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The Honolulu Advertiser
Posted on: Friday, October 18, 2002

City Bank parent earnings increase

By Frank Cho
Advertiser Staff Writer

CB Bancshares Inc., parent company of City Bank, said third-quarter operating earnings rose 11.4 percent from a year ago because of higher interest margins and increased income from fees and services.

The Honolulu bank holding company's profit from operations for the three months ended Sept. 30 rose to $3.7 million, or 92 cents a share, from $3.3 million, or 85 cents, in the same year-earlier quarter.

The company, however, took charges related to certain investments of $951,000 in the just-ended quarter, and $4 million in the same year-ago period. When the charges are included, the company reported net income of $2.7 million, or 69 cents a share, compared with a net loss of $676,000, or 18 cents a share, from the same quarter in 2001.

CB Bancshares is the fourth-largest bank holding company in Hawai'i and has been working to reduce its costs while increasing fee income from financial services.

Because of the low interest-rate environment, CB Bancshares has steadily been reducing its exposure to fixed-rate, long-term assets such as real-estate loans and replacing short-term deposits with longer-term deposits and borrowings.

For the first nine months of 2002, CB Bancshares said, operating profits surged to $10.8 million, or $2.75 a share, up 17.2 percent from $9.2 million, or $2.37 a share, in the same period a year ago.

Net interest income rose to $19.2 million during the quarter and $57.7 million for the nine months that ended Sept. 30, up 1.1 percent and 11 percent, respectively. Net interest margins rose to 5.27 percent, up 91 basis points from the same period in 2001.

During the quarter, the company received regulatory approval to open its first Kaua'i branch. It will open in November and be the company's first in-store branch.

CB Bancshares said noninterest income for the third quarter was $3 million, down $9,000, or 0.3 percent.

For nine months, noninterest income rose $1.5 million to $10.7 million, an increase of 16.5 percent from a year ago on increased revenues from service fees.

CB Bancshares reported total assets of $1.6 billion as of Sept. 30, down 5 percent from the same quarter a year ago. Loans were $1.1 billion, down 13.3 percent, and deposits were $1.1 billion, down 2.9 percent from a year ago.

Nonperforming loans and nonperforming assets, a growing concern in the U.S. banking industry, were $15.3 million and $16.7 million, respectively, representing declines of 9.8 percent and 18.6 percent. The bank said the decrease in nonperforming assets was largely because of $2 million in commercial loans and $2.2 million in other real estate owned.

Despite the improved performance, uncertainly about the economy caused the bank to increase its provision for credit losses to $4 million during the quarter from $3.7 million a year ago. For the nine months, provision for credit losses was $13 million, up from $8.7 million at this time in 2001.

"The higher loan loss provision in 2002 is appropriate given the continuing economic uncertainty both locally and nationally," Ronald Migita, CB Bancshares' president and chief executive officer, said in a statement yesterday.

Reach Frank Cho at 525-8088 or at fcho@honoluluadvertiser.com.