Financial Data and Key Metrics Changes - Net income for Q3 2024 was $13.3 million or $0.49 per diluted share, excluding $3.1 million in pre-tax expenses related to a strategic opportunity, net income and diluted EPS were $15.7 million and $0.58 respectively [17] - Net interest income increased to $53.9 million, up $1.9 million from the prior quarter, with a net interest margin of 3.07%, an increase of 10 basis points sequentially [20] - Total loan portfolio decreased by $41 million or 0.8% sequentially, with growth from commercial real estate and C&I portfolios offset by runoff in other loan types [18] Business Line Data and Key Metrics Changes - Other operating income increased to $12.7 million, primarily due to higher bank-owned life insurance income [21] - Other operating expenses totaled $46.7 million, including the $3.1 million in strategic opportunity expenses, with a normalized run rate of approximately $42 million quarterly [22] Market Data and Key Metrics Changes - Hawaii's construction industry generated $11.8 billion in 2023, a 10% increase from the prior year, with private building permits up 19% in the first seven months of 2024 [13] - Statewide visitor arrivals were down 2.2% year-to-date through August, about 92% of pre-pandemic levels in 2019 [14] - Hawaii's unemployment rate remained low at 2.9% in September, outperforming the national rate of 4.1% [15] Company Strategy and Development Direction - The company opened a new state-of-the-art branch in Kahului, Maui, to serve consumer and business needs, indicating a strategy to expand presence in key markets [11] - Management remains optimistic about the resilience of the local economy, with expectations of stable growth in Hawaii, particularly in the construction sector [12] Management's Comments on Operating Environment and Future Outlook - Management noted that loan growth remained challenged due to high rates but anticipates positive trends as rates begin to decline, indicating pent-up demand for loans [9][33] - The company is committed to navigating existing market conditions effectively while supporting clients and driving shareholder value [30] Other Important Information - The effective tax rate was 22% in Q3, expected to remain in the 22% to 24% range going forward [23] - The Board of Directors declared a quarterly cash dividend of $0.26 per share, payable on December 16 [23] Q&A Session Summary Question: Loan Demand and Growth Outlook - Management indicated that the decline in loans is primarily demand-driven due to high rates, with expectations of increased loan demand as rates decline [32][33] Question: Net Interest Margin and Deposit Competition - Management forecasted NIM in the next quarter or two in the 3.10% to 3.20% range, with positive trends in deposit flows [35][36] Question: Strategic Opportunity Discussions - Management could not provide further comments on the strategic opportunity discussions that are no longer ongoing [38] Question: Capital Deployment and Buybacks - Management expressed openness to share repurchases as a function of market conditions, with a focus on improving the tangible capital ratio [42] Question: Loan Production Yields and Growth Areas - New volume loan yields were about 7.75%, with growth opportunities primarily in the commercial sector, commercial real estate, and C&I [45][46]

Financial Performance - Net income for Q3 2024 was $13.3 million, or $0.49 per diluted share, compared to $13.1 million, or $0.49 per diluted share in Q3 2023[211]. - Net income for the nine months ended September 30, 2024, was $42.1 million, or $1.55 per diluted share, down from $43.8 million, or $1.62 per diluted share in the same period of 2023[212]. - Pre-provision net revenue (PPNR) for Q3 2024 was $19.9 million, down from $22.4 million in Q3 2023, primarily due to strategic opportunity-related expenses[215]. - Return on average assets (ROA) for Q3 2024 was 0.72%, compared to 0.70% in Q3 2023[218]. - Return on average shareholders' equity (ROE) for Q3 2024 was 10.02%, down from 10.95% in Q3 2023[218]. - Adjusted net income increased to $15,667 for the three months ended September 30, 2024, from $13,141 in 2023, and for the nine months, it rose to $44,429 from $43,803[223]. - The adjusted diluted earnings per share (EPS) for the three months ended September 30, 2024, was $0.58, up from $0.49 in 2023, while for the nine months, it was $1.64 compared to $1.62 in 2023[223]. - The efficiency ratio (non-GAAP) for the three months ended September 30, 2024, was 70.12%, compared to 63.91% in 2023, and for the nine months, it was 66.86% versus 63.89% in 2023[227]. - Adjusted return on average assets (ROA) for the three months ended September 30, 2024, was 0.85%, up from 0.70% in 2023, while for the nine months, it was 0.80% compared to 0.78% in 2023[230]. - Adjusted return on average shareholders' equity (ROE) for the three months ended September 30, 2024, was 11.75%, compared to 10.95% in 2023, and for the nine months, it was 11.51% versus 12.33% in 2023[230]. Credit Losses and Provisions - Provision for credit losses for Q3 2024 was $2.8 million, a decrease from $4.9 million in Q3 2023, attributed to lower loan balances and improved economic forecasts[213]. - The Company recorded a provision for credit losses of $9.0 million for the nine months ended September 30, 2024, compared to $11.0 million in the same period of 2023[214]. - The provision for credit losses on loans was $3.0 million for the third quarter of 2024, compared to $4.5 million in the same period last year[285]. - Net charge-offs for the third quarter of 2024 were $3.6 million, a decrease from $3.9 million in the prior year[285]. - The allowance for credit losses (ACL) totaled $61.6 million as of September 30, 2024, down from $64.5 million a year earlier[284]. Deposits and Loans - Total deposits decreased by $264.6 million, or 3.9%, to $6.58 billion as of September 30, 2024, from $6.85 billion at December 31, 2023[289]. - Core deposits totaled $5.97 billion at September 30, 2024, representing 90.6% of total deposits, compared to 87.4% at December 31, 2023[290]. - Total loans decreased by $96.4 million, or 1.77%, to $5.34 billion as of September 30, 2024, primarily due to a $110.9 million decrease in consumer loans[276]. - The Hawaii loan portfolio decreased by $59.9 million, or 1.3%, with notable declines in consumer loans ($44.5 million) and home equity loans ($39.4 million)[277]. - The U.S. Mainland loan portfolio decreased by $36.4 million, or 4.5%, primarily due to a $66.4 million decrease in consumer loans as the company allowed the portfolio to runoff[278]. Interest Income and Expenses - Net interest income for Q3 2024 was $54.0 million, an increase of $1.9 million or 3.6% from $52.1 million in Q3 2023[244]. - Taxable-equivalent interest income was $78.0 million for Q3 2024, representing an increase of $5.4 million or 7.5% from $72.6 million in the year-ago quarter[245]. - Interest expense for Q3 2024 was $24.0 million, an increase of $3.6 million or 17.4% from $20.5 million in Q3 2023[247]. - The net interest margin for Q3 2024 increased to 3.07%, up 19 basis points from 2.88% in the year-ago quarter[247]. - Average rates paid on interest-bearing deposits increased by 33 basis points to 1.82% in Q3 2024[247]. - Average yield on loans increased by 40 basis points, contributing approximately $5.3 million to interest income[246]. - Average yield on investment securities increased by 51 basis points, contributing approximately $1.9 million to interest income[245]. - Net interest income for the nine months ended September 30, 2024, was $156.4 million, a decrease of $3.0 million or 1.9% from $159.5 million in the same period of 2023[251]. - Interest expense rose to $72.2 million for the nine months ended September 30, 2024, an increase of $22.5 million or 45.3% compared to $49.7 million in the year-ago period[254]. Operational Metrics - The Company operates 27 branches and 56 ATMs throughout Hawaii as of September 30, 2024[205]. - The Company emphasizes the importance of non-GAAP financial measures to provide better indicators of core activities, excluding certain strategic expenses[219]. - The tangible common equity ratio (non-GAAP) as of September 30, 2024, was 7.31%, an increase from 6.12% in 2023[221]. - The company reported a higher adjusted PPNR in Q3 2024 primarily due to an increase in net interest income of $1.9 million compared to the year-ago period[224]. - The adjusted efficiency ratio increased to 65.51% in Q3 2024 from 63.91% in the year-ago quarter, attributed to higher operating expenses[228]. Economic and Market Conditions - Visitor arrivals to Maui decreased by approximately 57% in September 2023 compared to September 2022, but have since started to recover, with an 80% increase in August 2024 compared to August 2023[234]. - Total visitor spending in Hawaii for the eight months ended August 31, 2024, was $14.06 billion, down 2.3% from $14.39 billion in the same period last year, but up 16.6% from $12.06 billion in 2019[237]. - The unemployment rate for Maui improved from 8.4% in September 2023 to 4.0% in September 2024[234]. - Hawaii's seasonally adjusted annual unemployment rate was 2.9% in September 2024, compared to 3.0% in September 2023, indicating a stable labor market[239]. - Real personal income in Hawaii is projected to grow by 1.4% and real gross state product by 1.0% in 2024[241]. Shareholder Equity and Capital Management - Total shareholders' equity rose to $543.7 million at September 30, 2024, compared to $503.8 million at December 31, 2023, driven by net income of $42.1 million[296]. - The total shareholders' equity to total assets ratio improved to 7.33% at September 30, 2024, from 6.59% at December 31, 2023[297]. - The Company completed a $55.0 million private placement of ten-year fixed-to-floating rate subordinated notes, bearing a fixed interest rate of 4.75% for the first five years[307]. - As of September 30, 2024, the Company's leverage capital ratio was 9.5%, CET1 risk-based capital ratio was 12.1%, and total risk-based capital ratio was 15.3%, all above the "well capitalized" regulatory designation[312]. Risk Management and Compliance - The Company performed regular liquidity stress testing to ensure adequate liquidity under potential stress events[322]. - The Company’s total risk-based capital as of December 31, 2023, was 14.6%, exceeding the minimum required ratio of 8.0%[312]. - The Asset/Liability Management Committee utilizes a simulation model to manage interest rate risk and inform strategic actions[316]. - The company's management evaluated the effectiveness of disclosure controls and procedures, concluding they were effective as of the end of the reporting period[327]. - There were no changes in the company's internal control over financial reporting that materially affected its financial reporting during the reporting period[328]. - The company is involved in legal proceedings that arise in the ordinary course of business, but does not expect these to materially affect its financial condition or operations[330].

Financial Performance - Net income was $133 million, but adjusted net income, excluding $31 million in strategic opportunity expenses, reached $157 million[3] - Pre-provision net revenue (PPNR) was $199 million, increasing to $230 million on a non-GAAP basis[3] - Net interest margin (NIM) expanded by 10 basis points sequentially[3] - Core deposits grew by $539 million from the prior quarter[3] Financial Ratios and Capital - Tangible common equity (TCE) ratio improved to 731%[3] - Return on assets (ROA) was 072%, and adjusted ROA was 085%[3] - Return on equity (ROE) was 1002%, with an adjusted ROE of 1175%[3] - The company maintained a quarterly cash dividend of $026 per share[3] Loan and Deposit Portfolio - The loan portfolio is diversified, with nearly 80% secured by real estate[8] - The overall portfolio yield improved by 9 basis points to 489% in 3Q24[8] - 58% of deposits are FDIC insured, increasing to 63% when including collateralized deposits[11] Asset Quality - The allowance for credit losses (ACL) coverage ratio was 115% for 3Q24[21] - Delinquencies (90+ days) on total loans were 005%[17]

Core Insights - Central Pacific Financial (CPF) reported revenue of $66.59 million for the quarter ended September 2024, reflecting a year-over-year increase of 7.4% and a surprise of +2.09% over the Zacks Consensus Estimate of $65.22 million [1] - Earnings per share (EPS) for the quarter was $0.58, compared to $0.49 in the same quarter last year, resulting in an EPS surprise of +3.57% against the consensus estimate of $0.56 [1] Financial Performance Metrics - Efficiency Ratio was reported at 70.1%, higher than the estimated 63.5% by analysts [3] - Net Interest Margin stood at 3.1%, slightly above the average estimate of 3% [3] - Average Balance of Total Interest Earning Assets was $7.02 billion, marginally exceeding the estimate of $7.01 billion [3] - Total Nonaccrual Loans amounted to $11.60 million, surpassing the estimate of $10.61 million [3] - Total Nonperforming Assets were reported at $11.60 million, slightly below the estimated $11.91 million [3] - Net Charge-offs to Average Loans remained at 0.3%, matching the analyst estimate [3] - Net Interest Income (FTE) was $54 million, exceeding the estimate of $53.34 million [3] - Total Noninterest Income/Total Other Operating Income reached $12.73 million, above the estimate of $12.07 million [3] - Net Interest Income was reported at $53.85 million, higher than the average estimate of $53.16 million [3] Stock Performance - Shares of Central Pacific Financial have returned +3.9% over the past month, outperforming the Zacks S&P 500 composite's +1.8% change [4] - The stock currently holds a Zacks Rank 4 (Sell), indicating potential underperformance relative to the broader market in the near term [4]

Core Insights - Central Pacific Financial (CPF) reported quarterly earnings of $0.58 per share, exceeding the Zacks Consensus Estimate of $0.56 per share, and up from $0.49 per share a year ago, representing an earnings surprise of 3.57% [1] - The company achieved revenues of $66.59 million for the quarter ended September 2024, surpassing the Zacks Consensus Estimate by 2.09% and increasing from $61.98 million year-over-year [2] - Central Pacific Financial shares have appreciated approximately 48.1% year-to-date, significantly outperforming the S&P 500's gain of 22.3% [3] Earnings Outlook - The current consensus EPS estimate for the upcoming quarter is $0.58 on revenues of $66.02 million, and for the current fiscal year, it is $2.20 on revenues of $256.73 million [7] - The estimate revisions trend for Central Pacific Financial is currently unfavorable, resulting in a Zacks Rank 4 (Sell), indicating expected underperformance in the near future [6] Industry Context - The Zacks Industry Rank for Banks - West is in the bottom 41% of over 250 Zacks industries, suggesting that the industry outlook may negatively impact stock performance [8]

Financial Performance - Net income for Q3 2024 was $13.3 million, or $0.49 per diluted share, compared to $15.8 million, or $0.58 per diluted share in the previous quarter[2]. - Net interest income for Q3 2024 was $53,851,000, an increase from $51,921,000 in Q2 2024[25]. - Net income for Q3 2024 was $13,305,000, resulting in basic earnings per share of $0.49, down from $15,817,000 and $0.58 in Q2 2024[25]. - Return on average assets (ROA) decreased to 0.72% in Q3 2024 from 0.86% in Q2 2024[25]. - Return on average shareholders' equity (ROE) was 10.02% in Q3 2024, down from 12.42% in Q2 2024[25]. - Net income for the quarter was $13,305,000, a decrease of 15.9% compared to $15,817,000 in the prior quarter[30]. - Basic earnings per share decreased to $0.49 from $0.58, reflecting a decline of 15.5%[30]. - Net income for the three months ended September 30, 2024, was $13,305 thousand, with an adjusted net income of $15,667 thousand[40]. - Diluted earnings per share (EPS) for the same period was $0.49, adjusted EPS was $0.58[41]. Asset and Liability Management - Total assets increased by $28.5 million to $7.42 billion, a 0.4% increase from the previous quarter[10]. - Total assets increased to $7,415,430 thousand, up from $7,386,952 thousand in the previous quarter, representing a growth of 0.39%[27]. - Total liabilities decreased slightly to $6,816,475 thousand as of September 30, 2024, from $6,829,207 thousand in June 30, 2024[31]. - Total deposits remained stable at $6,583,013 thousand compared to $6,582,455 thousand in the previous quarter, showing a marginal increase of 0.01%[28]. - Total deposits increased slightly to $6,583,013 thousand from $6,582,455 thousand in the previous quarter, indicating a marginal growth of 0.01%[35]. Loan and Deposit Trends - Total loans decreased by $41.0 million to $5.34 billion, a decline of 0.8% from the previous quarter[11]. - Average loans held for sale decreased to $5,330,810,000 in Q3 2024 from $5,385,829,000 in Q2 2024[25]. - Total loans, net of deferred fees and costs decreased to $5,342,609 thousand from $5,383,644 thousand in the previous quarter, a decline of 0.76%[26]. - Total loans, net of allowance for credit losses stood at $5,280,962 thousand, a decrease from $5,321,419 thousand in the prior quarter, reflecting a decline of 0.8%[34]. - Core deposits increased by $53.9 million to $5.97 billion, a rise of 0.9% from the previous quarter[12]. - Noninterest-bearing demand deposits decreased to $1,838,009 thousand from $1,847,173 thousand, reflecting a decline of 0.7%[35]. - Commercial and industrial loans in Hawaii decreased to $411,209 thousand from $415,538 thousand, a decline of 0.8%[34]. Credit Quality and Risk Management - Nonperforming assets totaled $11.6 million, or 0.16% of total assets, up from $10.3 million, or 0.14% in the previous quarter[13]. - The allowance for credit losses was 1.15% of total loans, slightly down from 1.16% in the previous quarter[16]. - Provision for credit losses increased to $2,833,000 in Q3 2024 from $2,239,000 in Q2 2024[25]. - Nonaccrual loans increased to $11,597 thousand from $10,257 thousand in the previous quarter, indicating a rise of 13.06%[26]. - The ratio of non-performing assets (NPA) to total assets was 0.16%, up from 0.14% in the previous quarter[26]. - The ratio of total nonaccrual loans to total loans rose to 0.22% in September 2024, compared to 0.19% in June 2024[36]. - The allowance for credit losses on loans decreased to $61,647 thousand at the end of September 2024, down from $62,225 thousand at the end of June 2024[37]. Operational Efficiency - The efficiency ratio was 70.12%, compared to 64.26% in the previous quarter[8]. - The efficiency ratio (non-GAAP) improved to 65.51% for the three months ended September 30, 2024, compared to 70.12% reported[43]. - Salaries and employee benefits increased to $22,299,000 from $21,246,000, marking a 4.9% rise[30]. Market and Economic Factors - The company acknowledges that its forward-looking statements (FLS) are subject to risks and uncertainties, which may lead to actual results differing materially from projections[23]. - Factors affecting performance include inflation, interest rate fluctuations, and the impact of recent bank failures on customer confidence and liquidity[23]. - The COVID-19 pandemic continues to adversely affect local and national economies, particularly in tourism and construction sectors in Hawaii[23]. - Increased loan delinquency rates and deterioration in asset quality are potential risks due to adverse changes in borrowers' financial performance[23]. - Regulatory changes, including the Dodd-Frank Act and other reforms, may impact the company's operations and competitiveness[23]. - Changes in consumer spending and borrowing habits, as well as technological developments, pose additional challenges[23]. - The company must manage risks related to cybersecurity and data privacy breaches, which could have significant consequences[23]. - The ability to attract and retain key personnel is critical for the company's success in implementing its initiatives[23].

Group 1: Stock Performance - Central Pacific Financial (CPF) shares increased by 6.2% to close at $29.51, with notable trading volume [1] - CPF reached a new 52-week high of $29.55, driven by optimistic investor sentiment following a 50 basis points interest rate cut by the Federal Reserve [2] Group 2: Earnings Expectations - CPF is expected to report quarterly earnings of $0.56 per share, reflecting a year-over-year increase of 14.3%, with revenues projected at $65.22 million, up 5.2% from the previous year [3] - The consensus EPS estimate for CPF has remained unchanged over the last 30 days, indicating that stock price movements may not continue without trends in earnings estimate revisions [4] Group 3: Industry Context - CPF is part of the Zacks Banks - West industry, where Plumas Bancorp (PLBC) has a Zacks Rank of 3 (Hold) and reported a 14.9% decline in its EPS estimate year-over-year [4][5]

Financial Data and Key Metrics Changes - Net income for Q2 2024 was $15.8 million, or $0.58 per diluted share, with a return on average assets of 0.86% and return on average equity of 12.42% [8][9] - The efficiency ratio was reported at 64.26% [9] - Net interest income increased to $51.9 million, up $1.7 million from the prior quarter, with a net interest margin of 2.97%, reflecting a 14 basis point increase sequentially [10][9] Business Line Data and Key Metrics Changes - Total loan portfolio decreased by $17.8 million or 0.3% sequentially, with a notable $19.2 million decrease in Mainland consumer loans [9] - Core deposits grew by $16.7 million during the quarter, while total deposit portfolio decreased by $36.4 million or 0.5% sequentially [9][10] - Non-performing assets were $10.3 million or 0.14% of total assets, remaining flat from the prior quarter [12] Market Data and Key Metrics Changes - Hawaii's overall economic growth is modest, with total statewide visitor arrivals down 1.9% from the prior year, but at 92% of pre-pandemic levels [6][7] - The median single-family home price in Oahu was $1.12 million, reflecting a year-over-year increase of 6.7% [8] - The statewide seasonally adjusted unemployment rate was 2.9%, outperforming the national rate of 4.1% [7] Company Strategy and Development Direction - The company is focused on navigating current economic challenges while maintaining a positive outlook for the rest of the year [5] - There is an emphasis on core deposit growth and optimizing the funding base, particularly in the small business market [16][20] - The company aims to continue executing core strategies while remaining adaptable to market conditions [13] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about Hawaii's economic outlook, despite challenges in tourism and inflation [6][8] - The company anticipates modest loan growth in the second half of the year, driven by stabilization in the loan portfolio [9][10] - Management highlighted the importance of defense spending in Hawaii as a positive economic driver [38][40] Other Important Information - The effective tax rate was 23.4%, expected to remain in the 23% to 25% range [11] - A quarterly cash dividend of $0.26 per share was declared, payable on September 16 [11] Q&A Session Summary Question: Update on Maui's local economy post-wildfires - Management noted that visitor arrivals are improving, with ongoing rebuilding efforts in the community [14][15] Question: Insights on deposit growth initiatives - Management highlighted success in the small business market and the importance of core deposit growth [16][20] Question: Drivers behind loan growth in C&I on the Mainland - Growth was primarily seen in the SNC portfolio, with opportunities in new and existing credits [23] Question: Outlook for commercial real estate in Hawaii - A good pipeline for commercial real estate transactions was noted, with expectations for continued activity [25] Question: Expectations for net interest margin - Guidance for net interest margin is set at 3% to 3.10%, incorporating anticipated rate cuts [29][30] Question: Credit quality and consumer loan outlook - Management is monitoring the consumer book closely, with a positive outlook for future opportunities [34] Question: Impact of defense spending on growth - Defense spending is expected to benefit both loan and deposit opportunities, positively impacting the local economy [38][40]

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2024 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | --- | --- | --- | |----------------------------------------------------------------|--------------------------------------------------------------------------------------- ...

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 ...