Cathay General Bancorp

Good afternoon, ladies and gentlemen, and welcome to the Cathay General Bancorp's first quarter of 2024 earnings conference call. My name is Gary, 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 1 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.CathayGeneralBancorp.com. Now I would like to turn the call over to Georgia Lowe, Investor Relations of Cathay General Bancorp. Please go ahead.

Georgia Lowe, Investor Relations of Cathay General Bancorp. Thank you, Gary, 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 31, 2023, 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 first quarter 2024 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. Welcome to our 2024 First Quarter Earnings Conference Call. This afternoon, we reported net income of $71.4 million for first quarter 2024, a 13.4% decrease as compared to $82.5 million the previous quarter. Our net income this quarter included a $9 million, or $0.09 per diluted share, mark-to-market loss from equity securities, and a $2.9 million, or $0.03 per diluted share, accrual for an increase in the FDIC special assessment. Diluted earnings per share decreased by 13.5% to $0.98 per share for the first quarter of 2024, as compared to $1.13 per share in the previous quarter. In first quarter 2024, total gross loans decreased $119 million, or 2.4% annualized, or 3.8% annualized in commercial real estate loans, offset by a decrease of $172 million, or 20.9% annualized in commercial loans, and $40 million, or 37.7% annualized in construction loans. Due to slower than expected loan growth in first quarter 2024, we have revised our overall loan growth guidance for 2024 to range between 3% and 4%. We added slide 6 to show the percentage of loans in which major loan portfolio that are either fixed rate or hybrid loans in their fixed rate period. Our loan portfolio consists of 64% fixed rate and hybrid loans excluding fixed-to-flow interest rate swaps on 4% of total loans. Fixed rate loans comprise 30% of total loans, and hybrid loans in fixed rate period comprise 34% of total loans. We continue to monitor our commercial real estate loans, turning to slide 8 of our earnings Dec, as of 31st, 2024, the average loan-to-value of our CRE loans was 50%. As of March 31st, 2024, our retail property loan portfolio is shown on slide 9, comprised of 23% of our total commercial real estate loan portfolio, with 12% of our total loan portfolio. 90% of the $2.3 billion in retail property loan is secured by retail store, building, neighborhood, mixed-use, or strip centers. Only 9% is secured by shopping centers. On slide 10, office property loans represent 15% of our total commercial real estate loan portfolio, or 8% of our total loan portfolio. Only 34% of the $1.5 billion in office property loans are collateralized by pure office buildings. Only 3% are in central business districts. 38% of office property loans are collateralized by office retail stores. Office mixed-use and medical offices and the remainder 28% are collateralized by office condos. For first quarter 2024, we reported net charge-offs of $1.1 million as compared to $4.1 million in the previous quarter. Our non-accrual loans were 0.5% of total loans as of March 31, 2024, which increased by $31.4 million to $98.1 million as compared to the previous quarter. The increase in non-accrual loans during the first quarter of 2024 came mainly from a $23 million low loan-to-value construction loan in New York, which has passed due maturity, and two theater loans totaling $21 million. Turning to slide 12, as of March 31, 2024, classified loans increased to $244 million from $200 million as of December 31, 2023. And our special mission loans decreased to $249 million from $308 million as of December 31, 2023. So for first quarter 2024, there was a small decrease in total special mention and classified loans. We recorded a provision for credit loss of 1.9 million the first quarter of 2024 as compared to a 1.7 million in provision for credit losses for the previous quarter. Total deposits increased by 520.8 million or 10.8% annualized during the first quarter of 2024. Total core deposits increased 210.9 million or 8.4% annualized, and total time deposits increased 731.7 million, or 31.3% during the first quarter of 2024, mainly due to our Lunar New Year CD campaign. We expect the overall deposit growth to continue in an estimated range between 4% and 5%. As of March 31, 2024, total uninsured deposits were 8.1 billion, net of 0.7 billion in collateralized deposits, or 40.7% of total deposits. We have an unused borrowing capacity from the Federal Home Loan Bank of $6.9 billion and unplaced securities of $1.7 billion as of March 31st, 2024. The sources of available liquidity more than cover 100% of uninsured and uncollateralized deposits as of March 31st, 2024. I will now turn the floor over to our Executive Vice President and Chief Financial Officer, Mr. Hang Cheng, to discuss the quarterly financial results in more detail.