CATY - Earnings call transcript Q2 2022

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Operator

Good afternoon, ladies and gentlemen and welcome to Cathay General Bancorp's Second Quarter 2022 Earnings Conference Call. My name is Andrew 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.cathay generalbancorp.com.

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

Georgia Lo

Thank you, afternoon. Andrew and good

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

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

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

Chang Liu

quarter by second a the of afternoon, $XXX.X Diluted net million XXXX. increase $XX.X or earnings in XX.X% quarter our increased million $X.XX afternoon, share loans, $X.XX annualized. quarter the or in everyone. of for annualized increases income compared of $XXX.X XXXX of million earnings or for acquisition annualized excluding second quarter a million in XXXX, Welcome million for loans as loans, including commercial of per from In loans, in to increased reported XX.X% conference mortgage gross increase net primarily $XX annualized commercial was loans of to and approximately to second loan second or of XX.X% between compared a XXXX, quarter The $XX.X driven This $XXX.X loans. West X.X% XXXX X.X% for branches. million XXXX of real The is we $XXX.X XX.X% estate million to our for of certain HSBC second overall XX%, Georgia you, share good income expected residential Thank the XX% to to call. range the the Coast growth loans the per the XXXX, share ago. per year quarter second same a of for quarter PPP

project Excluding between in be loan the HSBC we XXXX. acquisition, and growth X% X% to

were of loans million During PPP $XX.X second forgiven. XXXX, the of quarter

real monitor We continue to loans. estate our commercial

presentation, earnings CRE our X average Turning was of as XX, loans to Slide of loan the value our to June XXXX, of XX%.

centers our retail shopping billion secured and is is XXXX, portfolio portfolio. of comprises in The X% loan real or XX% retail of commercial by mixed retail and our only total loan $X.XX XX, total As property the majority store loans X% centers. loan by our of estate of use secured XX% buildings, June portfolio neighborhood strip

the first XXXX, million to $X.X compared $X.X reported net million of of of recoveries quarter of we second recoveries in the XXXX. For net quarter

loans total end of of to loans increased as first XXXX. to $XX.X of compared XX, non-accrual the of $XX.X were XXXX million quarter June X.XX% million as by Our

XX, reversal credit XXXX. XXXX. deposits second million during quarter June of XXXX, first increased average second slightly Total in special XX, a of losses annualized of credit million XX, mention during On $XXX time $XXX market first compared market deposit during of or deposits X% increased quarter for and of $X.X annualized loss by quarter XXXX. $X quarter the $X.X deposits XXXX, Slide quartered deposit second to CDs June the money Average loans to classified increased from due $XXX million XX $XXX our XXXX $XXX We for of the to an to XX.X% XXXX. of in as second Slide million to the the during credit quarter of provision quarter Turning money were or losses million in annualized of provision provision of increased the for the loans $XXX.X runoff. from million million increase a and to million million the XXXX as to $XXX by migration million quarter XX.X% compared as of and quarter

is For includes of deposit from cost billion X% to deposit low HSBC the growth between $X.X XXXX, expected range approximately the overall acquisition. which and XX%,

in shares Chen the Mr. XXXX share the turn quarter deposits second $XX.X In the XXX,XXX million and board at XXX We an the adopted stock of in results Financial with 'XX second repurchasing acquired average our floor directors remaining detail. million -- to cost Executive first now will project the quarter following I financial to the $XX.X $XX.XX Excluding XXXX of repurchase new program. be million repurchased to more discuss deposit President between we May the May program. per HSBC, our share Vice X% X% quarter of in of growth XXXX. Officer, from and XXXX, stock Heng in Chief

Heng Chen

good everyone. Thank afternoon, you, and Chang

interest long the attributable second quarter expansion XXXX, by to to in was the net margin of of or quarter continued increase income increased million XXXX. to For quarter strong compared the million of The second $XX XX.X% $XX.X net and second XXXX. primarily growth

of the when interest same to year $X income XXXX the to to quarter tax on full tax the quarter West The part XXXX, expenses, million $X.X X.XX% credit XXXX certain or and between was the to second of quarter XXXX penalties second was fed increased points ago. basis was XXXX. as we points second margin Based quarter X.XX%. increased second $X.X increase be $XX.X between the the second of in points in and loan second prepay interest three in in to XXXX. to compared basis of quarter expectation a XXXX of branches. XX.X% XXXX of in of the and to of the professional interest first $X.X in in range primarily of compared of increased fees. quarter million higher due quarter XXXX, legal recoveries interest X.X%, net the compared in for quarter of The expense the the HSBC effective Non-interest XXXX compared four investments. a during Coast second quarter to X.X% compared rate quarter XXXX. in two $X.X net when margin partially to to amortization X.XX% of $XX.X million for solar million higher acquisition million million the to as net $X.X yearend million Non-interest due by year for and X.XX% primarily second by second and to to our million of for the Our by basis increases for XX.X% In added target $XX.X bonuses quarter due X.X% million funds decrease offset have salaries margin

effective tax and For XX.X% the second XX.X%. an rate expect half of we of XXXX, between

We XXXX expect $X.X the quarter $X.X credit third million quarter XXXX. solar and the of million in fourth of tax amortization in of

XXXX, ratio XX.XX% increased our XX.XX% to of capital leverage tier XX, one to XX, as March June of compared XXXX. as As

as our risk-based Our from of decreased -- XX, one tier XX, and XX.XX% tier XXXX. XX.XX% of XX.XX% to one capital leverage from risk-based to capital ratio March decreased March total ratio XXXX, as our XX.XX%

Chang Liu

Thank you. Hang.

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

Operator

first our comes And question line Sandler. Clark Matthew from instructions] the with [Operator Piper of

Matthew Clark

can other the core a give drove increase income? other the noninterest quarter income income, noninterest what on first the for fee the Maybe last from us income, in in you fee sense

Chang Liu

It's fees and other $XXX,XXX income booked $XXX,XXX in loan category. east we the from the far very some national we include and fees loan in that collected that regular loan low, it's

Matthew Clark

I'm Okay. ago. sure, just year making because the comparison I a from was thought

Chang Liu

you're -- ask quarter? year you it to comparing or first Are the last

Matthew Clark

quarter? first The

Chang Liu

Oh yeah.

We also had second a death benefit here in the quarter.

was I'm yeah, million. sorry that was was that $X.X So the basis. quarter linked on about That

Matthew Clark

increase question expenses in I Okay, the from quarter, again other linked great. last And operating in quarter. expense a guess similar then

Chang Liu

few had a items. one-time Yeah, we

was Our little marketing higher. expense bit a

the for -- between group. So retainer, had that the $XXX,XXX. the in annual fee which director higher and gets It by quarters also we then other lumpy was have we all about director

So XXX,XXX, that's XXX,XXX. about

Matthew Clark

Okay, great.

for the tax And you fine-tune and good. the income you credit amortization, within fourth Sounds you third also solar expenses shifting, gave expect housing quarter? on low can in then just guidance what

Chang Liu

on for keep per investments, so be income probably new We good quarter low million would $X.X making housing.

Matthew Clark

rate And of June deposits great. at as Okay, interest you spot of the on have the end do -- then bearing the -- XX?

Chang Liu

I XX calculation to hold well, me for this seems it. produce again, Once was got it's don't I basis think a I asking June, let -- out piece GL, to I the It's just on, -- a it so It's be not quick normally we it's find try points. this. did of precise. about but I that because think paper. of think people many

Matthew Clark

Okay.

Okay. continue appetite increased stock And repurchasing and on then potentially the given uncertainty the program, to the re-up in last buyback, economy. one for your just me another

Chang Liu

to intend quarter. still the amount same third We about do the in

first have of Our quarter authorization the million XXXX we goes left. into and $XX

It's can about. you quarter a million $XX figure. So maybe probably

Matthew Clark

Okay, great. Thank you.

Operator

our Securities. the Brandon next question from of King with you. And line Truist comes Thank

Brandon King

deposits. to I So on wanted touch

the to year, able noticed change expands guidance didn't You're the relative which growth to deposit peers. generate and you for in your I our quarter,

a sense you want gives along what get of half confidence for back of So growth the I deposits year? with just generating to the loan of the

Chang Liu

growth then deposit drop would half loan We'll to that brokerage our to X% our annualized match think Brandon? second needed. quarter, in CDs it's as we and the of probably first using or the Well, half flow second including it's implied. in second guidance in year, we the

Brandon King

sorry. Oh,

kind using and well. broker to CDs of the incorporated new say guess guidance as in Just that's that growth included, that's fund I

forward. guess in should projecting benefit of a increasing going to kind I interest that? So that smaller rates Is see

Chang Liu

only good the very QX increase and point. a of a had we June XX that to half basis from QX has Yeah, month

in half. it's rate these that going the unprecedented be will than prior NIM we increases are interest is better very do our momentum in rapid So But portfolio continue recent our history, but second guidance. think

Brandon King

Okay. the the hand And do month [indiscernible] in of you have June?

Chang Liu

Yes.

sorry by this the of May. that affected -- oh, was Some

I think it was X.XX.

Brandon King

that should loan loan then on as participate half there anticipating All you're others in? back slower lastly, are growth, categories growth see Okay. of the And just year, you right. in slower that loan any the to relative growth

Chang Liu

We're a not anything, mortgage are. if residential down expecting, rates little bit the where slow kind of might given

half pipeline segment a bit think the think kind we've was all that that now forward. result of a I impact I as of activities, applications in rate the slowdown but the the first interest sales will the little going booked

Brandon King

Okay. the Thanks all answers. for

Operator

from Thank you. question next our Terrell comes Stephens. Andrew And with

Andrew Terrell

the of point. kind seen just slowdown up Hey, year? on real this you've commercial curious to I last of third wanted was worked quarter volumes into in a as follow the we've similar estate on whether

Chang Liu

still to to course, rate. a floating because kind of they slower want But rates. who fixed see are the there We're for of float don't from example, are that activities flipping seeing the higher of refinance people

So about that short they're are. term where worried given the rates

dead. healthy still we're being current activity the the current is selective still activity acquisitions, pipeline of and there rates given particularly have our flowed but completely as where about, about fairly it's apartment our careful we're well, some Purchase on and seeing a clients. not So some relationships are

I think that what real kind going more commercial forward deals doing. of estate careful we're about of definitely we're

Andrew Terrell

the jut release, the curious quarter. any that didn't we deposit it was was -- this of market brokered? anywhere saw on that money I see last but the any in growth one the of growth was any And I of

Heng Chen

a was that of growth. It million Yes. total out $XXX

Andrew Terrell

Okay.

Heng Chen

end. That's period end period to

Andrew Terrell

Yep.

just me, then on think I was about, kind And quarter, curious, you. commercial little that status any I loan? bit one Thank placed on one it. we, a was you credit last this of share Got can $XX a update Okay. think Was for last non-accrual. that million around it

Chang Liu

specific about talk I receiver There's its to knowledge. been a like but don't appointed. customers, We public understand

amount. assets the we reserved So control and for have ultimately, get on reasonable from a that some of and securing from side the will then credit rest then the the loan for better we have house West come also feel it. we'll business the And collection that's we the

Andrew Terrell

appreciate I Well, you understood. taking my Okay. questions.

Chang Liu

Yeah. Thank you.

Operator

Thank you.

Our McGratty comes Chris the from next line KBW. of question with

Chris McGratty

about cycle Is through is think about different a Chang, Do XX% talked given the the at this, fed feel Heng higher? speed I any that which beta. the you is number moving? you or last now quarter, moving

Heng Chen

don't shift one in it's for they second the also it We our think still a less to we know. mix renew are In than quarter, had uncertain where as XX%. part, should customers which CDs, versus in that staying was was year renewal rate traditional our X%. in We much I whether was market. around retention we because year CD of get, heard was I But is money maturing CDs. of And a it term, Chang one it thought about did the -- XX% deposit

assume So CDs, than that XXX%. is much XX%. the We better for will beta a be of beta that our

unusual. So, this is very rate hikes

hours than and… of better doing we're far, So beta our

Chris McGratty

I fully what changed. you that make the the just that ex the what to expenses? -- want to your guide, the amortization? expense just expenses I reported for Is it expense, right. want are for of sure understand which And Yeah, get make I Just hasn't just I Is starting level so provide sure. XXXX? sure on Can reported

Heng Chen

year reported XXXX ex full It's amortization. Yeah.

Operator

the next with [Operator Davidson. line DA comes instructions] question Our from [indiscernible]

UnidentifiedAnalyst

wanted just that of kind over back loan guide. deposit to go I Heng, and

the year far deposit that of mentioned of the that that growth X%, would kind second loan deposit sort I strip growth to growth on of a loan answer you You guide growth, looking low your in with it guidance. based to projected on your of match end at suggest, think even but question of the half deposit were

something is misunderstanding So your comments? in am or that I accurate

Heng Chen

Yeah. to ratio our the deposit you'll -- for two We see the try keep XX% loan to quarters. is last

maintain or quarter to, broker to through if that. money that we trying to CD and maintain market broker have at go the we're end So we'll wholesale

loan -- up of drift XX%. short might little keep the year to too bit, the the a up not is rest that, to that intention deposit growth our the and right loan try around rest in for So with of keep hopefully but It much.

UnidentifiedAnalyst

And in so $X just XXXX. $X.X Thank versus the of then overall terms I billion All you're right. you. billion management, at know, to, or sheet of of Okay. down end liquidity don't balance

maintain at So, to that from is sheet tighter that a that point? level it deploy that perspective? cash to loans balance you'd or than of a run you and like securities this Would liquidity some

Heng Chen

around should It right be $X billion.

of final one year. than $XXX the than maturity million is treasuries, We less have less about which are --

deploy to So but that may that those run slower. balance as going -- count fed down for equivalents not drop to the ratios, maintaining regulatory because overall cash but we if into treasury, $X we the much we're billion is some we're cash

UnidentifiedAnalyst

run $X You're that's investment term going then to a short balance, the billion.

Heng Chen

No, no,

UnidentifiedAnalyst

it you thought -- going where not to, you're I said keep going to that's you're there. you

Heng Chen

Yes, sir.

Operator

question comes Thank our next you. [indiscernible]. And

UnidentifiedAnalyst

I brokerage Hi. Thanks. up on the I portfolio was wanted rate? to the topic. on brokered rate what's follow CDs your CD core CD the versus curious,

Heng Chen

month June. about our two basis a CD, June three month XX for this we deposits on then The time it's that brokerage core just, eights, our two -- and and three for quarter the this points. and was about is some Oh well, rate that's gets

UnidentifiedAnalyst

of And deal for it CDs. that Can can talk you'll core you get with competitiveness CDs? better market the doing the because you on seeing about guys specialists, core CDs talk competitors a of bit? the a plan you push seems any versus in that sort about kind up? brokerage some like Do your you Are

Chang Liu

we still that see have the general liquidity. lot have We need excess do sort a banks a don't because lot we of CD anybody in any Yeah. don't of -- marketplace Well, one, to doing of think specials. in

we of they They and leaving the customers larger peers same June. if quarter, one any rates were second for said can year the lost deposits for want twos, a customers. for some California product in X% came us deposit to In take since terms we service below say of published early but I in that, earlier and Today, would those it's Southern and nobody raised of we the rates -- CD, for all increase. would has any very looks fed that have our

So want my everybody larger for assumption offer. to they rate is that the customizing the depositors, is

UnidentifiedAnalyst

And about, quality, your talk can the Thanks curious that. it. LTVs you your very the related healthier you I'm are Got then very, borrowers, for you're outlook. health But low. seeing to to clearly, credit about of recessionary shifting can to then outlook, that, customers, in borrowers and your you about talk the are on anything talking economic if seeing what based and

Chang Liu

I'll David that take first. So

side, cash and interest higher what the standpoint. On like side, debt side, higher portfolio debt a will service payments rates done look just the from cover LTV CRE side the deeper dive not we've service assuming flow a into into the but and the debt

the last, significant $XXX,XXX still good, over On side, total about little I it's those. hiring a kind a are think that we've So economic quarters recession we've pretty think The million I and of about I feel and pretty but was we numbers, more, done those low. unemployment in was think seen. are review of think with pretty the tell the us will numbers something so sort three comfortable very week all the that of and GDP I numbers later strong the of $X.X bit report and

them We just kind and that, our their to think, inventory In kind any at at this that numbers of are strong. there aging we their more point. don't some sure their were sheet looking make at looking C&I addition to I of customers, also of carefully at concerns and have balance looking their

cuts is there So mile XX if was, Wall as the next a quickly one, think fed probably a Street one, may come I an in there months. expectation there how there's that as is for about report

UnidentifiedAnalyst

much. very Thanks Great.

Operator

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

Chang Liu

I us at call for want with our speaking to and thank call. forward release we our everyone next on look joining earnings you quarterly to

Operator

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

You may now day. Good disconnect.

Cathay General Bancorp (CATY) 26 Jul 222022 Q2 Earnings call transcript