Central Bancompany Adds Rate Hedge, Trimming Its Bet On Higher Rates
Management says the hedge moderates asset sensitivity "a little bit," even as the bank calls itself well positioned for higher rates.
Central Bancompany, the Jefferies City, Missouri, bank holding company behind The Central Trust Bank, put on a cash flow hedge at the very end of the third quarter to dial back its exposure to rising rates, management said on the company's earnings call Tuesday. The bank earned $116.2 million, or $0.48 per share, in the quarter.
A hedge to soften rate exposure
Asked by an analyst what strategies the bank might use to moderate its asset sensitivity (how much its earnings gain when rates rise), management called the question "prescient" and said the bank is still "slightly asset sensitive." The cash flow hedge, it said, is "designed to moderate that asset sensitivity back a little bit."
Management said it is "probably the right time" to look for prudent ways to cut exposure to rate volatility, partly through the securities portfolio. It described a swing from a year ago, when the bank was looking at three successive rate cuts, to "a rate hike that just happened," probably another in December and something early next year.
CEO John Ross said earlier on the call that the bank remains "well positioned for higher interest rates." On deposit costs, he said "time will tell" what its deposit cost beta (how much deposit rates follow market rates) will be.
Loans rolling into higher yields
Management pointed to $700 million of fixed-rate loans rolling off in the fourth quarter at roughly a 6% rate. It said reinvestment is improving yields by about 100 basis points, or one percentage point, and that the securities book now offers a significant repricing opportunity.
Third-quarter net interest income was $218.9 million, up $20 million from a year earlier, with a 4.51% net interest margin, up 12 basis points. Return on assets was 2.27%, and the efficiency ratio was 45.4%. Net charge-offs were 12 basis points.
The bank also expects a non-recurring pre-tax gain of approximately $27 million in the fourth quarter from terminating its pension plan.
Capital, buybacks and deals
Excess capital stands at $2 billion, or $8.28 per share, with $96 million of repurchase authority left. Management said it sees value in the shares but is cautious about buying aggressively, to protect trading liquidity. On acquisitions, Ross said the bank continues to pursue its strategy and has no updates.
Central Bancompany serves communities mainly in Missouri, Kansas, Oklahoma and Colorado, and had total assets of $20.75 billion at the end of 2025. Its market value was about $8.3 billion in Tuesday morning trading.
Management said it will keep weighing further ways to reduce asset sensitivity, including through the securities portfolio, as the rate path unfolds.
Sources
- Central Bancompany: Q3 Earnings Snapshot | 9news.com — Associated Press
- Consumer agency says unclear bank fees can add up for customers | CBC News — cbc.ca
- Central Bancompany, Inc. Reports Third Quarter 2026 — globenewswire.com
