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Central Pacific Financial Corp. Reports Second Quarter 2019 Results; Launches RISE2020 Initiative

- Net income of $13.5 million, or fully diluted EPS of $0.47 for the second quarter.

- ROA of 0.92% and ROE of 10.73% for the second quarter.

- Total loans increased by $145.5 million, or 3.5% sequentially, and $365.5 million, or 9.4% year-over-year.

- Core deposits increased by $38.5 million, or 0.9% sequentially, and $102.8 million, or 2.6% year-over-year.

- Asset quality remains strong as nonperforming assets declined to $1.3 million, or 0.02% of total assets.

- Launched RISE2020, a multifaceted initiative to enhance customer experience, drive stronger long-term growth and profitability and improve shareholder returns. Targeting a 15% return on average shareholders' equity and a 57% efficiency ratio by the end of 2022.

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

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

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

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

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

On July 23, 2019, the Company's Board of Directors declared a quarterly cash dividend of $0.23 per share on its outstanding common shares. The dividend will be payable on September 16, 2019 to shareholders of record at the close of business on August 30, 2019.

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

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

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

Other operating expense for the second quarter of 2019 totaled $36.1 million, which increased from $33.6 million in the year-ago quarter and increased from $34.3 million in the previous quarter. The increase from the year-ago quarter was primarily due to higher salaries and employee benefits of $1.8 million, higher entertainment and promotions expense of $0.7 million (included in other) and higher computer software expense of $0.3 million. These negative variances were partially offset by lower amortization of core deposit premium of $0.7 million, as the intangible asset was fully amortized as of September 30, 2018. The increase from the previous quarter was primarily due to higher salaries and employee benefits of $0.7 million, combined with higher entertainment and promotions expense of $0.8 million (included in other). The higher salaries and employee benefits compared to the year-ago and previous quarters was partially attributable to the addition of positions in strategic areas and higher commissions, combined with annual merit increases effective in the second quarter of 2019. The higher entertainment and promotions expense compared to the year-ago and previous quarters was primarily attributable to expenses related to a recent core deposit gathering campaign.

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

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

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

Total loans at June 30, 2019 of $4.25 billion increased by $365.5 million, or 9.4%, and $145.5 million, or 3.5% from June 30, 2018 and March 31, 2019, respectively. The year-over-year and sequential quarter increases in total loans were driven by broad-based growth in all loan categories.

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

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

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

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

In the second quarter of 2019, the Company recorded a provision for loan and lease losses of $1.4 million, compared to a provision of $0.5 million in the year-ago quarter and a provision of $1.3 million in the previous quarter. The increases in the provision from the year-ago and sequential quarters were primarily due to growth in our loan portfolio. The allowance for loan and lease losses, as a percentage of total loans and leases at June 30, 2019 was 1.14%, compared to 1.24% at June 30, 2018 and 1.15% at March 31, 2019.

Capital
Total shareholders' equity was $515.7 million at June 30, 2019, compared to $480.7 million and $502.6 million at June 30, 2018 and March 31, 2019, respectively.

The Company maintained its strong capital position and its capital ratios continue to exceed the levels required to be considered a "well-capitalized" institution for regulatory purposes under Basel III. At June 30, 2019, the Company's leverage capital, tier 1 risk-based capital, total risk-based capital, and common equity tier 1 ratios were 9.5%, 12.7%, 13.9%, and 11.6%, respectively, compared to 9.5%, 13.0%, 14.1%, and 11.8%, respectively, at March 31, 2019.

Non-GAAP Financial Measures

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

Conference Call
The Company's management will host a conference call today at 1:00 p.m. Eastern Time (7:00 a.m. Hawaii Time) to discuss the quarterly results. Individuals are encouraged to listen to the live webcast of the presentation by visiting the investor relations page of the Company's website at http://ir.centralpacificbank.com. Alternatively, investors may participate in the live call by dialing 1-877-505-7644. A playback of the call will be available through August 24, 2019 by dialing 1-877-344-7529 (passcode:10133440) and on the Company's website. Information which may be discussed in the conference call regarding RISE2020 is provided on the investor relations page of the Company's website at http://ir.centralpacificbank.com.

About Central Pacific Financial Corp.
Central Pacific Financial Corp. is a Hawaii-based bank holding company with approximately $5.9 billion in assets.  Central Pacific Bank, its primary subsidiary, operates 35 branches and 78 ATMs in the state of Hawaii, as of June 30, 2019.  For additional information, please visit the Company's website at http://www.centralpacificbank.com.

Forward-Looking Statements
This document may contain forward-looking statements concerning projections of revenues, income/loss, earnings/loss per share, capital expenditures, dividends, capital structure, or other financial items, plans and objectives of management for future operations, future economic performance including anticipated performance results from our RISE2020 initiative, or any of the assumptions underlying or relating to any of the foregoing.  Forward-looking statements can be identified by the fact that they do not relate strictly to historical or current facts, and may include the words "believes," "plans," "expects," "anticipates," "forecasts," "intends," "hopes," "targeting," "should," "estimates," or words of similar meaning.  While the Company believes that our forward-looking statements and the assumptions underlying them are reasonably based, such statements and assumptions are by their nature subject to risks and uncertainties, and thus could later prove to be inaccurate or incorrect.  Accordingly, actual results could materially differ from projections for a variety of reasons, to include, but not limited to:  the effect of, and our failure to comply with any regulatory orders or actions we are or may become subject to; oversupply of inventory and adverse conditions in the Hawaii and California real estate markets and any weakness in the construction industry;  adverse changes in the financial performance and/or condition of our borrowers and, as a result, increased loan delinquency rates,  deterioration in asset quality, and losses in our loan portfolio; our ability to successfully implement our RISE2020 initiative; the impact of local, national, and international economies and events (including political events, acts of war or terrorism, natural disasters such as wildfires, volcanoes, tsunamis and earthquakes) on the Company's business and operations and on tourism, the military and other major industries operating within the Hawaii market and any other markets in which the Company does business; deterioration or malaise in economic conditions, including destabilizing factors in the financial industry and deterioration of the real estate market, as well as the impact from any declining levels of consumer and business confidence in the state of the economy in general and in financial institutions in particular;  the impact of regulatory action on the Company and Central Pacific Bank and legislation affecting the financial services industry; failure to maintain effective internal control over financial reporting or disclosure controls and procedures; changes in estimates of future reserve requirements based upon the periodic review thereof under relevant regulatory and accounting requirements; the impact of the Dodd-Frank Wall Street Reform and Consumer Protection Act, other regulatory reform, and any related rules and regulations on our business operations and competitiveness; the costs and effects of legal and regulatory developments, including legal proceedings or regulatory or other governmental inquiries and proceedings and the resolution thereof, and the results of regulatory examinations or reviews;  the effects of the Tax Cuts and Jobs Act; the effects of and changes in trade, monetary and fiscal policies and laws, including the interest rate policies of the Board of Governors of the Federal Reserve System; inflation, interest rate, securities market and monetary fluctuations;  negative trends in our market capitalization and adverse changes in the price of the Company's common shares; changes in consumer spending, borrowings and savings habits; technological changes and developments; changes in the competitive environment among financial holding companies and other financial service providers, including fintech businesses; the effect of changes in accounting policies and practices, including changes as may be adopted by the regulatory agencies, as well as the Public Company Accounting Oversight Board, the Financial Accounting Standards Board and other accounting standard setters; changes in our capital position; our ability to attract and retain skilled directors, executives and employees; changes in our organization, compensation and benefit plans; and our success at managing the risks involved in any of the foregoing items. For further information on factors that could cause actual results to materially differ from projections, please see the Company's publicly available Securities and Exchange Commission filings, including the Company's Form 10-K for the last fiscal year and, in particular, the discussion of "Risk Factors" set forth therein. The Company does not update any of its forward-looking statements except as required by law.


CENTRAL PACIFIC FINANCIAL CORP. AND SUBSIDIARIES


Financial Highlights


(Unaudited)

TABLE 1



Three Months Ended


Six Months Ended

(Dollars in thousands,


June 30,


March 31,


December 31,


September 30,


June 30,


June 30,

except for per share amounts)


2019


2019


2018


2018


2018


2019


2018

CONDENSED INCOME STATEMENT















Net interest income


$

45,378



$

45,113



$

44,679



$

43,325



$

42,672



$

90,491



$

84,994


Provision (credit) for loan and lease losses


1,404



1,283



(1,386)



(59)



532



2,687



321


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


43,974



43,830



46,065



43,384



42,140



87,804



84,673


Total other operating income


10,094



11,673



9,400



10,820



9,630



21,767



18,584


Total other operating expense


36,107



34,348



33,642



34,025



33,611



70,455



67,015


Income before taxes


17,961



21,155



21,823



20,179



18,159



39,116



36,242


Income tax expense


4,427



5,118



6,031



4,986



3,935



9,545



7,741


Net income


13,534



16,037



15,792



15,193



14,224



29,571



28,501


Basic earnings per common share


$

0.47



$

0.56



$

0.54



$

0.52



$

0.48



$

1.03



$

0.96


Diluted earnings per common share


0.47



0.55



0.54



0.52



0.48



1.03



0.95


Dividends declared per common share


0.23



0.21



0.21



0.21



0.21



0.44



0.40

















PERFORMANCE RATIOS















Return on average assets (ROA) [1]


0.92

%


1.10

%


1.10

%


1.06

%


1.00

%


1.01

%


1.01

%

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


10.73



12.97



12.90



12.54



11.83



11.84



11.72


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


10.73



12.97



12.90



12.55



11.85



11.84



11.75


Average shareholders' equity to average assets


8.62



8.51



8.53



8.49



8.49



8.57



8.61


Efficiency ratio  [2]


65.09



60.49



62.21



62.84



64.26



62.76



64.70


Net interest margin (NIM) [1]


3.33



3.34



3.28



3.20



3.20



3.33



3.20


Dividend payout ratio [3]


48.94



38.18



38.89



40.38



43.75



42.72



42.11

















SELECTED AVERAGE BALANCES















Average loans and leases, including loans held for sale


$

4,171,558



$

4,083,791



$

4,022,376



$

3,941,511



$

3,836,739



$

4,127,917



$

3,813,169


Average interest-earning assets


5,485,977



5,464,377



5,451,052



5,418,924



5,376,115



5,475,237



5,355,311


Average assets


5,856,465



5,809,931



5,739,228



5,709,825



5,663,697



5,833,326



5,651,021


Average deposits


4,977,781



4,978,470



4,938,560



5,063,061



5,041,164



4,978,124



5,020,750


Average interest-bearing liabilities


3,897,619



3,821,528



3,769,920



3,802,028



3,776,053



3,859,784



3,761,115


Average shareholders' equity


504,749



494,635



489,510



484,737



480,985



499,720



486,554


Average tangible shareholders' equity


504,749



494,635



489,510



484,391



479,959



499,720



485,177


 

CENTRAL PACIFIC FINANCIAL CORP. AND SUBSIDIARIES

Financial Highlights

(Unaudited)

TABLE 1 (CONTINUED)




June 30,


March 31,


December 31,


September 30,


June 30,

(dollars in thousands)


2019


2019


2018


2018


2018

REGULATORY CAPITAL











Central Pacific Financial Corp.











Leverage capital


$

556,403



$

554,148



$

570,260



$

590,627



$

586,799


Tier 1 risk-based capital


556,403



554,148



570,260



590,627



586,799


Total risk-based capital


606,567



602,824



619,419



639,157



636,755


Common equity tier 1 capital


506,403



504,148



500,260



500,627



496,799


Central Pacific Bank











Leverage capital


544,480



539,390



533,166



571,949



569,128


Tier 1 risk-based capital


544,480



539,390



533,166



571,949



569,128


Total risk-based capital


594,644



588,066



582,325



620,479



619,084


Common equity tier 1 capital


544,480



539,390



533,166



571,949



569,128













REGULATORY CAPITAL RATIOS











Central Pacific Financial Corp.











Leverage capital ratio


9.5

%


9.5

%


9.9

%


10.3

%


10.3

%

Tier 1 risk-based capital ratio


12.7



13.0



13.5



14.2



14.4


Total risk-based capital ratio


13.9



14.1



14.7



15.4



15.7


Common equity tier 1 capital ratio


11.6



11.8



11.9



12.0



12.2


Central Pacific Bank











Leverage capital ratio


9.3



9.3



9.3



10.0



10.0


Tier 1 risk-based capital ratio


12.5



12.7



12.7



13.8



14.0


Total risk-based capital ratio


13.6



13.8



13.8



15.0



15.3


Common equity tier 1 capital ratio


12.5



12.7



12.7



13.8



14.0















June 30,


March 31,


December 31,


September 30,


June 30,

(dollars in thousands, except for per share amounts)


2019


2019


2018


2018


2018

BALANCE SHEET











Loans and leases


$

4,247,113



$

4,101,571



$

4,078,366



$

3,978,027



$

3,881,581


Total assets


5,920,006



5,841,352



5,807,026



5,728,640



5,681,519


Total deposits


4,976,849



4,948,128



4,946,490



5,003,680



4,979,099


Long-term debt


101,547



101,547



122,166



92,785



92,785


Total shareholders' equity


515,695



502,638



491,725



478,151



480,668


Total shareholders' equity to total assets


8.71

%


8.60

%


8.47

%


8.35

%


8.46

%

Tangible common equity to tangible assets [4]


8.71

%


8.60

%


8.47

%


8.35

%


8.45

%












ASSET QUALITY











Allowance for loan and lease losses


$

48,267



$

47,267



$

47,916



$

46,826



$

48,181


Non-performing assets


1,258



3,338



2,737



3,026



3,509


Allowance to loans and leases outstanding


1.14

%


1.15

%


1.17

%


1.18

%


1.24

%

Allowance to non-performing assets


3,836.80

%


1,416.03

%


1,750.68

%


1,547.46

%


1,373.07

%












PER SHARE OF COMMON STOCK OUTSTANDING











Book value per common share


$

18.05



$

17.50



$

16.97



$

16.34



$

16.30


Tangible book value per common share


18.05



17.50



16.97



16.34



16.28
























[1] ROA, ROE and ROTE are annualized based on a 30/360 day convention. Annualized net interest income and expense in the NIM calculation are based on the day count interest payment conventions at the interest-earning asset or interest-bearing liability level (i.e. 30/360, actual/actual).

[2] Efficiency ratio is defined as total operating expense divided by total revenue (net interest income and total other operating income).

[3] Dividend payout ratio is defined as dividends declared per share divided by diluted earnings per share.

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


 

CENTRAL PACIFIC FINANCIAL CORP. AND SUBSIDIARIES

Reconciliation of Non-GAAP Financial Measures

(Unaudited)

TABLE 2


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




June 30,


March 31,


December 31,


September 30,


June 30,

(Dollars in thousands)


2019


2019


2018


2018


2018

Tangible Common Equity Ratio:











Total shareholders' equity


$

515,695



$

502,638



$

491,725



$

478,151



$

480,668


Less: Other intangible assets










(669)


Tangible common equity


$

515,695



$

502,638



$

491,725



$

478,151



$

479,999













Total assets


$

5,920,006



$

5,841,352



$

5,807,026



$

5,728,640



$

5,681,519


Less: Other intangible assets










(669)


Tangible assets


$

5,920,006



$

5,841,352



$

5,807,026



$

5,728,640



$

5,680,850













Tangible common equity to tangible assets


8.71

%


8.60

%


8.47

%


8.35

%


8.45

%

 

CENTRAL PACIFIC FINANCIAL CORP. AND SUBSIDIARIES

Consolidated Balance Sheets

(Unaudited)

TABLE 3



June 30,


March 31,


December 31,


September 30,


June 30,

(Dollars in thousands, except share data)


2019


2019


2018


2018


2018

ASSETS











Cash and due from financial institutions


$

83,534



$

90,869



$

80,569



$

82,668



$

75,547


Interest-bearing deposits in other financial institutions


15,173



7,310



21,617



7,051



13,948


Investment securities:











Available-for-sale debt securities, at fair value


1,254,743



1,319,450



1,205,478



1,233,002



1,279,969


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






148,508



152,852



158,156


Equity securities, at fair value


1,034



910



826



885



844


Total investment securities


1,255,777



1,320,360



1,354,812



1,386,739



1,438,969


Loans held for sale


6,848



3,539



6,647



4,460



9,096


Loans and leases


4,247,113



4,101,571



4,078,366



3,978,027



3,881,581


Less allowance for loan and lease losses


48,267



47,267



47,916



46,826



48,181


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


4,198,846



4,054,304



4,030,450



3,931,201



3,833,400


Premises and equipment, net


43,600



44,527



45,285



46,184



47,004


Accrued interest receivable


17,260



17,082



17,000



16,755



16,606


Investment in unconsolidated subsidiaries


17,247



16,054



14,008



15,283



9,362


Other real estate owned


276



276



414



414



595


Mortgage servicing rights


15,266



15,347



15,596



15,634



15,756


Core deposit premium










669


Bank-owned life insurance


158,294



158,392



157,440



157,085



156,945


Federal Home Loan Bank ("FHLB") stock


17,824



16,145



16,645



10,965



10,246


Right of use lease asset [1]


53,678



54,781








Other assets


36,383



42,366



46,543



54,201



53,376


Total assets


$

5,920,006



$

5,841,352



$

5,807,026



$

5,728,640



$

5,681,519


LIABILITIES AND SHAREHOLDERS' EQUITY











Deposits:











Noninterest-bearing demand


$

1,351,190



$

1,357,890



$

1,436,967



$

1,403,534



$

1,365,010


Interest-bearing demand


1,002,706



965,316



954,011



935,130



952,991


Savings and money market


1,573,805



1,562,798



1,448,257



1,503,465



1,502,284


Time


1,049,148



1,062,124



1,107,255



1,161,551



1,158,814


Total deposits


4,976,849



4,948,128



4,946,490



5,003,680



4,979,099


FHLB advances and other short-term borrowings


221,000



179,000



197,000



105,000



87,000


Long-term debt


101,547



101,547



122,166



92,785



92,785


Lease liability [1]


53,829



54,861








Other liabilities


51,086



55,178



49,645



49,024



41,967


Total liabilities


5,404,311



5,338,714



5,315,301



5,250,489



5,200,851


Shareholders' equity:











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











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


456,293



462,952



470,660



478,721



485,402


Additional paid-in capital


89,724



89,374



88,876



87,939



86,949


Accumulated deficit


(34,780)



(41,733)



(51,718)



(61,406)



(70,435)


Accumulated other comprehensive income (loss)


4,458



(7,955)



(16,093)



(27,103)



(21,248)


Total shareholders' equity


515,695



502,638



491,725



478,151



480,668


Total liabilities and shareholders' equity


$

5,920,006



$

5,841,352



$

5,807,026



$

5,728,640



$

5,681,519













[1] The Company adopted ASU 2016-02 effective January 1, 2019 using the modified retrospective approach and recorded a right of use lease asset and lease liability on the balance sheet as of March 31, 2019 for its operating leases where it is a lessee. The Company also elected to apply the practical expedient available under ASU 2018-11, which allows entities to apply the new leases standard at the adoption date and elect to not recast comparative periods.

 

CENTRAL PACIFIC FINANCIAL CORP. AND SUBSIDIARIES

Consolidated Statements of Income

(Unaudited)

TABLE 4



Three Months Ended


Six Months Ended



June 30,


March 31,


December 31,


September 30,


June 30,


June 30,

(Dollars in thousands, except per share data)


2019


2019


2018


2018


2018


2019


2018

Interest income:















Interest and fees on loans and leases


$

45,540



$

43,768



$

42,836



$

40,531



$

38,699



$

89,308



$

76,089


Interest and dividends on investment securities:















Taxable investment securities


7,530



8,260



8,451



8,490



8,717



15,790



17,560


Tax-exempt investment securities


814



866



910



920



933



1,680



1,866


Dividend income on investment securities


14



18



17



26



3



32



18


Interest on deposits in other financial institutions


46



68



55



109



117



114



201


Dividend income on Federal Home Loan Bank stock


161



161



70



60



40



322



85


Total interest income


54,105



53,141



52,339



50,136



48,509



107,246



95,819


Interest expense:















Interest on deposits:















Demand


199



192



180



181



193



391



373


Savings and money market


1,507



791



579



593



459



2,298



828


Time


4,867



5,092



4,567



4,744



4,034



9,959



7,459


Interest on short-term borrowings


1,123



893



999



146



48



2,016



91


Interest on long-term debt


1,031



1,060



1,335



1,147



1,103



2,091



2,074


Total interest expense


8,727



8,028



7,660



6,811



5,837



16,755



10,825


Net interest income


45,378



45,113



44,679



43,325



42,672



90,491



84,994


Provision (credit) for loan and lease losses ("Provision")


1,404



1,283



(1,386)



(59)



532



2,687



321


Net interest income after Provision


43,974



43,830



46,065



43,384



42,140



87,804



84,673


Other operating income:















Mortgage banking income (refer to Table 5)


1,601



1,424



1,770



1,923



1,775



3,025



3,622


Service charges on deposit accounts


2,041



2,081



2,237



2,189



1,977



4,122



3,980


Other service charges and fees


3,691



3,064



3,426



3,286



3,377



6,755



6,411


Income from fiduciary activities


1,129



965



1,113



1,159



1,017



2,094



1,973


Equity in earnings of unconsolidated subsidiaries


71



8



82



71



37



79



80


Fees on foreign exchange


218



151



197



220



277



369



488


Net gains (losses) on sales of investment securities






(279)










Income from bank-owned life insurance


914



952



243



1,055



501



1,866



819


Loan placement fees


107



149



215



115



220



256



417


Other (refer to Table 5)


322



2,879



396



802



449



3,201



794


Total other operating income


10,094



11,673



9,400



10,820



9,630



21,767



18,584


Other operating expense:















Salaries and employee benefits


20,563



19,889



19,053



19,011



18,783



40,452



37,288


Net occupancy


3,525



3,458



3,649



3,488



3,360



6,983



6,626


Equipment


1,138



1,006



1,079



1,048



1,044



2,144



2,112


Amortization of core deposit premium








669



668





1,337


Communication expense


903



734



863



903



746



1,637



1,644


Legal and professional services


1,728



1,570



2,212



1,528



1,769



3,298



3,590


Computer software expense


2,560



2,597



2,597



2,672



2,305



5,157



4,572


Advertising expense


712



711



834



612



617



1,423



1,229


Foreclosed asset expense


49



159



37



212



31



208



325


Other (refer to Table 5)


4,929



4,224



3,318



3,882



4,288



9,153



8,292


Total other operating expense


36,107



34,348



33,642



34,025



33,611



70,455



67,015


Income before income taxes


17,961



21,155



21,823



20,179



18,159



39,116



36,242


Income tax expense


4,427



5,118



6,031



4,986



3,935



9,545



7,741


Net income


$

13,534



$

16,037



$

15,792



$

15,193



$

14,224



$

29,571



$

28,501


Per common share data:















Basic earnings per share


$

0.47



$

0.56



$

0.54



$

0.52



$

0.48



$

1.03



$

0.96


Diluted earnings per share


0.47



0.55



0.54



0.52



0.48



1.03



0.95


Cash dividends declared


0.23



0.21



0.21



0.21



0.21



0.44



0.40


Basic weighted average shares outstanding


28,546,564



28,758,310



29,033,261



29,297,465



29,510,175



28,651,852



29,658,051


Diluted weighted average shares outstanding


28,729,510



28,979,855



29,217,480



29,479,812



29,714,942



28,847,786



29,881,534


 

...

CENTRAL PACIFIC FINANCIAL CORP. AND SUBSIDIARIES

Other Operating Income and Other Operating Expense - Detail

(Unaudited)

TABLE 5


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




Three Months Ended


Six Months Ended



June 30,


March 31,


December 31,


September 30,


June 30,


June 30,

(Dollars in thousands)


2019


2019


2018


2018


2018


2019


2018

Mortgage banking income:















Loan servicing fees


$

1,245



$

1,245



$

1,290



$

1,269



$

1,289



$

2,490



$

2,600


Amortization of mortgage servicing rights


(601)



(471)



(446)



(519)



(437)



(1,072)



(894)


Net gains on sales of residential mortgage loans


975



611



1,072



1,082



959



1,586



1,931


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


(18)



39



(146)



91



(36)



21



(15)


Total mortgage banking income


$

1,601



$

1,424



$

1,770



$

1,923



$

1,775



$

3,025



$

3,622


















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




Three Months Ended


Six Months Ended



June 30,


March 31,


December 31,


September 30,


June 30,


June 30,

(Dollars in thousands)


2019