Cathay General Bancorp (CATY) 24 Oct 222022 Q3 Earnings call transcript

Good afternoon, ladies and gentlemen, and welcome to the Cathay General Bancorp's Third Quarter 2022 Earnings Conference Call. My name is Matt, and I'll be your coordinator for today. [Operator Instructions] Today's call is being recorded and will be available for replay at www.cathaygeneralbancorp.com.

Now I'd like to turn the call over to Georgia Lo, Investor Relations of Cathay General Bancorp.

Thank you, Matt, and good afternoon.

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

differ materially. Before uncertainties described particular, to of forward-looking XXXX, these to risks from and annual to could this on we filings of further results and the of cause wish that that XA, for and Litigation provisions XX, that These future begin, uncertainties on Reform are certain reports Commission results Securities speakers and time ended with events in report to Act in the remind applicable actual other at subject call concerning within item risks statements statements December you make company's are the Private and time. the the in Exchange XXXX the meaning may Securities Form XX-K year we and and

caution statements. reliance you undue not place As such, we to forward-looking such on

only date update or Any required to undertake an or to obligation statements the and or on no developments by any event. law, occurrence of forward-looking as circumstances, made, is speaks unanticipated reflect review statements except forward-looking events it we which as future of the

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

to I Chang and Chief will President Executive our Mr. over Liu. call the Officer, now turn

the reported the quarter a quarter XX.X% as of conference quarter to Welcome $XX of XXXX, for our of million call. XXXX. third to for Georgia, third third you, Thank everyone. of afternoon, compared income This million we afternoon, income good $XX.X earnings a net increase net and XXXX

ago. the increases In $X.XX same commercial Diluted or increase annualized. $X.XX the loans The loans million to $XXX.X gross X.X% loans; annualized X.X% third year for mortgage XXXX, excluding of for quarter per of of estate the share earnings or quarter quarter XX.X% share annualized in the annualized was loans, XXXX share million loans, our increased XXXX a in $XXX.X per increased PPP per $XX.X loans. or driven commercial to by quarter compared million in or X.X% XX.X% real for $XXX.X in third primarily residential million third of

including in The of loan XX.X%, of XXXX is to XX% overall loans the expected certain for February approximately XXXX. range million branches Coast growth West between from acquisition $XXX.X to HSBC

we X.X% be loan acquisition, the X% to HSBC growth between and project Excluding in XXXX.

monitor We continue real loans. our to commercial estate

X Slide earnings to presentation. Turning our of

As XX, of the of our was XX%. loan-to-value CRE XXXX, average September loans

and at As estate XX, portfolio portfolio. of portfolio of XXXX, comprises commercial X our XX% loan Slide retail loan loan total real our of September total our XX% property

majority, of store the buildings, $X.XX The use in by retail XX% is loans, mixed shopping centers, retail strip billion neighborhood, and centers. secured by is XX% only secured or

XXXX. the to million we the second of recoveries net third of reported charge-offs of quarter of net $X.X compared quarter $X.X For in XXXX, million

loans million XXXX. of quarter were by X.XX% million increased loans to XXXX, XX, as $X.X nonaccrual second of to Our compared total September of end as the $XX.X of

$XXX during of as our special million to the And loans quarter XXXX. to Classified of million slightly $XXX XX. September the million XX, XXXX. slightly million Turning decreased $XXX Slide quarter during as XX, from loans from $XXX September mention to increased

XXXX. during the credit of increased $XXX.X the to XXXX million credit provision as million of third compared or We X.X% by deposits XXXX million annualized of a third credit XXXX. reported the quarter in $X $X.X quarter the a in quarter losses provision of for losses provision of million for for loss $X.X second quarter third in Total and

quarter due or deposit increased primarily demand annualized annualized market compared migration Money increased million or to to the the annualized, a million of by runoff. deposits deposits $XX XX.X% second back money CDs deposits $XXX interest-bearing $XXX XXXX XXXX. Time third or to XX.X% quarter XX% million during of deposits or market and decreased and

cost For XXXX, growth the $XX.X We May adopted of the XXXX, and million X% in HSBC repurchased expected of deposit the approximately share includes million to range a overall at of third May $XX.X of stock XXXX X.XX average between the low-cost of new stock with acquisition. $XXX million deposits totaling repurchasing Directors shares program. million In X.X%, million program. of our $XXX repurchase is XXXX, in the which an quarter from $XX.XX, remaining Board

and will now Chen, President Chief I Heng of Financial the XXXX third results floor detail. Vice in to Executive to Officer, more Mr. over discuss financial our turn quarter the

Thank you, and everyone. afternoon, Chang, good

The margin interest $XX.X increase to income For the attributable quarter was by primarily to loan quarter $XX increased the compared net third or quarter continued expansion strong XXXX, growth million in the third of net third XX.X% XXXX. XXXX. million of and of to

margin of the range third to expectation have net points interest recoveries quarter on basis for margin points compared XXXX, year-end basis a X.XX% In X.X% penalties third interest year quarter to ago. was to margin the between to X.XX% XXXX of for X added XXXX the the interest compared Our X XXXX. X.X%. to and and our X.X% Based the as points the for net increased second target funds XXXX Fed basis quarter as X.XX%, in third be and net for same between the quarter interest of X prepayment quarter we

in to marketing higher tax effective in the million primarily of increased of income expenses part XXXX The to branches $XX.X by and XXXX. occupancy $X.X rate in to million the the expense by third Coast in $X.X due securities in million equity million due to third and due the of quarter of The higher million quarter $X.X compared million salaries acquisition quarter HSBC increase million third expenses. certain $X.X to $X.X of third in Noninterest of or in X.X% million $X.X XXXX West loss quarter in when $XX.X to a $X.X and bonuses $X.X to higher decreased XXXX, compared third to ] the XXXX, adjustment for quarter to the was million quarter (sic) QX. (sic) when XXXX. included QX of primarily XXXX was million million Noninterest the $XX.X million of true-up in during compared XXXX XX.X% [ -- a as ] which [ $XX.X XX.X% third

between of XX%. For quarter XXXX, the XX.X% we an fourth and effective of tax rate expect

of of in XXXX. tax solar expect million $X.X credit We amortization fourth the quarter

Tier leverage capital decreased of as to XXXX, XX, our As compared to XX.XX% ratio June as XX, X of September XX.XX% XXXX.

And risk-based our risk-based Tier XX.XX% XX.XX% to X ratio capital XX, XX.XX% June Our capital from of decreased as as to June XX.XX% total decreased of XX, from ratio XXXX. XXXX.

Thank you, Heng.

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

with first from Brandon King Securities. will question Instructions] [Operator come Our Truist

year? So NIM like guidance NIM first of kind the going this see you this is appreciate you year question and a into trajectory -- NIM beyond do And is for I of And but to what next. year full next your the out NIM what get wanted see beyond year? the outlook sense to topping potentially

we X% think then of about to it's our fourth if the feel we quarter tell XXXX, -- pretty as to it. gradually hard is for in and but full NIM our Well, increase year will good at XXXX, the still NIM

rate this where the fourth bit as year, Or a Okay. increase it you And that is you down today? expecting net for was slowing in QX? are off based still interest similar see of quarter a in margin do kind standing

seeing It lot primarily a into should little We're rates CDs of to are from past. less deposits. more the going customers be a mix of now attractive that compared bit the

And outsized achieve to pretty in you just just the to in want sort you deposit the deposit back understand And of it, that before environment? growth the deposit can correctly. balances. the I decent-sized much fourth make sure Backing it And growth, quarter, I that seems Okay. last want my queue. then confidence interpreting what guidance. expecting gives this if question you're like I'm that into growth so, step growth the in guidance, a current I

Well, growth are end But to be I growth. could get as year. the we deposit loan the we rounding it match Brandon, in think to targeting the of

the be in slower QX They in expect match just will to growth. we mainly interest to extent, QX, higher the loan rates loan and loan growth. because growth than So dampen will

Our next with will come question D.A. Tenner Gary from Davidson.

I Heng. wanted to question, the follow deposit up actually on

talking You're growth $XX.X X% year of deposit billion about to an base. X.X% full

about of project growth the in that at So suggest is would billion which your number quarter. -- range above, billion most the over I growth that almost think, low fourth at well $X obviously, where and, September year-end, $XX.X would XX the would loan end even

I but asked, guidance been answer. just, the by I your guess, in know a deck slide has question the bit So still versus, confused the again, previous I'm

expect but of I I think looked we in the about fine, -- it $XXX at million deposit it, quarter. fourth growth seems

Okay. total or the Great. end, deposit then costs? on September deposit costs give rate deposits And us quarter spot could you for at XX the interest-bearing at

total is This Yes. interest-bearing deposits.

count it doesn't So X.XX%. DDA. It's

final me. for then And question Okay.

not Is of an of we business the terms segments know the and at of might But to runoff lines growth expect equity look you're continued well, you're you In in commercial -- XXXX, I construction you this loan guidance growth, mortgage. giving sort But idea like, or reasonable the XXXX? have think what as about that generally course. point. about think how quarter fourth in for headwinds of as thinking of of in XXXX slower growth and

Yes. Yes.

come Our will Andrew Stephens. next with question Terrell from

on advances during back on brought to just circle funding. Maybe FHLB It like the some looks you quarter. the

Should given what FHLB for here? pay advances whether those stable we do you in quarter? funding. guess kind of fourth you're And curious I the Just have expect remain to growth any deposit flexibility the relatively just of from just those loan expecting or Or were down? term to overnight borrowings kind

Yes, that end. to just the came quarter timing go that expect was deposits of was down. It we the in --

So now, FHLB about million. right $XXX borrowings, down those to they're

just do side, by Okay. costs new now? on growth that $XXX for the what you CD and also remind you what And rolling represented you you going how deposit what of the that CD expect off kind that of million of in of portion are have to at fourth is CD CD right deposits be the a us rate maturing quarter? the Do of at kind And much then on have of deposits? Cathay kind can you referenced, then in

-- I'll the CD then roll-off, in back on then And to of your schedule the Andrew. get was? part question okay. Well, And I left second that you office. my

in of quarter. Just that growth the you $XXX -- of so referenced million anticipated or fourth the kind deposit

of market noninterest-bearing? opposed as checking much deposits you by CD money how represented to or to be IB that Just expect it or

some predict they're to expect depositors, money into would hard there's the new We of CDs. it a further to be if not -- because they next most year. locked for prefer It's market rate

increase going So still the fare want to money if in they stay is to think they'll to XXXX into market. that continue

So -- growth deposit expectation that but of my most that be CDs. in fourth is quarter will

Matthew question Clark next Piper will Our with Sandler. come from

around assuming the deposit the beta your assuming get beta cumulative your funds? Maybe outlook on X.XX%, through deposit Fed are for What X.XX% just to you cycle. we

Well, Matthew, the about it higher. deposit good QX I'm should would funds. That's a be XX% But in on might think XX%. that bit Fed little for overall beta according enough us. We was was deposit basing be to Page be XX. the on It average our XX%. cycle betas slides,

sense quarter, expense a can Okay. and to what the how run you drove for is give rate? that that Great. And this sustainable us then quarter relative comp last lower

and the of there's some people going vacation, commission that's swing value In quarter. expense the quarter-to-quarter the in had -- on million summer, $X we second -- vacation the is well, second Yes. quarter in about

good to So I reasons. you think $X rate a add rate should for just our QX QX, for those million

tax fourth And credit us on quarter? I gave you the Great. then your know Okay. housing low-income solar. for guidance amortization

Yes. adding It's be $X been to going investments. million. probably We've

increases. season as that So amortization a the

Our next from will question come KBW. Chris with McGratty

industry. on has the A lot this of quarter ratios been for TCE Great. attention

kind that. to growth moves you've don't have OCI where obviously levels interested so in big outlook. Given and of return your portfolio, capital been given largely the you a outlook for I'm stand immune -- capital bond the

Yes. portion have We our authorization. still left a in buyback current

-- to are in of shares slower, to new to our of -- XXXX. expect million and generation X fact the we in then first a going back would pace that quarter. And loan quarter buyback we'll fourth is we capital the of likely the growth have we're thinking the be So buying authorization given have

How year-on-year. core the to up about there, as And your incremental we the more maybe Matt's broadly expenses then into we pressures X% go are out The that follow to kind XXXX? on on of should question business up run are headwinds about expenses. inflationary think

one, Chang more, Well, several see but answer can let me -- closed branches start. XXXX. in we

branches their the Some acquisition are HSBC that of location to because we better is have close branch where located. theirs and

amount should to want just we we January a starting to from you give Chang, budget until XXXX save our So the don't earnings call. that. small any... But we're so process, add do Then guidance want

I'll of out we of other and can need we're in with what kind the add people of marketplace compete only retain there. to need to terms talent is, very thing build the Chris, that mindful mean, the and I to get relationships the the we to we got that they

can. managing time, doing we costs people we at performance need looking what them, to carefully selectively we're So as their at year-to-date. of as kind same And retain while and our the and

no At this are there queue. [Operator in the time, Instructions] questions

the back Cathay over turn to closing Bancorp's remarks. now will General call for I management

everyone to quarterly I and thank release our forward at call, you speaking look on call. for want earnings us our with joining we to next

and for Ladies you today's thank your This gentlemen, concludes presentation. the conference. in participation

Good You may day. now disconnect.