<PAGE> 1
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
----------------------
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended March 31, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ____________ to ______________
Commission file number 0-7949
----------------------
BANCWEST CORPORATION
(Exact name of registrant as specified in its charter)
----------------------
DELAWARE 99-0156159
(State of incorporation) (I.R.S. Employer
Identification No.)
999 BISHOP STREET, HONOLULU, HAWAII 96813
(Address of principal executive offices) (Zip Code)
(808) 525-7000
(Registrant's telephone number, including area code)
----------------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or l5(d) of the Securities Exchange Act of 1934
during the preceding 12 months
(or for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements
for the past 90 days.
Yes [X] No [ ]
The number of shares outstanding of each of the issuer's classes of common
stock as of April 30, 1999 was:
Class Outstanding
------------------------------------- -----------------
Common Stock, $1.00 Par Value 31,579,744 Shares
Class A Common Stock, $1.00 Par Value 25,814,768 Shares
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<PAGE> 2
PART I. FINANCIAL INFORMATION
<TABLE>
<CAPTION>
Item 1. Financial Statements (Unaudited) Page
----
<S> <C> <C>
Consolidated Balance Sheets at March 31, 1999, December 31, 1998
and March 31, 1998 2
Consolidated Statements of Income for the three months ended
March 31, 1999 and 1998 3
Consolidated Statements of Cash Flows for the three months ended
March 31, 1999 and 1998 4
Consolidated Statements of Changes in Stockholders' Equity for the three
months ended March 31, 1999 and 1998 5
Notes to Consolidated Financial Statements 5 - 7
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 8 - 22
Item 3. Quantitative and Qualitative Disclosures About Market Risk 22 - 23
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 24
SIGNATURES 25
EXHIBIT INDEX
</TABLE>
1
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS (Unaudited)
BancWest Corporation and Subsidiaries
<TABLE>
<CAPTION>
MARCH 31, December 31, March 31,
1999 1998 1998
------------ ------------ ------------
(in thousands)
<S> <C> <C> <C>
ASSETS
Cash and due from banks $ 606,010 $ 615,184 $ 288,260
Interest-bearing deposits in other banks 520,686 274,641 142,353
Federal funds sold and securities purchased
under agreements to resell 32,900 52,100 160,000
Investment securities:
Held-to-maturity 283,660 290,922 --
Available-for-sale 1,254,191 1,346,994 725,688
Loans and leases:
Loans and leases 11,531,409 11,339,580 6,293,908
Less allowance for credit losses 150,371 149,585 83,154
------------ ------------ ------------
Net loans and leases 11,381,038 11,189,995 6,210,754
------------ ------------ ------------
Premises and equipment 263,832 266,984 242,170
Customers' acceptance liability 1,819 1,377 673
Core deposit intangible 71,253 73,430 24,464
Goodwill 628,556 635,245 94,825
Other real estate owned and repossessed
personal property 33,005 33,381 31,226
Other assets 296,684 269,642 210,563
------------ ------------ ------------
TOTAL ASSETS $ 15,373,634 $ 15,049,895 $ 8,130,976
============ ============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Domestic:
Noninterest-bearing demand $ 1,517,606 $ 2,018,561 $ 793,956
Interest-bearing demand 280,552 318,756 305,803
Savings 4,565,972 3,886,714 2,258,731
Time 4,952,201 4,779,726 2,492,891
Foreign 242,219 256,563 287,115
------------ ------------ ------------
Total deposits 11,558,550 11,260,320 6,138,496
------------ ------------ ------------
Short-term borrowings 892,113 922,867 695,660
Acceptances outstanding 1,819 1,377 673
Other liabilities 502,354 467,486 243,166
Long-term debt 627,664 629,959 216,731
Guaranteed preferred beneficial interests
in Company's junior subordinated debentures 100,000 100,000 100,000
------------ ------------ ------------
TOTAL LIABILITIES 13,682,500 13,382,009 7,394,726
------------ ------------ ------------
Stockholders' equity:
Preferred stock -- -- --
Class A common stock 25,815 25,815 --
Common stock 33,190 33,190 165,952
Surplus 1,141,582 1,141,639 148,158
Retained earnings 533,989 511,525 485,233
Accumulated other comprehensive income 6,263 6,171 37
Treasury stock (49,705) (50,454) (63,130)
------------ ------------ ------------
TOTAL STOCKHOLDERS' EQUITY 1,691,134 1,667,886 736,250
------------ ------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 15,373,634 $ 15,049,895 $ 8,130,976
============ ============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
2
<PAGE> 4
CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
BancWest Corporation and Subsidiaries
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
1999 1998
------------ ------------
(in thousands, except average
shares and per share data)
<S> <C> <C>
INTEREST INCOME
Interest and fees on loans $ 205,687 $ 129,946
Lease financing income 26,884 4,887
Interest on investment securities:
Taxable interest income 23,363 12,520
Exempt from Federal income taxes 17 25
Other interest income 4,156 3,945
------------ ------------
Total interest income 260,107 151,323
------------ ------------
INTEREST EXPENSE
Deposits 81,976 51,033
Short-term borrowings 9,109 9,107
Long-term debt 11,175 5,605
------------ ------------
Total interest expense 102,260 65,745
------------ ------------
Net interest income 157,847 85,578
Provision for credit losses 9,625 4,396
------------ ------------
Net interest income after provision for
credit losses 148,222 81,182
------------ ------------
NONINTEREST INCOME
Trust and investment services income 8,544 7,169
Service charges on deposit accounts 15,320 7,272
Other service charges and fees 13,447 8,220
Securities losses, net (12) (5)
Other 5,410 2,732
------------ ------------
Total noninterest income 42,709 25,388
------------ ------------
NONINTEREST EXPENSE
Salaries and wages 42,551 27,524
Employee benefits 10,864 7,956
Occupancy expense 14,375 9,759
Equipment expense 7,265 6,446
Intangible amortization 8,866 1,470
Other 36,615 20,263
------------ ------------
Total noninterest expense 120,536 73,418
------------ ------------
Income before income taxes 70,395 33,152
Provision for income taxes 30,139 11,924
------------ ------------
NET INCOME $ 40,256 $ 21,228
============ ============
PER SHARE DATA(1):
BASIC EARNINGS $ .70 $ .68
============ ============
DILUTED EARNINGS $ .70 $ .68
============ ============
CASH DIVIDENDS $ .31 $ .31
============ ============
AVERAGE SHARES OUTSTANDING(1) 57,385,119 31,176,312
============ ============
</TABLE>
(1) Per share data and average shares outstanding were computed on a combined
basis using average Class A common stock and common stock.
The accompanying notes are an integral part of these consolidated financial
statements.
3
<PAGE> 5
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
BancWest Corporation and Subsidiaries
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
1999 1998
--------- ---------
(in thousands)
<S> <C> <C>
CASH AND DUE FROM BANKS AT BEGINNING OF PERIOD $ 615,184 $ 282,905
--------- ---------
Cash flows from operating activities:
Net income 40,256 21,228
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for credit losses 9,625 4,396
Depreciation and amortization 15,937 8,241
Income taxes 27,468 11,224
Increase in interest receivable (2,035) (2,124)
Increase (decrease) in interest payable 1,710 (2,661)
Increase in prepaid expenses (5,399) (133)
Other (12,799) 3,238
--------- ---------
Net cash provided by operating activities 74,763 43,409
--------- ---------
Cash flows from investing activities:
Net increase in interest-bearing deposits
in other banks (246,045) (4,423)
Net decrease (increase) in Federal funds sold and
securities purchased under agreements to resell 19,200 (25,726)
Proceeds from maturity of held-to-maturity
investment securities 23,169 --
Purchase of held-to-maturity investment securities (15,907) --
Proceeds from maturity of available-for-sale
investment securities 192,118 145,689
Purchase of available-for-sale investment securities (99,162) (92,791)
Net increase in loans and leases to customers (194,271) (64,421)
Purchase of premises and equipment (720) (3,810)
Other (10,400) 3,299
--------- ---------
Net cash used in investing activities (332,018) (42,183)
--------- ---------
Cash flows from financing activities:
Net increase in deposits 298,230 49,296
Net decrease in short-term borrowings (30,754) (28,205)
Payments on long-term debt (2,295) (5)
Cash dividends paid (17,792) (9,654)
Issuance (repurchase) of treasury stock, net 692 (7,303)
--------- ---------
Net cash provided by financing activities 248,081 4,129
--------- ---------
CASH AND DUE FROM BANKS AT END OF PERIOD $ 606,010 $ 288,260
========= =========
Supplemental disclosures:
Interest paid $ 100,550 $ 68,406
========= =========
Income taxes paid $ 2,671 $ 700
========= =========
Supplemental schedule of noncash investing and financing activities:
Loans converted into other real estate owned and
repossessed personal property $ 3,727 $ 2,311
========= =========
Loans made to facilitate the sale of other real estate owned $ 1,285 $ 793
========= =========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
4
<PAGE> 6
CONSOLIDATED STATEMENTS OF
CHANGES IN STOCKHOLDERS' EQUITY (Unaudited)
BancWest Corporation and Subsidiaries
<TABLE>
<CAPTION>
Accumulated
Class A Other
Common Common Retained Comprehensive Treasury
Stock Stock Surplus Earnings Income Stock Total
------- ----------- ----------- ----------- ----------- ----------- -----------
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1998 $25,815 $ 33,190 $ 1,141,639 $ 511,525 $ 6,171 $ (50,454) $ 1,667,886
Comprehensive income:
Net income -- -- -- 40,256 -- -- 40,256
Unrealized valuation adjustment,
net of tax and reclassification
adjustment -- -- -- -- 92 -- 92
------- ----------- ----------- ----------- ----------- ----------- -----------
Comprehensive income -- -- -- 40,256 92 -- 40,348
------- ----------- ----------- ----------- ----------- ----------- -----------
Cash dividends ($.31 per share) -- -- -- (17,792) -- -- (17,792)
Incentive Plan for Key Executives -- -- (57) -- -- 55 (2)
Issuance of treasury stock under
Stock Incentive Plan -- -- -- -- -- 694 694
------- ----------- ----------- ----------- ----------- ----------- -----------
BALANCE, MARCH 31, 1999 $25,815 $ 33,190 $ 1,141,582 $ 533,989 $ 6,263 $ (49,705) $ 1,691,134
======= =========== =========== =========== =========== =========== ===========
Balance, December 31, 1997 $ -- $ 165,952 $ 148,165 $ 473,659 $ (241) $ (55,834) $ 731,701
Comprehensive income:
Net income -- -- -- 21,228 -- -- 21,228
Unrealized valuation adjustment,
net of tax and reclassification
adjustment -- -- -- -- 278 -- 278
------- ----------- ----------- ----------- ----------- ----------- -----------
Comprehensive income -- -- -- 21,228 278 -- 21,506
------- ----------- ----------- ----------- ----------- ----------- -----------
Purchase of treasury stock -- -- -- -- -- (7,342) (7,342)
Cash dividends ($.31 per share) -- -- -- (9,654) -- -- (9,654)
Incentive Plan for Key Executives -- -- (7) -- -- 46 39
------- ----------- ----------- ----------- ----------- ----------- -----------
Balance, March 31, 1998 $ -- $ 165,952 $ 148,158 $ 485,233 $ 37 $ (63,130) $ 736,250
======= =========== =========== =========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accounting and reporting policies of BancWest Corporation and
Subsidiaries (the "Company") conform with generally accepted accounting
principles and practices within the banking industry. The following is a summary
of significant accounting policies:
CONSOLIDATION
The consolidated financial statements of the Company include the accounts of
BancWest Corporation ("BWE") and its wholly-owned subsidiaries: First Hawaiian
Bank and its wholly-owned subsidiaries ("First Hawaiian"); Bank of the West and
its wholly-owned subsidiaries ("Bank of the West"); FHL Lease Holding Company,
Inc. and its wholly-owned subsidiary; First Hawaiian Capital I (of which BWE
owns all the common securities); and FHI International, Inc. All significant
intercompany balances and transactions have been eliminated in consolidation. In
the opinion of management, all adjustments (which included only normal recurring
adjustments) necessary for a fair presentation are reflected in the consolidated
financial statements.
RECLASSIFICATIONS
Certain amounts in the consolidated financial statements for 1998 have been
reclassified to conform with the 1999 presentation. Such reclassifications had
no effect on the consolidated net income as previously reported.
2. NEW PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Standard ("SFAS") No. 133, "Accounting for Derivative
Instruments and Hedging Activities." SFAS No. 133 establishes accounting and
reporting standards for derivative instruments and hedging activities. SFAS No.
133 requires the recognition of all derivative instruments in the statement of
financial position as either assets or liabilities and the measurement of
derivative instruments at fair value. SFAS No. 133 is effective for fiscal years
beginning after June 15, 1999. The adoption of SFAS No. 133 is not expected to
have a material effect on the Company's consolidated financial statements.
Effective January 1, 1999, the Company adopted SFAS No. 134, "Accounting for
Mortgage-Backed Securities Retained after the Securitization of Mortgage Loans
Held for Sale by a Mortgage Banking Enterprise, an amendment of SFAS No. 65."
SFAS No. 134 requires mortgage banking enterprises to classify loans held for
sale that they have securitized, based on their intent to sell or hold these
investments. The adoption of SFAS No. 134 did not have a material effect on the
Company's consolidated financial statements.
5
<PAGE> 7
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
BancWest Corporation and Subsidiaries
3. EARNINGS PER SHARE
The following is a reconciliation of the numerators and denominators used to
calculate the Company's basic and diluted earnings per share:
<TABLE>
<CAPTION>
Three Months Ended March 31,
----------------------------------------------------------------------------------------------
1999 1998
---------------------------------------------- ------------------------------------------
INCOME SHARES PER SHARE Income Shares Per Share
(NUMERATOR) (DENOMINATOR) AMOUNT (Numerator) (Denominator) Amount
----------- ------------- --------- ----------- ------------- ------
(in thousands, except number of shares and per share data)
<S> <C> <C> <C> <C> <C> <C>
Basic:
Net income $ 40,256 57,385,119 $.70 $ 21,228 31,176,312 $.68
Effect of dilutive securities -
Stock incentive
plan options -- 295,664 -- -- 197,410 --
---------- ---------- ---- ---------- ---------- ----
Diluted:
Net income and
assumed conversions $ 40,256 57,680,783 $.70 $ 21,228 31,373,722 $.68
========== ========== ==== ========== ========== ====
</TABLE>
4. IMPAIRED LOANS
The following table summarizes impaired loan information as of and for the
three months ended March 31, 1999 and 1998 and as of and for the year ended
December 31, 1998:
<TABLE>
<CAPTION>
MARCH 31, 1999 December 31, 1998 March 31, 1998
-------------- ----------------- --------------
(in thousands)
<S> <C> <C> <C>
Impaired loans $106,035 $100,704 $ 77,230
Impaired loans with related allowance for credit
losses calculated under SFAS No. 114 $ 75,076 $ 67,849 $ 51,905
Total allowance for credit losses on impaired loans $ 18,665 $ 18,610 $ 12,249
Average impaired loans $103,370 $ 81,436 $ 76,545
Interest income recognized on impaired loans $ 17 $ 2,876 $ 110
</TABLE>
Impaired loans without a related allowance for credit losses are generally
collateralized by assets with fair values in excess of the recorded investment
in the loans. Interest payments on impaired loans are generally applied to
reduce the outstanding principal amounts of such loans.
5. MERGER AGREEMENT WITH BANCWEST CORPORATION
On November 1, 1998, the merger of the former BancWest Corporation ("Old
BancWest"), parent company of Bank of the West, with and into First Hawaiian,
Inc. ("FHI") was consummated (the "Merger"). At that date, Bank of the West,
headquartered in San Francisco, was California's fifth largest bank with
approximately $6.1 billion in assets and 103 branches in 21 counties in Northern
and Central California.
Prior to the consummation of the Merger, Old BancWest was wholly-owned by
Banque Nationale de Paris ("BNP"), France's second largest banking group. In the
Merger, BNP received approximately 25.8 million shares of the Company's newly
authorized Class A common stock (representing approximately 45% of the then
outstanding voting stock). The transaction was accounted for using the purchase
method of accounting and results of operations were included in the Consolidated
Statements of Income from the date of acquisition. The excess of cost over fair
value of net assets acquired amounted to approximately $599.0 million. FHI, the
surviving corporation of the Merger, changed its name to "BancWest Corporation"
on November 1, 1998. The new combined BancWest Corporation has more than 200
branches in the states of Hawaii, California, Oregon, Washington and Idaho,
Saipan and the territory of Guam.
6. SUBSIDIARY MERGERS
On June 19, 1998, First Hawaiian Creditcorp, Inc. ("Creditcorp"), a
wholly-owned subsidiary of the Company, was merged with and into First Hawaiian.
All 13 Creditcorp branches were closed as a result of this merger.
On November 1, 1998, Pacific One Bank, a wholly-owned subsidiary of the
Company, was merged with and into Bank of the West.
7. PROPOSED MERGER WITH SIERRAWEST BANCORP
On February 25, 1999, the Company and Bank of the West signed a definitive
agreement to acquire all of the outstanding stock of SierraWest Bancorp
("SierraWest"), a California corporation and the parent company of SierraWest
Bank. The agreement specifies that shareholders of SierraWest will receive .82
shares of the Company's stock for each share of SierraWest stock. Approximately
4,373,335 shares of the Company are expected to be issued in the transaction.
SierraWest, with total assets of $879 million as of December 31, 1998, has 20
branches in California and Nevada. The acquisition is expected to be accounted
for using the pooling-of-interests method of accounting. The merger is expected
to close in the third quarter of 1999, subject to, among other things, the
receipt of required regulatory approvals and approval by SierraWest's
shareholders.
6
<PAGE> 8
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
BancWest Corporation and Subsidiaries
8. OPERATING SEGMENTS
In 1998, the Company adopted SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information." SFAS No. 131 supersedes SFAS No. 14,
"Financial Reporting for Segments of a Business Enterprise," replacing the
"industry segment" approach with the "management" approach. The management
approach designates the internal organization that is used by management for
making operating decisions and assessing performance as the source of the
Company's reportable segments. SFAS No. 131 also requires disclosure about
products and services, geographic areas and major customers. The adoption of
SFAS No. 131 did not affect the Company's consolidated results of operations or
consolidated financial position as previously reported.
The Company has determined that its reportable segments are those that are
based on the Company's method of internal reporting, which disaggregates its
business on a geographic basis. As of December 31, 1998, the Company had two
reportable operating segments: First Hawaiian and Bank of the West. The First
Hawaiian segment operates primarily in the State of Hawaii. The Bank of the West
segment operates primarily on the mainland United States. The Bank of the West
segment includes the operations acquired by the Company in the Pacific Northwest
in 1996, which were merged with and into the operations of Bank of the West on
November 1, 1998.
The financial results on the Company's operating segments are presented on
an accrual basis. There are no significant differences between the accounting
policies of the segments as compared to the Company's consolidated financial
statements. The Company evaluates the performance of its segments and allocates
resources to them based on net interest income and net income. There are no
material intersegment revenues.
The tables below present information about the Company's operating segments
as of or for the quarters ended March 31, 1999 and 1998, respectively.
<TABLE>
<CAPTION>
Bank
First of the Reconciling Consolidated
Hawaiian West Other Items Totals
-------- ------- -------- ----------- -------------
(in millions)
<S> <C> <C> <C> <C> <C>
1999
NET INTEREST INCOME $ 78 $ 82 $ (2) $ -- $ 158
NET INCOME 24 18 (2) -- 40
SEGMENT ASSETS 7,342 7,959 2,525 (2,452) 15,374
1998
Net interest income $ 79 $ 10 $ (3) $ -- $ 86
Net income 22 1 (2) -- 21
Segment assets 7,088 907 1,345 (1,209) 8,131
</TABLE>
The reconciling items in the above table are principally intercompany
eliminations.
7
<PAGE> 9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Certain matters contained herein are forward-looking statements that involve
certain risks and uncertainties that could cause the Company's actual results to
differ materially from those discussed in the forward-looking statements.
Readers should carefully consider these risks and uncertainties in reading this
report. Factors that could cause or contribute to such differences include, but
are not limited to: (1) global, national and local economic and market
conditions; (2) the level and volatility of interest rates and currency values;
(3) fiscal and monetary policies of government agencies; (4) credit risks
inherent in the lending processes; (5) loan and deposit demand in the geographic
regions in which the Company conducts business; (6) the impact of intense
competition in the rapidly evolving banking and financial services business; (7)
the effect of current and pending government legislation and regulations; (8)
the extensive regulation of the Company's business at both the federal and state
levels; (9) whether expected revenue enhancements and cost savings from the
merger with Old BancWest are realized within expected time frames; (10) matters
relating to the integration of the business of the Company and Old BancWest,
including the impact of combining these businesses on revenues, expenses,
deposit attrition, customer retention and financial performance; (11) unforeseen
costs and/or complications relating to year 2000 compliance and euro conversion
efforts of the Company and third parties with whom the Company has business
relationships; (12) other risks discussed below; and (13) management's ability
to manage these risks.
The Company expressly disclaims any obligation or undertaking to update or
revise any forward-looking statement contained herein to reflect any change in
the Company's expectations with regard thereto or any change in events,
conditions or circumstances on which any statement is based.
MERGER
On November 1, 1998, for a purchase price of $905.7 million, the merger (the
"Merger") of the former BancWest Corporation, parent company of Bank of the
West, with and into First Hawaiian, Inc. ("FHI") was consummated. FHI, the
surviving corporation of the Merger, changed its name to "BancWest Corporation."
Prior to the consummation of the Merger, the former BancWest Corporation was
wholly-owned by Banque Nationale de Paris ("BNP"), BNP received approximately
25.8 million shares of the Company's newly authorized Class A common stock
(representing approximately 45% of the then outstanding voting stock) in the
Merger. The excess of cost over fair value of net assets acquired amounted to
approximately $599.0 million. The transaction was accounted for using the
purchase method of accounting.
The Company recorded restructuring, Merger-related and other nonrecurring costs
totaling $25,527,000 in 1998. Restructuring and Merger-related costs of
$20,043,000 included: (1) severance and termination payments to employees of
$2,211,000; (2) data processing contract termination penalties of $2,083,000;
(3) write-off of capitalized software costs of $2,755,000; (4) write-downs or
losses associated with excess leased commercial properties of $8,179,000; (5)
write-off of signage, forms, prepaid expenses and other miscellaneous assets
totaling $3,828,000; and (6) other integration costs of $987,000. The severance
and contract termination penalties will be paid in 1999. Other nonrecurring
costs included impairment charges of $5,484,000 related to intangible assets
associated with earlier acquisitions.
The Company expects that it will be able to generate increased revenues as a
result of the Merger. The Company expects that pre-tax revenue enhancements will
be approximately $6.3 million in 1999 and approximately $9.8 million in 2000.
The Company expects to achieve these results, in part, from cross-selling
products and services to the commercial and consumer customer bases of the
combined company. Whether these anticipated benefits are ultimately achieved
will depend on a number of factors, including the ability to successfully
integrate the businesses of the Company and Old BancWest.
Although no assurance can be given either that any specific level of cost
savings will be achieved or as to the timing thereof, the Company currently
expects to achieve approximately $23.2 million and $41.0 million in pre-tax
annual cost savings in 1999 and 2000, respectively, as a result of the Merger.
These cost savings are expected to be derived principally from the merger of
Pacific One Bank with Bank of the West (which occurred as of November 1, 1998),
integrating data processing and back-office operations, eliminating duplicative
operations and consolidating certain retail and wholesale operations.
8
<PAGE> 10
In substantially all of the Company's income and expense categories, the
principal reason for the change in the amounts reported for the quarter ended
March 31, 1999 as compared to the amounts reported in the quarter ended March
31, 1998 resulted from the Merger. The increases in substantially all of the
categories of the Company's Consolidated Balance Sheets between amounts reported
at March 31, 1999 and those reported at March 31, 1998 also principally resulted
from the Merger. Other significant factors affecting the Company's results of
operations and financial position are described in the applicable sections
below.
NET INCOME
The Company recorded consolidated net income for the first three months of 1999
of $40,256,000, an increase of $19,028,000, or 89.6%, over the first three
months of 1998.
Basic and diluted earnings per share for the first three months of 1999 were
both $.70. These per share amounts represented an increase of 2.9%, over the
basic and diluted earnings per share amounts for the same period in 1998. The
percentage increase in consolidated net income on a per share basis was less
than the percentage increase in consolidated net income because of the issuance
of 25.8 million shares of Class A common stock in connection with the Merger.
The issuance resulted in a higher average number of outstanding shares in 1999
as compared to 1998.
Diluted cash earnings per share (defined as earnings per share plus after-tax
amortization of goodwill and core deposit intangibles) for the first three
months of 1999 was $.84, representing an increase of 15.1% over the same period
in 1998.
On an annualized basis, the Company's return on average total assets for the
first three months of 1999 and 1998 were 1.09% and 1.07%, respectively. Its
return on average stockholders' equity for the first three months of 1999 was
9.73%, a decrease of 17.4% compared to the same period in 1998. The decrease in
the return on average stockholders' equity is principally a result of the
issuance of the Company's Class A common stock on November 1, 1998 and the
amortization of intangible assets.
The return on average tangible assets and the return on average tangible
stockholders' equity, on an annualized basis, increased by 16.10% and 32.30%,
respectively, over the first three months of 1998. The increases resulted from
the effects of the Merger. The return on average tangible assets and the return
on average tangible stockholders' equity are defined as cash earnings as a
percentage of average total assets and average stockholders' equity minus
average goodwill and core deposit intangibles, respectively.
NET INTEREST INCOME
Net interest income, on a fully taxable equivalent basis, increased $72,224,000,
or 84.3%, to $157,864,000 for the first three months of 1999 from $85,640,000
for the same period in 1998. The increase in net interest income for the first
three months of 1999 over the same period in 1998 was primarily due to the
Merger. The net interest margin remained at 4.80%, lower yields on assets were
offset by lower rates paid on funding sources for the first three months of 1999
compared to the same period in 1998, reflecting the declining interest rate
environment.
Average earning assets increased by $6,096,451,000, or 84.3%, for the first
three months of 1999 over the same period in 1998, primarily due to the Merger.
The increase was partially offset by the partial liquidation of investment
securities in the quarter ended March 31, 1999 resulting from a change in the
collateral requirements for state and local government funds.
Average loans and leases for the first three months of 1999 increased by
$5,218,092,000, or 84.0%, over the same period in 1998. The mix of loans
continues to change as the Company diversifies its loan portfolio, both
geographically and by industry. These efforts have resulted in growth in the
Company's banking operations in California and the Pacific Northwest. In
addition, the Merger further enhanced this loan diversification strategy.
Average interest-bearing deposits and liabilities increased by $4,895,823,000,
or 78.4%, for the first three months of 1999, over the same period in 1998
primarily due to the Merger.
9
<PAGE> 11
The following table sets forth the condensed consolidated average balance
sheets, an analysis of interest income/expense and average yield/rate for each
major category of earning assets and interest-bearing deposits and liabilities
for the periods indicated on a taxable equivalent basis. The tax equivalent
adjustment is made for items exempt from Federal income taxes (assuming a 35%
tax rate for 1999 and 1998) to make them comparable with taxable items before
any income taxes are applied.
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
--------------------------------------------------------------
1999 1998
---------------------------- ------------------------------
INTEREST Interest
AVERAGE INCOME/ YIELD/ Average Income/ Yield/
BALANCE EXPENSE RATE(1) Balance Expense Rate(1)
------- -------- ------- ------- -------- -------
(dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Earning assets:
Interest-bearing deposits
in other banks $ 231,102 $ 2,938 5.16% $ 134,749 $ 2,078 6.25%
Federal funds sold and
securities purchased
under agreements to resell 102,749 1,218 4.81 141,402 1,867 5.35
Investment securities (2) 1,563,391 23,389 6.07 742,732 12,558 6.86
Loans and leases (3),(4) 11,430,019 232,579 8.25 6,211,927 134,882 8.81
----------- -------- ---------- --------
Total earning assets 13,327,261 260,124 7.91 7,230,810 151,385 8.49
-------- --------
Nonearning assets 1,678,413 782,061
----------- ----------
Total assets $15,005,674 $8,012,871
=========== ==========
LIABILITIES AND
STOCKHOLDERS' EQUITY
Interest-bearing deposits
and liabilities:
Deposits $ 9,598,199 $ 81,976 3.46% $5,238,562 $ 51,033 3.95%
Short-term borrowings 801,138 9,109 4.61 689,651 9,107 5.36
Long-term debt and capital
securities 742,686 11,175 6.10 317,987 5,605 7.15
----------- -------- ---------- --------
Total interest-bearing
deposits and liabilities 11,142,023 102,260 3.72 6,246,200 65,745 4.27
-------- ---- -------- ----
Interest rate spread 4.19% 4.22%
==== ====
Noninterest-bearing demand
deposits 1,699,282 806,705
Other liabilities 486,570 228,831
----------- ----------
Total liabilities 13,327,875 7,281,736
Stockholders' equity 1,677,799 731,135
----------- ----------
Total liabilities and
stockholders' equity $15,005,674 $8,012,871
=========== ==========
Net interest income and
margin on total earning assets 157,864 4.80% 85,640 4.80%
==== ====
Tax equivalent adjustment 17 62
-------- --------
Net interest income $157,847 $ 85,578
======== ========
</TABLE>
(1) Annualized.
(2) Average balances exclude the effects of the fair value adjustments.
(3) Nonaccruing loans have been included in computations of average loan
balances.
(4) Interest income for loans included loan fees of $8,482 and $6,987 for 1999
and 1998, respectively.
10
<PAGE> 12
INVESTMENT SECURITIES
HELD-TO-MATURITY
The following table presents the amortized cost and fair values of
held-to-maturity investment securities as of the dates indicated:
<TABLE>
<CAPTION>
MARCH 31, December 31, March 31,
1999 1998 1998
---------- ---------- -----------
(in thousands)
<S> <C> <C> <C>
Amortized cost $ 283,660 $ 290,922 $ --
Unrealized gains 589 1,074 --
Unrealized losses (764) (582) --
---------- ---------- -----------
Fair value $ 283,485 $ 291,414 $ --
========== ========== ===========
</TABLE>
Gross realized gains and losses for the three months ended March 31, 1999 and
1998 were not significant.
AVAILABLE-FOR-SALE
The following table presents the amortized cost and fair values of
available-for-sale investment securities as of the dates indicated:
<TABLE>
<CAPTION>
MARCH 31, December 31, March 31,
1999 1998 1998
---------- ---------- ----------
(in thousands)
<S> <C> <C> <C>
Amortized cost $1,243,739 $1,337,099 $ 725,627
Unrealized gains 11,845 11,400 1,221
Unrealized losses (1,393) (1,505) (1,160)
---------- ---------- ----------
Fair value $1,254,191 $1,346,994 $ 725,688
========== ========== ==========
</TABLE>
Gross realized gains and losses on available-for-sale investment securities for
the three months ended March 31, 1999 and 1998 were as follows:
<TABLE>
<CAPTION>
1999 1998
-------- --------
(in thousands)
<S> <C> <C>
Realized gains $ 1 $ --
Realized losses (13) (5)
-------- --------
Securities losses, net $ (12) $ (5)
======== ========
</TABLE>
Gains and losses realized on the sales of available-for-sale investment
securities are determined using the specific identification method.
11
<PAGE> 13
LOANS AND LEASES
The following table sets forth the loan and lease portfolio by major categories
and loan and lease mix at March 31, 1999, December 31, 1998 and March 31, 1998:
<TABLE>
<CAPTION>
MARCH 31, 1999 December 31, 1998 March 31, 1998
---------------------- ------------------------ ----------------------------
AMOUNT % Amount % Amount %
----------- -------- ---------- --------- --------- -------
(dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Commercial, financial and agricultural $ 2,113,065 18.3% $ 2,089,351 18.4% $ 1,610,315 25.6%
Real estate:
Commercial 1,984,915 17.2 1,928,741 17.0 1,195,752 19.0
Construction 369,114 3.2 359,220 3.2 156,935 2.5
Residential:
Insured, guaranteed or
conventional 2,042,912 17.7 2,176,995 19.2 1,478,933 23.5
Home equity credit lines 451,147 3.9 475,280 4.2 446,746 7.1
----------- -------- ----------- --------- --------- -------
Total real estate loans 4,848,088 42.0 4,940,236 43.6 3,278,366 52.1
----------- -------- ----------- --------- --------- -------
Consumer 2,723,729 23.6 2,572,873 22.6 704,495 11.2
Lease financing 1,478,732 12.8 1,355,538 12.0 333,295 5.3
Foreign 367,795 3.3 381,582 3.4 367,437 5.8
----------- -------- ----------- --------- --------- -------
Total loans and leases 11,531,409 100.0% 11,339,580 100.0% 6,293,908 100.0%
======== ========= =======
Less allowance for credit losses 150,371 149,585 83,154
----------- ----------- -----------
Total net loans and leases $11,381,038 $11,189,995 $ 6,210,754
=========== =========== ===========
Total loans and leases to:
Total assets 75.0% 75.3% 77.4%
Total earning assets 85.6% 86.2% 86.9%
Total deposits 99.8% 100.7% 102.5%
</TABLE>
The loan and lease portfolio is the largest component of total earning assets
and accounts for the greatest portion of total interest income. At March 31,
1999, total loans were $11,531,409,000, representing increases of 1.7% and 83.2%
over December 31, 1998 and March 31, 1998, respectively. The increase in all
loan categories from March 31, 1998 is primarily due to the Merger.
Commercial, financial and agricultural loans as of March 31, 1999 increased
$23,714,000, or 1.1%, over December 31, 1998, and $502,750,000, or 31.2%, over
March 31, 1998. Although the Company continues its efforts to diversify its loan
and lease portfolio, both geographically and by industry, overall loan volume in
the State of Hawaii continues to decline as a result of the sluggish economy.
The Merger and credit extensions in California and the Pacific Northwest account
for the majority of the increase in loan and lease balances and geographic and
industry diversification.
Consumer loans as of March 31, 1999 increased $150,856,000, or 5.9%, over
December 31, 1998, and $2,019,234,000, or 286.6%, over March 31, 1998. Consumer
loans consist primarily of direct and indirect automobile, credit card and
unsecured financing. The increase over March 31, 1998 is primarily due to the
Merger and automobile financing in California and Oregon.
Lease financing as of March 31, 1999 increased $123,194,000, or 9.1%, over
December 31, 1998, and $1,145,437,000, or 343.7%, over March 31, 1998. The
increase in lease financing from December 31, 1998 was primarily due to an
increase in the automobile lease portfolio in California.
The Company's international operations, principally in Guam and Grand Cayman,
British West Indies, involve foreign banking and international financing
activities, including short-term investments, loans, acceptances, letters of
credit financing and international funds transfer. International activities are
identified on the basis of the domicile of the applicable customer. Foreign
loans as of March 31, 1999, decreased $13,787,000, or 3.6%, compared to December
31, 1998.
Loan concentrations are considered to exist when there are amounts loaned to
multiple borrowers engaged in similar activities which would cause them to be
similarly impacted by economic or other conditions. At March 31, 1999, the
Company did not have a concentration of loans greater than 10% of total loans
which is not otherwise disclosed as a category of loans as shown in the above
table.
12
<PAGE> 14
NONPERFORMING ASSETS
Nonperforming assets at March 31, 1999, December 31, 1998 and March 31, 1998 are
as follows:
<TABLE>
<CAPTION>
MARCH 31, December 31, March 31,
1999 1998 1998
-------- -------- --------
(dollars in thousands)
<S> <C> <C> <C>
Nonperforming loans and leases:
Nonaccrual:
Commercial, financial and agricultural $ 18,316 $ 21,719 $ 6,825
Real estate:
Commercial 18,459 17,457 4,568
Construction 820 -- --
Residential:
Insured, guaranteed, or conventional 10,864 9,543 10,590
Home equity credit lines 449 333 90
-------- -------- --------
Total real estate loans 30,592 27,333 15,248
-------- -------- --------
Consumer 2,339 2,366 --
Lease financing 2,355 1,816 63
Foreign 1,161 1,174 218
-------- -------- --------
Total nonaccrual loans and leases 54,763 54,408 22,354
-------- -------- --------
Restructured:
Commercial, financial and agricultural 2,674 3,894 1,532
Real estate:
Commercial 27,639 30,247 30,811
Residential:
Insured, guaranteed, or conventional 1,101 1,100 2,412
Home equity credit lines -- -- 659
-------- -------- --------
Total real estate loans 28,740 31,347 33,882
-------- -------- --------
Total restructured loans and leases 31,414 35,241 35,414
-------- -------- --------
Total nonperforming loans and leases 86,177 89,649 57,768
Other real estate owned and repossessed
personal property 33,005 33,381 31,226
-------- -------- --------
Total nonperforming assets $119,182 $123,030 $ 88,994
======== ======== ========
Past due loans and leases (1):
Commercial, financial and agricultural $ 2,121 $ 1,569 $ 2,616
Real estate:
Commercial 4,584 2,379 1,494
Construction -- 440 --
Residential:
Insured, guaranteed, or conventional 21,324 23,250 25,326
Home equity credit lines 1,561 1,710 2,073
-------- -------- --------
Total real estate loans 27,469 27,779 28,893
-------- -------- --------
Consumer 4,125 3,443 3,241
Lease financing 122 -- 33
Foreign 2,586 1,816 717
-------- -------- --------
Total past due loans and leases $ 36,423 $ 34,607 $ 35,500
======== ======== ========
Nonperforming assets to total loans and leases and
other real estate owned and
repossessed personal property (end of period):
Excluding past due loans and leases 1.03% 1.08% 1.41%
Including past due loans and leases 1.35% 1.39% 1.97%
Nonperforming assets to total assets (end of period):
Excluding past due loans and leases .78% .82% 1.09%
Including past due loans and leases 1.01% 1.05% 1.53%
</TABLE>
(1) Represents loans and leases which are past due 90 days or more as to
principal and/or interest, are still accruing interest and are adequately
collateralized and in the process of collection.
13
<PAGE> 15
NONPERFORMING ASSETS, CONTINUED
Nonperforming assets at March 31, 1999 were $119,182,000, or 1.03%, of total
loans and leases and other real estate owned ("OREO") and repossessed personal
property and .78% of total assets, compared to 1.41% and 1.09%, respectively, in
the first quarter of 1998.
Nonperforming assets increased by $30,188,000, or 33.92%, over the first quarter
of 1998. The increase was primarily due to the Merger and two commercial,
financial and agricultural loans and two real estate - commercial loans placed
on nonaccrual status subsequent to the first quarter of 1998. The increase was
partially offset by partial or full payoffs of two restructured loans and sales
and partial write-downs of OREO subsequent to the first quarter of 1998.
Nonperforming foreign loans consist primarily of loans secured by real estate in
the territory of Guam.
The Company generally places loans and leases on nonaccrual status that are 90
days past due as to principal or income unless well secured and in the process
of collection, or when management believes that collection of principal or
income has become doubtful, or when a loan is first classified as impaired.
Exceptions are made to the general rules regarding loans 90 days past due when
the fair value of the collateral exceeds the Company's recorded investment in
the loan or when other factors are present which indicate that the borrower will
shortly bring the loan current. While the majority of consumer loans and leases
are subject to the Company's general policies regarding nonaccrual loans,
certain past due consumer loans and leases are not placed on nonaccrual status
because they are generally charged off upon reaching a predetermined delinquency
status that ranges from 120 to 180 days and varies by product type. When loans
and leases are placed on nonaccrual status, previously accrued and uncollected
interest is reversed against interest income of the current period. Cash
interest payments received on nonaccrual loans are applied as a reduction of the
principal balance when doubt exists as to the ultimate collection of the
principal; otherwise, such payments are recorded as income. Nonaccrual loans and
leases are generally returned to accrual status when they become current as to
principal and interest or become both well secured and in the process of
collection.
At March 31, 1999, the Company was not aware of any significant potential
problem loans (not otherwise classified as nonperforming or past due in the
table on page 13) where possible credit problems of the borrower caused
management to have serious concerns as to the ability of such borrower to comply
with the present loan repayment terms.
Loans past due 90 days or more and still accruing interest totaled $36,423,000
at March 31, 1999, an increase of $923,000, or 2.6%, over March 31, 1998. All of
the loans which are past due 90 days or more and still accruing interest are, in
management's judgment, adequately collateralized and in the process of
collection.
Although Hawaii's recovery from its 1991 recession continues to be slow and
protracted, the economy in California and the Pacific Northwest continues to
expand. This is evidenced by the decline in the ratios of nonperforming assets
to total loans and leases and other OREO and of nonperforming assets to total
assets as of March 31, 1999, which includes the impact of the California-based
operations of Bank of the West, as compared to March 31, 1998.
Recently, a number of countries in the Asia Pacific region, including Japan,
have experienced significant weaknesses in their economies. The economic
downturn in Asia may adversely impact the volume and spending level of Asian
visitors to Hawaii, which in turn may adversely affect the Hawaii economy. At
March 31, 1999, outstanding commitments and loans to debtors in Asian countries,
excluding Japan, of $10,495,000 represented approximately .07% of total assets
and .62% of total stockholders' equity. Including Japan, such outstanding
commitments totaled $69,458,000, and represented approximately .45% of total
assets and 4.11% of total stockholders' equity, in each case at March 31, 1999.
These commitments and loans are primarily collateralized by certificates of
deposit, Hawaii real estate, standby letters of credit issued by Asian banks
and/or guarantees by creditworthy Asian individuals and corporations.
The Company does not foresee a major improvement in Hawaii's economic conditions
in the near-term and believes that these trends may continue to affect the level
of nonperforming assets and related charge-offs in future periods.
14
<PAGE> 16
DEPOSITS
The following table sets forth the average balances and the average rates paid
on deposits for the periods indicated:
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
----------------------------------------------------------
1999 1998
------------------------ ---------------------------
AVERAGE AVERAGE Average Average
BALANCE RATE(1) Balance Rate (1)
----------- -------- ----------- --------
(dollars in thousands)
<S> <C> <C> <C> <C>
Interest-bearing demand $ 307,871 1.18% $ 317,256 1.69%
Savings 4,278,467 2.04 2,296,283 2.68
Time 5,011,861 4.82 2,625,023 5.33
----------- ----------
Total interest-bearing deposits 9,598,199 3.46 5,238,562 3.95
Noninterest-bearing demand 1,699,282 -- 806,705 --
----------- ----------
Total deposits $11,297,481 2.94% $6,045,267 3.42%
=========== ==========
</TABLE>
Average interest-bearing deposits increased $4,359,637,000, or 83.2%, over the
first quarter of 1998. The increase in nearly all deposit categories from March
31, 1998 is primarily due to the Merger. The decrease in average
interest-bearing demand deposits is a result of depositors seeking higher yields
through the deposit product programs. The mix of average interest-bearing
deposits changed, with higher yielding average time certificates of deposits
representing 52.2% of average interest-bearing deposits in the first three
months of 1999, as compared to 50.1% in the same period in 1998. In addition,
average noninterest-bearing demand deposits for the first three months of 1999
increased $892,577,000, or 110.6%, as compared to the same period in 1998.
Consequently, the overall cost of total deposits decreased by 49 basis points in
the first three months of 1999 as compared to the same period in 1998.
Noninterest-bearing demand deposits decreased $500,955,000, or 24.8%, from
$2,019,000 at December 31, 1998 to $1,518,000 at March 31, 1999. The decrease
was due to the reclassification of certain portions of the noninterest-bearing
demand deposit accounts to the savings deposit category for reserve requirement
purposes.
(1) Annualized.
15
<PAGE> 17
PROVISION AND ALLOWANCE FOR CREDIT LOSSES
The following table sets forth the activity in the allowance for credit losses
for the periods indicated:
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
--------------------------------------
1999 1998
------------ ------------
(dollars in thousands)
<S> <C> <C>
Loans and leases outstanding (end of period) $ 11,531,409 $ 6,293,908
============ ============
Average loans and leases outstanding $ 11,430,019 $ 6,211,927
============ ============
Allowance for credit losses:
Balance at beginning of period $ 149,585 $ 82,596
------------ ------------
Loans and leases charged off:
Commercial, financial and agricultural 1,592 915
Real estate:
Commercial -- 1
Construction -- --
Residential 860 719
Consumer 6,852 3,856
Lease financing 1,457 --
Foreign 88 107
------------ ------------
Total loans and leases charged off 10,849 5,598
------------ ------------
Recoveries on loans and leases charged off:
Commercial, financial and agricultural 61 618
Real estate:
Commercial 13 395
Construction 18 --
Residential 373 1
Consumer 1,180 709
Lease financing 360 --
Foreign 5 37
------------ ------------
Total recoveries on loans and leases
previously charged off 2,010 1,760
------------ ------------
Net charge-offs (8,839) (3,838)
Provision for credit losses 9,625 4,396
------------ ------------
Balance at end of period $ 150,371 $ 83,154
============ ============
Net loans and leases charged off to average
loans and leases .31%(1) .25%(1)
Net loans and leases charged off to allowance for
credit losses 23.84%(1) 18.72%(1)
Allowance for credit losses to total
loans and leases (end of period) 1.30% 1.32%
Allowance for credit losses to nonperforming
loans and leases (end of period):
Excluding 90 days or more past due
accruing loans and leases 1.74X 1.44x
Including 90 days or more past due
accruing loans and leases 1.23X .89x
</TABLE>
(1) Annualized.
16
<PAGE> 18
PROVISION AND ALLOWANCE FOR CREDIT LOSSES, CONTINUED
The provision for credit losses for the first quarter of 1999 was $9,625,000, an
increase of $5,229,000, or 118.9%, over the first quarter of 1998. The increase
in the provision for credit losses for the first three months of 1999 over the
same period in 1998 primarily reflects the prolonged economic downturn in
Hawaii, that has resulted in a higher level of charge-offs.
The provision for credit losses is based upon management's judgment as to the
adequacy of the allowance for credit losses (the "Allowance") to absorb future
losses. The Company uses a systematic methodology to determine the adequacy of
the Allowance and related provision for credit losses to be reported for
financial statement purposes. The determination of the adequacy of the Allowance
is ultimately one of management judgment, which includes consideration of many
factors, including, among other things, the amount of problem and potential
problem loans and leases, net charge-off experience, changes in the composition
of the loan and lease portfolio by type and location of loans and leases and in
overall loan and lease risk profile and quality, general economic factors and
the fair value of collateral.
Charge-offs were $10,849,000 for the first three months of 1999, an increase of
$5,251,000, or 93.8%, over the same period in 1998. The increase was primarily
due to the Merger and partial charge-offs for three commercial, financial and
agricultural loans totaling $1,454,000 in the first quarter of 1999 as compared
to partial charge-offs for four commercial, financial and agricultural loans
totaling $857,000 in the first quarter of 1998. Consumer loan charge-offs were
negatively impacted by the ongoing sluggish Hawaii economy and a continued
increase in personal bankruptcies. Smaller balance homogeneous credit card and
consumer loans are charged off at a predetermined delinquency status or earlier
if the Company determines that the loan is uncollectible.
For the first quarter of 1999, recoveries increased $250,000, or 14.2%, over the
first quarter of 1998. The increase was primarily due to the Merger and
recoveries on three real estate - residential loans totaling $184,000 in the
first quarter of 1999 partially offset by a $548,000 recovery on a commercial,
financial and agricultural loan and a $272,000 recovery on a real estate -
commercial loan in the first quarter of 1998. The decrease in recoveries
reflects the ongoing sluggish Hawaii economy and continued increase in personal
bankruptcies.
The Allowance increased to 1.74 times nonperforming loans and leases (excluding
90 days or more past due accruing loans and leases) at March 31, 1999 from 1.44
times at March 31, 1998. The increase in the Allowance is principally due to the
Merger and to the higher level of charge-offs caused by the economic downturn in
Hawaii.
In management's judgment, the Allowance was adequate to absorb potential losses
currently inherent in the loan portfolio at March 31, 1999. However, changes in
prevailing economic conditions in the Company's markets could result in changes
in the level of nonperforming assets and charge-offs in the future and,
accordingly, changes in the Allowance.
NONINTEREST INCOME
Noninterest income totaled $42,709,000 for the first three months of 1999, an
increase of $17,321,000, or 68.2%, over the same period in 1998.
Trust and investment services income increased $1,375,000, or 19.2%, for the
first three months of 1999, over the same period in 1998. The increase was
primarily due to higher investment management fees earned.
Service charges on deposit accounts increased $8,048,000, or 110.7%, for the
first three months of 1999, over the same period in 1998. The increase was
primarily due to the Merger and higher service charges and checks paid and
returned.
Other service charges and fees increased $5,227,000, or 63.6%, for the first
three months of 1999, over the same period in 1998. The increase was primarily
due to: (1) the Merger; (2) higher ATM convenience fee income; (3) higher
merchant discount fees; and (4) mortgage servicing rights for mortgage loans
that were originated and sold with servicing retained.
Other noninterest income increased $2,678,000, or 98.0%, for the first three
months of 1999, over the same period in 1998. The increase was primarily due to
the Merger.
17
<PAGE> 19
NONINTEREST EXPENSE
Noninterest expense totaled $120,536,000 for the first three months of 1999, an
increase of 64.2% over the same period in 1998. In addition to the increase in
noninterest expense resulting from effects of the Merger, the overall increase
in noninterest expense reflected integration expenses, including increased
intangible amortization and higher expenses for outside services.
Total personnel expense (salaries and wages and employee benefits) increased
$17,935,000, or 50.5%, for the first three months of 1999 over the same period
in 1998 primarily due to the Merger. The increase was partially offset by: (1)
lower salaries and wages expense as a result of the Company's re-engineering and
consolidation efforts; and (2) higher pension credits.
Occupancy expense for the first three months of 1999 increased $4,616,000, or
47.3%, over the same period in 1998 primarily due to the Merger.
Equipment expense increased $819,000, or 12.7%, for the first three months of
1999 over the same period in 1998 due to the Merger. The increase was partially
offset by lower depreciation on furniture and equipment.
Intangible amortization increased $7,396,000 for the first quarter of 1999 as
compared to the first quarter of 1998, primarily due to three months of
increased amortization expense in 1999 resulting from the $599,000,000
Merger-related increase in goodwill.
Other noninterest expense increased $16,352,000 for the first three months of
1999, an increase of 80.7% over the same period in 1998. The increase was the
result of: (1) the Merger; (2) write-downs and losses on the sale of certain
OREO; (3) higher outside service expenses primarily related to the Year 2000
project (see Year 2000 disclosure on pages 19 to 21); and (4) higher foreclosed
property expenses.
The Company recorded restructuring, Merger-related and other nonrecurring costs
totaling $25,527,000, of which $11,302,000 was accrued as a liability, in 1998.
During the first quarter of 1999, the Company reduced the liability by a total
of $4,380,000. The total decrease was composed of: (1) $1,902,000 for payment of
data processing contract termination penalties; (2) $1,463,000 for severance
payments; (3) $527,000 for payments on other integration costs; and (4) $488,000
related to excess leased commercial properties.
INCOME TAXES
The Company's effective income tax rate (exclusive of the tax equivalent
adjustment) for the first three months of 1999 was 42.8%, as compared to 36.0%
for the same period in 1998. The higher rate in 1999 primarily reflects the
increased amortization of goodwill and intangible assets resulting from the
Merger, from which the Company receives no income tax benefit.
LIQUIDITY AND CAPITAL
Stockholders' equity was $1,691,134,000 at March 31, 1999, an increase of 1.4%
over $1,667,886,000 at December 31, 1998. Compared to the first quarter of 1998,
stockholders' equity increased by $954,884, or 129.7%.
18
<PAGE> 20
Quantitative measures established by regulation to ensure capital adequacy
require the Company to maintain minimum amounts and ratios (set forth in the
table below, at March 31, 1999) of Tier 1 and Total capital to risk-weighted
assets, and of Tier 1 capital to average assets.
<TABLE>
<CAPTION>
For Capital
Actual Adequacy Purposes
------------------ -------------------
Amount Ratio Amount Ratio
---------- ----- ---------- -----
(dollars in thousands)
<S> <C> <C> <C> <C>
Tier 1 Capital to
Risk-Weighted
Assets $1,111,857 8.25% $ 538,917 4.00%
Total Capital to
Risk-Weighted
Assets $1,362,228 10.11% $1,077,833 8.00%
Tier 1 Capital to
Average Assets $1,111,857 7.76% $ 429,980 3.00%
</TABLE>
As of March 31, 1999, the Company's depository institution subsidiaries were
categorized as well-capitalized under the applicable Federal regulations
regarding the regulatory framework for prompt corrective action. To be
categorized as well-capitalized, the Company's depository institution
subsidiaries must maintain Tier 1 risk-based and total risk-based capital ratios
of 6% and 10%, respectively. Management is not aware of any conditions or events
subsequent to March 31, 1999, that would cause a change in the Company's
depository institution subsidiaries' category.
YEAR 2000 ISSUES
Background
Many computer programs were written, and many computer chips were programmed, to
use only two digits to identify the year. Thus, a computer program could read
the digits "00" as the year 2000 or as the year 1900. If not corrected, software
and computer systems may fail or create erroneous results in the year 2000.
Also, computer chips embedded in many operating facilities--such as elevators
and communication systems--may cause equipment malfunctions because of the year
2000 date change. These potential software and systems problems may affect the
Company, the outside companies and agencies that the Company relies upon to
conduct its business and to service its customers ("External Parties"), and the
Company's borrowers. Failure by the Company or these third parties to
successfully address year 2000 issues could have a material and adverse effect
on the Company's business or consolidated results of operations or financial
condition.
The Company's programs to address these issues are being carried out by its
subsidiary banks, First Hawaiian and Bank of the West. Each bank has formed
management teams to address year 2000 issues. The teams report to the applicable
bank's senior management and to its Board of Directors or audit committee, which
in turn reports to the audit committee of the Company's Board of Directors.
The Company's year 2000 programs are designed to comply with guidelines issued
by the Federal Financial Institutions Examination Council (the "FFIEC"). The
Federal Deposit Insurance Corporation (the "FDIC") and Federal Reserve, which
are members of the FFIEC, conduct year 2000 compliance examinations of the
Company, First Hawaiian and Bank of the West. These examinations result in one
of three ratings: "satisfactory," "needs improvement," or "unsatisfactory," and
institutions that receive a rating of unsatisfactory may be subject to formal
enforcement action, supervisory agreements, cease and desist orders, civil money
penalties, or the appointment of a conservator. Disclosure of these ratings is
not permitted by Federal regulations.
Each bank's program includes the five major phases suggested in FFIEC guidelines
- -- awareness, assessment, renovation (remediation or replacement of noncompliant
items), validation (which includes stand-alone and integration testing), and
implementation. In the assessment phase, the banks classified items to be
addressed as "mission critical" or "non-mission critical." Mission critical
items are those applications or systems that are vital to the successful
continuance of a core business activity of the bank.
First Hawaiian and Bank of the West have substantially different data processing
environments and consequently different approaches to addressing year 2000
issues. While both banks rely heavily on third-party-provided software, First
Hawaiian operates its own data center to meet the majority of its systems'
requirements, while Bank of the West has outsourced its primary data processing
services. Because of this key difference in data processing environments,
implementation of each bank's year 2000 program is discussed separately below.
19
<PAGE> 21
STATUS OF IMPLEMENTATION OF FIRST HAWAIIAN'S PROGRAM
First Hawaiian has completed the first three phases of the program -- awareness,
assessment and renovation. As of December 31, 1998, First Hawaiian met a major
milestone of completing the renovation, testing and validation on a stand-alone
basis of a substantial portion of internal mission critical systems, meeting a
goal established by the FFIEC. As of April 30, 1999, First Hawaiian had
completed stand-alone testing and validation of all internal mission critical
systems, and integrated testing and validation for 94% of mission critical
systems. By June 30, 1999, First Hawaiian expects to complete all integrated
testing of mission critical systems, and expects to have substantially completed
implementation of mission critical systems.
EXTERNAL PARTIES
First Hawaiian is continuing to assess the year 2000 compliance efforts of
significant External Parties. It has categorized External Parties as follows:
(1) external processors--vendors who provide core business processing services,
such as credit card processing, and vendors who provide information access for
First Hawaiian's customers, such as business and home P.C. banking; (2) external
interfaces--companies and agencies with whom the bank exchanges information by
electronic or nonelectronic media, such as automated clearing house
transactions; and (3) external alliances--vendors, supplies providers, business
partners, customers and other third parties that are not covered by any other
category, such as credit bureaus and stock quotation services. By March 31,
1999, First Hawaiian had completed testing with all mission critical external
processors. Testing with some parties with external interfaces and selected
testing with customers is well underway and planned to be completed by June 30,
1999. Initial contact with External Parties involved in other alliances with
First Hawaiian was completed last year, and follow-up contact will continue
throughout 1999.
CUSTOMERS AND COUNTERPARTIES
The first stage of First Hawaiian's evaluation of year 2000 compliance by
customers included a credit risk survey and assessment process which was
completed by First Hawaiian credit officers in August 1998. Following FFIEC
guidelines and based on management judgment, all aggregate loans and commitments
to a borrower in excess of a fixed threshold were evaluated. In addition, all
applicants for new credits are being evaluated for year 2000 risk among other
underwriting risks. Borrowers are classified as "high risk," "medium risk" and
"low risk" based on year 2000 status. Reassessment and review of such risks will
continue throughout 1999. First Hawaiian's initial assessment of compliance by
counterparties and funds providers (including major depositors) was completed in
September 1998, and periodic reviews and reassessments are continuing throughout
1999.
STATUS OF IMPLEMENTATION OF BANK OF THE WEST'S PROGRAM
Bank of the West has completed the awareness and assessment phases of its year
2000 program and has completed the renovation and implementation phases for all
mission critical systems. By the end of February 1999, all mainframe computer
programs had been either renovated or replaced. Feature, function and interface
testing have been completed for each of the renovated and replaced systems and
they are currently running in the bank's production environment. Mainframe date
testing will occur on a stand-alone computer provided by the external service
provider and its technology center during the period March 1999 through May
1999, with completion planned by June 30, 1999. By April 30, 1999, Bank of the
West had successfully completed integrated, internal future-date testing of
all mission critical systems. Non-mission critical distributed systems will be
future-date tested throughout the remainder of 1999 on a stand-alone test system
installed on site at Bank of the West, with the majority of these systems
scheduled for completion by June 30, 1999.
EXTERNAL PARTIES
Bank of the West has also assessed the year 2000 compliance efforts of key
External Parties. The bank has categorized External Parties similarly to First
Hawaiian, as discussed above. The bank has received periodic reports from its
primary external processors which indicate that they are on or ahead of schedule
with their year 2000 plans. Additionally, regulatory agencies are performing
periodic reviews of these service processors' progress on year 2000 readiness
and providing copies of their evaluations to Bank of the West and other banks
serviced by these external processors.
Bank of the West will be performing interface testing (tests on the exchange of
data with other systems) with its External Parties during the March 1999 to June
1999 testing period. Additionally, year 2000 readiness questionnaires have been
sent to all key external alliance parties. Responses have been and will be
monitored to focus on mission critical relationships.
20
<PAGE> 22
CUSTOMERS AND COUNTERPARTIES
Bank of the West completed its initial assessment program in October 1998 with
respect to year 2000 compliance by funds providers (such as major depositors),
funds users (such as borrowers) and counterparties. Customers and counterparties
were selected for review based on FFIEC guidelines and management judgment. The
customers and counterparties were classified as "high risk," "medium risk" or
"low risk" based on their year 2000 status. This assessment was updated in
February 1999. All applicants for new credits at Bank of the West are being
evaluated for year 2000 risk among other underwriting factors, if applicable.
Reassessment and review of customer and counterparty risk will continue
throughout 1999.
BUDGET
The Company's current estimates of the total cost related solely to the year
2000 program is $12.3 million through June 30, 2000. Additionally, it estimates
that a total of $5.4 million has been and will be required for purchase and
installation of new or replacement systems or equipment that were accelerated to
address year 2000 issues. The source of these funds has been and will be the
operating cash flow of the Company. From the beginning of the year 2000 programs
through March 31, 1999, an aggregate of $7.5 million has been expended on costs
related solely to year 2000 compliance efforts, and $3.3 million has been spent
on the planning and accelerated installation of systems and applications to
address the year 2000 compliance issues as described above. In the first quarter
of 1999, the Company expended $1.1 million on costs related solely to year 2000
compliance and $.5 million on accelerated systems and applications.
CONTINGENCY PLANS
Both First Hawaiian and Bank of the West are preparing contingency plans to
minimize the possibility of disruptions to their respective bank operations due
to year 2000 issues. The plans address recovery of critical business processes
and alternatives to mitigate potential effects of service interruptions caused
by bank systems, service providers or other External Parties. Alternative
strategies and contingency plans for liquidity and cash are also being developed
as part of the year 2000 readiness plans for both banks. The contingency plans
are expected to be substantially completed for critical business operations by
June 30, 1999. Review and testing of these plans will continue through the
remainder of 1999.
RISKS
Even though the Company expects that the First Hawaiian and Bank of the West
programs will adequately address year 2000 issues, there can be no assurance
that unforeseen difficulties will not arise and impact the Company's business or
consolidated results of operations or financial condition. There is an
additional risk that may be posed by potential failure of certain parties, such
as power, telecommunication and transportation utilities or governmental
agencies, to resolve year 2000 issues where alternative providers of services
are not available. The Company's exposure to such infrastructure risks varies by
location, in part because operations conducted in Hawaii and other island
locations do not have access to adjacent power grids. For that reason and
others, the Company is closely monitoring the year 2000 status and contingency
plans of island-based utility providers, shippers and other parties that provide
critical infrastructure to such locations.
Readers are cautioned that forward-looking statements in this discussion of year
2000 issues should be read in conjunction with the discussion of the risks and
uncertainties relating to such forward-looking statements on page 8.
The disclosure contained in this Form 10-Q quarterly report, as well as the
information in the Company's 1998 and 1997 Annual Reports and its 1998 Form 10-Q
quarterly reports filed by the Company with the Securities and Exchange
Commission regarding its year 2000 readiness, are designated as year 2000
readiness disclosures under the Year 2000 Information and Readiness Disclosure
Act.
EURO CONVERSION
On January 1, 1999, 11 of the 15 member countries of the European Union (the
"Participating Countries") established fixed conversion rates between their
existing sovereign currencies (the "Legacy Currencies") and the euro. The
Participating Countries have adopted the euro as their common legal currency on
that date. On January 1, 1999, the euro also began trading on currency exchanges
and became available for non-cash transactions.
Following the introduction of the euro on January 1, 1999, the Legacy Currencies
are scheduled to remain legal tender in the Participating Countries as
denominations of the euro between January 1, 1999 and January 1, 2002. Beginning
January 1, 2002, the Participating Countries will issue new euro-denominated
bills and coins for use in cash transactions. No later than July 1, 2002, the
Participating Countries will withdraw all bills and coins denominated in the
Legacy Currencies, so that the Legacy Currencies no longer will be legal tender
for any transactions, making conversion to the euro complete.
As a provider of foreign exchange, custody, cash management and funds transfer
services, the Company has actively prepared for the introduction of the euro.
Similar to the year 2000 issue, euro preparations have required conversion of
21
<PAGE> 23
various operating and processing systems to avoid interruption in the Company's
ongoing business activities. The costs associated with the euro conversion have
been expensed in the period in which they were incurred and have not been
material.
The business conducted by the Company in the Participating Countries is not
material to its earnings. Furthermore, all of the Company's derivatives are
based on either domestic interest rates or London Interbank Offered Rates
("LIBOR"). Although the business conducted by the Company in Participating
Countries is not material, the Company has actively developed contingency plans
to deal with any liquidity issues that may result if changes in payment,
clearing or settlement procedures result in an increase in misrouted funds.
These plans have also addressed likely problems following conversion in order to
maximize the Company's ability to avoid disruptions. While the Company does not
expect that the impact of the conversion will be material to its consolidated
financial condition or results of operations, it cannot be assured that third
parties on whom it relies will be fully prepared.
Readers are cautioned that forward-looking statements in this discussion of the
euro conversion should be read in conjunction with the discussion of the risks
and uncertainties relating to such forward-looking statements on page 8.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Certain disclosures in this Item 3 are forward-looking statements about matters
that involve certain risks and uncertainties that could cause the Company's
actual results to differ materially from those discussed in such forward-looking
statements. See Item 2 above for a discussion of factors that could cause or
contribute to such differences.
INTEREST RATE RISK MEASUREMENT AND MANAGEMENT
The net interest income of the Company is subject to interest rate risk to the
extent the Company's interest-bearing liabilities (primarily deposits and
borrowings) mature or reprice on a different basis than its interest-earning
assets (primarily loans and investment securities). When interest-bearing
liabilities mature or reprice more quickly than interest-earning assets during a
given period, an increase in interest rates could reduce net interest income.
Similarly, when interest-earning assets mature or reprice more quickly than
interest-bearing liabilities, a decrease in interest rates could also reduce net
interest income. In addition, the impact of interest rate swings may be
exacerbated by factors such as our customers' propensity to manage their demand
deposit balances more or less aggressively or to refinance mortgage loans based
on the interest rate environment.
The Asset/Liability Committees of each of the Company's subsidiary companies are
responsible for managing interest rate risk. The frequency of the various
Asset/Liability Committee meetings range from weekly to monthly. Recommendations
for changes to a particular subsidiary's interest rate profile, should they be
deemed necessary and exceed established policies, are made to its Board of
Directors. Other than loans that are originated and held for sale and
commitments to purchase and sell foreign currencies and mortgage-backed
securities, the Company's interest rate, derivative products and other financial
instruments are not entered into for trading purposes.
The Company's exposure to interest rate risk is managed primarily by taking
actions that impact certain balance sheet accounts (e.g., lengthening or
shortening maturities in the investment portfolio, changing the asset and/or
liability mix --including increasing or decreasing the amounts of fixed and/or
variable instruments held by the Company -- to adjust sensitivity to interstate
rate changes) and/or utilizing off-balance sheet instruments such as interest
rate swaps, caps, floors, options, or forwards.
22
<PAGE> 24
The Company models its net interest income in order to quantify its exposure to
changes in interest rates. Generally, the size of the balance sheet is held
constant and then subjected to interest rate shocks up and down of 100 and 200
basis points (1% equals 100 basis points) each. Each account-level item is
repriced according to its respective contractual characteristics, including any
imbedded options which might exist (e.g., periodic interest rate caps or floors
which permit the borrower to prepay the principal balance of the loan prior to
maturity without penalty). Off-balance sheet instruments such as interest rate
swaps, caps or floors are included as part of the modeling process. For each
interest rate shock scenario, net interest income over a 12-month horizon is
compared against the results of a scenario in which no interest rate change
occurs (a "flat rate scenario") to determine the level of interest rate risk at
that time.
SIGNIFICANT ASSUMPTIONS UTILIZED AND INHERENT LIMITATIONS
The significant net interest income changes for each interest rate scenario
include assumptions based on accelerating or decelerating mortgage prepayments
in declining or rising scenarios, respectively, and adjusting deposit levels and
mix in the different interest rate scenarios. The magnitude of changes to both
areas in turn are based upon analyses of customers' behavior in differing rate
environments. However, these analyses may differ from actual future customer
behavior. For example, actual prepayments may differ from current assumptions
because prepayments are affected by many variables that cannot be predicted with
certainty (e.g., prepayments of mortgages may differ on fixed and adjustable
loans depending upon current interest rates, expectations of future interest
rates, availability of refinancing, economic benefit to borrower, financial
viability of borrower, etc.).
As with any model for analyzing interest rate risk, certain limitations are
inherent in the method of analysis presented above. For example, the actual
impact on net interest income due to certain interest rate shocks may differ
from those projected should market conditions vary from assumptions used in the
analysis. Furthermore, the analysis does not consider the effects of a changed
level of overall economic activity that could exist in certain interest rate
environments. Moreover, the method of analysis used does not take into account
the actions that management might take to respond to changes in interest rates
because of inherent difficulties in determining the likelihood or impact of any
such response.
At March 31, 1999, there was no significant change in the Company's market risk
from the information provided with respect to "Quantitative and Qualitative
Disclosures About Market Risk" in the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 1998. Quantitative and qualitative
disclosures regarding the Company's market risk are also included in
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" (page 44) and "Notes to Consolidated Financial Statements" (page 58
and 59) in the Financial Review section of the Company's Annual Report 1998.
23
<PAGE> 25
PART II. OTHER INFORMATION
(a) Exhibits
Exhibit 12 Statement Regarding Computation of Ratios.
Exhibit 27 Financial Data Schedule.
(b) Reports on Form 8-K Current report, dated as of February 26, 1999,
announcing that the Company and Bank of the West
entered into an Agreement and Plan of Merger, dated
as of February 25, 1999, with SierraWest Bancorp.
24
<PAGE> 26
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
BANCWEST CORPORATION
(REGISTRANT)
Date May 14, 1999 By /s/ HOWARD H. KARR
----------------- ------------------------------
HOWARD H. KARR
EXECUTIVE VICE PRESIDENT AND
CHIEF FINANCIAL OFFICER
(PRINCIPAL FINANCIAL OFFICER)
25
<PAGE> 27
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
-------- -----------
<S> <C>
12 Statement regarding computation of ratios.
27 Financial data schedule.
</TABLE>
<PAGE> 1
EXHIBIT 12. STATEMENT RE: COMPUTATION OF RATIOS
BancWest Corporation and Subsidiaries
Computation of Consolidated Ratios of Earnings to Fixed Charges
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
------------------------------
1999 1998
--------- ---------
(dollars in thousands)
<S> <C> <C>
Income before income taxes $ 70,395 $ 33,152
--------- ---------
Fixed charges:(1)
Interest expense 102,260 65,745
Rental expense 3,733 2,740
--------- ---------
105,993 68,485
Less interest on deposits 81,976 51,033
--------- ---------
Net fixed charges 24,017 17,452
--------- ---------
Earnings, excluding
interest on deposits $ 94,412 $ 50,604
========= =========
Earnings, including
interest on deposits $ 176,388 $ 101,637
========= =========
Ratio of earnings to fixed charges:
Excluding interest on deposits 3.93X 2.90x
Including interest on deposits 1.66X 1.48x
</TABLE>
(1) For purposes of computing the consolidated ratios of earnings to fixed
charges, earnings represent income before income taxes plus fixed charges.
Fixed charges, excluding interest on deposits, include interest (other
than on deposits), whether expensed or capitalized, and that portion of
rental expense (generally one third) deemed representative of the interest
factor. Fixed charges, including interest on deposits, consist of the
foregoing items plus interest on deposits.
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
REGISTRANT'S QUARTERLY FINANCIAL STATEMENTS AS OF AND FOR THE THREE MONTH PERIOD
ENDED MARCH 31, 1999, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 606,010
<INT-BEARING-DEPOSITS> 520,686
<FED-FUNDS-SOLD> 32,900
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 1,254,191
<INVESTMENTS-CARRYING> 283,660
<INVESTMENTS-MARKET> 283,485
<LOANS> 11,531,409
<ALLOWANCE> 150,371
<TOTAL-ASSETS> 15,373,634
<DEPOSITS> 11,558,550
<SHORT-TERM> 892,113
<LIABILITIES-OTHER> 502,354
<LONG-TERM> 727,664
0
0
<COMMON> 59,005
<OTHER-SE> 1,632,129
<TOTAL-LIABILITIES-AND-EQUITY> 15,373,634
<INTEREST-LOAN> 232,571
<INTEREST-INVEST> 23,380
<INTEREST-OTHER> 4,156
<INTEREST-TOTAL> 260,107
<INTEREST-DEPOSIT> 81,976
<INTEREST-EXPENSE> 102,260
<INTEREST-INCOME-NET> 157,847
<LOAN-LOSSES> 9,625
<SECURITIES-GAINS> (12)
<EXPENSE-OTHER> 120,536
<INCOME-PRETAX> 70,395
<INCOME-PRE-EXTRAORDINARY> 40,256
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 40,256
<EPS-PRIMARY> .70
<EPS-DILUTED> .70
<YIELD-ACTUAL> 7.91
<LOANS-NON> 54,763
<LOANS-PAST> 36,423
<LOANS-TROUBLED> 31,414
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 149,585
<CHARGE-OFFS> 10,849
<RECOVERIES> 2,010
<ALLOWANCE-CLOSE> 150,371
<ALLOWANCE-DOMESTIC> 97,035
<ALLOWANCE-FOREIGN> 1,380
<ALLOWANCE-UNALLOCATED> 51,956
</TABLE>
