Central Pacific Financial Corp (CPF) 2003 Q4 法說會逐字稿

Good day, ladies and gentlemen, and welcome to Central Pacific Financial Corp.'s fourth-quarter 2003 earnings conference call. At this time, I would like to inform you that this conference is being recorded and that all participants are in a listen-only mode. At the request of the Company, we will open the conference for questions and answers after the presentation.

This document contains forward-looking statements. Such statements include but are not limited to, one, statements about the benefits of a merger between Central Pacific Financial Corp., CPF, and CB Bancshares, Incorporated, CBBI, including future financial and operating results, cost savings and accretion to reported and cash earnings that may be realized from such a merger; two, statements with respect to CPF's plans, objectives, expectations and (indiscernible) other statements that are nonhistorical facts; and three, other statements are 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 -- one, the business of CPF and CBBI may not be integrated successfully, or such integration will be more difficult, time-consuming or costly than expected; two, expected revenues, synergies and cost savings from the merger may not be fully realized or realized within the expected timeframe; three, revenues following the merger may be lower than expected; four, 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; five, the regulatory approvals required for the merger may not be obtained on the proposed terms; six, the failure of CPF and CBBI shareholders to approve the merger; seven, competitive pressures among depository and other financial institutions may increase significantly and may have an effort (sic) on pricing, spending, third-party relationships and revenues; eight, the strength of the United States economy in general and the strength of Hawaii's economy may be different than expected, resulting in -- among other things -- a deterioration in credit quality will reduce the demand for credit, including the resultant effect on the combined companies' loan portfolio and allowance for loan losses; nine, changes in the U.S. legal and regulatory framework; and ten, 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 companies' 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 such (indiscernible) forward-looking statements concerning the proposed transaction or other matters attributable to CPF or any person acting on its behalf are express qualified (ph) 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 (indiscernible) CBBI nor any analyst has publish (inaudible) information for 2003, 2004 or 2005. In addition, CPF has now 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 (indiscernible) 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 on proxies from CBBI or CPF shareholders in connection with 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 any other relevant documents when available, including the tender offer statement as filed, filed with the SEC, as well as 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 be also obtained free of charge from CPF by directing such requests to Central Pacific Financial Corp., 220 South King Street, Honolulu, Hawaii, 96813, Attention David Morimoto, phone number 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 names, affiliations and interests of the participants in any such solicitation is contained in CPF's (inaudible) proxy notification statement as filed on May 22, 2003. Information about the directors and executive officers of CPF and the ownership of and interest in CPF stock is set forth in the proxy statement for CPF's 2003 annual meeting of shareholders.

I will now turn the conference to Mr. Arnoldus.

Thank you, Charlene, and thanks to all of you for joining us today to review Central Pacific Financial Corp.'s fourth-quarter and 2003 financial performance.

Here with me today is Neal Kanda, our Chief Financial Officer.

I'd like to start with a review of the significant events and highlights of 2003, comment on the current market environment, the economic outlook and finally, give you an update on our merger initiative with CB Bancshares. Neal will follow with a review of the financial results in more detail, and then we will close by answering any questions you have.

Looking at 2003 highlights first, as you've already seen in today's earnings release, we are very pleased to report a fifth consecutive year of record earnings for Central Pacific Financial Corp. and its subsidiary, Central Pacific Bank.

Net income reached $33.9 million and diluted earnings per share totaled $2.07, increasing by 2 percent and 1.5 percent respectively over 2002. We attribute this performance to our dedicated employees who have maintained a strong focus on our customers and the marketplace.

Fourth-quarter 2003 net income reached $9.1 million, or 55 cents a share, up from three quarters -- from three earlier quarters of 2003. But it was below last year's fourth quarter of $10.2 million, or 62 cents a share.

During the fourth quarter of 2002, we recognized a non-recurring gain of $1.4 million from the curtailment of our Company's defined benefit pension plan, and we recorded a $1 million net benefit from state high technology investment tax credits.

Balance sheet growth was significant in 2003. Total loans increased by 11.8 percent to $1.45 billion from the previous year. Total deposits increased by 6.8 percent to $1.75 billion, and we are very pleased that core deposits increased by 10.8 percent. This reflects a very positive trend in the expansion of our customer relationships.

Asset quality remained very sound with a 0.17 percent ratio of nonperforming assets to total assets, and our efficiency ratio improved slightly to 52.97 percent from 53.02 percent in 2002.

Return on average equity in 2003 declined to 18.33 percent from 20.55 percent in 2002. During the fourth quarter, we raised an additional $40 million in capital through a pooled trust preferred issuance in conjunction with our proposed merger with CB Bancshares and for other corporate purposes.

There were no stock repurchases made during 2003.

Looking at the economy for this state, the outlook in 2004 is very positive. Vigorous activity in the construction and real estate sectors will provide job and income growth. This includes over $2 billion in pending projects to privatize and renovate military housing in Hawaii. The State Department of Business, Economic Development and Tourism recently revised its estimates upward for most of the key economic indicators in our state. Real gross state product is now expected to grow by 2.8 percent in 2004. Personal income should increase by 5.5 percent. We should see job growth of 2 percent this year, led by construction and tourism.

The state expects visitor arrivals to increase by 6 percent and visitor spending by 7.5 percent in 2004. This compares to a slight decline in visitor arrivals of 0.6 percent in 2003. The all-important Japanese visitor market looks promising with the continued strength of the yen. Norwegian Cruise lines will be adding two new U.S. flagships for cruises in Hawaii this year. In the long-term, they will be creating 10,000 new jobs, as well as increasing tourism statewide. So, barring any adverse global events, we look forward to an economic upswing here in Hawaii with a combined impact of a stronger visitor market and robust construction activity.

So, let's look at 2004. This will mark the 50th anniversary of Central Pacific Bank, and we're looking forward to complementing this anniversary with another year of record earnings. Just as the founders of this institution were driven to meet the needs of local businesses and consumers 50 years ago, our commitment to loyalty to our customers and community has become stronger than ever and remains a driving force in our institution. With our strategic objectives and business-development initiatives in place, we are all very well positioned to response to the needs of our businesses and our consumer markets.

Noninterest income is a key area of opportunity for us this year. We are confident in a continued increase in market share, as we now have a fully integrated sales and service function with a wider scope of financial services.

As an example, significant resources were invested in our business banking and wealth management areas in the past year, including enhancements in trust, investment and asset-management services. We are now positioned to provide very competitive financial planning services in this marketplace with a level of expertise that was bought into our organization with these additions. Our focus on small and mid-tier businesses will be even sharper, with the realignment of resources designed to improve responsiveness to our customers.

During 2003, a sales and service team dedicated to small business was established. Our branch expansion plan, meanwhile, is right on schedule, as we prepare to open two new branches in the summer of this year to service the growing communities of Kapowai (ph) in West Oahu and Wailuku on the island of Maui. With these additions, our branch network will increase to 26 statewide.

Looking forward to 2004's financial performance, management projects earnings per share growth in the range of 5 to 7 percent, based on the current economic conditions and business forecast.

Let me say a few words about our merger initiative. With regard to this initiative, we received regulatory approvals from the Federal Reserve Board. We're now awaiting a decision from the State of Hawaii's Division of Financial Institutions for the final regulatory approval required to move ahead. The State has indicated they will be willing to make a decision by February 18, 2004.

While we cannot discuss any of the strategic or tactical issues related to the merger, we continue to believe that the combined entity can do so much more than what either bank could ever do independently. I will say that we continue to look forward to an opportunity to negotiate the transaction with CB Bancshares' management and board. Our next moves will be driven by what we believe to be in the best interests of our shareholders, employees, customers and the communities that we serve.

At this time, I want to turn the discussion over to Neal, who will provide more details on our financial performances.

Following is a discussion of the fourth-quarter and 2003 year financial highlights for Central Pacific Financial Corp. and its subsidiary, Central Pacific Bank.

For the 2003 year, net income of 33.9 million reached a new high, increasing by 2 percent over 2002, which was also a record year for Central Pacific Financial.

Net interest income in 2003 increased by 1.2 percent over 2002. Provisions for loan losses decreased by 300,000 and noninterest income and noninterest expense increased by 3.6 percent and 1 percent, respectively.

2003 diluted earnings totaled $2.07, up by 1.5 percent over $2.04 earned in 2002.

Expenses related to the Company's merger initiative totaled $1.3 million for the year, equating to an after-tax impact of approximately 5 cents per diluted share.

Costs capitalized related to the merger initiative as of 12-31-03 totaled $9.3 million. Net income for the fourth quarter of 2003 totaled $9.1 million, and diluted earnings per share of 55 cents represented the highest earning quarter for the 2003 year.

These results, however, declined by 10.6 percent and 11.3 percent respectively from the fourth quarter of 2002, mainly due to a non-recurring benefit of 1.4 million recognized in prior-year 2002 as a result of curtailment of the Company's defined benefit pension plan, as well as the $1 million net (inaudible) benefit on high-technology tax credits, which Clint mentioned earlier.

As for the balance sheet, the Company experienced asset growth of 7 percent for the year with net loans increasing by 12.1 percent, primarily in the residential and commercial mortgage loan category. Deposits increased by 6.8 percent, mainly in core deposits.

During the fourth quarter of 2003, loans increased by 1.2 percent for the three-month period, primarily in the commercial mortgage and real estate (indiscernible) categories. Residential mortgage loans for the fourth quarter remained relatively changed over the end of the preceding quarter (sic) -- the third quarter of 2003.

During the fourth quarter of 2003, the Company issued two trust preferred securities totaling 20 million in conjunction with the merger initiative embarked on during the first half of 2003, as well as for other corporate purposes. This $40 million is in addition to the 15 million issued earlier in the year, totaling 55 million of Tier 1 capital raised during 2003.

Stockholders' equity at the end of 2003 increased to $194 million, or 12.2 percent from a year ago. The Company's equity to assets ratio increased to 8.97 percent, compared to 8.55 percent at December 31, 2002.

With the issuance of the 55 million in pooled trust preferred securities, which are, again, Tier 1 capital-qualified for regulatory purposes, risk-based capital ratios at December 31, 2003 were as follows -- Tier 1 capital ratio of 15.85 percent; total risk-based capital ratio of 17.16 percent; and Tier 1 leverage capital ratio of 11.99 percent, increasing by 300 to 400 basis points over year-end 2002 ratios.

The Company maintains its stock repurchase program, which has approximately $9.7 million authorized for that purpose, as part of the current program approved by the Board of Directors in 2002. No repurchases were made during 2003.

Return On Assets for 2003 was 1.64 percent, compared to 1.74 percent in 2002. ROE for the fourth quarter of 2003 was 1.7 percent, compared to 2.06 percent in the previous year's quarter. The general stockholders' equity -- 18.33 percent compared to 20.55 percent in 2002. ROE for the fourth quarter of 2003 of 18.96 percent compared to 23.67 percent a year ago.

The efficiency ratio for the year was little-changed with 52.97 in 2003, compared with 53.02 percent in 2002.

Interest income in 2003, on a tax equivalent basis, increased by $1.5 million, or 1.6 percent, over the previous year. Average interest-earning assets for the year of $1.9 billion increased by 8.3 percent over 2002. Net interest margin decreased to 4.79 percent from 5.11 percent in 2002.

Total interest income for 2003 decreased by 7.8 million, or 6.5 percent, over the previous year with the yield on earning assets dropping from 6.5 percent in the first quarter of 2002 to 5.5 percent in the fourth quarter of 2003.

Yields on loan and securities equally approximated the 100 basis points decrease in earning asset yield during the period.

Loan repricing, due to the interest rate decline as well as competitive market conditions and prepayments on mortgage-backed securities, accounted for the drop in the yield.

Interest and fees on loans for 2003 decreased by 4.3 million, or 4.6 percent, from 2002. An increase of 6.9 percent in average loans was offset by the decline in portfolio yield (inaudible) 6.47 percent in 2003 from 7.26 percent in 2002.

Loan yields in the fourth quarter of 2003 decreased to 5.97 percent from 7.06 percent in the fourth quarter of 2002.

At year-end 2003, loans comprised 66.5 percent of total assets and 82.3 percent of total deposits, compared to a year-ago ratios of 63.6 percent and 78.6 percent, respectively.

Interest on securities on a tax equivalent basis for 2003 decreased by 3 million, or 11.5 percent, compared to 2002. Yields on the securities portfolio declined to 4.34 percent from 5.83 percent in the previous year. Full-year yield for the first quarter of 2003 was 4.37 percent.

Interest expense for 2003 decreased by 9.3 million, or 31.6 percent, compared to 2002, reflecting a 70 basis point drop in the effective cost of interest-bearing liabilities, down to 1.3 percent from 2 percent in 2002. Average interest-bearing liabilities increased by 8.1 percent on this annual comparison.

The effective cost of funds for 2003's fourth quarter of 1.21 percent compares with 1.76 percent in the fourth quarter of 2002 and has stabilized when compared with the 1.17 percent taken in the third quarter of 2003.

As a result, net interest margin in the fourth quarter of 2003 was 4.53 percent, compared to 5.06 percent in the 2002 fourth quarter.

The Company's balance sheet remains relatively neutral to slightly asset-sensitive. In a gradually rising-rate environment, our asset-liability modeling projects net interest margin for 2004 to approximate the 4.5 percent level.

Provision for loan losses for 2003 totaled 700,000, down from one million in the prior year. Net loan charge-offs of $123,000 in 2003 decreased from 465,000 in 2002.

2003 loan losses were aided by large loan-recoveries reported in the first quarter of 2003. Allowance for loan losses at December 31st was 1.72 percent of total loans, compared to 1.88 percent a year ago.

Nonperforming assets (inaudible) loan delinquencies at December 31, 2003 totaled 4.3 million, or 30 basis points of total loans, compared to 2.5 million, or 20 basis points of total loans a year ago. Nonaccrual loans of 3.6 million were mainly comprised of two loans on commercial properties secured by (inaudible) mortgages. Loans delinquent 90 days or more totaled $659,000 at the end of the year. The loan portfolio at December 31, 2003 totaled $1.4 billion. There were no other real estate held as of September 31, 2003.

Although the Company's economic outlook is positive for the coming year, continuance units of any economic uncertainties, as they affect the Hawaiian national economy, may lead to a deterioration of quality in the Company's loan portfolio.

Other operating income in 2003 of 15.8 million increased by 3.6 percent over 2002. (indiscernible) securities gains of 956,000 were realized, compared to 477,000 in 2002. Net of securities transactions and the $1.4 million gain on curtailment of pension obligations in 2002, as previously mentioned, total operating income increased by 10.9 percent in 2003 over 2002.

Income from the fiduciary activities in 2003 increased by close to 30 percent to $1.8 million for the year. Fees from retail investment sales activities included in other service charges continued to increase with fees up by 62 percent over last year -- over the 2002 year.

The Company expects accelerated growth in the wealth management, trust and investment areas in the coming quarters as part of the Company's strategy in increasing our fee-generating license business.

Total operating expense of 55.6 million for 2003 increased by 1 percent over 2002. Salaries and benefits had a slight decrease, mainly due to lower commissions and bonuses paid during 2003. Net occupancies increased due to expenses of a new branch opened in late 2002 and lower rental income from office buildings owned by the Company. Additionally, costs associated with the Company's merger initiative expense in 2003, as mentioned earlier, totaled $1.3 million.

As for income taxes, the effective tax rate for 2003 was 31.6 percent, compared to 31 percent for 2002.

In summary, we maintained a solid performance during the year. With expected stabilization of net interest margin and continuing vigilance over problem loans, non-interest income is positioned to increase as we offer a wider array of investment and wealth management services to the community and our customer base.

We remain focused on cost-containment within the context of optimizing revenue growth. As Clint mentioned earlier, our earnings per share expectation for this year is in the range of a 5 to 7 percent increase over $2.07 cents (indiscernible) and diluted earnings per share in 2003 I've reported today. The 5 to 7 percent projection does not assume -- does not include any repurchases of Company common stock in 2004.

This concludes the discussion of our financial results for the fourth quarter and 2003 year. We welcome any questions you may have.

Thank you. The question-and-answer session will be conducted at this time. (OPERATOR INSTRUCTIONS). Joe Morford from RBC Capital Markets.

Hello, everyone. Just a couple of miscellaneous things -- first, Neal, what were the merger costs just for the fourth quarter? What might we expect there kind of on a go-forward basis?

Merger costs for the fourth quarter totaled $500,000. As for projected costs, that is not available at this time. I mean, we don't have an exact number. As you saw, the costs in the preceding quarters and the trend show a downward number.

Are you assuming any costs in the 5 to 7 percent EPS growth?

No.

Okay. On the tax rate, it's a lower rate this quarter, fully reflecting the -- it looks like a million -- (technical difficulty) -- high-tech investments. I guess should we see this again in '04? What is kind of a good run-rate we should be using for a tax rate for '04?

Thirty-five percent would be -- (technical difficulty).

Thirty-five percent?

Hold on, Joe. Joe, I will say 36.

Thirty-six? Okay. This quarter, was the lower rate all due to the high-tech benefit?

Yes. That's (inaudible) in the fourth quarter so you cannot (inaudible) that (inaudible) run rate.

Are you currently -- do you expect an upturn to realize similar benefits next year, or this year, I guess?

You know, it depends on the economy and also how the State treats these tax benefits, going forward, so it's hard to project. But again, we look at these opportunities whereby it is helpful to -- in terms of the law -- and that is how we have been selecting these opportunities. So in short, we, of course, hope that we can seek out some very worthy test projects in the next year.

I guess, lastly, just a follow-up on the margin, specific from the fourth quarter to the third quarter, on a core basis, it looks like maybe down nine basis points or so. What was kind of driving that? It sounds like, based on your comments at the end of the year, the margins (indiscernible) pretty similar to this level or right around the 450 level or something like that.

We had a lot of loan repricings, Joe, during that quarter, and some securities as well, so those were the primary drivers.

Brett Rabatin from FTN Midwest Research.

Hi, Clint. Hi, Neal. A couple of questions -- first, I wanted to go to the loan growth. In the previous quarter, you guys had pretty strong growth, especially it looks like towards the end of the quarter. In the fourth quarter, it looks like maybe growth slowed a little bit. Can you talk about the fourth quarter and then your expectations just generally for '04?

Brett, it's very hard to keep consistency from quarter to quarter because these loans, they ebb and flow, and as they are successfully negotiated and then ultimately documented and funded, you know, then they appear on our results.

I think the more important thing is the trend that we're seeing in demand and our ability to go in and capture additional market share. Both of those categories look extremely solid. As I mentioned, Hawaii's economy looks very good. We think there will be plenty of opportunities to look at, and we think that we've got a good program to go in and capture further market share through aggressive calling and relationship-focus that we have been growing our marketplace (sic).

So, you'll continue to see quarters where we have real solid growth and others where it might be a little lighter. It's just where they all fall in that whole closing cycle.

Can you talk about the level of prepayments in the quarter versus -- I know Q3 wasn't as bad as this quarter in terms of pay-downs. Can you break out the growth on that numbers or (sic) --?

Actually, (indiscernible) prepayments but again, you know, we had a large, a big third quarter. Loans increased by $106 million and a lot of the -- as Clint mentioned, a lot of the work was done from (indiscernible) quarter. It falls into -- (technical difficulty) -- another. We did increase only by 17 million in the first (ph) quarter, and so when you average out the couple quarters and for the year, (indiscernible) we were up by double digits. That's what we look forward to as far as for next year, but as far as quarter-to-quarter, it's very hard to predict.

Can you talk some about the NPAs you put on in the fourth quarter? You mentioned they were secure commercial credits. Does the situation look like those NPAs might be on the balance sheet for awhile, or can you get those moved off fairly quickly?

As you say, we are basically a secured real estate lender, so when a loan becomes nonperforming, we are usually in a pretty good position, as we are with any of the loans that are in that current percentage. Of course, that's a very low number. Given the size of the Bank and the particular loans that are in there, we feel we have a good position with -- and there are signs that at least one of them will be able to bring their position current.

On the one that was added in the fourth quarter, you know, again, most of the non-accruals were comprised of two loans made to two borrowers. One borrower came on the books, which we were watching for awhile, and it is secured and it may stay on for awhile, though. We are working, as we always do, very hard on the credit, but it remains there.

Conversely, there's one that's been on there for awhile that is showing some very positive signs now, so --.

Then can you discuss the level of provisioning, going forward, and how you see the reserve?

As far as our -- I think (indiscernible) to discuss the reserve level. You see that there has been a drop in our reserve level down to the 1.72 percent level. In our quarter-to-quarter analyses of the adequacy of the loan reserves, in looking more closely at our history on the historical losses, we feel that we can justify a lower allowance-to-loans ratio. That's the reason we did allow it to drop.

As far as provisioning, we are expecting, in our budget, about a $3 million provision for the year. With the information that we have at this time, (indiscernible) subject to change quarter-to-quarter, but this is factored into our 5 to 7 percent earnings projection. (multiple speakers).

I was just going to say, if you are provisioning 3 million, that would be about 15 basis points of average loans, so I am assuming that you're going to tell me next that you are assuming either you don't have any charge-offs or you're going to reduce the relative reserve level a little bit further this year.

Well, we continue to put a focus on very solid underwriting and very stringent credit controls. That's always going to be part of our culture, so we expect to continue showing a very strong book of credits. In fact, we are in a regular dialogue with other parties that feel our reserve is too high, so as Neal said, we felt we were strong enough that we could let it come down a bit.

I'm sorry I interrupted you (indiscernible) comment.

That is basically the point I was going to make.

Just one last question on the trust side. Last quarter, it was little bit early to have some good disability. But I was curious, from a trust perspective, if you feel like the trust operation will be able to (indiscernible) eventually talking about doubling the size of the revenue when you first hired some new people. Does that still seem achievable in the near-term or is that maybe further out the road?

I think it's probably a little further down the road. We hired a great team of people and we have been working hard to make sure that our infrastructure can support them. That's where a lot of the focus has gone so far.

So far, we're very pleased with the growth. The outlook looks very solid, and we think that whole wealth management area will be producing very significant fee income for our bank, which as you know, is one of the areas we really need to focus on.

(OPERATOR INSTRUCTIONS). Greg Eisen from SAFECO Asset Management.

Good afternoon, Clint, Neal. I stepped away for a minute, so you might have answered this question while I was away. Could you comment on where you see Central Pacific Bank's market share in the Hawaiian marketplace as of the end of the year, say, in the loans or deposits versus where it was a year ago? Did you gain ground over the course of the year, in your opinion?

Yes, we showed very solid loan and deposit growth, and we expect that to continue. That will result in more market share. As you know, we have a relatively low market share right now -- 8 percent -- and we see that as a tremendous opportunity for us as we continue to develop the sales culture and focus on our marketplace.

So, we see it growing. We set our goals more in terms of what percentage growth we want to see in our loans and deposits and our market share follows. So you know, certainly, we expect to see that increase over the 8 percent by the end of the year, and we are focused on it. I don't have a specific number to give you.

Okay, but you see it as having grown over the course of the last year?

Yes, we do.

Of course, post-merger, it would be, obviously, a much larger number?

Yes, definitely. That would give us 14 percent.

Yes, but I was just thinking in terms of the your organic growth.

We have good, strong organic growth.

I will leave it at that. Thank you.

If there if there are no further questions, I will now turn the conference back to Mr. Arnoldus.

Thank you, everyone, for joining us today. We feel very confident that 2004 will be a strong year for our company and that it will be meriting or seeing the fruits of our infrastructure improvements. We expect some challenges in margin compression, but we are also very optimistic about the growth opportunities and the brisk economic activity we expect to see in our state for some time to come. We also have confidence in our management, employees to execute the sales and service objectives that we have for 2004.

So, we appreciate your continued interest and support of Central Pacific Finance (sic) Corp.

Ladies and gentlemen, if you wish to access the replay for this call, you may do so by dialing 1-800-428-6051 or 973-709-2089 with an ID number of 329315, or visit the corporate Web site at www.CentralPacificBank.com. This concludes our conference for today. Thank you all for participating and have a nice day. All parties may now disconnect.