Cathay General Bancorp(US:CATY)2024-07-23 14:49Financial 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]