Cathay General Bancorp

Good afternoon, ladies and gentlemen, and welcome to the Cathay General Bancorp's first 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. If you would like to participate in this portion of the call, please press star followed by 1 at any time during the conference. If assistance is needed at any time during the call, please press star followed by zero, and the coordinator will be happy to assist you. Today's call is being recorded and will be available for replay at www.cathegeneralbankcorp.com. Now I would like to turn the call over to Megan Chang, Investor Relations of Cathay General Bancorp.

Thank you, Andrew, and good afternoon. Here to discuss the financial results today are Mr. Chang Lui, our President and Chief Executive Officer, and Mr. Hang Chan, 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 31st, 2021, as item 1A in particular, and in other reports and filings of 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 Bankrupt issued an earnings release outlining its first quarter 2022 results. To update a copy of our earnings release as well as our first quarter earnings presentation, please visit our website at www.capitalgeneralbankup.com. After comments by management today, we will open up this call for questions. I will now turn the call over to our President and Chief Executive Officer, Mr. Chang Lui.

Thank you, Megan, and good afternoon, everyone. Welcome to our 2022 first quarter earnings conference call. This afternoon, we reported net income of $75 million for the first quarter of 2022, a 2.2% increase as compared to the net income of $73.4 million for the first quarter of 2021. Diluted earnings per share increased 7.6% to $0.99 per share for the first quarter of 2022, compared to $0.92 per share for the same quarter a year ago. In the first quarter of 2022, our growth loans increased 1.1 billion, or 25.8 percent annualized. Organic loan growth, excluding PPP loans and HSBC acquired loans, increased by 431.8 million to 16.8 billion, which represents an annualized growth rate of 10.6 percent. The increase in loans for the first quarter of 2022 was primarily driven by increases of 181.6 million or 25.1 percent annualized in commercial loans excluding PPP and HSBC loans, 258.5 million or 12.7 percent annualized in commercial real estate loans, 33.4 million or 3.2 percent annualized in residential mortgage loans. That excludes HSBC acquired loans. The overall loan growth for 2022 is expected to range between 9 percent to 13 percent. including approximately 646.1 million of loans from the acquisition of certain HSBC West Coast branches. Without the HSBC acquisition, we project loan growth to be between 5% and 8% in 2022. During the first quarter of 2022, 37.4 million of PPP loans were forgiven. As of March 31st, 2022, our deferred PPP loan fees were 49,000. We continue to monitor our commercial real estate loans Turning to slide eight of our earnings presentation, as of March 31st, 2022, the average loan-to-value of our CRE loans was 51%. As of March 31st, 2022, our retail property loan portfolio, shown on slide nine, comprises 23% of our total commercial real estate loan portfolio and 11% of our total loan portfolio. The majority, 88% of the $1.93 billion in retail loans, is secured by retail store buildings neighborhood, mixed-use, or strip centers, and only 11% is secured by shopping centers. For the first quarter of 2022, we reported net recoveries of 100,000 compared to net charge-offs of 300,000 in the fourth quarter of 2021. Our non-accrual loans were 0.5% of total loans as of March 31, 2022, increased by $20.5 million to 86.3 million as compared to the end of the fourth quarter of 2021. A 14 million commercial loan was placed on non-accrual. Turning to slide 12, we were pleased to see that our classified loans decreased during the quarter from 266 million to 219 million at March 31st, 2022. And our special mention loans decreased during the quarter from 499 million to 389 million at March 31st, 2022. We recorded a provision for credit loss of $8.6 million in the first quarter of 2022, as compared to a $3.5 million provision for credit losses in the fourth quarter of 2021, and a $13.6 million reversal of provision for credit losses in the first quarter of 2021. The provision for credit losses of $8.6 million reflected the growth in loans during the first quarter, which included a $2.3 million A2 CISO charge for the loans acquired from the HSBC acquisition. Turning to slide three, excuse me, turning to slide five, total average deposits excluding HSBC acquired deposits increased by 218.6 million or 7.4% annualized during the first quarter of 2022. On slide 13, average money market deposits increased 421.8 million or 35.6% annualized during the first quarter of 2022 compared to the fourth quarter of 2021. Average time deposit decreased by $314.8 million, or 17.4% annualized, due partly to the runoff of broker CDs and partly due to a migration of CDs to money market deposits. For 2022, the overall deposit growth is expected to range between 9% and 12%, which includes approximately $0.6 billion of low-cost deposits from the HSBC acquisition. Excluding the acquired deposits from HSBC, we project deposit growth to be between 5% and 8% in 2022. We repurchased 704,927 shares of our stock in an average cost of $46.67, totaling $32.9 million in the first quarter of 2022, completing the September 2021 stock repurchasing program. We are working on a new stock buyback program. The acquisition of certain West Coast branches from HSBC was successfully completed on February 7, 2022. We welcome the new customers and the HSBC associates in the 10 branches. We acquired $646 million in loans, $575 million in deposits, and 10 branches expanding our Northern and Southern California branch network. I will now turn the floor over to our Executive Vice President and Chief Financial Officer, Mr. Han Chang, to discuss the first quarter 2022 financial results in more detail.