CATY - Earnings call transcript Q4 2019

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Operator

Good afternoon, ladies and gentlemen, and welcome to Cathay General Bancorp's Fourth Quarter and Full-Year 2019 Earnings Conference Call. My name is Latif, 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]

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.

Georgia Lo

Thank you, afternoon. Latif, and good

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

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

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

caution statements, reliance you presentation. undue not place only As date this the speaks such, of which we of to forward-looking such on as

no update except any to any announce or publicly forward-looking to any law. of revision future to undertake by required developments or reflect obligation as forward-looking events, statements We statements

Bancorp this and call This website for questions. obtain up issued release Cathay fourth After earnings comments quarter www.cathaygeneralbancorp.com. at General afternoon, copy, please its we today, year-end open will outlining To results. our XXXX an a visit by management

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

Pin Tai

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

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

$XX fourth $XX.X quarter by XXXX, million our to grew the For X% total billion. of annualized deposits slightly or

by XX.X% XX% time of by money deposits deposit NOW quarter grew million fourth annualized. million the XXXX $XX.X annualized, market or or $XXX.X During by while million. grew $XXX.X decreased deposits

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

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

Heng Chen

and Pin, you, afternoon, Thank good everyone.

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

points. fourth Our X.XX% quarter third X.XX% for as XXXX. quarter the interest the basis liquidity net in of two XXXX, fourth Excess quarter X.XX% the XXXX margin NIM in during of was and reduced of compared fourth the the by to quarter

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

net We margin XXXX be to for X.XX%. expect between our interest and X.XX%

partially the gains million due fourth by was XXXX, offset compared in $X net wealth to securities decrease million million to $X.X by Non-interest fees. when $X.X income $X.X the million primarily a and this of management in quarter decreased fourth of during quarter increase XXXX to from decrease equity

expense when primarily investments in decrease to fourth in alternative XXXX the quarter decreased $XX.X in partnerships, $X.X amortization of a $X.X year to low in and X.X%, of million housing increase ago. due the million to by decrease million This $X.X the and $XX.X was State or partially same million compared million offset FDIC by Non-interest assessments. quarter a in income energy

of was expected rate full quarter to tax quarter the to effective assuming for to fourth year the for effective of rate tax XXXX. the for in the between be the credit be the investment XX.X%, is full XX.X% XXXX The effective of first rate solar The tax approximately XXXX XX% XX% of XX.X% of year XXXX. quarter closing and second XXXX with another

$XX.X credit XXXX. tax and amortization fourth quarter XXXX of full the million of the year was Solar $X for in million

Solar amortization million is be new in in expect XXXX, $XX second the million expected including to amortization tax credit $XX of approximately we close quarter. investment, to proposed which from the

of quarter the in The $X.X XXXX, ratio that December three of is in million At as million capital to last $X XXXX. same the of Tier XXXX amortization XXXX. December expense XX, XX, expected XX.XX% each was our the quarters leverage and first X be

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

to of XXXX net quarter $X.X of fourth million quarter of quarter charge-offs compared of fourth in the $X.X $X.X for third the recoveries in million recoveries of net were the XXXX. and XXXX Net million

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

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

continue. please Pin,

Pin Tai

Heng. you, Thank

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

Operator

Your first Instructions] KBW. [Operator of McGratty comes from question Chris

is line Your open.

Chris McGratty

whether Hey, and this maybe assumptions go Great. costs provide XXXX Thanks primarily starting margin will QX. X.XX%, for factors in to the further in that? related be interested function especially where the or kind the that Thanks. the dropping interest X.XX% Could into the behind question. deposit of assumptions a your to I'm we're of you rate of

Heng Chen

Chris. Yes,

think XXXX. is no the X.X%. two billion biggest is the eight at CDs, XX% excess basis add higher are mentioned these of cost secondarily, assuming them represent points relatively this total factor the eight points NIM then – remarks And in changes no we for portfolio. by And we of the or of I roughly by further than should And higher $X.X X.X%. I that first cost of my basis rate in cost renewal quarter, CD points. maturing had these the to the We – CDs have itself quarter And basis guidance first improve liquidity. is prime no our we And average in in expect renew

mature of offsetting from all existing So by rate as our of be loss some loans portfolio. that would

Chris McGratty

view Okay, growth, to XXXX maybe your you great. the how question do And accounting X% given provisioning, given provision change on CECL, given then expense for that. X% a the for loan implementation pipeline the Thanks of light of recoveries? in the of and in

Heng Chen

not we're we're where it had – CECL. quite think still We’ve on working is. X.X we Well, dry runs

about And that. so we're learning

growth, net that think increase our And terms residential just in for we a than which have of in loan of X% that's one of but it a mortgage. that adjustment, the provisioning be would is of the moderate in day I on little portion guidance on think less thinking not X% X% growth. yield, bit that a loan would terms be to we given

So that than loan rest our be debt the a reserve rate would at of lower portfolio.

an before to we have charged then of book in loans a XXXX. litigation CECL, or off But for Under lastly, pending we had we – quarters XX, for to – companies couple have December outlook, several prospects And probable any based recoveries asset were C&I our have recoveries XXXX. will litigation think recoveries on of this year. for collection we that

So credit to wise pretty it now, right benign us. looks

on not So more of to ball because – sort going crystal perfect. the guidance We're is our never that nobody that's give outlook. detailed

Chris McGratty

Thanks. And XXXX that housing might you in one helpful. and back. credits, could provide tax low be well? That's more as what The income I'll step just

Heng Chen

million slightly quarter. be amortization or The a the XXXX. would That should in be about as same $X.X about

Chris McGratty

you. Great. Thank

Operator

you. Thank

next of & from Aaron Company. Piper Deer Your comes question Sandler

is line Your open.

Aaron Deer

Hey, everyone. good afternoon,

Pin Tai

Aaron. Hi Hello.

Aaron Deer

Just for into that your XXXX, on year-end. curious I’m that loan complete, had into C&I clients. like And the pretty the what trade wondering just mix you in real estate seems with strong heading would I'd – thoughts Phase it like and perspectively growth your that for relative single-family how XXXX? now in what mix part heading of and the if mean commercial deal of X you to means might to get be might

Heng Chen

Well, macro more and the start can then give let me Pin guidance.

but high. total by slower looking the our will think loan than that – caught of you residential that terms the might our so And of tariffs, we dropped be at mortgage in growth impacted book that In not have of loans X% mortgage it had might portfolio. be the were past then group because XXXX, is

and in quarter loan So talk I Pin, XXXX, about the much, there a terms trade then think of want for… the slow outlook lastly, wasn't for you that to it's seasonally, growth, finance. QX

Pin Tai

The then than signing outlook for XXXX completed of the round first the and season. better look XXXX, of

In However, the it that second one tariff no is looks total at they handled probably like August think customer, get additional or there December, as increase. I September. we’re starting

the seeing in our impacted portfolio small and to are the tariff. reduction we total loan by So the impact actually customers a

Aaron Deer

you deployment, I guess thinking thoughts on Okay. about at repurchases are And then how point? this any how guys capital specifically about and on share that

Heng Chen

buyback Yes, of we to for and shares was we fourth relatively we we particularly first didn't being know stock. Most fair – bought impact over I shares in price half. its CECL of from X that think our due the I look mainly in million something in It's the XXXX, now a at XXXX. say us. in amount, quarter, the modest relative it certainly And the would will any

– it's in but stock an the basically so toolkit capital depend on on And item it'll price. our

Aaron Deer

Thanks great. for my Okay, questions. taking

Heng Chen

Aaron. you, Thank Yes.

Operator

Thank you.

Lana BMO Chan next Markets. Capital question comes of Your from

please. question Your

Lana Chan

Thanks. Good afternoon.

Heng Chen

Lana. Hi

Pin Tai

Lana. Hi

Lana Chan

growth your wondering asking I'm growth why I aggressive you with at XX% loan loan-to-deposit XXX%, was just loan what given strong increased lower in deposit ratio? reason versus growth? year-end, for costs XXXX be expectations wondering the to the how can And given your loan-to-deposit are the ratio I'm is deposit the

Heng Chen

have fourth the couple strong on growth. last we the of Yes, we outflows days deposit – pretty as the core of two in a But a I think had had large year. the on whole, ratio, we a quarter loan-to-deposit

terms getting XXXX In for challenge more the of is core us deposits. biggest

had we – a for six as sort rate a have promotion So from a as And New is think our it results pass. target of pretty Chinese actually I that’s where set we rate that lowering the than first higher this days XXX first Year the of increase didn't XXX. was that promotional couple cycle. of actually rate CDs net the far but lasts was to good in XXX promotion But been a renewal days we're current period XXX don't the two have rate in we in the for our week as

then think then momentum we'll on better CDs And on are we’ll have good getting average new lower the the rate we hired getting that as of stabilization getting we momentum manager have and summer able than lastly of believe And deposits business money we market because deposits. cash a to money have, execute in we'll be last rate we picture. which to continue market,

new So right core I weeks, for deposit results and decent. think now year it a growth is the of is start three good on pretty the we – first feel the based we a

Lana Chan

for I you core could then guess talk And Heng. expense expectations growth about this you. Thank year? Okay.

Heng Chen

with Yes, our we finished budget.

– and which that is little flat would going was the we half a X%. a think XXXX up to investing last by think excluding ago. expenses, the Our to expenses bit we're core that few more be or maybe approved be And on solar a maybe in week we XXXX increase budget because amortization, higher week overall

from we savings places telecommunications. got terms of In pretty good

that's XXXX. how tough most we're banks, like in other incentive We we bonuses Overall to expect XXXX on pretty be.

lower a as and for back that. marketing and we items discretionary budgeting we're amount like on such things So also cut

to to hard maintain try going neutral we're leverage. So a real operating

Lana Chan

first at the the down I liquidity if than could about period were elevated you. talked your it. I should $X.XX the which one billion your average you securities that excess look higher billion the And in Thank balance back come if quarter, just question, average of end Got in $X.XX quarter? was securities, last much

Heng Chen

$XXX think We keep of probably, months excess than million we to that. our all security roughly three like $XXX something $X.XX treasuries or had I billion Yes, – million, liquidity, the it because closer Fed. at rather in

Lana Chan

much. Okay. Great. Thank you very

Heng Chen

Sure.

Operator

Thank you.

Our Gary Please next Tenner D.A. question comes of Davidson. go from ahead.

Gary Tenner

decent about for the to the wondering of second a maturing any wanted detail also year questions might the CD on re-pricing in My I'm think just first terms rate year quarter. but the afternoon. further re-pricing. the of partially would could the if have answered, Good that follow-up Thanks. were talked renewal rates. delta on the you CD quarter I versus into

Heng Chen

Yes. less, contribute bit is very It's million quite and rate so so, CDs re-pricing the there's of X.X going X.XX a to little. average only that's

The fourth the billion the third is quarter there renewed, billion rate is the fourth of quarter average rate only X.XX In quarter this we is only down X.XX to maturing. in CDs the there's and year that's where already a and two. X.X

our to be and to conference the hopefully I'll be have in So report call, a quarter most of the able NIM. while it first first is going favorable give on we quarter

Gary Tenner

you. perfect. Thank Okay,

Operator

Securities. you. Instructions] Thank question The from comes Wedbush next of Chiaverini [Operator David

open. is line Your

David Chiaverini

you. of Hi, questions thanks. A couple for

it from I quarter X.XX% actually looks September to to as it curious to was quarter So rate, first like increased? the the market the December deposit up why that X.XX%. on went money from

Heng Chen

also put larger a to the X.X% start the are multiple accepting those we on so XXXX, that We of would range. CDs. we broker money the second, And a millions in using those quarter, middle attracting then alternative those as in And fourth wholesale emphasis rate. depositers and And in we'll basically bigger markets. a for did higher have, pay be

David Chiaverini

assuming And into you've at in incorporated, that I'm your that. the expected higher it. guidance, the your Got market money into growth rate

Heng Chen

I deposits exceptional average basis in relationship, XX our We market downward December Yes. points. by money re-priced we on money market think

at look a paying we're a once for large we'll the not relationship to least and balances. money quarter at market then market sure that make So above

David Chiaverini

XX X million. makes increased was over sense. Great. That to that days I And credit then driver due loans saw behind shifting What quality, about past the accruing that?

Heng Chen

loan, who that was I and that credit – country, – one we There cash some been understand with was guess a it's was contacting expect might – particular difficulties in, couple we weeks. the no was had out of be secured paid-off borrower that in It which there's of loan. to have – I but issue the

David Chiaverini

last Great. me. the And then for one

net of the the easing easing, So led in the about – how the X.X about to recoveries tariffs how quarter. it fourth of the and mentioned you of easing million

Heng Chen

Those to the go were We was unrelated. the easing. Excuse of about But sorry, loan talking the provisioning as provision ahead. me. related negative were some loss

David Chiaverini

you recoveries Phase that to done that Well, could I that as is see the or additional we get finish related war there expect, easing. there, extent and guess and just you would thought, this progress X to the additional are easing on trade to is loans any possibly

Heng Chen

We have for reserve war. that a trade general

the extent not it's in but XXXX, reserve over that general progress CECL. was to and under would the carry to a extent reduce huge and further reserve could is there So number, that we

David Chiaverini

much. very Thanks Great.

Heng Chen

you. Thank

Operator

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

Pin Tai

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

Operator

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

day. disconnect. now may Good You

Cathay General Bancorp (CATY) 22 Jan 202019 Q4 Earnings call transcript