Central Pacific says net income up by 4 percent

Advertiser Staff

Central Pacific Bank's parent company reported that second-quarter net income grew by 4 percent after the bank took a $620,000 charge for advertising related to its hostile takeover bid of rival CB Bancshares Inc., the parent of City Bank.

Also yesterday, Central Pacific responded to a lawsuit filed against it by CB Bancshares on Monday, calling the suit a meritless attack on CB's own shareholders.

CB Bancshares seeks to suspend the voting rights of its shareholders who pledged to support the takeover, alleging that the support constituted a transfer of "beneficial ownership" of more than 10 percent of the stock in violation of Hawai'i law.

The suit does not identify the shareholders, but said that they own as much as 30 percent or more of stock, which CB Bancshares also believes it should have the right to buy back.

Central Pacific said the support was solely to call a special meeting to consider its offer and was not a transfer of beneficial ownership, which is defined as direct or indirect voting power.

"This lawsuit is an utterly unprecedented assault on the people who own their company, on the intent of Hawai'i law, and on shareholder democracy," Central Pacific said in a statement.

In a conference call with analysts yesterday, Clint Arnoldus, president and CEO of Central Pacific, gave an update on the merger attempt when he discussed the bank's quarterly earnings.

"The most important message I want to convey is (that) we remain committed to moving forward with this transaction," Arnoldus said. "Although we are very disappointed by the many obstacles CB Bancshares has placed in the way ... we still hope CB Bancshares will negotiate with us," Arnoldus said.

CB Bancshares executives, who are fighting Central Pacific's $272 million takeover bid, reported that the company has spent $4.2 million defending against the takeover attempt.

Central Pacific did not report its total expenses related to the merger, only the advertising costs.

Neil Kanda, Central Pacific's chief financial officer, said that legal and other expenses related to the merger will be capitalized, or absorbed, by the bank.

In its quarterly earnings report, Central Pacific said net income increased because of growing deposits and improved asset quality.

The bank reported that total assets grew to $2.09 billion in the quarter, up 8 percent from the $1.94 billion reported a year ago. Total nonperforming assets declined 92 percent to $274,000, or 0.01 percent of total assets, compared to $3.2 million, or 0.17 percent, of total assets a year ago.

Total deposits grew to $1.71 billion, an increase of 10 percent from the $1.56 billion reported last year.

Central Pacific said net interest income before provision for loan losses was $22.3 million, up 2 percent.