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, 1997
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. Yes [ X ] 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, 1997: 5,272,894 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 - March 31, 1997 and
December 31, 1996 F-1
Consolidated Statements of Income - Three months ended
March 31, 1997 and 1996 F-2
Consolidated Statements of Cash Flows - Three months
ended March 31, 1997 and 1996 F-3
Notes to Consolidated Financial Statements F-4
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Certain statements in this report on Form 10-Q constitute "forward-looking
statements" under the Private Securities Litigation Reform Act of 1995, which
involve risks and uncertainties. The Company's actual results may differ
significantly from the results discussed in such forward-looking statements.
Factors that might cause such a difference include, but are not limited to,
credit quality, economic conditions, competition in the geographic and business
areas in which the Company conducts its operations, fluctuations in interest
rates and governmental regulations. For additional information concerning
these factors, see "Item 1. Business" and "Item 7. Management's Discussion and
Analysis of Financial Condition and Results of Operations" contained in the
Company's Annual Report on Form 10-K for the year ended December 31, 1996.
Overview
CPB Inc. (the "Company") posted first quarter 1997 net income of $3.591
million, increasing by 1.0% over the $3.554 million earned in the first quarter
of 1996. A $300,000 increase in the provision for loan losses was
substantially offset by a $221,000 decrease in salaries and employee benefits
compared to the first quarter of 1996. Net income for the first quarter of
1997 also included $64,000 in gains resulting from the sales of two properties
held as other real estate. As of March 31, 1997, total assets of $1,437.1
million increased by $34.0 million or 2.4%, net loans of $1,026.1 million
increased by $3.5 million or 0.3%, and total deposits of $1,154.5 million
increased by $30.9 million or 2.7% when compared with year-end 1996.
The following table presents annualized return on average assets, annualized
return on average stockholders' equity and earnings per share for the periods
indicated.
1
<PAGE>
Three Months Ended
March 31,
1997 1996
Annualized return
on average assets 1.02% 1.05%
Annualized return
on average
stockholders' equity 10.05% 10.57%
Earnings per share $0.68 $0.68
The State of Hawaii's economy remains sluggish, but there are indications
that the economy may be improving. Local economists say the decline in jobs in
Hawaii during the last five years has abated. They noted small increases in
hotel and education employment, while the rate of decline in certain key areas
like construction have slowed. In the tourism industry, visitor arrivals for
March 1997 increased by 4.3% compared to March 1996. Eastbound arrivals
(primarily from Asia) increased by 5.3% while westbound arrivals (primarily
from the U.S. mainland) increased by 3.7%. Visitor arrivals for the first
three months of 1997 were still down by 1.4% from the same period in 1996.
However, the adverse effects of the past several years' economic stagnation
are evident. Bankruptcy and foreclosure filings for the first three months of
1997 were up significantly. Bankruptcy petitions filed between January 1, 1997
and March 24, 1997 totaled 919 filings compared with 547 filings during the
same period last year, a 68% increase. There were also 627 foreclosure filings
during the same period in 1997, a 54% increase over the same period in 1996.
In the real estate market, the median sales price of single family homes on the
island of Oahu for the first quarter of 1997 fell to $313,800, a 5.4% decrease
from the first quarter of 1996. The median sales price of condominiums on the
island of Oahu fell to $150,000, a 16.7% decrease from the same period in 1996.
While the Hawaii economy is expected to grow modestly in 1997, future trends
in bankruptcy and foreclosure filings, employment, tourism and the real estate
market could affect the Company's loan demand, deposit growth, provision for
loan losses, noninterest income and noninterest expense. Accordingly, the
Company's results of operations for 1997 will, in part, 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, 1997 and 1996 is set forth below on a taxable
2
<PAGE>
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."
Three Months Ended
March 31,
1997 1996
(Dollars in thousands)
Interest income $26,519 $26,428
Interest expense 10,684 10,589
Net interest income $15,835 $15,839
Annualized net
interest margin 4.75% 4.94%
An increase in interest earning assets was partially offset by lower
interest rates and a $444,000 decline in fees on loans, resulting in a slight
increase in interest income of $91,000 or 0.3% in the first quarter of 1997 as
compared to the same period in 1996. Average interest earning assets of
$1,333.1 million for the three months ended March 31, 1997 increased by
$50.1 million or 3.9%, reflecting a $52.4 million or 5.3% increase in average
loans. Interest on taxable investment securities decreased by $606,000, while
interest on deposits in other banks increased by $616,000 as proceeds from
maturities of investment securities were held to meet anticipated liquidity
needs. Due to the change in composition of interest earning assets and the
decline in loan fees, the yield on interest earning assets decreased to 7.96%
from 8.24%.
Interest expense for the first three months of 1997 increased by $95,000 or
0.9% compared to the same period in 1996. Average interest-bearing liabilities
of $1,093.4 million for the first quarter of 1997 increased by $33.3 million or
3.1% when compared to the first quarter of 1996. However, the effective rate
on interest-bearing liabilities decreased to 3.91% from 4.00% for the same
period due to the lower level of interest rates paid on deposits in 1997.
As a result, net interest income for the first quarter of 1997 remained
relatively unchanged, decreasing by only $4,000, while net interest margin
decreased to 4.75% from 4.94%. With the expectation of continued strong
competition for both loans and deposits, no assurances can be given that the
Company will be able to maintain net interest margin at its current level for
the remainder of 1997.
Provision for Loan Losses
Provision for loan losses is determined by Management's ongoing evaluation
of the loan portfolio and assessment of the ability of the allowance for loan
losses to cover inherent losses. The Company, considering current information
and events
3
<PAGE>
regarding the borrowers' ability to repay their obligations, treats a loan
as impaired when it is probable that the Company will be unable to collect all
amounts due according to the contractual terms of the loan agreement. When a
loan is considered to be impaired, the amount of the impairment is measured
based on the present value of expected future cash flows discounted at the
loan's effective interest rate or, if the loan is considered to be
collateral dependent, based on the fair value of the collateral. Impairment
losses are included in the allowance for loan losses through a charge to the
provision for loan losses. For smaller-balance homogeneous loans (primarily
residential real estate and consumer loans), the allowance for loan
losses is based upon Management's evaluation of the quality, character and
risks inherent in the loan portfolio, current and projected economic
conditions, and loan loss experience. The allowance is increased by provisions
charged to operating expense and reduced by charge-offs, net of recoveries.
The following table sets forth certain information with respect to the
Company's allowance for loan losses as of the dates or for the periods
indicated.
Three Months Ended
March 31,
1997 1996
(Dollars in thousands)
Allowance for loan losses:
Balance at beginning
of period $19,436 $20,156
Charge-offs:
Commercial, financial
and agricultural 33 4
Real estate-construction - -
Real estate-mortgage-
residential 154 -
Real estate-mortgage-
commercial - -
Consumer
Credit card & related
plans 138 95
Other consumer 152 56
Other 2 -
Total charge-offs 479 155
Recoveries:
Commercial, financial
and agricultural 4 2
Real estate-construction - 11
Real estate-mortgage-
residential 19 -
Real estate-mortgage-
4
<PAGE>
commercial - -
Consumer
Credit card & related
plans 33 16
Other consumer 12 20
Other - -
Total recoveries 68 49
Net charge-offs 411 106
Provision charged to expense 750 450
Balance at end of period $19,775 $20,500
Annualized ratio of
net charge-offs to
average loans 0.16% 0.04%
The provision for loan losses of $750,000 for the first quarter of 1997
increased by $300,000 or 66.7% from the same period in 1996 due to continued
increases in bankruptcy filings in 1997 and management's reassessment of the
level of expected future loan losses. Net charge-offs of $411,000 and
$106,000 for the first three months of 1997 and 1996, respectively, when
expressed as an annualized percentage of average loans, were 0.16% and
0.04%, respectively. Consumer and residential real estate loans comprised
approximately 61% and 32%, respectively, of total charge-offs during the first
quarter of 1997, reflecting the impact on consumers of the prolonged economic
stalemate, coupled with continued declines in real estate values.
The allowance for loan losses expressed as a percentage of total loans was
1.89% and 1.87% at March 31, 1997 and December 31, 1996, respectively.
Management believes that the current level of provision for loan losses is
consistent with the state of Hawaii's relative economic stability experienced
during the last several years. Delinquencies, bankruptcies and foreclosures
occurring during the first quarter of 1997 were the result of past economic
conditions which had been provided for in the allowance for loan losses in
previous years. Notwithstanding the increase in net charge-offs in the first
quarter of 1997 compared to the same period in 1996, the Company's net
charge-offs remained relatively low as a percentage of total loans. However,
continuation of current economic conditions in the State of Hawaii may
adversely affect borrowers' ability to repay, collateral values and,
consequently, the level of nonperforming loans and provision for loan losses.
Nonperforming Assets
The following table sets forth nonperforming assets, accruing loans
delinquent for 90 days or more and restructured loans still accruing interest
at the dates indicated.
5
<PAGE>
March 31, December 31,
1997 1996
(Dollars in thousands)
Nonaccrual loans:
Commercial, financial
and agricultural $ 846 $ 2,175
Real estate-construction - -
Real estate-mortgage-
residential 2,550 2,462
Real estate-mortgage-
commercial 8,774 8,863
Consumer
Credit card & related plans 69 -
Other consumer - -
Other - -
Total nonaccrual loans 12,239 13,500
Other real estate 965 1,235
Total nonperforming assets 13,204 14,735
Loans delinquent for 90
days or more:
Commercial, financial
and agricultural 1,079 1,038
Real estate-construction - -
Real estate-mortgage-
residential 4,229 4,366
Real estate-mortgage-
commercial 2,099 341
Consumer
Credit card & related plans 130 104
Other consumer 553 455
Other 6 9
Total loans delinquent
for 90 days or more 8,096 6,313
Restructured loans still
accruing interest:
Commercial, financial
and agricultural 354 1,723
Real estate-construction - -
Real estate-mortgage-
residential - -
Real estate-mortgage-
commercial 2,571 11,095
Consumer
Credit card & related plans - -
Other consumer - -
Other - -
Total restructured loans
still accruing interest 2,925 12,818
6
<PAGE>
Total nonperforming assets,
loans delinquent for
90 days or more and
restructured loans still
accruing interest $24,225 $33,866
Total nonperforming assets as a
percentage of loans and
other real estate 1.26% 1.41%
Total nonperforming assets and
loans delinquent for 90 days
or more as a percentage of
loans and other real
estate 2.03% 2.02%
Total nonperforming assets,
loans delinquent for 90 days
or more and restructured loans
still accruing interest
as a percentage of loans
and other real estate 2.31% 3.25%
Nonperforming assets, loans delinquent for 90 days or more and restructured
loans still accruing interest totaled $24.2 million at March 31, 1997,
decreasing by $9.6 million or 28.5% from year-end 1996. 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 $12.2 million were comprised primarily of one commercial
loan, four commercial real estate loans and several residential mortgage
loans. Borrowers of the $846,000 commercial loan have filed for bankruptcy
protection and are currently developing a reorganization plan. A $6.0 million
commercial real estate loan secured by commercial properties, which has been
listed for sale by the borrowers, is in the workout process. Three commercial
real estate loans totaling $4.3 million, each secured by residential or
commercial real property, are subject to foreclosure proceedings, as are
substantially all nonaccrual residential mortgage loans. Partial charge-offs
have been made on several loans, and management believes additional allocated
reserves are adequate to cover any further losses which may result from the
disposition of nonaccrual loans.
Other real estate of $965,000 at March 31, 1997 decreased by $270,000 from
year-end 1996 due to the sale of two properties during the quarter. Loans
delinquent for 90 days or more totaled $8.1 million at March 31, 1997,
increasing by $1.8 million or 28.2% from year-end 1996 due primarily to the
addition of a $1.4 million commercial loan secured by various business assets.
7
<PAGE>
Restructured loans still accruing interest totaled $2.9 million at March 31,
1997, a decrease of $9.9 million or 77.2% from year-end 1996. Loans totaling
$9.8 million are performing as restructured and are no longer deemed to be
troubled debt restructurings. Impaired loans at March 31, 1997 amounted to
$12.9 million and included all nonaccrual and restructured loans greater than
$500,000. The allowance for loan losses allocated to impaired loans amounted
to $2.5 million.
Management continues to closely monitor loan delinquencies and work with
borrowers to resolve loan problems; however, a continued decline in general
economic conditions may result in future increases in nonperforming assets,
delinquencies, net charge-offs, provision for loan losses and noninterest
expense.
Other Operating Income
Total other operating income in the first quarter of 1997 of $2,627,000
increased by $50,000 or 1.9% from the first quarter of 1996. This increase was
primarily due to the sales of two properties held as other real estate
resulting in gains of $64,000 which were included in other income. A decrease
in foreign exchange fees of $89,000 was attributable, in part, to a change in
strategy to minimize foreign exchange risk. This was offset by increases in
trust fees and gains from sales of loans, which were included in other income.
Other Operating Expense
Total other operating expense of $11,735,000 for the first quarter of 1997
decreased by $293,000 or 2.4% from the first quarter of 1996. Salaries and
employee benefits of $6,368,000 decreased by $221,000 or 3.4% due primarily to
a $254,000 reduction in pension expense resulting from a revision to the
Company's defined benefit retirement plan made in the third quarter of 1996.
Income Taxes
Income tax expense totaled $2,321,000 and $2,331,000 for the three months
ended March 31, 1997 and 1996, respectively. The effective tax rate for the
first quarter of 1997 and 1996 was 39.26% and 39.61%, respectively. The
decline in the effective tax rate during 1997 was attributable to an increase
in tax-exempt interest on loans.
Financial Condition
Total assets at March 31, 1997 of $1,437.1 million increased by $34.0
million or 2.4% over December 31, 1996. Interest-bearing deposits in other
banks of $47.4 million increased by $21.1 million or 80.4% during the first
quarter of 1997 due to an increase in short-term customer deposits which were
invested in short-term interest-bearing instruments. Investment securities
of $250.3 million increased by $9.8 million or 4.1%, while net loans of
$1,026.1 million increased by $3.5 million or 0.3%.
8
<PAGE>
Total deposits at March 31, 1997 of $1,154.5 million increased by $30.9
million or 2.7% from year-end 1996. Interest-bearing deposits of $986.7
million increased by $31.3 million or 3.3%, with increases in money market
and consumer time deposits partially offset by declines in savings and
government time deposits. Core deposits (noninterest-bearing demand,
interest-bearing demand and savings deposits, and time deposits under
$100,000) at March 31, 1997 of $874.7 million increased by $15.5 million or
1.8% during the first quarter of 1997. Time deposits of $100,000 or more
increased by $15.4 million or 5.8% during the same period.
Capital Resources
Stockholders' equity of $142.9 million at March 31, 1997 increased by $2.0
million or 1.4% from December 31, 1996. When expressed as a percentage of
total assets, stockholders' equity was 9.94% and 10.04% at March 31, 1997 and
December 31, 1996, respectively. On March 17, 1997, the Company's board of
directors declared a quarterly cash dividend of $0.24 per share, matching the
$0.24 per share declared in the first quarter of 1996. Dividends declared in
the first quarter of 1997 totaled $1,265,000 compared with $1,263,000 in the
first quarter of 1996. 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 adopted by the Federal Reserve Board (the
"FRB") and the Federal Deposit Insurance Corporation (the "FDIC") are as
follows. 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 ("CAMELS") 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.
9
<PAGE>
Required Actual Excess
At March 31, 1997:
Tier I risk-based capital ratio 4.00% 12.19% 8.19%
Total risk-based capital ratio 8.00% 13.45% 5.45%
Leverage capital ratio 4.00% 10.21% 6.21%
At December 31, 1996:
Tier I risk-based capital ratio 4.00% 12.10% 8.10%
Total risk-based capital ratio 8.00% 13.35% 5.35%
Leverage capital ratio 4.00% 10.28% 6.28%
In addition, FDIC-insured institutions such as Central Pacific Bank (the
"Bank"), a wholly-owned subsidiary of the Company, 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.
Required Actual Excess
At March 31, 1997:
Tier I risk-based capital ratio 6.00% 11.36% 5.36%
Total risk-based capital ratio 10.00% 12.62% 2.62%
Leverage capital ratio 5.00% 9.54% 4.54%
At December 31, 1996:
Tier I risk-based capital ratio 6.00% 11.27% 5.27%
Total risk-based capital ratio 10.00% 12.53% 2.53%
Leverage capital ratio 5.00% 9.60% 4.60%
Asset-Liability Management and Liquidity
The Company's asset-liability management policy and liquidity position are
discussed in the 1996 Annual Report to Shareholders. No significant changes in
either have occurred during the quarter ended March 31, 1997.
10
<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
The Annual Meeting of Shareholders (the "Meeting") of the Company was held
on April 22, 1997, 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. Approval of the 1997 Stock Option Plan;
3. Ratification of the appointment of KPMG Peat Marwick LLP as the
Company's independent accountants for the fiscal year ending December
31, 1997; and
4. 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
4,304,033 shares, or 81.6% of eligible shares, were represented at the Meeting.
Votes Cast
Votes Cast Against or Abstentions
Name For Withheld or Nonvotes
Paul Devens 4,263,425 40,608 None
Stanley W. Hong 4,197,554 106,479 None
Yoshiharu Satoh 4,262,641 41,392 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
Alice F. Guild 1999
Dennis I. Hirota, Ph.D. 1998
Kensuke Hotta 1998
Daniel M. Nagamine 1999
11
<PAGE>
Joichi Saito 1998
Naoaki Shibuya 1999
The adoption of the 1997 Stock Option Plan was approved with a total of
3,812,440 votes cast for, 53,266 votes against and 438,327 abstentions or
nonvotes.
The ratification of the appointment of KPMG Peat Marwick LLP as independent
accountants for the fiscal year ending December 31, 1997 was approved with a
total of 4,244,056 votes cast for, 33,272 votes against or withheld and 26,705
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 1997.
12
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CPB INC.
(Registrant)
Date: May 12, 1997 /s/ Joichi Saito
Joichi Saito
Chairman of the Board and
Chief Executive Officer
Date: May 12, 1997 /s/ Neal Kanda
Neal Kanda
Vice President and Treasurer
(Principal Financial and
Accounting Officer)
13
<PAGE>
CPB INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
March 31, December 31,
(Dollars in thousands, except per share data) 1997 1996
<S> <C> <C>
ASSETS
Cash and due from banks $ 56,029 $ 55,534
Interest-bearing deposits in other banks 47,436 26,297
Investment securities:
Held to maturity, at cost (fair value of $114,632
and $109,288 at March 31, 1997 and December 31,
1996, respectively) 115,655 109,244
Available for sale, at fair value 134,652 131,214
Total investment securities 250,307 240,458
Loans 1,045,849 1,041,976
Less allowance for loan losses 19,775 19,436
Net loans 1,026,074 1,022,540
Premises and equipment 24,854 25,072
Accrued interest receivable 9,287 8,674
Investment in partnership 7,029 6,902
Due from customers on acceptances 250 1,162
Other assets 15,861 16,526
Total assets $1,437,127 $1,403,165
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Noninterest-bearing deposits $ 167,790 $ 168,170
Interest-bearing deposits 986,709 955,444
Total deposits 1,154,499 1,123,614
Short-term borrowings 5,000 5,427
Long-term debt 118,114 115,840
Bank acceptances outstanding 250 1,162
Other liabilities 16,346 16,240
Total liabilities 1,294,209 1,262,283
<PAGE>
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 5,272,894 and 5,268,874 shares at
March 31, 1997 and December 31, 1996, respectively 6,591 6,586
Surplus 45,567 45,481
Retained earnings 91,731 89,405
Unrealized loss on investment securities,
net of taxes (971) (590)
Total stockholders' equity 142,918 140,882
Total liabilities and stockholders' equity $1,437,127 $1,403,165
Book value per share $ 27.10 $ 26.74
<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
(Dollars in thousands, March 31,
except per share data) 1997 1996
<S> <C> <C>
Interest income:
Interest and fees on loans $22,204 $22,134
Interest and dividends on
investment securities:
Taxable interest 3,315 3,921
Tax-exempt interest 35 44
Dividends 267 258
Interest on deposits in other banks 633 17
Interest on Federal funds sold and
securities purchased under
agreements to resell - 1
Total interest income 26,454 26,375
Interest expense:
Interest on deposits 8,893 9,157
Interest on other borrowed funds 1,791 1,432
Total interest expense 10,684 10,589
Net interest income 15,770 15,786
Provision for loan losses 750 450
Net interest income after
provision for loan losses 15,020 15,336
Other operating income:
Service charges on deposit accounts 690 672
Other service charges and fees 1,383 1,407
Partnership income 127 115
Fees on foreign exchange 182 271
Other 245 112
Total other operating income 2,627 2,577
Other operating expense:
Salaries and employee benefits 6,368 6,589
Net occupancy 1,584 1,608
Equipment 684 676
Other 3,099 3,155
Total other operating expense 11,735 12,028
Income before income taxes 5,912 5,885
Income taxes 2,321 2,331
Net income $ 3,591 $ 3,554
Per common share:
Net income $ 0.68 $ 0.68
Cash dividends declared $ 0.24 $ 0.24
<PAGE>
Weighted average shares outstanding
(in thousands) 5,270 5,261
<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) 1997 1996
<S> <C> <C>
Cash flows from operating activities:
Net income $ 3,591 $ 3,554
Adjustments to reconcile net income
to net cash provided by operating
activities:
Provision for loan losses 750 450
Provision for depreciation and
amortization 683 676
Net amortization and accretion of
investment securities 120 292
Federal Home Loan Bank stock
dividends received (267) (258)
Net change in loans held for sale 565 (1,759)
Deferred income tax expense (benefit) 520 (606)
Partnership income (127) (115)
Increase in accrued interest
receivable and other assets (140) (293)
Increase (decrease) in accrued interest
payable and other liabilities 31 (32)
Net cash provided by operating
activities 5,726 1,909
Cash flows from investing activities:
Proceeds from maturities of and
calls on investment securities
held to maturity 10,277 15,512
Purchases of investment securities
held to maturity (16,784) -
Proceeds from maturities of and
calls on investment securities
available for sale 22,279 1,961
Purchases of investment securities
available for sale (26,108) (33,091)
Net decrease (increase) in interest-bearing
deposits in other banks (21,139) 7,091
Net loan repayments (originations) (4849) 245
Purchases of premises and equipment (465) (445)
Net cash used in investing
activities (36,789) (8,727)
Cash flows from financing activities:
Net increase (decrease) in deposits 30,885 (16,626)
Proceeds from long-term debt 16,000 10,000
Repayments of long-term debt (13,726) (10,193)
Net increase (decrease) in
<PAGE>
short-term borrowings (427) 23,551
Cash dividends paid (1,265) (1,260)
Proceeds from sale of common stock 91 106
Net cash provided by financing
activities 31,558 5,578
Net increase (decrease) in cash
and cash equivalents 495 (1,240)
Cash and cash equivalents:
At beginning of period 55,534 50,274
At end of period $56,029 $49,034
Supplemental disclosure of cash flow
information:
Cash paid during the period
for interest $10,726 $10,538
Cash paid during the period
for income taxes $ 1,450 $ 480
<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, 1996. 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, 1997 are not
necessarily indicative of the results to be expected for the full year.
ACCOUNTING PRONOUNCEMENTS
In June 1996, the FASB issued SFAS No. 125, "Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities." SFAS
No. 125 provides accounting and reporting standards for transfers and servicing
of financial assets and extinguishments of liabilities based on consistent
application of a financial-components approach that focuses on control. It
distinguishes transfers of financial assets that are sales from transfers that
are secured borrowings. In December 1996, the FASB issued SFAS No. 127,
"Deferral of the Effective Date of Certain Provisions of FASB Statement No.
125." SFAS No. 127 defers the effective date of certain provisions of SFAS
No. 125 to transactions occurring after December 31, 1997. Transactions
subject to deferral under SFAS No. 127 include transactions addressing secured
borrowings and collateral and transactions addressing financial assets that are
part of repurchase agreements, dollar rolls, securities lending and similar
transactions. In January 1997, the Company implemented those provisions of
SFAS No. 125 which were not subject to deferral by SFAS No. 127. However,
servicing assets were deemed immaterial, and accordingly, no disclosures will
be made, as permitted by SFAS No. 125. Further, the Company does not expect
the future application of SFAS No. 125 to the transactions covered under SFAS
No. 127 to have a material impact on the Company's consolidated financial
statements.
F-4
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 56,029
<INT-BEARING-DEPOSITS> 47,436
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 134,652
<INVESTMENTS-CARRYING> 250,307
<INVESTMENTS-MARKET> 249,284
<LOANS> 1,045,849
<ALLOWANCE> 19,775
<TOTAL-ASSETS> 1,437,127
<DEPOSITS> 1,154,499
<SHORT-TERM> 5,000
<LIABILITIES-OTHER> 16,346
<LONG-TERM> 118,114
0
0
<COMMON> 6,591
<OTHER-SE> 136,327
<TOTAL-LIABILITIES-AND-EQUITY> 1,437,127
<INTEREST-LOAN> 22,204
<INTEREST-INVEST> 3,617
<INTEREST-OTHER> 633
<INTEREST-TOTAL> 26,454
<INTEREST-DEPOSIT> 8,893
<INTEREST-EXPENSE> 10,684
<INTEREST-INCOME-NET> 15,770
<LOAN-LOSSES> 750
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 11,735
<INCOME-PRETAX> 5,912
<INCOME-PRE-EXTRAORDINARY> 5,912
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,591
<EPS-PRIMARY> 0.68
<EPS-DILUTED> 0.68
<YIELD-ACTUAL> 7.96
<LOANS-NON> 12,239
<LOANS-PAST> 8,096
<LOANS-TROUBLED> 2,925
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 19,436
<CHARGE-OFFS> 479
<RECOVERIES> 68
<ALLOWANCE-CLOSE> 19,775
<ALLOWANCE-DOMESTIC> 19,775
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 6,752
</TABLE>
