Cathay General Bancorp Q3 FY2025 earnings call

• Net income for Q3 2025 was $77.7 million, a 0.3% increase from Q2 2025; diluted EPS increased 2.7% to $1.13.
• Repurchased 1.07 million shares of common stock under the $150 million stock buyback program.
• Loan and deposit guidance increased from 3%-4% to 3.5%-5%.
• Loan portfolio has 60% fixed rate and hybrid loans, with fixed rate loans at 30% and hybrid in fixed rate period at 30%, expected to support loan yields as market rates decline.
• Monitored CRE loans: average LTV of CRE loans at 49%, retail property loans at 24% of CRE loans, office property loans at 14% of CRE loans.
• Net charge-offs were $15.6 million, nonaccrual loans were $165.6 million, provision for credit losses was $28.7 million.
• Total deposits increased by $515 million, with core deposits up $508 million. Uninsured deposits were $9.1 billion, and available liquidity sources exceeded uninsured and uncollateralized deposits.
• Net interest margin increased to 3.31% from 3.27% in Q2 2025. Noninterest income increased $5.6 million to $21 million. Noninterest expense decreased $1 million. Effective tax rate was 17.2% vs. 19.6% in Q2 2025. Capital ratios decreased slightly.

In Q3 2025, total gross loans increased $320 million or 6.6% annualized, with CRE loans up $122 million and residential loans up $123 million. Net income was $77.7 million, a 0.3% increase from Q2 2025. Diluted earnings per share increased 2.7% to $1.13. Net charge-offs were $15.6 million, nonaccrual loans were 0.8% of total loans, classified loans decreased from $432 million to $420 million, and special mention loans increased. Total deposits increased by $515 million or 10.5% annualized. The loan portfolio has 60% fixed rate and hybrid loans, with fixed rate loans at 30% and hybrid in fixed rate period at 30%. CRE loans had an average loan-to-value of 49%, with retail property loans comprising 24% of CRE loans (13% of total loans) and office property loans 14% of CRE loans (7% of total loans).

• Increased loan and deposit guidance from 3%-4% to 3.5%-5%.
• Expect fixed rate loans to support loan yields as market rates are expected to decline.

• Classified loans increased due to 6 relationships, including a national full-service business printing company, a real estate loan in Arizona, and a property in Southern California with leasing issues.
• CRE reserves increased due to $9.2 million additional reserve on 2 movie theater loans inherited from acquisition.
• Potential impacts of tariff uncertainties, tenant losses, and leasing issues on CRE loans.

Q: Just around the increase in classifieds, any additional color on types of commercial real estate and credit?

A: The largest was a $50 million national full-service business printing company with weak Q2 due to tariffs, a real estate loan in Arizona with a lost tenant and higher LTV, and a property in Southern California expected to be fully leased by Q2 2026.

Q: Increase in CRE reserves, related to migration or modifications?

A: CRE reserve up due to $9.2 million additional reserve on 2 movie theater loans inherited from acquisition.

Q: Expense guide and core expenses in Q4?

A: Consulting expense decreased, housing tax credit amortization was a one-time catch-up, core expenses expected to be stable with some adjustments.

Q: Bond portfolio floating rate and yield?

A: ~40% of bond portfolio is 6-month treasuries, rolling down causing yield loss, rest is fixed.

Q: CRE growth, demand and pricing?

A: Some pull-through from prior quarters, pipeline slowing due to waiting on rate cuts, pricing competitive with bearish margins for strong deposits.

Q: Funding, deposit competition and rate cuts?

A: Deposit competition fierce, adjusting rates quickly, driving noninterest-bearing and low interest-bearing deposits.

Q: Average net interest margin in September and deposit cost?

A: September net interest margin was 3.38%, interest-bearing deposit cost was 3.16% at end of September.