Q2 2024 Central Pacific Financial Corp Earnings Call
Good afternoon, ladies and gentlemen. Thank you for standing by, and welcome to the Central Pacific Financial Corp second quarter 2024 conference call.
Operator: and welcome to the Central Pacific Financial Corp. second quarter 2024 conference call. During today's presentation, all parties will be in a listen-only mode.
Operator: And welcome to the Central Pacific Financial Corp 2nd quarter 2024 conference call. During today's presentation, all parties will be in a listen-only mode. Following the presentation, the conference will be open for questions.
During today's presentation, all parties will be in a listen-only mode. Following the presentation, the conference will be open for questions.
Operator: This call is being recorded and will be available for replay shortly after its completion on the company's website at www.ctb.bank.
Operator: Following the presentation, the conference will be open for questions. This call is being recorded and will be available for replay shortly after its completion on the company's website at www.cpb.bank. I'd like to turn the call over to Ms. Dayna Matsumoto, Group SVP, Director, Finance & Accounting. Please go ahead.
This call is being recorded and will be available for replay shortly after its completion on the company's website at www.cpb.bank.
Dayna Matsumoto: I'd like to turn the call over to Miss Dayna Matsumoto, Group SCP Director, Finance and Accounting.
Dayna Matsumoto: I'd like to turn the call over to Ms. Dayna Matsumoto, Group SVP, Director, Finance & Accounting. Please go ahead.
Dayna Matsumoto: Please go ahead. Thank you, Jessica, and thank you all for joining us as we review the financial results of the 2nd quarter of 2024 for Central Pacific Financial Corp.
Dayna Matsumoto: Thank you, Jessica, and thank you all for joining us as we review the financial results of the second quarter of 2024 for Central Pacific Financial Corp. With me this morning are Arnold Martinez, who was recently appointed chairman of our board in addition to his role as president and chief executive officer; David Morimoto, Senior Executive Vice President and Chief Financial Officer; and Anna Hu, Executive Vice President and Chief Credit Officer. We have prepared a supplemental slide presentation that provides additional details on our release and is available in the Investor Relations section of our website at cpb.ca. During the course of today's call, management may make forward-looking statements. While we believe these statements are based on reasonable assumptions, they involve risks that may cause actual results to differ materially from those projected.
Dayna Matsumoto: Thank you, Jessica, and thank you all for joining us as we review the financial results of the second quarter of 2024 for Central Pacific Financial Corp.
Dayna Matsumoto: With me this morning are our known Martinez, who was recently appointed Chairman of our board in addition to his role as President and Chief Executive Officer. David Morimoto, Senior Executive Vice President and Chief Financial Officer, and Anna Hu, Executive Vice President and Chief Credit Officer. We have prepared a supplemental slide presentation that provides additional details on our release and is available in the Investor Relations section of our website at cpb.bank.
Speaker Change: With me this morning are Arnold Martines, who was recently appointed Chairman of our Board in addition to his role as President and Chief Executive Officer.
Speaker Change: David Morimoto, Senior Executive Vice President and Chief Financial Officer, and Anna Hu, Executive Vice President and Chief Credit Officer.
We have prepared a supplemental slide presentation that provides additional details on our release and is available in the Investor Relations section of our website at cpb.bank.
Dayna Matsumoto: During the course of today's call, management may make forward-looking statements. While we believe these statements are based on reasonable assumptions, they involve risks that may cause actual results to differ materially from those projected. For a complete discussion of the risks related to our forward-looking statements, please refer to slide 2 of our presentation.
Speaker Change: During the course of today's call, management may make forward-looking statements. While we believe these statements are based on reasonable assumptions, they involve risks that may cause actual results to differ materially from those projected.
Speaker Change: For a complete discussion of the risks related to our forward-looking statements, please refer to Slide 2 of our presentation.
Arnold Martinez: And now I'll turn the call over to our Chairman, President and CEO, Arnold Martinez. Thank you, Dana, and Aloha everyone. We appreciate your interest in Central Pacific Financial Corp, and we are pleased to share our latest updates and results with you. We had a strong 2nd quarter, highlighted by name expansion, already positive growth, and improving that charge-offs. With half the year behind us, I am pleased with the results and have a positive outlook for the rest of the year. Our team is successfully navigating the challenges of the current economic environment. While this continues to impact long growth and demand, we are seeing positive trends developing.
Dayna Matsumoto: For a complete discussion of the risks related to our forward-looking statements, please refer to slide two of our presentation. And now, I'll turn the call over to our Chairman, President, and CEO, Arnold Martines. Thank you, Dayna, and aloha, everyone.
Speaker Change: And now, I'll turn the call over to our Chairman, President, and CEO , Arnold Martinez.
Arnold D. Martines: We appreciate your interest in Central Pacific Financial Corp., and we are pleased to share our latest updates and results with you. We had a strong second quarter, highlighted by NIM expansion for Deposit Growth, improving that charge. Half the year behind us, we are pleased with the results, and have a positive outlook. Our team is successfully navigating the challenges of the current. While this continues to impact loan growth and demand, we are seeing positive trends.
Arnold Martinez: Thank you, Dayna, and aloha, everyone. We appreciate your interest in Central Pacific Financial Corp, and we are pleased to share our latest updates and results with you.
Speaker Change: We had a strong second quarter highlighted by NIM expansion, bar deposit growth, and improving net charge-offs.
Speaker Change: With half the year behind us, I am pleased with the results and have a positive outlook for the rest of the year.
Speaker Change: Our team is successfully navigating the challenges of the current economic environment.
Speaker Change: While this continues to impact loan growth and demand, we are seeing positive trends developing.
Arnold Martinez: I am also proud of the recognition we recently received by Forbes as one of America's best banks and best in-state bank for Hawaii in 2024.
Arnold D. Martines: I'm also proud of the recognition we received recently by Forbes as one of America's best banks and Bass In-State Bank for Hawaii. With that said, I'd like to provide an update on the Hawaiian Market before turning it over to my team and cover the quarter's results in. Hawaii overall is experiencing modest economic growth due to higher inflation, continued pressures on tourists, particularly the Japanese market where the exchange rate persists. Structured and Defense Spending in Hawaii are at all-time highs, helping to offset the impacts from other sectors of the economy in the month of June.
Speaker Change: I'm also proud of the recognition we recently received by Forbes as one of America's best banks and best in-state bank for Hawaii in 2024.
Arnold Martinez: With that said, I'd like to provide an update on the Hawaii market before turning it over to my team to cover the quarter's results in more detail. Hawaii overall is experiencing modest economic growth due to higher inflation and continued pressures on tourism, particularly the Japanese market where headwinds and exchange rate persist. Conversely, construction and defense spending in Hawaii are at an all-time high and helping to offset the impacts we are seeing from other sectors of the economy. In the month of June, total statewide visitor arrivals were down 1.9% from the prior year and were about 92% of pre-pandemic levels in 2019.
Speaker Change: Dayna Matsumoto, Dayna Matsumoto, Arnold Martines, Anna Hu
Speaker Change: With that said, I'd like to provide an update on the Hawaiian market before turning it over to my team to cover the quarter's results in more detail.
Speaker Change: Hawaii, overall, is experiencing modest economic growth due to higher inflation and continued pressures on tourism, particularly the Japanese market where headwinds and exchange rate persist.
Speaker Change: Conversely, unstructured and defense spending in Hawaii are at all-time highs and helping to offset the impacts we're seeing from other sectors of the economy.
Arnold D. Martines: Total statewide visitor arrivals were down 1.9% from the prior year and were about 92% of pre-pandemic levels in 2019. Visitors from Japan were up 28% from a year ago, yet remain about 50% of the same month. For the island of Maui, total visitors were about 78% of the prior year, as recovery following the wildfire continues at a slow but steady pace. Total statewide hotel occupancy in June was 76 percent, down 1.0 from a year ago, and the average daily rate of $373 was on 3.7. Hawaii's statewide seasonally adjusted unemployment rate was 2.9% in June, and it continues to outperform the national unemployment rate of 4%. Hawaii real estate values remain very strong. The Oahu median single-family home price was $1.12 million.
Speaker Change: In the month of June , total statewide visitor arrivals were down 1.9% from the prior year and were about 92% of pre-pandemic levels in 2019.
Arnold Martinez: Visitors from Japan were up 28% from a year ago, yet remained about 50% of the same month in 2019. For the island of Maui, total visitors in June were about 78% of the prior year, as recovery following the wildfires continues at a slow but steady pace. Total statewide hotel occupancy in June was 76%, down 1.2% from a year ago, with an average daily rate of $373, down 3.7% from a year ago. Hawaii's statewide recently adjusted unemployment rate was 2.9% in June and continues to outperform the national unemployment rate of 4.1%. Hawaii real estate values remained very strong.
Speaker Change: Hawaii statewide seasonally adjusted unemployment rate was two 9% in June.
Speaker Change: <unk> continues to outperform the national unemployment rate of four 1%.
Speaker Change: Hawaii real estate values remain very strong.
Arnold Martinez: The Oahu median single-family home price was 1.12 million, and the median condo sales price was 530,000 in June, reflecting year-over-year increases of 6.7% and 3.9%, respectively. Oahu sales volumes in the first half of the year were up 6.7% for single-family homes, but down 5.8% for condos compared to the prior year. Oahu's continued to move quickly, with a median of 15 days on the market.
Speaker Change: Wahoo median single family home price was 1.12 million and the median condo sales price was 530000 in June.
Arnold D. Martines: $530,000, reflecting year-over-year 6.7.. 9%. Home Sales Volume, first half of the year was up 6.7% for single-family homes and down 5.8% for condos, compared to the prior year. Overall, we remain optimistic about Hawai'i's economy. I believe the state economy will continue to grow modestly and demonstrate resilience. I'll now turn the call over to David Morimoto, our Chief Financial Officer. David.
Speaker Change: <unk> year over year increases of six 7% and.
Speaker Change: And three 9% respectively.
Speaker Change: All the sales volumes in the first half of the year were up six 7% for single family homes.
Speaker Change: But down five 8% for condos compared to the prior year.
One is continuing to move quickly with a median of 15 days on the market.
Arnold Martinez: Overall, we remain optimistic about Hawaii's economic outlook and believe the state economy will continue to grow modestly and demonstrate resiliency.
Speaker Change: Overall, we remain optimistic about Hawaii economic outlook and believe the state economy will continue to grow modestly and demonstrate resiliency.
David Morimoto: I'll now turn the call over to David Morremodel, our Chief Financial Officer.
David S. Morimoto: Thank you, Arnold. Turning to our earnings results, net income for the second quarter was $15.8 million, or $0.58 per diluted share. Return on average assets was 0.86%, return on average equity was 12.42%, and our efficiency ratio was 64.26. In the second quarter, our total loan portfolio decreased by $17.8 million, or 0.3% sequential quarter, which included a $19.2 million decrease in mainland consumer loans. Sequential quarter growth in our commercial real estate and C&I portfolios was offset by runoff in consumer and residential mortgages.
Speaker Change: I'll now turn the call over to David Morimoto, Our Chief Financial Officer, David.
David Morimoto: David. Thank you, Arnold. Turning to our earnings results, net income for the second quarter was 15.8 million dollars, or 58 cents for diluted share. Return on average assets was 0.86%, return on average equity was 12.42%, and our efficiency ratio was 64.26%. In the second quarter, our total loan portfolio decreased by 17.8 million dollars or 0.3% sequential quarter, which included a 19.2 million dollar decrease in mainland consumer loans. Equential quarter growth in our commercial real estate and CNI portfolios was offset by runoff in consumer and residential mortgage loans. The pace of the net decline in total loans is slowing, and we expect modest loan growth in the second half of the year.
David S. Morimoto: Thank you Arnold.
Turning to our earnings result, net income for the second quarter was $15 8 million or <unk> 58 per diluted share.
David S. Morimoto: Return on average assets was <unk>, 86%.
David S. Morimoto: Return on average equity was 12.42%.
David S. Morimoto: And our efficiency ratio was 64.26%.
Speaker Change: In the second quarter, our total loan portfolio decreased by $17 8 million or 3% sequential quarter, which included a $19 $2 million decrease in mainland consumer loans.
Speaker Change: Sequential quarter growth in our commercial real estate and C&I portfolios was offset by run off in consumer and residential mortgage loans.
David S. Morimoto: The pace of the net decline in total loans is slowing, and we expect modest loan growth in the second half of the year. Our total deposit portfolio decreased by $36.4 million, or 0.5% sequential quarter, which included a $41.6 million decrease in high-cost government-timed deposits. However, core deposits grew during the quarter by $16.7 million. Debt interest income for the second quarter was $51.9 million, an increase by $1.7 million from the prior quarter.
Speaker Change: The pace of the net decline in total loans is slowing and we expect modest loan growth in the second half of the year.
David Morimoto: Our total deposit portfolio decreased by 36.4 million dollars or 0.5% sequential quarter. quarter, which included a $41.6 million decrease in high cost government time deposit. Quarter deposits grew during the quarter by $16.7 million. That interest income for the second quarter was $51.9 million, an increase of $1.7 million from the prior quarter. The net interest margin was 2.97% in the second quarter, of 14 basis points sequential quarter. Net interest income and their expansion was driven by the increase in yields on our investment securities and loan portfolios, while our cost of funds remained relatively stable. Interest income on our investment securities during the quarter included $0.9 million from our swap on $115 million of municipal securities that started on March 31st of this year and has a five-year term.
Speaker Change: Our total deposit portfolio decreased by $36 $4 million or 0.5% sequential quarter.
Speaker Change: Which included a 41 $6 million decrease in high cost government time deposits.
Speaker Change: Core deposits grew during the quarter by $16 7 million.
Speaker Change: Net interest income for the second quarter was $51 $9 million, an increase by $1 7 million from the prior quarter.
Speaker Change: The net interest margin was 297% in the second quarter up 14 basis points sequential quarter.
David S. Morimoto: The net interest margin was 2.97% in the second quarter, up 14 basis points sequentially. Net interest income and NIM expansion were driven by the increase in yields on our investment securities and loan portfolios, while our cost of funds remained relatively stable. Interest income on investment securities during the quarter included $0.9 million from our swap on $115 million of municipal securities that started on March 31st of this year and has a five-year term.
Speaker Change: Net interest income and NIM expansion was driven by the increase in yields on our investment securities and loan portfolios.
Speaker Change: Our cost of funds remained relatively stable.
Speaker Change: Interest income on investment securities during the quarter included <unk>.
Speaker Change: $9 million from our swap.
Speaker Change: On a $115 million of municipal Securities that started on March 31 of this year and has a five year term.
David Morimoto: Our total cost of deposits remained relatively flat at 1.33%, and our cycle-to-date total deposit repricing beta also remained at 24%. Second quarter, other operating income increased to $12.1 million due to stronger mortgage banking and investment services income. Other operating expense totaled $41.2 million, an increase from $40.6 million in the prior quarter primarily due to higher salaries and benefits expense. Our effective tax rate was 23.4%, and we believe it will continue to remain in the 23 to 25% range. We did not repurchase any shares in the second quarter.
Speaker Change: Our total cost of deposits remained relatively flat at 133%.
David S. Morimoto: Our total costs of deposits remain relatively flat at 1.33%, and our cycle-to-date total deposit repricing beta also remains that 24. In the second quarter, other operating income increased to $12.1 million due to stronger mortgage banking and investment services. Our lower operating expenses totaled $41.2 million, an increase from $40.6 million in the prior quarter, primarily due to higher salaries and benefits. Our effective tax rate was 23.4%, and we believe it will continue to remain in the 23-25% range. We did not repurchase any shares in the second quarter.
Speaker Change: And our cycle to date total deposit repricing beta.
Speaker Change: Also remained at 24%.
Speaker Change: Second quarter other operating income increased to $12 $1 million due to stronger mortgage banking and investment services income.
Speaker Change: Other operating expense totaled $41 $2 million, an increase from $46 million in the prior quarter, primarily due to higher salaries and benefits expense.
Speaker Change: Our effective tax rate was 23, 4% and we believe it will continue to remain in the 23% to 25% range.
Speaker Change: We did not repurchase any shares in the second quarter.
David Morimoto: Our board of directors declared a quarterly cash dividend of 26 cents per share, which will be payable on September 16th to shareholders of record on August 30th.
David S. Morimoto: Our Board of Directors declared a quarterly cash dividend of $0.26 per share, which will be payable on September 16, to shareholders of record on August 30. I'll now turn the call over to Anna Hu, our Chief Credit Officer. Thank you, David. Our asset quality remains strong in the second quarter, and our lending and credit risk strategy continues to be based on diversification, consistent underwriting standards, strong collateral, and a focus on stable segments and industries that we have solid expertise in.
Speaker Change: Our board of directors declared a quarterly cash dividend of <unk> 26 cents per share, which will be payable on September 16th.
Speaker Change: To shareholders of record on August 30th.
Anna Hu: I'll now turn the call over to Anna, who are chief credit officer.
Speaker Change: I'll now turn the call over to Adam <unk>, Our Chief Credit Officer Anna.
Anna Hu: Anna. Thank you, David. Our asset quality remained strong in the second quarter, and our lending and credit risk strategy continues to be based on diversification, consistent underwriting standards, strong collateral, and a focus on stable segments and industries that we have solid expertise in. Nearly 80% of the loan portfolio is real estate secured, with a weighted average loan to value of 63%. Our commercial real estate office and retail exposure remains low at 3.2% and 5.5% of total loans, respectively. The office portfolio has a weighted average loan to value of 55% and 69 weighted average months to maturity.
Adam: Thank you David our asset quality remains strong in the second quarter, and our lending and credit risk strategy continues to be based on diversification.
Adam: Distant underwriting standard strong collateral and a focus on stable segments and industries that we have solid expertise in.
David S. Morimoto: Nearly 80% of the loan portfolio is real estate secured with a weighted average loan-to-value of 63%. Our commercial real estate office and retail exposure remains low at 3.2% and 5.5% of total loans, respectively. The office portfolio has a weighted average loan-to-value of 55% and 69 weighted average months to maturity.
Anna M. Hu: Nearly 80% of the loan portfolio is real estate secured with a weighted average loan to value of 63%.
Anna M. Hu: Our commercial real estate office and retail exposure remains low at three 2% and five 5% of total loans respectively.
Anna M. Hu: The office portfolio has a weighted average loan to value at 55% and 69 weighted average months to maturity.
Anna Hu: The retail portfolio has a weighted average loan to value of 65% and 65 weighted average months to maturity. All of our Maui-related loan deferrals have returned to regular payment status, and we are not anticipating any significant issues to cause us concern regarding our Maui portfolio. Non-performing assets for $10.3 million or 0.14% of total assets, which was relatively flat from the prior quarter. Criticized loans were $35.3 million, or 0.66% of total loans, a slight increase from the prior quarter, but remains at historically low levels. Total net charge-offs were $3.8 million for the second quarter, or 0.28% of average loans on an analyzed basis.
Anna M. Hu: The retail portfolio has a weighted average loan-to-value of 65% and 65 weighted average months to maturity. All of our Maui-related loan deferrals have returned to regular payment status, and we are not anticipating any significant issues to cause us concern regarding our Maui portfolio. Non-performing assets were $10.3 million, or 0.14% of total assets, which was relatively flat from the prior quarter. Criticized loans were $35.3 million, or 0.66% of total loans, a slight increase from the prior quarter, but remain at historically low levels.
Anna M. Hu: The retail portfolio has a weighted average loan to value of 65% and 65 weighted average months to maturity.
Anna M. Hu: All of our Maui related loan deferrals have returned to regular payment status and we are not anticipating any significant issues to cause us concern regarding our Maui portfolio.
Anna M. Hu: Nonperforming assets were $10 $3 million or 0.14% of total assets, which was relatively flat from the prior quarter.
Anna M. Hu: Criticized loans were $35 $3 million or 0.66% of total loans.
Anna M. Hu: The increase from the prior quarter, but remains at historically low levels.
Anna M. Hu: Total net charge-offs were $3.8 million for the second quarter, or 0.28% of average loans on an annualized basis. This reflects a six basis points decrease from the previous quarter. Our allowance for credit losses was $62.2 million, or 1.16% of outstanding loans. In the second quarter, our provision for credit losses on loans declined to $2.4 million due to a decline in net charge-offs.
Anna M. Hu: Total net charge offs were $3 $8 million for the second quarter or 0.28% of average loans on an annualized basis.
Anna Hu: This reflects a six basis points decrease from the previous quarter. Our allowance for credit losses was $62.2 million, or 1.16% of outstanding loans. In the second quarter, our provision for credit losses on loans declined to $2.4 million due to a decline in net charge-offs. Additionally, we recorded a $0.2 million credit to the provision for unfunded commitments for a total provision for credit losses of $2.2 million during the quarter.
Anna M. Hu: This reflects a six basis points decrease from the previous quarter.
Anna M. Hu: Our allowance for credit losses was $62 $2 million or 116% of outstanding loans.
Anna M. Hu: In the second quarter, our provision for credit losses on loans declined to $2 $4 million due to a decline in net charge offs.
Anna M. Hu: Additionally, we recorded a 0.2 million dollar credit to the provision for unfunded commitments for a total provision for credit losses of $2 $2 million during the quarter.
Anna Hu: Overall, our credit quality remains strong, and we continue to monitor the economic environment closely.
Anna M. Hu: Additionally, we recorded a $0.2 million credit to the provision for unfunded commitments for a total provision for credit losses of $2.2 million during the quarter. Overall, our credit quality remains strong, and we continue to monitor the economic environment.
Anna M. Hu: Overall, our credit quality remains strong and we continue to monitor the economic environment closely now I'll turn the call back to Arnold.
Arnold Martinez: Now, I'll turn the call back to Arnold. Thank you, Anna. In summary, we had a strong second quarter. Despite market uncertainties that persist, we have a positive outlook for the rest of the year, and we continue to focus on executing on our core strategies while remaining nimble. I want to thank you for your continued support and confidence in our organization. At this time, we will be happy to address any questions you may have. Thank you. Thank you so much.
Anna M. Hu: Arnaud.
Arnold D. Martines: Thank you, Anna. In summary, we had a strong second quarter. Despite market uncertainties that persist, we have a positive outlook for the rest of the year, and we continue to focus on executing on our core strategy while remaining nimble. I want to thank you for your continued support and confidence in our organization. At this time, we will be happy to address any questions. Thank you so much. To ask a question, please press star and then the number one on your telephone keypad.
Arnaud: Thank you Anna in summary, we had a strong second quarter.
Arnaud: Despite market uncertainties persist we have a positive outlook for the rest of the year and we continue to focus on executing on our core strategies, while remaining nimble.
Arnold: I want to thank you for your continued support and confidence in our organization.
Speaker Change: At this time, we will be happy to address any questions. You may have thank you.
Speaker Change: Thank you so much to ask a question. Please press Star then the number one on your telephone keypad and if he would like to withdraw your question. Please press star one again.
Operator: To ask a question, please press star, then the number one on your telephone keypad. And if you would like to withdraw your question, please press star one again.
David Feaster: Your first question comes from the line of David Feister with Raymond James.
Operator: And if you would like to withdraw your question, please press star one. Your first question comes from the line of David Feaster with Raymond James. David, your line is up. All right, good morning, everybody.
Steven <unk>: Your first question comes from the line of Steven <unk> with Raymond James.
Arnold Martinez: David, your line is open. Hey, good morning, everybody. Good morning, David. I wanted to follow up on kind of the Maui side. You know, we've got the anniversary of the wildfires coming up. I'm curious maybe where we are just from your standpoint in terms of the rebuild in the local economy. It's great to hear that we're not expecting any issues as loans come off to furl. That's extremely encouraging. But I'm just curious: what are you seeing there? And you're just, you know, you're posted a local economy in that market.
Steven <unk>: David Your line is open.
Steven <unk>: Hi, good morning, everybody.
Operator: Good morning, David. I wanted to follow up on kind of the Maui side. You know, we've got the anniversary of the wildfires coming up, and I'm curious maybe where we are from your standpoint in terms of the rebuild and the local economy. It's great to hear that we're not expecting any issues as loans come off deferral. That's extremely encouraging. But I'm just curious, what are you seeing there, and what is your pulse on the local economy in that market? Yes, so David, this is Arnold.
Steven <unk>: Morning, David.
Steven <unk>: I wanted to follow up on kind of the the Maui side, you know we've got the anniversary of the wildfires coming up I'm curious, maybe where are we are just from your standpoint in terms of the rebuild in the local economy. It's great to hear that we're not expecting any issues as loans come off deferral, that's extremely encouraging but I'm just.
Speaker Change: Curious what are you seeing there and your just your pulse of the local economy in that market.
Arnold Martinez: Yeah, so David, this is Arnold. You know, as I mentioned earlier, you know, the visitor arrivals, the visitor accounts are still at about 78%. But it is improving in a steady way. I think that the progress with regard to the things that have to be determined to move forward in a more deliberate way is coming together. You know, we're starting to see some homes being rebuilt. And I'm pretty optimistic that the community is coming together. And while, you know, there's still a lot of emotions, and obviously a lot of folks were impacted. People are starting to come together, and we're optimistic that we'll start to see forward movement in the months and within the year ahead.
Speaker Change: Yeah. So David this is Arnold as I mentioned earlier.
Arnold D. Martines: As I mentioned earlier, the visitor arrivals and visitor accounts are still at about 78%, but they are improving in a steady way. I think that progress with regard to the things that have to be determined to move forward in a more deliberate way is coming together. We're starting to see some homes being rebuilt, and I'm pretty optimistic that the community is coming together, while, you know, there's still a lot of emotions, and obviously a lot of folks were impacted. But people are starting to come together, and we're optimistic that we will start to see forward movement in the months and within the year ahead. That's great. And then maybe just touching on the deposit side.
Speaker Change: The visitor arrivals visitor accounts are still at about 78%, but.
Speaker Change: It is it is improving.
Steady way.
Speaker Change: I think that the.
Speaker Change: <unk>.
Speaker Change: The progress with regard to the things that have to be determined to move forward in a more.
Speaker Change: Deliberate way.
Speaker Change: Is coming together.
Speaker Change: We're starting to see.
Speaker Change: Some homes being rebuilt.
Speaker Change: And im pretty optimistic that the.
Speaker Change: The community is coming together and while.
Speaker Change: There's still a lot of emotions and obviously a lot of folks were impacted.
Speaker Change: People are starting to come together and we're optimistic.
Speaker Change: That will.
Speaker Change: We will start to see.
Speaker Change: Forward movement in the months and within the year Youre ahead.
David Feaster: That's great.
Arnold D. Martines: I mean, the deposit cost control, and the core deposit growth has been great. I mean, it's really impressive to just see one basis point of deposit cost growth. Curious, how do you think about deposits and the deposit growth initiatives? Where are you having success, and what's driving that?
Speaker Change: That's great.
David Feaster: Maybe just touching on the deposit side, the deposit cost control, the core deposit growth has been great. It's really impressive to just see one basis point of deposit cost growth.
Speaker Change: And then maybe just touching on the deposit side I mean, the deposit cost control. The core deposit growth has been great. I mean, it's really impressive to just one basis point of deposit cost growth I'm curious how do you think about deposits and the deposit growth initiatives, where are you having success and what's driving that and just where are you seeing that.
David Morimoto: How do you think about deposits and the deposit growth initiatives? Where are you having success and what's driving that, and just where are you seeing the cost of new deposits? I mean, basically trying to figure out, do you think funding costs can stabilize here and continue to grow, or are we more focused on optimizing the base just given the slower loan growth profile that we just talked about?
Arnold D. Martines: And just where are you seeing the cost of new deposits? I mean, basically trying to figure out, do you think funding costs can stabilize here and continue to grow? Or are we more focused on optimizing the base, just given the slower loan growth profile that we just talked about? So David, I'll start and then I'll turn it over to David Morimoto.
Speaker Change: Cost of new deposits I mean, basically trying to figure out do you think funding cost can stabilize year end and continue to grow are we more focused on optimizing.
Speaker Change: The base just given the slower loan growth profile, we just talked about.
Arnold Martinez: David, I'll start, and then I'll turn it over to David Morimoto. Our team has done a really good job with regard to just focusing on our customers, focusing on our core business. Small business market has been a real strength of ours and we'll be continuing to see, because of the efforts of our employees, just a steady growth of new customers and obviously what follows is deposit balances.
Speaker Change: So David I'll start and then I'll turn it over to David Maura modal.
Arnold D. Martines: Our team has done a really good job with regard to just focusing on our customers, focusing on our core business. You know, the small business market has been a real strength of ours, and we will continue to see, because of the efforts of our employees, just a steady growth of new customers, and obviously, what follows is deposit balances. But let me ask David to speak with regard to cost. Hey, David.
Speaker Change: Our team has done a really good job with.
Speaker Change: With regard to just focusing on our customers focusing on our core business.
David: Small business.
Speaker Change: Market has been a real strength of ours and we continue to see.
Speaker Change: Because of the efforts of our our employees just a steady.
Speaker Change: Growth of new customers and obviously.
Speaker Change: What follows is deposit balances, but let me, let me ask David to speak with regard to cost.
David Morimoto: But let me ask David to speak with regard to cost. David, yeah, I think, like you mentioned, we were very pleased with the second quarter results. The team did a great job of staying close to their customers and building new relationships. So we did see stabilization, especially in non-interest bearing DDA. The non-interest bearing DDA declined by 1 million sequential quarter, and obviously we're hoping that we continue to have that great success and then we start growing core deposits going forward.
David S. Morimoto: Yeah, I think, you know, like, you mentioned, we were very pleased with the second quarter results. The team did a great job of staying close to their customers and building new relationships. So we did see stabilization, especially in non-interest-bearing DDA. Non-interest-bearing DDA declined by 1 million sequential quarter.
David: Hey, David.
David: Yes, I think.
David: Like you mentioned, we're very pleased with the second quarter results.
David: Team did a great job of staying close to their customers and building new relationships.
David: So we did see stabilization, especially in noninterest bearing DDA.
Speaker Change: Noninterest bearing DDA declined by $1 million sequential quarter.
David S. Morimoto: And obviously, we're hoping that we continue to have that great success and that we start growing core deposits going forward. And I guess kind of thinking through that, would you, just trying to think of the kind of size of the balance sheet, right? I mean, to the extent that we do get core deposit growth, would you expect to continue to optimize the funding base and maybe let some of the CDs roll off?
Speaker Change: Obviously, we're hoping that we continue to have that great success, and then we start growing.
Speaker Change: Core deposits going forward.
David Morimoto: And I guess kind of thinking through that, I'm just trying to think of the kind of the size of the balance sheet, right? I mean, to the extent that we do get core deposit growth, would you expect to continue to optimize the funding base and maybe let some of the CDs roll off, or would you expect, basically, kind of have a stable kind of asset base and improving profitability, or would you expect the balance sheet to continue to grow? It's kind of curious how you think about that because that ultimately plays into the margin question as well.
Speaker Change: And I guess kind of kind of thinking through that.
Speaker Change: Would you just trying to think of the kind of the size of the balance sheet right I mean to the extent that we do get core deposit growth would you expect to continue to optimize the funding base and maybe let some of the Cds roll off or would you expect.
David S. Morimoto: Or would you expect to basically kind of have a stable kind of asset base and improving profitability? Or would you expect the balance sheet to continue to grow? Just kind of curious how you think about that, because that ultimately plays into the margin question as well.
Speaker Change: Basically you kind of have a stable kind of <unk>.
Speaker Change: Asset base and improving.
Speaker Change: Improving profitability or would you expect the balance sheet to continue to grow just kind of curious how you think about that because that ultimately plays into the margin question as well.
David Morimoto: Yeah, yeah, sure, David. I think the keys to the balance sheet size are core deposit growth and good risk-reward loan opportunities. I think we're getting to the point where things are lining up. The stars are lining up where we could see positive progress on both of those fronts. And if we do, that will allow us to grow the balance sheet footings. I think we've done a lot on the optimization of the funding base. And I think if we start seeing a good better risk reward on the loan opportunities, we could see the balance sheet grow.
David S. Morimoto: You know, I think the keys to balance sheet size are core deposit growth and good risk-reward loan opportunities. You know, I think we're getting to the point where, you know, things are lining up, the stars are lining up where we could see, you know, positive progress on both of those fronts. And if we do, that will allow us to grow the balance sheet. I think we've done a lot with the optimization of the funding base, and I think if we start seeing a good, better risk-reward on the loan opportunity side, we could see the balance sheet grow. It's not going to grow by a lot, but there will be opportunities.
David: Yes sure David.
Speaker Change: I think the keys to the balance sheet size are.
Speaker Change: Core deposit growth.
Speaker Change: Good risk reward of loan opportunities.
Speaker Change: I think we're getting to the point where.
Speaker Change: Things are lining up the stars are lining up where we could see.
Our positive progress on both of those fronts and if we do that.
That will allow us to grow the.
Speaker Change: The balance sheet balance sheet footings I.
Speaker Change: I think we've done a lot on the optimization of the funding base.
Speaker Change: And I think if we start seeing.
Speaker Change: Good better risk reward on the loan opportunity side, we could see the balance sheet grow.
David Morimoto: It's not going to grow by a lot, but there would be opportunities.
Speaker Change: Socrates.
Speaker Change: Bye bye a lot, but there would be opportunities to grow it.
Speaker Change: Okay. That's helpful. Thanks, everybody.
David: Thanks, David.
Andrew Liesch: And your next question comes from the line of Andrew Liesch with Piper Sandler. Andrew, your line is open. Thanks. Good morning, everyone. This question on the long growth here. Good to see an eye on the mainland. I'm curious what was behind that.
Operator: Okay, that's helpful. Thanks, everybody. And your next question comes from the line of Andrew Liesch with Piper Sandler. Andrew, your line is open. Thanks. Good morning, everyone.
Speaker Change: And your next question comes from the line of Andrew Rice with Piper Sandler.
Speaker Change: Andrew Your line is open.
Operator: Just a question on the loan growth here. Good C&I on the mainland. I'm curious what was behind that?
Andrew Brian Liesch: Thanks, Good morning, everyone.
Andrew Brian Liesch: Just a question on the loan growth here.
Andrew Brian Liesch: Good C&I on the mainland I'm curious, what what was behind that.
Anna Hu: Anna, do you want to answer the question? Sure.
Anna M. Hu: Anna, do you want to answer the question? Hi Andrew, this is Anna. So we primarily saw growth in our SNCC portfolio. We had the opportunity to participate in a new name as well as top off on a couple of existing SNCC credits that we were already in. So that's primarily what drove our second quarter growth on the C&I book on the mainland.
Andrew Brian Liesch: Anna you want to answer the question.
Anna M. Hu: Any other opportunities for that to continue, or do you think the portfolio maybe stabilizes from here? We continue to monitor and look at opportunities, and would certainly say that as it presents itself, we would be interested. Gotcha. Very helpful. And then, I guess, similarly, commercial real estate in Hawaii. What was the driver behind that, and how is that pipeline shaping up here for the rest of the year? Hi Andrew, this is Anna again.
Anna Hu: Hi, Andrew. This is Anna. So we primarily saw the growth in our SNCC portfolio. We had the opportunity to participate in a new name as well as top off on a couple of existing SNCC credits that we were already in. So that's primarily what drove our second quarter growth on the CNI book on the mainland. Got it.
Andrew Brian Liesch: Sure Hi, Andrew this is Donna.
Donna: We primarily you saw the growth in our snacking portfolio and we have the opportunity to participate in a new name as well as top off on a couple of existing <unk>.
Credits that we were already in.
Speaker Change: So that's primarily what drove our second quarter growth on the C&I book on the mainland.
Speaker Change: Got it and any other opportunities for that to continue or do you think the portfolio maybe stabilizes from here.
Anna Hu: Any other opportunities for that to continue, or do you think the portfolio may be stabilizes from here? We continue to monitor and look at opportunities, and would certainly say that, as it presents itself, we would be interested. Gotcha. Very helpful.
Speaker Change: We continue to monitor and look at opportunities I would certainly say that as it presents itself we would be interested.
Speaker Change: Got you very helpful. And then I guess similarly, the commercial real estate in Hawaii.
Andrew Liesch: And then I guess similarly the commercial real estate in Hawaii.
Anna Hu: What was the driver behind that, and how was that pipeline shaping up here for the rest of the year? Hi, Andrew. This is Anna again for commercial real estate in Hawaii. We had a couple of commercial real estate transactions that we closed on during the second quarter. And I would say from a pipeline standpoint, we have a good pipeline that we're looking at working through for the remainder of the year.
Speaker Change: What was the driver behind that and how is that pipeline shaping up here for the rest of the year.
Anna M. Hu: For commercial real estate in Hawaii, we had a couple of transactions that we closed on during the second quarter. And I would say from a pipeline standpoint, we have a good pipeline that we're looking at working through for the remainder of the year. Great. Any expected payoffs on any of the portfolios that might hinder the pace of growth?
Speaker Change: Hi, Andrew this is Alan again.
Alan: Commercial real estate and Hawaii, we had a couple of.
Alan: Commercial real estate transactions that we closed on during the second quarter and I would say from a pipeline standpoint, we have a good pipeline that we're looking at are working through for the remainder of the year.
Anna Hu: Great. Any expected payoffs on any of the portfolios that might enter the pace of growth? Perhaps on the construction side, that might be a little higher from a payoff perspective, just kind of forecast what the net pace might be here. Yeah, we are expecting a few payoffs here and there in the construction book as well as the commercial real estate. But we will be looking to try to fill that up and replace. Gotcha.
Alan: Great.
Speaker Change: Expected payoffs on any of the portfolios that might.
Speaker Change: Andrew the pace of growth.
Anna M. Hu: Perhaps on the construction side, that might be a little higher from a payoff perspective, just kind of forecasting what the net pace might be here. Yeah, we are expecting a few payoffs here and there in the construction book as well as the commercial real estate, but we will be looking to try to fill that up and replace it. Gotcha. All right.
Andrew Brian Liesch: Perhaps on the on the construction side that might be a little higher from a payout perspective, just kind of trying to forecast what the net pace might be here.
Speaker Change: Yes, we are expecting a few payoffs here and there in the construction book as well as the commercial real estate, but we will be looking to try to fill that up and replace.
Speaker Change: Gotcha, Alright very helpful.
Operator: Very helpful. And then, David, on the margin, obviously some good expansion here, and, as we've heard, some good success on the core deposit front. I wouldn't expect to see the margin rise this much again, but how are you thinking about the margin here going into the second half of the year, especially now that the swap is benefiting it? Yeah, sure.
Andrew Liesch: Very helpful.
David Morimoto: And then David on the margin, obviously some good expansion here. And as we've heard some good success on the court of posit front, I wouldn't expect to see the margin rise this much again.
Speaker Change: And then David on the margin obviously, some good expansion here.
Speaker Change: And as we've heard some good success on the core deposit front.
David: I wouldn't expect to see the margin rise this much again, but I mean, how are you thinking about the margin here going into the second half of the year.
David Morimoto: But I mean, how are you thinking about the margin here going into the second half of the year, especially now that the swap is benefiting it? Yeah, sure. And I think the way to look at the net interest margin forecast is if you break down the 14 basis points sequential quarter increase that we saw in the second quarter, roughly six basis points of that was organic. Now that was a result of interest-earning asset repricing outpacing interest-bearing liability. So six basis points organic, five basis points was related to the interest rate swap, and three basis points was related to reduction of excess balance sheet liquidity.
Speaker Change: Especially now that the swap is benefiting it.
David S. Morimoto: Andrew, I think the way to look at the net interest margin forecast is if you break down the 14 basis points sequential quarterly increase that we saw in the second quarter, roughly six basis points of that was organic. Now that was a result of interest earning asset repricing outpacing interest bearing liabilities. So six basis points were organic, five basis points were related to the interest rate swap, and three basis points were related to the reduction of excess balance sheet liquidity.
Speaker Change: Yes, sure Andrew I think the way way to look at net interest margin.
Speaker Change: Forecast as if you breakdown the 14 basis points sequential quarter increase that we saw in the second quarter.
Speaker Change: Roughly six basis points of that was organic now that was a result of it.
Speaker Change: Interest, earning asset repricing outpacing.
Speaker Change: Just bearing liabilities, so six basis points organic five basis points was related to the interest rate swap.
Speaker Change: And three basis points was related to reduction of excess balance sheet liquidity.
David Morimoto: And as I said, the reduction of balance sheet liquidity is kind of nearing the end, and then the swap is just going to be in our net interest margin going forward. But it's really that six basis points, and how much we can continue that going forward. So right now the net interest margin guidance for the next couple of quarters is three percent to three. 2010. Gotcha.
David S. Morimoto: As I said, the reduction in balance sheet liquidity is kind of nearing the end, and then the swap is just going to be in our, you know, net interest margin going forward. So it's really that six basis points and how much we can continue that going forward. So right now, the net interest margin guidance for the next couple quarters is 3 percent to 3.2. Gotcha.
Speaker Change: As I said the.
Our reduction of balance sheet liquidity is kind of nearing the end.
Speaker Change: The swap is just whether it'd be in our.
Speaker Change: Net interest margin going forward. So it's really about six basis points and how much. We can continue that going forward. So right now the net interest margin guidance for the next couple of quarters as well.
Speaker Change: 3% to $3 10.
David S. Morimoto: Does that incorporate any rate cuts on, I guess, how do you think the margin will react to a rate cut? With some of the movements that and some of the shifting that you've done over the last couple of years, how do you think the margin will react to a rate cut? Yeah, so our forecast for the remainder of this year incorporates two 25 basis point cuts, 25 basis point cuts in September and December. So that is incorporated into our 3 to 310 guidance.
Speaker Change: Got you does that incorporate any rate cuts and I guess, how what's some of the movements that.
David Morimoto: Does that incorporate any rate cuts? And I guess how with some of the movements that in some of the Pacific that you've done over the last couple of years, how do you think that the marginal reactor rate cuts? Yeah, so our forecast for the remainder of this year incorporates two 25 basis points cuts, 25 basis point cuts in September and December. So that is incorporated into our that three to three 10 guidance. As we've mentioned before, our net interest margin, our interest rate risk is relatively well matched. The balance sheet is relatively well matched. We do believe that there would be some opportunity for benefit from bad interest rate cuts for the back half of the year and into 2025.
Speaker Change: And some of the shifting that you've done over the last couple of years. How do you think the margin will react to a rate cut.
Speaker Change: Yes, so our forecast for the remainder of this year incorporates 225 basis points cut 25 basis point cuts in September and December So that is incorporated into our three to $3 10 guidance.
David S. Morimoto: As we've mentioned before, our net interest margin, our interest rate risk is relatively well matched. The balance sheet is relatively well matched. We do believe that there would be some opportunity for benefit from the balance sheet if the Fed interest rate cuts toward the back half of the year and into 2025. But again, we're not, you know, overly asset sensitive or liability sensitive.
Speaker Change: As we've mentioned before our net interest margin our interest rate risk is relatively well matched the balance sheet is relatively well matched.
Speaker Change: We do believe that there would be some opportunity for benefit from.
Speaker Change: Fed interest rate cuts.
Speaker Change: The back half of the year and into 2025, but again, we're not overly asset sensitive or liability sensitive so.
David Morimoto: But again, we're not overly asset sensitive or liability sensitive. So the rate cuts will help, but it's not a material mover. I think if you look at our range on our net interest margin over the last three, four years, it's probably in the 330; that the high end is probably in the 330.
David S. Morimoto: So, the rate cuts will help, but they're not a material mover. I think if you look at our range on our net interest margin over the last three, four years, it's probably in the 330s. The high end is probably in the 330s, so that's probably the upside for the foreseeable future.
Speaker Change: The rate cuts will help but it's not a material mover.
Speaker Change: Think if you look at our range on our net interest margin over the last three four years, it's probably in the 330.
Speaker Change: The high end is probably in the 330, so that's probably the upside.
David Morimoto: So that's probably the upside for the foreseeable future. Got it. That's very helpful.
Speaker Change: The foreseeable future.
David S. Morimoto: Got it. That's very helpful. And just shifting to the non-interest income side, looks like you have some success there on mortgage banking. Was there any MSR right up there, or was that a true gain on sale number that we should be looking at? Yeah, that was a true gain on sale. We did have better origination volume in the second quarter. Things got better in the second quarter relative to the first, but that was a good result overall.
Speaker Change: Got it that's very helpful.
David Morimoto: Intercepting to the non-interesting side looks like we have some success there on mortgage banking. Was there any MSR right up there, or was that a true gain on sale member that we should be looking at? Yeah, that was a true gain on sale. We did have better origination volume in the second quarter. Things got better in the second quarter relative to the first quarter. But that was a good result there. And then the other driver of the sequential quarter increase was in our retail investment sales area. That area had a good quarter. And that's expected to likely continue in the back half of the year.
Speaker Change: Turning to the noninterest income side.
Speaker Change: You had some success there on mortgage banking was there any MSR write up there or was that a true gain on sale number that we should be looking at.
Speaker Change: Yes that was a true gain on sale, we did have better origination volume.
Speaker Change: In the second quarter things things got better in the second quarter relative to the first quarter.
Speaker Change: But that was a good good results there and then the other driver of the sequential quarter increase was in our.
David S. Morimoto: And then the other driver of the sequential quarter increase was in our retail investment sales, that area had a good quarter, and is expected to likely continue in the back. Great. That's some good color.
Speaker Change: Our retail investment sales area that area had a good quarter and thats expected to likely continue in the back half of the year.
Andrew Liesch: Great. That's a good color. Thank you so much for taking the question. I'll step back. Thanks, Andrew. Thank you.
Speaker Change: Great.
Operator: Thank you so much for taking the questions. I'll step back. Thanks, Andrew. Go to Beadaholique.com for all of your beading supplies needs!
Speaker Change: That's some good color. Thank you so much for taking the questions I'll step back.
Andrew Brian Liesch: Thanks, Andrew.
Andrew Rice: Okay.
Speaker Change: Thank you I just want to remind folks if you would like to ask a question simply press Star then the number one on your telephone keypad to get your question. Thank you.
Operator: I just want to remind folks, if you would like to ask a question, simply press star and the number one on your telephone keypad to get your question into the queue. Our next question comes from the line of David Easter with Raymond James. David, you're live.
Operator: I just want to remind folks if you would like to ask a question, simply press stars on the number one on your telephone keypad to get your question into the queue.
David Easter: Our next question comes from the line of David Easter with Raymond James.
Speaker Change: Our next question comes from the line of David Easter with Raymond James.
David Easter: David, you're lined up. Thanks. Thanks for letting me take a couple more. Maybe just touching on credit. First, I guess on the consumer side, curious what you're thinking there and what you're seeing. Seems like things have improved, and then just broadly what you're seeing on the credit front. Obviously, we've got a really low level of MBAs and conservative underwriting.
Operator: Hey guys, hi. Thanks for letting me take a couple more.
Speaker Change: David Your line.
Speaker Change: Hi.
David Pipkin Feaster: Thanks for thanks for let me take a couple more.
Anna M. Hu: Maybe just touching on credit, you know, first, I guess, on the consumer side, curious what you're thinking there and what you're seeing. Seems like things have improved. And then just broadly, what you're seeing on the credit front, obviously, we've got a really low level of MPAs and conservative underwriting. But what you're watching closely, you know, just any trends that you're seeing and thoughts on managing the credit book going forward. Hi David. This is Anna.
David Pipkin Feaster: Maybe just touching on credit.
David Pipkin Feaster: First I guess on the consumer side curious, what youre thinking there and what Youre seeing it seems like things have.
David Pipkin Feaster: Improved and then just broadly.
What youre seeing on the on the credit front, obviously, you've got a really low level of NPA is but.
Speaker Change: Conservative underwriting, but whats you are watching closely.
Anna Hu: But what you're watching closely, just any trends that you're seeing in thoughts on managing the credit book going forward.
Speaker Change: Just any trends that youre seeing in thoughts on managing the credit book going forward.
Anna Hu: Hi, David. This is Anna. So, we continue to monitor really the consumer book. Our overall asset quality within our C and I CRE book remains very strong. So it continues to be consumer. We continue to monitor here locally as well as on the mainland. But our outlook is that we are anticipating to look at opportunities to start picking up on consumers. again. Okay, that's great.
Speaker Change: Hi, David This is Donna.
Anna M. Hu: So we continue to monitor, really, the consumer book. Our overall asset quality within our CNI, and CRE book remains very strong. So it continues to be consumer. We continue to monitor here locally, as well as on the mainland.
Donna: We continue to monitor really the consumer book, our overall asset quality.
Donna: Within our C&I CRE book remains very strong.
Continues to be consumer we continue to monitor here locally as well as on the mainland.
Anna M. Hu: But our outlook is that we are anticipating to look at opportunities to start picking up on consumers again. Okay, that's great. And then maybe just kind of going back to the margin question a little bit, you know, it's great to see the increase in loan yields. Could you just touch a bit on the repricing in the loan book that you're expecting in the next, you know, 12 to 24 months where roll-off rates are on those maturing loans and kind of how new loan yields are trending?
Our outlook is that we are anticipating to look at opportunities to start picking up on consumer again.
Speaker Change: Okay, that's great.
David Morimoto: And then maybe just kind of going back to the margin question a little bit, you know, it's great to see the increase in loan yields. Could you just touch a bit on the repricing in the loan book that you're expecting the next, you know, 12 to 24 months where roll-off rates are on those maturing loans and kind of how new loan yields are trending. David, yeah, I think we've mentioned in the past, the runoff on the loan portfolio averages out to about 175 to 200 million a quarter. And so, you know, runoff rates are pretty much near the portfolio rate.
Speaker Change: And then maybe just kind of going back to the margin question a little bit.
Speaker Change: Great to see the increase in loan yields.
Speaker Change: Could you just touch a bit on the repricing in the loan book that you're expecting in the next 12 months to 24 months, where roll off rates are on those maturing loans and kind of how new loan yields are trending.
Speaker Change: Okay.
Anna M. Hu: Thank you, David. Yeah, I think we've mentioned in the past that the runoff on the loan portfolio averages out to about $175 to $200 million a quarter, and so runoff rates are pretty much near the portfolio rate, so in the 450 to 5% range. And then new loan yields in the second quarter were $765.
David: Hey, David.
David: Yes, I think we've mentioned in the past.
David: Run off on the loan portfolio.
Averages out to about $175 million to $200 million a quarter and so runoff rates are pretty much near the portfolio right. So in the.
David Morimoto: So in the 450 to 5% range and their new loan yields in the second quarter, new weighted average new loan yields was 765. Okay, okay. So I mean, kind of, so it seems like maybe this kind of pace of loan yield expansions, probably sustainable, especially if we can start getting more growth. Is that the right way to think about it? Yeah, yeah, I think I think what you saw in the second quarter was without growth. You see just the impact of, you know, the repricing, and then to the extent that we can start adding some net growth to the portfolio, that should be helpful to the margin.
Speaker Change: For 55% range and the new loan yields in the second quarter, New weighted average new loan yields was 765.
David: Okay.
David S. Morimoto: Okay, so I mean, kind of. It seems like maybe this kind of pace of low yield expansion is probably sustainable, especially if we can start getting more growth. Is that the right way to think about it? Yeah, yeah, I think what you saw in the second quarter was without growth, see just the impact of, you know, the repricing, and then to the extent that we can start adding some net growth to the portfolio, that should be helpful to them. Yeah, that's pretty powerful. And then, just last one, you touched on the strength of defense spending. I'm curious, how does that play into your growth?
Speaker Change: Okay. So let me kind of if so it seems like maybe this kind of pace of loan yield expansions, probably sustainable, especially if we can start getting more growth.
Speaker Change: Is that the right way to think about it.
Speaker Change: Yes, Yes, I think I think what you saw in the second quarter was without growth you see just the impact of.
Speaker Change: The re pricing and then to the extent that Ken.
Speaker Change: Sorry, adding some.
Speaker Change: Net growth to the portfolio that should be helpful helpful to the margin.
David Morimoto: Yeah, that's pretty powerful.
Speaker Change: That's pretty powerful.
Arnold Martinez: And then just last one, you touched on the strength of defense spending. I'm curious; how does that play into your growth? Is that a C&I opportunity, or is it just a positive from a local economic benefit? Just kind of curious how, you know, defense spending can impact the bank.
Speaker Change: And then just last one you touched on the strength of defense spending.
Arnold D. Martines: Is that a CNI opportunity? Or is it just a positive from a local economic benefit? I'm just kind of curious how, you know, defense spending can impact the bank. Yeah, David. This is Arnold.
Speaker Change: Curious how does that play into your growth is that a C&I opportunity or is it just a pause.
Speaker Change: Positive from a local economic benefit just kind of curious how you know.
Speaker Change: Defense spending can impact the bank.
Arnold Martinez: Yeah, David, this is Arnold. You know, I would say that, you know, those defense spending translate or cascade to a lot of businesses here in Hawaii. So it does have, you know, broader impact to the economy. Lots of small businesses benefit from it. So, you know, it's a, it's a good thing. And, and we believe that it's going to continue as we move forward, given, you know, given kind of what's going on in the world today. Okay, that's awful. Thank you.
Arnold D. Martines: You know, I would say that, you know, defense spending translates or cascades to a lot of businesses here in Hawaii. So it does have a broader impact on the economy. Lots of small businesses benefit.
Arnell: Yes, David this is arnell.
Arnell: I would say that.
Speaker Change: Those defense spending translate or cascade to a lot of businesses here in Hawaii. So it does it does have.
Speaker Change: Broader impact to the economy.
Speaker Change: Lots of.
Speaker Change: Small businesses benefit from it so so.
Arnold D. Martines: So, you know, it's a good thing, and we believe that it's going to continue as we move forward given kind of what's going on in the world today. David, maybe I can just add to what Arnold shared, you know, from a more specifically banking standpoint, it's actually both. It is a loan and deposit opportunity. A lot of the relationships, the government contractors start on the deposit side, but once they get business, once they get contracts, they all need lines of credit.
Speaker Change: It's a good thing and.
Speaker Change: And we believe that.
Speaker Change: It's going to continue as we move forward given given kind of what's going on in the world today.
Speaker Change: Okay. That's helpful. Thank you.
David S. Morimoto: So, it actually is on both sides. Okay, that makes three. Thank you. Thank you. That is all the questions we have in our queue.
Operator: Yeah, David, maybe I can just add to what Arnold shared. You know, from a more specifically on a banking standpoint, it's actually both. It is a loan and deposit opportunity. A lot of the relationships, the government contractors start on the deposit side, but once they get the business, once they get contracts, they all need lines of credit. So it actually is on both sides of the balance sheet. Okay, that makes sense. Thank you. Thanks, David. Thank you. That is all the questions we have in our queue.
David maybe I can just add.
Speaker Change: Sure.
David: From a more specifically on our banking standpoint.
David: It's actually both it is a loan and deposit opportunity.
Speaker Change: Lot of the relationships to government contractors start on the deposit side, but once they get.
Speaker Change: Business once they get.
Speaker Change: Contracts, they all need lines of credit so it actually is on both sides of the balance sheet.
Speaker Change: Okay that makes sense.
David: Thanks, David.
Dayna Matsumoto: I will now turn the call back over to Ms. Matsumoto for closing remarks. Thank you very much for participating in our earnings call for the second quarter of 2024. We look forward to future opportunities to update you on our progress. Thank you. Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect. [inaudible] ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ??
David: Thank you.
David: All the questions we have in our queue I will now turn the call back over to you Ms Matsumoto for closing remarks.
Dayna Matsumoto: I will now turn the call back over to Ms. Makimoto for closing remarks.
Operator: Thank you very much for participating in our earnings call for the second quarter of 2024. We look forward to future opportunities to update you on our progress. Thank you.
Dayna Matsumoto: Thank you very much for participating in our earnings call for the second quarter of 2024, we look forward to future opportunities to update you on our progress.
Operator: Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect. .
Speaker Change: Ladies and gentlemen that concludes today's call. Thank you all for joining you may now disconnect.
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Speaker Change: Okay.
Speaker Change: [music].
Speaker Change: Okay.
Speaker Change: [music].
Speaker Change: Yes.
Speaker Change: [music].
Operator: Thank you so much for your time, thank you so much for your time, thank you so much for your time, thank you so much for your time, thank you so much for your time, thank you so much for your time, thank you so much for your time, thank you so much for your time, thank you so much for your time, thank you so much for your time, thank you so much for your time, thank you so much for your time, thank you so much for your time, thank you so much for your time, thank you so much for your time, thank you so much for your time, thank you so much for your time, thank you so much for your time, thank you so much for your time, thank you so much Thank you so much for your time Thank you so much for your time, thank you so much for your time, thank you so much for your time, thank you so much for your time, thank you so much for your time, thank you so much for your time, thank you so much for your time, thank you so much for your time, thank you so much for your time, thank you so much for your time, thank you so much for your time, thank you so much for your time, thank you so much for your time, thank you so much for your time, thank you so much for your time, thank you so much for your time, thank you so much for your time, thank you so much for your time, thank you so much for your time, thank you so much for your time, thank you so much for your time, thank you so much for your time, thank you so much for your time, thank you so much for your time, thank you so much for your time, thank you so much for your time, thank you so much for your time, thank you so much for your time, thank you so much for your time, thank you so much for your time, thank you so much for your time, thank you so much for your time, thank you so much for your time, thank you so much for your time, thank you so much for your time, thank you so much for your time, thank you so much for your time, thank you so much for your time, thank you so much for your time, thank you so much for your time, thank you so much for your time, thank you so much for your time, thank you so much for your time, thank you so much for your time, thank you so much for your time, thank you so much for your time, thank you so much for your time, thank you so much for your time, thank you so much for your time, thank you so much for your time, thank you so much for your time, thank you so much for your time, thank you so much for your time, thank you so much for your time, thank you so much for your time, thank you so much for your time, thank you so much for your time, thank you so much for your time, thank you so much for your time, thank you so much for your time thank you so much for your time, thank you so much for your time, thank you so much for your time, thank you so much for your time, thank you so much for your time, thank you so much for your time, thank you so much for your time, thank you so much for your time, thank you so much for your time, thank you so much for your time, thank you so much for your time, thank you so much for your time, thank you so much for your time, thank you so much for your time, thank you so much for your time, thank you so much for your time, thank you so much for your time, thank you so much for your time, thank you so much for your time, thank you so much for your time, thank you so much for your time, thank you so much for your time, thank you so much for your time, thank you so much for your time, thank you so much for your time, thank you so much for your time, thank you so much for your time, thank you so much for your time, thank you so much for your time Thank you so much for your time, thank you so much for your time, thank you so much for your time, thank you so much for your time, thank you so much for your time, thank you so much for your time, thank you so much for your time, thank you so much for your time, thank you so much for your time, thank you so much for your time, thank you so much for your time, thank you so much for your time, thank you so much for your time, thank you so much for your time, thank you so much for your time, thank you so much for your time, thank you so much for your time, thank you so much for your time, thank you so much for your time, thank you so much for your time, thank you so much for your time, thank you so much for your time, thank you so much for your time, thank you so much for your time, thank you so much for your time, thank you so much for your time, thank you so much for your time, thank you so much for Thank you so much for joining us today, thank you so much for joining us today, thank you so much for joining us today, thank you so much for joining us today, thank you so much for joining us today, thank you so much for joining us today, thank you so much for joining us today, thank you so much for joining us today, thank you so much for joining us today, thank you so much for joining us today, thank you so much for joining us today, thank you so much for joining us today, thank you so much for joining us today, thank you so much for joining us today, thank you so much for joining us today, thank you so much for joining us today, thank you so much for joining us today, thank you so much for joining us today, thank you so much for joining us today, thank you so much for joining us today, thank you so much for joining us today, thank you so much for joining us today, thank you so much for joining us today, thank you so much for joining us today, thank you so much for joining us Thank you so much for joining us today joining us today, thank you so much for joining us today, thank you so much for joining us today, thank you so much for joining us today, thank you so much for joining us today, thank you so much for joining us today, thank you so much for joining us today, thank you so much for joining us today, thank you so much for joining us today, thank you so much for joining us today, thank you so much for joining us today, thank you so much for joining us today, thank you so much for joining us today, thank you so much for joining us today, thank you so much for joining us today, thank you so much for joining us today, thank you so much for joining us today, thank you so much for joining us today, thank you so much for joining us today, thank you so much for joining us today, thank you so much for joining us today, thank you so much for joining us today, thank you so much for joining us today, thank you so much for joining us today, thank you so much for joining us today, thank you so much for joining us Thank you so much for joining us joining us today, thank you Thank you so much for joining us today David Morimoto, David Morimoto, Central Pacific Financial Corp
Speaker Change: Yes.
Speaker Change: [music].
Speaker Change: Okay.
Speaker Change: [music].
Speaker Change: Okay.
Speaker Change: [music].
Speaker Change: Okay.
Speaker Change: [music].
Speaker Change: Yes.
Speaker Change: [music].