Central Pacific Financial reports 2nd Quarter earnings of $14.5M

Central Pacific Financial Corp., parent company of Central Pacific Bank, today reported net income for the second quarter of 2023 of $14.5 million, or fully diluted earnings per share of $0.53. This is compared to net income of $16.2 million, or EPS of $0.60 in the previous quarter and net income of $17.6 million, or EPS of $0.64 in the year-ago quarter.

“Central Pacific delivered solid results during the second quarter and further strengthened our balance sheet, liquidity and capital positions,” said Arnold Martines, President and Chief Executive Officer. “We were successful in growing deposits by focusing on the needs of our long-time personal and business customers as well as attracting new relationships. We will continue our focus on building liquidity and ensuring strong credit quality while we navigate the current economic environment.”

Some highlights include the following:

• Net income of $14.5 million, or $0.53 per diluted share for the quarter.
• ROA of 0.78% and ROE of 12.12% for the quarter.
• Total loans of $5.52 billion decreased by $36.7 million in the second quarter.
• Total deposits of $6.81 billion increased by $58.8 million in the second quarter. Core deposits of $5.98 billion increased by $10.1 million, or 0.2% in the second quarter. 65% of total deposits are FDIC-insured or fully collateralized as of June 30, 2023.
• Solid liquidity position with $311.0 million in cash on balance sheet and $2.71 billion in total other liquidity sources, including available borrowing capacity and unpledged investment securities as of June 30, 2023.
• Ratio of total available sources of liquidity to uninsured and uncollateralized deposits was 128% as of June 30, 2023.
• Leverage capital, tier 1 risk-based capital, total risk-based capital, and common equity tier 1 ratios improved to 8.7%, 11.8%, 13.9%, and 10.9%, respectively, in the second quarter, compared to 8.6%, 11.5%, 13.6%, and 10.6% in the first quarter.
• Board of Directors approved quarterly cash dividend of $0.26 per share.

Pre-provision net revenue, or net income excluding provision for credit losses and income taxes, totaled $23.3 million in the second quarter of 2023, compared to PPNR of $23.1 million in the previous quarter and $24.8 million in the year-ago quarter. Net income and PPNR in the year-ago quarter included an $8.5 million non-recurring gain on sale of Class B shares of Visa, partially offset by a $4.9 million non-recurring, non-cash settlement charge related to the termination and settlement of the defined benefit pension plan.

Earnings Highlights

Net interest income for the second quarter of 2023 was $52.7 million, which decreased by $1.5 million, or 2.7% from the previous quarter, and decreased by $0.2 million, or 0.5% from the year-ago quarter. The sequential quarter decrease in net interest income is primarily due to increases in average balances and rates paid on interest-bearing deposits, which outpaced the increases in average loan balances and loan yields.

Net interest margin for the second quarter of 2023 was 2.96%, which decreased by 12 basis points (“bps”) from the previous quarter and decreased by 9 bps from the year-ago quarter. The sequential quarter decrease in NIM is primarily due to higher rates paid on deposits, which outpaced the increase in loan yields.

In the second quarter of 2023, the Company recorded a provision for credit losses of $4.3 million, compared to a provision of $1.9 million in the previous quarter and a provision of $1.0 million in the year-ago quarter. The provision in the second quarter consisted of a provision for credit losses on loans of $4.1 million and a provision for credit losses on off-balance sheet credit exposures of $0.2 million.

Other operating income for the second quarter of 2023 totaled $10.4 million, compared to $11.0 million in the previous quarter and $17.1 million in the year-ago quarter. The decrease from the previous quarter was primarily due to lower income from fiduciary activities of $0.3 million and lower income recovered on nonaccrual loans previously charged-off of $0.2 million (included in other). Other operating income in the year-ago quarter included the aforementioned $8.5 million gain on the sale of Class B common stock of Visa.

Other operating expense for the second quarter of 2023 totaled $39.9 million, compared to $42.1 million in the previous quarter and $45.3 million in the year-ago quarter. The decrease in other operating expense was primarily due to lower salaries and employee benefits of $1.2 million and lower legal and professional services of $0.4 million. Other operating expense in the year-ago quarter included the aforementioned non-cash settlement charge of $4.9 million related to the termination and settlement of the bank’s defined benefit pension plan.

The efficiency ratio for the second quarter of 2023 was 63.17%, compared to 64.58% in the previous quarter and 64.68% in the year-ago quarter.

The effective tax rate for the second quarter of 2023 was 23.6%, compared to 23.8% in the previous quarter and 26.0% in the year-ago quarter.