Central Pacific Financial Corp. (CPF) Q4 2025 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings report shows strong financial performance with increased net income, improved asset quality, and stable expenses. The Q&A revealed optimism about loan growth and strategic investments, though some specifics were vague. The guidance for net interest income and margin is strong, and the company plans to maintain dividends and share repurchases, which should support the stock price. Despite potential risks in deposit competition, the overall sentiment is positive, suggesting a stock price increase in the 2% to 8% range.
Key Financial Performance
Core Earnings Per Share Increased 24% year-over-year, reflecting strong operating momentum across the franchise.
Total Core Deposits Grew by $78 million during the quarter, with meaningful gains in interest-bearing demand, savings, and money market balances. The average rate paid on total deposits declined to 94 basis points from 102 basis points.
Total Loan Portfolio Declined by $78 million from the prior quarter due to large construction and commercial mortgage loan payoffs and delays in new loan fundings. For the full year, total loans declined by $44 million, driven by a $190 million decrease in residential mortgage, home equity, and consumer portfolios, partially offset by growth in commercial mortgage and construction.
Net Income (Q4 2025) $22.9 million or $0.85 per diluted share, compared to $18.6 million or $0.69 per diluted share in the prior quarter. This reflects improved profitability.
Net Income (Full Year 2025) $77.5 million or $2.86 per diluted share, representing a 24% increase over 2024 non-GAAP net income of $63.4 million, excluding noncore items.
Net Interest Income (Q4 2025) Rose by 1.3% from the prior quarter to $62.1 million, with net interest margin expanding by 7 basis points to 3.56%. Deposit costs were lowered by 8 basis points to 0.94%, while total loan yields declined by 2 basis points to 4.99%.
Total Other Operating Income $14.2 million, up $0.7 million from the previous quarter, primarily driven by a $0.9 million increase in bank-owned life insurance income.
Total Other Operating Expenses $45.7 million, down $1.3 million from the previous quarter, which included one-time expenses related to the consolidation of the operations center.
Net Charge-Offs $2.5 million or 18 basis points annualized on average loans, with consumer book losses stabilizing.
Nonperforming Assets (NPAs) $14.4 million or 19 basis points of total assets, with past due loans over 90 days totaling $1.6 million (3 basis points of total loans).
Criticized Loans Declined to 135 basis points of total loans, maintaining low levels.
Provision Expense $2.4 million, including $1.7 million added to the allowance and $0.7 million to the reserve for unfunded commitments. The decrease was driven by a decline in loan balances and improvements in asset quality and macroeconomic forecasts.
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Operating Highlights
Core earnings per share: Increased by 24% from the prior year, reflecting strong operating momentum.
International strategy expansion: Signed a strategic partnership with Korea Investment & Securities to expand international reach and create new deposit opportunities for Korean customers investing in Hawaii.
Core deposits growth: Increased by $78 million during the quarter, with a decline in average rate paid on total deposits to 94 basis points from 102 basis points.
Loan portfolio performance: Total loan portfolio declined by $78 million in Q4, with a full-year decline of $44 million. However, there was strong growth in commercial mortgage and construction loans.
Net interest income and margin: Net interest income rose by 1.3% to $62.1 million, and net interest margin expanded by 7 basis points to 3.56%.
Operating expenses: Total other operating expenses decreased by $1.3 million from the previous quarter, with guidance for a 2.5%-3.5% increase in 2026.
Share repurchase and dividend increase: Repurchased 530,000 shares in Q4 at a cost of $16.3 million and increased the quarterly dividend by 3.6%.
New share repurchase authorization: Board approved a new share repurchase authorization for up to $55 million in 2026.
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Risk or Challenges
Macroeconomic Uncertainty: Hawaii's economy is facing macroeconomic uncertainty, including lower visitor counts and softer job growth, which could impact the bank's operations and revenue.
Loan Portfolio Decline: The total loan portfolio declined by $78 million in Q4 2025, with a full-year decline of $44 million, driven by decreases in residential mortgage, home equity, and consumer portfolios. This could affect revenue growth.
Loan Funding Delays: Certain new loan fundings have been delayed to the first half of 2026, potentially impacting short-term revenue and operational plans.
Deposit Growth Challenges: While core deposits grew, the growth rate is guided to low single-digit percentages for 2026, indicating potential challenges in achieving significant deposit growth.
Credit Risk: Although asset quality indicators are stable, there is a risk of credit costs increasing if macroeconomic conditions worsen, impacting the bank's financial performance.
Interest Rate Sensitivity: The bank's net interest margin is expected to expand at a slower pace in 2026, which could limit profitability growth.
Operational Expense Increase: Total other operating expenses are expected to increase by 2.5% to 3.5% in 2026, which could pressure profitability.
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Guidance & Outlook
Revenue Growth Strategy: For 2026, the company plans to enhance its revenue growth strategy with sales management, technology tools, and consistent discipline to drive results. The focus will be on building the loan pipeline in the core Hawaii market and select mainland markets for diversification.
Deposit Growth: Deposit growth will be driven by deepening relationships in Hawaii and strategic partnerships in Japan and Korea.
Net Loan and Deposit Growth: The company is conservatively guiding to full-year net loan and deposit growth in the low single-digit percentage range for 2026.
Net Interest Income (NII): For the full year 2026, the company expects a 4% to 6% increase in net interest income. The net interest margin (NIM) is expected to expand, albeit at a slower pace than in 2025. The first quarter NIM is projected to expand by approximately 2 to 5 basis points.
Other Operating Income: Total other operating income is anticipated to grow by 1% to 2% in 2026 over 2025 normalized levels.
Operating Expenses: Total other operating expenses are expected to increase by 2.5% to 3.5% in 2026 from 2025 normalized levels.
Effective Tax Rate: The normalized effective tax rate is projected to be in the range of 21% to 22%.
Capital Allocation: The company plans to use capital for organic loan growth, dividends, and share repurchases, targeting a CET1 ratio of 11% to 12%.
Share Repurchase Authorization: The Board approved a new share repurchase authorization for up to $55 million in 2026.
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Shareholder Return Plan
Dividend Increase: The Board declared a first quarter cash dividend of $0.29 per share, an increase of 3.6% from the prior quarter.
Share Repurchase Program: During the fourth quarter, approximately 530,000 shares were repurchased at a total cost of $16.3 million. For the full 2025 year, 788,000 shares were repurchased at a total cost of $23.3 million. Additionally, the Board approved a new share repurchase authorization for up to $55 million in 2026.
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Key Q&A
Q:What is the timing for new loan fundings and its impact on provisioning in the first half?
A:The delayed closings are expected to be more weighted towards the second quarter rather than the first quarter. The fundings include a combination of funded deals and construction projects.
Q:What was the deposit spot rate at the end of the year?
A:The deposit spot rate at 12/31 was 89 basis points.
Q:Is the 30% deposit beta being maintained, and is there any risk due to deposit competition?
A:The current cycle's interest-bearing deposit beta is about 30%, and it is expected to remain in the 25%-30% range with the outlook for two rate cuts this year. There is still room to lower deposit costs to offset floating rate assets.
Q:Will the buyback plan for 2026 be completed this year?
A:The Board approved a larger share repurchase authorization for this year, providing flexibility. The amount bought back each quarter will be dynamic, depending on capital usage and business growth.
Q:What is the outlook for loan growth in Hawaii and the Mainland?
A:Loan growth in 2026 is expected to be stronger than in 2025, with a focus on commercial areas like C&I, commercial mortgage, and construction. Growth will fluctuate between Hawaii and the Mainland based on risk-return opportunities. In 2025, targeted areas like construction and commercial mortgage grew by 10% year-over-year, while residential mortgage, home equity, and consumer portfolios saw drawdowns.
Q:How will expenses be managed if growth is weaker or stronger than expected?
A:The company plans to maintain strong expense discipline while investing in technology for growth. Flexibility exists to adjust expenses based on revenue. Planned investments include sales management systems, data platform enhancements, and automation to offset costs.
Q:What is the expected trajectory for loan growth in 2026?
A:Loan growth is expected to start slower in the first quarter, which is seasonally weaker, and then accelerate throughout the year. The base case is low single-digit growth.
Q:What are the trends in loan originations and the drivers behind payoffs and paydowns?
A:Loan originations in Q4 were around $300 million, which is needed to keep the portfolio flat to slightly down. Growth requires higher originations. Payoffs and paydowns are influenced by the smaller construction portfolio, which is being expanded to achieve critical mass and offset paydowns with new draws.
Q:What is the competitive landscape for deposits and the source of core deposit growth?
A:The competitive landscape involves basic banking efforts like calling on new prospects and deepening relationships with existing customers. Core deposit growth is driven by initiatives like disciplined calling efforts, sales culture, and customer primacy, which are expected to lead to stronger growth in 2026.
Q:Review of Unclear Management Responses
A:Management avoided providing specific details on the exact amount of buybacks planned for each quarter, citing that it would be dynamic. Additionally, while they expressed optimism about core deposit growth and loan originations, they did not provide precise numerical targets or timelines for these initiatives.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
America bank
Asset quality
BOLI death
Bank Week
Bank core
CET position
Hawaii partnership
Hawaii team
Instructions reminder
Investment Securities
Korea Investment
Korea institution
Korea loan
Martines today
Matsumoto Executive
Pacific Bank
approach
book
building
consolidation
cycle
decrease
discipline
diversification
dividend repurchase
focus
franchise
improvement
income increase
momentum
mortgage
profitability
relationship
repurchase authorization
service
share cost
shareholder return
tax rate
value
CPF Transcript
Central Pacific Financial Corp. (CPF) Q4 2025 Earnings Call Transcript
Positive1-28
The earnings report shows strong financial performance with increased net income, improved asset quality, and stable expenses. The Q&A revealed optimism about loan growth and strategic investments, though some specifics were vague. The guidance for net interest income and margin is strong, and the company plans to maintain dividends and share repurchases, which should support the stock price. Despite potential risks in deposit competition, the overall sentiment is positive, suggesting a stock price increase in the 2% to 8% range.
Central Pacific Financial Corp. (CPF) Q3 2025 Earnings Call Transcript
Unknown10-29
The earnings call highlights steady loan and deposit growth and a new partnership with a Japanese bank, which are positive. However, concerns remain about the decline in residential mortgage and HELOC portfolios, unclear cost-reduction strategies, and cautious outlook for deposit growth. The company's optimism about loan growth and efficiency improvements is tempered by a lack of specific data and strategies. The mixed signals and lack of strong catalysts suggest a neutral stock price movement in the short term.
Central Pacific Financial Corp. (CPF) Q2 2025 Earnings Call Transcript
Unknown7-25
The earnings call reveals mixed performance: slight declines in deposits and loans, but strong noninterest-bearing deposit growth. The Q&A section highlights muted loan growth due to the operating environment, but a robust pipeline suggests future revenue growth. Credit quality concerns are idiosyncratic, not systemic. The guidance for expenses is stable, with investments in growth. Overall, the sentiment is neutral, with potential for improvement in Q3. The lack of market cap data suggests a conservative neutral prediction due to mixed signals and uncertainty in immediate market reaction.
Earnings call transcript: Central Pacific Financial beats Q4 2024 EPS forecast
Positive1-31
The earnings call indicates strong financial performance with increased net interest income and margin, a growing deposit portfolio, and a healthy loan pipeline. Despite some challenges, such as credit risk and regulatory changes, the company’s strategic moves, including dividend increases and share repurchase authorizations, reflect confidence in future growth. The Q&A session supports this positive outlook, with management expressing optimism about loan growth and operating leverage. The overall sentiment is positive, suggesting a likely stock price increase in the short term.
CPF Slides
CPF Report
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