캐세이 제너럴 뱅코프(CATY) 2026년 3분기 실적발표 콜: 사상 최대 순이자이익 및 성장 가이던스 상향

캐세이 제너럴 반코프(NASDAQ: CATY)가 2026년 3분기 사상 최대 순이자이익과 지속적인 마진 확대, 견조한 대출 및 수신 성장을 기록했다고 발표했다. 차주별 위험 노출액(익스포저) 3건의 영향으로 대손비용은 증가했으나 부실자산 및 분류여신 잔액은 감소했다.

핵심 요약

• 당기순이익은 9,520만 달러(희석 주당순이익 1.43달러)를 기록했으며, 순이자이익은 전분기 대비 5.5% 증가한 2억 1,190만 달러로 사상 최대치를 달성했다.
• 순이자마진(NIM)은 3.52%로 4bp 상승했다. 경영진은 연간 NIM이 가이던스 범위인 3.40%~3.50%의 상단에 근접할 것으로 전망했다.
• 기말 대출 잔액은 5억 7,300만 달러(2.8%) 증가한 212억 달러를 기록했다. 예수금은 7억 7,300만 달러(3.7%) 증가한 218억 달러를 기록했다.
• 회사는 연간 대출 성장률 전망치를 5%~6%로, 예수금 성장률 전망치를 4%~5%로 각각 상향 조정했다.
• 순대손상각액은 2,530만 달러(연율 기준 49bp)로 증가했으며, 이전에 식별된 3건의 여신에 집중되었다. 부실자산은 약 18% 감소했다.
• CATY는 5,030만 달러를 들여 자사주 약 80만 1,000주를 매입했으며, 분기 말 보통주자본(CET1) 비율 13.51%, 총위험기반자본비율 15%를 기록했다.

주요 재무 데이터

사업 및 영업 실적

상업 및 공업(C&I) 대출이 대출 성장의 주된 동력이었다. 경영진은 제조업, 유통업, 식품 도매업, 서비스 제공업 전반에 걸친 수요를 언급했다. 회사 측은 고금리가 실수요 중심의 C&I 차입보다는 상업용 부동산(CRE) 매수 활동에 더 큰 영향을 미칠 수 있다고 밝혔다.

평균 대출은 205억 달러로 연율 5.9% 성장을 나타냈다. 평균 예수금은 214억 달러에 달해 연율 13.8% 증가했다. 지점 영업활동과 법무법인 거래 관계에 힘입어 무이자예금이 이번 분기 동안 3억 3,100만 달러 증가했으나, 경영진은 이러한 성장 속도가 지속되기는 어렵다고 경고했다.

상업용 부동산(CRE) 집중도는 283%로 규제 기준 및 회사의 내부 한도를 밑도는 수준을 유지했다.

CATY는 수익률 1.83%의 기관 모기지담보증권(Agency MBS) 약 8,900만 달러를 매각하고, 매각 대금을 수익률 5.65%의 Agency MBS에 재투자했다. 경영진은 이 거래로 연간 순이자이익이 약 290만 달러 증가할 것으로 예상하고 있다. 2026년 총 약 4억 6,000만 달러 규모의 증권 포트폴리오 재조정 거래 3건을 통해 연간 순이자이익이 약 1,140만 달러 늘어날 것으로 기대된다.

비이자이익은 4,280만 달러를 기록했다. 주요 항목으로는 지분증권 평가이익 3,610만 달러, 5,410만 달러 규모의 신탁선호증권 상환에 따른 이익 310만 달러가 포함되었으나, 증권 재조정 손실 1,510만 달러로 일부 상쇄되었다. 조정 비이자이익은 주로 자산관리 수수료 감소 영향으로 소폭 하락한 1,880만 달러를 기록했다.

비이자비용은 9,230만 달러에서 1억 340만 달러로 증가했다. 이번 분기에는 캐세이 은행 재단(Cathay Bank Foundation)에 대한 약정금 800만 달러와 벤더 플랫폼 변경 관련 계약 해지 비용 약 540만 달러가 포함되었다. 조정 비이자비용은 8,290만 달러로 전분기 대비 약 1.2% 증가했다. 조정 효율성비율은 35.9%로 개선되었다.

경영진 가이던스

• 연간 대출 성장률: 기존 3.5%~4.5%에서 5%~6%로 상향.
• 연간 예수금 성장률: 기존 3%~4%에서 4%~5%로 상향.
• 연간 순이자마진(NIM): 3.40%~3.50% 유지. 경영진은 결과가 해당 범위의 상단에 근접할 것으로 예상.
• 조정 비이자비용 증가율: 3.5%~4.5% 유지.
• 연간 실효세율: 21.5%~22.5% 예상.
• 금리 가정: 9월 인상 및 12월 추가 인상을 포함하여 2026년 중 두 차례의 25bp 금리 인상.

경영진은 향후 1년간 89억 달러 규모의 대출금리가 금리 재조정(repricing)될 예정이어서 자산 수익률 향상에 도움이 될 수 있다고 밝혔다. 다만 4분기 중 약 34억 달러 규모의 양도성예금증서(CD) 만기가 도래함에 따라 조달비용 압박은 계속될 것으로 보인다.

리스크 및 관찰 항목

대손비용 증가 원인은 이전에 식별된 대출 3건 때문이다. 이는 원동국립은행(Far East National Bank) 인수 과정에서 인수한 영화관 관련 CRE 대출 2건과 침수, 오염, 구조적 문제의 영향을 받은 남캘리포니아 다가구 주택 건설 대출 1건이다. 경영진은 전체적인 포트폴리오가 대체로 안정적이며 전반적인 자산건전성은 건전하게 유지되고 있다고 설명했다.

이자부예금 금리는 2.91%로 5bp 상승했고, 전체 예수금 금리는 2.43%로 4bp 상승했다. 경영진은 예금 금리 경쟁이 계속해서 부담 요인으로 작용할 것으로 예상하고 있다.

미수이자 회수액은 분기 순이자마진(NIM)에 약 370만~380만 달러(약 6bp)의 기여를 했다. 경영진은 이러한 효과를 제외한 핵심 NIM이 약 3.46% 수준이었을 것이라고 밝혔다.

파이프라인이 건실함에도 불구하고 4분기 대출 성장세는 여전히 불확실하다. 경영진은 역대 4분기 성장이 비교적 정체되는 경향을 보였다는 점을 들어 대출 집행 시점에 대해 신중한 입장을 유지했다.

애널리스트 Q&A 주요 내용

경영진은 순이자마진(NIM)이 고점에 도달했다고 단정하기는 아직 이르다고 밝혔다. 다가오는 CD 만기와 예금 유치 경쟁이 마진 확대를 제한할 수 있지만, 대출금리 재조정, 현금 잔액, 증권 현금흐름이 추가적인 지지 기반이 될 수 있다.

예수금 성장과 관련해 경영진은 전반적으로 고른 증가세를 보였으나 9월 말경 일부 대규모 자금 유입이 있었다고 밝혔다. 회사는 저원가성 예금 유치를 지속적으로 우선시하고 있으나, 3분기에 기록한 3억 3,100만 달러 규모의 무이자예금 증가세가 동일한 속도로 지속되기는 어려울 것으로 보고 있다.

C&I 대출 수요는 실수요 중심의 차입 특성 덕분에 견조한 모습을 유지했다. 경영진은 고금리가 CRE 매수를 제약할 가능성이 높아 보이는 반면, 차환(리파이낸싱) 활동은 은행의 여신 심사 기준 내에서 계속 이루어지고 있다고 설명했다.

회사는 시장 상황, 대출 성장세, 전반적인 경기 전망에 따라 추가 자사주 매입 가능성을 열어두고 있다. 경영진은 자금 회수 기간이 용인할 수 있는 수준이며 주가가 여전히 매력적인 수준이라고 평가했다.

향후 투자 우선순위 분야로는 영업 현장의 대출 및 수신 담당 인력, 고객용 기술, 그리고 영업 및 대출 심사 팀의 효율성 향상을 위한 AI 기반 도구가 포함된다.

실적 발표 컨퍼런스 콜 전문

전체 실적 발표 컨퍼런스 콜 녹취록

경영진 발표

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.

질의응답

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.