Cathay General Bancorp(CATY) - 2025 Q3 - Quarterly Results

Company Announcement Cathay General Bancorp announced its unaudited third quarter 2025 financial results, showing growth in net income and diluted earnings per share Third Quarter 2025 Results Overview Cathay General Bancorp reported unaudited third quarter 2025 financial results, with increases in net income and diluted earnings per share | Metric | September 30, 2025 (Q3) | June 30, 2025 (Q2) | September 30, 2024 (Q3) | | :--------------------------------- | :------------------- | :------------------- | :------------------- | | Net Income (million USD) | $77.7 | $77.5 | $67.5 | | Basic Earnings per Common Share (USD) | $1.13 | $1.11 | $0.94 | | Diluted Earnings per Common Share (USD) | $1.13 | $1.10 | $0.94 | | Return on Average Assets | 1.29% | 1.33% | 1.15% | | Return on Average Total Shareholders' Equity | 10.60% | 10.72% | 9.50% | | Efficiency Ratio | 41.84% | 45.34% | 51.11% | Third Quarter Highlights The CEO highlighted continued growth in net interest margin and significant common stock repurchases during the third quarter - Net interest margin continued to grow compared to the second quarter of 2025[5] - Repurchased 1,070,000 shares of common stock at an average cost of $46.81 per share, totaling $50.1 million in the third quarter[5] Income Statement Review This section reviews the company's income statement performance, highlighting key revenue, expense, and profitability metrics Q3 2025 vs Q2 2025 Performance Third quarter 2025 saw growth in net income and diluted EPS, a slight decrease in average asset and equity returns, and a significant improvement in efficiency ratio Comparison of Key Financial Metrics: Q3 2025 vs Q2 2025 | Metric | September 30, 2025 (Q3) | June 30, 2025 (Q2) | Change (QoQ) | | :--------------------------------- | :------------------- | :------------------- | :--------- | | Net Income (million USD) | $77.7 | $77.5 | +$0.2 (0.3%) | | Diluted Earnings per Common Share (USD) | $1.13 | $1.10 | +$0.03 | | Return on Average Assets | 1.29% | 1.33% | -0.04% | | Return on Average Total Shareholders' Equity | 10.60% | 10.72% | -0.12% | | Efficiency Ratio | 41.84% | 45.34% | -3.50% | - Net interest margin increased from 3.27% in Q2 to 3.31% in Q3[8] - Gross loans (excluding loans held for sale) increased by 1.6% from $19.78 billion in Q2 to $20.10 billion in Q3[8] - Total deposits increased by $514.8 million, or 2.6%, in Q3, reaching $20.52 billion[8] Net Interest Income Before Provision for Credit Losses Net interest income before provision for credit losses and net interest margin both increased, driven by higher loan and securities interest income, partially offset by increased deposit expenses Net Interest Income and Margin Analysis | Metric | September 30, 2025 (Q3) | June 30, 2025 (Q2) | Change (QoQ) | | :--------------------------------- | :------------------- | :------------------- | :--------- | | Net Interest Income Before Provision for Credit Losses (million USD) | $189.6 | $181.2 | +$8.4 (4.6%) | | Net Interest Margin | 3.31% | 3.27% | +0.04% | | Yield on Average Interest-Earning Assets | 5.84% | 5.83% | +0.01% | | Cost of Average Interest-Bearing Liabilities | 3.32% | 3.37% | -0.05% | | Cost of Average Interest-Bearing Deposits | 3.28% | 3.35% | -0.07% | | Net Interest Spread | 2.52% | 2.46% | +0.06% | - The decrease in the cost of average interest-bearing liabilities was primarily due to lower re-pricing rates on maturing time deposits in Q3[10] - The increase in the yield on average interest-earning assets was mainly due to higher loan interest rates[10] Provision for Credit Losses Provision for credit losses significantly increased in Q3 due to additional provisions for two cinema loans and CECL model changes, leading to higher allowance for credit losses and its ratio to total loans Provision for Credit Losses and Net Charge-offs | Metric | September 30, 2025 (Q3) | June 30, 2025 (Q2) | Change (QoQ) | | :--------------------------------- | :------------------- | :------------------- | :--------- | | Provision for Credit Losses (million USD) | $28.7 | $11.2 | +$17.5 | | Allowance for Credit Losses (million USD) | $196.5 | $183.4 | +$13.1 | | Allowance for Credit Losses to Total Loans | 0.98% | 0.93% | +0.05% | | Net Charge-offs (million USD) | $15.646 | $12.741 | +$2.905 | - Q3 provision for credit losses included $9.1 million in additional provisions for two cinema loans and $3.8 million from CECL model changes[11] - Commercial loan charge-offs increased from $9.117 million in Q2 to $16.173 million in Q3[12] Non-interest Income Non-interest income grew significantly in Q3, primarily driven by increased gains on equity securities and wealth management fees Non-interest Income Composition | Metric | September 30, 2025 (Q3) | June 30, 2025 (Q2) | Change (QoQ) | | :--------------------------------- | :------------------- | :------------------- | :--------- | | Total Non-interest Income (million USD) | $21.0 | $15.4 | +$5.6 (36.4%) | | Increase in Equity Securities Gains (million USD) | - | - | +$4.7 | | Increase in Wealth Management Fees (million USD) | - | - | +$1.3 | Non-interest Expense Non-interest expense slightly decreased in Q3, mainly due to reduced professional service fees, contributing to an improved efficiency ratio Non-interest Expense and Efficiency Ratio | Metric | September 30, 2025 (Q3) | June 30, 2025 (Q2) | Change (QoQ) | | :--------------------------------- | :------------------- | :------------------- | :--------- | | Total Non-interest Expense (million USD) | $88.1 | $89.1 | -$1.0 (1.2%) | | Decrease in Professional Service Fees (million USD) | - | - | -$1.5 | | Efficiency Ratio | 41.84% | 45.34% | -3.50% | - An increase of $1.0 million in amortization of low-income housing and alternative energy partnership investments partially offset the decrease in professional service fees[15] Income Taxes The effective tax rate decreased in Q3, primarily influenced by low-income housing tax credits Effective Tax Rate | Metric | September 30, 2025 (Q3) | June 30, 2025 (Q2) | Change (QoQ) | | :--------------------------------- | :------------------- | :------------------- | :--------- | | Effective Tax Rate | 17.18% | 19.56% | -2.38% | - The effective tax rates for both Q2 and Q3 2025 included the impact of low-income housing tax credits[16] Balance Sheet Review This section provides an overview of the company's balance sheet, focusing on changes in assets, liabilities, and equity Gross Loans and Composition Gross loans (excluding loans held for sale) increased as of September 30, 2025, driven by growth in residential mortgage, commercial real estate, and construction loans Gross Loans and Composition (million USD) | Loan Type | September 30, 2025 | June 30, 2025 | Change (QoQ) | | :--------------------------------- | :-------------- | :-------------- | :--------- | | Gross Loans (excluding loans held for sale) | $20,104.7 | $19,784.7 | +$320.0 (1.62%) | | Residential Mortgage Loans | $5,815.1 | $5,692.1 | +$123.0 (2.2%) | | Commercial Real Estate Loans | $10,484.9 | $10,363.1 | +$121.8 (1.2%) | | Construction Loans | $356.2 | $301.1 | +$55.1 (18.3%) | | Commercial Loans | $3,212.9 | $3,194.7 | +$18.2 (0.6%) | Deposits and Composition Total deposits increased as of September 30, 2025, with growth across non-interest bearing demand, NOW, money market, and savings deposits, while time deposits remained relatively stable Deposits Composition (million USD) | Deposit Type | September 30, 2025 | June 30, 2025 | Change (QoQ) | | :--------------------------------- | :-------------- | :-------------- | :--------- | | Total Deposits | $20,521.1 | $20,006.3 | +$514.8 (2.6%) | | Non-interest Bearing Demand Deposits | $3,574.6 | $3,381.4 | +$193.2 | | NOW Deposits | $2,226.2 | $2,174.1 | +$52.1 | | Money Market Deposits | $3,586.3 | $3,431.1 | +$155.2 | | Savings Deposits | $1,424.2 | $1,317.1 | +$107.1 | | Time Deposits | $9,709.9 | $9,702.7 | +$7.2 | Asset Quality Review This section reviews the company's asset quality, including non-accrual loans, allowance for loan losses, and non-performing assets Non-accrual Loans and Allowance for Loan Losses Total non-accrual loans decreased as of September 30, 2025, while the allowance for loan losses balance and coverage ratio both improved, reflecting stronger coverage for potential credit risks Non-accrual Loans and Allowance for Loan Losses | Metric | September 30, 2025 | June 30, 2025 | Change (QoQ) | | :--------------------------------- | :-------------- | :-------------- | :--------- | | Total Non-accrual Loans (million USD) | $165.6 | $174.2 | -$8.6 (4.9%) | | Allowance for Loan Losses (million USD) | $186.6 | $173.5 | +$13.1 | | Allowance for Loan Losses to Period-End Total Loans | 0.93% | 0.88% | +0.05% | | Allowance for Loan Losses to Non-performing Loans | 112.61% | 96.12% | +16.49% | Non-performing Assets and Loan Modifications Total non-performing assets slightly decreased as of September 30, 2025, but Other Real Estate Owned (OREO) significantly increased, alongside a substantial rise in accruing loan modifications for financially distressed borrowers Non-performing Assets and Loan Modifications (million USD) | Metric | September 30, 2025 | June 30, 2025 | Change (QoQ) | | :--------------------------------- | :-------------- | :-------------- | :--------- | | Total Non-performing Assets | $198.7 | $199.5 | -$0.8 (0.4%) | | Accruing Loans 90 Days or More Past Due | $0.110 | $6.389 | -$6.279 (98%) | | Total Non-accrual Loans | $165.632 | $174.153 | -$8.521 (5%) | | Other Real Estate Owned (OREO) | $32.983 | $18.990 | +$13.993 (74%) | | Accruing Loan Modifications to Borrowers Experiencing Financial Difficulty | $63.355 | $10.485 | +$52.870 (504%) | - Non-performing assets as a percentage of total assets were 0.83%, slightly lower than 0.84% in the previous quarter[22] Capital Adequacy Review As of September 30, 2025, the company's capital adequacy ratios, calculated under Basel III capital rules, exceeded regulatory requirements, maintaining its 'well capitalized' status Capital Adequacy Ratios | Metric | September 30, 2025 | June 30, 2025 | Regulatory Requirement (Well Capitalized) | | :--------------------------------- | :-------------- | :-------------- | :------------------ | | Tier 1 Risk-Based Capital Ratio | 13.15% | 13.35% | ≥ 8% | | Total Risk-Based Capital Ratio | 14.76% | 14.92% | ≥ 10% | | Tier 1 Leverage Ratio | 10.88% | 11.09% | ≥ 5% | Year-to-Date Review For the nine months ended September 30, 2025, the company reported year-over-year growth in net income, diluted EPS, net interest margin, return on average assets, and return on average equity, with a significant improvement in efficiency ratio Year-to-Date Key Financial Metrics Comparison | Metric | September 30, 2025 (YTD) | September 30, 2024 (YTD) | Change (YoY) | | :--------------------------------- | :-------------------- | :-------------------- | :--------- | | Net Income (million USD) | $224.6 | $205.8 | +$18.8 (9.1%) | | Diluted Earnings per Common Share (USD) | $3.21 | $2.83 | +$0.38 | | Net Interest Margin | 3.28% | 3.03% | +0.25% | | Return on Average Assets | 1.28% | 1.18% | +0.10% | | Return on Average Total Shareholders' Equity | 10.39% | 9.84% | +0.55% | | Efficiency Ratio | 44.18% | 53.28% | -9.10% | Additional Information This section provides details on the upcoming conference call, an overview of Cathay General Bancorp, and important forward-looking statements Conference Call Cathay General Bancorp will host a conference call on October 21, 2025, at 3:00 PM PT to discuss its Q3 2025 financial results - Conference call scheduled for Tuesday, October 21, 2025, at 3:00 PM Pacific Time[27] - Dial-in number: 1-833-816-1377, Conference ID: 10203604[27] - Presentation and webcast available on the company's website www.cathaygeneralbancorp.com, with a replay archived for one year within 24 hours[27] About Cathay General Bancorp Cathay General Bancorp is the holding company for Cathay Bank, established in 1962, offering a wide range of financial services with branches and representative offices in the US and overseas - Cathay General Bancorp (Nasdaq: CATY) is the holding company for Cathay Bank, a California-chartered bank[28] - Cathay Bank, founded in 1962, operates over 60 branches across California, New York, Washington, Texas, Illinois, Massachusetts, Maryland, Nevada, and New Jersey in the United States[28] - Overseas operations include a branch in Hong Kong and representative offices in Beijing, Shanghai, and Taipei[28] Forward-Looking Statements This press release contains forward-looking statements regarding beliefs, forecasts, and assumptions about future results and events, which are subject to various risks and uncertainties that could cause actual results to differ materially from expectations - Forward-looking statements are based on management's estimates, beliefs, forecasts, and assumptions, and are not guarantees of future performance[29] - Risks and uncertainties include, but are not limited to: macroeconomic conditions, credit risk, regulatory changes, interest rate fluctuations, real estate market conditions, natural disasters, and cybersecurity risks[29] - The company undertakes no obligation to update or review any forward-looking statements to reflect subsequent circumstances or events, except as required by law[30] Consolidated Financial Highlights This section presents Cathay General Bancorp's unaudited consolidated financial highlights, covering income statement, earnings per share, key ratios, and capital ratios across various reporting periods Consolidated Financial Highlights (thousand USD, except per share data) | Metric | September 30, 2025 (Q3) | September 30, 2025 (Q2) | September 30, 2024 (Q3) | September 30, 2025 (YTD) | September 30, 2024 (YTD) | | :--------------------------------- | :------------------- | :------------------- | :------------------- | :-------------------- | :-------------------- | | Net Interest Income Before Provision for Credit Losses | $189,587 | $181,221 | $169,155 | $547,447 | $503,043 | | Provision for Credit Losses | $28,731 | $11,200 | $14,500 | $55,431 | $23,000 | | Net Income | $77,651 | $77,450 | $67,514 | $224,607 | $205,778 | | Diluted Earnings per Share | $1.13 | $1.10 | $0.94 | $3.21 | $2.83 | | Return on Average Assets | 1.29% | 1.33% | 1.15% | 1.28% | 1.18% | | Net Interest Margin | 3.31% | 3.27% | 3.04% | 3.28% | 3.03% | | Tier 1 Risk-Based Capital Ratio | 13.15% | 13.35% | 13.32% | - | - | | Total Risk-Based Capital Ratio | 14.76% | 14.92% | 14.87% | - | - | | Tier 1 Leverage Ratio | 10.88% | 11.09% | 10.82% | - | - | Condensed Consolidated Balance Sheets This section provides Cathay General Bancorp's unaudited condensed consolidated balance sheets, detailing the composition of assets, liabilities, and shareholders' equity across different reporting periods Condensed Consolidated Balance Sheets (thousand USD) | Item | September 30, 2025 | June 30, 2025 | September 30, 2024 | | :--------------------------------- | :-------------- | :-------------- | :-------------- | | Assets | | | | | Cash and Due from Banks | $166,167 | $190,011 | $182,542 | | Net Loans | $19,903,082 | $19,597,337 | $19,199,355 | | Total Assets | $24,075,644 | $23,723,847 | $23,274,443 | | Liabilities and Shareholders' Equity | | | | | Total Deposits | $20,521,149 | $20,006,330 | $19,943,941 | | Federal Home Loan Bank Borrowings | $190,000 | $412,000 | $60,000 | | Total Liabilities | $21,173,368 | $20,837,552 | $20,444,130 | | Shareholders' Equity | $2,902,276 | $2,886,295 | $2,830,313 | | Book Value per Common Share | $42.50 | $41.62 | $39.66 | | Common Shares Outstanding | 68,286,591 | 69,343,395 | 71,355,869 | Condensed Consolidated Statements of Operations This section presents Cathay General Bancorp's unaudited condensed consolidated statements of operations, detailing interest and dividend income, interest expense, non-interest income and expense, and net income across various reporting periods Condensed Consolidated Statements of Operations (thousand USD, except per share data) | Item | September 30, 2025 (Q3) | September 30, 2025 (Q2) | September 30, 2024 (Q3) | September 30, 2025 (YTD) | September 30, 2024 (YTD) | | :--------------------------------- | :------------------- | :------------------- | :------------------- | :-------------------- | :-------------------- | | Interest and Dividend Income | | | | | | | Loans Receivable | $308,945 | $296,857 | $310,311 | $899,786 | $916,175 | | Total Interest and Dividend Income | $334,195 | $322,918 | $339,491 | $976,508 | $1,004,993 | | Interest Expense | | | | | | | Time Deposits | $93,087 | $94,364 | $119,786 | $283,517 | $347,408 | | Total Interest Expense | $144,608 | $141,697 | $170,336 | $429,061 | $501,950 | | Net Interest Income Before Provision for Credit Losses | $189,587 | $181,221 | $169,155 | $547,447 | $503,043 | | Provision for Credit Losses | $28,731 | $11,200 | $14,500 | $55,431 | $23,000 | | Non-interest Income | | | | | | | Net Gains/(Losses) on Equity Securities | $3,263 | ($1,390) | $4,253 | ($2,318) | ($6,204) | | Total Non-interest Income | $21,021 | $15,391 | $20,365 | $47,616 | $40,191 | | Non-interest Expense | | | | | | | Salaries and Employee Benefits | $43,462 | $43,123 | $40,859 | $129,012 | $124,850 | | Total Non-interest Expense | $88,117 | $89,134 | $96,867 | $262,907 | $289,458 | | Net Income | $77,651 | $77,450 | $67,514 | $224,607 | $205,778 | | Diluted Earnings per Share | $1.13 | $1.10 | $0.94 | $3.21 | $2.83 | Average Balances – Selected Consolidated Financial Information This section provides Cathay General Bancorp's unaudited average balance information, including interest-earning assets, interest-bearing liabilities, their corresponding yields/costs, and average total assets and equity Average Balances – Selected Consolidated Financial Information (thousand USD) | Item | September 30, 2025 (Q3) Average Balance | September 30, 2025 (Q3) Average Yield/Cost | June 30, 2025 (Q2) Average Balance | June 30, 2025 (Q2) Average Yield/Cost | | :--------------------------------- | :-------------------- | :----------------------- | :-------------------- | :----------------------- | | Interest-Earning Assets | | | | | | Loans | $19,951,853 | 6.14% | $19,489,400 | 6.11% | | Total Interest-Earning Assets | $22,716,625 | 5.84% | $22,231,538 | 5.83% | | Interest-Bearing Liabilities | | | | | | Total Interest-Bearing Deposits | $16,864,447 | 3.28% | $16,633,658 | 3.35% | | Total Interest-Bearing Liabilities | $17,279,475 | 3.32% | $16,855,853 | 3.37% | | Total Average Assets | $23,843,380 | - | $23,349,928 | - | | Total Average Equity | $2,907,596 | - | $2,898,960 | - | Average Balances – Selected Consolidated Financial Information (thousand USD) - Year-to-Date | Item | September 30, 2025 (YTD) Average Balance | September 30, 2025 (YTD) Average Yield/Cost | September 30, 2024 (YTD) Average Balance | September 30, 2024 (YTD) Average Yield/Cost | | :--------------------------------- | :-------------------- | :----------------------- | :-------------------- | :----------------------- | | Interest-Earning Assets | | | | | | Loans | $19,593,553 | 6.14% | $19,464,496 | 6.29% | | Total Interest-Earning Assets | $22,321,937 | 5.85% | $22,174,039 | 6.05% | | Interest-Bearing Liabilities | | | | | | Total Interest-Bearing Deposits | $16,633,409 | 3.35% | $16,492,441 | 3.89% | | Total Interest-Bearing Liabilities | $16,957,498 | 3.38% | $16,995,140 | 3.95% | | Total Average Assets | $23,462,799 | - | $23,380,360 | - | | Total Average Equity | $2,890,581 | - | $2,794,384 | - | GAAP to Non-GAAP Reconciliation This section provides a reconciliation of GAAP to non-GAAP financial measures, including tangible equity, tangible assets, tangible book value per share, and return on average tangible common equity, offering supplementary information consistent with industry practice - The company uses non-GAAP financial measures such as tangible equity and tangible assets ratios, which are commonly used in the banking industry and by bank regulators and analysts[42] GAAP to Non-GAAP Reconciliation (thousand USD) | Metric | September 30, 2025 | June 30, 2025 | September 30, 2024 | | :--------------------------------- | :-------------- | :-------------- | :-------------- | | Shareholders' Equity | $2,902,276 | $2,886,295 | $2,830,313 | | Less: Goodwill | ($375,696) | ($375,696) | ($375,696) | | Less: Other Intangible Assets | ($2,667) | ($2,888) | ($3,590) | | Tangible Equity | $2,523,913 | $2,507,711 | $2,451,027 | | Total Assets | $24,075,644 | $23,723,847 | $23,274,443 | | Less: Goodwill | ($375,696) | ($375,696) | ($375,696) | | Less: Other Intangible Assets | ($2,667) | ($2,888) | ($3,590) | | Tangible Assets | $23,697,281 | $23,345,263 | $22,895,157 | | Tangible Book Value per Common Share | $36.96 | $36.16 | $34.35 | | Tangible Equity to Tangible Assets Ratio | 10.65% | 10.74% | 10.71% | | Return on Average Tangible Common Equity (Q3) | 12.33% | 12.39% | 11.05% | | Return on Average Tangible Common Equity (YTD) | 11.90% | - | 11.23% |