CATY - Earnings call 3 2023 | Cathay General Bancorp

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Operator

Good afternoon, ladies and gentlemen, and welcome to Cathay General Bancorp's Third Quarter of 2023 Earnings Conference Call. My name is Rocco, and I will be your coordinator for today.

[Operator Instructions] Today's call is being recorded and will be available for replay at www.cathaygeneralbancorp.com. I would now like to turn the call over to Georgia Lo, Investor Relations of Cathay General Bancorp. Please go ahead.

Georgia Lo

good and Rocco, you, afternoon. Thank

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

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

we statements caution statements speaks of As undertake to forward-looking circumstances, unanticipated review undue which date law, of the required except such as or it the future forward-looking by update Any you on on or obligation as place such, any occurrence we made, statements. only to and forward-looking not reflect no to is developments or reliance events events.

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

Liu. Executive over call Officer, to turn Mr. now and will I Chief our the Chang President

Chang Liu

conference quarter the $X.XX second to of of Xrd XXXX. share afternoon, everyone. for million $XX.X Diluted our an the XXXX call. share third reported quarter to XX.X% for income quarter third XX.X% quarter the as million for good Welcome Thank per per $X.XX net second share a per XXXX. net XXXX, you, to quarter decreased and $XX.X afternoon, income of This decrease of XXXX of compared Georgia, for the we of earnings to compared earnings

quarter a or of loans. XXXX, the several loans, growth of The in million commercial $XXX during primarily annualized in offset or $XX XX.X% increased third estate resulted in by of originated commercial loans annualized, quarter decrease million million or increases second $XXX residential solar commercial annualized driven and loan real of In our annualized gross from the in part XXXX. of X.X% by or XX.X% $XXX mortgage the third loans quarter million paydown in X.X% loans, large

We continue monitor to loans. estate our real commercial

Turning to X presentation. our of earnings Slide

loan-to-value the September of average was estate loans of XX, As XX%. commercial real XXXX, our

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

loan estate loans loans and buildings of pure X, the of X% Only of business or by portfolio our total the only are office loans XX% office of in real in Slide office billion total office property portfolio. XX% commercial loan property At districts. central property collateralized represent X% $X.X are

use are of condos. loans collotalized by office Another and retail XX% remaining are offices. by property loans collateralized mixed office of XX% office The medical stores, office office

been which, XXXX. quarters to XXXX, quarter charge-offs in third second the net million charge-offs million, $X.X compared prior of in have for of reserved the of $X $X.X For of reported net we million of quarter

of XXXX, loans to total quarter million XXXX. $X.X the end the were as as loans which of by XX, of nonaccrual compared $XX.X second September increased million Our of X.XX% to

Turning to Slide XX.

to million $XXX also slightly of from increased mention As $XXX million XX, slightly million of June and of increased June as million $XXX loans from classified XXXX, as September to special XXXX, loans XX, $XXX our XX, XXXX.

We second the credit of of quarter loss a recorded in as losses compared million provision to provision for $X of third for $X.X quarter XXXX a million for in credit the XXXX.

pleased deposits are or by increased $XXX the during We million that third XXXX. XX.X% quarter of total annualized

As of Federal the million reduce Bank to September a million result, from XX, $XX Loan $XXX during we XXXX. borrowings as to were our able quarter Home by

billion $X.X and billion Total uninsured $X.X deposits deposits XX, uncollateralized uninsured reduced XXXX. of XX.X% but $X September the or billion, of to were were in deposits deposits, as excluding collateralized total

Home sources of Federal of from and XXXX. more $X.X as Our liquidity than were billion, on-play $X.X the deposits uninsured securities unused uncollateralized was borrowing XX, and available Loan Bank of was These capacity September billion. XXX%

increased XX.X% increases. third million deposits Total the or by of seasonal compared annualized, growth quarter of to or $XXX XXXX second time annualized Total the core increased organic million primarily due $XXX during to and XXXX. deposits quarter XX.X%

President turn our financial detail. Chief Financial Mr. Vice now discuss XXXX more will to quarter floor and Chen, third over to in the the Executive I Heng results Officer,

Heng Chen

good Thank you, Chang, everyone. afternoon, and

as quarter net decreased million $XX.X million $X.X in share by a million income primarily per $XX.X $XX.X third million XXXX. second to per or securities equity share of quarter for on a unrealized second equity the due the the third compared to For $XX.X securities on to of quarter the unrealized million XXXX loss or compared quarter in gain $X.XX of or XXXX, XX.X% $X.XX of to XXXX,

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

increase in wealth interest from when million compared management XXXX. margin unrealized for X.XX%. $XX.X million the a of expectations gains a to part decreased second on to $X.X of XXXX We by be securities to in income our the to of XXXX. $XX.X million $X.X revised primarily commissions net X.XX% quarter third decrease due when decrease second have between equity in quarter XXXX compared to during million offset was The Noninterest in million the to quarter by $XX.X

Noninterest the compared million or million and $X primarily XXXX. million $XX.X when investments, the expenses. solar was to million of to quarter million offset X.X% quarter lower in $X.X million to The expense in increase increased $X.X in third salaries in benefits due of professional $XX $X.X second of tax in credit amortization by higher and by higher XXXX

X.X% insurance in and noninterest strengthen result infrastructure expense, excluding a incurred expect we bank's expenses information management FPIC deposit enterprise As the intangible OREO between XXXX risk to to XXXX to XXXX. FDIC quarter expense XXXX. the to of X.X% bank finalized and increase during special higher impact for from of excludes and This be premiums, of fourth core from expected credit core in assessment failures tax security the amortizations to any

$X expenses security, X related of to million and first risk approximately incurred. in information the were months, nonrecurring internal management enterprise processes control professional During

In compared addition, the we expenses XXXX. rate rate XXXX. quarter are XX% quarter in of taking quarter of reduce was tax the to XXXX XXXX The effective other third look noninterest to a second of and X.X% for the our during of for expense as the hard fourth growth in

XX%. we XXXX, and year For tax XX.X% of expect an rate between full effective

QX amortization of credit expect solar XXXX. in $XX tax million We investment of

June decreased XX, XX.XX% to of XX, XX.XX% as September of As capital as our compared leverage XXXX. XXXX, ratio Tier to X

ratio XX.X% our XX.XX% to XXXX, ratio XX.XX% XX, of XXXX. Tier total Our June XX, as capital risk-based from XX.XX% to risk-based X as capital increased June increased from of and

Chang Liu

Thank you, Heng.

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

Operator

Sandler. at question [Operator Piper from comes today Clark Instructions] Your Matthew first

Matthew Clark

to of quantify a little like the Just up margin. any about you couple basis I questions this recoveries prepay Did was the and up fees more, XX -- have loan points was loan in It the I around any looking yield yield. quarter. the guess, a looked

anything of front? was elevated on if wondering that Just kind

Heng Chen

Well, million interest recoveries. we had $X about of

rest As NIM, basis I pricing it be loans. was of improved just the X for points would of mentioned, it but

Matthew Clark

Got think . million you about $X that it. quarter. And last right? I Is had

Heng Chen

little Yes. A than less that.

Matthew Clark

to the of the interest-bearing on Okay. the September? then have spot you margin total in month And that if come back I average and rate later. deposits, or can

Heng Chen

Yes.

the next through of question, on interest-bearing was Matt? at -- month Let September rate me at deposits spot of part go the X.XX%. your so the was the end total XX What

Matthew Clark

you the take it. I'd in average September, margin If had

Heng Chen

bit Yes. had we average recoveries but quarter, -- it the a out noisy because was were interest The it's little X.XX%.

Matthew Clark

Okay. Understood.

Heng Chen

For the yes. month, September, .

Matthew Clark

X but . item, then housekeeping then back more queue. I'll The and still Great. $XX you the Okay. the just gave about amortization housing year, I maybe for million? is it in get And low-income know solar,

Heng Chen

yes. yes, see, Let's

Operator

Tenner Our next Gary today comes at D.A. from question Davidson.

Gary Tenner

it excluded you what assessment. I I the I which expenses. potential, I a rate, guess, had may XXXX, I were were core in run you for question First, expense heard X.X%, thought have said of on terms you saying but X.X% to expected misheard special any saying

or you're 'XX? was 'XX I talking So if confused about

Heng Chen

talking 'XX. about We're

banks you accrue As a finalized, not proposal that's there are whenever is know, expected GAAP, And to it. final. under

Gary Tenner

All right. wanted that. to I just clarify

terms wonder loan areas just coming of updates In you'd pipeline expect of of solid like through if quarter? could the at loan in still kind growth looks I of where of still the a you your is any it continue quarter. to level of suggests growth the give guidance that for kind strength from, fourth pipeline the loan terms kind fourth

Chang Liu

Gary. Sure,

that is purchases mortgage about surprisingly pipeline we're about That pipeline think and is actually. well, some strength holding I seeing in market. residential pretty the of still up XX% organic

today's given So market. that makes sense kind of

client So is slowing fairly seeing that mostly -- down, still there in. we're but from both Commercial is that's our -- we're current activity the estate definitely activity states the real across strong from base. continued

Some new betting very relationships carefully. that we're

for or activity new, definitely sure that C&I into the not prospects, of credit business a coming good looking And the on prepared path. we in. kind looking out XXXX. forward going lot to metrics continuing then find of our extent some side, on And But at make with and of that that we're coming new supporting and new we're their really they're clients

Gary Tenner

that. I question. last one And appreciate just

was third previously, you about paid me, I I don't a quarter, were that in it there were prepared commercial off quarter, Correct the those note second during the think loans in and recall. anticipated remarks, of some originated the larger if talked payoffs?

Chang Liu

They commercial we quarter. but of the that the during were lines second third credit quarter, pay and during down were paydowns some not downs, drawn payoffs, got

Heng Chen

borrowed vulnerable borrowers October. here then again in And Yes.

Operator

comes our And Truist next from Brandon King question Securities. at

Brandon King

in term you get how fourth play DDA could near deposit deposit the the in or DDA? expect to you're the some trends in fourth about wanted just to nonspring So growth context give also, out saw trends growth you you And around quarter? thinking And how quarter?

Heng Chen

But were the quarter. going what's pleasantly We at There I there's growth third may had amount was the that October. a pending that late that market a nothing it's small of that estate surprised be deposited purchase there's mean, I temporary. and we will the amount money and DDA, money think go -- -- customer in there. a to special deposit Yes, a real in out It's deposit. October,

Chang Liu

cost concentrate offset and in of even it a is as the is getting the think, bringing deposits enough really cost and that's that our of and on and DDA It's the driving part money we that but I growth really, But the we're effort, the is know order kind of DDA the to network, they network CDs, of funds to retaining key really retail our markets, of some where increase on them just funds. in collective on the CDs job. hit need

Brandon King

And expecting to in the outflow, much how that of are you quarter? Got fourth that outflow it. for

Heng Chen

million. Oh, $XX that one, was it

Brandon King

money was that market? see I Okay.

Heng Chen

It's Yes. It Yes. long market. Yes. a was time money a deposit.

Brandon King

Okay.

you back increase that in the trend expecting Okay. going And you How expectations? near similar of Are question fourth your a are on expecting then quarter? the sort loan yields. term? to to are of What kind

Heng Chen

one the in that quarters quarter. been mortgage, so. gone mean, almost each think we loan XXXX, -- of mortgage, for our residential large. very billion. thing $X -- is has And basis that We that's residential up XX I in It's every it's see points it's X

so was quarter, range. in quarter, almost the third hundred in million every X% million $XXX mortgages So loans or We're banking of X.XX%. the residential of a couple

we're They our -- XX when we So the it they period. XX and get then the get initial see they I trying mean, arms. up, from tend CRE, and -- And in when to to that Xs. to finish pay fixed off rate on continue prepayments pulls

Chang Liu

the them Right. a CRE, X-year can them we at we're plus XXX with if over pricing get X-year. about

but -- looking So seeing activity, some from seeing we're that some some some that's at. rate the refinance We're kind rate, we're range . purchases, still floating of so steady

Brandon King

hear it. did Got then I of expect fourth And it. sum that a kind up, -- that to just Got increase similar quarter. Is in kind of correctly? the you

Chang Liu

the third in Probably we Yes. what pretty quarter. Yes. to close had

Operator

And our next Terrell question today comes with Stephens. from Andrew

Andrew Terrell

or that square assuming from points going up in points basis the points XQ? interest this continues this basis quarter. was the but the loan forward? up did the margin Just lower or X I to that talk you maybe guess, basis last at whenever that that loan are out XX yields X you interest quarter, just recovery points recovery NIM the on the a include discussion should prepay Or quarter, about amount basis impacts yields, X normalize prepayment similar to going

Heng Chen

it Yes, see any don't off. should. nonaccruals paying big We

you from subtract just million it, the So onetime maybe $X.X for yes. nonaccruals.

Andrew Terrell

Understood.

you on I to similar then I X asked think, around looks addition underlying Okay. right question And the the increase talk nonaccruals OREO that around addition asset? like so. credits quarter? credit quarter. million the about quality, It then for OREO construction And that to, million just credit about from ran appreciate or just the went I $XX or this $XX drove Can it. up this

Chang Liu

Sure.

can bit. a construction portfolio about the On side, talk I that little

XX% One significant completion. partner Inland some It's as Unfortunately, California got It's result It's to at hospitality. partnership property. a the significant we LTV. between a was renovation dispute It some located. good reposition plus history. There's We're to the partnership. that pretty a has was reflag existing -- are. with where operating low asset. comfortable pretty some of them with the We're of there's a Empire led delays, a with Southern dispute to us well a asset an got

Heng Chen

past days Yes, that's nonaccrual. XX to between why That's had we loan on maturity. put that because

Chang Liu

buyer a a play we've as of that and there got other We've sort is been against identified set was that's some NorCal The a office and well. got building. that reposition also that's reserves it, X

Heng Chen

And It then it's single-family of OREO, in came Pacific out the a amount Palisades. nonaccrual. house

Andrew Terrell

there. wealth the quarter color good management could I that if about The talk X the a to what number more drove really management million moving appreciate sneak just rate a kind income quarter? wealth of this about is fee Understood. And then then strong. you Okay. fees I in. this the was think And forward? Can $X low list quarter run

Chang Liu

of I'll kind still on They're take at There's stab for a it. -- still budget year. this

first the behind year, half the Andrew, of I were think of they budget. kind

and the So volume their third and was the of effectively, it catch-up quarter their backlog of of kind on some pipeline. business

up. where I pick that's we think that so And really saw

Heng Chen

Yes.

close I think see volume fourth and in there's a lot of the third deals quarter. that

Andrew Terrell

Okay.

way think around more an So it. about this to maybe an on fair a Is annual like basis $XX number? million

Heng Chen

Yes. yes. Yes,

Operator

next Instructions] Today's question from comes Chris KBW. [Operator at McGratty

Nicholas Moutafakis

on just for months XX for This Maybe at term just appetite near Moutafakis in the at or higher a capital buyback is in a and your any stock price, Nick where Chris. given so? level are all next the levels

Heng Chen

by next to process Fed, it, out Absolutely. a I the conference release. We the months, builds the few bit talked capital press approved over on briefly about that. in quarter up get our -- it's it put there. it's And it's approval way little second the than we'll call, takes get longer compared in But once past. a going But the won't

certain. So when with we on can things catch more buybacks are

Nicholas Moutafakis

Okay. tax just And as rate maybe the well. then on

you longer If the is for rate do XXXX, good to look as into you run tax XX% XX.X% well? next term out year think a rate

Heng Chen

lower, runoff this overlap had we'll year, little plans a the that dollar -- we we for modeling solar it tax you're we had that give the one. almost up from have and solar bit. amortization dollar. And a XXXX. -- into low. is go X we'll is the guidance task fund go year. But We'll probably January extent for that credit It's higher, to little next in then a give the rate bottom, The we new second when And should then some a if

Operator

question follow-up from next Sandler. Clark is our a Matthew And Piper at

Matthew Clark

what us National Shared remind exposure you Can Credits? is SNC your

Heng Chen

It's less total Matthew. loans, than of X% our

Matthew Clark

that again, and quarter. might reserve, it. anything consistent guess, assuming the guys Okay. you I real the with but is this Got I'm office update and reserve the But the amount commercial on related And amount reserve the tweaked and sure not then, if I'm criticized? CRE reserve be the estate criticized, an

Heng Chen

XX our other the that I a at the criticized we're we amount reserve handy. about about that's in have Well, The What your think $XX million I amount can couple of tell don't loans points. question? is basis office. office reserving of criticized. We was part that's have you, nonaccruals, in now have at CRE

Operator

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

Chang Liu

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

Operator

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

You day. Good disconnect. may now

Cathay General Bancorp (CATY) 23 Oct 232023 Q3 Earnings call transcript