To Our Shareholders:
Pacific Century Financial Corporation saw improved profits
in the first quarter of 1999, reporting earnings of $35.4
million, up 4.1 percent from $34.0 million for the same period
last year. Per share earnings of 44 cents in the latest quarter
were up 4.8 percent from 42 cents a year ago. First quarter net
interest income was $143.8 million, up 1.5 percent over last
year's first quarter.
Your company's total assets at the end of March stood at
$14.9 billion, compared to $14.8 billion at March 31, 1998 and
$15.0 billion at year-end 1998. Total deposits at first-quarter
end were $9.4 billion, unchanged from the year earlier end date.
Net loans were $9.2 billion, up 2.0 percent from last year's
first quarter. Return on average assets for the quarter was 0.96
percent and return on average equity was 12.00 percent.
Tangible earnings for the quarter were $39.3 million
compared to $36.5 million for the year earlier period. Tangible
diluted earnings per share for the quarter were $0.48, up 6.7
percent from the $0.45 reported for the quarter ended March 31,
1998.
Non-interest income was up 15.7 percent at $61.2 million
versus $52.9 million in the year-earlier period, with all
categories of non-interest income posting double-digit growth.
Exclusive of securities transactions, non-interest income totaled
$59.3 million, a 19.9 percent increase from 1998's first quarter
and a 9.4 percent increase from 1998's fourth quarter. Fueling
the rise were an 11.6 percent increase in trust income, a 14.4
percent increase in service charges on deposit accounts, a 16.3
percent increase in other fee income, and a 47.1 percent increase
in other operating income over the year-earlier period.
Consensus economic forecasts call for growth in Hawaii's GDP
of about one and a half percent in 1999. We also see encouraging
signs of economic stabilization in Asia. We believe that we are
well positioned to take advantage of an improved operating
environment in each of these markets.
In January, Bank of Hawaii consummated the acquisition of
Triad/IAG Insurance Agency, a leading Honolulu-based provider of
property and casualty insurance. With this transaction, Pacific
Century gained a strong foothold in the state's property/casualty
insurance industry. The addition of property/casualty insurance
to our product line enables us to offer clients a truly
comprehensive array of quality financial services.
At the company's annual meeting in April, you and your
fellow shareholders voted to approve all of the proposals listed
in this year's proxy statement. Shareholders also approved the
appointment of two new directors, J. Richard Fredericks and
Martin A. Stein, to the holding company board. Expansion of our
board will further enhance the body's geographic diversity and
augment existing expertise and experience in the areas of
technology, strategic development and investment banking.
Also in April, the company named Marshall V. Laitsch
President and CEO of our mainland bank subsidiary, Pacific
Century Bank, N.A. (PCB). Under his leadership, we expect PCB to
further capitalize on the growth potential of the vigorous
California and Arizona markets, cementing Pacific Century's
position as one of the premiere middle market banks in these
regions.
At its April 23rd meeting, your board of directors declared
a quarterly cash dividend of 17 cents per share on the
outstanding common stock. The dividend will be payable on June
14, 1999 to shareholders of record at the close of business on
May 28, 1999. With this dividend declaration, Pacific Century
continues to honor its one-hundred-year tradition of paying
regular quarterly cash dividends to shareholders.
The value of your holdings in Pacific Century Financial
Corporation remains our utmost priority. Your continued
confidence and support are invaluable to us as we implement and
build upon the initiatives that will lead us into our New Era.
Sincerely,
/c/ LAWRENCE M. JOHNSON
Lawrence M. Johnson
Chairman and CEO
Corporate Offices:
Financial Plaza of the Pacific
130 Merchant Street
Honolulu, Hawaii 96813
Investor or Analyst Inquiries:
David A. Houle
Executive Vice President, Treasurer and Chief Financial Officer
(808) 537-8288
or
Sharlene K. Bliss
Investor Relations
(808) 537-8037
or
Cori C. Weston
Corporate Secretary
(808) 537-8272
Highlights (Unaudited) Pacific Century Financial Corporation and subsidiaries
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March 31 March 31
1999 1998
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Return on Average Assets 0.96% 0.95%
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Return on Average Equity 12.00% 12.11%
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Average Spread on Earning Assets 4.24% 4.29%
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Average Equity/Average Assets 7.98% 7.81%
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Book Value Per Common Share $15.01 $14.27
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Loss Reserve/Loans and Leases Outstanding 2.22% 1.90%
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Common Stock Price Range High Low Dividend
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1998............................. $25.88 $14.75 $0.6575
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1999 First Quarter............... $24.94 $19.94 $0.70
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Consolidated Statements of Income (Unaudited)
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3 Months 3 Months
Ended Ended
March 31 March 31
(in thousands of dollars except per share amounts) 1999 1998
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Total Interest Income $262,807 $273,066
Total Interest Expense 118,963 131,348
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Net Interest Income 143,844 141,718
Provision for Possible Loan Losses 12,590 18,303
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Net Interest Income After Provision for Possible Loan Losses 131,254 123,415
Total Non-Interest Income 61,170 52,864
Total Non-Interest Expense 134,840 121,703
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Income Before Income Taxes 57,584 54,576
Provision for Income Taxes 22,167 20,556
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Net Income $35,417 $34,020
=================================================================================================================================
Basic Earnings Per Share $0.44 $0.43
Diluted Earnings Per Share $0.44 $0.42
Basic Weighted Average Shares 80,421,563 79,881,229
Diluted Weighted Average Shares 81,405,868 80,735,604
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Consolidated Statements of Condition (Unaudited)
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March 31 December 31 March 31
(in thousands of dollars) 1999 1998 1998
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Assets
Interest-Bearing Deposits $494,202 $453,527 $425,637
Investment Securities
(Market Value of $3,636,296, $3,686,471, and $3,805,037 respectively) 3,627,968 3,671,205 3,800,428
Securities Purchased Under Agreements to Resell 4,083 0 0
Funds Sold 111,894 45,683 119,480
Loans 9,637,661 9,854,000 9,403,406
Unearned Income (220,206) (225,915) (202,865)
Reserve for Loan Losses (209,329) (211,276) (175,194)
Net Loans 9,208,126 9,416,809 9,025,347
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Total Earning Assets 13,446,273 13,587,224 13,370,892
Cash and Non-Interest Bearing Deposits 617,362 564,243 586,746
Premises and Equipment 292,583 293,591 285,916
Other Assets 572,068 571,505 514,261
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Total Assets $14,928,286 $15,016,563 $14,757,815
=================================================================================================================================
Liabilities
Deposits $9,434,427 $9,576,342 $9,435,399
Securities Sold Under Agreements to Repurchase 2,090,663 2,008,399 2,304,423
Funds Purchased 775,577 942,062 559,573
Short-Term Borrowings 377,387 356,822 259,604
Other Liabilities 367,039 361,728 370,738
Long-Term Debt 675,634 585,616 684,782
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Total Liabilities 13,720,727 13,830,969 13,614,519
Shareholders' Equity
Common Stock ($.01 par value at March 31, 1999 and December 31, 1998)
and ($2.00 at March 31, 1998), authorized 500,000,000 shares;
issued / outstanding, March 1999 - 80,537,756 / 80,398,067;
December 1998 - 80,512,372 / 80,325,998; March 1998 - 80,140,398 / 80,140,398 805 805 160,281
Capital Surplus 344,955 342,932 176,496
Accumulated Other Comprehensive Income (23,536) (22,476) (28,193)
Retained Earnings 888,367 867,852 834,712
Treasury Stock, at Cost - (March 1999 - 139,689 and December 1998 - 186,374 Shares) (3,032) (3,519) --
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Total Shareholders' Equity 1,207,559 1,185,594 1,143,296
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Total Liabilities and Shareholders' Equity $14,928,286 $15,016,563 $14,757,815
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