Central Pacific Financial Corp. :CPF-US: Earnings Analysis: Q3, 2017 By the Numbers : December 19, 2017

Central Pacific Financial Corp. reports financial results for the quarter ended September 30, 2017.

We analyze the earnings along side the following peers of Central Pacific Financial Corp. – Bank of Hawaii Corporation, Community West Bancshares, Pacific Premier Bancorp, Inc., Banner Corporation, SVB Financial Group and Sierra Bancorp (BOH-US, CWBC-US, PPBI-US, BANR-US, SIVB-US and BSRR-US) that have also reported for this period.


  • Summary numbers: Revenues of USD 51.89 million, Net Earnings of USD 11.81 million.
  • Net interest income margins widened from 79.23% to 80.94% compared to the same period last year.
  • Net loan assets changed 6.06% compared to same period last year and 1.31% from previous period, total deposits changed 9.05% compared to same period last year and 0.84% from previous period.
  • Year-on-year change in operating cash flow of -19.63% is about the same as the change in earnings, likely no significant movement in accruals or reserves.
  • Earnings grew despite decline in operating margins and pre-tax margins compared to same period last year.

The table below shows the preliminary results and recent trends for key metrics such as revenues and net income (See complete table at the end of this report):

2017-09-30 2017-06-30 2017-03-31 2016-12-31 2016-09-30
Relevant Numbers (Quarterly)
Revenues (mil) 51.89 49.82 51.94 49.49 49.76
Revenue Growth (%YOY) 4.27 -1.54 5.54 3.34 3.42
Earnings (mil) 11.81 12.03 13.08 12.21 11.47
Earnings Growth (%YOY) 3.02 -0.92 16.98 11.67 -6.06
Net Margin (%) 22.77 24.14 25.18 24.67 23.04
EPS 0.39 0.39 0.42 0.39 0.37
Return on Equity (%) 2.31 2.35 2.57 2.38 2.21
Return on Assets (%) 0.85 0.88 0.97 0.91 0.87

Access our Ratings and Scores for Central Pacific Financial Corp.

Market Share Versus Profits

Revenues History
Earnings History

CPF-US’s change in revenue this period compared to the same period last year of 4.27% is almost the same as its change in earnings, and is about average among the announced results thus far in its peer group, suggesting that CPF-US is holding onto its market share. Also, for comparison purposes, revenues changed by 4.16% and earnings by -1.77% compared to the immediate last period.

Revenues Growth Versus Earnings Growth

Quadrant label definitions. Hover to know more

Leader, Earnings Focus, Laggard, Revenues Focus

Earnings Growth Analysis

The company’s earnings growth was influenced by the year-on-year improvement in net interest income margins from 79.23% to 80.94%. However, the company’s loan loss provisions have prevented it from fully capitalizing on these net interest income margin improvements. CPF-US’s net interest income after provisions margin showed no improvement. Loan loss provisions as a percentage of net interest income were -0.13% this period, and -3.02% a year ago.

Net Interest Income Margin Versus Loan Loss Provisions Margin

Quadrant label definitions. Hover to know more

High Risk; High Reward Loans, Risky Loan Portfolio, Conservative Loan Portfolio, Safer Loan Portfolio
Net Interest Income Margin History
Loan Loss Provisions Margin History

Net Loans and Total Deposits

A financial institution’s core operations represented by Net Interest Income and Net Interest Income after Provisions are dependent on both the growth and quality of its deposits as well as the growth and quality of its loans. A firm could boost its interest income in the short-term by just increasing its loan assets with less concern about their quality – but this would eventually lead to greater loan loss provisions. Similarly a drive to increase deposits could result in higher interest expenses and eventually effect the firm’s equity. It is thus important to understand net interest income performance in context to loan loss provisions, loan assets and deposits.

Loan Assets Growth Rate History (Qtr YOY)
Total Deposits Growth Rate History (Qtr YOY)

The firm’s improvement in net interest income margins was influenced by both the relative increase in the levels of net loan assets and the level of total deposits as a percentage of equity. On an absolute basis, net loan assets changed 6.06% compared to the same period last year and 1.31% from the previous period. Total deposits changed 9.05% compared to the same period last year and 0.84% from the previous period.

Cash Versus Earnings – Sustainable Performance?

It is important to examine a company�s cash versus earnings numbers to gauge whether its performance is sustainable.

CPF-US’s change in operating cash flow of -19.63% compared to the same period last year is about the same as its change in earnings this period. Additionally, this change in operating cash flow is about average among its peer group. This suggests that the company did not use accruals or reserves to manage earnings this period, and that, all else being equal, the earnings number is sustainable.

Operating Cash Flow Growth Versus Earnings Growth

Quadrant label definitions. Hover to know more

Cash Flow based Earnings, Likely Non-cash Earnings, Low Cash Flow Base, Likely Undeclared Earnings


Despite a decline in operating’s margins as well as a decline in pretax margins, the company’s earnings rose.

EBIT Margin History
PreTax Margin History
EBIT Margin Versus PreTax Margin

Quadrant label definitions. Hover to know more

Operation driven Earnings, One-time Favorables, Low Earnings Base, One-time Unfavorables

Access our Ratings and Scores for Central Pacific Financial Corp.

Company Profile

Central Pacific Financial Corp. is a bank holding company, which engages in the provision of commercial banking services through its wholly owned subsidiary, Central Pacific Bank. It operates through the following segments: Banking Operations, Treasury, and All Others. The Banking Operations segment includes construction and real estate development lending, commercial lending, residential mortgage lending and servicing, indirect auto lending, trust services, and retail brokerage services. The Treasury segment involves in managing company’s investment securities portfolio and wholesale funding activities. The All Others segment consists electronic banking, data processing, and management of bank owned properties. The company was founded on February 1, 1982 and is headquartered in Honolulu, HI.

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