Mainland loans push Central Pacific's gain up 47.4%
Central Pacific Financial Corp., getting a big boost from its mainland loan operations, posted a 47.4 percent jump in fourth-quarter net income as the bank continued to digest two strategic acquisitions from the previous 18 months.
The state's fourth-largest bank in terms of assets had record earnings of $19.4 million, or 63 cents a share, compared with $13.1 million, or 46 cents a share, a year earlier. However, the net income fell shy of the 65 cents a share forecast by five analysts surveyed by Thomson Financial.
Central Pacific said about 75 percent of its fourth-quarter loan growth was generated from its mainland loan production office while the rest came from Hawaii.
Central Pacific expanded its mainland loan business when it acquired City Bank parent CB Bancshares Inc. in September 2004 and then solidified its lending in the state with the purchase of Hawaii HomeLoans, now called Central Pacific HomeLoans, during the third quarter of 2005.
"Central Pacific closed 2005 with another strong quarter with loans and deposits each increasing by more than $170 million, net interest margin expanding to 4.69 percent and efficiency ratio improving to 48.42 percent," Chief Executive Clint Arnoldus said. "We believe we are well-positioned to achieve our strategic growth and to continue our strong financial performance."
For the year, Central Pacific's net income soared 93.8 percent to $72.5 million, or $2.38 a share, compared with $37.4 million, or $1.87 a share, in 2004.
The 2004 results don't include City Bank's financial results before the close of the merger on Sept. 15, 2004.
The bank said yesterday it expected its 2006 operating earnings, which exclude nonrecurring merger expenses, to increase 7 to 10 percent over 2005.
Central Bank didn't have any merger-related expenses last quarter but recorded $5.4 million of such expenses in the fourth quarter of 2004.
The bank's loans and leases increased by $452.9 million, or 14.6 percent, to $3.6 billion from $3.1 billion a year earlier.
Total assets, which last quarter topped $5 billion for the first time, gained 12.2 percent to $5.2 billion from $4.7 billion. And deposits grew 9.5 percent to $3.6 billion from $3.3 billion.
Central Pacific's net interest income, which reflects the difference between what the bank pays depositors and what it brings in from loans, gained 12.9 percent to $52.3 million from $46.3 million a year earlier.
Last quarter's net income included a $680,000 prepayment penalty received on a government agency mortgage-backed security that was prepaid.
Net interest margin rose to 4.69 percent from 4.60 percent. Excluding the prepayment penalty, the bank's net interest margin last quarter would have been 4.63 percent.
In another special item, the bank said it had a $714,000 operating expense due to interest accrual on state and federal tax assessments.
Noninterest income, which includes revenue from service charges and fees, rose 26.5 percent to $11.5 million from $9.1 million. The increase stemmed primarily from Central Pacific HomeLoans and a gain in service charge fee income.
The bank's efficiency ratio, which measures how much it costs Central Pacific to make a dollar of revenue, improved because of the merger to 48.4 percent last quarter from 59.5percent a year earlier.
Nonperforming assets increased 15.5 percent to $12.6 million, or 0.24 percent of total assets, from $10.9 million, or 0.23 percent of total assets. a year earlier.