Central Pacific profit
rises 44% after
City Bank deal

The earnings reflect the first
merged results of City Bank
and Central Pacific Bank

Central Pacific Financial Corp.'s earnings jumped 44 percent in the fourth quarter as the holding company benefited from its first three months of owning two local banks.

The parent company of Central Pacific Bank and City Bank posted net income of $13.1 million, or 46 cents a share, compared with $9.1 million, or 55 cents a share, a year earlier.

Central Pacific, which closed a $423.1 million merger with City Bank parent CB Bancshares Inc. on Sept. 15, said it will combine operations of the two banks during President's Day weekend and operate 37 branches under the Central Pacific name beginning Feb. 22.

Central Pacific has said it is closing eight City Bank branches, relocating another City Bank branch and shuttering one Central Pacific branch.

Central Pacific Financial Corp. grew profits as a newly combined company last quarter. Chairman Ronald Migita, left, and CEO Clint Arnoldus spoke at a press conference last year discussing the merger of the parent companies of City Bank and Central Pacific Bank.

Central Pacific said it had $5.4 million in merger-related expenses in the quarter. Excluding those expenses, the bank's operating earnings soared 80.2 percent to $16.4 million, or 57 cents a share, from $9.1 million, or 55 cents a share, a year earlier. Central Pacific matched the 57 cents a share consensus forecast of the two analysts who cover the company.

The company issued 11.9 million common shares and paid $88.9 million in connection with the merger.

"We are pleased that we achieved strong operating performance in a transitional year for our company," Central Pacific Chief Executive Clint Arnoldus said.

In particular, Arnoldus noted that loans increased by $100 million over the third quarter and deposits grew by $29 million.

For the year, the bank had earnings of $37.4 million, or $1.87 a share, compared with $33.9 million, or $2.07 a share, in 2003. Operating income for 2004 was $43.7 million, or $2.18 a share, compared with $34.8 million, or $2.12 a share, a year earlier. Central Pacific recorded $6.3 million in after-tax merger-related expenses in 2004.

Central Pacific also said that based on current economic and business conditions that it was reaffirming its full-year 2005 guidance of $2.50 to $2.60 a share.

Arnoldus has said that he expected the merger would result in cost savings of about $19.5 million a year by 2006. The bank offered a voluntary separation program late last year and said 99 percent of the employees who were eligible for the program accepted the offer.

Bolstered by the combined operations of both banks, Central Pacific's assets, loans, leases and deposits jumped in the fourth quarter, with the merger accounting for about 85 percent of the growth in loans and deposits.

Assets jumped 114.6 percent to $4.7 billion from $2.2 billion a year ago. Loans and leases rose 114.8 percent to $3.1 billion from $1.4 billion. And deposits grew 89.8 percent to $3.3 billion from $1.8 billion.

Central Pacific's net interest income soared 110 percent in the fourth quarter to $46.3 million from $22.1 due to a 105 percent increase in average interest-earnings assets. Net interest margin, which reflects the difference of what the bank pays depositors and what it brings in from loans, rose to 4.60 percent from 4.53 percent a year ago.

"Overall, it was generally in line with forecasts and arguably slightly better than expected," said analyst Joe Morford, who covers the bank for San Francisco-based RBC Capital Markets. "We were encouraged with the loan growth and the increase in net interest margin and the fact that credit trends continue to improve."

Nonperforming assets rose in the quarter to $10.9 million, or 0.23 percent of total assets, from $3.6 million, or 0.17 percent of total assets, a year ago and was primarily attributable to several mortgage loans that are secured by commercial property, the company said.

Central Pacific's return-on-assets ratio, which indicates how many dollars of profits it achieves for each dollar of assets it controls, fell to 1.12 percent in the quarter from 1.7 percent a year ago.

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