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Bankoh loan
ratio ranked 3rd
worst in U.S.

New chairman Michael O'Neill
says focusing on credit issues
has been his top priority

---

By Rob Perez
Star-Bulletin

Bank of Hawaii at the end of September had the third highest ratio of bad loans to capital and reserves among the nation's big banks, according to a national rating company.

Among banks with more than $10 billion in assets, Bankoh's 17.53 percent ratio was topped only by Providian NB of Tilton, N.H., and Capital One Bank of Glen Allen, Va., said Weiss Ratings Inc., a Florida-based bank rating agency. The two East Coast banks had ratios of more than 22 percent.

In 1999 Bankoh's 13.34 percent was the ninth highest nationally, according to Weiss.

Bankoh's level of nonperforming loans as a percentage of its overall loan portfolio has been growing steadily for the past several years, said David Lackey, Weiss president.

At the end of September, Bankoh had about $220 million in bad loans, or 2.59 percent of its loan portfolio, Lackey said. At the end of 1999, nonperforming loans represented 1.84 percent of the total, according to Weiss data. A year before that it was 1.68 percent.

Michael O'Neill, chairman of Bankoh parent Pacific Century Financial Corp., said addressing credit quality issues has been his top priority since joining the company in November. He noted that Pacific Century recently hired two top executives to oversee the bank's risk-taking activities.

"We have a strong capital base and good liquidity," O'Neill said in a statement. "In October 2000 Moody's noted that Pacific Century has high capital ratios and is strongly funded by core deposits"

Despite Bankoh's credit quality problem, Weiss still gives the bank a safety rating of B- because of strengths in other areas, Lackey said.

The bank's credit quality problem has been a concern among investors and has hurt Pacific Century's stock and earnings. For the nine months through September, the company's net income fell 15 percent to $81.1 million, largely because of bad loans.

Nationally, the level of nonperforming loans throughout the industry grew by 15 percent in the first nine months of 2000, partly because of a slowing economy, Weiss said.

As of Sept. 30, bad loans accounted for 7.22 percent of the industry's capital and reserves, the highest level in three years, the company said.

Pacific Century's stock, which has been rebounding in the past few months, closed up 19 cents at $18.06 today on the New York Stock Exchange.

The stock is up 7.7 percent from a year ago.