CATY - Earnings call transcript Q1 2018

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Good afternoon, ladies and gentlemen, and welcome to the Cathay General Bancorp's First Quarter 2018 Earnings Conference Call. My name is Sherrie, 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 would like to turn the call over to Lisa Kim, Secretary of Cathay General Bancorp.

Lisa Kim

Thank you, Sherrie, and good afternoon, everyone.

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

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

to events, speaks date such you to on reflect place today, Mr. now earnings developments I publicly Chief statements our Pin will caution reliance we or This presentation. please questions. To this required management call first obtain After open Officer, afternoon, visit announce update of as ww.cathaygeneralbancorp.com. law. for such, release a up the only obligation call will our issued Cathay we Tai. by General any We quarter undertake forward-looking or over revision statements any Bancorp not by Executive an comments copy, its to As this as forward-looking outlining to undue future XXXX results. turn website to at of no which except of any statement, forward-looking the

Pin Tai

call. of first per quarter $X.XX XXXX XXXX, quarter Diluted for we Welcome the for million earnings XXXX XX.X% same first This for quarter net of $X.XX increase the of a quarter to of first compared for the good to Thank share share per income quarter increased net share ago. income a you, our earnings XX.X% and million afternoon. of $XX.X afternoon, when XXXX. compared $XX.X to Lisa, the first reported year per our to conference

increase by primarily decrease $XX partially for $XX $XXX million growth earnings include of due the $X.X XXXX residential annualized Adjusted adoption basis. billion first value respectively, of million $X.XX. in were that or a or the an million earnings commercial million. or this to Increases fair $XXX and X.X% from X% to XXXX the of item further new of first quarter securities first construction annualized was statement reduced in $XXX income resulted was X% gross loans around pronouncement, per loans mortgage offset loans growth a by grew X%. loans and anticipate of commercial First million in on remarks. the share decrease a these our to recorded of per which quarter will results In items, in share. by annualized share quarter Heng and an to of equity million be $X.XX XX% per of loan to the $XX in his accounting XXXX, loans which quarter in We discuss

and will July to operations. systems as that East our be Chen XX.X% deposits occur consolidations The that, million in Cathay’s National the $XX CFO, this turn Chinese increased first first to On of systems for cost system Year annualized from total over will Vice promotion. additional to occur. XXXX, quarter permit savings additional will completion necessary. We as conversion, XXXX running sets is time the have financials With which business we President room been of conversion more quarter detail. discuss $XXX floor back Bank City the over billion our two branch I'll weekend, longer Heng our Far which scheduled onto XXXX operations, anticipate For of the XX, of or until integration the benefited our the New no we for Executive

Heng Chen

Thank afternoon, Pin, everyone. good and you,

quarter, or net by announced decrease income was For a securities. the in fair of we $X.XX first share, per million of equity the $XX.X value from $X.XX which reduced

recorded recorded acquisition was fair from the National in equity. of points adoption Our due interest in compared quarter statement XXXX of compared year XXXX accounting margin recoveries of Non-interest the to ago, quarter securities XXXX, XXXX-XX first net XXXX in to basis basis by East in of prepayment compared of million $XX.X Non-interest of first was penalties changes million added and of and interest comprehensive first instruments. to first equity of quarter XXXX five as quarter XXXX. in to points quarter to the XX.X% the $X.X compared X.XX% first for margin new Prior the value The to fair was ASU adoption of $X.X income Bank. Far In X.XX% to X.XX% the of were in net million $XX income fourth as the quarter million during ASU by XXXX-XX, XXXX three same basis of the equity fourth in to when when financial in income decreased $X.X value the quarter or the securities first the and quarter first quarter the decrease pronouncement due $X.X in to part expense the a that the quarter the the increased XXXX. in XXXX. the for million for component of of million points of seven a interest the decrease

salaries in We tax increase to due an investment effective was of employee a rate expense from the $X.X the second quarter hope million XXXX, corporate XXXX Act. the quarter by solo quarter of tax tax Cuts for Tax complete first in of the the non-interest the rate million during the XXXX of reduced the enactment to first primarily increase and XX.X%. $X.X the expense credit tax expense in a the professional fund of and was Jobs quarter. The was and expense. benefits in services For first Income for increase reduction

While XX% complete will there if and such any complete year our tax project and rate between full is be we'll assurance XX.X%. effective investment, we such investment, that we no XXXX proceed

The effective to second quarter a tax catch meaningful tax effective up reflect the rate. rate date] to [ph] will year [year

XXXX. then solid expect At Tier compared of quarter amortization second and X We March million tax to ratio $X leverage XXXX. to XX, per as at XX.XX% XX, the the XXXX, quarter about increased half capital credit in million XX.XX% of second for $X our December

increased from capital December at And XXXX. XX.XX% December XX.X% XX.XX% increased from to Our at our risk-based XX, XXXX. total Tier ratio XX, X risk-based ratio capital XX.XX%

Net ratios fourth XXXX under $X.X net recoveries the Our charge-off of in quarter significantly XXXX in these were quarter of and regulatory of of for the all ratios compared well-capitalized guidelines. first quarter $X.X first of million to million the net million exceeded minimum $X.X recoveries XXXX.

to of million quarter the of first and loan XXXX, for for reversal XXXX. compared first the million $X.X loss quarter the fourth Our $X for of quarter was XXXX $X

million quarter Our period million $XX fourth the of to the XXXX. or first as during compared of non-accrual increased $X.X loans loans X.XX% quarter by end to

Pin Tai

Heng. you, Thank

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

Operator

Chris KBW. first [Operator McGratty Instructions] comes from question with Our

Chris McGratty

parts with bit acquisition you've XXXX growth talked and get the on the moving core hoping Obviously, interested, on clarity about good I'm past tax dollar start Heng, for maybe the control the a I'm X% the given with I credits, we the in little expense quarter. could and expenses. amounts. think more

million. you that's indicated If and how that take year? million, should you exclude if the this it of million, quarter's $XX million tax $XX the you that If roughly $X over less balance $XX trend about so was the right,

Heng Chen

late quarter. they were of They two close February East, the in terms the expense. down the branches for at Far in We first quarter in of the but lease were end

conversion, impact So then see back save QX. to Pin we'll won't in able duplicate office be the quarter eliminate back the that and as mentioned, a you staff. number room And of full with

quarter So good rate. a is run the first I probably think

will X, salary million extra of which the on expense quarter we a away it outsized that a go from FICA, The into we have FICA QX. about $X will effect then in then we million the then had $X increases have DFAS but We QX probably had and into of be half in second expense of first combined legal legal out and continue April go will but and bonuses DFAS.

prior So once for quarter rate again the first guidance. all-in-all rest the And my think it the we year. good pretty to, - think is I run the comes close of a

Chris McGratty

that's be be. So And highlighted. you kind the cost just will this of - with we amortization expense be about plus a quarter clear, where $XX million it to that that's should inflation for

Heng Chen

right. That's

Chris McGratty

duration from looking CDs ended in in how or that whether a in targets? to quarter you were lot On that I’m deposit that the money in interested doing terms kind campaign the of the you to came CDs, ratio loan has growth in much is of were Thanks. of it and the deposit raise the your ongoing context the the of maybe or still

Heng Chen

to use do then done year we loan - we so of in rate And CDs have we then XX% two most our and deposit some year. and and promotion summer for And promotion at that then it raised XXX%. of we our was that had deposits X.X% probably was deposit a So CD will year's The successful we will depositors. the three did we terms last ever. which that one-year - - ratio about to CDs keep broker was

growth good of - for of terms think our loan pre-funded increase half, in loans. we in some the deposits a quarter first pretty the first in of we place sort in So the having with the

Operator

Aaron question next O'Neill. Sandler with from Our Deer is

Aaron Deer

that other about kind it the that I the else fees interest there, quarter. strength of know higher benefited said there have in margin given basis in up margins accounting in away might so going there associated was I of terms question, CD purchase costs the and or curious was with in recoveries would to surprising the I'm guess, X on that, I be second the noise of points you the just was anything see following

Heng Chen

- $XXX,XXX rate accretion have was the accounting purchase that's pretty would use quarter. a accretion, to there us think take couple It purchase up run years discount that and think decent I probably at accretion. per we accounting run of of rate a yield

Aaron Deer

- - to front correct lingering it campaign that was costs the as is like coming timing nothing through deposit am and second of though would in sounded not that that reading any that margin in so I even the that be more it's So else ended quarter on the there's CD that one? then weigh quarter the terms was of in

Heng Chen

it of March. middle then the that We believe was that to so successful. in X, I started and that February We extended promotion

Aaron Deer

Okay.

Heng Chen

it's… So you know

Aaron Deer

[Indiscernible] the quarter?

Heng Chen

Yes, right.

Aaron Deer

trends eye there. on the looks just did like know about that then we And bit. continue Okay. behind little notice or see is credit good that I a the be it on? up that Anything keeping front, talk the an generally spiked should you you can to TDR that, something you on

Pin Tai

No took I - think we, not we deterioration. a it's a

a a TDR. I tuned had I think guess we few that our what's we we fine for loans definition -

the we from the increase most was So definition. a that fine of added - of the in to - tuning change the

Operator

question Michael Our SunTrust. is Young from next with

Michael Young

back in was But and Just we've buying think at third stock call, some valuation broken or tangible you interested any stock from two I these I there wanted stock you provide at Are below to about levels start quarter more on you the think just levels. conference can a fourth times those in at the there to $XX was back or capital standpoint. the front there? value in know, book hesitancy you buy color the now know

Heng Chen

Yes.

of we part I as think Far $XX. shares the acquisition XXX,XXX East issued at

as fourth use we're to either $XX. that would back on capital in buy but somewhat our so up of right we'll the thinking we likely below more below batch likely increase think then most the stock the some excess I see, long to probably that's was So as, And now. dividend quarter

Michael Young

that you or are that's credit quarter. an over come forward there switching how obviously just in Are going this We to you keep going a to forward? thinking continue credit thinking going pipeline more to and that And the see big provision end. to and asset about recoveries quality,

Heng Chen

to they lumpy. Yes, tend be

things and the our we we So either the a pretty, off loans or one heavy happened quarter to $XX first when was predict against paid under may CRE of but in term has it the that construction transferred of can’t happen, reserve that pretty I think had million methodology. that

of for - has very And of so our much mortgage which most from the come growth growth last has residential low the a allocation.

of trends given we’ll think the less I on So the have the all pressure portfolio. then

Operator

Jaffray. Piper from next is Matthew with Our question Clark

Matthew Clark

I you $XXX first guidance? for I year, a in to to start $XXX guidance think came of the year, if strong wondered tweak little the here to I wanted last million wanted to you on obviously million gave think the margin outlook, I start that quarter

Heng Chen

Well our I think we because loans have a mortgage. residential comfortable large in still percentage that we're at of

The from about five recoveries other the the points two two then that some day compared we know prepayments first of up year quarters to you to and basis interest quarter three. basis or points we picked quarters had and that's count dropped of and

maybe So overall you of the up we're we’ll our keeping think we’ll know that but I to QX, now, same in we - improve - that guidance guidance for behind.

Matthew Clark

you growth it forward. expect guess, this call the to how of the think year? you come you've on outlook single-family know the X%. of going I how that loan do from growth, I to about you XX% tweaked Do to then And still think there it X% mix resi

Pin Tai

stronger coming the X%. and about I expect from residential C&I mortgage the growth yield a think of we

Matthew Clark

And deposit kind did then say end cost your the at of March? things, at incremental of on of you side the mentioned I pricing the coming is where on the you promotion know deposits of guess, XXX,

Heng Chen

for probably think, XXX, what know if But yes. X%. it’s proceedings I one you or year Well, - it’s

Matthew Clark

or stuff, promotional more X%. the rely So brokers' on it to you if have of

you. Thank Okay.

Operator

Markets. next question Lana BMO from with Chan Our Capital comes

Lana Chan

Question the new are just of curve, parts on pricing you seeing flattening commercial estate? the real mortgage on resi your yield on your two What and that. current on

Pin Tai

increase primary, portfolio higher slightly first X.XX%. percentage - compared origination our new loan that’s our current mortgage. the our And portfolio to we of residential of a we is a existing is basis bond, X.X% the portfolio. quarter around origination which for believe existing X.XX% a new I originating compared and X.XX% first Our so had quarter, new residential slightly committee loan an mortgage, have up loan, of we XX C&I the points yield above are to

Lana Chan

the CRE? on then And

Pin Tai

quite is are current originally yield. we portfolio above CRE, the X.XX% close to

Lana Chan

And context you investments, that given you loan with securities how again are to deposit thinking trying forward. going and of growth are new the yield the your about fund growth curve,

the So think for should stable from about be here how the rest book, relatively the it we should of securities year.

Pin Tai

Fed the we and million, beginning, the to buying we X February on or on only year we and that a we're up is And investment gone down about on MBS, it’s the increases Yes. about by We the that. at were is $XX month where million $XX prime meeting, talking - per rate plan yield the cut million the getting think XXXX, three X% MBS $XX at given not that in plus attractive. securities I this couple - more

up - creep at I where much. that’s we we slightly think it not but So are, will best, by

Operator

Tenner Our next with question Gary D.A. from Davidson. comes

Gary Tenner

this say you I hear Did purchase quarter? accounting discount accretion million $X.X of accretion or

Pin Tai

No, $XXX,XXX.

Gary Tenner

in Sorry, fourth was I back managed And misheard it quarter. you. you

Heng Chen

It any. we still so book was the none accounting, because we purchase fine were didn't tuning

Gary Tenner

fourth the so… in any book didn’t quarter, You

Heng Chen

Right.

Gary Tenner

catch a this stable for of level from a here little you It's is of at think more And doesn’t sort least represent up. while? any

Heng Chen

$XXX,XXX I probably rest think the of per year. the for Yes quarter

Gary Tenner

that? your just year, think terms as then change versus for And first of outlook the demand. activity growth any on any the half of outlook for in behavior of you thoughts back year markets, in half of general the the the terms The of customer about maybe

Pin Tai

down it’s C&I - commercial loan a pretty lot But actually competitive But estate see residential lot of still the for pricing. there bidding we in them Surprisingly in very and working bidding strong mortgage. terms competing real CRE, lending pipeline theme at of out usually growth the and to in revolving of of lending, kind is we on quarter line utilization the credit. and kind see expect the lowest we C&I hard we are see the expanding first on of some of our since

will the So hopefully utilization second and quarter from going the third quarter, be up.

Gary Tenner

of it terms pricing six severe than the today more ago? competition, is In it was months

Pin Tai

say yes tax rate. would in I of reduction the because

away keeping to giving banks customers. the of some think I tax So savings and are the the them

Operator

question Securities. with Our comes Chiaverini David Wedbush from next

David Chiaverini

I question up on had follow capital. a

common the back on target Tier-X curious mentioned You I your ratio? what's the was buying stock on equity about $XX. below

Heng Chen

Well, we were. lot haven't where based given stock thought the on of a prices

think So is leverage there leverage there. more, and so look we at X% what is I room the X.X% ratio so we look would between to, probably

David Chiaverini

about years? reserve XX I over was level at down that then now loan it's past And to, trending basis so also What's your to been curious it's of your comfort and couple taking the ratio, down points. there

Heng Chen

done, how acquisitions our not on think depending they've that I banks Well, many many peers that are X% are there's anymore.

around First if try they're think percentage basis we’re going like all basis I two down to to it methodology loans mean points, basis as certainly that of Republic XX to close our keep what that to so think we as we're up so but even creeps one I points, number the and right so. here, not at sort I to by winds limited but or that point being want

David Chiaverini

That had. makes you're That's from the Thank getting such especially all growth I you. portfolio. resi strong sense, since

Operator

final our And with from KBW. McGratty question comes Chris

Chris McGratty

Heng, could you guide. just repeat the tax

said I year. full to think XX% XX.X% the for you

to it was consideration? the lay this in Can movement XX% think XX% I quarter quarter. you given any around just the out tax

Heng Chen

has investment. similar you solo do tax timing to of low fund with our So year. pattern had when credit we last we a the know It

So be you soon. relatively hopefully, it'll know,

and at rate we first And we're for if probably the or would be you'd quarter; XX%. we're let’s of XX% the something XX% for at then the just so at the what to to that down be we XX% quarter, XX% QX months, think would have six like the going in it do math, be, say second or

Chris McGratty

half. back the - And roughly for then XX% XX%

Heng Chen

Yes.

Chris McGratty

lower then or additional of I the solar top that did backwards? that that's $X and income there's the an get amortization that on then And $X and

Heng Chen

so $X quarter, But XX a income, it’s solar. - low yes, about additional a million the that's quarter. million it's $X it's the No,

Operator

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

Pin Tai

joining call, date. for with you and at this our quarterly next look Thank for us we release you earnings to speaking forward

Operator

does Ladies today's and conference. for This in thank participating program. the you gentlemen, conclude

a disconnect. wonderful have You And day. may all

Cathay General Bancorp (CATY) 18 Apr 182018 Q1 Earnings call transcript