Central Pacific Financial (CPF) - 2025 Q1 - Quarterly Report

Part I. Financial Information Item 1. Financial Statements (Unaudited) The unaudited statements show a slight asset decrease to $7.41 billion, higher net income, and stable loan balances Consolidated Balance Sheets Total assets decreased slightly to $7.41 billion, while total equity increased to $557.4 million Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Total Assets | $7,405,239 | $7,472,096 | | Loans, net | $5,274,078 | $5,273,670 | | Total investment securities | $1,370,067 | $1,334,588 | | Total Liabilities | $6,847,863 | $6,933,711 | | Total deposits | $6,596,048 | $6,644,011 | | Total Equity | $557,376 | $538,385 | Consolidated Statements of Income Q1 2025 net income rose to $17.8 million from $12.9 million year-over-year, driven by higher net interest income Q1 2025 vs. Q1 2024 Income Statement (in thousands, except per share data) | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net Interest Income | $57,699 | $50,187 | | Provision for credit losses | $4,172 | $3,936 | | Total other operating income | $11,096 | $11,244 | | Total other operating expense | $42,072 | $40,576 | | Net Income | $17,760 | $12,945 | | Diluted EPS | $0.65 | $0.48 | Consolidated Statements of Comprehensive Income Comprehensive income surged to $28.6 million in Q1 2025, boosted by net income and positive other comprehensive income Comprehensive Income Breakdown (in thousands) | Component | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net Income | $17,760 | $12,945 | | Other Comprehensive Income (Loss) | $10,857 | $(1,727) | | Comprehensive Income | $28,617 | $11,218 | Consolidated Statements of Changes in Equity Total equity grew to $557.4 million, driven by earnings that outweighed dividends and share repurchases - Key drivers for the $19.0 million increase in total equity during Q1 2025 were net income and positive other comprehensive income, partially offset by dividends and stock buybacks[17] Q1 2025 Equity Changes (in thousands) | Item | Amount | | :--- | :--- | | Beginning Equity (Dec 31, 2024) | $538,385 | | Net Income | $17,760 | | Other Comprehensive Income | $10,857 | | Cash Dividends Declared | $(7,327) | | Common Stock Repurchased | $(2,094) | | Ending Equity (Mar 31, 2025) | $557,376 | Consolidated Statements of Cash Flows Cash and cash equivalents decreased by $104.0 million due to investing and financing activities Q1 2025 Cash Flow Summary (in thousands) | Activity | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net Cash from Operating Activities | $20,440 | $16,996 | | Net Cash (Used in) from Investing Activities | $(42,101) | $10,165 | | Net Cash Used in Financing Activities | $(82,384) | $(236,716) | | Net Decrease in Cash | $(104,045) | $(209,555) | Notes to Consolidated Financial Statements The notes detail key accounting policies, including the DCF model for the Allowance for Credit Losses (ACL) - The company's Allowance for Credit Losses (ACL) model uses a one-year reasonable and supportable forecast from Moody's Analytics and a Discounted Cash Flow (DCF) methodology for most loan segments[28][30][42] - As of March 31, 2025, the company had $1.37 billion in investment securities with unrealized losses attributed to interest rate changes, not credit quality[52][62] - Total loans were stable at $5.33 billion, with nonaccrual loans at $11.1 million, or 0.21% of total loans[64][72] - The company operates as a single reportable segment, banking operations, with all operations located in the State of Hawaii[156] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses improved Q1 2025 net income of $17.8 million, driven by a 48 bps net interest margin expansion Q1 2025 Financial Highlights vs. Q1 2024 | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net Income | $17.8 million | $12.9 million | | Diluted EPS | $0.65 | $0.48 | | Net Interest Margin | 3.31% | 2.83% | | ROA | 0.96% | 0.70% | | ROE | 13.04% | 10.33% | - The Hawaii economy shows strength with a low unemployment rate of 2.9% in March 2025, though the recovery in tourism from Japan remains slow[186][189][191] - The efficiency ratio improved to 61.16% in Q1 2025 from 66.05% in Q1 2024, primarily due to higher net interest income[182][183] Results of Operations Net interest income grew by $7.5 million due to a 48 bps margin increase, while operating expenses rose 3.7% - Net interest income increased by $7.5 million year-over-year, primarily due to a $6.6 million positive impact from rate changes[197][203] - Other operating income decreased by $0.1 million, mainly due to a $1.0 million decline in income from bank-owned life insurance (BOLI)[205][206] - Other operating expense increased by $1.5 million, driven by higher salaries and employee benefits (+$1.1M) and legal and professional services (+$0.5M)[207][208] Financial Condition Total assets were $7.41 billion, with a stable loan portfolio of $5.33 billion and low nonperforming assets Loan Portfolio Composition (in thousands) | Loan Type | March 31, 2025 | Dec 31, 2024 | | :--- | :--- | :--- | | Commercial mortgage | $1,552,439 | $1,500,680 | | Residential mortgage | $1,870,239 | $1,892,520 | | Commercial and industrial | $634,620 | $606,936 | | Consumer | $461,920 | $510,523 | | Total Loans | $5,334,547 | $5,332,852 | Credit Quality Metrics | Metric | March 31, 2025 | Dec 31, 2024 | | :--- | :--- | :--- | | Nonperforming Assets (NPAs) | $11,085 | $11,018 | | NPAs / Total Assets | 0.15% | 0.15% | | ACL / Total Loans | 1.13% | 1.11% | | ACL / Nonaccrual Loans | 545.50% | 545.50% | - Total deposits decreased by $48.0 million to $6.60 billion, with estimated uninsured deposits at $2.45 billion, or 37% of total deposits[227][229] Capital Resources and Liquidity The company maintains a strong, well-capitalized position with robust liquidity and all regulatory ratios exceeded minimums Regulatory Capital Ratios (Company) - March 31, 2025 | Ratio | Actual | Minimum Required | | :--- | :--- | :--- | | CET1 risk-based capital | 12.4% | 4.5% | | Tier 1 risk-based capital | 13.4% | 6.0% | | Total risk-based capital | 15.6% | 8.0% | | Leverage capital | 9.4% | 4.0% | - In January 2025, a new $30.0 million share repurchase plan was approved, with $2.1 million used in Q1 2025[238][239] - Total liquidity sources as of March 31, 2025, including cash and borrowing capacity, totaled approximately $2.54 billion[260] Quantitative and Qualitative Disclosures About Market Risk The company's primary market risk is interest rate risk, with a +100 bps rate change estimated to increase NII by 0.96% Net Interest Income Sensitivity (Gradual Change) | Rate Change | March 31, 2025 | Dec 31, 2024 | | :--- | :--- | :--- | | +200 bps | 1.87% | 1.91% | | +100 bps | 0.96% | 0.84% | | -100 bps | (1.05)% | (1.36)% | | -200 bps | (2.44)% | (2.93)% | Controls and Procedures Management concluded that disclosure controls and procedures were effective with no material changes to internal controls - The Principal Executive Officer and Principal Financial Officer concluded that the Company's disclosure controls and procedures were effective as of the end of the period[263] - No changes occurred during the quarter that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting[264] Part II. Other Information Legal Proceedings Ongoing legal proceedings from the ordinary course of business are not expected to have a material adverse effect - The company states that it does not expect ongoing legal proceedings, which arise in the ordinary course of business, to have a material adverse effect on its financial condition or operations[266] Risk Factors Risk factors are materially unchanged, except for an update on potential impacts from changing government policies - A risk factor was updated to emphasize that significant changes in government policies could adversely affect asset quality, deposit levels, and loan demand[267] Unregistered Sales of Equity Securities and Use of Proceeds The company repurchased 77,316 shares for $2.1 million in Q1 2025 under a new $30 million authorization Q1 2025 Share Repurchase Activity | Metric | Value | | :--- | :--- | | New Authorization (Jan 2025) | $30.0 million | | Shares Repurchased in Q1 2025 | 77,316 | | Average Price Paid per Share | $27.09 | | Total Cost in Q1 2025 | $2.1 million | | Remaining Authorization (Mar 31, 2025) | $27.9 million | Other Information Two company directors adopted Rule 10b5-1 trading arrangements for the potential sale of company shares - Director A. Catherine Ngo adopted a Rule 10b5-1 trading plan on February 3, 2025, for the potential sale of up to 39,996 shares[271] - Director Paul K. Yonamine adopted a Rule 10b5-1 trading plan on March 5, 2025, for the potential sale of up to 8,295 shares[272] Exhibits This section lists filed exhibits, including CEO/CFO certifications and Interactive Data Files (Inline XBRL)