CPF - Earnings call transcript Q3 2017 | Central Pacific Financial Corp.

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Operator

Good day, ladies and gentlemen. Thank you for standing by and welcome to the Central Pacific Financial Corp Third Quarter 2017 Conference Call and Webcast.

During today’s presentation, all parties will be in a listen-only mode.

Following the presentation, the conference will be open for questions. This call is being recorded and will be available for replay shortly after its completion on the company’s website at www.centralpacificbank.com. the to turn to like call Mr. over I’d and Officer and Morimoto, Executive Financial President Vice David Treasurer. Chief go Please ahead sir.

David Morimoto

quarter results Thank Officer. you, as the this financial us and Catherine Executive Credit Ngo, Hu, for all With President third morning for and are Phil, and Chief we Executive thank review Vice you and of me XXXX. Officer Chief joining Anna our President

may make During forward-looking call, the course of management today’s statements.

risks on we cause that believe involve these assumptions, While materially projected. may based results those reasonable differ are to actual they statements from

discussion statements, turn Catherine. complete with the our a the of refer filings to over For risks related forward-looking recent I’ll call please to SEC. now And to

Catherine Ngo

resulted will everyone. $X.X to we $XX.X three detail quarter be quarters good of continued with and by the ahead another basis per financial XXXX stable and growth million and asset morning in David, market first diluted was in X.X%. with million on Hawaii XXXX Thanks year-to-date favorable quality. of of on provide Overall, a Loan net the income deposit our together in in his $X.XX. earnings of Net income economic more summary. performance, relied and conditions that share solid of David focused or financial

balances loans by total On mortgage $XXX.X while X.X% resi by and loan million, by or year-over-year the portfolios. primarily increased Hawaii flat loan by increased increased our by year On basis, sequential mortgage total from commercial by ago basis, driven quarter balances XX.X%. $XX.X loans million, Mainland X.X% by X.X%. which a a or declined was

on total from with deposit was $X the million year-over-year. $XXX.X strong million $X X.X% $XX.X remained a and stable, declined previous quality non-performing sequential quarter quarter. or and X.XX% X% million of also basis, or to or of assets million, Asset Total increases growth in assets

million at total quarterly share and the bought which and quarter visitor of per under of and this share, year. we declared the million, XXXX, payable repurchase previous the of to personal $X.XX a after positive outstanding labor outlook $XX.X December on XXXX. the $XX have continues in with plan shares for of XXXX. Of of X.X% first December income our remainder The XX, authority were back represented program a share year-to-date, this consistent to is dividend total cost capital steady three the quarters the of performances for Our cash market shareholders repurchase The shares which be as board just for on Hawaii additions track year, primarily generally economic industry, growth. XX, XXX,XXX

year in year of X.X% ago, decline ago, job however, in billion than this total growth the issued the a year, increased new years first projects permit labor spending X.X% have a permits arrivals compared period several months to period year relatively to compared the by X.X%. period $X.X projected increased rapid the months to activity of year of expansion. eight The civilian higher ago. however, and value XXXX. same easing pipeline total the to in Hawaii billion remained first XXXX outstanding a the to been of eight Construction increase The visitor this remains compared by robust, was same million, X.X% with force in are building the in of visitor after $XX.X X.X% to in the to by For same of flat $X.X August an

compared economic current by property index X.X%; financial in previous performance. in real forecast September personal and for indicators XXXX, unemployment For increase rate Hawaii. XXXX month X.X%; call to the quarter match which was of highlights consumer the the real X.X%. At State of Hawaii third X.X%, historic year turn over our by for – to David? I’ll me, by other the to growth the GDP the David mode of higher included time, review income this excuse price a The the Honolulu

David Morimoto

you, or primarily $X.XX $X.X million was in our in and net to in million loan The equity on compared reported was an third Catherine. decreases third interest average The is net XXXX income for on margin interest assets quarter. to quarter declined Net million last recorded time in increase the CD increase of was margin and basis interest $X.XX X.XX% yields. four of the fund Net per of income X.XX%. Thank or sequential share net increased return by recorded X.XX%. deposits, per – $XX.X costs particularly diluted average diluted sequential the share income public $XX quarter the was by sequential and balances. interest large loan attributable points of balance quarter result decline net income to quarter in Return quarter

to as At allowance net and loan million, third lease lease for of XX, credit $X.X the $X.X loan provision was the prior losses was quarter, September loans and leases. million million, and to the charge-offs X.XX% in totaled $X.X outstanding million our quarter compared third of $X.X of in $XX.X the million a compared During to Net recorded prior or quarter. for losses recorded in charge-offs a credit the we quarter.

XXXX nine the third expense expense benefit for was the campaign and third impacted quarter months ratio effective third ratio XX.X%. totaled salary non-recurring the of non-recurring quarter other in negatively of Current million. income million million operating for while other our $XX.X $X.X tax XX.X%, expense rate for XXXX In and quarter, the and The core efficiency a totaled million, XX.X%. operating operating quarter quarter other was for XXXX $X.X was efficiency was expense. deposit $X.X first the by Third

forward. rate by expect to XX% We going approximate normalized to effective XX% tax

stock average summary. $XX.XX. I’ll shares at completes return in third the cost average of additional of common month-to-date per the stock to quarter at we of also common the financial of shares XXX,XXX an now roughly We’ve call of an XXXX, That Catherine. $XX.XX. During repurchased share October repurchased an XX,XXX cost

Catherine Ngo

favorable and Thank on primarily driven quality a booking and deposits, customer year-to-date quarters, by On in we strengthening focus relationships in David. assets. growth and realized after economic our the loans Hawaii you, conditions by three basis meaningful

XXXX and any we you. customers our their Our to will this play to through and operational improve advancements our of work a role questions support as have. continued and efforts also would the organization time, in shareholders to continued our will At Thank achieving take key opportunity be toward remainder in thank address technology to like for happy I may we and efficiency streamlining you employees, year beyond. this goals. this confidence

Operator

question-and-answer [Operator The question comes Instructions] from begin session. Please now will ahead. KBW. first Bohlen Jackie We with the go

Jackie Bohlen

morning, good Hi, everyone.

Catherine Ngo

Good morning.

David Morimoto

morning. Good

Jackie Bohlen

related expense the was to comp-related deposit David, the non-recurring quarter? was Or that the million, mentioned, $X.X something the also campaign that else? in that you

Catherine Ngo

items. Let couple me speak to included expense Jackie. of that, a The non-recurring

a is a the it and balance medical one-time this comp a The quarter. is up first on benefits. expense and was other But true non-recurring for

Jackie Bohlen

Thank the was And looking completed you. campaign quarter, Okay. deposit it in I just, the that quarter? the the that run That’s in to all guess, third did fourth quarter? Or was then flow of helpful. into any

Catherine Ngo

us. And campaign was a it was for the in The campaign deposit quarter. third completed core

Jackie Bohlen

does that how you? play And out for

Catherine Ngo

the We but very exceeded pleased with were results. goals, we

Jackie Bohlen

Good.

you there forward, third just And from are I be the of lingering campaign in your guess quarter? impacts did deposit what And going of terms plans in so the will core generation?

Catherine Ngo

in in the back coming there’s have first, for and on from customers I’ll run, are opportunity those campaigns reflecting deposit to So other to campaigns the with furthermore, very other rate us. say, regard strong campaign that the on build experience campaign relationships on retention we those and the

and lift to front. then David turn front expect and as we just see what in good expect not opportunities on forward as deposit, far the a deposit the regard And to it but quarter. in to also we So coming fee-based on loan I’ll income just going

David Morimoto

did as we details, than Yes, the all you saw side. had quarters. sure look the the if in Jackie, at obviously, we Catherine. slightly you margin on have funding in look compression if it’s you cost what And greater prior at results,

deposits asset in some hopefully, stable comprised core public liability fund the primarily situation, reduce is strategizing in So which is our bring address million committee CD the to on portfolio, of efforts on large actively reliance and CDs. that $XXX

Jackie Bohlen

– out hop on head, back my and I’m to next I’ll to back question my then of going Okay. come the so right And went just in. if it’s it comes

Mainland just in that. were any in quarter the the The that much pretty offset portfolio, all decline about there off? it Sorry purchases Or was run that?

Catherine Ngo

all were run was the quarter. purchases There in It third no off.

Jackie Bohlen

the We’ve were this the relatively in nothing that with about time? that past. spoken there’s Okay. purchases? I Or not to market keeping in attractive have just know intentional stable it And book,

Catherine Ngo

It’s in the the attractive third latter, Jackie. was There quarter. nothing

I current think we which a to that as what about also think we opposed the on portfolio yield the if stable then quarter, going quality. expect So And as saw portfolio, decline. you Mainland credit it in the be to was forward, about

Jackie Bohlen

Okay. Catherine. really That’s in and need back helpful. I now to. hop step I back if Thanks,

Catherine Ngo

Thank Jackie. right, you. All

Operator

The Please with next from question comes Deer ahead. Sandler go Aaron O’Neill.

Aaron Deer

guys. good morning, Hi,

Catherine Ngo

Aaron. morning, Good

Aaron Deer

that heading what about of in the you the expecting you’re on the today? it next be talk into bit outlook, kind seeing growth pipeline, loan part Sticking you’re based what might Is little of with you seeing early and can – maybe rate? year-end what Hawaii a what year and

Catherine Ngo

year. regard a to we QX, the Sure, Aaron. expect In to finish strong

reflect the a fourth we quarter, the single-digit annualized high as that growth far would I would As percentage growth it in rate. say, rate expect

Aaron Deer

And of that that’s costs there funds Okay, of going And this guess campaign, future targeting what those the terms some in forward? categories back to you see that? in public deposit of these replace as – reflected or deposits deposit thinking allow – going higher going are types any deposit are your forward? just might going some we of mix for What’s Or customers? is specific then run-off helpful. cost to how and cost that the I of

Catherine Ngo

Sure.

higher hold the campaign. excited is, want a to number to were me customer some from then that, particular of balances and tends services let products I to on and would it as David say deposit level deposit segment into campaign likely on we see with of chime the of So customers and focused particularly the the other bank details. to market market. to core And kind our speak coming campaign in also new that segment the is mentioned, might need that this the would of a and this The a the at deposit I be high organization.

David Morimoto

add, grow these tend is quite focused customers, product. with work nicely. a balances on the I certain but time a accounts open was And at level what over we’ve it the past Aaron, checking to with seen campaigns the the in might just as we that

we can initiatives And several core employees this growth is deposit, of so CD the focused are deposit that that on reduce we one that increase core do to our on balances. reliance such prospective large the expect

Aaron Deer

made Okay. it, you might close that anything buyback think conference then what you on me, terms forgive the What that this one, was – to That’s is good considering on management, have can here. And beginning so what but if great. be capital board might guys or the is missed have I share some on of any is And on your in getting another call likely? I I – progress front, authorization done another the front? sense exhausted the else authorization be of at

Catherine Ngo

turn to me Let over David. that

David Morimoto

timing that is capital is be very the and forward a be having XXXX. likely plan to the as Management There the another of we still discussions to and to – determined. currently is Aaron. capital authorization, authorization regarding look size Yes, strategy

Aaron Deer

David. Thanks, Catherine. Okay. Thanks,

Catherine Ngo

Certainly, Aaron. thanks

David Morimoto

Aaron. Thanks,

Operator

question [Operator ahead. Compass with Instructions] comes go from Laurie Point. Please next Hunsicker The

Laurie Hunsicker

good Hi, morning, Yes. Catherine David. and

Catherine Ngo

Good morning, Laurie.

David Morimoto

Good morning.

Laurie Hunsicker

all wanted make back I – and to this. expenses that I’ll just wanted got sure I’ve to I go to

of and out. that $X.X line entertainment coming $XXX,XXX, million the So promotions is of

be So per $XXX,XXX, $XXX,XXX like that’s going going to to rates run a forward? quarter

Catherine Ngo

Yes. about That’s right.

David Morimoto

Yes.

Laurie Hunsicker

that’s And another thing, in were of same be $XXX,XXX off, savings or software, this Okay. benefits dollars so the then with quarter? combined where to you computer the going

David Morimoto

the benefits a entertainment, There $XXX,XXX line. in salaries $XXX,XXX employee roughly and Yes. the and non-recurring and was promotions in non-recurring

Laurie Hunsicker

benefits line. $XXX,XXX employee’s in salaries the and The

David Morimoto

correct. That’s

Laurie Hunsicker

And advertising that Okay. $XXX,XXX had another you had non-recurring. then

David Morimoto

expenses during uptick. advertising But they the really really was it that an just We call our we timing. core as is deposit the is there one build. basically didn’t Yes, campaign, it non-recurring, timing. And incur

Laurie Hunsicker

way, different that All I a for what mean, so About or quarter? advertising $XXX,XXX should Okay. right. I’ll expense, I guess, ask run? your

David Morimoto

number. that’s think I a Yes, good

Laurie Hunsicker

Okay.

costs so there. your non-recurring is of $XXX,XXX then, there’s that’s line, correct? So total $X.X operating that through million expense a of that ran And

David Morimoto

the guess, I but Maybe the high, on it’s $XXX,XXX again advertising, timing. $XXX,XXX is just

the $XXX,XXX is it just run, so And run depends the rate. like not maybe our when Laurie. advertising – core campaigns It’s

Laurie Hunsicker

Okay, all right.

be $XX.X or a million But you reported really million. at $XX.X if we the $X on basis? round look million numbers, maybe that so So so should that core just

Catherine Ngo

thinking That’s million, an aggregate I $X think Laurie. about we’re right. that’s so better,

David Morimoto

Yes.

Laurie Hunsicker

okay. but know we just Jackie thinking how on should and core Aaron to going that touched And be then, growth. or back think I your Okay, deposit and about we this, about

if As because forward? are core And the here, does of how to your that points, cost CDs number we we look strip all this basis that deposit XX% grow changing the five is out be of going campaign? costing going

David Morimoto

The deposit the Yes. will I the element Laurie. of core change the campaigns. that, no deposit core as of cost campaign. rate was There take can not interest a book to result

a one-time… was it So

Laurie Hunsicker

no was cheese there. There

Okay.

David Morimoto

Yes. piece campaign. deposit of rate no There core was the

at segment portfolio, million, average good core look I I deposit think book, when the large it portfolio. $XXX we way last roughly the But did beta deposit billion that, over at think it and rate months XX of a we the our core beta from we for billion, of the is rate look portfolio X%. rate points. deposit to $X.X to mentioned, at calculated CD basis you has a the And seven $X.X as

So is That under just portfolio that large weighted over $X extremely has million billion, that CD months. the average XX is performing of Offsetting beta portfolio million a rate portfolio, $XXX XX% rate well. same X.XX%. the that of total $XXX is

So core extremely the $X.X deposit that is the key is it at way takeaway portfolio billion performing well. is we look

pace on ways and core deposit initiatives, them, light the to that Our asset growth initiatives reduce one on campaign portfolio. large portfolio. in CD – again liability Five being our that of is increase deposits address committee reliance several of to CD focused core

Laurie Hunsicker

it. Got

to of that’s $XXX just deposits to numbers, because time go minute, so core for a an back million. And also out stripping $XXX,XXX, your deposits your I’m round average under

you’re in that campaign, including So $XXX your the million was… core deposit

David Morimoto

No.

core it our definition of including deposit. in We’re

Laurie Hunsicker

In core, right. your definition of

most so on – which this my I for the focused campaign? categories guess of the I is, deposit So mean, question was

David Morimoto

DDA.

Laurie Hunsicker

DDA.

Okay. my That question. answers

latest can Okay. there? with us seeing internal And then, I what the on also to just update you’re if you controls, wonder respect

Catherine Ngo

first Yes. Sure. year, weakness raised that been quarter in of That was is first adjusting material in the of the in in all quarter. the issues regards the to this progress has reported made great

have we earlier elimination our to of are And testing that the in At a on controls we And place, that this the so year. the assessment expect QX. we well way it’s the infrastructure in put that expect, of given an material then resources of elimination and also first matter made of quarter weakness that point, those was fully fully that XXXX. in we we for will

Laurie Hunsicker

us Any else Okay. credit here guess, can much Great. What with is the on is the this be How book? your share great. this book FICO consumer, where I That’s about there? came in $XXX all then, jumping over you mean, remind us quarter, consumer is what help charge-offs auto? is? helpful. of you the And would can But details to us, consumer of credit. specifically, pristine. I is you your think million just your And can

Catherine Ngo

Okay.

Let stab Laurie, take that. so let at me – a me

quality auto auto $XXX the the $XXX book And million, about the And million. the kind as just then, on the XXX-ish in Hawaii weighted the FICO XXX on on of FICOs credit in books, it’s And book book, or those then, the mainland range. range. is for then, that book, Hawaii. of far million is with as starting Mainland. in about average balance, is the the So $XXX

Laurie Hunsicker

Okay.

Catherine Ngo

I’m Go ahead, sorry.

Laurie Hunsicker

of charge-offs, that in within And net charge-offs, million auto? the Or consumer the $X.X else consumer? something was that was

Catherine Ngo

it’s applying I calls loan are regard charge-offs that on are campaigns one – is consumer, we is thing and in the – and time. to analytics over the The the this we will that earlier our about And mention the to on what trended that, unsecured preapproved consumer. our seeing and in there, charge-offs just in consumer so earlier so we talked Laurie, the and having are loans on portfolio vintages product those down that the of

unsecured that our credit improved we’re see what campaign. analytics expect quality to the on with So using is book I on that consumer

Laurie Hunsicker

Okay.

that’s, balance that book consumer is know, your then? million? that’s so $XXX – the I Round And of don’t numbers,

Catherine Ngo

I’m Anna, Anna to going You do the as to that far have speak as know – balances. you what,

Anna Hu

is balance is portfolio on the balances so outstanding the million. on The our preapproved – $XX preapproved about

Laurie Hunsicker

balances Okay. much Mainland? the is do on Hawaii? How have much How then, you SNC? And is

Catherine Ngo

do, we Laurie. Yes,

get Let me you. that for

SNC for then, $XX Hawaii mainland Laurie, is the So SNC are the number, And $XX million. million.

Laurie Hunsicker

million. $XX

Okay.

So that’s way down.

playing us then, And core Okay. of be – that think thinking should just margin into still just last sort your question, you can again, how keep help next this I quarter? campaign, deposit about about

Catherine Ngo

Let that. me to ask David speak to

David Morimoto

so programs it run last time But while. prior run consistently – But actually in even as Laurie, we over was over we’ve it’s in time. been Yes. growth a immediate, past. it’s it and consistent The the to in XXXX, XXXX, balances these is stated, what seen not is run these a we longer one these we have horizon.

to So impact the over to term. initiatives that at But discussed, will longer other nominal. hopefully next NIM And we that us the anticipate ALCO will be help going as the it looking the is help in I the think do in is the quarter several term. nearer committee we

initiatives there’s So on multiple there. going

Laurie Hunsicker

Aaron that? payout capital ratios? And one then, update think Great. I and touched the on How how you it Thanks. dividend know us question about around you as pertains Can buyback. about that just thoughts to just approach potentially Okay. raising maybe last you management. target

David Morimoto

is in consistent in against XX% Mainland slightly our range. than the XX% also to But payout pay peer range. probably ratio peers. is that. ratio higher Yes. with current The a in local local our the and The strive the be we We group dividend a ourselves benchmark peers. our might payout Mainland peers And ballpark, are peers

the much dividend. pretty that’s So we set how

gradually consistently dividend improve. or as core anticipate the we earnings increasing So

Laurie Hunsicker

there. it leave I you. Thank Great.

David Morimoto

Laurie. Thanks,

Catherine Ngo

Thanks, Laurie.

Operator

go Raymond Please from Worthington The with ahead. Don comes next James. question

Don Worthington

good Well, morning.

Catherine Ngo

Don. morning, Good

Don Worthington

income In Or the see forward? terms of was dropped that going mortgage just quarter, there to we slowdown that curious whether banking you’re that as couldn’t in a seasonal? seeing whether

Catherine Ngo

turn going I’m to that David. one to

David Morimoto

mortgage Hey, Don. decline mix. income the banking product was things. in a was of Yes, It two result

decline saw a is in then, second some the on change was And of We market mortgage slight tightening and decline a in is in competitive just there a the spread. there originations. thing originations. So government mortgages the mix in salable

Don Worthington

you And to experience expect, general, the deposit would little a then, pricing higher bit tighten? betas Fed to Okay. if in continues just

David Morimoto

slightly the the the see out we if December, I in futures, way lower governor rate tightening betas. increase currently three the betas fund’s talked think, there – currently what I in of think and that we see in Fed towards heard baked that rate an tightening the if increases extent to is forecast, see we rate Fed REIT rate in we which has forecast see of we XXXX, To play probably of Don, extent XXXX, trend pace probably one, increases, the type in higher. in, play it environment, like that well recently that should would type the of about

Don Worthington

Okay. thank All you. right,

David Morimoto

Thanks, Don.

Catherine Ngo

Don. Thanks,

Operator

question-and-answer the closing any turn and Catherine would Chief like Officer, our back for I to Executive session. conference remarks. to over concludes Ms. President Ngo, This

Catherine Ngo

progress. you, for We Thank in look quarter our of future opportunities update Phil. to Thank third you you call on very XXXX. earnings much to the our participating forward for

Operator

attending Thank The for today’s conference has now presentation. concluded. you

You disconnect. may now

Central Pacific Financial (CPF) 25 Oct 172017 Q3 Earnings call transcript