What are Cathay General Bancorp's Business Segments?
The Bank’s Board of Directors and senior management establish, review, and
modify the Bank’s lending policies. These policies include (as applicable)
an evaluation of a potential borrower’s financial condition, ability to
repay the loan, character, secondary repayment sources (such as guaranties), quality
and availability of collateral, capital, leverage capacity and regulatory guidelines,
market conditions for the borrower’s business or project, and prevailing
economic trends and conditions. Loan originations are obtained through a variety
of sources, including existing customers, walk-in customers, referrals from brokers
or existing customers, and advertising. While loan applications are accepted at
all branches, the Bank’s centralized document department supervises the
application process including documentation of loans, review of appraisals, and
credit reports.
Commercial Mortgage Loans. Commercial mortgage loans are typically secured by
first deeds of trust on commercial properties. Our commercial mortgage portfolio
includes primarily commercial retail properties, shopping centers, and owner-occupied
industrial facilities, and, secondarily, office buildings, multiple-unit apartments,
hotels, and multi-tenanted industrial properties.
The Bank also makes medium-term commercial mortgage loans which are generally
secured by commercial or industrial buildings where the borrower uses the property
for business purposes or derives income from tenants.
Commercial Loans. The Bank provides financial services to diverse commercial and
professional businesses in its market areas. Commercial loans consist primarily
of short-term loans (normally with a maturity of up to one year) to support general
business purposes, or to provide working capital to businesses in the form of
lines of credit to finance trade. The Bank continues to focus primarily on commercial
lending to small-to-medium size businesses within the Bank’s geographic
market areas. The Bank participates or syndicates loans, typically more than $25
million in principal amount, with other financial institutions to limit its credit
exposure. Commercial loan pricing is generally at a rate tied to the prime rate,
as quoted in The Wall Street Journal, or the Bank’s reference rate.
SBA Loans. The Bank originates U.S. Small Business Administration (“SBA”)
loans under the national “preferred lender” status. Preferred lender
status is granted to a lender that has made a certain number of SBA loans and
which, in the opinion of the SBA, has staff qualified and experienced in small
business loans. As a preferred lender, the Bank’s SBA Lending Group has
the authority to issue, on behalf of the SBA, the SBA guaranty on loans under
the 7(a) program which may result in shortening the time it takes to process a
loan. In addition, under this program, the SBA delegates loan underwriting, closing,
and most servicing and liquidation authority and responsibility to selected lenders.
The Bank utilizes both the 504 program, which is focused on long-term financing
of buildings and other long-term fixed assets, and the 7(a) program, which is
the SBA’s primary loan program and which can be used for financing of a
variety of general business purposes such as acquisition of land, buildings, equipment
and inventory and working capital needs of eligible businesses generally over
a 5- to 25-year term. The collateral position in the SBA loans is enhanced by
the SBA guaranty in the case of 7(a) loans, and by lower loan-to-value ratios
under the 504 program. The Bank has sold, and may in the future sell, the guaranteed
portion of certain of its SBA 7(a) loans in the secondary market. SBA loan pricing
is generally at a rate tied to the prime rate, as quoted in The Wall Street Journal.
Residential Mortgage Loans. The Bank originates single-family-residential mortgage
loans. The single-family-residential mortgage loans are comprised of conforming,
nonconforming, and jumbo residential mortgage loans, and are secured by first
or subordinate liens on single (one-to-four) family residential properties. The
Bank’s products include a fixed-rate residential mortgage loan and an adjustable-rate
residential mortgage loan. Mortgage loans are underwritten in accordance with
the Bank’s and regulatory guidelines, on the basis of the borrower’s
financial capabilities, an independent appraisal of the value of the property,
historical loan quality, and other factors deemed relevant by the Bank’s
underwriting personnel. It is the current practice of the Bank to sell all conforming
fixed rate residential first mortgages that meet Government Sponsored Agency guidelines
to the Federal Home Loan Mortgage Corporation on a cash basis as they are originated.
The Bank retains all other mortgage loans it originates in its portfolio. As such,
the Bank was not impacted by the rule pertaining to risk retention implementing
the risk retention requirements of the Dodd-Frank Wall Street Reform and Consumer
Protection Act (the “Dodd-Frank Act”), since the Bank does not securitize
any of the loans it sells or retains.
Real Estate Construction Loans. The Bank’s real estate construction loan
activity focuses on providing short-term loans to individuals and developers,
primarily for the construction of multi-unit projects. Residential real estate
construction loans are typically secured by first deeds of trust and guarantees
of the borrower. The economic viability of the projects, borrower’s credit
worthiness, and borrower’s and contractor’s experience are primary
considerations in the loan underwriting decision. The Bank utilizes approved independent
licensed appraisers and monitors projects during the construction phase through
construction inspections and a disbursement program tied to the percentage of
completion of each project. The Bank also occasionally makes unimproved property
loans to borrowers who intend to construct a single-family residence on their
lots generally within twelve months. In addition, the Bank makes commercial real
estate construction loans to high net worth clients with adequate liquidity for
construction of office and warehouse properties. Such loans are typically secured
by first deeds of trust and are guaranteed by the borrower.
Home Equity Lines of Credit. The Bank offers variable-rate home equity lines of
credit that are secured by the borrower’s home. The pricing on the variable-rate
home equity line of credit is generally at a rate tied to the prime rate, as quoted
in The Wall Street Journal, or the Bank’s reference rate. Borrowers may
use this line of credit for home improvement financing, debt consolidation and
other personal uses.
Installment Loans. Installment loans tend to be fixed rate and longer-term (one-to-six
year maturities). These loans are funded primarily for the purpose of financing
the purchase of automobiles and other personal uses of the borrower.
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