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Cathay General Bancorp (CATY)
Q3 2013 Earnings Conference Call
October 21, 2013 6:00 PM ET
Monica Chen - IR
Dunson Cheng - Chairman, President and CEO
Heng Chen - EVP, Treasurer, and CFO
Aaron Deer - Sandler O'Neill
Joe Morford - RBC Capital Markets
Brett Rabatin - Sterne Agee
Herman Chan - Wells Fargo Securities
Julianna Balicka - KBW
Previous Statements by CATY
» Cathay General Bancorp Discusses Q3 2013 Results (Webcast)
» Cathay General Bancorp (CATY) CEO Discusses Q2 2013 Results - Earnings Call Transcript
» Cathay General Bancorp's CEO Discusses Q1 2013 Results - Earnings Call Transcript
Now, I would like to turn the call over to Monica Chen, Investor Relations for Cathay General Bancorp.
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 of 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, 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 third quarter 2013 results. To obtain the copy, 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 Chairman of the Board, President, and CEO, Mr. Dunson Cheng.
Thank you, Monica, and good afternoon. Welcome to our 2013 third quarter earnings conference call. This afternoon, Cathay General Bancorp reported net income of $32.5 million for the third quarter of 2013 or $0.38 per common share. That compared to a net income of $30.4 million or $0.33 per common share for the third quarter of 2012, and $29.9 million or $0.35 per common share for the second quarter of 2013.
We are very pleased that our retained earnings and liquidity are sufficient to allow ourselves to complete the repayment of the Bancorp's remaining TARP preferred stock on September 30, 2013. After repayment, our capital ratios remain strong. Our Tier 1 risk-based capital ratio was 14.9%, total risk-based capital of 16.67% and Tier 1 leveraged capital ratio of 12.35%.
In the third quarter, we experienced solid loan growth. Gross loans increased $138 million in the quarter or a 7.2% increase from the second quarter of 2013. For the first nine months of 2013, loans increased by $403 million or 5.4%. In the third quarter, our commercial loans increased by $27 million, construction loans by $36 million, commercial mortgage loans increased by $12 million, and residential mortgages increased by $69 million.
Originations on residential mortgages were about the same for the second and third quarter, but there was a slowdown in payoff in the third quarter, so the net growth of residential mortgages in Q3 exceeded that of the same quarter of $41 million. New CRE origination was good, but payoffs reduced the net increase. Our current expectation for loan growth for the entire year is still 7%.
For the third quarter of 2013, our total deposits increased $208 million or 2.7% from $7.7 million at June 30, 2013, most of the increase centered around MMA accounts. In July, we signed an agreement to open an additional branch in Brooklyn, which is expected to take place in the first quarter of 2014. Our other new branches, West Covina, is projected to open before the end of this year.
Net recoveries for the third quarter of 2013 was $3.6 million compared to net charge-off of $7.7 million in the same quarter a year ago. Our loan loss provision was a credit of $3 million for the third quarter compared to zero in the second quarter a year ago. Our non-accrual loans increased 4.4% or $4.2 million during the third quarter of $99.9 million or --- during the third quarter to $99.9 million or 1.27% of period-end loans.
On July 15, we successfully completed a 24-month effort to upgrade our computer system to a new core. We expect the new system will provide quicker functionality and allow us to streamline our internal processes in all of our operational areas; and therefore, to improve our efficiency ratio as well.
With that, I’ll turn the call over to our Executive Vice President and CFO, Heng Chen, to discuss the third quarter 2013 financials in more detail.
Thank you, Dunson, and good afternoon everyone. For the third quarter, we announced net income of $32.5 million or $0.38 per share. Included in third quarter results were $6.9 million in prepayment penalties as well as $8.7 million in security gains. Our net interest margin was 3.35% in the third quarter of 2013 compared to 3.30% in the second quarter of 2013 and compared to 3.26% for the third quarter of 2012.