Posted on: Wednesday, October 27, 2004

Central Pacific earnings rise

By Deborah Adamson
Advertiser Staff Writer

Central Pacific Financial Corp. reported a smaller profit for the third quarter compared with a year ago, as expenses related to its merger with CB Bancshares hurt the company's bottom line. But excluding the charges, earnings rose by 20 percent and met Wall Street's expectations.

The parent of Central Pacific Bank and City Bank recorded a net income of $7.7 million, or 42 cents a share, compared with $8.3 million, or 51 cents, in the like period a year ago. Excluding one-time merger costs, profits came to $10.4 million, or 57 cents, up from $8.7 million, or 53 cents.

Higher net interest income and a lower tax rate contributed to the bottom line, the bank said.

Revenue rose by 23 percent to $33.5 million from $27.2 million in the year-ago period.

Analysts had been expecting revenue of $29.3 million and earnings of 57 cents a share, according to Thomson First Call.

Central Pacific also reaffirmed that it expects to earn $2.50 to $2.60 a share for 2005.

Central Pacific Financial and CB Bancshares, the former parent of City Bank, merged on Sept. 15. Their subsidiary banks will be combining in the first quarter of 2005.

"To date, we've been very pleased with the integration progress and the minimal impact we've experienced with our existing customers," said Chief Executive Clinton Arnoldus in a conference call with analysts.

"We feel very confident that our market position as the fourth-largest financial institution in Hawai'i and the service reputation that's driven the success of both Central Pacific and City Bank will result in significant success in our market place."

Total assets rose by 116 percent to $4.6 billion. Excluding the impact of the merger, total assets rose by 20 percent. Total loans and leases also more than doubled to $3.1 billion as a result of the merger. Without it, total loans and leases would have increased by 17 percent. Total deposits went up by 90 percent to $3.3 billion, but excluding the merger deposits would have risen by 11 percent.

In the quarter, net interest income before provision for loan losses rose by 23 percent to $28.6 million as its portfolio of interest-earning assets increased. Net interest income is what banks earn from loans and investments minus what they pay on deposits and other liabilities. Other operating income rose by 26 percent to $4.9 million, in part because of increases in service charges.

Operating expenses jumped 55 percent to $22.1 million — salaries and employee benefits rose by 48 percent to $11.3 million, and other costs mainly related to the merger rose by 62 percent to $10.8 million.

During the quarter, certain Central Pacific executives were paid retention bonuses related to the merger totaling $2 million.

Nonaccrual loans — including those past due 90 days or more — rose more than six-fold to $11.6 million from $1.8 million in 2003. Loans to three borrowers totaling $6.6 million are secured by commercial property.

Shares of Central Pacific fell by 16 cents to $29.29 yesterday.

Reach Deborah Adamson at dadamson@honoluluadvertiser.com or 525-8088.