EX-99.1 2 exhibit99-1erq12020.htm EX-99.1 Document

Exhibit 99.1
ex99logoa281.jpg
 
  FOR IMMEDIATE RELEASE
   
Investor Contact:Ian TanakaMedia Contact:Dean Kawamura
 VP, Treasury ManagerVP, Community Development Manager
 (808) 544-3646(808) 544-3642
 ian.tanaka@cpb.bankdean.kawamura@cpb.bank
 
NEWS RELEASE

CENTRAL PACIFIC FINANCIAL CORP. REPORTS RESULTS FOR FIRST QUARTER 2020


•Net income of $8.3 million, or fully diluted EPS of $0.29 for the first quarter, compared to net income of $14.2 million, or fully diluted EPS of $0.50 for the fourth quarter.

•Recognized total credit loss expense of $11.1 million in the first quarter under the CECL methodology. The increase in credit loss expense was driven by life of loan estimated losses under CECL and economic forecasts that anticipate deterioration due to the COVID-19 pandemic.

•Total loans increased by $62.5 million, or 1.4% sequentially, and $410.4 million, or 10.0% year-over-year.

•Core deposits increased by $45.4 million, or 1.1% sequentially, and $244.5 million, or 6.0% year-over-year.

•Cost of average total deposits of 0.36% in the first quarter declined by 5 basis points from the fourth quarter.

•We continue to execute on our RISE2020 initiative while navigating the challenging current landscape.

HONOLULU, HI, April 22, 2020 – Central Pacific Financial Corp. (NYSE: CPF) (the "Company"), parent company of Central Pacific Bank, today reported net income in the first quarter of 2020 of $8.3 million, or fully diluted earnings per share ("EPS") of $0.29, compared to net income in the first quarter of 2019 of $16.0 million, or EPS of $0.55, and net income in the fourth quarter of 2019 of $14.2 million, or EPS of $0.50. On January 1, 2020, the Company adopted the current expected credit losses ("CECL") accounting standard and, as a result, recorded increases of $3.6 million to the allowance for credit losses on loans and $0.7 million to the reserve for off-balance sheet credit exposures, that was offset in retained earnings and net deferred tax assets. During the first quarter of 2020, the Company recorded total credit loss expense under CECL, which includes the provisions for credit losses and off-balance sheet credit exposures, of $11.1 million which impacted our first quarter operating results.

"The Company is highly focused on navigating the current challenges brought on by the COVID-19 pandemic. While we expect to see an adverse impact to our earnings in the near term, we are confident that we have the right leadership, solid balance sheet and strong risk management to manage well through the situation," said Paul Yonamine, Chairman and Chief Executive Officer.

"We continue to live out the Bank's legacy by supporting our customers and the community during this unprecedented time. Through the hard work of our employees, we are assisting families and small businesses in Hawaii with various programs that we believe will help them weather the storm currently faced," said Catherine Ngo, President.



Central Pacific Financial Corp. Reports Results for First Quarter 2020
Page 2

During the first quarter of 2020, the Company repurchased 206,802 shares of common stock, or approximately 0.7% of its common stock outstanding as of December 31, 2019. Total cost of the shares repurchased during the first quarter of 2020 totaled $4.7 million, or an average cost per share of $22.96. In March 2020, the Company temporarily suspended its share repurchase program due to uncertainty during the current COVID-19 pandemic.

On April 21, 2020, 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 June 15, 2020 to shareholders of record at the close of business on May 29, 2020.

Earnings Highlights
Net interest income for the first quarter of 2020 was $47.8 million, compared to $45.1 million in the year-ago quarter and $47.9 million in the previous quarter. Net interest margin for the first quarter of 2020 was 3.43%, compared to 3.34% in the year-ago quarter and 3.43% in the previous quarter. The increases in net interest income and net interest margin from the year-ago quarter were primarily due to growth in the loan portfolio, combined with lower rates paid on interest-bearing liabilities. The decline in rates paid on interest-bearing liabilities is primarily attributable to the five rate cuts by the Federal Reserve from August 2019 through March 2020. Net interest income and net interest margin were stable on a sequential quarter basis as there were offsetting decreases in both yields earned on interest-earning assets and rates paid on interest-bearing liabilities.

Other operating income for the first quarter of 2020 totaled $8.9 million, compared to $11.7 million in the year-ago quarter and $9.8 million in the previous quarter. The decrease from the year-ago quarter was primarily due to a $2.6 million gain on the sale of MasterCard Class B common stock in the year-ago quarter, combined with lower mortgage banking income of $1.2 million and lower income from bank-owned life insurance of $1.0 million. These decreases were partially offset by $1.3 million in income related to an interest rate swap (included in other service charges and fees). The decrease from the previous quarter was primarily due to lower mortgage banking income of $1.1 million, combined with lower income from bank-owned life insurance of $0.6 million, partially offset by the $1.3 million in income related to an interest rate swap (included in other service charges and fees). The lower mortgage banking income compared to the year-ago and sequential quarters was primarily due to higher amortization of mortgage servicing rights of $1.1 million and $0.8 million, respectively, primarily attributable to the recent decline in market interest rates. The lower income from bank-owned life insurance compared to the year-ago and sequential quarters was primarily attributable to volatility in the equity markets. This included a loss on corporate-owned life insurance, which had an offsetting decrease in the Company's deferred compensation expense due to the market movements during the quarter.

Other operating expense for the first quarter of 2020 totaled $36.2 million, which increased from $34.3 million in the year-ago quarter and remained unchanged from $36.2 million in the previous quarter. The increase from the year-ago quarter was primarily due to a higher provision for off-balance sheet credit exposures of $1.6 million related to the new CECL methodology, combined with higher salaries and employee benefits of $0.5 million and higher legal and professional services of $0.5 million, primarily attributable to our RISE2020 initiative. These increases were partially offset by a $1.5 million credit related to the fair value of our directors' deferred compensation obligation (included in other) primarily attributable to the volatility in the equity markets. The aforementioned $1.5 million credit related to the fair value of our directors' deferred compensation obligation (included in other) and lower salaries and employee benefits of $0.9 million during the current quarter, were partially offset by a higher provision for off-balance sheet credit exposures of $2.0 million and higher advertising expenses of $0.6 million compared to the previous quarter. The lower salaries and employee benefits during the current quarter was primarily attributable to lower employee deferred compensation expense due to volatility in the equity markets, combined with a true-up of the Company's incentive compensation plan accrual for 2019 recorded in the previous quarter.

The efficiency ratio for the first quarter of 2020 was 63.90%, compared to 60.49% in the year-ago quarter and 62.81% in the previous quarter.

In the first quarter of 2020, the Company recorded income tax expense of $2.8 million, compared to $5.1 million in the year-ago quarter and $5.2 million in the previous quarter. The effective tax rate for the first quarter of 2020 was 25.3%, compared to 24.2% in the year-ago quarter and 26.7% in the previous quarter.
 



Central Pacific Financial Corp. Reports Results for First Quarter 2020
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Balance Sheet Highlights
Total assets at March 31, 2020 of $6.11 billion increased by $267.2 million, or 4.6% from March 31, 2019, and increased by $95.9 million, or 1.6% from December 31, 2019.
 
Total loans at March 31, 2020 of $4.51 billion increased by $410.4 million, or 10.0%, and $62.5 million, or 1.4% from March 31, 2019 and December 31, 2019, respectively. The year-over-year increase in total loans were driven by broad-based growth in almost all loan categories. The sequential quarter increase in total loans was primarily due to increases in all loan categories except consumer loans, which declined by $9.7 million.

Total deposits at March 31, 2020 of $5.14 billion increased by $187.9 million, or 3.8% from March 31, 2019, and increased by $16.0 million, or 0.3% from December 31, 2019.  The sequential quarter increase in total deposits was primarily attributable to the increases in savings and money market deposits of $93.3 million. This increase was offset by decreases in noninterest-bearing demand deposits of $20.0 million, interest-bearing demand deposits of $24.5 million and total time deposits of $32.7 million. Core deposits, which include demand deposits, savings and money market deposits, and time deposits less than $100,000, totaled $4.30 billion at March 31, 2020.  This represents an increase of $244.5 million, or 6.0% from March 31, 2019, and $45.4 million, or 1.1% from December 31, 2019. The Company's loan-to-deposit ratio was 87.9% at March 31, 2020, compared to 82.9% at March 31, 2019 and 86.9% at December 31, 2019.

Asset Quality
Nonperforming assets at March 31, 2020 totaled $3.6 million, or 0.06% of total assets, compared to $3.3 million, or 0.06% of total assets at March 31, 2019, and $1.7 million, or 0.03% of total assets at December 31, 2019. The increase in nonperforming assets was primarily due to the addition of $1.8 million of residential mortgage and home equity loans in non-accrual loans.

Loans delinquent for 90 days or more still accruing interest totaled $1.6 million at March 31, 2020, compared to $0.2 million and $1.0 million at March 31, 2019 and December 31, 2019, respectively.

Net charge-offs in the first quarter of 2020 totaled $1.2 million, compared to net charge-offs of $1.9 million in the year-ago quarter, and net charge-offs of $2.3 million in the previous quarter.

In the first quarter of 2020, the Company recorded a provision for credit losses on loans of $9.3 million, compared to a provision of $1.3 million in the year-ago quarter and a provision of $2.1 million in the previous quarter. In addition, the Company recorded a provision for off-balance sheet credit exposures (included in other operating expense) of $1.8 million, compared to a provision of $0.2 million in the year-ago quarter and a credit to the provision of $0.2 million in the previous quarter. The increases in the provisions for credit losses and off-balance sheet credit exposures from the year-ago and sequential quarters were primarily due to the incorporation of life of loan estimated losses under CECL and economic forecasts that anticipate deterioration due to the COVID-19 pandemic. The allowance for credit losses, as a percentage of total loans at March 31, 2020 was 1.32%, compared to 1.15% at March 31, 2019 and 1.08% at December 31, 2019.
 
Capital
Total shareholders' equity was $533.8 million at March 31, 2020, compared to $502.6 million and $528.5 million at March 31, 2019 and December 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 March 31, 2020, the Company's leverage capital, tier 1 risk-based capital, total risk-based capital, and common equity tier 1 ratios were 9.5%, 12.3%, 13.4%, and 11.3%, respectively, compared to 9.5%, 12.6%, 13.6%, and 11.5%, respectively, at December 31, 2019.

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 May 22, 2020 by dialing 1-877-344-7529 (passcode: 10142273) and on the Company's website. Information which may be discussed in the conference call is provided in an earnings supplement presentation on the Company's website at http://ir.centralpacificbank.com.



Central Pacific Financial Corp. Reports Results for First Quarter 2020
Page 4

About Central Pacific Financial Corp.
Central Pacific Financial Corp. is a Hawaii-based bank holding company with approximately $6.1 billion in assets.  Central Pacific Bank, its primary subsidiary, operates 35 branches (13 of which are temporarily closed to protect the health and well-being of the Company's employees and customers from COVID-19) and 75 ATMs in the state of Hawaii, as of March 31, 2020.  For additional information, please visit the Company's website at http://www.cpb.bank.
 

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Central Pacific Financial Corp. Reports Results for First Quarter 2020
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Forward-Looking Statements
This document may contain forward-looking statements concerning: projections of revenues, expenses, income or loss, earnings or loss per share, capital expenditures, the payment or nonpayment of dividends, capital position, net interest margin or other financial items; statements of plans, objectives and expectations of Central Pacific Financial Corp. or its management or Board of Directors, including those relating to business plans, use of capital resources, products or services and regulatory developments and regulatory actions; statements of future economic performance including anticipated performance results from our RISE2020 initiative; or any statements of the assumptions underlying or relating to any of the foregoing. Words such as "believes," "plans," "anticipates," "expects," "intends," "forecasts," "hopes," "targeting," "continue," "remain," "will," "should," "estimates," "may" and other similar expressions are intended to identify forward-looking statements but are not the exclusive means of identifying such statements.

While we believe 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 differ materially from those statements or projections for a variety of reasons, including, but not limited to: the adverse effects of the COVID-19 pandemic virus on local, national and international economies, including, but not limited to, the adverse impact on tourism and construction in the State of Hawaii, our borrowers, customers, third-party contractors, vendors and employees as well as the effects of government programs and initiatives in response to COVID-19; the increase in inventory or adverse conditions in the real estate market and deterioration 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 natural disasters such as wildfires, volcanic eruptions, hurricanes, tsunamis, storms, earthquakes and pandemic virus and disease, including COVID-19) 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 domestic economic conditions, including any destabilization in the financial industry and deterioration of the real estate market, as well as the impact of declining levels of consumer and business confidence in the state of the economy in general and in financial institutions in particular; 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 (the "Dodd-Frank Act"), changes in capital standards, other regulatory reform and federal and state legislation, including but not limited to regulations promulgated by the Consumer Financial Protection Bureau (the "CFPB"), government-sponsored enterprise reform, and any related rules and regulations which affect 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, the results of regulatory examinations or reviews and the effect of, and our ability to comply with, any regulatory orders or actions we are or may become subject to; ability to successfully implement our initiatives to lower our efficiency ratio; 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 (the "FRB" or the "Federal Reserve"); inflation, interest rate, securities market and monetary fluctuations, including the anticipated replacement of the London Interbank Offered Rate ("LIBOR") Index and the impact on our loans and debt which are tied to that index; negative trends in our market capitalization and adverse changes in the price of the Company's common stock; political instability; acts of war or terrorism; pandemic virus and disease, including COVID-19; changes in consumer spending, borrowings and savings habits; failure to maintain effective internal control over financial reporting or disclosure controls and procedures; cybersecurity and data privacy breaches and the consequence therefrom; the ability to address deficiencies in our internal controls over financial reporting or disclosure controls and procedures; technological changes and developments; 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 ("FASB") and other accounting standard setters and the cost and resources required to implement such changes; our ability to attract and retain key personnel; changes in our organization, compensation and benefit plans; and our success at managing the risks involved in the foregoing items.

For further information with respect to factors that could cause actual results to materially differ from the expectations or projections stated in the forward-looking statements, 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. We urge investors to consider all of these factors carefully in evaluating the forward-looking statements contained in this Form 8-K. Forward-looking statements speak only as of the date on which such statements are made. We undertake no obligation to update any forward-looking statements to reflect events or circumstances after the date on which such statement is made, or to reflect the occurrence of unanticipated events except as required by law.





CENTRAL PACIFIC FINANCIAL CORP. AND SUBSIDIARIES
Financial Highlights
(Unaudited)TABLE 1
 
 Three Months Ended
(Dollars in thousands, March 31,December 31,September 30,June 30,March 31,
except for per share amounts)20202019201920192019
CONDENSED INCOME STATEMENT   
Net interest income$47,830  $47,934  $45,649  $45,378  $45,113  
Provision for credit losses [1]9,329  2,098  1,532  1,404  1,283  
Net interest income after provision for credit losses [1]38,501  45,836  44,117  43,974  43,830  
Total other operating income8,886  9,768  10,266  10,094  11,673  
Total other operating expense36,240  36,242  34,934  36,107  34,348  
Income before taxes11,147  19,362  19,449  17,961  21,155  
Income tax expense2,821  5,165  4,895  4,427  5,118  
Net income8,326  14,197  14,554  13,534  16,037  
Basic earnings per common share$0.30  $0.50  $0.51  $0.47  $0.56  
Diluted earnings per common share0.29  0.50  0.51  0.47  0.55  
Dividends declared per common share0.23  0.23  0.23  0.23  0.21  
PERFORMANCE RATIOS     
Return on average assets (ROA) [2]0.55 %0.95 %0.99 %0.92 %1.10 %
Return on average shareholders’ equity (ROE) [2]6.21  10.70  11.11  10.73  12.97  
Average shareholders’ equity to average assets8.93  8.87  8.87  8.62  8.51  
Efficiency ratio [1] [3]63.90  62.81  62.48  65.09  60.49  
Net interest margin (NIM) [2]3.43  3.43  3.30  3.33  3.34  
Dividend payout ratio [4]79.31  46.00  45.10  48.94  38.18  
SELECTED AVERAGE BALANCES     
Average loans, including loans held for sale$4,462,347  $4,412,247  $4,293,455  $4,171,558  $4,083,791  
Average interest-earning assets5,621,043  5,595,142  5,527,532  5,485,977  5,464,377  
Average assets6,007,237  5,978,797  5,907,207  5,856,465  5,809,931  
Average deposits5,121,696  4,998,897  4,987,414  4,977,781  4,978,470  
Average interest-bearing liabilities3,917,332  3,947,924  3,920,304  3,897,619  3,821,528  
Average shareholders’ equity536,721  530,464  524,083  504,749  494,635  


CENTRAL PACIFIC FINANCIAL CORP. AND SUBSIDIARIES
Financial Highlights
(Unaudited)TABLE 1 (CONTINUED)

 March 31,December 31,September 30,June 30,March 31,
(dollars in thousands)20202019201920192019
REGULATORY CAPITAL         
Central Pacific Financial Corp.         
Leverage capital$567,947  $568,529  $561,478  $556,403  $554,148  
Tier 1 risk-based capital567,947  568,529  561,478  556,403  554,148  
Total risk-based capital618,504  617,772  611,076  606,567  602,824  
Common equity tier 1 capital517,947  518,529  511,478  506,403  504,148  
Central Pacific Bank
Leverage capital556,895  556,077  550,913  544,480  539,390  
Tier 1 risk-based capital556,895  556,077  550,913  544,480  539,390  
Total risk-based capital607,402  605,320  600,511  594,644  588,066  
Common equity tier 1 capital556,895  556,077  550,913  544,480  539,390  
REGULATORY CAPITAL RATIOS
Central Pacific Financial Corp.
Leverage capital ratio9.5 %9.5 %9.5 %9.5 %9.5 %
Tier 1 risk-based capital ratio12.3  12.6  12.6  12.7  13.0  
Total risk-based capital ratio13.4  13.6  13.7  13.9  14.1  
Common equity tier 1 capital ratio11.3  11.5  11.5  11.6  11.8  
Central Pacific Bank
Leverage capital ratio9.3  9.3  9.4  9.3  9.3  
Tier 1 risk-based capital ratio12.1  12.3  12.4  12.5  12.7  
Total risk-based capital ratio13.2  13.4  13.5  13.6  13.8  
Common equity tier 1 capital ratio12.1  12.3  12.4  12.5  12.7  

March 31,December 31,September 30,June 30,March 31,
(dollars in thousands, except for per share amounts)20202019201920192019
BALANCE SHEET   
Total loans$4,511,998  $4,449,540  $4,367,862  $4,247,113  $4,101,571  
Total assets6,108,548  6,012,672  5,976,716  5,920,006  5,841,352  
Total deposits5,136,069  5,120,023  5,037,659  4,976,849  4,948,128  
Long-term debt101,547  101,547  101,547  101,547  101,547  
Total shareholders’ equity533,781  528,520  525,227  515,695  502,638  
Total shareholders’ equity to total assets8.74 %8.79 %8.79 %8.71 %8.60 %
ASSET QUALITY     
Allowance for credit losses ("ACL") [1]$59,645  $47,971  $48,167  $48,267  $47,267  
Non-performing assets3,647  1,719  1,360  1,258  3,338  
ACL to loans outstanding [1]1.32 %1.08 %1.10 %1.14 %1.15 %
ACL to non-performing assets [1]1,635.45 %2,790.63 %3,541.69 %3,836.80 %1,416.03 %
PER SHARE OF COMMON STOCK OUTSTANDING     
Book value per common share$18.99  $18.68  $18.47  $18.05  $17.50  
[1] The Company adopted ASU 2016-13, "Financial Instruments-Credit Losses" ("CECL"), effective January 1, 2020 using the modified retrospective approach. Results for the reporting periods beginning after January 1, 2020 are presented under CECL, while prior period amounts continue to be reported under previous GAAP.
[2] 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).
[3] Efficiency ratio is defined as total operating expense divided by total revenue (net interest income and total other operating income).
[4] Dividend payout ratio is defined as dividends declared per share divided by diluted earnings per share.




CENTRAL PACIFIC FINANCIAL CORP. AND SUBSIDIARIES
Consolidated Balance Sheets
(Unaudited)TABLE 2
 
 March 31,December 31,September 30,June 30,March 31,
(Dollars in thousands, except share data)20202019201920192019
ASSETS   
Cash and due from financial institutions$81,972  $78,418  $87,395  $83,534  $90,869  
Interest-bearing deposits in other financial institutions11,021  24,554  7,803  15,173  7,310  
Investment securities:  
Available-for-sale debt securities, at fair value1,184,023  1,126,983  1,186,875  1,254,743  1,319,450  
Equity securities, at fair value1,002  1,127  1,058  1,034  910  
Total investment securities1,185,025  1,128,110  1,187,933  1,255,777  1,320,360  
Loans held for sale3,910  9,083  7,016  6,848  3,539  
Loans4,511,998  4,449,540  4,367,862  4,247,113  4,101,571  
Less allowance for credit losses [1]59,645  47,971  48,167  48,267  47,267  
Loans, net of allowance for credit losses4,452,353  4,401,569  4,319,695  4,198,846  4,054,304  
Premises and equipment, net50,447  46,343  44,095  43,600  44,527  
Accrued interest receivable16,851  16,500  16,220  17,260  17,082  
Investment in unconsolidated subsidiaries16,721  17,115  17,001  17,247  16,054  
Other real estate owned100  164  466  276  276  
Mortgage servicing rights13,345  14,718  15,058  15,266  15,347  
Bank-owned life insurance159,637  159,656  158,939  158,294  158,392  
Federal Home Loan Bank ("FHLB") stock18,109  14,983  17,183  17,824  16,145  
Right of use lease asset51,198  52,348  52,588  53,678  54,781  
Other assets47,859  49,111  45,324  36,383  42,366  
Total assets$6,108,548  $6,012,672  $5,976,716  $5,920,006  $5,841,352  
LIABILITIES AND SHAREHOLDERS' EQUITY     
Deposits:     
Noninterest-bearing demand$1,430,540  $1,450,532  $1,399,200  $1,351,190  $1,357,890  
Interest-bearing demand1,018,508  1,043,010  998,037  1,002,706  965,316  
Savings and money market1,693,280  1,600,028  1,593,738  1,573,805  1,562,798  
Time993,741  1,026,453  1,046,684  1,049,148  1,062,124  
Total deposits5,136,069  5,120,023  5,037,659  4,976,849  4,948,128  
FHLB advances and other short-term borrowings222,000  150,000  205,000  221,000  179,000  
Long-term debt101,547  101,547  101,547  101,547  101,547  
Lease liability51,541  52,632  52,807  53,829  54,861  
Reserve for off-balance sheet credit exposures [1]3,810  1,272  1,431  1,897  1,409  
Other liabilities59,751  58,678  53,045  49,189  53,769  
Total liabilities5,574,718  5,484,152  5,451,489  5,404,311  5,338,714  
Shareholders' equity:     
Preferred stock, no par value, authorized 1,000,000 shares; issued and outstanding: none at March 31, 2020, December 31, 2019, September 30, 2019, June 30, 2019, and March 31, 2019—  —  —  —  —  
Common stock, no par value, authorized 185,000,000 shares; issued and outstanding: 28,115,353 at March 31, 2020, 28,289,257 at December 31, 2019, 28,441,341 at September 30, 2019, 28,567,777 at June 30, 2019, and 28,723,041 at March 31, 2019442,853  447,602  452,278  456,293  462,952  
Additional paid-in capital92,284  91,611  90,604  89,724  89,374  
Accumulated deficit [1](20,428) (19,102) (26,782) (34,780) (41,733) 
Accumulated other comprehensive income (loss)19,072  8,409  9,127  4,458  (7,955) 
Total shareholders' equity533,781  528,520  525,227  515,695  502,638  
Non-controlling interest49  —  —  —  —  
Total equity533,830  528,520  525,227  515,695  502,638  
Total liabilities and shareholders' equity$6,108,548  $6,012,672  $5,976,716  $5,920,006  $5,841,352  
[1] The Company adopted ASU 2016-13, "Financial Instruments-Credit Losses" ("CECL"), effective January 1, 2020 using the modified retrospective approach. Results for the reporting periods beginning after January 1, 2020 are presented under CECL, while prior period amounts continue to be reported under previous GAAP.




CENTRAL PACIFIC FINANCIAL CORP. AND SUBSIDIARIES 
Consolidated Statements of Income 
(Unaudited)TABLE 3

 Three Months Ended
 March 31,December 31,September 30,June 30,March 31,
(Dollars in thousands, except per share data)20202019201920192019
Interest income:   
Interest and fees on loans$46,204  $47,488  $45,861  $45,540  $43,768  
Interest and dividends on investment securities:
Taxable investment securities6,757  6,486  7,178  7,530  8,260  
Tax-exempt investment securities668  656  708  814  866  
Dividend income on investment securities17  17  14  14  18  
Interest on deposits in other financial institutions36  54  33  46  68  
Dividend income on FHLB stock132  456  186  161  161  
Total interest income53,814  55,157  53,980  54,105  53,141  
Interest expense:     
Interest on deposits:     
Demand176  202  207  199  192  
Savings and money market1,118  1,253  1,549  1,507  791  
Time3,268  3,653  4,432  4,867  5,092  
Interest on short-term borrowings508  1,139  1,130  1,123  893  
Interest on long-term debt914  976  1,013  1,031  1,060  
Total interest expense5,984  7,223  8,331  8,727  8,028  
Net interest income47,830  47,934  45,649  45,378  45,113  
Provision for credit losses9,329  2,098  1,532  1,404  1,283  
Net interest income after provision for credit losses38,501  45,836  44,117  43,974  43,830  
Other operating income:     
Mortgage banking income337  1,410  1,994  1,708  1,573  
Service charges on deposit accounts2,050  2,159  2,125  2,041  2,081  
Other service charges and fees4,897  4,095  3,894  3,909  3,215  
Income from fiduciary activities1,297  1,175  1,126  1,129  965  
Equity in earnings of unconsolidated subsidiaries26  92  86  71  8  
Net gains (losses) on sales of investment securities—  —  36  —  —  
Income from bank-owned life insurance(19) 594  645  914  952  
Net gains (losses) on sales of foreclosed assets—  (162) 17  —  —  
Other (refer to Table 4)298  405  343  322  2,879  
Total other operating income8,886  9,768  10,266  10,094  11,673  
Other operating expense:     
Salaries and employee benefits20,347  21,207  20,631  20,563  19,889  
Net occupancy3,672  3,619  3,697  3,525  3,458  
Equipment1,097  1,142  1,067  1,138  1,006  
Communication expense837  906  1,008  903  734  
Legal and professional services2,028  2,123  1,933  1,728  1,570  
Computer software expense2,943  2,942  2,713  2,560  2,597  
Advertising expense1,092  527  711  712  711  
Foreclosed asset expense67  28  15  49  159  
Provision for off-balance sheet credit exposures1,798  (160) (465) 487  167  
Other (refer to Table 4)2,359  3,908  3,624  4,442  4,057  
Total other operating expense36,240  36,242  34,934  36,107  34,348  
Income before income taxes11,147  19,362  19,449  17,961  21,155  
Income tax expense2,821  5,165  4,895  4,427  5,118  
Net income$8,326  $14,197  $14,554  $13,534  $16,037  
Per common share data:     
Basic earnings per share$0.30  $0.50  $0.51  $0.47  $0.56  
Diluted earnings per share0.29  0.50  0.51  0.47  0.55  
Cash dividends declared0.23  0.23  0.23  0.23  0.21  
Basic weighted average shares outstanding28,126,400  28,259,294  28,424,898  28,546,564  28,758,310  
Diluted weighted average shares outstanding28,277,753  28,448,243  28,602,338  28,729,510  28,979,855  
Note: Certain amounts in the prior period financial statements have been reclassified to conform to the presentation of the current period.




CENTRAL PACIFIC FINANCIAL CORP. AND SUBSIDIARIES 
Other Operating Income and Other Operating Expense - Detail 
(Unaudited)TABLE 4

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

 Three Months Ended
 March 31,December 31,September 30,June 30,March 31,
(Dollars in thousands)20202019201920192019
Other operating income - other:
Income recovered on nonaccrual loans previously charged-off$23  $80  $73  $85  $82  
Other recoveries40  36  42  26  26  
Commissions on sale of checks81  75  75  79  80  
Gain on sale of MasterCard stock—  —  —  —  2,555  
Other154  214  153  132  136  
Total other operating income - other$298  $405  $343  $322  $2,879  

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

 Three Months Ended
 March 31,December 31,September 30,June 30,March 31,
(Dollars in thousands)20202019201920192019
Other operating expense - other:
Charitable contributions$187  $122  $230  $175  $154  
FDIC insurance assessment—  —  5  362  501  
Miscellaneous loan expenses300  361  274  317  294  
ATM and debit card expenses634  672  660  620  650  
Armored car expenses294  186  220  211  198  
Entertainment and promotions280  495  323  1,023  230  
Stationery and supplies248  305  240  279  225  
Directors’ fees and expenses241  246  242  238  242  
Directors' deferred compensation plan expense(1,483) 148  (155) 133  435  
Provision (credit) for residential mortgage loan repurchase losses—  —  —  (403) —  
Other1,658  1,373  1,585  1,487  1,128  
Total other operating expense - other$2,359  $3,908  $3,624  $4,442  $4,057  
Note: Certain amounts in the prior period financial statements have been reclassified to conform to the presentation of the current period.




CENTRAL PACIFIC FINANCIAL CORP. AND SUBSIDIARIES 
Average Balances, Interest Income & Expense, Yields and Rates (Taxable Equivalent) 
(Unaudited)TABLE 5

 Three Months EndedThree Months EndedThree Months Ended
March 31, 2020December 31, 2019March 31, 2019
 AverageAverage AverageAverage AverageAverage 
(Dollars in thousands)BalanceYield/RateInterestBalanceYield/RateInterestBalanceYield/RateInterest
ASSETS
Interest-earning assets:         
Interest-bearing deposits in other financial institutions$11,082  1.29 %$36  $13,704  1.57 %$54  $11,380  2.41 %$68  
Investment securities, excluding valuation allowance:
Taxable1,027,695  2.64  6,774  1,042,057  2.50  6,503  1,201,732  2.76  8,278  
Tax-exempt105,330  3.21  845  108,630  3.06  830  153,196  2.86  1,096  
Total investment securities1,133,025  2.69  7,619  1,150,687  2.55  7,333  1,354,928  2.77  9,374  
Loans, including loans held for sale4,462,347  4.16  46,204  4,412,247  4.28  47,488  4,083,791  4.33  43,768  
Federal Home Loan Bank stock14,589  3.61  132  18,504  9.85  456  14,278  4.52  161  
Total interest-earning assets5,621,043  3.85  53,991  5,595,142  3.94  55,331  5,464,377  3.94  53,371  
Noninterest-earning assets386,194    383,655    345,554    
Total assets$6,007,237    $5,978,797    $5,809,931    
LIABILITIES AND EQUITY
Interest-bearing liabilities:        
Interest-bearing demand deposits$1,013,795  0.07 %$176  $1,019,854  0.08 %$202  $951,101  0.08 %$192  
Savings and money market deposits1,651,751  0.27  1,118  1,592,398  0.31  1,253  1,472,835  0.22  791  
Time deposits under $100,000164,274  0.70  284  167,675  0.71  299  175,823  0.66  287  
Time deposits $100,000 and over846,152  1.42  2,984  828,434  1.61  3,354  982,678  1.98  4,805  
Total interest-bearing deposits3,675,972  0.50  4,562  3,608,361  0.56  5,108  3,582,437  0.69  6,075  
Federal Home Loan Bank advances and other short-term borrowings139,813  1.46  508  238,016  1.90  1,139  137,544  2.63  893  
Long-term debt101,547  3.62  914  101,547  3.81  976  101,547  4.23  1,060  
Total interest-bearing liabilities3,917,332  0.61  5,984  3,947,924  0.73  7,223  3,821,528  0.85  8,028  
Noninterest-bearing deposits1,445,724    1,390,536    1,396,033    
Other liabilities107,458    109,873    97,735    
Total liabilities5,470,514    5,448,333    5,315,296    
Shareholders’ equity536,721    530,464    494,635    
Non-controlling interest2    —    —    
Total equity536,723    530,464    494,635    
Total liabilities and equity$6,007,237    $5,978,797    $5,809,931    
Net interest income  $48,007    $48,108    $45,343  
Interest rate spread3.24 %3.21 %3.09 %
Net interest margin 3.43 %  3.43 %  3.34 % 




CENTRAL PACIFIC FINANCIAL CORP. AND SUBSIDIARIES
Loans by Geographic Distribution
(Unaudited)TABLE 6

 March 31,December 31,September 30,June 30,March 31,
(Dollars in thousands)20202019201920192019
HAWAII:     
Commercial, financial and agricultural$454,817  $454,582  $439,296  $435,353  $411,396  
Real estate:
Construction100,617  95,854  96,661  72,427  68,981  
Residential mortgage  1,632,536  1,599,801  1,558,735  1,516,936  1,451,794  
Home equity  504,686  490,734  475,565  473,151  465,905  
Commercial mortgage  917,886  909,798  909,987  905,479  869,521  
Consumer367,960  373,451  369,511  353,282  352,771  
Leases—  —  31  52  83  
Total loans3,978,502  3,924,220  3,849,786  3,756,680  3,620,451  
Allowance for credit losses(51,646) (42,592) (42,286) (42,414) (41,413) 
Loans, net of allowance for credit losses$3,926,856  $3,881,628  $3,807,500  $3,714,266  $3,579,038  
U.S. MAINLAND: [1]     
Commercial, financial and agricultural$120,507  $115,722  $137,316  $155,130  $155,399  
Real estate:
Construction—  —  —  —  2,194  
Residential mortgage  —  —  —  —  —  
Home equity  —  —  —  —  —  
Commercial mortgage  221,251  213,617  223,925  187,379  188,485  
Consumer191,738  195,981  156,835  147,924  135,042  
Leases—  —  —  —  —  
Total loans533,496  525,320  518,076  490,433  481,120  
Allowance for credit losses(7,999) (5,379) (5,881) (5,853) (5,854) 
Loans, net of allowance for credit losses$525,497  $519,941  $512,195  $484,580  $475,266  
TOTAL:     
Commercial, financial and agricultural$575,324  $570,304  $576,612  $590,483  $566,795  
Real estate:
Construction100,617  95,854  96,661  72,427  71,175  
Residential mortgage  1,632,536  1,599,801  1,558,735  1,516,936  1,451,794  
Home equity  504,686  490,734  475,565  473,151  465,905  
Commercial mortgage  1,139,137  1,123,415  1,133,912  1,092,858  1,058,006  
Consumer559,698  569,432  526,346  501,206  487,813  
Leases—  —  31  52  83  
Total loans4,511,998  4,449,540  4,367,862  4,247,113  4,101,571  
Allowance for credit losses(59,645) (47,971) (48,167) (48,267) (47,267) 
Loans, net of allowance for credit losses$4,452,353  $4,401,569  $4,319,695  $4,198,846  $4,054,304  
[1] U.S. Mainland includes territories of the United States.




CENTRAL PACIFIC FINANCIAL CORP. AND SUBSIDIARIES
Deposits
(Unaudited)TABLE 7
 
 March 31,December 31,September 30,June 30,March 31,
(Dollars in thousands)20202019201920192019
Noninterest-bearing demand$1,430,540  $1,450,532  $1,399,200  $1,351,190  $1,357,890  
Interest-bearing demand1,018,508  1,043,010  998,037  1,002,706  965,316  
Savings and money market1,693,280  1,600,028  1,593,738  1,573,805  1,562,798  
Time deposits less than $100,000162,399  165,755  165,687  171,106  174,265  
Core deposits4,304,727  4,259,325  4,156,662  4,098,807  4,060,269  
Government time deposits523,343  533,088  552,470  574,825  600,572  
Other time deposits $100,000 to $250,000  100,047  107,550  103,959  105,382  107,051  
Other time deposits greater than $250,000  207,952  220,060  224,568  197,835  180,236  
Total time deposits $100,000 and over831,342  860,698  880,997  878,042  887,859  
Total deposits$5,136,069  $5,120,023  $5,037,659  $4,976,849  $4,948,128  




CENTRAL PACIFIC FINANCIAL CORP. AND SUBSIDIARIES
Nonperforming Assets, Past Due and Restructured Loans
(Unaudited)TABLE 8

 March 31,December 31,September 30,June 30,March 31,
(Dollars in thousands)20202019201920192019
Nonaccrual loans (including loans held for sale):
Commercial, financial and agricultural$667  $467  $—  $—  $—  
Real estate:
Residential mortgage2,287  979  799  738  2,492  
Home equity545  92  95  244  570  
Consumer48  17  —  —  —  
Total nonaccrual loans3,547  1,555  894  982  3,062  
Other real estate owned ("OREO"):     
Real estate:  
Residential mortgage—  —  302  276  276  
Home equity100  164  164  —  —  
Total OREO100  164  466  276  276  
Total nonperforming assets ("NPAs")3,647  1,719  1,360  1,258  3,338  
Loans delinquent for 90 days or more still accruing interest:     
Real estate:  
Residential mortgage1,221  724  —  —  —  
Consumer352  286  235  267  159  
Total loans delinquent for 90 days or more still accruing interest1,573  1,010  235  267  159  
Restructured loans still accruing interest:     
Commercial, financial and agricultural113  135  157  178  199  
Real estate:  
Construction—  —  —  —  2,194  
Residential mortgage5,431  5,502  6,717  6,831  7,141  
Commercial mortgage1,709  1,839  1,985  2,097  2,222  
Total restructured loans still accruing interest7,253  7,476  8,859  9,106  11,756  
Total NPAs and loans delinquent for 90 days or more and restructured loans still accruing interest$12,473  $10,205  $10,454  $10,631  $15,253  
Total nonaccrual loans as a percentage of loans0.08 %0.03 %0.02 %0.02 %0.07 %
Total NPAs as a percentage of loans and OREO0.08 %0.04 %0.03 %0.03 %0.08 %
Total NPAs and loans delinquent for 90 days or more still accruing interest as a percentage of loans and OREO0.12 %0.06 %0.04 %0.04 %0.09 %
Total NPAs and loans delinquent for 90 days or more and restructured loans still accruing interest as a percentage of loans and OREO0.28 %0.23 %0.24 %0.25 %0.37 %
Quarter-to-quarter changes in NPAs:    
Balance at beginning of quarter$1,719  $1,360  $1,258  $3,338  $2,737  
Additions2,056  695  112  —  810  
Reductions:  
Payments(60) (34) (51) (2,055) (71) 
Return to accrual status—  —  (2) (25) —  
Sales of NPAs—  (302) —  —  —  
Charge-offs, valuation and other adjustments(68) —  43  —  (138) 
Total reductions(128) (336) (10) (2,080) (209) 
Balance at end of quarter$3,647  $1,719  $1,360  $1,258  $3,338  




CENTRAL PACIFIC FINANCIAL CORP. AND SUBSIDIARIES
Allowance for Credit Losses on Loans
(Unaudited)TABLE 9
 
 Three Months Ended
 March 31,December 31,September 30,June 30,March 31,
(Dollars in thousands)20202019201920192019
Allowance for credit losses:   
Balance at beginning of period$47,971  $48,167  $48,267  $47,267  $47,916  
Adoption of ASU 2016-13  3,566  —  —  —  —  
Adjusted balance at beginning of period  51,537  48,167  48,267  47,267  47,916  
Provision for credit losses9,329  2,098  1,532  1,404  1,283  
Charge-offs:
Commercial, financial and agricultural437  379  797  839  463  
Real estate:
Home equity—  —  5  —  —  
Consumer2,217  2,723  1,832  1,459  2,251  
Total charge-offs2,654  3,102  2,634  2,298  2,714  
Recoveries:   
Commercial, financial and agricultural342  264  362  315  233  
Real estate:
Construction131  6  6  592  6  
Residential mortgage181  26  104  372  22  
Home equity31  —  24  9  9  
Commercial mortgage2  —  —  25  —  
Consumer746  512  506  581  512  
Total recoveries1,433  808  1,002  1,894  782  
Net charge-offs (recoveries)1,221  2,294  1,632  404  1,932  
Balance at end of period$59,645  $47,971  $48,167  $48,267  $47,267  
Average loans, net of deferred costs$4,462,347  $4,412,247  $4,293,455  $4,171,558  $4,083,791  
Annualized ratio of net charge-offs to average loans0.11 %0.21 %0.15 %0.04 %0.19 %
Ratio of allowance for credit losses to loans1.32 %1.08 %1.10 %1.14 %1.15 %