Central Pacific Bank boosted net income 83.4%, increased its dividend for the second consecutive quarter and announced an investment in a new financial technology company that plans to launch a nationwide consumer banking app combining checking, credit and more into one integrated account.
The state’s fourth-largest bank, which in November introduced an all-digital checking account called Shaka, said it is launching a new Banking-as-a-Service initiative with Boulder, Colo.-based Swell, with the goal of expanding Central Pacific both in and beyond Hawaii. The BaaS initiative is being developed based on the successful product development and launch strategies used in Shaka, which now has more than 3,300 accounts.
Central Pacific said it will serve as Swell’s bank sponsor to service deposits and loans. Central Pacific and Swell also will collaborate with publicly traded Elevate Credit, a provider of digital lending solutions. Swell is scheduled to launch the new app in the middle of this year.
Central Pacific Chief Financial Officer David Morimoto, who said the bank invested between $1.5 million and $2 million in Swell, noted that Shaka and Swell are two different products.
“Shaka is a product of Central Pacific Bank, so there’s no (financial technology) company involved. We built that ourselves,” he said. “With Swell there is a financial technology company involved, and that’s a nationwide initiative. As the sponsor bank, Central Pacific Bank will get the loans and deposits from Swell customers.”
Central Pacific President and Chief Operating Officer Arnold Martines said Shaka has exceeded the bank’s expectations.
“Shaka was basically our initial venture in a digital product, which helped to get to the Swell investment and that extension,” Martines said. “For Shaka, since we’ve launched it, we have over 3,300 accounts that we’ve opened, and more than half of those new accounts are new customers of the bank. So it’s exceeded our expectations as far as the success of the new Shaka account, and we’re also looking forward to engaging these new customers with additional products and services to support their financial needs as the months go by.”
Central Pacific Chairman and CEO Paul Yonamine said 2021 was “extremely successful” for the bank.
“We will maintain our commitment to be a top community bank in Hawaii, combining the latest in digital convenience with our strong tradition of customer service,” he said in a statement. “Today’s announcement of our BaaS initiatives, represents an exciting new chapter of our Company as we expand beyond the Hawaii market which we believe will drive revenue growth and create even more shareholder value.”
Central Pacific Financial Corp., the holding company for the bank, was scheduled to report today that it earned $22.3 million, or 80 cents a share, to easily trounce analysts’ estimates of 65 cents a share. In the year-earlier quarter, Central Pacific earned $12.2 million, or 43 cents a share.
For the year, Central Pacific’s earnings more than doubled to $79.9 million, or $2.83 a share, from $37.3 million, or $1.32 a share, in 2020.
The bank’s pretax net income of $29.9 million in the fourth quarter and $105.7 million for the year represented the best pretax quarter and full-year results since 2007.
The company said it was increasing its quarterly dividend by a penny to 26 cents a share, payable March 15 to shareholders of record at the close of business Feb. 28.
The second straight dividend increase is a function of the core earnings for the company, Morimoto said.
“As our outlook for core earnings increases, management and the board get more comfortable with consistent increases in the quarterly dividend,” he said.
During the quarter, the company also repurchased 305,594 shares at a total cost of $8.4 million, or an average cost per share of $27.64. Central Pacific’s board also approved a new $30 million share repurchase program.
Central Pacific said it released $7.7 million from its loan-loss reserve in the fourth quarter due to continued improvements in the economic forecast. That compares with setting aside $4.9 million for potential loan losses in the year-ago quarter.
The bank’s loans rose last quarter by 2.8% to $5.10 billion from the year-earlier period. Deposits rose 14.5% to $6.64 billion.
Central Pacific’s stock closed Tuesday up 13 cents at $29.67.
Fourth-Quarter net
$22.3 million
Year-earlier net
$12.2 million
