Cathay General Bancorp (CATY)

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Cathay General Bancorp (CATY)

Q4 2013 Earnings Conference Call

January 23, 2013 6:00 p.m. ET


Monica Chen – IR

Dunson Cheng – Chairman, President and CEO

Heng Chen – EVP and CFO


David Gong – KBW

Brett Rabatin – Sterne Agee

Herman Chan – Wells Fargo Securities

Lana Chan – BMO Capital Markets



Good afternoon, ladies and gentlemen, and welcome to the Cathay General Bancorp's Fourth Quarter 2013 Earnings Conference Call. My name is Suquenna [ph] and I'll be your coordinator for today.

[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. Please proceed.

Monica Chen

Thank you, Suquenna [ph], 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 earnings release outlining its fourth quarter 2013 results. To obtain a 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 fourth quarter earnings conference call.

This afternoon, Cathay General Bancorp reported net income of $31.9 million for the fourth quarter 2013 or $0.40 per common share. This compare to net income of $28.3 million or $0.31 per common share in the fourth quarter of 2012 and $32.5 million or $0.38 per common share for third quarter of 2013.

In the fourth quarter we continued to experience solid loan growth. Gross loans increased $253 million in the quarter or a 12.8% annualized increase from the third quarter of 2013. For the full year of 2014, loans increased by $625 million or 8.8%.

During the fourth quarter we saw loan growth in all categories. Commercial loans increased by $65 million, construction loans increased by $32 million, commercial mortgages increased by $102 million, and residential mortgages increased by $61 million. The net growth in fourth quarter exceeded that of the third quarter of $138 million. Our current expectation is that loan growth in 2014 will be about 7%.

For the fourth quarter of 2013, our total deposits increased $63 million or 0.8% from $7.9 billion at September 30, 2013. For the full year of 2013, our core deposits increased by 10.3 or $386 million. In the beginning of this year we signed an agreement to purchase a branch in the Richmond District of San Francisco. This will give us a second branch in the city. Total deposit at branch are about $36 million. We expect the purchase of this branch to be completed early in the second quarter.

Back in December 2013, we opened our new branch in Westminster, Southern California. The open -- West Covina, sorry, in Southern California. The opening of our second Brooklyn [ph] branch was delayed and now expected to be March 2014. We are also relocating our Sacramento branch to a more centrally located area.

On July 15, 2013, we successfully completed a 24-month effort to upgrade our computer system to a new core system. Since the conversion date, we spent time in learning and fine-tuning the new system. We are happy to report that the new system is running smoothly. In the coming months we shall focus on streamlining our internal processes in all of our operating areas to improve our efficiency. In the fourth quarter, our efficiency ratio was 44.65%.

With that, I will turn the floor over to our Executive Vice President and CFO, Heng Chen, to discuss the fourth quarter results in more detail.

Heng Chen

Thank you, Dunson, and good afternoon everyone.

For the fourth quarter we announced net income of $31.9 million or $0.40 per share. For the full year 2013, our net income was $123.1 million or $1.43 per share. Our net interest margin was 3.3% in the fourth quarter of 2013 compared to 3.35% in the third quarter of 2013 and compared to 3.28% for the fourth quarter of 2012. During the fourth quarter, interest recoveries added 5 basis points to the net interest margin, whereas during the third quarter, interest recoveries added 6 basis points to the margin.

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