Press Release

HONOLULU, Jan. 25, 2017 /PRNewswire/ --

• Net income of $12.2 million, or fully diluted EPS of $0.39 during the quarter. Net income of $47.0 million, or fully diluted EPS of $1.50 for the year ended December 31, 2016.
• ROA of 0.92% and ROE of 9.46% during the quarter. ROA of 0.90% and ROE of 9.16% for the year ended December 31, 2016.
• Total loans increased by $85.2 million, or 2.5%, during the quarter and by $313.4 million, or 9.8% during the year.
• Total deposits increased by $89.6 million, or 2.0% during the quarter and by $174.8 million, or 3.9% during the year.

Central Pacific Financial Corp. (NYSE: CPF), (the "Company"), today reported net income  in the fourth quarter of 2016 of $12.2 million, or diluted earnings per share ("EPS") of $0.39, compared to net income in the fourth quarter of 2015 of $10.9 million, or EPS of $0.34, and net income in the third quarter of 2016 of $11.5 million, or EPS of $0.37. For the year ended December 31, 2016, net income was $47.0 million, or EPS of $1.50, compared to net income of $45.9 million, or EPS of $1.40 in 2015.

"We are pleased to have a very good end to 2016, and are pleased to report strong loan and deposit growth for the year, along with year-over-year improvement in net income and efficiency ratio," said Catherine Ngo, President and CEO of Central Pacific Financial Corp. "With a positive market environment and a continued focus on customer relationships, our consistent financial performance has allowed us to continue stock repurchases and quarterly cash dividends."

On January 24, 2017, the Company's Board of Directors declared a quarterly cash dividend of $0.16 per share on its outstanding common shares. The dividend will be payable on March 15, 2017 to shareholders of record at the close of business on February 28, 2017.

During the fourth quarter of 2016, the Company repurchased 159,900 shares of common stock at a total cost of $4.1 million. The average cost per share was $25.78. During the year ended December 31, 2016, the Company repurchased a total of 796,822 shares of common stock, or approximately 2.5% of its common stock outstanding as of December 31, 2015 for a total cost of $18.2 million.

On January 24, 2017, the Company's Board of Directors also 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"). The 2017 Repurchase Plan replaces and supersedes in its entirety the share repurchase program previously approved by the Company's Board of Directors, which had $11.8 million in remaining repurchase authority at December 31, 2016.

Earnings Highlights
Net interest income for the fourth quarter of 2016 was $39.7 million, compared to $38.2 million in the year-ago quarter and $39.4 million in the previous quarter. Net interest margin was 3.22%, compared to 3.30% in the year-ago quarter and 3.25% in the previous quarter. Steady loan portfolio growth continues to support net interest income, however, the investment securities portfolio yields have declined due to higher premium amortization on mortgage backed securities. Additionally, funding costs related to time deposits and borrowings have increased slightly with the recent increase in the Fed Funds rate. The Company's checking and savings deposits, which represent over 70% of its average total liabilities, are less volatile during periods of rising market interest rates.

Other operating income for the fourth quarter of 2016 totaled $13.8 million, compared to $9.0 million in the year-ago quarter and $10.0 million in the previous quarter. The increase from the year-ago quarter was primarily due to a $3.5 million gain on the sale of the Company's fee interest in a former branch location. In addition, the Company recorded higher mortgage banking income of $0.9 million compared to the year-ago quarter, primarily attributable to higher net gains on sales of residential mortgage loans of $0.8 million. The sequential quarter increase was primarily due to the aforementioned $3.5 million gain on sale of property.

Other operating expense for the fourth quarter of 2016 totaled $37.5 million, compared to $31.7 million in the year-ago quarter and $32.3 million in the previous quarter. The increases from the year-ago and previous quarters were primarily attributable to higher pension expense included in salaries and employee benefits. In 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 during the quarter. In addition to the higher pension expense, the Company recognized a $0.7 million charge (included in other) related to the early termination of a lease.

The efficiency ratio for the fourth quarter of 2016 was 70.08%, an increase from 67.24% in the year-ago quarter and 65.34% in the previous quarter. The efficiency ratio during the current quarter was negatively impacted by the aforementioned charges related to the pension obligation settlement and lease termination completed during the quarter, partially offset by the $3.5 million gain on sale of property. The efficiency ratio for the year ended December 31, 2016 was 66.69%, which declined from 2015 of 68.92% and reflects management's continued priority and focus on revenue generation and expense management.

In the fourth quarter of 2016, the Company recorded income tax expense of $6.4 million, compared to $6.5 million in the year-ago quarter and $6.4 million in the previous quarter. The effective tax rate for the fourth quarter of 2016 was 34.5%, compared to 37.2% in the year-ago quarter and 35.8% in the previous quarter.

Balance Sheet Highlights
Total assets at December 31, 2016 of $5.38 billion increased by $252.9 million from December 31, 2015, and increased by $64.3 million from September 30, 2016.

Total loans and leases at December 31, 2016 of $3.52 billion increased by $313.4 million, or 9.8% and $85.2 million, or 2.5% from December 31, 2015 and September 30, 2016, respectively.  Total loans and leases grew from December 31, 2015 across all major categories, with the exception of the commercial loan portfolio which declined by $10.6 million due to a planned reduction in the mainland commercial loan portfolio. The growth in total loans and leases from the third quarter of 2016 was due to strong loan origination activities with significant net increases in the residential mortgage loan portfolio of $56.5 million and commercial mortgage loan portfolio of $22.7 million.

Total deposits at December 31, 2016 of $4.61 billion increased by $174.8 million from December 31, 2015, and increased by $89.6 million from September 30, 2016.  Core deposits, which include demand deposits, savings and money market deposits, and time deposits less than $100,000, totaled $3.71 billion at December 31, 2016.  This represents an increase of $131.4 million from December 31, 2015, and an increase of $92.3 million from September 30, 2016.

Asset Quality
Nonperforming assets at December 31, 2016 totaled $9.2 million, or 0.17% of total assets, compared to $16.2 million, or 0.32% of total assets at December 31, 2015, and $11.7 million, or 0.22% of total assets at September 30, 2016. The sequential quarter decrease was primarily attributable to the payoff of a single borrower of $2.1 million.

Loans delinquent for 90 days or more still accruing interest totaled $1.4 million at December 31, 2016, compared to $0.3 million and $0.4 million at December 31, 2015 and September 30, 2016, respectively. The increases from December 31, 2015 and September 30, 2016 were primarily attributable to the addition of a single borrower of $1.1 million.

Net charge-offs in the fourth quarter of 2016 totaled $0.1 million, compared to net charge-offs of $1.4 million in the year-ago quarter, and net charge-offs of $0.6 million in the previous quarter. Net charge-offs in the fourth quarter of 2016 included a $0.9 million recovery from a commercial mortgage borrower.

In the fourth quarter of 2016, the Company recorded a credit to the provision for loan and lease losses of $2.6 million, compared to a credit of $2.0 million in the year-ago quarter and a credit of $0.7 million in the previous quarter. The credit to the provision for loan and lease losses in the fourth quarter of 2016 was primarily attributable to improving trends in credit quality and the aforementioned recovery of a commercial mortgage loan. After this credit, the allowance for loan and lease losses, as a percentage of total loans and leases at December 31, 2016 was 1.61%, compared to 1.97% at December 31, 2015 and 1.73% at September 30, 2016.

Capital
Total shareholders' equity was $504.7 million at December 31, 2016, compared to $494.6 million and $519.5 million at December 31, 2015 and September 30, 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 December 31, 2016, the Company's leverage capital, tier 1 risk-based capital, total risk-based capital, and common equity tier 1 ratios were 10.6%, 14.2%, 15.5%, and 12.3%, respectively, compared to 10.9%, 14.6%, 15.9%, and 12.5%, respectively, at September 30, 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 (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 25, 2017 by dialing 1-877-344-7529 (passcode: 10098984) 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 December 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;  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.