Cathay General raises full-year loan growth outlook to 5%–6% while holding NIM outlook at 3.40%–3.50%

Earnings Call Insights: Cathay General Bancorp (CATY) Q3 2026

Management View

• “We delivered another strong quarter of operating performance, highlighted by record net interest income, continued margin expansion, strong loan and deposit growth.” (CEO, President & Director Chang Liu)

• “Credit results this quarter included elevated charge-offs in 3 previously identified borrower-specific credits... As a result, nonperforming assets declined approximately 18%.” (CEO, President & Director Chang Liu)

• “We recognized a $36.1 million valuation gain on equity securities... [and] a $15.1 million loss related to another securities repositioning transaction... expected to add approximately $2.9 million to annual net interest income.” (CEO, President & Director Liu)

• “During the quarter, we completed the planned redemption of $54.1 million of trust preferred securities. The redemption provided a $3.1 million benefit... and reduced interest expense going forward.” (CEO, President & Director Liu)

• “Period-end loans net of fees were $21.2 billion... [and] period-end balances rose... to $21.8 billion... [which] improved our net loan-to-deposit ratio to approximately 96%.” (Executive VP, CFO & Treasurer Albert Wang)

• “During the quarter, we sold approximately $89 million of Agency MBS yielding 1.83% and reinvested in Agency MBS yielding 5.65%... expected to add approximately $11.4 million to annual net interest income with an aggregate earn-back period of approximately 3.6 years.” (Executive VP, CFO & Treasurer Wang)

Outlook

• “Based on our strong year-to-date loan growth, we are raising our full year outlook to 5% to 6% from 3.5% to 4.5% previously.” (Executive VP, CFO & Treasurer Wang)

• “We are also increasing our deposit growth outlook to 4% to 5% compared with the prior expectation of 3% to 4%.” (Executive VP, CFO & Treasurer Wang)

• “Our full year NIM outlook remains at 3.40% to 3.50%.” (Executive VP, CFO & Treasurer Wang)

• “Our rate outlook now assumes 2 25-basis points increases during 2026, including the September increase and another increase in December.” (Executive VP, CFO & Treasurer Wang)

• “We now expect our full year effective tax rate to be between 21.5% and 22.5%.” (Executive VP, CFO & Treasurer Wang)

Financial Results

• “Net income was $95.2 million or $1.43 per diluted share.” (CEO, President & Director Chang Liu)

• “Net interest income reached a record $211.9 million, increasing $11 million or 5.5% from the prior quarter... [and] net interest margin expansion to 3.52%.” (CEO, President & Director Liu)

• “Noninterest income increased to $42.8 million... includ[ing] $36.1 million unrealized gain on equity securities and a $3.1 million benefit from the trust preferred redemption... partially offset by the $15.1 million repositioning loss.” (Executive VP, CFO & Treasurer Albert Wang)

• “Noninterest expense increased to $103.4 million from $92.3 million last quarter” and management cited “$8 million to the Cathay Bank Foundation” and “$5.4 million of contract termination costs.” (Executive VP, CFO & Treasurer Wang)

• “Net charge-off increased to $25.3 million or 49 basis points annualized... concentrated in the 3 previously identified credits.” (Executive VP, CFO & Treasurer Wang)

• “During the quarter, we repurchased approximately 801,000 shares for $50.3 million at an average price of approximately $62.81 per share.” (Executive VP, CFO & Treasurer Wang)

Q&A

• David Chiaverini, Jefferies LLC: “can you talk about how we should think about the NIM into the fourth quarter” and “how rate hikes could impact” it? Executive VP, CFO & Treasurer Wang: “I'm not ready to call kind of a peak on NIM... I still think there's room for expansion,” while also flagging deposit headwinds from “$3.4 billion of CDs rolling off this quarter at a rate of 3.46%.”

• David Chiaverini, Jefferies LLC: “What's driving the strong [noninterest-bearing deposit] growth?” CEO, President & Director Liu: “some of the law firm practice that we have, that's adding good sort of much lower cost deposits,” and management highlighted branch focus on “lower cost of funds.”

• Gary Tenner, D.A. Davidson & Co.: Q4 loan growth implied by the full-year guide “could be anywhere from kind of flat to up 3%”; is there a slowdown? CEO, President & Director Liu: “Q4 historically has been flat... Although we're seeing some pretty good pipeline so far,” with C&I “the driver of that growth.”

• Andrew Terrell, Stephens: contract termination costs and future expenses? Executive VP, CFO & Treasurer Wang: the fee was “more of a onetime type of charge” tied to upgrading “a stronger platform and tech platform,” described as “not... an expense savings play per se.”

• Matthew Clark, Piper Sandler: isolate charge-offs tied to the 3 credits? CEO, President & Director Liu: “the 2 theater loans... totaled about [ $18 million ]” and a construction loan was “about almost a $9 million exposure.”

Sentiment Analysis

• Analyst tone was slightly skeptical on sustainability and drivers, repeatedly probing NIM durability, deposit costs, and whether loan growth could slow (e.g., “could be anywhere from kind of flat to up 3%”).

• Management tone was slightly positive in prepared remarks (“another strong quarter,” “well positioned”), while responses acknowledged specific pressures (“there's going to be some more pressure” on deposit costs) but reiterated confidence (“we feel pretty confident that we still have room to expand”).

• Versus Q2, management continued to project confidence around the NIM range and balance-sheet momentum, with more explicit discussion in Q3 of CD roll-off pricing pressure and the magnitude of loan repricing (“$8.9 billion of loans repricing”).

Quarter-over-quarter Comparison

• Q3 raised full-year growth targets (“raising our full year outlook to 5% to 6%” loans; “increasing... to 4% to 5%” deposits), while Q2 guidance kept loans at “3.5% to 4.5%” and deposits at “3% to 4%.” (Executive VP, CFO & Treasurer Albert Wang)

• Credit discussion shifted from Q2’s “Credit quality remains strong” and “Net charge-offs declined to $1.8 million” to Q3’s concentration of losses in “3 previously identified credits” and “Net charge-off increased to $25.3 million.” (CEO, President & Director Chang Liu; Executive VP, CFO & Treasurer Albert Wang)

• Capital actions progressed from Q2’s intent to redeem trust preferred securities to Q3’s completion (“completed the planned redemption of $54.1 million”), alongside a larger quarterly buyback footprint (“801,000 shares for $50.3 million” vs. Q2 “242,000 shares”). (CEO, President & Director Liu; Executive VP, CFO & Treasurer Wang)

Risks and Concerns

• “We do have some headwinds” on funding costs, including “$3.4 billion of CDs rolling off this quarter,” and management said “we expect the pressure to continue with competition.” (Executive VP, CFO & Treasurer Albert Wang)

• Credit risk centered on idiosyncratic problem loans, including “2 movie theater CRE loans acquired through the Far East National Bank acquisition” and a construction loan with “water damage and more contamination.” (Executive VP, CFO & Treasurer Wang; CEO, President & Director Chang Liu)

• Expense variability items included “contract termination costs” tied to vendor changes and management’s view that quarterly LIHTC amortization “can vary quarter-to-quarter.” (Executive VP, CFO & Treasurer Wang)

Final Takeaway

Management framed Q3 as a quarter of record net interest income, further net interest margin expansion, and stronger balance-sheet momentum, supported by securities repositioning and a completed trust preferred redemption. At the same time, leadership highlighted that Q3 credit costs were driven by three previously identified credits and that deposit pricing competition and CD roll-offs remain a headwind, even as the company raised full-year loan and deposit growth outlooks while keeping its 3.40%–3.50% full-year NIM range unchanged.

Read the full Earnings Call Transcript

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