Announces Bulk Sale of California Residential Construction Loans
Maintained 'Well-Capitalized' Regulatory Designation
HONOLULU, July 31 /PRNewswire-FirstCall/ -- Central Pacific Financial
Corp. (NYSE: CPF), parent company of Central Pacific Bank, today reported a
net operating loss for the second quarter of 2008 of $52.0 million, or ($1.81)
per diluted share. The net operating loss includes pre-tax credit costs
directly related to the Company's mainland loan portfolio of $112.0 million,
or ($2.35) per diluted share on an after-tax basis. The net operating loss
does not include a non-cash goodwill impairment charge of $94.3 million.
Including the goodwill impairment charge, the Company recognized a current
quarter net loss of $146.3 million, or ($5.10) per diluted share, compared to
net income of $21.0 million, or $0.68 per diluted share, reported in the
second quarter of 2007 and net income of $1.7 million, or $0.06 per diluted
share, reported in the first quarter of 2008.
Last quarter, the Company announced plans to reduce its exposure to the
troubled California residential construction market. In July 2008, the
Company sold assets with a combined carrying amount of $44.2 million at June
30, 2008. At June 30, 2008, the Company had written these assets down to
their sale price.
The goodwill impairment charge had no impact on the Company's cash flows,
tangible equity, or regulatory capital and was the result of the Company
writing off the remaining balance of goodwill allocated to its commercial real
estate reporting unit due to the continued deterioration in the California
residential construction market and the resultant decline in the Company's
market capitalization and asset values with exposure to this sector. All
goodwill related to the mainland operations has been written off and the
remaining goodwill on the Company's books at June 30, 2008 was attributable to
its Hawaii operations.
'Our operations in Hawaii continue to be solid with strong operating
fundamentals and we remain encouraged by the long-term outlook for our core
franchise,' said Clint Arnoldus, President and Chief Executive Officer.
'However, our quarterly results reflect the challenging economic environment
that we, along with financial institutions across the country, continue to
experience. As promised last quarter, we have taken steps to reduce our
exposure to problem loans in the weak California residential construction
market and enhance our risk management. We continue to address the impact of
this market on our loan portfolio and are focused on reducing our credit risk
and strengthening our capital ratios to better position the Company through
this economic cycle.'
Dean Hirata, Vice Chairman and Chief Financial Officer added, 'The July
sale of assets totaling $44.2 million has significantly reduced the amount of
nonperforming California residential construction loans in our portfolio. As
we wrote these assets down to the sales price in the second quarter, we will
not incur any additional losses related to these assets in the third quarter.
We believe our success in reducing our exposure to the troubled California
housing market, our continued scrutiny of portfolio risk, and our focus on our
core Hawaii operations will position the bank for improved financial
performance over the long term.'
Second Quarter Highlights
-- Maintained 'well-capitalized' regulatory designation at June 30, 2008
with Tier 1 risk-based capital, total risk-based capital, and leverage
capital ratios of 9.83%, 11.09%, and 8.21%, respectively.
-- Net revenues for the second quarter of 2008 were $65.4 million
(excluding the effects of the reversal of interest of $2.1 million
related to certain nonaccrual loans), an increase of 1.5% compared to
net revenues of $64.4 million in the second quarter of 2007.
-- Opened a record number of deposit accounts resulting from the success
of deposit campaigns.
-- Allowance for loan and lease losses as a percentage of total loans and
leases increased to 2.11% at June 30, 2008 from 1.31% at June 30,
2007.
-- Credit costs of $116.1 million were comprised of a provision for loan
and lease losses of $87.8 million, write-downs of loans held for sale
of $22.4 million, foreclosed asset expense of $4.0 million and an
increase to the reserve for unfunded commitments of $1.9 million. Of
this amount, $112.0 million, or 96.5%, was directly attributable to
the mainland loan portfolio.
-- Recorded a non-cash goodwill impairment charge of $94.3 million to
write-off the remaining balance of goodwill associated with the
Company's mainland operations.
Other Significant Events
-- Improved the Company's credit risk profile by significantly reducing
its exposure to the California residential construction market through
the sale of assets in July 2008 with a carrying amount of $44.2
million at June 30, 2008.
Earnings Highlights
Net interest income for the second quarter of 2008 was $51.4 million,
compared to $52.9 million in the year-ago quarter and $50.9 million in the
first quarter of 2008. The net interest margin for the current quarter was
3.97%, compared to 4.36% in the year-ago quarter and 3.99% in the first
quarter of 2008. The year-over-year and sequential-quarter compression was
primarily attributable to the reversal of interest of $2.1 million related to
certain nonaccrual loans and lower interest income due to a decrease in loan
yields. Excluding the effects of the $2.1 million reversal of interest on
nonaccrual loans, net interest income was $53.4 million and the net interest
margin was 4.13% for the current quarter.
The provision for loan and lease losses in the second quarter of 2008 was
$87.8 million, compared to $1.0 million in the year-ago quarter and $34.3
million in the first quarter of 2008. The current quarter increase was
directly attributable to significant deterioration in the Company's California
housing and residential construction loans as collateral values in this sector
continued to fall. As previously mentioned, the Company significantly reduced
its exposure to the California residential construction market in July 2008 by
selling many of these assets and the credit costs experienced in the current
quarter reflected those sales prices.
Other operating income totaled $11.9 million for the second quarter of
2008, compared to $11.5 million in the year-ago quarter and $14.3 million in
the first quarter of 2008. The increase from the year-ago quarter was
primarily due to increased gains on sales of residential loans totaling $0.8
million, offset by lower income from bank-owned life insurance totaling $0.3
million. The sequential-quarter decrease was primarily due to lower income
from bank-owned life insurance totaling $1.0 million, and the receipt of $0.9
million in cash proceeds from the partial redemption of the Company's equity
interest in Visa, Inc. during the first quarter of 2008.
Other operating expense for the second quarter of 2008 excluding the
aforementioned $94.3 million goodwill impairment charge was $66.0 million,
compared to $31.3 million in the year-ago quarter and $31.5 million in the
first quarter of 2008. The increase from the year-ago quarter was primarily
due to write-downs of certain loans held for sale totaling $22.4 million,
foreclosed asset expense totaling $4.0 million, higher salaries and employee
benefits totaling $1.8 million, loss on sale of commercial real estate loans
totaling $1.7 million and higher reserves for unfunded commitments totaling
$1.6 million. The sequential-quarter increase in other operating expense was
primarily due to the aforementioned write-downs of certain loans held for sale
totaling $22.4 million, higher reserves for unfunded commitments totaling $6.5
million, loss on sale of commercial real estate loans totaling $1.7 million,
higher write-downs of foreclosed properties totaling $1.4 million and higher
salaries and employee benefits totaling $1.3 million.
The Company's efficiency ratio for the second quarter of 2008 was 58.37%
(excluding the non-cash goodwill impairment charge of $94.3 million,
foreclosed asset expense of $4.0 million, loss on sale of commercial real
estate loans of $1.7 million, and write down of assets of $22.4 million),
compared with 47.03% in the year-ago quarter and 42.81% in the first quarter
of 2008. The current quarter variance from the year-ago and sequential
quarters was primarily attributable to the fluctuations in operating expenses
described above.
During the current quarter, the Company recognized an income tax benefit
of $38.5 million on a pre-tax net loss of $184.8 compared to the recognition
of an income tax benefit of $2.3 million on a pre-tax net loss of $0.6 million
during the first quarter of 2008. The Company's effective tax rate for the
current quarter was impacted by the disproportionate recognition of federal
and state tax credits, the generation of tax-exempt income and the non-cash
goodwill impairment charge, which is not deductible for tax purposes.
Balance Sheet Highlights
Total assets of $5.7 billion at June 30, 2008 reflect an increase of $86.8
million, or 1.6%, from a year ago and a decrease of $149.7 million, or 2.6%,
from March 31, 2008.
Total loans and leases of $4.1 billion at June 30, 2008 reflect an
increase of $140.9 million, or 3.6%, from a year ago and a decrease of $98.6
million, or 2.4%, from March 31, 2008. The current quarter decrease was
primarily attributable to the transfer of 13 mainland construction loans
totaling $46.4 million to the held for sale category and partial charge-offs
of 18 mainland construction loans totaling $73.3 million, offset by net loan
growth of $21.1 million. Overall, the Hawaii loan portfolio grew by $23.1
million during the current quarter, while the mainland loan portfolio
decreased by $121.7 million primarily due to the aforementioned charge-offs
totaling $73.3 million and transfer of loans to the held for sale category
totaling $46.4 million.
Total deposits of $3.9 billion at June 30, 2008 reflect an increase of
$5.8 million, or 0.1%, from a year ago and an increase of $140.6 million, or
3.7%, from March 31, 2008. Noninterest bearing demand, interest bearing
demand, savings and money market and time deposits increased in the current
quarter by $17.8 million, $13.6 million, $39.5 million and $69.8 million,
respectively.
Shareholders' equity at June 30, 2008 was $507.1 million.
Asset Quality
The Company's nonperforming assets as of June 30, 2008, March 31, 2008,
and proforma June 30, 2008 amounts following the completion of the
aforementioned sale of assets with exposure to the California residential
construction sector was as follows:
June 30, 2008
Proforma Upon
Nonperforming Assets (In Millions): March 31, June 30, Completion of
2008 2008 Loan Sale
Nonperforming loans including
loans held for sale $116.8 $142.4 $100.2
Other real estate owned 2.0 3.5 1.5
Total nonperforming assets $118.8 $145.9 $101.7
Non-performing assets as a % of
total assets 2.05% 2.58% 1.81%
The sequential-quarter increase in the Company's nonperforming assets was
primarily attributable to the addition of eight California residential
construction loans totaling $41.5 million and five California commercial real
estate loans totaling $16.9 million. The increase also included loans to two
Hawaii commercial real estate borrowers totaling $27.3 million. This was
partially offset by partial charge-offs of six California residential
construction loans totaling $23.3 million, partial charge-offs of two
Washington construction loans totaling $2.5 million, write-downs of California
residential construction loans classified as held for sale totaling $22.4
million, and write-downs of foreclosed properties totaling $3.9 million.
Net loan charge-offs in the second quarter of 2008 totaled $73.9 million,
compared to net loan charge-offs of $0.2 million in the year-ago quarter and
$54.2 million in the first quarter of 2008. Loan charge-offs in the second
quarter of 2008 included partial charge-offs of 14 California residential
construction loans totaling $65.0 million, two California commercial
construction loans totaling $5.8 million and two Washington construction loans
totaling $2.5 million.
Loans delinquent for 90 days or more still accruing interest totaled $0.5
million at June 30, 2008, an increase of 53.9% from a year ago and a decrease
of 4.5% from March 31, 2008.
The allowance for loan and lease losses as a percentage of total loans and
leases was 2.11% at June 30, 2008, compared to 1.31% a year ago and 1.73% at
March 31, 2008. The current quarter increase was attributable to the $87.8
million provision for loan and lease losses recorded during the current
quarter, offset by the aforementioned net loan charge-offs totaling $73.9
million.
Reduced California Residential Construction Exposure
At June 30, 2008, the Company's exposure to the California residential
construction market totaled $143.9 million, before the bulk loan sale in July
2008. This amount consisted of $87.2 million in the loan portfolio, $53.2
million classified as held for sale and two foreclosed properties totaling
$3.5 million. At March 31, 2008, the Company's total exposure to this sector
was $247.8 million, which consisted of $197.9 million in the loan portfolio,
$47.9 million classified as held for sale and one foreclosed property totaling
$2.0 million.
California residential construction loans held in the portfolio
represented 2.1% and 4.7% of total loans and leases at June 30, 2008 and March
31, 2008, respectively. Of the remaining $87.2 million balance in the
California residential construction portfolio, the specific allowance for loan
and lease losses established for these loans was $22.4 million at June 30,
2008, or 25.7%, of the total outstanding loan balance.
After completion of the July 2008 bulk loan sale, the Company's remaining
exposure to the California residential construction sector was $102.1 million,
which consisted of $87.2 million in the loan portfolio, $13.4 million
classified as held for sale and one foreclosed property totaling $1.5 million.
Nonperforming assets related to this sector was $97.9 million at June 30,
2008, or 1.73% of total assets, before the bulk loan sale. This balance was
comprised of nonaccrual portfolio loans totaling $41.2 million, nonaccrual
loans held for sale totaling $53.2 million, and other real estate owned
totaling $3.5 million. Following the sale, nonperforming assets related to
this sector was reduced to $56.1 million, or 1.00% of total assets.
Commercial Real Estate and Commercial Construction Exposure
Hawaii
At June 30, 2008, the Company's Hawaii commercial real estate and
construction loan portfolio totaled $1.2 billion. There were no Hawaii
commercial real estate or construction loans classified as held for sale.
Hawaii commercial real estate and construction loans held in the portfolio
represented 30.0% of total loans and leases at June 30, 2008.
Nonperforming assets related to this sector was comprised of seven loans
totaling $21.9 million at June 30, 2008, or 0.39% of total assets.
Of the $1.2 billion balance in the Hawaii commercial real estate and
construction portfolio, the allowance for loan and lease losses established
for these loans was $10.9 million at June 30, 2008, or 0.9%, of the total
outstanding balance.
Mainland
At June 30, 2008, the Company's exposure to the Mainland commercial real
estate and construction market was $996.9 million. This amount, which
excludes the aforementioned California residential construction portfolio,
consisted of $714.6 million in California and $282.3 million in other Western
states.
Commercial real estate and construction loans held in the mainland
portfolio represented 24.4% of total loans and leases at June 30, 2008.
Nonperforming assets related to this sector was comprised of five loans
totaling $16.9 million at June 30, 2008, or 0.30% of total assets.
Of the $996.9 million balance in the Mainland commercial real estate and
construction portfolio, the allowance for loan and lease losses established
for these loans was $27.6 million at June 30, 2008, or 2.8%, of the total
outstanding balance. Of the $714.6 million balance in the California
commercial real estate and construction portfolio, the allowance for loan and
lease losses established for these loans was $19.3 million at June 30, 2008,
or 2.7%, of the total outstanding balance.
Capital Levels and Third Quarter Cash Dividend
The Company and the Bank remain well-capitalized for regulatory purposes.
'Despite the deterioration in the California residential construction
market and its negative impact on our financial performance over the last four
quarters, our key regulatory capital ratios remain strong,' Arnoldus stated.
'At June 30, 2008, our Tier 1 capital ratio was 9.83%, our total capital ratio
was 11.09% and our leverage ratio was 8.21%; all of which are better than the
'well capitalized' regulatory measures of 6%, 10% and 5%, respectively.'
In addition to reporting its operating results for the second quarter of
2008, the Company also reported that its Board of Directors has declared a
third quarter cash dividend of $0.10 per common share payable on September 19,
2008 to shareholders of record as of August 15, 2008.
'The reduction in our quarterly cash dividend was an extremely difficult
decision as we realize the importance of the dividend to our shareholders,'
said Arnoldus. 'However, given the significant challenges facing the entire
financial services industry, we believe a partial dividend reduction is a
prudent means of preserving and building capital. Our Board of Directors
believes that this decision is in the best long-term interest of our
shareholders as it better positions the bank in the current economic
environment and leads to greater creation of long-term shareholder value.
When the economic environment stabilizes and our profitability is restored, we
will take a fresh look at our dividend.'
Arnoldus concluded, 'Our management and Board of Directors continue to
closely evaluate our capital levels given the uncertainty in the economy and
the capital markets. We intend to maintain our 'well capitalized' position
for regulatory purposes and believe it is vital to remain in a position to do
so in order to meet our customers' financial needs.'
Non-GAAP Financial Measures
This press release contains certain references to financial measures
identified as being stated on an operating basis or which adjust for or
exclude certain nonrecurring items, which are adjustments from comparable
measures calculated and presented in accordance with accounting principles
generally accepted in the United States of America ('GAAP'). These financial
measures, as used herein, differ from financial measures reported under 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 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 September 1, 2008 by dialing 1-877-344-7529 (passcode 421612) and on
the Company's website.
About Central Pacific Financial Corp.
Central Pacific Financial Corp. is one of the largest financial
institutions in Hawaii with more than $5.6 billion in assets. Central Pacific
Bank, its primary subsidiary, operates 39 branches and 98 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; the impact of competitive products, services,
pricing, and other competitive forces; movements in interest rates; loan
delinquency rates and changes in asset quality generally; and the price of the
Company's stock. 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. The Company does not update any
of its forward-looking statements.
CENTRAL PACIFIC FINANCIAL CORP. AND SUBSIDIARIES
Financial Highlights - June 30, 2008
(Unaudited)
Three Months Ended
June 30, %
(in thousands, except per share data) 2008 2007 Change
INCOME STATEMENT
Net income (loss) $(146,258) $21,016 -795.9%
Net operating income (loss) (1) (51,979) 21,016 -347.3%
Per share data:
Diluted:
Net income (loss) (5.10) 0.68 -850.0%
Net operating income (loss) (1) (1.81) 0.68 -366.2%
Cash dividends 0.25 0.24 4.2%
PERFORMANCE RATIOS
Return (loss) on average assets (2) -9.96% 1.52%
Return (loss) on average
shareholders' equity (2) -86.27% 10.99%
Net income (loss) to average tangible
shareholders' equity (2) -143.86% 19.03%
Efficiency ratio (3) 58.37% 47.03%
Net interest margin (2) 3.97% 4.36%
Dividend payout ratio -4.90% 34.78%
BALANCE SHEET
Total assets
Loans and leases, net of unearned
interest
Net loans and leases
Deposits
Shareholders' equity
Book value per share
Tangible book value per share
Market value per share
Tangible equity ratio
Three Months Ended
June 30, %
2008 2007 Change
SELECTED AVERAGE BALANCES
Total assets $5,876,047 $5,517,460 6.5%
Interest-earning assets 5,262,311 4,931,835 6.7%
Loans and leases, net of unearned
interest 4,346,980 3,984,070 9.1%
Other real estate 3,856 391 886.2%
Deposits 3,835,941 3,841,273 -0.1%
Interest-bearing liabilities 4,495,589 4,091,206 9.9%
Shareholders' equity 678,112 764,561 -11.3%
NONPERFORMING ASSETS
Nonaccrual loans (including loans
held for sale)
Other real estate, net
Total nonperforming assets
Loans delinquent for 90 days or more
(still accruing interest)
Restructured loans (still accruing
interest)
Total nonperforming assets, loans
delinquent for 90 days or more
(still accruing interest) and
restructured loans (still accruing
interest)
Three Months Ended
June 30,
2008 2007
Loan charge-offs $74,257 $843 8708.7%
Recoveries 399 638 -37.5%
Net loan charge-offs (recoveries) $73,858 $205 35928.3%
Net loan charge-offs to average loans (2) 6.80% 0.02%
Six Months Ended
June 30, %
(in thousands, except per share data) 2008 2007 Change
INCOME STATEMENT
Net income (loss) $(144,600) $41,151 -451.4%
Net operating income (loss) (1) (50,321) 41,151 -222.3%
Per share data:
Diluted:
Net income (loss) (5.04) 1.33 -478.9%
Net operating income (loss) (1) (1.76) 1.33 -232.3%
Cash dividends 0.50 0.48 4.2%
PERFORMANCE RATIOS
Return (loss) on average assets (2) -4.98% 1.50%
Return (loss) on average
shareholders' equity (2) -42.27% 10.87%
Net income (loss) to average tangible
shareholders' equity (2) -70.22% 19.04%
Efficiency ratio (3) 50.47% 46.23%
Net interest margin (2) 3.98% 4.44%
Dividend payout ratio -9.92% 35.82%
June 30, %
2008 2007 Change
BALANCE SHEET
Total assets $5,650,349 $5,563,598 1.6%
Loans and leases, net of unearned
interest 4,077,956 3,937,023 3.6%
Net loans and leases 3,991,906 3,885,614 2.7%
Deposits 3,920,630 3,914,857 0.1%
Shareholders' equity 507,103 753,543 -32.7%
Book value per share 17.66 24.75 -28.6%
Tangible book value per share 11.46 14.12 -18.8%
Market value per share 10.66 33.01 -67.7%
Tangible equity ratio 6.02% 8.20%
Six Months Ended
June 30, %
2008 2007 Change
SELECTED AVERAGE BALANCES
Total assets $5,812,250 $5,477,936 6.1%
Interest-earning assets 5,226,481 4,890,996 6.9%
Loans and leases, net of unearned
interest 4,297,175 3,942,181 9.0%
Other real estate 2,721 197 1281.2%
Deposits 3,832,501 3,814,332 0.5%
Interest-bearing liabilities 4,437,532 4,047,554 9.6%
Shareholders' equity 684,144 757,459 -9.7%
June 30, %
2008 2007 Change
NONPERFORMING ASSETS
Nonaccrual loans (including loans
held for sale) $142,408 $1,388 10159.9%
Other real estate, net 3,501 - -
Total nonperforming assets 145,909 1,388 10412.2%
Loans delinquent for 90 days or more
(still accruing interest) 508 330 53.9%
Restructured loans (still accruing
interest) - - 0.0%
Total nonperforming assets, loans
delinquent for 90 days or more
(still accruing interest) and
restructured loans (still accruing
interest) $146,417 $1,718 8422.5%
Six Months Ended
June 30,
2008 2007
Loan charge-offs $129,067 $5,678 2173.1%
Recoveries 996 1,207 -17.5%
Net loan charge-offs (recoveries) $128,071 $4,471 2764.5%
Net loan charge-offs to average loans (2) 5.96% 0.23%
June 30,
2008 2007
ASSET QUALITY RATIOS
Nonaccrual loans (including loans held
for sale) to total loans and leases 3.44% 0.04%
Nonperforming assets to total assets 2.58% 0.02%
Nonperforming assets, loans delinquent
for 90 days or more (still accruing
interest) and restructured loans (still
accruing interest) to total loans and
leases & other real estate 3.53% 0.04%
Allowance for loan and lease losses
to total loans and leases 2.11% 1.31%
Allowance for loan and lease losses
to nonaccrual loans (including loans
held for sale) 60.42% 3703.82%
(1) Excludes goodwill impairment of $94.3 million recorded in June 2008.
(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 2008 Non-GAAP Financial Measures
(Unaudited)
Three Months Six Months
Ended Ended
(Dollars in thousands, except per June 30, 2008 June 30, 2008
share data)
Net loss $(146,258) $(144,600)
Goodwill impairment 94,279 94,279
Net operating loss $(51,979) $(50,321)
Basic net loss per share $(5.10) $(5.04)
Goodwill impairment 3.29 3.28
Basic net operating loss per share $(1.81) $(1.76)
Diluted net loss per share $(5.10) $(5.04)
Goodwill impairment 3.29 3.28
Diluted net operating loss per share $(1.81) $(1.76)
CENTRAL PACIFIC FINANCIAL CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
CONSOLIDATED BALANCE SHEETS June 30, March 31, June 30,
(in thousands, except per share data) 2008 2008 2007
ASSETS
Cash and due from banks $97,657 $84,462 $116,216
Interest-bearing deposits in other banks 545 106 5,153
Federal funds sold 14,900 - 14,900
Investment securities:
Trading 5,077 - -
Available for sale 809,965 852,655 811,085
Held to maturity (fair value of $25,976
at June 30, 2008, $27,098 March 31,
2008 and $48,619 at June 30, 2007) 26,023 26,915 49,495
Total investment securities 841,065 879,570 860,580
Loans held for sale 108,535 97,743 45,539
Loans and leases 4,077,956 4,176,596 3,937,023
Less allowance for loan and lease
losses 86,050 72,108 51,409
Net loans and leases 3,991,906 4,104,488 3,885,614
Premises and equipment 82,724 83,504 78,122
Accrued interest receivable 22,687 25,541 25,337
Investment in unconsolidated subsidiaries 16,697 16,471 14,134
Other real estate 3,501 2,000 -
Goodwill 150,514 244,702 293,098
Core deposit premium 27,413 28,082 30,529
Mortgage servicing rights 13,622 11,536 11,253
Bank-owned life insurance 133,317 132,477 104,597
Federal Home Loan Bank stock 48,797 48,797 48,797
Other assets 96,469 40,558 29,729
Total assets $5,650,349 $5,800,037 $5,563,598
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Noninterest-bearing demand $649,950 $632,157 $623,778
Interest-bearing demand 471,294 457,742 444,875
Savings and money market 1,151,821 1,112,312 1,223,943
Time 1,647,565 1,577,810 1,622,261
Total deposits 3,920,630 3,780,021 3,914,857
Short-term borrowings 275,186 368,375 1,903
Long-tem debt 885,019 915,514 817,067
Minority interest 10,061 13,098 13,117
Other liabilities 52,350 48,366 63,111
Total liabilities 5,143,246 5,125,374 4,810,055
Shareholders' equity:
Preferred stock, no par value,
authorized 1,000,000 shares, none
issued - - -
Common stock, no par value, authorized
100,000,000 shares; issued and outstanding
28,716,667 shares at June 30, 2008
28,707,985 shares at March 31, 2008 and
30,446,160 shares at June 30, 2007 402,985 402,844 427,153
Surplus 55,039 54,487 53,932
Retained earnings 63,321 216,755 290,353
Accumulated other comprehensive
income (loss) (14,242) 577 (17,895)
Total shareholders' equity 507,103 674,663 753,543
Total liabilities and shareholders'
equity $5,650,349 $5,800,037 $5,563,598
CENTRAL PACIFIC FINANCIAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Three Months Ended Six Months Ended
June 30, March 31, June 30, June 30,
(In thousands, except 2008 2008 2007 2008 2007
per share data)
Interest income:
Interest and fees on
loans and leases $65,677 $70,294 $77,070 $135,971 $153,236
Interest and dividends on
investment securities:
Taxable interest 9,308 9,271 8,866 18,579 17,578
Tax-exempt interest 1,416 1,389 1,365 2,805 2,728
Dividends 11 24 60 35 93
Interest on deposits in
other banks 3 4 39 7 74
Interest on federal funds
sold and securities
purchased under agreements
to resell 22 21 109 43 119
Dividends on Federal
Home Loan Bank stock 171 122 24 293 122
Total interest income 76,608 81,125 87,533 157,733 173,950
Interest expense:
Demand 179 137 141 316 279
Savings and money market 2,980 3,785 6,167 6,765 12,452
Time 11,706 14,729 17,423 26,435 33,257
Interest on short-term
borrowings 2,357 1,923 303 4,280 808
Interest on long-term
debt 8,002 9,694 10,616 17,696 20,584
Total interest expense 25,224 30,268 34,650 55,492 67,380
Net interest income 51,384 50,857 52,883 102,241 106,570
Provision for loan and
lease losses 87,800 34,272 1,000 122,072 3,600
Net interest income
(loss) after provision
for loan and lease
losses (36,416) 16,585 51,883 (19,831) 102,970
Other operating income:
Service charges on
deposit accounts 3,511 3,543 3,463 7,054 6,907
Other service charges
and fees 3,710 3,415 3,414 7,125 6,771
Income from fiduciary
activities 990 1,005 854 1,995 1,615
Equity in earnings of
unconsolidated subsidiaries 131 283 167 414 424
Fees on foreign exchange 112 194 171 306 392
Investment securities gains 253 - - 253 -
Income from bank-owned
life insurance 845 1,870 1,183 2,715 2,214
Loan placement fees 213 153 283 366 542
Net gain on sales of
residential loans 2,241 1,798 1,403 4,039 2,770
Other (75) 2,018 600 1,943 1,055
Total other operating
income 11,931 14,279 11,538 26,210 22,690
Other operating expense:
Salaries and employee
benefits 18,648 17,364 16,888 36,012 33,294
Net occupancy 3,266 2,853 2,593 6,119 5,097
Equipment 1,433 1,395 1,325 2,828 2,555
Amortization of core
deposit premium 669 668 685 1,337 1,370
Amortization of mortgage
servicing rights 612 501 500 1,113 1,010
Communication expense 1,125 1,085 938 2,210 2,086
Legal and professional
services 2,615 2,413 2,110 5,028 4,437
Computer software expense 809 863 893 1,672 1,692
Advertising expense 700 682 635 1,382 1,258
Goodwill impairment 94,279 - - 94,279 -
Foreclosed asset expense 3,984 2,590 - 6,574 -
Loss on sale of commercial
real estate loans 1,671 - - 1,671 -
Write down of assets 22,424 - - 22,424 -
Other 8,048 1,046 4,764 9,094 9,008
Total other operating
expense 160,283 31,460 31,331 191,743 61,807
Income (loss) before
income taxes (184,768) (596) 32,090 (185,364) 63,853
Income tax expense
(benefit) (38,510) (2,254) 11,074 (40,764) 22,702
Net income (loss) $(146,258) $1,658 $21,016 $(144,600) $41,151
Per share data:
Basic earnings (loss)
per share $(5.10) $0.06 $0.69 $(5.04) $1.34
Diluted earnings (loss)
per share (5.10) 0.06 0.68 (5.04) 1.33
Cash dividends declared 0.25 0.25 0.24 0.50 0.48
Basic weighted average
shares outstanding 28,652 28,686 30,555 28,670 30,627
Diluted weighted average
shares outstanding 28,652 28,801 30,798 28,670 30,894
CENTRAL PACIFIC FINANCIAL CORP. AND SUBSIDIARIES
Average Balances, Interest Income & Expense, Yields and Rates (Taxable
Equivalent)
Three Months Ended
(Dollars in thousands) June 30, 2008
Average Average
Balance Yield/Rate Interest
Assets:
Interest earning assets:
Interest-bearing deposits in other banks $700 1.71% $3
Federal funds sold & securities
purchased under agreements to resell 4,385 2.04% 22
Taxable investment securities,
excluding valuation allowance 710,653 5.25% 9,319
Tax-exempt investment securities,
excluding valuation allowance 150,796 5.78% 2,179
Loans and leases, net of unearned
income 4,346,980 6.07% 65,677
Federal Home Loan Bank stock 48,797 1.40% 171
Total interest earning assets 5,262,311 5.90% 77,371
Nonearning assets 613,736
Total assets $5,876,047
Liabilities & Stockholders' Equity:
Interest-bearing liabilities:
Interest-bearing demand deposits $472,037 0.15% $179
Savings and money market deposits 1,111,289 1.08% 2,980
Time deposits under $100,000 590,750 2.81% 4,126
Time deposits $100,000 and over 1,054,284 2.89% 7,580
Short-term borrowings 369,489 2.57% 2,357
Long-term debt 897,740 3.58% 8,002
Total interest-bearing liabilities 4,495,589 2.26% 25,224
Noninterest-bearing deposits 607,581
Other liabilities 94,765
Stockholders' equity 678,112
Total liabilities & stockholders'
equity $5,876,047
Net interest income $52,147
Net interest margin 3.97%
Three Months Ended
(Dollars in thousands) June 30, 2007
Average Average
Balance Yield/Rate Interest
Assets:
Interest earning assets:
Interest-bearing deposits in other banks $3,011 5.16% $39
Federal funds sold & securities
purchased under agreements to resell 8,276 5.27% 109
Taxable investment securities,
excluding valuation allowance 732,966 4.87% 8,926
Tax-exempt investment securities,
excluding valuation allowance 154,715 5.43% 2,100
Loans and leases, net of unearned
income 3,984,070 7.76% 77,070
Federal Home Loan Bank stock 48,797 0.20% 24
Total interest earning assets 4,931,835 7.17% 88,268
Nonearning assets 585,625
Total assets $5,517,460
Liabilities & Stockholders' Equity:
Interest-bearing liabilities:
Interest-bearing demand deposits $441,674 0.13% $141
Savings and money market deposits 1,202,652 2.06% 6,167
Time deposits under $100,000 639,022 3.89% 6,203
Time deposits $100,000 and over 978,496 4.60% 11,220
Short-term borrowings 21,973 5.50% 303
Long-term debt 807,389 5.27% 10,616
Total interest-bearing liabilities 4,091,206 3.40% 34,650
Noninterest-bearing deposits 579,429
Other liabilities 82,264
Stockholders' equity 764,561
Total liabilities & stockholders'
equity $5,517,460
Net interest income $53,618
Net interest margin 4.36%
Six Months Ended
(Dollars in thousands) June 30, 2008
Average Average
Balance Yield/Rate Interest
Assets:
Interest earning assets:
Interest-bearing deposits in other banks $597 2.32% $7
Federal funds sold & securities
purchased under agreements to resell 3,513 2.48% 43
Taxable investment securities,
excluding valuation allowance 724,843 5.14% 18,614
Tax-exempt investment securities,
excluding valuation allowance 151,556 5.70% 4,316
Loans and leases, net of unearned
income 4,297,175 6.36% 135,971
Federal Home Loan Bank stock 48,797 1.20% 293
Total interest earning assets 5,226,481 6.12% 159,244
Nonearning assets 585,769
Total assets $5,812,250
Liabilities & Stockholders' Equity:
Interest-bearing liabilities:
Interest-bearing demand deposits $461,548 0.14% $316
Savings and money market deposits 1,126,287 1.21% 6,765
Time deposits under $100,000 561,634 3.08% 8,607
Time deposits $100,000 and over 1,079,719 3.32% 17,828
Short-term borrowings 299,471 2.87% 4,280
Long-term debt 908,873 3.92% 17,696
Total interest-bearing liabilities 4,437,532 2.51% 55,492
Noninterest-bearing deposits 603,313
Other liabilities 87,261
Stockholders' equity 684,144
Total liabilities & stockholders'
equity $5,812,250
Net interest income $103,752
Net interest margin 3.98%
Six Months Ended
(Dollars in thousands) June 30, 2007
Average Average
Balance Yield/Rate Interest
Assets:
Interest earning assets:
Interest-bearing deposits in other banks $2,894 5.14% $74
Federal funds sold & securities
purchased under agreements to resell 4,547 5.26% 119
Taxable investment securities,
excluding valuation allowance 737,964 4.79% 17,671
Tax-exempt investment securities,
excluding valuation allowance 154,613 5.43% 4,197
Loans and leases, net of unearned
income 3,942,181 7.83% 153,236
Federal Home Loan Bank stock 48,797 0.50% 122
Total interest earning assets 4,890,996 7.22% 175,419
Nonearning assets 586,940
Total assets $5,477,936
Liabilities & Stockholders' Equity:
Interest-bearing liabilities:
Interest-bearing demand deposits $437,444 0.13% $279
Savings and money market deposits 1,219,634 2.06% 12,452
Time deposits under $100,000 633,178 3.82% 11,986
Time deposits $100,000 and over 939,884 4.56% 21,271
Short-term borrowings 29,456 5.53% 808
Long-term debt 787,958 5.27% 20,584
Total interest-bearing liabilities 4,047,554 3.36% 67,380
Noninterest-bearing deposits 584,192
Other liabilities 88,731
Stockholders' equity 757,459
Total liabilities & stockholders'
equity $5,477,936
Net interest income $108,039
Net interest margin 4.44%
SOURCE Central Pacific Financial Corp.