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CP

CENTRAL PACIFIC FINANCIAL CORP (CPF)·Q1 2025 Earnings Summary

Executive Summary

  • Solid quarter with sequential and year-over-year improvement: diluted EPS $0.65, ROA 0.96%, efficiency ratio 61.16%, and NIM 3.31% (+14 bps q/q; best efficiency since 4Q22) .
  • Versus S&P Global consensus, CPF slightly beat EPS (actual $0.65 vs $0.63) but was below on revenue (actual $64.62M vs $68.93M); GAAP “total revenue” was $68.80M, highlighting definitional differences with S&P revenue series . Values retrieved from S&P Global*.
  • Management guided further NIM expansion in Q2 (~+4–7 bps q/q), maintained other operating expense run-rate guidance ($42.5–$43.5M/qtr), and reiterated full‑year low‑ to mid‑single‑digit loan growth; also flagged a one‑time $2.0–$2.5M pretax write‑off in Q2 or Q3 from office consolidation with ~$1M annual savings thereafter .
  • Potential catalysts: continued NIM tailwinds from lower deposit costs and 4Q24 securities repositioning; active buybacks resumed ($2.1M in Q1; additional ~86k shares through 4/16), and stable credit metrics (NCOs 0.20% annualized; NPAs/Assets 0.15%) .

What Went Well and What Went Wrong

  • What Went Well

    • “Meaningfully” higher NIM and net interest income driven by lower deposit costs (avg total deposit cost down 13 bps q/q to 1.08%) and higher securities yields post 4Q24 repositioning; NIM expanded to 3.31% (+14 bps q/q) . Quote: “We were successful in continuing to meaningfully grow net interest income and net interest margin” — Arnold Martines, CEO .
    • Efficiency improved to 61.16% from 75.65% in Q4 (64.65% adjusted) — best since 4Q22, reflecting operating discipline; pre‑provision net revenue rose to $26.7M .
    • Credit trends stable-to-better: annualized NCOs fell to 0.20% (from 0.29% in Q4), NPAs/Assets steady at 0.15%; ACL/Loans increased modestly to 1.13% amid a more conservative macro outlook .

  • What Went Wrong

    • Provision increased to $4.2M vs $0.8M in Q4, driven by macro‑economic inputs to CECL; loan yield slipped 3 bps q/q to 4.88% .
    • Period‑end deposits declined $48M q/q (core deposits down $64.6M), though average core balances improved and mix shifted favorably away from CDs .
    • One‑time office consolidation charge of $2.0–$2.5M pretax expected in Q2 or Q3, partially offset by ~$1M annual run‑rate savings; near‑term optics weigh on GAAP EPS in the quarter of recognition .

Financial Results

MetricQ1 2024Q4 2024Q1 2025
Total Revenue (NII + noninterest income) ($M)$61.43 $58.40 $68.80
Net Interest Income ($M)$50.19 $55.77 $57.70
Other Operating Income ($M)$11.24 $2.62 $11.10
Provision for Credit Losses ($M)$3.94 $0.82 $4.17
Diluted EPS ($)$0.48 $0.42 $0.65
ROA (%)0.70 0.62 0.96
Efficiency Ratio (%)66.05 75.65 61.16
Net Interest Margin (%)2.83 3.17 3.31

Versus S&P Global consensus and reported actuals:

MetricQ4 2024 EstimateQ4 2024 Actual (S&P)Q1 2025 EstimateQ1 2025 Actual (S&P)
Primary EPS ($)0.615*0.70*0.63*0.65*
Revenue ($M)67.01*57.58*68.93*64.62*
  • Note: Company “total revenue” (NII + other income) for Q1 2025 was $68.80M vs S&P actual of $64.62M, reflecting definitional differences in “Revenue” used by S&P Global . Values retrieved from S&P Global*.

Segment/portfolio mix (period-end):

  • Loan portfolio by type (3/31/25): C&I $634.6M; Construction $160.1M; Residential Mortgage $1,870.2M; Home Equity $655.2M; Commercial Mortgage $1,552.4M; Consumer $461.9M .
  • Supplement (mix %): Residential Mortgage 35%, Commercial Mortgage 29%, Home Equity 12%, C&I 12%, Consumer 9%, Construction 3% .

KPIs and balance sheet

KPIQ1 2024Q4 2024Q1 2025
Total Loans ($B)$5.401 $5.333 $5.335
Total Deposits ($B)$6.619 $6.644 $6.596
Core Deposits ($B)$5.895 $6.040 $5.976
Avg Total Deposit Cost (%)1.32 1.21 1.08
NPAs / Assets (%)0.14 0.15 0.15
NCOs (Annualized, % of Avg Loans)0.34 0.29 0.20
ACL / Loans (%)1.18 1.11 1.13
CET1 (%)11.6 12.3 12.4
Total RBC (%)14.8 15.4 15.6
TCE Ratio (%)6.83 7.21 7.53
Dividend/Share ($)0.26 0.26 0.27 (declared for 6/16)
Share Repurchases——77,316 shrs; $2.1M; $27.09 avg

Liquidity snapshot (3/31/25): Cash $276.9M; other available liquidity $2.54B (unpledged securities + borrowing capacity) .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Net Interest Margin (q/q delta)Q2 2025Not quantified (trend of expansion)+4–7 bps q/q; March NIM 3.37% as starting point New/More explicit
Other Operating ExpenseNear-term run-rate$42.5–$43.5M/qtr $42.5–$43.5M/qtr (unchanged) Maintained
Office consolidation write-offQ2 or Q3 2025n/aOne-time pretax $2.0–$2.5M; ~$1M annual savings thereafter New
Loan GrowthFY 2025Low- to mid-single-digitLow- to mid-single-digit (reiterated) Maintained
DividendQ2 2025$0.27 (raised in Q4) $0.27 declared for 6/16/25 Maintained
Capital returnsOngoingRepurchase program active for 2025 ($30M authorization) Repurchases resumed; ~$2.1M in Q1; ~86k shares through 4/16 at $24.70 Ongoing execution

Earnings Call Themes & Trends

TopicPrevious Mentions (Q3’24 and Q4’24)Current Period (Q1’25)Trend
NIM trajectoryQ3: NIM +10 bps to 3.07% aided by higher asset yields, slight deposit cost decline . Q4: NIM +10 bps to 3.17% as deposit costs fell 15 bps; securities repositioning executed .NIM 3.31% (+14 bps q/q); guidance for +4–7 bps in Q2; March NIM 3.37% .Improving, continued expansion
Deposit costs and mixQ3 avg deposit cost 1.32%; core up $53.9M . Q4 avg deposit cost 1.21%; core +$74.2M .Avg deposit cost down to 1.08%; period-end deposits −$48M but avg core up; rational pricing .Favorable cost, stable mix
Loan growthQ3/Q4 period-end loans declined modestly .First q/q increase in two years (+$1.7M), pipeline building; reaffirm low‑ to mid‑single‑digit FY growth .Turning positive
Expenses/efficiencyQ3 adj efficiency 65.51% (special project costs) . Q4 adj 64.65% (securities loss) .Efficiency 61.16%; office consolidation to further streamline .Improving
Macro/regulatoryQ4: Fed membership (regulatory streamlining) .Hawaii macro: strong construction; mixed tourism; watching policy/tariff impacts on select sectors (~10% of book) .Stable to cautious
Capital returnsQ4: Dividend raised to $0.27; new $30M buyback authorization .Buybacks resumed; continued dividend (~40% payout target) .Ongoing

Management Commentary

  • CEO framing: “Our first quarter financial results were solid… grow net interest income and net interest margin… asset quality has improved further… strong capital, liquidity and credit positions” — Arnold Martines .
  • CFO on drivers: “NIM… up 14 bps… driven by reduction in funding costs from deposits combined with higher average yield on investment securities… total deposit cost decreased by 13 bps to 1.08%” .
  • NIM outlook: “Our guidance is for an increase of approximately 4 to 7 basis points next quarter… additional Fed cuts would benefit our NIM further” — CFO .
  • Cost actions: “Consolidating our office space… expect a one‑time pretax write‑off of $2–$2.5M in Q2 or Q3… expect ~$1M annual savings” — CFO .
  • Credit stance: “Provision… primarily driven by a more conservative macroeconomic outlook… total risk‑based capital was 15.6%… can readily absorb… prolonged stress” — CRO .

Q&A Highlights

  • Loan growth and pipeline: Management remains “cautiously optimistic” and reiterated low‑ to mid‑single‑digit 2025 loan growth, focused on C&I, construction and commercial mortgage .
  • Tariffs/policy sensitivity: Sectors most exposed (accommodation, restaurants, wholesale/retail) are ~10% of loans; expect near‑term turbulence manageable; stress playbook in place .
  • Deposit costs and margin levers: Funding costs should “continue to trend down, but more gradually if the Fed is on hold”; pricing remains rational; March NIM was 3.37% .
  • Expense run‑rate: Despite BOLI/def comp volatility, near‑term other operating expense guidance remains $42.5–$43.5M per quarter; some reinvestment may offset real estate savings near term .
  • Capital allocation: Priority to fund organic growth and sustain ~40% dividend payout; buybacks attractive with flexibility based on outlook; repurchases continued into April .

Estimates Context

  • EPS: Beat by ~$0.02 (Q1 2025 actual $0.65 vs $0.63 S&P consensus); Q4 2024 S&P “Primary EPS” actual $0.70 vs $0.615 — aligns with company’s adjusted EPS, while GAAP was $0.42 due to securities loss . Values retrieved from S&P Global.
  • Revenue: Miss relative to S&P consensus in Q1 (actual $64.62M vs $68.93M), but company “total revenue” printed $68.80M, indicating definitional variance in S&P’s revenue series . Values retrieved from S&P Global.
  • Implications: Given NIM guidance (+4–7 bps q/q) and deposit cost tailwinds, forward NII/EPS estimates may move modestly higher; however, the one‑time real estate write‑off will reduce GAAP EPS in the recognition quarter .

Key Takeaways for Investors

  • Positive NIM momentum with explicit Q2 expansion guidance; deposit beta tailwinds remain and securities repositioning is contributing — supports above‑trend NII near term .
  • Expense discipline and footprint rationalization are improving efficiency; expect a one‑time charge in Q2/Q3, followed by ~$1M annual savings .
  • Credit remains benign and well‑reserved; provision increase reflects model conservatism rather than emerging loss content; capital ratios (CET1 12.4%, TRBC 15.6%) provide a cushion .
  • Loan growth inflecting with the first sequential increase in two years; full‑year low‑ to mid‑single‑digit growth reiterated, concentrated in commercial categories .
  • Capital return remains active (dividend maintained; buybacks resumed and continued into April), offering support to per‑share metrics .
  • Watch items: revenue definition differences in consensus series; the timing of the one‑time office write‑off; and macro/policy impacts on ~10% of the book (hospitality/retail‑adjacent sectors) .

Footnotes:

  • Values retrieved from S&P Global* (GetEstimates): EPS and revenue estimates/actuals in the estimates comparison table.