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 period ended June 30, 1994
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________________ to _____________
Commission file number 0-10777
CPB INC.
(Exact name of registrant as specified in its charter)
Hawaii 99-0212597
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
220 South King Street, Honolulu, Hawaii 96813
(Address of principal executive offices) (Zip Code)
(808) 544-0500
(Registrant's telephone number, including area code )
None
(Former name, former address and former fiscal year, if changed
since last report)
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15 (d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
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 June 30, 1994 - 5,235,331 shares
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
The financial statements listed below are filed as a part
hereof.
Page
Consolidated Balance Sheets - June 30, 1994 and
December 31, 1993 F-1
Consolidated Statements of Income - Three and six months ended
June 30, 1994 and 1993 F-2
Consolidated Statements of Cash Flows - Six months ended
June 30, 1994 and 1993 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 second quarter 1994 net income
of $3.480 million, decreasing by 10.9% from the $3.906 million
earned in the second quarter of 1993. Net income for the first six
months of 1994 was $6.606 million, decreasing by 16.9% from the
$7.947 million earned in the same period in 1993. The slowdown in
loan activity and the increase in expenses related to new branches
accounted for the decline in earnings. Net income for the first
half of 1994 also reflected expenses of approximately $915,000
related to the Voluntary Early Retirement Program (the "VERP")
which was offered to qualified employees of Central Pacific Bank
(the "Bank), a subsidiary of the Company (refer to "Results of
Operations --Other Operating Expense"). Net income for the first
half of 1993 included the recovery of a $300,000 write-down of a
mortgage-backed security recognized in 1992, along with the related
$185,000 of unaccrued interest, and a nonrecurring credit of
$208,000 resulting from the Company's adoption of Statement of
Financial Accounting Standards ("SFAS") No. 109, "Accounting for
Income Taxes." As of June 30, 1994, total assets of $1,305.0
million increased by $1.9 million or 0.1%, net loans of $922.2
million decreased by $6.4 million or 0.7%, and total deposits of
$1,077.1 million decreased by $1.2 million or 0.1% when compared
with year-end 1993.
1
The following table presents return on average assets, return on
average stockholders' equity and earnings per share for the periods
indicated.
Three Months Ended June 30, Six Months Ended June 30,
1994 1993 1994 1993
Annualized return on average assets
Before cumulative effect of
accounting change 1.07% 1.29% 1.02% 1.28%
After cumulative effect of
accounting change 1.07% 1.29% 1.02% 1.31%
Annualized return on average stockholders' equity
Before cumulative effect of
accounting change 12.00% 14.81% 11.43% 14.88%
After cumulative effect of
accounting change 12.00% 14.81% 11.43% 15.28%
Earnings per share
Before cumulative effect of
accounting change $0.66 $0.75 $1.26 $1.49
After cumulative effect of
accounting change $0.66 $0.75 $1.26 $1.53
The State of Hawaii's economy has shown signs of recovery in
certain sectors during the first half of 1994. Recent economic
indicators for Hawaii showed increases in visitor count,
construction contracts and credit demand. The results of
operations of the Company for the second half of 1994 will depend
on the speed and strength of economic recovery in the State of
Hawaii.
Results of Operations
Net Interest Income
A comparison of net interest income for the three and six months
ended June 30, 1994 and 1993 is set forth below on a taxable
equivalent basis using assumed income tax rates of
2
35% for 1994 and 34% for 1993. Net interest income, when expressed
as a percentage of average interest earning assets, is referred to
as "net interest margin."
Three Months Ended June 30, Six Months Ended June 30,
1994 1993 1994 1993
(Dollars in thousands)
Interest income $22,884 $23,169 $45,447 $46,498
Interest expense 7,373 7,774 14,541 15,944
Net interest income $15,511 $15,395 $30,906 $30,554
Net interest margin 5.16% 5.51% 5.15% 5.48%
Interest income decreased by $285,000 or 1.2% and $1,051,000 or
2.3% in the second quarter and first half of 1994, respectively, as
compared to the same periods in 1993. Average interest earning
assets of $1,201.8 million for the second quarter of 1994 increased
by $85.2 million or 7.6% over the second quarter of 1993.
Similarly, average interest earning assets for the first six months
of 1994 of $1,199.3 million increased by $83.8 million or 7.5% over
the same period last year. However, the yield on interest earning
assets for the three and six months ended June 30, 1994 as compared
to the same periods in 1993 decreased to 7.62% from 8.30% and to
7.58% from 8.34%, respectively. Fees on loans, which are included
in interest income, decreased by $278,000 or 31.6% and by $408,000
or 21.2% during those periods, resulting in a decrease in the yield
on loans. As a result, interest and fees on loans decreased by
$410,000 or 2.1% and $1,195,000 or 3.1% in the second quarter and
first half of 1994, respectively, as compared to the same periods
in 1993. The decrease in interest and dividends on investment
securities was attributable to a combination of a decrease in the
dividend rate on Federal Home Loan Bank stocks in 1994 and a
recovery of $185,000 of previously unaccrued interest on a single
mortgage-backed security during the first quarter of 1993.
Interest expense for the three and six months ended June 30,
1994 decreased by $401,000 or 5.2% and $1,403,000 or 8.8%,
respectively, as compared to the same periods in 1993, also a
result of the downward interest rate trend experienced in 1993.
Average interest-bearing liabilities of $1,018.1 million for the
second quarter of 1994 increased by $74.5 million or 7.9% when
compared to the second quarter of 1993. Average interest-bearing
liabilities for the first half of 1994 of $1,015.7 million also
increased by $71.4 million or 7.6% when compared with the
comparable period in 1993. The rate on interest-bearing
liabilities for the second quarter and first half of 1994 as
compared to the same periods in 1993 decreased to 2.90% from 3.30%
and to 2.86% from 3.38%, respectively, due primarily to the decline
in rates paid on the Bank's deposits.
As a result, net interest income for the second quarter and
first half of 1994 increased by $116,000 or 0.8% and by $352,000 or
1.2%, respectively, over the same period in 1993. Net interest
margin, however, decreased during the same periods due to the
growth in interest earning assets which exceeded the rate of growth
in net interest income. Fees on
3
loans boosted net interest income in recent years due to an
increase in mortgage originations, particularly refinancings,
resulting from the low interest rate environment. Given the
current interest rate environment, which has experienced 125-basis
point increases in the target Federal funds rate and the prime rate
during 1994, the Company anticipates a decline in loan demand and
consequently a continued tightening of the net interest margin for
the remainder of 1994.
Provision for Loan Losses
The amounts provided for loan losses are determined by
Management's ongoing evaluation of the loan portfolio and
assessment of the ability of the allowance to cover losses inherent
in the loan portfolio. Such evaluation is based upon the Bank's
loan loss experience and projections by loan category, the level
and nature of current delinquencies and delinquency trends, the
quality and loss potential of specific loans in the Bank's
portfolio, evaluation of collateral for such loans, the economic
conditions affecting collectibility of loans, trends of loan growth
and such other factors which, in Management's judgment, deserve
recognition in the estimation of losses inherent in the Bank's loan
portfolio.
Provision for loan losses, loan charge-offs, recoveries, net
loan charge-offs and the annualized ratio of net loan charge-offs
to average loans and other real estate are set forth below for the
periods indicated.
Three Months Ended June 30, Six Months Ended June 30,
1994 1993 1994 1993
Provision for loan losses $825 $750 $1,650 $1,600
Loan charge-offs $492 $356 $ 650 $ 530
Recoveries 83 47 134 85
Net loan charge-offs $409 $309 $ 516 $ 445
Annualized ratio of net loan
charge-offs to average loans
and other real estate 0.17% 0.14% 0.11% 0.10%
The provision for loan losses of $825,000 and $1,650,000 for the
second quarter and first half of 1994, respectively, increased
compared to the same periods in 1993. Net loan charge-offs of
$409,000 and $516,000 for the three and six months ended June 30,
1994, respectively, when expressed as an annualized percentage of
average total loans and other real estate, were 0.17% and 0.11%,
respectively. A partial charge-off on a single residential
mortgage loan, classified as nonaccrual as of June 30, 1994,
accounted for approximately 58% and 44% of loan charge-offs in the
second quarter and first half of 1994, respectively. Consumer
loans accounted for an additional 32% of loans charged off for the
first half of 1994. The allowance for loan losses expressed as a
percentage of total loans was 1.94% and 1.81% at June 30, 1994 and
December 31, 1993, respectively.
4
Management believes that the allowance for loan losses at June
30, 1994 was adequate to absorb inherent risks in the portfolio.
However, no assurance can be given that economic conditions which
may adversely affect the Bank's customers or other circumstances,
such as material and sustained declines in real estate values, will
not result in increased losses in the Bank's loan portfolio.
Nonperforming Assets
The following table sets forth nonperforming assets and accruing
loans which were delinquent for 90 days or more. There were no
restructured loans at the dates indicated.
June 30, December 31, June 30,
1994 1993 1993
(Dollars in thousands)
Nonaccrual loans $ 4,125 $ 4,477 $ 3,758
Other real estate 2,758 1,750 1,939
Total nonperforming assets 6,883 6,227 5,697
Loans delinquent for 90 days or more 6,878 19,820 5,090
Total nonperforming assets and loans
delinquent for 90 days or more $13,761 $26,047 $10,787
Total nonperforming assets as a percentage
of total loans and other real estate 0.73% 0.66% 0.62%
Total nonperforming assets and loans
delinquent for 90 days or more as a
percentage of total loans and other
real estate 1.46% 2.75% 1.18%
Nonaccrual loans and loans delinquent for 90 days or more at
June 30, 1994 were comprised primarily of loans secured by
commercial and residential real property in the State of Hawaii.
Nonaccrual loans of $4,125,000 were comprised of a commercial
mortgage loan secured by resort commercial property and several
residential mortgage loans. Nonaccrual loans are primarily
collateralized by real estate located in the State of Hawaii.
Other real estate of $2,761,000 at June 30, 1994 consisted of five
residential properties located in the State of Hawaii. Valuation
adjustments to other real estate may be necessary should real
estate values deteriorate. Loans delinquent for 90 days or more
and still accruing interest totaled $6,878,000 at June 30, 1994,
decreasing by $12,942,000 or 65.3% from year-end 1993. This
decrease was due primarily to loans being paid in full or brought
current by the borrowers. 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 general economic conditions may result in further
increases in nonperforming assets, delinquencies and net loan
charge-offs.
5
In May 1993, the Financial Accounting Standards Board ("FASB")
issued SFAS No. 114, "Accounting by Creditors for Impairment of a
Loan." SFAS No. 114, effective for fiscal years beginning after
December 15, 1994, prescribes the recognition criteria for loan
impairment and the measurement methods for certain impaired loans
and loans whose terms are modified in troubled debt restructurings.
Early adoption of SFAS No. 114 is permitted, and restatement of
previously-issued financial statements is prohibited. The Company
has not determined whether to adopt SFAS No. 114 prior to the
effective date and, accordingly, has not determined the impact of
its application at this time.
Other Operating Income
Total other operating income in the second quarter of 1994 of
$2,745,000 increased by $141,000 or 5.4% over the second quarter of
1993. Other service charges and fees of $1,280,000 increased by
$104,000 or 8.8% due primarily to an increase in charge card fees
and commissions.
Total other operating income for the first half of 1994 of
$5,529,000 decreased by $78,000 or 1.4% from the first half of
1993. Other service charges and fees of $2,545,000 increased by
$213,000 due to the increase in charge card fees and commissions.
This increase was offset by a decrease in investment securities
gains of $292,000 resulting from the Bank's recovery during the
first quarter of 1993 of a previously-recorded $300,000 write-down
of a mortgage-backed security.
Other Operating Expense
Total other operating expense of $11,518,000 for the second
quarter of 1994 increased by $715,000 or 6.6% over the same period
in 1993. Salaries and employee benefits of $6,075,000 increased by
$384,000 or 6.7%. The number of employees increased during this
period due to the recent creation of the Trust and Real Estate Loan
divisions and the new In-Store Branch Department as well as the
opening of two new branch offices in the towns of Mililani and
Kailua on the island of Oahu, which were established to offer
expanded services and increased access to customers. Pension plan
expense also contributed to the increase. Equipment expense of
$645,000 increased by $102,000 or 18.9% due to equipment needs of
the offices noted above, equipment expenditures made in conjunction
with the implementation of a new loan processing system and further
investments in the Bank's information and technology systems.
Other expense of $3,466,000 increased by $227,000 or 7.0% as a
result of increases in professional fees and miscellaneous expenses
and a decrease in insurance expense, primarily Federal Deposit
Insurance Corporation ("FDIC") deposit insurance premiums.
Total other operating expense of $23,668,000 for the first half
of 1994 increased by $1,893,000 or 8.7% over the first half of
1993. Salaries and employee benefits of $13,021,000 increased by
$1,742,000 or 15.4%. 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,
over half of which management expects to recoup via lower salaries
and employee benefits
6
through the remainder of 1994. The benefits from the VERP are also
expected to enhance profitability into future years. Salaries and
employee benefits also increased during the first half of 1994 due
to the increases in employees and salary levels discussed above.
Equipment expense for the first six months of 1994 of $1,269,000
increased by $220,000 or 21.0% over the same period in 1993 as
explained above. Other expense of $6,780,000 decreased by $81,000
or 1.2% due primarily to a decrease in insurance expense which was
offset by increases in charge card expenses and professional fees.
Income Taxes
The effective tax rates for the second quarter and first half of
1994 were 40.08% and 39.59%, respectively, compared with the
previous year's rates of 38.35% and 38.44%, respectively. The
increase in effective rates during the current year was
attributable largely to the increase in the U.S. corporate federal
income tax rate to 35% from 34%, which became effective during the
third quarter of 1993.
Financial Condition
Total assets at June 30, 1994 of $1,305.0 million increased by
$1.9 million or 0.1% from December 31, 1993. Cash and due from
banks of $51.8 million decreased by $6.3 million or 10.9%, and net
loans of $922.2 million decreased by $6.4 million or 0.7%. These
decreases were offset by increases of $9.5 million or 188.3% in
interest-bearing deposits in other banks and $4.2 million or 1.7%
in investment securities.
Total deposits at June 30, 1994 of $1,077.1 million decreased by
$1.2 million or 0.1% from year-end 1993. Noninterest-bearing
deposits of $160.4 million decreased by $19.9 million or 11.0%,
while interest-bearing deposits of $916.7 million increased by
$18.7 million or 2.1%. Core deposits (noninterest-bearing demand,
interest-bearing demand and savings deposits, and time deposits
under $100,000) at June 30, 1994 of $896.7 million decreased by
$3.5 million or 0.4% during the first half of 1994, and time
deposits of $100,000 or more of $180.4 million increased by $2.2
million or 1.3% during the six months ended June 30, 1994. The
decline in core deposits resulted from a combination of declines in
business checking and personal money market accounts which
decreased by $15.0 million and $7.2 million, respectively, offset
by an increase of $16.5 million in personal savings accounts.
Federal funds purchased and securities sold under agreements to
repurchase of $29.2 million increased by $20.1 million or 220.2%
due to funds received from a customer. Other borrowed funds of
$68.3 million decreased by $18.5 million or 21.3%.
During the first quarter of 1994, the Bank acquired
approximately $2.7 million in loans and assumed over $10.8 million
in deposits from First Hawaiian Bank's Rice Branch on the island of
Kauai. These accounts are serviced by the Bank's existing Lihue
Branch.
Effective January 1, 1994, the Company adopted SFAS No. 115,
"Accounting for Certain Investments in Debt and Equity Securities,"
which addresses the accounting and reporting for investments in
equity securities that have readily determinable fair values (other
7
than those accounted for under the equity method or as investments
in consolidated subsidiaries) and all investments in debt
securities. On January 1, 1994, the Company recorded net
unrealized gains of $33,000 (before income taxes) on its portfolio
of investment securities classified as available for sale due
solely to the implementation of SFAS No. 115. As of June 30, 1994,
net unrealized losses on investment securities amounted to
$1,134,000 (before income taxes). The increase in the valuation
allowance, included as a separate component of stockholders'
equity, resulted from the increase in market interest rates during
the first half of 1994.
Capital Resources
Stockholders' equity of $116.9 million at June 30, 1994
increased by $3.7 million or 3.2% from December 31, 1993. When
expressed as a percentage of total assets, stockholders' equity was
8.95% and 8.69% at June 30, 1994 and December 31, 1993,
respectively. On June 13, 1994, the Board of Directors declared a
second quarter cash dividend of $0.22 per share, bringing total
dividends declared to $0.44 per share for the first half of 1994,
consistent with dividends declared during the same period in 1993.
Dividends declared in the first half of 1994 totalled $2,303,000
compared with $2,294,000 in the first half of 1993. The Company's
objective with respect to capital resources is to maintain a level
of capital that will support sustained asset growth and anticipated
credit risks and to ensure that regulatory guidelines and industry
standards are met.
Regulations on capital adequacy guidelines adopted by the
Federal Reserve Board (the "FRB") and the 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.
Required Actual Excess
At June 30, 1994:
Tier I risk-based capital ratio 4.00% 11.41% 7.41%
Total risk-based capital ratio 8.00% 12.66% 4.66%
Leverage capital ratio 4.00% 8.97% 4.97%
8
Required Actual Excess
At December 31, 1993:
Tier I risk-based capital ratio 4.00% 10.94% 6.94%
Total risk-based capital ratio 8.00% 12.19% 4.19%
Leverage capital ratio 4.00% 8.65% 4.65%
The increase in retained earnings, coupled with a slight decline
in risk-weighted assets, in the first half of 1994 contributed to
the increase in capital ratios.
In addition, effective December 19, 1992, FDIC-insured
institutions such as the Bank must maintain leverage, Tier I and
total risk-based capital ratios of at least 5%, 6% and 10%,
respectively, to be considered "well capitalized" under the prompt
corrective action provisions of the FDIC Improvement Act of 1991.
The following table sets forth the Bank's capital ratios as of
the dates indicated.
Required Actual Excess
At June 30, 1994:
Tier I risk-based capital ratio 6.00% 10.14% 4.14%
Total risk-based capital ratio 10.00% 11.39% 1.39%
Leverage capital ratio 5.00% 8.37% 3.37%
At December 31, 1993:
Tier I risk-based capital ratio 6.00% 9.80% 3.80%
Total risk-based capital ratio 10.00% 11.06% 1.06%
Leverage capital ratio 5.00% 8.10% 3.10%
Liquidity and Effects of Inflation
A discussion of liquidity and effects of inflation is included
in the 1993 Annual Report to Shareholders. No significant changes
in the Company's liquidity position or policies have occurred
during the six months ended June 30, 1994.
9
PART II - OTHER INFORMATION
Items 1 to 5.
Items 1 to 5 are omitted pursuant to instructions to Part II.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
None
(b) Reports on Form 8-K
The Company filed no reports on Form 8-K during the second
quarter of 1994.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
CPB INC.
(Registrant)
Date: August 12, 1994 /s/ Yoshiharu Satoh
Yoshiharu Satoh
Chairman of the Board and
Chief Executive Officer
Date: August 12, 1994 /s/ Neal Kanda
Neal Kanda
Vice President and Treasurer
(Principal Financial and
Accounting Officer)
10
CPB INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(Unaudited)
June 30, December 31,
(Dollars in thousands, except per share data) 1994 1993
Assets
Cash and due from banks $ 51,833 $ 58,152
Interest-bearing deposits in other banks 14,526 5,039
Federal funds sold 5,000 5,000
Investment securities:
Held to maturity, at cost (market value $186,938 and $253,313 at
June 30, 1994 and December 31, 1993, respectively) 189,891 250,668
Available for sale, at market value 65,020 -
Total investment securities 254,911 250,668
Loans 940,469 945,768
Less allowance for loan losses 18,265 17,131
Net loans 922,204 928,637
Premises and equipment, net 23,648 23,282
Accrued interest receivable 8,416 9,108
Investment in partnership 5,065 4,666
Due from customers on acceptances 1,036 1,347
Other assets 18,377 17,203
Total assets $ 1,305,016 $ 1,303,102
Liabilities and Stockholders' Equity
Deposits:
Noninterest-bearing deposits $ 160,355 $ 180,254
Interest-bearing deposits 916,725 898,072
Total deposits 1,077,080 1,078,326
Federal funds purchased and securities sold under
agreements to repurchase 29,234 9,130
Other borrowed funds 68,335 86,831
Bank acceptances outstanding 1,036 1,347
Other liabilities 11,479 13,280
Employee stock ownership plan 1,000 1,000
Total liabilities 1,188,164 1,189,914
Stockholders' equity:
Preferred stock, no par value, authorized 1,000,000 shares, none issued - -
Common stock, no par value, stated value $1.25 per share.
Authorized 25,000,000 shares; issued and outstanding 5,235,331 and
5,230,331 shares at June 30, 1994 and December 31, 1993, respectively 6,544 6,538
Surplus 45,178 45,140
Retained earnings 66,813 62,510
Unrealized loss on investment securities (683) -
117,852 114,188
Employee stock ownership plan shares purchased with debt (1,000) (1,000)
Total stockholders' equity 116,852 113,188
Total liabilities and stockholders' equity $ 1,305,016 $ 1,303,102
Book value per share $ 22.32 $ 21.64
<FN>
See accompanying notes to consolidated financial statements.
F-1
CPB INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
(Dollars in thousands, except per share data) 1994 1993 1994 1993
Interest income:
Interest and fees on loans $ 19,007 $ 19,417 $ 37,791 $ 38,986
Interest and dividends on investment securities:
Taxable interest 3,120 2,771 6,228 5,979
Tax-exempt interest 88 265 210 413
Dividends 190 519 435 743
Interest on deposits in other banks 346 74 544 141
Interest on Federal funds sold 28 13 57 22
Total interest income 22,779 23,059 45,265 46,284
Interest expense:
Interest on deposits 5,937 6,771 11,755 14,000
Interest on other borrowed funds 1,436 1,003 2,786 1,944
Total interest expense 7,373 7,774 14,541 15,944
Net interest income 15,406 15,285 30,724 30,340
Provision for loan losses 825 750 1,650 1,600
Net interest income after provision for loan losses 14,581 14,535 29,074 28,740
Other operating income:
Service charges on deposit accounts 685 647 1,354 1,262
Other service charges and fees 1,280 1,176 2,545 2,332
Partnership income 406 377 739 740
Fees on foreign exchange 254 207 535 536
Investment securities gains - - - 292
Other 120 197 356 445
Total other operating income 2,745 2,604 5,529 5,607
Other operating expense:
Salaries and employee benefits 6,075 5,691 13,021 11,279
Net occupancy 1,332 1,330 2,598 2,586
Equipment 645 543 1,269 1,089
Other 3,466 3,239 6,780 6,821
Total other operating expense 11,518 10,803 23,668 21,775
Income before income taxes and cumulative effect
of accounting change 5,808 6,336 10,935 12,572
Income taxes 2,328 2,430 4,329 4,833
Income before cumulative effect of accounting change 3,480 3,906 6,606 7,739
Cumulative effect of accounting change - - - 208
Net income $ 3,480 $ 3,906 $ 6,606 $ 7,947
Per common share:
Income before cumulative effect of accounting change 0.66 0.75 1.26 1.49
Cumulative effect of accounting change - - - 0.04
Net income $ 0.66 $ 0.75 $ 1.26 $ 1.53
Cash dividends declared $ 0.22 $ 0.22 $ 0.44 $ 0.44
Weighted average shares outstanding (in thousands) 5,234 5,211 5,233 5,205
<FN>
See accompanying notes to consolidated financial statements.
F-2
CPB INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Six Months Ended June 30,
(Dollars in thousands) 1994 1993
Cash flows from operating activities:
Net income $ 6,606 $ 7,947
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan losses 1,650 1,600
Provision for depreciation and amortization 1,149 1,057
Net amortization and accretion of investment securities 1,464 1,600
Net gain on investment securities - (292)
Federal Home Loan Bank stock dividends (656) (350)
Net deferred loan origination fees (51) (90)
Net change in loans held for sale 6,831 3,789
Net gain on sale of loans (204) (274)
Amortization of intangible assets 54 46
Cumulative effect of accounting change - (208)
Deferred income tax expense (benefit) 582 (456)
Partnership income (739) (740)
Decrease (increase) in accrued interest receivable and other assets 386 (1,041)
Increase (decrease) in accrued interest payable and other liabilities (1,847) 400
Net cash provided by operating activities 15,225 12,988
Cash flows from investing activities:
Proceeds from maturities of and calls on investment securities held to maturity 55,202 102,573
Purchases of investment securities held to maturity (54,944) (88,586)
Proceeds from maturities of and calls on investment securities available for sale 70,841 -
Purchases of investment securities available for sale (77,284) -
Net decrease (increase) in interest-bearing deposits in other banks (9,487) 2,978
Net loan originations (145) (17,814)
Loans acquired in branch acquisition (2,656) -
Purchases of premises and equipment (1,515) (886)
Distributions from partnership 340 300
Net cash used in investing activities (19,648) (1,435)
Cash flows from financing activities:
Net decrease in deposits (12,067) (33,174)
Deposits acquired in branch acquisition 10,821 -
Proceeds from Federal Home Loan Bank advances 6,600 9,455
Repayments of Federal Home Loan Bank advances (25,115) (363)
Net increase (decrease) in other short-term borrowings 20,123 (591)
Cash dividends paid (2,302) (2,184)
Proceeds from sale of common stock 44 550
Net cash used in financing activities (1,896) (26,307)
Net decrease in cash and cash equivalents (6,319) (14,754)
Cash and cash equivalents:
At beginning of period 63,152 71,381
At end of period $ 56,833 $ 56,627
Supplemental disclosure of cash flow information:
Cash paid during the period for interest $ 14,892 $ 16,420
Cash paid during the period for income taxes $ 4,480 $ 5,243
<FN>
See accompanying notes to consolidated financial statements.
F-3
CPB INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
BASIS OF PRESENTATION
The financial information included herein is unaudited, except
for the consolidated balance sheet at December 31, 1993. However,
such information reflects all adjustments (consisting solely of
normal recurring adjustments) which are, in the opinion of
Management, necessary for a fair presentation of the Company's
financial condition and results of operations for the interim
periods.
The results of operations for the three and six months ended
June 30, 1994 are not necessarily indicative of the results to be
expected for the full year.
F-4