Pacific Century Financial Corporation Second Quarter 2001 Financials
HONOLULU--(BUSINESS WIRE)--July 23, 2001--Pacific Century Financial (NYSE:BOH - news):
- Net Income $26.7 Million or $0.32 Per Share
- Core Net Income Increases to $30.9 Million or $0.37 Per Share
- Board of Directors Approves $70 Million Share Repurchase Program
- Board of Directors Declares Dividend of $0.18 Per Share
Pacific Century Financial Corporation (NYSE:BOH - news) today reported second quarter 2001 diluted earnings per share of $0.32, compared to $0.42 for the first quarter of 2001 and $0.08 for the second quarter of 2000. Net income for the period was $26.7 million, down $7.0 million from the $33.7 million reported in the first quarter of 2001 and up $20.0 million from the $6.7 million reported in the second quarter of 2000. Pacific Century Financial Corporation also announced its intention to repurchase $70 million of its common stock.
''The results of our second quarter clearly demonstrate that we are delivering on our commitment to position the company for improved future performance,'' said Michael E. O'Neill, Chairman and Chief Executive Officer. ''We continued to improve our asset quality during the quarter and we made significant progress in implementing our strategic plan agenda. I am especially pleased that we are able to accelerate the timing of our share repurchases.''
For the first six months of 2001, net income was $60.4 million or $0.74 per share, up 30 percent from net income of $46.5 million, or $0.58 per share for the same period last year. Year-to-date return on average assets was 0.91 percent compared to 0.66 percent for the first six months of 2000. Year-to-date return on average equity was 9.0 percent versus 7.65 percent for the first half of 2000.
Earnings for the quarter included a number of significant items related to the company's implementation of its previously announced strategic plan. These items reduced net income by $4.2 million, or $0.05 per share and included gains of $24.8 million from the sale of Pacific Century Bank's Arizona branches, $7.4 million related to the sale of its ownership interest in Star Systems, Inc. and $3.7 million from the sale of the company's holdings in the Bank of Queensland. Restructuring and related expenses of $39.0 million offset these gains. Adjusted for these items and their related tax impact, core earnings per share for the quarter were $0.37 and core net income was $30.9 million, up slightly from the previous quarter.
Financial Highlights
Pacific Century Financial Corporation's net interest income for the quarter on a fully taxable equivalent basis was $116.9 million, down $8.4 million from the previous quarter primarily due to the March 31, 2001 sale of the company's credit card portfolio. Net interest income was down $17.2 million from the same quarter last year. The additional decline was largely due to the company's managed effort to reduce risk, which resulted in a reduction in the level of commercial loans.
Adjusted to reflect the reclassification of interchange fees and mortgage banking income, the company's net interest margin for the second quarter of 2001 was 3.92 percent compared to 3.97 percent in the first quarter of 2001. The 5 basis point decline was primarily due to the credit card portfolio sale. The net interest margin was 4.11 percent in the second quarter last year.
The provision for loan and lease losses was $6.4 million for the second quarter 2001, approximating net charge-offs. The prior quarter and comparable quarter last year included provisions for loan and lease losses of $52.5 million and $83.4 million, respectively, which strengthened the allowance for loan and lease losses.
Non-interest income of $98.4 million for the quarter includes $35.9 million in previously mentioned gains on sales. Non-interest income of $79.2 million for the second quarter of 2000 included a gain on settlement of pension obligations of $11.9 million. Adjusted for these special items, non-interest income decreased $4.8 million from the prior year quarter and $5.2 million from the previous quarter. This decrease in non-interest income was largely due to implementation of the company's strategic plan that called for an intentional scaleback in certain businesses. The most significant components of the reduction were in fees, exchange and other service charges. Interchange fees were down as a result of the sale of the company's credit card portfolio and foreign exchange, trading and letter of credit fees declined due to the wind down in Asia. Trust and asset management income was down from the prior periods due to lower securities values.
Non-interest expense for the quarter was $161.8 million compared with $121.2 million for the same quarter last year. Special items during second quarter 2001 included $39.0 million of restructuring and related costs. The largest element of these expenses was $20.0 million in severance and other exit costs recognized due to the decision to exit certain businesses. Also included was a $15.5 million writedown of goodwill in anticipation of the company's pending sale of Pacific Century Bank, the company's subsidiary in California. Excluding these special items, core non-interest expense increased $1.7 million from the prior year quarter and decreased $5.4 million from core non-interest expense of $128.2 million in the first quarter 2001. The largest component of the decline from the previous quarter was due to an adjustment to the insurance claims reserve of the captive insurance company. In addition, other operating expense declined due to lower processing expenses as a result of the sale of the credit card portfolio.
The higher efficiency ratio for the quarter reflects the divesting businesses as revenues declined faster than the corresponding expense levels. The company anticipates that the efficiency ratio will return to a more normal level by the end of the year.
The effective tax rate of 43 percent for the second quarter of 2001 reflects a higher level of non-tax-deductible costs associated with the divestitures.
Net income for the continuing businesses increased to $30 million, or $0.36 per share, up $6 million from the previous quarter as decreases in net interest income were offset by higher non-interest income, lower expense levels and improved credit performance. Excluding the effects of restructuring, net income for the divested businesses was $1 million, or $0.01 per share largely due to declining revenues as the businesses were scaled back and higher credit losses that more than offset reductions in non-interest expense.
Asset Quality Improvement
Asset quality improved for the third consecutive quarter. Non-performing assets, exclusive of loans past due 90+ days, decreased to $118.9 million, down slightly from the previous quarter and down $91.7 million, or 43.5 percent from the same period last year. At June 30, 2001, the ratio of non-performing assets to loans was 1.55 percent compared to 1.41 percent at March 31, 2001 and 2.19 percent at June 30, 2000. The higher ratio in the second quarter of 2001 compared to the first quarter is due to an $0.8 billion decrease in loans, including approximately $220 million for the sale of the Arizona branches. Other reductions include $239 million in other commercial loans and $193 million in foreign loans.
Total exposure, including undrawn commitments, decreased $269 million to $439 million in Asia while syndicated loans declined $504 million to $2.2 billion. At June 30, 2001, outstanding Asia and syndicated loans were $346 million and $682 million, respectively. The company continued to reduce the level of internally criticized and classified assets during the quarter.
Non-accrual loans of $67.3 million at the end of the second quarter declined $28.2 million or 29.5 percent from the previous quarter and $138.4 million or 67.3 percent from the same period last year. Non-accrual loans as a percentage of total loans were 0.88 percent, a decrease from 1.13 percent in the previous quarter, and 2.14 percent in the same period last year. The decline from the previous quarter includes the transfer of two Hawaii loans to foreclosed real estate (OREO). This exposure will be reduced through the sale of the real estate assets.
Net charge-offs for the second quarter of 2001 were $6.9 million or 0.34 percent of total loans (annualized). Charge-offs of $20.3 were partially offset by recoveries of $13.4 million. The most significant credit loss in the quarter was a $5.0 million charge-off in Pacific Century Bank. The allowance for loan and lease losses at June 30, 2001 was $199.8 million, unchanged from the prior quarter and down significantly from $246.6 million at June 30, 2000.
The ratio of the allowance for loan and lease losses to non-accrual loans was 297 percent at June 30, 2001, up from 209 percent at March 31, 2001 and up from 120 percent at June 30, 2000. The ratio of the allowance for loan and lease losses to total loans was 2.62 percent at the end of second quarter 2001 versus 2.37 percent at the end of first quarter 2001 and 2.56 percent at the end of the same quarter last year. The company expects to reevaluate the level of its allowance for loan and lease losses as it completes its divestitures and other risk reduction strategies.
Other Financial Highlights
Pacific Century Financial Corporation achieved significant progress during the second quarter 2001 in the execution of its strategic plan to return the focus of the company back to its core markets and maximize shareholder value over time. On June 5, 2001 the company announced the sale of Pacific Century Bank to U.S. Bancorp. The sale, which is subject to regulatory approvals, is expected to be completed in early September 2001, slightly ahead of the original schedule. The divestiture of the South Pacific locations is proceeding according to plan and information about those businesses has been distributed to interested potential buyers. The company continues to wind down its businesses in Asia. A representative office in Tokyo will be maintained.
Total assets were $12.8 billion at the end of June 30, 2001, which is currently on track with targeted reductions outlined in the company's strategic plan. The most significant reductions were in commercial loans, installment loans and commercial real estate loans. Asset reductions are on schedule with the sole exception of mortgage loan sales, now anticipated to commence in the third quarter of 2001.
Deposits at the end of the second quarter were $8.1 billion, down 8 percent from $8.8 billion at the end of the first quarter 2001 and down 11 percent from the second quarter of 2000. Compared with the first quarter 2001, domestic deposits declined primarily due to the sale of the Arizona branches in April, which reduced total deposits $0.4 million and a continued decline in foreign deposits resulting from the decision to exit certain foreign countries.
In addition to approval of the new stock repurchase program, 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 September 17, 2001 to shareholders of record at the close of business on August 24, 2001.
2001 Financial Outlook
Within a range of 2 percent, the company is maintaining its earnings guidance of $119 million or $1.51 per share for the full year. Net income for the continuing businesses is expected to be $102 million or $1.29 per share. It is apparent that the performance of the divesting businesses will be lower than originally projected. The aggregate cost of restructuring cannot be further refined until the sales price of the South Pacific banks is determined. Earnings per share projections were derived using certain assumptions of share price and repurchase timing. The current share price is higher than the price assumed in our projections. The company will provide guidance on the expected final outcome of restructuring when more information is available.
Hawaii's economists continue to forecast moderate economic expansion in 2001 with Hawaii real GSP growth estimates between 2.2 and 3.0 percent. The key drivers, according to the state's Council on Revenues are expected to be construction growth and rising real estate activity supported by low interest rates. Similar to the U.S. economy, Hawaii's year-to-date economic performance is slightly weaker than expected.
The company will review second quarter 2001 earnings today at 2:00 p.m. ET. The presentation will be accessible via teleconference and the investor relations link of Pacific Century Financial Corporation's web site, www.boh.com. The conference call number is 800/553-0327 in the U.S. or 612/332-0932 for international callers. A replay will be available for one week beginning at 6:00 p.m. ET on Monday, July 23, 2001 by calling 800/475-6701 (U.S.) or 320/365-3844 (International) and entering the number 593861 when prompted. A replay of the presentation will be available on the company's web site.
This news release contains forward-looking statements. All statements in this news release that address events or developments that we anticipate may occur in the future are forward-looking statements. 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: we may not complete implementation of the strategic plan within expected financial and time estimates; our credit markets may deteriorate; our credit quality initiatives 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; implementing the strategic plan may cause unanticipated organizational disruptions; customer acceptance of our business as restructured may be less than expected; there may be economic or political 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 holding company with locations throughout the Pacific region. Pacific Century and its subsidiaries provide varied financial services to businesses, governments and consumers in four principal markets: Hawaii and the West Pacific, South Pacific, Asia and selected markets on the U.S. Mainland. Pacific Century's principal subsidiary, Bank of Hawaii, is the largest commercial bank in the state of Hawaii.
Pacific Century Financial Corporation and subsidiaries Highlights (Unaudited) Table 1 ---------------------------------------------------------------------- (dollars in thousands except per share amounts) Earnings Highlights and Performance Ratios 2001 2000 ---------------------------------------------------------------------- Three Months Ended June 30 Net Income $26,739 $ 6,707 Basic Earnings Per Share 0.33 0.08 Diluted Earnings Per Share 0.32 0.08 Cash Dividends 14,426 14,305 Return on Average Assets 0.83% 0.19% Return on Average Equity 7.69% 2.19% Net Interest Margin 3.92% * 4.11% Core Efficiency Ratio (a) 68.74% 60.57% Six Months Ended June 30 Net Income $60,416 $46,472 Basic Earnings Per Share 0.75 0.58 Diluted Earnings Per Share 0.74 0.58 Cash Dividends 28,790 27,845 Return on Average Assets 0.91% 0.66% Return on Average Equity 9.00% 7.65% Net Interest Margin 3.94% 4.12% Core Efficiency Ratio (a) 66.98% 61.26% Summary of Results Excluding the Effect of Intangibles (b) ---------------------------------------------------------------------- Three Months Ended June 30 Net Income $28,676 $10,526 Basic Earnings per Share $0.36 $0.13 Diluted Earnings per Share $0.35 $0.13 Return on Average Assets 0.90% 0.30% Return on Average Equity 9.41% 4.10% Core Efficiency Ratio (a) 66.71% 58.43% Six Months Ended June 30 Net Income $67,383 $53,973 Basic Earnings per Share $0.84 $0.68 Diluted Earnings per Share $0.82 $0.67 Return on Average Assets 1.03% 0.77% Return on Average Equity 11.59% 10.66% Core Efficiency Ratio (a) 64.96% 59.18% (a) Core earnings excludes restructuring and non-recurring transactions. (b) Intangibles include goodwill, core deposit and trust Intangibles, and other intangibles. June 30 June 30 Statement of Condition Highlights 2001 2000 ---------------------------------------------------------------------- Total Assets $12,755,511 $14,294,625 Net Loans 7,418,607 9,368,718 Total Deposits 8,108,468 9,109,146 Total Shareholders' Equity 1,395,731 1,209,399 Book Value Per Common Share $17.24 $15.23 Allowance / Loans Outstanding 2.62% 2.56% Average Equity / Average Assets 10.08% 8.59% Employee (FTE) 4,197 4,275 Branches 156 174 Common Stock Price Range Quarter Ended Closing $25.79 $14.63 High $25.80 $23.19 Low $19.38 $14.63 * ---------------------------------------------------------------------- * Revision made 7/27/01 Corporate Offices: Inquiries: Financial Plaza of the Pacific Allan R. Landon 130 Merchant Street Vice Chairman and Honolulu, Hawaii 96813 Chief Financial Officer (808) 538-4727 Pacific Century Financial Corporation and subsidiaries Consolidated Statements of Income (Unaudited) Table 2 ---------------------------------------------------------------------- (dollars in thousands except per share amounts) Three Months Ended Six Months Ended June 30 June 30 June 30 June 30 2001 2000 2001 2000 Interest Income Interest on Loans $154,641 $188,233 $336,943 $371,656 Income on Lease Financing 9,174 9,747 16,031 17,726 Interest and Dividends on Investment Securities Taxable 10,902 13,321 22,538 27,557 Non-taxable 144 243 284 522 Income on Investment Securities Available for Sale 36,146 41,161 75,447 82,194 Deposits 4,903 3,834 10,117 7,598 Security Resale Agreements 101 6 139 16 Funds Sold 1,252 485 2,311 958 ---------------------------------------------------------------------- Total Interest Income 217,263 257,030 463,810 508,227 Interest Expense Deposits 60,061 71,064 132,080 139,278 Security Repurchase Agreements 20,843 26,021 45,473 48,974 Funds Purchased 2,333 7,834 8,456 16,361 Short-Term Borrowings 2,764 6,514 5,994 11,046 Long-Term Debt 14,459 13,319 29,773 26,007 ---------------------------------------------------------------------- Total Interest Expense 100,460 124,752 221,776 241,666 ---------------------------------------------------------------------- Net Interest Income 116,803 132,278 242,034 266,561 Provision for Loan Losses 6,413 83,407 58,879 96,929 ---------------------------------------------------------------------- Net Interest Income After Provision for Loan Losses 110,390 48,871 183,155 169,632 Non-Interest Income Trust and Asset Management 15,247 16,317 31,042 33,204 Mortgage Banking 4,606 2,799 9,683 4,878 Service Charges on Deposit Accounts 9,878 10,180 19,818 19,737 Fees, Exchange, and Other Service Charges 20,000 25,393 43,593 49,485 Gain on Sale of Card Portfolio and Branches 24,794 -- 100,208 -- Gain on Settlement of Pension Obligation -- 11,900 -- 11,900 Investment Securities Gains (Losses) 11,681 (515) 31,884 (233) Other Operating Income 12,170 13,097 22,883 28,672 ---------------------------------------------------------------------- Total Non-Interest Income 98,376 79,171 259,111 147,643 Non-Interest Expense Salaries 47,722 44,460 95,605 92,007 Pensions and Other Employee Benefits 12,543 10,788 26,896 25,418 Net Occupancy Expense 12,488 12,480 24,612 24,296 Net Equipment Expense 13,729 12,066 27,108 24,133 Goodwill Amortization 3,633 4,278 7,583 8,340 Restructuring and Other Related Costs 37,751 -- 82,189 -- Minority Interest 84 107 163 176 Other Operating Expense 33,885 36,998 70,319 72,209 ---------------------------------------------------------------------- Total Non-Interest Expense 161,835 121,177 334,475 246,579 ---------------------------------------------------------------------- Income Before Income Taxes 46,931 6,865 107,791 70,696 Provision for Income Taxes 20,192 158 47,375 24,224 ---------------------------------------------------------------------- Net Income $26,739 $ 6,707 $60,416 $46,472 ====================================================================== Basic Earnings Per Share $0.33 $0.08 $0.75 $0.58 Diluted Earnings Per Share $0.32 $0.08 $0.74 $0.58 Dividends Declared Per Share $0.36 $0.36 $0.36 $0.35 Basic Weighted Average Shares 80,516,216 79,425,245 80,120,449 79,623,305 Diluted Weighted Average Shares 82,975,267 80,002,989 82,030,085 79,975,904 ====================================================================== Pacific Century Financial Corporation and subsidiaries Consolidated Statements of Condition (Unaudited) Table 3 ---------------------------------------------------------------------- (dollars in thousands) June 30 December 31 June 30 2001 2000 2000 ---------------------------------------------------------------------- Assets Interest-Bearing Deposits $458,696 $188,649 $199,020 Investment Securities - Held to Maturity (Market Value of $628,393, $676,621 and $721,617, respectively) 616,412 670,038 730,445 Investment Securities - Available for Sale 2,202,718 2,507,076 2,493,066 Securities Purchased Under Agreements to Resell 7,688 3,969 -- Funds Sold 318,182 134,644 50,646 Loans Held for Sale 571,395 179,229 128,720 Loans 7,874,205 9,489,061 9,942,797 Unearned Income (255,798) (253,903) (327,520) Allowance for Loan Losses (199,800) (246,247) (246,559) ---------------------------------------------------------------------- Net Loans 7,418,607 8,988,911 9,368,718 ---------------------------------------------------------------------- Total Earning Assets 11,593,698 12,672,516 12,970,615 Cash and Non-Interest Bearing Deposits 391,552 523,969 473,950 Premises and Equipment 242,040 254,621 259,037 Customers' Acceptance Liability 4,184 14,690 9,406 Accrued Interest Receivable 61,702 68,585 75,883 Other Real Estate 40,077 4,526 4,915 Intangibles, including Goodwill 157,515 192,264 198,363 Other Assets 264,743 282,645 302,456 ---------------------------------------------------------------------- Total Assets $12,755,511 $14,013,816 $14,294,625 ====================================================================== Liabilities Domestic Deposits Demand - Non-Interest Bearing $1,591,824 $1,707,724 $1,696,106 - Interest Bearing 1,914,474 2,008,730 2,091,074 Savings 758,262 665,239 684,572 Time 2,602,035 2,836,083 2,781,868 Foreign Deposits Demand - Non-Interest Bearing 319,165 385,366 378,497 Time Due to Banks 265,768 535,126 442,678 Other Savings and Time 656,940 942,313 1,034,351 ---------------------------------------------------------------------- Total Deposits 8,108,468 9,080,581 9,109,146 Securities Sold Under Agreements to Repurchase 1,632,774 1,655,173 1,573,980 Funds Purchased 176,768 413,241 663,234 Short-Term Borrowings 242,781 211,481 530,231 Bank's Acceptances Outstanding 4,184 14,690 9,406 Accrued Retirement Expense 35,946 37,868 37,214 Accrued Interest Payable 59,559 72,460 64,579 Accrued Taxes Payable 170,815 130,766 83,343 Minority Interest 4,014 4,536 4,350 Other Liabilities 93,619 94,512 107,569 Long-Term Debt 830,852 997,152 902,174 ---------------------------------------------------------------------- Total Liabilities 11,359,780 12,712,460 13,085,226 Shareholders' Equity Common Stock ($.01 par value), authorized 500,000,000 shares; issued / outstanding: June 2001 - 80,368,629 / 80,948,825; December 2000 - 80,558,811 / 79,612,178; June 2000 - 80,555,424 / 79,399,919 806 806 806 Capital Surplus 367,390 346,045 346,018 Accumulated Other Comprehensive Income 25,886 (25,079) (75,462) Retained Earnings 1,028,036 996,791 959,041 Deferred Stock Grants (17,891) -- -- Treasury Stock, at Cost - (Shares: June 2001 - 419,804; December 2000 - 946,633; and June 2000 - 1,155,505) (8,496) (17,207) (21,004) ---------------------------------------------------------------------- Total Shareholders' Equity 1,395,731 1,301,356 1,209,399 ---------------------------------------------------------------------- Total Liabilities and Shareholders' Equity $12,755,511 $14,013,816 $14,294,625 ====================================================================== Pacific Century Financial Corporation and subsidiaries Consolidated Statements of Shareholders' Equity (Unaudited) Table 4 ---------------------------------------------------------------------- (in thousands of dollars) Accumulated Other Common Capital Comprehensive Total Stock Surplus Income ---------------------------------------------------------------------- Balance at December 31, 2000 $ 1,301,356 $ 806 $ 346,045 $ (25,079) Comprehensive Income Net Income 60,416 -- -- -- Other Comprehensive Income, Net of Tax Investment Securities, Net of Reclassification Adjustment 22,775 -- -- 22,775 Foreign Currency Translation Adjustment 27,496 -- -- 27,496 Pension Liability Adjustments (159) -- -- (159) Total Comprehensive Income Common Stock Issued 32,942 Profit Sharing Plan 725 -- 180 -- 416,413 Stock Option Plan 7,073 -- 643 -- 64,791 Dividend Reinvestment Plan 1,419 -- 326 -- 3,672 Directors' Restricted Shares and Deferred Compensation Plan 343 -- 81 -- 741,000 Employees' Restricted Shares 925 -- 18,816 -- 65,146 Hawaii Insurance Network 1,299 -- 1,299 -- Stock Compensation 853 -- -- 853 Cash Dividends Paid (28,790) -- -- -- ---------------------------------------------------------------------- Balance at June 30, 2001 $ 1,395,731 $ 806 $ 367,390 $ 25,886 ====================================================================== Balance at December 31, 1999 $ 1,212,330 $ 806 $ 345,851 $(66,106) Comprehensive Income Net Income 46,472 -- -- -- Other Comprehensive Income, Net of Tax Investment Securities, Net of Reclassification Adjustment (10,696) -- -- (10,696) Foreign Currency Translation Adjustment 1,340 -- -- 1,340 Pension Liability Adjustments -- -- -- -- Total Comprehensive Income Common Stock Issued 39,382 Profit Sharing Plan 723 -- 18 -- 140,260 Stock Option Plan 2,018 -- 3 -- 115,574 Dividend Reinvestment Plan 1,899 -- 52 -- 4,696 Directors' Restricted Shares and Deferred Compensation Plan 94 -- 94 -- Treasury Stock Purchased (16,936) -- -- -- Cash Dividends Paid (27,845) -- -- -- ---------------------------------------------------------------------- Balance at June 30, 2000 $ 1,209,399 $ 806 $ 346,018 $ (75,462) ====================================================================== Pacific Century Financial Corporation and subsidiaries Consolidated Statements of Shareholders' Equity (Unaudited) Table 4 (cont) ---------------------------------------------------------------------- Retained Deferred Treasury Comprehensive Earnings Stock Stock Income Grants ---------------------------------------------------------------------- Balance at December 31, 2000 $ 996,791 $ -- $ (17,207) Comprehensive Income Net Income 60,416 -- -- $60,416 Other Comprehensive Income, Net of Tax Investment Securities, Net of Reclassification Adjustment -- -- -- 22,775 Foreign Currency Translation Adjustment -- -- -- 27,496 Pension Liability Adjustments -- -- -- (159) ----------- Total Comprehensive Income $110,528 =========== Common Stock Issued 32,942 Profit Sharing Plan -- -- 545 416,413 Stock Option Plan (381) -- 6,811 64,791 Dividend Reinvestment Plan -- -- 1,093 3,672 Directors' Restricted Shares and Deferred Compensation Plan -- -- 262 741,000 Employees' Restricted Shares -- (17,891) -- 65,146 Hawaii Insurance Network -- -- -- Stock Compensation -- -- -- Cash Dividends Paid (28,790) -- -- ---------------------------------------------------------------------- Balance at June 30, 2001 $1,028,036 $ (17,891) $ (8,496) ====================================================================== Balance at December 31, 1999 $ 942,177 $ -- $(10,398) Comprehensive Income Net Income 46,472 -- -- $46,472 Other Comprehensive Income, Net of Tax Investment Securities, Net of Reclassification Adjustment -- -- -- (10,696) Foreign Currency Translation Adjustment -- -- -- 1,340 Pension Liability Adjustments -- -- -- -- ----------- Total Comprehensive Income $37,116 =========== Common Stock Issued 39,382 Profit Sharing Plan (128) -- 833 140,260 Stock Option Plan (1,019) -- 3,034 115,574 Dividend Reinvestment Plan (616) -- 2,463 4,696 Directors' Restricted Shares and Deferred Compensation Plan -- -- -- Treasury Stock Purchased -- -- (16,936) Cash Dividends Paid (27,845) -- -- ---------------------------------------------------------------------- Balance at June 30, 2000 $ 959,041 $ -- $ (21,004) ====================================================================== Pacific Century Financial Corporation and subsidiaries Consolidated Average Balances and Interest Rates Taxable Equivalent (Unaudited) Table 5 ---------------------------------------------------------------------- (dollars in millions) Three Months Ended June 30, 2001 Average Income/ Yield/ Balance Expense Rate ---------------------------------------------------------------------- Earning Assets Interest Bearing Deposits $ 414.3 $ 4.9 4.75% Funds Sold 120.3 1.4 4.51 Investment Portfolio - Held-To-Maturity 642.1 11.1 6.93 - Available for Sale 2,318.3 36.2 6.25 Loans Held For Sale 430.9 7.4 6.88 Net Loans - Domestic 6,910.9 137.1 7.96 - Foreign 1,136.9 19.3 6.80 ----------------------------- Total Loans 8,047.8 156.4 7.79 ----------------------------- Total Earning Assets 11,973.7 217.4 7.28 Cash and Due From Banks 367.6 Other Assets 655.1 ----------- Total Assets $ 12,996.4 =========== Interest Bearing Liabilities Domestic Deposits - Demand $ 1,905.0 9.3 1.95 - Savings 698.8 3.7 2.14 - Time 2,654.1 37.3 5.64 ----------------------------- Total Domestic Deposits 5,257.9 50.3 3.83 Foreign Deposits - Time Due to Banks 317.4 3.5 4.45 - Other Time and Savings 709.3 6.3 3.55 ----------------------------- Total Foreign Deposits 1,026.7 9.8 3.83 ----------------------------- Total Interest Bearing Deposits 6,284.6 60.1 3.83 Short-Term Borrowings 2,108.2 25.9 4.94 Long-Term Debt 864.5 14.5 6.71 ----------------------------- Total Interest Bearing Liabilities 9,257.3 100.5 4.35 ----------------------------- Net Interest Income 116.9 Interest Rate Spread 2.93% Net Interest Margin 3.92% Demand Deposits - Domestic 1,567.8 - Foreign 348.4 ----------- Total Demand Deposits 1,916.2 Other Liabilities 428.5 Shareholders' Equity 1,394.4 ----------- Total Liabilities and Shareholders' Equity $ 12,996.4 =========== Provision for Loan Losses 6.4 Net Overhead 63.5 ------- Income Before Income Taxes 47.0 Provision for Income Taxes 20.2 Tax-Equivalent Adjustment 0.1 ------- Net Income $ 26.7 Pacific Century Financial Corporation and subsidiaries Consolidated Average Balances and Interest Rates Taxable Equivalent (Unaudited) Table 5 (cont) ---------------------------------------------------------------------- (dollars in millions) Three Months Ended March 31, 2001 Average Income/ Yield/ Balance Expense Rate Earning Assets Interest Bearing Deposits $ 332.3 $ 5.2 6.36% Funds Sold 80.5 1.1 5.53 Investment Portfolio - Held-To-Maturity 656.3 11.9 7.35 - Available for Sale 2,479.9 39.3 6.43 Loans Held For Sale 201.7 3.6 7.24 Net Loans - Domestic 7,784.0 163.7 8.53 - Foreign 1,277.8 21.8 6.93 ----------------------------- Total Loans 9,061.8 185.5 8.21 ----------------------------- Total Earning Assets 12,812.5 246.6 7.81 Cash and Due From Banks 438.2 Other Assets 595.1 ----------- Total Assets $ 13,845.8 =========== Interest Bearing Liabilities Domestic Deposits - Demand $ 2,008.2 11.7 2.36 - Savings 665.7 3.4 2.04 - Time 2,902.7 43.1 6.03 ----------------------------- Total Domestic Deposits 5,576.6 58.2 4.23 ----------------------------- Foreign Deposits - Time Due to Banks 489.4 6.6 5.51 - Other Time and Savings 801.0 7.2 3.65 ----------------------------- Total Foreign Deposits 1,290.4 13.8 4.35 ----------------------------- Total Interest Bearing Deposits 6,867.0 72.0 4.25 Short-Term Borrowings 2,364.8 34.0 5.83 Long-Term Debt 916.0 15.3 6.78 ----------------------------- Total Interest Bearing Liabilities 10,147.8 121.3 4.85 ----------------------------- Net Interest Income 125.3 Interest Rate Spread 2.96% Net Interest Margin 3.97% Demand Deposits - Domestic 1,636.8 - Foreign 377.5 ----------- Total Demand Deposits 2,014.3 Other Liabilities 372.4 Shareholders' Equity 1,311.3 ----------- Total Liabilities and Shareholders' Equity $ 13,845.8 =========== Provision for Loan Losses 52.4 Net Overhead 11.9 ------- Income Before Income Taxes 61.0 Provision for Income Taxes 27.2 Tax-Equivalent Adjustment 0.1 ------- Net Income $ 33.7 ======= Pacific Century Financial Corporation and subsidiaries Consolidated Average Balances and Interest Rates Taxable Equivalent (Unaudited) Table 5 (cont) ---------------------------------------------------------------------- (dollars in millions) Three Months Ended June 30, 2000 Average Income/ Yield/ Balance Expense Rate Earning Assets Interest Bearing Deposits $ 220.0 $ 3.6 6.49% Funds Sold 32.2 0.5 6.13 Investment Portfolio - Held-To-Maturity 731.6 13.7 7.53 - Available for Sale 2,514.8 41.2 6.58 Loans Held For Sale 123.7 2.3 7.48 Net Loans - Domestic 7,980.7 172.3 8.68 - Foreign 1,532.5 25.1 6.58 ----------------------------- Total Loans 9,513.1 197.4 8.34 ----------------------------- Total Earning Assets 13,135.5 258.6 7.92 Cash and Due From Banks 444.0 Other Assets 638.8 ----------- Total Assets $ 14,218.3 =========== Interest Bearing Liabilities Domestic Deposits - Demand $ 2,097.8 12.3 2.36 - Savings 691.5 3.5 2.03 - Time 2,744.0 36.4 5.33 ----------------------------- Total Domestic Deposits 5,533.3 52.1 3.79 Foreign Deposits - Time Due to Banks 422.0 6.2 5.91 - Other Time and Savings 1,133.8 12.4 4.40 ----------------------------- Total Foreign Deposits 1,555.8 18.6 4.81 ----------------------------- Total Interest Bearing Deposits 7,089.1 70.7 4.01 Short-Term Borrowings 2,728.1 40.4 5.95 Long-Term Debt 807.2 13.3 6.64 ----------------------------- Total Interest Bearing Liabilities 10,624.3 124.4 4.71 ----------------------------- Net Interest Income 134.1 Interest Rate Spread 3.21% Net Interest Margin 4.11% Demand Deposits - Domestic 1,666.5 - Foreign 366.0 ---------- Total Demand Deposits 2,032.5 Other Liabilities 331.5 Shareholders' Equity 1,230.0 ---------- Total Liabilities and Shareholders' Equity 14,218.3 ========== Provision for Loan Losses 83.3 Net Overhead 43.0 ------- Income Before Income Taxes 7.8 Provision for Income Taxes 0.1 Tax-Equivalent Adjustment 1.0 ------- Net Income $ 6.7 ======= Pacific Century Financial Corporation and subsidiaries Loan Portfolio Balances (Unaudited) Table 6 ---------------------------------------------------------------------- (in millions of dollars) June 30 March 31 December 31 June 30 2001 2001 2000 2000 ---------------------------------------------------------------------- Domestic Loans Commercial and Industrial $1,786.8 $2,094.7 $2,443.3 $2,683.8 Real Estate Construction -- Commercial 213.6 284.0 282.4 294.3 -- Residential 32.4 28.9 25.0 21.9 Mortgage -- Commercial 866.3 1,023.8 1,125.5 1,241.2 -- Residential 2,785.6 2,866.7 2,855.9 2,678.7 Installment 486.4 496.4 729.9 750.0 Lease Financing 738.0 731.2 725.5 782.7 ---------------------------------------------------------------------- Total Domestic 6,909.1 7,525.7 8,187.5 8,452.6 ---------------------------------------------------------------------- Foreign Loans 965.1 1,157.7 1,301.6 1,490.2 ---------------------------------------------------------------------- Unearned Income (255.8) (258.4) (253.9) (327.5) Total Loans $7,618.4 $8,425.0 $9,235.2 $9,615.3 ====================================================================== 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) June 30 March 31 Dec 31 2001 2001 2000 ---------------------------------------------------------------------- Non-Accrual Loans Commercial and Industrial $11.8 $23.8 $55.4 Real Estate Construction 5.8 6.3 6.4 Commercial 14.4 29.7 60.1 Residential 16.2 18.5 22.7 Installment 0.2 0.1 -- Leases 0.4 0.2 0.4 --------------------------------- Total Domestic 48.8 78.6 145.0 Foreign 18.5 16.9 33.5 --------------------------------- Subtotal 67.3 95.5 178.5 Loans Held for Sale 11.5 12.8 -- Foreclosed Real Estate Domestic 39.8 10.9 4.2 Foreign 0.3 0.3 0.3 --------------------------------- Subtotal 40.1 11.2 4.5 --------------------------------- Total Non-Performing Assets 118.9 119.5 183.0 --------------------------------- Accruing Loans Past Due 90 Days or More Commercial and Industrial 0.2 3.9 5.0 Real Estate Construction -- -- -- Commercial -- 0.9 1.3 Residential 3.7 3.3 3.3 Installment 1.8 2.7 5.6 Leases 0.1 0.1 0.4 --------------------------------- Total Domestic 5.8 10.9 15.6 Foreign 0.4 0.2 3.2 --------------------------------- Subtotal 6.2 11.1 18.8 --------------------------------- Total $125.1 $130.6 $201.8 ================================= Total Loans $7,618 $8,425 $9,235 ---------------------------------------------------------------------- Ratio of Non-Accrual Loans to Total Loans 0.88% 1.13% 1.93% ---------------------------------------------------------------------- Ratio of Non-Performing Assets to Total Loans, Foreclosed Real Estate and Non-Performing Loans Held for Sale 1.55% 1.41% 1.98% ---------------------------------------------------------------------- Ratio of Non-Performing Assets and Accruing Loans Past Due 90 Days or More to Total Loans 1.64% 1.55% 2.19% ---------------------------------------------------------------------- Pacific Century Financial Corporation and subsidiaries Consolidated Non-Performing Assets and Accruing Loans Past Due 90 Days or More (Unaudited) Table 7 (cont) ---------------------------------------------------------------------- (dollars in millions) Sept 30 June 30 2000 2000 ---------------------------------------------------------------------- Non-Accrual Loans Commercial and Industrial $49.0 $52.7 Real Estate Construction 8.1 8.0 Commercial 86.8 62.2 Residential 22.0 23.2 Installment 0.1 0.1 Leases 0.2 0.3 --------------------------- Total Domestic 166.2 146.5 Foreign 48.3 59.2 --------------------------- Subtotal 214.5 205.7 Loans Held for Sale -- -- Foreclosed Real Estate Domestic 4.9 4.6 Foreign 0.2 0.3 --------------------------- Subtotal 5.1 4.9 --------------------------- Total Non-Performing Assets 219.6 210.6 --------------------------- Accruing Loans Past Due 90 Days or More Commercial and Industrial 2.2 4.7 Real Estate Construction 0.1 -- Commercial 4.9 2.0 Residential 7.2 3.5 Installment 4.6 4.0 Leases 0.1 1.5 --------------------------- Total Domestic 19.1 15.7 Foreign 1.5 1.3 --------------------------- Subtotal 20.6 17.0 --------------------------- Total $240.2 $227.6 =========================== Total Loans $9,339 $9,614 ---------------------------------------------------------------------- Ratio of Non-Accrual Loans to Total Loans 2.30% 2.14% ---------------------------------------------------------------------- Ratio of Non-Performing Assets to Total Loans, Foreclosed Real Estate and Non-Performing Loans Held for Sale 2.35% 2.19% ---------------------------------------------------------------------- Ratio of Non-Performing Assets and Accruing Loans Past Due 90 Days or More to Total Loans 2.57% 2.37% ---------------------------------------------------------------------- Pacific Century Financial Corporation and subsidiaries Consolidated Allowance for Loan Losses (Unaudited) Table 8 ---------------------------------------------------------------------- (dollars in millions) Second First Second Quarter Quarter Quarter 2001 2001 2000 Average Loans Outstanding $8,047.8 $9,061.8 $9,513.1 ---------------------------------------------------------------------- Balance of Allowance for Loan Losses at Beginning of Period $199.8 $246.2 $195.4 Loans Charged-Off Commercial and Industrial 8.9 75.5 12.4 Real Estate Construction -- -- 0.5 Commercial 1.6 11.9 7.7 Residential 1.7 2.5 1.4 Installment 4.2 5.4 5.2 Leases -- 0.1 0.2 ---------------------------------------------------------------------- Total Domestic 16.4 95.4 27.4 Foreign 3.9 10.0 9.1 ---------------------------------------------------------------------- Total Charged-Off 20.3 105.4 36.5 Recoveries on Loans Previously Charged-Off Commercial and Industrial 4.3 2.7 1.2 Real Estate Construction -- -- -- Commercial 0.8 0.3 0.1 Residential 0.3 0.2 0.2 Installment 1.6 1.8 1.9 Leases 0.1 0.1 -- ---------------------------------------------------------------------- Total Domestic 7.1 5.1 3.4 Foreign 6.3 2.6 0.2 ---------------------------------------------------------------------- Total Recoveries 13.4 7.7 3.6 ---------------------------------------------------------------------- Net Charge-Offs (6.9) (97.7) (32.9) Provision for Loan Losses 6.4 52.5 83.4 Other Net Additions (Reductions)(1) 0.5 (1.2) 0.7 ---------------------------------------------------------------------- Balance at End of Period $199.8 $199.8 $246.6 ====================================================================== Ratio of Net Charge-Offs to Average Loans Outstanding (annualized) 0.34% 4.31% 1.38% ---------------------------------------------------------------------- Ratio of Allowance to Loans Outstanding 2.62% 2.37% 2.56% ---------------------------------------------------------------------- (1) Includes balance transfers, reserves acquired, and foreign currency translation adjustments. Pacific Century Financial Corporation and subsidiaries Consolidated Allowance for Loan Losses (Unaudited) Table 8 (cont) ---------------------------------------------------------------------- (dollars in millions) First Six First Six Months Months 2001 2000 Average Loans Outstanding $8,552.0 $9,439.6 ---------------------------------------------------------------------- Balance of Allowance for Loan Losses at Beginning of Period $246.2 $194.2 Loans Charged-Off Commercial and Industrial 84.4 9.7 Real Estate Construction -- 0.5 Commercial 13.5 11.5 Residential 4.2 3.7 Installment 9.6 9.9 Leases 0.1 0.2 ---------------------------------------------------------------------- Total Domestic 111.8 35.5 Foreign 13.9 17.1 ---------------------------------------------------------------------- Total Charged-Off 125.7 52.6 Recoveries on Loans Previously Charged-Off Commercial and Industrial 7.0 2.9 Real Estate Construction -- -- Commercial 1.1 0.2 Residential 0.5 0.7 Installment 3.4 3.6 Leases 0.2 -- ---------------------------------------------------------------------- Total Domestic 12.2 7.4 Foreign 8.9 1.0 ---------------------------------------------------------------------- Total Recoveries 21.1 8.4 ---------------------------------------------------------------------- Net Charge-Offs (104.6) (44.2) Provision for Loan Losses 58.9 96.9 Other Net Additions (Reductions)(1) (0.7) (0.3) ---------------------------------------------------------------------- Balance at End of Period $199.8 $246.6 ====================================================================== Ratio of Net Charge-Offs to Average Loans Outstanding (annualized) 2.45% 0.94% ---------------------------------------------------------------------- Ratio of Allowance to Loans Outstanding 2.62% 2.56% ---------------------------------------------------------------------- (1) Includes balance transfers, reserves acquired, and foreign currency translation adjustments. Pacific Century Financial Corporation and subsidiaries Analysis of Earnings (Unaudited) Three Months Ended June 30, 2001 Table 9 ---------------------------------------------------------------------- (dollars in millions except per share amounts) Allocated ----------------------------------- Restructuring Divesting Continuing Reported Impact Businesses Businesses Amounts ---------------------------------------------------------------------- Net Revenue $ 36 $ 37 $ 142 $ 215 Non-Interest Expense 39 31 92 162 ----------------------------------------- (3) 6 50 53 Provision for Loan Losses -- 4 2 6 ----------------------------------------- Income Before Income Taxes (3) 2 48 47 Provision for Income Taxes 1 1 18 20 ----------------------------------------- Net Income $ (4) $ 1 $ 30 $ 27 Earnings Per Share-Diluted $ (0.05) $ 0.01 $ 0.36 $ 0.32 Continuing Business Outlook Year Ending 2001 ---------------------------------------------------------------------- (dollars in millions except per share amounts) Historical Amounts Current Outlook ------------ -------------------- Previous Q1 Q2 Q3 & Q4 Full Year Outlook ---------------------------------------------------------------------- Net Revenue $ 147 $ 142 $ 289 $ 578 $ 581 Non-Interest Expense 96 92 185 373 373 -------------------------------------------- 51 50 104 205 208 Provision for Loan Losses 12 2 21 35 45 -------------------------------------------- Income Before Income Taxes 39 48 83 170 163 Provision for Income Taxes 15 18 35 68 61 -------------------------------------------- Allocated Net Income $ 24 $ 30 $ 48 $ 102 $ 102 Allocated Earnings Per Share-Diluted $ 0.29 $ 0.36 $ 1.29 This information is based on estimates of current and future performance of identified business units 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 June 30 Mar. 31 Dec. 31 except per share amounts) 2001 2001 2000 ---------------------------------------------------------------------- Balance Sheet Totals Total Assets $ 12,755.5 $ 13,710.7 $ 14,013.8 Net Loans 7,418.6 8,225.2 8,988.9 Deposits 8,108.5 8,815.5 9,080.6 Long-Term Debt 830.9 882.7 997.2 Shareholders' Equity 1,395.7 1,371.9 1,301.4 Quarterly Operating Results Net Interest Income $ 116.8 $ 125.2 $ 132.1 Provision for Loan Losses 6.4 52.5 25.8 Non-Interest Income 98.4 160.7 70.6 Non-Interest Expense 161.8 172.6 123.1 Net Income 26.7 33.7 32.6 Basic Earnings Per Share $0.33 $0.42 $0.41 Diluted Earnings Per Share $0.32 $0.42 $0.41 Return on Average Assets 0.83% 0.99% 0.94% Return on Average Equity 7.69% 10.42% 10.24% Core Efficiency Ratio 68.74% 54.21% 60.37% Excluding the Effects of Intangibles (1) Net Income $28.7 $38.7 $36.2 Basic Earnings Per Share $0.36 $0.49 $0.46 Diluted Earnings Per Share $0.35 $0.48 $0.45 Return on Average Assets 0.90% 1.15% 1.06% Return on Average Equity 9.41% 14.01% 13.42% Core Efficiency Ratio 66.71% 52.54% 58.19% (1) Intangibles include goodwill, core deposit and trust intangibles, and other intangibles. Pacific Century Financial Corporation and subsidiaries Quarterly Summary of Selected Consolidated Financial Data (Unaudited) Table 10 (cont) ---------------------------------------------------------------------- (dollars in millions Sept. 30 June 30 except per share amounts) 2000 2000 ---------------------------------------------------------------------- Balance Sheet Totals Total Assets $ 13,939.9 $ 14,294.6 Net Loans 9,094.3 9,368.7 Deposits 8,820.7 9,109.1 Long-Term Debt 999.7 902.2 Shareholders' Equity 1,250.1 1,209.4 Quarterly Operating Results Net Interest Income $ 132.8 $ 132.3 Provision for Loan Losses 20.1 83.4 Non-Interest Income 67.0 79.2 Non-Interest Expense 124.2 121.2 Net Income 34.6 6.7 Basic Earnings Per Share $0.44 $0.08 Diluted Earnings Per Share $0.44 $0.08 Return on Average Assets 0.98% 0.19% Return on Average Equity 11.20% 2.19% Core Efficiency Ratio 62.12% 60.57% Excluding the Effects of Intangibles (1) Net Income $38.3 $10.5 Basic Earnings Per Share $0.48 $0.13 Diluted Earnings Per Share $0.48 $0.13 Return on Average Assets 1.10% 0.30% Return on Average Equity 14.76% 4.10% Core Efficiency Ratio 59.83% 58.43% (1) Intangibles include goodwill, core deposit and trust intangibles, and other intangibles.
Contact:
Pacific Century Financial
Stafford Kiguchi, 808/537-8580 (Media)
808/363-5383 (pager)
skiguchi@boh.com
Cindy Wyrick, 808/537-8430 (Investors/Analysts)
cwyrick@boh.com