Bankoh profitBank of Hawaii Corp., gearing up for its transition to a new technology system later this year, said today that earnings rose 9.9 percent in the fourth quarter and that it will not have to lay off as many employees as originally anticipated.
CEO says attrition will reduce
the need for layoffs resulting from
the banks technology outsourcing
By Dave Segal
Michael E. O'Neill, chairman and chief executive officer of Bank of Hawaii, said the 250 anticipated layoffs he announced in July as a result of an outsourcing agreement with Metavante Corp. will be reduced by 15 to 20 percent due to attrition. The outsourced technology system, which will be managed by Milwaukee-based Metavante, is expected to provide annual cost savings of more than $17 million.
"The Metavante conversion doesn't occur until the third quarter and we won't see the benefits until the fourth quarter," O'Neill said. "Obviously, we don't want to scrimp while we're getting it done, but once the conversion is in place and there's a successful implementation, we're going to see a significant reduction in expenses."
O'Neill also put to rest oft-heard speculation that he might be preparing the bank to be acquired. Breaking form company policy about not commenting on mergers and acquisitions, O'Neill said the bank hasn't been involved in any such talks in the past year.
Bank of Hawaii had net income in the fourth quarter of $28.9 million, or 44 cents a share, from $26.3 million, or 34 cents a share, in the year-earlier period. Earnings per share were up 29.4 percent. Fourth-quarter earnings included a charge of $7 million that is part of the $35.5 million in charges that will be taken in conjunction with the bank's conversion to the new technology system. Bank of Hawaii has now taken $13.6 million in charges over the past two quarters and will take its final charge in the third quarter of this year.
Bank of Hawaii also had $400,000 in net restructuring expenses from the closure of four branches in the West Pacific that was partially offset by a reversal of reserves related to the divestiture program.
Earnings in the fourth quarter of 2001 included gains on divestitures and restructuring items that increased net income by $6.4 million, or 8 cents a share.
For the year, Bank of Hawaii's net income rose 3 percent to $121.2 million, or $1.70 a share, compared with $117.8 million, or $1.46 a share, in 2001. Earnings per share were up 16 percent.
The bank's board of directors also announced an increase of its quarterly dividend 5.6 percent to 19 cents a share. The dividend had been at 18 cents for the 10 previous quarters. The dividend will be payable on March 14 to shareholders of record at the close of business on Feb. 24.
"We are pleased with several aspects of Bank of Hawaii's results for 2002," O'Neill said. "Our people are much more focused on key markets in Hawaii, Guam and American Samoa. Our credit quality has improved, our margin has strengthened, our share repurchase program has returned $530 million to shareholders and our technology conversion program is on schedule. Importantly, our customer and employee satisfaction measure has strengthened and our banking business are poised for growth in 2003."
O'Neill said net income is expected to increase in the second half of this year after the systems conversion is completed. He is forecasting earnings for the year of $131 million. He also said the bank, which did not take a loan loss provision in the fourth quarter, does not anticipate taking one in 2003.
The bank repurchased 3.3 million shares, totaling $94.1 million, at an average cost per share at $28.90 in the quarter. So far this year, the company has repurchased 1.4 million shares at an average cost of $30.29 per share.
As of Dec. 31, total assets were down 10.4 percent to $9.5 billion from $10.6 billion a year ago and down slightly from $9.7 billion at the end of the third quarter. The company attributed most of the year-over-year decline to a drop in commercial loans as the bank made strategic risk reductions in its portfolio.
Total deposits at the end of the year were $6.9 billion, up 3 percent from $6.7 billion a year earlier. Net loans fell 5.5 percent to $5.2 billion from $5.5 billion a year earlier.
Bank of Hawaii's fourth-quarter net interest income, which is interest earned on loans and investments minus interest paid on deposits, was down 15 percent to $90.2 million from $106.1 million a year earlier. It was primarily due to lower average earning assets related to the divestitures and the managed reduction of loans in an effort to reduce credit risk. The net interest margin was 4.05 percent, a 12 basis point gain from 3.93 percent a year earlier
Bank of Hawaii
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