CENTRAL FINANCIAL 2 nd Quarter 2024 Earnings Supplement July 31, 2024 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, 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. (the "Company") or its management or B ...

This quarterly report represents an earnings surprise of 20.83%. A quarter ago, it was expected that this operator of Central Pacific Bank would post earnings of $0.45 per share when it actually produced earnings of $0.48, delivering a surprise of 6.67%. Central Pacific Financial, which belongs to the Zacks Banks - West industry, posted revenues of $64.04 million for the quarter ended June 2024, surpassing the Zacks Consensus Estimate by 3.73%. This compares to year-ago revenues of $63.17 million. The compa ...

[Executive Summary & Q2 2024 Highlights](index=1&type=section&id=Executive%20Summary%20%26%20Q2%202024%20Highlights) Central Pacific Financial Corp. reported strong second-quarter 2024 financial results, with net income increasing by 22.2% sequentially to $15.8 million, driven by NIM expansion and core deposit growth [Q2 2024 Financial Performance Overview](index=1&type=section&id=Q2%202024%20Financial%20Performance%20Overview) Central Pacific Financial Corp. reported strong second-quarter 2024 financial results, with net income increasing by 22.2% sequentially to $15.8 million, driven by NIM expansion and core deposit growth | Metric | Q2 2024 | Q1 2024 | Change (QoQ) | Q2 2023 | Change (YoY) | | :-------------------------------- | :------ | :------ | :----------- | :------ | :----------- | | Net Income | $15.8M | $12.9M | +22.2% | $14.5M | +8.97% | | Diluted EPS | $0.58 | $0.48 | +20.83% | $0.53 | +9.43% | | Net Interest Margin (NIM) | 2.97% | 2.83% | +14 bps | - | - | | Total Loans | $5.38B | $5.40B | -$17.8M | - | - | | Core Deposits | $5.91B | $5.90B | +$16.7M | - | - | | Total Deposits | $6.58B | $6.62B | -$36.4M | - | - | | Net Charge-offs | $3.8M | $4.5M | -$0.8M | - | - | | Total Risk-Based Capital Ratio | 15.1% | - | - | - | - | | Common Equity Tier 1 Ratio | 11.9% | - | - | - | - | | Quarterly Cash Dividend per Share | $0.26 | - | - | - | - | [Management Commentary](index=1&type=section&id=Management%20Commentary) CEO Arnold Martines highlighted the strong second-quarter financial results, noting it was the highest net income in the last five quarters, driven by NIM expansion, core deposit growth, and improved net charge-offs, alongside solid liquidity and capital growth - CEO Arnold Martines stated that Q2 2024 net income was the **highest in the last five quarters**, attributing success to NIM expansion, core deposit growth, and improved net charge-offs[2](index=2&type=chunk) - The company maintained solid liquidity and further grew its capital levels[2](index=2&type=chunk) - Central Pacific Bank was recognized by Forbes Magazine as one of America's Best Banks and the Best-In-State Bank for Hawaii in 2024[2](index=2&type=chunk) [Board of Directors Update](index=1&type=section&id=Board%20of%20Directors%20Update) Mr. Arnold Martines was appointed Chairman of the Board for both the Company and the Bank, succeeding Ms. A. Catherine Ngo, who remains a board member - Mr. Arnold Martines was appointed Chairman of the Board of Central Pacific Financial Corp. and Central Pacific Bank[3](index=3&type=chunk) - Mr. Martines replaces Ms. A. Catherine Ngo, who continues to serve as a member of the Board of Directors[3](index=3&type=chunk) [Financial Performance](index=2&type=section&id=Financial%20Performance) The company's financial performance in Q2 2024 was marked by increased net interest income and margin, reduced credit loss provisions, and improved efficiency, contributing to overall profitability [Net Interest Income and Margin (NIM)](index=2&type=section&id=Net%20Interest%20Income%20and%20Margin%20(NIM)) Net interest income increased sequentially due to higher average yields on investment securities and loans, while interest-bearing liability costs remained stable, leading to a 14 bps increase in NIM | Metric | Q2 2024 | Q1 2024 | Change (QoQ) | Q2 2023 | Change (YoY) | | :------------------ | :------ | :------ | :----------- | :------ | :----------- | | Net Interest Income | $51.9M | $50.2M | +3.5% | $52.7M | -1.5% | | Net Interest Margin | 2.97% | 2.83% | +14 bps | 2.96% | +1 bp | - The sequential increase in net interest income and NIM was primarily due to higher average yields earned on investment securities and loans[4](index=4&type=chunk) - Interest-bearing liability costs remained relatively stable[4](index=4&type=chunk) [Provision for Credit Losses](index=2&type=section&id=Provision%20for%20Credit%20Losses) The provision for credit losses decreased significantly both sequentially and year-over-year, reflecting an improvement in credit quality outlook | Metric | Q2 2024 | Q1 2024 | Change (QoQ) | Q2 2023 | Change (YoY) | | :-------------------------- | :------ | :------ | :----------- | :------ | :----------- | | Provision for Credit Losses | $2.2M | $3.9M | -43.59% | $4.3M | -48.72% | | Provision for Loans | $2.4M | - | - | - | - | | Credit for Off-Balance Sheet | -$0.2M | - | - | - | - | [Other Operating Income](index=2&type=section&id=Other%20Operating%20Income) Total other operating income increased sequentially and year-over-year, primarily driven by higher mortgage banking income and investment services fees | Metric | Q2 2024 | Q1 2024 | Change (QoQ) | Q2 2023 | Change (YoY) | | :--------------------- | :------ | :------ | :----------- | :------ | :----------- | | Total Other Operating Income | $12.1M | $11.2M | +8.04% | $10.4M | +16.35% | | Mortgage Banking Income | +$0.4M | - | - | - | - | | Investment Services Fees | +$0.6M | - | - | - | - | [Operating Expenses and Efficiency Ratio](index=2&type=section&id=Operating%20Expenses%20and%20Efficiency%20Ratio) Total other operating expenses saw a slight increase, mainly due to higher salaries and employee benefits, however, the efficiency ratio improved sequentially | Metric | Q2 2024 | Q1 2024 | Change (QoQ) | Q2 2023 | Change (YoY) | | :---------------------- | :------ | :------ | :----------- | :------ | :----------- | | Total Other Operating Expense | $41.2M | $40.6M | +1.48% | $39.9M | +3.26% | | Efficiency Ratio | 64.26% | 66.05% | -1.79% | 63.17% | +1.09% | | Primary Driver of Expense Increase | Higher salaries and employee benefits | - | - | - | - | [Income Tax Expense](index=2&type=section&id=Income%20Tax%20Expense) The effective tax rate remained relatively stable quarter-over-quarter and year-over-year | Metric | Q2 2024 | Q1 2024 | Q2 2023 | | :---------------- | :------ | :------ | :------ | | Effective Tax Rate | 23.4% | 23.5% | 23.6% | [Balance Sheet Overview](index=2&type=section&id=Balance%20Sheet%20Overview) The balance sheet reflects a slight decrease in total assets and deposits, offset by stable core deposits and strong liquidity, while loan yields continued to improve [Assets](index=2&type=section&id=Assets) Total assets experienced a slight decrease both sequentially and year-over-year, with the company maintaining strong liquidity, covering 121% of uninsured and uncollateralized deposits | Metric | Jun 30, 2024 | Mar 31, 2024 | Change (QoQ) | Jun 30, 2023 | Change (YoY) | | :------------------------------------------------ | :----------- | :----------- | :----------- | :----------- | :----------- | | Total Assets | $7.39B | $7.41B | -0.3% | $7.57B | -2.4% | | Cash on Balance Sheet | $298.9M | - | - | - | - | | Total Other Liquidity Sources | $2.56B | - | - | - | - | | Available Liquidity as % of Uninsured Deposits | 121% | 118% | +3% | 128% | -7% | - Excess balance sheet liquidity was used to pay off **$41.6 million** in higher cost government time deposits during Q2 2024[9](index=9&type=chunk) [Loans](index=2&type=section&id=Loans) Total loans decreased slightly from the previous quarter and year-ago quarter, while average yields on loans continued to increase | Metric | Jun 30, 2024 | Mar 31, 2024 | Change (QoQ) | Jun 30, 2023 | Change (YoY) | | :-------------------------------- | :----------- | :----------- | :----------- | :----------- | :----------- | | Total Loans, net of deferred fees | $5.38B | $5.40B | -0.3% | $5.52B | -2.5% | | Average Yields on Loans | 4.80% | 4.67% | +13 bps | 4.37% | +43 bps | [Deposits](index=2&type=section&id=Deposits) Total deposits decreased, primarily due to a reduction in government time deposits, however, core deposits showed a modest increase, and the average rate paid on total deposits remained relatively stable sequentially | Metric | Jun 30, 2024 | Mar 31, 2024 | Change (QoQ) | Jun 30, 2023 | Change (YoY) | | :------------------------------------------------ | :----------- | :----------- | :----------- | :----------- | :----------- | | Total Deposits | $6.58B | $6.62B | -0.5% | $6.81B | -3.3% | | Core Deposits | $5.91B | $5.90B | +0.3% | - | - | | Government Time Deposits Decrease | $41.6M | - | - | - | - | | Average Rates Paid on Total Deposits | 1.33% | 1.32% | +1 bp | 0.84% | +49 bps | | FDIC-insured or fully collateralized deposits | 64% | 65% | -1% | 65% | -1% | [Asset Quality](index=2&type=section&id=Asset%20Quality) Asset quality remained stable with nonperforming assets consistent, a sequential decrease in net charge-offs, and a stable allowance for credit losses ratio [Nonperforming Assets](index=2&type=section&id=Nonperforming%20Assets) Nonperforming assets remained stable as a percentage of total assets sequentially, showing a slight decrease year-over-year | Metric | Jun 30, 2024 | Mar 31, 2024 | Jun 30, 2023 | | :-------------------------------- | :----------- | :----------- | :----------- | | Nonperforming Assets | $10.3M | $10.1M | $11.1M | | Nonperforming Assets as % of Total Assets | 0.14% | 0.14% | 0.15% | [Net Charge-offs](index=2&type=section&id=Net%20Charge-offs) Net charge-offs decreased sequentially but increased year-over-year, with the annualized rate as a percentage of average loans also showing a sequential decrease | Metric | Q2 2024 | Q1 2024 | Change (QoQ) | Q2 2023 | Change (YoY) | | :------------------------------------------ | :------ | :------ | :----------- | :------ | :----------- | | Net Charge-offs | $3.8M | $4.5M | -$0.7M | $3.4M | +$0.4M | | Annualized Net Charge-offs as % of Average Loans | 0.28% | 0.34% | -0.06% | 0.24% | +0.04% | [Allowance for Credit Losses](index=2&type=section&id=Allowance%20for%20Credit%20Losses) The allowance for credit losses as a percentage of total loans saw a slight sequential decrease but remained consistent year-over-year | Metric | Jun 30, 2024 | Mar 31, 2024 | Jun 30, 2023 | | :------------------------------------ | :----------- | :----------- | :----------- | | Allowance for Credit Losses as % of Total Loans | 1.16% | 1.18% | 1.16% | [Capital and Dividends](index=3&type=section&id=Capital%20and%20Dividends) The company strengthened its capital base with increased shareholders' equity and improved regulatory capital ratios, while maintaining a consistent quarterly cash dividend [Shareholders' Equity](index=3&type=section&id=Shareholders'%20Equity) Total shareholders' equity increased sequentially and year-over-year, indicating a strengthening capital base, with no share repurchases made during the quarter | Metric | Jun 30, 2024 | Mar 31, 2024 | Change (QoQ) | Jun 30, 2023 | Change (YoY) | | :--------------------- | :----------- | :----------- | :----------- | :----------- | :----------- | | Total Shareholders' Equity | $518.6M | $507.2M | +2.25% | $476.3M | +8.87% | | Share Repurchase Authorization Remaining | $19.1M | - | - | - | - | - The Company did not repurchase any shares of common stock during the second quarter of 2024[15](index=15&type=chunk) [Regulatory Capital Ratios](index=3&type=section&id=Regulatory%20Capital%20Ratios) All regulatory capital ratios for Central Pacific Financial Corp. improved sequentially, demonstrating a robust capital position | Ratio | Jun 30, 2024 | Mar 31, 2024 | Change (QoQ) | | :-------------------------- | :----------- | :----------- | :----------- | | Leverage Ratio | 9.3% | 9.0% | +0.3% | | Tier 1 Risk-Based Capital Ratio | 12.8% | 12.6% | +0.2% | | Total Risk-Based Capital Ratio | 15.1% | 14.8% | +0.3% | | Common Equity Tier 1 Capital Ratio | 11.9% | 11.6% | +0.3% | [Dividend Declaration](index=3&type=section&id=Dividend%20Declaration) The Board of Directors declared a quarterly cash dividend of $0.26 per share, payable in September 2024 - A quarterly cash dividend of **$0.26 per share** was declared on July 30, 2024[17](index=17&type=chunk) - The dividend is payable on September 16, 2024, to shareholders of record on August 30, 2024[17](index=17&type=chunk) [Company Information](index=3&type=section&id=Company%20Information) Central Pacific Financial Corp., a Hawaii-based bank holding company, provided details on its operations and the Q2 2024 earnings conference call for investors [About Central Pacific Financial Corp.](index=3&type=section&id=About%20Central%20Pacific%20Financial%20Corp.) Central Pacific Financial Corp. is a Hawaii-based bank holding company with approximately $7.39 billion in assets as of June 30, 2024, operating 27 branches and 55 ATMs through its primary subsidiary, Central Pacific Bank - Central Pacific Financial Corp. is a Hawaii-based bank holding company[19](index=19&type=chunk) - As of June 30, 2024, the company had approximately **$7.39 billion in assets**[19](index=19&type=chunk) - Its primary subsidiary, Central Pacific Bank, operates **27 branches and 55 ATMs** in Hawaii[19](index=19&type=chunk) [Conference Call Details](index=3&type=section&id=Conference%20Call%20Details) The company hosted a conference call on July 31, 2024, to discuss quarterly results, with webcast and playback options available for investors - A conference call was hosted on July 31, 2024, at 1:00 p.m. Eastern Time (7:00 a.m. Hawaii Time)[18](index=18&type=chunk) - Investors could listen via live webcast on the company's investor relations page or by dialing in[18](index=18&type=chunk) - A playback of the call is available through August 30, 2024[18](index=18&type=chunk) [Forward-Looking Statements](index=4&type=section&id=Forward-Looking%20Statements) This section contains cautionary statements regarding forward-looking information, emphasizing that actual results may differ materially due to various risks and uncertainties, including economic conditions, regulatory changes, and market fluctuations - The document contains forward-looking statements (FLS) concerning projections of financial items, plans, objectives, and future economic performance[20](index=20&type=chunk) - FLS are subject to risks and uncertainties, and actual results could differ materially due to factors such as inflation, interest rate fluctuations, bank failures, economic conditions, regulatory changes, and cybersecurity breaches[21](index=21&type=chunk) - Investors are urged to consider risk factors detailed in the Company's Form 10-K and other SEC filings[22](index=22&type=chunk) [Financial Tables](index=5&type=section&id=Financial%20Tables) This section provides comprehensive financial tables, including condensed income statements, balance sheets, performance ratios, and detailed breakdowns of loans and deposits, offering a complete view of the company's financial health [Condensed Income Statement & Performance Ratios](index=5&type=section&id=Condensed%20Income%20Statement%20%26%20Performance%20Ratios) This section provides a condensed income statement and key performance ratios for Central Pacific Financial Corp. across multiple quarters, highlighting trends in net income, EPS, profitability, and efficiency Condensed Income Statement (Dollars in thousands, except per share amounts) | Metric | Jun 30, 2024 | Mar 31, 2024 | Dec 31, 2023 | Sep 30, 2023 | Jun 30, 2023 | | :-------------------------- | :----------- | :----------- | :----------- | :----------- | :----------- | | Net interest income | $51,921 | $50,187 | $51,142 | $51,928 | $52,734 | | Provision for credit losses | 2,239 | 3,936 | 4,653 | 4,874 | 4,319 | | Total other operating income | 12,121 | 11,244 | 15,172 | 10,047 | 10,435 | | Total other operating expense | 41,151 | 40,576 | 42,522 | 39,611 | 39,903 | | Income tax expense | 4,835 | 3,974 | 4,273 | 4,349 | 4,472 | | Net income | 15,817 | 12,945 | 14,866 | 13,141 | 14,475 | | Basic earnings per share | $0.58 | $0.48 | $0.55 | $0.49 | $0.54 | | Diluted earnings per share | $0.58 | $0.48 | $0.55 | $0.49 | $0.53 | | Dividends declared per share | $0.26 | $0.26 | $0.26 | $0.26 | $0.26 | Performance Ratios | Metric | Jun 30, 2024 | Mar 31, 2024 | Dec 31, 2023 | Sep 30, 2023 | Jun 30, 2023 | | :-------------------------------- | :----------- | :----------- | :----------- | :----------- | :----------- | | Return on average assets (ROA) | 0.86% | 0.70% | 0.79% | 0.70% | 0.78% | | Return on average shareholders' equity (ROE) | 12.42% | 10.33% | 12.55% | 10.95% | 12.12% | | Average shareholders' equity to average assets | 6.94% | 6.73% | 6.32% | 6.39% | 6.40% | | Efficiency ratio | 64.26% | 66.05% | 64.12% | 63.91% | 63.17% | | Net interest margin (NIM) | 2.97% | 2.83% | 2.84% | 2.88% | 2.96% | | Dividend payout ratio | 44.83% | 54.17% | 47.27% | 53.06% | 49.06% | [Selected Average Balances & Regulatory Capital Ratios](index=5&type=section&id=Selected%20Average%20Balances%20%26%20Regulatory%20Capital%20Ratios) This section presents average balance sheet figures and regulatory capital ratios for both the holding company and the bank, illustrating capital adequacy and balance sheet composition over time Selected Average Balances (Dollars in thousands) | Metric | Jun 30, 2024 | Mar 31, 2024 | Dec 31, 2023 | Sep 30, 2023 | Jun 30, 2023 | | :-------------------------------- | :----------- | :----------- | :----------- | :----------- | :----------- | | Average loans, including loans held for sale | $5,385,829 | $5,400,558 | $5,458,245 | $5,507,248 | $5,543,398 | | Average interest-earning assets | 7,032,515 | 7,140,264 | 7,208,613 | 7,199,866 | 7,155,606 | | Average assets | 7,338,714 | 7,449,661 | 7,498,097 | 7,510,537 | 7,463,629 | | Average deposits | 6,542,767 | 6,659,812 | 6,730,883 | 6,738,071 | 6,674,650 | | Average interest-bearing liabilities | 4,910,998 | 5,009,542 | 5,023,321 | 4,999,820 | 4,908,120 | | Average shareholders' equity | 509,507 | 501,120 | 473,708 | 480,118 | 477,711 | Regulatory Capital Ratios (Central Pacific Financial Corp.) | Ratio | Jun 30, 2024 | Mar 31, 2024 | Dec 31, 2023 | Sep 30, 2023 | Jun 30, 2023 | | :-------------------------- | :----------- | :----------- | :----------- | :----------- | :----------- | | Leverage ratio | 9.3% | 9.0% | 8.8% | 8.7% | 8.7% | | Tier 1 risk-based capital ratio | 12.8% | 12.6% | 12.4% | 11.9% | 11.8% | | Total risk-based capital ratio | 15.1% | 14.8% | 14.6% | 14.1% | 13.9% | | Common equity tier 1 capital ratio | 11.9% | 11.6% | 11.4% | 11.0% | 10.9% | Regulatory Capital Ratios (Central Pacific Bank) | Ratio | Jun 30, 2024 | Mar 31, 2024 | Dec 31, 2023 | Sep 30, 2023 | Jun 30, 2023 | | :-------------------------- | :----------- | :----------- | :----------- | :----------- | :----------- | | Leverage ratio | 9.6% | 9.4% | 9.2% | 9.1% | 9.1% | | Tier 1 risk-based capital ratio | 13.3% | 13.1% | 12.9% | 12.4% | 12.3% | | Total risk-based capital ratio | 14.5% | 14.3% | 14.1% | 13.7% | 13.5% | | Common equity tier 1 capital ratio | 13.3% | 13.1% | 12.9% | 12.4% | 12.3% | [Balance Sheet (End of Period)](index=6&type=section&id=Balance%20Sheet%20(End%20of%20Period)) This table provides a snapshot of key balance sheet items at the end of each period, including total loans, assets, deposits, debt, and shareholders' equity, along with asset quality metrics Balance Sheet (Dollars in thousands) | Metric | Jun 30, 2024 | Mar 31, 2024 | Dec 31, 2023 | Sep 30, 2023 | Jun 30, 2023 | | :------------------------------------ | :----------- | :----------- | :----------- | :----------- | :----------- | | Total loans, net of deferred fees and costs | $5,383,644 | $5,401,417 | $5,438,982 | $5,508,710 | $5,520,683 | | Total assets | 7,386,952 | 7,409,999 | 7,642,796 | 7,637,924 | 7,567,592 | | Total deposits | 6,582,455 | 6,618,854 | 6,847,592 | 6,874,745 | 6,805,737 | | Long-term debt | 156,223 | 156,163 | 156,102 | 156,041 | 155,981 | | Total shareholders' equity | 518,647 | 507,203 | 503,815 | 468,598 | 476,279 | | Total shareholders' equity to total assets | 7.02% | 6.84% | 6.59% | 6.14% | 6.29% | Asset Quality (Dollars in thousands) | Metric | Jun 30, 2024 | Mar 31, 2024 | Dec 31, 2023 | Sep 30, 2023 | Jun 30, 2023 | | :------------------------------------ | :----------- | :----------- | :----------- | :----------- | :----------- | | Allowance for credit losses (ACL) | $62,225 | $63,532 | $63,934 | $64,517 | $63,849 | | Nonaccrual loans | 10,257 | 10,132 | 7,008 | 6,652 | 11,061 | | Non-performing assets (NPA) | 10,257 | 10,132 | 7,008 | 6,652 | 11,061 | | Ratio of ACL to total loans | 1.16% | 1.18% | 1.18% | 1.17% | 1.16% | | Ratio of NPA to total assets | 0.14% | 0.14% | 0.09% | 0.09% | 0.15% | Per Share of Common Stock Outstanding | Metric | Jun 30, 2024 | Mar 31, 2024 | Dec 31, 2023 | Sep 30, 2023 | Jun 30, 2023 | | :-------------------------- | :----------- | :----------- | :----------- | :----------- | :----------- | | Book value per common share | $19.16 | $18.76 | $18.63 | $17.33 | $17.61 | | Closing market price per common share | 21.20 | 19.75 | 19.68 | 16.68 | 15.71 | [Consolidated Balance Sheets (Detailed)](index=7&type=section&id=Consolidated%20Balance%20Sheets%20(Detailed)) This table provides a detailed breakdown of the company's assets, liabilities, and equity over the past five quarters, offering a comprehensive view of its financial position Consolidated Balance Sheets (Dollars in thousands) | Metric | Jun 30, 2024 | Mar 31, 2024 | Dec 31, 2023 | Sep 30, 2023 | Jun 30, 2023 | | :------------------------------------------------ | :----------- | :----------- | :----------- | :----------- | :----------- | | **ASSETS** | | | | | | | Cash and due from financial institutions | $103,829 | $98,410 | $116,181 | $108,818 | $129,071 | | Interest-bearing deposits in other financial institutions | 195,062 | 214,472 | 406,256 | 329,913 | 181,913 | | Total investment securities | 1,292,586 | 1,285,781 | 1,279,548 | 1,265,306 | 1,314,017 | | Loans, net of allowance for credit losses | 5,321,419 | 5,337,885 | 5,375,048 | 5,444,193 | 5,456,834 | | Total assets | $7,386,952 | $7,409,999 | $7,642,796 | $7,637,924 | $7,567,592 | | **LIABILITIES** | | | | | | | Total deposits | $6,582,455 | $6,618,854 | $6,847,592 | $6,874,745 | $6,805,737 | | Long-term debt, net | 156,223 | 156,163 | 156,102 | 156,041 | 155,981 | | Total liabilities | 6,868,305 | 6,902,796 | 7,138,981 | 7,169,326 | 7,091,313 | | **EQUITY** | | | | | | | Total shareholders' equity | 518,647 | 507,203 | 503,815 | 468,598 | 476,279 | | Total liabilities and equity | $7,386,952 | $7,409,999 | $7,642,796 | $7,637,924 | $7,567,592 | [Interest Income & Expense, Yields and Rates (Three Months)](index=8&type=section&id=Interest%20Income%20%26%20Expense%2C%20Yields%20and%20Rates%20(Three%20Months)) This table details the average balances, interest income/expense, and corresponding yields/rates for interest-earning assets and interest-bearing liabilities over the past five quarters, providing insight into net interest margin drivers Interest Income & Expense, Yields and Rates (Three Months Ended, Dollars in thousands) | Metric | Jun 30, 2024 | Mar 31, 2024 | Jun 30, 2023 | | :------------------------------------------------ | :----------- | :----------- | :----------- | | **Interest-earning assets:** | | | | | Interest and fees on loans | $64,422 | $62,819 | $60,455 | | Total interest income | 75,840 | 74,402 | 69,324 | | Average Yield on Total interest-earning assets | 4.34% | 4.19% | 3.89% | | **Interest expense:** | | | | | Interest on deposits | 21,640 | 21,932 | 14,013 | | Total interest expense | 23,919 | 24,215 | 16,590 | | Average Rate on Total interest-bearing liabilities | 1.96% | 1.94% | 1.36% | | Net interest income | 51,921 | 50,187 | 52,734 | | Net interest margin | 2.97% | 2.83% | 2.96% | [Interest Income & Expense, Yields and Rates (Six Months)](index=10&type=section&id=Interest%20Income%20%26%20Expense%2C%20Yields%20and%20Rates%20(Six%20Months)) This table presents the average balances, interest income/expense, and corresponding yields/rates for interest-earning assets and interest-bearing liabilities for the six months ended June 30, 2024, and June 30, 2023, offering a half-year comparison Interest Income & Expense, Yields and Rates (Six Months Ended, Dollars in thousands) | Metric | Jun 30, 2024 | Jun 30, 2023 | | :------------------------------------------------ | :----------- | :----------- | | **Interest-earning assets:** | | | | Interest and fees on loans | $127,241 | $118,724 | | Total interest income | 150,575 | 136,535 | | Average Yield on Total interest-earning assets | 4.26% | 3.85% | | **Interest expense:** | | | | Interest on deposits | 43,572 | 24,026 | | Total interest expense | 48,134 | 29,202 | | Average Rate on Total interest-bearing liabilities | 1.95% | 1.21% | | Net interest income | 102,441 | 107,333 | | Net interest margin | 2.90% | 3.02% | [Loans by Geographic Distribution](index=11&type=section&id=Loans%20by%20Geographic%20Distribution) This table breaks down the loan portfolio by geographic region (Hawaii and U.S. Mainland) and loan type, showing trends in commercial, real estate, and consumer lending over the past five quarters Loans by Geographic Distribution (Dollars in thousands) | Loan Type | Jun 30, 2024 | Mar 31, 2024 | Dec 31, 2023 | Sep 30, 2023 | Jun 30, 2023 | | :------------------------------------ | :----------- | :----------- | :----------- | :----------- | :----------- | | **HAWAII:** | | | | | | | Commercial and industrial | $415,538 | $420,009 | $421,736 | $406,433 | $374,601 | | Real estate: Construction | 147,657 | 145,213 | 163,337 | 174,057 | 168,012 | | Residential mortgage | 1,913,177 | 1,924,889 | 1,927,789 | 1,930,740 | 1,942,906 | | Home equity | 706,811 | 729,210 | 736,524 | 753,980 | 750,760 | | Commercial mortgage | 1,150,703 | 1,103,174 | 1,063,969 | 1,045,625 | 1,037,826 | | Consumer | 287,295 | 306,563 | 322,346 | 338,248 | 327,790 | | Total loans, net of deferred fees and costs (Hawaii) | 4,621,181 | 4,629,058 | 4,635,701 | 4,649,083 | 4,601,895 | | **U.S. MAINLAND:** | | | | | | | Commercial and industrial | $169,318 | $156,087 | $153,971 | $157,373 | $170,557 | | Real estate: Construction | 23,865 | 23,356 | 22,182 | 37,455 | 32,807 | | Commercial mortgage | 314,667 | 319,088 | 318,933 | 319,802 | 329,736 | | Consumer | 254,613 | 273,828 | 308,195 | 344,997 | 385,688 | | Total loans, net of deferred fees and costs (U.S. Mainland) | 762,463 | 772,359 | 803,281 | 859,627 | 918,788 | | **TOTAL:** | | | | | | | Total loans, net of deferred fees and costs | $5,383,644 | $5,401,417 | $5,438,982 | $5,508,710 | $5,520,683 | | Less: Allowance for credit losses | (62,225) | (63,532) | (63,934) | (64,517) | (63,849) | | Loans, net of allowance for credit losses | $5,321,419 | $5,337,885 | $5,375,048 | $5,444,193 | $5,456,834 | [Deposits Breakdown](index=12&type=section&id=Deposits%20Breakdown) This table provides a detailed breakdown of deposit types, including noninterest-bearing, interest-bearing demand, savings, money market, and time deposits, highlighting the composition of the company's funding sources Deposits (Dollars in thousands) | Deposit Type | Jun 30, 2024 | Mar 31, 2024 | Dec 31, 2023 | Sep 30, 2023 | Jun 30, 2023 | | :------------------------------------ | :----------- | :----------- | :----------- | :----------- | :----------- | | Noninterest-bearing demand | $1,847,173 | $1,848,554 | $1,913,379 | $1,969,523 | $2,009,387 | | Interest-bearing demand | 1,283,669 | 1,290,321 | 1,329,189 | 1,345,843 | 1,359,978 | | Savings and money market | 2,234,111 | 2,211,966 | 2,209,733 | 2,209,550 | 2,184,652 | | Time deposits up to $250,000 | 547,212 | 544,600 | 533,898 | 465,543 | 427,864 | | Core deposits | 5,912,165 | 5,895,441 | 5,986,199 | 5,990,459 | 5,981,881 | | Government time deposits | 193,833 | 235,463 | 374,581 | 400,130 | 383,426 | | Other time deposits greater than $250,000 | 476,457 | 487,950 | 486,812 | 484,156 | 440,430 | | Total time deposits greater than $250,000 | 670,290 | 723,413 | 861,393 | 884,286 | 823,856 | | Total deposits | $6,582,455 | $6,618,854 | $6,847,592 | $6,874,745 | $6,805,737 | [Nonperforming Assets and Accruing Loans 90+ Days Past Due](index=13&type=section&id=Nonperforming%20Assets%20and%20Accruing%20Loans%2090%2B%20Days%20Past%20Due) This table provides a detailed breakdown of nonaccrual loans, other real estate owned (OREO), and accruing loans 90+ days past due, along with key ratios and quarter-to-quarter changes in nonperforming assets Nonperforming Assets and Accruing Loans 90+ Days Past Due (Dollars in thousands) | Metric | Jun 30, 2024 | Mar 31, 2024 | Dec 31, 2023 | Sep 30, 2023 | Jun 30, 2023 | | :------------------------------------------------ | :----------- | :----------- | :----------- | :----------- | :----------- | | **Nonaccrual loans:** | | | | | | | Commercial and industrial | $355 | $357 | $432 | $352 | $319 | | Residential mortgage | 7,991 | 7,979 | 4,962 | 4,949 | 4,385 | | Total nonaccrual loans | 10,257 | 10,132 | 7,008 | 6,652 | 11,061 | | Total nonperforming assets ("NPAs") | 10,257 | 10,132 | 7,008 | 6,652 | 11,061 | | **Accruing loans 90+ days past due:** | | | | | | | Residential mortgage | 1,273 | 386 | — | 794 | 959 | | Total accruing loans 90+ days past due | 2,304 | 2,458 | 1,312 | 2,914 | 3,299 | | Total NPAs and accruing loans 90+ days past due | $12,561 | $12,590 | $8,320 | $9,566 | $14,360 | | Ratio of total nonaccrual loans to total loans | 0.19% | 0.19% | 0.13% | 0.12% | 0.20% | | Ratio of total NPAs to total assets | 0.14% | 0.14% | 0.09% | 0.09% | 0.15% | [Allowance for Credit Losses on Loans](index=14&type=section&id=Allowance%20for%20Credit%20Losses%20on%20Loans) This table details the activity within the allowance for credit losses, including provisions, charge-offs, and recoveries, providing insight into the company's credit loss management Allowance for Credit Losses on Loans (Dollars in thousands) | Metric | Jun 30, 2024 | Mar 31, 2024 | Dec 31, 2023 | Sep 30, 2023 | Jun 30, 2023 | | :------------------------------------------------ | :----------- | :----------- | :----------- | :----------- | :----------- | | Balance at beginning of period | $63,532 | $63,934 | $64,517 | $63,849 | $63,099 | | Provision for credit losses on loans | 2,448 | 4,121 | 4,959 | 4,526 | 4,135 | | Total charge-offs | (5,148) | (5,520) | (6,395) | (5,112) | (4,235) | | Total recoveries | 1,393 | 997 | 853 | 1,254 | 850 | | Net charge-offs | (3,755) | (4,523) | (5,542) | (3,858) | (3,385) | | Balance at end of period | $62,225 | $63,532 | $63,934 | $64,517 | $63,849 | | Ratio of annualized net charge-offs to average loans | 0.28% | 0.34% | 0.41% | 0.28% | 0.24% | | Ratio of ACL to total loans | 1.16% | 1.18% | 1.18% | 1.17% | 1.16% |

Investors might want to bet on Central Pacific Financial (CPF) , as it has been recently upgraded to a Zacks Rank #1 (Strong Buy). This upgrade primarily reflects an upward trend in earnings estimates, which is one of the most powerful forces impacting stock prices. The sole determinant of the Zacks rating is a company's changing earnings picture. The Zacks Consensus Estimate -- the consensus of EPS estimates from the sell-side analysts covering the stock -- for the current and following years is tracked by ...

Core Viewpoint - Central Pacific Financial Corp. (CPF) is positioned for growth due to balance sheet optimization, strong liquidity, and a solid capital base, with a positive outlook on earnings growth potential [1][3]. Earnings Growth - CPF has experienced an earnings growth of 8.58% over the past three to five years, attributed to stabilized top-line performance and prudent expense management [3]. - The Zacks Consensus Estimate indicates a 7.83% decline in earnings for 2024, followed by a recovery of 17.5% in 2025 [4]. - Analysts have revised the earnings estimates upward by 1% and 5.4% for 2024 and 2025, respectively [1]. Revenue Strength - CPF's revenues have shown a compound annual growth rate (CAGR) of 3.3% from 2019 to 2023, driven by growth in non-interest income [5]. - Net loans and total deposits experienced a CAGR of 5.1% and 7.5%, respectively, over the last four years, although both metrics reversed in the first quarter of 2024 [5]. - The Zacks Consensus Estimate predicts a 2.4% dip in revenues for 2024, with a growth rate of 5.5% in 2025 [6]. Strong Balance Sheet - As of March 31, 2024, CPF's total cash and cash equivalents were $312.9 million, and total debt was $127.8 million [7][8]. - The tier 1 risk-based capital ratio and total risk-based capital ratio were 12.6% and 14.8%, respectively, well above regulatory requirements [8]. Stock Valuation - CPF stock has a Value Score of A, indicating it is trading at a discount and helping investors avoid "value traps" [9]. Market Performance - Over the past six months, CPF shares have gained 9.1%, outperforming the industry's growth of 1.1% [2].

Core Viewpoint - The article emphasizes the importance of value investing and highlights specific metrics that indicate undervaluation of stocks, particularly focusing on CPF as a strong candidate for value investors [2][8]. Company Metrics - CPF has a Zacks Rank of 2 (Buy) and an A for Value, indicating strong potential for value investors [4]. - The stock's P/E ratio is 9.55, slightly below the industry average of 9.62, with a historical range between 6.89 and 10.49 [4]. - CPF's P/B ratio stands at 1.09, which is attractive compared to the industry's average P/B of 1.12, with a historical range of 0.85 to 1.17 [5]. - The P/S ratio for CPF is 1.63, lower than the industry's average of 1.76, suggesting a favorable valuation based on sales [6]. - CPF's P/CF ratio is 8.41, which is competitive against the industry's average of 8.53, with a historical range from 4.82 to 8.82 [7]. Investment Outlook - The combination of CPF's strong value metrics and positive earnings outlook positions it as an impressive value stock currently [8].

The proven Zacks Rank system focuses on earnings estimates and estimate revisions to find winning stocks. Nevertheless, we know that our readers all have their own perspectives, so we are always looking at the latest trends in value, growth, and momentum to find strong picks.Looking at the history of these trends, perhaps none is more beloved than value investing. This strategy simply looks to identify companies that are being undervalued by the broader market. Value investors rely on traditional forms of a ...

While the proven Zacks Rank places an emphasis on earnings estimates and estimate revisions to find strong stocks, we also know that investors tend to develop their own individual strategies. With this in mind, we are always looking at value, growth, and momentum trends to discover great companies.Looking at the history of these trends, perhaps none is more beloved than value investing. This strategy simply looks to identify companies that are being undervalued by the broader market. Value investors use tri ...

Financial Data and Key Metrics Changes - Net income for the first quarter was $12.9 million or $0.48 per diluted share, with a return on average assets of 0.70% and return on average equity of 10.33% [40] - The efficiency ratio was reported at 66%, indicating operational efficiency [40] - The net interest margin (NIM) is guided to be in the range of 2.90% to 3%, an increase from 2.83% in the first quarter [3][6] Business Line Data and Key Metrics Changes - The total loan portfolio decreased by $37.6 million or 0.7% sequentially, primarily due to planned runoff in the Mainland consumer loan portfolio [40] - Other operating income was $11.2 million, normalizing after a non-recurring gain in the previous quarter [32] - Non-performing assets increased slightly to $10.1 million or 0.14% of total assets, primarily due to residential mortgage loans moving into non-accrual status [50] Market Data and Key Metrics Changes - Total statewide hotel occupancy in Hawaii was 75%, down 1.9% from a year ago, with an average daily rate of $384, down 0.9% [29] - The unemployment rate in Hawaii was 3.1%, outperforming the national rate of 3.9% [29] - The Oahu median single-family home price increased to $1.1 million, with home sales volumes up 6.1% for single-family homes [39] Company Strategy and Development Direction - The company is focused on leveraging technology to improve operational efficiencies and is optimistic about revenue growth outpacing expense growth [5] - The lending strategy emphasizes diversification and stable segments, with nearly 80% of the loan portfolio being real estate secured [43] - The company plans to continue its share repurchase program and maintain a dividend payout ratio in the 40% to 50% range [11] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about Hawaii's economic outlook despite near-term challenges from the Maui wildfires [30] - The company anticipates a ramp-up in activity in 2024, particularly in commercial real estate and small business loans [46] - Management believes that the NIM has bottomed and will expand modestly in the coming quarters [32][66] Other Important Information - The company repurchased 49,960 shares at a total cost of $900,000 during the first quarter [41] - The effective tax rate was reported at 23.5%, expected to remain in the 23% to 25% range [32] - The allowance for credit losses was $63.5 million or 1.18% of outstanding loans, with a provision for credit losses of $4.1 million recorded during the quarter [51] Q&A Session Summary Question: What are the opportunities in the loan pipeline and competitive dynamics? - Management noted a healthy pipeline with strength in commercial real estate and small business loans, while acknowledging a competitive landscape due to lower overall market demand [46] Question: How is the company managing credit quality and trends in the consumer portfolio? - Management indicated that credit quality remains strong, with a decrease in criticized loans and a focus on monitoring the economic environment closely [50][51] Question: What are the trends in deposits and how does the company plan to drive core deposit growth? - The company experienced a $230 million sequential decrease in total deposits, primarily due to intentional runoff of higher-cost government CDs, but expects to gain traction in core deposit growth moving forward [56][57]

Part I. Financial Information [Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) The unaudited consolidated financial statements for Central Pacific Financial Corp. as of March 31, 2024, show a decrease in total assets to $7.41 billion from $7.64 billion at year-end 2023. Net income for the first quarter of 2024 was $12.9 million, a decrease from $16.2 million in the first quarter of 2023, primarily due to higher interest expense on deposits which compressed net interest income. The statements reflect the company's financial position, operational results, changes in equity, and cash flows for the period Consolidated Balance Sheet Highlights (Unaudited) | | March 31, 2024 | December 31, 2023 | | :--- | :--- | :--- | | **Total Assets** | **$7.41 billion** | **$7.64 billion** | | Total Loans, net | $5.34 billion | $5.38 billion | | Total Deposits | $6.62 billion | $6.85 billion | | **Total Liabilities** | **$6.90 billion** | **$7.14 billion** | | **Total Equity** | **$507.2 million** | **$503.8 million** | Consolidated Income Statement Highlights (Unaudited) | | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :--- | :--- | :--- | | Net Interest Income | $50.2 million | $54.2 million | | Provision for Credit Losses | $3.9 million | $1.9 million | | **Net Income** | **$12.9 million** | **$16.2 million** | | **Diluted EPS** | **$0.48** | **$0.60** | Consolidated Cash Flow Highlights (Unaudited) | | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :--- | :--- | :--- | | Net cash provided by operating activities | $17.0 million | $18.3 million | | Net cash provided by (used in) investing activities | $10.2 million | $(3.0) million | | Net cash (used in) provided by financing activities | $(236.7) million | $71.5 million | | **Net (decrease) increase in cash** | **$(209.6) million** | **$86.7 million** | [Notes to Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) The notes detail the company's accounting policies, including a significant update in Q3 2023 to its methodology for measuring expected credit losses, moving to a Discounted Cash Flow (DCF) method for most loan segments. They provide disaggregated data on investment securities, loan portfolio credit quality, allowance for credit losses, derivatives, debt, and fair value measurements, offering deeper insight into the figures presented in the primary financial statements - In **Q3 2023**, the company updated its methodology for measuring expected credit losses from PD/LGD or Loss-Rate Migration methods to the Discounted Cash Flow (DCF) method for most loan segments, believing DCF better aligns with the CECL standard for forward-looking forecasting[97](index=97&type=chunk) - The company uses Moody's Analytics' Baseline forecast for its economic assumptions, with a **one-year forecast period** followed by a **one-year straight-line reversion** to historical loss information[89](index=89&type=chunk)[90](index=90&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A)](index=40&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management attributes the Q1 2024 net income decrease to $12.9 million from $16.2 million year-over-year primarily to a $4.0 million decline in net interest income, driven by higher deposit costs. The provision for credit losses increased to $3.9 million, mainly due to higher charge-offs in the U.S. Mainland unsecured consumer loan portfolio. Total assets decreased by $232.8 million to $7.41 billion, as the company used excess liquidity to pay off maturing high-cost government time deposits. The discussion also covers the stable Hawaiian economy despite the Maui wildfires, asset quality, and capital resources, noting that regulatory capital ratios remain well above 'well capitalized' levels Q1 Financial Performance Summary | Metric | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Net Income | $12.9 million | $16.2 million | | Diluted EPS | $0.48 | $0.60 | | Pre-Provision Net Revenue (Non-GAAP) | $20.9 million | $23.1 million | | Provision for Credit Losses | $3.9 million | $1.9 million | - The decrease in Pre-Provision Net Revenue (PPNR) was primarily due to a **$4.0 million** decline in net interest income, caused by higher average balances and rates paid on interest-bearing deposits[313](index=313&type=chunk) - Total assets decreased by **3.0%** to **$7.41 billion** at March 31, 2024, as the company used excess liquidity to pay off high-cost government time deposits that matured during the quarter[384](index=384&type=chunk) - Nonperforming assets increased to **$10.1 million** (**0.14%** of total assets) from **$7.0 million** (**0.09%** of total assets) at year-end 2023, mainly due to additions in the well-collateralized residential mortgage category[365](index=365&type=chunk)[389](index=389&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=60&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company's primary market risk is interest rate risk, managed by the Asset/Liability Management Committee (ALCO). As of March 31, 2024, the company's balance sheet is relatively well-matched against interest rate movements. A static net interest income sensitivity analysis shows that an instantaneous **+100 bps rate shock** would increase net interest income by **0.33%**, while a **-100 bps shock** would decrease it by **1.93%**, both within ALCO policy limits Net Interest Income Sensitivity Analysis (as of March 31, 2024) | Rate Change Scenario (Instantaneous) | Estimated Net Interest Income Sensitivity | | :--- | :--- | | +200 bps | +0.62% | | +100 bps | +0.33% | | -100 bps | -1.93% | | -200 bps | -4.28% | - The company's objective in managing liquidity is to balance sources and uses of funds. As of March 31, 2024, it had **$312.9 million** in cash and approximately **$2.42 billion** in other liquidity sources, with total available liquidity covering **118%** of uninsured and uncollateralized deposits[418](index=418&type=chunk)[420](index=420&type=chunk) [Controls and Procedures](index=60&type=section&id=Item%204.%20Controls%20and%20Procedures) Management, including the CEO and CFO, evaluated the company's disclosure controls and procedures and concluded they were effective as of March 31, 2024. There were no changes in internal control over financial reporting during the quarter that have materially affected, or are reasonably likely to materially affect, these controls - Based on an evaluation as of the end of the period, the principal executive officer and principal financial officer concluded that the company's disclosure controls and procedures were **effective**[422](index=422&type=chunk) - **No material changes** to the company's internal control over financial reporting occurred during the first quarter of 2024[448](index=448&type=chunk) Part II. Other Information [Legal Proceedings](index=61&type=section&id=Item%201.%20Legal%20Proceedings) The company is involved in legal proceedings that arise in the ordinary course of business. Management does not expect the ultimate resolution of these matters to have a material adverse effect on the company's financial condition or operations - The company states that it does **not expect ongoing legal proceedings** from the ordinary course of business to have a material adverse effect on its financial condition[274](index=274&type=chunk)[449](index=449&type=chunk) [Risk Factors](index=61&type=page&id=Item%201A.%20Risk%20Factors) There have been no material changes to the risk factors previously disclosed in the company's Annual Report on Form 10-K for the year ended December 31, 2023 - **No material changes** from the Risk Factors disclosed in the 2023 Form 10-K have been reported[460](index=460&type=chunk) [Issuer Purchases of Equity Securities](index=61&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%2C%20Use%20of%20Proceeds%2C%20and%20Issuer%20Purchases%20of%20Equity%20Securities) In January 2024, the Board approved a new $20.0 million share repurchase plan. During the first quarter of 2024, the company repurchased 49,960 shares of common stock for an aggregate cost of $0.9 million. As of March 31, 2024, $19.1 million remained available for repurchase under the plan Share Repurchases in Q1 2024 | Period | Total Shares Purchased | Average Price Paid per Share | Shares Purchased as Part of Program | | :--- | :--- | :--- | :--- | | Jan 2024 | 0 | N/A | 0 | | Feb 2024 | 67,299 | $19.11 | 42,660 | | Mar 2024 | 7,300 | $18.54 | 7,300 | | **Total Q1** | **74,599** | **$19.05** | **49,960** | - A new **$20.0 million** share repurchase plan was authorized in January 2024. As of March 31, 2024, **$19.1 million** remained available under this authorization[461](index=461&type=chunk)[462](index=462&type=chunk) [Other Information](index=61&type=section&id=Item%205.%20Other%20Information) During the first quarter of 2024, none of the company's directors or officers adopted or terminated a Rule 10b5-1 trading arrangement or a non-Rule 10b5-1 trading arrangement for the purchase or sale of the company's common stock - **No directors or officers adopted or terminated** a Rule 10b5-1 or non-Rule 10b5-1 trading arrangement during Q1 2024[465](index=465&type=chunk) [Exhibits](index=62&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including CEO and CFO certifications under the Sarbanes-Oxley Act (Sections 302 and 906) and Interactive Data Files (Inline XBRL)