Central Pacific Financial Corp New · NYSE:CPF
Central Pacific Financial Corp New — Central Pacific Financial — Debt Investor Presentation (October 2020)
46 slides from Central Pacific Financial Corp New's debt investor presentation, Oct 20, 2020
Slide 1: Subordinated Notes Offering October 2020
Subordinated Notes Offering OCTOBER 2020
Slide 2: Forward Looking Statements and Disclaimer
FORWARD LOOKING STATEMENTS AND DISCLAIMER This document and any accompanying oral presentation may contain forward-looking statements (as defined in the Private Securities Litigation Reform Act of 1995) concerning, among other items: projections of revenues, expenses, income or loss, earnings or los
Slide 3: Terms of Planned Capital Raise
TERMS OF PLANNED CAPITAL RAISE Issuer Central Pacific Financial Corp. (NYSE: CPF) Security Subordinated Notes due 2030 Amount $50 million Security Rating BBB- by Kroll Bond Rating Agency Issuance Type Regulation D Private Placement With Registration Rights Offering Structure Fixed-to-Floating Rate (
Slide 4: Overview of Presenters
OVERVIEW OF PRESENTERS Paul Yonamine Catherine Ngo Chairman & CEO President • Over 40 years of executive • Over 27 years of banking management experience experience • As President of IBM Japan, led • Joined CPF/CPB in 2010 and the Company through the 2011 helped lead the Company Tohoku earthquake, t
Slide 5: I. Company Overview
I. Company Overview 5 5
Slide 6: Corporate Profile
CORPORATE PROFILE Founded in 1954 by Japanese- American MARKET INFORMATION veterans of World War II NYSE TICKER CPF Over 65 years later, Central Assets $6.6B Pacific continues to work for our customers, shareholders, Market Cap $382 Mil employees and the community Share Price $13.57 Dividend Yield 6
Slide 7: RISE2020 digital banking and branch transformation initiatives
• Launched cpb.bank • Committed to best-in-class website in November 2019 small business and cash management products, with • Launched new online and new platform fully rolled out mobile banking platforms 1 in July 2020 in August 2020 • Enhanced sales • Full ATM network upgrade DIGITAL REVENUE manag
Slide 8: Target Niche Market Opportunities
TARGET NICHE MARKET OPPORTUNITIES . SBA Lender of the Year Category II, 7 years in a row, with more SMALL loans originated than the 3 other large Hawaii banks combined BUSINESSES . Relationships with physician and dental organizations and CPB leads the Hawaii schools have been successful in growing
Slide 9: Resilient Hawaii Market
RESILIENT HAWAII MARKET State of Hawaii STRENGTHS AND RECOVERY FACTORS Real Gross State Product (GSP) Tourism • While tourism drives ~20% of GSP, Other*, 24% Related, 23% government/defense and real estate makes up another ~45% of GSP Healthcare, • Construction and development in Hawaii 7% continues
Slide 10: Attractive Position in Hawaii Market
ATTRACTIVE POSITION IN HAWAII MARKET LARGE SMALL INSTITUTIONS INSTITUTIONS . First Hawaiian Bank . Territorial Savings . $23B total assets . $2B total assets . 58 branches . $6.6B total assets . 30 branches . 31 branches* . Bank of Hawaii . Hawaii National Bank . $20B total assets . $0.7B total asse
Slide 11: Branch Footprint and Market Demographics
BRANCH FOOTPRINT AND MARKET DEMOGRAPHICS CPF (32) Kauai Honolulu Maui 2020-2021 2021-2026 2021 2021-2026 6/30/2020 Market 2021 Population Projected Median Projected HH Deposits Share Total Change Pop. Change Household Income County Rank Branches ($000) (%) Population (%) (%) Income ($) Change (%) Ho
Slide 12: II. Financial Highlights
II. Financial Highlights 12 12
Slide 13: Preliminary Review of Third Quarter Results
PRELIMINARY REVIEW OF THIRD QUARTER RESULTS Profitability: . 3Q 2020 diluted EPS expected to be in the range of $0.20 – $0.33, compared to $0.35 in 2Q 2020 . Q3 2020 provision for loan loss expense is expected to be between $12 million and $17 million, compared to $10.6 million in 2Q 2020 . 3Q2020 N
Slide 14: Financial Highlights – CECL Provision Estimate for Q3
FINANCIAL HIGHLIGHTS – CECL PROVISION ESTIMATE FOR Q3 Q3 Loan Loss Provision Estimates . CPF is continuing to build loan loss reserves given the overall economic $8 Economic Forecast Impact climate $10 • Additional Q3 provision expense is $1 Loan Down Grades being largely driven by the economic $2 f
Slide 15: Financial Highlights - Balance Sheet
Organic Growth FINANCIAL HIGHLIGHTS - BALANCE SHEET PPP Loans Total Assets ($ in billions)Gross Loans ($ in billions) Total Deposits ($ in billions) $6.6 $0.5 $6.1 $6.0 $5.8 $5.8 $5.6 $6.1 $5.4 $5.1 $5.1 $5.0 $5.0 $4.9 $0.5 $4.6 $4.4 $4.5 $4.1 $4.5 $3.8 $3.5 2016 2017 2018 2019 1Q20 2Q20 2016 2017 2
Slide 16: Financial Highlights - Profitability
FINANCIAL HIGHLIGHTS - PROFITABILITY ROAA ROATCE 1.05% 0.99% 12.6% 0.90% 11.4% 0.75% 9.6% 0.58% 8.4% 6.8% 2016 2017 2018 2019 YTD 2Q20 2016 2017 2018 2019 YTD 2Q20 Net Interest Margin Efficiency Ratio 3.35% 3.34% 3.28% 3.27% 66.2% 3.22% 64.2% 63.6% 62.7% 62.1% 2016 2017 2018 2019 YTD 2Q20 2016 2017
Slide 17: Financial Highlights - Capital Ratios
FINANCIAL HIGHLIGHTS - CAPITAL RATIOS Holding Company Bank Level TCE/TA* Leverage Ratio Excludes PPP 9.5% 9.5% 9.5% 9.5% 9.5% 9.3% 9.4% 9.3% 9.3% 8.9% 8.7% 8.9% 9.3% 9.4% 9.4% 9.4% 8.7% 8.8% 8.8% 8.7% 8.8% 8.2% Well capitalized: 6.5% 2Q19 3Q19 4Q19 1Q20 2Q20 2Q19 3Q19 4Q19 1Q20 2Q20 Tier 1 Ratio Tot
Slide 18: Financial Highlights - Asset Quality
FINANCIAL HIGHLIGHTS - ASSET QUALITY NPAs / Assets¹ NCOs / Avg. Loans 0.17% 0.18% 0.15% 0.11% 0.06% 0.07% 0.05% 0.03% 0.03% 0.02% 2016 2017 2018 2019 2Q20 2016 2017 2018 2019 YTD 2Q20 Loan Loss Reserve / Gross Loans Texas Ratio (NPA + Loans 90PD / TCE + LLR) 4.81% Excludes PPP 1.59% 1.50% 1.32% 3.07
Slide 19: III. Pandemic Response
III. Pandemic Response 19 19
Slide 20: COVID-19 Pandemic Response
COVID-19 PANDEMIC RESPONSE REMOTE WORK Successful transition to work from home with 70% of all employees setup on VPN BRANCH ADJUSTMENTS Temporarily closed smaller footprint branches for increased social distancing Some branches have since re-opened, while three in-supermarket branches were consolid
Slide 21: COVID-19 Impact on Customer Behavior
COVID-19 IMPACT ON CUSTOMER BEHAVIOR . COVID-19 accelerated the migration to digital banking . Strong momentum and ideal timing for the RISE2020 digital banking strategy new product launch in August 2020 21 21
Slide 22: Paycheck Protection Program (PPP)
PAYCHECK PROTECTION PROGRAM (“PPP”) Originated Over 7,200 loans Total funded Over $550 million Average loan size ~$76 thousand Total fee income $21 million • Significant funds deposited in CPB contributing to over $400MM growth in DDA balances in the second quarter of 2020 • New business relationshi
Slide 23: Paycheck Protection Program Outstanding Balance
PAYCHECK PROTECTION PROGRAM [PPP] Outstanding Balance as of 6/30/20 $ in Millions Other industries Foodservice $73 / 14% $77 / 15% Transportation & Warehousing $24 / 5% Manufacturing Healthcare $26 / 5% $75 / 14% $526MM Wholesale 10% Trade $26 / 5% Real Estate and Rental & Leasing $28 / 5% Construct
Slide 24: Loan Portfolio Review - Pandemic Impact
LOAN PORTFOLIO REVIEW - PANDEMIC IMPACT Timing Review performed during June 2020 All risk-rated Commercial & Industrial, Commercial Real Estate, and Scope Construction loans covering all industry exposures in the loan portfolio Review covered $1,665MM, or 37%, of the total loan portfolio, Penetratio
Slide 25: High Risk Industries
HIGH RISK INDUSTRIES Outstanding Balance as of 6/30/20 Criticized Outstanding % of as % of Balance Total Loans Total Loans $ Millions (Excl. PPP) (Excl. PPP) (Excl. PPP) C&I CRE PPP Healthcare$ 108 2.4% 0.1%$ 95 $ 13 $ 75 Retail Trade 71 1.6% 0.3% 49 22 32 Manufacturing 69 1.5% 0.3% 48 21 26 Foodser
Slide 26: Loan Payment Deferrals
LOAN PAYMENT DEFERRALS $ Millions % of Re‐ As of Sept. 23, Total Active Asset Total back on Deferral 2020 On 1st Deferral On 2nd Deferral On 3rd Deferral Deferrals Class1 Payment Rate2 $ Count $ Count $ Count $ Count $ Count RESI MTG 30.3 74 71.0 146 ‐ ‐ 101.3 220 5% 104.4 233 35% CRE & CONST 88.0 4
Slide 27: IV. Loan Portfolio
IV. Loan Portfolio < (CENTRAL PACIFIC FINANCIAL CORP
Slide 28: Total Loan Portfolio
TOTAL LOAN PORTFOLIO Total Loan Portfolio of $5,003MM Outstanding Balance as of 6/30/20 $ in Millions Loan Portfolio Highlights Commercial & • Diversified Loan Portfolio Consumer Industrial – 46% Commercial $527 / 11% $548 / 11% PPP – 54% Consumer CRE ‐ Investor $526 / 10% • Predominantly Hawaii $89
Slide 29: Commercial & Industrial – Industry Composition
COMMERCIAL & INDUSTRIAL – INDUSTRY COMPOSITION Outstanding Balance as of 6/30/20 $ in Millions Loan Portfolio Details Healthcare • Many borrowers are essential $95 / 17% businesses • Well established, locally Other Industries owned and operated by $154 / 28% strong management • Borrowers have access
Slide 30: Commercial Real Estate – Property Type Composition (Owner Occupied)
COMMERCIAL REAL ESTATE – PROPERTY TYPE COMPOSITION Outstanding Balance as of 6/30/20 $ in Millions Other Loan Portfolio Details $25 / 10% • Well-collateralized with WA LTV of 66%1 Restaurant • 77% secured in Hawaii and $12 / 5% 23% in Mainland HI WA LTV 67%1 Industrial $116 /50% ML WA LTV 55%1 •
Slide 31: Commercial Real Estate – Property Type Composition (Investor)
COMMERCIAL REAL ESTATE – PROPERTY TYPE COMPOSITION Outstanding Balance as of 6/30/20 $ in Millions Self Storage $25 / 3% All Other Loan Portfolio Details $23 / 3% Restaurant • Seasoned real estate $27 / 3% investors Hotel $59 / 6% • Well-collateralized with WA Multi‐Family 1 $303 / 34% LTV of 59% •
Slide 32: Residential Mortgage
RESIDENTIAL MORTGAGE Outstanding Balance as of 6/30/20 $ in Millions Investor & Second Home $319 / 19% Loan Portfolio Details • 100% in Hawaii; 90% on Oahu • 83% of loan balance are loans <$1.0MM • Average outstanding loan $1,658MM amount of $436,000 33% • WA LTV 61%1 • WA FICO 773 1Based on LTV at
Slide 33: Home Equity
HOME EQUITY Outstanding Balance as of 6/30/20 $ in Millions Investor & Second Home $69 / 13% Loan Portfolio Details • 100% in Hawaii; 85% on Oahu • 52% of loan balance are lines/loans <$250 thousand • Average outstanding loan amount of $133,000 $511MM • 52% are 1st mortgages 10% • 21% are 2nd mortga
Slide 34: Consumer
CONSUMER Outstanding Balance as of 6/30/20 $ in Millions Loan Portfolio Details • Total Consumer Personal Auto $253 / 48% HI 67%; WA FICO $274 / 52% 737 ML 33%; WA FICO $527MM 7591 11% • Auto HI WA FICO 729 ML WA FICO 7501 • Personal Auto Personal HI WA FICO 755 Mainland Private 1 $62 / 23
Slide 35: Loans Rated Special Mention
LOANS RATED SPECIAL MENTION Outstanding Balance as of 6/30/20 Loan Portfolio Details $ in Millions $116MM Special Mention Loans; Wholesale Trade 3% of Total Loan Portfolio (excl PPP) $2 / 2% Manufacturing Healthcare $2 / 2% Credit Risk Management $4 / 3% Approach Other Industries Real Estate and • S
Slide 36: Loans Rated Substandard
LOANS RATED SUBSTANDARD Outstanding Balance as of 6/30/20 $ in Millions Residential Mortgage Consumer Loan Portfolio Details $1 / 1% $5 / 10% $47MM Substandard Loans; Other Industries Manufacturing 1% of Total Loan Portfolio (excl PPP) $1 / 3% $12 / 25% Foodservice $1 / 3% Retail Trade $2 / 4% Healt
Slide 37: IV. Funding Base and Liquidity
IV. Funding Base and Liquidity 37 37
Slide 38: Attractive Low-Cost Funding
ATTRACTIVE LOW-COST FUNDING Deposit Composition Highlights Total Deposit Composition of $5,795M • Strong deposit base with core as of 6/30/20 deposits of $5.0B, which represents ~86% of total deposits¹ Jumbo Time • ~50% of deposits are checking ($771M) accounts 13% Retail Time Non-Int. • ~32% of dep
Slide 39: Securities Portfolio Composition
SECURITIES PORTFOLIO COMPOSITION Total Securities Portfolio of $1,169MM Portfolio Performance Notes as of 6/30/20 • 100% available-for-sale securities • Municipal, corporate, and non-agency NON AGY MBS positions are monitored and potential NON AGY $32MM GOVT risks are reported to management on CMBS
Slide 40: Interest Rate Sensitivity
INTEREST RATE SENSITIVITY . CPF utilizes a transaction level model to evaluate interest rate risk with ALCO reviewing IRR results monthly . Regular stress/sensitivity testing is performed around key assumptions to better understand the bank’s risk profile . CPF has a slightly asset sensitive interes
Slide 41: Appendix
Appendix (CENTRAL PACIFIC FINANCIAL CORP
Slide 42: Interest Coverage & Double Leverage
INTEREST COVERAGE & DOUBLE LEVERAGE • Assumes $50.0M gross offering, with net proceeds of $49.0M • 90% of net proceeds, or $44.1M, will be immediately downstreamed to the bank • 10% of net proceeds, or $4.9M, will be initially retained at the holding company $ in thousands For the Twelve Months Ende
Slide 43: Pro Forma Capitalization
PRO FORMA CAPITALIZATION • Assumes $50.0M gross offering, with net proceeds of $49.0M • 90% of net proceeds, or $44.1M, will be immediately downstreamed to the bank • 10% of net proceeds, or $4.9M, will be initially retained at the holding company Holding Company Capital Ratios Bank Level Capital Ra
Slide 44: Financial Highlights
FINANCIAL HIGHLIGHTS QTD QTD YEAR ENDED DECEMBER 31, ($ in millions) 2Q20 1Q20 2019 2018 2017 2016 2015 2014 Balance Sheet (period end data) Loans and leases $5,003.0 $4,512.0 $4,449.5 $4,078.4 $3,770.6 $3,524.9 $3,211.5 $2,932.2 Total assets 6,633.0 6,108.5 6,012.7 5,807.0 5,623.7 5,384.2 5,131.3 4
Slide 45: Non-GAAP Financial Measures - Pre-Tax, Pre-Provision Earnings
Non-GAAP Financial Measures- Pre-Tax, Pre-Provision Earnings Three-Months Ended $ Millions % Change Jun. 30, Mar. 31, Jun. 30, 2020 2020 2019 QoQ YoY Net Interest Income$ 49.3 $ 47.8 $ 45.4 3% 9% Other Operating Income 10.7 8.9 10.1 20% 6% Total Revenue 60.0 56.7 55.5 6% 8% Other Operating Expense 3
Slide 46: Non-GAAP Financial Measures - Excluding PPP
Non-GAAP Financial Measures- Excluding PPP Jun. 30, Jun. 30, 2020 PPP 2020 Actual Exclusions1 Adjusted Net Interest Income2 $ 49.4 $ (2.5) $ 46.9 Total Interest-Earnings Assets$ 6,073.4 $ (379.9) $ 5,693.5 Net Interest Margin3 3.26% 3.31% Tangible Common Equity4 $ 544.3 $ 544.3 Total Assets$ 6,633.0
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