Cathay General Bancorp Annual Report 2019

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FY2019 Annual Report · Cathay General Bancorp

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Enriching journeys
2019 Annual Report

Enriching each customer’s journey

Cathay General Bancorp

An unwavering commitment to each customer’s journey—that is

what continues to drive Cathay Bank’s success as we have grown

to $18 billion in assets over the last half-century.

Even in a challenging 2019 economy, we thrived. Commercial

and residential lending grew. Technology implementations drove

new efficiencies and enhanced the customer experience.

Communities benefited from our business, charitable works,

and volunteer engagement. We continued to develop some of

the best-trained people in the banking industry. All of which

led to Forbes recognizing us as among the top 20 banks in the

nation for the fifth straight year.

Three key drivers—strategic modernization, operational efficiency,

and cost control—are what fuel these results and enable us to

continue to help our customers achieve their dreams.

More than half a century ago, Cathay Bank
opened our doors to serve the growing
Chinese American community in Los Angeles.

We helped our customers put down new
roots with cars and homes. We supported
their businesses, which continue to sustain
generations. We worked with them to cultivate
communities united by a shared drive to
create and build lives in Southern California.

Over time, we’ve expanded along with our
customers. Cathay General Bancorp is the
holding company for Cathay Bank and is
publicly held (Nasdaq: CATY), with $18 billion
in assets.

Cathay Bank has 61 branches across the
United States, as well as outposts in Hong
Kong, Beijing, Shanghai, and Taipei.

While the people we serve have evolved
and changed, the spirit of what makes up
our customers remains the same. Every
one believes in the power of initiative and
perseverance. Each aims to achieve what
is possible. All strive to live their best lives.
And we’re happy to work alongside them—
providing the tools and services to get them
where they want to go.

Cathay Bank shared
the joy of Lunar New
Year in New York
City’s Times Square.

2019 Annual Report

Cathay General Bancorp

Financial highlights

Dear fellow stockholders,

(dollars in thousands, except per share data)

2019

2018

Amount

Percentage

Increase/(Decrease)

For the Year

Net income

$ 279,135

$ 271,885

$ 7,250

Net income per common share

Cash dividends paid per common share

3.48

1.24

3.33

1.03

0.15

0.21

2.7 %

4.5 %

20.4 %

At Year-End

Investment securities

Loans, net

Assets

Deposits

Stockholders’ equity

Book value per common share

Profitability Ratios

Return on average assets

Return on average stockholders’ equity

Capital Ratios

Tier 1 capital ratio

Total capital ratio

Leverage ratio

$ 1,451,842

$ 1,242,509

$ 209,333

16.8 %

1,079,799

1,309,407

989,968

172,417

2.42

7.8 %

7.2 %

8.1 %

9.2 %

14,951,631

18,094,144

14,692,308

2,294,283

28.78

1.61 %

12.63 %

12.51 %

14.11 %

10.83 %

13,871,832

16,784,737

13,702,340

2,121,866

26.36

1.70 %

13.18 %

12.43 %

14.15 %

10.83 %

$
2
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9

$
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$
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$
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$
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$
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Net Income (in millions)

Assets (in millions)

Stockholders’ Equity (in millions)

We are pleased to report that Cathay General Bancorp achieved record net income of
$279.1 million for the year ended December 31, 2019, as well as record earnings per share
of $3.48 in 2019.

Gross loans increased for the year by $1.1 billion, or 7.9%, to $15.1 billion as of December
31, 2019, primarily due to an increase of $551.1 million, or 8.2%, in commercial mortgage
loans; $394.7 million, or 10.7%, in residential mortgage loans; and $98 million, or 39.2%, in
home equity lines of credit. Total deposits grew by $1.0 billion, or 7.3%, to $14.7 billion as of
December 31, 2019. Total assets increased by $1.3 billion to $18.1 billion as of year-end 2019.

Our capital ratios as of December 31, 2019—calculated under the Basel III capital rules—
continue to place the Company in the “well capitalized” category for regulatory purposes.
Our Tier 1 risk-based capital ratio is at 12.51%, total risk-based capital ratio is at 14.11%, and
Tier 1 leverage capital ratio is at 10.83%. We maintained our quarterly dividend at $0.31
per share in 2019.

We achieved these results notwithstanding what we anticipated might be a challenging
year with the U.S.–China trade tensions and the Federal Reserve indicating it would no
longer increase rates. What we did not foresee was that a phase one U.S.–China trade
treaty would be delayed, tariffs would increase, and the Federal Reserve would reverse
and cut interest rates three times in 2019. The lower interest rates contributed to a
reduction of our net interest margin to 3.34% for the fourth quarter of 2019, from 3.77% in
the fourth quarter of 2018 and 3.56% for the third quarter of 2019.

“Our 1,244 team members are the heart of our organization, and their
hard work for our customers and each other is one reason that for five
years in a row we have been among the Top 20 in Forbes Best Banks in
America list.”

Pin Tai, Chief Executive Officer

2019 Annual Report

Cathay General Bancorp

We believe our management team and employees are well suited to meeting these
challenges head on and to ensuring the continued strength of our wholly owned
subsidiary Cathay Bank. Our efficiency ratio of 44.75% in 2019 reflects efficiencies; cost
control; and cautious, thoughtful expenditures to support growth.

In particular, we continued our determined focus on our digital transformation in 2019. We
celebrated the one-year anniversary of our Cathay Home Lending online home mortgage
application portal. The cathaybank.com website debuted a responsive design, giving
our customers and prospects an optimal experience that adapts to mobile, tablet and
desktop, delivered in three languages, and placing our customers at the forefront of a
superior customer experience. We also introduced Insights by Cathay, a content hub
hosted on our website to help inform our customers about financial best practices.

In 2020, we will continue technological advancements as we introduce a new consumer
online and mobile banking platform, which will include a unified experience across all
devices. We are also moving toward the launch of our first digital account opening
products, as well as a new FX portal that will give our customers more direct access to
their foreign currency activity.

Employee training and development was another area that received consistent attention
in 2019, reflecting our long-held commitment to maximizing our team members’ potential.
Our 1,244 team members are the heart of our organization, and their hard work for our
customers and each other is one reason that for five years in a row we have been among
the Top 20 in Forbes Best Banks in America list.

In many ways, this is a tribute to our Training and Development department and its ongoing
efforts to keep our employees informed so they can continue providing the best customer
experience. From product-based and operations courses to in-depth leadership and
management instruction, we believe our training programs enable our employees to
optimize their potential and advance within the company. Cathay has also instituted an
Enterprise Change Management team, to implement a process to manage change at
Cathay and help our employees adapt.

As we evaluate the challenges already developing in 2020, we are fortunate to have our 58
years of experience to guide our decision-making. With our knowledgeable management
and well-trained, insightful staff, Cathay feels well prepared to mitigate identified risks
and navigate unexpected hurdles. Those include, of course, ongoing U.S.–China trade tensions,
and we continuously assess the impact on our bank. The new threat of the novel coronavirus—
and its adverse effect on market conditions and many sectors, including transportation,
manufacturing, tourism, and consumer and business spending—reminds us that the global
economy provides both opportunities and risks that require diligent management.

Another area that reflects our experience is our strategic succession planning, which
led to the appointment of Chang M. Liu as President and Director of Cathay Bank, in
addition to his role as Chief Operating Officer of the bank. Liu’s 29 years of banking
experience and six years at Cathay have positioned him well to contribute to our growth
as a company. Liu’s experience in corporate lending will help us continue our traditional
strength in serving the commercial market in our nine-state footprint.

We also extend warm gratitude to our long-time board member and friend, Ting Y. Liu,
who is retiring from our Board of Directors. We thank him for his 39 years of service and
wish him all the best.

Thank you for your trust and confidence in us. We sincerely believe that Cathay Bank
holds a unique place in the financial lives of our customers and in our communities. We
remain focused on expanding our market share and building meaningful relationships
with our personal and business customers. As we celebrate in 2020 the 30th anniversary
of our listing on Nasdaq, we renew our commitment to providing our stockholders with
consistent and stable growth. Your support gives us the strength to envision the future
and bring it to fruition.

Sincerely,

“As we celebrate in 2020 the 30th anniversary of our listing on Nasdaq,
we renew our commitment to providing our stockholders with consistent
and stable growth.”

Dunson K. Cheng, Executive Chairman of the Board

Dunson K. Cheng
Executive Chairman
of the Board

Pin Tai
Chief Executive Officer

2019 Annual Report

Cathay General Bancorp

Milestones and accomplishments

1 Chang Liu appointed
President and Director
of Cathay Bank

2 New Cathay website
features responsive
design

3 Community Partner
Award from Chinatown
Service Center

4 Lunar New Year
gold-plated figurine and
ceramic money bank

Chang Liu takes on a
new role in addition to
Chief Operating Officer,
leveraging over 29 years
of banking experience.
He joined Cathay in 2014.

The site brings the
Cathay brand to life with a
visitor-centric experience
for desktop, tablet and
mobile; a new Insights by
Cathay content hub; and
advanced technology.

Congresswoman Judy Chu
presented the award to
Chief Executive Officer
Pin Tai in Los Angeles.

We introduced a custom-
designed, Cathay-exclusive
gold-plated figurine and
ceramic money bank during
our most successful Lunar
New Year promotion. We also
offered original calendars, a
lucky poster, couplets, and
red envelopes.

5 U.S.–China
Economic Report
with UCLA Anderson
Forecast
This annual economic
report was presented at
seven economic outlook
events across the country.

6 Cathay named to
Forbes Best Banks
in America 2020

Forbes has named
Cathay General Bancorp
to the Top 20 for five
years in a row.

7 Record mortgage
loan origination

8 Twenty Cathay
Bank Foundation
scholarships

9 Philip Hurst named
Program Manager of
the Year

Cathay generated $1.03
billion in residential
mortgage loans in 2019
and marked the one-
year anniversary of our
Cathay Home Lending
online application portal.

The Foundation’s
scholarship program
awarded $1,000 each to
20 high school seniors
throughout the nine
states where Cathay
has a presence.

Cetera Investment Services
named our Director of Wealth
Management as Program
Manager of the Year, chosen
from among 507 financial
institutions. Bank Investment
Consultant also ranked Philip
Hurst #15 on the Top Program
Manager list. Cathay Wealth
Management contributed
an increase of $3.3 million to
non-interest income in 2019
(see inside back cover*).

2019 Annual Report

Cathay General Bancorp

Helping businesses reach their goals
We were founded as a commercial bank, and our deep understanding of our customers’
financial challenges enables us to devise a range of financial solutions for their needs and
to build relationships that last.

“We are very proud to be associated with Cathay. … They’ve been with us
on almost every project with their lending policy … whether through line
of credit, letter of credit, mortgages. … when we are with Cathay … we feel
like there’s something extra that they can give us, and we feel comfortable
in the family atmosphere that they create for us.”

Youngwoo & Associates, real estate developer, New York City

Professionalism and individual attention spur commercial mortgage growth

In 2019, our commercial mortgage portfolio grew $551.1 million, or 8.2%, in no small
part because of how we ensure on-time execution and closing. As a direct lender, our
experienced real estate specialists guide clients through every phase of a project, including
customization of their loan package and helping evaluate future growth opportunities.

Deepening our commitment to commercial and industrial customers

The 2019 hiring of a Director of Treasury Management exemplifies our commitment to
commercial customers. We offer an online suite of dedicated products and services that
support business clients with all of their financial needs. The suite—which includes an
information and funds management portal and fraud prevention tools—improves our
clients’ control over spending, regulates cash flows, and reduces operational costs by
adding efficiency and optimization to internal financial processes.

We also added one of the largest merchant services providers, Elavon, and affiliated with
top-line credit card provider Pinnacle—an important addition to our commercial card
program that provides clients with greater flexibility.

1 Origin Point Brands
selected Cathay Bank
to support its long-
term growth

2 Young S. Woo,
Principal, and
Margarette Lee, Esq.,
Principal

“From the day we engaged with Cathay Bank … the company has tripled
in business. … I believe we can grow much more with Cathay Bank … they
understand the business and they respond to our needs and they make
things happen. … Having the loan available … to buy equipment, that not
only helps us increase revenue, also add more employees …”

Waleed Saab, Chief Executive Officer,
The Beef Jerky Factory, Colton, California

2019 Annual Report

Cathay General Bancorp

Helping individuals attain their dreams
Cathay Bank’s dedication to each individual’s journey became clear in our 2019 Customer
Experience Survey, in which customers gave our employees and branches an average score
of 9.5 out of 10.

Residential mortgage lending supports individuals, families and communities

Buying a home is a signature element of the American dream. In 2019, we achieved
record mortgage loan originations of $1.03 billion, and our outstanding mortgage balance
reached $4.09 billion.

Our customers benefited from technology enhancements, including our online mortgage
application portal, a self-service mortgage platform that offers a more transparent home
financing experience for consumers.

Other improvements included a mortgage support call center, an enhanced portfolio of
loan offerings, and the continuation of our popular relationship discount feature, which
inspires mortgage seekers to open new deposit accounts and sign up for automatic
payment.

New branch locations expand access to financial services

We celebrated with customers and the community at the grand openings of two branches
in Washington State and one in New York City.

“As a single transgender woman of color, I never thought home ownership
was in the stars for me. But from the moment I sat down with Lupe Sanchez,
AVP, Community Mortgage Lending Officer at Cathay Bank, I felt all my fears
disappear. Lupe helped me to get a clear understanding of the mortgage
process and what every detail of every document I was signing meant.”

Drian Juarez, first-time homebuyer

1 Canal Branch opened
in New York City

2 One-year anniversary
of WeChat

3 Striving to help
customers achieve
what’s next

2019 Annual Report

Cathay General Bancorp

Supporting our communities’ growth
We invested more than $3 million this year in the communities we serve. More than
300 of our employees volunteered 4,200 hours to help individuals and families purchase
first homes, businesses access capital, and youths to seniors understand finances.

“Through a $50,000 donation to Vermont Slauson Economic Development
Corporation, Cathay Bank enhanced our youth development and small
business development efforts, proving vital to the initial construction of
the Teen Tech Center. Cathay Bank’s partnership helps us create pathways
to self-sufficiency while strengthening families and uplifting communities.”

Joseph Rouzan, Executive Director, VSEDC

Sharing financial literacy

Cathay Bank employees volunteered 1,100 hours to Junior Achievement in California,
Nevada, Texas, and Washington to help young people own their economic success
through volunteer-led, experiential learning.

The Volunteer Income Tax Assistance Program is a federal program that offers free tax
help to people who generally make $56,000 or less, persons with disabilities, and limited
English-speaking taxpayers who need assistance in preparing their tax returns. Cathay
Bank IRS-certified volunteers provided 640 hours of service in English, Mandarin and
Cantonese.

A helping hand for small business

As a member of the Federal Home Loan Bank, Cathay Bank facilitated one of its two
largest grants in 2019: an Access to Housing and Economic Assistance for Development
grant for $50,000 to the Asian Pacific Islander Small Business Program, with the aim of
developing a business-planning app in Chinese and Khmer.

A combined $50,000 in grants from Cathay Bank and Cathay Bank Foundation to the
Vermont Slauson Economic Development Corporation (VSEDC) will assist with general
operating funds and loan loss reserves while also providing technical assistance to small
businesses in South Los Angeles.

1 Teaching at JA
Finance Park in Los
Angeles

2 Employees present
FDIC Money Smart
workshops in Spanish,
Mandarin, Cantonese,
and Korean

2019 Annual Report

Cathay General Bancorp

Investing in our employees
We believe the best way to enrich each customer’s journey is to provide our experienced,
knowledgeable bankers with multiple opportunities for professional advancement, which
are key to a culture of continuous, customer-focused improvement.

“The Inspirational Leadership training has helped me improve my ability to
provide feedback and coaching and work more effectively with a broad range
of people. It has also helped me develop a core network of future leaders of
the bank so we can all work together for the betterment of our organization.”

Anna Jordan, VP, Loan Servicing Manager

Employee survey yields insights, spurs action

We conducted our first-ever Employee Engagement Survey in 2018 and shared the results
in 2019. In 2020, we are implementing the recommendations that emerged, with a focus
on providing the resources necessary for maximizing each team member’s potential.

A full menu of staff development opportunities

In addition to tuition reimbursement, bank-paid Toastmasters, and training for front-line
retail employees, the year’s highlights include the launching of the online Cathay Bank
Academy to put learning directly in the hands of our team members.

To refine our managers’ skills, we made Inspirational Leadership training available for our
supervisors. To develop the bank’s bench strength, decision-making ability and future
leaders, we graduated classes from our Emerging Leadership Program, Operations
Career Pathway Program, Operations Bootcamps, and Officer Trainee Program.

1 Attracting talent at
career fairs throughout
the year

2 Building team spirit
during the annual Hong
Kong Dragon Boat
Festival in New York

3 Showing our pride

2019 Annual Report

Corporate information

Board of Directors

1 Dunson K. Cheng
Executive Chairman of the
Board of Cathay General
Bancorp and Cathay Bank

2 Peter Wu
Vice Chairman of the Board
of Cathay General Bancorp
and Cathay Bank

3 Anthony M. Tang
Vice Chairman of the Board
of Cathay General Bancorp
and Cathay Bank

4 Michael M.Y. Chang
Retired Attorney and former
Secretary of Cathay General
Bancorp and Cathay Bank

5 Kelly L. Chan
VP of Finance, Phoenix
Bakery Inc., and Certified
Public Accountant

6 Nelson Chung
President of Pacific
Communities Builder, Inc.

7 Felix S. Fernandez
Retired Banker

8 Jane Jelenko
Retired Financial Services
Partner of KPMG LLP

9 Ting Y. Liu
Retired Investor

10 Joseph C.H. Poon
President of Edward
Properties, LLC

11 Richard Sun
President of SSS
Development, Inc.

12 Pin Tai
Chief Executive Officer of
Cathay General Bancorp
and Cathay Bank

Director Emeritus

Patrick S.D. Lee

Cathay General Bancorp

Dunson K. Cheng
Executive Chairman of the Board
Peter Wu
Vice Chairman of the Board

Anthony M. Tang
Vice Chairman of the Board

Pin Tai
Chief Executive Officer

Heng W. Chen
Executive Vice President, Chief
Financial Officer, and Treasurer

Cathay Bank
Executive Officers

Dunson K. Cheng
Executive Chairman of the Board

Pin Tai
Chief Executive Officer and
Director of Cathay Bank

Chang M. Liu
President and Chief Operating
Officer and Director of Cathay Bank

Irwin Wong
Senior Executive Vice President
and Chief Administrative Officer

Heng W. Chen
Executive Vice President
and Chief Financial Officer

Kim R. Bingham
Executive Vice President
and Chief Risk Officer

Mark H. Lee
Executive Vice President
and Chief Credit Officer

Other Executive
Vice Presidents

Matthew Bonaccorso
Executive Vice President
and Chief Lending Officer

Eddie Chang
Executive Vice President and
Manager, Corporate Commercial
Real Estate and Construction
Lending

Marisa DeRojas
Executive Vice President,
Director of Financial Crimes
Risk Management
Shu-Yuan Lai
Executive Vice President
and Chief Lending Officer

Thomas Lo
Executive Vice President, Director
of Commercial and International
Banking

Allen Peng
Executive Vice President and
Chief Retail Administrator

Jennifer L. Powells
Executive Vice President and
Chief Human Resources Officer

Robert Romero
Executive Vice President
and Chief Information Officer

Veronica Tsang
Executive Vice President and
Chief Retail Administrator

Forward-looking statements

Our annual report includes forward-looking statements within the meaning of the applicable provisions of the Private Securities Litigation Reform Act of
1995 regarding management’s beliefs, projections, and assumptions concerning future results and events. We intend such forward-looking statements
to be covered by the safe harbor for forward-looking statements in these provisions. All statements other than statements of historical fact are “forward-
looking statements” for purposes of federal and state securities laws. Words such as “aims,” “anticipates,” “believes,” “can,” “continue,” “could,” “estimates,”
“expects,” “hopes,” “intends,” “may,” “optimistic,” “plans,” “predicts,” “possible,” “potential,” “projects,” “seeks,” “shall,” “should,” “will,” and variations of these
words and similar expressions are intended to identify these forward-looking statements. Forward-looking statements by us are based on estimates,
beliefs, projections, and assumptions of management and are not guarantees of future performance. These forward-looking statements are subject
to certain risks and uncertainties that could cause actual results to differ materially from our historical experience and our present expectations or
projections. These and other factors are described in our Annual Report on Form 10-K (at Item 1A in particular) for the year ended December 31, 2019; in
other reports filed with the Securities and Exchange Commission (the “SEC”); and in other filings we make with the SEC from time to time. Given these
risks and uncertainties, readers are cautioned not to place undue reliance on any forward-looking statement. Any forward-looking statement speaks only
as of the date on which it is made, and, except as required by law, we undertake no obligation to update or review any forward-looking statement to reflect
circumstances, developments or events occurring after the date on which the statement is made or to reflect the occurrence of unanticipated events.
Cathay General Bancorp’s Annual Report on Form 10-K for the year ended December 31, 2019, and other filings with the SEC are available at the website
maintained by the SEC at www.sec.gov or by request directed to Cathay General Bancorp, 9650 Flair Drive, El Monte, CA 91731; Attention: Investor
Relations; telephone: 626 279 3296. These reports and filings are also available at www.cathaygeneralbancorp.com. The information on the websites of
Cathay General Bancorp and Cathay Bank is not part of this Annual Report.
Cathay Bank, Member FDIC, is an Equal Housing Lender.
FDIC insurance coverage is limited to deposit accounts at Cathay Bank’s U.S. domestic branch locations. Non-Deposit Investment Products are NOT A
DEPOSIT | NOT FDIC INSURED | NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY | NO BANK GUARANTEE | MAY LOSE VALUE.

*Securities and insurance products are offered by, and financial consultants are registered with, Cetera Investment Services LLC, member FINRA/SIPC.
Advisory services are offered by Cetera Investment Services LLC. Neither firm is affiliated with Cathay Bank or its related companies. Advisory services
may only be offered by Investment Adviser Representatives. Cathay Wealth Management is located at Cathay Bank. Securities and insurance products,
with the exception of Brokerage CDs, (1) are not deposits of, obligations of, or guaranteed by the Bank, or an affiliate of the Bank; (2) are not insured by the
FDIC or any other agency of the United States, the Bank or, if applicable, an affiliate of the Bank; and (3) involve investment risk, including investment risk
associated with the product, including possible loss of principal. Cetera Investment Services registered office: 825 E. Valley Blvd., 2nd Floor, San Gabriel,
CA 91776. 877 722 8429

777 North Broadway
Los Angeles, CA 90012

T 213 625 4700
F 213 625 1368

cathaygeneralbancorp.com
cathaybank.com

Part of the cultural legacy of our communities
Founded in 1962, Cathay Bank offers a wide range of financial services.
Cathay Bank operates in nine states, with branches in California, Illinois,
Maryland, Massachusetts, Nevada, New Jersey, New York, Texas, and
Washington State, as well as Hong Kong.

Cathay participated in the 120th Golden Dragon Parade in Los Angeles.

United States
California
Alhambra
Arcadia
Artesia
City of Industry
Cupertino
Diamond Bar
Dublin
El Monte
Fountain Valley
Fremont
Irvine
Los Angeles
Millbrae
Milpitas
Monterey Park
Northridge
Oakland
Ontario
Orange
Rancho Cucamonga

Richmond
Rowland Heights
Sacramento
San Diego
San Francisco
San Gabriel
San Jose
Temple City
Torrance
Union City
West Covina
Westminster
Illinois
Chicago
Westmont
Maryland
Rockville
Massachusetts
Boston
Nevada
Las Vegas
New Jersey
Edison

New York
Brooklyn
Elmhurst
Flushing
New York City
Texas
Houston
Plano
Washington
Bellevue
Kent
Seattle
Overseas
Hong Kong

Overseas
Representative
Offices
Beijing
Shanghai
Taipei

Registrar and Transfer Agent
American Stock Transfer and Trust Company, LLC
6201 15th Avenue, Brooklyn, NY 11219
T 800 937 5449

www.fsc.org

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