Central Pacific Financial Corp. Reports $16.0 Million First Quarter Earnings And Increases Quarterly Cash Dividend

HONOLULU, April 24, 2019 /PRNewswire/ -- Central Pacific Financial Corp. (NYSE: CPF), (the "Company"), today reported net income in the first quarter of 2019 of $16.0 million, or diluted earnings per share ("EPS") of $0.55, compared to net income in the first quarter of 2018 of $14.3 million, or EPS of $0.48, and net income in the fourth quarter of 2018 of $15.8 million, or EPS of $0.54.

"We are pleased that our consistent earnings combined with solid asset quality and capital position has allowed us to increase our cash dividend," said Paul Yonamine, Chairman and Chief Executive Officer. "Our team continues to work on building customer relationships and we look forward to continuing to execute on our strategies during the rest of the year," said Catherine Ngo, President.

In April 2019, the Company's Board of Directors declared a quarterly cash dividend of $0.23 per share on its outstanding common shares. This represents a 9.5% increase from the $0.21 dividend paid in the first quarter of 2019. The dividend will be payable on June 17, 2019 to shareholders of record at the close of business on May 31, 2019.

During the three months ended March 31, 2019, the Company repurchased 277,000 shares of common stock, or approximately 1.0% of its common stock outstanding as of December 31, 2018. Total cost of the shares repurchased during the three months ended March 31, 2019 was $7.7 million, or an average cost per share of $27.83. The Company's remaining repurchase authority under its common stock repurchase program at March 31, 2019 is $13.0 million. During the three months ended March 31, 2019, the Company returned $13.8 million in capital to its shareholders through cash dividends and share repurchases.

Earnings Highlights
Net interest income for the first quarter of 2019 was $45.1 million, compared to $42.3 million in the year-ago quarter and $44.7 million in the previous quarter. Net interest margin for the first quarter of 2019 was 3.34%, compared to 3.21% in the year-ago quarter and 3.28% in the previous quarter. The increases in net interest income and net interest margin from the year-ago and sequential quarters were primarily due to growth in the loan portfolio, combined with increases in the yields earned on the loan and investment securities portfolios. These increases were partially offset by higher deposit and borrowing costs from the year-ago and sequential quarters.

Other operating income for the first quarter of 2019 totaled $11.7 million, compared to $9.0 million in the year-ago quarter and $9.4 million in the previous quarter. The increases from the year-ago and previous quarters were primarily due to the conversion of MasterCard Class B common stock received during their initial public offering to Class A common stock and immediate sale of the converted shares resulting in a gain of $2.6 million (recorded in other), combined with higher income from bank-owned life insurance. The increases in income from bank-owned life insurance from the year-ago and previous quarters of $0.6 million and $0.7 million, respectively, were primarily attributable to fluctuations in the stock market during the first quarter of 2019. These positive variances were partially offset by lower net gains on sales of residential mortgage loans (included in mortgage banking income) from the year-ago and previous quarters of $0.4 million and $0.5 million, respectively, and lower commissions and fees on investment services (included in other service charges and fees) of $0.4 million, compared to the previous quarter.

Other operating expense for the first quarter of 2019 totaled $34.3 million, which increased from $33.4 million in the year-ago quarter and increased from $33.6 million in the previous quarter. The increase from the year-ago quarter was primarily due to higher salaries and employee benefits of $1.4 million and higher computer software expense of $0.3 million. The increase in salaries and employee benefits in the current quarter was partially attributable to a $0.6 million increase in deferred compensation expense with a corresponding increase in income from bank-owned life insurance. These negative variances were partially offset by lower amortization of core deposit premium of $0.7 million, as the intangible asset was fully amortized as of September 30, 2018, and lower legal and professional fees of $0.3 million compared to the year-ago period. The increase from the previous quarter was primarily due to higher salaries and employee benefits of $0.8 million, combined with an increase to the reserve for unfunded commitments (included in other) of $0.2 million in the current quarter compared to a decrease to the provision of $0.5 million in the previous quarter. The increase in salaries and employee benefits in the current quarter was partially attributable to a $0.4 million increase in deferred compensation expense with a corresponding increase in income from bank-owned life insurance. These negative variances were partially offset by lower legal and professional services of $0.6 million, compared to the previous quarter.

The efficiency ratio for the first quarter of 2019 was 60.49%, compared to 65.15% in the year-ago quarter and 62.21% in the previous quarter. The efficiency ratio was positively impacted by the aforementioned MasterCard stock gain.

In the first quarter of 2019, the Company recorded income tax expense of $5.1 million, compared to $3.8 million in the year-ago quarter and $6.0 million in the previous quarter. The effective tax rate for the first quarter of 2019 was 24.2%, compared to 21.0% in the year-ago quarter and 27.6% in the previous quarter. Income tax expense in the year-ago quarter included an income tax benefit of $0.7 million related to the finalization of the impact of H.R.1, commonly referred to as the Tax Cuts and Jobs Act.

Balance Sheet Highlights
Total assets at March 31, 2019 of $5.84 billion increased by $190.1 million, or 3.4% from March 31, 2018, and increased by $34.3 million, or 0.6% from December 31, 2018.

Total loans and leases at March 31, 2019 of $4.10 billion increased by $285.4 million, or 7.5% and $23.2 million, or 0.6% from March 31, 2018 and December 31, 2018, respectively. The year-over-year increase in total loans was driven by broad based gains in every loan category, while the sequential quarter increase in total loans was led by growth in residential mortgage and commercial mortgage loans.

Total deposits at March 31, 2019 of $4.95 billion decreased by $32.3 million, or 0.6% from March 31, 2018, and remained relatively unchanged from December 31, 2018.  The year-over-year decline in total deposits was primarily attributable to a decrease in government time deposits of $102.9 million, partially offset by an increase in core deposits. Core deposits, which include demand deposits, savings and money market deposits, and time deposits less than $100,000, totaled $4.06 billion at March 31, 2019.  This represents an increase of $53.3 million, or 1.3% from March 31, 2018, and $44.3 million, or 1.1% from December 31, 2018. The Company's loan-to-deposit ratio was 82.9% at March 31, 2019, compared to 76.6% at March 31, 2018 and 82.5% at December 31, 2018.

Asset Quality
Nonperforming assets at March 31, 2019 totaled $3.3 million, or 0.06% of total assets, compared to $3.4 million, or 0.06% of total assets at March 31, 2018, and $2.7 million, or 0.05% of total assets at December 31, 2018.

Loans delinquent for 90 days or more still accruing interest totaled $0.2 million at March 31, 2019, compared to $0.4 million and $0.5 million at March 31, 2018 and December 31, 2018, respectively.

Net charge-offs in the first quarter of 2019 totaled $1.9 million, compared to net charge-offs of $0.6 million in the year-ago quarter, and net recoveries of $2.5 million in the previous quarter. Net recoveries in the fourth quarter of 2018 included a $4.5 million recovery on a U.S. mainland land loan.

In the first quarter of 2019, the Company recorded a provision for loan and lease losses of $1.3 million, compared to a credit of $0.2 million in the year-ago quarter and a credit of $1.4 million in the previous quarter. The aforementioned $4.5 million recovery contributed to the credit to the provision for loan and lease losses in the previous quarter. The allowance for loan and lease losses, as a percentage of total loans and leases at March 31, 2019 was 1.15%, compared to 1.29% at March 31, 2018 and 1.17% at December 31, 2018.

Capital
Total shareholders' equity was $502.6 million at March 31, 2019, compared to $484.1 million and $491.7 million at March 31, 2018 and December 31, 2018, 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 March 31, 2019, the Company's leverage capital, tier 1 risk-based capital, total risk-based capital, and common equity tier 1 ratios were 9.5%, 13.0%, 14.1%, and 11.8%, respectively, compared to 9.9%, 13.5%, 14.7%, and 11.9%, respectively, at December 31, 2018. The decline in the ratios was primarily due to  the redemption of $20 million in floating rate trust preferred securities and the underlying floating rate junior subordinated debentures during the first quarter of 2019 which was treated as capital.

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 May 24, 2019 by dialing 1-877-344-7529 (passcode: 10130726) and on the Company's website.

About Central Pacific Financial Corp.
Central Pacific Financial Corp. is a Hawaii-based bank holding company with approximately $5.8 billion in assets.  Central Pacific Bank, its primary subsidiary, operates 35 branches and 79 ATMs in the state of Hawaii, as of March 31, 2019.  For additional information, please visit the Company's website at http://www.centralpacificbank.com.

Forward-Looking Statements
This document may contain forward-looking statements concerning projections of revenues, income/loss, earnings/loss per share, capital expenditures, dividends, capital structure, or other financial items, plans and objectives of management for future operations, future economic performance, or any of the assumptions underlying or relating to any of the foregoing.  Forward-looking statements can be identified by the fact that they do not relate strictly to historical or current facts, and may include the words "believes," "plans," "expects," "anticipates," "forecasts," "intends," "hopes," "should," "estimates," or words of similar meaning.  While the Company believes 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 materially differ from projections for a variety of reasons, to include, but not limited to:  the effect of, and our failure to comply with any regulatory orders or actions we are or may become subject to; oversupply of inventory and adverse conditions in the Hawaii and California real estate markets and any weakness 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; the impact of local, national, and international economies and events (including political events, acts of war or terrorism, natural disasters such as wildfires, volcanoes, tsunamis and earthquakes) 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 economic conditions, including destabilizing factors in the financial industry and deterioration of the real estate market, as well as the impact from any declining levels of consumer and business confidence in the state of the economy in general and in financial institutions in particular;  the impact of regulatory action on the Company and Central Pacific Bank and legislation affecting the financial services industry; failure to maintain effective internal control over financial reporting or disclosure controls and procedures; 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, other regulatory reform, and any related rules and regulations on 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, and the results of regulatory examinations or reviews;  the effects of the Tax Cuts and Jobs Act; 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; inflation, interest rate, securities market and monetary fluctuations;  negative trends in our market capitalization and adverse changes in the price of the Company's common shares; changes in consumer spending, borrowings and savings habits; technological changes and developments; changes in the competitive environment among financial holding companies and other financial service providers, including fintech businesses; the effect of changes in accounting policies and practices, including changes as may be adopted by the regulatory agencies, as well as the Public Company Accounting Oversight Board, the Financial Accounting Standards Board and other accounting standard setters; changes in our capital position; our ability to attract and retain skilled directors, executives and employees; changes in our organization, compensation and benefit plans; and our success at managing the risks involved in any of the foregoing items. For further information on factors that could cause actual results to materially differ from projections, 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. The Company does not update any of its forward-looking statements except as required by law.

SOURCE Central Pacific Financial Corp.

Related Links

http://www.centralpacificbank.com