Cathay General Bancorp (CATY) 20 Apr 232023 Q1 Earnings call transcript

Good afternoon, ladies and gentlemen, and welcome to Cathay General Bancorp's First Quarter of 2023 Earnings Conference Call. My name is Anjay and I'll be your coordinator for today. At this time, all participants are in listen-only mode.

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

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

Thank you, afternoon. Anjay and good

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

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

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

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

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

visit first Bancorp website earnings issued please afternoon, a This General at Cathay XXXX release quarter outlining www.cathaygeneralbancorp.com. Instructions] results. of earnings our an our release presentation, as earnings its our of [Operator copy obtain To as well

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

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

Diluted million compared of for $X.XX of income per $X.XX write-off to decreased per share or share for the first Bank quarter $X quarter a quarter pre-tax the XXXX first the to per of per for share for corporate earnings fourth included Signature share securities. XXXX Net X.X% $X.XX XXXX.

our $XX.X in loans increases for gross The by the primarily million quarter X.X% In loans XXXX, $XXX $XXX of driven or mortgage loans, X.X% million loans, or mostly annualized. residential in of XXXX million of by a increased quarter annualized was XX% estate the in loans, of million first first in or commercial real offset factors. due increase seasonal $XXX annualized decrease commercial to

for Due uncertain to we previous XXXX between the for have to from our guidance X% growth overall reduced X%. to economy, X% guidance X% our loan to of

our estate monitor to real commercial loans. continue We

seven earnings slide our of presentation. to Turning

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

March XX% As of at retail and our commercial portfolio. XX% real of portfolio loan loan comprises property eight of slide estate loan portfolio total total our XXst, our XXXX,

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

office buildings. nine, $X.XX office property XX% real collateralized property by of estate billion portfolio our slide Only X% office loans total pure At and the of portfolio. XX% of loan total loan the loans is represent commercial

office condos. office and office collateralized are use, The is XX% stores, property medical of Another office, collateralized property in retail XX% loans by by remaining offices. loans office mixed

million compared primarily of XXXX. to first due quarter a in of net $X.X loan. the XXXX, net quarter fourth $X.X the were of reported of $X loan CRE and write-down million $X.X of filing, to offset For million charge-offs recovery from charge-offs the we a loan million by -- California $X.X resulted the in Northern CRE on net a bankruptcy The C&I million of resulting collateral charge-offs write-off

quarter March increased XXXX. million as end $XX.X X.X% loans compared the as of by XX, $X.X total fourth of to were to XXXX, Our million of which non-accrual loans

Turning to slide XX.

to slightly from $XXX December of December As decreased million decreased XXXX. $XXX March $XXX XXXX. $XXX XXst, loans our as million classified million mention to as XXst, million special of from XXXX, of The XXst, loans

We as credit recorded in of credit million to a for million provision XXXX compared quarter loss quarter for losses provision $X.X the a fourth first of XXXX. in $X.X the of

deposits We are quarter annualized by pleased $XXX.X XXXX. first that million total of reduced the during X.X% or

as XXXX. Total uninsured deposits XXst, December $X.X $X.X XXXX, of were $X.X decreased approximately as billion March of from billion XXst, billion

uninsured Excluding deposits $X.X of billion as in billion was of uncollateralized $X.X XX.X% March deposits XXXX. total collateralized and deposits, the XXst, of

were of of of liquidity Federal sources XXst, securities These the available unpriced uncollateralized was XXXX. as XXst, XXXX than of unused March billion March $X.X Home Loan Our and at XXst, XXX% borrowing uninsured and billion. $X.X March from as more was capacity Bank XXXX deposits

Total XXX% XXXX compared during annualized of to New due quarter the Year time campaign of of increased in to quarter deposits fourth January XXXX. a first $X.X promotional the Chinese billion XXXX or

On primarily Total due annualized level decreased and the million money runoff. market $X.X to by deposits a or to XXXX. March CDs increased deposits total April through have by March billion deposits XXst Xth, to XXX% XXth, deposit crisis or have pre-banking to on $XXX and $XX.X back recovered money market billion almost migration

expected the between XXXX, to For overall and X%. deposit range X% growth is

million, first an the XXXX stock we which program. stock completed repurchased XXX,XXX common XXXX, quarter shares our at average cost of $XX.XX for repurchase the of During of $X.X May

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

Chang good afternoon you, and Thank everyone.

margin increase by million the to of million for X.X% cost first compared quarter due net deposits. XXXX. $XX.X to $X.X the the XXXX, to compression interest income The million decrease attributable or primarily in was quarter decreased of net $XX fourth The of to

the be and of to margin quarter margin in interest first we quarter quarter of the compared to have net X.X%. In as XXXX. QX, With XXXX. recoveries for points X.XX% expectation to late eight revised in of interest interest fourth the penalties between compared no for XXXX that as one fourth the X.X% recuts rate XXXX, the anticipated net hike was basis our first margin point until to of interest to quarter net added for X.XX% basis XXXX Our prepaid and May Fed

$XX.X of of the fourth quarter gain $X.X by by million XXXX increased million to securities, to to Non-interest the a due an a on XXXX in million $X million corporate bond compared income write-off equity first $X.X quarter of offset when of increase during security.

for to Non-interest The expenses in to XXXX. the by the X.X% million to $XX.X higher was fourth when quarter million XXXX quarter salaries primarily increased first $X and compared million in higher million or of of in due $X.X $X.X increase $XX.X $X.X marketing million amortization bonuses, due higher operating and the rate expenses. offset in FDIC $X higher in to assessments FDIC insurance XXXX, solar other by tax lower million -- in investments, rate increase solar million tax credits general

integration credit to compared core XXXX increase XX.X% The expect excluding for We from expense, XX.X% effective of tax XXXX to the for rate tax X.X% XXXX. was and to HSBC non-interest of core fourth as and amortization quarter XXXX. intangibles the quarter deposit expenses first and

For XXXX, the effective we XX.X%. tax expect rate and XX.X% between

tax and We expect $XX million investment including and per solar million, million $XX XXXX. QX of $XX XXX in for amortization of day QX

As XXXX. as of to X of compared our capital XX, XX.XX% increased ratio to leverage March December XX.XX% as Tier XX, XXXX,

XX.XX% and XX.XX% Tier XX, as of Our our to December from to December XXXX. XX.XX% ratio XX.XX% risk-based increased increased from capital total as XX, XXXX, X risk-based capital ratio of

Thank you, Heng.

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

Instructions] [Operator

King Truist. ahead. Brandon Please from comes question with first Your go

afternoon. Good

Hi.

in deposit recently of control sense given gone has as to there's concentrations? to if to your going gather any wanted how I your be get strategy So, far you what you and deposits to and a as how want changes on want

so have been banks, we I like individual think they're that -- deposits spread offering through other ICFC many deposit Yes, that insured. that fully products depositors,

mean, that I have to that's So, our reassuring depositors concerns.

Aside I more at looking that, deposit. think, we're mean from Chang, I C&I-related

Yes.

business and in and of on we pace core and our business a C&I clients it, we to and key deposits that and continue base leveraging have of deposits to So, CDs that of certainly bringing is part that. deposits, non-interest continue on but C&I part use, also that a focus we'll bearing the

that far on grow are much, Got from now? you to deposits growth, deposit expecting need betas here slower don't it. now guess And as as as loan what you I

banks like been catch-up last many Well, week, this I deposit in announced think other betas. a there's

get depositors forth. I is more end think if rate CDs early in there's hike, rates the higher we cycle be Fed case hike one think there's when which rate to going But that the to we so in and aware that that's go the a more become you to typically of only May.

So, of New $X.X we think Chinese Year that our promotion we're in over well-positioned our up locked CDs. billion

till they be won't in So QX XXXX. price

it, short-term. But NIM, our much pretty that's support help Brandon. should that So,

just And quarter? CDs average the the what for first you in us remind rate raised is could the rate on CDG a follow-up,

upcoming York maturity? come the CDs Yes, the again, or about or promotion the Chinese -- New for

Yes, the those. on average rate

X.XX%. About

back hop taking you queue. Thank questions. in I'll my for Okay.

you. Thank

Piper with Clark Matthew from ahead. comes Please question next The Sandler. go

guys. Hey good afternoon

Hi.

relates I to in get Can in but press borrow you I the your have the liquidity end uninsured greatest your deck amount relative update the billion. as to of the it see of latest just us of $X.X available, it wanted $XXX capacity to cash, see March? to or the you of on at deposits the and didn't million release

remarks. wants he cover your Chang, I can that.

the $X.X billion. that Federal So, March, as securities $X.X have was end was we Loan the of Bank, at and have, billion of we available Home unpledged

mortgage $XXX first residential So, in about our quarter, of million. had we growth

add Federal to the Home Loan borrowing that would Bank So, capacity.

did cash counting $XXX for on cash, So, that to of about sheet. balance resort us. XXX% the last we it's not coverage, not of borrow we're lender the from slightly really over not And Fed. us, counting And we million

it. Got

it if end deposits. you the the month take I'll the rate then in And March of in in margin March, the spot terms have Okay. of at average of happen to

Yes. Yes.

I but little the was low month, month had Let it and a bit XX-day March of half me only have we in -- a was Fed. because a margin it,

for period-end loans the rate March for wanted you deposits? So, margin X.XX% the and and was

just deposits fine. No, is

Yes.

it. find me Let

is So, the March for X.-- of spot end accounts now rate for the

Total.

the Just give total. him

about is total The $X.XX.

is is Okay. total deposits, including non-interest. that interest-bearing? And that's that Or

doesn't-- That's bearing. interest That's

that sense. Okay, makes

can then you And that anything And give you in you CRE office have have, exposure? the on that for you exposure in aside that us reserve great. the criticized if set have portfolio? Okay, that

Yes.

non-accrual, memory it's And the it I'll their back I But which XX that's you $X On office it's this standard our probably points. that. basis -- be office. reserve, doing from zero. you could don't on get much only the it's million, even e-mail to reserve, size. We in think -- about I'll CRE non-accruals, is on have I'm on

Okay, no Thank worries. you.

next with Please comes Tenner Davidson. The D.A. go ahead. question Gary from

Brandon's regarding some afternoon. around NIM. A follow-up bit little a Good question Thanks. the of to assumptions

guide perspective, last that and base over couple expectation you are, NIM Just the a of you for buckets NIM deposit mix think of help your the as assumptions support rate you to helpful. deposit deposits But within obviously, kind lot mentioned your shift of provided? the of migration What's that's about a from what kind quarters. of so ongoing the

pretty We afford people much the XX-month because quarter typically we're think got have they that it's structure could year. some and offer it, to not we the -- think to so there's CDs the done. We a for term up lock we've that

All right.

down the basically, So for that assumption mix NIM your can your shrink. deposit is is rental

Right, right.

Okay.

ahead. -- go And Okay. sorry, then

there the was a no, during Well, shift quarter.

deposit deposit. So, off from period we're starting March mix end of the the

Got you.

Thanks. indicated you had the great. you authorization the Okay, in And of and you for something that? program. that would the on -- management that authorize? that, you you've prior update terms completed capital, potential quarter, another recommend of be Board can or kind sort given $XXX did just still that would looking the repurchase million for when so of would then inserting us economic Last Is

in hold year. like want We on -- we that many things see banks, Gary. how late We the it's now, shake may restart other But for out. to

question, I last could. then if And Okay.

kind is any there failed of to the March early beginning than liquidity mid-March. building did? up post everything, just little more thoughts Was bit banks mean, XX. cash you a Just I and I about year-end think,

CDs you Obviously, that a brought in. of lot had you

there consideration the some at that kind balance liquidity never timeframe? on was Or really more that of that sheet kind point was So, mid-March that a normalized? of

XX by we liquidity was build Federal need of because of hundreds the Bank. o'clock thing We Well, should then Loan Fedwire of yes, feel the to funding. a X:XX about lot get or up we the o'clock. We one X Home called deadline millions of by and just actually call didn't dollars

$XX thing a very main of amount or over that we saw the saw million first would the small depositors their They million took $XX be out. over space So, money week. it was

go -- have wasn't out it banks some week Silicon where Valley other not they after of it's dollars So, like Bank. billions that

build We because same-day of that, need up availability. on of the we So, cash. the didn't balance have $X Bank Loan we because -- as sheet Federal Home well the cash won to feel as billion

That’s helpful. Thank you.

[Operator Please Instructions] Stephens. from The next Andrew Terrell question ahead. with comes go

afternoon. good Hey

Hi.

some second And incremental in the And or the How mature promotional similar repricing rate? the margin-related are do if that questions. X.XX% relatively what's the what's rate on Is have year much of it new from? during today? of for Hey, that what's so you CDs new continue those a I to could CD the the was cost that that quarter?

Yes.

So, quarter maturity. light is the second a fairly

We CD rate The have average about billion, maturing. X.XX%. $X.XX that's is

our X.XX%. So, it's CD from rate off blended average far not

So, that's the number.

the in think I depends renewing deposit on of terms is, side. what rate the it

quarter. we CD up locked of funding fourth the So, quarter a first lot the in and

the -- depositors CD they've rate So, eager been depositors think locked I most wise, up.

slightly X.XX% -- renew at are above hopefully, we can something these So, the range.

also, just then wanted Okay, sure it. is the this make to got I case. it. I appreciate And

that come a million we occur of as just the in talked call, loan we're through nonaccrual yields thinking that recovery would starting for Did into quarter? quarter. interest conference going the think about second I about point kind last first the $X.X

It's happened pickup our basis Yes. from Yes. It in of part eight and January. fees. NIM prepayment non-accrual

that of largest loans guess, downtown you Okay, got million on of or total two average to sizes just exposure. slide I just whether average, think what average see portfolio? size. type the any the outstanding around and, larger question specifically are around or the sense then office deck a loans distribution have of I around I'm the you. just get And X% Can in three is kind office so. us you for the X.X about to me, through help metro last in trying the of the

any color on helpful. there largest would Just be incremental the credits

for of and it things. is kind Urban rest not out being passing we on our West be So, But sort Bay downtown L.A., and your of is South the business of use geographic you so, urban district XX% if and split kind what core. central of or consider L.A., really about example, I'll suburban those

tend we And kind that's of so on. what to focus

to far as memory end higher largest credits, as But the off the on just it. of of probably the million. as it's that's on you our And about the $XX largest noted million office $XX size And is X.X%. of deck, size sort -- between

Yes.

Okay.

the So, still granular pretty even still at is of the largest pretty small end to relative spectrum then? and

Right, right, right.

you Thank taking the good. Very for questions.

Thank you.

with The KBW. Please ahead. go from next comes McGratty question Chris

hit on Moutafakis have on questions McGratty. Good touch Hi, we provision. afternoon Most on, can guys. my maybe but this is the just Nick Chris for of already been

And So, rate speak expect I move a through you headed this see of up XXXX? quarter. Kind levels go as ramped you at to to from looking it run we can you here? going forward, where higher maybe reserve should

Yes.

But again but So, perfect, we we get during crystal we CRE than hope ball my second. one the quarter, that charge-offs job. large larger is not in had don't this

of if wouldn't So, growth We loan the about you in X% XX reserves. say, basis much is, residential mostly way residential let's and reserve mortgage in mortgage, very points. need

up the went quarter of seasonal prior line very end about usage at in the for is our $X.X reserve lastly, unfunded lower then by this March. And million

see balance I the a shift it the onto sheet first more for So, loan the in second that quarter. losses be the should we'll allowance trend, think than lower But quarter. of

You our down and little this see a quarter. can bit went

And a then for NIM? your beta the do guess, gears have for guide. deposit assumption on guidance maybe for switching you the I the -- just guys

XX%. June a thinking. certainly to tally I done, when day closer that's be have to going from we we're it's is idea up good and what But in think X. everything the We mean Fed we'll the

bearing? For interest

Yes, bearing. that's interest Yes, total.

accounts, that will like market all the and be CDs, middle savings rate would much increase at higher didn't we in money throughout. the for So be of for kind

Okay.

with hit points. else the on everyone most of mean I all. that’s think I

help. So, appreciate Thanks guys. the

Sure. Okay.

Instructions] [Operator

Piper Matthew is next follow-up with a The question from Clark Sandler.

Hey.

to wanted tax the close the loop Just on amortization. credit

the year gave but for You it can looking on $XX the low-income for was $XX you for think you -- housing? solar, year? the million the were update I us for million

million a in Yes. Matthew, $XX That's the same, quarter. still

you. Thank great. Okay,

you. Thank

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

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

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

disconnect. You day. Good may now