CENTRAL PACIFIC FINANCIAL CORP Q1 FY2025 earnings call

• Leadership transitions: David Morimoto appointed Vice Chairman and Chief Operating Officer, Dayna Matsumoto appointed Executive Vice President and Chief Financial Officer. - Financial results: Solid Q1 with NIM and net interest income expansion, strong capital, liquidity, and asset quality. - Hawaii market: Construction industry grew 20.3% in 2024 first ten months, tourism had mixed trends, real estate market strong with Oahu single-family homes at record high. - SBA award: CPB honored as SBA lender of the year for 16th time. - Loan growth: Q1 loan portfolio up $1.7 billion, focused on commercial, C&I, commercial mortgage, construction. - Deposit: End of Q1 deposits down $48M, but average balances up with non-time deposits up. - Financials: Net income, NIM, efficiency ratio, tax rate, share repurchases, dividend declared. - Asset quality: Healthy with net charge-offs, nonperforming assets, criticized loans, past due loans at favorable levels, allowance for credit loss up.

In the first quarter, the loan portfolio increased by $1.7 billion sequentially, the first quarterly increase in two years, led by Mainland and Hawaii commercial mortgage and Hawaii construction lending. Total deposits at the end of the first quarter declined by $48 million from the prior quarter, but on an average balance basis, total deposits increased by $14 million with average non-time deposits up $78 million quarter over quarter. Net income for the first quarter was $17.8 million, or 65¢ per diluted share. Return on average assets was 0.96%, and return on average equity was 13.04%. Net interest income for the first quarter was $57.7 million, increasing by $1.9 million or 3.5% from the prior quarter. Net interest margin was 3.31% in the first quarter, up 14 basis points on a sequential quarter basis.

• Loan growth: Full-year low to mid-single-digit loan growth, focused on commercial areas. - NIM: Expected to increase 4-7 basis points next quarter assuming Fed on hold in May and flat yield curve; additional Fed cuts or steeper yield curve would benefit NIM. - Other operating expense: Quarterly other operating expense guide $42.5 to $43.5 million per quarter. - Capital: Strong, evaluating capital optimization including dividends, organic growth, share repurchases.

• Market and economic uncertainty impacting industry and customers. - Potential impacts from trade wars/tariffs on accommodation, restaurant, wholesale, retail trades loan segments. - Volatility in BOLI income and deferred compensation expenses due to market conditions.

Q: David Pfister asked about loan growth, client response to market chaos, pipeline trend, and growth opportunities.

A: David Morimoto said they're in touch with clients, cautiously optimistic, full-year low to mid-single-digit loan growth focused on commercial areas.

Q: David Pfister asked about trade war impacts on clients.

A: Ralph Mesick said about 10% of loan book in impacted segments, clients likely to deal with short-term turbulence, have a playbook for stress events.

Q: David Pfister asked about deposit performance and competitive landscape.

A: Dayna Matsumoto said they're pleased with deposit performance, average balances up, focus on core deposits, deposit cost trending down.

Q: Andrew Liesch asked about March margin, NIM expansion, new loan yield.

A: Dayna Matsumoto said March margin was 3.37%, NIM expected to continue expanding with 4-7 basis points next quarter, new loan yield in Q1 was about 7.2%.

Q: Andrew Liesch asked about expense items and real estate rationalization cost saves.

A: Dayna Matsumoto said BOLI and deferred compensation had volatility, but expense guide remains $42.5 to $43.5M, cost saves from real estate rationalization will be used for investments in people and technology.

Q: David Fisher asked about capital priorities.

A: David Morimoto said capital position is strong, evaluating optimization including dividends, organic growth, share repurchases.