Cathay General Bancorp(CATY) - 2024 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company reported net income of $67.5 million for Q3 2024, a 1% increase from$ 66.8 million in Q2 2024 [5][13] - Diluted earnings per share increased by 2.2% to $0.94 per share in Q3 2024 compared to$ 0.92 per share in Q2 2024 [5] - Net interest margin for Q3 2024 was 3.04%, up from 3.01% in Q2 2024, indicating a potential bottoming out and beginning of an increase in net interest margin [13][14] Business Line Data and Key Metrics Changes - Total gross loans increased by $16 million or 0.3% annualized, driven by a$ 89 million increase in commercial real estate (CRE) loans and a $16 million increase in commercial and industrial (C&I) loans [6] - Residential mortgages and home equity lines of credit (HELOC) decreased by$ 40 million, and construction loans decreased by $50 million or 47% annualized [6] - Non-interest income for Q3 2024 increased by$ 7.2 million to $20.4 million compared to$ 13.2 million in Q2 2024, primarily due to a $5.7 million increase in mark-to-market gains on equity securities [14] Market Data and Key Metrics Changes - Total deposits increased by$ 171 million or 3.5% annualized during Q3 2024, with core deposits increasing by $195 million or 7.8% annualized [10] - Total uninsured deposits were$ 8.4 billion, representing 42.1% of total deposits as of September 30, 2024 [11] Company Strategy and Development Direction - The company anticipates continuing to repurchase around $35 million in stock per quarter in Q4 2024 and Q1 2025, depending on market conditions [6] - The company expects loan growth for 2024 to be between -1% and 0% based on current loan trends [6] Management's Comments on Operating Environment and Future Outlook - Management noted an increase in the provision for credit loss to$ 14.5 million in Q3 2024, up from $6.6 million in Q2, indicating a cautious approach to potential credit risks [10] - The effective tax rate for Q3 2024 was 13.6%, with expectations for a full-year effective tax rate between 10.5% and 11.5% [14][15] Other Important Information - The company recorded net charge-offs of$ 4.2 million in Q3 2024, down from $8 million in Q2 2024 [8] - Classified loans increased to$ 382 million from $324 million in Q2 2024, primarily due to the placement of a$ 38 million loan relationship to non-accrual [9][12] Q&A Session Summary Question: About the increase in the loan loss reserve - Management indicated that the $10 million increase in loan loss reserves was a general reserve addition and not specifically related to the$ 38 million loan relationship that went on non-accrual [17] Question: Inquiry on the maturity schedule of fixed loans - Management did not have the specific maturity schedule available but noted that most hybrid loans are residential mortgages [18] Question: On CD repricing and maturing CDs - Management stated that approximately $3.49 billion in CDs would mature in Q4 2024, with an average yield of about 4.82% [19][20] Question: Guidance on core expenses for Q4 - Management suggested that core expenses would be close to Q3 levels, with some savings expected from a project aimed at improving the deposit opening process [21] Question: Amortization for low-income housing - Management confirmed that$ 10 million is still a good run rate for the fourth quarter [22] Question: Buyback authorization for 2025 - Management indicated that the Board would consider increasing the buyback authorization from $125 million to potentially$ 150 million, depending on future conditions [23] Question: Spot rates on loans and deposits - Management provided spot rates for various loan categories, with residential mortgages at about 7% and commercial real estate around the mid-6% range [24][25] Question: Migration of non-performers during the quarter - Management noted that the increase in non-performers was primarily due to the $38.1 million relationship and a$ 12.7 million real estate loan in Hong Kong [26]