Central Bancompany, Inc.

Good day, and thank you for standing by. Welcome to the Central Bank Company fourth quarter 2025 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1-1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1-1 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, John Ross, President and CEO. Please go ahead.

Good morning, and thank you for joining our inaugural earnings call. With me in the room today is our Chief Financial Officer Jim Cerulli, Chief Customer Officer Dan Westhues, and Chief Credit Officer Eric Holgren. Before we begin, I'd like to point out that today's discussion is subject to the same forward-looking considerations outlined on page four of our press release. While the format of our calls may vary over time, today we plan to be very brief in our discussion of fourth quarter highlights before opening the line for Q&A. Before doing that, however, please allow me to thank our team for their tireless contributions. In 2025, they delivered for their communities with over 28,000 hours of community service. They also delivered for their customers, with our net promoter score improving two points to 73 on a consolidated basis across our business lines. And finally, to our shareholders, with significant progress made in our technology modernization program and our financial results, which I will turn to now. For the fourth quarter, Central Bank posted net income of $107.6 million, or 47 cents per fully diluted share. return on average assets of 2.17%, net interest margin on an FTE basis of 4.41%, and an efficiency ratio on an FTE basis of 47%. Our asset quality remained in line with 10 basis points of net charges, and our allowance covered 131 basis points of total loans. While too early to call it a trend, we are also encouraged by the resumption of balance sheet growth. With ending loans up 1% quarter over quarter, and non-public deposits up 1.7% quarter over quarter. Lastly, capital levels at the holding company remain well above target, with approximately $1.8 billion of excess, or $7.50 a share. We look forward to the challenge of repeating our historical earnings growth in 2026, including the critical objective of prudently deploying our ample excess capital. With that, I'd like to open the line for questions. Operator?

As a reminder, to ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Please stand by while we compile the Q&A roster.

And our first question comes from Manon Casalia with Morgan Stanley.

Your line is open.

Hi, good morning all. First up, congratulations on your inaugural earnings release as a public company.

Thank you, Manoj.

And JR, maybe to start with, M&A has always been in the DNA of Central, and you guys have been pretty clear that M&A is a core part of your strategy here as you look to deploy some of this excess capital. I guess my question is, can you give us an update on the opportunity set that you're seeing as it relates to M&A right now?

Yeah, I'll try to answer your question in a second, but for the broader group, let me just kind of level set for a few things that I know that you know. But over the last 50 years, we've done 47 acquisitions, so we do consider this a competency of the company. We have laid out in the context of our IPO very clearly what we're hoping to do, and we're looking to both grow acquisitions in our existing markets, but also potentially expand into Texas as well. We're hoping to do that with deals of size, which we've roughly equated to $2 billion in assets. And we're looking for high-quality targets, both in terms of their deposit franchise and their credit franchise, with cultures compatible to ours. And we outlined a list of about 30 names on that list that we think meet our criteria, and we are in a process and have been for a few years now making introductions and having good conversations with at least half of the folks on that list. We are broadly encouraged by the environment. There is a lot of activity and conversations going on, which does on the margin help boards think about their opportunity set more than they do, generally speaking. And we do have a currency now, which makes those conversations a lot more interesting to those who were are more inclined to participate in the upside of the company that we've enjoyed for so long. Having said that, we're not going to go into this call or any other call on a lot of detail other than to tell you we continue to diligently prosecute against that opportunity set, and we will likely have no specific update or detail for you until we're actually announcing a deal, which we look forward to do in hopefully the not-too-distant future. But as we've said before, We're much more focused on doing the right deal than doing a timely deal, so no real estimate or guidance on when that might be.

Yeah, and we're just going to be that way, Manon, and I think you guys can appreciate we just don't want to leave any breadcrumbs or any signals when something might be or might not be happening, so we prefer to just continue to talk about what our target set is but not really make any other comments.

Fair enough. Thank you for that. And maybe as it relates to fourth quarter earnings, you spoke about the resumption of balance sheet growth, and I think in the slide deck you noted less payoff activity as a tailwind to low growth in the fourth quarter. How should we think about the pace of balance sheet growth from here, and where do you see the most opportunity?

So we're also not going to provide forward-looking guidance What I will say is when you look at the detail of where our loan growth came from, it was pretty broad-based. And one of the things I'll point out to you that wasn't growing was our installment loan portfolio. And if you take out installment loans and you look at loan growth, when you annualize those numbers for just the third quarter, you see a number that's kind of mid, maybe even a bit over mid single digits growth. But we serve our markets and our customers are really going to dictate where that is. The one thing I would point out that is when we're in a risk-on environment, I think we're gonna probably grow a little bit slower than average when we're in a risk-off environment because we don't really change our credit underwriting standards through the cycle. We try to be as consistent as possible. In a risk-off environment, We'll see more opportunities come to us, and we like that. We like sticking to our knitting and doing our thing, so we're happy to see the loan growth. We think it's going to continue, but we're not going to provide any guidance as to how much and where it comes from is as much up to our customers as it is up to us.

Got it. Very helpful. I guess just without providing forward guidance, if you can just talk about the environment in the fourth quarter, and was that any different from the environment that you saw in the second and third quarter of 2025?

I would not say so. What we saw was there was just an abatement of some of the higher refi activity. We were pretty clear when we did the IPO Roadshow that we thought that origination volume year-to-date in 2025 was pretty robust and pretty strong, but it was muted by higher level of payoffs that we saw earlier in the year. We think the pipelines continue to be strong and the payoffs have muted, and that's what's translated, especially when you look at the commercial numbers. That's what's translated into the commercial numbers and C&D growth that you're seeing at the period in balance sheet. Eric, is there anything that I'm leaving out there? No, I don't think so. I appreciate the question.

Yeah, that's perfect. Thanks very much.

Thank you.

Thank you. Our next question comes from Nathan Race with Piper Sandler. Your line is open.

Hey, guys. Good morning. Thanks for taking the questions, and congrats on a nice quarter out of the gates here. You know, curious if you can just provide some color just in terms of how you're seeing spreads hold up on new loan production in the quarter and just maybe what kind of the way average rate on new loan production was in the quarter relative to, you know, the 630 portfolio yield, give or take.

Yeah, so there's a lot there. So keep track of how much I answer here. So we're not seeing spread compression. We, you know, keep in mind that in general, make two comments about our portfolio in general it's more granular so i.e you know in you know the median ticket size is probably lower than comparable 20 billion oversized banks and we probably over index on the fixed side but we continue to see if you're comparing with the treasury curve we're seeing spreads of around 300 basis points and we've seen that for a long long time and We don't, especially in our markets, expect that really to change much. So, you know, whether that's a variable or whether that's the fixed rate product, typically with a kind of a two to five year tenor, we're seeing about 300-ish bips in spread over comparable treasuries.

Okay, great. That's helpful. Thanks, Jim. And then just maybe turn to the right side of the balance sheet. You know, your deposit growth in the quarter was quite strong. You know, I'm curious if you can just remind us how much of that may be somewhat seasonal in nature versus just kind of blocking and tackling and taking market share or just, you know, growing balances across the existing client base.

Very good, Nate. I appreciate you remembering the seasonality. We've got a very large public funds oriented deposit gathering business. It's about 17% of our deposit portfolio. And in the state of Missouri, property taxes are collected at the end of the year. So really, I'd say focused in a December timeframe, and I'm learning this myself being somewhat new to the company, deposit balances grow. So if we try to normalize for that, we'd say non-public Deposits grew about 1.7% in the quarter. When you look at a year-over-year basis, we also saw some pretty nice growth. We saw about 6% growth on a comparison to prior year end. That does include some of the seasonality, but it also shows you that even with that seasonality, we're growing deposits in the mid to upper single digits. I want to go back to one comment I forgot to give you on loan yields. When you look at the loan yield, it came down like a bit. So amazingly stable in light of the 75 basis points of rate cuts that we had at the end of the year there. And, you know, that kind of underscores what we continue to say in terms of our sensitivity to the front end of the curve is relatively neutral.

Okay, that's very helpful. Jim, if I could just sneak one more in for you, just any update in terms of how you've contemplated or redeployed some of the capital or liquidity raised in the IPO?

It's early days, right? So we just raised that less than a quarter ago. I will still say our primary focus is looking at M&A opportunities. We think that's probably our greatest opportunity to add shareholder wealth. J.R. mentioned, you know, $7.50 a share represents excess capital, and we think we can deploy that in M&A transactions and earn something significantly above that $7.50. But look, everything remains on the table that, you know, in terms of deploying that capital, and our board is very, you know, very aware of its obligation as being good stewards of capital. as to how best to deploy that. So we would look at every tool on the table from dividends and buybacks. When the time comes and when it's appropriate, we'll continue to evaluate what the best way to deploy that capital is.

I apologize, Jim. I was actually asking in terms of how you're managing the liquidity that you raise in terms of just keeping it in cash or maybe investing in some short-term treasuries.

I'm sorry. I'm discovered. That's my bad, Nate. Yeah, so, you know, we look at some of the seasonality and the deposits, and we would expect that the seasonality we see picking up in December kind of runs out, you know, kind of it stays on the balance sheet through the second, maybe a little bit into the third quarter, and we'll keep the appropriate powder dry from a cash perspective and look to invest the rest. Now, down to a certain level. Given the shape of the curve right now, and with that cash earning, whatever the Fed's willing to pay us, there's not a real imperative to putting that out to use a little bit longer. But in terms of where the curve goes, if the forward curve is to be believed, and that's what we look at, We're not expecting to see a rate cut in the overnight rate until the second half of the year. So we're going to deploy that excess cash patiently in a disciplined way, the way we always have, into safe, relatively risk-free opportunities.

Got it. That's, again, very helpful. I appreciate all the color guys, and congrats on all the accomplishments over the last 90 days or so.

Thanks, Nate. Appreciate it.

Thank you. Our next question comes from Terry McEvoy with Stevens. Your line is open.

Hi, good morning, and thank you for hosting the call this morning. Maybe first question, could you just provide an update on the wealth and treasury management initiatives? And I'm not sure you'll answer this question, but when you think about growth in those two business lines in 26, do you see similar growth within the brokerage and fiduciary services? And and payment services has been a little flat. When would you expect some of those initiatives to translate into organic growth?

Great questions, Terry. I appreciate that. From a wealth perspective, I would point out to you that at the end of the quarter, our assets under advice grew to $16 billion, which was a nice pickup. That was the product of both investment performance, and I'd say investment outperformance because our guys are beating their relative benchmarks, as well as we saw strong net new money coming into AUM all throughout the year, especially in the fourth quarter. And I continue to say our wealth business can compete with anyone out there. And I truly mean anyone. And so some of the other providers that are simply doing something that's simpler, but maybe even charging more, I think we win against every day. So wealth continues to be a great opportunity for us. From a treasury management side, I'm going to point out there's a couple of things that you're probably looking at. So from a payments perspective, as well as a service charge perspective, we generally see a little bit of fall off going from Q3 to Q4. So there's some seasonality in those numbers. Not as much on the commercial side from a from a service charge perspective, but certainly payments volume falls off in the fourth quarter. We continue to make investments in that business that we think are going to lead to us continuing the growth rate you've historically seen in our company.

Thanks, Jim. And maybe just to follow up, stepping out of the model, could you discuss branch expansion plans in 2026?

We think there's tremendous opportunities, and we've got a number of things in the pipeline. I'm going to give Dan Westhues a chance to speak because he's eager to, and talk about where we're looking at putting those branches.

Thank you. For 2026, we have two major locations where we know we are having branches come online. That's St. Louis and Colorado, or Denver, Colorado. The first branch comes online here in the next couple months in St. Louis with at least two more for sure in 2026 in St. Louis. And then we're negotiating some other spaces, but it's still looking. So branch expansion in St. Louis, we are finally trying to kind of right-size our footprint up there. We have one coming on in Colorado, and that should be on by the second quarter of this year as well. So two for sure, two more coming after that, and the negotiations for the rest.

Great. Thanks, Dan, and congrats on your first company as a public company, first quarter.

Thanks, Jerry.

Thank you. As a reminder, to ask a question, please press star 1-1 on your telephone. Again, that is star 1-1 to ask a question. Our next question comes from Chris McGrady with KBW. Your line is open.

Oh, great. Good morning. Jim, maybe a question on slide five, if you could. The lower right part of slide five gives you kind of the net interest income outlook with a static balance sheet and also kind of alternative rates. I'm interested in how we should interpret this given the conversation this morning. Obviously, loan growth a little bit better, forward curve maybe having a cut or two. The base case would seem kind of where you'd want us to kind of land, but any kind of inside baseball on the nuances would be great. Thanks.

Yeah, I don't know that there's much in the way of nuances there. We show the steepener curve because, look, rates never – we show the parallel moves, right? But rates never move in parallel. When we look at the forward curve, we think we're looking at more of a steepener scenario with two rate cuts. This is what's in the modeling. Two rate cuts later in this year, and it's just not in the steepener model. It's more of an instantaneous shock. But We see the forward curve having two rate cuts later this year, so we are looking at the steepener, where we drop the front end of the curve, and from about the two-year point on out, we gradually increase that so that we've got a full 50 basis points baked in on the longer part of that curve, but 45 of that 50 is already baked in by the five-year mark in the steepener scenario. So as we look at that, what we wanted to show is really that we're not really, we don't think there's much impact to us. We go from a, we go from 6% up in net interest income next year with that steepener scenario to a 3% up, which is very similar to what we were showing at the time of the IPO. And again, we don't have much sensitivity to the front end of the curve. Our exposure is really more in the intermediate part of the curve. And to the extent that rates are up. They're up this morning. They continue to rise a little bit in that part of the curve. We're going to see a net interest income benefit.

Okay. So it feels like the base case is a fair place to start, and then you make my assumptions on the balance sheet growth. Okay.

It doesn't include growth.

That's right. Yes, sir. And on, I guess, credit, anything on the margin incrementally that you're Caring from customers, you're keeping your eye on. I mean, you guys are a good barometer of credit. So I'm interested in your thoughts if anything's changed in the last 90 days.

Yeah, I think those are fairly pristine numbers, Chris, especially with our net charge operating coming down. But I'll turn to Eric and see if there's any additional color you can add.

Yeah, thanks, Jim. So we haven't really seen anything specific that I would say points to weakness or pockets of weakness in the portfolio. On the watch list side, we've seen some evolution or composition shift from criticized into classified categories. But again, as we think about lost content, we don't see anything significant or moving in the portfolio. We are traditionally patient with our relationships and our loan relationships, but we're not holding or harvesting, delaying any potential resolutions. Markets are really diligent and focused on managing outcomes to the best possible extent for both the bank as well as the client. I think that's all I've got. Jim, did I miss anything that you want to add? Okay.

And then while I have you, Jim, just tax rate this quarter fair for going forward.

So you said the tax rate?

Yeah.

So you did call out that there was about 40 bips of unusual items in the effective tax rate so of that I guess that 30 of that 40 is out of period and 10 of that is native to the periods that should be helpful to you okay thank you thank you I'm showing no further questions at this time I would now like to turn it back to John Ross for closing remarks

Thank you, operator. Just over 20 minutes, that might be a record short earnings call, and I'm going to attribute that to solid numbers and a really good job that Jim did on his first call for us, having been here less than a year. So well done, Jim. I'd also like to thank the participants on the call for their time and interest, and our investors more broadly for their support. We look forward to any opportunity to serve you better as we mature as a public company. Thank you again.

This concludes today's conference call. Thank you for participating. You may now disconnect.