Central Pacific Financial (US:CPF)2022-10-21 20:15Financial Data and Key Metrics Changes - Net income for Q3 2022 was $16.7 million or $0.61 per diluted share, with a return on average assets of 0.91% and return on average equity of 14.49% [15] - Net interest income increased to $55.4 million, up $2.4 million from the prior quarter, with a net interest margin of 3.17%, an increase of 12 basis points [16] - Total deposits declined by $65 million or 1% from the prior quarter, marking a moderation in deposit balances [13] Business Line Data and Key Metrics Changes - Total loan portfolio increased by $121 million or 2.3% sequentially and 9% on an annualized basis, with residential mortgage portfolio growth of $32 million [10] - Mainland consumer purchase loans grew by $44 million, representing 8% of total loans, with a weighted average FICO score of 740 [12] - The allowance for credit losses was $64.4 million or 1.19% of outstanding loans, with net charge-offs of $1.6 million for the quarter [19] Market Data and Key Metrics Changes - Hawaii's tourism sector showed strong performance, with visitor arrivals at 90% of pre-pandemic levels and visitor spending reaching $1.7 billion in August, a 13.8% increase compared to August 2019 [6][8] - The unemployment rate in Hawaii was 4.1% in August 2022, expected to remain stable in 2023 [8] - Oahu's median single-family home price was $1.1 million in September 2022, up 5% from the previous year, indicating a strong housing market [9] Company Strategy and Development Direction - The company is focusing on a Mainland diversification strategy, participating in commercial, real estate, and C&I loan transactions while maintaining credit underwriting standards [11] - The banking-as-a-service FinTech strategy is being developed, with the Swell fintech app launched in an alpha pilot [14] - The company aims to manage future loan growth carefully, particularly in unsecured consumer loans, due to the current economic outlook [12] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's position to deliver strong performance despite external market challenges [22] - The company anticipates a moderate slowdown in Hawaii's economy in 2023, but expects a recovery in Japanese visitor numbers due to pent-up demand [7] - The effective tax rate is expected to remain in the 25% to 26% range going forward [20] Other Important Information - The company repurchased 218,000 shares at a total cost of $4.9 million, with a quarterly cash dividend of $0.26 per share declared [20] - Leadership changes were announced, with Paul Yonamine retiring and Arnold Martines becoming the new CEO [23][27] Q&A Session Summary Question: Details on mainland commercial real estate underwriting - The company participates in transactions with both mainland banks and Hawaii-based customers, ensuring independent underwriting [30] Question: Trends in Hawaii's commercial growth - No current reasons to pull back on commercial real estate transactions, with expectations of stability in Hawaii's market [32] Question: Deposit trends and non-interest bearing flows - A drop in non-interest bearing deposits was noted, primarily due to large corporate depositors moving funds as market rates increased [35] Question: Updates on Shaka digital deposits and Japanese deposit initiatives - Shaka accounts have reached about 4,000, with ongoing initiatives to drive activity, while Japanese deposits have grown significantly over the past four years [38][49] Question: Future targets for Swell and consumer unsecured lending - The company plans to moderate the unsecured consumer portfolio while focusing on profitable customer acquisition for Swell [54][56]