CPF - Earnings call transcript Q2 2019 | Central Pacific Financial Corp.

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Operator

Good day, ladies and gentlemen, and thank you for standing by, and welcome to the Central Pacific Financial Corp.

Second Quarter 2019 Conference Call and Webcast. [Operator Instructions]. This call is being recorded and will be available for replay shortly after its completion on the company's website at www.centralpacificbank.com.

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

David Morimoto

XXXX Officer. And you you, bank and Hu, of Credit joining Yonamine, Financial Chairman of Catherine are us our Executive President this Thank With the Central for Vice me Executive Chief Corp. quarter and results as thank of Paul financial Anna and all President Chief Chuck. subsidiary; morning Officer Pacific and the we second Officer; Chief for Ngo, review Executive

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

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

the refer a recent SEC. filings discussion of forward-looking to the to risks For our please statements, with complete related

And now I'll turn the Paul. to call over

Paul Yonamine

morning, everyone. good and David, you, Thank

with like rest CPF take next improved metrics consistently us and months I that to past next Today, level. of Over last the the me its months the years, the RISEXXXX. introduce initiative the executive shareholder would spent this named and I CEO Board eight of management developing we to level performance as CPF initiative multifaceted ago, appointed to Nine value. six Catherine performance. the to take profitability, team a have to has the

and future in banking; of like Digital for operational of our opportunity a strength RISEXXXX in recent that I'd as areas transformation; not to will current strategy. build to numerous enhancement; it the and has key and upon We the our We change branch emphasize excellence. revenue RISEXXXX success. four invest areas our opportunity. includes further highlight and foundation strategy view led to an initiatives, today: to plan enhancement

online banking banking, of implement to by fourth XXXX. and area the the CPF plans the of quarter In mobile platforms digital best-in-class

our developing systems. are that platforms existing will replace We currently new

Exceptional and enhancements our the working small Online are Banking products, our marketing introduction including business redesign digital Business include of accounts. recent we capabilities. robust Business and to website implement Revenue best-in-class Additionally,

also cash and an enhanced We of Central recently suite products. management iBusiness launched

in to Additionally, we invest we have a plan and initiatives competitive our sustainable business Japan, where development emphasize advantage.

transformation, areas area building In heart co-working Honolulu. branch will and we local redesign community small include the space customers revitalize The business of for of Central the Plaza, for plans downtown CPF own the meeting Pacific in nonprofits. to

we our digital include main customer experience. ensure technologies elevated transform Additionally, will flagship branch innovative to an banking to

Our installation the plans of ATMs. also here include full-function will

We our facilities other will upgrade our branch main following branch.

loans origination of operational an and Finally, are excellence, servicing. loan commercial we end-to-end area in residential outsourcing the system, implementing mortgage we are

customer-impacting use driving we areas our expanded in through of Additionally, the are efficiencies technology.

CPF aggregate, In million $XX the expects to invest on roughly initiative. RISEXXXX

these Some recurring capitalized, be are while of annually. others investments will

implemented annual increase to operating roughly the RISE start when XXXX. $X by We expense is million expect by fully of

generating and is a started RISE some of to bank. of within the on have initiatives, it the We lot excitement execute

We of XXXX. million incurred RISE-related expect expense expense the of $X to $X.X half approximately of in and roughly the million second RISE-related over XXXX second total quarter

While are revenue expense is growth. enhanced we increasing, forecasting also

our range in XXXX ratio XX% the expect be we to result, and XX% a As in efficiency XXXX. to

also next experience shareholder the to regard of employee performance CPF take level will with drive customer RISEXXXX and and to returns. enhanced

We end the are of by XXXX. targeting return and shareholders' XX% efficiency a XX% a equity on ratio

quarters. We details the on will RISEXXXX provide over more coming

will our Catherine results. now Catherine? quarter And provide highlights of second

Anli Ngo

of we Thank solid the this I'm realized growth that report to in you, quarter pleased year. Paul. second

commercial basis, on core loans future RISEXXXX mortgages increased over sheet $XX investments strong strong targeted $XX project our million and our impacted across and the resi by year-over-year. net by $XXX X.X% million deposits. in loan or for to all in growth, continued in industrial and by other areas and quarter gains commercial income sequential loans. mortgages, in million million loans quarter in Total Loan of by While previous X.X% or led was the was categories $XXX with increases million and balance growth expand $XX

the On also the across $XXX was a year-over-year increases million loan driven categories growth basis, all by types. and same solid loan

significantly or improved Total decreasing X a loans nonperforming of with on total basis. quarter assets. $X.X points million to basis flat sequential year-over-year quality deposits Asset and remained

However, million increased ago. by $XX from by $XXX a quarter previous from core million deposits the and year

to of core and of loan-to-deposit Our XX% Competition as markets and account presence. was business we A remains delivery. very on sharp, relationships our the continue market was Exceptional for and our consumer deposit executed service quarter. at to campaign ratio market deposit end expand the continue successful customer strong with Checking small strong base the in with gathering our quarter, focus second building we in second

to I'll time, financial review David of more call in our the this highlights the turn David? to performance. over detail At

David Morimoto

Thank of was diluted you, last for million second the quarter Net compared per net million income $XX.X of $XX.X $X.XX $X.XX to income Catherine. XXXX share per reported diluted or quarter. share or

stock. included on MasterCard the assets return of results was XXXX and of quarter pretax X.XX%, gain million $X.X The in a average equity sale XX.XX%. Return was average second first on quarter

$X.X interest stable on X.XX%. at interest was basis a margin million to quarter $XX.X relatively income million increased sequential Net and net

$X.X second we lease prior quarter. million million recorded a compared quarter, loan provision to the of provision recorded During and a in losses for $X.X of the

for quarter. quarter charge-offs and loans our the million $XX.X prior totaled leases. the of At Net of XX, lease and compared $X.X net second million $X.X outstanding million losses to allowance loan or June in was X.XX% charge-offs in

prior $X.X million. the offset in totaled from The other Services business in income quarter, $XX.X MasterCard of our primarily quarter on compared to higher was quarter. million million Investment decrease Second to $XX.X income due by stock gain operating partially of a prior the sale

of in quarter efficiency the million deposit promotions The for benefits mentioned quarter. was $XX.X operating to and The driven as was well compared and the the The to quarter investments benefits was million promotion in effective the was employee and promotions higher XX.X% as the $X.X $X.X XX.X% prior and The second expense expense. increase primarily of RISE-related in partially million was second due Other expense reflects core the higher second quarter and the expense quarter. previously $XX.X sequential campaign. related million. core salaries was tax deposit increase RISE salaries the for increase in rate ratio by

forward, to approximately Going XX%. to expect be rate the XX% we effective tax

XXXX announced that authorized the in Board We $XX new plan a June share repurchase to up authorization million. with

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

Thanks, and now call to I'll Paul. the return

Paul Yonamine

sustainable to we are needs timing employees, for with improved position. quality is our acceleration an of changing of toward Thank support our while in of the meeting confidence levels our continued customers the strategy growth The of and strong our this of our viability RISEXXXX, shareholders and the you, embark to the generate we like markets years. financial long-term and all We higher performance asset to the Overall, capital David. in stakeholders. maintaining On and our behalf right thank growth I'd a improving company, coming profitability pleased benefit reaching team, will for their management our for franchise. work of and in and of our invest on as continued believe organization

address At you. may we'll questions Thank any to this be you time, happy have.

Operator

[Operator Instructions].

from comes question Our Sandler + Aaron Deer O'Neill Partners. first of

Aaron Deer

the few minutes the of missed just first call. I

of been technology you different I talk how is from taking efficiency I other some guess, if you digging about me that like that can initiatives seems just And past you've talk hard. few of the that's is about out? more But for initiatives, ask forgive what is been versus this this expected the the has into something specifically RISEXXXX specifically, some So and years? addressed. Can expectation it -- revenues of play to driving the

Paul Yonamine

Sure. is Paul Yonamine. Thanks, Aaron. This

migrate be in best-in-class platform of have think mobile I a major period think, I about opportunity banking like digital think area, that, the but our a platform on and the digital are this marketplace. banking couple to going to very is the plan is, of is time, banks be unique lot the over is to to many an our talking day, advance the to to RISEXXXX similar think touch And initiative. end today. things the And in on I'd And quicker. of everyone for pretty online some way initiatives I going market a on of one a at first RISEXXXX the much technology, banking us overall I a

be making Our U.S. bank in a at intelligence a hard we'll is artificial at doing, what mainland. analytics, in big differentiate feel taking the financial look even leap data that that will other I I technologies. institutions are utilizing from level believe cloud a

think into be are it's investment. key incur RISEXXXX a on this basis, But that's one in things strength with year-to-year associated so not baked on million. going we within of it, the to a is area, be basis, right? investment we $XX going the lot to it's So software-as-a-service These a that completely a our

dynamics area, Hawaii. investment on Honolulu, in for facility's unique downtown even Another our is this a

critical positioned supports is that of and in more in this least for in huge a lot creates going Honolulu building into billboard what and do relevance bank really to is the with Our turn facility we the really at marketplace. a downtown a location

our a lot it the again, RISEXXXX and second on how of is We've to quarter. of A area spending this organization, reengineering the underpinnings a operate in as growth are, second on as of investment that, and some also growth deposit for process third growth digital is I relates and during our loan this business. on time, an strategy that the we we think, that making started and we've already been of a real quarter, lot the part

Aaron Deer

expectation are like long-term to months, million, the toward as be you've over appreciate a I of where next might given you'd us the XX investments to like expenses and over know get noninterest sense that. it Because on in down to is an to basis? $XX the on would you of on months, That's terms efficiency XX million objectives on XX, maybe Okay. I this basis thoughts can my helpful. basis, going next up quarterly guess also probably going give since your that? dollar your ramping a get be -- ramps, presumably maybe $XX where I but efficiency just these up to a And trending we're but XX go to, just the

Paul Yonamine

David to David? Aaron. that. going Morimoto to Thanks, I'm have

David Morimoto

million guiding million Thanks, range. $XX Paul. operating the so a of to we're in $XX to other Aaron, XXXX, second expense half

second that similar saw the the core in XXXX. a of will there So in deposit in the second was not what it's campaign to as Catherine back quarter. half But mentioned, we recur quarter

to we're expense second in RISE-related similar So so half, roughly the million is very was results. what second estimating quarter $X.X it of in the

up ramps of expect $XX we that 'XX then the $XX in million to the back million in be the initiatives. $XX to XXXX. on How and million to 'XX it million will our of -- dependent quarterly half in various rise implementation to million to So back million $XX $XX $XX to half of

we'll place take to time. million $XX the end million by of it'll over XXXX, be But So $XX in range. the

Aaron Deer

maybe And helpful. your another That's margin. one on for Okay. just the you --

of has Fed. the Given for expectations obviously environment pretty the year been quickly the rate outlook and this in changing terms

expected back kind expectation that year? different book of but margin half Fed out for been has at your down, Given you what's some point including affecting and margin, of of what's of dynamics building some here, this your maybe guess this securities that the of from purchases, the your through start the and the I

David Morimoto

X net at of and Fed in ease-ins to half of our X.XX% maintaining we're the back half Aaron, assuming and two XXXX. margin first the guidance in that's 'XX X.XX% Yes, interest

we've many well the As sheet balance discussed relatively matched. is over quarters,

So significant course. extent degradation pickup the of the cycle. that expect a in we the don't margin margin didn't net reverse rate lot a the in interest to see we rising of rates why that's Similarly,

So sticking X.XX% X.XX% we're the with guidance. to

Operator

Luke next comes Wooten question KBW. Our from of

Luke Wooten

two year? from year. guidance? see it put Just I end next know just you like just next of a that end it? X.XX%, time in going is the the I year, XQ to wanted parts in 'XX, in it there, lot of first is to going well kind I just or that it's matched -- of kind is if really one then this that X.XX% cuts to down of Fed we're without just in And the at at line and wanted the know keep X.XX% forward on of to obviously through it this of looking moving relatively year that X.XX% here a so kind margin, with of to half associated

David Morimoto

Luke, David. is Yes, this

the the next X yield quarters, steepness the X.XX%, curve. XXXX, seeing think yield wild X.XX%. I End of that quarters. X.XX% expansion, next the of curve, we would comfortable will but to the definitely be X.XX% we for X, card several could hope But the the big some with we're be for

Luke Wooten

should of And of timing end-to-end just helpful. then that the -- What know there stuff what back number technology revenue and platforms is RISEXXXX, the well to embedded other different guys are that? the just how with is just see on through to fee net in Okay. as coming interest the kind look kind efficiencies, synergies? of working just as I kind at in that should we going income with you of income in? see lines the of kind we That's wanted some commercial

Paul Yonamine

Sure. Luke, Yonamine. this is Paul

terms need of lot QX in already commenced a investments. make of revenue we period revenue But to generation. So operationally, time a naturally, in these we've of enhancements,

our organization. some reorganization on done customer-facing We have

of operational an pipeline frequency We discipline a have There visitations. leaders management, in organization. and loan in of cadence of more appointed of within new customer terms terms the is

very because we now. today. to with investments, are deliver on have we We how these to And getting market understand we granular go even

we deposit the this growth full QX, in on process trigger has force ahead. some on that, that a quarters and anticipate so tremendous loan And in -- this and embarked have will be our of we in

Luke Wooten

super That's Okay. helpful.

of the switching growth. portfolio over Just kind to

back strong -- the in in? digit really Is higher just see growth mid-single saw coming going be and the quarter, year of bit the of end it you to in wanted back how see XXXX? guide little guys of this a loan that You that end do softening or or to half is full

Paul Yonamine

Catherine respond Catherine? that. have to I'll

Anli Ngo

really were $XXX Paul for discipline much that the sales in a that level. QX. to we've organization loan see we employed Sure. million the to number pleased growth here higher Yes, spoke at

we year single the will the So mid-to-high we'll guidance are updating half with back for now of -- say digit. growth and our loan be for it

Luke Wooten

And repurchases the going pushed wanted helpful. June? RISEXXXX, just getting forward? then expenses see, kind Just we into should how impact reauthorization kind with new That's with think of the the see that of at kind should finally, about especially that, Okay. just we of to of the end

David Morimoto

if market market there Yes, pace that obviously depending be changes, David. volume. this will We're may started will the driven. the continue but But share share we year, an can open and share program. market ultimate repurchase But we open repurchase mentioning of the it's Luke, repurchases be on decrease or will insider program. increase we earlier market continue slow, -- to the as the

Operator

comes Our next Hunsicker from Point. Laurie of Compass question

Laurie Hunsicker

you wondered just to could I back the that? made Japan. if to think around about Paul, potential of some capture you business you go us comments Can RISEXXXX and the help in

Paul Yonamine

do I'd happy Sure, be to that, Laurie.

So with a cultivate naturally, takes Japanese relationships type And regional of organizations, lot sometimes year, we it effected banks. customer Japanese with these from referral. seven last of to alliances time the through

that. to see starting steady stream we're of So a

Japanese and harvesting to in many the need today. better interest state As that do of you feel of cash of the key cycle and investors extremely going focus we is is, are Hawaii, a know, opportunities. one a we rich, tremendous Japan job those through that of our economic individuals given Corporations, tourists

a takes lot So Japan key going to little good think a are we itinerary, focus that's next trying very our with alliance visiting work as a areas of and to again, our as I'll signs showing one partners, well well, of prospects I but it be loaded week with development. but customer to going be of Laurie. of time,

Laurie Hunsicker

loan I customers if or so much of forgive book, Japan? before I about that billion but -- it, guess is and your this, to I $X.X missed in so and of how And chatted don't it you me know so

Paul Yonamine

around base. our Japanese the think themselves investor loans the primarily customer focus -- deposits or with So is I

or purchases. we'll developments seeing especially investing commercial residences lift loans, not of have some the large-scale have in Hawaii in in we've and interest of in as terms the continue lot activity, terms to they active residential overall here In that residential Japanese high-end Hawaii, on see yet. been a of The been market on

more Our has been consumer. with focus the

Laurie Hunsicker

it. Got

Okay. from on of And the deposits, that question how Japanese coming in $X then much same guess, investors? billion is I

Paul Yonamine

you number? have number now. that right with don't do that David, have me I

David Morimoto

excess billion. Yes. in $X.X It's of

Laurie Hunsicker

Okay. growing? And -- you how then of in I terms are mean, about thinking how

Paul Yonamine

Right.

the avenues a alliance presence there are having a we services to given today, one. So economy That's One bit of actively of view dollar the and a little in partners number about portfolio. thing, their Japanese are counseling by their couple yen our a talking to there. the providing to bigger robustness better clients trying and consulting hedge having more

feel progressive is most two at have in the and And The companies plan self-insurance are we're really that's creating insurance captive thing to second that that And regulations captive certain like, for in behind and pursuing us, continue we very Hawaii the are the the captive been opportunities, a good bar terms way that for states nation. looking and niche companies. Vermont Japanese that. of insurance. angle we insurance example,

Laurie Hunsicker

maybe you this I'm back want way. And Great. RISEXXXX can make going right Okay. just to to about the I the expenses, then thinking sure -- David

in million $X about How $X September? take up quarter run total expense, of third of as So in that spread we back your Or $XXX,XXX million the of the million million thinking at $X.XX noninterest between and equally to $XX million then the spending addition a we million in $X look guide call let's $X or it, is $X.X that? rate? million to is fourth half, in When going included hypothetically, that for $X.XX and it should of million give RISE. be jumps June be it your the

David Morimoto

more it's Yes, latter. Laurie, the

So it's the half. increment $X.XX in back million the

Laurie Hunsicker

Perfect.

and outsized, that million should was $X.XXX to Okay. entertainment promotions, know very Catherine number this, you be just clarify where running? I and the and And mentioned that

Anli Ngo

nonrecurring. million with And the the campaign. is figure, $XXX,XXX promotional connection expense, Exceptional Deposit the was $X in about it includes That account which in Yes.

that instances if about So you that where you in to should special a campaign. it where other we back out, expect is have might see

Laurie Hunsicker

great. That's Okay. helpful. That's

the then changing changing should thing on how in this your changing loan fee about terms And RISEXXXX, growth of your growth or through? this terms last How or Okay. your of we a delta think in does play deposit income?

Paul Yonamine

Thanks, Yes. Laurie.

we'll We've RISEXXXX a a it starting our at of basically the think call be going customers creating to start Central this or all this of is can they opportunity the organizations our bank and year utilize. for is to is building here, employees main the our community. down in a market, lot for They believe a branches employees, our has their XXth out especially lot in for Hawaii. out RISEXXXX, remind to community area ask tremendous that today that of history market. bank action business the on Bank, have the our to I a Pacific us to of and whether us. a lot frontline go also turn a state that them And nonprofit playbook about them with that all double officers. our be and our customers had with done

committed. think are I our employees

We system to what excited and to quite looking and ahead. we're And that. happens have in an forward operational support months the weeks

Operator

Instructions]. [Operator

comes Raymond Our next of Worthington question James. from Don

Donald Worthington

the to of terms terms back raise special in the that in to deposit couple campaign? you Can size you're the core a what maybe success able of questions campaign. from Just going of of

Anli Ngo

million previous calls, dollar $XX account the And that is required the organization. lift these for relationships of This that million within campaign, we eventually minimum our us, this sure. customers $XX need products the of We in pleased will this the other range. lift from with to balance. believe services a are about we've has Yes, so really results talked were with and importance

amount that for lift about the much is it's the as represents about deposit actual into the number. So it that, us, opportunity

Donald Worthington

Was growth were deposit FHLB then of up in that loan kind catches growth the quarter. up? And of Great. funding Okay. the a temporary advances until

David Morimoto

Don, it's That's David. correct.

pricing. do investment back going in as been a the did you reduce were was really and So some, and remainder advances. between cheaper but we've CDs it's saw, the deposit the forth know, function funded able -- growth government We as portfolio from. the is advances of loan excess where And growth outpaced with FHLB Whichever we to will and is funding we public FHLB you quarter.

Donald Worthington

Okay. purchases this And any then were quarter? loan there

Anli Ngo

on question, in in of a what a million Don. purchase. profitable was me it the Let and purchase that purchase we to made range, top loan There we on quarter, reported This was a take QX. follow last $XX is

Donald Worthington

Okay.

So in shows mainland up the loans? that

Anli Ngo

in mainland consumer, It that's shows up right.

Operator

Paul concludes Yonamine This our like turn remarks. to for the would conference session. closing any I to question-and-answer back over

Paul Yonamine

Yes, look thank Everyone, that's progress. participating call really XXXX. second of the Paul thanks. forward in to our update for quarter you future much you very to for our opportunities We Yonamine. earnings on Many

Operator

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

You may now disconnect.

Central Pacific Financial (CPF) 24 Jul 192019 Q2 Earnings call transcript