Cathay General Bancorp

Good afternoon, ladies and gentlemen, and welcome to Cathay General Bancorp's fourth quarter and full year 2022 earnings conference call. My name is Sarah, 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 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.cathegeneralbankcorp.com. Now, I would like to turn the call over to Georgia Lowe, Investor Relations of Cathay General Bank Corp.

Thank you, Sarah, 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 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 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 obligations 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 fourth quarter and full year 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 from 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 fourth quarter earnings conference call. This afternoon, we reported net income of $97.6 million for the fourth quarter of 2022, a 29.6% increase as compared to a net income of $75.3 million for the fourth quarter of 2021. Diluted earnings per share increased 35.7% to $1.33 per share for the fourth quarter of 2022, compared to 98 cents per share for the same quarter a year ago. In the fourth quarter of 2022, our gross loans increased 147.2 million or 3.6% annualized. The increase in loans for the fourth quarter of 2022 was primarily driven by increases of 116 million or 5.3% annualized in commercial real estate loans, 122.3 million or 9.5% annualized in residential mortgage loans, The overall loan growth for 2023 is expected to range between 3% to 5%. We continue to monitor our commercial real estate loans. Turning to slide 8 of our earnings presentation, as of December 31st, 2022, the average loan-to-value of our CRE loans was 51%. As of December 31st, 2022, our retail property loan portfolio at slide 9 comprises 22% of our total commercial real estate loan portfolio and 11% of our total loan portfolio. The majority, 89% of the $1.96 billion in retail loans, is secured by retail building, neighborhood, mixed-use, or strip centers, and only 10% is secured by shopping centers. For the fourth quarter of 2022, we reported net charge-offs of $2.5 million, which included $2 million that were fully reserved as of September 30, 2022, compared to net charge-offs of $0.6 million in the third quarter of 2022. Our non-accrual loans were 0.38% of total loans as of December 31, 2022, increased by $3 million to $68.9 million as compared to the end of the third quarter of 2022. Turning to slide 12, as of December 31, 2022, classified loans increased slightly to $256 million from $240 million as of September 30, 2022. And our special mention loans increased to $321 million from $305 million as of September 30, 2022. We recorded a provision for credit loss of $1.4 million in the fourth quarter of 2022 as compared to a $2 million provision for credit losses in the third quarter of 2022 and $3.5 million provision for credit losses in the fourth quarter of 2021. Total average deposits increased by $387.5 million or 9% annualized during the fourth quarter of 2022. Average time deposits increased $1.4 billion or 99.2% annualized during the fourth quarter of 2022 compared to the third quarter of 2022. Average money market deposits decreased by 802.8 million, or 73.1% annualized, due primarily to a migration back to CDs from money market deposits and deposit runoff. For 2023, the overall deposit growth is expected to range between 3% and 5%. I will now turn the floor over to our Executive Vice President, Chief Financial Officer, Mr. Heng Cheng, to discuss the fourth quarter 2022 financial results in more detail.