Georgia Lo – Legal and Corporate Affairs Dunson Cheng – Chairman, President, and Chief Executive Officer Heng Chen – Chief Financial Officer, Executive Vice President, and Treasurer.

Joe Morford – RBC Capital Markets Aaron Deer – Sandler O'Neill & Partners Lana Chan – BMO Capital Markets Julianna Balicka – Keefe, Bruyette & Woods, Inc. .

Good afternoon, ladies and gentlemen, and welcome to Cathay General Bancorp's Third Quarter 2014 Earnings Conference Call. My name is Sara, 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 www.cathaygeneralbancorp.com. Now, I would like to turn the call over to Georgia Lo for Cathay General Bancorp..

Thank you, Sara, and good afternoon. Here to discuss the financial results today are Mr. Dunson Cheng, Chairman of the Board, President and Chief Executive Officer, and Mr. Heng Chen, 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, 2013, 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 third quarter 2014 results. To obtain a 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, Georgia. And good afternoon, and welcome to our 2014 third quarter earnings conference call. This afternoon, Cathay General Bancorp reported net income of $35.9 million for the third quarter of 2014, a 19.5% increase when compared to a net income available to common stockholders of $30 million for the third quarter of 2013.

Diluted earnings per share increased 18.4% to $0.45 per share for the third quarter of 2014, compared to $0.30 per share for the same quarter a year ago. In the third quarter, we continued to experience strong loan growth. Gross loans increased $293 million in the quarter, representing an increase of 13.6% on an annualized basis.

Both C&I and CRE loans grew over $100 million each, while residential mortgages increased by $48 million. For the nine months ended September 30, 2014, our loans increased $774 million, or 12.8% annualized, compared to an increase of $403 million, or 7.2% annualized for the nine months ended September 30, 2013.

The driver of the increase came from CRE loans, which increased $391 million, while residential mortgages grew by $162 million, C&I loans by $151 million, and the construction loans by $80 million. At this time, our expectation for loan growth for 2014 will come in about 12%.

For the third quarter of 2014, our total deposits increased $140 million to $8.69 billion. For the nine months ended September 30, 2013, the increase in deposits was $713 million, while representing a 12% annualized increase from December 31, 2013. I think I accidently – there is a typo.

For the first nine months of – ended September 2014, the increase was $713 million. Our core deposits increased 20.9% on an annualized basis, or $225 million on June 30, 2014. In the early July, we took over an existing branch in the Richmond District in San Francisco. We now have two branches in the City.

Total deposits at the branch on the date of acquisition were about $43 million. Cathay Bank remains committed to open or acquire new branches to better serve our customers. Since our core conversion in July 2013, we have taken steps to make further use of the new system's capabilities to streamline our workflows.

We are applying part of the third quarter cost saves to develop more business and in part to lower our efficiency ratio. In the third quarter, our efficiency ratio was 44.51%, a slight improvement over the second quarter ratio of 44.92% and an improvement over the third quarter of 2013 ratio of 51.01%.

With that, I will turn the floor over to our Executive Vice President and CFO, Heng Chen, to discuss the third quarter 2014 financials in more detail..

Thank you, Dunson, and good afternoon, everyone. For the third quarter, we announced net income of $35.9 million, or $0.45 per share. Our net interest margin was 3.31% in the third quarter of 2014, compared to 3.37% in the second quarter of 2014, and compared to 3.35% for the third quarter of 2013.

In both the second and third quarters of 2014, interest recoveries and prepayment penalties added 9 basis points to the net interest margin. In June 2014, we entered into $267 million of pay fixed received LIBOR interest rate swaps to reduce our exposure to higher interest rates.

The net payment on these interest rate swaps decreased the net interest margin by 5 basis points during the third quarter of 2014. Higher levels of short-term interest-bearing cash deposits resulting from a surge in money market deposits during the third quarter also reduced the net interest margin by 4 basis points.

Maturities of structural repos – of future maturities of structural repos are $100 million, at 3.5% in November and $50 million at 3.5% in January 2015. Non-interest income during the third quarter of 2014 was $8.6 million, which excluded net security gains of $0.4 million.

Non-interest expense decreased by $8.1 million to $42.6 million in the third quarter of 2014, compared to $50.7 million in the same quarter a year ago. The decrease was mainly due to $6.9 million of costs associated with debt redemption in the third quarter of 2013 as compared to only $0.5 million in the third quarter of 2014.

Amortization of core deposit premiums decreased $1.1 million as a result of the full amortization of the core deposit premium from the General Bank acquisition. Also, OREO expense for the third quarter of 2014 was income of $1 million mainly as a result of gains from sales of OREO.

We have implemented other enhancements in our data processing capabilities since the completion of the core conversion on July 15, 2013, and have begun to realize operating efficiencies provided by our new core system in both our branch network, as well as our backroom operations.

The effective tax rate for the third quarter of 2014 was 38.3% due in part to the higher expected pre-tax income for the full-year 2014, and we expect the fourth quarter effective tax rate to be approximately 37.3%.

At September 30, 2014 our Tier 1 leverage capital ratio increased to 12.66%, our Tier 1 risk-based capital ratio decreased to 14.77%, and our total risk-based capital ratio decreased to 16.05% as compared to June 30, 2014. All ratios significantly exceeded well-capitalized minimum ratios under all the regulatory guidelines.

At September 30, 2014, our Tier 1 common risk-based capital ratio was 13.53%. Net recoveries for the third quarter of 2014 were $5.2 million, or 0.06% of average loans compared to net recoveries of $3.6 million in both the second quarter of 2014 and the same quarter a year-ago.

Our loan loss reversal was $5.1 million for the third quarter, compared to $3.7 million in the second quarter of 2014 and $3.0 million for the third quarter of 2013. Our non-accrual loans decreased 15.9%, or $12.3 million during the third quarter to $65.3 million, or 0.74% of period-end loans, as compared to the second quarter of 2014..

Thank you, Heng. We will now proceed to the question-and-answer portion of the call..

Ladies and gentlemen, we are ready to open the lines for questions. (Operator Instructions) Our first question comes from Joe Morford from RBC Capital Markets..

Thanks. Good afternoon, guys..

Hi, Joe..

Hi, Joe..

I guess, I was just curious to learn a little bit more about the commercial loan growth in the quarter, and what was driving that? Was it much of the trade finance related, was it other kind of niches, and how does that pipeline look going into the fourth quarter and next year?.

Joe, this is Dunson Cheng, I think you’re correct. In the third quarter quite a bit of our royalty in C&I loan came from trade finance. As our trade customers draw down the line to finance their inventory and then later on account receivable.

And so that contributed a good part of the increase, although they have quite a few new loans that we have booked for the quarter – of the last quarter. And so as far as pipeline is concerned, I think the C&I pipeline is still good but however, it’s not as robust as in 2013.

And at this point in time, I still feel pretty good that our loan growth is maintaining at a pretty good pace. .

Okay. And then, I guess, the other question was just on the deposit, the core deposit growth was particularly strong.

I'm curious to learn more about driving that, and what was driving that? And then just the loan to deposit ratio now up over 100%, is that much of a concern or a focus point for you at this point?.

Dunson Cheng:.

And the growth of deposit continues to spread pretty evenly through the branch system that we have and we also had a pretty good growth in our Texas region as well..

And the growth of deposit continues to spread pretty evenly through the branch system that we have and we also had a pretty good growth in our Texas region as well..

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That's great, Heng. Thanks so much for the color..

Okay. Thank you, Joe..

Our next question comes from Aaron Deer with Sandler O'Neill & Partners..

Thanks. Good afternoon, guys..

Hi, Aaron..

Hi, Aaron..

Just a couple of quick follow-ups on Joe's questions.

One is, there is a way for you to delineate the amount of loan growth that came in the quarter between what was commercial and what was retail customers?.

It’s mostly commercial. I mean….

And I'm sorry. I was talking about the deposit growth in the quarter..

Oh, I mean, the money market, that's tradition, that’s the bulk of the growth, and that’s traditionally a commercial product for businesses. We have a lot of business customers that are involved in import/export, or they are affiliates of Taiwanese companies and so forth.

They are Chinese by background, so it’s mainly commercial that’s why it’s so lumpy, when there is big growth..

Sure, okay..

And Aaron, also, our demand deposits also have a pretty good growth and $68 million for the quarter. And that was the kind of the deposit, also has some pretty good growth. So it is evenly distributed..

Yes. No, that's great.

And then, on the trade finance loans, how should we think about the seasonality in that product? What kind of run-off would you expect in the fourth quarter, as some of those lines get paid down?.

Well, it – if we – I think our previous experience has been that the fourth quarter growth in trade related customers will flat as distinct once they sell the inventory it takes maybe 60 days up to 90 days to collect their ARs and then pay down. I think the first quarter of 2015 traditionally should have a lower balance..

Should have decline?.

Yes, decline, yes, for the trade finance customers..

Okay. And then one last one, if I may. Heng, you mentioned that the – you’re getting some cost savings from the conversion. I am wondering how much more that might be left versus how much is being reinvested into new lenders.

So what might we see in terms of professional or in terms of a run rate for compensation expense and similarly, are there any lingering cost saves on the professional services line that we might say?.

Yes. I had mentioned there was probably going to be $1 million a quarter in total. So probably we have half of that realized through the end of the third quarter and then what we’ll try to get the other $0.5 million per quarter in the fourth and first quarter of next year.

And then the professional, we’re that – there is room to go there, but particularly in 2015 as we look at those sort of discretionary type expenses or controllable expenses, our goal is to have continued operating leverage where we try to have non-interest expense essentially almost flat quarter-to-quarter and so that’s the case right now from the second to the third quarter..

Okay, great. Thanks for taking my questions..

Okay..

Our next question comes from Lana Chan from BMO Capital Markets..

Hi, good afternoon..

Hi, Lana..

Hi, Lana..

I wanted to ask about loan pricing and what you're seeing in sort of different loan buckets so C&I commercial real estate, resi mortgage, any significant change quarter-over-quarter?.

Lana, as far as C&I loan pricing is concerned is – it will see a lot of deterioration in the C&I loan pricing. However, on CRE loans, we are experiencing quite a bit of competition on the CRE loans and some other fact in the third quarter we saw a higher pay-off on CRE loan as some of the existing loans are being let go because of pricing.

On the other hand we were still able to increase our CRE portfolio quite substantially. So on the other hand we are experiencing keen competition in CRE loan pricing. On the other hand we are fortunate to be able to replenish that with newer loans..

Yes, Lana, On the residential mortgage, since April we have not been taking 30 year fixed-rate residential mortgage applications, but so our emphasis has been on 15 year fixed-rate as well 5.1 RMs or 3.1 RMs, and that pricing because most of it is – a lot of it is for investment property, that’s holding up compared to the residential mortgage pricing for conforming product..

Okay. And just in terms of as you look at the sort of overall balance sheet growth, you gave the loan growth guidance.

But could you talk about what you would expect was that moving parts on the cash and the securities portfolio and the pay downs, overall just balance sheet growth for the year and going forward?.

.

So we don’t like the rates that were available. And then, last Wednesday when interest rates with the 10-year plummeted to 1.87% we sold $100 million of 30-year MBS at our cost. So, and we’re going to reinvest that in 15-year MBS when interest rates are higher.

But we’re going to try to keep that cash at the Fed down to a lower level and that in the third quarter that was a cause of a four basis point drag to the margin. So….

And just any thoughts about how long that would take in terms of getting the cash down $100 million? I know you are assuming that, that goes into securities or loans?.

It goes into loans. Right now, we are actually there. We have $100 million and we think we’ll be able – it will be a little easier. The $100 million of 30-year MBS that we sold, we sold that for November settlement and we have $100 million of structural repos that will mature in the middle of November as well.

So, our goal is to have a more efficient balance sheet and to have, to keep the earning assets flat, for lack of a better word..

Okay. Thank you..

(Operator Instructions) Our next question comes from Julianna Balicka from KBW..

Good afternoon..

Hi, Julianna..

Hi, Julianna..

Hello. I have a couple of questions. One just to quickly follow-up on the cash conversation that you are just having.

So this coming quarter we should expect a positive NIM adjustment back up from the reduction in cash, yes?.

Yes..

Yes..

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Well, not quite, because we also did the interest rate swaps which were – what was that? It was, not that, it was five basis points. So, it’s we were hoping that the 10-year would go back up to 3%. But, it hasn’t happened yet..

Right.

Okay, and then so this interest rates swap impact will be present this coming quarter for just a one-off?.

No, it’s going to be present until the Fed, until LIBOR starts to move. There’s going to be back same five basis point drag. It’s just not going to get any worse..

Right, got it. Okay, I understand.

All right, and then in terms of your pipeline of recoveries that you typically have in your interest income and then also often in your charge-offs can you give us an update on what we should be looking up for next couple of quarters?.

Well, so far in the fourth quarter we think we’ll have several million, maybe not quite as high the third quarter but there is a couple of real estate loans that are going to be paid off that had been charged off or partially charged off.

And then, our visibility in the 2015 is less clear but we do – we have one loan in the third quarter that's scheduled to mature and we have $8 million of charge-offs and roughly $5 million of interest supply to principle on that loan which we expect to recover because that property is in New York City and its residential.

The use is for resident – for condo construction. So we’re optimistic that another bank will take this out..

Oh, good, and then that’s for next quarter, for this quarter you said several million.

So that several million recoveries are going to be recovery in terms of positive, I mean, in terms of the provision charge-off line or is that recovering in terms of several million of interest income recovery?.

It’s provision. The interest recovery, it’s generally four basis points to nine basis points depending on – it’s lumpy but it jumps around..

Okay.

And then in terms of your deposit growth which has been very strong, can you talk a little bit more about any verticals of specialized deposit verticals, any concentrations, or any particular industry expertises that you have in your business deposit growth?.

We’re actually – we just offer the traditional banking products to our type of customer. So we don’t have a team that goes after a title in escrow or law firms or anything that – it’s just if the business owner is Chinese, and has some sort of trade relation or whatever, that’s our target customer.

And then for individuals that tends to be more on the CD side..

Got it. And then a final question and I will step back. You said earlier in the Q&A, you mentioned the lending runoff, the $40 million of internet CDs this quarter.

And you’re continued that runoff in 4Q so how much more of internet CDs, are you seeing another $40 million or is that different in amount?.

Yes, it’s about that..

Okay.

And then, after that, is that all – there is no more internet CDs left?.

No, we have about $300 million and our plan is when we get to a – if we need more deposits we – this quarter we’ve got $50 million from the State of California, 10 basis points for six month money.

That limit is $300 million and so we over the course of 2015, we’ll try to use that as an alternative source for deposits if our core deposit growth is not high enough..

Okay. That makes sense.

And then, so the internet CDs that you are running off though, sorry, what’s the cost on those?.

Generally 1%..

Okay, got it. Thank you very much..

Okay..

All right, great. It looks like there are no further questions in queue, so I will turn the call back over to Cathay General Bancorp’s management for closing remarks..

Thank you for joining us for this call and we look forward to talking with you again in our next quarterly earnings release date..

Next year. Yes..

Ladies and gentlemen, thank you for your participation. This concludes today’s presentation. You can disconnect and have a great day..