Central Pacific Financial Corp. Reports Fourth Quarter 2009 Results

REDUCES COMMERCIAL REAL ESTATE EXPOSURE THROUGH LOAN SALES

Jan 29, 2010, 08:30 ET from Central Pacific Financial Corp.

HONOLULU, Jan. 29 /PRNewswire-FirstCall/ -- Central Pacific Financial Corp. (NYSE: CPF), parent company of Central Pacific Bank, today reported a net loss for the fourth quarter of 2009 of $77.8 million, or $2.64 per diluted share, compared to net income of $3.1 million, or $0.11 per diluted share, in the fourth quarter of 2008 and a net loss of $183.1 million, or $6.38 per diluted share, reported in the third quarter of 2009.  The fourth quarter net loss included an increase in the valuation allowance against net deferred tax assets totaling $32.0 million.  The net loss for the third quarter of 2009 included an increase in the valuation allowance totaling $61.4 million and a non-cash goodwill impairment charge of $50.0 million.

Fourth Quarter Highlights

  • Sold Hawaii and California commercial real estate loans totaling $204.4 million at an aggregate discount of 18.9% compared to their book values at the time of the sales.
  • Improved loan-to-deposit ratio to 85.8% at December 31, 2009 from 89.6% at September 30, 2009.
  • Reduced total loans and leases to $3.1 billion at December 31, 2009, down from $3.5 billion at September 30, 2009 and $4.0 billion at December 31, 2008.
  • Originated $372.8 million in residential mortgage loans in Hawaii during the fourth quarter, up 25.5% over the year-ago quarter, and $1.9 billion for the full year 2009, up 24.3% from 2008.  Substantially all of these loans were sold in the secondary market, primarily to Fannie Mae and Freddie Mac.
  • Recognized total credit costs of $88.5 million in the fourth quarter, comprised primarily of a provision for loan and lease losses of $84.3 million and the write-down of a loan held for sale totaling $3.6 million.  Credit costs in the third quarter of 2009 totaled $145.1 million.
  • Increased allowance for loan and lease losses, as a percentage of total loans and leases, to 6.70% at December 31, 2009 from 5.93% at September 30, 2009.
  • Maintained tier 1 risk-based capital, total risk-based capital, and leverage capital ratios as of December 31, 2009 of 10.16%, 11.47%, and 7.23%, respectively.

During the fourth quarter, the Company reduced its credit risk exposure by selling $204.4 million of commercial real estate loans, comprised of $126.7 million from its Mainland portfolio and $77.7 million from its Hawaii portfolio.  These loans, of which $53.1 million were nonperforming, were sold at an aggregate discount of 18.9% compared to their book values at the time of the sales.  

"While our quarterly results continue to reflect elevated credit costs, we are making progress on our near-term objectives of improving our capital position and reducing credit risk, while maintaining strong liquidity," said Ronald K. Migita, Chairman, President, and Chief Executive Officer.  "In the fourth quarter, we reduced our exposure to the commercial real estate markets in Hawaii and California by selling more than $200 million of commercial real estate loans.  We will continue to pursue loan sales, along with other measures, to improve our asset quality."

"Raising additional capital is also a top priority for us and we continue to make progress," Migita added.  "We are exploring all capital raising options, including private equity placements and public offerings.  Currently, we are in discussions with potential investors."

Earnings Highlights

Net interest income for the fourth quarter of 2009 was $38.5 million, compared to $49.1 million in the year-ago quarter and $43.5 million in the third quarter of 2009.  The net interest margin for the current quarter was 3.30%, compared to 4.03% in the year-ago quarter and 3.56% in the third quarter of 2009.  The sequential-quarter and year-over-year compression in the net interest margin was the result of lower loan yields.  Excluding the effects of interest reversals on nonaccrual loans, the net interest margin was 3.46% for the current quarter, compared to 4.04% in the year-ago quarter and 3.72% in the third quarter of 2009.

The provision for loan and lease losses in the fourth quarter of 2009 was $84.3 million, compared to $26.7 million in the year-ago quarter and $142.5 million in the third quarter of 2009.  The current quarter's provision reflects the continued weakness in the Hawaii and California commercial real estate portfolios driven by ongoing pressure experienced by certain commercial real estate borrowers.

Other operating income totaled $11.7 million for the fourth quarter of 2009, compared to $16.9 million in the year-ago quarter and $15.4 million in the third quarter of 2009.  The decrease from the year-ago quarter was primarily due to:  (1) lower unrealized gains on outstanding interest rate locks during the current quarter totaling $3.8 million and (2) lower non-cash gains related to the ineffective portion of a cash flow hedge totaling $2.0 million.  The sequential-quarter decrease was primarily due to:  (1) lower unrealized gains on outstanding interest rate locks during the current quarter totaling $1.6 million, (2) lower non-cash gains related to the ineffective portion of a cash flow hedge totaling $1.3 million and (3) lower gains on sales of residential loans totaling $1.1 million.

Other operating expense for the fourth quarter of 2009 totaled $43.9 million, compared to $43.6 million in the year-ago quarter and $89.5 million in the third quarter of 2009.  The modest increase from the year-ago quarter reflects:  (1) higher write-downs on loans held for sale totaling $2.4 million, (2) higher legal and professional fees totaling $1.6 million, (3) higher FDIC insurance expense totaling $1.0 million and (4) the reversal of certain incentive compensation accruals in the year-ago quarter totaling $1.8 million, offset by: (1) a non-cash mortgage servicing rights impairment charge totaling $3.4 million and the recognition of a counterparty loss on a financing transaction totaling $2.8 million in the year-ago quarter and (2) lower reserves for unfunded commitments totaling $1.4 million.  The sequential-quarter decrease was primarily due to (1) the $50.0 million non-cash goodwill impairment charge recorded in the third quarter of 2009 and (2) lower foreclosed asset expense totaling $4.8 million, partially offset by: (1) higher write-downs on loans held for sale totaling $3.6 million, (2) higher reserves for unfunded commitments totaling $2.8 million and (3) higher legal and professional fees totaling $2.5 million.

The efficiency ratio for the fourth quarter of 2009 was 77.04% (excluding the write-down on loans held for sale of $3.6 million and foreclosed asset expense of $0.7 million), compared with 57.11% in the year-ago quarter (excluding the recognition of a counterparty loss on a financing transaction totaling $2.8 million, the write-down of loans held for sale totaling $1.3 million, and foreclosed asset expense of $0.7 million) and 55.82% (excluding the non-cash goodwill impairment charge of $50.0 million and foreclosed asset expense of $5.5 million) in the third quarter of 2009.  The sequential quarter increase was the result of:  (1) higher professional fees totaling $2.5 million primarily related to the maintenance of certain impaired assets, (2) a $2.8 million decrease in the reserves for unfunded commitments during the third quarter of 2009, and (3) lower net interest income and other operating income of $5.0 million and $3.7 million, respectively.

During the fourth quarter, the Company recognized an income tax benefit of $0.1 million.  The nominal income tax benefit despite the loss before income taxes of $77.9 million was due to an increase in the valuation allowance against net deferred tax assets totaling $32.0 million.

Balance Sheet Highlights

Total assets at December 31, 2009 were $4.9 billion, compared to $5.4 billion and $5.2 billion at December 31, 2008 and September 30, 2009, respectively.

Total loans and leases at December 31, 2009 were $3.1 billion, compared to $4.0 billion and $3.5 billion at December 31, 2008 and September 30, 2009, respectively.  The current quarter decrease was primarily due to a decrease in the mainland loan portfolio totaling $171.7 million and a decrease in the Hawaii construction and commercial real estate loan portfolio totaling $165.8 million.  The decrease in these portfolios was attributable to the loan sales mentioned above, as well as charge-offs and paydowns.

Total deposits at December 31, 2009 were $3.6 billion, compared to $3.9 billion at both December 31, 2008 and September 30, 2009.  Core deposits of $3.0 billion at December 31, 2009 increased by $145.8 million from a year ago and decreased by $192.6 million from September 30, 2009.  Interest-bearing demand deposits increased during the current quarter by $41.0 million, while noninterest-bearing demand deposits, savings and money market deposits, and time deposits decreased during the fourth quarter by $9.3 million, $228.7 million, and $95.0 million, respectively.

Total shareholders' equity was $356.9 million at December 31, 2009, compared to $526.3 million and $436.6 million at December 31, 2008 and September 30, 2009, respectively.

Asset Quality

Nonperforming assets at December 31, 2009 totaled $520.8 million, or 10.65% of total assets, compared to $418.5 million, or 8.09%, of total assets at September 30, 2009.  The sequential-quarter increase reflects further deterioration in the Hawaii construction portfolios, which included net additions of $57.3 million in Hawaii residential construction loans and $49.5 million in Hawaii commercial construction loans.  

Loans delinquent for 90 days or more still accruing interest decreased from $27.7 million at September 30, 2009, to $3.3 million at December 31, 2009.  In addition, loans delinquent for 30 days or more still accruing interest decreased from $53.7 million at September 30, 2009, to $51.5 million at December 31, 2009.

Net loan charge-offs in the fourth quarter of 2009 totaled $83.9 million, compared to $7.0 million in the year-ago quarter and $103.7 million in the third quarter of 2009.

The allowance for loan and lease losses as a percentage of total loans and leases was 6.70% at December 31, 2009, compared to 5.93% at September 30, 2009.  The increase was attributable to the decrease in the loan portfolio and the $84.3 million provision for loan and lease losses, offset by net loan charge-offs totaling $83.9 million.

Hawaii Construction and Commercial Real Estate Loans

At December 31, 2009, the Hawaii construction and commercial real estate loan portfolios totaled $934.2 million, Hawaii construction and commercial real estate loans held for sale totaled $10.9 million, and Hawaii construction and commercial real estate foreclosed properties totaled $9.8 million.  This portfolio decreased by $165.8 million from September 30, 2009.

Hawaii construction and commercial real estate loans represented 30.5% and 31.8% of total loans and leases at December 31, 2009, and September 30, 2009, respectively.  Of the $934.2 million balance in the Hawaii construction and commercial real estate portfolios, the allowance for loan and lease losses established for these loans was $85.0 million at December 31, 2009, or 9.10%, of the total outstanding balance.

Nonperforming assets related to this sector totaled $286.2 million at December 31, 2009, or 5.9%, of total assets.  This balance was comprised of 56 loans totaling $265.5 million at December 31, 2009, two loans held for sale to the same borrower totaling $10.9 million and two foreclosed properties totaling $9.8 million.  Nonperforming assets related to this sector totaled $176.4 million at September 30, 2009.

Mainland Construction and Commercial Real Estate Loans

At December 31, 2009, mainland construction and commercial real estate loans totaled $694.2 million, mainland construction and commercial real estate loans held for sale totaled $7.3 million, and mainland construction and commercial real estate foreclosed properties totaled $17.1 million.  The portfolio balance consisted of $493.8 million in California and $200.4 million in other Western states.  This portfolio decreased by $171.7 million from September 30, 2009.

Mainland construction and commercial real estate loans represented 22.7% and 25.0% of total loans and leases at December 31, 2009, and September 30, 2009, respectively.  Of the $694.2 million balance in the mainland construction and commercial real estate portfolio, the allowance for loan and lease losses established for these loans was $72.0 million at December 31, 2009, or 10.4%, of the total outstanding balance.

Nonperforming assets related to this sector totaled $194.6 million at December 31, 2009, or 4.0%, of total assets.  This balance was comprised of 39 loans totaling $170.2 million, two loans held for sale totaling $7.3 million, and seven foreclosed properties totaling $17.1 million.  Nonperforming assets related to this sector totaled $213.5 million at September 30, 2009.

Capital Levels

The Company's Tier 1 risk-based capital, total risk-based capital, and leverage capital ratios were 10.16%, 11.47%, and 7.23%, respectively, at December 31, 2009.   At September 30, 2009, these capital ratios were 10.94%, 12.24%, and 8.11%, respectively.  

Consolidation of Branches and Closure of California Loan Offices

In addition to announcing its fourth quarter 2009 results, the Company also announced its consolidation plan for two branch locations on Oahu due to the expiration of branch leases.  In April 2010, the branch currently located at 1018 Bethel Street in downtown Honolulu will be consolidated into the Main branch at 220 S. King Street and the branch at 1600 Kapiolani Boulevard will be consolidated into the branch at 818 Keeaumoku Street.  Both branch consolidations are subject to regulatory approval and a public comment period expiring on February 13, 2010.  

"As part of our long-term plan, we want to improve upon our service delivery efficiencies by consolidating branches that are in close proximity to each other and to enhance our customer service by extending business hours at the consolidated branch locations," said Denis Isono, Vice Chair and Chief Operations Officer.  

The branch consolidation will result in a branch network of 35 locations, including 28 on Oahu, four on Maui, two on Hawaii, one on Kauai and approximately 100 ATMs throughout the State of Hawaii.  More information on the Company's branch locations and business hours can be found at its website at www.centralpacificbank.com.

In California, the Bank's commercial loan offices in Pasadena and Roseville will be closed at the end of March 2010.  These office closures are part of the Company's previously announced plan to exit the California market.  

The branch consolidations and closure of the two California loan offices are expected to result in annual savings of approximately $1.9 million.  

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 and Slide Presentation

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 as well as view a slide presentation by visiting the investor relations page of the Company's website at http://investor.centralpacificbank.com.  Alternatively, investors may download the slide presentation from the "Presentations" tab of the investor relations page and participate in the live call by dialing 1-800-860-2442.  A playback of the call will be available through March 2, 2010 by dialing 1-877-344-7529 (passcode: 437300) and on the Company's website.

About Central Pacific Financial Corp.

Central Pacific Financial Corp. is a Hawaii-based bank holding company with $4.9 billion in assets.  Central Pacific Bank, its primary subsidiary, operates 37 branches and approximately 100 ATMs throughout Hawaii.  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, concerning plans and objectives of management for future operations, concerning future economic performance, or concerning 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", "intends", "expects", "anticipates", "forecasts" or words of similar meaning.  While we believe 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 impact of local, national, and international economies and events, including natural disasters, 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; the impact of regulatory actions on the Company including the Consent Order by the FDIC and the Hawaii Division of Financial Institutions; the impact of legislation affecting the banking industry including the Emergency Economic Stabilization Act of 2008; the impact of competitive products, services, pricing, and other competitive forces; movements in interest rates; loan delinquency rates and changes in asset quality generally; the price of the Company's stock; volatility in the financial markets and uncertainties concerning the availability of debt or equity financing; and the impact of regulatory supervision.  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/A for 2008 and Form 10-Q's for 2009.  The Company does not update any of its forward-looking statements.

    
    
                      CENTRAL PACIFIC FINANCIAL CORP.  AND SUBSIDIARIES 
                           Financial Highlights - December 31, 2009         
                                         (Unaudited)                        
    
    (in thousands,                                                            
     except per     Three Months Ended                Year Ended              
     share             December 31,      %            December 31,       %    
     data)           2009       2008   Change       2009        2008   Change
    INCOME
     STATEMENT                                                                
    Net income
     (loss)       $(77,831)    $3,145 (2574.8)%  $(292,785) $(138,414) 111.5% 
    Per share
     data:                                                                    
      Diluted
       (after
       dividends on
       preferred
       stock):                                          
           Net income                                                         
            (loss)   (2.64)      0.11 (2500.0)      (10.31)     (4.83) 113.5  
      Cash
       dividends      0.00       0.10  (100.0)        0.00       0.70 (100.0) 
                                                                              
    PERFORMANCE RATIOS                                                        
    Return (loss) on                                                          
     average
     assets (1)      (6.18)%     0.23%               (5.47)%    (2.45)%       
    Return (loss)
     on                                                                       
     average                                                                  
     shareholders'                                                            
     equity (1)     (77.26)      2.43               (51.32)    (23.07)        
    Net income (loss)                                                         
     to average tangible                                                      
     shareholders'                                                            
     equity (1)    (113.17)      3.74               (72.42)    (37.00)        
    Efficiency
     ratio (2)       77.04      57.11                63.52      53.93         
    Net interest
     margin (1)       3.30       4.03                 3.62       4.02         
    
    
    
                                                     December 31,        %    
                                                  2009         2008    Change 
    BALANCE SHEET                                                             
    Total assets                                $4,890,484 $5,432,361  (10.0)%
    Loans and leases, net of unearned
     interest                                    3,062,942  4,030,266  (24.0) 
    Net loans and leases                         2,857,663  3,910,388  (26.9) 
    Deposits                                     3,568,916  3,911,566   (8.8) 
    Total shareholders' equity                     356,925    526,291  (32.2) 
    Book value per common share                       7.52      18.32  (59.0) 
    Tangible book value per common share              3.31      12.04  (72.5) 
    Market value per common share                     1.31      10.04  (87.0) 
    Tangible common equity ratio                      2.11%      6.59%        
    
    
    
                  Three Months Ended                Year Ended                
                      December 31,         %        December 31,        %    
                   2009         2008     Change    2009       2008    Change  
    SELECTED
     AVERAGE
     BALANCES                                                                
    Total
     assets     $5,041,345 $5,438,885    (7.3)% $5,347,958 $5,653,409   (5.4)%
    Interest-
     earning                                                                  
     assets      4,695,506  4,925,836    (4.7)   4,881,865  5,100,472   (4.3) 
    Loans and
     leases,                                                                  
     net of
     unearned                                                                 
     interest    3,440,303  4,109,047   (16.3)   3,745,964  4,209,045  (11.0) 
    Other real
     estate         21,722     11,753    84.8       18,464      4,843  281.3  
    Deposits     3,703,562  3,787,823    (2.2)   3,890,811  3,814,809    2.0  
    Interest-
     bearing                                                                  
     liabilities 3,947,931  4,288,187    (7.9)   4,100,406  4,380,295   (6.4) 
    Total
     shareholders'                                                            
     equity        402,968    517,256   (22.1)     570,544    599,861   (4.9) 
    
    
    
                                                      December 31,      %    
                                                    2009       2008   Change  
    NONPERFORMING ASSETS                                                      
    Nonaccrual loans
     (including loans
     held for sale)                               $493,812   $132,563  272.5% 
    Other real estate, net                          26,954     11,220  140.2  
                                                   ------     ------          
      Total nonperforming assets                   520,766    143,783  262.2  
                                                   =======    =======         
    Loans delinquent for 90 days or more
     (still accruing interest)                       3,292      1,070  207.7  
    Restructured loans (still accruing interest)     6,310          -    0.0  
                                                     -----          -         
      Total nonperforming assets and loans
       delinquent for 90 days or more (still
       accruing interest) and restructured loans
       (still accruing interest)                  $530,368   $144,853  266.1
                                                                              
                                                                              
                           Three Months Ended          Year Ended             
                              December 31,             December 31,           
                     2009        2008               2009         2008         
    Loan charge-
     offs          $84,835     $7,478  1034.5%    $244,746   $145,686   68.0% 
    Recoveries         931        433   115.0        2,308      1,847   25.0  
     Net loan charge-                                                         
      offs
      (recoveries) $83,904     $7,045  1091.0     $242,438   $143,839   68.5  
    Net loan charge-                                                          
     offs to average                                                          
     loans (1)        9.76%      0.69%                6.47%      3.42%        
    
                                                                              
                                                       December 31,           
                                                     2009        2008        
    ASSET QUALITY RATIOS                                                      
    Nonaccrual loans (including loans held for
     sale) to total loans and leases and loans
     held for sale                                   15.69%      3.26%        
    Nonperforming assets to total assets             10.65       2.65         
    Nonperforming assets, loans delinquent for
     90 days or more (still accruing interest) and 
     restructured loans (still accruing interest)                             
     to total loans and leases, loans held for
     sale & other real estate                        16.71       3.55         
    Allowance for loan and lease losses
     to total loans and leases                        6.70       2.97         
    Allowance for loan and lease losses
     to nonaccrual loans (including loans
     held for sale)                                  41.57      90.43         
                                                                              
    (1) Annualized 
    (2) Efficiency ratio is derived by dividing other operating expense 
        excluding amortization, impairment and write-down of intangible 
        assets, goodwill, loans held for sale and foreclosed property, 
        loss on investment transaction and loss on sale of commercial real 
        estate loans by net operating revenue (net interest income on a 
        taxable equivalent basis plus other operating income before securities
        transactions). 
    
    
    
               CENTRAL PACIFIC FINANCIAL CORP. AND SUBSIDIARIES           
                 Reconciliation of Non-GAAP Financial Measures            
                                  (Unaudited)                             
                                                                          
                                                                          
                             Quarter Ended  Quarter Ended  Quarter Ended 
    (Dollars in thousands,   December 31,   September 30,   December 31,  
     except per share data)     2009            2009           2008     
    -----------------------  -------------  --------------  ------------- 
                                                                          
    Net Interest Margin                                                   
                                                                          
    Annualized net interest
     income for the quarter
     as a percentage of     
     quarter-to-date average                                           
     interest earning                                            
     assets                       3.30%           3.56%          4.03%
                                                                      
    Reversal of interest on                                           
     nonaccrual loans             0.16            0.16           0.01 
                                  ----            ----           ---- 
                                                                      
    Net interest margin,                                              
     excluding reversal of                                            
     interest on nonaccrual                                           
     loans                        3.46%           3.72%          4.04%
                                  ====            ====           ==== 
                                                                      
                                                                      
    Efficiency Ratio                                                  
                                                                      
    Total operating                                                   
     expenses as a                                                    
     percentage of net                                                
     operating revenue           87.05%         150.24%         65.41%
    Goodwill impairment              -          (83.94)             - 
    Amortization and                                                  
     impairment of other                                              
     intangible assets           (1.43)          (1.21)         (1.08)
    Foreclosed asset expense     (1.39)          (9.27)         (1.05)
    Write down of assets         (7.19)              -          (1.91)
    Counterparty loss on a                                            
     financing transaction           -               -          (4.26)
                                   ---             ---          ----- 
                                                                      
    Efficiency ratio             77.04%          55.82%         57.11%
                                 =====           =====          ===== 
    
    
    
                    CENTRAL PACIFIC FINANCIAL CORP. AND SUBSIDIARIES          
                              CONSOLIDATED BALANCE SHEETS                     
                                      (Unaudited)                             
                                                                              
    (in thousands, except per        December         September       December
     share data)                     31, 2009         30, 2009        31, 2008
                                     --------         --------        --------
                                                                              
    ASSETS                                                                    
    Cash and due from banks           $87,897         $112,828        $107,270
    Interest-bearing deposits in                                              
     other banks                      400,470          204,338             475
    Investment securities:                                                    
      Available for sale              919,655          973,364         742,600
      Held to maturity (fair value
       of $4,804 at December 31, 2009,                 
       $5,461 at September 30, 2009                                      
       and $8,759 at December 31,                                       
       2008)                            4,704            5,332           8,697
                                        -----            -----           -----
          Total investment                                                    
           securities                 924,359          978,696         751,297
                                      -------          -------         -------
                                                                              
    Loans held for sale                83,830           60,027          40,108
    Loans and leases                3,062,942        3,457,682       4,030,266
      Less allowance for loan and                                             
       lease losses                   205,279          204,914         119,878
                                      -------          -------         -------
          Net loans and leases      2,857,663        3,252,768       3,910,388
                                    ---------        ---------       ---------
                                                                              
    Premises and equipment             75,189           76,511          81,059
    Accrued interest receivable        14,588           16,590          20,079
    Investment in unconsolidated                                              
     subsidiaries                      17,395           17,794          15,465
    Other real estate                  26,954           21,093          11,220
    Goodwill                          102,689          102,689         152,689
    Other intangible assets            24,801           25,520          27,676
    Mortgage servicing rights          20,589           19,406          12,107
    Bank-owned life insurance         139,811          138,757         135,371
    Federal Home Loan Bank stock       48,797           48,797          48,797
    Other assets                       65,452           95,696         118,360
                                       ------           ------         -------
          Total assets             $4,890,484       $5,171,510      $5,432,361
                                   ==========       ==========      ==========
                                                                              
    LIABILITIES AND EQUITY                                                    
    Deposits:                                                                 
      Noninterest-bearing demand     $638,328         $647,672        $627,094
      Interest-bearing demand         588,396          547,414         472,269
      Savings and money market      1,195,815        1,424,518       1,057,881
      Time                          1,146,377        1,241,327       1,754,322
                                    ---------        ---------       ---------
          Total deposits            3,568,916        3,860,931       3,911,566
                                                                              
    Short-term borrowings             242,429          252,807         279,450
    Long-tem debt                     657,874          558,212         649,257
    Other liabilities                  54,314           52,889          55,748
                                       ------           ------          ------
          Total liabilities         4,523,533        4,724,839       4,896,021
                                    ---------        ---------       ---------
                                                                              
    Equity:                                                                   
      Preferred stock, no par
       value, authorized 1,000,000
       shares; issued and outstanding
       135,000 shares at
       December 31, 2009             
       and September 30, 2009,  none                                          
       at December 31, 2008           128,975          128,606               -
      Common stock, no par value,
       authorized 185,000,000 shares;                   
       issued and outstanding
       30,328,764 shares at
       December 31, 2009,         
       30,329,123 shares at
       September 30, 2009                                                
       and 28,732,259 at
       December 31, 2008              405,355          406,312         403,176
      Surplus                          63,075           62,837          55,963
      Retained earnings (accumulated                                          
       deficit)                      (236,969)        (157,088)         63,762
      Accumulated other                                                       
       comprehensive gain (loss)       (3,511)          (4,028)          3,390
                                       ------           ------           -----
          Total shareholders'                                                 
           equity                     356,925          436,639         526,291
    Non-controlling interest           10,026           10,032          10,049
                                       ------           ------          ------
          Total equity                366,951          446,671         536,340
                                      -------          -------         -------
                                                                              
          Total liabilities and                                               
           equity                  $4,890,484       $5,171,510      $5,432,361
                                   ==========       ==========      ==========
    
    
    
                    CENTRAL PACIFIC FINANCIAL CORP. AND SUBSIDIARIES          
                            CONSOLIDATED STATEMENTS OF INCOME                 
                                       (Unaudited)                            
                                                                              
                                Three Months Ended               Year Ended   
    (In thousands,              ------------------               ----------   
     except per share  December 31, September 30, December 31,  December 31,  
     data)                2009         2009          2008      2009      2008 
                          ----         ----          ----      ----      ---- 
    Interest income:                                                          
      Interest and                                                            
       fees on loans                                                          
       and leases       $42,256     $48,594       $62,988  $201,573  $263,183 
      Interest and
       dividends on
       investment                                          
       securities:                                                            
            Taxable                                                           
             interest     8,837       9,768         7,518    36,392    34,793 
            Tax-exempt                                                        
             interest       766         937         1,217     4,020     5,373 
            Dividends         3           2             2        10        44 
      Interest on                                                             
       deposits in                                                            
       other banks          116         106             1       233        12 
      Interest on federal
       funds sold and
       securities                                 
       purchased under                                                        
       agreements to                                                          
       resell                 -           3             7         9        83 
      Dividends on                                                            
       Federal Home                                                           
       Loan Bank                                                              
       stock                  -           -             -         -       464 
                            ---         ---           ---       ---       --- 
                                                                              
          Total interest                                                      
           income        51,978      59,410        71,733   242,237   303,952 
                         ------      ------        ------   -------   ------- 
                                                                              
    Interest expense:                                                         
      Demand                311         364           293     1,351       860 
      Savings and                                                             
       money market       2,401       3,250         2,592    11,928    12,528 
      Time                4,936       6,218        11,550    29,267    48,917 
      Interest on                                                             
       short-term                                                             
       borrowings           132         144           700       548     6,563 
      Interest on long-                                                       
       term debt          5,661       5,982         7,468    24,621    33,129 
                          -----       -----         -----    ------    ------ 
                                                                              
          Total interest                                                      
           expense       13,441      15,958        22,603    67,715   101,997 
                         ------      ------        ------    ------   ------- 
                                                                              
          Net interest                                                        
           income        38,537      43,452        49,130   174,522   201,955 
    Provision for                                                             
     loan and lease                                                           
     losses              84,269     142,496        26,696   327,839   171,668 
                         ------     -------        ------   -------   ------- 
                                                                              
          Net interest                                                        
           income (loss)                                                      
           after provision                                                    
           for loan and                                                       
           lease                                                              
           losses       (45,732)    (99,044)       22,434  (153,317)   30,287 
                        -------     -------        ------  --------    ------ 
                                                                              
    Other operating income:                                                   
      Service charges                                                         
       on deposit                                                             
       accounts           3,921       4,052         3,982    15,458    14,738 
      Other service                                                           
       charges and                                                            
       fees               3,734       3,549         3,436    14,187    14,062 
      Income from                                                             
       fiduciary                                                              
       activities           916         874           981     3,759     3,921 
      Equity in                                                               
       earnings of                                                            
       unconsolidated                                                         
       subsidiaries         146         134            44       759       561 
      Fees on foreign                                                         
       exchange             153         170           217       584       665 
      Investment                                                              
       securities gains                                                       
       (losses)             244        (169)            -    (2,639)      265 
      Income from bank-                                                       
       owned life                                                             
       insurance          1,066       1,599         1,273     5,249     4,876 
      Loan placement                                                          
       fees                 234         188           247       982       814 
      Net gains                                                               
       (losses) on                                                            
       sales of                                                               
       residential                                                            
       loans              1,974       3,060         1,871    13,582     7,717 
      Other                (697)      1,982         4,837     5,492     7,189 
                           ----       -----         -----     -----     ----- 
                                                                              
          Total other                                                         
           operating                                                          
           income        11,691      15,439        16,888    57,413    54,808 
                         ------      ------        ------    ------    ------ 
                                                                              
    Other operating expense:                                                  
      Salaries and                                                            
       employee                                                               
       benefits          15,820      16,582        13,449    66,346    67,019 
      Net occupancy       3,775       3,260         3,384    13,415    12,764 
      Equipment           1,510       1,497         1,474     6,081     5,722 
      Amortization and                                                        
       impairment of                                                          
       intangible                                                             
       assets             1,570       1,582         4,725     6,123     8,412 
      Communication                                                           
       expense            1,116       1,087         1,119     4,317     4,484 
      Legal and                                                               
       professional                                                           
       services           5,470       2,957         3,901    13,989    12,138 
      Computer                                                                
       software                                                               
       expense              858         818           909     3,428     3,446 
      Advertising                                                             
       expense              850         948           960     3,266     3,358 
      Goodwill                                                                
       impairment             -      50,000             -    50,000    94,279 
      Foreclosed asset                                                        
       expense              699       5,523           703     8,651     7,360 
      Loss on sale of                                                         
       commercial real                                                        
       estate loans           -           -             -         -     1,874 
      Write down of                                                           
       assets             3,624           -         1,272     4,963    23,796 
      Other               8,575       5,239        11,718    36,297    28,170 
                          -----       -----        ------    ------    ------ 
                                                                              
          Total other                                                         
           operating                                                          
           expense       43,867      89,493        43,614   216,876   272,822 
                         ------      ------        ------   -------   ------- 
                                                                              
      Loss before                                                             
       income taxes     (77,908)   (173,098)       (4,292) (312,780) (187,727)
    Income tax                                                                
     expense                                                                  
     (benefit)              (77)     10,043        (7,437)  (19,995)  (49,313)
                            ---      ------        ------   -------   -------
          Net income                                                          
           (loss)       (77,831)   (183,141)        3,145  (292,785) (138,414)
                        =======    ========         =====  ========  ========
                                                                              
    Per common share data:                                                    
      Basic earnings                                                          
       (loss) per                                                             
       share             $(2.64)     $(6.38)        $0.11   $(10.31)   $(4.83)
      Diluted earnings                                                        
       (loss) per share                                                       
       (after dividends                                                       
       and accretion on                                                       
       preferred                                                              
       stock)             (2.64)      (6.38)         0.11    (10.31)    (4.83)
      Cash dividends                                                          
       declared               -           -          0.10         -      0.70 
                                                                              
    Basic weighted                                                            
     average shares                                                           
     outstanding         30,267      29,030        28,673    29,170    28,669 
    Diluted weighted                                                          
     average shares                                                           
     outstanding         30,267      29,030        28,703    29,170    28,669 
    
    
    
                     CENTRAL PACIFIC FINANCIAL CORP. AND SUBSIDIARIES         
                   Average Balances, Interest Income & Expense, Yields
                            and Rates (Taxable Equivalent)
                                                                              
                                                                              
                                                                              
                              Three Months Ended         Three Months Ended   
    (Dollars in thousands)    December 31, 2009          December 31, 2008    
                              -----------------          -----------------    
                                   Average                    Average         
                          Average   Yield/           Average   Yield/         
                          Balance   Rate   Interest  Balance   Rate   Interest
                          -------  ------  --------  -------  ------  --------
    Assets:                                                                   
    Interest earning assets:                                                  
      Interest-bearing                                                        
       deposits in other                                                      
       banks              $264,874   0.17%    $116    $3,839    0.10%       $1
      Federal funds sold
       & securities
       purchased                                       
       under agreements
       to resell                 0   0.00%       0     4,279    0.59%        7
      Taxable investment
       securities,
       excluding                                        
       valuation
       allowance           866,792   4.08%   8,840   630,811    4.77%    7,520
      Tax-exempt investment
       securities,                                               
       excluding valuation                                                    
       allowance            74,740   6.31%   1,179   129,063    5.80%    1,872
      Loans and leases, net                                                   
       of unearned
       income            3,440,303   4.88%  42,256 4,109,047    6.11%   62,988
      Federal Home Loan                                                       
       Bank stock           48,797   0.00%       0    48,797    0.00%        0
                            ------   ----      ---    ------    ----       ---
        Total interest                                                        
         earning assets  4,695,506   4.44%  52,391 4,925,836    5.86%   72,388
    Nonearning assets      345,839                   513,049                  
                           -------                   -------                  
      Total assets      $5,041,345                $5,438,885                  
                        ==========                ==========                  
                                                                              
    Liabilities & Equity:                                                     
    Interest-bearing liabilities:                                             
      Interest-bearing                                                        
       demand deposits    $586,401   0.21%    $311  $461,994    0.25%     $293
      Savings and money                                                       
       market deposits   1,299,120   0.73%   2,401 1,041,151    0.99%    2,592
      Time deposits under                                                     
       $100,000            553,230   1.92%   2,674   764,295    2.85%    5,467
      Time deposits                                                           
       $100,000 and over   641,583   1.40%   2,262   948,495    2.55%    6,083
      Short-term
       borrowings          241,119   0.22%     132   308,208    0.91%      700
      Long-term debt       626,478   3.58%   5,661   764,044    3.89%    7,468
                           -------   ----    -----   -------    ----     -----
        Total interest-                                                       
         bearing
         liabilities     3,947,931   1.35%  13,441 4,288,187    2.10%   22,603
                                            ------                      ------
    Noninterest-bearing                                                       
     deposits              623,228                   571,888                  
    Other liabilities       57,189                    51,502                  
                            ------                    ------                  
      Total liabilities  4,628,348                 4,911,577                  
                         ---------                 ---------                  
    Shareholders' equity   402,968                   517,256                  
    Non-controlling
     interest               10,029                    10,052                  
                            ------                    ------                  
      Total equity         412,997                   527,308                  
                           -------                   -------                  
      Total liabilities &                                                     
       equity           $5,041,345                $5,438,885                  
                        ==========                ==========                  
                                                                              
    Net interest income                    $38,950                     $49,785
                                           =======                     =======
                                                                              
                                                                              
    Net interest margin              3.30%                      4.03%         
                                     ====                       ====          
                                                                              
                                                                              
                                                                              
                                   Year Ended                Year Ended       
    (Dollars in thousands)     December 31, 2009          December 31, 2008   
                               -----------------          -----------------   
                                   Average                    Average         
                          Average   Yield/           Average   Yield/         
                          Balance   Rate   Interest  Balance   Rate   Interest
                          -------  ------  --------  -------  ------  --------
    Assets:                                                                   
    Interest earning assets:                                                  
      Interest-bearing                                                        
       deposits in other                                                      
       banks              $126,200   0.18%    $233    $1,500    0.78%      $12
      Federal funds sold
       & securities
       purchased                                       
       under
       agreements to                                                          
       resell                7,144   0.13%       9     4,532    1.83%       83
      Taxable investment
       securities,
       excluding                                        
       valuation
       allowance           851,298   4.28%  36,402   692,610    5.03%   34,837
      Tax-exempt
       investment
       securities,                                               
       excluding
       valuation                                                          
       allowance           102,462   6.04%   6,185   143,988    5.74%    8,266
      Loans and leases, net                                                   
       of unearned
       income            3,745,964   5.38% 201,573 4,209,045    6.25%  263,183
      Federal Home Loan                                                       
       Bank stock           48,797   0.00%       0    48,797    0.95%      464
                            ------   ----      ---    ------    ----       ---
        Total interest                                                        
         earning assets  4,881,865   5.01% 244,402 5,100,472    6.02%  306,845
    Nonearning assets      466,093                   552,937                  
                           -------                   -------                  
      Total assets      $5,347,958                $5,653,409                  
                        ==========                ==========                  
                                                                              
    Liabilities & Equity:                                                     
    Interest-bearing liabilities:                                             
      Interest-bearing                                                        
       demand deposits    $544,910   0.25%  $1,351  $463,776    0.19%     $860
      Savings and money                                                       
       market deposits   1,319,228   0.90%  11,928 1,094,690    1.14%   12,528
      Time deposits under                                                     
       $100,000            631,482   2.45%  15,446   639,794    2.91%   18,618
      Time deposits                                                           
       $100,000 and over   800,303   1.73%  13,821 1,023,852    2.96%   30,299
      Short-term
       borrowings          187,720   0.29%     548   292,466    2.24%    6,563
      Long-term debt       616,763   3.99%  24,621   865,717    3.83%   33,129
                           -------   ----   ------   -------    ----    ------
        Total interest-                                                       
         bearing
         liabilities     4,100,406   1.65%  67,715 4,380,295    2.33%  101,997
                                            ------                     -------
    Noninterest-bearing                                                       
     deposits              594,888                   592,697                  
    Other liabilities       72,083                    70,496                  
                            ------                    ------                  
      Total liabilities  4,767,377                 5,043,488                  
                         ---------                 ---------                  
    Shareholders' equity   570,544                   599,861                  
    Non-controlling
     interest               10,037                    10,060                  
                            ------                    ------                  
      Total equity         580,581                   609,921                  
                           -------                   -------                  
      Total liabilities &                                                     
       equity           $5,347,958                $5,653,409                  
                        ==========                ==========                  
                                                                              
    Net interest income                   $176,687                    $204,848
                                          ========                    ========
                                                                              
                                                                              
    Net interest margin              3.62%                      4.02%         
                                     ====                       ====          
    
    

SOURCE Central Pacific Financial Corp.



RELATED LINKS

http://www.centralpacificbank.com