CATHAY GENERAL BANCORP Q1 FY2025 earnings call

Tariffs: About 1.4% of total loans could be adversely impacted by proposed tariffs; monitoring impact on borrowers and loan portfolio. ### Loan Activity: Gross loans decreased $23 million, driven by commercial and residential loan decreases, offset by CRE and construction loan increases; widened 2025 loan growth guidance to 1%-4% from 3%-4%. ### Loan Portfolio: 62% fixed rate and hybrid loans; fixed rate loans 3%, hybrid and fixed rate period 32%. ### CRE Loans: Average LTV 49% as of March 31, 2025; retail property loans 25% of CRE portfolio, 13% of total loans; office property loans 15% of CRE portfolio, 8% of total loans. ### Deposits: Increased $131 million, primarily core and time deposits; total uninsured deposits $8.5 billion, 42.7% of total deposits; liquidity sources cover 100% of unsecured and uncollateralized deposits. ### Stock Repurchase: Completed $125 million stock repurchase program in Q1 2025, repurchasing 876,906 shares at average cost $46.83 per share.

In Q1 2025, Cathay General Bancorp reported net income of $69.5 million, a 13.3% decrease from Q4 2024's $80.2 million. Diluted EPS was $0.98, down 12.5% from $1.12 in Q4 2024. Total gross loans decreased $23 million (0.5% annualized), with commercial loans down $100 million, residential loans down $65 million, offset by CRE loans up $127 million and construction loans up $13 million. Net charge-offs were $2 million in Q1 2025 vs. $16.3 million in Q4 2024. Non-accrual loans were 0.8% of total loans. Classified loans remained $380 million, special mention loans increased to $300 million. Provision for credit loss was $15.5 million, reserve to loan ratio 0.91% (1.17% excluding residential mortgage). Net interest margin increased to 3.25% from 3.07%, with 2025 NIM guidance raised to 3.35%. Non-interest income decreased to $11.2 million from $15.5 million. Non-interest expense increased to $85.7 million from $85.2 million. Effective tax rate was 19.82% vs. 7.57% in Q4 2024. Tier one leverage capital ratio was 11.06%, risk-based capital ratios increased. Total deposits increased $131 million (2.7% annualized), with core deposits up $67 million and time deposits up $64 million.

Loan Growth: Widened 2025 loan growth guidance to 1% to 4% from previous 3% to 4%. ### NIM: Increased 2025 NIM guidance to 3.35% from previous 3.10% to 3.20%.

Tariff Impact: About 1.4% of total loans could be adversely impacted by proposed tariffs. ### Economic Uncertainties: Impact on loan growth and borrower behavior. ### Potential Loan Paydowns: If tariff conditions don't improve, some importers may stop importing.

Q: How is the margin sensitivity to rate cuts and NII level if there are more than one interest rate cut in July?

A: On a full-year basis, about four basis points for every rate cut; if rates go down 25 basis points, it's positive for NIM.

Q: Can you provide spot deposit costs at the end of the quarter and average margin for March?

A: Spot rate for total interest-bearing deposits at March 31, 2025, was 3.36%; average margin for March was 3.39%.

Q: What drove the revision to loan growth guidance?

A: Uncertainty in the economy, tariff impact on C&I clients, and shifting in residential mortgage market.

Q: Are projects being delayed or customers not investing on the C&I side?

A: Some C&I customers have paused growth plans, focused on managing balance sheet and P&L due to demand slowdown and cost unpredictability.

Q: Details on the ACL and tariff-related provisions?

A: Majority of Q1 provision was for a domestic company, tariff-related buildup in reserve; allowance on 1.4% of loans, hopeful importers can pass on costs or stop importing if tariffs unreasonable.

Q: On noninterest expense and deposit growth seasonality?

A: Salaries and benefits had excess bonus approvals offsetting FICA; deposit growth had seasonality from Lunar New Year promotion in Jan-Feb, with lunar new year deposit specials offered at around 4.10% for six months and one year.

Q: Follow-up on lunar new year deposit specials rates?

A: Six-month specials were about 4.10%, compared to previous July renewals around 4.50; one-year specials were 4.10% vs. previous 5.50%.