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Central Pacific posts $3 million profit
POSTED: 03:10 p.m. HST, Oct 31, 2008
Central Pacific Financial Corp. returned to profitability in the third quarter after an arduous 15-month process in which it set aside $194.4 million to cover potential loan losses, primarily in its California residential construction market.
The parent of Central Pacific Bank, which on Oct. 15 preannounced an estimated range for its third-quarter results, hit the midpoint of those numbers with net income of $3 million, or 11 cents a share. That was down 67 percent from a year ago when it had earnings of $9.1 million, or 30 cents a share, but the profitable quarter was a sharp reversal from the second quarter of this year when the bank posted a $146.3 million loss that included a $94.3 million noncash goodwill impairment charge that reflected the diminished value of its 2004 buyout of City Bank.
Revenue fell 3.5 percent to $62.3 million from $64.6 million.
The bank, which announced the results before the stock market opened today, has been aggressively reducing its exposure to the California market and in July closed a bulk-asset sale worth $44.2 million. As of Sept. 30, Central Pacific's exposure to the California residential construction market was $95.4 million, down from $143.9 million at the end of the second quarter.
Overall, the value of Central Pacific's mainland loan portfolio totals $1.1 billion, or 27 percent of the bank's overall $4.1 billion loan portfolio. The bank's Hawaii loan portfolio totals $3 billion.
"I don't know if they've turned the quarter, but they've addressed a big concern (by reducing their California exposure)," said Brett Rabatin, an analyst with Nashville, Tenn.-based FTN MidWest Research. "I wouldn't say their credit concerns are over, but they're probably through the worst of it."
The third quarter included a loan-loss provision of $22.9 million and net loan charge-offs of $8.7 million, with $7.5 million of the charge-offs due to two California residential construction loans.
Central Pacific Chief Financial Officer Dean Hirata said the bank's capital ratios continue to be well capitalized, but that in light of the current economic turmoil and uncertainty in the financial market, the bank has applied for additional capital through the U.S. Treasury's Troubled Asset Relief Program, or TARP, that evolved from the government's $700 billion bailout plan signed into law by President Bush earlier this month. Under terms of the program, Hirata said, the minimum amount that can be obtained is 1 percent of risk-weighted assets up to a maximum of 3 percent.
"For our bank, that would equate to $45 million to $135 million," Hirata said. "The expectation of the program is that the money would be used to continue to support our lending activities and, as we're a community bank, we are very close to our customers and recognize during these challenging times we want to continue to be there and support them."
Ron Migita, who took over as chief executive on Aug. 1 when Clint Arnoldus retired, said the bank is keeping close tabs on the faltering Hawaii economy as well as in California.
"It's a moving target," Migita said. "We feel we have our arms all over the issue, but we continue evaluating our portfolio and our risk profile going forward."
The bank, which at the end of the second quarter slashed its dividend 60 percent to 10 cents a share from 25 cents a share, said today it will maintain the 10-cent dividend for this quarter's distribution. The dividend will be paid Dec. 19 to shareholders of record as of Nov. 21.
Central Pacific's net interest income, which reflects the difference between what it pays depositors and what it brings in from loans, fell 4.3 percent last quarter to $50.6 million from $52.8 million. Noninterest income, which includes service charges and fees, slipped 0.4 percent to $11.7 million from $11.8 million. Net interest income and noninterest income make up a bank's revenue.
Total assets decreased 2.5 percent to $5.5 billion from $5.6 billion. Total loans and leases increased 0.2 percent to $4.08 billion from $4.07 billion. And total deposits declined 4.2 percent to $3.8 billion from $3.9 billion.
Central Pacific Financial Corp. returned to profitability in the third quarter after an arduous 15-month process in which it set aside $194.4 million to cover potential loan losses, primarily in its California residential construction market.
The parent of Central Pacific Bank, which on Oct. 15 preannounced an estimated range for its third-quarter results, hit the midpoint of those numbers with net income of $3 million, or 11 cents a share. That was down 67 percent from a year ago when it had earnings of $9.1 million, or 30 cents a share, but the profitable quarter was a sharp reversal from the second quarter of this year when the bank posted a $146.3 million loss that included a $94.3 million noncash goodwill impairment charge that reflected the diminished value of its 2004 buyout of City Bank.
Revenue fell 3.5 percent to $62.3 million from $64.6 million.
The bank, which announced the results before the stock market opened today, has been aggressively reducing its exposure to the California market and in July closed a bulk-asset sale worth $44.2 million. As of Sept. 30, Central Pacific's exposure to the California residential construction market was $95.4 million, down from $143.9 million at the end of the second quarter.
Overall, the value of Central Pacific's mainland loan portfolio totals $1.1 billion, or 27 percent of the bank's overall $4.1 billion loan portfolio. The bank's Hawaii loan portfolio totals $3 billion.
"I don't know if they've turned the quarter, but they've addressed a big concern (by reducing their California exposure)," said Brett Rabatin, an analyst with Nashville, Tenn.-based FTN MidWest Research. "I wouldn't say their credit concerns are over, but they're probably through the worst of it."
The third quarter included a loan-loss provision of $22.9 million and net loan charge-offs of $8.7 million, with $7.5 million of the charge-offs due to two California residential construction loans.
Central Pacific Chief Financial Officer Dean Hirata said the bank's capital ratios continue to be well capitalized, but that in light of the current economic turmoil and uncertainty in the financial market, the bank has applied for additional capital through the U.S. Treasury's Troubled Asset Relief Program, or TARP, that evolved from the government's $700 billion bailout plan signed into law by President Bush earlier this month. Under terms of the program, Hirata said, the minimum amount that can be obtained is 1 percent of risk-weighted assets up to a maximum of 3 percent.
"For our bank, that would equate to $45 million to $135 million," Hirata said. "The expectation of the program is that the money would be used to continue to support our lending activities and, as we're a community bank, we are very close to our customers and recognize during these challenging times we want to continue to be there and support them."
Ron Migita, who took over as chief executive on Aug. 1 when Clint Arnoldus retired, said the bank is keeping close tabs on the faltering Hawaii economy as well as in California.
"It's a moving target," Migita said. "We feel we have our arms all over the issue, but we continue evaluating our portfolio and our risk profile going forward."
The bank, which at the end of the second quarter slashed its dividend 60 percent to 10 cents a share from 25 cents a share, said today it will maintain the 10-cent dividend for this quarter's distribution. The dividend will be paid Dec. 19 to shareholders of record as of Nov. 21.
Central Pacific's net interest income, which reflects the difference between what it pays depositors and what it brings in from loans, fell 4.3 percent last quarter to $50.6 million from $52.8 million. Noninterest income, which includes service charges and fees, slipped 0.4 percent to $11.7 million from $11.8 million. Net interest income and noninterest income make up a bank's revenue.
Total assets decreased 2.5 percent to $5.5 billion from $5.6 billion. Total loans and leases increased 0.2 percent to $4.08 billion from $4.07 billion. And total deposits declined 4.2 percent to $3.8 billion from $3.9 billion.
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