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PARENT COMPANY AND REGULATORY RESTRICTIONS | 12 Months Ended
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Dec. 31, 2021
Condensed Financial Information Disclosure [Abstract] |
PARENT COMPANY AND REGULATORY RESTRICTIONS | 26. PARENT COMPANY AND REGULATORY RESTRICTIONS At December 31, 2021, the retained earnings of the parent company, Central Pacific Financial Corp., included $371.2 million of equity in undistributed losses of Central Pacific Bank. Central Pacific Bank, as a Hawaii state-chartered bank, may only pay dividends to the extent it has retained earnings as defined under Hawaii banking law ("Statutory Retained Earnings"), which differs from GAAP retained earnings. As of December 31, 2021, the bank had Statutory Retained Earnings of $114.0 million. For further information, see Note 13 - Equity. The Company and the bank are subject to various regulatory capital requirements administered by federal banking agencies. Capital adequacy guidelines and, additionally for banks, prompt corrective action regulations, involve quantitative measures of assets, liabilities, and certain off-balance-sheet items calculated under regulatory accounting practices. Capital amounts and classifications are also subject to qualitative judgments by regulators. Failure to meet capital requirements can initiate regulatory action. The final rules implementing Basel Committee on Banking Supervision’s capital guidelines for U.S. banks ("Basel III rules") became effective for the Company on January 1, 2015, and were fully phased in on January 1, 2019. Under the Basel III rules, the Company must hold a "capital conservation buffer" above the adequately capitalized risk-based capital ratios. The capital conservation buffer was phased in at the rate of 0.625% per year from 0.625% in 2016 to 2.50% on January 1, 2019. The capital conservation buffer for 2019, 2018 and 2017 was 2.50%, 1.875% and 1.25%, respectively. The net unrealized gain or loss on available-for-sale securities is not included in computing regulatory capital. Management believes as of December 31, 2021, the Company and bank met all capital adequacy requirements to which they are subject. Prompt corrective action regulations provide five classifications: well-capitalized, adequately capitalized, under-capitalized, significantly under-capitalized, and critically under-capitalized, although these terms are not used to represent overall financial condition. If adequately capitalized, regulatory approval is required to accept brokered deposits. If under-capitalized, capital distributions are limited, as is asset growth and expansion, and capital restoration plans are required. At year-end 2021 and 2020, the bank was categorized as "well-capitalized" and maintained the required capital conservation buffer under the regulatory framework for prompt corrective action. There are no conditions or events since then that management believes have changed the institution’s category. The following table sets forth actual and required capital and capital ratios for the Company and the bank, as well as the minimum capital adequacy requirements applicable generally to all financial institutions as of the dates indicated.
| Actual |  | Minimum required for capital adequacy purposes |  | Minimum required to be well-capitalized
(Dollars in thousands) | Amount |  | Ratio |  | Amount |  | Ratio (1) |  | Amount |  | Ratio
Company |  |  |  |  |  |  |  |  |  |  |
As of December 31, 2021 |  |  |  |  |  |  |  |  |  |  |
Tier 1 capital to avg. assets (leverage ratio) | $ | 622,130 |  |  | 8.5 | % |  | $ | 293,382 |  |  | 4.0 | % |  |  |  | N/A
Tier 1 capital to risk-weighted assets | 622,130 |  |  | 12.2 |  |  | 307,215 |  |  | 6.0 |  |  |  |  | N/A
Total capital to risk-weighted assets | 741,291 |  |  | 14.5 |  |  | 409,620 |  |  | 8.0 |  |  |  |  | N/A
Common equity tier 1 ("CET1") capital to risk-weighted assets | 572,130 |  |  | 11.2 |  |  | 230,411 |  |  | 4.5 |  |  |  |  | N/A
As of December 31, 2020 |  |  |  |  |  |  |  |  |  |  |
Tier 1 capital to avg. assets (leverage ratio) | 581,358 |  |  | 8.8 |  |  | 263,979 |  |  | 4.0 |  |  |  |  | N/A
Tier 1 capital to risk-weighted assets | 581,358 |  |  | 12.9 |  |  | 271,027 |  |  | 6.0 |  |  |  |  | N/A
Total capital to risk-weighted assets | 686,130 |  |  | 15.2 |  |  | 361,369 |  |  | 8.0 |  |  |  |  | N/A
CET1 capital to risk-weighted assets | 531,358 |  |  | 11.8 |  |  | 203,270 |  |  | 4.5 |  |  |  |  | N/A
Central Pacific Bank |  |  |  |  |  |  |  |  |  |  |
As of December 31, 2021 |  |  |  |  |  |  |  |  |  |  |
Tier 1 capital to avg. assets (leverage ratio) | $ | 652,987 |  |  | 8.9 | % |  | $ | 292,877 |  |  | 4.0 | % |  | $ | 366,096 |  |  | 5.0 | %
Tier 1 capital to risk-weighted assets | 652,987 |  |  | 12.8 |  |  | 306,497 |  |  | 6.0 |  |  | 408,663 |  |  | 8.0 |
Total capital to risk-weighted assets | 717,000 |  |  | 14.0 |  |  | 408,663 |  |  | 8.0 |  |  | 510,828 |  |  | 10.0 |
CET1 capital to risk-weighted assets | 652,987 |  |  | 12.8 |  |  | 229,873 |  |  | 4.5 |  |  | 332,038 |  |  | 6.5 |
As of December 31, 2020 |  |  |  |  |  |  |  |  |  |  |
Tier 1 capital to avg. assets (leverage ratio) | 620,372 |  |  | 9.4 |  |  | 263,735 |  |  | 4.0 |  |  | 329,668 |  |  | 5.0 |
Tier 1 capital to risk-weighted assets | 620,372 |  |  | 13.7 |  |  | 270,820 |  |  | 6.0 |  |  | 361,094 |  |  | 8.0 |
Total capital to risk-weighted assets | 670,087 |  |  | 14.9 |  |  | 361,094 |  |  | 8.0 |  |  | 451,367 |  |  | 10.0 |
CET1 capital to risk-weighted assets | 620,372 |  |  | 13.7 |  |  | 203,115 |  |  | 4.5 |  |  | 293,389 |  |  | 6.5 |
(1) Under the Basel III Capital Rules, the Company and the bank must also maintain the required Capital Conservation Buffer ("CCB") to avoid becoming subject to restrictions on capital distributions and certain discretionary bonus payments to management. The CCB is calculated as a ratio of CET1 capital to risk-weighted assets, and effectively increases the required minimum risk-based capital ratios. The CCB requirement was phased in over a three-year period that began on January 1, 2016. The phase-in period ended on January 1, 2019, and the CCB is now at its fully phased-in level of 2.5%.
Condensed financial statements of the parent company are as follows: CENTRAL PACIFIC FINANCIAL CORP. CONDENSED BALANCE SHEETS
| December 31,
(Dollars in thousands) | 2021 |  | 2020
Assets |  |  |
Cash and cash equivalents | $ | 20,090 |  |  | $ | 11,184 |
Equity investment securities, at fair value | — |  |  | 1,351 |
Investment in subsidiary bank | 639,050 |  |  | 635,673 |
Other assets | 12,029 |  |  | 8,575 |
Total assets | $ | 671,169 |  |  | $ | 656,783 |
Liabilities and Equity |  |  |
Long-term debt | $ | 105,616 |  |  | $ | 105,385 |
Other liabilities | 7,334 |  |  | 4,713 |
Total liabilities | 112,950 |  |  | 110,098 |
Total shareholders’ equity | 558,219 |  |  | 546,685 |
Total equity | 558,219 |  |  | 546,685 |
Total liabilities and equity | $ | 671,169 |  |  | $ | 656,783 |
CENTRAL PACIFIC FINANCIAL CORP. CONDENSED STATEMENTS OF INCOME
| Year Ended December 31,
(Dollars in thousands) | 2021 |  | 2020 |  | 2019
Income: |  |  |  |  |
Dividends from subsidiary bank | $ | 54,016 |  |  | $ | 24,015 |  |  | $ | 42,008 |
Interest income from subsidiary bank | 3 |  |  | 4 |  |  | 5 |
Other income | 43 |  |  | 52 |  |  | 92 |
Total income | 54,062 |  |  | 24,071 |  |  | 42,105 |
Expense: |  |  |  |  |
Interest expense on long-term debt | 4,097 |  |  | 2,095 |  |  | 2,453 |
Other expenses | 3,504 |  |  | 1,293 |  |  | 2,599 |
Total expenses | 7,601 |  |  | 3,388 |  |  | 5,052 |
Income before income taxes and equity in undistributed income of subsidiaries | 46,461 |  |  | 20,683 |  |  | 37,053 |
Income tax expense (benefit) | (1,968) |  |  | (690) |  |  | (1,289) |
Income before equity in undistributed income of subsidiaries | 48,429 |  |  | 21,373 |  |  | 38,342 |
Equity in undistributed income of subsidiary bank | 31,465 |  |  | 15,900 |  |  | 19,980 |
Net income | $ | 79,894 |  |  | $ | 37,273 |  |  | $ | 58,322 |
CENTRAL PACIFIC FINANCIAL CORP. CONDENSED STATEMENTS OF CASH FLOWS
| Year Ended December 31,
(Dollars in thousands) | 2021 |  | 2020 |  | 2019
Cash flows from operating activities: |  |  |  |  |
Net income | $ | 79,894 |  |  | $ | 37,273 |  |  | $ | 58,322 |
Adjustments to reconcile net income to net cash provided by operating activities: |  |  |  |  |
Deferred income tax expense (benefit) | 70 |  |  | 2,552 |  |  | 3,055 |
Net change in dividends receivable from subsidiary bank | — |  |  | — |  |  | 21,004 |
Equity in undistributed loss (income) of subsidiary bank | (31,465) |  |  | (15,900) |  |  | (19,980) |
Share-based compensation expense | 3,231 |  |  | 3,231 |  |  | 2,735 |
Net change in other assets and liabilities | (85) |  |  | (3,010) |  |  | (2,900) |
Net cash provided by operating activities | 51,645 |  |  | 24,146 |  |  | 62,236 |
Cash flows from investing activities: |  |  |  |  |
Contributions to subsidiary bank | — |  |  | (46,750) |  |  | — |
Proceeds from sale of investment securities | 1,653 |  |  | — |  |  | — |
Distributions from unconsolidated entities | — |  |  | — |  |  | 622 |
Net cash provided by (used in) investing activities | 1,653 |  |  | (46,750) |  |  | 622 |
Cash flows from financing activities: |  |  |  |  |
Net proceeds from issuance of common stock and stock option exercises | 1,236 |  |  | — |  |  | 151 |
Net proceeds from subordinated debt | — |  |  | 53,838 |  |  | — |
Repayments of long-term debt | — |  |  | — |  |  | (20,619) |
Repurchases of common stock | (18,669) |  |  | (4,749) |  |  | (22,793) |
Cash dividends paid on common stock | (26,959) |  |  | (25,935) |  |  | (25,706) |
Net cash provided by (used in) financing activities | (44,392) |  |  | 23,154 |  |  | (68,967) |
Net increase (decrease) in cash and cash equivalents | 8,906 |  |  | 550 |  |  | (6,109) |
Cash and cash equivalents at beginning of year | 11,184 |  |  | 10,634 |  |  | 16,743 |
Cash and cash equivalents at end of year | $ | 20,090 |  |  | $ | 11,184 |  |  | $ | 10,634 |

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- Definition The entire disclosure for condensed financial information, including the financial position, cash flows, and the results of operations of the registrant (parent company) as of the same dates or for the same periods for which audited consolidated financial statements are being presented. Alternatively, the details of this disclosure can be reported by the specific parent company taxonomy elements, indicating the appropriate date and period contexts in an instance document. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 205 -SubTopic 10 -Section S99 -Paragraph 6 -Subparagraph (SX 210.5-04(Schedule I)) -URI http://asc.fasb.org/extlink&oid=120391182&loc=d3e5864-122674 Reference 2: http://www.xbrl.org/2003/role/recommendedDisclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 810 -SubTopic 10 -Section 45 -Paragraph 11 -URI http://asc.fasb.org/extlink&oid=123454820&loc=d3e5283-111683 Reference 3: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 3 -Subparagraph (SX 210.12-04(a)) -URI http://asc.fasb.org/extlink&oid=120395691&loc=d3e24072-122690 + Details
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