Cathay General Bancorp Posts Strong Q3 Results, Driven by Record Net Interest Income and Margin Expansion
Cathay General Bancorp has reported a strong third quarter of operating performance, highlighted by record net interest income, continued margin expansion, and robust loan and deposit growth. The company's net income reached $95.2 million or $1.43 per diluted share, while net interest income hit a record $211.9 million, increasing 5.5% from the prior quarter.
The bank's balance sheet management strategy has paid off, with active balance sheet management, loan growth, and asset repricing contributing to another 4 basis points of net interest margin expansion to 3.52%. Pre-provision net revenue also saw a significant jump, rising $21.3 million or 16.4% from the prior quarter, driven by stronger revenue growth relative to expenses.
Loan and deposit growth were notable during the quarter, with loans increasing $575 million or 2.8%, while deposits grew by $773 million or 3.7%. Non-interest-bearing demand and money market balances led this growth, which helped fund lending and improved the net loan-to-deposit ratio to approximately 96%.
However, the company did experience elevated charge-offs in three borrower-specific credits, leading to a decline in non-performing assets of about 18%. Credit results were also impacted by criticized and classified balances, but overall credit quality remains sound outside these specific credits.
The quarter also included several notable items, including a $36.1 million valuation gain on equity securities and a $15.1 million loss related to securities repositioning. The latter is expected to add approximately $2.9 million to annual net interest income and improve the yield on the securities portfolio.
Cathay General Bancorp has continued its commitment to supporting communities through philanthropy, committing $8 million to the Cathay Bank Foundation during the quarter. Additionally, the company incurred $5.4 million in contract termination costs to enhance its operating model and completed a planned redemption of $54.1 million of trust preferred securities, providing a $3.1 million benefit.
CEO Chang Liu expressed satisfaction with underlying trends in the business, including strong relationship growth, improving net interest income, continued investment in the franchise, and a robust capital position. CFO Al Wang further elaborated on the balance sheet performance during his presentation.
