Cathay General Bancorp

Good afternoon, ladies and gentlemen, and welcome to the Cathay General Bancorp's third quarter 2022 earnings conference call. My name is Matt and I'll be your coordinator for today. At this time, all participants are in listen only mode. Following the prepared remarks, there will be a question and answer session. If you'd 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 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'd like to turn the call over to Georgia Lowe, Investor Relations of Cathay General Bank Corp.

Thank you, Matt, 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 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, 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 an anticipated event. This afternoon, Cathay General Bancorp issued its earning release outlining its third 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 up this call 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 third quarter earnings conference call. This afternoon, we reported net income of $99 million for the third quarter of 2022, a 36.8% increase as compared to a net income of $72.4 million for the third quarter of 2021. Deluded earnings per share increased 45.2% to $1.35 per share for the third quarter of 2022, compared to $0.93 per share for the same quarter a year ago. In the third quarter of 2022, our gross loans increased 318.9 million or 7.8% annualized. The increase in loans for the third quarter of 2022 was primarily driven by increases of 193.4 million or 26.8% annualized in commercial loans, excluding PPP loans. 114.7 million or 5.6% annualized in commercial real estate loans. 85.3 million or 8.2% annualized in residential mortgage loans. The overall loan growth for 2022 is expected to range between 11 percent to 12.5 percent, including approximately 646.1 million of loans from the acquisition of certain HSBC West Coast branches in February 2022. Excluding the HSBC acquisition, we project loan growth to be between 7 percent and 8.5 percent in 2022. We continue to monitor our commercial real estate loans. turning to slide seven of our earnings presentation, as of September 30th, 2022, the average loan-to-value of our CRE loans was 51%. As of September 30th, 2022, our retail property loan portfolio, as slide eight, comprises 22% of our total commercial real estate loan portfolio and 11% of our total loan portfolio. The majority, 89% of the $1.95 billion in retail loans, is secured by retail store buildings, neighborhood, mixed-use or strip centers, and only 10 percent secured by shopping centers. For the third quarter of 2022, we reported net charge-offs of $0.6 million compared to net recoveries of $0.2 million in the second quarter of 2022. Our non-accrual loans were 0.38 percent of total loans as of September 30, 2022, increased by $7.5 million to $68.1 million as compared to the end of second quarter of 2022. Turning to slide 11, CLASSIFIED LOANS DECREASED SLIGHTLY DURING THE QUARTER FROM $244 MILLION TO $240 MILLION AS OF SEPTEMBER 30, 2022. AND OUR SPECIAL MISSION LOANS INCREASED SLIGHTLY DURING THE QUARTER FROM $295 MILLION TO $305 MILLION AS OF SEPTEMBER 30, 2022. WE RECORDED PROVISION FOR CREDIT LOSS OF $2 MILLION IN THE THIRD QUARTER OF 2022 AS COMPARED TO A $2.5 MILLION PROVISION FOR CREDIT LOSSES IN THE SECOND QUARTER OF 2022. and $3.1 million provision for credit losses in the third quarter of 2021. Total deposits increased by $288.4 million, or 6.4% annualized, during the third quarter of 2022. Time deposits increased $686 million, or 49.7% annualized, and interest-bearing demand deposits increased $76 million, or 12% annualized, during the third quarter of 2022, compared to the second quarter of 2022. Money market deposits decreased by $387 million, or 33.6 percent annualized due primarily to a migration back to CDs from money market deposits and deposit runoff. For 2022, the overall deposit growth is expected to range between 8 percent and 9.5 percent, which includes approximately $600 million of low-cost deposits from the HSBC acquisition. In May 2022, the Board of Directors adopted $125 million new share repurchasing program. We repurchased $1.08 million of shares of our stock at an average cost of $42.88, totaling $46.3 million in the third quarter of 2022, with $76.9 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. Hang Chang, to discuss the third quarter of 2022 financial results in more detail.