Loans to Calif. homebuilders shrink Central Pacific's net | The Honolulu Advertiser

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Loans to Calif. homebuilders shrink Central Pacific's net | The Honolulu Advertiser | Hawaii's Newspaper

Posted on: Friday, February 1, 2008

Loans to Calif. homebuilders shrink Central Pacific's net

By Greg Wiles
Advertiser Staff Writer

Loans made to California homebuilders continue to dog Central Pacific Financial Corp., which yesterday reported fourth-quarter profit shrank by 81 percent as credit costs ballooned.

The parent company of Central Pacific Bank said preliminary results show it earned $3.55 million, or 12 cents a share, in the October-to-December quarter.

That was about one-fifth of the $18.8 million, or 61 cents a share, earned in the quarter a year earlier.

"Our fourth quarter results were negatively impacted by increased credit costs due to continued deterioration in California's housing market," said President and Chief Executive Officer Clint Arnoldus on a conference call discussing the results with analysts and investors.

Central Pacific's earnings tumbled for a second straight quarter because of construction loans made to home builders in California's Inland Empire and Central Valley areas. The builders have had troubles selling homes as quickly as originally planned as an indirect result of the subprime mortgage crisis, said Chief Financial Officer Dean Hirata.

Because of that the bank has set aside $28.2 million for potential losses from the loans and hired former Mainland bankers to help with the situation. Hirata said only a small portion of the problem loans are being considered for foreclosure at this point.

Central Pacific also said:

Fourth quarter profit could further be lowered by $1 million depending on what's decided on taking a goodwill impairment charge. The action relates to 2004 purchase of City Bank and the fact that market capitalization has slipped below book value.

An after-tax loss of $1 million for an investment portfolio repositioning and a $4.7 million expense in increasing the reserve for unfunded commitments.

Loans and leases increased by 1.7 percent to $69.2 million from the prior quarter.

Net interest income fell to $52.5 million from $53.4 million a year earlier as its net interest margin shrank to 4.15 percent from 4.47 percent a year earlier.

Total assets of $5.7 billion at the end of the year were 4.4 percent higher than a year earlier.

At the end of the year non-performing assets totaled 1.07 percent of total assets. A year earlier it was 0.16 percent.

The bank also announced it had received board authorization to buy back an additional 1.2 million of its shares, adding to its existing repurchase plan. Arnoldus also the bank intends to maintain its dividend at current levels.

Reach Greg Wiles at gwiles@honoluluadvertiser.com.

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