PARENT COMPANY AND REGULATORY RESTRICTIONS

12 Months Ended

Dec. 31, 2016

Condensed Financial Information of Parent Company Only Disclosure [Abstract]

PARENT COMPANY AND REGULATORY RESTRICTIONS

27. PARENT COMPANY AND REGULATORY RESTRICTIONS

At December 31, 2016, the accumulated deficit of the parent company, Central Pacific Financial Corp., included $397.7 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, 2016, the bank had Statutory Retained Earnings of $83.9 million. For further information, see Note 14 - Equity.

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 under-capitalized. The restrictions become increasingly more severe as an institution’s capital category declines from under-capitalized to critically under-capitalized.

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, 2016 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, 2016
Leverage capital	$	562,460	10.6	%	$	211,383	4.0	%	$	264,229	5.0	%
Tier 1 risk-based capital	562,460		14.2		237,157		6.0		316,209		8.0
Total risk-based capital	612,202		15.5		316,209		8.0		395,261		10.0
CET1 risk-based capital	485,268		12.3		177,868		4.5		256,920		6.5

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

Central Pacific Bank
As of December 31, 2016
Leverage capital	541,577		10.3		211,135		4.0		263,918		5.0
Tier 1 risk-based capital	541,577		13.7		236,806		6.0		315,741		8.0
Total risk-based capital	591,185		15.0		315,741		8.0		394,677		10.0
CET1 risk-based capital	541,577		13.7		177,604		4.5		256,540		6.5

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

Condensed financial statements of the parent company are as follows:

CENTRAL PACIFIC FINANCIAL CORP.

CONDENSED BALANCE SHEETS



	December 31,
	2016			2015
	(Dollars in thousands)
Assets
Cash and cash equivalents	$	19,500		$	12,559
Investment securities available for sale	660			917
Investment in subsidiary bank, at equity in underlying net assets	569,898			551,156
Accrued interest receivable and other assets	10,682			24,560
Total assets	$	600,740		$	589,192

Liabilities and Equity
Long-term debt	$	92,785		$	92,785
Other liabilities	3,280			1,768
Total liabilities	96,065			94,553

Shareholders’ equity:
Preferred stock, no par value, authorized 1,000,000 shares; issued and outstanding none at December 31, 2016 and 2015	—			—
Common stock, no par value, authorized 185,000,000 shares; issued and outstanding 30,796,243 and 31,361,452 shares at December 31, 2016 and 2015 , respectively	530,932			548,878
Surplus	84,180			82,847
Accumulated deficit	(108,941		)	(137,314		)
Accumulated other comprehensive income (loss)	(1,521		)	203
Total shareholders’ equity	504,650			494,614
Non-controlling interest	$	25		$	25
Total equity	$	504,675		$	494,639

Total liabilities and equity	$	600,740		$	589,192

CENTRAL PACIFIC FINANCIAL CORP.

CONDENSED STATEMENTS OF INCOME



	Year Ended December 31,
	2016			2015			2014
	(Dollars in thousands)
Income:
Dividends from subsidiary banks	$	29,965		$	111,765		$	159,319
Interest income:
Interest from subsidiary banks	6			9			16
Other income	100			91			89
Total income	30,071			111,865			159,424

Expense:
Interest on long-term debt	3,005			2,626			2,572
Other expenses	2,739			2,551			2,262
Total expenses	5,744			5,177			4,834

Gain (loss) before income taxes and equity in undistributed income of subsidiaries	24,327			106,688			154,590
Income tax expense (benefit)	(2,467		)	670			(2,520		)
Income before equity in undistributed income of subsidiaries	26,794			106,018			157,110

Equity in undistributed income (loss) of subsidiary bank	20,198			(60,150		)	(116,657		)
Net income	$	46,992		$	45,868		$	40,453

CENTRAL PACIFIC FINANCIAL CORP.

CONDENSED STATEMENTS OF CASH FLOWS



	Year Ended December 31,
	2016			2015			2014
	(Dollars in thousands)
Cash flows from operating activities:
Net income	$	46,992		$	45,868		$	40,453
Adjustments to reconcile net income to net cash provided by operating activities:
Deferred income tax expense (benefit)	15,683			670			(2,520		)
Equity in undistributed income (loss) of subsidiary bank	(20,198		)	60,150			116,657
Share-based compensation	1,045			1,429			4,218
Other, net	(697		)	983			(923		)
Net cash provided by operating activities	42,825			109,100			157,885

Cash flows from investing activities:
Distributions from unconsolidated subsidiaries	—			—			479
Contributions to unconsolidated subsidiaries	—			—			518
Net cash provided by investing activities	—			—			997

Cash flows from financing activities:
Net proceeds from issuance of common stock and stock option exercises	941			360			74
Repurchases of common stock	(18,206		)	(93,533		)	(142,405		)
Dividends paid	(18,619		)	(26,143		)	(13,405		)
Net cash used in financing activities	(35,884		)	(119,316		)	(155,736		)

Net increase (decrease) in cash and cash equivalents	6,941			(10,216		)	3,146

Cash and cash equivalents at beginning of year	12,559			22,775			19,629
Cash and cash equivalents at end of year	$	19,500		$	12,559		$	22,775