Central Pacific Financial Corp. Reports Increase In Second Quarter Earnings To $18.7 Million
07/28/2021 - 06:30 AM
HONOLULU , July 28, 2021 /PRNewswire/ -- Central Pacific Financial Corp. (NYSE: CPF) (the "Company"), parent company of Central Pacific Bank (the "Bank"), today reported net income in the second quarter of 2021 of $18.7 million , or fully diluted earnings per share ("EPS") of $0.66 , compared to net income in the second quarter of 2020 of $9.9 million , or EPS of $0.35 , and net income in the first quarter of 2021 of $18.0 million , or EPS of $0.64 .
"We are pleased to report very strong financial results with quarterly pre-tax income reaching a new high since 2007," said Paul Yonamine , Chairman and Chief Executive Officer. "During the second quarter we resumed share repurchases as the Hawaii economy continued to rebound, and our asset quality, liquidity and capital levels remained very strong."
"Our quarterly results are a reflection of the extraordinary work of our teams who continue to diligently manage risks while growing our loans and deposits to meet our customer's needs," said Catherine Ngo , President.
On July 27, 2021, the Company's Board of Directors declared a quarterly cash dividend of $0.24 per share on its outstanding common shares. The dividend will be payable on September 15, 2021 to shareholders of record at the close of business on August 31, 2021.
During the second quarter of 2021, the Company resumed repurchases under its common stock repurchase program and repurchased 156,600 shares of common stock, at a total cost of $4.3 million , or an average cost per share of $27.63 . The Company's remaining repurchase authority under its common stock repurchase program at June 30, 2021 is $20 .7 million. During the six months ended June 30, 2021 , the Company returned $17.6 million in capital to its shareholders through cash dividends and share repurchases.
Earnings Highlights Net interest income for the second quarter of 2021 was $52.1 million , compared to $49.3 million in the year-ago quarter and $49.8 million in the previous quarter. Net interest margin for the second quarter of 2021 was 3.16% , compared to 3.26% in the year-ago quarter and 3.19% in the previous quarter. The sequential quarter increase in net interest income is primarily due to an increase in loan fees on PPP loans and was partially offset by decreases in yields earned on the Company's interest-earning assets. Net interest income for the second quarter of 2021 included $7.9 million in net interest income and loan fees on PPP loans, compared to $5.2 million in the previous quarter. Net deferred fees on PPP loans totaled $15 .9 million and $20 .3 million at June 30, 2021 and March 31, 2021, respectively. Additional information on average balances, interest income and expenses and yields and rates is presented in Tables 4 and 5.
In the second quarter of 2021, the Company recorded a credit to the provision for credit losses on loans of $3.4 million , compared to a provision of $11.2 million in the year-ago quarter and a credit to the provision of $0.8 million in the previous quarter. The credit to the provision for credit losses in the second quarter of 2021 was driven by an improved economic forecast and positive migration of loan grades as the State of Hawaii continues to recover from the COVID-19 pandemic.
Other operating income for the second quarter of 2021 totaled $10.5 million , compared to $10.7 million in the year-ago quarter and $10.7 million in the previous quarter. Additional information on other operating income is presented in Table 3.
Other operating expense for the second quarter of 2021 totaled $41.4 million , compared to $35.9 million in the year-ago quarter and $37.8 million in the previous quarter. The increase from the previous quarter was primarily due to an increase in salaries and employee benefits of $4 .0 million. Additional information on other operating expense is presented in Table 3.
The efficiency ratio for the second quarter of 2021 was 66.20% , compared to 59.81% in the year-ago quarter and 62.54% in the previous quarter.
The effective tax rate for the second quarter of 2021 was 23.9% , compared to 23.0% in the year-ago quarter and 23.2% in the previous quarter.
Balance Sheet Highlights Total assets at June 30, 2021 of $7.18 billion increased from $6 .63 billion at June 30, 2020, and increased from $6 .98 billion at March 31, 2021.
Total loans at June 30, 2021 of $5.08 billion increased from $5 .00 billion at June 30, 2020, and decreased from $5 .14 billion at March 31, 2021. The sequential quarter decrease in total loans was due to a decrease in PPP loans of $163 .2 million, offset by a net increase in core loans of $102 .7 million. In the second quarter of 2021, the Company received repayments of PPP loans totaling $195.8 million , which were offset by PPP originations of $28.1 million . Loans on forbearance or deferral totaled $3 .5 million, or less than 1% of total loans at June 30, 2021, and declined 91.2% from the first quarter of 2021. Loans by geographic distribution are summarized in Table 6.
Total deposits at June 30, 2021 of $6.40 billion increased from $5 .79 billion at June 30, 2020, and increased from $6 .21 billion at March 31, 2021. Core deposits, which include demand deposits, savings and money market deposits and time deposits up to $250,000 , totaled $5.83 billion at June 30, 2021, and increased by $278 .6 million from March 31, 2021. The Company's loan-to-deposit ratio was 79.4% at June 30, 2021, compared to 86.4% at June 30, 2020 and 82.8% at March 31, 2021. Core deposit and total deposit balances are summarized in Table 7.
Asset Quality Nonperforming assets at June 30, 2021 totaled $6.7 million , or 0.09% of total assets, compared to $4.7 million , or 0.07% of total assets at June 30, 2020, and $7.2 million , or 0.10% of total assets at March 31, 2021. Additional information on nonperforming assets, past due and restructured loans is presented in Table 8.
Net charge-offs in the second quarter of 2021 totaled $0.8 million , compared to net charge-offs of $2.9 million in the year-ago quarter, and net charge-offs of $0.7 million in the previous quarter.
The allowance for credit losses, as a percentage of total loans at June 30, 2021 was 1.53% , compared to 1.35% at June 30, 2020 and 1.59% at March 31, 2021. Excluding PPP loans, the allowance for credit losses, as a percentage of core loans at June 30, 2021 was 1.68% , compared to 1.80% at March 31, 2021. Additional information on net charge-offs and recoveries and the allowance for credit losses is presented in Tables 9 and 10.
Capital Total shareholders' equity was $552.8 million at June 30, 2021, compared to $544.3 million and $542.9 million at June 30, 2020 and March 31, 2021, respectively.
The Company maintained its strong capital position and its capital ratios continue to exceed the levels required to be considered a "well-capitalized" institution for regulatory purposes under Basel III. At June 30, 2021, the Company's leverage capital, tier 1 risk-based capital, total risk-based capital, and common equity tier 1 ratios were 8.6% , 12.7% , 14.9% , and 11.6% , respectively, compared to 8.9% , 13.1% , 15.4% , and 12.0% , respectively, at March 31, 2021.
Non-GAAP Financial Measures This press release contains certain references to financial measures that have been adjusted to exclude certain expenses and other specified items. These financial measures differ from comparable measures calculated and presented in accordance with accounting principles generally accepted in the United States of America ("GAAP") in that they exclude unusual or non-recurring charges, losses, credits or gains. This press release identifies the specific items excluded from the comparable GAAP financial measure in the calculation of each non-GAAP financial measure. Management believes that financial presentations excluding the impact of these items provide useful supplemental information that is important to a proper understanding of the Company's core business results by investors. These presentations should not be viewed as a substitute for results determined in accordance with GAAP, nor are they necessarily comparable to non-GAAP financial measures presented by other companies.
Conference Call The Company's management will host a conference call today at 1:00 p.m. Eastern Time (7:00 a.m. Hawaii Time) to discuss the quarterly results. Individuals are encouraged to listen to the live webcast of the presentation by visiting the investor relations page of the Company's website at http://ir.cpb.bank. Alternatively, investors may participate in the live call by dialing 1-877-505-7644. A playback of the call will be available through August 28, 2021 by dialing 1-877-344-7529 (passcode: 10158618) and on the Company's website. Information which may be discussed in the conference call is provided in an earnings supplement presentation on the Company's website at http://ir.cpb.bank .
About Central Pacific Financial Corp. Central Pacific Financial Corp. is a Hawaii -based bank holding company with approximately $7.2 billion in assets as of June 30, 2021. Central Pacific Bank, its primary subsidiary, operates 31 branches and 70 ATMs in the state of Hawaii. For additional information, please visit the Company's website at http://www.cpb.bank .
Forward-Looking Statements This document may contain forward-looking statements concerning: projections of revenues, expenses, income or loss, earnings or loss per share, capital expenditures, the payment or nonpayment of dividends, capital position, credit losses, net interest margin or other financial items; statements of plans, objectives and expectations of Central Pacific Financial Corp. or its management or Board of Directors, including those relating to business plans, use of capital resources, products or services and regulatory developments and regulatory actions; statements of future economic performance including anticipated performance results from our RISE2020 and other business initiatives; or any statements of the assumptions underlying or relating to any of the foregoing. Words such as "believes," "plans," "anticipates," "expects," "intends," "forecasts," "hopes," "targeting," "continue," "remain," "will," "should," "estimates," "may" and other similar expressions are intended to identify forward-looking statements but are not the exclusive means of identifying such statements.
While we believe that our forward-looking statements and the assumptions underlying them are reasonably based, such statements and assumptions are by their nature subject to risks and uncertainties, and thus could later prove to be inaccurate or incorrect. Accordingly, actual results could differ materially from those statements or projections for a variety of reasons, including, but not limited to: the adverse effects of the COVID-19 pandemic virus on local, national and international economies, including, but not limited to, the adverse impact on tourism and construction in the State of Hawaii , our borrowers, customers, third-party contractors, vendors and employees as well as the effects of government programs and initiatives in response to COVID-19; the impact of our participation in the Paycheck Protection Program ("PPP") and fulfillment of government guarantees on our PPP loans; the increase in inventory or adverse conditions in the real estate market and deterioration in the construction industry; adverse changes in the financial performance and/or condition of our borrowers and, as a result, increased loan delinquency rates, deterioration in asset quality, and losses in our loan portfolio; our ability to successfully implement our RISE2020 and other business initiatives; the impact of local, national, and international economies and events (including natural disasters such as wildfires, volcanic eruptions, hurricanes, tsunamis, storms, earthquakes and pandemic virus and disease, including COVID-19) on the Company's business and operations and on tourism, the military, and other major industries operating within the Hawaii market and any other markets in which the Company does business; deterioration or malaise in domestic economic conditions, including any destabilization in the financial industry and deterioration of the real estate market, as well as the impact of declining levels of consumer and business confidence in the state of the economy in general and in financial institutions in particular; changes in estimates of future reserve requirements based upon the periodic review thereof under relevant regulatory and accounting requirements; the impact of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the "Dodd-Frank Act"), changes in capital standards, other regulatory reform and federal and state legislation, including but not limited to regulations promulgated by the Consumer Financial Protection Bureau (the "CFPB"), government-sponsored enterprise reform, and any related rules and regulations which affect our business operations and competitiveness; the costs and effects of legal and regulatory developments, including legal proceedings or regulatory or other governmental inquiries and proceedings and the resolution thereof, the results of regulatory examinations or reviews and the effect of, and our ability to comply with, any regulatory orders or actions we are or may become subject to; ability to successfully implement our initiatives to lower our efficiency ratio; the effects of and changes in trade, monetary and fiscal policies and laws, including the interest rate policies of the Board of Governors of the Federal Reserve System (the "FRB" or the "Federal Reserve"); inflation, interest rate, securities market and monetary fluctuations, including the anticipated replacement of the London Interbank Offered Rate ("LIBOR") Index and the impact on our loans and debt which are tied to that index; negative trends in our market capitalization and adverse changes in the price of the Company's common stock; political instability; acts of war or terrorism; pandemic virus and disease, including COVID-19; changes in consumer spending, borrowings and savings habits; failure to maintain effective internal control over financial reporting or disclosure controls and procedures; cybersecurity and data privacy breaches and the consequence therefrom; the ability to address deficiencies in our internal controls over financial reporting or disclosure controls and procedures; technological changes and developments; changes in the competitive environment among financial holding companies and other financial service providers; the effect of changes in accounting policies and practices, as may be adopted by the regulatory agencies, as well as the Public Company Accounting Oversight Board, the Financial Accounting Standards Board ("FASB") and other accounting standard setters and the cost and resources required to implement such changes; our ability to attract and retain key personnel; changes in our organization, compensation and benefit plans; and our success at managing the risks involved in the foregoing items.
For further information with respect to factors that could cause actual results to materially differ from the expectations or projections stated in the forward-looking statements, please see the Company's publicly available Securities and Exchange Commission filings, including the Company's Form 10-K for the last fiscal year and, in particular, the discussion of "Risk Factors" set forth therein. We urge investors to consider all of these factors carefully in evaluating the forward-looking statements contained in this Form 8-K. Forward-looking statements speak only as of the date on which such statements are made. We undertake no obligation to update any forward-looking statements to reflect events or circumstances after the date on which such statements are made, or to reflect the occurrence of unanticipated events except as required by law.
CENTRAL PACIFIC FINANCIAL CORP. AND SUBSIDIARIES
Financial Highlights
(Unaudited)
TABLE 1
Three Months Ended
Six Months Ended
(Dollars in thousands,
Jun 30,
Mar 31,
Dec 31,
Sep 30,
Jun 30,
Jun 30,
except for per share amounts)
2021
2021
2020
2020
2020
2021
2020
CONDENSED INCOME STATEMENT
Net interest income
$
52,061
$
49,804
$
51,474
$
49,120
$
49,259
$
101,865
$
97,089
(Credit) provision for credit losses [1]
(3,443)
(821)
4,898
14,873
11,213
(4,264)
22,340
Total other operating income
10,530
10,711
14,057
11,563
10,692
21,241
19,578
Total other operating expense [1]
41,433
37,846
44,690
36,751
35,854
79,279
70,296
Income tax expense
5,887
5,452
3,772
2,200
2,967
11,339
5,788
Net income
18,714
18,038
12,171
6,859
9,917
36,752
18,243
Basic earnings per common share
$
0.66
$
0.64
$
0.43
$
0.24
$
0.35
$
1.31
$
0.65
Diluted earnings per common share
0.66
0.64
0.43
0.24
0.35
1.29
0.65
Dividends declared per common share
0.24
0.23
0.23
0.23
0.23
0.47
0.46
PERFORMANCE RATIOS
Return on average assets (ROA) [2]
1.06
%
1.07
%
0.74
%
0.42
%
0.61
%
1.07
%
0.58
%
Return on average shareholders' equity (ROE) [2]
13.56
13.07
8.87
4.99
7.34
13.31
6.77
Average shareholders' equity to average assets
7.84
8.19
8.29
8.36
8.36
8.01
8.64
Efficiency ratio [3]
66.20
62.54
68.20
60.56
59.81
64.40
60.25
Net interest margin (NIM) [2]
3.16
3.19
3.32
3.19
3.26
3.18
3.34
Dividend payout ratio [4]
36.36
35.94
53.49
95.83
65.71
36.43
70.77
SELECTED AVERAGE BALANCES
Average loans, including loans held for sale
$
5,110,820
$
5,079,874
$
5,034,717
$
5,016,955
$
4,902,905
$
5,095,433
$
4,682,626
Average interest-earning assets
6,606,779
6,305,786
6,202,228
6,160,381
6,073,361
6,457,115
5,847,202
Average assets
7,039,928
6,738,825
6,621,127
6,574,492
6,468,129
6,890,195
6,237,592
Average deposits
6,269,516
5,958,742
5,755,257
5,728,147
5,614,595
6,114,975
5,368,056
Average interest-bearing liabilities
4,253,382
4,161,453
4,163,396
4,118,726
4,082,699
4,207,670
4,000,016
Average shareholders' equity
552,102
551,976
548,663
549,378
540,802
552,039
538,762
CENTRAL PACIFIC FINANCIAL CORP. AND SUBSIDIARIES
Financial Highlights
(Unaudited)
TABLE 1 (CONTINUED)
Jun 30,
Mar 31,
Dec 31,
Sep 30,
Jun 30,
(dollars in thousands)
2021
2021
2020
2020
2020
REGULATORY CAPITAL RATIOS
Central Pacific Financial Corp
Leverage capital ratio
8.6
%
8.9
%
8.8
%
8.8
%
8.9
%
Tier 1 risk-based capital ratio
12.7
13.1
12.9
12.8
12.5
Total risk-based capital ratio
14.9
15.4
15.2
13.9
13.6
Common equity tier 1 capital ratio
11.6
12.0
11.8
11.6
11.4
Central Pacific Bank
Leverage capital ratio
9.1
9.4
9.4
8.6
8.7
Tier 1 risk-based capital ratio
13.5
13.9
13.7
12.5
12.2
Total risk-based capital ratio
14.6
15.0
14.9
13.6
13.3
Common equity tier 1 capital ratio
13.5
13.9
13.7
12.5
12.2
CENTRAL PACIFIC FINANCIAL CORP. AND SUBSIDIARIES
Financial Highlights
(Unaudited)
TABLE 1 (CONTINUED)
Jun 30,
Mar 31,
Dec 31,
Sep 30,
Jun 30,
(dollars in thousands, except for per share amounts)
2021
2021
2020
2020
2020
BALANCE SHEET
Total loans, net of deferred fees and costs
$
5,077,318
$
5,137,849
$
4,964,113
$
5,030,626
$
5,003,438
Total assets
7,178,481
6,979,265
6,594,583
6,648,142
6,632,972
Total deposits
6,397,159
6,208,950
5,796,118
5,678,929
5,794,685
Long-term debt
105,495
105,436
105,385
101,547
167,491
Total shareholders' equity
552,793
542,865
546,685
543,903
544,271
Total shareholders' equity to total assets
7.70
%
7.78
%
8.29
%
8.18
%
8.21
%
ASSET QUALITY
Allowance for credit losses (ACL) [1] [2]
$
77,781
$
81,553
$
83,269
$
80,542
$
67,339
Non-performing assets (NPA)
6,745
7,194
6,192
13,187
4,741
ACL to total loans [1]
1.53
%
1.59
%
1.68
%
1.60
%
1.35
%
ACL to core loans (refer to Table 10) [1]
1.68
%
1.80
%
1.83
%
1.79
%
1.50
%
ACL to non-performing assets [1]
1,153.17
%
1,133.63
%
1,344.78
%
610.77
%
1,420.35
%
NPA to total assets
0.09
%
0.10
%
0.09
%
0.20
%
0.07
%
PER SHARE OF COMMON STOCK OUTSTANDING
Book value per common share
$
19.59
$
19.19
$
19.40
$
19.30
$
19.33
Closing market price per common share
26.06
26.68
19.01
13.57
16.03
[1] As of January 1, 2021, the provision for credit losses on off-balance sheet credit exposures (previously included in other operating expense) is included in the provision for credit losses line on the consolidated statements of income. Prior period amounts have been reclassified to conform to the current period presentation. The allowance for off-balance sheet credit exposures continues to be included in other liabilities
[2] ROA, ROE and ROTE are annualized based on a 30/360 day convention. Annualized net interest income and expense in the NIM calculation are based on the day count interest payment conventions at the interest-earning asset or interest-bearing liability level (i.e. 30/360, actual/actual)
[3] Efficiency ratio is defined as total operating expense divided by total revenue (net interest income and total other operating income)
[4] Dividend payout ratio is defined as dividends declared per share divided by diluted earnings per share
CENTRAL PACIFIC FINANCIAL CORP. AND SUBSIDIARIES
Consolidated Balance Sheets
(Unaudited)
TABLE 2
Jun 30,
Mar 31,
Dec 31,
Sep 30,
Jun 30,
(Dollars in thousands, except share data)
2021
2021
2020
2020
2020
ASSETS
Cash and due from financial institutions
$
116,009
$
93,358
$
97,546
$
89,665
$
102,132
Interest-bearing deposits in other financial institutions
224,469
166,533
6,521
5,489
41,201
Investment securities:
Available-for-sale debt securities, at fair value
1,407,340
1,216,341
1,182,609
1,166,319
1,168,594
Equity securities, at fair value
1,578
1,435
1,351
1,204
1,209
Total investment securities
1,408,918
1,217,776
1,183,960
1,167,523
1,169,803
Loans held for sale
5,361
5,234
16,687
23,962
10,443
Loans, net of deferred fees and costs
5,077,318
5,137,849
4,964,113
5,030,626
5,003,438
Less allowance for credit losses
77,781
81,553
83,269
80,542
67,339
Loans, net of allowance for credit losses
4,999,537
5,056,296
4,880,844
4,950,084
4,936,099
Premises and equipment, net
76,740
72,599
65,278
61,095
55,032
Accrued interest receivable
19,014
19,440
20,224
21,478
19,590
Investment in unconsolidated subsidiaries
31,052
31,487
29,968
30,239
16,428
Other real estate owned
—
—
—
128
—
Mortgage servicing rights
10,500
11,094
11,865
12,429
12,771
Bank-owned life insurance
167,289
167,110
163,161
161,743
161,758
Federal Home Loan Bank ("FHLB") stock
8,149
8,155
8,237
17,468
9,229
Right of use lease asset
41,890
44,727
45,857
44,896
50,039
Other assets
69,553
85,456
64,435
61,943
48,447
Total assets
$
7,178,481
$
6,979,265
$
6,594,583
$
6,648,142
$
6,632,972
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Noninterest-bearing demand
$
2,203,806
$
2,070,428
$
1,790,269
$
1,762,476
$
1,851,012
Interest-bearing demand
1,341,280
1,237,574
1,174,888
1,114,123
1,067,483
Savings and money market
2,048,945
2,004,368
1,932,043
1,881,104
1,945,744
Time
803,128
896,580
898,918
921,226
930,446
Total deposits
6,397,159
6,208,950
5,796,118
5,678,929
5,794,685
FHLB advances and other short-term borrowings
—
—
22,000
206,000
—
Long-term debt
105,495
105,436
105,385
101,547
167,491
Lease liability
43,112
46,033
47,191
45,355
50,440
Other liabilities
79,874
75,933
77,156
72,369
76,050
Total liabilities
6,625,640
6,436,352
6,047,850
6,104,200
6,088,666
Shareholders' equity:
Preferred stock, no par value, authorized 1,000,000 shares; issued and outstanding: none at June 30, 2021, March 31, 2021, December 31, 2020, September 30, 2020, and June 30, 2020
—
—
—
—
—
Common stock, no par value, authorized 185,000,000 shares; issued and outstanding: 28,218,860 at June 30, 2021, 28,282,530 at March 31, 2021, 28,183,340 at December 31, 2020, 28,179,798 at September 30, 2020, and 28,154,159 at June 30, 2020
440,854
443,505
442,635
442,635
442,699
Additional paid-in capital
96,182
95,721
94,842
94,336
93,007
Retained earnings (accumulated deficit)
10,831
628
(10,920)
(16,609)
(16,986)
Accumulated other comprehensive income
4,926
3,011
20,128
23,541
25,551
Total shareholders' equity
552,793
542,865
546,685
543,903
544,271
Non-controlling interest
48
48
48
39
35
Total equity
552,841
542,913
546,733
543,942
544,306
Total liabilities and shareholders' equity
$
7,178,481
$
6,979,265
$
6,594,583
$
6,648,142
$
6,632,972
CENTRAL PACIFIC FINANCIAL CORP. AND SUBSIDIARIES
Consolidated Statements of Income
(Unaudited)
TABLE 3
Three Months Ended
Six Months Ended
June 30,
March 31,
December 31,
September 30,
June 30,
June 30,
(Dollars in thousands, except per share data)
2021
2021
2020
2020
2020
2021
2020
Interest income:
Interest and fees on loans
$
49,024
$
46,074
$
48,259
$
45,751
$
45,915
$
95,098
$
92,119
Interest and dividends on investment securities:
Taxable investment securities
4,447
5,106
5,002
5,233
6,310
9,553
13,067
Tax-exempt investment securities
346
514
504
621
599
860
1,267
Dividend income on investment securities
18
18
18
17
17
36
34
Interest on deposits in other financial institutions
61
10
4
3
3
71
39
Dividend income on FHLB stock
63
59
114
128
106
122
238
Total interest income
53,959
51,781
53,901
51,753
52,950
105,740
106,764
Interest expense:
Interest on deposits:
Demand
93
86
105
115
114
179
290
Savings and money market
282
274
314
417
567
556
1,685
Time
498
588
813
1,284
2,124
1,086
5,392
Interest on short-term borrowings
—
2
65
71
74
2
582
Interest on long-term debt
1,025
1,027
1,130
746
812
2,052
1,726
Total interest expense
1,898
1,977
2,427
2,633
3,691
3,875
9,675
Net interest income
52,061
49,804
51,474
49,120
49,259
101,865
97,089
(Credit) provision for credit losses
(3,443)
(821)
4,898
14,873
11,213
(4,264)
22,340
Net interest income after (credit) provision for credit losses
55,504
50,625
46,576
34,247
38,046
106,129
74,749
Other operating income:
Mortgage banking income
1,533
2,970
5,434
4,345
3,566
4,503
3,903
Service charges on deposit accounts
1,443
1,478
1,560
1,475
1,149
2,921
3,199
Other service charges and fees
4,619
3,790
3,709
3,345
2,916
8,409
7,813
Income from fiduciary activities
1,269
1,231
1,113
1,149
1,270
2,500
2,567
Net gain (loss) on sales of investment securities
50
—
151
(352)
—
50
—
Income from bank-owned life insurance
1,210
797
1,219
1,179
1,424
2,007
1,405
Other
406
445
871
422
367
851
691
Total other operating income
10,530
10,711
14,057
11,563
10,692
21,241
19,578
Other operating expense:
Salaries and employee benefits
23,790
19,827
23,090
20,375
20,329
43,617
40,383
Net occupancy
4,055
3,764
4,011
3,834
3,645
7,819
7,317
Equipment
1,048
1,000
1,157
1,234
1,043
2,048
2,140
Communication expense
756
769
758
856
774
1,525
1,611
Legal and professional services
2,572
2,377
2,507
2,262
2,238
4,949
4,266
Computer software expense
3,398
3,783
3,625
3,114
3,035
7,181
5,978
Advertising expense
1,329
1,658
756
1,020
923
2,987
2,015
Other
4,485
4,668
8,786
4,056
3,867
9,153
6,586
Total other operating expense
41,433
37,846
44,690
36,751
35,854
79,279
70,296
Income before income taxes
24,601
23,490
15,943
9,059
12,884
48,091
24,031
Income tax expense
5,887
5,452
3,772
2,200
2,967
11,339
5,788
Net income
$
18,714
$
18,038
$
12,171
$
6,859
$
9,917
$
36,752
$
18,243
Per common share data:
Basic earnings per share
$
0.66
$
0.64
$
0.43
$
0.24
$
0.35
$
1.31
$
0.65
Diluted earnings per share
0.66
0.64
0.43
0.24
0.35
1.29
0.65
Cash dividends declared
0.24
0.23
0.23
0.23
0.23
0.47
0.46
Basic weighted average shares outstanding
28,173,710
28,108,648
28,071,151
28,060,020
28,040,802
28,141,360
28,083,602
Diluted weighted average shares outstanding
28,456,624
28,313,014
28,177,366
28,111,664
28,095,230
28,407,479
28,190,132
Note: Certain amounts in the prior period financial statements have been reclassified to conform to the presentation of the current period.
CENTRAL PACIFIC FINANCIAL CORP. AND SUBSIDIARIES
Average Balances, Interest Income & Expense, Yields and Rates (Taxable Equivalent)
(Unaudited)
TABLE 4
Three Months Ended
Three Months Ended
Three Months Ended
June 30, 2021
March 31, 2021
June 30, 2020
Average
Average
Average
Average
Average
Average
(Dollars in thousands)
Balance
Yield/Rate
Interest
Balance
Yield/Rate
Interest
Balance
Yield/Rate
Interest
ASSETS
Interest-earning assets:
Interest-bearing deposits in other financial institutions
$
222,934
0.11
%
$
61
$
43,442
0.10
%
$
10
$
15,777
0.10
%
$
3
Investment securities, excluding valuation allowance:
Taxable
1,172,183
1.52
4,465
1,081,271
1.90
5,124
1,042,441
2.43
6,327
Tax-exempt
92,702
1.89
438
93,665
2.78
651
100,485
3.02
758
Total investment securities
1,264,885
1.55
4,903
1,174,936
1.97
5,775
1,142,926
2.48
7,085
Loans, including loans held for sale
5,110,820
3.84
49,024
5,079,874
3.66
46,074
4,902,905
3.76
45,915
Federal Home Loan Bank stock
8,140
3.11
63
7,534
3.13
59
11,753
3.62
106
Total interest-earning assets
6,606,779
3.28
54,051
6,305,786
3.32
51,918
6,073,361
3.51
53,109
Noninterest-earning assets
433,149
433,039
394,768
Total assets
$
7,039,928
$
6,738,825
$
6,468,129
LIABILITIES AND EQUITY
Interest-bearing liabilities:
Interest-bearing demand deposits
$
1,269,676
0.03
%
$
93
$
1,186,963
0.03
%
$
86
$
1,056,885
0.04
%
$
114
Savings and money market deposits
2,028,583
0.06
282
1,972,800
0.06
274
1,856,621
0.12
567
Time deposits up to $250,000
231,922
0.34
196
236,828
0.41
241
260,319
0.81
525
Time deposits over $250,000
617,745
0.20
302
657,004
0.21
347
708,831
0.91
1,599
Total interest-bearing deposits
4,147,926
0.08
873
4,053,595
0.09
948
3,882,656
0.29
2,805
Federal Home Loan Bank advances and other short-term borrowings
—
—
—
2,456
0.30
2
63,104
0.48
74
Long-term debt
105,456
3.90
1,025
105,402
3.95
1,027
136,939
2.38
812
Total interest-bearing liabilities
4,253,382
0.18
1,898
4,161,453
0.19
1,977
4,082,699
0.36
3,691
Noninterest-bearing deposits
2,121,590
1,905,147
1,731,939
Other liabilities
112,852
120,247
112,687
Total liabilities
6,487,824
6,186,847
5,927,325
Shareholders' equity
552,102
551,976
540,802
Non-controlling interest
2
2
2
Total equity
552,104
551,978
540,804
Total liabilities and equity
$
7,039,928
$
6,738,825
$
6,468,129
Net interest income
$
52,153
$
49,941
$
49,418
Interest rate spread
3.10
%
3.13
%
3.15
%
Net interest margin
3.16
%
3.19
%
3.26
%
CENTRAL PACIFIC FINANCIAL CORP. AND SUBSIDIARIES
Average Balances, Interest Income & Expense, Yields and Rates (Taxable Equivalent)
(Unaudited)
TABLE 5
Six Months Ended
Six Months Ended
June 30, 2021
June 30, 2020
Average
Average
Average
Average
(Dollars in thousands)
Balance
Yield/Rate
Interest
Balance
Yield/Rate
Interest
ASSETS
Interest-earning assets:
Interest-bearing deposits in other financial institutions
$
133,684
0.11
%
$
71
$
13,430
0.59
%
$
39
Investment securities, excluding valuation allowance:
Taxable
1,126,978
1.70
9,589
1,035,068
2.53
13,101
Tax-exempt
93,181
2.34
1,089
102,907
3.12
1,604
Total investment securities
1,220,159
1.75
10,678
1,137,975
2.58
14,705
Loans, including loans held for sale
5,095,433
3.75
95,098
4,682,626
3.95
92,119
Federal Home Loan Bank stock
7,839
3.12
122
13,171
3.61
238
Total interest-earning assets
6,457,115
3.30
105,969
5,847,202
3.67
107,101
Noninterest-earning assets
433,080
390,390
Total assets
$
6,890,195
$
6,237,592
LIABILITIES AND EQUITY
Interest-bearing liabilities:
Interest-bearing demand deposits
$
1,228,548
0.03
%
$
179
$
1,035,340
0.06
%
$
290
Savings and money market deposits
2,000,845
0.06
556
1,754,186
0.19
1,685
Time deposits up to $250,000
234,361
0.38
437
163,074
1.38
1,116
Time deposits over $250,000
637,266
0.21
649
826,714
1.04
4,276
Total interest-bearing deposits
4,101,020
0.09
1,821
3,779,314
0.39
7,367
Federal Home Loan Bank advances and other short-term borrowings
1,221
0.30
2
101,459
1.15
582
Long-term debt
105,429
3.93
2,052
119,243
2.91
1,726
Total interest-bearing liabilities
4,207,670
0.19
3,875
4,000,016
0.49
9,675
Noninterest-bearing deposits
2,013,955
1,588,742
Other liabilities
116,529
110,070
Total liabilities
6,338,154
5,698,828
Shareholders' equity
552,039
538,762
Non-controlling interest
2
2
Total equity
552,041
538,764
Total liabilities and equity
$
6,890,195
$
6,237,592
Net interest income
$
102,094
$
97,426
Interest rate spread
3.11
%
3.18
%
Net interest margin
3.18
%
3.34
%
CENTRAL PACIFIC FINANCIAL CORP. AND SUBSIDIARIES
Loans by Geographic Distribution
(Unaudited)
TABLE 6
June 30,
March 31,
December 31,
September 30,
June 30,
(Dollars in thousands)
2021
2021
2020
2020
2020
HAWAII:
Commercial, financial and agricultural:
SBA Paycheck Protection Program
$
395,352
$
548,880
$
375,879
$
485,286
$
483,827
Other
389,341
399,154
426,670
414,754
431,887
Real estate:
Construction
133,457
137,976
125,407
118,247
103,518
Residential mortgage
1,711,801
1,687,513
1,690,212
1,680,060
1,657,558
Home equity
583,430
559,514
551,266
534,056
510,962
Commercial mortgage
926,006
911,216
898,055
914,144
912,422
Consumer
328,332
319,032
332,430
342,203
350,414
Total loans, net of deferred fees and costs
4,467,719
4,563,285
4,399,919
4,488,750
4,450,588
Allowance for credit losses
(67,773)
(70,961)
(73,152)
(71,575)
(59,765)
Loans, net of allowance for credit losses
$
4,399,946
$
4,492,324
$
4,326,767
$
4,417,175
$
4,390,823
U.S. MAINLAND: [1]
Commercial, financial and agricultural:
SBA Paycheck Protection Program
$
39,258
$
48,939
$
40,496
$
43,295
$
42,581
Other
96,884
115,035
118,421
113,316
115,971
Real estate:
Commercial mortgage
260,424
253,122
258,273
227,121
217,747
Consumer
213,033
157,468
147,004
158,144
176,551
Total loans, net of deferred fees and costs
609,599
574,564
564,194
541,876
552,850
Allowance for credit losses
(10,008)
(10,592)
(10,117)
(8,967)
(7,574)
Loans, net of allowance for credit losses
$
599,591
$
563,972
$
554,077
$
532,909
$
545,276
TOTAL:
Commercial, financial and agricultural:
SBA Paycheck Protection Program
$
434,610
$
597,819
$
416,375
$
528,581
$
526,408
Other
486,225
514,189
545,091
528,070
547,858
Real estate:
Construction
133,457
137,976
125,407
118,247
103,518
Residential mortgage
1,711,801
1,687,513
1,690,212
1,680,060
1,657,558
Home equity
583,430
559,514
551,266
534,056
510,962
Commercial mortgage
1,186,430
1,164,338
1,156,328
1,141,265
1,130,169
Consumer
541,365
476,500
479,434
500,347
526,965
Total loans, net of deferred fees and costs
5,077,318
5,137,849
4,964,113
5,030,626
5,003,438
Allowance for credit losses
(77,781)
(81,553)
(83,269)
(80,542)
(67,339)
Loans, net of allowance for credit losses
$
4,999,537
$
5,056,296
$
4,880,844
$
4,950,084
$
4,936,099
[1] U.S. Mainland includes territories of the United States
CENTRAL PACIFIC FINANCIAL CORP. AND SUBSIDIARIES
Deposits
(Unaudited)
TABLE 7
June 30,
March 31,
December 31,
September 30,
June 30,
(Dollars in thousands)
2021
2021
2020
2020
2020
Noninterest-bearing demand
$
2,203,806
$
2,070,428
$
1,790,269
$
1,762,476
$
1,851,012
Interest-bearing demand
1,341,280
1,237,574
1,174,888
1,114,123
1,067,483
Savings and money market
2,048,945
2,004,368
1,932,043
1,881,104
1,945,744
Time deposits less than $100,000
141,498
145,497
149,063
157,051
159,739
Other time deposits $100,000 t o $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 t o $250,000 have been included in core deposits. Prior period amounts have been reclassified to conform to current period presentation.
CENTRAL PACIFIC FINANCIAL CORP. AND SUBSIDIARIES
Nonperforming Assets, Past Due and Restructured Loans
(Unaudited)
TABLE 8
June 30,
March 31,
December 31,
September 30,
June 30,
(Dollars in thousands)
2021
2021
2020
2020
2020
Nonaccrual loans: [1]
Commercial, financial and agricultural - Other
$
699
$
1,412
$
1,461
$
1,536
$
934
Real estate:
Residential mortgage
5,280
4,553
4,115
4,032
3,215
Home equity
434
439
524
533
538
Commercial mortgage
—
—
—
6,889
—
Consumer
332
790
92
69
54
Total nonaccrual loans
6,745
7,194
6,192
13,059
4,741
Other real estate owned ("OREO"):
Real estate:
Residential mortgage
—
—
—
128
—
Total OREO
—
—
—
128
—
Total nonperforming assets ("NPAs")
6,745
7,194
6,192
13,187
4,741
Loans delinquent for 90 days or more still accruing interest: [1]
Commercial, financial and agricultural - Other
29
—
—
—
—
Real estate:
Residential mortgage
1,438
4,522
567
588
726
Consumer
100
262
240
321
444
Total loans delinquent for 90 days or more still accruing interest
1,567
4,784
807
909
1,170
Restructured loans still accruing interest: [1]
Commercial, financial and agricultural - Other
26
63
100
137
172
Real estate:
Residential mortgage
4,258
5,473
5,718
5,178
5,290
Commercial mortgage
1,636
1,698
1,761
1,825
1,888
Consumer
132
198
207
214
145
Total restructured loans still accruing interest
6,052
7,432
7,786
7,354
7,495
Total NPAs and loans delinquent for 90 days or more and restructured loans still accruing interest
$
14,364
$
19,410
$
14,785
$
21,450
$
13,406
Total nonaccrual loans as a percentage of total loans
0.13
%
0.14
%
0.12
%
0.26
%
0.09
%
Total NPAs as a percentage of total loans and OREO
0.13
%
0.14
%
0.12
%
0.26
%
0.09
%
Total NPAs and loans delinquent for 90 days or more still accruing interest as a percentage of total loans and OREO
0.16
%
0.23
%
0.14
%
0.28
%
0.12
%
Total NPAs, loans delinquent for 90 days or more and restructured loans still accruing interest as a percentage of total loans and OREO
0.28
%
0.38
%
0.30
%
0.43
%
0.27
%
Quarter-to-quarter changes in NPAs:
Balance at beginning of quarter
$
7,194
$
6,192
$
13,187
$
4,741
$
3,647
Additions
1,879
2,257
1,370
9,060
1,771
Reductions:
Payments
(1,120)
(292)
(3,186)
(393)
(367)
Return to accrual status
(84)
(99)
(548)
—
(123)
Sales of NPAs
—
—
(4,353)
—
(94)
Charge-offs, valuation and other adjustments
(1,124)
(864)
(278)
(221)
(93)
Total reductions
(2,328)
(1,255)
(8,365)
(614)
(677)
Balance at end of quarter
$
6,745
$
7,194
$
6,192
$
13,187
$
4,741
[1] Section 4013 of the CARES Act and the revised Interagency Statement are being applied to loan modifications related to the COVID-19 pandemic as eligible and applicable. These loan modifications are not included in the delinquent or restructured loan balances presented above.
CENTRAL PACIFIC FINANCIAL CORP. AND SUBSIDIARIES
Allowance for Credit Losses on Loans
(Unaudited)
TABLE 9
Three Months Ended
Six Months Ended
Jun 30,
Mar 31,
Dec 31,
Sep 30,
Jun 30,
June 30,
(Dollars in thousands)
2021
2021
2020
2020
2020
2021
2020
Allowance for credit losses ("ACL"):
ACL at beginning of period
$
81,553
$
83,269
$
80,542
$
67,339
$
59,645
$
83,269
$
47,971
Adoption of ASU 2016-13
—
—
—
—
—
—
3,566
Adjusted ACL at beginning of period
81,553
83,269
80,542
67,339
59,645
83,269
51,537
(Credit) provision for credit losses on loans [1] [2]
(2,963)
(974)
4,496
14,465
10,640
(3,937)
19,969
Charge-offs:
Commercial, financial and agricultural - Other
401
609
676
810
1,103
1,010
1,540
Real estate:
Residential mortgage
—
—
—
11
52
—
52
Commercial mortgage
—
—
—
75
—
—
—
Consumer
1,523
1,098
1,856
1,492
2,626
2,621
4,843
Leases
—
—
—
—
—
—
—
Total charge-offs
1,924
1,707
2,532
2,388
3,781
3,631
6,435
Recoveries:
Commercial, financial and agricultural - Other
276
89
189
321
305
365
647
Real estate:
Construction
—
—
—
—
—
—
131
Residential mortgage
186
106
15
13
20
292
201
Home equity
—
9
2
—
—
9
31
Commercial mortgage
65
8
1
12
1
73
3
Consumer
588
753
556
780
509
1,341
1,255
Total recoveries
1,115
965
763
1,126
835
2,080
2,268
Net charge-offs
809
742
1,769
1,262
2,946
1,551
4,167
ACL at end of period
$
77,781
$
81,553
$
83,269
$
80,542
$
67,339
$
77,781
$
67,339
Average loans, net of deferred fees and costs
$
5,110,820
$
5,079,874
$
5,034,717
$
5,016,955
$
4,902,905
$
5,095,433
$
4,682,626
Annualized ratio of net charge-offs to average loans
0.06
%
0.06
%
0.14
%
0.10
%
0.24
%
0.06
%
0.18
%
[1] In 2020, the Company recorded a reserve on accrued interest receivable ("AIR") of $0.2 million for loans on payment forbearance or deferral, which were granted to borrowers impacted by the COVID-19 pandemic. This reserve was recorded as a contra-asset against AIR with the offset to the provision for credit losses. During the second quarter of 2021, the Company reversed the entire reserve on AIR. The provision for credit losses presented in this table excludes the provision for credit losses on AIR.
[2] As of January 1, 2021, the provision for credit losses on off-balance sheet credit exposures (previously included in other operating expense) is included in the provision for credit losses line on the consolidated statements of income. The allowance for off-balance sheet credit exposures continues to be included in other liabilities. For roll-forward purposes, in this table we exclude the provision for credit losses on off-balance sheet credit exposures.
CENTRAL PACIFIC FINANCIAL CORP. AND SUBSIDIARIES
Reconciliation of Non-GAAP Financial Measures
(Unaudited)
TABLE 10
The following table sets forth a reconciliation of our core loans and the ratios of our allowance for credit losses ("ACL") to total loans and ACL to core loans (or total loans, excluding SBA Paycheck Protection Program ("PPP") loans), for each of the periods indicated:
Jun 30,
Mar 31,
Dec 31,
Sep 30,
Jun 30,
(Dollars in thousands)
2021
2021
2020
2020
2020
ACL
$
77,781
$
81,553
$
83,269
$
80,542
$
67,339
Total loans
$
5,077,318
$
5,137,849
$
4,964,113
$
5,030,626
$
5,003,438
Less: PPP loans
434,610
597,819
416,375
528,581
526,408
Core loans (or total loans, excluding PPP loans)
$
4,642,708
$
4,540,030
4,547,738
4,502,045
$
4,477,030
Ratio of ACL to total loans
1.53
%
1.59
%
1.68
%
1.60
%
1.35
%
Ratio of ACL to core loans
1.68
%
1.80
%
1.83
%
1.79
%
1.50
%
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SOURCE Central Pacific Financial Corp.