Cathay General Bancorp(CATY) - 2025 Q1 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company reported net income of $69.5 million for Q1 2025, a 13.3% decrease from$ 80.2 million in Q4 2024 [10] - Earnings per share decreased by 12.5% to $0.98 for Q1 2025 compared to$ 1.12 in Q4 2024 [10] - The interest margin increased to 3.25% for Q1 2025 from 3.07% in Q4 2024 [23] - Non-interest income for Q1 decreased by 4.3% to $11.2 million compared to$ 15.5 million in Q4 2024 [25] - Non-interest expense increased by 0.6% to $85.7 million in Q1 2025 from$ 85.2 million in Q4 2024 [25][27] Business Line Data and Key Metrics Changes - Total gross loans decreased by $23 million or 0.5% annualized, driven by a$ 100 million decrease in commercial loans and a $65 million decrease in residential loans, offset by increases in CRE loans by$ 127 million and construction loans by $13 million [11] - The loan portfolio consists of 62% fixed rate and hybrid loans, with fixed rate loans comprising 30% and hybrid loans 32% [13] Market Data and Key Metrics Changes - Total deposits increased by$ 131 million, or 2.7% annualized during Q1 2025, primarily due to a net increase of $67 million in core deposits and an increase of$ 64 million in time deposits [19] - As of March 31, 2025, total uninsured deposits were $8.5 billion, accounting for 42.7% of total deposits [20] Company Strategy and Development Direction - The company has widened its 2025 loan growth guidance to 1% to 4% from the previous guidance of 3% to 4% due to economic uncertainties [11] - The management is closely monitoring the impact of tariffs on borrowers and the loan portfolio, estimating that about 1.4% of total loans could be adversely impacted by post-tariff conditions [8] Management Comments on Operating Environment and Future Outlook - Management expressed concerns about the current economic environment, particularly regarding the impact of tariffs on commercial and industrial clients, leading to a cautious outlook on loan growth [38][42] - There is a noted shift in the residential mortgage market, with a slight uptick in activity, indicating a potential change in market dynamics [38] Other Important Information - The company completed its$ 125 million stock repurchase program in Q1 2025, repurchasing 876,906 shares at an average cost of $46.83 per share [11] - The effective tax rate for Q1 2025 was 19.82%, significantly higher than 7.57% in Q4 2024, due to a decrease in solar tax credit fund investment [27] Q&A Session Summary Question: Margin sensitivity to interest rate cuts - Management indicated that for every rate cut, the margin would be impacted by about four basis points on a full-year basis, with a two basis point impact if it occurs in July [31] Question: Loan growth guidance revision - Management explained that the revision to the loan growth guidance was due to current uncertainties and observed behavior from commercial clients, who are pausing growth plans and focusing on managing their balance sheets [36][40] Question: Specific commercial credit provision - The provision for credit loss was primarily related to a domestic company, not directly tied to trade finance or tariffs, although some reserves were built for tariff-related exposures [48]