Q3 2024 Cathay General Bancorp Earnings Call
Rocco: Good afternoon ladies and gentlemen, and welcome to Kathy General Vancouver's third quarter of 2024 earnings conference fall. My name is Rocco and I will be your coordinator for today.
Rocco: 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, follow by one at any time during the conference.
Rocco: and the assistance needed at any time during the call, please press star follow my zero and a coordinator will be happy to assist you.
Rocco: Today's show is being recorded and will be available for replay at www.cathaginoldanko.com.
Speaker Change: Now I'll invite the trying to call over to Georgia Lo, and that's the Relations and Cathage and Old Vancouver.
Georgia Lo: and good afternoon. Here to discuss the financial results today, our Mr. Cheng Liu, our President and Chief Executive Officer and Mr. Heng Chen, our Executive Vice President and Chief Financial Officer.
Speaker Change: Before we begin, we wish to remind you that the speakers on this call may make forward-looking statement.
Speaker Change: Within the meaning of the applicable provisions of the private securities litigation reform act of 1995.
Speaker Change: Concerning future results in events and that these statements are subject to certain risks and uncertainties that could cause actual results to differ materially. These risk and uncertainties are further described in the company's annual report on form 10K for the year ended December 31, 2023, at item 1A in Virginia.
Speaker Change: and other reports and file links with the Security's Exchange Commission from time to time.
Speaker Change: As such, we caution you not to place undue reliance on such forward-looking statements. Any forward-looking statements speaks only as of the date on which it's made and except as you part by law, we undertake no obligation to update or review any forward-looking statements to reflect future circumstances, elements or events, or the occurrence of unanticipated events.
Speaker Change: The South Channoon, Café General Bancorbe, issued an earnings release outlining its third quarter 2024 results.
Speaker Change: Tap Tina, copy of our earnings release as well as our earnings presentation. Please visit our website at www.CathyJermilBankworld.com.
Georgia Lo: 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, Ms. Chang Liu. Thank you, Georgia, and good afternoon. Welcome to our 2024 third quarter earnings conference call.
Chang Liu: This afternoon, we reported net income of 67.5 million for Q3 2024, a 1% increase as compared to 66.8 million in Q2.
Chang Liu: The earnings per share increased 2.2% to 94 cents per share for the third quarter as compared to 92 cents per share in Q2.
Chang Liu: During the third quarter of 2024, we repurchase 832,460 shares of our common stock and an average cost of $42 per share with 35 million under our May 2024 and 25 million stock by back program.
Chang Liu: We anticipate continuing to re-purchase around 35 million in stock per quarter in Q4 and Q1225 depending on the market conditions.
Chang Liu: In Q3 2024, total gross loans increase 16 million, or 0.3% and annualized, primarily driven by increases of 89 million, or 4% annualized in CIOE loans, and 16 million, or 2% annualized in CIOE loans.
Chang Liu: Offset by decreases of 40 million or 3% annualized in residential mortgages since he lock and 50 million or 47% annualized in construction months.
Chang Liu: We expect long growth for 2024 to be between –1% and 0% based on the long trend so far in 2024.
Chang Liu: Flight 6 shows the percentage of loans in each major loan portfolio that are either fixed rate or hybrid loans in their fixed rate period.
Chang Liu: Our loan portfolio consists of 63% fixed rate and hyperlones, excluding fixed-to-flow interest rate swaps on 4.5% of total loans.
Chang Liu: Fixed rate loans comprise B% of total loans, and hybride in fixed rate period comprise 33% of total loans.
Chang Liu: We expect these fixed-rate loans to support our loan yields as market rates are expected to decline.
Chang Liu: We continue to monitor our commercial real estate loans, turning to slide 8 of our earnings presentation as of September 30, 2024, the average loan to value of our COE loans was 49%.
Chang Liu: As of September 30, 2024, a retail property loan portfolio is shown on slide 9, comprised of 24% of our total CRE loan portfolio, were 12% of our total loan portfolio.
Chang Liu: 90% of the 2.4 billion in retail property alone is secured by retail store, building, neighborhood mixed use or strip centers, only 9% secured by shopping centers.
Chang Liu: On Sight 10, office property loans represent 15% of our total COU loan portfolio, where 8% of our total loan portfolio.
Chang Liu: Only 35% of the 1.5 billion in office property loans are collateralized by pure office buildings. Only 3% are in central business districts.
Chang Liu: 38% of office property loans are collateralized by office retail stores, office mixed use in medical offices, and the remainder 27% are collateralized by office.
Chang Liu: Andals.
Chang Liu: for Q3 2024, reported net charge offs of 4.2 million, as compared to 8 million in Q2.
Chang Liu: are not a cruel loans were 0.84% of total loans as of September 30, 2024, which increased 55.5 million to 162.8 million as compared to Q2.
Chang Liu: The increase in non-accrual loans during the U-320-24 came primarily from a 38 million loan relationship that was placed on non-accrual due to interest in the increase of more than more than 90 days on 19 million of those loans.
Chang Liu: of this long relationship, 11.2 million is a real estate loan with a ball we're looking for in the lender. The ball is also seeking new financing to repay commercial loans in this relationship.
Chang Liu: We expect a long-term inconsistency to be resolved in the next few months.
Chang Liu: The largest new non-accrual loan is a $12.7 million real estate loan Heng Kong, secured by four rental properties with no projected loss.
Chang Liu: During the third quarter, we also saw our largest.
Chang Liu: Nonacruo Lo, a 23 million construction loan, and recover 1.9 million of back interest.
Chang Liu: Training on slide 12, as of September 30, 2024, classified loans increased to 382,000, from 324,000 in Q2, mainly due to the placement of the 38 million loan relationship discussed above to not cruel.
Chang Liu: and our special mentioned loans increased to 23 million from 222 million in Q2.
Chang Liu: We recorded provision for credit loss of 14.5 million in Q32024 as compared to a 6.6 million provision for credit losses for Q2.
Chang Liu: This increased the reserve to long ratio from 0.79% for Q2 to 0.85% for Q3 However, excluding our residential mortgage portfolio which has historically have very low loss content, the total reserve to long ratio would be 1.08%
Chang Liu: Total deposits increased by 171 million or 3.5% annualized during Q3204. Total core deposits increased 195 million or 7.8% annualized due to seasonal factors in marketing activities and total time deposits decreased 24 million or 1% annualized during Q32024.
Chang Liu: The average number of months of time deposits is 5 months, which will allow us to lower the cost of time deposits as deposits are expected to decline.
Chang Liu: As of September 30, 2024, total uninsured deposits were 8.4 billion, net of 0.8 billion in collateralized deposits, or 42.1% of total deposits.
Chang Liu: We have an unused borrowing capacity from the federal home bank of $7.2 billion in the Federal Reserve Bank of $438 million.
Chang Liu: and Unplaced Securities of 1.5 billion as of September 30, 2024. These sources of available liquidity more than covers 100% of uninsured and uncollateralized deposits as of September 30, 2024.
Speaker Change: I will now turn the floor towards our Executive Vice President and Chief Financial Officer, Mr. Heng Chen, to discuss quarterly financial results in more detail.
Heng Chen: Thank you, Chang, and could ask for new, everyone.
Speaker Change: on Q3 2020-24 now then come increase 0.7 million, but 1% is a 6.7.5 million.
Heng Chen: Comparing the 66.8 million for Q2.
Heng Chen: I'm Yala, you do the increases.
Heng Chen: I was 3.8 million in Nail Interest on CUP
Heng Chen: and 7.1 million in non-interest income.
Heng Chen: and 2.5 million decreases in non-interest expense.
Heng Chen: I'll say bye.
Heng Chen: 7.9 million increase in provision for credit losses.
Heng Chen: and 4.9 million increase in income tax expense.
Heng Chen: Let's encamp.
Heng Chen: for Q3 2024 was reduced by 2.2 million.
Heng Chen: or three cents per share from the true up of loan-compousing tax credits.
Heng Chen: Recorded for 2020-23.
Heng Chen: 2,3, 2020, 4, net-in-transpagion was 3.04% as compared to 3.01% for Q2.
Heng Chen: with the set starting of the right cutting cycle.
Heng Chen: Our net interest margin appears to have positive doubt.
Heng Chen: and Big Lan Chen in Queens.
Heng Chen: We anticipate.
Heng Chen: That's a net interest margin for 2024.
Heng Chen: Q2 range between 3.05% and 3.10%.
Heng Chen: Thank you, three, interest recoveries and pre-panic bellies.
Heng Chen: and a five basis point to the net interest income.
Heng Chen: As compared to adding two basis points in that interest margin.
Heng Chen: Forum, Q2.
Heng Chen: Land Interest Encom for Q3, 2021, increase.
Heng Chen: 7.2 million to 20.4 million, one compared to 13.2 million, thank you to 2024.
Heng Chen: The increase was primarily due to what?
Heng Chen: 5.7 million increase in marks the market and new lives gain on equity securities.
Heng Chen: Now, interest expenses decrease by 2.5 million.
Heng Chen: 2.5% to 96.9 million and 2.32024.
Heng Chen: From comparison to the 99.4 million in Q2.
Heng Chen: is the first one to go.
Heng Chen: in lower professional expense.
Heng Chen: and 1.2瞭眼
Heng Chen: in lower operating expenses.
Heng Chen: Lower Adder Offering Stances.
Heng Chen: Executive Act rate for Q32024.
Heng Chen: was 13.6% as compared to 7.9% for Q2.
Heng Chen: We expect an effective tax rate between 10 and 1.5 and 11.5 per 24.
Heng Chen: and Solar Tax Credit Investment Amherzation is expected to be 32.5 million in 2024.
Heng Chen: I'm going to go to 1.5 million.
Heng Chen: and Q4.
Heng Chen: I'd show up a low, low, low, come housing tax-square
Heng Chen: This is worth 2020-3.
Heng Chen: Added 2.2 million.
Heng Chen: Interpolar 2020-2024 in Heng Tax Express.
Heng Chen: As is 10th of the 30th, 2024.
Heng Chen: Here, one-level capital issue begins to 10.2%.
Heng Chen: is compared to 10.83%.
Heng Chen: As such, June 30, 2024.
Heng Chen: Chair 1, RISBASE CAPTAORATION SHOW INCLEASE.
Heng Chen: 13.3%
Heng Chen: from 13.26% as in 232024.
Heng Chen: and our total risk-based capital ratio.
Heng Chen: Increased to 14.88%.
Heng Chen: from 14.74%
Heng Chen: as a June 30th point.
Heng Chen: 24.
Speaker Change: Thank you, Heng. We will now proceed to the question and answers portion of the call.
Speaker Change: Thank you. Ladies and gentlemen, if you have a question at this time, please press star and one on the cutstone telephone.
Speaker Change: We ask you please bring yourself to one question and one follow-up.
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Speaker Change: To move on to the background noise, we ask you please place yourself on mute once your question has been stated.
Speaker Change: Hello, first question for an action, Gary, tell me at the D.A. Davidson. Please go ahead.
Speaker Change: Thanks, good afternoon.
Speaker Change: What did I ask first about the increase in the loan loss reserve and the quarter of the $10 million increase? Was that related to the $38 million loan relationship that won a nonaccroll in the quarter or any other changes that you made to the model or any inputs there?
Speaker Change: I'm Gary, this is Heng.
Speaker Change: Natto, 30 million dollar loans.
Speaker Change: We did not have any difficulties on us yesterday.
Speaker Change: Hello.
Speaker Change: We mainly have added...
Speaker Change: The expert panel yet ahead of charge-offs, just to bolster our research.
Speaker Change: So, it's called as General Readers.
Speaker Change: OK, thank you.
Speaker Change: and then, as we're looking at the 2025, you know, that the fixed.
Speaker Change: Loans and then the fixed loans that become hybrid loans. Can you give us an idea of the maturity schedule of the fixed loans and how much of those fixed loans enter our hybrid period next year?
Speaker Change: I don't have a hand here.
Speaker Change: I'll give you a couple of questions and I'll give back to you.
Speaker Change: and the most of those hybrid loans are residential poor.
Speaker Change: Okay.
Speaker Change: Thank you.
Speaker Change: Thank you, and I'll ask questions today from Andrew Toro with Steven. Please go ahead.
Speaker Change: Hey, good afternoon.
Speaker Change: If I could just start on the, you know, the CD repricing.
Speaker Change: is used to see the time deposit costs leveled out in the third quarter just curious as you look at the fourth quarter you know how much is coming up from maturity and then relative to your average costs right now you know where what's the kind of backbook cost of what's rolling off in the fourth quarter and where are you pricing new CDs at today.
Speaker Change: So, I can start with that in the fourth quarter, maturing cities is going to be about 3.49 billion. The average yield on those maturing cities is about 4.82%. Depending upon where what kind of tenure the clients choose, whether it's 6 months or 12 months, those rates are going to be in the low to mid-force. Yes.
Speaker Change: and then we we have a...
Speaker Change: We have a box.
Speaker Change: 100 million fat.
Speaker Change: Well, here's the...
Speaker Change: The Touring, January and early February from Chinese New Year Promotion.
Speaker Change: That's the one year CDs and those were at 4.85%.
Speaker Change: and no roll down to hopefully not.
Speaker Change: 2,04, may be 42430.
Speaker Change: and the last thing we have.
Speaker Change: Another...
Speaker Change: He had a million of self.
Speaker Change: at the six months of Chinese promotion seeding family, Georgia.
Speaker Change: July
Speaker Change: and early August, so...
Speaker Change: We price them down by 2020, this is for us.
Speaker Change: When they come up for a new engineering February, there'll be another 60-day point of
Speaker Change: in the adoption of nursing.
Speaker Change: Okay, very good. I appreciate it. If I could just ask one more on the, um...
Speaker Change: on the expense side, just making sure I have the guidance correctly. It looks like to get to the state.
Speaker Change: Police. Full-year expense, growth range on the core expense side, it implies kind of a moderation again by, you know, a few million dollars off the core, run rate. In 4Q24, similar moves to what we saw this quarter, does that, does that sound right? Should we expect the core expenses to step down by a few million bucks or so? In 4Q.
Speaker Change: I think some people could have.
Speaker Change: Pops of Keith's Rea.
Speaker Change: We have this...
Speaker Change: YIWA.
Speaker Change: Improve our deposit, open processing, that should be finished in Q3, so we'll save something here.
Speaker Change: and I, for our office.
Speaker Change: is just a couple of minutes, a couple of them in Andrew.
Speaker Change: from Markeyes.
Speaker Change: Okay, very good. Thank you for your questions, I'll stay back.
Speaker Change: Thank you, and our next question comes from Chris McGrattie, KBW, please go ahead.
Speaker Change: Hi, this is Nick, which I have a gift on for Chris.
Speaker Change: I'm going to make a sound.
Speaker Change: Starts real quick on the amortization for low income housing, it's 10 million still a good run rate for the fourth quarter.
Speaker Change: Yes, yes.
Speaker Change: Okay, and then meet this on the buyback.
Speaker Change: and they said 35 million for this quarter and next.
Speaker Change: but any reason to deviate.
Speaker Change: I was looking to 2025 for...
Speaker Change: In our Reap in the Authorization, just give in the capital levels.
Speaker Change: Uh...
Speaker Change: Well, well, well, a board will consider that when we're done with this one.
Speaker Change: Yeah!
Speaker Change: but we...
Speaker Change: or probably do the same size maybe more.
Speaker Change: and Morgan Chris is there.
Speaker Change: It's around 125 now
Speaker Change: Police Station, 150 million from the fire back.
Speaker Change: OK, thank you for taking my questions.
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Speaker Change: and our next question to make on some of the out-of-bought-world paper sandler, please go ahead.
Speaker Change: Hey everyone this is Adam Monk for Matthew Clark
Speaker Change: If I look at your nim guide, the low end would assume about a three-payage point increase from this prior quarter and the upside, high end would be even more. If you guys have to have the spot rate on loans, deposits, and or the nim.
Speaker Change: at the end of the quarter of the month of September.
Speaker Change: and thank you for that and then I was also curious about the deposits and the names you have that.
Yeah, so this is the passage.
Speaker Change: It's a...
Speaker Change: I mean it will soon get you back to the barge.
Speaker Change: and the Nalps.
Speaker Change: and Marl-Cowry.