Pacific Century Financial Corporation 2001 Financial Results
-- 2001 Net Income $117.8 Million, Up 4% From 2000
-- Company Completes Divestiture Phase of Strategic Plan
-- Regulators Remove Memorandum of Understanding
-- $300 Million Additional Share Repurchase Program Announced
-- Board of Directors Declares Dividend of $0.18 Per Share
Pacific Century Financial Corporation (NYSE:BOH) today reported diluted earnings
per share for 2001 of $1.46, compared to $1.42 in 2000. Net income for the year
was $117.8 million, up $4.1 million from $113.7 million reported in the previous
year. The return on average assets in 2001 was 0.93 percent, up 14.8 percent
compared to 0.81 percent in 2000. The return on average equity was 8.76 percent,
down from 9.21 percent in 2000.
Pacific Century Financial Corporation also announced today that the Company has satisfied its obligations under the Memorandum of Understanding imposed by its regulators during the third quarter of 2000 and it has been removed. Additionally, the Company announced its authorization from its Board of Directors to repurchase an additional $300 million of its common stock.
"I am pleased that we were able to successfully complete the sale of our non-strategic assets," said Michael E. O'Neill, Chairman and CEO. "The divestiture and risk reduction program was the cornerstone of our strategic plan initiatives for the past year. Successfully accomplishing those objectives allows us to now focus exclusively on our key markets of Hawaii, the West Pacific and American Samoa. Also gratifying and significant was the lifting of the Memorandum of Understanding by our regulators."
Net income for the fourth quarter of 2001 was $26.3 million or $0.34 per diluted share, down from net income of $32.6 million, or $0.41 per diluted share for the same period last year. The Company's restructuring program had considerable impact on the quarterly operating results in 2001 and reduced the relevance of comparisons with prior periods.
Included in earnings for the fourth quarter of 2001 were several items relating to implementation of the Company's previously announced strategic plan that increased net income by $6.4 million, or $0.08 per diluted share. Significant items during the quarter included net gains of $32.2 million from the sale of the Company's Papua New Guinea, Fiji and Vanuatu branch franchise to Australia-based ANZ and the sale of its French Polynesia and New Caledonia operations to France-based Caisse Nationale des Caisses d'Epargne. These gains were offset by losses in venture investments of $3.4 million. Adjustments and other expenses related to restructuring and non-core activities of $18.5 million partially offset the gains and were primarily due to severance and professional services costs and asset write-downs. Adjusted for these items and their related tax impact, core diluted earnings per share for the fourth quarter were $0.26 and core net income was $19.9 million.
Financial Highlights
The net interest income for the fourth quarter of 2001 on a fully taxable equivalent basis was $106.2 million, down $25.9 million from $132.1 million in the same quarter last year. The decrease was primarily due to reduced business activity as a result of the divestitures, the wind down of the Asia business and the ongoing managed reduction of loans to improve the Company's credit profile.The Company's net interest margin of 3.93 percent for the fourth quarter was down from 4.08 percent in the comparable quarter last year. The decrease was primarily due to loan reductions and asset sales, including the credit card portfolio, and lower returns earned on the increased liquidity of the Company.
The provision for loan and lease losses was $14.5 million for the fourth quarter 2001, down from $25.8 million in the same quarter last year. The provision equaled net charge-offs. Included in loan losses was approximately $10 million recognized in connection with loan sales.
Non-interest income was $80.2 million for the fourth quarter, including $28.7 million in non-core items. Adjusted for these items, core non-interest income decreased $19.1 million from the fourth quarter of 2000. This decrease was largely due to the intentional downsizing of certain businesses, sales of the Company's credit card portfolio, Pacific Century Bank branch franchise and South Pacific entities, and mortgage banking losses of $8.5 million recorded during fourth quarter 2001. The mortgage banking losses resulted from unhedged exposure to increases in interest rates.
Non-interest expense for the fourth quarter of 2001 was $141.5 million. Excluding a total of $18.5 million of restructuring and other related costs, core non-interest expense was essentially flat with non-interest expense of $122.9 million in the fourth quarter last year. In the fourth quarter of 2001, all categories of expense include adjustments and accruals to fully reflect expenses incurred as of year-end.
The 2001 core efficiency ratio of 69.9 percent excluding intangible amortization, was negatively impacted by the divesting businesses, where revenue declined more quickly than the related expenses and the fourth quarter loss in mortgage banking. The Company anticipates that the efficiency ratio will be approximately 62 percent in 2002.
The unusually low effective tax rate for the fourth quarter of 2001 reflects the impact of foreign tax and other credits recognized in the fourth quarter as well as adjustments in the effective tax rate for the year.
Net income from the continuing businesses was $20 million, or $0.26 per diluted share, down $9 million from the previous quarter. The decrease in revenue was due to the mortgage loss which more than offset increases in the other revenue categories. The provision for loan losses increased by approximately $10 million primarily due to net charge-offs taken in connection with the sale of loans. Non-interest expenses increased due to accruals for relocation and other costs of new employees, software licenses and maintenance, legal and professional fees, advertising and performance incentives in certain businesses. Excluding the effects of restructuring, net income for the divested businesses was negligible during the fourth quarter.
Asset Quality
Asset quality improved during the fourth quarter 2001. Non-performing assets, exclusive of loans past due 90+ days, decreased for the fifth consecutive quarter to $79.7 million. Compared to the previous quarter, non-performing assets declined $26.7 million or 25.1 percent and were down $103.3 million or 56.4 percent from last year. At December 31, 2001, the ratio of non-performing assets to total loans plus foreclosed assets was 1.41 percent compared to 1.56 percent at September 30, 2001 and 1.98 percent at December 31, 2000.Non-accrual loans of $60.8 million at the end of the fourth quarter were down from $61.8 million in the third quarter and down $117.7 million or 65.9 percent from the same quarter last year. Non-accrual loans as a percentage of total loans were 1.08 percent, up from 0.91 percent in the previous quarter due to lower loan levels and down significantly from 1.93 percent in the same period last year.
Foreclosed assets were $17.2 million at the end of the fourth quarter, down $20.0 million or 53.8 percent from the prior quarter and up from $4.5 million in the fourth quarter last year. The significant improvement from the third quarter resulted from the sale of two commercial properties in Hawaii.
Net charge-offs for the fourth quarter of 2001 were $14.5 million or 0.87 percent of total average loans (annualized). Charge-offs of $25.9 million were offset by recoveries of $11.4 million. The allowance for loan and lease losses at December 31, 2001 was $159.0 million, down $23.5 million from the prior quarter and down significantly from $246.2 million at December 31, 2000. The decrease from the prior quarter is due to the release of $23.7 million reserves resulting from the sale of the South Pacific entities, of which $17.2 million is reflected in the gain on sale.
The allowance for loan and lease losses to non-accrual loans was 262 percent, down slightly from the previous quarter and up from 138 percent last year. The allowance for loan and lease losses to total loans was 2.81 percent at the end of the fourth quarter 2001, up from 2.70 percent at the end of the third quarter 2001 and 2.67 percent at the end of the same quarter last year.
The Company's total exposure to the air transportation industry at December 31, 2001 was $158 million, consisting of $136 million in equity interests in leveraged leases and $22 million in lending exposure of which $5 million was undrawn. The leases are comprised of $90 million in 14 aircraft leased to major United States and international passenger carriers, $31 million on 13 aircraft leased to regional carriers and $15 million on one aircraft leased to a major air cargo carrier.
At December 31, 2001 outstanding loans to national hotel and management companies totaled $65 million with undrawn commitments of $59 million. Exposure to hotel companies in Hawaii at December 31, 2001 included loans outstanding of $112 million and undrawn commitments of $19 million. In the West Pacific, loans outstanding to hotel owners totaled $59 million at December 31, 2001.
All of the Company's air transportation and hotel leases and loans remain current.
As a result of the Company's closure of its Asia businesses, it has no loans outstanding in Asia. Loans outstanding to Asian borrowers operating in Hawaii, Guam and the West Pacific were $103 million at the end of the year. The remaining Asia exposure represents placements of $167 million at December 31, 2001 in AA rated banks.
Syndicated loans outstanding decreased $103 million to $482 million during the fourth quarter. Syndicated exposure consisting of loans and undrawn commitments declined $124 million to $1.6 billion at December 31, 2001.
Other Financial Highlights
On November 27, 2001, the Company closed the sale of its operations in Papua New Guinea and Vanuatu to ANZ. The Company completed the sale of its approximately 95 percent share interest in its French Polynesia and New Caledonia operations to Caisse Nationale des Caisses d'Epargne on December 28, 2001. The sale of its Fiji operation to ANZ was completed on December 31, 2001.Total assets were $10.6 billion at the end of December 31, 2001, down from $11.9 billion at September 30, 2001 and down from $14.0 billion at the end of December 31, 2000. The most significant reduction was in commercial loans, including foreign loans and commercial real estate loans resulting from the divestitures.
Deposits at the end of the year were $6.7 billion. Compared with the previous year, deposits declined primarily due to sales of the Pacific Century Bank branch franchise and South Pacific operations, as well as a managed decline in foreign deposits resulting from the Company's decision to exit certain foreign locations. During the fourth quarter, domestic deposits in the continuing businesses continued to reflect positive trends as demand and savings deposit balances increased replacing higher cost funds.
As part of its efforts to effectively manage capital, the Company announced a program during the third quarter of 2001 to repurchase $70 million common shares, which was completed in October 2001. An additional program to repurchase $200 million of common stock was announced on October 22, 2001. At December 31, 2001 the Company had repurchased for $195.7 million a total of 8.3 million shares under both programs at an average cost of $23.57. The Company is currently initiating an additional $300 million repurchase program. Remaining buyback authority is now $374.3 million in common stock under the existing repurchase programs.
The Company's capital and liquidity remains exceptionally strong. At December 31, 2001 Tier 1 leverage was 11.2 percent compared to 9.1 percent at December 31, 2000.
The Company's Board of Directors declared a quarterly cash dividend of $0.18 per share on the Company's outstanding shares. The dividend will be payable on March 14, 2002 to shareholders of record at the close of business on February 26, 2002.
Economic Outlook
The Hawaii economy continues to show improvement from the initial decline in tourism following the September 11 attacks. The economic recovery is currently on track for a gradual return to normal visitor levels by mid-2002. Hawaii's overall economic growth rate is anticipated to return to a normal 3 percent after inflation as tourism recovers. Hawaii's unemployment rate increased from 4.5 percent to 5.5 percent subsequent to September, where it has stabilized and is forecast to shift downward. Inflation is expected to remain substantially below national norms during 2002.Earnings Outlook
The Company reaffirmed its earnings guidance for the full year 2002 at $120 million in net income for its continuing businesses. The Company also reaffirmed its previous guidance of $130 million in net income for the full year 2003. Earnings per share and return on equity projections are dependent upon the terms and timing of share repurchases."We successfully completed the strategic goals we established for 2001 and continue to be optimistic in our outlook about Hawaii," said Michael E. O'Neill. "Completion of these initiatives positions us well to take advantage of opportunities that arise as the economy recovers. We remain confident in our ability to meet our previously stated financial forecasts."
The Company will review its 2001 earnings today at 1:00 p.m. ET. The presentation will be accessible via teleconference and via the investor relations link of Pacific Century Financial Corporation's web site, www.boh.com. The conference call number is (800) 553-0349 in the U.S. or (612) 332-0718 for international callers. A replay will be available for one week beginning at 6:00 p.m. ET on Monday, January 28, 2002 by calling (800) 475-6701 (U.S.) or (320) 365-3844 (International) and entering the number 623444 when prompted. A replay of the presentation will be also available on the Company's web site.
This news release contains forward-looking statements concerning anticipated revenues and expenses in 2002 and 2003. We believe the assumptions underlying our forward-looking statements are reasonable. However, any of the assumptions could prove to be inaccurate and actual results may differ materially from those projected for a variety of reasons including, but not limited to: the Hawaii economy may not recover at the pace we anticipate; our refocused emphasis on our Hawaii market may not achieve the customer and revenue gains we anticipate; our credit markets may deteriorate and our credit quality may fall short of our goals; we may not achieve the expense reductions we expect; we may not be able to maintain our net interest margin; we may not be able to implement our proposed equity repurchases in the amount or at the times planned; customer acceptance of our business as restructured may be less than expected; there may be economic volatility in the markets we serve; and there may be changes in business and economic conditions, competition, fiscal and monetary policies or legislation. Except where specified, we do not undertake any obligation to update any forward-looking statements to reflect later events or circumstances.
Pacific Century Financial Corporation is a regional financial services company serving businesses, consumers and governments in Hawaii, American Samoa and the West Pacific. Pacific Century's principal subsidiary, Bank of Hawaii, was founded in 1897 and is the dominant commercial bank in the state of Hawaii.
Pacific Century Financial Corporation and subsidiaries
Highlights (Unaudited) Table 1
----------------------------------------------------------------------
(dollars in thousands except per share amounts)
Three Months Ended Year Ended
Dec. 31, Dec. 31, Dec. 31, Dec. 31,
2001 2000 2001 2000
Earnings Highlights and
Performance Ratios
Net Income $ 26,320 $ 32,586 $117,795 $113,661
Basic Earnings
Per Share 0.35 0.41 1.49 1.43
Diluted Earnings
Per Share 0.34 0.41 1.46 1.42
Cash Dividends 13,152 14,324 56,567 56,471
Return on Average
Assets 0.90% 0.94% 0.93% 0.81%
Return on Average
Equity 8.14% 10.24% 8.76% 9.21%
Net Interest Margin 3.93% 4.08% 3.91% 4.08%
Core Efficiency
Ratio(a) 78.13% 60.68% 69.92% 61.28%
Cash Basis
Financial Data
Net Income $ 28,767 $ 36,270 $131,137 $128,926
Basic Earnings
per Share 0.38 0.46 1.66 1.62
Diluted Earnings
per Share 0.37 0.45 1.63 1.62
Return on Average
Assets 0.99% 1.06% 1.05% 0.93%
Return on Average
Equity 9.50% 13.44% 11.00% 12.45%
Core Efficiency
Ratio(a)(b) 76.58% 58.86% 68.02% 59.38%
(a) Excludes the effect of restructuring activities and non-core
transactions.
(b) Excludes the effect of intangibles which include goodwill, core
deposit and trust intangibles.
----------------------------------------------------------------------
Statement of Condition Highlights December 31, December 31,
and Performance Ratios 2001 2000
----------------------------------------------------------------------
Total Assets $ 10,628,109 $ 14,013,816
Net Loans 5,493,539 8,988,311
Total Deposits 6,673,908 9,080,581
Total Shareholders' Equity 1,247,012 1,301,356
Book Value Per Common Share $ 17.03 $ 16.35
Allowance / Loans Outstanding 2.81% 2.67%
Average Equity / Average Assets 10.60% 8.78%
Employees (FTE) 3,175 4,166
Branches and offices 97 175
Market Price Per Share of
Common Stock Quarter Ended
Closing $ 25.89 $ 17.69
High $ 26.40 $ 18.75
Low $ 19.32 $ 11.06
----------------------------------------------------------------------
Pacific Century Financial Corporation and subsidiaries
Consolidated Statements of Income (Unaudited) Table 2
----------------------------------------------------------------------
(dollars in thousands except per share amounts)
Three Months Ended Year Ended
December 31 December 31
2001 2000 2001 2000
----------------------------------------------------------------------
Interest Income
Interest and Fees
on Loan and Leases $ 123,716 $ 202,481 $ 619,447 $ 795,028
Income on Investment
Securities -
Held to Maturity 6,422 11,110 33,521 48,013
Income on Investment
Securities -
Available for Sale 29,317 41,462 137,320 166,266
Deposits 7,858 4,018 27,596 15,685
Funds Sold and
Security Resale
Agreements 803 1,366 5,034 2,689
Other 1,396 1,221 5,344 4,742
----------------------------------------------------------------------
Total Interest
Income 169,512 261,658 828,262 1,032,423
Interest Expense
Deposits 35,158 73,607 217,305 286,046
Security Repurchase
Agreements 14,716 28,621 77,764 104,536
Funds Purchased 365 7,315 10,099 32,636
Short-Term Borrowings 1,549 3,174 9,562 19,002
Long-Term Debt 11,624 16,925 53,854 59,053
----------------------------------------------------------------------
Total Interest
Expense 63,412 129,642 368,584 501,273
----------------------------------------------------------------------
Net Interest Income 106,100 132,016 459,678 531,150
Provision for Loan
and Lease Losses 14,541 25,777 74,339 142,853
----------------------------------------------------------------------
Net Interest Income
After Provision for
Loan and Lease Losses 91,559 106,239 385,339 388,297
Non-Interest Income
Trust and Asset
Management 14,883 16,999 59,924 66,077
Mortgage Banking (58) 2,885 20,133 10,996
Service Charges on
Deposit Accounts 9,045 10,251 38,467 40,062
Fees, Exchange, and
Other Service Charges 17,223 24,636 78,787 99,519
Gain on Sale of Banking
Operations and Venture
Investments Loss 28,746 -- 173,426 --
Gain on Settlement
of Pension Obligation -- -- -- 11,900
Investment Securities
Gains (Losses) 68 (581) 32,982 (1,101)
Other Operating Income 10,255 16,292 48,900 57,459
----------------------------------------------------------------------
Total Non-Interest
Income 80,162 70,482 452,619 284,912
Non-Interest Expense
Salaries 46,601 45,106 191,473 184,413
Pensions and Other
Employee Benefits 13,247 10,238 52,235 48,042
Net Occupancy Expense 10,897 11,917 46,344 48,798
Net Equipment Expense 14,445 13,129 53,395 50,620
Goodwill and Other
Intangibles
Amortization 2,447 3,684 13,342 15,265
Restructuring and
Other Related Costs 18,464 -- 104,794 --
Minority Interest 144 101 383 387
Other Operating Expense 35,294 38,701 136,033 145,279
----------------------------------------------------------------------
Total Non-Interest
Expense 141,539 122,876 597,999 492,804
----------------------------------------------------------------------
Income Before
Income Taxes 30,182 53,845 239,959 180,405
Provision for
Income Taxes 3,862 21,259 122,164 66,744
----------------------------------------------------------------------
Net Income $ 26,320 $ 32,586 $117,795 $113,661
======================================================================
Basic Earnings
Per Share $ 0.35 $ 0.41 $ 1.49 $ 1.43
Diluted Earnings
Per Share $ 0.34 $ 0.41 $ 1.46 $ 1.42
Dividends Declared
Per Share $ 0.18 $ 0.18 $ 0.72 $ 0.71
Basic Weighted
Average Shares 75,165,102 79,534,105 78,977,011 79,551,296
Diluted Weighted
Average Shares 76,835,941 79,747,220 80,577,763 79,813,443
======================================================================
Pacific Century Financial Corporation and subsidiaries
Consolidated Statements of Condition (Unaudited) Table 3
----------------------------------------------------------------------
(dollars in thousands)
December 31 December 31
2001 2000
----------------------------------------------------------------------
Assets
Interest-Bearing Deposits $ 1,101,974 $ 189,301
Investment Securities
- Held to Maturity
(Market Value of $407,838 and
$589,079, respectively) 396,216 583,587
Investment Securities
- Available for Sale 2,001,420 2,509,359
Securities Purchased
Under Agreements to Resell -- 3,969
Funds Sold 115,000 134,644
Loans Held for Sale 456,709 179,229
Loans 5,652,518 9,234,558
Allowance for Loan
and Lease Losses (158,979) (246,247)
----------------------------------------------------------------------
Net Loans 5,493,539 8,988,311
----------------------------------------------------------------------
Total Earning Assets 9,564,858 12,588,400
Cash and Non-Interest
Bearing Deposits 405,981 523,968
Premises and Equipment 196,171 254,621
Customers' Acceptance Liability 593 14,690
Accrued Interest Receivable 42,687 68,585
Foreclosed Assets 17,174 4,526
Mortgage Service Rights 27,291 16,195
Goodwill and Other Intangibles 36,216 176,070
Other Assets 337,138 366,761
----------------------------------------------------------------------
Total Assets $10,628,109 $14,013,816
======================================================================
Liabilities
Domestic Deposits
Demand - Non-Interest Bearing $ 1,548,322 $ 1,707,724
- Interest Bearing 1,926,018 2,008,730
Savings 968,137 665,239
Time 1,927,778 2,836,083
Foreign Deposits
Demand - Non-Interest Bearing 2 385,366
Time Due to Banks 230,247 535,126
Other Savings and Time 73,404 942,313
----------------------------------------------------------------------
Total Deposits 6,673,908 9,080,581
Securities Sold Under
Agreements to Repurchase 1,643,444 1,655,173
Funds Purchased 55,800 413,241
Short-Term Borrowings 134,222 211,481
Banker's Acceptances Outstanding 593 14,690
Retirement Expense Payable 36,175 37,931
Accrued Interest Payable 29,762 72,460
Taxes Payable 138,366 130,760
Minority Interest -- 4,536
Other Liabilities 98,422 94,450
Long-Term Debt 570,405 997,157
----------------------------------------------------------------------
Total Liabilities 9,381,097 12,712,460
Shareholders' Equity
Common Stock ($.01 par value),
authorized 500,000,000 shares;
issued / outstanding:
Dec. 2001 - 81,377,241 /
73,218,326;
Dec. 2000 - 80,558,811 /
79,612,178 806 806
Capital Surplus 367,672 346,045
Accumulated Other
Comprehensive Income 22,761 (25,079)
Retained Earnings 1,055,424 996,791
Deferred Stock Grants (7,637) --
Treasury Stock, at Cost
(Shares: December 2001
- 8,136,134:
December 2000
- 946,633) (192,014) (17,207)
----------------------------------------------------------------------
Total Shareholders' Equity 1,247,012 1,301,356
----------------------------------------------------------------------
Total Liabilities and
Shareholders' Equity $10,628,109 $14,013,816
======================================================================
Pacific Century Financial Corporation and subsidiaries
Consolidated Statements of Shareholders' Equity (Unaudited) Table 4
----------------------------------------------------------------------
(dollars in thousands)
Accumulated
Other
Compre-
Common Capital hensive
Total Stock Surplus Income
----------------------------------------------------------------------
Balance at
December 31, 2000 $ 1,301,356 $ 806 $346,045 $ (25,079)
Comprehensive Income
Net Income 117,795 -- -- --
Other Comprehensive
Income, Net of Tax
Investment Securities 20,733 -- -- 20,733
Foreign Currency
Translation
Adjustment 27,266 -- -- 27,266
Pension Liability
Adjustments (159) -- -- (159)
Total Comprehensive
Income
Common Stock Issued
59,586 Profit
Sharing Plan 1,402 -- 261 --
916,817 Stock Option
Plan 21,314 -- 1,054 --
120,397 Dividend
Reinvestment Plan 2,819 -- 495 --
5,487 Directors'
Restricted Shares
and Deferred
Compensation Plan 336 -- 121 --
727,800 Employees'
Restricted Shares 5,105 -- 18,397 --
65,146 Hawaii
Insurance Network 1,299 -- 1,299 --
Treasury Stock Purchased
(8,300,900 shares) (195,687)
Cash Dividends Paid (56,567) -- -- --
----------------------------------------------------------------------
Balance at
December 31, 2001 $ 1,247,012 $ 806 $367,672 $ 22,761
======================================================================
Deferred Compre-
Retained Stock Treasury hensive
Earnings Grants Stock Income
Balance at
December 31, 2000 $ 996,791 $ -- $(17,207)
Comprehensive Income
Net Income 117,795 -- $117,795
Other Comprehensive
Income, Net of Tax
Investment Securities -- -- -- 20,733
Foreign Currency
Translation
Adjustment -- -- -- 27,266
Pension Liability
Adjustments -- -- -- (159)
---------
Total Comprehensive
Income $165,635
=========
Common Stock Issued
59,586 Profit
Sharing Plan -- -- 1,141
916,817 Stock Option
Plan (2,591) 5,655 17,196
120,397 Dividend
Reinvestment Plan (4) -- 2,328
5,487 Directors'
Restricted Shares
and Deferred
Compensation Plan -- -- 215
727,800 Employees'
Restricted Shares -- (13,292) --
65,146 Hawaii
Insurance Network -- -- --
Treasury Stock Purchased
(8,300,900 shares) (195,687)
Cash Dividends Paid (56,567) -- --
----------------------------------------------------------------------
Balance at
December 31, 2001 $1,055,424 $(7,637) $(192,014)
======================================================================
Accumulated
Other
Compre-
Common Capital hensive
Total Stock Surplus Income
----------------------------------------------------------------------
Balance at
December 31, 1999 $ 1,212,330 $ 806 $345,851 $ (66,106)
Comprehensive Income
Net Income 113,661 -- -- --
Other Comprehensive
Income, Net of Tax
Investment Securities,
Net of
Reclassification
Adjustment 45,300 -- -- 45,300
Foreign Currency
Translation
Adjustment (4,273) -- -- (4,273)
Total Comprehensive
Income
Common Stock Issued
86,670 Profit
Sharing Plan 1,470 -- 18 --
228,438 Stock
Option Plan 2,948 -- 3 --
193,689 Dividend
Reinvestment Plan 3,261 -- 51 --
6,901 Directors'
Restricted Shares and
Deferred Compensation
Plan 122 -- 122 --
Treasury Stock Purchased
(934,800 shares) (16,992) -- -- --
Cash Dividends Paid (56,471) -- -- --
----------------------------------------------------------------------
Balance at
December 31, 2000 $ 1,301,356 $ 806 $346,045 $ (25,079)
======================================================================
Deferred Compre-
Retained Stock Treasury hensive
Earnings Grants Stock Income
----------------------------------------------------------------------
Balance at
December 31, 1999 $ 942,177 $ -- $(10,398)
Comprehensive Income
Net Income 113,661 -- $113,661
Other Comprehensive
Income, Net of Tax
Investment Securities,
Net of
Reclassification
Adjustment -- -- 45,300
Foreign Currency
Translation
Adjustment -- -- (4,273)
----------
Total Comprehensive
Income $154,688
==========
Common Stock Issued
86,670 Profit
Sharing Plan (230) 1,682
228,438 Stock
Option Plan (1,763) 4,708
193,689 Dividend
Reinvestment Plan (583) 3,793
6,901 Directors'
Restricted Shares and
Deferred Compensation
Plan -- --
Treasury Stock Purchased
(934,800 shares) -- (16,992)
Cash Dividends Paid (56,471) --
----------------------------------------------------------------------
Balance at
December 31, 2000 $ 996,791 $ -- $(17,207)
======================================================================
Pacific Century Financial Corporation and subsidiaries
Consolidated Average Balances and
Interest Rates Taxable Equivalent (Unaudited) Table 5
----------------------------------------------------------------------
(dollars in millions)
Three Months Ended Three Months Ended
December 31, 2001 December 31, 2000(A)
Average Income/ Yield/ Average Income/ Yield/
Balance Expense Rate Balance Expense Rate
----------------------------------------------------------------------
Earning Assets
Interest
Bearing
Deposits $ 1,236.2 $ 7.9 2.52% $ 215.7 $ 4.0 7.41%
Funds Sold 150.5 0.8 2.09 66.8 1.4 8.14
Investment
Portfolio
- Held-To-
Maturity 431.5 6.5 5.99 616.0 11.2 7.25
- Available
for Sale 2,037.5 29.3 5.75 2,478.4 41.5 6.66
Loans Held
For Sale 304.9 5.1 6.63 153.1 3.0 7.80
Net Loans
- Domestic 5,752.6 104.0 7.20 7,955.3 177.0 8.85
- Foreign 777.0 14.6 7.48 1,319.9 22.5 6.78
------------------------ ------------------------
Total Loans 6,529.6 118.6 7.23 9,275.2 199.5 8.56
Other 86.3 1.4 6.42 74.8 1.2 6.50
------------------------ ------------------------
Total Earning
Assets 10,776.5 169.6 6.27 12,880.0 261.8 8.09
Cash and Due
From Banks 354.9 404.5
Other Assets 480.7 503.3
--------- ---------
Total Assets $11,612.1 $13,787.8
========= =========
Interest Bearing
Liabilities
Domestic
Deposits
- Demand $ 1,774.7 5.1 1.15 $ 1,991.6 12.1 2.41
- Savings 958.3 4.6 1.89 667.5 3.4 2.03
- Time 2,048.2 19.7 3.81 2,815.6 42.3 5.98
------------------------ ------------------------
Total
Domestic
Deposits 4,781.2 29.4 2.44 5,474.6 57.8 4.20
Foreign
Deposits
- Time Due
to Banks 365.5 2.1 2.26 557.9 8.7 6.23
- Other Time
and Savings 445.9 3.7 3.31 768.9 7.1 3.65
------------------------ ------------------------
Total Foreign
Deposits 811.4 5.8 2.84 1,326.8 15.8 4.73
------------------------ ------------------------
Total
Interest
Bearing
Deposits 5,592.6 35.2 2.49 6,801.5 73.6 4.31
Short-Term
Borrowings 1,942.4 16.6 3.40 2,437.1 39.2 6.38
Long-Term Debt 678.9 11.6 6.79 1,001.6 16.9 6.72
------------------------ ------------------------
Total
Interest
Bearing
Liabilities 8,214.0 63.4 3.06 10,240.2 129.6 5.04
------------------------ ------------------------
Net Interest
Income 106.2 132.1
Interest Rate
Spread 3.20% 3.05%
Net Interest
Margin 3.93% 4.08%
Demand Deposits
- Domestic 1,397.8 1,610.8
- Foreign 328.0 354.7
--------- ---------
Total Demand
Deposits 1,725.7 1,965.5
Other
Liabilities 390.3 315.6
Shareholders'
Equity 1,282.1 1,266.5
--------- ---------
Total
Liabilities
and
Shareholders'
Equity $11,612.1 $13,787.8
========= =========
Provision for
Loan Losses 14.5 25.8
Net Overhead 61.4 52.3
-------- --------
Income Before
Income Taxes 30.3 54.0
Provision for
Income Taxes 3.9 21.3
Tax-Equivalent
Adjustment 0.1 0.1
-------- ---------
Net Income $ 26.3 $ 32.6
======== =========
Year Ended Year Ended
December 31, 2001 December 31, 2000 (A)
Average Income/ Yield/ Average Income/ Yield/
Balance Expense Rate Balance Expense Rate
Earning Assets
Interest
Bearing
Deposits $ 733.4 $ 27.6 3.76% $ 216.2 $ 15.7 7.25%
Funds Sold 136.7 5.1 3.63 43.2 2.7 6.22
Investment
Portfolio
- Held-To-
Maturity 525.6 33.7 6.42 658.9 48.8 7.41
- Available
for Sale 2,242.3 137.3 6.12 2,502.5 166.3 6.64
Loans Held
For Sale 312.7 21.4 6.85 128.4 9.8 7.63
Net Loans
- Domestic 6,693.2 525.5 7.85 7,948.0 687.5 8.65
- Foreign 1,026.4 72.5 7.07 1,467.9 97.7 6.65
------------------------ ------------------------
Total Loans 7,719.6 598.0 7.75 9,415.9 785.2 8.34
Other 79.6 5.4 6.72 73.0 4.7 6.50
------------------------ ------------------------
Total Earning
Assets 11,749.9 828.5 7.05 13,038.1 1,033.2 7.92
Cash and Due
From Banks 376.6 443.1
Other Assets 554.5 574.1
--------- ---------
Total Assets $12,681.0 $14,055.3
========= =========
Interest Bearing
Liabilities
Domestic
Deposits
- Demand $ 1,894.5 34.4 1.82 $ 2,061.9 48.7 2.36
- Savings 780.3 16.2 2.08 684.8 13.9 2.03
- Time 2,506.7 129.6 5.17 2,781.1 154.1 5.54
------------------------ ------------------------
Total
Domestic
Deposits 5,181.5 180.2 3.48 5,527.8 216.7 3.92
Foreign
Deposits
- Time Due
to Banks 351.2 14.5 4.13 505.4 30.5 6.03
- Other Time
and Savings 648.2 22.6 3.49 960.5 38.9 4.05
------------------------ ------------------------
Total Foreign
Deposits 999.4 37.1 3.71 1,465.9 69.4 4.73
Total
Interest
Bearing
Deposits 6,180.9 217.3 3.52 6,993.7 286.1 4.09
Short-Term
Borrowings 2,105.6 97.4 4.63 2,597.4 156.1 6.01
Long-Term Debt 800.5 53.9 6.73 886.8 59.0 6.66
------------------------ ------------------------
Total
Interest
Bearing
Liabilities 9,087.0 368.6 4.06 10,477.9 501.2 4.78
Net Interest
Income 459.9 532.0
Interest Rate
Spread 2.99% 3.14%
Net Interest
Margin 3.91% 4.08%
Demand Deposits
- Domestic 1,527.1 1,640.0
- Foreign 346.0 371.4
--------- ---------
Total Demand
Deposits 1,873.1 2,011.4
Other
Liabilities 376.8 331.4
Shareholders'
Equity 1,344.1 1,234.6
--------- ---------
Total
Liabilities
and
Shareholders'
Equity $12,681.0 $14,055.3
========= =========
Provision for
Loan Losses 74.3 142.9
Net Overhead 145.5 207.9
-------- --------
Income Before
Income Taxes 240.2 181.2
Provision for
Income Taxes 122.2 66.7
Tax-Equivalent
Adjustment 0.2 0.8
-------- --------
Net Income $ 117.8 $ 113.7
======== ========
(A) Adjusted to reflect the reclassification of interchange fees,
mortgage banking income, and other interest income.
Pacific Century Financial Corporation and subsidiaries
Loan and Lease Portfolio Balances Table 6
----------------------------------------------------------------------
(dollars in millions)
December 31 September 30 December 31
2001 2001 2000
----------------------------------------------------------------------
Domestic Loans
Commercial and
Industrial $ 1,177.5 $ 1,436.7 $ 2,433.6
Real Estate
Construction
- Commercial 141.9 144.4 282.4
- Residential 27.7 31.3 25.0
Mortgage
- Commercial 640.7 667.9 1,125.5
- Residential 2,427.2 2,442.0 2,558.8
Installment 729.7 735.3 1,001.9
Lease Financing 493.4 503.0 539.8
----------------------------------------------------------------------
Total Domestic 5,638.1 5,960.6 7,967.0
----------------------------------------------------------------------
Foreign Loans 14.4 806.1 1,267.6
----------------------------------------------------------------------
Total Loan and Leases $ 5,652.5 $ 6,766.7 $ 9,234.6
======================================================================
Pacific Century Financial Corporation and subsidiaries
Consolidated Non-Performing Assets and
Accruing Loans Past Due 90 Days or More (Unaudited) Table 7
----------------------------------------------------------------------
(dollars in millions)
Dec. 31 Sept. 30 June 30 March 31 Dec. 31
2001 2001 2001 2001 2000
----------------------------------------------------------------------
Non-Accrual Loans
Commercial &
Industrial $ 18.9 $ 10.5 $ 11.8 $ 23.8 $ 55.4
Real Estate
Construction 9.3 0.7 5.8 6.3 6.4
Commercial 16.3 12.8 14.4 29.7 60.1
Residential 15.4 19.5 16.2 18.5 22.7
Installment 0.1 0.1 0.2 0.1 --
Leases 0.8 1.0 0.4 0.2 0.4
-----------------------------------------------------
Total
Domestic 60.8 44.6 48.8 78.6 145.0
Foreign -- 17.2 18.5 16.9 33.5
-----------------------------------------------------
Subtotal 60.8 61.8 67.3 95.5 178.5
Loans Held
For Sale 1.7 7.4 11.5 12.8 --
Foreclosed Assets
Domestic 17.2 36.9 39.8 10.9 4.2
Foreign -- 0.3 0.3 0.3 0.3
-----------------------------------------------------
Subtotal 17.2 37.2 40.1 11.2 4.5
-----------------------------------------------------
Total Non-
Performing
Assets $ 79.7 $ 106.4 $ 118.9 $ 119.5 $ 183.0
=====================================================
Accruing Loans
Past Due 90
Days or More
Commercial &
Industrial $ 0.1 $ 0.1 $ 0.2 $ 3.9 $ 5.0
Real Estate
- Construction
& Commercial -- -- -- 0.9 1.3
- Residential 3.8 3.4 3.7 3.3 3.3
Installment 0.9 1.0 1.8 2.7 5.6
Leases 0.1 -- 0.1 0.1 0.4
-----------------------------------------------------
Total
Domestic 4.9 4.5 5.8 10.9 15.6
Foreign -- 0.8 0.4 0.2 3.2
-----------------------------------------------------
Total
Accruing &
Past Due $ 4.9 $ 5.3 $ 6.2 $ 11.1 $ 18.8
=====================================================
Total Loans $5,652.5 $6,766.6 $7,618.4 $8,425.0 $9,234.6
----------------------------------------------------------------------
Ratio of
Non-Accrual
Loans to
Total Loans 1.08% 0.91% 0.88% 1.13% 1.93%
----------------------------------------------------------------------
Ratio of Non-
Performing
Assets to
Total Loans,
Foreclosed Real
Estate and Non-
Performing Loans
Held for Sale 1.41% 1.56% 1.55% 1.41% 1.98%
----------------------------------------------------------------------
Ratio of Non-
Performing
Assets and
Accruing Loans
Past Due 90 Days
or More to
Total Loans 1.50% 1.65% 1.64% 1.55% 2.19%
----------------------------------------------------------------------
Quarter to Quarter
Changes in Non-
Performing
Assets
Beginning
Balance $ 106.4 $ 118.9 $ 119.5 $ 183.0 $ 219.6
Additions 43.8 23.2 23.8 43.1 50.7
Reductions
Payments (40.9) (25.8) (14.4) (63.7) (68.4)
Return to
Accrual (3.6) (0.9) (2.5) (3.0) (4.4)
Sales of
Foreclosed
Assets (21.9) (2.2) (1.6) (3.0) (2.7)
Charge-offs (4.1) (6.8) (5.9) (36.9) (11.8)
----------------------------------------------------
Total
Reductions (70.5) (35.7) (24.4) (106.6) (87.3)
Ending
Balance $ 79.7 $ 106.4 $ 118.9 $ 119.5 $ 183.0
====================================================
Pacific Century Financial Corporation and subsidiaries
Consolidated Allowance
for Loan and Lease Losses (Unaudited) Table 8
----------------------------------------------------------------------
(dollars in millions)
Three Months Ended Year Ended
December 31 December 31
2001 2000 2001 2000
----------------------------------------------------------------------
Balance of Allowance
for Loan and Lease Losses
at Beginning of Period $ 182.5 $ 245.0 $ 246.2 $ 194.2
Loans Charged-Off
Commercial and
Industrial 9.7 4.4 97.5 22.1
Real Estate
Construction 0.1 0.1 0.1 0.6
Commercial 3.1 0.9 19.2 15.2
Residential 3.4 1.3 8.9 6.5
Installment 5.5 5.6 20.5 20.1
Leases 0.1 0.1 0.8 0.5
----------------------------------------------------------------------
Total Domestic 21.9 12.4 147.0 65.0
Foreign 4.0 19.2 22.0 45.8
----------------------------------------------------------------------
Total Charged-Off 25.9 31.6 169.0 110.8
Recoveries on Loans
Previously Charged-Off
Commercial and
Industrial 3.0 0.4 11.1 5.5
Real Estate
Construction -- -- -- --
Commercial 0.8 0.3 3.2 0.6
Residential 0.3 0.1 1.0 1.1
Installment 2.3 1.6 8.0 6.9
Leases -- -- 0.2 --
----------------------------------------------------------------------
Total Domestic 6.4 2.4 23.5 14.1
Foreign 5.0 3.6 24.1 7.3
----------------------------------------------------------------------
Total Recoveries 11.4 6.0 47.6 21.4
----------------------------------------------------------------------
Net Charge-Offs (14.5) (25.6) (121.4) (89.4)
Provision for Loan
and Lease Losses 14.5 25.8 74.3 142.9
Allowance Related
to Dispositions (23.7) -- (40.2) --
Foreign Currency
Translation 0.2 1.0 0.1 (1.5)
----------------------------------------------------------------------
Balance at End of Period $ 159.0 $ 246.2 $ 159.0 $ 246.2
======================================================================
Average Loans
Outstanding $ 6,529.6 $ 9,275.2 $ 7,719.6 $ 9,415.9
======================================================================
Ratio of Net
Charge-Offs to
Average Loans
Outstanding
(annualized) 0.87% 1.10% 1.57% 0.95%
----------------------------------------------------------------------
Ratio of Allowance
to Loans Outstanding 2.81% 2.67% 2.81% 2.67%
----------------------------------------------------------------------
Pacific Century Financial Corporation and subsidiaries
Analysis of Earnings (Unaudited) Table 9
----------------------------------------------------------------------
(dollars in millions, except per share amounts)
Allocated
--------------------------------------
Restructuring
and Non-
Core Divesting Continuing Reported
Impact Businesses Businesses Amounts
----------------------------------------------------------------------
Three Months
Ended
Dec. 31, 2001
Net Revenue $ 29 $ 20 $ 137 $ 186
Non-Interest
Expense 19 21 102 142
----------------------------------------------------
10 (1) 35 44
Provision for
Loan Losses -- (1) 15 14
----------------------------------------------------
Income Before
Income Taxes 10 -- 20 30
Provision for
Income Taxes 4 -- -- 4
----------------------------------------------------
Net Income $ 6 $ -- $ 20 $ 26
====================================================
Diluted
Earnings
Per Share $ 0.08 $ -- $ 0.26 $ 0.34
====================================================
Year Ended
Dec. 31, 2001
Net Revenue $ 207 $ 133 $ 572 $ 912
Non-Interest
Expense 105 118 375 598
----------------------------------------------------
102 15 197 314
Provision for
Loan Losses 37 -- 37 74
----------------------------------------------------
Income Before
Income Taxes 65 15 160 240
Provision for
Income Taxes 60 5 57 122
----------------------------------------------------
Net Income $ 5 $ 10 $ 103 $ 118
====================================================
Diluted
Earnings
Per Share $ 0.06 $ 0.12 $ 1.28 $ 1.46
====================================================
Business Outlook
Year Ending 2002
----------------------------------------------------------------------
(dollars in millions)
Current Previous
Outlook Outlook
----------------------------------------------------------------------
Net Interest Income $ 376
Non-Interest Income 215
-------
Net Revenue 591 $ 597
Non-Interest Expense 364 369
Provision For Loan and Lease Losses 39 36
------- -------
Income Before Income Taxes 188 192
Provision For Income Taxes 68 73
------- -------
Net Income $ 120 $ 119
======= =======
This information is based on estimates of future performance
within a range of 2%.
Readers are reminded to refer to the guidance regarding forward
looking information.
Pacific Century Financial Corporation and subsidiaries
Quarterly Summary of Selected Consolidated
Financial Data (Unaudited) Table 10
----------------------------------------------------------------------
(dollars in millions except per share amounts)
Dec. 31 Sept. 30 June 30 March 31 Dec. 31
2001 2001 2001 2001 2000
----------------------------------------------------------------------
Balance Sheet
Totals
Total Assets $ 10,628.1 $ 11,944.2 $ 12,755.5 $ 13,710.7 $ 14,013.8
Net Loans 5,493.5 6,584.1 7,418.6 8,225.2 8,988.3
Deposits 6,673.9 7,399.7 8,108.5 8,815.5 9,080.6
Long-Term
Debt 570.4 678.4 830.9 882.7 997.2
Shareholders'
Equity 1,247.0 1,371.1 1,395.7 1,371.9 1,301.4
Quarterly
Operating
Results
Net Interest
Income $ 106.1 $ 111.8 $ 116.8 $ 125.0 $ 132.0
Provision
for Loan
and Lease
Losses 14.5 0.9 6.4 52.5 25.8
Non-Interest
Income 80.2 113.7 98.2 160.5 70.5
Non-Interest
Expense 141.5 123.1 161.6 171.8 122.9
Net Income 26.3 31.1 26.7 33.7 32.6
Basic
Earnings
Per Share $ 0.35 $ 0.39 $ 0.33 $ 0.42 $ 0.41
Diluted
Earnings
Per Share $ 0.34 $ 0.37 $ 0.32 $ 0.42 $ 0.41
Return on
Average
Assets 0.90% 1.00% 0.83% 0.99% 0.94%
Return on
Average
Equity 8.14% 8.88% 7.69% 10.42% 10.24%
Core
Efficiency
Ratio 78.13% 69.07% 68.50% 65.33% 60.68%
Cash Basis
Financial
Data(1)(2)
Net Income $ 28.8 $ 34.4 $ 30.4 $ 37.6 $ 36.3
Basic
Earnings
Per Share $ 0.38 $ 0.43 $ 0.38 $ 0.47 $ 0.46
Diluted
Earnings
Per Share $ 0.37 $ 0.41 $ 0.37 $ 0.46 $ 0.45
Return on
Average
Assets 0.99% 1.12% 0.95% 1.12% 1.06%
Return on
Average
Equity 9.50% 11.17% 9.96% 13.61% 13.44%
Core
Efficiency
Ratio 76.58% 67.15% 66.47% 63.32% 58.86%
(1) Excludes the effect of restructuring activities and non-core
transactions.
(2) Excludes the effect of intangibles which include goodwill, core
deposit and trust intangibles.
CONTACT: Pacific Century Financial Corp.
Stafford Kiguchi, 808/537-8580 (Media)
or 877/849-5423 (pager)
skiguchi@boh.com
Cindy Wyrick, 808/537-8430 (Investors/Analysts)
cwyrick@boh.com