Key Highlights

  • Net income was $116.2 million, up 19.7% from $97.1 million a year earlier and 2.2% from the second quarter.
  • Diluted EPS was $0.48, up 9.9% from $0.44, and adjusted diluted EPS was also $0.48, up from $0.47.
  • Net interest margin was 4.48%, up from 4.36% a year earlier, on net interest income of $218.9 million.
  • The efficiency ratio improved to 45.9% from 49.6% a year earlier.
  • The CET1 ratio was 29.1%, with excess capital of $1.98 billion above the 13.5% long-term target.

Central Bancompany Earnings: What Is a 29.1% CET1 Ratio Telling Investors?

Central Bancompany (NASDAQ:CBC) reported third-quarter net income of $116.2 million on Tuesday, October 27, up 19.7% from $97.1 million a year earlier. Diluted earnings per share were $0.48, up 9.9% from $0.44, and adjusted diluted EPS, a non-GAAP measure, was $0.48 versus $0.47 a year earlier. As screened, the $0.48 compared with a $0.49 estimate, a 1.23% shortfall.

The headline capital figure is a consolidated CET1 ratio of 29.1%, up from 24.6% a year earlier. The company calculates excess CET1 capital of $1.98 billion, or $8.28 per share, against a 13.5% long-term target. It issued no numeric guidance.

Central Bancompany is a roughly $20 billion bank holding company with operations in Missouri, Kansas, Oklahoma and Colorado.

Central Bancompany Margin: How Did Net Interest Income Grow 10.0%?

Net interest income was $218.9 million, up 10.0% from a year earlier and 2.9% from the second quarter. The net interest margin was 4.48%, compared with 4.40% in the prior quarter and 4.36% a year earlier. The loan yield was 6.29% and the cost of deposits fell to 1.11% from 1.19%.

A second-quarter securities repositioning added about $1.0 million of net interest income in the third quarter. Management described the balance sheet as asset-sensitive. Fixed-rate loans of about $700 million at 6.0% mature in the fourth quarter, with roughly $2.2 billion at 6.0% rolling off in 2027.

Noninterest income was $66.8 million, with wealth management fees up 16.7% to $23.6 million on assets under advice of $17.5 billion. Mortgage banking revenue fell 14.3% from a year earlier to $8.8 million. Noninterest expense was $131.0 million, up 3.2%, which pushed the efficiency ratio to 45.9%.

Central Bancompany Credit: Are Nonperforming Commercial Loans a Concern?

Loans held for investment were $11.73 billion, up 3.6% year over year, and deposits were $15.32 billion, with noninterest-bearing balances of $5.65 billion up 6.3%. The provision for credit losses was $4.0 million, up from $3.5 million in the second quarter, and management attributed the increase mainly to loan growth. The allowance was $150.9 million, or 1.29% of loans.

Nonperforming loans rose to $62.9 million, or 0.54% of loans, from 0.49% in the second quarter and 0.45% a year earlier. Nonperforming commercial loans of $32.8 million were up 79.3% from a year earlier, while nonperforming consumer loans fell 7.3%. Net charge-offs were $3.6 million, or 0.12% of average loans, and delinquent loans were 24 basis points of the portfolio.

Return on average assets was 2.27% and return on average common equity was 11.9%.

Central Bancompany Capital Deployment: What to Watch After the October 27 Report?

The company paid a quarterly dividend of $0.12 per share and repurchased $3.8 million of stock in the quarter at an average price of $31.02 under a $100 million authorization. Management said excess capital is held at the holding company for rapid deployment and that it continuously explores acquisitions, though none was named.

Watch for any acquisition announcement, the path of nonperforming commercial loans, and whether period-end loans, which exceeded the third-quarter average by $54 million, translate into fourth-quarter growth.