PARENT COMPANY AND REGULATORY RESTRICTIONS

12 Months Ended

Dec. 31, 2015

Condensed Financial Information of Parent Company Only Disclosure [Abstract]

PARENT COMPANY AND REGULATORY RESTRICTIONS

At December 31, 2015, the accumulated deficit of the parent company, Central Pacific Financial Corp., included $417.9 million of equity in undistributed losses of Central Pacific Bank.

Central Pacific Bank, as a Hawaii state-chartered bank, may only pay dividends to the extent it has retained earnings as defined under Hawaii banking law (“Statutory Retained Earnings”), which differs from GAAP retained earnings. As of December 31, 2015, the bank had Statutory Retained Earnings of $63.7 million. For further information, see Note 13.

Section 131 of the Federal Deposit Insurance Corporation Improvement Act (“FDICIA”) required the Board of Governors of the Federal Reserve System, FDIC, and the Comptroller of the Currency (collectively, the “Agencies”) to develop a mechanism to take prompt corrective action to resolve the problems of insured depository institutions. The final rules to implement FDICIA’s Prompt Corrective Action provisions established minimum regulatory capital standards to determine an insured depository institution’s capital category. However, the Agencies may impose higher minimum standards on individual institutions or may downgrade an institution from one capital category to a lower capital category because of safety and soundness concerns.

The Prompt Corrective Action provisions impose certain restrictions on institutions that are undercapitalized. The restrictions become increasingly more severe as an institution’s capital category declines from undercapitalized to critically undercapitalized.

The following table sets forth actual and required capital and capital ratios for the Company and the bank, as well as the minimum capital adequacy requirements applicable generally to all financial institutions as of the dates indicated. The Company’s and the bank’s leverage capital, Tier 1, total risk-based capital ratios, and common equity Tier 1 (CET1) risk based capital as of December 31, 2015 were above the levels required for a “well-capitalized” regulatory designation.



	Actual				Minimum required for capital adequacy purposes				Minimum required to be well-capitalized
	Amount		Ratio		Amount		Ratio		Amount		Ratio
	(Dollars in thousands)
Company
As of December 31, 2015
Leverage capital	$	532,787	10.7	%	$	199,350	4.0	%	$	249,187	5.0	%
Tier 1 risk-based capital	532,787		14.4		221,808		6.0		295,745		8.0
Total risk-based capital	579,651		15.7		295,745		8.0		369,681		10.0
CET1 risk-based capital	472,698		12.8		166,356		4.5		240,292		6.5

As of December 31, 2014
Leverage capital	562,063		12.0		186,922		4.0		233,652		5.0
Tier 1 risk-based capital	562,063		17.0		132,475		4.0		198,712		6.0
Total risk-based capital	603,939		18.2		264,949		8.0		331,187		10.0

Central Pacific Bank
As of December 31, 2015
Leverage capital	518,617		10.4		199,098		4.0		248,872		5.0
Tier 1 risk-based capital	518,617		14.1		221,435		6.0		295,247		8.0
Total risk-based capital	565,231		15.3		295,247		8.0		369,058		10.0
CET1 risk-based capital	518,617		14.1		166,076		4.5		239,888		6.5

As of December 31, 2014
Leverage capital	540,273		11.6		186,828		4.0		233,535		5.0
Tier 1 risk-based capital	540,273		16.3		132,376		4.0		198,564		6.0
Total risk-based capital	582,068		17.6		264,752		8.0		330,940		10.0

Condensed financial statements of the parent company are as follows:

CENTRAL PACIFIC FINANCIAL CORP.

CONDENSED BALANCE SHEETS



	December 31,
	2015			2014
	(Dollars in thousands)
Assets
Cash and cash equivalents	$	12,559		$	22,775
Investment securities available for sale	917			877
Investment in subsidiary bank, at equity in underlying net assets	551,156			612,505
Investment in other subsidiaries, at equity in underlying assets	—			—
Accrued interest receivable and other assets	24,560			26,136
Total assets	$	589,192		$	662,293

Liabilities and Shareholders’ Equity
Long-term debt	$	92,785		$	92,785
Other liabilities	1,768			1,467
Total liabilities	94,553			94,252

Shareholders’ equity:
Preferred stock, no par value, authorized 1,100,000 shares; issued and outstanding none at December 31, 2015 and 2014	—			—
Common stock, no par value, authorized 185,000,000 shares; issued and outstanding 31,361,452 and 35,233,674 shares at December 31, 2015 and 2014, respectively	548,878			642,205
Surplus	82,847			79,716
Accumulated deficit	(137,314		)	(157,039		)
Accumulated other comprehensive income (loss)	203			3,159
Total shareholders’ equity	494,614			568,041
Non-controlling interest	$	25		$	—
Total Equity	$	494,639		$	568,041

Total liabilities and shareholders’ equity	$	589,192		$	662,293

CENTRAL PACIFIC FINANCIAL CORP.

CONDENSED STATEMENTS OF INCOME



	Year Ended December 31,
	2015			2014			2013
	(Dollars in thousands)
Income:
Dividends from subsidiary banks	$	111,765		$	159,319		$	—
Interest income:
Interest from subsidiary banks	9			16			30
Other income	91			89			2,001
Total income	111,865			159,424			2,031

Expense:
Interest on long-term debt	2,626			2,572			3,118
Other expenses	2,551			2,262			2,679
Total expenses	5,177			4,834			5,797

Gain (loss) before income taxes and equity in undistributed income of subsidiaries	106,688			154,590			(3,766		)
Income tax expense (benefit)	670			(2,520		)	(31,891		)
Income before equity in undistributed income of subsidiaries	106,018			157,110			28,125

Equity in undistributed income (loss) of subsidiary bank	(60,150		)	(116,657		)	143,945
Equity in undistributed income of other subsidiaries	—			—			5
Net income	$	45,868		$	40,453		$	172,075

CASH FLOWS



	Year Ended December 31,
	2015			2014			2013
	(Dollars in thousands)
Cash flows from operating activities
Net income	$	45,868		$	40,453		$	172,075
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Deferred income tax expense (benefit)	670			(2,520		)	(25,707		)
Equity in undistributed income (loss) of subsidiary bank	60,150			116,657			(143,945		)
Equity in undistributed income of other subsidiaries	—			—			(5		)
Share-based compensation	1,429			4,218			4,931
Accrued interest payable	—			—			(11,919		)
Other, net	983			(923		)	(362		)
Net cash provided by (used in) operating activities	109,100			157,885			(4,932		)

Cash flows from investing activities
Distributions from unconsolidated subsidiaries	—			479			9,000
Contributions to unconsolidated subsidiaries	—			518			(9,000		)
Net cash provided by investing activities	—			997			—

Cash flows from financing activities
Net proceeds from issuance of common stock and stock option exercises	360			74			74
Repayments of long-term debt	—			—			(15,464		)
Repurchases of common stock	(93,533		)	(142,405		)	—
Dividends paid	(26,143		)	(13,405		)	(6,735		)
Net cash used in financing activities	(119,316		)	(155,736		)	(22,125		)

Net increase (decrease) in cash and cash equivalents	(10,216		)	3,146			(27,057		)

Cash and cash equivalents
At beginning of year	22,775			19,629			46,686
At end of year	$	12,559		$	22,775		$	19,629