Central Pacific Financial Corp. Reports Increase In Second Quarter Earnings To $18.7 Million

Rhea-AI Summary

Central Pacific Financial Corp. (NYSE: CPF) reported a strong second quarter in 2021, achieving net income of $18.7 million or $0.66 EPS, a significant increase from $9.9 million or $0.35 EPS in Q2 2020. The company resumed share repurchases, buying 156,600 shares at an average cost of $27.63. Total assets reached $7.18 billion, with loans totaling $5.08 billion. The quarterly cash dividend was declared at $0.24 per share, payable on September 15, 2021. The credit for loan losses was $3.4 million, indicating improved asset quality as Hawaii's economy rebounds.

Positive

• Net income increased to $18.7 million or $0.66 EPS in Q2 2021, up from $9.9 million or $0.35 EPS in Q2 2020.
• Resumed share repurchases, buying 156,600 shares at an average cost of $27.63.
• Total assets grew to $7.18 billion from $6.63 billion year-over-year.
• Cash dividend of $0.24 declared, reflecting strong capital return to shareholders.

Negative

• Net interest margin decreased to 3.16% from 3.26% in the same quarter last year.
• Total loans decreased sequentially by $0.06 billion from $5.14 billion in Q1 2021.

HONOLULU, July 28, 2021 /PRNewswire/ -- Central Pacific Financial Corp. (NYSE: CPF) (the "Company"), parent company of Central Pacific Bank (the "Bank"), today reported net income in the second quarter of 2021 of $18.7 million, or fully diluted earnings per share ("EPS") of $0.66, compared to net income in the second quarter of 2020 of $9.9 million, or EPS of $0.35, and net income in the first quarter of 2021 of $18.0 million, or EPS of $0.64.

"We are pleased to report very strong financial results with quarterly pre-tax income reaching a new high since 2007," said Paul Yonamine, Chairman and Chief Executive Officer. "During the second quarter we resumed share repurchases as the Hawaii economy continued to rebound, and our asset quality, liquidity and capital levels remained very strong."

"Our quarterly results are a reflection of the extraordinary work of our teams who continue to diligently manage risks while growing our loans and deposits to meet our customer's needs," said Catherine Ngo, President.

On July 27, 2021, the Company's Board of Directors declared a quarterly cash dividend of $0.24 per share on its outstanding common shares. The dividend will be payable on September 15, 2021 to shareholders of record at the close of business on August 31, 2021.

During the second quarter of 2021, the Company resumed repurchases under its common stock repurchase program and repurchased 156,600 shares of common stock, at a total cost of $4.3 million, or an average cost per share of $27.63. The Company's remaining repurchase authority under its common stock repurchase program at June 30, 2021 is $20.7 million. During the six months ended June 30, 2021, the Company returned $17.6 million in capital to its shareholders through cash dividends and share repurchases.

Earnings Highlights
Net interest income for the second quarter of 2021 was $52.1 million, compared to $49.3 million in the year-ago quarter and $49.8 million in the previous quarter. Net interest margin for the second quarter of 2021 was 3.16%, compared to 3.26% in the year-ago quarter and 3.19% in the previous quarter. The sequential quarter increase in net interest income is primarily due to an increase in loan fees on PPP loans and was partially offset by decreases in yields earned on the Company's interest-earning assets. Net interest income for the second quarter of 2021 included $7.9 million in net interest income and loan fees on PPP loans, compared to $5.2 million in the previous quarter. Net deferred fees on PPP loans totaled $15.9 million and $20.3 million at June 30, 2021 and March 31, 2021, respectively. Additional information on average balances, interest income and expenses and yields and rates is presented in Tables 4 and 5.

In the second quarter of 2021, the Company recorded a credit to the provision for credit losses on loans of $3.4 million, compared to a provision of $11.2 million in the year-ago quarter and a credit to the provision of $0.8 million in the previous quarter. The credit to the provision for credit losses in the second quarter of 2021 was driven by an improved economic forecast and positive migration of loan grades as the State of Hawaii continues to recover from the COVID-19 pandemic.

Other operating income for the second quarter of 2021 totaled $10.5 million, compared to $10.7 million in the year-ago quarter and $10.7 million in the previous quarter.  Additional information on other operating income is presented in Table 3.

Other operating expense for the second quarter of 2021 totaled $41.4 million, compared to $35.9 million in the year-ago quarter and $37.8 million in the previous quarter. The increase from the previous quarter was primarily due to an increase in salaries and employee benefits of $4.0 million. Additional information on other operating expense is presented in Table 3.

The efficiency ratio for the second quarter of 2021 was 66.20%, compared to 59.81% in the year-ago quarter and 62.54% in the previous quarter.

The effective tax rate for the second quarter of 2021 was 23.9%, compared to 23.0% in the year-ago quarter and 23.2% in the previous quarter.

Balance Sheet Highlights
Total assets at June 30, 2021 of $7.18 billion increased from $6.63 billion at June 30, 2020, and increased from $6.98 billion at March 31, 2021.

Total loans at June 30, 2021 of $5.08 billion increased from $5.00 billion at June 30, 2020, and decreased from $5.14 billion at March 31, 2021. The sequential quarter decrease in total loans was due to a decrease in PPP loans of $163.2 million, offset by a net increase in core loans of $102.7 million. In the second quarter of 2021, the Company received repayments of PPP loans totaling $195.8 million, which were offset by PPP originations of $28.1 million. Loans on forbearance or deferral totaled $3.5 million, or less than 1% of total loans at June 30, 2021, and declined 91.2% from the first quarter of 2021. Loans by geographic distribution are summarized in Table 6.

Total deposits at June 30, 2021 of $6.40 billion increased from $5.79 billion at June 30, 2020, and increased from $6.21 billion at March 31, 2021. Core deposits, which include demand deposits, savings and money market deposits and time deposits up to $250,000, totaled $5.83 billion at June 30, 2021, and increased by $278.6 million from March 31, 2021. The Company's loan-to-deposit ratio was 79.4% at June 30, 2021, compared to 86.4% at June 30, 2020 and 82.8% at March 31, 2021. Core deposit and total deposit balances are summarized in Table 7.

Asset Quality
Nonperforming assets at June 30, 2021 totaled $6.7 million, or 0.09% of total assets, compared to $4.7 million, or 0.07% of total assets at June 30, 2020, and $7.2 million, or 0.10% of total assets at March 31, 2021. Additional information on nonperforming assets, past due and restructured loans is presented in Table 8.

Net charge-offs in the second quarter of 2021 totaled $0.8 million, compared to net charge-offs of $2.9 million in the year-ago quarter, and net charge-offs of $0.7 million in the previous quarter.

The allowance for credit losses, as a percentage of total loans at June 30, 2021 was 1.53%, compared to 1.35% at June 30, 2020 and 1.59% at March 31, 2021. Excluding PPP loans, the allowance for credit losses, as a percentage of core loans at June 30, 2021 was 1.68%, compared to 1.80% at March 31, 2021. Additional information on net charge-offs and recoveries and the allowance for credit losses is presented in Tables 9 and 10.

Capital
Total shareholders' equity was $552.8 million at June 30, 2021, compared to $544.3 million and $542.9 million at June 30, 2020 and March 31, 2021, 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, 2021, the Company's leverage capital, tier 1 risk-based capital, total risk-based capital, and common equity tier 1 ratios were 8.6%, 12.7%, 14.9%, and 11.6%, respectively, compared to 8.9%, 13.1%, 15.4%, and 12.0%, respectively, at March 31, 2021.

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.cpb.bank. Alternatively, investors may participate in the live call by dialing 1-877-505-7644. A playback of the call will be available through August 28, 2021 by dialing 1-877-344-7529 (passcode: 10158618) 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.cpb.bank.

About Central Pacific Financial Corp.
Central Pacific Financial Corp. is a Hawaii-based bank holding company with approximately $7.2 billion in assets as of June 30, 2021. Central Pacific Bank, its primary subsidiary, operates 31 branches and 70 ATMs in the state of Hawaii. For additional information, please visit the Company's website at http://www.cpb.bank.

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, credit losses, 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 and other business initiatives; 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 impact of our participation in the Paycheck Protection Program ("PPP") and fulfillment of government guarantees on our PPP loans; 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 and other business initiatives; 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 statements are 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																				Six Months Ended
(Dollars in thousands,		Jun 30,				Mar 31,				Dec 31,				Sep 30,				Jun 30,				Jun 30,
except for per share amounts)		2021				2021				2020				2020				2020				2021				2020
CONDENSED INCOME STATEMENT
Net interest income		$	52,061			$	49,804			$	51,474			$	49,120			$	49,259			$	101,865			$	97,089
(Credit) provision for credit losses [1]		(3,443)				(821)				4,898				14,873				11,213				(4,264)				22,340
Total other operating income		10,530				10,711				14,057				11,563				10,692				21,241				19,578
Total other operating expense [1]		41,433				37,846				44,690				36,751				35,854				79,279				70,296
Income tax expense		5,887				5,452				3,772				2,200				2,967				11,339				5,788
Net income		18,714				18,038				12,171				6,859				9,917				36,752				18,243
Basic earnings per common share		$	0.66			$	0.64			$	0.43			$	0.24			$	0.35			$	1.31			$	0.65
Diluted earnings per common share		0.66				0.64				0.43				0.24				0.35				1.29				0.65
Dividends declared per common share		0.24				0.23				0.23				0.23				0.23				0.47				0.46
PERFORMANCE RATIOS
Return on average assets (ROA) [2]		1.06		%		1.07		%		0.74		%		0.42		%		0.61		%		1.07		%		0.58		%
Return on average shareholders' equity (ROE) [2]		13.56				13.07				8.87				4.99				7.34				13.31				6.77
Average shareholders' equity to average assets		7.84				8.19				8.29				8.36				8.36				8.01				8.64
Efficiency ratio  [3]		66.20				62.54				68.20				60.56				59.81				64.40				60.25
Net interest margin (NIM) [2]		3.16				3.19				3.32				3.19				3.26				3.18				3.34
Dividend payout ratio [4]		36.36				35.94				53.49				95.83				65.71				36.43				70.77
SELECTED AVERAGE BALANCES
Average loans, including loans held for sale		$	5,110,820			$	5,079,874			$	5,034,717			$	5,016,955			$	4,902,905			$	5,095,433			$	4,682,626
Average interest-earning assets		6,606,779				6,305,786				6,202,228				6,160,381				6,073,361				6,457,115				5,847,202
Average assets		7,039,928				6,738,825				6,621,127				6,574,492				6,468,129				6,890,195				6,237,592
Average deposits		6,269,516				5,958,742				5,755,257				5,728,147				5,614,595				6,114,975				5,368,056
Average interest-bearing liabilities		4,253,382				4,161,453				4,163,396				4,118,726				4,082,699				4,207,670				4,000,016
Average shareholders' equity		552,102				551,976				548,663				549,378				540,802				552,039				538,762

 

CENTRAL PACIFIC FINANCIAL CORP. AND SUBSIDIARIES
Financial Highlights
(Unaudited)														TABLE 1 (CONTINUED)
		Jun 30,			Mar 31,			Dec 31,			Sep 30,			Jun 30,
(dollars in thousands)		2021			2021			2020			2020			2020
REGULATORY CAPITAL RATIOS
Central Pacific Financial Corp
Leverage capital ratio		8.6	%		8.9	%		8.8	%		8.8	%		8.9	%
Tier 1 risk-based capital ratio		12.7			13.1			12.9			12.8			12.5
Total risk-based capital ratio		14.9			15.4			15.2			13.9			13.6
Common equity tier 1 capital ratio		11.6			12.0			11.8			11.6			11.4
Central Pacific Bank
Leverage capital ratio		9.1			9.4			9.4			8.6			8.7
Tier 1 risk-based capital ratio		13.5			13.9			13.7			12.5			12.2
Total risk-based capital ratio		14.6			15.0			14.9			13.6			13.3
Common equity tier 1 capital ratio		13.5			13.9			13.7			12.5			12.2

 

CENTRAL PACIFIC FINANCIAL CORP. AND SUBSIDIARIES
Financial Highlights
(Unaudited)																		TABLE 1 (CONTINUED)
		Jun 30,				Mar 31,				Dec 31,				Sep 30,				Jun 30,
(dollars in thousands, except for per share amounts)		2021				2021				2020				2020				2020
BALANCE SHEET
Total loans, net of deferred fees and costs		$	5,077,318			$	5,137,849			$	4,964,113			$	5,030,626			$	5,003,438
Total assets		7,178,481				6,979,265				6,594,583				6,648,142				6,632,972
Total deposits		6,397,159				6,208,950				5,796,118				5,678,929				5,794,685
Long-term debt		105,495				105,436				105,385				101,547				167,491
Total shareholders' equity		552,793				542,865				546,685				543,903				544,271
Total shareholders' equity to total assets		7.70		%		7.78		%		8.29		%		8.18		%		8.21		%
ASSET QUALITY
Allowance for credit losses (ACL) [1] [2]		$	77,781			$	81,553			$	83,269			$	80,542			$	67,339
Non-performing assets (NPA)		6,745				7,194				6,192				13,187				4,741
ACL to total loans [1]		1.53		%		1.59		%		1.68		%		1.60		%		1.35		%
ACL to core loans (refer to Table 10) [1]		1.68		%		1.80		%		1.83		%		1.79		%		1.50		%
ACL to non-performing assets [1]		1,153.17		%		1,133.63		%		1,344.78		%		610.77		%		1,420.35		%
NPA to total assets		0.09		%		0.10		%		0.09		%		0.20		%		0.07		%
PER SHARE OF COMMON STOCK OUTSTANDING
Book value per common share		$	19.59			$	19.19			$	19.40			$	19.30			$	19.33
Closing market price per common share		26.06				26.68				19.01				13.57				16.03

[1] As of January 1, 2021, the provision for credit losses on off-balance sheet credit exposures (previously included in other operating expense) is included in the provision for credit losses line on the consolidated statements of income. Prior period amounts have been reclassified to conform to the current period presentation. The allowance for off-balance sheet credit exposures continues to be included in other liabilities

[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
		Jun 30,				Mar 31,				Dec 31,				Sep 30,				Jun 30,
(Dollars in thousands, except share data)		2021				2021				2020				2020				2020
ASSETS
Cash and due from financial institutions		$	116,009			$	93,358			$	97,546			$	89,665			$	102,132
Interest-bearing deposits in other financial institutions		224,469				166,533				6,521				5,489				41,201
Investment securities:
Available-for-sale debt securities, at fair value		1,407,340				1,216,341				1,182,609				1,166,319				1,168,594
Equity securities, at fair value		1,578				1,435				1,351				1,204				1,209
Total investment securities		1,408,918				1,217,776				1,183,960				1,167,523				1,169,803
Loans held for sale		5,361				5,234				16,687				23,962				10,443
Loans, net of deferred fees and costs		5,077,318				5,137,849				4,964,113				5,030,626				5,003,438
Less allowance for credit losses		77,781				81,553				83,269				80,542				67,339
Loans, net of allowance for credit losses		4,999,537				5,056,296				4,880,844				4,950,084				4,936,099
Premises and equipment, net		76,740				72,599				65,278				61,095				55,032
Accrued interest receivable		19,014				19,440				20,224				21,478				19,590
Investment in unconsolidated subsidiaries		31,052				31,487				29,968				30,239				16,428
Other real estate owned		—				—				—				128				—
Mortgage servicing rights		10,500				11,094				11,865				12,429				12,771
Bank-owned life insurance		167,289				167,110				163,161				161,743				161,758
Federal Home Loan Bank ("FHLB") stock		8,149				8,155				8,237				17,468				9,229
Right of use lease asset		41,890				44,727				45,857				44,896				50,039
Other assets		69,553				85,456				64,435				61,943				48,447
Total assets		$	7,178,481			$	6,979,265			$	6,594,583			$	6,648,142			$	6,632,972
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Noninterest-bearing demand		$	2,203,806			$	2,070,428			$	1,790,269			$	1,762,476			$	1,851,012
Interest-bearing demand		1,341,280				1,237,574				1,174,888				1,114,123				1,067,483
Savings and money market		2,048,945				2,004,368				1,932,043				1,881,104				1,945,744
Time		803,128				896,580				898,918				921,226				930,446
Total deposits		6,397,159				6,208,950				5,796,118				5,678,929				5,794,685
FHLB advances and other short-term borrowings		—				—				22,000				206,000				—
Long-term debt		105,495				105,436				105,385				101,547				167,491
Lease liability		43,112				46,033				47,191				45,355				50,440
Other liabilities		79,874				75,933				77,156				72,369				76,050
Total liabilities		6,625,640				6,436,352				6,047,850				6,104,200				6,088,666
Shareholders' equity:
Preferred stock, no par value, authorized 1,000,000 shares; issued and outstanding:  none at June 30, 2021, March 31, 2021, December 31, 2020, September 30, 2020, and June 30, 2020		—				—				—				—				—
Common stock, no par value, authorized 185,000,000 shares; issued and outstanding:  28,218,860 at June 30, 2021, 28,282,530 at March 31, 2021, 28,183,340 at December 31, 2020, 28,179,798 at September 30, 2020, and 28,154,159 at June 30, 2020		440,854				443,505				442,635				442,635				442,699
Additional paid-in capital		96,182				95,721				94,842				94,336				93,007
Retained earnings (accumulated deficit)		10,831				628				(10,920)				(16,609)				(16,986)
Accumulated other comprehensive income		4,926				3,011				20,128				23,541				25,551
Total shareholders' equity		552,793				542,865				546,685				543,903				544,271
Non-controlling interest		48				48				48				39				35
Total equity		552,841				542,913				546,733				543,942				544,306
Total liabilities and shareholders' equity		$	7,178,481			$	6,979,265			$	6,594,583			$	6,648,142			$	6,632,972

 

CENTRAL PACIFIC FINANCIAL CORP. AND SUBSIDIARIES
Consolidated Statements of Income
(Unaudited)																						TABLE 3
		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)		2021				2021				2020				2020				2020				2021				2020
Interest income:
Interest and fees on loans		$	49,024			$	46,074			$	48,259			$	45,751			$	45,915			$	95,098			$	92,119
Interest and dividends on investment securities:
Taxable investment securities		4,447				5,106				5,002				5,233				6,310				9,553				13,067
Tax-exempt investment securities		346				514				504				621				599				860				1,267
Dividend income on investment securities		18				18				18				17				17				36				34
Interest on deposits in other financial institutions		61				10				4				3				3				71				39
Dividend income on FHLB stock		63				59				114				128				106				122				238
Total interest income		53,959				51,781				53,901				51,753				52,950				105,740				106,764
Interest expense:
Interest on deposits:
Demand		93				86				105				115				114				179				290
Savings and money market		282				274				314				417				567				556				1,685
Time		498				588				813				1,284				2,124				1,086				5,392
Interest on short-term borrowings		—				2				65				71				74				2				582
Interest on long-term debt		1,025				1,027				1,130				746				812				2,052				1,726
Total interest expense		1,898				1,977				2,427				2,633				3,691				3,875				9,675
Net interest income		52,061				49,804				51,474				49,120				49,259				101,865				97,089
(Credit) provision for credit losses		(3,443)				(821)				4,898				14,873				11,213				(4,264)				22,340
Net interest income after (credit) provision for credit losses		55,504				50,625				46,576				34,247				38,046				106,129				74,749
Other operating income:
Mortgage banking income		1,533				2,970				5,434				4,345				3,566				4,503				3,903
Service charges on deposit accounts		1,443				1,478				1,560				1,475				1,149				2,921				3,199
Other service charges and fees		4,619				3,790				3,709				3,345				2,916				8,409				7,813
Income from fiduciary activities		1,269				1,231				1,113				1,149				1,270				2,500				2,567
Net gain (loss) on sales of investment securities		50				—				151				(352)				—				50				—
Income from bank-owned life insurance		1,210				797				1,219				1,179				1,424				2,007				1,405
Other		406				445				871				422				367				851				691
Total other operating income		10,530				10,711				14,057				11,563				10,692				21,241				19,578
Other operating expense:
Salaries and employee benefits		23,790				19,827				23,090				20,375				20,329				43,617				40,383
Net occupancy		4,055				3,764				4,011				3,834				3,645				7,819				7,317
Equipment		1,048				1,000				1,157				1,234				1,043				2,048				2,140
Communication expense		756				769				758				856				774				1,525				1,611
Legal and professional services		2,572				2,377				2,507				2,262				2,238				4,949				4,266
Computer software expense		3,398				3,783				3,625				3,114				3,035				7,181				5,978
Advertising expense		1,329				1,658				756				1,020				923				2,987				2,015
Other		4,485				4,668				8,786				4,056				3,867				9,153				6,586
Total other operating expense		41,433				37,846				44,690				36,751				35,854				79,279				70,296
Income before income taxes		24,601				23,490				15,943				9,059				12,884				48,091				24,031
Income tax expense		5,887				5,452				3,772				2,200				2,967				11,339				5,788
Net income		$	18,714			$	18,038			$	12,171			$	6,859			$	9,917			$	36,752			$	18,243
Per common share data:
Basic earnings per share		$	0.66			$	0.64			$	0.43			$	0.24			$	0.35			$	1.31			$	0.65
Diluted earnings per share		0.66				0.64				0.43				0.24				0.35				1.29				0.65
Cash dividends declared		0.24				0.23				0.23				0.23				0.23				0.47				0.46
Basic weighted average shares outstanding		28,173,710				28,108,648				28,071,151				28,060,020				28,040,802				28,141,360				28,083,602
Diluted weighted average shares outstanding		28,456,624				28,313,014				28,177,366				28,111,664				28,095,230				28,407,479				28,190,132
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 4
		Three Months Ended											Three Months Ended											Three Months Ended
		June 30, 2021											March 31, 2021											June 30, 2020
		Average				Average							Average				Average							Average				Average
(Dollars in thousands)		Balance				Yield/Rate			Interest				Balance				Yield/Rate			Interest				Balance				Yield/Rate			Interest
ASSETS
Interest-earning assets:
Interest-bearing deposits in other financial institutions		$	222,934			0.11	%		$	61			$	43,442			0.10	%		$	10			$	15,777			0.10	%		$	3
Investment securities, excluding valuation allowance:
Taxable		1,172,183				1.52			4,465				1,081,271				1.90			5,124				1,042,441				2.43			6,327
Tax-exempt		92,702				1.89			438				93,665				2.78			651				100,485				3.02			758
Total investment securities		1,264,885				1.55			4,903				1,174,936				1.97			5,775				1,142,926				2.48			7,085
Loans, including loans held for sale		5,110,820				3.84			49,024				5,079,874				3.66			46,074				4,902,905				3.76			45,915
Federal Home Loan Bank stock		8,140				3.11			63				7,534				3.13			59				11,753				3.62			106
Total interest-earning assets		6,606,779				3.28			54,051				6,305,786				3.32			51,918				6,073,361				3.51			53,109
Noninterest-earning assets		433,149											433,039											394,768
Total assets		$	7,039,928										$	6,738,825										$	6,468,129
LIABILITIES AND EQUITY
Interest-bearing liabilities:
Interest-bearing demand deposits		$	1,269,676			0.03	%		$	93			$	1,186,963			0.03	%		$	86			$	1,056,885			0.04	%		$	114
Savings and money market deposits		2,028,583				0.06			282				1,972,800				0.06			274				1,856,621				0.12			567
Time deposits up to $250,000		231,922				0.34			196				236,828				0.41			241				260,319				0.81			525
Time deposits over $250,000		617,745				0.20			302				657,004				0.21			347				708,831				0.91			1,599
Total interest-bearing deposits		4,147,926				0.08			873				4,053,595				0.09			948				3,882,656				0.29			2,805
Federal Home Loan Bank advances and other short-term borrowings		—				—			—				2,456				0.30			2				63,104				0.48			74
Long-term debt		105,456				3.90			1,025				105,402				3.95			1,027				136,939				2.38			812
Total interest-bearing liabilities		4,253,382				0.18			1,898				4,161,453				0.19			1,977				4,082,699				0.36			3,691
Noninterest-bearing deposits		2,121,590											1,905,147											1,731,939
Other liabilities		112,852											120,247											112,687
Total liabilities		6,487,824											6,186,847											5,927,325
Shareholders' equity		552,102											551,976											540,802
Non-controlling interest		2											2											2
Total equity		552,104											551,978											540,804
Total liabilities and equity		$	7,039,928										$	6,738,825										$	6,468,129
Net interest income									$	52,153										$	49,941										$	49,418
Interest rate spread						3.10	%										3.13	%										3.15	%
Net interest margin						3.16	%										3.19	%										3.26	%

 

CENTRAL PACIFIC FINANCIAL CORP. AND SUBSIDIARIES
Average Balances, Interest Income & Expense, Yields and Rates (Taxable Equivalent)
(Unaudited)													TABLE 5
		Six Months Ended											Six Months Ended
		June 30, 2021											June 30, 2020
		Average				Average							Average				Average
(Dollars in thousands)		Balance				Yield/Rate			Interest				Balance				Yield/Rate			Interest
ASSETS
Interest-earning assets:
Interest-bearing deposits in other financial institutions		$	133,684			0.11	%		$	71			$	13,430			0.59	%		$	39
Investment securities, excluding valuation allowance:
Taxable		1,126,978				1.70			9,589				1,035,068				2.53			13,101
Tax-exempt		93,181				2.34			1,089				102,907				3.12			1,604
Total investment securities		1,220,159				1.75			10,678				1,137,975				2.58			14,705
Loans, including loans held for sale		5,095,433				3.75			95,098				4,682,626				3.95			92,119
Federal Home Loan Bank stock		7,839				3.12			122				13,171				3.61			238
Total interest-earning assets		6,457,115				3.30			105,969				5,847,202				3.67			107,101
Noninterest-earning assets		433,080											390,390
Total assets		$	6,890,195										$	6,237,592
LIABILITIES AND EQUITY
Interest-bearing liabilities:
Interest-bearing demand deposits		$	1,228,548			0.03	%		$	179			$	1,035,340			0.06	%		$	290
Savings and money market deposits		2,000,845				0.06			556				1,754,186				0.19			1,685
Time deposits up to  $250,000		234,361				0.38			437				163,074				1.38			1,116
Time deposits over $250,000		637,266				0.21			649				826,714				1.04			4,276
Total interest-bearing deposits		4,101,020				0.09			1,821				3,779,314				0.39			7,367
Federal Home Loan Bank advances and other short-term borrowings		1,221				0.30			2				101,459				1.15			582
Long-term debt		105,429				3.93			2,052				119,243				2.91			1,726
Total interest-bearing liabilities		4,207,670				0.19			3,875				4,000,016				0.49			9,675
Noninterest-bearing deposits		2,013,955											1,588,742
Other liabilities		116,529											110,070
Total liabilities		6,338,154											5,698,828
Shareholders' equity		552,039											538,762
Non-controlling interest		2											2
Total equity		552,041											538,764
Total liabilities and equity		$	6,890,195										$	6,237,592
Net interest income									$	102,094										$	97,426
Interest rate spread						3.11	%										3.18	%
Net interest margin						3.18	%										3.34	%

 

CENTRAL PACIFIC FINANCIAL CORP. AND SUBSIDIARIES
Loans by Geographic Distribution
(Unaudited)																			TABLE 6
		June 30,				March 31,				December 31,				September 30,				June 30,
(Dollars in thousands)		2021				2021				2020				2020				2020
HAWAII:
Commercial, financial and agricultural:
SBA Paycheck Protection Program		$	395,352			$	548,880			$	375,879			$	485,286			$	483,827
Other		389,341				399,154				426,670				414,754				431,887
Real estate:
Construction		133,457				137,976				125,407				118,247				103,518
Residential mortgage		1,711,801				1,687,513				1,690,212				1,680,060				1,657,558
Home equity		583,430				559,514				551,266				534,056				510,962
Commercial mortgage		926,006				911,216				898,055				914,144				912,422
Consumer		328,332				319,032				332,430				342,203				350,414
Total loans, net of deferred fees and costs		4,467,719				4,563,285				4,399,919				4,488,750				4,450,588
Allowance for credit losses		(67,773)				(70,961)				(73,152)				(71,575)				(59,765)
Loans, net of allowance for credit losses		$	4,399,946			$	4,492,324			$	4,326,767			$	4,417,175			$	4,390,823
U.S. MAINLAND: [1]
Commercial, financial and agricultural:
SBA Paycheck Protection Program		$	39,258			$	48,939			$	40,496			$	43,295			$	42,581
Other		96,884				115,035				118,421				113,316				115,971
Real estate:
Commercial mortgage		260,424				253,122				258,273				227,121				217,747
Consumer		213,033				157,468				147,004				158,144				176,551
Total loans, net of deferred fees and costs		609,599				574,564				564,194				541,876				552,850
Allowance for credit losses		(10,008)				(10,592)				(10,117)				(8,967)				(7,574)
Loans, net of allowance for credit losses		$	599,591			$	563,972			$	554,077			$	532,909			$	545,276
TOTAL:
Commercial, financial and agricultural:
SBA Paycheck Protection Program		$	434,610			$	597,819			$	416,375			$	528,581			$	526,408
Other		486,225				514,189				545,091				528,070				547,858
Real estate:
Construction		133,457				137,976				125,407				118,247				103,518
Residential mortgage		1,711,801				1,687,513				1,690,212				1,680,060				1,657,558
Home equity		583,430				559,514				551,266				534,056				510,962
Commercial mortgage		1,186,430				1,164,338				1,156,328				1,141,265				1,130,169
Consumer		541,365				476,500				479,434				500,347				526,965
Total loans, net of deferred fees and costs		5,077,318				5,137,849				4,964,113				5,030,626				5,003,438
Allowance for credit losses		(77,781)				(81,553)				(83,269)				(80,542)				(67,339)
Loans, net of allowance for credit losses		$	4,999,537			$	5,056,296			$	4,880,844			$	4,950,084			$	4,936,099
[1] U.S. Mainland includes territories of the United States

 

 

CENTRAL PACIFIC FINANCIAL CORP. AND SUBSIDIARIES
Deposits
(Unaudited)																		TABLE 7
		June 30,				March 31,				December 31,				September 30,				June 30,
(Dollars in thousands)		2021				2021				2020				2020				2020
Noninterest-bearing demand		$	2,203,806			$	2,070,428			$	1,790,269			$	1,762,476			$	1,851,012
Interest-bearing demand		1,341,280				1,237,574				1,174,888				1,114,123				1,067,483
Savings and money market		2,048,945				2,004,368				1,932,043				1,881,104				1,945,744
Time deposits less than $100,000		141,498				145,497				149,063				157,051				159,739
Other time deposits $100,000 to $250,000 [1]		89,710				88,814				90,149				95,918				96,633
Core deposits		5,825,239				5,546,681				5,136,412				5,010,672				5,120,611
Government time deposits		403,755				500,194				500,344				500,762				509,927
Other time deposits greater than $250,000		168,165				162,075				159,362				167,495				164,147
Total time deposits greater than $250,000		571,920				662,269				659,706				668,257				674,074
Total deposits		$	6,397,159			$	6,208,950			$	5,796,118			$	5,678,929			$	5,794,685
[1] As of January 1, 2021, other time deposits $100,000 to $250,000 have been included in core deposits. Prior period amounts have been reclassified to conform to current period presentation.

 

CENTRAL PACIFIC FINANCIAL CORP. AND SUBSIDIARIES
Nonperforming Assets, Past Due and Restructured Loans
(Unaudited)																		TABLE 8
		June 30,				March 31,				December 31,				September 30,				June 30,
(Dollars in thousands)		2021				2021				2020				2020				2020
Nonaccrual loans: [1]
Commercial, financial and agricultural - Other		$	699			$	1,412			$	1,461			$	1,536			$	934
Real estate:
Residential mortgage		5,280				4,553				4,115				4,032				3,215
Home equity		434				439				524				533				538
Commercial mortgage		—				—				—				6,889				—
Consumer		332				790				92				69				54
Total nonaccrual loans		6,745				7,194				6,192				13,059				4,741
Other real estate owned ("OREO"):
Real estate:
Residential mortgage		—				—				—				128				—
Total OREO		—				—				—				128				—
Total nonperforming assets ("NPAs")		6,745				7,194				6,192				13,187				4,741
Loans delinquent for 90 days or more still accruing interest: [1]
Commercial, financial and agricultural - Other		29				—				—				—				—
Real estate:
Residential mortgage		1,438				4,522				567				588				726
Consumer		100				262				240				321				444
Total loans delinquent for 90 days or more still accruing interest		1,567				4,784				807				909				1,170
Restructured loans still accruing interest: [1]
Commercial, financial and agricultural - Other		26				63				100				137				172
Real estate:
Residential mortgage		4,258				5,473				5,718				5,178				5,290
Commercial mortgage		1,636				1,698				1,761				1,825				1,888
Consumer		132				198				207				214				145
Total restructured loans still accruing interest		6,052				7,432				7,786				7,354				7,495
Total NPAs and loans delinquent for 90 days or more and restructured loans still accruing interest		$	14,364			$	19,410			$	14,785			$	21,450			$	13,406
Total nonaccrual loans as a percentage of total loans		0.13		%		0.14		%		0.12		%		0.26		%		0.09		%
Total NPAs as a percentage of total loans and OREO		0.13		%		0.14		%		0.12		%		0.26		%		0.09		%
Total NPAs and loans delinquent for 90 days or more still accruing interest as a percentage of total loans and OREO		0.16		%		0.23		%		0.14		%		0.28		%		0.12		%
Total NPAs, loans delinquent for 90 days or more and restructured loans still accruing interest as a percentage of total loans and OREO		0.28		%		0.38		%		0.30		%		0.43		%		0.27		%
Quarter-to-quarter changes in NPAs:
Balance at beginning of quarter		$	7,194			$	6,192			$	13,187			$	4,741			$	3,647
Additions		1,879				2,257				1,370				9,060				1,771
Reductions:
Payments		(1,120)				(292)				(3,186)				(393)				(367)
Return to accrual status		(84)				(99)				(548)				—				(123)
Sales of NPAs		—				—				(4,353)				—				(94)
Charge-offs, valuation and other adjustments		(1,124)				(864)				(278)				(221)				(93)
Total reductions		(2,328)				(1,255)				(8,365)				(614)				(677)
Balance at end of quarter		$	6,745			$	7,194			$	6,192			$	13,187			$	4,741

[1] Section 4013 of the CARES Act and the revised Interagency Statement are being applied to loan modifications related to the COVID-19 pandemic as eligible and applicable. These loan modifications are not included in the delinquent or restructured loan balances presented above.

 

 

CENTRAL PACIFIC FINANCIAL CORP. AND SUBSIDIARIES
Allowance for Credit Losses on Loans
(Unaudited)																						TABLE 9
		Three Months Ended																				Six Months Ended
		Jun 30,				Mar 31,				Dec 31,				Sep 30,				Jun 30,				June 30,
(Dollars in thousands)		2021				2021				2020				2020				2020				2021				2020
Allowance for credit  losses ("ACL"):
ACL at beginning of period		$	81,553			$	83,269			$	80,542			$	67,339			$	59,645			$	83,269			$	47,971
Adoption of ASU 2016-13		—				—				—				—				—				—				3,566
Adjusted ACL at beginning of period		81,553				83,269				80,542				67,339				59,645				83,269				51,537
(Credit) provision for credit losses on loans [1] [2]		(2,963)				(974)				4,496				14,465				10,640				(3,937)				19,969
Charge-offs:
Commercial, financial and agricultural - Other		401				609				676				810				1,103				1,010				1,540
Real estate:
Residential mortgage		—				—				—				11				52				—				52
Commercial mortgage		—				—				—				75				—				—				—
Consumer		1,523				1,098				1,856				1,492				2,626				2,621				4,843
Leases		—				—				—				—				—				—				—
Total charge-offs		1,924				1,707				2,532				2,388				3,781				3,631				6,435
Recoveries:
Commercial, financial and agricultural - Other		276				89				189				321				305				365				647
Real estate:
Construction		—				—				—				—				—				—				131
Residential mortgage		186				106				15				13				20				292				201
Home equity		—				9				2				—				—				9				31
Commercial mortgage		65				8				1				12				1				73				3
Consumer		588				753				556				780				509				1,341				1,255
Total recoveries		1,115				965				763				1,126				835				2,080				2,268
Net charge-offs		809				742				1,769				1,262				2,946				1,551				4,167
ACL at end of period		$	77,781			$	81,553			$	83,269			$	80,542			$	67,339			$	77,781			$	67,339
Average loans, net of deferred fees and costs		$	5,110,820			$	5,079,874			$	5,034,717			$	5,016,955			$	4,902,905			$	5,095,433			$	4,682,626
Annualized ratio of net charge-offs to average loans		0.06		%		0.06		%		0.14		%		0.10		%		0.24		%		0.06		%		0.18		%

[1] In 2020, the Company recorded a reserve on accrued interest receivable ("AIR") of $0.2 million for loans on payment forbearance or deferral, which were granted to borrowers impacted by the COVID-19 pandemic. This reserve was recorded as a contra-asset against AIR with the offset to the provision for credit losses. During the second quarter of 2021, the Company reversed the entire reserve on AIR. The provision for credit losses presented in this table excludes the provision for credit losses on AIR.

[2] As of January 1, 2021, the provision for credit losses on off-balance sheet credit exposures (previously included in other operating expense) is included in the provision for credit losses line on the consolidated statements of income.  The allowance for off-balance sheet credit exposures continues to be included in other liabilities. For roll-forward purposes, in this table we exclude the provision for credit losses on off-balance sheet credit exposures.

CENTRAL PACIFIC FINANCIAL CORP. AND SUBSIDIARIES
Reconciliation of Non-GAAP Financial Measures
(Unaudited)																		TABLE 10
The following table sets forth a reconciliation of our core loans and the ratios of our allowance for credit losses ("ACL") to total loans and ACL to core loans (or total loans, excluding SBA Paycheck Protection Program ("PPP") loans), for each of the periods indicated:
		Jun 30,				Mar 31,				Dec 31,				Sep 30,				Jun 30,
(Dollars in thousands)		2021				2021				2020				2020				2020
ACL		$	77,781			$	81,553			$	83,269			$	80,542			$	67,339
Total loans		$	5,077,318			$	5,137,849			$	4,964,113			$	5,030,626			$	5,003,438
Less: PPP loans		434,610				597,819				416,375				528,581				526,408
Core loans (or total loans, excluding PPP loans)		$	4,642,708			$	4,540,030			4,547,738				4,502,045				$	4,477,030
Ratio of ACL to total loans		1.53		%		1.59		%		1.68		%		1.60		%		1.35		%
Ratio of ACL to core loans		1.68		%		1.80		%		1.83		%		1.79		%		1.50		%

 

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SOURCE Central Pacific Financial Corp.