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Press Release

Central Pacific Financial Corp. Reports Results For Fourth Quarter And Full Year Of 2019

- Net income of $14.2 million, or fully diluted EPS of $0.50 for the fourth quarter, compared to net income of $14.6 million, or fully diluted EPS of $0.51 for the third quarter

- Net income of $58.3 million, or fully diluted EPS of $2.03 for the year, compared to net income of $59.5 million, or fully diluted EPS of $2.01 last year

- Total loans increased by $81.7 million, or 1.9% sequentially, and $371.2 million, or 9.1% year-over-year

- Core deposits increased by $102.7 million, or 2.5% sequentially, and $243.4 million, or 6.1% year-over-year

- Cost of average total deposits of 0.41% in the fourth quarter declined by 8 basis points from the third quarter

- RISE2020 transformation project remains on schedule with significant progress made on multiple initiatives

Company Release - 1/29/2020 6:30 AM ET

HONOLULU, Jan. 29, 2020 /PRNewswire/ -- Central Pacific Financial Corp. (NYSE: CPF) (the "Company"), parent company of Central Pacific Bank, today reported net income in the fourth quarter of 2019 of $14.2 million, or fully diluted earnings per share ("EPS") of $0.50, compared to net income in the fourth quarter of 2018 of $15.8 million, or EPS of $0.54, and net income in the third quarter of 2019 of $14.6 million, or EPS of $0.51. Net income in the year ended December 31, 2019 totaled $58.3 million, or  EPS of $2.03, compared to net income in the year ended December 31, 2018 of $59.5 million, or EPS of $2.01.

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

"2019 was a pivotal year for the Company as we embarked on our RISE2020 transformation. We continue to make significant progress and are on schedule to meet our 2020 milestones in our digital banking and branch transformation initiatives. We are pleased with the financial results for 2019 which reflect continued execution on revenue growth while we invest for the future," said Paul Yonamine, Chairman and Chief Executive Officer.

"We concluded 2019 with strong financial results including solid loan and deposit growth and core margin expansion. We look forward to continuing to transform our bank in 2020 and beyond," said Catherine Ngo, President.

On January 28, 2020, 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 March 16, 2020 to shareholders of record at the close of business on February 28, 2020.

During the fourth quarter of 2019, the Company repurchased 165,703 shares of common stock, at a total cost of $4.8 million, or an average cost per share of $29.13. During the year ended December 31, 2019, the Company repurchased 797,003 shares of common stock, or approximately 2.8% of its common stock outstanding as of December 31, 2018. Total cost of the shares repurchased during the year ended December 31, 2019 was $22.8 million, or an average cost per share of $28.60. During the year ended December 31, 2019, the Company returned $48.5 million in capital to its shareholders through cash dividends and share repurchases.

In January 2020, the Company's Board of Directors also authorized the repurchase of up to $30 million of its outstanding common stock under its share repurchase program (the "Repurchase Plan"). This authorization supersedes the remaining repurchase authority under the prior repurchase program, which had $21.1 million in remaining repurchase authority at December 31, 2019.

Earnings Highlights
Net interest income for the fourth quarter of 2019 was $47.9 million, compared to $44.7 million in the year-ago quarter and $45.6 million in the previous quarter. Net interest margin for the fourth quarter of 2019 was 3.43%, compared to 3.28% in the year-ago quarter and 3.30% in the previous quarter. The increases in net interest income and net interest margin from the year-ago and sequential quarters were primarily due to growth in the loan portfolio, combined with higher non-recurring interest and dividends and lower deposit and borrowing costs compared to the year-ago and sequential quarters. These increases were partially offset by lower interest and dividends on investment securities due to the planned runoff of our investment securities portfolio from the year-ago and sequential quarters. Net interest income in the current quarter included higher non-recurring interest and dividends of $0.9 million and $1.1 million from the year-ago and sequential quarters, respectively, which positively impacted net interest income and net interest margin in the current quarter. The non-recurring amounts included in net interest income primarily related to interest recoveries on nonaccrual loans. The decline in deposit and borrowing costs from the year-ago and sequential quarters were primarily attributable to, and consistent with, the three rate cuts by the Federal Reserve during second half of 2019.

Other operating income for the fourth quarter of 2019 totaled $9.8 million, compared to $9.4 million in the year-ago quarter and $10.3 million in the previous quarter. The increase from the year-ago quarter was primarily due to higher merchant and bank card fees and commission and fees on investment services of $0.3 million and $0.2 million, respectively (both included in other service charges and fees), higher income from bank-owned life insurance of $0.4 million, and net losses on sales of investment securities of $0.3 million recorded the year-ago quarter, partially offset by lower mortgage banking income of $0.6 million. The decrease from the previous quarter was primarily due to lower mortgage banking income of $0.6 million, combined with a net loss on the sale of a foreclosed asset during the current quarter of $0.2 million, partially offset by higher commissions and fees on investment services of $0.1 million (included in other service charges and fees).

Other operating expense for the fourth quarter of 2019 totaled $36.2 million, which increased from $33.6 million in the year-ago quarter and increased from $34.9 million in the previous quarter. The increase from the year-ago quarter was primarily due to higher salaries and employee benefits of $2.2 million and higher computer software expense of $0.3 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. The increase from the previous quarter was primarily due to higher salaries and employee benefits of $0.6 million and higher computer software expense of $0.2 million. The increases from the year-ago and sequential quarter were also attributable to a lower credit to the reserve for unfunded loan commitments. During the current quarter the Company recorded a credit to the reserve for unfunded loan commitments of $0.2 million (included in other), compared to a credit to the reserve for unfunded loan commitments during the year-ago and previous quarters of $0.5 million. Other operating expense in the fourth quarter of 2019 included approximately $1.3 million in RISE2020-related expenses.

The efficiency ratio for the fourth quarter of 2019 was 62.81%, compared to 62.21% in the year-ago quarter and 62.48% in the previous quarter.

In the fourth quarter of 2019, the Company recorded income tax expense of $5.2 million, compared to $6.0 million in the year-ago quarter and $4.9 million in the previous quarter. The effective tax rate for the fourth quarter of 2019 was 26.7%, compared to 27.6% in the year-ago quarter and 25.2% in the previous quarter.

Balance Sheet Highlights
Total assets at December 31, 2019 of $6.01 billion increased by $205.6 million, or 3.5% from December 31, 2018, and increased by $36.0 million, or 0.6% from September 30, 2019.

Total loans at December 31, 2019 of $4.45 billion increased by $371.2 million, or 9.1%, and $81.7 million, or 1.9% from December 31, 2018 and September 30, 2019, respectively. The year-over-year increase in total loans were driven by broad-based growth in almost all loan categories. The sequential quarter increase in total loans were primarily due to increases in consumer loans of $43.1 million, residential mortgage loans of $41.1 million, and home equity loans of $15.2 million, partially offset by decreases in commercial mortgage loans of $10.5 million and commercial loans of $6.3 million.

Total deposits at December 31, 2019 of $5.12 billion increased by $173.5 million, or 3.5% from December 31, 2018, and increased by $82.4 million, or 1.6% from September 30, 2019.  The sequential quarter increase in total deposits was primarily attributable to increases in noninterest-bearing demand deposits of $51.3 million, interest-bearing demand deposits of $45.0 million and savings and money market deposits of $6.3 million, partially offset by a decrease in government time deposits of $19.4 million. Core deposits, which include demand deposits, savings and money market deposits, and time deposits less than $100,000, totaled $4.26 billion at December 31, 2019.  This represents an increase of $243.4 million, or 6.1% from December 31, 2018, and $102.7 million, or 2.5% from September 30, 2019. The Company's loan-to-deposit ratio was 86.9% at December 31, 2019, compared to 82.5% at December 31, 2018 and 86.7% at September 30, 2019.

Asset Quality
Nonperforming assets at December 31, 2019 totaled $1.7 million, or 0.03% of total assets, compared to $2.7 million, or 0.05% of total assets at December 31, 2018, and $1.4 million, or 0.02% of total assets at September 30, 2019.

Loans delinquent for 90 days or more still accruing interest totaled $1.0 million at December 31, 2019, compared to $0.5 million and $0.2 million at December 31, 2018 and September 30, 2019, respectively.

Net charge-offs in the fourth quarter of 2019 totaled $2.3 million, compared to net recoveries of $2.5 million in the year-ago quarter, and net charge-offs of $1.6 million in the previous quarter.

In the fourth quarter of 2019, the Company recorded a provision for loan and lease losses of $2.1 million, compared to a credit of $1.4 million in the year-ago quarter and a provision of $1.5 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, combined with increases in net charge-offs. The allowance for loan and lease losses, as a percentage of total loans and leases at December 31, 2019 was 1.08%, compared to 1.17% at December 31, 2018 and 1.10% at September 30, 2019.

Capital
Total shareholders' equity was $528.5 million at December 31, 2019, compared to $491.7 million and $525.2 million at December 31, 2018 and September 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 December 31, 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%, 13.6%, and 11.5%, respectively, compared to 9.5%, 12.6%, 13.7%, and 11.5%, respectively, at September 30, 2019.

Conference Call
The Company's management will host a conference call today at 1:00 p.m. Eastern Time (8:00 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 February 29, 2020 by dialing 1-877-344-7529 (passcode: 10138495) 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 77 ATMs in the state of Hawaii, as of December 31, 2019.  For additional information, please visit the Company's website at http://www.cpb.bank.

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; cybersecurity and data privacy breaches and the consequences therefrom; 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


Year Ended

(Dollars in thousands,


December 31,


September 30,


June 30,


March 31,


December 31,


December 31,

except for per share amounts)


2019


2019


2019


2019


2018


2019


2018

CONDENSED INCOME STATEMENT















Net interest income


$

47,934



$

45,649



$

45,378



$

45,113



$

44,679



$

184,074



$

172,998


Provision (credit) for loan and lease losses


2,098



1,532



1,404



1,283



(1,386)



6,317



(1,124)


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


45,836



44,117



43,974



43,830



46,065



177,757



174,122


Total other operating income


9,768



10,266



10,094



11,673



9,400



41,801



38,804


Total other operating expense


36,242



34,934



36,107



34,348



33,642



141,631



134,682


Income before taxes


19,362



19,449



17,961



21,155



21,823



77,927



78,244


Income tax expense


5,165



4,895



4,427



5,118



6,031



19,605



18,758


Net income


14,197



14,554



13,534



16,037



15,792



58,322



59,486


Basic earnings per common share


$

0.50



$

0.51



$

0.47



$

0.56



$

0.54



$

2.05



$

2.02


Diluted earnings per common share


0.50



0.51



0.47



0.55



0.54



2.03



2.01


Dividends declared per common share


0.23



0.23



0.23



0.21



0.21



0.90



0.82

















PERFORMANCE RATIOS















Return on average assets (ROA) [1]


0.95

%


0.99

%


0.92

%


1.10

%


1.10

%


0.99

%


1.05

%

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


10.70



11.11



10.73



12.97



12.90



11.36



12.22


Average shareholders' equity to average assets


8.87



8.87



8.62



8.51



8.53



8.72



8.56


Efficiency ratio  [2]


62.81



62.48



65.09



60.49



62.21



62.70



63.59


Net interest margin (NIM) [1]


3.43



3.30



3.33



3.34



3.28



3.35



3.22


Dividend payout ratio [3]


46.00



45.10



48.94



38.18



38.89



44.33



40.80

















SELECTED AVERAGE BALANCES















Average loans and leases, including loans held for sale


$

4,412,247



$

4,293,455



$

4,171,558



$

4,083,791



$

4,022,376



$

4,241,308



$

3,898,250


Average interest-earning assets


5,595,142



5,527,532



5,485,977



5,464,377



5,451,052



5,518,641



5,395,477


Average assets


5,978,797



5,907,207



5,856,465



5,809,931



5,739,228



5,888,615



5,688,076


Average deposits


4,998,897



4,987,414



4,977,781



4,978,470



4,938,560



4,985,701



5,010,698


Average interest-bearing liabilities


3,947,924



3,920,304



3,897,619



3,821,528



3,769,920



3,897,254



3,773,647


Average shareholders' equity


530,464



524,083



504,749



494,635



489,510



513,610



486,841


 

CENTRAL PACIFIC FINANCIAL CORP. AND SUBSIDIARIES


Financial Highlights


(Unaudited)

TABLE 1 (CONTINUED)





December 31,


September 30,


June 30,


March 31,


December 31,

(dollars in thousands)


2019


2019


2019


2019


2018

REGULATORY CAPITAL











Central Pacific Financial Corp











Leverage capital


$

568,529



$

561,478



$

556,403



$

554,148



$

570,260


Tier 1 risk-based capital


568,529



561,478



556,403



554,148



570,260


Total risk-based capital


617,772



611,076



606,567



602,824



619,419


Common equity tier 1 capital


568,529



511,478



506,403



504,148



500,260


Central Pacific Bank











Leverage capital


556,077



550,913



544,480



539,390



533,166


Tier 1 risk-based capital


556,077



550,913



544,480



539,390



533,166


Total risk-based capital


605,320



600,511



594,644



588,066



582,325


Common equity tier 1 capital


556,077



550,913



544,480



539,390



533,166













REGULATORY CAPITAL RATIOS











Central Pacific Financial Corp











Leverage capital ratio


9.5

%


9.5

%


9.5

%


9.5

%


9.9

%

Tier 1 risk-based capital ratio


12.6



12.6



12.7



13.0



13.5


Total risk-based capital ratio


13.6



13.7



13.9



14.1



14.7


Common equity tier 1 capital ratio


11.5



11.5



11.6



11.8



11.9


Central Pacific Bank











Leverage capital ratio


9.3



9.4



9.3



9.3



9.3


Tier 1 risk-based capital ratio


12.3



12.4



12.5



12.7



12.7


Total risk-based capital ratio


13.4



13.5



13.6



13.8



13.8


Common equity tier 1 capital ratio


12.3



12.4



12.5



12.7



12.7




















December 31,


September 30,


June 30,


March 31,


December 31,

(dollars in thousands, except for per share amounts)


2019


2019


2019


2019


2018

BALANCE SHEET











Loans and leases


$

4,449,540



$

4,367,862



$

4,247,113



$

4,101,571



$

4,078,366


Total assets


6,012,672



5,976,716



5,920,006



5,841,352



5,807,026


Total deposits


5,120,023



5,037,659



4,976,849



4,948,128



4,946,490


Long-term debt


101,547



101,547



101,547



101,547



122,166


Total shareholders' equity


528,520



525,227



515,695



502,638



491,725


Total shareholders' equity to total assets


8.79

%


8.79

%


8.71

%


8.60

%


8.47

%












ASSET QUALITY











Allowance for loan and lease losses


$

47,971



$

48,167



$

48,267



$

47,267



$

47,916


Non-performing assets


1,719



1,360



1,258



3,338



2,737


Allowance to loans and leases outstanding


1.08

%


1.10

%


1.14

%


1.15

%


1.17

%

Allowance to non-performing assets


2,790.63

%


3,541.69

%


3,836.80

%


1,416.03

%


1,750.68

%












PER SHARE OF COMMON STOCK OUTSTANDING











Book value per common share


$

18.68



$

18.47



$

18.05



$

17.50



$

16.97
























[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





December 31,


September 30,


June 30,


March 31,


December 31,

(Dollars in thousands, except share data)


2019


2019


2019


2019


2018

ASSETS











Cash and due from financial institutions


$

78,418



$

87,395



$

83,534



$

90,869



$

80,569


Interest-bearing deposits in other financial institutions


24,554



7,803



15,173



7,310



21,617


Investment securities:











Available-for-sale debt securities, at fair value


1,126,983



1,186,875



1,254,743



1,319,450



1,205,478


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










148,508


Equity securities, at fair value


1,127



1,058



1,034



910



826


Total investment securities


1,128,110



1,187,933



1,255,777



1,320,360



1,354,812


Loans held for sale


9,083



7,016



6,848



3,539



6,647


Loans and leases


4,449,540



4,367,862



4,247,113



4,101,571



4,078,366


Less allowance for loan and lease losses


47,971



48,167



48,267



47,267



47,916


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


4,401,569



4,319,695



4,198,846



4,054,304



4,030,450


Premises and equipment, net


46,343



44,095



43,600



44,527



45,285


Accrued interest receivable


16,500



16,220



17,260



17,082



17,000


Investment in unconsolidated subsidiaries


17,115



17,001



17,247



16,054



14,008


Other real estate owned


164



466



276



276



414


Mortgage servicing rights


14,718



15,058



15,266



15,347



15,596


Bank-owned life insurance


159,656



158,939



158,294



158,392



157,440


Federal Home Loan Bank ("FHLB") stock


14,983



17,183



17,824



16,145



16,645


Right of use lease asset [1]


52,348



52,588



53,678



54,781




Other assets


49,111



45,324



36,383



42,366



46,543


Total assets


$

6,012,672



$

5,976,716



$

5,920,006



$

5,841,352



$

5,807,026


LIABILITIES AND SHAREHOLDERS' EQUITY











Deposits:











Noninterest-bearing demand


$

1,450,532



$

1,399,200



$

1,351,190



$

1,357,890



$

1,436,967


Interest-bearing demand


1,043,010



998,037



1,002,706



965,316



954,011


Savings and money market


1,600,028



1,593,738



1,573,805



1,562,798



1,448,257


Time


1,026,453



1,046,684



1,049,148



1,062,124



1,107,255


Total deposits


5,120,023



5,037,659



4,976,849



4,948,128



4,946,490


FHLB advances and other short-term borrowings


150,000



205,000



221,000



179,000



197,000


Long-term debt


101,547



101,547



101,547



101,547



122,166


Lease liability [1]


52,632



52,807



53,829



54,861




Other liabilities


59,950



54,476



51,086



55,178



49,645


Total liabilities


5,484,152



5,451,489



5,404,311



5,338,714



5,315,301


Shareholders' equity:











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











Common stock, no par value, authorized 185,000,000 shares; issued and outstanding:  28,289,257 at December 31, 2019, 28,441,341 at September 30, 2019, 28,567,777 at June 30, 2019, 28,723,041 at March 31, 2019, and 28,967,715 at December 31, 2018


447,602



452,278



456,293



462,952



470,660


Additional paid-in capital


91,611



90,604



89,724



89,374



88,876


Accumulated deficit


(19,102)



(26,782)



(34,780)



(41,733)



(51,718)


Accumulated other comprehensive income (loss)


8,409



9,127



4,458



(7,955)



(16,093)


Total shareholders' equity


528,520



525,227



515,695



502,638



491,725


Total liabilities and shareholders' equity


$

6,012,672



$

5,976,716



$

5,920,006



$

5,841,352



$

5,807,026













[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


Year Ended



December 31,


September 30,


June 30,


March 31,


December 31,


December 31,

(Dollars in thousands, except per share data)


2019


2019


2019


2019


2018


2019


2018

Interest income:















Interest and fees on loans and leases


$

47,488



$

45,861



$

45,540



$

43,768



$

42,836



$

182,657



$

159,456


Interest and dividends on investment securities:















Taxable investment securities


6,486



7,178



7,530



8,260



8,451



29,454



34,501


Tax-exempt investment securities


656



708



814



866



910



3,044



3,696


Dividend income on investment securities


17



14



14



18



17



63



61


Interest on deposits in other financial institutions


54



33



46



68



55



201



365


Dividend income on FHLB stock


456



186



161



161



70



964



215


Total interest income


55,157



53,980



54,105



53,141



52,339



216,383



198,294


Interest expense:















Interest on deposits:















Demand


202



207



199



192



180



800



734


Savings and money market


1,253



1,549



1,507



791



579



5,100



2,000


Time


3,653



4,432



4,867



5,092



4,567



18,044



16,770


Interest on short-term borrowings


1,139



1,130



1,123



893



999



4,285



1,236


Interest on long-term debt


976



1,013



1,031



1,060



1,335



4,080



4,556


Total interest expense


7,223



8,331



8,727



8,028



7,660



32,309



25,296


Net interest income


47,934



45,649



45,378



45,113



44,679



184,074



172,998


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


2,098



1,532



1,404



1,283



(1,386)



6,317



(1,124)


Net interest income after Provision


45,836



44,117



43,974



43,830



46,065



177,757



174,122


Other operating income:















Mortgage banking income


1,194



1,764



1,601



1,424



1,770



5,983



7,315


Service charges on deposit accounts


2,159



2,125



2,041



2,081



2,237



8,406



8,406


Other service charges and fees


3,879



3,724



3,691



3,064



3,426



14,358



13,123


Income from fiduciary activities


1,175



1,126



1,129



965



1,113



4,395



4,245


Equity in earnings of unconsolidated subsidiaries


92



86



71



8



82



257



233


Fees on foreign exchange


216



170



218



151



197



755



905


Net gains (losses) on sales of investment securities




36







(279)



36



(279)


Income from bank-owned life insurance


594



645



914



952



243



3,105



2,117


Loan placement fees


216



230



107



149



215



702



747


Net gains (losses) on sales of foreclosed assets


(162)



17









(145)




Other (refer to Table 4)


405



343



322



2,879



396



3,949



1,992


Total other operating income


9,768



10,266



10,094



11,673



9,400



41,801



38,804


Other operating expense:















Salaries and employee benefits


21,207



20,631



20,563



19,889



19,053



82,290



75,352


Net occupancy


3,619



3,697



3,525



3,458



3,649



14,299



13,763


Equipment


1,142



1,067



1,138



1,006



1,079



4,353



4,239


Amortization of core deposit premium














2,006


Communication expense


906



1,008



903



734



863



3,551



3,410


Legal and professional services


2,123



1,933



1,728



1,570



2,212



7,354



7,330


Computer software expense


2,942



2,713



2,560



2,597



2,597



10,812



9,841


Advertising expense


527



711



712



711



834



2,661



2,675


Foreclosed asset expense


28



15



49



159



37



251



574


Other (refer to Table 4)


3,748



3,159



4,929



4,224



3,318



16,060



15,492


Total other operating expense


36,242



34,934



36,107



34,348



33,642



141,631



134,682


Income before income taxes


19,362



19,449



17,961



21,155



21,823



77,927



78,244


Income tax expense


5,165



4,895



4,427



5,118



6,031



19,605



18,758


Net income


$

14,197



$

14,554



$

13,534



$

16,037



$

15,792



$

58,322



$

59,486


Per common share data:















Basic earnings per share


$

0.50



$

0.51



$

0.47



$

0.56



$

0.54



$

2.05



$

2.02


Diluted earnings per share


0.50



0.51



0.47



0.55



0.54



2.03



2.01


Cash dividends declared


0.23



0.23



0.23



0.21



0.21



0.90



0.82


Basic weighted average shares outstanding


28,259,294



28,424,898



28,546,564



28,758,310



29,033,261



28,495,699



29,409,683


Diluted weighted average shares outstanding


28,448,243



28,602,338



28,729,510



28,979,855



29,217,480



28,677,100



29,609,907


 

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


Year Ended



December 31,


September 30,


June 30,


March 31,


December 31,


December 31,

(Dollars in thousands)


2019


2019


2019


2019


2018


2019


2018

Other operating income - other:















Income recovered on nonaccrual loans previously charged-off


$

80



$

73



$

85



$

82



$

99



$

320



$

720


Other recoveries


36



42



26



26



25



130



221


Commissions on sale of checks


75



75



79



80



79



309



328


Gain on sale of MasterCard stock








2,555





2,555




Other


214



153



132



136



193



635



723


Total other operating income - other


$

405



$

343



$

322



$

2,879



$

396



$

3,949



$

1,992


















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








Three Months Ended


Year Ended



December 31,


September 30,


June 30,


March 31,


December 31,


December 31,

(Dollars in thousands)


2019


2019


2019


2019


2018


2019


2018

Other operating expense - other:















Charitable contributions


$

122



$

230



$

175



$

154



$

138



$

681



$

635


FDIC insurance assessment




5



362



501



427



868



1,732


Miscellaneous loan expenses


361



274



317



294



339



1,246



1,365


ATM and debit card expenses


672



660



620



650



613



2,602



2,645


Armored car expenses


186



220



211



198



238



815



822


Entertainment and promotions


495



323



1,023



230



445



2,071



1,062


Stationery and supplies


305



240



279



225



271



1,049



914


Directors' fees and expenses


246



242



238



242



263



968



1,040


Provision (credit) for residential mortgage loan repurchase losses






(403)





(181)



(403)



150


Increase (decrease) to the reserve for unfunded commitments


(160)



(465)



487



167



(461)



29



(425)


Other


1,521



1,430



1,620



1,563



1,226



6,134



5,552


Total other operating expense - other


$

3,748



$

3,159



$

4,929



$

4,224



$

3,318



$

16,060



$

15,492

















 

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



December 31, 2019


September 30, 2019


December 31, 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


$

13,704



1.57

%


$

54



$

6,295



2.05

%


$

33



$

9,393



2.29

%


$

55


Investment securities, excluding valuation allowance:



















Taxable


1,042,057



2.50



6,503



1,093,352



2.63



7,192



1,243,226



2.72



8,468


Tax-exempt [1]


108,630



3.06



830



117,784



3.04



896



161,935



2.84



1,152


Total investment securities


1,150,687



2.55



7,333



1,211,136



2.67



8,088



1,405,161



2.74



9,620


Loans and leases, including loans held for sale


4,412,247



4.28



47,488



4,293,455



4.25



45,861



4,022,376



4.24



42,836


Federal Home Loan Bank stock


18,504



9.85



456



16,646



4.46



186



14,122



1.98



70


Total interest-earning assets


5,595,142



3.94



55,331



5,527,532



3.90



54,168



5,451,052



3.84



52,581


Noninterest-earning assets


383,655







379,675







288,176






Total assets


$

5,978,797







$

5,907,207







$

5,739,228

























LIABILITIES AND EQUITY

Interest-bearing liabilities:



















Interest-bearing demand deposits


$

1,019,854



0.08

%


$

202



$

1,002,875



0.08

%


$

207



$

923,810



0.08

%


$

180


Savings and money market deposits


1,592,398



0.31



1,253



1,582,795



0.39



1,549



1,459,326



0.16



579


Time deposits under $100,000


167,675



0.71



299



167,331



0.69



293



176,669



0.60



265


Time deposits $100,000 and over


828,434



1.61



3,354



874,192



1.88



4,139



940,348



1.81



4,302


Total interest-bearing deposits


3,608,361



0.56



5,108



3,627,193



0.68



6,188



3,500,153



0.60



5,326


Federal Home Loan Bank advances and other short-term borrowings


238,016



1.90



1,139



191,564



2.34



1,130



157,299



2.52



999


Long-term debt


101,547



3.81



976



101,547



3.96



1,013



112,468



4.71



1,335


Total interest-bearing liabilities


3,947,924



0.73



7,223



3,920,304



0.84



8,331



3,769,920



0.81



7,660


Noninterest-bearing deposits


1,390,536







1,360,221







1,438,407






Other liabilities


109,873







102,599







41,391






Total liabilities


5,448,333







5,383,124







5,249,718






Shareholders' equity


530,464







524,083







489,510






Non-controlling interest



















Total equity


530,464







524,083







489,510






Total liabilities and equity


$

5,978,797







$

5,907,207







$

5,739,228

























Net interest income






$

48,108







$

45,837







$

44,921





















Interest rate spread




3.21

%






3.06

%






3.03

%






















Net interest margin




3.43

%






3.30

%






3.28

%






















[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








Year Ended


Year Ended



December 31, 2019


December 31, 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


$

9,842



2.04

%


$

201



$

20,104



1.81

%


$

365


Investment securities, excluding valuation allowance:













Taxable


1,120,711



2.63



29,517



1,304,523



2.65



34,562


Tax-exempt [1]


130,411



2.95



3,853



163,610



2.86



4,678


Total investment securities


1,251,122



2.67



33,370



1,468,133



2.67



39,240


Loans and leases, including loans held for sale


4,241,308



4.31



182,657



3,898,250



4.09



159,456


Federal Home Loan Bank stock


16,369



5.89



964



8,990



2.40



215


Total interest-earning assets


5,518,641



3.94



217,192



5,395,477



3.69



199,276


Noninterest-earning assets


369,974







292,599






Total assets


$

5,888,615







$

5,688,076



















LIABILITIES AND EQUITY

Interest-bearing liabilities:













Interest-bearing demand deposits


$

984,298



0.08

%


$

800



$

936,034



0.08

%


$

734


Savings and money market deposits


1,556,766



0.33



5,100



1,494,658



0.13



2,000


Time deposits under $100,000


171,064



0.69



1,183



177,936



0.51



910


Time deposits $100,000 and over


897,670



1.88



16,861



1,016,643



1.56



15,860


Total interest-bearing deposits


3,609,798



0.66



23,944



3,625,271



0.54



19,504


Federal Home Loan Bank advances and other short-term borrowings


185,909



2.31



4,285



50,630



2.44



1,236


Long-term debt


101,547



4.02



4,080



97,746



4.66



4,556


Total interest-bearing liabilities


3,897,254



0.83



32,309



3,773,647



0.67



25,296


Noninterest-bearing deposits


1,375,903







1,385,427






Other liabilities


101,848







42,157






Total liabilities


5,375,005







5,201,231






Shareholders' equity


513,610







486,841






Non-controlling interest








4






Total equity


513,610







486,845






Total liabilities and equity


$

5,888,615







$

5,688,076



















Net interest income






$

184,883







$

173,980















Interest rate spread




3.11

%






3.02

%
















Net interest margin




3.35

%






3.22

%
















[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














December 31,


September 30,


June 30,


March 31,


December 31,

(Dollars in thousands)


2019


2019


2019


2019


2018

HAWAII:











Commercial, financial and agricultural


$

454,582



$

439,296



$

435,353



$

411,396



$

439,112


Real estate:











Construction


95,854



96,661



72,427



68,981



64,654


Residential mortgage


1,599,801



1,558,735



1,516,936



1,451,794



1,428,205


Home equity


490,734



475,565



473,151



465,905



468,966


Commercial mortgage


909,798



909,987



905,479



869,521



861,086


Consumer


373,451



369,511



353,282



352,771



357,908


Leases




31



52



83



124


Total loans and leases


3,924,220



3,849,786



3,756,680



3,620,451



3,620,055


Allowance for loan and lease losses


(42,592)



(42,286)



(42,414)



(41,413)



(42,993)


Net loans and leases


$

3,881,628



$

3,807,500



$

3,714,266



$

3,579,038



$

3,577,062













U.S. MAINLAND: [1]











Commercial, financial and agricultural


$

115,722



$

137,316



$

155,130



$

155,399



$

142,548


Real estate:











Construction








2,194



2,273


Residential mortgage











Home equity











Commercial mortgage


213,617



223,925



187,379



188,485



179,192


Consumer


195,981



156,835



147,924



135,042



134,298


Leases











Total loans and leases


525,320



518,076



490,433



481,120



458,311


Allowance for loan and lease losses


(5,379)



(5,881)



(5,853)



(5,854)



(4,923)


Net loans and leases


$

519,941



$

512,195



$

484,580



$

475,266



$

453,388













TOTAL:











Commercial, financial and agricultural


$

570,304



$

576,612



$

590,483



$

566,795



$

581,660


Real estate:











Construction


95,854



96,661



72,427



71,175



66,927


Residential mortgage


1,599,801



1,558,735



1,516,936



1,451,794



1,428,205


Home equity


490,734



475,565



473,151



465,905



468,966


Commercial mortgage


1,123,415



1,133,912



1,092,858



1,058,006



1,040,278


Consumer


569,432



526,346



501,206



487,813



492,206


Leases




31



52



83



124


Total loans and leases


4,449,540



4,367,862



4,247,113



4,101,571



4,078,366


Allowance for loan and lease losses


(47,971)



(48,167)



(48,267)



(47,267)



(47,916)


Net loans and leases


$

4,401,569



$

4,319,695



$

4,198,846



$

4,054,304



$

4,030,450













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

 

CENTRAL PACIFIC FINANCIAL CORP. AND SUBSIDIARIES

Deposits

(Unaudited)

TABLE 8














December 31,


September 30,


June 30,


March 31,


December 31,

(Dollars in thousands)


2019


2019


2019


2019


2018

Noninterest-bearing demand


$

1,450,532



$

1,399,200



$

1,351,190



$

1,357,890



$

1,436,967


Interest-bearing demand


1,043,010



998,037



1,002,706



965,316



954,011


Savings and money market


1,600,028



1,593,738



1,573,805



1,562,798



1,448,257


Time deposits less than $100,000


165,755



165,687



171,106



174,265



176,707


Core deposits


4,259,325



4,156,662



4,098,807



4,060,269



4,015,942













Government time deposits


533,088



552,470



574,825



600,572



631,293


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


107,550



103,959



105,382



107,051



106,783


Other time deposits greater than $250,000


220,060



224,568



197,835



180,236



192,472


Total time deposits $100,000 and over


860,698



880,997



878,042



887,859



930,548


Total deposits


$

5,120,023



$

5,037,659



$

4,976,849



$

4,948,128



$

4,946,490


 

CENTRAL PACIFIC FINANCIAL CORP. AND SUBSIDIARIES

Nonperforming Assets, Past Due and Restructured Loans

(Unaudited)

TABLE 9














December 31,


September 30,


June 30,


March 31,


December 31,

(Dollars in thousands)


2019


2019


2019


2019


2018

Nonaccrual loans (including loans held for sale):











Commercial, financial and agricultural


$

467



$



$



$



$


Real estate:











Residential mortgage


979



799



738



2,492



2,048


Home equity


92



95



244



570



275


Consumer


17










Total nonaccrual loans


1,555



894



982



3,062



2,323













Other real estate owned ("OREO"):











Real estate:











Residential mortgage




302



276



276



414


Home equity


164



164








Total OREO


164



466



276



276



414


Total nonperforming assets ("NPAs")


1,719



1,360



1,258



3,338



2,737













Loans delinquent for 90 days or more still accruing interest:











Real estate:











Residential mortgage


724










Home equity










298


Consumer


286



235



267



159



238


Total loans delinquent for 90 days or more still accruing interest


1,010



235



267



159



536













Restructured loans still accruing interest:











Commercial, financial and agricultural


135



157



178



199



220


Real estate:











Construction








2,194



2,273


Residential mortgage


5,502



6,717



6,831



7,141



8,026


Commercial mortgage


1,839



1,985



2,097



2,222



2,348


Total restructured loans still accruing interest


7,476



8,859



9,106



11,756



12,867


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


$

10,205



$

10,454



$

10,631



$

15,253



$

16,140













Total nonaccrual loans as a percentage of loans and leases


0.03

%


0.02

%


0.02

%


0.07

%


0.06

%

Total NPAs as a percentage of loans and leases and OREO


0.04

%


0.03

%


0.03

%


0.08

%


0.07

%

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


0.06

%


0.04

%


0.04

%


0.09

%


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


0.23

%


0.24

%


0.25

%


0.37

%


0.40

%












Quarter-to-quarter changes in NPAs:











Balance at beginning of quarter


$

1,360



$

1,258



$

3,338



$

2,737



$

3,026


Additions


695



112





810




Reductions:











Payments


(34)



(51)



(2,055)



(71)



(154)


Return to accrual status




(2)



(25)





(135)


Sales of NPAs


(302)










Charge-offs, valuation and other adjustments




43





(138)




Total reductions


(336)



(10)



(2,080)



(209)



(289)


Balance at end of quarter


$

1,719



$

1,360



$

1,258



$

3,338



$

2,737


 

CENTRAL PACIFIC FINANCIAL CORP. AND SUBSIDIARIES

Allowance for Loan and Lease Losses

(Unaudited)

TABLE 10








Three Months Ended


Year Ended



December 31,


September 30,


June 30,


March 31,


December 31,


December 31,

(Dollars in thousands)


2019


2019


2019


2019


2018


2019


2018

Allowance for loan and lease losses:















Balance at beginning of period


$

48,167



$

48,267



$

47,267



$

47,916



$

46,826



$

47,916



$

50,001

















Provision (credit) for loan and lease losses


2,098



1,532



1,404



1,283



(1,386)



6,317



(1,124)

















Charge-offs:















Commercial, financial and agricultural


379



797



839



463



881



2,478



2,852


Real estate:















Home equity




5









5




Consumer


2,723



1,832



1,459



2,251



1,899



8,265



7,323


Total charge-offs


3,102



2,634



2,298



2,714



2,780



10,748



10,175

















Recoveries:















Commercial, financial and agricultural


264



362



315



233



186



1,174



1,203


Real estate:















Construction


6



6



592



6



4,554



610



5,759


Residential mortgage


26



104



372



22



106



524



204


Home equity




24



9



9



9



42



27


Commercial mortgage






25







25



52


Consumer


512



506



581



512



401



2,111



1,969


Total recoveries


808



1,002



1,894



782



5,256



4,486



9,214


Net charge-offs (recoveries)


2,294



1,632



404



1,932



(2,476)



6,262



961


Balance at end of period


$

47,971



$

48,167



$

48,267



$

47,267



$

47,916



$

47,971



$

47,916

















Average loans and leases, net of deferred costs


$

4,412,247



$

4,293,455



$

4,171,558



$

4,083,791



$

4,022,376



$

4,241,308



$

3,898,250

















Annualized ratio of net charge-offs to average loans and leases


0.21

%


0.15

%


0.04

%


0.19

%


(0.25)

%


0.15

%


0.02

%
















Ratio of allowance for loan and lease losses to loans and leases


1.08

%


1.10

%


1.14

%


1.15