Cathay General Bancorp (CATY) 27 Apr 202020 Q1 Earnings call transcript

Good day, ladies and gentlemen, and welcome to the Cathay General Bancorp's First Quarter 2020 Earnings Conference Call. My name is Justin, and I will be your coordinator for today. At this time, all participant lines are in a listen-only mode.

Following the prepared remarks, there will be a question-and-answer session. [Operator Instructions]. recorded be being at for is www.cathaygeneralbancorp.com. call and available will replay Today's

like call please turn Lo, I to Now would the of General Investor Cathay over Bancorp. Ma'am begin. Relations Georgia to

good afternoon. Thank you, Justin, and

Tai, Here to results and and Executive Officer. financial and discuss Mr. President Heng Mr. Liu, Operating Executive our Vice Chief Mr. Chang President today Officer; Chief Chief are the Pin Officer; Chen, our Financial

forward-looking we begin, Private this to remind within actual the the that of on certain to make Act Securities of the wish materially. you call XXXX results speakers applicable may cause these that results differ risks concerning subject Before and statements statements Reform of to meaning uncertainties the and future could we provisions events, are and Litigation that

are report in Exchange These ended year in with Securities reports XX, the described further XX-K the Form results for particular, in and other XA on Item the from company's time-to-time. uncertainties filings and XXXX, at December and the Commission annual and

As required no you or to it statement unanticipated such looking any place statements. to occurrence of forward-looking We caution law. future except reflect not undue update developments forward-looking forward of on events. only and as date or made circumstances, reliance of the Any is as the obligation which to events, by undertake speaks statements we review such, or

quarter XXXX we at call obtain Cathay afternoon, questions. To www.cathaygeneralbancorp.com. earnings today, by General release This results. comments up will management Bancorp first issued copy, this its our After please outlining for a open visit website an

Pin Officer, our to over Tai. call Executive the turn now will Mr. I Chief

call. earnings quarter our first operating will to Thank our you, Welcome acknowledge good Georgia, XXXX I first results. quarter and conference afternoon.

team we XXXX, to per compared net earnings first is a XXXX. on of and quarter $X.XX $X.XX share members XX% the quarter year the afternoon, the same share of a during million the focus per to clients, first $XX.X commitment COVID-XX compared when to XX.X% income Diluted reported of a quarter per $XX.X Our for for pandemic. income This the and share XXXX million decreased our for net first of supporting for communities today by ago. decrease of quarter

results $XX.X quarter basis. million of of provision losses economic for growth of first include quarter $XX.X driven conditions loss loans per million or COVID-XX. increase an This XX.X% of reduced or to an increase in XXXX residential or the part the in our of gross drawdown related borrowers to earnings primarily and In $X.XX. million loans mortgage special loans XX% due $XX mortgage billion deterioration annualized. loans our by loans share first due to annualized, for grew the to X.X% XXXX, higher on annualized commercial a due loan or The $XXX.X million in by loan X.X% in closing provision the weeks XXXX of quarter annualized special The by commercial quarter million $XXX.X in by of first was the of $XXX.X

total a our or to primarily deposits new billion, increased $XX.X result XXXX, XX.X% For of as $XXX.X additional the and first quarter deposits. deposits million wholesale of annualized

per shares and stock at the our average XXX,XXX program XXXX. We share of of of cost continued quarter buyback our an stock first $XX.XX repurchased in

to XXXX quarter our beyond. any through pandemic for demand back of results and on not monitor the further COVID-XX the financial impact shares deposits, buying services our additional continue be will We and until second of and the notice. loans, We'll products so

detail our turn and quality borrowers. With Liu for floor to in Bank's initiatives Chang the over Operating COVID-XX discuss asset first more that, President our I'll our the Chief Officer, and quarter to

that payment borrowers are short-term relief by implemented have financial XX afternoon, borrowers, Pin, We Xst good launched for the to to mortgage and our days. several everyone. of who COVID-XX we respect assist April residential to program pandemic, the assistance for experiencing the up mortgage impacted provide as to on you, are hardship lending pandemic. With COVID-XX result Thank initiatives a

April approved balance XXX million an loan XX, our payment of have approximately aggregate of of we deferment As with ratio approximately residential XXXX current weighted-average or $XXX.X XX%. requests mortgage with portfolio, X.X% of loan-to-value

CRE modification modified CRE what XX, to adversely been our that We to we The with loan began XXXX X% prudently portfolio relief, can XX%. loans through and on provide have or and/or working with terms of was loans do XXX loan CRE covenant approximately of through provide an by balance March XXst, COVID-XX portfolio a our borrowers at $XXX.X origination of impacted repayment so average X.X% XXXX, C&I total ratio repayment for relief loan-to-value as and of our these million of been has terms. aggregate

loan Program with balance to $XX.X XX, In of C&I have aggregate of addition, XX of portfolio relief Protection XXXX repayment launched on portfolio total loan of an X.XX% SBA been terms. April X.X% Xth. and our loans C&I our our million on or approximately modified Payment provide as March We

process As PPP the with XXX portal. million XX, aggregate loans submitting we of XXXX an April balance SBA of $XXX to are of in the approximately over

SBA footprint Relief program any also of separate programs. state relief and program, is government between Program, to small We from X affected the the XX,XXX. in business loan with micro which help Loan a loans Smart to launched or our X,XXX COVID-XX loan pandemic owners purpose backed by is The the independent

are XXX an processing million. As balance XX, X we aggregate with of applications of over XXXX over April a

compared fourth to of of $XXX,XXX of net recoveries recoveries and XXXX. For recoveries in XXXX quarter the quarter in first of the first quarter of we the net of $X.X million net XXXX, $XX,XXX reported

to $XX.X estate. loan stores, or loans was chain compared of due XXXX. million to as of $XX.X The period of the non-accrual a which quarter one by million increased loans fourth Our the by end of X.XX% secured to end to increase is real tire

of $X provision fourth first due the the quarter XXXX first the in loss million. the quarter $XX in provision the pandemic loss of a loss quarter included loan $XX to million of reversal first adjustments in COVID-XX to million the of of of model XXXX quarter loan qualitative compared million in impact $XX under loss the and a loss XXXX. recognized The XXXX We loan incurred of no provision new

have XXXX CECL in Act, in to in $X would elected adopted. loss had under resulted defer preliminary the We million permitted results losses implementation CECL based the recognizing to range been of credit CARES $XX for on loan if of quarter of the have recently additional provision the first as enacted million standard the which

the the partially resolved the believe trade our from potential the also Borrowers tariffs our approximately dispute adversely We we impacted U.S. loan of that continuing tariffs and China and continue between the be X.X% total to hold of to monitor evaluate portfolio. portfolio. current by could impact loan

and With Vice in discuss Heng financial that, I'll to quarter Chen, detail. Financial more results first our the turn President to Chief the Officer, Executive floor over XXXX

Thank you, Chang, and good afternoon, everyone.

to net $XX.X quarter the XXXX. the or income compared quarter XX.X% by decreased million $XX.X first first to For XXXX, million of of

COVID-XX. which Diluted the special earnings per XX% $XX first the due compared $X.XX per decrease $X.XX of share was million quarter a $X.XX to XXXX, share to provision to reduced XXXX by was of quarter loan loss related first for or of

of of XXXX. at XXX XXXX rates in X.X the the XXXX loan X.X% loans was XXXX of of fourth Our December X.XX% quarter There as of loans to floor net billion compared as XXXX. for of compared first XX, first margin at and in of rate March quarter floor interest to were X.XX% quarter XX, their as million the their

interest quarter compared XXXX, point of quarter recoveries basis penalties fourth for only interest points first of X for XXXX. and the first margin quarter to points basis added X the the basis XXXX In and net of the prepayment X to

our and XXXX first $X.X of fees quarters with of valuation Non-interest the quarter from of second offset X.X $X.X of million billion decreased of by quarter equity $XX.X to swaps. during was the XXXX X.X% a valuation rate million mature and million CDs compared securities, management million during The the $X.X of in attributable by and first the XXXX. billion wealth swing partially and of income X.X of average when a the increase to decrease $X.X net change X.X%. rates to in Approximately million interest primarily third

X.X% Non-interest in when million first of million million, or in compared by ago. to expense XXXX, to the the $XX.X first quarter $XX $X.X quarter decreased a year

decrease commitments, decrease change expense the primarily For non-interest investments million of was in the the XXXX and from employee unfunded million for in $X.X a offset income of to a $X.X provision $X.X the amortization energy benefit partnerships. of increase and by in foreclosed alternative real sale first partially in housing salaries and in in a quarter $X.X due low gain a recognized estate, million expense million

investments XXXX. we would funds of XXXX quarter first effective for tax to the to in tax for credits tax solar XX% of approximately project our XX.X%, rate first effective completed the which week, quarter XX%. XX.X% the year rate The to was full compared We lower last

amortization credit quarter was XXXX. last a XXXX in the to $X.X in of first quarter the and is million $X of $X.X second in the million be and tax of expected two million Solar quarter each quarters

to ratio March December XX.XX% XXXX decreased at At as our increased XX, to capital X risk-based Tier at X December XXXX. decreased XX, leverage XX.XX% XX.XX% capital our XX.XX% to XX.XX% XX, capital risk-based Tier our from compared December XXXX, and XX.XX% XXXX total XX, ratio to from at

Thank you, Heng.

to proceed portion question-and-answer call. the of now the We will

[Operator Chris Instructions]. And our comes from McGratty from question first KBW.

Your line now open. is

be excluding help the several run little we maybe challenging moment. perspective? should amortization for expenses, a more a expenses revenue you turned a the thinking the bit Heng, kind for a us environment start could Could from I the the given about core rate next just reasonable quarters that of on with

April, more in typically cut merit have and that about we less about this increases QX. X%, we or officers in have Well, it’s annual was that's year for our a offset X%, that by

of be adjusted, run rate QX the the think I year. So for would rest a probably good

you the housing...? Got on a the do have amortization, low think -- And provided the then did you the solar, income -- Okay. it. I have you

a It's up quarter. X million

to second kind we're energy, of this quarter in. banks there's the risky a you portfolios about would of just bit the see that proportion the just these restaurants, Okay, environment exposure to that some follow-up portfolios, remind great. Maybe others lot perceived as a Could any that today? would loans is of be, the might have of be or higher question discussion of be helpful, hotel, your risk a you several that given us

roughly think, our about hotel/motel have investors mentioned that portfolio I I Yes, has XXX million. to

So it's CRE X.X% loans. total loans or X.X% of our of

CRE retail, it's and $X.XX of Our total of loans. XX% XX.X% that’s loans our billion, our

there very are is low last LTVs -- So and in a was pretty I the debt strong. interest up mentioned in coverage year when -- past the the think ratio retail, couple retail, it's service we

X.X% of loans. are Most Chinese X.X% fast that's restaurants. million, restaurants, think service and -- For XXX CRE, of a we is to that categories. about well have It's then of those that total anyway -- the I

is XXX X.X% them of and also about are our oil total of We have and gas all meter loan which lending. portfolio, reserve-based of

Thank next Gary Tenner you. our from question Davidson. from And D.A. comes

open. now is line Your

I you was adoption just the of you into decision of the guys defer ultimate you. if in to Thank CECL? wondering for was go could deciding what terms

somewhat Yes, were in for years we haven't Gary, had so, and I think net five recoveries in those we've loss years. would loan or -- a provision that, been for we we that feel unique

increase was adjustment, And so, We take the -- drastic to how provisions very at one we mention do charge-offs -- overstates these end the that when our bit try XXXX us, mention were we measures so the our the measures XX-K, had loss at March. have loan didn't whereas from over self to given or was XX-Q, And low which XXXX, the LTV. the we then recession little to our or in and in accessed a we all a day of for CECL apply we'll what it we overall in had of XX%. economic property losses

we the midcap of the XX% adjusted we whenever We less thinking a or then lack we quarters the save about captures that's loss choice. the were this our like model have. we all emergency the But know charge-offs XXXX. more So we have our represents so recent fair that strongly because over or chose XX is declared and more banks to or time really and felt of of We we -- we that have of December the had validate to defer to the incurred needed in that as COVID-XX pressure. model of year,

next quarter? then you quarters it in maturing to And confirm, just mentioned when the CDs X.X couple the of billion was per

billion second in It’s X.X billion X.X the quarter, third the quarter. in

rate? CD your current what's And Okay. XX-months

hope into or We have wholesale system terms last been -- loan stimulus the X%. offer to but market, XXX% year once of has about time so been the brokerage CD proceeds the under efficient in the at including now come banking by. goes one get so, it weeks and It's try high, the market the ratio deposit CD. little can that we as the more for lower bit six our pretty Cathay, is we rates today In to the to rates be

Thank our from you. Lana Capital And comes question BMO Chan next from Markets.

line is now open. Your

A couple questions. under credit One, for million, XX was potential of quarter provision that losses loss highlighted? one the much this loan of that of C&I how you

it's work that one well second, it been it’s just to cross--collateralized XX-days have, was -- secured we past other That out was real-estates, it's maturity.

modified in you been under a of were sense in? mentioned you that retail And what modification segments, on have us this give Is more or CRE the Okay. the quarter side? or industries could they it CRE loans C&I, of were

Sure. probably numbers retail as and Yes. and well. we a talked of was that of categories segment Chang about. two motels here. hotels the biggest are There's the then Those

I especially the revenue next have portfolio, sectors in pretty significant of CRE Okay. much liquidity look do the I and mean couple across how in some of drop hotel/motel restaurants, your and borrowers a actually months? you when your sustain to over guess retail

same are I the cash The restaurants. also even we actually we a X% we at that for from up mean, at and of mentioned mass entire have working at standpoint, loan just flow. for liquidity the items just and they sectors hotel/motel, us, global three their -- the sponsors, on the cash you property's that flow looking the entire We're looking Collectively, loans not make portfolio. the retail, been about time.

that, for about to portfolio XX.X%, for want XX%. leveraged and hotel/motel our it’s LTV I about add retail is

going Instructions]. to [Operator David is from our Wedbush from come And Securities. you. Thank next question Chiaverini

Your line open. is now

Hi. Thanks. A couple of questions.

look do do any how you quarter, as we could provisioning on First, as out any to quarter? to quarter, second in sense on the far thus second what of based performing the are the provision, as occur you have to have borrowers the whatsoever sense level in

economic more the forecast. going it's be think, I to on

under XXth, provision And weak as that's improving. So need far things unemployment as if yes, of We -- under reopened let's say more and many have they're in peaked, the you when incurred don't states would cash count June less both majority because the states and of regulatory our and -- borrowers CECL our flow the in loss model. we're trouble, has at a if guidance. that now that deferment, the are a guidance SEC have those, that’s in the under

very not it to provisioning now. to going are be cause graph things hard by So, itself. months It's would a from two where

shifting the then I of can to And some categories. appreciate that. more gears traditional

net going quarters? your the So are margin, expecting interest next couple you what forward over

the one But am varies, about points I the is is NIM -- I X.XX sorry, it and forgiven, fee was it's X one as because April. but PPE if X they’re March of of then We get think said is mean or rate was income. I we the level that think it, -- I low,

March X.XX Our April last fees month. I preliminary of -- NIM then think the book we was on and was the our day our

be I or than So higher like would April X.XX closer a bit little that. think to our

have month CDs lift hit our a the loans reprice, most as repricing. we get CDs our So -- the if and of floors, every from

surge as think once not stabilize. non-accruals and are But to giving if over goes. our again, it we're things exactly there I that, NIM like So, guidance time no where of should

floor one on rates increased think our loans. new I have we thing,

rate our many it's close nowadays, for low rate the so to for loans example, pretty and the we the new be up portfolio mortgage our in residential Xs, to extent average we So would get CRE pushed the loans.

much expect rate we new don't from originations. So, compression

industry. seen then how And of over saw what you about similar helpful. mentioned growth, across levels That's we've loan shifting the to C&I to elevated drawdowns

Just are in looking of environment? type forward, you what loan type growth expecting this of

in the And the muted. predict very from aside for the But residential that, loan and has also because been CRE. then can't C&I one, mortgage growth of the so We for PPP. same April, far

Thank Davidson. comes D.A. Gary our from Tenner next question you. And from

line Your is now open.

could up on you loans, fee? weighted the on tell PPP us quick One that expect that, average what fee you follow average the

X%. probably Yes,

SunTrust And next Humphrey. Michael you. from and Thank from our Young Robinson question comes

Your line is now open.

balances tell a into you are just Heng, update generally maybe portfolio? and you loan modification those guys get us of granting residential the wanted to or extension? mortgage And portfolios maybe an you can in within much then kind just And deferrals? of separately, the commercial forcing full CRE, already like are the how are

residential moment, the is of been and So system call granted the million. account booked of loans that on been at [$XXX.X And deferment. about the approval million]. that's for the That's of been signed XXX we on agreement mentioned -- actual have the about mortgage, have $XXX.X loans probably our

Heng, I grow of you you I general, guys you not Okay. portfolio cycle, you stated mortgage it think down category point growth you in the resi et the of on much think in credit said, new of kind view overall. altogether given to size But losses, just the that case of rate increased had before here, obviously do this just or And a and in from grow as safer tamp just cetera? capital at preserve are kind wanting may to

it's And CRE. a compared certainly -- category. to then I XXX% It's XX%, a weighting, for only risk our the historically, safer think it’s

on very during or two, March. capital. busy has late staff the our So for month But been relatively last the very light -- it's it's think I

impacted see normal June months been have COVID-XX. our July, but is be. by our we'll so that's would and that then more And what focus now right the servicing customers And

exposure. bucket but and each that’s cities? I provide tackle would if on of maybe of it's hotel/motel, other in that know as to assume one Dallas, in any better And individually I preponderance geographic on some last California detail don't or that you restaurants. But could Okay. one New maybe was York Southern retail for if

But right? in New in XX% XX% of XX% which then investors total about our the on Washington, website, like and is about of slides both. Georgia. those anyways, then about California, York It's or Texas, XX% X% our it’s Yes. and California of about it's Northern is Southern each and

Southern Northern it's New California, predominantly So California. and York

get of than to and other geography trying just any California an hotel/motel? exposure was outside like I have Southern a guess, I att specific different retail to do -- categories And Northern those or

I I hotel/motel same. terms spread bit No, of than the geographies. more Yes, less more in a are in probably, think the of in yes, I in mean California out New York. But that’s little LTVs uniformly about or think yes. terms Retail

Okay. And are for end the this pretty be LTV from that that to point? those portfolio? averages end you the Or would the the low consistent provided, high at

Yes.

in classes CRE for XX%. is maximum Our LTV most

-- and yes, those So mean so -- well XX%, the are that's it's current that in I LTVs.

a pay So appreciation, and don't there's been some dispersion. but big have down some we

in some have where down more loans higher. family single payments are have that that larger We where we

question we from Chiaverini follow-up And David a have from Wedbush Securities.

You if the LTVs portfolios? it's you earlier, retail, curious Hey, low, are there it each hotel was what is that what and but I state the LTV thanks. for for for and the on I the for LTVs question LTVs. last Can wanted for how have on CRE to mentioned follow-up the just and what is you the XX% of mentioned very figure you overall restaurants?

retail then hotel/motel This average, but is it's and the can XX%, call the and very close ... for -- you later, is to deferment is XX% they’re the I

Restaurant?

Restaurant is XX%.

participation. you over not for Thank back call General I Cathay your to management would to for closing the remarks. you. the like Thank Bancorp’s turn

challenging on for thank us to been our pandemic. to a for call. the want I our joining due country everyone time It's

speaking services to As we communities, continue provide banking day. to we with at next to you our our look earnings forward results quarterly

and today's in ladies And you. you conference. concludes This for Thank participating today's program. gentlemen, thank

a have day. great Everyone, disconnect. now may You