Bank bid includes branch cutbacks
By David Butts
Advertiser Staff Writer
Central Pacific Bank said today it would close 10 of the 45 combined branches it will control if its hostile bid to take over City Bank succeeds.
Yesterday Central Pacific Bank, the state's fourth-largest financial institution, made an unsolicited offer to buy local rival City Bank, the fifth largest, for about $285 million or $70 per City Bank share.
Central Pacific Bank has 24 branches. City Bank, owned by CB Bancshares Inc., has 21. Many of the branches are within blocks of each other.
"We have a working estimate of about 10 branches in close proximity of one another which could be considered for consolidation," Central Pacific Bank chairman Clint Arnoldus said in a statement. He also said the bank may look at opening other branches in areas not served by an existing branch.
Central Pacific Bank officials have not said how many of the combined 1,000 jobs at the two banks would be eliminated by the merger. The potential closing of more than 20 percent of the branches is the first indication of how much trimming the merged bank may do.
In a conference call with investors and analysts today, Arnoldus described his attempts to sell the merger plan to City Bank executives, who have yet to comment publicly on the offer and have rebuked Arnoldus' requests for meetings.
Arnoldus said he made a "soft attempt" to discuss a merger last year and City Bank executives declined. Arnoldus decided this year he would pursue the merger even if City Bank officials did not agree to it. On March 17 he sent his financial advisers to City Bank to explain the offer.
Arnoldus said he did not attend the March 17 meeting because his relationship with City Bank executives was so chilly he believed they would not agree to meet if Arnoldus was there. "Based on our offer last year, they were not sending me Christmas cards," Arnoldus said.
Finally City Bank did agree to a meeting on April 2, Arnoldus said, but the City Bank officials did not respond to the offer. They just listened and asked questions, Arnoldus said.
Arnoldus said he made one more attempt to reach City Bank by sending letters to individual board members, but that too failed. At that point he decided to take his offer directly to the shareholders in hopes they would force City Bank management to respond.
Also today, CPB Inc., parent of Central Pacific Bank, reported that first-quarter net income grew 14 percent to $8.6 million, or 52 cents per diluted share, from the $7.5 million, or 47 cents per share, posted during the same period last year.
Arnoldus said the earnings growth "further supports our proposal to combine CPB Inc. with CB Bancshares Inc."
CPB assets grew to $2.03 billion, a 9 percent increase over the $1.86 billion reported a year ago. Investment securities increased to $528.3 million, up 29 percent from $409.6 million reported last year. Total loans grew 5 percent to $1.34 billion, compared to $1.27 billion a year ago.
Total deposits grew to $1.65 billion, an increase of 12 percent over the $1.48 billion reported as of March 31, 2002. Non-interest-bearing deposits increased by 33 percent to $297.8 million, compared to $223.4 million a year ago.
The bank said net interest income before provision for loan losses was $22.4 million, up 5 percent from the first quarter of 2002. The net interest margin was 4.98 percent, a slight decrease from the 5.07 percent reported a year ago.
The bank made no provision for loan losses in the first quarter of 2003, as net recoveries of $912,000 were recorded during the quarter. The provision for loan losses was $300,000 and net charge-offs were $145,000 in the first quarter of 2002.
"We are focusing on increasing our fee income through an expansion of trust, asset management and private banking services, and see strong potential for growth in these high-value services," said Neal Kanda, vice president and chief financial officer.
