EX-99.1 2 exhibit99-1erq32020.htm EX-99.1 Document

Exhibit 99.1
ex99logoa2811.jpg
 
  FOR IMMEDIATE RELEASE
   
Investor Contact:Ian TanakaMedia Contact:Dean Kawamura
 VP, Treasury ManagerVP, Community Development Manager
 (808) 544-3646(808) 544-3642
 ian.tanaka@cpb.bankdean.kawamura@cpb.bank
 
NEWS RELEASE

CENTRAL PACIFIC FINANCIAL CORP. REPORTS RESULTS FOR THIRD QUARTER 2020


•Net income of $6.9 million, or fully diluted EPS of $0.24 for the third quarter, compared to net income of $9.9 million, or fully diluted EPS of $0.35 for the second quarter.

•Pre-tax pre-provision earnings of $23.7 million for the third quarter increased by 13.0% from the year-ago quarter and 0.8% from the second quarter.

•Continued to increase credit loss reserves in the pandemic environment with an allowance for credit losses to total loans ratio of 1.60% (or 1.79% excluding Paycheck Protection Program ("PPP") loans) at September 30, 2020, compared to 1.35% (or 1.50% excluding PPP loans) at June 30, 2020.

•Loans on forbearance or deferral declined by 48.8% to $290.8 million, or 5.78% of the total loan portfolio (or 6.46% excluding PPP loans) at September 30, 2020 from $567.9 million, 11.35% of the total loan portfolio (or 12.68% excluding PPP loans) at June 30, 2020.

•Cost of average total deposits of 0.13% in the third quarter declined by 7 basis points from the second quarter.

•Mortgage banking income of $4.3 million in the third quarter increased by 117.9% from the year-ago quarter, and 21.8% from the second quarter.

•Launched our premier digital banking platform, one of the key initiatives and milestones of our RISE2020 initiative.

•Board of Directors declared a quarterly cash dividend of $0.23 per share.


HONOLULU, HI, October 28, 2020 – Central Pacific Financial Corp. (NYSE: CPF) (the "Company"), parent company of Central Pacific Bank, today reported net income in the third quarter of 2020 of $6.9 million, or fully diluted earnings per share ("EPS") of $0.24, compared to net income in the third quarter of 2019 of $14.6 million, or EPS of $0.51, and net income in the second quarter of 2020 of $9.9 million, or EPS of $0.35. Our operating results continue to be impacted by a higher provision for credit loss expense that was driven by the economic forecast under the current COVID-19 pandemic. During the third quarter of 2020, the Company recorded a provision for credit loss expense of $14.7 million, compared to $1.5 million in the third quarter of 2019 and $10.6 million in the second quarter of 2020.


Central Pacific Financial Corp. Reports Results for Third Quarter 2020
Page 2


"Central Pacific Financial Corp. continues to perform well with solid pre-tax, pre-provision earnings, strong mortgage banking income and the achievement of our RISE2020 milestones on digital banking," said Paul Yonamine, Chairman and Chief Executive Officer.

"We are actively managing the risks related to the COVID-19 pandemic, including building our credit loss reserves and raising Tier 2 capital through a recent issuance of subordinated debt. The Company is well positioned to continue to be a source of strength and liquidity for our customers, employees and shareholders as we all navigate this difficult economic environment," said Catherine Ngo, President.

On October 20, 2020, the Company completed a $55 million private placement of ten-year fixed-to-floating rate subordinated notes, which will be used to support regulatory capital ratios and for general corporate purposes. The Notes bear a fixed interest rate of 4.75% for the first five years and will reset quarterly thereafter for the remaining five years to the then current three-month Secured Overnight Financing Rate, as published by the Federal Reserve Bank of New York, plus 456 basis points.

On October 27, 2020, the Company's Board of Directors declared a quarterly cash dividend of $0.23 per share on its outstanding common shares. The dividend will be payable on December 15, 2020 to shareholders of record at the close of business on November 30, 2020.

Earnings Highlights
Net interest income for the third quarter of 2020 was $49.1 million, compared to $45.6 million in the year-ago quarter and $49.3 million in the previous quarter. Net interest margin for the third quarter of 2020 was 3.19%, compared to 3.30% in the year-ago quarter and 3.26% in the previous quarter. The increase in net interest income from the year-ago quarter was primarily due to growth in the loan portfolio, including loans originated under the PPP program, combined with lower rates paid on interest-bearing liabilities, partially offset by lower yields earned on the loan and investment securities portfolios. Net interest income for the third quarter of 2020 included $3.4 million in PPP net interest income and net loan fees, which are accreted into income over the term of the loans and accelerated when the loans are forgiven or paid-off. No PPP loans were forgiven during the third quarter. The declines in net interest margin, yields earned on the loans and investment securities portfolios and rates paid on interest-bearing liabilities from the year-ago and sequential quarters are primarily attributable to the historically low interest rate environment. During the third quarter of 2020, the Company had an average PPP loan balance of $544.7 million, which earned approximately 2.48% in net interest income and net loan fees. PPP loans accounted for approximately 2 basis points of the sequential quarter decrease in net interest margin.

Other operating income for the third quarter of 2020 totaled $11.6 million, which increased from $10.3 million in the year-ago quarter and $10.7 million in the previous quarter, primarily due to strong mortgage banking activity. Mortgage banking income increased by $2.4 million and $0.8 million from the year-ago and previous quarters, respectively. The increase in other operating income from the year-ago quarter was also attributable to higher income from bank-owned life insurance of $0.5 million. These increases were partially offset by lower service charges on deposit accounts of $0.7 million and lower other service charges and fees of $0.5 million, which were primarily attributable to lower transactional activity due to the pandemic. The Company also sold certain investment securities during the quarter at a loss of $0.4 million. The increase in other operating income from the previous quarter was primarily due to the aforementioned higher mortgage banking income, combined with higher other service charges and fees of $0.4 million and higher service charges on deposit accounts of $0.3 million. During the quarter, we reinstated certain service charges that were temporarily suspended in the previous quarter due to the pandemic. These increases were partially offset by the aforementioned loss on the sale of investment securities, combined with lower income from bank-owned life insurance of $0.2 million. The changes in income from bank-owned life insurance compared to the year-ago and previous quarters were primarily attributable to volatility in the equity markets.

Other operating expense for the third quarter of 2020 totaled $37.0 million, which increased from $34.9 million in the year-ago quarter and $36.4 million in the previous quarter. The increase from the year-ago quarter was primarily due to higher FDIC insurance assessment of $0.6 million (included in other), higher computer software expense of $0.4 million, and higher legal and professional services and advertising expenses of $0.3 million each. In addition, the Company recorded a provision for off-balance sheet credit exposures of $0.2 million, compared to a credit for off-balance sheet credit exposures of $0.5 million in the year-ago quarter. The Company also recognized costs totaling $0.3 million (included in other) related to the consolidation of three in-store branches with other existing nearby branches. These in-store branches had a small square footage which did not allow for adequate social distancing and have been closed since March 2020 due to the COVID-19 pandemic. A traditional branch is expected to be consolidated during the fourth quarter of 2020. The increase in other operating expense from the previous quarter was primarily due to higher equipment expense of $0.2 million and higher net occupancy expense of $0.2 million. These increases


Central Pacific Financial Corp. Reports Results for Third Quarter 2020
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were partially offset by a lower provision for off-balance sheet credit exposures of $0.4 million and a lower net change in the directors' deferred compensation plan obligation of $0.3 million.

The efficiency ratio for the third quarter of 2020 was 60.93%, compared to 62.48% in the year-ago quarter and 60.76% in the previous quarter.

In the third quarter of 2020, the Company recorded income tax expense of $2.2 million, compared to $4.9 million in the year-ago quarter and $3.0 million in the previous quarter. The effective tax rate for the third quarter of 2020 was 24.3%, compared to 25.2% in the year-ago quarter and 23.0% in the previous quarter.

Balance Sheet Highlights
Total assets at September 30, 2020 of $6.65 billion increased by $671.4 million, or 11.2% from September 30, 2019, and increased by $15.2 million, or 0.2% from June 30, 2020.

Total loans at September 30, 2020 of $5.03 billion increased by $662.8 million, or 15.2%, and $27.2 million, or 0.5% from September 30, 2019 and June 30, 2020, respectively. The year-over-year increase in total loans was driven by the origination of PPP loans totaling $528.6 million, net of deferred fees and costs, combined with increases in residential mortgage loans of $121.3 million, home equity loans of $58.5 million, construction loans of $21.6 million and commercial mortgage loans of $7.4 million, partially offset by decreases in the other commercial and consumer loan portfolios of $48.5 million and $26.0 million, respectively. The sequential quarter increase in total loans was primarily due to increases in home equity loans of $23.1 million, residential mortgage loans of $22.5 million, construction loans of $14.7 million and commercial mortgage loans of $11.1 million, partially offset by decreases in the consumer and other commercial loan portfolios of $26.6 million and $19.8 million, respectively. During the third quarter of 2020, the Company transferred $6.6 million in commercial and commercial real estate loans to a single borrower to loans-held-for-sale. In October 2020, the Company sold the loans at a loss of less than $0.1 million.

Total deposits at September 30, 2020 of $5.68 billion increased by $641.3 million, or 12.7% from September 30, 2019, and decreased by $115.8 million, or 2.0% from June 30, 2020. The deposit of PPP funds into both new and existing deposit accounts largely contributed to the increase in total deposits year-over-year. The sequential quarter decrease in total deposits was primarily attributable to the decreases in noninterest-bearing demand deposits of $88.5 million, savings and money market deposits of $64.6 million and total time deposits of $9.2 million, as some PPP funds were spent by clients during the current quarter. The decrease was offset by an increase in interest-bearing demand deposits of $46.6 million. Core deposits, which include demand deposits, savings and money market deposits, and time deposits less than $100,000, totaled $4.91 billion at September 30, 2020. This represents an increase of $758.1 million, or 18.2% from September 30, 2019, and a decrease of $109.2 million, or 2.2% from June 30, 2020. The Company's loan-to-deposit ratio was 88.6% at September 30, 2020, compared to 86.7% at September 30, 2019 and 86.4% at June 30, 2020.

Asset Quality
Nonperforming assets at September 30, 2020 totaled $13.2 million, or 0.20% of total assets, compared to $1.4 million, or 0.02% of total assets at September 30, 2019, and $4.7 million, or 0.07% of total assets at June 30, 2020. During the third quarter of 2020, the Company had $8.4 million in net additions to nonperforming assets, of which $7.6 million were to two borrowers consisting of commercial and commercial real estate loans that the Company believes are well-secured.

Loans delinquent for 90 days or more still accruing interest totaled $0.9 million at September 30, 2020, compared to $0.2 million and $1.2 million at September 30, 2019 and June 30, 2020, respectively.

Loans on payment forbearance or deferrals granted to borrowers impacted by the COVID-19 pandemic declined significantly to $290.8 million or 5.78% of the total loan portfolio (or 6.46% excluding PPP loans), as of September 30, 2020, compared to $567.9 million or 11.35% of the total loan portfolio (or 12.68% excluding PPP loans), as of June 30, 2020.

Net charge-offs in the third quarter of 2020 totaled $1.3 million, compared to net charge-offs of $1.6 million in the year-ago quarter, and net charge-offs of $2.9 million in the previous quarter.



Central Pacific Financial Corp. Reports Results for Third Quarter 2020
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In the third quarter of 2020, the Company recorded a provision for credit losses on loans of $14.7 million, compared to a provision of $1.5 million in the year-ago quarter and a provision of $10.6 million in the previous quarter. The higher provision for credit losses from the year-ago and sequential quarters was driven by models that utilize Hawaii-specific economic projections from a third party economic forecast. The allowance for credit losses, as a percentage of total loans at September 30, 2020 was 1.60%, compared to 1.10% at September 30, 2019 and 1.35% at June 30, 2020. Excluding the PPP loans, the allowance for credit losses, as a percentage of total loans at September 30, 2020 was 1.79%, compared to 1.50% at June 30, 2020.

Capital
Total shareholders' equity was $543.9 million at September 30, 2020, compared to $525.2 million and $544.3 million at September 30, 2019 and June 30, 2020, 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 September 30, 2020, the Company's leverage capital, tier 1 risk-based capital, total risk-based capital, and common equity tier 1 ratios were 8.8%, 12.8%, 13.9%, and 11.6%, respectively, compared to 8.9%, 12.5%, 13.6%, and 11.4%, respectively, at June 30, 2020.

On October 20, 2020, the Company completed a $55 million private placement of ten-year fixed-to-floating rate subordinated notes, which have been structured to qualify initially as tier 2 capital for the Company for regulatory capital purposes.

Non-GAAP Financial Measures
This press release contains certain references to financial measures that have been adjusted to exclude certain expenses and other specified items. These financial measures differ from comparable measures calculated and presented in accordance with accounting principles generally accepted in the United States of America ("GAAP") in that they exclude unusual or non-recurring charges, losses, credits or gains. This press release identifies the specific items excluded from the comparable GAAP financial measure in the calculation of each non-GAAP financial measure. Management believes that financial presentations excluding the impact of these items provide useful supplemental information that is important to a proper understanding of the Company's core business results by investors. These presentations should not be viewed as a substitute for results determined in accordance with GAAP, nor are they necessarily comparable to non-GAAP financial measures presented by other companies.

Conference Call
The Company's management will host a conference call today at 1:00 p.m. Eastern Time (7:00 a.m. Hawaii Time) to discuss the quarterly results. Individuals are encouraged to listen to the live webcast of the presentation by visiting the investor relations page of the Company's website at http://ir.centralpacificbank.com. Alternatively, investors may participate in the live call by dialing 1-877-505-7644. A playback of the call will be available through November 28, 2020 by dialing 1-877-344-7529 (passcode: 10149191) and on the Company's website. Information which may be discussed in the conference call is provided in an earnings supplement presentation on the Company's website at http://ir.centralpacificbank.com.

About Central Pacific Financial Corp.
Central Pacific Financial Corp. is a Hawaii-based bank holding company with approximately $6.6 billion in assets.  Central Pacific Bank, its primary subsidiary, operates 32 branches (four of which remain temporarily closed to protect the health and well-being of the Company's employees and customers from COVID-19) and 75 ATMs in the state of Hawaii, as of September 30, 2020.  For additional information, please visit the Company's website at http://www.cpb.bank.


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Central Pacific Financial Corp. Reports Results for Third Quarter 2020
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Forward-Looking Statements
This document may contain forward-looking statements concerning: projections of revenues, expenses, income or loss, earnings or loss per share, capital expenditures, the payment or nonpayment of dividends, capital position, credit losses, net interest margin or other financial items; statements of plans, objectives and expectations of Central Pacific Financial Corp. or its management or Board of Directors, including those relating to business plans, use of capital resources, products or services and regulatory developments and regulatory actions; statements of future economic performance including anticipated performance results from our RISE2020 initiative; or any statements of the assumptions underlying or relating to any of the foregoing. Words such as "believes," "plans," "anticipates," "expects," "intends," "forecasts," "hopes," "targeting," "continue," "remain," "will," "should," "estimates," "may" and other similar expressions are intended to identify forward-looking statements but are not the exclusive means of identifying such statements.

While we believe that our forward-looking statements and the assumptions underlying them are reasonably based, such statements and assumptions are by their nature subject to risks and uncertainties, and thus could later prove to be inaccurate or incorrect. Accordingly, actual results could differ materially from those statements or projections for a variety of reasons, including, but not limited to: the adverse effects of the COVID-19 pandemic virus on local, national and international economies, including, but not limited to, the adverse impact on tourism and construction in the State of Hawaii, our borrowers, customers, third-party contractors, vendors and employees as well as the effects of government programs and initiatives in response to COVID-19; the impact of our participation in the Paycheck Protection Program ("PPP") and fulfillment of government guarantees on our PPP loans; the increase in inventory or adverse conditions in the real estate market and deterioration in the construction industry; adverse changes in the financial performance and/or condition of our borrowers and, as a result, increased loan delinquency rates, deterioration in asset quality, and losses in our loan portfolio; our ability to successfully implement our RISE2020 initiative; the impact of local, national, and international economies and events (including natural disasters such as wildfires, volcanic eruptions, hurricanes, tsunamis, storms, earthquakes and pandemic virus and disease, including COVID-19) on the Company's business and operations and on tourism, the military, and other major industries operating within the Hawaii market and any other markets in which the Company does business; deterioration or malaise in domestic economic conditions, including any destabilization in the financial industry and deterioration of the real estate market, as well as the impact of declining levels of consumer and business confidence in the state of the economy in general and in financial institutions in particular; changes in estimates of future reserve requirements based upon the periodic review thereof under relevant regulatory and accounting requirements; the impact of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the "Dodd-Frank Act"), changes in capital standards, other regulatory reform and federal and state legislation, including but not limited to regulations promulgated by the Consumer Financial Protection Bureau (the "CFPB"), government-sponsored enterprise reform, and any related rules and regulations which affect our business operations and competitiveness; the costs and effects of legal and regulatory developments, including legal proceedings or regulatory or other governmental inquiries and proceedings and the resolution thereof, the results of regulatory examinations or reviews and the effect of, and our ability to comply with, any regulatory orders or actions we are or may become subject to; ability to successfully implement our initiatives to lower our efficiency ratio; the effects of and changes in trade, monetary and fiscal policies and laws, including the interest rate policies of the Board of Governors of the Federal Reserve System (the "FRB" or the "Federal Reserve"); inflation, interest rate, securities market and monetary fluctuations, including the anticipated replacement of the London Interbank Offered Rate ("LIBOR") Index and the impact on our loans and debt which are tied to that index; negative trends in our market capitalization and adverse changes in the price of the Company's common stock; political instability; acts of war or terrorism; pandemic virus and disease, including COVID-19; changes in consumer spending, borrowings and savings habits; failure to maintain effective internal control over financial reporting or disclosure controls and procedures; cybersecurity and data privacy breaches and the consequence therefrom; the ability to address deficiencies in our internal controls over financial reporting or disclosure controls and procedures; technological changes and developments; changes in the competitive environment among financial holding companies and other financial service providers; the effect of changes in accounting policies and practices, as may be adopted by the regulatory agencies, as well as the Public Company Accounting Oversight Board, the Financial Accounting Standards Board ("FASB") and other accounting standard setters and the cost and resources required to implement such changes; our ability to attract and retain key personnel; changes in our organization, compensation and benefit plans; and our success at managing the risks involved in the foregoing items.

For further information with respect to factors that could cause actual results to materially differ from the expectations or projections stated in the forward-looking statements, please see the Company's publicly available Securities and Exchange Commission filings, including the Company's Form 10-K for the last fiscal year and, in particular, the discussion of "Risk Factors" set forth therein. We urge investors to consider all of these factors carefully in evaluating the forward-looking statements contained in this Form 8-K. Forward-looking statements speak only as of the date on which such statements are made. We undertake no obligation to update any forward-looking statements to reflect events or circumstances after the date on which such statements are made, or to reflect the occurrence of unanticipated events except as required by law.




CENTRAL PACIFIC FINANCIAL CORP. AND SUBSIDIARIES
Financial Highlights
(Unaudited)TABLE 1
 
 Three Months EndedNine Months Ended
(Dollars in thousands, September 30,June 30,March 31,December 31,September 30,September 30,
except for per share amounts)2020202020202019201920202019
CONDENSED INCOME STATEMENT     
Net interest income$49,120 $49,259 $47,830 $47,934 $45,649 $146,209 $136,140 
Provision for credit losses [1]14,652 10,640 9,329 2,098 1,532 34,621 4,219 
Net interest income after provision for credit losses [1]34,468 38,619 38,501 45,836 44,117 111,588 131,921 
Total other operating income11,563 10,692 8,886 9,768 10,266 31,141 32,033 
Total other operating expense36,972 36,427 36,240 36,242 34,934 109,639 105,389 
Income before taxes9,059 12,884 11,147 19,362 19,449 33,090 58,565 
Income tax expense2,200 2,967 2,821 5,165 4,895 7,988 14,440 
Net income6,859 9,917 8,326 14,197 14,554 25,102 44,125 
Basic earnings per common share$0.24 $0.35 $0.30 $0.50 $0.51 $0.89 $1.54 
Diluted earnings per common share0.24 0.35 0.29 0.50 0.51 0.89 1.53 
Dividends declared per common share0.23 0.23 0.23 0.23 0.23 0.69 0.67 
PERFORMANCE RATIOS       
Return on average assets (ROA) [2]0.42 %0.61 %0.55 %0.95 %0.99 %0.53 %1.00 %
Return on average shareholders’ equity (ROE) [2]4.99 7.34 6.21 10.70 11.11 6.17 11.58 
Average shareholders’ equity to average assets8.36 8.36 8.93 8.87 8.87 8.54 8.67 
Efficiency ratio [1] [3]60.93 60.76 63.90 62.81 62.48 61.82 62.67 
Net interest margin (NIM) [2]3.19 3.26 3.43 3.43 3.30 3.29 3.32 
Dividend payout ratio [4]95.83 65.71 79.31 46.00 45.10 77.53 43.79 
SELECTED AVERAGE BALANCES       
Average loans, including loans held for sale$5,016,955 $4,902,905 $4,462,347 $4,412,247 $4,293,455 $4,794,883 $4,183,703 
Average interest-earning assets6,160,381 6,073,361 5,621,043 5,595,142 5,527,532 5,952,357 5,492,860 
Average assets6,574,492 6,468,129 6,007,237 5,978,797 5,907,207 6,350,696 5,858,224 
Average deposits5,728,147 5,614,595 5,121,696 4,998,897 4,987,414 5,488,947 4,981,254 
Average interest-bearing liabilities4,118,726 4,082,699 3,917,332 3,947,924 3,920,304 4,039,874 3,880,179 
Average shareholders’ equity549,378 540,802 536,721 530,464 524,083 542,326 507,930 


CENTRAL PACIFIC FINANCIAL CORP. AND SUBSIDIARIES
Financial Highlights
(Unaudited)TABLE 1 (CONTINUED)

 September 30,June 30,March 31,December 31,September 30,
(dollars in thousands)20202020202020192019
REGULATORY CAPITAL   
Central Pacific Financial Corp.   
Leverage capital$573,636 $571,976 $567,947 $568,529 $561,478 
Tier 1 risk-based capital573,636 571,976 567,947 568,529 561,478 
Total risk-based capital623,157 622,393 618,504 617,772 611,076 
Common equity tier 1 capital523,636 521,976 517,947 518,529 511,478 
Central Pacific Bank
Leverage capital559,750 559,461 556,895 556,077 550,913 
Tier 1 risk-based capital559,750 559,461 556,895 556,077 550,913 
Total risk-based capital609,203 609,811 607,402 605,320 600,511 
Common equity tier 1 capital559,750 559,461 556,895 556,077 550,913 
REGULATORY CAPITAL RATIOS
Central Pacific Financial Corp.
Leverage capital ratio8.8 %8.9 %9.5 %9.5 %9.5 %
Tier 1 risk-based capital ratio12.8 12.5 12.3 12.6 12.6 
Total risk-based capital ratio13.9 13.6 13.4 13.6 13.7 
Common equity tier 1 capital ratio11.6 11.4 11.3 11.5 11.5 
Central Pacific Bank
Leverage capital ratio8.6 8.7 9.3 9.3 9.4 
Tier 1 risk-based capital ratio12.5 12.2 12.1 12.3 12.4 
Total risk-based capital ratio13.6 13.3 13.2 13.4 13.5 
Common equity tier 1 capital ratio12.5 12.2 12.1 12.3 12.4 

September 30,June 30,March 31,December 31,September 30,
(dollars in thousands, except for per share amounts)20202020202020192019
BALANCE SHEET   
Total loans, net of deferred fees and costs$5,030,626 $5,003,438 $4,511,998 $4,449,540 $4,367,862 
Total assets6,648,142 6,632,972 6,108,548 6,012,672 5,976,716 
Total deposits5,678,929 5,794,685 5,136,069 5,120,023 5,037,659 
Long-term debt101,547 167,491 101,547 101,547 101,547 
Total shareholders’ equity543,903 544,271 533,781 528,520 525,227 
Total shareholders’ equity to total assets8.18 %8.21 %8.74 %8.79 %8.79 %
ASSET QUALITY     
Allowance for credit losses ("ACL") [1]$80,542 $67,339 $59,645 $47,971 $48,167 
Non-performing assets ("NPA")13,187 4,741 3,647 1,719 1,360 
ACL to total loans [1]1.60 %1.35 %1.32 %1.08 %1.10 %
ACL to total loans, excluding PPP loans [1]1.79 %1.50 %1.32 %1.08 %1.10 %
ACL to non-performing assets [1]610.77 %1,420.35 %1,635.45 %2,790.63 %3,541.69 %
NPA to total assets0.20 %0.07 %0.06 %0.03 %0.02 %
PER SHARE OF COMMON STOCK OUTSTANDING     
Book value per common share$19.30 $19.33 $18.99 $18.68 $18.47 
[1] The Company adopted ASU 2016-13, "Financial Instruments-Credit Losses" ("CECL"), effective January 1, 2020 using the modified retrospective approach. Results for the reporting periods beginning after January 1, 2020 are presented under CECL, while prior period amounts continue to be reported under previous GAAP.
[2] ROA, ROE and ROTE are annualized based on a 30/360 day convention. Annualized net interest income and expense in the NIM calculation are based on the day count interest payment conventions at the interest-earning asset or interest-bearing liability level (i.e. 30/360, actual/actual).
[3] Efficiency ratio is defined as total operating expense divided by total revenue (net interest income and total other operating income).
[4] Dividend payout ratio is defined as dividends declared per share divided by diluted earnings per share.




CENTRAL PACIFIC FINANCIAL CORP. AND SUBSIDIARIES
Consolidated Balance Sheets
(Unaudited)TABLE 2
 
 September 30,June 30,March 31,December 31,September 30,
(Dollars in thousands, except share data)20202020202020192019
ASSETS   
Cash and due from financial institutions$89,665 $102,132 $81,972 $78,418 $87,395 
Interest-bearing deposits in other financial institutions5,489 41,201 11,021 24,554 7,803 
Investment securities:  
Available-for-sale debt securities, at fair value1,166,319 1,168,594 1,184,023 1,126,983 1,186,875 
Equity securities, at fair value1,204 1,209 1,002 1,127 1,058 
Total investment securities1,167,523 1,169,803 1,185,025 1,128,110 1,187,933 
Loans held for sale23,962 10,443 3,910 9,083 7,016 
Loans, net of deferred fees and costs5,030,626 5,003,438 4,511,998 4,449,540 4,367,862 
Less allowance for credit losses [1]80,542 67,339 59,645 47,971 48,167 
Loans, net of allowance for credit losses4,950,084 4,936,099 4,452,353 4,401,569 4,319,695 
Premises and equipment, net61,095 55,032 50,447 46,343 44,095 
Accrued interest receivable21,478 19,590 16,851 16,500 16,220 
Investment in unconsolidated subsidiaries30,239 16,428 16,721 17,115 17,001 
Other real estate owned128 — 100 164 466 
Mortgage servicing rights12,429 12,771 13,345 14,718 15,058 
Bank-owned life insurance161,743 161,758 159,637 159,656 158,939 
Federal Home Loan Bank ("FHLB") stock17,468 9,229 18,109 14,983 17,183 
Right of use lease asset44,896 50,039 51,198 52,348 52,588 
Other assets61,943 48,447 47,859 49,111 45,324 
Total assets$6,648,142 $6,632,972 $6,108,548 $6,012,672 $5,976,716 
LIABILITIES AND SHAREHOLDERS' EQUITY     
Deposits:     
Noninterest-bearing demand$1,762,476 $1,851,012 $1,430,540 $1,450,532 $1,399,200 
Interest-bearing demand1,114,123 1,067,483 1,018,508 1,043,010 998,037 
Savings and money market1,881,104 1,945,744 1,693,280 1,600,028 1,593,738 
Time921,226 930,446 993,741 1,026,453 1,046,684 
Total deposits5,678,929 5,794,685 5,136,069 5,120,023 5,037,659 
FHLB advances and other short-term borrowings206,000 — 222,000 150,000 205,000 
Long-term debt101,547 167,491 101,547 101,547 101,547 
Lease liability45,355 50,440 51,541 52,632 52,807 
Other liabilities72,369 76,050 63,561 59,950 54,476 
Total liabilities6,104,200 6,088,666 5,574,718 5,484,152 5,451,489 
Shareholders' equity:     
Preferred stock, no par value, authorized 1,000,000 shares; issued and outstanding: none at September 30, 2020, June 30, 2020, March 31, 2020, December 31, 2019, and September 30, 2019— — — — — 
Common stock, no par value, authorized 185,000,000 shares; issued and outstanding: 28,179,798 at September 30, 2020, 28,154,159 at June 30, 2020, 28,115,353 at March 31, 2020, 28,289,257 at December 31, 2019, and 28,441,341 at September 30, 2019442,635 442,699 442,853 447,602 452,278 
Additional paid-in capital94,336 93,007 92,284 91,611 90,604 
Accumulated deficit [1](16,609)(16,986)(20,428)(19,102)(26,782)
Accumulated other comprehensive income23,541 25,551 19,072 8,409 9,127 
Total shareholders' equity543,903 544,271 533,781 528,520 525,227 
Non-controlling interest39 35 49 — — 
Total equity543,942 544,306 533,830 528,520 525,227 
Total liabilities and shareholders' equity$6,648,142 $6,632,972 $6,108,548 $6,012,672 $5,976,716 
[1] The Company adopted ASU 2016-13, "Financial Instruments-Credit Losses" ("CECL"), effective January 1, 2020 using the modified retrospective approach. Results for the reporting periods beginning after January 1, 2020 are presented under CECL, while prior period amounts continue to be reported under previous GAAP.




CENTRAL PACIFIC FINANCIAL CORP. AND SUBSIDIARIES 
Consolidated Statements of Income 
(Unaudited)TABLE 3

 Three Months EndedNine Months Ended
 September 30,June 30,March 31,December 31,September 30,September 30,
(Dollars in thousands, except per share data)2020202020202019201920202019
Interest income:     
Interest and fees on loans$45,751 $45,915 $46,204 $47,488 $45,861 $137,870 $135,169 
Interest and dividends on investment securities:
Taxable investment securities5,233 6,310 6,757 6,486 7,178 18,300 22,968 
Tax-exempt investment securities621 599 668 656 708 1,888 2,388 
Dividend income on investment securities17 17 17 17 14 51 46 
Interest on deposits in other financial institutions3 3 36 54 33 42 147 
Dividend income on FHLB stock128 106 132 456 186 366 508 
Total interest income51,753 52,950 53,814 55,157 53,980 158,517 161,226 
Interest expense:       
Interest on deposits:       
Demand115 114 176 202 207 405 598 
Savings and money market417 567 1,118 1,253 1,549 2,102 3,847 
Time1,284 2,124 3,268 3,653 4,432 6,676 14,391 
Interest on short-term borrowings71 74 508 1,139 1,130 653 3,146 
Interest on long-term debt746 812 914 976 1,013 2,472 3,104 
Total interest expense2,633 3,691 5,984 7,223 8,331 12,308 25,086 
Net interest income49,120 49,259 47,830 47,934 45,649 146,209 136,140 
Provision for credit losses14,652 10,640 9,329 2,098 1,532 34,621 4,219 
Net interest income after provision for credit losses34,468 38,619 38,501 45,836 44,117 111,588 131,921 
Other operating income:       
Mortgage banking income4,345 3,566 337 1,410 1,994 8,248 5,275 
Service charges on deposit accounts1,475 1,149 2,050 2,159 2,125 4,674 6,247 
Other service charges and fees3,345 2,916 4,897 4,095 3,894 11,158 11,018 
Income from fiduciary activities1,149 1,270 1,297 1,175 1,126 3,716 3,220 
Equity in earnings of unconsolidated subsidiaries104 104 26 92 86 234 165 
Net gain (loss) on sales of investment securities(352)— — — 36 (352)36 
Income from bank-owned life insurance1,179 1,424 (19)594 645 2,584 2,511 
Net gain (loss) on sales of foreclosed assets— (6)— (162)17 (6)17 
Other (refer to Table 4)318 269 298 405 343 885 3,544 
Total other operating income11,563 10,692 8,886 9,768 10,266 31,141 32,033 
Other operating expense:       
Salaries and employee benefits20,729 20,622 20,347 21,207 20,631 61,698 61,083 
Net occupancy3,834 3,645 3,672 3,619 3,697 11,151 10,680 
Equipment1,234 1,043 1,097 1,142 1,067 3,374 3,211 
Communication expense856 774 837 906 1,008 2,467 2,645 
Legal and professional services2,262 2,238 2,028 2,123 1,933 6,528 5,231 
Computer software expense3,114 3,035 2,943 2,942 2,713 9,092 7,870 
Advertising expense1,020 923 1,092 527 711 3,035 2,134 
Foreclosed asset expense6 — 67 28 15 73 223 
Other (refer to Table 4)3,917 4,147 4,157 3,748 3,159 12,221 12,312 
Total other operating expense36,972 36,427 36,240 36,242 34,934 109,639 105,389 
Income before income taxes9,059 12,884 11,147 19,362 19,449 33,090 58,565 
Income tax expense2,200 2,967 2,821 5,165 4,895 7,988 14,440 
Net income$6,859 $9,917 $8,326 $14,197 $14,554 $25,102 $44,125 
Per common share data:       
Basic earnings per share$0.24 $0.35 $0.30 $0.50 $0.51 $0.89 $1.54 
Diluted earnings per share0.24 0.35 0.29 0.50 0.51 0.89 1.53 
Cash dividends declared0.23 0.23 0.23 0.23 0.23 0.69 0.67 
Basic weighted average shares outstanding28,060,020 28,040,802 28,126,400 28,259,294 28,424,898 28,075,684 28,575,369 
Diluted weighted average shares outstanding28,111,664 28,095,230 28,277,753 28,448,243 28,602,338 28,172,153 28,762,057 
Note: Certain amounts in the prior period financial statements have been reclassified to conform to the presentation of the current period.




CENTRAL PACIFIC FINANCIAL CORP. AND SUBSIDIARIES 
Other Operating Income and Other Operating Expense - Detail 
(Unaudited)TABLE 4

The following table sets forth the components of other operating income - other for the periods indicated:

 Three Months EndedNine Months Ended
 September 30,June 30,March 31,December 31,September 30,September 30,
(Dollars in thousands)2020202020202019201920202019
Other operating income - other:
Income recovered on nonaccrual loans previously charged-off$47 $37 $23 $80 $73 $107 $240 
Other recoveries22 26 40 36 42 88 94 
Commissions on sale of checks73 56 81 75 75 210 234 
Gain on sale of MasterCard stock— — — — — — 2,555 
Other176 150 154 214 153 480 421 
Total other operating income - other$318 $269 $298 $405 $343 $885 $3,544 

The following table sets forth the components of other operating expense - other for the periods indicated:

 Three Months EndedNine Months Ended
 September 30,June 30,March 31,December 31,September 30,September 30,
(Dollars in thousands)2020202020202019201920202019
Other operating expense - other:
Charitable contributions$12 $10 $187 $122 $230 $209 $559 
FDIC insurance assessment649 475 — — 5 1,124 868 
Miscellaneous loan expenses497 399 300 361 274 1,196 885 
ATM and debit card expenses573 584 634 672 660 1,791 1,930 
Armored car expenses192 229 294 186 220 715 629 
Entertainment and promotions132 165 280 495 323 577 1,576 
Stationery and supplies226 220 248 305 240 694 744 
Directors’ fees and expenses213 196 241 246 242 650 722 
Directors' deferred compensation plan expense(237)103 (1,483)148 (155)(1,617)413 
Provision (credit) for residential mortgage loan repurchase losses— — — — — — (403)
Provision for off-balance sheet credit exposures221 573 1,798 (160)(465)2,592 189 
Branch consolidation costs321 — — — — 321 — 
Other1,118 1,193 1,658 1,373 1,585 3,969 4,200 
Total other operating expense - other$3,917 $4,147 $4,157 $3,748 $3,159 $12,221 $12,312 
Note: Certain amounts in the prior period financial statements have been reclassified to conform to the presentation of the current period.




CENTRAL PACIFIC FINANCIAL CORP. AND SUBSIDIARIES 
Average Balances, Interest Income & Expense, Yields and Rates (Taxable Equivalent) 
(Unaudited)TABLE 5

 Three Months EndedThree Months EndedThree Months Ended
September 30, 2020June 30, 2020September 30, 2019
 AverageAverage AverageAverage AverageAverage 
(Dollars in thousands)BalanceYield/RateInterestBalanceYield/RateInterestBalanceYield/RateInterest
ASSETS
Interest-earning assets:         
Interest-bearing deposits in other financial institutions$12,262 0.09 %$3 $15,777 0.10 %$3 $6,295 2.05 %$33 
Investment securities, excluding valuation allowance:
Taxable1,029,987 2.04 5,250 1,042,441 2.43 6,327 1,093,352 2.63 7,192 
Tax-exempt88,749 3.54 786 100,485 3.02 758 117,784 3.04 896 
Total investment securities1,118,736 2.16 6,036 1,142,926 2.48 7,085 1,211,136 2.67 8,088 
Loans, including loans held for sale5,016,955 3.64 45,751 4,902,905 3.76 45,915 4,293,455 4.25 45,861 
Federal Home Loan Bank stock12,428 4.12 128 11,753 3.62 106 16,646 4.46 186 
Total interest-earning assets6,160,381 3.36 51,918 6,073,361 3.51 53,109 5,527,532 3.90 54,168 
Noninterest-earning assets414,111   394,768   379,675   
Total assets$6,574,492   $6,468,129   $5,907,207   
LIABILITIES AND EQUITY
Interest-bearing liabilities:        
Interest-bearing demand deposits$1,092,976 0.04 %$115 $1,056,885 0.04 %$114 $1,002,875 0.08 %$207 
Savings and money market deposits1,910,971 0.09 417 1,856,621 0.12 567 1,582,795 0.39 1,549 
Time deposits under $100,000160,634 0.57 232 161,874 0.65 261 167,331 0.69 293 
Time deposits $100,000 and over769,030 0.54 1,052 807,276 0.93 1,863 874,192 1.88 4,139 
Total interest-bearing deposits3,933,611 0.18 1,816 3,882,656 0.29 2,805 3,627,193 0.68 6,188 
Federal Home Loan Bank advances and other short-term borrowings79,984 0.35 71 63,104 0.48 74 191,564 2.34 1,130 
Long-term debt105,131 2.82 746 136,939 2.38 812 101,547 3.96 1,013 
Total interest-bearing liabilities4,118,726 0.25 2,633 4,082,699 0.36 3,691 3,920,304 0.84 8,331 
Noninterest-bearing deposits1,794,536   1,731,939   1,360,221   
Other liabilities111,851   112,687   102,599   
Total liabilities6,025,113   5,927,325   5,383,124   
Shareholders’ equity549,378   540,802   524,083   
Non-controlling interest1   2   —   
Total equity549,379   540,804   524,083   
Total liabilities and equity$6,574,492   $6,468,129   $5,907,207   
Net interest income  $49,285   $49,418   $45,837 
Interest rate spread3.11 %3.15 %3.06 %
Net interest margin 3.19 %  3.26 %  3.30 % 




CENTRAL PACIFIC FINANCIAL CORP. AND SUBSIDIARIES 
Average Balances, Interest Income & Expense, Yields and Rates (Taxable Equivalent) 
(Unaudited)TABLE 6

 Nine Months EndedNine Months Ended
September 30, 2020September 30, 2019
 AverageAverage AverageAverage 
(Dollars in thousands)BalanceYield/RateInterestBalanceYield/RateInterest
ASSETS
Interest-earning assets:      
Interest-bearing deposits in other financial institutions$13,038 0.43 %$42 $8,540 2.30 %$147 
Investment securities, excluding valuation allowance:
Taxable1,033,362 2.37 18,351 1,147,217 2.67 23,014 
Tax-exempt98,153 3.25 2,390 137,750 2.93 3,023 
Total investment securities1,131,515 2.44 20,741 1,284,967 2.70 26,037 
Loans, including loans held for sale4,794,883 3.84 137,870 4,183,703 4.32 135,169 
Federal Home Loan Bank stock12,921 3.78 366 15,650 4.33 508 
Total interest-earning assets5,952,357 3.57 159,019 5,492,860 3.94 161,861 
Noninterest-earning assets398,339   365,364   
Total assets$6,350,696   $5,858,224   
LIABILITIES AND EQUITY
Interest-bearing liabilities:      
Interest-bearing demand deposits$1,054,692 0.05 %$405 $972,316 0.08 %$598 
Savings and money market deposits1,806,829 0.16 2,102 1,544,759 0.33 3,847 
Time deposits under $100,000162,255 0.64 777 172,204 0.69 884 
Time deposits $100,000 and over807,346 0.98 5,899 921,003 1.96 13,507 
Total interest-bearing deposits3,831,122 0.32 9,183 3,610,282 0.70 18,836 
Federal Home Loan Bank advances and other short-term borrowings94,248 0.93 653 168,350 2.50 3,146 
Long-term debt114,504 2.88 2,472 101,547 4.09 3,104 
Total interest-bearing liabilities4,039,874 0.41 12,308 3,880,179 0.86 25,086 
Noninterest-bearing deposits1,657,825   1,370,972   
Other liabilities110,669   99,143   
Total liabilities5,808,368   5,350,294   
Shareholders’ equity542,326   507,930   
Non-controlling interest2   —   
Total equity542,328   507,930   
Total liabilities and equity$6,350,696   $5,858,224   
Net interest income  $146,711   $136,775 
Interest rate spread3.16 %3.08 %
Net interest margin 3.29 %  3.32 % 




CENTRAL PACIFIC FINANCIAL CORP. AND SUBSIDIARIES
Loans by Geographic Distribution
(Unaudited)TABLE 7

 September 30,June 30,March 31,December 31,September 30,
(Dollars in thousands)20202020202020192019
HAWAII:     
Commercial, financial and agricultural:
SBA Paycheck Protection Program$485,286 $483,827 $— $— $— 
Other414,754 431,887 454,817 454,582 439,296 
Real estate:
Construction118,247 103,518 100,617 95,854 96,661 
Residential mortgage1,680,060 1,657,558 1,632,536 1,599,801 1,558,735 
Home equity534,056 510,962 504,686 490,734 475,565 
Commercial mortgage914,144 912,422 917,886 909,798 909,987 
Consumer342,203 350,414 367,960 373,451 369,511 
Leases— — — — 31 
Total loans, net of deferred fees and costs4,488,750 4,450,588 3,978,502 3,924,220 3,849,786 
Allowance for credit losses(71,575)(59,765)(51,646)(42,592)(42,286)
Loans, net of allowance for credit losses$4,417,175 $4,390,823 $3,926,856 $3,881,628 $3,807,500 
U.S. MAINLAND: [1]     
Commercial, financial and agricultural:
SBA Paycheck Protection Program$43,295 $42,581 $— $— $— 
Other113,316 115,971 120,507 115,722 137,316 
Real estate:
Construction— — — — — 
Residential mortgage— — — — — 
Home equity— — — — — 
Commercial mortgage227,121 217,747 221,251 213,617 223,925 
Consumer158,144 176,551 191,738 195,981 156,835 
Leases— — — — — 
Total loans, net of deferred fees and costs541,876 552,850 533,496 525,320 518,076 
Allowance for credit losses(8,967)(7,574)(7,999)(5,379)(5,881)
Loans, net of allowance for credit losses$532,909 $545,276 $525,497 $519,941 $512,195 
TOTAL:     
Commercial, financial and agricultural:
SBA Paycheck Protection Program$528,581 $526,408 $— $— $— 
Other528,070 547,858 575,324 570,304 576,612 
Real estate:
Construction118,247 103,518 100,617 95,854 96,661 
Residential mortgage1,680,060 1,657,558 1,632,536 1,599,801 1,558,735 
Home equity534,056 510,962 504,686 490,734 475,565 
Commercial mortgage1,141,265 1,130,169 1,139,137 1,123,415 1,133,912 
Consumer500,347 526,965 559,698 569,432 526,346 
Leases— — — — 31 
Total loans, net of deferred fees and costs5,030,626 5,003,438 4,511,998 4,449,540 4,367,862 
Allowance for credit losses(80,542)(67,339)(59,645)(47,971)(48,167)
Loans, net of allowance for credit losses$4,950,084 $4,936,099 $4,452,353 $4,401,569 $4,319,695 
[1] U.S. Mainland includes territories of the United States.




CENTRAL PACIFIC FINANCIAL CORP. AND SUBSIDIARIES
Deposits
(Unaudited)TABLE 8
 
 September 30,June 30,March 31,December 31,September 30,
(Dollars in thousands)20202020202020192019
Noninterest-bearing demand$1,762,476 $1,851,012 $1,430,540 $1,450,532 $1,399,200 
Interest-bearing demand1,114,123 1,067,483 1,018,508 1,043,010 998,037 
Savings and money market1,881,104 1,945,744 1,693,280 1,600,028 1,593,738 
Time deposits less than $100,000157,051 159,739 162,399 165,755 165,687 
Core deposits4,914,754 5,023,978 4,304,727 4,259,325 4,156,662 
Government time deposits500,762 509,927 523,343 533,088 552,470 
Other time deposits $100,000 to $250,00095,918 96,633 100,047 107,550 103,959 
Other time deposits greater than $250,000167,495 164,147 207,952 220,060 224,568 
Total time deposits $100,000 and over764,175 770,707 831,342 860,698 880,997 
Total deposits$5,678,929 $5,794,685 $5,136,069 $5,120,023 $5,037,659 




CENTRAL PACIFIC FINANCIAL CORP. AND SUBSIDIARIES
Nonperforming Assets, Past Due and Restructured Loans
(Unaudited)TABLE 9

 September 30,June 30,March 31,December 31,September 30,
(Dollars in thousands)20202020202020192019
Nonaccrual loans: [1]
Commercial, financial and agricultural$1,536 $934 $667 $467 $— 
Real estate:
Residential mortgage4,032 3,215 2,287 979 799 
Home equity533 538 545 92 95 
Commercial mortgage6,889 — — — — 
Consumer69 54 48 17 — 
Total nonaccrual loans13,059 4,741 3,547 1,555 894 
Other real estate owned ("OREO"):     
Real estate:  
Residential mortgage128 — — — 302 
Home equity— — 100 164 164 
Total OREO128 — 100 164 466 
Total nonperforming assets ("NPAs")13,187 4,741 3,647 1,719 1,360 
Loans delinquent for 90 days or more still accruing interest: [1]     
Real estate:  
Residential mortgage588 726 1,221 724 — 
Consumer321 444 352 286 235 
Total loans delinquent for 90 days or more still accruing interest909 1,170 1,573 1,010 235 
Restructured loans still accruing interest: [1]     
Commercial, financial and agricultural137 172 113 135 157 
Real estate:  
Residential mortgage5,178 5,290 5,431 5,502 6,717 
Commercial mortgage1,825 1,888 1,709 1,839 1,985 
Consumer214 145 — — — 
Total restructured loans still accruing interest7,354 7,495 7,253 7,476 8,859 
Total NPAs and loans delinquent for 90 days or more and restructured loans still accruing interest$21,450 $13,406 $12,473 $10,205 $10,454 
Total nonaccrual loans as a percentage of total loans0.26 %0.09 %0.08 %0.03 %0.02 %
Total NPAs as a percentage of total loans and OREO0.26 %0.09 %0.08 %0.04 %0.03 %
Total NPAs and loans delinquent for 90 days or more still accruing interest as a percentage of total loans and OREO0.28 %0.12 %0.12 %0.06 %0.04 %
Total NPAs, loans delinquent for 90 days or more and restructured loans still accruing interest as a percentage of total loans and OREO0.43 %0.27 %0.28 %0.23 %0.24 %
Quarter-to-quarter changes in NPAs:    
Balance at beginning of quarter$4,741 $3,647 $1,719 $1,360 $1,258 
Additions9,060 1,771 2,056 695 112 
Reductions:  
Payments(393)(367)(60)(34)(51)
Return to accrual status— (123)— — (2)
Sales of NPAs— (94)— (302)— 
Charge-offs, valuation and other adjustments(221)(93)(68)— 43 
Total reductions(614)(677)(128)(336)(10)
Balance at end of quarter$13,187 $4,741 $3,647 $1,719 $1,360 
[1] Section 4013 of the CARES Act and the revised Interagency Statement are being applied to loan modifications related to the COVID-19 pandemic as eligible and applicable. These loan modifications are not included in the delinquent or restructured loan balances presented above.




CENTRAL PACIFIC FINANCIAL CORP. AND SUBSIDIARIES
Allowance for Credit Losses on Loans
(Unaudited)TABLE 10
 
 Three Months EndedNine Months Ended
 September 30,June 30,March 31,December 31,September 30,September 30,
(Dollars in thousands)2020202020202019201920202019
Allowance for credit losses ("ACL"):     
ACL at beginning of period$67,339 $59,645 $47,971 $48,167 $48,267 $47,971 $47,916 
Adoption of ASU 2016-13— — 3,566 — — 3,566 — 
Adjusted ACL at beginning of period67,339 59,645 51,537 48,167 48,267 51,537 47,916 
Provision for credit losses on loans [1]14,465 10,640 9,329 2,098 1,532 34,434 4,219 
Charge-offs: 
Commercial, financial and agricultural810 1,103 437 379 797 2,350 2,099 
Real estate:
Residential mortgage11 52 — — — 63 — 
Home equity— — — — 5 — 5 
Commercial mortgage75 — — — — 75 — 
Consumer1,492 2,626 2,217 2,723 1,832 6,335 5,542 
Leases— — — — — — — 
Total charge-offs2,388 3,781 2,654 3,102 2,634 8,823 7,646 
Recoveries:     
Commercial, financial and agricultural321 305 342 264 362 968 910 
Real estate:
Construction— — 131 6 6 131 604 
Residential mortgage13 20 181 26 104 214 498 
Home equity— — 31 — 24 31 42 
Commercial mortgage12 1 2 — — 15 25 
Consumer780 509 746 512 506 2,035 1,599 
Total recoveries1,126 835 1,433 808 1,002 3,394 3,678 
Net charge-offs (recoveries)1,262 2,946 1,221 2,294 1,632 5,429 3,968 
ACL at end of period$80,542 $67,339 $59,645 $47,971 $48,167 $80,542 $48,167 
Average loans, net of deferred fees and costs$5,016,955 $4,902,905 $4,462,347 $4,412,247 $4,293,455 $4,794,883 $4,183,703 
Annualized ratio of net charge-offs to average loans0.10 %0.24 %0.11 %0.21 %0.15 %0.15 %0.13 %
[1] The Company recorded a reserve on accrued interest receivable for loans on payment forbearance or deferral, which were granted to borrowers impacted by the COVID-19 pandemic. This reserve was recorded as a contra-asset against accrued interest receivable with the offset to provision for credit losses. The provision for credit losses presented in this table excludes the provision for credit losses on accrued interest receivable of $0.187 million.




CENTRAL PACIFIC FINANCIAL CORP. AND SUBSIDIARIES
Reconciliation of Non-GAAP Financial Measures
(Unaudited)TABLE 11
 
The Company believes that pre-tax, pre-provision ("PTPP") earnings, a non-GAAP financial measure, is useful as a tool to help evaluate the ability to provide for credit costs through operations. The following tables set forth a reconciliation of our PTPP earnings and our PTPP earnings to average assets for each of the periods indicated:

Three Months EndedNine Months Ended
September 30,June 30,March 31,December 31,September 30,September 30,
(Dollars in thousands)2020202020202019201920202019
Net income$6,859 $9,917 $8,326 $14,197 $14,554 $25,102 $44,125 
Add: Income tax expense2,200 2,967 2,821 5,165 4,895 7,988 14,440 
Income before taxes9,059 12,884 11,147 19,362 19,449 33,090 58,565 
Add: Provision for credit losses14,652 10,640 9,329 2,098 1,532 34,621 4,219 
PTPP earnings$23,711 $23,524 $20,476 $21,460 $20,981 $67,711 $62,784 

Three Months EndedNine Months Ended
September 30,June 30,March 31,December 31,September 30,September 30,
(Dollars in thousands)2020202020202019201920202019
Net income$6,859 $9,917 $8,326 $14,197 $14,554 $25,102 $44,125 
Net income (annualized)27,436 39,668 33,304 56,788 58,216 33,469 58,833 
PTPP earnings23,711 23,524 20,476 21,460 20,981 67,711 62,784 
PTPP earnings (annualized)94,844 94,096 81,904 85,840 83,924 90,281 83,712 
Average assets6,574,492 6,468,129 6,007,237 5,978,797 5,907,207 6,350,696 5,858,224 
Return on average assets0.42 %0.61 %0.55 %0.95 %0.99 %0.53 %1.00 %
PTPP earnings to average assets1.44 %1.45 %1.36 %1.44 %1.42 %1.42 %1.43 %

The following table sets forth a reconciliation of the ratios of our allowance for credit losses ("ACL") to total loans and ACL to total loans, excluding PPP loans, for each of the periods indicated:

September 30,June 30,March 31,December 31,September 30,
(Dollars in thousands)20202020202020192019
Allowance for credit losses ("ACL")$80,542 $67,339 $59,645 $47,971 $48,167 
Total loans$5,030,626 $5,003,438 $4,511,998 $4,449,540 $4,367,862 
Less: SBA Paycheck Protection Program ("PPP loans")528,581 526,408 — — — 
Total loans, excluding PPP loans$4,502,045 $4,477,030 4,511,998 4,449,540 $4,367,862 
Ratio of ACL to total loans1.60 %1.35 %1.32 %1.08 %1.10 %
Ratio of ACL to total loans, excluding PPP loans1.79 %1.50 %1.32 %1.08 %1.10 %

The following table sets forth a reconciliation of the ratios of our loans on payment forbearance or deferrals to total loans and loans on payment forbearance or deferrals to total loans, excluding PPP loans, for each of the periods indicated:

September 30,June 30,
20202020
Loans on payment forbearance or deferrals$290,841 $567,860 
Total loans5,030,626 5,003,438 
Total loans, excluding PPP loans4,502,045 4,477,030 
Ratio of loans on payment forbearance or deferrals to total loans5.78 %11.35 %
Ratio of loans on payment forbearance or deferrals to total loans, excluding PPP loans6.46 %12.68 %