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PARENT COMPANY AND REGULATORY RESTRICTIONS

12 Months Ended

Dec. 31, 2023

Condensed Financial Information Disclosure [Abstract]

PARENT COMPANY AND REGULATORY RESTRICTIONS

22. PARENT COMPANY AND REGULATORY RESTRICTIONS

The retained earnings of the parent company, Central Pacific Financial Corp., included $316.0 million and $339.4 million of equity in undistributed losses of Central Pacific Bank as of December 31, 2023 and 2022.

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.

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, 2023 and 2022. 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
Central Pacific Financial Corp.
As of December 31, 2023
Tier 1 capital to avg. assets (leverage ratio)			$	676,536					8.8		%				$	305,843					4.0		%				N/A						N/A
Tier 1 capital to risk-weighted assets			676,536						12.4						328,609						6.0						N/A						N/A
Total capital to risk-weighted assets			799,175						14.6						438,146						8.0						N/A						N/A
Common equity tier 1 ("CET1") capital to risk-weighted assets			626,536						11.4						246,457						4.5						N/A						N/A
As of December 31, 2022
Tier 1 capital to avg. assets (leverage ratio)			642,302						8.5						301,053						4.0						N/A						N/A
Tier 1 capital to risk-weighted assets			642,302						12.2						340,151						6.0						N/A						N/A
Total capital to risk-weighted assets			764,283						14.5						453,535						8.0						N/A						N/A
CET1 capital to risk-weighted assets			592,302						11.2						255,113						4.5						N/A						N/A
Central Pacific Bank
As of December 31, 2023
Tier 1 capital to avg. assets (leverage ratio)			$	704,512					9.2		%				$	305,375					4.0		%				$	381,719					5.0		%
Tier 1 capital to risk-weighted assets			704,512						12.9						327,902						6.0						437,203						8.0
Total capital to risk-weighted assets			772,151						14.1						437,203						8.0						546,503						10.0
CET1 capital to risk-weighted assets			704,512						12.9						245,926						4.5						355,227						6.5
As of December 31, 2022
Tier 1 capital to avg. assets (leverage ratio)			675,331						8.9						300,584						4.0						375,730						5.0
Tier 1 capital to risk-weighted assets			675,331						12.8						339,422						6.0						452,563						8.0
Total capital to risk-weighted assets			742,312						14.0						452,563						8.0						565,704						10.0
CET1 capital to risk-weighted assets			675,331						12.8						254,567						4.5						367,708						6.5
(1) Under the Basel III Capital Rules, the Company and the Bank must also maintain a 2.5% 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.

Condensed financial statements of the parent company are as follows:

CENTRAL PACIFIC FINANCIAL CORP.

CONDENSED BALANCE SHEETS

			December 31,
(Dollars in thousands)			2023						2022
Assets
Cash and due from financial institutions			$	22,059					$	16,915
Investment in subsidiary bank			579,601						534,817
Other assets			14,805						14,442
Total assets			$	616,465					$	566,174
Liabilities and Equity
Long-term debt			$	106,102					$	105,859
Other liabilities			6,548						7,444
Total liabilities			112,650						113,303
Equity:
Preferred stock, no par value, authorized 1,000,000 shares; issued and outstanding none at December 31, 2023 and 2022			—						—
Common stock, no par value, authorized 185,000,000 shares; issued and outstanding 27,045,033 and 27,025,070 shares at December 31, 2023 and 2022, respectively			405,439						408,071
Additional paid-in capital			102,982						101,346
Retained earnings			117,990						87,438
Accumulated other comprehensive loss			(122,596)						(143,984)
Total equity			503,815						452,871
Total liabilities and equity			$	616,465					$	566,174

CENTRAL PACIFIC FINANCIAL CORP.

CONDENSED STATEMENTS OF INCOME

			Year Ended December 31,
(Dollars in thousands)			2023						2022						2021
Income:
Dividends from subsidiary bank			$	42,540					$	47,427					$	54,016
Interest income:
Interest income from subsidiary bank			3						3						3
Other income			122						64						43
Total income			42,665						47,494						54,062
Expense:
Interest expense on long-term debt			6,762						4,930						4,097
Other expenses			3,250						2,317						3,504
Total expenses			10,012						7,247						7,601
Income before income taxes and equity in undistributed income of subsidiaries			32,653						40,247						46,461
Income tax benefit			(2,620)						(1,917)						(1,968)
Income before equity in undistributed income of subsidiaries			35,273						42,164						48,429
Equity in undistributed income of subsidiary bank			23,396						31,764						31,465
Net income			$	58,669					$	73,928					$	79,894

CENTRAL PACIFIC FINANCIAL CORP.

CONDENSED STATEMENTS OF CASH FLOWS

			Year Ended December 31,
(Dollars in thousands)			2023						2022						2021
Cash flows from operating activities:
Net income			$	58,669					$	73,928					$	79,894
Adjustments to reconcile net income to net cash provided by operating activities:
Deferred income tax (benefit) expense			32						(26)						70
Equity in undistributed income of subsidiary bank			(23,396)						(31,764)						(31,465)
Share-based compensation expense			1,636						3,273						3,231
Net change in other assets and liabilities			(1,543)						(20)						(85)
Net cash provided by operating activities			35,398						45,391						51,645
Cash flows from investing activities:
Proceeds from sale of investment securities			—						—						1,653
Distributions from unconsolidated entities			495						—						—
Net cash provided by investing activities			495						—						1,653
Cash flows from financing activities:
Net proceeds from issuance of common stock and stock option exercises			—						679						1,236
Repurchases of common stock			(2,632)						(20,740)						(18,669)
Cash dividends paid on common stock			(28,117)						(28,505)						(26,959)
Net cash used in financing activities			(30,749)						(48,566)						(44,392)
Net increase (decrease) in cash and cash equivalents			5,144						(3,175)						8,906
Cash and cash equivalents at beginning of year			16,915						20,090						11,184
Cash and cash equivalents at end of year			$	22,059					$	16,915					$	20,090

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- References

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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
-Topic 235
-SubTopic 10
-Name Accounting Standards Codification
-Section S99
-Paragraph 3
-Subparagraph (SX 210.12-04(a))
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147480678/235-10-S99-3

Reference 2: http://www.xbrl.org/2003/role/disclosureRef
-Topic 205
-SubTopic 10
-Name Accounting Standards Codification
-Section S99
-Paragraph 6
-Subparagraph (SX 210.5-04(Schedule I))
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147480922/205-10-S99-6

Reference 3: http://www.xbrl.org/2003/role/recommendedDisclosureRef
-Topic 810
-SubTopic 10
-Name Accounting Standards Codification
-Section 45
-Paragraph 11
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147481231/810-10-45-11

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