Sign in

You're signed outSign in or to get full access.

CG

CATHAY GENERAL BANCORP (CATY)·Q1 2025 Earnings Summary

Executive Summary

  • Q1 2025 EPS of $0.98 modestly beat S&P Global consensus $0.95*, while “revenue” (S&P definition = NII after provision + non‑interest income) of $172.3M was below $186.2M* as lower non‑interest income and a higher tax rate offset stronger NIM expansion . Values with asterisk (*) retrieved from S&P Global.
  • Net interest margin expanded 18 bps q/q to 3.25% as deposit costs declined; efficiency held at 45.6% .
  • Asset quality improved: non‑accruals fell 8.6% q/q to $154.6M; net charge-offs dropped to $2.0M from $16.3M in Q4 .
  • Guidance: 2025 NIM raised to 3.25%–3.35% (from 3.10%–3.20%); loan growth widened to 1%–4% (from 3%–4%); expenses outlook maintained. Dividend of $0.34/share declared on May 15 and a new $150M buyback authorized on June 5 provide capital return visibility .

What Went Well and What Went Wrong

  • What Went Well

    • NIM expansion: “Net interest margin increased to 3.25%” q/q; March average margin was 3.39% (3.21% ex recoveries) as deposit costs fell to a 3.36% spot rate at quarter-end .
    • Credit metrics improved: non‑accrual loans decreased $14.5M q/q to $154.6M and coverage (ALLL/NPLs) rose to 112% from 93% .
    • Liquidity and capital strong: Unused FHLB capacity $7.0B, FRB $343M, and $1.5B unpledged securities; Tier 1 leverage 11.06% and risk-based ratios solidly “well-capitalized” .

  • What Went Wrong

    • Top-line (S&P “revenue”) miss: $172.3M actual vs $186.2M* consensus as non‑interest income fell $4.3M q/q and the effective tax rate rose to 19.82% (vs 7.57% in Q4) . Values with asterisk (*) retrieved from S&P Global.
    • Loan growth headwinds: Gross loans declined slightly q/q to $19.35B, with commercial and residential down, partly offset by CRE growth; management widened 2025 loan growth outlook amid macro/tariff uncertainty .
    • Tariff overhang: Management estimates ~1.4% of loans could be adversely impacted by proposed U.S.-China tariffs; reserve build in Q1 was driven mostly by one domestic C&I borrower, with additional tariff-related reserves added .

Financial Results

Headline metrics by quarter

MetricQ3 2024Q4 2024Q1 2025
Total Revenue ($USD Millions) (NII after provision + Non-interest income)$175.0 $172.0 $172.3
Net Interest Margin (%)3.04% 3.07% 3.25%
Net Income ($USD Millions)$67.5 $80.2 $69.5
Diluted EPS ($)$0.94 $1.12 $0.98
Efficiency Ratio (%)51.11% 45.70% 45.60%
ROA (%)1.15% 1.37% 1.22%
ROE (%)9.50% 11.18% 9.84%

Q1 2025 vs Consensus (S&P Global)

MetricConsensusActualBeat/(Miss)
Diluted EPS ($)$0.95*$0.98 Beat by $0.03
Total Revenue ($USD Millions)$186.2*$172.3 Miss by $(13.9)

Values with asterisk (*) retrieved from S&P Global.

Balance sheet and asset quality

KPIQ3 2024Q4 2024Q1 2025
Gross Loans ($USD Billions)$19.374 $19.376 $19.353
Total Deposits ($USD Billions)$19.944 $19.686 $19.818
Non‑accrual Loans ($USD Millions)$162.8 $169.2 $154.6
Net Charge‑offs ($USD Millions)$4.2 $16.3 $2.0
ALLL / Gross Loans (%)0.85% 0.83% 0.90%
ALLL / NPLs (%)96.45% 93.39% 112.06%
Tier 1 Leverage (%)10.82% 10.97% 11.06%

Notes:

  • Q1 “Total Revenue” equals NII after provision ($161.1M) + non‑interest income ($11.2M) = $172.3M, consistent with S&P’s revenue definition .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Net Interest MarginFY 20253.10%–3.20% 3.25%–3.35% Raised
Loan Growth (Gross Loans)FY 20253%–4% 1%–4% Widened/lowered low end
Non‑interest Expense GrowthFY 2025 (y/y)4.5%–5.5% (prior commentary) 4.5%–5.5% Maintained
Dividend per ShareQ2 2025$0.34 (prior run‑rate) $0.34 (payable Jun 9) Maintained
Share RepurchasePost‑Q1$125M (completed Feb 28, 2025) New $150M authorization (June 5, 2025) Introduced/expanded

Earnings Call Themes & Trends

TopicQ3 2024 (Prev‑2)Q4 2024 (Prev‑1)Q1 2025 (Current)Trend
NIM trajectory3.04% NIM; deposit costs high but stabilizing 3.07% NIM; spread improved to 2.17% 3.25% NIM; raised FY guide to 3.25%–3.35% Improving
Deposit cost dynamicsInterest‑bearing deposit cost 3.95% avg 3.72% avg Spot cost 3.36%; promo CDs ~4.10% (6m/13m) vs 5.3–5.4% last year Easing
Asset qualityNon‑accruals rose to $162.8M Increased to $169.2M; coverage 93% Fell to $154.6M; coverage 112% Improving
Tariffs/macro——~1.4% of loans potentially impacted; widened loan growth guide Emerging risk
Liquidity——Liquidity covers 100%+ of uninsured/un‑collateralized deposits Solid
Capital returnBuybacks ongoing ($35M in Q3) Buybacks continued ($23.9M in Q4) Completed $125M program; later adopted new $150M authorization Ongoing/expanded

Management Commentary

  • Strategic tone and focus: “We expect these fixed rate loans to support our loan yields as market rates are expected to decline.” (62% of loans fixed/hybrid) .
  • Tariff exposure scoped and contained: “We estimate that about 1.4% of total loans could be adversely impacted by the proposed tariffs.” .
  • NIM outlook improved: “Based on the first quarter net interest margin, we have increased our 2025 guidance to 3.25% to 3.35%.” .
  • Credit provisioning: “Most of the provisions were to cover possible losses from 1 commercial client.” .

Q&A Highlights

  • Rate sensitivity: Each 25 bps Fed cut is a ~+4 bps tailwind to full‑year NIM; if a July cut, ~+2 bps for 2025 given timing .
  • March NIM detail and deposit costs: March average margin 3.39% (3.21% ex recoveries); spot interest‑bearing deposit rate 3.36% at 3/31/25 .
  • Loan growth guidance: Widened to 1%–4% on uncertainty (tariffs, C&I investment pauses); some importers may pause activity and pay down lines .
  • Reserve specifics: Majority of Q1 reserve build was one domestic C&I credit; tariff‑exposed 1.4% of loans carry ~2% allowance .
  • Capital return: New buyback pending regulatory approval at the time of the call; subsequently announced $150M authorization on June 5 .

Estimates Context

  • S&P Global consensus (4 estimates) for Q1 2025: EPS $0.9525*, Revenue $186.2M*; actual EPS $0.98 and “revenue” $172.3M (NII after provision + non‑interest income) . Values with asterisk (*) retrieved from S&P Global.
  • Implication: Models may raise NIM and lower non‑interest income (and effective tax rate) assumptions; revenue definition sensitivity matters for banks where “revenue” includes credit provisioning.

Key Takeaways for Investors

  • NIM momentum and positive rate sensitivity (+4 bps per 25 bps cut) should support 2025 NII even as asset yields drift modestly; watch deposit betas and mix shift .
  • Credit trends improved q/q (lower non‑accruals, higher coverage, sharply lower NCOs); continued monitoring of CRE and C&I remains prudent .
  • Loan growth uncertainty persists amid tariff risk and C&I caution; management widened growth range to 1%–4% .
  • Capital return is a clear support: dividend sustained at $0.34 and a new $150M buyback provides flexibility if organic growth is slower .
  • Liquidity robust (>100% of uninsured/un‑collateralized deposits covered), reducing tail‑risk perception versus peers .
  • Near‑term trading: Focus on NIM trajectory versus raised guidance and any incremental reserve actions; a durable deposit cost downtrend is a potential catalyst .
  • Medium term: If tariffs moderate and C&I confidence stabilizes, growth could re‑accelerate within the 1%–4% range while capital returns continue .
All figures are from company filings and the Q1 2025 earnings call unless noted. Values marked with an asterisk (*) are retrieved from S&P Global.

Appendix: Additional Data Points (for reference)

  • Q1 2025 efficiency ratio 45.60%; ROA 1.22%; ROE 9.84% .
  • Yield/cost dynamics Q1: asset yield 5.89%, interest‑bearing liabilities cost 3.46%, deposit cost 3.43% .
  • Deposit mix Q1: NIBD $3.36B; time deposits $9.63B; total deposits $19.82B .