Published:
Central Pacific Financial Corp. Reports Third Quarter 2009 Results
HONOLULU, Oct. 29 /PRNewswire-FirstCall/ -- Central Pacific Financial Corp. (NYSE: CPF), parent company of Central Pacific Bank, today reported an adjusted net loss for the third quarter of 2009 of ($71.7) million, or ($2.54) per diluted share. The net loss has been adjusted to exclude a non-cash goodwill impairment charge of $50.0 million and a non-cash charge related to the establishment of a valuation allowance against the Company's net deferred tax assets totaling $61.4 million. Including these non-cash charges, the Company recognized a current quarter net loss of ($183.1) million, or ($6.38) per diluted share, compared to net income of $3.0 million, or $0.11 per diluted share, reported in the third quarter of 2008 and a net loss of ($34.4) million, or ($1.27) per diluted share, reported in the second quarter of 2009.
The goodwill impairment charge had no impact on the Company's regulatory capital, tangible equity, or cash flows and was directly attributable to the current quarter decline in the Company's market capitalization. At September 30, 2009, the Company's remaining goodwill totaled $102.7 million, all of which was assigned to its Hawaii Market reporting unit. Additionally, in accordance with generally accepted accounting principles, the Company established a valuation allowance against its net deferred tax assets as a result of its recent net operating losses.
As previously announced, on October 22, 2009, the Company's shareholders voted in favor of increasing its authorized common shares from 100,000,000 to 185,000,000. The authorization of additional shares provides increased flexibility to the Company's capital raising efforts. In addition to the potential issuance of additional common shares, the Company is also evaluating all measures to improve its capital position. As part of its capital raising efforts, the Company has also retained the services of a third-party consultant to provide an independent review of its loan portfolio.
"Our quarterly results continue to be adversely impacted by increased credit costs resulting from further deterioration in the Hawaii and California commercial real estate markets and the resultant decline in property values in those sectors," said Ronald K. Migita, Chairman, President, and Chief Executive Officer. "We continue to expect these challenging economic conditions to persist over the coming quarters and to result in further credit deterioration. As we navigate through this difficult period, we intend to accelerate the reduction of our credit risk by pursuing loan sales, including potential bulk sales. At the same time, we are pursuing all measures to increase our capital levels, while maintaining strong liquidity."
Third Quarter Highlights
-- Improved loan-to-deposit ratio from 93.0% at June 30, 2009 to 89.6% at
September 30, 2009.
-- Originated $334.9 million in residential mortgage loans in Hawaii during
the current quarter and $1.5 billion year-to-date, up 24.0% over the
year-ago period. Substantially all of these loans were sold in the
secondary market, primarily to Fannie Mae and Freddie Mac.
-- Recognized total credit costs of $145.1 million comprised of a provision
for loan and lease losses of $142.5 million and foreclosed asset expense
of $5.5 million, partially offset by a decrease to the reserve for
unfunded commitments of $2.9 million.
-- Increased allowance for loan and lease losses, as a percentage of total
loans and leases, to 5.93% at September 30, 2009 from 4.50% at June 30,
2009.
-- Maintained tier 1 risk-based capital, total risk-based capital, and
leverage capital ratios as of September 30, 2009 of 10.94%, 12.24%, and
8.11%, respectively. The Company also reported a tangible common equity
ratio of 3.57% at September 30, 2009.
Earnings Highlights
Net interest income for the third quarter of 2009 was $43.5 million, compared to $50.6 million in the year-ago quarter and $46.1 million in the second quarter of 2009. The net interest margin for the current quarter was 3.56%, compared to 4.07% in the year-ago quarter and 3.77% in the second quarter of 2009. The sequential-quarter decrease in net interest income was primarily attributable to higher reversals of interest on nonaccrual loans totaling $0.6 million and lower interest income due to lower loan yields. Excluding the effects of interest reversals on nonaccrual loans, the net interest margin was 3.72% for the current quarter, compared to 4.10% in the year-ago quarter and 3.89% in the second quarter of 2009.
The provision for loan and lease losses in the third quarter of 2009 was $142.5 million, compared to $22.9 million in the year-ago quarter and $74.3 million in the second quarter of 2009. The sequential-quarter increase was primarily attributable to continued deterioration in the Hawaii and California commercial real estate portfolios due to further declines in property values and ongoing pressure on many of the Company's commercial real estate borrowers.
Other operating income totaled $15.4 million for the third quarter of 2009, compared to $11.7 million in the year-ago quarter and $14.6 million in the second quarter of 2009. The increase from the year-ago quarter was primarily due to: (1) higher non-cash gains related to the ineffective portion of a cash flow hedge totaling $1.2 million, (2) higher gains on sales of loans totaling $1.3 million and (3) higher income from bank-owned life insurance totaling $0.7 million. The sequential-quarter increase was primarily due to: (1) an other-than-temporary impairment ("OTTI") charge totaling $2.6 million recognized in the previous quarter and (2) higher unrealized gains on outstanding interest rate locks during the current quarter totaling $1.0 million, partially offset by: (1) lower gains on sales of loans totaling $1.5 million and (2) lower non-cash gains related to the ineffective portion of a cash flow hedge totaling $1.0 million.
Other operating expense for the third quarter of 2009 (which included the aforementioned $50.0 million non-cash goodwill impairment charge) totaled $89.5 million, compared to $37.5 million in the year-ago quarter and $45.8 million in the second quarter of 2009. The increase from the year-ago quarter was primarily due to: (1) the $50.0 million non-cash goodwill impairment charge, (2) higher foreclosed asset expense totaling $5.4 million and (3) higher FDIC insurance expense totaling $1.3 million, partially offset by: (1) lower reserves for unfunded commitments totaling $2.7 million and (2) lower salaries and employee benefits totaling $1.0 million. The sequential-quarter increase was primarily due to: (1) the $50.0 million goodwill impairment charge and (2) higher foreclosed asset expense totaling $3.2 million, partially offset by: (1) lower reserves for unfunded commitments totaling $5.3 million, (2) lower FDIC insurance expense totaling $2.2 million, (3) lower salaries and employee benefits totaling $1.1 million, and (4) lower write-downs on loans held for sale totaling $0.9 million.
The efficiency ratio for the third quarter of 2009 was 55.82% (excluding the non-cash goodwill impairment charge of $50.0 million and foreclosed asset expense of $5.5 million), compared with 57.71% in the year-ago quarter (excluding the loss on sale of commercial real estate loans totaling $0.2 million, foreclosed asset expense of $0.1 million and the write-down of assets totaling $0.1 million) and 65.64% (excluding foreclosed asset expense of $2.3 million and the write-down of assets totaling $0.9 million) in the second quarter of 2009. The variance from the year-ago quarter was primarily attributable to the fluctuations in other operating expenses described above.
During the current quarter, the Company recognized income tax expense of $10.0 million. This includes the aforementioned non-cash charge related to the establishment of a valuation allowance against the Company's net deferred tax assets totaling $61.4 million. The effective tax rate for the third quarter of 2009 was also impacted by the non-cash goodwill impairment charge of $50.0 million.
Balance Sheet Highlights
Total assets at September 30, 2009 were $5.2 billion, compared to $5.5 billion at both September 30, 2008 and June 30, 2009.
Total loans and leases at September 30, 2009 were $3.5 billion, compared to $4.1 billion and $3.7 billion at September 30, 2008 and June 30, 2009, respectively. The current quarter decrease was primarily due to a decrease in the mainland loan portfolio totaling $88.0 million and a decrease in the Hawaii construction and commercial real estate portfolio totaling $57.7 million.
Total deposits at September 30, 2009 were $3.9 billion, compared to $3.8 billion and $4.0 billion at September 30, 2008 and June 30, 2009, respectively. Core deposits of $3.1 billion at September 30, 2009 increased by $435.6 million from a year ago and decreased by $36.4 million from June 30, 2009. Noninterest-bearing demand deposits increased during the current quarter by $24.0 million, while interest-bearing demand deposits, savings and money market deposits, and time deposits decreased during the current quarter by $0.8 million, $4.4 million, and $124.5 million, respectively.
Total shareholders' equity was $436.6 million at September 30, 2009, compared to $510.1 million and $615.0 million at September 30, 2008 and June 30, 2009, respectively.
Asset Quality
Nonperforming assets as of September 30, 2009 totaled $418.5 million, or 8.09%, of total assets, compared to $261.2 million, or 4.73%, of total assets at June 30, 2009. The sequential-quarter increase reflects further deterioration in the Hawaii and Mainland commercial real estate portfolios, which included net additions of $53.8 million in Mainland commercial mortgage loans, $38.9 million in Hawaii commercial construction loans, $38.8 million in Hawaii residential construction loans, and $33.8 million in Mainland commercial construction loans.
Loans delinquent for 90 days or more still accruing interest increased to $27.7 million at September 30, 2009, from $4.4 million at June 30, 2009. In addition, loans delinquent for 30 days or more still accruing interest increased to $53.7 million at September 30, 2009, from $21.1 million at June 30, 2009.
Net loan charge-offs in the third quarter of 2009 totaled $103.7 million, compared to $8.7 million in the year-ago quarter and $30.5 million in the second quarter of 2009.
The allowance for loan and lease losses as a percentage of total loans and leases was 5.93% at September 30, 2009, compared to 4.50% at June 30, 2009. The increase was attributable to the decrease in the loan portfolio and the $142.5 million provision for loan and lease losses, offset by net loan charge-offs totaling $103.7 million.
Hawaii Construction and Commercial Real Estate Loans
At September 30, 2009, the Hawaii construction and commercial real estate loan portfolio totaled $1.1 billion and Hawaii construction and commercial real estate loans held for sale totaled $14.5 million. The Company's total exposure to this sector decreased by $43.2 million from June 30, 2009.
Hawaii construction and commercial real estate loans represented 31.8% and 31.4% of total loans and leases at September 30, 2009 and June 30, 2009, respectively. Of the $1.1 billion balance in the Hawaii construction and commercial real estate portfolio, the allowance for loan and lease losses established for these loans was $84.1 million at September 30, 2009, or 7.64%, of the total outstanding balance.
Nonperforming assets related to this sector totaled $176.4 million at September 30, 2009, or 3.41%, of total assets. This balance was comprised of 32 loans totaling $161.9 million at September 30, 2009 and two loans held for sale to the same borrower totaling $14.5 million. Nonperforming assets related to this sector totaled $87.5 million at June 30, 2009.
Mainland Construction and Commercial Real Estate Loans
At September 30, 2009, mainland construction and commercial real estate loans totaled $865.8 million, mainland construction and commercial real estate loans held for sale totaled $6.9 million, and mainland construction and commercial real estate foreclosed properties totaled $20.5 million. The portfolio balance consisted of $594.6 million in California and $271.2 million in other Western states. The Company's total exposure to this sector decreased by $77.8 million from June 30, 2009.
Mainland construction and commercial real estate loans represented 25.0% and 25.9% of total loans and leases at September 30, 2009 and June 30, 2009, respectively. Of the $865.8 million balance in the mainland construction and commercial real estate portfolio, the allowance for loan and lease losses established for these loans was $83.1 million at September 30, 2009, or 9.6%, of the total outstanding balance.
Nonperforming assets related to this sector totaled $213.5 million at September 30, 2009, or 4.13%, of total assets. This balance was comprised of 44 loans totaling $186.1 million, two loans held for sale totaling $6.9 million, and seven foreclosed properties totaling $20.5 million. Nonperforming assets related to this sector totaled $142.8 million at June 30, 2009.
Capital Levels
The Company's Tier 1 risk-based capital, total risk-based capital, and leverage capital ratios were 10.94%, 12.24%, and 8.11%, respectively, at September 30, 2009. At June 30, 2009, these capital ratios were 13.28%, 14.57%, and 10.61%, respectively. The tangible common equity ratio was 3.57% at September 30, 2009, as compared to 5.76% at June 30, 2009.
Regulatory Matters
In addition to reporting its third quarter results, the Company also announced that it expects Central Pacific Bank to consent to a formal enforcement action with the Federal Deposit Insurance Corporation (the "FDIC") and the Hawaii Department of Financial Institutions. We anticipate that the enforcement action will require, among other things, directives to strengthen capital, improve asset quality, and maintain liquidity that are consistent with near-term strategies which the Company is currently pursuing. The Company intends to work toward full compliance with the enforcement action and has already initiated a number of measures to this end. The Company will continue to provide a full range of products and services to its customers and all customer deposits remain fully insured to the highest limits set by the FDIC.
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 and Slide Presentation
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 as well as view a slide presentation by visiting the investor relations page of the Company's website at http://investor.centralpacificbank.com. Alternatively, investors may download the slide presentation from the "Presentations" tab of the investor relations page and participate in the live call by dialing 1-800-860-2442. A playback of the call will be available through November 30, 2009 by dialing 1-877-344-7529 (passcode: 434638) and on the Company's website.
About Central Pacific Financial Corp.
Central Pacific Financial Corp. is a Hawaii-based bank holding company with $5.2 billion in assets. Central Pacific Bank, its primary subsidiary, operates 37 branches and more than 100 ATMs throughout Hawaii. 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, earnings per share, capital expenditures, dividends, capital structure, or other financial items, concerning plans and objectives of management for future operations, concerning future economic performance, or concerning 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", "intends", "expects", "anticipates", "forecasts" or words of similar meaning. 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 materially differ from projections for a variety of reasons, to include, but not limited to: the impact of local, national, and international economies and events, including natural disasters, 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; the impact of legislation affecting the banking industry including the Emergency Economic Stabilization Act of 2008; the impact of competitive products, services, pricing, and other competitive forces; movements in interest rates; loan delinquency rates and changes in asset quality generally; the price of the Company's stock; and volatility in the financial markets and uncertainties concerning the availability of debt or equity financing. 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/A for the last fiscal year. The Company does not update any of its forward-looking statements.
CENTRAL PACIFIC FINANCIAL CORP. AND SUBSIDIARIES
Financial Highlights - September 30, 2009
(Unaudited)
Three Months Ended
September 30, %
(in thousands, except per share data) 2009 2008 Change
INCOME STATEMENT
Net income (loss) $(183,141) $3,041 (6122.4)%
Adjusted net income (loss) (1) (71,725) 3,041 (2458.6)
Per share data:
Diluted (after dividends on preferred
stock):
Net income (loss) (6.38) 0.11 (5900.0)
Adjusted net income (loss) (1) (2.54) 0.11 (2409.1)
Cash dividends 0.00 0.10 (100.0)
PERFORMANCE RATIOS
Return (loss) on average assets (2) (13.59)% 0.22%
Return (loss) on average
shareholders' equity (2) (121.43) 2.36
Net income to average tangible
shareholders' equity (2) (172.29) 3.61
Efficiency ratio (3) 55.82 57.71
Net interest margin (2) 3.56 4.07
Nine Months Ended
September 30, %
(in thousands, except per share data) 2009 2008 Change
INCOME STATEMENT
Net income (loss) $(214,954) $(141,559) 51.8%
Adjusted net income (loss) (1) (103,538) (47,280) 119.0
Per share data:
Diluted (after dividends on preferred stock):
Net income (loss) (7.67) (4.94) 55.3
Adjusted net income (loss) (1) (3.80) (1.65) 130.3
Cash dividends 0.00 0.60 (100.0)
PERFORMANCE RATIOS
Return (loss) on average assets (2) (5.26)% (3.30)%
Return (loss) on average
shareholders' equity (2) (45.71) (30.07)
Net income to average tangible
shareholders' equity (2) (63.99) (48.81)
Efficiency ratio (3) 59.87 52.83
Net interest margin (2) 3.72 4.01
September 30, %
2009 2008 Change
BALANCE SHEET
Total assets $5,171,510 $5,504,304 (6.0)%
Loans and leases, net of unearned
interest 3,457,682 4,080,266 (15.3)
Net loans and leases 3,252,768 3,980,039 (18.3)
Deposits 3,860,931 3,777,072 2.2
Total shareholders' equity 436,639 510,071 (14.4)
Book value per common share 10.16 17.75 (42.8)
Tangible book value per common share 5.93 11.45 (48.2)
Market value per common share 2.52 16.81 (85.0)
Tangible equity ratio 6.12% 6.18%
Tangible common equity ratio 3.57% 6.18%
Three Months Ended
September 30, %
2009 2008 Change
SELECTED AVERAGE BALANCES
Total assets $5,388,922 $5,553,705 (3.0)%
Interest-earning assets 4,917,174 5,025,828 (2.2)
Loans and leases, net of unearned
interest 3,672,714 4,134,700 (11.2)
Other real estate 20,307 2,131 852.9
Deposits 3,863,544 3,806,797 1.5
Interest-bearing liabilities 4,125,662 4,359,174 (5.4)
Total shareholders' equity 603,268 515,733 17.0
Nine Months Ended
September 30, %
2009 2008 Change
SELECTED AVERAGE BALANCES
Total assets $5,451,285 $5,725,439 (4.8)%
Interest-earning assets 4,944,667 5,159,109 (4.2)
Loans and leases, net of unearned
interest 3,848,970 4,242,621 (9.3)
Other real estate 17,366 2,523 588.3
Deposits 3,953,913 3,823,870 3.4
Interest-bearing liabilities 4,151,790 4,411,222 (5.9)
Total shareholders' equity 627,016 627,597 (0.1)
September 30, %
2009 2008 Change
NONPERFORMING ASSETS
Nonaccrual loans (including loans
held for sale) $397,386 $120,964 228.5%
Other real estate, net 21,093 11,590 82.0
-------- --------
Total nonperforming assets 418,479 132,554 215.7
-------- --------
Loans delinquent for 90 days or more
(still accruing interest) 27,742 640 4234.7
Restructured loans (still accruing
interest) 7,125 - 0.0
-------- --------
Total nonperforming assets, loans
delinquent for 90 days or more
(still accruing interest)
and restructured loans (still
accruing interest) $453,346 $133,194 240.4
======== ========
Three Months Ended
September 30,
2009 2008
Loan charge-offs $104,153 $9,141 1039.4%
Recoveries 500 418 19.6
Net loan charge-offs $103,653 $8,723 1088.3
Net loan charge-offs to average
loans (2) 11.29% 0.84%
Nine Months Ended
September 30,
2009 2008
Loan charge-offs $159,911 $138,208 15.7%
Recoveries 1,377 1,414 (2.6)
Net loan charge-offs $158,534 $136,794 15.9
Net loan charge-offs to average
loans (2) 5.49% 4.30%
September 30,
2009 2008
ASSET QUALITY RATIOS
Nonaccrual loans (including loans
held for sale) to total loans and
leases and loans held for sale 11.30% 2.94%
Nonperforming assets to total assets 8.09 2.41
Nonperforming assets, loans delinquent
for 90 days or more (still accruing
interest) and restructured loans
(still accruing interest) to total
loans and leases, loans held for sale
& other real estate 12.81 3.23
Allowance for loan and lease losses to
total loans and leases 5.93 2.46
Allowance for loan and lease losses to
nonaccrual loans (including loans
held for sale) 51.57 82.86
(1) Excludes non-cash goodwill impairment charges of $50.0 million and
$94.3 million recorded in September 2009 and June 2008, respectively,
and non-cash charge related to the establishment of a valuation
allowance against net deferred tax assets of $61.4 million recorded
in September 2009.
(2) Annualized
(3) Efficiency ratio is derived by dividing other operating expense
excluding amortization, impairment and write-down of intangible
assets, goodwill, loans held for sale and foreclosed property and
loss on sale of commercial real estate loans by net operating revenue
(net interest income on a taxable equivalent basis plus other
operating income before securities transactions).
CENTRAL PACIFIC FINANCIAL CORP. AND SUBSIDIARIES
Reconciliation of Non-GAAP Financial Measures
(Unaudited)
Quarter Ended Quarter Ended Quarter Ended
(in thousands, except per September 30, June 30, September 30,
share data) 2009 2009 2008
------------------------- ------------- -------- -------------
Adjusted Net Income (Loss)
Net income (loss) $(183,141) $(34,442) $3,041
Non-cash goodwill impairment
charge 50,000 - -
Non-cash charge related to the
establishment of a valuation
allowance against the Company's
net deferred tax assets 61,416 - -
-------- -------- ------
Adjusted net income (loss) $(71,725) $(34,442) $3,041
======== ======== ======
Diluted net income (loss)
per share $(6.38) $(1.27) $0.11
Non-cash goodwill impairment
charge 1.72 - -
Non-cash charge related to
the establishment of a valuation
allowance against the Company's
net deferred tax assets 2.12 - -
-------- -------- ------
Diluted adjusted net income
(loss) per share $(2.54) $(1.27) $0.11
======== ======== ======
Net Interest Margin
Annualized net interest income
for the quarter as a percentage of
quarter-to-date average interest
earning assets 3.56% 3.77% 4.07%
-------- -------- ------
Reversal of interest on nonaccrual
loans 0.16 0.12 0.03
-------- -------- ------
Net interest margin,
excluding reversal of
interest on nonaccrual loans 3.72% 3.89% 4.10%
======== ======== ======
CENTRAL PACIFIC FINANCIAL CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(in thousands, except per September 30, June 30, September 30,
share data) 2009 2009 2008
------------- -------- -------------
ASSETS
Cash and due from banks $112,828 $161,985 $68,293
Interest-bearing deposits
in other banks 204,338 23,071 133
Federal funds sold - 19,000 12,000
Investment securities:
Available for sale 973,364 1,049,949 779,016
Held to maturity (fair
value of $5,461 at
September 30, 2009, $6,907
at June 30, 2009 and
$23,896 at September 30,
2008) 5,332 6,830 23,968
---------- ---------- ----------
Total investment
securities 978,696 1,056,779 802,984
---------- ---------- ----------
Loans held for sale 60,027 84,748 36,470
Loans and leases 3,457,682 3,688,519 4,080,266
Less allowance for loan
and lease losses 204,914 166,071 100,227
---------- ---------- ----------
Net loans and leases 3,252,768 3,522,448 3,980,039
---------- ---------- ----------
Premises and equipment 76,511 77,142 81,918
Accrued interest receivable 16,590 18,724 22,591
Investment in unconsolidated
subsidiaries 17,794 17,534 16,104
Other real estate 21,093 17,862 11,590
Goodwill 102,689 152,689 152,820
Other intangible assets 25,520 26,239 28,394
Mortgage servicing rights 19,406 18,474 15,125
Bank-owned life insurance 138,757 137,946 134,200
Federal Home Loan Bank
stock 48,797 48,797 48,797
Other assets 95,696 141,849 92,846
---------- ---------- ----------
Total assets $5,171,510 $5,525,287 $5,504,304
========== ========== ==========
LIABILITIES AND EQUITY
Deposits:
Noninterest-bearing
demand $647,672 $623,698 $596,907
Interest-bearing demand 547,414 548,166 457,906
Savings and money market 1,424,518 1,428,881 1,067,690
Time 1,241,327 1,365,779 1,654,569
---------- ---------- ----------
Total deposits 3,860,931 3,966,524 3,777,072
Short-term borrowings 252,807 267,155 278,205
Long-tem debt 558,212 608,554 881,534
Other liabilities 52,889 57,970 47,367
---------- ---------- ----------
Total liabilities 4,724,839 4,900,203 4,984,178
---------- ---------- ----------
Equity:
Preferred stock, no par
value, authorized 1,000,000
shares; issued and outstanding
135,000 shares at September 30,
2009 and June 30, 2009, none
at September 30, 2008 128,606 128,239 -
Common stock, no par value,
authorized 100,000,000 shares;
issued and outstanding
30,329,123 shares at
September 30, 2009, 28,745,214
shares at June 30, 2009 and
28,729,933 at September
30, 2008 406,312 403,219 403,117
Surplus 62,837 62,549 55,639
Retained earnings
(accumulated deficit) (157,088) 28,083 63,489
Accumulated other
comprehensive loss (4,028) (7,043) (12,174)
---------- ---------- ----------
Total shareholders' equity 436,639 615,047 510,071
Non-controlling interest 10,032 10,037 10,055
---------- ---------- ----------
Total equity 446,671 625,084 520,126
---------- ---------- ----------
Total liabilities and
equity $5,171,510 $5,525,287 $5,504,304
========== ========== ==========
CENTRAL PACIFIC FINANCIAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Three Months Ended Nine Months Ended
-------------------------------- -----------------
(In thousands, September June September
except per share 30, 30, 30, September 30,
data) 2009 2009 2008 2009 2008
--------- ------- --------- -------- --------
Interest income:
Interest and
fees on loans
and leases $48,594 $54,218 $64,224 $159,317 $200,195
Interest and
dividends on
investment
securities:
Taxable
interest 9,768 9,058 8,696 27,555 27,275
Tax-exempt
interest 937 1,146 1,351 3,254 4,156
Dividends 2 2 7 7 42
Interest on
deposits in
other banks 106 11 4 117 11
Interest on federal
funds sold and
securities
purchased under
agreements to
resell 3 6 33 9 76
Dividends on
Federal Home
Loan Bank
stock - - 171 - 464
--------- -------- ------ --------- ---------
Total interest
income 59,410 64,441 74,486 190,259 232,219
--------- -------- ------ --------- ---------
Interest expense:
Demand 364 355 251 1,040 567
Savings and
money market 3,250 3,414 3,171 9,527 9,936
Time 6,218 8,219 10,932 24,331 37,367
Interest on
short-term
borrowings 144 34 1,583 416 5,863
Interest on long-
term debt 5,982 6,359 7,965 18,960 25,661
--------- -------- ------ --------- ---------
Total interest
expense 15,958 18,381 23,902 54,274 79,394
--------- -------- ------ --------- ---------
Net interest
income 43,452 46,060 50,584 135,985 152,825
Provision for
loan and lease
losses 142,496 74,324 22,900 243,570 144,972
--------- -------- ------ --------- ---------
Net interest
income (loss)
after provision
for loan and
lease
losses (99,044) (28,264) 27,684 (107,585) 7,853
--------- -------- ------ --------- ---------
Other operating income:
Service charges
on deposit
accounts 4,052 3,948 3,702 11,537 10,756
Other service
charges and
fees 3,549 3,584 3,501 10,453 10,626
Income from
fiduciary
activities 874 999 945 2,843 2,940
Equity in
earnings of
unconsolidated
subsidiaries 134 205 103 613 517
Fees on foreign
exchange 170 145 142 431 448
Investment
securities gains
(losses) (169) (2,564) 12 (2,883) 265
Income from bank-
owned life
insurance 1,599 1,514 888 4,183 3,603
Loan placement
fees 188 312 201 748 567
Net gain on
sales of
residential
loans 3,060 4,539 1,807 11,608 5,846
Other 1,982 1,917 409 6,189 2,352
--------- -------- ------ --------- ---------
Total other
operating
income 15,439 14,599 11,710 45,722 37,920
--------- -------- ------ --------- ---------
Other operating expense:
Salaries and
employee
benefits 16,582 17,684 17,558 50,526 53,570
Net occupancy 3,260 3,101 3,261 9,640 9,380
Equipment 1,497 1,562 1,420 4,571 4,248
Amortization and
impairment of
intangible
assets 1,582 1,550 1,237 4,553 3,687
Communication
expense 1,087 975 1,155 3,201 3,365
Legal and
professional
services 2,957 2,846 3,209 8,519 8,237
Computer
software
expense 818 840 865 2,570 2,537
Advertising
expense 948 713 1,016 2,416 2,398
Goodwill
impairment 50,000 - - 50,000 94,279
Foreclosed asset
expense 5,523 2,294 83 7,952 6,657
Loss on sale of
commercial real
estate loans - - 203 - 1,874
Write down of
assets - 904 100 1,339 22,524
Other 5,239 13,349 7,358 27,722 16,452
--------- -------- ------ --------- ---------
Total other
operating
expense 89,493 45,818 37,465 173,009 229,208
--------- -------- ------ --------- ---------
Income (loss)
before income
taxes (173,098) (59,483) 1,929 (234,872) (183,435)
Income tax
expense
(benefit) 10,043 (25,041) (1,112) (19,918) (41,876)
--------- -------- ------ --------- ---------
Net income
(loss) $(183,141) $(34,442) $3,041 $(214,954) $(141,559)
========= ======== ====== ========= =========
Per common share data:
Basic earnings
per share $(6.38) $(1.27) $0.11 $(7.67) $(4.94)
Diluted earnings
per share (after
dividends and
accretion on
preferred
stock) (6.38) (1.27) 0.11 (7.67) (4.94)
Cash dividends
declared - - 0.10 - 0.60
Basic weighted
average shares
outstanding 29,030 28,687 28,665 28,801 28,668
Diluted weighted
average shares
outstanding 29,030 28,687 28,699 28,801 28,668
CENTRAL PACIFIC FINANCIAL CORP. AND SUBSIDIARIES
Average Balances, Interest Income & Expense, Yields and
Rates (Taxable Equivalent)
Three Months Ended
(Dollars in thousands) September 30, 2009
-----------------------------
Average Average
Balance Yield/Rate Interest
------- ---------- --------
Assets:
Interest earning assets:
Interest-bearing
deposits in other
banks $166,365 0.25% $106
Federal funds sold &
securities purchased
under agreements to
resell 10,978 0.13% 3
Taxable investment
securities, excluding
valuation allowance 924,659 4.23% 9,770
Tax-exempt investment
securities, excluding
valuation allowance 93,661 6.15% 1,441
Loans and leases, net
of unearned income 3,672,714 5.26% 48,594
Federal Home Loan
Bank stock 48,797 0.00% 0
---------- ---- --------
Total interest
earning assets 4,917,174 4.85% 59,914
Nonearning assets 471,748
----------
Total assets $5,388,922
==========
Liabilities & Equity:
Interest-bearing liabilities:
Interest-bearing
demand deposits $553,218 0.26% $364
Savings and money
market deposits 1,443,260 0.89% 3,250
Time deposits under
$100,000 595,792 2.28% 3,429
Time deposits
$100,000 and over 684,272 1.62% 2,789
Short-term borrowings 257,079 0.22% 144
Long-term debt 592,041 4.01% 5,982
---------- ---- --------
Total interest-
bearing liabilities 4,125,662 1.53% 15,958
--------
Noninterest-bearing
deposits 587,002
Other liabilities 62,955
----------
Total liabilities 4,775,619
----------
Shareholders' equity 603,268
Non-controlling interest 10,035
----------
Total equity 613,303
----------
Total liabilities &
equity $5,388,922
==========
Net interest income $43,956
========
Net interest margin 3.56%
====
Three Months Ended
(Dollars in thousands) September 30, 2008
-----------------------------
Average Average
Balance Yield/Rate Interest
------- ---------- --------
Assets:
Interest earning assets:
Interest-bearing
deposits in other
banks $946 1.59% $4
Federal funds sold &
securities purchased
under agreements to
resell 6,799 1.94% 33
Taxable investment
securities, excluding
valuation allowance 690,643 5.04% 8,703
Tax-exempt investment
securities, excluding
valuation allowance 143,943 5.77% 2,078
Loans and leases, net
of unearned income 4,134,700 6.19% 64,224
Federal Home Loan
Bank stock 48,797 1.40% 171
---------- ---- --------
Total interest
earning assets 5,025,828 5.96% 75,213
Nonearning assets 527,877
----------
Total assets $5,553,705
==========
Liabilities & Equity:
Interest-bearing liabilities:
Interest-bearing
demand deposits $469,966 0.21% $251
Savings and money
market deposits 1,085,721 1.16% 3,171
Time deposits under
$100,000 669,914 2.70% 4,544
Time deposits
$100,000 and over 988,691 2.57% 6,388
Short-term borrowings 262,865 2.39% 1,583
Long-term debt 882,017 3.59% 7,965
---------- ---- --------
Total interest-
bearing liabilities 4,359,174 2.18% 23,902
--------
Noninterest-bearing
deposits 592,505
Other liabilities 76,236
----------
Total liabilities 5,027,915
----------
Shareholders' equity 515,733
Non-controlling interest 10,057
----------
Total equity 525,790
----------
Total liabilities &
equity $5,553,705
==========
Net interest income $51,311
========
Net interest margin 4.07%
====
Nine Months Ended
(Dollars in thousands) September 30, 2009
-----------------------------
Average Average
Balance Yield/Rate Interest
------- ---------- --------
Assets:
Interest earning assets:
Interest-bearing
deposits in other
banks $79,468 0.20% $117
Federal funds sold &
securities purchased
under agreements to
resell 9,552 0.13% 9
Taxable investment
securities, excluding
valuation allowance 846,076 4.34% 27,562
Tax-exempt investment
securities, excluding
valuation allowance 111,804 5.97% 5,006
Loans and leases, net
of unearned income 3,848,970 5.53% 159,317
Federal Home Loan
Bank stock 48,797 0.00% 0
---------- ---- --------
Total interest
earning assets 4,944,667 5.19% 192,011
Nonearning assets 506,618
----------
Total assets $5,451,285
==========
Liabilities & Equity:
Interest-bearing liabilities:
Interest-bearing
demand deposits $530,928 0.26% $1,040
Savings and money
market deposits 1,326,005 0.96% 9,527
Time deposits under
$100,000 657,852 2.60% 12,773
Time deposits
$100,000 and over 853,791 1.81% 11,558
Short-term borrowings 169,725 0.33% 416
Long-term debt 613,489 4.13% 18,960
---------- ---- --------
Total interest-
bearing liabilities 4,151,790 1.75% 54,274
--------
Noninterest-bearing
deposits 585,337
Other liabilities 77,102
----------
Total liabilities 4,814,229
----------
Shareholders' equity 627,016
Non-controlling interest 10,040
----------
Total equity 637,056
----------
Total liabilities &
equity $5,451,285
==========
Net interest income $137,737
========
Net interest margin 3.72%
====
Nine Months Ended
(Dollars in thousands) September 30, 2008
-----------------------------
Average Average
Balance Yield/Rate Interest
------- ---------- --------
Assets:
Interest earning assets:
Interest-bearing
deposits in other
banks $714 1.99% $11
Federal funds sold &
securities purchased
under agreements to
resell 4,617 2.21% 76
Taxable investment
securities, excluding
valuation allowance 713,360 5.11% 27,317
Tax-exempt investment
securities, excluding
valuation allowance 149,000 5.72% 6,393
Loans and leases, net
of unearned income 4,242,621 6.30% 200,195
Federal Home Loan
Bank stock 48,797 1.27% 464
---------- ---- --------
Total interest
earning assets 5,159,109 6.07% 234,456
Nonearning assets 566,330
----------
Total assets $5,725,439
==========
Liabilities & Equity:
Interest-bearing liabilities:
Interest-bearing
demand deposits $464,374 0.16% $567
Savings and money
market deposits 1,112,667 1.19% 9,936
Time deposits under
$100,000 597,990 2.94% 13,151
Time deposits
$100,000 and over 1,049,155 3.08% 24,216
Short-term borrowings 287,181 2.73% 5,863
Long-term debt 899,855 3.81% 25,661
---------- ---- --------
Total interest-
bearing liabilities 4,411,222 2.40% 79,394
--------
Noninterest-bearing
deposits 599,684
Other liabilities 76,873
----------
Total liabilities 5,087,779
----------
Shareholders' equity 627,597
Non-controlling interest 10,063
----------
Total equity 637,660
----------
Total liabilities &
equity $5,725,439
==========
Net interest income $155,062
========
Net interest margin 4.01%
====
SOURCE Central Pacific Financial Corp.
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