PART ONE OF FIVE: Pacific Century Financial Corporation Reports Second Quarter Earnings of $0.08 Per Share
HONOLULU--(BUSINESS WIRE)--July 20, 2000--Pacific Century Financial Corporation (NYSE:BOH) reported second quarter earnings of $6.7 million and diluted earnings of $0.08 per share. Comparatively, earnings for the second quarter of 1999 were $38.5 million and $0.47 per share, and $39.8 million and $0.50 per share for the first quarter of 2000.
The decline in net income reflects the impact of the previously announced increased provisioning to the reserve for loan losses. The second quarter's provisioning of $83.4 million exceeded net charge-offs of $32.9 million. Pacific Century increased provisioning in response to weakness in its syndicated loan and Hawaii commercial real estate loan portfolios. The extra provisioning also considers recent political and economic turmoil in Fiji.
"We took prudent and appropriate action to address weaknesses and issues related to asset quality," said Lawrence M. Johnson, Chairman and CEO. "We have bolstered our reserve for loan losses by approximately $50 million to complement our capital base."
Earnings for the first six months of 2000 were $46.5 million compared to $73.9 million for the first half of 1999. Diluted earnings per share totaled $0.58 relative to $0.91 for the six-month period in 1999. Tangible or economic earnings for the first half of 2000 were $54.9 million and tangible diluted earnings per share were $0.69. Year-to-date return on average assets was 0.66 percent and on a tangible basis was 0.79 percent. Year-to-date return on average equity was 7.65 percent and on a tangible basis was 10.84 percent. For the first six months of 2000, the efficiency ratio was 59.6 percent and 57.3 percent on a tangible basis.
At June 30, 2000, net loans totaled $9.5 billion compared to $9.2 billion at second quarter-end 1999 and $9.3 billion at March 31, 2000. Total deposits at the end of the second quarter were $9.1 billion relative to $9.3 billion at June 30, 1999 and relatively unchanged from March 31, 2000. Total assets at June 30, 2000 were $14.3 billion relative to the $14.6 billion at June 30, 1999 and unchanged from March 31, 2000.
Non-performing assets, exclusive of loans past due 90+ days, totaled $199.4 million, compared to $136.4 million at March 31, 2000 and $149.4 million at June 30, 1999. The increase from the end of the first quarter 2000 includes the previously announced expected additions, primarily from syndicated loans and Hawaii commercial real estate loans. At the end of the second quarter, non-performing assets as a percent of total loans represented 1.98 percent compared to 1.39 percent at March 31, 2000 and 1.55 percent at June 30, 1999.
The ratio of reserve to loans outstanding was 2.53 percent for the second quarter of 2000, 2.05 percent for the first quarter of 2000 and 2.23 percent for the second quarter of 1999. The ratio of reserve to non-performing assets (exclusive of loans past due 90+ days) was 124 percent, relative to 143 percent at March 31, 2000 and 140 percent at June 30, 1999.
Johnson noted that during the quarter, Bank of Hawaii engaged in a comprehensive review of the commercial loan portfolio, which involved reviewing loans of $250,000 or more. "We felt the task was warranted given industry concerns about asset quality and a perceived tightening in credit standards for the industry as a whole," said Johnson.
Both non-interest income and non-interest expense in the second quarter demonstrated the positive benefit of New Era Redesign, which completed its third quarter of implementation. Non-interest income in the second quarter also included $11.9 million in non-recurring income related to the partial settlement of the company's defined benefit pension plan.
Johnson noted that the implementation of New Era ideas was on track and contributing to the company's overall efforts to improve efficiency. "We're extremely pleased that our results show tangible improvements in line with our stated performance objectives for New Era. Since the implementation process began in October 1999, everyone in the organization has played a role in our success and bringing about positive changes."
Hawaii's economy continues to strengthen with economists' 2000 forecast for real gross state product growth between 3.0 and 3.5 percent. The visitor industry showed 4.0 percent growth in visitor arrivals for the first five months of 2000. The state's Department of Business Economic Development & Tourism expects visitor arrivals to grow by 3.8 percent in 2000 and 3.5 percent in 2001. Employment and jobs grew in the first quarter and the state's unemployment rate fell to 4.6 percent, approaching the U.S. unemployment rate of 4.1 percent recorded in the first quarter.
Further highlights on Pacific Century's performance are included in the attached "Comments on Second Quarter 2000 Results."
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.
Highlights (Unaudited)
Pacific Century Financial Corporation and subsidiaries
(in thousands of dollars except per share amounts)
Earnings Highlights and Performance Ratios
Percentage
2000 1999 Change
Three Months Ended June 30
Net Income $6,707 $38,462 -82.6%
Basic Earnings Per Share 0.08 0.48 -83.3%
Diluted Earnings Per Share 0.08 0.47 -83.0%
Cash Dividends 14,305 13,645
Return on Average Assets 0.19% 1.05%
Return on Average Equity 2.19% 12.72%
Net Interest Margin 4.27% 4.28%
Efficiency Ratio 57.31% 65.67%
Six Months Ended June 30
Net Income $46,472 $73,879 -37.1%
Basic Earnings Per Share 0.58 0.92 -37.0%
Diluted Earnings Per Share 0.58 0.91 -36.3%
Cash Dividends 27,845 27,336
Return on Average Assets 0.66% 1.01%
Return on Average Equity 7.65% 12.36%
Net Interest Margin 4.28% 4.26%
Efficiency Ratio 59.63% 66.02%
Summary of Results Excluding the Effect of Intangibles (a)
Three Months Ended June 30
Net Income $10,995 $42,291 -74.0%
Basic Earnings per Share $0.14 $0.53 -73.6%
Diluted Earnings per Share $0.14 $0.52 -73.1%
Return on Average Assets 0.32% 1.18%
Return on Average Equity 4.30% 17.01%
Efficiency Ratio 54.96% 63.53%
Six Months Ended June 30
Net Income $54,884 $81,543 -32.7%
Basic Earnings per Share $0.69 $1.01 -31.7%
Diluted Earnings per Share $0.69 $1.00 -31.0%
Return on Average Assets 0.79% 1.13%
Return on Average Equity 10.84% 16.62%
Efficiency Ratio 57.29% 63.89%
(a) Intangibles include goodwill, core deposit and trust intangibles, and other intangibles.
Statement of Condition Highlights and Performance Ratios
June 30 June 30 Percentage
2000 1999 Change
Total Assets $14,294,625 $14,551,458 -1.8%
Net Loans 9,497,438 9,181,690 3.4%
Total Deposits 9,109,146 9,286,155 -1.9%
Total Shareholders' Equity 1,209,399 1,214,214 -0.4%
Book Value Per Common Share $15.23 $15.12
Loss Reserve / Loans Outstanding 2.53% 2.23%
Average Equity / Average Assets 8.59% 8.14%
Common Stock Price Range High Low
1999 $24.94 $17.38
2000 First Quarter $20.38 $14.35
Second Quarter $23.19 $14.63
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
Pacific Century Financial Corporation and subsidiaries
Consolidated Statements of Income (Unaudited)
3 Months 3 Months 6 Months 6 Months
Ended Ended Ended Ended
June 30 June 30 June 30 June 30
2000 1999 2000 1999
(in thousands of dollars
except per share amounts)
Interest Income
Interest on Loans $185,584 $171,636 $365,986 $347,636
Loan Fees 8,977 11,717 17,223 21,298
Income on Lease Financing 9,747 6,448 17,726 14,716
Interest and Dividends on
Investment Securities
Taxable 13,321 14,912 27,557 28,591
Non-taxable 243 276 522 552
Income on Investment
Securities Available for
Sale 41,161 41,918 82,194 83,700
Interest on Deposits 3,551 6,465 7,315 14,691
Interest on Security
Resale Agreements 6 67 16 168
Interest on Funds Sold 485 1,598 958 4,151
Total Interest Income 263,075 255,037 519,497 515,503
Interest Expense
Interest on Deposits 70,781 63,460 138,995 129,787
Interest on Security
Repurchase Agreements 26,021 24,393 48,974 48,809
Interest on Funds
Purchased 7,834 8,743 16,361 21,511
Interest on Short-Term
Borrowings 6,514 3,321 11,046 6,570
Interest on Long-Term
Debt 13,319 10,720 26,007 20,582
Total Interest Expense 124,469 110,637 241,383 227,259
Net Interest Income 138,606 144,400 278,114 288,244
Provision for Loan Losses 83,407 13,948 96,929 26,538
Net Interest Income After
Provision for Loan Losses 55,199 130,452 181,185 261,706
Non-Interest Income
Trust Income 16,317 14,408 33,204 29,983
Service Charges on
Deposit Accounts 10,180 7,675 19,737 17,070
Fees, Exchange, and Other
Service Charges 22,586 22,618 44,212 44,616
Other Operating Income 13,097 12,094 28,672 24,449
Gain on Settlement of
Pension Obligation 11,900 -- 11,900 --
Investment Securities
Gains (Losses) (515) 6,818 (233) 8,665
Total Non-Interest Income 73,565 63,613 137,492 124,783
Non-Interest Expense
Salaries 44,460 50,483 92,007 101,325
Pensions and Other
Employee Benefits 10,788 14,907 25,418 29,950
Net Occupancy Expense 12,480 11,810 24,296 24,078
Net Equipment Expense 12,066 11,685 24,133 23,812
Other Operating Expense 41,998 43,147 81,951 87,500
Minority Interest 107 96 176 303
Total Non-Interest Expense 121,899 132,128 247,981 266,968
Income Before Income Taxes 6,865 61,937 70,696 119,521
Provision for Income Taxes 158 23,475 24,224 45,642
Net Income $6,707 $38,462 $46,472 $73,879
Basic Earnings Per Share $0.08 $0.48 $0.58 $0.92
Diluted Earnings Per Share $0.08 $0.47 $0.58 $0.91
Dividends Declared Per
Share $0.18 $0.17 $0.35 $0.34
Basic Weighted Average
Shares 79,425,245 80,302,154 79,623,305 80,361,529
Diluted Weighted Average
Shares 80,002,989 81,121,840 79,975,904 81,263,475
(END OF PART ONE OF FIVE)
CONTACT: Pacific Century Financial Corporation
Stafford Kiguchi, 808/537-8580 (Media Inquiries)
Pager: 808 363-5383
Sharlene Bliss, 808/537-8037 (Investor/Analyst Inquiries)