Central Pacific’s net tumbles, but its lending remains strong
Oct. 21—Central Pacific Bank said Thursday its lending business was still performing well despite a nationwide housing slowdown due to the company’s joint ventures with developers and real estate brokers.
Central Pacific Bank said Thursday its lending business was still doing well despite a national housing downturn due to the company’s joint ventures with developers and real estate brokers.
The state’s fourth-largest bank was expected to report today that its third-quarter net profit fell 19.7% from the previous quarter, but its lending volume came in at an annualized rate of 9 .1% and that the bank’s net interest margin had improved by 12 basis points to 3.17% compared to the previous three months.
Central Pacific Financial Corp., the holding company, reported net income of $16.7 million, or 61 cents per share, to beat analysts’ consensus forecast of 60 cents per share. That compares to net income of $20.8 million, or 74 cents per share, a year ago.
“We continued to perform well in the third quarter, as evidenced by our strong earnings, loan growth and net interest margin expansion,” Chairman and CEO Paul Yonamine said in a statement. “While the broader economy presents challenges for the entire financial services industry, Hawaii has outperformed the nation in past recessions.”
Central Pacific’s loans reached $5.42 billion, up 7.5% from the year-ago quarter, and rose 2.3% from the prior three months to put loans on on track for a 9.1% annualized gain.
The bank’s net interest margin – the difference between what the bank generates in loans and pays out in deposits – rose 12 basis points to 3.17% in the previous three months, but fell by 14 basis points from the prior year quarter. This year-ago quarter included $8.6 million in net interest and fee income from the Paycheck Protection Program, compared to $700,000 in the current quarter.
Chief Financial Officer David Morimoto said year-over-year comparisons of loan growth and net interest margin are skewed due to the impact the PPP program had on earnings in the third quarter. quarter 2021.
“Higher interest rates have slowed mortgage volumes because there is no refinancing activity,” Morimoto said.
“It’s really become a buying market. I think the Hawaii residential real estate market will do a lot better than the mainland, like it has in every other downturn. We just have the factor of scarcity.
“We are already seeing some of this in the third quarter numbers, where on the mainland, sales volumes and median selling prices are down. In Hawaii, unit volumes are down from a year ago , but median selling prices continue to rise – but they are rising at a slower pace.”
He said that’s an indication that Hawaii’s real estate market will fare better than the rest of the nation.
“I think it’s playing well for Central Pacific because of our joint ventures with developers and real estate brokers,” he said. “It’s buy activity. Typically when refinancing activity is down, Central Pacific outperforms through our joint ventures.”
Central Pacific maintained its quarterly dividend at 26 cents per share. It will be payable on December 15 to shareholders of record at the close of business on November 30.
Shares of the bank closed Thursday down 67 cents at $21.82 ahead of today’s earnings release.