キャシー・ジェネラル・バンコープ（CATY）2026年第3四半期決算説明会：過去最高の純金利収入と成長見通しの引き上げ

キャシー・ジェネラル・バンコープ（NASDAQ: CATY）が発表した2026年第3四半期決算は、純利息収入が過去最高を記録し、純利息マージン（NIM）の拡大が継続したほか、貸出金および預金が堅調に増加しました。与信費用は事前に特定されていた借り手固有の3件の与信集中により増加したものの、不良資産および区分貸付金残高は減少しました。

要点

• 当期純利益は9,520万ドル（希薄化後1株当たり1.43ドル）、純利息収入は前四半期比5.5%増の2億1,190万ドルと過去最高に達しました。
• 純利息マージンは4ベーシスポイント（bp）上昇して3.52%となりました。経営陣は、通期の純利息マージンがガイダンス範囲（3.40%〜3.50%）の上限付近になるとの見通しを示しました。
• 期末の貸出金残高は5億7,300万ドル（2.8%）増の212億ドルとなりました。預金残高は7億7,300万ドル（3.7%）増の218億ドルに増加しました。
• 同社は通期の貸出金成長率の見通しを5%〜6%に、預金成長率の見通しを4%〜5%にそれぞれ引き上げました。
• 純貸倒損失額は2,530万ドル（年率換算で49ベーシスポイント）に増加しましたが、事前に特定されていた3件の与信に集中していました。不良資産は約18%減少しました。
• CATYは5,030万ドルで約80万1,000株の自社株買いを実施する一方、当四半期末の普通株式等Tier1（CET1）比率は13.51%、総リスクベース自己資本比率は15%と高い水準を維持しました。

主要財務データ

業務および業績推移

商業・工業（C&I）向け貸出が貸出金成長の主要な原動力となりました。経営陣は製造業、流通業、食品卸売業、サービスプロバイダーからの旺盛な需要を挙げました。また、高金利は必要性に基づくC&I融資よりも商業用不動産（CRE）の購入活動に大きな影響を与える可能性があると指摘しました。

平均貸出金残高は205億ドルで、年率換算で5.9%増加しました。平均預金残高は214億ドルに達し、年率換算で13.8%増加しました。無利息預金は店舗網の営業活動や法律事務所との関係性に支えられ当四半期中に3億3,100万ドル増加したものの、経営陣はこの増加ペースが継続的ではない可能性があると警鐘を鳴らしました。

商業用不動産（CRE）の集中率は283%となり、規制上の基準値および同社の社内限度額を下回る水準を維持しました。

CATYは利回り1.83%の政府系機関住宅ローン担保証券（エージェンシーMBS）約8,900万ドルを売却し、売却益を利回り5.65%のエージェンシーMBSに再投資しました。経営陣はこの取組により年間純利息収入が約290万ドル増加すると予想しています。また、2026年に実施した合計約4億6,000万ドルの有価証券入替取引（3件）により、年間純利息収入が約1,140万ドル押し上げられる見込みです。

非利息収入は4,280万ドルとなりました。主な要因として、株式の未実現利益3,610万ドルや、5,410万ドルの信託優先証券の償還による利益310万ドルが計上された一方、有価証券の再配置に伴う売却損1,510万ドルで一部相殺されました。調整後非利息収入は1,880万ドルとなり、主にウェルスマネジメント手数料の減少によりわずかに減少しました。

非利息費用は前四半期の9,230万ドルから1億340万ドルに増加しました。当四半期には、キャセイ・バンク財団への800万ドルの拠出金や、ベンダープラットフォーム変更に伴う約540万ドルの契約解除費用が含まれています。調整後非利息費用は8,290万ドルで、前四半期比約1.2%増となりました。調整後エフィシエンシー・シオ（経費率）は35.9%へと改善しました。

経営陣の見通し（ガイダンス）

• 通期の貸出金成長率：従来の3.5%〜4.5%から5%〜6%に引き上げ。
• 通期の預金成長率：従来の3%〜4%から4%〜5%に引き上げ。
• 通期の純利息マージン：3.40%〜3.50%に維持。経営陣は範囲の上限付近になると予想。
• 調整後非利息費用の増加率：3.5%〜4.5%に維持。
• 通期の実行税率：21.5%〜22.5%を予想。
• 金利前提：2026年中に25ベーシスポイントの利上げが2回（9月の利上げと12月の追加利上げを含む）。

経営陣によると、今後1年間で89億ドルの貸出金が金利改定（リプライス）予定となっており、資産利回りを下支えする可能性があります。ただし、第4四半期には約34億ドルの定期預金（CD）が満期を迎えるため、資金調達コストに対する圧迫が続きます。

リスクおよび注視事項

与信費用が高水準となったのは、事前に特定されていた3件の融資によるものです。具体的には、ファー・イースト・ナショナル・バンクの買収により取得した映画館向け商業用不動産（CRE）融資2件と、漏水・汚染・構造的トラブルの影響を受けた南カリフォルニアの集合住宅建設融資1件です。経営陣は、ポートフォリオ全体としては概ね安定しており、全体的な信用の質は引き続き健全であると説明しました。

有利息預金コストは5ベーシスポイント上昇して2.91%となり、預金総コストは4ベーシスポイント上昇して2.43%となりました。経営陣は、預金金利の獲得競争が引き続き逆風になると予想しています。

未収利息の回収が当四半期の純利息マージンを約370万〜380万ドル（約6ベーシスポイント）押し上げました。経営陣は、この要因を除いたコア純利息マージンは約3.46%になると指摘しました。

案件パイプラインは好調なものの、第4四半期の貸出金成長には不透明感が残ります。経営陣は、例年第4四半期が比較的横ばい傾向にあることを考慮し、融資執行のタイミングについては慎重な見方を維持しています。

アナリスト質疑応答の要点

経営陣は、純利息マージンがピークに達したと判断するのは時期尚早であると述べました。貸出金のリプライス、現金残高、有価証券のキャッシュフローがさらなる下押し・下支え要因となり得る一方、今後のCD満期や預金競争が拡大を抑制する可能性もあります。

預金の増加について、経営陣は広範な分野での増加であるとしたものの、9月末に向けて一部でまとまった資金流入があったことを認めました。同社は低コスト預金の獲得を最優先事項として維持していますが、第3四半期に見られた無利息預金の3億3,100万ドル増というペースが継続するとは予想していません。

C&I（商業・工業）需要は、借り入れが主に実需に基づくものであるため堅調に推移しました。経営陣は、高金利環境は商業用不動産（CRE）の購入を制約する可能性が高い一方、借換活動は同行の審査基準の範囲内で継続していると述べました。

同社は、市場環境、貸出金の成長率、および全体的な見通しに応じて、追加の自社株買いに前向きな姿勢を維持しています。経営陣は、株価は依然として魅力的であり、ペイバック（投資回収）期間も許容範囲内であると考えていると述べました。

今後の投資優先分野としては、営業・預金獲得部門のフロントライン人員、顧客向けテクノロジー、ならびに業務および融資チームの効率向上を目的としたAIツールの導入が挙げられます。

決算説明会文字起こし全文

決算説明会の完全なトランスクリプト

経営陣による説明

Operator

Good afternoon, ladies and gentlemen, and welcome to Cathay General Bancorp's Third Quarter 2026 Earnings Conference Call. My name is Asha, and I will be your coordinator for today. [Operator Instructions] Today's call is being recorded and will be available for replay at ww.cathaygeneralbancorp.com.

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, Asha, and good afternoon. Here to discuss the financial results today are Mr. Chang Liu, our President and Chief Executive Officer; and Al Wang, our Executive Vice President and Chief Financial Officer.

Before we begin, we wish to remind you that speakers on this call may make forward 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. These results and uncertainties are further described in the company's annual report on Form 10-K for the year ended December 31, 2025, at Item 1A in particular, 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 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. This afternoon, Cathay General Bancorp issued an earnings release outlining its third quarter 2026 results. To obtain a copy of our earnings release as well as our earnings presentation, please visit our website at ww.cathaygeneralbancorp.com.

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.

Chang Liu

Thank you, Asha. Good afternoon, and thank you for joining us today. I will begin on Slide 4. We delivered another strong quarter of operating performance, highlighted by record net interest income, continued margin expansion, loan and deposit growth. Net income was $95.2 million or $1.43 per diluted share. Net interest income reached a record $211.9 million, increased $11 million or 5.5% from the prior quarter. Active balance sheet management, loan growth and asset repricing helped drive the 4 basis points of net interest margin expansion to 3.52%.

Pre-provision net revenue was $151.3 million, up to $21.3 million or 16.4% from the prior quarter. Excluding the notable items in both periods, adjusted preprovision net revenue was $140.6 million, up $11.7 million or 9.1%, reflecting stronger revenue growth relative to expenses. We generated strong loan and deposit growth during the quarter. Loans increased $575 million or 2.8% during the quarter while deposits increased $773 million or 3.7%, led by growth in noninterest-bearing demand and remarket balances.

Credit results this quarter include elevated charge-offs in 3 previously identified borrower specific credits. We have substantial reserves in place against these credits and took appropriate action during the quarter. As a result, nonperforming assets declined approximately 18%, criticized and classified balances also declined. Outside of these credits, the broader portfolio remains stable and overall credit quality remains sound. The quarter also included several notable items. We recognized a $36.1 million valuation gain on equity securities. We also recognized a $15.1 million loss related to another securities repositioning transaction. The repositioning improved the yield on the securities portfolio is expected to add approximately $2.9 million to annual net interest income. To support the communities we serve and enhance tax efficiency, we committed $8 million to the Cathay Bank Foundation. We also incurred filing $4 million of contract termination costs to improve our operating model.

Finally, during the quarter, we completed a planned redemption of $54.1 million of trust preferred securities. The redemption provided a $3.1 million benefit, simplified our funding structure and reduced interest expense going forward. Overall, we are pleased with the underlying trends in the business, including strong relationship growth, improving net interest income, continued investment in the franchise and a strong capital position.

I will now turn the call over to Mr. Al Wang to walk through the third quarter results in more detail. I'll provide some closing comments before we open up the call to Q&A.

Albert Wang

Thank you, Chang. I'll start with our balance sheet on Slide 5. Period-end loans net of fees were $21.2 billion, increasing approximately $573 million or 2.8% linked quarter, reflecting strong loan growth, particularly in C&I.

On the deposit side, period-end balances rose approximately $773 million or 3.7% to $21.8 billion, led by noninterest-bearing demand and money market deposits. That growth helped fund our lending and improved our net loan-to-deposit ratio to approximately 96%. Tangible book value per share grew $0.61 to $40.54 even after this quarter's share repurchases.

Slide 6 shows our average loan and deposit mix. Average loans were $20.5 billion, representing annualized growth of 5.9%. Average deposits reached $21.4 billion, representing annualized growth of 13.8%. Our CRE concentration ratio was 283%, remaining below both regulatory thresholds and our internal limits. .

Slide 7 summarizes our cash and available for securities portfolio. Cash and short-term investments increased this quarter, reflecting strong deposit growth and the timing of our balance sheet management activities. By contrast, the AFS securities portfolio declined modestly, reflecting a lower reinvestment rate and the impact of sharply higher market rates. During the quarter, we sold approximately $89 million of Agency MBS yielding 1.83% and reinvested in Agency MBS yielding 5.65%. The new securities have a similar average life and shorter duration. So we picked up yield without adding interest rate or credit risk. So far this year, we repositioned approximately $460 million of securities through this -- 3 transactions Together, these transactions are expected to add approximately $11.4 million to annual net interest income with an aggregate earned at period of approximately 3-point [ figures ].

Our securities portfolio remains highly liquid and defensively positioned. Effective duration is approximately 2.1 years and 61% of projected cash flows are expected to return through 2027. That limits our duration exposure and gives us substantial near-term capacity to reinvest in a higher rate environment.

Moving to Slide 8. Net income increased 3.2% linked quarter to $95.2 million, record net interest income and higher noninterest income supported the increase. Higher provision expense and noninterest expense offset part of that benefit.

On Slide 9, I'll walk through the yields and funding costs. Net interest income increased $11 million to a record $211.9 million, driven by loan growth, day count and continued margin expansion. Net interest margin increased 4 basis points to 3.52% as higher loan yields more than offset the increase in funding costs. Loan yields increased 5 basis points to 6.2%, reflecting higher rates as well as interest recoveries and prepayment penalties. That benefit was partially offset by higher funding costs. Total deposit cost rose 4 basis points to 2.43% and interest-bearing deposit costs rose 5 basis points to 2.91%. Overall, we continue to see positive momentum in net interest income supported by balance sheet growth and asset repricing.

Moving to Slide 10. Noninterest income increased to $42.8 million, driven mainly by the notable items, Chang mentioned earlier. These included $36.1 million unrealized gain on equity securities and a $3.1 million benefit from the trust preferred redemption. Those gains were partially offset by the $15.1 million repositioning loss, excluding these items, adjusted noninterest income was $18.8 million, down slightly from last quarter, mainly due to lower wealth management fees.

Moving to Slide 11. Noninterest expense increased to $103.4 million from $92.3 million last quarter. The increase was primarily driven by the 2 other notable items, Chang mentioned earlier. We committed $8 million to the Cathay Bank Foundation to support those communities we serve while also providing a tax benefit. We also incurred [ $5.4 million ] of contract termination costs as we made changes to improve our operating model. Outside of those items, compensation and benefits increased by $1.5 million partially offset by approximately $3.4 million of lower tax credit investment amortization. Excluding those notable items, adjusted noninterest expense was $82.9 million, up approximately 1.2% from the prior quarter. With only modest growth in underlying expenses, strong revenue growth further drove improvement to our efficiency ratios. Our reported efficiency ratio improved to 40.6% and while our adjusted efficiency ratio, excluding the notable items, improved to 35.9%.

Turning to Slide 12. The allowance for loan loss increased approximately $5 million to $224 million while the allowance ratio remained relatively stable at 1.06% of gross loans. The provision for credit loss was $28.6 million this quarter, primarily reflecting strong loan growth and updated loss assumptions, incorporating recent charge-off experience. Net charge-offs increased to $25.3 million or 49 basis points annualized. These charge-offs were concentrated in the 3 previously identified credits, it included 1 fully reserved construction loan and 2 movie theater CRE loans acquired through the Far East National Bank acquisition. It previously provisioned $9.1 million for those 2 movie theater loan in the third quarter of 2025.

Classified balances and nonperforming assets declined during the quarter, largely reflecting the charge-offs. Beyond those credits, broader portfolio trends remain generally stable and overall credit quality remains sound.

Turning to Slide 13. Capital ratios declined modestly, reflecting strong loan growth and share repurchases while the redemption of our trust preferred securities reduced total risk-based capital. During the quarter, we repurchased approximately 801,000 shares for $50.3 million at an average price of approximately $62.81 per share. Even with those impacts, our capital position remains strong. We ended the quarter with a CET1 ratio of 13.51% and total risk-based capital ratio of 15%, both well above regulatory minimum requirements.

I'll wrap up on Slide 14 with our full year 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. We are also increasing our deposit growth outlook to 4% to 5%, compared with the prior expectation of 3% to 4%. We continue to expect adjusted noninterest expense growth of 3.5% to 4.5% for the year.

Our full year NIM outlook remains a 3.40 to 3.50%. Our rate outlook now assumes 225 basis points increases during 2026, including the September increase and another increase in December. Finally, we now expect our full year effective tax rate to be between 21.5% and 22.5%.

And with that, I'll turn the call back over to Jerry.

Chang Liu

Thank you, Al. We are pleased with our performance through the first 9 months including strong balance sheet growth, record net interest income and continued margin expansion. The momentum is reflected in the higher full year loan and deposit growth outlooks we announced today. During the quarter, we took several proactive steps to support our communities, improve our earnings profile and optimize our funding and capital structure while continuing to support organic growth. We believe these actions leave us well positioned as we move forward. Looking ahead, our priorities remain straightforward, disciplined relationship growth, sound credit quality and prudent capital management. With that, we can now open it up for questions.

Operator

[Operator Instructions] Your first question comes from David Chiaverini with Jefferies.

質疑応答

David Chiaverini

I wanted to start on the net interest margin, very nice trend here over the past several quarters. And looking at the guide range being unchanged, seems to be conservative, but can you talk about how we should think about the NIM into the fourth quarter? And then maybe layer into that, your rate sensitivity and how rate hikes could impact the forward look on NIM?

Chang Liu

Yes. So we -- I'm not ready to call it kind of a peak on NIM. I still think there's room for expansion. We do have in the guide a 25 basis point increase in December, which will kind of help us from the asset side. So we've got, I would say, on the asset side, over the next year, we've got $8.9 billion of loans repricing. Obviously, we have $1 billion-plus of cash and a large part of our investment portfolio, half of which are on treasury. So we'll get some tailwind from the asset side. On the deposit side, I would say that we do have some headwinds with -- we've got $3.4 billion of CDs rolling off this quarter at a rate of [ $3.4 ]6. So as you might know, we ran a summer CD promo for example, at $3.65 and $3.85 for 6 and 12 months, respectively. So just with those data points, there's going to be some more pressure. And you saw some pressure on deposit costs just this quarter. It went up about 5 basis points. So we expect the pressure to continue with competition, and that's not just for us but across the industry. But we feel pretty confident that we still have room to expand. If I look at, for example, the margin in the month of September, ex kind of prepayments and recoveries. I mean we were just for that month at 3.53%. So I think we'll probably be at the upper end of the range, but that's -- remember, that's a full year range. So I think we're pretty confident at least in the near term with where we'll be in terms of margin. .

David Chiaverini

Great. And my follow-up is on the deposit side, noninterest-bearing deposits up nicely year-over-year what's driving the strong growth? And how do the pipelines look? Could this momentum continue?

Chang Liu

I think the team did a really nice job this quarter. I mean we grew noninterest-bearing $331 million in 1 quarter. So that's kind of -- I would probably say that, that's not sustainable. So I wouldn't kind of bake that in into the forward guide. But it is an area of focus for us in the branch network and

I don't know, [indiscernible], if you want to...

Unknown Executive

Yes. So I'll add to that a little bit. I think some of the law firm practice that we have, that's adding good sort of much lower cost deposits to our sort of liability side. And I think our communication and sort of collaboration with the branches is a lot stronger now where they know the direction going forward is to really bring in lower cost of funds. The CD campaign, while it's at [ $365, $385 ], you can -- you know for a fact that's not at the top of the market. So while that's a tool for them to kind of defend the CD base, at the same time, they're also using that to bring in other type of deposits that's going to help to contribute that low cost end of the balance.

Operator

The next question comes from Gary Tenner with D.A. Davidson.

Gary Tenner

I wanted to ask about loan growth. The guide was increased at 5% to 6%, but that kind of full year guide seems to suggest fourth quarter growth to be anywhere from kind of flat to up 3%. So could you talk about that a little bit? Are you seeing any specific slowdown? Is it just where the pipelines are any impact of interest rates, et cetera, that maybe is having a lean conservative for the fourth quarter?

Albert Wang

So yes, Gary, the way we're thinking about it is, I think we saw the biggest growth in Q2 and Q3. Our Q1 was pretty flat. Q4 historically has been flat based on my experience, although we're seeing some pretty good pipeline so far C&I has been kind of the driver of that growth, and we see that in a sort of just a broad-based different type of industries, whether it's sort of the manufacturing distribution and the service providers. So we're continuing to kind of expect some of that to pull through but it's harder for us to say how much of that is really going to be a significant growth event for Q4. So I think we're comfortable with the revised guide that we issued today.

Gary Tenner

Okay. Appreciate that. And then just in terms of the [ LIHTC ] amortization in fourth quarter, what do you expect that number to be?

Albert Wang

Yes. So this quarter obviously came in a little bit below expectations and kind of what I was guiding to. It was mainly due to timing and kind of updates to prior estimates. Q3 had some true-ups that came in during the quarter. And we also got a small amount of solar investment distributions on investments where our basis was 0 or fully amortized. So those were recorded against amortization expense. So I'm expecting kind of more of the $9 million to $10 million per quarter. Obviously, as you know, that can vary quarter-to-quarter, and it depends on the financials that we get relative to project performance and tax credit recognition.

Operator

[Operator Instructions] The next question comes from Andrew Terrell with Stephens.

Andrew Terrell

Could you talk a little bit more about just the contract termination that took place this quarter, just how that plays into operating expenses moving forward? And then just more broadly, any kind of areas you're looking to get efficiency out of? And how does that play into, just kind of you think about expense growth from here?

Albert Wang

Yes. So I would say that, that contract termination fee, we noted it as kind of a notable item because it is kind of more of a onetime type of charge. It really wasn't a expense savings play per se. It was really more a vendor agreement for one of our lines of business that we plan to upgrade because another vendor we're looking at, we think, has kind of a stronger platform and tech platform. So we're hoping that obviously it's going to generate revenue growth for us in the future. I hope for that any -- I don't know, Chang, if you want to weigh on to it?

Andrew Terrell

No, that's great. And if I could just follow up on the margin quickly as well. Do you have -- I might have missed it, do you have the dollar amount or the basis point impact of the interest recovery in loan yields this quarter?

Chang Liu

Yes. Yes. Most of it was recoveries and not prepayment penalties, but it was about $3.7 million, $3.8 million of recoveries. It was about 6 basis points for the quarter. So core NIM would have been around [ $3.46 ].

Operator

The next question comes from Matthew Clark with Piper Sandler.

Matthew Clark

On the net charge-offs this quarter, can you just isolate how much of those -- how much of the net charge-offs were tied to those 3 credits that were previously reserved against? I guess I'm just trying -- I'm getting -- trying to -- yes, go ahead. .

Albert Wang

Yes, yes. Sorry. So the 2 theater loans that from the Far East Bank acquisition, those 2 totaled about [ 18 ]. And we have 1 particular construction loan that have problems with water damage and more contamination and leading to structural issues. So that's also something that's kind of unforeseen for us. It was a multifamily product. It was here in [ SoCal ] and that's about almost $9 million exposure.

Matthew Clark

Okay. Got it. And then just on -- maybe I can do a combo here. Do you have the spot rate on deposits at the end of September? And then your appetite to continue to buy back stock here with a nice step-up here in 3Q?

Chang Liu

Yes. So the September kind of interest rate deposit cost for interest-bearing was like $2.92. All in, it was $2.43, obviously, helping with the growth in noninterest-bearing. And we're -- in terms of buybacks, we -- obviously, the same caveats always apply relative to kind of the market loan growth and kind of the outlook. But we're pretty comfortable with kind of how we the buybacks from this past quarter, we think the stock is still attractively priced, and the earn back is very acceptable to us. So that's kind of where we are with the buybacks. Hopefully, that helps answer your question. .

Operator

The next question comes from Kelly Motta with KBW.

Kelly Motta

I'd like to kick it back to loan growth. Commercial in particular, has been incredibly strong all year and especially in Q3. Just wondering if you could provide additional color as to the drivers of that? And if you're seeing -- it sounds like there's still a decent outlook here, but if higher weights rates are impacting borrower behavior at this point?

Chang Liu

Sure, Kelly. So we're still seeing just the stronger loan growth on the C&I side. The industries that we serve in the manufacturing side, the distribution side, some of them there are sort of the wholesalers in the food business. Their business is doing well. In terms of sort of the rate hire for longer, I talked to my C&I folks and the lender side, that's really a need base and a value proposition. If they need the loan and they need the lines, you're going to continue to use it regardless of the rate environment. I think the higher rate environment may hit the CRE demand a little bit more. And even on the CRE side, that's going to hit maybe the purchases side a little bit more on the refi we -- in the last few months of the quarter, we saw a little bit of activity in sort of cash out refi and still within our credit parameters. But when there's a cash out refi were maturity refi, then they still have to do those. And then on the -- so for the C&I side, I think it's really just on a net basis and what kind of value we can provide to the new prospects and the new clients that come into our bank as well.

Kelly Motta

Got it. That's helpful. And then somebody touched on this earlier. But just to close the loop on the noninterest-bearing deposit growth. Clearly, you're working very hard at that, and the results are showing through. If I look at a spot basis, they were up much more meaningfully than where the average balances are. I'm just wondering as I'm thinking about just near-term modeling, if there was any kind of larger, chunkier flows in Q3 that I should be cognizant of when thinking through what you jumping off for average balances?

Chang Liu

Yes, I think it was pretty -- I think generally, it was broad-based across the board. But I think at the end of the quarter, there were some larger deposit inflows at the end in September, but I'd have to go back and look at kind of the month over month. .

Kelly Motta

Got it. That's helpful. Maybe last question for me is just on the expenses. You've done a really nice job with holding and growing margin and while growing the balance sheet. I know it's a little early to start thinking about next year. But as you think ahead, what are the strategic priorities in terms of investments and your ability to continue to drive what's been really nice positive operating leverage now for the past couple of years?

Chang Liu

So maybe I'll start and Al can certainly chime in. I think strategically, we've got to think about where we need to invest, right? I think we need to invest in our people, on some of the front line, whether it's the lending side or the deposit side, that's where you can kind of see the investment sort of a return on that investment. Additionally, sort of the technology front and anything -- any tech that's kind of client-facing including anything that's operationally with AI and efficiencies we can gain out of AI. Some of the things we're using here with, for example, some of the AI-based platform that's available to us, we're already seeing increases in what -- how the lending teams are either running their product or their book and their loan reviews and those kind of things. So we're seeing some efficiencies there. So that's where really our focus should be. And long term, some of the expenses, we're not ready -- we're not prepared to give you the guide for '27, but still going to be sort of the salaries and the tech investment side that you're going to see the bulk of it. .

Operator

[Operator Instructions] Our next question comes from Andrew Liesch with [ StoneX ].

Unknown Analyst

most of my questions have been answered, but just wanted to circle back to the fee income side, noninterest income. The decline in wealth management revenue, just curious what might have been driving that?

Chang Liu

Yes. That was just -- it was transaction-based volume. There was nothing kind of significant or unusual. I'd say we had a -- you can see over the trend over the last several quarters, particularly since our new leader came in for that business, things have been -- revenues have been very strong. So we're expecting kind of a tick up, maybe not back to the Q2 level, but we think that there'll be a tick up next quarter.

Operator

Thank you for your participation. I will now turn the call back over to Cathay General Bancorp's management for closing remarks. Please go ahead. .

Chang Liu

I want to thank everyone for joining us and for your interest in Cathay Bank. We look forward to speaking with you at our next quarterly earnings release call.

Operator

Ladies and gentlemen, thank you for your participation in today's conference. This concludes the presentation. You may now disconnect. Good day.