Strong earnings at City Bank

By David Butts
Advertiser Staff Writer

The parent company of City Bank said net income almost doubled in the fourth quarter despite spending $470,000 on its fight against a hostile takeover attempt by Central Pacific Financial Corp.

CB Bancshares reported $6.9 million, or $1.56 per share, in net income for the three months ended Dec. 31 — a 90.7 percent increase over the $3.6 million, or 83 cents a share, earned during the same period a year earlier.

"City Bank has delivered three consecutive quarters of outstanding financial performance fueled by continued strength in the bank's core businesses," said Ronald Migita, president and chief executive of CB Bancshares, in a statement. "We believe City Bank is well positioned ... to enhance value for the shareholders."

The earnings are significant as Central Pacific and City Bank head toward a likely shareholder vote on whether to merge the state's fourth and fifth largest banks.

Earlier this month, City Bank pointed to its gains in profit — up 96 percent in the second quarter and 83 percent in the third — to argue that shareholders should reject the Central Pacific offer of $70 per share. In newspaper advertisements, City Bank said a more appropriate price would be $109 per share, given its strong earnings growth since the original offer was made in April.

"With the performance in 2003, the hostile takeover proposal is clearly inadequate," said Dean Hirata, CB Bancshares chief financial officer. Hirata said that once the fourth-quarter earnings are factored in, the Central Pacific offer should be $126 a share. That calculation is based on a median price paid for banks bought over the past year, he said.

Hirata said City Bank's jump in earnings was "reflective of improved asset quality."

Nonperforming loans amounted to $5.7 million as of Dec. 31, a decrease of $7 million, or 55 percent, from a year earlier. Nonperforming assets were at $5.9 million, a decline of $9 million. Improvement in loan and asset quality meant the bank could cut its provision for credit losses to $1.2 million in the fourth quarter, or $3 million below the year-earlier period.

City Bank said net income for the year was $20.7 million, or $4.72 per share — up 54 percent from $13.5 million, or $3.11 per share, in 2002.

Migita said the bank's mortgage business and loans at its California operations contributed to the growth in income.

City Bank said it spent $6.6 million last year, including $470,000 in the fourth quarter, to defend itself against the unsolicited takeover bid from Central Pacific.

CB Bancshares stock rose $1.46 yesterday, closing at $64.50 per share. The earnings were announced after the close of the market.

Reach David Butts at dbutts@honoluluadvertiser.com or 535-2453.