Investors are always looking for stocks that are poised to beat at earnings season and Cathay General Bancorp (CATY) may be one such company. The firm has earnings coming up pretty soon, and events are shaping up quite nicely for their report. That is because Cathay is seeing favorable earnings estimate revision activity as of late, which is generally a precursor to an earnings beat. After all, analysts raising estimates right before earnings — with the most up-todate information possible — is a pretty good ...

In its upcoming report, Cathay General (CATY) is predicted by Wall Street analysts to post quarterly earnings of $0.98 per share, reflecting a decline of 13.3% compared to the same period last year. Revenues are forecasted to be $182.7 million, representing a year-over-year decrease of 5.6%. The consensus EPS estimate for the quarter has undergone a downward revision of 3.7% in the past 30 days, bringing it to its present level. This represents how the covering analysts, as a whole, have reassessed their in ...

Core Viewpoint - Wall Street anticipates a year-over-year decline in earnings for Cathay General (CATY) due to lower revenues, with a focus on how actual results compare to estimates impacting stock price [1][2]. Earnings Expectations - The upcoming earnings report is expected to show quarterly earnings of $0.98 per share, reflecting a -13.3% change year-over-year, with revenues projected at $182.7 million, down 5.6% from the previous year [3]. - The consensus EPS estimate has been revised 3.65% lower in the last 30 days, indicating a reassessment by analysts [4]. Earnings Surprise Prediction - The Zacks Earnings ESP model suggests that a positive Earnings ESP reading indicates a likely earnings beat, particularly when combined with a strong Zacks Rank [8][10]. - For Cathay, the Most Accurate Estimate is higher than the Zacks Consensus Estimate, resulting in a positive Earnings ESP of +1.20%, suggesting a potential earnings beat [10]. Historical Performance - Cathay has a history of beating consensus EPS estimates, having done so in the last four quarters, including a +1.04% surprise in the last reported quarter [11][12]. Conclusion - While Cathay appears to be a compelling candidate for an earnings beat, other factors should also be considered before making investment decisions [15].

Looking for a stock that has been consistently beating earnings estimates and might be well positioned to keep the streak alive in its next quarterly report? Cathay General (CATY) , which belongs to the Zacks Banks - West industry, could be a great candidate to consider. This holding company for Cathay Bank has seen a nice streak of beating earnings estimates, especially when looking at the previous two reports. The average surprise for the last two quarters was 4.44%. For the most recent quarter, Cathay wa ...

[FORM 10-Q Filing Information](index=1&type=section&id=FORM%2010-Q) This section outlines Cathay General Bancorp's quarterly report filing details, including registrant, type, status, and common stock - Registrant: Cathay General Bancorp (Bancorp), Cathay Bank (Bank)[1](index=1&type=chunk)[4](index=4&type=chunk) - Filing Type: Quarterly Report (Form 10-Q) for the period ended June 30, 2024[1](index=1&type=chunk) - Filer Status: Large accelerated filer[1](index=1&type=chunk) - Common Stock: CATY, Nasdaq Global Select Market, **72,170,433 shares outstanding** as of July 31, 2024[1](index=1&type=chunk)[2](index=2&type=chunk) [Forward-Looking Statements](index=3&type=section&id=Forward-Looking%20Statements) This section cautions that forward-looking statements are based on management's estimates and assumptions, subject to various economic and regulatory risks - Forward-looking statements are based on management's estimates, beliefs, projections, and assumptions, and are not guarantees of future performance[5](index=5&type=chunk) - Key risks include local, regional, national, and international economic conditions, potential loan losses, credit risks, extensive laws and regulations, higher capital requirements (Basel III), liquidity risk, interest rate fluctuations, and real estate market conditions[5](index=5&type=chunk) - The Company does not intend or undertake any obligation to update forward-looking statements, except as required by law[6](index=6&type=chunk) [PART I – FINANCIAL INFORMATION](index=4&type=section&id=PART%20I%20%E2%80%93%20FINANCIAL%20INFORMATION) This part presents the unaudited consolidated financial statements, management's discussion, market risk, and controls [Item 1. FINANCIAL STATEMENTS (Unaudited)](index=4&type=section&id=Item%201.%20FINANCIAL%20STATEMENTS%20(Unaudited)) This section provides the unaudited consolidated financial statements and accompanying notes, detailing the Company's financial position, performance, and cash flows [Consolidated Balance Sheets](index=4&type=section&id=CONSOLIDATED%20BALANCE%20SHEETS) This section presents the Company's financial position, detailing assets, liabilities, and stockholders' equity at specific reporting dates Consolidated Balance Sheet Highlights (In thousands) | Metric | June 30, 2024 | December 31, 2023 | | :------------------------------------- | :------------ | :---------------- | | **Assets** | | | | Total assets | $23,235,245 | $23,081,534 | | Loans held for investment, net | $19,193,335 | $19,382,858 | | Securities available-for-sale | $1,648,731 | $1,604,570 | | **Liabilities** | | | | Total deposits | $19,773,017 | $19,325,447 | | Non-interest-bearing deposits | $3,161,632 | $3,529,018 | | Advances from FHLB | $165,000 | $540,000 | | **Stockholders' Equity** | | | | Total stockholders' equity | $2,793,242 | $2,736,575 | - Total assets increased by **$153.7 million (0.7%)** from December 31, 2023, to June 30, 2024[7](index=7&type=chunk)[157](index=157&type=chunk) - Total deposits increased by **$447.6 million (2.3%)** from December 31, 2023, to June 30, 2024[7](index=7&type=chunk)[209](index=209&type=chunk) [Consolidated Statements of Operations and Comprehensive Income](index=6&type=section&id=CONSOLIDATED%20STATEMENTS%20OF%20OPERATIONS%20AND%20COMPREHENSIVE%20INCOME) This section details the Company's financial performance, including net interest income, credit loss provisions, net income, and earnings per share Consolidated Statements of Operations Highlights (In thousands, except per share data) | Metric | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | | :-------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net interest income before provision for credit losses | $165,316 | $181,533 | $333,888 | $373,968 | | Provision for credit losses | $6,600 | $9,155 | $8,500 | $17,255 | | Net income | $66,829 | $93,220 | $138,264 | $189,227 | | Basic Net Income Per Common Share | $0.92 | $1.29 | $1.90 | $2.61 | | Diluted Net Income Per Common Share | $0.92 | $1.28 | $1.90 | $2.60 | | Cash dividends paid per common share | $0.34 | $0.34 | $0.68 | $0.68 | - Net income for Q2 2024 decreased by **$26.4 million (28.3%)** YoY to **$66.8 million**. Diluted EPS decreased to **$0.92** from **$1.28** YoY[8](index=8&type=chunk)[140](index=140&type=chunk) - Net interest income before provision for credit losses decreased by **$16.2 million (8.9%)** YoY to **$165.3 million** in Q2 2024, primarily due to increased interest expense from deposits, partially offset by higher interest income from loans and securities[8](index=8&type=chunk)[142](index=142&type=chunk) [Consolidated Statements of Changes in Stockholders' Equity](index=7&type=section&id=CONSOLIDATED%20STATEMENTS%20OF%20CHANGES%20IN%20STOCKHOLDERS'%20EQUITY) This section outlines changes in the Company's equity, reflecting net income, dividends, stock-based compensation, and other comprehensive income or loss Changes in Stockholders' Equity (Six Months Ended June 30, 2024, In thousands) | Metric | Amount | | :--------------------------------------------------- | :----- | | Balance at December 31, 2023 | $2,736,575 | | Net income | $138,264 | | Dividend Reinvestment Plan | $1,488 | | Restricted stock units vested | $2 | | Stock issued to directors | $850 | | Shares withheld related to net share settlement of RSUs | $(3,708) | | Purchases of treasury stock | $(25,301) | | Stock-based compensation | $2,189 | | Cash dividends of $0.68 per share | $(49,473) | | Other comprehensive loss | $(7,644) | | Balance at June 30, 2024 | $2,793,242 | - Total stockholders' equity increased by **$56.7 million** to **$2.79 billion** as of June 30, 2024, from **$2.74 billion** at December 31, 2023[10](index=10&type=chunk)[129](index=129&type=chunk)[216](index=216&type=chunk) - The increase was primarily driven by net income of **$138.3 million**, stock-based compensation of **$2.2 million**, and dividend reinvestment proceeds of **$1.5 million**, partially offset by cash dividends of **$49.5 million** and treasury stock purchases of **$25.3 million**[10](index=10&type=chunk)[129](index=129&type=chunk)[216](index=216&type=chunk) [Consolidated Statements of Cash Flows](index=9&type=section&id=CONSOLIDATED%20STATEMENTS%20OF%20CASH%20FLOWS) This section summarizes cash flows from operating, investing, and financing activities, providing insight into the Company's liquidity and solvency Consolidated Statements of Cash Flows Highlights (Six Months Ended June 30, In thousands) | Metric | 2024 | 2023 | | :------------------------------------------ | :----- | :----- | | Net cash provided by operating activities | $161,087 | $211,847 | | Net cash provided/(used) for investing activities | $119,472 | $(746,023) | | Net cash (used)/provided by financing activities | $(4,359) | $854,039 | | Increase in cash, cash equivalents, and restricted cash | $276,200 | $319,863 | | Cash, cash equivalents, and restricted cash, end of the period | $1,105,001 | $1,482,265 | - Net cash provided by operating activities decreased to **$161.1 million** in H1 2024 from **$211.8 million** in H1 2023[11](index=11&type=chunk) - Net cash from investing activities significantly improved, turning from a use of **$746.0 million** in H1 2023 to a provision of **$119.5 million** in H1 2024[11](index=11&type=chunk) - Net cash from financing activities shifted from a provision of **$854.0 million** in H1 2023 to a use of **$4.4 million** in H1 2024[11](index=11&type=chunk) [Notes to Consolidated Financial Statements (Unaudited)](index=10&type=section&id=NOTES%20TO%20CONSOLIDATED%20FINANCIAL%20STATEMENTS%20(Unaudited)) This section provides detailed explanations and additional information supporting the unaudited consolidated financial statements, covering accounting policies and disclosures [1. Business](index=10&type=section&id=1.%20Business) This note describes Cathay General Bancorp's operations, including banking services, branch network, and FDIC insurance status - Cathay General Bancorp is the holding company for Cathay Bank, offering a wide range of financial services since 1962[12](index=12&type=chunk) - The Bank operates **24 branches in Southern California, 19 in Northern California, 9 in New York, 4 in Washington, 2 in Illinois, 2 in Texas, and one each in Maryland, Massachusetts, Nevada, and New Jersey**, plus a branch in Hong Kong and representative offices in Taipei, Beijing, and Shanghai[12](index=12&type=chunk) - Deposit accounts at the Hong Kong branch are not FDIC insured[12](index=12&type=chunk) [2. Basis of Presentation and Summary of Significant Accounting Policies](index=10&type=section&id=2.%20Basis%20of%20Presentation%20and%20Summary%20of%20Significant%20Accounting%20Policies) This note explains the preparation of unaudited financial statements under GAAP and highlights management's estimates, especially for loan losses - Unaudited Consolidated Financial Statements are prepared in accordance with GAAP for interim financial information and Form 10-Q instructions[13](index=13&type=chunk) - Management's estimates and judgments affect reported amounts, with the allowance for loan losses being the most significant estimate subject to change[14](index=14&type=chunk) [3. Recent Accounting Pronouncements](index=10&type=section&id=3.%20Recent%20Accounting%20Pronouncements) This note discusses the impact and effective dates of recent accounting standards updates (ASUs) and SEC rules on financial statements - ASU 2023-02 (Investments-Equity Method and Joint Ventures) on accounting for tax equity investments became effective after December 15, 2023; the Company elected not to apply the proportional amortization method[15](index=15&type=chunk) - ASU 2022-03 (Fair Value Measurement) on contractual sale restrictions for equity securities did not have a significant impact on financial statements[16](index=16&type=chunk) - ASU No. 2023-07 (Segment Reporting) and ASU No. 2023-09 (Income Taxes) are effective for fiscal years beginning after December 15, 2024, and the Company is evaluating their impact[17](index=17&type=chunk)[19](index=19&type=chunk) - SEC's final rules on climate-related disclosures (SEC Release No. 33-11275) will apply to the Company's fiscal year beginning January 1, 2025, but are currently stayed pending judicial review[18](index=18&type=chunk) [4. Cash, Cash Equivalents and Restricted Cash](index=12&type=section&id=4.%20Cash,%20Cash%20Equivalents%20and%20Restricted%20Cash) This note defines cash and cash equivalents, and breaks down restricted cash balances for swaps and alternative energy investments - Cash and cash equivalents include cash on hand, due from banks, short-term investments, and interest-bearing deposits with original maturities of three months or less[21](index=21&type=chunk) Restricted Cash Balances (In millions) | Metric | June 30, 2024 | December 31, 2023 | | :------------------------------------------------ | :------------ | :---------------- | | Cash margin for interest rate swaps (restricted portion) | $8.4 | $8.6 | | Restricted escrow account for alternative energy investments | $14.8 | $6.4 | [5. Earnings per Share](index=12&type=section&id=5.%20Earnings%20per%20Share) This note presents basic and diluted earnings per common share for quarterly and year-to-date periods, reflecting per-share profitability Earnings Per Common Share (Three Months Ended June 30) | Metric | 2024 | 2023 | | :-------------------------------------- | :--- | :--- | | Basic Net Income Per Common Share | $0.92 | $1.29 | | Diluted Net Income Per Common Share | $0.92 | $1.28 | Earnings Per Common Share (Six Months Ended June 30) | Metric | 2024 | 2023 | | :-------------------------------------- | :--- | :--- | | Basic Net Income Per Common Share | $1.90 | $2.61 | | Diluted Net Income Per Common Share | $1.90 | $2.60 | - Diluted EPS for Q2 2024 was **$0.92**, down from **$1.28** in Q2 2023. For the six months ended June 30, 2024, diluted EPS was **$1.90**, down from **$2.60** in the prior year[23](index=23&type=chunk) [6. Stock-Based Compensation](index=12&type=section&id=6.%20Stock-Based%20Compensation) This note details the Company's stock-based award programs, including RSUs, vesting schedules, activity, and recognized compensation expense - The Company grants various stock-based awards, including Restricted Stock Units (RSUs), which generally vest over one to three years, with some being performance-based[24](index=24&type=chunk)[25](index=25&type=chunk) RSU Activity (Six Months Ended June 30, 2024) | Metric | Time-Based Shares | Performance-Based Shares | | :--------------------------- | :---------------- | :----------------------- | | Balance at December 31, 2023 | 194,389 | 349,661 | | Granted | 75,827 | 121,412 | | Vested | (41,186) | (113,764) | | Forfeited | (23,424) | (17,395) | | Balance at June 30, 2024 | 205,606 | 339,914 | Stock-Based Compensation Expense (In millions) | Period | 2024 | 2023 | | :-------------------------------- | :--- | :--- | | Three months ended June 30 | $1.3 | $1.4 | | Six months ended June 30 | $2.2 | $3.0 | - Unrecognized stock-based compensation expense related to RSUs was **$13.5 million** as of June 30, 2024, expected to be recognized over the next **2.3 years**[28](index=28&type=chunk) [7. Investment Securities](index=14&type=section&id=7.%20Investment%20Securities) This note breaks down investment securities, especially AFS securities, their fair values, and unrealized gains or losses Securities Available-for-Sale (AFS) Fair Value (In thousands) | Security Type | June 30, 2024 | December 31, 2023 | | :--------------------------------- | :------------ | :---------------- | | U.S. treasury securities | $545,000 | $495,300 | | U.S. government agency entities | $11,010 | $48,169 | | U.S. government sponsored entities | $79,734 | N/A | | Mortgage-backed securities | $728,764 | $786,723 | | Collateralized mortgage obligations | $26,079 | $28,044 | | Corporate debt securities | $258,144 | $246,334 | | **Total Securities AFS** | **$1,648,731** | **$1,604,570** | - The Company recognized an unrealized net loss of **$1.4 million** on equity securities for Q2 2024, compared to a net gain of **$10.7 million** for Q2 2023[32](index=32&type=chunk) - As of June 30, 2024, the Company had **203 AFS securities** in a gross unrealized loss position (**$131.7 million** total gross unrealized losses) with no credit impairment, primarily mortgage-backed securities[33](index=33&type=chunk) - Unrealized losses were primarily attributed to yield curve movement, widened liquidity spreads, and credit spreads, not credit losses. No allowance for credit losses was recorded against these securities[35](index=35&type=chunk) [8. Loans](index=17&type=section&id=8.%20Loans) This note details the loan portfolio composition, including types, geographic concentrations, non-accrual status, and CECL methodology - Most business activities are with clients in high-density Asian-populated areas across California, New York, Texas, Washington, Massachusetts, Illinois, Maryland, and Nevada, and also in Hong Kong[36](index=36&type=chunk)[179](index=179&type=chunk) Loans Held for Investment (In thousands) | Loan Type | June 30, 2024 | December 31, 2023 | | :--------------------------------- | :------------ | :---------------- | | Commercial loans | $3,090,763 | $3,305,048 | | Construction loans | $356,978 | $422,647 | | Commercial real estate loans | $9,886,030 | $9,729,581 | | Residential mortgage loans | $5,782,202 | $5,838,747 | | Equity lines | $235,277 | $245,919 | | Installment and other loans | $6,274 | $6,198 | | **Gross loans** | **$19,357,524** | **$19,548,140** | | Allowance for loan losses | $(153,404) | $(154,562) | | **Total loans held for investment, net** | **$19,193,335** | **$19,382,858** | - Gross loans held for investment decreased by **$190.6 million (1.0%)** to **$19.36 billion** at June 30, 2024, primarily due to decreases in commercial loans, construction loans, and residential mortgage loans, partially offset by an increase in commercial real estate loans[36](index=36&type=chunk)[166](index=166&type=chunk) Non-Accrual Loans (Recorded Investment, In thousands) | Loan Type | June 30, 2024 | December 31, 2023 | | :-------------------------------------- | :------------ | :---------------- | | Commercial loans | $4,075 | $14,404 | | Construction loans | $22,998 | $7,736 | | Commercial real estate loans | $60,085 | $32,030 | | Residential mortgage loans and equity lines | $20,112 | $12,511 | | **Total non-accrual loans** | **$107,270** | **$66,681** | - Total non-accrual loans increased by **$40.6 million (60.9%)** to **$107.3 million** at June 30, 2024, from **$66.7 million** at December 31, 2023[36](index=36&type=chunk)[171](index=171&type=chunk) - The Company adopted ASU 2022-02 for Troubled Debt Restructurings (TDR) and Vintage Disclosures, applying it prospectively and excluding accrued interest receivable from disclosed amortized cost basis of loan modifications[44](index=44&type=chunk) - The allowance for credit losses (ACL) is based on management's best estimate of lifetime expected credit losses, considering historical experience, current conditions, and reasonable and supportable economic forecasts (CECL approach)[60](index=60&type=chunk)[62](index=62&type=chunk) - The CECL methodology utilizes an **eight-quarter** reasonable and supportable forecast period and a **four-quarter** reversion period, blending multiple economic forecasts from Moody's Analytics[65](index=65&type=chunk)[66](index=66&type=chunk) - As of June 30, 2024, the allowance for loan losses was **$153.4 million**, and the reserve for unfunded loan commitments was **$9.6 million**, totaling **$163.0 million** for credit losses[73](index=73&type=chunk)[191](index=191&type=chunk) - The allowance for credit losses represented **0.84%** of period-end gross loans and **147.21%** of non-performing loans at June 30, 2024[191](index=191&type=chunk) [9. Commitments and Contingencies](index=33&type=section&id=9.%20Commitments%20and%20Contingencies) This note discusses the Company's legal proceedings and unfunded commitments for housing and alternative energy partnerships - The Company is party to litigation in the ordinary course of business, but management believes liabilities would not have a material adverse impact on financial condition, results of operations, or liquidity[80](index=80&type=chunk) - Unfunded commitments related to affordable housing and alternative energy partnerships were **$107.5 million** as of June 30, 2024, down from **$130.3 million** at December 31, 2023[82](index=82&type=chunk) [10. Borrowed Funds](index=33&type=section&id=10.%20Borrowed%20Funds) This note details the Company's borrowed funds, including FHLB advances and junior subordinated notes, with their rates and capacities Federal Home Loan Bank (FHLB) Advances (In millions) | Metric | June 30, 2024 | December 31, 2023 | | :-------------------------------- | :------------ | :---------------- | | Advances from FHLB | $165.0 | $540.0 | | Weighted average rate | 5.62% | 5.64% | | Unused borrowing capacity from FHLB | $7,300.0 | $6,600.0 | | Unpledged securities | $1,630.0 | $1,470.0 | Junior Subordinated Notes (In millions) | Metric | June 30, 2024 | December 31, 2023 | | :-------------------------- | :------------ | :---------------- | | Total Junior Subordinated Notes | $119.1 | $119.1 | | Weighted average interest rate | 7.90% | 7.54% | - The Company has the right to defer interest payments on Junior Subordinated Notes for up to **twenty consecutive quarterly periods**, which would restrict dividend payments on capital stock[84](index=84&type=chunk) [11. Income Taxes](index=33&type=section&id=11.%20Income%20Taxes) This note presents the effective tax rate, discusses influencing factors like tax credits, and outlines open audit periods for tax returns Effective Tax Rate | Period | 2024 | 2023 | | :-------------------------- | :--- | :--- | | Six months ended June 30 | 9.4% | 13.2% | - The effective tax rate includes the impact of low-income housing and alternative energy investment tax credits[86](index=86&type=chunk) - The Company's tax returns are open for audit by the IRS back to **2020** and by the California Franchise Tax Board back to **2019**[86](index=86&type=chunk) [12. Fair Value Measurements and Fair Value of Financial Instruments](index=34&type=section&id=12.%20Fair%20Value%20Measurements%20and%20Fair%20Value%20of%20Financial%20Instruments) This note explains the Company's fair value measurements for assets and liabilities, categorizing them into a three-level hierarchy, and provides detailed tables - The Company uses fair value to measure certain assets and liabilities on a recurring basis (e.g., AFS securities, derivatives) and nonrecurring basis (e.g., individually evaluated loans, OREO)[87](index=87&type=chunk) - Fair value measurements are classified into **Level 1** (quoted prices in active markets), **Level 2** (observable inputs other than Level 1), and **Level 3** (unobservable inputs based on management judgment)[88](index=88&type=chunk) Financial Assets Measured at Fair Value on a Recurring Basis (June 30, 2024, In thousands) | Asset Type | Level 1 | Level 2 | Level 3 | Total Fair Value | | :--------------------------------- | :------ | :-------- | :------ | :--------------- | | Securities AFS | $545,000 | $1,103,731 | $0 | $1,648,731 | | Equity securities | $29,949 | $0 | $0 | $29,949 | | Interest rate swaps | $0 | $52,192 | $0 | $52,192 | | Foreign exchange contracts | $0 | $226 | $0 | $226 | | **Total Assets** | **$574,949** | **$1,156,149** | **$0** | **$1,731,098** | Financial Liabilities Measured at Fair Value on a Recurring Basis (June 30, 2024, In thousands) | Liability Type | Level 1 | Level 2 | Level 3 | Total Fair Value | | :------------------------- | :------ | :-------- | :------ | :--------------- | | Interest rate swaps | $0 | $39,962 | $0 | $39,962 | | Foreign exchange contracts | $0 | $241 | $0 | $241 | | **Total Liabilities** | **$0** | **$40,203** | **$0** | **$40,203** | - During Q2 2024, the Company entered into a restructuring support agreement and received **Level 3 equity securities** in a private company, valued using projected earnings and cash on hand[94](index=94&type=chunk) [13. Goodwill and Other Intangible Assets](index=41&type=section&id=13.%20Goodwill%20and%20Other%20Intangible%20Assets) This note reports the carrying value of goodwill and core deposit intangibles, including amortization expense and impairment assessments - Goodwill remained unchanged at **$375.7 million** as of June 30, 2024, and was not impaired[106](index=106&type=chunk) Core Deposit Intangibles (In thousands) | Metric | June 30, 2024 | December 31, 2023 | | :------------------------- | :------------ | :---------------- | | Gross balance | $10,562 | $10,562 | | Accumulated amortization | $(5,792) | $(5,291) | | Impairment | $(1,324) | $(1,227) | | **Net carrying balance** | **$3,446** | **$4,044** | - Amortization expense for core deposit intangibles was **$259 thousand** for Q2 2024 (down from **$559 thousand** in Q2 2023) and **$598 thousand** for H1 2024 (down from **$809 thousand** in H1 2023)[108](index=108&type=chunk) [14. Financial Derivatives](index=42&type=section&id=14.%20Financial%20Derivatives) This note describes the Company's use of financial derivatives to manage interest rate risk, their fair value recognition, and outstanding contract details - The Company uses financial derivatives (e.g., interest rate swaps, caps, floors) to mitigate exposure to interest rate risks, not for speculation[109](index=109&type=chunk) - All financial derivatives are recognized as assets or liabilities at fair value on the Consolidated Balance Sheets[111](index=111&type=chunk) - As of June 30, 2024, outstanding interest rate derivative contracts with clients and third-party financial institutions had a notional amount of **$618.4 million** and a fair value of **$40.0 million**[112](index=112&type=chunk) - The Bank's outstanding fair value interest rate swap contracts matched to individual fixed-rate commercial real estate loans had a notional amount of **$82.8 million** with a fair value of **$4.5 million** as of June 30, 2024[114](index=114&type=chunk) - The Company has designated a partial-term hedging election of **$754.4 million** notional as a last-of-layer hedge on pools of loans to reduce interest rate exposure[115](index=115&type=chunk) [15. Balance Sheet Offsetting](index=45&type=section&id=15.%20Balance%20Sheet%20Offsetting) This note clarifies the Company's policy regarding offsetting financial instruments, particularly derivatives, on the consolidated balance sheets - Certain financial instruments, including derivatives, may be eligible for offset in the Consolidated Balance Sheets or subject to master netting arrangements, but the Company generally does not offset them for financial reporting purposes[121](index=121&type=chunk) Derivative Offsetting Information (June 30, 2024, In thousands) | Metric | Gross Amounts Recognized | Offset Balance | Net Amounts Presented in Balance Sheet | Collateral Posted | Net Amount | | :---------- | :----------------------- | :------------- | :------------------------------------- | :---------------- | :--------- | | Assets: Derivatives | $52,192 | $1,282 | $50,910 | $47,276 | $3,634 | | Liabilities: Derivatives | $39,962 | $0 | $39,962 | $0 | $39,962 | [16. Revenue from Contracts with Clients](index=45&type=section&id=16.%20Revenue%20from%20Contracts%20with%20Clients) This note breaks down non-interest income from client contracts, highlighting changes in fees, wealth management fees, and other service fees Non-Interest Income from Contracts with Clients (In thousands) | Metric | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | | :----------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Fees and service charges on deposit accounts | $2,450 | $2,336 | $4,687 | $4,855 | | Wealth management fees | $5,678 | $3,639 | $11,316 | $7,536 | | Other service fees | $4,737 | $4,591 | $8,787 | $8,135 | | **Total noninterest income (in-scope)** | **$12,865** | **$10,566** | **$24,790** | **$20,526** | | Noninterest income (not in-scope) | $350 | $12,544 | $(4,964) | $16,828 | | **Total noninterest income** | **$13,215** | **$23,110** | **$19,826** | **$37,354** | - Total non-interest income for Q2 2024 decreased by **$9.9 million (42.9%)** to **$13.2 million**, compared to **$23.1 million** in Q2 2023[148](index=148&type=chunk) - The decrease was primarily due to a **$12.1 million** increase in unrealized loss on equity securities, partially offset by a **$2.0 million** increase in Wealth Management fees[148](index=148&type=chunk) - The Company applies practical expedients for revenue recognition, not disclosing unsatisfied performance obligations for contracts less than one year and not adjusting for significant financing components in short-term contracts[128](index=128&type=chunk) [17. Stockholders' Equity](index=47&type=section&id=17.%20Stockholders'%20Equity) This note details changes in total equity, including net income, dividends, stock-based compensation, treasury stock, and other comprehensive income or loss - Total equity increased by **$56.7 million** to **$2.79 billion** as of June 30, 2024, driven by net income, stock-based compensation, and dividend reinvestment, offset by cash dividends, treasury stock purchases, and other comprehensive loss[129](index=129&type=chunk)[216](index=216&type=chunk) Changes in Total Equity (Six Months Ended June 30, 2024, In thousands) | Metric | Amount | | :--------------------------------------------------- | :----- | | Net income | $138,264 | | Proceeds from shares issued through the Dividend Reinvestment Plan | $1,488 | | Shares withheld related to net share settlement of RSUs | $(3,708) | | Purchase of treasury stock | $(25,301) | | Stock-based compensation | $2,189 | | Cash dividends paid to common stockholders | $(49,473) | | Restricted stock units vested | $2 | | Stock issued to directors | $850 | | Other comprehensive loss | $(7,644) | | **Net increase in total equity** | **$56,667** | Accumulated Other Comprehensive Income/(Loss) (Net-of-tax, In thousands) | Metric | June 30, 2024 | June 30, 2023 | | :-------------------------------- | :------------ | :------------ | | Beginning balance | $(85,416) | $(102,295) | | Net unrealized gains/(losses) arising during the period | $(7,644) | $3,246 | | Reclassification adjustment for net losses in net income | $0 | $0 | | **Ending balance** | **$(93,060)** | **$(99,049)** | [18. Stock Repurchase Program](index=49&type=section&id=18.%20Stock%20Repurchase%20Program) This note details the Company's stock repurchase activities, including new program announcements and shares repurchased under existing plans - On May 28, 2024, the Company announced a new stock repurchase program to buy back up to **$125.0 million** of common stock[133](index=133&type=chunk) - During Q2 2024, the Company repurchased **0.7 million shares** at an average cost of **$36.41 per share**, totaling **$25.1 million**[133](index=133&type=chunk) - The previous **$125.0 million** share repurchase program was completed on February 21, 2023, with **2,897,628 shares** repurchased at an average cost of **$43.14**[133](index=133&type=chunk) [19. Subsequent Events](index=49&type=section&id=19.%20Subsequent%20Events) This note confirms the Company evaluated post-balance sheet events and found no material items requiring disclosure - The Company evaluated events subsequent to June 30, 2024, and found no material events requiring recognition or disclosure[134](index=134&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=49&type=section&id=Item%202.%20MANAGEMENT'S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) This section provides management's perspective on financial condition and results, highlighting key performance indicators, income, expenses, balance sheet items, accounting policies, market risk, and liquidity [Critical Accounting Policies](index=49&type=section&id=Critical%20Accounting%20Policies) This section discusses accounting policies requiring management's most subjective judgments and estimates, particularly the allowance for loan losses - The discussion relies on unaudited Consolidated Financial Statements prepared in accordance with GAAP, requiring management estimates and judgments[136](index=136&type=chunk) - The allowance for loan losses is identified as a critical accounting policy due to significant judgments and assumptions that materially impact the carrying value of net loans[138](index=138&type=chunk) [Highlights](index=51&type=section&id=Highlights) This section summarizes key financial performance indicators and significant corporate actions for the quarter, including net interest margin, EPS, and stock repurchase programs - Net interest margin decreased to **3.01%** in Q2 2024 from **3.05%** in Q1 2024[139](index=139&type=chunk) - Diluted EPS decreased to **$0.92** for Q2 2024 from **$0.98** for Q1 2024, mainly due to higher provision for loan losses[139](index=139&type=chunk) - A new **$125.0 million** stock repurchase program was announced on May 28, 2024, following the completion of the previous program[139](index=139&type=chunk) [Quarterly Statement of Operations Review](index=51&type=section&id=Quarterly%20Statement%20of%20Operations%20Review) This section analyzes the Company's quarterly financial performance, examining net income, net interest income, credit loss provision, non-interest income, expense, and income taxes [Net Income (Quarterly)](index=51&type=section&id=Net%20Income_Q) This subsection reviews the Company's quarterly net income, earnings per share, and key profitability ratios like return on assets and equity Quarterly Net Income and EPS (In millions, except per share data) | Metric | Q2 2024 | Q2 2023 | | :-------------------------------------- | :------ | :------ | | Net income | $66.8 | $93.2 | | Basic earnings per common share | $0.92 | $1.29 | | Diluted earnings per common share | $0.92 | $1.28 | | Return on average assets | 1.15% | 1.67% | | Return on average total stockholders' equity | 9.63% | 14.47% | | Efficiency ratio | 55.65% | 45.36% | - Net income for Q2 2024 decreased by **$26.4 million (28.3%)** to **$66.8 million** compared to **$93.2 million** in Q2 2023[140](index=140&type=chunk) - Diluted EPS for Q2 2024 was **$0.92**, down from **$1.28** in Q2 2023[140](index=140&type=chunk) [Net Interest Income Before Provision for Credit Losses (Quarterly)](index=51&type=section&id=Net%20Interest%20Income%20Before%20Provision%20for%20Credit%20Losses_Q) This subsection analyzes quarterly changes in net interest income, net interest margin, and factors influencing interest income and expense - Net interest income before provision for credit losses decreased by **$16.2 million (8.9%)** to **$165.3 million** in Q2 2024, primarily due to increased interest expense from deposits, offset by higher interest income from loans and securities[142](index=142&type=chunk) - Net interest margin was **3.01%** for Q2 2024, down from **3.44%** for Q2 2023[142](index=142&type=chunk) Key Interest Rate Metrics (Q2 2024 vs. Q2 2023) | Metric | Q2 2024 | Q2 2023 | | :------------------------------------------ | :------ | :------ | | Yield on average interest-earning assets | 6.05% | 5.68% | | Cost of funds on average interest-bearing liabilities | 3.97% | 2.99% | | Average cost of interest-bearing deposits | 3.94% | 2.91% | | Net interest spread | 2.08% | 2.69% | Changes in Interest Income and Expense (Q2 2024 vs. Q2 2023, In thousands) | Category | Changes in Volume | Changes in Rate | Total Change | | :-------------------------------- | :---------------- | :-------------- | :----------- | | Total changes in interest income | $13,419 | $19,336 | $32,755 | | Total changes in interest expense | $10,497 | $38,475 | $48,972 | | **Changes in net interest income** | **$2,922** | **$(19,139)** | **$(16,217)** | [Provision for Credit Losses (Quarterly)](index=53&type=section&id=Provision%20for%20credit%20losses_Q) This subsection examines quarterly provision for credit losses, changes in allowance, and net charge-offs, reflecting loan portfolio risk assessment - Provision for credit losses decreased to **$6.6 million** in Q2 2024 from **$9.2 million** in Q2 2023[147](index=147&type=chunk) - The allowance for credit losses decreased by **$0.7 million** to **$163.0 million (0.84% of gross loans)** at June 30, 2024, from **$163.7 million (0.84% of gross loans)** at December 31, 2023[147](index=147&type=chunk) Net Charge-offs (Three Months Ended June 30, In thousands) | Metric | 2024 | 2023 | | :-------------------- | :----- | :----- | | Total charge-offs | $8,257 | $2,483 | | Total recoveries | $260 | $503 | | **Net charge-offs** | **$7,997** | **$1,980** | [Non-Interest Income (Quarterly)](index=53&type=section&id=Non-Interest%20Income_Q) This subsection analyzes quarterly non-interest income trends, identifying key drivers like wealth management fees and unrealized gains or losses - Non-interest income decreased by **$9.9 million (42.9%)** to **$13.2 million** in Q2 2024, compared to **$23.1 million** in Q2 2023[148](index=148&type=chunk) - The decrease was primarily due to a **$12.1 million** increase in unrealized loss on equity securities, partially offset by a **$2.0 million** increase in Wealth Management fees[148](index=148&type=chunk) [Non-Interest Expense (Quarterly)](index=55&type=section&id=Non-Interest%20Expense_Q) This subsection reviews quarterly non-interest expense changes, highlighting factors like salaries, amortization, OREO, and their impact on efficiency - Non-interest expense increased by **$6.6 million (7.1%)** to **$99.4 million** in Q2 2024 compared to **$92.8 million** in Q2 2023[150](index=150&type=chunk) - Key drivers of the increase were a **$3.4 million** rise in salaries and employee benefits, a **$1.7 million** increase in amortization of low-income housing and alternative energy partnerships, and a **$1.4 million** increase in OREO expenses[150](index=150&type=chunk) - The efficiency ratio worsened to **55.65%** in Q2 2024 from **45.36%** in Q2 2023[150](index=150&type=chunk) [Income Taxes (Quarterly)](index=55&type=section&id=Income%20Taxes_Q) This subsection discusses the quarterly effective tax rate and influencing factors like alternative energy and low-income housing tax credits - The effective tax rate for Q2 2024 was **7.9%**, down from **9.2%** for Q2 2023, influenced by alternative energy investments and low-income housing tax credits[151](index=151&type=chunk) [Year-to-Date Statement of Operations Review](index=55&type=section&id=Year-to-Date%20Statement%20of%20Operations%20Review) This section analyzes the Company's year-to-date financial performance, covering net income and net interest income before credit loss provision [Net Income (Year-to-Date)](index=55&type=section&id=Net%20Income_YTD) This subsection reviews the Company's year-to-date net income, diluted EPS, and key profitability ratios, comparing current to prior year - Net income for H1 2024 was **$138.3 million**, a decrease of **$51.0 million (26.9%)** compared to **$189.2 million** in H1 2023[152](index=152&type=chunk) - Diluted EPS for H1 2024 was **$1.90**, down from **$2.60** in H1 2023[152](index=152&type=chunk) - Return on average stockholders' equity was **10.01%** and return on average assets was **1.19%** for H1 2024, compared to **14.92%** and **1.71%** respectively for H1 2023[152](index=152&type=chunk) [Net Interest Income Before Provision for Credit Losses (Year-to-Date)](index=55&type=section&id=Net%20Interest%20Income%20Before%20Provision%20for%20Credit%20Losses_YTD) This subsection analyzes year-to-date changes in net interest income, net interest margin, and factors influencing interest income and expense Key Interest Rate Metrics (H1 2024 vs. H1 2023) | Metric | H1 2024 | H1 2023 | | :------------------------------------------ | :------ | :------ | | Yield on average interest-earning assets | 6.03% | 5.61% | | Cost of funds on average interest-bearing liabilities | 3.92% | 2.73% | | Average cost of interest-bearing deposits | 3.86% | 2.66% | | Net interest spread | 2.11% | 2.88% | | Net interest margin | 3.03% | 3.59% | Changes in Interest Income and Expense (H1 2024 vs. H1 2023, In thousands) | Category | Changes in Volume | Changes in Rate | Total Change | | :-------------------------------- | :---------------- | :-------------- | :----------- | | Total changes in interest income | $34,463 | $45,548 | $80,011 | | Total changes in interest expense | $27,906 | $92,185 | $120,091 | | **Changes in net interest income** | **$6,557** | **$(46,637)** | **$(40,080)** | [Balance Sheet Review](index=57&type=section&id=Balance%20Sheet%20Review) This section analyzes the Company's balance sheet, examining changes in assets, securities, loans, credit loss allowance, deposits, and uninsured deposits [Assets](index=57&type=section&id=Assets_BS) This subsection reviews overall changes in total assets, providing a high-level overview of the Company's asset growth or contraction - Total assets increased by **$153.7 million (0.7%)** to **$23.24 billion** as of June 30, 2024, from **$23.08 billion** at December 31, 2023[157](index=157&type=chunk) [Securities Available-for-Sale](index=57&type=section&id=Securities%20Available-for-Sale_BS) This subsection discusses the Company's AFS debt securities, including fair value measurement, impairment testing, and unrealized gains or losses - AFS debt securities are measured at fair value and subject to impairment testing, with credit-related losses recognized in earnings and non-credit related components in other comprehensive income[158](index=158&type=chunk) - Unrealized losses on AFS securities were determined to be due to market interest rates and supply/demand dynamics, not credit deterioration, and were recognized in other comprehensive income[164](index=164&type=chunk) - AFS securities represented **7.1%** of total assets (**$1.65 billion**) as of June 30, 2024, up from **7.0% ($1.60 billion)** at December 31, 2023[165](index=165&type=chunk) - As of June 30, 2024, **$18.9 million** of AFS securities were pledged to secure public deposits and other borrowings, down from **$134.2 million** at December 31, 2023[165](index=165&type=chunk) [Loans](index=59&type=section&id=Loans_BS) This subsection analyzes the loan portfolio, including gross loans, non-performing assets, and concentrations in construction and commercial real estate (CRE) loans Gross Loans Held for Investment (In millions) | Loan Type | June 30, 2024 | December 31, 2023 | % Change | | :-------------------------------------- | :------------ | :---------------- | :------- | | Commercial loans | $3,090.8 | $3,305.0 | (6.5%) | | Construction loans | $357.0 | $422.6 | (15.5%) | | Commercial real estate loans | $9,886.0 | $9,729.6 | 1.6% | | Residential mortgage loans and equity lines | $6,017.5 | $6,084.7 | (1.1%) | | Installment and other loans | $6.3 | $6.2 | 1.2% | | **Total Gross Loans** | **$19,357.5** | **$19,548.1** | **(1.0%)** | - Gross loans held for investment decreased by **$190.6 million (1.0%)** to **$19.36 billion** at June 30, 2024, primarily due to decreases in commercial loans, construction loans, and residential mortgage loans, partially offset by an increase in commercial real estate loans[166](index=166&type=chunk) - Non-performing assets increased by **$35.7 million (38.3%)** to **$129.0 million** at June 30, 2024, from **$93.3 million** at December 31, 2023, mainly due to a **60.9%** increase in non-accrual loans[168](index=168&type=chunk) Non-Performing Assets (In thousands) | Metric | June 30, 2024 | December 31, 2023 | % Change | | :------------------------------------------ | :------------ | :---------------- | :------- | | Accruing loans past due 90 days or more | $3,443 | $7,157 | (52%) | | Non-accrual loans | $107,270 | $66,681 | 61% | | Other real estate owned | $18,277 | $19,441 | (6%) | | **Total non-performing assets** | **$128,990** | **$93,279** | **38%** | - The allowance for loan losses to non-performing loans decreased to **138.6%** at June 30, 2024, from **209.3%** at December 31, 2023, primarily due to the increase in non-accrual loans[175](index=175&type=chunk) - Construction loans with pre-established interest reserves were **$194.5 million** with **$33.9 million** in reserves at June 30, 2024, down from **$220.6 million** with **$41.3 million** in reserves at December 31, 2023[177](index=177&type=chunk) - The Bank's loans for construction, land development, and other land represented **16%** of total risk-based capital at June 30, 2024, and total CRE loans represented **288%** of total risk-based capital, both within internal limits[180](index=180&type=chunk) Total CREC Loans by Property Type (June 30, 2024, In thousands) | Property Type | Amount | % of Total | | :------------------------- | :------- | :--------- | | Retail | $2,370,805 | 23% | | Multifamily | $2,683,331 | 26% | | Office | $1,505,298 | 15% | | Warehouse | $1,204,716 | 12% | | Industrial and Multi-Use | $587,364 | 6% | | Lodging | $299,299 | 3% | | Construction & Land | $446,007 | 4% | | Other | $1,146,188 | 11% | | **Total CREC loans** | **$10,243,008** | **100%** | - The weighted-average loan-to-value (LTV) ratio of the total CREC loan portfolio was **50%** as of June 30, 2024, with approximately **84%** of total CREC loans having an LTV ratio of **60% or lower**[182](index=182&type=chunk) - **49%** of total CREC loans were concentrated in California as of June 30, 2024[183](index=183&type=chunk) [Allowance for Credit Losses](index=66&type=section&id=Allowance%20for%20Credit%20Losses_BS) This subsection details the allowance for credit losses (ACL), its adequacy relative to loans and non-performing assets, and CECL economic scenarios - The allowance for credit losses (ACL) is maintained at a level appropriate to cover estimated and known risks in the loan portfolio and off-balance sheet unfunded credit commitments[189](index=189&type=chunk) - The ACL was **$163.0 million** at June 30, 2024 (**0.84% of gross loans** and **147.21% of non-performing loans**), compared to **$163.6 million** at December 31, 2023 (**0.84% of gross loans** and **221.58% of non-performing loans**)[191](index=191&type=chunk) - The decrease in ACL was primarily due to a decrease in total loans and the charge-off of a previously reserved for loan[195](index=195&type=chunk) - The Company's CECL methodology uses an **eight-quarter** reasonable and supportable forecast period and a **four-quarter** reversion period, blending multiple economic forecasts[198](index=198&type=chunk) - As of June 30, 2024, the Company placed equal weight on its downside and base economic scenarios, with a small weighting on the upside scenario[200](index=200&type=chunk) - If **100%** weighting had been applied to the downside scenario, the ACL as of June 30, 2024, would have been approximately **$52.9 million higher**[202](index=202&type=chunk) Allowance for Loan Losses Activity (Six Months Ended June 30, In thousands) | Metric | 2024 | 2023 | | :------------------------------------------ | :----- | :----- | | Balance at beginning of period | $154,562 | $146,485 | | Provision for expected credit losses on loans | $7,979 | $15,460 | | Total charge-offs | $(10,450) | $(10,390) | | Total recoveries | $1,313 | $3,554 | | **Balance at the end of period** | **$153,404** | **$155,109** | Allowance for Loan Losses by Loan Type (June 30, 2024 vs. December 31, 2023, In thousands) | Loan Type | June 30, 2024 | December 31, 2023 | | :-------------------------------------- | :------------ | :---------------- | | Commercial loans | $48,588 | $53,791 | | Construction loans | $8,912 | $8,180 | | Commercial real estate loans | $78,465 | $74,428 | | Residential mortgage loans and equity lines | $17,416 | $18,140 | | Installment and other loans | $23 | $23 | | **Total loans** | **$153,404** | **$154,562** | [Deposits](index=72&type=section&id=Deposits_BS) This subsection analyzes changes in total deposits and their composition, including non-interest-bearing, NOW, money market, savings, and time deposits - Total deposits increased by **$447.6 million (2.3%)** to **$19.77 billion** as of June 30, 2024, from **$19.33 billion** at December 31, 2023[209](index=209&type=chunk) Deposit Mix (June 30, 2024 vs. December 31, 2023, In thousands) | Deposit Type | June 30, 2024 Amount | June 30, 2024 Percentage | December 31, 2023 Amount | December 31, 2023 Percentage | | :-------------------------------- | :------------------- | :----------------------- | :----------------------- | :----------------------- | | Non-interest-bearing demand deposits | $3,161,632 | 16.0% | $3,529,018 | 18.3% | | NOW deposits | $2,145,580 | 10.9% | $2,370,685 | 12.3% | | Money market deposits | $3,182,031 | 16.1% | $3,049,754 | 15.8% | | Savings deposits | $1,014,287 | 5.1% | $1,039,203 | 5.4% | | Time deposits | $10,269,487 | 51.9% | $9,336,787 | 48.2% | | **Total deposits** | **$19,773,017** | **100.0%** | **$19,325,447** | **100.0%** | - Time deposits constituted **51.9%** of total deposits at June 30, 2024, with **99.8%** maturing within one year or less[210](index=210&type=chunk)[211](index=211&type=chunk)[225](index=225&type=chunk) [FDIC Special Assessment and Uninsured Deposits](index=72&type=section&id=FDIC%20Special%20Assessment%20and%20Uninsured%20Deposits) This subsection provides information on uninsured deposits, available liquidity coverage, and the impact of the FDIC special assessment - Total uninsured deposits were **$9.00 billion** as of June 30, 2024, an increase of **$286.4 million** from December 31, 2023[209](index=209&type=chunk) - Excluding collateralized deposits, uninsured and uncollateralized deposits were **$8.22 billion (41.6% of total deposits)** at June 30, 2024[209](index=209&type=chunk) - Available liquidity (unused FHLB borrowing capacity of **$7.30 billion** and unpledged securities of **$1.63 billion**) exceeded **100%** of uninsured and uncollateralized deposits[209](index=209&type=chunk) - The Company recognized an additional **$2.9 million** for the FDIC special assessment in Q1 2024, following an **$11.3 million** recognition in Q4 2023[212](index=212&type=chunk) [Off-Balance-Sheet Arrangements and Contractual Obligations](index=73&type=section&id=Off-Balance-Sheet%20Arrangements%20and%20Contractual%20Obligations) This section details the Company's off-balance-sheet financial instruments and contractual obligations, including deposits, borrowings, and operating leases Contractual Obligations (June 30, 2024, In thousands) | Obligation Type | 1 year or less | 1-3 years | 3-5 years | 5 years or more | Total | | :------------------------------------------ | :------------- | :-------- | :-------- | :-------------- | :------------ | | Deposits with stated maturity dates | $10,243,914 | $21,741 | $0 | $3,832 | $10,269,487 | | Advances from the Federal Home Loan Bank | $165,000 | $0 | $0 | $0 | $165,000 | | Other borrowings | $0 | $0 | $0 | $17,838 | $17,838 | | Long-term debt | $0 | $0 | $0 | $119,136 | $119,136 | | Operating leases | $10,968 | $16,800 | $9,579 | $1,111 | $38,458 | | **Total contractual obligations** | **$10,419,882** | **$38,541** | **$9,579** | **$141,917** | **$10,609,919** | - The Company enters into off-balance sheet financial instruments, such as commitments to extend credit and standby letters of credit, to meet client financing needs, which involve varying degrees of credit and interest rate risk[214](index=214&type=chunk)[215](index=215&type=chunk) [Capital Resources](index=73&type=section&id=Capital%20Resources) This section discusses the Company's capital management strategy, including capital adequacy ratios and dividend policy, ensuring regulatory compliance and growth [Capital Adequacy Review](index=75&type=section&id=Capital%20Adequacy%20Review) This subsection reviews the Company's capital levels and ratios, demonstrating compliance with Basel III and "well capitalized" thresholds - Management aims to maintain capital levels sufficient for future growth, depositor/stockholder protection, and regulatory compliance[217](index=217&type=chunk) Capital Ratios (June 30, 2024, In thousands) | Ratio | Bancorp Actual Ratio | Bank Actual Ratio | Minimum Required Ratio (Basel III) | Required to be Well Capitalized Ratio | | :-------------------------------------- | :------------------- | :---------------- | :--------------------------------- | :------------------------------------ | | Common Equity Tier 1 to Risk-Weighted Assets | 13.26% | 13.61% | 7.00% | 6.50% | | Tier 1 Capital to Risk-Weighted Assets | 13.26% | 13.61% | 8.50% | 8.00% | | Total Capital to Risk-Weighted Assets | 14.74% | 14.47% | 10.50% | 10.00% | | Leverage Ratio | 10.83% | 11.11% | 4.00% | 5.00% | - As of June 30, 2024, capital levels at both Bancorp and the Bank exceeded all capital adequacy requirements under fully phased-in Basel III Capital Rules and the minimum levels to be considered 'well capitalized'[219](index=219&type=chunk) [Dividend Policy](index=76&type=section&id=Dividend%20Policy) This subsection outlines the Company's common stock dividend policy, including current rate and payment restrictions from junior subordinated notes - Holders of common stock are entitled to dividends as declared by the Board of Directors, but the Company is not required to pay them[219](index=219&type=chunk) - The common stock dividend has been **$0.34 per share** since Q4 2021[219](index=219&type=chunk) - Payment of dividends is limited by the terms of Junior Subordinated Notes; if interest payments are deferred, common stock dividends cannot be paid[219](index=219&type=chunk) - The Company declared a cash dividend of **$0.34 per share** on May 30, 2024, totaling **$24.8 million** paid in Q2 2024[221](index=221&type=chunk) [Liquidity](index=77&type=section&id=Liquidity) This section describes the Company's liquidity management, including its ability to meet obligations, primary sources, and available borrowing capacity - Liquidity is the ability to meet financial obligations and client credit needs. Principal sources include deposit growth, security maturities/sales, loan repayments, federal funds, repurchase agreements, and FHLB advances[222](index=222&type=chunk) - The average monthly liquidity ratio was **13.7%** as of June 30, 2024, consistent with December 31, 2023[222](index=222&type=chunk) - The Bank had an approved FHLB credit line of **$8.19 billion**, with **$165.0 million** in advances and **$950.0 million** in standby letters of credit as of June 30, 2024[223](index=223&type=chunk) - Investment securities totaled **$1.65 billion** at June 30, 2024, with **$18.9 million** pledged as collateral, leaving the remainder available for liquidity[224](index=224&type=chunk) - Approximately **99.8%** of time deposits mature within one year or less, and management expects them to reprice lower with anticipated Fed funds rate decreases[225](index=225&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=77&type=section&id=Item%203.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) This section describes the Company's market risk management, primarily interest rate risk, using a net interest income simulation model, outlining methodology, assumptions, and impact of rate changes on NII and MVE - The Company uses a net interest income simulation model to measure interest rate risk and project future earnings or market values under alternative interest rate scenarios[226](index=226&type=chunk) - The model requires significant assumptions for loan prepayment rates, volumes, pricing, and deposit/borrowing volumes and pricing, which may prove inaccurate[227](index=227&type=chunk) - A policy tolerance level limits net interest income volatility to plus or minus **5%** and net economic value loss to zero for hypothetical rate changes of plus or minus **200 basis points**[228](index=228&type=chunk) Estimated Impact of Interest Rate Changes (June 30, 2024) | Change in Interest Rate (Basis Points) | Net Interest Income Volatility (1) | Market Value of Equity Volatility (2) | | :--------------------------------------- | :--------------------------------- | :------------------------------------ | | +200 | 15.68% | -7.6% | | +100 | 7.9% | -3.8% | | -100 | -5.0% | 4.4% | | -200 | -10.3% | 9.5% | [Item 4. Controls and Procedures](index=79&type=section&id=Item%204.%20CONTROLS%20AND%20PROCEDURES) This section confirms the effectiveness of disclosure controls and procedures as of June 30, 2024, with no material changes in internal control over financial reporting during Q2 2024 - The principal executive and financial officers evaluated and concluded that the Company's disclosure controls and procedures are effective as of June 30, 2024[231](index=231&type=chunk) - No material changes in internal control over financial reporting occurred during Q2 2024[232](index=232&type=chunk) [PART II – OTHER INFORMATION](index=79&type=section&id=PART%20II%20%E2%80%93%20OTHER%20INFORMATION) This part includes disclosures on legal proceedings, risk factors, equity security sales, and other information not covered in financial statements [Item 1. Legal Proceedings](index=79&type=section&id=Item%201.%20LEGAL%20PROCEEDINGS) This section states the Company is involved in ordinary course legal proceedings, with management believing no material adverse impact on financial condition, results, or liquidity - The Company is a party to litigation arising in the ordinary course of business[233](index=233&type=chunk) - Management believes that any liability from such litigation would not have a material adverse impact on the Company's consolidated financial condition, results of operations, or liquidity[233](index=233&type=chunk) [Item 1A. Risk Factors](index=79&type=section&id=Item%201A.%20RISK%20FACTORS) This section indicates no material changes to 2023 Form 10-K risk factors, advising readers to consider all potential risks that could adversely affect business and financial performance - No material changes to risk factors previously disclosed in the **2023 Form 10-K**[234](index=234&type=chunk) - Readers should carefully consider the disclosed risk factors, as well as additional unknown or immaterial risks, which could adversely affect the Company's business, financial condition, results of operations, and stock price[234](index=234&type=chunk) - Limitations on dividend payments are discussed in the 'Dividend Policy' and 'Liquidity' sections[235](index=235&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=79&type=section&id=Item%202.%20UNREGISTERED%20SALES%20OF%20EQUITY%20SECU RITIES%20AND%20USE%20OF%20PROCEEDS) This section details the Company's Q2 2024 share repurchase activities, including number of shares purchased and average price under announced plans Issuer Purchases of Equity Securities (Q2 2024) | Period | Total Number of Shares Purchased | Average Price per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | Maximum Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Plans or Programs | | :----------------------------------- | :------------------------------- | :---------------------- | :------------------------------------------------------------------------------- | :---------------------------------------------------------------------------------------------------------- | | April 1, 2024 - April 30, 2024 | 0 | $0.00 | 0 | $0 | | May 1, 2024 - May 31, 2024 | 150,000 | $36.49 | 150,000 | $119,526,565 | | June 1, 2024 - June 30, 2024 | 539,470 | $36.38 | 539,470 | $99,897,996 | | **Total** | **689,470** | **$36.41** | **689,470** | **$99,897,996** | - The Company repurchased **689,470 shares** at an average price of **$36.41 per share** during Q2 2024[235](index=235&type=chunk) [Item 3. Defaults Upon Senior Securities](index=80&type=section&id=Item%203.%20DEFAULTS%20UPON%20SENIOR%20SECURITIES) This section states that there are no defaults upon senior securities to report - Not applicable[237](index=237&type=chunk) [Item 4. Mine Safety Disclosures](index=80&type=section&id=Item%204.%20MINE%20SAFETY%20DISCLOSURES) This section states that there are no mine safety disclosures to report - Not applicable[237](index=237&type=chunk) [Item 5. Other Information](index=80&type=section&id=Item%205.%20OTHER%20INFORMATION) This section indicates that there is no other information to report - None[237](index=237&type=chunk) [Item 6. Exhibits](index=81&type=section&id=Item%206.%20EXHIBITS) This section lists all exhibits filed with the Form 10-Q, including organizational documents, incentive plans, certifications, and XBRL documents - Includes Restated Certificate of Incorporation, Amended and Restated Bylaws, Certificates of Designation for Preferred Stock, and various Restricted Stock Unit Agreements[238](index=238&type=chunk) - Contains certifications from the CEO and CFO pursuant to Sarbanes-Oxley Act Sections 302 and 906[238](index=238&type=chunk) - Includes Inline XBRL Instance Document and Taxonomy Extension documents[238](index=238&type=chunk)[239](index=239&type=chunk) [Signatures](index=82&type=section&id=SIGNATURES) This section provides official signatures of the Company's principal executive and financial officers, certifying Form 10-Q accuracy - Report signed by Chang M. Liu, President and Chief Executive Officer, and Heng W. Chen, Executive Vice President and Chief Financial Officer[239](index=239&type=chunk) - Date of signing: August 8, 2024[239](index=239&type=chunk)

Financial Data and Key Metrics Changes - The company reported net income of $66.8 million for Q2 2024, a decrease of 6.4% compared to $71.4 million in Q1 2024 [4] - Diluted earnings per share decreased by 6.1% to $0.92 per share for Q2 2024 from $0.98 per share in the prior quarter [4] - Noninterest income for Q2 2024 increased by $6.6 million to $13.2 million compared to $6.6 million in Q1 2024 [10] - Net interest margin for Q2 2024 was 3.01%, down from 3.05% in Q1 2024, but showed signs of stabilization with June's NIM at 3.06% [25] Business Line Data and Key Metrics Changes - Total gross loans decreased by $72 million or 1.5% annualized, driven by declines in commercial loans, residential mortgages, and construction loans, while commercial real estate loans increased by $64 million or 2.6% annualized [21] - Classified loans increased to $324 million from $244 million in Q1, while special mention loans decreased to $201 million from $249 million in Q1 [7] - Net charge-offs for Q2 2024 were $8 million, compared to $1.1 million in Q1 [23] Market Data and Key Metrics Changes - Total deposits decreased by $73 million or 1.5% annualized during Q2 2024, with a notable decrease in NOW deposits [7] - Total uninsured deposits were $8.2 billion, net of $0.8 billion in collateralized deposits, representing 41.5% of total deposits [24] Company Strategy and Development Direction - The company has revised its overall loan growth guidance for 2024 to a range between 0% and 2% due to slower-than-expected loan growth in the first half of the year [21] - The company plans to repurchase approximately $35 million in stock per quarter in Q3 and Q4 under its stock buyback program [21] - The company is focusing on increasing its commercial real estate loan portfolio while managing risks associated with classified loans [33] Management's Comments on Operating Environment and Future Outlook - Management noted that expenses are expected to moderate in the second half of 2024 after experiencing one-time expenses in Q2 [15] - The effective tax rate for Q2 2024 was 7.9%, with expectations of an effective tax rate between 10.5% and 11.5% for the second half of 2024 [27] - Management expressed confidence in the stability of the economy and the company's ability to manage risks associated with nonaccrual loans [50] Other Important Information - The company recorded a provision for credit loss of $6.6 million in Q2 2024, up from $1.9 million in Q1 [7] - The company has an unused borrowing capacity from the Federal Home Loan Bank of $7.1 billion and the Federal Reserve Bank of $174 million as of June 30, 2024 [24] Q&A Session Summary Question: What is the spot rate on deposits at the end of June? - The total interest-bearing spot rate was 3.92% [28] Question: Can you quantify unusual expenses around consulting, marketing, and charitable contributions? - It was about $10 million a quarter for low-income housing [30] Question: Can you provide insights on the increase in classified loans this quarter? - The increase was primarily due to downgrades from the EM class, mostly related to real estate, with no significant risk anticipated [33] Question: What is the company's current interest in M&A? - The company is open to M&A opportunities but currently has no viable candidates in its niche space [34] Question: How does the company expect loan growth to improve in the second half of the year? - Most expected growth will come from commercial real estate, while residential mortgage applications are down significantly [46]

The reported revenue compares to the Zacks Consensus Estimate of $179.5 million, representing a surprise of -0.54%. The company delivered an EPS surprise of +1.04%, with the consensus EPS estimate being $0.96. Since these metrics play a crucial role in driving the top- and bottom-line numbers, comparing them with the year-ago numbers and what analysts estimated about them helps investors better project a stock's price performance. View all Key Company Metrics for Cathay here>>> For the quarter ended June 20 ...

Over the last four quarters, the company has surpassed consensus EPS estimates four times. Heritage Commerce's revenues are expected to be $43.35 million, down 10.4% from the year-ago quarter. Investors should be mindful of the fact that the outlook for the industry can have a material impact on the performance of the stock as well. In terms of the Zacks Industry Rank, Banks - West is currently in the bottom 32% of the 250 plus Zacks industries. Our research shows that the top 50% of the Zacks-ranked indust ...

Financial Performance - Net income for the second quarter of 2024 was $66.8 million, or $0.92 per share, down from $71.4 million, or $0.98 per share in the first quarter of 2024[10]. - Net income for the second quarter of 2024 was $66.8 million, a decrease of 6.4% from $71.4 million in the first quarter of 2024[36]. - Diluted earnings per share decreased to $0.92 for the second quarter of 2024 compared to $0.98 for the first quarter of 2024[36]. - Basic net income per common share for the three months ended June 30, 2024, was $0.92, down from $0.98 in the previous quarter and $1.29 in the same quarter last year[65]. - Tangible net income for the three months ended June 30, 2024, was $67,019,000, down from $71,667,000 in the previous quarter and $93,621,000 in the same quarter last year[66]. Income and Expenses - Non-interest income rose to $13.2 million, a 100.0% increase compared to $6.6 million in the first quarter of 2024, driven by a decrease in unrealized losses on equity securities[16]. - Non-interest expense increased by $6.1 million, or 6.5%, to $99.3 million in the second quarter of 2024 compared to $93.2 million in the first quarter of 2024[41]. - Total non-interest expense increased to $99,352,000 for the three months ended June 30, 2024, from $93,239,000 in the previous quarter and $92,821,000 in the same quarter last year[65]. Loans and Credit Losses - Gross loans decreased by $71.9 million, or 0.4%, to $19.36 billion as of June 30, 2024, primarily due to a $59.6 million decrease in residential mortgage loans[7]. - The provision for credit losses increased to $6.6 million in the second quarter of 2024, compared to $1.9 million in the first quarter[14]. - Provision for credit losses increased to $6,600,000 for the three months ended June 30, 2024, compared to $1,900,000 in the previous quarter and $9,155,000 in the same quarter last year[65]. Capital and Ratios - The Company's Tier 1 risk-based capital ratio improved to 13.26% as of June 30, 2024, from 13.08% as of March 31, 2024, indicating strong capital position[21]. - The Tier 1 risk-based capital ratio improved to 13.26% as of June 30, 2024, compared to 13.08% as of March 31, 2024[50]. - Total stockholders' equity reached $2,793,242 thousand, up from $2,602,671 thousand in the previous year, indicating a strong capital position[1]. Asset Management - Total assets decreased to $23,235,245 thousand as of June 30, 2024, from $23,404,803 thousand as of March 31, 2024[28]. - Total deposits as of June 30, 2024, were $19.77 billion, a slight decrease from $19.85 billion as of March 31, 2024[19]. - Total deposits decreased to $19,773,017 thousand as of June 30, 2024, from $19,846,259 thousand as of March 31, 2024[28]. - Total interest-earning assets increased to $22,187,849 thousand with an average yield of 6.03% as of June 30, 2024, compared to $21,028,593 thousand and 5.61% in the previous year[1]. Efficiency and Performance Ratios - The efficiency ratio for the second quarter of 2024 was 55.65%, compared to 53.22% in the first quarter of 2024, indicating a decline in operational efficiency[10]. - Return on average assets decreased to 1.15% for the second quarter of 2024 from 1.23% in the previous quarter[27]. - Return on average total stockholders' equity decreased to 9.63% for the second quarter of 2024 compared to 10.40% in the first quarter of 2024[27]. - Non-performing assets to total assets ratio was 0.56% as of June 30, 2024, an increase from 0.53% as of March 31, 2024, with total non-performing assets rising to $129.0 million[1]. Shareholder Returns - Cash dividends paid per common share remained stable at $0.34 for both the second quarter of 2024 and the first quarter of 2024[51]. - Cash dividends paid per common share remained stable at $0.34 for the three months ended June 30, 2024, consistent with the previous quarter and the same quarter last year[65]. Stock Repurchase - The company announced a new stock repurchase program to buy back up to $125.0 million of its common stock[35].

Cathay General (CATY) is expected to deliver a year-over-year decline in earnings on lower revenues when it reports results for the quarter ended June 2024. This widely-known consensus outlook gives a good sense of the company's earnings picture, but how the actual results compare to these estimates is a powerful factor that could impact its near-term stock price. While the sustainability of the immediate price change and future earnings expectations will mostly depend on management's discussion of business ...