Commercial Bancgroup, Inc. (CBK) Earnings Call Transcript & Summary

Thank you for standing by. At this time, I would like to welcome everyone to the Commercial Bancgroup Third Quarter 2025 Earnings Call. [Operator Instructions]. I would now like to turn the call over to Terry Lee, President and CEO. You may begin.

Good morning. Thank you for joining us today for our first earnings call as we successfully completed our public company offering in September 30, '25, the last day of the third quarter. I'm Terry Lee, President and CEO; and with me today is Adam Robertson, Chairman; Philip Metheny, our Chief Financial Officer; and Richard Sprinkle, our Chief Credit Officer. Before we begin, I must remind everyone that this call may include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are based on our current expectations and assumptions and are subject to risks and uncertainties that could cause actual results to differ materially from our expectations. For a discussion of these risks and uncertainties, we encourage you to review our full Safe Harbor statement and cautionary language, including our earnings press release and in our latest SEC filings. Also during the call today, we may discuss certain non-GAAP measures. Reconciliation of those measures to the most directly comparable GAAP measure can be found in our earnings release, which is available on our website and filed with the SEC. We're pleased to report the successful completion of our IPO at CBK became a public company on September 30, as mentioned earlier. As each of you are aware, the IPO process is an expansive and very time-consuming process that requires a tremendous amount of human resources, commitment, coupled with a lot of professional guidance. And even this time, with all this effort directed toward our IPO, CBK has produced another impressive financial performance quarter. This performance demonstrates the depth of our many talented members that understand our core mission, our values, staying focused to produce strong financial results while at the same time, working on a once-in-a-lifetime project. I would like to just review a few of our financial metrics for the first 9 months of '25. Our net income, $27.1 million. That's a 4.9% increase year-to-date. Return on assets is 1.60%, 1.9% increase. Return on equity is 15.5%, a slight decrease over '24, an 8.5% decrease. Revenue came in at $66.9 million, a 1.9% increase. Our expenses actually fell $31.9 million, what was 8 basis points reduction. Earnings per share came in at $2.22 per share, a 6.2% increase. Our tangible book value per share, $19.05. That's a 14.5% increase. And our efficiency ratio held strong at 47.6% through the first 9 months of '25. We experienced moderate loan growth year-over-year due to headwinds from some large payoffs we experienced in the first half of '25. These payoffs were from long-term borrowers selling their business. The loan portfolio activity remains robust, enabling us to keep pace with the loan payoffs. We anticipate a strong loan closing volume for the fourth quarter of '25, which will more than offset the payoff volume and provide for a moderate growth for the entire fiscal year-end 2025. The asset quality remains very strong. Our loan delinquencies are at historical lows of 0.5% of 1% and our troubled debt ratio is at 2.19%. Looking ahead, we are confident in our strategy and our direction as we move into the public bank space. And with our ability to navigate this new opportunity, the public market provides for us to continue to grow our franchise, providing long-term value to our shareholders and providing positive experiences for every customer every day. With that, I will now turn the call over to Philip Metheny, our CFO, to provide a more detailed review of our third quarter. Phil?

Thank you, Terry. I would like to provide the --highlight our financial metrics for the third quarter of 2025 compared to the third quarter of 2024. Net income for 2025 was $9.5 million compared to $9.2 million for 2024 for a 3.3% increase. Revenue, we had $22.9 million or a 4.6% increase over prior year. Our expenses were maintained flat at $10.6 million compared to $10.5 million in the prior year for the third quarter for just a minor increase of 1%. Earnings per share for the third quarter of 2025 was $0.77 a share, 4% increase over the prior year. Tangible book per share was $19.05, a 14.5% increase over the prior year. Our efficiency ratio remained strong at 46.19% compared to 48.13%, a 4% decrease from the prior year. ROA for the third quarter of 2025 was 1.69% compared to 1.65% for 2024, a 2.4% increase from the prior year. ROE was 15.76%, a 9% decrease from the prior year. Terry?

This concludes our prepared remarks. I'll ask the operator to open the call for any questions that the listeners may have.

[Operator Instructions] And your first question comes from the line of Brett Rabatin with Hovde Group.

Wanted to start off just, Terry, we've talked about the loan pipeline being strong. And you said fourth quarter you expected some solid loan growth. Can you maybe just give us any idea of the magnitude in 4Q and then just what you're growing and what the outlook is and maybe what payoffs activity you experienced during 3Q?

We didn't have a lot of payoff experience during the third quarter. I think we had one at the very start that concluded, maybe it actually started, some of it was paid off in the second quarter and finished up in the third quarter. But we -- I mean, our loan activity has been really brisk. Our pipeline is really full for fourth quarter closings. We feel confident that we will end the year positive from where we started last year. One of the things is one of the customers that paid us off, they all -- at the end of every year, they drew up a huge line of credit to the tune of about $30 million for distributions to a doctor's group. So as a result of that, every year, we would have a huge run-up in our outstandings on loans and then it worked its way down through the first quarter. We're not going to have that this year. But even not having that, we're still going to end the year positive in loan growth over where we were last year. We won't meet budget, but we'll have a nice loan growth for year-end. That's assuming, of course, the attorneys gets everything done, we get everything closed and those type of things. But the pipeline looks good, and we've got a lot of closings lined up.

Okay. Great. And I know you guys are slightly asset sensitive and the Fed is possibly going to cut 1 or 2 times here end of the year. Any thoughts on the margin in 4Q and just what you guys are seeing on loan and deposit pricing that might either help or hinder the margin?