Central Bancompany, Inc. Class A Common Stock 2026 Q2 Earnings Call

Thank you, J.R. Net income of $113.8 million for the quarter, or $0.47 per share, produced a return on average assets of 2.24%. Relative to the second quarter of 2025, adjusted net income increased by $15.4 million, or 16%. Net interest income increased $17.7 million over the prior year quarter, with average earning assets up $1.1 billion and net interest margin on an FTE basis, expanding 13 basis points to 4.43%. Loan yields over the past year have been relatively stable, despite a decline in short-term rates and a mixing of the consumer portfolio into lower yielding but lower risk mortgage loans and out of the higher yielding consumer loans where we are being more selective.

During the quarter, our cost of deposits declined three basis points, due mostly to a lower level of public fund deposits. We expect the public fund deposits will continue to decline seasonally in Q3 before increasing in Q4. Our core fee income ratio was 24.5%, reflecting seasonality and continued growth in non-interest income, a remarkable achievement considering the increase in net interest income. During the quarter, we participated in Visa's shares exchange offer, converting a portion of our Class B shares and recognizing a gain of $8.4 million. Additionally, we took advantage of higher rates to marginally reduce our asset sensitivity by selling $210 million in shorter duration securities, taking a loss of $7.8 million and reinvesting the proceeds in medium-term duration securities with a 250 basis point pickup in yield.

We posted an FTE efficiency ratio of 46.1%. On a linked quarter basis, we typically experience more of an expense increase moving from Q1 to Q2. The largest component of this increase was salary and benefits. Last year, we had a 4.9% linked quarter increase. This year, we saw a similar increase of 5.3%. While our merit raises drive most of this increase, this quarter, we had the impact of, A, deferred compensation expense, which totaled $1 million with an equal offset in other non-interest income, and B, higher performance-related compensation. Mortgage commissions were $1.0 million seasonally higher in Q2. Commissions are recognized when loans close, so one Q commission expense related to the revenue from December through February, the lowest volume part of the year.

Our asset quality remained consistent with just 10 basis points of net charge-offs again this quarter. Our NPA ratio ticked up slightly as we downgraded one small commercial loan into non-performing status at the end of the quarter. Delinquencies were only 22 basis points of total loans, a decline from the prior quarter, driven by improvement in commercial loans and consumer credit cards. Lastly, capital levels at the holding company remained well above target, with approximately $1.9 billion of excess capital, or $7.98 per share. We announced this morning that our board refreshed our stock buyback authorization to $100 million, which replaces the 11 million remaining on the buyback authorization we announced in February.

While we have been pleased to see our stock outperform the market in the second quarter, we still see value at current levels and will continue to be opportunistic with our new authorization. With that, I'd like to open the line for questions.

Yes, Manan. Loan growth was pretty broad-based during the quarter. Look, net of the decline in other consumer loans, which as I mentioned in my prepared remarks, we're de-emphasizing and being selective. We grew at a 6.5% annualized pace this quarter and finished the quarter with an ending balance higher than our average balance, carrying some nice momentum into the second quarter. We continue to see good opportunities. The pipelines are robust and similar to what they were, I'd say, in the first half of 2025.