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Bankoh parent’s
stock hits
5-year low

Its shares tumble 12%
following the company's
warning of lower fourth
quarter and 2001 profits

City Bank parent's net soars

---

By Rick Daysog
Star-Bulletin

Shares of Bank of Hawaii's parent company tumbled more than 12 percent today to a five-year closing low after the company said its earnings for the fourth quarter and next year would be significantly lower than Wall Street's expectations.

Pacific Century Financial Corp. also said yesterday that bank regulators have stepped up their oversight of the company.

In heavy trading, the company's stock closed on the New York Stock Exchange at $13.19, down $1.81. The stock had dropped as low as $12.69 earlier in the day. Today's closing price was the lowest since Jan. 24, 1995, when the stock ended at $13.06.

About 1.05 million shares changed hands, compared to the average daily volume of about 298,000 shares for the past six months.

"I think the stock price decline reflects more disappointment by investors," said James Bradshaw, banking analyst at D.A. Davidson & Co. in Portland. "I think a lot of people have given up on the stock."

Pacific Century said yesterday after the market closed that analysts' projections for the fourth quarter 2000 and the full year 2001 were "significantly higher" than the company expects based on the third quarter results.

Analysts on average had been predicting earnings of 51 cents a share for fourth quarter 2000 and $2.13 for the 2001 year.

Pacific Century said it is contemplating taking additional charges over the next year that could impact income growth. The company said it hopes to limit the charge-offs and loan loss provisions next year to $50 million to $60 million.

Earlier this year, the company took a $55 million to $65 million charge to cover loan losses and to shore up its reserves for future nonperforming loans. The charge -- largely for out-of-state loans -- effectively wiped out the company's second quarter earnings.

For the quarter ending Sept. 31, the bank holding company said it earned $34.6 million, or 44 cents a share, up 61.1 percent from the year-earlier quarter's $21.5 million, or 27 cents per share. However, the increase largely reflected a $22.5 million charge that the company took in the third quarter 1999 to pay for its New Era redesign program.

The latest per-share results were also below the 48-cent average estimate of nine Wall Street analysts.

The company also said it has entered into an informal agreement with an unnamed regulator in which the company would require approval to pay dividends, incur debt and expand its stock buy back program. Pacific Century said the regulator has given its consent for a fourth quarter dividend and the continuation of the company's commercial paper program.

The agreement -- known as a "memorandum of understanding" -- means that the regulatory agency, presumably the Federal Deposit Insurance Corp., is raising questions about the recent decline Pacific Century's loan quality, according to Bradshaw.

Pacific Century's nonperforming assets totaled $219.6 million at the end of the third quarter, up $154.8 million in the year-earlier period. The company said that a previously reported $65 million troubled loan remains unresolved.

"I don't think it's a bank that has huge worries but they have some asset quality issues to go through," Bradshaw said. "The FDIC is clearly worried about asset quality there and wants to make sure that they are apprised of any developments."

Richard Dahl, Pacific Century's president and chief operating officer, said the agreement should not hamper the company's daily operations.

The recent negative developments come as Pacific Century restructuring is paying dividends.

The company said that results from its New Era redesign program exceeded original estimates. Pacific Century said the restructuring -- which eliminated about 1,000 jobs companywide -- has saved about $43 million and has enhanced revenues by about $25 million.

Pacific Century also said it has pared down its syndicated loan portfolio by $100 million to $1.2 million and has reduced its loan exposure in Asia by $100 million to $900 million.

"The third quarter's results reflect the impact of efforts to reduce exposures in syndicated lending and continuing emphasis on asset quality," said Pacific Century' Chairman and Chief Executive Officer Lawrence Johnson, who announced his retirement in August after the company's stock sagged.

"We are continuing a rigorous process for reviewing and monitoring asset quality that will strengthen the company over the long term," he said.