Pacific Century Financial Corp. today reported a 10.2 percent decline in third-quarter net income compared to the third quarter of 2000, mostly due to trimming its operations to aim at future profits. Bankoh parent net falls
10.2% amid cutbacksBy Russ Lynch and Rick Daysog
The profit for the three months through Sept. 30 was $31.06 million, or 37 cents a share, compared to $34.6 million, or 44 cents a share in the 2000 quarter.
For the first nine months of this year, the company earned $91.5 million, or $1.11 a share, up from $81.1 million, or $1.02 a share in the year-earlier period.
Assets, loans and deposits were all down year-over-year, but the quarterly report from the parent of Bank of Hawaii makes it clear that the declines were mostly due to down-sizing -- for example, the sale of mainland branches -- as the company moved ahead with Chairman and CEO Michael E. O'Neill's plans to dump potential losers and concentrate on its core businesses in Hawaii and islands close to home.
The results were largely in line with Wall Street's expectations. Analysts surveyed by Nelson Information were fore- casting the company's third quarter net at 36 cents per share.
The stock market reacted favorably to today's news. Shares of Pacific Century rose 88 cents to $21.25 today on the New York Stock Exchange.
Pacific Century also said it has added $200 million to the amount authorized for the company's purchases of its own common stock, which will reduce the number of shares outstanding, a move that usually enhances value for shareholders.
The company, which recently completed a $70 million share repurchase program, said it may make additional buybacks of additional shares beyond the $270 million committed.
"The third quarter's results demonstrate our ongoing commitment to position the company for improved financial performance," said O'Neill, who joined the company in early November last year, more than a month after the end of the 2000 third quarter.
At the end of September, Pacific Century's total assets of $11.94 billion were down 14.3 percent from $13.94 billion a year earlier.
Net loans of $6.58 billion were down 27.6 percent from a year-earlier $9.09 billion. Total deposits of $7.4 billion were down 16.1 percent year-over-year from $8.82 billion.
Reducing those numbers was all part of O'Neill's plan.
He announced in April that Pacific Century would sell off nearly all of its non-Hawaii assets in steps that could reduce payroll by 1,000 employees and trim assets by $5 billion.
In the latest quarter, the company said it received $49.4 million from U.S. Bancorp for all 20 branches of its Pacific Century Bank in Southern California. Pacific Century paid $183 million for the assets in 1997.
Costs and taxes related to the sale of the California branches added to expenses, but Pacific Century said it ended the quarter with a net income from its core business of $31.4 million, up slightly from last year.
The sale of the California branches also pulled down assets, net interest income, loans and other figures. That sale was completed on Sept. 7. At the end of August, the company closed its Bank of Hawaii Hong Kong office and three offices in the Philippines. Other branches and subsidiaries in Asia have stopped accepting business and will be closed by the end of the year.
After the end of the latest quarter, the company reached an agreement to sell its operations in Papua New Guinea, Vanuatu and Fiji. The company also is in discussions with potential buyers of its banks in French Polynesia and New Caledonia.
The company said it had improved the quality of its loans and other assets before the Sept. 11 disaster hurt the economy of tourism-dependent Hawaii.
Pacific Century said it reduced its exposure to the tourism industry in October by selling off $10 million in loans that it issued to national hotel and management companies. The company said its outstanding loans to hotel operations now stand at $62 million.
Pacific Century also listed its exposure to the airline industry. Outstanding loans to that sector totaled $188 million as of Sept. 30. Of that amount, $141 million consists of secured equity interests in leveraged aircraft leases.
All of the bank's hotel and transportation leases were performing.
"The extent of the economic impact on Hawaii's tourism business will depend on future events. However, management's progress in improving asset quality over the past year, combined with a strong allowance (for possible loan losses), has limited the initial impact on earnings," the company said.