CPF - Earnings call transcript Q3 2021 | Central Pacific Financial Corp.

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Operator

Thank you for standing by and welcome to the Central Pacific Financial Corporation Third Quarter 2021 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 it's completion on the company's website at www.cpb.bank. I'd like to turn the call over to Mr. President, Officer. Vice Executive Morimoto, Chief Financial David Please go ahead.

David Morimoto

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

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

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

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

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

Paul Yonamine

good Thank David everyone. and you, morning,

As of President the be will to will your be interest of President CEO will and news Pacific X, are Operating Catherine and CPB, President comment yesterday and Executive Dahlstrom, CFO, the Arnold holding three serve bank Banking and Executive Bank like several effective and all continue Officer, part Central Bank always, Vice management the to Working Morimoto, and of and promoted Officer holding Chief played collaboratively of currently to that President and we Chief I'd our Committee Catherine holding past of promoted will And holding the of company. pleased promoted a of Officer EVP Officer, regarding company. the currently on and the have Bank be Chief myself, Marketing will as on am become exciting out sent with company. They to in Executive Senior President the and EVP Vice-Chair responsible EVP continue key company. CFO Martinez, Catherine David Strategy team. and years promotions we Chief and and management Ngo, January bank. will the I the of appreciate currently key be the the Financial of role to the the executive some for become Vice to Executive CPF XXXX. Kevin Corp. CPB the some and they follows: individuals success financial in currently

lending, development four Our business pillars residential and continue business, Japan focus include expansion. will our market digital before. on small key These as

active solutions segments, We continue real provide will be on also to estate, C&I to in driving focus a customer experience. digital consumer exceptional the an commercial with and

bank digital bank and Hawaii's Our institution. from local first digital underscored financial Shaka with a transformation to only is become of first Checking, launch upcoming the a account

We Xth are campaign. marketing with state's the proceeding social the influencer November launch media largest ever

reimbursement banking funds a to help like return $XX our to it digital other in as average of have get sign X,XXX the looking days up early, wait over ATM your list for galvanize up a position month and products to include will fees We than higher the the paycheck to up product a be who Shaka. opportunity benefits account. We people this to in the Product on feel to and first digital Hawaii. the two on are leader

August case spike state known we modernizing the and in experienced in to has virus decline case strong have in rest weeks. of market variant. To continue network, curb in the counts updating and further investing talent variant counts to these and place the pleased country, seen facility service to our in Like certain however, are our rapid required customer of Hawaii with we the state products to deliver able spread measures will, put this, related the for. leverage September in the We been address the the branch state a the recent COVID get as of and to to under Delta the we Delta our control, are

trend, earlier this the positive easing Governor Xst. restrictions or last the fully And on and implemented of events starting gatherings this travelers week, for Given month, business Governor pleasure, the welcoming back announced Oahu. November domestic on vaccinated

their the vaccination has in the community employers many have over protect in Our their to rate vaccinations state XX%, general. as employees, statewide customers to mandated risen and

positive developments, numbers season. declined in recovery. call to have forecasted will September Hawaii the strong that decline travel will remained the in Development month now million by on market projecting rise rate Catherine to price Ngo, the mark The Department housing to further this single-family once hot Hawaii of holiday President. The state our continue our X.X% past these in of XXXX. turn and Business I'd X.X% Overall, of local with over and visitor With a and unemployment Economic economists again Hawaii like for surpassing Tourism is very are home Catherine? to $X the Hawaii remains the economy track to median to quarter.

Catherine Ngo

Thank you, Paul.

for third with were record quarter results very new the a quarterly high. strong reaching again financial pre-tax Our income

year. are the for half Our second on loan growth up of anticipated core a picked track as we and strong

fee Our income as effort to strong continues forgiveness successful PPP deliver continues.

non-performing with total basis quality of strong just of points as be asset assets continues assets XX to September at Our XXth.

classified of related less we Nearly payment assets all returned than of pay status. the to loans. granted, Additionally, X% total COVID loans were have deferrals total

XXth, $X.X million September have just of we remaining deferral. loans in on As

we weekly to employees the group vaccinated against XX% now of fully a Finally, COVID and customers, third our we charge-offs Shifting our $X.X our COVID-XX. that of employees To protect million net started September employees. are in declined to pleased with in employees, un-vaccinated are very testing just small quarter.

got Arnold? a Officer. over incentive to offered I'd to September our cash Chief the after We turn un-vaccinated for now who $XXX Xst. Martinez, like also employees vaccinated Banking call Arnold

Arnold Martines

PPP portfolio $XXX loan of Approximately our by categories except XX% X%. from The million. growth growth quarter's was loan Mainland by loans. increased was the quarter our quarter, million $XXX of came forgiveness million third offset paydowns consumer sequential X% Year-over-year, portfolio the In construction. increased loan core broad-based all or Catherine. you, loan across or Thank loan $XX core by which

residential originated the production mortgage nearly equity the previous already home through in XX% quarter. balances balances production $XX from September PPP third quarter to forgiven with be million XXXX XX% total with XXth. mortgage Our and XXXX, residential very million in and portfolio and of the of strong in total and $XXX paid continue loan forgiveness net originated continues growth of progress well to the of in down

quarter, on portfolio from million one origination loan on of during Mainland XXX. our loan about FICO ongoing for third we The During credit partners auto and consumer an established $XX guidelines. score flow continued of the our had based average purchase purchases the purchased quarter a basis an unsecured auto weighted we

auto portfolios September unsecured consumer, loans continue X% and well. total total to XXth, perform approximately As mainland of our of Hawaii Both purchase loans. were and consumer Mainland

total loan product Our including With Hawaii's XX% loans, is target healthy for continue all commercial categories. recovery, see in around consumer and steady a loan of to we pipeline Mainland range economic total loans.

year with strong loan As such, the growth. anticipate we ending

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

basis dropped deposits the cost in quarter points. third just average our to of Additionally, total X

David? to Officer. economy Hawaii our help recover financial Morimoto, the are our I'll as the investment David activity and Finally, customers to focused their and Financial Chief now prepared we turn over continues increases, meet to objectives. call

David Morimoto

increase the increase Net was NIM NIM and of and Net fees loan interest due equity third you, million offset was on The by improvements million slightly yield excess average the investment income net Thank million the was compared the and third was to per for interest in quarter. normalized quarter compared normalized was prior third $X.X by return was in PPP interest included fees Arnold. interest average investment income margin partially liquidity. sheet $X.XX by income September increase diluted recognition. million XX.XX%. PPP million core prior in $X.X compared the net quarter increased quarter share, $X.X to $X.XX increased PPP which third to net the the X.XX% portfolio X.XX% third quarter or previous X.XX% on X.XX% growth, $X.X loan or The driven quarter. $XX.X fee and assets and to net income X.XX% was to The in PPP At an in the the Net $XX.X XXth, quarter. in quarter the share unearned quarter. in investment from balance diluted yield, portfolio from for million higher in prior increase million. the for an in prior $X the per quarter Return loan

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

net quarter, market fluctuations. there bank-owned offset continue expense in focused fees. a by efficiency XX.X% life investments decrease This in driving strategic We insurance quarter was operating the and was our driven The to on to ratio income was third third prior service efficiency. for was in decreased $XX.X Other by charges to $X.X with improve higher income. due the which leverage line with our interest million the the quarter. During positive quarter to higher million remain of operating

at into ongoing consolidation As announced branch recently Kapiolani initiatives, we in year. branch efficiency the our of Honolulu the part this end our of of nearby a

savings future $XXX,XXX approximately consolidation. of from annual this We expect

With portfolio. and the million losses for opportunities well economic our improvements million XX.X% channels, At the the outstanding allowance branch X.XX% as a we in continued both effective the migration was and credit to credit due or September quarter. In consolidation loan The forecasts loans, tax digital provision of our recorded network excluding third consider the to our in we will $XX.X in XXXX. PPP to was as evaluate loans. to transactions of quarter, $X.X losses rate continue third for credit XXth, expansion

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

a of Our of remains we at and capital cost $X.X cost third total share an XXX,XXX average position per quarter repurchased or million shares during strong $XX.XX. the

of XX, And previous return declared an Paul. Finally, call cash Board our which of increase Directors quarterly dividend or from to on share October quarter. $X.XX the the per was of I'll $X.XX X.X% a now

Paul Yonamine

at innovate summary, and to toward same recovery. quarter our strategic liquidity providing In will we maintained a capital our through leverage had Thank targets, solid Pacific third committed Further, you, economic Central to the we and to progress we we David. our time the the investments to continue support progress community position. and as employees, customers to and credit, strong remain continue our

we approach RISEXXXX, a of the management more apparent. increasingly well multi-faceted as worked our to to to sense team, a customers, continued you. are Over to success our shareholders. support branches, well team a business. as on positioned perhaps employees together any offerings build team and focus for address by organization. This value and this At of motivated purpose. designed the On lines future we'll in our employees, behalf and with to initiative With our of may strengthen thank continue and past this our of questions primary are implementation you, and continued investing on happy optimism and service Betsy. team in confidence Finally we management our we Thank and accomplishments with digital you you lead position in be results our importantly, as your highly of the The time, these to have. becoming market and focus on efforts ATM product four to

Operator

Piper comes question Sandler. first The Andrew from Instructions] of Please go [Operator ahead. Liesch you. Thank

Andrew Liesch

this Hi, good appetite with the and in the with to book? more morning securities the the the on to tenure purchases securities the ask with add I and about recent -- margin increased just here rise, to the promotions. curve, rise the wanted your steeper congratulations and

David Morimoto

offset both recent to the excess Yes come and the are spreads Andrew, to obviously, redeploy treasury. potentially the are growth with Yes, portfolio. have investment -- rise continue been into looking to increase it's the loan has the in tenure, not see we continue It David. total to to nice we grow in mortgage liquidity that

So quite we right market MBS HSE attractive find the now.

Andrew Liesch

purchased you getting? just what can yields during you're what then, remind Got sort of us it. And the you quarter,

David Morimoto

purchase new investments, the a which XXX weighted roughly the current portfolio One yield compares yields was average of to XXX.

are things we're are parity. So getting to pretty close where at

Andrew Liesch

the helpful. the got what had Got just those nice then really to both on the Hawaii in increases loan in Mainland. you driving on in very on two really the But What's good and there turning it, And you've C&I, color quarter. growth, markets? growth

Arnold Martines

as acquired Arnold. that This development hi. the in well we've very we've some is Yes, as been coming their lucky know, very talent new you so Yes, have to of our our some business to been we've bank over -- efforts. -- team

traction in had modest strong growth building because of that say a made a areas. nice great really categories in more pipeline the we're except the loan want So loans. all of in but to solid for construction was efforts those proud of I third construction loan We of decline that we've in a quarter. on lot really timing in

yes, we're the team. pleased of so, really efforts And with the

Andrew Liesch

back. it, Got taking Thanks very for that's I'll helpful. step questions. the

Operator

Feaster go The next James. David Please from Raymond with comes question ahead.

David Feaster

morning, good Hey, everybody.

Paul Yonamine

Hi, David.

Catherine Ngo

morning. Good

David Feaster

knocked generating, of I thoughts of to strength out of the last on just and you're just kind kind we the outlook questioning, given you've of get that your high sense park. wanted and growth hires on kind single pipeline made you've talked you the line that follow-up the that the just the digits, that on of organic production of

forward for going expectations growth on and well? thoughts your as curious production Just

Arnold Martines

a is Arnold. lot. Yes, thanks. This Thanks

into across all pretty pipeline categories. we -- QX, As into strong move looks loan the our

I pipeline to going forward. we economic in move improving to our the build think is Hawaii conditions as help

CRE, Looking the QX, and consumer at will for resi us. probably drivers be

take portfolio which looking of million projects $XXX QX we to to take that resi, normal are We're million fee by of out to we've as million that translates PPP and that For of forward been I future. have augmented start And range, the a are we putting but expect think at to -- in and and about mix looking somewhat a resi $X.X sell a to the quarters to the -- starting the million how high we out, quarter. back we the to move completed opportunistic few range start the that in $X.X with at past in in supercharged on in mentioned ship rise quarter I've loans, between we we've the gain of more then, loans see regard in sale, that in past we're to lead production $XXX shift portfolio as we really lender. because have income

David Feaster

had just maybe Okay. of talk within takes on just cost the puts and you we about, you 'XX touching branch takes the in Could expenses, run No, with as of that Q closure. initiatives the that's what just about have look we've great just balancing you color. appreciate that saving some then rate the forward, good as is on the investments the And puts maybe think and talked detail a just some going line? forward and we that continued

David Morimoto

Right total We David, guidance on it's $XX David. now, quarterly million we're of $XX good million operating expense. think a sticking with rate. other the that's to run

David Feaster

Okay.

and just you've deposit on Shaka sounds Japan the it new the front, the initiative. platform, and Okay then this like mobile the initiative then maybe -- got

with Just-- already sign sounds X,XXX like are read it pretty Shaka that early good folks on trying the is to up.

deposit the this Japan going then in curious you're growth for Just what on seeing side forward? expectations and

Paul Yonamine

to seen have Japanese their Japanese deposits Hawaii on measures play, in pandemic travel can't we've still Thanks, This a Interestingly, because our Paul from rise the quarantine really even David. customers. the during is Yonamine. when they

continue travel building probably that with be customers, So we're really optimistic will difficult coming Hawaii. we'll more Japanese reconnect up that prospects, if can plan as on our a our resumes see next to of very hopefully we bump well. once year. base early It's quite deposits see which to into lot deposit a tell We to proactively still

on the weeks X,XXX Shaka list. account program the We're checking social over that pleased started As media is far X,XXX, as quite Shaka -- there wait we just concerned, ago. is our three people

the feel to optimistic into quite November of customers with lot checking increase is will Xth, about of we new that marketing -- proactive challenges a convert try Shaka we doing continue we front in to customers to is once which but of on them Some us launch more and platform.

David Feaster

Got helpful. it. That's

Paul Yonamine

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

Laurie Hunsicker

Good Yes, morning. hi, thanks.

outsized PPP this you Just $X.X hoping have help net remaining impact million provided. is about you that could there unamortized was fees you bit, margin obviously little a think us quarter told that and interest

we quarter, cost movement basis most there. kind should ex-CD specifically the about that? And is fourth how as to So past points of looking in deposits like into what on of your think core well, deposits is of quarter the if first move sitting comments we your think remarkably about is we at happening that any margin X

I So we guess you how putting together? should everything any can be will Any give guidance us help, appreciated. be

David Morimoto

Laurie, Sure. Hey, it's David.

X to in was when next few which normalize the expansion XXX to quarter third XXX PPP, in quarters from the for was So, the NIM point for second we're X% core And a NIM is quarter. the a you what basis guiding range. the

that the the in we hopefully our and executed XXXX. trough can portfolio. as swaps increases expansion, start So came hoping basis the the sequential relatively the that X But quarter points we're from into it's that of at see majority roll is NIM, NIM to investment we bond we

were successful amortization brought to doing So swaps which the swaps MBS in the bond control. and coupon down under premium bond we

the was quarter of majority that sequential the So increase.

margin loan -- see good So, obviously from relatively and is we thing. If loan yields core we'll deposit here, flattish up which deposit drive if can asset quarter we some sequential yields expansion. can, might a then and were now

Laurie Hunsicker

Got it.

right was do grow? thanks. where we maybe to more at what's broadly, if is that the and fingertips, Mainland that? when you that don't your about just $XX auto going think you book Hawaii, guess should late, and bond auto Was generally what's And the how purchasing of you that longer your I have information, early, million in Okay, middle? book the that secure, purchased, the then quarter Or

Arnold Martines

I -- a that's we when can problem. to have know hand auto purchase Arnold. right back on don't on This get Yes, that at but not don't you that, Laurie. Yes, is closed information I that

Mainland mix believe mean I far the as -- auto, split, As a like auto are unsecured XX/XX both unsecured -- and we as XX the strategy, it's as in right far consumer. the loans have now we I on basically of XX and

far of total loan portfolio. As is from more the as our at kind look we strategy holistically Mainland a perspective concerned, the

on we've try snick portfolio So we and and about a always consumer and loan Mainland CRE Mainland. looked the XX% exposure to the manage at to total the

our We've can that's behind at have between we been and how also as risk I and doing while folks, so management on a disciplined our of pretty this a that you management, it strong process business looked for kind our And of this. we assure fairly credit grasp Hu a this. and credit Anna we as management our of well -- line have pretty all

think and I was it to opportunistic when is start announced the that economy was programs very, quarter trailing pleased mentioned we're us overall actually we kind that -- Mainland it well as us the this as for I efforts and the opportunistic portfolios. that movement restarted the performed so for consumer I believe our very Mainland. for the of And earlier, and in of performance with earlier the loan us Hawaii with second very on we those

Laurie Hunsicker

Thanks. That's helpful.

as maybe well question; guess The you reserve are more one for David. now I Just as [indiscernible]. loans to

you as settle? pristine, trying loan credit should obviously will that down? looking to provision any your settles how be eventual I can you reserves we're most likely mean, Just model to where guidance where think is and on there about we us thinking give number and

David Morimoto

David. it's Laurie, Yes,

with net previously, I here and the ratio as So we've of total ACL loan as at coverage will the the the loan going loans of to -- to growth. day directionally we impact what migration consistent ratio XXX economic back is seeing we're was -- net which forecasts, what the to net CECL coverage we're think ACL be to But ACL stated CPF expecting one industry consistently in coverage the charge-offs, revert area. ratio and the XXX loans that gradually is across and

Laurie Hunsicker

that's you so much. Right, helpful. Thank

David Morimoto

Laurie. Thanks,

Operator

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

Paul Yonamine

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

Operator

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

now may disconnect. You

Central Pacific Financial (CPF) 28 Oct 212021 Q3 Earnings call transcript