CATY - Earnings call transcript Q2 2020

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Operator

Good afternoon ladies and gentlemen and welcome to the Cathay General Bancorp Second Quarter 2020 Earnings Conference Call. My name is Val 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.

call Bancorp. Georgia the of Investor turn General Cathay let's over Lo, to Relations Now,

begin. may You

Georgia Lo

Thank you, good Valerie and afternoon.

Chang President Here to Mr. Chief our Mr. Financial Tai, are Heng Mr. Cathy discuss the Vice financial Chief results Chen, our Officer. Executive President Officer; Chief Operating and today Executive Pin Liu, and Bank's and Officer;

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

will Mr. turn website questions. call as -- this a for over earnings as After I earnings Cathay law, and obligation quarter at such to as caution occurrence of an our any reflect our on its we on or undue or which Chief Tai. unanticipated reliance developments the call statements Bancorp events, issued statements. our is statements to as today, Any to the up to of forward-looking will from release Pin Officer, please it management update made, cathaygeneralbancorp.com. place To quarter release or Executive such, And you speaks by outlining well date no not required General cathaybank only visit now afternoon, As we we comments presentation, forward-looking forward-looking copy undertake results. of the open except this second our review future earnings circumstances, XXXX obtain events. second

Pin Tai

afternoon. Welcome second quarter good conference and Georgia call. to XXXX earnings you, Thank our

of second billion same second loans quarter the million grew increase for gross annualized of loans annualized to compared on for While reported or origination on Net of a support of the we clients, our for XXXX members, increase construction $XX.X results, is the of an for share XXXX, in team primarily quarter net quarter of loans drawdowns. basis. $XX continuing per net was of muted. million year result to quarter was In we focus to a today share quarter This during of second XX.X% $XX.X income second acknowledge XXXX. a million XX.X% of our per the the the $XXX.X quarter to million The Diluted relatively $XX.X income and afternoon, XX.X% the XXXX, communities our the operating ago. of remaining driven COVID-XX pandemic. million by our of the share compared in decrease, $XX.X commitment second quarter when Loans and a changes the Protection decreased XXXX Paycheck portfolio by second to and $X.XX $X.XX or as per an for of loan X.X% earnings

As $XXX.X of approximately million. of originated we aggregate an X,XXX balance June PPP loans XXth, with XXXX, have

third deposit, on our the and as demand services, continue quarter COVID-XX loans, will We XXXX of to impact the for products beyond. as of and monitor pandemic our well financial the results during

reviews impacted we've in economic conducted borrowers quarter, industries, pandemic. by credit of our the second of the the impact During particularly

expect loans, to loans for values be the generally these We review are in more carrying discuss could the I Bank's and liquidity to our our encouraged Officer, President to low asset these our which the cost and loan reviewed initiatives Chang support outside to Chief a over will of Operating by detail this quality used the COVID-XX Liu, loan. the that is that, turn borrowers. With second and by for we helped floor of quarter

Chang Liu

to and by implemented pandemic. with Thank that as good initiatives have Pin are borrowers COVID-XX aggregate balance loan on from X.X% June With afternoon of XXth, have you, repayment commercial $XX.X loans assist the modified everyone. pandemic, terms XX XXXX respect borrowers. C&I to million impacted provide portfolio an of relief lending on several our the of approximately or been to requests based we

with of loan of of our earnings billion XX%. was for these seven provide modified to presentation, relief or been repayment ratio our value $X.XXX approximately our XXX loan an slide total June loans loan CRE portfolio terms. to balance XXXX, at XXth, have X.X% portfolio Turning to on at loans of CRE XX.X% average aggregate and The origination

For the XXXX, hotel went the XXth, month $XXX mods At XXXX, payment back XX XX% million. of regular to loan matured has during loans totaled that terms. June June that Cathay

We and four mods XX Of California in Texas. service, Southern and in loan have processed limited hotel are service on full are $XXX or this loans, XX% three million. one XX

Turning centers only. XX% total properties. our modifications, is which factory the CRE is and our to retail interest of this reviewed loan or XX% power outlet community total portfolio XXth, billion loan commercial paying note XX% as reviewed with by XXXX. XX% $X.XX Of neighborhood in of the of approximately comprises of our malls, only million portfolio, we $XXX by estate secured XX% slide strip are real loans and that we retail secured of regional The in loans majority, eight, of or XX% portfolio lifestyle June retail loans or loan loan

for XX% payment $XXX.X we loan XX.X% of aggregate or balance approximately July slide of Through July have of XXth, to X,XXX deferment June loan our an an deferments portfolio. residential additional mortgage XXth, Turning XXXX, million requested million $XXX.X nine, as with of XXXX, requests have deferment. XX days the of maturing approved

program owners nine-state the footprint purpose to loans pandemic program, launched also relief separate by programs. the is to the in or loan $XX,XXX. small relief which program, between independent our of and SBA business with We from loan smart COVID-XX loan is micro $X,XXX a help any government-backed The affected

As are million. with of applications of nearly processing we $X.X XXXX, June over an XXth, balance XXX aggregate

charge-offs of the we XXXX, of quarter of million quarter reported recoveries the net to net quarter second $XX,XXX $XX,XXX of compared recoveries XXXX. first net the in For and of second in XXXX of $X.X

reduced a for of qualitative XXXX, in to the at quarter the past loans first July increased the loans due million to recognized $XX non-accrual $XX.X pandemic. or completed. due of quarter amount X.XX% quarter first loss as We the same $X.X $XX.X by in loans $XX quarter $X.X XXXX or days loss were as loss more under due June end XXXX. incurred loan million Our to have the million of as million the The of impact Accruing these XX million as renewals XXth, the period-end to included adjustments of COVID-XX loans XXXX. XXXX, XXth, model of loan in of the been of XXXX from compared second provision provision second the million past

CECL to Act. have for recently implementation under as of permitted losses credit the defer We recognizing standard elected CARES the the enacted

We XX-Q. the second range loss continue estimated the under Form disclose and CECL we'll reserve to quarter in our loan work on

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

during We the and deposits in annualized XX% President Officer, second or deposits wholesale annualized to liquidity deposit to $X.X the Executive XXXX half quarter. increased deposits during reducing and XXXX. annualized that, balances increasing million, financial $XXX over brokered to XX, XX% Cathay customers more turn address the PPP of million times. by efforts market a liquidity slide the increased by to large brought Heng to Turning corporate billion $XXX in part marketing Chen, and our on during total second results primarily to XX% Financial Chief depositors. by detail. Vice discuss increased of With Money core quarter plan DDA with floor I'll growth excess the these result deposits unspent second by as by the in or due funds uncertain

Heng Chen

Thank good afternoon everyone. you, Chang and

second to million was XXXX, net mentioned as quarter million decreased $XX.X by to $XX million XX.X% due compared income loan the attributable COVID-XX, loss provision For which earlier. $XX.X the to of quarter to of primarily the XXXX, or second

X.XX% our of XXXX. Approximately rates XXXX, X.X%, the quarter net the to the second margin penalties of CDs second of billion There March margin points of June X.XX%, to one in of fourth of as billion In loans the prepayment $X.X the quarter quarters was their of first Our billion to XXXX. interest XXXX $X.X X.XX% of during flow loans quarter were at first for X.XX% interest basis with at XX, compared XXXX XX, $X.X $X.X added first basis of rates as interest and of quarter third to recoveries quarter and as $X.X rates the average compared net of XXXX, of billion and compared XXXX. XXXX point floor and for respectively. billion, mature the three of their

million the second basis when renewing primarily to by in same the a of in when targeting million the the range. to to the retail compared quarter $X.X equity are increased XX We by during million $XX.X of was or valuation second securities. compared Non-interest the million X.X% $XX.X attributable CDs XXXX. quarter a $XX.X increase in decreased $X.X quarter year point $X.X million expense to increase The of XXXX of in Non-interest XX to income million quarter to XXXX ago. second

compared salaries the benefits decrease which lower capitalized expense, tax second to second project was year and the for For the We full quarter rate an will in accruals The the of to quarter originations. resulting XX%. XXXX due effective of tax decrease fund loan approximately for second rate quarter primarily salaries we a investment employee to credit of the in XXXX, second increase XXXX. in completed in expense our solar and XXXX, from tax effective for lower a X%, million of was bonus in XX.X% quarter $X non-interest the

was two a at $X.X capital XX, XX.XX% quarter second of compared XX.XX% At quarters decreased XXXX Tier in XX, tax the to to Solar $X.X X in December amortization to expected the million as XXXX. is June our quarter ratio XXXX. XXXX, last credit of leverage be each and million

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

Pin Tai

now to portion Heng. of the Thank you, the question-and-answer call. We'll proceed

Operator

comes first [Operator you. Thank from Our SunTrust. of Michael question Young Instructions]

Your is open. line

Michael Young

question. of Wanted good Hey, special the could levels and/or criticized assets, you time? mention the start of Thanks this with outside assets for at to evening. just classified provide the

Pin Tai

was million. XXst, $XXX down -- actually $XXX it's to million, and went At it Yes, March XXXX down. it went it

from migration mention a to during substandard was quarter. there second So, special the

Michael Young

CRE Heng guess, reserve. I And was bigger I the -- like book about level guys seems peers. reserve on the that's Okay, just end reserve is looks then you a question, the maybe basis helpful. points low but loan understand sub XX of have it's I of kind relative on loss just $X.X of picture to book. the on billion It value, like low

help bit help out that So, a that? just with to parse trying little you me if could was better,

Heng Chen

make all can at estate almost Yes, add our a dive, to personal portfolio. did in. maybe -- We real all let in as Pin stab or of and loan Chang are most loan them with full deep our mention loans me portfolio, guarantees. that starting have hotel we very our of tried And a

hotel the operating outside as involved of as statistics at portfolio. review liquidity the looking our the So, the well of borrowers

a on we more they're fee And looking as one; did or of calculate occupancy the similar this based as Then without secured the remarks. XX% neighborhood the in whole, neighborhood we've or center that our the an rates. type go as liquidity anchor, the well by at current to as most in of centers levels. think that's them didn't So a on much I our well think retail a rates we year But outside had many the comments our liquidity. and as centers. burn retail, loans I with we on last drugstore anchor prepared in are -- we or can neighborhood outside that that it but current of the analysis the supermarket And a mention

So, we well. think pretty they will hold up

loss historical points our is all, XX generally year. basis in all think CRE I our for a So,

-- XX% our values loan in So to the typically that's and were range. when

you would Pin, else? -- Chang, So, or anything

Pin Tai

I think it. covered you

Heng Chen

mean that's look at. we I of so Yes, how Okay. kind

I think tell. time will

XX% This is they're of of loan that I think one to things going that June. full the mentioned had back CRE Chang is and interest for that principal the mods, repayments.

borrowers of these their So, capable are properties. supporting

Michael Young

and one out net very in quarter? was trying amortization the any much is the in all of helpful. And helpful. impact me, this for break there margin the Last fees? did offsetting the understand just that's Okay, there on And fee slide PPP, I it deck, just total income interest appreciate to if how was and expense

Heng Chen

The million, X.XX%. Yes. $X.X was origination is which fees

straight term. $X amortizing are million I loans. related of doing the to some line we know the and then We other quicker are about the the expense over almost amortization of XX-month PPP salary banks capitalize

Michael Young

Heng. you, Thank perfect. Okay,

Heng Chen

Sure.

Operator

Thank you.

question next of KBW. Chris Our comes from McGratty

is Your open. line

Chris McGratty

some how back we Great. we loan about the How loan think PPP first lot Thanks. think rates should line year? near-term given second the absent of about of in half moderation of the utilization quarter, growth banks A Thanks. into the growth Heng, program? do and then shows impact the in demand the quarter. core

Heng Chen

And but pipelines think given in mortgage, loans. recession, a the guidance that's normal. I are underwriting the we're given think cautious that new fact we about Residential than formal are we're I continuing. not uncertainties, lighter giving our very

We of million are far I we're the offset prepayments. a residential others, we mortgage that about -- the $XX pretty cautious originating And think month so has once the and borrowers. on make the -- rates new new before that on we make a before occupancy firm sure a we CRE. new loans to make loan we want Certainly, loans, are to then

Chris McGratty

Okay.

it the book of little rundown a sounds stay book stable have and resi commercial you So, the bit based in conservatism? might the on could like

Heng Chen

Yes.

Chris McGratty

the you the the salary of into kind you in the do year? -- then back half income adding terms going there. the be low We well, guess movement half And on the expenses, what's we about And how expenses do should have as $X.X in overall about What then help year? you back could think we of talked million then And you that? that for the the about also Okay. of the rate to solar. I talked -- that. thank run us line, just of

Heng Chen

it on XX. Slide Ye. out We try break to

$X.X million and we the it think housing So will that was low-income about be in QX, rate.

that bit as of per million. can. expense, And quarter. up to it controlling other million. Solar, might the mentioned, was $X.X We I was second costs that in a -- non-interest think, that hard $XX we're just half But, expense all on the little drift million the year, $XX.X working real on non-interest we under

Chris McGratty

to total number I I portfolios. last then you modifications, a of loan think, of as the make question. provided kind XXth, sure Okay, total of have mods housekeeping great. I The individual And just please. the want June

Heng Chen

on. think I it's in our comments, but hold

for for $XXX million, billion then it's CRE $XX So, $X.XXX C&I, it's mortgage, million. and residential is

Chris McGratty

thank Great, very you much.

Heng Chen

Sure.

Operator

you. Thank

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

is line open. Your

Lana Chan

Thank you.

question help year? downward, that's given margin, offset to half you that stabilize the of the the of in margin second or CDs the to on going continued think a Just the do be able repricing

Heng Chen

Yes, yes.

XX As so. that's point rate range; have, million to for we the which probably comments, maturing I that wholesale billion them retail XX to $X.X CDs CDs, mentioned in we're CDs, and $XXX my quarter of we the is or have X.X%; and for third at renewing in basis

For reprising our that those XX loan down keeping, the side, stable each been yields QX. loans have the are month. And we're ones months The around to then points. on pretty basis by we're for tracking of three in the

-- floors with floors portfolio. would a their their primarily fixed -- we at the rate will on So, loans

lastly, Street an we're there at and then and to X.X% portfolio. And that's now Journal case very current continue We're average QX. new about was should residential the the increasing, -- originating that a rates in so article not renewing us. today's loans So, for close that's Wall into mortgage, jumbo surprisingly, about rate

Lana Chan

the industries have is any on loans modified And that question then Thanks. there seeing on more commercial, are my you're the in specific been where -- C&I side, Great. final stress?

Chang Liu

Not particularly.

was half we in delayed of particular. think It -- was sort just as result the population being It actually, in about loan I of there really have that that that do a model, to that one a the wasn't in loan with, of payment accounted the and situation. for receivables COVID-XX the terms.

the then it so on and is it of small $XXX,XXX. the mostly average, then So, is, rest because rest and business of $XXX,XXX

Lana Chan

Thank Okay. you.

Operator

Thank you.

Clark next Piper comes Sandler. question from Our Matthew with

open. is line Your

Matthew Clark

good afternoon. Hey,

kind mentioned you an On XX% to have so expired overall had think Do kind of renewals, payments. get I it so back the as one have them the that the you of buckets were that bigger normal deferrals went for far deferral picture? relates portion number we can of to overall a

Chang Liu

population. a That's small

June, will between -- or bigger really when an of month indication But and July May, like million of we in of in population that -- than time, hopefully track August. certainly for at of population point that's deferments what for expired deferment in that expires and to it million off $XXX of we looked kind as -- the we June was the The deferment sometime $XXX number of $XXX an April, that So, indication track rest and so. at period. number look million that in roll they comes it's less us the the the will

Matthew Clark

how a here August, that beyond trying just expiring sense how for to what slug of is And in September? much and July be large is in and get might that that

Chang Liu

number-- July The

Heng Chen

rather think I wrong you number. you on give that call Matthew, than the we'll

Chang Liu

Yes.

Matthew Clark

No worries.

the series, there, late? what the longer how retail much looking of sure -- that occur any concern, of but obviously, you drops changes about you bucket have of piece? exposures then that portfolio Are in but high-risk your in it's largest guess, I'm off changes but And the Okay. after term there, on seeing office will terms that, I

Chang Liu

percentage of modifications XX% strong, portfolio a has little Our a had mods. percentage about a that there is for asked portfolio just think, is as have up it's total number holding -- small over I total the office a we -- of probably office small pretty we

Matthew Clark

And then any Okay, but and you CECL to on now, we'll just if it happen the mentioned, impact early the estimated in adopt in you sure? number that or think I'm XQ great. it will had Q, timing, take desire range, have I the see to

Heng Chen

and But the muted, still what then forecast loan worse June but if Well, provision it, loss September will low in in remain CECL, third our working fourth -- if fairly doesn't Q. I had Matthew, the in they Moody's isn't charge-offs quarters. on the put than their we're if be then hopefully, the on we -- should mean,

hope. the that's So,

Matthew Clark

it. Got Thank you.

Operator

Thank you.

next Our of Wedbush David from question comes Securities. Chiaverini

is line Your open.

David Chiaverini

to talk about could quality. charge-offs thanks. Hi, special you the credit the quarter, credits same Could want in driver the mention substandard, about talk mentioned what to the increase the then about you there? you ask migration the question, net from about the in I there? And was

Heng Chen

itself Yes, that the had was question, the second in credit the on -- that's originally second our your quarters, for non-accrual of a -- the because it been was one a was branch. charge-off really was to it's charge-off what Then in part million. quarter. COVID Dave? This the had We Hong Kong unrelated It $X.X unsecured. credit was for few on

David Chiaverini

substandard, special from mention migration the The driver there? to

Heng Chen

let's loan million, there one metal over wholesaler. Yes, -- that's say, is I $XX

So, substandard. chain PPP -- to. that mailing That a one on quarter. we to made loan that We was We non-accrual loan had bars a from juice in PPP a we also the that had went a made also substandard. of It to. second went company

those So, ones. I really largest three are the think

David Chiaverini

margin. net follow-up a on had interest the I then And it. Got question

close on you're portfolio quarter. about current fixed resi repricing many move least that third mentioned portfolio that it's the the floors, and on rate the you at originating are behaving mentioned to into as are You But you their then so mortgage have we side the so about rates the CDs. a loans like opportunity at how yet the

rather here? or you that translate expansion margin So, from stability of into are thinking would than more expansion actual

Heng Chen

margin We hundred CDs off several hope to the we which excess mainly million CDs. will trend use of repricing from brokered liquidity, going the and to higher, have also we're pay

we'll PPP a probably the And help we'll -- will will fourth see quarter in lastly, the have those help. on So, the forgiveness also loans, margin. start then to which

David Chiaverini

is me about the activity. how And portfolio some last quarter, Got the and one -- to That you banks mentioned slightly saw you that for commitments in it. given it. the increase the Got you new there construction on lot Are drawdown guys solely draw makes see was pulling of construction any sense. then that and are there putting a increased are due this or some opportunities there? downs we back in that out is

Chang Liu

this due draw Yes, It's primarily to commitments. Chang. David, that's our existing is downs -- of

that's coming but While very lot we door, of we're in and very, selective. being construction, do a see opportunities the careful very for

As there, looking base committee recognize certainly remember and a as through that to this with sponsorship matter went selective. serve that loan we current relationships, but our potential to there client have fact, the can't out got for construction that last I the of is quality any we're right expand continue approval. and being opportunities actually relationships with far we're credit history them. as very the and in new We But

David Chiaverini

Thanks Great. much. very

Operator

you. Thank

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

is open. Your line

Gary Tenner

Thanks.

us Just it. you the for outstanding loans quarter? the a think give couple PPP you Can on don't of average questions I PPP. disclosed

Pin Tai

the at be average I -- end will just, the of We think two-thirds probably that. period

Gary Tenner

two then you're of relative recognition months. And recognized XX fees the it going net quarter, to in the the comp said months' that fees I in and recognize worth know over Okay. expense of Was to quarter? the you net

Heng Chen

Yes, yes.

Gary Tenner

Thank All you. right, great.

Heng Chen

you. Thank Yes.

Operator

this [Operator and like showing questions to Thank turn to remarks. back time. any at Pin Instructions] for further management you. I'd the call over I'm no closing

Pin Tai

call. It been country, a has thank everyone the for our time I us to on for challenging pandemic. want our joining to due

quarterly new to call. company. has a his satisfaction and and speaking after the Mr. been continue commitment As strong at unwavering under customer role privilege and with our of legacy look stockholders' release I'll forward that you September over Chang Heng, and have as Liu honor be leadership. Cathay's an to next value will Chang and increasing in CEO. to flourish become earnings all led previously to confidence both the next Chang It served the And will best I at retiring Cathay, announced, wish XXXX. XX XXth, his CEO effective years

Operator

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

You a day. may now Have disconnect. great

Cathay General Bancorp (CATY) 27 Jul 202020 Q2 Earnings call transcript