Central Pacific Bank loses $146.3 million
The bank cuts its dividend 60 percent but says Hawaii operations remain solid
On the same day that Central Pacific Financial Corp. announced a new chief executive officer, the state's fourth-largest bank said today exposure to the slumping California residential construction market produced a staggering $146.3 million loss in the second quarter and prompted the board to slash the company's dividend by 60 percent.
The bank said its loss included a noncash goodwill impairment charge of $94.3 million associated with its 2004 buyout of City Bank, which had the initial exposure in California real estate that is now creating problems for Central Pacific. Excluding the charge, which was taken to reflect the diminished value of the City Bank acquisition, Central Bank lost $52 million, or $1.81 a share, in the quarter.
The loss per share including the charge, which had no impact on the bank's cash flows, was $5.10.
A year ago, Central Pacific had net income of $21 million, or 68 cents a share.
Revenue slipped 1.7 percent to $63.3 million last quarter from $64.4 million a year earlier.
Central Pacific announced its earnings just hours before disclosing that it had ended a four-month search for a new CEO by naming non-executive chairman Ronald Migita to replace the retiring Clint Arnoldus.
Arnoldus said reducing the quarterly dividend to 10 cents a share from 25 cents a share was "an extremely difficult decision" but that given the significant challenges facing the entire financial services industry that "a partial dividend reduction is a prudent means of preserving and building capital."
The dividend will be payable on Sept. 19 to shareholders of record as of Aug. 15.
Arnoldus said the bank's Hawaii operations continue to be solid with strong operating fundamentals.
"We remain encouraged by the long-term outlook for our core franchise," he said.
Central Pacific continues to be aggressive in reducing its exposure to California real estate and said today that earlier this month it sold assets from the California residential construction market totaling $44.2 million after writing down those assets to their sale price in the second quarter.
"As we wrote these assets down to the sales price in the second quarter, we will not incur any additional losses related to these assets in the third quarter," Central Pacific Chief Financial Officer Dean Hirata said.
The bulk-loan sale reduced Central Pacific's exposure in the California residential construction market to $102.1 million, down from $143.9 million at the end of the second quarter and $247.8 million at the end of the first quarter.
Central Pacific also took a provision for loan and lease losses of $87.8 million versus just $1 million a year ago. That amount set aside for potential loan losses is more than the combined $83.7 million that the bank put aside in the three previous quarters and brings the bank's loan-loss provision over the last four quarters to $171.5 million.