PARENT COMPANY AND REGULATORY RESTRICTIONS

12 Months Ended

Dec. 31, 2017

Condensed Financial Information of Parent Company Only Disclosure [Abstract]

PARENT COMPANY AND REGULATORY RESTRICTIONS

27. PARENT COMPANY AND REGULATORY RESTRICTIONS

At December 31, 2017, the accumulated deficit of the parent company, Central Pacific Financial Corp., included $396.0 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, 2017, the bank had Statutory Retained Earnings of $85.6 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, 2017 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, 2017
Leverage capital	$	578,607	10.4	%	$	223,646	4.0	%	$	279,557	5.0	%
Tier 1 risk-based capital	578,607		14.7		236,721		6.0		315,628		8.0
Total risk-based capital	628,068		15.9		315,628		8.0		394,535		10.0
CET1 risk-based capital	490,861		12.4		177,541		4.5		256,448		6.5

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

Central Pacific Bank
As of December 31, 2017
Leverage capital	565,412		10.1		223,431		4.0		279,289		5.0
Tier 1 risk-based capital	565,412		14.4		236,401		6.0		315,201		8.0
Total risk-based capital	614,732		15.6		315,201		8.0		394,002		10.0
CET1 risk-based capital	565,412		14.4		177,301		4.5		256,101		6.5

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

Condensed financial statements of the parent company are as follows:

CENTRAL PACIFIC FINANCIAL CORP.

CONDENSED BALANCE SHEETS



	December 31,
	2017			2016
	(Dollars in thousands)
Assets
Cash and cash equivalents	$	13,931		$	19,500
Investment securities available for sale	825			660
Investment in subsidiary bank, at equity in underlying net assets	572,101			569,898
Accrued interest receivable and other assets	9,577			10,682
Total assets	$	596,434		$	600,740

Liabilities and Equity
Long-term debt	$	92,785		$	92,785
Other liabilities	3,614			3,280
Total liabilities	96,399			96,065

Shareholders’ equity:
Preferred stock, no par value, authorized 1,000,000 shares; issued and outstanding none at December 31, 2017 and 2016	—			—
Common stock, no par value, authorized 185,000,000 shares; issued and outstanding 30,024,222 and 30,796,243 shares at December 31, 2017 and 2016, respectively	503,988			530,932
Surplus	86,098			84,180
Accumulated deficit	(89,036		)	(108,941		)
Accumulated other comprehensive income (loss)	(1,039		)	(1,521		)
Total shareholders’ equity	500,011			504,650
Non-controlling interest	$	24		$	25
Total equity	$	500,035		$	504,675

Total liabilities and equity	$	596,434		$	600,740

CENTRAL PACIFIC FINANCIAL CORP.

CONDENSED STATEMENTS OF INCOME



	Year Ended December 31,
	2017			2016			2015
	(Dollars in thousands)
Income:
Dividends from subsidiary bank	$	43,000		$	29,965		$	111,765
Interest income:
Interest from subsidiary bank	6			6			9
Other income	150			100			91
Total income	43,156			30,071			111,865

Expense:
Interest on long-term debt	3,479			3,005			2,626
Other expenses	2,002			2,739			2,551
Total expenses	5,481			5,744			5,177

Gain (loss) before income taxes and equity in undistributed income of subsidiaries	37,675			24,327			106,688
Income tax expense (benefit)	(1,781		)	(2,467		)	670
Income before equity in undistributed income of subsidiaries	39,456			26,794			106,018

Equity in undistributed income (loss) of subsidiary bank	1,748			20,198			(60,150		)
Net income	$	41,204		$	46,992		$	45,868

CENTRAL PACIFIC FINANCIAL CORP.

CONDENSED STATEMENTS OF CASH FLOWS



	Year Ended December 31,
	2017			2016			2015
	(Dollars in thousands)
Cash flows from operating activities:
Net income	$	41,204		$	46,992		$	45,868
Adjustments to reconcile net income to net cash provided by operating activities:
Deferred income tax expense (benefit)	(442		)	15,683			670
Equity in undistributed income (loss) of subsidiary bank	(1,748		)	(20,198		)	60,150
Share-based compensation	1,918			1,045			1,429
Other, net	1,357			(697		)	983
Net cash provided by operating activities	42,289			42,825			109,100

Cash flows from financing activities:
Net proceeds from issuance of common stock and stock option exercises	—			941			360
Repurchases of common stock	(26,559		)	(18,206		)	(93,533		)
Dividends paid	(21,299		)	(18,619		)	(26,143		)
Net cash used in financing activities	(47,858		)	(35,884		)	(119,316		)

Net increase (decrease) in cash and cash equivalents	(5,569		)	6,941			(10,216		)

Cash and cash equivalents at beginning of year	19,500			12,559			22,775
Cash and cash equivalents at end of year	$	13,931		$	19,500		$	12,559

- Definition

The entire disclosure for condensed financial information, including the financial position, cash flows, and the results of operations of the registrant (parent company) as of the same dates or for the same periods for which audited consolidated financial statements are being presented. Alternatively, the details of this disclosure can be reported by the specific parent company taxonomy elements, indicating the appropriate date and period contexts in an instance document.

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