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    CATY
    Earnings call· Jun 2026(Q2 FY26)

    CATHAY GENERAL BANCORP CATY

    Jul 22, 2026 Source

    Executive summary

    Cathay General Bancorp Q2 FY26 — Strong NIM Expansion and Capital Management

    Cathay General Bancorp delivered strong Q2 FY26 results, highlighted by continued net interest margin expansion and solid earnings. The company actively managed its balance sheet through securities repositioning and enhanced capital returns via an increased share repurchase authorization. Despite a revised, lower full-year deposit growth outlook and competitive funding environment, management expressed confidence in its NIM target and momentum heading into the second half of the year.

    Highlights

    5

    • Reported net income of $92.2 million or $1.37 per diluted share.

    • Net interest margin expanded 5 basis points to 3.48%, marking the eighth consecutive quarter of expansion.

    • Period-end loans grew 2.2% linked quarter to $20.6 billion, with strong July bookings of $200 million.

    • Board approved an increase in share repurchase authorization from $150 million to $200 million.

    • Tangible book value per share increased 3% linked quarter and 10% year-over-year.

    Concerns

    4

    • Completed a securities repositioning resulting in a $10.6 million loss on sale.

    • Reported efficiency ratio increased to 41.5% from 40.4% due to higher low-income housing tax credit amortization.

    • Full-year deposit growth outlook revised down to 3% to 4% from previous expectations due to slower H1 growth.

    • Anticipates pressure on deposit costs from competition, with $3.3 billion to $3.4 billion of CDs rolling off at a 3.54% rate.

    Guidance & targets

    5
    CategoryTargetConfidence
    Full-year loan growth
    3.5% to 4.5%
    high materiality
    High
    Full-year deposit growth
    3% to 4%
    high materiality
    Medium
    Full-year NIM target
    3.4% to 3.5%
    high materiality
    High
    Adjusted noninterest expense growth
    3.5% to 4.5%
    medium materiality
    High
    Effective tax rate
    21% to 22%
    medium materiality
    Medium

    Operational metrics

    30
    Adjusted efficiency ratio
    37.0%compared to 36.9% in prior quarter
    Q2 FY26

    Excluding low-income housing tax credit amortization and other noncore expenses.

    Share repurchase authorization
    $200 millionincreased from $150 million
    authorization

    Approved by the Board, subject to regulatory approval.

    Shares repurchased
    242,000
    Q2 FY26

    Part of the capital management strategy.

    Trust preferred securities redemption
    $54.1 million
    planned

    Expected to reduce funding costs and improve recurring earnings.

    Regulatory capital ratios increase
    20 bps
    Q2 FY26

    Resulting from a review of certain regulatory capital reporting treatments.

    Securities sold (Q2 repositioning)
    $160 million
    Q2 FY26

    Part of ongoing balance sheet optimization efforts.

    Securities reinvested (Q2 repositioning)
    $152 million
    Q2 FY26

    Proceeds from sold securities reinvested at higher yields.

    Securities repositioning earn-back (Q2 trade)
    3.5 years
    Q2 FY26

    Earn-back period for the Q2 securities repositioning trade.

    Securities repositioning NII lift (Q2 trade)
    $3.1 million
    per quarter

    Expected NII benefit from the Q2 securities repositioning trade.

    Securities repositioning NII lift (YTD aggregate)
    $8.5 million
    annual

    Combined annual NII lift from all year-to-date securities repositioning activities.

    Securities repositioning NIM impact lift (YTD aggregate)
    3 bps
    going forward

    Combined NIM impact lift from all year-to-date securities repositioning activities.

    Securities sold (YTD)
    $371.7 million
    YTD FY26

    Total securities sold year-to-date as part of repositioning.

    Securities reinvested (YTD)
    $341.8 million
    YTD FY26

    Total securities reinvested year-to-date.

    Securities repositioning earn-back (YTD aggregate)
    3.1 years
    YTD FY26

    Aggregate earn-back period for all year-to-date repositioning activities.

    Securities portfolio duration
    ~2 years
    Q2 FY26

    Portfolio remains highly liquid and defensively positioned.

    Securities portfolio cash flows within 12 months
    ~2/3
    next 12 months

    Projected cash flows from the securities portfolio.

    Securities portfolio backed by US government agencies
    >95%
    Q2 FY26

    Indicates high credit quality of the portfolio.

    Noninterest income (excluding notable items)
    $20.3 millioncompared to $19 million in prior quarter
    Q2 FY26

    Excludes $11.7 million gain on equity securities and $10.6 million loss on AFS securities.

    Low-income housing tax credit amortization increase
    $3.1 million
    Q2 FY26

    Primary driver for the increase in noninterest expense, following updated fund financial statements.

    Low-income housing tax credit amortization (expected)
    $8 million
    Q3 FY26

    Expected for next quarter based on current schedules.

    Low-income housing tax credit amortization (expected long-term)
    under $10 million
    per quarter

    Expected quarterly run rate after the next quarter.

    Allowance for loan loss increase due to loan growth
    $5.5 million
    Q2 FY26

    Portion of the total $10 million increase in allowance.

    Allowance for loan loss increase due to specific reserves (net)
    $3 million
    Q2 FY26

    Portion of the total $10 million increase in allowance, net of a favorable release for a CRE property.

    Allowance for loan loss increase due to key factors
    $1.5 million
    Q2 FY26

    Portion of the total $10 million increase in allowance, due to housekeeping on key factors.

    Uninsured deposit ratio
    45%stable QoQ
    Q2 FY26

    Remained stable linked quarter.

    CDs rolling off
    $3.3 billion-$3.4 billion
    coming quarters

    Expected to be replaced at a slightly higher yield, creating pressure on deposit costs.

    Year-to-date deposit growth
    $167 million0.8%
    YTD FY26

    Modest growth in the first half of the year.

    Deposit growth (first 21 days of July)
    $240 million
    July 1-21, 2026

    Strong deposit growth observed early in Q3.

    Loan bookings (first 3 weeks of July)
    $200 million
    July 1-21, 2026

    Strong loan pipeline and activity heading into Q3.

    Core Net Interest Margin
    3.44%
    Q2 FY26

    Excluding interest recoveries and prepayment penalties.

    Industry KPIs

    12
    MetricValueDetails
    Loans$20.6 billionUSD
    Deposits$21.1 billionUSD
    Cet1 ratiowell above minimum requirements
    Capital returns$200 millionUSD
    Fee income lines$20.3 millionUSD
    Allowance reserves$219 millionUSD
    Net interest income$200.9 millionUSD
    Net interest margin3.48%%
    Net charge offs npls$1.8 millionUSD
    Total operating expenses$92.3 millionUSD
    Provision for credit losseslower
    Efficiency ratio operating leverage41.5%%

    Risks & headwinds

    3
    Competition for depositsOngoing

    Not quantified, but described as 'a lot of competition'

    Mitigation: Continued focus on managing funding costs and optimizing deposit mix.

    Pressure on NIM from CD roll-offsComing quarters

    $3.3 billion to $3.4 billion of CDs rolling off at a 3.54% rate

    Mitigation: Expects to replace at a slightly higher yield, implying continued focus on deposit pricing and mix.

    Macro uncertaintyOngoing

    Not quantified

    Mitigation: Maintained economic scenarios for allowance for loan loss due to geopolitical uncertainty.

    What to watch in Q3 FY26

    5

    NIM trajectory

    Next quarter
    Current3.48% (reported), 3.44% (core)
    TargetContinued, but smaller, expansion

    Why it matters

    Net interest margin is a key profitability driver for the bank, and its trajectory indicates the effectiveness of funding cost management and loan pricing.

    I still think in the coming quarter, there's probably -- we still think even on a core basis, there's some room for improvement. But again, it's going to become smaller and smaller as we go forward.

    Q&A highlights

    5

    Clarification on the reiterated 3.4%-3.5% NIM guidance, considering the current 3.48% and potential pressures from rate hikes and deposit costs.

    Management explained that core NIM was 3.44% in Q2, excluding one-time items. They anticipate continued, though smaller, NIM improvement in the coming quarter, acknowledging pressure from CD roll-offs and competition for deposits, but remain confident in achieving the full-year target range.

    “I still think in the coming quarter, there's probably -- we still think even on a core basis, there's some room for improvement. But again, it's going to become smaller and smaller as we go forward.”

    asked by David Chiaverini · answered by Albert Wang

    2 min read5 chapters

    Detailed Narrative

    01

    Net Interest Margin Expansion and Funding Costs

    Net interest margin expanded 5 basis points linked quarter to 3.48%, marking the eighth consecutive quarter of expansion. This was driven by continued improvement in funding costs, partially offset by narrower loan spreads. On a core basis, excluding interest recoveries and prepayment penalties, NIM would have been 3.44%. Management anticipates continued, though smaller, NIM expansion in the coming quarter, despite competitive pressures on deposit costs and an assumed 25-basis-point rate hike in September.

    02

    Balance Sheet Optimization through Securities Repositioning

    The company completed another securities repositioning in Q2, selling $160 million of lower-yielding securities at a $10.6 million loss and reinvesting $152 million at significantly higher yields (5.31% vs 3.15%). This transaction has an earn-back period of less than 3.5 years and is expected to generate $3.1 million in NII per quarter. Year-to-date, $371.7 million of securities have been sold and $341.8 million reinvested, with an aggregate earn-back of approximately 3.1 years, contributing a 3-basis-point NIM lift going forward⏳.

    03

    Loan and Deposit Growth Dynamics

    Period-end loans grew 2.2% linked quarter to $20.6 billion, with average loan balances increasing 1% linked quarter on an annualized basis. Period-end deposits increased 1.9% linked quarter to $21.1 billion, though year-to-date deposit growth remained modest at $167 million (0.8%). Deposit growth accelerated meaningfully in May and June, with $240 million in deposits grown in the first 21 days of July. Loan bookings also showed strong momentum, with $200 million in the first three weeks of July, primarily in CRE.

    04

    Robust Capital Management and Returns

    Cathay General Bancorp maintains strong capital levels, well above regulatory minimums. The Board approved an increase in the share repurchase authorization from $150 million to $200 million. During Q2, 242,000 shares were repurchased at an average cost of $58 per share. The company also plans to redeem $54.1 million of its outstanding trust preferred securities, targeting the highest cost issuances, and a review of regulatory capital reporting treatments resulted in a 20-basis-point increase to risk-based capital ratios.

    05

    Strong Credit Quality and Allowance for Loan Loss

    Credit quality remained strong, with net charge-offs declining to $1.8 million. Classified loans decreased by $10 million and criticized loans improved by $103 million during the quarter. The allowance for loan loss increased $10 million to $219 million, representing 1.06% of gross loans. This increase was primarily driven by $5.5 million for loan growth, $3 million for specific reserves (net of a favorable release), and $1.5 million for key factors, with economic scenarios remaining intact due to geopolitical uncertainty🌐.

    AI-generated summary of the company’s earnings call. Not investment advice.