Cathay General Bancorp has seen its share price go up the past few weeks.
The Chinatown holding company of Cathay Bank has not made any major announcements in that time period.
Its stock closed at $39.93 on Dec. 12, and by Dec. 14 shot up 11% to a close of $44.31. The shares reached their 52-week high on Dec. 27 when it closed at $45.44.
Since Jan. 3 of last year, when its stock price closed at $38.59, it has gained nearly 16% in value through Jan. 2, when it closed at $44.66.
That is in marked contrast to late October, when the share price closed down by almost 1% from its close of $33 on Oct. 23 to the following day when it closed at $32.70, most likely due to mixed financial results.
On Oct. 23, after the market closed, the holding company announced its financial results of net income of $82.4 million ($1.13 a share) for the quarter ending Sept. 30, a decrease of nearly 17% when compared with net income of $99 million ($1.33) in the same period of the previous year. Total deposits increased by about 6% from the third quarter of the prior year to $19.6 billion.
The stock price closed at $43.27 on Jan. 4.
Chang Liu, the chief executive of the company, said he was pleased that total deposits increased by $539 million during the third quarter when compared with the second quarter. From the previous year’s third quarter, the increase was $1.1 billion.
“As a result, we were able to reduce our borrowings from Federal Home Loan Bank by $800 million during the quarter to $15 million as of Sept. 30,” Liu said in a conference call with analysts on Oct. 23 to discuss the quarterly results.
Buybacks ahead?
Matthew Clark, an analyst with Piper Sandler & Co. in New York, in a research note from Nov. 6 downgraded Cathay’s stock to underperform, or sell, from neutral, or hold.
He said in the report that the downgrading “is partially based on its lower reserve coverage, our below the Street (earnings per share) estimates, and its relative valuation. Its buyback is also on hold for the next few months until it receives regulatory approval.”
Nicholas Moutafakis, an assistant vice president in equity research at KBW, a Stifel company, in New York, asked about the buybacks during the conference call and if Cathay had “any appetite at all” for a buyback in the next year or so.
Chief Financial Officer Heng Chen said “absolutely,” and that the approval process takes a bit longer than compared to the past.
“But in the next few months, we’ll get going on that,” Chen said. “So we can catch on with buybacks when things are more certain.”
Andrew Terrell, an analyst in the Little Rock, Arkansas office of Stephens Inc., asked about construction nonaccruals that went up from zero to roughly $17 million.
Liu said that on the construction portfolio side, one of the projects that went into nonaccrual after not being paid on for 90 days was a hotel property in the Inland Empire. The company is 90% complete doing some renovations to the property, Liu said.
“We’re pretty comfortable with the asset. It’s got a pretty low LTV (loan-to-value ratio). It’s well located. It’s got a good operating history,” he added.
The other project that made the construction nonaccruals go up was an office building in Northern California, Liu continued.
“We’ve got a buyer that’s been identified and that we’ve got some reserves that’s set against it, and that one was also sort of a reposition play there as well,” Liu said.
