EXHIBIT 99.2
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
PACIFIC CENTURY FINANCIAL CORPORATION
EXHIBIT TO CURRENT REPORT ON
FORM 8-K DATED April 23, 2001
NEWS RELEASE
[LETTERHEAD]
PACIFIC CENTURY FINANCIAL CORPORATION NEW STRATEGY
TO FOCUS ON HAWAII OPERATIONS
WILL DIVEST NON-CORE HOLDINGS
FOR IMMEDIATE RELEASE
HONOLULU, HI (April 23, 2001) - Pacific Century Financial Corporation
(PCFC) today announced its new corporate strategic plan designed to maximize
shareholder value by strengthening its Hawaii and West Pacific operations and
divesting non-core holdings.
Michael E. O'Neill, PCFC and Bank of Hawaii Chairman and CEO, said,
"The new strategy focuses on building on strengths in the company's core
markets. We will be directing our efforts at three key business units: retail
banking, commercial banking, and financial services." The company also plans to
seek approval next year to change the parent company name from Pacific Century
Financial Corporation to Bank of Hawaii Corporation.
The new plan, which goes into effect immediately and extends through
2003, is the result of an intensive and detailed four-month strategic assessment
process, during which the company made the decision to divest or wind down its
holdings in California, most of the South Pacific and Asia. It will retain
operations in Hawaii, the West Pacific, American Samoa and Japan, as well as an
office in Arizona for its leasing operations and technology support.
O'Neill said, "The decision to divest, while necessary, was certainly
difficult since the company has served these regions for many years and has
strong historical ties."
He explained, "Although financial projections for these businesses
forecast improvement, current and expected returns were insufficient when
compared to those in Hawaii and the West Pacific. These lines of business were
not creating value for our shareholders."
The plan calls for the divestiture program to be completed by the end
of 2001. PCFC and Bank of Hawaii President Richard Dahl will oversee all
divestiture-related activities.
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PCFC NEW STRATEGY
PAGE 2
Approximately 1,000 employees work throughout the impacted divisions.
However, it is anticipated that many of them could continue employment under new
owners. The impact on Hawaii-based employees is expected to be minimal.
Successful implementation of the planned changes will have a
significant potential impact on the company's profitability and the return to
its shareholders. The charts attached to this release show the projected effect
through 2003. In addition, implementation as planned will reduce the economic
capital required to run the company by nearly half. This will result in
approximately $800 million in capital that will need to either be reinvested or
returned to shareholders.
In our core markets, our major focus will be toward building deeper and
broader relationships with existing customers and increasing the share of
financial products and services provided. This will be done while maintaining a
focus on efficiency and expense management.
RETAIL BANKING: Bank of Hawaii's retail banking franchise and market
share in Hawaii, the West Pacific and American Samoa are key strengths of the
company. All locations are U.S. dollar-based with similar products and services
and operating under traditional U.S. legal systems.
"We see tremendous opportunity for growth in our core markets," O'Neill
said. "We've always been exceptionally strong in traditional banking - checking
and savings accounts and loans. But today we define financial services much more
broadly. People are looking for someone to help with insurance, investments such
as mutual funds and stocks, trust services, financial planning, and other needs.
When you combine all of those needs, we probably have less than 10 percent
market penetration. We think we can at least double that. In addition, we're
paying close attention to taking care of customers at all levels, whether
they're in the branch, on-line or on the phone."
COMMERCIAL BANKING: Commercial banking is a core strength for
the bank. O'Neill described the strategy as "improving credit quality while
expanding our strong market share of high-value relationships in Hawaii and the
West Pacific." He said Bank of Hawaii enjoys a solid reputation and has
excellent market coverage and the expertise and products that commercial
customers want and need.
FINANCIAL SERVICES GROUP: Bank of Hawaii has long been a leader in
private banking, trust and asset management. The growth strategy for this group
is to expand the client base through integration with other areas of the bank
and to deepen relationships with existing customers. This will include offering
new investment products and lines of insurance.
To ensure the proper oversight of the new organizational structure, the
Managing Committee members and their respective responsibilities have been
changed. Richard Dahl remains as President with responsibility for implementing
the divestiture plan. In addition to Dahl, the Managing Committee will consist
of seven vice chairs reporting directly to the Chairman and CEO.
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PCFC NEW STRATEGY
PAGE 3
They are: Alton Kuioka (Commercial Banking); David Thomas (Retail Banking - will
join in mid-June 2001); Walter Laskey (Financial Services); Allan Landon
(Finance); William Nelson (Risk Management); Mary Carryer (Technology /
Operations / Procurement / Premises); and Neal Hocklander (Human Resources).
Also reporting to O'Neill are Lori McCarney (Marketing and Communications) and
Joe Kiefer (General Counsel).
O'Neill said the new management team represents a combination of
strengths that will help ensure the company achieves its goals. "Having a
flatter organization and broader span of control allows for increased efficiency
in decision making."
He said, "We believe our new Hawaii-focused strategy is going to be
good for customers and shareholders. We will also continue our practice of being
a responsible corporate citizen, providing generously to worthy charitable
causes, and being meaningfully involved in community activities. We're doing
tangible things that are going to provide tangible results."
The company will review first quarter 2001 earnings and the results of
its strategic assessment process at a presentation in New York today at 8:00
a.m. ET. The presentation will be accessible via teleconference as well as
through the investor relations link of PCFC's web site, www.boh.com. The
conference call number is (800) 230-1096 or for international locations call
(612) 332-0720. A replay will be available at 12 noon ET on Monday, April 23,
2001 by calling (800) 475-6701 (USA) or (320) 365-3844 (International) and
entering the number 577584 when prompted. A replay of the presentation will be
available at 12 noon ET, Monday, April 23, 2001 on PCFC's web site.
Pacific Century Financial Corporation is a regional financial services
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 and the West Pacific, 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.
This news release contains forward-looking statements. All statements
in this news release that address events or developments that we anticipate may
occur in the future are forward-looking statements. We believe the assumptions
underlying our forward-looking statements are reasonable. However, any of the
assumptions could prove to be inaccurate and actual results may differ
materially from those projected for a variety of reasons including, but not
limited to: we may not complete implementation of the restructuring plan within
expected financial and time estimates; our credit markets may deteriorate; our
credit quality initiatives may fall short of our goals; we may not achieve the
expense reductions we expect; we may not be able to maintain our net interest
margin; we may not be able to implement our proposed equity repurchases in the
amount or at the times planned; our restructuring may cause unanticipated
organizational disruptions; customer acceptance of our business as restructured
may be less than expected; there may be economic or political volatility in the
markets we serve; and there may be changes in business and economic conditions,
competition, fiscal and monetary policies or legislation. We do not undertake
any obligation to update any forward-looking statements to reflect later events
or circumstances.
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PCFC NEW STRATEGY
PAGE 4
PCFC STRATEGY SUMMARY
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FROM 2001 TO 2003
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NAME Pacific Century Financial Corporation Bank of Hawaii Corporation
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MISSION Bank of the Pacific Maximize shareholder value over time by
exceeding customers' expectations
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FOOTPRINT 6 Asian countries; 6 South Pacific Hawaii, West Pacific, American Samoa,
locations; West Pacific; Hawaii; Japan, and Arizona (leasing)
California; Arizona, New York
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ORGANIZATIONAL FOCUS Business strategy by geographic Retail, Commercial and Financial Services
market
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EMPLOYEES 4,166 Approximately 3,070
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BRANDING Multiple brands Bank of Hawaii
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COMMUNITY REINVESTMENT Outstanding Outstanding
ACT RATING
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TOTAL ASSETS $14 billion Approximately $9 billion
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CORE NET INCOME $119 million (+/- 2%) $131 million (+/- 2%)
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CORE EPS DILUTED $1.51 (+/- 2%) $2.51 (+/- 2%)
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RETURN ON EQUITY 9% - 10% 17%
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THE STRATEGIC ACTION PLAN
TOTAL BUSINESS FORECAST FOR 2001
(PROJECTION PLUS OR MINUS 2%)
Actual Forecast
($millions) 1Q01 Full Year 2001
-----------------------------------
Total Revenue $199 $702
Total Expense 132 453
-----------------------------------
Operating Income 67 249
Credit Provision 16 56
-----------------------------------
Pretax Income 51 193
Provision for Taxes 20 74
Core Net Income $ 31 $119
===================================
Significant Items $ 3
--------
Core EPS - Diluted $0.38 $1.51
THE STRATEGIC ACTION PLAN
DIVESTED BUSINESSES FORECAST FOR 2001
(PROJECTION PLUS OR MINUS 2%)
Actual Forecast
($millions) 1Q01 Full Year 2001
-------------------------------------
Total Revenue $ 51 $121
Total Expense 35 80
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Operating Income 16 41
Credit Provision 4 11
-------------------------------------
Pretax Income 12 30
Provision for Taxes 5 13
-------------------------------------
Core Net Income $ 7 $ 17
=====================================
Core EPS - Diluted $0.09 $0.22
THE STRATEGIC ACTION PLAN
CONTINUING BUSINESSES FORECAST FOR 2001
(PROJECTION PLUS OR MINUS 2%)
Actual Forecast
($millions) 1Q01 Full Year 2001
----------------------------------
Total Revenue $148 $581
Total Expense 97 373
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Operating Income 51 208
Credit Provision 12 45
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Pretax Income 39 163
Provision for Taxes 15 61
----------------------------------
Core Net Income $ 24 $102
==================================
Core EPS - Diluted $0.29 $1.29
THE STRATEGIC ACTION PLAN
FORECAST FOR 2002 - 2003
(PROJECTION PLUS OR MINUS 2%)
Forecast Forecast
($millions) 2002 2003
----------------------------------
Total Revenue $597 $619
Total Expense 369 376
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Operating Income 228 243
Credit Provision 36 30
----------------------------------
Pretax Income 192 213
Provision for Taxes 73 82
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Net Income $119 $131
==================================
EPS - Diluted $2.19 $2.51
2001 STRATEGIC ACTION PLAN
BALANCE SHEET TRENDS
ASSETS ($millions) 2000 2003 CHANGE
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Business Dispositions 2,800 100 (2,700)
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Credit Concentrations:
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Corporate Banking 1,130 440 (690)
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Commercial Real Estate 740 500 (240)
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Hawaii Commercial Banking 670 590 (80)
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Mortgage Portfolio 2,620 1,670 (950)
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Securities Portfolio 2,940 2,200 (740)
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All Other Lines of Business 3,160 3,200 40
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TOTAL ASSETS 14,060 8,700 (5,360)
THE STRATEGIC ACTION PLAN
2001 2002 2003
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o Restructure/Clean-up o Clearly See Benefits o Steady State
o Assets $11 - 12 Billion o Assets $8 - 9 Billion o Assets $8 - 9 Billion
o Capital Targets o Capital Targets o Capital Targets
-leverage 8 - 9% -leverage 9 - 10% -leverage 10%
-Tier 1 11 - 12% -Tier 1 12% -Tier 1 12 -13%
o Financial Targets o Financial Targets o Financial Targets
-EPS $1.51 (+/- 2%) -EPS $2.19 (+/- 2%) -EPS $2.51 (+/- 2%)
-ROE 9 - 10% -ROE 15% -ROE 17%
-ROA over 1% -ROA over 1.3% -ROA over 1.5%
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