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Saturday, April 28, 2012
After Soaking Taxpayers for $63M on Bailout, Central Pacific Financial Corp. Reports $13.5 Million Net Income
By News Release @ 3:24 PM :: 4257 Views :: Energy, Environment

News Release from CPB HONOLULU, April 26, 2012

HONOLULU, April 26, 2012 -- Central Pacific Financial Corp. (NYSE: CPF), parent company of Central Pacific Bank (the "Bank"), today reported net income for the first quarter of 2012 of $13.5 million, or $0.32 per diluted share, compared to net income in the first quarter of 2011 of $4.6 million, or $4.58 per diluted share, and net income in the fourth quarter of 2011 of $12.1 million, or $0.29 per diluted share. Net income per diluted share in the first quarter of 2011 included the impact of a one-time accounting adjustment totaling $85.1 million resulting from the exchange of the Company's preferred stock issued to the U.S. Department of Treasury for common stock as part of its recapitalization in February 2011. Excluding this one-time adjustment, which did not impact the Company's reported net income of $4.6 million, the Company's net income per diluted share for the first quarter of 2011 was $0.18.

"We are pleased to have maintained the positive momentum from our Company's turnaround in 2011 with a fifth consecutive quarter of profitability," said John C. Dean, President and Chief Executive Officer. "Continued improvement in our credit risk profile resulted in a meaningful reduction in our allowance for loan and lease losses that contributed to our profitable quarter."

Significant Highlights and First Quarter Results

  • Reported fifth consecutive profitable quarter with net income of $13.5 million, compared to net income of $12.1 million in the fourth quarter of 2011.
  • For the fourth consecutive quarter, the Company did not incur credit costs as it reduced its allowance for loan and lease losses (ALLL) by an amount greater than net foreclosed asset expense, write-downs of loans held for sale and changes to the reserve for unfunded commitments. The reduction in the ALLL resulted in a credit to the provision for loan and lease losses of $5.0 million, compared to a credit of $11.2 million for the fourth quarter of 2011.
  • The ALLL, as a percentage of total loans and leases, decreased to 5.49% at March 31, 2012, compared to 5.91% at December 31, 2011. In addition, the Company had an ALLL, as a percentage of nonperforming assets, of 55.61% at March 31, 2012, compared to 62.42% at December 31, 2011.
  • Increased the loans and leases portfolio by $18.3 million to $2.08 billion at March 31, 2012, compared to $2.06 billion at December 31, 2011.
  • Increased total deposits by $64.3 million to $3.51 billion at March 31, 2012, compared to $3.44 billion at December 31, 2011.
  • Maintained a strong capital position with Tier 1 risk-based capital, total risk-based capital, and leverage capital ratios of 22.83%, 24.13%, and 14.03%, respectively, as of March 31, 2012, compared to 22.94%, 24.24%, and 13.78%, respectively, as of December 31, 2011. The Company's capital ratios continue to exceed the minimum levels required for a "well-capitalized" regulatory designation.

Earnings Highlights

Net interest income for the first quarter of 2012 was $30.5 million, compared to $28.2 million in the year-ago quarter and $30.8 million in the fourth quarter of 2011. Net interest margin was 3.23%, compared to 3.03% in the year-ago quarter and 3.25% in the fourth quarter of 2011. The improvement in both net interest income and the net interest margin from the year-ago quarter reflects the deployment of the Company's excess liquidity into higher yielding investment securities and the previously reported early repayment of long term borrowings at the Federal Home Loan Bank of Seattle in September 2011. The sequential quarter decrease was primarily due to slightly lower yields on the Company's interest-earning assets compared to the fourth quarter of 2011.

The provision for loan and lease losses for the first quarter of 2012 was a credit of $5.0 million, compared to a credit of $1.6 million in the year-ago quarter and a credit of $11.2 million in the fourth quarter of 2011. The credit to the provision for loan and lease losses recorded during the quarter was impacted by three elements. First, lower net charge-offs for the quarter of $2.8 million, compared to $13.3 million for the same quarter last year and $10.1 million for the fourth quarter of 2011. Second, the historical quarterly charge-off data used to allocate the ALLL continues to improve. Finally, continued improvement in other factors of our overall risk profile also contributed to the reduction in our ALLL.

Other operating income for the first quarter of 2012 totaled $13.2 million, compared to $12.5 million in the year-ago quarter and $15.2 million in the fourth quarter of 2011. The increase from the year-ago quarter was primarily due to higher rental income from foreclosed properties of $1.1 million and higher gains on sales of residential mortgage loans of $0.8 million, partially offset by lower income from bank-owned life insurance of $0.6 million. The sequential quarter decrease was primarily due to the recognition of a $1.0 million gain on the sale of investment securities during the fourth quarter of 2011, lower gains on sales of residential mortgage loans of $0.7 million and lower income from bank-owned life insurance of $0.5 million, partially offset by higher unrealized gains on interest rate locks of $0.6 million.

Other operating expense for the first quarter of 2012 totaled $35.2 million, compared to $37.6 million in the year-ago quarter and $45.2 million in the fourth quarter of 2011. The decrease from the year-ago quarter was primarily due to lower net credit-related charges (which includes changes in the reserve for unfunded commitments, write-downs of loans held for sale and foreclosed asset expense) of $3.3 million and lower FDIC insurance expense of $1.7 million, partially offset by higher salaries and employee benefits of $1.6 million and higher legal and professional services of $1.3 million. The sequential quarter decrease was primarily attributable to lower net credit-related charges of $5.2 million and lower charitable contributions of $3.5 million.

The efficiency ratio for the first quarter of 2012 was 74.99% (excluding write-downs of loans held for sale of $1.8 million and foreclosed asset income of $0.1 million), compared to 81.8% in the year-ago quarter (excluding foreclosed asset expense of $2.0 million and write-downs of loans held for sale of $1.6 million) and 92.0% (excluding gains on sale of investment securities of $1.0 million and foreclosed asset expense of $3.0 million) in the fourth quarter of 2011.

The Company continues to recognize a full valuation allowance against its net deferred tax assets and did not record any income tax benefit or expense during the first quarter of 2012.

Balance Sheet Highlights

Total assets at March 31, 2012 of $4.2 billion increased by $144.9 million and $25.4 million from March 31, 2011 and December 31, 2011, respectively.

Total loans and leases at March 31, 2012 of $2.1 billion increased by $15.5 million and $18.3 million from March 31, 2011 and December 31, 2011, respectively. The increase in total loans and leases from the fourth quarter of 2011 was primarily due to an increase in the residential mortgage, commercial mortgage and commercial loan portfolios of $15.6 million, $13.6 million and $6.3 million, respectively, partially offset by a decrease in the construction and development portfolio of $13.5 million.

Total deposits at March 31, 2012 were $3.5 billion, compared to $3.1 billion and $3.4 billion at March 31, 2011 and December 31, 2011, respectively. Core deposits, which include demand deposits, savings and money market deposits, and time deposits less than $100,000, totaled $2.9 billion at March 31, 2012. This represents an increase of $128.5 million from a year ago and an increase of $89.9 million from December 31, 2011. Changes in total deposits during the quarter included an increase in interest-bearing demand deposits, non-interest bearing demand deposits and savings and money market deposits of $41.4 million, $37.4 million and $24.2 million, respectively, offset by a decrease in time deposits of $38.8 million.

Total shareholders' equity was $467.5 million at March 31, 2012, compared to $385.0 million and $456.4 million at March 31, 2011 and December 31, 2011, respectively.

Asset Quality

Nonperforming assets at March 31, 2012 totaled $205.6 million, or 4.94% of total assets, compared to $195.6 million, or 4.73% of total assets at December 31, 2011. The sequential-quarter increase reflects net additions in Mainland construction and development assets totaling $10.8 million, Mainland commercial mortgage assets totaling $4.9 million and Hawaii commercial assets totaling $3.3 million, partially offset by net decreases in Hawaii construction and development assets totaling $7.7 million and Hawaii residential mortgage assets totaling $1.7 million.

Loans delinquent for 90 days or more still accruing interest totaled $0.2 million at March 31, 2012, compared to $28,000 at December 31, 2011. In addition, loans delinquent for 30 days or more still accruing interest totaled $6.2 million at March 31, 2012, compared to $5.4 million at December 31, 2011.

As mentioned earlier, net charge-offs in the first quarter of 2012 totaled $2.8 million, compared to $13.3 million in the year-ago quarter and $10.1 million in the fourth quarter of 2011. Net charge-offs included the following significant amounts: Mainland construction and development loans totaling $1.1 million and Hawaii commercial loans totaling $1.4 million.

The ALLL, as a percentage of total loans and leases, was 5.49% at March 31, 2012, compared to 5.91% at December 31, 2011. The ALLL, as a percentage of nonperforming assets, was 55.61% at March 31, 2012, compared to 62.42% at December 31, 2011.

Capital Levels

At March 31, 2012, the Company's Tier 1 risk-based capital, total risk-based capital, and leverage capital ratios were 22.83%, 24.13%, and 14.03%, respectively, compared to 22.94%, 24.24%, and 13.78%, respectively, at December 31, 2011. The Company's capital ratios continue to exceed the minimum levels required by both the Memorandum of Understanding between the bank and its regulators and the levels required for a "well-capitalized" regulatory designation.

read … Central Pacific Financial Corp. Reports $13.5 Million Net Income

* * * * *

Treasury Winds Down ‘Investment’ in Central Pacific at $63M Loss

On March 29, a similar story unfolded with Central Pacific Bank of Hawaii. In January 2009, Central Pacific based in Honolulu, took $109 million in Capital Purchase Program funds. Treasury bought 135,000 shares of preferred stock for $135 million. The bank continued to struggle, and in February 2011 had to be recapitalized by outside investors. As part of the recapitalization, Treasury swapped its 135,000 preferred shares for 5.6 million common shares. Here's a chart of the company's stock.

In June, seeking to recoup some of its "investment," Treasury held a public offering of Central Pacific , selling 2.85 million shares at $12.75 each. That brought in about $36 million, and left Treasury with about 2.77 million common shares. In the last few quarters, Central Pacific's stock has muddled along. On March 29, Treasury announced that it had "executed an underwriting agreement" to sell its remaining 2.77 million shares at $13.01 per share ($13.15 before the underwriters' commission). That brought in another $36 million.

The upshot: Treasury paid $135 million for a stake that it ultimately sold for $72 million. The loss to taxpayers on this deal: $63 million.

* * * * *

HFP: Failing, Central Pacific Got $337M in Secret Federal Reserve Loans

HFP: After Call From Senator Inouye’s Office, Small Hawaii Bank Got U.S. Aid

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