City Bank’s
parent takes
$9 million charge
Its Hawaii subsidiary and
By Russ Lynch
International S&L also will
proceed with their merger
Star-Bulletin
CB Bancshares Inc. will take one-time charges of about $9 million in the current quarter, possibly wiping out its earnings for the year but cutting its expenses for the future.
The company said yesterday it will relaunch its 1996 plan to merge its two subsidiaries, City Bank and International Savings & Loan Association. In connection with that merger, which the company expects to conclude by mid-2000, CB Bancshares will incur a restructuring charge of $1.6 million before taxes against income in the 1999 fourth quarter.
That will be a cost of about $1 million after taxes, said Dean K. Hirata, senior vice president and chief financial officer.
However, it will create a more-efficient business that will also give customers access to more branches and new services, he said.
The other fourth-quarter charge for 1999 is $8 million, after taxes, for an accounting change. CB Banchares recently changed the way it annually writes off part of what it paid for ISL when it bought the savings bank in 1994.
While it means a hit on earnings now, it will save the company about $850,000 a year in costs starting next year, Hirata said.
Analyst Randy Havre of Honolulu Venture Capital said the fourth-quarter charges are a one-time event not related to the performance of the company this year. Future expense savings are more important than the nonrecurring charges which aren't material to the performance of the company, he said.
For the first nine months of 1999, CB Bancshares had a net profit of $6.7 million, up 8 percent from a net of $6.2 million in the year-earlier nine months. CB Bancshares now will have to earn at least $2.3 million this quarter to break even for the year, about $1 million more than it made in the fourth quarter of last year.
CB Bancshares first proposed merging ISL into City Bank in the fall of 1996 but found other ways to cut costs, so put the merger on hold in 1998. Now the company expects the merger to take place by mid-2000. The 11-branch ISL unit will be merged into the 11-branch City Bank and the savings and loan branches will become City Bank branches.
At that time two ISL branches which are already located in City Bank branch buildings -- one on Kapiolani Boulevard and one in Kahului, Maui -- will be absorbed by the City Bank branches, reducing the branch total to 20.
The merger will provide more branches for customers since ISL customers can now use only the ISL branches.
Terms of existing certificates of deposit won't change and they will continue to maturity, said Ronald K. Migita, CB Bancshares president and chief executive officer.
CB Bancshares finished unchanged at $30 today on the Nasdaq.
