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

Published

- Net income of $18.7 million, or $0.66 per diluted share for the second quarter.

- ROA of 1.06% and ROE of 13.56% for the second quarter.

- Core loans increased by $102.7 million in the second quarter, while PPP loans decreased by $163.2 million for a net decrease in total loans of $60.5 million from the first quarter of 2021.

- Total deposits of $6.40 billion increased by $188.2 million, or 3.0% from the first quarter of 2021.

- Cost of average total deposits of 0.06% in the second quarter.

- Board of Directors declared a quarterly cash dividend of $0.24 per share.

- Repurchased 156,600 shares of the Company's common stock, at a total cost of $4.3 million.

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.

Central Pacific Financial Corp. Logo (PRNewsFoto/Central Pacific Financial Corp.)

"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 HighlightsNet 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 HighlightsTotal 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 QualityNonperforming 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.

CapitalTotal 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 MeasuresThis 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 CallThe 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 StatementsThis 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; issuedand 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 forcredit 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, excludingvaluation 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 othershort-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 andrestructured 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 accruinginterest 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 onloans [1] [2]

(2,963)

(974)

4,496

14,465

10,640

(3,937)

19,969

Charge-offs:

Commercial, financial andagricultural - 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 andagricultural - 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 andcosts

$

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.

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