Press Release

HONOLULU, April 28, 2016 /PRNewswire/ -- Central Pacific Financial Corp. (NYSE: CPF), (the "Company"), today reported net income for the first quarter of 2016 of $11.2 million, or $0.35 per diluted share, compared to net income in the first quarter of 2015 of $10.4 million, or $0.29 per diluted share, and net income in the fourth quarter of 2015 of $10.9 million, or $0.34 per diluted share.

"We are pleased with our first quarter results and believe this positions us well for the remainder of the year," said Catherine Ngo, President and Chief Executive Officer.  "Our ongoing and consistent efforts to grow our loan portfolio and strengthen profitability are reflected in our net interest margin expansion and efficiency ratio improvement."

During the first quarter of 2016, the Company repurchased 233,722 shares of common stock, or approximately 0.7% of its common stock outstanding as of December 31, 2015, at a total cost of $4.7 million. The Company's remaining repurchase authority under its common stock repurchase program at March 31, 2016 is $25.3 million.

On April 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 June 15, 2016 to shareholders of record at the close of business on May 31, 2016.

Since reinstating quarterly cash dividends in 2013, the Company has returned a total of $290.2 million in cash to its shareholders, in the form of cash dividends totaling $50.7 million, and through the repurchase of 11,402,223 shares of common stock at a total cost of $239.5 million, excluding fees and expenses.

Significant Highlights and First Quarter Results

• Reported net income of $11.2 million, compared to net income in the first quarter of 2015 of $10.4 million and net income in the fourth quarter of 2015 of $10.9 million.
• Loans and leases were up 11.5% from the prior year period and increased by $97.4 million, or 3.0%, during the quarter to $3.31 billion at March 31, 2016, with balanced growth across the portfolio.
• Total deposits were up 7.4% from the prior year period and increased by $63.2 million, or 1.4%, during the quarter to $4.50 billion at March 31, 2016. Core deposits were up 10.0% from the prior year period and increased by $81.7 million, or 2.3%, during the quarter to $3.66 billion at March 31, 2016.
• Reported net interest income of $39.2 million, compared to $36.2 million in first quarter of 2015 and $38.2 million in the fourth quarter of 2015. Reported a net interest margin of 3.33%, compared to 3.28% in the prior year period and 3.30% in the fourth quarter of 2015.
• Recorded a credit to the provision for loan and lease losses of $0.7 million in the first quarter of 2016, compared to a credit of $2.7 million in the first quarter of 2015 and a credit of $2.0 million in the fourth quarter of 2015.
• Reported an efficiency ratio of 66.58% in the first quarter of 2016, compared to 71.73% in the first quarter of 2015 and 67.82% in the fourth 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 at the holding company of 10.8%, 14.5%, 15.8%, and 12.5%, respectively, as of March 31, 2016.  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 first quarter of 2016 was $39.2 million, compared to $36.2 million in the year-ago quarter and $38.2 million in the fourth quarter of 2015.  Net interest margin was 3.33%, compared to 3.28% in the year-ago quarter and 3.30% in the fourth quarter of 2015. The increases in net interest income and net interest margin from the year-ago quarter were primarily attributable to average loan portfolio balances increasing by $303.3 million. This increase was partially offset by a 4 basis point increase in rates paid on our average total interest-bearing deposits. The sequential quarter increases in net interest income and net interest margin were primarily attributable to average loan portfolio balances increasing by $116.0 million. In addition, the taxable equivalent yield on the loan portfolio increased to 3.92% in the current quarter from 3.87% last quarter and the taxable equivalent yield on the investment securities portfolio increased to 2.64% in the current quarter from 2.60% last quarter. These increases were partially offset by a $158.8 million increase in our average total interest-bearing deposits, combined with a 3 basis point increase in rates paid on our average total interest-bearing deposits.

In the first quarter of 2016, a credit to the provision for loan and lease losses of $0.7 million was recorded, compared to a credit of $2.7 million in the year-ago quarter and a credit of $2.0 million in the fourth quarter of 2015.

Other operating income for the first quarter of 2016 totaled $10.2 million, compared to $11.2 million in the year-ago quarter and $9.8 million in the fourth quarter of 2015. The decrease from the year-ago quarter was primarily due to lower unrealized gains on loans held for sale and interest rate lock commitments of $0.5 million, and lower other service charges and fees and lower other recoveries of  $0.3 million each. The sequential quarter increase was primarily due to higher  income from bank-owned life insurance of $0.2 million, and higher net gain on sales of residential mortgage loans and higher net gain on sales of foreclosed assets of $0.1 million each.

Other operating expense for the first quarter of 2016 totaled $32.9 million, compared to $34.0 million in the year-ago quarter and $32.6 million in the fourth quarter of 2015. The decrease from the year-ago quarter was primarily attributable to a credit to the reserve for residential mortgage loan repurchase losses of $0.4 million in the current quarter compared to an increase to the provision of $0.2 million in the year-ago quarter, and lower legal and professional services of $0.6 million, partially offset by higher computer software expense of $0.6 million. The sequential quarter increase was primarily due to higher amortization of mortgage servicing rights of $0.7 million and higher computer software expense of $0.6 million, partially offset by lower net occupancy expense of $0.7 million.

The efficiency ratio for the first quarter of 2016 was 66.58%, compared to 71.73% in the year-ago quarter and 67.82% in the fourth quarter of 2015. The improvement in the efficiency ratio from the year-ago quarter was attributable to the growth in net interest income, combined with the decrease in other operating expenses, offset by lower other operating income in the current quarter as described above. The sequential quarter improvement in the efficiency ratio was attributable to higher net interest income and higher other operating income, offset by higher other operating expenses in the current quarter as described above.

In the first quarter of 2016, the Company recorded income tax expense of $6.1 million, compared to income tax expense of $5.8 million in the year-ago quarter and $6.5 million in the fourth quarter of 2015. The effective tax rate for the first quarter of 2016 was 35.2%, compared to 35.7% in the year-ago quarter and 37.2% in the fourth quarter of 2015. As of March 31, 2016, the Company's net deferred tax assets totaled $67.9 million, compared to $94.3 million and $82.0 million at March 31, 2015 and December 31, 2015, respectively.

Balance Sheet Highlights
Total assets at March 31, 2016, of $5.24 billion increased by $276.3 million from March 31, 2015, and increased by $110.9 million from December 31, 2015.

Total loans and leases at March 31, 2016, of $3.31 billion increased by $341.2 million and $97.4 million from March 31, 2015 and December 31, 2015, respectively.  The increase in total loans and leases from March 31, 2015 was primarily due to an increase in the commercial, residential mortgage, commercial mortgage, and consumer loan portfolios of $34.4 million, $158.9 million, $71.8 million, and $89.4 million, respectively, partially offset a decrease in the construction loan portfolio of $11.4 million. The increase in total loans and leases from the fourth quarter of 2015 was primarily due to an increase in the commercial, construction, residential mortgage, commercial mortgage, and consumer loan portfolios of $14.0 million, $16.5 million, $22.9 million, $12.3 million, and $31.9 million, respectively.

Total deposits at March 31, 2016 of $4.50 billion increased by $308.0 million from March 31, 2015, and increased by $63.2 million from December 31, 2015.  Core deposits, which include demand deposits, savings and money market deposits, and time deposits less than $100,000, totaled $3.66 billion at March 31, 2016.  This represents an increase of $333.8 million and $81.7 million from March 31, 2015 and December 31, 2015, respectively.  Changes in total deposits from March 31, 2015 included net increases in savings and money market deposits of $218.3 million, noninterest-bearing demand deposits of $98.0 million, and interest-bearing demand deposits of $43.3 million, offset by net decreases in time deposits $100,000 and over of $25.8 million and time deposits less than $100,000 of $25.8 million. Changes in total deposits during the quarter included net increases in savings and money market deposits of $66.4 million and interest-bearing demand deposits of $25.0 million, offset by net decreases in time deposits $100,000 and over of $18.6 million, time deposits less than $100,000 of $5.2 million, and noninterest-bearing demand deposits of $4.5 million.

Total shareholders' equity was $509.4 million at March 31, 2016, compared to $572.9 million and $494.6 million at March 31, 2015 and December 31, 2015, respectively. The sequential quarter increase reflects an increase in unrealized gains on investment securities of $11.9 million and net income of $11.2 million, partially offset by repurchases of common stock under the Company's common stock repurchase program of $4.7 million and common stock dividends paid of $4.4 million.

Asset Quality
Nonperforming assets at March 31, 2016 totaled $15.9 million, or 0.30% of total assets, compared to $40.8 million, or 0.82% of total assets at March 31, 2015, and $16.2 million, or 0.32% of total assets at December 31, 2015.  The sequential-quarter decrease in nonperforming assets reflects net decreases in Hawaii residential mortgage assets of $1.3 million and Hawaii commercial mortgage assets of $0.2 million, partially offset by a net increase in Hawaii commercial assets of $1.2 million.

Loans delinquent for 90 days or more still accruing interest totaled $0.8 million at March 31, 2016, compared to $5 thousand and $0.3 million at March 31, 2015 and December 31, 2015, respectively.  In addition, loans delinquent for 30 days or more still accruing interest totaled $7.4 million at March 31, 2016, compared to $3.6 million at March 31, 2015 and $7.1 million at December 31, 2015.

Net charge-offs in the first quarter of 2016 totaled $0.4 million, compared to net recoveries of $0.1 million in the first quarter of 2015, and net charge-offs of $1.4 million in the fourth quarter of 2015.

The ALLL, as a percentage of total loans and leases, was 1.88% at March 31, 2016, compared to 2.41% at March 31, 2015 and 1.97% at December 31, 2015.  The ALLL, as a percentage of nonperforming assets, was 389.80% at March 31, 2016, compared to 175.21% at March 31, 2015 and 390.10% at December 31, 2015.  The ALLL, as a percentage of nonaccrual loans, was 423.24% at March 31, 2016, compared to 190.89% at March 31, 2015 and 443.75% at December 31, 2015.

Capital Levels
At March 31, 2016, the Company's leverage capital, tier 1 risk-based capital, total risk-based capital, and common equity tier 1 ratios were 10.8%, 14.5%, 15.8%, and 12.5%, respectively.  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 10.7%, 14.4%, 15.7%, and 12.8%, 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 28, 2016 by dialing 1-877-344-7529 (passcode: 10084062) and on the Company's website.

About Central Pacific Financial Corp.
Central Pacific Financial Corp. is a Hawaii-based bank holding company with approximately $5.2 billion in assets.  Central Pacific Bank, its primary subsidiary, operates 35 branches and 103 ATMs in the state of Hawaii, as of March 31, 2016.  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.