Teleconferência de Resultados do 3º Trimestre de 2026 da Cathay General Bancorp (CATY): Receita Líquida de Juros Recorde e Elevação nas Projeções de Crescimento

A Cathay General Bancorp (NASDAQ: CATY) registrou receita líquida de juros recorde, expansão contínua da margem e forte crescimento nos empréstimos e depósitos no terceiro trimestre de 2026. Os custos de crédito aumentaram devido a três exposições específicas de tomadores previamente identificadas, mas os ativos inadimplentes e os saldos classificados caíram.

Principais destaques

• O lucro líquido foi de US$ 95,2 milhões, ou US$ 1,43 por ação diluída, enquanto a receita líquida de juros atingiu o recorde de US$ 211,9 milhões, uma alta de 5,5% em relação ao trimestre anterior.
• A margem líquida de juros subiu 4 pontos-base, para 3,52%. A administração afirmou que o resultado do ano todo deve ficar próximo do limite superior da faixa de projeção de 3,40% a 3,50%.
• Os empréstimos no encerramento do período subiram US$ 573 milhões, ou 2,8%, para US$ 21,2 bilhões. Os depósitos cresceram US$ 773 milhões, ou 3,7%, para US$ 21,8 bilhões.
• A empresa elevou sua perspectiva de crescimento de empréstimos para o ano todo de 5% a 6% e a de crescimento de depósitos para 4% a 5%.
• As baixas líquidas para prejuízo (net charge-offs) subiram para US$ 25,3 milhões, ou 49 pontos-base anualizados, e ficaram concentradas em três créditos previamente identificados. Os ativos inadimplentes caíram aproximadamente 18%.
• A CATY recomprou aproximadamente 801.000 ações por US$ 50,3 milhões, encerrando o trimestre com um índice CET1 de 13,51% e um índice de capital total baseado em risco de 15%.

Dados financeiros principais

Desempenho operacional e dos negócios

A concessão de empréstimos comerciais e industriais (C&I) foi o principal motor de crescimento da carteira de crédito. A administração destacou a demanda nos setores de manufatura, distribuição, atacado de alimentos e prestadores de serviços. A empresa afirmou que taxas de juros mais elevadas podem afetar a compra de imóveis comerciais mais do que a tomada de crédito C&I baseada em necessidades.

A média de empréstimos foi de US$ 20,5 bilhões, representando um crescimento anualizado de 5,9%. A média de depósitos atingiu US$ 21,4 bilhões, um aumento anualizado de 13,8%. Os depósitos não sujeitos a juros cresceram US$ 331 milhões no trimestre, impulsionados pela atividade das agências e relacionamentos com escritórios de advocacia, embora a administração tenha alertado que esse ritmo não é sustentável.

O índice de concentração em imóveis comerciais (CRE) ficou em 283%, permanecendo abaixo dos limites regulatórios e das metas internas da empresa.

A CATY vendeu aproximadamente US$ 89 milhões em títulos Agency MBS com rendimento de 1,83% e reinvestiu os recursos em Agency MBS com rendimento de 5,65%. A administração espera que essa transação adicione cerca de US$ 2,9 milhões à receita líquida de juros anual. Três transações de reposicionamento de títulos totalizando aproximadamente US$ 460 milhões em 2026 devem adicionar cerca de US$ 11,4 milhões à receita líquida de juros anual.

A receita não proveniente de juros foi de US$ 42,8 milhões. Os destaques incluíram um ganho não realizado de US$ 36,1 milhões em títulos de renda variável e um benefício de US$ 3,1 milhões referente ao resgate de US$ 54,1 milhões em títulos preferenciais de trust, parcialmente compensados por uma perda de US$ 15,1 milhões no reposicionamento de títulos. A receita ajustada não proveniente de juros foi de US$ 18,8 milhões, em leve queda devido principalmente a menores tarifas de gestão de patrimônio.

As despesas não provenientes de juros subiram de US$ 92,3 milhões para US$ 103,4 milhões. O trimestre incluiu um compromisso de US$ 8 milhões com a Fundação Cathay Bank e cerca de US$ 5,4 milhões em custos de rescisão contratual relacionados à mudança na plataforma de um fornecedor. As despesas ajustadas não provenientes de juros foram de US$ 82,9 milhões, uma alta de aproximadamente 1,2% em relação ao trimestre anterior. O índice de eficiência ajustado melhorou para 35,9%.

Projeções da administração

• Crescimento de empréstimos no ano: elevado para 5%–6%, de 3,5%–4,5% anterior.
• Crescimento de depósitos no ano: elevado para 4%–5%, de 3%–4% anterior.
• Margem líquida de juros no ano: mantida em 3,40%–3,50%. A administração espera que o resultado fique próximo do limite superior da faixa.
• Crescimento das despesas ajustadas não provenientes de juros: mantido em 3,5%–4,5%.
• Alíquota efetiva de imposto no ano: estimada entre 21,5% e 22,5%.
• Premissa para a taxa de juros: dois aumentos de 25 pontos-base em 2026, incluindo a alta de setembro e outro aumento em dezembro.

A administração afirmou que US$ 8,9 bilhões em empréstimos estão programados para repacificação no próximo ano, oferecendo um suporte potencial para o rendimento dos ativos. No entanto, aproximadamente US$ 3,4 bilhões em certificados de depósito (CDs) vencerão no quarto trimestre, mantendo a pressão sobre os custos de captação.

Riscos e pontos de atenção

Os custos de crédito foram elevados devido a três empréstimos previamente identificados: dois créditos imobiliários comerciais (CRE) do setor de cinemas adquiridos na aquisição do Far East National Bank e um empréstimo para construção residencial multifamiliar no sul da Califórnia afetado por danos decorrentes de água, contaminação e problemas estruturais. A administração afirmou que o portfólio mais amplo permaneceu em geral estável e a qualidade geral do crédito permaneceu sólida.

Os custos dos depósitos remunerados subiram 5 pontos-base, para 2,91%, enquanto os custos totais de depósitos aumentaram 4 pontos-base, para 2,43%. A administração espera que a competição na precificação de depósitos continue a ser um obstáculo.

A recuperação de juros contribuiu com cerca de US$ 3,7 milhões a US$ 3,8 milhões, ou cerca de 6 pontos-base, para a margem líquida de juros trimestral. A administração indicou que a margem líquida de juros (NIM) principal teria sido de aproximadamente 3,46% sem esse benefício.

O crescimento dos empréstimos no quarto trimestre permanece incerto, apesar de um pipeline saudável. A administração observou que o quarto trimestre historicamente costuma ser relativamente estável e manteve uma visão cautelosa quanto ao cronograma de fechamento dos empréstimos.

Destaques das perguntas e respostas dos analistas

A administração declarou que ainda não está pronta para afirmar que a margem líquida de juros atingiu o pico. A repacificação de empréstimos, os saldos de caixa e os fluxos de caixa de títulos podem oferecer suporte adicional, embora os próximos vencimentos de CDs e a concorrência por depósitos possam limitar a expansão.

Sobre o crescimento dos depósitos, a administração descreveu a alta como generalizada, mas reconheceu a entrada de fluxos maiores no final de setembro. A empresa continua priorizando depósitos de menor custo, mas não espera que o aumento de US$ 331 milhões nos saldos não sujeitos a juros do terceiro trimestre continue no mesmo ritmo.

A demanda C&I permaneceu resiliente por se tratar de tomada de crédito baseada em necessidades imediatas. A administração afirmou que os juros elevados parecem ter maior probabilidade de limitar as compras no setor de imóveis comerciais (CRE), enquanto a atividade de refinanciamento prosseguiu dentro dos parâmetros de crédito do banco.

A empresa permanece aberta a novas recompras de ações, sujeitas às condições de mercado, ao crescimento dos empréstimos e ao cenário macroeconômico. A administração disse que continua a considerar as ações atraentes em termos de preço, com um período de retorno (earn-back) aceitável.

As prioridades de investimentos futuros incluem pessoal de atendimento e concessão de crédito na ponta, tecnologia voltada para o cliente e ferramentas baseadas em IA com o objetivo de melhorar a eficiência operacional e da equipe de crédito.

Transcrição completa da teleconferência de resultados

Transcrição completa da teleconferência de resultados

Comentários da administração

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.

Perguntas e respostas

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.