PR Newswire | Jan 26, 2022 06:31AM EST

BANKING-AS-A-SERVICE INITIATIVE TO DRIVE MAINLAND EXPANSION

01/26 05:30 CST

CENTRAL PACIFIC FINANCIAL ANNOUNCES RECORD EARNINGS AND LAUNCHES NEW BANKING-AS-A-SERVICE INITIATIVE TO DRIVE MAINLAND EXPANSION- Net income of $22.3 million, or $0.80 per diluted share for the quarter. Net income of $79.9 million, or $2.83 per diluted share for the year.- ROA of 1.22% and ROE of 16.05% for the quarter. ROA of 1.13% and ROE of 14.38% for the year.- Board of Directors increased quarterly cash dividend by 4.0% to $0.26 per share.- Board of Directors approved new $30 million share repurchase program. Repurchased 305,594 shares of the Company's common stock, at a total cost of $8.4 million in the fourth quarter.- Core loans increased by $183.2 million, or 3.8%, in the fourth quarter, while PPP loans decreased by $127.3 million for a net increase in total loans of $55.9 million, or 1.1%, from the third quarter of 2021.- Core deposits of $6.16 billion increased by $66.0 million, or 1.1%, from the third quarter of 2021. Total deposits of $6.64 billion increased by $123.3 million, or 1.9%, from the third quarter of 2021.- Cost of average total deposits was 0.06% in the fourth quarter. HONOLULU, Jan. 26, 2022

HONOLULU, Jan. 26, 2022 /PRNewswire/ -- Central Pacific Financial Corp. (NYSE: CPF) (the "Company"), parent company of Central Pacific Bank (the "Bank"), today reported record net income for the fourth quarter and the 2021 year. Net income for the quarter was $22.3 million, or fully diluted earnings per share ("EPS") of $0.80, compared to net income in the fourth quarter of 2020 of $12.2 million, or EPS of $0.43, and net income in the third quarter of 2021 of $20.8 million, or EPS of $0.74. For the year, net income was $79.9 million, or EPS of $2.83, compared to net income of $37.3 million, or EPS of $1.32 for all of 2020. Pre-tax net income was $29.9 million and $105.7 million for the fourth quarter and the 2021 year, which represents the best pre-tax quarter and full year results since 2007.

The Company is also announcing the launch of a new Banking-as-a-Service ("BaaS") initiative with the goal of expanding the Company both in and beyond Hawaii by investing in or collaborating with leading fintech companies. The BaaS initiative is being developed based on the successful product development and launch strategies used in the Company's new Shaka digital product. Shaka, Hawaii's first all-digital checking account, was launched with a VIP waitlist campaign and the largest social media influencer campaign in Hawaii's history. Since the product launch on November 8, 2021, over 3,300 Shaka accounts have been opened.

Beginning in the first quarter of 2022, the Company will continue its BaaS initiatives with an equity investment in Swell, a new fintech company. Swell plans to launch a consumer banking app that combines checking, credit and more into one integrated account, and Central Pacific Bank will serve as the bank sponsor. There will also be a collaboration between the Company, Swell and Elevate Credit (NYSE:ELVT), a leading provider of digital lending solutions. Swell is scheduled to launch its first product in mid-2022.

"We are very pleased with our record earnings and an extremely successful 2021," said Paul Yonamine, Chairman and Chief Executive Officer. "We will maintain our commitment to be a top community bank in Hawaii, combining the latest in digital convenience with our strong tradition of customer service. Today's announcement of our BaaS initiatives, represents an exciting new chapter of our Company as we expand beyond the Hawaii market which we believe will drive revenue growth and create even more shareholder value."

On January 25, 2022, the Company's Board of Directors declared a quarterly cash dividend of $0.26 per share on its outstanding common shares. This represents a 4.0% increase from the dividend paid of $0.25 per share in the fourth quarter of 2021. The dividend will be payable on March 15, 2022 to shareholders of record at the close of business on February 28, 2022.

On January 25, 2022, the Company's Board of Directors authorized the repurchase of up to $30 million of its common stock from time to time in the open market or in privately negotiated transactions, pursuant to a newly authorized share repurchase program (the "Repurchase Plan"). The Repurchase Plan replaces and supersedes in its entirety the share repurchase program previously approved by the Company's Board of Directors, which had $6.3 million in remaining repurchase authority as of December 31, 2021. During the fourth quarter of 2021, the Company repurchased 305,594 shares of common stock, at a total cost of $8.4 million, or an average cost per share of $27.64. During the year ended December 31, 2021, the Company returned $45.6 million in capital to its shareholders through cash dividends and share repurchases.

Earnings Highlights

Net interest income for the fourth quarter of 2021 was $53.1 million, compared to $51.5 million in the year-ago quarter and $56.1 million in the previous quarter. Net interest margin for the fourth quarter of 2021 was 3.08%, compared to 3.32% in the year-ago quarter and 3.31% in the previous quarter. The sequential quarter decrease in net interest income and net interest margin is primarily due to lower net interest income and loan fees on PPP loans, and lower yields on core loans, partially offset by higher average loan and investment security balances. Net interest income for the fourth quarter of 2021 included $4.7 million in net interest income and loan fees on PPP loans, compared to $8.6 million in the previous quarter. Net deferred fees on PPP loans totaled $3.5 million at December 31, 2021, compared to $7.9 million at September 30, 2021, respectively. Additional information on average balances, interest income and expenses and yields and rates is presented in Tables 4 and 5.

In the fourth quarter of 2021, the Company recorded a credit to the provision for credit losses of $7.7 million, compared to a provision of $4.9 million in the year-ago quarter and a credit to the provision of $2.6 million in the previous quarter. The credit to the provision for credit losses in the fourth quarter of 2021 was driven by continued improvements in the economic forecast, net recoveries during the current quarter and strong asset quality as the State of Hawaii continues to recover from the COVID-19 pandemic.

Other operating income for the fourth quarter of 2021 totaled $11.6 million, compared to $14.1 million in the year-ago quarter and $10.3 million in the previous quarter. The decrease from the year-ago quarter was primarily due to lower mortgage banking income of $3.5 million, partially offset by higher other service charges and fees of $1.3 million. The increase from the previous quarter was primarily due to higher mortgage banking income and bank-owned life insurance of $0.6 million and $0.4 million, respectively. Additional information on other operating income is presented in Table 3.

Other operating expense for the fourth quarter of 2021 totaled $42.4 million, compared to $44.7 million in the year-ago quarter and $41.3 million in the previous quarter. Other operating expense in the current quarter included $1.1 million in severance expense and $0.4 million in costs related to the consolidation of our Kapalama Branch on Oahu. The Company plans to consolidate three additional branches in 2022. The decrease in other operating expense from the year-ago quarter was primarily due to $3.9 million in nonrecurring expenses (included in other) in the year-ago quarter, which included: branch consolidation costs of $1.3 million, litigation settlements of $0.8 million, Federal Home Loan Bank advance prepayment fee of $0.7 million, loss on disposal of fixed assets of $0.6 million and other nonrecurring expenses totaling $0.5 million. The increase in other operating expense from the previous quarter is primarily due to branch consolidation costs, higher deferred compensation plan expenses and higher promotions expense of $0.4 million each. Additional information on other operating expense is presented in Table 3.

The efficiency ratio for the fourth quarter of 2021 was 65.61%, compared to 68.20% in the year-ago quarter and 62.32% in the previous quarter.

The effective tax rate for the fourth quarter of 2021 was 25.4%, compared to 23.7% in the year-ago quarter and 24.7% in the previous quarter.

Balance Sheet Highlights

Total assets at December 31, 2021 of $7.42 billion increased from $6.59 billion at December 31, 2020, and increased from $7.30 billion at September 30, 2021.

Total loans, net of deferred fees and costs, at December 31, 2021 of $5.10 billion increased from $4.96 billion at December 31, 2020, and increased from $5.05 billion at September 30, 2021. The sequential quarter increase in total loans included a net increase in core loans (or non-PPP loans) of $183.2 million led by residential mortgage loan growth of $127.3 million, offset by a decline in PPP loans of $127.3 million due to SBA forgiveness and payments. Loans on forbearance or deferral totaled $0.4 million, or less than 1% of total loans at December 31, 2021. Loans by geographic distribution are summarized in Table 6.

Total deposits at December 31, 2021 of $6.64 billion increased from $5.80 billion at December 31, 2020, and increased from $6.52 billion at September 30, 2021. Core deposits, which include demand deposits, savings and money market deposits and time deposits up to $250,000, totaled $6.16 billion at December 31, 2021, and increased by $66.0 million from September 30, 2021. Non-core deposits increased by $57.3 million from September 30, 2021. The Company's loan-to-deposit ratio was 76.8% at December 31, 2021, compared to 77.4% at September 30, 2021. Core deposit and total deposit balances are summarized in Table 7.

Asset Quality

Nonperforming assets at December 31, 2021 totaled $5.9 million, or 0.08% of total assets, compared to $6.2 million, or 0.09% of total assets at December 31, 2020, and $7.2 million, or 0.10% of total assets at September 30, 2021. Additional information on nonperforming assets, past due and restructured loans is presented in Table 8.

Net recoveries in the fourth quarter of 2021 totaled $0.9 million, compared to net charge-offs of $1.8 million in the year-ago quarter, and net charge-offs of $0.2 million in the previous quarter.

The allowance for credit losses, as a percentage of total loans at December 31, 2021 was 1.33%, compared to 1.68% at December 31, 2020 and 1.48% at September 30, 2021. Excluding PPP loans, the allowance for credit losses, as a percentage of core loans at December 31, 2021 was 1.36%, compared to 1.55% at September 30, 2021. Additional information on net charge-offs and recoveries and the allowance for credit losses is presented in Tables 9 and 10.

Capital

Total shareholders' equity was $558.2 million at December 31, 2021, compared to $546.7 million and $555.4 million at December 31, 2020 and September 30, 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 December 31, 2021, the Company's leverage capital, tier 1 risk-based capital, total risk-based capital, and common equity tier 1 ratios were 8.5%, 12.2%, 14.5%, and 11.2%, respectively, compared to 8.5%, 12.2%, 14.6%, and 11.2%, respectively, at September 30, 2021.

Non-GAAP Financial Measures

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

Conference Call

The Company's management will host a conference call today at 1:00 p.m. Eastern Time (8:00 a.m. Hawaii Time) to discuss the quarterly results. Individuals are encouraged to listen to the live webcast of the presentation by visiting the investor relations page of the Company's website at http://ir.cpb.bank. Alternatively, investors may participate in the live call by dialing 1-844-200-6205 (access code: 319900). A playback of the call will be available through February 25, 2022 by dialing 1-866-813-9403 (access code: 961340) 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 $7.4 billion in assets as of December 31, 2021. Central Pacific Bank, its primary subsidiary, operates 30 branches and 69 ATMs in the state of Hawaii. For additional information, please visit the Company's website at http://www.cpb.bank.

**********

Forward-Looking Statements

This 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 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; our ability to successfully implement our Banking-as-a-Service initiatives, including adoption of the initiatives by customers and risks faced by any of our bank collaborations including reputational and regulatory risk; 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 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 viruses and diseases, including COVID-19) on the Company's business and operations and on tourism, the military, and other major industries operating within the Hawaii market and any other markets in which the Company does business; deterioration or malaise in domestic economic conditions, including any destabilization in the financial industry and deterioration of the real estate market, as well as the impact of declining levels of consumer and business confidence in the state of the economy in general and in financial institutions in particular; changes in estimates of future reserve requirements based upon the periodic review thereof under relevant regulatory and accounting requirements; the impact of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the "Dodd-Frank Act"), changes in capital standards, other regulatory reform and federal and state legislation, including but not limited to regulations promulgated by the Consumer Financial Protection Bureau (the "CFPB"), government-sponsored enterprise reform, and any related rules and regulations which affect our business operations and competitiveness; the costs and effects of legal and regulatory developments, including legal proceedings or regulatory or other governmental inquiries and proceedings and the resolution thereof, the results of regulatory examinations or reviews and the effect of, and our ability to comply with, any 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 personnel, organization, compensation and benefit plans; and our success at managing the risks involved in the foregoing items.

For further information with respect to factors that could cause actual results to materially differ from the expectations or projections stated in the 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 Year Ended

(Dollars in thousands, Dec 31, Sep 30, Jun 30, Mar 31, Dec 31, Dec 31,

except for per share amounts) 2021 2021 2021 2021 2020 2021 2020

CONDENSED INCOME STATEMENT

Net interest income $ 53,096 $ 56,086 $ 52,061 $ 49,804 $ 51,474 $ 211,047 $ 197,683

(Credit) provision for credit losses [1] (7,692) (2,635) (3,443) (821) 4,898 (14,591) 42,111

Total other operating income 11,566 10,253 10,530 10,711 14,057 43,060 45,198

Total other operating expense [1] 42,422 41,345 41,433 37,846 44,690 163,046 151,737

Income tax expense 7,605 6,814 5,887 5,452 3,772 25,758 11,760

Net income 22,327 20,815 18,714 18,038 12,171 79,894 37,273

Basic earnings per common share $ 0.80$ 0.74$ 0.66$ 0.64$ 0.43$ 2.85$ 1.33

Diluted earnings per common share 0.80 0.74 0.66 0.64 0.43 2.83 1.32

Dividends declared per common share 0.25 0.24 0.24 0.23 0.23 0.96 0.92



PERFORMANCE RATIOS

Return on average assets (ROA) [2] 1.22 % 1.15 % 1.06 % 1.07 % 0.74 % 1.13 % 0.58 %

Return on average shareholders' equity (ROE) [2]16.05 14.82 13.56 13.07 8.87 14.38 6.85

Average shareholders' equity to average assets 7.61 7.79 7.84 8.19 8.29 7.85 8.47

Efficiency ratio [3] 65.61 62.32 66.20 62.54 68.20 64.16 62.47

Net interest margin (NIM) [2] 3.08 3.31 3.16 3.19 3.32 3.18 3.30

Dividend payout ratio [4] 31.25 32.43 36.36 35.94 53.49 33.92 69.70



SELECTED AVERAGE BALANCES

Average loans, including loans held for sale $ 5,073,069 $ 5,022,909 $ 5,110,820 $ 5,079,874 $ 5,034,717 $ 5,071,516 $ 4,855,169

Average interest-earning assets 6,890,829 6,761,643 6,606,779 6,305,786 6,202,228 6,643,193 6,015,166

Average assets 7,315,325 7,210,210 7,039,928 6,738,825 6,621,127 7,078,025 6,418,661

Average deposits 6,536,826 6,424,768 6,269,516 5,958,742 5,755,257 6,299,369 5,555,877

Average interest-bearing liabilities 4,407,612 4,221,073 4,253,382 4,161,453 4,163,396 4,288,041 4,070,923

Average shareholders' equity 556,462 561,606 552,102 551,976 548,663 555,600 543,919

CENTRAL PACIFIC FINANCIAL CORP. AND SUBSIDIARIES

Financial Highlights

(Unaudited) TABLE 1 (CONTINUED)



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

(dollars in thousands) 2021 2021 2021 2021 2020

REGULATORY CAPITAL RATIOS

Central Pacific Financial Corp.

Leverage capital ratio 8.5 % 8.5 % 8.6 % 8.9 % 8.8 %

Tier 1 risk-based capital ratio 12.2 12.2 12.7 13.1 12.9

Total risk-based capital ratio 14.5 14.6 14.9 15.4 15.2

Common equity tier 1 capital ratio 11.2 11.2 11.6 12.0 11.8

Central Pacific Bank

Leverage capital ratio 8.9 9.0 9.1 9.4 9.4

Tier 1 risk-based capital ratio 12.8 13.0 13.5 13.9 13.7

Total risk-based capital ratio 14.0 14.3 14.6 15.0 14.9

Common equity tier 1 capital ratio 12.8 13.0 13.5 13.9 13.7





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

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

BALANCE SHEET

Total loans, net of deferred fees and costs $ 5,101,649 $ 5,045,797 $ 5,077,318 $ 5,137,849 $ 4,964,113

Total assets 7,419,089 7,298,231 7,178,481 6,979,265 6,594,583

Total deposits 6,639,158 6,515,863 6,397,159 6,208,950 5,796,118

Long-term debt 105,616 105,556 105,495 105,436 105,385

Total shareholders' equity 558,219 555,419 552,793 542,865 546,685

Total shareholders' equity to total assets 7.52 % 7.61 % 7.70 % 7.78 % 8.29 %



ASSET QUALITY

Allowance for credit losses (ACL) [1] $ 68,097 $ 74,587 $ 77,781 $ 81,553 $ 83,269

Non-performing assets (NPA) 5,881 7,237 6,745 7,194 6,192

ACL to total loans [1] 1.33 % 1.48 % 1.53 % 1.59 % 1.68 %

ACL to core loans (refer to Table 10) [1] 1.36 % 1.55 % 1.68 % 1.80 % 1.83 %

ACL to non-performing assets [1] 1,157.92 % 1,030.63 % 1,153.17 % 1,133.63 % 1,344.78 %

NPA to total assets 0.08 % 0.10 % 0.09 % 0.10 % 0.09 %



PER SHARE OF COMMON STOCK OUTSTANDING

Book value per common share $ 20.14$ 19.84 $ 19.59 $ 19.19 $ 19.40

Closing market price per common share 28.17 25.68 26.06 26.68 19.01



[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



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

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

ASSETS

Cash and due from financial institutions $ 81,506$ 108,669$ 116,009$ 93,358$ 97,546

Interest-bearing deposits in other financial institutions 247,401 240,173 224,469 166,533 6,521

Investment securities:

Available-for-sale debt securities, at fair value 1,631,699 1,535,450 1,407,340 1,216,341 1,182,609

Equity securities, at fair value - 1,593 1,578 1,435 1,351

Total investment securities 1,631,699 1,537,043 1,408,918 1,217,776 1,183,960

Loans held for sale 3,531 5,290 5,361 5,234 16,687

Loans, net of deferred fees and costs 5,101,649 5,045,797 5,077,318 5,137,849 4,964,113

Less allowance for credit losses 68,097 74,587 77,781 81,553 83,269

Loans, net of allowance for credit losses 5,033,552 4,971,210 4,999,537 5,056,296 4,880,844

Premises and equipment, net 80,354 80,190 76,740 72,599 65,278

Accrued interest receivable 16,709 17,110 19,014 19,440 20,224

Investment in unconsolidated entities 29,679 30,397 31,052 31,487 29,968

Other real estate owned - - - - -

Mortgage servicing rights 9,738 9,976 10,500 11,094 11,865

Bank-owned life insurance 169,148 167,961 167,289 167,110 163,161

Federal Home Loan Bank ("FHLB") stock 7,964 7,952 8,149 8,155 8,237

Right of use lease asset 39,441 40,757 41,890 44,727 45,857

Other assets 68,367 81,503 69,553 85,456 64,435

Total assets $ 7,419,089 $ 7,298,231 $ 7,178,481 $ 6,979,265 $ 6,594,583

LIABILITIES AND SHAREHOLDERS' EQUITY

Deposits:

Noninterest-bearing demand $ 2,291,246 $ 2,195,404 $ 2,203,806 $ 2,070,428 $ 1,790,269

Interest-bearing demand 1,415,277 1,372,626 1,341,280 1,237,574 1,174,888

Savings and money market 2,225,903 2,296,968 2,048,945 2,004,368 1,932,043

Time 706,732 650,865 803,128 896,580 898,918

Total deposits 6,639,158 6,515,863 6,397,159 6,208,950 5,796,118

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

Long-term debt 105,616 105,556 105,495 105,436 105,385

Lease liability 40,731 41,933 43,112 46,033 47,191

Other liabilities 75,317 79,412 79,874 75,933 77,156

Total liabilities 6,860,822 6,742,764 6,625,640 6,436,352 6,047,850

Shareholders' equity:

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

Common stock, no par value, authorized 185,000,000 shares; issued and outstanding: 27,714,071 at December 31, 2021, 27,999,588 at 433,263 436,957 440,854 443,505 442,635 September 30, 2021, 28,218,860 at June 30, 2021, 28,282,530 at March 31, 2021, and 28,183,340 at December 31, 2020

Additional paid-in capital 98,073 97,279 96,182 95,721 94,842

Retained earnings (accumulated deficit) 34,843 22,916 10,831 628 (10,920)

Accumulated other comprehensive (loss) income (7,960) (1,733) 4,926 3,011 20,128

Total shareholders' equity 558,219 555,419 552,793 542,865 546,685

Non-controlling interest 48 48 48 48 48

Total equity 558,267 555,467 552,841 542,913 546,733

Total liabilities and shareholders' equity $ 7,419,089 $ 7,298,231 $ 7,178,481 $ 6,979,265 $ 6,594,583





CENTRAL PACIFIC FINANCIAL CORP. AND SUBSIDIARIES

Consolidated Statements of Income

(Unaudited) TABLE 3



Three Months Ended Year Ended

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

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

Interest income:

Interest and fees on loans $ 47,576 $ 51,104 $ 49,024 $ 46,074 $ 48,259 $ 193,778 $ 186,129

Interest and dividends on investment securities:

Taxable investment securities 6,667 6,210 4,447 5,106 5,002 22,430 23,302

Tax-exempt investment securities 642 470 346 514 504 1,972 2,392

Dividend income on investment securities 21 18 18 18 18 75 69

Interest on deposits in other financial institutions 86 105 61 10 4 262 46

Dividend income on FHLB stock 61 62 63 59 114 245 480

Total interest income 55,053 57,969 53,959 51,781 53,901 218,762 212,418

Interest expense:

Interest on deposits:

Demand 104 101 93 86 105 384 510

Savings and money market 352 332 282 274 314 1,240 2,416

Time 478 428 498 588 813 1,992 7,489

Interest on short-term borrowings - - - 2 65 2 718

Interest on long-term debt 1,023 1,022 1,025 1,027 1,130 4,097 3,602

Total interest expense 1,957 1,883 1,898 1,977 2,427 7,715 14,735

Net interest income 53,096 56,086 52,061 49,804 51,474 211,047 197,683

(Credit) provision for credit losses (7,692) (2,635) (3,443) (821) 4,898 (14,591) 42,111

Net interest income after (credit) provision for 60,788 58,721 55,504 50,625 46,576 225,638 155,572 credit losses

Other operating income:

Mortgage banking income 1,902 1,327 1,533 2,970 5,434 7,732 13,682

Service charges on deposit accounts 1,800 1,637 1,443 1,478 1,560 6,358 6,234

Other service charges and fees 5,016 4,942 4,619 3,790 3,709 18,367 14,867

Income from fiduciary activities 1,283 1,292 1,269 1,231 1,113 5,075 4,829

Net gain (loss) on sales of investment securities - 100 50 - 151 150 (201)

Income from bank-owned life insurance 946 540 1,210 797 1,219 3,493 3,803

Other 619 415 406 445 871 1,885 1,984

Total other operating income 11,566 10,253 10,530 10,711 14,057 43,060 45,198

Other operating expense:

Salaries and employee benefits 23,030 23,566 23,790 19,827 23,090 90,213 83,848

Net occupancy 4,129 4,185 4,055 3,764 4,011 16,133 15,162

Equipment 1,207 1,089 1,048 1,000 1,157 4,344 4,531

Communication expense 922 824 756 769 758 3,271 3,225

Legal and professional services 2,928 2,575 2,572 2,377 2,507 10,452 9,035

Computer software expense 3,125 2,998 3,398 3,783 3,625 13,304 12,717

Advertising expense 1,179 1,329 1,329 1,658 756 5,495 3,791

Other 5,902 4,779 4,485 4,668 8,786 19,834 19,428

Total other operating expense 42,422 41,345 41,433 37,846 44,690 163,046 151,737

Income before income taxes 29,932 27,629 24,601 23,490 15,943 105,652 49,033

Income tax expense 7,605 6,814 5,887 5,452 3,772 25,758 11,760

Net income $ 22,327 $ 20,815 $ 18,714 $ 18,038 $ 12,171 $ 79,894 $ 37,273

Per common share data:

Basic earnings per share $ 0.80$ 0.74$ 0.66$ 0.64$ 0.43$ 2.85$ 1.33

Diluted earnings per share 0.80 0.74 0.66 0.64 0.43 2.83 1.32

Cash dividends declared 0.25 0.24 0.24 0.23 0.23 0.96 0.92

Basic weighted average shares outstanding 27,769,651 27,967,089 28,173,710 28,108,648 28,071,151 28,003,744 28,074,543

Diluted weighted average shares outstanding 28,045,826 28,175,953 28,456,624 28,313,014 28,177,366 28,257,323 28,180,576



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

December 31, 2021 September 30, 2021 December 31, 2020

Average Average Average Average Average Average

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

ASSETS

Interest-earning assets:

Interest-bearing deposits in other $ 225,560 0.15 % $ 86$ 273,039 0.15 % $ 105$ 16,7860.10 %$ 4financial institutions

Investment securities, excluding valuation allowance:

Taxable 1,469,711 1.82 6,688 1,351,272 1.84 6,228 1,048,665 1.91 5,020

Tax-exempt 114,529 2.84 813 106,333 2.24 595 90,452 2.83 638

Total investment securities 1,584,240 1.89 7,501 1,457,605 1.87 6,823 1,139,117 1.99 5,658

Loans, including loans held for sale5,073,069 3.73 47,576 5,022,909 4.05 51,104 5,034,717 3.82 48,259

Federal Home Loan Bank stock 7,960 3.05 61 8,090 3.09 62 11,608 3.91 114

Total interest-earning assets 6,890,829 3.19 55,224 6,761,643 3.42 58,094 6,202,228 3.48 54,035

Noninterest-earning assets 424,496 448,567 418,899

Total assets $ 7,315,325 $ 7,210,210 $ 6,621,127



LIABILITIES AND EQUITY

Interest-bearing liabilities:

Interest-bearing demand deposits $ 1,383,6960.03 % $ 104$ 1,356,9670.03 % $ 101$ 1,149,7590.04 %$ 105

Savings and money market deposits 2,224,592 0.06 352 2,168,055 0.06 332 1,902,876 0.07 314

Time deposits up to $250,000 225,451 0.31 176 228,762 0.31 181 246,573 0.57 351

Time deposits over $250,000 468,292 0.26 302 467,289 0.21 247 662,390 0.28 462

Total interest-bearing deposits 4,302,031 0.09 934 4,221,073 0.08 861 3,961,598 0.12 1,232

Federal Home Loan Bank advances and - - - - - - 76,968 0.33 65 other short-term borrowings

Long-term debt 105,581 3.85 1,023 105,516 3.84 1,022 124,830 3.60 1,130

Total interest-bearing liabilities 4,407,612 0.18 1,957 4,326,589 0.17 1,883 4,163,396 0.23 2,427

Noninterest-bearing deposits 2,234,795 2,203,695 1,793,659

Other liabilities 116,408 118,272 115,407

Total liabilities 6,758,815 6,648,556 6,072,462

Shareholders' equity 556,462 561,606 548,663

Non-controlling interest 48 48 2

Total equity 556,510 561,654 548,665

Total liabilities and equity $ 7,315,325 $ 7,210,210 $ 6,621,127



Net interest income $ 53,267 $ 56,211 $ 51,608



Interest rate spread 3.01 % 3.25 % 3.25 %



Net interest margin 3.08 % 3.31 % 3.32 %







CENTRAL PACIFIC FINANCIAL CORP. AND SUBSIDIARIES

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

(Unaudited) TABLE 5



Year Ended Year Ended

December 31, 2021 December 31, 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$ 191,9670.14 % $ 262$ 13,9800.33 % $ 46

Investment securities, excluding valuation allowance:

Taxable 1,269,900 1.77 22,505 1,037,209 2.25 23,371

Tax-exempt 101,877 2.45 2,496 96,217 3.15 3,028

Total investment securities 1,371,777 1.82 25,001 1,133,426 2.33 26,399

Loans, including loans held for sale 5,071,516 3.82 193,778 4,855,169 3.83 186,129

Federal Home Loan Bank stock 7,933 3.09 245 12,591 3.81 480

Total interest-earning assets 6,643,193 3.30 219,286 6,015,166 3.54 213,054

Noninterest-earning assets 434,832 403,495

Total assets $ 7,078,025 $ 6,418,661



LIABILITIES AND EQUITY

Interest-bearing liabilities:

Interest-bearing demand deposits $ 1,300,022 0.03 % $ 384$ 1,078,589 0.05 % $ 510

Savings and money market deposits 2,099,388 0.06 1,240 1,830,972 0.13 2,416

Time deposits up to $250,000 230,705 0.34 795 257,708 0.75 1,921

Time deposits over $250,000 551,831 0.22 1,197 696,650 0.80 5,568

Total interest-bearing deposits 4,181,946 0.09 3,616 3,863,919 0.27 10,415

Federal Home Loan Bank advances and other short-term 607 0.30 2 89,904 0.80 718 borrowings

Long-term debt 105,488 3.88 4,097 117,100 3.08 3,602

Total interest-bearing liabilities 4,288,041 0.18 7,715 4,070,923 0.36 14,735

Noninterest-bearing deposits 2,117,423 1,691,958

Other liabilities 116,936 111,859

Total liabilities 6,522,400 5,874,740

Shareholders' equity 555,600 543,919

Non-controlling interest 25 2

Total equity 555,625 543,921

Total liabilities and equity $ 7,078,025 $ 6,418,661



Net interest income $ 211,571 $ 198,319



Interest rate spread 3.12 % 3.18 %



Net interest margin 3.18 % 3.30 %







CENTRAL PACIFIC FINANCIAL CORP. AND SUBSIDIARIES

Loans by Geographic Distribution

(Unaudited) TABLE 6



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

(Dollars in thousands) 2021 2021 2021 2021 2020

HAWAII:

Commercial, financial and agricultural:

SBA Paycheck Protection Program $ 87,459 $ 198,315 $ 395,352 $ 548,880 $ 375,879

Other 422,388 404,751 389,341 399,154 426,670

Real estate:

Construction 122,867 128,908 133,457 137,976 125,407

Residential mortgage 1,875,980 1,748,729 1,711,801 1,687,513 1,690,212

Home equity 637,249 618,951 583,430 559,514 551,266

Commercial mortgage 922,146 915,746 926,006 911,216 898,055

Consumer 333,843 331,987 328,332 319,032 332,430

Total loans, net of deferred fees and costs4,401,932 4,347,387 4,467,719 4,563,285 4,399,919

Allowance for credit losses (55,808) (62,126) (67,773) (70,961) (73,152)

Loans, net of allowance for credit losses $ 4,346,124 $ 4,285,261 $ 4,399,946 $ 4,492,324 $ 4,326,767



U.S. MAINLAND: [1]

Commercial, financial and agricultural:

SBA Paycheck Protection Program $ 3,868$ 20,356$ 39,258$ 48,939$ 40,496

Other 107,733 114,122 96,884 115,035 118,421

Real estate:

Commercial mortgage 298,058 292,671 260,424 253,122 258,273

Consumer 290,058 271,261 213,033 157,468 147,004

Total loans, net of deferred fees and costs699,717 698,410 609,599 574,564 564,194

Allowance for credit losses (12,289) (12,461) (10,008) (10,592) (10,117)

Loans, net of allowance for credit losses $ 687,428 $ 685,949 $ 599,591 $ 563,972 $ 554,077



TOTAL:

Commercial, financial and agricultural:

SBA Paycheck Protection Program $ 91,327 $ 218,671 $ 434,610 $ 597,819 $ 416,375

Other 530,121 518,873 486,225 514,189 545,091

Real estate:

Construction 122,867 128,908 133,457 137,976 125,407

Residential mortgage 1,875,980 1,748,729 1,711,801 1,687,513 1,690,212

Home equity 637,249 618,951 583,430 559,514 551,266

Commercial mortgage 1,220,204 1,208,417 1,186,430 1,164,338 1,156,328

Consumer 623,901 603,248 541,365 476,500 479,434

Total loans, net of deferred fees and costs5,101,649 5,045,797 5,077,318 5,137,849 4,964,113

Allowance for credit losses (68,097) (74,587) (77,781) (81,553) (83,269)

Loans, net of allowance for credit losses $ 5,033,552 $ 4,971,210 $ 4,999,537 $ 5,056,296 $ 4,880,844



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

CENTRAL PACIFIC FINANCIAL CORP. AND SUBSIDIARIES

Deposits

(Unaudited) TABLE 7



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

(Dollars in thousands) 2021 2021 2021 2021 2020

Noninterest-bearing demand $ 2,291,246$ 2,195,404$ 2,203,806$ 2,070,428$ 1,790,269

Interest-bearing demand 1,415,277 1,372,626 1,341,280 1,237,574 1,174,888

Savings and money market 2,225,903 2,296,968 2,048,945 2,004,368 1,932,043

Time deposits less than $100,000 136,584 139,358 141,498 145,497 149,063

Other time deposits $100,000 to $250,000 [1]88,873 87,491 89,710 88,814 90,149

Core deposits 6,157,883 6,091,847 5,825,239 5,546,681 5,136,412



Government time deposits 214,950 238,950 403,755 500,194 500,344

Other time deposits greater than $250,000 266,325 185,066 168,165 162,075 159,362

Total time deposits greater than $250,000 481,275 424,016 571,920 662,269 659,706

Total deposits $ 6,639,158$ 6,515,863$ 6,397,159$ 6,208,950$ 5,796,118



[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



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

(Dollars in thousands) 2021 2021 2021 2021 2020

Nonaccrual loans: [1]

Commercial, financial and agricultural - Other $ 183$ 689$ 699$ 1,412$ 1,461

Real estate:

Residential mortgage 4,623 5,351 5,280 4,553 4,115

Home equity 786 880 434 439 524

Commercial mortgage - - - - -

Consumer 289 317 332 790 92

Total nonaccrual loans 5,881 7,237 6,745 7,194 6,192

Other real estate owned ("OREO"):

Real estate:

Residential mortgage - - - - -

Total OREO - - - - -

Total nonperforming assets ("NPAs") 5,881 7,237 6,745 7,194 6,192

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

Commercial, financial and agricultural - Other 945 - 29 - -

Real estate:

Residential mortgage - 444 1,438 4,522 567

Home equity 44 - - - -

Consumer 374 166 100 262 240

Total loans delinquent for 90 days or more still accruing interest1,363 610 1,567 4,784 807

Restructured loans still accruing interest: [1]

Commercial, financial and agricultural - Other - 12 26 63 100

Real estate:

Residential mortgage 3,768 4,458 4,258 5,473 5,718

Commercial mortgage 1,043 1,577 1,636 1,698 1,761

Consumer 92 99 132 198 207

Total restructured loans still accruing interest 4,903 6,146 6,052 7,432 7,786

Total NPAs and loans delinquent for 90 days or more and $ 12,147 $ 13,993 $ 14,364 $ 19,410 $ 14,785 restructured loans still accruing interest



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

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

Total NPAs and loans delinquent for 90 days or more still accruing0.14 % 0.16 % 0.16 % 0.23 % 0.14 % interest as a percentage of total loans and OREO

Total NPAs, loans delinquent for 90 days or more and restructured loans still accruing interest as a percentage of total loans and 0.24 % 0.28 % 0.28 % 0.38 % 0.30 % OREO



Quarter-to-quarter changes in NPAs:

Balance at beginning of quarter $ 7,237$ 6,745$ 7,194$ 6,192$ 13,187

Additions 1,375 1,951 1,879 2,257 1,370

Reductions:

Payments (933) (767) (1,120) (292) (3,186)

Return to accrual status (1,034) (141) (84) (99) (548)

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

Charge-offs, valuation and other adjustments (764) (551) (1,124) (864) (278)

Total reductions (2,731) (1,459) (2,328) (1,255) (8,365)

Balance at end of quarter $ 5,881$ 7,237$ 6,745$ 7,194$ 6,192



[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 Year Ended

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

(Dollars in thousands) 2021 2021 2021 2021 2020 2021 2020

Allowance for credit losses ("ACL"):

ACL at beginning of period $ 74,587 $ 77,781$ 81,553$ 83,269 $ 80,542 $ 83,269$ 47,971

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

Adjusted ACL at beginning of period 74,587 77,781 81,553 83,269 80,542 83,269 51,537



(Credit) provision for credit losses on loans [1] [2](7,417) (2,969) (2,963) (974) 4,496 (14,323) 38,930



Charge-offs:

Commercial, financial and agricultural - Other 379 334 401 609 676 1,723 3,026

Real estate:

Residential mortgage - - - - - - 63

Commercial mortgage - - - - - - 75

Consumer 952 829 1,523 1,098 1,856 4,402 8,191

Total charge-offs 1,331 1,163 1,924 1,707 2,532 6,125 11,355



Recoveries:

Commercial, financial and agricultural - Other 358 281 276 89 189 1,004 1,157

Real estate:

Construction 1,159 - - - - 1,159 131

Residential mortgage 13 53 186 106 15 358 229

Home equity - - - 9 2 9 33

Commercial mortgage - - 65 8 1 73 16

Consumer 728 604 588 753 556 2,673 2,591

Total recoveries 2,258 938 1,115 965 763 5,276 4,157

Net (recoveries) charge-offs (927) 225 809 742 1,769 849 7,198

ACL at end of period $ 68,097 $ 74,587$ 77,781$ 81,553 $ 83,269 $ 68,097$ 83,269



Average loans, net of deferred fees and costs $ 5,073,069 $ 5,022,909 $ 5,110,820 $ 5,079,874 $ 5,034,717 $ 5,071,516 $ 4,855,169

Annualized ratio of net charge-offs to average loans (0.07) %0.02 % 0.06 % 0.06 % 0.14 % 0.02 % 0.15 %



[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:



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

(Dollars in thousands) 2021 2021 2021 2021 2020

ACL $ 68,097$ 74,587$ 77,781$ 81,553$ 83,269



Total loans $ 5,101,649 $ 5,045,797 $ 5,077,318 $ 5,137,849 $ 4,964,113

Less: PPP loans 91,327 218,671 434,610 597,819 416,375

Core loans (or total loans, excluding PPP loans)$ 5,010,322 $ 4,827,126 4,642,708 4,540,030 $ 4,547,738



Ratio of ACL to total loans 1.33 % 1.48 % 1.53 % 1.59 % 1.68 %

Ratio of ACL to core loans 1.36 % 1.55 % 1.68 % 1.80 % 1.83 %

View original content to download multimedia: https://www.prnewswire.com/news-releases/central-pacific-financial-announces-record-earnings-and-launches-new-banking-as-a-service-initiative-to-drive-mainland-expansion-301468262.html

SOURCE Central Pacific Financial Corp.