Pacific Century Financial Corporation Reports Third Quarter Net Income of $34.6 Million and Earnings Per Share of 44 cents
Board of Directors Declare Quarterly Dividend of 18 Cents Per Share
HONOLULU--(BUSINESS WIRE)--Oct. 18, 2000--Pacific Century Financial Corporation (NYSE:BOH) reported third quarter net income of $34.6 million, up 61.1 percent compared to $21.5 million for the third quarter of 1999, which reflected a pre-tax restructuring charge of $22.5 million related to the company's New Era Redesign program. Diluted earnings per share were $0.44, up 63.0 percent relative to $0.27 reported for the third quarter of 1999.
For the third quarter of 2000, return on average assets was 0.98 percent and on a tangible basis was 1.12 percent. Return on average equity was 11.20 percent and on a tangible basis was 14.94 percent. The efficiency ratio was 62.3 percent and 59.8 percent on a tangible basis.
For the nine-month period, Pacific Century reported earnings of $81.1 million relative to $95.4 million posted for the first nine months of 1999. Diluted earnings per share were $1.02 compared to $1.18 for the first nine months of 1999. Tangible or "cash" diluted earnings per share totaled $1.17 versus $1.32 for the same period last year.
"The third quarter's results reflect the impact of efforts to reduce exposures in syndicated lending and continuing emphasis on asset quality," said Chairman and Chief Executive Officer Lawrence M. Johnson. "We are continuing a rigorous process for reviewing and monitoring asset quality that will strengthen the company over the long-term."
On October 17, 2000, the Board of Directors of Pacific Century Financial Corporation declared a quarterly cash dividend of 18 cents per share on the company's outstanding shares. The dividend will be payable on December 14, 2000 to shareholders of record at the close of business on November 24, 2000.
Key events in the third quarter:
-
Pacific Century successfully completed the implementation of New Era Redesign, with results exceeding original estimates.
-
The company reduced its syndicated loan portfolio by $100 million during the quarter to $1.2 billion. Correspondingly, commitments on syndicated loans inclusive of outstandings dropped to $3.5 billion from $3.7 billion at the end of the second quarter. Pacific Century also reduced Asian exposure to $900 million at quarter-end compared to $1.0 billion at June 30, 2000.
-
The company has entered into an informal agreement or Memorandum of Understanding with its regulator, which requires various analyses, plans and reports regarding the operation and management of the company and requires regulatory consent to pay dividends, incur debt and expand its previously announced stock repurchase program. Consent has been obtained for the fourth quarter dividend and to continue the company's existing commercial paper program.
-
The search for a new CEO for Pacific Century began in August 2000 by the company's independent Board of Directors. Korn/Ferry International has been retained to assist with the search.
New Era Redesign Benefits
During the third quarter, Pacific Century successfully completed its yearlong implementation phase of New Era Redesign and exceeded the program's expectations for reducing costs and enhancing revenues. The New Era Redesign implementation process tracked and monitored 1,200 ideas for implementation. In September 1999, Pacific Century projected that the benefits from New Era would reach an annualized run-rate of $43 million in cost savings and $21 million in revenue enhancements by the end of the fourth quarter 2000. Run-rate benefits at September 30, 2000 from cost savings ideas totaled $43 million and matched the company's projected estimate. Run-rate revenue enhancements of $25 million exceeded the company's expectations.
"We're very pleased with the results of New Era and believe its success reflects the efforts of everyone in the company to deliver on their projected targets and ensure that implementation occurred as planned," said Lawrence M. Johnson, Pacific Century Chairman & CEO. "We gained confidence early in the implementation process that New Era Redesign was producing tangible benefits and making positive contributions."
Update on Hawaii's Economy
The outlook for Hawaii's economy continues to be positive with economists forecasting real gross state product growth between 3.0 and 3.5 percent for 2000 and 2001. The state's visitor industry grew 4.2 percent in visitor arrivals through August and is forecast to grow 4.8 percent in 2000, according to the state's Department of Business Economic Development and Tourism.
Hotel occupancy rates were 80 percent through August 2000, representing a 5 percent increase over 1999. Other indicators of Hawaii's strengthening economy in 2000 are forecasts of job growth of 1.9 percent, unemployment of 4.0 percent and construction growth of 10 percent, all better than expected at the beginning of the year.
Net Interest Income
Third quarter net interest income on a fully taxable equivalent basis totaled $139.6 million compared to $143.8 million for the same period in 1999. The decline in net interest income reflected the company's progress in making its balance sheet more efficient with comparable period average loan growth of $207 million being more than offset by a $435 million reduction in securities and interest bearing deposits.
Meanwhile, net interest margin held firm for the third quarter at 4.25 percent, down only three basis points from 4.28 percent reported for the third quarter of 1999 and versus 4.27 percent for the second quarter of 2000.
Balance Sheet
Total assets at September 30, 2000 were $13.9 billion relative to $14.5 billion at September 30, 1999 and $14.3 billion at June 30, 2000. The decline in assets reflects the company's balance sheet efficiency initiatives as well as actions taken to reduce exposure in the Asia and syndicated loan portfolios. Net loans totaled $9.2 billion compared to $9.3 billion at third quarter-end 1999 and $9.5 billion at June 30, 2000.
Total deposits at the end of the quarter were $8.8 billion relative to $9.3 billion at September 30, 1999 and $9.1 billion at June 30, 2000. Year-over-year domestic deposits grew by 1.6 percent. Foreign deposits declined by 25.7 percent primarily due to a $350 million discretionary reduction in wholesale Eurodollar deposits (short-term borrowed funds) and approximately $200 million in currency translation adjustments. On a linked quarter basis, domestic deposits ended September 30, 2000 down 1.6 percent from June 30, 2000. Also on a linked quarter basis, foreign deposits declined 9.4 percent, again largely represented by discretionary reduction in purchased funds and currency adjustments.
Asset Quality
The quarterly provision for loan losses totaled $20.1 million compared with $13.5 million for the same period in 1999 and $83.4 million for second quarter of 2000. The third quarter provision exceeded net charge-offs of $19.6 million.
Gross charge-offs for the quarter were $26.6 million relative to $36.5 million for the second quarter of 2000 and $20.5 million for the like period in 1999. Commercial & Industrial charge-offs of $8.0 million were largely related to the sale of two syndicated credits totaling $6.4 million. Commercial real estate charge-offs totaled $2.8 million and was related to one Hawaii credit. Foreign charge-offs were $9.5 million with $7.1 million related to Asia, including $4.2 million to one International Trust & Investment Corporation credit in China.
Non-performing assets, exclusive of accruing loans past due 90+ days, totaled $219.6 million, compared to $210.6 million at June 30, 2000 and $154.8 million at September 30, 1999. Non-performing assets as a percent of total loans represented 2.25 percent relative to 2.09 percent at June 30, 2000 and 1.59 percent at September 30, 1999.
Non-accrual loans for the quarter were $214.5 million compared to $205.7 million for the second quarter of 2000 and $148.9 million for the third quarter of 1999. The increase in non-accruals was reflected in commercial real estate which totaled $86.8 million and was driven primarily by a single Hawaii credit of $19.2 million. At September 30, 2000, $39.4 million of the commercial real estate non-accruals represented credits where borrowers were current with respect to payments but were placed on non-accrual status. Foreign non-accruals declined $10.9 million, primarily reflecting charge-offs.
The ratio of reserves to loans outstanding was 2.58 percent for the third quarter of 2000, relative to 2.53 percent for the second quarter of 2000 and 2.22 percent for the third quarter of 1999. The ratio of reserves to non-performing assets (exclusive of accruing loans past due 90+ days) was 112 percent, relative to 117 percent at June 30, 2000 and 137 percent at September 30, 1999.
Loan Portfolio Highlights
Syndicated Loans, defined as credits of $20 million or more with three or more institutions (using shared national credit examination criteria), declined during the third quarter.
At September 30, 2000, syndicated loans totaled $1.2 billion out of $3.5 billion in commitments versus June 30, 2000 totals of $1.3 billion in outstandings against $3.7 billion in commitments. The decline in the portfolio was driven primarily by a reduction in non-relationship loans and is consistent with the company's previously stated intention to reduce this portfolio by several hundred million dollars over time. Of the $3.5 billion in remaining commitments, approximately 58 percent represented relationship credits, while approximately 64 percent represented investment grade quality loans.
The $65 million potential problem loan mentioned in the second quarter 2000 continues to be unresolved, but remained current at September 30, 2000.
Commercial Real Estate Loans totaled $1.5 billion at the end of the third quarter, unchanged from June 30, 2000. Hawaii commercial real estate represented approximately $860 million (57 percent) of this segment.
Non-Interest Income
Non-interest income, exclusive of securities transactions and extraordinary one-time items, was $61.3 million for the third quarter, up 7 percent compared to $57.3 million for the third quarter of 1999 and $62.2 million for the second quarter of 2000. The third quarter of 1999 included a $14.0 million one-time gain from the sale of a special purpose leasing company and the second quarter of 2000 included $11.9 million in non-recurring income related to the partial settlement of the company's defined benefit pension plan. The improvement in non-interest income in 2000 primarily reflects the contributions resulting from the implementation of the company's New Era Redesign program.
Non-Interest Expense
Non-interest expense, exclusive of extraordinary one-time items, was $124.9 million, down 6 percent from $133.1 million (adjusted for restructuring charges) for the third quarter of 1999 and down 1.4 percent from $126.7 million for the second quarter of 2000. The third quarter of 1999 included a restructuring charge of $22.5 million and the second quarter of 2000 reflected reductions in incentive and profit sharing accruals of approximately $4.8 million. The improvement in non-interest expense is largely attributable to cost savings from the implementation of New Era Redesign.
Other Items
"We continue to see progress in our asset management group and residential lending in Hawaii," noted Johnson. "The benefits from growth in these segments validates initiatives introduced in the mid-1990s to become more customer-focused and sales oriented in our delivery of products and services."
The company's asset management business totaled $8.0 billion in discretionary assets compared to $7.6 billion at yearend 1999. The growing recognition of the company's asset management capability by the institutional marketplace, such as Corporate, Governmental, Taft Hartley and other accounts coupled with an increasing retail market presence has contributed to earnings. Pacific Century's combined trust and asset management business at September 30, 2000 totaled $13.2 billion in assets under administration.
The company continues to maintain its dominant presence in Hawaii residential lending. Pacific Century's market share of loan originations is approximately 21 percent. The loan servicing portfolio is approximately $5.0 billion, compared to $4.6 billion at yearend 1999.
Guidance for the remainder of 2000 and outlook for 2001
Balance Sheet Guidance
-
As the company discussed in the second quarter of 2000, business methods and risk profile changes in our Asia and syndicated loan markets have resulted in our decision to reduce exposure to each of those segments.
-
Exposure in Asia ended the third quarter at $900 million, relative to $1.0 billion at June 30, 2000 and $1.2 billion at yearend 1999. Current exposure is approximately in line with target levels.
-
Syndicated loan exposure ended the third quarter at $3.5 billion in commitments, down $200 million from $3.7 billion at June 30, 2000 and down approximately $400 million from yearend 1999. Our objective is to continue to lower our syndicated loan outstanding exposure to approximately $1.0 billion in loans outstanding over a reasonable period of time, with most of the reduction expected to be in the non-relationship segment of the portfolio.
Earnings Guidance
-
Currently, analysts' earnings estimates for Pacific Century's fourth quarter 2000 and full year 2001 are significantly higher than the results of the just ended quarter would support. In large measure differences in estimates are reflected in net interest income and loan loss provisioning.
-
The company believes the third quarter 2000 financial statements to be a better proxy for estimating future results than existing analyst earnings models. Actions taken to improve asset quality and reduce our syndicated loan exposure are partially reflected in the third quarter results. Additional reductions in exposure are contemplated, making net growth in earning assets (and net interest income) challenging over the near term.
-
Likewise, the company suggests that analysts use the third quarter results to estimate loan loss provisioning for the fourth quarter. For 2001 our objective will be to limit net charge-offs and provisioning to $50 - $60 million.
Share Repurchase
-
No shares of Pacific Century common stock were repurchased in the third quarter due to asset quality trends evidenced in the second quarter. On October 17, 2000 Pacific Century's board of directors reaffirmed existing repurchase authorizations to offset shares issued under the company's dividend reinvestment and other benefit plans and to repurchase up to 300,000 shares (or up to $6 million) per quarter. Pacific Century expects to repurchase shares under the terms of the authorization.
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, the West and 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.
Forward-Looking Statements
This press release contains forward-looking information. The Company cautions readers not to place undue reliance on any forward-looking statements, which speak only as of the date made. Forward-looking statements are subject to significant risk and uncertainties, many of which are beyond the Company's control. Although the Company believes that the assumptions underlying its forward-looking statements are reasonable, any of the assumptions could prove to be inaccurate and actual results may differ from those contained in or implied by such forward-looking statements for a variety of reasons. Factors which might cause such a difference include, but are not limited to, competitor pressures in the banking and financial services industry increase significantly, particularly in connection with product delivery and pricing; business disruption related to implementation of New Era Redesign programs or methodologies; inability to achieve expected customer acceptance of revised pricing structure and strategies; general economic conditions in the geographic areas where the Company operated are weaker than expected; deterioration of credit quality may cause higher level of provisioning; continued increase to interest rates may put additional pressure on those weaker obligors in servicing their debt which in turn may cause further deterioration to the portfolio; continued weakness in the syndicated national credit market creating greater difficulty for companies to create, find or roll over credit facilities; increased volatility in Asia or the Pacific either politically or economically; economic recovery in Hawaii slows because of U. S. Mainland economic slowdown which may restrict our ability to grow our relationship portfolio as originally forecasted; the need to maintain market competitiveness may require much higher levels of capital expenditures than originally forecasted; higher oil prices reducing tourism; loss of confidence by customers/borrowers/depositors erodes funding and asset base; loss of staff confidence creating higher rates of turnover and the consequent ability to attract new staff may cause a higher than expected increase to non-interest expense. The Company does not undertake and specifically disclaims any obligation to update any forward-looking statements to reflect events or circumstance after the date of such statements.
Highlights
Pacific Century Financial Corporation and subsidiaries
(in thousands of dollars except per share amounts)
Earnings Highlights and Percentage
Performance Ratios 2000 1999 Change
Three Months Ended September 30
Net Income $ 34,603 $ 21,479 61.1%
Basic Earnings Per Share 0.44 0.27 63.0%
Diluted Earnings Per Share 0.44 0.27 63.0%
Cash Dividends 14,302 13,655
Return on Average Assets 0.98% 0.59%
Return on Average Equity 11.20% 7.01%
Net Interest Margin 4.25% 4.28%
Efficiency Ratio 62.26% 72.44%
Nine Months Ended September 30
Net Income $ 81,075 $ 95,358 -15.0%
Basic Earnings Per Share 1.02 1.19 -14.3%
Diluted Earnings Per Share 1.02 1.18 -13.6%
Cash Dividends 42,147 40,991
Return on Average Assets 0.77% 0.87%
Return on Average Equity 8.85% 10.55%
Net Interest Margin 4.27% 4.27%
Efficiency Ratio 60.49% 68.25%
Summary of Results Excluding
the Effect of Intangibles (a)
Three Months Ended September 30
Net Income $ 38,806 $ 25,887 49.9%
Basic Earnings per Share $ 0.49 $ 0.32 53.1%
Diluted Earnings per Share $ 0.49 $ 0.32 53.1%
Return on Average Assets 1.12% 0.72%
Return on Average Equity 14.94% 10.25%
Efficiency Ratio 59.83% 70.04%
Nine Months Ended September 30
Net Income $ 93,690 $ 107,430 -12.8%
Basic Earnings per Share $ 1.18 $ 1.34 -11.9%
Diluted Earnings per Share $ 1.17 $ 1.32 -11.4%
Return on Average Assets 0.90% 0.99%
Return on Average Equity 12.23% 14.45%
Efficiency Ratio 58.12% 66.03%
(a) Intangibles include goodwill, core deposit and trust intangibles,
and other intangibles.
Statement of Condition Highlights and Performance Ratios
September 30 September 30 Percentage
2000 1999 Change
Total Assets $ 13,939,861 $ 14,505,361 -3.9%
Net Loans 9,233,476 9,321,477 -0.9%
Total Deposits 8,820,668 9,290,389 -5.1%
Total Shareholders' Equity 1,250,069 1,208,499 3.4%
Book Value Per Common Share $ 15.72 $ 15.05
Loss Reserve / Loans Outstanding 2.58% 2.22%
Average Equity / Average Assets 8.65% 8.25%
Common Stock Price Range High Low
1999 $ 24.94 $ 17.38
2000 First Quarter $ 20.38 $ 14.35
Second Quarter $ 23.19 $ 14.63
Third Quarter $ 17.50 $ 13.13
Corporate Offices: Inquiries:
Financial Plaza of the Pacific David A. Houle
130 Merchant Street Executive Vice President, Treasurer
Honolulu, Hawaii 96813 and Chief Financial Officer
(808) 537-8288
Consolidated Statements of Income (Unaudited)
Pacific Century Financial Corporation and subsidiaries
(in thousands of dollars except per share amounts)
3 Months 3 Months 9 Months 9 Months
Ended Ended Ended Ended
Sept 30 Sept 30 Sept 30 Sept 30
2000 1999 2000 1999
Interest Income
Interest on Loans $192,749 $173,414 $558,735 $521,050
Loan Fees 7,679 8,792 24,902 30,090
Income on Lease
Financing 9,935 7,035 27,661 21,751
Interest and
Dividends on
Investment
Securities
Taxable 12,943 14,657 40,500 43,248
Non-taxable 241 268 763 820
Income on Investment
Securities
Available for Sale 41,772 42,808 123,966 126,508
Interest on Deposits 3,319 5,700 10,917 20,391
Interest on Security
Resale Agreements 55 70 71 238
Interest on Funds
Sold 577 223 1,535 4,374
Total Interest
Income 269,270 252,967 789,050 768,470
Interest Expense
Interest on Deposits 73,162 63,916 212,440 193,703
Interest on Security
Repurchase
Agreements 26,941 21,812 75,915 70,621
Interest on Funds
Purchased 8,960 9,975 25,321 31,486
Interest on Short-
Term Borrowings 4,739 2,213 15,785 8,783
Interest on Long-
Term Debt 16,164 11,598 42,171 32,180
Total Interest
Expense 129,966 109,514 371,632 336,773
Net Interest Income 139,304 143,453 417,418 431,697
Provision for Loan
Losses 20,145 13,500 117,074 40,038
Net Interest Income
After Provision for
Loan Losses 119,159 129,953 300,344 391,659
Non-Interest Income
Trust Income 15,874 14,670 49,078 44,653
Service Charges on
Deposit Accounts 10,074 8,638 29,811 25,708
Fees, Exchange, and
Other Service
Charges 22,714 21,956 66,926 66,572
Other Operating
Income 12,676 26,061 41,348 50,510
Gain on Settlement
of Pension
Obligation -- -- 11,900 --
Investment
Securities Gains
(Losses) (82) 77 (315) 8,742
Total Non-Interest
Income 61,256 71,402 198,748 196,185
Non-Interest Expense
Salaries 45,220 50,768 137,227 152,093
Pensions and Other
Employee Benefits 12,303 13,437 37,721 43,387
Net Occupancy
Expense 12,577 11,560 36,873 35,638
Net Equipment
Expense 13,365 12,380 37,498 36,192
Other Operating
Expense 41,350 44,889 123,301 132,389
Restructuring Charge -- 22,478 -- 22,478
Minority Interest 110 81 286 384
Total Non-Interest
Expense 124,925 155,593 372,906 422,561
Income Before Income
Taxes 55,490 45,762 126,186 165,283
Provision for Income
Taxes 20,887 24,283 45,111 69,925
Net Income $34,603 $21,479 $81,075 $95,358
Basic Earnings Per
Share $0.44 $0.27 $1.02 $1.19
Diluted Earnings Per
Share $0.44 $0.27 $1.02 $1.18
Dividends Declared
Per Share $0.18 $0.17 $0.53 $0.51
Basic Weighted
Average Shares 79,455,040 80,274,350 79,566,807 80,332,150
Diluted Weighted
Average Shares 79,525,474 80,860,870 79,791,250 81,116,106
Consolidated Statements of Condition (Unaudited)
Pacific Century Financial Corporation and subsidiaries
September 30 December 31 September 30
(in thousands of dollars) 2000 1999 1999
Assets
Interest-Bearing
Deposits $ 185,312 $ 278,473 $ 410,497
Investment Securities
- Held to Maturity
(Market Value of
$714,920, $787,720
and $815,416,
respectively) 716,392 796,322 816,728
Investment Securities
- Available for Sale 2,484,482 2,542,232 2,625,545
Securities Purchased
Under Agreements to
Resell 5,560 -- 4,103
Funds Sold 28,323 52,740 40,726
Loans 9,750,661 9,717,556 9,746,581
Unearned Income (272,219) (242,503) (213,798)
Reserve for Loan
Losses (244,966) (194,205) (211,306)
Net Loans 9,233,476 9,280,848 9,321,477
Total Earning
Assets 12,653,545 12,950,615 13,219,076
Cash and Non-Interest
Bearing Deposits 438,312 639,895 417,142
Premises and
Equipment 251,240 271,728 281,512
Customers' Acceptance
Liability 10,956 7,236 10,797
Accrued Interest
Receivable 86,109 78,974 77,915
Other Real Estate 5,128 4,576 5,874
Intangibles,
including Goodwill 194,418 205,904 211,609
Other Assets 300,153 281,387 281,436
Total Assets $ 13,939,861 $ 14,440,315 $ 14,505,361
Liabilities
Domestic Deposits
Demand
- Non-Interest
Bearing $ 1,626,426 $ 1,676,425 $ 1,683,210
- Interest Bearing 2,039,325 2,076,358 2,059,662
Savings 671,437 700,720 712,968
Time 2,801,947 2,761,650 2,570,112
Foreign Deposits
Demand
- Non-Interest
Bearing 343,828 401,613 437,110
Time Due to Banks 571,576 597,675 679,344
Other Savings and
Time 766,129 1,179,777 1,147,983
Total Deposits 8,820,668 9,394,218 9,290,389
Securities Sold Under
Agreements to
Repurchase 1,791,983 1,490,655 1,916,747
Funds Purchased 377,069 839,962 628,212
Short-Term Borrowings 365,407 458,962 335,416
Bank's Acceptances
Outstanding 10,956 7,236 10,797
Accrued Retirement
Expense 37,796 40,360 41,494
Accrued Interest
Payable 80,792 64,588 60,138
Accrued Taxes Payable 97,597 85,022 90,380
Minority Interest 4,154 4,435 4,587
Other Liabilities 103,634 114,890 123,888
Long-Term Debt 999,736 727,657 794,814
Total Liabilities 12,689,792 13,227,985 13,296,862
Shareholders' Equity
Common Stock
($.01 par value),
authorized
500,000,000 shares;
issued/outstanding;
September 2000 -
80,556,883/
79,503,301; December
1999 - 80,550,728/
80,036,417;
September 1999 -
80,550,124/80,308,130 806 806 806
Capital Surplus 346,016 345,851 345,477
Accumulated Other
Comprehensive Income (56,620) (66,106) (52,525)
Retained Earnings 979,007 942,177 919,664
Treasury Stock, at
Cost - (September
2000 - 1,053,582;
December 1999 -
514,311 and
September 1999 -
241,994 shares) (19,140) (10,398) (4,923)
Total Shareholders'
Equity 1,250,069 1,212,330 1,208,499
Total Liabilities
and Shareholders'
Equity $ 13,939,861 $ 14,440,315 $ 14,505,361
Pacific Century Financial Corporation and subsidiaries
Consolidated Statements of Shareholders' Equity (Unaudited)
Accumulated
Other
Common Capital Comprehensive
(in thousands of dollars) Total Stock Surplus Income
Balance at
December 31, 1999 $1,212,330 $806 $345,851 ($66,106)
Comprehensive Income
Net Income 81,075 -- -- --
Other Comprehensive
Income, Net of Tax
Investment Securities,
Net of
Reclassification
Adjustment 9,960 -- -- 9,960
Foreign Currency
Translation Adjustment (474) -- -- (474)
Total Comprehensive
Income
Common Stock Issued
62,102 Profit Sharing
Plan 1,096 -- 18 --
195,094 Stock Option
Plan 2,610 -- -- --
142,421 Dividend
Reinvestment Plan 2,481 -- 52 --
4,973 Directors'
Restricted Shares and
Deferred Compensation
Plan 95 -- 95 --
Treasury Stock Purchased (16,957) -- -- --
Cash Dividends Paid (42,147) -- -- --
Balance at
September 30, 2000 $1,250,069 $806 $346,016 ($56,620)
Balance at
December 31, 1998 $1,185,594 $805 $342,932 ($22,476)
Comprehensive Income
Net Income 95,358 -- -- --
Other Comprehensive
Income, Net of Tax
Investment Securities,
Net of
Reclassification
Adjustment (28,231) -- -- (28,231)
Foreign Currency
Translation Adjustment (1,818) -- -- (1,818)
Total Comprehensive
Income
Common Stock Issued
37,419 Profit Sharing
Plan 736 -- 3 --
318,672 Stock Option
Plan 5,843 -- 2,265 --
154,515 Dividend
Reinvestment Plan 3,204 1 137 --
6,595 Directors'
Restricted Shares and
Deferred Compensation
Plan 140 -- 140 --
Treasury Stock Purchased (11,336) -- -- --
Cash Dividends Paid (40,991) -- -- --
Balance at
September 30, 1999 $1,208,499 $806 $345,477 ($52,525)
Retained Treasury Comprehensive
(in thousands of dollars) Earnings Stock Income
Balance at
December 31, 1999 $942,177 ($10,398)
Comprehensive Income
Net Income 81,075 -- $81,075
Other Comprehensive
Income, Net of Tax
Investment Securities,
Net of
Reclassification
Adjustment -- -- 9,960
Foreign Currency
Translation Adjustment -- -- (474)
--------
Total Comprehensive
Income $90,561
========
Common Stock Issued
62,102 Profit Sharing
Plan (167) 1,245
195,094 Stock Option
Plan (1,500) 4,110
142,421 Dividend
Reinvestment Plan (431) 2,860
4,973 Directors'
Restricted Shares and
Deferred Compensation
Plan -- --
Treasury Stock Purchased -- (16,957)
Cash Dividends Paid (42,147) --
Balance at
September 30, 2000 $979,007 ($19,140)
Balance at
December 31, 1998 $867,852 ($3,519)
Comprehensive Income
Net Income 95,358 -- $95,358
Other Comprehensive
Income, Net of Tax
Investment Securities,
Net of
Reclassification
Adjustment -- -- (28,231)
Foreign Currency
Translation Adjustment -- -- (1,818)
--------
Total Comprehensive
Income $65,309
========
Common Stock Issued
37,419 Profit Sharing
Plan (70) 803
318,672 Stock Option
Plan (2,288) 5,866
154,515 Dividend
Reinvestment Plan (197) 3,263
6,595 Directors'
Restricted Shares and
Deferred Compensation
Plan -- --
Treasury Stock Purchased -- (11,336)
Cash Dividends Paid (40,991) --
Balance at
September 30, 1999 $919,664 ($4,923)
Consolidated Average Balances and Interest Rates Taxable Equivalent
(Unaudited)
Pacific Century Financial Corporation and subsidiaries
Three Months Ended Three Months Ended
September 30, 2000 September 30, 1999
(in millions Average Income/ Yield/ Average Income/ Yield/
of dollars) Balance Expense Rate Balance Expense Rate
Earning Assets
Interest Bearing
Deposits $197.3 $3.3 6.69% $348.5 $5.7 6.49%
Investment
Securities Held
to Maturity
-Taxable 711.7 12.9 7.23 804.8 14.7 7.23
-Tax-Exempt 8.3 0.4 17.70 11.7 0.4 14.04
Investment
Securities
Available for
Sale 2,490.2 41.8 6.67 2,677.5 42.8 6.31
Funds Sold 38.8 0.6 6.48 38.9 0.5 5.57
Net Loans
-Domestic 8,193.4 177.6 8.62 7,692.0 154.6 7.98
-Foreign 1,435.2 25.2 7.00 1,729.7 25.8 5.92
Loan Fees 7.7 8.8
Total Earning
Assets 13,074.9 269.5 8.20 13,303.1 253.3 7.55
Cash and Due From
Banks 418.2 425.2
Other Assets 523.6 655.2
Total Assets $14,016.7 $14,383.5
Interest Bearing
Liabilities
Domestic Deposits
- Demand $2,043.7 11.9 2.31 $2,128.8 12.3 2.30
- Savings 680.4 3.5 2.03 720.5 3.7 2.03
- Time 2,799.4 40.3 5.73 2,492.7 29.4 4.68
Total Domestic 5,523.5 55.7 4.01 5,342.0 45.4 3.37
Foreign Deposits
- Time Due to
Banks 552.6 8.5 6.13 606.7 8.1 5.27
- Other Time and
Savings 821.4 9.0 4.36 1,175.7 10.4 3.52
Total Foreign 1,374.0 17.5 5.07 1,782.4 18.5 4.11
Total Interest
Bearing
Deposits 6,897.5 73.2 4.22 7,124.4 63.9 3.56
Short-Term
Borrowings 2,599.4 40.6 6.22 2,837.3 34.0 4.75
Long-Term Debt 963.4 16.1 6.67 732.3 11.6 6.28
Total Interest
Bearing
Liabilities 10,460.3 129.9 4.94 10,694.0 109.5 4.06
Net Interest
Income 139.6 143.8
Interest Rate
Spread 3.26% 3.49%
Net Interest
Margin 4.25% 4.28%
Demand Deposits
- Domestic 1,619.8 1,633.7
- Foreign 345.6 438.6
Total Demand
Deposits 1,965.4 2,072.3
Other Liabilities 361.6 401.2
Shareholders'
Equity 1,229.4 1,216.0
Total
Liabilities and
Shareholders'
Equity $14,016.7 $14,383.5
Provision for Loan
Losses 20.1 13.5
Net Overhead 63.7 84.2
Income Before
Income Taxes 55.8 46.1
Provision for
Income Taxes 20.9 24.3
Tax-Equivalent
Adjustment 0.3 0.1
Net Income $34.6 $21.7
Nine Months Ended Nine Months Ended
September 30, 2000 September 30, 1999
(in millions Average Income/ Yield/ Average Income/ Yield/
of dollars) Balance Expense Rate Balance Expense Rate
Earning Assets
Interest Bearing
Deposits $216.4 $10.9 6.74% $424.2 $20.4 6.43%
Investment
Securities Held
to Maturity
-Taxable 736.8 40.5 7.34 808.9 43.2 7.15
-Tax-Exempt 8.9 1.2 17.67 11.7 1.3 14.44
Investment
Securities
Available for
Sale 2,510.6 124.0 6.60 2,735.4 126.5 6.18
Funds Sold 35.3 1.6 6.07 125.2 4.9 5.20
Net Loans
-Domestic 8,065.7 511.5 8.47 7,721.9 461.6 7.99
-Foreign 1,517.6 75.2 6.62 1,706.8 81.2 6.36
Loan Fees 24.9 30.1
Total Earning
Assets 13,091.3 789.8 8.06 13,534.1 769.2 7.60
Cash and Due From
Banks 456.1 475.6
Other Assets 597.7 648.5
Total Assets $14,145.1 $14,658.2
Interest Bearing
Liabilities
Domestic Deposits
- Demand $2,085.6 36.4 2.33 $2,146.0 36.4 2.27
- Savings 690.6 10.5 2.03 728.0 11.0 2.03
- Time 2,769.5 111.8 5.39 2,534.0 90.9 4.80
Total Domestic 5,545.7 158.7 3.82 5,408.0 138.3 3.42
Foreign Deposits
- Time Due to
Banks 487.7 21.7 5.95 646.7 25.0 5.17
- Other Time and
Savings 1,024.9 32.0 4.18 1,163.7 30.4 3.49
Total Foreign 1,512.6 53.7 4.75 1,810.4 55.4 4.09
Total Interest
Bearing
Deposits 7,058.3 212.4 4.02 7,218.4 193.7 3.59
Short-Term
Borrowings 2,651.2 117.0 5.90 3,118.3 110.9 4.75
Long-Term Debt 848.3 42.2 6.64 665.2 32.2 6.47
Total Interest
Bearing
Liabilities 10,557.8 371.6 4.70 11,001.9 336.8 4.09
Net Interest
Income 418.2 432.4
Interest Rate
Spread 3.36% 3.51%
Net Interest
Margin 4.27% 4.27%
Demand Deposits
- Domestic 1,649.9 1,649.2
- Foreign 376.9 427.6
Total Demand
Deposits 2,026.8 2,076.8
Other Liabilities 336.6 370.8
Shareholders'
Equity 1,223.9 1,208.7
Total
Liabilities and
Shareholders'
Equity $14,145.1 $14,658.2
Provision for Loan
Losses 117.1 40.0
Net Overhead 174.2 226.4
Income Before
Income Taxes 126.9 166.0
Provision for
Income Taxes 45.1 69.9
Tax-Equivalent
Adjustment 0.7 0.7
Net Income $81.1 $95.4
Pacific Century Financial Corporation and subsidiaries
Consolidated Non-Performing Assets and Accruing Loans Past Due 90 Days
or More (Unaudited)
(in millions Sep 30 Jun 30 Mar 31 Dec 31 Sep 30
of dollars) 2000 2000 2000 1999 1999
Non-Accrual
Loans
Commercial and
Industrial $49.0 $52.7 $20.1 $23.7 $31.7
Real Estate
Construction 8.1 8.0 0.9 1.1 2.1
Commercial 86.8 62.2 18.2 19.0 20.8
Residential 22.0 23.2 23.2 29.7 33.1
Installment 0.1 0.1 0.5 0.5 0.7
Leases 0.2 0.3 3.7 3.9 4.8
Total Domestic 166.2 146.5 66.6 77.9 93.2
Foreign 48.3 59.2 65.2 67.4 55.7
Subtotal 214.5 205.7 131.8 145.3 148.9
Foreclosed Real
Estate
Domestic 4.9 4.6 4.3 4.3 5.6
Foreign 0.2 0.3 0.3 0.3 0.3
Subtotal 5.1 4.9 4.6 4.6 5.9
Total Non-
Performing
Assets 219.6 210.6 136.4 149.9 154.8
Accruing Loans
Past Due 90
Days or More
Commercial and
Industrial 2.2 4.7 6.7 5.9 6.2
Real Estate
Construction 0.1 -- -- -- 0.5
Commercial 4.9 2.0 2.1 1.9 2.4
Residential 7.2 3.5 5.0 4.0 2.8
Installment 4.6 4.0 4.7 4.5 4.5
Leases 0.1 1.5 1.4 1.2 0.2
Total Domestic 19.1 15.7 19.9 17.5 16.6
Foreign 1.5 1.3 3.2 1.0 5.0
Subtotal 20.6 17.0 23.1 18.5 21.6
Total $240.2 $227.6 $159.5 $168.4 $176.4
Ratio of Non-
Performing
Assets to Total
Loans 2.25% 2.09% 1.39% 1.54% 1.59%
Ratio of Non-
Performing
Assets and
Accruing Loans
Past Due 90
Days or More to
Total Loans 2.46% 2.26% 1.63% 1.73% 1.81%
(in millions Jun 30 Mar 31 Dec 31 Sep 30
of dollars) 1999 1999 1998 1998
Non-Accrual
Loans
Commercial and
Industrial $37.5 $39.1 $28.2 $24.0
Real Estate
Construction 0.8 3.1 2.9 4.4
Commercial 17.2 18.7 5.4 6.7
Residential 35.2 37.6 36.4 35.9
Installment 0.8 0.5 0.8 0.9
Leases 4.4 4.5 0.7 0.8
Total Domestic 95.9 103.5 74.4 72.7
Foreign 47.5 53.6 57.5 67.9
Subtotal 143.4 157.1 131.9 140.6
Foreclosed Real
Estate
Domestic 5.8 6.1 5.5 10.8
Foreign 0.2 0.1 0.1 0.1
Subtotal 6.0 6.2 5.6 10.9
Total Non-
Performing
Assets 149.4 163.3 137.5 151.5
Accruing Loans
Past Due 90
Days or More
Commercial and
Industrial 3.9 4.3 0.4 7.3
Real Estate
Construction 0.2 0.2 0.4 0.6
Commercial 0.2 0.4 -- 0.8
Residential 3.7 3.5 4.5 4.8
Installment 5.2 6.9 7.3 6.6
Leases -- 0.1 0.3 0.1
Total Domestic 13.2 15.4 12.9 20.2
Foreign 8.2 6.3 7.9 7.1
Subtotal 21.4 21.7 20.8 27.3
Total $170.8 $185.0 $158.3 $178.8
Ratio of Non-
Performing
Assets to Total
Loans 1.55% 1.69% 1.40% 1.59%
Ratio of Non-
Performing
Assets and
Accruing Loans
Past Due 90
Days or More to
Total Loans 1.78% 1.92% 1.61% 1.87%
Pacific Century Financial Corporation and subsidiaries
Summary of Loan Loss Experience
Third Second First First Nine First Nine
(in millions Quarter Quarter Quarter Months Months
of dollars) 2000 2000 2000 2000 1999
Average Amount
of Loans
Outstanding $ 9,628.6 $ 9,636.9 $ 9,484.1 $ 9,583.3 $ 9,428.7
Balance of
Reserve for
Loan Losses
at Beginning
of Period $ 246.6 $ 195.4 $ 194.2 $ 194.2 $ 211.3
Loans
Charged-Off
Commercial
and
Industrial 8.0 8.3 1.4 17.7 15.7
Real Estate
Construction -- 0.5 -- 0.5 0.2
Commercial 2.8 7.6 3.9 14.3 2.3
Residential 1.5 1.3 2.4 5.2 5.6
Installment 4.6 5.2 4.7 14.5 19.1
Leases 0.2 0.2 -- 0.4 0.2
Total Domestic 17.1 23.1 12.4 52.6 43.1
Foreign 9.5 13.4 3.7 26.6 17.6
Total
Charged-Off 26.6 36.5 16.1 79.2 60.7
Recoveries on
Loans
Previously
Charged-Off
Commercial and
Industrial 2.2 1.2 1.7 5.1 12.9
Real Estate
Construction -- -- -- -- --
Commercial 0.1 0.1 0.1 0.3 1.0
Residential 0.3 0.2 0.5 1.0 0.2
Installment 1.7 1.9 1.7 5.3 5.6
Total Domestic 4.3 3.4 4.0 11.7 19.7
Foreign 2.7 0.2 0.8 3.7 4.0
Total Recoveries 7.0 3.6 4.8 15.4 23.7
Net Charge-Offs (19.6) (32.9) (11.3) (63.8) (37.0)
Provision Charged
to Operating
Expenses 20.2 83.4 13.5 117.1 40.1
Other Net
Additions
(Reductions)(a) (2.2) 0.7 (1.0) (2.5) (3.1)
Balance at End of
Period $ 245.0 $ 246.6 $ 195.4 $ 245.0 $ 211.3
Ratio of Net
Charge-Offs to
Average Loans
Outstanding
(annualized) 0.81% 1.37% 0.48% 0.89% 0.52%
Ratio of Reserve
to Loans
Outstanding 2.58% 2.53% 2.05% 2.58% 2.22%
(a) Includes balance transfers, reserves acquired, and foreign
currency translation adjustments.
Pacific Century Financial Corporation and subsidiaries
Quarterly Summary of Selected Consolidated Financial Data
(in millions of dollars Sep. 30 Jun. 30 Mar. 31
except per share amounts) 2000 2000 2000
Balance Sheet Totals
Total Assets $ 13,939.9 $ 14,294.6 $ 14,250.4
Net Loans 9,233.5 9,497.4 9,346.5
Deposits 8,820.7 9,109.1 9,143.1
Long-Term Debt 999.7 902.2 805.7
Shareholders' Equity 1,250.1 1,209.4 1,225.9
Quarterly Operating
Results
Net Interest Income $ 139.3 $ 138.6 $ 139.5
Provision for Loan
Losses 20.1 83.4 13.5
Non-Interest Income 61.3 73.6 63.9
Non-Interest Expense 124.9 121.9 126.1
Net Income 34.6 6.7 39.8
Basic Earnings Per
Share $ 0.44 $ 0.08 $ 0.50
Diluted Earnings Per
Share $ 0.44 $ 0.08 $ 0.50
Return on Average
Assets 0.98% 0.19% 1.13%
Return on Average
Equity 11.20% 2.19% 13.19%
Efficiency Ratio 62.26% 57.31% 62.06%
Normalized Efficiency
Ratio (1) -- -- --
Excluding the Effects of
Intangibles (2)
Net Income $ 38.8 $ 11.0 $ 43.9
Basic Earnings
Per Share $ 0.49 $ 0.14 $ 0.55
Diluted Earnings
Per Share $ 0.49 $ 0.14 $ 0.55
Return on Average
Assets 1.12% 0.32% 1.26%
Return on Average
Equity 14.94% 4.30% 17.54%
Efficiency Ratio 59.83% 54.96% 59.73%
Normalized Efficiency
Ratio (1) -- -- --
(in millions of dollars Dec. 31 Sept. 30 Jun. 30 Mar. 31
except per share amounts) 1999 1999 1999 1999
Balance Sheet Totals
Total Assets $ 14,440.3 $ 14,505.4 $ 14,551.5 $ 14,928.3
Net Loans 9,280.8 9,321.5 9,181.7 9,208.1
Deposits 9,394.2 9,290.4 9,286.2 9,434.4
Long-Term Debt 727.7 794.8 654.8 675.6
Shareholders' Equity 1,212.3 1,208.5 1,214.2 1,207.6
Quarterly Operating
Results
Net Interest Income $ 143.0 $ 143.5 $ 144.4 $ 143.8
Provision for Loan
Losses 20.9 13.5 13.9 12.6
Non-Interest Income 69.4 71.4 63.6 61.2
Non-Interest Expense 131.2 155.6 132.1 134.8
Net Income 37.6 21.5 38.5 35.4
Basic Earnings Per
Share $ 0.47 $ 0.27 $ 0.48 $ 0.44
Diluted Earnings Per
Share $ 0.47 $ 0.27 $ 0.47 $ 0.44
Return on Average
Assets 1.04% 0.59% 1.05% 0.96%
Return on Average
Equity 12.29% 7.01% 12.72% 12.00%
Efficiency Ratio 63.32% 72.44% 65.67% 66.37%
Normalized Efficiency
Ratio (1) -- 61.98% -- --
Excluding the Effects of
Intangibles (2)
Net Income $ 42.3 $ 25.9 $ 42.3 $ 39.3
Basic Earnings
Per Share $ 0.53 $ 0.32 $ 0.53 $ 0.49
Diluted Earnings
Per Share $ 0.52 $ 0.32 $ 0.52 $ 0.48
Return on Average
Assets 1.19% 0.72% 1.18% 1.08%
Return on Average
Equity 16.69% 10.25% 17.01% 16.21%
Efficiency Ratio 60.59% 70.04% 63.53% 64.25%
Normalized Efficiency
Ratio (1) -- 59.57% -- --
(1) Excludes impact of $22.5 million restructuring charge in
1999's Third Quarter.
(2) Intangibles include goodwill, core deposit and trust
intangibles, and other intangibles.
| CONTACT: | Pacific Century Financial Corporation |
|---|---|
| Stafford Kiguchi, 808/537-8580 (Media Inquiries) | |
| Pager: 808/363-5383 | |
| skiguchi@boh.com | |
| Sharlene Bliss, 808/537-8037 (Investor/Analyst Inquiries) | |
| sbliss@boh.com | |