Good day and thank you for standing by. Welcome to the Central Bank Company third quarter 2026 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 11 on your telephone. You will then hear an automated message advising your hand has been raised. To withdraw your question, please press star 11 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.

Thank you, operator. Good morning, and thank you for joining us for Central Bank Company's third quarter 2026 earnings call. With me in the room today is our Chief Financial Officer, Jim Ciroli, Chief Customer Officer, Dan Westhues, and Chief Credit Officer, Eric Holdren. As a reminder, I'd like to point out that the discussion today is subject to the same forward-looking considerations outlined on page four of our press release. I'd like to share two notable central banker promotions before we dive into the third quarter financials. Matt Adams, who joined us 19 years ago and most recently served as our senior lender in Oklahoma, has been elevated to CEO of that region. Brandy Bryant, who has been with us for over 28 years and has most recently served as a market CEO, has been promoted to the newly created position of head of consumer and small business lending, a strategic focus for our company. Congratulations, Brandy and Matt, on your well-deserved new roles. Now, moving on to financials. We are pleased to report net income of $116.2 million in the third quarter, or $0.48 per share. which resulted in a return on assets of 2.27%. Net interest income of $218.9 million this quarter up $20 million from the prior year quarter. We posted 4.51% FTE net interest margin up 12 basis points from the prior year quarter. The cost of deposits was down 8 basis points from the same quarter last year reflecting the rate cuts we had late last year. While we have been disciplined in our deposit pricing and expect that to continue, the unusual turbulence of the current rate environment introduces uncertainty and time will tell as to our deposit cost beta from here. Irrespective, we remained well positioned for higher interest rates. Our core fee income grew 4% year-over-year or 8% excluding mortgage. While mortgage revenues have declined this quarter, we are pleased that originations remain profitable on a direct cost basis. Turning to expenses, our FTE efficiency ratio for the quarter was 45.4%. Overall, expenses remain well controlled. As we have disclosed previously, we are in the process of terminating our pension plan, which was frozen in 2018. We have now contracted the associated termination payments and expect to record a non-recurring pre-tax gain of approximately $27 million in the fourth quarter. As for credit, it again remained benign with just 12 basis points of net charge-offs in the quarter. Lastly, our capital levels remain well above target with $2 billion of excess capital or $8.28 per share. We repurchased a minimal amount of shares during the quarter and still have $96 million of repurchase authority remaining. We see value in the shares at current levels as outlined in our deck, But we will continue to be opportunistic with our repurchases in light of our limited authorization. With that, I'd like to open the line for questions. Operator?

Certainly. As a reminder, to ask a question, please press star 1-1. One moment, please. Our first question comes from the line of Ryan Kenney with Morgan Stanley.

Hey, good morning. Thanks for taking my questions. So maybe just starting out on the payments business, you highlighted the increase in transaction activity.

Can you talk a bit about what you're doing to drive growth in payments and also to what degree does the payments business bring in low-cost deposits? Thanks, Ryan. This is Jim. I'm not sure I got all of that. So, yeah, happy to try to be more transparent on the payment business. The payment volumes are up nicely on a year-over-year basis. and we're deeply committed to that business as well. I'm going to turn over to Dan Westhues for what are some of the things that we're doing in that area to maximize our payments.

On the consumer side, we run a pretty modest credit card portfolio but then our debit card portfolio is really what's driving the payments volume.

That goes directly with the growth in our retail base. So as we grow the retail base, that payment area grows. We did exit a few small areas, gift cards, a few things like that, which are kind of in those numbers, but the expenses that went along with that were too high. So on the commercial side, we're continually very active in trying to grow that business within our own existing base. And continuing to make investments there.

Yes.

And then non-interest-bearing deposits in the quarter went up nicely, 6% year over year. And can you unpack what's driving the growth that you're seeing in non-interest-bearing balances, and how resilient do you think that growth can be given higher rates? Great question, Ryan. So the 6% is kind of consistent with our long-term trend. And I would remind you, and I know you're new to the story, so maybe this isn't as much of a reminder. We really focus on our customer acquisition on checking accounts and not high-yield savings. We're not trying to buy money. We're trying to bring new customers in on the checking account side. I don't think it's a surprise to see the 6% number for us. I think some number in the mid-single digits range is where we should expect to be year in and year out across a pretty long horizon. Thank you. Thank you. And our next question comes from the line of Christopher McGrady with KBW. Great morning. Jim, maybe a question for you on the debate of margin and NII dollars. I guess, where do you stand? It's modest balance sheet growth, but the NIM continues to go up. Obviously, you're well positioned for this environment.

Maybe you could unpack the outlook for margins and balance sheet growth. Thanks.

Yeah, I appreciate the question. And I think it's one of the key questions for us. So it's a great question. It's a great thing to focus on because we put on page five within the slide deck a couple of things that we thought would be helpful. So in the upper right-hand corner of that slide, we talk about what our fixed loan repricing looks like on a go-forward basis. So fourth quarter, we've got $700 million rolling off. Next year, we've got $2.2 million of loans rolling off. Those are all rolling off at pretty much a six flat rate. And when we're investing, we're improving yields around 100 basis points as we're reinvesting that fixed rate book into where we currently stand. Now, there's a couple of other things going on in there. Largely, you'll notice that we're continuing to see declines in our other consumer portfolio. That's largely in direct lending. Those are a little bit higher yielding, maybe a little bit more credit loss content. and those are really being replaced with residential first mortgages and we saw nice HELOC growth in our loans this past quarter. So there's a little bit of a mixed shift going on on the consumer side. From a commercial side, it's business as usual, so we continue to think there's a nice opportunity to expand margin coming from the left-hand side of the balance sheet. and many more. Thank you. Even in rising rate environments, we've seen kind of a mid to low 20s type of a beta, and that's kind of our expectation. And then finally, I'd throw securities in there, where one quarter ago, we'd say there wasn't much of a repricing opportunity within our securities book. There is a significant repricing opportunity within our securities book, and we added those to page five as well. And then in the bottom right corner on page five, We kind of show, we give you an analysis we've given you before, which is in a static portfolio, so we're not taking any credit for loan growth or deposit growth in that static curve. And full disclosure, it's a September 30th curve where rates were a little bit higher than where they are today. But you can see where we expect to have net interest income in 27 and 28 relative to our projections for 2026 in those two numbers. So you can see what our own internal models are telling us, again, with those two assumptions, static curve, static balance sheet. And I think the conclusions are correct. There's additional opportunity for that net interest margin and net interest income to grain higher.

I just say one quick thing because Chris put out a report that basically says is it NEM, NII, or is it return on tangible common equity? And I think Jim is saying, well, we're going to have NEM this year, we're going to have a balance sheet that continues to grow as a house historically, and so those will both do well. But the only thing I would add to your report is we don't look at – we look at return on tangible common equity, obviously, but what we look at internally is net income Thank you for your time.

I guess A, is that another option? And then B, maybe more broadly for the team, any change in M&A conversations?

What's available? Thanks.

I'll take on the first part of that. I'll toss it over to J.R. for the second part of that. So we just locked in, as J.R. mentioned in his prepared remarks, we just locked this in last week. So we've not made any decisions as to whether there's something that's Thank you. Thank you.

On the M&A side, I would just say you followed the story closely, so I think you and the community are broadly familiar with the strategy we're prosecuting against. We continue to prosecute against it, and we have no updates for you at this time.

Thank you. And our next question comes from the line of Matt Olney with Stevens.

Hey, thanks. Good morning. Just want to go back to the loan growth discussion, and I'm curious what you're hearing from your commercial borrowers today with respect to higher rates. And investors are just concerned that higher rates are going to ultimately lead to some demand destruction at some point. So be curious what you're hearing with conversations with some of your commercial borrowers and higher rates and future demand.

Thanks.

Yeah, so I appreciate the question, Matt. As you know and can see in our numbers, we grew loans at a 3% linked quarter annualized basis. If you back out the other consumer decline, which has been declining for several quarters, that actual linked quarter annualized growth is about 4%, which I'd say normally, over a long period of time, and many more. We continue to be encouraged by our commercial and pipeline from a gross basis and a net basis. They are as strong as they were a quarter ago. So I think we continue to be optimistic in terms of being able to grow from here in the right way. But Eric, what else should I add to that?

I think certainly given kind of the rate environment and the outlook, we're seeing a little bit of moderation in certain markets. Thank you. Okay.

Appreciate the color on that. And then just as a follow-up, you mentioned on that slide five your assumptions and static balance sheet and the impact to higher rates. It feels like it's a nice place to be given kind of market expectations now of higher rates. But I'm curious, kind of moving into the future, what are some strategies that we could expect from the bank down the road if and when you guys do think about moderating your asset sensitivity? What are some strategies you guys would probably focus on? Thanks. Matt, that's a very prescient question because I would tell you that when you look at our queue where we make the interest rate risk disclosures and you'll see that we're still slightly asset sensitive and it's not lost on us that this hire for longer rate environment is something that benefits our business model. So Beginning last quarter, and we're going to continue to look at this, we did put on a cash flow hedge at the very end of the quarter that's designed to moderate that asset sensitivity back a little bit. And I think that now in the rate cycle, it is probably the right time to think about are there means that we can take that are prudent and effective reduce our exposure a little bit to potential rate volatility. I think JR mentioned it's kind of a crazy environment where a year ago we were looking at three successive rate cuts, and now we're looking at a rate hike that just happened. Probably another one happens in December and something early next year. So with this period of rate uncertainty, I think it's probably better If we can take some of that asset sensitivity off the table, that's what we're going to look at. We do some of that through our securities portfolio as well. And on page five, we kind of dimension what we think the repricing opportunity is over time with that portfolio. Okay. Thanks for the color.

Thank you. And our next question comes from the line of Nathan Reese with Piper Sandler.

Hey guys, good morning. Thanks for taking the questions. Just going back to the capital discussion. Yeah, just thanks. Just going back to the capital discussion, you know, curious how you guys are thinking about, you know, maybe stepping up on buybacks until we see an acquisition announcement. Just are you thinking about maybe, you know, greater buybacks going forward just to provide more kind of consistent comprehensive total return to shareholders versus kind of just balancing the float that's out there?

That's a great question, and I appreciate you mentioning the float at the end. Look, I would say that when you think about the value of our excess capital, $8.28 of that per share, and the opportunity to earn an even higher return, we mentioned this on slide 13, as well as what we were just talking about, with Matt in the previous question about the higher for longer rate. I don't think the benefits are yet fully reflected in our stock price from either of those. And also, I'd add, when you look at our performance relative to the people that we compare ourselves to, which is that high-performing peer group, we think there is some unrecognized value, that there is still value at $34, $35 a share. But it's not as great as it was at $24, $25 a share. So we're not as aggressive with our buyback. We're also concerned about managing the value that we think continues to exist in the stock and balancing that off against the float that we have. It wasn't even a year ago that we went public, so we're just always kind of a little bit tepid, a little bit are reluctant to go out there aggressively and buy that back. And we only have $100 million authorization. And so we want to make sure that we pick our spots and pick them in the right places if we are going to take action on spending that authorization.

Once we do a deal and get more flow out there, the dynamic will change. But it will also always be balanced against the M&A opportunity set going forward. So it's limited in the near term. And I think we've gotten favorable results feedback on that from investors because we don't want to kill the liquidity in the stock that exists by overdoing it. That's kind of how we engage the 100 million for now.

Yeah, that's really helpful. Just one kind of housekeeping question as a follow-up. Jim, I think floating rate loans are about $2.5 billion. And can you just remind me of the mix between Prime and Stouffer within that $2.5 billion? Just trying to get a sense for How much of the move up in SOFR ahead of the Fed rate hike at September benefit loan yields as we kind of think about forward rate expectations on the short-term curve?

I'm going to have to get back to you, Nate. I understand the question. It's a very good question, but I'm going to have to get back to you on the mix.

Okay, but $2.5 billion is still kind of the right number on the floating rate side of things? Okay, great. Okay, great. Thanks, guys.

Thank you. Our next question comes from the line of Brandon Berman with Bank of America.

Good morning. Thank you for taking my questions. I wanted to start on the deposit side, and I was wondering if you could sort of help unpack. I believe there's some Thank you so much for joining us. Let's unpack that a little bit by going back to what really drives that seasonality, and it's really in the state of Missouri, and we have a very special relationship with the state of Missouri. But in the state of Missouri, property tax payments are due in December. So while it troughs in September, what we'll see on an average basis, comparing third quarter to fourth quarter typically in a year, is that average is flattish. But on a spot basis, that will go up. And our highest quarter from an average basis is going to be the first quarter, which is kind of interesting actually because on a spot basis, the deposits kind of move around to different pockets within the state, but they stay kind of within the state pockets. And then from March 31st throughout the rest of the year until collections resume again at the end of the year, and the various places where the state collects the money and then distributes it out to its agencies and then the agencies spend it down throughout the year. So that's the seasonality you see. We've put something together on page nine of the slide deck that helps dimension the cost of those and you can see why we're focused on those because as we look at our total deposit costs, period over period over period, The change in costs is often driven by just what's going on in this portfolio where our cost of deposits is not extremely high, but higher than where they are in the consumer and commercial books. So hopefully I've dimensioned what we expect in terms of the seasonality of those changes. I would also point out, going from Q2 to Q3, Not only do we see some seasonal declines in the public fund deposits because they trough in September, but we typically see a small seasonal decline in our consumer deposits as well.

Gotcha. Thank you.

And then as a follow-up and just more of a housekeeping item, the increase in commercial non-performers this quarter, were those still primarily related to the isolated borrower or borrowers you discussed last quarter, or was there something else that –

that led to the increase. Thank you.

Yeah, I'll turn that over to Eric. But look, I would point out that when I see non-performing assets going up, albeit small numbers, and delinquencies going down, commercial delinquencies have been such low numbers for the past couple of quarters that I really think that's kind of the law of small numbers. We're seeing increases that are not significant, but numbers that are bouncing around the bottom Eric, how would you answer that?

Brandon, so the increase that we saw is really kind of situational and specific to certain commercial situations. We haven't really observed a thematic shift in the portfolio or any specific asset class that gives us real concern. And, you know, despite a fairly modest adjustment and level relative to our balance sheet on non-performing assets, excuse me, We remain pretty convicted in kind of the positioning of the portfolio as well as the indication of credit risk that we see going forward and don't see anything shifting or thematically changing in the near term.

Great.

Thank you, guys. Last thing I'd add to that is that we're trying to keep the allowance coverage ratio to the loan portfolio stable and let loan growth drive Thank you. I'm sure no further questions. So with that, I'll hand the call back over to President and CEO John Ross for any closing remarks.

Thank you, operator.

We were pleased to deliver another solid order and appreciate everyone taking the time to join us this morning.

Thanks again, and we will talk to you in the new year.

Ladies and gentlemen, thank you for participating. This does conclude today's program, and you may now disconnect.