Cathay General Bancorp (CATY)’s Fourth Quarter 2014 Earnings Call Transcript

Lana Chan, BMO Capital Markets

Just a follow-up, so the securities repositioning earlier in this year, wouldn’t that impact on the yield?

Heng W. Chen, EVP, CFO and Treasurer

Slightly, probably about 60 basis points and we’re going to over time put more buy more 15-year MBS to compensate that. And also, we don’t view our investment portfolio as a big source of interest income, we’re using that to fund loans to the extent possible. So there is going to be some natural shrinkage in our securities portfolio as we go into loans.

Lana Chan, BMO Capital Markets

Okay. My second question was on the capital. You said that with Asia Bank, the capital would go down about 40 basis points. Can you talk about, you still have excess capital to deploy, what the priorities are?

Heng W. Chen, EVP, CFO and Treasurer

Yes, I think, one, the first priority is that we want to try to have 10% or more loan growth in 2015. We would want to try to have a dividend increase hopefully in the middle of 2015. Our long-term goals to pay out about 30% of the prior year’s earnings. We also — over the last 18 months, we’ve issued through stock option exercises and RSU, best thing we issued about I believe about 1.5 million shares. So, once our stress testing is submitted and reviewed by the regulators. We would seek to buyback those shares that were issued for stock option, hopefully, in the third quarter. So, those – and then the acquisitions of Asian Bank used up around 40 basis points, but you can see here in the fourth quarter our capital ratio is built up by 22 basis points in one quarter, when the loan growth was little bit slower. It’s something that we will continue to work on.

Lana Chan, BMO Capital Markets

Okay. Thanks, Heng.

Heng W. Chen, EVP, CFO and Treasurer

Yeah thank you.

Operator

Our next question comes from the line of Julianna Balicka with KBW. You may proceed.

Julianna Balicka, KBW

Hi, I have two quick follow-ups, please. Heng, I’m sorry, I didn’t quite catch your remarks about the tax rate credits. You mentioned amortization that we should be seeing in 2014 but what is the underlying lower tax rate? And B, what would be the restructuring charges related to the Bank Asia deal?

Heng W. Chen, EVP, CFO and Treasurer

Okay. So on the tax credit, I think if you compare the tax rate ranges versus where our fourth quarter effective tax rate is and factor in the amortization, you can come up with a EPS number, which is the — it would just be math. And then the restructuring for Asia, it’s still subject to change, but we have to buy out their data processing contract that cost about $800,000 there’s some severance for transitional personnel that — so, as estimate, it’s probably $1.5 million pretax to maybe $2 million.

Julianna Balicka, KBW

Thank you very much.

Heng W. Chen, EVP, CFO and Treasurer

Yes, thank you.