Central Pacific Financial Corp. Reports Results For Third Quarter 2020
10/28/2020 - 06:30 AM
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 $0.24 $14.6 million $0.51 $9.9 million $0.35 $14 $1 $10
"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 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 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 $45.6 million $49.3 million 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 $544.7 million 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 $10.3 million $10.7 million $2 $0.8 million $0 $0 $0 $0 $0 $0 $0
Other operating expense for the third quarter of 2020 totaled $37.0 million $34.9 million $36.4 million $0 $0 $0.3 million $0 $0 $0 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 $0 $0 $0
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 $4.9 million $3.0 million 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 $671.4 million 11.2% from September 30, 2019, and increased by $15.2 million 0.2% from June 30, 2020.
Total loans at September 30, 2020 of $5.03 billion $662.8 million 15.2% , and $27.2 million 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 $121 $58 $21 $7 $48 $26 $23 $22 $14 $11 $26 $19 $6.6 million 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 $641.3 million 12.7% from September 30, 2019, and decreased by $115.8 million 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 $64.6 million $9 $46.6 million $100,000 $4.91 billion $758.1 million 18.2% from September 30, 2019, and a decrease of $109.2 million 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 0.20% of total assets, compared to $1.4 million 0.02% of total assets at September 30, 2019, and $4.7 million 0.07% of total assets at June 30, 2020. During the third quarter of 2020, the Company had $8 $7.6 million
Loans delinquent for 90 days or more still accruing interest totaled $0.9 million $0.2 million $1.2 million
Loans on payment forbearance or deferrals granted to borrowers impacted by the COVID-19 pandemic declined significantly to $290 5.78% of the total loan portfolio (or 6.46% excluding PPP loans), as of September 30, 2020, compared to $567 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 $1.6 million $2.9 million
In the third quarter of 2020, the Company recorded a provision for credit losses on loans of $14.7 million $1.5 million $10.6 million 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 $525.2 million $544.3 million
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
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 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 t o $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 $0.18 7 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
%
http://www.prnewswire.com/news-releases/central-pacific-financial-corp-reports-results-for-third-quarter-2020-301161430.html
SOURCE Central Pacific Financial Corp.
