Cathay General Bancorp

Good afternoon, ladies and gentlemen, and welcome to Cathay General Bancorp's third quarter of 2023 earnings conference call. My name is Rocco, and I will 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 1 at any time during the conference. If assistance is needed 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. I would now like to turn the call over to Georgia Lowe, Investor Relations of Cathay General Bancorp. Please go ahead.

Georgia Lowe Thank you, Rocco, 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, 2022, 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 forelooking 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 third quarter 2023 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 2023 Third Quarter Earnings Conference Call. This afternoon, we reported net income of 82.4 million for the third quarter of 2023, an 11.6% decrease as compared to a net income of 93.2 million for the second quarter of 2023. The looted earnings per share decreased 11.8% to 1.13 per share for the third quarter of 2023, compared to $1.28 per share for the second quarter of 2023. In the third quarter of 2023, our gross loans increased $71 million, or 1.6% annualized, primarily driven by increases of $218 million, or 9.9% annualized in commercial real estate loans. and 143 million or 10.9% annualized in residential mortgage loans, offset by a decrease of 227 million or 27.4% annualized in commercial loans. The slow loan growth during the third quarter resulted in part from pay down of several large commercial loans originated in the second quarter of 2023. We continue to monitor our commercial real estate loans, turning to slide seven of our earnings presentation, As of September 30, 2023, the average loan-to-value of our commercial real estate loans was 50%. As of September 30, 2023, our retail property loan portfolio at slide 8 comprises 23% of our total commercial real estate loan portfolio, or 11% of our total loan portfolio. Eighty-nine percent of the $2.2 billion in retail loans is secured by retail store, building, neighborhood, mixed-use, or strip centers, and only 10% is secured by shopping centers. At slide 9, office property loans represent 16% of our total commercial real estate loan portfolio, or 8% of total loan portfolio. Only 34% of the $1.5 billion in office property loans are collateralized by pure office buildings, and only 4% of the office property loans are in central business districts. Another 25% of office property loans are collateralized by office retail stores, office mixed use, and medical offices. The remaining 28% of office property loans are collateralized by office condos. For the third quarter of 2023, we reported net charge-offs of $6.6 million, of which $4.3 million had been reserved for in prior quarters compared to net charge-offs of $2 million in the second quarter of 2023. Our non-accrual loans were 0.41% of total loans as of September 30, 2023, which increased by 8.3 million to 77.3 million as compared to the end of the second quarter of 2023. Turning to slide 12, as of September 30th, 2023, classified loans increased slightly to 202 million from 193 million as of June 30th, 2023. And our special mention loans also increased slightly to 278 million from 260 million as of June 30th, 2023. We recorded a provision for credit loss of $7 million in the third quarter of 2023 as compared to a $9.2 million in provision for credit losses for the second quarter of 2023. We are pleased that total deposits increased by $539 million or 11.6% annualized during the third quarter of 2023. As a result, we were able to reduce our borrowings from Federal Home Loan Bank by $800 million during the quarter to $15 million as of September 30, 2023. Total uninsured deposits were $9 billion, but excluding $0.8 billion in collateralized deposits, the uninsured and uncollateralized deposits were reduced to $8.2 billion, or 41.7% of total deposits, as of September 30, 2023. Our unused borrowing capacity from the Federal Home Loan Bank was $7.2 billion, and on-place securities was $1.4 billion. Resources of available liquidity were more than 100% of uninsured and uncollateralized deposits as of September 30th, 2023. Total time deposits increased 237 million or 31.2% annualized during the third quarter of 2023 compared to the second quarter of 2023. Total core deposits increased by 301 million or 10.5% annualized primarily due to organic growth and seasonal increases. I will now turn the floor over to our Executive Vice President and Chief Financial Officer, Mr. Heng Cheng, to discuss the third quarter 2023 financial results in more detail.