CPF - Earnings call transcript Q2 2024 | 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.

Second Quarter 2024 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. I'd like to turn the call over to Ms. Director, Accounting. SVP, Group Matsumoto, Finance and Dayna Please go ahead.

Dayna Matsumoto

Financial you joining results Arnold us you, Central the Jessica, we Martines, for thank Chief and Pacific role Vice for Officer; XXXX financial Morimoto, Thank who as was morning all review quarter Officer. Chairman of Vice me recently Corp. With Senior Credit appointed this second his are of President our President and Chief and and in Board President of Financial Anna Executive Executive Hu, Executive and to Chief addition as Officer; the David

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

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

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

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

Arnold Martines

Thank deposit year expansion, a pleased growth net NIM share and half Corp. pleased for improving quarter, the a the outlook positive core Central second by are the results With year. the behind in charge-offs. and and am we appreciate I Pacific to We have you, strong your us, hello, latest with you. We Financial updates highlighted and results had Dayna, our with interest and rest everyone. of

the the of navigating current successfully is challenges environment. team economic Our

of Banks we Best proud seeing the received Hawaii of for by as While recently this impact and America's and XXXX. trends positive recognition continues to Best also developing. I'm Bank growth one are In-State in loan we demand, Forbes

it market my an like Hawaii the over the in to more that provide cover to before I'd update results quarter's With to detail. on team said, turning

June, growth are down all-time the visitor defense market Conversely, pre-pandemic helping economy. In economic in highs higher exchange to were about Hawaii offset on of about ago, particularly pressures tourism, headwinds the we the experiencing and to at Visitors are were where spending persists. XX% construction statewide other the a total Hawaii prior month the arrivals overall XXXX. from and from Japanese the same of inflation impacts remained continued XX% in modest year from and Japan due is rate and sectors from levels of XX% month in yet up year and of were X.X% XXXX. seeing

for real price $X.XX remain X.X% were half for quickly year. continue move single-family market. the Homes the and X.X%, Oahu sales year-over-year volumes strong. on of up days million, increases reflecting an median prior to estate rate in statewide June a island following X.X% year of the the X.X% a from the with seasonally total visitors national a ago, $XXX, down June was average adjusted statewide ago. Hawaii of was XX% in For the and continues continues in unemployment slow Maui, hotel to down from outperform first down Home a $XXX,XXX sales values June daily but year compared condos the occupancy respectively. unemployment rate in very rate were XX%, X.X%. Hawaii recovery Total X.X% year pace. the X.X% year of steady XX X.X% about in wildfires of and was at as of The but of to median June, price single-family the condo home homes prior with was median

Financial our will outlook modestly state to the and turn believe to about Overall, Officer. now economy demonstrate Morimoto, continue and Chief the call David we David? Hawaii's remain economic optimistic over grow resiliency. I'll

David Morimoto

Thank you, Arnold.

million million on loan Return earnings sequential average was was efficiency Turning or per and Net total ratio by quarter, quarter, offset decline half XX.XX%. In for X.XX%, growth our second in XX.XX% $X.XX the the consumer portfolios we income expect million was share. runoff commercial $XX.X in modest estate real second is assets loans the and Mainland $XX.X of the in on consumer loan return which and in was decrease total our to quarter equity and C&I of growth The our the a our results. by $XX.X net X.X% pace or was slowing, quarter Sequential average residential loans. included in portfolio diluted year. mortgage loans. second decreased

during $X.X portfolio interest in quarter, X.XX% sequential or $XX.X million high-cost decreased was was decrease second Our government X.X% quarter deposits total by deposit quarter. margin time million. Net driven million points the prior March XX the municipal income Core second interest the quarter securities included $XX.X that XX from and by was our securities the relatively $XX.X quarter, up started of included on net of while increase an $XXX The and the basis income our increase investment by grew a income a by million the which quarter deposits. for $XX.X of interest funds during million, Net on investment yields sequential million term. loan remain has expansion on X-year and cost on NIM our this securities stable. Interest swap million portfolios, year from in quarter. in $X.X

of Our flat cycle-to-date and at total total remained X.XX% our at also beta deposit relatively cost XX%. remained repricing deposits

expense to prior operating banking in income. from increase Second services stronger $XX.X other to operating increased Other and the expense. higher an $XX.X quarter due and income mortgage primarily to totaled million, salaries million benefits due quarter $XX.X million investment

rate remain range. We second Our quarter. XX% and did believe to any will was in the in shares XX.X%, to continue effective tax XX% the we repurchase not it

Directors payable XX. XX Our of of August $X.XX shareholders cash quarterly Board on record will be September dividend of which to a declared per on share,

Officer. Anna the our Anna? to Credit turn over call Chief Hu, now I'll

Anna Hu

David. you, Thank

weighted stable and we Nearly a with Our portfolio to loan-to-value and strong estate loan be standards, average our strategy lending on on XX%. consistent and risk asset focus a collateral expertise segments of continues industries in XX% underwriting solid of real credit second remained quality that the have quarter, based in. and is diversification, secured the strong

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

our have deferrals related issues anticipating any payment cause concern loan and not returned portfolio. of are significant regular regarding to to Maui us status we All Maui our

of Nonperforming which was assets quarter. or were $XX.X million relatively total X.XX% from assets, prior the flat

prior were loans at or levels. the Criticized but $XX.X total remains low slight from of million a loans, X.XX% increase historically quarter

$X.X X.XX% Total quarter. previous average were quarter for decrease points second annualized a basis on the the X an net of charge-offs reflects loans basis. from This million or

outstanding quarter, our losses in provision $X.X the million second or to for of decline on a loans. In loans declined Our allowance credit for charge-offs. credit losses to was $XX.X due net X.XX% million

the unfunded we credit commitments provision recorded for losses provision $X.X during million for million a total to a Additionally, $X.X the of for credit quarter.

and to Overall, monitor environment our continue quality economic credit strong we the closely. remains

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

Arnold Martines

Thank you, while positive second had and the outlook Anna. focus In we for uncertainties we have remaining the a continue summary, our rest market quarter. to year a nimble. strong Despite of on we core strategies on that persist, executing

may this happy support your to you our address questions have. I you and Thank At organization. want in to we be you. time, confidence continued will for any thank

Operator

line Feaster James. Instructions] Raymond comes of the from with Your [Operator question David first

David Feaster

just of up we terms your curious the come are great pulse in seeing maybe wildfires what It's that of the that I you economy? wanted local hear That's loans But in are expecting up. I'm your the not issues Maui of curious, standpoint where any and follow to extremely there to we're rebuild as coming of side. local off from just kind on I'm We've the anniversary encouraging. the in the got economy deferral. just market?

Arnold Martines

Yes.

So David, this is Arnold.

XX%. earlier, in a it is at steady the arrivals, mentioned accounts visitor I are way. the improving still As visitor But about

some folks together. to to being to deliberate while movement I see a months move We're in that lot regard the have and we're see are the And determined to think that impacted, the is within the be rebuilt I'm that of forward the and progress starting way optimistic together emotions that in people community to optimistic ahead. obviously, together. more coming with forward a and is a things still were homes start pretty we'll to coming year there's of lot come and starting

David Feaster

that just And new base you cost deposit the seeing having grow? we growth continue to think about deposit the are growth. Curious, see X just the stabilize been That's point has deposits where cost control, to of Are given cost on loan profile slower about? great. I how think growth trying the just then the touching initiatives? do on optimizing you And deposit figure the mean, I that? side. to basis success? really deposit deposit and focused growth impressive here and out, just can you I mean, are Where funding basically deposits? of core costs maybe just great. more it's you the driving do talked we what's And mean

Arnold Martines

David, and So turn it then Morimoto. over I'll David start to I'll

Our has done just a Small to we employees, new core and our market follows business has efforts regard and strength focusing job our of on focusing customers a really is will growth steady with been business. deposit a team see, ours of of just to good on the our what customers, continue because obviously, real balances. of

ask David me let to cost. speak regard with But to

David Morimoto

yes. David,

relationships. job close team you did to customers results. are staying mentioned, we building The very new pleased their the I think with and like second great quarter a of

see great deposits we we're So noninterest-bearing that growing we then declined quarter. especially $X core hoping by to obviously, stabilization, in have DDA success, continue and did sequential noninterest-bearing The start we DDA. forward. And going million that

David Feaster

-- sheet, sheet think of how that get you expect growth, of off? Just question the maybe kind kind we continue asset well. through basically optimize would expect that that, you to the a to profitability? would I about and I size because margin thinking you the funding improving extent mean and Or that to would base of CDs the just of balance guess plays let curious of you ultimately base to balance grow? think roll the kind of Or kind the of and deposit some And core trying would you kind do into as stable to to right? of expect continue have the the

David Morimoto

Yes. David. Yes. Sure,

size and risk good reward I the deposit sheet to growth core opportunities. loan balance think are the keys

could those see balance aligning up. both us footings. we progress I to the are to And positive allow on stars think that sheet do, of will we're point are if grow fronts. where getting we lining where things the The

the to funding there not I would grow we sheet opportunity think by optimization be It's on grow. on the see base. good, a a lot think if risk reward the side, balance opportunities loan but And it. going the to lot, I better done seeing of could we've a we start grow

Operator

from And your comes Andrew Liesch the with Sandler. question of next line Piper

Andrew Liesch

I'm Mainland. that? the what on C&I Good here. was growth loan behind curious the on question a Just

Arnold Martines

Anna, you want to answer question? the

Anna Hu

Andrew, is this Anna. Sure.

we growth in saw So our the SNC portfolio. primarily

to have of We name a the new well existing off already were credits opportunity participate we as SNC couple as in. in that on top a

primarily that's our quarter book on drove what So Mainland. the growth the second on C&I

Andrew Liesch

the other Any here? from do opportunities or it. Got that you portfolio maybe stabilizes to for continue think

Anna Hu

and monitor and to as say it we continue opportunities, interested. look would itself, be We at certainly presents would that

Andrew Liesch

Got behind you, driver the helpful. how year? the very in pipeline I was that commercial similarly, guess real the then, up the rest is And that? here estate of for And shaping Hawaii, what

Anna Hu

Andrew, this is Anna again.

at pipeline real commercial second remainder on from we that standpoint, commercial of closed a in through a pipeline year. looking we real had couple that estate good say I the And quarter. transactions of we're would we estate for For the have the during working a Hawaii,

Andrew Liesch

on Any of from might growth? might that a expected any pace that a side little of the construction be continue Perhaps higher the payoffs perspective. portfolios the on payoff Great.

net the might here. pace what forecast of kind be Just

Anna Hu

Yes.

and a payoffs try we expecting estate, in that construction are up the commercial fill book well as be and We to looking few here real the will as there but to replace.

Andrew Liesch

the how rise Very year, All thinking especially it? some going the this see the are now the obviously, good on And about second here the that core wouldn't margin, half to as I the helpful. David, margin success expansion Got good heard benefiting is mean, deposit much of we've then, swap again. right. I into on the expect you. some margin But you here front.

David Morimoto

Andrew. sure. Yes,

repricing forecast second in we I of That roughly think is look that margin was liabilities. the way net increase the was of points sequential outpacing break quarter interest if basis down the that to a asset XX at you X quarter, result saw interest-bearing interest basis organic. points earning the

was So points X points X points basis basis was to related balance excess sheet interest the reduction to organic, swap basis related rate of X liquidity. and

then and basis going sheet we balance liquidity the can much the swap to the be interest nearing of X margin of forward. continue our As really is going that reduction points and I kind It's in is said, end forward. how going just net that

of So right net is guidance the quarters interest to margin for now, X% next couple the X.XX%.

Andrew Liesch

any the cut? how last Got with do some the you. And to Does done will over the some that of the I rate movements of how, you've incorporate guess, shifting couple rate think and you cuts? a of margin years, that react

David Morimoto

Yes.

for XX in points XX September cuts, forecast remainder incorporates point to basis our the So cuts this of and basis December. year

So incorporated to that X% is our guidance. X.XX% into

asset we've into interest As for The or there well mentioned cuts balance for the opportunity margin, relatively our is would sensitive sensitive. we're Fed matched. not relatively again, be rate rate overly and the matched. do some interest We risk half back year before, XXXX. But believe benefit net interest our of sheet well liability is that from

cuts but a it's will not mover. So the material help, rate

I net the high probably interest X.XX%, X, the it's end on last our over is X.XX%. think margin if the X you probably our that range years, look in in at the

So the for that's the probably foreseeable future. upside

Andrew Liesch

shifting success that mortgage on a Got income MSR we banking. it. true any Was That's side. at? just write-up looking to helpful. or very sale noninterest got gain there Looks you that on the be was should like number some there And

David Morimoto

Yes. that the better We a volume second the sequential a retail origination sale. relative was quarter. year. That did second result better on the gain was back have good in the other to quarter. likely area, area that's And sales in But got our investment quarter. good that expected had half the then quarter was first in And Things a continue in increase of of driver the there. to the true quarter

Operator

next the line comes of Our Raymond Instructions] question [Operator Feaster David from with James.

David Feaster

on Maybe touching just credit.

And managing NPAs guess, got what But like consumer Just and just thinking you're what closely? low Obviously, on broadly, there you you're side, any things then you of credit seems going and and front. on what book First, improved. seeing the seeing? on level the really seeing a watching curious you've It are conservative you're trends credit forward? that are what I have thoughts the underwriting.

Anna Hu

David, Anna. this is

consumer continue really we to book. monitor So the

quality strong. within asset CRE overall Our very C&I, our remains book

So it consumer. be continues to

to look outlook picking continue locally anticipating again. We at opportunities here our as to start that well on the on Mainland. are up monitor to is as consumer But we

David Feaster

just question to next just the the great the then margin Where on repricing loan months? XX loans? It's a XX to roll-off new are loan Okay. kind little maybe in That's increase back on see expecting book trending? great. how are kind yields in of to bit. Could loan And of bit you're the rates going the yields. you And touch maturing that in those a

David Morimoto

yes. David,

$XXX the portfolio past, think about loan I on mentioned we've quarter. to the the in million averages $XXX to runoff out a million

near much are so the rates portfolio runoff pretty And rate.

average X.XX%. second new yields quarter, weighted X.XX% in And So yield the loan the the X% loan new to range. in was

David Feaster

Okay.

is getting way like sustainable, we kind it? about of that can of Is more to if seems this expansions especially it loan yield the pace start think probably right maybe growth. So

David Morimoto

Yes. Yes.

without I should of quarter net to then start margin. the think what the extent in the that just second to portfolio, the growth, you the the repricing. impact you some be saw And that see to growth we adding helpful can was

David Feaster

one. last just pretty powerful. then Yes. And That's

how into of defense a your You is economic on a can C&I the touched curious, kind that how defense spending growth? or curious from the a positive it I'm impact benefit? local opportunity does spending. strength of that Just just play bank. Is

Arnold Martines

Hawaii. to those translate is cascade of or This lot here would say Arnold. businesses spending David. a that defense I in Yes,

broader businesses of have the does small to benefit it. Lots impact from economy. it a So

world And So it's continue we it's going kind what's the going believe today. on a we good to of that forward given thing. as move in

David Morimoto

David, need lot of deposit once on a credit. opportunity. loan what actually to specifically and can they both. on From A relationships, add maybe contracts, government once start standpoint, business, lines Arnold they the side. get more I a all the just they get banking the deposit contractors shared. is It But of it's

is So on it sides actually of balance the sheet. both

Operator

I have call back That our closing the queue. remarks. is for turn Ms. questions now Matsumoto will all we in to the over

Dayna Matsumoto

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

Operator

that Ladies and all gentlemen, joining. concludes today's for Thank call. you

You may now disconnect.

Central Pacific Financial (CPF) 31 Jul 242024 Q2 Earnings call transcript