Cathay General Bancorp (CATY) Q2 2024 Earnings Call Highlights: Navigating Challenges with ...
Net Income: $66.8 million for Q2 2024, a 6.4% decrease from $71.4 million in Q1.
Diluted Earnings Per Share: $0.92 for Q2 2024, down 6.1% from $0.98 in Q1.
Stock Repurchase: 689,470 shares repurchased at an average cost of $36.37, totaling $25.1 million.
Total Gross Loans: Decreased by $72 million or 1.5% annualized in Q2 2024.
Net Charge-Offs: $8 million in Q2 2024, compared to $1.1 million in Q1.
Non-Accrual Loans: 0.55% of total loans as of June 30, 2024, increased by $9.2 million to $107.3 million.
Provision for Credit Loss: $6.6 million in Q2 2024, up from $1.9 million in Q1.
Total Deposits: Decreased by $73 million or 1.5% annualized in Q2 2024.
Net Interest Margin: 3.01% for Q2 2024, compared to 3.05% in Q1.
Non-Interest Income: Increased by $6.6 million to $13.2 million in Q2 2024.
Non-Interest Expense: Increased by $6.1 million or 6.5% to $99.3 million in Q2 2024.
Effective Tax Rate: 7.9% for Q2 2024, compared to 10.8% in Q1.
Tier One Leverage Capital Ratio: Increased to 10.83% as of June 30, 2024, from 10.71% as of March 31, 2024.
Release Date: July 22, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
Cathay General Bancorp (NASDAQ:CATY) reported net income of $66.8 million for Q2 2024, despite a decrease from the previous quarter.
The company repurchased 689,470 shares of its common stock, demonstrating a commitment to returning value to shareholders.
The loan portfolio consists of 64% fixed rate and hybrid loans, providing stability in interest income.
Cathay General Bancorp (NASDAQ:CATY) has a strong liquidity position, with available liquidity sources covering over 100% of uninsured and uncollateralized deposits.
The effective tax rate for Q2 2024 was reduced to 7.9%, down from 10.8% in Q1, indicating improved tax efficiency.
Negative Points
Net income decreased by 6.4% compared to Q1 2024, primarily due to increased provisions for credit losses.
Total gross loans decreased by $72 million, reflecting slower than expected loan growth.
Non-accrual loans increased to 0.55% of total loans, with significant contributions from office and retail condo CRE loans.
Total deposits decreased by $73 million, driven by a runoff of brokered deposits.
Non-interest expense increased by 6.5% due to higher amortization of tax credit investments and other expenses.
Q & A Highlights
Q: What was the spot rate on deposits at the end of June? A: Heng Chen, CFO, stated that the spot rate of total interest-bearing deposits was 3.92%.
Q: Can you explain the updated expense guidance and what will drive the reduction in core expenses? A: Heng Chen, CFO, mentioned that there were some one-time expenses in Q2, such as higher consulting, marketing, and charitable contributions, totaling about $2.5 million. Expenses are expected to moderate in the second half.
Q: What is the expected low-income housing amortization for Q3 and Q4? A: Heng Chen, CFO, indicated that the expected amortization is about $10 million per quarter for low-income housing.
Q: How are the $7.2 billion in CDs maturing in the second half of the year distributed, and what is the expected impact on deposit costs? A: Heng Chen, CFO, explained that $3.7 billion will mature in Q3 and $3.5 billion in Q4. The repricing is expected to reduce rates from 5.2% to around 5%, providing a 20 basis point benefit.
Q: Can you discuss the increase in classified loans this quarter? A: Chang Liu, CEO, noted that the increase was mostly due to downgrades in real estate-secured loans, but they do not see significant risk.
Q: What is the current interest in M&A activities? A: Chang Liu, CEO, stated that they are open to opportunities within their niche space but currently do not have any active prospects.
Q: How does the loan growth guidance look for the second half of the year, and what segments are expected to drive this growth? A: Chang Liu, CEO, mentioned that growth is expected mainly from commercial real estate, while residential mortgage applications and C&I businesses are down due to higher rates.
Q: What is the outlook for net interest income (NII) and net interest margin (NIM)? A: Heng Chen, CFO, expects earning assets to remain flat or slightly up, with potential rate cuts in September and December contributing to NII stability.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
This article first appeared on GuruFocus.