CATY - Earnings call transcript Q3 2018

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Operator

Good afternoon, ladies and gentlemen, and welcome to the Cathay General Bancorp's Third Quarter 2018 Earnings Conference Call. My name is Sherrie, and I will be your coordinator for today. At this time, all participants are in a 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 cathaygeneralbancorp.com.

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

Georgia Lo

and Sherrie, you, good everyone. Thank afternoon

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

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

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

Pin Tai

when $X.XX Welcome XXXX, net for to a to and Diluted the compared third one grew quarter Georgia our share XX% per quarter increase our afternoon. The increase quarter XXX.X quarter XX.X per a of quarter third net In for XX.X XX.X% billion loans million for of ago. driven third you, the mortgage per afternoon of reported or XX.X $X.XX income quarter third continued XX.X% growth good million of compared of we basis. earnings share an the call. of third million for of X.X% of XX.X% XXXX the form annualized for commercial quarter same conference the was XXXX income of XXXX. annualized. to This share XXXX, In third gross million earnings increased primarily to in the XXXX the on annualized. XXX.X the by million year or or increase of loans an loans loans to by XX.X residential Thank

X% be XXXX continue between growth project to We loan in X%. to to

For our deposits as or the CD third result of million total a XXXX increased promotion. billion, annualized mainly summer XX% XXX.X of quarter to XX.X our

We our monitor continue and between US and to China evaluate potential impacts the trade distance loan the and portfolio. to

tariffs current those the September of adversely total be than our XX, will loan. borrowers, which will believe impacted XXXX be As we of less by X.X%

customers. in President our Executive that loan other more frequent XXXX the charge in Officer, Vice some manufacturers, third accruals modular linked no of offs I'll many sorting XX, Financial of they countries. to turn the the Chief and were evaluating the floor or are would be Through tariffs been Heng of had quarter also the imposition to with With there and contact Chen, that products XXXX, tariffs. to are financials detail. We September discuss retailers that shared believe these had much indicated importers, that XX% and their borrowers of from borrowers between these Many

Heng Chen

Pin everyone. afternoon Thank good and you,

share. income net announced $X.XX per For the we quarter third XX.X of or million

points X.XX% the was and quarter quarter quarter X.XX% X.XX% margin XXXX. of XXXX, the for interest of in XXXX compared of XX the In of quarter interest recoveries second and basis margin, second prepayment quarter in XXXX the of penalties compared XXXX. third net added five for as for and the basis the third net basis the points XXXX, third points of of third four to to quarter Our interest

of to East in parent Far X.X National to Given million gain the the primarily of Bank. ago. the of X.X X.X be acquisition income the due by million X.X for interest XXXX recognized compared believe year third third SinoPac when when XX.X million third in compared to million increased results, million X.X% expense decreased third company in to Non-interest quarter the fourth XXXX million the of quarter we to quarter third non-interest a compared XXXX quarter net was X.X% of quarter from a the of quarter that quarter of the quarter X.XX%, of the The XX during third same the between would or margin to XXXX our XXXX by XXXX. decrease to XXXX, Bancorp, in

Partially expense increase and to For increase XX.X%. in the housing by compared year million rate XXXX rate for XXXX long-term XXXX benefits of of in the tax costs the X.X and ago. third of acquisition quarter X.X of fourth X.X that same was and million anticipate million when investments expense approximately due third in to employee increase a primarily will alternative and be energy non-interest offset the in amortization salaries XX.X%. partnerships. The quarter in effective our decrease We was for quarter effective tax the quarter integration expense

was full of the adjustment quarter X.X million In we XXXX, solar recognized to reflects rate. that of rate third quarter from of quarter amortization expense tax made credit year investment third Our tax the new year-to-date the second effective tax effective in a XXXX.

amortization Tier XX.XX% September solar fourth the ratio leverage our XX.XX% tax We XXXX, to of at XXXX. XX, XXXX. December quarter as expect capital At approximately increased in credit million XX, XX X of to compared

compared increased XX.X% XXXX from XX, X.X capital to and net of in increased loss quarter December to capital XXXX, the loan from quarter of at XX, total XXXX. XXX,XXX of million of to XXXX ratio risk-based X to December risk-based of and a the loan net XXXX. at XXXX. loss of million the third Net third Tier million reversal was quarter ratio charge-offs quarter third no There the of XX.XX% our XXXX quarter in and second in XX.XX% recoveries compared for for recoveries XX.XX% X.X X.X Our were XXXX, of quarter second third the provision of

loans the XXXX. of third XX Our million compared or by to loans to XX.X as non-accrual of quarter decreased end million period X.XX%

Pin Tai

Heng. Thank you,

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

Operator

Sandler question first from Deer with O'Neill. [Operator Aaron comes Our Instructions]

Aaron Deer

everyone. Hi, afternoon, good

Pin Tai

Hi, Aaron.

Aaron Deer

this in The it in the was and book. be quarter to growth strong seems again still residential centered

today new we that higher, kind First, what of business getting go are to drift on and growth that continuing - your rates with you forward? what's that outlook as for rates on production in the

Pin Tai

about to - adjusted rate underwriting are to X I'll current high is X.XX% [indiscernible] to half - that higher or slightly third in current than X and - the we say for is underwriting residential mortgage. quarter. Well, And the the X is the this X.X% of X% loan X mortgage rate

Heng Chen

most Aaron, originations of then, purchases. And are on our

and There down. holiday think so may interest Year, don't down seasons also it because will we some Chinese that that slow during slow seasonality that. New is our So rates the of

Aaron Deer

has XXXX you prepared this at this year. pretty growth see as to Okay. about And of obviously, talk then are kind the point, but good been don't I

As to of sense do next you you should growth what have - look of year, of what out we a kind kind expect?

Heng Chen

this planning Well, will year. suspect to be they similar our we We haven't yet. finished

Aaron Deer

Okay.

Heng Chen

have certainly we'll January formal in But guidance.

Aaron Deer

in Sure. I that guess ways about be anything, XXXX, maybe should of low your making what the investments partners Do up expect for tax talking we going income to 'XX looking related level there in housing rate forward? have we'd that? in similar out to business in might that been expect have terms you might given and you've credits with the and what you you Heng,

Heng Chen

need year. to be and our to time, tax be make should the to regulatory we million and - assuming XX - we this the XX year amortization another for but takes be rate for Yeah, close million would approval - XX.X%, investment, XXXX, it compared some expense so we get about should

Aaron Deer

Perfect. taking Okay. for Thanks my questions.

Heng Chen

Thank Yeah. you. Sure.

Operator

Thank you.

Young question comes with Michael Our SunTrust. from next

Michael Young

afternoon. Hey, good

Pin Tai

Hi, Michael.

Michael Young

back go color on if else you of CD on are could kind the special, holiday some do year. summer wondered and the just provide deposit anything to this you season the wanted Just side maybe you on plan to

Just give sense of expectation betas on a and rate us kind is going what your forward?

Heng Chen

Yeah, promotion our we summer this - goes targeting week. into were CD finishes actually -

was and new CD going rate but higher broker probably bit that about about same a it targeting then New now. points. XX Through of million. million basis new R&D year, have offering a X.XX moved volume. pace in rates And yet, I the think, surprisingly the the constant, are XXX funds. Chinese is by set increase the rates XX week it's rates And do than So Year at getting that. would we're - another pretty will though then, wind up it's And the a to we about last haven't even there we XXX of promotion, right we that up September But net we'll still of FED was September be little the rate there next we - still we're

Michael Young

Okay.

remain would steady together assumption kind and with continued of forward? moving taking Just loan I betas the to kind today that you all we relatively where similar your of to are side, guess deposit the expect kind of those on growth at

Heng Chen

for know, you went non-interest - bearing was the that on million. one demand surprises so, the surprise deposits of favorable average our quarter up XXX think I third

money banks updated sit as of other market little the tight for us. seasonally, it so long as half sitting We're the rate the haven't core still as is, we and thing are And deposits, following well. we And our still the today, some banks for larger still big a that - - poster of year tight, second the rates. helps we is stronger then

Michael Young

benefiting one recovery for provision last one while. on just the pipeline. a been It's And

Just provision now kind will near you zero? outlook in what's are harvest the you able at low keep pretty and continue do to those 'XX, the levels to and be think current of

Heng Chen

pop-up. Well, couple can't recoveries potential we same $XX but quarter we the - they'll in million can't large the million of $XX range, still what predict to the we have

aside of residential our the that, provision of again, residential about of is So XX so because, is it's reserved will have mortgage. we be want But depend from think our couple we because only need we B which half notes much growth the a We on mortgage, loan sell loan for loan loss property. customer points once to the who moderate, coming just to that. the from - growth and basis

Michael Young

Thanks. great. Okay,

Pin Tai

Yeah. Thanks.

Operator

Thank you.

Clark from next Matthew Piper Our comes with question Jaffray.

Matthew Clark

Hi, good afternoon.

Pin Tai

Hi, Matt.

Matthew Clark

but solar credit income give just then on and the tax isolate the [ph] low could quarter of you it also third housing amortization housing the you XX the launch gave on Could fourth the solar the in from for you million quarter?

Pin Tai

Yeah.

point last So so this X.X total be now down and had the housing solar our then and is about the fourth X - was to roughly it's XX low is And XX.X a the normally another rest million, the rough, was X in quarter guidance the a the amortization million quarter income - quarter. little solar - X then XX yeah. might million from million we in and

Matthew Clark

Great it, Got might a there's other but if seasonal? there sequential in worked late then a fee okay. year-over-year, on that little the anything just basis, unusual be and wondered flattish income

Pin Tai

the we Well, think swaps that fixed rate hedging and unusually high, on our of quarter, of our mark-to-market there by XXX,XXX the in - we'll the so about it's these loans. turnaround are swaps are value think fourth was

Matthew Clark

and quarter your management XXXX? capital okay and into plans fourth the update on then Great, any in

Pin Tai

will - up our I would to so XXX,XXX that shares stock the last restricted that then auctions Well and we last below had a issued [ph]. then over [indiscernible], in is all the years the about quarter were be SinoPac buyback about in we our terms below will quarter stock the total $XX that. and and that's X.X XX said historically surprisingly issued shares back the to of of have units, the thing from we what tariffs amount, mentioned so next two we we stock if we shares call share the those XXX,XXX also in the stock million back would market though, I best bought think week prices that when and told had the [ph] first that be so issuances of we And

Matthew Clark

last one, just or initiatives year any savings it and cost projects? then cost a Got partial potential you're also thoughts savings and next around things in offset on any as related - working or investments

Pin Tai

in renewed the in million of say a almost by triple know sort don't which is save July us going then contract down will in was DP of in it's million are but process how be in thinking amounts. improvement premiums we backroom what's which healthcare our some XX also Well we XXXX. I will to small - to going and - much,

So positive operating and constant we're know really focus on effort. leverage a delivering we at

Matthew Clark

you. okay. Thank Got it,

Pin Tai

Thank you.

Operator

you. Instructions] McGratty Thank Chris with question [Operator from KBW. Our comes next

Chris McGratty

Hi, thanks question. for the

the to and how terms growth, be kind In of of portfolio then size purchases I should of sheet X% balance securities X% about growth, loan managing from here? think thinking the investment the

Pin Tai

higher We but think the we're late have XXXX and - we interest would NIM, want pretty on portfolio that year rates in we'll with that the XX larger be ramp think be peak drifting - to also happens to in we'll securities of It mindful so the up I start MBS. but could portfolio, if the securities a mainly XXXX gradually. that

Chris McGratty

the I there dividend board external comments And share there great. lot you is are capital, organic be thinking aside and your the of that a opportunities of could markets? Okay. question Any if Is repurchases follow-up growth, from priority? a Are and prior something in and on that a M&A? how on would the

Heng Chen

continuing potential But for that price I always are that [indiscernible] all out targets. out understand looking [indiscernible]. we we're watching

Chris McGratty

thank Great, you.

Heng Chen

Yeah, thanks.

Operator

you. Thank

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

Lana Chan

Hi, good afternoon.

Pin Tai

Lana. Hi,

Lana Chan

the to two, those Hi, over some want I are industry commercial about to which segments last quarter growth, you ask participations? started good just growth C&I loan get or

Pin Tai

increase we loan best have and coming commitment new in from seeing some last and we teams we outstanding loan meant Well we areas the inventory. probably commercial the so some are see also specialized that line year, - loans [ph] different

Lana Chan

Okay. And then we -

Pin Tai

but it's participation, participation from [indiscernible] side. guess Not - not from

Lana Chan

what CRE think about around made it two about over expect your had question the in more another talk you And of that quarters side, in big conditions pretty you on is competitive just loan can should with terms of I a that we Okay. and the commentaries CRE, guys because business terms book? some portfolio last

Pin Tai

we the are But competitive given of new loans, market the from previous loans a coming quarter loan in in very might so be still the the last that's the is softening, more CRE change growth underwriting XXXX, no see careful XXXX CRE quarters. and we understand the that in in so why even that couple we

Lana Chan

you. Thank Okay.

Operator

David Wedbush our Chiaverini Securities. you. And comes final question from Thank with

David Chiaverini

the X.XX% - for Hi, thanks. Question for guidance, that of the quarter full-year NIM or to on first the on clarification the XXXX? was X.X% fourth

Heng Chen

Just quarter. the fourth

David Chiaverini

end range? in Okay. it for what could we're potentially that X.XX% and the And the could to cause range of the you talk at to about about lower you what vice - to end the the go middle cause range since and of could third quarter, kind of versa be the talk smack that at of that upper could

Heng Chen

kind rates Well well, we it's of the X I the and XX such what We're prepayment think if only same for terms And X is increased goal to cause of to market then if what as basis then points. at to if up the so factor higher penalties by from [indiscernible]. XX could go - deposit let's we'll basis money right as move now, QX significantly say it so. start us risks have points XX points basis the in in more and lower, banks

a always if concern see have So - market movement we pricing. money it's for to but it that's starting - there, we're us,

David Chiaverini

at you rate it period and September average X.XX% think what quarter? And the helpful. can you the then have for And was Do XXth? that's I provide the was? deposit what was

Heng Chen

have we it the it. don't and for month just we normally Well September of compute

the the bearing quarter. versus X.XX rate the average month liabilities for is of for X.XX the September, interest So

David Chiaverini

a loan have for you the the side, yield? do number similar loan on - And

Heng Chen

point Yeah, I X.XX - earning assets, well, mean X.XX, its it's for X versus yeah.

David Chiaverini

Got the of September? was month it, for X.XX

Heng Chen

accounting Yeah, the [ph] but a skewed book the end so only would we our bit this it's quarter, push - at by little accretions of buyback.

David Chiaverini

it, very Got much. thanks

Heng Chen

Sure. Yeah.

Operator

now like for Bancorp's your for to I participation. management back turn gentlemen, remarks. call thank any General closing the Cathay you and would Ladies over to

Pin Tai

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

Operator

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

wonderful disconnect have day. all a may You and

Cathay General Bancorp (CATY) 18 Oct 182018 Q3 Earnings call transcript