Central Pacific Financial Reports Fourth Quarter Earnings of $20.2 Million and Full Year 2022 Earnings of $73.9 Million

Rhea-AI Summary

Central Pacific Financial Corp. (NYSE: CPF) reported a net income of $20.2 million for Q4 2022, marking a 21% increase from Q3, yet an 8% decrease year-over-year. The company's full-year net income was $73.9 million, down from $79.9 million in 2021. Total loans rose by 2.5% in Q4, totaling $5.56 billion, with an annual increase of 8.9%. Total deposits increased by 2.7% to $6.74 billion in the quarter. The Board approved a cash dividend of $0.26 per share and a $25 million stock repurchase program. Despite robust asset quality, the rise in unrealized losses from securities amid increasing interest rates impacted shareholder equity.

Positive

• Q4 net income rose by 21% from Q3 2022.
• Total loans increased by 2.5% in Q4 2022.
• Total deposits increased by 2.7% in Q4 2022.
• Board approved a quarterly cash dividend of $0.26 per share.
• New $25 million share repurchase program authorized.

Negative

• Q4 2022 net income decreased by 8% from the year-ago quarter.
• Total shareholders' equity fell to $452.9 million from $558.2 million year-over-year.
• Provision for credit losses increased to $0.6 million in Q4 2022.

• Net income of $20.2 million, or $0.74 per diluted share for the fourth quarter. Net income of $73.9 million, or $2.68 per diluted share for the 2022 year.

• ROA of 1.09% and ROE of 18.30% for the fourth quarter. ROA of 1.01% and ROE of 15.47% for the 2022 year.

• Total loans of $5.56 billion increased by $133.3 million, or 2.5% (10.0% annualized) in the fourth quarter. Total loans increased by $453.8 million, or 8.9% for the 2022 year.

• Total deposits of $6.74 billion increased by $179.8 million, or 2.7% (10.8% annualized) in the fourth quarter. Total deposits increased by $97.1 million, or 1.5% for the 2022 year.

• Net interest income increased by $0.9 million, or 1.7% from the previous quarter. Net interest margin of 3.17% was consistent with the previous quarter. Net interest margin, excluding PPP loans, of 3.16% increased by 3 bps from the previous quarter.

• Board of Directors approved quarterly cash dividend of $0.26 per share and new $25 million share repurchase program.

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 for the fourth quarter of 2022 of $20.2 million, compared to $16.7 million in the previous quarter and $22.3 million in the year-ago quarter. Fully diluted earnings per share ("EPS") of $0.74 for the fourth quarter of 2022 reflected a 21% increase from $0.61 in the previous quarter and a 8% decrease from $0.80 in the year-ago quarter. For the 2022 year, net income was $73.9 million, or EPS of $2.68, compared to net income of $79.9 million, or EPS of $2.83 last year.

"We ended the 2022 year successfully with strong loan, deposit and net interest income growth," said Arnold Martines, President and Chief Executive Officer. "At the same time, we continued to have solid asset quality, liquidity and capital positions. We believe the Hawaii economy will be resilient and fare better than the rest of the country because of our strong housing and tourism markets, as well as the large military presence in our State. I would like to thank our hard-working and committed team of employees, as well as our customers for their ongoing support of our bank."

Earnings Highlights

Net interest income for the fourth quarter of 2022 was $56.3 million, an increase of $0.9 million, or 1.7% from the previous quarter, and an increase of $3.2 million, or 6.0% from the year-ago quarter. The sequential quarter increase in net interest income is primarily due to higher asset yields and continued strong loan growth which outpaced the increase in rates paid on deposits. Net interest income in the fourth quarter of 2022 included $0.1 million in net PPP interest income and fees, compared to $0.7 million and $4.7 million, in the previous and year-ago quarters, respectively. Net interest income for the 2022 year included $3.6 million in net PPP interest income and fees, compared to $26.4 million for the 2021 year.

Net interest margin ("NIM") for the fourth quarter of 2022 was 3.17%, which remained unchanged from the previous quarter and increased by 9 basis points ("bps") from the year-ago quarter. NIM, excluding PPP loans, of 3.16% increased by 3 bps from the previous quarter. The increase in NIM, excluding PPP loans, was primarily attributable to higher yields earned during the quarter on investment securities and core loans, or total loans excluding PPP loans, partially offset by increases in rates paid on deposits and borrowings. Additional information on average balances, interest income and expenses and yields and rates is presented in Tables 4, 5 and 10.

In the fourth quarter of 2022, the Company recorded a provision for credit losses of $0.6 million, compared to a provision of $0.4 million in the previous quarter and a release of the credit loss reserves of $7.7 million in the year-ago quarter.

Other operating income for the fourth quarter of 2022 totaled $11.6 million, compared to $9.6 million in the previous quarter and $11.6 million in the year-ago quarter. The increase from the previous quarter was primarily due to higher income from bank-owned life insurance. Additional information on other operating income is presented in Table 3.

Other operating expense for the fourth quarter of 2022 totaled $40.4 million, compared to $42.0 million in the previous quarter and $42.4 million in the year-ago quarter. The decrease in other operating expense from the previous quarter was primarily due to lower net occupancy and advertising expenses. Additional information on other operating expense is presented in Table 3.

The efficiency ratio for the fourth quarter of 2022 was 59.56%, compared to 64.62% in the previous quarter and 65.61% in the year-ago quarter.

The effective tax rate for the fourth quarter of 2022 was 24.9%, compared to 26.2% in the previous quarter and 25.4% in the year-ago quarter.

Balance Sheet Highlights

Total assets at December 31, 2022 of $7.43 billion increased by $95.1 million, or 1.3% from $7.34 billion at September 30, 2022, and increased by $13.7 million, or 0.2% from $7.42 billion at December 31, 2021.

Total loans, net of deferred fees and costs, at December 31, 2022 of $5.56 billion increased by $133.3 million, or 2.5% from $5.42 billion at September 30, 2022, and increased by $453.8 million, or 8.9%, from $5.10 billion at December 31, 2021. Loans by type and geographic distribution are summarized in Table 6.

Total deposits at December 31, 2022 of $6.74 billion increased by $179.8 million or 2.7% from $6.56 billion at September 30, 2022, and increased by $97.1 million, or 1.5%, from $6.64 billion at December 31, 2021. Core deposits, which include demand deposits, savings and money market deposits and time deposits up to $250,000, totaled $6.08 billion at December 31, 2022, and increased by $38.8 million from September 30, 2022. Core deposit and total deposit balances are summarized in Table 7.

Asset Quality

Nonperforming assets at December 31, 2022 totaled $5.3 million, or 0.07% of total assets, compared to $4.2 million, or 0.06% of total assets at September 30, 2022, and $5.9 million, or 0.08% of total assets at December 31, 2021. Additional information on nonperforming assets, past due and restructured loans is presented in Table 8.

Net charge-offs in the fourth quarter of 2022 totaled $1.7 million, compared to net charge-offs of $1.6 million in the previous quarter, and net recoveries of $0.9 million in the year-ago quarter.

The allowance for credit losses, as a percentage of total loans at December 31, 2022 was 1.15%, compared to 1.19% at September 30, 2022, and 1.33% at December 31, 2021. Additional information on net charge-offs and recoveries and the allowance for credit losses is presented in Table 9.

Capital

Total shareholders' equity was $452.9 million at December 31, 2022, compared to $438.5 million and $558.2 million at September 30, 2022 and December 31, 2021, respectively. The decline in shareholders' equity from a year ago was primarily due to an increase in unrealized losses on our available-for-sale investment securities portfolio which is included in accumulated other comprehensive income, and were driven by the rising interest rate environment.

At December 31, 2022, the Company's leverage capital, tier 1 risk-based capital, total risk-based capital, and common equity tier 1 ratios were 8.5%, 11.3%, 13.5%, and 10.5%, respectively, compared to 8.7%, 11.5%, 13.7%, and 10.6%, respectively, at September 30, 2022.

On January 24, 2023, the Company's Board of Directors declared a quarterly cash dividend of $0.26 per share on its outstanding common shares. The dividend will be payable on March 15, 2023 to shareholders of record at the close of business on February 28, 2023.

On January 24, 2023, the Company's Board of Directors also authorized the repurchase of up to $25 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 $10.3 million in remaining repurchase authority as of December 31, 2022. During the fourth quarter of 2022, the Company repurchased 241,203 shares of common stock, at a total cost of $4.9 million, or an average cost per share of $20.41. During the year ended December 31, 2022, the Company returned $49.2 million in capital to its shareholders through cash dividends and share repurchases.

Key Business Highlights during the fourth quarter included the following:

• Arnold Martines, a veteran of the local banking industry and Central Pacific Bank, was promoted to President & CEO of Central Pacific Bank and Central Pacific Financial.
• Newsweek named Central Pacific Bank one of the Best Banks in Hawaii.
• Jason Fujimoto, President & CEO of HPM Building Supply on the island of Hawaii, was named to the boards of CPB and CPF.
• The Central Pacific Bank Foundation again contributed generously to the local community with total donations in 2022 of $1.3 million.
• In the community, the Bank launched a major small business marketing campaign aimed at a key customer segment and area of strategic focus for the Bank.

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: 274117). A playback of the call will be available through February 24, 2023 by dialing 1-866-813-9403 (access code: 649427) 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 $7.43 billion in assets as of December 31, 2022. Central Pacific Bank, its primary subsidiary, operates 27 branches and 64 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
CPF Listed NYSE

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. 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 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 rising interest rates; 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 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; the increase in inventory or adverse conditions in the real estate market and deterioration in the construction industry; adverse changes in the financial performance and/or condition of our borrowers and, as a result, increased loan delinquency rates, deterioration in asset quality, and losses in our loan portfolio; our ability to achieve the objectives of our RISE2020 initiative; our ability to successfully implement and achieve the objectives of our Banking-as-a-Service ("BaaS") initiatives, including adoption of the initiatives by customers and risks faced by any of our bank collaborations including reputational and regulatory risk; the impact of local, national, and international economies and events (including natural disasters such as wildfires, volcanic eruptions, hurricanes, tsunamis, storms, earthquakes and pandemic viruses and diseases) on the Company's business and operations and on tourism, the military, and other major industries operating within the Hawaii market and any other markets in which the Company does business; deterioration or malaise in domestic economic conditions, including any destabilization in the financial industry and deterioration of the real estate market, as well as the impact of declining levels of consumer and business confidence in the state of the economy in general and in financial institutions in particular; changes in estimates of future reserve requirements based upon the periodic review thereof under relevant regulatory and accounting requirements; the impact of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the "Dodd-Frank Act"), changes in capital standards, other regulatory reform and federal and state legislation, including but not limited to regulations promulgated by the Consumer Financial Protection Bureau (the "CFPB"), government-sponsored enterprise reform, and any related rules and regulations which affect our business operations and competitiveness; the costs and effects of legal and regulatory developments, including legal proceedings 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 anticipated replacement of the London Interbank Offered Rate ("LIBOR") Index and the impact on our loans and debt which are tied to that index and uncertainties regarding potential alternative reference rates, including the Secured Overnight Financing Rate ("SOFR"); negative trends in our market capitalization and adverse changes in the price of the Company's common stock; political instability; acts of war or terrorism; changes in consumer spending, borrowings and savings habits; 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 ("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 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 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)		2022				2022				2022				2022				2021				2022				2021
CONDENSED INCOME STATEMENT
Net interest income		$	56,285			$	55,365			$	52,978			$	50,935			$	53,096			$	215,563			$	211,047
Provision (credit) for credit losses			571				362				989				(3,195	)			(7,692	)			(1,273	)			(14,591	)
Total other operating income			11,601				9,629				17,138				9,551				11,566				47,919				43,060
Total other operating expense			40,434				41,998				45,349				38,205				42,422				165,986				163,046
Income tax expense			6,700				5,919				6,184				6,038				7,605				24,841				25,758
Net income			20,181				16,715				17,594				19,438				22,327				73,928				79,894
Basic earnings per common share		$	0.74			$	0.61			$	0.64			$	0.70			$	0.80			$	2.70			$	2.85
Diluted earnings per common share			0.74				0.61				0.64				0.70				0.80				2.68				2.83
Dividends declared per common share			0.26				0.26				0.26				0.26				0.25				1.04				0.96
PERFORMANCE RATIOS
Return on average assets (ROA) [1]			1.09	%			0.91	%			0.96	%			1.06	%			1.22	%			1.01	%			1.13	%
Return on average shareholders’ equity (ROE) [1]			18.30				14.49				14.93				14.44				16.05				15.47				14.38
Average shareholders’ equity to average assets			5.97				6.30				6.45				7.34				7.61				6.51				7.85
Efficiency ratio [2]			59.56				64.62				64.68				63.16				65.61				63.00				64.16
Net interest margin (NIM) [1]			3.17				3.17				3.05				2.97				3.08				3.09				3.18
Dividend payout ratio [3]			35.14				42.62				40.63				37.14				31.25				38.81				33.92
SELECTED AVERAGE BALANCES
Average loans, including loans held for sale		$	5,498,800			$	5,355,088			$	5,221,300			$	5,114,260			$	5,073,069			$	5,298,573			$	5,071,516
Average interest-earning assets			7,103,841				6,991,773				6,982,556				6,932,649				6,890,829				7,003,232				6,643,193
Average assets			7,389,712				7,320,751				7,309,939				7,341,850				7,315,325				7,340,261				7,078,025
Average deposits			6,673,922				6,535,321				6,626,462				6,581,593				6,536,826				6,604,049				6,299,369
Average interest-bearing liabilities			4,708,045				4,538,893				4,442,172				4,429,114				4,407,612				4,530,347				4,288,041
Average shareholders’ equity			441,084				461,328				471,420				538,601				556,462				477,775				555,600
[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 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,
		2022				2022				2022				2022				2021
REGULATORY CAPITAL RATIOS
Central Pacific Financial Corp. (consolidated)
Leverage capital ratio			8.5	%			8.7	%			8.6	%			8.5	%			8.5	%
Tier 1 risk-based capital ratio			11.3				11.5				11.6				11.9				12.2
Total risk-based capital ratio			13.5				13.7				13.9				14.2				14.5
Common equity tier 1 capital ratio			10.5				10.6				10.7				10.9				11.2
Central Pacific Bank
Leverage capital ratio			9.0				9.1				9.0				9.0				8.9
Tier 1 risk-based capital ratio			11.9				12.2				12.2				12.6				12.8
Total risk-based capital ratio			13.1				13.4				13.5				13.8				14.0
Common equity tier 1 capital ratio			11.9				12.2				12.2				12.6				12.8
		Dec 31,				Sep 30,				Jun 30,				Mar 31,				Dec 31,
(dollars in thousands, except for per share amounts)		2022				2022				2022				2022				2021
BALANCE SHEET
Total loans, net of deferred fees and costs		$	5,555,466			$	5,422,212			$	5,301,633			$	5,174,837			$	5,101,649
Total assets			7,432,763				7,337,631				7,299,178				7,298,819				7,419,089
Total deposits			6,736,223				6,556,434				6,622,061				6,599,031				6,639,158
Long-term debt			105,859				105,799				105,738				105,677				105,616
Total shareholders’ equity			452,871				438,468				455,100				486,328				558,219
Total shareholders’ equity to total assets			6.09	%			5.98	%			6.23	%			6.66	%			7.52	%
ASSET QUALITY
Allowance for credit losses (ACL)		$	63,738			$	64,382			$	65,211			$	64,754			$	68,097
Nonaccrual loans			5,251				4,220				4,983				5,336				5,881
Non-performing assets (NPA)			5,251				4,220				4,983				5,336				5,881
ACL to total loans			1.15	%			1.19	%			1.23	%			1.25	%			1.33	%
ACL to nonaccrual loans			1,213.83	%			1,525.64	%			1,308.67	%			1,213.53	%			1,157.92	%
NPA to total assets			0.07	%			0.06	%			0.07	%			0.07	%			0.08	%
PER SHARE OF COMMON STOCK OUTSTANDING
Book value per common share		$	16.76			$	16.08			$	16.57			$	17.63			$	20.14
Closing market price per common share			20.28				20.69				21.45				27.90				28.17

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)		2022				2022				2022				2022				2021
ASSETS
Cash and due from financial institutions		$	97,150			$	116,365			$	108,389			$	83,947			$	81,506
Interest-bearing deposits in other financial institutions			14,894				22,332				22,741				118,183				247,401
Investment securities:
Available-for-sale debt securities, at fair value			671,794				686,681				787,373				1,199,482				1,631,699
Held-to-maturity debt securities, at amortized cost; fair value of: $596,781 at December 31, 2022, $590,880 at September 30, 2022, $635,565 at June 30, 2022, $329,503 at March 31, 2022, and none at December 31, 2021			664,883				662,827				663,365				329,507				—
Equity securities, at fair value			—				—				—				—				—
Total investment securities			1,336,677				1,349,508				1,450,738				1,528,989				1,631,699
Loans held for sale			1,105				1,701				535				4,677				3,531
Loans, net of deferred fees and costs			5,555,466				5,422,212				5,301,633				5,174,837				5,101,649
Less: allowance for credit losses			63,738				64,382				65,211				64,754				68,097
Loans, net of allowance for credit losses			5,491,728				5,357,830				5,236,422				5,110,083				5,033,552
Premises and equipment, net			91,634				89,979				88,664				79,455				80,354
Accrued interest receivable			20,345				18,134				17,146				16,423				16,709
Investment in unconsolidated entities			46,641				36,769				37,341				31,092				29,679
Mortgage servicing rights			9,074				9,216				9,369				9,480				9,738
Bank-owned life insurance			167,967				167,761				167,202				167,407				169,148
Federal Home Loan Bank ("FHLB") stock			9,146				13,546				8,943				8,943				7,964
Right of use lease asset			34,985				35,978				36,978				38,435				39,441
Other assets			111,417				118,512				114,710				101,705				68,367
Total assets		$	7,432,763			$	7,337,631			$	7,299,178			$	7,298,819			$	7,419,089
LIABILITIES
Deposits:
Noninterest-bearing demand		$	2,092,823			$	2,138,083			$	2,282,967			$	2,269,562			$	2,291,246
Interest-bearing demand			1,453,167				1,441,302				1,444,566				1,433,284				1,415,277
Savings and money market			2,199,028				2,194,991				2,214,146				2,197,647				2,225,903
Time			991,205				782,058				680,382				698,538				706,732
Total deposits			6,736,223				6,556,434				6,622,061				6,599,031				6,639,158
FHLB advances and other short-term borrowings			5,000				115,000				—				—				—
Long-term debt			105,859				105,799				105,738				105,677				105,616
Lease liability			35,889				36,941				38,037				39,610				40,731
Other liabilities			96,921				84,989				78,242				68,123				75,317
Total liabilities			6,979,892				6,899,163				6,844,078				6,812,441				6,860,822
EQUITY
Shareholders' equity:
Preferred stock, no par value, authorized 1,000,000 shares; issued and outstanding: none at December 31, 2022, September 30, 2022, June 30, 2022, March 31, 2022, and December 31, 2021			—				—				—				—				—
Common stock, no par value, authorized 185,000,000 shares; issued and outstanding: 27,025,070 at December 31, 2022, 27,262,879 at September 30, 2022, 27,463,562 at June 30, 2022, 27,584,929 at March 31, 2022, and 27,714,071 at December 31, 2021			408,071				412,994				417,862				421,153				426,091
Additional paid-in capital			101,346				100,426				98,977				98,270				98,073
Retained earnings			87,438				74,301				64,693				54,252				42,015
Accumulated other comprehensive loss			(143,984	)			(149,253	)			(126,432	)			(87,347	)			(7,960	)
Total shareholders' equity			452,871				438,468				455,100				486,328				558,219
Non-controlling interest			—				—				—				50				48
Total equity			452,871				438,468				455,100				486,378				558,267
Total liabilities and equity		$	7,432,763			$	7,337,631			$	7,299,178			$	7,298,819			$	7,419,089

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,				December 31,
(Dollars in thousands, except per share data)		2022			2022			2022				2022				2021				2022				2021
Interest income:
Interest and fees on loans		$	56,682		$	51,686		$	46,963			$	44,949			$	47,576			$	200,280			$	193,778
Interest and dividends on investment securities:
Taxable investment securities			7,104			6,933			7,035				6,969				6,667				28,041				22,430
Tax-exempt investment securities			776			805			807				816				642				3,204				1,972
Dividend income on investment securities			—			—			—				21				21				21				75
Interest on deposits in other financial institutions			370			107			191				72				86				740				262
Dividend income on FHLB stock			105			138			68				59				61				370				245
Total interest income			65,037			59,669			55,064				52,886				55,053				232,656				218,762
Interest expense:
Interest on deposits:
Demand			333			217			144				112				104				806				384
Savings and money market			2,488			1,054			317				329				352				4,188				1,240
Time			4,063			1,092			490				469				478				6,114				1,992
Interest on short-term borrowings			393			660			2				—				—				1,055				2
Interest on long-term debt			1,475			1,281			1,133				1,041				1,023				4,930				4,097
Total interest expense			8,752			4,304			2,086				1,951				1,957				17,093				7,715
Net interest income			56,285			55,365			52,978				50,935				53,096				215,563				211,047
Provision (credit) for credit losses			571			362			989				(3,195	)			(7,692	)			(1,273	)			(14,591	)
Net interest income after provision (credit) for credit losses			55,714			55,003			51,989				54,130				60,788				216,836				225,638
Other operating income:
Mortgage banking income			667			831			1,140				1,172				1,902				3,810				7,732
Service charges on deposit accounts			2,172			2,138			2,026				1,861				1,800				8,197				6,358
Other service charges and fees			4,972			4,955			4,610				4,488				5,016				19,025				18,367
Income from fiduciary activities			1,058			1,165			1,188				1,154				1,283				4,565				5,075
Net gain on sales of investment securities			—			—			8,506				—				—				8,506				150
Income from bank-owned life insurance			2,187			167			(1,028	)			539				946				1,865				3,493
Other			545			373			696				337				619				1,951				1,885
Total other operating income			11,601			9,629			17,138				9,551				11,566				47,919				43,060
Other operating expense:
Salaries and employee benefits			22,692			22,778			22,369				20,942				23,030				88,781				90,213
Net occupancy			3,998			4,743			4,448				3,774				4,129				16,963				16,133
Equipment			996			1,085			1,075				1,082				1,207				4,238				4,344
Communication			696			712			744				806				922				2,958				3,271
Legal and professional services			2,677			2,573			2,916				2,626				2,928				10,792				10,452
Computer software			3,996			4,138			3,624				3,082				3,125				14,840				13,304
Advertising			701			1,150			1,150				1,150				1,179				4,151				5,495
Other			4,678			4,819			9,023				4,743				5,902				23,263				19,834
Total other operating expense			40,434			41,998			45,349				38,205				42,422				165,986				163,046
Income before income taxes			26,881			22,634			23,778				25,476				29,932				98,769				105,652
Income tax expense			6,700			5,919			6,184				6,038				7,605				24,841				25,758
Net income		$	20,181		$	16,715		$	17,594			$	19,438			$	22,327			$	73,928			$	79,894
Per common share data:
Basic earnings per share		$	0.74		$	0.61		$	0.64			$	0.70			$	0.80			$	2.70			$	2.85
Diluted earnings per share			0.74			0.61			0.64				0.70				0.80				2.68				2.83
Cash dividends declared			0.26			0.26			0.26				0.26				0.25				1.04				0.96
Basic weighted average shares outstanding			27,134,970			27,356,614			27,516,284				27,591,390				27,769,651				27,398,445				28,003,744
Diluted weighted average shares outstanding			27,303,249			27,501,212			27,676,619				27,874,924				28,045,826				27,567,780				28,257,323
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, 2022									September 30, 2022									December 31, 2021
		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		$	38,610		3.80	%		$	370		$	19,802		2.14	%		$	107		$	225,560		0.15	%		$	86
Investment securities, excluding valuation allowance:
Taxable			1,399,627		2.03				7,104			1,445,781		1.92				6,934			1,469,711		1.82				6,688
Tax-exempt [1]			156,079		2.52				982			158,052		2.57				1,018			114,529		2.84				813
Total investment securities			1,555,706		2.08				8,086			1,603,833		1.98				7,952			1,584,240		1.89				7,501
Loans, including loans held for sale			5,498,800		4.10				56,682			5,355,088		3.84				51,686			5,073,069		3.73				47,576
Federal Home Loan Bank stock			10,725		3.90				105			13,050		4.23				138			7,960		3.05				61
Total interest-earning assets			7,103,841		3.66				65,243			6,991,773		3.41				59,883			6,890,829		3.19				55,224
Noninterest-earning assets			285,871									328,978									424,496
Total assets		$	7,389,712								$	7,320,751								$	7,315,325
LIABILITIES AND EQUITY
Interest-bearing liabilities:
Interest-bearing demand deposits		$	1,441,787		0.09	%		$	333		$	1,450,434		0.06	%		$	217		$	1,383,696		0.03	%		$	104
Savings and money market deposits			2,209,166		0.45				2,488			2,208,037		0.19				1,054			2,224,592		0.06				352
Time deposits up to $250,000			311,639		1.50				1,174			228,707		0.42				245			225,451		0.31				176
Time deposits over $250,000			595,133		1.93				2,889			443,178		0.76				847			468,292		0.26				302
Total interest-bearing deposits			4,557,725		0.60				6,884			4,330,356		0.22				2,363			4,302,031		0.09				934
Federal Home Loan Bank advances and other short-term borrowings			44,491		3.51				393			102,777		2.55				660			—		—				—
Long-term debt			105,829		5.53				1,475			105,760		4.80				1,281			105,581		3.85				1,023
Total interest-bearing liabilities			4,708,045		0.74				8,752			4,538,893		0.38				4,304			4,407,612		0.18				1,957
Noninterest-bearing deposits			2,116,197									2,204,965									2,234,795
Other liabilities			124,386									115,565									116,408
Total liabilities			6,948,628									6,859,423									6,758,815
Shareholders’ equity			441,084									461,328									556,462
Non-controlling interest			—									—									48
Total equity			441,084									461,328									556,510
Total liabilities and equity		$	7,389,712								$	7,320,751								$	7,315,325
Net interest income								$	56,491								$	55,579								$	53,267
Interest rate spread					2.92	%								3.03	%								3.01	%
Net interest margin					3.17	%								3.17	%								3.08	%
[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%.

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, 2022									December 31, 2021
		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		$	80,096		0.92	%		$	740		$	191,967		0.14	%		$	262
Investment securities, excluding valuation allowance:
Taxable			1,455,246		1.93				28,062			1,269,900		1.77				22,505
Tax-exempt [1]			159,120		2.55				4,056			101,877		2.45				2,496
Total investment securities			1,614,366		1.99				32,118			1,371,777		1.82				25,001
Loans, including loans held for sale			5,298,573		3.78				200,280			5,071,516		3.82				193,778
Federal Home Loan Bank stock			10,197		3.63				370			7,933		3.09				245
Total interest-earning assets			7,003,232		3.33				233,508			6,643,193		3.30				219,286
Noninterest-earning assets			337,029									434,832
Total assets		$	7,340,261								$	7,078,025
LIABILITIES AND EQUITY
Interest-bearing liabilities:
Interest-bearing demand deposits		$	1,438,232		0.06	%		$	806		$	1,300,022		0.03	%		$	384
Savings and money market deposits			2,208,630		0.19				4,188			2,099,388		0.06				1,240
Time deposits up to $250,000			245,599		0.70				1,723			230,705		0.34				795
Time deposits over $250,000			494,943		0.89				4,391			551,831		0.22				1,197
Total interest-bearing deposits			4,387,404		0.25				11,108			4,181,946		0.09				3,616
Federal Home Loan Bank advances and other short-term borrowings			37,211		2.84				1,055			607		0.30				2
Long-term debt			105,732		4.66				4,930			105,488		3.88				4,097
Total interest-bearing liabilities			4,530,347		0.38				17,093			4,288,041		0.18				7,715
Noninterest-bearing deposits			2,216,645									2,117,423
Other liabilities			115,478									116,936
Total liabilities			6,862,470									6,522,400
Shareholders’ equity			477,775									555,600
Non-controlling interest			16									25
Total equity			477,791									555,625
Total liabilities and equity		$	7,340,261								$	7,078,025
Net interest income								$	216,415								$	211,571
Interest rate spread					2.95	%								3.12	%
Net interest margin					3.09	%								3.18	%
[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%.

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)		2022				2022				2022				2022				2021
HAWAII:
Commercial, financial and agricultural:
SBA Paycheck Protection Program		$	2,555			$	5,208			$	19,469			$	43,380			$	87,459
Other			383,665				358,805				367,676				407,559				422,388
Real estate:
Construction			150,208				138,724				134,103				122,329				122,867
Residential mortgage			1,940,999				1,923,068				1,890,783				1,874,048				1,875,980
Home equity			739,380				719,399				698,209				676,326				637,249
Commercial mortgage			1,029,708				1,002,874				994,405				927,241				922,146
Consumer			346,789				347,388				341,213				337,188				333,843
Total loans, net of deferred fees and costs			4,593,304				4,495,466				4,445,858				4,388,071				4,401,932
Allowance for credit losses			(45,169	)			(47,814	)			(51,374	)			(51,521	)			(55,808	)
Loans, net of allowance for credit losses		$	4,548,135			$	4,447,652			$	4,394,484			$	4,336,550			$	4,346,124
U.S. MAINLAND: [1]
Commercial, financial and agricultural:
SBA Paycheck Protection Program		$	—			$	—			$	712			$	851			$	3,868
Other			160,282				158,474				156,567				136,857				107,733
Real estate:
Construction			16,515				12,872				10,935				988				—
Commercial mortgage			333,367				332,872				309,230				316,258				298,058
Consumer			451,998				422,528				378,331				331,812				290,058
Total loans, net of deferred fees and costs			962,162				926,746				855,775				786,766				699,717
Allowance for credit losses			(18,569	)			(16,568	)			(13,837	)			(13,233	)			(12,289	)
Loans, net of allowance for credit losses		$	943,593			$	910,178			$	841,938			$	773,533			$	687,428
TOTAL:
Commercial, financial and agricultural:
SBA Paycheck Protection Program		$	2,555			$	5,208			$	20,181			$	44,231			$	91,327
Other			543,947				517,279				524,243				544,416				530,121
Real estate:
Construction			166,723				151,596				145,038				123,317				122,867
Residential mortgage			1,940,999				1,923,068				1,890,783				1,874,048				1,875,980
Home equity			739,380				719,399				698,209				676,326				637,249
Commercial mortgage			1,363,075				1,335,746				1,303,635				1,243,499				1,220,204
Consumer			798,787				769,916				719,544				669,000				623,901
Total loans, net of deferred fees and costs			5,555,466				5,422,212				5,301,633				5,174,837				5,101,649
Allowance for credit losses			(63,738	)			(64,382	)			(65,211	)			(64,754	)			(68,097	)
Loans, net of allowance for credit losses		$	5,491,728			$	5,357,830			$	5,236,422			$	5,110,083			$	5,033,552
[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)		2022			2022			2022			2022			2021
Noninterest-bearing demand		$	2,092,823		$	2,138,083		$	2,282,967		$	2,269,562		$	2,291,246
Interest-bearing demand			1,453,167			1,441,302			1,444,566			1,433,284			1,415,277
Savings and money market			2,199,028			2,194,991			2,214,146			2,197,647			2,225,903
Time deposits less than $100,000			181,547			153,238			129,103			132,712			136,584
Other time deposits $100,000 to $250,000			148,601			108,723			84,840			87,838			88,873
Core deposits			6,075,166			6,036,337			6,155,622			6,121,043			6,157,883
Government time deposits			290,057			195,057			165,000			188,000			214,950
Other time deposits greater than $250,000			371,000			325,040			301,439			289,988			266,325
Total time deposits greater than $250,000			661,057			520,097			466,439			477,988			481,275
Total deposits		$	6,736,223		$	6,556,434		$	6,622,061		$	6,599,031		$	6,639,158

CENTRAL PACIFIC FINANCIAL CORP. AND SUBSIDIARIES
Nonperforming Assets, Past Due and Restructured Loans
(Unaudited)		TABLE 8
		Dec 31,				Sep 30,				Jun 30,				Mar 31,				Dec 31,
(Dollars in thousands)		2022				2022				2022				2022				2021
Nonaccrual loans: [1]
Commercial, financial and agricultural - Other		$	297			$	277			$	333			$	293			$	183
Real estate:
Residential mortgage			3,808				2,771				3,490				3,804				4,623
Home equity			570				584				592				820				786
Consumer			576				588				568				419				289
Total nonaccrual loans			5,251				4,220				4,983				5,336				5,881
Other real estate owned ("OREO"):
Real estate:
Residential mortgage			—				—				—				—				—
Total OREO			—				—				—				—				—
Total nonperforming assets ("NPAs")			5,251				4,220				4,983				5,336				5,881
Loans delinquent for 90 days or more still accruing interest: [1]
Commercial, financial and agricultural - Other			39				669				309				592				945
Real estate:
Residential mortgage			559				503				—				111				—
Home equity			—				—				—				—				44
Consumer			1,240				623				842				621				374
Total loans delinquent for 90 days or more still accruing interest			1,838				1,795				1,151				1,324				1,363
Restructured loans still accruing interest: [1]
Real estate:
Residential mortgage			1,845				2,030				2,006				2,751				3,768
Commercial mortgage			886				925				965				1,004				1,043
Consumer			62				69				76				83				92
Total restructured loans still accruing interest			2,793				3,024				3,047				3,838				4,903
Total NPAs and loans delinquent for 90 days or more and restructured loans still accruing interest		$	9,882			$	9,039			$	9,181			$	10,498			$	12,147
Total nonaccrual loans as a percentage of total loans			0.09	%			0.08	%			0.09	%			0.10	%			0.12	%
Total NPAs as a percentage of total loans and OREO			0.09	%			0.08	%			0.09	%			0.10	%			0.12	%
Total NPAs and loans delinquent for 90 days or more still accruing interest as a percentage of total loans and OREO			0.13	%			0.11	%			0.12	%			0.13	%			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			0.18	%			0.17	%			0.17	%			0.20	%			0.24	%
Quarter-to-quarter changes in NPAs:
Balance at beginning of quarter		$	4,220			$	4,983			$	5,336			$	5,881			$	7,237
Additions			2,162				1,072				1,881				1,659				1,375
Reductions:
Payments			(198	)			(329	)			(285	)			(1,598	)			(933	)
Return to accrual status			(44	)			(616	)			(979	)			(38	)			(1,034	)
Charge-offs, valuation and other adjustments			(889	)			(890	)			(970	)			(568	)			(764	)
Total reductions			(1,131	)			(1,835	)			(2,234	)			(2,204	)			(2,731	)
Balance at end of quarter		$	5,251			$	4,220			$	4,983			$	5,336			$	5,881
[1] Section 4013 of the CARES Act and the revised Interagency Statement were applied to loan modifications related to the COVID-19 pandemic as eligible and applicable. This relief ended on January 1, 2022. These loan modifications were 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)		2022				2022				2022				2022				2021				2022				2021
Allowance for credit losses ("ACL"):
ACL at beginning of period		$	64,382			$	65,211			$	64,754			$	68,097			$	74,587			$	68,097			$	83,269
Provision (credit) for credit losses on loans [1]			1,032				731				1,456				(2,931	)			(7,417	)			288				(14,323	)
Charge-offs:
Commercial, financial and agricultural - Other			678				550				487				254				379				1,969				1,723
Consumer			1,881				1,912				1,390				1,216				952				6,399				4,402
Total charge-offs			2,559				2,462				1,877				1,470				1,331				8,368				6,125
Recoveries:
Commercial, financial and agricultural - Other			210				220				215				350				358				995				1,004
Real estate:
Construction			—				14				62				—				1,159				76				1,159
Residential mortgage			133				14				36				112				13				295				358
Home equity			—				36				—				—				—				36				9
Commercial mortgage			—				—				—				—				—				—				73
Consumer			540				618				565				596				728				2,319				2,673
Total recoveries			883				902				878				1,058				2,258				3,721				5,276
Net charge-offs (recoveries)			1,676				1,560				999				412				(927	)			4,647				849
ACL at end of period		$	63,738			$	64,382			$	65,211			$	64,754			$	68,097			$	63,738			$	68,097
Average loans, net of deferred fees and costs		$	5,498,800			$	5,355,088			$	5,221,300			$	5,114,260			$	5,073,069			$	5,298,573			$	5,071,516
Annualized ratio of net charge-offs to average loans			0.12	%			0.12	%			0.08	%			0.03	%			(0.07	) %			0.09	%			0.02	%
[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. 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 net interest income and net interest margin ("NIM"), excluding the impact of SBA Paycheck Protection Program ("PPP") loans and its related net interest income and fees, for each of the periods indicated:
		Three Months Ended																				Year Ended
		Dec 31,				Sep 30,				Jun 30,				Mar 31,				Dec 31,				December 31,
		2022				2022				2022				2022				2021				2022				2021
Net interest income, reported		$	56,285			$	55,365			$	52,978			$	50,935			$	53,096			$	215,563			$	211,047
Less: Net interest income on PPP loans			(140	)			(667	)			(890	)			(1,941	)			(4,685	)			(3,638	)			(26,352	)
Net income income, excl. PPP loans		$	56,145			$	54,698			$	52,088			$	48,994			$	48,411			$	211,925			$	184,695
Average interest-earning assets, reported		$	7,103,841			$	6,991,773			$	6,982,556			$	6,932,649			$	6,890,829			$	7,003,232			$	6,643,193
Less: Average PPP loans			(3,615	)			(12,406	)			(33,022	)			(68,657	)			(153,792	)			(29,200	)			(389,795	)
Average interest-earning assets, excl. PPP		$	7,100,226			$	6,979,367			$	6,949,534			$	6,863,992			$	6,737,037			$	6,974,032			$	6,253,398
Net interest margin, reported			3.17	%			3.17	%			3.05	%			2.97	%			3.08	%			3.09	%			3.18	%
Less: Impact of PPP loans on net interest margin			(0.01	) %			(0.04	) %			(0.04	) %			(0.08	) %			(0.21	) %			(0.04	) %			(0.22	) %
Net interest margin, excl. PPP			3.16	%			3.13	%			3.01	%			2.89	%			2.87	%			3.05	%			2.96	%
The following table sets for a reconciliation of pre-tax pre-provision ("PTPP") earnings, excluding net interest income and fees on PPP loans, for each of the periods indicated:
		Three Months Ended																				Year Ended
		Dec 31,				Sep 30,				Jun 30,				Mar 31,				Dec 31,				December 31,
(Dollars in thousands)		2022				2022				2022				2022				2021				2022				2021
Net income		$	20,181			$	16,715			$	17,594			$	19,438			$	22,327			$	73,928			$	79,894
Add: Income tax expense			6,700				5,919				6,184				6,038				7,605				24,841				25,758
Income before taxes			26,881				22,634				23,778				25,476				29,932				98,769				105,652
Add: (Credit) provision for credit losses			571				362				989				(3,195	)			(7,692	)			(1,273	)			(14,591	)
PTPP earnings			27,452				22,996				24,767				22,281				22,240				97,496				91,061
Less: Net interest income on PPP loans			(140	)			(667	)			(890	)			(1,941	)			(4,685	)			(3,638	)			(26,352	)
PTPP earnings, excluding net interest income on PPP loans		$	27,312			$	22,329			$	23,877			$	20,340			$	17,555			$	93,858			$	64,709

 

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Investor Contact:

Ian Tanaka

SVP, Treasurer

(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's net income for Q4 2022?

Central Pacific Financial reported a net income of $20.2 million for Q4 2022.

How did total loans change in Q4 2022 for CPF?

Total loans increased by 2.5% in Q4 2022, reaching $5.56 billion.

What is the dividend declared by CPF's Board of Directors?

The Board declared a quarterly cash dividend of $0.26 per share.

What was the full-year net income for Central Pacific Financial in 2022?

The full-year net income for 2022 was $73.9 million.

How much did total deposits increase in Q4 2022 for CPF?

Total deposits increased by 2.7% to $6.74 billion in Q4 2022.