U N I T E D S T A T E S
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report
(Date of earliest event reported) October 18, 2000
PACIFIC CENTURY FINANCIAL CORPORATION
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 1-6887 99-0148992
------------------------ ------------ -------------------
(State of incorporation) (Commission (IRS Employer
File Number) Identification No.)
130 Merchant Street, Honolulu, Hawaii 96813
---------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
(Registrant's telephone number,
including area code) (808) 537-8037
Item 5. Other Events
(a) Exhibit
99.1 Press Release
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act
of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned thereunto duly authorized.
Date: October 20, 2000 PACIFIC CENTURY FINANCIAL
CORPORATION
/s/ Richard J. Dahl
(Signature)
Richard J. Dahl
President & Chief
Operating Officer
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
PACIFIC CENTURY FINANCIAL CORPORATION
EXHIBIT TO CURRENT REPORT ON
FORM 8-K DATED October 18, 2000
Commission File Number 1-6887
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
FOR IMMEDIATE RELEASE
HONOLULU (October 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:
o Pacific Century successfully completed the implementation of
New Era Redesign, with results exceeding original estimates.
o 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.
o 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.
o 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
o 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.
o 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.
o 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
o 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.
o 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.
o 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
o 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)
Percentage
Earnings Highlights and 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.
September 30 September 30 Percentage
Statement of Condition Highlights and Performance Ratios 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
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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
- ------------------------------------------------------------------------------------------------------------
3 Months 3 Months 9 Months 9 Months
Ended Ended Ended Ended
Sept 30 Sept 30 Sept 30 Sept 30
(in thousands of dollars except per share amounts) 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
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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
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Total Interest Expense 129,966 109,514 371,632 336,773
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Net Interest Income 139,304 143,453 417,418 431,697
Provision for Loan Losses 20,145 13,500 117,074 40,038
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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 0 0 11,900 0
Investment Securities Gains (Losses) (82) 77 (315) 8,742
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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 0 22,478 0 22,478
Minority Interest 110 81 286 384
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Total Non-Interest Expense 124,925 155,593 372,906 422,561
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Income Before Income Taxes 55,490 45,762 126,186 165,283
Provision for Income Taxes 20,887 24,283 45,111 69,925
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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 0 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
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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 - 80,550,1 806 806 806
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 Retained Treasury Comprehensive
(in thousands of dollars) Total Stock Surplus Income Earnings Stock Income
- -----------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1999 $1,212,330 $806 $345,851 ($66,106) $942,177 ($10,398)
Comprehensive Income
Net Income 81,075 0 - - 81,075 - $81,075
Other Comprehensive Income, Net of Tax
Investment Securities, Net of
Reclassification Adjustment 9,960 0 0 9,960 0 - 9,960
Foreign Currency Translation Adjustment (474) 0 0 (474) 0 - (474)
------------
Total Comprehensive Income $90,561
============
Common Stock Issued
62,102 Profit Sharing Plan 1,096 0 18 0 (167) 1,245
195,094 Stock Option Plan 2,610 0 0 0 (1,500) 4,110
142,421 Dividend Reinvestment Plan 2,481 0 52 0 (431) 2,860
4,973 Directors' Restricted Shares and
Deferred Compensation Plan 95 0 95 0 0 0
Treasury Stock Purchased (16,957) 0 0 0 0 (16,957)
Cash Dividends Paid (42,147) 0 0 0 (42,147) 0
- ----------------------------------------------------------------------------------------------------------------------
Balance at September 30, 2000 $1,250,069 $806 $346,016 ($56,620) $979,007 ($19,140)
======================================================================================================================
Balance at December 31, 1998 $1,185,594 $805 $342,932 ($22,476) $867,852 ($3,519)
Comprehensive Income
Net Income 95,358 0 - - 95,358 - $95,358
Other Comprehensive Income, Net of Tax
Investment Securities, Net of
Reclassification Adjustment (28,231) 0 0 (28,231) 0 - (28,231)
Foreign Currency Translation Adjustment (1,818) 0 0 (1,818) 0 - (1,818)
-----------
Total Comprehensive Income $65,309
===========
Common Stock Issued
37,419 Profit Sharing Plan 736 0 3 0 (70) 803
318,672 Stock Option Plan 5,843 0 2,265 0 (2,288) 5,866
154,515 Dividend Reinvestment Plan 3,204 1 137 0 (197) 3,263
6,595 Directors' Restricted Shares and
Deferred Compensation Plan 140 0 140 0 0 0
Treasury Stock Purchased (11,336) 0 0 0 0 (11,336)
Cash Dividends Paid (40,991) 0 0 0 (40,991) 0
- -----------------------------------------------------------------------------------------------------------------------------------
Balance at September 30, 1999 $1,208,499 $806 $345,477 ($52,525) $919,664 ($4,923)
===================================================================================================================================
Consolidated Average Balances and Interest Rates Taxable Equivalent (Unaudited)
- ------------------------------------------------------------------------------------------------
Three Months Ended Three Months Ended
September 30, 2000 September 30, 1999
Average Income/Yield/ Average Income/ Yield/
(in millions 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 Dep- 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 Deposit- 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
====== ======
Consolidated Average Balances and Interest Rates Taxable Equivalent (Unaudited)
- ------------------------------------------------------------------------------------------------
Nine Months Ended Nine Months Ended
September 30, 2000 September 30, 1999
Average Income/Yield/ Average Income/ Yield/
(in millions 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 Dep- 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 Deposit- 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)
- -----------------------------------------------------------------------------------------------------
Sep 30 Jun 30 Mar 31 Dec 31 Sep 30 Jun 30 Mar 31 Dec 31 Sep 30
(in millions of dollars) 2000 2000 2000 1999 1999 1999 1999 1998 1998
- -----------------------------------------------------------------------------------------------------
Non-Accrual Loans
Commercial and Industrial $49.0 $52.7 $20.1 $23.7 $31.7 $37.5 $39.1 $28.2 $24.0
Real Estate
Construction 8.1 8.0 0.9 1.1 2.1 0.8 3.1 2.9 4.4
Commercial 86.8 62.2 18.2 19.0 20.8 17.2 18.7 5.4 6.7
Residential 22.0 23.2 23.2 29.7 33.1 35.2 37.6 36.4 35.9
Installment 0.1 0.1 0.5 0.5 0.7 0.8 0.5 0.8 0.9
Leases 0.2 0.3 3.7 3.9 4.8 4.4 4.5 0.7 0.8
-----------------------------------------------------------------------
Total Domestic 166.2 146.5 66.6 77.9 93.2 95.9 103.5 74.4 72.7
Foreign 48.3 59.2 65.2 67.4 55.7 47.5 53.6 57.5 67.9
-----------------------------------------------------------------------
Subtotal 214.5 205.7 131.8 145.3 148.9 143.4 157.1 131.9 140.6
Foreclosed Real Estate
Domestic 4.9 4.6 4.3 4.3 5.6 5.8 6.1 5.5 10.8
Foreign 0.2 0.3 0.3 0.3 0.3 0.2 0.1 0.1 0.1
-----------------------------------------------------------------------
Subtotal 5.1 4.9 4.6 4.6 5.9 6.0 6.2 5.6 10.9
-----------------------------------------------------------------------
Total Non-Performing Assets 219.6 210.6 136.4 149.9 154.8 149.4 163.3 137.5 151.5
-----------------------------------------------------------------------
Accruing Loans Past Due 90 Days or More
Commercial and Industrial 2.2 4.7 6.7 5.9 6.2 3.9 4.3 0.4 7.3
Real Estate
Construction 0.1 0.0 0.0 0.0 0.5 0.2 0.2 0.4 0.6
Commercial 4.9 2.0 2.1 1.9 2.4 0.2 0.4 0.0 0.8
Residential 7.2 3.5 5.0 4.0 2.8 3.7 3.5 4.5 4.8
Installment 4.6 4.0 4.7 4.5 4.5 5.2 6.9 7.3 6.6
Leases 0.1 1.5 1.4 1.2 0.2 0.0 0.1 0.3 0.1
-----------------------------------------------------------------------
Total Domestic 19.1 15.7 19.9 17.5 16.6 13.2 15.4 12.9 20.2
Foreign 1.5 1.3 3.2 1.0 5.0 8.2 6.3 7.9 7.1
-----------------------------------------------------------------------
Subtotal 20.6 17.0 23.1 18.5 21.6 21.4 21.7 20.8 27.3
-----------------------------------------------------------------------
Total $240.2 $227.6 $159.5 $168.4 $176.4 $170.8 $185.0 $158.3 $178.8
=======================================================================
- -----------------------------------------------------------------------------------------------------
Ratio of Non-Performing Assets
to Total Loans 2.25% 2.09% 1.39% 1.54% 1.59% 1.55% 1.69% 1.40% 1.59%
- -----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
Ratio of Non-Performing Assets
and Accruing Loans Past Due
90 Days or More to Total Loan 2.46% 2.26% 1.63% 1.73% 1.81% 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
Quarter Quarter Quarter Months Months
(in millions 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 0.0 0.5 0.0 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 0.0 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 0.0 0.0 0.0 0.0 0.0
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)* (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%
- -----------------------------------------------------------------------------------------------------
* Includes balance transfers, reserves acquired, and foreign currency translation adjustments.
Pacific Century Financial Corporation and subsidiaries
Quarterly Summary of Selected Consolidated Financial Data
- ------------------------------------------------------------------------------------------------------------------------------------
Sep. 30 Jun. 30 Mar. 31 Dec. 31 Sept. 30 Jun. 30 Mar. 31
(in millions of dollars except per share amounts) 2000 2000 2000 1999 1999 1999 1999
- ------------------------------------------------------------------------------------------------------------------------------------
Balance Sheet Totals
Total Assets $13,939.9 $14,294.6 $14,250.4 $14,440.3 $14,505.4 $14,551.5 $14,928.3
Net Loans 9,233.5 9,497.4 9,346.5 9,280.8 9,321.5 9,181.7 9,208.1
Deposits 8,820.7 9,109.1 9,143.1 9,394.2 9,290.4 9,286.2 9,434.4
Long-Term Debt 999.7 902.2 805.7 727.7 794.8 654.8 675.6
Shareholders' Equity 1,250.1 1,209.4 1,225.9 1,212.3 1,208.5 1,214.2 1,207.6
Quarterly Operating Results
Net Interest Income $139.3 $138.6 $139.5 $143.0 $143.5 $144.4 $143.8
Provision for Loan Losses 20.1 83.4 13.5 20.9 13.5 13.9 12.6
Non-Interest Income 61.3 73.6 63.9 69.4 71.4 63.6 61.2
Non-Interest Expense 124.9 121.9 126.1 131.2 155.6 132.1 134.8
Net Income 34.6 6.7 39.8 37.6 21.5 38.5 35.4
Basic Earnings Per Share $0.44 $0.08 $0.50 $0.47 $0.27 $0.48 $0.44
Diluted Earnings Per Share $0.44 $0.08 $0.50 $0.47 $0.27 $0.47 $0.44
Return on Average Assets 0.98% 0.19% 1.13% 1.04% 0.59% 1.05% 0.96%
Return on Average Equity 11.20% 2.19% 13.19% 12.29% 7.01% 12.72% 12.00%
Efficiency Ratio 62.26% 57.31% 62.06% 63.32% 72.44% 65.67% 66.37%
Normalized Efficiency Ratio (1) 0.00 0.00 0.00 0.00 61.98% 0.00 0.00
Excluding the Effects of Intangibles (2)
Net Income $38.8 $11.0 $43.9 $42.3 $25.9 $42.3 $39.3
Basic Earnings Per Share $0.49 $0.14 $0.55 $0.53 $0.32 $0.53 $0.49
Diluted Earnings Per Share $0.49 $0.14 $0.55 $0.52 $0.32 $0.52 $0.48
Return on Average Assets 1.12% 0.32% 1.26% 1.19% 0.72% 1.18% 1.08%
Return on Average Equity 14.94% 4.30% 17.54% 16.69% 10.25% 17.01% 16.21%
Efficiency Ratio 59.83% 54.96% 59.73% 60.59% 70.04% 63.53% 64.25%
Normalized Efficiency Ratio (1) 0.00 0.00 0.00 0.00 59.57% 0.00 0.00
(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.