Cathay's Record NII Growth Accelerates as Margin Widens

The Tip Desk · October 27, 2026 · 4 min read

Net interest income reached a record $211.9 million, up 5.5%, as the net interest margin expanded four basis points to 3.52%.

Cathay General Bancorp (CATY), the holding company for Cathay Bank, reported record net interest income of $211.9 million for the quarter ended September 30, 2026, up $11.0 million, or 5.5%, from $200.9 million in the second quarter. That sequential gain accelerated from a $6.7 million, or 3.5%, increase in the prior quarter.

The net interest margin expanded four basis points to 3.52% from 3.48%, after a five-basis-point expansion to 3.48% from 3.43% in the second quarter. The yield on average interest-earning assets rose to 5.74% from 5.66%, while the cost of average interest-bearing deposits increased to 2.91% from 2.86% as maturing time deposits repriced higher. The net interest spread widened to 2.81% from 2.77%. The company said the higher asset yield resulted mainly from higher interest rates on loans and that the increase in net interest income was due primarily to higher interest income from loans and deposits with banks, partially offset by higher deposit interest expense.

Gross loans excluding loans held for sale increased $574.5 million, or 2.79%, to $21.20 billion, about 11.4% annualized, after a 2.21% sequential increase to $20.62 billion in the second quarter. Commercial loans rose $420.4 million, or 11.9%, to $3.95 billion. Commercial real estate loans increased $65.5 million, or 0.6%, to $10.84 billion. Construction loans rose $17.5 million, or 7.0%, to $265.9 million. Residential mortgages increased $73.3 million, or 1.3%, to $5.91 billion. Equity lines declined $6.4 million, or 2.7%, to $227.8 million.

Total deposits increased $773.3 million, or 3.67%, to $21.83 billion, after a $386.0 million, or 1.87%, sequential increase to $21.06 billion in the second quarter. Non-interest-bearing demand deposits rose to $3.95 billion from $3.57 billion. Money market deposits increased to $4.28 billion from $3.89 billion. NOW deposits rose to $2.63 billion from $2.61 billion. Savings deposits increased to $1.52 billion from $1.42 billion. Time deposits declined to $9.45 billion from $9.57 billion.

The provision for credit losses increased to $28.6 million from $11.2 million. The company said the higher provision primarily reflected strong loan growth and updated loss assumptions incorporating recent charge-off experience. Net charge-offs were $25.3 million, or 0.48% of average loans on an annualized basis, concentrated in three borrower-specific credits including one construction loan and two movie-theater commercial real estate loans acquired from Far East National Bank, versus $1.8 million in the second quarter.

Nonperforming assets declined $26.2 million, or 18.0%, to $119.2 million, and the ratio of nonperforming assets to total assets improved to 0.47% from 0.59%. Non-accrual loans fell $24.4 million, or 21.8%, to $87.3 million. The allowance for loan losses increased $5.3 million to $224.2 million, remaining 1.06% of gross loans, and coverage of non-performing loans rose to 242.97% from 195.97%.

Non-interest income doubled to $42.8 million from $21.4 million, driven by a $24.4 million increase in net gains from equity securities and a $3.1 million benefit from the redemption of trust preferred securities, partially offset by a $4.5 million increase in investment-securities repositioning losses and a $1.3 million decrease in wealth management fees. Non-interest expense rose $11.1 million, or 12.0%, to $103.4 million, including an $8.0 million charitable contribution to the Cathay Bank Foundation and a $5.4 million contract termination fee. The efficiency ratio improved to 40.60% from 41.53%.

Net income was $95.2 million, or $1.43 a share, compared with $92.2 million, or $1.37 a share, in the second quarter. Return on average assets was 1.51% and return on average stockholders’ equity was 12.28%. The company completed the redemption of $54.1 million of trust preferred securities, about 45% of outstanding TruPS. Common Equity Tier 1 capital was 13.51% at September 30, down from 13.70% at June 30. Cash dividends paid per common share were $0.38, unchanged from the second quarter.