Central Pacific Financial (US:CPF)2019-10-23 23:40Financial Data and Key Metrics Changes - Net income for Q3 2019 was $14.6 million or $0.51 per diluted share, compared to $13.5 million or $0.47 per diluted share in the previous quarter [9] - Return on average assets was 0.99% and return on average equity was 11.11% [9] - Net interest income increased by $0.3 million to $45.6 million sequentially, with a net interest margin of 3.30% [9][10] - Efficiency ratio improved to 62.5% from 65.1% in the prior quarter [10] Business Line Data and Key Metrics Changes - Total loans increased by $121 million or 2.8% from the previous quarter and by $390 million or 9.8% year-over-year [7] - Non-performing assets were $1.4 million, representing 2 basis points of total assets [8] - Total deposits increased by 1.2% sequentially and by 0.7% year-over-year, with core deposits contributing almost all growth [8] Market Data and Key Metrics Changes - Visitor arrivals in Hawaii increased by 5.2% year-to-date as of August, while visitor expenditures decreased by 0.5% [6] - Forecasted job growth for 2019 is 0.4%, real personal income growth is 1.2%, and real GDP growth is 1.1% [6] Company Strategy and Development Direction - The company launched RISE2020, a comprehensive initiative aimed at enhancing customer experience and driving long-term growth [6] - Plans for Q4 include launching a new website, upgrading online and mobile banking platforms, and implementing a commercial loan origination system [6] - The company is focusing on branch modernization and digital banking initiatives [6] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in maintaining a positive momentum and achieving enhanced goals through the RISE2020 initiative [12] - Economic conditions in Hawaii are projected to grow, albeit at a slower rate than previous years, with construction activity as a bright spot [6] Other Important Information - The company repurchased 140,600 shares during the quarter, totaling 631,300 shares year-to-date, returning $37.2 million in capital to shareholders [5] Q&A Session Summary Question: Impact of outsourcing mortgage servicing on revenue and expenses - Management indicated that outsourcing was aimed at enhancing regulatory compliance and allowing employees to focus on mortgage growth, not primarily for cost reduction [14] Question: Outlook on loan yields and net interest margin - New loan yields for the quarter were 4.12%, with guidance for net interest margin maintained at 3.25% to 3.35% [16][17] Question: Future of the investment securities portfolio - The investment portfolio is expected to remain at 18% to 20% of total assets, with no significant further rundown anticipated [17] Question: Expense outlook for Q4 and 2020 - Expected operating expenses for Q4 are $35 million to $36 million, with a range of $36 million to $38 million for 2020, incorporating RISE2020 investments [21][34] Question: Progress on Japanese deposit accounts - Japanese deposits increased to approximately $545 million, with continued focus on this market opportunity [28] Question: Traction on new online and mobile banking platform - The new platform is on schedule for rollout in early 2020, with no traction yet as it has not been established [26] Question: Charge-offs in consumer category - Charge-offs were attributed to a mix of Prosper and the Hawaii consumer portfolio, with the Prosper balance holding steady around $74 million [40][41] Question: Commercial loan growth outlook - Management expressed optimism for C&I growth in the fourth quarter and next year, despite medium loan growth in Hawaii [44]