Cathay General Bancorp (CATY)

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Cathay General Bancorp (CATY)

Q2 2013 Earnings Conference Call

July 17, 2013 18:00 pm ET


Monica Chen - Investor Relations

Dunson Cheng - Chairman of the Board, President and Chief Executive Officer

Heng Chen - Executive Vice President, Chief Financial Officer and Treasurer


Aaron Deer - Sandler O’Neill & Partners

Joe Morford - RBC Capital Markets

Brett Rabatin - Sterne Agee

Herman Chan - Wells Fargo

Julianna Balicka - KBW

Gary Tenner - D.A. Davidson

Don Destino - Harvest



Good afternoon, ladies and gentlemen, and welcome to the Cathay General Bancorp’s Second Quarter 2013 Earnings Conference Call. My name is Philip 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. (Operator Instructions) Today’s call is being recorded and will be available for replay at

Now, I would like to turn the call over to Monica Chen, Investor Relations for Cathay General Bancorp.

Monica Chen

Thank you, Philip, and good afternoon. Here to discuss the financial results today are Mr. Dunson Cheng, our Chairman of the Board, President and Chief Executive Officer; and Mr. Heng 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 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, 2012, 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, which speak only as of the date of this presentation. We undertake no obligation to update any forward-looking statements or to publicly announce any revision of any forward-looking statements to reflect future developments or events, except as required by law.

This afternoon, Cathay General Bancorp issued an earning release outlining its second quarter 2013 results. To obtain the copy, please visit our website at After comments by management today, we will open up this call for questions.

I will now turn the call over to our Chairman of the Board, President and CEO, Mr. Dunson Cheng.

Dunson Cheng

Thank you, Monica, and good afternoon. Welcome to our 2013 second quarter earnings conference call. This afternoon, Cathay General Bancorp reported net income of $29.9 million for the second quarter of 2013 or $0.35 per common share. That compared to a net income of $29.9 million or $0.33 per common share for the second quarter of 2012 and $28.8 million or $0.30 per common share for the first quarter of 2013.

In the second quarter, we see a much stronger loan growth. Gross loans increased $330 million in the quarter or 4.5% increase from the first quarter of 2013. For the first half of 2013, loans increased by $265 million or 3.6%. Commercial loans increased by $179 million, commercial mortgages, CRE loans, increased by $150 million and residential mortgage loans increased by $41 million. The increase in commercial loans was due to new borrowing, higher usage of existing credit line, increased activities in our trade finance business and growth in our Hong Kong branch. New CRE origination was strong but construction balances dropped because one large construction loan mature and was turned into CRE.

While our residential mortgage increased in the quarter, we expect it will slowdown in the coming months. Our current expectation for loan growth for the entire year is 7% a slight upward revision from the previous 6%. For the second quarter 2013, our total deposits increased $285 million or 3.8% from $7.4 billion at March 31, 2013. During the second quarter, we completed the acquisition of new Las Vegas branch on June 17. In July, we signed an agreement to open an additional branch in Brooklyn. Both this branch and the previously announced new one in West Covina are expected to open in the fourth quarter.

Net recovery for the second quarter of 2013 was $0.9 million compared to net recoveries of $2.6 million in the same quarter a year ago. Our loan loss provision was zero for the second quarter of 2013 compared to a credit of $5 million in the same quarter a year ago. Our non-accrual loans decreased 4.5% or $4.7 million during the second quarter to $95.6 million or 1.24% of period-end loans. This past weekend, we successfully completed a 24-month effort to upgrade our computer system to a new core. We expect the new system will provide good functionality and allow us to streamline our internal processes in all of our operating areas and therefore to improve our efficiency ratio.

With that I’ll turn the floor over to our Executive Vice President and CFO, Heng Chen to discuss the second quarter 2013 financials in more detail.

Heng Chen

Thank you, Dunson and good afternoon everyone.

For the second quarter, we announced net income of $29.9 million or $0.35 per share. Included in second quarter results were $10.1 million in prepayment penalties as well as $12.2 million in securities gains. Our net interest margin was 3.3% in the second quarter of 2013 compared to 3.35% in the first quarter of 2013 and compared to 3.24% for the second quarter of 2012.

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