Central Pacific Financial Corp. Reports Results For Third Quarter 2020

Rhea-AI Summary

Central Pacific Financial Corp. (NYSE: CPF) reported third-quarter 2020 net income of $6.9 million ($0.24 EPS), down from $14.6 million ($0.51 EPS) a year earlier. The increase in credit loss provision to $14.7 million amid COVID-19 impacts operations. Net interest income rose to $49.1 million, supported by PPP loan activity, though net interest margin decreased to 3.19%. Total assets grew to $6.65 billion, while loans increased to $5.03 billion. The Company declared a quarterly dividend of $0.23 per share, payable December 15, 2020. Central Pacific maintains strong capital ratios despite the pandemic's challenges.

Positive

• Net interest income increased to $49.1 million, up from $45.6 million year-over-year.
• Total assets rose by 11.2% year-over-year to $6.65 billion.
• Total loans increased 15.2% year-over-year to $5.03 billion, driven by PPP loans.
• Quarterly cash dividend of $0.23 declared, indicating commitment to shareholders.

Negative

• Net income dropped to $6.9 million from $14.6 million year-over-year.
• Provision for credit losses surged to $14.7 million compared to $1.5 million a year ago.
• Net interest margin decreased to 3.19% from 3.30% a year earlier.

HONOLULU, Oct. 28, 2020 /PRNewswire/ -- Central Pacific Financial Corp. (NYSE: CPF) (the "Company"), parent company of Central Pacific Bank, today reported net income in the third quarter of 2020 of $6.9 million, or fully diluted earnings per share ("EPS") of $0.24, compared to net income in the third quarter of 2019 of $14.6 million, or EPS of $0.51, and net income in the second quarter of 2020 of $9.9 million, or EPS of $0.35. Our operating results continue to be impacted by a higher provision for credit loss expense that was driven by the economic forecast under the current COVID-19 pandemic. During the third quarter of 2020, the Company recorded a provision for credit loss expense of $14.7 million, compared to $1.5 million in the third quarter of 2019 and $10.6 million in the second quarter of 2020.

"Central Pacific Financial Corp. continues to perform well with solid pre-tax, pre-provision earnings, strong mortgage banking income and the achievement of our RISE2020 milestones on digital banking," said Paul Yonamine, Chairman and Chief Executive Officer.

"We are actively managing the risks related to the COVID-19 pandemic, including building our credit loss reserves and raising Tier 2 capital through a recent issuance of subordinated debt. The Company is well positioned to continue to be a source of strength and liquidity for our customers, employees and shareholders as we all navigate this difficult economic environment," said Catherine Ngo, President.

On October 20, 2020, the Company completed a $55 million private placement of ten-year fixed-to-floating rate subordinated notes, which will be used to support regulatory capital ratios and for general corporate purposes. The Notes bear a fixed interest rate of 4.75% for the first five years and will reset quarterly thereafter for the remaining five years to the then current three-month Secured Overnight Financing Rate, as published by the Federal Reserve Bank of New York, plus 456 basis points.

On October 27, 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 December 15, 2020 to shareholders of record at the close of business on November 30, 2020.

Earnings Highlights
Net interest income for the third quarter of 2020 was $49.1 million, compared to $45.6 million in the year-ago quarter and $49.3 million in the previous quarter. Net interest margin for the third quarter of 2020 was 3.19%, compared to 3.30% in the year-ago quarter and 3.26% in the previous quarter. The increase in net interest income from the year-ago quarter was primarily due to growth in the loan portfolio, including loans originated under the PPP program, combined with lower rates paid on interest-bearing liabilities, partially offset by lower yields earned on the loan and investment securities portfolios. Net interest income for the third quarter of 2020 included $3.4 million in PPP net interest income and net loan fees, which are accreted into income over the term of the loans and accelerated when the loans are forgiven or paid-off. No PPP loans were forgiven during the third quarter. The declines in net interest margin, yields earned on the loans and investment securities portfolios and rates paid on interest-bearing liabilities from the year-ago and sequential quarters are primarily attributable to the historically low interest rate environment. During the third quarter of 2020, the Company had an average PPP loan balance of $544.7 million, which earned approximately 2.48% in net interest income and net loan fees. PPP loans accounted for approximately 2 basis points of the sequential quarter decrease in net interest margin.

Other operating income for the third quarter of 2020 totaled $11.6 million, which increased from $10.3 million in the year-ago quarter and $10.7 million in the previous quarter, primarily due to strong mortgage banking activity. Mortgage banking income increased by $2.4 million and $0.8 million from the year-ago and previous quarters, respectively. The increase in other operating income from the year-ago quarter was also attributable to higher income from bank-owned life insurance of $0.5 million. These increases were partially offset by lower service charges on deposit accounts of $0.7 million and lower other service charges and fees of $0.5 million, which were primarily attributable to lower transactional activity due to the pandemic. The Company also sold certain investment securities during the quarter at a loss of $0.4 million. The increase in other operating income from the previous quarter was primarily due to the aforementioned higher mortgage banking income, combined with higher other service charges and fees of $0.4 million and higher service charges on deposit accounts of $0.3 million. During the quarter, we reinstated certain service charges that were temporarily suspended in the previous quarter due to the pandemic. These increases were partially offset by the aforementioned loss on the sale of investment securities, combined with lower income from bank-owned life insurance of $0.2 million. The changes in income from bank-owned life insurance compared to the year-ago and previous quarters were primarily attributable to volatility in the equity markets.

Other operating expense for the third quarter of 2020 totaled $37.0 million, which increased from $34.9 million in the year-ago quarter and $36.4 million in the previous quarter. The increase from the year-ago quarter was primarily due to higher FDIC insurance assessment of $0.6 million (included in other), higher computer software expense of $0.4 million, and higher legal and professional services and advertising expenses of $0.3 million each. In addition, the Company recorded a provision for off-balance sheet credit exposures of $0.2 million, compared to a credit for off-balance sheet credit exposures of $0.5 million in the year-ago quarter. The Company also recognized costs totaling $0.3 million (included in other) related to the consolidation of three in-store branches with other existing nearby branches. These in-store branches had a small square footage which did not allow for adequate social distancing and have been closed since March 2020 due to the COVID-19 pandemic. A traditional branch is expected to be consolidated during the fourth quarter of 2020. The increase in other operating expense from the previous quarter was primarily due to higher equipment expense of $0.2 million and higher net occupancy expense of $0.2 million. These increases were partially offset by a lower provision for off-balance sheet credit exposures of $0.4 million and a lower net change in the directors' deferred compensation plan obligation of $0.3 million.

The efficiency ratio for the third quarter of 2020 was 60.93%, compared to 62.48% in the year-ago quarter and 60.76% in the previous quarter.

In the third quarter of 2020, the Company recorded income tax expense of $2.2 million, compared to $4.9 million in the year-ago quarter and $3.0 million in the previous quarter. The effective tax rate for the third quarter of 2020 was 24.3%, compared to 25.2% in the year-ago quarter and 23.0% in the previous quarter.

Balance Sheet Highlights
Total assets at September 30, 2020 of $6.65 billion increased by $671.4 million, or 11.2% from September 30, 2019, and increased by $15.2 million, or 0.2% from June 30, 2020.

Total loans at September 30, 2020 of $5.03 billion increased by $662.8 million, or 15.2%, and $27.2 million, or 0.5% from September 30, 2019 and June 30, 2020, respectively. The year-over-year increase in total loans was driven by the origination of PPP loans totaling $528.6 million, net of deferred fees and costs, combined with increases in residential mortgage loans of $121.3 million, home equity loans of $58.5 million, construction loans of $21.6 million and commercial mortgage loans of $7.4 million, partially offset by decreases in the other commercial and consumer loan portfolios of $48.5 million and $26.0 million, respectively. The sequential quarter increase in total loans was primarily due to increases in home equity loans of $23.1 million, residential mortgage loans of $22.5 million, construction loans of $14.7 million and commercial mortgage loans of $11.1 million, partially offset by decreases in the consumer and other commercial loan portfolios of $26.6 million and $19.8 million, respectively. During the third quarter of 2020, the Company transferred $6.6 million in commercial and commercial real estate loans to a single borrower to loans-held-for-sale. In October 2020, the Company sold the loans at a loss of less than $0.1 million.

Total deposits at September 30, 2020 of $5.68 billion increased by $641.3 million, or 12.7% from September 30, 2019, and decreased by $115.8 million, or 2.0% from June 30, 2020. The deposit of PPP funds into both new and existing deposit accounts largely contributed to the increase in total deposits year-over-year. The sequential quarter decrease in total deposits was primarily attributable to the decreases in noninterest-bearing demand deposits of $88.5 million, savings and money market deposits of $64.6 million and total time deposits of $9.2 million, as some PPP funds were spent by clients during the current quarter. The decrease was offset by an increase in interest-bearing demand deposits of $46.6 million. Core deposits, which include demand deposits, savings and money market deposits, and time deposits less than $100,000, totaled $4.91 billion at September 30, 2020. This represents an increase of $758.1 million, or 18.2% from September 30, 2019, and a decrease of $109.2 million, or 2.2% from June 30, 2020. The Company's loan-to-deposit ratio was 88.6% at September 30, 2020, compared to 86.7% at September 30, 2019 and 86.4% at June 30, 2020.

Asset Quality
Nonperforming assets at September 30, 2020 totaled $13.2 million, or 0.20% of total assets, compared to $1.4 million, or 0.02% of total assets at September 30, 2019, and $4.7 million, or 0.07% of total assets at June 30, 2020. During the third quarter of 2020, the Company had $8.4 million in net additions to nonperforming assets, of which $7.6 million were to two borrowers consisting of commercial and commercial real estate loans that the Company believes are well-secured.

Loans delinquent for 90 days or more still accruing interest totaled $0.9 million at September 30, 2020, compared to $0.2 million and $1.2 million at September 30, 2019 and June 30, 2020, respectively.

Loans on payment forbearance or deferrals granted to borrowers impacted by the COVID-19 pandemic declined significantly to $290.8 million or 5.78% of the total loan portfolio (or 6.46% excluding PPP loans), as of September 30, 2020, compared to $567.9 million or 11.35% of the total loan portfolio (or 12.68% excluding PPP loans), as of June 30, 2020.

Net charge-offs in the third quarter of 2020 totaled $1.3 million, compared to net charge-offs of $1.6 million in the year-ago quarter, and net charge-offs of $2.9 million in the previous quarter.

In the third quarter of 2020, the Company recorded a provision for credit losses on loans of $14.7 million, compared to a provision of $1.5 million in the year-ago quarter and a provision of $10.6 million in the previous quarter. The higher provision for credit losses from the year-ago and sequential quarters was driven by models that utilize Hawaii-specific economic projections from a third party economic forecast. The allowance for credit losses, as a percentage of total loans at September 30, 2020 was 1.60%, compared to 1.10% at September 30, 2019 and 1.35% at June 30, 2020. Excluding the PPP loans, the allowance for credit losses, as a percentage of total loans at September 30, 2020 was 1.79%, compared to 1.50% at June 30, 2020.

Capital
Total shareholders' equity was $543.9 million at September 30, 2020, compared to $525.2 million and $544.3 million at September 30, 2019 and June 30, 2020, 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 September 30, 2020, the Company's leverage capital, tier 1 risk-based capital, total risk-based capital, and common equity tier 1 ratios were 8.8%, 12.8%, 13.9%, and 11.6%, respectively, compared to 8.9%, 12.5%, 13.6%, and 11.4%, respectively, at June 30, 2020.

On October 20, 2020, the Company completed a $55 million private placement of ten-year fixed-to-floating rate subordinated notes, which have been structured to qualify initially as tier 2 capital for the Company for regulatory capital purposes.

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.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 November 28, 2020 by dialing 1-877-344-7529 (passcode: 10149191) 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.

About Central Pacific Financial Corp.
Central Pacific Financial Corp. is a Hawaii-based bank holding company with approximately $6.6 billion in assets.  Central Pacific Bank, its primary subsidiary, operates 32 branches (four of which remain 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 September 30, 2020.  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 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 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 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 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																				Nine Months Ended
(Dollars in thousands,		September 30,				June 30,				March 31,				December 31,				September 30,				September 30,
except for per share amounts)		2020				2020				2020				2019				2019				2020				2019
CONDENSED INCOME STATEMENT
Net interest income		$	49,120			$	49,259			$	47,830			$	47,934			$	45,649			$	146,209			$	136,140
Provision for credit losses [1]		14,652				10,640				9,329				2,098				1,532				34,621				4,219
Net interest income after provision for credit losses [1]		34,468				38,619				38,501				45,836				44,117				111,588				131,921
Total other operating income		11,563				10,692				8,886				9,768				10,266				31,141				32,033
Total other operating expense		36,972				36,427				36,240				36,242				34,934				109,639				105,389
Income before taxes		9,059				12,884				11,147				19,362				19,449				33,090				58,565
Income tax expense		2,200				2,967				2,821				5,165				4,895				7,988				14,440
Net income		6,859				9,917				8,326				14,197				14,554				25,102				44,125
Basic earnings per common share		$	0.24			$	0.35			$	0.30			$	0.50			$	0.51			$	0.89			$	1.54
Diluted earnings per common share		0.24				0.35				0.29				0.50				0.51				0.89				1.53
Dividends declared per common share		0.23				0.23				0.23				0.23				0.23				0.69				0.67
PERFORMANCE RATIOS
Return on average assets (ROA) [2]		0.42		%		0.61		%		0.55		%		0.95		%		0.99		%		0.53		%		1.00		%
Return on average shareholders' equity (ROE) [2]		4.99				7.34				6.21				10.70				11.11				6.17				11.58
Average shareholders' equity to average assets		8.36				8.36				8.93				8.87				8.87				8.54				8.67
Efficiency ratio [1] [3]		60.93				60.76				63.90				62.81				62.48				61.82				62.67
Net interest margin (NIM) [2]		3.19				3.26				3.43				3.43				3.30				3.29				3.32
Dividend payout ratio [4]		95.83				65.71				79.31				46.00				45.10				77.53				43.79
SELECTED AVERAGE BALANCES
Average loans, including loans held for sale		$	5,016,955			$	4,902,905			$	4,462,347			$	4,412,247			$	4,293,455			$	4,794,883			$	4,183,703
Average interest-earning assets		6,160,381				6,073,361				5,621,043				5,595,142				5,527,532				5,952,357				5,492,860
Average assets		6,574,492				6,468,129				6,007,237				5,978,797				5,907,207				6,350,696				5,858,224
Average deposits		5,728,147				5,614,595				5,121,696				4,998,897				4,987,414				5,488,947				4,981,254
Average interest-bearing liabilities		4,118,726				4,082,699				3,917,332				3,947,924				3,920,304				4,039,874				3,880,179
Average shareholders' equity		549,378				540,802				536,721				530,464				524,083				542,326				507,930

 

CENTRAL PACIFIC FINANCIAL CORP. AND SUBSIDIARIES
Financial Highlights
(Unaudited)															TABLE 1 (CONTINUED)
		September 30,				June 30,				March 31,				December 31,				September 30,
(dollars in thousands)		2020				2020				2020				2019				2019
REGULATORY CAPITAL
Central Pacific Financial Corp
Leverage capital		$	573,636			$	571,976			$	567,947			$	568,529			$	561,478
Tier 1 risk-based capital		573,636				571,976				567,947				568,529				561,478
Total risk-based capital		623,157				622,393				618,504				617,772				611,076
Common equity tier 1 capital		523,636				521,976				517,947				518,529				511,478
Central Pacific Bank
Leverage capital		559,750				559,461				556,895				556,077				550,913
Tier 1 risk-based capital		559,750				559,461				556,895				556,077				550,913
Total risk-based capital		609,203				609,811				607,402				605,320				600,511
Common equity tier 1 capital		559,750				559,461				556,895				556,077				550,913
REGULATORY CAPITAL RATIOS
Central Pacific Financial Corp
Leverage capital ratio		8.8		%		8.9		%		9.5		%		9.5		%		9.5		%
Tier 1 risk-based capital ratio		12.8				12.5				12.3				12.6				12.6
Total risk-based capital ratio		13.9				13.6				13.4				13.6				13.7
Common equity tier 1 capital ratio		11.6				11.4				11.3				11.5				11.5
Central Pacific Bank
Leverage capital ratio		8.6				8.7				9.3				9.3				9.4
Tier 1 risk-based capital ratio		12.5				12.2				12.1				12.3				12.4
Total risk-based capital ratio		13.6				13.3				13.2				13.4				13.5
Common equity tier 1 capital ratio		12.5				12.2				12.1				12.3				12.4
		September 30,				June 30,				March 31,				December 31,				September 30,
(dollars in thousands, except for per share amounts)		2020				2020				2020				2019				2019
BALANCE SHEET
Total loans, net of deferred fees and costs		$	5,030,626			$	5,003,438			$	4,511,998			$	4,449,540			$	4,367,862
Total assets		6,648,142				6,632,972				6,108,548				6,012,672				5,976,716
Total deposits		5,678,929				5,794,685				5,136,069				5,120,023				5,037,659
Long-term debt		101,547				167,491				101,547				101,547				101,547
Total shareholders' equity		543,903				544,271				533,781				528,520				525,227
Total shareholders' equity to total assets		8.18		%		8.21		%		8.74		%		8.79		%		8.79		%
ASSET QUALITY
Allowance for credit losses ("ACL") [1]		$	80,542			$	67,339			$	59,645			$	47,971			$	48,167
Non-performing assets ("NPA")		13,187				4,741				3,647				1,719				1,360
ACL to total loans [1]		1.60		%		1.35		%		1.32		%		1.08		%		1.10		%
ACL to total loans, excluding PPP loans [1]		1.79		%		1.50		%		1.32		%		1.08		%		1.10		%
ACL to non-performing assets [1]		610.77		%		1,420.35		%		1,635.45		%		2,790.63		%		3,541.69		%
NPA to total assets		0.20		%		0.07		%		0.06		%		0.03		%		0.02		%
PER SHARE OF COMMON STOCK OUTSTANDING
Book value per common share		$	19.30			$	19.33			$	18.99			$	18.68			$	18.47

[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
		September 30,				June 30,				March 31,				December 31,				September 30,
(Dollars in thousands, except share data)		2020				2020				2020				2019				2019
ASSETS
Cash and due from financial institutions		$	89,665			$	102,132			$	81,972			$	78,418			$	87,395
Interest-bearing deposits in other financial institutions		5,489				41,201				11,021				24,554				7,803
Investment securities:
Available-for-sale debt securities, at fair value		1,166,319				1,168,594				1,184,023				1,126,983				1,186,875
Equity securities, at fair value		1,204				1,209				1,002				1,127				1,058
Total investment securities		1,167,523				1,169,803				1,185,025				1,128,110				1,187,933
Loans held for sale		23,962				10,443				3,910				9,083				7,016
Loans, net of deferred fees and costs		5,030,626				5,003,438				4,511,998				4,449,540				4,367,862
Less allowance for credit losses [1]		80,542				67,339				59,645				47,971				48,167
Loans, net of allowance for credit losses		4,950,084				4,936,099				4,452,353				4,401,569				4,319,695
Premises and equipment, net		61,095				55,032				50,447				46,343				44,095
Accrued interest receivable		21,478				19,590				16,851				16,500				16,220
Investment in unconsolidated subsidiaries		30,239				16,428				16,721				17,115				17,001
Other real estate owned		128				—				100				164				466
Mortgage servicing rights		12,429				12,771				13,345				14,718				15,058
Bank-owned life insurance		161,743				161,758				159,637				159,656				158,939
Federal Home Loan Bank ("FHLB") stock		17,468				9,229				18,109				14,983				17,183
Right of use lease asset		44,896				50,039				51,198				52,348				52,588
Other assets		61,943				48,447				47,859				49,111				45,324
Total assets		$	6,648,142			$	6,632,972			$	6,108,548			$	6,012,672			$	5,976,716
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Noninterest-bearing demand		$	1,762,476			$	1,851,012			$	1,430,540			$	1,450,532			$	1,399,200
Interest-bearing demand		1,114,123				1,067,483				1,018,508				1,043,010				998,037
Savings and money market		1,881,104				1,945,744				1,693,280				1,600,028				1,593,738
Time		921,226				930,446				993,741				1,026,453				1,046,684
Total deposits		5,678,929				5,794,685				5,136,069				5,120,023				5,037,659
FHLB advances and other short-term borrowings		206,000				—				222,000				150,000				205,000
Long-term debt		101,547				167,491				101,547				101,547				101,547
Lease liability		45,355				50,440				51,541				52,632				52,807
Other liabilities		72,369				76,050				63,561				59,950				54,476
Total liabilities		6,104,200				6,088,666				5,574,718				5,484,152				5,451,489
Shareholders' equity:
Preferred stock, no par value, authorized 1,000,000 shares; issued and outstanding:  none at September 30, 2020, June 30, 2020, March 31, 2020, December 31, 2019, and September 30, 2019		—				—				—				—				—
Common stock, no par value, authorized 185,000,000 shares; issued and outstanding:  28,179,798 at September 30, 2020, 28,154,159 at June 30, 2020, 28,115,353 at March 31, 2020, 28,289,257 at December 31, 2019, and 28,441,341 at September 30, 2019		442,635				442,699				442,853				447,602				452,278
Additional paid-in capital		94,336				93,007				92,284				91,611				90,604
Accumulated deficit [1]		(16,609)				(16,986)				(20,428)				(19,102)				(26,782)
Accumulated other comprehensive income		23,541				25,551				19,072				8,409				9,127
Total shareholders' equity		543,903				544,271				533,781				528,520				525,227
Non-controlling interest		39				35				49				—				—
Total equity		543,942				544,306				533,830				528,520				525,227
Total liabilities and shareholders' equity		$	6,648,142			$	6,632,972			$	6,108,548			$	6,012,672			$	5,976,716

[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																				Nine Months Ended
		September 30,				June 30,				March 31,				December 31,				September 30,				September 30,
(Dollars in thousands, except per share data)		2020				2020				2020				2019				2019				2020				2019
Interest income:
Interest and fees on loans		$	45,751			$	45,915			$	46,204			$	47,488			$	45,861			$	137,870			$	135,169
Interest and dividends on investment securities:
Taxable investment securities		5,233				6,310				6,757				6,486				7,178				18,300				22,968
Tax-exempt investment securities		621				599				668				656				708				1,888				2,388
Dividend income on investment securities		17				17				17				17				14				51				46
Interest on deposits in other financial institutions		3				3				36				54				33				42				147
Dividend income on FHLB stock		128				106				132				456				186				366				508
Total interest income		51,753				52,950				53,814				55,157				53,980				158,517				161,226
Interest expense:
Interest on deposits:
Demand		115				114				176				202				207				405				598
Savings and money market		417				567				1,118				1,253				1,549				2,102				3,847
Time		1,284				2,124				3,268				3,653				4,432				6,676				14,391
Interest on short-term borrowings		71				74				508				1,139				1,130				653				3,146
Interest on long-term debt		746				812				914				976				1,013				2,472				3,104
Total interest expense		2,633				3,691				5,984				7,223				8,331				12,308				25,086
Net interest income		49,120				49,259				47,830				47,934				45,649				146,209				136,140
Provision for credit losses		14,652				10,640				9,329				2,098				1,532				34,621				4,219
Net interest income after provision for credit losses		34,468				38,619				38,501				45,836				44,117				111,588				131,921
Other operating income:
Mortgage banking income		4,345				3,566				337				1,410				1,994				8,248				5,275
Service charges on deposit accounts		1,475				1,149				2,050				2,159				2,125				4,674				6,247
Other service charges and fees		3,345				2,916				4,897				4,095				3,894				11,158				11,018
Income from fiduciary activities		1,149				1,270				1,297				1,175				1,126				3,716				3,220
Equity in earnings of unconsolidated subsidiaries		104				104				26				92				86				234				165
Net gain (loss) on sales of investment securities		(352)				—				—				—				36				(352)				36
Income from bank-owned life insurance		1,179				1,424				(19)				594				645				2,584				2,511
Net gain (loss) on sales of foreclosed assets		—				(6)				—				(162)				17				(6)				17
Other (refer to Table 4)		318				269				298				405				343				885				3,544
Total other operating income		11,563				10,692				8,886				9,768				10,266				31,141				32,033
Other operating expense:
Salaries and employee benefits		20,729				20,622				20,347				21,207				20,631				61,698				61,083
Net occupancy		3,834				3,645				3,672				3,619				3,697				11,151				10,680
Equipment		1,234				1,043				1,097				1,142				1,067				3,374				3,211
Communication expense		856				774				837				906				1,008				2,467				2,645
Legal and professional services		2,262				2,238				2,028				2,123				1,933				6,528				5,231
Computer software expense		3,114				3,035				2,943				2,942				2,713				9,092				7,870
Advertising expense		1,020				923				1,092				527				711				3,035				2,134
Foreclosed asset expense		6				—				67				28				15				73				223
Other (refer to Table 4)		3,917				4,147				4,157				3,748				3,159				12,221				12,312
Total other operating expense		36,972				36,427				36,240				36,242				34,934				109,639				105,389
Income before income taxes		9,059				12,884				11,147				19,362				19,449				33,090				58,565
Income tax expense		2,200				2,967				2,821				5,165				4,895				7,988				14,440
Net income		$	6,859			$	9,917			$	8,326			$	14,197			$	14,554			$	25,102			$	44,125
Per common share data:
Basic earnings per share		$	0.24			$	0.35			$	0.30			$	0.50			$	0.51			$	0.89			$	1.54
Diluted earnings per share		0.24				0.35				0.29				0.50				0.51				0.89				1.53
Cash dividends declared		0.23				0.23				0.23				0.23				0.23				0.69				0.67
Basic weighted average shares outstanding		28,060,020				28,040,802				28,126,400				28,259,294				28,424,898				28,075,684				28,575,369
Diluted weighted average shares outstanding		28,111,664				28,095,230				28,277,753				28,448,243				28,602,338				28,172,153				28,762,057
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
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																				Nine Months Ended
		September 30,				June 30,				March 31,				December 31,				September 30,				September 30,
(Dollars in thousands)		2020				2020				2020				2019				2019				2020				2019
Other operating income - other:
Income recovered on nonaccrual loans previously charged-off		$	47			$	37			$	23			$	80			$	73			$	107			$	240
Other recoveries		22				26				40				36				42				88				94
Commissions on sale of checks		73				56				81				75				75				210				234
Gain on sale of MasterCard stock		—				—				—				—				—				—				2,555
Other		176				150				154				214				153				480				421
Total other operating income - other		$	318			$	269			$	298			$	405			$	343			$	885			$	3,544

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

		Three Months Ended																				Nine Months Ended
		September 30,				June 30,				March 31,				December 31,				September 30,				September 30,
(Dollars in thousands)		2020				2020				2020				2019				2019				2020				2019
Other operating expense - other:
Charitable contributions		$	12			$	10			$	187			$	122			$	230			$	209			$	559
FDIC insurance assessment		649				475				—				—				5				1,124				868
Miscellaneous loan expenses		497				399				300				361				274				1,196				885
ATM and debit card expenses		573				584				634				672				660				1,791				1,930
Armored car expenses		192				229				294				186				220				715				629
Entertainment and promotions		132				165				280				495				323				577				1,576
Stationery and supplies		226				220				248				305				240				694				744
Directors' fees and expenses		213				196				241				246				242				650				722
Directors' deferred compensation plan expense		(237)				103				(1,483)				148				(155)				(1,617)				413
Provision (credit) for residential mortgage loan repurchase losses		—				—				—				—				—				—				(403)
Provision for off-balance sheet credit exposures		221				573				1,798				(160)				(465)				2,592				189
Branch consolidation costs		321				—				—				—				—				321				—
Other		1,118				1,193				1,658				1,373				1,585				3,969				4,200
Total other operating expense - other		$	3,917			$	4,147			$	4,157			$	3,748			$	3,159			$	12,221			$	12,312
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 Ended											Three Months Ended											Three Months Ended
		September 30, 2020											June 30, 2020											September 30, 2019
		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		$	12,262			0.09	%		$	3			$	15,777			0.10	%		$	3			$	6,295			2.05	%		$	33
Investment securities, excluding valuation allowance:
Taxable		1,029,987				2.04			5,250				1,042,441				2.43			6,327				1,093,352				2.63			7,192
Tax-exempt		88,749				3.54			786				100,485				3.02			758				117,784				3.04			896
Total investment securities		1,118,736				2.16			6,036				1,142,926				2.48			7,085				1,211,136				2.67			8,088
Loans, including loans held for sale		5,016,955				3.64			45,751				4,902,905				3.76			45,915				4,293,455				4.25			45,861
Federal Home Loan Bank stock		12,428				4.12			128				11,753				3.62			106				16,646				4.46			186
Total interest-earning assets		6,160,381				3.36			51,918				6,073,361				3.51			53,109				5,527,532				3.90			54,168
Noninterest-earning assets		414,111											394,768											379,675
Total assets		$	6,574,492										$	6,468,129										$	5,907,207
LIABILITIES AND EQUITY
Interest-bearing liabilities:
Interest-bearing demand deposits		$	1,092,976			0.04	%		$	115			$	1,056,885			0.04	%		$	114			$	1,002,875			0.08	%		$	207
Savings and money market deposits		1,910,971				0.09			417				1,856,621				0.12			567				1,582,795				0.39			1,549
Time deposits under $100,000		160,634				0.57			232				161,874				0.65			261				167,331				0.69			293
Time deposits $100,000 and over		769,030				0.54			1,052				807,276				0.93			1,863				874,192				1.88			4,139
Total interest-bearing deposits		3,933,611				0.18			1,816				3,882,656				0.29			2,805				3,627,193				0.68			6,188
Federal Home Loan Bank advances and other short-term borrowings		79,984				0.35			71				63,104				0.48			74				191,564				2.34			1,130
Long-term debt		105,131				2.82			746				136,939				2.38			812				101,547				3.96			1,013
Total interest-bearing liabilities		4,118,726				0.25			2,633				4,082,699				0.36			3,691				3,920,304				0.84			8,331
Noninterest-bearing deposits		1,794,536											1,731,939											1,360,221
Other liabilities		111,851											112,687											102,599
Total liabilities		6,025,113											5,927,325											5,383,124
Shareholders' equity		549,378											540,802											524,083
Non-controlling interest		1											2											—
Total equity		549,379											540,804											524,083
Total liabilities and equity		$	6,574,492										$	6,468,129										$	5,907,207
Net interest income									$	49,285										$	49,418										$	45,837
Interest rate spread						3.11	%										3.15	%										3.06	%
Net interest margin						3.19	%										3.26	%										3.30	%

 

CENTRAL PACIFIC FINANCIAL CORP. AND SUBSIDIARIES
Average Balances, Interest Income & Expense, Yields and Rates (Taxable Equivalent)
(Unaudited)											TABLE 6
		Nine Months Ended											Nine Months Ended
		September 30, 2020											September 30, 2019
		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		$	13,038			0.43	%		$	42			$	8,540			2.30	%		$	147
Investment securities, excluding valuation allowance:
Taxable		1,033,362				2.37			18,351				1,147,217				2.67			23,014
Tax-exempt		98,153				3.25			2,390				137,750				2.93			3,023
Total investment securities		1,131,515				2.44			20,741				1,284,967				2.70			26,037
Loans, including loans held for sale		4,794,883				3.84			137,870				4,183,703				4.32			135,169
Federal Home Loan Bank stock		12,921				3.78			366				15,650				4.33			508
Total interest-earning assets		5,952,357				3.57			159,019				5,492,860				3.94			161,861
Noninterest-earning assets		398,339											365,364
Total assets		$	6,350,696										$	5,858,224
LIABILITIES AND EQUITY
Interest-bearing liabilities:
Interest-bearing demand deposits		$	1,054,692			0.05	%		$	405			$	972,316			0.08	%		$	598
Savings and money market deposits		1,806,829				0.16			2,102				1,544,759				0.33			3,847
Time deposits under $100,000		162,255				0.64			777				172,204				0.69			884
Time deposits $100,000 and over		807,346				0.98			5,899				921,003				1.96			13,507
Total interest-bearing deposits		3,831,122				0.32			9,183				3,610,282				0.70			18,836
Federal Home Loan Bank advances and other short-term borrowings		94,248				0.93			653				168,350				2.50			3,146
Long-term debt		114,504				2.88			2,472				101,547				4.09			3,104
Total interest-bearing liabilities		4,039,874				0.41			12,308				3,880,179				0.86			25,086
Noninterest-bearing deposits		1,657,825											1,370,972
Other liabilities		110,669											99,143
Total liabilities		5,808,368											5,350,294
Shareholders' equity		542,326											507,930
Non-controlling interest		2											—
Total equity		542,328											507,930
Total liabilities and equity		$	6,350,696										$	5,858,224
Net interest income									$	146,711										$	136,775
Interest rate spread						3.16	%										3.08	%
Net interest margin						3.29	%										3.32	%

 

CENTRAL PACIFIC FINANCIAL CORP. AND SUBSIDIARIES
Loans by Geographic Distribution
(Unaudited)																TABLE 7
		September 30,				June 30,				March 31,				December 31,				September 30,
(Dollars in thousands)		2020				2020				2020				2019				2019
HAWAII:
Commercial, financial and agricultural:
SBA Paycheck Protection Program		$	485,286			$	483,827			$	—			$	—			$	—
Other		414,754				431,887				454,817				454,582				439,296
Real estate:
Construction		118,247				103,518				100,617				95,854				96,661
Residential mortgage		1,680,060				1,657,558				1,632,536				1,599,801				1,558,735
Home equity		534,056				510,962				504,686				490,734				475,565
Commercial mortgage		914,144				912,422				917,886				909,798				909,987
Consumer		342,203				350,414				367,960				373,451				369,511
Leases		—				—				—				—				31
Total loans, net of deferred fees and costs		4,488,750				4,450,588				3,978,502				3,924,220				3,849,786
Allowance for credit losses		(71,575)				(59,765)				(51,646)				(42,592)				(42,286)
Loans, net of allowance for credit losses		$	4,417,175			$	4,390,823			$	3,926,856			$	3,881,628			$	3,807,500
U.S. MAINLAND: [1]
Commercial, financial and agricultural:
SBA Paycheck Protection Program		$	43,295			$	42,581			$	—			$	—			$	—
Other		113,316				115,971				120,507				115,722				137,316
Real estate:
Construction		—				—				—				—				—
Residential mortgage		—				—				—				—				—
Home equity		—				—				—				—				—
Commercial mortgage		227,121				217,747				221,251				213,617				223,925
Consumer		158,144				176,551				191,738				195,981				156,835
Leases		—				—				—				—				—
Total loans, net of deferred fees and costs		541,876				552,850				533,496				525,320				518,076
Allowance for credit losses		(8,967)				(7,574)				(7,999)				(5,379)				(5,881)
Loans, net of allowance for credit losses		$	532,909			$	545,276			$	525,497			$	519,941			$	512,195
TOTAL:
Commercial, financial and agricultural:
SBA Paycheck Protection Program		$	528,581			$	526,408			$	—			$	—			$	—
Other		528,070				547,858				575,324				570,304				576,612
Real estate:
Construction		118,247				103,518				100,617				95,854				96,661
Residential mortgage		1,680,060				1,657,558				1,632,536				1,599,801				1,558,735
Home equity		534,056				510,962				504,686				490,734				475,565
Commercial mortgage		1,141,265				1,130,169				1,139,137				1,123,415				1,133,912
Consumer		500,347				526,965				559,698				569,432				526,346
Leases		—				—				—				—				31
Total loans, net of deferred fees and costs		5,030,626				5,003,438				4,511,998				4,449,540				4,367,862
Allowance for credit losses		(80,542)				(67,339)				(59,645)				(47,971)				(48,167)
Loans, net of allowance for credit losses		$	4,950,084			$	4,936,099			$	4,452,353			$	4,401,569			$	4,319,695
[1] U.S. Mainland includes territories of the United States

 

CENTRAL PACIFIC FINANCIAL CORP. AND SUBSIDIARIES
Deposits
(Unaudited)																	TABLE 8
		September 30,				June 30,				March 31,				December 31,				September 30,
(Dollars in thousands)		2020				2020				2020				2019				2019
Noninterest-bearing demand		$	1,762,476			$	1,851,012			$	1,430,540			$	1,450,532			$	1,399,200
Interest-bearing demand		1,114,123				1,067,483				1,018,508				1,043,010				998,037
Savings and money market		1,881,104				1,945,744				1,693,280				1,600,028				1,593,738
Time deposits less than $100,000		157,051				159,739				162,399				165,755				165,687
Core deposits		4,914,754				5,023,978				4,304,727				4,259,325				4,156,662
Government time deposits		500,762				509,927				523,343				533,088				552,470
Other time deposits $100,000 to $250,000		95,918				96,633				100,047				107,550				103,959
Other time deposits greater than $250,000		167,495				164,147				207,952				220,060				224,568
Total time deposits $100,000 and over		764,175				770,707				831,342				860,698				880,997
Total deposits		$	5,678,929			$	5,794,685			$	5,136,069			$	5,120,023			$	5,037,659

 

CENTRAL PACIFIC FINANCIAL CORP. AND SUBSIDIARIES
Nonperforming Assets, Past Due and Restructured Loans
(Unaudited)															TABLE 9
		September 30,				June 30,				March 31,				December 31,				September 30,
(Dollars in thousands)		2020				2020				2020				2019				2019
Nonaccrual loans: [1]
Commercial, financial and agricultural		$	1,536			$	934			$	667			$	467			$	—
Real estate:
Residential mortgage		4,032				3,215				2,287				979				799
Home equity		533				538				545				92				95
Commercial mortgage		6,889				—				—				—				—
Consumer		69				54				48				17				—
Total nonaccrual loans		13,059				4,741				3,547				1,555				894
Other real estate owned ("OREO"):
Real estate:
Residential mortgage		128				—				—				—				302
Home equity		—				—				100				164				164
Total OREO		128				—				100				164				466
Total nonperforming assets ("NPAs")		13,187				4,741				3,647				1,719				1,360
Loans delinquent for 90 days or more still accruing interest: [1]
Real estate:
Residential mortgage		588				726				1,221				724				—
Consumer		321				444				352				286				235
Total loans delinquent for 90 days or more still accruing interest		909				1,170				1,573				1,010				235
Restructured loans still accruing interest: [1]
Commercial, financial and agricultural		137				172				113				135				157
Real estate:
Residential mortgage		5,178				5,290				5,431				5,502				6,717
Commercial mortgage		1,825				1,888				1,709				1,839				1,985
Consumer		214				145				—				—				—
Total restructured loans still accruing interest		7,354				7,495				7,253				7,476				8,859
Total NPAs and loans delinquent for 90 days or more and restructured loans still accruing interest		$	21,450			$	13,406			$	12,473			$	10,205			$	10,454
Total nonaccrual loans as a percentage of total loans		0.26		%		0.09		%		0.08		%		0.03		%		0.02		%
Total NPAs as a percentage of total loans and OREO		0.26		%		0.09		%		0.08		%		0.04		%		0.03		%
Total NPAs and loans delinquent for 90 days or more still accruing interest as a percentage of total loans and OREO		0.28		%		0.12		%		0.12		%		0.06		%		0.04		%
Total NPAs, loans delinquent for 90 days or more and restructured loans still accruing interest as a percentage of total loans and OREO		0.43		%		0.27		%		0.28		%		0.23		%		0.24		%
Quarter-to-quarter changes in NPAs:
Balance at beginning of quarter		$	4,741			$	3,647			$	1,719			$	1,360			$	1,258
Additions		9,060				1,771				2,056				695				112
Reductions:
Payments		(393)				(367)				(60)				(34)				(51)
Return to accrual status		—				(123)				—				—				(2)
Sales of NPAs		—				(94)				—				(302)				—
Charge-offs, valuation and other adjustments		(221)				(93)				(68)				—				43
Total reductions		(614)				(677)				(128)				(336)				(10)
Balance at end of quarter		$	13,187			$	4,741			$	3,647			$	1,719			$	1,360

[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 10
		Three Months Ended																				Nine Months Ended
		September 30,				June 30,				March 31,				December 31,				September 30,				September 30,
(Dollars in thousands)		2020				2020				2020				2019				2019				2020				2019
Allowance for credit  losses ("ACL"):
ACL at beginning of period		$	67,339			$	59,645			$	47,971			$	48,167			$	48,267			$	47,971			$	47,916
Adoption of ASU 2016-13		—				—				3,566				—				—				3,566				—
Adjusted ACL at beginning of period		67,339				59,645				51,537				48,167				48,267				51,537				47,916
Provision for credit losses on loans [1]		14,465				10,640				9,329				2,098				1,532				34,434				4,219
Charge-offs:
Commercial, financial and agricultural		810				1,103				437				379				797				2,350				2,099
Real estate:
Residential mortgage		11				52				—				—				—				63				—
Home equity		—				—				—				—				5				—				5
Commercial mortgage		75				—				—				—				—				75				—
Consumer		1,492				2,626				2,217				2,723				1,832				6,335				5,542
Leases		—				—				—				—				—				—				—
Total charge-offs		2,388				3,781				2,654				3,102				2,634				8,823				7,646
Recoveries:
Commercial, financial and agricultural		321				305				342				264				362				968				910
Real estate:
Construction		—				—				131				6				6				131				604
Residential mortgage		13				20				181				26				104				214				498
Home equity		—				—				31				—				24				31				42
Commercial mortgage		12				1				2				—				—				15				25
Consumer		780				509				746				512				506				2,035				1,599
Total recoveries		1,126				835				1,433				808				1,002				3,394				3,678
Net charge-offs (recoveries)		1,262				2,946				1,221				2,294				1,632				5,429				3,968
ACL at end of period		$	80,542			$	67,339			$	59,645			$	47,971			$	48,167			$	80,542			$	48,167
Average loans, net of deferred fees and costs		$	5,016,955			$	4,902,905			$	4,462,347			$	4,412,247			$	4,293,455			$	4,794,883			$	4,183,703
Annualized ratio of net charge-offs to average loans		0.10		%		0.24		%		0.11		%		0.21		%		0.15		%		0.15		%		0.13		%

[1] The Company recorded a reserve on accrued interest receivable 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 accrued interest receivable with the offset to provision for credit losses. The provision for credit losses presented in this table excludes the provision for credit losses on accrued interest receivable of $0.187 million.

 

CENTRAL PACIFIC FINANCIAL CORP. AND SUBSIDIARIES
Reconciliation of Non-GAAP Financial Measures
(Unaudited)	TABLE 11

The Company believes that pre-tax, pre-provision ("PTPP") earnings, a non-GAAP financial measure, is useful as a tool to help evaluate the ability to provide for credit costs through operations. The following tables set forth a reconciliation of our PTPP earnings and our PTPP earnings to average assets for each of the periods indicated:

		Three Months Ended																				Nine Months Ended
		September 30,				June 30,				March 31,				December 31,				September 30,				September 30,
(Dollars in thousands)		2020				2020				2020				2019				2019				2020				2019
Net income		$	6,859			$	9,917			$	8,326			$	14,197			$	14,554			$	25,102			$	44,125
Add: Income tax expense		2,200				2,967				2,821				5,165				4,895				7,988				14,440
Income before taxes		9,059				12,884				11,147				19,362				19,449				33,090				58,565
Add: Provision for credit losses		14,652				10,640				9,329				2,098				1,532				34,621				4,219
PTPP earnings		$	23,711			$	23,524			$	20,476			$	21,460			$	20,981			$	67,711			$	62,784
		Three Months Ended																				Nine Months Ended
		September 30,				June 30,				March 31,				December 31,				September 30,				September 30,
(Dollars in thousands)		2020				2020				2020				2019				2019				2020				2019
Net income		$	6,859			$	9,917			$	8,326			$	14,197			$	14,554			$	25,102			$	44,125
Net income (annualized)		27,436				39,668				33,304				56,788				58,216				33,469				58,833
PTPP earnings		23,711				23,524				20,476				21,460				20,981				67,711				62,784
PTPP earnings (annualized)		94,844				94,096				81,904				85,840				83,924				90,281				83,712
Average assets		6,574,492				6,468,129				6,007,237				5,978,797				5,907,207				6,350,696				5,858,224
Return on average assets		0.42		%		0.61		%		0.55		%		0.95		%		0.99		%		0.53		%		1.00		%
PTPP earnings to average assets		1.44		%		1.45		%		1.36		%		1.44		%		1.42		%		1.42		%		1.43		%

The following table sets forth a reconciliation of the ratios of our allowance for credit losses ("ACL") to total loans and ACL to total loans, excluding PPP loans, for each of the periods indicated:

		September 30,				June 30,				March 31,				December 31,				September 30,
(Dollars in thousands)		2020				2020				2020				2019				2019
Allowance for credit losses ("ACL")		$	80,542			$	67,339			$	59,645			$	47,971			$	48,167
Total loans		$	5,030,626			$	5,003,438			$	4,511,998			$	4,449,540			$	4,367,862
Less: SBA Paycheck Protection Program ("PPP loans")		528,581				526,408				—				—				—
Total loans, excluding PPP loans		$	4,502,045			$	4,477,030			4,511,998				4,449,540				$	4,367,862
Ratio of ACL to total loans		1.60		%		1.35		%		1.32		%		1.08		%		1.10		%
Ratio of ACL to total loans, excluding PPP loans		1.79		%		1.50		%		1.32		%		1.08		%		1.10		%

The following table sets forth a reconciliation of the ratios of our loans on payment forbearance or deferrals to total loans and loans on payment forbearance or deferrals to total loans, excluding PPP loans, for each of the periods indicated:

		September 30,				June 30,
		2020				2020
Loans on payment forbearance or deferrals		$	290,841			$	567,860
Total loans		5,030,626				5,003,438
Total loans, excluding PPP loans		4,502,045				4,477,030
Ratio of loans on payment forbearance or deferrals to total loans		5.78		%		11.35		%
Ratio of loans on payment forbearance or deferrals to total loans, excluding PPP loans		6.46		%		12.68		%

 

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SOURCE Central Pacific Financial Corp.

FAQ

What were Central Pacific Financial's Q3 2020 earnings per share?

The earnings per share for Q3 2020 were $0.24.

How much did Central Pacific Financial report as net income for Q3 2020?

Central Pacific Financial reported net income of $6.9 million for Q3 2020.

What is the current dividend declared by Central Pacific Financial?

Central Pacific Financial declared a quarterly cash dividend of $0.23 per share.

What was the provision for credit losses in Q3 2020 for CPF?

The provision for credit losses in Q3 2020 was $14.7 million.

What were the total assets reported by Central Pacific Financial for Q3 2020?

Total assets were reported at $6.65 billion as of September 30, 2020.