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 March 31, 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 March 31, 1995 - 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 - March 31, 1995 and
December 31, 1994 F-1
Consolidated Statements of Income - Three months ended
March 31, 1995 and 1994 F-2
Consolidated Statements of Cash Flows - Three months ended
March 31, 1995 and 1994 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 first quarter 1995 net income of
$3.442 million, increasing by 10.1% from the $3.126 million earned
in the first quarter of 1994. The increase in net income reflects
expenses of approximately $915,000 recognized during the first
quarter of 1994 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"). As
of March 31, 1995, total assets of $1,387.3 million increased by
$5.8 million or 0.4%, net loans of $991.2 million increased by
$17.5 million or 1.8%, and total deposits of $1,117.7 million
increased by $35.8 million or 3.3% when compared with year-end
1994.
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 March 31,
1995 1994
<S> <C> <C>
Annualized return on average assets 1.00% 0.96%
Annualized return on average
stockholders' equity 11.14% 10.86%
Earnings per share $0.66 $0.60
</TABLE>
The State of Hawaii's economy has demonstrated signs of recovery
in certain sectors, with local construction activity, job counts
and credit demand increasing during the first quarter of 1995.
Year-to-date visitor counts for 1995 were comparable to 1994
levels, but
1
<PAGE>
monthly visitor counts for February and March of 1995 actually
declined from prior year periods. The recent decline in tourism
activity, vital to the health of the state's economy, is attributed
in part to the effects of the earthquake in Kobe, Japan in early
1995 and the devaluation of the Mexican peso. Despite the recent
downturn, the Hawaii Visitor Bureau has forecasted continued
recovery in the travel industry, with projected increases in
visitors from the Mainland U.S., Asia and the Pacific region. Home
sales have declined substantially throughout the state compared to
a year ago when mortgage interest rates were more attractive.
Median sales prices of both single-family and condominium
properties have also declined slightly from prior year levels.
However, with the recent declines in market interest rates,
moderately lower housing prices and the potential for increased
foreign investment resulting from foreign exchange rate movements,
local realtors and industry analysts anticipate a rebound in the
real estate market in the second half of 1995. Management is
hopeful that the economic turnaround will continue and will have a
correspondingly positive impact on loan and deposit growth.
Consequently, the results of operations of the Company for the
remainder of 1995 will depend on the speed, strength and duration
of the economic recovery in the State of Hawaii.
Results of Operations
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 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 March 31,
1995 1994
(Dollars in thousands)
<S> <C> <C>
Interest income $26,014 $22,563
Interest expense 10,592 7,168
Net interest income $15,422 $15,395
Net interest margin 4.82% 5.15%
</TABLE>
Interest income increased by $3.5 million or 15.3% in the first
quarter of 1995 as compared to the same period in 1994 due to the
higher level of interest rates in 1995. Average interest earning
assets of $1,280.3 million for the three months ended March 31,
1995 increased by $83.5 million or 7.0% over the first quarter of
1994, and the yield on interest earning assets for the first
quarter of 1995 as compared to the same period in 1994 increased to
8.13% from 7.54%. The increase in yield was primarily attributable
to the increase in market interest rates over the past year.
Interest and fees on loans for the first three months of 1995
increased by $3.1 million or 16.3% over the same period in 1994,
while average loans outstanding increased by 8.2%. The increase in
interest and fees on loans reflects the higher level of interest
rates, partially offset by a decrease of $488,000 in
2
<PAGE>
fees on loans and the impact of the increase in nonaccrual loans in
the first quarter of 1995 as compared to the same period in 1994
(refer to Results of Operations -- Nonperforming Assets). Interest
on Federal funds sold and securities purchased under agreements to
resell for the first quarter of 1995 increased by $298,000, a
1027.6% increase, over the first quarter of 1994 due to a
combination of the rise in short-term interest rates and an
increase in average balances of approximately 500% during those
periods.
Interest expense for the first three months of 1995 increased by
$3.4 million or 47.8% as compared to the same period in 1994, also
a result of the upward interest rate trend experienced over the
past year. The rate on interest-bearing liabilities for the first
quarter of 1995 as compared to the same period in 1994 increased to
3.88% from 2.83%. Average interest-bearing liabilities of $1,092.2
million for the first quarter of 1995 increased by $78.9 million or
7.8% when compared to the first quarter of 1994. The rise in
interest rates, coupled with increased competition for deposits,
raised the cost of deposits. Meanwhile, the growth in loan demand,
which outpaced the growth in deposits, led the Bank to seek higher-
costing external sources of funds.
As a result, net interest income for the first quarter of 1995
increased by $27,000 or 0.2%. Net interest margin, however,
decreased to 4.82% from 5.15% during the same period 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 heightened competition for both loans and deposits,
the Company anticipates a continued tightening of the net interest
margin for the remainder of 1995 as loan spreads decline and
funding costs rise.
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.
3
<PAGE>
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 March 31,
1995 1994
(Dollars in thousands)
<S> <C> <C>
Provision for loan losses $825 $825
Loan charge-offs $130 $158
Recoveries 43 51
Net loan charge-offs $ 87 $107
Annualized ratio of net loan
charge-offs to average loans
and other real estate 0.03% 0.05%
</TABLE>
The provision for loan losses of $825,000 for the first quarter
of 1995 was consistent with the same period in 1994 due to the
lower level of net charge-offs during the current period. Net loan
charge-offs of $87,000 and $107,000 for the first three months of
1995 and 1994, respectively, when expressed as an annualized
percentage of average total loans and other real estate, were 0.03%
and 0.05%, respectively. Substantially all loans charged off
during the first quarter of 1995, approximately 93%, were consumer
loans. The allowance for loan losses expressed as a percentage of
total loans was 1.88% and 1.84% at March 31, 1995 and December 31,
1994, respectively. The increase in this ratio reflects
uncertainties due to the increase in loan delinquencies created by
local economic conditions.
Management believes that the allowance for loan losses at March
31, 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,
accruing loans at the dates indicated.
<TABLE>
<CAPTION>
MARCH 31, December 31,
1995 1994
(Dollars in thousands)
<S> <C> <C>
Nonaccrual loans $15,175 $16,056
Other real estate 3,092 2,242
Total nonperforming assets 18,267 18,298
Loans delinquent for 90 days or more 19,157 12,872
Restructured, accruing loans 6,874 8,486
Total nonperforming assets, loans delinquent
for 90 days or more and restructured, accruing
loans $44,298 $39,656
Total nonperforming assets as a percentage of
total loans and other real estate 1.80% 1.84%
Total nonperforming assets and loans delinquent
for 90 days or more as a percentage of
total loans and other real estate 3.69% 3.14%
Total nonperforming assets, loans delinquent for
90 days or more and restructured, accruing loans
as a percentage of total loans and other real estate 4.37% 3.99%
</TABLE>
Nonperforming assets, loans delinquent for 90 days or more and
restructured, accruing loans totalled $44,298,000 at March 31,
1995, increasing by $4,642,000 or 11.7% over year-end 1994.
Nonaccrual loans, loans delinquent for 90 days or more and
restructured, accruing loans were comprised primarily of loans
secured by commercial or residential real property in the State of
Hawaii. Nonaccrual loans of $15,175,000 were comprised of several
large commercial and commercial real estate loans and several
residential real estate loans, all of which are secured by
commercial or residential real estate located in the State of
Hawaii. In May 1995, nonaccrual loans totalling $11,250,000 were
paid in full, along with all previously unaccrued interest thereon.
Other real estate of $3,092,000 at March 31, 1995 consisted of
several residential properties acquired by the Bank through formal
foreclosure proceedings. Loans delinquent for 90 days or more and
still accruing interest totaled $19,157,000 at March 31, 1995,
increasing by $6,285,000 or 48.8% from year-end 1994. Increases in
delinquencies occurred in both the residential real estate and
commercial loan portfolios, a reflection of local economic
conditions. Management continues to closely monitor loan
delinquencies and is increasing its efforts to determine the extent
of loss exposure on these and all other loans. A continued decline
in the general economic
5
<PAGE>
conditions may result in further increases in nonperforming assets,
delinquencies, net loan charge-offs and provision 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,
described more fully in the Notes to Consolidated Financial
Statements, were not material to the consolidated financial
statements of the Company. At March 31, 1995, there were no
impaired loans not already included in nonaccrual loans, loans
delinquent for 90 days or more or restructured, accruing loans.
Other Operating Income
Total other operating income in the first quarter of 1995 of
$2,822,000 increased by $38,000 or 1.4% from the first quarter of
1994. Other service charges and fees of $1,318,000 increased by
$58,000 or 4.2% due primarily to an increase in commissions and
fees earned on credit card accounts. Investment securities gains
of $30,000 for the first quarter of 1995 resulted from the call of
a single municipal bond. Other income of $118,000 for the first
three months of 1995 decreased by $118,000 or 50.0% from the same
period last year due to a decrease of $162,000 in gains on loan
sales, offset by a $30,000 increase in trust revenues.
Other Operating Expense
Total other operating expense of $11,675,000 for the first
quarter of 1995 decreased by $475,000 or 3.9% from the first
quarter of 1994. Salaries and employee benefits of $6,235,000
decreased by $711,000 or 10.2% due primarily to costs 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 cost
of the VERP, which included the 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 $204,000 or 3.4% during the
first quarter of 1995 due to an increase in employees as a result
of the establishment of the new In-Store Branch Department and the
opening of two branches during the past year. Net occupancy
expense of $1,358,000 increased by $92,000 or 7.3% due in part to
the branch openings as well as scheduled rental increases on other
bank facilities. Other expense of $3,413,000 increased by $99,000
or 3.0% due to increases in credit card and insurance expense.
Income Taxes
The effective tax rate for the first quarter of 1995 and 1994 was
39.55% and 39.03%, respectively. The increase in effective rates
during the current year is attributable largely to the decrease in
tax-exempt investment securities holdings during the past year.
6
<PAGE>
Financial Condition
Total assets at March 31, 1995 of $1,387.3 million increased by
$5.8 million or 0.8% over December 31, 1994. Total loans of
$1,010.2 million increased by $18.2 million or 1.8%, while cash and
due from banks of $51.2 million and interest-bearing deposits in
other banks of $32.9 million decreased by $10.4 million or 16.9%
and $7.4 million or 18.3%, respectively, during the first quarter
of 1995.
Total deposits at March 31, 1995 of $1,117.7 million increased by
$35.8 million or 3.3% from year-end 1994, while securities sold
under agreements to repurchase of $57.0 million and other borrowed
funds of $73.5 million decreased by $10.4 million or 15.4% and
$20.8 million or 22.1%, respectively, over that same period.
Noninterest-bearing deposits of $170.2 million increased by $7.4
million or 4.5%, and interest-bearing deposits of $947.5 million
increased by $28.4 million or 3.1%. Core deposits (noninterest-
bearing demand, interest-bearing demand and savings deposits, and
time deposits under $100,000) at March 31, 1995 of $878.9 million
remained relatively constant, increasing by less than 0.1%, during
the first quarter of 1995. An increase in time deposits of $62.5
million, including $35.5 million of time deposits of $100,000 or
more, was partially offset by decreases of $21.0 million in savings
deposits, primarily personal savings accounts. Recent increases in
the level of interest rates, particularly in time deposit rates,
coupled with well-publicized losses and uncertainty in the stock,
bond and mutual funds markets, may have curtailed the trend of
deposit outflows into those markets as was experienced in past
years.
Capital Resources
Stockholders' equity of $124.2 million at March 31, 1995
increased by $3.1 million or 2.6% from December 31, 1994.
Approximately $900,000 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 8.96% and 8.77% at March 31,
1995 and December 31, 1994, respectively. On March 13, 1995, the
Board of Directors declared a quarterly cash dividend of $0.22 per
share, consistent with the first quarter of 1994. Dividends
declared in the first quarter of 1995 totalled $1,152,000 compared
with $1,151,000 in the first quarter 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 Federal Deposit Insurance
Corporation (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
7
<PAGE>
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 March 31, 1995:
Tier I risk-based capital ratio 4.00% 11.51% 7.51%
Total risk-based capital ratio 8.00% 12.77% 4.77%
Leverage capital ratio 4.00% 9.00% 5.00%
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 quarter 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.
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 March 31, 1995:
Tier I risk-based capital ratio 6.00% 10.27% 4.27%
Total risk-based capital ratio 10.00% 11.53% 1.53%
Leverage capital ratio 5.00% 8.40% 3.40%
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>
8
<PAGE>
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 quarter ended March 31, 1995.
9
<PAGE>
PART II - OTHER INFORMATION
Items 1 to 3 and Item 5.
Items 1 to 3 and Item 5 are omitted pursuant to instructions to
Part II.
Item 4. Submission of Matters to a Vote of Security Holders
On Tuesday, April 25, 1995, the Annual Meeting of Shareholders
(the "Meeting") of the Company was held for the purpose of
considering and voting upon the following matters:
1. Election of three persons to the Board of Directors for a
term of three years and to serve until their successors are
elected and qualified;
2. Ratification of the appointment of KPMG Peat Marwick LLP as
the Company's independent accountants for the fiscal year
ending December 31, 1995; and
3. Transaction of such other business as may properly come
before the Meeting and at any and all adjournments thereof.
The following table presents the names of directors elected at
the Meeting, as well as the number of votes cast for, votes cast
against or withheld, and abstentions or nonvotes for each of the
directors nominated. A total of 3,965,057 shares were represented
at the Meeting.
Votes Cast
Against or Abstentions
Name For Withheld or Nonvotes
Dennis I. Hirota 3,941,686 23,371 None
Kensuke Hotta 3,943,616 21,441 None
Joichi Saito 3,942,464 22,593 None
In addition to the above directors, the following directors will
continue to serve on the Board of Directors until the expiration of
their respective terms as indicated.
Expiration
Name of Term
Paul Devens 1997
Alice F. Guild 1996
Stanley Hong 1997
Daniel M. Nagamine 1996
Yoshiharu Satoh 1997
Naoaki Shibuya 1996
10
<PAGE>
The ratification of the appointment of KPMG Peat Marwick LLP as
independent accountants for the fiscal year ending December 31,
1995 was approved with a total of 3,940,731 votes cast for, 7,882
votes against or withheld and 16,444 abstentions or nonvotes.
There were no other matters brought before the Meeting which
required a vote by shareholders.
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 first
quarter of 1995.
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: May 12, 1995 /s/ Yoshiharu Satoh
Yoshiharu Satoh
Chairman of the Board and
Chief Executive Officer
Date: May 12, 1995 /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>
MARCH 31, December 31,
(Dollars in thousands, except per share data) 1995 1994
<S> <C> <C>
ASSETS
Cash and due from banks $ 51,209 $ 61,604
Interest-bearing deposits in other banks 32,913 40,277
Federal funds sold and securities sold under agreements to repurchase 5,000 -
Investment securities:
Held to maturity, at cost (fair value $157,543 and $157,345 at
March 31, 1995 and December 31, 1994, respectively) 160,635 162,098
Available for sale, at fair value 88,112 81,690
Total investment securities 248,747 243,788
Loans 1,010,194 991,968
Less allowance for loan losses 19,034 18,296
Net loans 991,160 973,672
Premises and equipment 24,689 24,217
Accrued interest receivable 9,848 9,781
Investment in partnership 5,815 5,428
Due from customers on acceptances 716 1,459
Other assets 17,204 21,313
Total assets $ 1,387,301 $ 1,381,539
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Noninterest-bearing deposits $ 170,156 $ 162,776
Interest-bearing deposits 947,509 919,133
Total deposits 1,117,665 1,081,909
Federal funds purchased and securities sold under
agreements to repurchase 57,000 67,355
Other borrowed funds 73,501 94,324
Bank acceptances outstanding 716 1,459
Other liabilities 13,672 14,889
Employee stock ownership plan note payable 500 500
Total liabilities 1,263,054 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 5,235,831 and
5,235,331 shares at March 31, 1995 and December 31, 1994, respectively 6,544 6,544
Surplus 45,178 45,178
Retained earnings 73,676 71,386
Unrealized loss on investment securities (651) (1,505)
124,747 121,603
Employee stock ownership plan shares purchased with debt (500) (500)
Total stockholders' equity 124,247 121,103
Total liabilities and stockholders' equity $ 1,387,301 $ 1,381,539
Book value per share $ 23.73 $ 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
MARCH 31,
(Dollars in thousands, except per share data) 1995 1994
<S> <C> <C>
INTEREST INCOME:
Interest and fees on loans $ 21,839 $ 18,784
Interest and dividends on investment securities:
Taxable interest 3,196 3,108
Tax-exempt interest 35 122
Dividends 187 245
Interest on deposits in other banks 380 198
Interest on Federal funds sold and securities purchased under
agreements to resell 327 29
Total interest income 25,964 22,486
INTEREST EXPENSE:
Interest on deposits 8,450 5,818
Interest on other borrowed funds 2,142 1,350
Total interest expense 10,592 7,168
Net interest income 15,372 15,318
Provision for loan losses 825 825
Net interest income after provision for loan losses 14,547 14,493
OTHER OPERATING INCOME:
Service charges on deposit accounts 676 669
Other service charges and fees 1,318 1,265
Partnership income 386 333
Fees on foreign exchange 294 281
Investment securities gains 30 -
Other 118 236
Total other operating income 2,822 2,784
OTHER OPERATING EXPENSE:
Salaries and employee benefits 6,235 6,946
Net occupancy 1,358 1,266
Equipment 669 624
Other 3,413 3,314
Total other operating expense 11,675 12,150
Income before income taxes and cumulative effect
of accounting change 5,694 5,127
Income taxes 2,252 2,001
Net income $ 3,442 $ 3,126
Per common share:
Net income $ 0.66 $ 0.60
Cash dividends declared $ 0.22 $ 0.22
Weighted average shares outstanding (in thousands) 5,235 5,231
<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>
THREE MONTHS ENDED
MARCH 31,
(Dollars in thousands) 1995 1994
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 3,442 $ 3,126
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan losses 825 825
Provision for depreciation and amortization 658 561
Net amortization and accretion of investment securities 498 800
Net gain on investment securities (30) -
Federal Home Loan Bank stock dividends received (187) (411)
Net deferred loan origination fees 242 (89)
Net change in loans held for sale 1,266 4,919
Net gain on sale of loans (4) (166)
Amortization of intangible assets 25 25
Deferred income tax expense (benefit) (404) 836
Partnership income (386) (333)
Decrease (increase) in accrued interest receivable and other assets 4,782 (437)
Decrease in accrued interest payable and other liabilities (1,293) (990)
Net cash provided by operating activities 9,434 8,666
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from maturities of and calls on investment securities held to maturity 3,977 38,573
Purchases of investment securities held to maturity (3,000) (41,085)
Proceeds from maturities of and calls on investment securities available for sale 321 46,302
Purchases of investment securities available for sale (5,120) (46,000)
Net decrease (increase) in interest-bearing deposits in other banks 7,364 (30,408)
Net loan repayments (originations) (20,667) 11,182
Loans acquired in branch acquisition - (2,656)
Purchases of premises and equipment (1,130) (716)
Net cash used in investing activities (18,255) (24,808)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in deposits 35,756 (1,159)
Deposits acquired in branch acquisition - 10,821
Proceeds from Federal Home Loan Bank intermediate-term advances 10,000 6,600
Repayments of Federal Home Loan Bank intermediate-term advances (5,964) (10,999)
Net increase (decrease) in other short-termborrowings (35,214) 17,639
Cash dividends paid (1,152) (1,151)
Proceeds from sale of common stock - 25
Net cash provided by financing activities 3,426 21,776
Net increase (decrease) in cash and cash equivalents (5,395) 5,634
CASH AND CASH EQUIVALENTS:
At beginning of period 61,604 63,152
At end of period $ 56,209 $ 68,786
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for interest $ 12,104 $ 7,339
Cash paid during the period for income taxes $ 800 $ 540
<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 months ended March 31,
1995 are not necessarily indicative of the results to be expected
for the full year.
IMPAIRED LOANS
On January 1, 1995, the Company adopted Statement of Financial
Accounting Standards ("SFAS") No. 114, "Accounting by Creditors for
Impairment of a Loan," as amended by 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 adoption of SFAS Nos. 114 and
118 did not result in additional provisions for loan losses or
changes in previously reported net income.
The Company considers a loan to be impaired when, based upon
current information and events, it believes it is probable that the
Company will be unable to collect all amounts due according to the
contractual terms of the loan agreement. The Company's impaired
loans within the scope of SFAS Nos. 114 and 118 include certain
nonaccrual loans, all troubled debt restructurings and certain
delinquent loans for which full payment of principal and interest
is not expected. The Company bases the measurement of these
impaired loans on the fair value of the loans' collateral
properties. Cash receipts on nonaccrual impaired loans are
applied to principal outstanding, and no interest income is
recognized unless the financial condition and payment record of the
borrowers warrant such recognition. For impaired loans other than
nonaccrual loans, interest income is recognized and cash receipts
are applied to principal and interest in accordance with the
contractual loan terms. Adjustments to impairment losses due to
changes in the fair value of impaired loans' collateral properties
are included in the provision for loan losses. Upon disposition of
an impaired loan, any related valuation allowance is reversed
through a charge-off to the allowance for loan losses.
At March 31, 1995, the net recorded investment in loans for which
impairment has been recognized in accordance with SFAS Nos. 114 and
118 totalled $27.3 million, and the total allowance for loan losses
related to such loans was $2.8 million. Interest income recognized
F-4
<PAGE>
on impaired loans during the three months ended March 31, 1995
totalled $352,000. There was no activity in the allowance for loan
losses for the three months ended March 31, 1995 related to
impaired loans since appropriate amounts had been specifically
reserved as of December 31, 1994.
F-5
<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> 51,209
<INT-BEARING-DEPOSITS> 32,913
<FED-FUNDS-SOLD> 5,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 88,112
<INVESTMENTS-CARRYING> 248,747
<INVESTMENTS-MARKET> 245,655
<LOANS> 1,010,194
<ALLOWANCE> 19,034
<TOTAL-ASSETS> 1,387,301
<DEPOSITS> 1,117,665
<SHORT-TERM> 58,158
<LIABILITIES-OTHER> 13,672
<LONG-TERM> 72,343
<COMMON> 6,544
0
0
<OTHER-SE> 117,703
<TOTAL-LIABILITIES-AND-EQUITY> 1,387,301
<INTEREST-LOAN> 21,839
<INTEREST-INVEST> 3,418
<INTEREST-OTHER> 707
<INTEREST-TOTAL> 25,964
<INTEREST-DEPOSIT> 8,450
<INTEREST-EXPENSE> 10,592
<INTEREST-INCOME-NET> 15,372
<LOAN-LOSSES> 825
<SECURITIES-GAINS> 30
<EXPENSE-OTHER> 11,675
<INCOME-PRETAX> 5,694
<INCOME-PRE-EXTRAORDINARY> 5,694
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,442
<EPS-PRIMARY> 0.66
<EPS-DILUTED> 0.66
<YIELD-ACTUAL> 8.13
<LOANS-NON> 15,175
<LOANS-PAST> 19,157
<LOANS-TROUBLED> 6,874
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 18,296
<CHARGE-OFFS> 130
<RECOVERIES> 43
<ALLOWANCE-CLOSE> 19,034
<ALLOWANCE-DOMESTIC> 14,508
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 4,526
</TABLE>
