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PARENT COMPANY AND REGULATORY RESTRICTIONS
 12 Months Ended
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.
 
ActualMinimum required for
capital adequacy purposes		Minimum required to
be well-capitalized
(Dollars in thousands)AmountRatioAmountRatio (1)AmountRatio
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 assets622,130 12.2 307,215 6.0 N/A
Total capital to risk-weighted assets741,291 14.5 409,620 8.0 N/A
Common equity tier 1 ("CET1") capital to risk-weighted assets572,130 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 assets581,358 12.9 271,027 6.0 N/A
Total capital to risk-weighted assets686,130 15.2 361,369 8.0 N/A
CET1 capital to risk-weighted assets531,358 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 assets652,987 12.8 306,497 6.0 408,663 8.0 
Total capital to risk-weighted assets717,000 14.0 408,663 8.0 510,828 10.0 
CET1 capital to risk-weighted assets652,987 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 assets620,372 13.7 270,820 6.0 361,094 8.0 
Total capital to risk-weighted assets670,087 14.9 361,094 8.0 451,367 10.0 
CET1 capital to risk-weighted assets620,372 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)20212020
Assets  
Cash and cash equivalents$20,090 $11,184 
Equity investment securities, at fair value— 1,351 
Investment in subsidiary bank639,050 635,673 
Other assets12,029 8,575 
Total assets$671,169 $656,783 
Liabilities and Equity  
Long-term debt$105,616 $105,385 
Other liabilities7,334 4,713 
Total liabilities112,950 110,098 
Total shareholders’ equity558,219 546,685 
Total equity558,219 546,685 
Total liabilities and equity$671,169 $656,783 
CENTRAL PACIFIC FINANCIAL CORP.
CONDENSED STATEMENTS OF INCOME
 
 Year Ended December 31,
(Dollars in thousands)202120202019
Income:   
Dividends from subsidiary bank$54,016 $24,015 $42,008 
Interest income from subsidiary bank3 4 5 
Other income43 52 92 
Total income54,062 24,071 42,105 
Expense:   
Interest expense on long-term debt4,097 2,095 2,453 
Other expenses3,504 1,293 2,599 
Total expenses7,601 3,388 5,052 
Income before income taxes and equity in undistributed income of subsidiaries46,461 20,683 37,053 
Income tax expense (benefit)(1,968)(690)(1,289)
Income before equity in undistributed income of subsidiaries48,429 21,373 38,342 
Equity in undistributed income of subsidiary bank31,465 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)202120202019
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 expense3,231 3,231 2,735 
Net change in other assets and liabilities(85)(3,010)(2,900)
Net cash provided by operating activities51,645 24,146 62,236 
Cash flows from investing activities:   
Contributions to subsidiary bank— (46,750)— 
Proceeds from sale of investment securities1,653 — — 
Distributions from unconsolidated entities— — 622 
Net cash provided by (used in) investing activities1,653 (46,750)622 
Cash flows from financing activities:   
Net proceeds from issuance of common stock and stock option exercises1,236 — 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 equivalents8,906 550 (6,109)
Cash and cash equivalents at beginning of year11,184 10,634 16,743 
Cash and cash equivalents at end of year$20,090 $11,184 $10,634