SECURITIES
AND EXCHANGE COMMISSION |
SCHEDULE 14D-9 |
Solicitation/
Recommendation Statement Under |
| CB BANCSHARES, INC. (Name of Subject Company) |
| CB BANCSHARES, INC. (Name of Person(s) Filing Statement) |
| Common Stock, Par Value $1.00 Per Share
(Title of Class of Securities) |
| 124785106 (CUSIP Number of Class of Securities) |
| Dean K. Hirata CB Bancshares, Inc. 201 Merchant Street Honolulu, Hawaii 96813 (808) 535-2500 (Name, Address and Telephone Number of Person Authorized to Receive Notice and Communications on Behalf of the Person(s) Filing Statement) |
| With copies to: Fred B. White, III Skadden, Arps, Slate, Meagher & Flom LLP Four Times Square New York, New York 10036 (212) 735-3000 |
| |X| Check the box if the filing relates solely to preliminary communications made before the commencement of a tender offer. |
| MATERIALS USED IN PRESENTATION MADE TO DIVISION OF FINANCIAL INSTITUTIONS INFORMATIONAL AND COMMENT PROCEEDING |
| Searchable text section of graphics shown above |
Introduction
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o I would like to thank the Division of Financial Institutions for giving
me the opportunity to speak today on behalf of CB Bancshares ("CBBI")
o During my comments, I would like to focus on the inadequacy of CPF's
hostile proposal from a financial point of view
o Specifically, I will review:
>> The current offer value of CPF's hostile proposal
>> The implied offer multiples based on the current offer value
and CBBI's recent performance
>> Transaction multiples from recent nationwide transactions
>> A transaction at the current offer level, or any higher, may
critically impair CPF's amount of capital and may create
greater risk for shareholders, customers, and the community
>> An overview of CBBI's bright future
o I will conclude by letting you, the Committee, "do the math" on the
financial inadequacy of the offer
o It is worth noting that our financial advisor, Sandler O'Neill &
Partners, one of the pre-eminent investment banks in the financial
services industry, has given its opinion that CPF's hostile proposal was
inadequate from a financial point of view not only once but twice
1
Financial Inadequacy of CPF's Hostile Proposal
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Recent CPF and CBBI Stock Performance
Stock Price Performance Since CPF's Unsolicited Proposal
[GRAPHIC OMITTED]
o CPF announced their hostile takeover proposal on April 16, 2003
o Since announcement, CBBI has reported two quarters of record earnings
o We believe that investors are recognizing CBBI's recent financial
performance and that there is substantial upside in our stock based
on this performance
Notes: "CPF Axis" measures CPF's closing stock price. "CBBI & Offer Axis"
measures both CBBI's closing stock price and the implied value of the offer based
on CPF's May 9, 2003 unsolicited proposal of $22.27 cash and 1.6005 CPF shares
per share of CBBI.
2
Financial Inadequacy of CPF's Hostile Proposal
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Analysis of Offer Multiples
CBBI's CPF's Hostile Nationwide CPF's Hostile
Current Trading Proposal Multiples Transaction Proposal Multiples
Multiples(1) At 12/01/03(2) Multiples(3) At 4/16/03(4)
Price/Adjusted EPS(5) 12.9X 13.5x 21.67x 20.4x
Price/Adjusted Latest
Quarter EPS(5) 10.3x 10.8x 21.67x 20.4x
Price/Book Value 166% 175% 239% 189%
Price/Tangible
Book Value 166% 175% 250% 189%
o Based on CBBI's adjusted earnings per share of $4.93 for LTM ended
9/30/03, the price to latest 12 months earnings per share of CPF's
hostile offer is 13.5x. This is over 8 multiple points lower than the
national median.
o If you annualize CBBI's most recent quarterly earnings per share, the
offer multiple is less than half the national median.
(1) Data as of, or for the period ending, 9/30/03. Current CBBI stock price as
of $63.50 as of 12/01/03. (2) Deal value of $66.72 per share based on CPF's
closing price of $27.77 on 12/01/03. Data as of, or for the period ending,
9/30/03. (3) Nationwide transactions include 87 commercial bank nationwide deals
announced this year with deal value greater than $15 million. Pricing data as of
12/01/03. (4) Pricing data as of 4/16/03. Data as of, or for the period ending,
3/31/03. Based on CPF's April 17, 2003 Investor Presentation. (5) Adjusted net
income and adjusted earnings per share are based on net income excluding
after-tax unsolicited CPF proposal-related charges of $4.1 million.
Source: SNL Financial, CBBI and CPF public filings.
3
Financial Inadequacy of CPF's Hostile Proposal
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CPF's Capital Ratios
o Under Hawaii law, shareholders who dissent from the proposed transaction
have the right to have their shares appraised for fair value and paid for
in cash
o Given the inadequate level of the current offer, the appraisal value
should be significantly higher
o If there is any significant dissent, or if CPF should raise its offer,
the increased cash will considerably reduce CPF's capital ratios
o There are a variety of scenarios where CPF would no longer be well
capitalized under regulatory guidelines
o Therefore a transaction at the current offer level, or any higher offer
level, may critically impair CPF's amount of capital and may create
greater risk for shareholders, customers, and the community
4
Recent Performance Suggests Bright Future
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Strong Quarterly Balance Sheet and Income Growth
TOTAL ASSETS TOTAL DEPOSITS
2Q,02 3Q,02 4Q,02 2Q,02 3Q,02 4Q,02
$1,556,411 $1,588,195 $1,674,358 $1,135,727 $1,133,298 $1,163,227
1Q,03 2Q,03 3Q,03 1Q,03 2Q,03 3Q,03
$1,656,759 $1,698,829 $1,842,958 $1,146,094 $1,181,568 $1,178,188
ADJUSTED NET INCOME ADJUSTED EARNINGS PER SHARE
2Q,02 3Q,02 4Q,02 2Q,02 3Q,02 4Q,02
$3,621 $3,672 $3,604 $0.83 $0.84 $0.84
1Q,03 2Q,03 3Q,03 1Q,03 2Q,03 3Q,03
$3,972 $7,149 $6,856 $0.92 $1.63 $1.54
Source: CBBI's public filings, CBBI management.
Note: Adjusted net income and adjusted earnings per share excludes asset-backed
securities impairment charge of $951,000 after tax incurred in 3Q02, $2.8
million after tax in unsolicited CPF proposal related charges in 2Q03 and $1.3
million after tax in unsolicited CPF proposal related charges in 3Q03.
5
Recent Performance Suggests Bright Future
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Key Performance Metrics Are Improving
ADJUSTED RETURN ON ADJUSTED RETURN ON
AVERAGE EQUITY AVERAGE ASSETS
2Q,02 3Q,02 4Q,02 2Q,02 3Q,02 4Q,02
10.35% 9.74% 9.66% 0.93% 0.92% 0.89%
1Q,03 2Q,03 3Q,03 1Q,03 2Q,03 3Q,03
10.40% 19.09% 16.81% 0.96% 1.68% 1.49%
NET INTEREST MARGIN EFFICIENCY RATIO
2Q,02 3Q,02 4Q,02 2Q,02 3Q,02 4Q,02
5.31% 5.27 5.18% 58.33% 57.66% 58.22%
1Q,03 2Q,03 3Q,03 1Q,03 2Q,03 3Q,03
4.76% 4.82% 4.84% 57.14% 56.42% 55.51%
Source: CBBI's public filings, CBBI management.
Note: Adjusted return on average equity adjusted return on average assets, and
the efficiency ratio are based on net income excluding asset-backed securities
impairment charge of $951,000 after tax incurred in 3Q02, $2.8 million after tax
in unsolicited CPF proposal related charges in 2Q03 and $1.3 million after tax
in unsolicited CPF proposal related charges in 3Q03. Efficiency ratio shows
non-interest expense divided by the sum of non-interest income and net-interest
income.
6
Recent Performance Suggests Bright Future
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Areas of Strong Performance
o Substantial increase in earnings per share
>> Adjusted EPS of $1.54 in the third quarter of 2003 is an 83%
increase versus Adjusted EPS of $0.84 in the third quarter of 2002
o California loan production offices are achieving stronger than
anticipated growth
>> Approximately $100 million of CBBI's loan portfolio at the end of
the third quarter 2003
o Mortgage banking business continues to improve
>> For the nine months ended September 30, 2003 revenues from the
mortgage banking business totaled $2.3 million, an increase of 59%
over the same period last year
o Reduced credit-related costs
>> Nonperforming assets decreased $4.9 million, or 29.3%, from $16.7
million at September 30, 2002 to $11.8 million at September 30, 2003
>> Nonperforming loans as a percentage of total loans decreased 47
basis points from 1.36% at September 30, 2002 to 0.89% at September
30, 2003
>> Loan loss provision of $1.2 million for the third quarter of 2003 is
71% lower than the loan loss provision of $4.0 million in the third
quarter of 2002
7
Recent Performance Suggests Bright Future
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Comparable Group Performance
Data as of or for the Period Ending September 30, 2003
Pricing Data as of December 1, 2003
Dollar Values in Millions
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Tangible
Equity/ Price/ Price/ Price/ Price/
Total Tangible LTM LTM Tangible LTM Est.2003 Est.EPS Market
Name City St. Assets($) Assets(%) ROAA(%) ROAE(%) BV(%) EPS(x) EPS(x) 2004(x) Cap.($)
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Central Pacific
Financial Corp Honolulu HI 2,131.8 8.79 1.73 19.44 236.18 12.90 13.46 12.11 442.8
First National
Bank Alaska Anchorage AK 2,156.8 20.64 2.13 9.99 182.03 18.61 NA NA 810.2
Frontier Financial Corp. Everett WA 2,059.9 10.06 1.93 19.04 307.17 16.64 15.80 14.71 634.8
Mid-State Bancshares Arroyo Grande CA 2,086.1 10.79 1.69 13.01 271.56 19.00 18.72 17.23 599.3
Columbia Banking
System Inc Tacoma WA 1,699.0 8.51 1.10 13.55 194.56 15.32 14.99 13.99 281.1
West Coast Bancorp Lake Oswego OR 1,669.0 8.18 1.26 14.48 238.55 17.34 17.06 15.58 325.6
TriCo Bancshares Chico CA 1,440.6 7.25 1.28 14.35 252.93 15.86 15.64 14.11 260.1
Capital Corp
of the West Merced CA 1,162.4 7.14 1.21 16.14 256.97 16.98 16.11 14.34 212.8
Heritage Commerce Corp. San Jose CA 984.7 8.88 0.85 9.47 161.83 17.86 18.66 16.45 141.6
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HIGH 2,156.8 20.64 2.13 19.44 307.17 19.00 18.72 17.23 810.2
LOW 984.7 7.14 0.85 9.47 161.83 12.90 13.46 12.11 141.6
MEAN 1,710.0 10.03 1.46 14.39 233.53 16.72 16.31 14.81 412.0
MEDIAN 1,699.0 8.79 1.28 14.35 238.55 16.98 15.95 14.53 325.6
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CB Bancshares Inc. Honolulu HI 1,843.0 8.84 1.26 14.04 168.01 12.88(2) NA NA 274.0
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o Despite our strong recent performance, CBBI continues to trade at a
discount to our peers
o This is due, at least in part, to the uncertainty surrounding CPF's hostile
proposal
o As I stated earlier, we believe that investors are recognizing CBBI's
improved fundamentals
Source: SNL Financial.
(1) The regional group includes publicly traded commercial banks of comparable
size located in the western region of the United States, comprising Alaska,
Arizona, California, Hawaii, Idaho, Montana, Nevada, Oregon, Washington and
Wyoming. (2) Price / Adjusted LTM EPS of 12.88x is based on Adjusted LTM EPS of
$4.93. Utilizing unadjusted EPS of $4.00, the Price / LTM EPS multiple is
15.88x.
8
Summary
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o CPF's offer is inadequate from a financial point of view
o The implied offer multiples based on the current offer value and CBBI's
recent financial performance are well below the national transaction
median
o We believe that CBBI has great prospects for the future as a stand-alone
company and we believe we will continue to play an important role in the
Hawaii community
9
Forward-looking Information
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This communication may be deemed to include forward-looking statements, such as
statements that relate to CB Bancshares' financial results. Forward- looking
statements are typically identified by words or phrases such as "believe,"
"expect," "anticipate," "intent," "estimate," "may increase," "may fluctuate,"
and similar expressions or future or conditional verbs such as "will," "should,"
"would," and "could." Forward-looking statements are CB Bancshares' current
estimates or expectations of future events or future results. For such
statements, CB Bancshares claims the protection of the safe harbor for
forward-looking statements contained in the Private Securities Litigation Reform
Act of 1995. Actual results could differ materially from those indicated by
these statements because the realization of those results is subject to many
risks and uncertainties. CB Bancshares' 2002 Annual Report on Form 10-K and
other periodic reports to the Securities and Exchange Commission contain
additional information about factors that could affect actual results. All
forward-looking statements included in this communication are based on
information available at the time of the release, and CB Bancshares assumes no
obligation to update any forward-looking statement.
Subject to future developments, CB Bancshares may file with the SEC a
Solicitation/Recommendation Statement on Schedule 14D-9 relating to any
tender/exchange offer made by Central Pacific Financial Corp. Shareholders of CB
Bancshares are advised to read CB Bancshares' Solicitation/Recommendation
Statement on Schedule 14D-9 when such document becomes available because it will
contain important information. Shareholders of CB Bancshares and other
interested parties may obtain, free of charge, copies of the Schedule 14D-9
(when available) and other documents filed by CB Bancshares with the SEC at the
SEC's internet website at www.sec.gov. Each of these documents (when available)
may also be obtained, free of charge, by calling investor relations at CB
Bancshares at 808-546-8413.
10