Regional bank Cathay General Bancorp (NASDAQ: CATY) announced better-than-expected revenue in Q1 CY2026, with sales up 11.9% year on year to $214.8 million. Its non-GAAP profit of $1.29 per share was 6.3% above analysts’ consensus estimates.

Is now the time to buy CATY? Find out in our full research report (it’s free for active Edge members).

StockStory’s Take

Cathay General Bancorp’s first quarter performance saw revenue and profit results above Wall Street’s expectations, with management attributing the outcome to disciplined deposit cost management and a focus on core relationship lending. CEO Chang Liu noted that net interest margin (NIM) expanded due to lower deposit costs, despite a competitive environment and only modest loan growth. The quarter was also marked by a mix of a valuation gain on equity securities and an impairment on debt securities, which largely offset each other, as well as continued improvement in credit quality metrics and efficiency ratios.

Looking forward, Cathay General Bancorp’s management reiterated their guidance for full-year loan and deposit growth, anticipating these will be more weighted towards the middle and back end of the year, supported by a healthy pipeline and improved customer engagement. CFO Albert Wang stated that, with the removal of expected rate cuts from the outlook, the bank still aims to maintain its NIM through active securities repositioning and ongoing management of deposit costs. Management also highlighted the potential impact of regulatory changes on capital ratios, while reaffirming their cautious approach to loan origination given macroeconomic uncertainties and competitive pressures in deposit markets.

Key Insights from Management’s Remarks

Management attributed the quarter’s results to effective deposit cost controls, a focus on stable credit quality, and a balance sheet repositioning that supported margin expansion.

• Deposit cost management: The bank achieved net interest margin expansion by reducing deposit costs, even as competition for deposits intensified. Management cited the repricing of maturing certificates of deposit (CDs) at lower rates as a key lever.

• Balance sheet repositioning: Cathay General Bancorp executed a securities portfolio repositioning, selling lower-yielding mortgage-backed securities and reinvesting proceeds at higher yields. CFO Albert Wang estimated this will contribute an additional 2–3 basis points to NIM in 2026, supporting overall profitability.

• Credit quality discipline: Credit metrics improved, with lower net charge-offs and a reduction in nonperforming asset ratios. The bank increased loan loss provisions selectively, especially in coastal office portfolios, in response to a slightly weaker macroeconomic outlook.

• Efficiency gains: The efficiency ratio improved both on a reported and adjusted basis, as noninterest expenses declined due to lower amortization of low-income housing credits and reduced compensation costs.

• Capital return actions: The board approved a new $150 million share repurchase program (pending regulatory approval) and raised the quarterly cash dividend, signaling an ongoing commitment to returning capital to shareholders.

Drivers of Future Performance

Management sees margin sustainability, stable credit quality, and disciplined loan growth as the primary themes for upcoming quarters.

• Margin management amid rate pressures: The outlook assumes no further rate cuts in 2026, with management relying on higher-yielding securities and careful deposit repricing to sustain net interest margin. CFO Albert Wang noted that while deposit competition could increase funding costs, completed securities trades should partially offset these pressures.

• Cautious loan growth: Loan growth is expected to be more weighted towards the middle and back end of the year, supported by a healthy origination pipeline and increased customer engagement. However, management remains committed to disciplined underwriting and relationship-based lending, prioritizing credit quality over volume.

• Regulatory and macroeconomic factors: Potential changes in capital requirements could benefit Cathay General Bancorp, especially given its large, low-risk mortgage portfolio. Management also flagged ongoing geopolitical and economic uncertainties as factors driving a prudent risk management stance, particularly in stressed segments like coastal office real estate.

Catalysts in Upcoming Quarters

In the coming quarters, the StockStory team will be watching (1) whether deposit cost discipline continues to support net interest margin in a more competitive environment, (2) the pace and quality of loan growth as customer pipelines mature, and (3) the impact of regulatory changes on capital ratios, particularly given the bank’s exposure to low-risk mortgage lending. Execution on securities repositioning and expense management will also be key indicators of ongoing profitability.

Cathay General Bancorp currently trades at $53.80, in line with $53.78 just before the earnings. At this price, is it a buy or sell? See for yourself in our full research report (it’s free).

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