CENTRAL PACIFIC FINANCIAL ANNOUNCES RECORD EARNINGS AND LAUNCHES NEW BANKING-AS-A-SERVICE INITIATIVE TO DRIVE MAINLAND EXPANSION

Rhea-AI Summary

Central Pacific Financial Corp. (NYSE: CPF) reported record net income of $22.3 million for Q4 2021, translating to earnings per share (EPS) of $0.80, a significant increase from $12.2 million or $0.43 EPS in Q4 2020. For the full year, net income reached $79.9 million ($2.83 EPS), up from $37.3 million ($1.32 EPS) in 2020. The Company launched a Banking-as-a-Service initiative and plans to invest in fintech. A quarterly cash dividend of $0.26 was declared, with a 4% increase from the prior quarter. Additionally, a $30 million share repurchase program was authorized.

Positive

• Record net income of $22.3 million in Q4 2021, up 83% YoY.
• Full-year net income increased to $79.9 million from $37.3 million in 2020.
• Launch of Banking-as-a-Service initiative aimed at revenue growth.
• Quarterly cash dividend increased by 4% to $0.26 per share.
• Authorized $30 million share repurchase program.

Negative

• Net interest income decreased from previous quarter, affecting overall margins.
• Decrease in net interest margin to 3.08% from 3.32% YoY.
• Other operating income fell to $11.6 million from $14.1 million YoY.

HONOLULU, Jan. 26, 2022 /PRNewswire/ -- Central Pacific Financial Corp. (NYSE: CPF) (the "Company"), parent company of Central Pacific Bank (the "Bank"), today reported record net income for the fourth quarter and the 2021 year. Net income for the quarter was $22.3 million, or fully diluted earnings per share ("EPS") of $0.80, compared to net income in the fourth quarter of 2020 of $12.2 million, or EPS of $0.43, and net income in the third quarter of 2021 of $20.8 million, or EPS of $0.74. For the year, net income was $79.9 million, or EPS of $2.83, compared to net income of $37.3 million, or EPS of $1.32 for all of 2020. Pre-tax net income was $29.9 million and $105.7 million for the fourth quarter and the 2021 year, which represents the best pre-tax quarter and full year results since 2007.

The Company is also announcing the launch of a new Banking-as-a-Service ("BaaS") initiative with the goal of expanding the Company both in and beyond Hawaii by investing in or collaborating with leading fintech companies. The BaaS initiative is being developed based on the successful product development and launch strategies used in the Company's new Shaka digital product. Shaka, Hawaii's first all-digital checking account, was launched with a VIP waitlist campaign and the largest social media influencer campaign in Hawaii's history. Since the product launch on November 8, 2021, over 3,300 Shaka accounts have been opened.

Beginning in the first quarter of 2022, the Company will continue its BaaS initiatives with an equity investment in Swell, a new fintech company. Swell plans to launch a consumer banking app that combines checking, credit and more into one integrated account, and Central Pacific Bank will serve as the bank sponsor.  There will also be a collaboration between the Company, Swell and Elevate Credit (NYSE:ELVT), a leading provider of digital lending solutions. Swell is scheduled to launch its first product in mid-2022.

"We are very pleased with our record earnings and an extremely successful 2021," said Paul Yonamine, Chairman and Chief Executive Officer.  "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.  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."

On January 25, 2022, the Company's Board of Directors declared a quarterly cash dividend of $0.26 per share on its outstanding common shares. This represents a 4.0% increase from the dividend paid of $0.25 per share in the fourth quarter of 2021. The dividend will be payable on March 15, 2022 to shareholders of record at the close of business on February 28, 2022.

On January 25, 2022, the Company's Board of Directors authorized the repurchase of up to $30 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, which had $6.3 million in remaining repurchase authority as of December 31, 2021. During the fourth quarter of 2021, the Company repurchased 305,594 shares of common stock, at a total cost of $8.4 million, or an average cost per share of $27.64. During the year ended December 31, 2021, the Company returned $45.6 million in capital to its shareholders through cash dividends and share repurchases.

Earnings Highlights

Net interest income for the fourth quarter of 2021 was $53.1 million, compared to $51.5 million in the year-ago quarter and $56.1 million in the previous quarter. Net interest margin for the fourth quarter of 2021 was 3.08%, compared to 3.32% in the year-ago quarter and 3.31% in the previous quarter. The sequential quarter decrease in net interest income and net interest margin is primarily due to lower net interest income and loan fees on PPP loans, and lower yields on core loans, partially offset by higher average loan and investment security balances. Net interest income for the fourth quarter of 2021 included $4.7 million in net interest income and loan fees on PPP loans, compared to $8.6 million in the previous quarter. Net deferred fees on PPP loans totaled $3.5 million at December 31, 2021, compared to $7.9 million at September 30, 2021, respectively. Additional information on average balances, interest income and expenses and yields and rates is presented in Tables 4 and 5.

In the fourth quarter of 2021, the Company recorded a credit to the provision for credit losses of $7.7 million, compared to a provision of $4.9 million in the year-ago quarter and a credit to the provision of $2.6 million in the previous quarter. The credit to the provision for credit losses in the fourth quarter of 2021 was driven by continued improvements in the economic forecast, net recoveries during the current quarter and strong asset quality as the State of Hawaii continues to recover from the COVID-19 pandemic.

Other operating income for the fourth quarter of 2021 totaled $11.6 million, compared to $14.1 million in the year-ago quarter and $10.3 million in the previous quarter. The decrease from the year-ago quarter was primarily due to lower mortgage banking income of $3.5 million, partially offset by higher other service charges and fees of $1.3 million. The increase from the previous quarter was primarily due to higher mortgage banking income and bank-owned life insurance of $0.6 million and $0.4 million, respectively. Additional information on other operating income is presented in Table 3.

Other operating expense for the fourth quarter of 2021 totaled $42.4 million, compared to $44.7 million in the year-ago quarter and $41.3 million in the previous quarter. Other operating expense in the current quarter included $1.1 million in severance expense and $0.4 million in costs related to the consolidation of our Kapalama Branch on Oahu. The Company plans to consolidate three additional branches in 2022. The decrease in other operating expense from the year-ago quarter was primarily due to $3.9 million in nonrecurring expenses (included in other) in the year-ago quarter, which included: branch consolidation costs of $1.3 million, litigation settlements of $0.8 million, Federal Home Loan Bank advance prepayment fee of $0.7 million, loss on disposal of fixed assets of $0.6 million and other nonrecurring expenses totaling $0.5 million. The increase in other operating expense from the previous quarter is primarily due to branch consolidation costs, higher deferred compensation plan expenses and higher promotions expense of $0.4 million each. Additional information on other operating expense is presented in Table 3.

The efficiency ratio for the fourth quarter of 2021 was 65.61%, compared to 68.20% in the year-ago quarter and 62.32% in the previous quarter.

The effective tax rate for the fourth quarter of 2021 was 25.4%, compared to 23.7% in the year-ago quarter and 24.7% in the previous quarter.

Balance Sheet Highlights

Total assets at December 31, 2021 of $7.42 billion increased from $6.59 billion at December 31, 2020, and increased from $7.30 billion at September 30, 2021.

Total loans, net of deferred fees and costs, at December 31, 2021 of $5.10 billion increased from $4.96 billion at December 31, 2020, and increased from $5.05 billion at September 30, 2021. The sequential quarter increase in total loans included a net increase in core loans (or non-PPP loans) of $183.2 million led by residential mortgage loan growth of $127.3 million, offset by a decline in PPP loans of $127.3 million due to SBA forgiveness and payments. Loans on forbearance or deferral totaled $0.4 million, or less than 1% of total loans at December 31, 2021. Loans by geographic distribution are summarized in Table 6.

Total deposits at December 31, 2021 of $6.64 billion increased from $5.80 billion at December 31, 2020, and increased from $6.52 billion at September 30, 2021. Core deposits, which include demand deposits, savings and money market deposits and time deposits up to $250,000, totaled $6.16 billion at December 31, 2021, and increased by $66.0 million from September 30, 2021. Non-core deposits increased by $57.3 million from September 30, 2021. The Company's loan-to-deposit ratio was 76.8% at December 31, 2021, compared to 77.4% at September 30, 2021. Core deposit and total deposit balances are summarized in Table 7.

Asset Quality

Nonperforming assets at December 31, 2021 totaled $5.9 million, or 0.08% of total assets, compared to $6.2 million, or 0.09% of total assets at December 31, 2020, and $7.2 million, or 0.10% of total assets at September 30, 2021. Additional information on nonperforming assets, past due and restructured loans is presented in Table 8.

Net recoveries in the fourth quarter of 2021 totaled $0.9 million, compared to net charge-offs of $1.8 million in the year-ago quarter, and net charge-offs of $0.2 million in the previous quarter.

The allowance for credit losses, as a percentage of total loans at December 31, 2021 was 1.33%, compared to 1.68% at December 31, 2020 and 1.48% at September 30, 2021. Excluding PPP loans, the allowance for credit losses, as a percentage of core loans at December 31, 2021 was 1.36%, compared to 1.55% at September 30, 2021. Additional information on net charge-offs and recoveries and the allowance for credit losses is presented in Tables 9 and 10.

Capital

Total shareholders' equity was $558.2 million at December 31, 2021, compared to $546.7 million and $555.4 million at December 31, 2020 and September 30, 2021, respectively.

The Company maintained its strong capital position and its capital ratios continue to exceed the levels required to be considered a "well-capitalized" institution for regulatory purposes under Basel III. At December 31, 2021, the Company's leverage capital, tier 1 risk-based capital, total risk-based capital, and common equity tier 1 ratios were 8.5%, 12.2%, 14.5%, and 11.2%, respectively, compared to 8.5%, 12.2%, 14.6%, and 11.2%, respectively, at September 30, 2021.

Non-GAAP Financial Measures

This press release contains certain references to financial measures that have been adjusted to exclude certain expenses and other specified items. These financial measures differ from comparable measures calculated and presented in accordance with accounting principles generally accepted in the United States of America ("GAAP") in that they exclude unusual or non-recurring charges, losses, credits or gains. This press release identifies the specific items excluded from the comparable GAAP financial measure in the calculation of each non-GAAP financial measure. Management believes that financial presentations excluding the impact of these items provide useful supplemental information that is important to a proper understanding of the Company's core business results by investors. These presentations should not be viewed as a substitute for results determined in accordance with GAAP, nor are they necessarily comparable to non-GAAP financial measures presented by other companies.

Conference Call

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 1-844-200-6205 (access code: 319900). A playback of the call will be available through February 25, 2022 by dialing 1-866-813-9403 (access code: 961340) 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.

About Central Pacific Financial Corp.

Central Pacific Financial Corp. is a Hawaii-based bank holding company with approximately $7.4 billion in assets as of December 31, 2021. Central Pacific Bank, its primary subsidiary, operates 30 branches and 69 ATMs in the state of Hawaii. For additional information, please visit the Company's website at http://www.cpb.bank.

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Forward-Looking Statements

This document may contain forward-looking statements concerning: projections of revenues, expenses, income or loss, earnings or loss per share, capital expenditures, the payment or nonpayment of dividends, capital position, credit losses, net interest margin or other financial items; statements of plans, objectives and expectations of Central Pacific Financial Corp. or its management or Board of Directors, including those relating to business plans, use of capital resources, products or services and regulatory developments and regulatory actions; statements of future economic performance including anticipated performance results from our business initiatives; or any statements of the assumptions underlying or relating to any of the foregoing. Words such as "believes," "plans," "anticipates," "expects," "intends," "forecasts," "hopes," "targeting," "continue," "remain," "will," "should," "estimates," "may" and other similar expressions are intended to identify forward-looking statements but are not the exclusive means of identifying such statements.

While we believe that our forward-looking statements 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 adverse effects of the COVID-19 pandemic virus 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 as well as the effects of government programs and initiatives in response to COVID-19; the impact of our participation in the Paycheck Protection Program ("PPP") and fulfillment of government guarantees on our PPP loans; our ability to successfully implement our Banking-as-a-Service initiatives, including adoption of the initiatives by customers and risks faced by any of our bank collaborations including reputational and regulatory risk; 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 our business initiatives; 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, including COVID-19) 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 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 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"); inflation, interest rate, securities market and monetary fluctuations, including the anticipated replacement of the London Interbank Offered Rate ("LIBOR") Index and the impact on our loans and debt which are tied to that 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;  pandemic virus and disease, including COVID-19; changes in consumer spending, borrowings and savings habits; failure to maintain effective internal control over financial reporting or disclosure controls and procedures; cybersecurity and data privacy breaches and the consequence therefrom; 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, 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.

For further information with respect to factors that could cause actual results to materially differ from the expectations or projections stated in the forward-looking statements, please see the Company's publicly available Securities and Exchange Commission filings, including the Company's Form 10-K for the last fiscal year and, in particular, the discussion of "Risk Factors" set forth therein. We urge investors to consider all of these factors carefully in evaluating the forward-looking statements contained in this Form 8-K. Forward-looking statements speak only as of the date on which such statements are made. We undertake no obligation to update any forward-looking statements to reflect events or circumstances after the date on which such statements are made, or to reflect the occurrence of unanticipated events except as required by law.

CENTRAL PACIFIC FINANCIAL CORP. AND SUBSIDIARIES
Financial Highlights
(Unaudited)														TABLE 1
		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)		2021		2021		2021		2021		2020		2021		2020
CONDENSED INCOME STATEMENT
Net interest income		$     53,096		$     56,086		$     52,061		$     49,804		$     51,474		$   211,047		$   197,683
(Credit) provision for credit losses [1]		(7,692)		(2,635)		(3,443)		(821)		4,898		(14,591)		42,111
Total other operating income		11,566		10,253		10,530		10,711		14,057		43,060		45,198
Total other operating expense [1]		42,422		41,345		41,433		37,846		44,690		163,046		151,737
Income tax expense		7,605		6,814		5,887		5,452		3,772		25,758		11,760
Net income		22,327		20,815		18,714		18,038		12,171		79,894		37,273
Basic earnings per common share		$        0.80		$        0.74		$        0.66		$        0.64		$        0.43		$        2.85		$        1.33
Diluted earnings per common share		0.80		0.74		0.66		0.64		0.43		2.83		1.32
Dividends declared per common share		0.25		0.24		0.24		0.23		0.23		0.96		0.92
PERFORMANCE RATIOS
Return on average assets (ROA) [2]		1.22  %		1.15  %		1.06  %		1.07  %		0.74  %		1.13  %		0.58  %
Return on average shareholders' equity (ROE) [2]		16.05		14.82		13.56		13.07		8.87		14.38		6.85
Average shareholders' equity to average assets		7.61		7.79		7.84		8.19		8.29		7.85		8.47
Efficiency ratio  [3]		65.61		62.32		66.20		62.54		68.20		64.16		62.47
Net interest margin (NIM) [2]		3.08		3.31		3.16		3.19		3.32		3.18		3.30
Dividend payout ratio [4]		31.25		32.43		36.36		35.94		53.49		33.92		69.70
SELECTED AVERAGE BALANCES
Average loans, including loans held for sale		$ 5,073,069		$ 5,022,909		$ 5,110,820		$ 5,079,874		$ 5,034,717		$ 5,071,516		$ 4,855,169
Average interest-earning assets		6,890,829		6,761,643		6,606,779		6,305,786		6,202,228		6,643,193		6,015,166
Average assets		7,315,325		7,210,210		7,039,928		6,738,825		6,621,127		7,078,025		6,418,661
Average deposits		6,536,826		6,424,768		6,269,516		5,958,742		5,755,257		6,299,369		5,555,877
Average interest-bearing liabilities		4,407,612		4,221,073		4,253,382		4,161,453		4,163,396		4,288,041		4,070,923
Average shareholders' equity		556,462		561,606		552,102		551,976		548,663		555,600		543,919

 

CENTRAL PACIFIC FINANCIAL CORP. AND SUBSIDIARIES
Financial Highlights
(Unaudited)								TABLE 1 (CONTINUED)
		Dec 31,		Sep 30,		Jun 30,		Mar 31,		Dec 31,
(dollars in thousands)		2021		2021		2021		2021		2020
REGULATORY CAPITAL RATIOS
Central Pacific Financial Corp.
Leverage capital ratio		8.5  %		8.5  %		8.6  %		8.9  %		8.8  %
Tier 1 risk-based capital ratio		12.2		12.2		12.7		13.1		12.9
Total risk-based capital ratio		14.5		14.6		14.9		15.4		15.2
Common equity tier 1 capital ratio		11.2		11.2		11.6		12.0		11.8
Central Pacific Bank
Leverage capital ratio		8.9		9.0		9.1		9.4		9.4
Tier 1 risk-based capital ratio		12.8		13.0		13.5		13.9		13.7
Total risk-based capital ratio		14.0		14.3		14.6		15.0		14.9
Common equity tier 1 capital ratio		12.8		13.0		13.5		13.9		13.7
		Dec 31,		Sep 30,		Jun 30,		Mar 31,		Dec 31,
(dollars in thousands, except for per share amounts)		2021		2021		2021		2021		2020
BALANCE SHEET
Total loans, net of deferred fees and costs		$ 5,101,649		$ 5,045,797		$ 5,077,318		$ 5,137,849		$ 4,964,113
Total assets		7,419,089		7,298,231		7,178,481		6,979,265		6,594,583
Total deposits		6,639,158		6,515,863		6,397,159		6,208,950		5,796,118
Long-term debt		105,616		105,556		105,495		105,436		105,385
Total shareholders' equity		558,219		555,419		552,793		542,865		546,685
Total shareholders' equity to total assets		7.52  %		7.61  %		7.70  %		7.78  %		8.29  %
ASSET QUALITY
Allowance for credit losses (ACL) [1]		$     68,097		$     74,587		$     77,781		$     81,553		$     83,269
Non-performing assets (NPA)		5,881		7,237		6,745		7,194		6,192
ACL to total loans [1]		1.33  %		1.48  %		1.53  %		1.59  %		1.68  %
ACL to core loans (refer to Table 10) [1]		1.36  %		1.55  %		1.68  %		1.80  %		1.83  %
ACL to non-performing assets [1]		1,157.92  %		1,030.63  %		1,153.17  %		1,133.63  %		1,344.78  %
NPA to total assets		0.08  %		0.10  %		0.09  %		0.10  %		0.09  %
PER SHARE OF COMMON STOCK OUTSTANDING
Book value per common share		$       20.14		$       19.84		$       19.59		$       19.19		$       19.40
Closing market price per common share		28.17		25.68		26.06		26.68		19.01
[1] As of January 1, 2021, the provision for credit losses on off-balance sheet credit exposures (previously included in other operating expense) is included in the provision for credit losses line on the consolidated statements of income. Prior period amounts have been reclassified to conform to the current period presentation. The allowance for off-balance sheet credit exposures continues to be included in other liabilities.
[2] ROA, ROE and ROTE 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).
[3] Efficiency ratio is defined as total operating expense divided by total revenue (net interest income and total other operating income).
[4] Dividend payout ratio is defined as dividends declared per share divided by diluted earnings per share.

 

CENTRAL PACIFIC FINANCIAL CORP. AND SUBSIDIARIES
Consolidated Balance Sheets
(Unaudited)										TABLE 2
		Dec 31,		Sep 30,		Jun 30,		Mar 31,		Dec 31,
(Dollars in thousands, except share data)		2021		2021		2021		2021		2020
ASSETS
Cash and due from financial institutions		$           81,506		$         108,669		$       116,009		$           93,358		$           97,546
Interest-bearing deposits in other financial institutions		247,401		240,173		224,469		166,533		6,521
Investment securities:
Available-for-sale debt securities, at fair value		1,631,699		1,535,450		1,407,340		1,216,341		1,182,609
Equity securities, at fair value		—		1,593		1,578		1,435		1,351
Total investment securities		1,631,699		1,537,043		1,408,918		1,217,776		1,183,960
Loans held for sale		3,531		5,290		5,361		5,234		16,687
Loans, net of deferred fees and costs		5,101,649		5,045,797		5,077,318		5,137,849		4,964,113
Less allowance for credit losses		68,097		74,587		77,781		81,553		83,269
Loans, net of allowance for credit losses		5,033,552		4,971,210		4,999,537		5,056,296		4,880,844
Premises and equipment, net		80,354		80,190		76,740		72,599		65,278
Accrued interest receivable		16,709		17,110		19,014		19,440		20,224
Investment in unconsolidated entities		29,679		30,397		31,052		31,487		29,968
Other real estate owned		—		—		—		—		—
Mortgage servicing rights		9,738		9,976		10,500		11,094		11,865
Bank-owned life insurance		169,148		167,961		167,289		167,110		163,161
Federal Home Loan Bank ("FHLB") stock		7,964		7,952		8,149		8,155		8,237
Right of use lease asset		39,441		40,757		41,890		44,727		45,857
Other assets		68,367		81,503		69,553		85,456		64,435
Total assets		$      7,419,089		$      7,298,231		$    7,178,481		$      6,979,265		$      6,594,583
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Noninterest-bearing demand		$      2,291,246		$      2,195,404		$    2,203,806		$      2,070,428		$      1,790,269
Interest-bearing demand		1,415,277		1,372,626		1,341,280		1,237,574		1,174,888
Savings and money market		2,225,903		2,296,968		2,048,945		2,004,368		1,932,043
Time		706,732		650,865		803,128		896,580		898,918
Total deposits		6,639,158		6,515,863		6,397,159		6,208,950		5,796,118
FHLB advances and other short-term borrowings		—		—		—		—		22,000
Long-term debt		105,616		105,556		105,495		105,436		105,385
Lease liability		40,731		41,933		43,112		46,033		47,191
Other liabilities		75,317		79,412		79,874		75,933		77,156
Total liabilities		6,860,822		6,742,764		6,625,640		6,436,352		6,047,850
Shareholders' equity:
Preferred stock, no par value, authorized 1,000,000 shares; issued and outstanding:  none at December 31, 2021, September 30, 2021, June 30, 2021, March 31, 2021, and December 31, 2020		—		—		—		—		—
Common stock, no par value, authorized 185,000,000 shares; issued and outstanding:  27,714,071 at December 31, 2021, 27,999,588 at September 30, 2021, 28,218,860 at June 30, 2021, 28,282,530 at March 31, 2021, and 28,183,340 at December 31, 2020		433,263		436,957		440,854		443,505		442,635
Additional paid-in capital		98,073		97,279		96,182		95,721		94,842
Retained earnings (accumulated deficit)		34,843		22,916		10,831		628		(10,920)
Accumulated other comprehensive (loss) income		(7,960)		(1,733)		4,926		3,011		20,128
Total shareholders' equity		558,219		555,419		552,793		542,865		546,685
Non-controlling interest		48		48		48		48		48
Total equity		558,267		555,467		552,841		542,913		546,733
Total liabilities and shareholders' equity		$      7,419,089		$      7,298,231		$    7,178,481		$      6,979,265		$      6,594,583

 

CENTRAL PACIFIC FINANCIAL CORP. AND SUBSIDIARIES
Consolidated Statements of Income
(Unaudited)														TABLE 3
		Three Months Ended										Year Ended
		December 31,		September 30,		June 30,		March 31,		December 31,		December 31,
(Dollars in thousands, except per share data)		2021		2021		2021		2021		2020		2021		2020
Interest income:
Interest and fees on loans		$               47,576		$               51,104		$               49,024		$               46,074		$               48,259		$            193,778		$            186,129
Interest and dividends on investment securities:
Taxable investment securities		6,667		6,210		4,447		5,106		5,002		22,430		23,302
Tax-exempt investment securities		642		470		346		514		504		1,972		2,392
Dividend income on investment securities		21		18		18		18		18		75		69
Interest on deposits in other financial institutions		86		105		61		10		4		262		46
Dividend income on FHLB stock		61		62		63		59		114		245		480
Total interest income		55,053		57,969		53,959		51,781		53,901		218,762		212,418
Interest expense:
Interest on deposits:
Demand		104		101		93		86		105		384		510
Savings and money market		352		332		282		274		314		1,240		2,416
Time		478		428		498		588		813		1,992		7,489
Interest on short-term borrowings		—		—		—		2		65		2		718
Interest on long-term debt		1,023		1,022		1,025		1,027		1,130		4,097		3,602
Total interest expense		1,957		1,883		1,898		1,977		2,427		7,715		14,735
Net interest income		53,096		56,086		52,061		49,804		51,474		211,047		197,683
(Credit) provision for credit losses		(7,692)		(2,635)		(3,443)		(821)		4,898		(14,591)		42,111
Net interest income after (credit) provision for credit losses		60,788		58,721		55,504		50,625		46,576		225,638		155,572
Other operating income:
Mortgage banking income		1,902		1,327		1,533		2,970		5,434		7,732		13,682
Service charges on deposit accounts		1,800		1,637		1,443		1,478		1,560		6,358		6,234
Other service charges and fees		5,016		4,942		4,619		3,790		3,709		18,367		14,867
Income from fiduciary activities		1,283		1,292		1,269		1,231		1,113		5,075		4,829
Net gain (loss) on sales of investment securities		—		100		50		—		151		150		(201)
Income from bank-owned life insurance		946		540		1,210		797		1,219		3,493		3,803
Other		619		415		406		445		871		1,885		1,984
Total other operating income		11,566		10,253		10,530		10,711		14,057		43,060		45,198
Other operating expense:
Salaries and employee benefits		23,030		23,566		23,790		19,827		23,090		90,213		83,848
Net occupancy		4,129		4,185		4,055		3,764		4,011		16,133		15,162
Equipment		1,207		1,089		1,048		1,000		1,157		4,344		4,531
Communication expense		922		824		756		769		758		3,271		3,225
Legal and professional services		2,928		2,575		2,572		2,377		2,507		10,452		9,035
Computer software expense		3,125		2,998		3,398		3,783		3,625		13,304		12,717
Advertising expense		1,179		1,329		1,329		1,658		756		5,495		3,791
Other		5,902		4,779		4,485		4,668		8,786		19,834		19,428
Total other operating expense		42,422		41,345		41,433		37,846		44,690		163,046		151,737
Income before income taxes		29,932		27,629		24,601		23,490		15,943		105,652		49,033
Income tax expense		7,605		6,814		5,887		5,452		3,772		25,758		11,760
Net income		$               22,327		$               20,815		$               18,714		$               18,038		$               12,171		$               79,894		$               37,273
Per common share data:
Basic earnings per share		$                   0.80		$                   0.74		$                   0.66		$                   0.64		$                   0.43		$                   2.85		$                   1.33
Diluted earnings per share		0.80		0.74		0.66		0.64		0.43		2.83		1.32
Cash dividends declared		0.25		0.24		0.24		0.23		0.23		0.96		0.92
Basic weighted average shares outstanding		27,769,651		27,967,089		28,173,710		28,108,648		28,071,151		28,003,744		28,074,543
Diluted weighted average shares outstanding		28,045,826		28,175,953		28,456,624		28,313,014		28,177,366		28,257,323		28,180,576
Note: Certain amounts in the prior period financial statements have been reclassified to conform to the presentation of the current period.

 

CENTRAL PACIFIC FINANCIAL CORP. AND SUBSIDIARIES
Average Balances, Interest Income & Expense, Yields and Rates (Taxable Equivalent)
(Unaudited)																		TABLE 4
		Three Months Ended						Three Months Ended						Three Months Ended
		December 31, 2021						September 30, 2021						December 31, 2020
		Average		Average				Average		Average				Average		Average
(Dollars in thousands)		Balance		Yield/Rate		Interest		Balance		Yield/Rate		Interest		Balance		Yield/Rate		Interest
ASSETS
Interest-earning assets:
Interest-bearing deposits in other financial institutions		$   225,560		0.15  %		$       86		$   273,039		0.15  %		$      105		$     16,786		0.10        %		$         4
Investment securities, excluding valuation allowance:
Taxable		1,469,711		1.82		6,688		1,351,272		1.84		6,228		1,048,665		1.91		5,020
Tax-exempt		114,529		2.84		813		106,333		2.24		595		90,452		2.83		638
Total investment securities		1,584,240		1.89		7,501		1,457,605		1.87		6,823		1,139,117		1.99		5,658
Loans, including loans held for sale		5,073,069		3.73		47,576		5,022,909		4.05		51,104		5,034,717		3.82		48,259
Federal Home Loan Bank stock		7,960		3.05		61		8,090		3.09		62		11,608		3.91		114
Total interest-earning assets		6,890,829		3.19		55,224		6,761,643		3.42		58,094		6,202,228		3.48		54,035
Noninterest-earning assets		424,496						448,567						418,899
Total assets		$  7,315,325						$  7,210,210						$  6,621,127
LIABILITIES AND EQUITY
Interest-bearing liabilities:
Interest-bearing demand deposits		$  1,383,696		0.03   %		$      104		$  1,356,967		0.03  %		$      101		$  1,149,759		0.04        %		$      105
Savings and money market deposits		2,224,592		0.06		352		2,168,055		0.06		332		1,902,876		0.07		314
Time deposits up to $250,000		225,451		0.31		176		228,762		0.31		181		246,573		0.57		351
Time deposits over $250,000		468,292		0.26		302		467,289		0.21		247		662,390		0.28		462
Total interest-bearing deposits		4,302,031		0.09		934		4,221,073		0.08		861		3,961,598		0.12		1,232
Federal Home Loan Bank advances and other short-term borrowings		—		—		—		—		—		—		76,968		0.33		65
Long-term debt		105,581		3.85		1,023		105,516		3.84		1,022		124,830		3.60		1,130
Total interest-bearing liabilities		4,407,612		0.18		1,957		4,326,589		0.17		1,883		4,163,396		0.23		2,427
Noninterest-bearing deposits		2,234,795						2,203,695						1,793,659
Other liabilities		116,408						118,272						115,407
Total liabilities		6,758,815						6,648,556						6,072,462
Shareholders' equity		556,462						561,606						548,663
Non-controlling interest		48						48						2
Total equity		556,510						561,654						548,665
Total liabilities and equity		$  7,315,325						$  7,210,210						$  6,621,127
Net interest income						$ 53,267						$ 56,211						$ 51,608
Interest rate spread				3.01  %						3.25  %						3.25        %
Net interest margin				3.08  %						3.31  %						3.32       %

 

CENTRAL PACIFIC FINANCIAL CORP. AND SUBSIDIARIES
Average Balances, Interest Income & Expense, Yields and Rates (Taxable Equivalent)
(Unaudited)												TABLE 5
		Year Ended						Year Ended
		December 31, 2021						December 31, 2020
		Average		Average				Average		Average
(Dollars in thousands)		Balance		Yield/Rate		Interest		Balance		Yield/Rate		Interest
ASSETS
Interest-earning assets:
Interest-bearing deposits in other financial institutions		$     191,967		0.14   %		$            262		$       13,980		0.33  %		$              46
Investment securities, excluding valuation allowance:
Taxable		1,269,900		1.77		22,505		1,037,209		2.25		23,371
Tax-exempt		101,877		2.45		2,496		96,217		3.15		3,028
Total investment securities		1,371,777		1.82		25,001		1,133,426		2.33		26,399
Loans, including loans held for sale		5,071,516		3.82		193,778		4,855,169		3.83		186,129
Federal Home Loan Bank stock		7,933		3.09		245		12,591		3.81		480
Total interest-earning assets		6,643,193		3.30		219,286		6,015,166		3.54		213,054
Noninterest-earning assets		434,832						403,495
Total assets		$  7,078,025						$  6,418,661
LIABILITIES AND EQUITY
Interest-bearing liabilities:
Interest-bearing demand deposits		$  1,300,022		0.03   %		$            384		$  1,078,589		0.05   %		$            510
Savings and money market deposits		2,099,388		0.06		1,240		1,830,972		0.13		2,416
Time deposits up to  $250,000		230,705		0.34		795		257,708		0.75		1,921
Time deposits over $250,000		551,831		0.22		1,197		696,650		0.80		5,568
Total interest-bearing deposits		4,181,946		0.09		3,616		3,863,919		0.27		10,415
Federal Home Loan Bank advances and other short-term borrowings		607		0.30		2		89,904		0.80		718
Long-term debt		105,488		3.88		4,097		117,100		3.08		3,602
Total interest-bearing liabilities		4,288,041		0.18		7,715		4,070,923		0.36		14,735
Noninterest-bearing deposits		2,117,423						1,691,958
Other liabilities		116,936						111,859
Total liabilities		6,522,400						5,874,740
Shareholders' equity		555,600						543,919
Non-controlling interest		25						2
Total equity		555,625						543,921
Total liabilities and equity		$  7,078,025						$  6,418,661
Net interest income						$     211,571						$     198,319
Interest rate spread				3.12  %						3.18  %
Net interest margin				3.18 %						3.30 %

 

CENTRAL PACIFIC FINANCIAL CORP. AND SUBSIDIARIES
Loans by Geographic Distribution
(Unaudited)										TABLE 6
		December 31,		September 30,		June 30,		March 31,		December 31,
(Dollars in thousands)		2021		2021		2021		2021		2020
HAWAII:
Commercial, financial and agricultural:
SBA Paycheck Protection Program		$             87,459		$         198,315		$         395,352		$         548,880		$         375,879
Other		422,388		404,751		389,341		399,154		426,670
Real estate:
Construction		122,867		128,908		133,457		137,976		125,407
Residential mortgage		1,875,980		1,748,729		1,711,801		1,687,513		1,690,212
Home equity		637,249		618,951		583,430		559,514		551,266
Commercial mortgage		922,146		915,746		926,006		911,216		898,055
Consumer		333,843		331,987		328,332		319,032		332,430
Total loans, net of deferred fees and costs		4,401,932		4,347,387		4,467,719		4,563,285		4,399,919
Allowance for credit losses		(55,808)		(62,126)		(67,773)		(70,961)		(73,152)
Loans, net of allowance for credit losses		$        4,346,124		$      4,285,261		$      4,399,946		$      4,492,324		$      4,326,767
U.S. MAINLAND: [1]
Commercial, financial and agricultural:
SBA Paycheck Protection Program		$               3,868		$           20,356		$           39,258		$           48,939		$           40,496
Other		107,733		114,122		96,884		115,035		118,421
Real estate:
Commercial mortgage		298,058		292,671		260,424		253,122		258,273
Consumer		290,058		271,261		213,033		157,468		147,004
Total loans, net of deferred fees and costs		699,717		698,410		609,599		574,564		564,194
Allowance for credit losses		(12,289)		(12,461)		(10,008)		(10,592)		(10,117)
Loans, net of allowance for credit losses		$           687,428		$         685,949		$         599,591		$         563,972		$         554,077
TOTAL:
Commercial, financial and agricultural:
SBA Paycheck Protection Program		$             91,327		$         218,671		$         434,610		$         597,819		$         416,375
Other		530,121		518,873		486,225		514,189		545,091
Real estate:
Construction		122,867		128,908		133,457		137,976		125,407
Residential mortgage		1,875,980		1,748,729		1,711,801		1,687,513		1,690,212
Home equity		637,249		618,951		583,430		559,514		551,266
Commercial mortgage		1,220,204		1,208,417		1,186,430		1,164,338		1,156,328
Consumer		623,901		603,248		541,365		476,500		479,434
Total loans, net of deferred fees and costs		5,101,649		5,045,797		5,077,318		5,137,849		4,964,113
Allowance for credit losses		(68,097)		(74,587)		(77,781)		(81,553)		(83,269)
Loans, net of allowance for credit losses		$        5,033,552		$      4,971,210		$      4,999,537		$      5,056,296		$      4,880,844
[1] U.S. Mainland includes territories of the United States.

 

CENTRAL PACIFIC FINANCIAL CORP. AND SUBSIDIARIES
Deposits
(Unaudited)										TABLE 7
		December 31,		September 30,		June 30,		March 31,		December 31,
(Dollars in thousands)		2021		2021		2021		2021		2020
Noninterest-bearing demand		$        2,291,246		$        2,195,404		$        2,203,806		$        2,070,428		$        1,790,269
Interest-bearing demand		1,415,277		1,372,626		1,341,280		1,237,574		1,174,888
Savings and money market		2,225,903		2,296,968		2,048,945		2,004,368		1,932,043
Time deposits less than $100,000		136,584		139,358		141,498		145,497		149,063
Other time deposits $100,000 to $250,000 [1]		88,873		87,491		89,710		88,814		90,149
Core deposits		6,157,883		6,091,847		5,825,239		5,546,681		5,136,412
Government time deposits		214,950		238,950		403,755		500,194		500,344
Other time deposits greater than $250,000		266,325		185,066		168,165		162,075		159,362
Total time deposits greater than $250,000		481,275		424,016		571,920		662,269		659,706
Total deposits		$        6,639,158		$        6,515,863		$        6,397,159		$        6,208,950		$        5,796,118
[1] As of January 1, 2021, other time deposits $100,000 to $250,000 have been included in core deposits. Prior period amounts have been reclassified to conform to current period presentation.

 

CENTRAL PACIFIC FINANCIAL CORP. AND SUBSIDIARIES
Nonperforming Assets, Past Due and Restructured Loans
(Unaudited)										TABLE 8
		December 31,		September 30,		June 30,		March 31,		December 31,
(Dollars in thousands)		2021		2021		2021		2021		2020
Nonaccrual loans: [1]
Commercial, financial and agricultural - Other		$           183		$           689		$           699		$         1,412		$         1,461
Real estate:
Residential mortgage		4,623		5,351		5,280		4,553		4,115
Home equity		786		880		434		439		524
Commercial mortgage		—		—		—		—		—
Consumer		289		317		332		790		92
Total nonaccrual loans		5,881		7,237		6,745		7,194		6,192
Other real estate owned ("OREO"):
Real estate:
Residential mortgage		—		—		—		—		—
Total OREO		—		—		—		—		—
Total nonperforming assets ("NPAs")		5,881		7,237		6,745		7,194		6,192
Loans delinquent for 90 days or more still accruing interest: [1]
Commercial, financial and agricultural - Other		945		—		29		—		—
Real estate:
Residential mortgage		—		444		1,438		4,522		567
Home equity		44		—		—		—		—
Consumer		374		166		100		262		240
Total loans delinquent for 90 days or more still accruing interest		1,363		610		1,567		4,784		807
Restructured loans still accruing interest: [1]
Commercial, financial and agricultural - Other		—		12		26		63		100
Real estate:
Residential mortgage		3,768		4,458		4,258		5,473		5,718
Commercial mortgage		1,043		1,577		1,636		1,698		1,761
Consumer		92		99		132		198		207
Total restructured loans still accruing interest		4,903		6,146		6,052		7,432		7,786
Total NPAs and loans delinquent for 90 days or more and restructured loans still accruing interest		$       12,147		$       13,993		$       14,364		$       19,410		$       14,785
Total nonaccrual loans as a percentage of total loans		0.12  %		0.14  %		0.13  %		0.14  %		0.12  %
Total NPAs as a percentage of total loans and OREO		0.12  %		0.14  %		0.13  %		0.14  %		0.12  %
Total NPAs and loans delinquent for 90 days or more still accruing interest as a percentage of total loans and OREO		0.14  %		0.16  %		0.16  %		0.23  %		0.14  %
Total NPAs, loans delinquent for 90 days or more and restructured loans still accruing interest as a percentage of total loans and OREO		0.24  %		0.28  %		0.28  %		0.38  %		0.30  %
Quarter-to-quarter changes in NPAs:
Balance at beginning of quarter		$         7,237		$         6,745		$         7,194		$         6,192		$       13,187
Additions		1,375		1,951		1,879		2,257		1,370
Reductions:
Payments		(933)		(767)		(1,120)		(292)		(3,186)
Return to accrual status		(1,034)		(141)		(84)		(99)		(548)
Sales of NPAs		—		—		—		—		(4,353)
Charge-offs, valuation and other adjustments		(764)		(551)		(1,124)		(864)		(278)
Total reductions		(2,731)		(1,459)		(2,328)		(1,255)		(8,365)
Balance at end of quarter		$         5,881		$         7,237		$         6,745		$         7,194		$         6,192
[1] Section 4013 of the CARES Act and the revised Interagency Statement are being applied to loan modifications related to the COVID-19 pandemic as eligible and applicable. These loan modifications are not included in the delinquent or restructured loan balances presented above.

 

CENTRAL PACIFIC FINANCIAL CORP. AND SUBSIDIARIES
Allowance for Credit Losses on Loans
(Unaudited)														TABLE 9
		Three Months Ended										Year Ended
		Dec 31,		Sep 30,		Jun 30,		Mar 31,		Dec 31,		December 31,
(Dollars in thousands)		2021		2021		2021		2021		2020		2021		2020
Allowance for credit  losses ("ACL"):
ACL at beginning of period		$     74,587		$     77,781		$     81,553		$     83,269		$     80,542		$     83,269		$     47,971
Adoption of ASU 2016-13		—		—		—		—		—		—		3,566
Adjusted ACL at beginning of period		74,587		77,781		81,553		83,269		80,542		83,269		51,537
(Credit) provision for credit losses on loans [1] [2]		(7,417)		(2,969)		(2,963)		(974)		4,496		(14,323)		38,930
Charge-offs:
Commercial, financial and agricultural - Other		379		334		401		609		676		1,723		3,026
Real estate:
Residential mortgage		—		—		—		—		—		—		63
Commercial mortgage		—		—		—		—		—		—		75
Consumer		952		829		1,523		1,098		1,856		4,402		8,191
Total charge-offs		1,331		1,163		1,924		1,707		2,532		6,125		11,355
Recoveries:
Commercial, financial and agricultural - Other		358		281		276		89		189		1,004		1,157
Real estate:
Construction		1,159		—		—		—		—		1,159		131
Residential mortgage		13		53		186		106		15		358		229
Home equity		—		—		—		9		2		9		33
Commercial mortgage		—		—		65		8		1		73		16
Consumer		728		604		588		753		556		2,673		2,591
Total recoveries		2,258		938		1,115		965		763		5,276		4,157
Net (recoveries) charge-offs		(927)		225		809		742		1,769		849		7,198
ACL at end of period		$     68,097		$     74,587		$     77,781		$     81,553		$     83,269		$     68,097		$     83,269
Average loans, net of deferred fees and costs		$ 5,073,069		$ 5,022,909		$ 5,110,820		$ 5,079,874		$ 5,034,717		$ 5,071,516		$ 4,855,169
Annualized ratio of net charge-offs to average loans		(0.07)         %		0.02  %		0.06  %		0.06  %		0.14  %		0.02  %		0.15  %
[1] In 2020, the Company recorded a reserve on accrued interest receivable ("AIR") of $0.2 million for loans on payment forbearance or deferral, which were granted to borrowers impacted by the COVID-19 pandemic. This reserve was recorded as a contra-asset against AIR with the offset to the provision for credit losses. During the second quarter of 2021, the Company reversed the entire reserve on AIR. The provision for credit losses presented in this table excludes the provision for credit losses on AIR.
[2] As of January 1, 2021, the provision for credit losses on off-balance sheet credit exposures (previously included in other operating expense) is included in the provision for credit losses line on the consolidated statements of income.  The allowance for off-balance sheet credit exposures continues to be included in other liabilities. For roll-forward purposes, in this table we exclude the provision for credit losses on off-balance sheet credit exposures.

 

CENTRAL PACIFIC FINANCIAL CORP. AND SUBSIDIARIES
Reconciliation of Non-GAAP Financial Measures
(Unaudited)										TABLE 10
The following table sets forth a reconciliation of our core loans and the ratios of our allowance for credit losses ("ACL") to total loans and ACL to core loans (or total loans, excluding SBA Paycheck Protection Program ("PPP") loans), for each of the periods indicated:
		Dec 31,		Sep 30,		Jun 30,		Mar 31,		Dec 31,
(Dollars in thousands)		2021		2021		2021		2021		2020
ACL		$        68,097		$        74,587		$        77,781		$        81,553		$        83,269
Total loans		$   5,101,649		$   5,045,797		$   5,077,318		$   5,137,849		$   4,964,113
Less: PPP loans		91,327		218,671		434,610		597,819		416,375
Core loans (or total loans, excluding PPP loans)		$   5,010,322		$   4,827,126		4,642,708		4,540,030		$   4,547,738
Ratio of ACL to total loans		1.33 %		1.48 %		1.53 %		1.59 %		1.68 %
Ratio of ACL to core loans		1.36 %		1.55 %		1.68 %		1.80 %		1.83 %

 

 

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SOURCE Central Pacific Financial Corp.