CPF - Earnings call transcript Q3 2019 | 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 Third Quarter 2019 Conference Call.

During today’s presentation, all parties will be in 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 Hu, and we With and review Chief XXXX you, Chief us and Central Executive me the joining Ivy for Officer. Catherine Paul Credit financial Vice thank this you Executive morning President results Yonamine, Financial Officer; Anna of Pacific third are of for quarter Corp. all Chairman as President; Ngo,

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

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

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

I’ll call And turn over the Paul. now, to

Paul Yonamine

report quarter company’s the year-to-date months. David performance for this financial of performance on nine the as Thanks, morning, over pleased good and for third solid as everyone. year well I past the the to am

call. core both strong We sequential a maintained ratios, capital basis. basis year-over-year and financial continued interest later nine-month solid year, generate and On will providing net and our improved details year-to-date deposit our efficiency to on and interest be net compared to growth of a quality and loan non-interest last ratio. quarter margin, this a we David asset in income, the income highlights

year. stock $XX.X quarter. this our of common we have Our the our dividends, have we Year-to-date, capital or million XXXX. position of us enabled X.X% Combined in to strong XXX,XXX of CPF profitability repurchased of capital cash and stock as to repurchase during returned the shareholders with roughly shares shares outstanding XXX,XXX end

we Since a shareholder our customers drive customer and long-term our from profitability positive employees. and feedback launch, last encouraging stronger RISEXXXX, returns. comprehensive to initiative enhance earnings have and experience, At we and call, growth improve the heard announced

new with of are The website phase key projected bright The may commercial early and mobile the mortgage Hawaii upgraded cpb.bank for under deck a to origination in XXXX the economic Efforts well. in employee the quarter progressing year. implementation The shown launch last third system. initiatives the indicators previous the digital over are online slower a same end-to-end high-rise in August be fourth X.X% Honolulu. an very we year-to-date modernization of the our in residential our did outsource and of but of has and visitor arrivals banking robust domain as year. the period servicing buildings loan and branch than leading conditions in construction grow, solid pipeline name, still in hit successfully quarter. residential in pilot our of While of are milestones urban the banking initiative, activity rate platforms at to increases in the industry On spot the visitor

X.X%. slightly visitor income However, personal real growth forecasted real The X.X%, jobs in GDP were down at and X.X%. expenditures XXXX at at for by is X.X%

At this Catherine sheet over for balance it highlights. Catherine? to I’ll our time, turn

Catherine Ngo

you, Thank Paul.

loan resi basis, loan ago, across our grown across categories growth. from or by the increases a X.X% $XXX year-over-year. with and categories, construction year $XX year-over-year million million solid loan direction, consumer the million has basis, by by $XXX $XX or million in On quarter in On the with commercial loans quarter a right sheet balanced loan same balanced million nearly mortgages, financing. loan growth among the mortgages, types. also balance or increase an have all Total billion assets million X.X% in increased million led of total sequential deposit $XX was loans in $XX relatively increases were same period core in $XXX X.X% our and As over to composition the moving and to been a regard $X especially previous

X.X% continued quality Total non-performing sequential represented by deposits basis be of on increased X total by of to year-over-year a with assets. quarter million, assets basis $X.X strong and points which X.X%. Asset

of core a the market However, in increase demand $XX X% money X.X% or X.X%, savings million X.X% deposits million in of that increase or X.X% led balances. with balances. by increase core increase demand by was led of contributed to all growth quarter non-interest-bearing in sequential The increase almost year-over-year in $XXX and a and deposits interest-bearing

Our campaigns meaningful of the an gathering strategy. premium development account several results We initiatives and we initiated forward. as going promotion quarter, the including We’ve of third was end deposit had successful at enhanced feel business during targeted execution loan-to-deposit also XX% checking quarter. ratio business that deposit the the yield of core will

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

David Morimoto

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

We we to for interest $XX.X were solid initiatives. was to on sequential a the million future our income while basis results, through our $X.X quarter margin Net investing and post million quarter are RISEXXXX pleased interest net able X.XX%. third increased by

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

the to quarter a Third for the operating in quarter. efficiency the income improved quarter. commitments, ratio reserve expense XX.X% $XX.X $XX.X quarter. quarter million the the in in quarter deposit quarter. third our the prior quarter XX.X% million $XX.X in compared in the driven prior Other promotions The totaled reduction was in and was in XX.X% The effective loan from the campaign was million tax an operating other quarter quarter. sequential assessment $XX.X improvement in insurance compared third for rate by to unfunded core third deposit the prior expense The primarily current to prior FDIC million related credit to

effective be Going expect forward, XX% XX% the in the rate we range. continue to to tax to

Thanks. And now, we will turn the Paul. call to

Paul Yonamine

commitment Overall, another we for into confidence are infused quarter positive our behalf in of in our company goals maintaining support continued coming pleased set a have thank the of enhanced On the quarters we the management team, and in achieve to momentum your and three you organization. initiative enthusiasm years. The our with RISEXXXX the another first solid year. has throughout and level of

and confident investment the for a toward We that a bold for employees, to is better are make right customers, long-term. timing community move our building the shareholders and bank

time, to address we be you this much. will any may questions you At have. happy Thank very

Operator

comes Sandler We question-and-answer Instructions] Deer Our will question & first from now with Aaron [Operator session. Partners. O’Neill the begin

Aaron Deer

Good morning, Hi. everyone.

David Morimoto

Aaron. morning, Good

Catherine Ngo

morning, Good Aaron.

Aaron Deer

maybe you Paul, mentioned servicing. the just to start, of the outsourcing mortgage

know to might kind line your into impact and both curious on of line quarter? expense mortgage that have as revenue Just what head the fourth we

Paul Yonamine

was takeout our Is I compliance making our se and cost folks mortgage cross more market. our Ts to dot really and credit This getting on get think to the the regulatory focus all that while really sure play matters. employees was outsourcing regulatory was the it per on not the compliance policies one we growth about focused and on for opportunity strengthening

right we it but track the bumps there so right with on together job And way, did as is made transition some migrations, is think our and along all pulling team and always the great now. I a

Aaron Deer

and quarter. Okay. like late quarter you And fair those prime given how rate offset at with was to Looks I prior to of the the pretty the yields back thinking rates the additional yields core on NIM then flat funding in But loan we loan sequentially. looks about recovery in like bit the drop the guess in the what your the do extent down a costs? and are that perspectives, moved falling and expect interest you reduced impact are coming, margin,

Paul Yonamine

– I Aaron, will will that. to respond have Catherine have I

Catherine Ngo

of the yields loan came at and of our this go as portfolio X.XX% for loan talk compares yield then the and in it forward. to will quarter X.XX% new David the for and quarter with then for I to in about average go I’ll that then and forward, But start terms turn yields just David?

David Morimoto

Hey, Aaron.

the I with think are stick been net guidance we margin that providing now we have interest now. to for comfortable several quarters for

with are So, X.XX%. the for sticking the quarters we NIM of next X.XX% couple of on guidance to the

that loan quarter. the of yield again, interest quarter, non-recurring exacerbated sequential the Regarding second recoveries by decline in the was the in outsized

what So, guidance. we we we do X.XX% maintain to can now. are that X.XX% still That’s holding to for believe

Aaron Deer

are curious, anticipate this impact net is you’ve like to there? then forward the And done I’m Okay. portfolio if be down continued we that just how portfolio. more that to to That’s looked income point investment run – you do moving interest great. securities shrink? that And at then, continues there or done in is it

David Morimoto

always the largely normally to investment largely has It’s probably but you taken the the rundown deposit in has as portfolio be of the XX% of We going loan Yes. and growth, a assets. XX% interaction between to would say, function – place. run

we’re right of at think now. right I top-end the range that

would a deposit but it might function. run in it that to but XX% growth, are able the range If to keep for normally be going probably in we higher, always little assets. it a of we outsized being, generate So trend time the it’s XX% to total then

Aaron Deer

Got it.

step Okay. back. you. Thank I’ll

Operator

Wooten comes next KBW. with Luke from Our question

Luke Wooten

Good morning, guys.

a – unfunded the current in the guys the on promotional dig to wanted campaign. for Just expenses you reserve the and quarter, with in reversal so then the had also for the drop-off commitments second, for

running $XX we around million the higher-end back to to wanted to quarter, or guide kind the for outlook wanted anticipate that look $XX And the see closer million of the going $XX for that million the how maintaining XXXX to the range at fourth million to should then hear just up how – on and should was expense balance, looking? the just for we that to of also $XX forward? Just

David Morimoto

were forward Luke, normal $XX the into And think in looking million seems there million investments I fund that’s so quarter, in and the a and for but the correct. you good the the the funded anticipated fourth items. – yes, $XX that are way $XX.X to range thinking third XXXX, Okay. XXXX $XX $XX incorporate fourth like it’s other the million count quarter, range appropriate line the RISEXXXX to for for Yes, million on, million Hey, reserve increases is reduction is was would David. quarter. can’t it about and necessarily related $XX We we inflationary guide roughly an not million to then the expense

Luke Wooten

guys you deposit then the campaign in exceptional Would the know the Okay, kind that at success Or deposit consider on that something guys considering another campaign, you plan? just of about of implementing doing in that’s of point feel helpful. cycle? you this the campaign how with up I finished And kind like plan XQ. do

Paul Yonamine

Luke. is Hi, This Paul.

on dialog campaigns, in really in currently still it, we’ll the can campaigns. drive discussion the are but in growth nature to that, you no There deposit we’re We subsequent the as expect to on deposit doing but quarters. us question is timing, of be more that

Luke Wooten

quarter, Okay, this core if of accounts. growth know that’s you more addition was – And of helpful. of to guys lot I any know wanted related about and of kind talked or of the then had had that if been just those guys to last funded, and was was that just for you quarter I any the pushing I deposit on know deposit wondering a Japanese deposit accounts really it

Paul Yonamine

in wanting continue there of working focus made expect with the quarter and time, Japanese we the the opportunity, and to current investors we and with placing to market the this some good for market some takes think and know, Japanese a have consumers or that you progression Japanese but globalize. I growth and economy companies As given appetite on a strength lot always

things making continue will progress. we focus. to time, but some we’re the place think Japan sometimes little Again, in So, good I take a

Luke Wooten

was know I mobile and late then but on out, have those think, you guys just platform? wanted accounts. traction And I on planned a see how either helpful. of or traction to just to roll it’s early the that’s new Okay, seen banking XQ online XQ the building lastly, ‘XX, lot

Paul Yonamine

– hasn’t established traction There not any hasn’t platform the been it because yet. new on it’s

roll in to out you schedule. I current implementation the part on XXXX. tell can are plans our is that of early Our it

really could forward. and We’re bank and that proud business quite pleased and our I confident help our going

keep you posted quarters. So, that progress on in our we’ll on subsequent

Luke Wooten

I Okay. will Thank step you. back.

Operator

[Operator next question Instructions] with from Hunsicker Our Compass comes Laurie Point.

Laurie Hunsicker

morning. good Hi, Yes.

Catherine Ngo

Laurie. Hi,

David Morimoto

Good morning, Laurie.

Catherine Ngo

Good morning.

Laurie Hunsicker

of balance that Luke have was back wanted a you an your I where think as have Just Is of you it new gave to $XXX going. XQ, million. where unchanged or circle Do was you Japanese to actual do stood? deposits us number?

Paul Yonamine

at about we’re currently, $XXX And million.

And so some again, progress.

and consumer continue to on interest to market. the hoping and the We’re opportunity the in there among focus the Hawaii average Japanese

Laurie Hunsicker

then expenses, in Thanks. great. terms I could fourth assessment back see you just much know quarter? but how Okay, have credit, FDIC still And roll we going remaining into of to what the is

David Morimoto

Hey, Laurie, it’s David.

Laurie Hunsicker

David. Hi,

David Morimoto

roughly through a quarter it. came is what Hey, of

roughly So you that when then remaining. fund there obtained function when credit – the know. million timing $X.X would insurance of And a is be deposit the is as on

Laurie Hunsicker

Sure.

be kind RISEXXXX, the good. compared was in June roughly of into could of Okay, then quarter on Thanks. about full-year sits baked the $X.X refresh guidance you will so I million you what be the million saw the and both gave expenses we to of quarter thinking that quarter And fourth us, should that. RISEXXXX the if third in that but with XXXX and embedded I $X us that the wonder terms then and how

Paul Yonamine

so, the quarter. Laurie, yes, is million Yes, fourth now, roughly the our in – Right the $X.X RISEXXXX estimate expenses quarter $X.X related million fourth estimate second the quarter. of in in

Laurie Hunsicker

Okay.

Paul Yonamine

but increase RISE-related we’ve quarter, other again, but guide items. rate you expenses a inflationary been RISEXXXX, million full we roughly Then that into expense that million roll it’s run operating only in to line $XX to other providing XXXX, not as other quarterly on disclosed just million expense we mentioned last the the related $XX earlier, includes expenses, $X also as in

Laurie Hunsicker

Okay.

David Morimoto

investments more and sure getting Laurie, component making more lot and how that I short-term And coming customer-oriented we aside the spearheading be to growth for the really in investment, we’re initiative, of RISE our continue big is making total we’ve is into team are reorganized the from and a some in going really counter our RISEXXXX. together to how to we dollar a bring efforts market. think

Laurie Hunsicker

I just Okay, sure great. I that right. helpful. That’s it have piece make And expense the want to of

$X.X increase at in look amount way? So, rate. you saying of million thinking the were are about a I when you just at $X that the about an when talk quarter, will Am And about what million to run I XXXX, annualized basically third the $X.X so $X.X million million. obviously right it

Paul Yonamine

gear team the implement do to of lot areas in – RISEXXXX initiatives. strategic expenses we up strengthened and the and Yes. of a we Again, key our needed a that lot to

So, that’s correct.

Laurie Hunsicker

Okay.

are Okay, Paul, redo can chance And lens had new of RISEXXXX us of novo doing I the terms would guess, then that but great. you of you’re branches, sort of how how completely a strategically, you’ve take as how you your sort are and a to that the I world, is look de thinking you everything, to you relative branching? in view a just retweak seeing through through or know about current table? off

Paul Yonamine

branches? talking remaining you about Are our

Laurie Hunsicker

do kind potentially you build-out new at that branching. that would look In would of any you No. words, idea novo the other de

Paul Yonamine

Laurie, optimization looking naturally of on we our refreshes store As are branch at fronts. effort, part

demographic Lab have real be CPB the main going be our in opportunities, looking process, having remaining in but catalyst occur a time. reconfiguration look at isn’t naturally And on this that us at new going certain branch our period Oahu. primarily to and to are going changes given This We to over of for that’s that on branches, to we island is in of a this all XXXX. we’re on

you need fed quarters. new keep really and I profit yes, are the time some that opportunities posted we’ll can definitely table. still up on that on we subsequent you So, tell branch clearly to

Laurie Hunsicker

last one your this, help credit, with that’s great. consumer And the obviously, can looks appear on question you coming me hoping David, – the just charge-offs category. from largely but coming credit great, to Okay, be from then all

So the And are us then consumer can is on of categories? that? from that update other the charge-off where on just and in you much of approaching you Prosper Prosper the how stands how growth balance or coming balance terms

Catherine Ngo

This is Laurie. I’ll…. Hi, Catherine.

Laurie Hunsicker

Hi, Catherine.

Catherine Ngo

consumer then loans, also relate charge-offs the calls also then throughout Prosper we various campaigns here a Question, the on have to the came had mentioned and of in Hawaii that preapproved mix in QX charge-offs so of some our from on so and in portfolio. on we consumer portfolio the the also consumer earlier earlier line consumer year Hawaii, quarters

Laurie Hunsicker

Okay.

where so was And moment? I of at it, is your the Prosper balance as it have million? $XX June,

Catherine Ngo

Yes.

for in about it’s QX range well. So It’s Prosper that. is balance at as that – holding the actually

Laurie Hunsicker

Okay. plan And levels kind these is to looking continue to the you of or hold to grow? at it

Catherine Ngo

credit of function quality so, yields. and It course, on and really is focused a opportunity of then

we see purchase. to continue So as going we will forward, opportunities those

Laurie Hunsicker

Okay, it great. there. I Thanks. will leave

Operator

is question O’Neill Sandler with follow-up Partners. from a next Our and Deer Aaron

Aaron Deer

taking for the thanks Hi, follow-up.

Just I the the on third weak the curious guess, CRE line and C&I both seemed the little Hawaii, in loan commercial a growth in quarter.

of Just much sense do downs to into curious stemmed loan a maybe want heading the less then maybe demand you’re XXXX? that, that if of how to give you for from borrowers to extent know pay from seeing outlook and or growth your us

Catherine Ngo

that I’ll question, Aaron. take

So, we Hawaii, yes, out in are there we relates the look say – the at what line, and overall year. loan have the our to you if would and next SNCs in is in our growth far go had quarter then C&I continuing mainland line, fourth on decline focused decline about so market as the to is in on officers I C&I optimistic the as the forward very on know, C&I the as you the we but medium growth the be

Aaron Deer

then how real estate? commercial with about And Okay.

Catherine Ngo

relationships of that I again same estate in real Hawaii are the our would we market. function say for building and a commercial

Aaron Deer

my Thanks questions. Good taking for Okay. stuff.

Operator

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

Paul Yonamine

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

Operator

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

disconnect. now may You

Central Pacific Financial (CPF) 23 Oct 192019 Q3 Earnings call transcript