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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):

October 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 October 24, 2018, Central Pacific Financial Corp. issued a press release regarding its results of operations and financial condition for the quarter ended September 30, 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:
October 24, 2018
/s/ David S. Morimoto
 
 
David S. Morimoto
 
 
Executive Vice President and Chief Financial Officer


(Back To Top)

Section 2: EX-99.1 (EXHIBIT 99.1)

Exhibit

Exhibit 99.1
395461027_ex99logoa18.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
 
 
 
NEWS RELEASE
 
 
 
 
 

CENTRAL PACIFIC FINANCIAL CORP. REPORTS $15.2 MILLION
THIRD QUARTER EARNINGS


Net income of $15.2 million, or fully diluted EPS of $0.52 for the third quarter, representing an increase of 28.6% and 33.3%, respectively, from the year-ago quarter.

ROA of 1.06% and ROE of 12.54% for the third quarter.

Total loans increased by $96.4 million in the third quarter, or 2.5% sequentially and 9.4% year-over-year.

Total deposits increased by $24.6 million in the third quarter, or 0.5% sequentially and 1.5% year-over-year.


HONOLULU, HI, October 24, 2018 – Central Pacific Financial Corp. (NYSE: CPF), (the "Company"), today reported net income in the third quarter of 2018 of $15.2 million, or diluted earnings per share ("EPS") of $0.52, compared to net income in the third quarter of 2017 of $11.8 million, or EPS of $0.39, and net income in the second quarter of 2018 of $14.2 million, or EPS of $0.48.

"We are pleased to report another quarter of solid financial performance highlighted by strong loan growth and improved efficiency," said Paul Yonamine, Chairman and Chief Executive Officer. "The continued improvement in the efficiency ratio is reflective of the execution of our strategic initiatives and the continued great work of our employees," said Catherine Ngo, President.

In October 2018, the Company's Board of Directors declared a quarterly cash dividend of $0.21 per share on its outstanding common shares. The dividend will be payable on December 17, 2018 to shareholders of record at the close of business on November 30, 2018.

During the third quarter of 2018, the Company repurchased 235,043 shares of common stock, at a total cost of $6.7 million, or an average cost per share of $28.43. During the nine months ended September 30, 2018, the Company has repurchased 849,290 shares of common stock, or approximately 2.8% of its common stock outstanding as of December 31, 2017. Total cost of the shares repurchased during the nine months ended September 30, 2018 was $24.8 million, or an average cost per share of $29.16. The Company's remaining repurchase authority under its common stock repurchase program at September 30, 2018 is $28.7 million. During the nine months ended September 30, 2018, the Company returned $42.8 million in capital to its shareholders through cash dividends and share repurchases.




Central Pacific Financial Corp. Reports $15.2 Million Third Quarter Earnings
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Earnings Highlights
Net interest income for the third quarter of 2018 was $43.3 million, compared to $42.0 million in the year-ago quarter and $42.7 million in the previous quarter. Net interest margin for the third quarter of 2018 was 3.20%, compared to 3.25% in the year-ago quarter and 3.20% in the previous quarter. The increase in net interest income from the year-ago and sequential quarters was primarily due to growth in the loan portfolio, combined with increases in the yield earned on the loan and investment securities portfolios. 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.

To improve net interest income and net interest margin, the Company announced in October 2018 that it submitted a notice to redeem, in whole and at par, $20 million of floating rate trust preferred securities and the underlying floating rate junior subordinated debentures, which are reported as long-term debt on the Company's balance sheet with a current interest rate of 5.18%. The redemption is pursuant to the optional prepayment provisions of the indenture and is scheduled to occur on December 17, 2018.

Other operating income for the third quarter of 2018 totaled $10.8 million, compared to $9.6 million in the year-ago quarter and $9.6 million in the previous quarter. The increase from the year-ago quarter was primarily due to income recovered on nonaccrual loans previously charged-off of $0.4 million (included in other), higher net gains on sales of residential mortgage loans of $0.4 million (included in mortgage banking income), and higher income from fiduciary activities of $0.2 million. The sequential quarter increase was primarily due to death benefit income of $0.4 million (included in income from bank-owned life insurance), higher income recovered on nonaccrual loans previously charged-off of $0.3 million (included in other), and higher service charges on deposit accounts of $0.2 million.

Other operating expense for the third quarter of 2018 totaled $34.1 million, which increased from $33.5 million in the year-ago quarter and increased from $33.7 million in the previous quarter. The increase from the year-ago quarter was primarily due to higher salaries and employee benefits of $0.9 million, primarily attributable to the increase in the Company's starting pay rate effective January 1, 2018. The sequential quarter increase was primarily due to higher computer software expense of $0.4 million.

The efficiency ratio for the third quarter of 2018 was 63.05%, compared to 64.99% in the year-ago quarter and 64.48% in the previous quarter. The improvements in the efficiency ratio from the year-ago and sequential quarters were primarily due to the aforementioned improvements in net interest income and other operating income, partially offset by higher other operating expenses in the current quarter compared to the year-ago and sequential quarters.

In the third quarter of 2018, the Company recorded income tax expense of $4.9 million, compared to $6.4 million in the year-ago quarter and $3.8 million in the previous quarter. The effective tax rate for the third quarter of 2018 was 24.3%, compared to 35.0% in the year-ago quarter and 21.2% in the previous quarter. The decline in income tax expense and effective tax rate in the current quarter compared to the year-ago quarter was primarily due to the enactment of H.R.1, commonly referred to as the Tax Cuts and Jobs Act. Income tax expense in the second quarter of 2018 included a one-time estimated benefit of $0.6 million to income tax expense due to a tax accounting method change strategy.
 
Balance Sheet Highlights
Total assets at September 30, 2018 of $5.73 billion increased by $159.4 million, or 2.9% from September 30, 2017, and increased by $47.1 million, or 0.8% from June 30, 2018.
 
Total loans and leases at September 30, 2018 of $3.98 billion increased by $341.7 million, or 9.4% and $96.4 million, or 2.5% from September 30, 2017 and June 30, 2018, respectively. The increase in total loans and leases from September 30, 2017 was primarily attributable to strong organic growth in the Hawaii loan portfolios (excluding the Hawaii construction loan portfolio) totaling $289.6 million, combined with increases in the U.S. mainland commercial, financial and agricultural and commercial mortgage loan portfolios of $49.8 million and $48.5 million, respectively, partially offset by reductions in the Hawaii construction loan portfolio of $29.0 million and the U.S. mainland consumer loan portfolio of $16.5 million. The increase in total loans and leases from the second quarter of 2018 was primarily due to strong organic growth in the Hawaii loan portfolios totaling $87.3 million, combined with an increase in the U.S. mainland commercial, financial and agricultural loan portfolio of $26.7 million, partially offset by a decrease in the U.S mainland consumer loan portfolio of $16.5 million.
 
Total deposits at September 30, 2018 of $5.00 billion increased by $76.2 million, or 1.5% from September 30, 2017, and increased by $24.6 million, or 0.5% from June 30, 2018.  Core deposits, which include demand deposits, savings and money market deposits, and time deposits less than $100,000, totaled $4.02 billion at September 30, 2018.  This represents an increase of $61.8 million, or




Central Pacific Financial Corp. Reports $15.2 Million Third Quarter Earnings
Page 3


1.6% from September 30, 2017, and an increase of $21.1 million, or 0.5% from June 30, 2018. The Company's loan-to-deposit ratio was 79.5% at September 30, 2018, compared to 73.8% at September 30, 2017 and 78.0% at June 30, 2018.

Asset Quality
Nonperforming assets at September 30, 2018 totaled $3.0 million, or 0.05% of total assets, compared to $6.0 million, or 0.11% of total assets at September 30, 2017, and $3.5 million, or 0.06% of total assets at June 30, 2018.

Loans delinquent for 90 days or more still accruing interest totaled $0.3 million at September 30, 2018, compared to $0.4 million and $0.6 million at September 30, 2017 and June 30, 2018, respectively.
 
Net charge-offs in the third quarter of 2018 totaled $1.3 million, compared to net charge-offs of $1.5 million in the year-ago quarter, and net charge-offs of $1.6 million in the previous quarter.

In the third quarter of 2018, the Company recorded a credit to the provision for loan and lease losses of $0.1 million, compared to a credit of $0.1 million in the year-ago quarter and a debit to the provision of $0.5 million in the previous quarter. The allowance for loan and lease losses, as a percentage of total loans and leases at September 30, 2018 was 1.18%, compared to 1.41% at September 30, 2017 and 1.24% at June 30, 2018.
 
Capital
Total shareholders' equity was $478.2 million at September 30, 2018, compared to $509.8 million and $480.7 million at September 30, 2017 and June 30, 2018, respectively.

The Company maintained its strong capital position and its capital ratios continue to exceed the levels required to be considered a "well-capitalized" institution for regulatory purposes under Basel III. At September 30, 2018, the Company's leverage capital, tier 1 risk-based capital, total risk-based capital, and common equity tier 1 ratios were 10.3%, 14.2%, 15.4%, and 12.0%, respectively, compared to 10.3%, 14.4%, 15.7%, and 12.2%, respectively, at June 30, 2018.

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 November 24, 2018 by dialing 1-877-344-7529 (passcode: 10125425) and on the Company's website.

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 78 ATMs in the state of Hawaii, as of September 30, 2018.  For additional information, please visit the Company's website at http://www.centralpacificbank.com.

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Central Pacific Financial Corp. Reports $15.2 Million Third Quarter Earnings
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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, 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, 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
 
Nine Months Ended
(Dollars in thousands,
 
Sep 30,
 
Jun 30,
 
Mar 31,
 
Dec 31,
 
Sep 30,
 
Sep 30,
except for per share amounts)
 
2018
 
2018
 
2018
 
2017
 
2017
 
2018
 
2017
CONDENSED INCOME STATEMENT
 
 

 
 

 
 
 
 
 
 

 
 

 
 

Net interest income
 
$
43,325

 
$
42,672

 
$
42,322

 
$
42,824

 
$
41,995

 
$
128,319

 
$
124,879

Provision (credit) for loan and lease losses
 
(59
)
 
532

 
(211
)
 
(186
)
 
(126
)
 
262

 
(2,488
)
Net interest income after provision (credit) for loan and lease losses
 
43,384

 
42,140

 
42,533

 
43,010

 
42,121

 
128,057

 
127,367

Total other operating income
 
10,820

 
9,630

 
8,954

 
9,043

 
9,569

 
29,404

 
27,453

Total other operating expense
 
34,139

 
33,724

 
33,518

 
34,511

 
33,511

 
101,381

 
97,306

Income before taxes
 
20,065

 
18,046

 
17,969

 
17,542

 
18,179

 
56,080

 
57,514

Income tax expense
 
4,872

 
3,822

 
3,692

 
13,254

 
6,367

 
12,386

 
20,598

Net income
 
15,193

 
14,224

 
14,277

 
4,288

 
11,812

 
43,694

 
36,916

Basic earnings per common share
 
$
0.52

 
$
0.48

 
$
0.48

 
$
0.14

 
$
0.39

 
$
1.48

 
$
1.21

Diluted earnings per common share
 
0.52

 
0.48

 
0.48

 
0.14

 
0.39

 
1.47

 
1.20

Dividends declared per common share
 
0.21

 
0.21

 
0.19

 
0.18

 
0.18

 
0.61

 
0.52

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
PERFORMANCE RATIOS
 
 

 
 

 
 

 
 

 
 

 
 

 
 

Return on average assets (ROA) [1]
 
1.06
%
 
1.00
%
 
1.01
%
 
0.31
%
 
0.85
%
 
1.03
%
 
0.90
%
Return on average shareholders’ equity (ROE) [1]
 
12.54

 
11.83

 
11.60

 
3.35

 
9.16

 
11.99

 
9.57

Return on average tangible shareholders’ equity (ROTE) [1]
 
12.55

 
11.85

 
11.64

 
3.37

 
9.22

 
12.01

 
9.64

Average shareholders’ equity to average assets
 
8.49

 
8.49

 
8.73

 
9.12

 
9.30

 
8.57

 
9.38

Efficiency ratio [2]
 
63.05

 
64.48

 
65.37

 
66.54

 
64.99

 
64.28

 
63.88

Net interest margin (NIM) [1]
 
3.20

 
3.20

 
3.21

 
3.27

 
3.25

 
3.20

 
3.28

Dividend payout ratio [3]
 
40.38

 
43.75

 
39.58

 
128.57

 
46.15

 
41.50

 
43.33

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
SELECTED AVERAGE BALANCES
 
 

 
 

 
 

 
 

 
 

 
 

 
 

Average loans and leases, including loans held for sale
 
$
3,941,511

 
$
3,836,739

 
$
3,789,338

 
$
3,719,684

 
$
3,625,455

 
$
3,856,420

 
$
3,589,124

Average interest-earning assets
 
5,418,924

 
5,376,115

 
5,334,276

 
5,279,360

 
5,216,089

 
5,376,748

 
5,150,302

Average assets
 
5,709,825

 
5,663,697

 
5,638,205

 
5,605,728

 
5,545,909

 
5,670,838

 
5,479,085

Average deposits
 
5,063,061

 
5,041,164

 
5,000,108

 
4,936,743

 
4,893,778

 
5,035,009

 
4,819,635

Average interest-bearing liabilities
 
3,802,028

 
3,776,053

 
3,746,012

 
3,686,222

 
3,613,872

 
3,774,903

 
3,613,575

Average shareholders’ equity
 
484,737

 
480,985

 
492,184

 
511,277

 
515,580

 
485,942

 
514,137

Average tangible shareholders' equity
 
484,391

 
479,959

 
490,453

 
508,886

 
512,554

 
484,912

 
510,414


CENTRAL PACIFIC FINANCIAL CORP. AND SUBSIDIARIES
 
Financial Highlights
 
(Unaudited)
TABLE 1 (CONTINUED)
 
 
Sep 30,
 
Jun 30,
 
Mar 31,
 
Dec 31,
 
Sep 30,
(dollars in thousands)
 
2018
 
2018
 
2018
 
2017
 
2017
REGULATORY CAPITAL
 
 
 
 
 
 
 
 
 
 
Central Pacific Financial Corp.
 
 
 
 
 
 
 
 
 
 
Leverage capital
 
$
590,627

 
$
586,799

 
$
579,221

 
$
578,607

 
$
585,950

Tier 1 risk-based capital
 
590,627

 
586,799

 
579,221

 
578,607

 
585,950

Total risk-based capital
 
639,157

 
636,755

 
629,179

 
628,068

 
634,677

Common equity tier 1 capital
 
500,627

 
496,799

 
489,221

 
490,861

 
497,828

Central Pacific Bank
 
 
 
 
 
 
 
 
 
 
Leverage capital
 
571,949

 
569,128

 
568,409

 
565,412

 
569,990

Tier 1 risk-based capital
 
571,949

 
569,128

 
568,409

 
565,412

 
569,990

Total risk-based capital
 
620,479

 
619,084

 
618,240

 
614,732

 
618,576

Common equity tier 1 capital
 
571,949

 
569,128

 
568,409

 
565,412

 
569,990

 
 
 
 
 
 
 
 
 
 
 
REGULATORY CAPITAL RATIOS
 
 
 
 
 
 
 
 
 
 
Central Pacific Financial Corp.
 
 
 
 
 
 
 
 
 
 
Leverage capital ratio
 
10.3
%
 
10.3
%
 
10.3
%
 
10.4
%
 
10.6
%
Tier 1 risk-based capital ratio
 
14.2

 
14.4

 
14.5

 
14.7

 
15.1

Total risk-based capital ratio
 
15.4

 
15.7

 
15.8

 
15.9

 
16.3

Common equity tier 1 capital ratio
 
12.0

 
12.2

 
12.3

 
12.4

 
12.8

Central Pacific Bank
 
 
 
 
 
 
 
 
 
 
Leverage capital ratio
 
10.0

 
10.0

 
10.1

 
10.1

 
10.3

Tier 1 risk-based capital ratio
 
13.8

 
14.0

 
14.3

 
14.4

 
14.7

Total risk-based capital ratio
 
15.0

 
15.3

 
15.5

 
15.6

 
16.0

Common equity tier 1 capital ratio
 
13.8

 
14.0

 
14.3

 
14.4

 
14.7

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

 
 

 
 
 
 
 
 

Loans and leases
 
$
3,978,027

 
$
3,881,581

 
$
3,816,146

 
$
3,770,615

 
$
3,636,370

Total assets
 
5,728,640

 
5,681,519

 
5,651,287

 
5,623,708

 
5,569,230

Total deposits
 
5,003,680

 
4,979,099

 
4,980,431

 
4,956,354

 
4,927,497

Long-term debt
 
92,785

 
92,785

 
92,785

 
92,785

 
92,785

Total shareholders’ equity
 
478,151

 
480,668

 
484,108

 
500,011

 
509,846

Total shareholders’ equity to total assets
 
8.35
%
 
8.46
%
 
8.57
%
 
8.89
%
 
9.15
%
Tangible common equity to tangible assets [4]
 
8.35
%
 
8.45
%
 
8.54
%
 
8.86
%
 
9.11
%
 
 
 
 
 
 
 
 
 
 
 
ASSET QUALITY
 
 

 
 

 
 

 
 

 
 

Allowance for loan and lease losses
 
$
46,826

 
$
48,181

 
$
49,217

 
$
50,001

 
$
51,217

Non-performing assets
 
3,026

 
3,509

 
3,438

 
3,626

 
5,970

Allowance to loans and leases outstanding
 
1.18
%
 
1.24
%
 
1.29
%
 
1.33
%
 
1.41
%
Allowance to non-performing assets
 
1,547.46
%
 
1,373.07
%
 
1,431.56
%
 
1,378.96
%
 
857.91
%
 
 
 
 
 
 
 
 
 
 
 
PER SHARE OF COMMON STOCK OUTSTANDING
 
 

 
 

 
 

 
 

 
 

Book value per common share
 
$
16.34

 
$
16.30

 
$
16.30

 
$
16.65

 
$
16.89

Tangible book value per common share
 
16.34

 
16.28

 
16.25

 
16.59

 
16.80

Closing market price per common share
 
26.43

 
28.65

 
28.46

 
29.83

 
32.18

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
[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:

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

 
 

 
 
 
 
 
 

Total shareholders’ equity
 
$
478,151

 
$
480,668

 
$
484,108

 
$
500,011

 
$
509,846

Less: Other intangible assets
 

 
(669
)
 
(1,337
)
 
(2,006
)
 
(2,674
)
Tangible common equity
 
$
478,151

 
$
479,999

 
$
482,771

 
$
498,005

 
$
507,172

 
 
 
 
 
 
 
 
 
 
 
Total assets
 
$
5,728,640

 
$
5,681,519

 
$
5,651,287

 
$
5,623,708

 
$
5,569,230

Less: Other intangible assets
 

 
(669
)
 
(1,337
)
 
(2,006
)
 
(2,674
)
Tangible assets
 
$
5,728,640

 
$
5,680,850

 
$
5,649,950

 
$
5,621,702

 
$
5,566,556

 
 
 
 
 
 
 
 
 
 
 
Tangible common equity to tangible assets
 
8.35
%
 
8.45
%
 
8.54
%
 
8.86
%
 
9.11
%





CENTRAL PACIFIC FINANCIAL CORP. AND SUBSIDIARIES
 
Consolidated Balance Sheets
 
(Unaudited)
TABLE 3
 
 
 
Sep 30,
 
Jun 30,
 
Mar 31,
 
Dec 31,
 
Sep 30,
(Dollars in thousands, except share data)
 
2018
 
2018
 
2018
 
2017
 
2017
ASSETS
 
 

 
 

 
 
 
 
 
 

Cash and due from financial institutions
 
$
82,668

 
$
75,547

 
$
59,905

 
$
75,318

 
$
90,080

Interest-bearing deposits in other financial institutions
 
7,051

 
13,948

 
5,875

 
6,975

 
18,195

Investment securities:
 
 
 
 
 
 

 
 

 
 
Available-for-sale debt securities, at fair value [1]
 
1,233,002

 
1,279,969

 
1,326,092

 
1,304,066

 
1,349,311

Held-to-maturity debt securities, at fair value of: $146,466 at September 30, 2018, $152,330 at June 30, 2018, $171,399 at March 31, 2018, $189,201 at December 31, 2017, and $195,714 at September 30, 2017
 
152,852

 
158,156

 
177,078

 
191,753

 
197,672

Equity securities, at fair value [1]
 
885

 
844

 
753

 
825

 
794

Total investment securities
 
1,386,739

 
1,438,969

 
1,503,923

 
1,496,644

 
1,547,777

Loans held for sale
 
4,460

 
9,096

 
7,492

 
16,336

 
10,828

Loans and leases
 
3,978,027

 
3,881,581

 
3,816,146

 
3,770,615

 
3,636,370

Less allowance for loan and lease losses
 
46,826

 
48,181

 
49,217

 
50,001

 
51,217

Loans and leases, net of allowance for loan and lease losses
 
3,931,201

 
3,833,400

 
3,766,929

 
3,720,614

 
3,585,153

Premises and equipment, net
 
46,184

 
47,004

 
47,436

 
48,348

 
48,339

Accrued interest receivable
 
16,755

 
16,606

 
16,070

 
16,581

 
15,434

Investment in unconsolidated subsidiaries
 
15,283

 
9,362

 
6,478

 
7,088

 
7,101

Other real estate owned
 
414

 
595

 
595

 
851

 
851

Mortgage servicing rights
 
15,634

 
15,756

 
15,821

 
15,843

 
16,093

Core deposit premium
 

 
669

 
1,337

 
2,006

 
2,674

Bank-owned life insurance
 
157,085

 
156,945

 
156,611

 
156,293

 
155,928

Federal Home Loan Bank stock
 
10,965

 
10,246

 
9,007

 
7,761

 
6,484

Other assets
 
54,201

 
53,376

 
53,808

 
53,050

 
64,293

Total assets
 
$
5,728,640

 
$
5,681,519

 
$
5,651,287

 
$
5,623,708

 
$
5,569,230

LIABILITIES AND EQUITY
 
 

 
 

 
 

 
 

 
 

Deposits:
 
 

 
 

 
 

 
 

 
 

Noninterest-bearing demand
 
$
1,403,534

 
$
1,365,010

 
$
1,349,029

 
$
1,395,556

 
$
1,383,548

Interest-bearing demand
 
935,130

 
952,991

 
946,464

 
933,054

 
911,273

Savings and money market
 
1,503,465

 
1,502,284

 
1,533,483

 
1,481,876

 
1,476,017

Time
 
1,161,551

 
1,158,814

 
1,151,455

 
1,145,868

 
1,156,659

Total deposits
 
5,003,680

 
4,979,099

 
4,980,431

 
4,956,354

 
4,927,497

Federal Home Loan Bank advances and other short-term borrowings
 
105,000

 
87,000

 
56,000

 
32,000

 

Long-term debt
 
92,785

 
92,785

 
92,785

 
92,785

 
92,785

Other liabilities
 
49,024

 
41,967

 
37,963

 
42,534

 
39,078

Total liabilities
 
5,250,489

 
5,200,851

 
5,167,179

 
5,123,673

 
5,059,360

Equity:
 
 

 
 

 
 

 
 

 
 

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

 

 

 

 

Common stock, no par value, authorized 185,000,000 shares; issued and outstanding: 29,270,398 at September 30, 2018, 29,489,954 at June 30, 2018, 29,707,122 at March 31, 2018, 30,024,222 at December 31, 2017, and 30,188,748 at September 30, 2017
 
478,721

 
485,402

 
493,794

 
503,988

 
509,243

Additional paid-in capital
 
87,939

 
86,949

 
86,497

 
86,098

 
85,300

Accumulated deficit
 
(61,406
)
 
(70,435
)
 
(78,454
)
 
(89,036
)
 
(87,913
)
Accumulated other comprehensive income (loss)
 
(27,103
)
 
(21,248
)
 
(17,729
)
 
(1,039
)
 
3,216

Total shareholders' equity
 
478,151

 
480,668

 
484,108

 
500,011

 
509,846

Non-controlling interest
 

 

 

 
24

 
24

Total equity
 
478,151

 
480,668

 
484,108

 
500,035

 
509,870

Total liabilities and equity
 
$
5,728,640

 
$
5,681,519

 
$
5,651,287

 
$
5,623,708

 
$
5,569,230

 
 
 
 
 
 
 
 
 
 
 
[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
 
Nine Months Ended
 
 
Sep 30,
 
Jun 30,
 
Mar 31,
 
Dec 31,
 
Sep 30,
 
Sep 30,
(Dollars in thousands, except per share data)
 
2018
 
2018
 
2018
 
2017
 
2017
 
2018
 
2017
Interest income:
 
 

 
 

 
 
 
 
 
 

 
 

 
 

Interest and fees on loans and leases
 
$
40,531

 
$
38,699

 
$
37,390

 
$
37,447

 
$
36,289

 
$
116,620

 
$
106,777

Interest and dividends on investment securities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Taxable investment securities
 
8,490

 
8,717

 
8,843

 
8,777

 
8,540

 
26,050

 
25,156

Tax-exempt investment securities
 
920

 
933

 
933

 
955

 
966

 
2,786

 
2,919

Dividend income on investment securities
 
26

 
3

 
15

 
13

 
12

 
44

 
36

Interest on deposits in other financial institutions
 
109

 
117

 
84

 
58

 
163

 
310

 
298

Dividend income on Federal Home Loan Bank stock
 
60

 
40

 
45

 
26

 
23

 
145

 
100

Total interest income
 
50,136

 
48,509

 
47,310

 
47,276

 
45,993

 
145,955

 
135,286

Interest expense:
 
 

 
 

 
 

 
 

 
 

 
 

 
 

Interest on deposits:
 
 

 
 

 
 

 
 

 
 

 
 

 
 

Demand
 
181

 
193

 
180

 
170

 
177

 
554

 
471

Savings and money market
 
593

 
459

 
369

 
302

 
281

 
1,421

 
797

Time
 
4,744

 
4,034

 
3,425

 
2,967

 
2,637

 
12,203

 
6,490

Interest on short-term borrowings
 
146

 
48

 
43

 
97

 
9

 
237

 
86

Interest on long-term debt
 
1,147

 
1,103

 
971

 
916

 
894

 
3,221

 
2,563

Total interest expense
 
6,811

 
5,837

 
4,988

 
4,452

 
3,998

 
17,636

 
10,407

Net interest income
 
43,325

 
42,672

 
42,322

 
42,824

 
41,995

 
128,319

 
124,879

Provision (credit) for loan and lease losses
 
(59
)
 
532

 
(211
)
 
(186
)
 
(126
)
 
262

 
(2,488
)
Net interest income after provision for loan and lease losses
 
43,384

 
42,140

 
42,533

 
43,010

 
42,121

 
128,057

 
127,367

Other operating income:
 
 

 
 

 
 

 
 

 
 

 
 

 
 

Mortgage banking income (refer to Table 5)
 
1,923

 
1,775

 
1,847

 
1,531

 
1,531

 
5,545

 
5,431

Service charges on deposit accounts
 
2,189

 
1,977

 
2,003

 
2,130

 
2,182

 
6,169

 
6,338

Other service charges and fees
 
3,286

 
3,377

 
3,034

 
2,532

 
3,185

 
9,697

 
8,986

Income from fiduciary activities
 
1,159

 
1,017

 
956

 
935

 
911

 
3,132

 
2,739

Equity in earnings of unconsolidated subsidiaries
 
71

 
37

 
43

 
214

 
176

 
151

 
388

Fees on foreign exchange
 
220

 
277

 
211

 
135

 
101

 
708

 
394

Net gains (losses) on sales of investment securities
 

 

 

 
230

 

 

 
(1,640
)
Income from bank-owned life insurance
 
1,055

 
501

 
318

 
614

 
1,074

 
1,874

 
2,774

Loan placement fees
 
115

 
220

 
197

 
170

 
86

 
532

 
366

Net gains on sales of foreclosed assets
 

 

 

 

 
19

 

 
205

Other (refer to Table 5)
 
802

 
449

 
345

 
552

 
304

 
1,596

 
1,472

Total other operating income
 
10,820

 
9,630

 
8,954

 
9,043

 
9,569

 
29,404

 
27,453

Other operating expense:
 
 

 
 

 
 

 
 

 
 

 
 

 
 

Salaries and employee benefits
 
19,011

 
18,783

 
18,505

 
18,759

 
18,157

 
56,299

 
53,527

Net occupancy
 
3,488

 
3,360

 
3,266

 
3,418

 
3,404

 
10,114

 
10,153

Equipment
 
1,048

 
1,044

 
1,068

 
1,007

 
969

 
3,160

 
2,778

Amortization of core deposit premium
 
669

 
668

 
669

 
668

 
669

 
2,006

 
2,006

Communication expense
 
903

 
746

 
898

 
924

 
944

 
2,547

 
2,735

Legal and professional services
 
1,528

 
1,769

 
1,821

 
2,091

 
1,854

 
5,118

 
5,633

Computer software expense
 
2,672

 
2,305

 
2,267

 
2,404

 
2,346

 
7,244

 
6,788

Advertising expense
 
612

 
617

 
612

 
1,000

 
626

 
1,841

 
1,408

Foreclosed asset expense
 
212

 
31

 
294

 
28

 
24

 
537

 
123

Other (refer to Table 5)
 
3,996

 
4,401

 
4,118

 
4,212

 
4,518

 
12,515

 
12,155

Total other operating expense
 
34,139

 
33,724

 
33,518

 
34,511

 
33,511

 
101,381

 
97,306

Income before income taxes
 
20,065

 
18,046

 
17,969

 
17,542

 
18,179

 
56,080

 
57,514

Income tax expense
 
4,872

 
3,822

 
3,692

 
13,254

 
6,367

 
12,386

 
20,598

Net income
 
$
15,193

 
$
14,224

 
$
14,277

 
$
4,288

 
$
11,812

 
$
43,694

 
$
36,916

Per common share data:
 
 

 
 

 
 

 
 

 
 

 
 

 
 

Basic earnings per share
 
$
0.52

 
$
0.48

 
$
0.48

 
$
0.14

 
$
0.39

 
$
1.48

 
$
1.21

Diluted earnings per share
 
0.52

 
0.48

 
0.48

 
0.14

 
0.39

 
1.47

 
1.20

Cash dividends declared
 
0.21

 
0.21

 
0.19

 
0.18

 
0.18

 
0.61

 
0.52

Basic weighted average shares outstanding
 
29,297,465

 
29,510,175

 
29,807,572

 
30,027,366

 
30,300,195

 
29,536,536

 
30,526,260

Diluted weighted average shares outstanding
 
29,479,812

 
29,714,942

 
30,041,351

 
30,271,910

 
30,514,459

 
29,743,238

 
30,758,989





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
 
Nine Months Ended
 
 
Sep 30,
 
Jun 30,
 
Mar 31,
 
Dec 31,
 
Sep 30,
 
September 30,
(Dollars in thousands)
 
2018
 
2018
 
2018
 
2017
 
2017
 
2018
 
2017
Mortgage banking income:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Loan servicing fees
 
$
1,269

 
$
1,289

 
$
1,311

 
$
1,316

 
$
1,323

 
$
3,869

 
$
4,021

Amortization of mortgage servicing rights
 
(519
)
 
(437
)
 
(457
)
 
(745
)
 
(476
)
 
(1,413
)
 
(1,543
)
Net gains on sales of residential mortgage loans
 
1,082

 
959

 
972

 
968

 
705

 
3,013

 
3,101

Unrealized gains (losses) on loans-held-for-sale and interest rate locks
 
91

 
(36
)
 
21

 
(8
)
 
(21
)
 
76

 
(148
)
Total mortgage banking income
 
$
1,923

 
$
1,775

 
$
1,847

 
$
1,531

 
$
1,531

 
$
5,545

 
$
5,431


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

 
 
Three Months Ended
 
Nine Months Ended
 
 
Sep 30,
 
Jun 30,
 
Mar 31,
 
Dec 31,
 
Sep 30,
 
September 30,
(Dollars in thousands)
 
2018
 
2018
 
2018
 
2017
 
2017
 
2018
 
2017
Other operating income - other:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Income recovered on nonaccrual loans previously charged-off
 
$
395

 
$
130

 
$
96

 
$
156

 
$
25

 
$
621

 
$
611

Other recoveries
 
101

 
49

 
46

 
26

 
32

 
196

 
123

Commissions on sale of checks
 
79

 
84

 
86

 
83

 
86

 
249

 
258

Other
 
227

 
186

 
117

 
287

 
161

 
530

 
480

Total other operating income - other
 
$
802

 
$
449

 
$
345

 
$
552

 
$
304

 
$
1,596

 
$
1,472


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

 
 
Three Months Ended
 
Nine Months Ended
 
 
Sep 30,
 
Jun 30,
 
Mar 31,
 
Dec 31,
 
Sep 30,
 
September 30,
(Dollars in thousands)
 
2018
 
2018
 
2018
 
2017
 
2017
 
2018
 
2017
Other operating expense - other:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Charitable contributions
 
$
166

 
$
131

 
$
200

 
$
165

 
$
141

 
$
497

 
$
428

FDIC insurance assessment
 
437

 
434

 
434

 
438

 
433

 
1,305

 
1,286

Miscellaneous loan expenses
 
403

 
324

 
299

 
288

 
302

 
1,026

 
856

ATM and debit card expenses
 
686

 
698

 
648

 
495

 
548

 
2,032

 
1,466

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

 
113

 
114

 
114

 
174

 
341

 
630

Armored car expenses
 
185

 
233

 
166

 
241

 
176

 
584

 
632

Entertainment and promotions
 
185

 
273

 
159

 
438

 
818

 
617

 
1,222

Stationery and supplies
 
206

 
236

 
201

 
202

 
204

 
643

 
612

Directors’ fees and expenses
 
263

 
283

 
231

 
209