Cathay General’s Mixed Earnings Call: Key Insights

Cathay General ((CATY)) has held its Q1 earnings call. Read on for the main highlights of the call.

The recent earnings call of Cathay General presented a mixed sentiment, highlighting both positive and negative aspects of the company’s financial performance. While there was an encouraging increase in net interest margin and deposit growth, the company faced significant challenges, including a decrease in net income and non-interest income, as well as an increased tax rate. The revision of loan growth guidance due to economic uncertainties further dampened the outlook.

Net Interest Margin Increase

The net interest margin saw a positive uptick, increasing to 3.25% for Q1 2025 from 3.07% in Q4 2024. This improvement has led Cathay General to revise its 2025 NIM guidance upwards to 3.35%, indicating a stronger profitability outlook in its core lending operations.

Net Charge-Offs Decrease

A significant reduction in net charge-offs was reported, dropping to $2 million in Q1 2025 from $16.3 million in Q4 2024. This decrease suggests improved credit quality and effective risk management strategies within the bank’s loan portfolio.

Loan Portfolio Stability

The stability of the loan portfolio was evident, with the average loan-to-value of CRE loans remaining at 49%. Additionally, non-accrual loans decreased by $14.5 million to $154.6 million, reflecting a healthier loan book.

Deposit Growth

Cathay General experienced a growth in total deposits, which increased by $131 million or 2.7% annualized during Q1 2025. Core deposits also rose by $67 million, showcasing the bank’s ability to attract and retain customer deposits.

Decrease in Net Income

Net income saw a decline of 13.3%, falling to $69.5 million in Q1 2025 compared to $80.2 million in Q4 2024. This decrease highlights the challenges the bank faces in maintaining profitability amidst economic uncertainties.

Decrease in Non-Interest Income

Non-interest income decreased by $4.3 million to $11.2 million in Q1 2025, primarily due to a $2.9 million mark-to-market loss on equity securities, indicating volatility in non-core revenue streams.

Effective Tax Rate Increase

The effective tax rate increased significantly to 19.82% in Q1 2025 from 7.57% in Q4 2024. This rise was attributed to the absence of investments in solar tax credit funds, impacting the company’s net income.

Loan Growth Guidance Revision

Due to economic uncertainties and tariff impacts, Cathay General revised its loan growth guidance down to a range of 1% to 4% from the previous 3% to 4%. This cautious outlook reflects the bank’s strategy to navigate through uncertain economic conditions.

Forward-Looking Guidance

Looking ahead, Cathay General has adjusted its financial expectations, with a revised loan growth guidance of 1% to 4% for 2025. The company completed a $125 million stock repurchase program, indicating confidence in its stock value. Despite a slight decrease in total gross loans, the net interest margin’s rise to 3.25% offers a positive outlook for future earnings.

In conclusion, Cathay General’s earnings call painted a picture of cautious optimism. While there are positive signs such as increased net interest margin and deposit growth, challenges like decreased net income and revised loan growth guidance due to economic uncertainties remain. Investors and stakeholders will be keenly watching how the bank navigates these challenges in the coming quarters.