UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1994
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________________ to ________________
Commission file number 0-10777
CPB INC.
(Exact name of registrant as specified in its charter)
HAWAII 99-0212597
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
220 SOUTH KING STREET, HONOLULU, HAWAII 96813
(Address of principal executive offices) (Zip Code)
(808) 544-0500
(Registrant's telephone number, including area code)
NONE
(Former name, former address and former fiscal year, if changed
since last report)
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.
[X]Yes [ ]No
Indicate the number of shares outstanding of each of the
issuer's classes of common stock, as of the latest practicable
date.
Common Stock, No Par Value, $1.25 Stated Value;
Outstanding at September 30, 1994 - 5,235,331 shares
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
The financial statements listed below are filed as a part hereof.
<TABLE>
<CAPTION>
Page
<S> <C>
Consolidated Balance Sheets - September 30, 1994 and
December 31, 1993 F-1
Consolidated Statements of Income - Three and nine months ended
September 30, 1994 and 1993 F-2
Consolidated Statements of Cash Flows - Nine months ended
September 30, 1994 and 1993 F-3
Notes to Consolidated Financial Statements F-4
</TABLE>
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Overview
CPB Inc. (the "Company") posted third quarter 1994 net income of
$3.546 million, decreasing by 10.9% from the $3.978 million earned
in the third quarter of 1993. Net income for the first nine months
of 1994 was $10.152 million, decreasing by 14.9% from the $11.925
million earned in the same period in 1993. The continuing slowdown
in loan refinancings and the increase in expenses related to new
branches accounted for the decline in earnings. Net income for the
first nine months of 1994 also reflected expenses of approximately
$915,000 related to the Voluntary Early Retirement Program (the
"VERP") which was offered to qualified employees of Central Pacific
Bank (the "Bank"), a wholly-owned subsidiary of the Company (refer
to "Results of Operations -- Other Operating Expense"). Net income
for the first nine months of 1993 included the recovery of a
$300,000 write-down of a mortgage-backed security recognized in
1992, along with the related $185,000 of unaccrued interest, and a
nonrecurring credit of $208,000 resulting from the Company's
adoption of Statement of Financial Accounting Standards ("SFAS")
No. 109, "Accounting for Income Taxes." As of September 30, 1994,
total assets of $1,313.1 million increased by $10.0 million or
0.8%, net loans of $950.4 million increased by $21.8 million or
2.3%, and total deposits of $1,068.4 million decreased by $9.9
million or 0.9% when compared with year-end 1993.
1
<PAGE>
The following table presents return on average assets, return on
average stockholders' equity and earnings per share for the periods
indicated.
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
1994 1993 1994 1993
<S> <C> <C> <C> <C>
Annualized return on average assets
Before cumulative effect of
accounting change 1.09% 1.29% 1.04% 1.28%
After cumulative effect of
accounting change 1.09% 1.29% 1.04% 1.30%
Annualized return on average stockholders' equity
Before cumulative effect of
accounting change 12.03% 14.67% 11.63% 14.81%
After cumulative effect of
accounting change 12.03% 14.67% 11.63% 15.07%
Earnings per share
Before cumulative effect of
accounting change $0.68 $0.76 $1.94 $2.25
After cumulative effect of
accounting change $0.68 $0.76 $1.94 $2.29
</TABLE>
The State of Hawaii's economy has shown some signs of recovery in
certain sectors through the first nine months of 1994. Recent
economic indicators for Hawaii showed increases in the visitor
count, credit demand and consumer purchasing power categories.
However, construction contracts and job counts declined. A recent
study by Kemper Securities, Inc. ranked Hawaii last in the nation
in economic growth citing its reliance on factors beyond its
control. The results of operations of the Company for the
remainder of 1994 may depend on the speed and strength of
economic recovery in the State of Hawaii.
Results of Operations
Net Interest Income
A comparison of net interest income for the three and nine months
ended September 30, 1994 and 1993 is set forth below on a taxable
equivalent basis using an assumed income tax rate of 35%. Net
interest income, when expressed as a percentage of average interest
earning assets, is referred to as "net interest margin."
2
<PAGE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
1994 1993 1994 1993
(Dollars in thousands)
<S> <C> <C> <C> <C>
Interest income $23,643 $22,952 $69,090 $69,450
Interest expense 7,940 7,524 22,481 23,468
Net interest income $15,703 $15,428 $46,609 $45,982
Net interest margin 5.23% 5.43% 5.18% 5.46%
</TABLE>
Interest income increased by $691,000 or 3.0% in the third
quarter of 1994 but decreased by $360,000 or 0.5% in the first nine
months of 1994 when compared to the same periods in 1993. Average
interest earning assets of $1,200.7 million for the third quarter
of 1994 increased by $64.0 million or 5.6% over the third quarter
of 1993. Similarly, average interest earning assets for the first
nine months of 1994 of $1,199.8 million increased by $77.1 million
or 6.9% over the same period last year. However, the yield on
interest earning assets for the three and nine months ended
September 30, 1994 as compared to the same periods in 1993
decreased to 7.88% from 8.08% and to 7.68% from 8.25%,
respectively. Fees on loans, which are included in interest
income, decreased by $532,000 or 52.3% and by $940,000 or 31.9%
during those periods. The yield on loans for the third quarter and
first nine months of 1994 decreased to 8.37% from 8.50% and to
8.20% from 8.60%, respectively, compared to the same periods in
1993. Interest and fees on loans for the third quarter of 1994
increased by $590,000 or 3.0% over the third quarter of 1993 due
primarily to an increase of $41.9 million or 4.6% in average loans
outstanding. Interest and fees on loans for the first nine months
of 1994 decreased by $605,000 or 1.0% from the comparable period in
1993 as the increase of $34.4 million or 3.8% in
average loans outstanding did not completely offset the impact of
the decline in yields. Interest and dividends on investment
securities increased $104,000 or 3.1% in the third quarter of 1994
compared with the third quarter of 1993. Interest and dividends on
investment securities for the first nine months of 1994 also
increased after adjusting for the effect of the 1993 recovery of
$185,000 of previously unaccrued interest on a single mortgage-
backed security.
Interest expense increased by $416,000 or 5.5% for the third
quarter of 1994 but decreased by $987,000 or 4.2% for the nine
months ended September 30, 1994 as compared to the same periods in
1993. Average interest-bearing liabilities of $1,015.8
million for the third quarter of 1994 increased by $54.5 million or
5.7% when compared to the third quarter of 1993. Average interest-
bearing liabilities for the first nine months of 1994 of $1,015.7
million also increased by $65.7 million or 6.9% when compared with
the comparable period in 1993. The rate on
interest-bearing liabilities was 3.13% for the third quarter of
1994 and 1993, representing a reversal of the year-to-year
declining rate trend. The rate on interest-bearing liabilities for
the first nine months of 1994 as compared to the same period in
1993 decreased to 2.95% from 3.29% due primarily to the lower level
of rates paid on the Bank's deposits through the majority of 1994
as compared to 1993.
3
<PAGE>
As a result, net interest income for the third quarter and first
nine months of 1994 increased by $275,000 or 1.8% and by $627,000
or 1.4%, respectively, over the same periods in 1993. Net interest
margin, however, decreased to 5.23% from 5.43% and to 5.18% from
5.46%, respectively, during those periods. Fees on loans boosted
net interest income in recent years due to an increase in mortgage
originations, particularly refinancings, resulting from the low
interest rate environment. Given the current interest rate
environment, which has experienced 175-basis point increases in the
target Federal funds rate and the prime rate during 1994, the
Company anticipates continued
pressure on net interest margin for the remainder of 1994.
Provision for Loan Losses
The amounts provided for loan losses are determined by
Management's ongoing evaluation of the loan portfolio and
assessment of the ability of the allowance to cover losses
inherent in the loan portfolio. Such evaluation is based upon the
Bank's loan loss experience and projections by loan category, the
level and nature of current delinquencies and delinquency trends,
the quality and loss potential of specific loans in the Bank's
portfolio, evaluation of collateral for such loans, the economic
conditions affecting collectibility of loans, trends of loan growth
and such other factors which, in Management's
judgment, deserve recognition in the estimation of losses
inherent in the Bank's loan portfolio.
Provision for loan losses, loan charge-offs, recoveries, net loan
charge-offs and the annualized ratio of net loan charge-offs to
average loans and other real estate are set forth below for the
periods indicated.
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
1994 1993 1994 1993
<S> <C> <C> <C> <C>
Provision for loan losses $825 $850 $2,475 $2,450
Loan charge-offs $147 $508 $797 $1,038
Recoveries 96 36 249 121
Net loan charge-offs $ 51 $472 $548 $ 917
Annualized ratio of net loan
charge-offs to average loans
and other real estate 0.02% 0.21% 0.08% 0.14%
</TABLE>
The provision for loan losses of $825,000 for the third
quarter of 1994 decreased from the same period in 1993 reflecting
the decline in current net charge-offs, while the provision of
$2,475,000 for the first nine months of 1994 increased compared to
the same period in 1993 due to the increase in loans
outstanding. Net loan charge-offs of $51,000 and $548,000 for the
three and nine months ended September 30, 1994, respectively, when
expressed as an annualized percentage of average total loans and
other real estate, were 0.02% and 0.08%, respectively.
Substantially all loans charged off during the third quarter of
1994 were
4
<PAGE>
consumer loans. A partial charge-off on a single residential
mortgage loan during the second quarter of 1994 accounted for
approximately 36% of loan charge-offs in the first nine months of
1994. Consumer loans accounted for an additional 42% of loans
charged off for the first nine months of 1994. The allowance for
loan losses expressed as a percentage of total loans was 1.97% and
1.81% at September 30, 1994 and December 31, 1993,
respectively.
Management believes that the allowance for loan losses at
September 30, 1994 was adequate to absorb risks inherent in the
portfolio. However, no assurance can be given that economic
conditions which may adversely affect the Bank's customers or other
circumstances, such as material and sustained declines in real
estate values, will not result in increased losses in the Bank's
loan portfolio.
Nonperforming Assets
The following table sets forth nonperforming assets, accruing
loans which were delinquent for 90 days or more, and restructured
loans which were still accruing interest as of the dates
indicated.
<TABLE>
<CAPTION>
SEPTEMBER 30, December 31, September 30,
1994 1993 1993
(Dollars in thousands)
<S> <C> <C> <C>
Nonaccrual loans $ 4,394 $ 4,477 $ 3,932
Other real estate 2,583 1,750 1,950
Total nonperforming assets 6,977 6,227 5,882
Loans delinquent for 90 days
or more 9,789 19,820 16,039
Restructured loans (still accruing
interest) 8,522 - -
Total nonperforming assets, loans
delinquent for 90 days or more
and restructured loans $25,288 $26,047 $21,921
Total nonperforming assets as a percentage
of total loans and other real
estate 0.72% 0.66% 0.63%
Total nonperforming assets and loans
delinquent for 90 days or more as a
percentage of total loans and other
real estate 1.72% 2.75% 2.36%
Total nonperforming assets, loans
delinquent for 90 days or more and
restructured loans as a percentage of
total loans and other real
estate 2.60% 2.75% 2.36%
</TABLE>
5
<PAGE>
Nonaccrual loans and loans delinquent for 90 days or more at
September 30, 1994 were comprised primarily of loans secured by
commercial and residential real property in the State of Hawaii.
Nonaccrual loans of $4,394,000 were comprised of a commercial
mortgage loan secured by resort commercial property and several
residential mortgage loans. Other real estate of $2,583,000 at
September 30, 1994 consisted of five residential properties.
Valuation adjustments totalling $175,000 were made during the third
quarter of 1994 on two properties whose values were
reassessed at below previous carrying values. Loans delinquent for
90 days or more and still accruing interest totaled
$9,789,000 at September 30, 1994, decreasing by $10,031,000 or
50.6% from year-end 1993. This decrease was due primarily to loans
being paid in full or brought current by the borrowers. During the
third quarter of 1994, two commercial loans were restructured to
accommodate the borrowers' financial situations. Both
restructurings entailed the deferral of principal and
interest payments, with additional collateral obtained in one
instance to further protect the Bank's interests; however, no
interest rate concessions were made on these loans. The
prolonged downturn in the local economy has resulted in an
increase in internally-monitored credits; however, the Bank has not
experienced, nor does it currently anticipate, an increase in loan
losses beyond the level provided for in the allowance for loan
losses. Management continues to closely monitor the
performance of the loan portfolio and is increasing its efforts to
determine the extent of loss exposure, if any, on these and all
other loans.
In May 1993, the Financial Accounting Standards Board ("FASB")
issued SFAS No. 114, "Accounting by Creditors for Impairment of a
Loan." SFAS No. 114 prescribes the recognition criteria for loan
impairment and the measurement methods for certain impaired loans
and loans whose terms are modified in troubled debt
restructurings. In October 1994, the FASB issued SFAS No. 118,
"Accounting by Creditors for Impairment of a Loan - Income
Recognition and Disclosures," an amendment of SFAS No. 114, which
allows creditors to use existing methods to recognize interest
income on impaired loans and addresses disclosure requirements for
investments in and interest income recognition on impaired loans.
SFAS No. 114 and SFAS No. 118 are effective for financial
statements for fiscal years beginning after December 15, 1994.
Early adoption is permitted, and restatement of previously-issued
financial statements is prohibited. The Company has not
determined whether to adopt SFAS No. 114, as amended by SFAS No.
118, prior to the effective date and, accordingly, has not
determined the impact of their application at this time.
Other Operating Income
Total other operating income in the third quarter of 1994 of
$2,583,000 decreased by $240,000 or 8.5% from the third quarter of
1993. Decreases in the gain on sale of loans of $149,000 and
partnership income of $67,000 contributed to the decline.
Total other operating income for the first nine months of 1994 of
$8,112,000 decreased by $318,000 or 3.8% from the comparable period
in 1993 due primarily to the Bank's 1993 recovery of a previously-
recorded $300,000 write-down of a mortgage-backed security. Other
service charges and fees of $3,829,000 increased by $224,000 due to
an increase of
6
<PAGE>
$220,000 in charge card fees and commissions. This increase was
offset by a decrease of $220,000 in the gain on sale of loans.
Other Operating Expense
Total other operating expense of $11,572,000 for the third
quarter of 1994 increased by $834,000 or 7.8% over the same period
in 1993. Salaries and employee benefits of $6,080,000 increased by
$344,000 or 6.0%. The number of employees increased during this
period due to the establishment of the Trust and Real Estate Loan
divisions and the new In-Store Branch Department as well as the
opening of two new full-service branches in the towns of Mililani
and Kailua and our first in-store branch in the Times Super Market
in Royal Kunia on the island of Oahu, all of which were established
to offer expanded services and increased access for customers.
Increases in pension plan expense and medical insurance premiums
also contributed to the increase. Other expense of $3,700,000
increased by $489,000 or 15.2% due
primarily to write-downs totalling $175,000 on two residential
properties held as other real estate based on Management's
determination that those properties had suffered a decline in
value. Increases in promotional expenses, audit/examination fees
and losses on disposals of premises and equipment also
contributed to the increase in other operating expense.
Total other operating expense of $35,240,000 for the first nine
months of 1994 increased by $2,727,000 or 8.4% over the same period
in 1993. Salaries and employee benefits of $19,101,000 increased
by $2,086,000 or 12.3%. During the first quarter of 1994, the Bank
offered a special retirement bonus to qualifying individuals who
elected to retire by April 1, 1994. The total cost of the VERP,
which included the retirement bonus,
accumulated vacation pay and related payroll taxes thereon,
amounted to approximately $915,000, much of which the Company is
recovering via lower salary and employee benefit levels. The
benefits from the VERP are also expected to enhance profitability
into future years. Salaries and employee benefits also increased
during the first nine months of 1994 due to the increases in
employees discussed above. Equipment expense of $1,896,000
increased by $256,000 or 15.6% over the same period in 1993 due to
the expansion noted above coupled with an increase in
expenditures related to the Bank's information and technology
systems. Other expense of $10,480,000 increased by $448,000 or
4.5% due primarily to the other real estate write-down discussed
above, as well as increases in charge card expenses and legal and
other professional fees.
In October 1994, the Company began investigating irregular
transactions involving an employee in one of its branches.
The employee has been removed from all positions of authority
and suspended pending completion of the investigation.
Although the Company anticipates that it may incur operating
losses as a result of the incident, the Company carries a
fidelity bond covering losses for incidents of the type being
investigated. To the extent that losses exceed the amount of
insurance coverage, losses could be material. However, based
upon current information and the opinion of counsel, Management
believes that any such losses, net of insurance coverage, will
not be material.
7
<PAGE>
Income Taxes
The effective tax rates for the three and nine months ended
September 30, 1994 were 39.01% and 39.39%, respectively, compared
with the previous year's rates of 39.48% and 38.80%,
respectively. The U.S. corporate federal income tax rate was
increased to 35% from 34% during the third quarter of 1993, at
which time the Company recorded a cumulative adjustment for the
year-to-date impact of the change.
Financial Condition
Total assets at September 30, 1994 of $1,313.1 million
increased by $10.0 million or 0.8% from December 31, 1993. Cash
and due from banks of $52.4 million decreased by $5.8 million or
9.9%, and there were no Federal funds sold at September 30, 1994,
compared with $5.0 million outstanding at year-end 1993. These
decreases were offset by an increase of $21.8 million or 2.3% in
net loans.
Total deposits at September 30, 1994 of $1,068.4 million
decreased by $9.9 million or 0.9% from year-end 1993.
Noninterest-bearing deposits of $157.0 million decreased by $23.2
million or 12.9%, while interest-bearing deposits of $911.4 million
increased by $13.3 million or 1.5%. Core deposits
(noninterest-bearing demand, interest-bearing demand and savings
deposits, and time deposits under $100,000) at September 30, 1994
of $886.5 million decreased by $13.7 million or 1.5% during the
first nine months of 1994, and time deposits of $100,000 or more of
$181.9 million decreased by $3.8 million or 2.1% during the nine
months ended September 30, 1994. The decline in core
deposits resulted from a decrease of $20.7 million in business
checking accounts, offset by a $12.0 million increase in personal
savings accounts. Federal funds purchased and securities sold
under agreements to repurchase of $29.3 million increased by $20.2
million or 220.8% due to funds received from a customer.
During the first quarter of 1994, the Bank acquired
approximately $2.7 million in loans and assumed over $10.8
million in deposits from First Hawaiian Bank's Rice Branch on the
island of Kauai. These accounts are serviced by the Bank's
existing Lihue Branch.
Effective January 1, 1994, the Company adopted SFAS No. 115,
"Accounting for Certain Investments in Debt and Equity
Securities," which addresses the accounting and reporting for
investments in equity securities that have readily determinable
fair values (other than those accounted for under the equity method
or as investments in consolidated subsidiaries) and all investments
in debt securities. On January 1, 1994, the Company recorded net
unrealized gains of $33,000 (before income taxes) on its portfolio
of investment securities classified as available for sale due
solely to the implementation of SFAS No. 115. As of September 30,
1994, net unrealized losses on investment
securities classified as available for sale amounted to
$1,360,000 (before income taxes), or 1.9% of the gross available-
for-sale portfolio. The increase in the valuation allowance,
included as a separate component of stockholders' equity,
resulted from the increase in market interest rates during the
first nine months of 1994.
8
<PAGE>
In October 1994, the FASB adopted SFAS No. 119, "Disclosure about
Derivative Financial Instruments and Fair Value of
Financial Instruments." SFAS No. 119, effective for financial
statements for fiscal years ending after December 15, 1994,
requires disclosures of the amounts, nature and terms of
derivative financial instruments. The Company will adopt the
provisions of SFAS No. 119, which will have no impact on the
Company's financial condition or results of operations, for the
fiscal year ending December 31, 1994.
Capital Resources
Stockholders' equity of $119.1 million at September 30, 1994
increased by $5.9 million or 5.2% from December 31, 1993. When
expressed as a percentage of total assets, stockholders' equity was
9.07% and 8.69% at September 30, 1994 and December 31, 1993,
respectively. On September 6, 1994, the Board of Directors
declared a third quarter cash dividend of $0.22 per share,
bringing total dividends declared to $0.66 per share for the first
nine months of 1994, consistent with dividends declared during the
same period in 1993. Dividends declared in the first three
quarters of 1994 totalled $3,455,000 compared with
$3,444,000 in the same period in 1993. The Company's objective
with respect to capital resources is to maintain a level of capital
that will support sustained asset growth and anticipated credit
risks and to ensure that regulatory guidelines and
industry standards are met.
Regulations on capital adequacy guidelines adopted by the Federal
Reserve Board (the "FRB") and the Federal Deposit
Insurance Corporation (the "FDIC") follow. Effective December 31,
1992, an institution is required to maintain a minimum ratio of
qualifying total capital to risk-weighted assets of 8%, of which at
least 4% must consist of Tier I capital, essentially common
stockholders' equity (before unrealized loss on investment
securities) less intangible assets. The FRB and the FDIC have also
adopted a minimum leverage ratio of Tier I capital to total assets
of 3%. The leverage ratio requirement establishes the minimum
level for banks that have a uniform composite ("CAMEL") rating of
1, and all other institutions and institutions
experiencing or anticipating significant growth are expected to
maintain capital levels at least 100 to 200 basis points above the
minimum level. Furthermore, higher leverage and risk-based capital
ratios are required to be considered well-capitalized or adequately
capitalized under the prompt corrective action
provisions of the FDIC Improvement Act of 1991. The following
table sets forth capital requirements applicable to the Company and
the Company's capital ratios as of the dates indicated.
<TABLE>
<CAPTION>
Required Actual Excess
<S> <C> <C> <C>
AT SEPTEMBER 30, 1994:
Tier I risk-based capital ratio 4.00% 11.40% 7.40%
Total risk-based capital ratio 8.00% 12.65% 4.65%
Leverage capital ratio 4.00% 9.09% 5.09%
</TABLE>
9
<PAGE>
<TABLE>
<CAPTION>
Required Actual Excess
<S> <C> <C> <C>
At December 31, 1993:
Tier I risk-based capital ratio 4.00% 10.94% 6.94%
Total risk-based capital ratio 8.00% 12.19% 4.19%
Leverage capital ratio 4.00% 8.65% 4.65%
</TABLE>
The increase in retained earnings in the first nine months of
1994 contributed to the increase in capital ratios.
In addition, effective December 19, 1992, FDIC-insured
institutions such as the Bank must maintain leverage, Tier I and
total risk-based capital ratios of at least 5%, 6% and 10%,
respectively, to be considered "well capitalized" under the prompt
corrective action provisions of the FDIC Improvement Act of 1991.
The following table sets forth the Bank's capital ratios as of
the dates indicated.
<TABLE>
<CAPTION>
Required Actual Excess
<S> <C> <C> <C>
AT SEPTEMBER 30, 1994:
Tier I risk-based capital ratio 6.00% 10.21% 4.21%
Total risk-based capital ratio 10.00% 11.47% 1.47%
Leverage capital ratio 5.00% 8.55% 3.55%
At December 31, 1993:
Tier I risk-based capital ratio 6.00% 9.80% 3.80%
Total risk-based capital ratio 10.00% 11.06% 1.06%
Leverage capital ratio 5.00% 8.10% 3.10%
</TABLE>
Liquidity and Effects of Inflation
A discussion of liquidity and effects of inflation is included in
the 1993 Annual Report to Shareholders. No significant
changes in the Company's liquidity position or policies have
occurred during the nine months ended September 30, 1994.
10
<PAGE>
PART II - OTHER INFORMATION
Items 1 to 5.
Items 1 to 5 are omitted pursuant to instructions to Part II.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
None
(b) Reports on Form 8-K
The Company filed no reports on Form 8-K during the third
quarter of 1994.
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.
CPB INC.
(Registrant)
Date: November 14, 1994 /s/ Yoshiharu Satoh
Yoshiharu Satoh
Chairman of the Board and
Chief Executive Officer
Date: November 14, 1994 /s/ Neal Kanda
Neal Kanda
Vice President and Treasurer
(Principal Financial and
Accounting Officer)
11
<PAGE>
CPB INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
SEPTEMBER 30, December 31,
(Dollars in thousands, except per share data) 1994 1993
<S> <C> <C>
ASSETS
Cash and due from banks $ 52,387 $ 58,152
Interest-bearing deposits in other banks 4,200 5,039
Federal funds sold - 5,000
Investment securities:
Held to maturity, at cost (market value $175,235 and $253,313 at
September 30, 1994 and December 31, 1993, respectively) 178,286 250,668
Available for sale, at market value 70,226 -
Total investment securities 248,512 250,668
Loans 969,465 945,768
Less allowance for loan losses 19,058 17,131
Net loans 950,407 928,637
Premises and equipment, net 23,813 23,282
Accrued interest receivable 9,691 9,108
Investment in partnership 5,260 4,666
Due from customers on acceptances 1,053 1,347
Other assets 17,796 17,203
Total assets $ 1,313,119 $ 1,303,102
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Noninterest-bearing deposits $ 157,023 $ 180,254
Interest-bearing deposits 911,402 898,072
Total deposits 1,068,425 1,078,326
Federal funds purchased and securities sold under
agreements to repurchase 29,290 9,130
Other borrowed funds 82,107 86,831
Bank acceptances outstanding 1,053 1,347
Other liabilities 12,134 13,280
Employee stock ownership plan note payable 1,000 1,000
Total liabilities 1,194,009 1,189,914
Stockholders' equity:
Preferred stock, no par value, authorized 1,000,000 shares, none issued - -
Common stock, no par value, stated value $1.25 per share.
Authorized 25,000,000 shares; issued and outstanding 5,235,331 and
5,230,331 shares at September 30, 1994 and December 31, 1993, respectively 6,544 6,538
Surplus 45,178 45,140
Retained earnings 69,207 62,510
Unrealized loss on investment securities (819) -
120,110 114,188
Employee stock ownership plan shares purchased with debt (1,000) (1,000)
Total stockholders' equity 119,110 113,188
Total liabilities and stockholders' equity $ 1,313,119 $ 1,303,102
Book value per share $ 22.75 $ 21.64
<FN>
See accompanying notes to consolidated financial statements.
</FN>
</TABLE>
F-1
<PAGE>
CPB INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
(Dollars in thousands, except per share data) 1994 1993 1994 1993
<S> <C> <C> <C> <C>
INTEREST INCOME:
Interest and fees on loans $ 19,965 $ 19,375 $ 57,756 $ 58,361
Interest and dividends on investment securities:
Taxable interest 3,243 2,830 9,471 8,809
Tax-exempt interest 33 189 243 602
Dividends 180 333 615 1,076
Interest on deposits in other banks 140 127 684 268
Interest on Federal funds sold 7 8 64 30
Total interest income 23,568 22,862 68,833 69,146
INTEREST EXPENSE:
Interest on deposits 6,464 6,394 18,219 20,394
Interest on other borrowed funds 1,476 1,130 4,262 3,074
Total interest expense 7,940 7,524 22,481 23,468
Net interest income 15,628 15,338 46,352 45,678
Provision for loan losses 825 850 2,475 2,450
Net interest income after provision for loan losses 14,803 14,488 43,877 43,228
OTHER OPERATING INCOME:
Service charges on deposit accounts 708 686 2,062 1,948
Other service charges and fees 1,284 1,273 3,829 3,605
Partnership income 325 392 1,064 1,132
Fees on foreign exchange 166 211 701 747
Investment securities gains - 26 - 318
Other 100 235 456 680
Total other operating income 2,583 2,823 8,112 8,430
OTHER OPERATING EXPENSE:
Salaries and employee benefits 6,080 5,736 19,101 17,015
Net occupancy 1,165 1,240 3,763 3,826
Equipment 627 551 1,896 1,640
Other 3,700 3,211 10,480 10,032
Total other operating expense 11,572 10,738 35,240 32,513
Income before income taxes and cumulative effect
of accounting change 5,814 6,573 16,749 19,145
Income taxes 2,268 2,595 6,597 7,428
Income before cumulative effect of accounting change 3,546 3,978 10,152 11,717
Cumulative effect of accounting change - - - 208
Net income $ 3,546 $ 3,978 $ 10,152 $ 11,925
Per common share:
Income before cumulative effect of accounting change 0.68 0.76 1.94 2.25
Cumulative effect of accounting change - - - 0.04
Net income $ 0.68 $ 0.76 $ 1.94 $ 2.29
Cash dividends declared $ 0.22 $ 0.22 $ 0.66 $ 0.66
Weighted average shares outstanding (in thousands) 5,235 5,226 5,233 5,212
<FN>
See accompanying notes to consolidated financial statements.
</FN>
</TABLE>
F-2
<PAGE>
CPB INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30,
(Dollars in thousands) 1994 1993
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 10,152 $ 11,925
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan losses 2,475 2,450
Provision for depreciation and amortization 1,754 1,599
Net amortization and accretion of investment securities 2,110 2,408
Net gain on investment securities - (318)
Federal Home Loan Bank stock dividends (1,026) (743)
Net deferred loan origination fees 121 (45)
Net change in loans held for sale 7,218 2,500
Net gain on sale of loans (211) (431)
Amortization of intangible assets 83 69
Cumulative effect of accounting change - (208)
Deferred income tax expense (benefit) 1,479 (947)
Partnership income (1,064) (1,132)
Increase in accrued interest receivable and other assets (1,051) (1,828)
Decrease in accrued interest payable and other liabilities (1,460) (634)
Net cash provided by operating activities 20,580 14,665
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from maturities of and calls on investment securities held to maturity 67,740 158,377
Purchases of investment securities held to maturity (56,550) (161,903)
Proceeds from maturities of and calls on investment securities available for sale 78,767 -
Purchases of investment securities available for sale (90,245) -
Net decrease in interest-bearing deposits in other banks 839 6,083
Net loan originations over principal repayments (29,550) (28,726)
Loans acquired in branch acquisition (2,656) -
Purchases of premises and equipment (2,285) (1,911)
Distributions from partnership 470 420
Net cash used in investing activities (33,470) (27,660)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net decrease in deposits (20,722) (32,430)
Deposits acquired in branch acquisition 10,821 -
Proceeds from Federal Home Loan Bank advances 14,600 20,455
Repayments of Federal Home Loan Bank advances (20,331) (570)
Net increase in other short-term borrowings 21,167 5,371
Cash dividends paid (3,454) (3,333)
Proceeds from sale of common stock 44 566
Net cash provided by (used in) financing activities 2,125 (9,941)
Net decrease in cash and cash equivalents (10,765) (22,936)
CASH AND CASH EQUIVALENTS:
At beginning of period 63,152 71,381
At end of period $ 52,387 $ 48,445
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for interest $ 22,899 $ 23,859
Cash paid during the period for income taxes $ 5,620 $ 7,989
<FN>
See accompanying notes to consolidated financial statements. </FN>
</TABLE>
F-3
<PAGE>
CPB INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
BASIS OF PRESENTATION
The financial information included herein is unaudited, except
for the consolidated balance sheet at December 31, 1993. However,
such information reflects all adjustments (consisting solely of
normal recurring adjustments) which are, in the opinion of
Management, necessary for a fair presentation of the Company's
financial condition and results of operations for the interim
periods.
The results of operations for the three and nine months ended
September 30, 1994 are not necessarily indicative of the results to
be expected for the full year.
F-4
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> SEP-30-1994
<CASH> 52,387
<INT-BEARING-DEPOSITS> 4,200
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 0
<INVESTMENTS-CARRYING> 248,512
<INVESTMENTS-MARKET> 245,461
<LOANS> 969,465
<ALLOWANCE> 19,058
<TOTAL-ASSETS> 1,313,119
<DEPOSITS> 1,068,425
<SHORT-TERM> 36,247
<LIABILITIES-OTHER> 13,187
<LONG-TERM> 76,150
<COMMON> 6,544
0
0
<OTHER-SE> 112,566
<TOTAL-LIABILITIES-AND-EQUITY> 1,313,119
<INTEREST-LOAN> 57,756
<INTEREST-INVEST> 10,329
<INTEREST-OTHER> 748
<INTEREST-TOTAL> 68,833
<INTEREST-DEPOSIT> 18,219
<INTEREST-EXPENSE> 22,481
<INTEREST-INCOME-NET> 46,352
<LOAN-LOSSES> 2,475
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 35,240
<INCOME-PRETAX> 16,749
<INCOME-PRE-EXTRAORDINARY> 16,749
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 10,152
<EPS-PRIMARY> 1.94
<EPS-DILUTED> 1.94
<YIELD-ACTUAL> 7.68
<LOANS-NON> 4,394
<LOANS-PAST> 9,789
<LOANS-TROUBLED> 8,522
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 17,131
<CHARGE-OFFS> 797
<RECOVERIES> 249
<ALLOWANCE-CLOSE> 19,058
<ALLOWANCE-DOMESTIC> 17,860
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 1,198
</TABLE>
