Central Pacific Financial Corp. Reports $10.2 Million Third Quarter Earnings

PR Newswire

HONOLULU, Oct. 30, 2013 /PRNewswire/ -- Central Pacific Financial Corp. (CPF), parent company of Central Pacific Bank (the "Bank"), today reported net income for the third quarter of 2013 of $10.2 million, or $0.24 per diluted share, compared to net income in the third quarter of 2012 of $10.7 million, or $0.26 per diluted share, and net income in the second quarter of 2013 of $14.3 million, or $0.34 per diluted share.

"We continue to realize solid earnings as we execute our strategic initiatives," said John C. Dean, President and Chief Executive Officer. "We are pleased with the strong loan and deposit growth for the quarter, and continue to work on improving our operational efficiencies."

The Company's Board of Directors declared a quarterly cash dividend of $0.08 per share on the Company's outstanding common shares. The dividend will be payable on December 16, 2013 to shareholders of record at the close of business on November 29, 2013. This represents our second consecutive quarterly cash dividend.

Significant Highlights and Third Quarter Results

  • Reported eleventh consecutive profitable quarter since the Company's recapitalization with net income of $10.2 million, compared to net income in the second quarter of 2013 of $14.3 million.
  • Declared quarterly cash dividend of $0.08 per share on the Company's outstanding common shares payable on December 16, 2013.
  • Increased the loans and leases portfolio by $111.2 million to $2.48 billion at September 30, 2013, compared to $2.37 billion at June 30, 2013.
  • Increased total deposits by $50.6 million to $3.91 billion at September 30, 2013, compared to $3.86 billion at June 30, 2013.
  • For the tenth consecutive quarter, the Company did not incur credit costs. A credit to the provision for loan and lease losses of $3.2 million was recorded, compared to a credit of $0.2 million for the second quarter of 2013.
  • Reduced nonperforming assets by $1.9 million to $59.0 million at September 30, 2013 from $60.9 million at June 30, 2013.
  • The ALLL, as a percentage of total loans and leases, decreased to 3.43% at September 30, 2013, compared to 3.67% at June 30, 2013.  The Company's ALLL, as a percentage of nonperforming assets, increased to 144.33% at September 30, 2013 from 143.05% at June 30, 2013 and the Company's ALLL, as a percentage of nonaccrual loans, decreased to 159.94% at September 30, 2013 from 162.95% at June 30, 2013.
  • Maintained a strong capital position with Tier 1 risk-based capital, total risk-based capital, and leverage capital ratios of 21.30%, 22.58%, and 13.96%, respectively, as of September 30, 2013, compared to 21.55%, 22.83%, and 14.24%, respectively, as of June 30, 2013.  The Company's capital ratios continue to be well in excess of the minimum levels required for a "well-capitalized" regulatory designation.

Earnings Highlights
Net interest income for the third quarter of 2013 was $33.8 million, compared to $29.6 million in the year-ago quarter and $33.2 million in the second quarter of 2013.  Net interest margin was 3.19%, compared to 3.02% in the year-ago quarter and 3.23% in the second quarter of 2013. The sequential quarter increase in net interest income was primarily due to an overall increase in the Company's interest earning assets, including net increases of $115.4 million and $69.0 million in its average loan and investment securities portfolios, respectively, partially offset by lower recoveries of interest on loans previously placed on nonaccrual status of $1.1 million. The sequential quarter decrease in net interest margin was primarily attributable to lower yields earned on the loan portfolio due to lower recoveries of interest on loans previously placed on nonaccrual status.

The provision for loan and lease losses for the third quarter of 2013 was a credit of $3.2 million, compared to a credit of $5.0 million in the year-ago quarter and a credit of $0.2 million in the second quarter of 2013.  The credit to the provision for loan and lease losses was the result of continued improvement in the Company's credit risk profile, as evidenced by the previously mentioned decrease in nonperforming assets and further reductions in the historical quarterly charge-off data used to calculate the ALLL.

Other operating income for the third quarter of 2013 totaled $11.9 million, compared to $17.0 million in the year-ago quarter and $17.8 million in the second quarter of 2013. The decrease from the year-ago quarter was primarily due to lower net gains on sales of residential mortgage loans of $3.2 million, lower rental income from foreclosed properties of $1.1 million, lower gains on sales of foreclosed assets of $0.8 million, and lower investment securities gains of $0.8 million, partially offset by higher unrealized gains on loans held for sale and interest rate locks of $0.5 million. The sequential quarter decrease was primarily due to lower net gains on sales of foreclosed assets of $7.4 million and lower net gains on sales of residential loans of $1.4 million, partially offset by higher unrealized gains on loans held for sale and interest rate locks of $1.9 million.

Other operating expense for the third quarter of 2013 totaled $36.5 million, compared to $40.9 million in the year-ago quarter and $35.0 million in the second quarter of 2013.  The decrease from the year-ago quarter was primarily due to net credit-related charges of $7.0 million (which include changes in the reserve for unfunded commitments, write-downs of loans held for sale and foreclosed asset expense), lower amortization of other intangible assets of $1.1 million, and lower legal and professional fees of $0.6 million, partially offset by higher salaries and employee benefits of $1.9 million, a premium paid on the repurchase of preferred stock of two subsidiaries of $1.9 million, and a lower credit for repurchased residential mortgage loans of $0.9 million. The sequential quarter increase was primarily attributable to the aforementioned premium paid on the repurchase of preferred stock of two subsidiaries of $1.9 million, higher salaries and employee benefits of $0.9 million, and higher net credit-related charges of $0.5 million, partially offset by a lower provision for repurchased residential mortgage loans of $1.3 million and lower amortization of other intangible assets of $0.5 million. The increase in salaries and employee benefits in the current quarter was due to severance, early retirement and retention benefits totaling $1.3 million, which were related to an efficiency initiative that included a voluntary early retirement program and a reduction of select positions. There will be additional expenses related to this initiative in the fourth quarter of 2013 and in 2014, as some employees must render service through dates extending into 2014 as a condition to receiving their benefits.

The efficiency ratio for the third quarter of 2013 was 78.02% (excluding amortization expense related to certain intangible assets totaling $0.7 million, net gains on sales of foreclosed assets of $0.3 million, and foreclosed asset income of $12,000), compared to 78.51% in the year-ago quarter (excluding foreclosed asset expense of $4.0 million, net gains on sales of foreclosed assets of $1.1 million, write downs of loans held for sale of $0.8 million, gains on sales of investment securities of $0.8 million, and amortization expense related to certain intangible assets totaling $0.7 million) and 76.68% in the second quarter of 2013 (excluding net gains on sales of foreclosed assets of $7.7 million, foreclosed asset expense of $0.7 million, and amortization expense related to certain intangible assets totaling $0.7 million).

In the third quarter of 2013, the Company recorded income tax expense of $2.2 million, compared to income tax expense of $1.9 million in the second quarter of 2013. As of September 30, 2013, the Company's net deferred tax assets totaled $139.3 million.

Balance Sheet Highlights
Total assets at September 30, 2013 of $4.74 billion increased by $434.9 million and $37.7 million from September 30, 2012 and June 30, 2013, respectively.

Total loans and leases at September 30, 2013 of $2.48 billion increased by $374.2 million and $111.2 million from September 30, 2012 and June 30, 2013, respectively.  The increase in total loans and leases from the second quarter of 2013 was due to an increase in the residential mortgage, commercial, and consumer loan portfolios of $62.1 million, $51.8 million, and $27.6 million, respectively, offset by a decrease in the commercial mortgage loan, construction and development loan and leases portfolios of $23.1 million, $6.3 million, and $0.9 million, respectively.

Total deposits at September 30, 2013 were $3.91 billion, and increased by $284.7 million and $50.6 million from September 30, 2012 and June 30, 2013, respectively.  Core deposits, which include demand deposits, savings and money market deposits, and time deposits less than $100,000, totaled $3.10 billion at September 30, 2013.  This represents an increase of $160.9 million from a year ago and an increase of $59.7 million from June 30, 2013.  Changes in total deposits during the quarter included an increase in savings and money market deposits, interest-bearing demand deposits, and non-interest bearing demand deposits of $31.8 million, $18.7 million, and $17.6 million, respectively, offset by a decrease in time deposits of $17.5 million.

Total shareholders' equity was $653.5 million at September 30, 2013, compared to $501.0 million and $642.0 million at September 30, 2012 and June 30, 2013, respectively.

Asset Quality
Nonperforming assets at September 30, 2013 totaled $59.0 million, or 1.24% of total assets, compared to $60.9 million, or 1.29% of total assets at June 30, 2013.  The sequential-quarter change reflects net decreases in Hawaii residential mortgage assets of $2.1 million, Hawaii construction and development assets of $1.0 million, Hawaii commercial assets of $0.3 million, and Mainland commercial mortgage assets of $0.1 million, partially offset by a net increase in Hawaii commercial mortgage assets of $1.6 million.

Loans delinquent for 90 days or more still accruing interest totaled $37,000 at September 30, 2013, compared to $17,000 at June 30, 2013.  In addition, loans delinquent for 30 days or more still accruing interest totaled $3.7 million at September 30, 2013, compared to $1.5 million at June 30, 2013.

Net recoveries in the third quarter of 2013 totaled $1.3 million, compared to net charge-offs of $1.9 million in the third quarter of 2012, and net recoveries of $0.5 million in the  second quarter of 2013.

The ALLL, as a percentage of total loans and leases, was 3.43% at September 30, 2013, compared to 3.67% at June 30, 2013.  The ALLL, as a percentage of nonperforming assets, was 144.33% at September 30, 2013, compared to 143.05% at June 30, 2013.  The ALLL, as a percentage of nonaccrual loans, was 159.94% at September 30, 2013, compared to 162.95% at June 30, 2013.

Capital Levels
At September 30, 2013, the Company's Tier 1 risk-based capital, total risk-based capital, and leverage capital ratios were 21.30%, 22.58%, and 13.96%, respectively, compared to 21.55%, 22.83%, and 14.24%, respectively, at June 30, 2013.  The Company's capital ratios continue to exceed the levels required to be considered a "well-capitalized" institution for regulatory purposes.

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://investor.centralpacificbank.com.  Alternatively, investors may participate in the live call by dialing 1-888-317-6016.  A playback of the call will be available through December 2, 2013 by dialing 1-877-344-7529 (passcode:10035664) and on the Company's website.

About Central Pacific Financial Corp.
Central Pacific Financial Corp. is a Hawaii-based bank holding company with approximately $4.7 billion in assets.  Central Pacific Bank, its primary subsidiary, operates 35 branches and 112 ATMs in the state of Hawaii, as of September 30, 2013.  For additional information, please visit the Company's website at http://www.centralpacificbank.com.

Forward-Looking Statements
This document may contain forward-looking statements concerning projections of revenues, income/loss, earnings/loss per share, capital expenditures, dividends, capital structure, or other financial items, plans and objectives of management for future operations, future economic performance, 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 we are or may become subject to; our ability to continue making progress on our recovery plan; 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 further 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 banking 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 the resolution of legal proceedings or regulatory or other governmental inquiries and the results of regulatory examinations or reviews;  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; changes in the competitive environment among financial holding companies and other financial service providers; 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; our ability to attract and retain skilled executives and employees; changes in our organization, compensation and benefit plans; and our success at managing the risks involved in 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 - September 30, 2013


(Unaudited)


















Three Months Ended




Nine Months Ended






September 30,




September 30,




(in thousands, except per share data)

2013


2012




2013


2012


















INCOME STATEMENT













Net income 

$      10,204


$      10,721




$    161,780


$      35,011




Per common share data:














Basic earnings per share

0.24


0.26




3.86


0.84





Diluted earnings per share 

0.24


0.26




3.83


0.83





Cash dividends declared

0.08


-




0.08


-


















PERFORMANCE RATIOS













Return on average assets (1)

0.87

%

1.00

%



4.73

%

1.12

%



Return on average shareholders' equity (1)

6.34


8.73




35.51


9.81




Net income to average tangible shareholders' equity (1) 

6.48


9.04




36.37


10.19




Efficiency ratio (2)

78.02


78.51




75.85


77.98




Net interest margin (1)

3.19


3.02




3.16


3.14


























September 30,




REGULATORY CAPITAL RATIOS







2013


2012




Central Pacific Financial Corp.














Tier 1 risk-based capital 







21.30

%

23.34

%




Total risk-based capital







22.58


24.63





Leverage capital







13.96


14.06


















Central Pacific Bank 














Tier 1 risk-based capital 







20.12

%

22.20

%




Total risk-based capital







21.39


23.49





Leverage capital







13.13


13.39
























September 30,


%










2013


2012


Change


BALANCE SHEET













Total assets







$  4,744,483


$  4,309,618


10.1

%

Loans and leases







2,484,318


2,110,163


17.7


Net loans and leases







2,399,090


2,013,235


19.2


Deposits







3,906,264


3,621,590


7.9


Total shareholders' equity







653,476


501,042


30.4


Book value per common share







15.53


11.97


29.7


Tangible book value per common share







15.21


11.59


31.2


Market value per common share







17.70


14.30


23.8


Tangible common equity ratio (3)







13.53

%

11.30

%

19.8
















CENTRAL PACIFIC FINANCIAL CORP.  AND SUBSIDIARIES


Financial Highlights - September 30, 2013


(Unaudited)


















Three Months Ended




Nine Months Ended






September 30,




September 30,




(in thousands, except per share data)

2013


2012


%

Change


2013


2012


%

Change
















SELECTED AVERAGE BALANCES













Total assets

$  4,671,536


$  4,270,497


9.4

%

$  4,564,965


$  4,178,984


9.2

%

Interest-earning assets

4,286,152


3,949,697


8.5


4,190,119


3,870,034


8.3


Loans and leases, including loans held for sale

2,439,459


2,132,775


14.4


2,341,500


2,116,636


10.6


Other real estate

6,980


49,474


(85.9)


8,643


53,031


(83.7)


Deposits

3,856,574


3,592,165


7.4


3,763,087


3,510,884


7.2


Interest-bearing liabilities

3,112,081


2,911,709


6.9


3,030,927


2,864,758


5.8


Total shareholders' equity

643,874


491,011


31.1


607,525


475,924


27.7














































September 30,


%










2013


2012


Change


NONPERFORMING ASSETS













Nonaccrual loans (including loans held for sale)







$      53,288


$      92,931


(42.7)

%

Other real estate







5,761


47,378


(87.8)



Total nonperforming assets







59,049


140,309


(57.9)


Loans delinquent for 90 days or more (still accruing interest)






37


539


(93.1)


Restructured loans (still accruing interest)







27,805


24,869


11.8



Total nonperforming assets, loans delinquent for 90 days or more (still accruing interest)










 and restructured loans (still accruing interest)







$      86,891


$    165,717


(47.6)














































Three Months Ended




Nine Months Ended






September 30,


%


September 30,


%




2013


2012


Change


2013


2012


Change


Loan charge-offs

$           892


$        3,444


(74.1)

%

$        8,113


$      13,331


(39.1)

%

Recoveries

2,204


1,540


43.1


6,905


4,768


44.8



Net loan charge-offs (recoveries)

$       (1,312)


$        1,904


(168.9)


$        1,208


$        8,563


(85.9)


Net loan charge-offs (recoveries) to average loans (1)

(0.22)

%

0.36

%



0.07

%

0.54

%































CENTRAL PACIFIC FINANCIAL CORP.  AND SUBSIDIARIES


Financial Highlights - September 30, 2013


(Unaudited)






















September 30,












2013


2012




ASSET QUALITY RATIOS













Nonaccrual loans (including loans held for sale) to total loans and leases and loans held for sale



2.13

%

4.35

%



Nonperforming assets to total assets







1.24


3.26




Nonperforming assets, loans delinquent for 90 days or more (still accruing interest) and restructured loans








(still accruing interest) to total loans and leases, loans held for sale & other real estate




3.47


7.60




Allowance for loan and lease losses to total loans and leases






3.43


4.59




Allowance for loan and lease losses to nonaccrual loans (including loans held for sale)




159.94


104.30




Allowance for loan and lease losses to nonperforming assets






144.33


69.08














































(1)

Annualized



























(2)

The efficiency ratio is a non-GAAP financial measure which should be read and used in conjunction with the Company's GAAP financial information. Comparison of our efficiency ratio with those of other companies may not be possible because other companies may calculate the efficiency ratio differently. Our efficiency ratio is derived by dividing other operating expense (excluding amortization, impairment and write-down of intangible assets, goodwill, loans held for sale and foreclosed assets, loss on early extinguishment of debt, loss on investment transaction and loss on sale of commercial real estate loans) by net operating revenue (net interest income on a taxable equivalent basis plus other operating income before securities transactions and gains on sale of foreclosed assets).  See Reconciliation of Non-GAAP Financial Measures.





(3)

The tangible common equity ratio is a non-GAAP financial measure which should be read and used in conjunction with the Company's  GAAP financial information. Comparison of our tangible common equity ratio with those of other companies may not be possible because other companies may calculate the tangible common equity ratio differently. Our tangible common equity ratio is derived by dividing common shareholders' equity, less intangible assets (excluding mortgage servicing rights (MSRs)) by total assets, less intangible assets (excluding MSRs).


 

CENTRAL PACIFIC FINANCIAL CORP. AND SUBSIDIARIES

Reconciliation of Non-GAAP Financial Measures

(Unaudited)
















Quarter Ended


Quarter Ended


Quarter Ended


(Dollars in thousands, except per share data)

September 30, 2013


June 30, 2013


September 30, 2012









Efficiency Ratio







Total other operating expenses

$           36,512


$           35,000


$           40,859


Less:







   Amortization of other intangible assets

669


668


668


   Foreclosed asset expense

(12)


705


3,972


   Write down of assets

-


-


827


Adjusted other operating expenses

$           35,855


$           33,627


$           35,392









Net interest income (tax equivalent)

$           34,305


$           33,733


$           29,939


Total other operating income

11,930


17,812


17,038


Less:







   Net gains on sales of foreclosed assets

276


7,694


1,109


   Net gains on sales of investment securities

-


-


789


Adjusted other operating income

$           45,959


$           43,851


$           45,079









Efficiency ratio

78.02

%

76.68

%

78.51

%








Tangible Common Equity Ratio

September 30, 2013


September 30, 2012




Total shareholders' equity

$         653,476


$         501,042




Less: Other intangible assets

(13,372)


(16,047)




Tangible common equity

640,104


484,995











Total assets

4,744,483


4,309,618




Less: Other intangible assets

(13,372)


(16,047)




Tangible assets

4,731,111


4,293,571




Tangible common equity / Tangible assets

13.53

%

11.30

%



 

CENTRAL PACIFIC FINANCIAL CORP. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Unaudited)




















 September 30, 


 June 30, 


 September 30, 

(In thousands, except share data)







2013


2013


2012













ASSETS












Cash and due from banks






$

59,400

$

57,477

$

61,078

Interest-bearing deposits in other banks







37,499


79,697


159,595

Investment securities:












  Available for sale







1,501,948


1,510,861


1,499,546

  Held to maturity (fair value of $245,519 at September 30, 2013,








       $245,450 at June 30, 2013 and $165,012 at September 30, 2012)


255,663


254,981


163,733

      Total investment securities







1,757,611


1,765,842


1,663,279













Loans held for sale







12,437


14,674


24,080

Loans and leases







2,484,318


2,373,077


2,110,163

  Less allowance for loan and lease losses







85,228


87,105


96,928

      Net loans and leases







2,399,090


2,285,972


2,013,235













Premises and equipment, net







48,151


48,807


49,424

Accrued interest receivable







13,765


14,138


13,198

Investment in unconsolidated subsidiaries







18,558


18,844


11,244

Other real estate







5,761


7,437


47,378

Mortgage servicing rights







20,249


20,690


22,726

Other intangible assets







13,372


14,041


16,047

Bank-owned life insurance







148,903


148,292


146,680

Federal Home Loan Bank stock







46,626


47,059


48,363

Other assets







163,061


183,786


33,291

      Total assets






$

4,744,483

$

4,706,756

$

4,309,618













LIABILITIES AND EQUITY












Deposits:












  Noninterest-bearing demand






$

878,262

$

860,694

$

803,796

  Interest-bearing demand







739,421


720,741


648,331

  Savings and money market







1,212,488


1,180,657


1,177,164

  Time







1,076,093


1,093,574


992,299

      Total deposits







3,906,264


3,855,666


3,621,590













Short-term borrowings







28,000


-


-

Long-term debt







108,268


108,272


108,285

Other liabilities







48,415


90,837


68,738

      Total liabilities







4,090,947


4,054,775


3,798,613













Equity:












  Preferred stock, no par value, authorized 1,100,000 shares;











        issued and outstanding none at September 30, 2013, June 30, 2013,







        and September 30, 2012







-


-


-

  Common stock, no par value, authorized 185,000,000 shares;










        issued and outstanding 42,091,180 shares at September 30, 2013, 42,088,976





        shares at June 30, 2013 and 41,859,566 shares at September 30, 2012


784,473


784,473


784,512

  Surplus







73,735


72,173


69,094

  Accumulated deficit







(191,014)


(197,851)


(361,837)

  Accumulated other comprehensive income (loss)






(13,718)


(16,760)


9,273

      Total shareholders' equity







653,476


642,035


501,042

Non-controlling interest







60


9,946


9,963

      Total equity







653,536


651,981


511,005













      Total liabilities and equity






$

4,744,483

$

4,706,756

$

4,309,618

 

CENTRAL PACIFIC FINANCIAL CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)
















Three Months Ended


Nine months ended




September 30,


June 30,


September 30,


September 30,

(In thousands, except per share data)


2013


2013


2012


2013


2012













Interest income:











  Interest and fees on loans and leases

$

26,414

$

26,505

$

24,241

$

77,362

$

73,642

  Interest and dividends on investment











     securities:











        Taxable interest


8,114


7,373


6,641


22,518


21,844

        Tax-exempt interest


992


1,040


704


3,059


1,347

        Dividends


5


6


4


16


11

  Interest on deposits in other banks


21


68


84


178


212

  Dividends on Federal Home Loan Bank stock


12


-


-


12


-













      Total interest income


35,558


34,992


31,674


103,145


97,056













Interest expense:











  Interest on deposits:











    Demand



91


87


83


259


258

    Savings and money market


227


219


232


663


783

    Time



671


720


869


2,150


2,904

  Interest on short-term borrowings


3


-


-


3


-

  Interest on long-term debt


795


793


930


2,457


2,790













      Total interest expense


1,787


1,819


2,114


5,532


6,735













      Net interest income


33,771


33,173


29,560


97,613


90,321

Provision (credit) for loan and lease losses


(3,189)


(227)


(4,982)


(9,977)


(16,602)













      Net interest income after provision











           for loan and lease losses


36,960


33,400


34,542


107,590


106,923













Other operating income:











  Service charges on deposit accounts


1,776


1,583


2,130


4,950


6,719

  Other service charges and fees


4,931


4,643


4,538


13,904


13,115

  Income from fiduciary activities


724


686


662


2,107


1,930

  Equity in earnings of unconsolidated subsidiaries


513


192


171


733


386

  Fees on foreign exchange


149


128


165


348


447

  Investment securities gains


-


-


789


-


789

  Income from bank-owned life insurance


611


317


741


1,492


2,274

  Loan placement fees


81


178


114


408


547

  Net gains on sales of residential loans


1,476


2,888


4,713


8,492


11,084

  Net gains on sales of foreclosed assets


276


7,694


1,109


8,528


1,109

  Other



1,393


(497)


1,906


1,810


5,484













      Total other operating income


11,930


17,812


17,038


42,772


43,884













Other operating expense:











  Salaries and employee benefits


19,167


18,242


17,256


55,944


51,511

  Net occupancy 


3,802


3,622


3,629


10,651


10,159

  Equipment



952


878


1,030


2,788


3,008

  Amortization of other intangible assets


1,637


2,109


2,698


5,994


7,490

  Communication expense


907


870


872


2,727


2,542

  Legal and professional services


2,155


1,945


2,772


6,410


10,635

  Computer software expense


1,056


1,193


959


3,182


2,852

  Advertising expense


601


728


906


2,141


2,632

  Foreclosed asset expense


(12)


705


3,972


993


6,467

  Write down of assets


-


-


827


-


2,586

  Other



6,247


4,708


5,938


13,435


15,914













      Total other operating expense


36,512


35,000


40,859


104,265


115,796













  Income before income taxes


12,378


16,212


10,721


46,097


35,011

Income tax expense (benefit)


2,174


1,945


-


(115,683)


-

      Net income

$

10,204

$

14,267

$

10,721

$

161,780

$

35,011













Per common share data:











  Basic earnings per share

$

0.24

$

0.34

$

0.26

$

3.86

$

0.84

  Diluted earnings per share 


0.24


0.34


0.26


3.83


0.83

  Cash dividends declared


0.08


-


-


0.08


-













Basic weighted average shares outstanding


42,028


41,957


41,764


41,934


41,704

Diluted weighted average shares outstanding


42,421


42,320


42,016


42,263


41,961

 

CENTRAL PACIFIC FINANCIAL CORP. AND SUBSIDIARIES

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







































































Three Months Ended


Three Months Ended


Nine Months Ended


Nine Months Ended

(Dollars in thousands)


September 30, 2013


September 30, 2012


September 30, 2013


September 30, 2012





Average

Average




Average

Average




Average

Average




Average

Average







Balance

Yield/Rate


Interest


Balance

Yield/Rate


Interest


Balance

Yield/Rate


Interest


Balance

Yield/Rate


Interest
























Assets:





















Interest earning assets:






















Interest-bearing deposits in other banks

$      33,973

0.25

%

$        21


$    133,963

0.25

%

$        84


$        95,381

0.25

%

$           178


$    113,968

0.25

%

$      212


Taxable investment securities, excluding





















   valuation allowance


1,588,412

2.04


8,119


1,527,572

1.74


6,645


1,528,169

1.97


22,534


1,531,785

1.90


21,855


Tax-exempt investment securities,






















   excluding valuation allowance


177,319

3.44


1,526


106,623

4.06


1,083


177,636

3.53


4,706


58,859

4.69


2,072


Loans and leases, including loans held for sale

2,439,459

4.31


26,414


2,132,775

4.53


24,241


2,341,500

4.41


77,362


2,116,636

4.64


73,642


Federal Home Loan Bank stock


46,989

0.10


12


48,764

-


-


47,433

0.03


12


48,786

-


-



Total interest earning assets


4,286,152

3.36


36,092


3,949,697

3.24


32,053


4,190,119

3.34


104,792


3,870,034

3.37


97,781

Nonearning assets


385,384





320,800





374,846





308,950





Total assets


$ 4,671,536





$ 4,270,497





$   4,564,965





$ 4,178,984



























Liabilities & Equity:





















Interest-bearing liabilities:






















Interest-bearing demand deposits


$    730,534

0.05

%

$        91


$    630,209

0.05

%

$        83


$      702,662

0.05

%

$           259


$    604,990

0.06

%

$      258


Savings and money market deposits


1,197,911

0.08


227


1,172,065

0.08


232


1,183,101

0.07


663


1,159,000

0.09


783


Time deposits under $100,000


278,583

0.43


302


320,516

0.55


446


289,420

0.47


1,015


332,221

0.62


1,531


Time deposits $100,000 and over


793,136

0.18


369


680,632

0.25


423


746,241

0.20


1,135


658,245

0.28


1,373


Short-term borrowings


3,648

0.32


3


-

-


-


1,230

0.32


3


4

0.76


-


Long-term debt


108,269

2.92


795


108,287

3.42


930


108,273

3.04


2,457


110,298

3.38


2,790



Total interest-bearing liabilities


3,112,081

0.23


1,787


2,911,709

0.29


2,114


3,030,927

0.24


5,532


2,864,758

0.31


6,735

Noninterest-bearing deposits


856,410





788,743





841,663





756,428




Other liabilities


57,083





69,068





77,548





71,902





Total liabilities


4,025,574





3,769,520





3,950,138





3,693,088




Shareholders' equity


643,874





491,011





607,525





475,924




Non-controlling interest


2,088





9,966





7,302





9,972





Total equity


645,962





500,977





614,827





485,896





Total liabilities & equity


$ 4,671,536





$ 4,270,497





$   4,564,965





$ 4,178,984



























Net interest income





$ 34,305





$ 29,939





$      99,260





$ 91,046















































Net interest margin



3.19

%



3.02

%



3.16

%



3.14

%

 

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