Press Release

HONOLULU, April 26, 2017 /PRNewswire/ --

• Net income of $13.1 million, or fully diluted EPS of $0.42.
• ROA of 0.96% and ROE of 10.24%.
• Total loans increased by $20.8 million, or 0.6%, sequentially and 7.2% year-over-year
• Total deposits increased by $169.2 million, or 3.7% sequentially and 6.2% year-over-year.

Central Pacific Financial Corp. (NYSE: CPF), (the "Company"), today reported net income  in the first quarter of 2017 of $13.1 million, or diluted earnings per share ("EPS") of $0.42, compared to net income in the first quarter of 2016 of $11.2 million, or EPS of $0.35, and net income in the fourth quarter of 2016 of $12.2 million, or EPS of $0.39.

"We are pleased to report another solid quarter with improved earnings and continued balance sheet growth," said Catherine Ngo, President and CEO. "The increase in our quarterly cash dividend, combined with our ongoing share repurchase program is a reflection of our commitment to creating value for our shareholders, and our confidence in the financial strength and long-term outlook of our business."

In April 2017, the Company's Board of Directors declared a quarterly cash dividend of $0.18 per share on its outstanding common shares. This represents a 12.5% increase from the $0.16 paid during the quarter. The dividend will be payable on June 15, 2017 to shareholders of record at the close of business on May 31, 2017.

In January 2017, the Company's Board of Directors authorized the repurchase of up to $30 million of its common stock from time to time in the open market or in privately negotiated transactions, pursuant to a newly authorized share repurchase program (the "2017 Repurchase Plan").

During the first quarter of 2017, the Company repurchased 113,750 shares of common stock, or approximately 0.4% of its common stock outstanding as of December 31, 2016. Total cost of the shares repurchased was $3.5 million, or an average cost per share of $31.03. The Company's remaining repurchase authority under the 2017 Repurchase Plan at March 31, 2017 is $26.5 million.

Earnings Highlights
Net interest income for the first quarter of 2017 was $41.3 million, compared to $39.2 million in the year-ago quarter and $39.7 million in the previous quarter. Net interest margin was 3.30%, compared to 3.33% in the year-ago quarter and 3.22% in the previous quarter. The increase in net interest income from the year-ago quarter was primarily attributable to the significant year-over-year growth in our loan portfolio, combined with interest recoveries on nonaccrual loans totaling $1.0 million in the current quarter, compared to less than $0.1 million in interest recoveries in the year-ago quarter. This increase was partially offset by increased funding costs related to time deposits due to the recent increases in the federal funds rate. The sequential quarter increases in net interest income and net interest margin were primarily attributable to the aforementioned loan interest recoveries, combined with lower premium amortization on investment securities totaling $0.7 million. These increases were partially offset by increased funding costs related to time deposits. Total deposit cost for the quarter ended March 31, 2017 was 0.18%.

Other operating income for the first quarter of 2017 totaled $10.0 million, compared to $8.7 million in the year-ago quarter and $13.8 million in the previous quarter. The increase from the year-ago quarter was primarily due to higher mortgage banking income of $0.7 million, combined with higher income from bank-owned life insurance of $0.5 million. The higher mortgage banking income was primarily attributable to lower amortization of mortgage servicing rights of $1.0 million due to slower prepayment activity. The higher income from bank-owned life insurance was primarily attributable to death benefit income totaling $0.6 million received in the current quarter. The sequential quarter decrease was primarily due to a $3.5 million gain on the sale of the Company's fee interest in a former branch location recognized in the fourth quarter of 2016, combined with lower mortgage banking income in the current quarter of $0.9 million resulting from lower net gain on sales of residential mortgage loans, partially offset by higher income from bank-owned life insurance of $0.8 million due to the aforementioned death benefit income received in the current quarter.

Other operating expense for the first quarter of 2017 totaled $31.5 million, which remained relatively unchanged from $31.4 million in the year-ago quarter but decreased from $37.5 million in the previous quarter. During the fourth quarter of 2016, the Company executed a defined benefit pension plan de-risking strategy whereby the Company purchased non-participating annuity contracts to settle the pension obligation for a portion of its plan participants. This resulted in the immediate recognition of $3.8 million in net actuarial losses (included in salaries and employee benefits) in the previous quarter. In addition to the higher salaries and employee benefits expense in the fourth quarter of 2016, the Company recognized a $0.7 million charge (included in other expenses) related to the early termination of a lease during the previous quarter.

The efficiency ratio for the first quarter of 2017 was 61.4%, a marked improvement from 65.5% in the year-ago quarter and 70.1% in the previous quarter. The efficiency ratio during the current quarter was positively impacted by the growth in net interest income and the death benefit income received during the quarter. The efficiency ratio during the previous quarter was negatively impacted by the aforementioned charges related to the pension obligation settlement and lease termination, partially offset by the $3.5 million gain on sale of property completed during the fourth quarter of 2016.

In the first quarter of 2017, the Company recorded income tax expense of $6.8 million, compared to $6.1 million in the year-ago quarter and $6.4 million in the previous quarter. The effective tax rate for the first quarter of 2017 was 34.2%, compared to 35.2% in the year-ago quarter and 34.5% in the previous quarter.

Balance Sheet Highlights
Total assets at March 31, 2017 of $5.44 billion increased by $201.0 million, or 3.8% from March 31, 2016, and increased by $58.9 million, or 1.1% from December 31, 2016.

Total loans and leases at March 31, 2017 of $3.55 billion increased by $236.8 million, or 7.2% and $20.8 million, or 0.6% from March 31, 2016 and December 31, 2016, respectively.  The increase in total loans and leases from March 31, 2016 was primarily attributable to strong organic growth in the Hawaii loan portfolios, offset by reductions in the U.S. mainland commercial and other consumer loan portfolios. The increase in total loans and leases from the fourth quarter of 2016 was primarily due to growth in the Hawaii commercial, residential mortgage, home equity, and commercial mortgage loan portfolios, partially offset by net decreases in the U.S. mainland commercial and other consumer loan portfolios.

Total deposits at March 31, 2017 of $4.78 billion increased by $280.8 million, or 6.2% from March 31, 2016, and increased by $169.2 million, or 3.7% from December 31, 2016.  Core deposits, which include demand deposits, savings and money market deposits, and time deposits less than $100,000, totaled $3.81 billion at March 31, 2017.  This represents an increase of $147.0 million, or 4.0% from March 31, 2016, and an increase of $97.4 million, or 2.6% from December 31, 2016.

Asset Quality
Nonperforming assets at March 31, 2017 totaled $8.8 million, or 0.16% of total assets, compared to $15.9 million, or 0.30% of total assets at March 31, 2016, and $9.2 million, or 0.17% of total assets at December 31, 2016.

Loans delinquent for 90 days or more still accruing interest totaled $0.2 million at March 31, 2017, compared to $0.8 million and $1.4 million at March 31, 2016 and December 31, 2016, respectively.

Net charge-offs in the first quarter of 2017 totaled $1.2 million, compared to net charge-offs of $0.4 million in the year-ago quarter, and net charge-offs of $0.1 million in the previous quarter. Net charge-offs increased in the current quarter due to fewer recoveries. The previous quarter included a $0.9 million recovery from a single commercial mortgage borrower.

In the first quarter of 2017, the Company recorded a credit to the provision for loan and lease losses of $0.1 million, compared to a credit of $0.7 million in the year-ago quarter and a credit of $2.6 million in the previous quarter. The allowance for loan and lease losses, as a percentage of total loans and leases at March 31, 2017 was 1.56%, compared to 1.88% at March 31, 2016 and 1.61% at December 31, 2016.

Capital
Total shareholders' equity was $511.5 million at March 31, 2017, compared to $509.4 million and $504.7 million at March 31, 2016 and December 31, 2016, respectively.

The Company maintained its strong capital position and its capital ratios continue to exceed the levels required to be considered a "well-capitalized" institution for regulatory purposes under Basel III. At March 31, 2017, the Company's leverage capital, tier 1 risk-based capital, total risk-based capital, and common equity tier 1 ratios were 10.7%, 15.2%, 16.5%, and 13.0%, respectively, compared to 10.6%, 14.2%, 15.5%, and 12.3%, respectively, at December 31, 2016.

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 26, 2017 by dialing 1-877-344-7529 (passcode: 10105178) and on the Company's website.

About Central Pacific Financial Corp.
Central Pacific Financial Corp. is a Hawaii-based bank holding company with approximately $5.4 billion in assets.  Central Pacific Bank, its primary subsidiary, operates 35 branches and 103 ATMs in the state of Hawaii, as of March 31, 2017.  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;  the impact of regulatory action on the Company and Central Pacific Bank and legislation affecting the financial services 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, including fintech businesses; 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; changes in our capital position; 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.