• Net Income: $17.8 million or $0.65 per diluted share.
• Return on Average Assets: 0.96%.
• Return on Average Equity: 13.04%.
• Efficiency Ratio: 61.2%.
• Net Interest Income: $57.7 million, increased by $1.9 million or 3.5% from the prior quarter.
• Net Interest Margin: 3.31%, up 14 basis points sequentially.
• Total Deposits: Declined by $48 million from the prior quarter; average balance increased by $14 million.
• Total Other Operating Income: $11.1 million.
• Total Other Operating Expense: $42.1 million.
• Allowance for Credit Loss: $60.5 million or 1.13% of outstanding loans.
• Provision Expense: $4.2 million.
• Total Risk-Based Capital: 15.6% at the end of the first quarter.
• Share Repurchase: 77,000 shares at $2.1 million in Q1; 86,000 shares at $24.70 per share in Q2 to date.
• Quarterly Cash Dividend: $0.27 per share, payable on June 16.

• Warning! GuruFocus has detected 2 Warning Sign with CPF.

Release Date: April 23, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Central Pacific Financial Corp (NYSE:CPF) achieved a meaningful net interest margin (NIM) and net interest income expansion in Q1 2025.
• The company maintained strong capital, liquidity, and asset quality, positioning it well for future economic challenges.
• CPF was honored as the SBA lender of the Year Category 2 for the 16th consecutive year, highlighting its commitment to supporting small businesses.
• The loan portfolio increased by $1.7 million sequentially, marking the first quarterly increase in two years, driven by commercial mortgage and construction lending.
• Net interest margin expanded by 14 basis points to 3.31% in Q1, reflecting disciplined pricing and balance sheet management.

Negative Points

• Total deposits declined by $48 million from the prior quarter, although average balances increased slightly.
• Visitor arrivals in Hawaii dropped 1.9% from the prior year, with a slow recovery of visitors from Japan impacting tourism.
• The company anticipates a one-time pre-tax write-off of $2 million to $2.5 million due to office space consolidation.
• Non-performing assets remained flat at $11.1 million, with criticized loans up 20 basis points quarter-on-quarter.
• The company faces potential impacts from trade wars and tariffs, with about 10% of its loan book in potentially affected industries.

Q & A Highlights

Q: How are clients responding to market volatility, and where do you see opportunities for loan growth? A: David Morimoto, Chief Financial Officer, noted that despite market volatility, they remain cautiously optimistic and maintain their full-year loan growth guidance of low to mid-single digits. Growth is expected in commercial areas, particularly CNI, commercial mortgage, and construction.

Q: What potential impacts do trade wars and tariffs have on your clients, and how are you approaching this? A: Ralph Mesick, Chief Risk Officer, stated that industries potentially impacted by trade policies represent about 10% of their loan book. They believe their clients can handle short-term turbulence, and they have a playbook for stress events to manage potential impacts.

Q: Can you discuss the competitive landscape for deposits and potential for margin expansion? A: Diana Matsumoto, Chief Financial Officer, explained that deposit costs are trending down, and they expect funding costs to continue decreasing gradually. The market for deposit pricing remains rational, and their strategies have been effective.

Q: What was the net interest margin (NIM) in March, and what are the expectations for future NIM expansion? A: Diana Matsumoto reported a March NIM of 3.37% and expects further expansion of 4 to 7 basis points next quarter, assuming the Fed remains on hold and the yield curve stays flat.

Q: How are you prioritizing capital deployment, and what are your thoughts on share repurchases? A: Diana Matsumoto stated that their capital position is strong, allowing flexibility. They prioritize paying a quarterly dividend, organic growth, and share repurchases, viewing the current market as an opportunity for buybacks.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.