Filed by Central Pacific Financial Corp.

Pursuant to Rule 425 of the Securities Act of 1933, as amended, and

deemed filed pursuant to Rule 14d-2 and Rule 14a-12 under

the Securities Exchange Act of 1934, as amended

Subject Company: CB Bancshares, Inc.

Commission File No. 333-104783

 

The following is a press release issued by Central Pacific Financial Corp. on October 23, 2003.

 

 

Investor Contact:		Neal Kanda		Media Contact:		Ann Takiguchi
		VP & Chief Financial Officer				PR/Communications Officer
		(808) 544-0622				(808) 544-0685
		neal.kanda@centralpacificbank.com				ann.takiguchi@centralpacificbank.com

 

NEWS RELEASE

CENTRAL PACIFIC FINANCIAL CORP. REPORTS THIRD QUARTER EARNINGS

 

HONOLULU, October 23, 2003 — Central Pacific Financial Corp. (NYSE: CPF), parent company of Central Pacific Bank, today reported third quarter net income of $8.3 million, up 4.9% compared to the third quarter of 2002.  Third quarter 2003 diluted earnings per share increased 6.3% to $0.51 from $0.48 for the third quarter of 2002.  Strong loan and deposit growth contributed to the quarter’s results.

 

Third Quarter Highlights

•                  Net income increased 4.9% to $8.3 million from $7.9 million in the third quarter of 2002.

•                  Diluted earnings per share (EPS) grew 6.3% to $0.51 compared to $0.48 in the third quarter of 2002.

•                  Return on average equity (ROE) was 17.89% and return on average assets (ROA) was 1.58%.

•                  Loans increased by $89.6 million during the quarter, or 6.7% from June 30, 2003.

•                  Nonperforming assets decreased by 58.8% to $1.8 million from $4.5 million at September 30, 2002.

•                  Cash dividends increased by 60% to $0.16 per share from $0.10 in the third quarter of 2002.

 

“The Company continued to perform well in a challenging interest rate environment.  The recent increase in market interest rates from their June lows and strengthening loan demand is expected to increase revenues going forward,” said Clint Arnoldus, Chairman, President and Chief Executive Officer.  “Additionally, during the quarter, we continued to add resources in our sales management, retail investment sales and business banking areas.  We believe these initiatives will also help accelerate top line revenue growth and build our earnings momentum,” said Arnoldus.

 

Third Quarter Results of Operations

Third quarter revenues (net interest income before provision plus other operating income) grew 4% to $27.2 million, compared to $26.3 million in the third quarter of 2002.  Net interest income before provision for loan losses was $23.3 million, little changed from the third quarter of 2002.  Net interest margin for the third quarter of 2003 was 4.89%, up from 4.79% in the prior quarter and down from 5.24% in the third quarter of 2002.  Declining market interest rates and accelerated asset repricing have resulted in lower margins from a year ago, while a nonrecurring benefit of $1.3 million from a loan prepayment penalty resulted in the sequential quarter increase.

 

Provision for loan losses in the third quarter of 2003 was $500,000, a 67% increase from the $300,000 reported in the same period last year.  The higher provision for loan losses was result of strong loan growth and the higher level of net charge-offs experienced during the quarter.

 

Other operating income for the third quarter of 2003, excluding securities gains and losses, was $3.8 million, a 15% increase over the $3.3 million reported in the third quarter of last year.  The increase was primarily driven by increases in trust income and gains on sale of residential mortgage loans.

 

Salaries and employee benefits totaled $7.6 million, a 3% increase from the $7.4 million reported in the third quarter of 2002.  Other operating expenses, excluding salaries and benefits, totaled $6.7 million, a decrease of 4% from the $6.9 million reported in the third quarter of last year.  The third quarter of 2003 included $617,000 in expenses associated

 

 

with the Company’s proposal to acquire CB Bancshares, Inc., while the year ago period included $976,000 in interest expense on a state tax assessment under appeal.

 

The effective tax rate increased slightly to 33.55% in the third quarter of 2003 from 32.37% in the same period last year.

 

Asset Quality

Asset quality remains sound, as total nonperforming assets declined 59% to $1.8 million or 0.09% of total assets, compared to $4.5 million or 0.23% of total assets a year ago.  Loans delinquent for 90 days or more was $722,000 or 0.03% of total assets at September 30, 2003.

 

Net loan charge-offs totaled $1.1 million in the third quarter of 2003, compared to $37,000 in the year ago period.  Year-to-date net loan charge-offs of $92,000 improved from the $333,000 recorded during the first nine months of 2002.  The allowance for loan losses declined to 1.73% of total loans compared to 1.94% a year ago.

 

Balance Sheet Analysis

Total assets grew to $2.13 billion at September 30, 2003, an 8% increase over the $1.98 billion reported a year ago.  Investment securities increased to $537.1 million,  up 2% from $527.1 million reported last year.  Total loans grew 11% to $1.43 billion, compared to $1.29 billion a year ago.

 

Total deposits grew to $1.73 billion, an increase of 8% over the $1.61 billion reported at September 30, 2002.  Non-interest bearing deposits increased by 21% to $331.5 million, compared to $274.5 million a year ago.

 

Shareholders’ equity increased 12% to $187.5 million, or $11.69 book value per share at September 30, 2003, compared to $167.1 million or $10.49 book value per share a year ago.

 

Earnings Outlook

“In the fourth quarter, we expect continued loan growth and a slight improvement in the net interest margin from the third quarter’s normalized level.  As a result, management expects diluted earnings per share for the year of $2.05 - $2.07,” said Neal Kanda, Vice President and Chief Financial Officer.

 

Merger Update

The Company remains committed to its proposal to acquire CB Bancshares, Inc. (Nasdaq: CBBI) for $22.27 in cash and 1.6005 shares of CPF stock for each outstanding share of CBBI stock.  CPF is proceeding with its efforts to secure all necessary regulatory approvals.  Additionally, the Company raised $40 million in capital on October 10, 2003 to support the proposed merger and for general corporate purposes.   “We continue to believe this transaction is good for all constituencies — the shareholders, customers and employees of both banks and the state of Hawaii,” said Arnoldus.

 

Teleconference and Webcast Information

The Company will conduct a conference call to review its quarterly results today at 4:00 p.m. Eastern Time (10:00 a.m. Hawaii Time).  The audio webcast can be accessed through the Investor Relations page of the Company’s website at www.centralpacificbank.com.

 

About Central Pacific Financial Corp./Central Pacific Bank

Central Pacific Financial Corp. is a Hawaii-based bank holding company whose common stock is traded on The New York Stock Exchange under the symbol “CPF.”  Central Pacific Bank, its wholly owned subsidiary, is Hawaii’s third largest commercial bank with 24 branches statewide, including five supermarket branches and more than 70 ATMs.  For additional information, please visit our web site at http://www.centralpacificbank.com.

 

 

2

 

 

FORWARD LOOKING INFORMATION

 

This document contains forward-looking statements.  Such statements include, but are not limited to, (i) statements about the benefits of a merger between Central Pacific Financial Corp. (“CPF”) and CB Bancshares, Inc. (“CBBI”), including future financial and operating results, costs savings and accretion to reported and cash earnings that may be realized from such merger; (ii) statements with respect to CPF’s plans, objectives, expectations and intentions and other statements that are not historical facts; and (iii) other statements identified by words such as “believes”, “expects”, “anticipates”, “estimates”, “intends”, “plans”, “targets”, “projects” and other similar expressions.  These statements are based upon the current beliefs and expectations of CPF’s management and are subject to significant risks and uncertainties.  Actual results may differ from those set forth in the forward-looking statements.

 

The following factors, among others, could cause actual results to differ materially from the anticipated results or other expectations expressed in the forward-looking statements:  (1) the business of CPF and CBBI may not be integrated successfully or such integration may be more difficult, time-consuming or costly than expected; (2) expected revenue synergies and cost savings from the merger may not be fully realized or realized within the expected time frame; (3) revenues following the merger may be lower than expected; (4) deposit attrition, operating costs, customer loss and business disruption, including, without limitation, difficulties in maintaining relationships with employees, customers, clients or suppliers, may be greater than expected following the merger; (5) the regulatory approvals required for the merger may not be obtained on the proposed terms; (6) the failure of CPF’s and CBBI’s shareholders to approve the merger; (7) competitive pressures among depository and other financial institutions may increase significantly and may have an effect on pricing, spending, third-party relationships and revenues; (8) the strength of the United States economy in general and the strength of the Hawaii economy may be different than expected, resulting in, among other things, a deterioration in credit quality or a reduced demand for credit, including the resultant effect on the combined company’s loan portfolio and allowance for loan losses; (9) changes in the U.S. legal and regulatory framework; and (10) adverse conditions in the stock market, the public debt market and other capital markets (including changes in interest rate conditions) and the impact of such conditions on the combined company’s activities.

 

Additional factors that could cause CPF results to differ materially from those described in the forward-looking statements can be found in CPF’s reports (such as Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K) filed with the Securities and Exchange Commission (“SEC”) and available at the SEC’s Internet web site (www.sec.gov). All subsequent written and oral forward-looking statements concerning the proposed transaction or other matters attributable to CPF or any person acting on its behalf are expressly qualified in their entirety by the cautionary statements above.  CPF does not undertake any obligation to update any forward-looking statement to reflect circumstances or events that occur after the date the forward-looking statement is made.

 

With respect to financial projections for CBBI contained in this document, neither CBBI nor any analyst has published any information for 2003, 2004 or 2005.  In addition, CPF has not been given the opportunity to do any due diligence on CBBI other than reviewing its publicly available information.  Therefore, management of CPF has created its own financial model for CBBI based on CBBI’s historical performance and CPF’s assumptions regarding the reasonable future performance of CBBI on a stand-alone basis.  These assumptions may or may not prove to be correct.  The assumptions are inherently subject to significant uncertainties and contingencies, many of which are beyond the control of CBBI.  There is no assurance that these projections will be realized and actual results are likely to differ significantly from such projections.

 

CPF has filed with the SEC an amended registration statement on Form S-4 to register the shares of CPF common stock to be issued in a proposed exchange offer.  The registration statement is not final and will be further amended.  Subject to future developments, CPF may file proxy statements for solicitation of proxies from CBBI or CPF shareholders, in connection with special meetings of such shareholders at a date or dates subsequent hereto and may file a tender offer statement.  Investors and security holders are urged to read the registration statement and proxy statements and any other relevant documents (when available), including the tender offer statement if filed, filed with the SEC, as well as

 

3

 

any amendments or supplements to those documents, because they contain and will contain important information.  Investors and security holders may obtain a free copy of documents filed with the SEC at the SEC’s Internet web site at (www.sec.gov).  Such documents may also be obtained free of charge from CPF by directing such request to: Central Pacific Financial Corp., 220 South King Street, Honolulu, Hawaii 96813, Attention: David Morimoto, (808) 544-0627.

 

CPF, its directors and executive officers and certain other persons may be deemed to be “participants” if CPF solicits proxies from CBBI and CPF shareholders.  A detailed list of the names, affiliations and interests of the participants in any such solicitation is contained in CPF’s definitive proxy revocation statement as filed on May 22, 2003.  Information about the directors and executive officers of CPF and their ownership of and interests in CPF stock is set forth in the proxy statement for CPF’s 2003 Annual Meeting of Shareholders.

 

###

 

 

 

 

4

 

 

CENTRAL PACIFIC FINANCIAL CORP. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Unaudited)

 

CONSOLIDATED BALANCE SHEETS

 

											Annual Change
(in thousands, except per share data)		September 30, 2003			December 31, 2002			September 30, 2002			$			%
ASSETS
Cash and due from banks		$	63,155		$	62,273		$	55,065		$	8,090		14.7	%
Interest-bearing deposits in other banks		3,371			39,358			17,446			(14,075		)	-80.7	%
Federal funds sold		—			—			—			—			N.A.
Investment securities:
Held to maturity, at cost (fair value of $44,559 at September 30, 2003, $58,491 at December 31, 2002, and $62,130 at September 30, 2002)		42,883			56,320			59,664			(16,781		)	-28.1	%
Available for sale, at fair value		494,261			484,604			467,463			26,798			5.7	%
Total investment securities		537,144			540,924			527,127			10,017			1.9	%
Loans held for sale		8,179			6,420			6,014			2,165			36.0	%
Loans		1,425,858			1,289,892			1,287,707			138,151			10.7	%
Less allowance for loan losses		24,805			24,197			25,131			(326		)	-1.3	%
Net loans		1,401,053			1,265,695			1,262,576			138,477			11.0	%
Premises and equipment		56,244			57,725			58,544			(2,300		)	-3.9	%
Accrued interest receivable		8,482			9,254			9,180			(698		)	-7.6	%
Investment in unconsolidated subsidiaries		1,820			3,150			2,062			(242		)	-11.7	%
Due from customers on acceptances		—			34			111			(111		)	-100.0	%
Other real estate		—			1,903			1,287			(1,287		)	-100.0	%
Other assets		52,318			41,427			40,330			11,988			29.7	%
Total assets		$	2,131,766		$	2,028,163		$	1,979,742		$	152,024		7.7	%
LIABILITIES AND SHAREHOLDERS’ EQUITY
Deposits:
Noninterest-bearing deposits		$	331,485		305,351			$	274,489		$	56,996		20.8	%
Interest-bearing deposits		1,399,436			1,335,750			1,332,425			67,011			5.0	%
Total deposits		1,730,921			1,641,101			1,606,914			124,007			7.7	%
Short-term borrowings		8,716			29,008			3,438			5,278			153.5	%
Long-tem debt		164,563			147,155			157,514			7,049			4.5	%
Bank acceptances outstanding		—			34			111			(111		)	-100.0	%
Minority interest		10,062			10,064			10,064			(2		)	0.0	%
Other liabilities		30,028			27,358			34,568			(4,540		)	-13.1	%
Total liabilities		1,944,290			1,854,720			1,812,609			131,681			7.3	%
Shareholders’ equity:
Preferred stock, no par value, authorized 1,000,000 shares, none issued		—			—			—			—			N.A.
Common stock, no par value; authorized 50,000,000 shares; issued and outstanding 16,042,618 shares at September 30, 2003, 15,973,458 shares at  December 31, 2002, and 15,934,658 shares at September 30, 2002		9,392			8,707			8,284			1,108			13.4	%
Surplus		45,848			45,848			45,848			—			0.0	%
Retained earnings		136,109			118,958			110,542			25,567			23.1	%
Deferred stock awards		(54		)	(99		)	(28		)	(26		)	92.9	%
Accumulated other comprehensive income		(3,819		)	29			2,487			(6,306		)	-253.6	%
Total shareholders’ equity		187,476			173,443			167,133			20,343			12.2	%
Total liabilities and shareholders’ equity		$	2,131,766		$	2,028,163		$	1,979,742		$	152,024		7.7	%

 

 

5

 

 

CENTRAL PACIFIC FINANCIAL CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

 

(In thousands, except per share data)		Three Months Ended September 30,							Change					Nine Months Ended September 30,						Change
		2003				2002			$			%		2003			2002			$			%
Interest income:
Interest and fees on loans		$		22,905		$	23,784		$	(879	)	-3.7	%	$	67,458		$	70,408		$	(2,950	)	-4.2	%
Interest and dividends on investment securities:
Taxable interest		3,728				5,089			(1,361		)	-26.7	%	12,160			15,120			(2,960		)	-19.6	%
Tax-exempt interest		1,012				813			199			24.5	%	2,829			2,254			575			25.5	%
Dividends		253				329			(76		)	-23.1	%	764			825			(61		)	-7.4	%
Interest on deposits in other banks		8				160			(152		)	-95.0	%	73			440			(367		)	-83.4	%
Interest on Federal funds sold and securities purchased under agreements to resell		3				26			(23		)	-88.5	%	30			129			(99		)	-76.7	%
Total interest income		27,909				30,201			(2,292		)	-7.6	%	83,314			89,176			(5,862		)	-6.6	%
Interest expense:
Interest on deposits		3,258				5,757			(2,499		)	-43.4	%	11,296			18,158			(6,862		)	-37.8	%
Interest on short-term borrowings		20				49			(29		)	-59.2	%	34			178			(144		)	-80.9	%
Interest on long-term debt		1,325				1,252			73			5.8	%	3,981			4,552			(571		)	-12.5	%
Total interest expense		4,603				7,058			(2,455		)	-34.8	%	15,311			22,888			(7,577		)	-33.1	%
Net interest income		23,306				23,143			163			0.7	%	68,003			66,288			1,715			2.6	%
Provision for loan losses		500				300			200			66.7	%	700			900			(200		)	-22.2	%
Net interest income after provision for loan losses		22,806				22,843			(37		)	-0.2	%	67,303			65,388			1,915			2.9	%
Other operating income:
Income from fiduciary activities		448				350			98			28.0	%	1,290			964			326			33.8	%
Service charges on deposit accounts		1,097				1,064			33			3.1	%	3,229			3,211			18			0.6	%
Other service charges and fees		1,275				1,248			27			2.2	%	3,878			3,559			319			9.0	%
Fees on foreign exchange		152				120			32			26.7	%	415			375			40			10.7	%
Investment securities gains (losses)		164				(163		)	327			n/m		168			477			(309		)	-64.8	%
Other		790				496			294			59.3	%	2,278			1,822			456			25.0	%
Total other operating income		3,926				3,115			811			26.0	%	11,258			10,408			850			8.2	%
Other operating expense:
Salaries and employee benefits		7,613				7,367			246			3.3	%	21,893			22,700			(807		)	-3.6	%
Net occupancy		1,100				936			164			17.5	%	3,165			2,784			381			13.7	%
Equipment		561				750			(189		)	-25.2	%	1,857			2,119			(262		)	-12.4	%
Other		4,993				5,229			(236		)	-4.5	%	14,107			12,920			1,187			9.2	%
Total other operating expense		14,267				14,282			(15		)	-0.1	%	41,022			40,523			499			1.2	%
Income before income taxes		12,465				11,676			789			6.8	%	37,539			35,273			2,266			6.4	%
Income taxes		4,182				3,780			402			10.6	%	12,696			12,163			533			4.4	%
Net income		$	8,283			$	7,896		387			4.9	%	$	24,843		$	23,110		1,733			7.5	%
Per share data:
Basic earnings per share		$	0.52			$	0.49		0.03			6.1	%	1.55			$	1.45		$	0.10		6.9	%
Diluted earnings per share		0.51				0.48			0.03			6.3	%	1.52			1.42			0.10			7.0	%
Cash dividends declared		0.16				0.10			0.06			60.0	%	0.48			0.29			0.19			65.5	%
Basic weighted average shares outstanding (000’s)		16,034				15,969			65			0.4	%	16,016			15,923			93			0.6	%
Diluted weighted average shares outstanding (000’s)		16,381				16,314			71			0.4	%	16,397			16,275			123			0.8	%

 

 

6

 

CENTRAL PACIFIC FINANCIAL CORP. AND SUBSIDIARIES

FINANCIAL HIGHLIGHTS

(Unaudited)

 

(in thousands, except per share data)		Three Months Ended September 30,								Nine Months Ended September 30,
		2003			2002			% Change		2003			2002			% Change
SELECTED AVERAGE BALANCES
Total assets		$	2,095,669		$	1,943,599		7.8	%	$	2,043,594		$	1,895,269		7.8	%
Interest-earning assets		1,949,876			1,798,644			8.4	%	1,897,745			1,755,790			8.1	%
Loans, net of unearned interest		1,378,706			1,289,099			7.0	%	1,353,119			1,282,132			5.5	%
Other real estate		—			966			-100.0	%	630			626			0.6	%
Deposits		1,711,465			1,562,954			9.5	%	1,666,362			1,514,910			10.0	%
Interest-bearing liabilities		1,568,882			1,486,200			5.6	%	1,535,323			1,460,042			5.2	%
Stockholders’ equity		185,230			165,851			11.7	%	182,878			158,615			15.3	%
PERFORMANCE RATIOS
Return on average assets **		1.58		%	1.63		%			1.62		%	1.63		%
Return on average stockholders’ equity **		17.89		%	19.04		%			18.11		%	19.43		%
Efficiency ratio		52.71		%	54.06		%			51.87		%	53.17		%
Net interest margin **		4.89		%	5.24		%			4.88		%	5.13		%
Dividend payout ratio		30.77		%	20.41		%			30.97		%	20.00		%

 

 

		September 30,				% Change
		2003		2002
NONPERFORMING ASSETS
Nonperforming (nonaccrual) loans		$1,843		$3,183		-42.1	%
Other real estate		—		1,287		-100.0	%
Total nonperforming assets		1,843		4,470		-58.8	%
Loans delinquent for 90 days or more		722		496		45.6	%
Restructured loans (still accruing interest)		—		—		—
Total nonperforming assets, loans delinquent for 90 days or more and restructured loans		$2,565		$4,966		-48.3	%

 

 

		Three Months Ended September 30,								Nine Months Ended September 30,
		2003			2002					2003			2002
Net loan charge-offs to average loans **		0.32		%	0.01		%			0.01		%	0.03		%
Loan charge-offs		$	1,246		$	87		1332.2	%	$	1,690		$	488		246.3	%
Recoveries		126			50			152.0	%	1,598			155			931.0	%
Net loan charge-offs (recoveries)		$	1,120		$	37		2927.0	%	$	92		$	333		-72.4	%

 

 

 

		September 30,
		2003			2002
SELECTED FINANCIAL DATA & BALANCE SHEET RATIOS
Book value per share		$	11.69		$	10.49
Market value per share		$	24.50		$	23.09
Total stockholders’ equity to assets		8.79		%	8.44		%
Nonperforming assets to total assets		0.09		%	0.23		%
Nonperforming assets to total loans & other real estate		0.13		%	0.35		%
Nonperforming assets and loans delinquent for 90 days or more to total loans & other real estate		0.18		%	0.38		%
Nonperforming assets, loans delinquent for 90 days or more and restructured loans to total loans & other real estate		0.18		%	0.38		%
Nonperforming loans to total loans		0.13		%	0.25		%
Allowance for loan losses to total loans		1.73		%	1.94		%
Allowance for loan losses to nonperforming loans		1345.90		%	789.54		%

** Annualized

 

7