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 September 30, 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 October 31,
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)
- -------------------------------------------------------------------------------
September 30, December 31, September 30,
1995 1994 1994
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
ASSETS
Cash and due from banks $ 46,317 $ 48,748 $ 51,423
Federal Funds Sold and securities
purchased 1,705 5 2,905
Investment securities:
Held-to-maturity (market value of
$203,267 in 1995, $238,189 at
12-31-95 and $220,713 at 9-30-94) 202,266 247,995 227,656
Available for sale 49,856 13,998 32,673
Trading 568 4,997 -
Gross loans 1,128,063 1,075,424 1,013,496
Less allowance for loan losses (14,426) (14,326) (13,806)
- -------------------------------------------------------------------------------
Net Loans 1,113,637 1,061,098 999,690
Premises and equipment 17,695 17,287 13,953
Other assets 43,748 33,247 41,231
Goodwill 11,490 12,136 12,348
- -------------------------------------------------------------------------------
Total assets $1,487,282 $1,439,511 $1,381,879
===============================================================================
LIABILITIES AND STOCKHOLDERS EQUITY
Deposits
Non-interest bearing $ 123,501 $ 135,368 $ 125,241
Interest bearing 897,686 788,076 788,645
- -------------------------------------------------------------------------------
Total deposits 1,021,187 923,444 913,886
Short-term borrowings 264,908 274,903 172,997
Other liabilities 33,038 16,795 75,399
Long-term debt 46,820 106,850 103,381
- -------------------------------------------------------------------------------
Total liabilities 1,365,953 1,321,992 1,265,663
Deferred gain 6,497 6,354 6,444
Stockholders' equity (Note B)
$1 par value, 50,000,000 shares authorized
Issued and outstanding - 3,551,228 shares
3,551 3,551 3,551
Additional paid-in capital 65,080 65,080 65,080
Retained earnings 46,170 42,886 41,331
Unrealized valuation adjustment 31 (352) (190)
- -------------------------------------------------------------------------------
Total stockholders' equity 114,832 111,165 109,772
- -------------------------------------------------------------------------------
Total liabilities and
stockholders' equity $1,487,282 $1,439,511 $1,381,879
===============================================================================
</TABLE>
2
<PAGE>
CB BANCSHARES, INC. AND SUBSIDIARIES (unaudited)
CONSOLIDATED STATEMENT OF INCOME
<TABLE>
<CAPTION>
(in thousands, except per share data) Quarter ended Nine months ended
- -------------------------------------------------------------------------------------------------------------
September 30, September 30, September 30, September 30,
1995 1994 1995 1994
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Interest income
Interest and fees on loans $24,111 $20,307 $70,776 $50,605
Interest and dividends on investment securities
Taxable 4,038 4,465 12,157 10,416
Non taxable 63 71 203 283
Dividends 198 132 529 594
Other interest income 180 18 684 226
- -------------------------------------------------------------------------------------------------------------
Total interest income 28,590 24,993 84,349 62,124
Interest Expense
Deposits 9,816 6,081 26,774 15,120
Short-term borrowings 2,930 2,240 9,955 3,498
Long-term debt 1,874 1,973 6,416 4,397
- -------------------------------------------------------------------------------------------------------------
Total interest expense 14,620 10,294 43,145 23,015
- -------------------------------------------------------------------------------------------------------------
Net interest income 13,970 14,699 41,204 39,109
Provision for loan losses 420 375 660 1,125
- -------------------------------------------------------------------------------------------------------------
Net interest income after provision
for loan losses 13,550 14,324 40,544 37,984
Other income
Service charges and fees 2,221 1,584 6,595 6,704
Other 20 117 243 833
- -------------------------------------------------------------------------------------------------------------
Total other income 2,241 1,701 6,838 7,537
Other expenses
Salaries and employee benefits 5,236 4,369 15,487 13,607
Net occupancy and equipment expense 2,320 2,436 7,210 6,552
Other 4,419 4,378 13,875 12,058
- -------------------------------------------------------------------------------------------------------------
Total other expenses 11,975 11,183 36,572 32,217
- -------------------------------------------------------------------------------------------------------------
Income before income taxes 3,816 4,842 10,810 13,304
Provision for income taxes 1,434 1,729 4,064 4,942
- -------------------------------------------------------------------------------------------------------------
Net income $2,382 $3,113 $ 6,746 $ 8,362
=============================================================================================================
Per common share:
Net income $ .67 $ 0.88 $ 1.90 $ 2.56
=============================================================================================================
</TABLE>
3
<PAGE>
CB BANCSHARES, INC. AND SUBSIDIARIES (unaudited)
CONSOLIDATED STATEMENTS OF CASH FLOW
<TABLE>
<CAPTION>
(in thousands, except per share data) Nine months ended September 30,
- -------------------------------------------------------------------------------
1995 1994
- -------------------------------------------------------------------------------
<S> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES:
Net Income $ 6,746 $ 8,362
Net adjustments to reconcile net income to cash
provided by operating activities 12,741 42,666
- -------------------------------------------------------------------------------
Net cash provided by operating activities 19,487 51,028
Cash flow provided by investing activities:
Increase (decrease) in federal funds sold and
securities under resale agreements (1,700) 22,100
Proceeds from maturities of investment securities 26,965 54,196
Purchase of investment securities (17,094) (59,392)
Net (decrease) increase in loans (52,639) (120,050)
Capital expenditures (1,706) (3,013)
Purchase of International Holding Capital Corp.,
net of cash acquired - (21,720)
- -------------------------------------------------------------------------------
Net cash (used) in investing activities (46,174) (127,879)
Cash flow provided by financing activities:
Net increase (decrease) in deposits 97,743 (4,458)
Net increase (decrease) in short-term borrowings (9,995) 165,659
Increase (decrease) in long-term debt (60,030) (80,839)
Cash dividend paid (3,462) (3,187)
- -------------------------------------------------------------------------------
Net cash provided by financing activities 24,256 77,175
(DECREASE) IN CASH (2,431) 324
- -------------------------------------------------------------------------------
Cash and due from banks at beginning of period 48,748 51,099
- -------------------------------------------------------------------------------
Cash and due from banks at end of period $46,317 $51,423
===============================================================================
</TABLE>
4
<PAGE>
CB BANCSHARES, INC. AND SUBSIDIARIES
Note to consolidated Financial Statements
September 30, 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 three months ended September 30, 1995,
totaled $2.38 million, or $0.67 per share, as compared to $3.11 million, or
$0.88 per share for the same quarter last year. The decrease in net earnings
was due primarily to a $0.73 million decline in net interest income and $0.79
million increase in other expenses, offset by a $0.54 million increase in other
income.
Consolidated net income for the nine months ended September 30, 1995,
totaled $6.75 million, or $1.90 per share, as compared to $8.36 million, or
$2.56 per share for the same period year.
The Company's annualized return on average assets for the nine months ended
September 30, 1995 was 0.61%, as compared to 0.95% for the same period last
year. The Company's annualized return on average stockholder's equity was
7.96% for the nine months ended September 30, 1995, as compared to 11.38% for
the same period last year.
NET INTEREST INCOME
A comparison of net interest income for the three and nine months ended
September 30, 1995, and 1994 is set forth below on a taxable basis:
<TABLE>
<CAPTION>
Quarter Ended September 30, Nine months ended September 30,
1995 1994 1995 1994
(dollars in thousands) (dollars in thousands)
<S> <C> <C> <C> <C>
Interest income $28,622 $25,083 $84,454 $62,576
Interest Expense 14,620 10,294 43,145 23,015
------- ------- ------- -------
Net interest income $14,002 $14,789 $41,309 $39,561
======= ======= ======= =======
Net interest margin 4.05 4.76% 4.01% 5.07%
======= ======= ======= =======
</TABLE>
The $1.75 million growth in net interest income for the first three quarters
of 1995 reflects the increase in interest-earning assets and interest -
bearing liabilities as a result of the ISL acquisition. Specifically,
average earning assets increased by $333.42 million during the first three
quarters of 1995 as compared to the same period in 1994. Similarly,
weighted average interest - bearing liabilities increased by $321.03 million
during the first three quarters of 1995, as compared to the respective 1994
period.
The weighted average yield on interest-earning assets was 8.20% for the first
three quarters of 1995, as compared to 8.01% for the respective 1994 period.
The weighted average cost of interest-bearing liabilities increased to 4.79%
for the first three quarters of 1995, as compared to 3.48% for the respective
1994 period.
6
<PAGE>
As a result of the foregoing, the Company's net interest margin decreased to
4.01% for the first three quarters of 1995, representing a 106 basis point
decrease from the 5.07% for the same period in 1994. Management principally
attributes the decline in the 1995 net interest margin primarily to the 131
basis point increase in the cost of funds due to the change in market rates
and a shift into higher rate time deposits.
PROVISION AND ALLOWANCE FOR LOAN LOSSES
The allowance for loan losses at September 30, 1995 was $14.43 million,
and represented 1.28% of total loans. The ratio at December 31, 1994 and
September 30, 1994, was 1.33% and 1.36%, respectively. Changes in the
allowances for loan losses were as follows:
<TABLE>
<CAPTION>
Quarter ended Nine months ended
September 30, September 30,
1995 1994 1995 1994
(dollars in thousands) (dollars in thousands)
<S> <C> <C> <C> <C>
Balance at beginning of period $14,429 $10,430 $14,326 $ 9,816
Provision charged to expense 420 380 660 1,176
Allowance of IHCC at acquisition - 3,121 - 3,121
Net recoveries(charge-offs) (423) (125) (560) (307)
-------- -------- ------- --------
Balance at end of period $ 14,426 $13,806 $14,426 $13,806
</TABLE>
7
<PAGE>
NON-PERFORMING ASSETS
A summary of non-performing assets follows:
<TABLE>
<CAPTION>
September 30,
1995 1994
---------------------
<S> <C> <C>
Loan accounted for on a
non-accrual basis $8,783 $6,936
Loan contractually past due
ninety days or more as to
interest or principal payments 5,170 7,959
---------------------
Total non-performing loans 13,953 14,895
Other Real Estate Owned 3,453 1,235
---------------------
Total non-performing assets $17,406 $16,130
=====================
</TABLE>
Non-performing assets represented 1.17% of total assets at September 30,
1995 and 1994. Loans past due 90 days or more and still accruing are included
in the non-performing ratios.
OTHER OPERATING INCOME
Other operating income totaled $2.24 million for the three months ended
September 30, 1995, an increase of $0.54 million from the comparable period in
1994. For the nine months ended September 30, 1995, other operating income
totaled $6.84 million an decrease of $0.70 million from the comparable periods
in 1994. The decrease in other operating income for the nine months ended
September 30, 1995 was due to decreases in securities gains.
OTHER OPERATING EXPENSES
Other operating expenses totaled $11.98 million for the three months ended
September 30, 1995, an increase of $0.79 million from the same period in 1994.
For the nine months ended September 30, 1995, other operating expensed totaled
$36.57 million an increase of $4.36 million from the same period in 1994. The
lower fiscal 1994 operating expenses was due, in part, to the exclusion of
ISL's operating expenses in the first quarter of 1994 since ISL was not
acquired until the second quarter of 1994 - see Note 2 of Notes to Financial
Statements.
In August 1995, the FDIC announced that it would be lowering the deposit
premiums commercial banks pay sometime during the third quarter of 1995,
"saving the industry about $4.4 billion a year". The premium rates assessed
for members of the Bank Insurance Fund (BIF), such as City Bank, would range
from 4 to 31 basis points. In September 1995, City Bank received a $383,000
refund on its FDIC insurance premiums, which reflected the reduction in
City Bank's assessment rate from 23 to 4 basis points (per $100 in
deposits). The FDIC refund is included other expenses for the three and nine
months ended September 30,1995.
8
<PAGE>
RECENT REGULATORY DEVELOPMENTS
There has been a flurry of recent activity in Congress related to
recapitalizing the Savings Association Insurance Fund ("SAIF") and the
possible merger of the bank and thrift charters.
Under the proposed SAIF recapitalization, SAIF insured institutions, such as
International Savings & Loan ("ISL"), would be assessed a one-time
special assessment of 85 to 90 basis points on all SAIF insured deposits
held. Under the proposal, such payments would be made on January 1, 1996 and
would amount to approximately $3 million for ISL (based on the proposed
assessment rate of 85 to 90 basis points).
The Company cannot determine at this time the final form of the above proposals
and its effect on ISL's liquidity and capital resources.
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
B) No reports on Form 8-K were filed during the quarter ended September
30, 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
November 14, 1995 By /s/ Daniel Motohiro
Daniel Motohiro, Treasurer
and Principal Financial Officer
10
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1995
<CASH> 46,317
<INT-BEARING-DEPOSITS> 897,686
<FED-FUNDS-SOLD> 1,705
<TRADING-ASSETS> 568
<INVESTMENTS-HELD-FOR-SALE> 49,856
<INVESTMENTS-CARRYING> 202,266
<INVESTMENTS-MARKET> 203,267
<LOANS> 1,128,063
<ALLOWANCE> 14,426
<TOTAL-ASSETS> 1,487,282
<DEPOSITS> 1,021,187
<SHORT-TERM> 264,908
<LIABILITIES-OTHER> 33,038
<LONG-TERM> 46,820
<COMMON> 3,551
0
0
<OTHER-SE> 111,281
<TOTAL-LIABILITIES-AND-EQUITY> 1,487,282
<INTEREST-LOAN> 70,776
<INTEREST-INVEST> 12,889
<INTEREST-OTHER> 684
<INTEREST-TOTAL> 84,349
<INTEREST-DEPOSIT> 26,774
<INTEREST-EXPENSE> 43,145
<INTEREST-INCOME-NET> 41,204
<LOAN-LOSSES> 660
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 36,572
<INCOME-PRETAX> 10,810
<INCOME-PRE-EXTRAORDINARY> 10,810
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,746
<EPS-PRIMARY> 1.90
<EPS-DILUTED> 1.90
<YIELD-ACTUAL> 8.20
<LOANS-NON> 8,783
<LOANS-PAST> 5,170
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 14,326
<CHARGE-OFFS> 897
<RECOVERIES> 337
<ALLOWANCE-CLOSE> 14,426
<ALLOWANCE-DOMESTIC> 12,963
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 1,463
</TABLE>
