Hawai'i banks say 2002 very good year
By Frank Cho
Advertiser Staff Writer
Hawai'i-based banks enjoyed a banner year in 2002 as many other local businesses struggled to shake off the economic aftershocks of Sept. 11.
The lowest interest rates in almost 40 years have meant that Hawai'i bankers were able to earn more on the money they loaned than they paid on deposits, enjoying healthy margins. And because local banks have mostly avoided loans to larger shaky companies, profit easily outstripped the cost of defaults.
"For most of 2002, bank net income benefited from the low interest-rate environment, as the bank was able to lower its cost of funds," said Robert Clarke, chairman, president and chief executive officer of Hawaiian Electric Industries Inc., the parent company of American Savings Bank.
With delinquencies reaching five-year lows last year, American Savings increased the spread between what it paid depositors and what is collected from borrowers in interest to 3.24 percent last year from 3.17 percent in 2001.
CB Bancshares Inc., the parent of City Bank, yesterday said that net income more than doubled in 2002 to $13.5 million, up from $6.2 million the previous year.
"Thanks to strong growth in our core deposits and continued improvement in efficiency, we achieved the highest earnings in our history," said Ronald Migita, CB Bancshares president and chief executive officer.
The parent company of First Hawaiian Bank earlier reported that fourth-quarter earnings rose 55 percent, while CPB Inc., parent company of Central Pacific Bank, said fourth-quarter profits surged 14.5 percent on higher bank-fee income and lower interest expense.
CPB, the state's fourth-largest financial institution in total assets, reported net income for the three months ending Dec. 31 of $10.2 million, or 62 cents per diluted share, compared with $8.9 million, or 55 cents, in the same year-ago period.
Revenues during the quarter grew 12 percent to $27.6 million, up from $24.6 million in the same quarter a year earlier.
Asset quality continued to improve at the bank subsidiary, with total nonperforming assets decreasing by 28 percent to $2.3 million or 0.12 percent at the end of last year.
"The record performance of the past year is a result of the hard work and dedication of our employees," Clint Arnoldus, the bank holding company's chairman, president and chief executive officer, said in a statement yesterday.
For the full year, CPB reported earnings of $33.3 million on total revenues of $104.3 million, a 15.9 percent increase from the $28.7 million it earned in 2001.
Earnings grew nearly 19 percent in 2002 to $2.04 per diluted share, up from $1.72 in 2001. Return on average equity rose to 20.6 percent, compared with 19.3 percent, and return on average assets increased to 1.7 percent from 1.6 percent.
Arnoldus said the bank's future earnings growth will depend on expanding its market share.
"Hawai'i's economy continues its gradual recovery from the shocks of 2001, with visitor arrivals increasing, strong construction activity and rising home sales," he said. "While we believe the market for financial services will grow modestly in 2003, our growth will primarily be fueled by increases in loan and deposit market share."
The bank also said it plans to expand its penetration of the investment and wealth-management market in Hawai'i.
"As a result, our team is targeting annual EPS (earnings per share) growth in the 10 to 12 percent range," Arnoldus said.
Total assets grew to a record $2 billion at the end of last year, up 10 percent from $1.8 billion a year earlier. Total loans rose by 2 percent to $1.3 billion, while total deposits grew to $1.6 billion, an increase of 13 percent over the previous year.
Reach Frank Cho at 525-8088 or at fcho@honoluluadvertiser.com.
