Cathay General Bancorp(CATY) - 2022 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company reported net income of $99 million for Q3 2022, a 36.8% increase compared to$ 72.4 million in Q3 2021 [6] - Diluted earnings per share increased by 45.2% to $1.35 for Q3 2022, up from$ 0.93 in the same quarter a year ago [6] - Net interest margin expanded to 3.83% in Q3 2022 from 3.22% in Q3 2021 [15] Business Line Data and Key Metrics Changes - Gross loans increased by $318.9 million or 7.8% annualized in Q3 2022, driven by a$ 193.4 million increase in commercial loans (26.8% annualized) and a $114.7 million increase in commercial real estate loans (5.6% annualized) [7] - Non-interest income decreased by$ 2.3 million to $9.9 million in Q3 2022, primarily due to a$ 3.7 million loss in equity securities [16] - Non-interest expense increased by $3.2 million or 4.3% to$ 75.4 million in Q3 2022 compared to $72.2 million in Q3 2021 [17] Market Data and Key Metrics Changes - Total deposits increased by$ 288.4 million or 6.4% annualized during Q3 2022 [12] - Time deposits increased by $686 million or 49.7% annualized, while money market deposits decreased by$ 287 million or 33.6% annualized [12][13] Company Strategy and Development Direction - The company expects overall loan growth for 2022 to range between 11% to 12.5%, including approximately $646.1 million from the acquisition of certain HSBC West Coast branches [8] - The company is targeting deposit growth to match loan growth, with expectations for slower loan growth in Q4 due to higher interest rates [24] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in a gradual increase in net interest margin for Q4 2022, but noted potential challenges in 2023 due to market conditions [21] - The effective tax rate for Q3 2022 was 23.8%, with expectations for Q4 2022 to be between 22.5% and 23% [18] Other Important Information - The company repurchased$ 1.08 million of shares at an average cost of $42.88, totaling$ 46.3 million in Q3 2022, with $76.9 million remaining in the stock repurchase program [14] - As of September 30, 2022, the tier one leverage capital ratio decreased to 10.02% from 10.05% as of June 30, 2022 [19] Q&A Session Summary Question: NIM outlook beyond this year - Management believes NIM will gradually increase in Q4 and is optimistic about reaching 4% for the full year of 2023 [21] Question: Deposit growth guidance - Management expects deposit growth to match loan growth, with a target of approximately$ 300 million in deposit growth for Q4 [24][26] Question: Loan growth expectations for 2023 - Management anticipates continued runoff in construction and equity lines of business, with slower growth in commercial mortgage [28] Question: FHLB advances and stability - Management expects FHLB borrowings to decrease, currently at about $150 million [31] Question: Deposit beta assumptions - Management indicated that cumulative deposit beta should be about 30% as the fed funds rate approaches 4.50% to 4.75% [37] Question: Capital return outlook - Management plans to continue share buybacks, expecting to buy back a million shares in Q4 2022 [43]