Q4 2024 Cathay General Bancorp Earnings Call
Speaker Change: Good afternoon, ladies and gentlemen, and welcome to Cadet General VanCorp's fourth quarter and full year 2024 Earnings Conference Call.
Asya: My name is Asya, 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. Ladies and gentlemen, if you would like to participate in this portion of the call, please press star followed by 1 anytime during the conference call. If assistance is needed at any time during the call, please press star followed by 0, and the coordinator will be happy to assist you. Following the prepared remarks, there will be a question-and-answer session.
Asya: Today's call is being recorded and will be available for replay at www.cafe.generalbankcorp.com. Now, I would like to turn the call over to Georgia Lo for the translation of Cafe General
Georgia Lo: are President and Chief Executive Officer, and Mr. Heng Chen, our Executive Vice President and Chief Financial Officer. Before we begin, we would like to remind you that the speakers on this call mainly report on forms of payment with the meaning of the applicable provisions of the Private Securities Litigation Reform Act, in particular, and the other reports and filings of the Securities and Exchange Commission at that time.
Georgia Lo: After comments by 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, and good afternoon. Before we go into our 2024 fourth quarter earnings, I know that our hearts are heavy with the news of the devastating fires that have swept across Los Angeles. The destruction is unimaginable, and our thoughts are with every person affected.
Georgia Lo: I know that our parks, along with the rest of our Los Angeles community, will continue to work diligently towards that park. The destruction is unimaginable. This afternoon, we reported a net income of $80.2 million for Q4 2024. The flames are extinguished, the work of rebuilding lives here to 67.5 million in Q3. The bank, along with the rest of our Los Angeles community, will continue to work diligently towards that park. For the fourth quarter, as compared to Q0.9, we reported a net income of $80.2 million.
Georgia Lo: For 2024, we repurchased $106,000 as compared to $67.5 million in Q3. At an average cost of $47.10 per share, for $23.9 million for the fourth quarter, compared to $109 million for stock buyback per share in Q3.
Georgia Lo: During Q4 2024, we repurchased around 30,150,151 shares, depending on market conditions.
Georgia Lo: at an average cost of $2427.10 per share, or $2423.905% annualized, primarily driven by increases of $59 million, or 2.4% annualized, in 10-day continuing to RE loans, and $13 million, or $11.9% annualized construction loans.
Georgia Lo: Our loan portfolio consists of 61 million or 1.2% annualized in residential mortgages, and 9 million or 1.1% annualized in commercial mortgages. We expect loan growth in 2025 to be between 3% and 4%. Slide 7 shows the percentage of loans in each major loan portfolio that are either fixed rate or hybrid loans in just a fixed rate period. Our loan portfolio consists of 3% fixed rate and hybrid loans in commercial loans.
Welcome back.
Georgia Lo: We continue to monitor our closing interest rate swaps on 4.1% of the total. Turning to slide 9 of our earnings stats, fixed-rate loans comprise 31% of total loans, and hybrid and fixed-rate periods comprise 32% of 49%.
Georgia Lo: We expect as of December 31st, 2024, our retail property loan portfolio, as shown on slide 10, continue to monitor our commercial real estate portfolio, according to slide 9, of our earning portfolio. As of December 31st, 2024, the average home owning value of our CRE loan is secured by 49%.
Georgia Lo: comprised of 24% of our total CRE loan portfolios, representing 14% of our total CRE loan portfolio. 90% of the $2.4 billion in retail property loans is secured by retail stores, and $1.4 billion in office property loans are collateralized by a pure office. And only 3.5% are in central. On slide 11...
Georgia Lo: Office property loans represent 14% of our total property loans are collateralized by office or 7% of our total office mixed-use and medical offices, only 36% of the remainder 28% are collateralized by office contracts, collateralized by pure office, Q4 2020 and only 3.5% reported net charge-offs of $16.3 million.
Georgia Lo: As compared to 4.2 million, 36% of office property loans are collateralized by office retail stores. 4.2 million acute and medical offices in the remainder 28% are collateralized by office condos.
Georgia Lo: Our non-accrual loans were 0.83% of total loans as of December 13, 2024. As compared to Q3, which increased 6.3 million to 169.23 million net charge of 4.2 million. This increase in non-accrual loans in Q4, 2024 came primarily from a 16 million CRE loan collateralized by a commercial and residential mixed-use property in New York on December 31, 2024. The loan was reclassified as non-accrual in December after the fall of 2 million as compared to Q3.
Georgia Lo: The loan is fully secured by the non-accrual loan and no losses projected.
Georgia Lo: mentioned loans increased to $293 million from $203 million in Q3. The total reserve-to-loan ratio was reported on April 20 for credit loss of $14.5 million in Q4 2024. Total deposits decreased by $258 million or 5.3% and the reserve-to-loan ratio decreased to 0.83% for Q4, primarily due to the decrease of $549 million in corporate deposits.
Georgia Lo: However, excluding our residential mortgage portfolio, the total reserve to loan ratio will be 1.7% annualized due to seasonal factors and marketing activities. Total time deposits, including brokerage deposits, decreased 224%
or 43.8% on total losses.
Chang Liu: Thank you, Chang. Good afternoon, everyone. Q4 2024, we have income increase to 12.5 percent.
Speaker Change: 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.
Speaker Change: Thank you for joining us. Good afternoon, everyone. In Q4 2024, net income, net interest income, 12.2 million, 18.3 percent, interest on spend, 2 million, compared to 67.5 million.
and Company 3.
Speaker Change: for a $26 million increase in non-interest expense, and for a $1.3 or 4% income tax expense.
Speaker Change: as they have the ability to afford lower deposit costs over the next few quarters that are near them, while having the support income appear to have bottomed out.
and we anticipate...
Speaker Change: for the benefit of December with a strong December jobless income.
Speaker Change: The fund, based on the ability to lower deposit costs, projected at one rate cut in July 2025. While having the support...
Speaker Change: We anticipate that the net interest margin for 2025 would be a December range, a strong December job with 10% and a 3.5% interest.
20% rejects one rate cut in July 2025.
to the floor.
Speaker Change: Interest rate averages income from 2004 to 2024. For basis, decreased 4.9 million income, 15.5 million.
was primarily due to a 5.6.
Speaker Change: Six-million China interest in marketed markets declined by 11.4 points of 3.
Speaker Change: to 85.2 million and 204 loss of 1.24 million in June compared to 96.9 million in Q3.
A decrease is primarily due to a decrease.
Speaker Change: $1.7 million in lower Solar tax credit to 85.2 million in Q4. Expect $1.4 billion interest expense, compared to $ graphically $90.13 billion in Q3. The peak was primarily due to …
.370 and lower solar tax credit.
Thank you.
We expect health from 2024 to 2019.5 percent.
Speaker Change: and 20% effective tax rate for 2025. 2024, we do not anticipate investing in any compared to 30.5% for Q3 in 2025. We expect an effective tax rate December 31, 2025.
Speaker Change: Our Tier 1 leveraged capital ratio is 10.97%. We do not anticipate investing in any solar tax as of September 31st.
on the latest updates.
Speaker Change: We will now proceed to the question and answer portion of the call.
and a total risk-based capital issue.
Thank you.
Speaker Change: Ladies and gentlemen, if you have a question at this time, please press star and one key on your touch-tone phone. We ask that you please limit yourself to one question and one follow-up question. Thank you, Heng. We will now proceed to the question and answer portion of the call.
Speaker Change: If your question has been answered or you wish to remove yourself from the queue, please press star, then two. If you have a question at this time, please press star, then one, and if such, don't phone. We ask that you please limit yourself to one question and one follow-up question. You may then return to the queue.
Speaker Change: Please, go ahead. Your question has been answered or you wish to unmute yourself from the queue, please press star, then two. Just a few questions around the margin. Could you give us the average margin in the month of December and the spot rate on deposits at the end of the year? Yeah, the...
Speaker Change: average margin for the month of December was 3.05%. Just a few questions around the margin. I'm sorry, 3.11%. Could you give us the average margin in the month of December and the spot rate on your projects at the end of the year? That includes the basis points.
average margins for recovery.
And then, Amber, what was 3.05, part of your question?
That included six basis points of...
Thank you.
Speaker Change: and then what was that? The other part of your question? The spot rate on deposits, either total or interest bearing at year end?
Okay.
Speaker Change: Can you remind us how much in the way of CDs you have coming due here in the first quarter? The rates they're maturing at and what are you expecting to renew at?
Quite a bit.
So...
Speaker Change: Okay, that's interesting. Okay, and then can you remind us how much in the way of CTEs you have coming due here in the first quarter, the rates are maturing at, what are you expecting to renew at?
So… 8.6 percent.
Speaker Change: We're offering a renewal for the Chinese New Year. This is from our between 4% to 4.1% in promotion.
Speaker Change: And then just last one minute, I'll hop back in the queue. Your expectations for the low-income housing tax credit amortization this year in dollars? About $10 million.
Speaker Change: I know you're not going to do any solar, but are there any other tax credit investments embedded in that tax rate? Guy, in just last one minute, I'll hop back in the queue, we're assuming you're expectations for the low-income housing tax credit amortization this year. Thank you. It's about...
It's about $10 million a quarter, Matt.
Speaker Change: The next question comes from... And I know you're not going to do any solar, but are there any other tax credit investments embedded in that tax rate guidance? Oh great, thanks for the question.
Speaker Change: I was wondering if you could unpack the expense, the core expense growth of roughly 5%, a little bit higher than what we've been seeing. I'm wondering if there's a catch-up in some investments or anything in particular in Colorado.
Speaker Change: Great. Thanks for the question. I was wondering if you could unpack the expense, the core expense growth of roughly 5%, a little bit higher than what we've been seeing. I'm wondering if there's a catch-up in these investments or anything in particular that you're talking about.
We expect higher bonuses for next year.
Speaker Change: This year we've been adding to staff in 2024 lower than the target.
So it's the full year impact of that.
China. We expect nothing.
Speaker Change: higher level? Yes, so Chris, you know, since spring of 23, you know, we had to really beef up our risk side of our business, given the higher level of maturity on the risk side that's expected from the regulatory side, so that's where we've been adding some of the bodies. I think that actually our headcount has been pretty consistent on the branch side and the lending side other than the uptick in the operational side.
South Korea.
Speaker Change: and the $90 million dollar increase in, I guess there's a special mention, any color there that you could provide?
Thank you very much.
Speaker Change: Next question comes from Gary Tenor with DA Davidson. Please go ahead.
Gary Tenor: Thanks, good afternoon. I wanted to ask about the impact of the wildfires. Obviously, nothing in terms of a kind of recommendation for you this quarter. I know a lot of those areas had been closed to access for a period of time. They may still be. Can you talk about how you've gone about assessing...
Speaker Change: I wanted to ask about the impact of the wall of bars. Obviously, nothing in terms of credit or ramification for this quarter. I know a lot of those areas...
Speaker Change: C&I Portfolio with a Collateral in the Allostate. So far we have no loss reported in any of our Commercial Real Estate Portfolios, nothing in the Business Banking Portfolio, and nothing in the SBA Portfolio. We've received reports as well that some reported items in the C&I Portfolio, there's none in the C&I Portfolio with a collateral in the Mortgage Allostate we have in total.
Speaker Change: And we have a few of the mortgages to HELOC that we've received reports, as well as we've verified them through some of the websites, but it's a small number compared to the size of the mortgage assets that we have in total.
Thanks for joining us. Have a great day.
Okay, appreciate the color
Speaker Change: there. And then just in terms of the securities yield, it's come down a few quarters in a row. I didn't recall there being much in the way of variable rate securities in your portfolio. Can you kind of talk to...
So that rate has come down between 2020.
Speaker Change: Yeah, during 2024, there is mostly, and that we have changed, we've been buying six-month treasuries.
Yeah, that's so that rate has come down for 2020.
Those were in 2004.
I'm... And?
Speaker Change: over 5% range. And those will not replace it. All right. Thank you. But that's pretty much it. Once again, if you have a question, please press star, then one. Next question. Go ahead.
Hey, good afternoon.
Speaker Change: All right, thank you. Chang, just a question on capital. I think I heard in your prepared remarks you have continued maybe interest in the buyback, but your capital is still in a really strong position. Just wanted to get, you know, updated thoughts from you on any other potential avenues of capital deployment. Hey, good afternoon. Is M&A of interest to you in 2025? Chang, just a question on capital. I think I heard in your prepared remarks you have continued maybe interest in the buyback, but your capital is still in a really strong position. Sure, Andrew. We've always had an eye on the M&A side of the business, but as you know, we all
Speaker Change: I love them, they have both faiths that much, two hours in our backyard, not a lot of it depends on you guys who are there, so they are going to give us a party, even if they were, if it makes sense, it's a creative to the numbers and
Speaker Change: Was that pretty evenly spread throughout the fourth quarter? Was it, you know, front end or back end loaded? And then just expectations going forward, is there any more broker deposits that you foresee remixing throughout 2025?
Moshe Wagela.
We'll probably just maintain
Speaker Change: C.D. performed slower, or come down quite a bit, and some of which left in my second half of the campaign, and thus we have a good deposit growth.
Speaker Change: We're less hired. We'll probably just maintain. It's an incremental source. I've come down quite a bit.
Thank you for taking the questions.
Speaker Change: Next question comes from Matthew Clark with Piper Sanders. Please go ahead. Incremental sources. I think you called out...
Speaker Change: As part of your net charge, being sure national credit related, can you just remind us how large your SNCC portfolio is? It's about 4%. Please go ahead. All our loans.
I think he called out that in 2024.
Speaker Change: As part of your net charge-offs being sheer national credit related, can you just remind us how large your SNCC portfolio is?
Speaker Change: It's about 4% of our total. What percent of that portfolio is criticized? Okay. We've been trying to do that since 2024.
Thank you.
Speaker Change: Got it. And I guess, what percent of that portfolio is criticized? It's lower than average.
Speaker Change: because we did sell about 50 million. I think most of the clear national credits on our, it's in our now, for to reduce credit exposure.
It was so low, lower than average.
Well, the answer is yes. Thank you, James.
Speaker Change: Yeah, we, um, you know, I mean, it's really kind of just timing, right? I mean, it's, uh, really the incumbent, uh, CRO has expressed, you know, that he wanted to step down and retire and move on to the next chapter, but, uh, in the meantime, we were able to run the market and, and, yeah, we, um, and, you know, I mean, it's really kind of just timing, right? I mean, really, uh, really, the 23, we need to be more focused on the risks as expressed, and, you know, we believe we found the right candidates,
Georgia Lo: Loh here, and they have a great well-deserved win for Atlanta, as reported in this report.
Speaker Change: Thank you for your participation in today's conference. This concludes the presentation. You may now disconnect. Good day. Please go ahead. I want 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: Thank you for your participation in today's conference. This concludes the presentation. You may now disconnect. Good day.