CPF - Earnings call 4 2023 | 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. Fourth Quarter 2023 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. And with that, I'd like to turn the call over to Ms. Dayna Matsumoto, Group Senior Vice President and Director of Finance and Accounting. ahead. go Please

Dayna Matsumoto

morning and President we Greg, Chief quarter all joining Anna Morimoto, Vice me for XXXX Chief Executive President Thank Officer; Hu, Chief Executive the thank Officer. Financial financial Credit as David this Corp. With Financial review Central Executive fourth and Arnold results us, Martines, for and Vice you, Senior Pacific you are and of President of and the Officer;

details supplemental of We release, presentation cpb.bank. slide on have additional the section our is provides Relations a our in available prepared and that at Investor website

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

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

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

Arnold Martines

appreciate pleased aloha, Thank with Central are we and updates We you, Pacific and and results. your Dayna, to our interest latest Corp., in everyone. you share Financial

proud of the the will by of our we one in few continuing honor while the to an legacy It are operating deliver we as regional this anniversary. results. strong continue year a recently is we XXth us, banks in as for challenges, of best Newsweek, America celebrate received weeks, XXXX. and recognition Also, solid We community. XXXX our lead to institution supporting for another the was successfully environment navigated

for We future. balanced strategy have growth positions us a strong the extremely well sheet, balance our and

opportunities returns good few fourth repositioning quarter, that sheet and to were greater the completed gain a future balance During we efficiencies. transactions

the of the strong. fourth but was signings, values our of levels on still year, arrivals an ago, outperform XX% up down unemployment and visitors lagging contract year rate X% of The Maui similar X.X% Statewide, year be of $XXX, XXXX. The on limited December anticipated. In to to X% market. Overall, of million, well, previous continues do of and year December, faster unemployment price but Hawaii market. statewide up tourism we our from Oahu ago. Hawaii quickly to state's with opportunities move median first recovering outlook. in about Hawaii economic Home December We optimistic additional to XXXX. Total estate in unemployment will at financial but credit national median the in were to from see month visitors X.X% the was to XX% occupancy rate December, XX% will low with Hawaii strategy update continued metrics, X.X% increase, visitor in The $XXX,XXX. Maui year slightly, and are and was our with In sale Hawaii at statewide Japan from and an in properties starting daily the continue Research declining industry XXXX. Real down a in detail an ago, up was very single-family inventory, recently consistently sales price a rate pre-pandemic Hawaii's Organization increase me are and team XX% $X year-over-year, rates from continue volumes remain condo than December, arrivals are with start and to mortgage the home rate a we XXXX. from University a let continue the that align average continues provide adjusted Economic XX% X.X%. with was pursue in seasonally forecast with insights pre-pandemic quarter at XX%, XXXX. were total $X.XX visitor down ago Total in from billion only hotel spending to December to

events the unfortunate Maui now resilient over be uncertainty, faces future. I'll community turn is headwinds to island the While and and Chief in our some Hawaii's economy to turn Officer. opportunities proving to wildfires, stronger call the state we David? like David make to to into rebuild and Financial our the hope Morimoto,

David Morimoto

Arnold. you, Thank

results. our to earnings Turning

for per higher was was our $X.XX diluted and be $XX.X the on was loan or average with XX.XX%. At average growth. efficiency continue cash was assets our quarter Return fourth income balanced of as position of liquidity share. on to equity further reflected our ratio million X.XX%, Net sheet balance we XX.XX% year-end, return with strengthening our levels

real quarter, portfolios. commercial $XX in due Mainland growth by Hawaii our us sequential to and our total to portfolio offset million or Our loan runoff C&I loan let by continuing primarily decreased estate partially portfolio X.X% and

from million Our relatively total Total remained noninterest-bearing continuing basis demand flat, prior from the by income higher-cost to costs. sequential fourth funding as quarter, X higher CDs. From due interest migration balance by an fourth continued despite DDA average points off trends interest of of government out was to some ran decline portfolio we decreased slow. Net and deposits decreased margin deposits. was the The indicate quarter, deposits standpoint, primarily is quarter, X.XX% for the $XX.X the quarter. some core quarter net $XX a deposit million in the or to sequential $X.X X.X% movement time million

our total within which Our X.XX% quarter, deposits total deposit in of remains repricing cost the XX%, and was beta expectations. cycle-to-date fourth our was

float of to expected And as benefit half the margin as fix our with first expect compression in we to this trough that receive year. narrow. pay positive the our well swap, Our continues from trend NIM

earnings on million. Overall, annual of $X.X where to charge be million. Fourth gain aforementioned performance, investment improve quarter, onetime approximately other $XX.X sheet an $X.X quarter balance completed sale which includes was at operating of positions a estimate during of restructuring lease future termination our and through $X office As gain improved incurred increase loss million $XX X estate Arnold income $X.X investment fourth and nonrecurring restructuring real sold a the we we we portfolio which where of million, loss. to office pretax mentioned, repositioning, sheet a million, building portfolio branch an the in income we a to a transactions for balance an pretax utilized the prospective million

which in termination. market Additionally, we driven quarter on had the rally expense. Other higher deferred expenses the was by quarter, higher and totaled the operating and fourth early branch the BOLI equity included lease by fourth in compensation offset charge the million $XX.X income

effective Our rate in quarter, declined to income. XX.X% higher tax the to only fourth exempt tax due primarily

Going be forward, we to effective expect tax rate to our normalized XX% XX%.

repurchase quarter, the did not shares. During fourth we any

per Directors Board February share, quarterly our of XX. of to on Finally, cash of payable record declared shareholders dividend XX March $X.XX a on

up plan XXXX. I'll Board Credit Hu, Our of also the over repurchase to to million of our to Anna Chief turn Directors Anna? new share call stock repurchase in Officer. our $XX a now authorized common

Anna Hu

Thank you, David.

criticized quality loans remained asset total quarter, at to Our points X assets assets fourth with strong loans. in total of X.XX% of decreasing nonperforming the basis and

a continues real Our loan be with estate the secured, diversified of portfolio of average portfolio loan XX%. by well loan to XX% is and loan-to-value Over type sector. weighted industry

across Our outstanding types, in commercial X% portfolio represents maturing balances this real XXXX. of is XX% in portfolio estate all of asset and loans with diversified total

loan-to-value and loan-to-value and Our retail XX% real weighted respectively. maturity. commercial to portfolio months office XX estate remains weighted of weighted X.X% exposure average maturity. The a retail has The low XX average to a months average XX% of average and of X.X% office portfolio has weighted loans, total and at

value the slightly have area total as loans $XXX $XXX Our million million or that of X.X% $XX wildfire. was impacted $XX total X% December Lahaina, XX% or We by loans and directly million have down the the coverage. Maui estimate paid were August of of Maui of were not XX. XX% loan the million before sufficient impacted, then, wildfire, and exposure to directly Since balances or land or to total loans insurance outstanding Lahaina, that

new million or in XX the and of ago. Net primarily business continued loans million of portfolio which loans. The the charge-offs million to X.X% We continued U.S. fourth Lahaina $X.X as to to compared average Mainland run for decline The XX as the are in Mainland portfolio. Mainland December fourth unsecured prudent as quarter, going quarter, remains monitoring the which this $X charge-offs continues portfolio annualized solid. percent off our primarily year Overall, increase net of were total small consumer consumer of the remaining to hold consumer as a runoff loans. improve portfolio This million and forward. points portfolio portfolio have to peaked $XXX due purchases to during loans, said, includes will losses were that our that loan $XXX believe loan measure. With from in our we a equates remain a basis on

the or of losses X.XX% allowance losses In $X loans. a quarter, primarily outstanding for charge-offs. was credit million Our we net fourth due to provision on recorded $XX.X loans credit million for

our quarter. Overall, provision underwriting to a recorded credit strong for losses and million well. the culture $X.X of commitments, management Additionally, us total during unfunded $X.X policies provision million the we for for credit risk continue serve conservative a to

environment Our strong, credit continue and closely. remains economic we loan portfolio quality monitor to the

call Arnold? the turn I'll back Arnold. Now to

Arnold Martines

Thank our we our liquidity, progress you, of to We we to deliver continue Anna. results our are and In pleased with with well mission strong community. results focus summary, for capital are and customers positioned with believe, XXXX. broader credit a our on and serving the

you this As questions want may we'll XX to be this our in any of continued year, support serving we happy I for you Hawaii organization. At years confidence to thank and have. address celebrate our time, your

Operator

with question of comes And Feaster Instructions] line our [Operator like Raymond first it looks James. from the David

David Feaster

front just how on do think Fed sense to a -- high lower, credit about see But just demand if mortgage you you loan deposits we Maybe start your Fed loan that decent cuts? get your on especially pent-up could is the that cuts. to side. potential about and and benefit Obviously, we how of maybe I'd level, would maybe on reprice growth of there's the the impacts amount like do accelerate there ability think

Arnold Martines

we sure. then Thanks, David. to a better to I'll about to feel We going that second year. and for your start, It of the be think this of regard for it year has than the is operating side growth question. With I'll good normalize bit. Arnold. loan turn part do that environment the is David it, last This over to

loan XXXX. So small support expect move see a We half business and and and to most in home CRE residential in we're also categories. building we do But of as the we XXXX. pipeline growth into first C&I of the equity activity a the strong loan

runoff, what Mainland until we the know, continent visibility perspective. have in to let portfolio loan on you happens As we economic from consumer an the better U.S. continue

for engaged range. interest operating we year with tell loan to rates the growth see with improving are and point quarter happens anticipate you, what economy. supported your good percentage our for that growth, that what as by that goals. have to bankers low single-digit be hope in transitional I anticipate loan help to we to given Hawaii's all to achieve we be So we to environment earlier. But year waiting the a investment XXXX in a said, I'll their QX just add full resilient an some folks are our all all, customers And excited broader see

So repricing let me some part of David the have maybe of your question? cover

David Morimoto

the cuts have on those the much market saw that with that as data. on move would obviously customers accounts product and David, our rates. implemented deposit pretty potential accounts would XXX% options strategy. were Yes. react anticipate year, we are -- high some in And pricing plans And we yield a those so seeking side, higher data what yields. beta the higher segmentation We for rate last for created we high

NIM. beneficial the our to as is cuts So we've somewhat balance having be well-matched. overall said sheet we But an that, do said, basis, on our view that expectation CPF as relatively and rate consistently would

the swings really large our don't rate in we net in margin. rate environment environment, falling a both rising So see and interest

range. tends in well-defined margin pretty stay to interest helps, net Hopefully, a David. Our that

David Feaster

the were and terrific. seeing about No, trends of think Yes. growth was deposits, reverse started forward from insurance you proceeds there. you see your some wildfires? the outflows, look deposit kind the to some inflows of outlook of you from quarter again, Or of in maybe just And stay do course touch since on and in you initiatives? started your in then the of -- see of Japanese hoping initiatives the the some drivers of of partnership some could curious, any how we any to And put about and let's just Have the that's the NIB forward, just or the kind drivers some as all. we I that of deposit talking you going whether you're at flows benefits place.

David Morimoto

It's start, can I David. again. David Yes.

out flat core On interest-bearing. the deposits core was as a again, of is were migration within -- positive. which deposits, some whole continued sequential into relatively DDA There quarter,

analysis. good declines million the declined and sequential of DDA quarter about average XXXX, million. balances. declined a it were And a $XX then million to DDA. we've However, in are tracking of Dayna Matsumoto And did in million $XX in balances out to been quarter the and the to quarterly it fourth quarterly average quarter, $XX these third all quarter the $XX early And

is about represents trend which in moving the XX% in So right of pre-pandemic. is where was deposits, XXXX late DDA total the direction. it

are continuing then of migration again. yes, noninterest-bearing that. really it that pointing on or are tide slow. turn the the out So all get indicators need And the to focused we teams growing to will to and And the outflow

David Feaster

helpful. capital one priorities. the last touching That's on maybe for And then just me,

on a about pause talked You last quarter buyback. the

restructurings share new this securities those I'm but You've appetite are sheet capital put made several the in curious, just your maybe quarter. additional We repurchases. program neutral. for balance or moves,

capital priorities your the strength thoughts of base. Just curious, capital given your on

David Morimoto

David, remains the capital management consistent. is --

like quarterly to right? with continue the the similar to sheet us do And restructurings. open the levels. we'll are share then be the another cash we're we'll on -- each that, the payout beyond still plan. And And you have dividend we repurchase there We at options opportunities those all buyback, pay So further said, against ultimate Board do other. to balance evaluating authorization are And alternatives, provided insider. then

the the make beyond that So believe decisions we'll are cash we prudent dividend.

David Feaster

rate margin Okay. like sounds And does trough just you're a it cuts? in Terrific. first for about half, talking that confirming, incorporate the the guidance

David Morimoto

Yes.

cuts forecast in Our but not -- point has basis baseline internal forecast quarter. in our being XXXX, XXX first the baseline

So early net the the in the important rate the margin on think rate note again, XXXX. interest interest swap, to interest swap that I starting thing put is forward in, we

April So funds it XXXX. Fed goes we're floating. And again, fixed X, we're on paying and receiving at live XXX,

in million. XXX the the points on $XXX So current at basis time, we're money

to basis our EPS. points forecast, to XXXX, basis XXX income, in there will swap cuts NIM, if interest add X So million by points net are $X.X the the in $X.XX

Operator

Instructions] comes And our Piper from Liesch Sandler. the next with [Operator question of line Andrew

Andrew Liesch

kind the So $X offices just and do much the redeploy to $X of into the line on reinvest -- of million it as is versus you of the going the base well, touch repositioning or think million. that to the to the bottom and How back securities then flow franchise?

Arnold Martines

Andrew, question that's good David. a for

David Morimoto

franchise. multiple had we banks, you We to as continue Andrew, in know, all like invest Again, -- the we've Yes. technology initiatives.

enhancements. office technology with recently, customer-facing back focused -- new with implementations. software the we've started we been First, some software More on

what So all to I think question your the the way to rate answer line. guide flow our is won't But it on OOE. is you bottom probably guidance run would I to likely quarterly

dealing we're we guiding for $XXX quarter which guidance $XX million you with. the So single-digit XXXX then being full the million million range. And per believe it growth still to nonrecurring, pressures all $XX XXXX in reasonable, low we're normalize rate, inflationary year to considering a or the $XXX million that ends if like up annualized is to

we what offsets. finding are I So some would say is

inflationary will low is offset offsets rate such -- full some for single-digit in annualized that the impact, and expenses the find range. growth the We to the

Andrew Liesch

I've book consumer of the the That's the The of model that A about it. the guess, Got drivers grinding quarters. losses in performance last has the ratio that what the good to credit CECL think helpful. the and that's of happen? it. are outside excellent. noticed has some to Because -- Mainland been way been few some of reserve causing the higher -- I

a the So reserve bit like driving higher? what's in -- model I'm just CECL this the curious ratio

David Morimoto

baseline like the Yes. We there CECL Moody's. forecast. all economic so use models, a Yes, Andrew, is

top overlay for And qualitative the our factor, Moody's to there's qualitative then that. on economic the subscribe we of forecast. So

was mainland I point. it increased grinding And to related it I basis charge-offs. the the higher, think primarily think the consumer

were So the deterioration, area -- little of we've an is credit say from consumers mainland that a pristine deterioration one consumer buoyed seen has would I all that where been by of period stimulus. abnormally the the time, fiscal although bit

feels that Andrew? back only expectations. I'm like question, our really not it's normalizing address does it's lot, to probably normal So a your but it sure, rising

Andrew Liesch

balances high earlier those? of certain be declines those can quarter how be used the are somewhere? about forward? areas Just the Yes. alluded should end to fund? -- going about think deposit Absolutely. what you cash Are level that then year-end, redeployed or thinking what's Are there some in it you to to And more at that going we cash

David Morimoto

Yes. There the I was additional forgot cash fourth build during mention. quarter, to and

basis liquidity. fourth sequential the points X that had on NIM we quarter basis sheet X balance a of of was quarter. in the in points result So increase of -- deterioration

balance the liquidity forward, not going so plan sheet is to on increase further. And

enough done enough. good, there. is sheet fortressed fortress think we've The I balance it's

So options sheet liquidity further, any and to it somewhat. reduce grow at won't looking we we probably are on-balance

Andrew Liesch

it. Got

now, option just hold right in maybe -- So under that the funds earn before for and it? it Fed

David Morimoto

funds Yes. That's Currently, the the it's yield. close Yes. sheet million. going make liquidity or some where $XXX of right? Obviously, million bad yielding there, on-balance challenge redeploying So Fed not to $XXX that's could stay to is not sense. a

Operator

we Instructions] looks like [Operator it And no further have questions.

this Martines at over the for remarks. closing I floor to time, call back Arnold will Arnold, is So yours. the turn

Arnold Martines

XXXX. the And earnings you, to for much Thank Thanks our future participating very you progress. our Greg. to very on update quarter opportunities call look thank you for We fourth forward of much. in

Operator

today's Arnold. disconnect. now And you, ladies for Thank joining, Thank you conclude you that call. and gentlemen, does and may all

Central Pacific Financial (CPF) 31 Jan 242023 Q4 Earnings call transcript