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PARENT COMPANY AND REGULATORY RESTRICTIONS
 12 Months Ended
Dec. 31, 2022
Condensed Financial Information Disclosure [Abstract]  
PARENT COMPANY AND REGULATORY RESTRICTIONS
25. PARENT COMPANY AND REGULATORY RESTRICTIONS
 
The retained earnings of the parent company, Central Pacific Financial Corp., included $339.4 million of equity in undistributed losses of Central Pacific Bank as of December 31, 2022.
 
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. The bank had Statutory Retained Earnings of $145.7 million and $114.0 million as of December 31, 2022 and 2021, respectively. For further information, see Note 12 - 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 investment securities is not included in computing regulatory capital. Management believes the Company and bank met all capital adequacy requirements to which they are subject as of December 31, 2022.

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. The bank was categorized as "well-capitalized" and maintained the required capital conservation buffer under the regulatory framework for prompt corrective action as of December 31, 2022 and 2021. 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)AmountRatioAmount
Ratio (1)
AmountRatio
Company      
As of December 31, 2022      
Tier 1 capital to avg. assets (leverage ratio)$642,302 8.5 %$301,053 4.0 %N/A
Tier 1 capital to risk-weighted assets642,302 11.3 340,151 6.0 N/A
Total capital to risk-weighted assets764,283 13.5 453,535 8.0 N/A
Common equity tier 1 ("CET1") capital to risk-weighted assets592,302 10.5 255,113 4.5 N/A
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
CET1 capital to risk-weighted assets572,130 11.2 230,411 4.5 N/A
Central Pacific Bank      
As of December 31, 2022      
Tier 1 capital to avg. assets (leverage ratio)$675,331 9.0 %$300,584 4.0 %$375,730 5.0 %
Tier 1 capital to risk-weighted assets675,331 11.9 339,422 6.0 452,563 8.0 
Total capital to risk-weighted assets742,312 13.1 452,563 8.0 565,704 10.0 
CET1 capital to risk-weighted assets675,331 11.9 254,567 4.5 367,708 6.5 
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 
(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)20222021
Assets  
Cash and cash equivalents$16,915 $20,090 
Investment in subsidiary bank534,817 639,050 
Other assets14,442 12,029 
Total assets$566,174 $671,169 
Liabilities and Equity  
Long-term debt$105,859 $105,616 
Other liabilities7,444 7,334 
Total liabilities113,303 112,950 
Shareholders’ equity:  
Preferred stock, no par value, authorized 1,000,000 shares; issued and outstanding none at December 31, 2022 and 2021
— — 
Common stock, no par value, authorized 185,000,000 shares; issued and outstanding 27,025,070 and 27,714,071 shares at December 31, 2022 and 2021, respectively
408,071 433,263 
Additional paid-in capital101,346 98,073 
Retained earnings87,438 34,843 
Accumulated other comprehensive loss(143,984)(7,960)
Total shareholders’ equity452,871 558,219 
Total equity452,871 558,219 
Total liabilities and equity$566,174 $671,169 
CENTRAL PACIFIC FINANCIAL CORP.
CONDENSED STATEMENTS OF INCOME

 Year Ended December 31,
(Dollars in thousands)202220212020
Income:   
Dividends from subsidiary bank$47,427 $54,016 $24,015 
Interest income:   
Interest income from subsidiary bank3 3 4 
Other income64 43 52 
Total income47,494 54,062 24,071 
Expense:   
Interest expense on long-term debt4,930 4,097 2,095 
Other expenses2,317 3,504 1,293 
Total expenses7,247 7,601 3,388 
Income before income taxes and equity in undistributed income of subsidiaries40,247 46,461 20,683 
Income tax expense (benefit)(1,917)(1,968)(690)
Income before equity in undistributed income of subsidiaries42,164 48,429 21,373 
Equity in undistributed income of subsidiary bank31,764 31,465 15,900 
Net income$73,928 $79,894 $37,273 
CENTRAL PACIFIC FINANCIAL CORP.
CONDENSED STATEMENTS OF CASH FLOWS

 Year Ended December 31,
(Dollars in thousands)202220212020
Cash flows from operating activities:   
Net income$73,928 $79,894 $37,273 
Adjustments to reconcile net income to net cash provided by operating activities:   
Deferred income tax expense (benefit)(26)70 2,552 
Equity in undistributed income of subsidiary bank(31,764)(31,465)(15,900)
Share-based compensation expense3,273 3,231 3,231 
Net change in other assets and liabilities(20)(85)(3,010)
Net cash provided by operating activities45,391 51,645 24,146 
Cash flows from investing activities:   
Contributions to subsidiary bank— — (46,750)
Proceeds from sale of investment securities— 1,653 — 
Net cash provided by (used in) investing activities— 1,653 (46,750)
Cash flows from financing activities:   
Net proceeds from issuance of common stock and stock option exercises679 1,236 — 
Net proceeds from subordinated debt— — 53,838 
Repurchases of common stock(20,740)(18,669)(4,749)
Cash dividends paid on common stock(28,505)(26,959)(25,935)
Net cash (used in) provided by financing activities(48,566)(44,392)23,154 
Net (decrease) increase in cash and cash equivalents(3,175)8,906 550 
Cash and cash equivalents at beginning of year20,090 11,184 10,634 
Cash and cash equivalents at end of year$16,915 $20,090 $11,184