Central Pacific Financial Reports Third Quarter 2024 Earnings

Highlights include:

• Net income of $13.3 million, or $0.49 per diluted share. Excluding $3.1 million in pre-tax expenses related to a strategic opportunity, adjusted net income (non-GAAP) was $15.7 million, or $0.58 per diluted share.
• Net interest margin of 3.07% increased by 10 bps from 2.97% in the previous quarter
• Total loans of $5.34 billion decreased by $41.0 million from the previous quarter
• Core deposits of $5.97 billion increased by $53.9 million from the previous quarter. Total deposits of $6.58 billion increased by $0.6 million from the previous quarter, which included a decrease in government time deposits of $69.1 million.
• Total risk-based capital and common equity tier 1 ratios of 15.3% and 12.1%, respectively
• The CPF Board of Directors approved a 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 of $13.3 million, or fully diluted earnings per share ("EPS") of $0.49 for the third quarter of 2024, compared to net income of $15.8 million, or EPS of $0.58 in the previous quarter and net income of $13.1 million, or EPS of $0.49 in the year-ago quarter. Results for the third quarter of 2024 were impacted by $3.1 million in pre-tax expenses related to our evaluation and assessment of a strategic opportunity. While the parties are no longer currently engaged in discussions, we remain interested in the opportunity under the right terms and conditions. Excluding these expenses, adjusted net income and EPS (non-GAAP) for the quarter was approximately $15.7 million and $0.58, respectively.

"Our third quarter core results were strong and we continue to pursue our strategies for future growth and additional internal operating efficiencies," said Arnold Martines, Chairman, President and Chief Executive Officer. "Our net interest income and net interest margin expanded as we successfully managed the balance sheet and repricing in this evolving interest rate environment."

"Central Pacific remains committed to supporting our customers and communities. We were pleased to open a new state-of-the-art branch in Kahului to support the business and personal financial needs of the Maui community as we move to expand our presence on the neighbor islands," Martines said.

Earnings Highlights

Net interest income was $53.9 million for the third quarter of 2024, which increased by $1.9 million, or 3.7% from the previous quarter, and increased by $1.9 million, or 3.7% from the year-ago quarter. Net interest margin ("NIM") was 3.07% for the third quarter of 2024, an increase of 10 basis points ("bp" or "bps") from the previous quarter and an increase of 19 bp from the year-ago quarter. The sequential quarter increase in net interest income and NIM was primarily due to higher average yields earned on investment securities and loans of 11 and 9 bps, respectively, combined with a 1 bp decline in average rates paid on interest-bearing deposits. The higher average yield earned on investment securities in the third quarter of 2024 includes $1.1 million in income from an interest rate swap that became effective on March 31, 2024, compared to $0.9 million in the second quarter of 2024.

The Company recorded a provision for credit losses of $2.8 million in the third quarter of 2024, compared to a provision of $2.2 million in the previous quarter and a provision of $4.9 million in the year-ago quarter. The provision in the current quarter consisted of a provision for credit losses on loans of $3.0 million, offset by a credit to the provision for off-balance sheet exposures of $0.2 million.

Other operating income totaled $12.7 million for the third quarter of 2024, compared to $12.1 million in the previous quarter and $10.0 million in the year-ago quarter. The higher other operating income was primarily due to higher income from bank-owned life insurance of $0.7 million, partially offset by lower mortgage banking income of $0.2 million.

Other operating expense totaled $46.7 million for the third quarter of 2024, compared to $41.2 million in the previous quarter and $39.6 million in the year-ago quarter. The higher other operating expense was primarily due to the aforementioned $3.1 million in expenses related to a strategic opportunity (included in other), higher salaries and employee benefits of $1.1 million, and higher directors' deferred compensation plan expenses of $1.0 million (included in other).

The efficiency ratio was 70.12% for the third quarter of 2024, compared to 64.26% in the previous quarter and 63.91% in the year-ago quarter. Excluding the aforementioned expenses related to a strategic opportunity, the adjusted efficiency ratio (non-GAAP) for the third quarter of 2024 was 65.51%.

The effective tax rate was 22.0% for the third quarter of 2024, compared to 23.4% in the previous quarter and 24.9% in the year-ago quarter. The decrease in the effective tax rate was primarily due to higher tax-exempt income from bank-owned life insurance and additional tax credits recognized.

Balance Sheet Highlights

Total assets of $7.42 billion at September 30, 2024 increased by $28.5 million, or 0.4% from $7.39 billion at June 30, 2024, and decreased by $222.5 million, or 2.9% from $7.64 billion at September 30, 2023. The Company had $326.6 million in cash on its balance sheet and $2.55 billion in total other liquidity sources, including available borrowing capacity and unpledged investment securities at September 30, 2024. Total available sources of liquidity as a percentage of uninsured and uncollateralized deposits was 118% at September 30, 2024, compared to 121% at June 30, 2024 and 122% at September 30, 2023. During the third quarter of 2024, excess balance sheet liquidity was used to pay off $69.1 million in higher cost government time deposits.

Total loans, net of deferred fees and costs, of $5.34 billion at September 30, 2024 decreased by $41.0 million, or 0.8%from $5.38 billion at June 30, 2024, and decreased by $166.1 million, or 3.0% from $5.51 billion at September 30, 2023. Average yields earned on loans during the third quarter of 2024 was 4.89%, compared to 4.80% in the previous quarter and 4.49% in the year-ago quarter.

Total deposits of $6.58 billion at September 30, 2024 increased by $0.6 million or 0.01% from $6.58 billion at June 30, 2024, and decreased by $291.7 million, or 4.2% from $6.87 billion at September 30, 2023. Core deposits, which include demand deposits, savings and money market deposits and time deposits up to $250,000, totaled $5.97 billion at September 30, 2024, and increased by $53.9 million, or 0.9% from $5.91 billion at June 30, 2024. Average rates paid on total deposits during the third quarter of 2024 was 1.32%, compared to 1.33% in the previous quarter and 1.07% in the year-ago quarter. FDIC-insured or fully collateralized deposits represented approximately 63% of total deposits at September 30, 2024, compared to 64% at June 30, 2024 and 65% at September 30, 2023.

Asset Quality

Nonperforming assets totaled $11.6 million, or 0.16% of total assets at September 30, 2024, compared to $10.3 million, or 0.14% of total assets at June 30, 2024 and $6.7 million, or 0.09% of total assets at September 30, 2023. The increase in nonperforming assets was primarily due to the addition of residential mortgage loans totaling $2.2 million which were well-collateralized with strong loan-to-value ratios.

Net charge-offs totaled $3.6 million in the third quarter of 2024, compared to net charge-offs of $3.8 million in the previous quarter, and net charge-offs of $3.9 million in the year-ago quarter. Annualized net charge-offs as a percentage of average loans was 0.27%, 0.28% and 0.28% during the three months ended September 30, 2024, June 30, 2024 and September 30, 2023, respectively.

The allowance for credit losses, as a percentage of total loans was 1.15% at September 30, 2024, compared to 1.16% at June 30, 2024, and 1.17% at September 30, 2023.

Capital

Total shareholders' equity was $543.7 million at September 30, 2024, compared to $518.6 million and $468.6 million at June 30, 2024 and September 30, 2023, respectively.

During the third quarter of 2024, the Company did not repurchase any shares of common stock. As of September 30, 2024, $19.1 million in share repurchase authorization remained available under the Company's share repurchase program.

The Company's leverage, common equity tier 1, tier 1 risk-based capital, and total risk-based capital ratios were 9.5%, 12.1%, 13.1%, and 15.3%, respectively, at September 30, 2024, compared to 9.3%, 11.9%, 12.8%, and 15.1%, respectively, at June 30, 2024.

On October 29, 2024, the Company's Board of Directors declared a quarterly cash dividend of $0.26 per share on its outstanding common shares. The dividend will be payable on December 16, 2024 to shareholders of record at the close of business on November 29, 2024.

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 1-800-715-9871 (conference ID: 6299769). A playback of the call will be available through November 29, 2024 by dialing 1-800-770-2030 (playback ID: 6299769) 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 $7.42 billion in assets as of September 30, 2024. Central Pacific Bank, its primary subsidiary, operates 27 branches and 56 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

This document may contain forward-looking statements ("FLS") concerning: projections of revenues, expenses, income or loss, earnings or loss per share, capital expenditures, payment or nonpayment of dividends, capital position, credit losses, net interest margin or other financial items; statements of plans, objectives and expectations of Central Pacific Financial Corp. (the "Company") or its management or Board of Directors, including those relating to business plans, use of capital resources, products or services and regulatory developments and regulatory actions; statements of future economic performance including anticipated performance results from our business initiatives; or any statements of the assumptions underlying or relating to any of the foregoing. Words such as "believe," "plan," "anticipate," "seek," "expect," "intend," "forecast," "hope," "target," "continue," "remain," "estimate," "will," "should," "may" and other similar expressions are intended to identify FLS but are not the exclusive means of identifying such statements.

While we believe that our FLS and the assumptions underlying them are reasonably based, such statements and assumptions are by their nature subject to risks and uncertainties, and thus could later prove to be inaccurate or incorrect. Accordingly, actual results could differ materially from those statements or projections for a variety of reasons, including, but not limited to: the effects of inflation and interest rate fluctuations; 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 its variants) and other pandemic viruses 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 thereto; supply chain disruptions; labor contract disputes and potential strikes; 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; the impact of local, national, and international economies and events (including natural disasters such as wildfires, volcanic eruptions, hurricanes, tsunamis, storms, and earthquakes) 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, 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, government-sponsored enterprise reform, and any related rules and regulations which affect our business operations and competitiveness; the costs and effects of legal and regulatory developments, including legal proceedings and lawsuits we are or may become subject to, or regulatory or other governmental inquiries and proceedings and the resolution thereof; the results of regulatory examinations or reviews and the effect of, and our ability to comply with, any regulations or regulatory orders or actions we are or may become subject to, and the effect of any recurring or special FDIC assessments; the effect of changes in accounting policies and practices, as may be adopted by the regulatory agencies, as well as the PCAOB, the FASB and other accounting standard setters and the cost and resources required to implement such changes; 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; securities market and monetary fluctuations, including the impact resulting from the elimination of the LIBOR Index; negative trends in our market capitalization and adverse changes in the price of the Company's common stock; the effects of any potential or actual acquisitions or dispositions we may make or evaluate, and the related costs, including re-engagement in any potential acquisition process; political instability; acts of war or terrorism; changes in consumer spending, borrowings and savings habits; technological changes and developments; cybersecurity and data privacy breaches and the consequence therefrom; failure to maintain effective internal control over financial reporting or disclosure controls and procedures; our ability to address deficiencies in our internal controls over financial reporting or disclosure controls and procedures; changes in the competitive environment among financial holding companies and other financial service providers; our ability to successfully implement our initiatives to lower our efficiency ratio; our ability to attract and retain key personnel; changes in our personnel, organization, compensation and benefit plans; our ability to successfully implement and achieve the objectives of our BaaS initiatives, including adoption of the initiatives by customers and risks faced by any of our bank collaborations including reputational and regulatory risk; 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 SEC 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.