Central Pacific Financial (US:CPF)2020-07-29 16:21Financial Performance - Net income for Q2 2020 was $9.9 million, or $0.35 per diluted share, down from $13.5 million, or $0.47 per diluted share in Q2 2019[243]. - For the first half of 2020, net income was $18.2 million, or $0.65 per diluted share, compared to $29.6 million, or $1.03 per diluted share in the same period of 2019[243]. - Pre-tax, pre-provision income for Q2 2020 was $26.5 million, up from $23.8 million in Q2 2019[244]. - Return on average assets decreased to 0.61% in Q2 2020 from 0.92% in Q2 2019[246]. - Return on average shareholders' equity fell to 7.34% in Q2 2020 from 10.73% in Q2 2019[246]. - Net interest income for the three months ended June 30, 2020, was $49.4 million, an increase of 8.4% from $45.6 million in the same period of 2019[306]. - Net interest income for the six months ended June 30, 2020, was $97.4 million, representing a 7.1% increase from $90.9 million in the same period of 2019[306]. Credit Losses and Provisions - The provision for credit losses increased significantly to $11.2 million for Q2 2020, compared to $1.9 million in Q2 2019, reflecting the impact of COVID-19[245]. - The Company expects to incur significant credit losses and increased allowance for credit losses due to the economic impact of COVID-19, particularly affecting borrowers' ability to make loan payments[264]. - Provision for credit losses on loans was $10.6 million for the three months ended June 30, 2020, compared to $1.4 million in the same period of 2019, reflecting a significant increase due to adverse economic conditions from the COVID-19 pandemic[318]. - The Company recorded a provision for credit losses on loans of $20.0 million for the six months ended June 30, 2020, reflecting anticipated deterioration due to the COVID-19 pandemic[365]. - The allowance for credit losses (ACL) increased by $19.4 million, or 40.4%, to $67.3 million as of June 30, 2020[346]. - The allowance for credit losses (ACL) as a percentage of total loans increased from 1.08% at December 31, 2019, to 1.35% at June 30, 2020, and was 1.50% excluding the PPP loan portfolio[367]. Operational Adjustments Due to COVID-19 - The ongoing COVID-19 pandemic has caused significant disruptions, leading to economic instability and affecting the company's operations[248]. - The bank temporarily closed 13 branches during the pandemic, with 22 branches remaining operational[257]. - The Company has implemented COVID-19 relief programs, including loan payment deferrals for residential and commercial customers, with deferrals typically lasting 3 to 6 months[278]. - Loan payment forbearances or deferrals were made for borrowers impacted by the COVID-19 pandemic, totaling $567.9 million, or 11.3% of total loans[361]. - The Company has waived non-CPB ATM fees and early withdrawal fees on time deposits to support customers during the pandemic, although these fees were reinstated on July 1, 2020[267]. Loan and Deposit Trends - As of June 30, 2020, the Company had loan payment deferrals on outstanding balances of $567.9 million, representing 11.3% of total loans (12.7% excluding PPP loans)[283]. - The Company funded over 7,200 PPP loans totaling over $550 million from April 3 to June 30, 2020, receiving gross processing fees of over $21 million[279]. - Total loans increased by $553.9 million, or 12.4%, to $5.00 billion at June 30, 2020, driven by a $526.4 million increase in Paycheck Protection Program loans[346]. - Total deposits increased by $674.7 million, or 13.2%, from $5.12 billion at December 31, 2019, to $5.79 billion at June 30, 2020[370]. - Core deposits totaled $5.02 billion at June 30, 2020, an increase of $764.7 million, or 18.0%, from December 31, 2019[371]. Asset and Equity Growth - Total assets increased to $6,468,129 thousand, up from $5,856,465 thousand, representing a growth of 10.4%[303]. - Total equity increased to $540,804 thousand, compared to $504,749 thousand, reflecting a growth of 7.1%[303]. - Shareholders' equity totaled $544.3 million at June 30, 2020, compared to $528.5 million at December 31, 2019, driven by net income of $18.2 million[374]. - The total shareholders' equity to total assets ratio decreased to 8.21% at June 30, 2020, from 8.79% at December 31, 2019, primarily due to an increase in total assets from PPP loans[375]. Market and Economic Conditions - Daily visitors to Hawaii declined by 99% in May 2020 compared to the same period last year, contributing to an unemployment rate of approximately 13.9% in June 2020[262]. - Total visitor arrivals in Hawaii decreased by 49.5% for the five months ended May 31, 2020, compared to the same prior year period, with April and May seeing a decline of approximately 99%[294]. - The unemployment rate in Hawaii was 13.9% in June 2020, down from 23.5% in May, with a total seasonally adjusted labor force of 612,800[296]. Strategic Initiatives - The RISE2020 initiative, launched in Q2 2019, aims to enhance customer experience and improve shareholder returns, with significant progress made despite COVID-19 challenges[300]. - The development of the new online and mobile banking platforms is in the final stages of pilot testing, with a public launch scheduled for late August 2020[300].