CPF - Earnings call transcript Q2 2018 | Central Pacific Financial Corp.

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Operator

Good afternoon ladies and gentlemen. Thank you for standing by and welcome to the Central Pacific Financial Corp Second Quarter 2018 Earnings Conference Call.

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. turn over to Mr. like would the to call I Officer. President, David Vice Financial Morimoto, Executive Chief Please ahead. go

David Morimoto

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

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

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

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

Catherine Ngo

and second basis per share I'm by will to morning, positive provide more Thank you, earnings another good income net XX.X% David, of the year. and net which XX.X% David report pleased impact and reform On X.X% stable period component. and a remain year-ago. by the of of income quarter tax mortgages. this our for improved the $XXX year-over-year solid a included everyone. the by Loan an financial growth for details was performance mortgages commercial half increased legislation. during Total across of previous as or same loan well loans first the quarter-end $XX over led all regular million year. by million distributed the X.X% from by or and the as quarter by Loan growth a sites

with has and year-over-year. plan positions to Competitive the dividends, by The activity returning profitability our cash compression and and remains Asset repurchase increased X.X% basis on for quarter. with in consistency have quarter shareholder X.XX% a capital contributed our total of deposit previous a and capital increased XX.X% remained of assets. latter our Total net quality with flat us has in for value our deposits been growth non-performing strong the stock at market to assets by interest elevating our continue allowed strong and margin. which local pricing sequential

projected month of Index GDP call X.X% and over is The rate in of to Price June increase expected the positive Consumer personal our based Turning The the performance In the growth the that David this number year, for XXXX remainder nationwide. the and and XXXX over economic of in expenditures compare increased unemployment by conditions way the XX.X% remain David? highlights will over is growth income into I our Visitor Hawaii, forecasted a the same year in year visitors survival X.X% review to XXXX year and previous X.X% and X.X%. the to increase to market X.X% XXXX first expenditures the the year. period indicators last two in outpaced same to of X.X% includes recent year. this visitor of for Job financial unemployment labor are to real X.X%. is turn the to by X.X% is income outlook personal time, rate X.X% Hawaii X.X% the the tourism and forecast on five months performance. for over Honolulu the projected industry, At respectively. arrivals the was by period by increases [indiscernible] the projected The the to by The year-over-year. for increase by XXXX ago Hawaii’s previous

David Morimoto

and assets average share or Return of on million Net of return the net you, reported income or per equity the XX.X was on XX.X income quarter. diluted XX.XX%. diluted to quarter X.XX% was compared share same $X.XX $X.XX for XXXX Thank average Catherine. second per was million last

certain accelerate the a from include quarter year results under income streams one-time XXXX tax a tax resulting million which tax benefit XXXX corporate the higher into stream. second deductions accounting tax X.X Our message

related X.X quarter of Our refinement included tax to income of of asset. results XXXX one-time benefit a also first in a net tax revaluation estimate the million deferred the

more in basis. expect the declined tax the X.X effective to XX% net continue interest interest range and increased over on to to be rate sequential X.XX% a XX% Net income point basis million our normalized coming We one by by margin quarters. quarter to

as We loan continue than to yields. see increased slightly bearing slight faster deposit our some interest spread compression costs

improve interest to asset interest to margin several net Our sheet continuing liabilities net and balance income. maybe implement, cost strategies effective

During quarter. At reported for a million million and credit we the charge outstanding these to the net in loan million X.X June million compared compared XXth losses loans for in reported exist. or second the of a quarter provision quarter, offs second totaled offs prior to Net in million X.X as quarter. of loading losses prior allowance the our lease X.X X.XX% was charge X.X XX.X of that of

Puna district the are We In we a outstanding eruptions portfolio home equity lava million residential big of of loans on are of with aware Hawaii. the constantly Within balance mortgage island $X.X of total XX a the residential Puna total mortgage monitoring in have $X.X outstanding district the and has destroyed. been properties six we that with million. balance Kilauea that an aggregate

coverage. these all insurance that six have We have of properties confirmed adequate

primarily million, totaled the to the reported increase The in XX.X quarter second increases. $X.X operating second the Second quarter for annual income by operating which million. for was quarter prior from XX.X% was quarter the improvement expense slightly XX.X% merit Other driven was efficiency sequential salary increased ratio quarter. an XXXX, other

stock cost at the quarter of share repurchased XXXX, roughly $XX.XX. During second average of we of per shares XXX,XXX an common

an shares have July an in cost stock mostly common average of $XX.XX. XX,XXX repurchased at additional of We also

highlights financial of close by summarizing with Finally, quarter the our like would of some summary I to second results.

and our quarter of growth Thanks, call continues of XX%. year-over-year, ratios, and trend XX% low-XX% income year-over-year Solid net to and our loan target now by fourth return Catherine. the improve quality will and ratio of growth growth capital XXXX. the net and EPS Strong X% efficiency asset to of towards I

Catherine Ngo

remain strengthening set I our achieving improvement, plan, our goal XXXX in David. business relationships. you, technology confident built customer for in operational upon forth Thank and

of to in in challenges my customers continued confidence growth, technology. questions organization this support measures and areas our for to and the work fund address the XXXX be taken as appreciation cost express continued to shareholders have. happy At may in information to have to We we'll like we and term. I employees, any investments would modifying time, our their you. attain Thank to our address long you loan

Operator

question-and-answer first question go will The we you, now with ahead. Jaffray. begin Piper [Operator Thank Please session. the Rabatin from Brett Instructions] comes

Brett Rabatin

morning Hi, everyone. good

David Morimoto

Brett. morning, Good

Catherine Ngo

Good morning.

Brett Rabatin

out But for there. you that heard ask say thought the I Wanted second guide? to growth for was X% - my I full-year, cutting is the a for first still

David Morimoto

growth that year-over-year No, was right.

Catherine Ngo

digits in year And then year as growth for range. us for far as the mid-single

Brett Rabatin

Okay. guess just on Alright. I'm I David, And margin. curious the then

the margin mentioned Does here, thinking You little some anything pressure the a are going are on portfolio half the the of doing year. more you forward? securities the different reach the at you And equation. floor of on funding back cost looking

David Morimoto

Brett. on as slight additional is to - could year margin half Yes mentioned. you the the flat pressure back there Guidance the in of be some

and that of But we looking hoping is kind conservative. are right range, XXX that are we is that XXX to are at guidance. now hoping that conservative the We

portfolio. investment the as far As

somewhat considering shifting in our are saw looking you portfolio the [half] - the investment We employers (Ph). as second

into investment down higher the the take and to assets looking to portfolio. allocate are portfolio continue yielding loan we So

Brett Rabatin

is is cash strategic repositioning Okay, that but flow? now more active some

David Morimoto

At correct. this point, that's the plan

Brett Rabatin

And expenses. the it still of like are year. for mean half the a around flattish sounds just in lastly Okay. kind then the back you I of looking outlook

was that sure right? make to want Just

Catherine Ngo

range. for so expecting Yes range the $XX we $XX the expenses, in and are million a million

Brett Rabatin

for the Thanks color. great. all Okay,

Catherine Ngo

Alright, you. Brett. Thank

David Morimoto

Thanks Brett.

Operator

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

Aaron Deer

Hey, everyone. good morning,

Catherine Ngo

Aaron. morning Good

David Morimoto

Hey, Aaron.

Aaron Deer

or extent it of cash strategies net flows that caused to those I to to question into guess the book growth that X% forward? the X% would And looking going be expectations one reposition what I might that see you in average on guess David, it to decline investment balance continue up just off the quarter? following on then have the of call interest the in loans, you is securities thoughts. yield can your sheets in kind are income redeploy

David Morimoto

it quarter Mae in operation, backed On first a these there property. investment unexpected security data know on was Aaron single little the of bond, the underwriter delegated are second a I by thus portfolio late far, was Fannie multifamily yield, had an MDS. a question we so the commercial a on bit servicer

So we XXX,XXX got a about to premium unexpected the payoff quarter. and so in accelerate we have rate amortization of

yield. So on investment five basis I the portfolio it's think that about points

if you back have would then quarter that that, sequential increased. the if or you normalized investment out actually portfolio So for

my understanding forth that prepayment to and is on that coming. think penalty maintenance if So we security, property on I forthcoming the yield the was don't keep is by into some not. fire are still in be or penalty It's that a research of destroyed it whether period actually currently doing were that particularly

Some to then research reallocations. done regarding And the needs still the on second there. be question,

we investment consideration right is basis then higher the borrowings to now. are thing play are And from looking that the We flow of just into so of yield kind into government portfolios it in into the cost cash loans, process doing slash portfolio taking are on reallocate we also one in the will that decision. that

Aaron Deer

what loan kind dynamics, I book in can maybe guess of is What within seen reprises then production the And what And percentage relative where the have quarters? the you of us in more into remind a floating, slightly is year? to impacts little a coming margin, also rate that average Okay. recent on the percentage to is itself. you new what on then in

Catherine Ngo

to new quarter yields to loan to But X.XX%. will the the I to second talk payment new loan the compares loan and about in yield the X.XX% average and over floating other that turn at speak will I are before rates. it David our the

David Morimoto

loan Aaron, a reprises about year. on one of portfolio existing portfolio within the the third reprising,

Aaron Deer

shift loan lift kind family of sounds new where it seeing yields like now, or that in so production is was is of from single quarter. much bit seems because of just the the mixed you with higher contributed residential of the environment? rate like the flat not this are the portfolio Okay what a that a It terms are fair

Catherine Ngo

some is Aaron. there Well

on relationships value the the we do at the you in to couple expect quarters. of forward on so of we adding. focus and see We - year was X.XX% next to are continue excuse loan for new in me compare If that and hope origination some that first do the this pricing we yield as our lift going quarter

David Morimoto

add, in origination last quarters. I the uptick we starting Aaron an to might to yields Yes relative several see are new loan

that million, the recall you Journal that Hawaii of to $XXX off - related Street we is $XXX based didn't and have banks Time about way a is million Wall if basically portfolio the all the you Some down. know bank follow

we it rise portion benefit to really started portfolio the come, to bank quarter Hawaiian started every see the time until base Journal the portfolio. increase didn't of now is rate in with year. prime Street Wall rate of as this the the subsequent basically helping bank in first so And on And the

is loan categories. So other helping are that across much increase seeing pretty board and an in the we just

are the quarter loan what whether is remembered we I still in and say better we we believe six income can New sequential similar net ago. about second think was interest origination yields than your net then increase definitely to drive was months and interest just that income I second question the quarter saw objective. and the it

Aaron Deer

Thanks for terrific. my taking question. Okay,

David Morimoto

Aaron. Thanks

Catherine Ngo

Aaron. Thanks

Operator

go Okay next KBW. with Bohlen Please Jackie question from ahead. the comes

Jackie Bohlen

Hi, good morning everyone.

Catherine Ngo

Jackie. Morning

David Morimoto

Hey Jackie.

Jackie Bohlen

sources you an that have just thinking what thinking going of public you Touching about fluctuation viability and update how funds are this on of you that other in market, borrowings are mentioned you the quarter securities. the would positioning how on public then are provide deposits Can and play forward. seeing the about you into side,

Catherine Ngo

will to David. I turn that David. question

David Morimoto

Hey Jackie.

and government at increase borrowings was think slight wholesale on we normalization pricing, pricing million than we X.XX function have public was was cheaper about I million cheaper. of lean in It So the so quarter just a XXX was a of it some that a total government increase will time seen $XX then time. it was sequential and

X.XX% was quarter had second the XXX that the in the the new of of rate new volumes free weighted booked were average average X.XX%. and did we a So volumes

Jackie Bohlen

costs Okay from or is deposit at well. seeing time main you driver pressure that the of [indiscernible] are there as movement and the for are you retail in your

David Morimoto

billion or the when primarily the look XX of at large points And the into investment, the time I core funds. again, in way we portfolio nine large it's rate months billion to would of at core segment the deposit everyone that look the way, when X%. $X if roughly over that In at portfolio, it beta look we portfolio. and at the you And we like deposit think look is it to $X average the $X rate last billion is way best $X has exhibited portfolio and basis billion weighted CE a public

rate and a very CE of large portfolio by last low second XXX rate rate over months contrast in quarter XX%. So the of a XX weighted had The beta. the average beta

Jackie Bohlen

So team thinking securities. strategies evaluating discussion potential mentioned is terms are up? come ever about when in shrinkage you any your of it you sheet Does balance how sheet balance of just and the

David Morimoto

been We we that been have of taken a the have Overall shrinkage look balance strategies one we at hasn’t it, it. focused model have sheet on.

extent investment higher that focused steady, see reallocating We into and to growth. on we keeping it loan from loans been have strong the yielding

hasn't going little the really where need a been. the and that strategy has top-line focused. and auto But growth a revenue more five we the think sheet. have We I really on taking drive focus for to is balance the shrinking leverage of growing been way with been so even

Jackie Bohlen

Now Great. sense. that Thank make you.

David Morimoto

Thanks Jackie.

Catherine Ngo

Thanks Jackie.

Operator

Okay. go next ahead. comes Hunsicker with Please Point. from The Compass question Laurie

Laurie Hunsicker

morning. $XXX XXX million for can funds. upon question hi you have quarter? comparable the prior gave the good up of on Do I Jackie's us you in just we a quarter cost this Yes, follow think to you just wondered

David Morimoto

we actually on I Laurie, can it me but don't back you know to You that. on have get

Laurie Hunsicker

seems going that deposit Okay. us we be your we of movement. Can are be approaching that? comment money outside one guys And capital. just that then to see seems how is I you generally specifically CDs. to where help and That Where to to elevating about How the guess be the about market, think specials. about thinking you cost should

Catherine Ngo

supply Laurie the money are in you speaking Sp market? the savings to

Laurie Hunsicker

Correct.

Catherine Ngo

deposits There project of deposits also the construction benefited quarters taken to one of are larger And and there, those here. as far have escrow as deposits. earlier in accounting we related

there So in the second quarter, accounts. outflow out of an was those two

Laurie Hunsicker

cost, market be that And Yes directionally, guess are from tough that? we to of respect I with quarter how about jumping just basis to we the Or okay. Got thinking cost money then points XX. should the if at it, linked and market reaction. looking went savings XX

Catherine Ngo

David? that turn me Let to

David Morimoto

a some to it of Sure. strategies. Laurie, lot implementing would banks guess Similar I other call are deposit, deposit a segmentation you we

And are I higher on defensive just are yield So created components doing within the money you more savings what market within those have categories. seeing is that category, we that of some there. and think we strategy

not those accounts it's savings rate increases broad So based all on categories. NMB there are within pockets

Laurie Hunsicker

as margin Got that And range. together okay. about rate to XXX in think it, then many assumed putting had number? you your that guide all hike just XXX we How

David Morimoto

the XXXX two. half In of back its

is the Laurie. that So guidance. pretty a are do to forecast pretty conservative XXX I consensus XXX to reiterate And it's hopeful that want we

Laurie Hunsicker

in the thinking an versus that Newman Hawaii loan growth then to purchase stands update purchases us we you you just be I of auto, million then where about and then just breakdown book? and should or Thanks. total just what how give book in And auto Okay growth, saw auto, $XX your can Mainland?

Catherine Ngo

have David, number that do book? the you of

David Morimoto

breakout? The

Catherine Ngo

one. Yes. we to may to get Laurie, you that have back on

David Morimoto

Yes.

Laurie Hunsicker

Okay.

Okay. you to generally I growing we was one-off forward? of purchasers approaching just see or of are is that, terms this mean a expect kind this a in could going something how

Catherine Ngo

look at and no whether book on opportunities loan it or we from way Mainland the quarters. more the It's The look as at OEM that way purchases at yields. really see and opportunistic different that the is really it's we right here and in we

Laurie Hunsicker

book charge just off? maybe describe that was that as one then David, has jumped foreseen, charge line there mean particular item? any And but $X.X anything within credit Is I in offs, your consumer in there was you there million anything. that Okay. can

David Morimoto

it no. pretty No, Laurie, was consistent.

if you have pretty I think the look growth offs, charge offs been at growth charge consistent.

charge kept high look is So of we offs that had to that first recoveries two charge in relative that the were quarter really large that quarter and XXXX this actually offs. due

Laurie Hunsicker

Okay. needs hey are you at obviously see I and point starting terms loan we what back And of somewhere quarter can provisions to mean just that in how say offs? be should our just you gave us maybe million refresh that to now on a between and provisioning? then is Or charge last minimum be $X.X about thinking million, we come to you guide do mean, a loan covering provisioning ramp your loss $X.X I us here. loss

Catherine Ngo

I will turn to question over that Anna. an

Anna Hu

Hi, Laurie.

Laurie Hunsicker

Anna. Hi,

Anna Hu

to to we $X.X similar $XXX,XXX to be Hi., with what million. directed last the that range quarter, between

expect that forward. to We continue going

baring range. to that and course major do expect Of any any changes We to within changes, unforeseen maintain occur. to

Laurie Hunsicker

let's elevated questions. Okay. included take more Great, was a of The statement, is two just that then And income benefit? just that some helpful. to bowling

David Morimoto

Laurie, were set all roughly core that's no rate I the was good So income. debt think for the into no. quarter, run a it There generally second XXX,XXX,

have account quarter came have was do a no, does a actually income doing have But The it's from long not first does value because over when bully acquisition income fixed well time we securities, isn't separate stable in that a in one ago. it bond add so standpoint. a that value market an invested stable policy not do that doesn’t policy the well,

actually So was first quarter low.

Laurie Hunsicker

the you burn us then detail just Okay, total what the is big I your district, helpful, can remind okay you gave question that last Puna exposure appreciate around is? island

Catherine Ngo

Laurie question Sure, I have will then come back information auto that. will I for I and take that actually to you.

$XXX a represents portfolio. in big which of as and and million balance. Puna the district the as So the of loan was as destroyed district million total include would amount island is in exposure in then million total district then remarks, the $X.X Puna his our far the total mortgages and damage X.X hillocks of mentioned David properties is in of X.X% Puna And that course principal that

Laurie Hunsicker

you is then said auto. helpful, okay. the had really you And Okay, that

Catherine Ngo

that, Let QX break million then me was come as I so and back the up it balances XXX and a portfolio were between and portfolio to the and Hawaii XXX will auto balance auto of Hawaii million. Mainland, Mainland

Laurie Hunsicker

Okay, great, much. there. thank it leave will you I so

Catherine Ngo

Sure. Thank you.

David Morimoto

Laurie. Thank

Operator

ahead. Please Instructions] comes Don next question with James. from go [Operator Raymond The Okay. Worthington

Don Worthington

Thank morning. you, good

that Just quarter. steady you one or pretty of year, at mortgage banking the had two quarters more, has terms you the continue that two this been expect the would first in of level revenue to

Catherine Ngo

I will take one. that

for in So if production then look And million in quarter are the expecting in $XXX had range. and $XXX mortgages I quarter I second XQ, couple will the our to we beyond be QX, think to projects in we the we that have in million next out be for and quarter, the we a a more in do have condo units are that do be now closed fourth quarter. a in buildings those going fourth the of of significant the percentage that completed

Don Worthington

Okay, it Mainland little went up was then great, C&I like looks and the in anything portfolio particular. a that

Catherine Ngo

the was purchases there mentioned extent going continue in That I whether and that. at Mainland my opportunities as mix auto opportunistically that to or snakes on to look are remarks, be earlier the are for to we

C&I in million that was So mainland in that fixed. saw X.X QX the was in you

Don Worthington

thank Okay. you. Great,

David Morimoto

Thanks.

Catherine Ngo

Sure Don.

Operator

in remarks. queue, to conference this no Catherine to our further the like concludes Seeing closing questions I over back answer any the question for would turn Ngo and session

Catherine Ngo

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

Operator

presentation. concluded. attending you The for is today's conference Thank now

disconnect. now may You

Central Pacific Financial (CPF) 25 Jul 182018 Q2 Earnings call transcript