PR Newswire | Oct 28, 2020 06:31AM EDT

10/28 05:30 CDT

Central Pacific Financial Corp. Reports Results For Third Quarter 2020- Net income of $6.9 million, or fully diluted EPS of $0.24 for the third quarter, compared to net income of $9.9 million, or fully diluted EPS of $0.35 for the second quarter.- Pre-tax pre-provision earnings of $23.7 million for the third quarter increased by 13.0% from the year-ago quarter and 0.8% from the second quarter.- Continued to increase credit loss reserves in the pandemic environment with an allowance for credit losses to total loans ratio of 1.60% (or 1.79% excluding Paycheck Protection Program ("PPP") loans) at September 30, 2020, compared to 1.35% (or 1.50% excluding PPP loans) at June 30, 2020.- Loans on forbearance or deferral declined by 48.8% to $290.8 million, or 5.78% of the total loan portfolio (or 6.46% excluding PPP loans) at September 30, 2020 from $567.9 million, 11.35% of the total loan portfolio (or 12.68% excluding PPP loans) at June 30, 2020.- Cost of average total deposits of 0.13% in the third quarter declined by 7 basis points from the second quarter.- Mortgage banking income of $4.3 million in the third quarter increased by 117.9% from the year-ago quarter, and 21.8% from the second quarter.- Launched our premier digital banking platform, one of the key initiatives and milestones of our RISE2020 initiative.- Board of Directors declared a quarterly cash dividend of $0.23 per share. HONOLULU, Oct. 28, 2020

HONOLULU, Oct. 28, 2020 /PRNewswire/ -- Central Pacific Financial Corp. (NYSE: CPF) (the "Company"), parent company of Central Pacific Bank, today reported net income in the third quarter of 2020 of $6.9 million, or fully diluted earnings per share ("EPS") of $0.24, compared to net income in the third quarter of 2019 of $14.6 million, or EPS of $0.51, and net income in the second quarter of 2020 of $9.9 million, or EPS of $0.35. Our operating results continue to be impacted by a higher provision for credit loss expense that was driven by the economic forecast under the current COVID-19 pandemic. During the third quarter of 2020, the Company recorded a provision for credit loss expense of $14.7 million, compared to $1.5 million in the third quarter of 2019 and $10.6 million in the second quarter of 2020.

"Central Pacific Financial Corp. continues to perform well with solid pre-tax, pre-provision earnings, strong mortgage banking income and the achievement of our RISE2020 milestones on digital banking," said Paul Yonamine, Chairman and Chief Executive Officer.

"We are actively managing the risks related to the COVID-19 pandemic, including building our credit loss reserves and raising Tier 2 capital through a recent issuance of subordinated debt. The Company is well positioned to continue to be a source of strength and liquidity for our customers, employees and shareholders as we all navigate this difficult economic environment," said Catherine Ngo, President.

On October 20, 2020, the Company completed a $55 million private placement of ten-year fixed-to-floating rate subordinated notes, which will be used to support regulatory capital ratios and for general corporate purposes. The Notes bear a fixed interest rate of 4.75% for the first five years and will reset quarterly thereafter for the remaining five years to the then current three-month Secured Overnight Financing Rate, as published by the Federal Reserve Bank of New York, plus 456 basis points.

On October 27, 2020, the Company's Board of Directors declared a quarterly cash dividend of $0.23 per share on its outstanding common shares. The dividend will be payable on December 15, 2020 to shareholders of record at the close of business on November 30, 2020.

Earnings HighlightsNet interest income for the third quarter of 2020 was $49.1 million, compared to $45.6 million in the year-ago quarter and $49.3 million in the previous quarter. Net interest margin for the third quarter of 2020 was 3.19%, compared to 3.30% in the year-ago quarter and 3.26% in the previous quarter. The increase in net interest income from the year-ago quarter was primarily due to growth in the loan portfolio, including loans originated under the PPP program, combined with lower rates paid on interest-bearing liabilities, partially offset by lower yields earned on the loan and investment securities portfolios. Net interest income for the third quarter of 2020 included $3.4 million in PPP net interest income and net loan fees, which are accreted into income over the term of the loans and accelerated when the loans are forgiven or paid-off. No PPP loans were forgiven during the third quarter. The declines in net interest margin, yields earned on the loans and investment securities portfolios and rates paid on interest-bearing liabilities from the year-ago and sequential quarters are primarily attributable to the historically low interest rate environment. During the third quarter of 2020, the Company had an average PPP loan balance of $544.7 million, which earned approximately 2.48% in net interest income and net loan fees. PPP loans accounted for approximately 2 basis points of the sequential quarter decrease in net interest margin.

Other operating income for the third quarter of 2020 totaled $11.6 million, which increased from $10.3 million in the year-ago quarter and $10.7 million in the previous quarter, primarily due to strong mortgage banking activity. Mortgage banking income increased by $2.4 million and $0.8 million from the year-ago and previous quarters, respectively. The increase in other operating income from the year-ago quarter was also attributable to higher income from bank-owned life insurance of $0.5 million. These increases were partially offset by lower service charges on deposit accounts of $0.7 million and lower other service charges and fees of $0.5 million, which were primarily attributable to lower transactional activity due to the pandemic. The Company also sold certain investment securities during the quarter at a loss of $0.4 million. The increase in other operating income from the previous quarter was primarily due to the aforementioned higher mortgage banking income, combined with higher other service charges and fees of $0.4 million and higher service charges on deposit accounts of $0.3 million. During the quarter, we reinstated certain service charges that were temporarily suspended in the previous quarter due to the pandemic. These increases were partially offset by the aforementioned loss on the sale of investment securities, combined with lower income from bank-owned life insurance of $0.2 million. The changes in income from bank-owned life insurance compared to the year-ago and previous quarters were primarily attributable to volatility in the equity markets.

Other operating expense for the third quarter of 2020 totaled $37.0 million, which increased from $34.9 million in the year-ago quarter and $36.4 million in the previous quarter. The increase from the year-ago quarter was primarily due to higher FDIC insurance assessment of $0.6 million (included in other), higher computer software expense of $0.4 million, and higher legal and professional services and advertising expenses of $0.3 million each. In addition, the Company recorded a provision for off-balance sheet credit exposures of $0.2 million, compared to a credit for off-balance sheet credit exposures of $0.5 million in the year-ago quarter. The Company also recognized costs totaling $0.3 million (included in other) related to the consolidation of three in-store branches with other existing nearby branches. These in-store branches had a small square footage which did not allow for adequate social distancing and have been closed since March 2020 due to the COVID-19 pandemic. A traditional branch is expected to be consolidated during the fourth quarter of 2020. The increase in other operating expense from the previous quarter was primarily due to higher equipment expense of $0.2 million and higher net occupancy expense of $0.2 million. These increases were partially offset by a lower provision for off-balance sheet credit exposures of $0.4 million and a lower net change in the directors' deferred compensation plan obligation of $0.3 million.

The efficiency ratio for the third quarter of 2020 was 60.93%, compared to 62.48% in the year-ago quarter and 60.76% in the previous quarter.

In the third quarter of 2020, the Company recorded income tax expense of $2.2 million, compared to $4.9 million in the year-ago quarter and $3.0 million in the previous quarter. The effective tax rate for the third quarter of 2020 was 24.3%, compared to 25.2% in the year-ago quarter and 23.0% in the previous quarter.

Balance Sheet HighlightsTotal assets at September 30, 2020 of $6.65 billion increased by $671.4 million, or 11.2% from September 30, 2019, and increased by $15.2 million, or 0.2% from June 30, 2020.

Total loans at September 30, 2020 of $5.03 billion increased by $662.8 million, or 15.2%, and $27.2 million, or 0.5% from September 30, 2019 and June 30, 2020, respectively. The year-over-year increase in total loans was driven by the origination of PPP loans totaling $528.6 million, net of deferred fees and costs, combined with increases in residential mortgage loans of $121.3 million, home equity loans of $58.5 million, construction loans of $21.6 million and commercial mortgage loans of $7.4 million, partially offset by decreases in the other commercial and consumer loan portfolios of $48.5 million and $26.0 million, respectively. The sequential quarter increase in total loans was primarily due to increases in home equity loans of $23.1 million, residential mortgage loans of $22.5 million, construction loans of $14.7 million and commercial mortgage loans of $11.1 million, partially offset by decreases in the consumer and other commercial loan portfolios of $26.6 million and $19.8 million, respectively. During the third quarter of 2020, the Company transferred $6.6 million in commercial and commercial real estate loans to a single borrower to loans-held-for-sale. In October 2020, the Company sold the loans at a loss of less than $0.1 million.

Total deposits at September 30, 2020 of $5.68 billion increased by $641.3 million, or 12.7% from September 30, 2019, and decreased by $115.8 million, or 2.0% from June 30, 2020. The deposit of PPP funds into both new and existing deposit accounts largely contributed to the increase in total deposits year-over-year. The sequential quarter decrease in total deposits was primarily attributable to the decreases in noninterest-bearing demand deposits of $88.5 million, savings and money market deposits of $64.6 million and total time deposits of $9.2 million, as some PPP funds were spent by clients during the current quarter. The decrease was offset by an increase in interest-bearing demand deposits of $46.6 million. Core deposits, which include demand deposits, savings and money market deposits, and time deposits less than $100,000, totaled $4.91 billion at September 30, 2020. This represents an increase of $758.1 million, or 18.2% from September 30, 2019, and a decrease of $109.2 million, or 2.2% from June 30, 2020. The Company's loan-to-deposit ratio was 88.6% at September 30, 2020, compared to 86.7% at September 30, 2019 and 86.4% at June 30, 2020.

Asset QualityNonperforming assets at September 30, 2020 totaled $13.2 million, or 0.20% of total assets, compared to $1.4 million, or 0.02% of total assets at September 30, 2019, and $4.7 million, or 0.07% of total assets at June 30, 2020. During the third quarter of 2020, the Company had $8.4 million in net additions to nonperforming assets, of which $7.6 million were to two borrowers consisting of commercial and commercial real estate loans that the Company believes are well-secured.

Loans delinquent for 90 days or more still accruing interest totaled $0.9 million at September 30, 2020, compared to $0.2 million and $1.2 million at September 30, 2019 and June 30, 2020, respectively.

Loans on payment forbearance or deferrals granted to borrowers impacted by the COVID-19 pandemic declined significantly to $290.8 million or 5.78% of the total loan portfolio (or 6.46% excluding PPP loans), as of September 30, 2020, compared to $567.9 million or 11.35% of the total loan portfolio (or 12.68% excluding PPP loans), as of June 30, 2020.

Net charge-offs in the third quarter of 2020 totaled $1.3 million, compared to net charge-offs of $1.6 million in the year-ago quarter, and net charge-offs of $2.9 million in the previous quarter.

In the third quarter of 2020, the Company recorded a provision for credit losses on loans of $14.7 million, compared to a provision of $1.5 million in the year-ago quarter and a provision of $10.6 million in the previous quarter. The higher provision for credit losses from the year-ago and sequential quarters was driven by models that utilize Hawaii-specific economic projections from a third party economic forecast. The allowance for credit losses, as a percentage of total loans at September 30, 2020 was 1.60%, compared to 1.10% at September 30, 2019 and 1.35% at June 30, 2020. Excluding the PPP loans, the allowance for credit losses, as a percentage of total loans at September 30, 2020 was 1.79%, compared to 1.50% at June 30, 2020.

CapitalTotal shareholders' equity was $543.9 million at September 30, 2020, compared to $525.2 million and $544.3 million at September 30, 2019 and June 30, 2020, 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 September 30, 2020, the Company's leverage capital, tier 1 risk-based capital, total risk-based capital, and common equity tier 1 ratios were 8.8%, 12.8%, 13.9%, and 11.6%, respectively, compared to 8.9%, 12.5%, 13.6%, and 11.4%, respectively, at June 30, 2020.

On October 20, 2020, the Company completed a $55 million private placement of ten-year fixed-to-floating rate subordinated notes, which have been structured to qualify initially as tier 2 capital for the Company for regulatory capital purposes.

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.centralpacificbank.com. Alternatively, investors may participate in the live call by dialing 1-877-505-7644. A playback of the call will be available through November 28, 2020 by dialing 1-877-344-7529 (passcode: 10149191) 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.centralpacificbank.com.

About Central Pacific Financial Corp.Central Pacific Financial Corp. is a Hawaii-based bank holding company with approximately $6.6 billion in assets. Central Pacific Bank, its primary subsidiary, operates 32 branches (four of which remain temporarily closed to protect the health and well-being of the Company's employees and customers from COVID-19) and 75 ATMs in the state of Hawaii, as of September 30, 2020. 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 initiative; 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 initiative; 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 Nine Months Ended

(Dollars in September 30,June 30, March 31, December 31, September 30,September 30, thousands,

except for per 2020 2020 2020 2019 2019 2020 2019 share amounts)

CONDENSED INCOME STATEMENT

Net interest $49,120 $49,259 $47,830 $47,934 $45,649 $146,209 $136,140 income

Provision for credit losses 14,652 10,640 9,329 2,098 1,532 34,621 4,219 [1]

Net interest income after provision for 34,468 38,619 38,501 45,836 44,117 111,588 131,921 credit losses [1]

Total other 11,563 10,692 8,886 9,768 10,266 31,141 32,033 operating income

Total other operating 36,972 36,427 36,240 36,242 34,934 109,639 105,389 expense

Income before 9,059 12,884 11,147 19,362 19,449 33,090 58,565 taxes

Income tax 2,200 2,967 2,821 5,165 4,895 7,988 14,440 expense

Net income 6,859 9,917 8,326 14,197 14,554 25,102 44,125

Basic earnings $0.24 $0.35 $0.30 $0.50 $0.51 $0.89 $1.54 per common share

Diluted earnings0.24 0.35 0.29 0.50 0.51 0.89 1.53 per common share

Dividends declared per 0.23 0.23 0.23 0.23 0.23 0.69 0.67 common share



PERFORMANCE RATIOS

Return on average assets 0.42 %0.61 %0.55 %0.95 %0.99 %0.53 %1.00 %(ROA) [2]

Return on average 4.99 7.34 6.21 10.70 11.11 6.17 11.58 shareholders' equity (ROE) [2]

Average shareholders' 8.36 8.36 8.93 8.87 8.87 8.54 8.67 equity to average assets

Efficiency ratio60.93 60.76 63.90 62.81 62.48 61.82 62.67 [1] [3]

Net interest 3.19 3.26 3.43 3.43 3.30 3.29 3.32 margin (NIM) [2]

Dividend payout 95.83 65.71 79.31 46.00 45.10 77.53 43.79 ratio [4]



SELECTED AVERAGE BALANCES

Average loans, including loans $5,016,955 $4,902,905 $4,462,347 $4,412,247 $4,293,455 $4,794,883 $4,183,703 held for sale

Average interest-earning6,160,381 6,073,361 5,621,043 5,595,142 5,527,532 5,952,357 5,492,860 assets

Average assets 6,574,492 6,468,129 6,007,237 5,978,797 5,907,207 6,350,696 5,858,224

Average deposits5,728,147 5,614,595 5,121,696 4,998,897 4,987,414 5,488,947 4,981,254

Average interest-bearing4,118,726 4,082,699 3,917,332 3,947,924 3,920,304 4,039,874 3,880,179 liabilities

Average shareholders' 549,378 540,802 536,721 530,464 524,083 542,326 507,930 equity

CENTRAL PACIFIC FINANCIAL CORP. AND SUBSIDIARIES

Financial Highlights

(Unaudited) TABLE 1 (CONTINUED)

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

(dollars in 2020 2020 2020 2019 2019 thousands)

REGULATORY CAPITAL

Central Pacific Financial Corp

Leverage $573,636 $571,976 $567,947 $568,529 $561,478 capital

Tier 1 risk-based 573,636 571,976 567,947 568,529 561,478 capital

Total risk-based 623,157 622,393 618,504 617,772 611,076 capital

Common equity 523,636 521,976 517,947 518,529 511,478 tier 1 capital

Central Pacific Bank

Leverage 559,750 559,461 556,895 556,077 550,913 capital

Tier 1 risk-based 559,750 559,461 556,895 556,077 550,913 capital

Total risk-based 609,203 609,811 607,402 605,320 600,511 capital

Common equity 559,750 559,461 556,895 556,077 550,913 tier 1 capital



REGULATORY CAPITAL RATIOS

Central Pacific Financial Corp

Leverage 8.8 %8.9 %9.5 %9.5 %9.5 %capital ratio

Tier 1 risk-based 12.8 12.5 12.3 12.6 12.6 capital ratio

Total risk-based 13.9 13.6 13.4 13.6 13.7 capital ratio

Common equity tier 1 capital11.6 11.4 11.3 11.5 11.5 ratio

Central Pacific Bank

Leverage 8.6 8.7 9.3 9.3 9.4 capital ratio

Tier 1 risk-based 12.5 12.2 12.1 12.3 12.4 capital ratio

Total risk-based 13.6 13.3 13.2 13.4 13.5 capital ratio

Common equity tier 1 capital12.5 12.2 12.1 12.3 12.4 ratio



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

(dollars in thousands, 2020 2020 2020 2019 2019 except for per share amounts)

BALANCE SHEET

Total loans, net of $5,030,626 $5,003,438 $4,511,998 $4,449,540 $4,367,862 deferred fees and costs

Total assets 6,648,142 6,632,972 6,108,548 6,012,672 5,976,716

Total deposits5,678,929 5,794,685 5,136,069 5,120,023 5,037,659

Long-term debt101,547 167,491 101,547 101,547 101,547

Total shareholders' 543,903 544,271 533,781 528,520 525,227 equity

Total shareholders' 8.18 %8.21 %8.74 %8.79 %8.79 %equity to total assets



ASSET QUALITY

Allowance for credit losses $80,542 $67,339 $59,645 $47,971 $48,167 ("ACL") [1]

Non-performing13,187 4,741 3,647 1,719 1,360 assets ("NPA")

ACL to total 1.60 %1.35 %1.32 %1.08 %1.10 %loans [1]

ACL to total loans, 1.79 %1.50 %1.32 %1.08 %1.10 %excluding PPP loans [1]

ACL to non-performing610.77 %1,420.35 %1,635.45 %2,790.63 %3,541.69 %assets [1]

NPA to total 0.20 %0.07 %0.06 %0.03 %0.02 %assets



PER SHARE OF COMMON STOCK OUTSTANDING

Book value per$19.30 $19.33 $18.99 $18.68 $18.47 common share

[1] The Company adopted ASU 2016-13, "Financial Instruments-Credit Losses"("CECL"), effective January 1, 2020 using the modified retrospective approach.Results for the reporting periods beginning after January 1, 2020 are presentedunder CECL, while prior period amounts continue to be reported under previousGAAP.

[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 onthe day count interest payment conventions at the interest-earning asset orinterest-bearing liability level (i.e. 30/360, actual/actual).

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

[4] Dividend payout ratio is defined as dividends declared per share divided bydiluted earnings per share.

CENTRAL PACIFIC FINANCIAL CORP. AND SUBSIDIARIES

Consolidated Balance Sheets

(Unaudited) TABLE 2

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

(Dollars in thousands, except 2020 2020 2020 2019 2019 share data)

ASSETS

Cash and due from financial $89,665 $102,132 $81,972 $78,418 $87,395 institutions

Interest-bearing deposits in other 5,489 41,201 11,021 24,554 7,803 financial institutions

Investment securities:

Available-for-sale debt securities, at1,166,319 1,168,594 1,184,023 1,126,983 1,186,875 fair value

Equity securities, 1,204 1,209 1,002 1,127 1,058 at fair value

Total investment 1,167,523 1,169,803 1,185,025 1,128,110 1,187,933 securities

Loans held for sale23,962 10,443 3,910 9,083 7,016

Loans, net of deferred fees and 5,030,626 5,003,438 4,511,998 4,449,540 4,367,862 costs

Less allowance for 80,542 67,339 59,645 47,971 48,167 credit losses [1]

Loans, net of allowance for 4,950,084 4,936,099 4,452,353 4,401,569 4,319,695 credit losses

Premises and 61,095 55,032 50,447 46,343 44,095 equipment, net

Accrued interest 21,478 19,590 16,851 16,500 16,220 receivable

Investment in unconsolidated 30,239 16,428 16,721 17,115 17,001 subsidiaries

Other real estate 128 - 100 164 466 owned

Mortgage servicing 12,429 12,771 13,345 14,718 15,058 rights

Bank-owned life 161,743 161,758 159,637 159,656 158,939 insurance

Federal Home Loan 17,468 9,229 18,109 14,983 17,183 Bank ("FHLB") stock

Right of use lease 44,896 50,039 51,198 52,348 52,588 asset

Other assets 61,943 48,447 47,859 49,111 45,324

Total assets $6,648,142$6,632,972$6,108,548$6,012,672$5,976,716

LIABILITIES AND SHAREHOLDERS' EQUITY

Deposits:

Noninterest-bearing$1,762,476$1,851,012$1,430,540$1,450,532$1,399,200demand

Interest-bearing 1,114,123 1,067,483 1,018,508 1,043,010 998,037 demand

Savings and money 1,881,104 1,945,744 1,693,280 1,600,028 1,593,738 market

Time 921,226 930,446 993,741 1,026,453 1,046,684

Total deposits 5,678,929 5,794,685 5,136,069 5,120,023 5,037,659

FHLB advances and other short-term 206,000 - 222,000 150,000 205,000 borrowings

Long-term debt 101,547 167,491 101,547 101,547 101,547

Lease liability 45,355 50,440 51,541 52,632 52,807

Other liabilities 72,369 76,050 63,561 59,950 54,476

Total liabilities 6,104,200 6,088,666 5,574,718 5,484,152 5,451,489

Shareholders' equity:

Preferred stock, no par value, authorized 1,000,000 shares; issued and outstanding: none - - - - - at September 30, 2020, June 30, 2020, March 31, 2020, December 31, 2019, and September 30, 2019

Common stock, no par value, authorized 185,000,000 shares; issued and outstanding: 28,179,798 at September 30, 2020,442,635 442,699 442,853 447,602 452,278 28,154,159 at June 30, 2020, 28,115,353 at March 31, 2020, 28,289,257 at December 31, 2019, and 28,441,341 at September 30, 2019

Additional paid-in 94,336 93,007 92,284 91,611 90,604 capital

Accumulated deficit(16,609) (16,986) (20,428) (19,102) (26,782) [1]

Accumulated other comprehensive 23,541 25,551 19,072 8,409 9,127 income

Total shareholders'543,903 544,271 533,781 528,520 525,227 equity

Non-controlling 39 35 49 - - interest

Total equity 543,942 544,306 533,830 528,520 525,227

Total liabilities and shareholders' $6,648,142$6,632,972$6,108,548$6,012,672$5,976,716equity

[1] The Company adopted ASU 2016-13, "Financial Instruments-Credit Losses"("CECL"), effective January 1, 2020 using the modified retrospective approach.Results for the reporting periods beginning after January 1, 2020 are presentedunder CECL, while prior period amounts continue to be reported under previousGAAP.

CENTRAL PACIFIC FINANCIAL CORP. AND SUBSIDIARIES

Consolidated Statements of Income

(Unaudited) TABLE 3

Three Months Ended Nine Months Ended

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

(Dollars in thousands, except per share data) 2020 2020 2020 2019 2019 2020 2019

Interest income:

Interest and fees on loans $45,751 $ 45,915 $ 46,204 $47,488 $45,861 $ 137,870$ 135,169

Interest and dividends on investment securities:

Taxable investment securities 5,233 6,310 6,757 6,486 7,178 18,300 22,968

Tax-exempt investment securities 621 599 668 656 708 1,888 2,388

Dividend income on investment securities 17 17 17 17 14 51 46

Interest on deposits in other financial 3 3 36 54 33 42 147 institutions

Dividend income on FHLB stock 128 106 132 456 186 366 508

Total interest income 51,753 52,950 53,814 55,157 53,980 158,517 161,226

Interest expense:

Interest on deposits:

Demand 115 114 176 202 207 405 598

Savings and money market 417 567 1,118 1,253 1,549 2,102 3,847

Time 1,284 2,124 3,268 3,653 4,432 6,676 14,391

Interest on short-term borrowings 71 74 508 1,139 1,130 653 3,146

Interest on long-term debt 746 812 914 976 1,013 2,472 3,104

Total interest expense 2,633 3,691 5,984 7,223 8,331 12,308 25,086

Net interest income 49,120 49,259 47,830 47,934 45,649 146,209 136,140

Provision for credit losses 14,652 10,640 9,329 2,098 1,532 34,621 4,219

Net interest income after provision for credit 34,468 38,619 38,501 45,836 44,117 111,588 131,921 losses

Other operating income:

Mortgage banking income 4,345 3,566 337 1,410 1,994 8,248 5,275

Service charges on deposit accounts 1,475 1,149 2,050 2,159 2,125 4,674 6,247

Other service charges and fees 3,345 2,916 4,897 4,095 3,894 11,158 11,018

Income from fiduciary activities 1,149 1,270 1,297 1,175 1,126 3,716 3,220

Equity in earnings of unconsolidated subsidiaries 104 104 26 92 86 234 165

Net gain (loss) on sales of investment securities (352) - - - 36 (352) 36

Income from bank-owned life insurance 1,179 1,424 (19) 594 645 2,584 2,511

Net gain (loss) on sales of foreclosed assets - (6) - (162) 17 (6) 17

Other (refer to Table 4) 318 269 298 405 343 885 3,544

Total other operating income 11,563 10,692 8,886 9,768 10,266 31,141 32,033

Other operating expense:

Salaries and employee benefits 20,729 20,622 20,347 21,207 20,631 61,698 61,083

Net occupancy 3,834 3,645 3,672 3,619 3,697 11,151 10,680

Equipment 1,234 1,043 1,097 1,142 1,067 3,374 3,211

Communication expense 856 774 837 906 1,008 2,467 2,645

Legal and professional services 2,262 2,238 2,028 2,123 1,933 6,528 5,231

Computer software expense 3,114 3,035 2,943 2,942 2,713 9,092 7,870

Advertising expense 1,020 923 1,092 527 711 3,035 2,134

Foreclosed asset expense 6 - 67 28 15 73 223

Other (refer to Table 4) 3,917 4,147 4,157 3,748 3,159 12,221 12,312

Total other operating expense 36,972 36,427 36,240 36,242 34,934 109,639 105,389

Income before income taxes 9,059 12,884 11,147 19,362 19,449 33,090 58,565

Income tax expense 2,200 2,967 2,821 5,165 4,895 7,988 14,440

Net income $6,859 $ 9,917 $ 8,326 $14,197 $14,554 $ 25,102 $ 44,125

Per common share data:

Basic earnings per share $0.24 $ 0.35 $ 0.30 $0.50 $0.51 $ 0.89 $ 1.54

Diluted earnings per share 0.24 0.35 0.29 0.50 0.51 0.89 1.53

Cash dividends declared 0.23 0.23 0.23 0.23 0.23 0.69 0.67

Basic weighted average shares outstanding 28,060,02028,040,80228,126,40028,259,29428,424,89828,075,68428,575,369

Diluted weighted average shares outstanding 28,111,66428,095,23028,277,75328,448,24328,602,33828,172,15328,762,057



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

Other Operating Income and Other Operating Expense - Detail

(Unaudited) TABLE 4

The following table sets forth the components of other operating income - other for the periods indicated:

Three Months Ended Nine Months Ended

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

(Dollars in thousands) 2020 2020 2020 2019 2019 2020 2019

Other operating income - other:

Income recovered on nonaccrual $47 $37 $23 $80 $73 $107$240 loans previously charged-off

Other recoveries 22 26 40 36 42 88 94

Commissions on sale of checks 73 56 81 75 75 210 234

Gain on sale of MasterCard - - - - - - 2,555 stock

Other 176 150 154 214 153 480 421

Total other operating income $318 $269$298$405 $343 $885$3,544- other



The following table sets forth the components of other operating expense - other for the periods indicated:

Three Months Ended Nine Months Ended

SeptemberJune 30,March DecemberSeptemberSeptember 30, 30, 31, 31, 30,

(Dollars in thousands) 2020 2020 2020 2019 2019 2020 2019

Other operating expense - other:

Charitable contributions $ 12 $10 $187 $122 $ 230 $209 $559

FDIC insurance assessment 649 475 - - 5 1,124 868

Miscellaneous loan 497 399 300 361 274 1,196 885 expenses

ATM and debit card 573 584 634 672 660 1,791 1,930 expenses

Armored car expenses 192 229 294 186 220 715 629

Entertainment and 132 165 280 495 323 577 1,576 promotions

Stationery and supplies 226 220 248 305 240 694 744

Directors' fees and 213 196 241 246 242 650 722 expenses

Directors' deferred (237) 103 (1,483)148 (155) (1,617) 413 compensation plan expense

Provision (credit) for residential mortgage loan - - - - - - (403) repurchase losses

Provision for off-balance 221 573 1,798 (160) (465) 2,592 189 sheet credit exposures

Branch consolidation costs321 - - - - 321 -

Other 1,118 1,193 1,658 1,373 1,585 3,969 4,200

Total other operating $ 3,917$4,147$4,157$3,748$ 3,159$12,221$12,312expense - other



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 5

Three Months Ended Three Months Ended Three Months Ended

September 30, 2020 June 30, 2020 September 30, 2019

Average Average Average Average Average Average

(Dollars in thousands)Balance Yield/ Interest Balance Yield/ Interest Balance Yield/ Interest Rate Rate Rate

ASSETS

Interest-earning assets:

Interest-bearing deposits in other $12,262 0.09% $3 $15,777 0.10% $3 $6,295 2.05 % $33 financial institutions

Investment securities, excluding valuation allowance:

Taxable 1,029,987 2.04 5,250 1,042,441 2.43 6,327 1,093,352 2.63 7,192

Tax-exempt 88,749 3.54 786 100,485 3.02 758 117,784 3.04 896

Total investment 1,118,736 2.16 6,036 1,142,926 2.48 7,085 1,211,136 2.67 8,088 securities

Loans, including loans5,016,955 3.64 45,751 4,902,905 3.76 45,915 4,293,455 4.25 45,861 held for sale

Federal Home Loan Bank12,428 4.12 128 11,753 3.62 106 16,646 4.46 186 stock

Total interest-earning6,160,381 3.36 51,918 6,073,361 3.51 53,109 5,527,532 3.90 54,168 assets

Noninterest-earning 414,111 394,768 379,675 assets

Total assets $6,574,492 $6,468,129 $5,907,207



LIABILITIES AND EQUITY

Interest-bearing liabilities:

Interest-bearing $1,092,9760.04% $115 $1,056,8850.04% $114 $1,002,8750.08 % $207 demand deposits

Savings and money 1,910,971 0.09 417 1,856,621 0.12 567 1,582,795 0.39 1,549 market deposits

Time deposits under 160,634 0.57 232 161,874 0.65 261 167,331 0.69 293 $100,000

Time deposits $100,000769,030 0.54 1,052 807,276 0.93 1,863 874,192 1.88 4,139 and over

Total interest-bearing3,933,611 0.18 1,816 3,882,656 0.29 2,805 3,627,193 0.68 6,188 deposits

Federal Home Loan Bank advances and other 79,984 0.35 71 63,104 0.48 74 191,564 2.34 1,130 short-term borrowings

Long-term debt 105,131 2.82 746 136,939 2.38 812 101,547 3.96 1,013

Total interest-bearing4,118,726 0.25 2,633 4,082,699 0.36 3,691 3,920,304 0.84 8,331 liabilities

Noninterest-bearing 1,794,536 1,731,939 1,360,221 deposits

Other liabilities 111,851 112,687 102,599

Total liabilities 6,025,113 5,927,325 5,383,124

Shareholders' equity 549,378 540,802 524,083

Non-controlling 1 2 - interest

Total equity 549,379 540,804 524,083

Total liabilities and $6,574,492 $6,468,129 $5,907,207 equity



Net interest income $49,285 $49,418 $45,837



Interest rate spread 3.11% 3.15% 3.06 %



Net interest margin 3.19% 3.26% 3.30 %







CENTRAL PACIFIC FINANCIAL CORP. AND SUBSIDIARIES

Average Balances, Interest Income & Expense, Yields and Rates (Taxable Equivalent)

(Unaudited) TABLE 6

Nine Months Ended Nine Months Ended

September 30, 2020 September 30, 2019

Average Average Average Average

(Dollars in thousands)Balance Yield/ Interest Balance Yield/ Interest Rate Rate

ASSETS

Interest-earning assets:

Interest-bearing deposits in other $13,038 0.43% $42 $8,540 2.30% $147 financial institutions

Investment securities, excluding valuation allowance:

Taxable 1,033,362 2.37 18,351 1,147,217 2.67 23,014

Tax-exempt 98,153 3.25 2,390 137,750 2.93 3,023

Total investment 1,131,515 2.44 20,741 1,284,967 2.70 26,037 securities

Loans, including loans4,794,883 3.84 137,870 4,183,703 4.32 135,169 held for sale

Federal Home Loan Bank12,921 3.78 366 15,650 4.33 508 stock

Total interest-earning5,952,357 3.57 159,019 5,492,860 3.94 161,861 assets

Noninterest-earning 398,339 365,364 assets

Total assets $6,350,696 $5,858,224



LIABILITIES AND EQUITY

Interest-bearing liabilities:

Interest-bearing $1,054,6920.05% $405 $972,316 0.08% $598 demand deposits

Savings and money 1,806,829 0.16 2,102 1,544,759 0.33 3,847 market deposits

Time deposits under 162,255 0.64 777 172,204 0.69 884 $100,000

Time deposits $100,000807,346 0.98 5,899 921,003 1.96 13,507 and over

Total interest-bearing3,831,122 0.32 9,183 3,610,282 0.70 18,836 deposits

Federal Home Loan Bank advances and other 94,248 0.93 653 168,350 2.50 3,146 short-term borrowings

Long-term debt 114,504 2.88 2,472 101,547 4.09 3,104

Total interest-bearing4,039,874 0.41 12,308 3,880,179 0.86 25,086 liabilities

Noninterest-bearing 1,657,825 1,370,972 deposits

Other liabilities 110,669 99,143

Total liabilities 5,808,368 5,350,294

Shareholders' equity 542,326 507,930

Non-controlling 2 - interest

Total equity 542,328 507,930

Total liabilities and $6,350,696 $5,858,224 equity



Net interest income $146,711 $136,775



Interest rate spread 3.16% 3.08%



Net interest margin 3.29% 3.32%







CENTRAL PACIFIC FINANCIAL CORP. AND SUBSIDIARIES

Loans by Geographic Distribution

(Unaudited) TABLE 7

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

(Dollars in 2020 2020 2020 2019 2019 thousands)

HAWAII:

Commercial, financial and agricultural:

SBA Paycheck Protection $485,286 $483,827 $- $- $- Program

Other 414,754 431,887 454,817 454,582 439,296

Real estate:

Construction 118,247 103,518 100,617 95,854 96,661

Residential 1,680,060 1,657,558 1,632,536 1,599,801 1,558,735 mortgage

Home equity 534,056 510,962 504,686 490,734 475,565

Commercial 914,144 912,422 917,886 909,798 909,987 mortgage

Consumer 342,203 350,414 367,960 373,451 369,511

Leases - - - - 31

Total loans, net of 4,488,750 4,450,588 3,978,502 3,924,220 3,849,786 deferred fees and costs

Allowance for(71,575) (59,765) (51,646) (42,592) (42,286) credit losses

Loans, net of allowance for$4,417,175$4,390,823$3,926,856$3,881,628$3,807,500credit losses



U.S. MAINLAND: [1]

Commercial, financial and agricultural:

SBA Paycheck Protection $43,295 $42,581 $- $- $- Program

Other 113,316 115,971 120,507 115,722 137,316

Real estate:

Construction - - - - -

Residential - - - - - mortgage

Home equity - - - - -

Commercial 227,121 217,747 221,251 213,617 223,925 mortgage

Consumer 158,144 176,551 191,738 195,981 156,835

Leases - - - - -

Total loans, net of 541,876 552,850 533,496 525,320 518,076 deferred fees and costs

Allowance for(8,967) (7,574) (7,999) (5,379) (5,881) credit losses

Loans, net of allowance for$532,909 $545,276 $525,497 $519,941 $512,195 credit losses



TOTAL:

Commercial, financial and agricultural:

SBA Paycheck Protection $528,581 $526,408 $- $- $- Program

Other 528,070 547,858 575,324 570,304 576,612

Real estate:

Construction 118,247 103,518 100,617 95,854 96,661

Residential 1,680,060 1,657,558 1,632,536 1,599,801 1,558,735 mortgage

Home equity 534,056 510,962 504,686 490,734 475,565

Commercial 1,141,265 1,130,169 1,139,137 1,123,415 1,133,912 mortgage

Consumer 500,347 526,965 559,698 569,432 526,346

Leases - - - - 31

Total loans, net of 5,030,626 5,003,438 4,511,998 4,449,540 4,367,862 deferred fees and costs

Allowance for(80,542) (67,339) (59,645) (47,971) (48,167) credit losses

Loans, net of allowance for$4,950,084$4,936,099$4,452,353$4,401,569$4,319,695credit losses



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

CENTRAL PACIFIC FINANCIAL CORP. AND SUBSIDIARIES

Deposits

(Unaudited) TABLE 8

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

(Dollars in thousands) 2020 2020 2020 2019 2019

Noninterest-bearing $1,762,476$1,851,012$1,430,540$1,450,532$1,399,200demand

Interest-bearing demand1,114,123 1,067,483 1,018,508 1,043,010 998,037

Savings and money 1,881,104 1,945,744 1,693,280 1,600,028 1,593,738 market

Time deposits less than157,051 159,739 162,399 165,755 165,687 $100,000

Core deposits 4,914,754 5,023,978 4,304,727 4,259,325 4,156,662



Government time 500,762 509,927 523,343 533,088 552,470 deposits

Other time deposits 95,918 96,633 100,047 107,550 103,959 $100,000 to $250,000

Other time deposits 167,495 164,147 207,952 220,060 224,568 greater than $250,000

Total time deposits 764,175 770,707 831,342 860,698 880,997 $100,000 and over

Total deposits $5,678,929$5,794,685$5,136,069$5,120,023$5,037,659

CENTRAL PACIFIC FINANCIAL CORP. AND SUBSIDIARIES

Nonperforming Assets, Past Due and Restructured Loans

(Unaudited) TABLE 9

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

(Dollars in 2020 2020 2020 2019 2019 thousands)

Nonaccrual loans: [1]

Commercial, financial and $1,536 $934 $667 $467 $- agricultural

Real estate:

Residential 4,032 3,215 2,287 979 799 mortgage

Home equity 533 538 545 92 95

Commercial 6,889 - - - - mortgage

Consumer 69 54 48 17 -

Total nonaccrual 13,059 4,741 3,547 1,555 894 loans

Other real estate owned ("OREO"):

Real estate:

Residential 128 - - - 302 mortgage

Home equity - - 100 164 164

Total OREO 128 - 100 164 466

Total nonperforming 13,187 4,741 3,647 1,719 1,360 assets ("NPAs")

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

Real estate:

Residential 588 726 1,221 724 - mortgage

Consumer 321 444 352 286 235

Total loans delinquent for 90 909 1,170 1,573 1,010 235 days or more still accruing interest

Restructured loans still accruing interest: [1]

Commercial, financial and 137 172 113 135 157 agricultural

Real estate:

Residential 5,178 5,290 5,431 5,502 6,717 mortgage

Commercial 1,825 1,888 1,709 1,839 1,985 mortgage

Consumer 214 145 - - -

Total restructured loans still 7,354 7,495 7,253 7,476 8,859 accruing interest

Total NPAs and loans delinquent for 90 days or more and $21,450 $13,406 $12,473 $10,205 $10,454 restructured loans still accruing interest



Total nonaccrual loans as a 0.26 %0.09 %0.08 %0.03 %0.02 %percentage of total loans

Total NPAs as a percentage of 0.26 %0.09 %0.08 %0.04 %0.03 %total loans and OREO

Total NPAs and loans delinquent for 90 days or more still 0.28 %0.12 %0.12 %0.06 %0.04 %accruing interest as a percentage of total loans and OREO

Total NPAs, loans delinquent for 90 days or more and restructured loans still accruing 0.43 %0.27 %0.28 %0.23 %0.24 %interest as a percentage of total loans and OREO



Quarter-to-quarter changes in NPAs:

Balance at beginning of $4,741 $3,647 $1,719 $1,360 $1,258 quarter

Additions 9,060 1,771 2,056 695 112

Reductions:

Payments (393) (367) (60) (34) (51)

Return to accrual - (123) - - (2) status

Sales of NPAs - (94) - (302) -

Charge-offs, valuation and (221) (93) (68) - 43 other adjustments

Total reductions (614) (677) (128) (336) (10)

Balance at end of $13,187 $4,741 $3,647 $1,719 $1,360 quarter

[1] Section 4013 of the CARES Act and the revised Interagency Statement arebeing applied to loan modifications related to the COVID-19 pandemic aseligible and applicable. These loan modifications are not included in thedelinquent or restructured loan balances presented above.

CENTRAL PACIFIC FINANCIAL CORP. AND SUBSIDIARIES

Allowance for Credit Losses on Loans

(Unaudited) TABLE 10

Three Months Ended Nine Months Ended

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

(Dollars in 2020 2020 2020 2019 2019 2020 2019 thousands)

Allowance for credit losses ("ACL"):

ACL at beginning of$67,339 $59,645 $47,971 $48,167 $48,267 $47,971 $47,916 period

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

Adjusted ACL at beginning67,339 59,645 51,537 48,167 48,267 51,537 47,916 of period



Provision for credit 14,465 10,640 9,329 2,098 1,532 34,434 4,219 losses on loans [1]



Charge-offs:

Commercial, financial 810 1,103 437 379 797 2,350 2,099 and agricultural

Real estate:

Residential 11 52 - - - 63 - mortgage

Home equity - - - - 5 - 5

Commercial 75 - - - - 75 - mortgage

Consumer 1,492 2,626 2,217 2,723 1,832 6,335 5,542

Leases - - - - - - -

Total 2,388 3,781 2,654 3,102 2,634 8,823 7,646 charge-offs



Recoveries:

Commercial, financial 321 305 342 264 362 968 910 and agricultural

Real estate:

Construction- - 131 6 6 131 604

Residential 13 20 181 26 104 214 498 mortgage

Home equity - - 31 - 24 31 42

Commercial 12 1 2 - - 15 25 mortgage

Consumer 780 509 746 512 506 2,035 1,599

Total 1,126 835 1,433 808 1,002 3,394 3,678 recoveries

Net charge-offs 1,262 2,946 1,221 2,294 1,632 5,429 3,968 (recoveries)

ACL at end $80,542 $67,339 $59,645 $47,971 $48,167 $80,542 $48,167 of period



Average loans, net of deferred $5,016,955 $4,902,905 $4,462,347 $4,412,247 $4,293,455 $4,794,883 $4,183,703 fees and costs



Annualized ratio of net charge-offs 0.10 %0.24 %0.11 %0.21 %0.15 %0.15 %0.13 %to average loans



[1] The Company recorded a reserve on accrued interest receivable 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 accrued interest receivable with the offset to provision for credit losses. The provision for credit losses presented in this table excludes the provision for credit losses on accrued interest receivable of $0.187 million.

CENTRAL PACIFIC FINANCIAL CORP. AND SUBSIDIARIES

Reconciliation of Non-GAAP Financial Measures

(Unaudited) TABLE 11

The Company believes that pre-tax, pre-provision ("PTPP") earnings, 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 PTPP earnings and our PTPP earnings to average assets for each of the periods indicated:

Three Months Ended Nine Months Ended

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

(Dollars in thousands) 2020 2020 2020 2019 2019 2020 2019

Net income $6,859 $9,917 $8,326 $ 14,197 $14,554 $25,102 $44,125

Add: Income tax expense2,200 2,967 2,821 5,165 4,895 7,988 14,440

Income before taxes 9,059 12,884 11,147 19,362 19,449 33,090 58,565

Add: Provision for 14,652 10,640 9,329 2,098 1,532 34,621 4,219 credit losses

PTPP earnings $23,711 $23,524 $20,476 $ 21,460 $20,981 $67,711 $62,784



Three Months Ended Nine Months Ended

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

(Dollars in thousands) 2020 2020 2020 2019 2019 2020 2019

Net income $6,859 $9,917 $8,326 $ 14,197 $14,554 $25,102 $44,125

Net income (annualized)27,436 39,668 33,304 56,788 58,216 33,469 58,833

PTPP earnings 23,711 23,524 20,476 21,460 20,981 67,711 62,784

PTPP earnings 94,844 94,096 81,904 85,840 83,924 90,281 83,712 (annualized)

Average assets 6,574,492 6,468,129 6,007,237 5,978,797 5,907,207 6,350,696 5,858,224

Return on average 0.42 %0.61 %0.55 %0.95 %0.99 %0.53 %1.00 %assets

PTPP earnings to 1.44 %1.45 %1.36 %1.44 %1.42 %1.42 %1.43 %average assets

The following table sets forth a reconciliation of the ratios of our allowance for credit losses ("ACL") to total loans and ACL to total loans, excluding PPP loans, for each of the periods indicated:

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

(Dollars in 2020 2020 2020 2019 2019 thousands)

Allowance for credit$80,542 $67,339 $59,645 $47,971 $48,167 losses ("ACL")



Total $5,030,626 $5,003,438 $4,511,998 $4,449,540 $4,367,862 loans

Less: SBA Paycheck Protection528,581 526,408 - - - Program ("PPP loans")

Total loans, $4,502,045 $4,477,030 4,511,998 4,449,540 $4,367,862 excluding PPP loans



Ratio of ACL to 1.60 %1.35 %1.32 %1.08 %1.10 %total loans

Ratio of ACL to total 1.79 %1.50 %1.32 %1.08 %1.10 %loans, excluding PPP loans

The following table sets forth a reconciliation of the ratios of our loans on payment forbearance or deferrals to total loans and loans on payment forbearance or deferrals to total loans, excluding PPP loans, for each of the periods indicated:

September June 30, 30,

2020 2020

Loans on payment forbearance or deferrals $290,841 $567,860

Total loans 5,030,626 5,003,438

Total loans, excluding PPP loans 4,502,045 4,477,030

Ratio of loans on payment forbearance or deferrals 5.78 %11.35 %to total loans

Ratio of loans on payment forbearance or deferrals 6.46 %12.68 %to total loans, excluding PPP loans



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SOURCE Central Pacific Financial Corp.