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Bankoh parent’s
earnings sink 83%

Pacific Century was forced
to set aside $83.4 million
to cover loan losses

City Bank's profits rise 26%

By Russ Lynch
Star-Bulletin

Confirming its previously announced earnings drop because of expected loan losses, Pacific Century Financial Corp. yesterday reported a second-quarter profit of $6.7 million, down 82.6 percent from a net of $38.5 million in the year-earlier period. The earnings were equal to 8 cents a share, down from 47 cents.

The stock market had virtually no reaction to the news, with the company's shares closing at $15.37 on the New York Stock Exchange, up 37 cents. The stock had dropped nearly $4 a month ago when Pacific Century announced it expected to report much lower second-quarter results.

Most of the change came from a $50 million increase in the Bank of Hawaii parent's reserve for loan losses. Pacific Century put aside $83.4 million for that purpose in the latest quarter, citing weakness in some syndicated commercial loans and the political and economic turmoil in Fiji, where Bank of Hawaii has three branches.

The year-earlier reserve for possible loan losses was $13.9 million.

The company wrote off $36.5 million in bad loans in the latest quarter, a 127 percent increase from $16.1 million in loan charge-offs in the first quarter of this year.

Included were almost $6 million to cover two syndicated loans, $7.6 million for three Hawaii real estate loans, $4.5 million in Fiji and $5.2 million in China.

Lawrence M. Johnson, Pacific Century chairman and CEO, called the loan-loss reserve action "prudent and appropriate."

He said Bank of Hawaii conducted a comprehensive review of its commercial loans in the second quarter, reviewing loans of $250,000 or more in line with the national banking industry's concerns about asset quality and a national tightening of credit standards.

Nonperforming assets, not counting loans past due 90 days or more, totaled $199.4 million at the end of June, up 33.5 percent from $149.4 million on June 30, 1999.

Johnson said that on the plus side, Pacific Century's "New Era" restructuring, which was started in October 1999, had shown tangible positive results by the second quarter of this year.

Pacific Century ended the second quarter with assets of $14.3 billion, down 2 percent from $14.6 billion a year earlier.

Net loans of $9.5 billion were up 3.3 percent from $9.2 billion at the end of June 1999. Deposits of $9.1 billion were down 2.2 percent from $9.3 billion at the end of June 1999.

Johnson said Hawaii's economy continues to strengthen, with economists now forecasting a growth of between 3 percent and 3.5 percent this year in real gross state product. Tourist arrivals are up and continuing to grow, he said.

Pacific Century has operations in Hawaii, the Western Pacific, the South Pacific and Asia.