Investor Contact: David Morimoto Media Contact: Cedric Yamanaka
SVP & Treasurer Public Relations/Communications Manager
(808) 544-0627 (808) 544-6898
david.morimoto@centralpacificbank.com cedric.yamanaka@centralpacificbank.com
NEWS RELEASE
IMPORTANT NOTE: Central Pacific Financial Corp. (NYSE: CPF) is in the process of performing a Statement of Financial Accounting Standards No. 142, Goodwill and Other Intangible Assets, impairment test on the goodwill of its subsidiary, Central Pacific Bank, due to the inherent volatility in the financial markets. CPF notes that any potential charge related to the impairment of acquisition-related goodwill would be a non-cash charge, reducing net income in the current period, but with no impact on cash flows, tangible book value, or regulatory capital. The Company expects to issue a final release upon conclusion of the analysis.
“While our analysis of goodwill is ongoing, we are committed to completing it in a timely manner,” said Clint Arnoldus, President and Chief Executive Officer. “Although a potential impairment charge would reduce our net income, the fundamentals of the bank remain strong.”
CENTRAL PACIFIC FINANCIAL CORP. REPORTS FOURTH QUARTER RESULTS
HONOLULU, January 31, 2008 – Central Pacific Financial Corp. (NYSE: CPF), parent company of Central Pacific Bank, today reported net income for the fourth quarter of 2007 of $3.5 million, or $0.12 per diluted share, excluding the potential impact of any goodwill impairment charge, compared to $18.8 million, or $0.61 per diluted share, reported in the fourth quarter of 2006 and $9.1 million, or $0.30 per diluted share, reported in the third quarter of 2007. The current quarter’s results include the following previously announced items: (1) credit costs of $32.9 million; and (2) an after tax loss on an investment portfolio repositioning of $1.0 million, or $0.04 per diluted share. For the year ended December 31, 2007, CPF reported net income of $53.8 million, or $1.77 per diluted share, excluding the potential impact of any goodwill impairment charge, compared to $79.2 million, or $2.57 per diluted share, reported in 2006.
“As we previously announced, our fourth quarter results were negatively impacted by increased credit costs due to continued deterioration in California’s housing market,” said Clint Arnoldus, President and Chief Executive Officer. “In spite of the increased credit costs, we continue to be profitable and our capital base remains strong. Although we cannot predict when California’s housing market will stabilize, we are working to further reduce our credit risk exposure in this sector.”
Fourth Quarter Highlights
| § | Loans and leases increased by $69.2 million, or 1.7%, from September 30, 2007. |
| § | Deposits increased by $60.5 million, or 1.5%, from September 30, 2007. |
| § | Total credit costs of $32.9 million comprised of a provision for loan and lease losses of $28.2 million and an increase to the reserve for unfunded commitments of $4.7 million. |
| § | Sold $119 million in available-for-sale investment securities with an average yield of 3.98% and reinvested the proceeds into a similar amount of new investment securities with an average yield of 5.43%. |
Earnings Highlights
Net interest income for the fourth quarter of 2007 was $52.5 million, compared to $53.4 million in the year-ago quarter and $52.8 million in the third quarter of 2007. The net interest margin for the current quarter was 4.15%, compared to 4.47% in the year-ago quarter and 4.29% in the third quarter of 2007. The sequential-quarter compression was primarily attributable to lower interest income due to a decrease in loan yields and the reversal of interest related to certain nonaccrual loans totaling $1.0 million. The year-over-year compression in the net interest margin was primarily attributable to increased funding costs resulting from a shift in the composition of the deposit base from lower-rate demand, money market, and savings accounts into higher-rate time deposit accounts and the aforementioned reversal of interest on nonaccrual loans. Excluding the effects of the $1.0 million reversal of interest on nonaccrual loans, the net interest margin for the current quarter was 4.23%.
Earlier this month, CPF announced the completion of an investment portfolio repositioning in December 2007 to reduce interest income volatility and increase prospective earnings and the net interest margin. The repositioning was not related to any subprime risk within the investment portfolio as CPF’s portfolio consists of high grade investment securities. As a result of the repositioning, CPF reduced its interest rate risk exposure to declining market interest rates and expects 2008 net interest income and net interest margin to improve by approximately $1.7 million, or $0.04 per diluted share, and 3 basis points, respectively.
The provision for loan and lease losses in the fourth quarter of 2007 was $28.2 million, compared to zero in the year-ago quarter and $21.2 million in the third quarter of 2007. As was previously announced, the current quarter increase was directly attributable to the continued deterioration in the housing and residential construction market in California and the resultant negative credit migration of certain loans with exposure to this sector.
Other operating income totaled $11.4 million for the fourth quarter of 2007, compared to $9.5 million in the year-ago quarter and $11.8 million in the third quarter of 2007. The increase from the year-ago quarter was primarily due to higher gains on sales of loans of $0.8 million and increased income from bank-owned life insurance totaling $0.6.
Other operating expense for the fourth quarter of 2007 was $35.2 million, compared to $35.7 million in the year-ago quarter and $31.6 million in the third quarter of 2007. The decrease from the year-ago quarter was primarily due to lower salaries and employee benefits expense resulting from lower bonus and profit sharing accruals totaling $6.1 million, offset by the aforementioned increase in the reserve for unfunded commitments of $4.7 million and the accrual of interest related to tax contingency items totaling $1.0 million. The sequential-quarter increase was primarily due to the aforementioned increase in the reserve for unfunded commitments of $4.7 million, the aforementioned accrual of interest related to tax contingency items totaling $1.0 million, higher core deposit premium amortization expense of $0.4 million, and higher legal and professional fees of $0.3 million, offset by lower salaries and employee benefits primarily due to lower bonus and profit sharing expense totaling $3.2 million.
The Company’s efficiency ratio for the fourth quarter of 2007 was 51.44%, compared with 53.40% in the year-ago quarter and 47.27% in the third quarter of 2007. The current quarter increase was primarily attributable to the aforementioned increase in the reserve for unfunded commitments.
The Company’s effective tax rate for the full year ended December 31, 2007 was 29.3%, compared to 34.3% for the full year ended December 31, 2006. The current year decrease was due to the disproportionate recognition of federal and state tax credits compared to taxable income and the recording of certain income tax true-up adjustments resulting in a net income tax benefit of $2.0 million, partially offset by the settlement of a tax contingency item resulting in additional income tax expense of $2.4 million.
Balance Sheet Highlights
Total assets of $5.7 billion at December 31, 2007 increased by $241.2 million, or 4.4%, from a year ago and by $80.8 million, or 1.4%, from September 30, 2007.
Total loans and leases of $4.1 billion at December 31, 2007 increased by $295.7 million, or 7.7%, from a year ago and by $69.2 million, or 1.7%, from September 30, 2007. The Hawaii lending operations accounted for approximately 87% of the current quarter’s loan growth, while the mainland loan production offices contributed the remaining 13%.
Total deposits of $4.0 billion at December 31, 2007 increased by $158.2 million, or 4.1%, from a year ago and by $60.5 million, or 1.5%, from September 30, 2007. Current quarter increases in time deposits of $44.9 million, noninterest-bearing demand deposits of $34.4 million and interest-bearing demand deposits of $19.3 million were offset by a decrease in savings and money market deposits of $38.1 million.
Shareholders’ equity of $722.4 million at December 31, 2007 decreased by $15.7 million from a year ago and by $21.6 million from September 30, 2007.
Stock Repurchase Plan and Dividend
In 2007, the Company’s Board of Directors authorized the repurchase of up to 2,100,000 shares of the Company’s common stock. The Company completed the repurchase of these shares in December 2007. In January 2008, the Company’s board of directors approved an additional stock repurchase plan authorizing the Company to repurchase up to an additional 1,200,000 shares.
“Despite the challenging market conditions in California, we intend to maintain our quarterly dividend at the current level,” added Arnoldus.
Asset Quality
Net loan charge-offs in the fourth quarter of 2007 totaled $8.7 million, compared to net loan charge-offs of $0.3 million in the year-ago quarter and $0.1 million in the third quarter of 2007. Loan charge-offs in the fourth quarter of 2007 included the partial charge-off of four California land loans totaling $6.3 million and one Hawaii commercial loan totaling $2.0 million.
At December 31, 2007, nonperforming assets totaled $61.5 million, or 1.07%, of total assets, compared to $9.0 million, or 0.16%, of total assets at December 31, 2006 and $30.8 million, or 0.55%, of total assets at September 30, 2007. Nonperforming assets as of December 31, 2007 was comprised of nonaccrual loans totaling $56.1 million and a nonperforming loan classified as held for sale totaling $5.4 million. The sequential-quarter increase was primarily attributable to the addition of six California land loans to five borrowers totaling $34.7 million.
Loans delinquent for 90 days or more still accruing interest of $0.9 million declined by 0.7%, from a year ago and increased by 0.1%, from September 30, 2007.
The allowance for loan and lease losses as a percentage of total loans and leases was 2.22% at December 31, 2007, compared to 1.36% a year ago and 1.78% at September 30, 2007. The current quarter increase was directly attributable to the increased provision for loan and lease losses described above.
Total exposure in the California residential construction market was $305.2 million at December 31, 2007 compared to $329.8 million at September 30, 2007. The allowance for loan and lease losses related to this portfolio was $45.6 million at December 31, 2007, or 14.9%, of the total outstanding balance. Nonperforming assets related to this sector was $57.7 million at December 31, 2007, or 1.01% of total assets.
Bank Opens 39th Branch in Lahaina, Maui
Earlier this month, the Company announced the opening of a new branch in Lahaina. Located in West Maui’s newest retail destination, the Lahaina Gateway Center, the branch will cover 3,540 square feet and will offer the latest in banking technology.
“In an effort to better serve our customers, we have made notable improvements to our branch network,” commented Arnoldus. “We just opened our 39th branch in Lahaina. We also completed the renovation of our Kalihi branch in December and expect to open a new and improved branch in Kapahulu in the coming months. We believe these improvements will provide our customers with increased convenience and will allow us to become a more visible part of the communities we serve.”
Conference Call Information
Central Pacific Financial Corp. will conduct a conference call today at 4:00 p.m. Eastern Time (11:00 a.m. Hawaii Time) to discuss the quarterly results. To participate in the conference call, please dial 1-888-668-1637 or visit the investor relations page of the Company’s website at http://investor.centralpacificbank.com. A playback of the call will be available through February 7, 2008 by dialing 1-888-203-1112 (passcode: 4155913) and on the Company’s website.
About Central Pacific Financial Corp.
Central Pacific Financial Corp. is the fourth largest financial institution in Hawaii with more than $5.7 billion in assets. Central Pacific Bank, its primary subsidiary, operates 39 branches and more than 90 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 - December 31, 2007 | |
| (Unaudited) | |
| | | | | | | | | | | | | | | | | | | | |
| | | | Three Months Ended | | | | | | Year Ended | | | | |
| | | | December 31, | | | % | | | December 31, | | | % | |
| (in thousands, except per share data) | | 2007 | | | 2006 | | | Change | | | 2007 | | | 2006 | | | Change | |
| | | | | | | | | | | | | | | | | | | | |
| INCOME STATEMENT | | | | | | | | | | | | | | | | | | |
| Net income | | $ | 3,548 | | | $ | 18,800 | | | | -81.1 | % | | $ | 53,806 | | | $ | 79,180 | | | | -32.0 | % |
| Per share data: | | | | | | | | | | | | | | | | | | | | | | | | |
| | Diluted earnings per share | | | 0.12 | | | | 0.61 | | | | -80.3 | % | | | 1.77 | | | | 2.57 | | | | -31.1 | % |
| | Cash dividends | | | 0.25 | | | | 0.23 | | | | 8.7 | % | | | 0.98 | | | | 0.88 | | | | 11.4 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| PERFORMANCE RATIOS | | | | | | | | | | | | | | | | | | | | | | | | |
| Return on average assets (1) | | | 0.25 | % | | | 1.39 | % | | | | | | | 0.97 | % | | | 1.50 | % | | | | |
| Return on average shareholders' equity (1) | | | 1.90 | % | | | 10.22 | % | | | | | | | 7.12 | % | | | 11.16 | % | | | | |
| Net income to average tangible shareholders' equity (1) | | | 3.34 | % | | | 18.55 | % | | | | | | | 12.50 | % | | | 21.01 | % | | | | |
| Efficiency ratio (2) | | | 51.44 | % | | | 53.40 | % | | | | | | | 47.80 | % | | | 49.67 | % | | | | |
| Net interest margin (1) | | | 4.15 | % | | | 4.47 | % | | | | | | | 4.33 | % | | | 4.55 | % | | | | |
| Dividend payout ratio | | | 208.33 | % | | | 37.70 | % | | | | | | | 55.06 | % | | | 33.85 | % | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | December 31, | | | % | |
| | | | | | | | | | | | | | | | 2007 | | | 2006 | | | Change | |
| BALANCE SHEET | | | | | | | | | | | | | | | | | | | | | | | | |
| Total assets | | | | | | | | | | | | | | $ | 5,728,386 | | | $ | 5,487,192 | | | | 4.4 | % |
| Loans and leases | | | | | | | | | | | | | | | 4,141,705 | | | | 3,846,004 | | | | 7.7 | % |
| Loans and leases, net of unearned interest | | | | | | | | | | | | | | | 4,049,656 | | | | 3,793,724 | | | | 6.7 | % |
| Deposits | | | | | | | | | | | | | | | 4,002,719 | | | | 3,844,483 | | | | 4.1 | % |
| Shareholders' equity | | | | | | | | | | | | | | | 722,403 | | | | 738,139 | | | | -2.1 | % |
| Book value per share | | | | | | | | | | | | | | | 25.12 | | | | 24.04 | | | | 4.5 | % |
| Market value per share | | | | | | | | | | | | | | | 18.46 | | | | 38.76 | | | | -52.4 | % |
| Tangible equity ratio | | | | | | | | | | | | | | | 7.42 | % | | | 7.90 | % | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | Three Months Ended | | | | | | | Year Ended | | | | | |
| | | | December 31, | | | % | | | December 31, | | | % | |
| | | | 2007 | | | 2006 | | | Change | | | 2007 | | | 2006 | | | Change | |
| SELECTED AVERAGE BALANCES | | | | | | | | | | | | | | | | | | | | | | | | |
| Total assets | | $ | 5,718,712 | | | $ | 5,397,587 | | | | 5.9 | % | | $ | 5,563,115 | | | $ | 5,271,644 | | | | 5.5 | % |
| Interest-earning assets | | | 5,108,920 | | | | 4,812,504 | | | | 6.2 | % | | | 4,965,878 | | | | 4,689,967 | | | | 5.9 | % |
| Loans and leases, net of unearned interest | | | 4,171,889 | | | | 3,803,169 | | | | 9.7 | % | | | 4,021,094 | | | | 3,689,979 | | | | 9.0 | % |
| Other real estate | | | - | | | | - | | | | - | | | | 97,129 | | | | - | | | | - | |
| Deposits | | | 3,965,157 | | | | 3,790,692 | | | | 4.6 | % | | | 3,872,206 | | | | 3,676,063 | | | | 5.3 | % |
| Interest-bearing liabilities | | | 4,270,510 | | | | 3,973,418 | | | | 7.5 | % | | | 4,125,076 | | | | 3,844,106 | | | | 7.3 | % |
| Shareholders' equity | | | 747,574 | | | | 736,075 | | | | 1.6 | % | | | 755,310 | | | | 709,244 | | | | 6.5 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | December 31, | | | % | |
| | | | | | | | | | | | | | | | 2007 | | | 2006 | | | Change | |
| NONPERFORMING ASSETS | | | | | | | | | | | | | | | | | | | | | | | | |
| Nonaccrual loans (including loans held for sale) | | | | | | | | | | | | | | $ | 61,541 | | | $ | 8,958 | | | | 587.0 | % |
| Other real estate | | | | | | | | | | | | | | | - | | | | - | | | | - | |
| | Total nonperforming assets | | | | | | | | | | | | | | | 61,541 | | | | 8,958 | | | | 587.0 | % |
| Loans delinquent for 90 days or more (still accruing interest) | | | | | | | | | | | | | | | 903 | | | | 909 | | | | -0.7 | % |
| 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) | | | | | | | | | | | | | | $ | 62,444 | | | $ | 9,867 | | | | 532.9 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | Three Months Ended | | | | | | | Year Ended | | | | | |
| | | | December 31, | | | % | | | December 31, | | | % | |
| | | | 2007 | | | 2006 | | | Change | | | 2007 | | | 2006 | | | Change | |
| Loan charge-offs | | $ | 9,679 | | | $ | 2,671 | | | | 262.4 | % | | $ | 16,192 | | | $ | 6,270 | | | | 158.2 | % |
| Recoveries | | | 1,010 | | | | 2,340 | | | | -56.8 | % | | | 2,960 | | | | 4,264 | | | | -30.6 | % |
| | Net loan charge-offs (recoveries) | | $ | 8,669 | | | $ | 331 | | | | 2519.0 | % | | $ | 13,232 | | | $ | 2,006 | | | | 559.6 | % |
| Net loan charge-offs to average loans (1) | | | 0.83 | % | | | 0.03 | % | | | | | | | 0.33 | % | | | 0.05 | % | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | December 31, | | | | | |
| | | | | | | | | | | | | | | | 2007 | | | 2006 | | | | | |
| ASSET QUALITY RATIOS | | | | | | | | | | | | | | | | | | | | | | | | |
| Nonaccrual loans to total loans | | | | | | | | | | | | | | | 1.49 | % | | | 0.23 | % | | | | |
| Nonperforming assets to total assets | | | | | | | | | | | | | | | 1.07 | % | | | 0.16 | % | | | | |
| Nonperforming assets, loans delinquent for 90 days or more | | | | | | | | | | | | | | | | | | | | | | | | |
| | (still accruing interest) and restructured loans (still | | | | | | | | | | | | | | | | | | | | | | | | |
| | accruing interest) to total loans & other real estate | | | | | | | | | | | | | | | 1.51 | % | | | 0.26 | % | | | | |
| Allowance for loan and lease losses to total loans and leases | | | | | | | | | | | | | | | 2.22 | % | | | 1.36 | % | | | | |
| Allowance for loan and lease losses to nonaccrual loans | | | | | | | | | | | | | | | 149.57 | % | | | 583.61 | % | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| (1) | Annualized | | | | | | | | | | | | | | | | | | | | | | | | |
| (2) | Efficiency ratio is derived by dividing other operating expense before amortization of intangible assets by net operating | | | | | | | | | |
| | income (net interest income on a fully taxable equivalent basis plus other operating income before securities transactions). | | | | | | | | | |
| |
| CONSOLIDATED BALANCE SHEETS | |
| (Unaudited) | |
| | | | | | | | | | |
| | | | | | | | | | |
| CONSOLIDATED BALANCE SHEETS | | December 31, | | | September 30, | | | December 31, | |
| (in thousands, except per share data) | | 2007 | | | 2007 | | | 2006 | |
| | | | | | | | | | |
| ASSETS | | | | | | | | | |
| Cash and due from banks | | $ | 79,088 | | | $ | 90,161 | | | $ | 129,715 | |
| Interest-bearing deposits in other banks | | | 241 | | | | 439 | | | | 5,933 | |
| Federal funds sold | | | 2,800 | | | | 14,900 | | | | - | |
| Investment securities: | | | | | | | | | | | | |
| Held to maturity, at cost (fair value of $46,077 December 31, 2007, | | | | | | | | | | | | |
| $46,977 at September 30, 2007 and $64,249 at December 31, 2006) | | | 46,124 | | | | 47,465 | | | | 65,204 | |
| Available for sale, at fair value | | | 835,130 | | | | 801,640 | | | | 833,154 | |
| Total investment securities | | | 881,254 | | | | 849,105 | | | | 898,358 | |
| | | | | | | | | | | | | |
| Loans held for sale | | | 37,572 | | | | 31,388 | | | | 26,669 | |
| Loans and leases | | | 4,141,705 | | | | 4,072,536 | | | | 3,846,004 | |
| Less allowance for loan and lease losses | | | 92,049 | | | | 72,517 | | | | 52,280 | |
| Net loans and leases | | | 4,049,656 | | | | 4,000,019 | | | | 3,793,724 | |
| | | | | | | | | | | | | |
| Premises and equipment | | | 82,841 | | | | 80,173 | | | | 77,341 | |
| Accrued interest receivable | | | 26,041 | | | | 27,580 | | | | 26,269 | |
| Investment in unconsolidated subsidiaries | | | 17,404 | | | | 16,333 | | | | 12,957 | |
| Goodwill | | | 292,702 | | | | 293,566 | | | | 298,996 | |
| Core deposit premium | | | 28,750 | | | | 29,844 | | | | 31,898 | |
| Mortgage servicing rights | | | 11,222 | | | | 11,111 | | | | 11,640 | |
| Bank-owned life insurance | | | 131,454 | | | | 130,089 | | | | 102,394 | |
| Federal Home Loan Bank stock | | | 48,797 | | | | 48,797 | | | | 48,797 | |
| Other assets | | | 38,564 | | | | 24,119 | | | | 22,501 | |
| Total assets | | $ | 5,728,386 | | | $ | 5,647,624 | | | $ | 5,487,192 | |
| | | | | | | | | | | | | |
| LIABILITIES AND SHAREHOLDERS' EQUITY | | | | | | | | | | | | |
| Deposits: | | | | | | | | | | | | |
| Noninterest-bearing demand | | $ | 665,034 | | | $ | 630,586 | | | $ | 661,027 | |
| Interest-bearing demand | | | 461,175 | | | | 441,884 | | | | 438,943 | |
| Savings and money market | | | 1,178,855 | | | | 1,216,991 | | | | 1,205,271 | |
| Time | | | 1,697,655 | | | | 1,652,798 | | | | 1,539,242 | |
| Total deposits | | | 4,002,719 | | | | 3,942,259 | | | | 3,844,483 | |
| | | | | | | | | | | | | |
| Short-term borrowings | | | 16,000 | | | | 72,245 | | | | 79,308 | |
| Long-tem debt | | | 916,019 | | | | 816,535 | | | | 740,189 | |
| Minority interest | | | 13,104 | | | | 13,110 | | | | 13,130 | |
| Other liabilities | | | 58,141 | | | | 59,503 | | | | 71,943 | |
| Total liabilities | | | 5,005,983 | | | | 4,903,652 | | | | 4,749,053 | |
| | | | | | | | | | | | | |
| 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 28,756,647 shares at December 31, 2007, 29,914,586 shares | | | | | | | | | | | | |
| at September 30, 2007, and 30,709,389 shares at December 31, 2006 | | | 403,304 | | | | 419,463 | | | | 430,904 | |
| Surplus | | | 54,669 | | | | 54,686 | | | | 51,756 | |
| Retained earnings | | | 270,644 | | | | 281,682 | | | | 270,624 | |
| Accumulated other comprehensive loss | | | (6,214 | ) | | | (11,859 | ) | | | (15,145 | ) |
| Total shareholders' equity | | | 722,403 | | | | 743,972 | | | | 738,139 | |
| | | | | | | | | | | | | |
| Total liabilities and shareholders' equity | | $ | 5,728,386 | | | $ | 5,647,624 | | | $ | 5,487,192 | |
| CENTRAL PACIFIC FINANCIAL CORP. AND SUBSIDIARIES | |
| CONSOLIDATED STATEMENTS OF INCOME | |
| (Unaudited) | |
| | | | | | | | | | | | | | | | |
| | | Three Months Ended | | | Twelve Months Ended | |
| | | December 31, | | | September 30, | | | December 31, | | | December 31, | |
| (In thousands, except per share data) | | 2007 | | | 2007 | | | 2006 | | | 2007 | | | 2006 | |
| | | | | | | | | | | | | | | | |
| Interest income: | | | | | | | | | | | | | | | |
| Interest and fees on loans and leases | | $ | 77,159 | | | $ | 78,325 | | | $ | 74,643 | | | $ | 308,720 | | | $ | 279,246 | |
| Interest and dividends on investment | | | | | | | | | | | | | | | | | | | | |
| securities: | | | | | | | | | | | | | | | | | | | | |
| Taxable interest | | | 8,757 | | | | 8,386 | | | | 8,779 | | | | 34,721 | | | | 34,775 | |
| Tax-exempt interest | | | 1,349 | | | | 1,343 | | | | 1,258 | | | | 5,420 | | | | 5,080 | |
| Dividends | | | 71 | | | | 83 | | | | 274 | | | | 247 | | | | 538 | |
| Interest on deposits in other banks | | | 14 | | | | 82 | | | | 244 | | | | 170 | | | | 550 | |
| Interest on federal funds sold and securities | | | | | | | | | | | | | | | | | | | | |
| purchased under agreements to resell | | | 62 | | | | 125 | | | | 58 | | | | 306 | | | | 143 | |
| Dividends on Federal Home Loan Bank stock | | | 98 | | | | 73 | | | | 49 | | | | 293 | | | | 49 | |
| | | | | | | | | | | | | | | | | | | | | |
| Total interest income | | | 87,510 | | | | 88,417 | | | | 85,305 | | | | 349,877 | | | | 320,381 | |
| | | | | | | | | | | | | | | | | | | | | |
| Interest expense: | | | | | | | | | | | | | | | | | | | | |
| Demand | | | 138 | | | | 139 | | | | 138 | | | | 556 | | | | 566 | |
| Savings and money market | | | 5,177 | | | | 6,321 | | | | 6,017 | | | | 23,950 | | | | 17,684 | |
| Time | | | 18,285 | | | | 17,925 | | | | 16,090 | | | | 69,467 | | | | 53,419 | |
| Interest on short-term borrowings | | | 506 | | | | 302 | | | | 162 | | | | 1,616 | | | | 2,197 | |
| Interest on long-term debt | | | 10,906 | | | | 10,900 | | | | 9,503 | | | | 42,390 | | | | 35,666 | |
| | | | | | | | | | | | | | | | | | | | | |
| Total interest expense | | | 35,012 | | | | 35,587 | | | | 31,910 | | | | 137,979 | | | | 109,532 | |
| | | | | | | | | | | | | | | | | | | | | |
| Net interest income | | | 52,498 | | | | 52,830 | | | | 53,395 | | | | 211,898 | | | | 210,849 | |
| Provision for loan and lease losses | | | 28,201 | | | | 21,200 | | | | - | | | | 53,001 | | | | 1,350 | |
| Net interest income after | | | | | | | | | | | | | | | | | | | | |
| provision for loan and lease losses | | | 24,297 | | | | 31,630 | | | | 53,395 | | | | 158,897 | | | | 209,499 | |
| | | | | | | | | | | | | | | | | | | | | |
| Other operating income: | | | | | | | | | | | | | | | | | | | | |
| Service charges on deposit accounts | | | 3,679 | | | | 3,581 | | | | 3,845 | | | | 14,167 | | | | 14,408 | |
| Other service charges and fees | | | 3,126 | | | | 3,281 | | | | 3,195 | | | | 13,178 | | | | 12,188 | |
| Income from fiduciary activities | | | 983 | | | | 968 | | | | 758 | | | | 3,566 | | | | 2,915 | |
| Equity in earnings of | | | | | | | | | | | | | | | | | | | | |
| unconsolidated subsidiaries | | | 110 | | | | 169 | | | | 155 | | | | 703 | | | | 576 | |
| Fees on foreign exchange | | | 180 | | | | 149 | | | | 164 | | | | 721 | | | | 765 | |
| Investment securities losses | | | (1,715 | ) | | | - | | | | (1,491 | ) | | | (1,715 | ) | | | (1,510 | ) |
| Income from bank-owned life insurance | | | 1,746 | | | | 1,861 | | | | 1,195 | | | | 5,821 | | | | 3,989 | |
| Loan placement fees | | | 289 | | | | 248 | | | | 511 | | | | 1,079 | | | | 1,767 | |
| Gains on sales of loans | | | 1,503 | | | | 1,116 | | | | 730 | | | | 5,389 | | | | 4,863 | |
| Other | | | 1,461 | | | | 379 | | | | 425 | | | | 2,895 | | | | 3,195 | |
| | | | | | | | | | | | | | | | | | | | | |
| Total other operating income | | | 11,362 | | | | 11,752 | | | | 9,487 | | | | 45,804 | | | | 43,156 | |
| | | | | | | | | | | | | | | | | | | | | |
| Other operating expense: | | | | | | | | | | | | | | | | | | | | |
| Salaries and employee benefits | | | 13,028 | | | | 16,240 | | | | 19,083 | | | | 62,562 | | | | 73,211 | |
| Net occupancy | | | 2,687 | | | | 2,624 | | | | 2,244 | | | | 10,408 | | | | 9,218 | |
| Equipment | | | 1,418 | | | | 1,255 | | | | 1,240 | | | | 5,228 | | | | 4,864 | |
| Amortization of core deposit premium | | | 1,094 | | | | 684 | | | | 975 | | | | 3,148 | | | | 3,897 | |
| Amortization of mortgage servicing rights | | | 356 | | | | 478 | | | | 526 | | | | 1,844 | | | | 2,223 | |
| Communication expense | | | 1,148 | | | | 1,032 | | | | 1,080 | | | | 4,266 | | | | 4,642 | |
| Legal and professional services | | | 2,477 | | | | 2,223 | | | | 2,401 | | | | 9,137 | | | | 8,575 | |
| Computer software expense | | | 799 | | | | 869 | | | | 862 | | | | 3,360 | | | | 2,818 | |
| Advertising expense | | | 663 | | | | 661 | | | | 780 | | | | 2,582 | | | | 2,569 | |
| Other | | | 11,526 | | | | 5,487 | | | | 6,519 | | | | 26,021 | | | | 20,146 | |
| | | | | | | | | | | | | | | | | | | | | |
| Total other operating expense | | | 35,196 | | | | 31,553 | | | | 35,710 | | | | 128,556 | | | | 132,163 | |
| | | | | | | | | | | | | | | | | | | | | |
| Income before income taxes | | | 463 | | | | 11,829 | | | | 27,172 | | | | 76,145 | | | | 120,492 | |
| Income taxes | | | (3,085 | ) | | | 2,722 | | | | 8,372 | | | | 22,339 | | | | 41,312 | |
| | | | | | | | | | | | | | | | | | | | | |
| Net income | | $ | 3,548 | | | $ | 9,107 | | | $ | 18,800 | | | $ | 53,806 | | | $ | 79,180 | |
| | | | | | | | | | | | | | | | | | | | | |
| Per share data: | | | | | | | | | | | | | | | | | | | | |
| Basic earnings per share | | $ | 0.12 | | | $ | 0.30 | | | $ | 0.61 | | | $ | 1.78 | | | $ | 2.60 | |
| Diluted earnings per share | | | 0.12 | | | | 0.30 | | | | 0.61 | | | | 1.77 | | | | 2.57 | |
| Cash dividends declared | | | 0.25 | | | | 0.25 | | | | 0.23 | | | | 0.98 | | | | 0.88 | |
| | | | | | | | | | | | | | | | | | | | | |
| Basic weighted average shares outstanding | | | 29,355 | | | | 30,192 | | | | 30,645 | | | | 30,197 | | | | 30,511 | |
| Diluted weighted average shares outstanding | | | 29,485 | | | | 30,378 | | | | 30,933 | | | | 30,406 | | | | 30,827 | |
| CENTRAL PACIFIC FINANCIAL CORP. AND SUBSIDIARIES |
| Average Balances, Interest Income & Expense, Yields and Rates (Taxable Equivalent) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Three Months Ended | | | Three Months Ended | | | Year Ended | | | Year Ended | |
| (Dollars in thousands) | | December 31, 2007 | | | December 31, 2006 | | | December 31, 2007 | | | December 31, 2006 | |
| | | Average | | | Average | | | | | Average | | | Average | | | | | Average | | | Average | | | | | Average | | | Average | | | |
| | | Balance | | | Yield/Rate | | Interest | | | Balance | | | Yield/Rate | | Interest | | | Balance | | | Yield/Rate | | Interest | | | Balance | | | Yield/Rate | | Interest | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Assets: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Interest earning assets: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Interest-bearing deposits in other banks | | $ | 1,268 | | | | 4.51 | % | | $ | 14 | | | $ | 18,813 | | | | 5.16 | % | | $ | 244 | | | $ | 3,358 | | | | 5.08 | % | | $ | 170 | | | $ | 11,919 | | | | 4.62 | % | | $ | 550 | |
| Federal funds sold & securities purchased | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| under agreements to resell | | | 5,354 | | | | 4.56 | % | | | 62 | | | | 4,353 | | | | 5.26 | % | | | 58 | | | | 6,065 | | | | 5.04 | % | | | 306 | | | | 2,880 | | | | 4.95 | % | | | 143 | |
| Taxable investment securities, excluding | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| valuation allowance | | | 729,677 | | | | 4.84 | % | | | 8,828 | | | | 796,725 | | | | 4.55 | % | | | 9,053 | | | | 733,105 | | | | 4.77 | % | | | 34,968 | | | | 799,583 | | | | 4.42 | % | | | 35,313 | |
| Tax-exempt investment securities, | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| excluding valuation allowance | | | 151,935 | | | | 5.47 | % | | | 2,076 | | | | 140,647 | | | | 5.51 | % | | | 1,935 | | | | 153,459 | | | | 5.43 | % | | | 8,338 | | | | 136,809 | | | | 5.71 | % | | | 7,815 | |
| Loans and leases, net of unearned income | | | 4,171,889 | | | | 7.35 | % | | | 77,159 | | | | 3,803,169 | | | | 7.80 | % | | | 74,643 | | | | 4,021,094 | | | | 7.68 | % | | | 308,720 | | | | 3,689,979 | | | | 7.57 | % | | | 279,246 | |
| Federal Home Loan Bank stock | | | 48,797 | | | | 0.80 | % | | | 98 | | | | 48,797 | | | | 0.40 | % | | | 49 | | | | 48,797 | | | | 0.60 | % | | | 293 | | | | 48,797 | | | | 0.10 | % | | | 49 | |
| Total interest earning assets | | | 5,108,920 | | | | 6.87 | % | | | 88,237 | | | | 4,812,504 | | | | 7.10 | % | | | 85,982 | | | | 4,965,878 | | | | 7.10 | % | | | 352,795 | | | | 4,689,967 | | | | 6.89 | % | | | 323,116 | |
| Nonearning assets | | | 609,792 | | | | | | | | | | | | 585,083 | | | | | | | | | | | | 597,237 | | | | | | | | | | | | 581,677 | | | | | | | | | |
| Total assets | | $ | 5,718,712 | | | | | | | | | | | $ | 5,397,587 | | | | | | | | | | | $ | 5,563,115 | | | | | | | | | | | $ | 5,271,644 | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Liabilities & Stockholders' Equity: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Interest-bearing liabilities: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Interest-bearing demand deposits | | $ | 450,008 | | | | 0.12 | % | | $ | 138 | | | $ | 428,395 | | | | 0.13 | % | | $ | 138 | | | $ | 440,537 | | | | 0.13 | % | | $ | 556 | | | $ | 426,828 | | | | 0.13 | % | | $ | 566 | |
| Savings and money market deposits | | | 1,170,325 | | | | 1.76 | % | | | 5,177 | | | | 1,224,906 | | | | 1.95 | % | | | 6,017 | | | | 1,206,392 | | | | 1.99 | % | | | 23,950 | | | | 1,153,651 | | | | 1.53 | % | | | 17,684 | |
| Time deposits under $100,000 | | | 564,265 | | | | 3.75 | % | | | 5,337 | | | | 619,302 | | | | 3.56 | % | | | 5,558 | | | | 612,793 | | | | 3.83 | % | | | 23,450 | | | | 590,335 | | | | 3.08 | % | | | 18,156 | |
| Time deposits $100,000 and over | | | 1,171,825 | | | | 4.38 | % | | | 12,948 | | | | 930,203 | | | | 4.49 | % | | | 10,532 | | | | 1,018,123 | | | | 4.52 | % | | | 46,017 | | | | 876,513 | | | | 4.02 | % | | | 35,263 | |
| Short-term borrowings | | | 41,334 | | | | 4.86 | % | | | 506 | | | | 12,019 | | | | 5.34 | % | | | 162 | | | | 30,640 | | | | 5.28 | % | | | 1,616 | | | | 41,401 | | | | 5.31 | % | | | 2,197 | |
| Long-term debt | | | 872,753 | | | | 4.96 | % | | | 10,906 | | | | 758,593 | | | | 4.97 | % | | | 9,503 | | | | 816,591 | | | | 5.19 | % | | | 42,390 | | | | 755,378 | | | | 4.72 | % | | | 35,666 | |
| Total interest-bearing liabilities | | | 4,270,510 | | | | 3.25 | % | | | 35,012 | | | | 3,973,418 | | | | 3.19 | % | | | 31,910 | | | | 4,125,076 | | | | 3.34 | % | | | 137,979 | | | | 3,844,106 | | | | 2.85 | % | | | 109,532 | |
| Noninterest-bearing deposits | | | 608,734 | | | | | | | | | | | | 587,886 | | | | | | | | | | | | 594,361 | | | | | | | | | | | | 628,736 | | | | | | | | | |
| Other liabilities | | | 91,894 | | | | | | | | | | | | 100,208 | | | | | | | | | | | | 88,368 | | | | | | | | | | | | 89,558 | | | | | | | | | |
| Stockholders' equity | | | 747,574 | | | | | | | | | | | | 736,075 | | | | | | | | | | | | 755,310 | | | | | | | | | | | | 709,244 | | | | | | | | | |
| Total liabilities & stockholders' equity | | $ | 5,718,712 | | | | | | | | | | | $ | 5,397,587 | | | | | | | | | | | $ | 5,563,115 | | | | | | | | | | | $ | 5,271,644 | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Net interest income | | | | | | | | | | $ | 53,225 | | | | | | | | | | | $ | 54,072 | | | | | | | | | | | $ | 214,816 | | | | | | | | | | | $ | 213,584 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Net interest margin | | | | | | | 4.15 | % | | | | | | | | | | | 4.47 | % | | | | | | | | | | | 4.33 | % | | | | | | | | | | | 4.55 | % | | | | |
