CBC Q1 2026 Earnings Transcript

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DATE

Tuesday, April 28, 2026, at 10 a.m. ET

CALL PARTICIPANTS

• Chairman and Chief Executive Officer — John Ross
• Chief Financial Officer — James Ciroli
• Chief Customer Officer — Daniel Westhues
• Chief Credit Officer — Eric Hallgren

TAKEAWAYS

• Net Income -- $111.1 million, representing a 17% increase and a $16.3 million rise from the prior year.
• Earnings Per Share -- $0.46 per fully diluted share.
• Return on Average Assets -- 2.2% for the period.
• Net Interest Margin (NIM) on an FTE Basis -- 4.36%.
• Efficiency Ratio on an FTE Basis -- 45.7%.
• Net Charge-Offs -- 10 basis points, with the allowance covering 130 basis points of total loans.
• Loan Growth -- Ending loans, excluding other consumer, up nearly 6% annualized quarter over quarter.
• Deposit Growth -- Average deposits increased 5% year over year.
• Capital Levels -- $1.9 billion of excess capital at holding company level, equating to $7.80 per share.
• Capital Deployment -- Repurchased $32 million of shares and increased quarterly dividend.
• Loan Yields -- Declined 3 basis points versus the prior quarter mainly due to lower prepayment fees; future repricing of $1.8 billion expected at approximately 5.80% yield.
• Deposit Costs -- Down 5 basis points quarter over quarter when adjusted for seasonal increase in public funds balances.
• Payments Revenue -- Seasonal decline between Q4 and Q1, but "no concern" on year-over-year growth per Ross; commercial segment programs contributing positively.
• Public Fund Deposits -- Seasonal fluctuations impacted quarter averages, but ending balances were lower than those averages and expected to continue to decrease.
• Share Repurchases -- Over 1 million shares repurchased representing $32 million; stock "still cheap" according to Ciroli.
• Expense Management -- Noninterest expense at a sustainable quarterly run rate; public company cost run-rate now incorporated, with only minor expected uptick from merit increases.
• Nonmaturity Deposits -- Approximately 90% of deposit base is nonmaturity, leading to gradual adjustment in deposit costs.
• Securities Reinvestment -- Increased purchases near quarter-end, with April reinvestments made at about a 4.30% yield, primarily in U.S. government or agency securities.

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RISKS

• The increase in delinquency, "primarily driven by commercial in the first quarter," was concentrated "in a small number of markets and largely attributable to a handful of commercial clients," but management does not expect broader deterioration.

SUMMARY

Central Bancompany (NASDAQ:CBC) reported significant growth in net income and capital, with a low efficiency ratio highlighting operational discipline. Management continues to deploy excess capital through buybacks and dividends while keeping capital ratios well above targets. Initiatives in payments and commercial lending are yielding favorable results, with seasonal and competitive factors in deposits noted but not viewed as impacting strategic trajectory. Expansion of securities investments at higher yields and an active approach to balance sheet management were clearly communicated as current priorities.

• Management described the stock as "still cheap" relative to core capital metrics and highlighted increased liquidity as supporting continued share repurchases.
• Ciroli said, "We do not target a specific cash-to-earning-assets ratio," emphasizing flexibility in liquidity management and focus on risk-appropriate deployment.
• Public funds seasonality was clarified as a transient factor, with normalization expected in subsequent quarters to benefit the net interest margin mix.
• Leadership indicated no imminent updates on M&A activity, reiterating ongoing dialogue but "Nothing is imminent." at this stage.
• Payments business seasonal Q1 decline was explicitly described by Ross as not a concern due to durable underlying growth drivers.
• Deposit growth was attributed to mid-single-digit expansion across markets through checking account acquisition rather than yield-driven competition.

INDUSTRY GLOSSARY

• Net Interest Margin (NIM) on an FTE Basis: Net interest income divided by average earning assets, adjusted for the tax-equivalent effect of municipal securities or loans.
• Efficiency Ratio: Noninterest expense divided by the sum of net interest income and noninterest income, indicating cost efficiency.
• Nonmaturity Deposits: Deposits without a contractual maturity date, including savings, money market, and demand deposit accounts.
• Public Fund Deposits: Deposits from governmental or public sector entities, often subject to seasonal fluctuations.
• Core Conversion: Implementation or migration of foundational banking systems, typically affecting operations and expenses.

Full Conference Call Transcript

John Ross: Thank you, operator. Good morning, and thank you for joining us for Central Bancompany, Inc. Class A Common Stock’s first quarter 2026 earnings call. With me in the room today are our chief financial officer, James Ciroli; chief customer officer, Daniel Westhues; and chief credit officer, Eric Hallgren. As a reminder, I would like to point out that the discussion today is subject to the same forward-looking considerations outlined on page 3 of our press release. Today, we plan to briefly discuss first quarter highlights before opening the line for questions. Before I turn to the numbers, please allow me to share some non-financial highlights.

In the first quarter, we were humbled to again be named one of Best Banks by Forbes, as well as the best-performing U.S. public bank with more than $10 billion in assets by S&P Global Market Intelligence. Recognition from such organizations is a testament to the efforts of our nearly 3,000 full-time employees, whom I would like to thank for their continued legendary service. With that, let us cover the financial results. For the quarter, Central Bancompany, Inc. Class A Common Stock posted net income of $111.1 million, or $0.46 per fully diluted share. Return on average assets was 2.2%, NIM on an FTE basis was 4.36%, and the efficiency ratio on an FTE basis was 45.7%.

Relative to 2025, net income increased $16.3 million, or 17%. Our asset quality remained consistent with 10 basis points of net charge-offs again this quarter, and the allowance covered 130 basis points of total loans. We remain encouraged by the continued resumption of growth in our balance sheet, with ending loans excluding other consumer up nearly 6% annualized quarter over quarter, and average deposits up 5% year over year. Lastly, capital levels at the holding company remain well above target, with approximately $1.9 billion of excess, or $7.80 per share.

We leaned into capital deployment this quarter by announcing a meaningful increase to our quarterly dividend and repurchasing $32 million worth of our shares, taking advantage of attractive prices and expanded liquidity. We are pleased with these results and appreciate those on the line for joining us for this call. We will now open the call for questions. Operator?

Operator: Please press star 11 on your telephone. You will hear an automated message advising your hand is raised. To remove yourself, please press star 11 again. Our first question is coming from the line of Manan Gosalia of Morgan Stanley. Your line is open.

Manan Gosalia: Hi. Good morning, all. It looks like loan yields held up nicely despite rate cuts at the end of last year. I was hoping you could help us with what is going on under the surface in terms of yield spreads, fixed-rate loan repricing, and anything that can help us think through the forward look across different rate scenarios, given that rate expectations have been moving around quite significantly over the past several weeks.

James Ciroli: Yes, happy to, Manan. Looking at it on a linked-quarter basis, loan yields came down 3 basis points, and almost all of that was lower loan fees coming off higher prepayment fees in the prior quarter. We had fewer prepayments this quarter. I would also note that loans ended the quarter higher than their average, so we are showing growth momentum coming out of the quarter and into the second quarter. With fewer prepayments, we like that scenario. We repriced about $400 million in the quarter, and we anticipate about $800 million more for the rest of the year.

When those loans are repricing, they are coming out at roughly a 5.80% type yield, and we continue to see loan opportunities at about 300 basis points over similar-maturity Treasuries. As that $1.8 billion reprices over the rest of the year, that could provide some upside to where we were in NIM. I would not necessarily focus on the modest move in loan yields. If you look at the deposit side, our deposit costs came down 5 basis points if you factor out the shift higher in public funds we signaled on the last call. Public funds ended the fourth quarter higher, and we talked about the seasonality there.

Averages for the first quarter were higher than the fourth-quarter averages in public funds, and that is exactly what we saw. We anticipate that public funds balances, which ended the quarter lower than the average balance, will continue to come down, and that is exactly what we said on the last call. We also added slide 9 to the deck for transparency. Did I cover everything you wanted me to cover there, Manan?

Manan Gosalia: Yes, that was great detail. Thank you. Maybe pivoting to credit, delinquencies have edged up a little bit for a couple of quarters, and it looks like it is driven by commercial. Any thoughts on what you are seeing and your views on credit overall?

James Ciroli: What I would tell you is that we continue to have a lot of small numbers in our asset quality statistics, and when you have small numbers, small changes can seem bigger than they actually are. Our asset quality numbers continue to be pristine. Small changes in that pristineness can lead to big percentage changes, but that does not necessarily mean anything. I will now turn it over to Eric Hallgren for additional color.

Eric Hallgren: Thanks, Jim. The increase in delinquencies, as you noted, was primarily driven by commercial in the first quarter. That was concentrated in a small number of markets and largely attributable to a handful of commercial clients. From what we see, we do not anticipate those delinquencies degrading further and expect resolution here. Overall, we view it as isolated pockets of stress and not an indication of systemic weakness as we look ahead for the rest of the year.

Manan Gosalia: Got it. That is great. Thanks so much for the color.

Operator: Thank you. One moment for the next question, please. Our next question will be coming from the line of Nathan Race of Piper Sandler. Your line is open.

Nathan Race: Hey, good morning. Thanks for taking the questions. Jim, going back to the deposit flows in the quarter, how are you thinking about working down some of the excess liquidity that weighed on the margin in 1Q, and more generally, how should we think about the size of the balance sheet—specifically earning assets—as a better jump-off point for the second quarter?

James Ciroli: Great question, Nate. We worked hard in the first quarter. If you recall the path of rates, it was not looking terribly good earlier in the quarter, but near the end of the quarter we like to extend duration to about the four-year mark in our securities portfolio. Near quarter-end, rates came up in that part of the curve, so we stepped up the pace of our buying activity in March, and that continued into April as well. In April, we are reinvesting cash at about a 4.30% yield. We continue to look for opportunities that are U.S. government guaranteed or at least agency-sponsored. We do not like taking on a lot of convexity risk.

Our treasury team has done a lot of work, and when the market comes back to where we want it to be, like it did in March and April, we were able to move faster.

Nathan Race: Got it. That is helpful. Maybe changing gears, you are continuing to build excess capital at a really strong clip, as evidenced here in 1Q. JR, would love to get your thoughts on your optimism level for an acquisition this year and how conversations are trending. It seems like you have a competitive currency to share with potential partners, but would love some updated thoughts.

John Ross: It is an understandable question. More than half our capital is excess, and it is a major focus for us daily. Having said that, we have no real updates at this stage. You can push replay on the comments we made last quarter. To summarize, we think we are well positioned. We are in active discussions. Nothing is imminent. We see everything that is out there, and we will update you when we have a deal. Until then, we are just going to work really hard on it. No real updates this quarter.

Nathan Race: Fair enough. Maybe one last one. Payments revenue tends to show a seasonal decline in the first quarter. Do you still feel like the initiatives you put in place—particularly with Dan and his team—are bearing fruit, and do the payments revenue projections you have talked about still hold in terms of a nice ramp over the balance of this year?

John Ross: We do. I appreciate that you noticed the seasonality between Q4 and Q1. It really comes off a good quarter in Q4 and then comes down pretty sharply. But on a year-over-year basis, we continue to see the consumer spending, so there is no concern there. We are also seeing nice growth on the commercial side with programs we have put in place. We continue to feel sanguine about that business as we look forward.

Nathan Race: Okay, great. I appreciate all the color. Thanks, guys.

Operator: Thank you. One moment for the next question, please. Our next question will be coming from the line of Matt Olney of Stephens. Your line is open.

Matt Olney: Hey, thanks. Good morning, everybody. Going back to deposits, Jim, you already addressed the moving parts around public funds, and slide 9 is helpful. Any general observations you can share as far as the competitive dynamics for deposits in your marketplace and what you are seeing more recently?

James Ciroli: That is a fair question, Matt, and welcome to coverage on our stock. Looking forward to spending more time with you. Adjusting for seasonality—which we had a lot of this quarter—we are generally growing deposits mid-single digits across our markets. We are doing that through acquisition campaigns focused on growing checking accounts. We are focused on being our depositors’ primary checking account and on primacy overall. Once you normalize for seasonal activity, you can see mid-single-digit growth. We are not really out there competing for yield-seeking funds. We compete on service and primacy in the markets we serve, so I do think it is competitive out there from what I hear, but that is not the market we compete in.

Matt Olney: Appreciate the color. On capital allocation, you stepped up the share repurchase this quarter—just over a million shares. Help us appreciate your capital allocation strategy and where buybacks come into play. I think you disclosed ROIC around 12% based on how you think about it. Any more color on capital allocation and buybacks?

James Ciroli: Even with the $32 million we bought back this quarter, and the dividend step-up, we still grew our excess capital from $1.8 billion to $1.9 billion, as JR said. More than half of our tangible book value is excess capital. We value that excess roughly dollar for dollar. If you strip it out and look at our core capital and compare that to any measure you want—trailing twelve months, next twelve months, even looking at 2027 earnings—we think the stock is still cheap. If we intend to use the stock in an M&A transaction, having it that cheap is something we would like to work against. We would like to see the stock more fully valued in the marketplace.

John Ross: On ROIC, we calculate it the same way we look at bank acquisitions because it is good discipline, and we look at several other methods as well. Intuitively, bringing in a single-digit P/E multiple on a forward basis for the core bank is very attractive. Obviously, $32 million is a drop in the bucket compared to our excess capital. One last thing I would add: we were pleasantly surprised by the increase in the stock’s liquidity, which may provide us more opportunities going forward. We were a bit constrained initially with the $50 million authorization because we were concerned about liquidity impact, but we have been pleasantly surprised to see it pick up.

Matt Olney: Perfect. Thanks for the color.

James Ciroli: Thank you, Matt.

Operator: Thank you. One moment for the next question. Our next question will be coming from the line of Christopher McGratty of KBW. Your line is open.

Christopher McGratty: Great, good morning. Jim, on expenses, really good performance in the quarter. Can you speak to sustainability and maybe broader operating leverage expectations?

James Ciroli: Great question. On a linked-quarter basis, expenses came down a little bit. We have signaled additional costs of around $5 million per year in public company expenses, and the first quarter has about that run-rate in it. We are still in the middle of our core conversion, and during the quarter we only capitalized about $700,000 of the dollars spent. I think first-quarter noninterest expense is fairly loaded and a fairly sustainable run-rate. There might be a little uptick because we do merit increases in March, but I would not expect much of an uptick beyond that.

Christopher McGratty: That is helpful. On slide 5—the updated rate sensitivity static analysis—I think it was a touch weaker, call it 100 basis points from last quarter, but the base case shows a pretty good ramp in both years. Can you speak to any strategies to lock in the margin given higher for longer is seemingly a base case? And how should we think about NII progression as you get better growth and the loan fee adjustment you talked about?

James Ciroli: I go back to what I mentioned to Nate. One of our biggest opportunities is to continue to invest our excess cash. For most of the quarter, the differential between the four-year point on the curve and the overnight rate was slight. That has steepened a little bit with an anticipation that we will not have a rate cut until sometime late in 2027. As that environment has improved, we have accelerated our investing strategy to put excess cash to work. Beyond that, opportunities come from continuing to grow noninterest-bearing deposits, and I think there is still some room to manage deposit costs down. I would point out that about 90% of our deposit base is nonmaturity.

To work down rates from the cuts we saw in late 2025, our market CEOs have to go out every day and manually work that with depositors; it does not just mechanically come down. We still think a low-20s beta is appropriate, but because of the nature of nonmaturity deposits, that will take a while to come in. Also remember seasonality: as we roll out of the first quarter with higher public fund deposits—hence slide 9—mix should normalize. Had we not mixed higher in public fund deposits, our cost of deposits would have been down 5 basis points on a linked-quarter basis.

As public fund balances come down across Q2 and Q3, I expect the mix shift to continue to benefit net interest margin as well.

Christopher McGratty: If I could squeeze one more on excess cash, how does that settle in terms of proportional balance sheet over the next couple of years? Where do you want to run cash-to-earning assets?

James Ciroli: We do not target a specific cash-to-earning-assets ratio. We focus on deploying excess liquidity into attractive, risk-appropriate assets—primarily government and agency securities around the four-year point—while supporting organic loan growth and maintaining balance sheet flexibility. Thank you.

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