Press Release

HONOLULU, Jan. 28, 2016 /PRNewswire/ -- Central Pacific Financial Corp. (NYSE: CPF), parent company of Central Pacific Bank (the "Bank"), today reported net income for the fourth quarter of 2015 of $10.9 million, or $0.34 per diluted share, compared to net income in the fourth quarter of 2014 of $13.3 million, or $0.37 per diluted share, and net income in the third quarter of 2015 of $12.2 million, or $0.38 per diluted share. For the year ended December 31, 2015, the Company's net income was $45.9 million, or $1.40 per diluted share, compared to net income in the year ended December 31, 2014 of $40.5 million, or $1.07 per diluted share.

"We are pleased to report a solid fourth quarter highlighted by strong growth in loans and deposits. Additionally, our performance for the full year 2015 was excellent with gains in net income, loan and deposit growth, and an improvement in asset quality," said Catherine Ngo, President and Chief Executive Officer.  "We believe we are well positioned for further growth and strong performance in 2016."

On January 27, 2016, the Company's Board of Directors declared a quarterly cash dividend of $0.14 per share on the Company's outstanding common shares. The dividend will be payable on March 15, 2016 to shareholders of record at the close of business on February 29, 2016.

The Company did not repurchase any shares of common stock under its share repurchase program during the fourth quarter of 2015. During the year ended December 31, 2015, the Company repurchased approximately 11.7% of its common stock outstanding as of December 31, 2014.

On January 27, 2016, the Company's Board of Directors also authorized the repurchase of up to $30 million of the Company's common stock from time to time in the open market or in privately negotiated transactions, pursuant to a newly authorized share repurchase program (the "2016 Repurchase Plan"). The 2016 Repurchase Plan replaces and supersedes in its entirety the share repurchase program previously approved by the Company's Board of Directors, which had approximately $20.2 million in remaining repurchase authority at December 31, 2015.

Since reinstating quarterly cash dividends in 2013, the Company has returned a total of $46.3 million in cash dividends to its shareholders and repurchased 11,168,501 shares of common stock at a total cost of $234.8 million, excluding fees and expenses.

Significant Highlights and Fourth Quarter Results

• Reported net income of $10.9 million, compared to net income in the third quarter of 2015 of $12.2 million.
• Loans and leases increased by $110.1 million, or 3.5%, to $3.21 billion at December 31, 2015, compared to $3.10 billion at September 30, 2015.
• Total deposits increased by $202.9 million to $4.43 billion at December 31, 2015, compared to $4.23 billion at September 30, 2015. Core deposits increased by $180.83 million to $3.58 billion at December 31, 2015, compared to $3.40 billion at September 30, 2015.
• Reported net interest income of $38.2 million, compared to $37.8 million in the third quarter of 2015. Reported a net interest margin of 3.30%, compared to 3.31% in the third quarter of 2015.
• Recorded a credit to the provision for loan and lease losses of $2.0 million in the fourth quarter of 2015, compared to a credit to the provision for loan and lease losses of $3.6 million in the third quarter of 2015.
• Reported an efficiency ratio of 67.82% in the fourth quarter of 2015, compared to 67.55% in the third quarter of 2015.
• Maintained a strong capital position with leverage capital, tier 1 risk-based capital, total risk-based capital, and common equity tier 1 ratios of 10.69%, 14.41%, 15.68%, and 12.79%, respectively, as of December 31, 2015.  The Company's capital ratios continue to be in excess of the minimum levels required for a "well-capitalized" regulatory designation under Basel III.

Earnings Highlights
Net interest income for the fourth quarter of 2015 was $38.2 million, compared to $36.2 million in the year-ago quarter and $37.8 million in the third quarter of 2015.  Net interest margin was 3.30%, compared to 3.33% in the year-ago quarter and 3.31% in the third quarter of 2015. The sequential quarter increase in net interest income was primarily attributable to our average loan portfolio balances increasing by $72.5 million. In addition, the taxable equivalent yield on our investment securities portfolio increased to 2.60% in the current quarter from 2.58% last quarter. These increases were partially offset by the decrease in our taxable equivalent yield on the loans and leases portfolio to 3.87% in the current quarter from 3.91% last quarter.

In the fourth quarter of 2015, a credit to the provision for loan and lease losses of $2.0 million was recorded, compared to a credit of $5.4 million in the year-ago quarter and a credit of $3.6 million in the third quarter of 2015. The credit to the provision for loan and lease losses in the current quarter was attributable to net charge-offs of $1.4 million during the quarter and improvement in overall credit quality.

Other operating income for the fourth quarter of 2015 totaled $9.8 million, compared to $10.2 million in the year-ago quarter and remained relatively unchanged from the $9.8 million reported in the third quarter of 2015. The decrease from the year-ago quarter was primarily due to lower income from bank-owned life insurance of $0.2 million and lower income recovered on nonaccrual loans previously charged-off of $0.2 million (included in other).

Other operating expense for the fourth quarter of 2015 totaled $32.6 million, compared to $32.7 million in the year-ago quarter and $32.2 million in the third quarter of 2015. The decrease from the year-ago quarter was primarily attributable to a larger credit to the reserve for residential mortgage loan repurchase losses of $0.5 million (included in other), and lower salaries and employee benefits of $0.5 million, partially offset by higher advertising expense of $0.7 million. The sequential quarter increase was primarily due to higher advertising expense of $0.5 million and higher net occupancy expense of $0.4 million, partially offset by a $0.5 million change in the reserve for unfunded loan commitments (included in other).

The efficiency ratio for the fourth quarter of 2015 was 67.82%, compared to 70.59% in the year-ago quarter and 67.55% in the third quarter of 2015. The decrease in the efficiency ratio from the year-ago quarter was primarily attributable to the growth in net interest income. The sequential quarter increase in the efficiency ratio was primarily attributable to higher other operating expenses in the current quarter as described above.

In the fourth quarter of 2015, the Company recorded income tax expense of $6.5 million, compared to income tax expense of $5.8 million in the year-ago quarter and $6.9 million in the third quarter of 2015. The effective tax rate for the fourth quarter of 2015 was 37.2%, compared to 30.3% in the year-ago quarter and 36.1% in the third quarter of 2015. The 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 the Company's net deferred tax assets of $0.5 million. As of December 31, 2015, the Company's net deferred tax assets totaled $82.0 million.

Balance Sheet Highlights
Total assets at December 31, 2015 of $5.1 billion increased by $278.3 million from December 31, 2014, and increased by $109.5 million from September 30, 2015.

Total loans and leases at December 31, 2015 of $3.2 billion increased by $279.3 million and $110.1 million from December 31, 2014 and September 30, 2015, respectively.  The increase in total loans and leases from the third quarter of 2015 was primarily due to an increase in the commercial, construction, residential mortgage, commercial mortgage, and consumer loan portfolios of $14.5 million, $9.5 million, $51.0 million, $23.8 million, and $11.3 million, respectively.

Total deposits at December 31, 2015 of $4.4 billion increased by $323.1 million from December 31, 2014, and increased by $202.9 million from September 30, 2015.  Core deposits, which include demand deposits, savings and money market deposits, and time deposits less than $100,000, totaled $3.58 billion at December 31, 2015.  This represents an increase of $276.0 million and $180.8 million from a year ago and from September 30, 2015, respectively.  Changes in total deposits during the quarter included net increases in savings and money market deposits of $115.6 million, interest-bearing demand deposits of $39.0 million, noninterest-bearing demand deposits of $32.5 million, and time deposits greater than $100,000 of $22.1 million, offset by a net decrease in time deposits less than $100,000 of $6.2 million.

Total shareholders' equity was $494.6 million at December 31, 2015, compared to $568.0 million and $503.3 million at December 31, 2014 and September 30, 2015, respectively. The sequential quarter decrease reflects common stock dividends paid of $14.4 million and a change in unrealized gains on investment securities of $7.5 million, partially offset by net income of $10.9 million. Common stock dividends paid in the fourth quarter of 2015 included a special cash dividend payment of $0.32 per share totaling $10.0 million.

Asset Quality
Nonperforming assets at December 31, 2015 totaled $16.2 million, or 0.32% of total assets, compared to $14.0 million, or 0.28% of total assets at September 30, 2015 and $42.0 million, or 0.87% of total assets at December 31, 2014.  The sequential-quarter change in nonperforming assets reflects a net increase in Hawaii commercial mortgage assets of $4.4 million, partially offset by net decreases in Hawaii commercial assets of $2.0 million and Hawaii residential mortgage assets of $0.1 million.

Loans delinquent for 90 days or more still accruing interest totaled $0.3 million at December 31, 2015, compared to $0.1 million at September 30, 2015.  In addition, loans delinquent for 30 days or more still accruing interest totaled $7.1 million at December 31, 2015, compared to $3.1 million at September 30, 2015.

Net charge-offs in the fourth quarter of 2015 totaled $1.4 million, compared to net charge-offs of $3.4 million in the fourth quarter of 2014, and net recoveries of $3.4 million in the third quarter of 2015. Net charge-offs during the fourth quarter of 2015 included a $0.9 million charge-off of a Hawaii commercial mortgage loan placed on nonaccrual status during the quarter.

The ALLL, as a percentage of total loans and leases, was 1.97% at December 31, 2015, compared to 2.15% at September 30, 2015.  The ALLL, as a percentage of nonperforming assets, was 390.10% at December 31, 2015, compared to 475.99% at September 30, 2015.  The ALLL, as a percentage of nonaccrual loans, was 443.75% at December 31, 2015, compared to 551.32% at September 30, 2015.

Capital Levels
At December 31, 2015, the Company's leverage capital, tier 1 risk-based capital, total risk-based capital, and common equity tier 1 ratios were 10.69%, 14.41%, 15.68%, and 12.79%, respectively.  At September 30, 2015, the Company's leverage capital, tier 1 risk-based capital, total risk-based capital, and common equity tier 1 ratios were 10.87%, 15.00%, 16.27%, and 13.32%, 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 (8:00 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 February 28, 2016 by dialing 1-877-344-7529 (passcode: 10078448) and on the Company's website.

About Central Pacific Financial Corp.
Central Pacific Financial Corp. is a Hawaii-based bank holding company with approximately $5.1 billion in assets.  Central Pacific Bank, its primary subsidiary, operates 36 branches and 103 ATMs in the state of Hawaii, as of December 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.