Cathay General Bancorp's $150M Buyback: A Strategic Play to Elevate Shareholder Value

Cathay General Bancorp (CATY) has doubled down on its commitment to shareholders with the announcement of a new $150 million share buyback program, replacing a prior $125 million initiative completed just months earlier. The move underscores the Los Angeles-based bank holding company's confidence in its financial position and signals a strategic focus on optimizing capital returns. But what does this mean for investors? Let's break down the implications.

A Track Record of Execution

The prior $125 million buyback, concluded in February 2025, saw Cathay repurchase 2.91 million shares at an average price of $43.02—a clear demonstration of its ability to execute such programs efficiently. With the new $150 million authorization, management aims to further reduce the company's 70.1 million outstanding shares, potentially boosting metrics like earnings per share (EPS) and enhancing shareholder value through reduced dilution.

Why Now? The Strategic Rationale

The timing of this announcement is telling. Cathay has consistently prioritized capital returns, maintaining a $0.34 per share quarterly dividend since 2024 while demonstrating fiscal discipline. By increasing the buyback size, the company is signaling that it sees its stock as undervalued—or at least worth defending—amid shifting market conditions. For investors, this is a vote of confidence in Cathay's ability to navigate economic cycles while rewarding long-term holders.

Crucially, the flexibility of the program—allowing open-market or private transactions, and even the use of a Rule 10b5-1 plan—gives management the agility to buy shares opportunistically. This is a hallmark of strategic capital allocation: deploying cash when it maximizes returns rather than adhering to rigid schedules.

Risks? Consider the Trade-Offs

Critics might argue that $150 million could be better spent on growth initiatives or reserves. But Cathay's history suggests prudence: it completed its prior buyback without compromising its dividend or capital ratios. The company's focus on optimizing shareholder returns aligns with a broader trend among banks to prioritize returns over expansion in a low-growth environment.

Moreover, with shares trading at roughly 1.2x book value—a valuation that has been consistent over the past five years—the buyback is a logical move to counteract dilution and support price stability.

The Bottom Line: A Compelling Case for Investors

For shareholders, the buyback isn't just about short-term EPS boosts. It's a statement of Cathay's financial health and management's long-term vision. The increased authorization reflects confidence in the company's balance sheet, which has withstood economic headwinds while maintaining a steady dividend.

Investors should take note: Cathay is executing a disciplined capital strategy that balances returns with resilience. With the stock's valuation at reasonable multiples and the buyback providing a tailwind, now could be an opportune moment to consider adding this name to a portfolio—or holding for the long haul.

In a market hungry for companies that walk the talk on shareholder value, Cathay General Bancorp's actions are speaking louder than words. The question is: will investors listen?