Central Pacific Financial Reports Second Quarter Earnings of $14.5 Million
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 2023 of $14.5 million, or fully diluted earnings per share ("EPS") of $0.53, compared to net income of $16.2 million, or EPS of $0.60 in the previous quarter and net income of $17.6 million, or EPS of $0.64 in the year-ago quarter.
Pre-provision net revenue ("PPNR"), or net income excluding provision for credit losses and income taxes, totaled $23.3 million in the second quarter of 2023, compared to PPNR of $23.1 million in the previous quarter and $24.8 million in the year-ago quarter. Net income and PPNR in the year-ago quarter included an $8.5 million non-recurring gain on sale of Class B shares of Visa, partially offset by a $4.9 million non-recurring, non-cash settlement charge related to the termination and settlement of our defined benefit pension plan. Additional information on pre-provision net revenue is presented in Table 10.
"Central Pacific delivered solid results during the second quarter and further strengthened our balance sheet, liquidity and capital positions," said Arnold Martines, President and Chief Executive Officer. "We were successful in growing deposits by focusing on the needs of our long-time personal and business customers as well as attracting new relationships. We will continue our focus on building liquidity and ensuring strong credit quality while we navigate the current economic environment."
Earnings Highlights
Net interest income for the second quarter of 2023 was $52.7 million, which decreased by $1.5 million, or 2.7% from the previous quarter, and decreased by $0.2 million, or 0.5% from the year-ago quarter. The sequential quarter decrease in net interest income is primarily due to increases in average balances and rates paid on interest-bearing deposits, which outpaced the increases in average loan balances and loan yields.
Net interest margin ("NIM") for the second quarter of 2023 was 2.96%, which decreased by 12 basis points ("bps") from the previous quarter and decreased by 9 bps from the year-ago quarter. The sequential quarter decrease in NIM is primarily due to higher rates paid on deposits, which outpaced the increase in loan yields. 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 2023, the Company recorded a provision for credit losses of $4.3 million, compared to a provision of $1.9 million in the previous quarter and a provision of $1.0 million in the year-ago quarter. The provision in the second quarter consisted of a provision for credit losses on loans of $4.1 million and a provision for credit losses on off-balance sheet credit exposures of $0.2 million.
Other operating income for the second quarter of 2023 totaled $10.4 million, compared to $11.0 million in the previous quarter and $17.1 million in the year-ago quarter. The decrease from the previous quarter was primarily due to lower income from fiduciary activities of $0.3 million and lower income recovered on nonaccrual loans previously charged-off of $0.2 million (included in other). Other operating income in the year-ago quarter included the aforementioned $8.5 million gain on the sale of Class B common stock of Visa. Additional information on other operating income is presented in Table 3.
Other operating expense for the second quarter of 2023 totaled $39.9 million, compared to $42.1 million in the previous quarter and $45.3 million in the year-ago quarter. The decrease in other operating expense was primarily due to lower salaries and employee benefits of $1.2 million and lower legal and professional services of $0.4 million. Other operating expense in the year-ago quarter included the aforementioned non-cash settlement charge of $4.9 million related to the termination and settlement of our defined benefit pension plan. Additional information on other operating expense is presented in Table 3.
The efficiency ratio for the second quarter of 2023 was 63.17%, compared to 64.58% in the previous quarter and 64.68% in the year-ago quarter.
The effective tax rate for the second quarter of 2023 was 23.6%, compared to 23.8% in the previous quarter and 26.0% in the year-ago quarter.
Balance Sheet Highlights
Total assets at June 30, 2023 of $7.57 billion increased by $46.3 million, or 0.6% from $7.52 billion at March 31, 2023, and increased by $268.4 million, or 3.7% from $7.30 billion at June 30, 2022. At June 30, 2023, the Company had $311.0 million in cash on its balance sheet and $2.71 billion in total other liquidity sources, including available borrowing capacity and unpledged investment securities. Total available sources of liquidity as a percentage of uninsured and uncollateralized deposits was 128%.
Total loans, net of deferred fees and costs, at June 30, 2023 of $5.52 billion decreased by $36.7 million from $5.56 billion at March 31, 2023, and increased by $219.1 million, or 4.1% from $5.30 billion at June 30, 2022. Average yields earned on loans during the second quarter of 2023 was 4.37%, compared to 4.26% in the previous quarter and 3.60% in the year-ago quarter. Loans by type and geographic distribution are summarized in Table 6.
Total deposits at June 30, 2023 of $6.81 billion increased by $58.8 million or 0.9% from $6.75 billion at March 31, 2023, and increased by $183.7 million, or 2.8% from $6.62 billion at June 30, 2022. Core deposits, which include demand deposits, savings and money market deposits and time deposits up to $250,000, totaled $5.98 billion at June 30, 2023, and increased by $10.1 million, or 0.2% from $5.97 billion at March 31, 2023. Average rates paid on total deposits during the second quarter of 2023 was 0.84%, compared to 0.60% in the previous quarter and 0.06% in the year-ago quarter. At June 30, 2023, approximately 65% of the Company's total deposits were FDIC-insured or fully collateralized. Core deposit and total deposit balances are summarized in Table 7.
Asset Quality
Nonperforming assets at June 30, 2023 totaled $11.1 million, or 0.15% of total assets, compared to $5.3 million, or 0.07% of total assets at March 31, 2023 and $5.0 million, or 0.07% of total assets at June 30, 2022. The increase in nonperforming assets from the previous quarter is primarily attributable to the addition of two Hawaii construction loans to a single borrower totaling $4.9 million. In mid-July 2023, the loans were paid-off in full.
Additional information on nonperforming assets, past due and restructured loans is presented in Table 8.
Net charge-offs in the second quarter of 2023 totaled $3.4 million, compared to net charge-offs of $2.3 million in the previous quarter, and net charge-offs of $1.0 million in the year-ago quarter. Annualized net charge-offs as a percentage of average loans was 0.24%, 0.16% and 0.08% during the three months ended June 30, 2023, March 31, 2023 and June 30, 2022, respectively.
The allowance for credit losses, as a percentage of total loans at June 30, 2023 was 1.16%, compared to 1.14% at March 31, 2023, and 1.23% at June 30, 2022. Additional information on net charge-offs and recoveries and the allowance for credit losses is presented in Table 9.
Total shareholders' equity was $476.3 million at June 30, 2023, compared to $470.9 million and $455.1 million at March 31, 2023 and June 30, 2022, respectively.
During the second quarter of 2023, the Company repurchased 23,750 shares of common stock, at a total cost of $0.4 million, or an average cost per share of $14.92. During the six months ended June 30, 2023, the Company repurchased 125,510 shares of common stock, at a total cost of $2.6 million, or an average cost per share of $20.39. As of June 30, 2023, $23.5 million remained available for repurchase under the Company's share repurchase program.
At June 30, 2023, the Company's leverage capital, tier 1 risk-based capital, total risk-based capital, and common equity tier 1 ratios were 8.7%, 11.8%, 13.9%, and 10.9%, respectively, compared to 8.6%, 11.5%, 13.6%, and 10.6%, respectively, at March 31, 2023.
On July 25, 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 September 15, 2023 to shareholders of record at the close of business on August 31, 2023.
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 1-888-510-2553 (access code: 9816541). A playback of the call will be available through August 26, 2023 by dialing 1-800-770-2030 (access code: 9816541) and on the Company's website. Information which may be discussed in the conference call is provided in an earnings supplement presentation on the Company's website at http://ir.cpb.bank.
About Central Pacific Financial Corp.
Central Pacific Financial Corp. is a Hawaii-based bank holding company with approximately $7.57 billion in assets as of June 30, 2023. Central Pacific Bank, its primary subsidiary, operates 27 branches and 57 ATMs in the state of Hawaii. For additional information, please visit the Company's website at http://www.cpb.bank.
Equal Housing Lender
Member FDIC
NYSE Listed: CPF
Forward-Looking Statements ("FLS")
This document may contain FLS concerning: projections of revenues, expenses, income or loss, earnings or loss per share, capital expenditures, the payment or nonpayment of dividends, capital position, credit losses, net interest margin or other financial items; statements of plans, objectives and expectations of Central Pacific Financial Corp. (the "Company") or its management or Board of Directors, including those relating to business plans, use of capital resources, products or services and regulatory developments and regulatory actions; statements of future economic performance including anticipated performance results from our business initiatives; or any statements of the assumptions underlying or relating to any of the foregoing. Words such as "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 recent bank failures and the potential impact of such developments on customer confidence, deposit behavior, liquidity and regulatory responses thereto; the adverse effects of the COVID-19 pandemic virus (and ongoing pandemic variants) on local, national and international economies, including, but not limited to, the adverse impact on tourism and construction in the State of Hawaii, our borrowers, customers, third-party contractors, vendors and employees; supply chain disruptions; the increase in inventory or adverse conditions in the real estate market and deterioration in the construction industry; adverse changes in the financial performance and/or condition of our borrowers and, as a result, increased loan delinquency rates, deterioration in asset quality, and losses in our loan portfolio; our ability to 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 and lawsuits we are or may become subject to, or regulatory or other governmental inquiries and proceedings and the resolution thereof, the results of regulatory examinations or reviews and the effect of, and our ability to comply with, any regulations or regulatory orders or actions we are or may become subject to; ability to successfully implement our initiatives to lower our efficiency ratio; the effects of and changes in trade, monetary and fiscal policies and laws, including the interest rate policies of the Board of Governors of the Federal Reserve System (the "FRB" or the "Federal Reserve"); securities market and monetary fluctuations, including the 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; cybersecurity and data privacy breaches and the consequence therefrom; failure to maintain effective internal control over financial reporting or disclosure controls and procedures; the ability to address deficiencies in our internal controls over financial reporting or disclosure controls and procedures; technological changes and developments; changes in the competitive environment among financial holding companies and other financial service providers; the effect of changes in accounting policies and practices, as may be adopted by the regulatory agencies, as well as the Public Company Accounting Oversight Board ("PCAOB"), the Financial Accounting Standards Board ("FASB") and other accounting standard setters and the cost and resources required to implement such changes; our ability to attract and retain key personnel; changes in our personnel, organization, compensation and benefit plans; and our success at managing the risks involved in the foregoing items.
For further information with respect to factors that could cause actual results to materially differ from the expectations or projections stated in the FLS, please see the Company's publicly available Securities and Exchange Commission filings, including the Company's 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
Six Months Ended
(Dollars in thousands,
Jun 30,
Mar 31,
Dec 31,
Sep 30,
Jun 30,
Jun 30,
except for per share amounts)
2023
2023
2022
2022
2022
2023
2022
CONDENSED INCOME STATEMENT
Net interest income
$
52,734
$
54,196
$
56,285
$
55,365
$
52,978
$
106,930
$
103,913
Provision (credit) for credit losses
4,319
1,852
571
362
989
6,171
(2,206
)
Total other operating income
10,435
11,009
11,601
9,629
17,138
21,444
26,689
Total other operating expense
39,903
42,107
40,434
41,998
45,349
82,010
83,554
Income tax expense
4,472
5,059
6,700
5,919
6,184
9,531
12,222
Net income
14,475
16,187
20,181
16,715
17,594
30,662
37,032
Basic earnings per share
$
0.54
$
0.60
$
0.74
$
0.61
$
0.64
$
1.14
$
1.34
Diluted earnings per share
0.53
0.60
0.74
0.61
0.64
1.13
1.33
Dividends declared per share
0.26
0.26
0.26
0.26
0.26
0.52
0.52
PERFORMANCE RATIOS
Return on average assets (ROA) [1]
0.78
%
0.87
%
1.09
%
0.91
%
0.96
%
0.82
%
1.01
%
Return on average shareholders’ equity (ROE) [1]
12.12
13.97
18.30
14.49
14.93
13.03
14.67
Average shareholders’ equity to average assets
6.40
6.23
5.97
6.30
6.45
6.31
6.89
Efficiency ratio [2]
63.17
64.58
59.56
64.62
64.68
63.88
63.98
Net interest margin (NIM) [1]
2.96
3.08
3.17
3.17
3.05
3.02
3.01
Dividend payout ratio [3]
49.06
43.33
35.14
42.62
40.63
46.02
39.10
SELECTED AVERAGE BALANCES
Average loans, including loans held for sale
$
5,543,398
$
5,525,988
$
5,498,800
$
5,355,088
$
5,221,300
$
5,534,741
$
5,168,076
Average interest-earning assets
7,155,606
7,112,377
7,103,841
6,991,773
6,982,556
7,134,111
6,957,918
Average assets
7,463,629
7,443,767
7,389,712
7,320,751
7,309,939
7,453,753
7,325,042
Average deposits
6,674,650
6,655,660
6,673,922
6,535,321
6,626,462
6,665,208
6,603,467
Average interest-bearing liabilities
4,908,120
4,820,660
4,708,045
4,538,893
4,442,172
4,864,633
4,435,678
Average shareholders’ equity
477,711
463,556
441,084
461,328
471,420
470,673
504,825
[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)
Jun 30,
Mar 31,
Dec 31,
Sep 30,
Jun 30,
2023
2023
2022
2022
2022
REGULATORY CAPITAL RATIOS
Central Pacific Financial Corp.
8.7
%
8.6
%
8.5
%
8.7
%
8.6
%
Tier 1 risk-based capital ratio
11.8
11.5
11.3
11.5
11.6
Total risk-based capital ratio
13.9
13.6
13.5
13.7
13.9
Common equity tier 1 capital ratio
10.9
10.6
10.5
10.6
10.7
Central Pacific Bank
9.1
9.0
9.0
9.1
9.0
Tier 1 risk-based capital ratio
12.3
12.0
11.9
12.2
12.2
Total risk-based capital ratio
13.5
13.2
13.1
13.4
13.5
Common equity tier 1 capital ratio
12.3
12.0
11.9
12.2
12.2
Jun 30,
Mar 31,
Dec 31,
Sep 30,
Jun 30,
(dollars in thousands, except for per share amounts)
2023
2023
2022
2022
2022
BALANCE SHEET
Total loans, net of deferred fees and costs
$
5,520,683
$
5,557,397
$
5,555,466
$
5,422,212
$
5,301,633
Total assets
7,567,592
7,521,247
7,432,763
7,337,631
7,299,178
Total deposits
6,805,737
6,746,968
6,736,223
6,556,434
6,622,061
Long-term debt
155,981
155,920
105,859
105,799
105,738
Total shareholders’ equity
476,279
470,926
452,871
438,468
455,100
Total shareholders’ equity to total assets
6.29
%
6.26
%
6.09
%
5.98
%
6.23
%
ASSET QUALITY
Allowance for credit losses (ACL)
$
63,849
$
63,099
$
63,738
$
64,382
$
65,211
Nonaccrual loans
11,061
5,313
5,251
4,220
4,983
Non-performing assets (NPA)
11,061
5,313
5,251
4,220
4,983
ACL to total loans
1.16
%
1.14
%
1.15
%
1.19
%
1.23
%
ACL to nonaccrual loans
577.24
%
1,187.63
%
1,213.83
%
1,525.64
%
1,308.67
%
NPA to total assets
0.15
%
0.07
%
0.07
%
0.06
%
0.07
%
PER SHARE OF COMMON STOCK OUTSTANDING
Book value per common share
$
17.61
$
17.44
$
16.76
$
16.08
$
16.57
Closing market price per common share
15.71
17.90
20.28
20.69
21.45
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)
2023
2023
2022
2022
2022
ASSETS
Cash and due from financial institutions
$
129,071
$
108,535
$
97,150
$
116,365
$
108,389
Interest-bearing deposits in other financial institutions
181,913
90,247
14,894
22,332
22,741
Investment securities:
Available-for-sale debt securities, at fair value
664,071
687,188
671,794
686,681
787,373
Held-to-maturity debt securities, at amortized cost; fair value of: $581,222 at June 30, 2023, $599,300 at March 31, 2023, $596,780 at December 31, 2022, $590,880 at September 30, 2022, and $635,565 at June 30, 2022
649,946
658,596
664,883
662,827
663,365
Total investment securities
1,314,017
1,345,784
1,336,677
1,349,508
1,450,738
Loans held for sale, at fair value
2,593
—
1,105
1,701
535
Loans, net of deferred fees and costs
5,520,683
5,557,397
5,555,466
5,422,212
5,301,633
Less: allowance for credit losses
63,849
63,099
63,738
64,382
65,211
Loans, net of allowance for credit losses
5,456,834
5,494,298
5,491,728
5,357,830
5,236,422
Premises and equipment, net
96,479
93,761
91,634
89,979
88,664
Accrued interest receivable
20,463
20,473
20,345
18,134
17,146
Investment in unconsolidated entities
45,218
45,953
46,641
36,769
37,341
Mortgage servicing rights
8,843
8,943
9,074
9,216
9,369
Bank-owned life insurance
168,136
168,244
167,967
167,761
167,202
Federal Home Loan Bank ("FHLB") stock
10,960
11,960
9,146
13,546
8,943
Right-of-use lease asset
33,247
34,237
34,985
35,978
36,978
Other assets
99,818
98,812
111,417
118,512
114,710
Total assets
$
7,567,592
$
7,521,247
$
7,432,763
$
7,337,631
$
7,299,178
LIABILITIES
Deposits:
Noninterest-bearing demand
$
2,009,387
$
2,028,087
$
2,092,823
$
2,138,083
$
2,282,967
Interest-bearing demand
1,359,978
1,386,913
1,453,167
1,441,302
1,444,566
Savings and money market
2,184,652
2,184,675
2,199,028
2,194,991
2,214,146
Time
1,251,720
1,147,293
991,205
782,058
680,382
Total deposits
6,805,737
6,746,968
6,736,223
6,556,434
6,622,061
FHLB advances and other short-term borrowings
—
25,000
5,000
115,000
—
Long-term debt, net of unamortized debt issuance costs of: $566 at June 30, 2023, $627 at March 31, 2023, $688 at December 31, 2022, $748 at September 30, 2022 and $809 at June 30, 2022
155,981
155,920
105,859
105,799
105,738
Lease liability
34,111
35,076
35,889
36,941
38,037
Other liabilities
95,484
87,357
96,921
84,989
78,242
Total liabilities
7,091,313
7,050,321
6,979,892
6,899,163
6,844,078
EQUITY
Shareholders' equity:
Preferred stock, no par value, authorized 1,000,000 shares; issued and outstanding: none at June 30, 2023, March 31, 2023, December 31, 2022, September 30, 2022, and June 30, 2022
—
—
—
—
—
Common stock, no par value, authorized 185,000,000 shares; issued and outstanding: 27,045,792 at June 30, 2023, 27,005,545 at March 31, 2023, 27,025,070 at December 31, 2022, 27,262,879 at September 30, 2022, and 27,463,562 at June 30, 2022
405,511
405,866
408,071
412,994
417,862
Additional paid-in capital
101,997
101,188
101,346
100,426
98,977
Retained earnings
104,046
96,600
87,438
74,301
64,693
Accumulated other comprehensive loss
(135,275
)
(132,728
)
(143,984
)
(149,253
)
(126,432
)
Total shareholders' equity
476,279
470,926
452,871
438,468
455,100
Non-controlling interest
—
—
—
—
—
Total equity
476,279
470,926
452,871
438,468
455,100
Total liabilities and equity
$
7,567,592
$
7,521,247
$
7,432,763
$
7,337,631
$
7,299,178
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,
Jun 30,
(Dollars in thousands, except per share data)
2023
2023
2022
2022
2022
2023
2022
Interest income:
Interest and fees on loans
$
60,455
$
58,269
$
56,682
$
51,686
$
46,963
$
118,724
$
91,912
Interest and dividends on investment securities:
Taxable investment securities
7,145
7,336
7,104
6,933
7,035
14,481
14,004
Tax-exempt investment securities
727
790
776
805
807
1,517
1,623
Dividends on investment securities
—
—
—
—
—
—
21
Interest on deposits in other financial institutions
877
277
370
107
191
1,154
263
120
136
105
138
68
256
127
Total interest income
69,324
66,808
65,037
59,669
55,064
136,132
107,950
Interest expense:
Interest on deposits:
411
363
333
217
144
774
256
Savings and money market
4,670
3,386
2,488
1,054
317
8,056
646
Time
8,932
6,264
4,063
1,092
490
15,196
959
Interest on short-term borrowings
378
761
393
660
2
1,139
2
Interest on long-term debt
2,199
1,838
1,475
1,281
1,133
4,037
2,174
Total interest expense
16,590
12,612
8,752
4,304
2,086
29,202
4,037
Net interest income
52,734
54,196
56,285
55,365
52,978
106,930
103,913
Provision (credit) for credit losses
4,319
1,852
571
362
989
6,171
(2,206
)
Net interest income after provision (credit) for credit losses
48,415
52,344
55,714
55,003
51,989
100,759
106,119
Other operating income:
Mortgage banking income
690
526
667
831
1,140
1,216
2,312
Service charges on deposit accounts
2,137
2,111
2,172
2,138
2,026
4,248
3,887
Other service charges and fees
4,994
4,985
4,972
4,955
4,610
9,979
9,098
Income from fiduciary activities
1,068
1,321
1,058
1,165
1,188
2,389
2,342
Net gain on sales of investment securities
—
—
—
—
8,506
—
8,506
Income from bank-owned life insurance
1,185
1,291
2,187
167
(1,028
)
2,476
(489
)
Other
361
775
545
373
696
1,136
1,033
Total other operating income
10,435
11,009
11,601
9,629
17,138
21,444
26,689
Other operating expense:
Salaries and employee benefits
20,848
22,023
22,692
22,778
22,369
42,871
43,311
Net occupancy
4,310
4,474
3,998
4,743
4,448
8,784
8,222
Equipment
932
946
996
1,085
1,075
1,878
2,157
Communication
791
778
696
712
744
1,569
1,550
Legal and professional services
2,469
2,886
2,677
2,573
2,916
5,355
5,542
Computer software
4,621
4,606
3,996
4,138
3,624
9,227
6,706
Advertising
942
933
701
1,150
1,150
1,875
2,300
Other
4,990
5,461
4,678
4,819
9,023
10,451
13,766
Total other operating expense
39,903
42,107
40,434
41,998
45,349
82,010
83,554
18,947
21,246
26,881
22,634
23,778
40,193
49,254
Income tax expense
4,472
5,059
6,700
5,919
6,184
9,531
12,222
Net income
$
14,475
$
16,187
$
20,181
$
16,715
$
17,594
$
30,662
$
37,032
Per common share data:
Basic earnings per share
$
0.54
$
0.60
$
0.74
$
0.61
$
0.64
$
1.14
$
1.34
Diluted earnings per share
0.53
0.60
0.74
0.61
0.64
1.13
1.33
Cash dividends declared
0.26
0.26
0.26
0.26
0.26
0.52
0.52
Basic weighted average shares outstanding
27,024,043
26,999,138
27,134,970
27,356,614
27,516,284
27,011,659
27,553,629
Diluted weighted average shares outstanding
27,071,478
27,122,012
27,303,249
27,501,212
27,676,619
27,090,258
27,759,187
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
June 30, 2023
March 31, 2023
June 30, 2022
Average
Average
Average
Average
Average
Average
(Dollars in thousands)
Balance
Yield/Rate
Interest
Balance
Yield/Rate
Interest
Balance
Yield/Rate
Interest
ASSETS
Interest-earning assets:
Interest-bearing deposits in other financial institutions
$
69,189
5.08
%
$
877
$
24,957
4.51
%
$
277
$
106,083
0.72
%
$
191
Investment securities, excluding valuation allowance:
Taxable
1,379,319
2.07
7,145
1,395,985
2.10
7,336
1,487,129
1.89
7,034
Tax-exempt [1]
151,979
2.42
920
153,067
2.61
1,000
159,087
2.57
1,023
Total investment securities
1,531,298
2.11
8,065
1,549,052
2.15
8,336
1,646,216
1.96
8,057
Loans, including loans held for sale
5,543,398
4.37
60,455
5,525,988
4.26
58,269
5,221,300
3.60
46,963
Federal Home Loan Bank stock
11,721
4.10
120
12,380
4.40
136
8,957
3.02
68
Total interest-earning assets
7,155,606
3.89
69,517
7,112,377
3.80
67,018
6,982,556
3.17
55,279
Noninterest-earning assets
308,023
331,390
327,383
Total assets
$
7,463,629
$
7,443,767
$
7,309,939
LIABILITIES AND EQUITY
Interest-bearing liabilities:
Interest-bearing demand deposits
$
1,367,878
0.12
%
$
411
$
1,415,155
0.10
%
$
363
$
1,435,088
0.04
%
$
144
Savings and money market deposits
2,172,680
0.86
4,670
2,182,942
0.63
3,386
2,204,934
0.06
317
Time deposits up to $250,000
390,961
2.98
2,907
341,396
2.22
1,870
217,605
0.27
148
Time deposits over $250,000
790,864
3.06
6,025
689,432
2.58
4,394
478,483
0.29
342
Total interest-bearing deposits
4,722,383
1.19
14,013
4,628,925
0.88
10,013
4,336,110
0.09
951
Federal Home Loan Bank advances and other short-term borrowings
29,791
5.09
378
64,462
4.79
761
363
1.84
2
Long-term debt
155,946
5.65
2,199
127,273
5.86
1,838
105,699
4.30
1,133
Total interest-bearing liabilities
4,908,120
1.36
16,590
4,820,660
1.06
12,612
4,442,172
0.19
2,086
Noninterest-bearing deposits
1,952,267
2,026,735
2,290,352
Other liabilities
125,531
132,816
105,979
Total liabilities
6,985,918
6,980,211
6,838,503
Shareholders’ equity
477,711
463,556
471,420
Non-controlling interest
—
—
16
Total equity
477,711
463,556
471,436
Total liabilities and equity
$
7,463,629
$
7,443,767
$
7,309,939
Net interest income
$
52,927
$
54,406
$
53,193
Interest rate spread
2.53
%
2.74
%
2.98
%
Net interest margin
2.96
%
3.08
%
3.05
%
[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, 2023
June 30, 2022
Average
Average
Average
Average
(Dollars in thousands)
Balance
Yield/Rate
Interest
Balance
Yield/Rate
Interest
ASSETS
Interest-earning assets:
Interest-bearing deposits in other financial institutions
$
47,195
4.93
%
$
1,154
$
131,829
0.40
%
$
263
Investment securities, excluding valuation allowance:
Taxable
1,387,606
2.09
14,481
1,488,327
1.88
14,024
Tax-exempt [1]
152,520
2.52
1,920
161,208
2.55
2,056
Total investment securities
1,540,126
2.13
16,401
1,649,535
1.95
16,080
Loans, including loans held for sale
5,534,741
4.32
118,724
5,168,076
3.58
91,912
Federal Home Loan Bank stock
12,049
4.26
256
8,479
3.00
127
Total interest-earning assets
7,134,111
3.85
136,535
6,957,919
3.13
108,382
Noninterest-earning assets
319,642
367,124
Total assets
$
7,453,753
$
7,325,043
LIABILITIES AND EQUITY
Interest-bearing liabilities:
Interest-bearing demand deposits
$
1,391,386
0.11
%
$
774
$
1,430,222
0.04
%
$
256
Savings and money market deposits
2,177,783
0.75
8,056
2,208,659
0.06
646
Time deposits up to $250,000
366,316
2.63
4,776
220,617
0.28
303
Time deposits over $250,000
740,428
2.84
10,420
470,330
0.28
656
Total interest-bearing deposits
4,675,913
1.04
24,026
4,329,828
0.09
1,861
Federal Home Loan Bank advances and other short-term borrowings
47,031
4.88
1,139
182
1.84
2
Long-term debt
141,689
5.75
4,037
105,668
4.15
2,174
Total interest-bearing liabilities
4,864,633
1.21
29,202
4,435,678
0.18
4,037
Noninterest-bearing deposits
1,989,295
2,273,639
Other liabilities
129,152
110,868
Total liabilities
6,983,080
6,820,185
Shareholders’ equity
470,673
504,825
Non-controlling interest
—
32
Total equity
470,673
504,857
Total liabilities and equity
$
7,453,753
$
7,325,042
Net interest income
$
107,333
$
104,345
Interest rate spread
2.64
%
2.95
%
Net interest margin
3.02
%
3.01
%
[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)
2023
2023
2022
2022
2022
HAWAII:
Commercial, financial and agricultural:
SBA Paycheck Protection Program
$
1,565
$
1,821
$
2,555
$
5,208
$
19,469
Other
373,036
375,158
383,665
358,805
367,676
Real estate:
Construction
168,012
154,303
150,208
138,724
134,103
Residential mortgage
1,942,906
1,941,230
1,940,999
1,923,068
1,890,783
Home equity
750,760
743,908
739,380
719,399
698,209
Commercial mortgage
1,037,826
1,030,086
1,029,708
1,002,874
994,405
Consumer
327,790
342,922
346,789
347,388
341,213
Total loans, net of deferred fees and costs
4,601,895
4,589,428
4,593,304
4,495,466
4,445,858
Allowance for credit losses
(44,828
)
(44,062
)
(45,169
)
(47,814
)
(51,374
)
Loans, net of allowance for credit losses
$
4,557,067
$
4,545,366
$
4,548,135
$
4,447,652
$
4,394,484
U.S. MAINLAND: [1]
Commercial, financial and agricultural:
SBA Paycheck Protection Program
$
—
$
—
$
—
$
—
$
712
Other
170,557
179,906
160,282
158,474
156,567
Real estate:
Construction
32,807
27,171
16,515
12,872
10,935
Commercial mortgage
329,736
331,546
333,367
332,872
309,230
Consumer
385,688
429,346
451,998
422,528
378,331
Total loans, net of deferred fees and costs
918,788
967,969
962,162
926,746
855,775
Allowance for credit losses
(19,021
)
(19,037
)
(18,569
)
(16,568
)
(13,837
)
Loans, net of allowance for credit losses
$
899,767
$
948,932
$
943,593
$
910,178
$
841,938
TOTAL:
Commercial, financial and agricultural:
SBA Paycheck Protection Program
$
1,565
$
1,821
$
2,555
$
5,208
$
20,181
Other
543,593
555,064
543,947
517,279
524,243
Real estate:
Construction
200,819
181,474
166,723
151,596
145,038
Residential mortgage
1,942,906
1,941,230
1,940,999
1,923,068
1,890,783
Home equity
750,760
743,908
739,380
719,399
698,209
Commercial mortgage
1,367,562
1,361,632
1,363,075
1,335,746
1,303,635
Consumer
713,478
772,268
798,787
769,916
719,544
Total loans, net of deferred fees and costs
5,520,683
5,557,397
5,555,466
5,422,212
5,301,633
Allowance for credit losses
(63,849
)
(63,099
)
(63,738
)
(64,382
)
(65,211
)
Loans, net of allowance for credit losses
$
5,456,834
$
5,494,298
$
5,491,728
$
5,357,830
$
5,236,422
[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)
2023
2023
2022
2022
2022
Noninterest-bearing demand deposits
$
2,009,387
$
2,028,087
$
2,092,823
$
2,138,083
$
2,282,967
Interest-bearing demand deposits
1,359,978
1,386,913
1,453,167
1,441,302
1,444,566
Savings and money market deposits
2,184,652
2,184,675
2,199,028
2,194,991
2,214,146
Time deposits less than $100,000
221,366
188,289
181,547
153,238
129,103
Other time deposits $100,000 to $250,000
206,498
183,861
148,601
108,723
84,840
Core deposits
5,981,881
5,971,825
6,075,166
6,036,337
6,155,622
Government time deposits
383,426
360,501
290,057
195,057
165,000
Other time deposits greater than $250,000
440,430
414,642
371,000
325,040
301,439
Total time deposits greater than $250,000
823,856
775,143
661,057
520,097
466,439
Total deposits
$
6,805,737
$
6,746,968
$
6,736,223
$
6,556,434
$
6,622,061
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)
2023
2023
2022
2022
2022
Nonaccrual loans:
Commercial, financial and agricultural - Other
$
319
$
264
$
297
$
277
$
333
Real estate:
Construction
4,851
—
—
—
—
Residential mortgage
4,385
3,445
3,808
2,771
3,490
Home equity
797
712
570
584
592
Commercial mortgage
77
77
—
—
—
Consumer
632
815
576
588
568
Total nonaccrual loans
11,061
5,313
5,251
4,220
4,983
Other real estate owned ("OREO"):
Real estate:
Residential mortgage
—
—
—
—
—
Total OREO
—
—
—
—
—
Total nonperforming assets ("NPAs")
11,061
5,313
5,251
4,220
4,983
Loans delinquent for 90 days or more still accruing interest:
Commercial, financial and agricultural:
SBA PPP
—
—
13
—
—
Other
—
—
26
669
309
Real estate:
Residential mortgage
959
—
559
503
—
Home equity
133
—
—
—
—
Consumer
2,207
1,908
1,240
623
842
Total loans delinquent for 90 days or more still accruing interest
3,299
1,908
1,838
1,795
1,151
Restructured loans still accruing interest:
Real estate:
Residential mortgage
1,339
1,376
1,845
2,030
2,006
Commercial mortgage
805
846
886
925
965
Consumer
47
54
62
69
76
Total restructured loans still accruing interest
2,191
2,276
2,793
3,024
3,047
Total NPAs and loans delinquent for 90 days or more and restructured loans still accruing interest
$
16,551
$
9,497
$
9,882
$
9,039
$
9,181
Total nonaccrual loans as a percentage of total loans
0.20
%
0.10
%
0.09
%
0.08
%
0.09
%
Total NPAs as a percentage of total loans and OREO
0.20
%
0.10
%
0.09
%
0.08
%
0.09
%
Total NPAs and loans delinquent for 90 days or more still accruing interest as a percentage of total loans and OREO
0.26
%
0.13
%
0.13
%
0.11
%
0.12
%
Total NPAs, loans delinquent for 90 days or more and restructured loans still accruing interest as a percentage of total loans and OREO
0.30
%
0.17
%
0.18
%
0.17
%
0.17
%
Quarter-to-quarter changes in NPAs:
Balance at beginning of quarter
$
5,313
$
5,251
$
4,220
$
4,983
$
5,336
Additions
7,105
1,609
2,162
1,072
1,881
Reductions:
Payments
(290
)
(505
)
(198
)
(329
)
(285
)
Return to accrual status
(212
)
(14
)
(44
)
(616
)
(979
)
Net charge-offs, valuation and other adjustments
(855
)
(1,028
)
(889
)
(890
)
(970
)
Total reductions
(1,357
)
(1,547
)
(1,131
)
(1,835
)
(2,234
)
Balance at end of quarter
$
11,061
$
5,313
$
5,251
$
4,220
$
4,983
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,
Jun 30,
(Dollars in thousands)
2023
2023
2022
2022
2022
2023
2022
Allowance for credit losses:
Balance at beginning of period
$
63,099
$
63,738
$
64,382
$
65,211
$
64,754
$
63,738
$
68,097
Provision (credit) for credit losses on loans
4,135
1,615
1,032
731
1,456
5,750
(1,475
)
Charge-offs:
Commercial, financial and agricultural - Other
362
779
678
550
487
1,141
741
Consumer
3,873
2,686
1,881
1,912
1,390
6,559
2,606
Total charge-offs
4,235
3,465
2,559
2,462
1,877
7,700
3,347
Recoveries:
Commercial, financial and agricultural - Other
125
250
210
220
215
375
565
Real estate:
Construction
—
—
—
14
62
—
62
Residential mortgage
7
53
133
14
36
60
148
Home equity
15
—
—
36
—
15
—
Consumer
703
908
540
618
565
1,611
1,161
Total recoveries
850
1,211
883
902
878
2,061
1,936
Net charge-offs
3,385
2,254
1,676
1,560
999
5,639
1,411
Balance at end of period
$
63,849
$
63,099
$
63,738
$
64,382
$
65,211
$
63,849
$
65,211
Average loans, net of deferred fees and costs
$
5,543,398
$
5,525,988
$
5,498,800
$
5,355,088
$
5,221,300
$
5,534,741
$
5,168,076
Annualized ratio of net charge-offs to average loans
0.24
%
0.16
%
0.12
%
0.12
%
0.08
%
0.20
%
0.05
%
CENTRAL PACIFIC FINANCIAL CORP. AND SUBSIDIARIES
Reconciliation of Non-GAAP Financial Measures
(Unaudited)
TABLE 10
To supplement our consolidated financial statements presented in accordance with GAAP, the Company also uses non-GAAP financial measures in addition to our GAAP results. The Company believes non-GAAP financial measures may provide useful information for evaluating our cash operating performance, ability to service debt, compliance with debt covenants and measurement against competitors. This information should be considered as supplemental in nature and should not be considered in isolation or as a substitute for the related financial information prepared in accordance with GAAP. In addition, these non-GAAP financial measures may not be comparable to similarly entitled measures reported by other companies.
The Company believes that pre-provision net revenue ("PPNR"), a non-GAAP financial measure, is useful as a tool to help evaluate the ability to provide for credit costs through operations. The following tables set forth a reconciliation of our PPNR and our PPNR to average assets for each of the periods indicated:
Three Months Ended
Six Months Ended
Jun 30,
Mar 31,
Dec 31,
Sep 30,
Jun 30,
Jun 30,
(Dollars in thousands)
2023
2023
2022
2022
2022
2023
2022
Net income
$
14,475
$
16,187
$
20,181
$
16,715
$
17,594
$
30,662
$
37,032
Add: Income tax expense
4,472
5,059
6,700
5,919
6,184
9,531
12,222
Pre-tax income
18,947
21,246
26,881
22,634
23,778
40,193
49,254
Add: Provision (credit) for credit losses
4,319
1,852
571
362
989
6,171
(2,206
)
PPNR
$
23,266
$
23,098
$
27,452
$
22,996
$
24,767
$
46,364
$
47,048
Three Months Ended
Six Months Ended
Jun 30,
Mar 31,
Dec 31,
Sep 30,
Jun 30,
Jun 30,
(Dollars in thousands)
2023
2023
2022
2022
2022
2023
2022
Net income
$
14,475
$
16,187
$
20,181
$
16,715
$
17,594
$
30,662
$
37,032
Net income (annualized)
57,900
64,748
80,724
66,860
70,376
61,324
74,064
PPNR
23,266
23,098
27,452
22,996
24,767
46,364
47,048
PPNR (annualized)
93,064
92,392
109,808
91,984
99,068
92,728
94,096
Average assets
7,463,629
7,443,767
7,389,712
7,320,751
7,309,939
7,453,753
7,325,042
Return on average assets ("ROA")
0.78
%
0.87
%
1.09
%
0.91
%
0.96
%
0.82
%
1.01
%
PPNR to average assets
1.25
%
1.24
%
1.49
%
1.26
%
1.36
%
1.24
%
1.28
%
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