Cathay General Bancorp(CATY)2025-04-21 19:00Financial 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 0.5% to $85.7 million in Q1 2025 from $85.2 million in Q4 2024 [25] 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 and construction loans [11] - The company repurchased 876,906 shares at an average cost of $46.83 per share, completing a $125 million stock repurchase program [11] 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 in core deposits [19] - As of March 31, 2025, total uninsured deposits were $8.5 billion, representing 42.7% of total deposits [20] Company Strategy and Development Direction - The company 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 [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 clients and the potential for loan paydowns [42][43] - There is a noted shift in customer behavior, with some clients pausing growth plans and focusing on managing their balance sheets [40] Other Important Information - The effective tax rate for Q1 2025 was 19.82%, an increase from 7.57% in Q4 2024, primarily due to a decrease in solar tax credit fund investment [27] - The Tier 1 leverage capital ratio increased to 11.06% from 10.97% as of December 31, 2024 [28] Q&A Session Summary Question: Margin sensitivity to interest rate cuts - Management indicated that for every rate cut, the margin would be affected by about four basis points on a full-year basis, with two basis points if it occurs in July [31] Question: Changes in loan growth guidance - Management noted that the pipeline for commercial loans remains strong, but the guidance was revised due to uncertainties related to tariffs and customer behavior [36][38] Question: Specific commercial credit and tariff impact - The reserve built for a specific commercial credit was not related to trade finance, and management is hopeful that the provisions cover most exposure related to tariffs [48] Question: Non-interest expense outlook - Management discussed major expense categories, indicating that salaries and benefits would see an increase due to excess bonus accruals, while consulting expenses are expected to decrease in the second half of the year [54] Question: Deposit growth seasonality - Management confirmed that the Lunar New Year promotion contributed to deposit growth, estimating about $200 million from this seasonal factor [57]