Central Pacific Financial (US:CPF)2024-02-20 16:00Financial Overview - As of December 31, 2023, the company reported total assets of $7.64 billion, total loans of $5.44 billion, total deposits of $6.85 billion, and shareholders' equity of $503.8 million[55]. - The company operates 27 bank branches and 58 ATMs throughout Hawaii, with a significant presence on the island of Oahu[56]. - The company derives income primarily from interest and fees on loans, interest on investment securities, and fees from deposit services[57]. - The company has $50.0 million in trust preferred securities, $55.0 million in subordinated notes, and $50.0 million in FHLB long-term advances as of December 31, 2023[135]. Loan Portfolio - Approximately 78% of the loan portfolio consists of real estate-related loans, including residential mortgage loans, home equity loans, commercial mortgage loans, and construction loans[45]. - The Bank's total construction, land development, and other land loans represented less than 100% of its total risk-based capital as of December 31, 2023[107]. - The Bank's total commercial real estate (CRE) loans represented less than 300% of its total risk-based capital and have increased by less than 50% over the prior 36 months[107]. Regulatory Compliance - The company is subject to various regulatory capital requirements, including the Basel III Capital Rule, which mandates minimum risk-based and leverage capital ratios[67][68]. - The company is committed to maintaining compliance with the Community Reinvestment Act (CRA) to support the credit needs of the communities in which it operates[78]. - The company anticipates an increased focus on regulatory compliance and supervision in 2024 due to ongoing developments in the banking industry[74]. - The Company is subject to regulatory restrictions on dividends, which depend on management's assessment of future capital requirements and other factors[87]. - The final CRA rule, effective April 1, 2024, includes new tests and data collection requirements for banks with total assets exceeding $2 billion[102]. Cybersecurity and Technology - The SEC adopted rules in July 2023 requiring registrants to disclose material cybersecurity incidents and describe their cybersecurity risk management strategies[94]. - Federal regulators emphasize the need for multiple layers of cybersecurity controls to protect against compromised customer credentials and ensure business continuity after cyberattacks[112]. - The company must notify regulators within 36 hours of any significant computer-security incidents that disrupt banking operations, with potential regulatory sanctions for non-compliance[113]. - The Company maintains a comprehensive Information Security and Cybersecurity Program to protect its information assets and manage cybersecurity risks[145]. - The Board of Directors oversees cybersecurity risk, with specific management by the Executive Committee and relevant officers[146]. - The Company’s systems are regularly targeted by cyber-attacks, but no significant incidents have adversely affected operations or customers to date[147]. - Annual examinations by financial regulators assess the Company's Information Technology and Information Security Departments, ensuring proper risk management[149]. Human Resources - As of December 31, 2023, the average employee had 9 years of service, with 35% of the staff having been with the Bank for ten years or more[109]. - The company employed 737 individuals, with 90% of the workforce being ethnically diverse and 64% female[127]. - Competition for qualified employees in the banking industry is intense, particularly in the Hawaii market, impacting recruitment efforts[140]. Economic and Environmental Risks - The company faces potential adverse effects from inflation, interest rate fluctuations, and economic conditions in Hawaii, particularly in the real estate market[53]. - The company is subject to extensive environmental regulations, which may lead to significant compliance costs affecting financial condition and results of operations[131]. - Climate change presents immediate and long-term risks, including operational, credit, transition, and reputational risks that could adversely affect the Company[142]. - The Company is creating governance processes around climate change-related risks and integrating these considerations into its risk governance framework[143]. - The Company faces potential increased expenses from strategic planning and regulatory scrutiny related to climate change responses[143]. - Natural disasters and external events, including pandemics, could materially affect the Company's financial condition and results of operations[141]. Legal and Reputational Risks - The company faces potential reputational damage and financial liability from legal claims, which could increase legal and professional service costs[132]. - The company is required to maintain effective anti-money laundering programs, with significant penalties for non-compliance that could adversely affect business operations[130]. - Publicized cybersecurity issues could damage the Company's reputation and adversely affect its business and financial condition[140]. Financial Assessments - The FDIC has set the Designated Reserve Ratio (DRR) at 2.00%, with an increase in assessment rates effective January 1, 2023, to restore the reserve ratio to at least 1.35% by September 30, 2029[83]. - A special assessment finalized by the FDIC in November 2023 will equal approximately 13.4 basis points annually based on uninsured deposits, collected over eight quarterly assessment periods[92]. - The company is currently subject to FDIC insurance premiums, which may increase if there are additional bank failures, potentially adversely affecting earnings and stock value[111].