CATY - Earnings call transcript Q3 2019

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Operator

Good afternoon, ladies and gentlemen, and welcome to the Cathay General Bancorp's Third Quarter 2019 Earnings Conference Call. My name is Sherry and I'll 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]. recorded be being at for is www.cathaygeneralbancorp.com. call and available will replay Today's

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

Georgia Lo

And good Thank you, Sherry. afternoon.

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

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

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

we future to such, of you not only undertake except statements revisions presentation. of to of the announce any statements publicly required reliance which events, reflect statements, any or no place law. speak We forward-looking caution to on this to date forward-looking developments any update or as As such obligation as forward-looking undue by

please afternoon, General at earnings copy, This visit at results. a Bancorp release an us outlining issued XXXX our Cathay obtain its third To quarter www.cathaygeneralbancorp.com. website

this will up we management call questions. comments After today, open for by

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

Pin Tai

quarter Welcome our third conference good earnings call. afternoon. And Georgia. to you, Thank XXXX

when million XXXX. the of third $XX.X of income third quarter of reported XXXX, $XX.X This million for net income net afternoon, a increase X.X% to the quarter compared of for we

share increased Diluted the the to for to by same per $X.XX third quarter earnings for a quarter of ago. XXXX compared year per $X.XX share X.X%

growth for increase grew billion X.X% in or million an annualized gross in million an and of XX.X% loans, The third loans by XX.X% decrease our to in was basis. on estate of annualized, third of of and of primarily commercial commercial $XXX.X loans the annualized, of the mortgage loans the quarter In of We by real $XXX.X sales XXXX or loans increase residential offset X% quarter partially of by $XX.X $XXX between XXXX anticipate million sales, $XXX.X including in the growth million loans. the loans XXXX, mortgage loan X%. million for in to $XX.X residential or driven held

million. $XX.X the million in quarter For annualized the of to by $XXX.X The primarily XXXX total driven X.X% increased the third billion. growth deposits $XX.X million increase of deposits or XX.X% in XXXX, for our third or quarter XX.X% of deposits was demand decrease annualized, deposits annualized in $XXX.X the time market or $XXX.X deposits of partly of million by non-interest-bearing offset and money

market conditions We stock may XXXX the fourth program cost average repurchased business of shares and We continued additional the $XX.XX in XXXX. price, buyback stock depending XXX,XXX and an quarter pertinent general share stock quarter our of and third in upon at of of shares factors. per other purchase our

our the Borrowers portfolio. trade by our to be current adversely that impact we of we With could US and loans. the impacted continue hold total its potential monitor dispute ongoing tariffs between respect to loan X.X% to approximately and believe evaluate China, the

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

Heng Chen

Pin. And you, good afternoon, Thank everyone.

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

the second third and quarter Our as X.XX% net X.XX% X.XX% XXXX. margin interest XXXX the of XXXX the for in compared to third was quarter quarter of of in

for interest margin quarter the recoveries of basis third basis points basis third of points and second to quarter interest added penalties to prepayment XXXX, the net and XXXX. XXXX the In quarter the points XX X X of for compared

XXXX the X.XX% quarter expect meeting. for fourth the XXth be to rate margin between after October cut interest and our Fed a X.XX% net We of X.XX based point on

of the the $X.X million on increased swap due residential million $XX.X quarter mortgages. and to million of income of of sale rate Non-interest by million of primarily when This gain quarter $X.X compared third XXXX an the the was increase to in during interest third contracts increase XXXX. valuation $X.X to

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

million salary was alternative For and low-income the energy a expense million the increase $X.X amortization $X.X partially in employee $X.X to increase by third increase professional primarily services. of quarter of a decrease investments offset a in marketing expense benefits, in and partnerships, in due million non-interest in and in million $X.X decrease XXXX, the a housing

XXXX tax of XX.X%. quarter effective The for third rate was the

The third rate. to quarter effective tax effective rate year-to-date reflects the tax a adjustment full-year

a includes of credits. impact in fourth installation $X.X XXXX of will adjustment to solar the adjustment million XX%. expense low tax lower-than-expected and a $X.X third housing reflect The income anticipate quarter effective that tax our of for XXXX million rate quarter delay a systems be for We the approximately income the tax

solar XXXX. $X.X Solar approximately $X fourth tax the in credit third of quarter tax quarter in of credit amortization amortization was XXXX. the million project million We of

decreased December to XX, at capital XX.XX% ratio X compared XXXX. XX.XX% September XX, to as XXXX, At leverage our Tier

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

Net of million XXXX. $X.X quarter in the quarter of and third XXXX to for third were recoveries net the $X.X quarter million second of in $X.X XXXX of million of compared recoveries net the recoveries

loan a loan quarter $X $X.X third provision of of third compared a of no loss XXXX. in for XXXX of to loss the XXXX the million quarter reversal loan was of second reversal in million There loss quarter the and

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

Pin Tai

Heng. you, Thank

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

Operator

[Operator Instructions].

Partners. Deer + O'Neill Aaron question with Sandler comes Our first from

Aaron Deer

afternoon, Hi. everyone. Good

Pin Tai

Hi, Aaron.

Aaron Deer

Heng, the your and the out to recovery heard back guidance core around if fourth it for penalties, correctly. interest the looks X.XX% quarter and the prepayment like third X.XX%, if X.XX% quarter I you is margin was I in

Given a some kind what we're see pressures of to we're industry, maybe even fourth that flattish of seeing across going margin the in to you gives that quarter? the yield the confidence up here

Heng Chen

in from is, basis, And guidance, a science. here. of are XX influx basis That it's money PBA deposits Yeah. XX two, by our to those a September CDs, more late third June X and quarter, market they of art But still of large thing [ph] one on than have XXXX. we points had XXXX point-to-point we on the declined deposits

points prepayment So, we some fourth penalties then, NIM the interest recoveries. the think about benefits and in quarter. we'll And get get in in from typically X basis we that

think anyways guidance or the expectation. that's X.XX% I our be whatever, nickel So, round basis is within since should but it view our whether about

Aaron Deer

sticking guess relative the completed year I Maybe I think understand. of offered you the I a were where or toward to CD Sure. are maybe your with your ago? theme, the campaign. you've guys what probably end summer rates same CDs one-year they on – tail now

Heng Chen

Yeah.

experience. from learned we've think I

then, managers, this for reflection the average is have So, in XX/XX we And – our down the to so – best quarters we up from the quarter, four the X.XX% that average I smaller general rate has But now, are versus overpaying we to that wind branch of our dropped which upcoming were guidance is rate don't reflects think leaving of that repriced quarter, the X.XX%. CD X.XX%. for rate CDs the CDs.

are the points picking we roughly, because still used now time maybe to are think, rates, now, on from little continue a the we right lower – there's offering banks for promotions. the that basis our think, on goes are a up CD I while the deposits to repricing repricing. it a think XX in that few to sticky we're hoping quarter, So, And improve side takes as that. And on fourth but we'll deposits get I

Aaron Deer

That's my Thanks for great. taking questions.

Heng Chen

Thank you, Sure. Aaron.

Operator

you. Thank

Our with from Jaffray. comes Clark next question Piper Matthew

Matthew Clark

afternoon. Hi, good

Heng Chen

Matthew. Hi,

Matthew Clark

including Just recoveries, recorded to basis guidance X.XX% points NIM on of X.XX% of to a is and your correct? clarify, prepay basis, X

Heng Chen

Yes, yes.

Matthew Clark

then slowed quarter. speak just buyback, your stock back remaining appetite is and your buy TDRs just much are I how the that's on But just your both then, assume around to Can your and left Okay. concerns activity war. to authorization? again, down. And given the you trade under this current partly non-performers the

Heng Chen

million And Fed left. there their that's recently the I Yeah. is $XX requirement. changed believe

companies, long trying campaign don't as then, So, every at bank And new terms a holding particular to I they it fairly look think amount need approval than appetite, buybacks. regulatory for a rather the quarter. of hit we in

given amount amount have compression And, is depends do Pin think as And to a QX. we'll I sure, So, year. mentioned, in on for we'll the the on obviously, some a And do then, fair XXXX circumstance. new NIM. it the

Matthew Clark

you. Thank okay. Great,

Heng Chen

Yeah.

Operator

Thank you.

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

Lana Chan

good afternoon. Hi,

Heng Chen

Lana. Hi,

Lana Chan

from You X% to for think. resi on loan year the X% before, guidance planning more X% full because I mortgage? slowed selling Is you're the growth that X% to to

Heng Chen

I we rates, more almost And are we or seeing is residential think lower that portfolio. the have $X the a issue for larger billion prepayments mortgage refinancings.

that's driver main sales them that. week. for And mortgage then, we this held of the the did million $XX that's sold move And But of to for so, And last sale. loan for we loans extent quarter. residential

Lana Chan

tax in an And rate? as tax my XQ Okay, the you. us expense on you give amortization question well update can is, expected thank the second credit as

Heng Chen

for million fourth housing Yeah. million the $X the low-income for will tax solar, $X and XX%. probably quarter The amortization be rate is for

Lana Chan

Thanks, Heng.

Heng Chen

Sure, thanks.

Operator

Thank you.

with from question Michael Young next SunTrust. Our comes

Michael Young

to question. question. the follow back loan for the on wanted Thanks growth I Hey. up

around driving that? you balances this C&I significantly provide were quarter. Just down color was bit Can what a little of pretty

Heng Chen

to... Yeah. want Go ahead, Pin, you

Pin Tai

loans around of C&I And got in We pay during quarter that into October a of had probably the decrease amount $XX off some that certain third that we close decrease have caused also a the in caused third that pay are we million. quarter pushed down outstanding. loan the to and trying a

Michael Young

And we… should

Heng Chen

yeah. lack for else. ahead, Go anything of Yeah,

Michael Young

in to there. in kicking kind Just in also, seen pipeline if was we expect quarter? rebound capital going I kind for things ask, should other some family you'd you're of one C&I the demand call a in the balances XQ four And what curious and product. change fourth mortgage any of with in was in lines just seeing to

Pin Tai

Yes.

later kind fund department, mortgage, them on And volume syndication some also, talked increase today. an we're And expect for this increase lending. residential the strong. the financing still I month. expecting in We in They are of going to

loan I fourth quarter. we to have the So, add together, in expect a still think higher growth

Michael Young

Okay. And me. question one for clean-up just

good there, expenses, bit a on Anything Just other changed that down this dropped quarter. Heng?

Heng Chen

Well, I or…? other talking – the think other other about Michael, expenses, you're

Michael Young

million quarter. Yeah. versus quarter Around this million $X $X last

Heng Chen

No.

it's trying think I'm think. to -- I yeah,

quarter, fourth off we it. we in reserve in balance And was in about That commitment. second that we're sheet balance good for I get And well commitments. that sheet think balance pretty hopeful quarter, I I expense reserve a decrease had think off the the off much $XXX,XXX. that's higher for sheet from as think could

Michael Young

Thanks. Okay.

Operator

you. Thank

with question comes McGratty next Our Chris KBW. from

Christopher McGratty

Thanks. Great.

So, question, expense do we about can growth bit of the investment next just the the if year, What's pace the on a margins. expense for of with revenue How Heng, franchise? we look if franchise, industry pressures elaborate business? [indiscernible] into I facing a maybe in reasonable for is of obviously, think the the kind excluding range

Heng Chen

I could think like we're that hopeful X.X%. be it

I Now, of we'll that. extent then, off scripts. always be network. branch branch for I was call are XXXX. find revenues think a I to And We're our planning There's people are going focused other part can until higher. at reading think that investing on very to some conference We our the to close. – And that's look pushing

Christopher McGratty

of Maybe corporate just kind your with Did of for you're the situation? demand outlook conversations the on last borrowers? Could you tariffs. of elaborate on tariff some the one kind having more Thanks. [indiscernible] given maybe

Pin Tai

in production avoid And moving did to plan, Vietnam – in I buying Yeah. better China tariffs. and facility our them customers many different speak have they different their and already to of from sourcing many from countries of and hit Cambodia to these the planned also regions. diversify also supplier including other

the tariffs already seeing performance have – customers far. severely And plans. impacted most then, so since by negatively not we're some So, any

Christopher McGratty

much. Thank Great. very you

Heng Chen

Chris. Thanks, Yeah.

Operator

Thank you.

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

Gary Tenner

afternoon. Good Thanks.

Heng Chen

Gary. Hi,

Gary Tenner

Hi.

fourth on you question where where you tariffs. where of the had trade in same have in from experienced actually that But different years finance? about past? still are being drawdowns you quarter. now another bit – I the I Are seeing would much know Just Really, was seeing in topic you're it's curious a early

Pin Tai

outstanding, loan from we their when paying some fact, of actually the In look customers' sales down at their inventory. they previous are loans

So, tariff not the so loan seen is – because not outstanding an far we've of issue. increase the

Gary Tenner

inventories? the seasonal a increase also kind to seeing related And in not then, drawdowns you're of

Pin Tai

Right. no, No, no.

Gary Tenner

Okay. All right.

Operator

Thank you. [Operator Instructions].

Our next with question comes from Wedbush Securities. David Chiaverini

David Chiaverini

of interest margin. for a on Hi, thanks. net questions the Couple Starting with you. follow-up

implies from quarter was normalized fees, to to of sort So, level points. guidance when basis, fourth flattish you the the you of pre-pay be X core it normalized quarter on kind include a of said basis about third

pickup points seeing you're on XX repricing. of CDs Now, a about basis

So, first see possibly way when XXXX, is is quarter first quarter it? we in NIM about we the of the of think look should up the there to chance the to out sort a stable or that

Heng Chen

have portion Well, book we first reprices quarter. the CD our biggest in of the

So and our the this promotion. is from – New Year Chinese

portfolio in have now. It's we has repricing the that So, the highest rates. $X.X X.XX% quarter. average billion right first And

the, mature, them roll them some will So, CDs can say, market back or money we're of hopeful go that to at X.XX% or when X.XX% we those balances.

David Chiaverini

it. Got

gears loan shifting then to Okay. the That's helpful. growth. And

refi due up. activity about the picking to mentioned is lower You guidance

competitors would are aggressive kind that being Is and about that your that could there? of willing winning rate business. Just of are your on Now rate? that very you're to you competitive dynamics some of that competitors match imply talk the it just not the kind

Heng Chen

Yeah. check residential with mortgage the head I Well, of department. first, our

purchase a primarily lender. are We

of our originations purchases. from historically, XX% been So, have

also, that mortgage There offer alien the but to of of the terms extent, our is this And of the in offer our bulk unique. kind XX%, – terms Now, doc purchases. non-resident sort mortgages. about pricing, pipeline, not from low production smaller we is has a stuff don't are current mainstream of dropped then, of banks the and products to coming in

refinancing but pretty with peers. else, our we we're Wells these American or Chinese, there, somebody development. fairly depositors But don't So, competitive to a see Fargo other it's recent

to idea of the the So, extent as better as a refinancings. we'll months go on, get the

David Chiaverini

Thanks very it. Got much.

Heng Chen

Okay. Thank you.

Operator

Lee Holdings. Thank And final you. with Taiwan come from our question [ph] will K.H.

Unidentified Participant

And Financial Taipei SinoPac some you Holdings arrangements K.H. strongly Taiwan recent Far that Investors. [indiscernible] in President, National Bank, on engaged order Times Are Cathay in any underprice aware of Cathay there protect My order an accepting deal Michael Michael problems Chang, Yu East Bank's alleged FENB get afternoon. deal, price. Chairman there Li's the Cathay's is, question benefit Chang private provide in for the and an news, Good the in at in with This your will actions of return Preferred ever against deal a from unfair purchase is not in the are to be articles legal reputation? does to in Institutional for Taipei? illegitimate visit M&A that SinoPac suggesting has Holdings in SinoPac's future

Lisa Kim

I'm Kim. General Lisa is This Counsel General of Bancorp. Cathay the

are are We any we are be and comment no but issues not we of will say Taiwan, aware position making to anything it. at the in that going on on

Unidentified Participant

you. Thank Okay.

Operator

over there time, General no closing turn this are to management for Cathay Bancorp's call questions. like back I'd any remarks. At to the

Pin Tai

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

Operator

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

good may a You now have disconnect. day. And

Cathay General Bancorp (CATY) 16 Oct 192019 Q3 Earnings call transcript