CENTRAL PACIFIC FINANCIAL REPORTS THIRD QUARTER EARNINGS OF $16.7 MILLION

• Net income of $16.7 million, or $0.61 per diluted share for the quarter.
• ROA of 0.91% and ROE of 14.49% for the quarter.
• Total loans of $5.42 billion increased by $120.6 million, or 2.3% (9.2% annualized) in the third quarter.
• Net interest income increased by $2.4 million, or 4.5% from the previous quarter.
• Net interest margin of 3.17% increased by 12 bps from the previous quarter.
• Board of Directors approved quarterly cash dividend of $0.26 per share.
• Arnold Martines, current President and Chief Operating Officer announced to succeed Paul Yonamine as Chief Executive Officer, effective January 1, 2023.

HONOLULU, Oct. 21, 2022 /PRNewswire/ -- Central Pacific Financial Corp. (NYSE: CPF) (the "Company"), parent company of Central Pacific Bank (the "Bank" or "CPB"), today reported net income for the third quarter of 2022 of $16.7 million, or fully diluted earnings per share ("EPS") of $0.61.

"We continued to execute well in the third quarter as reflected in our strong earnings, loan growth and expanding net interest margin," said Paul Yonamine, Chairman and Chief Executive Officer. "While the broader economy is presenting challenges for the entire financial services industry, Hawaii has outperformed the nation during past recessions. Additionally, Central Pacific is well-positioned with solid asset quality and capital."

"We are pleased with our third quarter performance as our teams continue to work hard to meet our customers' needs.  We continue to develop our digital and Banking-as-a-Service initiatives as a key part of our long-term strategic goal to build robust digital channels," said Arnold Martines, President and Chief Operating Officer.

Yesterday, the Company announced the promotion of Martines to Chief Executive Officer of both the Company and the Bank, succeeding Yonamine who will become Chairman Emeritus of the Company and the Bank, as well as an advisor to Martines. Also, Catherine Ngo, presently Executive Vice Chair, will become Chair of the Board of Directors of both the Company and the Bank. All changes will be effective January 1, 2023. In commenting on the changes, Yonamine said, "I have had four great years at Central Pacific Bank and have accomplished all of my strategic goals for the Company and the Bank, including our RISE 2020 program with the $40 million renovation of our Central Pacific Plaza headquarters, our online, mobile and ATM upgrades and our total corporate rebrand. These accomplishments have put us on a solid path to becoming a digital-first bank to help us excel in the rapidly changing banking paradigm. I'd like to express my appreciation to the Board, Arnold, David and Catherine, for their partnership and support the past four years. I expect us to continue on our current path and can think of no better banker anywhere than Arnold Martines to lead this great institution into the future."

In commenting on the changes, Martines, who will also be named to the Board of Directors of the Company and the Bank, said, "It is my honor and privilege to lead Central Pacific Bank. We are an organization with strong core values and a solid digital roadmap for the future, thanks to Paul and Catherine. We intend to stay true to our founders and continue their legacy of focusing on serving the needs of our customers, by providing exceptional service while leveraging new technologies to provide the ultimate in convenience and value." 

Earnings Highlights
Net interest income for the third quarter of 2022 was $55.4 million, an increase of $2.4 million, or 4.5% from the prior quarter, and a decrease of $0.7 million, or 1.3% from the year-ago quarter.

Net interest margin for the third quarter of 2022 was 3.17%, an increase of 12 basis points ("bps") from the prior quarter and a decrease of 14 bps from the year-ago quarter. The year-ago quarter included $8.6 million in net PPP interest income and fees, compared to $0.7 million in the current quarter.

The sequential quarter increase in net interest income and net interest margin is primarily due to higher asset yields and continued strong loan growth. Additional information on average balances, interest income and expenses and yields and rates is presented in Tables 4 and 5.

In the third quarter of 2022, the Company recorded a provision for credit losses of $0.4 million, compared to a provision of $1.0 million in the previous quarter and a release of the credit loss reserves of $2.6 million in the year-ago quarter.

Other operating income for the third quarter of 2022 totaled $9.6 million, compared to $17.1 million in the previous quarter and $10.3 million in the year-ago quarter. The decrease from the previous quarter was primarily due to the $8.5 million gain on sale of restricted Class B common stock of Visa, Inc. last quarter. Additional information on other operating income is presented in Table 3.

Other operating expense for the third quarter of 2022 totaled $42.0 million, compared to $45.3 million in the previous quarter and $41.3 million in the year-ago quarter. The decrease in other operating expense from the previous quarter was primarily due to a non-cash settlement charge of $4.9 million for the termination of the Company's defined benefit pension plan (included in other) last quarter. Additional information on other operating expense is presented in Table 3.

The efficiency ratio for the third quarter of 2022 was 64.62%, compared to 64.68% in the previous quarter and 62.32% in the year-ago quarter.

The effective tax rate for the third quarter of 2022 was 26.2%, compared to 26.0% in the previous quarter and 24.7% in the year-ago quarter.

Balance Sheet Highlights
Total assets at September 30, 2022 of $7.34 billion increased by $38.5 million, or 0.5% from $7.30 billion at June 30, 2022, and increased by $39.4 million, or 0.5% from $7.30 billion at September 30, 2021.

Total loans, net of deferred fees and costs, at September 30, 2022 of $5.42 billion increased by $120.6 million, or 2.3% from $5.30 billion at June 30, 2022, and increased by $376.4 million, or 7.5%, from $5.05 billion at September 30, 2021. Loans by type and geographic distribution are summarized in Table 6.

Total deposits at September 30, 2022 of $6.56 billion decreased by $65.6 million or 1.0%  from $6.62 billion at June 30, 2022, but increased by $40.6 million, or 0.6%, from $6.52 billion at September 30, 2021. Core deposits, which include demand deposits, savings and money market deposits and time deposits up to $250,000, totaled $6.04 billion at September 30, 2022, and decreased by $119.3 million from June 30, 2022. Core deposit and total deposit balances are summarized in Table 7.

Asset Quality
Nonperforming assets at September 30, 2022 totaled $4.2 million, or 0.06% of total assets, compared to $5.0 million, or 0.07% of total assets at June 30, 2022, and $7.2 million, or 0.10% of total assets at September 30, 2021. Additional information on nonperforming assets, past due and restructured loans is presented in Table 8.

Net charge-offs in the third quarter of 2022 totaled $1.6 million, compared to net charge-offs of $1.0 million in the previous quarter, and net charge-offs of $0.2 million in the year-ago quarter.

The allowance for credit losses, as a percentage of total loans at September 30, 2022 was 1.19%, compared to 1.23% at June 30, 2022, and 1.48% at September 30, 2021. Additional information on net charge-offs and recoveries and the allowance for credit losses is presented in Table 9.

Capital
Total shareholders' equity was $438.5 million at September 30, 2022, compared to $455.1 million and $555.4 million at June 30, 2022 and September 30, 2021, respectively. The decline in shareholders' equity was primarily due to an increase in unrealized losses on our available-for-sale investment securities portfolio which flow through accumulated other comprehensive income, and were driven by the rising interest rate environment.

During the third quarter of 2022, the Company repurchased 218,000 shares of common stock, at a total cost of $4.9 million, or an average cost per share of $22.33. As of September 30, 2022, $15.2 million remained available for repurchase under the Company's share repurchase program.

At September 30, 2022, the Company's leverage capital, tier 1 risk-based capital, total risk-based capital, and common equity tier 1 ratios were 8.7%, 11.5%, 13.7%, and 10.6%, respectively, compared to 8.6%, 11.6%, 13.9%, and 10.7%, respectively, at June 30, 2022.

On October 20, 2022, the Company's Board of Directors declared a quarterly cash dividend of $0.26 per share on its outstanding common shares. The dividend will be payable on December 15, 2022 to shareholders of record at the close of business on November 30, 2022.

Conference Call
The Company's management will host a conference call today at 1:00 p.m. Eastern Time (7:00 a.m. Hawaii Time) to discuss the quarterly results. Individuals are encouraged to listen to the live webcast of the presentation by visiting the investor relations page of the Company's website at http://ir.cpb.bank. Alternatively, investors may participate in the live call by dialing 1-844-200-6205 (access code: 420241). A playback of the call will be available through November 21, 2022 by dialing 1-866-813-9403 (access code: 996439) and on the Company's website. Information which may be discussed in the conference call is provided in an earnings supplement presentation on the Company's website at http://ir.cpb.bank.

About Central Pacific Financial Corp.
Central Pacific Financial Corp. is a Hawaii-based bank holding company with approximately $7.34 billion in assets as of September 30, 2022. Central Pacific Bank, its primary subsidiary, operates 27 branches and 65 ATMs in the state of Hawaii. For additional information, please visit the Company's website at http://www.cpb.bank.

EQUAL HOUSING LENDER | Member FDIC | CPF LISTED NYSE

Forward-Looking Statements ("FLS")
This document may contain 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. or its management or Board of Directors, including those relating to business plans, use of capital resources, products or services and regulatory developments and regulatory actions; statements of future economic performance including anticipated performance results from our business initiatives; or any statements of the assumptions underlying or relating to any of the foregoing. Words such as "believes," "plans," "anticipates," "expects," "intends," "forecasts," "hopes," "targeting," "continue," "remain," "will," "should," "estimates," "may" and other similar expressions are intended to identify FLS but are not the exclusive means of identifying such statements.

While we believe that our FLS and the assumptions underlying them are reasonably based, such statements and assumptions are by their nature subject to risks and uncertainties, and thus could later prove to be inaccurate or incorrect. Accordingly, actual results could differ materially from those statements or projections for a variety of reasons, including, but not limited to: the effects of inflation and rising interest rates; the adverse effects of the COVID-19 pandemic virus (and ongoing pandemic variants) on local, national and international economies, including, but not limited to, the adverse impact on tourism and construction in the State of Hawaii, our borrowers, customers, third-party contractors, vendors and employees as well as the effects of government programs and initiatives in response to COVID-19; the impact of our participation in the Paycheck Protection Program ("PPP") and fulfillment of government guarantees on our PPP loans; the increase in inventory or adverse conditions in the real estate market and deterioration in the construction industry; adverse changes in the financial performance and/or condition of our borrowers and, as a result, increased loan delinquency rates, deterioration in asset quality, and losses in our loan portfolio; our ability to achieve the objectives of our RISE2020 initiative; our ability to successfully implement and achieve the objectives of our Banking-as-a-Service ("BaaS") initiatives, including adoption of the initiatives by customers and risks faced by any of our bank collaborations including reputational and regulatory risk; the impact of local, national, and international economies and events (including natural disasters such as wildfires, volcanic eruptions, hurricanes, tsunamis, storms, earthquakes and pandemic viruses and diseases, including COVID-19) on the Company's business and operations and on tourism, the military, and other major industries operating within the Hawaii market and any other markets in which the Company does business; deterioration or malaise in domestic economic conditions, including any destabilization in the financial industry and deterioration of the real estate market, as well as the impact of declining levels of consumer and business confidence in the state of the economy in general and in financial institutions in particular; changes in estimates of future reserve requirements based upon the periodic review thereof under relevant regulatory and accounting requirements; the impact of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the "Dodd-Frank Act"), changes in capital standards, other regulatory reform and federal and state legislation, including but not limited to regulations promulgated by the Consumer Financial Protection Bureau (the "CFPB"), government-sponsored enterprise reform, and any related rules and regulations which affect our business operations and competitiveness; the costs and effects of legal and regulatory developments, including legal proceedings or regulatory or other governmental inquiries and proceedings and the resolution thereof, the results of regulatory examinations or reviews and the effect of, and our ability to comply with, any regulations or regulatory orders or actions we are or may become subject to; ability to successfully implement our initiatives to lower our efficiency ratio; the effects of and changes in trade, monetary and fiscal policies and laws, including the interest rate policies of the Board of Governors of the Federal Reserve System (the "FRB" or the "Federal Reserve"); securities market and monetary fluctuations, including the anticipated replacement of the London Interbank Offered Rate ("LIBOR") Index and the impact on our loans and debt which are tied to that index and uncertainties regarding potential alternative reference rates, including the Secured Overnight Financing Rate ("SOFR"); negative trends in our market capitalization and adverse changes in the price of the Company's common stock; political instability; acts of war or terrorism;  pandemic virus and disease, including COVID-19; changes in consumer spending, borrowings and savings habits; failure to maintain effective internal control over financial reporting or disclosure controls and procedures; cybersecurity and data privacy breaches and the consequence therefrom; the ability to address deficiencies in our internal controls over financial reporting or disclosure controls and procedures; technological changes and developments; changes in the competitive environment among financial holding companies and other financial service providers; the effect of changes in accounting policies and practices, as may be adopted by the regulatory agencies, as well as the Public Company Accounting Oversight Board ("PCAOB"), the Financial Accounting Standards Board ("FASB") and other accounting standard setters and the cost and resources required to implement such changes; our ability to attract and retain key personnel; changes in our personnel, organization, compensation and benefit plans; and our success at managing the risks involved in the foregoing items.

For further information with respect to factors that could cause actual results to materially differ from the expectations or projections stated in the FLS, please see the Company's publicly available Securities and Exchange Commission filings, including the Company's Form 10-K for the last fiscal year and, in particular, the discussion of "Risk Factors" set forth therein. We urge investors to consider all of these factors carefully in evaluating the FLS contained in this document. FLS speak only as of the date on which such statements are made. We undertake no obligation to update any FLS to reflect events or circumstances after the date on which such statements are made, or to reflect the occurrence of unanticipated events except as required by law.

SOURCE Central Pacific Financial Corp.