Central Pacific Financial Reports Fourth Quarter Earnings of $14.9 Million and Full Year 2023 Earnings of $58.7 Million

Rhea-AI Summary

Central Pacific Financial Corp. (CPF) reported a net income of $14.9 million for the fourth quarter of 2023, with an EPS of $0.55, and a net income of $58.7 million for the year. The company approved a quarterly cash dividend of $0.26 per share and authorized a new share repurchase program of up to $20.0 million for 2024. Net interest income decreased by 1.5% from the previous quarter, and the net interest margin decreased by 4 basis points. The Company completed a $30.0 million investment portfolio restructuring designed to increase prospective earnings and net interest margin. The provision for credit losses was $4.7 million in the fourth quarter of 2023. Total assets remained relatively flat at $7.64 billion at December 31, 2023. Nonperforming assets totaled $7.0 million, or 0.09% of total assets at December 31, 2023. Total shareholders' equity was $503.8 million at December 31, 2023.

Insights

Financial Analyst

The reported net income and earnings per share (EPS) figures for Central Pacific Financial Corp. (CPF) signify a notable year-over-year decline, which may raise concerns among investors regarding the company's profitability trajectory. The reduction in net interest income and net interest margin (NIM) is indicative of margin compression, a common issue for financial institutions in a fluctuating interest rate environment. The NIM decrease suggests that the cost of funds is increasing at a faster rate than the yield on assets, potentially impacting future earnings negatively.

However, the balance sheet repositioning, including the sale of real estate and investment securities portfolio restructuring, demonstrates proactive management in enhancing future profitability. The estimated annual positive impact to pre-tax income and the strategic investment portfolio restructuring are positive steps towards optimizing the company's financial performance. The authorization of a new share repurchase program for 2024 could be viewed as a signal of confidence by the board in the company's valuation and financial health, potentially providing support to the stock price.

Market Research Analyst

The increase in total assets and the liquidity measures reported by CPF are reassuring from a market perspective, as they reflect the company's stability and ability to meet short-term obligations. The emphasis on liquidity is particularly important in the current economic climate, where unexpected market shifts can occur. The reported asset quality metrics, such as the low percentage of nonperforming assets, suggest that CPF is maintaining a healthy loan portfolio, which is crucial for investor confidence.

From a competitive standpoint, CPF's positioning as one of America's Best Regional Banks by Newsweek could enhance its public image and attract more business, potentially contributing to long-term growth. The company's strategic focus on the Hawaii marketplace and relationship-based approach could foster customer loyalty and strengthen its regional market share.

Economist

The reported increases in average rates paid on deposits and yields on loans during the fourth quarter are reflective of the broader economic trends, particularly the rising interest rate environment as a response to inflationary pressures. These trends are double-edged; they can lead to higher interest income from loans but also increase the cost of deposits, thus affecting the net interest margin. The company's ability to navigate this environment will be critical for its financial stability.

The effective tax rate's decrease is a favorable factor for net income, but it's important to monitor whether such reductions are sustainable or result from one-time factors. The overall capital position and the reported capital ratios suggest that CPF is well-capitalized, which provides a buffer against potential economic downturns and supports ongoing operations and strategic initiatives.

Highlights Included:

• 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--(BUSINESS WIRE)-- 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."

Earnings Highlights

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.

Balance Sheet Highlights

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.

Asset Quality

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.

Capital

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.

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 1-888-510-2553 (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.

About Central Pacific Financial Corp.

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.

Equal Housing Lender
Member FDIC
NYSE Listed: CPF

Forward-Looking Statements ("FLS")

This document may contain FLS 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. (the "Company") 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 "believe," "plan," "anticipate," "expect," "intend," "forecast," "hope," "target," "continue," "remain," "estimate," "will," "should," "may" and other similar expressions are intended to identify FLS but are not the exclusive means of identifying such statements.

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.

For further information with respect to factors that could cause actual results to materially differ from the expectations or projections stated in the FLS, please see the Company's publicly available Securities and Exchange Commission filings, including the Company's Forms 10-Q and 10-K for the current and 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 FLS contained in this document. FLS speak only as of the date on which such statements are made. We undertake no obligation to update any FLS 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)			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.

CENTRAL PACIFIC FINANCIAL CORP. AND SUBSIDIARIES
Financial Highlights
(Unaudited)										TABLE 1 (CONTINUED)
		Dec 31,				Sep 30,				Jun 30,				Mar 31,				Dec 31,
			2023				2023				2023				2023				2022
REGULATORY CAPITAL RATIOS
Central Pacific Financial Corp.
Leverage ratio			8.8	%			8.7	%			8.7	%			8.6	%			8.5	%
Tier 1 risk-based capital ratio			12.4				11.9				11.8				11.5				11.3
Total risk-based capital ratio			14.6				14.1				13.9				13.6				13.5
Common equity tier 1 capital ratio			11.4				11.0				10.9				10.6				10.5
Central Pacific Bank
Leverage ratio			9.2				9.1				9.1				9.0				9.0
Tier 1 risk-based capital ratio			12.9				12.4				12.3				12.0				11.9
Total risk-based capital ratio			14.1				13.7				13.5				13.2				13.1
Common equity tier 1 capital ratio			12.9				12.4				12.3				12.0				11.9
		Dec 31,				Sep 30,				Jun 30,				Mar 31,				Dec 31,
(dollars in thousands, except for per share amounts)			2023				2023				2023				2023				2022
BALANCE SHEET
Total loans, net of deferred fees and costs		$	5,438,982			$	5,508,710			$	5,520,683			$	5,557,397			$	5,555,466
Total assets			7,642,796				7,637,924				7,567,592				7,521,247				7,432,763
Total deposits			6,847,592				6,874,745				6,805,737				6,746,968				6,736,223
Long-term debt			156,102				156,041				155,981				155,920				105,859
Total shareholders’ equity			503,815				468,598				476,279				470,926				452,871
Total shareholders’ equity to total assets			6.59	%			6.14	%			6.29	%			6.26	%			6.09	%
ASSET QUALITY
Allowance for credit losses ("ACL")		$	63,934			$	64,517			$	63,849			$	63,099			$	63,738
Nonaccrual loans			7,008				6,652				11,061				5,313				5,251
Non-performing assets ("NPA")			7,008				6,652				11,061				5,313				5,251
Ratio of ACL to total loans			1.18	%			1.17	%			1.16	%			1.14	%			1.15	%
Ratio of NPA to total assets			0.09	%			0.09	%			0.15	%			0.07	%			0.07	%
PER SHARE OF COMMON STOCK OUTSTANDING
Book value per common share		$	18.63			$	17.33			$	17.61			$	17.44			$	16.76
Closing market price per common share			19.68				16.68				15.71				17.90				20.28

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)			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

CENTRAL PACIFIC FINANCIAL CORP. AND SUBSIDIARIES
Consolidated Statements of Income
(Unaudited)																						TABLE 3
		Three Months Ended																				Year Ended
		Dec 31,				Sep 30,				Jun 30,				Mar 31,				Dec 31,				Dec 31,
(Dollars in thousands, except per share data)			2023				2023				2023				2023				2022				2023				2022
Interest income:
Interest and fees on loans		$	62,429			$	62,162			$	60,455			$	58,269			$	56,682			$	243,315			$	200,280
Interest and dividends on investment securities:
Taxable investment securities			7,292				7,016				7,145				7,336				7,104				28,789				28,041
Tax-exempt investment securities			686				709				727				790				776				2,912				3,204
Dividends on investment securities			—				—				—				—				—				—				21
Interest on deposits in other financial institutions			3,597				2,412				877				277				370				7,163				740
Dividend income on FHLB stock			109				113				120				136				105				478				370
Total interest income			74,113				72,412				69,324				66,808				65,037				282,657				232,656
Interest expense:
Interest on deposits:
Demand			467				460				411				363				333				1,701				806
Savings and money market			7,459				6,464				4,670				3,386				2,488				21,979				4,188
Time			12,741				11,268				8,932				6,264				4,063				39,205				6,114
Interest on short-term borrowings			—				—				378				761				393				1,139				1,055
Interest on long-term debt			2,304				2,292				2,199				1,838				1,475				8,633				4,930
Total interest expense			22,971				20,484				16,590				12,612				8,752				72,657				17,093
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	)
Net interest income after provision (credit) for credit losses			46,489				47,054				48,415				52,344				55,714				194,302				216,836
Other operating income:
Mortgage banking income			611				765				690				526				667				2,592				3,810
Service charges on deposit accounts			2,312				2,193				2,137				2,111				2,172				8,753				8,197
Other service charges and fees			5,349				5,203				4,994				4,985				4,972				20,531				19,025
Income from fiduciary activities			1,272				1,234				1,068				1,321				1,058				4,895				4,565
Net (loss) gain on sales of investment securities			(1,939	)			(135	)			—				—				—				(2,074	)			8,506
Income from bank-owned life insurance			2,015				379				1,185				1,291				2,187				4,870				1,865
Other			5,552				408				361				775				545				7,096				1,951
Total other operating income			15,172				10,047				10,435				11,009				11,601				46,663				47,919
Other operating expense:
Salaries and employee benefits			20,164				19,015				20,848				22,023				22,692				82,050				88,781
Net occupancy			4,676				4,725				4,310				4,474				3,998				18,185				16,963
Equipment			968				1,112				932				946				996				3,958				4,238
Communication			632				809				791				778				696				3,010				2,958
Legal and professional services			2,245				2,359				2,469				2,886				2,677				9,959				10,792
Computer software			4,026				4,473				4,621				4,606				3,996				17,726				14,840
Advertising			1,045				968				942				933				701				3,888				4,151
Other			8,766				6,150				4,990				5,461				4,678				25,367				23,263
Total other operating expense			42,522				39,611				39,903				42,107				40,434				164,143				165,986
Income before income taxes			19,139				17,490				18,947				21,246				26,881				76,822				98,769
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
Per common share data:
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
Cash dividends declared			0.26				0.26				0.26				0.26				0.26				1.04				1.04
Basic weighted average shares outstanding			27,044,121				27,042,762				27,024,043				26,999,138				27,134,970				27,027,681				27,398,445
Diluted weighted average shares outstanding			27,097,285				27,079,484				27,071,478				27,122,012				27,303,249				27,080,518				27,567,780

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, 2023											September 30, 2023											December 31, 2022
		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		$	261,594			5.45	%		$	3,597			$	177,780			5.38	%		$	2,412			$	38,610			3.80	%		$	370
Investment securities:
Taxable			1,331,752			2.19				7,292				1,354,039			2.07				7,016				1,399,627			2.03				7,104
Tax-exempt [1]			146,803			2.36				868				149,824			2.40				897				156,079			2.52				982
Total investment securities			1,478,555			2.21				8,160				1,503,863			2.10				7,913				1,555,706			2.08				8,086
Loans, including loans held for sale			5,458,245			4.55				62,429				5,507,248			4.49				62,162				5,498,800			4.10				56,682
FHLB stock			10,219			4.30				109				10,975			4.09				113				10,725			3.90				105
Total interest-earning assets			7,208,613			4.10				74,295				7,199,866			4.01				72,600				7,103,841			3.66				65,243
Noninterest-earning assets			289,484											310,671											285,871
Total assets		$	7,498,097										$	7,510,537										$	7,389,712
LIABILITIES AND EQUITY
Interest-bearing liabilities:
Interest-bearing demand deposits		$	1,315,943			0.14	%		$	467			$	1,339,294			0.14	%		$	460			$	1,441,787			0.09	%		$	333
Savings and money market deposits			2,217,065			1.33				7,459				2,209,835			1.16				6,464				2,209,166			0.45				2,488
Time deposits up to $250,000			478,085			2.80				3,373				449,844			2.33				2,637				311,639			1.50				1,174
Time deposits over $250,000			856,159			4.34				9,368				844,842			4.05				8,631				595,133			1.93				2,889
Total interest-bearing deposits			4,867,252			1.68				20,667				4,843,815			1.49				18,192				4,557,725			0.60				6,884
FHLB advances and other short-term borrowings			—			—				—				—			—				—				44,491			3.51				393
Long-term debt			156,069			5.86				2,304				156,005			5.83				2,292				105,829			5.53				1,475
Total interest-bearing liabilities			5,023,321			1.81				22,971				4,999,820			1.63				20,484				4,708,045			0.74				8,752
Noninterest-bearing deposits			1,863,631											1,894,256											2,116,197
Other liabilities			137,437											136,343											124,386
Total liabilities			7,024,389											7,030,419											6,948,628
Total equity			473,708											480,118											441,084
Total liabilities and equity		$	7,498,097										$	7,510,537										$	7,389,712
Net interest income									$	51,324										$	52,116										$	56,491
Interest rate spread						2.29	%										2.38	%										2.92	%
Net interest margin						2.84	%										2.88	%										3.17	%
[1] Interest income and resultant yield information for tax-exempt investment securities is expressed on a taxable-equivalent basis using a federal statutory tax rate of 21%.
Note: Certain prior period information has been reclassified to conform to the current period presentation.

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, 2023											December 31, 2022
		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		$	134,150			5.34	%		$	7,163			$	80,096			0.92	%		$	740
Investment securities:
Taxable			1,365,067			2.11				28,789				1,455,246			1.93				28,062
Tax-exempt [1]			150,399			2.45				3,686				159,120			2.55				4,056
Total investment securities			1,515,466			2.14				32,475				1,614,366			1.99				32,118
Loans, including loans held for sale			5,508,530			4.42				243,315				5,298,573			3.78				200,280
FHLB stock			11,317			4.23				478				10,197			3.63				370
Total interest-earning assets			7,169,463			3.95				283,431				7,003,232			3.33				233,508
Noninterest-earning assets			309,780											337,029
Total assets		$	7,479,243										$	7,340,261
LIABILITIES AND EQUITY
Interest-bearing liabilities:
Interest-bearing demand deposits		$	1,359,240			0.13	%		$	1,701			$	1,438,232			0.06	%		$	806
Savings and money market deposits			2,195,763			1.00				21,979				2,208,630			0.19				4,188
Time deposits up to $250,000			415,541			2.15				8,917				245,599			0.70				1,723
Time deposits over $250,000			795,917			3.81				30,288				494,943			0.89				4,391
Total interest-bearing deposits			4,766,461			1.32				62,885				4,387,404			0.25				11,108
FHLB advances and other short-term borrowings			23,322			4.88				1,139				37,211			2.84				1,055
Long-term debt			148,922			5.80				8,633				105,732			4.66				4,930
Total interest-bearing liabilities			4,938,705			1.47				72,657				4,530,347			0.38				17,093
Noninterest-bearing deposits			1,933,666											2,216,645
Other liabilities			133,053											115,478
Total liabilities			7,005,424											6,862,470
Shareholders’ equity			473,819											477,775
Non-controlling interest			—											16
Total equity			473,819											477,791
Total liabilities and equity		$	7,479,243										$	7,340,261
Net interest income									$	210,774										$	216,415
Interest rate spread						2.48	%										2.95	%
Net interest margin						2.94	%										3.09	%
[1] Interest income and resultant yield information for tax-exempt investment securities is expressed on a taxable-equivalent basis using a federal statutory tax rate of 21%.
Note: Certain prior period information has been reclassified to conform to the current period presentation.

CENTRAL PACIFIC FINANCIAL CORP. AND SUBSIDIARIES
Loans by Geographic Distribution
(Unaudited)		TABLE 6
		Dec 31,				Sep 30,				Jun 30,				Mar 31,				Dec 31,
(Dollars in thousands)			2023				2023				2023				2023				2022
HAWAII:
Commercial and industrial:
Small Business Administration Paycheck Protection Program ("SBA PPP")		$	1,284			$	1,410			$	1,565			$	1,821			$	2,555
Other			420,452				405,023				373,036				375,158				383,665
Real estate:
Construction			163,337				174,057				168,012				154,303				150,208
Residential mortgage			1,927,789				1,930,740				1,942,906				1,941,230				1,940,999
Home equity			736,524				753,980				750,760				743,908				739,380
Commercial mortgage			1,063,969				1,045,625				1,037,826				1,030,086				1,029,708
Consumer			322,346				338,248				327,790				342,922				346,789
Total loans, net of deferred fees and costs			4,635,701				4,649,083				4,601,895				4,589,428				4,593,304
Less: Allowance for credit losses			48,189				48,105				44,828				44,062				45,169
Loans, net of allowance for credit losses		$	4,587,512			$	4,600,978			$	4,557,067			$	4,545,366			$	4,548,135
U.S. MAINLAND: [1]
Commercial and industrial:
Other			153,971				157,373				170,557				179,906				160,282
Real estate:
Construction			22,182				37,455				32,807				27,171				16,515
Commercial mortgage			318,933				319,802				329,736				331,546				333,367
Consumer			308,195				344,997				385,688				429,346				451,998
Total loans, net of deferred fees and costs			803,281				859,627				918,788				967,969				962,162
Less: Allowance for credit losses			15,745				16,412				19,021				19,037				18,569
Loans, net of allowance for credit losses		$	787,536			$	843,215			$	899,767			$	948,932			$	943,593
TOTAL:
Commercial and industrial:
SBA PPP		$	1,284			$	1,410			$	1,565			$	1,821			$	2,555
Other			574,423				562,396				543,593				555,064				543,947
Real estate:
Construction			185,519				211,512				200,819				181,474				166,723
Residential mortgage			1,927,789				1,930,740				1,942,906				1,941,230				1,940,999
Home equity			736,524				753,980				750,760				743,908				739,380
Commercial mortgage			1,382,902				1,365,427				1,367,562				1,361,632				1,363,075
Consumer			630,541				683,245				713,478				772,268				798,787
Total 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
[1] U.S. Mainland includes territories of the United States.

CENTRAL PACIFIC FINANCIAL CORP. AND SUBSIDIARIES
Deposits
(Unaudited)										TABLE 7
		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

CENTRAL PACIFIC FINANCIAL CORP. AND SUBSIDIARIES
Nonperforming Assets and Accruing Loans 90+ Days Past Due
(Unaudited)		TABLE 8
		Dec 31,				Sep 30,				Jun 30,				Mar 31,				Dec 31,
(Dollars in thousands)			2023				2023				2023				2023				2022
Nonaccrual loans:
Commercial and industrial:
Other		$	432			$	352			$	319			$	264			$	297
Real estate:
Construction			—				—				4,851				—				—
Residential mortgage			4,962				4,949				4,385				3,445				3,808
Home equity			834				677				797				712				570
Commercial mortgage			77				77				77				77				—
Consumer			703				597				632				815				576
Total nonaccrual loans			7,008				6,652				11,061				5,313				5,251
Foreclosed real estate			—				—				—				—				—
Total nonperforming assets ("NPAs")			7,008				6,652				11,061				5,313				5,251
Accruing loans 90+ days past due:
Commercial and industrial:
SBA PPP			—				—				—				—				13
Other			—				—				—				—				26
Real estate:
Residential mortgage			—				794				959				—				559
Home equity			229				—				133				—				—
Consumer			1,083				2,120				2,207				1,908				1,240
Total accruing loans 90+ days past due			1,312				2,914				3,299				1,908				1,838
Total NPAs and accruing loans 90+ days past due		$	8,320			$	9,566			$	14,360			$	7,221			$	7,089
Ratio of total nonaccrual loans to total loans			0.13	%			0.12	%			0.20	%			0.10	%			0.09	%
Ratio of total NPAs to total loans and foreclosed real estate			0.13	%			0.12	%			0.20	%			0.10	%			0.09	%
Ratio of total NPAs and accruing loans 90+ days past due to total loans and foreclosed real estate			0.15	%			0.17	%			0.26	%			0.13	%			0.13	%
Quarter-to-quarter changes in NPAs:
Balance at beginning of quarter		$	6,652			$	11,061			$	5,313			$	5,251			$	4,220
Additions			1,836				2,311				7,105				1,609				2,162
Reductions:
Payments			(268	)			(5,718	)			(290	)			(505	)			(198	)
Return to accrual status			(137	)			(207	)			(212	)			(14	)			(44	)
Net charge-offs, valuation and other adjustments			(1,075	)			(795	)			(855	)			(1,028	)			(889	)
Total reductions			(1,480	)			(6,720	)			(1,357	)			(1,547	)			(1,131	)
Balance at end of quarter		$	7,008			$	6,652			$	11,061			$	5,313			$	5,251

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,				Dec 31,
(Dollars in thousands)			2023				2023				2023				2023				2022				2023				2022
Allowance for credit losses:
Balance at beginning of period		$	64,517			$	63,849			$	63,099			$	63,738			$	64,382			$	63,738			$	68,097
Provision for credit losses on loans			4,959				4,526				4,135				1,615				1,032				15,235				288
Charge-offs:
Commercial and industrial:
Other			419				402				362				779				678				1,962				1,969
Consumer			5,976				4,710				3,873				2,686				1,881				17,245				6,399
Total charge-offs			6,395				5,112				4,235				3,465				2,559				19,207				8,368
Recoveries:
Commercial and industrial:
Other			84				261				125				250				210				720				995
Real estate:
Construction			—				1				—				—				—				1				76
Residential mortgage			7				10				7				53				133				77				295
Home equity			42				—				15				—				—				57				36
Consumer			720				982				703				908				540				3,313				2,319
Total recoveries			853				1,254				850				1,211				883				4,168				3,721
Net charge-offs			5,542				3,858				3,385				2,254				1,676				15,039				4,647
Balance at end of period		$	63,934			$	64,517			$	63,849			$	63,099			$	63,738			$	63,934			$	63,738
Average loans, net of deferred fees and costs		$	5,458,245			$	5,507,248			$	5,543,398			$	5,525,988			$	5,498,800			$	5,508,530			$	5,298,573
Ratio of annualized net charge-offs to average loans			0.41	%			0.28	%			0.24	%			0.16	%			0.12	%			0.27	%			0.09	%
Ratio of ACL to total loans			1.18	%			1.17	%			1.16	%			1.14	%			1.15	%			1.18	%			1.15	%

CENTRAL PACIFIC FINANCIAL CORP. AND SUBSIDIARIES
Reconciliation of Non-GAAP Financial Measures
(Unaudited)		TABLE 10

The Company uses certain non-GAAP financial measures in addition to our GAAP results to provide useful information for evaluating our cash operating performance, ability to service debt, compliance with debt covenants and measurement against competitors. This information should be considered as supplemental in nature and should not be considered in isolation or as a substitute for the related financial information prepared in accordance with GAAP. In addition, these non-GAAP financial measures may not be comparable to similarly entitled measures reported by other companies.

The Company believes that pre-provision net revenue ("PPNR"), a non-GAAP financial measure, is useful as a tool to help evaluate the ability to provide for credit costs through operations. The following tables set forth a reconciliation of our PPNR and our PPNR to average assets for each of the periods indicated:

		Three Months Ended																				Year Ended
		Dec 31,				Sep 30,				Jun 30,				Mar 31,				Dec 31,				Dec 31,
(Dollars in thousands)			2023				2023				2023				2023				2022				2023				2022
Net income		$	14,866			$	13,141			$	14,475			$	16,187			$	20,181			$	58,669			$	73,928
Add: Income tax expense			4,273				4,349				4,472				5,059				6,700				18,153				24,841
Pre-tax income			19,139				17,490				18,947				21,246				26,881				76,822				98,769
Add: Provision (credit) for credit losses			4,653				4,874				4,319				1,852				571				15,698				(1,273	)
PPNR		$	23,792			$	22,364			$	23,266			$	23,098			$	27,452			$	92,520			$	97,496
		Three Months Ended																				Year Ended
		Dec 31,				Sep 30,				Jun 30,				Mar 31,				Dec 31,				Dec 31,
(Dollars in thousands)			2023				2023				2023				2023				2022				2023				2022
Net income		$	14,866			$	13,141			$	14,475			$	16,187			$	20,181			$	58,669			$	73,928
PPNR			23,792				22,364				23,266				23,098				27,452				92,520				97,496
Average assets			7,498,097				7,510,537				7,463,629				7,443,767				7,389,712				7,479,243				7,340,261
Return on average assets ("ROA")			0.79	%			0.70	%			0.78	%			0.87	%			1.09	%			0.78	%			1.01	%
PPNR to average assets			1.27	%			1.19	%			1.25	%			1.24	%			1.49	%			1.24	%			1.33	%

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20240131966846/en/

Investor Contact:

Ian Tanaka

SVP, Treasury Manager

(808) 544-3646

ian.tanaka@cpb.bank

Media Contact:

Tim Sakahara

AVP, Corporate Communications Manager

(808) 544-5125

tim.sakahara@cpb.bank

Source: Central Pacific Financial Corp.

FAQ

What was Central Pacific Financial Corp.'s (CPF) net income for the fourth quarter of 2023?

Central Pacific Financial Corp. reported a net income of $14.9 million for the fourth quarter of 2023.

What was the net interest income for Central Pacific Financial Corp. in the fourth quarter of 2023?

Net interest income was $51.1 million for the fourth quarter of 2023, which decreased by 1.5% from the previous quarter.

What was the provision for credit losses in the fourth quarter of 2023 for Central Pacific Financial Corp.?

The provision for credit losses was $4.7 million in the fourth quarter of 2023.

What was Central Pacific Financial Corp.'s total assets at the end of 2023?

Total assets remained relatively flat at $7.64 billion at December 31, 2023.

What was the total shareholders' equity of Central Pacific Financial Corp. at the end of 2023?

Total shareholders' equity was $503.8 million at December 31, 2023.