Cathay General Bancorp added $340.4 million to commercial loans in the three months ended June 30, while construction loans fell $89.2 million. The bank is growing one part of its loan book and shrinking another, a useful detail in a filing that first looks straightforward: revenue rose 29.0% to $15.9 million, and net income increased 19.1% to $92.2 million.
Diluted earnings per share rose 24.5% to $1.37, helped by a 4.1% reduction in diluted shares. The margin is the counterpoint. Cathay’s reported net margin fell from 629.5% to 581.1%, a decline of 48.4 percentage points, even as the bottom line moved higher.
Management attributes the biggest lift to funding costs, not to a broad improvement in every revenue line. The company also disclosed a $13.0 million increase in net gains from equity securities, partly offset by a $10.6 million loss from repositioning available-for-sale securities. That makes the earnings increase a combination of cheaper deposits, market-related gains, and fewer shares outstanding.
Cathay’s explanation for the interest line is blunt:
"The increase was primarily due to a lower interest expense on deposits, partially offset by a lower interest income on deposits with other banks."
Cathay General Bancorp, 10-Q, Aug. 7, 2026
In plain English, the bank paid less for deposits, but also earned less on cash parked with other banks. The filing gives the helpful part of the equation a name, while leaving the full rate-sensitive trade-off intact.
Operating costs moved the other way. Salaries and employee benefits increased $3.6 million, computer and equipment expenses rose $1.4 million, and other real estate owned expense increased $0.7 million. Cathay described the combination this way:
"The increase was primarily due to a $3.6 million increase in salaries and employee benefits, a $1.4 million increase in computer and equipment expenses, and a $0.7 million increase in other real estate owned expense, partially offset by a $1.5 million decrease in professional service expense, and a $1.3 million decrease in amortization expense of investments in low-income housing."
Cathay General Bancorp, 10-Q, Aug. 7, 2026
That is the filing’s central trade-off. Earnings grew, while operating costs also increased and the reported margin declined. The balance sheet provides another piece of context: total non-performing assets rose 1.2% to $145.4 million at June 30, primarily because other real estate owned increased $3.3 million.
Capital still accumulated. Total equity reached $3.05 billion, up $121.2 million from Dec. 31, 2025, after net income and other comprehensive income more than offset dividends and treasury-stock purchases. The bank is therefore showing higher earnings and more total equity in the same filing that records a slightly heavier non-performing-asset load.
Cathay was also among the most active names in a 23-member regional-bank group on Aug. 7, when 18 members crossed the activity threshold. That is a description of trading behavior, not an explanation for Cathay’s results, but it places the filing in a session where several regional-bank names were moving within the same broad group.
Cathay’s next quarterly report will make the current tension easier to track by showing whether the lower deposit-interest expense persists alongside the non-performing-asset balance. For now, the arithmetic is simple enough: cheaper deposits coincided with higher earnings, while operating costs also increased and the reported margin declined.
Cathay’s latest filing pairs cheaper deposits with a costlier operating bill.