Central Pacific Financial (US:CPF)2024-04-24 19:20Part I. Financial Information Financial Statements 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 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 forecasting97 - 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 information8990 Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) 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 deposits313 - 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 quarter384 - 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 category365389 Quantitative and Qualitative Disclosures About Market Risk 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 deposits418420 Controls and Procedures 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 effective422 - No material changes to the company's internal control over financial reporting occurred during the first quarter of 2024448 Part II. Other Information Legal Proceedings 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 condition274449 Risk Factors 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 reported460 Issuer Purchases of Equity Securities 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 authorization461462 Other Information 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 2024465 Exhibits 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)