Central Bancompany (CBC) Business Profile

What it does

Central Bancompany is a bank holding company headquartered in Jefferson City, Missouri. It serves consumers, businesses, government agencies and community organizations primarily through its banking subsidiary, The Central Trust Bank.

The company takes deposits through checking, savings, money market and time-deposit accounts. It lends to individuals and businesses, including through mortgages, credit cards, commercial loans and loans secured by real estate. It also offers businesses and government clients services for making and receiving payments, managing cash and reconciling accounts.

Its wealth management businesses help clients invest and plan for financial needs. Their services include investment management, trusts and fiduciary services, retirement planning, and estate and tax planning. Central Investment Advisors also offers brokerage services in partnership with LPL Financial.

Central Bancompany organizes its activities into Consumer Banking, Commercial Banking and Wealth Management. Customers can use branches and digital channels, including online and mobile banking. Local market leaders have authority to make decisions in their communities, working with senior leaders and business-line managers.

The company operates full-service branches, with its business predominantly located in Missouri.

How it makes money

Central Bancompany earns interest on loans and investments and pays interest on deposits and other funding. The difference is net interest income. Deposit accounts are a primary funding source for loans and securities, and some accounts do not pay interest.

Consumer Banking provides deposits, mortgages, home equity lines of credit, consumer loans and credit cards. The company retains some mortgages on its balance sheet and sells others to Freddie Mac, Fannie Mae or private investors.

Commercial Banking lends to businesses and offers deposits, treasury management and payment services. It charges fees for services such as commercial account analysis and wire transfers. Payment services revenue includes interchange and incentive revenue from electronic transactions, as well as fees associated with cards and other services.

Wealth Management earns brokerage and fiduciary fees from investment and trust services. These activities include management of trust assets, investment management, financial planning and brokerage. The value of assets under advice and customer activity can affect associated fees and commissions.

Noninterest income also includes deposit service charges, including overdraft and insufficient-funds fees. Brokerage services and fiduciary fees increased in the latest year as assets under advice grew. The company does not rely solely on interest-bearing deposits for funding: it also has noninterest-bearing deposit accounts.

Customers and how it sells

Central Bancompany serves individuals, businesses, public entities and community organizations. Consumer Banking serves households, while Commercial Banking serves small, middle-market and commercial business entities. Its government business holds public funds for government clients.

The company’s operations are predominantly in Missouri, with banking markets in Kansas, Oklahoma, Colorado and Florida. It organizes its community bank around primary markets serving communities across its footprint. It also operates a full-service branch in the Naples Market in Florida, outside those primary markets.

Customers can use the branch network, online and mobile banking, and business treasury-management tools. Commercial customers can access payment, receivable, reporting and account-reconciliation services. Wealth services are offered through Central Trust Company and Central Investment Advisors.

The company takes deposits from consumer, commercial and public-funds customers. Its government relationships include state-level entities and agencies, public schools, and municipal and county governments. Most of its loans were to borrowers who resided or were organized in its primary markets.

Suppliers and costs

Deposits are Central Bancompany’s primary funding source. The company also has access to customer repurchase agreements, federal funds purchased from correspondent banks, unencumbered investment securities and wholesale sources such as FHLB borrowings.

Interest expense reflects the rates paid on deposits and other funding. It decreased in the latest year, primarily because of lower rates on savings and interest-bearing demand deposits. Changes in rates can affect both what the company earns on assets and what it pays on liabilities.

The company’s operating costs include employee compensation and benefits, technology investment and regulatory compliance. Its in-house technology division and innovation teams support the business lines and include programmers and designers. The company is undertaking a banking-core modernization project intended to provide real-time, API-based capabilities.

Central Investment Advisors partners with LPL Financial for brokerage and managed investment solutions. The bank also sells certain residential mortgages to Freddie Mac, Fannie Mae or private investors. Its bank holding company depends primarily on dividends from the bank for funding, subject to statutory and regulatory restrictions.

Competitive position

Central Bancompany competes with local and regional banks, national banks, credit unions and digital-only banks. It also faces competition from mortgage and consumer finance companies, trust companies, brokerage firms and financial technology companies. No individual competitors are named.

The company’s approach combines local decision-making with consumer, commercial and wealth services. Its market leaders are responsible for growing their markets and can make local decisions in collaboration with senior leaders. The company also invests in digital services and maintains an in-house technology team.

Our reading: Local relationships provide a competitive foundation because the company can serve banking and wealth needs within the same markets. Our reading: Its technology investment supports that position, though banks, digital-only providers and other financial firms compete across the same services. Our reading: Market position varies by location, so the consolidated deposit-share figure should not be treated as its share in every market.

Growth opportunities

Central Bancompany’s strategic plan focuses on customer growth, deeper relationships and deploying capital into strategic acquisitions. It intends to cross-sell existing and new services to customers and has hired in private banking and treasury management to support those efforts. The company expects recent private-banking hires and a planned product expansion to help it serve high-net-worth and ultra-high-net-worth clients.

The company has identified wealth assets held with other advisers by its existing high-net-worth banking customers. It intends to capture more business from existing customers through its banking network.

Branch expansion is another part of the plan. The company has built branches as it expanded in Oklahoma, Colorado and Florida, and closed branches in markets it considered well served. It plans new branches in the St. Louis, Kansas City Metro and Denver markets over the next few years.

The company is also modernizing its banking core to support real-time, API-based capabilities. Its commercial payments business is investing in technologies including instant payments through RTP. The company’s ability to execute its plan depends in part on expanding branch coverage efficiently, realizing cross-selling opportunities and identifying and integrating suitable acquisitions.

Structural risks

• Credit and local economic conditions. The company may not adequately measure or manage credit risk. Unfavorable economic conditions, particularly in Missouri and its other primary markets, can affect borrowers’ ability to meet their obligations and lead to losses.
• Interest rates and liquidity. Changes in rates can affect the difference between interest earned on assets and interest paid on liabilities. Liquidity risks could affect operations and the company’s financial condition, while funding and mortgage activity can also be affected by changing rates.
• Market-sensitive wealth revenue. Unfavorable market conditions can reduce the value of assets under advice or prompt customers to withdraw funds, reducing associated fees. They can also reduce trading activity and affect commissions and brokerage revenue.
• Operational security. Fraud, failures of information-security controls and cybersecurity incidents could materially harm the company’s business, results and brand.
• Regulation and execution. The company is subject to extensive supervision, and changes in laws or their enforcement may affect its operations and earnings. Geographic concentration may affect long-term growth, while its strategic plan depends on branch expansion, cross-selling and acquisition execution.
• Control. The Voting Trust has significant control over the company, and its interests may conflict with those of other investors.

Bottom line

Our reading

Our reading: Central Bancompany is a relationship-focused regional bank whose deposit base funds lending, alongside payment and wealth-management fee businesses. Its local customer relationships and range of services support its model, while its concentration in Missouri and other primary markets ties it to local economic conditions. Growth plans depend on adding customers and deepening relationships, and investors also face the governance implications of the Voting Trust’s significant control.