Sign in

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

CG

CATHAY GENERAL BANCORP (CATY)·Q2 2025 Earnings Summary

Executive Summary

  • Q2 2025 EPS of $1.10 grew 12% QoQ and 20% YoY; revenue rose to $185.4M, driven by higher net interest income, lower provision, and stronger fee income; net interest margin expanded to 3.27% .
  • Versus S&P Global consensus, EPS modestly beat ($1.10 vs $1.088) while revenue missed ($185.4M vs $195.9M); the miss reflects consensus expectations for higher post-provision revenue than realized. Bold catalysts: NIM expansion and active buybacks offsetting credit cost volatility (provision and net charge-offs) .
  • Guidance: FY loan growth raised back to 3–4% on strong pipelines; effective tax rate lowered to 18.5–19% (one-time ~$3.4M DTA write-off in Q2); management expects further NIM expansion if the Fed cuts rates .
  • Balance sheet: Loans +2.23% QoQ to $19.78B; deposits +$189M QoQ to $20.01B; uninsured deposits 43.3% with liquidity sources >100% of uninsured/unsecured deposits .
  • Credit: Non-accrual loans increased $19.6M QoQ; net charge-offs rose to $12.7M largely due to an $8.3M charge-off previously reserved; provision fell to $11.2M as macro inputs and specific reserves shifted .

What Went Well and What Went Wrong

What Went Well

  • Net interest margin expanded to 3.27% (from 3.25%), supported by lower deposit costs and loan growth; CEO: “We are pleased by the continued increase in the net interest margin” .
  • Loan and deposit momentum: Loans +2.23% QoQ to $19.78B; deposits +$188.8M QoQ to $20.01B, with core deposit gains and seasonality .
  • Capital return: 804,179 shares repurchased at $44.22 ($35.6M) under the new $150M authorization adopted June 5, 2025 .

What Went Wrong

  • Asset quality deterioration: Non-accrual loans rose 12.7% QoQ to $174.2M; classified loans increased ~$50M due to one commercial relationship; allowance coverage of NPLs fell to 96.1% .
  • Net charge-offs increased to $12.7M (vs $2.0M in Q1), including an $8.3M specific commercial charge-off; provision, while lower QoQ, remained elevated .
  • Revenue miss vs consensus (actual $185.4M vs $195.9M) despite EPS beat; fee income improved but not enough to offset consensus expectations for post-provision revenue .

Financial Results

MetricQ2 2024Q1 2025Q2 2025
Revenue ($USD Millions)$171.9$172.3$185.4
Diluted EPS ($)$0.92 $0.98 $1.10
Net Interest Margin (%)3.01% 3.25% 3.27%
Efficiency Ratio (%)55.65% 45.60% 45.34%

Values for “Revenue” retrieved from S&P Global*

Q2 2025 vs Consensus (S&P Global):

MetricConsensus (Q2 2025)Actual (Q2 2025)
Revenue ($USD Millions)$195.9*$185.4*
Diluted EPS ($)$1.088*$1.10
# of EPS Estimates5*—
# of Revenue Estimates5*—

Values marked with * retrieved from S&P Global

KPIs and Balance Sheet

KPIQ2 2024Q1 2025Q2 2025
Total Loans (Period-End, $USD Billions)$19.36 $19.35 $19.78
Total Deposits (Period-End, $USD Billions)$19.77 $19.82 $20.01
Net Interest Income Before Provision ($USD Millions)$165.3 $176.6 $181.2
Provision for Credit Losses ($USD Millions)$6.6 $15.5 $11.2
Net Charge-offs ($USD Millions)$14.7 $2.0 $12.7
Non-accrual Loans ($USD Millions)$107.3 $154.6 $174.2
NPA/Total Assets (%)—0.75% 0.84%
Allowance to Gross Loans (%)0.79% 0.90% 0.88%
Tier 1 Risk-Based Capital (%)13.26% 13.57% 13.35%
Tier 1 Leverage (%)10.83% 11.06% 11.09%
Uninsured Deposits (% of Total)—42.7% 43.3%
Liquidity Sources (FHLB / Fed / Unpledged, $USD Billions)—$7.0 / $0.343 / $1.5 $7.0 / $1.5 / $1.5
Share Repurchases (Shares; $USD Millions)—876,906; $41.1 804,179; $35.6
Book Value per Share ($)$38.70 $40.91 $41.62

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Loan GrowthFY 20251%–4% (Q1 update) 3%–4% (Q2 update) Raised
Effective Tax RateFY 202519.5%–20.5% 18.5%–19% Lowered
Net Interest MarginFY 20253.25%–3.35% (Q1 update) Expect expansion with Fed cuts (qualitative) Maintained; positive bias
Tax Credit AmortizationQ3–Q4 2025—~$11M per quarter New specificity
DividendQuarterly$0.34 declared (May 15, 2025) $0.34 paid June 9 Maintained
Share Repurchase AuthorizationProgramPrior $125M completed Feb 2025 New $150M authorization (June 5, 2025) Increased capacity

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4’24, Q1’25)Current Period (Q2’25)Trend
Loan GrowthGuidance widened to 1–4% amid tariff uncertainty Guidance raised to 3–4% on strong pipelines Improving
NIM and Deposit BetasNIM up to 3.25%; sensitivity +4bps per 25bp cut; deposit cost decline noted NIM 3.27%; further expansion expected as CDs reprice and fixed/hybrid loans support yields Gradual expansion
Tariffs/MacroTariff exposure ring-fenced (~1.4% of loans) and monitored Reduced specific tariff reserve; importers resilient; macro unemployment input increased Mixed risk; manageable
CRE Exposure (Retail/Office)CRE LTV ~49%; retail ~25% CRE; office ~15% CRE CRE LTV 49%; retail 24% CRE; office 14% CRE; limited CBD office Stable mix
Liquidity/Uninsured DepositsLiquidity >100% of uninsured/unsecured deposits; Fed capacity $343M Liquidity >100%; Fed capacity $1.5B; plan to replace FHLB with brokered CDs Strengthened
Credit CostsProvision $15.5M; NCOs $2.0M; NPLs down QoQ Provision $11.2M; NCOs $12.7M (one large reserved loan); NPLs up Volatile; elevated
Capital ReturnBuybacks continued; completed prior $125M program New $150M program; $35.6M repurchased in Q2 Ongoing

Management Commentary

  • CEO: “We are pleased by the continued increase in the net interest margin compared to the first quarter of 2025… we repurchased 804,179 common shares at an average cost of $44.22 per share” .
  • CEO on loan growth/guidance: “Given the strong Q2 loan growth, we are revising our 2025 loan growth guidance back to 3% to 4% from the previously revised guidance of 1% to 4%” .
  • CFO on tax rate and estimates: “Due to a recent California tax legislation, we are updating our guidance for the effective tax rate to between 18.5% to 19%…” and “$3.4 million… writing off a portion of our deferred tax asset” .
  • CFO on NIM drivers: “The increase in net interest income was due to the lower cost of funds… interest recoveries and prepayment penalties added 3 bps to NIM” .
  • CFO on liquidity and funding: “Unused borrowing capacity… FHLB $7B… FRB $1.5B… unpledged securities $1.5B; replacing FHLB with brokered CDs” .

Q&A Highlights

  • Effective tax rate: ~$3.4M one-time DTA write-off; FY tax rate guided to 18.5–19% .
  • ACL dynamics: Macro unemployment factor increased in Moody’s model; specific tariff reserve reduced; collateral improvements removed special reserve .
  • Loan growth outlook: Balanced CRE and C&I growth; pipeline supports 3–4% FY; caution on macro/tariff risks limits raising the top end .
  • Funding strategy: Q2 surge in June loans drove short-term FHLB borrowing (~4.6% rate); replacing with brokered CDs (~4.3%) .
  • Classified loans: ~$50M increase tied to one commercial relationship; secured by real estate; expected to normalize by Q3 .

Estimates Context

  • EPS: $1.10 actual vs $1.088 consensus — modest beat; five estimates. Revenue: $185.4M actual vs $195.9M consensus — miss, with consensus looking for higher post-provision revenue. Expect modest upward revisions to EPS trajectory with lower tax rate guidance and NIM expansion bias, while revenue models may recalibrate for provision/fee dynamics and credit costs. Values retrieved from S&P Global*

Key Takeaways for Investors

  • NIM trajectory improving; deposit cost reductions and fixed/hybrid loan mix should support spread as rates decline — constructive for NII and earnings quality .
  • Loan growth momentum and restored 3–4% FY guidance indicate demand and pipeline strength; watch for balancing against macro/tariff risks .
  • Credit metrics require monitoring: higher NPLs and NCOs (one reserved charge-off) amid classified loan uptick; coverage ratios slightly lower QoQ .
  • Capital deployment remains shareholder-friendly: active buybacks under the $150M authorization and sustained dividend ($0.34) .
  • Liquidity is ample (>100% coverage of uninsured/unsecured deposits), with proactive shift from FHLB to brokered CDs lowering funding costs .
  • Effective tax rate lowered to 18.5–19% provides incremental EPS tailwind; one-time DTA impact is isolated to Q2 .
  • Near-term trading: EPS beat and NIM expansion guidance are positives; revenue miss and credit noise may cap upside until credit trends stabilize — watch Q3 classified loan normalization and NCO cadence .

Sources: Q2 2025 8-K/press release and exhibits ; Q2 2025 earnings call transcripts ; Q1 2025 press release/transcripts ; Q4 2024 press release ; Dividend/repurchase press releases . Values marked with * retrieved from S&P Global.