Cathay General Bancorp(CATY)2023-07-25 02:55Financial Data and Key Metrics Changes - The company reported net income of $93.2 million for Q2 2023, a decrease of 2.9% compared to $96 million in Q1 2023 [4] - Diluted earnings per share decreased by 2.3% to $1.28 for Q2 2023 from $1.32 in Q1 2023 [4] - Net interest margin was 3.44% in Q2 2023, down from 3.74% in Q1 2023 [10] - Non-interest expense increased by $9.6 million or 11.6% to $92.8 million in Q2 2023 compared to $83.2 million in Q1 2023 [11] Business Line Data and Key Metrics Changes - Gross loans increased by $635.5 million or 13.9% annualized in Q2 2023, driven by a $377 million increase in commercial real estate loans [17] - Residential mortgage loans increased by $158 million or 12.1% annualized, while commercial loans rose by $165 million or 19.9% annualized [17] - Total deposits increased by $448.1 million or 9.7% annualized during Q2 2023 [20] - Total time deposits increased by $325 million or 18.6% annualized, and total saving deposits increased by $241 million or 196.2% annualized [21] Market Data and Key Metrics Changes - As of June 30, 2023, classified loans decreased to $193 million from $240 million as of March 31, 2023 [7] - Non-accrual loans were 0.36% of total loans as of June 30, 2023, down from the previous quarter [19] Company Strategy and Development Direction - The company revised its overall loan growth guidance for 2023 to between 5% to 7%, up from the previous guidance of 1% to 3% [5] - The company is focusing on improving returns by increasing loan spreads for fixed-rate commercial real estate loans [5] Management's Comments on Operating Environment and Future Outlook - Management noted that the decrease in net income was primarily due to net interest margin compression from increased deposit costs [22] - The company expects loan growth in Q3 and Q4 to be lower than in Q2, indicating a more muted demand for loans in the second half of the year [36] Other Important Information - The company recorded a provision for credit loss of $9.2 million in Q2 2023, compared to $8.1 million in Q1 2023 [7] - The effective tax rate for Q2 2023 was 9.2%, down from 21.4% in Q1 2023 [41] Q&A Session Summary Question: What are the expectations for the net interest margin? - Management expects the net interest margin to improve slightly due to anticipated Fed rate hikes and lower loan growth in the second half of the year [27] Question: What is the outlook for core expenses? - The company anticipates core expenses to remain close to $67 million per quarter in the second half of the year [34] Question: How is the loan growth outlook given the economic uncertainty? - Management indicated that loan growth was driven by a few large clients and does not expect to maintain the same pace in the second half of the year [36] Question: What is the plan regarding Federal Home Loan Bank borrowings? - The company plans to pay down a portion of the Federal Home Loan Bank borrowings in Q3 or Q4 [37] Question: Are there any signs of credit migration within the office portfolio? - Management confirmed that there have been no special reserves on the office portfolio, and general reserves were built up this quarter [62] Question: Is there any consideration for resuming buybacks? - Management stated that there are no plans for buybacks at this time, preferring to assess the economic situation first [66]