EXECUTIVE COMPENSATION
Compensation Discussion and Analysis
This Compensation Discussion and Analysis
(CD&A) is intended to provide information relevant to an understanding of our executive compensation program and decisions regarding the compensation of the executive officers identified in the Summary Compensation Table in
Remuneration of Executive Officers below (the Named Executive Officers). It may contain some statements regarding thresholds, targets, and goals for future individual and company performance. These are disclosed in the
limited context of our executive compensation program and should not be understood to be statements of managements expectations or estimates of our financial results or other guidance. We specifically caution investors not to apply these
statements to other contexts.
Overview and Objectives of Our Executive Compensation Program
It is our policy to build stockholder value by attracting, motivating, and retaining capable executive management and other key personnel for the purpose
of achieving our business goals.
We seek to implement this policy, in part, through our executive compensation program. We believe that an
effective executive compensation program is one in which executive officers receive compensation that is competitive with the practices of other financial institutions in our market area, but which at the same time ties compensation to our financial
and operating performance and does not encourage the taking of unnecessary and excessive risks or encourage the manipulation of reported earnings. In addition, we believe that individual compensation should be based on the experience, performance,
and responsibility level of the executive officers and their contributions towards achievement of our business goals.
Further, we believe
that an effective executive compensation program is one that is designed to align the interests of our executive officers with those of our stockholders through both cash and equity-based incentive compensation that rewards performance as
measured against the achievement of our annual, long-term, and strategic goals.
Accordingly, our executive compensation program consists of cash and non-cash components, all of which are intended to work together to help fulfill the
objectives of our compensation policy, which are:
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to attract, motivate, and retain capable executive management and other key personnel;
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to optimize the individual performance of our executive officers and our financial and operating performance;
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to align the interests of our executive officers with those of our stockholders;
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to ensure that we are not unnecessarily exposed to risks or to the manipulation of our reported earnings; and
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to provide incentives that are commensurate with prudent risk taking and link specific performance to the overall quality and sustainability of our
performance and profitability.
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We seek to combine these components, which are described below, in such a way as to best
achieve these objectives.
2012 Financial Performance
The following are highlights of our financial performance for the year 2012:
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Net income increased $17.2 million to $117.4 million for the year ended December 31, 2012, compared to net income of $100.2 million for the year
ended December 31, 2011.
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Commercial loans increased $258.8 million to $2.1 billion at December 31, 2012, compared to $1.9 billion at December 31, 2011.
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Residential mortgage loans increased $174.0 million to $1.1 billion at December 31, 2012, from $972.3 million at December 31, 2011.
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Non-performing assets decreased $149.7 million to $150.9 million at December 31, 2012, from $300.6 million at December 31, 2011.
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Net charge-offs decreased $51.5 million to $14.7 million for the year ended December 31, 2012, from $66.2 million for the year ended
December 31, 2011.
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Elements of Our Executive Compensation Program
For 2012, our executive compensation program for the Named Executive Officers, including our Chief Executive Officer and our Chief Financial Officer,
consisted of the following components:
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long-term restricted stock units;
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retirement benefits provided under (i) an employee stock ownership plan for employees who met their eligibility requirements prior to January 2003
and (ii) a 401(k) plan;
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life insurance and the same medical, dental, and disability benefits as provided generally to other Cathay Bank employees; and
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perquisites and other personal benefits.
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Each of these components serves as a means to achieve one or more of the objectives of our executive compensation program. We do not follow rigid formulas for allocating compensation among these various
components. Instead, we utilize our judgment guided by the general principles of our executive compensation policy as well as consideration of our business objectives, our fiduciary and corporate responsibilities (including internal equity
considerations and affordability), competitive practices and trends, and regulatory requirements. We believe this flexible approach optimizes our ability to deal with the changing business environment.
TARP Compensation Standards
As a result of our participation in the Capital Purchase Program portion of the United States Department of the Treasurys (the U.S. Treasury) Troubled Assets Relief Program (the
TARP Capital Purchase Program), we became subject to certain standards for executive compensation and corporate governance in accordance with the Emergency Economic Stabilization Act of 2008, as amended by
the American Recovery Reinvestment Act of 2009, and the rules and regulations thereunder (the EESA). These standards generally apply to the principal executive officer, principal
financial officer, and the three next most highly compensated executive officers (the senior executive officers) and up to 20 of the next most highly compensated employees during the period in which any obligation arising from financial
assistance under the TARP Capital Purchase Program remains outstanding, disregarding any warrants to purchase common stock that the U.S. Treasury may hold (the TARP Period).
These standards under the EESA include:
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ensuring that incentive compensation for senior executive officers does not encourage unnecessary and excessive risks that threaten the value of the
financial institution;
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clawback of any bonus or incentive compensation based on statements of earnings, gains, or other criteria that are later proven to be materially
inaccurate;
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prohibition on making golden parachute payments (defined as any payment for the departure from employment for any reason, or any payment
due to a change in control, except for payments for services performed or benefits accrued, including the acceleration of vesting due to the departure or the change in control event, as applicable) to the senior executive officers and the five next
most highly-compensated employees;
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prohibition on the payment or accrual of any bonus, retention award, or incentive compensation specified in the EESA, other than certain long-term
restricted stock or restricted stock units permitted thereunder, provided that the value of any such award may not exceed one-third of the employees annual compensation as determined for the fiscal year of the award, the award shall vest and
be transferable only in accordance with the terms of the EESA, and the employee must provide services for at least two years after the date of the grant for the long-term restricted stock or restricted stock units to vest;
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prohibition on the payment of tax gross-ups (defined as any reimbursement of taxes owed with respect to any compensation);
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an agreement not to deduct for tax purposes executive compensation in excess of $500,000 for each of the senior executive officers;
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making reasonable efforts to limit any unnecessary risks that employee compensation plans pose to the organization; and
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elimination of any features in employee compensation plans that would encourage the manipulation of reported earnings to enhance the compensation of
any employee.
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We have incorporated these standards into our executive compensation program. Our Named Executive Officers
have each agreed to voluntarily waive any claim against the U.S. Treasury or Bancorp and Cathay Bank for any changes to their compensation or benefits that are required in order to comply with the EESA during the TARP Period.
Base Salary
We
provide executive officers and other employees with a base salary to compensate them for services rendered during the year and to attract, motivate, and retain them. The Compensation Committee does not apply any fixed formula for setting base
salaries for our Named Executive Officers. Instead, the Compensation Committee considers a wide range of factors. In particular, the Compensation Committee will consider our overall financial and operating performance and profitability, and its
evaluation of each Named Executive Officers individual performance and contribution toward this overall performance and profitability. Our overall performance and profitability is determined, without any quantified targets or particular
weighting, with reference to financial factors such as net income, earnings per share, return on average assets, return on average stockholders equity, efficiency ratio, and percentage increase or decrease in total assets, loans, and deposits.
The evaluation of each Named Executive Officers individual performance is largely subjective and involves consideration of such factors
as the significance of the Named Executive Officers services, level of responsibility, any changes to those responsibilities, and the achievement of individual loan production or deposit goals or completion of any strategic initiatives and
special projects or assignments that may have been set from year to
year, without any particular weight being assigned to these factors. As part of this evaluation, the Compensation Committee may consider the Named Executive Officers individual skills,
experience, length of service, and compensation levels in past years, not only in relation to the individuals performance in those years compared with the current year, but also in relation to competitive employment opportunities for that
individual. Consideration is also given to changes in the cost of living.
The Compensation Committee also takes into consideration the base
compensation of executive officers in equivalent positions at banks and bank holding companies considered to be similar to Cathay Bank and Bancorp. We believe it is helpful to consider comparative market information about compensation paid to
executive officers of other companies in our business and geographic marketplace that seek similarly skilled and talented executives. We want to be able to retain our executive officers and, accordingly, we take into consideration publicly available
information about compensation paid to executive officers at other financial institutions in making our decisions about compensation. However, we do not establish compensation levels based on benchmarking and we do not attempt to maintain a certain
target percentile within any peer group to determine compensation. We view information on pay practices at other institutions as relevant to a general understanding of the market and for assessing the competitiveness and reasonableness of our
executive compensation program.
Salary levels are typically considered in April as part of our employee performance review process. Salary
levels may also be reviewed and adjusted for an executive officer upon a promotion or change in job responsibility or for special retention purposes. The Compensation Committee does not set any target range or apply any formulas or any particular
minimum or maximum percentages. Instead, it considers the base salary increases on a case-by-case and year-by-year basis applying the factors set forth above. However, the Compensation Committee takes into consideration the compensation history of
the Named Executive Officers and will observe past ranges for reference and guidance without being bound or limited by them.
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Cash Bonus
Although no cash bonuses have been paid to our Named Executive Officers for the last three fiscal years, the cash bonus component of our executive compensation program can serve as an incentive and reward
for the achievement of our business goals and as a means to attract, motivate, and retain our Named Executive Officers.
Under the
compensation standards of the EESA, the only form of bonus, incentive compensation, and retention arrangements we are permitted to award our Named Executive Officers are certain long-term restricted stock or restricted stock units permitted under
the EESA. Accordingly, the Compensation Committee will not consider its Named Executive Officers for cash bonuses until after the TARP Period.
Salary Stock
The compensation standards under the EESA that are applicable to financial
institutions participating in the TARP Capital Purchase Program permit an arrangement under which an employee can receive salary in the form of stock (so-called salary stock), so long as the stock is not subject to a substantial risk of
forfeiture (as defined) or other future period of required services, the amount is determinable as a dollar amount through the date such compensation is earned (for example, an agreement that salary payments will be made in stock equal to the value
of the cash payment that would otherwise be due), and the amount of stock accrues at the same time or times as the salary or other permissible payments would otherwise be paid in cash.
The compensation standards under the EESA further provide that the salary stock may be made subject to holding periods or transferability restrictions, such as not permitting the stock to be transferred
for a specified number of years, until a specified event occurs (such as the employees retirement, or a specified number of years after an employees retirement, or other termination of employment), or until certain amounts of the
financial assistance under the TARP Capital Purchase Program have been repaid.
Since June 2012, the Compensation Committee has used salary
stock as a form of compensation that
helps to align the interests of our Named Executive Officers with those of our stockholders through stock ownership, helps us to retain our executive officers through payment of competitive total
compensation, and recognizes our executive officers for our financial and operational performance, all in a manner consistent with the compensation standards under the EESA. In June 2012, the Compensation Committee adjusted the annual base salaries
of the Named Executive Officers for the remainder of 2012, and in December 2012 it adjusted the annual base salaries of the Named Executive Officers for 2013, with the amount of the adjustment being payable as salary stock.
Equity Incentive Compensation
Incentive Plans.
Bancorp has two plans under which it has issued equity awards to its directors and employees (including Named Executive Officers) and to directors and employees of Cathay Bank.
These plans are designed to strengthen Bancorp by providing selected employees and directors an opportunity to participate in our future by offering them the right to acquire our common stock. They also serve as incentive and reward for the
achievement of our long-term business goals and as a means to attract, motivate, and retain key personnel.
Our 1998 Incentive Plan authorized
awards that could result in the issuance of Bancorps common stock. All awards granted under this plan have been in the form of nonstatutory stock options. Upon stockholder approval of the 2005 Incentive Plan in May 2005, we ceased granting
awards under the 1998 Incentive Plan, but options previously granted under this plan remain exercisable.
Our 2005 Incentive Plan permits us
to grant stock options (both incentive stock options designed to comply with Internal Revenue Code Section 422 and nonstatutory stock options which will not so comply), stock awards (including shares, restricted stock units, stock appreciation
rights, and other similar awards), and cash awards. The purpose of granting awards under the 2005 Incentive Plan is to compensate eligible participants for their contributions to our business and to encourage them to exert maximum efforts for our
success by providing them, in the case of options and stock awards, an opportunity to benefit from increases in the value of our common
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stock and thereby aligning the interests of the participants with those of our stockholders. For a discussion of consideration being given to the type of awards to be made under our 2005
Incentive Plan, see
Accounting for Stock-Based Compensation
below.
The Compensation Committee has authority to determine
the number and type of equity awards for executive officers and all other employees of Bancorp and Cathay Bank. Awards are generally based on a subjective analysis of the individuals performance based on, without any particular weighting, such
factors as the following: the individuals title and level of responsibility; the internal annual performance evaluation rating given by that individuals immediate supervisor, which is based on subjective and qualitative evaluations of
job knowledge, job skills, performance of duties, professional attributes, management skills, customized annual goals or special projects, and adherence to our policies; the length of service and the nature of that individuals job functions;
and the perceived contributions of that individual to our overall performance and profitability. For purposes of awarding equity compensation, our overall performance and profitability is determined with reference to such factors as the following,
without any quantified targets or particular weighting: net income, return on average assets, return on average stockholders equity, efficiency ratio, and percentage increase or decrease in total assets, loans, and deposits. Without
benchmarking, and for general reference purposes only, the Compensation Committee also will consider the size of awards made in the past to each individual and also generally refer to the size of awards made at other banks and bank holding companies
of comparable size and complexity. Consideration is also given to the estimated dilutive effect of such awards on our stockholders.
Awards
generally have been made on an annual basis at fixed meeting dates that are specified in advance of the actual meeting. Awards are also made on occasion during the year to newly hired or newly promoted officers or for special retention purposes.
Such awards for new hires, promotions, and retention become effective on the date of approval of the award by the Compensation Committee. All awards of stock options are made at or above the fair market value of our common stock as quoted on the
Nasdaq
Global Select Market on the date the option is granted (incentive stock options granted to employees who are also 10% stockholders, if any, must have an exercise price equal to at least 110% of
the fair market value of the stock on the date of the award). The fair market value of our common stock is determined generally as the closing price of the common stock on the date the option is granted. We may substitute or assume options with
exercise prices equal to less than 100% of the fair market value of the underlying option shares on the date of grant in connection with an acquisition of another company. Outstanding options may not be repriced to reduce the exercise price without
stockholder approval.
Since we became a participant in the TARP Capital Purchase Program, we have been unable to grant options or other forms
of incentive compensation to our Named Executive Officers other than certain long-term restricted stock or restricted stock units permitted under the EESA, which provides that the value of any such grant may not exceed one-third of that
employees annual compensation as determined for the fiscal year of the award, the award shall vest and be transferable only in accordance with the terms of the EESA, and the employee must provide services for at least two years after the date
of the grant for the long-term restricted stock or restricted stock units to vest. In both 2011 and 2012, the Compensation Committee granted such long-term restricted stock units to our Named Executive Officers. These grants were made twice a year,
in March and December of 2011 and in May and December of 2012.
Equity Award Guidelines.
The Compensation Committee also observes the
following guidelines with regard to stock awards and the grant of options under the 2005 Incentive Plan:
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The period of vesting of any stock award shall not be less than three years, except to the extent that (a) the period of vesting of a stock award
is at least one year and the award is performance based, (b) the stock award is made by a committee composed entirely of independent directors and the number of shares covered by all awards with a period of vesting of less than three years does
not exceed 10% of the total number of shares authorized for grant or award, or (c) the stock
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award is made by a committee composed entirely of independent directors, constitutes an employment inducement award for a new hire and does not exceed 10% of the total number of shares authorized
for grant or award under the 2005 Incentive Plan;
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Restriction periods of any stock awards shall not be waived except to the extent that (a) the waiver is made by a committee composed entirely of
independent directors and the number of shares covered by all awards as to which such waivers apply does not exceed 10% of the total number of shares authorized for grant or award under the 2005 Incentive Plan, (b) the waiver is in connection
with a change in control as defined in the 2005 Incentive Plan, or (c) the waiver is made by a committee composed entirely of independent directors as a result of disability or other extenuating circumstances pertaining to the awardee; and
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All grants of options and stock awards to non-employee directors shall be on a fixed or formulaic (rather than discretionary) basis, except if the
grant or award is made by a committee composed entirely of independent directors and the number of shares covered by all grants and awards on a discretionary basis to non-employee directors does not exceed 10% of the total number of shares
authorized for grant or award under the 2005 Incentive Plan.
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Retirement and Other Benefits
We have an employee stock ownership plan and a 401(k) plan to provide our employees an opportunity to save for retirement in a tax
efficient manner. Our Named Executive Officers are eligible to participate in these plans on the same terms as our other employees.
Under our
Cathay Bank Employee Stock Ownership Plan (the ESOP), as amended and restated from time to time, we can make annual contributions to a trust (the Trust) in the form of either cash or common stock for the benefit of eligible
employees and to pay administration expenses. In prior years, our Board determined the amount of the annual contribution to the Trust in light of our earnings in the prior plan year and such contributions were made in cash. The cash contributed to
the Trust has been invested by its trustees in shares of our common
stock. Each participants benefits under the ESOP consist of cash (or cash equivalents) and shares of common stock allocated to the participant. We have not made a contribution since 2003,
and we do not plan to make a contribution in 2013.
Salaried employees of Cathay Bank who have completed three months of service and have
attained the age of 21 are eligible to participate in a 401(k) Profit Sharing Plan. During 2012, Cathay Bank matched 100% of the participants contribution up to 2.5% of the participants eligible compensation per pay period. The vesting
schedule for the matching contribution is 0% for less than two years of service, 25% after two years of service, and from then on at an increment of 25% each year until 100% is vested after five years of service.
We also provide group life, health, dental, disability, and medical reimbursement plans that do not discriminate in scope, terms, or operation in favor
of our executive officers or directors and that are available generally to all salaried employees.
Perquisites and Other
Personal Benefits
We provide our Named Executive Officers with perquisites and other personal benefits that the Board and the Compensation
Committee believe are reasonable and consistent with our overall compensation program to better enable us to attract and retain employees for key positions. The Compensation Committee periodically reviews the levels of perquisites and other personal
benefits provided to the Named Executive Officers. Currently, these perquisites consist of automobile expenses and club memberships. For 2012, the aggregate amount of perquisites and other personal benefits provided to our Named Executive Officers
was less than $10,000 each.
The Board has adopted an Excessive and Luxury Expenditure Policy that prohibits excessive or luxury expenditures
on any of the following to the extent such expenditures are not reasonable expenditures for staff development, reasonable performance incentives, or other similar reasonable measures conducted in the normal course of our business operations:
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entertainment and events;
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office or facility renovations;
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aviation or other transportation services; and
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other similar items, activities, or events for which we may reasonably anticipate incurring expenses, or reimbursing an employee for incurring
expenses.
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This policy contains standards that identify the types or categories of expenditures which are prohibited;
identify the types or categories of expenditures for which prior approval is required; provide reasonable approval procedures under which an expenditure requiring prior approval may be approved; require Chief Executive Officer certification that the
approval of any expenditure requiring the prior approval of any Named Executive Officer, any executive officer of a substantially similar level of responsibility, or the Board or Board committee was properly obtained with respect to each such
expenditure; require the prompt internal reporting of violations to the Compensation Committee; and mandate accountability for adherence to the policy. A copy of this Excessive and Luxury Expenditure Policy is available at
www.cathaygeneralbancorp.com.
Establishing Our Executive Compensation
Role of Compensation Committee
The Compensation Committee, which is comprised of independent directors, exercises oversight with respect to the compensation philosophy, policies, practices, and implementation for our executive officers
and directors. For information relating to the composition and responsibilities of the Compensation Committee, see Compensation Committee under Board of Directors and Corporate Governance above.
The Chief Executive Officer and the Compensation Committee review the performance of each Named Executive Officer (other than the Chief Executive
Officer) and all other executive officers. The conclusions reached and recommendations made based on these reviews, which include salary adjustments and equity award amounts, are then taken into account by the Compensation Committee as it makes
decisions about compensation of the Named Executive Officers and other executive officers.
With respect to the Chief Executive Officer, the Compensation Committee reviews and approves the corporate
goals and objectives relevant to the Chief Executive Officers compensation, evaluates the Chief Executive Officers performance against those objectives, and approves the Chief Executive Officers compensation based on that
evaluation. The Chief Executive Officer does not participate in any deliberations or voting regarding his own compensation.
The Compensation
Committee has the authority to retain or obtain the advice of a compensation consultant, legal counsel, or such other advisor as it, in its sole discretion, deems necessary or advisable to assist it in carrying out its responsibilities. The
Compensation Committee is responsible for the appointment, compensation, and oversight of the work of any such compensation consultant or other advisor. Before selecting an advisor or receiving advice, other than from our inhouse counsel, the
Compensation Committee makes inquiry and assesses the responses to determine whether there are any potential conflicts of interest. In making its determinations with respect to compensation, the Compensation Committee also has access to and seeks
input from senior management, the Lead Independent Director, and other directors, as well as receiving administrative support and advice from the General Counsel, the Director of Human Resources of Cathay Bank, and representatives of other
departments of Cathay Bank.
Compensation Consultant
In June 2012, the Compensation Committee retained Frederic W. Cook & Co., Inc. (FWC) as a compensation consultant. FWC reports directly to the Compensation Committee. Management has
not retained its own compensation consultant. The Compensation Committee has conducted an inquiry and assessment with respect to FWC, and determined that it is independent of management, provides no other services to us or to management, has in
place policies and procedures designed to prevent conflicts of interest, and has no conflicts of interest in acting as a compensation consultant to the Compensation Committee.
As part of its engagement, FWC informs the Compensation Committee on practices and trends in executive compensation in the banking sector.
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Specifically, FWC was engaged to assist the Compensation Committee in (a) designing a post-TARP Period compensation plan for certain of our executive officers that can meet the requirements
of Section 162(m) of the Internal Revenue Code, (b) structuring our post-TARP Period equity compensation program among restricted stock, stock options, stock performance shares or other forms of equity compensation, (c) assessing
whether our incentive compensation program will be commensurate with prudent risk taking and links specific performance to the overall quality and sustainability of our performance and profitability, and (d) preparing the CD&A in this proxy
statement.
The Compensation Committee did not use the services of FWC or any other compensation consultant in determining the form or amount
of compensation for our executive officers for 2012.
Compensation Decisions for Named Executive Officers
During 2012, the Compensation Committee held 23 meetings to discuss, review, and/or deliberate about our compensation program and the appropriate levels
of compensation for the Named Executive Officers. As discussed in this CD&A and elsewhere in this proxy statement, the Compensation Committee, consistent with its charter and the objectives of our compensation program, reviewed and considered
relevant information available to it in making its compensation decisions.
While our policies and decisions with respect to our Named
Executive Officers are not materially different than for our other executive officers, the Compensation Committee is not precluded from taking into account exceptional circumstances when making its decisions so long as those policies and decisions
are believed to be in our best interests and those of our stockholders. In the case of our Chief Executive Officer, the greater relative size and range of his total compensation reflect his length of service, his critical role as the key person
responsible for our earlier expansion and growth, and his leadership in guiding us through the recession and financial crisis of recent years back to profitability.
In April 2012, decisions were made by the Compensation Committee with respect to the level of annual base salaries for the Named Executive
Officers. Minor adjustments of between 2.09% and 3.20% were made in the annual base salaries, other than that for Mr. Cheng, which remained unchanged.
In June 2012, the Compensation Committee increased the annual base salaries of our Named Executive Officers for the period June 1, 2012, through
December 31, 2012, to be payable as salary stock. The additional base salary amounts were $565,000 for Mr. Cheng, $245,000 for Mr. Wu, $135,000 for Mr. Tang, $135,000 for Mr. Chen, and $95,000 for Mr. Wong, ranging from
36% to 57% of their annual base salaries.
The amount of the increase in the base salaries was paid partly in fully-vested, non-forfeitable
shares of our common stock pursuant to our 2005 Incentive Plan on each payroll date for the pay periods beginning June 1, 2012, and ending December 31, 2012, with the number of shares being equal to the additional base salary amount
payable for each pay period, divided by the closing price of our common stock as reported on Nasdaq, and partly in cash to satisfy tax withholding.
In December 2012, the Compensation Committee increased the annual base salaries for each of our Named Executive Officers for the period January 1, 2013, through December 31, 2013, and awarded
salary stock on the same basis as in June 2012, but payable on each payroll date for the pay periods beginning January 1, 2013, and ending December 31, 2013. The additional base salary amounts are $1,060,000 for Mr. Cheng, $420,000
for Mr. Wu, $231,428 for Mr. Tang, $231,428 for Mr. Chen, and $162,857 for Mr. Wong, ranging from 62% to 106% of their annual base salaries.
The salary stock may not be sold or transferred (except in the case of death or permanent disability) during the TARP Period. In addition, the Compensation Committee may, in its sole discretion and
without the executive officers consent, at any time, terminate, suspend, or modify the obligation to pay the additional base salary amounts and salary stock awards, provided that the executive officers rights to stock previously issued
are not materially and adversely affected. This will permit the Compensation Committee to reevaluate the components of our compensation program after the TARP Period and, if it chooses, to discontinue the use of salary stock.
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In awarding salary stock, the Compensation Committee discussed, among other things, the tax treatment and
cost, the equity compensation and total annual compensation of the executive officers for 2012, the equity compensation and total annual compensation paid to executive officers of other financial institutions, our financial condition and projected
financial performance for 2012, and our objectives and compensation practices. In determining the appropriate level of salary stock for each Named Executive Officer, the Compensation Committee reviewed and assessed the individuals skills,
responsibilities, performance, and contributions.
The Compensation Committee granted long-term restricted stock units in May 2012 and, after
evaluating our financial performance for the year, again in December 2012. The long-term restricted stock units represent a contingent right to receive one share of our common stock for each unit, were valued on the basis of the closing price of our
common stock on the date of grant, and vest on the second anniversary of the date of grant, or earlier in the event of death or disability. Upon vesting, the shares are issued, but transfer of the shares is restricted until certain amounts of the
TARP Capital Purchase Program financial assistance have been repaid, except to the extent necessary to satisfy tax withholding. The total value of the long-term restricted stock units granted in May 2012 and December 2012 to the Named Executive
Officers amounted to approximately 50% of the 2012 base salaries of each of the Named Executive Officers.
In granting long-term restricted
stock units, the Compensation Committee discussed, among other things, the limitations of the EESA, the terms and purposes of the proposed grants, the methodology for calculating the size of the grants, our financial condition and estimated
financial results for 2012, safety and soundness and risk management considerations, paying for performance, our compensation practices, the compensation of executive officers at other banks and bank holding companies, the perceived views of our
stockholders and expectations of our executive officers, and alternatives to granting long-term restricted stock units.
Additional Information Relating to Executive Compensation
Ownership Guidelines
We
do not require that each Named Executive Officer maintain a minimum ownership interest in our stock.
Compensation Recovery
Policy
As a result of our participation in the TARP Capital Purchase Program, we have agreed that any bonus or other incentive
compensation we pay to our Named Executive Officers during the TARP Period are subject to recovery (or clawback) if such payments were made based on materially inaccurate financial statements or any other materially inaccurate
performance metric criteria. The recovery period is unlimited. We believe the principles of a clawback in the event of materially inaccurate financial or performance data are consistent with our compensation philosophy, which ties compensation to
our financial and operating performance and the overall increase in stockholder value, and which does not encourage the taking of unnecessary and excessive risks that could threaten the value of Bancorp or encourage the manipulation of reported
earnings to enhance the compensation of any employee. Each of our Named Executive Officers has specifically agreed to the provisions of the clawback.
Control Agreements
The Board desires to promote stability and continuity of senior
management and to help align their interests with those of our stockholders in the event of a change in control or potential change in control of Bancorp. Accordingly, we entered into Change of Control Employment Agreements (the Control
Agreements) with each of our Named Executive Officers and certain other senior officers of Cathay Bank in November 2006. These Control Agreements were amended and restated in December 2008 to comply with Section 409A of the Internal
Revenue Code. We believe that these agreements help to ensure that our key officers will remain fully engaged during a change in control or potential change in control. The Control Agreements provide for enhanced severance benefits in the event of a
voluntary termination of employment for good reason or involuntary termination other than for cause following a change in control. Based on a
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review of information generally available to the public and the advice of outside legal counsel, the Board determined that these arrangements were competitive and reasonable. The Control
Agreements do not influence our decisions surrounding the Named Executive Officers cash and equity compensation.
As a result of our
participation in the TARP Capital Purchase Program, we have agreed to prohibit any golden parachute payment to any of our Named Executive Officers and each of the five next most highly-compensated employees during the TARP Period. In
addition, pursuant to a memorandum of understanding entered with the Federal Reserve Bank of San Francisco (FRB) in December 2009, among other things, Bancorp agreed to notify the FRB prior to effecting certain changes to our senior
executive officers and Board and is limited and/or prohibited, in certain circumstances, in its ability to enter into contracts to pay and to make golden parachute severance and indemnification payments. Cathay Bank was previously subject to similar
limitations imposed in its March 2010 memorandum of understanding with the Federal Deposit Insurance Corporation and the California Department of Financial Institutions, but this memorandum of understanding was terminated in November 2012. For a
more detailed discussion of the severance benefits, the events that would trigger payment of severance benefits, and the Control Agreements in general, see Potential Payments Upon Termination or Change in Control below.
Risk Assessment
As a
result of our participation in the TARP Capital Purchase Program, our Compensation Committee meets with our senior risk officers to ensure that the Named Executive Officers incentive compensation arrangements do not encourage such officers to
take unnecessary and excessive risks that threaten our value. Accordingly, in February, June, and October of 2012, our Compensation Committee met with Bancorps and Cathay Banks senior risk officers to evaluate the risks, both long-term
and short-term, that we face. As part of this evaluation, our Compensation Committee identified risks inherent in our business, including credit risk, market risk, liquidity risk, operations risk, legal/compliance risk, and reputation risk. These
and other risks are described in our Annual Report on Form 10-K. The Compensation Committee then reviewed our
incentive compensation arrangements to ensure that such arrangements do not encourage our Named Executive Officers to take any unnecessary or excessive risks that threaten our value, to identify
features that could pose risks to Bancorp and limit those features to ensure that Bancorp is not unnecessarily exposed to risks, and to eliminate any features that would encourage the manipulation of reported earnings of Bancorp to enhance the
compensation of any employee.
Say on Pay/Response to 2012 Vote
Our Board has been annually submitting to our stockholders a proposal to approve, on an advisory (non-binding) basis, our executive compensation. At the
2012 annual meeting of stockholders 93.7% of the votes cast were in favor of approving this proposal. While the Compensation Committee was aware of and considered the results of the advisory vote on executive compensation, the results have not
affected its executive compensation decisions and policies.
Pledging and Hedging Policy
Our Board has adopted a policy that prohibits, unless advance approval has been obtained from the Board, all directors and executive officers (including
the Named Executive Officers) from holding our securities in a margin account or otherwise pledging or hypothecating our securities as collateral for a loan, entering into hedging or monetization transactions or similar arrangements with respect to
our securities, or engaging in certain other speculative trading in our securities.
Deductibility of Executive
Compensation
As part of its responsibilities, the Compensation Committee reviews and considers the deductibility of executive compensation
under Section 162(m) of the Internal Revenue Code, which provides that we may not deduct compensation of more than $1,000,000 that is paid to certain employees. This limitation does not apply, however, to performance-based
compensation that is payable due to the attainment of one or more preestablished performance goals, the material terms of which have been approved by the stockholders in advance of payment. As a result of our participation in the TARP Capital
Purchase Program in December 2008, we have not been able to deduct compensation paid to any of our Named
27
Executive Officers in excess of $500,000, and the exemption for performance-based compensation is not available during the TARP Period. For additional information regarding the deductibility of
executive compensation, see Proposal TwoReapproval of the Material Terms for the Award of Performance-Based Compensation under our 2005 Incentive Plan below.
Nonqualified Deferred Compensation
We do not have a deferred compensation program, and we
have no current plans to implement such a program. However, we do have one deferred compensation arrangement with Dunson K. Cheng, our Chief Executive Officer, under an agreement effective November 23, 2004. For details regarding the deferral
agreement, see Nonqualified Deferred Compensation below.
Accounting for Stock-Based Compensation
On January 1, 2006, we adopted FASB Accounting Standards Codification Topic 718, CompensationStock Compensation (FASB ASC
Topic 718) (formerly known as FASB Statement of Financial Accounting Standards No. 123 (revised 2004), Share-Based Payment) on a modified prospective basis. FASB ASC Topic 718 requires an entity to recognize compensation expense based on
an estimate of the number of awards expected to actually vest, exclusive of awards expected to be forfeited.
Under the 2005 Incentive Plan,
we are permitted to issue both incentive stock options and nonstatutory stock options. However, historically we have elected to award only nonstatutory stock options because we believed that the tax benefits to the company outweighed the potential
tax benefits of incentive stock options to our employees. Generally, nonstatutory stock options entitled us to a deduction at the time the options are exercised and in the same amount as the optionees taxable income, calculated as the excess
of the fair market value of the shares over the exercise price. In the case of incentive stock options, we would be entitled to a deduction equaling the amount of the optionees taxable income as calculated above, but only if shares were sold
within one year of exercise or two years of grant.
With the adoption of FASB ASC Topic 718, the accounting treatment for all forms of stock
options
changed, thereby prompting us to review the relative merits of nonstatutory stock options. As a result of this review, we have awarded shares of restricted stock or restricted stock units to
employees eligible under the 2005 Incentive Plan either in place of or in combination with nonstatutory stock options.
A desirable feature of
restricted stock and restricted stock units is that they permit us to issue fewer shares, thereby reducing potential stockholder dilution. We believe that restricted stock and restricted stock units provide an equally motivating form of incentive
compensation as stock options, and we will weigh the costs of restricted stock, restricted stock units, and nonstatutory stock option grants with their potential benefits as compensation tools. Stock options only have value to the extent that our
share price on the date of exercise exceeds the exercise price on the grant date and are an effective motivational tool when the stock price rises over the term of the award. Restricted stock and restricted stock units serve to reward and retain
executive officers through shares valued at the current price on the date the restriction lapses.
As discussed above, under the regulations
applicable to participants in the TARP Capital Purchase Program, the only form of bonus, incentive compensation, and retention awards we are currently permitted to award to our Named Executive Officers and the 10 next most highly-compensated
employees are certain long-term restricted stock or restricted stock units. A combination of restricted stock, restricted stock units, and, after the TARP Period, nonstatutory stock option grants should continue to effectively serve our objectives
of incentivizing our executive officers to focus on delivering long-term value to our stockholders while providing value to our executive officers through equity awards.
Compensation Committee Interlocks and Insider Participation
No person who was a member of the Compensation
Committee during 2012 had any relationships requiring disclosure.
28
Compensation Committee Report
The Compensation Committee has reviewed and
discussed the CD&A with management. Based on such review and discussions, the Compensation Committee recommended to the Board that the CD&A be included in this proxy statement and incorporated by reference into Bancorps Annual Report
on Form 10-K for the year ended December 31, 2012.
As described in the CD&A, the compensation program for the Named Executive
Officers and other Cathay Bank employees in recent years consisted primarily of base salary and equity compensation. The base salaries of the Named Executive Officers are determined each year on a case-by-case basis and in 2012 included salary stock
as described above. For 2012, we did not pay cash bonuses, but did award long-term restricted stock units within the meaning of the EESA to our Named Executive Officers as described above. These grants were awarded in accordance with the regulations
applicable to participants in the TARP Capital Purchase Program, as described in the CD&A, which require that the only form of bonus, incentive compensation, and retention awards we are currently permitted to award to our Named Executive
Officers and the 10 next most highly-compensated employees are long-term restricted stock or restricted stock units, provided that the value of such award may not exceed one-third of that employees annual compensation as determined for the
fiscal year of the award and that the award shall vest and be transferable only in accordance with the terms of the EESA.
Generally we
believe that by using a combination of base salary, cash bonus, and equity compensation, our compensation program avoids encouraging the Named Executive Officers to take unnecessary and excessive risks that threaten the value of Bancorp. We also
believe that such risk is mitigated by the variable factors we take into account in making our compensation decisions. We believe that an appropriate mix of total compensation comprised of fixed base salaries and discretionary cash bonuses, stock
options, and restricted stock or restricted stock units, can strike an appropriate balance between short- and long-term risk and reward, and ultimately drive appropriate and desired results consistent with Bancorps overall growth strategy and
risk profile. Accordingly, we seek to balance base salary and
equity compensation for Named Executive Officers and to not cause base salary to be disproportionately low compared with equity compensation. Also, subject to the limitations of the EESA, we mix
service-based and performance-based equity awards that include stock options, restricted stock, and restricted stock units. We believe this approach is reasonable given Bancorps business objectives and is comparable to programs used by other
banks and bank holding companies within a range similar in assets and market capitalization.
We also seek to discourage the Named Executive
Officers from taking unnecessary and excessive risks by having base salary, cash bonus, and equity compensation determinations made on the basis of variable factors in our discretion as described in the CD&A. We endeavor to set realistic
performance goals because we believe that setting goals that are unattainable could encourage excessive risk taking to achieve those goals. We also want to be comfortable that the maximum payout opportunity under the best performance scenario is
both reasonable and not likely to motivate excessive risk taking. We believe the use of variable metrics and subjecting compensation decisions to qualitative evaluation serve to minimize the potential for excessive risk taking. Formula-based metrics
focused solely on quantitative returns may encourage increased risk taking in singular pursuit of specific objectives for individual enrichment without due regard for the long-term welfare of Bancorp and the interests of our stockholders.
By avoiding strict formula-based quantitative measures, our compensation program seeks to reduce the potential for manipulation of specific
quantitative results and affords us the flexibility to look beyond specific quantitative metrics and assess the quality of the financial results and their effect on the long-term objectives and welfare of Bancorp and the interests of our
stockholders. Under this flexible approach, we can further measure relative performance against industry averages or other performance objectives rather than on absolute returns. For example, even though net income of Bancorp was used in years prior
to the TARP Period to determine cash bonus awards for Dunson K. Cheng and Peter Wu, we had the right to reduce the awards or to eliminate the cash bonuses altogether in our sole discretion even if the minimum net income metrics had been achieved.
29
In accordance with the EESA, further measures have been taken to limit features in the compensation
arrangements that could lead the Named Executive Officers to take unnecessary and excessive risks, unnecessarily expose Bancorp to risks, or encourage the manipulation of our reported earnings to enhance the compensation of an employee.
Specifically, we amended our compensation program to provide that: (a) the Named Executive Officers are not eligible to receive compensation thereunder to the extent we determine that such compensation may provide incentives for them to take
unnecessary and excessive risks that threaten the value of Bancorp; (b) each Named Executive Officer and the 20 next most highly-compensated employees are required to return any bonus, retention award, or incentive compensation paid to them
based on materially inaccurate financial statements or any other materially inaccurate performance metric criteria (the clawback); and (c) we will not pay or accrue any bonus, retention award, or incentive compensation to any Named
Executive Officer or the 10 next most highly-compensated employees, other than certain long-term restricted stock or restricted stock units permitted under the EESA. In addition, we have reviewed and will continue to review and evaluate with our
senior risk officers at least every six months our compensation plans and the risks posed by these plans in order to identify and limit the features that could lead to the taking of unnecessary and excessive risks that could threaten the value of
Bancorp, to identify any features in these plans that could pose risks to Bancorp and limit those features to ensure Bancorp is not unnecessarily exposed to risks, and to eliminate any features in employee compensation plans that would encourage the
manipulation of reported earnings of Bancorp to enhance the compensation of any employee. The clawback feature supports the accuracy of our financial statements and encourages the maintenance of accurate books and records and compliance
with applicable accounting policies.
The Compensation Committees risk evaluation was confirmed in December 2012 by FWC, which conducted
a review of the Bancorps employee compensation plans and concluded that it did not find significant risk areas from a compensation risk perspective. Moreover, FWCs review had identified
no features in the Bancorps employee compensation plans that were inconsistent with the Compensation Committees certifications required under the EESA and the proxy statement rules of
the SEC, and it was FWCs opinion that the risks arising from Bancorps compensation policies and practices are not reasonably likely to have a material adverse effect on the Bancorp.
The Compensation Committee certifies that:
|
|
It has reviewed with senior risk officers the senior executive officer (SEO) compensation plans and has made all reasonable efforts to ensure that
these plans do not encourage SEOs to take unnecessary and excessive risks that threaten the value of Bancorp;
|
|
|
It has reviewed with senior risk officers the employee compensation plans and has made all reasonable efforts to limit any unnecessary risks these
plans pose to Bancorp; and
|
|
|
It has reviewed the employee compensation plans to eliminate any features of these plans that would encourage the manipulation of reported earnings of
Bancorp to enhance the compensation of any employee.
|
Compensation Committee
Ting Y. Liu (Chairman)
Kelly L. Chan
Patrick S.D. Lee
Joseph C.H. Poon
30
Remuneration of Executive Officers
The following tables set forth information
regarding the compensation for services in all capacities paid or accrued for the periods indicated by Bancorp to its principal executive officer, principal financial officer
,
and the three most highly compensated executive officers of either
Bancorp or Cathay Bank other than Bancorps principal executive officer and principal financial officer (the Named Executive Officers).
Summary Compensation Table
The table below sets forth information for the Named Executive
Officers regarding compensation for the last three completed fiscal years:
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|
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|
|
|
|
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|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Summary Compensation
Table
|
|
Name and Principal
Position
|
|
Year
|
|
|
Salary
1/
($)
|
|
|
Bonus
($)
|
|
|
Stock
awards
2/
($)
|
|
|
Option
awards
3/
($)
|
|
|
Non-equity
incentive
plan
compensation
4/
($)
|
|
|
Change in
pension
value
and non-
qualified
deferred
compensation
earnings ($)
|
|
|
All
other
compensation
5/
($)
|
|
|
Total
($)
|
|
Dunson K. Cheng
|
|
|
2012
|
|
|
|
1,565,000
|
6/
|
|
|
|
|
|
|
782,485
|
|
|
|
|
|
|
|
|
|
|
|
14,909
|
7
/
|
|
|
6,250
|
|
|
|
2,368,644
|
|
Chairman of the
Board, President,
and Chief
Executive Officer
of Bancorp and
Cathay Bank
|
|
|
2011
|
|
|
|
1,000,000
|
|
|
|
|
|
|
|
499,991
|
|
|
|
|
|
|
|
|
|
|
|
13,909
|
|
|
|
6,125
|
|
|
|
1,520,025
|
|
|
|
2010
|
|
|
|
1,000,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12,977
|
|
|
|
6,125
|
|
|
|
1,019,102
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Peter Wu
|
|
|
2012
|
|
|
|
705,625
|
8/
|
|
|
|
|
|
|
352,803
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,250
|
|
|
|
1,064,678
|
|
Executive Vice
Chairman of the
Board and Chief
Operating Officer
of Bancorp and
Cathay Bank
|
|
|
2011
|
|
|
|
449,625
|
|
|
|
|
|
|
|
224,799
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,125
|
|
|
|
680,549
|
|
|
|
2010
|
|
|
|
438,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,125
|
|
|
|
444,125
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
|
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|
|
|
|
|
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|
|
|
|
|
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|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Anthony M. Tang
|
|
|
2012
|
|
|
|
466,900
|
9/
|
|
|
|
|
|
|
233,440
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,250
|
|
|
|
706,590
|
|
Executive Vice
President of
Bancorp and
Senior Executive
Vice President
and Chief Lending
Officer of Cathay
Bank
|
|
|
2011
|
|
|
|
322,000
|
|
|
|
|
|
|
|
161,046
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,125
|
|
|
|
489,171
|
|
|
|
2010
|
|
|
|
313,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,125
|
|
|
|
319,125
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Heng W. Chen
|
|
|
2012
|
|
|
|
467,800
|
10/
|
|
|
|
|
|
|
233,899
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,250
|
|
|
|
707,949
|
|
Executive Vice
President and
Chief Financial
Officer of Bancorp
and Cathay Bank
|
|
|
2011
|
|
|
|
321,750
|
|
|
|
|
|
|
|
160,925
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,125
|
|
|
|
488,800
|
|
|
|
2010
|
|
|
|
312,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,125
|
|
|
|
318,125
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Irwin Wong
|
|
|
2012
|
|
|
|
357,850
|
11/
|
|
|
|
|
|
|
178,916
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,250
|
|
|
|
543,016
|
|
Executive Vice
President and
Chief Risk Officer
of Cathay Bank
|
|
|
2011
|
|
|
|
254,750
|
|
|
|
|
|
|
|
127,372
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,125
|
|
|
|
388,247
|
|
|
|
2010
|
|
|
|
246,250
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,125
|
|
|
|
252,375
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1/
|
Includes salary
stock received by the Named Executive Officers and amounts deferred by Named Executive Officers under Bancorps 401(k) Profit Sharing Plan. For a discussion of salary stock, see Compensation Discussion and Analysis Elements of Our
Executive Compensation Program above.
|
31
|
2/
|
The amounts shown, if any, are not cash compensation received by the Named Executive Officer and may not correspond to the actual value that could be
realized by the Named Executive Officer. Instead, the amount represents the fair value of restricted stock units computed for the corresponding fiscal year, in accordance with FASB ASC Topic 718, valued at the closing price of the Bancorps
common stock on the date of the grant.
|
|
3/
|
No stock options
were granted to the Named Executive Officers for the last three completed fiscal years.
|
|
4/
|
No non-equity
incentive plan compensation was paid to the Named Executive Officers for the last three completed fiscal years.
|
|
5/
|
The amounts in this column consist of employer contributions under the 401(k) Profit Sharing Plan. Perquisites and other personal benefits, or
property, are excluded if the aggregate amount of such compensation was less than $10,000. Group life insurance, health insurance, and long-term disability insurance premiums are also excluded because such premiums are pursuant to a plan that does
not favor executive officers or directors and is generally available to all salaried employees.
|
|
6/
|
Includes $1,000,000 cash salary and $565,000 salary stock paid to Mr. Cheng in 2012. The salary stock was paid to Mr. Cheng partly in 20,848
fully-vested, non-forfeitable shares of our common stock and partly in cash of $207,242 to satisfy tax withholding.
|
|
7/
|
This consists of
interest paid on deferred compensation that is considered above-market under the regulations of the SEC. For a discussion of the deferral agreement, see Nonqualified Deferred Compensation below.
|
|
8/
|
Includes $460,625
cash salary and $245,000 salary stock paid to Mr. Wu in 2012. The salary stock was paid to Mr. Wu partly in 9,040 fully-vested, non-forfeitable shares of our common stock and partly in cash of $89,866 to satisfy tax withholding.
|
|
9/
|
Includes $331,900
cash salary and $135,000 salary stock paid to Mr. Tang in 2012. The salary stock was paid to Mr. Tang partly in 4,981 fully-vested, non-forfeitable shares of our common stock and partly in cash of $49,518 to satisfy tax withholding.
|
|
10/
|
Includes $332,800
cash salary and $135,000 salary stock paid to Mr. Chen in 2012. The salary stock was paid to Mr. Chen partly in 4,981 fully-vested, non-forfeitable shares of our common stock and partly in cash of $49,518 to satisfy tax withholding.
|
|
11/
|
Includes
approximately $262,850 cash salary and $95,000 salary stock paid to Mr. Wong in 2012. The salary stock was paid to Mr. Wong partly in 3,505 fully-vested, non-forfeitable shares of our common stock and partly in cash of $34,846 to satisfy
tax withholding.
|
Grants of Plan-Based Awards
The table below sets forth information regarding grants of plan-based awards to our Named Executive Officers in 2012. The awards consist of long-term
restricted stock units and salary stock, both of which are permitted by the Emergency Economic Stabilization Act of 2008, as amended from time to time, and the rules and regulations promulgated thereunder (the EESA).
The restricted stock units represent a contingent right to receive one share of our common stock for each unit and are scheduled to vest on the second
anniversary of the date of grant, or earlier in the event of death or disability. The shares, upon issuance, are subject to certain transfer restrictions under the EESA.
The salary stock represents shares of our common stock issued to the Named Executive Officers as an adjustment to their base salary. The amount of the adjustment was paid partly in fully-vested,
non-forfeitable shares of our common stock and partly in cash to satisfy tax withholding. Payment was made on each payroll date for the pay periods beginning June 1, 2012 and ending December 31, 2012, with the number of shares being equal
to the additional base salary amount payable for each pay period, divided by the closing price of our common stock as reported on Nasdaq. The shares, upon issuance, are subject to certain transfer restrictions under the EESA.
32
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Grants of Plan-Based
Awards
|
|
Name
|
|
Type of Grant
|
|
|
Grant date
|
|
|
Estimated future payouts
under equity and non-equity
incentive
plan awards
|
|
|
All other
stock
awards:
number
of shares
of stock
or units
(#)
1/
|
|
|
All other
option
awards;
number
of
securities
underlying
options
(#)
|
|
|
Exercise
or base
price of
option
awards
($/Sh)
|
|
|
Grant
date fair
value
of stock
and
option
awards
($)
2/
|
|
|
|
|
Threshold
($)
|
|
|
Target
($)
|
|
|
Maximum
($)
|
|
|
|
|
|
Dunson K. Cheng
|
|
|
Restricted Stock Units
|
|
|
|
5/8/2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11,862
|
|
|
|
|
|
|
|
|
|
|
|
199,993
|
|
|
|
|
Restricted Stock Units
|
|
|
|
12/20/2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30,481
|
|
|
|
|
|
|
|
|
|
|
|
582,492
|
|
|
|
|
Salary Stock
|
|
|
|
Various
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20,848
|
|
|
|
|
|
|
|
|
|
|
|
357,758
|
|
Peter Wu
|
|
|
Restricted Stock Units
|
|
|
|
5/8/2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,379
|
|
|
|
|
|
|
|
|
|
|
|
90,690
|
|
|
|
|
Restricted Stock Units
|
|
|
|
12/20/2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13,716
|
|
|
|
|
|
|
|
|
|
|
|
262,113
|
|
|
|
|
Salary Stock
|
|
|
|
Various
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,040
|
|
|
|
|
|
|
|
|
|
|
|
155,134
|
|
Anthony M. Tang
|
|
|
Restricted Stock Units
|
|
|
|
5/8/2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,819
|
|
|
|
|
|
|
|
|
|
|
|
81,248
|
|
|
|
|
Restricted Stock Units
|
|
|
|
12/20/2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,964
|
|
|
|
|
|
|
|
|
|
|
|
152,192
|
|
|
|
|
Salary Stock
|
|
|
|
Various
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,981
|
|
|
|
|
|
|
|
|
|
|
|
85,482
|
|
Heng W. Chen
|
|
|
Restricted Stock Units
|
|
|
|
5/8/2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,819
|
|
|
|
|
|
|
|
|
|
|
|
81,248
|
|
|
|
|
Restricted Stock Units
|
|
|
|
12/20/2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,988
|
|
|
|
|
|
|
|
|
|
|
|
152,651
|
|
|
|
|
Salary Stock
|
|
|
|
Various
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,981
|
|
|
|
|
|
|
|
|
|
|
|
85,482
|
|
Irwin Wong
|
|
|
Restricted Stock Units
|
|
|
|
5/8/2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,810
|
|
|
|
|
|
|
|
|
|
|
|
64,237
|
|
|
|
|
Restricted Stock Units
|
|
|
|
12/20/2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,001
|
|
|
|
|
|
|
|
|
|
|
|
114,679
|
|
|
|
|
Salary Stock
|
|
|
|
Various
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,505
|
|
|
|
|
|
|
|
|
|
|
|
60,154
|
|
|
1/
|
The number of
shares of salary stock for each Named Executive Officer were payable on each payroll date for the pay periods beginning June 1, 2012, and ending December 31, 2012, but have been aggregated for purposes of this table.
|
|
2/
|
The grant date
fair value of the restricted stock units is as determined for financial reporting purposes and included in the Stock awards column for each Named Executive Officer in the Summary Compensation Table above. The value of the
salary stock is included in the Salary column in the Summary Compensation Table above, but the portion paid in cash to satisfy tax withholding is not included in this table.
|
33
Outstanding Equity Awards at Fiscal Year-End
The table below sets forth information regarding outstanding equity awards as of December 31, 2012, made to our Named Executive Officers. Except as
stated in the footnotes below, all options vest in 20% increments over a five-year period. All options terminate 10 years from the date of the grant, subject to early termination in the event of termination of employment, disability, or death. Stock
awards consist of long-term restricted stock units, each of which represents a contingent right to receive one share of Bancorp common stock. All long-term restricted stock units are scheduled to vest on the second anniversary of the grant date, or
earlier in the event of death or disability, and are subject to certain transfer restrictions under the EESA.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option
awards
|
|
|
Stock
awards
|
|
Name
|
|
Number of
securities
underlying
unexercised
options
exercisable
(#)
|
|
|
Number of
securities
underlying
unexercised
options
unexercisable
(#)
|
|
|
Equity
incentive
plan
awards:
number of
securities
underlying
unexercised
unearned
options
(#)
|
|
|
Option
exercise
price
($)
|
|
|
Option
expiration
date
|
|
|
Number of
shares or
units
of
stock
that
have
not
vested
(#)
|
|
|
Market
value of
shares or
units of
stock that
have not
vested
($)
|
|
|
Equity incentive
plan
awards:
number of
unearned
shares, units or
other rights that
have not
vested (#)
|
|
|
Equity incentive
plan
awards:
market or
payout value
or
unearned
shares, units or
other
rights
that have not
vested ($)
|
|
Dunson K. Cheng
|
|
|
153,060
|
|
|
|
|
|
|
|
|
|
|
|
19.925
|
|
|
|
1/16/2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
246,940
|
|
|
|
|
|
|
|
|
|
|
|
24.80
|
|
|
|
11/20/2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
154,940
|
|
|
|
|
|
|
|
|
|
|
|
37.00
|
|
|
|
2/17/2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
245,060
|
1/
|
|
|
|
|
|
|
|
|
|
|
32.47
|
|
|
|
3/22/2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
264,694
|
2/
|
|
|
|
|
|
|
|
|
|
|
33.54
|
|
|
|
5/12/2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
154,940
|
|
|
|
|
|
|
|
|
|
|
|
36.24
|
|
|
|
1/25/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
123,976
|
|
|
|
30,994
|
|
|
|
|
|
|
|
23.37
|
|
|
|
2/21/2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
100,000
|
3/
|
|
|
|
|
|
|
|
|
|
|
23.37
|
|
|
|
2/21/2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12,384
|
4/
|
|
|
241,860
|
4/
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
21,913
|
5/
|
|
|
427,961
|
5/
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11,862
|
6/
|
|
|
231,665
|
6/
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30,481
|
7/
|
|
|
595,294
|
7/
|
Peter Wu
|
|
|
100,000
|
|
|
|
|
|
|
|
|
|
|
|
28.695
|
|
|
|
2/19/2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
72,170
|
|
|
|
|
|
|
|
|
|
|
|
37.00
|
|
|
|
2/17/2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
72,170
|
|
|
|
|
|
|
|
|
|
|
|
36.24
|
|
|
|
1/25/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
57,784
|
|
|
|
14,446
|
|
|
|
|
|
|
|
23.37
|
|
|
|
2/21/2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,192
|
4/
|
|
|
120,930
|
4/
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,116
|
5/
|
|
|
178,035
|
5/
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,379
|
6/
|
|
|
105,052
|
6/
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13,716
|
7/
|
|
|
267,873
|
7/
|
Anthony M. Tang
|
|
|
47,500
|
|
|
|
|
|
|
|
|
|
|
|
19.925
|
|
|
|
1/16/2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
105,140
|
|
|
|
|
|
|
|
|
|
|
|
24.80
|
|
|
|
11/20/2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
39,820
|
|
|
|
|
|
|
|
|
|
|
|
37.00
|
|
|
|
2/17/2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
42,690
|
|
|
|
|
|
|
|
|
|
|
|
36.24
|
|
|
|
1/25/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
35,200
|
|
|
|
8,800
|
|
|
|
|
|
|
|
23.37
|
|
|
|
2/21/2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,846
|
4/
|
|
|
94,642
|
4/
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,047
|
5/
|
|
|
118,098
|
5/
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,819
|
6/
|
|
|
94,115
|
6/
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,964
|
7/
|
|
|
155,537
|
7/
|
Heng W. Chen
|
|
|
19,896
|
|
|
|
|
|
|
|
|
|
|
|
24.80
|
|
|
|
11/20/2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
40,100
|
|
|
|
|
|
|
|
|
|
|
|
37.00
|
|
|
|
2/17/2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
45,000
|
|
|
|
|
|
|
|
|
|
|
|
36.24
|
|
|
|
1/25/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
35,200
|
|
|
|
8,800
|
|
|
|
|
|
|
|
23.37
|
|
|
|
2/21/2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,830
|
4/
|
|
|
94,330
|
4/
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,057
|
5/
|
|
|
118,293
|
5/
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,819
|
6/
|
|
|
94,115
|
6/
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,988
|
7/
|
|
|
156,006
|
7/
|
Irwin Wong
|
|
|
30,064
|
|
|
|
|
|
|
|
|
|
|
|
19.925
|
|
|
|
1/16/2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
143,040
|
|
|
|
|
|
|
|
|
|
|
|
24.80
|
|
|
|
11/20/2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
32,580
|
|
|
|
|
|
|
|
|
|
|
|
37.00
|
|
|
|
2/17/2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31,000
|
|
|
|
|
|
|
|
|
|
|
|
36.24
|
|
|
|
1/25/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16,000
|
|
|
|
4,000
|
|
|
|
|
|
|
|
23.37
|
|
|
|
2/21/2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,840
|
4/
|
|
|
74,995
|
4/
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,774
|
5/
|
|
|
93,236
|
5/
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,810
|
6/
|
|
|
74,409
|
6/
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,001
|
7/
|
|
|
117,200
|
7/
|
|
1/
|
These options vested at a rate of 30% on the date of grant, March 22, 2005; 10% vested on November 20, 2005; and the remainder vested at a
rate of 20% in three equal annual increments beginning November 20, 2006.
|
34
|
2/
|
These options vested at a rate of approximately 40% on November 20, 2005, and the remainder vested at a rate of approximately 20% in three equal
annual increments beginning November 20, 2006.
|
|
3/
|
These options vested at a rate of 50% in two annual increments beginning February 21, 2009.
|
|
4/
|
These restricted
stock units vested in a single installment on March 23, 2013, and are subject to certain transfer restrictions under the EESA.
|
|
5/
|
These restricted
stock units are scheduled to vest in a single installment on December 15, 2013, or earlier in the event of death or disability, and are subject to certain transfer restrictions under the EESA.
|
|
6/
|
These restricted
stock units are scheduled to vest in a single installment on May 8, 2014, or earlier in the event of death or disability, and are subject to certain transfer restrictions under the EESA.
|
|
7/
|
These restricted
stock units are scheduled to vest in a single installment on December 20, 2014, or earlier in the event of death or disability, and are subject to certain transfer restrictions under the EESA.
|
Option Exercises and Stock Vested
The table below sets forth information regarding stock options exercised and vesting of stock awards for the Named Executive Officers during 2012.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option
awards
|
|
|
Stock
awards
|
|
Name
|
|
Number of shares
acquired on
exercise (#)
|
|
|
Value realized on
exercise ($)
|
|
|
Number of shares
acquired on
vesting (#)
|
|
|
Value realized on
vesting ($)
|
|
Dunson K. Cheng
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Peter Wu
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Anthony M. Tang
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Heng W. Chen
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Irwin Wong
|
|
|
11,088
|
|
|
$
|
9,534
|
|
|
|
|
|
|
|
|
|
Pension Benefits
Our Named Executive Officers did not receive any
benefits during 2012 under any defined contribution plan other than the 401(k) Profit Sharing Plan. We do not have any defined benefit plans.
Nonqualified Deferred Compensation
The only deferred compensation arrangement that
we have with an executive officer is an agreement we reached with Dunson K. Cheng, President and Chief Executive Officer, effective November 23, 2004, whereby Mr. Cheng agreed to defer any cash bonus amounts in excess of $225,000 for the
year ended December 31, 2004, until January 1 of the first year following such time as Mr. Cheng separates from us (the Cheng Deferred Compensation Agreement). This Cheng Deferred Compensation Agreement was amended and
restated on November 8, 2007, to comply with Section 409A of the Internal Revenue
Code (the Code) and provides that, if Mr. Cheng is subject to Section 409A of the Code, payment of the deferred amount will be delayed to the later of:
(i) January 1 of the first year following his separation from service; or (ii) the first day of the seventh month following his separation from service. Pursuant to this agreement, an amount equal to $610,000 was deferred in 2004. The
deferred amount accrues interest at the rate of 7% per annum computed based on the actual number of days during each period divided by the actual number of days for the full year. The deferred amount will be increased each quarter by the amount
of interest computed for the preceding quarter. Beginning on the tenth anniversary of the agreement, the interest rate will equal 275 basis points above the then prevailing interest rate on a 10-year Treasury note.
The table below sets forth information regarding non-qualified deferred compensation arrangements for our Named Executive Officers during 2012.
35
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
Executive
Contributions in
Last FY ($)
|
|
|
Registrant
Contributions in
Last FY ($)
|
|
|
Aggregate
Earnings in
Last FY ($)
|
|
|
Aggregate
Withdrawals /
Distributions ($)
|
|
|
Aggregate Balance
at Last
FYE ($)
|
|
Dunson K. Cheng
|
|
|
|
|
|
|
|
|
|
|
71,480
|
1/
|
|
|
|
|
|
|
1,066,205
|
2/
|
Peter Wu
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Anthony M. Tang
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Heng W. Chen
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Irwin Wong
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1/
|
Includes $14,909 reported in the Summary Compensation Table above as interest that is considered above-market under the regulations of the
SEC.
|
|
2/
|
Includes $690,243 reported in the Summary Compensation Table for previous years.
|
POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL
Bancorp has not entered into any written employment agreements with any of the Named Executive Officers,
with the exception of: (i) the Control Agreements with each of the Named Executive Officers which in effect become employment agreements upon the occurrence of a change in control as defined therein; and (ii) the Cheng Deferred
Compensation Agreement.
As a result of its participation in the TARP Capital Purchase Program, Bancorp has agreed to prohibit any
golden parachute payment to any of its Named Executive Officers and to each of the five next most highly-compensated employees during the TARP Period. Golden parachute payment is defined as any payment for the departure from
Bancorp for any reason, or any payment due to a change in control, except for payments for services performed or benefits accrued, and includes the acceleration of vesting due to the departure or the change in control event, as applicable. Also as a
result of its participation in the TARP Capital Purchase Program, Bancorp has further agreed to prohibit any payment of tax gross-ups to any of its Named Executive Officers and to each of the 20 next most highly-compensated employees
during the TARP Period. Tax gross-ups are defined as any reimbursement of taxes owed with respect to any compensation. In addition, pursuant to the regulatory limitations described in
Control Agreements
under
Executive CompensationCompensation Discussion and Analysis above, Bancorp is limited in its ability to make golden parachute severance payments.
The tables below under Cash Compensation and Benefits in the Event of a Change in Control reflect
the amount of compensation payable to each of the Named Executive Officers in the event of termination of the Named Executive Officers employment after a change in control of Bancorp as if
these prohibitions on golden parachute payments and tax gross-ups had not been in place. The amount of compensation payable to each Named Executive Officer upon voluntary and involuntary termination and in the event of death
or disability of the Named Executive Officer is shown. The amounts shown assume that such termination was effective as of December 31, 2012, and thus include amounts earned through such time, and are estimates of the amounts which would be paid
out to the Named Executive Officers upon their termination. The actual amounts to be paid out, if any, can only be determined at the time of the Named Executive Officers separation from Bancorp and Cathay Bank.
In addition, a separate table below under Equity Compensation in the Event of a Change in Control reflects the value of any equity awards
granted to each Named Executive Officer under the 2005 Incentive Plan and the 1998 Incentive Plan that may be accelerated upon a change in control of Bancorp even if there was no termination of the Named Executive Officers employment, assuming
the prohibition on golden parachute payments had not been in place. The administrator of the 2005 Incentive Plan has the discretion to have Bancorp assume, substitute, or adjust each outstanding award under such plan, accelerate the
vesting of any options, or terminate any restrictions on stock awards or cash awards upon a change in control, as defined therein. Similarly, under the 1998 Incentive Plan, upon a change in control of Bancorp, as defined
36
therein, the Board has the discretion to accelerate the vesting of options under the 1998 Incentive Plan and to determine if outstanding options under the 1998 Incentive Plan will be cashed out
at the change in control price, as defined therein.
Payments Made Upon Termination Other Than After a Change in Control
A Named Executive Officer who ceases to be an employee of Bancorp other than after a change in control, whether voluntary or involuntary
and with or without cause, retirement, disability, or death, will be entitled to receive the following, which are generally available to all salaried employees:
|
|
base salary through the date of termination;
|
|
|
accrued vacation pay as of the date of termination;
|
|
|
vested benefits as of the date of termination;
|
|
|
if termination resulted from disability: long-term disability benefits of two-thirds annual base salary up to $15,000 per month and vesting of
long-term restricted stock units within the meaning of the EESA; and
|
|
|
if termination resulted from death: three times annual base salary, up to $600,000, subject to reduction beginning at age 65, and vesting of long-term
restricted stock units granted within the meaning of the EESA.
|
In addition to such amounts, Mr. Cheng would also be
entitled to receive, pursuant to the Cheng Deferred Compensation Agreement, an amount equal to $610,000 plus interest at the rate of 7% per annum until 2014 and thereafter interest at the rate of 275 basis points above the then prevailing
interest rate on a 10-year Treasury note.
Change of Control Employment Agreements
Bancorp entered into the Control Agreements with each of the Named Executive Officers which in effect become employment agreements upon the occurrence of
a change in control as defined therein. The Control Agreements for each of the Named Executive Officers are substantially similar and have been filed as exhibits to Bancorps Annual Report on Form 10-K for the year ended December 31,
2008.
The following is only a summary of the significant terms of the Control Agreements. This summary is
qualified in its entirety by reference to the Control Agreements. For a discussion of the purposes of the Control Agreements and their relationship to our compensation policy, see
Control Agreements
under Executive
CompensationCompensation Discussion and Analysis above.
Subject to the prohibitions on golden parachute payments and
tax gross-ups resulting from Bancorps participation in the TARP Capital Purchase Program and the regulatory limitations described above, pursuant to the Control Agreements, Bancorp or Cathay Bank (as applicable) has agreed to
continue the employment of each Named Executive Officer for a period of three years from the occurrence of a change of control (the effective date). During this employment period, each Named Executive Officer will be entitled to the
following compensation and benefits:
|
|
An annual base salary at least equal to 12 times the highest monthly base salary paid or payable (including deferred salary) during the 12-months
preceding the effective date;
|
|
|
An annual cash bonus at least equal to the highest annual bonus earned for the last three full fiscal years prior to the effective date (with partial
years being annualized for the purpose of determining the amount of the bonus);
|
|
|
Participation in all incentive, saving, and retirement plans and programs applicable generally to other peer executives on terms no less favorable than
those in effect during the 120-day period immediately prior to the effective date;
|
|
|
Participation in welfare benefit plans and programs on terms no less favorable than those in effect during the 120-day period immediately prior to the
effective date;
|
|
|
Reimbursement for all reasonable expenses in accordance with procedures in effect during the 120-day period immediately prior to the effective date;
|
|
|
Fringe benefits (including, without limitation, tax and financial planning services, payment of club dues, and, if applicable, use of an automobile and
payment of related expenses) in accordance with the most favorable plans in effect during the 120-day period immediately prior to the effective date;
|
37
|
|
Office, secretarial and support staff; and
|
|
|
Paid vacation in accordance with the most favorable plans in effect during the 120-day period immediately prior to the effective date.
|
Payments Made Upon Death or Disability After a Change in Control
Subject to the prohibitions on golden parachute payments and tax gross-ups resulting from Bancorps participation in the TARP
Capital Purchase Program and the regulatory limitations described above, the Control Agreements provide that, in the event of the death or disability of a Named Executive Officer after a change of control, Bancorp or Cathay Bank (as applicable) has
agreed to pay the Named Executive Officer (or the Named Executive Officers estate or beneficiaries in the event of death): (i) base salary through the date of termination; (ii) a pro-rata bonus until the date of termination of the
higher of (A) the highest annual bonus earned for the last three full fiscal years prior to the change in control and (B) the annual bonus paid or payable for the most recently completed fiscal year following the change in control,
including any bonus or portion thereof that has been earned but deferred (the greater of clauses (A) and (B), the Highest Annual Bonus); (iii) any accrued vacation pay (items (i), (ii), and (iii), collectively, the
Accrued Obligations); and (iv) amounts that are vested benefits or that the Named Executive Officer is otherwise entitled to receive under any plan, policy, practice or program of, or any other contract or agreement with, Bancorp or
Cathay Bank at or subsequent to the date of termination (Other Benefits).
Payments Made Upon Involuntary
Termination Other Than For Cause or Voluntary Termination For Good Reason After a Change in Control
Subject to the prohibitions on
golden parachute payments and tax gross-ups resulting from Bancorps participation in the TARP Capital Purchase Program and the regulatory limitations described above, the Control Agreements provide that, if a Named
Executive Officers employment is terminated following a change in control (other than termination by Bancorp or Cathay Bank for cause or by reason of death or disability or by the Named
Executive Officer for other than good reason) or if the Named Executive Officer terminates employment in certain circumstances defined in the Control Agreements which constitute
good reason, in addition to the Accrued Obligations and Other Benefits as defined in the preceding section, the Named Executive Officer will be paid the aggregate of the following in a lump sum in cash within 30 days after the date of
termination:
|
|
an amount equal to a multiple (two, two and one-half, or three, depending on the applicable Control Agreement) of the Named Executive Officers
annual base salary and of the Highest Annual Bonus; and
|
|
|
an amount equal to the sum of Bancorps or Cathay Banks (as applicable) matching or other employer contributions under Bancorps or
Cathay Banks qualified defined contribution plans and any excess or supplemental defined contribution plans in which the Named Executive Officer participates that the Named Executive Officer would receive if the Named Executive Officers
employment continued (for two, two and one-half, or three years after the date of termination, depending on the applicable Control Agreement).
|
Also (for a period of two, two and one-half, or three years, depending on the applicable Control Agreement), the Named Executive Officer would be entitled to receive welfare benefits (including medical,
prescription, dental, disability, employee life, group life, accidental death, and travel accident insurance) at least equal to, and at the same after-tax cost to the Named Executive Officer, as those that would have been provided in accordance with
the plans, programs, practices, and policies then in effect. In addition, the Named Executive Officer would be entitled to receive outplacement services, provided that the cost of such outplacement services will not exceed $50,000.
Payments Made Upon Involuntary Termination For Cause or Voluntary Termination For Other Than Good Reason After a Change in Control
Subject to the prohibitions on golden parachute payments and tax gross-ups resulting from Bancorps
participation in the TARP Capital Purchase Program and the regulatory limitations described above, the Control Agreements provide that, if a Named Executive Officers employment is
38
terminated for cause following a change in control or if the Named Executive Officer terminates his employment for other than good reason, Bancorp or Cathay Bank has agreed to pay the
Named Executive Officer: (i) base salary through the date of termination; (ii) any accrued vacation pay; and (iii) Other Benefits.
Certain Additional Payments
The Control Agreements provide that each Named Executive
Officer is eligible for tax gross-up payments in reimbursement for change in control excise taxes imposed on the severance payments and benefits, unless the value of the payments and benefits does not exceed 110% of the maximum amount payable
without triggering the excise taxes, in which case the payments and benefits will be reduced to the maximum amount. However, as a result of its participation in the TARP Capital Purchase Program, these payments are prohibited to
any of the Named Executive Officers during the TARP Period.
Cash
Compensation and Benefits in the Event of a Change in Control
The tables below show the potential cash payments and benefits for the Named
Executive Officers if, hypothetically solely for the purposes of this proxy statement, the prohibitions on golden parachute payments and tax gross-ups had not been in place and there had been a change in control effective
December 31, 2012, and the Named Executive Officer had been terminated as of the same day. These tables include the dollar amount of salary stock awarded as part of the base salary of each Named Executive Officer, but exclude accrued and unpaid
salary and vacation as well as Other Benefits because all employees are generally entitled to these payments and benefits upon termination of employment.
39
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Voluntary
Termination
|
|
|
Involuntary Termination
|
|
|
|
|
Dunson K. Cheng
|
|
For Other
Than Good
Reason
|
|
|
For Good
Reason
|
|
|
For Cause
|
|
|
Other Than
For Cause
|
|
|
Death or
Disability
|
|
Compensation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Base Salary and Bonus
1/
|
|
$
|
0
|
|
|
$
|
4,695,000
|
|
|
$
|
0
|
|
|
$
|
4,695,000
|
|
|
$
|
0
|
|
Accrued Obligations
2/
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
401(k) Matching
|
|
|
0
|
|
|
|
18,750
|
|
|
|
0
|
|
|
|
18,750
|
|
|
|
0
|
|
Benefits
3/
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Group Life Insurance
|
|
|
0
|
|
|
|
2,106
|
|
|
|
0
|
|
|
|
2,106
|
|
|
|
0
|
|
Health Insurance
|
|
|
0
|
|
|
|
13,848
|
|
|
|
0
|
|
|
|
13,848
|
|
|
|
0
|
|
Long-Term Disability Insurance
|
|
|
0
|
|
|
|
1,458
|
|
|
|
0
|
|
|
|
1,458
|
|
|
|
0
|
|
Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outplacement Services (max.)
|
|
|
0
|
|
|
|
50,000
|
|
|
|
0
|
|
|
|
50,000
|
|
|
|
0
|
|
Excise Tax plus Gross Up
|
|
|
0
|
|
|
|
1,310,057
|
|
|
|
0
|
|
|
|
1,310,057
|
|
|
|
0
|
|
Less: Reduction for 280G Limitation
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL:
|
|
$
|
0
|
|
|
$
|
6,091,219
|
|
|
$
|
0
|
|
|
$
|
6,091,219
|
|
|
$
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Voluntary Termination
|
|
|
Involuntary Termination
|
|
|
|
|
Peter Wu
|
|
For Other
Than Good
Reason
|
|
|
For Good
Reason
|
|
|
For Cause
|
|
|
Other Than
For Cause
|
|
|
Death or
Disability
|
|
Compensation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Base Salary and Bonus
4/
|
|
$
|
0
|
|
|
$
|
1,770,000
|
|
|
$
|
0
|
|
|
$
|
1,770,000
|
|
|
$
|
0
|
|
Accrued Obligations
2/
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
401(k) Matching
|
|
|
0
|
|
|
|
15,625
|
|
|
|
0
|
|
|
|
15,625
|
|
|
|
0
|
|
Benefits
3/
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Group Life Insurance
|
|
|
0
|
|
|
|
2,700
|
|
|
|
0
|
|
|
|
2,700
|
|
|
|
0
|
|
Health Insurance
|
|
|
0
|
|
|
|
19,532
|
|
|
|
0
|
|
|
|
19,532
|
|
|
|
0
|
|
Long-Term Disability Insurance
|
|
|
0
|
|
|
|
1,215
|
|
|
|
0
|
|
|
|
1,215
|
|
|
|
0
|
|
Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outplacement Services (max.)
|
|
|
0
|
|
|
|
50,000
|
|
|
|
0
|
|
|
|
50,000
|
|
|
|
0
|
|
Excise Tax plus Gross Up
|
|
|
0
|
|
|
|
513,902
|
|
|
|
0
|
|
|
|
513,902
|
|
|
|
0
|
|
Less: Reduction for 280G Limitation
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL:
|
|
$
|
0
|
|
|
$
|
2,372,974
|
|
|
$
|
0
|
|
|
$
|
2,372,974
|
|
|
$
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Voluntary Termination
|
|
|
Involuntary Termination
|
|
|
|
|
Anthony M. Tang
|
|
For Other
Than Good
Reason
|
|
|
For Good
Reason
|
|
|
For Cause
|
|
|
Other Than
For Cause
|
|
|
Death or
Disability
|
|
Compensation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Base Salary and Bonus
5/
|
|
$
|
0
|
|
|
$
|
1,173,000
|
|
|
$
|
0
|
|
|
$
|
1,173,000
|
|
|
$
|
0
|
|
Accrued Obligations
2/
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
401(k) Matching
|
|
|
0
|
|
|
|
15,625
|
|
|
|
0
|
|
|
|
15,625
|
|
|
|
0
|
|
Benefits
3/
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Group Life Insurance
|
|
|
0
|
|
|
|
2,700
|
|
|
|
0
|
|
|
|
2,700
|
|
|
|
0
|
|
Health Insurance
|
|
|
0
|
|
|
|
18,365
|
|
|
|
0
|
|
|
|
18,365
|
|
|
|
0
|
|
Long-Term Disability Insurance
|
|
|
0
|
|
|
|
1,215
|
|
|
|
0
|
|
|
|
1,215
|
|
|
|
0
|
|
Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outplacement Services (max.)
|
|
|
0
|
|
|
|
50,000
|
|
|
|
0
|
|
|
|
50,000
|
|
|
|
0
|
|
Excise Tax plus Gross Up
|
|
|
0
|
|
|
|
342,759
|
|
|
|
0
|
|
|
|
342,759
|
|
|
|
0
|
|
Less: Reduction for 280G Limitation
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL:
|
|
$
|
0
|
|
|
$
|
1,603,664
|
|
|
$
|
0
|
|
|
$
|
1,603,664
|
|
|
$
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
40
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Voluntary Termination
|
|
|
Involuntary Termination
|
|
|
|
|
Heng W. Chen
|
|
For Other
Than Good
Reason
|
|
|
For Good
Reason
|
|
|
For Cause
|
|
|
Other Than
For Cause
|
|
|
Death or
Disability
|
|
Compensation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Base Salary and Bonus
6/
|
|
$
|
0
|
|
|
$
|
940,800
|
|
|
$
|
0
|
|
|
$
|
940,800
|
|
|
$
|
0
|
|
Accrued Obligations
2/
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
401(k) Matching
|
|
|
0
|
|
|
|
12,500
|
|
|
|
0
|
|
|
|
12,500
|
|
|
|
0
|
|
Benefits
3/
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Group Life Insurance
|
|
|
0
|
|
|
|
2,160
|
|
|
|
0
|
|
|
|
2,160
|
|
|
|
0
|
|
Health Insurance
|
|
|
0
|
|
|
|
18,513
|
|
|
|
0
|
|
|
|
18,513
|
|
|
|
0
|
|
Long-Term Disability Insurance
|
|
|
0
|
|
|
|
972
|
|
|
|
0
|
|
|
|
972
|
|
|
|
0
|
|
Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outplacement Services (max.)
|
|
|
0
|
|
|
|
50,000
|
|
|
|
0
|
|
|
|
50,000
|
|
|
|
0
|
|
Excise Tax plus Gross Up
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
Less: Reduction for 280G Limitation
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL:
|
|
$
|
0
|
|
|
$
|
1,024,945
|
|
|
$
|
0
|
|
|
$
|
1,024,945
|
|
|
$
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Voluntary Termination
|
|
|
Involuntary Termination
|
|
|
|
|
Irwin Wong
|
|
For Other
Than Good
Reason
|
|
|
For Good
Reason
|
|
|
For Cause
|
|
|
Other Than
For Cause
|
|
|
Death or
Disability
|
|
Compensation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Base Salary and Bonus
7/
|
|
$
|
0
|
|
|
$
|
719,600
|
|
|
$
|
0
|
|
|
$
|
719,600
|
|
|
$
|
0
|
|
Accrued Obligations
2/
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
401(k) Matching
|
|
|
0
|
|
|
|
12,500
|
|
|
|
0
|
|
|
|
12,500
|
|
|
|
0
|
|
Benefits
3/
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Group Life Insurance
|
|
|
0
|
|
|
|
2,160
|
|
|
|
0
|
|
|
|
2,160
|
|
|
|
0
|
|
Health Insurance
|
|
|
0
|
|
|
|
21,450
|
|
|
|
0
|
|
|
|
21,450
|
|
|
|
0
|
|
Long-Term Disability Insurance
|
|
|
0
|
|
|
|
946
|
|
|
|
0
|
|
|
|
946
|
|
|
|
0
|
|
Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outplacement Services (max.)
|
|
|
0
|
|
|
|
50,000
|
|
|
|
0
|
|
|
|
50,000
|
|
|
|
0
|
|
Excise Tax plus Gross Up
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
Less: Reduction for 280G Limitation
8/
|
|
|
0
|
|
|
|
(18,789
|
)
|
|
|
0
|
|
|
|
(18,789
|
)
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL
:
|
|
$
|
0
|
|
|
$
|
787,867
|
|
|
$
|
0
|
|
|
$
|
787,867
|
|
|
$
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1/
|
This amount is equal to the product of (i) three and (ii) the sum of (x) the Named Executive Officers base salary effective as of
December 31, 2012 ($1,565,000), and (y) the Highest Annual Bonus (none).
|
|
2/
|
Accrued Obligations include (i) base salary through the date of termination, (ii) a pro-rata portion of the Highest Annual Bonus based on the
number of days elapsed in the year of termination, and (iii) any accrued vacation pay. These Accrued Obligations are earned through the date of termination under the terms of the employment agreement that takes effect upon a change in control.
They serve as compensation to the Named Executive Officers for services rendered during employment and not as severance or post-employment compensation. For the purposes of this table, only the pro-rata bonus as defined in the Control Agreements is
included because all employees are generally entitled to accrued and unpaid salary and vacation upon termination. Further, it is probable that, had the hypothetical change in control and termination taken place on December 31, 2012, the
pro-rata bonus would have been paid in lieu of, and not in addition to, the actual bonus, if any, paid to the Named Executive Officer for 2012 as would be reported in the Summary Compensation Table above.
|
|
3/
|
Amounts shown are based on the annual cost to Bancorp as of December 31, 2012, multiplied by three in the case of Mr. Cheng, by two and
one-half in the case of Mr. Wu and Mr. Tang, and by two in the case of Mr. Chen and Mr. Wong.
|
|
4/
|
This amount is equal to the product of (i) two and one-half and (ii) the sum of (x) the Named Executive Officers base salary
effective as of December 31, 2012 ($708,000), and (y) the Highest Annual Bonus (none).
|
|
5/
|
This amount is equal to the product of (i) two and one-half and (ii) the sum of (x) the Named Executive Officers base salary
effective as of December 31, 2012 ($469,200), and (y) the Highest Annual Bonus (none).
|
41
|
6/
|
This amount is equal to the product of (i) two and (ii) the sum of (x) the Named Executive Officers base salary effective as of
December 31, 2012 ($470,400), and (y) the Highest Annual Bonus (none).
|
|
7/
|
This amount is equal to the product of (i) two and (ii) the sum of (x) the Named Executive Officers base salary effective as of
December 31, 2012 ($359,800), and (y) the Highest Annual Bonus (none).
|
|
8
/
|
Under Section 4999 of the Internal Revenue Code, a 20% excise tax is imposed on change in control payments that are excess parachute
payments within the meaning of Section 280G(b)(1) of the Internal Revenue Code. Although the Control Agreements provide a tax gross-up payment if the value of an executives severance payments and benefits exceeds 110% of the
maximum amount payable without triggering the excise tax, this payment would not apply to Mr. Wong. As a result, in order to provide Mr. Wong with the best after tax benefit in accordance with his Control Agreement, his
cash severance payment would be reduced to the safe harbor amount which is three times his base amount less $1.
|
Equity Compensation in the
Event of a Change in Control
Assuming solely for the purposes of this proxy statement that the prohibitions on golden parachute
payments and tax gross-ups had not been in place and that a change in control occurred on the last business day of 2012 and the vesting of all options was accelerated and all restrictions on stock awards
were terminated, the following table sets forth the estimated value for equity awards to the Named Executive Officers that would not otherwise have vested or been terminated but for the change in
control:
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
Stock Options
Accelerated Vesting
|
|
|
Restricted Stock
Accelerated Vesting
1/
|
|
|
Total
|
|
Dunson K. Cheng
|
|
$
|
0
|
|
|
$
|
1,496,779
|
|
|
$
|
1,496,779
|
|
Peter Wu
|
|
|
0
|
|
|
|
671,891
|
|
|
|
671,891
|
|
Anthony M. Tang
|
|
|
0
|
|
|
|
462,392
|
|
|
|
462,392
|
|
Heng W. Chen
|
|
|
0
|
|
|
|
462,744
|
|
|
|
462,744
|
|
Irwin Wong
|
|
|
0
|
|
|
|
359,840
|
|
|
|
359,840
|
|
|
1/
|
Consists of long-term restricted stock units, the value of which is based on the closing price of Bancorps common stock on December 31,
2012, which was $19.53 per share.
|
42
PROPOSAL TWO
REAPPROVAL OF THE MATERIAL TERMS FOR THE AWARD OF PERFORMANCE-BASED COMPENSATION UNDER OUR 2005 INCENTIVE PLAN
In March 2005, our Board adopted the Cathay General Bancorp 2005 Incentive Plan (the 2005
Plan), which was approved by our stockholders in May 2005. The 2005 Plan is a broad-based equity and cash compensation plan pursuant to which awards may be made to employees and directors of Bancorp or any of its affiliates, including Cathay
Bank. In October 2007, it was amended and restated by the Board to reflect changes necessary to comply with Section 409A of the Internal Revenue Code (the Code).
We are asking our stockholders to reapprove the material terms for the award of performance-based compensation under our 2005 Plan so that we can claim deductions from our Federal income taxes
for the full amount of incentive compensation awarded to certain of our executive officers. We are not asking that our stockholders approve any amendments to the 2005 Plan or reapprove the 2005 Plan in its entirety. Importantly, we are not asking
that our stockholders approve an increase in the number of shares available for awards under the 2005 Plan or an extension of the term of the 2005 Plan.
Background
In general, Section 162(m) of the Code (sometimes referred to in this
proxy statement as Section 162(m)) places a $1 million limit on the deductibility for Federal income tax purposes of the compensation paid by public companies to their chief executive officers and each of the other three most highly
compensated executive officers other than their chief executive officers or chief financial officers. This limitation does not apply, however, to performance-based compensation that is payable due to the attainment of one or more
preestablished performance goals. The 2005 Plan was structured such that certain awards are intended to satisfy the requirements for performance-based compensation within the meaning of Section 162(m). One of the requirements is
that the material terms of the performance-based compensation be approved by the stockholders before payment, as was the case with the 2005 Plan, and be reapproved every five years after the initial stockholder approval.
As a result of our participation in the TARP Capital Purchase Program, through the sale of our preferred
shares to the U.S. Treasury in December 2008, the only form of incentive compensation we have been permitted to award to certain of our executive officers and other employees has been certain long-term restricted stock or restricted stock units.
Once we are no longer subject to these restrictions, we will have the ability to pay and accrue for such persons other forms of incentive compensation under the 2005 Plan, including cash bonuses, stock appreciation rights, and performance shares and
units. We recently redeemed 50% of our preferred shares held by the U.S. Treasury and, subject to regulatory approval, it is our intention to redeem the remaining preferred shares later in 2013. In planning for the time when we will no longer be
subject to these restrictions, we are submitting this proposal for stockholder approval so that we can claim deductions from our Federal income tax for the full amount of incentive compensation awarded to certain of our executive officers for
service provided subsequent to the redemption of the remaining preferred shares.
For purposes of Section 162(m), the material terms for
the payment of performance-based compensation under the 2005 Plan include: who is eligible to receive compensation, the general business criteria on which the performance goals will be based, and the maximum award payable to any participant if the
performance goals are attained. Each of these aspects of the 2005 Plan is described in the summary of the 2005 Plan set forth below. Stockholder approval of this Proposal will be deemed to constitute approval of the material terms for the payment of
performance-based compensation, as well as approval of each of these aspects of the 2005 Plan, for purposes of Section 162(m).
If our
stockholders approve this Proposal, and unless the material terms are subsequently changed, we believe that the material terms for payment of performance-based compensation under the 2005 Plan will meet the stockholder approval requirements of
Section 162(m) until termination of the 2005 Plan. If our stockholders do not approve this Proposal, the 2005 Plan will continue in effect, but our ability to deduct performance-based compensation under the
43
2005 Plan will be limited by Section 162(m) as discussed above.
Summary of the 2005 Plan
The following summary is qualified in its entirety by the full text of the 2005 Plan, which as amended and restated was filed with the SEC on March 1, 2013, as Exhibit 10.7 of our Annual Report on
Form 10-K for the year ended December 31, 2012, and is incorporated herein by reference.
Purpose
The purpose of granting awards under the 2005 Plan is to provide a means by which eligible recipients may be given an opportunity to benefit from
increases in the value of our common stock, to retain the services of such recipients, to attract and retain the services of new persons eligible to receive awards, and to provide incentives for recipients to exert maximum efforts for our success
and that of our affiliates.
Types of Awards
The 2005 Plan permits us to issue stock options (both incentive stock options designed to comply with Section 422 of the Code and nonstatutory stock options that will not so comply), stock awards
(including shares, stock units, stock appreciation rights, and other similar awards), and cash awards.
Administration
Our Board has designated the Compensation Committee as the administrator of the 2005 Plan, which has the authority to select those to whom
awards are to be granted, the number of shares or amount of cash to be covered by each award, and the type of award to be granted, as well as to determine the terms and conditions of these awards. However, with respect to grants to certain
non-officer employees, the Compensation Committee may from time to time delegate its authority to one or more officers.
Eligibility
Awards
under the 2005 Plan may be granted to our employees and employees of our affiliates, including Cathay Bank, and to members of our Board
(including non-employee or outside Board members). Incentive stock options may be granted only to our employees or employees of a subsidiary. As of April 1, 2013, there were approximately
1,011 employees of Bancorp and our affiliates, including seven executive officers of Bancorp, and nine non-employee directors of Bancorp, who were eligible to receive discretionary awards under the 2005 Plan.
Available Shares and Award Limits
The 2005 Plan provides that 3,131,854 shares of our common stock may be issued pursuant to awards, increased by up to 3,624,586 additional shares, issuable upon exercise of options granted pursuant to our
1998 Equity Incentive Plan, that terminate or expire or become unexercisable for any reason without having been exercised in full after March 22, 2005. As of April 1, 2013, 175,989 shares of our common stock had been issued under the 2005
Plan and 3,865,665 shares were subject to issuance under outstanding awards, including 2,103,166 shares subject to issuance under outstanding awards under the 1998 Equity Incentive Plan. The 2005 Plan provides that the aggregate number of shares of
common stock subject to awards during any calendar year to any one awardee will not exceed 1,000,000 (subject to adjustment), and that the maximum amount payable under the portion of a cash award for any fiscal year to any awardee that is intended
to satisfy the requirements for performance-based compensation under Section 162(m) will not exceed $3,000,000.
Performance Awards
The 2005 Plan provides that the Compensation Committee will establish performance criteria and the level of achievement versus these criteria which will
include: (i) the target and minimum and maximum amount payable under any cash award, which criteria may be based on financial performance and/or personal performance evaluations or (ii) the grant, issuance, retention and /or vesting of
each stock award or the shares subject thereto, which may be based on financial performance, personal performance evaluations, and/or the completion of service by the awardee. The performance criteria for any portion of an award that is intended to
satisfy the requirements for performance-based compensation will be based on one or more qualified performance criteria selected by the Compensation Committee no
44
later than the earlier of the end of 25% of the period of service or the 90th day after the commencement of the period of service to which the performance goals relate, provided that the outcome
is substantially uncertain at that time (or in such other manner that complies with Section 162(m)). Notwithstanding the satisfaction of the performance criteria, the number of shares, options, or other benefits under an award may be reduced by
the Compensation Committee in its sole discretion.
Performance Criteria
The term qualifying performance criteria means any one or more of the following: (1) cash flow, (2) earnings (including gross
margin, earnings before interest and taxes, earnings before taxes, and net earnings), (3) earnings per share, (4) growth in earnings or earnings per share, (5) stock price, (6) return on equity or average stockholders
equity, (7) total stockholder return, (8) return on capital, (9) return on assets or net assets, (10) return on investment, (11) revenue, (12) income or net income, (13) operating income or net operating income, in
aggregate or per share, (14) operating profit or net operating profit, (15) operating margin, (16) return on operating revenue, (17) market share, (18) contract awards or backlog, (19) overhead or other expense
reduction, (20) growth in stockholder value relative to the moving average of the S&P 500 Index or our peer group index, (21) credit rating, (22) strategic plan development and implementation (including individual performance
objectives that relate to achievement of our or any business units strategic plan), (23) improvement in workforce diversity, (24) growth of revenue, operating income, or net income, (25) efficiency ratio, (26) ratio of
nonperforming assets to total assets, and (27) such other similar criteria.
This performance criteria can be applied either
individually, alternatively, or in any combination, and to either Bancorp as a whole or to a business unit, affiliate, or business segment, either individually, alternatively, or in any combination. They can be measured either annually or
cumulatively over a period of years, on an absolute basis or relative to a pre-established target, to previous years results or to a designated comparison group, in each case as specified by the Compensation Committee in the award.
The Compensation Committee may adjust any evaluation of performance to exclude any of the following events
that occur during the performance period: (a) asset write downs, (b) litigation or claim judgments or settlements, (c) the effect of changes in tax law, accounting principles, or other laws affecting reported results,
(d) accruals for reorganization and restructuring programs, and (e) any gains or losses classified as extraordinary or as discontinued operations in our financial statements.
Option Awards
Each
option is evidenced by a stock option agreement. The 2005 Plan allows the Compensation Committee broad discretion to determine the terms of individual options.
The Compensation Committee determines the exercise price of options at the time they are granted. The exercise price may not be less than 100% of the fair market value of our common stock on the date of
grant (incentive stock options granted to employees who are also 10% stockholders must have an exercise price not less than 110% of the fair market value of the stock on the date of grant). Options may be granted with exercise prices equal to less
than 100% of the fair market value of the underlying option shares on the date of grant in connection with an acquisition by us of another company. The fair market value of our common stock is determined generally as the closing price on the grant
date. The Compensation Committee determines when options become vested and exercisable, and in its discretion may reduce or eliminate any restrictions surrounding any participants right to exercise all or part of an option. However,
outstanding options may not be repriced to reduce the exercise price without stockholder approval. The 2005 Plan permits payment to be made by cash, check, wire transfer, other shares of our common stock (with some restrictions), broker assisted
same-day sales, any other form of consideration and method of payment permitted by applicable law, or any combination thereof.
The term of an
option may be no more than 10 years from the date of grant; provided that an incentive stock option granted to an employee who is also a 10% stockholder must have a term that is no more than five years from the date of grant. No option may be
exercised after the expiration of its term.
45
If an optionees employment terminates for any reason (other than the optionees death or
disability), then all options held by the optionee under the 2005 Plan will terminate immediately; provided that the Compensation Committee may in the stock option agreement specify a period of time (but not beyond the expiration date of the option)
following the optionees termination during which the optionee may exercise the option as to shares that were vested and exercisable as of the optionees termination date.
Stock Awards
Each
stock award is evidenced by an award agreement. The 2005 Plan allows the Compensation Committee broad discretion to determine the terms of individual stock awards.
Stock awards may be stock grants, stock units, or stock appreciation rights. Stock grants are awards of a specific number of shares of our common stock and represent a promise to deliver at a future date
an amount of cash, property, or shares of our common stock equal to the fair market value of such shares. Stock appreciation rights are rights to receive cash and/or shares of our common stock based on a change in the fair market value of a specific
number of shares of our common stock. Shares may be granted under the 2005 Plan as stock awards or stock units without requiring the participant to pay us an amount equal to the fair market value of our common stock as of the award date in order to
acquire the shares.
Each stock award agreement will contain provisions regarding: (1) the number of shares subject to such stock award
or a formula for determining such number, (2) the purchase price of the shares, if any, and the means of payment, (3) the performance criteria, if any, and level of achievement versus the criteria that will determine the number of shares
granted, issued, retainable, and/or vested, (4) such terms and conditions on the grant, issuance, vesting, and/or forfeiture of the shares as may be determined from time to time by the Compensation Committee, (5) restrictions on
transferability, and (6) such further terms and conditions, in each case not inconsistent with the 2005 Plan, as may be determined from time to time by the Compensation Committee.
In the case of stock awards, including stock units, unless the Compensation Committee determines
otherwise, the outstanding stock or stock units will be forfeited upon the participants termination of employment, provided that we will have the right to repurchase the unvested shares at
such price and on such terms and conditions as the Compensation Committee determines.
Cash Awards
Cash awards under the 2005 Plan confer upon the participant the opportunity to earn a future payment tied to the level of achievement with respect to one
or more performance criteria established for a performance period. Cash awards will generally be limited to individuals who are, or who may be, one of our five most highly compensated officers (such individuals being those employees whose
compensation may not be fully deductible under Section 162(m) if it exceeds, with respect to a given year, the limits imposed by that section).
The award agreement for each cash award will contain provisions regarding: (1) the target and maximum amount payable to the participant as a cash award, (2) the performance criteria and level of
achievement versus the criteria that will determine the amount of such payment, (3) the period as to which performance will be measured for establishing the amount of any payment, (4) the timing of any payment earned by virtue of
performance, (5) restrictions on the alienation or transfer of the cash award prior to actual payment, (6) forfeiture provisions, and (7) such further terms and conditions, in each case not inconsistent with the 2005 Plan, as may be
determined from time to time by the Compensation Committee. The maximum amount payable as a cash award may be a multiple of the target amount payable, subject to the award limit described above. Nothing in the 2005 Plan prevents us from granting
cash awards outside of the 2005 Plan to any individual.
Adjustments Upon Certain Fundamental Changes
Subject to any required action by our stockholders, there will be an adjustment for any increase or decrease in the number or kind of issued shares
resulting from a stock split, reverse stock split, stock dividend, combination or reclassification of our common stock, or any other increase or decrease in the number of issued shares of our common stock effected without receipt of consideration.
46
In the event of a liquidation or dissolution and unless otherwise determined by the Compensation Committee,
any unexercised options or other stock awards pursuant to which shares have not yet been issued will terminate.
In the event of a change in
control, as defined in the 2005 Plan, as determined by the Compensation Committee, the Compensation Committee, in its discretion, may provide for the assumption, substitution, or adjustment to each outstanding award, accelerate the vesting of
options and terminate any restrictions on cash awards or stock awards, or terminate awards on such terms and conditions as the Compensation Committee deems appropriate, including for a cash payment to the awardee.
Nontransferability of Awards
Unless otherwise determined by the Compensation Committee, awards granted under the 2005 Plan are not transferable other than by a beneficiary designation, will, or the laws of descent and distribution,
and incentive stock options may be exercised during the optionees lifetime only by the optionee. The Compensation Committee will have the sole discretion to permit the transfer of an award; however, the transferability of incentive stock
options is restricted under the Code.
Amendment and Termination
The Board may amend, alter, or discontinue the 2005 Plan, subject to stockholder approval in the manner and to the extent required by law or any exchange
on which we have listed shares. In addition, unless approved by stockholders, no such amendment shall materially increase the number of shares for which awards may be granted (with certain exceptions), reduce the minimum exercise price at which
options may be granted, result in a repricing of options, or change the class of persons eligible to receive awards under the 2005 Plan. No such action by the Board or stockholders may impair any award previously granted under the 2005 Plan without
the written consent of the participant (except for certain changes specified in the 2005 Plan). Unless terminated earlier, the 2005 Plan will terminate in May 2015, 10 years after its approval by our stockholders.
Federal Income Tax Consequences
The following is only a summary of the effect of U.S. Federal income taxation upon awardees and Bancorp with respect to the grant and exercise of awards
under the 2005 Plan. It does not purport to be complete and does not discuss the tax consequences arising in the context of the employees death or the income tax laws of any municipality, state, or foreign country in which the employees
income or gain may be taxable.
Incentive Stock Options
An optionee who is granted an incentive stock option does not recognize taxable income at the time the option is granted or upon its exercise, although the exercise is an adjustment item for alternative
minimum tax purposes and may subject the optionee to the alternative minimum tax.
Upon a disposition of the shares acquired on exercise of an
incentive stock option more than two years after grant of the option and one year after exercise of the option, the optionee will recognize long-term capital gain or loss equal to the difference between the sale price and the exercise price. If this
holding period is not satisfied, then a disqualifying disposition of the shares will occur. A disqualifying disposition generally requires the optionee to recognize, as ordinary income, the difference between the incentive stock option exercise
price and the fair market value of the shares at the time the option is exercised. The amount of the ordinary income will be added to the basis of the shares to determine the capital gain that must be recognized on the disqualifying
disposition. If the sale price of the shares exceeds the exercise price of the option, in addition to the ordinary income, the optionee will recognize capital gain equal to the excess of the sale price over the adjusted basis of the shares. If,
however, the price that the optionee receives for the shares in a disqualifying disposition is less than the fair market value of the stock on the exercise date, then the amount of ordinary income that the holder of the shares would generally
recognize is the excess, if any, of the amount realized on the sale or exchange over the adjusted basis of the shares. Unless limited by other applicable provisions of the Code, we are entitled to a deduction in the same year that the
optionees disqualifying disposition of the shares occurs and in the same amount as the ordinary
47
income that is recognized by the optionee on account of the disposition.
Nonstatutory Stock Options
An optionee does not recognize any taxable income at the time a
nonstatutory stock option is granted. Upon exercise of vested shares, the optionee recognizes taxable income generally measured by the excess of the then fair market value of the shares over the exercise price. Any taxable income recognized in
connection with an option exercise by an employee is subject to tax withholding. Unless limited by other applicable provisions of the Code, we are entitled to a deduction in the same amount as, and in the same year that, the optionee recognizes
ordinary income. Upon a disposition of such shares by the optionee, any difference between the sale price and the exercise price, to the extent not recognized as taxable income as provided above, is treated as long-term or short-term capital gain or
loss, depending on the holding period.
Stock Awards
Stock awards will generally be taxed in the same manner as nonstatutory stock options. However, if a stock award is subject to a substantial risk of forfeiture within the meaning of
Section 83 of the Code (e.g., the award will be forfeited in the event that the employee ceases to provide services), the employee will not recognize ordinary income at the time of award. Instead, the employee will recognize ordinary income on
the date when the stock is no longer subject to a substantial risk of forfeiture, or when the stock becomes transferable, if earlier. The employees ordinary income is measured as the difference between the amount paid for the stock, if any,
and the fair market value of the stock on the date the stock is no longer subject to forfeiture.
The employee may accelerate his or her
recognition of ordinary income, if any, in connection with the issuance of restricted shares and begin his or her capital gains holding period by timely filing (i.e., within 30 days of the award) an election pursuant to Section 83(b) of the
Code. In such an event, the ordinary income recognized, if any, is measured as the difference between the amount paid for the stock, if any, and the fair market value of the stock on the date of award, and the capital gain holding period
commences on such date. The ordinary income recognized by an employee will be subject to tax withholding. Unless limited by Section 162(m), we are entitled to a deduction in the same amount
and at the time the employee recognizes ordinary income.
Cash Awards
Upon receipt of cash, the recipient will have taxable ordinary income, in the year of receipt, equal to the cash received. Any cash award received by an
employee will be subject to tax withholding. Unless limited by Section 162(m), we will be entitled to a tax deduction in the amount, and at the time, the recipient recognizes compensation income.
Section 162(m) Limitations
The 2005 Plan is designed to enable us to provide certain forms of performance-based compensation to executive officers that are intended to meet the requirements for tax deductibility under
Section 162(m). However, the rules and regulations promulgated under Section 162(m) are complex and subject to change from time to time, sometimes with retroactive effect. As such, there can be no assurance that awards under the 2005 Plan,
even if this Proposal is approved by our stockholders, will be treated as qualified performance-based compensation under Section 162(m) and fully deductible by us.
Section 409A
Acceleration of income, additional taxes, and interest apply to
nonqualified deferred compensation that is not compliant with Section 409A of the Code. It is intended that awards under the 2005 Plan will be exempt from, or satisfy the requirements of, Section 409A and any regulations or guidance that
may be adopted thereunder from time to time. The Board has adopted amendments to the 2005 Plan intended to satisfy the requirements of Section 409A.
Plan Benefits
No awards under the 2005 Plan have been made subject to stockholder approval
of this Proposal. The grant of awards under the 2005 Plan is discretionary, and we cannot determine the number or type of awards to be granted in the future to any particular person or group.
48
As described above, the Compensation Committee has been limited in its ability to award incentive
compensation for the past four years under the regulations applicable to participants in the TARP Capital Purchase Program. The Compensation Committee or its designee will make the determinations as to future awards in its discretion in accordance
with the terms of the 2005 Plan. For information on awards granted to our Named Executive Officers in 2012, see Grants of Plan-Based Awards under Executive CompensationRemuneration of Executive Officers.
Prior to becoming subject to the limitations applicable to participants in the TARP Capital Purchase Program, the Compensation Committee had approved
annual cash bonuses under the 2005 Plan to our President and Chief Executive Officer, Dunson K. Cheng, and our Executive Vice Chairman and Chief Operating Officer, Peter Wu, and outside the 2005 Plan to other Named Executive Officers. Mr. Cheng
and Mr. Wu were selected as the only participants for cash awards under the 2005 Plan because they were the two highest ranked and highest compensated executive officers, and because of the potential effects of Section 162(m).
Board Recommendation
The Board believes that it is in our best interests and that of our stockholders to enable us to implement compensation arrangements under the 2005 Plan that are intended to qualify as performance-based
compensation for which we can claim deductions for Federal income tax purposes. The Board therefore recommends that our stockholders reapprove, for purposes of Section 162(m), the material terms for the performance-based compensation as set
forth above. However, nothing in this Proposal precludes the Compensation Committee or its designee from granting any award or making any payment of compensation outside the 2005 Plan or that otherwise does not qualify for tax deductibility under
Section 162(m).
YOUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE
FOR
REAPPROVAL OF THE MATERIAL TERMS FOR THE
AWARD OF PERFORMANCE-BASED COMPENSATION UNDER OUR 2005 INCENTIVE PLAN.
49
PROPOSAL THREE
ADVISORY (NON-BINDING) VOTE TO APPROVE OUR EXECUTIVE COMPENSATION
As a result of our participation in the TARP Capital Purchase Program, we are required by the Emergency
Economic Stabilization Act of 2008, as amended, to permit a non-binding stockholder vote to approve the compensation of executives, as disclosed pursuant to the compensation disclosure rules of the Securities and Exchange Commission (which
disclosure includes the compensation discussion and analysis, the compensation tables, the narrative discussion, and any related material). Accordingly, the Board is submitting the following proposal for stockholder consideration:
Resolved, that the stockholders approve the compensation of executive officers, as disclosed pursuant to the compensation rules of
the Securities and Exchange Commission including the Compensation Discussion and Analysis, the compensation tables, the narrative discussion, and any related material contained in this proxy statement.
This vote is not intended to address any specific item of compensation, but rather the overall compensation of our Named Executive Officers and other
executive officers and the policies and practices described in this proxy statement. Your vote is advisory and will not be binding upon the Board, and should not be
construed as overruling a decision by the Board or the Compensation Committee, creating or implying any additional fiduciary duty by the Board or the Compensation Committee, or restricting or
limiting the ability of stockholders to make proposals for inclusion in proxy materials related to executive compensation. However, the Board and Compensation Committee will consider the voting results of this non-binding proposal when reviewing
compensation policies and practices.
The Compensation Discussion and Analysis and the tables in Remuneration of Executive
Officer under Executive Compensation describe our compensation philosophy and compensation actions taken in 2012 with respect to our Named Executive Officers and other executive officers. We believe that our current executive
compensation program directly links executive compensation to our performance and aligns the interests of our executive officers with those of our stockholders.
YOUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE
FOR
THE ADVISORY (NON-BINDING) PROPOSAL TO APPROVE OUR EXECUTIVE COMPENSATION.
50
PROPOSAL FOUR
RATIFICATION OF THE APPOINTMENT OF INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM
We are asking stockholders to ratify the appointment of KPMG LLP (KPMG) as our independent
registered public accounting firm for our 2013 fiscal year. Although ratification is not legally required, we are submitting the appointment of KPMG to our stockholders for ratification in the interest of good corporate governance. In the event that
this appointment is not ratified, the Audit and Risk Management Committee of the Board will reconsider the appointment.
The Audit and Risk
Management Committee appoints the independent registered public accounting firm annually. Before appointing KPMG as our independent registered public accounting firm for fiscal 2013, the Audit and Risk Management Committee carefully considered the
firms qualifications and performance during fiscal 2011 and 2012. In addition, the Audit and Risk Management Committee reviewed and approved audit and permissible non-audit services performed by KPMG in fiscal 2011 and 2012, as well as the
fees
paid to KPMG for such services. In its review of non-audit service fees and its appointment of KPMG as Bancorps independent registered public accounting firm, the Audit and Risk Management
Committee considered whether the provision of such services was compatible with maintaining KPMGs independence.
Representatives of KPMG
LLP are expected to attend the meeting and will have an opportunity to make a statement if they wish to do so. They may also respond to appropriate questions from stockholders or their representatives.
YOUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE
FOR
RATIFICATION OF THE APPOINTMENT OF KPMG AS OUR INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM FOR THE 2013 FISCAL YEAR.
PRINCIPAL ACCOUNTING FEES AND SERVICES
KPMG audited our financial statements for the
fiscal year ended December 31, 2012. The following table presents fees billed or to be billed for professional audit services rendered by KPMG for the audits of our annual financial statements for 2012 and 2011 and for other services rendered
by KPMG.
|
|
|
|
|
|
|
|
|
|
|
2012
|
|
|
2011
|
|
Audit Fees
|
|
$
|
1,046,700
1/
|
|
|
$
|
1,179,300
1/
|
|
Audit-Related Fees
|
|
|
93,069
2/
|
|
|
|
35,798
2/
|
|
Tax Fees
|
|
|
5,776
3/
|
|
|
|
5,494
3/
|
|
All Other Fees
|
|
|
0
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
Total Fees
|
|
$
|
1,145,545
|
|
|
$
|
1,220,592
|
|
|
|
|
|
|
|
|
|
|
|
1/
|
Audit fees consist
of the aggregate fees of KPMG in connection with: (i) the audit of the annual consolidated financial statements, and (ii) the required review of the financial information included in our Quarterly Reports on Form 10-Q.
|
|
2/
|
Audit-related fees consist of professional services provided by KPMG Hong Kong in connection with the review of banking returns, review of internal
controls, and other agreed upon procedures for the Hong Kong branch.
|
|
3/
|
Tax fees include tax compliance services provided by KPMG Hong Kong for the Hong Kong branch.
|
51
AUDIT COMMITTEE REPORT
As part of its ongoing activities, the Audit and
Risk Management Committee has:
|
|
Reviewed and discussed with management Bancorps audited consolidated financial statements for the year ended December 31, 2012;
|
|
|
Discussed with Bancorps independent auditors the matters required to be discussed by the statement on Auditing Standards No. 61, as amended
(AICPA,
Professional Standards
, Vol. 1, AU section 380), as adopted by the Public Company Accounting Oversight Board in Rule 3200T; and
|
|
|
Received the written disclosures and the letter from Bancorps independent accountant required by applicable requirements of the Public Company
Accounting Oversight Board regarding the independent accountants communications with the Audit and Risk Management Committee concerning independence, and has discussed with such independent accountant the independent accountants
independence.
|
Based on the review and discussions referred to above, the Audit and Risk Management Committee recommended to
the Board that the audited consolidated financial statements be included in Bancorps Annual Report on Form 10-K for the year ended December 31, 2012.
Audit and Risk Management Committee
Kelly L. Chan (Chairman)
Jane Jelenko
Ting Y. Liu
INCORPORATION OF CERTAIN INFORMATION
The information contained in this proxy statement under the captions Audit Committee Report,
Compensation Committee Interlocks and Insider Participation, and Compensation Committee Report shall not be deemed to be incorporated by reference by any general statement that purports to incorporate this proxy statement by
reference, or any part thereof, into any filing under the Securities Act of 1933, as amended (the Securities Act), or the Exchange Act of 1934, as amended (the Exchange Act), except to the extent that Bancorp expressly
incorporates such information in such filing by reference. The information contained in this proxy
statement under the captions Audit Committee Report and Compensation Committee Report shall not be deemed to be soliciting material or otherwise be deemed to be filed
under the Securities Act or the Exchange Act, except to the extent that Bancorp requests that such information be treated as soliciting material or expressly incorporates such information in any such filing by reference. The websites of Bancorp at
www.cathaygeneralbancorp.com and of Cathay Bank at www.cathaybank.com are neither a part of nor are they incorporated into this proxy statement.
SECTION 16(a)
BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires that Bancorps executive officers and directors and
persons who own more than 10% of its common stock timely file initial reports of ownership of common stock and other equity securities, and reports of changes in such ownership, with the SEC. We have instituted procedures to receive and review these
insider reports. After a review of the insider reports, we believe that all required reports were timely filed during 2012, except as follows: Dunson
K. Cheng, a director and executive officer, Peter Wu, a director and executive officer, Anthony M. Tang, a director and executive officer, Heng W. Chen, an executive officer, and Irwin Wong, an
executive officer, were each late in filing a report on Form 4 relating to salary stock awarded on July 13, 2012; and Jane Jelenko, a director, was late in filing a report on Form 5 relating to a purchase of shares in 2012.
52
TRANSACTIONS WITH RELATED PERSONS,
PROMOTERS AND CERTAIN CONTROL PERSONS
Policies and Procedures Regarding Related Party Transactions
It is the policy of the Board that all related
party transactions are subject to review and approval or ratification by Bancorps Audit and Risk Management Committee, except for those matters that the Board has delegated to other committees or that require approval of a majority of the
independent directors or that are reserved for the full Board or for the Board of Directors of Cathay Bank by statute, charter, regulations, Nasdaq listing standards, bylaws, or otherwise. Extensions of credit by Cathay Bank to executive officers,
directors, and principal stockholders of Bancorp and their related interests are subject to review and approval by the Board of Directors of Cathay Bank pursuant to section 22(h) of the Federal Reserve Act (12 U.S.C. 375b), as implemented by the
Federal Reserve Boards Regulation O (12 CFR part 215).
A related party transaction includes any transaction in which Bancorp or any of
its subsidiaries is a participant and in which any of the following persons has or will have a direct or indirect interest: (a) a person who is or was (since the beginning of the last fiscal year for which Bancorp has filed a Form 10-K and
proxy statement, even if they do not presently serve in that role) an executive officer, director, or nominee for election as a director; (b) a greater than 5% beneficial owner of Bancorps common stock; or (c) an immediate family
member of any of the foregoing. Immediate family member includes a persons spouse, parents, stepparents, children, stepchildren, siblings, mothers- and fathers-in-law, sons- and daughters-in-law, and brothers- and sisters-in-law and anyone
residing in such persons home (other than a tenant or employee).
In addition, the Audit and Risk Management Committee is responsible
for reviewing and investigating any matters pertaining to the integrity of management, including conflicts of interest and adherence to Bancorps Code of Ethics. Under Bancorps Code of Ethics, directors, officers, and all personnel are
expected to avoid and to promptly disclose any relationship, influence, or activity that would cause or even appear to cause a conflict of
interest. All directors must abstain from any discussion or decision affecting their personal, business, or professional interests.
In determining whether to approve or ratify a related party transaction, the Audit and Risk Management Committee generally considers applicable laws and regulations and all relevant facts and
circumstances and will take into account, among other factors it deems appropriate, whether the related party transaction is on terms not more favorable than terms generally available to an unaffiliated third-party under the same or similar
circumstances and the extent of the related partys interest in the transaction.
These policies and procedures regarding related party
transactions are reflected in the Audit and Risk Management Committee charter, our Code of Ethics, the Cathay Bank Regulation O Policy, and the Cathay Bank Code of Personal and Business Conduct, and have been approved by the Board.
Banking Transactions
Certain directors and officers of Bancorp or Cathay Bank, members of their families, and the companies with which they are associated, have been customers
of, and have had banking transactions with, Cathay Bank in the ordinary course of Cathay Banks business. Cathay Bank expects to continue such banking transactions in the future. All loans and commitments to lend in such transactions were made
in compliance with applicable laws and on substantially the same terms, including interest rates and collateral, as those prevailing at Cathay Bank at the time for comparable loans with persons not related to Cathay Bank and, in the opinion of the
management of Cathay Bank, did not involve more than a normal risk of collectability or present any other unfavorable features.
Sales of
Loan Participations
On
March 12, 2012, Cathay Bank sold to Noble Field Overseas Limited, a Virgin Islands company (Noble Field) participations in two outstanding loans that
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Cathay Bank had originated and were each secured by retail centers. Cathay Bank is informed that Noble Field is controlled by Angela Chen Sabella, who is the spouse of Anthony M. Tang, an
Executive Vice President of Bancorp and Senior Executive Vice President and Chief Lending Officer of Cathay Bank. These loans were performing, but had been classified by Cathay Bank as substandard. The outstanding principal amount and accrued and
unpaid interest on the two loans totaled approximately $9.5 million. The participations purchased by Noble Field consisted of an undivided interest of approximately 90% in each of these loans, for which it paid Cathay Bank approximately $7.9
million, or approximately 92.5% of the outstanding principal amount and accrued and unpaid interest attributable to the 90% participation.
Cathay Bank continues to service these loans and is obligated to pay Noble Field its proportionate share of any distributions, less certain excluded
amounts, and Noble Field bears the credit risk with respect to its undivided interests. The sale in 2012 of the participations in the two loans was approved by the Credit Committee of Cathay Bank, without Mr. Tangs participation. In
approving the sale, the Credit Committee determined that the sale was for an amount not less than the then current market value of the participation, was made on substantially the same terms and procedures no less stringent than those prevailing for
comparable transactions with unrelated parties, and was made on terms no more favorable than those generally available to an unaffiliated third party under the same or similar circumstances.
On July 22, 2011, Cathay Bank sold to Noble Field for $24.5 million a 48.35% undivided interest in another loan, for which the outstanding amount and
accrued and unpaid interest totaled approximately $51.6 million. Cathay Bank continues to service this loan and is obligated to pay Noble Field its proportionate share of any distributions,
less certain excluded amounts, and Noble Field bears the credit risk with respect to its undivided interest.
Indemnity Agreements
Bancorps bylaws provide for
the indemnification by Bancorp of its agents, including its directors and officers, to the maximum extent permitted under Delaware law. Bancorp also has indemnity agreements with its directors and certain of its officers. These indemnity agreements
permit Bancorp to indemnify an officer or director to the maximum extent permitted under Delaware law and prohibit Bancorp from terminating its indemnification obligations as to acts of any officer or director that occur before the termination.
Bancorp believes the indemnity agreements assist it in attracting and retaining qualified individuals to serve as directors and officers of Bancorp. Bancorps certificate of incorporation also provides for certain limitations on the liability
of directors, as permitted by Delaware law. The indemnification and limitations on liability permitted by the certificate of incorporation, bylaws, and the indemnity agreements are subject to the limitations set forth by Delaware law. In addition,
pursuant to a memorandum of understanding entered with FRB in December 2009, among other things, Bancorp agreed to notify the FRB prior to effecting certain changes to our senior executive officers and Board and is limited and/or prohibited, in
certain circumstances, in its ability to enter into contracts to pay and to make golden parachute severance and indemnification payments.
CODE OF ETHICS
Bancorp has adopted a code of ethics that applies to its principal executive officer, principal
financial officer, principal accounting officer or controller, or persons performing similar functions, known as the Code of Ethics for Senior Financial Officers, and which is available at www.cathaygeneralbancorp.com. Stockholders may
request a free copy of the Code of Ethics for Senior Financial Officers by written request directed to Cathay General Bancorp, 9650 Flair Drive, El Monte, CA 91731, Attention: Investor Relations.
If Bancorp makes any substantive amendments to its Code of Ethics for Senior Financial Officers or grants
any waiver, including any implicit waiver, from a provision of the Code to its principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, it will disclose the nature
of such amendment or waiver in a report on Form 8-K.
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COMMUNICATIONS WITH BOARD OF DIRECTORS
The Board has an established process for stockholder communications. Stockholders may send communications
to the Board or any individual director by mail addressed to: Board of Directors, Cathay General Bancorp, 9650 Flair Drive, El Monte, California 91731. Communications addressed to the Board will be reviewed by the Assistant Secretary of
Bancorp and directed to the Secretary, the Chairman of the Board, or the Lead Independent Director, as appropriate, for further review and distribution to certain or all members of the Board.
Communications addressed to individual directors will be forwarded directly to them.
AVAILABILITY OF ANNUAL
REPORT ON FORM 10-K AND PROXY STATEMENT
On the written request of any stockholder of record as of April 1, 2013, Bancorp will furnish, without
charge, a copy of its Annual Report on Form 10-K for the year ended December 31, 2012, including financial statements, schedules, and lists of exhibits,
and any particular exhibit specifically requested. Requests should be addressed to Monica Chen, Assistant Secretary, Cathay General Bancorp, 9650 Flair Drive, El Monte, California 91731,
telephone number, (626) 279-3286.
STOCKHOLDER PROPOSALS
FOR 2014 ANNUAL MEETING OF STOCKHOLDERS
Under Bancorps bylaws, nominations for election to the Board and proposals for other business to be
transacted by Bancorp stockholders at an annual meeting of stockholders may be made by a stockholder (as distinct from Bancorp) only if the stockholder is entitled to vote at the meeting and has given Bancorps Secretary timely written notice
that complies with the notice requirements of the bylaws. In addition, business other than a nomination for election to the Board must be a proper matter for action under Delaware law and Bancorps certificate of incorporation and bylaws. Among
other requirements, the written notice must be delivered to Bancorps Secretary at Bancorps principal executive office located at 777 North Broadway, Los Angeles, California 90012, by no earlier than February 11, 2014, or later than
March 13, 2014, based on the expected date of the scheduled annual meeting being May 12, 2014. However, if less than 70 days notice or prior public disclosure of the date of the scheduled annual meeting is given or made, the notice,
to be timely, must be so delivered or received by the close of business on the 10th day following the earlier of the day on which notice of the date of the scheduled annual meeting was mailed or the day on which such public disclosure was made.
Separate and apart from the required notice described in the preceding paragraph, rules promulgated by the
SEC under the Exchange Act entitle a stockholder in certain instances to require Bancorp to include that stockholders proposal (but not that stockholders nominees for director) in the
proxy materials distributed by Bancorp for its next annual meeting of stockholders. Any stockholder of Bancorp who wishes to present a proposal for inclusion in Bancorps 2014 proxy solicitation materials must: (i) set forth the proposal
in writing; (ii) file it with Bancorps Secretary on or before December 12, 2013, or if the date for the 2014 annual meeting is before April 13, 2014, or after June 12, 2014, then such stockholder must file it with
Bancorps Secretary at a reasonable time before the printing and mailing of the proxy statement for the 2014 annual meeting of stockholders; and (iii) meet the other requirements for inclusion contained in the SECs stockholder
proposal rules.
By Order of the Board of Directors,
Perry Oei
Secretary
Los Angeles, California
April 11, 2013
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0 14475
CATHAY GENERAL BANCORP Proxy for the Annual Meeting of Stockholders, May 13, 2013 THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF CATHAY GENERAL BANCORP Peter Wu and Heng W. Chen, or either of them, with full power of
substitution, are hereby appointed as proxy holders and authorized to represent and to vote as designated on the reverse the undersigneds shares of Cathay General Bancorp common stock at the Annual Meeting of Stockholders to be held at 9650
Flair Drive, El Monte, California 91731, at 5:00 p.m., local time, on May 13, 2013, and at any adjournments or postponements thereof. This proxy card when properly executed will be voted in the manner directed by you. If you return this proxy
card without voting instructions, then the proxy holders will vote your shares according to the recommendations of the Board of Directors. (Continued and to be signed on other side.)
Signature
of Stockholder Date: Signature of Stockholder Date: Note: Please sign exactly as your name or names appear on this Proxy. When shares are held jointly, each holder should sign. When signing as executor, administrator, attorney, trustee or guardian,
please give full title as such. If the signer is a corporation, please sign full corporate name by duly authorized officer, giving full title as such. If signer is a partnership, please sign in partnership name by authorized person. To change the
address on your account, please check the box at right and indicate your new address in the address space above. Please note that changes to the registered name(s) on the account may not be submitted via this method. The Board recommends a vote FOR
ALL NOMINEES on the following proposal: 1. To elect four Class II directors to serve until the 2016 annual meeting of stockholders and their successors have been elected and qualified;. O Kelly L. Chan O Dunson K. Cheng O Thomas C.T. Chiu O Joseph
C.H. Poon The Board recommends a vote FOR the following proposals: 2. To reapprove the material terms for the award of performance-based compensation under our 2005 Incentive Plan; 3. To vote on an advisory (non-binding) proposal to approve our
executive compensation; 4. To ratify the appointment of KPMG LLP as our independent registered public accounting firm for the 2013 fiscal year; and Other Business. 5. In their discretion, the proxy holders are authorized to vote upon such other
business as may properly come before the Annual Meeting or any adjournments or postponements thereof. The undersigned acknowledges receipt of the Notice of Annual Meeting and Proxy Statement dated April 11, 2013. Please sign, date, and return
this proxy card even if you intend to be present at the Annual Meeting. This proxy may be revoked as set forth in the accompanying Proxy Statement, and the shares may be voted by the holder at the Annual Meeting. PLEASE MARK ABOVE, THEN SIGN AND
DATE THIS PROXY CARD BELOW AND RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE. FOR AGAINST ABSTAIN FOR ALL NOMINEES WITHHOLD AUTHORITY FOR ALL NOMINEES FOR ALL EXCEPT (See instructions below) INSTRUCTIONS: To withhold authority to vote for any
individual nominee(s), mark FOR ALL EXCEPT and fill in the circle next to each nominee you wish to withhold, as shown here: JOHN SMITH 1234 MAIN STREET APT. 203 NEW YORK, NY 10038 NOMINEES: ANNUAL MEETING OF STOCKHOLDERS OF CATHAY
GENERAL BANCORP May 13, 2013 TELEPHONECall toll-free 1-800-PROXIES (1-800-776-9437) in the United States or 1-718-921-8500 from foreign countries from any touch-tone telephone and follow the instructions. Have your proxy card available
when you call and use the Company Number and Account Number shown on your proxy card. Vote by phone until 11:59 PM EST the day before the meeting. MAILSign, date, and mail your proxy card in the envelope provided as soon as possible. IN
PERSONYou may vote your shares in person by attending the Annual Meeting. PROXY VOTING INSTRUCTIONS Please detach along perforated line and mail in the envelope provided IF you are not voting via telephone. PLEASE SIGN, DATE, AND RETURN
PROMPTLY IN THE ENCLOSED ENVELOPE. PLEASE MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN HERE x 20430303000000000000 6 051313 COMPANY NUMBER ACCOUNT NUMBER IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE STOCKHOLDER MEETING TO
BE HELD ON MAY 13, 2013. Cathay General Bancorps Proxy Statement and Annual Report for the year ended December 31, 2012, are also available electronically at www.cathaygeneralbancorp.com/proxymaterials FOR AGAINST ABSTAIN FOR AGAINST
ABSTAIN
0 14475
CATHAY GENERAL BANCORP Proxy for the Annual Meeting of Stockholders, May 13, 2013 THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF CATHAY GENERAL BANCORP Peter Wu and Heng W. Chen, or either of them, with full power of
substitution, are hereby appointed as proxy holders and authorized to represent and to vote as designated on the reverse the undersigneds shares of Cathay General Bancorp common stock at the Annual Meeting of Stockholders to be held at 9650
Flair Drive, El Monte, California 91731, at 5:00 p.m., local time, on May 13, 2013, and at any adjournments or postponements thereof. This proxy card when properly executed will be voted in the manner directed by you. If you return this proxy
card without voting instructions, then the proxy holders will vote your shares according to the recommendations of the Board of Directors. (Continued and to be signed on other side.)
ANNUAL
MEETING OF STOCKHOLDERS OF CATHAY GENERAL BANCORP MAY 13, 2013 IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE STOCKHOLDER MEETING TO BE HELD ON MAY 13, 2013 Cathay General Bancorps Proxy Statement and Annual Report for
the year ended December 31, 2012 are also available electronically at www.cathaygeneralbancorp.com/proxymaterials Please sign, date, and mail your proxy card in the envelope provided as soon as possible. Signature of Stockholder Date: Signature
of Stockholder Date: Note: Please sign exactly as your name or names appear on this Proxy. When shares are held jointly, each holder should sign. When signing as executor, administrator, attorney, trustee, or guardian, please give full title as
such. If the signer is a corporation, please sign full corporate name by duly authorized officer, giving full title as such. If signer is a partnership, please sign in partnership name by authorized person. To change the address on your account,
please check the box at right and indicate your new address in the address space above. Please note that changes to the registered name(s) on the account may not be submitted via this method. The Board recommends a vote FOR ALL NOMINEES on the
following proposal: 1. To elect four Class II directors to serve until the 2016 annual meeting of stockholders and their successors have been elected and qualified;. O Kelly L. Chan O Dunson K. Cheng O Thomas C.T. Chiu O Joseph C.H. Poon The Board
recommends a vote FOR the following proposals: 2. To reapprove the material terms for the award of performance-based compensation under our 2005 Incentive Plan; 3. To vote on an advisory (non-binding) proposal to approve our executive compensation;
4. To ratify the appointment of KPMG LLP as our independent registered public accounting firm for the 2013 fiscal year; and Other Business. 5. In their discretion, the proxy holders are authorized to vote upon such other business as may properly
come before the Annual Meeting or any adjournments or postponements thereof. The undersigned acknowledges receipt of the Notice of Annual Meeting and Proxy Statement dated April 11, 2013. Please sign, date, and return this proxy card even if
you intend to be present at the Annual Meeting. This proxy may be revoked as set forth in the accompanying Proxy Statement, and the shares may be voted by the holder at the Annual Meeting. PLEASE MARK ABOVE, THEN SIGN AND DATE THIS PROXY CARD BELOW
AND RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE. FOR ALL NOMINEES WITHHOLD AUTHORITY FOR ALL NOMINEES FOR ALL EXCEPT (See instructions below) INSTRUCTIONS: To withhold authority to vote for any individual nominee(s), mark FOR ALL EXCEPT and fill in
the circle next to each nominee you wish to withhold, as shown here: NOMINEES: PLEASE SIGN, DATE, AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE. PLEASE MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN HERE x Please detach along perforated line and mail
in the envelope provided. 20430303000000000000 6 051313 FOR AGAINST ABSTAIN FOR AGAINST ABSTAIN FOR AGAINST ABSTAIN
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