CPB's earnings slip in fourth quarter
Loans and deposits were up but net income fell by 2.9 percent after charges
Central Pacific Financial Corp. increased both loans and deposits during the fourth quarter, but said yesterday that net income fell 2.9 percent after taking several one-time charges totaling $2.5 million.
The state's fourth-largest bank in terms of assets had earnings of $18.8 million, or 61 cents a share, compared with $19.4 million, or 63 cents a share, a year earlier.
The special items consisted of an after-tax charge of $900,000, or 3 cents a share, from a previously announced investment portfolio repositioning of $109 million in available-for-sale investment securities; a $1.1 million tax charge, or 3 cents a share, for income tax liability adjustments; and a $500,000 after-tax charge, or 2 cents a share, for adjustments to employee benefit-related liabilities.
Central Pacific also had $1.4 million in net federal and state tax credits for high-tech investments and energy conservation leases.
Analysts had forecast earnings per share of 66 cents, according to Thomson Financial. However, it was unclear which analysts had taken the special items into account when calculating their estimates.
"Earnings were in line with the exception of slightly higher expenses than I expected," said Brett Rabatin, an analyst for Nashville, Tenn.-based FTN MidWest Research. "There was a lot of noise (special items) and that tended to mute the core earnings."
Central Pacific also forecast that its earnings per share for 2007 would be in the range of $2.80 to $2.90 a share. Analysts are calling for $2.85 a share.
For all of last year, Central Pacific's earnings rose 9.3 percent to $79.2 million, or $2.57 a share, from $72.5 million, or $2.38 a share, in 2005.
"We are pleased that we have achieved solid growth in loans and deposits over the past year, while at the same time maintaining a strong credit discipline," said Clint Arnoldus, president and chief executive of Central Pacific. "We have also made significant strides in our Bank Secrecy Act remediation efforts and expect to be in full compliance by midyear."
Last month, Central Pacific received a cease-and-desist order from federal and state regulators after they found the company's ability to monitor large currency transactions deficient under the federal Bank Secrecy Act.
Central Pacific said the percentage of loan growth from mainland operations shrunk to 50 percent last quarter from about 75 percent in both the third quarter of 2006 and the fourth quarter of 2005.
Mortgage origination activity for the fourth quarter increased by 23 percent over the previous quarter but plunged 37 percent from the year-ago quarter.
Still, total loans and leases increased by 8.3 percent to $3.8 billion from $3.6 billion a year ago
"I was expecting loan growth to slow from the mainland," Rabatin said. "It's difficult to come by now whether it be from the mainland or Hawaii. There's a lot of competition and it's a somewhat slowing economy. Demand is not as brisk as it was two or three quarters ago, particularly on the mainland."
Total assets increased 4.9 percent to $5.5 billion from $5.2 billion a year ago while total deposits gained 5.6 percent to $3.8 billion from $3.6 billion.
Net interest income, which reflects the difference between what the bank pays depositors and what it brings in from loans, rose 2.2 percent to $53.4 million from $52.3 million a year earlier.
The bank's net interest margin fell to 4.49 percent from 4.69 percent as it increased its pricing on deposits and borrowings and investors shifted their money to higher-yielding accounts.
Noninterest income, which includes revenue from service charges and fees, declined 17.3 percent to $9.5 million from $11.5 million due mainly to the investment portfolio repositioning.
At year-end, Central Pacific's nonperforming assets were $9 million, or 0.16 percent of total assets, compared with $12.6 million, or 0.24 percent of total assets, at the end of 2005
