Central Pacific Financial (US:CPF)2019-08-06 17:41Financial Performance - Net income for Q2 2019 was $13.5 million, or $0.47 per diluted share, compared to $14.2 million, or $0.48 per diluted share in Q2 2018[191]. - For the six months ended June 30, 2019, net income was $29.6 million, or $1.03 per diluted share, compared to $28.5 million, or $0.95 per diluted share in the same period of 2018[191]. - The return on average assets for 2019 was 0.92%, down from 1.00% in 2018, while the return on average shareholders' equity was 10.73% in 2019, down from 11.83% in 2018[192]. - The company recorded income tax expenses of $4.4 million and $9.5 million for the three and six months ended June 30, 2019, respectively, compared to $3.9 million and $7.7 million in the same prior year periods[237]. Operational Initiatives - The company plans to invest approximately $40 million in the RISE2020 initiative, which aims to enhance customer experience and drive long-term growth[205]. - RISE2020 is expected to increase annual operating expenses by approximately $7 million when fully implemented by the start of 2021[205]. - The company expects its efficiency ratio to be in the 63-65% range in 2019 and 2020, targeting a 15% return on average shareholders' equity by the end of 2022[205]. Asset and Liability Management - Total assets increased to $5,856,465,000 from $5,663,697,000, reflecting a growth of 3.4%[211]. - Total equity grew to $504,749,000 from $480,985,000, indicating an increase of 4.3%[211]. - Total interest-bearing liabilities increased to $3,897,619,000, compared to $3,776,053,000, marking a rise of 3.2%[211]. - Total loans and leases, including loans held for sale, reached $4,171,558,000, an increase of 8.7% from $3,836,739,000[211]. Interest Income and Expenses - Net interest income rose to $45,594,000, up from $42,920,000, representing an increase of 6.2%[211]. - The interest rate spread improved to 3.07%, up by 0.06% compared to the previous period[211]. - Interest expense for the three months ended June 30, 2019, was $8.7 million, an increase of 49.5% from the same period in 2018[219]. - The net interest margin improved to 3.33%, up by 0.13% from the previous period[211]. Market Conditions - Hawaii's unemployment rate was 2.8% in June 2019, compared to 2.4% in June 2018, remaining below the national average of 3.7%[199]. - Visitor arrivals in Hawaii increased by 4.2% to 5.2 million in the first half of 2019, but visitor spending decreased by 2.0% to $8.9 billion[197]. - The median sales price for single-family homes on Oahu was $775,000 in the first half of 2019, a decrease of 0.5% from the same period in 2018[200]. Nonperforming Assets and Loan Quality - Total nonperforming assets decreased to $1.258 million at June 30, 2019, down from $2.737 million at December 31, 2018, representing a reduction of 54.0%[253]. - Nonaccrual loans totaled $982 thousand at June 30, 2019, a decrease of 57.7% from $2.323 million at December 31, 2018[253]. - The allowance for loan and lease losses was $48.267 million at June 30, 2019, compared to $47.916 million at December 31, 2018, reflecting a provision of $1.404 million for the three months ended June 30, 2019[257]. Shareholder Returns - The Company declared a cash dividend of $0.23 per share on July 23, 2019, a 9.5% increase from the previous year's dividend of $0.21 per share[269]. - The Company repurchased approximately 1.7% of its common stock outstanding as of December 31, 2018, totaling 490,700 shares at a cost of $14.0 million in the first half of 2019[265][272]. - The Company has $29.9 million remaining available for repurchase under its newly authorized share repurchase program as of June 30, 2019[272]. Risk Management - The primary market risk exposure for the company is interest rate risk, managed through asset/liability management strategies[294]. - Interest rate risk sensitivity analysis indicated a potential increase in net interest income of 1.54% with a 100 basis point increase in rates and a decrease of 4.24% with a 100 basis point decrease[285][286]. - The simulation model used to measure interest rate risk indicates that the mix of rate-sensitive assets and liabilities would not exceed established policy limits for net interest income fluctuations[295].