Central Pacific Financial Reports First Quarter Earnings of $16.2 Million

• Net income of $16.2 million, or $0.60 per diluted share for the quarter.

• ROA of 0.87% and ROE of 13.97% for the quarter.

• Total loans of $5.56 billion increased by $1.9 million in the first quarter.

• Total deposits of $6.75 billion increased by $10.7 million in the first quarter. 66% of total deposits are FDIC-insured or fully collateralized as of March 31, 2023.

• Asset quality remains strong as nonperforming assets totaled $5.3 million, or 0.07% of total assets.

• Solid liquidity position with $198.8 million in cash on balance sheet and $2.83 billion in total other liquidity sources, including available borrowing capacity plus unpledged investment securities as of March 31, 2023.

• Board of Directors approved quarterly cash dividend of $0.26 per share.

Central Pacific Financial Corp. (NYSE: CPF) (the "Company"), parent company of Central Pacific Bank (the "Bank" or "CPB"), today reported net income for the first quarter of 2023 of $16.2 million, or fully diluted earnings per share ("EPS") of $0.60, compared to net income of $20.2 million, or EPS of $0.74 in the previous quarter and net income of $19.4 million, or EPS of $0.70 in the year-ago quarter.

"We are pleased with our first quarter financial results, highlighted by stable deposit balances, continued solid asset quality and strong liquidity and capital positions," said Arnold Martines, President and Chief Executive Officer. "Despite the recent events affecting the national banking industry, Central Pacific Bank remains financially strong and committed to supporting our customers and community."

Earnings Highlights

Net interest income for the first quarter of 2023 was $54.2 million, which decreased by $2.1 million, or 3.7% from the previous quarter, and increased by $3.3 million, or 6.4% from the year-ago quarter. The sequential quarter decrease in net interest income is primarily due to increases in average balances and rates paid on interest-bearing deposits and borrowings, which outpaced the increases in average loan balances and asset yields.

Net interest margin ("NIM") for the first quarter of 2023 was 3.08%, which decreased by 9 basis points ("bps") from the previous quarter and increased by 11 bps from the year-ago quarter. The sequential quarter decrease in NIM is primarily due to higher rates paid on deposits and borrowings, which outpaced the increase in asset yields. Additional information on average balances, interest income and expenses and yields and rates is presented in Table 4.

In the first quarter of 2023, the Company recorded a provision for credit losses of $1.9 million, compared to a provision of $0.6 million in the previous quarter and a release of credit loss reserves of $3.2 million in the year-ago quarter.

Other operating income for the first quarter of 2023 totaled $11.0 million, compared to $11.6 million in the previous quarter and $9.6 million in the year-ago quarter. The decrease from the previous quarter was primarily due to lower income from bank-owned life insurance of $0.9 million, partially offset by higher income from fiduciary activities of $0.3 million. Additional information on other operating income is presented in Table 3.

Other operating expense for the first quarter of 2023 totaled $42.1 million, compared to $40.4 million in the previous quarter and $38.2 million in the year-ago quarter. The increase in other operating expense was primarily due to higher computer software expense of $0.6 million, higher net occupancy expense of $0.5 million and a higher FDIC insurance assessment of $0.5 million (included in other), partially offset by lower salaries and employee benefits expense of $0.7 million. Additional information on other operating expense is presented in Table 3.

The efficiency ratio for the first quarter of 2023 was 64.58%, compared to 59.56% in the previous quarter and 63.16% in the year-ago quarter.

The effective tax rate for the first quarter of 2023 was 23.8%, compared to 24.9% in the previous quarter and 23.7% in the year-ago quarter.

Balance Sheet Highlights

Total assets at March 31, 2023 of $7.52 billion increased by $88.5 million, or 1.2% from $7.43 billion at December 31, 2022, and increased by $222.4 million, or 3.0% from $7.30 billion at March 31, 2022.

Total loans, net of deferred fees and costs, at March 31, 2023 of $5.56 billion increased by $1.9 millionfrom $5.56 billion at December 31, 2022, and increased by $382.6 million, or 7.4% from $5.17 billion at March 31, 2022. Loans by type and geographic distribution are summarized in Table 5.

Total deposits at March 31, 2023 of $6.75 billion increased by $10.7 million or 0.2% from $6.74 billion at December 31, 2022, and increased by $147.9 million, or 2.2% from $6.60 billion at March 31, 2022. Core deposits, which include demand deposits, savings and money market deposits and time deposits up to $250,000, totaled $5.97 billion at March 31, 2023, and decreased by $103.3 million, or 1.7% from December 31, 2022. Average rates paid on total deposits during the first quarter of 2023 was 0.61%, compared to 0.41% in the previous quarter and 0.06% in the year-ago quarter. At March 31, 2023, approximately 66% of the Company's total deposits were FDIC-insured or fully collateralized. Core deposit and total deposit balances are summarized in Table 6.

At March 31, 2023, the Company had $198.8 million in cash on balance sheet and $2.83 billion in total other liquidity sources, including available borrowing capacity plus unpledged investment securities.

Asset Quality

Nonperforming assets at March 31, 2023 totaled $5.3 million, or 0.07% of total assets, and remained relatively unchanged from December 31, 2022 and March 31, 2022. Additional information on nonperforming assets, past due and restructured loans is presented in Table 7.

Net charge-offs in the first quarter of 2023 totaled $2.3 million, compared to net charge-offs of $1.7 million in the previous quarter, and net charge-offs of $0.4 million in the year-ago quarter. Annualized net charge-offs as a percentage of average loans was 0.16%, 0.12% and 0.03% during the three months ended March 31, 2023, December 31, 2022 and March 31, 2022, respectively.

The allowance for credit losses, as a percentage of total loans at March 31, 2023 was 1.14%, compared to 1.15% at December 31, 2022, and 1.25% at March 31, 2022. Additional information on net charge-offs and recoveries and the allowance for credit losses is presented in Table 8.

Capital

Total shareholders' equity was $470.9 million at March 31, 2023, compared to $452.9 million and $486.3 million at December 31, 2022 and March 31, 2022, respectively. The increase in shareholders' equity from the previous quarter was primarily due to net income of $16.2 million and a decline in unrealized losses on our available-for-sale investment securities portfolio which flow through accumulated other comprehensive loss.

During the first quarter of 2023, the Company repurchased 101,760 shares of common stock, at a total cost of $2.2 million, or an average cost per share of $21.67. As of March 31, 2023, $23.8 million remained available for repurchase under the Company's share repurchase program. In March 2023, the Company temporarily suspended share repurchases while market conditions continue to be evaluated.

At March 31, 2023, the Company's leverage capital, tier 1 risk-based capital, total risk-based capital, and common equity tier 1 ratios were 8.6%, 11.5%, 13.6%, and 10.6%, respectively, compared to 8.5%, 11.3%, 13.5%, and 10.5%, respectively, at December 31, 2022.

On April 25, 2023, the Company's Board of Directors declared a quarterly cash dividend of $0.26 per share on its outstanding common shares. The dividend will be payable on June 15, 2023 to shareholders of record at the close of business on May 31, 2023.

During the quarter, CPB was named Lender of the Year (Category 2), by the Small Business Administration. In January 2023, the Bank also launched its unique Friendship Floor, a newly-remodeled co-working hub on the third floor of Central Pacific Plaza, with eight conference rooms and 80 hybrid workspaces and other conveniences to promote employee engagement.

Conference Call

The Company's management will host a conference call today at 1:00 p.m. Eastern Time (7:00 a.m. Hawaii Time) to discuss the quarterly results. Individuals are encouraged to listen to the live webcast of the presentation by visiting the investor relations page of the Company's website at http://ir.cpb.bank. Alternatively, investors may participate in the live call by dialing 1-833-470-1428 (access code: 500446). A playback of the call will be available through May 26, 2023 by dialing 1-866-813-9403 (access code: 402781) 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 $7.52 billion in assets as of March 31, 2023. Central Pacific Bank, its primary subsidiary, operates 27 branches and 61 ATMs in the state of Hawaii. For additional information, please visit the Company's website at http://www.cpb.bank.

Equal Housing Lender
Member FDIC
NYSE Listed: CPF

Forward-Looking Statements ("FLS")

This document may contain FLS concerning: projections of revenues, expenses, income or loss, earnings or loss per share, capital expenditures, the payment or nonpayment of dividends, capital position, credit losses, net interest margin or other financial items; statements of plans, objectives and expectations of Central Pacific Financial Corp. or its management or Board of Directors, including those relating to business plans, use of capital resources, products or services and regulatory developments and regulatory actions; statements of future economic performance including anticipated performance results from our business initiatives; or any statements of the assumptions underlying or relating to any of the foregoing. Words such as "believes," "plans," "anticipates," "expects," "intends," "forecasts," "hopes," "targeting," "continue," "remain," "will," "should," "estimates," "may" and other similar expressions are intended to identify FLS but are not the exclusive means of identifying such statements.

While we believe that our FLS and the assumptions underlying them are reasonably based, such statements and assumptions are by their nature subject to risks and uncertainties, and thus could later prove to be inaccurate or incorrect. Accordingly, actual results could differ materially from those statements or projections for a variety of reasons, including, but not limited to: the effects of inflation and rising interest rates; the adverse effects of recent bank failures and the potential impact of such developments on customer confidence, deposit behavior, liquidity and regulatory responses thereto; the adverse effects of the COVID-19 pandemic virus (and ongoing pandemic variants)on local, national and international economies, including, but not limited to, the adverse impact on tourism and construction in the State of Hawaii, our borrowers, customers, third-party contractors, vendors and employees; supply chain disruptions; the increase in inventory or adverse conditions in the real estate market and deterioration in the construction industry; adverse changes in the financial performance and/or condition of our borrowers and, as a result, increased loan delinquency rates, deterioration in asset quality, and losses in our loan portfolio; our ability to achieve the objectives of our RISE2020 initiative; our ability to successfully implement and achieve the objectives of our Banking-as-a-Service ("BaaS") initiatives, including adoption of the initiatives by customers and risks faced by any of our bank collaborations including reputational and regulatory risk; the impact of local, national, and international economies and events (including natural disasters such as wildfires, volcanic eruptions, hurricanes, tsunamis, storms, earthquakes and pandemic viruses and diseases) on the Company's business and operations and on tourism, the military, and other major industries operating within the Hawaii market and any other markets in which the Company does business; deterioration or malaise in domestic economic conditions, including any destabilization in the financial industry and deterioration of the real estate market, as well as the impact of declining levels of consumer and business confidence in the state of the economy in general and in financial institutions in particular; changes in estimates of future reserve requirements based upon the periodic review thereof under relevant regulatory and accounting requirements; the impact of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the "Dodd-Frank Act"), changes in capital standards, other regulatory reform and federal and state legislation, including but not limited to regulations promulgated by the Consumer Financial Protection Bureau (the "CFPB"), government-sponsored enterprise reform, and any related rules and regulations which affect our business operations and competitiveness; the costs and effects of legal and regulatory developments, including legal proceedings or regulatory or other governmental inquiries and proceedings and the resolution thereof, the results of regulatory examinations or reviews and the effect of, and our ability to comply with, any regulations or regulatory orders or actions we are or may become subject to; ability to successfully implement our initiatives to lower our efficiency ratio; the effects of and changes in trade, monetary and fiscal policies and laws, including the interest rate policies of the Board of Governors of the Federal Reserve System (the "FRB" or the "Federal Reserve"); securities market and monetary fluctuations, including the replacement of the London Interbank Offered Rate ("LIBOR") Index and the impact on our loans and debt which are tied to that index and uncertainties regarding potential alternative reference rates, including the Secured Overnight Financing Rate ("SOFR"); negative trends in our market capitalization and adverse changes in the price of the Company's common stock; political instability; acts of war or terrorism; changes in consumer spending, borrowings and savings habits; 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 ("PCAOB"), the Financial Accounting Standards Board ("FASB") and other accounting standard setters and the cost and resources required to implement such changes; our ability to attract and retain key personnel; changes in our personnel, organization, compensation and benefit plans; and our success at managing the risks involved in the foregoing items.

For further information with respect to factors that could cause actual results to materially differ from the expectations or projections stated in the FLS, please see the Company's publicly available Securities and Exchange Commission filings, including the Company's Form 10-K for the last fiscal year and, in particular, the discussion of "Risk Factors" set forth therein. We urge investors to consider all of these factors carefully in evaluating the FLS contained in this document. FLS speak only as of the date on which such statements are made. We undertake no obligation to update any FLS to reflect events or circumstances after the date on which such statements are made, or to reflect the occurrence of unanticipated events except as required by law.