Cathay General Bancorp Q4 Earnings Call Highlights

22 Jan 2026, 19:46 by Teresa Graham · The Cerbat Gem

Cathay General Bancorp (NASDAQ:CATY) reported fourth-quarter 2025 net income of $90.5 million, up 16.5% from $77.7 million in the third quarter, as lower credit provisioning and higher revenue more than offset higher expenses and taxes. Diluted earnings per share rose 18.3% to $1.33 from $1.13 in the prior quarter, according to management’s prepared remarks on the company’s earnings call.

For the full year 2025, the bank posted net income of $315.1 million, a 10.1% increase from $286.0 million in 2024.

Share repurchases and balance sheet growth outlook

President and CEO Chang Liu said the company repurchased 1.1 million shares in the fourth quarter for $51.9 million at an average cost of $47.15 per share under a $150 million stock buyback program announced in June 2025. Management said about $12 million remained under the authorization and that the bank expected to complete the program in early February, with plans to announce a new buyback program after receiving approvals.

Total gross loans increased $42 million in the quarter, driven primarily by an $80 million increase in commercial real estate (CRE) loans and a $17 million increase in residential loans. Liu said the company expects loan growth in 2026 to be between 3.5% and 4.5%.

On loan structure, management highlighted that hybrid loans represented 60% of the portfolio (excluding fixed-to-floating interest rate swaps, which represent 3.1% of total loans), while fixed-rate loans accounted for 30% of total loans. Liu said the company expects fixed-rate loans to support loan yields if market rates decline.

CRE portfolio composition and monitoring

Management emphasized ongoing monitoring of the bank’s CRE portfolio and provided details on portfolio metrics. Liu said the average loan-to-value (LTV) for CRE loans remained steady at 49%.

Retail property loans: 24% of the total CRE portfolio (or 12% of total loans). Of the $2.5 billion retail property portfolio, 90% is secured by retail store, neighborhood, mixed-use, or strip centers, while 9% is secured by shopping centers.
Office property loans: 13% of the total CRE portfolio (or 7% of total loans). Of $1.4 billion in office loans, 30% is secured by “pure office,” and 3% is in central business districts. Another 42% is collateralized by office retail stores, office mixed-use, and medical office properties, with the remaining 28% secured by office condos.

Credit quality trends and provisioning

Credit metrics improved sequentially in the fourth quarter. The company reported net charge-offs of $5.4 million, down from $15.6 million in the third quarter. Non-accrual loans were 0.6% of total loans as of Dec. 31, 2025, and decreased $53.3 million to $112.4 million from the prior quarter. Liu attributed the decline in non-accrual loans in part to the sale of a $15.8 million CRE loan at par and a $10.8 million CRE loan returning to accrual status after being brought current.

Classified loans declined to $391 million from $420 million in the prior quarter. Special mention loans increased to $535 million from $455 million. Management said the bank downgraded five loan relationships totaling $92 million to special mention due to missed debt covenants and short-term financial issues, but indicated it believes these credits will resolve within the next 12 months through upgrades or partial/full payoffs.

During the Q&A session, management gave additional color on three of the downgraded relationships, describing them as distinct situations rather than indicating a broader trend. Examples included a completed, fully occupied mixed-use project in New York awaiting approval for a lower property tax status; a Pacific Northwest multifamily mixed-use property working to add a new commercial tenant amid increased competition; and a C&I borrower described as an exercise equipment distributor that had missed quarterly financial requirements but expected a positive full-year outcome once CPA financials are received.

The provision for credit losses was $17.2 million in the fourth quarter, compared with $28.7 million in the third quarter. Liu said the allowance for loan and lease losses (ALLL) to gross loans increased to 0.97% from 0.93%; excluding the residential loan portfolio, the reserve-to-loan ratio would be 1.22%.

Margin improvement, deposit dynamics, and 2026 guidance items

Executive Vice President and CFO Heng Chen said fourth-quarter net income rose primarily due to an $11.5 million reduction in the provision for credit losses, a $5.4 million increase in net interest income, and a $6.8 million increase in non-interest income. Those factors were partially offset by a $4.0 million increase in non-interest expense and a $6.8 million increase in income tax provision.

Net interest margin (NIM) increased to 3.36% from 3.31% in the prior quarter, which Chen attributed to lower funding costs. The company projected a 2026 NIM range of 3.4% to 3.5% and said it anticipates additional benefit from declining deposit costs, supported by the fixed-rate portion of the loan portfolio. Chen also referenced fed funds futures, projecting two rate cuts in 2025—one in June and a second in September.

Interest recoveries and prepayment penalties added five basis points to NIM in the fourth quarter, compared with four basis points in the third quarter, Chen said.

Non-interest income increased to $27.8 million from $21.0 million, mainly reflecting a $6.4 million change in mark-to-market unrealized gains on equity securities. Non-interest expense rose to $92.2 million from $88.1 million, driven primarily by a $4.3 million higher bonus accrual tied to “above budget” financial performance for 2025. Chen said the company expects core non-interest expense (excluding tax credit and core deposit intangible amortization) to increase 3.5% to 4.5% in 2026.

Total deposits increased $373 million in the fourth quarter, or 7.6% on an annualized basis, led by $366 million in core deposit growth. Management attributed the increase to seasonal factors and targeted marketing. For 2026, the company expects deposit growth of 4% to 5%.

In response to an analyst question, management said it is assuming deposit betas “in the 60% range” for interest-bearing deposits. Liu added that the local Los Angeles and New York deposit markets remain competitive and noted nearly $4 billion of maturing CDs in the first quarter with an average yield of about 3.8%. He said the bank plans to run a Lunar New Year campaign and aims to price renewals somewhat below that level while remaining focused on defending its deposit base and transitioning some balances into non-interest-bearing accounts.

On liquidity, Liu said uninsured deposits totaled $9.3 billion net of $0.9 billion in collateralized deposits, representing 44.6% of total deposits at Dec. 31, 2025. He cited $7.5 billion of unused Federal Home Loan Bank borrowing capacity, $1.3 billion from the Federal Reserve Bank, and $1.6 billion in unpledged securities, stating these sources together exceeded 100% of uninsured and uncollateralized deposits.

Chen also reviewed capital levels, noting the Tier 1 leverage ratio increased to 10.91% from 10.88% in the third quarter, the Tier 1 risk-based capital ratio rose to 13.27% from 13.15%, and the total risk-based capital ratio increased to 14.93% from 14.76%.

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.