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The Honolulu Advertiser
Posted on: Wednesday, October 23, 2002

CPB Inc. continues to reap profits

By Frank Cho
Advertiser Staff Writer

CPB Inc., the parent company of Central Pacific Bank, said third-quarter operating earnings surged nearly 30 percent to its 14th consecutive quarterly record, reflecting increased investment fee income and improved interest margins.

Hawai'i's third-largest bank holding company's profit from operations for the quarter that ended Sept. 30 rose to $8.4 million, or $1.03 a share diluted, up 29.6 percent from $6.5 million, or 77 cents, in the same quarter last year.

Still, CPB's net income fell 9.5 percent to $7.9 million, or 97 cents a diluted share, from $8.7 million, or $1.06 a share, in the same quarter a year ago. The company said the drop was because of a one-time $877,000 charge for back interest on a state tax assessment in the latest quarter and a $2.2 million gain from a federal tax credit in the year earlier period. CPB said the state tax assessment is under appeal.

"Looking ahead, we remain confident in our ability to gain loan and deposit market share and increase our investment and wealth management penetration," Clint Arnoldus, CPB's chairman, president and chief executive officer, said in a statement.

The bank's earnings per share met Wall Street's estimates of 97 cents a share, according to a survey of analysts. The company's stock climbed 58 cents to close at a 52-week high of $48.57.

During the third quarter, the company announced plans to buy back 540,000 shares, or 3.4 percent, of outstanding common stock, in its seventh stock repurchase program. It also announced a 2-for-1 common stock split.

"The stock buyback will increase earnings per share, and the stock split is expected to increase liquidity in the company's shares," Arnoldus said. "We believe both actions will benefit shareholders."

The company, along with other banks, have benefited from falling interest rates that increased the spread in the bank's net interest margin to 5.42 percent, an increase of 42 basis points from 4.82 percent a year ago.

"There's not too much noise this quarter. The bank is still looking strong," said Brett Rabatin, a banking analyst with Midwest Research in Nashville, Tenn.

The company's third-quarter revenues rose 14.1 percent to $26.3 million, up from $23 million in the same year-ago quarter. Net interest income, before provision for loan losses was $23.1 million, up 17.6 percent from a year ago.

The company's provision for loan losses for the quarter was $300,000, down 73 percent from $1.1 million a year ago.

"We've been able to reduce the provision based on an assessment of the quality of the loan portfolio and the level of the allowance for loan losses," said Neal Kanda, CPB's chief financial officer.

Rabatin said economic growth for Hawai'i over the next five years is expected to be small, but he expects CPB to continue to perform well.