Central Pacific Bank posts strong loan growth

January 25—Central Pacific Bank posted strong loan growth and better spreads in the fourth quarter and said it expects Hawaii to hold up better than the rest of the country as the Federal Reserve continues to raise interest rates to combat inflation.

Central Pacific Bank posted strong loan growth and better margins in the fourth quarter and said it expects Hawaii to hold up better than the rest of the country as the Federal Reserve continues to raise interest rates to combat inflation.

The state’s fourth-largest bank was scheduled to announce this morning that its net income was down 9.6% from the prior-year quarter, but its full-year core earnings were up 45% from 2021 when changes were made and interest income from the Paycheck Protection Program. to the bank’s loan loss reserve, are excluded.

“We had a tremendous fourth quarter,” said Chairman and CEO Arnold Martines, who took over as CEO Jan. 1 from Paul Yonamine, who has retired. “It really ended the year well for us. Overall, 2022 turned out to be a banner year for CPB from a performance perspective… Our strategic pillars continue to be home ownership, small business, digital adoption and market development of Japan… and of course staying connected to the community.”

Central Pacific Financial Corp., the holding company, reported net income of $20.2 million, or 74 cents per share, beating the analyst consensus estimate of 60 cents per share. That compares with net income of $22.3 million, or 80 cents a share, in the same period a year earlier.

Net income was hit by $571,000 that the bank set aside last quarter for possible credit losses, compared to a year earlier when CPB released $7.7 million of its reserve for credit losses to its income statement. In addition, the bank generated $100,000 in income from interest and Paycheck Protection Program fees last quarter, compared to $4.7 million in the same period last year.

For the full year, CPB earnings fell 7.5% to $73.9 million, or $2.68 per share, from $79.9 million, or $2.83 per share, in 2021. However, the decline in $6 million in net income was affected by two non-core items: its loan-loss reserve and income and PPP interest fees. In 2022, the bank had $3.6 million in net interest income and PPP fees, compared with $26.4 million for all of 2021, nearly a $23 million reduction. Additionally, the bank released on its income statement just $1.3 million of its loan loss reserve in 2022 after releasing $14.6 million in 2021.

“When you normalize for a change in provision and the change in PPP, if you exclude those two lines and look at core earnings, the bank’s core earnings were up $29.1 million, or 45%, year-over-year,” the bank said. CFO. Said officer David Mori motorcycle. “We think it’s a very impressive point.”

Loans increased 8.9% to $5.56 billion from the prior-year quarter and 2.5% from the third quarter, an annualized increase of 10%.

“We have been growing at low double-digit annualized growth rates, and we anticipate some slowdown in 2023 as a result of the operating environment,” Morimoto said. “There are higher interest rates, so residential mortgage growth is obviously very subdued. We anticipate some slowdown in the national economy, although we expect the Hawaiian economy to outperform due to tourism, military and construction “.

The bank’s net interest margin, the difference between what the bank makes on loans and pays out on deposits, improved 9 basis points to 3.17% from 3.08% in the prior-year quarter. Its net interest income increased 6% to $56.3 million from $53.1 million in the prior-year quarter.

Martines also said the bank will soon begin building a new branch in Kahului to replace an existing one. The new branch, at 145 Hookele Street, is less than 2 miles from the old branch at 85 W. Kaahumanu Ave. The new branch is expected to open in mid-2024.

Central Pacific kept its quarterly dividend at 26 cents per share. It will be paid on March 15 to shareholders of record at the close of business on February 28. The bank also announced that its board of directors has authorized the repurchase of up to $25 million of its common shares.

The bank’s shares closed Tuesday down 17 cents at $20.90.

FOURTH QUARTER NET $20.2 million PRIOR YEAR NET $22.3 million