Cathay General Bancorp Q2 earnings call highlights

• Regional Bank Buybacks: 5 Institutions Making Big Moves

Cathay General Bancorp (NASDAQ:CATY) reported higher second-quarter 2026 earnings as net interest income rose and the bank continued to expand its net interest margin, while management pointed to improved loan and deposit momentum entering the second half of the year.

President and Chief Executive Officer Chang Liu said the company generated net income of $92.2 million, or $1.37 per diluted share, for the quarter. Net interest income increased to $200.9 million, while net interest margin expanded to 3.48%, marking what Liu described as the company's eighth consecutive quarter of margin expansion.

"This reflects our continued focus on managing funding costs in a competitive environment," Liu said on the call.

Executive Vice President and Chief Financial Officer Al Wang said net income rose 6% from the prior quarter, driven by higher net interest income and a lower provision for credit losses, partially offset by higher non-interest expense and income tax expense.

Loan and Deposit Growth Improved During the Quarter

Wang said period-end loans totaled $20.6 billion, up 2.2% from the prior quarter, while period-end deposits increased 1.9% to $21.1 billion. Average loan balances increased 1% on an annualized linked-quarter basis, and average deposits rose 2% on the same basis.

Deposit growth remained modest year to date, increasing $167 million, or 0.8%, but Wang said quarterly deposit growth accelerated "meaningfully" during May and June. Non-maturity deposits increased while time deposits declined, resulting in what management described as a more favorable funding mix and lower concentration in certificates of deposit. The uninsured deposit ratio remained stable at 45%.

During the question-and-answer portion of the call, Liu said the company saw stronger loan activity after a slower first quarter. He said second-quarter loan growth reflected more commercial and industrial activity, slight growth in residential mortgage and stronger commercial real estate activity, while construction declined somewhat.

"Looking ahead in Q3, honestly, I think we see pretty strong numbers so far," Liu said, adding that the company had seen $200 million in loan bookings during the first three weeks of July, with much of that tied to commercial real estate, including apartment refinancing, multifamily and retail activity.

Margin Outlook Maintained Despite Deposit Competition

Cathay maintained its full-year net interest margin target of 3.4% to 3.5%, with Wang noting that the outlook now assumes a 25-basis-point rate increase in September. He said net interest margin expanded five basis points from the prior quarter, reflecting lower funding costs, partially offset by narrower loan spreads.

In response to a question from David Chiaverini of Jefferies, Wang said reported loan yields were affected by interest recoveries and prepayment penalties. Excluding those items, he said loan yields were roughly flat. He added that the company saw a 10-basis-point reduction in deposit costs during the quarter, helped by both pricing and mix.

Wang cautioned that deposit pricing remains competitive. He said the company has approximately $3.3 billion to $3.4 billion of CDs rolling off at a 3.54% rate and expects replacement rates to be slightly higher. Still, he said management believes there is room for margin expansion in the near term, though that room is narrowing.

Wang also said the company's non-interest-bearing deposit mix, roughly 17%, is projected to remain about where it ended the second quarter. Through the first 21 days of July, he said Cathay had grown deposits by $240 million, distributed mainly among money market, savings and time deposits.

Securities Repositioning Aimed at Future Earnings

Management highlighted another securities repositioning during the quarter as part of balance sheet optimization efforts. Liu said the transaction resulted in a $10.6 million loss on sale but is expected to improve future earnings and support margin expansion.

Wang said the company sold $160 million of lower-yielding securities in June and reinvested the proceeds at significantly higher yields, with an expected earn-back period of less than 3.5 years. In response to a question from Matthew Clark of Piper Sandler, Wang said the securities sold in the second quarter were yielding about 3.15%, while the company reinvested about $152 million at approximately 5.31%.

For the year to date, Cathay has sold $371.7 million of lower-yielding securities and reinvested $341.8 million into higher-yielding investments. Wang said the combined repositioning activities have an aggregate earn-back period of approximately 3.1 years and were executed without a meaningful change to the portfolio's overall duration or credit profile.

The available-for-sale securities portfolio remains defensively positioned, Wang said, with a duration of approximately two years, about two-thirds of projected cash flow expected to return within 12 months and more than 95% backed by U.S. government agencies.

Expenses Rose, Credit Metrics Improved

Non-interest expense increased to $92.3 million from $86.7 million in the prior quarter. Wang said the increase was primarily driven by $3.1 million of higher amortization expense tied to low-income housing tax partnerships after receiving updated fund financial statements. Excluding that and other non-core expenses, adjusted non-interest expense was $81.9 million, and the adjusted efficiency ratio was 37.0%, compared with 36.9% in the prior quarter.

Credit quality remained strong, management said. Net charge-offs declined to $1.8 million, classified loans decreased by $10 million and criticized loans improved by $103 million during the quarter. The allowance for loan losses increased $10 million to $219 million, or 1.06% of gross loans, primarily reflecting loan growth.

In response to Gary Tenner of D.A. Davidson, Wang said roughly $5.5 million of the allowance increase was due to loan growth, about $3 million related to specific reserves and another $1.5 million came from an adjustment to a qualitative factor.

Capital Return and Full-Year Guidance

Liu said capital management remains a key part of the company's strategy. During the quarter, Cathay repurchased 242,000 shares at an average cost of $58 per share. The board also approved an increase in the share repurchase authorization from $150 million to $200 million, subject to regulatory approval.

Wang said buyback activity was lighter during the quarter in part because regulatory approval came later in the period. He said the company expects to increase repurchase activity through the rest of the year and maintain more capacity heading into the first quarter than in prior years.

Cathay also plans to redeem approximately $54.1 million of its $119.1 million in outstanding trust-preferred securities, targeting its highest-cost issuances. Management said the move is expected to reduce funding costs and improve recurring earnings.

For the full year, Wang said Cathay continues to expect loan growth of 3.5% to 4.5%. The company lowered its deposit growth outlook to 3% to 4%, citing slower-than-expected first-half growth. Cathay maintained its adjusted non-interest expense growth outlook of 3.5% to 4.5% and now expects an effective tax rate between 21% and 22%.

"Overall, we're pleased with our performance for the first half of the year," Liu said, adding that the company is entering the third quarter with "good momentum" while maintaining a disciplined approach to growth, capital and expenses.

About Cathay General Bancorp (NASDAQ:CATY)

Cathay General Bancorp is a bank holding company headquartered in Los Angeles, California, trading on NASDAQ under the symbol CATY. Its principal subsidiary, Cathay Bank, provides a full suite of financial services to commercial, institutional and retail clients. As a community-focused institution, the company emphasizes relationship banking and tailored solutions for businesses and individuals.

Founded in 1962 by a group of Chinese American entrepreneurs, Cathay has expanded from a single branch operation in downtown Los Angeles into one of the largest Asian-American banks in the United States.

This instant news alert was generated by narrative science technology and financial data from MarketBeat in order to provide readers with the fastest reporting and unbiased coverage. Please send any questions or comments about this story to [email protected].

Where Should You Invest $1,000 Right Now?

Before you make your next trade, you'll want to hear this.

MarketBeat keeps track of Wall Street's top-rated and best performing research analysts and the stocks they recommend to their clients on a daily basis.

Our team has identified the five stocks that top analysts are quietly whispering to their clients to buy now before the broader market catches on... and none of the big name stocks were on the list.

They believe these five stocks are the five best companies for investors to buy now...

See The Five Stocks Here

Featured Articles

• The Top Five Stocks to Own in August
• Could Truth API Become Trump Media's First Meaningful Revenue Driver?
• Small Caps Are Crushing the S&P 500-3 Stocks Still Worth Buying
• Moog Is More Than a Missile Maker, and Wall Street Is Noticing
• A Boring Dividend Growth Strategy Becomes a Solid Defensive Play
• Boxabl Disrupts Housing With A Tiny Float IPO