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Central Pacific Bank more than tripled its net income in the third quarter, increased its dividend and repurchased more of its shares as it continued to distance itself from the effects of the COVID-19 pandemic.
The state’s fourth-largest bank also benefited from releasing $2.6 million from its loan-loss reserve, compared with the year-earlier quarter when it set aside $14.9 million for potential loan losses.
Central Pacific Financial Corp., the holding company for the bank, was scheduled to report today that it earned $20.8 million, or 74 cents a share, to easily trounce analysts’ estimates of 58 cents a share.
In the year-earlier quarter, Central Pacific earned $6.9 million, or 24 cents a share.
“It was a really strong quarter,” Central Pacific Chairman and CEO Paul Yonamine said in a phone interview. “We had good loan growth. We had fee income as a result of our PPP program that was able to drive a lot of our cost-reduction measures. All in all, it was one of the best quarterly results since the great financial recession.”
The company said it was increasing its quarterly dividend by a penny to 25 cents a share, and that it will be payable Dec. 15 to shareholders of record at the close of business Nov. 30. The annualized dividend yield would be 3.69% based on Tuesday’s closing price of $27.08, when the stock fell 22 cents. Central Pacific’s shares are up 42.5% so far this year.
During the quarter, the company also repurchased 234,700 shares at a total cost of $5.9 million, or an average cost per share of $25.12. Central Pacific’s remaining repurchase authority under its stock repurchase program as of Sept. 30 was $14.8 million.
Central Pacific said it was able to release some of its loan-loss reserve in the third quarter due to continued improvements in the economic forecast and lower net charge-offs.
“We’re still in the early innings (of recovery), but I think we’re off to a really good start with a lot of the (infrastructure and digital) transformation that we’ve done with the team going through the pandemic,” said Yonamine, whose father was Hawaii-born, Japanese professional baseball star Wally Yonamine. “The team has performed magnificently, but we still have aspirations of making this bank more higher-performing. I’d say we’re probably in the bottom of the third inning. We still have a ways to go, but it’s been a solid three innings.”
In a sign of the improving economy, the bank’s loans on forbearance or deferral at the end of the third quarter totaled just $1.3 million, or less than 1% of total loans as of Sept. 30.
Net interest income, which is the difference that the bank generates from loans and pays out in deposits, rose 14.2% to $56.1 million. That amount included $8.6 million in net interest income and loan fees on PPP loans.
The bank’s net interest margin improved 12 basis points to 3.31% from 3.19% in the year-earlier quarter and was better by 15 basis points from 3.16% in the second quarter.
“The net interest margin expanded, and some of that is related to the PPP fee that was recognized in the quarter,” Central Pacific Chief Financial Officer David Morimoto said. “But even if you normalize (don’t include) the PPP vehicle, the net interest margin still expanded. We were able to do that a couple ways. First, the net interest margin expanded related to the actions we took with the investment portfolio. And second, we had strong loan growth when you factor out the PPP loans. Our core annualized loan growth on a link quarter (consecutive quarters) basis was 16%.”
Total loans edged up 0.3% to $5.05 billion from the year-earlier quarter.
Noninterest income, which includes charges and fees, fell 11.3% to $10.3 million primarily due to $3 million less in mortgage banking income and about $600,000 less in bank-owned life insurance.
Deposits increased 14.7% to $6.52 billion from the year-earlier quarter. Core deposits, which include demand deposits, savings and money market deposits and time deposits up to $250,000, totaled $6.09 billion as of Sept. 30 and increased 21.6% from the year-earlier quarter.
THIRD-QUARTER NET
$20.8 million
YEAR-EARLIER NET
$6.9 million
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