Central Pacific Financial (US:CPF)2024-10-30 20:10Financial Performance - Net income for Q3 2024 was $13.3 million, or $0.49 per diluted share, compared to $13.1 million, or $0.49 per diluted share in Q3 2023[211]. - Net income for the nine months ended September 30, 2024, was $42.1 million, or $1.55 per diluted share, down from $43.8 million, or $1.62 per diluted share in the same period of 2023[212]. - Pre-provision net revenue (PPNR) for Q3 2024 was $19.9 million, down from $22.4 million in Q3 2023, primarily due to strategic opportunity-related expenses[215]. - Return on average assets (ROA) for Q3 2024 was 0.72%, compared to 0.70% in Q3 2023[218]. - Return on average shareholders' equity (ROE) for Q3 2024 was 10.02%, down from 10.95% in Q3 2023[218]. - Adjusted net income increased to $15,667 for the three months ended September 30, 2024, from $13,141 in 2023, and for the nine months, it rose to $44,429 from $43,803[223]. - The adjusted diluted earnings per share (EPS) for the three months ended September 30, 2024, was $0.58, up from $0.49 in 2023, while for the nine months, it was $1.64 compared to $1.62 in 2023[223]. - The efficiency ratio (non-GAAP) for the three months ended September 30, 2024, was 70.12%, compared to 63.91% in 2023, and for the nine months, it was 66.86% versus 63.89% in 2023[227]. - Adjusted return on average assets (ROA) for the three months ended September 30, 2024, was 0.85%, up from 0.70% in 2023, while for the nine months, it was 0.80% compared to 0.78% in 2023[230]. - Adjusted return on average shareholders' equity (ROE) for the three months ended September 30, 2024, was 11.75%, compared to 10.95% in 2023, and for the nine months, it was 11.51% versus 12.33% in 2023[230]. Credit Losses and Provisions - Provision for credit losses for Q3 2024 was $2.8 million, a decrease from $4.9 million in Q3 2023, attributed to lower loan balances and improved economic forecasts[213]. - The Company recorded a provision for credit losses of $9.0 million for the nine months ended September 30, 2024, compared to $11.0 million in the same period of 2023[214]. - The provision for credit losses on loans was $3.0 million for the third quarter of 2024, compared to $4.5 million in the same period last year[285]. - Net charge-offs for the third quarter of 2024 were $3.6 million, a decrease from $3.9 million in the prior year[285]. - The allowance for credit losses (ACL) totaled $61.6 million as of September 30, 2024, down from $64.5 million a year earlier[284]. Deposits and Loans - Total deposits decreased by $264.6 million, or 3.9%, to $6.58 billion as of September 30, 2024, from $6.85 billion at December 31, 2023[289]. - Core deposits totaled $5.97 billion at September 30, 2024, representing 90.6% of total deposits, compared to 87.4% at December 31, 2023[290]. - Total loans decreased by $96.4 million, or 1.77%, to $5.34 billion as of September 30, 2024, primarily due to a $110.9 million decrease in consumer loans[276]. - The Hawaii loan portfolio decreased by $59.9 million, or 1.3%, with notable declines in consumer loans ($44.5 million) and home equity loans ($39.4 million)[277]. - The U.S. Mainland loan portfolio decreased by $36.4 million, or 4.5%, primarily due to a $66.4 million decrease in consumer loans as the company allowed the portfolio to runoff[278]. Interest Income and Expenses - Net interest income for Q3 2024 was $54.0 million, an increase of $1.9 million or 3.6% from $52.1 million in Q3 2023[244]. - Taxable-equivalent interest income was $78.0 million for Q3 2024, representing an increase of $5.4 million or 7.5% from $72.6 million in the year-ago quarter[245]. - Interest expense for Q3 2024 was $24.0 million, an increase of $3.6 million or 17.4% from $20.5 million in Q3 2023[247]. - The net interest margin for Q3 2024 increased to 3.07%, up 19 basis points from 2.88% in the year-ago quarter[247]. - Average rates paid on interest-bearing deposits increased by 33 basis points to 1.82% in Q3 2024[247]. - Average yield on loans increased by 40 basis points, contributing approximately $5.3 million to interest income[246]. - Average yield on investment securities increased by 51 basis points, contributing approximately $1.9 million to interest income[245]. - Net interest income for the nine months ended September 30, 2024, was $156.4 million, a decrease of $3.0 million or 1.9% from $159.5 million in the same period of 2023[251]. - Interest expense rose to $72.2 million for the nine months ended September 30, 2024, an increase of $22.5 million or 45.3% compared to $49.7 million in the year-ago period[254]. Operational Metrics - The Company operates 27 branches and 56 ATMs throughout Hawaii as of September 30, 2024[205]. - The Company emphasizes the importance of non-GAAP financial measures to provide better indicators of core activities, excluding certain strategic expenses[219]. - The tangible common equity ratio (non-GAAP) as of September 30, 2024, was 7.31%, an increase from 6.12% in 2023[221]. - The company reported a higher adjusted PPNR in Q3 2024 primarily due to an increase in net interest income of $1.9 million compared to the year-ago period[224]. - The adjusted efficiency ratio increased to 65.51% in Q3 2024 from 63.91% in the year-ago quarter, attributed to higher operating expenses[228]. Economic and Market Conditions - Visitor arrivals to Maui decreased by approximately 57% in September 2023 compared to September 2022, but have since started to recover, with an 80% increase in August 2024 compared to August 2023[234]. - Total visitor spending in Hawaii for the eight months ended August 31, 2024, was $14.06 billion, down 2.3% from $14.39 billion in the same period last year, but up 16.6% from $12.06 billion in 2019[237]. - The unemployment rate for Maui improved from 8.4% in September 2023 to 4.0% in September 2024[234]. - Hawaii's seasonally adjusted annual unemployment rate was 2.9% in September 2024, compared to 3.0% in September 2023, indicating a stable labor market[239]. - Real personal income in Hawaii is projected to grow by 1.4% and real gross state product by 1.0% in 2024[241]. Shareholder Equity and Capital Management - Total shareholders' equity rose to $543.7 million at September 30, 2024, compared to $503.8 million at December 31, 2023, driven by net income of $42.1 million[296]. - The total shareholders' equity to total assets ratio improved to 7.33% at September 30, 2024, from 6.59% at December 31, 2023[297]. - The Company completed a $55.0 million private placement of ten-year fixed-to-floating rate subordinated notes, bearing a fixed interest rate of 4.75% for the first five years[307]. - As of September 30, 2024, the Company's leverage capital ratio was 9.5%, CET1 risk-based capital ratio was 12.1%, and total risk-based capital ratio was 15.3%, all above the "well capitalized" regulatory designation[312]. Risk Management and Compliance - The Company performed regular liquidity stress testing to ensure adequate liquidity under potential stress events[322]. - The Company’s total risk-based capital as of December 31, 2023, was 14.6%, exceeding the minimum required ratio of 8.0%[312]. - The Asset/Liability Management Committee utilizes a simulation model to manage interest rate risk and inform strategic actions[316]. - The company's management evaluated the effectiveness of disclosure controls and procedures, concluding they were effective as of the end of the reporting period[327]. - There were no changes in the company's internal control over financial reporting that materially affected its financial reporting during the reporting period[328]. - The company is involved in legal proceedings that arise in the ordinary course of business, but does not expect these to materially affect its financial condition or operations[330].