To Our Shareholders:
This quarter's earnings were among the highest in the
history of Pacific Century Financial Corporation. Your company
reported strong net income of $38.5 million for 1999's second
quarter, up from $3.1 million for 1998's second quarter. Diluted
earnings per share were $0.47, up from $0.04 for the same period
last year. Year-over-year comparisons reflect the $19.4 million
restructuring charge and extra provisioning to the reserve for
loan losses incurred in the second quarter of 1998.
Tangible or "cash" earnings for the quarter were $42.3
million compared to $7.4 million reported for the similar period
last year. On a per share basis, tangible diluted earnings were
$0.52, up from $0.09 in 1998's second quarter.
These results reflect our continuing efforts to make the
balance sheet more efficient, control non-interest expense and
improve asset quality.
For the first six months of 1999, return on average assets
grew to 1.01 percent, up from 0.50 percent in 1998's first half
year. Return on average equity was 12.36 percent, compared with
6.53 percent reported in last year's like period.
We are pleased to note that Asia's economic recovery is
shaping up to be stronger and faster than expected. We also see
compelling evidence of gradually accelerating economic recovery
in Hawaii. The consensus economic forecast calls for 2 percent
real economic growth for the state through 1999 and into 2000.
In June, Bank of Hawaii agreed to boost its ownership in the
Bank of Queensland by acquiring 5.8 million shares, or
approximately 10 percent, of that bank's outstanding common
stock. This will bring our ownership stake in the Bank of
Queensland to approximately 17 percent. The transaction is
expected to close in the third quarter of this year, pending
regulatory approval, and will strengthen and enhance the
strategic alliance between the two banks that began in 1997.
Your company met the final major regulatory milestone for
Year 2000 readiness last month. By June 30, 1999, all of our
critical computer systems had been successfully tested to handle
the year 2000 change in date, and the Y2K contingency plans were
in place. During the remainder of 1999, we will focus on
validating our year 2000 contingency plans and monitoring the
readiness of third parties we rely on to serve our customers.
Pacific Century's Board of Directors has declared a
quarterly cash dividend of 17 cents per share on its outstanding
common shares. The dividend will be payable on September 15, 1999
to shareholders of record at the close of business on August 24,
1999.
The value of your holdings in Pacific Century remains our
utmost priority, and we appreciate your confidence in our ability
to guide your company into the 21st century.
Sincerely,
/s/ LAWRENCE M. JOHNSON
Lawrence M. Johnson
Chairman and CEO
Corporate Offices:
Financial Plaza of the Pacific
130 Merchant Street
Honolulu, HI 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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June 30 June 30
1999 1998
Return on Average Assets 1.01% 0.50%
Return on Average Equity 12.36% 6.53%
Average Spread on Earning Assets 4.26% 4.25%
Average Equity/Average Assets 8.14% 7.63%
Book Value Per Common Share $15.12 $14.19
Loss Reserve/Loans and Leases Outstanding 2.23% 2.20%
Common Stock Price Range High Low Dividend
1998................................ $25.88 $14.75 $0.6575
1999 First Quarter.................. $24.94 $19.94 $0.17
Second Quarter............ $23.25 $19.81 $0.17
Consolidated Statements of Income (Unaudited)
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3 Months 3 Months 6 Months 6 Months
Ended Ended Ended Ended
June 30 June 30 June 30 June 30
(in thousands of dollars except per share amounts) 1999 1998 1999 1998
- ------------------------------------------------------------------------------------------------------------------------------
Total Interest Income $255,037 $278,934 $515,503 $548,263
Total Interest Expense 110,637 132,082 227,259 259,693
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Net Interest Income 144,400 146,852 288,244 288,570
Provision for Possible Loan Losses 13,948 41,982 26,538 60,285
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Net Interest Income After Provision for Possible Loan Losses 130,452 104,870 261,706 228,285
Total Non-Interest Income 63,613 49,798 124,783 102,662
Total Non-Interest Expense 132,128 151,716 266,968 273,419
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Income Before Income Taxes 61,937 2,952 119,521 57,528
Provision for Income Taxes 23,475 (144) 45,642 20,412
- ------------------------------------------------------------------------------------------------------------------------------
Net Income $38,462 $3,096 $73,879 $37,116
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Basic Earnings Per Share $0.48 $0.04 $0.92 $0.47
Diluted Earnings Per Share $0.47 $0.04 $0.91 $0.46
Basic Weighted Average Shares 80,302,154 80,258,217 80,361,529 80,070,764
Diluted Weighted Average Shares 81,121,840 81,416,341 81,263,475 81,170,893
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Consolidated Statements of Condition (Unaudited)
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June 30 December 31 June 30
(in thousands of dollars) 1999 1998 1998
- ------------------------------------------------------------------------------------------------------------------------------
Assets
Interest-Bearing Deposits $411,239 $453,527 $542,966
Investment Securities
(Market Value of $3,547,199, $3,686,471, and $3,728,525, respectively) 3,550,115 3,671,205 3,713,420
Securities Purchased Under Agreements to Resell 4,325 -- --
Funds Sold 34,995 45,683 31,715
Loans 9,610,980 9,854,000 9,464,901
Unearned Income (219,717) (225,915) (207,742)
Reserve for Loan Losses (209,573) (211,276) (204,049)
Net Loans 9,181,690 9,416,809 9,053,110
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Total Earning Assets 13,182,364 13,587,224 13,341,211
Cash and Non-Interest Bearing Deposits 493,483 564,243 575,553
Premises and Equipment 288,955 293,591 297,392
Other Assets 586,656 571,505 516,954
- ------------------------------------------------------------------------------------------------------------------------------
Total Assets $14,551,458 $15,016,563 $14,731,110
==============================================================================================================================
Liabilities
Deposits $9,286,155 $9,576,342 $9,505,968
Securities Sold Under Agreements to Repurchase 1,990,178 2,008,399 2,313,784
Funds Purchased 715,398 942,062 366,066
Short-Term Borrowings 353,177 356,822 379,129
Other Liabilities 337,489 361,728 360,583
Long-Term Debt 654,847 585,616 665,106
- ------------------------------------------------------------------------------------------------------------------------------
Total Liabilities 13,337,244 13,830,969 13,590,636
Shareholders' Equity
Common Stock ($.01 par value), authorized 500,000,000 shares;
issued / outstanding; June 1999 - 80,544,104 / 80,287,805;
December 1998 - 80,512,372 / 80,325,998;
June 1998 - 80,385,041 / 80,385,041 805 805 804
Capital Surplus 345,468 342,932 340,872
Accumulated Other Comprehensive Income (39,245) (22,476) (25,958)
Retained Earnings 912,686 867,852 824,756
Treasury Stock, at Cost - (June 1999 - 256,299 and
December 1998 - 186,374 Shares) (5,500) (3,519) --
- ------------------------------------------------------------------------------------------------------------------------------
Total Shareholders' Equity 1,214,214 1,185,594 1,140,474
- ------------------------------------------------------------------------------------------------------------------------------
Total Liabilities and Shareholders' Equity $14,551,458 $15,016,563 $14,731,110
==============================================================================================================================