Central Pacific Financial Reports Third Quarter Earnings of $13.1 Million
Central Pacific Financial Corp. (NYSE: CPF) (the "Company"), parent company of Central Pacific Bank (the "Bank" or "CPB"), today reported net income of $13.1 million, or fully diluted earnings per share ("EPS") of $0.49 for the third quarter of 2023, compared to net income of $14.5 million, or EPS of $0.53 in the previous quarter and net income of $16.7 million, or EPS of $0.61 in the year-ago quarter.
Pre-provision net revenue ("PPNR"), or net income excluding provision for credit losses and income taxes, totaled $22.4 million in the third quarter of 2023, compared to PPNR of $23.3 million in the previous quarter and $23.0 million in the year-ago quarter.
"In the third quarter, Central Pacific continued our focus on maintaining strong liquidity and capital given the ongoing market uncertainties," said Arnold Martines, President and Chief Executive Officer. "We are pleased with our success in growing our deposit portfolio while managing our total deposit costs. Our asset quality remained strong, our loan portfolio is well-diversified and we continue to effectively manage our expenses. Finally, we remain committed to supporting the communities impacted by the Lahaina wildfires through financial and in-kind support to aid recovery efforts."
Earnings Highlights
Net interest income was $51.9 million for the third quarter of 2023, which decreased by $0.8 million, or 1.5% from the previous quarter, and decreased by $3.4 million, or 6.2% from the year-ago quarter. The sequential quarter decrease in net interest income was primarily due to higher average balances and rates paid on interest-bearing deposits, which outpaced the higher average yield earned on loans.
Net interest margin ("NIM") was 2.88% for the third quarter of 2023, which decreased by 8 basis points ("bps") from the previous quarter and decreased by 29 bps from the year-ago quarter. The sequential quarter decrease in NIM was primarily due to higher average rates paid on deposits, which outpaced the higher average yield earned on loans.
The Company recorded a provision for credit losses of $4.9 million in the third quarter of 2023, compared to a provision of $4.3 million in the previous quarter and a provision of $0.4 million in the year-ago quarter. The provision in the third quarter consisted of a provision for credit losses on loans of $4.5 million and a provision for credit losses on off-balance sheet credit exposures of $0.4 million.
Other operating income totaled $10.0 million for the third quarter of 2023, compared to $10.4 million in the previous quarter and $9.6 million in the year-ago quarter. The decrease from the previous quarter was primarily due to lower income from bank-owned life insurance of $0.8 million, partially offset by higher other service charges and fees of $0.2 million and higher income from fiduciary activities of $0.2 million.
Other operating expense totaled $39.6 million for the third quarter of 2023, compared to $39.9 million in the previous quarter and $42.0 million in the year-ago quarter. Lower salaries and employee benefits of $1.8 million was partially offset by higher net occupancy of $0.4 million, higher directors' deferred compensation plan expense (included in other) of $0.3 million, higher armored car expense (included in other) of $0.2 million, and a net loss on sale of loans (included in other) of $0.2 million.
The efficiency ratio was 63.91% for the third quarter of 2023, compared to 63.17% in the previous quarter and 64.62% in the year-ago quarter.
The effective tax rate was 24.9% for the third quarter of 2023, compared to 23.6% in the previous quarter and 26.2% in the year-ago quarter.
Balance Sheet Highlights
Total assets of $7.64 billion at September 30, 2023 increased by $70.3 million, or 0.9% from $7.57 billion at June 30, 2023, and increased by $300.3 million, or 4.1% from $7.34 billion at September 30, 2022. The Company had $438.7 million in cash on its balance sheet and $2.47 billion in total other liquidity sources, including available borrowing capacity and unpledged investment securities at September 30, 2023. Total available sources of liquidity as a percentage of uninsured and uncollateralized deposits was 122% at September 30, 2023.
Total loans, net of deferred fees and costs, of $5.51 billion at September 30, 2023 decreased by $12.0 million, or 0.2% from $5.52 billion at June 30, 2023, and increased by $86.5 million, or 1.6% from $5.42 billion at September 30, 2022. Average yields earned on loans during the third quarter of 2023 was 4.49%, compared to 4.37% in the previous quarter and 3.84% in the year-ago quarter.
Total deposits of $6.87 billion at September 30, 2023 increased by $69.0 million or 1.0% from $6.81 billion at June 30, 2023, and increased by $318.3 million, or 4.9% from $6.56 billion at September 30, 2022. Core deposits, which include demand deposits, savings and money market deposits and time deposits up to $250,000, totaled $5.99 billion at September 30, 2023, and increased by $8.6 million, or 0.1% from $5.98 billion at June 30, 2023. Average rates paid on total deposits during the third quarter of 2023 was 1.08%, compared to 0.84% in the previous quarter and 0.14% in the year-ago quarter. At September 30, 2023, approximately 65% of the Company's total deposits were FDIC-insured or fully collateralized.
Asset Quality
Nonperforming assets totaled $6.7 million, or 0.09% of total assets at September 30, 2023, compared to $11.1 million, or 0.15% of total assets at June 30, 2023 and $4.2 million, or 0.06% of total assets at September 30, 2022. The decline in nonperforming assets from the previous quarter was primarily attributable to two Hawaii construction loans to a single borrower totaling $4.9 million that were paid off in full.
Net charge-offs totaled $3.9 million in the third quarter of 2023, compared to net charge-offs of $3.4 million in the previous quarter, and net charge-offs of $1.6 million in the year-ago quarter. Annualized net charge-offs as a percentage of average loans was 0.28%, 0.24% and 0.12% during the three months ended September 30, 2023, June 30, 2023 and September 30, 2022, respectively.
The allowance for credit losses, as a percentage of total loans was 1.17% at September 30, 2023, compared to 1.16% at June 30, 2023, and 1.19% at September 30, 2022.
Total shareholders' equity was $468.6 million at September 30, 2023, compared to $476.3 million and $438.5 million at June 30, 2023 and September 30, 2022, respectively.
During the third quarter of 2023, the Company repurchased 4,500 shares of common stock, at a total cost of $0.1 million, or an average cost per share of $16.07. During the nine months ended September 30, 2023, the Company repurchased 130,010 shares of common stock, at a total cost of $2.6 million, or an average cost per share of $20.24. As of September 30, 2023, $23.4 million in share repurchase authorization remained available under the Company's share repurchase program.
The Company's leverage, tier 1 risk-based capital, total risk-based capital, and common equity tier 1 capital ratios were 8.7%, 11.9%, 14.1%, and 11.0%, respectively, at September 30, 2023, compared to 8.7%, 11.8%, 13.9%, and 10.9%, respectively, at June 30, 2023.
On October 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 December 15, 2023 to shareholders of record at the close of business on November 30, 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 November 24, 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 $7.64 billion in assets as of September 30, 2023. Central Pacific Bank, its primary subsidiary, operates 27 branches and 58 ATMs in the State of Hawaii. For additional information, please visit the Company's website at http://www.cpb.bank.
Equal Housing Lender
Member FDIC
NYSE Listed: CPF
Forward-Looking Statements ("FLS")
This document may contain FLS concerning: projections of revenues, expenses, income or loss, earnings or loss per share, capital expenditures, the payment or nonpayment of dividends, capital position, credit losses, net interest margin or other financial items; statements of plans, objectives and expectations of Central Pacific Financial Corp. (the "Company") or its management or Board of Directors, including those relating to business plans, use of capital resources, products or services and regulatory developments and regulatory actions; statements of future economic performance including anticipated performance results from our business initiatives; or any statements of the assumptions underlying or relating to any of the foregoing. Words such as "believe," "plan," "anticipate," "expect," "intend," "forecast," "hope," "target," "continue," "remain," "estimate," "will," "should," "may" and other similar expressions are intended to identify FLS but are not the exclusive means of identifying such statements.
While we believe that our FLS and the assumptions underlying them are reasonably based, such statements and assumptions are by their nature subject to risks and uncertainties, and thus could later prove to be inaccurate or incorrect. Accordingly, actual results could differ materially from those statements or projections for a variety of reasons, including, but not limited to: the effects of inflation and 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
Nine Months Ended
(Dollars in thousands,
Sep 30,
Jun 30,
Mar 31,
Dec 31,
Sep 30,
Sep 30,
except for per share amounts)
2023
2023
2023
2022
2022
2023
2022
CONDENSED INCOME STATEMENT
Net interest income
$
51,928
$
52,734
$
54,196
$
56,285
$
55,365
$
158,858
$
159,278
Provision (credit) for credit losses
4,874
4,319
1,852
571
362
11,045
(1,844
)
Total other operating income
10,047
10,435
11,009
11,601
9,629
31,491
36,318
Total other operating expense
39,611
39,903
42,107
40,434
41,998
121,621
125,552
Income tax expense
4,349
4,472
5,059
6,700
5,919
13,880
18,141
Net income
13,141
14,475
16,187
20,181
16,715
43,803
53,747
Basic earnings per share
$
0.49
$
0.54
$
0.60
$
0.74
$
0.61
$
1.62
$
1.96
Diluted earnings per share
0.49
0.53
0.60
0.74
0.61
1.62
1.94
Dividends declared per share
0.26
0.26
0.26
0.26
0.26
0.78
0.78
PERFORMANCE RATIOS
Return on average assets (ROA) [1]
0.70
%
0.78
%
0.87
%
1.09
%
0.91
%
0.78
%
0.98
%
Return on average shareholders’ equity (ROE) [1]
10.95
12.12
13.97
18.30
14.49
12.33
14.62
Average shareholders’ equity to average assets
6.39
6.40
6.23
5.97
6.30
6.34
6.69
Efficiency ratio [2]
63.91
63.17
64.58
59.56
64.62
63.89
64.19
Net interest margin (NIM) [1]
2.88
2.96
3.08
3.17
3.17
2.98
3.06
Dividend payout ratio [3]
53.06
49.06
43.33
35.14
42.62
48.15
40.21
SELECTED AVERAGE BALANCES
Average loans, including loans held for sale
$
5,507,248
$
5,543,398
$
5,525,988
$
5,498,800
$
5,355,088
$
5,525,476
$
5,231,098
Average interest-earning assets
7,199,866
7,155,606
7,112,377
7,103,841
6,991,773
7,156,270
6,969,326
Average assets
7,510,537
7,463,629
7,443,767
7,389,712
7,320,751
7,472,890
7,323,596
Average deposits
6,738,071
6,674,650
6,655,660
6,673,922
6,535,321
6,689,762
6,580,502
Average interest-bearing liabilities
4,999,820
4,908,120
4,820,660
4,708,045
4,538,893
4,910,190
4,470,461
Average shareholders’ equity
480,118
477,711
463,556
441,084
461,328
473,856
490,140
[1]
ROA and ROE are annualized based on a 30/360 day convention. Annualized net interest income and expense in the NIM calculation are based on the day count interest payment conventions at the interest-earning asset or interest-bearing liability level (i.e. 30/360, actual/actual).
[2]
Efficiency ratio is defined as total other operating expense divided by total revenue (net interest income and total other operating income).
[3]
Dividend payout ratio is defined as dividends declared per share divided by diluted earnings per share.
CENTRAL PACIFIC FINANCIAL CORP. AND SUBSIDIARIES
Financial Highlights
(Unaudited)
TABLE 1 (CONTINUED)
Sep 30,
Jun 30,
Mar 31,
Dec 31,
Sep 30,
2023
2023
2023
2022
2022
REGULATORY CAPITAL RATIOS
Central Pacific Financial Corp.
Leverage ratio
8.7
%
8.7
%
8.6
%
8.5
%
8.7
%
Tier 1 risk-based capital ratio
11.9
11.8
11.5
11.3
11.5
Total risk-based capital ratio
14.1
13.9
13.6
13.5
13.7
Common equity tier 1 capital ratio
11.0
10.9
10.6
10.5
10.6
Central Pacific Bank
Leverage ratio
9.1
9.1
9.0
9.0
9.1
Tier 1 risk-based capital ratio
12.4
12.3
12.0
11.9
12.2
Total risk-based capital ratio
13.7
13.5
13.2
13.1
13.4
Common equity tier 1 capital ratio
12.4
12.3
12.0
11.9
12.2
Sep 30,
Jun 30,
Mar 31,
Dec 31,
Sep 30,
(dollars in thousands, except for per share amounts)
2023
2023
2023
2022
2022
BALANCE SHEET
Total loans, net of deferred fees and costs
$
5,508,710
$
5,520,683
$
5,557,397
$
5,555,466
$
5,422,212
Total assets
7,637,924
7,567,592
7,521,247
7,432,763
7,337,631
Total deposits
6,874,745
6,805,737
6,746,968
6,736,223
6,556,434
Long-term debt
156,041
155,981
155,920
105,859
105,799
Total shareholders’ equity
468,598
476,279
470,926
452,871
438,468
Total shareholders’ equity to total assets
6.14
%
6.29
%
6.26
%
6.09
%
5.98
%
ASSET QUALITY
Allowance for credit losses (ACL)
$
64,517
$
63,849
$
63,099
$
63,738
$
64,382
Nonaccrual loans
6,652
11,061
5,313
5,251
4,220
Non-performing assets (NPA)
6,652
11,061
5,313
5,251
4,220
Ratio of ACL to total loans
1.17
%
1.16
%
1.14
%
1.15
%
1.19
%
Ratio of NPA to total assets
0.09
%
0.15
%
0.07
%
0.07
%
0.06
%
PER SHARE OF COMMON STOCK OUTSTANDING
Book value per common share
$
17.33
$
17.61
$
17.44
$
16.76
$
16.08
Closing market price per common share
16.68
15.71
17.90
20.28
20.69
CENTRAL PACIFIC FINANCIAL CORP. AND SUBSIDIARIES
Consolidated Balance Sheets
(Unaudited)
TABLE 2
Sep 30,
Jun 30,
Mar 31,
Dec 31,
Sep 30,
(Dollars in thousands, except share data)
2023
2023
2023
2022
2022
ASSETS
Cash and due from financial institutions
$
108,818
$
129,071
$
108,535
$
97,150
$
116,365
Interest-bearing deposits in other financial institutions
329,913
181,913
90,247
14,894
22,332
Investment securities:
Available-for-sale debt securities, at fair value
625,253
664,071
687,188
671,794
686,681
Held-to-maturity debt securities, at amortized cost; fair value of: $531,887 at September 30, 2023, $581,222 at June 30, 2023, $599,300 at March 31, 2023, $596,780 at December 31, 2022, and $590,880 at September 30, 2022
640,053
649,946
658,596
664,883
662,827
Total investment securities
1,265,306
1,314,017
1,345,784
1,336,677
1,349,508
Loans held for sale, at fair value
—
2,593
—
1,105
1,701
Loans, net of deferred fees and costs
5,508,710
5,520,683
5,557,397
5,555,466
5,422,212
Less: allowance for credit losses
64,517
63,849
63,099
63,738
64,382
Loans, net of allowance for credit losses
5,444,193
5,456,834
5,494,298
5,491,728
5,357,830
Premises and equipment, net
97,378
96,479
93,761
91,634
89,979
Accrued interest receivable
21,529
20,463
20,473
20,345
18,134
Investment in unconsolidated entities
42,523
45,218
45,953
46,641
36,769
Mortgage servicing rights
8,797
8,843
8,943
9,074
9,216
Bank-owned life insurance
168,543
168,136
168,244
167,967
167,761
Federal Home Loan Bank of Des Moines ("FHLB") stock
10,995
10,960
11,960
9,146
13,546
Right-of-use lease assets
32,294
33,247
34,237
34,985
35,978
Other assets
107,635
99,818
98,812
111,417
118,512
Total assets
$
7,637,924
$
7,567,592
$
7,521,247
$
7,432,763
$
7,337,631
LIABILITIES
Deposits:
Noninterest-bearing demand
$
1,969,523
$
2,009,387
$
2,028,087
$
2,092,823
$
2,138,083
Interest-bearing demand
1,345,843
1,359,978
1,386,913
1,453,167
1,441,302
Savings and money market
2,209,550
2,184,652
2,184,675
2,199,028
2,194,991
Time
1,349,829
1,251,720
1,147,293
991,205
782,058
Total deposits
6,874,745
6,805,737
6,746,968
6,736,223
6,556,434
FHLB advances and other short-term borrowings
—
—
25,000
5,000
115,000
Long-term debt, net of unamortized debt issuance costs of: $506 at September 30, 2023, $566 at June 30, 2023, $627 at March 31, 2023, $688 at December 31, 2022 and $748 at September 30, 2022
156,041
155,981
155,920
105,859
105,799
Lease liabilities
33,186
34,111
35,076
35,889
36,941
Other liabilities
105,354
95,484
87,357
96,921
84,989
Total liabilities
7,169,326
7,091,313
7,050,321
6,979,892
6,899,163
EQUITY
Shareholders' equity:
Preferred stock, no par value, authorized 1,000,000 shares; issued and outstanding: none at September 30, 2023, June 30, 2023, March 31, 2023, December 31, 2022, and September 30, 2022
—
—
—
—
—
Common stock, no par value, authorized 185,000,000 shares; issued and outstanding: 27,043,169 at September 30, 2023, 27,045,792 at June 30, 2023, 27,005,545 at March 31, 2023, 27,025,070 at December 31, 2022, and 27,262,879 at September 30, 2022
405,439
405,511
405,866
408,071
412,994
Additional paid-in capital
102,550
101,997
101,188
101,346
100,426
Retained earnings
110,156
104,046
96,600
87,438
74,301
Accumulated other comprehensive loss
(149,547
)
(135,275
)
(132,728
)
(143,984
)
(149,253
)
Total shareholders' equity
468,598
476,279
470,926
452,871
438,468
Total liabilities and equity
$
7,637,924
$
7,567,592
$
7,521,247
$
7,432,763
$
7,337,631
CENTRAL PACIFIC FINANCIAL CORP. AND SUBSIDIARIES
Consolidated Statements of Income
(Unaudited)
TABLE 3
Three Months Ended
Nine Months Ended
Sep 30,
Jun 30,
Mar 31,
Dec 31,
Sep 30,
Sep 30,
(Dollars in thousands, except per share data)
2023
2023
2023
2022
2022
2023
2022
Interest income:
Interest and fees on loans
$
62,162
$
60,455
$
58,269
$
56,682
$
51,686
$
180,886
$
143,598
Interest and dividends on investment securities:
Taxable investment securities
7,016
7,145
7,336
7,104
6,933
21,497
20,937
Tax-exempt investment securities
709
727
790
776
805
2,226
2,428
Dividends on investment securities
—
—
—
—
—
—
21
Interest on deposits in other financial institutions
2,412
877
277
370
107
3,566
370
113
120
136
105
138
369
265
Total interest income
72,412
69,324
66,808
65,037
59,669
208,544
167,619
Interest expense:
Interest on deposits:
460
411
363
333
217
1,234
473
Savings and money market
6,464
4,670
3,386
2,488
1,054
14,520
1,700
Time
11,268
8,932
6,264
4,063
1,092
26,464
2,051
Interest on short-term borrowings
—
378
761
393
660
1,139
662
Interest on long-term debt
2,292
2,199
1,838
1,475
1,281
6,329
3,455
Total interest expense
20,484
16,590
12,612
8,752
4,304
49,686
8,341
Net interest income
51,928
52,734
54,196
56,285
55,365
158,858
159,278
Provision (credit) for credit losses
4,874
4,319
1,852
571
362
11,045
(1,844
)
Net interest income after provision (credit) for credit losses
47,054
48,415
52,344
55,714
55,003
147,813
161,122
Other operating income:
Mortgage banking income
765
690
526
667
831
1,981
3,143
Service charges on deposit accounts
2,193
2,137
2,111
2,172
2,138
6,441
6,025
Other service charges and fees
5,203
4,994
4,985
4,972
4,955
15,182
14,053
Income from fiduciary activities
1,234
1,068
1,321
1,058
1,165
3,623
3,507
Net (loss) gain on sales of investment securities
(135
)
—
—
—
—
(135
)
8,506
Income from bank-owned life insurance
379
1,185
1,291
2,187
167
2,855
(322
)
Other
408
361
775
545
373
1,544
1,406
Total other operating income
10,047
10,435
11,009
11,601
9,629
31,491
36,318
Other operating expense:
Salaries and employee benefits
19,015
20,848
22,023
22,692
22,778
61,886
66,089
Net occupancy
4,725
4,310
4,474
3,998
4,743
13,509
12,965
Equipment
1,112
932
946
996
1,085
2,990
3,242
Communication
809
791
778
696
712
2,378
2,262
Legal and professional services
2,359
2,469
2,886
2,677
2,573
7,714
8,115
Computer software
4,473
4,621
4,606
3,996
4,138
13,700
10,844
Advertising
968
942
933
701
1,150
2,843
3,450
Other
6,150
4,990
5,461
4,678
4,819
16,601
18,585
Total other operating expense
39,611
39,903
42,107
40,434
41,998
121,621
125,552
17,490
18,947
21,246
26,881
22,634
57,683
71,888
Income tax expense
4,349
4,472
5,059
6,700
5,919
13,880
18,141
Net income
$
13,141
$
14,475
$
16,187
$
20,181
$
16,715
$
43,803
$
53,747
Per common share data:
Basic earnings per share
$
0.49
$
0.54
$
0.60
$
0.74
$
0.61
$
1.62
$
1.96
Diluted earnings per share
0.49
0.53
0.60
0.74
0.61
1.62
1.94
Cash dividends declared
0.26
0.26
0.26
0.26
0.26
0.78
0.78
Basic weighted average shares outstanding
27,042,762
27,024,043
26,999,138
27,134,970
27,356,614
27,022,141
27,487,237
Diluted weighted average shares outstanding
27,079,484
27,071,478
27,122,012
27,303,249
27,501,212
27,081,541
27,666,197
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
September 30, 2023
June 30, 2023
September 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
$
177,780
5.38
%
$
2,412
$
69,189
5.08
%
$
877
$
19,802
2.14
%
$
107
Investment securities:
Taxable
1,354,039
2.07
7,016
1,379,319
2.07
7,145
1,445,781
1.92
6,934
Tax-exempt [1]
149,824
2.40
897
151,979
2.42
920
158,052
2.57
1,018
Total investment securities
1,503,863
2.10
7,913
1,531,298
2.11
8,065
1,603,833
1.98
7,952
Loans, including loans held for sale
5,507,248
4.49
62,162
5,543,398
4.37
60,455
5,355,088
3.84
51,686
FHLB stock
10,975
4.09
113
11,721
4.10
120
13,050
4.23
138
Total interest-earning assets
7,199,866
4.01
72,600
7,155,606
3.89
69,517
6,991,773
3.41
59,883
Noninterest-earning assets
310,671
308,023
328,978
Total assets
$
7,510,537
$
7,463,629
$
7,320,751
LIABILITIES AND EQUITY
Interest-bearing liabilities:
Interest-bearing demand deposits
$
1,339,294
0.14
%
$
460
$
1,367,878
0.12
%
$
411
$
1,450,434
0.06
%
$
217
Savings and money market deposits
2,209,835
1.16
6,464
2,172,680
0.86
4,670
2,208,037
0.19
1,054
Time deposits up to $250,000
449,844
3.38
3,827
390,961
2.98
2,907
228,707
0.42
245
Time deposits over $250,000
844,842
3.49
7,441
790,864
3.06
6,025
443,178
0.76
847
Total interest-bearing deposits
4,843,815
1.49
18,192
4,722,383
1.19
14,013
4,330,356
0.22
2,363
FHLB advances and other short-term borrowings
—
—
—
29,791
5.09
378
102,777
2.55
660
Long-term debt
156,005
5.83
2,292
155,946
5.65
2,199
105,760
4.80
1,281
Total interest-bearing liabilities
4,999,820
1.63
20,484
4,908,120
1.36
16,590
4,538,893
0.38
4,304
Noninterest-bearing deposits
1,894,256
1,952,267
2,204,965
Other liabilities
136,343
125,531
115,565
Total liabilities
7,030,419
6,985,918
6,859,423
Shareholders’ equity
480,118
477,711
461,328
Non-controlling interest
—
—
—
Total equity
480,118
477,711
461,328
Total liabilities and equity
$
7,510,537
$
7,463,629
$
7,320,751
Net interest income
$
52,116
$
52,927
$
55,579
Interest rate spread
2.38
%
2.53
%
3.03
%
Net interest margin
2.88
%
2.96
%
3.17
%
[1]
Interest income and resultant yield information for tax-exempt investment securities is expressed on a taxable-equivalent basis using a federal statutory tax rate of 21%.
CENTRAL PACIFIC FINANCIAL CORP. AND SUBSIDIARIES
Average Balances, Interest Income Expense, Yields and Rates (Taxable Equivalent)
(Unaudited)
TABLE 5
Nine Months Ended
Nine Months Ended
September 30, 2023
September 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
$
91,202
5.23
%
$
3,566
$
94,076
0.53
%
$
370
Investment securities:
Taxable
1,376,294
2.08
21,497
1,473,989
1.90
20,958
Tax-exempt [1]
151,611
2.48
2,818
160,144
2.56
3,073
Total investment securities
1,527,905
2.12
24,315
1,634,133
1.96
24,031
Loans, including loans held for sale
5,525,476
4.37
180,886
5,231,098
3.67
143,598
FHLB stock
11,687
4.21
369
10,019
3.53
265
Total interest-earning assets
7,156,270
3.90
209,136
6,969,326
3.22
168,264
Noninterest-earning assets
316,620
354,270
Total assets
$
7,472,890
$
7,323,596
LIABILITIES AND EQUITY
Interest-bearing liabilities:
Interest-bearing demand deposits
$
1,373,831
0.12
%
$
1,234
$
1,437,034
0.04
%
$
473
Savings and money market deposits
2,188,585
0.89
14,520
2,208,449
0.10
1,700
Time deposits up to $250,000
394,464
2.92
8,604
223,343
0.33
548
Time deposits over $250,000
775,615
3.08
17,860
461,180
0.44
1,503
Total interest-bearing deposits
4,732,495
1.19
42,218
4,330,006
0.13
4,224
FHLB advances and other short-term borrowings
31,182
4.88
1,139
34,756
2.55
662
Long-term debt
146,513
5.78
6,329
105,699
4.37
3,455
Total interest-bearing liabilities
4,910,190
1.35
49,686
4,470,461
0.25
8,341
Noninterest-bearing deposits
1,957,267
2,250,496
Other liabilities
131,577
112,478
Total liabilities
6,999,034
6,833,435
Shareholders’ equity
473,856
490,140
Non-controlling interest
—
21
Total equity
473,856
490,161
Total liabilities and equity
$
7,472,890
$
7,323,596
Net interest income
$
159,450
$
159,923
Interest rate spread
2.55
%
2.97
%
Net interest margin
2.98
%
3.06
%
[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
Sep 30,
Jun 30,
Mar 31,
Dec 31,
Sep 30,
(Dollars in thousands)
2023
2023
2023
2022
2022
HAWAII:
Commercial and industrial:
Small Business Administration Paycheck Protection Program ("SBA PPP")
$
1,410
$
1,565
$
1,821
$
2,555
$
5,208
Other
405,023
373,036
375,158
383,665
358,805
Real estate:
Construction
174,057
168,012
154,303
150,208
138,724
Residential mortgage
1,930,740
1,942,906
1,941,230
1,940,999
1,923,068
Home equity
753,980
750,760
743,908
739,380
719,399
Commercial mortgage
1,045,625
1,037,826
1,030,086
1,029,708
1,002,874
Consumer
338,248
327,790
342,922
346,789
347,388
Total loans, net of deferred fees and costs
4,649,083
4,601,895
4,589,428
4,593,304
4,495,466
Less: Allowance for credit losses
48,105
44,828
44,062
45,169
47,814
Loans, net of allowance for credit losses
$
4,600,978
$
4,557,067
$
4,545,366
$
4,548,135
$
4,447,652
U.S. MAINLAND: [1]
Commercial and industrial:
Other
157,373
170,557
179,906
160,282
158,474
Real estate:
Construction
37,455
32,807
27,171
16,515
12,872
Commercial mortgage
319,802
329,736
331,546
333,367
332,872
Consumer
344,997
385,688
429,346
451,998
422,528
Total loans, net of deferred fees and costs
859,627
918,788
967,969
962,162
926,746
Less: Allowance for credit losses
16,412
19,021
19,037
18,569
16,568
Loans, net of allowance for credit losses
$
843,215
$
899,767
$
948,932
$
943,593
$
910,178
TOTAL:
Commercial and industrial:
SBA PPP
$
1,410
$
1,565
$
1,821
$
2,555
$
5,208
Other
562,396
543,593
555,064
543,947
517,279
Real estate:
Construction
211,512
200,819
181,474
166,723
151,596
Residential mortgage
1,930,740
1,942,906
1,941,230
1,940,999
1,923,068
Home equity
753,980
750,760
743,908
739,380
719,399
Commercial mortgage
1,365,427
1,367,562
1,361,632
1,363,075
1,335,746
Consumer
683,245
713,478
772,268
798,787
769,916
Total loans, net of deferred fees and costs
5,508,710
5,520,683
5,557,397
5,555,466
5,422,212
Less: Allowance for credit losses
64,517
63,849
63,099
63,738
64,382
Loans, net of allowance for credit losses
$
5,444,193
$
5,456,834
$
5,494,298
$
5,491,728
$
5,357,830
[1]
U.S. Mainland includes territories of the United States.
CENTRAL PACIFIC FINANCIAL CORP. AND SUBSIDIARIES
Deposits
(Unaudited)
TABLE 7
Sep 30,
Jun 30,
Mar 31,
Dec 31,
Sep 30,
(Dollars in thousands)
2023
2023
2023
2022
2022
Noninterest-bearing demand deposits
$
1,969,523
$
2,009,387
$
2,028,087
$
2,092,823
$
2,138,083
Interest-bearing demand deposits
1,345,843
1,359,978
1,386,913
1,453,167
1,441,302
Savings and money market deposits
2,209,550
2,184,652
2,184,675
2,199,028
2,194,991
Time deposits up to $250,000
465,543
427,864
372,150
330,148
261,961
Core deposits
5,990,459
5,981,881
5,971,825
6,075,166
6,036,337
Government time deposits
400,130
383,426
360,501
290,057
195,057
Other time deposits greater than $250,000
484,156
440,430
414,642
371,000
325,040
Total time deposits greater than $250,000
884,286
823,856
775,143
661,057
520,097
Total deposits
$
6,874,745
$
6,805,737
$
6,746,968
$
6,736,223
$
6,556,434
CENTRAL PACIFIC FINANCIAL CORP. AND SUBSIDIARIES
Nonperforming Assets and Accruing Loans 90+ Days Past Due
(Unaudited)
TABLE 8
Sep 30,
Jun 30,
Mar 31,
Dec 31,
Sep 30,
(Dollars in thousands)
2023
2023
2023
2022
2022
Nonaccrual loans:
Commercial and industrial:
Other
$
352
$
319
$
264
$
297
$
277
Real estate:
Construction
—
4,851
—
—
—
Residential mortgage
4,949
4,385
3,445
3,808
2,771
Home equity
677
797
712
570
584
Commercial mortgage
77
77
77
—
—
Consumer
597
632
815
576
588
Total nonaccrual loans
6,652
11,061
5,313
5,251
4,220
Other real estate owned ("OREO")
—
—
—
—
—
Total nonperforming assets ("NPAs")
6,652
11,061
5,313
5,251
4,220
Accruing loans 90+ days past due:
Commercial and industrial:
SBA PPP
—
—
—
13
—
Other
—
—
—
26
669
Real estate:
Residential mortgage
794
959
—
559
503
Home equity
—
133
—
—
—
Consumer
2,120
2,207
1,908
1,240
623
Total accruing loans 90+ days past due
2,914
3,299
1,908
1,838
1,795
Total NPAs and accruing loans 90+ days past due
$
9,566
$
14,360
$
7,221
$
7,089
$
6,015
Ratio of total nonaccrual loans to total loans
0.12
%
0.20
%
0.10
%
0.09
%
0.08
%
Ratio of total NPAs to total loans and OREO
0.12
%
0.20
%
0.10
%
0.09
%
0.08
%
Ratio of total NPAs and accruing loans 90+ days past due to total loans and OREO
0.17
%
0.26
%
0.13
%
0.13
%
0.11
%
Quarter-to-quarter changes in NPAs:
Balance at beginning of quarter
$
11,061
$
5,313
$
5,251
$
4,220
$
4,983
Additions
2,311
7,105
1,609
2,162
1,072
Reductions:
Payments
(5,718
)
(290
)
(505
)
(198
)
(329
)
Return to accrual status
(207
)
(212
)
(14
)
(44
)
(616
)
Net charge-offs, valuation and other adjustments
(795
)
(855
)
(1,028
)
(889
)
(890
)
Total reductions
(6,720
)
(1,357
)
(1,547
)
(1,131
)
(1,835
)
Balance at end of quarter
$
6,652
$
11,061
$
5,313
$
5,251
$
4,220
CENTRAL PACIFIC FINANCIAL CORP. AND SUBSIDIARIES
Allowance for Credit Losses on Loans
(Unaudited)
TABLE 9
Three Months Ended
Nine Months Ended
Sep 30,
Jun 30,
Mar 31,
Dec 31,
Sep 30,
Sep 30,
(Dollars in thousands)
2023
2023
2023
2022
2022
2023
2022
Allowance for credit losses:
Balance at beginning of period
$
63,849
$
63,099
$
63,738
$
64,382
$
65,211
$
63,738
$
68,097
Provision (credit) for credit losses on loans
4,526
4,135
1,615
1,032
731
10,276
(744
)
Charge-offs:
Commercial and industrial:
Other
402
362
779
678
550
1,543
1,291
Consumer
4,710
3,873
2,686
1,881
1,912
11,269
4,518
Total charge-offs
5,112
4,235
3,465
2,559
2,462
12,812
5,809
Recoveries:
Commercial and industrial:
Other
261
125
250
210
220
636
785
Real estate:
Construction
1
—
—
—
14
1
76
Residential mortgage
10
7
53
133
14
70
162
Home equity
—
15
—
—
36
15
36
Consumer
982
703
908
540
618
2,593
1,779
Total recoveries
1,254
850
1,211
883
902
3,315
2,838
Net charge-offs
3,858
3,385
2,254
1,676
1,560
9,497
2,971
Balance at end of period
$
64,517
$
63,849
$
63,099
$
63,738
$
64,382
$
64,517
$
64,382
Average loans, net of deferred fees and costs
$
5,507,248
$
5,543,398
$
5,525,988
$
5,498,800
$
5,355,088
$
5,525,476
$
5,231,098
Ratio of annualized net charge-offs to average loans
0.28
%
0.24
%
0.16
%
0.12
%
0.12
%
0.23
%
0.08
%
Ratio of ACL to total loans
1.17
%
1.16
%
1.14
%
1.15
%
1.19
%
1.17
%
1.19
%
CENTRAL PACIFIC FINANCIAL CORP. AND SUBSIDIARIES
Reconciliation of Non-GAAP Financial Measures
(Unaudited)
TABLE 10
The Company uses certain non-GAAP financial measures in addition to our GAAP results to provide useful information for evaluating our cash operating performance, ability to service debt, compliance with debt covenants and measurement against competitors. This information should be considered as supplemental in nature and should not be considered in isolation or as a substitute for the related financial information prepared in accordance with GAAP. In addition, these non-GAAP financial measures may not be comparable to similarly entitled measures reported by other companies.
The Company believes that pre-provision net revenue ("PPNR"), a non-GAAP financial measure, is useful as a tool to help evaluate the ability to provide for credit costs through operations. The following tables set forth a reconciliation of our PPNR and our PPNR to average assets for each of the periods indicated:
Three Months Ended
Nine Months Ended
Sep 30,
Jun 30,
Mar 31,
Dec 31,
Sep 30,
Sep 30,
(Dollars in thousands)
2023
2023
2023
2022
2022
2023
2022
Net income
$
13,141
$
14,475
$
16,187
$
20,181
$
16,715
$
43,803
$
53,747
Add: Income tax expense
4,349
4,472
5,059
6,700
5,919
13,880
18,141
Pre-tax income
17,490
18,947
21,246
26,881
22,634
57,683
71,888
Add: Provision (credit) for credit losses
4,874
4,319
1,852
571
362
11,045
(1,844
)
PPNR
$
22,364
$
23,266
$
23,098
$
27,452
$
22,996
$
68,728
$
70,044
Three Months Ended
Nine Months Ended
Sep 30,
Jun 30,
Mar 31,
Dec 31,
Sep 30,
Sep 30,
(Dollars in thousands)
2023
2023
2023
2022
2022
2023
2022
Net income
$
13,141
$
14,475
$
16,187
$
20,181
$
16,715
$
43,803
$
53,747
Net income (annualized)
52,564
57,900
64,748
80,724
66,860
58,404
71,663
PPNR
22,364
23,266
23,098
27,452
22,996
68,728
70,044
PPNR (annualized)
89,456
93,064
92,392
109,808
91,984
91,637
93,392
Average assets
7,510,537
7,463,629
7,443,767
7,389,712
7,320,751
7,472,890
7,323,596
Return on average assets ("ROA")
0.70
%
0.78
%
0.87
%
1.09
%
0.91
%
0.78
%
0.98
%
PPNR to average assets
1.19
%
1.25
%
1.24
%
1.49
%
1.26
%
1.23
%
1.28
%
View source version on businesswire.com: https://www.businesswire.com/news/home/20231025271829/en/