Release Date: April 21, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Cathay General Bancorp (CATY, Financial) reported a net interest margin increase to 3.25% for Q1 2025 from 3.07% in Q4 2024.
- Total deposits increased by $131 million or 2.7% annualized during Q1 2025, driven by a net increase in core deposits and time deposits.
- The company completed its $125 million stock repurchase program, buying back 876,906 shares at an average cost of $46.83 per share.
- Cathay General Bancorp (CATY) has a strong liquidity position with unused borrowing capacity from the Federal Home Loan Bank and the Federal Reserve Bank, covering more than 100% of uninsured and uncollateralized deposits.
- The Tier 1 leverage capital ratio increased to 11.06% as of March 31, 2025, indicating a strong capital position.
Negative Points
- Net income for Q1 2025 decreased by 13.3% to $69.5 million compared to Q4 2024.
- The diluted earnings per share decreased by 12.5% to $0.98 for Q1 2025 compared to $1.12 in Q4 2024.
- Total gross loans decreased by $23 million or 0.5% annualized, primarily due to decreases in commercial and residential loans.
- Non-interest income decreased by $4.3 million to $11.2 million in Q1 2025, primarily due to a mark-to-market unrealized loss on equity securities.
- The provision for credit loss increased to $15.5 million in Q1 2025, up from $14.5 million in Q4 2024, mainly to cover possible losses from one commercial client.
Q & A Highlights
Q: Can you provide the sensitivity to the margin guide and NII levels if there are more than one interest rate cut in July?
A: Heng Chen, CFO, stated that on a full-year basis, it would be about 4 basis points for every rate cut. If it happens in July, it would be only 2 basis points.
Q: What were the spot deposit costs at the end of the quarter and the average margin for March?
A: Heng Chen noted that the average margin for March was 3.39%, with the bulk of interest recoveries for the first quarter. Excluding interest recoveries, the net margin was 3.21%. The spot rate for total interest-bearing deposits as of March 31, 2025, was 3.36%.
Q: What drove the change in loan growth guidance from 3%-4% to 1%-4%?
A: Chang Liu, CEO, explained that the pipeline for commercial real estate remains strong, but uncertainties, particularly tariffs affecting C&I clients, led to the revised guidance. Residential mortgage activity has seen a slight uptick, but overall uncertainty persists.
Q: Are C&I customers delaying projects or investments due to current conditions?
A: Chang Liu mentioned that some growth or expansion plans are paused, with customers focusing on managing their balance sheets and P&L due to unpredictable inventory prices. Heng Chen added that some importers might stop importing until conditions improve.
Q: Regarding the allowance for credit losses, was the provision related to a borrower impacted by tariffs?
A: Heng Chen clarified that the reserve was for a domestic company, not trade finance-related. The rest of the reserve buildup was tariff-related, and they are hopeful it covers most exposure. The allowance on the 1.4% of loans potentially impacted by tariffs is about 2%.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
