Cathay General Bancorp

Good afternoon, ladies and gentlemen, and welcome to CAFE General Bank Court Second Quarter 2021 Earnings Conference Call. My name is Paul, 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. If you would like to participate in this portion of the call, please press star followed by one at any time during the conference. If assistance is needed at any time during the call, please press star followed by zero, and a coordinator will be happy to assist you. Today's call is being recorded and will be available for replay at www.categeneralbankcorp.com. Now, I would like to turn the call over to Georgia Lowe, Investor Relations of Cate General Bank Corp.

Thank you, Paul, and good afternoon. Here to discuss the financial results today are Mr. Chang Liu, our President and Chief Executive Officer, and Mr. Hang Chen, our Executive Vice President and Chief Financial Officer. Before we begin, we wish to remind you that the speakers on this call may make forward-looking statements within the meaning of the applicable provisions of the Private Securities Litigation Reform Act of 1995 concerning future results and events, and that these statements are subject to certain risks and uncertainties that could cause actual results to differ materially. These risks and uncertainties are further described in the company's annual report on Form 10-K for the year ended December 31, 2020, at Item 1A in particular, and in other reports and filings with the Securities and Exchange Commission from time to time. As such, we caution you not to place undue reliance on such forward-looking statements. Any forward-looking statement speaks only as of the date on which it is made and except as required by law. We undertake no obligation to update or review any forward-looking statements to reflect future circumstances, developments or events, or the occurrence of unanticipated events. This afternoon, Cathay General Bancorp issued an earnings release outlining its second quarter 2021 results. To obtain a copy of our earnings release, as well as our earnings presentation, please visit our website at www.cathaygeneralbancorp.com. After comments by management today, we will open this call-out for questions. I will now turn the call over to our President and Chief Executive Officer, Mr. Chang Liu.

Thank you, Georgia, and good afternoon, everyone. Welcome to our 2021 second quarter earnings conference call. This afternoon, we reported net income of 77.2 million for the second quarter of 2021, a 5.2% increase as compared to a net income of 73.4 million for the first quarter of 2021. Deluded earnings per share increased 42.6% to 97 cents per share for the second quarter of 2021, compared to 68 cents per share for the same quarter a year ago. In the second quarter of 2021, our gross loans excluding PPP loans increased by $134.4 million to $15.5 billion, which represents an annualized growth rate of 3.4%. The increase in loans for the second quarter of 2021 was primarily driven by increases of $72.3 million, or 11.1% annualized, in commercial loans excluding PPP loans and 65.6 million or 3.5% annualized in commercial real estate loans. We continue to expect full-year loan growth excluding PPP loans of between 3% and 5%. During the second quarter of 2021, 118.5 million of PPP loans were forgiven. As of June 30th, 2021, our deferred PPP loan fees were 8.8 million. We continue to monitor our commercial real estate loans. Turning to slide seven of our earnings presentation, as of June 30th, 2021, the average loan to value of our CRE loans was 51%. As of June 30th, 2021, CRE loans with an aggregate balance of 92 million, or approximately 1.2% of our CRE loan portfolio, remain on loan modifications to provide relief on repayment terms. All loans under loan modification are continued to make interest payments as of june 30th 2021 our retail property loan portfolio comprises 23 of our total commercial real estate loan portfolio and 11 of our total loan portfolio the majority 61 of the 1.72 billion in retail loans is secured by neighborhood mixed use or strip centers and only 10 is secured by shopping centers for the second quarter of 2021 We reported net charge-offs of 7.3 million compared to net charge-offs of 7.8 million in the first quarter of 2021. Our second quarter charge-offs included an oil and gas loan charge-off of 4.4 million and a commercial loan charge-off of 1.7 million from our Hong Kong office. Our non-accrual loans were 0.42% of total loans as of June 30th, 2021, decreased by 26.7 million to 67.8 million as compared to the end of the first quarter of 2021. The decrease was primarily due to a sale of an $18.8 million oil and gas loan at a discount of $4.4 million and a payoff of a $10.1 million commercial real estate loan in April 2021. Our total oil and gas loan portfolio was $113 million as of June 30, 2021, and no loan was rated substandard. Please see page 11 of our earnings presentation. We recognize the reversal for credit loss of $9 million in the second quarter of 2021 as compared to a $13.6 million reversal provision for credit losses in the first quarter of 2021. The reversal for credit losses of $9 million reflected the continuing improvement in the economic forecast made in June 2021 compared to the forecast made in March 2021 by the economic forecaster used in our CISO process. Turning to slide 12. Total average deposits increased by $348.7 million, or 8.7% during the second quarter of 2021. Average time deposit decreased by $369.5 million, or 23.1%, due mainly to the runoff of broker CDs. Under the company's $75 million April 1, 2021 buyback program, we repurchased 1.5 million shares of our stocks at an average cost of $41.46 million. totaling 63.5 million in the second quarter of 2021. We continue to work on the integration and conversion plan for our purchase of the 10 branches and select West Coast loans and deposits from HSBC. This transaction will broaden the reach of our Northern and Southern California branch network in addition to requiring $1 billion in low-cost deposits and $0.8 billion in residential loans. The transaction is expected to be completed during the first quarter of 2022. I will now turn the floor over to our Executive Vice President and Chief Financial Officer, Hang Cheng, to discuss the second quarter 2021 financial results in more detail.