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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):

April 25, 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 April 25, 2018, Central Pacific Financial Corp. issued a press release regarding its results of operations and financial condition for the quarter ended March 31, 2018. A copy of the press release is furnished herewith as Exhibit 99.1.
 
ITEM 9.01. FINANCIAL STATEMENTS AND EXHIBITS
 
(d)
 
Exhibits
 
 
99.1

 






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:
April 25, 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 $14.3 Million First Quarter Earnings
Page 1


Exhibit 99.1
393172617_ex99logoa14.jpg
 
 
 
 
FOR IMMEDIATE RELEASE
 
 
 
 
Investor Contact:
Ian Tanaka
Media Contact:
Wayne Kirihara
 
VP, Treasury Manager
 
EVP, Chief Marketing Officer
 
(808) 544-3646
 
(808) 544-3687
 
ian.tanaka@centralpacificbank.com
 
wayne.kirihara@centralpacificbank.com
 
NEWS RELEASE
 
 
 
 
 

CENTRAL PACIFIC FINANCIAL CORP. REPORTS $14.3 MILLION
FIRST QUARTER EARNINGS


Net income of $14.3 million, or fully diluted EPS of $0.48 for the first quarter.

ROA of 1.01% and ROE of 11.60% for the first quarter.

Total loans increased by $45.5 million in the first quarter, or 1.2% sequentially and 7.6% year-over-year.

Total deposits increased by $24.1 million in the first quarter, or 0.5% sequentially and 4.2% year-over-year. Core deposits increased by $15.7 million in the first quarter, or 0.4% sequentially and 5.1% year-over-year.

Increased quarterly cash dividend by 10.5% to $0.21 per share from $0.19 per share paid in the first quarter.


HONOLULU, HI, April 25, 2018 – Central Pacific Financial Corp. (NYSE: CPF), (the "Company"), today reported net income in the first quarter of 2018 of $14.3 million, or diluted earnings per share ("EPS") of $0.48, compared to net income in the first quarter of 2017 of $13.1 million, or EPS of $0.42, and net income in the fourth quarter of 2017 of $4.3 million, or EPS of $0.14.

"We are pleased to report on another solid quarter of net income driven primarily by continued loan and deposit growth," said Catherine Ngo, President and Chief Executive Officer. "Our earnings and strong capital position have allowed our company to increase our quarterly cash dividend and continue executing on our stock repurchase plan."

In April 2018, the Company's Board of Directors declared a quarterly cash dividend of $0.21 per share on its outstanding common shares. This represents a 10.5% increase from the $0.19 dividend paid in the first quarter of 2018. The dividend will be payable on June 15, 2018 to shareholders of record at the close of business on May 31, 2018.

During the first quarter of 2018, the Company repurchased 344,362 shares of common stock, or approximately 1.1% of its common stock outstanding as of December 31, 2017. Total cost of the shares repurchased was $10.1 million, or an average cost per share of $29.36. The Company's remaining repurchase authority under its common stock repurchase program at March 31, 2018 is $43.4 million.





Central Pacific Financial Corp. Reports $14.3 Million First Quarter Earnings
Page 2


Earnings Highlights
Net interest income for the first quarter of 2018 was $42.3 million, compared to $41.3 million in the year-ago quarter and $42.8 million in the previous quarter. Net interest margin for the first quarter of 2018 was 3.21%, compared to 3.30% in the year-ago quarter and 3.27% in the previous quarter. The increase in net interest income from the year-ago quarter was primarily due to growth in the loan portfolio, combined with an increase in the taxable-equivalent yield earned on the investment security portfolio. These increases were partially offset by higher deposit and borrowing costs attributable to the recent increases in the federal funds rate, which also resulted in the decline in the net interest margin from the year-ago quarter. The decrease in net interest income and net interest margin from the previous quarter was primarily due to a decline in yields earned on the loan and investment securities portfolios, combined with higher rates paid on time deposits and borrowings.

Other operating income for the first quarter of 2018 totaled $9.0 million, compared to $10.0 million in the year-ago quarter and $9.0 million in the previous quarter. The decrease from the year-ago quarter was primarily due to lower income from bank-owned life insurance of $0.8 million and lower income recovered on nonaccrual loans previously charged-off of $0.5 million, partially offset by higher commissions on investment services of $0.3 million (included in other service charges and fees). The lower income from bank-owned life insurance was primarily attributable to death benefit income of $0.6 million recorded in the year-ago quarter. Other operating income remained relatively unchanged from the previous quarter.

Other operating expense for the first quarter of 2018 totaled $33.5 million, which increased from $31.5 million in the year-ago quarter and decreased from $34.5 million in the previous quarter. The increase from the year-ago quarter was primarily due to higher salaries and employee benefits of $1.1 million, combined with the write-down of a foreclosed asset of $0.3 million (included in foreclosed asset expense). The higher salaries and employee benefits expense was primarily attributable to the increase in the Company's starting pay rate and the pay scale for other wage progression positions effective January 1, 2018, combined with annual merit increases effective in the second quarter of 2017. The sequential quarter decrease was primarily due to lower advertising expense of $0.4 million, lower legal and professional services of $0.3 million, lower salaries and employee benefits of $0.3 million, and lower net occupancy expense of $0.2 million, partially offset by higher foreclosed asset expense of $0.3 million. The lower salaries and employee benefits from the sequential quarter were primarily attributable to a special, one-time bonus totaling $0.8 million given to all employees, with the exception of executives on the Company's managing committee, in the fourth quarter of 2017, partially offset by higher salaries paid during the current quarter due to aforementioned increases in pay rates.

The efficiency ratio for the first quarter of 2018 was 65.37%, compared to 61.36% in the year-ago quarter and 66.54% in the previous quarter. The increase in the efficiency ratio from the year-ago quarter was primarily due to the aforementioned lower other operating income combined with higher other operating expenses in the current quarter compared to the year-ago quarter, partially offset by the improvement in net interest income. The improvement in the efficiency ratio compared to the previous quarter was due to the aforementioned lower other operating expenses, partially offset by the lower net interest income.

In the first quarter of 2018, the Company recorded income tax expense of $3.7 million, compared to $6.8 million in the year-ago quarter and $13.3 million in the previous quarter. Income tax expense in the previous quarter included a one-time, non-cash estimated charge of $7.4 million to income tax expense due to the revaluation of the Company's net deferred tax assets in connection with the enactment of H.R.1, commonly referred to as the Tax Cuts and Jobs Act. The effective tax rate for the first quarter of 2018 was 20.5%, compared to 34.2% in the year-ago quarter and 75.6% in the previous quarter. The decline in income tax expense and effective tax rate in the current quarter was primarily due to the Tax Cuts and Jobs Act.
 
Balance Sheet Highlights
Total assets at March 31, 2018 of $5.65 billion increased by $208.1 million, or 3.8% from March 31, 2017, and increased by $27.6 million, or 0.5% from December 31, 2017.
 
Total loans and leases at March 31, 2018 of $3.82 billion increased by $270.4 million, or 7.6% and $45.5 million, or 1.2% from March 31, 2017 and December 31, 2017, respectively. The increase in total loans and leases from March 31, 2017 was primarily attributable to strong organic growth in the Hawaii loan portfolios, combined with an increase in the U.S. mainland commercial mortgage portfolio, partially offset by reductions in the Hawaii construction loan portfolio and the U.S. mainland consumer loan portfolio. The increase in total loans and leases from the fourth quarter of 2017 was primarily due to strong organic growth in the Hawaii loan portfolios, partially offset by a reduction in the U.S. mainland consumer loan portfolio.
 
Total deposits at March 31, 2018 of $4.98 billion increased by $203.0 million, or 4.2% from March 31, 2017, and increased by $24.1 million, or 0.5% from December 31, 2017.  Core deposits, which include demand deposits, savings and money market deposits,




Central Pacific Financial Corp. Reports $14.3 Million First Quarter Earnings
Page 3


and time deposits less than $100,000, totaled $4.01 billion at March 31, 2018.  This represents an increase of $196.0 million, or 5.1% from March 31, 2017, and an increase of $15.7 million, or 0.4% from December 31, 2017.

Asset Quality
Nonperforming assets at March 31, 2018 totaled $3.4 million, or 0.06% of total assets, compared to $8.8 million, or 0.16% of total assets at March 31, 2017, and $3.6 million, or 0.06% of total assets at December 31, 2017.

Loans delinquent for 90 days or more still accruing interest totaled $0.4 million at March 31, 2018, compared to $0.2 million and $0.6 million at March 31, 2017 and December 31, 2017, respectively.
 
Net charge-offs in the first quarter of 2018 totaled $0.6 million, compared to net charge-offs of $1.2 million in the year-ago quarter, and net charge-offs of $1.0 million in the previous quarter.

In the first quarter of 2018, the Company recorded a credit to the provision for loan and lease losses of $0.2 million, compared to a credit of $0.1 million in the year-ago quarter and a credit of $0.2 million in the previous quarter. The allowance for loan and lease losses, as a percentage of total loans and leases at March 31, 2018 was 1.29%, compared to 1.56% at March 31, 2017 and 1.33% at December 31, 2017.
 
Capital
Total shareholders' equity was $484.1 million at March 31, 2018, compared to $511.5 million and $500.0 million at March 31, 2017 and December 31, 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 March 31, 2018, the Company's leverage capital, tier 1 risk-based capital, total risk-based capital, and common equity tier 1 ratios were 10.3%, 14.5%, 15.8%, and 12.3%, respectively, compared to 10.4%, 14.7%, 15.9%, and 12.4%, respectively, at December 31, 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.
 
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 May 25, 2018 by dialing 1-877-344-7529 (passcode: 10119342) 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 $5.7 billion in assets.  Central Pacific Bank, its primary subsidiary, operates 35 branches and 80 ATMs in the state of Hawaii, as of March 31, 2018.  For additional information, please visit the Company's website at http://www.centralpacificbank.com.





Central Pacific Financial Corp. Reports $14.3 Million First Quarter Earnings
Page 4


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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; 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, 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 and 10-K/A 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
(Dollars in thousands,
 
Mar 31,
 
Dec 31,
 
Sep 30,
 
Jun 30,
 
Mar 31,
except for per share amounts)
 
2018
 
2017
 
2017
 
2017
 
2017
CONDENSED INCOME STATEMENT
 
 

 
 

 
 
 
 
 
 

Net interest income
 
$
42,322

 
$
42,824

 
$
41,995

 
$
41,629

 
$
41,255

Provision (credit) for loan and lease losses
 
(211
)
 
(186
)
 
(126
)
 
(2,282
)
 
(80
)
Net interest income after provision (credit) for loan and lease losses
 
42,533

 
43,010

 
42,121

 
43,911

 
41,335

Total other operating income
 
8,954

 
9,043

 
9,569

 
7,870

 
10,014

Total other operating expense
 
33,518

 
34,511

 
33,511

 
32,335

 
31,460

Income before taxes
 
17,969

 
17,542

 
18,179

 
19,446

 
19,889

Income tax expense
 
3,692

 
13,254

 
6,367

 
7,421

 
6,810

Net income
 
14,277

 
4,288

 
11,812

 
12,025

 
13,079

Basic earnings per common share
 
$
0.48

 
$
0.14

 
$
0.39

 
$
0.39

 
$
0.43

Diluted earnings per common share
 
0.48

 
0.14

 
0.39

 
0.39

 
0.42

Dividends declared per common share
 
0.19

 
0.18

 
0.18

 
0.18

 
0.16

 
 
 
 
 
 
 
 
 
 
 
PERFORMANCE RATIOS
 
 

 
 

 
 

 
 

 
 

Return on average assets (1)
 
1.01
%
 
0.31
%
 
0.85
%
 
0.88
%
 
0.96
%
Return on average shareholders’ equity (1)
 
11.60

 
3.35

 
9.16

 
9.32

 
10.24

Return on average tangible shareholders’ equity (1)
 
11.64

 
3.37

 
9.22

 
9.39

 
10.33

Average shareholders’ equity to average assets
 
8.73

 
9.12

 
9.30

 
9.44

 
9.42

Efficiency ratio (2)
 
65.37

 
66.54

 
64.99

 
65.32

 
61.36

Net interest margin (1)
 
3.21

 
3.27

 
3.25

 
3.29

 
3.30

Dividend payout ratio (3)
 
39.58

 
128.57

 
46.15

 
46.15

 
38.10

 
 
 
 
 
 
 
 
 
 
 
SELECTED AVERAGE BALANCES
 
 

 
 

 
 

 
 

 
 

Average loans and leases, including loans held for sale
 
$
3,789,338

 
$
3,719,684

 
$
3,625,455

 
$
3,593,347

 
$
3,547,718

Average interest-earning assets
 
5,334,276

 
5,279,360

 
5,216,089

 
5,138,038

 
5,095,455

Average assets
 
5,638,205

 
5,605,728

 
5,545,909

 
5,467,461

 
5,422,529

Average deposits
 
5,000,108

 
4,936,743

 
4,893,778

 
4,800,815

 
4,762,874

Average interest-bearing liabilities
 
3,746,012

 
3,686,222

 
3,613,872

 
3,600,761

 
3,626,229

Average shareholders’ equity
 
492,184

 
511,277

 
515,580

 
515,974

 
510,804

Average tangible shareholders' equity
 
490,453

 
508,886

 
512,554

 
512,254

 
506,366


CENTRAL PACIFIC FINANCIAL CORP. AND SUBSIDIARIES
 
Financial Highlights
 
(Unaudited)
TABLE 1 (CONTINUED)
 
 
Mar 31,
 
Dec 31,
 
Sep 30,
 
Jun 30,
 
Mar 31,
(dollars in thousands)
 
2018
 
2017
 
2017
 
2017
 
2017
REGULATORY CAPITAL
 
 
 
 
 
 
 
 
 
 
Central Pacific Financial Corp.
 
 
 
 
 
 
 
 
 
 
Leverage capital
 
$
579,221

 
$
578,607

 
$
585,950

 
$
584,441

 
$
577,081

Tier 1 risk-based capital
 
579,221

 
578,607

 
585,950

 
584,441

 
577,081

Total risk-based capital
 
629,179

 
628,068

 
634,677

 
632,780

 
624,735

Common equity tier 1 capital
 
489,221

 
490,861

 
497,828

 
497,172

 
491,538

Central Pacific Bank
 
 
 
 
 
 
 
 
 
 
Leverage capital
 
568,409

 
565,412

 
569,990

 
564,765

 
560,921

Tier 1 risk-based capital
 
568,409

 
565,412

 
569,990

 
564,765

 
560,921

Total risk-based capital
 
618,240

 
614,732

 
618,576

 
612,968

 
608,450

Common equity tier 1 capital
 
568,409

 
565,412

 
569,990

 
564,765

 
560,921

 
 
 
 
 
 
 
 
 
 
 
REGULATORY CAPITAL RATIOS
 
 
 
 
 
 
 
 
 
 
Central Pacific Financial Corp.
 
 
 
 
 
 
 
 
 
 
Leverage capital ratio
 
10.3
%
 
10.4
%
 
10.6
%
 
10.7
%
 
10.7
%
Tier 1 risk-based capital ratio
 
14.5

 
14.7

 
15.1

 
15.2

 
15.2

Total risk-based capital ratio
 
15.8

 
15.9

 
16.3

 
16.4

 
16.5

Common equity tier 1 capital ratio
 
12.3

 
12.4

 
12.8

 
12.9

 
13.0

Central Pacific Bank
 
 
 
 
 
 
 
 
 
 
Leverage capital ratio
 
10.1

 
10.1

 
10.3

 
10.4

 
10.4

Tier 1 risk-based capital ratio
 
14.3

 
14.4

 
14.7

 
14.7

 
14.8

Total risk-based capital ratio
 
15.5

 
15.6

 
16.0

 
15.9

 
16.1

Common equity tier 1 capital ratio
 
14.3

 
14.4

 
14.7

 
14.7

 
14.8

 
 
Mar 31,
 
Dec 31,
 
Sep 30,
 
Jun 30,
 
Mar 31,
(dollars in thousands, except for per share amounts)
 
2018
 
2017
 
2017
 
2017
 
2017
BALANCE SHEET
 
 

 
 

 
 
 
 
 
 

Loans and leases
 
$
3,816,146

 
$
3,770,615

 
$
3,636,370

 
$
3,591,735

 
$
3,545,718

Total assets
 
5,651,287

 
5,623,708

 
5,569,230

 
5,533,135

 
5,443,181

Total deposits
 
4,980,431

 
4,956,354

 
4,927,497

 
4,886,382

 
4,777,444

Long-term debt
 
92,785

 
92,785

 
92,785

 
92,785

 
92,785

Total shareholders’ equity
 
484,108

 
500,011

 
509,846

 
512,930

 
511,536

Total shareholders’ equity to total assets
 
8.57
%
 
8.89
%
 
9.15
%
 
9.27
%
 
9.40
%
Tangible common equity to tangible assets (4)
 
8.54
%
 
8.86
%
 
9.11
%
 
9.22
%
 
9.33
%
 
 
 
 
 
 
 
 
 
 
 
ASSET QUALITY
 
 

 
 

 
 

 
 

 
 

Allowance for loan and lease losses
 
$
49,217

 
$
50,001

 
$
51,217

 
$
52,828

 
$
55,369

Non-performing assets
 
3,438

 
3,626

 
5,970

 
9,042

 
8,834

Allowance to loans and leases outstanding
 
1.29
%
 
1.33
%
 
1.41
%
 
1.47
%
 
1.56
%
Allowance to non-performing assets
 
1,431.56
%
 
1,378.96
%
 
857.91
%
 
584.25
%
 
626.77
%
 
 
 
 
 
 
 
 
 
 
 
PER SHARE OF COMMON STOCK OUTSTANDING
 
 

 
 

 
 

 
 

 
 

Book value per common share
 
$
16.30

 
$
16.65

 
$
16.89

 
$
16.81

 
$
16.66

Tangible book value per common share
 
16.25

 
16.59

 
16.80

 
16.70

 
16.53

Closing market price per common share
 
28.46

 
29.83

 
32.18

 
31.47

 
30.54

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(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 our tangible common equity ratio for each of the dates indicated:

 
 
March 31,
 
December 31,
 
September 30,
 
June 30,
 
March 31,
(Dollars in thousands)
 
2018
 
2017
 
2017
 
2017
 
2017
Tangible Common Equity Ratio:
 
 

 
 

 
 
 
 
 
 

Total shareholders’ equity
 
$
484,108

 
$
500,011

 
$
509,846

 
$
512,930

 
$
511,536

Less: Other intangible assets
 
(1,337
)
 
(2,006
)
 
(2,674
)
 
(3,343
)
 
(4,012
)
Tangible common equity
 
$
482,771

 
$
498,005

 
$
507,172

 
$
509,587

 
$
507,524

 
 
 
 
 
 
 
 
 
 
 
Total assets
 
$
5,651,287

 
$
5,623,708

 
$
5,569,230

 
$
5,533,135

 
$
5,443,181

Less: Other intangible assets
 
(1,337
)
 
(2,006
)
 
(2,674
)
 
(3,343
)
 
(4,012
)
Tangible assets
 
$
5,649,950

 
$
5,621,702

 
$
5,566,556

 
$
5,529,792

 
$
5,439,169

 
 
 
 
 
 
 
 
 
 
 
Tangible common equity to tangible assets
 
8.54
%
 
8.86
%
 
9.11
%
 
9.22
%
 
9.33
%





CENTRAL PACIFIC FINANCIAL CORP. AND SUBSIDIARIES
 
Consolidated Balance Sheets
 
(Unaudited)
TABLE 3
 
 
 
 
March 31,
 
December 31,
 
September 30,
 
June 30,
 
March 31,
 
(Dollars in thousands, except share data)
 
2018
 
2017
 
2017
 
2017
 
2017
 
ASSETS
 
 

 
 

 
 
 
 
 
 

 
Cash and due from financial institutions
 
$
59,905

 
$
75,318

 
$
90,080

 
$
85,975

 
$
83,670

 
Interest-bearing deposits in other financial institutions
 
5,875

 
6,975

 
18,195

 
54,576

 
22,363

 
Investment securities:
 
 
 
 
 
 

 
 

 
 
 
Available-for-sale debt securities, at fair value (1)
 
1,326,092

 
1,304,066

 
1,349,311

 
1,315,086

 
1,302,207

 
Held-to-maturity debt securities, at fair value of: $171,399 at March 31, 2018, $189,201 at December 31, 2017, $195,714 at September 30, 2017, $203,334 at June 30, 2017, and $208,181 at March 31, 2017
 
177,078

 
191,753

 
197,672

 
204,588

 
211,426

 
Equity securities, at fair value (1)
 
753

 
825

 
794

 
809

 
682

 
Total investment securities
 
1,503,923

 
1,496,644

 
1,547,777

 
1,520,483

 
1,514,315

 
Loans held for sale
 
7,492

 
16,336

 
10,828

 
13,288

 
9,905

 
Loans and leases
 
3,816,146

 
3,770,615

 
3,636,370

 
3,591,735

 
3,545,718

 
Less allowance for loan and lease losses
 
49,217

 
50,001

 
51,217

 
52,828

 
55,369

 
Loans and leases, net of allowance for loan and lease losses
 
3,766,929

 
3,720,614

 
3,585,153

 
3,538,907

 
3,490,349

 
Premises and equipment, net
 
47,436

 
48,348

 
48,339

 
49,252

 
48,303

 
Accrued interest receivable
 
16,070

 
16,581

 
15,434

 
15,636

 
14,819

 
Investment in unconsolidated subsidiaries
 
6,478

 
7,088

 
7,101

 
6,189

 
6,279

 
Other real estate owned
 
595

 
851

 
851

 
1,008

 
851

 
Mortgage servicing rights
 
15,821

 
15,843

 
16,093

 
15,932

 
15,847

 
Core deposit premium
 
1,337

 
2,006

 
2,674

 
3,343

 
4,012

 
Bank-owned life insurance
 
156,611

 
156,293

 
155,928

 
156,053

 
155,019

 
Federal Home Loan Bank stock
 
9,007

 
7,761

 
6,484

 
6,492

 
7,333

 
Other assets
 
53,808

 
53,050

 
64,293

 
66,001

 
70,116

 
Total assets
 
$
5,651,287

 
$
5,623,708

 
$
5,569,230

 
$
5,533,135

 
$
5,443,181

 
LIABILITIES AND EQUITY
 
 

 
 

 
 

 
 

 
 

 
Deposits:
 
 

 
 

 
 

 
 

 
 

 
Noninterest-bearing demand
 
$
1,349,029

 
$
1,395,556

 
$
1,383,548

 
$
1,383,754

 
$
1,290,632

 
Interest-bearing demand
 
946,464

 
933,054

 
911,273

 
917,956

 
898,306

 
Savings and money market
 
1,533,483

 
1,481,876

 
1,476,017

 
1,453,108

 
1,430,399

 
Time
 
1,151,455

 
1,145,868

 
1,156,659

 
1,131,564

 
1,158,107

 
Total deposits
 
4,980,431

 
4,956,354

 
4,927,497

 
4,886,382

 
4,777,444

 
Federal Home Loan Bank advances and other short-term borrowings
 
56,000

 
32,000

 

 

 
21,000

 
Long-term debt
 
92,785

 
92,785

 
92,785

 
92,785

 
92,785

 
Other liabilities
 
37,963

 
42,534

 
39,078

 
41,013

 
40,391

 
Total liabilities
 
5,167,179

 
5,123,673

 
5,059,360

 
5,020,180

 
4,931,620

 
Equity:
 
 

 
 

 
 

 
 

 
 

 
Preferred stock, no par value, authorized 1,000,000 shares; issued and outstanding none at: March 31, 2018, December 31, 2017, September 30, 2017, June 30, 2017, and March 31, 2017
 

 

 

 

 

 
Common stock, no par value, authorized 185,000,000 shares; issued and outstanding: 29,707,122 at March 31, 2018, 30,024,222 at December 31, 2017, 30,188,748 at September 30, 2017, 30,514,799 at June 30, 2017, and 30,701,219 at March 31, 2017
 
493,794

 
503,988

 
509,243

 
519,383

 
527,403

 
Surplus
 
86,497

 
86,098

 
85,300

 
84,592

 
84,678

 
Accumulated deficit
 
(78,454
)
 
(89,036
)
 
(87,913
)
 
(94,269
)
 
(100,784
)
 
Accumulated other comprehensive income (loss)
 
(17,729
)
 
(1,039
)
 
3,216

 
3,224

 
239

 
Total shareholders' equity
 
484,108

 
500,011

 
509,846

 
512,930

 
511,536

 
Non-controlling interest
 

 
24

 
24

 
25

 
25

 
Total equity
 
484,108

 
500,035

 
509,870

 
512,955

 
511,561

 
Total liabilities and equity
 
$
5,651,287

 
$
5,623,708

 
$
5,569,230

 
$
5,533,135

 
$
5,443,181

 
 
 
 
 
 
 
 
 
 
 
 
 
(1) Financial information for prior quarters has been revised to reflect the impact of the adoption of ASU 2016-01, Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities.
 




CENTRAL PACIFIC FINANCIAL CORP. AND SUBSIDIARIES
 
Consolidated Statements of Income
 
(Unaudited)
TABLE 4
 
 
Three Months Ended
 
 
Mar 31,
 
Dec 31,
 
Sep 30,
 
Jun 30,
 
Mar 31,
(Dollars in thousands, except per share data)
 
2018
 
2017
 
2017
 
2017
 
2017
Interest income:
 
 

 
 

 
 
 
 
 
 

Interest and fees on loans and leases
 
$
37,390

 
$
37,447

 
$
36,289

 
$
35,531

 
$
34,957

Interest and dividends on investment securities:
 
 
 
 
 
 
 
 
 
 
Taxable investment securities
 
8,843

 
8,777

 
8,540

 
8,481

 
8,135

Tax-exempt investment securities
 
933

 
955

 
966

 
974

 
979

Dividend income on investment securities
 
15

 
13

 
12

 
12

 
12

Interest on deposits in other financial institutions
 
84

 
58

 
163

 
61

 
74

Dividend income on Federal Home Loan Bank stock
 
45

 
26

 
23

 
21

 
56

Total interest income
 
47,310

 
47,276

 
45,993

 
45,080

 
44,213

Interest expense:
 
 

 
 

 
 

 
 

 
 

Interest on deposits:
 
 

 
 

 
 

 
 

 
 

Demand
 
180

 
170

 
177

 
154

 
140

Savings and money market
 
369

 
302

 
281

 
259

 
257

Time
 
3,425

 
2,967

 
2,637

 
2,136

 
1,717

Interest on short-term borrowings
 
43

 
97

 
9

 
46

 
31

Interest on long-term debt
 
971

 
916

 
894

 
856

 
813

Total interest expense
 
4,988

 
4,452

 
3,998

 
3,451

 
2,958

Net interest income
 
42,322

 
42,824

 
41,995

 
41,629

 
41,255

Provision (credit) for loan and lease losses
 
(211
)
 
(186
)
 
(126
)
 
(2,282
)
 
(80
)
Net interest income after provision for loan and lease losses
 
42,533

 
43,010

 
42,121

 
43,911

 
41,335

Other operating income:
 
 

 
 

 
 

 
 

 
 

Mortgage banking income (refer to Table 5)
 
1,847

 
1,531

 
1,531

 
1,957

 
1,943

Service charges on deposit accounts
 
2,003

 
2,130

 
2,182

 
2,120

 
2,036

Other service charges and fees
 
3,034

 
2,532

 
3,185

 
3,053

 
2,748

Income from fiduciary activities
 
956

 
935

 
911

 
964

 
864

Equity in earnings of unconsolidated subsidiaries
 
43

 
214

 
176

 
151

 
61

Fees on foreign exchange
 
211

 
135

 
101

 
130

 
163

Net gains (losses) on sales of investment securities
 

 
230

 

 
(1,640
)
 

Income from bank-owned life insurance
 
318

 
614

 
1,074

 
583

 
1,117

Loan placement fees
 
197

 
170

 
86

 
146

 
134

Net gains on sales of foreclosed assets
 

 

 
19

 
84

 
102

Other (refer to Table 5)
 
345

 
552

 
304

 
322

 
846

Total other operating income
 
8,954

 
9,043

 
9,569

 
7,870

 
10,014

Other operating expense:
 
 

 
 

 
 

 
 

 
 

Salaries and employee benefits
 
18,505

 
18,759

 
18,157

 
17,983

 
17,387

Net occupancy
 
3,266

 
3,418

 
3,404

 
3,335

 
3,414

Equipment
 
1,068

 
1,007

 
969

 
967

 
842

Amortization of core deposit premium
 
669

 
668

 
669

 
669

 
668

Communication expense
 
898

 
924

 
944

 
891

 
900

Legal and professional services
 
1,821

 
2,091

 
1,854

 
1,987

 
1,792

Computer software expense
 
2,267

 
2,404

 
2,346

 
2,190

 
2,252

Advertising expense
 
612

 
1,000

 
626

 
390

 
392

Foreclosed asset expense
 
294

 
28

 
24

 
63

 
36

Other (refer to Table 5)
 
4,118

 
4,212

 
4,518

 
3,860

 
3,777

Total other operating expense
 
33,518

 
34,511

 
33,511

 
32,335

 
31,460

Income before income taxes
 
17,969

 
17,542

 
18,179

 
19,446

 
19,889

Income tax expense
 
3,692

 
13,254

 
6,367

 
7,421

 
6,810

Net income
 
$
14,277

 
$
4,288

 
$
11,812

 
$
12,025

 
$
13,079

Per common share data:
 
 

 
 

 
 

 
 

 
 

Basic earnings per share
 
$
0.48

 
$
0.14

 
$
0.39

 
$
0.39

 
$
0.43

Diluted earnings per share
 
0.48

 
0.14

 
0.39

 
0.39

 
0.42

Cash dividends declared
 
0.19

 
0.18

 
0.18

 
0.18

 
0.16

Basic weighted average shares outstanding
 
29,807,572

 
30,027,366

 
30,300,195

 
30,568,247

 
30,714,895

Diluted weighted average shares outstanding
 
30,041,351

 
30,271,910

 
30,514,459

 
30,803,725

 
31,001,238





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
 
 
Mar 31,
 
Dec 31,
 
Sep 30,
 
Jun 30,
 
Mar 31,
(Dollars in thousands)
 
2018
 
2017
 
2017
 
2017
 
2017
Mortgage banking income:
 
 
 
 
 
 
 
 
 
 
Loan servicing fees
 
$
1,311

 
$
1,316

 
$
1,323

 
$
1,340

 
$
1,358

Amortization of mortgage servicing rights
 
(457
)
 
(745
)
 
(476
)
 
(547
)
 
(520
)
Net gains on sales of residential mortgage loans
 
972

 
968

 
705

 
1,084

 
1,312

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

 
(8
)
 
(21
)
 
80

 
(207
)
Total mortgage banking income
 
$
1,847

 
$
1,531

 
$
1,531

 
$
1,957

 
$
1,943


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

 
 
Three Months Ended
 
 
Mar 31,
 
Dec 31,
 
Sep 30,
 
Jun 30,
 
Mar 31,
(Dollars in thousands)
 
2018
 
2017
 
2017
 
2017
 
2017
Other operating income - other:
 
 
 
 
 
 
 
 
 
 
Income recovered on nonaccrual loans previously charged-off
 
$
96

 
$
156

 
$
25

 
$
25

 
$
561

Other recoveries
 
46

 
26

 
32

 
54

 
37

Commissions on sale of checks
 
86

 
83

 
86

 
85

 
87

Other
 
117

 
287

 
161

 
158

 
161

Total other operating income - other
 
$
345

 
$
552

 
$
304

 
$
322

 
$
846


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

 
 
Three Months Ended
 
 
Mar 31,
 
Dec 31,
 
Sep 30,
 
Jun 30,
 
Mar 31,
(Dollars in thousands)
 
2018
 
2017
 
2017
 
2017
 
2017
Other operating expense - other:
 
 
 
 
 
 
 
 
 
 
Charitable contributions
 
$
200

 
$
165

 
$
141

 
$
136

 
$
151

FDIC insurance assessment
 
434

 
438

 
433

 
429

 
424

Miscellaneous loan expenses
 
299

 
288

 
302

 
293

 
261

ATM and debit card expenses
 
648

 
495

 
548

 
468

 
450

Amortization of investments in low-income housing tax credit partnerships
 
114

 
114

 
174

 
223

 
233

Armored car expenses
 
166

 
241

 
176

 
198

 
258

Entertainment and promotions
 
159

 
438

 
818

 
246

 
158

Stationery and supplies
 
201

 
202

 
204

 
230

 
178

Directors’ fees and expenses
 
231

 
209

 
208

 
250

 
207

Provision (credit) for residential mortgage loan repurchase losses
 

 
209

 

 

 

Increase (decrease) to the reserve for unfunded commitments
 
41

 
(101
)
 
72

 
53

 
70

Other
 
1,625

 
1,514

 
1,442

 
1,334

 
1,387

Total other operating expense - other
 
$
4,118

 
$
4,212

 
$
4,518

 
$
3,860

 
$
3,777





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
 
 
 
March 31, 2018
 
December 31, 2017
 
March 31, 2017
 
 
 
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
 
$
22,790

 
1.50
%
 
$
84

 
$
17,944

 
1.27
%
 
$
58

 
$
39,910

 
0.75
%
 
$
74

 
Investment securities, excluding valuation allowance:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Taxable
 
1,350,135

 
2.62

 
8,858

 
1,367,530

 
2.57

 
8,790

 
1,329,915

 
2.45

 
8,147

 
Tax-exempt (1)
 
165,176

 
2.86

 
1,181

 
166,665

 
3.53

 
1,469

 
171,139

 
3.52

 
1,506

 
Total investment securities
 
1,515,311

 
2.65

 
10,039

 
1,534,195

 
2.67

 
10,259

 
1,501,054

 
2.57

 
9,653

 
Loans and leases, including loans held for sale
 
3,789,338

 
3.98

 
37,390

 
3,719,684

 
4.01

 
37,447

 
3,547,718

 
3.98

 
34,957

 
Federal Home Loan Bank stock
 
6,837

 
2.61

 
45

 
7,537

 
1.38

 
26

 
6,773

 
3.31

 
56

 
Total interest-earning assets
 
5,334,276

 
3.59

 
47,558

 
5,279,360

 
3.61

 
47,790

 
5,095,455

 
3.54

 
44,740

 
Noninterest-earning assets
 
303,929

 
 

 
 

 
326,368

 
 

 
 

 
327,074

 
 

 
 

 
Total assets
 
$
5,638,205

 
 

 
 

 
$
5,605,728

 
 

 
 

 
$
5,422,529

 
 

 
 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
LIABILITIES AND EQUITY
 
Interest-bearing liabilities:
 
 
 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
Interest-bearing demand deposits
 
$
935,483

 
0.08
%
 
$
180

 
$
916,957

 
0.07
%
 
$
170

 
$
879,428

 
0.06
%
 
$
140

 
Savings and money market deposits
 
1,499,419

 
0.10

 
369

 
1,492,707

 
0.08

 
302

 
1,419,420

 
0.07

 
257

 
Time deposits under $100,000
 
179,547

 
0.44

 
195

 
183,234

 
0.43

 
198

 
193,638

 
0.38

 
180

 
Time deposits $100,000 and over
 
1,029,972

 
1.27

 
3,230

 
974,163

 
1.13

 
2,769

 
1,026,181

 
0.61

 
1,537

 
Total interest-bearing deposits
 
3,644,421

 
0.44

 
3,974

 
3,567,061

 
0.38

 
3,439

 
3,518,667

 
0.24

 
2,114

 
Federal Home Loan Bank advances and other short-term borrowings
 
8,806

 
1.97

 
43

 
26,376

 
1.45

 
97

 
14,777

 
0.84

 
31
<