PR Newswire | Jul 28, 2021 06:31AM EDT

$18.7 Million

07/28 05:30 CDT

Central Pacific Financial Corp. Reports Increase In Second Quarter Earnings To $18.7 Million- Net income of $18.7 million, or $0.66 per diluted share for the second quarter.- ROA of 1.06% and ROE of 13.56% for the second quarter.- Core loans increased by $102.7 million in the second quarter, while PPP loans decreased by $163.2 million for a net decrease in total loans of $60.5 million from the first quarter of 2021.- Total deposits of $6.40 billion increased by $188.2 million, or 3.0% from the first quarter of 2021.- Cost of average total deposits of 0.06% in the second quarter.- Board of Directors declared a quarterly cash dividend of $0.24 per share.- Repurchased 156,600 shares of the Company's common stock, at a total cost of $4.3 million. HONOLULU, July 28, 2021

HONOLULU, July 28, 2021 /PRNewswire/ -- Central Pacific Financial Corp. (NYSE: CPF) (the "Company"), parent company of Central Pacific Bank (the "Bank"), today reported net income in the second quarter of 2021 of $18.7 million, or fully diluted earnings per share ("EPS") of $0.66, compared to net income in the second quarter of 2020 of $9.9 million, or EPS of $0.35, and net income in the first quarter of 2021 of $18.0 million, or EPS of $0.64.

"We are pleased to report very strong financial results with quarterly pre-tax income reaching a new high since 2007," said Paul Yonamine, Chairman and Chief Executive Officer. "During the second quarter we resumed share repurchases as the Hawaii economy continued to rebound, and our asset quality, liquidity and capital levels remained very strong."

"Our quarterly results are a reflection of the extraordinary work of our teams who continue to diligently manage risks while growing our loans and deposits to meet our customer's needs," said Catherine Ngo, President.

On July 27, 2021, the Company's Board of Directors declared a quarterly cash dividend of $0.24 per share on its outstanding common shares. The dividend will be payable on September 15, 2021 to shareholders of record at the close of business on August 31, 2021.

During the second quarter of 2021, the Company resumed repurchases under its common stock repurchase program and repurchased 156,600 shares of common stock, at a total cost of $4.3 million, or an average cost per share of $27.63. The Company's remaining repurchase authority under its common stock repurchase program at June 30, 2021 is $20.7 million. During the six months ended June 30, 2021, the Company returned $17.6 million in capital to its shareholders through cash dividends and share repurchases.

Earnings HighlightsNet interest income for the second quarter of 2021 was $52.1 million, compared to $49.3 million in the year-ago quarter and $49.8 million in the previous quarter. Net interest margin for the second quarter of 2021 was 3.16%, compared to 3.26% in the year-ago quarter and 3.19% in the previous quarter. The sequential quarter increase in net interest income is primarily due to an increase in loan fees on PPP loans and was partially offset by decreases in yields earned on the Company's interest-earning assets. Net interest income for the second quarter of 2021 included $7.9 million in net interest income and loan fees on PPP loans, compared to $5.2 million in the previous quarter. Net deferred fees on PPP loans totaled $15.9 million and $20.3 million at June 30, 2021 and March 31, 2021, respectively. 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 2021, the Company recorded a credit to the provision for credit losses on loans of $3.4 million, compared to a provision of $11.2 million in the year-ago quarter and a credit to the provision of $0.8 million in the previous quarter. The credit to the provision for credit losses in the second quarter of 2021 was driven by an improved economic forecast and positive migration of loan grades as the State of Hawaii continues to recover from the COVID-19 pandemic.

Other operating income for the second quarter of 2021 totaled $10.5 million, compared to $10.7 million in the year-ago quarter and $10.7 million in the previous quarter. Additional information on other operating income is presented in Table 3.

Other operating expense for the second quarter of 2021 totaled $41.4 million, compared to $35.9 million in the year-ago quarter and $37.8 million in the previous quarter. The increase from the previous quarter was primarily due to an increase in salaries and employee benefits of $4.0 million. Additional information on other operating expense is presented in Table 3.

The efficiency ratio for the second quarter of 2021 was 66.20%, compared to 59.81% in the year-ago quarter and 62.54% in the previous quarter.

The effective tax rate for the second quarter of 2021 was 23.9%, compared to 23.0% in the year-ago quarter and 23.2% in the previous quarter.

Balance Sheet HighlightsTotal assets at June 30, 2021 of $7.18 billion increased from $6.63 billion at June 30, 2020, and increased from $6.98 billion at March 31, 2021.

Total loans at June 30, 2021 of $5.08 billion increased from $5.00 billion at June 30, 2020, and decreased from $5.14 billion at March 31, 2021. The sequential quarter decrease in total loans was due to a decrease in PPP loans of $163.2 million, offset by a net increase in core loans of $102.7 million. In the second quarter of 2021, the Company received repayments of PPP loans totaling $195.8 million, which were offset by PPP originations of $28.1 million. Loans on forbearance or deferral totaled $3.5 million, or less than 1% of total loans at June 30, 2021, and declined 91.2% from the first quarter of 2021. Loans by geographic distribution are summarized in Table 6.

Total deposits at June 30, 2021 of $6.40 billion increased from $5.79 billion at June 30, 2020, and increased from $6.21 billion at March 31, 2021. Core deposits, which include demand deposits, savings and money market deposits and time deposits up to $250,000, totaled $5.83 billion at June 30, 2021, and increased by $278.6 million from March 31, 2021. The Company's loan-to-deposit ratio was 79.4% at June 30, 2021, compared to 86.4% at June 30, 2020 and 82.8% at March 31, 2021. Core deposit and total deposit balances are summarized in Table 7.

Asset QualityNonperforming assets at June 30, 2021 totaled $6.7 million, or 0.09% of total assets, compared to $4.7 million, or 0.07% of total assets at June 30, 2020, and $7.2 million, or 0.10% of total assets at March 31, 2021. Additional information on nonperforming assets, past due and restructured loans is presented in Table 8.

Net charge-offs in the second quarter of 2021 totaled $0.8 million, compared to net charge-offs of $2.9 million in the year-ago quarter, and net charge-offs of $0.7 million in the previous quarter.

The allowance for credit losses, as a percentage of total loans at June 30, 2021 was 1.53%, compared to 1.35% at June 30, 2020 and 1.59% at March 31, 2021. Excluding PPP loans, the allowance for credit losses, as a percentage of core loans at June 30, 2021 was 1.68%, compared to 1.80% at March 31, 2021. Additional information on net charge-offs and recoveries and the allowance for credit losses is presented in Tables 9 and 10.

CapitalTotal shareholders' equity was $552.8 million at June 30, 2021, compared to $544.3 million and $542.9 million at June 30, 2020 and March 31, 2021, respectively.

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, 2021, the Company's leverage capital, tier 1 risk-based capital, total risk-based capital, and common equity tier 1 ratios were 8.6%, 12.7%, 14.9%, and 11.6%, respectively, compared to 8.9%, 13.1%, 15.4%, and 12.0%, respectively, at March 31, 2021.

Non-GAAP Financial MeasuresThis 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 CallThe 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 1-877-505-7644. A playback of the call will be available through August 28, 2021 by dialing 1-877-344-7529 (passcode: 10158618) 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 $7.2 billion in assets as of June 30, 2021. Central Pacific Bank, its primary subsidiary, operates 31 branches and 70 ATMs in the state of Hawaii. For additional information, please visit the Company's website at http://www.cpb.bank.

Forward-Looking StatementsThis document may contain forward-looking statements 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 RISE2020 and other 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 forward-looking statements but are not the exclusive means of identifying such statements.

While we believe that our forward-looking statements 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 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 successfully implement our RISE2020 and other business initiatives; the impact of local, national, and international economies and events (including natural disasters such as wildfires, volcanic eruptions, hurricanes, tsunamis, storms, earthquakes and pandemic virus and disease, 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 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; 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, 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 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 forward-looking statements, 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 forward-looking statements contained in this Form 8-K. Forward-looking statements speak only as of the date on which such statements are made. We undertake no obligation to update any forward-looking statements 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) 2021 2021 2020 2020 2020 2021 2020

CONDENSED INCOME STATEMENT

Net interest income $52,061 $49,804 $51,474 $49,120 $49,259 $101,865 $97,089

(Credit) provision for credit losses [1] (3,443) (821) 4,898 14,873 11,213 (4,264) 22,340

Total other operating income 10,530 10,711 14,057 11,563 10,692 21,241 19,578

Total other operating expense [1] 41,433 37,846 44,690 36,751 35,854 79,279 70,296

Income tax expense 5,887 5,452 3,772 2,200 2,967 11,339 5,788

Net income 18,714 18,038 12,171 6,859 9,917 36,752 18,243

Basic earnings per common share $0.66 $0.64 $0.43 $0.24 $0.35 $1.31 $0.65

Diluted earnings per common share 0.66 0.64 0.43 0.24 0.35 1.29 0.65

Dividends declared per common share 0.24 0.23 0.23 0.23 0.23 0.47 0.46



PERFORMANCE RATIOS

Return on average assets (ROA) [2] 1.06 %1.07 %0.74 %0.42 %0.61 %1.07 %0.58 %

Return on average shareholders' equity (ROE) [2]13.56 13.07 8.87 4.99 7.34 13.31 6.77

Average shareholders' equity to average assets 7.84 8.19 8.29 8.36 8.36 8.01 8.64

Efficiency ratio [3] 66.20 62.54 68.20 60.56 59.81 64.40 60.25

Net interest margin (NIM) [2] 3.16 3.19 3.32 3.19 3.26 3.18 3.34

Dividend payout ratio [4] 36.36 35.94 53.49 95.83 65.71 36.43 70.77



SELECTED AVERAGE BALANCES

Average loans, including loans held for sale $5,110,820 $5,079,874 $5,034,717 $5,016,955 $4,902,905 $5,095,433 $4,682,626

Average interest-earning assets 6,606,779 6,305,786 6,202,228 6,160,381 6,073,361 6,457,115 5,847,202

Average assets 7,039,928 6,738,825 6,621,127 6,574,492 6,468,129 6,890,195 6,237,592

Average deposits 6,269,516 5,958,742 5,755,257 5,728,147 5,614,595 6,114,975 5,368,056

Average interest-bearing liabilities 4,253,382 4,161,453 4,163,396 4,118,726 4,082,699 4,207,670 4,000,016

Average shareholders' equity 552,102 551,976 548,663 549,378 540,802 552,039 538,762

CENTRAL PACIFIC FINANCIAL CORP. AND SUBSIDIARIES

Financial Highlights

(Unaudited) TABLE 1 (CONTINUED)



Jun 30,Mar 31,Dec 31,Sep 30,Jun 30,

(dollars in thousands) 2021 2021 2020 2020 2020

REGULATORY CAPITAL RATIOS

Central Pacific Financial Corp

Leverage capital ratio 8.6 % 8.9 % 8.8 % 8.8 % 8.9 %

Tier 1 risk-based capital ratio 12.7 13.1 12.9 12.8 12.5

Total risk-based capital ratio 14.9 15.4 15.2 13.9 13.6

Common equity tier 1 capital ratio 11.6 12.0 11.8 11.6 11.4

Central Pacific Bank

Leverage capital ratio 9.1 9.4 9.4 8.6 8.7

Tier 1 risk-based capital ratio 13.5 13.9 13.7 12.5 12.2

Total risk-based capital ratio 14.6 15.0 14.9 13.6 13.3

Common equity tier 1 capital ratio 13.5 13.9 13.7 12.5 12.2

CENTRAL PACIFIC FINANCIAL CORP. AND SUBSIDIARIES

Financial Highlights

(Unaudited) TABLE 1 (CONTINUED)



Jun 30, Mar 31, Dec 31, Sep 30, Jun 30,

(dollars in thousands, except for per share amounts)2021 2021 2020 2020 2020

BALANCE SHEET

Total loans, net of deferred fees and costs $5,077,318 $5,137,849 $4,964,113 $5,030,626 $ 5,003,438

Total assets 7,178,481 6,979,265 6,594,583 6,648,142 6,632,972

Total deposits 6,397,159 6,208,950 5,796,118 5,678,929 5,794,685

Long-term debt 105,495 105,436 105,385 101,547 167,491

Total shareholders' equity 552,793 542,865 546,685 543,903 544,271

Total shareholders' equity to total assets 7.70 %7.78 %8.29 %8.18 %8.21 %



ASSET QUALITY

Allowance for credit losses (ACL) [1] [2] $77,781 $81,553 $83,269 $80,542 $ 67,339

Non-performing assets (NPA) 6,745 7,194 6,192 13,187 4,741

ACL to total loans [1] 1.53 %1.59 %1.68 %1.60 %1.35 %

ACL to core loans (refer to Table 10) [1] 1.68 %1.80 %1.83 %1.79 %1.50 %

ACL to non-performing assets [1] 1,153.17 %1,133.63 %1,344.78 %610.77 %1,420.35 %

NPA to total assets 0.09 %0.10 %0.09 %0.20 %0.07 %



PER SHARE OF COMMON STOCK OUTSTANDING

Book value per common share $19.59 $19.19 $19.40 $19.30 $ 19.33

Closing market price per common share 26.06 26.68 19.01 13.57 16.03



[1] As of January 1, 2021, the provision for credit losses on off-balance sheet credit exposures (previously included in other operating expense) is included in the provision for credit losses line on the consolidated statements of income. Prior period amounts have been reclassified to conform to the current period presentation. The allowance for off-balance sheet credit exposures continues to be included in other liabilities

[2] ROA, ROE and ROTE 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)

[3] Efficiency ratio is defined as total operating expense divided by total revenue (net interest income and total other operating income)

[4] Dividend payout ratio is defined as dividends declared per share divided by diluted earnings per share

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) 2021 2021 2020 2020 2020

ASSETS

Cash and due from financial institutions $116,009 $93,358 $97,546 $89,665 $102,132

Interest-bearing deposits in other financial institutions 224,469 166,533 6,521 5,489 41,201

Investment securities:

Available-for-sale debt securities, at fair value 1,407,340 1,216,341 1,182,609 1,166,319 1,168,594

Equity securities, at fair value 1,578 1,435 1,351 1,204 1,209

Total investment securities 1,408,918 1,217,776 1,183,960 1,167,523 1,169,803

Loans held for sale 5,361 5,234 16,687 23,962 10,443

Loans, net of deferred fees and costs 5,077,318 5,137,849 4,964,113 5,030,626 5,003,438

Less allowance for credit losses 77,781 81,553 83,269 80,542 67,339

Loans, net of allowance for credit losses 4,999,537 5,056,296 4,880,844 4,950,084 4,936,099

Premises and equipment, net 76,740 72,599 65,278 61,095 55,032

Accrued interest receivable 19,014 19,440 20,224 21,478 19,590

Investment in unconsolidated subsidiaries 31,052 31,487 29,968 30,239 16,428

Other real estate owned - - - 128 -

Mortgage servicing rights 10,500 11,094 11,865 12,429 12,771

Bank-owned life insurance 167,289 167,110 163,161 161,743 161,758

Federal Home Loan Bank ("FHLB") stock 8,149 8,155 8,237 17,468 9,229

Right of use lease asset 41,890 44,727 45,857 44,896 50,039

Other assets 69,553 85,456 64,435 61,943 48,447

Total assets $7,178,481$6,979,265$6,594,583$6,648,142$6,632,972

LIABILITIES AND SHAREHOLDERS' EQUITY

Deposits:

Noninterest-bearing demand $2,203,806$2,070,428$1,790,269$1,762,476$1,851,012

Interest-bearing demand 1,341,280 1,237,574 1,174,888 1,114,123 1,067,483

Savings and money market 2,048,945 2,004,368 1,932,043 1,881,104 1,945,744

Time 803,128 896,580 898,918 921,226 930,446

Total deposits 6,397,159 6,208,950 5,796,118 5,678,929 5,794,685

FHLB advances and other short-term borrowings - - 22,000 206,000 -

Long-term debt 105,495 105,436 105,385 101,547 167,491

Lease liability 43,112 46,033 47,191 45,355 50,440

Other liabilities 79,874 75,933 77,156 72,369 76,050

Total liabilities 6,625,640 6,436,352 6,047,850 6,104,200 6,088,666

Shareholders' equity:

Preferred stock, no par value, authorized 1,000,000 shares; issued and outstanding: none at June 30, 2021, March 31, 2021, - - - - - December 31, 2020, September 30, 2020, and June 30, 2020

Common stock, no par value, authorized 185,000,000 shares; issued and outstanding: 28,218,860 at June 30, 2021, 28,282,530 440,854 443,505 442,635 442,635 442,699 at March 31, 2021, 28,183,340 at December 31, 2020, 28,179,798 at September 30, 2020, and 28,154,159 at June 30, 2020

Additional paid-in capital 96,182 95,721 94,842 94,336 93,007

Retained earnings (accumulated deficit) 10,831 628 (10,920) (16,609) (16,986)

Accumulated other comprehensive income 4,926 3,011 20,128 23,541 25,551

Total shareholders' equity 552,793 542,865 546,685 543,903 544,271

Non-controlling interest 48 48 48 39 35

Total equity 552,841 542,913 546,733 543,942 544,306

Total liabilities and shareholders' equity $7,178,481$6,979,265$6,594,583$6,648,142$6,632,972





CENTRAL PACIFIC FINANCIAL CORP. AND SUBSIDIARIES

Consolidated Statements of Income

(Unaudited) TABLE 3



Three Months Ended Six Months Ended

June 30, March 31, December 31,September 30,June 30, June 30,

(Dollars in thousands, except per share data) 2021 2021 2020 2020 2020 2021 2020

Interest income:

Interest and fees on loans $49,024 $46,074 $48,259 $45,751 $45,915 $95,098 $92,119

Interest and dividends on investment securities:

Taxable investment securities 4,447 5,106 5,002 5,233 6,310 9,553 13,067

Tax-exempt investment securities 346 514 504 621 599 860 1,267

Dividend income on investment securities 18 18 18 17 17 36 34

Interest on deposits in other financial institutions61 10 4 3 3 71 39

Dividend income on FHLB stock 63 59 114 128 106 122 238

Total interest income 53,959 51,781 53,901 51,753 52,950 105,740 106,764

Interest expense:

Interest on deposits:

Demand 93 86 105 115 114 179 290

Savings and money market 282 274 314 417 567 556 1,685

Time 498 588 813 1,284 2,124 1,086 5,392

Interest on short-term borrowings - 2 65 71 74 2 582

Interest on long-term debt 1,025 1,027 1,130 746 812 2,052 1,726

Total interest expense 1,898 1,977 2,427 2,633 3,691 3,875 9,675

Net interest income 52,061 49,804 51,474 49,120 49,259 101,865 97,089

(Credit) provision for credit losses (3,443) (821) 4,898 14,873 11,213 (4,264) 22,340

Net interest income after (credit) provision for 55,504 50,625 46,576 34,247 38,046 106,129 74,749 credit losses

Other operating income:

Mortgage banking income 1,533 2,970 5,434 4,345 3,566 4,503 3,903

Service charges on deposit accounts 1,443 1,478 1,560 1,475 1,149 2,921 3,199

Other service charges and fees 4,619 3,790 3,709 3,345 2,916 8,409 7,813

Income from fiduciary activities 1,269 1,231 1,113 1,149 1,270 2,500 2,567

Net gain (loss) on sales of investment securities 50 - 151 (352) - 50 -

Income from bank-owned life insurance 1,210 797 1,219 1,179 1,424 2,007 1,405

Other 406 445 871 422 367 851 691

Total other operating income 10,530 10,711 14,057 11,563 10,692 21,241 19,578

Other operating expense:

Salaries and employee benefits 23,790 19,827 23,090 20,375 20,329 43,617 40,383

Net occupancy 4,055 3,764 4,011 3,834 3,645 7,819 7,317

Equipment 1,048 1,000 1,157 1,234 1,043 2,048 2,140

Communication expense 756 769 758 856 774 1,525 1,611

Legal and professional services 2,572 2,377 2,507 2,262 2,238 4,949 4,266

Computer software expense 3,398 3,783 3,625 3,114 3,035 7,181 5,978

Advertising expense 1,329 1,658 756 1,020 923 2,987 2,015

Other 4,485 4,668 8,786 4,056 3,867 9,153 6,586

Total other operating expense 41,433 37,846 44,690 36,751 35,854 79,279 70,296

Income before income taxes 24,601 23,490 15,943 9,059 12,884 48,091 24,031

Income tax expense 5,887 5,452 3,772 2,200 2,967 11,339 5,788

Net income $18,714 $18,038 $12,171 $6,859 $9,917 $36,752 $18,243

Per common share data:

Basic earnings per share $0.66 $0.64 $0.43 $0.24 $0.35 $1.31 $0.65

Diluted earnings per share 0.66 0.64 0.43 0.24 0.35 1.29 0.65

Cash dividends declared 0.24 0.23 0.23 0.23 0.23 0.47 0.46

Basic weighted average shares outstanding 28,173,71028,108,64828,071,151 28,060,020 28,040,80228,141,36028,083,602

Diluted weighted average shares outstanding 28,456,62428,313,01428,177,366 28,111,664 28,095,23028,407,47928,190,132



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, 2021 March 31, 2021 June 30, 2020

Average Average Average Average Average Average

(Dollars in thousands) Balance Yield/RateInterest Balance Yield/RateInterest Balance Yield/RateInterest

ASSETS

Interest-earning assets:

Interest-bearing deposits in $222,934 0.11 % $61 $43,442 0.10 % $10 $15,777 0.10 % $3 other financial institutions

Investment securities, excluding valuation allowance:

Taxable 1,172,183 1.52 4,465 1,081,271 1.90 5,124 1,042,441 2.43 6,327

Tax-exempt 92,702 1.89 438 93,665 2.78 651 100,485 3.02 758

Total investment securities 1,264,885 1.55 4,903 1,174,936 1.97 5,775 1,142,926 2.48 7,085

Loans, including loans held for 5,110,820 3.84 49,024 5,079,874 3.66 46,074 4,902,905 3.76 45,915 sale

Federal Home Loan Bank stock 8,140 3.11 63 7,534 3.13 59 11,753 3.62 106

Total interest-earning assets 6,606,779 3.28 54,051 6,305,786 3.32 51,918 6,073,361 3.51 53,109

Noninterest-earning assets 433,149 433,039 394,768

Total assets $7,039,928 $6,738,825 $6,468,129



LIABILITIES AND EQUITY

Interest-bearing liabilities:

Interest-bearing demand $1,269,6760.03 % $93 $1,186,9630.03 % $86 $1,056,8850.04 % $114 deposits

Savings and money market 2,028,583 0.06 282 1,972,800 0.06 274 1,856,621 0.12 567 deposits

Time deposits up to $250,000 231,922 0.34 196 236,828 0.41 241 260,319 0.81 525

Time deposits over $250,000 617,745 0.20 302 657,004 0.21 347 708,831 0.91 1,599

Total interest-bearing deposits 4,147,926 0.08 873 4,053,595 0.09 948 3,882,656 0.29 2,805

Federal Home Loan Bank advances and other short-term - - - 2,456 0.30 2 63,104 0.48 74 borrowings

Long-term debt 105,456 3.90 1,025 105,402 3.95 1,027 136,939 2.38 812

Total interest-bearing liabilities4,253,382 0.18 1,898 4,161,453 0.19 1,977 4,082,699 0.36 3,691

Noninterest-bearing deposits 2,121,590 1,905,147 1,731,939

Other liabilities 112,852 120,247 112,687

Total liabilities 6,487,824 6,186,847 5,927,325

Shareholders' equity 552,102 551,976 540,802

Non-controlling interest 2 2 2

Total equity 552,104 551,978 540,804

Total liabilities and equity $7,039,928 $6,738,825 $6,468,129



Net interest income $52,153 $49,941 $49,418



Interest rate spread 3.10 % 3.13 % 3.15 %



Net interest margin 3.16 % 3.19 % 3.26 %







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, 2021 June 30, 2020

Average Average Average Average

(Dollars in thousands) Balance Yield/RateInterest Balance Yield/RateInterest

ASSETS

Interest-earning assets:

Interest-bearing deposits in other financial institutions$133,684 0.11 % $71 $13,430 0.59 % $39

Investment securities, excluding valuation allowance:

Taxable 1,126,978 1.70 9,589 1,035,068 2.53 13,101

Tax-exempt 93,181 2.34 1,089 102,907 3.12 1,604

Total investment securities 1,220,159 1.75 10,678 1,137,975 2.58 14,705

Loans, including loans held for sale 5,095,433 3.75 95,098 4,682,626 3.95 92,119

Federal Home Loan Bank stock 7,839 3.12 122 13,171 3.61 238

Total interest-earning assets 6,457,115 3.30 105,969 5,847,202 3.67 107,101

Noninterest-earning assets 433,080 390,390

Total assets $6,890,195 $6,237,592



LIABILITIES AND EQUITY

Interest-bearing liabilities:

Interest-bearing demand deposits $1,228,5480.03 % $179 $1,035,3400.06 % $290

Savings and money market deposits 2,000,845 0.06 556 1,754,186 0.19 1,685

Time deposits up to $250,000 234,361 0.38 437 163,074 1.38 1,116

Time deposits over $250,000 637,266 0.21 649 826,714 1.04 4,276

Total interest-bearing deposits 4,101,020 0.09 1,821 3,779,314 0.39 7,367

Federal Home Loan Bank advances and other 1,221 0.30 2 101,459 1.15 582 short-term borrowings

Long-term debt 105,429 3.93 2,052 119,243 2.91 1,726

Total interest-bearing liabilities 4,207,670 0.19 3,875 4,000,016 0.49 9,675

Noninterest-bearing deposits 2,013,955 1,588,742

Other liabilities 116,529 110,070

Total liabilities 6,338,154 5,698,828

Shareholders' equity 552,039 538,762

Non-controlling interest 2 2

Total equity 552,041 538,764

Total liabilities and equity $6,890,195 $6,237,592



Net interest income $102,094 $97,426



Interest rate spread 3.11 % 3.18 %



Net interest margin 3.18 % 3.34 %







CENTRAL PACIFIC FINANCIAL CORP. AND SUBSIDIARIES

Loans by Geographic Distribution

(Unaudited) TABLE 6



June 30, March 31, December 31,September 30,June 30,

(Dollars in thousands) 2021 2021 2020 2020 2020

HAWAII:

Commercial, financial and agricultural:

SBA Paycheck Protection Program $395,352 $548,880 $375,879 $485,286 $483,827

Other 389,341 399,154 426,670 414,754 431,887

Real estate:

Construction 133,457 137,976 125,407 118,247 103,518

Residential mortgage 1,711,801 1,687,513 1,690,212 1,680,060 1,657,558

Home equity 583,430 559,514 551,266 534,056 510,962

Commercial mortgage 926,006 911,216 898,055 914,144 912,422

Consumer 328,332 319,032 332,430 342,203 350,414

Total loans, net of deferred fees and costs4,467,719 4,563,285 4,399,919 4,488,750 4,450,588

Allowance for credit losses (67,773) (70,961) (73,152) (71,575) (59,765)

Loans, net of allowance for credit losses $4,399,946$4,492,324$4,326,767$4,417,175 $4,390,823



U.S. MAINLAND: [1]

Commercial, financial and agricultural:

SBA Paycheck Protection Program $39,258 $48,939 $40,496 $43,295 $42,581

Other 96,884 115,035 118,421 113,316 115,971

Real estate:

Commercial mortgage 260,424 253,122 258,273 227,121 217,747

Consumer 213,033 157,468 147,004 158,144 176,551

Total loans, net of deferred fees and costs609,599 574,564 564,194 541,876 552,850

Allowance for credit losses (10,008) (10,592) (10,117) (8,967) (7,574)

Loans, net of allowance for credit losses $599,591 $563,972 $554,077 $532,909 $545,276



TOTAL:

Commercial, financial and agricultural:

SBA Paycheck Protection Program $434,610 $597,819 $416,375 $528,581 $526,408

Other 486,225 514,189 545,091 528,070 547,858

Real estate:

Construction 133,457 137,976 125,407 118,247 103,518

Residential mortgage 1,711,801 1,687,513 1,690,212 1,680,060 1,657,558

Home equity 583,430 559,514 551,266 534,056 510,962

Commercial mortgage 1,186,430 1,164,338 1,156,328 1,141,265 1,130,169

Consumer 541,365 476,500 479,434 500,347 526,965

Total loans, net of deferred fees and costs5,077,318 5,137,849 4,964,113 5,030,626 5,003,438

Allowance for credit losses (77,781) (81,553) (83,269) (80,542) (67,339)

Loans, net of allowance for credit losses $4,999,537$5,056,296$4,880,844$4,950,084 $4,936,099



[1] U.S. Mainland includes territories of the United States

CENTRAL PACIFIC FINANCIAL CORP. AND SUBSIDIARIES

Deposits

(Unaudited) TABLE 7



June 30, March 31, December 31, September 30, June 30,

(Dollars in thousands) 2021 2021 2020 2020 2020

Noninterest-bearing demand $2,203,806 $2,070,428 $1,790,269 $1,762,476 $1,851,012

Interest-bearing demand 1,341,280 1,237,574 1,174,888 1,114,123 1,067,483

Savings and money market 2,048,945 2,004,368 1,932,043 1,881,104 1,945,744

Time deposits less than $100,000 141,498 145,497 149,063 157,051 159,739

Other time deposits $100,000 to $250,000 [1] 89,710 88,814 90,149 95,918 96,633

Core deposits 5,825,239 5,546,681 5,136,412 5,010,672 5,120,611



Government time deposits 403,755 500,194 500,344 500,762 509,927

Other time deposits greater than $250,000 168,165 162,075 159,362 167,495 164,147

Total time deposits greater than $250,000 571,920 662,269 659,706 668,257 674,074

Total deposits $6,397,159 $6,208,950 $5,796,118 $5,678,929 $5,794,685



[1] As of January 1, 2021, other time deposits $100,000 to $250,000 have been included in core deposits. Prior period amounts have been reclassified to conform to current period presentation.

CENTRAL PACIFIC FINANCIAL CORP. AND SUBSIDIARIES

Nonperforming Assets, Past Due and Restructured Loans

(Unaudited) TABLE 8



June 30, March 31, December 31, September 30, June 30,

(Dollars in thousands) 2021 2021 2020 2020 2020

Nonaccrual loans: [1]

Commercial, financial and agricultural - Other $699 $1,412 $ 1,461 $ 1,536 $934

Real estate:

Residential mortgage 5,280 4,553 4,115 4,032 3,215

Home equity 434 439 524 533 538

Commercial mortgage - - - 6,889 -

Consumer 332 790 92 69 54

Total nonaccrual loans 6,745 7,194 6,192 13,059 4,741

Other real estate owned ("OREO"):

Real estate:

Residential mortgage - - - 128 -

Total OREO - - - 128 -

Total nonperforming assets ("NPAs") 6,745 7,194 6,192 13,187 4,741

Loans delinquent for 90 days or more still accruing interest: [1]

Commercial, financial and agricultural - Other 29 - - - -

Real estate:

Residential mortgage 1,438 4,522 567 588 726

Consumer 100 262 240 321 444

Total loans delinquent for 90 days or more still accruing interest 1,567 4,784 807 909 1,170

Restructured loans still accruing interest: [1]

Commercial, financial and agricultural - Other 26 63 100 137 172

Real estate:

Residential mortgage 4,258 5,473 5,718 5,178 5,290

Commercial mortgage 1,636 1,698 1,761 1,825 1,888

Consumer 132 198 207 214 145

Total restructured loans still accruing interest 6,052 7,432 7,786 7,354 7,495

Total NPAs and loans delinquent for 90 days or more and $14,364 $19,410 $ 14,785 $ 21,450 $13,406 restructured loans still accruing interest



Total nonaccrual loans as a percentage of total loans 0.13 %0.14 %0.12 % 0.26 % 0.09 %

Total NPAs as a percentage of total loans and OREO 0.13 %0.14 %0.12 % 0.26 % 0.09 %

Total NPAs and loans delinquent for 90 days or more still accruing 0.16 %0.23 %0.14 % 0.28 % 0.12 %interest as a percentage of total loans and OREO

Total NPAs, loans delinquent for 90 days or more and restructured 0.28 %0.38 %0.30 % 0.43 % 0.27 %loans still accruing interest as a percentage of total loans and OREO



Quarter-to-quarter changes in NPAs:

Balance at beginning of quarter $7,194 $6,192 $ 13,187 $ 4,741 $3,647

Additions 1,879 2,257 1,370 9,060 1,771

Reductions:

Payments (1,120) (292) (3,186) (393) (367)

Return to accrual status (84) (99) (548) - (123)

Sales of NPAs - - (4,353) - (94)

Charge-offs, valuation and other adjustments (1,124) (864) (278) (221) (93)

Total reductions (2,328) (1,255) (8,365) (614) (677)

Balance at end of quarter $6,745 $7,194 $ 6,192 $ 13,187 $4,741



[1] Section 4013 of the CARES Act and the revised Interagency Statement are being applied to loan modifications related to the COVID-19 pandemic as eligible and applicable. These loan modifications are 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) 2021 2021 2020 2020 2020 2021 2020

Allowance for credit losses ("ACL"):

ACL at beginning of period $81,553 $83,269 $80,542 $67,339 $59,645 $83,269 $47,971

Adoption of ASU 2016-13 - - - - - - 3,566

Adjusted ACL at beginning of period 81,553 83,269 80,542 67,339 59,645 83,269 51,537



(Credit) provision for credit losses on(2,963) (974) 4,496 14,465 10,640 (3,937) 19,969 loans [1] [2]



Charge-offs:

Commercial, financial and 401 609 676 810 1,103 1,010 1,540 agricultural - Other

Real estate:

Residential mortgage - - - 11 52 - 52

Commercial mortgage - - - 75 - - -

Consumer 1,523 1,098 1,856 1,492 2,626 2,621 4,843

Leases - - - - - - -

Total charge-offs 1,924 1,707 2,532 2,388 3,781 3,631 6,435



Recoveries:

Commercial, financial and 276 89 189 321 305 365 647 agricultural - Other

Real estate:

Construction - - - - - - 131

Residential mortgage 186 106 15 13 20 292 201

Home equity - 9 2 - - 9 31

Commercial mortgage 65 8 1 12 1 73 3

Consumer 588 753 556 780 509 1,341 1,255

Total recoveries 1,115 965 763 1,126 835 2,080 2,268

Net charge-offs 809 742 1,769 1,262 2,946 1,551 4,167

ACL at end of period $77,781 $81,553 $83,269 $80,542 $67,339 $77,781 $67,339



Average loans, net of deferred fees and$5,110,820 $5,079,874 $5,034,717 $5,016,955 $4,902,905 $5,095,433 $4,682,626 costs

Annualized ratio of net charge-offs to 0.06 %0.06 %0.14 %0.10 %0.24 %0.06 %0.18 %average loans



[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 in2021 2021 2020 2020 2020 thousands)

ACL $77,781 $81,553 $83,269 $80,542 $67,339



Total loans$5,077,318 $5,137,849 $4,964,113 $5,030,626 $5,003,438

Less: PPP 434,610 597,819 416,375 528,581 526,408 loans

Core loans (or total loans, $4,642,708 $4,540,030 4,547,738 4,502,045 $4,477,030 excluding PPP loans)



Ratio of ACL to 1.53 %1.59 %1.68 %1.60 %1.35 %total loans

Ratio of ACL to core1.68 %1.80 %1.83 %1.79 %1.50 %loans

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SOURCE Central Pacific Financial Corp.