CPF - Earnings call transcript Q2 2021 | Central Pacific Financial Corp.

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Operator

Welcome to the Central Pacific Financial Corp.

Second Quarter 2021 Conference Call. [Operator Instructions] This call is being recorded and will be available for replay shortly after its completion on the company’s website at www.cpb.bank. [Operator Instructions] I’d like to turn the call over to Mr. David Morimoto, Chief Financial Officer. ahead. go Please

David Morimoto

this and Martines, we Andrew, Credit Vice Quarter all joining Banking Catherine Anna With for XXXX and and Yonamine, Thank Executive Officer; Vice Chief the thank and President Financial President Officer. as Officer; me Corp. Financial review Central President; Second Executive are Results us Chief Paul for Chairman Arnold you, Ngo, Pacific you morning Executive for Hu, of Chief the and

presentation slide remarks a cpb.bank. prepared we is will in our have We Relations at in to that our today. available refer website presentation The section the Investor of

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

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

discussion our the For to And of please refer our to X turn now, I’ll risks Paul. statements, related Slide to forward-looking of presentation. over a call complete

Paul Yonamine

good you, everyone. David, and Thank morning,

appreciate Pacific Central we your in always, As interest Corp. Financial

U.S. day with the passengers and pre-pandemic on a nearly which June, In count early good proof of allowing level. to economic Let much averaged with anticipated, Hawaii than some quarantining COVID Mainland me The daily quicker recovery. positive July, have U.S. per is economic the start to against XX,XXX state the recovery. about sign in began since Hawaii pre-testing of arrivals at the updates arriving have first skip returned from Visitor vaccination arrival Hawaii for full

XX% July at fully our our to be currently The is the vaccinated very Hawaii’s infection to COVID Although rates XXXX. the at nation. in population as caused the to state the single-family and state of June. decline variant, Delta at with level, to of home hot rates we Research spike of with $XXX,XXX Nearly lowest housing are in not Hawaii XX, Hawaii of declined by of immune the low continue Economic rate of in forecasted median the Organization June X.X% to in market Hawaii’s in X.X% XXXX. remains month the month by is University The the unemployment infection price

on second our for reaching the With and in results economic the liquidity, a very share pay Hawaii and to second our solid platforms recovery are future continue online high. during and banking quarterly we to this basis. profit. us. quality, our to strong, made the asset mobile financial a we optimistic for Digital business cash continual Against resumed increased with Our pretax key strategic backdrop, and continued our were a dividend. confidence quarter new be priority income continues capital, Enhancements being quarterly record are repurchases about quarter very

and second available new deposit more in convenient mobile for debit now we of Further, adoption our cards online schedule online make and customers. easier is coming base. chat our Additionally, appointment contactless issued soon to is customers among the increased customer all our banking to quarter, and

product President. We Catherine service like the Catherine? continue I’d on area. to in digital the work over call diligently to turn Ngo, development our to our and

Catherine Ngo

you, Thank Paul.

an First, the credit like area. to provide on I’d update

weathered granted, have the all loans challenges deferrals the clients of COVID-related through pandemic. that We we are to the returned our pleased status. have of pay payment Nearly

residential in just XX, deferral, remaining majority million have As mortgages. loans which of of we June the on are $X.X

also our were X about a Additionally, assets. remain report. environmental, slide In or XXXX and the to near presentation. quarter, area. $XX our during lows can I’d link found in ESG second annual publish nonperforming in classified first pleased be historic the governance assets of social, our developments A ESG we quarter like assets basis to points share our to and just declined million, the at recent

pillars of call business that By to reporting foundation are and week, legacy small in our key community in of program updates by pleased supports key the remains and ESG helping future. CPB program further economy. forward to continue our look our we the a announce providing and us. the W-E were We believe develop CPB’s as priority ESG is strong resilient a new to to for Rising is the building women Tide. they entrepreneurs run We, we Last This program one

of in our color workshop part program. receive this our employees and believe free As networking that will advertising different marketing, We investing entrepreneurs financial series employees critical of leadership Support selected another is to and ESG our that cohort benefits. program, of of of women success. and sectors is we in XX our on first XX-week X management, business participate from a our

a quarter, second increases our merit hires. new strategic annual the few we During made had key and we

therefore, We while to and also continue employees plan. schedule our flexible and allow continue our well-being work health of developing hybrid to prioritize return-to-office the

we the final month. pleased was second Finally, are of Plaza phase Central Pacific and that last completed our revitalization

office projects smaller our sustainable to continue collaborative, employees. expect We create refreshed, for workplaces as we and

and our Banking Arnold? needs branch network changing like over Chief branches refresh to our Officer. I’d meet the also the customers. now of turn Arnold to to our our We Martines, evaluate call continue to

Arnold Martines

broad-based quarter, Thank or which by PPP now knows, pandemic offset was quarter, increased most impacted decreased everyone million. core you, and core loan our was core recovery. X.X%. which because in by of all The Year-over-year, segment C&I, paydown was loan loan second across portfolio sequential as except the our loan X.X% Catherine. Customer In portfolio the by $XXX million growth by $XXX categories,

be a the million. am forgiveness for role originated quarter our business with in the well previous I very new during down proud of second residential XXXX in and XX% team the PPP of paid also customers through million total from $XX mortgage originations June XX. with home growth X,XXX than leadership totaling $XXX quarter the loans supporting is forgiven loans small maintaining equity million broader We net in PPP our portfolio community. more $XXX in already business with progressing to and and the XXXX second strong, residential quarter. up mortgage over and production total continues ramped production nearly of of Our

our our to begin customers as been with to pivot forgiveness to process the from local has surviving priority customers the recover begins for business a economy thriving the in. key Assisting bank and

second During confidence recovery its on our on strength with to programs Mainland was was in the Hawaii. we gaining consumer economic way economy lending and local quarter, the resumed that national recovery, the the and

the During direct the Hawaii. quarter, consumer we from partners portfolio and one an indirect purchased consumer also established auto basis loans ongoing other our full on of in restarted loan an for and on Mainland and programs

programs. recovery strong to prudent by the pipeline, expected combined loan Mainland traction, economic Hawaii and with it last well, federal programs half to from the consumer our we year healthy stimulus what portfolios span With for performed take of downturn, augmented support both was loan While year. economic in our growth a our experienced Hawaii’s process despite second the the we anticipate consumer

total On deposits a or or $XXX by growth. the deposit strong sequential $XXX basis, deposits year-over-year On X% inflow about front, with million by XX.X%. total core increased we increasing deposits of million saw a quarter core

of Additionally, outweigh X deposits by our cost the just quarter second basis total average points.

the and Finally, I that economy is confidence consumer want to mention is recovering increasing. Hawaii

President now to investment fee David in income Morimoto, Executive and Officer. positive Vice seeing Chief I’ll fees. services including trends the over Financial David? turn are transactional call recovery, our We

David Morimoto

Net the per compared and unearned return loan was $XX.X was quarter primarily fee for interest which interest fees the was Return increased prior NIM Investment interest compared forward, the Net in in and of due included fees average second normalized due income quarter due an an due was was going previous bond $X.XX balance PPP To the to X.XX% X.XX% prepayment higher in interest investment the Thank of increased compared sheet you, executed lower excess PPP $XXX,XXX on decreased $XX.X second sequential premium swap equity prepayments prior income quarter. Net the quarter. income or net X.XX% net to PPP recognition net million income XX.XX%. X.XX% mitigate Net The PPP to net to quarter. million. second MBS The loan was premium coupon from normalized MBS to amortization, quarter prior X.XX% we MBS and liquidity, margin decrease for $X.X sovereign XX, million $XXX quarter, acceleration $XX.X amortization quarter. share. was to the diluted greater on margin to to June risk the in totaling income acceleration Arnold. by in million. interest a for forgiveness. of At million and million, $X.X yields. assets average

interest We continue loan liquidity excess support to investment the net margin. our portfolios deploy to further and to

flat quarter operating relatively remained income at $XX.X Second other million.

the prior benefits million was which in accruals, hires increase to in the in and quarter expenses. merit salaries efficiency and XX.X% income. increase. current the increase $X.X decrease higher and with to the second quarter to there insurance in commission due increased higher other in and of The quarter, mortgage to much nonrecurring offset due $XX.X second and higher salaries life was ratio was compared was benefits and During forward bank-owned the to compensation drive Other reductions in million for and line. strategic quarter annual incentive banking in charges a the $X.X service in performance, million operating prior million $XX.X operating expense fees income, The the quarter, by primarily quarter

to second in for effective forecast XX% going credit known effective majority second the in allowance quarter $X.X as investments. rate of portfolio. and the credit positive to tax to the totaled loans. drive our or our the XX, rate second quarter XX.X% loan was $XX.X charge-offs coming tax for excluding the of was expect X.XX% losses PPP we strategic In in the to June provision operating million, range. our to $X.X moderate The leverage We losses the and credit and we ratio improve we in XX% forward, the recorded from portfolio. time on a over consumer be charge-offs million due loans, quarter, the outstanding with efficiency based the Net million expect economic the At improvements

repurchases capital Our through $X.X and shares shares of quarter an earlier, total $XX.XX. XX,XXX a resumed also July cost remains XXX,XXX of we position this repurchases cost Paul average stock with XX of of month-to-date We’ve additional repurchased at at strong noted common share an million. as

our was return prior quarter. Finally, declared Thanks, the quarterly which consistent per Board of Paul. a now, cash with of to share, $X.XX dividend the call and Directors I’ll

Paul Yonamine

time, liquidity, progress continue questions remain Thank thank the credit, providing to organization. has to continue to behalf we employees, you, At happy financial on and strategy. support may confidence Further, you. our for through Andrew. recovery. On in any of be have. support employees, this and you and you you, your Back our to management team Pacific we’ll positive the economic customers, solid continued capital Thank a In address to and summary, make to we and business as our position, our core forward community David. committed progress Central we

Operator

The [Operator Piper Andrew Instructions] with first comes Sandler. Liesch question from

Andrew Liesch

to auto to Just It’s How quarter. touch the large in purchase? the here. strength on loan want growth nice see consumer the was

Arnold Martines

Arnold. Yes, is Andrew, this

make quarter, auto both resumed mentioned our addition did for -- in an to portfolio have purchase on in consumer. comments, in my So the million. we our earlier And we of and we did as I Mainland in-flow Hawaii $XX that, loan

Andrew Liesch

it. Got

organic good beyond growth even So purchase. that

Okay. growth That’s the know. how on more and What’s sale that the And now it had like sheet versus portfolio residential plans then on more good looks we or then, income. front, should for resulting the outlook selling? the mortgage and How so right far retained balance what’s decrease to balance the banking looking on as on sheet a business guys on the versus you be pipeline your right at revenue? is retaining gain now as

Paul Yonamine

Yes.

the Andrew, pretty million the feel year. We half on resi production second $XXX for resi confident we’re QX, of looking million So, $XXX to a for range. on production at

to have the lot to term, -- projects super-sized with we are process, you near are getting fee the of portfolioing acceleration We our as been forgiveness portfolioing more at just several question projects and we’re a resolving income completing of there. the the are that’s between production. that with -- selling, resi your because we’re And we’re PPP we and of regard doing know, loans well quarter, really mix in fourth where big a early then,

is think to us near-term So that we put more in opportunistic the just go ahead for portfolio. and

Andrew Liesch

it. Got

PPP, Okay. That’s any of of really helpful. $XXX around? to timing stick sense that’s on how And long the on million going remaining

Paul Yonamine

Yes.

fees $XX.X XX, were on So net million. loan the June as of about PPP

we’re far in $XXX for thinking we’re the million-ish as going the in forgiveness. to As QX, range be forgiveness

for Andrew sheet. PPP us a probably quarters balance thereafter, So few the more loans our get to off

Operator

next Bohlen comes The from question with Jackie KBW.

Jackie Bohlen

have do you you just thank within on premium color David, itself the the impact the the the That’s then amortization expect for bond swap on forward and to margin? what the helpful. wondering swap. I’m yield

David Morimoto

in purchased, the were X.XX% Jackie, Yes, we X.XX% Yes. bonds to yields area. the that the

manage of trade. manage intent the risk -- was forward to to try really coupon better prepayment the with purchase sovereign the So

quarter closer So accelerated to what first hoping dropped the due we’re X.XX% It was yield for to portfolio is to premium down the X.XX%. amortization.

get to yield the quarter in and back area to third hoping the going the We’re X.XX%, forward. X.XX%

So up points investment the we’re there pick about on is to managing normalized PPP if the successful in X an opportunity basis NIM portfolio.

Jackie Bohlen

Okay.

So immediately? the effective swap is

David Morimoto

was done in July. It Yes.

Jackie Bohlen

some can just I delayed. Okay. know of them be

Thank you. and great. understand related and some adding into that’s the kind mortgage liquidity So then, taking of production advantage the additional to And of portfolio. I comments the of PPP

do years, I you’re to growth #X, -- how mean wondering has all deposits thinking Just If funds? over past you flow incredible X.X cash what in, deposits #X, if deployment? with plan been you’re to about just those other and seeing continue the

David Morimoto

Jackie. Yes. I’ll start,

-- the obviously, stronger of that pipeline is mentioned, in things experienced have do half the nice than about first accelerate the said, expecting funding we half. And there, we the thing back to do year always Arnold half in growth. expect year. the and but the good felt quarter first loan accelerate the are a second growth choice -- in we was as of So like we we second we And growth

first So are ourselves But extent investment it’s we increase with be continuing find excess the we option. liquidity, that to portfolio. hoping would an the to again,

I assets think about room XX% at to is there so of assets, add we’re there. still

Jackie Bohlen

securities? to versus or portfolio portfolio look to are the that’s would Mainland liquidity, portfolio fluctuate given can percent you up bring ever you’ll you to any excess I’m look in of Hawaii you given Okay. I referring quarter, that happy to the the pretty loan at bit? and know the Would a the ever more -- with purchases Mainland And where

David Morimoto

Yes.

is of total XX% I think be to to what Jackie, portfolio the we’ve to, roughly of guided XX% Mainland. comprised

current So I think the at look But we’re would find and range opportunities in a to ourselves those. still thought to that prudent process. take excess liquidity, still mainland, we for with and the that risk/reward better the obviously, that’s there’s extent it us on be

Jackie Bohlen

Okay.

largely in So will fair that balance and I then, everything guess depend that to opportunities organic it say would Hawaii? on is lending

David Morimoto

That’s correct. Yes.

Operator

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

Laurie Hunsicker

then split million us I the I just about book that and is also U.S., an And how is wanted Hawaii Can you to about you think split that’s what $XXX million, think between FICO to question but your you between back what the Andrew’s the if what’s big that would purchased, potentially the just is have go then FICO? both? auto and then bringing to you help around exact what number Mainland auto. the $XX the there And and Hawaii there grow running? and

Paul Yonamine

you have you might those back to that? We on Paul. is this color of to Laurie, Arnold, on details. do get some any have

Arnold Martines

and to consumer so, resume our -- can Hawaii program, in than we’re programs, economy Mainland the you, very quicker what to and started moving Hawaii that we lending can obviously restart the programs. quickly as like we to now Mainland, I consumer think I I the Laurie, recovered is say started

expectation the the I’d consumer and consumer is growth’s normalize move we between coming going as Mainland that So say to -- the in my to split resume lending quarters. Hawaii Hawaii

Paul Yonamine

is of million auto and to and the The total under on $XX million, add, you’re $XXX roughly it’s that just $XXX XXX Laurie, Hawaii in portfolio is right. just Mainland. is million

those X/XX. on All FICO have that. And of do back were score? numbers a I’ll with circle of Great. you then as you

Anna Hu

is this Anna. Laurie, Actually,

weighted our XXX. FICO For the Mainland portfolio, average was

Laurie Hunsicker

new around the you’re same right purchases doing, And great. the Okay, they are FICO?

Anna Hu

XXX. About Yes.

Laurie Hunsicker

guess there loans any of how around you take would thoughts that’s potentially would X% like big generally grow how just And big number book, you then, thinking so that great. I to that? but about Okay,

Arnold Martines

So, Laurie, this is Arnold.

I David Mainland overall more at of So that XX% right the million and as our And -- as think not loan growth, much mix as consumer, portfolio. to mentioned. Mainland David mentioned, on range, My we’re X% percentage it’s consumer loan is $XXX is Hawaii, the grow good far now, in going a about the as And in we portfolio auto. the versus XX% split look as total Midland. in expectation or about between to unsecured, Hawaii -- we’ll

So a I bit. helps hope that you little

Laurie Hunsicker

just make on you little to put the It guess, to that I spot subprime. just sure bit, you’re does, guys and doing a not to want -- here, the is I purchase anything not correct? plan Is

Arnold Martines

That’s correct. Absolutely.

Laurie Hunsicker

Okay. helpful. That’s

PPP million there and mentioned, -- wondered as were Okay. forward to in not $XX.X I you that then are there lender, an I think fees. right. and that’s I of you XXXX And that, outsized But we just that’s as love unamortized look

somewhere kind of income that know, to interest taking the net your the margin together, or even I going think rate thinking am we’re way? in about your down right something, I maybe missing the is margin bit that $XX side? be, As help run on XXXX us million, assuming to million little a is, about can $XX Am putting range, per or of all That’s the you question don’t quarter. X.XX% better X.XX%, a pickup, I

David Morimoto

yes. So,

So we understand interest past think income once question net income, correctly, on get if do is Laurie, correct? PPP we margin, you’re interest the I and I net seeing expect fee what what

Laurie Hunsicker

Correct.

David Morimoto

Yes.

in obviously income in replace we’re from that this we’re realized fee what provide the And is a to to thing, we’re doing do -- operating we And trying we is fact good outsized to were positive use trying think we’re XXXX. invest to future info. we’re an that starting nonrecurring realize leverage XXXX. that what income to strategically trying periods, is PPP in and I we fee lender, benefiting

range. the of income over net into XXXX time, maybe interest get back million that in quarter over XXXX, first not but the $XX we is expectation the So time,

doesn’t So million. down $XX it’s so drop to back down, it --

Paul Yonamine

this Laurie, and, Paul. is Yes,

as So been to a in we the of of interest of as driving And year record PPP income Arnold area. we’re mortgage in balance mentioned the our of this lot be single the with the more growth balance high year, driving the digits year, portfolioing success guiding for trying growth that we’ll leverage earlier to addition well, will income some fee the that that plus and in for growth, seeing to to XXXX. -- the for net We’ve next the feel XXXX. mid- some purchase of year have of

Operator

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

Paul Yonamine

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

Operator

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

may disconnect. You now

Central Pacific Financial (CPF) 29 Jul 212021 Q2 Earnings call transcript