Central Pacific Financial Corp. in Honolulu announced Friday that its fourth-quarter earnings would come in well below expectations, largely because of continued weakness in its California construction lending portfolio.
The $5.6 billion-asset company, which is to announce its results Jan. 31, said it expects to report a profit of 10 to 14 cents per diluted share. The average estimate in Thomson Financial's analyst poll was 53 cents.
Central Pacific earned 61 cents a share, or $18.8 million, in the fourth quarter of 2006.
It said it expects to take a loan-loss provision of $32 million to $34 million for the fourth quarter and said its net chargeoffs would be $8.5 million to $9 million.
"While we expect these credit conditions to improve over time, we anticipate a challenging market in California for the next several quarters and we are committed to reducing our credit exposure in this sector," president and chief executive Clint Arnoldus said in a press release.
Central Pacific also said it would take about a $1 million loss, or 4 cents per share, on its investment portfolios as it sold off certain securities to better position itself for a declining interest rate environment.
Despite the lower earnings, the company said it still expects to maintain its quarterly dividend and continue a stock repurchase program. Last year its board authorized two buybacks totaling up to 2.1 million shares. Through the end of the third quarter it had repurchased roughly 900,000 shares.
Brett Rabatin, an analyst with First Horizon National Corp.'s FTN Midwest Securities Research Corp., called Central Pacific's decision to continue buybacks surprising.
"I can't fathom the logic in that endeavor," he said. "Given the deterioration in the housing and market week by week, I'd want to be more cautious on something like that. …The thing for them to do is hoard capital and be conservative."
Central Pacific's shares have fallen 60% in the past year. The closed at $15.10 Friday, down less than 1% for the day.
