Q1 2024 Cathay General Bancorp Earnings Call
Good afternoon, ladies and gentlemen, and welcome to the Cathay General Bancorp's first quarter of 'twenty 'twenty four earnings conference call.
Gary: Good afternoon, ladies and gentlemen, and welcome to the Cathay General Bancorp's first quarter of 2024 earnings conference call. My name is Gary, and I'll be your coordinator for today. At this time, all participants are in listen-only mode. Following the prepared remarks, there will be a question and answer session. If you would like to participate in this portion of the call, please press star followed by one at any time during the call.
Gary: My name is Gary and I'll be your coordinator for today.
Gary: At this time, all participants are in listen only mode.
Gary: Following the prepared remarks, there will be a question and answer session.
Gary: If you would like to participate in this portion of the call. Please press star followed by one at any time during the conference.
Gary: If assistance is needed at any time during the call, please press star followed by zero, and a coordinator will be happy to assist you. Today's call is being recorded and will be available for replay at www.cathaygeneralbancorp.com. Now, I would like to turn the call over to Georgia Lo, Investor Relations, Cathay General Bancorp. Please go ahead.
Gary: With assistance is needed at any time during the call. Please press star followed by zero and a coordinator will be happy to assist you.
Gary: Today's call is being recorded and will be available for replay at www Dot Cathay General Bancorp at Dotcom.
Gary: Now I would like to turn the call over to Georgia Lo Investor Relations of Cathay General Bancorp. Please go ahead.
Georgia Lo: Thank you Gary and good afternoon here to discuss the financial results today are Mr. Chengdu, Our president and Chief Executive Officer, and Mr. Heng, Chen our executive Vice President and Chief Financial Officer before we begin we wish to remind you that the speakers on this call may make forward looking statements within the meaning of the applicable provisions of the pie.
Georgia Lo: Thank you, Gary, and good afternoon. Here to discuss the financial results today are Mr. Chang Liu, our President and Chief Executive Officer, and Mr. Heng Chen, our Executive Vice President and Chief Financial Officer. Before we begin, we wish to remind you that the speakers on this call may make forward-looking statements within the meaning of the applicable provisions of the Private Securities Litigation Reform Act of 1995 concerning future results and events, and that these statements are subject to certain risks and uncertainties that could cause actual results to differ materially.
Georgia Lo: The Securities Litigation Reform Act of 1995 concerning future results and events and that these statements are subject to certain risks and uncertainties that could cause actual results to differ materially. These risks and uncertainties are further described in the company's annual report on Form 10-K for the year ended December 31st 2023 and item one a in particular.
Georgia Lo: These risks and uncertainties are further described in the company's annual report on Form 10-K for the year ended December 31, 2023, at Item 1A in particular, and in other, As such, we caution you not to place undue reliance on such forward-looking statements. Any forward-looking statement speaks only as of the date on which it is made and, except as required by law. We undertake no obligation to update or review any forward-looking statements to reflect future circumstances, developments, or events or the occurrence of unanticipated events.
Georgia Lo: And in other reports and filings with the Securities and Exchange Commission from time to time as such we caution you not to place undue reliance on such forward looking statements any forward looking statements speaks only as of the date on which it is made and except as required by law. We undertake no obligation to update or review any forward looking statements to reflect future circumstances develop.
Georgia Lo: Mr event or the occurrence of an anticipated events. This afternoon, Cathay General Bancorp issued an earnings release outlining its first quarter 'twenty 'twenty four results to obtain a copy of our earnings release as well as our earnings presentation. Please visit our website at Www Dot Cathay General Bancorp Dotcom after comments by management today.
Georgia Lo: This afternoon, Cathay General Bancorp issued an earnings release outlining its first quarter 2024 results. To obtain a copy of our earnings release, as well as our earnings presentation, please visit our website at www.cathaygeneralbancorp.com. Comments on management today. We will open up this call for questions. I will now turn the call over to our President and Chief Executive Officer, Mr. Chang Liu. Thank you, Georgia.
Georgia Lo: We will open up this call for questions I will now turn the call over to our President and Chief Executive Officer. Mr. Chengdu. Thank you, Georgia and good afternoon welcome to our 2024 first quarter earnings Conference call. This afternoon. We reported net income of 71 4 million for first quarter 'twenty 'twenty four.
Chang Ming Liu: Thank you, Georgia, and good afternoon. Welcome to our 2024 first quarter earnings conference call. This afternoon, we reported net income of $71.4 million for the first quarter of 2024, a 13.4 percent decrease as compared to $82.5 million the previous quarter. Our net income this quarter included a $9 million, or $0.09 per diluted share, mark-to-market loss from equity security, and a $2.9 million, or $0.03 per diluted share, accrual for an increase in the FDIC Special Assessment. The total earnings per share decreased by 13.5% to $0.98 per share for the first quarter of 2024, as compared to $1.13 per share in the previous quarter.
Georgia Lo: $13 44 per cent decrease as compared to 82.5 million the previous quarter.
Georgia Lo: Our net income this quarter included a 9 million or nine cents per diluted share mark to market loss from equity securities and a 2.9 million or three cents per diluted share accrual for an increase in the FDIC special assessment.
Georgia Lo: <unk> earnings per share decreased by 13, 5% to 98 per share for the first quarter of 2024 as compared to $1 13 per share in the previous quarter.
Chang Ming Liu: In first quarter 2024, total growth zones decreased 119 million or 2.4% annualized, primarily driven by increases of 992 million or 3.8% annualized in commercial real estate loans, offset by a decrease of $172 million, or 20.9%, annualized in commercial real estate, and 40 million or 37.7% annualized in construction. Due to slower than expected loan growth in the first quarter of 2024, we have revised our overall loan growth guidance for 2024 to range between 3% and 4%.
Georgia Lo: And first quarter of 2020 for total gross loans decreased $119 million or 2.4% annualized primarily driven by increases of $992 million was 3.8%.
Georgia Lo: Annualized in commercial real estate loans, offset by a decrease of $172 million or 29% annualized.
Georgia Lo: Annualized in commercial loans, and $40 million or 37.7% annualized and construction loans.
Georgia Lo: It is slower than expected loan growth in first quarter of 2024, we have revised our overall loan growth guidance for 'twenty 'twenty four to range between 3% and 4%.
Chang Ming Liu: We've added slide six to show the percentage of loans in which major loan portfolio that are either fixed rate or hybrid loans in their fixed rate period. Our loan portfolio consists of 64% fixed rate and hybrid loans excluding fixed-to-float interest rate swaps on 4% of total loans. Fixed rate loans comprise 30% of total loans, and hybrid loans in the fixed rate period comprise 34% of total. We continue to monitor our commercial real estate loans. Turning to slide A of our earnings, as of 31st December 2024, the average loan-to-value of our CRE loans was 50%.
Georgia Lo: We've added slide six to show the percentage of loans in which major loan portfolio that are either fixed rate or a hybrid loans into a fixed rate period.
Georgia Lo: Loan portfolio consists of 64% fixed rate and hybrid loans, excluding fixed to floating interest rate swaps on 4% of total loans.
Georgia Lo: Great loans comprised 30% of total loans and hybrid loans and fixed rate period comprised 34% of total loans.
Georgia Lo: We continue to monitor our commercial real estate loans, turning to slide eight of our earnings.
Georgia Lo: As of 31st 2024, the average loan to value of our CRE loans was 50%.
Georgia Lo: As of March 31st 2020 for a retail property loan portfolio as shown on slide nine comprised of 23% of our total commercial real estate loan portfolio with 12% of our total loan portfolio.
Georgia Lo: 90% of the $2 3 billion in retail property, along with secure by retail store building their neighborhood mixed use or strip centers only 9% secured by shopping centers.
Chang Ming Liu: As of March 31st, 2024, our retail property loan portfolio is shown on slide 9, comprised of 23% of our total commercial real estate loan portfolio, with 12% of our total loan portfolio. 90% of the $2.3 billion in retail property loans is secured by retail store, building, neighborhood, mixed-use, or strip centers; only 9% is secured by shopping centers. On slide 10, office property loans represent 15% of our total commercial real estate loan portfolio or 8% of our total loan portfolio. Furthermore, only 34% of the $1.5 billion in office property loans are collateralized by pure office buildings. Only 3% are in central business districts.
Georgia Lo: On Slide 10 office property loans represent 15% of our total commercial real estate loan portfolio were 8% of our total loan portfolio.
Georgia Lo: Only 34% of the 1.5 billion office property loans are collateralized by pure office buildings only 3%.
Georgia Lo: Central to this business the central business districts, 38% of office property loans are collateralized by office retail stores office mixed use in medical offices, and the remainder of 28% of all collateralized by office.
Georgia Lo: Those were.
Georgia Lo: Our first quarter of 'twenty 'twenty four we reported net charge offs of $1 1 million as compared to $4 1 million in the previous quarter, our nonaccrual loans, whereas your 0.5% of total loans as of March 31st 2024, which increased by 31.4 million to $98 1 million as compared to the previous quarter.
Georgia Lo: The increase in nonaccrual loans during the first quarter of 'twenty 'twenty four came mainly from a 23 million low loan to value construction loan in New York, which is past due maturity and two theater loans totaling $21 million.
Chang Ming Liu: 38% of office property loans are collateralized by office, retail, office Mixed Use, and Medical Offices, and the remainder, 28%, are collateralized by office conduct. For the first quarter of 2024, we reported net charge-offs of $1.1 million, as compared to $4.1 million in the previous quarter. Our non-accrual loans were 0.5% of total loans as of March 31, 2024, which increased by $31.4 million to $98.1 million as compared to the previous quarter. The increase in non-accrual loans during the first quarter of 2024 came mainly from a $23 million low loan-to-value construction loan in New York, which has passed due maturity, and two theater loans totaling $21 million.
Georgia Lo: Turning to slide 12 as of March 31st 2020 for classified loans increased to $244 million from 200 million as of December 31st 2023, and our special mention loans decreased to 249 million from 308 million as of December 31st 2023.
Georgia Lo: So for first quarter 'twenty 'twenty four there was a small decrease in total special mention and classified loans.
Georgia Lo: Quarter provision for credit loss of $1 9 million in the first quarter of 2024 as compared to a 1.7 million provision for credit losses for the freedom for the previous quarter.
Georgia Lo: Total deposits increased by $520 8 million or 10, 8% annualized during the first quarter of 2024.
Georgia Lo: Total core deposits increased 210.9 million or eight 4% annualized in total time deposits increased 731.7 million or 31, 3% during the first quarter of 2024, mainly due to our lunar new year CD campaign.
Chang Ming Liu: Turning to slide 12, as of March 31st, 2024, classified loans increased to $244 million from $200 million as of December 31st, 2023, and our special admission loans decreased to $249 million from $308 million as of December 31st, 2023. So for the first quarter of 2024, there was a small decrease in total special mention and classified loans. We recorded a provision for credit losses of $1.9 million in the first quarter of 2020, as compared to $1.7 million in provision for credit losses for the previous quarter.
Georgia Lo: We expect the overall deposit growth to continue and estimate a range between 4% and 5%.
Georgia Lo: As of March 31st 2024, total uninsured deposits were $8 1 billion net of 0.7 billion in collateralized deposits or 40.7% of total deposits.
Georgia Lo: We have an unused borrowing capacity from the federal home loan bank of $6 9 billion in Unpledged Securities up 1.7 billion as of March 34 is 2024 east.
Georgia Lo: These sources of available liquidity more than cover 100% of uninsured and uncollateralized deposits as of March 31st 2024.
Georgia Lo: I will now turn the floor over to our executive Vice President and Chief Financial Officer, Mr. Heng Chen to discuss the quarterly financial results in more detail.
Chang Ming Liu: Total deposits increased by $520.8 million, or 10.8% annualized, during the first quarter of 2024; total core deposits increased by $210.9 million, or 8.4% annualized, and total time deposits increased $731.7 million, or 31.3%, mainly due to our Lunar New Year CD campaign. We expect the overall deposit growth to continue in an estimated range between 4% and 5%. As of March 31st, 2024, total uninsured deposits were $8.1 billion, net of $0.7 billion in collateralized deposits, or 40.7% of total deposits.
Heng W. Chen: Thank you Chang and good afternoon, everyone.
Heng W. Chen: Q1, 'twenty 'twenty four net income decreased by $11 1 million or 13, 4% to 71 4 million.
Heng W. Chen: Compared to 82 five months.
Heng W. Chen: In the previous quarter.
Heng W. Chen: Not only due to a $9 million.
Heng W. Chen: Unrealized loss on equity Securities in Q1, 'twenty 'twenty four.
Heng W. Chen: Versus the 9 million unrealized gain on equity securities.
Heng W. Chen: Q4 2023.
Heng W. Chen: An additional $2 9 million accrual in Q1, 'twenty 'twenty four.
Heng W. Chen: For the FDIC special assessment.
Heng W. Chen: Q1, 'twenty 'twenty four net interest margin was 3.15%.
Heng W. Chen: As compared to 3.27% for the previous quarter.
Heng W. Chen: Interest recoveries and prepayment penalties.
Heng W. Chen: That changed the net interest margin for Q1, 'twenty 'twenty or.
Chang Ming Liu: We have an unused borrowing capacity from the Federal Home Loan Bank of $6.9 billion and unpledged securities of $1.7 billion as of March 31, 2024. These sources of available liquidity more than cover 100% of uninsured and uncollateralized deposits as of March 31st, 2024. I will now turn the floor over to our Executive Vice President and Chief Financial Officer, Mr. Heng Chen, to discuss the quarterly financial results in more detail.
Heng W. Chen: First is the increase of one basis point.
Heng W. Chen: Previous quarter.
Heng W. Chen: We estimate our net interest margin for 'twenty 'twenty four to be between 3.05.
Heng W. Chen: 3.15%.
Based on the expectation for two rate cuts in 2024.
Heng W. Chen: With a first rate cut in September and the second rate cut in December.
Heng W. Chen: Our prior net interest margin guidance was based on three weight, that's what the first rate cut being June.
Heng W. Chen: Given that.
Heng W. Chen: 64% of our loans.
Heng W. Chen: Fixed rate or hybrid loans in the fixed rate.
Heng W. Chen: Thank you, Chang, and good afternoon, everyone. Q1 2024 net income decreased by $11.1 million or 13.4% to $71.4 million compared to $82.5 million in the previous quarter, primarily due to a $9 million unrealized loss of equity securities in Q1 2024 versus a $9 million unrealized gain on equity securities. Q4 2023, and an additional $2.9 million accrual in Q1 2024 for the FDIC Special Assessment. The 2021-2024 interest margin was 3.05%, compared to 3.27% for the previous quarter.
Heng W. Chen: The lower number of rate cuts.
Heng W. Chen: Negatively impacted our net interest margin guidance.
Heng W. Chen: Non interest income during the first quarter of 'twenty 'twenty four decreased by $16 5 million to $6 6 million when compared to 23.
Point 1 billion the previous quarter.
Heng W. Chen: The decrease was primarily due to an $18 million increase.
Heng W. Chen: And unrealized loss on equity securities between the two quarters.
Heng W. Chen: Non interest expense decreased by $17 3 million.
Heng W. Chen: Or 15, 6%.
Heng W. Chen: The $93 2 million in Q1, 'twenty 'twenty four.
Heng W. Chen: When compared to $110 5 million.
Heng W. Chen: Interest Recoveries and the Prepayment Penalty did not change the net interest margin for Q1 2024 versus the increase of one basis point of the previous quarter. We estimate our net interest margin for 2024 to be between $3.05 and 3.15%, based on the expectation for two rate cuts in 2024, for the first recut in September and the second recut in December. A prior Net Interest Margin Guideline was based on three weighted cuts, with the first rate cut being June, given that 64% of our loans, fixed rate or hybrid loans, are in their fixed rate period. The lower number of rate cuts negatively impacted our Net Interest Margin Guide.
Heng W. Chen: The prior quarter.
Heng W. Chen: This decrease.
Heng W. Chen: It was primarily due to a net decrease of $8 3 million from the FDIC Special assessment.
Heng W. Chen: $11 7 million and lower amortization of solar tax credit.
Heng W. Chen: Past months.
Heng W. Chen: And 1.3 million.
Heng W. Chen: Lower his professional expense.
Heng W. Chen: Offset by increase.
Heng W. Chen: $3 5 million in salary and benefits.
Heng W. Chen: Which included a 2 million.
Heng W. Chen: Sure.
Heng W. Chen: Sure.
Heng W. Chen: 2023 bonuses.
Heng W. Chen: And one point for Murray and seasonally higher payroll expense.
Heng W. Chen: And the acceleration of 1 million contributions.
Heng W. Chen: Into Q1, 'twenty 'twenty four.
Heng W. Chen: Non-interest income during the first quarter of 2024 decreased by $16.5 million, 6.6 million when compared to 23, $0.1 million the previous quarter. The decrease was primarily due to an $18 million increase and an unrealized loss on equity securities between the two quarters.
Heng W. Chen: As compared to the previous quarter.
Heng W. Chen: Yes.
Heng W. Chen: The effective tax rate for Q1, 'twenty 'twenty, four was 10.76% as compared to 11.28%.
Heng W. Chen: The previous quarter.
Heng W. Chen: With the closing of the new solar tax credit.
Heng W. Chen: Our fund investment in Q1, 'twenty 'twenty four.
Heng W. Chen: Non-interest expense decreased by 17.3 million, or 15.6%, to 93.2 million in Q1 2024 when compared to $110.5 million in the prior quarter. Just decreased was primarily due to a net decrease of $8.3 million from the FDIC Special Assessment, $11.7 million in lower amortization of solo tax credit investments, and 1.3 million. Lower is lower, are set by increased.
Heng W. Chen: We expect the tax.
Heng W. Chen: Tax rate of between 12%.
Heng W. Chen: And 13% for 2024.
Heng W. Chen: We now expect total 22020 for solar tax credit investment amortization.
Heng W. Chen: A 32.
Heng W. Chen: $5 million.
Heng W. Chen: 8 million in Q2 of only 20 or not.
Heng W. Chen: 9 million each in Q3 and Q4.
Heng W. Chen: As of March 31, 'twenty 'twenty four O.
Heng W. Chen: Our tier one leverage capital ratio.
Heng W. Chen: Increased to 10.71% as compared to <unk>.
Heng W. Chen: 10.55% as of December 31.
Heng W. Chen: $3.5 million in salary and benefits, which included a $2 million true-up for... 2023 bonus, and a $1.4 million seasonally higher payroll expense, and an acceleration of one million contributions into Q1 2024, as compared to the previous quarter. The effective tax rate for Q1 2024 was 16.5%. 10.76%, compared to 11.1.28%, previous quarter, with the closing of the new solar tax credit, fund investment in Q1 2024. We expect an effective tax rate of 13% for the 19 6 25 29 50 41 52 51 52 52 53 53 54 55 55 55 55 56 56 57 58 59 60 63 64 65 66 67 and 13% for 2024.
Heng W. Chen: 2023.
Heng W. Chen: Our tier one risk base capital ratio.
Heng W. Chen: Increased 13.8.
Speaker Change: Oh eight cents.
Speaker Change: 12.83% as of December 31, 2023.
Speaker Change: And our total risk base.
Speaker Change: Capital ratio increased to $14 five 5%.
Speaker Change: 14.3%.
Speaker Change: As of December 31st 2023.
Speaker Change: Thank you Heng, we will now proceed to the question and answer portion of the call.
Speaker Change: Ladies and gentlemen, if you have a question at this time. Please press. The Star then one key on your Touchtone telephone we ask that you. Please limit yourself to one question and one follow up question. You made then return to the queue.
Speaker Change: If your question has been answered or you wish to remove yourself from the queue. Please press Star then two.
Speaker Change: To prevent any background noise, we ask that you. Please place yourself on mute. Once your question has been stated.
Heng W. Chen: We now expect a total of $32.5 million, with $8 million in Q2 of 2024 and $9 million each in Q3 and Q4, as of March 31, 2024. Our tier one leverage capital ratio increased to 10.71% as compared to 10.55% as of December 31. 2023. [inaudible] increased to 13.8% 0.08 percent from 12.83% as of December 31, 2023, and a total risk-based capital ratio increased to 14.55% from 14.3% as of December 31st, 2023.
Speaker Change: The first question today is from Matthew Clark with Piper Sandler. Please go ahead.
Matthew Timothy Clark: Hey, good afternoon, thanks for the questions.
Matthew Timothy Clark: Just the first the first one around the then the margin.
Matthew Timothy Clark: Could you give us the average margin in the month of March and then the.
Matthew Timothy Clark: Our spot rate on interest bearing our total deposits at the end of March.
Matthew Timothy Clark: Yeah.
Matthew Timothy Clark: For the month of March was 299%.
Matthew Timothy Clark: And then the <unk>.
Matthew Timothy Clark: Spot rate or interest bearing deposits at the end of March was 3.8%.
Matthew Timothy Clark: Okay.
Speaker Change: Got it Okay, and then just the low income housing tax credit amortization I think it was $8 2 million in the first quarter or is that still expected to be 10, and a half million.
Speaker Change: Per quarter for the next three.
Speaker Change:
Speaker Change: It might be closer to the 10 budgets.
Chang Ming Liu: Thank you, Heng. We will now proceed to the question and answer portion of the call.
Speaker Change: It jumps around.
Speaker Change: Yep.
Speaker Change: Okay.
Speaker Change: Okay, and then just the.
Speaker Change: The reserve on your office portfolio is it consistent with the overall theory reserve or has it changed at all.
Operator: Ladies and gentlemen, if you have a question at this time, please press the star then 1 key on your touchtone telephone. We ask that you please limit yourself to one question and one follow-up question. You may then return to the queue. If your question has been answered or you wish to remove yourself from the queue, please press star then 2. Rent Any Background Noise, we ask that you please place yourself on mute once your question has been stated. The first question today is from Matthew Clark with Piper Sandler. Please go ahead.
Speaker Change:
Speaker Change: Matthew since we didn't have any new office not kohl's, it's still.
Speaker Change: Hold on let me.
Speaker Change: Okay.
Matthew Timothy Clark: It's still.
Matthew Timothy Clark: It's still the same message general reinsurer.
Speaker Change: Okay. Okay. Thank you.
Speaker Change: Yeah.
Speaker Change: The next question is from Brandon King with Truest. Please go ahead.
Brandon Thomas King: Hey, good afternoon, thanks for taking my questions.
Brandon Thomas King: So on the NIM guidance, where do you think it takes you from the lower end of the range to the higher into the range could you just give us kind of the puts and takes as far as how you're thinking about things.
Matthew Timothy Clark: Hey, good afternoon. Thanks for the questions. This is the first one about the margin. Can you give us the average margin for the month of March and then the... Spot rate on interest-bearing or total deposits at the end of March? Yeah.
Speaker Change: Yeah Brandon.
Brandon Thomas King: You know one except the higher rates we paid.
Brandon Thomas King: For the six months Cds in the Chinese.
Heng W. Chen: Yeah, the name for the month of March was 2.99%, and then the The spot rate for interest-bearing deposits at the end of March was 3.8%.
Brandon Thomas King: New year promotion.
Brandon Thomas King: We think.
Brandon Thomas King: We're getting less.
Brandon Thomas King: Deposit pricing pressure.
Matthew Timothy Clark: Got it. Okay.
Brandon Thomas King: So.
Brandon Thomas King: As the as the quarter goes on.
Matthew Timothy Clark: And then just the low-income housing tax credit amortization, I think it was $8.2 million in the first quarter. Is that still expected to be $10.5 million? million per quarter for the next three?
Brandon Thomas King: The CD pricing.
Brandon Thomas King: It's gonna be base on the Oh.
Brandon Thomas King: Six bond for one year treasuries yourself, that's going to.
It's going to decrease compared to where it is now so we'll get less deposit pressure and then.
Heng W. Chen: It might be closer to 10. It jumps around.
Matthew Timothy Clark: Okay, and then just the... The reserve on your office portfolio, is it consistent with the overall theory reserve, or has it changed at all?
Brandon Thomas King: Meanwhile.
Brandon Thomas King: Our new loans.
Brandon Thomas King: At market rates.
Heng W. Chen: [inaudible]
Brandon Thomas King: For example, residential mortgage new lungs.
Matthew Timothy Clark: Matthew, since we didn't have any new office non-appals, it's still, uh.., still, still the same as the general research.
Brandon Thomas King: Low sevens, so it's kind of all of our new loan production.
Matthew Timothy Clark: Okay. Okay. Thank you.
Brandon Thomas King: He is going to pull up.
Brandon Thomas King: The next question is from Brandon King with Truist. Please go ahead.
Brandon Thomas King: The average rate on loans and then.
Brandon Thomas King: Hey, good afternoon. Thanks for taking my question. So, on the NIRM guidance... What do you think takes us from the lower end of the range to the higher end of the range? Could you just give us kind of the pro and con as far as how you're thinking about that?
Brandon Thomas King: We have rough.
Brandon Thomas King: Some.
Brandon Thomas King: Loans that are repricing.
Brandon Thomas King: She or he belongs that repricing so that will also.
Brandon Thomas King: Improve the radar alone so.
Heng W. Chen: Yeah, Brandon. You know, except for the higher rates we paid for the six-month CD's in the Chinese New Year Promotion Week. We think we're getting less deposit pricing pressure. So, as the quarter goes on, the CD pricing is going to be based on to expand for one-year treasury. So that's going to.
Brandon Thomas King: So we see that.
Brandon Thomas King: A little bit lower in Q2.
Brandon Thomas King: May be flat to Q2, and Q3 and Q4.
Brandon Thomas King: Would be much better.
Speaker Change: Got it and that's because of the rate cuts right.
Heng W. Chen: It's going to decrease compared to where it is now. So we'll get less deposit pressure and then. Meanwhile, our new loans are at a marker range. For example, residential mortgage or new loans. There are seven.
Speaker Change: Good very good yesterday.
Speaker Change: Okay, Yeah got it okay that makes sense and then could you update us on the CD pricing.
Speaker Change: Or the CD maturities for the rest of the year.
Speaker Change: Uh huh.
Heng W. Chen: So all our new loan production is going to pull up the average rate on our loans. And then we have the rough, we have some loans that are repricing during the CRE loans are repricing. So that will also improve the rate on the loan. So we see that the M, a little bit lower in Q2, maybe flat in Q2 and Q3, and then Q4 would be much better.
Speaker Change: Yeah, let me.
Speaker Change: Right.
Speaker Change: We have been here.
Speaker Change: So in the second quarter, we have a 2.1 billion luby's.
Speaker Change: Repricing.
Speaker Change: While the yield of the maturing Cds are 457.
Speaker Change: We.
Speaker Change: $3 6 billion and the yield on.
Brandon Thomas King: Got it. And that's because of the rate cuts, right? The impact of the rate cuts?
Speaker Change: And those Cds is 4.82, so that reflects.
Heng W. Chen: Yes. Okay. Yes. Okay. That makes sense. And then could you update us on the CD repricing? What are the CD maturities for the rest of the year?
Speaker Change: Uh huh.
Speaker Change: Our Chinese studio a promotion for this.
Speaker Change: Sure.
Speaker Change: Q4.
Speaker Change: <unk> 2 billion of Cds are maturing yield is 467.
Heng W. Chen: Yeah, let me try it. We have it here.
Speaker Change: And then in Q1 'twenty 'twenty five we have.
Heng W. Chen: So in the second quarter, we have $2.1 billion in CDs. They're repricing, while the yield of the maturing seedlings is 4.57. $3.6 billion, and the yield on those CDs is 4.82. So that we've got a Chinese studio promotion for the Sixth Movement. Thank you for 2 billion; see these are maturing; the yield is 4.67. And then in Q1 2025, we have $1.9 billion maturing, and the yield there is that, or Point 18. And there it is. Some of the lower yield reflects the fact that our... Chinese New Year promotion. Our one-year rate was at 4.88. (inaudible)
Speaker Change: 1.9 billion.
Speaker Change: Maturing.
Speaker Change: And the yield there is that.
Speaker Change: 4.18.
Speaker Change: And there it's.
Speaker Change: Some of the lower yield reflects the fact that Dara.
Speaker Change: Our Chinese new year promotion, our one year rate was at 4.8.
Speaker Change: So that was lower than six phosphate.
Speaker Change: [laughter].
Speaker Change: Got it got it very helpful I'll hop back in queue.
Speaker Change: Thank you.
Speaker Change: The next question is from Gary Tenner with D. A Davidson. Please go ahead.
Gary Peter Tenner: Thanks, Good afternoon.
Gary Peter Tenner: A little bit of a follow up on the deposit NIM question I mean, just in a year, where you don't have a need for massive deposit growth given what the loan growth outlook looks like how aggressive can you be on deposit pricing maybe outside the C. D portfolio is that there's going to rollover anyway.
Brandon Thomas King: Got it, got it. Very helpful. I will hop back in the queue.
Gary Peter Tenner: The next question is from Gary Tenner with D.A. Davidson. Please go ahead.
Gary Peter Tenner: Thanks. Good afternoon.
Gary Peter Tenner: A little bit of a follow-up on the deposit and NIM question. I mean, just, you know, in a year where, you know, you don't have a need for massive deposit growth, given what the loan growth outlook looks like, how aggressive can you be on deposit pricing, maybe outside the CD portfolio? Is that just going to roll lower anyway?
Gary Peter Tenner: Oh.
Speaker Change: Well, Gary I you know.
Speaker Change: I'm the final stop or a rate concessions.
Speaker Change: And our cafe.
Speaker Change: And we're seeing much less.
Speaker Change: So when we are.
Heng W. Chen: Well, Gary, you know, I'm the final stop for rate concessions and at Cathay, and we're seeing much less. So when we do, we're facing less pressure to raise new deposits because we expect our loan growth to be slower. And so, so we're, So the mindset, particularly later on in the year is to be a little bit more aggressive at pushing down the... And again, the fact that the treasuries, at some point, the one you're treasuring, are going to start declining, that will help, right?
Speaker Change: Yeah.
Speaker Change: So we're facing less pressure.
To raise new deposits because we.
Speaker Change: Our loan growth to be slower.
Speaker Change: And so so.
Speaker Change: So the mindset.
Speaker Change: But typically a later on the year is too.
Speaker Change: Yeah Yeah.
Speaker Change: He will open more aggressive pushing down down rates and again.
Speaker Change: Fact that treasuries are.
Speaker Change: At some point when you tried for years.
Speaker Change: It's got to start declining.
Speaker Change: That will help us.
Speaker Change: Right I guess, what I was trying to ask me, perhaps I didn't ask it well enough is.
Gary Peter Tenner: Right, I guess what I was trying to ask, perhaps I didn't ask it well enough, is... Outside of the CD book, do you have the ability, do you think, to push down or nibble on any kind of deposit pricing to push it a little bit lower even ahead of the Fed cut? Or do you not think you have the ability to do that?
Speaker Change: Outside of the CD book do you have the ability do.
Speaker Change: Do you think to be.
Speaker Change: To push down or nibble on kind of deposit pricing, especially a little bit lower even ahead of the fed cut or do you not to give anybody can do that.
Speaker Change: Uh huh.
Speaker Change: Well we are.
Speaker Change: A big.
Speaker Change: Yeah.
Speaker Change: Have a good proportion of our money market book.
Heng W. Chen: a good proportion of our money market book is effectively tied to Fed funds. So as soon as there's a FedRateCut on those depositors, we're going to cut the rate by 25 basis points, and then we plan on for other money market deposits will reduce flows by 10 or 15%. So, and then we have some accounts that are also tied to. [inaudible]
Speaker Change: Yes.
Speaker Change: Is effectively tied to fed funds.
Speaker Change: Uh huh.
Speaker Change: So as soon as those up.
Speaker Change: Fed rate cut on those depositors, what kind of pets that.
Speaker Change: The rate by 25 basis points and then we plan on for.
Speaker Change:
Speaker Change: Other money market deposits are as you know people, while reduced flows by 10 or 15 basis points.
Speaker Change: Well and then we have some national accounts that are also tied to them.
Hi to fast funds.
Gary Peter Tenner: Got it. Thank you.
Speaker Change: Got it thank you.
Gary Peter Tenner: It's just not the CDs that won't be able to reproduce prices, right? Yeah. Thank you.
Speaker Change: It's not the Cds that won't be able to reprice.
Right. Okay. Thank you.
Speaker Change: Again to ask a question. Please press Star then one.
Operator: Again, to ask a question, please press star, then 1. The next question is from Andrew Terrell with Stevens. Please go ahead.
Speaker Change: The next question is from Andrew <unk> with Stephens. Please go ahead.
Andrew: Hey, good afternoon.
Robert Andrew Terrell: Hey, good afternoon. Just a quick follow-up on the margin. On the discussion around the cadence throughout the year, it sounded like flattish in 2Q and 3Q and then lifts into 4Q, kind of commensurate with your Fed cut assumptions. I'm just curious, the flattish commentary, is that off of the spot margin you referenced or the March margin of 299? Or do you think that the 2Q margin is flat to the 305 reported in the first quarter? [inaudible] No, it'll be okay.
Andrew:
Andrew: Just a quick follow up on the margin I'm just.
Andrew: On the on the discussion around the cadence throughout the year it sounded like flattish in two Q3, Q and then left center for Q.
Andrew: Kind of commensurate with your fed cut assumptions I'm. Just curious is the flattish commentary is that off of the spot margin you referenced the March margin of 299 or or do you think that the <unk> margin is flat to the three of five reported in the first quarter.
Andrew:
Speaker Change: No it'll be down a couple of basis points.
Heng W. Chen: No, it'll be down a couple of bases, you know. There are two 30-day months, so that helps because we have so many residents.
Speaker Change: You know.
Speaker Change: Q2, there's 230 day month, so that helps us.
Speaker Change: Because you have so many residential mortgages.
Robert Andrew Terrell: Okay, so maybe down just a couple of basis points in the second quarter and then flattish in the third quarter and then start to lift. Yes, yes.
Speaker Change: Yeah.
Okay. So maybe down just a couple of basis points in the second quarter, and then flattish in <unk> and then starts to lift.
Speaker Change: Yes, yes.
Heng W. Chen: OK. And then if I was looking at the core operating expense lift in the first quarter, and it was maybe a little more than I was expecting, and if I'm doing the math right, kind of tracking a few million dollars ahead of where your full year expense growth guidance implies. So I guess my question is just how much of the kind of one Q lift in core operating expenses was more seasonality driven and then just curious as we move throughout the year. Where are you going to see quarterly expense reductions in the core OPEX to land in that three to three and a half percent growth guide?
Speaker Change: Okay.
Speaker Change: Hum.
Speaker Change: And then if I was looking at the core operating expense left in the first quarter and it was maybe a little more than <unk>.
Speaker Change: What I was expecting and I, if I'm doing the math right kind of tracking a few million dollars ahead of where your full year expense growth guidance implies. So I guess my question is just how much of the the kind of a <unk> lift in core operating expenses was more seasonality driven and then just curious as we move throughout the year.
Speaker Change: Where you could see a quarterly expense reductions and the core opex to land in that three to three 5% growth guidance.
Speaker Change: Yeah.
Robert Andrew Terrell: Yeah, well, you know, in my comments I tried to cover.., of the, you know, the FICA here, the Bonus, Ketchup, the fact that we accelerated, are some charitable contributions from April to March. We also, because of our loan growth. It's negative. We also had. Les... ... ... ... ... ... ... Long, a rich nation costs capital. So I.., you know, based on kind of looking at the flow of expenses, we think we'll be close to that three and a half percent. Upper Range.
Speaker Change: In my comments I tried to cover.
Speaker Change:
Speaker Change: The you know the.
Speaker Change: Yeah.
Speaker Change: One us catch up.
Speaker Change: The fact that we accelerated.
Speaker Change: Our some charitable contributions from April to March we also because our loan growth was.
Speaker Change: Yeah.
Speaker Change: Well it's negative.
Speaker Change: We also had a.
Speaker Change: Yes, Uh huh.
Speaker Change: On the origination cost.
Speaker Change: Capitalized.
Speaker Change: So I.
Speaker Change: You know based on.
Speaker Change: Kind of are looking.
Speaker Change: Looking at the flow of expenses.
Speaker Change: We think we'll be a close that 3.5%.
Speaker Change: Upper range.
Speaker Change: Okay understood I appreciate it.
Heng W. Chen: Okay, I understand. I appreciate it.
Speaker Change: Yes. Thank you.
Speaker Change: The next question is from Chris Mcgratty with K B W. Please go ahead.
Chris McGrady: The next question is from Chris McGrady with KBW. Please go ahead.
Chris Mcgratty: Oh, great. Thanks.
Chris McGrady: Oh great, thanks. Last quarter you talked about, you know, a key to your guide for the margin was, I think, stability and non-interest bearing, which fell again this quarter. Have you revised that assumption for the back half of the year in your guide? Uh, we...
Chris Mcgratty: Last quarter, you talked about you know a key to your guide for the margin was I think stability in the noninterest bearing which which fell again this quarter what.
Chris Mcgratty: Have you revised that assumption for the back half of the year in your guide.
Speaker Change: Are we.
Heng W. Chen: We spent a lot of time... Thank you. Thank you, at the DEA by branch.
Speaker Change: We spent a lot of time.
Speaker Change: Lucky.
Speaker Change: At the D a by branch and we.
Heng W. Chen: We think some of it is seasonal because of the Chinese New Year and the payment of taxes around, you know, yeah, so. It's been stable in March. And so far, I've, in terms of the DTA, and then Chang Yai, tends to build up later in the year as a customer's kind of business.
Speaker Change: We think some of it is.
Speaker Change: As seen snow.
Speaker Change: Because of.
Speaker Change: The Chinese new year, the payment of taxes right.
Speaker Change: Sure.
Speaker Change: Yeah. So.
Speaker Change: Uh huh.
Speaker Change: It's been stable.
Speaker Change: Yeah.
Speaker Change: In March.
Speaker Change: And so far in April in terms of the DTA balance.
Speaker Change: And then Shanghai I think.
Speaker Change: Hence the bill about later in the year as the customer is kind of business flow and the volume continues some of the DDA balances should pick back up.
Heng W. Chen: As the customer's flow of business and the volume continues, some of the DDA balance should pick back up.
Speaker Change: Okay.
Chris McGrady: And then the follow-up, I guess, is two-part. One...
Speaker Change: Okay great.
Speaker Change: And then the follow up I guess, there's two part one.
Chris McGrady: It would seem like net interest income dollars would have a little bit more downward pressure in Q2, stability in Q3, and then growth in Q4. And then I just want to make sure I heard Matt's question on the amortization. So Q2 should be somewhere like $18 million combined solar and low income, right? 8 plus 10? Yes, yes, Yes. And then do you agree with my logic on the net interest income cadence on a quarterly basis?
Speaker Change: It would seem like net interest income dollars would have a little bit more downward pressure in Q2 stability Q3, and then growth in Q4, and then I just want make sure I heard matts question on the amortization, so Q2 should be somewhere like $18 million combined solar and low income rate April stone yeah, yeah.
Speaker Change: Yes.
Speaker Change: Okay, and then you agree with my logic on the net interest income cadence on a quarterly basis.
Speaker Change: Okay.
Heng W. Chen: Yeah. It'll be down a little bit more in Q2, we benefit from two 30-day months in Q2, and then in Q3. We have half a month of the Fed's cut, which happened in September, and hopefully some re-pricing from our... Chinese New York deposit.
Speaker Change: Yeah. It's.
Speaker Change: It'll be down a little bit more in a.
Speaker Change: Q2.
Speaker Change: We benefit from that too.
Speaker Change: 30 day months in Q2.
Speaker Change: And then in case, we Oh, yeah, we have half a month of the fed cut.
Speaker Change: Happen in September.
Speaker Change: Yeah.
Speaker Change: And hopefully some repricing from bar Chinese New York deposit so.
Speaker Change: Yeah, Okay great.
Speaker Change: Great. Thanks.
Speaker Change: Okay, Yeah. Thanks, Chris.
Chang Ming Liu: Thank you for your participation. I will now turn the call back over to Cathay General Bancorp's management for closing remarks.
Speaker Change: Yeah.
Speaker Change: Thank you for your participation.
Speaker Change: I'll now turn the call back over to can say, but general Bancorp's management for closing remarks.
Speaker Change: I would like to thank everyone for joining us on our call and we look forward to speaking with speaking with you at our next quarterly earnings release call.
Chang Ming Liu: I would like to thank everyone for joining us on our call, and we look forward to speaking with you at our next quarterly earnings release call.
Speaker Change: Ladies and gentlemen, thank you for your participation in today's conference. This concludes the presentation. You may now disconnect good day.
Operator: Ladies and gentlemen, thank you for your participation in today's conference. This concludes the presentation. You may now disconnect. Good day.
Speaker Change: [music].