CENTRAL PACIFIC FINANCIAL REPORTS SECOND QUARTER EARNINGS OF $17.6 MILLION

Rhea-AI Summary

Central Pacific Financial Corp. (NYSE: CPF) reported net income of $17.6 million or $0.64 earnings per share for Q2 2022, a decrease from $18.7 million in Q2 2021. Total loans increased by $126.8 million (2.5%) to $5.30 billion, while deposits rose by $23.0 million (0.3%) to $6.62 billion. The bank's net interest margin improved to 3.05%. A quarterly dividend of $0.26 per share was declared, and Central Pacific Bank was named the Best Bank in Hawaii by Forbes. Despite the gain from Visa stock sale, a pension plan settlement charge impacted earnings.

Positive

• Net interest margin increased to 3.05%, up 8 basis points from the previous quarter.
• Total loans grew by $126.8 million (2.5%) in Q2 2022, indicating strong demand.
• Total deposits increased by $23.0 million (0.3%), reflecting steady inflow of core deposits.
• Board approved a quarterly cash dividend of $0.26 per share.
• Central Pacific Bank named the Best Bank in Hawaii by Forbes.

Negative

• Net income decreased to $17.6 million from $18.7 million year-over-year.
• Non-cash settlement charge of $4.9 million related to pension plan negatively impacted earnings.
• Provision for credit losses increased to $1.0 million driven by growth in loan portfolio.

• Net income of $17.6 million, or $0.64 per diluted share for the quarter.
• ROA of 0.96% and ROE of 14.93% for the quarter.
• Total loans of $5.30 billion increased by $126.8 million, or 2.5% (10.0% annualized) in the second quarter.
• Total deposits of $6.62 billion increased by $23.0 million, or 0.3% (1.2% annualized) in the second quarter. Core deposits increased by $34.6 million, or 0.6% (2.4% annualized) in the second quarter.
• Net interest margin of 3.05% increased by 8 bp from the previous quarter.
• Central Pacific Bank named the Best Bank in Hawaii by Forbes.
• Board of Directors approved quarterly cash dividend of $0.26 per share.

HONOLULU, July 27, 2022 /PRNewswire/ -- Central Pacific Financial Corp. (NYSE: CPF) (the "Company"), parent company of Central Pacific Bank (the "Bank" or "CPB"), today reported net income for the second quarter of 2022 of $17.6 million, or fully diluted earnings per share ("EPS") of $0.64, compared to net income in the second quarter of 2021 of $18.7 million, or EPS of $0.66, and net income in the first quarter of 2022 of $19.4 million, or EPS of $0.70. Net income for the second quarter of 2022, included an $8.5 million gain on the sale of the Company's Class B common stock of Visa, Inc., partially offset by a $4.9 million non-cash settlement charge related to the termination and settlement of the Company's defined benefit pension plan.

"We are pleased to report strong financial performance for the second quarter, highlighted by solid double-digit annualized loan growth, continued inflow of core deposits, net interest margin expansion, and excellent asset quality. With these favorable trends, we expect to drive further growth in earnings throughout the rest of 2022 and beyond," said Paul Yonamine, Chairman and Chief Executive Officer.

"Statewide Hawaii visitor arrivals are expected to exceed 90% of pre-pandemic levels in 2022, thanks in part to the gradual return of higher-spending international travelers. This will bode well for the state, creating additional opportunities for economic growth," said Arnold Martines, President and Chief Operating Officer.

During the second quarter, CPB was named the top bank in Hawaii in 2022 by Forbes. CPB finished ahead of the other local banks based on a survey that ranked all of the local banks on branch and digital services, overall customer service and trust as well as financial advice.

"This recognition validates that our digital and branch strategies are creating positive momentum in the market and is really a tribute to all of our hardworking employees who serve our valued customers to the best of their ability every day," Martines said.

Earnings Highlights

Net interest income for the second quarter of 2022 was $53.0 million, compared to $52.1 million in the year-ago quarter and $50.9 million in the previous quarter. Net interest margin for the second quarter of 2022 was 3.05%, compared to 3.16% in the year-ago quarter and 2.97% in the previous quarter. The sequential quarter increase in net interest income and net interest margin is primarily due to higher average loan balances and higher average yields earned on loans and investment securities. These increases were partially offset by lower net interest income and loan fees on PPP loans. Net interest income for the second quarter of 2022 included $0.9 million in net interest income and loan fees on PPP loans, compared to $1.9 million in the previous quarter. Net deferred fees on PPP loans remaining at June 30, 2022 was $0.9 million, compared to $1.7 million at March 31, 2022. Additional information on average balances, interest income and expenses and yields and rates is presented in Tables 4 and 5.

In the second quarter of 2022, the Company recorded a provision for credit losses of $1.0 million, compared to releases of the credit loss reserves of $3.4 million and $3.2 million in the year-ago and previous quarters, respectively. The provision for credit losses in the second quarter of 2022 was driven by the increase in our loan portfolio and net charge-offs.

Other operating income for the second quarter of 2022 totaled $17.1 million, compared to $10.5 million in the year-ago quarter and $9.6 million in the previous quarter. The increase from the year-ago and previous quarters was primarily due to the sale of our restricted Class B common stock of Visa, Inc. The investment was carried at a zero cost basis, therefore the entire net proceeds from the sale of $8.5 million were recorded as a gain on sale of investment securities. The increase was partially offset by lower income from bank-owned life insurance ("BOLI"). The Company recognized BOLI expense of $1.0 million during second quarter of 2022, compared to BOLI income of $1.2 million and $0.5 million in the year-ago and previous quarters, respectively. The lower BOLI income was primarily attributable to market volatility, and was offset by lower deferred compensation expense in other operating expenses. Additional information on other operating income is presented in Table 3.

Other operating expense for the second quarter of 2022 totaled $45.3 million, compared to $41.4 million in the year-ago quarter and $38.2 million in the previous quarter. The increase in other operating expense from the year-ago and previous quarters was primarily due to the termination and settlement of our defined benefit pension plan resulting in a non-cash settlement charge of $4.9 million (included in other). Additional information on other operating expense is presented in Table 3.

The efficiency ratio for the second quarter of 2022 was 64.68%, compared to 66.20% in the year-ago quarter and 63.16% in the previous quarter.

The effective tax rate for the second quarter of 2022 was 26.0%, compared to 23.9% in the year-ago quarter and 23.7% in the previous quarter. The increase in the effective tax rate compared to the year-ago and previous quarters was primarily due to lower tax-exempt BOLI income.

Balance Sheet Highlights

Total assets at June 30, 2022 of $7.30 billion increased by $120.7 million, or 1.7% from $7.18 billion at June 30, 2021, and remained relatively unchanged from $7.30 billion at March 31, 2022.

Total loans, net of deferred fees and costs, at June 30, 2022 of $5.30 billion increased from $5.08 billion at June 30, 2021, and increased from $5.17 billion at March 31, 2022. The sequential quarter increase in total loans included growth in commercial mortgage loans of $60.1 million, consumer loans of $50.5 million, home equity loans of $21.9 million, construction of $21.7 million, and residential mortgage of $16.7 million, offset by declines in PPP loans of $24.1 million and other commercial loans of $20.2 million. Loans by geographic distribution are summarized in Table 6.

Total deposits at June 30, 2022 of $6.62 billion increased from $6.40 billion at June 30, 2021, and increased from $6.60 billion at March 31, 2022. Core deposits, which include demand deposits, savings and money market deposits and time deposits up to $250,000, totaled $6.16 billion at June 30, 2022, and increased by $34.6 million from March 31, 2022. The Company's loan-to-deposit ratio was 80.1% at June 30, 2022, compared to 78.4% at March 31, 2022. Core deposit and total deposit balances are summarized in Table 7.

Asset Quality

Nonperforming assets at June 30, 2022 totaled $5.0 million, or 0.07% of total assets, compared to $6.7 million, or 0.09% of total assets at June 30, 2021, and $5.3 million, or 0.07% of total assets at March 31, 2022. Additional information on nonperforming assets, past due and restructured loans is presented in Table 8.

Net charge-offs in the second quarter of 2022 totaled $1.0 million, compared to net charge-offs of $0.8 million in the year-ago quarter, and net charge-offs of $0.4 million in the previous quarter.

The allowance for credit losses, as a percentage of total loans at June 30, 2022 was 1.23%, compared to 1.53% at June 30, 2021 and 1.25% at March 31, 2022. Additional information on net charge-offs and recoveries and the allowance for credit losses is presented in Tables 9 and 10.

Capital

Total shareholders' equity was $455.1 million at June 30, 2022, compared to $552.8 million and $486.3 million at June 30, 2021 and March 31, 2022, respectively. The decline in shareholders' equity was primarily due to an increase in unrealized losses on our available-for-sale investment securities portfolio which flow through accumulated other comprehensive income, and were driven by the rising interest rate environment.

During the second quarter of 2022, the Company repurchased 174,429 shares of common stock, at a total cost of $4.2 million, or an average cost per share of $24.18. During the six months ended June 30, 2022, the Company returned $25.3 million in capital to its shareholders through cash dividends and share repurchases.

The Company maintained its strong capital position and its capital ratios continue to exceed the levels required to be considered a "well-capitalized" institution for regulatory purposes under Basel III. At June 30, 2022, the Company's leverage capital, tier 1 risk-based capital, total risk-based capital, and common equity tier 1 ratios were 8.6%, 11.6%, 13.9%, and 10.7%, respectively, compared to 8.5%, 11.9%, 14.2%, and 10.9%, respectively, at March 31, 2022.

On July 26, 2022, 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 September 15, 2022 to shareholders of record at the close of business on August 31, 2022.

Non-GAAP Financial Measures

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

Conference Call

The Company's management will host a conference call today at 1:00 p.m. Eastern Time (7:00 a.m. Hawaii Time) to discuss the quarterly results. Individuals are encouraged to listen to the live webcast of the presentation by visiting the investor relations page of the Company's website at http://ir.cpb.bank. Alternatively, investors may participate in the live call by dialing 1-844-200-6205 (access code: 499388). A playback of the call will be available through August 24, 2022 by dialing 1-866-813-9403 (access code: 673448) 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 $7.30 billion in assets as of June 30, 2022. Central Pacific Bank, its primary subsidiary, operates 28 branches and 65 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                                                               

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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 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, including COVID-19) on the Company's business and operations and on tourism, the military, and other major industries operating within the Hawaii market and any other markets in which the Company does business; deterioration or malaise in domestic economic conditions, including any destabilization in the financial industry and deterioration of the real estate market, as well as the impact of declining levels of consumer and business confidence in the state of the economy in general and in financial institutions in particular; changes in estimates of future reserve requirements based upon the periodic review thereof under relevant regulatory and accounting requirements; the impact of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the "Dodd-Frank Act"), changes in capital standards, other regulatory reform and federal and state legislation, including but not limited to regulations promulgated by the Consumer Financial Protection Bureau (the "CFPB"), government-sponsored enterprise reform, and any related rules and regulations which affect our business operations and competitiveness; the costs and effects of legal and regulatory developments, including legal proceedings or regulatory or other governmental inquiries and proceedings and the resolution thereof, the results of regulatory examinations or reviews and the effect of, and our ability to comply with, any 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"); inflation, interest rate, securities market and monetary fluctuations, including the anticipated replacement of the London Interbank Offered Rate ("LIBOR") Index and the impact on our loans and debt which are tied to that index 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;  pandemic virus and disease, including COVID-19; changes in consumer spending, borrowings and savings habits; failure to maintain effective internal control over financial reporting or disclosure controls and procedures; cybersecurity and data privacy breaches and the consequence therefrom; the ability to address deficiencies in our internal controls over financial reporting or disclosure controls and procedures; technological changes and developments; changes in the competitive environment among financial holding companies and other financial service providers; the effect of changes in accounting policies and practices, as may be adopted by the regulatory agencies, as well as the Public Company Accounting Oversight Board ("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 Form 8-K. 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										Six Months Ended
(Dollars in thousands,		Jun 30,		Mar 31,		Dec 31,		Sep 30,		Jun 30,		Jun 30,
except for per share amounts)		2022		2022		2021		2021		2021		2022		2021
CONDENSED INCOME STATEMENT
Net interest income		$     52,978		$     50,935		$     53,096		$     56,086		$     52,061		$   103,913		$   101,865
Provision (credit) for credit losses		989		(3,195)		(7,692)		(2,635)		(3,443)		(2,206)		(4,264)
Total other operating income		17,138		9,551		11,566		10,253		10,530		26,689		21,241
Total other operating expense		45,349		38,205		42,422		41,345		41,433		83,554		79,279
Income tax expense		6,184		6,038		7,605		6,814		5,887		12,222		11,339
Net income		17,594		19,438		22,327		20,815		18,714		37,032		36,752
Basic earnings per common share		$        0.64		$        0.70		$        0.80		$        0.74		$        0.66		$        1.34		$        1.31
Diluted earnings per common share		0.64		0.70		0.80		0.74		0.66		1.33		1.29
Dividends declared per common share		0.26		0.26		0.25		0.24		0.24		0.52		0.47
PERFORMANCE RATIOS
Return on average assets (ROA) [1]		0.96 %		1.06 %		1.22 %		1.15 %		1.06 %		1.01 %		1.07 %
Return on average shareholders' equity (ROE) [1]		14.93		14.44		16.05		14.82		13.56		14.67		13.31
Average shareholders' equity to average assets		6.45		7.34		7.61		7.79		7.84		6.89		8.01
Efficiency ratio  [2]		64.68		63.16		65.61		62.32		66.20		63.98		64.40
Net interest margin (NIM) [1]		3.05		2.97		3.08		3.31		3.16		3.01		3.18
Dividend payout ratio [3]		40.63		37.14		31.25		32.43		36.36		39.10		36.43
SELECTED AVERAGE BALANCES
Average loans, including loans held for sale		$ 5,221,300		$ 5,114,260		$ 5,073,069		$ 5,022,909		$ 5,110,820		$ 5,168,076		$ 5,095,433
Average interest-earning assets		6,982,556		6,932,649		6,890,829		6,761,643		6,606,779		6,957,918		6,457,115
Average assets		7,309,939		7,341,850		7,315,325		7,210,210		7,039,928		7,325,042		6,890,195
Average deposits		6,626,462		6,581,593		6,536,826		6,424,768		6,269,516		6,603,467		6,114,975
Average interest-bearing liabilities		4,442,172		4,429,114		4,407,612		4,221,073		4,253,382		4,435,678		4,207,670
Average shareholders' equity		471,420		538,601		556,462		561,606		552,102		504,825		552,039

[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 (ie. 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)
		Jun 30,		Mar 31,		Dec 31,		Sep 30,		Jun 30,
		2022		2022		2021		2021		2021
REGULATORY CAPITAL RATIOS
Central Pacific Financial Corp
Leverage capital ratio		8.6 %		8.5 %		8.5 %		8.5 %		8.6 %
Tier 1 risk-based capital ratio		11.6		11.9		12.2		12.2		12.7
Total risk-based capital ratio		13.9		14.2		14.5		14.6		14.9
Common equity tier 1 capital ratio		10.7		10.9		11.2		11.2		11.6
Central Pacific Bank
Leverage capital ratio		9.0		9.0		8.9		9.0		9.1
Tier 1 risk-based capital ratio		12.2		12.6		12.8		13.0		13.5
Total risk-based capital ratio		13.5		13.8		14.0		14.3		14.6
Common equity tier 1 capital ratio		12.2		12.6		12.8		13.0		13.5
		Jun 30,		Mar 31,		Dec 31,		Sep 30,		Jun 30,
(dollars in thousands, except for per share amounts)		2022		2022		2021		2021		2021
BALANCE SHEET
Total loans, net of deferred fees and costs		$ 5,301,633		$ 5,174,837		$ 5,101,649		$ 5,045,797		$ 5,077,318
Total assets		7,299,178		7,298,819		7,419,089		7,298,231		7,178,481
Total deposits		6,622,061		6,599,031		6,639,158		6,515,863		6,397,159
Long-term debt		105,738		105,677		105,616		105,556		105,495
Total shareholders' equity		455,100		486,328		558,219		555,419		552,793
Total shareholders' equity to total assets		6.23 %		6.66 %		7.52 %		7.61 %		7.70 %
ASSET QUALITY
Allowance for credit losses (ACL)		$     65,211		$     64,754		$     68,097		$     74,587		$     77,781
Nonaccrual loans		4,983		5,336		5,881		7,237		6,745
Non-performing assets (NPA)		4,983		5,336		5,881		7,237		6,745
ACL to total loans		1.23 %		1.25 %		1.33 %		1.48 %		1.53 %
ACL to core loans (refer to Table 9)		1.23 %		1.26 %		1.36 %		1.55 %		1.68 %
ACL to nonaccrual loans		1,308.67 %		1,213.53 %		1,157.92 %		1,030.63 %		1,153.17 %
NPA to total assets		0.07 %		0.07 %		0.08 %		0.10 %		0.09 %
PER SHARE OF COMMON STOCK OUTSTANDING
Book value per common share		$       16.57		$       17.63		$       20.14		$       19.84		$       19.59
Closing market price per common share		21.45		27.90		28.17		25.68		26.06

 

CENTRAL PACIFIC FINANCIAL CORP. AND SUBSIDIARIES Consolidated Balance Sheets
(Unaudited)										TABLE 2
		Jun 30,		Mar 31,		Dec 31,		Sep 30,		Jun 30,
(Dollars in thousands, except share data)		2022		2022		2021		2021		2021
ASSETS
Cash and due from financial institutions		$         108,389		$           83,947		$         81,506		$         108,669		$         116,009
Interest-bearing deposits in other financial institutions		22,741		118,183		247,401		240,173		224,469
Investment securities:
Available-for-sale debt securities, at fair value		787,373		1,199,482		1,631,699		1,535,450		1,407,340
Held-to-maturity debt securities, at amortized cost; fair value of: $635,565 at June 30, 2022, $329,503 at March 31, 2022, and none at December 31, 2021, September 30, 2021, and June 30, 2021		663,365		329,507		—		—		—
Equity securities, at fair value		—		—		—		1,593		1,578
Total investment securities		1,450,738		1,528,989		1,631,699		1,537,043		1,408,918
Loans held for sale		535		4,677		3,531		5,290		5,361
Loans, net of deferred fees and costs		5,301,633		5,174,837		5,101,649		5,045,797		5,077,318
Less: allowance for credit losses		65,211		64,754		68,097		74,587		77,781
Loans, net of allowance for credit losses		5,236,422		5,110,083		5,033,552		4,971,210		4,999,537
Premises and equipment, net		88,664		79,455		80,354		80,190		76,740
Accrued interest receivable		17,146		16,423		16,709		17,110		19,014
Investment in unconsolidated entities		37,341		31,092		29,679		30,397		31,052
Mortgage servicing rights		9,369		9,480		9,738		9,976		10,500
Bank-owned life insurance		167,202		167,407		169,148		167,961		167,289
Federal Home Loan Bank ("FHLB") stock		8,943		8,943		7,964		7,952		8,149
Right of use lease asset		36,978		38,435		39,441		40,757		41,890
Other assets		114,710		101,705		68,367		81,503		69,553
Total assets		$      7,299,178		$      7,298,819		$    7,419,089		$      7,298,231		$      7,178,481
LIABILITIES
Deposits:
Noninterest-bearing demand		$      2,282,967		$      2,269,562		$    2,291,246		$      2,195,404		$      2,203,806
Interest-bearing demand		1,444,566		1,433,284		1,415,277		1,372,626		1,341,280
Savings and money market		2,214,146		2,197,647		2,225,903		2,296,968		2,048,945
Time		680,382		698,538		706,732		650,865		803,128
Total deposits		6,622,061		6,599,031		6,639,158		6,515,863		6,397,159
Long-term debt		105,738		105,677		105,616		105,556		105,495
Lease liability		38,037		39,610		40,731		41,933		43,112
Other liabilities		78,242		68,123		75,317		79,412		79,874
Total liabilities		6,844,078		6,812,441		6,860,822		6,742,764		6,625,640
EQUITY
Shareholders' equity:
Preferred stock, no par value, authorized 1,000,000 shares; issued and outstanding: none at June 30, 2022, March 31, 2022, December 31, 2021, September 30, 2021, and June 30, 2021		—		—		—		—		—
Common stock, no par value, authorized 185,000,000 shares; issued and outstanding: 27,463,562 at June 30, 2022, 27,584,929 at March 31, 2022, 27,714,071 at December 31, 2021, 27,999,588 at September 30, 2021, and 28,218,860 at June 30, 2021		417,862		421,153		426,091		436,957		440,854
Additional paid-in capital		98,977		98,270		98,073		97,279		96,182
Retained earnings		64,693		54,252		42,015		22,916		10,831
Accumulated other comprehensive (loss) income		(126,432)		(87,347)		(7,960)		(1,733)		4,926
Total shareholders' equity		455,100		486,328		558,219		555,419		552,793
Non-controlling interest		—		50		48		48		48
Total equity		455,100		486,378		558,267		555,467		552,841
Total liabilities and  equity		$      7,299,178		$      7,298,819		$    7,419,089		$      7,298,231		$      7,178,481

 

CENTRAL PACIFIC FINANCIAL CORP. AND SUBSIDIARIES Consolidated Statements of Income
(Unaudited)												TABLE 3
		Three Months Ended										Six Months Ended
		Jun 30,		Mar 31,		Dec 31,		Sep 30,		Jun 30,		June 30,
(Dollars in thousands, except per share data)		2022		2022		2021		2021		2021		2022		2021
Interest income:
Interest and fees on loans		$               46,963		$               44,949		$               47,576		$               51,104		$               49,024		$               91,912		$               95,098
Interest and dividends on investment securities:
Taxable investment securities		7,200		7,134		6,667		6,210		4,447		14,334		9,553
Tax-exempt investment securities		642		651		642		470		346		1,293		860
Dividend income on investment securities		—		21		21		18		18		21		36
Interest on deposits in other financial institutions		191		72		86		105		61		263		71
Dividend income on FHLB stock		68		59		61		62		63		127		122
Total interest income		55,064		52,886		55,053		57,969		53,959		107,950		105,740
Interest expense:
Interest on deposits:
Demand		144		112		104		101		93		256		179
Savings and money market		317		329		352		332		282		646		556
Time		490		469		478		428		498		959		1,086
Interest on short-term borrowings		2		—		—		—		—		2		2
Interest on long-term debt		1,133		1,041		1,023		1,022		1,025		2,174		2,052
Total interest expense		2,086		1,951		1,957		1,883		1,898		4,037		3,875
Net interest income		52,978		50,935		53,096		56,086		52,061		103,913		101,865
Provision (credit) for credit losses		989		(3,195)		(7,692)		(2,635)		(3,443)		(2,206)		(4,264)
Net interest income after provision (credit) for credit losses		51,989		54,130		60,788		58,721		55,504		106,119		106,129
Other operating income:
Mortgage banking income		1,140		1,172		1,902		1,327		1,533		2,312		4,503
Service charges on deposit accounts		2,026		1,861		1,800		1,637		1,443		3,887		2,921
Other service charges and fees		4,610		4,488		5,016		4,942		4,619		9,098		8,409
Income from fiduciary activities		1,188		1,154		1,283		1,292		1,269		2,342		2,500
Net gain on sales of investment securities		8,506		—		—		100		50		8,506		50
Income from bank-owned life insurance		(1,028)		539		946		540		1,210		(489)		2,007
Other		696		337		619		415		406		1,033		851
Total other operating income		17,138		9,551		11,566		10,253		10,530		26,689		21,241
Other operating expense:
Salaries and employee benefits		22,369		20,942		23,030		23,566		23,790		43,311		43,617
Net occupancy		4,448		3,774		4,129		4,185		4,055		8,222		7,819
Equipment		1,075		1,082		1,207		1,089		1,048		2,157		2,048
Communication		744		806		922		824		756		1,550		1,525
Legal and professional services		2,916		2,626		2,928		2,575		2,572		5,542		4,949
Computer software		3,624		3,082		3,125		2,998		3,398		6,706		7,181
Advertising		1,150		1,150		1,179		1,329		1,329		2,300		2,987
Other		9,023		4,743		5,902		4,779		4,485		13,766		9,153
Total other operating expense		45,349		38,205		42,422		41,345		41,433		83,554		79,279
Income before income taxes		23,778		25,476		29,932		27,629		24,601		49,254		48,091
Income tax expense		6,184		6,038		7,605		6,814		5,887		12,222		11,339
Net income		$               17,594		$               19,438		$               22,327		$               20,815		$               18,714		$               37,032		$               36,752
Per common share data:
Basic earnings per share		$                   0.64		$                   0.70		$                   0.80		$                   0.74		$                   0.66		$                   1.34		$                   1.31
Diluted earnings per share		0.64		0.70		0.80		0.74		0.66		1.33		1.29
Cash dividends declared		0.26		0.26		0.25		0.24		0.24		0.52		0.47
Basic weighted average shares outstanding		27,516,284		27,591,390		27,769,651		27,967,089		28,173,710		27,553,629		28,141,360
Diluted weighted average shares outstanding		27,676,619		27,874,924		28,045,826		28,175,953		28,456,624		27,759,187		28,407,479

 

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
		June 30, 2022						March 31, 2022						June 30, 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		$   106,083		0.72 %		$      191		$   157,861		0.18 %		$       72		$   222,934		0.11 %		$       61
Investment securities, excluding valuation allowance:
Taxable		1,532,282		1.88		7,200		1,535,039		1.86		7,155		1,172,183		1.52		4,465
Tax-exempt [1]		113,934		2.85		813		117,493		2.80		824		92,702		1.89		438
Total investment securities		1,646,216		1.95		8,013		1,652,532		1.93		7,979		1,264,885		1.55		4,903
Loans, including loans held for sale		5,221,300		3.60		46,963		5,114,260		3.54		44,949		5,110,820		3.84		49,024
Federal Home Loan Bank stock		8,957		3.02		68		7,996		2.98		59		8,140		3.11		63
Total interest-earning assets		6,982,556		3.17		55,235		6,932,649		3.08		53,059		6,606,779		3.28		54,051
Noninterest-earning assets		327,383						409,201						433,149
Total assets		$  7,309,939						$  7,341,850						$  7,039,928
LIABILITIES AND EQUITY
Interest-bearing liabilities:
Interest-bearing demand deposits		$  1,435,088		0.04 %		$      144		$  1,425,303		0.03 %		$      112		$  1,269,676		0.03 %		$       93
Savings and money market deposits		2,204,934		0.06		317		2,212,426		0.06		329		2,028,583		0.06		282
Time deposits up to $250,000		217,605		0.27		148		223,661		0.28		156		231,922		0.34		196
Time deposits over $250,000		478,483		0.29		342		462,087		0.28		313		617,745		0.20		302
Total interest-bearing deposits		4,336,110		0.09		951		4,323,477		0.09		910		4,147,926		0.08		873
Federal Home Loan Bank advances and other short-term borrowings		363		1.84		2		—		—		—		—		—		—
Long-term debt		105,699		4.30		1,133		105,637		4.00		1,041		105,456		3.90		1,025
Total interest-bearing liabilities		4,442,172		0.19		2,086		4,429,114		0.18		1,951		4,253,382		0.18		1,898
Noninterest-bearing deposits		2,290,352						2,258,116						2,121,590
Other liabilities		105,979						115,971						112,852
Total liabilities		6,838,503						6,803,201						6,487,824
Shareholders' equity		471,420						538,601						552,102
Non-controlling interest		16						48						2
Total equity		471,436						538,649						552,104
Total liabilities and equity		$  7,309,939						$  7,341,850						$  7,039,928
Net interest income						$ 53,149						$ 51,108						$ 52,153
Interest rate spread				2.98 %						2.90 %						3.10 %
Net interest margin				3.05 %						2.97 %						3.16 %
[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
		Six Months Ended						Six Months Ended
		June 30, 2022						June 30, 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		$     131,829		0.40 %		$            263		$     133,684		0.11 %		$              71
Investment securities, excluding valuation allowance:
Taxable		1,533,570		1.87		14,355		1,126,978		1.70		9,589
Tax-exempt [1]		115,964		2.82		1,637		93,181		2.34		1,089
Total investment securities		1,649,534		1.94		15,992		1,220,159		1.75		10,678
Loans, including loans held for sale		5,168,076		3.58		91,912		5,095,433		3.75		95,098
Federal Home Loan Bank stock		8,479		3.00		127		7,839		3.12		122
Total interest-earning assets		6,957,918		3.13		108,294		6,457,115		3.30		105,969
Noninterest-earning assets		367,124						433,080
Total assets		$  7,325,042						$  6,890,195
LIABILITIES AND EQUITY
Interest-bearing liabilities:
Interest-bearing demand deposits		$  1,430,222		0.04 %		$            256		$  1,228,548		0.03 %		$            179
Savings and money market deposits		2,208,659		0.06		646		2,000,845		0.06		556
Time deposits up to $250,000		220,617		0.28		303		234,361		0.38		437
Time deposits over $250,000		470,330		0.28		656		637,266		0.21		649
Total interest-bearing deposits		4,329,828		0.09		1,861		4,101,020		0.09		1,821
Federal Home Loan Bank advances and other short-term borrowings		182		1.84		2		1,221		0.30		2
Long-term debt		105,668		4.15		2,174		105,429		3.93		2,052
Total interest-bearing liabilities		4,435,678		0.18		4,037		4,207,670		0.19		3,875
Noninterest-bearing deposits		2,273,639						2,013,955
Other liabilities		110,868						116,529
Total liabilities		6,820,185						6,338,154
Shareholders' equity		504,825						552,039
Non-controlling interest		32						2
Total equity		504,857						552,041
Total liabilities and equity		$  7,325,042						$  6,890,195
Net interest income						$     104,257						$     102,094
Interest rate spread				2.95 %						3.11 %
Net interest margin				3.01 %						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
		Jun 30,		Mar 31,		Dec 31,		Sep 30,		Jun 30,
(Dollars in thousands)		2022		2022		2021		2021		2021
HAWAII:
Commercial, financial and agricultural:
SBA Paycheck Protection Program		$             19,469		$           43,380		$           87,459		$         198,315		$         395,352
Other		367,676		407,559		422,388		404,751		389,341
Real estate:
Construction		134,103		122,329		122,867		128,908		133,457
Residential mortgage		1,890,783		1,874,048		1,875,980		1,748,729		1,711,801
Home equity		698,209		676,326		637,249		618,951		583,430
Commercial mortgage		994,405		927,241		922,146		915,746		926,006
Consumer		341,213		337,188		333,843		331,987		328,332
Total loans, net of deferred fees and costs		4,445,858		4,388,071		4,401,932		4,347,387		4,467,719
Allowance for credit losses		(51,374)		(51,521)		(55,808)		(62,126)		(67,773)
Loans, net of allowance for credit losses		$        4,394,484		$      4,336,550		$      4,346,124		$      4,285,261		$      4,399,946
U.S. MAINLAND: [1]
Commercial, financial and agricultural:
SBA Paycheck Protection Program		$                  712		$                851		$             3,868		$           20,356		$           39,258
Other		156,567		136,857		107,733		114,122		96,884
Real estate:
Construction		10,935		988		—		—		—
Commercial mortgage		309,230		316,258		298,058		292,671		260,424
Consumer		378,331		331,812		290,058		271,261		213,033
Total loans, net of deferred fees and costs		855,775		786,766		699,717		698,410		609,599
Allowance for credit losses		(13,837)		(13,233)		(12,289)		(12,461)		(10,008)
Loans, net of allowance for credit losses		$           841,938		$         773,533		$         687,428		$         685,949		$         599,591
TOTAL:
Commercial, financial and agricultural:
SBA Paycheck Protection Program		$             20,181		$           44,231		$           91,327		$         218,671		$         434,610
Other		524,243		544,416		530,121		518,873		486,225
Real estate:
Construction		145,038		123,317		122,867		128,908		133,457
Residential mortgage		1,890,783		1,874,048		1,875,980		1,748,729		1,711,801
Home equity		698,209		676,326		637,249		618,951		583,430
Commercial mortgage		1,303,635		1,243,499		1,220,204		1,208,417		1,186,430
Consumer		719,544		669,000		623,901		603,248		541,365
Total loans, net of deferred fees and costs		5,301,633		5,174,837		5,101,649		5,045,797		5,077,318
Allowance for credit losses		(65,211)		(64,754)		(68,097)		(74,587)		(77,781)
Loans, net of allowance for credit losses		$        5,236,422		$      5,110,083		$      5,033,552		$      4,971,210		$      4,999,537
[1] U.S. Mainland includes territories of the United States.

 

CENTRAL PACIFIC FINANCIAL CORP. AND SUBSIDIARIES Deposits
(Unaudited)										TABLE 7
		Jun 30,		Mar 31,		Dec 31,		Sep 30,		Jun 30,
(Dollars in thousands)		2022		2022		2021		2021		2021
Noninterest-bearing demand		$        2,282,967		$        2,269,562		$        2,291,246		$        2,195,404		$        2,203,806
Interest-bearing demand		1,444,566		1,433,284		1,415,277		1,372,626		1,341,280
Savings and money market		2,214,146		2,197,647		2,225,903		2,296,968		2,048,945
Time deposits less than $100,000		129,103		132,712		136,584		139,358		141,498
Other time deposits $100,000 to $250,000		84,840		87,838		88,873		87,491		89,710
Core deposits		6,155,622		6,121,043		6,157,883		6,091,847		5,825,239
Government time deposits		165,000		188,000		214,950		238,950		403,755
Other time deposits greater than $250,000		301,439		289,988		266,325		185,066		168,165
Total time deposits greater than $250,000		466,439		477,988		481,275		424,016		571,920
Total deposits		$        6,622,061		$        6,599,031		$        6,639,158		$        6,515,863		$        6,397,159

 

CENTRAL PACIFIC FINANCIAL CORP. AND SUBSIDIARIES Nonperforming Assets, Past Due and Restructured Loans
(Unaudited)										TABLE 8
		Jun 30,		Mar 31,		Dec 31,		Sep 30,		Jun 30,
(Dollars in thousands)		2022		2022		2021		2021		2021
Nonaccrual loans: [1]
Commercial, financial and agricultural - Other		$           333		$           293		$           183		$           689		$           699
Real estate:
Residential mortgage		3,490		3,804		4,623		5,351		5,280
Home equity		592		820		786		880		434
Consumer		568		419		289		317		332
Total nonaccrual loans		4,983		5,336		5,881		7,237		6,745
Other real estate owned ("OREO"):
Real estate:
Residential mortgage		—		—		—		—		—
Total OREO		—		—		—		—		—
Total nonperforming assets ("NPAs")		4,983		5,336		5,881		7,237		6,745
Loans delinquent for 90 days or more still accruing interest: [1]
Commercial, financial and agricultural - Other		309		592		945		—		29
Real estate:
Residential mortgage		—		111		—		444		1,438
Home equity		—		—		44		—		—
Consumer		842		621		374		166		100
Total loans delinquent for 90 days or more still accruing interest		1,151		1,324		1,363		610		1,567
Restructured loans still accruing interest: [1]
Commercial, financial and agricultural - Other		—		—		—		12		26
Real estate:
Residential mortgage		2,006		2,751		3,768		4,458		4,258
Commercial mortgage		965		1,004		1,043		1,577		1,636
Consumer		76		83		92		99		132
Total restructured loans still accruing interest		3,047		3,838		4,903		6,146		6,052
Total NPAs and loans delinquent for 90 days or more and restructured loans still accruing interest		$         9,181		$       10,498		$       12,147		$       13,993		$       14,364
Total nonaccrual loans as a percentage of total loans		0.09 %		0.10 %		0.12 %		0.14 %		0.13 %
Total NPAs as a percentage of total loans and OREO		0.09 %		0.10 %		0.12 %		0.14 %		0.13 %
Total NPAs and loans delinquent for 90 days or more still accruing interest as a percentage of total loans and OREO		0.12 %		0.13 %		0.14 %		0.16 %		0.16 %
Total NPAs, loans delinquent for 90 days or more and restructured loans still accruing interest as a percentage of total loans and OREO		0.17 %		0.20 %		0.24 %		0.28 %		0.28 %
Quarter-to-quarter changes in NPAs:
Balance at beginning of quarter		$         5,336		$         5,881		$         7,237		$         6,745		$         7,194
Additions		1,881		1,659		1,375		1,951		1,879
Reductions:
Payments		(285)		(1,598)		(933)		(767)		(1,120)
Return to accrual status		(979)		(38)		(1,034)		(141)		(84)
Charge-offs, valuation and other adjustments		(970)		(568)		(764)		(551)		(1,124)
Total reductions		(2,234)		(2,204)		(2,731)		(1,459)		(2,328)
Balance at end of quarter		$         4,983		$         5,336		$         5,881		$         7,237		$         6,745

[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										Six Months Ended
		Jun 30,		Mar 31,		Dec 31,		Sep 30,		Jun 30,		June 30,
(Dollars in thousands)		2022		2022		2021		2021		2021		2022		2021
Allowance for credit losses ("ACL"):
ACL at beginning of period		$     64,754		$     68,097		$     74,587		$     77,781		$     81,553		$     68,097		$     83,269
(Credit) provision for credit losses on loans [1] [2]		1,456		(2,931)		(7,417)		(2,969)		(2,963)		(1,475)		(3,937)
Charge-offs:
Commercial, financial and agricultural - Other		487		254		379		334		401		741		1,010
Consumer		1,390		1,216		952		829		1,523		2,606		2,621
Total charge-offs		1,877		1,470		1,331		1,163		1,924		3,347		3,631
Recoveries:
Commercial, financial and agricultural - Other		215		350		358		281		276		565		365
Real estate:
Construction		62		—		1,159		—		—		62		—
Residential mortgage		36		112		13		53		186		148		292
Home equity		—		—		—		—		—		—		9
Commercial mortgage		—		—		—		—		65		—		73
Consumer		565		596		728		604		588		1,161		1,341
Total recoveries		878		1,058		2,258		938		1,115		1,936		2,080
Net charge-offs (recoveries)		999		412		(927)		225		809		1,411		1,551
ACL at end of period		$     65,211		$     64,754		$     68,097		$     74,587		$     77,781		$     65,211		$     77,781
Average loans, net of deferred fees and costs		$ 5,221,300		$ 5,114,260		$ 5,073,069		$ 5,022,909		$ 5,110,820		$ 5,168,076		$ 5,095,433
Annualized ratio of net charge-offs to average loans		0.08 %		0.03 %		(0.07) %		0.02 %		0.06 %		0.05 %		0.06 %

[1] In 2020, the Company recorded a reserve on accrued interest receivable ("AIR") of $0.2 million for loans on payment forbearance or deferral, which were granted to borrowers impacted by the COVID-19 pandemic. This reserve was recorded as a contra-asset against AIR with the offset to the provision for credit losses. During the second quarter of 2021, the Company reversed the entire reserve on AIR. The provision for credit losses presented in this table excludes the provision for credit losses on AIR.

[2] As of January 1, 2021, the provision for credit losses on off-balance sheet credit exposures (previously included in other operating expense) is included in the provision for credit losses line on the consolidated statements of income. The allowance for off-balance sheet credit exposures continues to be included in other liabilities. For roll-forward purposes, in this table we exclude the provision for credit losses on off-balance sheet credit exposures.

 

CENTRAL PACIFIC FINANCIAL CORP. AND SUBSIDIARIES Reconciliation of Non-GAAP Financial Measures
(Unaudited)										TABLE 10
The following table sets forth a reconciliation of our core loans and the ratios of our allowance for credit losses ("ACL") to total loans and ACL to core loans (or total loans, excluding SBA Paycheck Protection Program ("PPP") loans), for each of the periods indicated:
		Jun 30,		Mar 31,		Dec 31,		Sep 30,		Jun 30,
(Dollars in thousands)		2022		2022		2021		2021		2021
ACL		$        65,211		$        64,754		$        68,097		$        74,587		$        77,781
Total loans		$   5,301,633		$   5,174,837		$   5,101,649		$   5,045,797		$   5,077,318
Less: PPP loans		20,181		44,231		91,327		218,671		434,610
Core loans (or total loans, excluding PPP loans)		$   5,281,452		$   5,130,606		5,010,322		4,827,126		$   4,642,708
Ratio of ACL to total loans		1.23 %		1.25 %		1.33 %		1.48 %		1.53 %
Ratio of ACL to core loans		1.23 %		1.26 %		1.36 %		1.55 %		1.68 %

 

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SOURCE Central Pacific Financial Corp.

FAQ

What were Central Pacific Financial Corp.'s earnings for Q2 2022?

Central Pacific Financial Corp. reported net income of $17.6 million, or $0.64 per diluted share.

How much did total loans increase in Q2 2022 for CPF?

Total loans increased by $126.8 million, or 2.5%, in Q2 2022.

What dividend did Central Pacific Financial Corp. declare in July 2022?

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

What was the net interest margin for CPF in Q2 2022?

The net interest margin for Q2 2022 was 3.05%.

What recognition did Central Pacific Bank receive in 2022?

Central Pacific Bank was named the Best Bank in Hawaii by Forbes.