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Press Release

Central Pacific Financial Corp. Reports Third Quarter 2019 Results

- Net income of $14.6 million, or fully diluted EPS of $0.51 for the third quarter, compared to net income of $13.5 million, or fully diluted EPS of $0.47 for the second quarter

- ROA of 0.99% and ROE of 11.11% for the third quarter, compared to ROA of 0.92% and ROE of 10.73% for the second quarter

- Total loans increased by $120.7 million, or 2.8% sequentially, and $389.8 million, or 9.8% year-over-year

- Core deposits increased by $57.9 million, or 1.4% sequentially, and $139.6 million, or 3.5% year-over-year

- RISE2020 was successfully launched and is on schedule with significant progress made on multiple initiatives. The Company is on track to achieve its key milestones over the next several quarters

Company Release - 10/23/2019 6:30 AM ET

HONOLULU, Oct. 23, 2019 /PRNewswire/ -- Central Pacific Financial Corp. (NYSE: CPF) (the "Company"), parent company of Central Pacific Bank, today reported net income in the third quarter of 2019 of $14.6 million, or fully diluted earnings per share ("EPS") of $0.51, compared to net income in the third quarter of 2018 of $15.2 million, or EPS of $0.52, and net income in the second quarter of 2019 of $13.5 million, or EPS of $0.47. Net income in the nine months ended September 30, 2019 totaled $44.1 million, or  EPS of $1.53, compared to net income in the nine months ended September 30, 2018 of $43.7 million, or EPS of $1.47.

Central Pacific Financial Corp. Logo (PRNewsFoto/Central Pacific Financial Corp.)

"We are pleased with our third quarter financial results and look towards building upon the momentum and excitement from both our employees and the community as we continue to execute on our RISE2020 initiative," said Paul Yonamine, Chairman and Chief Executive Officer.

"Our strong quarterly loan growth, solid asset quality and progress on early RISE2020 milestones are reflective of the great work of our employees," said Catherine Ngo, President.

On October 22, 2019, the Company's Board of Directors declared a quarterly cash dividend of $0.23 per share on its outstanding common shares. The dividend will be payable on December 16, 2019 to shareholders of record at the close of business on November 29, 2019.

During the third quarter of 2019, the Company repurchased 140,600 shares of common stock, at a total cost of $4.0 million, or an average cost per share of $28.56. During the nine months ended September 30, 2019, the Company repurchased 631,300 shares of common stock, or approximately 2.2% of its common stock outstanding as of December 31, 2018. Total cost of the shares repurchased during the nine months ended September 30, 2019 was $18.0 million, or an average cost per share of $28.46. The Company's remaining repurchase authority under its share repurchase program at September 30, 2019 is $25.9 million. During the nine months ended September 30, 2019, the Company returned $37.2 million in capital to its shareholders through cash dividends and share repurchases.

Earnings Highlights
Net interest income for the third quarter of 2019 was $45.6 million, compared to $43.3 million in the year-ago quarter and $45.4 million in the previous quarter. Net interest margin for the third quarter of 2019 was 3.30%, compared to 3.20% in the year-ago quarter and 3.33% in the previous quarter. The increases in net interest income and net interest margin from the year-ago quarter were primarily due to growth in the loan portfolio, combined with higher yields earned on the loan portfolio compared to the year-ago quarter. These increases were partially offset by lower interest and dividends on investment securities due to the planned runoff of our investment securities portfolio, combined with higher deposit and borrowing costs from the year-ago quarter. The sequential quarter increase in net interest income was primarily due to growth in the loan portfolio, combined with lower deposit costs, partially offset by lower interest and dividends on investment securities. Net interest income in the previous quarter included higher non-recurring interest recoveries of $0.5 million which positively impacted the net interest margin in the previous quarter.

Other operating income for the third quarter of 2019 totaled $10.3 million, compared to $10.8 million in the year-ago quarter and $10.1 million in the previous quarter. The decrease from the year-ago quarter was primarily due to lower income from bank-owned life insurance of $0.4 million, lower income recovered on nonaccrual loans previously charged-off of $0.3 million and lower mortgage banking income of $0.2 million, partially offset by higher merchant and bank card fees of $0.3 million (included in other service charges and fees). The increase from the previous quarter was primarily due to higher merchant and bank card fees of $0.2 million (included in other service charges and fees) and higher mortgage banking income of $0.2 million, partially offset by lower income from bank-owned life insurance of $0.3 million.

Other operating expense for the third quarter of 2019 totaled $34.9 million, which increased from $34.0 million in the year-ago quarter and decreased from $36.1 million in the previous quarter. The increase from the year-ago quarter was primarily due to higher salaries and employee benefits of $1.6 million and higher legal and professional services of $0.4 million. The higher salaries and employee benefits compared to the year-ago quarter was partially attributable to the addition of positions in strategic areas and higher commissions, combined with annual merit increases effective in the second quarter of 2019. These negative variances were partially offset by lower amortization of core deposit premium of $0.7 million, as the intangible asset was fully amortized as of September 30, 2018, a credit to the reserve for unfunded loan commitments during the current quarter of $0.5 million (included in other) and lower FDIC insurance expense of $0.4 million (included in other). FDIC insurance expense includes a $0.4 million assessment credit received in the current quarter. The decrease from the previous quarter was primarily due to a credit to the reserve for unfunded loan commitments during the current quarter of $0.5 million (included in other), compared to an increase to the reserve for unfunded loan commitments during the previous quarter of $0.5 million. The decrease from the previous quarter was also attributable to lower entertainment and promotions expense of $0.7 million (included in other) and lower FDIC insurance expense of $0.4 million (included in other). Entertainment and promotions expense in the previous quarter included expenses related to a core deposit gathering campaign. Other operating expense in the third quarter of 2019 included approximately $1.2 million in RISE2020-related expenses.

The efficiency ratio for the third quarter of 2019 was 62.48%, compared to 62.84% in the year-ago quarter and 65.09% in the previous quarter. The efficiency ratio in the previous quarter was negatively impacted by the variances in operating expenses noted above.

In the third quarter of 2019, the Company recorded income tax expense of $4.9 million, compared to $5.0 million in the year-ago quarter and $4.4 million in the previous quarter. The effective tax rate for the third quarter of 2019 was 25.2%, compared to 24.7% in the year-ago quarter and 24.6% in the previous quarter.

Balance Sheet Highlights
Total assets at September 30, 2019 of $5.98 billion increased by $248.1 million, or 4.3% from September 30, 2018, and increased by $56.7 million, or 1.0% from June 30, 2019.

Total loans at September 30, 2019 of $4.37 billion increased by $389.8 million, or 9.8%, and $120.7 million, or 2.8% from September 30, 2018 and June 30, 2019, respectively. The year-over-year and sequential quarter increases in total loans were driven by broad-based growth in all loan categories.

Total deposits at September 30, 2019 of $5.04 billion increased by $34.0 million, or 0.7% from September 30, 2018, and increased by $60.8 million, or 1.2% from June 30, 2019.  The sequential quarter increase in total deposits was primarily attributable to increases in noninterest-bearing demand deposits of $48.0 million, savings and money market deposits of $19.9 million and other time deposits greater than $250,000 of $26.7 million, partially offset by a decrease in government time deposits of $22.4 million. Core deposits, which include demand deposits, savings and money market deposits, and time deposits less than $100,000, totaled $4.16 billion at September 30, 2019.  This represents an increase of $139.6 million, or 3.5% from September 30, 2018, and $57.9 million, or 1.4% from June 30, 2019. The Company's loan-to-deposit ratio was 86.7% at September 30, 2019, compared to 79.5% at September 30, 2018 and 85.3% at June 30, 2019.

Asset Quality
Nonperforming assets at September 30, 2019 totaled $1.4 million, or 0.02% of total assets, compared to $3.0 million, or 0.05% of total assets at September 30, 2018, and $1.3 million, or 0.02% of total assets at June 30, 2019.

Loans delinquent for 90 days or more still accruing interest totaled $0.2 million at September 30, 2019, compared to $0.3 million and $0.3 million at September 30, 2018 and June 30, 2019, respectively.

Net charge-offs in the third quarter of 2019 totaled $1.6 million, compared to net charge-offs of $1.3 million in the year-ago quarter, and net charge-offs of $0.4 million in the previous quarter.

In the third quarter of 2019, the Company recorded a provision for loan and lease losses of $1.5 million, compared to a credit of $0.1 million in the year-ago quarter and a provision of $1.4 million in the previous quarter. The increases in the provision from the year-ago and sequential quarters were primarily due to growth in our loan portfolio. The allowance for loan and lease losses, as a percentage of total loans and leases at September 30, 2019 was 1.10%, compared to 1.18% at September 30, 2018 and 1.14% at June 30, 2019.

Capital
Total shareholders' equity was $525.2 million at September 30, 2019, compared to $478.2 million and $515.7 million at September 30, 2018 and June 30, 2019, respectively.

The Company maintained its strong capital position and its capital ratios continue to exceed the levels required to be considered a "well-capitalized" institution for regulatory purposes under Basel III. At September 30, 2019, the Company's leverage capital, tier 1 risk-based capital, total risk-based capital, and common equity tier 1 ratios were 9.5%, 12.6%, 13.7%, and 11.5%, respectively, compared to 9.5%, 12.7%, 13.9%, and 11.6%, respectively, at June 30, 2019.

Conference Call
The Company's management will host a conference call today at 1:00 p.m. Eastern Time (7:00 a.m. Hawaii Time) to discuss the quarterly results. Individuals are encouraged to listen to the live webcast of the presentation by visiting the investor relations page of the Company's website at http://ir.centralpacificbank.com. Alternatively, investors may participate in the live call by dialing 1-877-505-7644. A playback of the call will be available through November 23, 2019 by dialing 1-877-344-7529 (passcode: 10136063) and on the Company's website.

About Central Pacific Financial Corp.
Central Pacific Financial Corp. is a Hawaii-based bank holding company with approximately $6.0 billion in assets.  Central Pacific Bank, its primary subsidiary, operates 35 branches and 78 ATMs in the state of Hawaii, as of September 30, 2019.  For additional information, please visit the Company's website at http://www.centralpacificbank.com.

Forward-Looking Statements
This document may contain forward-looking statements concerning projections of revenues, income/loss, earnings/loss per share, capital expenditures, dividends, capital structure, or other financial items, plans and objectives of management for future operations, future economic performance including anticipated performance results from our RISE2020 initiative, or any of the assumptions underlying or relating to any of the foregoing.  Forward-looking statements can be identified by the fact that they do not relate strictly to historical or current facts, and may include the words "believes," "plans," "expects," "anticipates," "forecasts," "intends," "hopes," "targeting," "should," "estimates," or words of similar meaning.  While the Company believes that our forward-looking statements and the assumptions underlying them are reasonably based, such statements and assumptions are by their nature subject to risks and uncertainties, and thus could later prove to be inaccurate or incorrect.  Accordingly, actual results could materially differ from projections for a variety of reasons, including, but not limited to:  the effect of, and our failure to comply with any regulatory orders or actions we are or may become subject to; oversupply of inventory and adverse conditions in the Hawaii and California real estate markets and any weakness in the construction industry;  adverse changes in the financial performance and/or condition of our borrowers and, as a result, increased loan delinquency rates,  deterioration in asset quality, and losses in our loan portfolio; our ability to successfully implement our RISE2020 initiative; current and projected levels of RISE2020-related expense, which include estimates of expense related to dedicated staff and management time and third-party expense; the impact of local, national, and international economies and events (including political events, acts of war or terrorism, natural disasters such as wildfires, volcanoes, tsunamis and earthquakes) on the Company's business and operations and on tourism, the military and other major industries operating within the Hawaii market and any other markets in which the Company does business; deterioration or malaise in economic conditions, including destabilizing factors in the financial industry and deterioration of the real estate market, as well as the impact from any declining levels of consumer and business confidence in the state of the economy in general and in financial institutions in particular;  the impact of regulatory action on the Company and Central Pacific Bank and legislation affecting the financial services industry; failure to maintain effective internal control over financial reporting or disclosure controls and procedures; changes in estimates of future reserve requirements based upon the periodic review thereof under relevant regulatory and accounting requirements; the impact of the Dodd-Frank Wall Street Reform and Consumer Protection Act, other regulatory reform, and any related rules and regulations on our business operations and competitiveness; the costs and effects of legal and regulatory developments, including legal proceedings or regulatory or other governmental inquiries and proceedings and the resolution thereof, and the results of regulatory examinations or reviews;  the effects of the Tax Cuts and Jobs Act; the effects of and changes in trade, monetary and fiscal policies and laws, including the interest rate policies of the Board of Governors of the Federal Reserve System; inflation, interest rate, securities market and monetary fluctuations;  negative trends in our market capitalization and adverse changes in the price of the Company's common shares; changes in consumer spending, borrowings and savings habits; technological changes and developments; changes in the competitive environment among financial holding companies and other financial service providers, including fintech businesses; the effect of changes in accounting policies and practices, including changes as may be adopted by the regulatory agencies, as well as the Public Company Accounting Oversight Board, the Financial Accounting Standards Board and other accounting standard setters; changes in our capital position; our ability to attract and retain skilled directors, executives and employees; changes in our organization, compensation and benefit plans; and our success at managing the risks involved in any of the foregoing items. For further information on factors that could cause actual results to materially differ from projections, please see the Company's publicly available Securities and Exchange Commission filings, including the Company's Form 10-K for the last fiscal year and, in particular, the discussion of "Risk Factors" set forth therein. The Company does not update any of its forward-looking statements except as required by law.

CENTRAL PACIFIC FINANCIAL CORP. AND SUBSIDIARIES

Financial Highlights

(Unaudited)

TABLE 1



Three Months Ended


Nine Months Ended

(Dollars in thousands,


September 30,


June 30,


March 31,


December 31,


September 30,


September 30,

except for per share amounts)


2019


2019


2019


2018


2018


2019


2018

CONDENSED INCOME STATEMENT















Net interest income


$

45,649



$

45,378



$

45,113



$

44,679



$

43,325



$

136,140



$

128,319


Provision (credit) for loan and lease losses


1,532



1,404



1,283



(1,386)



(59)



4,219



262


Net interest income after provision (credit) for loan and lease losses


44,117



43,974



43,830



46,065



43,384



131,921



128,057


Total other operating income


10,266



10,094



11,673



9,400



10,820



32,033



29,404


Total other operating expense


34,934



36,107



34,348



33,642



34,025



105,389



101,040


Income before taxes


19,449



17,961



21,155



21,823



20,179



58,565



56,421


Income tax expense


4,895



4,427



5,118



6,031



4,986



14,440



12,727


Net income


14,554



13,534



16,037



15,792



15,193



44,125



43,694


Basic earnings per common share


$

0.51



$

0.47



$

0.56



$

0.54



$

0.52



$

1.54



$

1.48


Diluted earnings per common share


0.51



0.47



0.55



0.54



0.52



1.53



1.47


Dividends declared per common share


0.23



0.23



0.21



0.21



0.21



0.67



0.61

















PERFORMANCE RATIOS















Return on average assets (ROA) [1]


0.99

%


0.92

%


1.10

%


1.10

%


1.06

%


1.00

%


1.03

%

Return on average shareholders' equity (ROE) [1]


11.11



10.73



12.97



12.90



12.54



11.58



11.99


Average shareholders' equity to average assets


8.87



8.62



8.51



8.53



8.49



8.67



8.57


Efficiency ratio  [2]


62.48



65.09



60.49



62.21



62.84



62.67



64.06


Net interest margin (NIM) [1]


3.30



3.33



3.34



3.28



3.20



3.32



3.20


Dividend payout ratio [3]


45.10



48.94



38.18



38.89



40.38



43.79



41.50

















SELECTED AVERAGE BALANCES















Average loans and leases, including loans held for sale


$

4,293,455



$

4,171,558



$

4,083,791



$

4,022,376



$

3,941,511



$

4,183,703



$

3,856,420


Average interest-earning assets


5,527,532



5,485,977



5,464,377



5,451,052



5,418,924



5,492,860



5,376,748


Average assets


5,907,207



5,856,465



5,809,931



5,739,228



5,709,825



5,858,224



5,670,838


Average deposits


4,987,414



4,977,781



4,978,470



4,938,560



5,063,061



4,981,254



5,035,009


Average interest-bearing liabilities


3,920,304



3,897,619



3,821,528



3,769,920



3,802,028



3,880,179



3,774,903


Average shareholders' equity


524,083



504,749



494,635



489,510



484,737



507,930



485,942


 

CENTRAL PACIFIC FINANCIAL CORP. AND SUBSIDIARIES

Financial Highlights

(Unaudited)

TABLE 1 (CONTINUED)



September 30,


June 30,


March 31,


December 31,


September 30,

(dollars in thousands)


2019


2019


2019


2018


2018

REGULATORY CAPITAL











Central Pacific Financial Corp











Leverage capital


$

561,478



$

556,403



$

554,148



$

570,260



$

590,627


Tier 1 risk-based capital


561,478



556,403



554,148



570,260



590,627


Total risk-based capital


611,076



606,567



602,824



619,419



639,157


Common equity tier 1 capital


511,478



506,403



504,148



500,260



500,627


Central Pacific Bank











Leverage capital


550,913



544,480



539,390



533,166



571,949


Tier 1 risk-based capital


550,913



544,480



539,390



533,166



571,949


Total risk-based capital


600,511



594,644



588,066



582,325



620,479


Common equity tier 1 capital


550,913



544,480



539,390



533,166



571,949













REGULATORY CAPITAL RATIOS











Central Pacific Financial Corp











Leverage capital ratio


9.5

%


9.5

%


9.5

%


9.9

%


10.3

%

Tier 1 risk-based capital ratio


12.6



12.7



13.0



13.5



14.2


Total risk-based capital ratio


13.7



13.9



14.1



14.7



15.4


Common equity tier 1 capital ratio


11.5



11.6



11.8



11.9



12.0


Central Pacific Bank











Leverage capital ratio


9.4



9.3



9.3



9.3



10.0


Tier 1 risk-based capital ratio


12.4



12.5



12.7



12.7



13.8


Total risk-based capital ratio


13.5



13.6



13.8



13.8



15.0


Common equity tier 1 capital ratio


12.4



12.5



12.7



12.7



13.8




September 30,


June 30,


March 31,


December 31,


September 30,

(dollars in thousands, except for per share amounts)


2019


2019


2019


2018


2018

BALANCE SHEET











Loans and leases


$

4,367,862



$

4,247,113



$

4,101,571



$

4,078,366



$

3,978,027


Total assets


5,976,716



5,920,006



5,841,352



5,807,026



5,728,640


Total deposits


5,037,659



4,976,849



4,948,128



4,946,490



5,003,680


Long-term debt


101,547



101,547



101,547



122,166



92,785


Total shareholders' equity


525,227



515,695



502,638



491,725



478,151


Total shareholders' equity to total assets


8.79

%


8.71

%


8.60

%


8.47

%


8.35

%












ASSET QUALITY











Allowance for loan and lease losses


$

48,167



$

48,267



$

47,267



$

47,916



$

46,826


Non-performing assets


1,360



1,258



3,338



2,737



3,026


Allowance to loans and leases outstanding


1.10

%


1.14

%


1.15

%


1.17

%


1.18

%

Allowance to non-performing assets


3,541.69

%


3,836.80

%


1,416.03

%


1,750.68

%


1,547.46

%












PER SHARE OF COMMON STOCK OUTSTANDING











Book value per common share


$

18.47



$

18.05



$

17.50



$

16.97



$

16.34
























[1] ROA, ROE and ROTE are annualized based on a 30/360 day convention. Annualized net interest income and expense in the NIM calculation are based on the day count interest payment conventions at the interest-earning asset or interest-bearing liability level (i.e. 30/360, actual/actual)

[2] Efficiency ratio is defined as total operating expense divided by total revenue (net interest income and total other operating income)

[3] Dividend payout ratio is defined as dividends declared per share divided by diluted earnings per share

 

CENTRAL PACIFIC FINANCIAL CORP. AND SUBSIDIARIES

Consolidated Balance Sheets

(Unaudited)

TABLE 2



September 30,


June 30,


March 31,


December 31,


September 30,

(Dollars in thousands, except share data)


2019


2019


2019


2018


2018

ASSETS











Cash and due from f inancial institutions


$

87,395



$

83,534



$

90,869



$

80,569



$

82,668


Interest-bearing deposits in other financial institutions


7,803



15,173



7,310



21,617



7,051


Investment securities:











Available-for-sale debt securities, at fair value


1,186,875



1,254,743



1,319,450



1,205,478



1,233,002


Held-to-maturity debt securities, at amortized cost; fair value of:  none at September 30, 2019, none at June 30, 2019, none at March 31, 2019, $144,272 at December 31, 2018, and $146,466 at September 30, 2018








148,508



152,852


Equity securities, at fair value


1,058



1,034



910



826



885


Total investment securities


1,187,933



1,255,777



1,320,360



1,354,812



1,386,739


Loans held for sale


7,016



6,848



3,539



6,647



4,460


Loans and leases


4,367,862



4,247,113



4,101,571



4,078,366



3,978,027


Less allowance for loan and lease losses


48,167



48,267



47,267



47,916



46,826


Loans and leases, net of allowance for loan and lease losses


4,319,695



4,198,846



4,054,304



4,030,450



3,931,201


Premises and equipment, net


44,095



43,600



44,527



45,285



46,184


Accrued interest receivable


16,220



17,260



17,082



17,000



16,755


Investment in unconsolidated subsidiaries


17,001



17,247



16,054



14,008



15,283


Other real estate owned


466



276



276



414



414


Mortgage servicing rights


15,058



15,266



15,347



15,596



15,634


Bank-owned life insurance


158,939



158,294



158,392



157,440



157,085


Federal Home Loan Bank ("FHLB") stock


17,183



17,824



16,145



16,645



10,965


Right of use lease asset [1]


52,588



53,678



54,781






Other assets


45,324



36,383



42,366



46,543



54,201


Total assets


$

5,976,716



$

5,920,006



$

5,841,352



$

5,807,026



$

5,728,640


LIABILITIES AND SHAREHOLDERS' EQUITY











Deposits:











Noninterest-bearing demand


$

1,399,200



$

1,351,190



$

1,357,890



$

1,436,967



$

1,403,534


Interest-bearing demand


998,037



1,002,706



965,316



954,011



935,130


Savings and money market


1,593,738



1,573,805



1,562,798



1,448,257



1,503,465


Time


1,046,684



1,049,148



1,062,124



1,107,255



1,161,551


Total deposits


5,037,659



4,976,849



4,948,128



4,946,490



5,003,680


FHLB advances and other short-term borrowings


205,000



221,000



179,000



197,000



105,000


Long-term debt


101,547



101,547



101,547



122,166



92,785


Lease liability [1]


52,807



53,829



54,861






Other liabilities


54,476



51,086



55,178



49,645



49,024


Total liabilities


5,451,489



5,404,311



5,338,714



5,315,301



5,250,489


Shareholders' equity:











Preferred stock, no par value, authorized 1,000,000 shares; issued and outstanding:  none at September 30, 2019, June 30, 2019, March 31, 2019, December 31, 2018, and September 30, 2018











Common stock, no par value, authorized 185,000,000 shares; issued and outstanding:  28,441,341 at September 30, 2019, 28,567,777 at June 30, 2019, 28,723,041 at March 31, 2019, 28,967,715 at December 31, 2018, and 29,270,398 at September 30, 2018


452,278



456,293



462,952



470,660



478,721


Additional paid-in capital


90,604



89,724



89,374



88,876



87,939


Accumulated deficit


(26,782)



(34,780)



(41,733)



(51,718)



(61,406)


Accumulated other comprehensive income (loss)


9,127



4,458



(7,955)



(16,093)



(27,103)


Total shareholders' equity


525,227



515,695



502,638



491,725



478,151


Total liabilities and shareholders' equity


$

5,976,716



$

5,920,006



$

5,841,352



$

5,807,026



$

5,728,640













[1] The Company adopted ASU 2016-02 effective January 1, 2019 using the modified retrospective approach and recorded a right of use lease asset and lease liability on the balance sheet as of March 31, 2019 for its operating leases where it is a lessee. The Company also elected to apply the practical expedient available under ASU 2018-11, which allows entities to apply the new leases standard at the adoption date and elect to not recast comparative periods

 

CENTRAL PACIFIC FINANCIAL CORP. AND SUBSIDIARIES

Consolidated Statements of Income

(Unaudited)

TABLE 3



Three Months Ended


Nine Months Ended



September 30,


June 30,


March 31,


December 31,


September 30,


September 30,

(Dollars in thousands, except per share data)


2019


2019


2019


2018


2018


2019


2018

Interest income:















Interest and fees on loans and leases


$

45,861



$

45,540



$

43,768



$

42,836



$

40,531



$

135,169



$

116,620


Interest and dividends on investment securities:















Taxable investment securities


7,178



7,530



8,260



8,451



8,490



22,968



26,050


Tax-exempt investment securities


708



814



866



910



920



2,388



2,786


Dividend income on investment securities


14



14



18



17



26



46



44


Interest on deposits in other financial institutions


33



46



68



55



109



147



310


Dividend income on FHLB stock


186



161



161



70



60



508



145


Total interest income


53,980



54,105



53,141



52,339



50,136



161,226



145,955


Interest expense:















Interest on deposits:















Demand


207



199



192



180



181



598



554


Savings and money market


1,549



1,507



791



579



593



3,847



1,421


Time


4,432



4,867



5,092



4,567



4,744



14,391



12,203


Interest on short-term borrowings


1,130



1,123



893



999



146



3,146



237


Interest on long-term debt


1,013



1,031



1,060



1,335



1,147



3,104



3,221


Total interest expense


8,331



8,727



8,028



7,660



6,811



25,086



17,636


Net interest income


45,649



45,378



45,113



44,679



43,325



136,140



128,319


Provision (credit) for loan and lease losses ("Provision")


1,532



1,404



1,283



(1,386)



(59)



4,219



262


Net interest income after Provision


44,117



43,974



43,830



46,065



43,384



131,921



128,057


Other operating income:















Mortgage banking income


1,764



1,601



1,424



1,770



1,923



4,789



5,545


Service charges on deposit accounts


2,125



2,041



2,081



2,237



2,189



6,247



6,169


Other service charges and fees


3,724



3,691



3,064



3,426



3,286



10,479



9,697


Income from fiduciary activities


1,126



1,129



965



1,113



1,159



3,220



3,132


Equity in earnings of unconsolidated subsidiaries


86



71



8



82



71



165



151


Fees on foreign exchange


170



218



151



197



220



539



708


Net gains (losses) on sales of investment securities


36







(279)





36




Income from bank-owned life insurance


645



914



952



243



1,055



2,511



1,874


Loan placement fees


230



107



149



215



115



486



532


Net gains on sales of foreclosed assets


17











17




Other (refer to Table 4)


343



322



2,879



396



802



3,544



1,596


Total other operating income


10,266



10,094



11,673



9,400



10,820



32,033



29,404


Other operating expense:















Salaries and employee benefits


20,631



20,563



19,889



19,053



19,011



61,083



56,299


Net occupancy


3,697



3,525



3,458



3,649



3,488



10,680



10,114


Equipment


1,067



1,138



1,006



1,079



1,048



3,211



3,160


Amortization of core deposit premium










669





2,006


Communication expense


1,008



903



734



863



903



2,645



2,547


Legal and professional services


1,933



1,728



1,570



2,212



1,528



5,231



5,118


Computer software expense


2,713



2,560



2,597



2,597



2,672



7,870



7,244


Advertising expense


711



712



711



834



612



2,134



1,841


Foreclosed asset expense


15



49



159



37



212



223



537


Other (refer to Table 4)


3,159



4,929



4,224



3,318



3,882



12,312



12,174


Total other operating expense


34,934



36,107



34,348



33,642



34,025



105,389



101,040


Income before income taxes


19,449



17,961



21,155



21,823



20,179



58,565



56,421


Income tax expense


4,895



4,427



5,118



6,031



4,986



14,440



12,727


Net income


$

14,554



$

13,534



$

16,037



$

15,792



$

15,193



$

44,125



$

43,694


Per common share data:















Basic earnings per share


$

0.51



$

0.47



$

0.56



$

0.54



$

0.52



$

1.54



$

1.48


Diluted earnings per share


0.51



0.47



0.55



0.54



0.52



1.53



1.47


Cash dividends declared


0.23



0.23



0.21



0.21



0.21



0.67



0.61


Basic weighted average shares outstanding


28,424,898



28,546,564



28,758,310



29,033,261



29,297,465



28,575,369



29,536,536


Diluted weighted average shares outstanding


28,602,338



28,729,510



28,979,855



29,217,480



29,479,812



28,762,057



29,743,238


 

CENTRAL PACIFIC FINANCIAL CORP. AND SUBSIDIARIES

Other Operating Income and Other Operating Expense - Detail

(Unaudited)

TABLE 4


The following table sets forth the components of other operating income - other for the periods indicated:




Three Months Ended


Nine Months Ended



September 30,


June 30,


March 31,


December 31,


September 30,


September 30,

(Dollars in thousands)


2019


2019


2019


2018


2018


2019


2018

Other operating income - other:















Income recovered on nonaccrual loans previously charged-off


$

73



$

85



$

82



$

99



$

395



$

240



$

621


Other recoveries


42



26



26



25



101



94



196


Commissions on sale of checks


75



79



80



79



79



234



249


Gain on sale of MasterCard stock






2,555







2,555




Other


153



132



136



193



227



421



530


Total other operating income - other


$

343



$

322



$

2,879



$

396



$

802



$

3,544



$

1,596

















The following table sets forth the components of other operating expense - other for the periods indicated:




Three Months Ended


Nine Months Ended



September 30,


June 30,


March 31,


December 31,


September 30,


September 30,

(Dollars in thousands)


2019


2019


2019


2018


2018


2019


2018

Other operating expense - other:















Charitable contributions


$

230



$

175



$

154



$

138



$

166



$

559



$

497


FDIC insurance assessment


5



362



501



427



437



868



1,305


Miscellaneous loan expenses


274



317



294



339



403



885



1,026


ATM and debit card expenses


660



620



650



613



686



1,930



2,032


Armored car expenses


220



211



198



238



185



629



584


Entertainment and promotions


323



1,023



230



445



185



1,576



617


Stationery and supplies


240



279



225



271



206



744



643


Directors' fees and expenses


242



238



242



263



263



722



777


Provision (credit) for residential mortgage loan repurchase losses




(403)





(181)



331



(403)



331


Increase (decrease) to the reserve for unfunded commitments


(465)



487



167



(461)



(71)



189



36


Other


1,430



1,620



1,563



1,226



1,091



4,613



4,326


Total other operating expense - other


$

3,159



$

4,929



$

4,224



$

3,318



$

3,882



$

12,312



$

12,174

















 

CENTRAL PACIFIC FINANCIAL CORP. AND SUBSIDIARIES

Average Balances, Interest Income & Expense, Yields and Rates (Taxable Equivalent)

(Unaudited)

TABLE 5



Three Months Ended


Three Months Ended


Three Months Ended



September 30, 2019


June 30, 2019


September 30, 2018



Average


Average




Average


Average




Average


Average



(Dollars in thousands)


Balance


Yield/Rate


Interest


Balance


Yield/Rate


Interest


Balance


Yield/Rate


Interest

ASSETS

Interest-earning assets:



















Interest-bearing deposits in other financial institutions


$

6,295



2.05

%


$

33



$

8,002



2.34

%


$

46



$

22,057



1.97

%


$

109


Investment securities, excluding valuation allowance:



















Taxable


1,093,352



2.63



7,192



1,147,759



2.63



7,544



1,284,411



2.65



8,516


Tax-exempt [1]


117,784



3.04



896



142,660



2.89



1,030



163,172



2.86



1,165


Total investment securities


1,211,136



2.67



8,088



1,290,419



2.66



8,574



1,447,583



2.67



9,681


Loans and leases, including loans held for sale


4,293,455



4.25



45,861



4,171,558



4.37



45,540



3,941,511



4.09



40,531


Federal Home Loan Bank stock


16,646



4.46



186



15,998



4.02



161



7,773



3.11



60


Total interest-earning assets


5,527,532



3.90



54,168



5,485,977



3.97



54,321



5,418,924



3.70



50,381


Noninterest-earning assets


379,675







370,488







290,901






Total assets


$

5,907,207







$

5,856,465







$

5,709,825

























LIABILITIES AND EQUITY

Interest-bearing liabilities:



















Interest-bearing demand deposits


$

1,002,875



0.08

%


$

207



$

962,402



0.08

%


$

199



$

933,405



0.08

%


$

181


Savings and money market deposits


1,582,795



0.39



1,549



1,577,437



0.38



1,507



1,524,121



0.15



593


Time deposits under $100,000


167,331



0.69



293



173,556



0.70



305



177,108



0.53



236


Time deposits $100,000 and over


874,192



1.88



4,139



907,330



2.02



4,562



1,049,446



1.70



4,508


Total interest-bearing deposits


3,627,193



0.68



6,188



3,620,725



0.73



6,573



3,684,080



0.59



5,518


Federal Home Loan Bank advances and other short-term borrowings


191,564



2.34



1,130



175,347



2.57



1,123



25,163



2.30



146


Long-term debt


101,547



3.96



1,013



101,547



4.07



1,031



92,785



4.90



1,147


Total interest-bearing liabilities


3,920,304



0.84



8,331



3,897,619



0.90



8,727



3,802,028



0.71



6,811


Noninterest-bearing deposits


1,360,221







1,357,056







1,378,981






Other liabilities


102,599







97,041







44,079






Total liabilities


5,383,124







5,351,716







5,225,088






Shareholders' equity


524,083







504,749







484,737






Non-controlling interest



















Total equity


524,083







504,749







484,737






Total liabilities and equity


$

5,907,207







$

5,856,465







$

5,709,825

























Net interest income






$

45,837







$

45,594







$

43,570





















Interest rate spread




3.06

%






3.07

%






2.99

%






















Net interest margin




3.30

%






3.33

%






3.20

%






















[1] Interest income and resultant yield information for tax-exempt investment securities is expressed on a taxable-equivalent basis using a federal statutory tax rate of 21% effective January 1, 2018




















 

CENTRAL PACIFIC FINANCIAL CORP. AND SUBSIDIARIES

Average Balances, Interest Income & Expense, Yields and Rates (Taxable Equivalent)

(Unaudited)

TABLE 6



Nine Months Ended


Nine Months Ended



September 30, 2019


September 30, 2018



Average


Average




Average


Average



(Dollars in thousands)


Balance


Yield/Rate


Interest


Balance


Yield/Rate


Interest

ASSETS

Interest-earning assets:













Interest-bearing deposits in other financial institutions


$

8,540



2.30

%


$

147



$

23,713



1.75

%


$

310


Investment securities, excluding valuation allowance:













Taxable


1,147,217



2.67



23,014



1,325,180



2.63



26,094


Tax-exempt [1]


137,750



2.93



3,023



164,174



2.86



3,527


Total investment securities


1,284,967



2.70



26,037



1,489,354



2.65



29,621


Loans and leases, including loans held for sale


4,183,703



4.32



135,169



3,856,420



4.04



116,620


Federal Home Loan Bank stock


15,650



4.33



508



7,261



2.67



145


Total interest-earning assets


5,492,860



3.94



161,861



5,376,748



3.64



146,696


Noninterest-earning assets


365,364







294,090






Total assets


$

5,858,224







$

5,670,838



















LIABILITIES AND EQUITY

Interest-bearing liabilities:













Interest-bearing demand deposits


$

972,316



0.08

%


$

598



$

940,154



0.08

%


$

554


Savings and money market deposits


1,544,759



0.33



3,847



1,506,565



0.13



1,421


Time deposits under $100,000


172,204



0.69



884



178,363



0.42



645


Time deposits $100,000 and over


921,003



1.96



13,507



1,042,353



1.48



11,558


Total interest-bearing deposits


3,610,282



0.70



18,836



3,667,435



0.52



14,178


Federal Home Loan Bank advances and other short-term borrowings


168,350



2.50



3,146



14,683



2.16



237


Long-term debt


101,547



4.09



3,104



92,785



4.64



3,221


Total interest-bearing liabilities


3,880,179



0.86



25,086



3,774,903



0.62



17,636


Noninterest-bearing deposits


1,370,972







1,367,574






Other liabilities


99,143







42,414






Total liabilities


5,350,294







5,184,891






Shareholders' equity


507,930







485,942






Non-controlling interest








5






Total equity


507,930







485,947






Total liabilities and equity


$

5,858,224







$

5,670,838



















Net interest income






$

136,775







$

129,060















Interest rate spread




3.08

%






3.02

%
















Net interest margin




3.32

%






3.20

%
















[1] Interest income and resultant yield information for tax-exempt investment securities is expressed on a taxable-equivalent basis using a federal statutory tax rate of 21% effective January 1, 2018














 

CENTRAL PACIFIC FINANCIAL CORP. AND SUBSIDIARIES

Loans and Leases by Geographic Distribution

(Unaudited)

TABLE 7



September 30,


June 30,


March 31,


December 31,


September 30,

(Dollars in thousands)


2019


2019


2019


2018


2018

HAWAII:











Commercial, financial and agricultural


$

439,296



$

435,353



$

411,396



$

439,112



$

427,047


Real estate:











Construction


96,661



72,427



68,981



64,654



66,286


Residential mortgage


1,558,735



1,516,936



1,451,794



1,428,205



1,392,669


Home equity


475,565



473,151



465,905



468,966



455,599


Commercial mortgage


909,987



905,479



869,521



861,086



845,864


Consumer


369,511



353,282



352,771



357,908



345,785


Leases


31



52



83



124



170


Total loans and leases


3,849,786



3,756,680



3,620,451



3,620,055



3,533,420


Allowance for loan and lease losses


(42,286)



(42,414)



(41,413)



(42,993)



(41,991)


Net loans and leases


$

3,807,500



$

3,714,266



$

3,579,038



$

3,577,062



$

3,491,429













U.S. MAINLAND: [1]











Commercial, financial and agricultural


$

137,316



$

155,130



$

155,399



$

142,548



$

138,317


Real estate:











Construction






2,194



2,273



2,355


Residential mortgage











Home equity











Commercial mortgage


223,925



187,379



188,485



179,192



187,586


Consumer


156,835



147,924



135,042



134,298



116,349


Leases











Total loans and leases


518,076



490,433



481,120



458,311



444,607


Allowance for loan and lease losses


(5,881)



(5,853)



(5,854)



(4,923)



(4,835)


Net loans and leases


$

512,195



$

484,580



$

475,266



$

453,388



$

439,772













TOTAL:











Commercial, financial and agricultural


$

576,612



$

590,483



$

566,795



$

581,660



$

565,364


Real estate:











Construction


96,661



72,427



71,175



66,927



68,641


Residential mortgage


1,558,735



1,516,936



1,451,794



1,428,205



1,392,669


Home equity


475,565



473,151



465,905



468,966



455,599


Commercial mortgage


1,133,912



1,092,858



1,058,006



1,040,278



1,033,450


Consumer


526,346



501,206



487,813



492,206



462,134


Leases


31



52



83



124



170


Total loans and leases


4,367,862



4,247,113



4,101,571



4,078,366



3,978,027


Allowance for loan and lease losses


(48,167)



(48,267)



(47,267)



(47,916)



(46,826)


Net loans and leases


$

4,319,695



$

4,198,846



$

4,054,304



$

4,030,450



$

3,931,201













[1] U.S. Mainland includes territories of the United States

 

CENTRAL PACIFIC FINANCIAL CORP. AND SUBSIDIARIES

Deposits

(Unaudited)

TABLE 8



September 30,


June 30,


March 31,


December 31,


September 30,

(Dollars in thousands)


2019


2019


2019


2018


2018

Noninterest-bearing demand


$

1,399,200



$

1,351,190



$

1,357,890



$

1,436,967



$

1,403,534


Interest-bearing demand


998,037



1,002,706



965,316



954,011



935,130


Savings and money market


1,593,738



1,573,805



1,562,798



1,448,257



1,503,465


Time deposits less than $100,000


165,687



171,106



174,265



176,707



174,920


Core deposits


4,156,662



4,098,807



4,060,269



4,015,942



4,017,049













Government time deposits


552,470



574,825



600,572



631,293



696,349


Other time deposits $100,000 to $250,000


103,959



105,382



107,051



106,783



104,339


Other time deposits greater than $250,000


224,568



197,835



180,236



192,472



185,943


Total time deposits $100,000 and over


880,997



878,042



887,859



930,548



986,631


Total deposits


$

5,037,659



$

4,976,849



$

4,948,128



$

4,946,490



$

5,003,680


 

CENTRAL PACIFIC FINANCIAL CORP. AND SUBSIDIARIES

Nonperforming Assets, Past Due and Restructured Loans

(Unaudited)

TABLE 9



September 30,


June 30,


March 31,


December 31,


September 30,

(Dollars in thousands)


2019


2019


2019


2018


2018

Nonaccrual loans (including loans held for sale):











Real estate:











Residential mortgage


$

799



$

738



$

2,492



$

2,048



$

2,197


Home equity


95



244



570



275



415


Total nonaccrual loans


894



982



3,062



2,323



2,612













Other real estate owned ("OREO"):











Real estate:











Residential mortgage


302



276



276



414



414


Home equity


164










Total OREO


466



276



276



414



414


Total nonperforming assets ("NPAs")


1,360



1,258



3,338



2,737



3,026













Loans delinquent for 90 days or more still accruing interest:











Home equity








298




Consumer


235



267



159



238



333


Total loans delinquent for 90 days or more still accruing interest


235



267



159



536



333













Restructured loans still accruing interest:











Commercial, financial and agricultural


157



178



199



220



388


Real estate:











Construction






2,194



2,273




Residential mortgage


6,717



6,831



7,141



8,026



9,747


Home equity











Commercial mortgage


1,985



2,097



2,222



2,348



1,145


Total restructured loans still accruing interest


8,859



9,106



11,756



12,867



11,280


Total NPAs and loans delinquent for 90 days or more and restructured loans still accruing interest


$

10,454



$

10,631



$

15,253



$

16,140



$

14,639













Total nonaccrual loans as a percentage of loans and leases


0.02

%


0.02

%


0.07

%


0.06

%


0.07

%

Total NPAs as a percentage of loans and leases and OREO


0.03

%


0.03

%


0.08

%


0.07

%


0.08

%

Total NPAs and loans delinquent for 90 days or more still accruing interest as a percentage of loans and leases and OREO


0.04

%


0.04

%


0.09

%


0.08

%


0.08

%

Total NPAs and loans delinquent for 90 days or more and restructured loans still accruing interest as a percentage of loans and leases and OREO


0.24

%


0.25

%


0.37

%


0.40

%


0.37

%












Quarter-to-quarter changes in NPAs:











Balance at beginning of quarter


$

1,258



$

3,338



$

2,737



$

3,026



$

3,509


Additions


112





810






Reductions:











Payments


(51)



(2,055)



(71)



(154)



(121)


Return to accrual status


(2)



(25)





(135)



(181)


Charge-offs, valuation and other adjustments


43





(138)





(181)


Total reductions


(10)



(2,080)



(209)



(289)



(483)


Balance at end of quarter


$

1,360



$

1,258



$

3,338



$

2,737



$

3,026


 

CENTRAL PACIFIC FINANCIAL CORP. AND SUBSIDIARIES

Allowance for Loan and Lease Losses

(Unaudited)

TABLE 10



Three Months Ended


Nine Months Ended



September 30,


June 30,


March 31,


December 31,


September 30,


September 30,

(Dollars in thousands)


2019


2019


2019


2018


2018


2019


2018

Allowance for loan and lease losses:















Balance at beginning of period


$

48,267



$

47,267



$

47,916



$

46,826



$

48,181



$

47,916



$

50,001

















Provision (credit) for loan and lease losses


1,532



1,404



1,283



(1,386)



(59)



4,219



262

















Charge-offs:















Commercial, financial and agricultural


797



839



463



881



731



2,099



1,971


Real estate:















Home equity


5











5




Consumer


1,832



1,459



2,251



1,899



1,762



5,542



5,424


Total charge-offs


2,634



2,298



2,714



2,780



2,493



7,646



7,395

















Recoveries:















Commercial, financial and agricultural


362



315



233



186



578



910



1,017


Real estate:















Construction


6



592



6



4,554



6



604



1,205


Residential mortgage


104



372



22



106



51



498



98


Home equity


24