<PAGE>
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, 1995
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, 1995 - 5,243,978 shares
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
The financial statements listed below are filed as a part
hereof.
Page
Consolidated Balance Sheets - September 30, 1995 and
December 31, 1994 F-1
Consolidated Statements of Income - Three and nine months
ended September 30, 1995 and 1994 F-2
Consolidated Statements of Cash Flows - Nine months ended
September 30, 1995 and 1994 F-3
Notes to Consolidated Financial Statements F-4
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Overview
CPB Inc. (the "Company") posted third quarter 1995 net income
of $3.711 million, increasing by 4.7% over the $3.546 million
earned in the third quarter of 1994. Net income for the first nine
months of 1995 was $10.676 million, increasing by 5.2% over the
$10.152 million earned in the same period in 1994. The increase in
net interest income was the principal contributor to the increase
in earnings for the third quarter and first nine months of 1995
compared with the same periods in 1994. Net income for the third
quarter and first nine months of 1995 reflects a refund of Federal
Deposit Insurance Corporation ("FDIC") deposit insurance premiums
totalling $691,000. Net income for the first nine months of 1994
reflects 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
subsidiary of the Company (refer to "Results of Operations -- Other
Operating Expense"). As of September 30, 1995, total assets of
$1,400.5 million increased by $18.9 million or 1.4%, net loans of
$974.1 million increased by $0.5 million, and total deposits of
$1,123.0 million increased by $41.1 million or 3.8% when compared
with year-end 1994.
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 September 30, Nine Months Ended September 30,
1995 1994 1995 1994
<S> <C> <C> <C> <C>
Annualized return on
average assets 1.07% 1.09% 1.03% 1.04%
Annualized return on average
stockholders' equity 11.47% 12.03% 11.25% 11.63%
Earnings per share $0.71 $0.68 $2.04 $1.94
</TABLE>
The State of Hawaii's economy has shown signs of recovery in
certain sectors during the first three quarters of 1995. The state
index of leading economic indicators was down 0.06% in August 1995
after 14 months of improvement. The visitor count has improved
over 1994 levels, and industry analysts forecast continued strength
throughout the year. Conversely, the local labor market has shown
signs of weakness. The state unemployment rate reached 6.0% in
September 1995, unchanged from the previous month. The rate
reflects a loss of 3,600 government jobs since September 1994,
partially the result of state layoffs in response to a projected
budget deficit. The high level of unemployment also contributed to
an increase in bankruptcies and foreclosures during 1995 over 1994
levels. Ongoing development of a state convention center in
Waikiki is expected to stimulate construction activity in the near
term and boost tourism upon completion. Accordingly, the results
of operations of the Company for the remainder of 1995 will be
affected by the speed, strength and duration 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, 1995 and 1994 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."
<TABLE>
<CAPTION>
Three Months Ended September 30, Nine Months Ended September 30,
1995 1994 1995 1994
(Dollars in thousands)
<S> <C> <C> <C> <C>
Interest income $27,547 $23,643 $81,069 $69,090
Interest expense 11,592 7,940 33,550 22,481
Net interest income $15,955 $15,703 $47,519 $46,609
Net interest margin 4.95% 5.23% 4.94% 5.18%
</TABLE>
2
<PAGE>
Interest income increased by $3.9 million or 16.5% and $12.0
million or 17.3% in the third quarter and first nine months of
1995, respectively, as compared to the same periods in 1994, due to
the higher level of interest rates in 1995. In addition, average
interest earning assets of $1,290.0 million and $1,281.4 million
for the third quarter and first nine months of 1995, respectively,
increased by $89.2 million or 7.4% and $81.6 million or 6.8%,
respectively, over the same periods in 1994. As a result, the
yield on interest earning assets for the three and nine months
ended September 30, 1995 as compared to the same periods in 1994
increased to 8.54% from 7.88% and to 8.44% from 7.68%,
respectively.
Interest and fees on loans increased by $3.3 million or 16.5%
and $10.8 million or 18.8% in the third quarter and first nine
months of 1995, respectively, as compared to the same periods in
1994 due primarily to the increase in interest rates during the
latter half of 1994 and early 1995. Interest on loans for the nine
months ended September 30, 1995 also included $485,000 of
previously unaccrued interest on two nonaccrual loans which were
repaid during the second quarter of 1995 (refer to "Results of
Operations -- Nonperforming Assets"). Fees on loans, which are
included in interest income, increased by $278,000 or 56.8% in the
third quarter of 1995 but decreased by $247,000 or 12.2% in the
first nine months of 1995 compared to prior year levels. Interest
on deposits in other banks increased by $500,000 or 357.1% and by
$772,000 or 112.9%, respectively, in the three and nine months
ended September 30, 1995, compared with the same periods in 1994,
due to a combination of the rise in short-term interest rates and
an increase in average balances during 1995.
Interest expense for the three and nine months ended September
30, 1995 increased by $3.7 million or 46.0% and $11.1 or 49.2%,
respectively, as compared to the same periods in 1994, also a
result of the upward interest rate trend experienced in the second
half of 1994 and first half of 1995. Average interest-bearing
liabilities of $1,093.2 million for the third quarter of 1995
increased by $77.4 million or 7.6% when compared to the third
quarter of 1994. Average interest-bearing liabilities for the
first nine months of 1995 of $1,087.3 million also increased by
$71.6 million or 7.0% when compared with the comparable period in
1994. As such, the rate on interest-bearing liabilities for the
third quarter and first nine months of 1995 as compared to the same
periods in 1994 increased to 4.24% from 3.13% and to 4.11% from
2.95%, respectively, due primarily to the increase in rates paid on
the Bank's deposits and shifts in balances to higher-rate deposit
products.
As a result, net interest income for the third quarter and
first nine months of 1995 increased by $252,000 or 1.6% and
$910,000 or 2.0%, respectively, over the same periods in 1994. Net
interest margin, however, decreased during the same periods as
average interest-bearing liabilities and the average rate on those
liabilities grew at a higher rate than average interest earning
assets and their corresponding average yield. Due to the
expectation of increased competition for both loans and deposits,
the Company anticipates continuing pressure on net interest margin
for the remainder of 1995.
3
<PAGE>
Provision for Loan Losses
The provision for loan losses is determined by Management's
ongoing evaluation of the loan portfolio and assessment of the
ability of the allowance to cover inherent losses. 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 September 30, Nine Months Ended September 30,
1995 1994 1995 1994
(Dollars in thousands)
<S> <C> <C> <C> <C>
Provision for loan losses $825 $825 $2,475 $2,475
Loan charge-offs $266 $147 $ 561 $ 797
Recoveries 45 116 261 249
Net loan charge-offs $221 $ 31 $ 300 $ 548
Annualized ratio of net loan
charge-offs to average loans
and other real estate 0.09% 0.01% 0.04% 0.08%
</TABLE>
The provision for loan losses of $825,000 and $2,475,000 for
the third quarter and first nine months of 1995, respectively,
remained constant with the same periods in 1994. Net loan charge-
offs of $221,000 and $300,000 for the third quarter and first nine
months of 1995, when expressed as an annualized percentage of
average total loans and other real estate, was 0.09% and 0.04%,
respectively. Consumer loans comprised 71% and real estate loans
represented 25% of all loans charged off during the first nine
months of 1995. The allowance for loan losses expressed as a
percentage of total loans was 2.06% and 1.84% at September 30, 1995
and December 31, 1994, respectively.
Management believes that the allowance for loan losses at
September 30, 1995 was adequate to cover the credit risks inherent
in the loan 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.
4
<PAGE>
Nonperforming Assets
The following table sets forth nonperforming assets, accruing
loans which were delinquent for 90 days or more and restructured
loans still accruing interest at the dates indicated.
<TABLE>
<CAPTION>
September 30, December 31, September 30,
1995 1994 1994
(Dollars in thousands)
<S> <C> <C> <C>
Nonaccrual loans $ 4,820 $16,056 $ 4,394
Other real estate 3,181 2,242 2,583
Total nonperforming assets 8,001 18,298 6,977
Loans delinquent for 90 days or more 6,447 12,872 9,789
Restructured loans still accruing interest 6,809 8,486 8,522
Total nonperforming assets, loans delinquent
for 90 days or more and restructured
loans still accruing interest $21,257 $39,656 $25,288
Total nonperforming assets as a percentage
of total loans and other real estate 0.80% 1.84% 0.72%
Total nonperforming assets and loans
delinquent for 90 days or more as a
percentage of total loans and other
real estate 1.45% 3.14% 1.72%
Total nonperforming assets, loans
delinquent for 90 days or more and
restructured loans still accruing interest
as a percentage of total loans
and other real estate 2.13% 3.99% 2.60%
</TABLE>
Nonperforming assets, loans delinquent for 90 days or more and
restructured loans still accruing interest totalled $21.3 million
at September 30, 1995, decreasing by $18.4 million or 46.4% from
year-end 1994. Nonaccrual loans, loans delinquent for 90 days or
more and restructured loans still accruing interest were comprised
primarily of loans secured by commercial or residential real
property in the State of Hawaii. Nonaccrual loans of $4.8 million
at September 30, 1995 were comprised of two commercial real estate
loans, several residential real estate loans and a small commercial
loan. During the second quarter of 1995, nonaccrual loans to one
borrower totalling $11,250,000 were paid in full, along with
$485,000 of previously unaccrued interest thereon. Other real
estate of $3.2 million at September 30, 1995 consisted of six
residential properties acquired by the Bank through formal
foreclosure proceedings. Write-downs totalling $175,000 were made
to reflect declines in values on two properties during the third
quarter of 1995, bringing total write-downs to $350,000 in the nine
months ended September 30, 1995. Loans delinquent for 90 days or
more and still accruing interest totaled $6.4 million at September
30, 1995, decreasing by $6.4 million or 49.9% from year-end 1994.
This decrease was due primarily to loans being paid in full or
brought current by borrowers. Management continues to
5
<PAGE>
closely monitor loan delinquencies and is maintaining its efforts
to determine the extent of loss exposure on these and all other
loans. A continued decline in real estate values and general
economic conditions may result in further increases in
nonperforming assets, delinquencies, net loan charge-offs and
provisions for loan losses.
In January 1995, the Company adopted the provisions of the
Financial Accounting Standards Board (the "FASB") Statement of
Financial Accounting Standards ("SFAS") No. 114, "Accounting by
Creditors for Impairment of a Loan," and SFAS No. 118, "Accounting
by Creditors for Impairment of a Loan - Income Recognition and
Disclosures." SFAS Nos. 114 and 118 prescribe the recognition
criteria for loan impairment and the measurement methods for
certain impaired loans and loans whose terms are modified in
troubled debt restructurings. The effects of the implementation
were not material to the consolidated financial statements of the
Company. At September 30, 1995, there were no impaired loans not
already included in nonaccrual loans, loans delinquent for 90 days
or more or restructured loans still accruing interest.
Other Operating Income
Total other operating income in the third quarter of 1995 of
$2,655,000 increased by $72,000 or 2.8% from the third quarter of
1994. A decline in partnership income of $72,000, due primarily to
the capitalization of costs in 1994 related to the development of
the Kaimuki Plaza, partially offset increases in other service
charges and fees on foreign exchange.
Total other operating income for the first nine months of 1995
of $8,081,000 decreased by $31,000 or 0.4% from the same period in
1994. Increases in other service charges and fees on foreign
exchange offset declines in service charges on deposits and
partnership income.
Other Operating Expense
Total other operating expense of $11,595,000 for the third
quarter of 1995 increased by $23,000 or 0.2% over the same period
in 1994. Salaries and employee benefits of $6,391,000 increased by
$311,000 or 5.1% as the number of employees increased during this
period, a result of the growth of our in-store banking activities
during the past year. Net occupancy expense of $1,543,000 also
increased by $378,000 or 32.4% over the third quarter of 1995 due
to the expansion of the bank's in-store branch network. Other
expenses decreased $630,000 or 17.0% due to the $691,000 FDIC
deposit insurance premium refund received in the third quarter of
1995. In September 1995, the FDIC premium rates were reduced by
83%, and overpayments since June 1995 were refunded. The lower
level of FDIC deposit insurance premiums will apply through the
remainder of 1995.
Total other operating expense of $35,301,000 for the first nine
months of 1995 increased by $61,000 or 0.2% over the same period in
1994. Salaries and employee benefits of $18,866,000 decreased by
$235,000 or 1.2% due in part to expenses incurred by the Bank in
1994 relating to the VERP. 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
6
<PAGE>
cost of the VERP, which included a retirement bonus, accumulated
vacation pay and related payroll taxes thereon, amounted to
approximately $915,000. Excluding the impact of the VERP, salaries
and employee benefits increased by $680,000 during the first nine
months of 1995 due to the Bank's recent in-store branch expansion.
Net occupancy expense of $4,321,000 increased by $558,000 or 14.8%,
due also to this expansion. Other expenses decreased by $267,000
or 2.5% due to the FDIC deposit insurance premium reduction, offset
by increases in other real estate write-downs and an increase in
charge card expenses.
Income Taxes
The effective tax rates for the third quarter and first nine
months of 1995 were 39.59% and 39.61%, respectively, compared with
the previous year's rates of 39.01% and 39.39%, respectively. The
difference in effective rates during the current year was
attributable largely to the changes in tax-exempt investment
securities holdings during the first nine months of 1995 compared
to the previous year.
Financial Condition
Total assets at September 30, 1995 of $1,400.5 million
increased by $18.9 million or 1.4% from December 31, 1994. Cash
and due from banks of $44.3 million decreased by $17.3 million or
28.0%, while interest-bearing deposits in other banks of $61.2
million increased $20.9 million or 51.9%, and investment securities
of $259.8 million increased by $16.0 million or 6.6%. Net loans of
$974.1 million was virtually unchanged from the $973.7 million at
year-end 1994.
Total deposits at September 30, 1995 of $1,123.0 million
increased by $41.1 million or 3.8% from year-end 1994.
Noninterest-bearing deposits of $150.9 million decreased by $11.9
million or 7.3%, while interest-bearing deposits of $972.1 million
increased by $52.9 million or 5.8%. Core deposits (noninterest-
bearing demand, interest-bearing demand and savings deposits, and
time deposits under $100,000) at September 30, 1995 of $850.4
million decreased by $28.3 million or 3.2% during the first nine
months of 1995, while time deposits of $100,000 or more of $272.6
million increased by $69.3 million or 34.1% during the nine months
ended September 30, 1995. The decline in core deposits, attributed
to the higher deposit rates offered during 1995 which attracted
depositors to longer-term, higher-yielding certificates of deposit,
resulted from a combination of declines in business money market
and savings accounts of $17.6 million and $7.1 million,
respectively, and personal savings accounts which decreased by
$10.7 million during the first nine months of 1995. Conversely,
time deposits with maturities greater than one year increased by
$22.8 million.
Capital Resources
Stockholders' equity of $129.7 million at September 30, 1995
increased by $8.5 million or 7.1% from December 31, 1994.
Approximately $1.4 million of this increase was attributable to the
reduction in the unrealized loss, net of taxes, on investment
securities available for sale. When expressed as a percentage of
total assets, stockholders' equity was 9.26% and 8.77% at September
30, 1995 and December 31, 1994, respectively. On
7
<PAGE>
September 11, 1995, the Board of Directors declared a third quarter
cash dividend of $0.24 per share, a 9.1% increase over the previous
quarter, bringing total dividends declared to $0.68 per share for
the first nine months of 1995, a 3.0% increase over dividends
declared during the same period in 1994. Dividends declared in the
first nine months of 1995 totalled $3,564,000 compared with
$3,455,000 in the first nine months of 1994. 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 FDIC are as follows.
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, 1995:
Tier I risk-based capital ratio 4.00% 12.10% 8.10%
Total risk-based capital ratio 8.00% 13.36% 5.36%
Leverage capital ratio 4.00% 9.24% 5.24%
At December 31, 1994:
Tier I risk-based capital ratio 4.00% 11.31% 7.31%
Total risk-based capital ratio 8.00% 12.56% 4.56%
Leverage capital ratio 4.00% 8.84% 4.84%
</TABLE>
The increase in retained earnings, which exceeded the rate of
growth in risk-weighted assets in the first nine months of 1995,
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.
8
<PAGE>
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, 1995:
Tier I risk-based capital ratio 6.00% 10.87% 4.87%
Total risk-based capital ratio 10.00% 12.12% 2.12%
Leverage capital ratio 5.00% 8.67% 3.67%
At December 31, 1994:
Tier I risk-based capital ratio 6.00% 10.11% 4.11%
Total risk-based capital ratio 10.00% 11.37% 1.37%
Leverage capital ratio 5.00% 8.17% 3.17%
</TABLE>
Liquidity and Effects of Inflation
A discussion of liquidity and effects of inflation is included
in the 1994 Annual Report to Shareholders. No significant changes
in the Company's liquidity position or policies have occurred
during the nine months ended September 30, 1995.
9
<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 a report on Form 8-K on September 19,
1995 announcing the retirement of Yoshiharu Satoh, chairman
of the board and chief executive officer, effective January
1, 1996.
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 13, 1995 /s/Austin Imamura
Austin Imamura
Vice President and Secretary
Date: November 13, 1995 /s/Neal Kanda
Neal Kanda
Vice President and Treasurer
(Principal Financial and
Accounting Officer)
10
<PAGE>
CPB INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
September 30, December 31,
(Dollars in thousands, except per share data) 1995 1994
<S> <C> <C>
Assets
Cash and due from banks $ 44,337 $ 61,604
Interest-bearing deposits in other banks 61,189 40,277
Federal funds sold and securities purchased under agreements to resell - -
Investment securities:
Held to maturity, at cost (fair value $161,949 and $157,345 at
September 30, 1995 and December 31, 1994, respectively) 162,878 162,098
Available for sale, at fair value 96,917 81,690
Total investment securities 259,795 243,788
Loans 994,599 991,968
Less allowance for loan losses 20,471 18,296
Net loans 974,128 973,672
Premises and equipment 24,483 24,217
Accrued interest receivable 10,156 9,781
Investment in partnership 6,033 5,428
Due from customers on acceptances 777 1,459
Other assets 19,560 21,313
Total assets $ 1,400,458 $ 1,381,539
Liabilities and Stockholders' Equity
Deposits:
Noninterest-bearing deposits $ 150,900 $ 162,776
Interest-bearing deposits 972,059 919,133
Total deposits 1,122,959 1,081,909
Federal funds purchased and securities sold under
agreements to repurchase 42,000 67,355
Other borrowed funds 87,392 94,324
Bank acceptances outstanding 777 1,459
Other liabilities 17,179 14,889
Employee stock ownership plan note payable 500 500
Total liabilities 1,270,807 1,260,436
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 5,243,978 and
5,235,331 shares at September 30, 1995 and December 31, 1994, respectively 6,555 6,544
Surplus 45,238 45,178
Retained earnings 78,498 71,386
Unrealized loss on investment securities (140) (1,505)
130,151 121,603
Employee stock ownership plan shares purchased with debt (500) (500)
Total stockholders' equity 129,651 121,103
Total liabilities and stockholders' equity $ 1,400,458 $ 1,381,539
Book value per share $ 24.72 $ 23.13
<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) 1995 1994 1995 1994
<S> <C> <C> <C> <C>
Interest income:
Interest and fees on loans $ 23,251 $ 19,965 $ 68,601 $ 57,756
Interest and dividends on investment securities:
Taxable interest 3,343 3,243 9,817 9,471
Tax-exempt interest 30 33 98 243
Dividends 236 180 614 615
Interest on deposits in other banks 640 140 1,456 684
Interest on Federal funds sold and securities purchased under
agreements to resell - 7 336 64
Total interest income 27,500 23,568 80,922 68,833
Interest expense:
Interest on deposits 9,589 6,464 27,260 18,219
Interest on other borrowed funds 2,003 1,476 6,290 4,262
Total interest expense 11,592 7,940 33,550 22,481
Net interest income 15,908 15,628 47,372 46,352
Provision for loan losses 825 825 2,475 2,475
Net interest income after provision for loan losses 15,083 14,803 44,897 43,877
Other operating income:
Service charges on deposit accounts 658 708 1,972 2,062
Other service charges and fees 1,373 1,284 3,961 3,829
Partnership income 253 325 924 1,064
Fees on foreign exchange 244 166 808 701
Investment securities gains - - 25 -
Other 127 100 391 456
Total other operating income 2,655 2,583 8,081 8,112
Other operating expense:
Salaries and employee benefits 6,391 6,080 18,866 19,101
Net occupancy 1,543 1,165 4,321 3,763
Equipment 591 627 1,901 1,896
Other 3,070 3,700 10,213 10,480
Total other operating expense 11,595 11,572 35,301 35,240
Income before income taxes and cumulative effect
of accounting change 6,143 5,814 17,677 16,749
Income taxes 2,432 2,268 7,001 6,597
Net income $ 3,711 $ 3,546 $ 10,676 $ 10,152
Per common share:
Net income $ 0.71 $ 0.68 $ 2.04 $ 1.94
Cash dividends declared $ 0.24 $ 0.22 $ 0.68 $ 0.66
Weighted average shares outstanding (in thousands) 5,243 5,235 5,239 5,233
<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) 1995 1994
<S> <C> <C>
Cash flows from operating activities:
Net income $ 10,676 $ 10,152
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan losses 2,475 2,475
Provision for depreciation and amortization 1,922 1,754
Net amortization and accretion of investment securities 1,405 2,110
Net gain on investment securities (25) -
Federal Home Loan Bank stock dividends received (614) (1,026)
Net deferred loan origination fees (68) 121
Net change in loans held for sale (915) 7,218
Net gain on sale of loans (9) (211)
Loss on disposal of premises and equipment 37 -
Amortization of intangible assets 75 83
Deferred income tax expense (benefit) (1,696) 1,479
Partnership income (924) (1,064)
Decrease (increase) in accrued interest receivable and other assets 3,377 (1,051)
Increase (decrease) in accrued interest payable and other liabilities 2,191 (1,460)
Net cash provided by operating activities 17,907 20,580
Cash flows from investing activities:
Proceeds from maturities of and calls on investment securities held to maturity 33,433 67,740
Purchases of investment securities held to maturity (35,667) (56,550)
Proceeds from maturities of and calls on investment securities available for sale 9,112 78,767
Purchases of investment securities available for sale (21,384) (90,245)
Net decrease (increase) in interest-bearing deposits in other banks (20,912) 839
Net loan originations (3,228) (29,550)
Loans acquired in branch acquisition - (2,656)
Purchases of premises and equipment (2,442) (2,285)
Proceeds from disposal of premises and equipment 217 -
Distributions from partnership 320 470
Net cash used in investing activities (40,551) (33,470)
Cash flows from financing activities:
Net increase (decrease) in deposits 41,050 (20,722)
Deposits acquired in branch acquisition - 10,821
Proceeds from Federal Home Loan Bank intermediate-term advances 26,000 14,600
Repayments of Federal Home Loan Bank intermediate-term advances (7,885) (20,331)
Net increase (decrease) in other short-term borrowings (50,402) 21,167
Cash dividends paid (3,457) (3,454)
Proceeds from sale of common stock 71 44
Net cash provided by financing activities 5,377 2,125
Net decrease in cash and cash equivalents (17,267) (10,765)
Cash and cash equivalents:
At beginning of period 61,604 63,152
At end of period $ 44,337 $ 52,387
Supplemental disclosure of cash flow information:
Cash paid during the period for interest $ 34,864 $ 22,899
Cash paid during the period for income taxes $ 8,800 $ 5,620
<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, 1994.
However, such information reflects all adjustments (consisting
solely of normal recurring adjustments) which are, in the opinion
of management, necessary for a fair statement of results for the
interim periods.
The results of operations for the three and nine months ended
September 30, 1995 are not necessarily indicative of the results to
be expected for the full year.
F-4
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1995
<CASH> 44,337
<INT-BEARING-DEPOSITS> 61,189
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 96,917
<INVESTMENTS-CARRYING> 259,795
<INVESTMENTS-MARKET> 258,866
<LOANS> 994,599
<ALLOWANCE> 20,471
<TOTAL-ASSETS> 1,400,458
<DEPOSITS> 1,122,959
<SHORT-TERM> 42,777
<LIABILITIES-OTHER> 17,179
<LONG-TERM> 87,892
<COMMON> 6,555
0
0
<OTHER-SE> 123,096
<TOTAL-LIABILITIES-AND-EQUITY> 1,400,458
<INTEREST-LOAN> 68,601
<INTEREST-INVEST> 10,529
<INTEREST-OTHER> 1,792
<INTEREST-TOTAL> 80,922
<INTEREST-DEPOSIT> 27,260
<INTEREST-EXPENSE> 33,550
<INTEREST-INCOME-NET> 47,372
<LOAN-LOSSES> 2,475
<SECURITIES-GAINS> 25
<EXPENSE-OTHER> 35,301
<INCOME-PRETAX> 17,677
<INCOME-PRE-EXTRAORDINARY> 17,677
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 10,676
<EPS-PRIMARY> 2.04
<EPS-DILUTED> 2.04
<YIELD-ACTUAL> 8.44
<LOANS-NON> 4,820
<LOANS-PAST> 6,447
<LOANS-TROUBLED> 6,809
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 18,296
<CHARGE-OFFS> 561
<RECOVERIES> 261
<ALLOWANCE-CLOSE> 20,471
<ALLOWANCE-DOMESTIC> 9,771
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 10,700
</TABLE>
