FOR IMMEDIATE RELEASE
Investor Contact:			Ian Tanaka			Media Contact:			Tim Sakahara
			SVP, Treasury Manager						AVP, Corporate Communications Manager
			(808) 544-3646						(808) 544-5125
			ian.tanaka@cpb.bank						tim.sakahara@cpb.bank

 

CENTRAL PACIFIC FINANCIAL REPORTS THIRD QUARTER EARNINGS OF $13.1 MILLION

•Net income of $13.1 million, or $0.49 per diluted share for the quarter.

•ROA of 0.70%, ROE of 10.95% and NIM of 2.88% for the quarter.

•Total loans of $5.51 billion decreased by $12.0 million in the third quarter.

•Ratio of nonperforming assets to total assets of 0.09% at September 30, 2023.

•Total deposits of $6.87 billion increased by $69.0 million in the third quarter. Total deposit cost was 1.08% in the third quarter.

•Solid liquidity position with $438.7 million in cash on balance sheet and $2.47 billion in total other liquidity sources, including available borrowing capacity and unpledged investment securities at September 30, 2023.

•Ratio of total available sources of liquidity to uninsured and uncollateralized deposits of 122% at September 30, 2023.

•Board of Directors approved quarterly cash dividend of $0.26 per share.

HONOLULU, HI, October 25, 2023 – Central Pacific Financial Corp. (NYSE: CPF) (the "Company"), parent company of Central Pacific Bank (the "Bank" or "CPB"), today reported net income of $13.1 million, or fully diluted earnings per share ("EPS") of $0.49 for the third quarter of 2023, compared to net income of $14.5 million, or EPS of $0.53 in the previous quarter and net income of $16.7 million, or EPS of $0.61 in the year-ago quarter.

Pre-provision net revenue ("PPNR"), or net income excluding provision for credit losses and income taxes, totaled $22.4 million in the third quarter of 2023, compared to PPNR of $23.3 million in the previous quarter and $23.0 million in the year-ago quarter.

"In the third quarter, Central Pacific continued our focus on maintaining strong liquidity and capital given the ongoing market uncertainties," said Arnold Martines, President and Chief Executive Officer. "We are pleased with our success in growing our deposit portfolio while managing our total deposit costs. Our asset quality remained strong, our loan portfolio is well-diversified and we continue to effectively manage our expenses. Finally, we remain committed to supporting the communities impacted by the Lahaina wildfires through financial and in-kind support to aid recovery efforts."

Net interest income was $51.9 million for the third quarter of 2023, which decreased by $0.8 million, or 1.5% from the previous quarter, and decreased by $3.4 million, or 6.2% from the year-ago quarter. The sequential quarter decrease in net interest income was primarily due to higher average balances and rates paid on interest-bearing deposits, which outpaced the higher average yield earned on loans.

Net interest margin ("NIM") was 2.88% for the third quarter of 2023, which decreased by 8 basis points ("bps") from the previous quarter and decreased by 29 bps from the year-ago quarter. The sequential quarter decrease in NIM was primarily due to higher average rates paid on deposits, which outpaced the higher average yield earned on loans.

The Company recorded a provision for credit losses of $4.9 million in the third quarter of 2023, compared to a provision of $4.3 million in the previous quarter and a provision of $0.4 million in the year-ago quarter. The provision in the third quarter consisted of a provision for credit losses on loans of $4.5 million and a provision for credit losses on off-balance sheet credit exposures of $0.4 million.

Other operating income totaled $10.0 million for the third quarter of 2023, compared to $10.4 million in the previous quarter and $9.6 million in the year-ago quarter. The decrease from the previous quarter was primarily due to lower income from bank-owned life insurance of $0.8 million, partially offset by higher other service charges and fees of $0.2 million and higher income from fiduciary activities of $0.2 million.

Other operating expense totaled $39.6 million for the third quarter of 2023, compared to $39.9 million in the previous quarter and $42.0 million in the year-ago quarter. Lower salaries and employee benefits of $1.8 million was partially offset by higher net occupancy of $0.4 million, higher directors' deferred compensation plan expense (included in other) of $0.3 million, higher armored car expense (included in other) of $0.2 million, and a net loss on sale of loans (included in other) of $0.2 million.

The efficiency ratio was 63.91% for the third quarter of 2023, compared to 63.17% in the previous quarter and 64.62% in the year-ago quarter.

The effective tax rate was 24.9% for the third quarter of 2023, compared to 23.6% in the previous quarter and 26.2% in the year-ago quarter.

Total assets of $7.64 billion at September 30, 2023 increased by $70.3 million, or 0.9% from $7.57 billion at June 30, 2023, and increased by $300.3 million, or 4.1% from $7.34 billion at September 30, 2022. The Company had $438.7 million in cash on its balance sheet and $2.47 billion in total other liquidity sources, including available borrowing capacity and unpledged investment securities at September 30, 2023. Total available sources of liquidity as a percentage of uninsured and uncollateralized deposits was 122% at September 30, 2023.

Total loans, net of deferred fees and costs, of $5.51 billion at September 30, 2023 decreased by $12.0 million, or 0.2% from $5.52 billion at June 30, 2023, and increased by $86.5 million, or 1.6% from $5.42 billion at September 30, 2022. Average yields earned on loans during the third quarter of 2023 was 4.49%, compared to 4.37% in the previous quarter and 3.84% in the year-ago quarter.

Total deposits of $6.87 billion at September 30, 2023 increased by $69.0 million or 1.0% from $6.81 billion at June 30, 2023, and increased by $318.3 million, or 4.9% from $6.56 billion at September 30, 2022. Core deposits, which include demand deposits, savings and money market deposits and time deposits up to $250,000, totaled $5.99 billion at September 30, 2023, and increased by $8.6 million, or 0.1% from $5.98 billion at June 30, 2023. Average rates paid on total deposits during the third quarter of 2023 was 1.08%, compared to 0.84% in the previous quarter and 0.14% in the year-ago quarter. At September 30, 2023, approximately 65% of the Company's total deposits were FDIC-insured or fully collateralized.

Nonperforming assets totaled $6.7 million, or 0.09% of total assets at September 30, 2023, compared to $11.1 million, or 0.15% of total assets at June 30, 2023 and $4.2 million, or 0.06% of total assets at September 30, 2022. The decline in nonperforming assets from the previous quarter was primarily attributable to two Hawaii construction loans to a single borrower totaling $4.9 million that were paid off in full.

Net charge-offs totaled $3.9 million in the third quarter of 2023, compared to net charge-offs of $3.4 million in the previous quarter, and net charge-offs of $1.6 million in the year-ago quarter. Annualized net charge-offs as a percentage of average loans was 0.28%, 0.24% and 0.12% during the three months ended September 30, 2023, June 30, 2023 and September 30, 2022, respectively.

The allowance for credit losses, as a percentage of total loans was 1.17% at September 30, 2023, compared to 1.16% at June 30, 2023, and 1.19% at September 30, 2022.

Total shareholders' equity was $468.6 million at September 30, 2023, compared to $476.3 million and $438.5 million at June 30, 2023 and September 30, 2022, respectively.

During the third quarter of 2023, the Company repurchased 4,500 shares of common stock, at a total cost of $0.1 million, or an average cost per share of $16.07. During the nine months ended September 30, 2023, the Company repurchased 130,010 shares of common stock, at a total cost of $2.6 million, or an average cost per share of $20.24. As of September 30, 2023, $23.4 million in share repurchase authorization remained available under the Company's share repurchase program.

The Company's leverage, tier 1 risk-based capital, total risk-based capital, and common equity tier 1 capital ratios were 8.7%, 11.9%, 14.1%, and 11.0%, respectively, at September 30, 2023, compared to 8.7%, 11.8%, 13.9%, and 10.9%, respectively, at June 30, 2023.

On October 24, 2023, the Company's Board of Directors declared a quarterly cash dividend of $0.26 per share on its outstanding common shares. The dividend will be payable on December 15, 2023 to shareholders of record at the close of business on November 30, 2023.

The Company's management will host a conference call today at 1:00 p.m. Eastern Time (7:00 a.m. Hawaii Time) to discuss the quarterly results. Individuals are encouraged to listen to the live webcast of the presentation by visiting the investor relations page of the Company's website at http://ir.cpb.bank. Alternatively, investors may participate in the live call by dialing 1-888-510-2553 (access code: 9816541). A playback of the call will be available through November 24, 2023 by dialing 1-800-770-2030 (access code: 9816541) and on the Company's website. Information which may be discussed in the conference call is provided in an earnings supplement presentation on the Company's website at http://ir.cpb.bank.

Central Pacific Financial Corp. is a Hawaii-based bank holding company with approximately $7.64 billion in assets as of September 30, 2023. Central Pacific Bank, its primary subsidiary, operates 27 branches and 58 ATMs in the State of Hawaii. For additional information, please visit the Company's website at http://www.cpb.bank.

                                        

**********

While we believe that our FLS and the assumptions underlying them are reasonably based, such statements and assumptions are by their nature subject to risks and uncertainties, and thus could later prove to be inaccurate or incorrect. Accordingly, actual results could differ materially from those statements or projections for a variety of reasons, including, but not limited to: the effects of inflation and rising interest rates; the adverse effects of recent bank failures and the potential impact of such developments on customer confidence, deposit behavior, liquidity and regulatory responses thereto; the adverse effects of the COVID-19 pandemic virus (and ongoing pandemic variants) on local, national and international economies, including, but not limited to, the adverse impact on tourism and construction in the State of Hawaii, our borrowers, customers, third-party contractors, vendors and employees; supply chain disruptions; the increase in inventory or adverse conditions in the real estate market and deterioration in the construction industry; adverse changes in the financial performance and/or condition of our borrowers and, as a result, increased loan delinquency rates, deterioration in asset quality, and losses in our loan portfolio; our ability to achieve the objectives of our RISE2020 initiative; our ability to successfully implement and achieve the objectives of our Banking-as-a-Service ("BaaS") initiatives, including adoption of the initiatives by customers and risks faced by any of our bank collaborations including reputational and regulatory risk; the impact of local, national, and international economies and events (including natural disasters such as wildfires, volcanic eruptions, hurricanes, tsunamis, storms, earthquakes and pandemic viruses and diseases) on the Company's business and operations and on tourism, the military, and other major industries operating within the Hawaii market and any other markets in which the Company does business; deterioration or malaise in domestic economic conditions, including any destabilization in the financial industry and deterioration of the real estate market, as well as the impact of declining levels of consumer and business confidence in the state of the economy in general and in financial institutions in particular; changes in estimates of future reserve requirements based upon the periodic review thereof under relevant regulatory and accounting requirements; the impact of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the "Dodd-Frank Act"), changes in capital standards, other regulatory reform and federal and state legislation, including but not limited to regulations promulgated by the Consumer Financial Protection Bureau (the "CFPB"), government-sponsored enterprise reform, and any related rules and regulations which affect our business operations and competitiveness; the costs and effects of legal and regulatory developments, including legal proceedings and lawsuits we are or may become subject to, or regulatory or other governmental inquiries and proceedings and the resolution thereof, the results of regulatory examinations or reviews and the effect of, and our ability to comply with, any regulations or regulatory orders or actions we are or may become subject to; ability to successfully implement our initiatives to lower our efficiency ratio; the effects of and changes in trade, monetary and fiscal policies and laws, including the interest rate policies of the Board of Governors of the Federal Reserve System (the "FRB" or the "Federal Reserve"); securities market and monetary fluctuations, including the replacement of the London Interbank Offered Rate ("LIBOR") Index and the impact on our loans and debt which are tied to that index and uncertainties regarding potential alternative reference rates, including the Secured Overnight Financing Rate ("SOFR"); negative trends in our market capitalization and adverse changes in the price of the Company's common stock; political instability; acts of war or terrorism; changes in consumer spending, borrowings and savings habits; cybersecurity and data privacy breaches and the consequence therefrom; failure to maintain effective internal control over financial reporting or disclosure controls and procedures; the ability to address deficiencies in our internal controls over financial reporting or disclosure controls and procedures; technological changes and developments; changes in the competitive environment among financial holding companies and other financial service providers; the effect of changes in accounting policies and practices, as may be adopted by the regulatory agencies, as well as the Public Company Accounting Oversight Board ("PCAOB"), the Financial Accounting Standards Board ("FASB") and other accounting standard setters and the cost and resources required to implement such changes; our ability to attract and retain key personnel; changes in our personnel, organization, compensation and benefit plans; and our success at managing the risks involved in the foregoing items.

 

						Three Months Ended																														Nine Months Ended
(Dollars in thousands,						Sep 30,						Jun 30,						Mar 31,						Dec 31,						Sep 30,						Sep 30,
except for per share amounts)						2023						2023						2023						2022						2022						2023						2022
CONDENSED INCOME STATEMENT
Net interest income						$	51,928					$	52,734					$	54,196					$	56,285					$	55,365					$	158,858					$	159,278
Provision (credit) for credit losses						4,874						4,319						1,852						571						362						11,045						(1,844)
Total other operating income						10,047						10,435						11,009						11,601						9,629						31,491						36,318
Total other operating expense						39,611						39,903						42,107						40,434						41,998						121,621						125,552
Income tax expense						4,349						4,472						5,059						6,700						5,919						13,880						18,141
Net income						13,141						14,475						16,187						20,181						16,715						43,803						53,747
Basic earnings per share						$	0.49					$	0.54					$	0.60					$	0.74					$	0.61					$	1.62					$	1.96
Diluted earnings per share						0.49						0.53						0.60						0.74						0.61						1.62						1.94
Dividends declared per share						0.26						0.26						0.26						0.26						0.26						0.78						0.78
PERFORMANCE RATIOS
Return on average assets (ROA) [1]						0.70		%				0.78		%				0.87		%				1.09		%				0.91		%				0.78		%				0.98		%
Return on average shareholders’ equity (ROE) [1]						10.95						12.12						13.97						18.30						14.49						12.33						14.62
Average shareholders’ equity to average assets						6.39						6.40						6.23						5.97						6.30						6.34						6.69
Efficiency ratio [2]						63.91						63.17						64.58						59.56						64.62						63.89						64.19
Net interest margin (NIM) [1]						2.88						2.96						3.08						3.17						3.17						2.98						3.06
Dividend payout ratio [3]						53.06						49.06						43.33						35.14						42.62						48.15						40.21
SELECTED AVERAGE BALANCES
Average loans, including loans held for sale						$	5,507,248					$	5,543,398					$	5,525,988					$	5,498,800					$	5,355,088					$	5,525,476					$	5,231,098
Average interest-earning assets						7,199,866						7,155,606						7,112,377						7,103,841						6,991,773						7,156,270						6,969,326
Average assets						7,510,537						7,463,629						7,443,767						7,389,712						7,320,751						7,472,890						7,323,596
Average deposits						6,738,071						6,674,650						6,655,660						6,673,922						6,535,321						6,689,762						6,580,502
Average interest-bearing liabilities						4,999,820						4,908,120						4,820,660						4,708,045						4,538,893						4,910,190						4,470,461
Average shareholders’ equity						480,118						477,711						463,556						441,084						461,328						473,856						490,140
[1] ROA and ROE are annualized based on a 30/360 day convention. Annualized net interest income and expense in the NIM calculation are based on the day count interest payment conventions at the interest-earning asset or interest-bearing liability level (i.e. 30/360, actual/actual).
[2] Efficiency ratio is defined as total other operating expense divided by total revenue (net interest income and total other operating income).
[3] Dividend payout ratio is defined as dividends declared per share divided by diluted earnings per share.

 

						Sep 30,						Jun 30,						Mar 31,						Dec 31,						Sep 30,
(Dollars in thousands, except share data)						2023						2023						2023						2022						2022
ASSETS
Cash and due from financial institutions						$	108,818					$	129,071					$	108,535					$	97,150					$	116,365
Interest-bearing deposits in other financial institutions						329,913						181,913						90,247						14,894						22,332
Investment securities:
Available-for-sale debt securities, at fair value						625,253						664,071						687,188						671,794						686,681
Held-to-maturity debt securities, at amortized cost; fair value of: $531,887 at September 30, 2023, $581,222 at June 30, 2023, $599,300 at March 31, 2023, $596,780 at December 31, 2022, and $590,880 at September 30, 2022						640,053						649,946						658,596						664,883						662,827
Total investment securities						1,265,306						1,314,017						1,345,784						1,336,677						1,349,508
Loans held for sale, at fair value						—						2,593						—						1,105						1,701
Loans, net of deferred fees and costs						5,508,710						5,520,683						5,557,397						5,555,466						5,422,212
Less: allowance for credit losses						64,517						63,849						63,099						63,738						64,382
Loans, net of allowance for credit losses						5,444,193						5,456,834						5,494,298						5,491,728						5,357,830
Premises and equipment, net						97,378						96,479						93,761						91,634						89,979
Accrued interest receivable						21,529						20,463						20,473						20,345						18,134
Investment in unconsolidated entities						42,523						45,218						45,953						46,641						36,769
Mortgage servicing rights						8,797						8,843						8,943						9,074						9,216
Bank-owned life insurance						168,543						168,136						168,244						167,967						167,761
Federal Home Loan Bank of Des Moines ("FHLB") stock						10,995						10,960						11,960						9,146						13,546
Right-of-use lease assets						32,294						33,247						34,237						34,985						35,978
Other assets						107,635						99,818						98,812						111,417						118,512
Total assets						$	7,637,924					$	7,567,592					$	7,521,247					$	7,432,763					$	7,337,631
LIABILITIES
Deposits:
Noninterest-bearing demand						$	1,969,523					$	2,009,387					$	2,028,087					$	2,092,823					$	2,138,083
Interest-bearing demand						1,345,843						1,359,978						1,386,913						1,453,167						1,441,302
Savings and money market						2,209,550						2,184,652						2,184,675						2,199,028						2,194,991
Time						1,349,829						1,251,720						1,147,293						991,205						782,058
Total deposits						6,874,745						6,805,737						6,746,968						6,736,223						6,556,434
FHLB advances and other short-term borrowings						—						—						25,000						5,000						115,000
Long-term debt, net of unamortized debt issuance costs of: $506 at September 30, 2023, $566 at June 30, 2023, $627 at March 31, 2023, $688 at December 31, 2022 and $748 at September 30, 2022						156,041						155,981						155,920						105,859						105,799
Lease liabilities						33,186						34,111						35,076						35,889						36,941
Other liabilities						105,354						95,484						87,357						96,921						84,989
Total liabilities						7,169,326						7,091,313						7,050,321						6,979,892						6,899,163
EQUITY
Shareholders' equity:
Preferred stock, no par value, authorized 1,000,000 shares; issued and outstanding: none at September 30, 2023, June 30, 2023, March 31, 2023, December 31, 2022, and September 30, 2022						—						—						—						—						—
Common stock, no par value, authorized 185,000,000 shares; issued and outstanding: 27,043,169 at September 30, 2023, 27,045,792 at June 30, 2023, 27,005,545 at March 31, 2023, 27,025,070 at December 31, 2022, and 27,262,879 at September 30, 2022						405,439						405,511						405,866						408,071						412,994
Additional paid-in capital						102,550						101,997						101,188						101,346						100,426
Retained earnings						110,156						104,046						96,600						87,438						74,301
Accumulated other comprehensive loss						(149,547)						(135,275)						(132,728)						(143,984)						(149,253)
Total shareholders' equity						468,598						476,279						470,926						452,871						438,468
Total liabilities and equity						$	7,637,924					$	7,567,592					$	7,521,247					$	7,432,763					$	7,337,631

 

						Sep 30,						Jun 30,						Mar 31,						Dec 31,						Sep 30,
(Dollars in thousands)						2023						2023						2023						2022						2022
Noninterest-bearing demand deposits						$	1,969,523					$	2,009,387					$	2,028,087					$	2,092,823					$	2,138,083
Interest-bearing demand deposits						1,345,843						1,359,978						1,386,913						1,453,167						1,441,302
Savings and money market deposits						2,209,550						2,184,652						2,184,675						2,199,028						2,194,991
Time deposits up to $250,000						465,543						427,864						372,150						330,148						261,961
Core deposits						5,990,459						5,981,881						5,971,825						6,075,166						6,036,337
Government time deposits						400,130						383,426						360,501						290,057						195,057
Other time deposits greater than $250,000						484,156						440,430						414,642						371,000						325,040
Total time deposits greater than $250,000						884,286						823,856						775,143						661,057						520,097
Total deposits						$	6,874,745					$	6,805,737					$	6,746,968					$	6,736,223					$	6,556,434