Central Pacific Financial (US:CPF)2022-01-26 20:25Financial Data and Key Metrics Changes - Net income for Q4 2021 was $22.3 million or $0.80 per diluted share, an increase of $1.5 million or $0.06 per diluted share from the prior quarter [22] - For the full year 2021, net income was $79.9 million or $2.83 per diluted share, compared to $37.3 million or $1.32 per diluted share in 2020 [22] - Return on average assets in Q4 was 1.22% and return on average equity was 16.05% [22] - Net interest income for Q4 was $53.1 million, a decrease of $3 million from the prior quarter [23] - The net interest margin decreased to 3.08% in Q4 compared to 3.31% in the prior quarter [24] Business Line Data and Key Metrics Changes - Core loan portfolio increased by $183 million or 4% sequentially in Q4, with a year-over-year increase of 10% [15] - Residential mortgage production in Q4 was $354 million, with total production for 2021 reaching $1.2 billion [17] - Total core deposits increased by $66 million or 1% sequentially in Q4, and by $1 billion or 20% year-over-year [20] Market Data and Key Metrics Changes - Hawaii's unemployment rate was at 6% in November 2021, with strong visitor holiday travel season averaging over 25,000 daily air arrivals [13] - The housing market in Hawaii remains strong, with median single-family home prices holding just over $1 million [14] - Non-performing assets were at just 8 basis points of total assets as of December 31 [14] Company Strategy and Development Direction - The company announced the launch of a Banking-as-a-Service strategy, focusing on partnerships with fintech companies to create customized financial products [8] - The Shaka Checking product, Hawaii's first digital bank account from a local institution, has seen strong demand with over 33,000 accounts opened since its launch [10] - An equity investment and bank sponsorship of Swell, a new fintech company, is planned to launch in mid-2022 [11] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism for 2022, highlighting strong financial results for 2021 and the potential of the Banking-as-a-Service initiative [7] - The company expects favorable loan growth trends to continue in 2022, supported by a healthy loan pipeline across all product categories [19] - The effective tax rate was 25.4% in Q4, with expectations to remain in the 24% to 26% range going forward [28] Other Important Information - The efficiency ratio increased to 65.6% in Q4 due to lower net interest income and non-recurring expenses [27] - The company plans to consolidate two additional branches in 2022, anticipating annualized savings of $0.8 million from branch consolidations [26] - A quarterly cash dividend of $0.26 per share was declared, an increase of 4% from the prior quarter [29] Q&A Session Summary Question: Inquiry about the Banking-as-a-Service initiative and revenue-sharing agreement - Management confirmed that the revenue-sharing agreement is based on both loan growth and deposit growth, with potential adjustments as the initiative progresses [33] Question: Clarification on credit protection provided by Elevate - Management explained that CPF will dictate credit guidelines and monitor closely, leveraging Elevate's experience in credit management [34][36] Question: Outlook on net interest margin - Management indicated that the net interest margin on a core basis is expected to be around 285 to 295 basis points, suggesting it has troughed [42] Question: Insights on deposit growth from the Shaka product - Management noted that while it is early to discuss specific deposit growth figures, they are optimistic about continued growth from the Shaka accounts [44][46] Question: Outlook for expenses in 2022 - Management projected a flat expense outlook for 2022, estimating quarterly expenses to be around $40 million to $42 million [48] Question: Target launch date for Swell - Management confirmed the target launch date for Swell is mid-2022 [61]