• Net Income: $15.8 million or $0.58 per diluted share.
• Return on Average Assets: 0.86%.
• Return on Average Equity: 12.42%.
• Efficiency Ratio: 64.26%.
• Total Loan Portfolio: Decreased by $17.8 million or 0.3% sequential quarter.
• Total Deposit Portfolio: Decreased by $36.4 million or 0.5% sequential quarter.
• Net Interest Income: $51.9 million, an increase by $1.7 million from the prior quarter.
• Net Interest Margin: 2.97%, up 14 basis points sequential quarter.
• Total Cost of Deposits: Relatively flat at 1.33%.
• Other Operating Income: Increased to $12.1 million.
• Other Operating Expense: $41.2 million, an increase from $40.6 million in the prior quarter.
• Effective Tax Rate: 23.4%.
• Non-Performing Assets: $10.3 million or 0.14% of total assets.
• Criticized Loans: $35.3 million or 0.66% of total loans.
• Total Net Charge-Offs: $3.8 million or 0.28% of average loans on an annualized basis.
• Allowance for Credit Losses: $62.2 million or 1.16% of outstanding loans.
• Provision for Credit Losses: $2.2 million during the quarter.

• Warning! GuruFocus has detected 6 Warning Sign with CPF.

Release Date: July 31, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Central Pacific Financial Corp (NYSE:CPF) reported a strong second quarter with net income of $15.8 million, or $0.58 per diluted share.
• The company experienced net interest margin (NIM) expansion, increasing by 14 basis points to 2.97% in the second quarter.
• Core deposits grew by $16.7 million during the quarter, indicating strong customer relationships and deposit growth initiatives.
• CPF was recognized by Forbes as one of America's Best Banks and Best In-State Bank for Hawaii in 2024.
• Asset quality remains strong with non-performing assets at 0.14% of total assets and a decrease in net charge-offs by six basis points from the previous quarter.

Negative Points

• Total loan portfolio decreased by $17.8 million or 0.3% sequentially, with a notable $19.2 million decrease in Mainland consumer loans.
• Total deposit portfolio decreased by $36.4 million or 0.5% sequentially, including a $41.6 million decrease in high-cost government time deposits.
• Hawaii's tourism sector, particularly the Japanese market, continues to face headwinds, impacting economic growth.
• Total statewide visitor arrivals in Hawaii were down 1.9% from the prior year, and hotel occupancy decreased by 1.2% from a year ago.
• The company did not repurchase any shares in the second quarter, which may concern investors looking for capital return initiatives.

Q & A Highlights

Q: Can you provide an update on the Maui economy following the wildfires and the status of loan deferrals? A: Arnold Martines, President and CEO, noted that visitor arrivals are at about 78% and improving steadily. The community is coming together, and homes are being rebuilt. All Maui-related loan deferrals have returned to regular payment status, and no significant issues are anticipated.

Q: How is Central Pacific Financial Corp managing deposit growth and costs? A: Arnold Martines, President and CEO, highlighted the focus on core business and customer relationships, particularly in the small business market. David Morimoto, CFO, added that noninterest-bearing deposits have stabilized, and the team is working on growing core deposits while maintaining cost control.

Q: What is driving the loan growth in the Mainland C&I portfolio? A: Anna Hu, Chief Credit Officer, explained that growth was primarily driven by the Shared National Credit (SNC) portfolio, with opportunities to participate in new names and expand existing credits.

Q: What are the expectations for net interest margin (NIM) in the coming quarters? A: David Morimoto, CFO, stated that the NIM is expected to be between 3% and 3.10% for the next couple of quarters. This forecast includes anticipated rate cuts and reflects a balanced interest rate risk profile.

Q: How does defense spending impact the bank's growth opportunities? A: Arnold Martines, President and CEO, mentioned that defense spending benefits the broader Hawaii economy, particularly small businesses. David Morimoto, CFO, added that it presents both loan and deposit opportunities, as government contractors often require lines of credit.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.