HONOLULU, July 24, 2019 /PRNewswire/ — Central Pacific Financial Corp. (NYSE: CPF) (the «Company»), parent company of Central Pacific Bank, today reported net income in the second quarter of 2019 of $13.5 million, or diluted earnings per share («EPS») of $0.47, compared to net income in the second quarter of 2018 of $14.2 million, or EPS of $0.48, and net income in the first quarter of 2019 of $16.0 million, or EPS of $0.55. Net income in the six months ended June 30, 2019 totaled $29.6 million, or  EPS of $1.03, compared to net income in the six months ended June 30, 2018 of $28.5 million, or EPS of $0.95.

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

«The second quarter results were highlighted by solid loan and core deposit growth and excellent asset quality. In our 65th Anniversary year, we are excited to launch RISE2020, a company-wide initiative that we believe will take Central Pacific Bank to a new level of customer experience and financial performance,» said Paul Yonamine, Chairman and Chief Executive Officer.

«RISE2020 includes a number of initiatives and investments to build a better bank to meet the changing needs of our customers,» said Catherine Ngo, President.

RISE2020 includes initiatives in the following key areas of opportunity: Digital Banking, Revenue Enhancements, Branch Transformation and Operational Excellence.  RISE2020 will provide Central Pacific Bank with best-in class products and services in several strategic areas.  The Company anticipates investing roughly $40 million in RISE2020 and expects the initiative to lead to enhanced profitability that will result in a 15% return on average shareholders’ equity and a 57% efficiency ratio by the end of 2022.  The second quarter of 2019 included roughly $1.0 million of RISE2020-related expense. The Company will share more on RISE2020 on today’s conference call and in future quarters.

On July 23, 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 September 16, 2019 to shareholders of record at the close of business on August 30, 2019.

In June 2019, the Company’s Board of Directors authorized the repurchase of up to $30 million of its common stock from time to time in the open market or in privately negotiated transactions, pursuant to a newly authorized share repurchase program (the «Repurchase Plan»). The Repurchase Plan replaces and supersedes in its entirety the share repurchase program previously approved by the Company’s Board of Directors, which had $6.8 million in remaining repurchase authority. During the second quarter of 2019, the Company repurchased 213,700 shares of common stock, at a total of $6.2 million, or an average cost per share of $29.22. During the six months ended June 30, 2019, the Company repurchased 490,700 shares of common stock, or approximately 1.7% of its common stock outstanding as of December 31, 2018. Total cost of the shares repurchased during the six months ended June 30, 2019 was $14.0 million, or an average cost per share of $28.43. The Company’s remaining repurchase authority under the Repurchase Plan at June 30, 2019 is $29.9 million. During the six months ended June 30, 2019, the Company returned $26.6 million in capital to its shareholders through cash dividends and share repurchases.

Earnings Highlights
Net interest income for the second quarter of 2019 was $45.4 million, compared to $42.7 million in the year-ago quarter and $45.1 million in the previous quarter. Net interest margin for the second quarter of 2019 was 3.33%, compared to 3.20% in the year-ago quarter and 3.34% in the previous quarter. The increases in net interest income from the year-ago and sequential quarters were primarily due to growth in the loan portfolio, combined with higher yields earned on the loan portfolio in the second quarter of 2019. In addition, the Company recorded non-recurring interest recoveries of $0.5 million and $0.3 million in the second and first quarters of 2019, respectively. 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 and sequential quarters.

Other operating income for the second quarter of 2019 totaled $10.1 million, compared to $9.6 million in the year-ago quarter and $11.7 million in the previous quarter. The increase from the year-ago quarter was primarily due to higher income from bank-owned life insurance of $0.4 million and higher commissions and fees on investment services of $0.3 million (included in other service charges and fees), partially offset by higher amortization of mortgage servicing rights of $0.2 million (included in mortgage banking income). The increase in income from bank-owned life insurance from the year-ago quarter was primarily attributable to death benefit income of $0.1 million recorded in the current quarter, combined with fluctuations in the equity markets. The decrease from the previous quarter was primarily due to the conversion of MasterCard Class B common stock received during their initial public offering to Class A common stock and immediate sale of the converted shares resulting in a gain of $2.6 million (included in other) in the previous quarter, partially offset by higher commissions and fees on investment services of $0.5 million (included in other service charges and fees) in the current quarter.

Other operating expense for the second quarter of 2019 totaled $36.1 million, which increased from $33.6 million in the year-ago quarter and increased from $34.3 million in the previous quarter. The increase from the year-ago quarter was primarily due to higher salaries and employee benefits of $1.8 million, higher entertainment and promotions expense of $0.7 million (included in other) and higher computer software expense of $0.3 million. 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. The increase from the previous quarter was primarily due to higher salaries and employee benefits of $0.7 million, combined with higher entertainment and promotions expense of $0.8 million (included in other). The higher salaries and employee benefits compared to the year-ago and previous quarters 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 higher entertainment and promotions expense compared to the year-ago and previous quarters was primarily attributable to expenses related to a recent core deposit gathering campaign.

The efficiency ratio for the second quarter of 2019 was 65.09%, compared to 64.26% in the year-ago quarter and 60.49% in the previous quarter. The efficiency ratio in the previous quarter was positively impacted by the aforementioned MasterCard stock gain.

In the second quarter of 2019, the Company recorded income tax expense of $4.4 million, compared to $3.9 million in the year-ago quarter and $5.1 million in the previous quarter. The effective tax rate for the second quarter of 2019 was 24.6%, compared to 21.7% in the year-ago quarter and 24.2% in the previous quarter. Income tax expense in the year-ago quarter included a one-time estimated income tax benefit of $0.6 million related to a tax accounting method change strategy that allows the deduction for certain expenses to be accelerated for income tax purposes.

Balance Sheet Highlights
Total assets at June 30, 2019 of $5.92 billion increased by $238.5 million, or 4.2% from June 30, 2018, and increased by $78.7 million, or 1.3% from March 31, 2019.

Total loans at June 30, 2019 of $4.25 billion increased by $365.5 million, or 9.4%, and $145.5 million, or 3.5% from June 30, 2018 and March 31, 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 June 30, 2019 of $4.98 billion remained relatively unchanged from June 30, 2018, and increased by $28.7 million, or 0.6% from March 31, 2019.  The sequential quarter increase in total deposits was primarily attributable to an increase in interest-bearing demand deposits of $37.4 million, savings and money market deposits of $11.0 million and other time deposits greater than $250,000 of $17.6 million, partially offset by a decrease in government time deposits of $25.7 million. Core deposits, which include demand deposits, savings and money market deposits, and time deposits less than $100,000, totaled $4.10 billion at June 30, 2019.  This represents an increase of $102.8 million, or 2.6% from June 30, 2018, and $38.5 million, or 0.9% from March 31, 2019. The Company’s loan-to-deposit ratio was 85.3% at June 30, 2019, compared to 78.0% at June 30, 2018 and 82.9% at March 31, 2019.

Asset Quality
Nonperforming assets at June 30, 2019 declined to $1.3 million, or 0.02% of total assets, compared to $3.5 million, or 0.06% of total assets at June 30, 2018, and $3.3 million, or 0.06% of total assets at March 31, 2019.

Loans delinquent for 90 days or more still accruing interest totaled $0.3 million at June 30, 2019, compared to $0.6 million and $0.2 million at June 30, 2018 and March 31, 2019, respectively.

Net charge-offs in the second quarter of 2019 totaled $0.4 million, compared to net charge-offs of $1.6 million in the year-ago quarter, and net charge-offs of $1.9 million in the previous quarter.

In the second quarter of 2019, the Company recorded a provision for loan and lease losses of $1.4 million, compared to a provision of $0.5 million in the year-ago quarter and a provision of $1.3 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 June 30, 2019 was 1.14%, compared to 1.24% at June 30, 2018 and 1.15% at March 31, 2019.

Capital
Total shareholders’ equity was $515.7 million at June 30, 2019, compared to $480.7 million and $502.6 million at June 30, 2018 and March 31, 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 June 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%, 12.7%, 13.9%, and 11.6%, respectively, compared to 9.5%, 13.0%, 14.1%, and 11.8%, respectively, at March 31, 2019.

Non-GAAP Financial Measures

This press release contains certain references to financial measures that have been adjusted to exclude certain expenses and other specified items.  These financial measures differ from comparable measures calculated and presented in accordance with accounting principles generally accepted in the United States of America («GAAP») in that they exclude unusual or non-recurring charges, losses, credits or gains.  This press release identifies the specific items excluded from the comparable GAAP financial measure in the calculation of each non-GAAP financial measure. Management believes that financial presentations excluding the impact of these items provide useful supplemental information that is important to a proper understanding of the Company’s core business results by investors.  These presentations should not be viewed as a substitute for results determined in accordance with GAAP, nor are they necessarily comparable to non-GAAP financial measures presented by other companies.

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 August 24, 2019 by dialing 1-877-344-7529 (passcode: 10133440) and on the Company’s website. Information which may be discussed in the conference call regarding RISE2020 is provided on the investor relations page of the Company’s website at http://ir.centralpacificbank.com.

About Central Pacific Financial Corp.
Central Pacific Financial Corp. is a Hawaii-based bank holding company with approximately $5.9 billion in assets.  Central Pacific Bank, its primary subsidiary, operates 35 branches and 78 ATMs in the state of Hawaii, as of June 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, to include, 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; 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

Six Months Ended

(Dollars in thousands,

June 30,

March 31,

December 31,

September 30,

June 30,

June 30,

except for per share amounts)

2019

2019

2018

2018

2018

2019

2018

CONDENSED INCOME STATEMENT

Net interest income

$

45,378

$

45,113

$

44,679

$

43,325

$

42,672

$

90,491

$

84,994

Provision (credit) for loan and lease losses

1,404

1,283

(1,386)

(59)

532

2,687

321

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

43,974

43,830

46,065

43,384

42,140

87,804

84,673

Total other operating income

10,094

11,673

9,400

10,820

9,630

21,767

18,584

Total other operating expense

36,107

34,348

33,642

34,025

33,611

70,455

67,015

Income before taxes

17,961

21,155

21,823

20,179

18,159

39,116

36,242

Income tax expense

4,427

5,118

6,031

4,986

3,935

9,545

7,741

Net income

13,534

16,037

15,792

15,193

14,224

29,571

28,501

Basic earnings per common share

$

0.47

$

0.56

$

0.54

$

0.52

$

0.48

$

1.03

$

0.96

Diluted earnings per common share

0.47

0.55

0.54

0.52

0.48

1.03

0.95

Dividends declared per common share

0.23

0.21

0.21

0.21

0.21

0.44

0.40

PERFORMANCE RATIOS

Return on average assets (ROA) [1]

0.92

%

1.10

%

1.10

%

1.06

%

1.00

%

1.01

%

1.01

%

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

10.73

12.97

12.90

12.54

11.83

11.84

11.72

Return on average tangible shareholders’ equity (ROTE) [1]

10.73

12.97

12.90

12.55

11.85

11.84

11.75

Average shareholders’ equity to average assets

8.62

8.51

8.53

8.49

8.49

8.57

8.61

Efficiency ratio  [2]

65.09

60.49

62.21

62.84

64.26

62.76

64.70

Net interest margin (NIM) [1]

3.33

3.34

3.28

3.20

3.20

3.33

3.20

Dividend payout ratio [3]

48.94

38.18

38.89

40.38

43.75

42.72

42.11

SELECTED AVERAGE BALANCES

Average loans and leases, including loans held for sale

$

4,171,558

$

4,083,791

$

4,022,376

$

3,941,511

$

3,836,739

$

4,127,917

$

3,813,169

Average interest-earning assets

5,485,977

5,464,377

5,451,052

5,418,924

5,376,115

5,475,237

5,355,311

Average assets

5,856,465

5,809,931

5,739,228

5,709,825

5,663,697

5,833,326

5,651,021

Average deposits

4,977,781

4,978,470

4,938,560

5,063,061

5,041,164

4,978,124

5,020,750

Average interest-bearing liabilities

3,897,619

3,821,528

3,769,920

3,802,028

3,776,053

3,859,784

3,761,115

Average shareholders’ equity

504,749

494,635

489,510

484,737

480,985

499,720

486,554

Average tangible shareholders’ equity

504,749

494,635

489,510

484,391

479,959

499,720

485,177

 

CENTRAL PACIFIC FINANCIAL CORP. AND SUBSIDIARIES

Financial Highlights

(Unaudited)

TABLE 1 (CONTINUED)

June 30,

March 31,

December 31,

September 30,

June 30,

(dollars in thousands)

2019

2019

2018

2018

2018

REGULATORY CAPITAL

Central Pacific Financial Corp.

Leverage capital

$

556,403

$

554,148

$

570,260

$

590,627

$

586,799

Tier 1 risk-based capital

556,403

554,148

570,260

590,627

586,799

Total risk-based capital

606,567

602,824

619,419

639,157

636,755

Common equity tier 1 capital

506,403

504,148

500,260

500,627

496,799

Central Pacific Bank

Leverage capital

544,480

539,390

533,166

571,949

569,128

Tier 1 risk-based capital

544,480

539,390

533,166

571,949

569,128

Total risk-based capital

594,644

588,066

582,325

620,479

619,084

Common equity tier 1 capital

544,480

539,390

533,166

571,949

569,128

REGULATORY CAPITAL RATIOS

Central Pacific Financial Corp.

Leverage capital ratio

9.5

%

9.5

%

9.9

%

10.3

%

10.3

%

Tier 1 risk-based capital ratio

12.7

13.0

13.5

14.2

14.4

Total risk-based capital ratio

13.9

14.1

14.7

15.4

15.7

Common equity tier 1 capital ratio

11.6

11.8

11.9

12.0

12.2

Central Pacific Bank

Leverage capital ratio

9.3

9.3

9.3

10.0

10.0

Tier 1 risk-based capital ratio

12.5

12.7

12.7

13.8

14.0

Total risk-based capital ratio

13.6

13.8

13.8

15.0

15.3

Common equity tier 1 capital ratio

12.5

12.7

12.7

13.8

14.0

June 30,

March 31,

December 31,

September 30,

June 30,

(dollars in thousands, except for per share amounts)

2019

2019

2018

2018

2018

BALANCE SHEET

Loans and leases

$

4,247,113

$

4,101,571

$

4,078,366

$

3,978,027

$

3,881,581

Total assets

5,920,006

5,841,352

5,807,026

5,728,640

5,681,519

Total deposits

4,976,849

4,948,128

4,946,490

5,003,680

4,979,099

Long-term debt

101,547

101,547

122,166

92,785

92,785

Total shareholders’ equity

515,695

502,638

491,725

478,151

480,668

Total shareholders’ equity to total assets

8.71

%

8.60

%

8.47

%

8.35

%

8.46

%

Tangible common equity to tangible assets [4]

8.71

%

8.60

%

8.47

%

8.35

%

8.45

%

ASSET QUALITY

Allowance for loan and lease losses

$

48,267

$

47,267

$

47,916

$

46,826

$

48,181

Non-performing assets

1,258

3,338

2,737

3,026

3,509

Allowance to loans and leases outstanding

1.14

%

1.15

%

1.17

%

1.18

%

1.24

%

Allowance to non-performing assets

3,836.80

%

1,416.03

%

1,750.68

%

1,547.46

%

1,373.07

%

PER SHARE OF COMMON STOCK OUTSTANDING

Book value per common share

$

18.05

$

17.50

$

16.97

$

16.34

$

16.30

Tangible book value per common share

18.05

17.50

16.97

16.34

16.28

[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.

[4] The tangible common equity ratio is a non-GAAP measure which should be read in conjunction with the Company’s GAAP financial information. Comparison of our ratio with those of other companies may not be possible because other companies may calculate the ratio differently. See Reconciliation of Non-GAAP Financial Measures in Table 2.

 

CENTRAL PACIFIC FINANCIAL CORP. AND SUBSIDIARIES

Reconciliation of Non-GAAP Financial Measures

(Unaudited)

TABLE 2

The following table sets forth a reconciliation of our tangible common equity ratio for each of the dates indicated:

June 30,

March 31,

December 31,

September 30,

June 30,

(Dollars in thousands)

2019

2019

2018

2018

2018

Tangible Common Equity Ratio:

Total shareholders’ equity

$

515,695

$

502,638

$

491,725

$

478,151

$

480,668

Less: Other intangible assets

(669)

Tangible common equity

$

515,695

$

502,638

$

491,725

$

478,151

$

479,999

Total assets

$

5,920,006

$

5,841,352

$

5,807,026

$

5,728,640

$

5,681,519

Less: Other intangible assets

(669)

Tangible assets

$

5,920,006

$

5,841,352

$

5,807,026

$

5,728,640

$

5,680,850

Tangible common equity to tangible assets

8.71

%

8.60

%

8.47

%

8.35

%

8.45

%

 

CENTRAL PACIFIC FINANCIAL CORP. AND SUBSIDIARIES

Consolidated Balance Sheets

(Unaudited)

TABLE 3

June 30,

March 31,

December 31,

September 30,

June 30,

(Dollars in thousands, except share data)

2019

2019

2018

2018

2018

ASSETS

Cash and due from financial institutions

$

83,534

$

90,869

$

80,569

$

82,668

$

75,547

Interest-bearing deposits in other financial institutions

15,173

7,310

21,617

7,051

13,948

Investment securities:

Available-for-sale debt securities, at fair value

1,254,743

1,319,450

1,205,478

1,233,002

1,279,969

Held-to-maturity debt securities, at amortized cost; fair value of:  none at June 30, 2019, none at March 31, 2019, $144,272 at December 31, 2018, $146,466 at September 30, 2018, and $152,330 at June 30, 2018

148,508

152,852

158,156

Equity securities, at fair value

1,034

910

826

885

844

Total investment securities

1,255,777

1,320,360

1,354,812

1,386,739

1,438,969

Loans held for sale

6,848

3,539

6,647

4,460

9,096

Loans and leases

4,247,113

4,101,571

4,078,366

3,978,027

3,881,581

Less allowance for loan and lease losses

48,267

47,267

47,916

46,826

48,181

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

4,198,846

4,054,304

4,030,450

3,931,201

3,833,400

Premises and equipment, net

43,600

44,527

45,285

46,184

47,004

Accrued interest receivable

17,260

17,082

17,000

16,755

16,606

Investment in unconsolidated subsidiaries

17,247

16,054

14,008

15,283

9,362

Other real estate owned

276

276

414

414

595

Mortgage servicing rights

15,266

15,347

15,596

15,634

15,756

Core deposit premium

669

Bank-owned life insurance

158,294

158,392

157,440

157,085

156,945

Federal Home Loan Bank («FHLB») stock

17,824

16,145

16,645

10,965

10,246

Right of use lease asset [1]

53,678

54,781

Other assets

36,383

42,366

46,543

54,201

53,376

Total assets

$

5,920,006

$

5,841,352

$

5,807,026

$

5,728,640

$

5,681,519

LIABILITIES AND SHAREHOLDERS’ EQUITY

Deposits:

Noninterest-bearing demand

$

1,351,190

$

1,357,890

$

1,436,967

$

1,403,534

$

1,365,010

Interest-bearing demand

1,002,706

965,316

954,011

935,130

952,991

Savings and money market

1,573,805

1,562,798

1,448,257

1,503,465

1,502,284

Time

1,049,148

1,062,124

1,107,255

1,161,551

1,158,814

Total deposits

4,976,849

4,948,128

4,946,490

5,003,680

4,979,099

FHLB advances and other short-term borrowings

221,000

179,000

197,000

105,000

87,000

Long-term debt

101,547

101,547

122,166

92,785

92,785

Lease liability [1]

53,829

54,861

Other liabilities

51,086

55,178

49,645

49,024

41,967

Total liabilities

5,404,311

5,338,714

5,315,301

5,250,489

5,200,851

Shareholders’ equity:

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

Common stock, no par value, authorized 185,000,000 shares; issued and outstanding:  28,567,777 at June 30, 2019, 28,723,041 at March 31, 2019, 28,967,715 at December 31, 2018, 29,270,398 at September 30, 2018, and 29,489,954 at June 30, 2018

456,293

462,952

470,660

478,721

485,402

Additional paid-in capital

89,724

89,374

88,876

87,939

86,949

Accumulated deficit

(34,780)

(41,733)

(51,718)

(61,406)

(70,435)

Accumulated other comprehensive income (loss)

4,458

(7,955)

(16,093)

(27,103)

(21,248)

Total shareholders’ equity

515,695

502,638

491,725

478,151

480,668

Total liabilities and shareholders’ equity

$

5,920,006

$

5,841,352

$

5,807,026

$

5,728,640

$

5,681,519

[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 4

Three Months Ended

Six Months Ended

June 30,

March 31,

December 31,

September 30,

June 30,

June 30,

(Dollars in thousands, except per share data)

2019

2019

2018

2018

2018

2019

2018

Interest income:

Interest and fees on loans and leases

$

45,540

$

43,768

$

42,836

$

40,531

$

38,699

$

89,308

$

76,089

Interest and dividends on investment securities:

Taxable investment securities

7,530

8,260

8,451

8,490

8,717

15,790

17,560

Tax-exempt investment securities

814

866

910

920

933

1,680

1,866

Dividend income on investment securities

14

18

17

26

3

32

18

Interest on deposits in other financial institutions

46

68

55

109

117

114

201

Dividend income on Federal Home Loan Bank stock

161

161

70

60

40

322

85

Total interest income

54,105

53,141

52,339

50,136

48,509

107,246

95,819

Interest expense:

Interest on deposits:

Demand

199

192

180

181

193

391

373

Savings and money market

1,507

791

579

593

459

2,298

828

Time

4,867

5,092

4,567

4,744

4,034

9,959

7,459

Interest on short-term borrowings

1,123

893

999

146

48

2,016

91

Interest on long-term debt

1,031

1,060

1,335

1,147

1,103

2,091

2,074

Total interest expense

8,727

8,028

7,660

6,811

5,837

16,755

10,825

Net interest income

45,378

45,113

44,679

43,325

42,672

90,491

84,994

Provision (credit) for loan and lease losses («Provision»)

1,404

1,283

(1,386)

(59)

532

2,687

321

Net interest income after Provision

43,974

43,830

46,065

43,384

42,140

87,804

84,673

Other operating income:

Mortgage banking income (refer to Table 5)

1,601

1,424

1,770

1,923

1,775

3,025

3,622

Service charges on deposit accounts

2,041

2,081

2,237

2,189

1,977

4,122

3,980

Other service charges and fees

3,691

3,064

3,426

3,286

3,377

6,755

6,411

Income from fiduciary activities

1,129

965

1,113

1,159

1,017

2,094

1,973

Equity in earnings of unconsolidated subsidiaries

71

8

82

71

37

79

80

Fees on foreign exchange

218

151

197

220

277

369

488

Net gains (losses) on sales of investment securities

(279)

Income from bank-owned life insurance

914

952

243

1,055

501

1,866

819

Loan placement fees

107

149

215

115

220

256

417

Other (refer to Table 5)

322

2,879

396

802

449

3,201

794

Total other operating income

10,094

11,673

9,400

10,820

9,630

21,767

18,584

Other operating expense:

Salaries and employee benefits

20,563

19,889

19,053

19,011

18,783

40,452

37,288

Net occupancy

3,525

3,458

3,649

3,488

3,360

6,983

6,626

Equipment

1,138

1,006

1,079

1,048

1,044

2,144

2,112

Amortization of core deposit premium

669

668

1,337

Communication expense

903

734

863

903

746

1,637

1,644

Legal and professional services

1,728

1,570

2,212

1,528

1,769

3,298

3,590

Computer software expense

2,560

2,597

2,597

2,672

2,305

5,157

4,572

Advertising expense

712

711

834

612

617

1,423

1,229

Foreclosed asset expense

49

159

37

212

31

208

325

Other (refer to Table 5)

4,929

4,224

3,318

3,882

4,288

9,153

8,292

Total other operating expense

36,107

34,348

33,642

34,025

33,611

70,455

67,015

Income before income taxes

17,961

21,155

21,823

20,179

18,159

39,116

36,242

Income tax expense

4,427

5,118

6,031

4,986

3,935

9,545

7,741

Net income

$

13,534

$

16,037

$

15,792

$

15,193

$

14,224

$

29,571

$

28,501

Per common share data:

Basic earnings per share

$

0.47

$

0.56

$

0.54

$

0.52

$

0.48

$

1.03

$

0.96

Diluted earnings per share

0.47

0.55

0.54

0.52

0.48

1.03

0.95

Cash dividends declared

0.23

0.21

0.21

0.21

0.21

0.44

0.40

Basic weighted average shares outstanding

28,546,564

28,758,310

29,033,261

29,297,465

29,510,175

28,651,852

29,658,051

Diluted weighted average shares outstanding

28,729,510

28,979,855

29,217,480

29,479,812

29,714,942

28,847,786

29,881,534

 

CENTRAL PACIFIC FINANCIAL CORP. AND SUBSIDIARIES

Other Operating Income and Other Operating Expense – Detail

(Unaudited)

TABLE 5

The following table sets forth the components of mortgage banking income for the periods indicated:

Three Months Ended

Six Months Ended

June 30,

March 31,

December 31,

September 30,

June 30,

June 30,

(Dollars in thousands)

2019

2019

2018

2018

2018

2019

2018

Mortgage banking income:

Loan servicing fees

$

1,245

$

1,245

$

1,290

$

1,269

$

1,289

$

2,490

$

2,600

Amortization of mortgage servicing rights

(601)

(471)

(446)

(519)

(437)

(1,072)

(894)

Net gains on sales of residential mortgage loans

975

611

1,072

1,082

959

1,586

1,931

Unrealized gains (losses) on loans-held-for-sale and interest rate locks

(18)

39

(146)

91

(36)

21

(15)

Total mortgage banking income

$

1,601

$

1,424

$

1,770

$

1,923

$

1,775

$

3,025

$

3,622

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

Three Months Ended

Six Months Ended

June 30,

March 31,

December 31,

September 30,

June 30,

June 30,

(Dollars in thousands)

2019

2019

2018

2018

2018

2019

2018

Other operating income – other:

Income recovered on nonaccrual loans previously charged-off

$

85

$

82

$

99

$

395

$

130

$

167

$

226

Other recoveries

26

26

25

101

49

52

95

Commissions on sale of checks

79

80

79

79

84

159

170

Gain on sale of MasterCard stock

2,555

2,555

Other

132

136

193

227

186

268

303

Total other operating income – other

$

322

$

2,879

$

396

$

802

$

449

$

3,201

$

794

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

Three Months Ended

Six Months Ended

June 30,

March 31,

December 31,

September 30,

June 30,

June 30,

(Dollars in thousands)

2019

2019

2018

2018

2018

2019

2018

Other operating expense – other:

Charitable contributions

$

175

$

154

$

138

$

166

$

131

$

329

$

331

FDIC insurance assessment

362

501

427

437

434

863

868

Miscellaneous loan expenses

317

294

339

403

324

611

623

ATM and debit card expenses

620

650

613

686

698

1,270

1,346

Armored car expenses

211

198

238

185

233

409

399

Entertainment and promotions

1,023

230

445

185

273

1,253

432

Stationery and supplies

279

225

271

206

236

504

437

Directors’ fees and expenses

238

242

263

263

283

480

514

Provision (credit) for residential mortgage loan repurchase losses

(403)

(181)

331

(403)

Increase (decrease) to the reserve for unfunded commitments

487

167

(461)

(71)

66

654

107

Other

1,620

1,563

1,226

1,091

1,610

3,183

3,235

Total other operating expense – other

$

4,929

$

4,224

$

3,318

$

3,882

$

4,288

$

9,153

$

8,292

 

CENTRAL PACIFIC FINANCIAL CORP. AND SUBSIDIARIES

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

(Unaudited)

TABLE 6

Three Months Ended

Three Months Ended

Three Months Ended

June 30, 2019

March 31, 2019

June 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

$

8,002

2.34

%

$

46

$

11,380

2.41

%

$

68

$

26,300

1.78

%

$

117

Investment securities, excluding valuation allowance:

Taxable

1,147,759

2.63

7,544

1,201,732

2.76

8,278

1,341,717

2.60

8,720

Tax-exempt [1]

142,660

2.89

1,030

153,196

2.86

1,096

164,196

2.87

1,181

Total investment securities

1,290,419

2.66

8,574

1,354,928

2.77

9,374

1,505,913

2.63

9,901

Loans and leases, including loans held for sale

4,171,558

4.37

45,540

4,083,791

4.33

43,768

3,836,739

4.04

38,699

Federal Home Loan Bank stock

15,998

4.02

161

14,278

4.52

161

7,163

2.24

40

Total interest-earning assets

5,485,977

3.97

54,321

5,464,377

3.94

53,371

5,376,115

3.63

48,757

Noninterest-earning assets

370,488

345,554

287,582

Total assets

$

5,856,465

$

5,809,931

$

5,663,697

LIABILITIES AND EQUITY

Interest-bearing liabilities:

Interest-bearing demand deposits

$

962,402

0.08

%

$

199

$

951,101

0.08

%

$

192

$

951,597

0.08

%

$

193

Savings and money market deposits

1,577,437

0.38

1,507

1,472,835

0.22

791

1,495,884

0.12

459

Time deposits under $100,000

173,556

0.70

305

175,823

0.66

287

178,459

0.48

214

Time deposits $100,000 and over

907,330

2.02

4,562

982,678

1.98

4,805

1,047,428

1.46

3,820

Total interest-bearing deposits

3,620,725

0.73

6,573

3,582,437

0.69

6,075

3,673,368

0.51

4,686

Federal Home Loan Bank advances and other short-term borrowings

175,347

2.57

1,123

137,544

2.63

893

9,900

1.96

48

Long-term debt

101,547

4.07

1,031

101,547

4.23

1,060

92,785

4.77

1,103

Total interest-bearing liabilities

3,897,619

0.90

8,727

3,821,528

0.85

8,028

3,776,053

0.62

5,837

Noninterest-bearing deposits

1,357,056

1,396,033

1,367,796

Other liabilities

97,041

97,735

38,863

Total liabilities

5,351,716

5,315,296

5,182,712

Shareholders’ equity

504,749

494,635

480,985

Non-controlling interest

Total equity

504,749

494,635

480,985

Total liabilities and equity

$

5,856,465

$

5,809,931

$

5,663,697

Net interest income

$

45,594

$

45,343

$

42,920

Interest rate spread

3.07

%

3.09

%

3.01

%

Net interest margin

3.33

%

3.34

%

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 7

Six Months Ended

Six Months Ended

June 30, 2019

June 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

$

9,682

2.38

%

$

114

$

24,555

1.65

%

$

201

Investment securities, excluding valuation allowance:

Taxable

1,174,596

2.69

15,822

1,345,902

2.61

17,578

Tax-exempt [1]

147,899

2.88

2,127

164,684

2.87

2,362

Total investment securities

1,322,495

2.71

17,949

1,510,586

2.64

19,940

Loans and leases, including loans held for sale

4,127,917

4.35

89,308

3,813,169

4.01

76,089

Federal Home Loan Bank stock

15,143

4.26

322

7,001

2.42

85

Total interest-earning assets

5,475,237

3.95

107,693

5,355,311

3.61

96,315

Noninterest-earning assets

358,089

295,710

Total assets

$

5,833,326

$

5,651,021

LIABILITIES AND EQUITY

Interest-bearing liabilities:

Interest-bearing demand deposits

$

956,783

0.08

%

$

391

$

943,584

0.08

%

$

373

Savings and money market deposits

1,525,425

0.30

2,298

1,497,642

0.11

828

Time deposits under $100,000

174,683

0.68

592

179,000

0.46

409

Time deposits $100,000 and over

944,796

2.00

9,367

1,038,748

1.37

7,050

Total interest-bearing deposits

3,601,687

0.71

12,648

3,658,974

0.48

8,660

Federal Home Loan Bank advances and other short-term borrowings

156,550

2.60

2,016

9,356

1.97

91

Long-term debt

101,547

4.15

2,091

92,785

4.51

2,074

Total interest-bearing liabilities

3,859,784

0.88

16,755

3,761,115

0.58

10,825

Noninterest-bearing deposits

1,376,437

1,361,776

Other liabilities

97,385

41,568

Total liabilities

5,333,606

5,164,459

Shareholders’ equity

499,720

486,554

Non-controlling interest

8

Total equity

499,720

486,562

Total liabilities and equity

$

5,833,326

$

5,651,021

Net interest income

$

90,938

$

85,490

Interest rate spread

3.07

%

3.03

%

Net interest margin

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

Loans and Leases by Geographic Distribution

(Unaudited)

TABLE 8

June 30,

March 31,

December 31,

September 30,

June 30,

(Dollars in thousands)

2019

2019

2018

2018

2018

HAWAII:

Commercial, financial and agricultural

$

435,353

$

411,396

$

439,112

$

427,047

$

411,687

Real estate:

Construction

72,427

68,981

64,654

66,286

64,457

Residential mortgage

1,516,936

1,451,794

1,428,205

1,392,669

1,377,219

Home equity

473,151

465,905

468,966

455,599

430,870

Commercial mortgage

905,479

869,521

861,086

845,864

829,647

Consumer

353,282

352,771

357,908

345,785

332,040

Leases

52

83

124

170

223

Total loans and leases

3,756,680

3,620,451

3,620,055

3,533,420

3,446,143

Allowance for loan and lease losses

(42,414)

(41,413)

(42,993)

(41,991)

(43,212)

Net loans and leases

$

3,714,266

$

3,579,038

$

3,577,062

$

3,491,429

$

3,402,931

U.S. MAINLAND:

Commercial, financial and agricultural

$

155,130

$

155,399

$

142,548

$

138,317

$

111,608

Real estate:

Construction

2,194

2,273

2,355

2,437

Residential mortgage

Home equity

Commercial mortgage

187,379

188,485

179,192

187,586

188,543

Consumer

147,924

135,042

134,298

116,349

132,850

Leases

Total loans and leases

490,433

481,120

458,311

444,607

435,438

Allowance for loan and lease losses

(5,853)

(5,854)

(4,923)

(4,835)

(4,969)

Net loans and leases

$

484,580

$

475,266

$

453,388

$

439,772

$

430,469

TOTAL:

Commercial, financial and agricultural

$

590,483

$

566,795

$

581,660

$

565,364

$

523,295

Real estate:

Construction

72,427

71,175

66,927

68,641

66,894

Residential mortgage

1,516,936

1,451,794

1,428,205

1,392,669

1,377,219

Home equity

473,151

465,905

468,966

455,599

430,870

Commercial mortgage

1,092,858

1,058,006

1,040,278

1,033,450

1,018,190

Consumer

501,206

487,813

492,206

462,134

464,890

Leases

52

83

124

170

223

Total loans and leases

4,247,113

4,101,571

4,078,366

3,978,027

3,881,581

Allowance for loan and lease losses

(48,267)

(47,267)

(47,916)

(46,826)

(48,181)

Net loans and leases

$

4,198,846

$

4,054,304

$

4,030,450

$

3,931,201

$

3,833,400

 

CENTRAL PACIFIC FINANCIAL CORP. AND SUBSIDIARIES

Deposits

(Unaudited)

TABLE 9

June 30,

March 31,

December 31,

September 30,

June 30,

(Dollars in thousands)

2019

2019

2018

2018

2018

Noninterest-bearing demand

$

1,351,190

$

1,357,890

$

1,436,967

$

1,403,534

$

1,365,010

Interest-bearing demand

1,002,706

965,316

954,011

935,130

952,991

Savings and money market

1,573,805

1,562,798

1,448,257

1,503,465

1,502,284

Time deposits less than $100,000

171,106

174,265

176,707

174,920

175,695

Core deposits

4,098,807

4,060,269

4,015,942

4,017,049

3,995,980

Government time deposits

574,825

600,572

631,293

696,349

727,087

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

105,382

107,051

106,783

104,339

100,971

Other time deposits greater than $250,000

197,835

180,236

192,472

185,943

155,061

Total time deposits $100,000 and over

878,042

887,859

930,548

986,631

983,119

Total deposits

$

4,976,849

$

4,948,128

$

4,946,490

$

5,003,680

$

4,979,099

 

CENTRAL PACIFIC FINANCIAL CORP. AND SUBSIDIARIES

Nonperforming Assets, Past Due and Restructured Loans

(Unaudited)

TABLE 10

June 30,

March 31,

December 31,

September 30,

June 30,

(Dollars in thousands)

2019

2019

2018

2018

2018

Nonaccrual loans (including loans held for sale):

Real estate:

Residential mortgage

$

738

$

2,492

$

2,048

$

2,197

$

2,400

Home equity

244

570

275

415

514

Total nonaccrual loans

982

3,062

2,323

2,612

2,914

Other real estate owned («OREO»):

Real estate:

Residential mortgage

276

276

414

414

595

Total OREO

276

276

414

414

595

Total nonperforming assets («NPAs»)

1,258

3,338

2,737

3,026

3,509

Loans delinquent for 90 days or more still accruing interest:

Real estate:

Residential mortgage

279

Home equity

298

Consumer

267

159

238

333

362

Total loans delinquent for 90 days or more still accruing interest

267

159

536

333

641

Restructured loans still accruing interest:

Commercial, financial and agricultural

178

199

220

388

423

Real estate:

Construction

2,194

2,273

Residential mortgage

6,831

7,141

8,026

9,747

9,621

Commercial mortgage

2,097

2,222

2,348

1,145

1,253

Total restructured loans still accruing interest

9,106

11,756

12,867

11,280

11,297

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

$

10,631

$

15,253

$

16,140

$

14,639

$

15,447

Total nonaccrual loans as a percentage of loans and leases

0.02

%

0.07

%

0.06

%

0.07

%

0.08

%

Total NPAs as a percentage of loans and leases and OREO

0.03

%

0.08

%

0.07

%

0.08

%

0.09

%

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

0.04

%

0.09

%

0.08

%

0.08

%

0.11

%

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

0.25

%

0.37

%

0.40

%

0.37

%

0.40

%

Quarter-to-quarter changes in NPAs:

Balance at beginning of quarter

$

3,338

$

2,737

$

3,026

$

3,509

$

3,438

Additions

810

330

Reductions:

Payments

(2,055)

(71)

(154)

(121)

(37)

Return to accrual status

(25)

(135)

(181)

(222)

Charge-offs/valuation adjustments

(138)

(181)

Total reductions

(2,080)

(209)

(289)

(483)

(259)

Balance at end of quarter

$

1,258

$

3,338

$

2,737

$

3,026

$

3,509

 

CENTRAL PACIFIC FINANCIAL CORP. AND SUBSIDIARIES

Allowance for Loan and Lease Losses

(Unaudited)

TABLE 11

Three Months Ended

Six Months Ended

June 30,

March 31,

December 31,

September 30,

June 30,

June 30,

(Dollars in thousands)

2019

2019

2018

2018

2018

2019

2018

Allowance for loan and lease losses:

Balance at beginning of period

$

47,267

$

47,916

$

46,826

$

48,181

$

49,217

$

47,916

$

50,001

Provision (credit) for loan and lease losses

1,404

1,283

(1,386)

(59)

532

2,687

321

Charge-offs:

Commercial, financial and agricultural

839

463

881

731

742

1,302

1,240

Consumer

1,459

2,251

1,899

1,762

1,729

3,710

3,662

Total charge-offs

2,298

2,714

2,780

2,493

2,471

5,012

4,902

Recoveries:

Commercial, financial and agricultural

315

233

186

578

295

548

439

Real estate:

Construction

592

6

4,554

6

6

598

1,199

Residential mortgage

372

22

106

51

21

394

47

Home equity

9

9

9

6

9

18

12

Commercial mortgage

25

8

29

25

44

Consumer

581

512

401

548

543

1,093

1,020

Total recoveries

1,894

782

5,256

1,197

903

2,676

2,761

Net charge-offs (recoveries)

404

1,932

(2,476)

1,296

1,568

2,336

2,141

Balance at end of period

$

48,267

$

47,267

$

47,916

$

46,826

$

48,181

$

48,267

$

48,181

Average loans and leases, net of deferred costs

$

4,171,558

$

4,083,791

$

4,022,376

$

3,941,511

$

3,836,739

$

4,127,917

$

3,813,169

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

0.04

%

0.19

%

(0.25)

%

0.13

%

0.16

%

0.11

%

0.11

%

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

1.14

%

1.15

%

1.17

%

1.18

%

1.24

%

1.14

%

1.24

%

 

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SOURCE Central Pacific Financial Corp.