Cathay General Bancorp

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. If you would like to participate in this portion of the call, please press star 1-1 at any time during the conference. 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 Georgia Lowe, Investor Relations of Cathay General Bank Corp.

Thank you, Andrew, 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 action results that 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, 2021. At Item 1-A, 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 of 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 an unanticipated event. This afternoon, Cathay General Bancorp issued an earnings release outlining its second quarter 2022 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 up 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 2022 second quarter earnings conference call. This afternoon, we reported net income of $89 million for the second quarter of 2022, a 15.3% increase as compared to a net income of $77.2 million for the second quarter of 2021. Diluted earnings per share increased 21.6% to $1.18 per share for the second quarter of 2022, compared to $0.97 per share for the same quarter a year ago. In the second quarter of 2022, our gross loans increased $389.5 million, or 9.5% annualized. Increasing loans for the second quarter of 2022 was primarily driven by increases of $94.6 million, or 13.1% annualized in commercial loans, excluding PPP loans, $161.3 million, or 7.9% annualized in commercial real estate loans, 210.6 MILLION OR 20.1% ANNUALIZED IN RESIDENTIAL MORTGAGE LOANS. THE OVERALL LOAN GROWTH FOR 2022 IS EXPECTED TO RANGE BETWEEN 10% TO 12%, INCLUDING APPROXIMATELY 646.1 MILLION OF LOANS FROM THE ACQUISITION OF CERTAIN HSBC WEST COAST BRANCHES. EXCLUDING THE HSBC ACQUISITION, WE PROJECT LOAN GROWTH TO BE BETWEEN 6% AND 8% IN 2022. DURING THE SECOND QUARTER OF 2022, 25.3 MILLION OF PPP LOANS WERE FORGIVEN. WE CONTINUE TO MONITOR OUR COMMERCIAL REAL ESTATE LOANS. TURNING TO SLIDE EIGHT OF OUR EARNINGS PRESENTATION, AS OF JUNE 30TH, 2022, THE AVERAGE LOAN TO VALUE OF OUR CRE LOANS WAS 52%. AS OF JUNE 30TH, 2022, OUR RETAIL PROPERTY LOAN PORTFOLIO COMPRISES 23% OF OUR TOTAL COMMERCIAL REAL ESTATE LOAN PORTFOLIO AND 9% OF OUR TOTAL LOAN PORTFOLIO. THE MAJORITY, 90% OF THE 1.94 BILLION IN RETAIL LOANS SECURED BY RETAIL STORE BUILDINGS, NEIGHBORHOOD MIXED USE OR STRIP CENTERS, AND ONLY 9% IS SECURED BY SHOPPING CENTERS. FOR THE SECOND QUARTER OF 2022, WE REPORTED NET RECOVERIES OF 0.2 MILLION COMPARED TO NET RECOVERIES OF 0.3 MILLION IN THE FIRST QUARTER OF 2022. OUR NON-ACCRUAL LOANS WERE 0.35% OF TOTAL LOANS AS OF JUNE 30, 2022, DECREASED BY 25.7 MILLION TO 60.6 MILLION AS COMPARED TO THE END OF FIRST QUARTER OF 2022. TURNING TO SLIDE 11, CLASSIFIED LOANS INCREASED SLIGHTLY DURING THE QUARTER FROM 219 MILLION TO 244 MILLION AS OF JUNE 30TH, 2022. AND OUR SPECIAL MISSION LOANS DECREASED DURING THE QUARTER FROM 389 MILLION TO 295 MILLION AS OF JUNE 30TH, 2022. WE RECORDED A PROVISION FOR CREDIT LOSS OF 2.5 MILLION THE SECOND QUARTER OF 2022. AS COMPARED TO AN 8.6 MILLION PROVISION FOR CREDIT LOSSES IN THE FIRST QUARTER OF 2022, AND A 9 MILLION REVERSAL OF PROVISION FOR CREDIT LOSSES IN THE SECOND QUARTER OF 2021. TOTAL DEPOSITS INCREASED BY 227.1 MILLION, OR 5% ANNUALIZED DURING THE SECOND QUARTER OF 2022. ON SLIDE 12, AVERAGE MONEY MARKET DEPOSITS INCREASED 465 MILLION, OR 38.6% ANNUALIZED DURING THE SECOND QUARTER OF 2022. compared to the first quarter of 2022. Average time deposit decreased by $408 million, or 30.9% annualized due to migration of CDs to money market deposits and deposit runoff. For 2022, the overall deposit growth is expected to range between 9% and 12%, which includes approximately $0.6 billion of low-cost deposit from the HSBC acquisition. Excluding the acquired deposits from HSBC, we project deposit growth to be between 5% and 8% in 2022. In May 2022, the Board of Directors adopted $125 million new share repurchasing program. We repurchased 750,000 shares of our stock at an average cost of $40.78 per share, totaling $30.6 million in the second quarter of 2022, with $94.4 million remaining in the May 2022 stock repurchase program. I WILL NOW TURN THE FLOOR OVER TO OUR EXECUTIVE VICE PRESIDENT AND CHIEF FINANCIAL OFFICER, MR. HENG CHENG, TO DISCUSS THE FIRST QUARTER, THE SECOND QUARTER 22 FINANCIAL RESULTS IN MORE DETAIL.