Central Pacific Financial Reports Third Quarter Earnings of $13.1 Million

Central Pacific Financial Corp. (NYSE: CPF) (the "Company"), parent company of Central Pacific Bank (the "Bank" or "CPB"), today reported net income of $13.1 million, or fully diluted earnings per share ("EPS") of $0.49 for the third quarter of 2023, compared to net income of $14.5 million, or EPS of $0.53 in the previous quarter and net income of $16.7 million, or EPS of $0.61 in the year-ago quarter.

Pre-provision net revenue ("PPNR"), or net income excluding provision for credit losses and income taxes, totaled $22.4 million in the third quarter of 2023, compared to PPNR of $23.3 million in the previous quarter and $23.0 million in the year-ago quarter.

"In the third quarter, Central Pacific continued our focus on maintaining strong liquidity and capital given the ongoing market uncertainties," said Arnold Martines, President and Chief Executive Officer. "We are pleased with our success in growing our deposit portfolio while managing our total deposit costs. Our asset quality remained strong, our loan portfolio is well-diversified and we continue to effectively manage our expenses. Finally, we remain committed to supporting the communities impacted by the Lahaina wildfires through financial and in-kind support to aid recovery efforts."

Earnings Highlights

Net interest income was $51.9 million for the third quarter of 2023, which decreased by $0.8 million, or 1.5% from the previous quarter, and decreased by $3.4 million, or 6.2% from the year-ago quarter. The sequential quarter decrease in net interest income was primarily due to higher average balances and rates paid on interest-bearing deposits, which outpaced the higher average yield earned on loans.

Net interest margin ("NIM") was 2.88% for the third quarter of 2023, which decreased by 8 basis points ("bps") from the previous quarter and decreased by 29 bps from the year-ago quarter. The sequential quarter decrease in NIM was primarily due to higher average rates paid on deposits, which outpaced the higher average yield earned on loans.

The Company recorded a provision for credit losses of $4.9 million in the third quarter of 2023, compared to a provision of $4.3 million in the previous quarter and a provision of $0.4 million in the year-ago quarter. The provision in the third quarter consisted of a provision for credit losses on loans of $4.5 million and a provision for credit losses on off-balance sheet credit exposures of $0.4 million.

Other operating income totaled $10.0 million for the third quarter of 2023, compared to $10.4 million in the previous quarter and $9.6 million in the year-ago quarter. The decrease from the previous quarter was primarily due to lower income from bank-owned life insurance of $0.8 million, partially offset by higher other service charges and fees of $0.2 million and higher income from fiduciary activities of $0.2 million.

Other operating expense totaled $39.6 million for the third quarter of 2023, compared to $39.9 million in the previous quarter and $42.0 million in the year-ago quarter. Lower salaries and employee benefits of $1.8 million was partially offset by higher net occupancy of $0.4 million, higher directors' deferred compensation plan expense (included in other) of $0.3 million, higher armored car expense (included in other) of $0.2 million, and a net loss on sale of loans (included in other) of $0.2 million.

The efficiency ratio was 63.91% for the third quarter of 2023, compared to 63.17% in the previous quarter and 64.62% in the year-ago quarter.

The effective tax rate was 24.9% for the third quarter of 2023, compared to 23.6% in the previous quarter and 26.2% in the year-ago quarter.

Balance Sheet Highlights

Total assets of $7.64 billion at September 30, 2023 increased by $70.3 million, or 0.9% from $7.57 billion at June 30, 2023, and increased by $300.3 million, or 4.1% from $7.34 billion at September 30, 2022. The Company had $438.7 million in cash on its balance sheet and $2.47 billion in total other liquidity sources, including available borrowing capacity and unpledged investment securities at September 30, 2023. Total available sources of liquidity as a percentage of uninsured and uncollateralized deposits was 122% at September 30, 2023.

Total loans, net of deferred fees and costs, of $5.51 billion at September 30, 2023 decreased by $12.0 million, or 0.2% from $5.52 billion at June 30, 2023, and increased by $86.5 million, or 1.6% from $5.42 billion at September 30, 2022. Average yields earned on loans during the third quarter of 2023 was 4.49%, compared to 4.37% in the previous quarter and 3.84% in the year-ago quarter.

Total deposits of $6.87 billion at September 30, 2023 increased by $69.0 million or 1.0% from $6.81 billion at June 30, 2023, and increased by $318.3 million, or 4.9% from $6.56 billion at September 30, 2022. Core deposits, which include demand deposits, savings and money market deposits and time deposits up to $250,000, totaled $5.99 billion at September 30, 2023, and increased by $8.6 million, or 0.1% from $5.98 billion at June 30, 2023. Average rates paid on total deposits during the third quarter of 2023 was 1.08%, compared to 0.84% in the previous quarter and 0.14% in the year-ago quarter. At September 30, 2023, approximately 65% of the Company's total deposits were FDIC-insured or fully collateralized.

Asset Quality

Nonperforming assets totaled $6.7 million, or 0.09% of total assets at September 30, 2023, compared to $11.1 million, or 0.15% of total assets at June 30, 2023 and $4.2 million, or 0.06% of total assets at September 30, 2022. The decline in nonperforming assets from the previous quarter was primarily attributable to two Hawaii construction loans to a single borrower totaling $4.9 million that were paid off in full.

Net charge-offs totaled $3.9 million in the third quarter of 2023, compared to net charge-offs of $3.4 million in the previous quarter, and net charge-offs of $1.6 million in the year-ago quarter. Annualized net charge-offs as a percentage of average loans was 0.28%, 0.24% and 0.12% during the three months ended September 30, 2023, June 30, 2023 and September 30, 2022, respectively.

The allowance for credit losses, as a percentage of total loans was 1.17% at September 30, 2023, compared to 1.16% at June 30, 2023, and 1.19% at September 30, 2022.

Capital

Total shareholders' equity was $468.6 million at September 30, 2023, compared to $476.3 million and $438.5 million at June 30, 2023 and September 30, 2022, respectively.

During the third quarter of 2023, the Company repurchased 4,500 shares of common stock, at a total cost of $0.1 million, or an average cost per share of $16.07. During the nine months ended September 30, 2023, the Company repurchased 130,010 shares of common stock, at a total cost of $2.6 million, or an average cost per share of $20.24. As of September 30, 2023, $23.4 million in share repurchase authorization remained available under the Company's share repurchase program.

The Company's leverage, tier 1 risk-based capital, total risk-based capital, and common equity tier 1 capital ratios were 8.7%, 11.9%, 14.1%, and 11.0%, respectively, at September 30, 2023, compared to 8.7%, 11.8%, 13.9%, and 10.9%, respectively, at June 30, 2023.

On October 24, 2023, 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, 2023 to shareholders of record at the close of business on November 30, 2023.

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 1-888-510-2553 (access code: 9816541). A playback of the call will be available through November 24, 2023 by dialing 1-800-770-2030 (access code: 9816541) 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 $7.64 billion in assets as of September 30, 2023. Central Pacific Bank, its primary subsidiary, operates 27 branches and 58 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

NYSE Listed: CPF

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. (the "Company") 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 "believe," "plan," "anticipate," "expect," "intend," "forecast," "hope," "target," "continue," "remain," "estimate," "will," "should," "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 recent bank failures and the potential impact of such developments on customer confidence, deposit behavior, liquidity and regulatory responses thereto; 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; supply chain disruptions; 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) 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 and lawsuits we are or may become subject to, 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 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; changes in consumer spending, borrowings and savings habits; cybersecurity and data privacy breaches and the consequence therefrom; failure to maintain effective internal control over financial reporting or disclosure controls and procedures; 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.

CENTRAL PACIFIC FINANCIAL CORP. AND SUBSIDIARIES
Financial Highlights
(Unaudited)																						TABLE 1
		Three Months Ended																				Nine Months Ended
(Dollars in thousands,		Sep 30,				Jun 30,				Mar 31,				Dec 31,				Sep 30,				Sep 30,
except for per share amounts)		2023				2023				2023				2022				2022				2023				2022
CONDENSED INCOME STATEMENT
Net interest income		$	51,928			$	52,734			$	54,196			$	56,285			$	55,365			$	158,858			$	159,278
Provision (credit) for credit losses			4,874				4,319				1,852				571				362				11,045				(1,844	)
Total other operating income			10,047				10,435				11,009				11,601				9,629				31,491				36,318
Total other operating expense			39,611				39,903				42,107				40,434				41,998				121,621				125,552
Income tax expense			4,349				4,472				5,059				6,700				5,919				13,880				18,141
Net income			13,141				14,475				16,187				20,181				16,715				43,803				53,747
Basic earnings per share		$	0.49			$	0.54			$	0.60			$	0.74			$	0.61			$	1.62			$	1.96
Diluted earnings per share			0.49				0.53				0.60				0.74				0.61				1.62				1.94
Dividends declared per share			0.26				0.26				0.26				0.26				0.26				0.78				0.78
PERFORMANCE RATIOS
Return on average assets (ROA) [1]			0.70	%			0.78	%			0.87	%			1.09	%			0.91	%			0.78	%			0.98	%
Return on average shareholders’ equity (ROE) [1]			10.95				12.12				13.97				18.30				14.49				12.33				14.62
Average shareholders’ equity to average assets			6.39				6.40				6.23				5.97				6.30				6.34				6.69
Efficiency ratio [2]			63.91				63.17				64.58				59.56				64.62				63.89				64.19
Net interest margin (NIM) [1]			2.88				2.96				3.08				3.17				3.17				2.98				3.06
Dividend payout ratio [3]			53.06				49.06				43.33				35.14				42.62				48.15				40.21
SELECTED AVERAGE BALANCES
Average loans, including loans held for sale		$	5,507,248			$	5,543,398			$	5,525,988			$	5,498,800			$	5,355,088			$	5,525,476			$	5,231,098
Average interest-earning assets			7,199,866				7,155,606				7,112,377				7,103,841				6,991,773				7,156,270				6,969,326
Average assets			7,510,537				7,463,629				7,443,767				7,389,712				7,320,751				7,472,890				7,323,596
Average deposits			6,738,071				6,674,650				6,655,660				6,673,922				6,535,321				6,689,762				6,580,502
Average interest-bearing liabilities			4,999,820				4,908,120				4,820,660				4,708,045				4,538,893				4,910,190				4,470,461
Average shareholders’ equity			480,118				477,711				463,556				441,084				461,328				473,856				490,140

[1]		ROA and ROE are annualized based on a 30/360 day convention. Annualized net interest income and expense in the NIM calculation are based on the day count interest payment conventions at the interest-earning asset or interest-bearing liability level (i.e. 30/360, actual/actual).
[2]		Efficiency ratio is defined as total other operating expense divided by total revenue (net interest income and total other operating income).
[3]		Dividend payout ratio is defined as dividends declared per share divided by diluted earnings per share.

CENTRAL PACIFIC FINANCIAL CORP. AND SUBSIDIARIES
Financial Highlights
(Unaudited)								TABLE 1 (CONTINUED)
		Sep 30,			Jun 30,			Mar 31,			Dec 31,			Sep 30,
		2023			2023			2023			2022			2022
REGULATORY CAPITAL RATIOS
Central Pacific Financial Corp.
Leverage ratio		8.7	%		8.7	%		8.6	%		8.5	%		8.7	%
Tier 1 risk-based capital ratio		11.9			11.8			11.5			11.3			11.5
Total risk-based capital ratio		14.1			13.9			13.6			13.5			13.7
Common equity tier 1 capital ratio		11.0			10.9			10.6			10.5			10.6
Central Pacific Bank
Leverage ratio		9.1			9.1			9.0			9.0			9.1
Tier 1 risk-based capital ratio		12.4			12.3			12.0			11.9			12.2
Total risk-based capital ratio		13.7			13.5			13.2			13.1			13.4
Common equity tier 1 capital ratio		12.4			12.3			12.0			11.9			12.2

		Sep 30,				Jun 30,				Mar 31,				Dec 31,				Sep 30,
(dollars in thousands, except for per share amounts)		2023				2023				2023				2022				2022
BALANCE SHEET
Total loans, net of deferred fees and costs		$	5,508,710			$	5,520,683			$	5,557,397			$	5,555,466			$	5,422,212
Total assets			7,637,924				7,567,592				7,521,247				7,432,763				7,337,631
Total deposits			6,874,745				6,805,737				6,746,968				6,736,223				6,556,434
Long-term debt			156,041				155,981				155,920				105,859				105,799
Total shareholders’ equity			468,598				476,279				470,926				452,871				438,468
Total shareholders’ equity to total assets			6.14	%			6.29	%			6.26	%			6.09	%			5.98	%
ASSET QUALITY
Allowance for credit losses (ACL)		$	64,517			$	63,849			$	63,099			$	63,738			$	64,382
Nonaccrual loans			6,652				11,061				5,313				5,251				4,220
Non-performing assets (NPA)			6,652				11,061				5,313				5,251				4,220
Ratio of ACL to total loans			1.17	%			1.16	%			1.14	%			1.15	%			1.19	%
Ratio of NPA to total assets			0.09	%			0.15	%			0.07	%			0.07	%			0.06	%
PER SHARE OF COMMON STOCK OUTSTANDING
Book value per common share		$	17.33			$	17.61			$	17.44			$	16.76			$	16.08
Closing market price per common share			16.68				15.71				17.90				20.28				20.69

CENTRAL PACIFIC FINANCIAL CORP. AND SUBSIDIARIES
Consolidated Balance Sheets
(Unaudited)										TABLE 2
		Sep 30,				Jun 30,				Mar 31,				Dec 31,				Sep 30,
(Dollars in thousands, except share data)		2023				2023				2023				2022				2022
ASSETS
Cash and due from financial institutions		$	108,818			$	129,071			$	108,535			$	97,150			$	116,365
Interest-bearing deposits in other financial institutions			329,913				181,913				90,247				14,894				22,332
Investment securities:
Available-for-sale debt securities, at fair value			625,253				664,071				687,188				671,794				686,681
Held-to-maturity debt securities, at amortized cost; fair value of: $531,887 at September 30, 2023, $581,222 at June 30, 2023, $599,300 at March 31, 2023, $596,780 at December 31, 2022, and $590,880 at September 30, 2022			640,053				649,946				658,596				664,883				662,827
Total investment securities			1,265,306				1,314,017				1,345,784				1,336,677				1,349,508
Loans held for sale, at fair value			—				2,593				—				1,105				1,701
Loans, net of deferred fees and costs			5,508,710				5,520,683				5,557,397				5,555,466				5,422,212
Less: allowance for credit losses			64,517				63,849				63,099				63,738				64,382
Loans, net of allowance for credit losses			5,444,193				5,456,834				5,494,298				5,491,728				5,357,830
Premises and equipment, net			97,378				96,479				93,761				91,634				89,979
Accrued interest receivable			21,529				20,463				20,473				20,345				18,134
Investment in unconsolidated entities			42,523				45,218				45,953				46,641				36,769
Mortgage servicing rights			8,797				8,843				8,943				9,074				9,216
Bank-owned life insurance			168,543				168,136				168,244				167,967				167,761
Federal Home Loan Bank of Des Moines ("FHLB") stock			10,995				10,960				11,960				9,146				13,546
Right-of-use lease assets			32,294				33,247				34,237				34,985				35,978
Other assets			107,635				99,818				98,812				111,417				118,512
Total assets		$	7,637,924			$	7,567,592			$	7,521,247			$	7,432,763			$	7,337,631
LIABILITIES
Deposits:
Noninterest-bearing demand		$	1,969,523			$	2,009,387			$	2,028,087			$	2,092,823			$	2,138,083
Interest-bearing demand			1,345,843				1,359,978				1,386,913				1,453,167				1,441,302
Savings and money market			2,209,550				2,184,652				2,184,675				2,199,028				2,194,991
Time			1,349,829				1,251,720				1,147,293				991,205				782,058
Total deposits			6,874,745				6,805,737				6,746,968				6,736,223				6,556,434
FHLB advances and other short-term borrowings			—				—				25,000				5,000				115,000
Long-term debt, net of unamortized debt issuance costs of: $506 at September 30, 2023, $566 at June 30, 2023, $627 at March 31, 2023, $688 at December 31, 2022 and $748 at September 30, 2022			156,041				155,981				155,920				105,859				105,799
Lease liabilities			33,186				34,111				35,076				35,889				36,941
Other liabilities			105,354				95,484				87,357				96,921				84,989
Total liabilities			7,169,326				7,091,313				7,050,321				6,979,892				6,899,163
EQUITY
Shareholders' equity:
Preferred stock, no par value, authorized 1,000,000 shares; issued and outstanding: none at September 30, 2023, June 30, 2023, March 31, 2023, December 31, 2022, and September 30, 2022			—				—				—				—				—
Common stock, no par value, authorized 185,000,000 shares; issued and outstanding: 27,043,169 at September 30, 2023, 27,045,792 at June 30, 2023, 27,005,545 at March 31, 2023, 27,025,070 at December 31, 2022, and 27,262,879 at September 30, 2022			405,439				405,511				405,866				408,071				412,994
Additional paid-in capital			102,550				101,997				101,188				101,346				100,426
Retained earnings			110,156				104,046				96,600				87,438				74,301
Accumulated other comprehensive loss			(149,547	)			(135,275	)			(132,728	)			(143,984	)			(149,253	)
Total shareholders' equity			468,598				476,279				470,926				452,871				438,468
Total liabilities and equity		$	7,637,924			$	7,567,592			$	7,521,247			$	7,432,763			$	7,337,631

CENTRAL PACIFIC FINANCIAL CORP. AND SUBSIDIARIES
Consolidated Statements of Income
(Unaudited)																						TABLE 3
		Three Months Ended																				Nine Months Ended
		Sep 30,				Jun 30,				Mar 31,				Dec 31,				Sep 30,				Sep 30,
(Dollars in thousands, except per share data)		2023				2023				2023				2022				2022				2023				2022
Interest income:
Interest and fees on loans		$	62,162			$	60,455			$	58,269			$	56,682			$	51,686			$	180,886			$	143,598
Interest and dividends on investment securities:
Taxable investment securities			7,016				7,145				7,336				7,104				6,933				21,497				20,937
Tax-exempt investment securities			709				727				790				776				805				2,226				2,428
Dividends on investment securities			—				—				—				—				—				—				21
Interest on deposits in other financial institutions			2,412				877				277				370				107				3,566				370
Dividend income on FHLB stock			113				120				136				105				138				369				265
Total interest income			72,412				69,324				66,808				65,037				59,669				208,544				167,619
Interest expense:
Interest on deposits:
Demand			460				411				363				333				217				1,234				473
Savings and money market			6,464				4,670				3,386				2,488				1,054				14,520				1,700
Time			11,268				8,932				6,264				4,063				1,092				26,464				2,051
Interest on short-term borrowings			—				378				761				393				660				1,139				662
Interest on long-term debt			2,292				2,199				1,838				1,475				1,281				6,329				3,455
Total interest expense			20,484				16,590				12,612				8,752				4,304				49,686				8,341
Net interest income			51,928				52,734				54,196				56,285				55,365				158,858				159,278
Provision (credit) for credit losses			4,874				4,319				1,852				571				362				11,045				(1,844	)
Net interest income after provision (credit) for credit losses			47,054				48,415				52,344				55,714				55,003				147,813				161,122
Other operating income:
Mortgage banking income			765				690				526				667				831				1,981				3,143
Service charges on deposit accounts			2,193				2,137				2,111				2,172				2,138				6,441				6,025
Other service charges and fees			5,203				4,994				4,985				4,972				4,955				15,182				14,053
Income from fiduciary activities			1,234				1,068				1,321				1,058				1,165				3,623				3,507
Net (loss) gain on sales of investment securities			(135	)			—				—				—				—				(135	)			8,506
Income from bank-owned life insurance			379				1,185				1,291				2,187				167				2,855				(322	)
Other			408				361				775				545				373				1,544				1,406
Total other operating income			10,047				10,435				11,009				11,601				9,629				31,491				36,318
Other operating expense:
Salaries and employee benefits			19,015				20,848				22,023				22,692				22,778				61,886				66,089
Net occupancy			4,725				4,310				4,474				3,998				4,743				13,509				12,965
Equipment			1,112				932				946				996				1,085				2,990				3,242
Communication			809				791				778				696				712				2,378				2,262
Legal and professional services			2,359				2,469				2,886				2,677				2,573				7,714				8,115
Computer software			4,473				4,621				4,606				3,996				4,138				13,700				10,844
Advertising			968				942				933				701				1,150				2,843				3,450
Other			6,150				4,990				5,461				4,678				4,819				16,601				18,585
Total other operating expense			39,611				39,903				42,107				40,434				41,998				121,621				125,552
Income before income taxes			17,490				18,947				21,246				26,881				22,634				57,683				71,888
Income tax expense			4,349				4,472				5,059				6,700				5,919				13,880				18,141
Net income		$	13,141			$	14,475			$	16,187			$	20,181			$	16,715			$	43,803			$	53,747
Per common share data:
Basic earnings per share		$	0.49			$	0.54			$	0.60			$	0.74			$	0.61			$	1.62			$	1.96
Diluted earnings per share			0.49				0.53				0.60				0.74				0.61				1.62				1.94
Cash dividends declared			0.26				0.26				0.26				0.26				0.26				0.78				0.78
Basic weighted average shares outstanding			27,042,762				27,024,043				26,999,138				27,134,970				27,356,614				27,022,141				27,487,237
Diluted weighted average shares outstanding			27,079,484				27,071,478				27,122,012				27,303,249				27,501,212				27,081,541				27,666,197

CENTRAL PACIFIC FINANCIAL CORP. AND SUBSIDIARIES
Average Balances, Interest Income & Expense, Yields and Rates (Taxable Equivalent)
(Unaudited)																				TABLE 4
		Three Months Ended									Three Months Ended									Three Months Ended
		September 30, 2023									June 30, 2023									September 30, 2022
		Average			Average						Average			Average						Average			Average
(Dollars in thousands)		Balance			Yield/Rate			Interest			Balance			Yield/Rate			Interest			Balance			Yield/Rate			Interest
ASSETS
Interest-earning assets:
Interest-bearing deposits in other financial institutions		$	177,780		5.38	%		$	2,412		$	69,189		5.08	%		$	877		$	19,802		2.14	%		$	107
Investment securities:
Taxable			1,354,039		2.07				7,016			1,379,319		2.07				7,145			1,445,781		1.92				6,934
Tax-exempt [1]			149,824		2.40				897			151,979		2.42				920			158,052		2.57				1,018
Total investment securities			1,503,863		2.10				7,913			1,531,298		2.11				8,065			1,603,833		1.98				7,952
Loans, including loans held for sale			5,507,248		4.49				62,162			5,543,398		4.37				60,455			5,355,088		3.84				51,686
FHLB stock			10,975		4.09				113			11,721		4.10				120			13,050		4.23				138
Total interest-earning assets			7,199,866		4.01				72,600			7,155,606		3.89				69,517			6,991,773		3.41				59,883
Noninterest-earning assets			310,671									308,023									328,978
Total assets		$	7,510,537								$	7,463,629								$	7,320,751
LIABILITIES AND EQUITY
Interest-bearing liabilities:
Interest-bearing demand deposits		$	1,339,294		0.14	%		$	460		$	1,367,878		0.12	%		$	411		$	1,450,434		0.06	%		$	217
Savings and money market deposits			2,209,835		1.16				6,464			2,172,680		0.86				4,670			2,208,037		0.19				1,054
Time deposits up to $250,000			449,844		3.38				3,827			390,961		2.98				2,907			228,707		0.42				245
Time deposits over $250,000			844,842		3.49				7,441			790,864		3.06				6,025			443,178		0.76				847
Total interest-bearing deposits			4,843,815		1.49				18,192			4,722,383		1.19				14,013			4,330,356		0.22				2,363
FHLB advances and other short-term borrowings			—		—				—			29,791		5.09				378			102,777		2.55				660
Long-term debt			156,005		5.83				2,292			155,946		5.65				2,199			105,760		4.80				1,281
Total interest-bearing liabilities			4,999,820		1.63				20,484			4,908,120		1.36				16,590			4,538,893		0.38				4,304
Noninterest-bearing deposits			1,894,256									1,952,267									2,204,965
Other liabilities			136,343									125,531									115,565
Total liabilities			7,030,419									6,985,918									6,859,423
Shareholders’ equity			480,118									477,711									461,328
Non-controlling interest			—									—									—
Total equity			480,118									477,711									461,328
Total liabilities and equity		$	7,510,537								$	7,463,629								$	7,320,751
Net interest income								$	52,116								$	52,927								$	55,579
Interest rate spread					2.38	%								2.53	%								3.03	%
Net interest margin					2.88	%								2.96	%								3.17	%

[1]		Interest income and resultant yield information for tax-exempt investment securities is expressed on a taxable-equivalent basis using a federal statutory tax rate of 21%.

CENTRAL PACIFIC FINANCIAL CORP. AND SUBSIDIARIES
Average Balances, Interest Income & Expense, Yields and Rates (Taxable Equivalent)
(Unaudited)											TABLE 5
		Nine Months Ended									Nine Months Ended
		September 30, 2023									September 30, 2022
		Average			Average						Average			Average
(Dollars in thousands)		Balance			Yield/Rate			Interest			Balance			Yield/Rate			Interest
ASSETS
Interest-earning assets:
Interest-bearing deposits in other financial institutions		$	91,202		5.23	%		$	3,566		$	94,076		0.53	%		$	370
Investment securities:
Taxable			1,376,294		2.08				21,497			1,473,989		1.90				20,958
Tax-exempt [1]			151,611		2.48				2,818			160,144		2.56				3,073
Total investment securities			1,527,905		2.12				24,315			1,634,133		1.96				24,031
Loans, including loans held for sale			5,525,476		4.37				180,886			5,231,098		3.67				143,598
FHLB stock			11,687		4.21				369			10,019		3.53				265
Total interest-earning assets			7,156,270		3.90				209,136			6,969,326		3.22				168,264
Noninterest-earning assets			316,620									354,270
Total assets		$	7,472,890								$	7,323,596
LIABILITIES AND EQUITY
Interest-bearing liabilities:
Interest-bearing demand deposits		$	1,373,831		0.12	%		$	1,234		$	1,437,034		0.04	%		$	473
Savings and money market deposits			2,188,585		0.89				14,520			2,208,449		0.10				1,700
Time deposits up to $250,000			394,464		2.92				8,604			223,343		0.33				548
Time deposits over $250,000			775,615		3.08				17,860			461,180		0.44				1,503
Total interest-bearing deposits			4,732,495		1.19				42,218			4,330,006		0.13				4,224
FHLB advances and other short-term borrowings			31,182		4.88				1,139			34,756		2.55				662
Long-term debt			146,513		5.78				6,329			105,699		4.37				3,455
Total interest-bearing liabilities			4,910,190		1.35				49,686			4,470,461		0.25				8,341
Noninterest-bearing deposits			1,957,267									2,250,496
Other liabilities			131,577									112,478
Total liabilities			6,999,034									6,833,435
Shareholders’ equity			473,856									490,140
Non-controlling interest			—									21
Total equity			473,856									490,161
Total liabilities and equity		$	7,472,890								$	7,323,596
Net interest income								$	159,450								$	159,923
Interest rate spread					2.55	%								2.97	%
Net interest margin					2.98	%								3.06	%

[1]		Interest income and resultant yield information for tax-exempt investment securities is expressed on a taxable-equivalent basis using a federal statutory tax rate of 21%.

CENTRAL PACIFIC FINANCIAL CORP. AND SUBSIDIARIES
Loans by Geographic Distribution
(Unaudited)								TABLE 6
		Sep 30,			Jun 30,			Mar 31,			Dec 31,			Sep 30,
(Dollars in thousands)		2023			2023			2023			2022			2022
HAWAII:
Commercial and industrial:
Small Business Administration Paycheck Protection Program ("SBA PPP")		$	1,410		$	1,565		$	1,821		$	2,555		$	5,208
Other			405,023			373,036			375,158			383,665			358,805
Real estate:
Construction			174,057			168,012			154,303			150,208			138,724
Residential mortgage			1,930,740			1,942,906			1,941,230			1,940,999			1,923,068
Home equity			753,980			750,760			743,908			739,380			719,399
Commercial mortgage			1,045,625			1,037,826			1,030,086			1,029,708			1,002,874
Consumer			338,248			327,790			342,922			346,789			347,388
Total loans, net of deferred fees and costs			4,649,083			4,601,895			4,589,428			4,593,304			4,495,466
Less: Allowance for credit losses			48,105			44,828			44,062			45,169			47,814
Loans, net of allowance for credit losses		$	4,600,978		$	4,557,067		$	4,545,366		$	4,548,135		$	4,447,652
U.S. MAINLAND: [1]
Commercial and industrial:
Other			157,373			170,557			179,906			160,282			158,474
Real estate:
Construction			37,455			32,807			27,171			16,515			12,872
Commercial mortgage			319,802			329,736			331,546			333,367			332,872
Consumer			344,997			385,688			429,346			451,998			422,528
Total loans, net of deferred fees and costs			859,627			918,788			967,969			962,162			926,746
Less: Allowance for credit losses			16,412			19,021			19,037			18,569			16,568
Loans, net of allowance for credit losses		$	843,215		$	899,767		$	948,932		$	943,593		$	910,178
TOTAL:
Commercial and industrial:
SBA PPP		$	1,410		$	1,565		$	1,821		$	2,555		$	5,208
Other			562,396			543,593			555,064			543,947			517,279
Real estate:
Construction			211,512			200,819			181,474			166,723			151,596
Residential mortgage			1,930,740			1,942,906			1,941,230			1,940,999			1,923,068
Home equity			753,980			750,760			743,908			739,380			719,399
Commercial mortgage			1,365,427			1,367,562			1,361,632			1,363,075			1,335,746
Consumer			683,245			713,478			772,268			798,787			769,916
Total loans, net of deferred fees and costs			5,508,710			5,520,683			5,557,397			5,555,466			5,422,212
Less: Allowance for credit losses			64,517			63,849			63,099			63,738			64,382
Loans, net of allowance for credit losses		$	5,444,193		$	5,456,834		$	5,494,298		$	5,491,728		$	5,357,830

[1]		U.S. Mainland includes territories of the United States.

CENTRAL PACIFIC FINANCIAL CORP. AND SUBSIDIARIES
Deposits
(Unaudited)								TABLE 7
		Sep 30,			Jun 30,			Mar 31,			Dec 31,			Sep 30,
(Dollars in thousands)		2023			2023			2023			2022			2022
Noninterest-bearing demand deposits		$	1,969,523		$	2,009,387		$	2,028,087		$	2,092,823		$	2,138,083
Interest-bearing demand deposits			1,345,843			1,359,978			1,386,913			1,453,167			1,441,302
Savings and money market deposits			2,209,550			2,184,652			2,184,675			2,199,028			2,194,991
Time deposits up to $250,000			465,543			427,864			372,150			330,148			261,961
Core deposits			5,990,459			5,981,881			5,971,825			6,075,166			6,036,337
Government time deposits			400,130			383,426			360,501			290,057			195,057
Other time deposits greater than $250,000			484,156			440,430			414,642			371,000			325,040
Total time deposits greater than $250,000			884,286			823,856			775,143			661,057			520,097
Total deposits		$	6,874,745		$	6,805,737		$	6,746,968		$	6,736,223		$	6,556,434

CENTRAL PACIFIC FINANCIAL CORP. AND SUBSIDIARIES
Nonperforming Assets and Accruing Loans 90+ Days Past Due
(Unaudited)										TABLE 8
		Sep 30,				Jun 30,				Mar 31,				Dec 31,				Sep 30,
(Dollars in thousands)		2023				2023				2023				2022				2022
Nonaccrual loans:
Commercial and industrial:
Other		$	352			$	319			$	264			$	297			$	277
Real estate:
Construction			—				4,851				—				—				—
Residential mortgage			4,949				4,385				3,445				3,808				2,771
Home equity			677				797				712				570				584
Commercial mortgage			77				77				77				—				—
Consumer			597				632				815				576				588
Total nonaccrual loans			6,652				11,061				5,313				5,251				4,220
Other real estate owned ("OREO")			—				—				—				—				—
Total nonperforming assets ("NPAs")			6,652				11,061				5,313				5,251				4,220
Accruing loans 90+ days past due:
Commercial and industrial:
SBA PPP			—				—				—				13				—
Other			—				—				—				26				669
Real estate:
Residential mortgage			794				959				—				559				503
Home equity			—				133				—				—				—
Consumer			2,120				2,207				1,908				1,240				623
Total accruing loans 90+ days past due			2,914				3,299				1,908				1,838				1,795
Total NPAs and accruing loans 90+ days past due		$	9,566			$	14,360			$	7,221			$	7,089			$	6,015
Ratio of total nonaccrual loans to total loans			0.12	%			0.20	%			0.10	%			0.09	%			0.08	%
Ratio of total NPAs to total loans and OREO			0.12	%			0.20	%			0.10	%			0.09	%			0.08	%
Ratio of total NPAs and accruing loans 90+ days past due to total loans and OREO			0.17	%			0.26	%			0.13	%			0.13	%			0.11	%
Quarter-to-quarter changes in NPAs:
Balance at beginning of quarter		$	11,061			$	5,313			$	5,251			$	4,220			$	4,983
Additions			2,311				7,105				1,609				2,162				1,072
Reductions:
Payments			(5,718	)			(290	)			(505	)			(198	)			(329	)
Return to accrual status			(207	)			(212	)			(14	)			(44	)			(616	)
Net charge-offs, valuation and other adjustments			(795	)			(855	)			(1,028	)			(889	)			(890	)
Total reductions			(6,720	)			(1,357	)			(1,547	)			(1,131	)			(1,835	)
Balance at end of quarter		$	6,652			$	11,061			$	5,313			$	5,251			$	4,220

CENTRAL PACIFIC FINANCIAL CORP. AND SUBSIDIARIES
Allowance for Credit Losses on Loans
(Unaudited)																					TABLE 9
		Three Months Ended																				Nine Months Ended
		Sep 30,				Jun 30,				Mar 31,				Dec 31,				Sep 30,				Sep 30,
(Dollars in thousands)		2023				2023				2023				2022				2022				2023				2022
Allowance for credit losses:
Balance at beginning of period		$	63,849			$	63,099			$	63,738			$	64,382			$	65,211			$	63,738			$	68,097
Provision (credit) for credit losses on loans			4,526				4,135				1,615				1,032				731				10,276				(744	)
Charge-offs:
Commercial and industrial:
Other			402				362				779				678				550				1,543				1,291
Consumer			4,710				3,873				2,686				1,881				1,912				11,269				4,518
Total charge-offs			5,112				4,235				3,465				2,559				2,462				12,812				5,809
Recoveries:
Commercial and industrial:
Other			261				125				250				210				220				636				785
Real estate:
Construction			1				—				—				—				14				1				76
Residential mortgage			10				7				53				133				14				70				162
Home equity			—				15				—				—				36				15				36
Consumer			982				703				908				540				618				2,593				1,779
Total recoveries			1,254				850				1,211				883				902				3,315				2,838
Net charge-offs			3,858				3,385				2,254				1,676				1,560				9,497				2,971
Balance at end of period		$	64,517			$	63,849			$	63,099			$	63,738			$	64,382			$	64,517			$	64,382
Average loans, net of deferred fees and costs		$	5,507,248			$	5,543,398			$	5,525,988			$	5,498,800			$	5,355,088			$	5,525,476			$	5,231,098
Ratio of annualized net charge-offs to average loans			0.28	%			0.24	%			0.16	%			0.12	%			0.12	%			0.23	%			0.08	%
Ratio of ACL to total loans			1.17	%			1.16	%			1.14	%			1.15	%			1.19	%			1.17	%			1.19	%

CENTRAL PACIFIC FINANCIAL CORP. AND SUBSIDIARIES
Reconciliation of Non-GAAP Financial Measures
(Unaudited)	TABLE 10

The Company uses certain non-GAAP financial measures in addition to our GAAP results to provide useful information for evaluating our cash operating performance, ability to service debt, compliance with debt covenants and measurement against competitors. This information should be considered as supplemental in nature and should not be considered in isolation or as a substitute for the related financial information prepared in accordance with GAAP. In addition, these non-GAAP financial measures may not be comparable to similarly entitled measures reported by other companies.

The Company believes that pre-provision net revenue ("PPNR"), a non-GAAP financial measure, is useful as a tool to help evaluate the ability to provide for credit costs through operations. The following tables set forth a reconciliation of our PPNR and our PPNR to average assets for each of the periods indicated:

		Three Months Ended																				Nine Months Ended
		Sep 30,				Jun 30,				Mar 31,				Dec 31,				Sep 30,				Sep 30,
(Dollars in thousands)		2023				2023				2023				2022				2022				2023				2022
Net income		$	13,141			$	14,475			$	16,187			$	20,181			$	16,715			$	43,803			$	53,747
Add: Income tax expense			4,349				4,472				5,059				6,700				5,919				13,880				18,141
Pre-tax income			17,490				18,947				21,246				26,881				22,634				57,683				71,888
Add: Provision (credit) for credit losses			4,874				4,319				1,852				571				362				11,045				(1,844	)
PPNR		$	22,364			$	23,266			$	23,098			$	27,452			$	22,996			$	68,728			$	70,044

		Three Months Ended																				Nine Months Ended
		Sep 30,				Jun 30,				Mar 31,				Dec 31,				Sep 30,				Sep 30,
(Dollars in thousands)		2023				2023				2023				2022				2022				2023				2022
Net income		$	13,141			$	14,475			$	16,187			$	20,181			$	16,715			$	43,803			$	53,747
Net income (annualized)			52,564				57,900				64,748				80,724				66,860				58,404				71,663
PPNR			22,364				23,266				23,098				27,452				22,996				68,728				70,044
PPNR (annualized)			89,456				93,064				92,392				109,808				91,984				91,637				93,392
Average assets			7,510,537				7,463,629				7,443,767				7,389,712				7,320,751				7,472,890				7,323,596
Return on average assets ("ROA")			0.70	%			0.78	%			0.87	%			1.09	%			0.91	%			0.78	%			0.98	%
PPNR to average assets			1.19	%			1.25	%			1.24	%			1.49	%			1.26	%			1.23	%			1.28	%

 

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