UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OF 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File Number 0-12396
CB BANCSHARES, INC.
(Exact name of registrant as specified in its charter)
Hawaii 99-0197163
(State of Incorporation) (IRS Employer Identification No.)
201 Merchant Street Honolulu, Hawaii 96813
(Address of principal executive offices)
(808) 546-2411
(Registrant's Telephone Number)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes [X] No [ ]
The number of shares outstanding of registrant's common stock at April 30,
1995 was 3,551,228 shares.
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
CB BANCSHARES, INC. AND SUBSIDIARIES (unaudited)
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
(in thousands, except shares and per share data)
- -------------------------------------------------------------------------------
March 31, December 31, March 31,
1995 1994 1994
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
ASSETS
Cash and due from banks $ 49,902 $ 48,748 $ 45,854
Federal Funds Sold and securities
purchased 5 5 41,805
Investment securities:
Held-to-maturity 223,052 247,995 125,851
Available for sale 42,563 13,998 30,202
Trading 1,039 4,997 -
Gross loans 1,104,711 1,082,187 555,921
Less allowance for loan losses (14,423) (21,089) (10,043)
Net Loans 1,090,288 1,061,098 545,878
Premises and equipment 17,619 17,287 10,272
Other assets 43,210 33,247 26,987
Goodwill 11,923 12,136 -
- -------------------------------------------------------------------------------
Total assets $1,479,601 $1,439,511 $ 826,849
===============================================================================
LIABILITIES AND STOCKHOLDERS EQUITY
Deposits
Non-interest bearing $ 124,078 $ 135,368 $ 109,429
Interest bearing 828,332 788,076 546,823
- -------------------------------------------------------------------------------
Total deposits 952,410 923,444 656,252
Short-term borrowings 283,673 274,903 5,474
Other liabilities 28,531 16,795 13,463
Long-term debt 96,232 106,850 65,000
- -------------------------------------------------------------------------------
Total liabilities 1,360,846 1,321,992 740,189
Deferred gain 6,220 6,354 6,667
Stockholders' equity (Note B)
$1 par value, 50,000,000 shares authorized
Issued and outstanding - 3,551,228 shares
(2,706,000 shares at March 31, 1994) 3,551 3,551 2,706
Additional paid-in capital 65,080 65,080 39,723
Retained earnings 44,068 42,886 37,542
Unrealized valuation adjustment (164) (352) 22
Total stockholders' equity 112,535 111,165 79,993
- -------------------------------------------------------------------------------
Total liabilities and
stockholders' equity $1,479,601 $1,439,511 $ 826,849
===============================================================================
</TABLE>
2
<PAGE>
CB BANCSHARES, INC. AND SUBSIDIARIES (unaudited)
CONSOLIDATED STATEMENT OF INCOME
<TABLE>
<CAPTION>
(in thousands, except per share data) Quarter ended
- -------------------------------------------------------------------------------
March 31, March 31,
1995 1994
- -------------------------------------------------------------------------------
<S> <C> <C>
Interest income
Interest and fees on loans $23,230 $10,996
Interest and dividends on investment securities
Taxable 4,023 2,466
Non taxable 70 107
Dividends 162 136
Other interest income 118 278
- -------------------------------------------------------------------------------
Total interest income 27,603 13,983
Interest Expense
Deposits 7,815 3,214
Short-term borrowings 4,131 138
Long-term debt 1,716 638
- -------------------------------------------------------------------------------
Total interest expense 13,662 3,990
Net interest income 13,941 9,993
Provision for loan losses 120 409
- -------------------------------------------------------------------------------
Net interest income after provision
for loan losses 13,821 9,584
Other income
Service charges and fees 2,072 1,829
Other 112 112
- -------------------------------------------------------------------------------
Total other income 2,184 1,941
Other expenses
Salaries and employee benefits 5,074 3,358
Net occupancy and equipment expense 2,419 1,782
Other 4,776 2,658
- -------------------------------------------------------------------------------
Total other expenses 12,269 7,798
- -------------------------------------------------------------------------------
Income before income taxes 3,736 3,727
Provision for income taxes 1,400 1,463
- -------------------------------------------------------------------------------
Net income $2,336 $2,264
===============================================================================
Per common share:
Net income $ 0.66 $ 0.84
===============================================================================
</TABLE>
3
<PAGE>
CB BANCSHARES, INC. AND SUBSIDIARIES (unaudited)
CONSOLIDATED STATEMENTS OF CASH FLOW
<TABLE>
<CAPTION>
(in thousands, except per share data) Quarter ended March 31,
- -------------------------------------------------------------------------------
1995 1994
- -------------------------------------------------------------------------------
<S> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES:
Net Income $ 2,236 $2,264
Net adjustments to reconcile net income to cash
provided by operating activities 1,400 (277)
- -------------------------------------------------------------------------------
Net cash provided by operating activities 3,736 1,987
Cash flow provided by investing activities:
Increase (decrease) in federal funds sold and
securities under resale agreements 0 (16,800)
Proceeds from maturities of investment securities 7,546 15,034
Purchase of investment securities (6,171) (29,900)
Net (decrease) increase in loans (29,287) (6,691)
Capital expenditures (634) (329)
- -------------------------------------------------------------------------------
Net cash provided (used) in investing activities 28,546 (38,686)
Cash flow provided by financing activities:
Net increase in deposits 28,966 34,097
Net increase (decrease) in short-term borrowings 8,770 (1,864)
Increase (decrease) in long-term debt (10,618) 0
Cash dividend paid (1,154) (779)
- -------------------------------------------------------------------------------
Net cash provided by financing activities 25,964 31,454
INCREASE (DECREASE) IN CASH 1,154 (5,245)
- -------------------------------------------------------------------------------
Cash and due from banks at beginning of period 48,748 51,099
- -------------------------------------------------------------------------------
Cash and due from banks at end of period $49,902 $45,854
===============================================================================
</TABLE>
4
<PAGE>
CB BANCSHARES, INC. AND SUBSIDIARIES
Note to consolidated Financial Statements
March 31, 1995
NOTE A - BASIS FOR PRESENTATION
The unaudited financial statements have been prepared in accordance with the
instructions to Form 10-Q and do not include all information and footnotes
necessary for a fair presentation of the financial condition, results of
operations, and cash flows of CB Bancshares, Inc., and subsidiaries, in
conformity with generally accepted accounting principles.
The financial statements reflect all adjustments of a normal and recurring
nature which are, in the opinion of management, necessary for a fair
presentation of the results for the interim periods.
NOTE B - ACQUISITION OF INTERNATIONAL SAVINGS & LOAN ASSOCIATION, LTD (ISL)
On April 4, 1994, the Company acquired all the outstanding stock of
International Holding Capital Corp. at a purchase price of $52.4 million. As a
result of the acquisition, ISL became a wholly-owned subsidiary of the Company.
The consideration consisted of $26.2 million in cash and 845,228 shares of
newly issued Company common stock. The acquisition was accounted for using the
purchase method of accounting and the results of operations of ISL are included
in the Company's financial statements from the date of acquisition.
5
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
NET INCOME
Consolidated net income for the quarter ended March 31, 1995, totaled $2.34
million, or $0.66 per share, as compared to $2.26 million, or $0.84 per share
for the same quarter last year. The decrease in 1995 per share earnings was
due primarily to the increase in the average shares to 3,551,228 compared to
the 2,706,000 shares outstanding during the quarter ended March 31, 1994. In
April 1994, 845,228 shares of common stock were issued in connection with the
acquisition of International Savings & Loan Association, Ltd ("ISL") - see
Note
B to Financial Statements.
The Company's annualized return on average assets for the quarter ended March
31, 1995 was 0.65%, as compared to 1.13% for the same quarter last year. The
Company's annualized return on average stockholder's equity was 8.47% for the
quarter ended March 31, 1995, as compared to 11.46% for the same quarter last
year.
NET INTEREST INCOME
A comparison of net interest income for the three months ended March 31, 1995,
and 1994 is set forth below on a taxable basis:
<TABLE>
<CAPTION>
Quarter Ended March 31,
1995 1994
(dollars in thousands)
<S> <C> <C>
Interest income $27,639 $14,038
Interest Expense 13,662 3,990
------- -------
Net interest income $13,977 $10,048
======= =======
Net interest margin 4.15% 5.82%
======= =======
</TABLE>
The growth in net interest income in 1995 reflects the interest-earning assets
and interest - bearing liabilities as a result of the ISL acquisition.
Specifically, weighted average earning assets increased by $597.2 million
during the three month periods ended March 31, 1995, as compared to the
respective 1994 period. Similarly, weighted average interest - bearing
liabilities increased by $581.1 million during the three months ended March 31,
1995, as compared to the respective 1994 period.
The weighted average yield on interest-earning assets was 8.22% for the first
quarter of 1995 compared to 7.85% for the respective 1994 period. The weighted
average cost of interest-bearing liabilities increased to 4.80% for the three
month periods ended March 31, 1995, as compared to 2.81% for the respective
1994 period.
6
<PAGE>
As a result of the foregoing, the Company's net interest margin decreased to
4.15% for the three months ended March 31, 1995 from 5.82% in the 1994 period.
Management principally attributes the decline in the 1995 net interest margin
primarily to the increase in the cost of funds due to the change in market
rates, which exceeded the 37 basis-point increase in yield on interest-earning
assets.
PROVISION AND ALLOWANCE FOR LOAN LOSSES
The allowance for loan losses at March 31, 1995 was $14.4 million, and
represented 1.31% of total loans. The ratio at December 31, 1994 and March 31,
1994, was 1.32% and 1.81%, respectively. The 50 basis point decrease in the
allowance ratio at March 31, 1995, compared to the allowance ratio at March 31,
1994, was due primarily to the change in the mix of the Company's loan
portfolio. As a result of the acquisition of ISL, real estate mortgage loans,
which have a lower historical loan loss experience, increased to 72.0% of the
total loan portfolio at March 31, 1995, compared to 54.2% at the same time in
1994.
Changes in the allowances for loan losses were as follows:
<TABLE>
<CAPTION>
Quarter Ended March 31,
1995 1994
(dollars in thousands)
<S> <C> <C>
Balance at beginning of period $14,426 $ 9,816
Provision charged to expense 120 409
Net recoveries(charge-offs) (124) (182)
-------- --------
Balance at end of period $14,422 $10,043
</TABLE>
7
<PAGE>
NON-PERFORMING ASSETS
A summary of non-performing assets follows:
<TABLE>
<CAPTION>
March 31,
1995 1994
---------------------
<S> <C> <C>
Loan accounted for on a
non-accrual basis $ 8,305 $4,043
Loan contractually past due
ninety days or more as to
interest or principal payments 8,530 1,798
---------------------
Total non-performing loans 16,835 5,841
Other Real Estate Owned 1,882 0
---------------------
Total non-performing assets $18,717 $5,841
=====================
</TABLE>
At March 31, 1995, non-performing assets represented 1.26% of total assets,
compared to 0.71% at March 31, 1994. The increase in non-performing asset at
March 31, 1995 was due primarily to the inclusion of $10.9 million of ISL's
non-performing assets. Loans past due 90 days or more and still accruing are
included in the non-performing ratios.
OTHER OPERATING INCOME
Other operating income totaled $2.18 million for the three month periods ended
March 31, 1995, which compares to $1.94 million for the comparable period in
1994. The increase in other operating income for the three months ended March
31, 1995 was comprised of ISL's other income of $.47 million which was offset
by a $.23 million decrease in City Bank's other income.
OTHER OPERATING EXPENSES
Other operating expenses totaled $12.27 million for the three months ended
March 31, 1995, an increase of $4.47 million over the same period in 1994. The
increase in other operating expenses resulted primarily from the inclusion of
ISL's operating expenses, which amounted to $3.9 million for the three months
ended March 31, 1995.
8
<PAGE>
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
On April 27, 1995, the Company held its Annual Meeting of Stockholders
to: 1) elect three Class III Directors, and 2) to elect the firm Grant
Thornton as independent auditors for 1995. All of the Company's
proposals were passed.
PROPOSAL 1 - The three nominees for directors and voting results were
as follows:
Voted for Withheld
--------- --------
Kunihiko Adachi 2,564,781 44,480
Raymond Y. Arakawa 2,564,442 41,819
Frederic K.T. Chun 2,567,992 41,269
PROPOSAL 2 - Voting results for the election of Grant Thornton as
independent auditors was as follows:
For: 2,575,119
Against: 20,038
Abstain: 14,104
Broker non-votes: None
Item 6. Exhibits and Reports on Form 8-K
No reports on Form 8-K were filed during the quarter ended March 31,
1995.
9
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CB BANCSHARES, INC. AND SUBSIDIARIES
May 15, 1995 By /s/ Daniel Motohiro
Daniel Motohiro, Treasurer
and Principal Financial Officer
10
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> MAR-31-1995
<CASH> 49,902
<INT-BEARING-DEPOSITS> 828,332
<FED-FUNDS-SOLD> 5
<TRADING-ASSETS> 1,039
<INVESTMENTS-HELD-FOR-SALE> 42,563
<INVESTMENTS-CARRYING> 223,052
<INVESTMENTS-MARKET> 219,283
<LOANS> 1,104,711
<ALLOWANCE> 14,423
<TOTAL-ASSETS> 1,479,601
<DEPOSITS> 952,410
<SHORT-TERM> 283,673
<LIABILITIES-OTHER> 28,531
<LONG-TERM> 96,232
<COMMON> 3,551
0
0
<OTHER-SE> 108,984
<TOTAL-LIABILITIES-AND-EQUITY> 1,479,601
<INTEREST-LOAN> 23,230
<INTEREST-INVEST> 4,255
<INTEREST-OTHER> 118,
<INTEREST-TOTAL> 27,603
<INTEREST-DEPOSIT> 7,815
<INTEREST-EXPENSE> 13,662
<INTEREST-INCOME-NET> 13,941
<LOAN-LOSSES> 120
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 12,269
<INCOME-PRETAX> 3,736
<INCOME-PRE-EXTRAORDINARY> 3,736
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,336
<EPS-PRIMARY> 0.66
<EPS-DILUTED> 0.66
<YIELD-ACTUAL> 8.22
<LOANS-NON> 8,305
<LOANS-PAST> 8,530
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 14,426
<CHARGE-OFFS> 212
<RECOVERIES> 88
<ALLOWANCE-CLOSE> 14,422
<ALLOWANCE-DOMESTIC> 13,196
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 1,226
</TABLE>
