Cathay General ((CATY)) has held its Q2 earnings call. Read on for the main highlights of the call.
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Cathay General Bancorp’s recent earnings call painted a mixed picture for investors. While the company reported strong net income and impressive loan growth, it also highlighted some challenges, such as increased net charge-offs and a rise in classified and nonaccrual loans. This dual narrative reflects both the strengths and vulnerabilities facing the bank in the current financial landscape.
Significant Increase in Net Income
Cathay General Bancorp reported a net income of $77.4 million for the second quarter of 2025, marking an 11.4% increase compared to the first quarter’s $69.5 million. This substantial growth in net income underscores the bank’s robust financial performance and its ability to generate profits even amidst a challenging economic environment.
Earnings Per Share Growth
The bank’s diluted earnings per share also saw a notable increase, rising by 12.2% to $1.10 for Q2 2025 compared to $0.98 in Q1 2025. This growth in earnings per share indicates strong profitability and is likely to be well-received by shareholders.
Strong Loan Growth
Cathay General Bancorp experienced significant loan growth, with total gross loans increasing by $432 million or 8.9% annualized. The growth was driven by substantial increases in commercial loans, commercial real estate loans, and residential loans, reflecting the bank’s strategic focus on expanding its loan portfolio.
Improvement in Deposit Growth
The bank also reported an improvement in deposit growth, with total deposits growing by $189 million or 3.8% annualized in Q2 2025. This growth was largely due to increases in core deposits, highlighting the bank’s ability to attract and retain customer deposits.
Increase in Net Charge-Offs
Despite the positive financial metrics, the bank faced challenges with net charge-offs, which rose to $12.7 million in Q2 2025 from $2 million in Q1 2025. This increase was primarily due to a large commercial loan and suggests potential risks in the bank’s loan portfolio.
Rise in Classified Loans
Classified loans increased to $432 million from $380 million in Q1 2025, driven by the downgrade of a large loan relationship. This rise in classified loans indicates potential credit quality issues that the bank will need to address.
Increase in Nonaccrual Loans
Nonaccrual loans also saw an increase, rising by $19.6 million to $174.2 million, primarily due to a $16 million real estate loan in the process of foreclosure. This increase highlights ongoing challenges in managing nonperforming assets.
Forward-Looking Guidance
Looking ahead, Cathay General Bancorp revised its 2025 loan growth guidance to 3%-4% due to strong loan performance in the second quarter. The bank’s net interest margin rose to 3.27%, supported by improved net interest income and decreased cost of funds. Despite increased noninterest expenses, the bank adjusted its effective tax rate guidance to 18.5%-19% following recent California tax legislation, indicating a proactive approach to managing its financial outlook.
In summary, Cathay General Bancorp’s earnings call revealed a company that is performing well financially, with strong net income and loan growth. However, the rise in net charge-offs, classified loans, and nonaccrual loans presents challenges that the bank must navigate. Investors will be watching closely to see how the bank addresses these issues while maintaining its growth trajectory.