Cathay General Bancorp (CATY), the holding company for Cathay Bank, on Tuesday evening reported a net loss for the fourth quarter compared to a profit in the prior-year quarter, hurt by higher credit costs and markdowns of related assets.
For the fourth quarter, the Los Angeles, California-based company's net loss available to common stockholders was $4.04 million, or $0.08 per share, compared to net income of $30.92 million, or $0.62 per share, in the same period last year.
On average, ten analysts polled by First Call/Thomson Financial expected the company to report earnings of $0.30 per share for the quarter. Analysts' estimate typically excludes special items.
Net interest income for the quarter declined 7.7% to $74.24 million from $80.45 million in the corresponding period last year. Total non-interest income for the quarter was $11.58 million, up 76% from $6.58 million in the previous-year period. Wall Street analysts had a consensus revenue estimate for the quarter of $82.97 million.
The decline in net interest income was due primarily to the decline in the net interest margin, which was partially offset by strong growth in loans and investment securities compared to the prior year. Net interest margin on a full-taxable equivalent basis was 2.85% for the quarter, down from 2.88% in the prior-year period. The increase in non-interest income was primarily due to increases in gains on sale of available-for-sale securities of $8.2 million.
Dunson Cheng, Chairman of the Board, Chief Executive Officer, and President of the company, said, "Our fourth quarter results were significantly impacted by the deepening recession and the ongoing slowdown in residential housing, resulting in significant increases in credit costs and markdowns of related assets." The provision for credit losses for the quarter was $62.90 million, up sharply from $5.70 million in the prior-year period. Allowance for credit losses to gross loans at the end of the quarter was 1.73%, compared to 1.04% in the same period last year.
Return on average assets were a negative 0.10% compared to a positive 1.23% in the prior-year quarter. At December 31, 2008, the company's Tier 1 risk-based capital ratio was 12.07%, total risk-based capital ratio was 13.88%, and Tier 1 leverage capital ratio was 9.79%.
For fiscal year 2008, the company reported net income available to common stockholders of $49.38 million, or $1.00 per share, down from $125.47 million, or $2.46 per share, a year ago. Analysts expected the company to report earnings of $1.36 per share for the year.
The decline in net income for the year was due primarily to increases in the provision for loan losses and the impairment charge.
Net interest income for the year before provision for credit losses declined 5% to $295.15 million from $309.52 million in the prior year. Non-interest income slipped 31% to $18.91 million from $27.49 million a year ago. Analysts expected revenues for the year of $316.99 million.
Looking ahead, the company said it intends to focus on managing through the credit cycle in fiscal year 2009.
Cheng said, "Our focus in the year ahead will be on managing through this challenging credit cycle and on providing the lending and banking needs of our customers. We shall also make the necessary investments to enable Cathay Bank to continue to grow when the economy recovers."
CATY closed Tuesday's regular trading session at $13.27, down $0.29 or 2.14% on a volume of 0.99 million shares.
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