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 FOURTH QUARTER EARNINGS OF $14.9 MILLION

•Net income of $14.9 million, or $0.55 per diluted share for the fourth quarter.

•ROA of 0.79%, ROE of 12.55% and NIM of 2.84% for the fourth quarter.

•Net income of $58.7 million, or $2.17 per diluted share for the 2023 year.

•ROA of 0.78%, ROE of 12.38% and NIM of 2.94% for the 2023 year.

•Completed balance sheet repositioning including the sale of an office real estate property, branch lease termination and investment securities portfolio restructuring, resulting in a net $0.9 million pre-tax gain in the fourth quarter, and a total estimated annual positive impact to future pre-tax income of $2.0 million.

•Board of Directors approved quarterly cash dividend of $0.26 per share and authorized a new share repurchase program of up to $20.0 million for 2024.

HONOLULU, HI, January 31, 2024 – Central Pacific Financial Corp. (NYSE: CPF) (the "Company"), parent company of Central Pacific Bank (the "Bank" or "CPB"), today reported net income of $14.9 million, or fully diluted earnings per share ("EPS") of $0.55 for the fourth quarter of 2023, compared to net income of $13.1 million, or EPS of $0.49 in the previous quarter and net income of $20.2 million, or EPS of $0.74 in the year-ago quarter. For the 2023 year, net income was $58.7 million, or EPS of $2.17, compared to net income of $73.9 million, or EPS of $2.68 last year.

Pre-provision net revenue ("PPNR"), or net income excluding provision for credit losses and income taxes, totaled $23.8 million in the fourth quarter of 2023, compared to PPNR of $22.4 million in the previous quarter and $27.5 million in the year-ago quarter.

"Our solid 2023 results reflect our consistent business approach, strong credit culture and commitment to the Hawaii marketplace. We are proud to have been named to Newsweek’s 2024 list of America’s Best Regional Banks, based on our creditworthiness, profitability, net loan activity and public image. This achievement was made possible through our hardworking and committed team of employees and support of our customers and the community." said Arnold Martines, President and Chief Executive Officer. "We believe we are positioned to deliver a strong financial performance in 2024, highlighted by our strategic relationship focused approach and our solid liquidity, capital and asset quality." Net interest income was $51.1 million for the fourth quarter of 2023, which decreased by $0.8 million, or 1.5% from the previous quarter, and decreased by $5.1 million, or 9.1% from the year-ago quarter.

Net interest margin ("NIM") was 2.84% for the fourth quarter of 2023, which decreased by 4 basis points ("bps") from the previous quarter and decreased by 33 bps from the year-ago quarter. The sequential quarter decreases in net interest income and NIM was primarily due to increases in average balances and rates paid on interest-bearing deposits, which outpaced the increases in average yields earned on investment securities and loans and the increase in average interest-earning deposits at the Federal Reserve Bank.

During the quarter, the Company completed a $30.0 million investment portfolio restructuring designed to increase prospective earnings and net interest margin. The Company sold available-for-sale debt securities with a book value of $30.0 million, weighted average yield of 3.3%, weighted average duration of 3.4 years, and recognized a loss of $1.9 million. Proceeds from the sale were used to purchase $28.3 million in debt securities with a weighted average yield of 5.7% and a weighted average duration of 2.5 years. The Company estimates the earn-back period to be approximately 2.8 years.

The Company recorded a provision for credit losses of $4.7 million in the fourth quarter of 2023, compared to a provision of $4.9 million in the previous quarter and a provision of $0.6 million in the year-ago quarter. The provision in the fourth quarter consisted of a provision for credit losses on loans of $5.0 million, offset by a credit to the provision for credit losses on off-balance sheet exposures of $0.3 million.

Other operating income totaled $15.2 million for the fourth quarter of 2023, compared to $10.0 million in the previous quarter and $11.6 million in the year-ago quarter. The increase from the previous quarter was primarily due to a non-recurring pre-tax net gain on the sale of a real estate property (included in other) of $5.1 million, combined with higher income from bank-owned life insurance ("BOLI") of $1.6 million, partially offset by the aforementioned losses on sales of investment securities totaling $1.9 million recognized in the current quarter. The Company expects future annual savings from the sale and consolidation of the real estate office space of approximately $0.6 million. The higher BOLI income was primarily attributable to equity market volatility and was offset by higher deferred compensation expense in other operating expenses.

Other operating expense totaled $42.5 million for the fourth quarter of 2023, compared to $39.6 million in the previous quarter and $40.4 million in the year-ago quarter. The increase from the previous quarter was primarily due to a non-recurring branch lease termination expense (included in other) of $2.3 million, combined with higher salaries and employee benefits of $1.1 million, partially offset by lower computer software expense of $0.4 million. The Company expects future annual savings from the branch lease termination and consolidation of approximately $0.7 million.

The efficiency ratio was 64.12% for the fourth quarter of 2023, compared to 63.91% in the previous quarter and 59.56% in the year-ago quarter.

The effective tax rate was 22.3% for the fourth quarter of 2023, compared to 24.9% in the previous quarter and 24.9% in the year-ago quarter. The lower effective tax rate was primarily attributable to higher tax-exempt BOLI income as a percentage of pre-tax income.

Total assets of $7.64 billion at December 31, 2023 remained relatively flat from $7.64 billion at September 30, 2023, and increased by $210.0 million, or 2.8% from $7.43 billion at December 31, 2022. The Company had $522.4 million in cash on its balance sheet and $2.45 billion in total other liquidity sources, including available borrowing capacity and unpledged investment securities at December 31, 2023. Total available sources of liquidity as a percentage of uninsured and uncollateralized deposits was 125% at December 31, 2023.

Total loans, net of deferred fees and costs, of $5.44 billion at December 31, 2023 decreased by $69.7 million, or 1.3% from $5.51 billion at September 30, 2023, and decreased by $116.5 million, or 2.1% from $5.56 billion at December 31, 2022. Average yields earned on loans during the fourth quarter of 2023 was 4.55%, compared to 4.49% in the previous quarter and 4.10% in the year-ago quarter.

Total deposits of $6.85 billion at December 31, 2023 decreased by $27.2 million or 0.4% from $6.87 billion at September 30, 2023, and increased by $111.4 million, or 1.7% from $6.74 billion at December 31, 2022. Core deposits, which include demand deposits, savings and money market deposits and time deposits up to $250,000, totaled $5.99 billion at December 31, 2023, and remained relatively flat from $5.99 billion at September 30, 2023. Average rates paid on total deposits during the fourth quarter of 2023 was 1.22%, compared to 1.07% in the previous quarter and 0.41% in the year-ago quarter.

At December 31, 2023, approximately 65% of the Company's total deposits were FDIC-insured or fully collateralized.

Nonperforming assets totaled $7.0 million, or 0.09% of total assets at December 31, 2023, compared to $6.7 million, or 0.09% of total assets at September 30, 2023 and $5.3 million, or 0.07% of total assets at December 31, 2022.

Net charge-offs totaled $5.5 million in the fourth quarter of 2023, compared to net charge-offs of $3.9 million in the previous quarter, and net charge-offs of $1.7 million in the year-ago quarter. The increase in net charge-offs was primarily attributable to the mainland consumer loan portfolio. Annualized net charge-offs as a percentage of average loans was 0.41%, 0.28% and 0.12% during the three months ended December 31, 2023, September 30, 2023 and December 31, 2022, respectively.

The allowance for credit losses, as a percentage of total loans was 1.18% at December 31, 2023, compared to 1.17% at September 30, 2023, and 1.15% at December 31, 2022.

Total shareholders' equity was $503.8 million at December 31, 2023, compared to $468.6 million and $452.9 million at September 30, 2023 and December 31, 2022, respectively. The increase from the previous and year-ago quarters is primarily due to net income, combined with the decrease in unrealized losses on investment securities, partially offset by dividends paid.

The Company's leverage, tier 1 risk-based capital, total risk-based capital, and common equity tier 1 capital ratios were 8.8%, 12.4%, 14.6%, and 11.4%, respectively, at December 31, 2023, compared to 8.7%, 11.9%, 14.1%, and 11.0%, respectively, at September 30, 2023.

On January 30, 2024, 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 March 15, 2024 to shareholders of record at the close of business on February 29, 2024.

On January 30, 2024, the Company's Board of Directors also authorized the repurchase of up to $20 million of its common stock from time to time in the open market or in privately negotiated transactions, pursuant to a newly authorized share repurchase program (the "Repurchase Plan"). The Repurchase Plan replaces and supersedes in its entirety the share repurchase program previously approved by the Company's Board of Directors. The Company did not repurchase any shares of common stock during the fourth quarter of 2023. During the year ended December 31, 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. During the year ended December 31, 2023, the Company returned $30.7 million in capital to its shareholders through cash dividends and share repurchases.

The Company's management will host a conference call today at 1:00 p.m. Eastern Time (8:00 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 March 1, 2024 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 December 31, 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 interest rate fluctuations; 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 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 impact resulting from the elimination of the London Interbank Offered Rate ("LIBOR") Index; 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																														Year Ended
(Dollars in thousands,						Dec 31,						Sep 30,						Jun 30,						Mar 31,						Dec 31,						Dec 31,
except for per share amounts)						2023						2023						2023						2023						2022						2023						2022
CONDENSED INCOME STATEMENT
Net interest income						$	51,142					$	51,928					$	52,734					$	54,196					$	56,285					$	210,000					$	215,563
Provision (credit) for credit losses						4,653						4,874						4,319						1,852						571						15,698						(1,273)
Total other operating income						15,172						10,047						10,435						11,009						11,601						46,663						47,919
Total other operating expense						42,522						39,611						39,903						42,107						40,434						164,143						165,986
Income tax expense						4,273						4,349						4,472						5,059						6,700						18,153						24,841
Net income						14,866						13,141						14,475						16,187						20,181						58,669						73,928
Basic earnings per share						$	0.55					$	0.49					$	0.54					$	0.60					$	0.74					$	2.17					$	2.70
Diluted earnings per share						0.55						0.49						0.53						0.60						0.74						2.17						2.68
Dividends declared per share						0.26						0.26						0.26						0.26						0.26						1.04						1.04
PERFORMANCE RATIOS
Return on average assets (ROA) [1]						0.79		%				0.70		%				0.78		%				0.87		%				1.09		%				0.78		%				1.01		%
Return on average shareholders’ equity (ROE) [1]						12.55						10.95						12.12						13.97						18.30						12.38						15.47
Average shareholders’ equity to average assets						6.32						6.39						6.40						6.23						5.97						6.34						6.51
Efficiency ratio [2]						64.12						63.91						63.17						64.58						59.56						63.95						63.00
Net interest margin (NIM) [1]						2.84						2.88						2.96						3.08						3.17						2.94						3.09
Dividend payout ratio [3]						47.27						53.06						49.06						43.33						35.14						47.93						38.81
SELECTED AVERAGE BALANCES
Average loans, including loans held for sale						$	5,458,245					$	5,507,248					$	5,543,398					$	5,525,988					$	5,498,800					$	5,508,530					$	5,298,573
Average interest-earning assets						7,208,613						7,199,866						7,155,606						7,112,377						7,103,841						7,169,463						7,003,232
Average assets						7,498,097						7,510,537						7,463,629						7,443,767						7,389,712						7,479,243						7,340,261
Average deposits						6,730,883						6,738,071						6,674,650						6,655,660						6,673,922						6,700,127						6,604,049
Average interest-bearing liabilities						5,023,321						4,999,820						4,908,120						4,820,660						4,708,045						4,938,705						4,530,347
Average shareholders’ equity						473,708						480,118						477,711						463,556						441,084						473,819						477,775
[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.

 

						Dec 31,						Sep 30,						Jun 30,						Mar 31,						Dec 31,
(Dollars in thousands, except share data)						2023						2023						2023						2023						2022
ASSETS
Cash and due from financial institutions						$	116,181					$	108,818					$	129,071					$	108,535					$	97,150
Interest-bearing deposits in other financial institutions						406,256						329,913						181,913						90,247						14,894
Investment securities:
Available-for-sale debt securities, at fair value						647,210						625,253						664,071						687,188						671,794
Held-to-maturity debt securities, at amortized cost; fair value of: $565,178 at December 31, 2023, $531,887 at September 30, 2023, $581,222 at June 30, 2023, $599,300 at March 31, 2023, and $596,780 at December 31, 2022						632,338						640,053						649,946						658,596						664,883
Total investment securities						1,279,548						1,265,306						1,314,017						1,345,784						1,336,677
Loans held for sale, at fair value						1,778						—						2,593						—						1,105
Loans, net of deferred fees and costs						5,438,982						5,508,710						5,520,683						5,557,397						5,555,466
Less: allowance for credit losses						63,934						64,517						63,849						63,099						63,738
Loans, net of allowance for credit losses						5,375,048						5,444,193						5,456,834						5,494,298						5,491,728
Premises and equipment, net						96,184						97,378						96,479						93,761						91,634
Accrued interest receivable						21,511						21,529						20,463						20,473						20,345
Investment in unconsolidated entities						41,546						42,523						45,218						45,953						46,641
Mortgage servicing rights						8,696						8,797						8,843						8,943						9,074
Bank-owned life insurance						170,706						168,543						168,136						168,244						167,967
Federal Home Loan Bank of Des Moines ("FHLB") stock						6,793						10,995						10,960						11,960						9,146
Right-of-use lease assets						29,720						32,294						33,247						34,237						34,985
Other assets						88,829						107,635						99,818						98,812						111,417
Total assets						$	7,642,796					$	7,637,924					$	7,567,592					$	7,521,247					$	7,432,763
LIABILITIES
Deposits:
Noninterest-bearing demand						$	1,913,379					$	1,969,523					$	2,009,387					$	2,028,087					$	2,092,823
Interest-bearing demand						1,329,189						1,345,843						1,359,978						1,386,913						1,453,167
Savings and money market						2,209,733						2,209,550						2,184,652						2,184,675						2,199,028
Time						1,395,291						1,349,829						1,251,720						1,147,293						991,205
Total deposits						6,847,592						6,874,745						6,805,737						6,746,968						6,736,223
FHLB advances and other short-term borrowings						—						—						—						25,000						5,000
Long-term debt, net of unamortized debt issuance costs of: $445 at December 31, 2023, $506 at September 30, 2023, $566 at June 30, 2023, $627 at March 31, 2023 and $688 at December 31, 2022						156,102						156,041						155,981						155,920						105,859
Lease liabilities						30,634						33,186						34,111						35,076						35,889
Other liabilities						104,653						105,354						95,484						87,357						96,921
Total liabilities						7,138,981						7,169,326						7,091,313						7,050,321						6,979,892
EQUITY
Shareholders' equity:
Preferred stock, no par value, authorized 1,000,000 shares; issued and outstanding: none at December 31, 2023, September 30, 2023, June 30, 2023, March 31, 2023, and December 31, 2022						—						—						—						—						—
Common stock, no par value, authorized 185,000,000 shares; issued and outstanding: 27,045,033 at December 31, 2023, 27,043,169 at September 30, 2023, 27,045,792 at June 30, 2023, 27,005,545 at March 31, 2023, and 27,025,070 at December 31, 2022						405,439						405,439						405,511						405,866						408,071
Additional paid-in capital						102,982						102,550						101,997						101,188						101,346
Retained earnings						117,990						110,156						104,046						96,600						87,438
Accumulated other comprehensive loss						(122,596)						(149,547)						(135,275)						(132,728)						(143,984)
Total shareholders' equity						503,815						468,598						476,279						470,926						452,871
Total liabilities and equity						$	7,642,796					$	7,637,924					$	7,567,592					$	7,521,247					$	7,432,763

 

						Dec 31,						Sep 30,						Jun 30,						Mar 31,						Dec 31,
(Dollars in thousands)						2023						2023						2023						2023						2022
Noninterest-bearing demand deposits						$	1,913,379					$	1,969,523					$	2,009,387					$	2,028,087					$	2,092,823
Interest-bearing demand deposits						1,329,189						1,345,843						1,359,978						1,386,913						1,453,167
Savings and money market deposits						2,209,733						2,209,550						2,184,652						2,184,675						2,199,028
Time deposits up to $250,000						533,898						465,543						427,864						372,150						330,148
Core deposits						5,986,199						5,990,459						5,981,881						5,971,825						6,075,166
Government time deposits						374,581						400,130						383,426						360,501						290,057
Other time deposits greater than $250,000						486,812						484,156						440,430						414,642						371,000
Total time deposits greater than $250,000						861,393						884,286						823,856						775,143						661,057
Total deposits						$	6,847,592					$	6,874,745					$	6,805,737					$	6,746,968					$	6,736,223