Cathay General Bancorp Q3 2026 Earnings: Margin Expansion Lifted Net Interest Income

Cathay General Bancorp (NASDAQ: CATY) reported Q3 2026 net interest income before credit-loss provisions of $211.9 million, up 11.8% from $189.6 million a year earlier, while diluted EPS increased to $1.43 from $1.13. Net income reached $95.2 million as margin expansion and higher non-interest income outweighed increased operating expenses and a sharp sequential rise in credit provisions.

Core Earnings Data

Year over year, growth in net interest income and a more than doubling of non-interest income supported higher earnings. Compared with Q2 2026, net income increased 3.3% even though the provision for credit losses rose to $28.6 million from $11.2 million and non-interest expense increased 12.0%.

The efficiency ratio improved because combined net interest and non-interest income grew faster than operating expenses.

Return on average equity rose to 12.28% from 10.60% a year earlier, while return on average assets increased to 1.51% from 1.29%.

Loan and Deposit Growth

Gross loans excluding loans held for sale increased $574.5 million, or 2.79% sequentially, to $21.20 billion. Commercial loans provided most of the increase, rising $420.4 million, or 11.9%, while residential real estate, commercial real estate, and construction loans also grew.

Deposits increased faster than loans during the quarter, rising $773.3 million, or 3.67%, to $21.83 billion. Non-interest-bearing demand deposits grew by $382.9 million and money market deposits by $389.9 million, while time deposits declined by $117.1 million. Compared with September 2025, gross loans grew approximately 5.4% and deposits increased approximately 6.4%.

Margin and Securities Gains Offset Higher Provisions and Expenses

Net interest margin expanded four basis points from Q2 to 3.52%. The yield on average interest-earning assets rose eight basis points to 5.74%, exceeding the four-basis-point increase in the cost of interest-bearing liabilities to 2.93%. As a result, the net interest spread widened to 2.81% from 2.77%.

Non-interest income increased $21.4 million sequentially to $42.8 million. The principal drivers were a $24.4 million increase in net equity-security gains and a $3.1 million benefit from redeeming trust preferred securities. These gains were partially offset by a $4.5 million increase in losses from investment-securities repositioning and a $1.3 million decline in wealth-management fees.

Operating costs also increased. The quarter included an $8.0 million contribution to the Cathay Bank Foundation, a $5.4 million contract termination fee, and $1.5 million of additional salary and employee-benefit expense. Lower amortization of affordable-housing and alternative-energy investments provided a partial offset.

Asset Quality Balances Improved Even as Charge-Offs Increased

Nonperforming assets declined 18.0% from Q2 to $119.2 million, and their ratio to total assets improved to 0.47% from 0.59%. Non-accrual loans fell 21.8% to $87.3 million, while other real estate owned declined 20.1%.

However, net charge-offs rose to $25.3 million from $1.8 million in the preceding quarter. The charge-offs were concentrated in three borrower-specific credits: one construction loan and two movie-theater commercial real estate loans acquired from Far East National Bank. Strong loan growth and updated assumptions incorporating recent charge-off experience caused the credit-loss provision to more than double sequentially.

The allowance for loan losses increased to $224.2 million and remained at 1.06% of gross loans. Allowance coverage of nonperforming loans improved to 242.97% from 195.97%, largely alongside the decline in nonperforming balances.

Capital ratios remained above applicable regulatory minimums, although they declined sequentially. The common equity Tier 1 ratio was 13.51%, the total risk-based capital ratio was 15.00%, and the Tier 1 leverage ratio was 11.06%. Cathay also redeemed $54.1 million of trust preferred securities, representing approximately 45% of the amount outstanding before the transaction.

Recent Insider Transactions

The provided insider data identifies seven sales among the latest 10 reported records. Three additional records did not disclose a transaction direction or amount and are therefore excluded below; the disclosed transactions do not establish the insiders’ motivations.

Across the separate six-month summary, insiders purchased 8,356 shares through three transactions and sold 87,158 shares through nine transactions, resulting in net sales of 78,802 shares.

Risks Investors Need to Watch

• Borrower-specific credit losses: The $25.3 million of quarterly net charge-offs was concentrated in only three credits, showing that a small number of borrowers can materially affect credit costs.
• Commercial real estate exposure: Commercial real estate loans totaled $10.84 billion, or approximately 51% of gross loans. Two of the three credits behind the quarter’s elevated charge-offs were movie-theater CRE loans.
• Deposit repricing pressure: The cost of interest-bearing deposits rose to 2.91% from 2.86% as maturing time deposits repriced at higher rates. Continued increases could limit further margin expansion.
• Non-interest income variability: Equity-security gains and the trust preferred securities redemption materially supported the quarter, while securities-repositioning losses moved in the opposite direction. Changes in these items could cause non-interest income to fluctuate.

Summary

Cathay General Bancorp delivered higher year-over-year and sequential earnings in Q3 2026, supported by loan growth, deposit growth, a wider net interest margin, and equity-security gains. The main counterweights were higher operating expenses and a substantial sequential increase in credit provisions and charge-offs. Future results will depend in part on whether margin expansion continues and whether borrower-specific credit losses remain contained as the loan portfolio grows.