Central Pacific Financial Corp. Q2 FY2025 earnings call

• CPB was named the Best Bank in Hawaii by Forbes Magazine for the fourth consecutive year. • Hawaii's economy shows resilience with strong construction, tourism trends (visitor arrivals up 2.8% YTD, spending up), low unemployment. • Loan and deposit growth strategy focuses on deepening customer relationships. • Financial results: net income $18.3 million, net interest income up 3.6% Q/Q to $59.8 million, net interest margin expanded to 3.44%. • Strong credit performance with low NPAs, past dues, and criticized assets. • Repurchased ~103,000 shares and declared a $0.27 per share dividend.

The loan portfolio ended at $5.29 billion in the second quarter, with growth in construction and consumer loans but declines in other categories. Average yields on loans increased to 4.96% from 4.88% prior quarter. Total deposits ended at $6.54 billion, slightly declined from prior quarter, with a favorable shift in deposit mix including an increase in noninterest-bearing DDA deposits.

• Target low single-digit full year growth for loans and deposits in 2025. • Near-term total other operating expense guidance: $43.5 million to $44.5 million per quarter excluding onetime impact. • $25.3 million in share repurchase authorization remaining. • Quarterly cash dividend of $0.27 per share payable September 15.

• Risks related to forward-looking statements as actual results may differ. • Specific credit risk with a single commercial loan write-off; however, consumer book losses flat to prior quarter. • Potential headwinds from global and domestic economic conditions affecting Hawaii's economy.

Q: How is the pulse of client demand and the competitive landscape?

A: Loan growth in first half was muted but team is optimistic for second half; competition in Hawaii banking market is average with no major change in strategy.

Q: How is noninterest-bearing deposit growth driven and margin trajectory?

A: Team focuses on keeping close to customers, prospecting, and ramping up core deposit growth efforts; margin expected to be driven by loan growth and back book repricing.

Q: What's the core expense run rate and investments?

A: Near-term total other operating expense guidance $43.5 million to $44.5 million per quarter, with investments in technology, facilities, and people for efficiency and revenue growth.

Q: Details on credit losses and criticized loans?

A: Net charge-offs included a single large commercial loan write-off, consumer book losses stable; criticized loans increased to 180 basis points but remain low, with two loans downgraded but performing and adequately collateralized.

Q: CD repricing and margin with rate cuts?

A: ~$430 million CDs maturing in third quarter, ~$350 million in fourth quarter; expect to lower CD costs as they roll over, with betas expected to be similar on deposit side with Fed rate cuts.