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"2024 was a solid year for Central Pacific Bank and we would like to send a sincere thank you to our valued customers and all the communities we serve. Key contributors to our success in 2024 included strong NIM expansion and core deposit growth, along with very healthy levels of liquidity, asset quality and capital," said Arnold Martines, Chairman, President and Chief Executive Officer. "We are proud to be recognized once again as one of America’s Best Regional Banks by Newsweek, one of the Best in State Banks by Forbes, and the Best Bank in Hawaii by readers of the Honolulu Star Advertiser. It is a testament to the hard work and exceptional customer service all of our employees consistently demonstrate. In 2025, we will continue to execute upon our strategies and build upon the success we've had in 2024."

Earnings Highlights

Net interest income was $55.8 million for the fourth quarter of 2024, which increased by $1.9 million, or 3.6% from the previous quarter, and increased by $4.6 million, or 9.1% from the year-ago quarter. Net interest margin ("NIM") was 3.17% for the fourth quarter of 2024, an increase of 10 basis points ("bp" or "bps") from the previous quarter and an increase of 33 bps from the year-ago quarter. The sequential quarter increase in net interest income and NIM was primarily due to a 15 bps decline in average rates paid on interest-bearing deposits, combined with a higher average yield earned on loans of 2 bps.

During the fourth quarter of 2024, the Company completed an investment portfolio repositioning related to its available-for-sale investment securities portfolio. The Company sold lower-yielding available-for-sale debt securities with a book value of $106.5 million and received proceeds of $96.6 million, which resulted in a pre-tax loss of $9.9 million. Proceeds from the sale were reinvested in $101.6 million of higher-yielding debt securities. The Company estimates the transaction will result in a prospective annual increase to net interest income of $2.7 million and net interest margin of 4 bps. The earn-back period is estimated to be approximately 3.5 years. The securities sold had a weighted average yield of 2.1% and a weighted average duration of 3.6 years, and the securities purchased had a weighted average yield of 4.9% and a weighted average duration of 4.1 years.

The Company recorded a provision for credit losses of $0.8 million in the fourth quarter of 2024, compared to a provision of $2.8 million in the previous quarter and a provision of $4.7 million in the year-ago quarter. The provision in the current quarter consisted of a provision for credit losses on loans of $1.4 million, offset by a credit to the provision for off-balance sheet exposures of $0.6 million. The lower provision for credit losses was primarily due to improvements in the economic forecast and movements in loan balances by segment, combined with an overall loan balance decline during the quarter.

Other operating income totaled $2.6 million for the fourth quarter of 2024, compared to $12.7 million in the previous quarter and $15.2 million in the year-ago quarter. The lower other operating income was primarily due to the aforementioned pre-tax loss on sales of investment securities related to an investment portfolio repositioning of $9.9 million.

Other operating expense totaled $44.2 million for the fourth quarter of 2024, compared to $46.7 million in the previous quarter and $42.5 million in the year-ago quarter. The sequential quarter reduction in other operating expense was primarily due to the aforementioned $3.1 million in expenses related to a strategic opportunity (included in other) in the third quarter of 2024. In addition, the Company recorded lower directors' deferred compensation plan expenses of $1.2 million (included in other). These decreases were partially offset by an impairment charge on intangible assets of $1.4 million (included in other) during the fourth quarter of 2024.

The efficiency ratio was 75.65% for the fourth quarter of 2024, compared to 70.12% in the previous quarter and 64.12% in the year-ago quarter. Excluding the aforementioned pre-tax items, the adjusted efficiency ratio (non-GAAP) was 64.65% for the fourth quarter of 2024, compared to an adjusted efficiency ratio (non-GAAP) of 65.51% for the third quarter of 2024.

The effective tax rate was 15.4% for the fourth quarter of 2024, compared to 22.0% in the previous quarter and 22.3% in the year-ago quarter. The decrease in the effective tax rate was primarily due to additional tax credits recognized and tax return to provision adjustments.

Balance Sheet Highlights

Total assets of $7.47 billion at December 31, 2024 increased by $56.7 million, or 0.8% from $7.42 billion at September 30, 2024, and decreased by $170.7 million, or 2.2% from $7.64 billion at December 31, 2023. The Company had $380.9 million in cash on its balance sheet and $2.49 billion in total other liquidity sources, including available borrowing capacity and unpledged investment securities at December 31, 2024.

Total loans, net of deferred fees and costs, of $5.33 billion at December 31, 2024 decreased by $9.8 million, or 0.2% from $5.34 billion at September 30, 2024, and decreased by $106.1 million, or 2.0% from $5.44 billion at December 31, 2023. Average yields earned on loans during the fourth quarter of 2024 was 4.91%, compared to 4.89% in the previous quarter and 4.55% in the year-ago quarter.

Total deposits of $6.64 billion at December 31, 2024 increased by $61.0 million, or 0.93% from $6.58 billion at September 30, 2024, and decreased by $203.6 million, or 3.0% from $6.85 billion at December 31, 2023. Core deposits, which include demand deposits, savings and money market deposits and time deposits up to $250,000, totaled $6.04 billion at December 31, 2024, and increased by $74.2 million, or 1.2% from $5.97 billion at September 30, 2024. Average rates paid on total deposits during the fourth quarter of 2024 was 1.21%, compared to 1.32% in the previous quarter and 1.22% in the year-ago quarter.

Asset Quality

Nonperforming assets totaled $11.0 million, or 0.15% of total assets at December 31, 2024, compared to $11.6 million, or 0.16% of total assets at September 30, 2024 and $7.0 million, or 0.09% of total assets at December 31, 2023.

Net charge-offs totaled $3.8 million in the fourth quarter of 2024, compared to net charge-offs of $3.6 million in the previous quarter, and net charge-offs of $5.5 million in the year-ago quarter. Annualized net charge-offs as a percentage of average loans was 0.29%, 0.27% and 0.41% during the three months ended December 31, 2024, September 30, 2024 and December 31, 2023, respectively.

The allowance for credit losses, as a percentage of total loans was 1.11% at December 31, 2024, compared to 1.15% at September 30, 2024, and 1.18% at December 31, 2023.

Capital

Total shareholders' equity was $538.4 million at December 31, 2024, compared to $543.7 million and $503.8 million at September 30, 2024 and December 31, 2023, respectively.

The Company's leverage, common equity tier 1, tier 1 risk-based capital, and total risk-based capital ratios were 9.3%, 12.3%, 13.2%, and 15.4%, respectively, at December 31, 2024, compared to 9.5%, 12.1%, 13.1%, and 15.3%, respectively, at September 30, 2024.

On January 28, 2025, the Company's Board of Directors declared a quarterly cash dividend of $0.27 per share on its outstanding common shares. The dividend represents an increase of 3.8% from the $0.26 per share in the fourth quarter of 2024 and will be payable on March 17, 2025 to shareholders of record at the close of business on February 28, 2025.

On January 28, 2025, the Company's Board of Directors also authorized the repurchase of up to $30 million of its common stock from time to time in the open market or in privately negotiated transactions, pursuant to a newly authorized share repurchase program (the "Repurchase Plan"). The Repurchase Plan replaces and supersedes in its entirety the share repurchase program previously approved by the Company's Board of Directors. During the year ended December 31, 2024, the Company repurchased 49,960 shares of common stock, at a total cost of $0.9 million, or an average cost per share of $18.92. During the year ended December 31, 2024, the Company returned $29.1 million in capital to its shareholders through cash dividends and share repurchases.

Regulatory

On January 10, 2025, the Bank received final approval from the Federal Reserve to become a member of the Federal Reserve System (the "Fed Membership"). Accordingly, upon the effective date, the Bank’s primary federal supervisor will be the Board of Governors of the Federal Reserve System, acting through authority delegated to the Federal Reserve Bank of San Francisco. The Fed Membership became effective on January 24, 2025.

As a bank holding company, the Company is already supervised by the Federal Reserve Bank of San Francisco, and the Company believes that the Bank’s Fed Membership will streamline the Company’s regulatory oversight structure by having a single federal supervisor for both the Company and the Bank. Both the Company and the Bank will continue to be regulated by the Hawaii Division of Financial Institutions. The Bank’s deposits will continue to be insured by the Federal Deposit Insurance Corporation, in accordance with applicable limits.

Conference Call

The Company's management will host a conference call today at 1:00 p.m. Eastern Time (8:00 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 1-800-715-9871 (conference ID: 6299769). A playback of the call will be available through February 28, 2025 by dialing 1-800-770-2030 (playback ID: 6299769) 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 $7.47 billion in assets as of December 31, 2024. Central Pacific Bank, its primary subsidiary, operates 27 branches and 55 ATMs in the State of Hawaii. Central Pacific Financial Corp. is traded on the New York Stock Exchange (NYSE) under the symbol "CPF." For additional information, please visit: cpb.bank

Equal Housing Lender
Member FDIC
CPF Listed NYSE

Forward-Looking Statements

This document may contain forward-looking statements ("FLS") concerning: projections of revenues, expenses, income or loss, earnings or loss per share, capital expenditures, payment or nonpayment of dividends, net interest income, 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," "seek," "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, 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 interest rate fluctuations; the adverse effects of 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 its variants) and other pandemic viruses 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 thereto; supply chain disruptions; labor contract disputes and potential strikes; 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; the impact of local, national, and international economies and events (including natural disasters such as wildfires, volcanic eruptions, hurricanes, tsunamis, storms, and earthquakes) 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, 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, 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, and the effect of any recurring or special FDIC assessments; the effect of changes in accounting policies and practices, as may be adopted by the regulatory agencies, as well as the PCAOB, the FASB and other accounting standard setters and the cost and resources required to implement such changes; 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; securities market and monetary fluctuations, including the impact resulting from the elimination of the LIBOR Index; negative trends in our market capitalization and adverse changes in the price of the Company's common stock; the effects of any potential or actual acquisitions or dispositions we may make or evaluate, and the related costs; political instability; acts of war or terrorism; changes in consumer spending, borrowings and savings habits; technological changes and developments; cybersecurity and data privacy breaches and the consequence therefrom; failure to maintain effective internal control over financial reporting or disclosure controls and procedures; our ability to address deficiencies in our internal controls over financial reporting or disclosure controls and procedures; changes in the competitive environment among financial holding companies and other financial service providers; our ability to successfully implement our initiatives to lower our efficiency ratio; our ability to attract and retain key personnel; changes in our personnel, organization, compensation and benefit plans; our ability to successfully implement and achieve the objectives of our BaaS initiatives, including adoption of the initiatives by customers and risks faced by any of our bank collaborations including reputational and regulatory risk; 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 SEC 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.

To supplement our consolidated financial information, the Company uses certain non-GAAP financial measures, which are not meant to be considered in isolation or as a substitute for comparable GAAP. The Company believes these non-GAAP financial measures provide useful information to investors and others, which excludes transactions that are not meaningful in comparison to our past operating performance or not reflective of ongoing financial results. The Company believes that these measures offer a supplemental measure for period-to-period comparisons and can be used to evaluate our historical and prospective financial performance. These non-GAAP financial measures may not be comparable to similarly entitled measures reported by other companies.

The following reconciling adjustments from GAAP or reported financial measures to non-GAAP adjusted financial measures are limited to: (i) pre-tax loss on sales of investment securities related to an investment portfolio repositioning of $9.9 million and $1.9 million in the fourth quarter of 2024 and fourth quarter of 2023, respectively, (ii) $3.1 million in pre-tax expenses related to our evaluation and assessment of a strategic opportunity in the third quarter of 2024, (iii) a pre-tax gain on sale of a real estate property of $5.1 million in the fourth quarter of 2023 and (iv) pre-tax branch lease termination expense of $2.3 million in the fourth quarter of 2023. Management does not consider these transactions to be representative of the Company's core operating performance. The income tax effect was calculated assuming a 23% effective tax rate.

The following table presents a recalculation of the non-GAAP core earnings and non-GAAP EPS presented above.

The following table presents a recalculation of the non-GAAP adjusted pre-provision net revenue ("PPNR") presented above.

The following table presents a recalculation of the non-GAAP adjusted efficiency ratio presented above.

The following table presents a recalculation of the non-GAAP adjusted ROA and adjusted ROE presented above.

The following table presents a recalculation of the non-GAAP tangible common equity ("TCE") ratio presented above.

 

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Contacts

Investor Contact:
Ian Tanaka
SVP, Treasury Manager
(808) 544-3646
ian.tanaka@cpb.bank

Media Contact:
Tim Sakahara
AVP, Corporate Communications Manager
(808) 544-5125
tim.sakahara@cpb.bank