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Section 1: 8-K (8-K)

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 
Washington, D.C.  20549
 
FORM 8-K
 
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 
Date of report (Date of earliest event reported):

January 24, 2018
 
 
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Central Pacific Financial Corp.
(Exact name of registrant as specified in its charter)
 
Hawaii
 
001-31567
 
99-0212597
(State or other jurisdiction
 
(Commission File
 
(I.R.S. Employer
of incorporation)
 
Number)
 
Identification No.)
 
220 South King Street, Honolulu, Hawaii
 
96813
(Address of principal executive offices)
 
(Zip Code)
 
(808) 544-0500
(Registrant’s telephone number, including area code)
 
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
 
o
 
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
 
 
 
o
 
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
 
 
 
o
 
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
 
 
 
o
 
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 12b-2 of the Exchange Act.

Emerging growth company o

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act . o





ITEM 2.02. RESULTS OF OPERATIONS AND FINANCIAL CONDITION
 
On January 24, 2018, Central Pacific Financial Corp. issued a press release regarding its results of operations and financial condition for the quarter ended December 31, 2017. A copy of the press release is furnished herewith as Exhibit 99.
 
ITEM 9.01. FINANCIAL STATEMENTS AND EXHIBITS
 
(d)
 
Exhibits
 
 
99

 






SIGNATURES
 
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 
 
 
Central Pacific Financial Corp.
 
 
(Registrant)
 
 
 
 
 
 
 
 
 
Date:
January 24, 2018
/s/ A. Catherine Ngo
 
 
A. Catherine Ngo
 
 
President and Chief Executive Officer


(Back To Top)

Section 2: EX-99.1 (EXHIBIT 99.1)

Exhibit

Central Pacific Financial Corp. Reports Earnings of $4.3 Million for the Fourth Quarter and $41.2 Million for the 2017 Year
Page 1


Exhibit 99
391876584_ex99logoa12.jpg
 
 
 
 
FOR IMMEDIATE RELEASE
 
 
 
 
Investor Contact:
Isaac Okita
Media Contact:
Wayne Kirihara
 
VP, Treasury Manager
 
EVP, Chief Marketing Officer
 
(808) 544-3626
 
(808) 544-3687
 
isaac.okita@centralpacificbank.com
 
wayne.kirihara@centralpacificbank.com
 
NEWS RELEASE
 
 
 
 
 

CENTRAL PACIFIC FINANCIAL CORP. REPORTS EARNINGS OF $4.3 MILLION
FOR THE FOURTH QUARTER AND $41.2 MILLION FOR THE 2017 YEAR


Net income of $4.3 million, or fully diluted EPS of $0.14 for the fourth quarter. Net income of $41.2 million, or fully diluted EPS of $1.34 for the year.

Net income in the fourth quarter and year included an estimated one-time $7.4 million charge for the revaluation of the Company's net deferred tax assets due to the Tax Cuts and Jobs Act ("Tax Reform") that was enacted into law on December 22, 2017. Excluding the estimated impact of Tax Reform, net income in the fourth quarter of 2017 was $11.7 million, or fully diluted EPS of $0.39 and net income for the year was $48.6 million, or fully diluted EPS of $1.59.

ROA of 0.31% and ROE of 3.35% for the fourth quarter. ROA of 0.75% and ROE of 8.03% for the year.

Total loans increased by $134.2 million in the fourth quarter, or 3.7% sequentially and 7.0% year-over-year.

Total deposits increased by $28.9 million in the fourth quarter, or 0.6% sequentially and 7.6% year-over-year. Core deposits increased by $35.9 million in the fourth quarter, or 0.9% sequentially and 7.5% year-over-year.


HONOLULU, HI, January 24, 2018 – Central Pacific Financial Corp. (NYSE: CPF), (the "Company"), today reported net income in the fourth quarter of 2017 of $4.3 million, or diluted earnings per share ("EPS") of $0.14, compared to net income in the fourth quarter of 2016 of $12.2 million, or EPS of $0.39, and net income in the third quarter of 2017 of $11.8 million, or EPS of $0.39.

Net income in the fourth quarter of 2017 included an estimated one-time, non-cash charge to income tax expense of $7.4 million, representing a ($0.25) decrease in EPS, due to the revaluation of the Company's net deferred tax assets resulting from the reduction in the corporate Federal income tax rate in connection with the enactment of the Tax Cuts and Jobs Act ("Tax Reform").

Net income in the year ended December 31, 2017 totaled $41.2 million, or EPS of $1.34, compared to net income in the year ended December 31, 2016 of $47.0 million, or EPS of $1.50.





Central Pacific Financial Corp. Reports Earnings of $4.3 Million for the Fourth Quarter and $41.2 Million for the 2017 Year
Page 2


"We are pleased to have ended the year with strong loan and core deposit growth, as well as year-over-year increases in net interest income and net interest margin," said Catherine Ngo, President and Chief Executive Officer. "While we recorded a one-time adjustment in the valuation of our net deferred tax assets in the quarter, we look forward to the positive impact of a reduced corporate income tax rate in the coming year."

In January 2018, the Company's Board of Directors declared a quarterly cash dividend of $0.19 per share on its outstanding common shares. This represents a 5.6% increase from the $0.18 paid during the quarter. The dividend will be payable on March 15, 2018 to shareholders of record at the close of business on February 28, 2018.

In November 2017, the Company's Board of Directors authorized an increase in its common stock repurchase program authority by an additional $50 million. This amount is an addition to the $30 million in planned repurchases authorized earlier in the year. During the fourth quarter of 2017, the Company repurchased 167,000 shares of common stock at a total cost of $5.3 million, or an average cost per share of $31.47. During the year ended December 31, 2017, the Company repurchased 864,483 shares of common stock, or approximately 2.8% of its common stock outstanding as of December 31, 2016. Total cost of the shares repurchased during the year ended December 31, 2017 was $26.6 million, or an average cost per share of $30.72. The Company's remaining repurchase authority under its common stock repurchase program at December 31, 2017 is $53.5 million.

Earnings Highlights
Net interest income for the fourth quarter of 2017 was $42.8 million, compared to $39.7 million in the year-ago quarter and $42.0 million in the previous quarter. Net interest margin was 3.27%, increased from 3.22% in the year-ago quarter and increased from 3.25% in the previous quarter. The increases in net interest income and net interest margin from the year-ago and sequential quarters were primarily attributable to the growth in the loan and investment securities portfolios, combined with increases in yields earned on the loan and investment securities portfolios. These increases were partially offset by higher time deposits cost attributable to the recent increases in the federal funds rate.

Other operating income for the fourth quarter of 2017 totaled $9.0 million, compared to $13.8 million in the year-ago quarter and $9.6 million in the previous quarter. The decrease from the year-ago quarter was primarily due to a $3.5 million gain on the sale of the Company's fee interest in a former branch location recorded in the year-ago quarter, combined with lower net gains on sales of residential mortgage loans of $1.1 million (included in mortgage banking income) recorded in the current quarter. The sequential quarter decrease was primarily due to lower commissions on sales of investment services and insurance of $0.5 million (included in other service charges and fees), combined with lower death benefit income of $0.4 million (included in income from bank-owned life insurance).

Other operating expense for the fourth quarter of 2017 totaled $34.5 million, which decreased from $37.5 million in the year-ago quarter and increased from $33.5 million in the previous quarter. The decrease from the year-ago quarter was primarily due to lower salaries and employee benefits of $2.5 million, combined with a $0.7 million charge (included in other) related to the early termination of a lease recognized in the year-ago quarter. The decrease in salaries and employee benefits was primarily attributable to the recognition of $3.8 million in net actuarial losses recorded in the year-ago quarter related to the execution of a defined benefit pension plan de-risking strategy whereby the Company purchased non-participating annuity contracts to settle the pension obligation for a portion of its plan participants. This decrease was partially offset by $0.8 million in special, one-time bonuses given to all employees, with the exception of executives on its managing committee, in the fourth quarter of 2017. The sequential quarter increase was primarily due to higher salaries and employee benefits of $0.6 million, primarily attributable to the aforementioned bonuses, combined with higher advertising expense of $0.4 million and higher legal and professional expense of $0.2 million, partially offset by lower entertainment and promotions expense of $0.4 million (included in other). The higher entertainment and promotions expense recorded in the previous quarter was primarily attributable to a core deposit gathering campaign.

The efficiency ratio for the fourth quarter of 2017 was 66.54%, compared to 70.08% in the year-ago quarter and 64.99% in the previous quarter. The decrease in the efficiency ratio from the year-ago quarter was primarily due to the aforementioned $3.8 million in net actuarial losses and the $0.7 million charge related to the early termination of a lease recognized in the year-ago quarter, combined with the improvement in net interest income, partially offset by the aforementioned $3.5 million gain on the sale of the Company's fee interest in a former branch location recorded in the year-ago quarter. The increase in the efficiency ratio compared to the previous quarter was due to the aforementioned lower other operating income and higher other operating expenses, offset by the improvement in net interest income.

In the fourth quarter of 2017, the Company recorded income tax expense of $13.3 million, compared to $6.4 million in the year-ago quarter and $6.4 million in the previous quarter. The effective tax rate for the fourth quarter of 2017 was 75.6%, compared to




Central Pacific Financial Corp. Reports Earnings of $4.3 Million for the Fourth Quarter and $41.2 Million for the 2017 Year
Page 3


34.5% in the year-ago quarter and 35.0% in the previous quarter. The income tax expense and effective tax rate in the fourth quarter of 2017 were negatively impacted by the aforementioned estimated one-time, non-cash charge of $7.4 million related to Tax Reform.
 
Balance Sheet Highlights
Total assets at December 31, 2017 of $5.62 billion increased by $239.5 million, or 4.4% from December 31, 2016, and increased by $54.5 million, or 1.0% from September 30, 2017.
 
Total loans and leases at December 31, 2017 of $3.77 billion increased by $245.7 million, or 7.0% and $134.2 million, or 3.7% from December 31, 2016 and September 30, 2017, respectively.  The increase in total loans and leases from December 31, 2016 was primarily attributable to strong organic growth in the Hawaii loan portfolios, combined with increases in the U.S. mainland commercial mortgage and automobile portfolios, partially offset by reductions in the Hawaii construction and other consumer loan portfolios and the U.S. mainland commercial and other consumer loan portfolios. The increase in total loans and leases from the third quarter of 2017 was primarily due to strong organic growth in the Hawaii loan portfolios, combined with increases in the U.S. mainland commercial mortgage, automobiles, and commercial loan portfolios, partially offset by reductions in the Hawaii construction and the U.S. mainland other consumer loan portfolios.
 
Total deposits at December 31, 2017 of $4.96 billion increased by $348.2 million, or 7.6% from December 31, 2016, and increased by $28.9 million, or 0.6% from September 30, 2017.  Core deposits, which include demand deposits, savings and money market deposits, and time deposits less than $100,000, totaled $3.99 billion at December 31, 2017.  This represents an increase of $277.7 million, or 7.5% from December 31, 2016, and an increase of $35.9 million, or 0.9% from September 30, 2017.

Asset Quality
Nonperforming assets at December 31, 2017 totaled $3.6 million, or 0.06% of total assets, compared to $9.2 million, or 0.17% of total assets at December 31, 2016, and $6.0 million, or 0.11% of total assets at September 30, 2017.

Loans delinquent for 90 days or more still accruing interest totaled $0.6 million at December 31, 2017, compared to $1.4 million and $0.4 million at December 31, 2016 and September 30, 2017, respectively.
 
Net charge-offs in the fourth quarter of 2017 totaled $1.0 million, compared to net charge-offs of $0.1 million in the year-ago quarter, and net charge-offs of $1.5 million in the previous quarter. Charge-offs remained relatively unchanged from the year-ago and previous quarters. The variances in net charge-offs from the year-ago and previous quarters were primarily due to the level of recoveries in each of the respective periods.

In the fourth quarter of 2017, the Company recorded a credit to the provision for loan and lease losses of $0.2 million, compared to a credit of $2.6 million in the year-ago quarter and a credit of $0.1 million in the previous quarter. The allowance for loan and lease losses, as a percentage of total loans and leases at December 31, 2017 was 1.33%, compared to 1.61% at December 31, 2016 and 1.41% at September 30, 2017.
 
Capital
Total shareholders' equity was $500.0 million at December 31, 2017, compared to $504.7 million and $509.8 million at December 31, 2016 and September 30, 2017, 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, 2017, the Company's leverage capital, tier 1 risk-based capital, total risk-based capital, and common equity tier 1 ratios were 10.4%, 14.7%, 15.9%, and 12.4%, respectively, compared to 10.6%, 15.1%, 16.3%, and 12.8%, respectively, at September 30, 2017.

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.




Central Pacific Financial Corp. Reports Earnings of $4.3 Million for the Fourth Quarter and $41.2 Million for the 2017 Year
Page 4


 
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 24, 2018 by dialing 1-877-344-7529 (passcode: 10116271) and on the Company's website. Information which may be discussed in the conference call regarding non-GAAP financial performance and reconciliation to GAAP financial performance is provided on 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 $5.6 billion in assets.  Central Pacific Bank, its primary subsidiary, operates 35 branches and 79 ATMs in the state of Hawaii, as of December 31, 2017.  For additional information, please visit the Company's website at http://www.centralpacificbank.com.

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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, 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," "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; the impact of local, national, and international economies and events (including political events, acts of war or terrorism, natural disasters such as wildfires, 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; 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




Central Pacific Financial Corp. Reports Earnings of $4.3 Million for the Fourth Quarter and $41.2 Million for the 2017 Year
Page 5


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, 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,
 
Dec 31,
 
Sep 30,
 
Jun 30,
 
Mar 31,
 
Dec 31,
 
Dec 31,
except for per share amounts)
 
2017
 
2017
 
2017
 
2017
 
2016
 
2017
 
2016
CONDENSED INCOME STATEMENT
 
 

 
 

 
 
 
 
 
 

 
 

 
 

Net interest income
 
$
42,824

 
$
41,995

 
$
41,629

 
$
41,255

 
$
39,704

 
$
167,703

 
$
157,950

Provision (credit) for loan and lease losses
 
(186
)
 
(126
)
 
(2,282
)
 
(80
)
 
(2,645
)
 
(2,674
)
 
(5,517
)
Net interest income after provision (credit) for loan and lease losses
 
43,010

 
42,121

 
43,911

 
41,335

 
42,349

 
170,377

 
163,467

Total other operating income
 
9,043

 
9,569

 
7,870

 
10,014

 
13,769

 
36,496

 
42,316

Total other operating expense
 
34,511

 
33,511

 
32,335

 
31,460

 
37,472

 
131,817

 
133,563

Income before taxes
 
17,542

 
18,179

 
19,446

 
19,889

 
18,646

 
75,056

 
72,220

Income tax expense
 
13,254

 
6,367

 
7,421

 
6,810

 
6,438

 
33,852

 
25,228

Net income
 
4,288

 
11,812

 
12,025

 
13,079

 
12,208

 
41,204

 
46,992

Basic earnings per common share
 
$
0.14

 
$
0.39

 
$
0.39

 
$
0.43

 
$
0.40

 
$
1.36

 
$
1.52

Diluted earnings per common share
 
0.14

 
0.39

 
0.39

 
0.42

 
0.39

 
1.34

 
1.50

Dividends declared per common share
 
0.18

 
0.18

 
0.18

 
0.16

 
0.16

 
0.70

 
0.60

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
PERFORMANCE RATIOS
 
 

 
 

 
 

 
 

 
 

 
 

 
 

Return on average assets (1)
 
0.31
%
 
0.85
%
 
0.88
%
 
0.96
%
 
0.92
%
 
0.75
%
 
0.90
%
Return on average shareholders’ equity (1)
 
3.35

 
9.16

 
9.32

 
10.24

 
9.46

 
8.03

 
9.16

Return on average tangible shareholders’ equity (1)
 
3.37

 
9.22

 
9.39

 
10.33

 
9.56

 
8.08

 
9.27

Average shareholders’ equity to average assets
 
9.12

 
9.30

 
9.44

 
9.42

 
9.67

 
9.32

 
9.78

Efficiency ratio (2)
 
66.54

 
64.99

 
65.32

 
61.36

 
70.08

 
64.55

 
66.69

Net interest margin (1)
 
3.27

 
3.25

 
3.29

 
3.30

 
3.22

 
3.28

 
3.27

Dividend payout ratio (3)
 
128.57

 
46.15

 
46.15

 
38.10

 
41.03

 
52.24

 
40.00

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
SELECTED AVERAGE BALANCES
 
 

 
 

 
 

 
 

 
 

 
 

 
 

Average loans and leases, including loans held for sale
 
$
3,719,684

 
$
3,625,455

 
$
3,593,347

 
$
3,547,718

 
$
3,489,757

 
$
3,622,033

 
$
3,385,741

Average interest-earning assets
 
5,279,360

 
5,216,089

 
5,138,038

 
5,095,455

 
4,981,766

 
5,182,832

 
4,890,426

Average assets
 
5,605,728

 
5,545,909

 
5,467,461

 
5,422,529

 
5,335,909

 
5,511,006

 
5,250,113

Average deposits
 
4,936,743

 
4,893,778

 
4,800,815

 
4,762,874

 
4,558,589

 
4,849,153

 
4,496,096

Average interest-bearing liabilities
 
3,686,222

 
3,613,872

 
3,600,761

 
3,626,229

 
3,568,767

 
3,631,886

 
3,539,903

Average shareholders’ equity
 
511,277

 
515,580

 
515,974

 
510,804

 
516,067

 
513,416

 
513,255

Average tangible shareholders' equity
 
508,886

 
512,554

 
512,254

 
506,366

 
511,004

 
510,029

 
507,197

 
 
 
Dec 31,
 
Sep 30,
 
Jun 30,
 
Mar 31,
 
Dec 31,
(dollars in thousands)
 
2017
 
2017
 
2017
 
2017
 
2016
REGULATORY CAPITAL
 
 
 
 
 
 
 
 
 
 
Central Pacific Financial Corp.
 
 
 
 
 
 
 
 
 
 
Leverage capital
 
$
578,607

 
$
585,950

 
$
584,441

 
$
577,081

 
$
562,460

Tier 1 risk-based capital
 
578,607

 
585,950

 
584,441

 
577,081

 
562,460

Total risk-based capital
 
628,068

 
634,677

 
632,780

 
624,735

 
612,202

Common equity tier 1 capital
 
490,861

 
497,828

 
497,172

 
491,538

 
485,268

Central Pacific Bank
 
 
 
 
 
 
 
 
 
 
Leverage capital
 
565,412

 
569,990

 
564,765

 
560,921

 
541,577

Tier 1 risk-based capital
 
565,412

 
569,990

 
564,765

 
560,921

 
541,577

Total risk-based capital
 
614,732

 
618,576

 
612,968

 
608,450

 
591,185

Common equity tier 1 capital
 
565,412

 
569,990

 
564,765

 
560,921

 
541,577

 
 
 
 
 
 
 
 
 
 
 
REGULATORY CAPITAL RATIOS
 
 
 
 
 
 
 
 
 
 
Central Pacific Financial Corp.
 
 
 
 
 
 
 
 
 
 
Leverage capital ratio
 
10.4
%
 
10.6
%
 
10.7
%
 
10.7
%
 
10.6
%
Tier 1 risk-based capital ratio
 
14.7

 
15.1

 
15.2

 
15.2

 
14.2

Total risk-based capital ratio
 
15.9

 
16.3

 
16.4

 
16.5

 
15.5

Common equity tier 1 capital ratio
 
12.4

 
12.8

 
12.9

 
13.0

 
12.3

Central Pacific Bank
 
 
 
 
 
 
 
 
 
 
Leverage capital ratio
 
10.1

 
10.3

 
10.4

 
10.4

 
10.2

Tier 1 risk-based capital ratio
 
14.4

 
14.7

 
14.7

 
14.8

 
13.7

Total risk-based capital ratio
 
15.6

 
16.0

 
15.9

 
16.1

 
15.0

Common equity tier 1 capital ratio
 
14.4

 
14.7

 
14.7

 
14.8

 
13.7

 
 
Dec 31,
 
Sep 30,
 
Jun 30,
 
Mar 31,
 
Dec 31,
(dollars in thousands, except for per share amounts)
 
2017
 
2017
 
2017
 
2017
 
2016
BALANCE SHEET
 
 

 
 

 
 
 
 
 
 

Loans and leases
 
$
3,770,615

 
$
3,636,370

 
$
3,591,735

 
$
3,545,718

 
$
3,524,890

Total assets
 
5,623,708

 
5,569,230

 
5,533,135

 
5,443,181

 
5,384,236

Total deposits
 
4,956,354

 
4,927,497

 
4,886,382

 
4,777,444

 
4,608,201

Long-term debt
 
92,785

 
92,785

 
92,785

 
92,785

 
92,785

Total shareholders’ equity
 
500,011

 
509,846

 
512,930

 
511,536

 
504,650

Total shareholders’ equity to total assets
 
8.89
%
 
9.15
%
 
9.27
%
 
9.40
%
 
9.37
%
Tangible common equity to tangible assets (4)
 
8.86
%
 
9.11
%
 
9.22
%
 
9.33
%
 
9.29
%
 
 
 
 
 
 
 
 
 
 
 
ASSET QUALITY
 
 

 
 

 
 

 
 

 
 

Allowance for loan and lease losses
 
$
50,001

 
$
51,217

 
$
52,828

 
$
55,369

 
$
56,631

Non-performing assets
 
3,626

 
5,970

 
9,042

 
8,834

 
9,187

Allowance to loans and leases outstanding
 
1.33
%
 
1.41
%
 
1.47
%
 
1.56
%
 
1.61
%
Allowance to non-performing assets
 
1,378.96

 
857.91

 
584.25

 
626.77

 
616.43

 
 
 
 
 
 
 
 
 
 
 
PER SHARE OF COMMON STOCK OUTSTANDING
 
 

 
 

 
 

 
 

 
 

Book value per common share
 
$
16.65

 
$
16.89

 
$
16.81

 
$
16.66

 
$
16.39

Tangible book value per common share
 
16.59

 
16.80

 
16.70

 
16.53

 
16.23

Closing market price per common share
 
29.83

 
32.18

 
31.47

 
30.54

 
31.42

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(1) Annualized.
(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 adjusted net income and diluted earnings per share excluding the estimated impact of Tax Reform for each of the dates indicated:

 
 
Three Months Ended
 
Year Ended
 
 
Dec 31,
 
Sep 30,
 
Jun 30,
 
Mar 31,
 
Dec 31,
 
December 31,
(Dollars in thousands, except per share data)
 
2017
 
2017
 
2017
 
2017
 
2016
 
2017
 
2016
Reported net income
 
$
4,288

 
$
11,812

 
$
12,025

 
$
13,079

 
$
12,208

 
$
41,204

 
$
46,992

Estimated impact of Tax Reform
 
7,440

 

 

 

 

 
7,440

 

Adjusted net income
 
$
11,728

 
$
11,812

 
$
12,025

 
$
13,079

 
$
12,208

 
$
48,644

 
$
46,992

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Reported diluted earnings per share
 
$
0.14

 
$
0.39

 
$
0.39

 
$
0.42

 
$
0.39

 
$
1.34

 
$
1.50

Estimated impact of Tax Reform
 
0.25

 

 

 

 

 
0.25

 

Adjusted diluted earnings per share
 
$
0.39

 
$
0.39

 
$
0.39

 
$
0.42

 
$
0.39

 
$
1.59

 
$
1.50

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Diluted weighted average shares outstanding
 
30,271,910

 
30,514,459

 
30,803,725

 
31,001,238

 
31,001,246

 
30,638,140

 
31,224,894


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

 
 
December 31,
 
September 30,
 
June 30,
 
March 31,
 
December 31,
(Dollars in thousands)
 
2017
 
2017
 
2017
 
2017
 
2016
Tangible Common Equity Ratio:
 
 

 
 

 
 
 
 
 
 

Total shareholders’ equity
 
$
500,011

 
$
509,846

 
$
512,930

 
$
511,536

 
$
504,650

Less: Other intangible assets
 
(2,006
)
 
(2,674
)
 
(3,343
)
 
(4,012
)
 
(4,680
)
Tangible common equity
 
$
498,005

 
$
507,172

 
$
509,587

 
$
507,524

 
$
499,970

 
 
 
 
 
 
 
 
 
 
 
Total assets
 
$
5,623,708

 
$
5,569,230

 
$
5,533,135

 
$
5,443,181

 
$
5,384,236

Less: Other intangible assets
 
(2,006
)
 
(2,674
)
 
(3,343
)
 
(4,012
)
 
(4,680
)
Tangible assets
 
$
5,621,702

 
$
5,566,556

 
$
5,529,792

 
$
5,439,169

 
$
5,379,556

 
 
 
 
 
 
 
 
 
 
 
Tangible common equity to tangible assets
 
8.86
%
 
9.11
%
 
9.22
%
 
9.33
%
 
9.29
%





CENTRAL PACIFIC FINANCIAL CORP. AND SUBSIDIARIES
 
Consolidated Balance Sheets
 
(Unaudited)
TABLE 3
 
 
 
December 31,
 
September 30,
 
June 30,
 
March 31,
 
December 31,
(Dollars in thousands, except share data)
 
2017
 
2017
 
2017
 
2017
 
2016
ASSETS
 
 

 
 

 
 
 
 
 
 

Cash and due from financial institutions
 
$
75,318

 
$
90,080

 
$
85,975

 
$
83,670

 
$
75,272

Interest-bearing deposits in other financial institutions
 
6,975

 
18,195

 
54,576

 
22,363

 
9,069

Investment securities:
 
 
 
 
 
 

 
 

 
 
Available for sale, at fair value
 
1,304,891

 
1,350,105

 
1,315,895

 
1,302,889

 
1,243,847

Held to maturity, fair value of: $189,201 at December 31, 2017, $195,714 at September 30, 2017, $203,334 at June 30, 2017, $208,181 at March 31, 2017, and $214,366 at December 31, 2016
 
191,753

 
197,672

 
204,588

 
211,426

 
217,668

Total investment securities
 
1,496,644

 
1,547,777

 
1,520,483

 
1,514,315

 
1,461,515

Loans held for sale
 
16,336

 
10,828

 
13,288

 
9,905

 
31,881

Loans and leases
 
3,770,615

 
3,636,370

 
3,591,735

 
3,545,718

 
3,524,890

Less allowance for loan and lease losses
 
50,001

 
51,217

 
52,828

 
55,369

 
56,631

Loans and leases, net of allowance for loan and lease losses
 
3,720,614

 
3,585,153

 
3,538,907

 
3,490,349

 
3,468,259

Premises and equipment, net
 
48,348

 
48,339

 
49,252

 
48,303

 
48,258

Accrued interest receivable
 
16,581

 
15,434

 
15,636

 
14,819

 
15,675

Investment in unconsolidated subsidiaries
 
7,088

 
7,101

 
6,189

 
6,279

 
6,889

Other real estate owned
 
851

 
851

 
1,008

 
851

 
791

Mortgage servicing rights
 
15,843

 
16,093

 
15,932

 
15,847

 
15,779

Core deposit premium
 
2,006

 
2,674

 
3,343

 
4,012

 
4,680

Bank-owned life insurance
 
156,293

 
155,928

 
156,053

 
155,019

 
155,593

Federal Home Loan Bank stock
 
7,761

 
6,484

 
6,492

 
7,333

 
11,572

Other assets
 
53,050

 
64,293

 
66,001

 
70,116

 
79,003

Total assets
 
$
5,623,708

 
$
5,569,230

 
$
5,533,135

 
$
5,443,181

 
$
5,384,236

LIABILITIES AND EQUITY
 
 

 
 

 
 

 
 

 
 

Deposits:
 
 

 
 

 
 

 
 

 
 

Noninterest-bearing demand
 
$
1,395,556

 
$
1,383,548

 
$
1,383,754

 
$
1,290,632

 
$
1,265,246

Interest-bearing demand
 
933,054

 
911,273

 
917,956

 
898,306

 
862,991

Savings and money market
 
1,481,876

 
1,476,017

 
1,453,108

 
1,430,399

 
1,390,600

Time
 
1,145,868

 
1,156,659

 
1,131,564

 
1,158,107

 
1,089,364

Total deposits
 
4,956,354

 
4,927,497

 
4,886,382

 
4,777,444

 
4,608,201

Federal Home Loan Bank advances and other short-term borrowings
 
32,000

 

 

 
21,000

 
135,000

Long-term debt
 
92,785

 
92,785

 
92,785

 
92,785

 
92,785

Other liabilities
 
42,534

 
39,078

 
41,013

 
40,391

 
43,575

Total liabilities
 
5,123,673

 
5,059,360

 
5,020,180

 
4,931,620

 
4,879,561

Equity:
 
 

 
 

 
 

 
 

 
 

Preferred stock, no par value, authorized 1,000,000 shares; issued and outstanding none at: December 31, 2017, September 30, 2017, June 30, 2017, March 31, 2017, and December 31, 2016
 

 

 

 

 

Common stock, no par value, authorized 185,000,000 shares; issued and outstanding: 30,024,222 at December 31, 2017, 30,188,748 at September 30, 2017, 30,514,799 at June 30, 2017, 30,701,219 at March 31, 2017, and 30,796,243 at December 31, 2016
 
503,988

 
509,243

 
519,383

 
527,403

 
530,932

Surplus
 
86,098

 
85,300

 
84,592

 
84,678

 
84,180

Accumulated deficit
 
(89,036
)
 
(87,913
)
 
(94,269
)
 
(100,784
)
 
(108,941
)
Accumulated other comprehensive income (loss)
 
(1,039
)
 
3,216

 
3,224

 
239

 
(1,521
)
Total shareholders' equity
 
500,011

 
509,846

 
512,930

 
511,536

 
504,650

Non-controlling interest
 
24

 
24

 
25

 
25

 
25

Total equity
 
500,035

 
509,870

 
512,955

 
511,561

 
504,675

Total liabilities and equity
 
$
5,623,708

 
$
5,569,230

 
$
5,533,135

 
$
5,443,181

 
$
5,384,236





CENTRAL PACIFIC FINANCIAL CORP. AND SUBSIDIARIES
 
Consolidated Statements of Income
 
(Unaudited)
TABLE 4
 
 
Three Months Ended
 
Year Ended
 
 
Dec 31,
 
Sep 30,
 
Jun 30,
 
Mar 31,
 
Dec 31,
 
Dec 31,
(Dollars in thousands, except per share data)
 
2017
 
2017
 
2017
 
2017
 
2016
 
2017
 
2016
Interest income:
 
 

 
 

 
 
 
 
 
 

 
 

 
 

Interest and fees on loans and leases
 
$
37,447

 
$
36,289

 
$
35,531

 
$
34,957

 
$
33,973

 
$
144,224

 
$
132,028

Interest and dividends on investment securities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Taxable investment securities
 
8,777

 
8,540

 
8,481

 
8,135

 
7,203

 
33,933

 
30,848

Tax-exempt investment securities
 
955

 
966

 
974

 
979

 
989

 
3,874

 
3,975

Dividend income on investment securities
 
13

 
12

 
12

 
12

 
12

 
49

 
42

Interest on deposits in other financial institutions
 
58

 
163

 
61

 
74

 
22

 
356

 
67

Dividend income on Federal Home Loan Bank stock
 
26

 
23

 
21

 
56

 
56

 
126

 
179

Total interest income
 
47,276

 
45,993

 
45,080

 
44,213

 
42,255

 
182,562

 
167,139

Interest expense:
 
 

 
 

 
 

 
 

 
 

 
 

 
 

Interest on deposits:
 
 

 
 

 
 

 
 

 
 

 
 

 
 

Demand
 
170

 
177

 
154

 
140

 
129

 
641

 
489

Savings and money market
 
302

 
281

 
259

 
257

 
257

 
1,099

 
1,043

Time
 
2,967

 
2,637

 
2,136

 
1,717

 
1,175

 
9,457

 
4,074

Interest on short-term borrowings
 
97

 
9

 
46

 
31

 
191

 
183

 
578

Interest on long-term debt
 
916

 
894

 
856

 
813

 
799

 
3,479

 
3,005

Total interest expense
 
4,452

 
3,998

 
3,451

 
2,958

 
2,551

 
14,859

 
9,189

Net interest income
 
42,824

 
41,995

 
41,629

 
41,255

 
39,704

 
167,703

 
157,950

Provision (credit) for loan and lease losses
 
(186
)
 
(126
)
 
(2,282
)
 
(80
)
 
(2,645
)
 
(2,674
)
 
(5,517
)
Net interest income after provision for loan and lease losses
 
43,010

 
42,121

 
43,911

 
41,335

 
42,349

 
170,377

 
163,467

Other operating income:
 
 

 
 

 
 

 
 

 
 

 
 

 
 

Mortgage banking income (refer to Table 5)
 
1,531

 
1,531

 
1,957

 
1,943

 
2,845

 
6,962

 
8,069

Service charges on deposit accounts
 
2,130

 
2,182

 
2,120

 
2,036

 
2,065

 
8,468

 
7,891

Other service charges and fees
 
2,532

 
3,185

 
3,053

 
2,748

 
2,833

 
11,518

 
11,449

Income from fiduciary activities
 
935

 
911

 
964

 
864

 
858

 
3,674

 
3,435

Equity in earnings of unconsolidated subsidiaries
 
214

 
176

 
151

 
61

 
267

 
602

 
723

Fees on foreign exchange
 
135

 
101

 
130

 
163

 
116

 
529

 
519

Net gains (losses) on sales of investment securities
 
230

 

 
(1,640
)
 

 

 
(1,410
)
 

Income from bank-owned life insurance
 
614

 
1,074

 
583

 
1,117

 
273

 
3,388

 
2,685

Loan placement fees
 
170

 
86

 
146

 
134

 
175

 
536

 
494

Net gains on sales of foreclosed assets
 

 
19

 
84

 
102

 
1

 
205

 
607

Gain on sale of premises and equipment
 

 

 

 

 
3,537

 

 
3,537

Other (refer to Table 5)
 
552

 
304

 
322

 
846

 
799

 
2,024

 
2,907

Total other operating income
 
9,043

 
9,569

 
7,870

 
10,014

 
13,769

 
36,496

 
42,316

Other operating expense:
 
 

 
 

 
 

 
 

 
 

 
 

 
 

Salaries and employee benefits
 
18,759

 
18,157

 
17,983

 
17,387

 
21,254

 
72,286

 
73,500

Net occupancy
 
3,418

 
3,404

 
3,335

 
3,414

 
3,606

 
13,571

 
14,065

Equipment
 
1,007

 
969

 
967

 
842

 
967

 
3,785

 
3,399

Amortization of core deposit premium
 
668

 
669

 
669

 
668

 
669

 
2,674

 
2,675

Communication expense
 
924

 
944

 
891

 
900

 
868

 
3,659

 
3,694

Legal and professional services
 
2,091

 
1,854

 
1,987

 
1,792

 
1,821

 
7,724

 
6,856

Computer software expense
 
2,404

 
2,346

 
2,190

 
2,252

 
2,332

 
9,192

 
9,475

Advertising expense
 
1,000

 
626

 
390

 
392

 
562

 
2,408

 
2,401

Foreclosed asset expense
 
28

 
24

 
63

 
36

 
16

 
151

 
152

Other (refer to Table 5)
 
4,212

 
4,518

 
3,860

 
3,777

 
5,377

 
16,367

 
17,346

Total other operating expense
 
34,511

 
33,511

 
32,335

 
31,460

 
37,472

 
131,817

 
133,563

Income before income taxes
 
17,542

 
18,179

 
19,446

 
19,889

 
18,646

 
75,056

 
72,220

Income tax expense
 
13,254

 
6,367

 
7,421

 
6,810

 
6,438

 
33,852

 
25,228

Net income
 
$
4,288

 
$
11,812

 
$
12,025

 
$
13,079

 
$
12,208

 
$
41,204

 
$
46,992

Per common share data:
 
 

 
 

 
 

 
 

 
 

 
 

 
 

Basic earnings per share
 
$
0.14

 
$
0.39

 
$
0.39

 
$
0.43

 
$
0.40

 
$
1.36

 
$
1.52

Diluted earnings per share
 
0.14

 
0.39

 
0.39

 
0.42

 
0.39

 
1.34

 
1.50

Cash dividends declared
 
0.18

 
0.18

 
0.18

 
0.16

 
0.16

 
0.70

 
0.60

Basic weighted average shares outstanding
 
30,027,366

 
30,300,195

 
30,568,247

 
30,714,895

 
30,770,528

 
30,400,511

 
31,008,744

Diluted weighted average shares outstanding
 
30,271,910

 
30,514,459

 
30,803,725

 
31,001,238

 
31,001,246

 
30,638,140

 
31,224,894





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
 
Year Ended
 
 
Dec 31,
 
Sep 30,
 
Jun 30,
 
Mar 31,
 
Dec 31,
 
December 31,
(Dollars in thousands)
 
2017
 
2017
 
2017
 
2017
 
2016
 
2017
 
2016
Mortgage banking income:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Loan servicing fees
 
$
1,316

 
$
1,323

 
$
1,340

 
$
1,358

 
$
1,340

 
$
5,337

 
$
5,421

Amortization of mortgage servicing rights
 
(745
)
 
(476
)
 
(547
)
 
(520
)
 
(781
)
 
(2,288
)
 
(5,066
)
Net gains on sales of residential mortgage loans
 
968

 
705

 
1,084

 
1,312

 
2,108

 
4,069

 
7,631

Unrealized gains (losses) on loans-held-for-sale and interest rate locks
 
(8
)
 
(21
)
 
80

 
(207
)
 
178

 
(156
)
 
83

Total mortgage banking income
 
$
1,531

 
$
1,531

 
$
1,957

 
$
1,943

 
$
2,845

 
$
6,962

 
$
8,069


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

 
 
Three Months Ended
 
Year Ended
 
 
Dec 31,
 
Sep 30,
 
Jun 30,
 
Mar 31,
 
Dec 31,
 
December 31,
(Dollars in thousands)
 
2017
 
2017
 
2017
 
2017
 
2016
 
2017
 
2016
Other operating income - other:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Income recovered on nonaccrual loans previously charged-off
 
$
156

 
$
25

 
$
25

 
$
561

 
$
444

 
$
767

 
$
1,325

Other recoveries
 
26

 
32

 
54

 
37

 
19

 
149

 
313

Commissions on sale of checks
 
83

 
86

 
85

 
87

 
84

 
341

 
340

Other
 
287

 
161

 
158

 
161

 
252

 
767

 
929

Total other operating income - other
 
$
552

 
$