Press Release

HONOLULU, April 23, 2015 /PRNewswire/ -- Central Pacific Financial Corp. (NYSE: CPF), parent company of Central Pacific Bank (the "Bank"), today reported net income for the first quarter of 2015 of $10.4 million, or $0.29 per diluted share, compared to net income in the first quarter of 2014 of $9.8 million, or $0.23 per diluted share, and net income in the fourth quarter of 2014 of $13.3 million, or $0.37 per diluted share.

"We continued to expand our loan and deposit portfolios, and maintained stable net interest income during the quarter," said John C. Dean, chairman and CEO.  "I am especially pleased that we were able to repurchase an aggregate of approximately 9.4% of our common stock between January 1, 2015 and April 1, 2015 for the benefit of our shareholders."

In April 2015, the Company's Board of Directors declared a quarterly cash dividend of $0.12 per share on the Company's outstanding common shares. The dividend will be payable on June 15, 2015 to shareholders of record at the close of business on May 29, 2015.

During the first quarter of 2015, the Company repurchased 473,829 shares of common stock at a total cost of $9.3 million under its share repurchase program. The average cost was $19.64 per share repurchased. In addition, in March 2015, the Company's Board of Directors authorized the addition of $75 million to its common stock repurchase program and promptly deployed this enhanced repurchase authority on April 1, 2015 with the repurchase of an additional 3,259,452 shares of its common stock at a purchase price per share of $23.01 (and an aggregate repurchase cost of approximately $75 million) in connection with the underwritten public offering of the Company's common stock by the Company's two largest shareholders, ACMO-CPF, L.L.C. and Carlyle Financial Services Harbor, L.P. (collectively, the "Selling Shareholders").  Since the transaction closed on April 1, 2015, the impact of the $75 million repurchase is not reflected in this quarterly earnings release.

Following the April 1, 2015 repurchase, the Company's remaining repurchase authority under its common stock repurchase program is approximately $29.2 million.

Significant Highlights and First Quarter Results

• Reported net income of $10.4 million, compared to net income in the fourth quarter of 2014 of $13.3 million.
• Increased the loans and leases portfolio by $35.6 million to $2.97 billion at March 31, 2015, compared to $2.93 billion at December 31, 2014.
• Increased total deposits by $78.3 million to $4.19 billion at March 31, 2015, compared to $4.11 billion at December 31, 2014.
• Reported a net interest margin of 3.28% at March 31, 2015, compared to 3.33% at December 31, 2014.
• Recorded a credit to the provision for loan and lease losses of $2.7 million in the first quarter of 2015, compared to a credit to the provision for loan and lease losses of $5.4 million in the fourth quarter of 2014.
• Nonperforming assets decreased by $1.2 million to $40.8 million at March 31, 2015 from $42.0 million at December 31, 2014.
• Maintained a strong capital position with leverage capital, tier 1 risk-based capital, total risk-based capital, and the new common equity tier 1 ratios of 12.79%, 17.29%, 18.54%, and 14.78% respectively, as of March 31, 2015.  The Company's capital ratios continue to be well in excess of the minimum levels required for a "well-capitalized" regulatory designation under Basel III.

Earnings Highlights
Net interest income for the first quarter of 2015 was $36.2 million, compared to $35.8 million in the year-ago quarter and remained relatively unchanged from the fourth quarter of 2014.  Net interest margin was 3.28%, compared to 3.31% in the year-ago quarter and 3.33% in the fourth quarter of 2014. The sequential quarter decrease in net interest margin was primarily due to decreases in yields on interest-earning assets. The taxable equivalent yield on the investment securities portfolio decreased to 2.61% in the current quarter, compared to 2.64% last quarter. The taxable equivalent yield on the loans and leases portfolio decreased to 3.90% in the current quarter from 3.94% last quarter.

In the first quarter of 2015, we recorded a credit to the provision for loan and lease losses of $2.7 million, compared to a credit of $1.3 million in the year-ago quarter and a credit of $5.4 million in the fourth quarter of 2014. The credit to the provision for loan and lease losses was primarily attributable to improving trends in credit quality.

Other operating income for the first quarter of 2015 totaled $11.2 million, compared to $10.1 million in the year-ago quarter and $10.2 million in the fourth quarter of 2014. The increase from the year-ago quarter was primarily due to higher unrealized gains on loans held for sale and interest rate locks of $0.5 million (included in other), higher gains on sales of residential mortgage loans of $0.4 million, and a partial recovery of a previous counterparty loss on a financing transaction of $0.3 million recorded in the first quarter of 2015 (included in other). The sequential quarter increase was primarily due to higher unrealized gains on loans held for sale and interest rate locks of $0.6 million (included in other), higher other service charges and fees of $0.3 million, the aforementioned partial recovery of a previous counterparty loss on a financing transaction of $0.3 million recorded in the first quarter of 2015 (included in other), and higher gains on sales of residential mortgage loans of $0.2 million.

Other operating expense for the first quarter of 2015 totaled $34.0 million, compared to $31.9 million in the year-ago quarter and $32.7 million in the fourth quarter of 2014.  The increase from the year-ago quarter was primarily attributable to higher amortization of mortgage servicing rights of $0.9 million, higher computer software expenses of $0.7 million, a lower credit to the reserve for unfunded loan commitments of $0.7 million (included in other), and expenses related to the Selling Shareholders share repurchase of $0.5 million (included in legal and professional services). These increases were offset by lower salaries and employee benefits of $0.3 million and lower reserves for repurchased residential mortgage loans of $0.3 million (included in other). The sequential quarter increase is primarily attributable to higher amortization of mortgage servicing rights of $0.7 million and higher computer software expenses of $0.4 million.

The efficiency ratio for the first quarter of 2015 was 71.73%, compared to 69.50% in the year-ago quarter and 70.59% in the fourth quarter of 2014. The efficiency ratio in the first quarter of 2015 was impacted by the higher other operating expenses noted above.

In the first quarter of 2015, the Company recorded income tax expense of $5.8 million, compared to an income tax expense of $5.5 million in the year-ago quarter and remained relatively unchanged from income tax expense in the fourth quarter of 2014. The effective tax rate for the first quarter of 2015 was 35.7%, compared to 30.3% in the fourth quarter of 2014. Our income tax expense and effective tax rate in the first quarter of 2015 was impacted by $0.5 million in costs related to the underwriting agreement and share repurchase which are not tax-deductible. Our income tax expense and effective tax rate in the fourth quarter of 2014 was impacted by solar tax credits of $0.4 million and a credit true-up adjustment of our net deferred tax assets of $0.5 million. As of March 31, 2015, the Company's net deferred tax assets totaled $94.3 million.

Balance Sheet Highlights
Total assets at March 31, 2015 of $4.97 billion increased by $138.5 million from March 31, 2014, and increased by $112.9 million from December 31, 2014.

Total loans and leases at March 31, 2015 of $2.97 billion increased by $270.3 million and $35.6 million from March 31, 2014 and December 31, 2014, respectively.  The increase in total loans and leases from the fourth quarter of 2014 was primarily due to an increase in the commercial and industrial and residential mortgage loan portfolios of $36.9 million and $18.0 million, respectively, partially offset by a decrease in the consumer loan portfolio of $15.2 million.

Total deposits at March 31, 2015 were $4.19 billion, and increased by $202.9 million and $78.3 million from March 31, 2014 and December 31, 2014, respectively.  Core deposits, which include demand deposits, savings and money market deposits, and time deposits less than $100,000, totaled $3.33 billion at March 31, 2015.  This represents an increase of $155.4 million and $24.0 million from a year ago and from December 31, 2014, respectively.  Changes in total deposits during the quarter included net increases in time deposits, interest-bearing demand deposits, noninterest-bearing demand deposits, and savings and money market deposits of $46.8 million, $18.3 million, $8.6 million, and $4.7 million, respectively.

Total shareholders' equity was $572.9 million at March 31, 2015, compared to $608.4 million and $568.0 million at March 31, 2014 and December 31, 2014, respectively. The sequential quarter increase is due primarily to net income of $10.4 million in the current quarter and a $6.9 million increase in unrealized gains on investment securities, partially offset by repurchases of $9.3 million in common stock under the Company's stock repurchase program and common stock dividends paid of $4.2 million.

Asset Quality
Nonperforming assets at March 31, 2015 totaled $40.8 million, or 0.82% of total assets, compared to $42.0 million, or 0.87% of total assets at December 31, 2014.  The sequential-quarter change in nonperforming assets reflects a net decrease in Hawaii construction and development assets of $0.9 million, Hawaii residential mortgage assets of $0.5 million, and Hawaii commercial mortgage assets of $0.2 million, partially offset by a net increase in Hawaii commercial and industrial assets of $0.4 million.

Loans delinquent for 90 days or more still accruing interest totaled $5,000 at March 31, 2015, compared to $77,000 at December 31, 2014.  In addition, loans delinquent for 30 days or more still accruing interest totaled $3.6 million at March 31, 2015, compared to $5.8 million at December 31, 2014.

Net recoveries in the first quarter of 2015 totaled $0.1 million, compared to net recoveries of $0.7 million in the first quarter of 2014, and net charge-offs of $3.4 million in the fourth quarter of 2014. Net recoveries during the first quarter of 2015 included a $1.0 million recovery of a Hawaii residential mortgage loan.

The ALLL, as a percentage of total loans and leases, was 2.41% at March 31, 2015, compared to 2.53% at December 31, 2014.  The ALLL, as a percentage of nonperforming assets, was 175.21% at March 31, 2015, compared to 176.14% at December 31, 2014.  The ALLL, as a percentage of nonaccrual loans, was 190.89% at March 31, 2015, compared to 189.42% at December 31, 2014.

Capital Levels
At March 31, 2015, the Company's leverage capital, tier 1 risk-based capital, total risk-based capital, and the new common equity tier 1 ratios were 12.79%, 17.29%, 18.54%, and 14.78%, respectively.  At December 31, 2014, the Company's leverage capital, tier 1 risk-based capital, and total risk-based capital ratios were 12.03%, 16.97%, and 18.24%, respectively. The Company's capital ratios continue to exceed the levels required to be considered a "well-capitalized" institution for regulatory purposes under Basel III.

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

Conference Call
The Company's management will host a conference call today at 1:00 p.m. Eastern Time (7:00 a.m. Hawaii Time) to discuss the quarterly results.  Individuals are encouraged to listen to the live webcast of the presentation by visiting the investor relations page of the Company's website at http://ir.centralpacificbank.com.  Alternatively, investors may participate in the live call by dialing 1-877-505-7644.  A playback of the call will be available through May 23, 2015 by dialing 1-877-344-7529 (passcode: 10063921) and on the Company's website.

About Central Pacific Financial Corp.
Central Pacific Financial Corp. is a Hawaii-based bank holding company with approximately $5.0 billion in assets.  Central Pacific Bank, its primary subsidiary, operates 36 branches and 110 ATMs in the state of Hawaii, as of March 31, 2015.  For additional information, please visit the Company's website at http://www.centralpacificbank.com.

Forward-Looking Statements
This document may contain forward-looking statements concerning projections of revenues, income/loss, earnings/loss per share, capital expenditures, dividends, capital structure, or other financial items, plans and objectives of management for future operations, future economic performance, or any of the assumptions underlying or relating to any of the foregoing.  Forward-looking statements can be identified by the fact that they do not relate strictly to historical or current facts, and may include the words "believes," "plans," "expects," "anticipates," "forecasts," "intends," "hopes," "should," "estimates," or words of similar meaning.  While the Company believes that our forward-looking statements and the assumptions underlying them are reasonably based, such statements and assumptions are by their nature subject to risks and uncertainties, and thus could later prove to be inaccurate or incorrect.  Accordingly, actual results could materially differ from projections for a variety of reasons, to include, but not limited to:  the effect of, and our failure to comply with any regulatory orders we are or may become subject to; oversupply of inventory and adverse conditions in the Hawaii and California real estate markets and any weakness in the construction industry;  adverse changes in the financial performance and/or condition of our borrowers and, as a result, increased loan delinquency rates,  deterioration in asset quality, and losses in our loan portfolio; the impact of local, national, and international economies and events (including political events, acts of war or terrorism, natural disasters such as wildfires, tsunamis and earthquakes) on the Company's business and operations and on tourism, the military and other major industries operating within the Hawaii market and any other markets in which the Company does business; deterioration or malaise in economic conditions, including destabilizing factors in the financial industry and deterioration of the real estate market, as well as the impact from any declining levels of consumer and business confidence in the state of the economy in general and in financial institutions in particular;  our ability to continue making progress on our recovery plan; the impact of regulatory action on the Company and Central Pacific Bank and legislation affecting the banking industry; changes in estimates of future reserve requirements based upon the periodic review thereof under relevant regulatory and accounting requirements; the impact of the Dodd-Frank Wall Street Reform and Consumer Protection Act, other regulatory reform, and any related rules and regulations on our business operations and competitiveness; the costs and effects of legal and regulatory developments, including legal proceedings or regulatory or other governmental inquiries and proceedings and the resolution thereof, and the results of regulatory examinations or reviews;  the effects of and changes in trade, monetary and fiscal policies and laws, including the interest rate policies of the Board of Governors of the Federal Reserve System; inflation, interest rate, securities market and monetary fluctuations;  negative trends in our market capitalization and adverse changes in the price of the Company's common shares; changes in consumer spending, borrowings and savings habits; technological changes and developments; changes in the competitive environment among financial holding companies and other financial service providers; 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 and other accounting standard setters; our ability to attract and retain skilled executives and employees; changes in our organization, compensation and benefit plans; and our success at managing the risks involved in any of the foregoing items.For further information on factors that could cause actual results to materially differ from projections, please see the Company's publicly available Securities and Exchange Commission filings, including the Company's Form 10-K for the last fiscal year and, in particular, the discussion of "Risk Factors" set forth therein. The Company does not update any of its forward-looking statements except as required by law.