Pacific Century deal unloads California bank

Pacific Century Financial Corp. has reached a deal to sell its 20-branch California bank subsidiary to U.S. Bancorp, the nation's eighth-largest financial services holding company.

The move — less than two months after the Honolulu-based parent company of Bank of Hawaii announced a major restructuring aimed at selling nearly all of its operations outside Hawai'i — would complete the financial institution's withdrawal from Mainland banking.

Under terms of the agreement, Minneapolis-based U.S. Bancorp will buy Pacific Century Bank in a deal involving about $640 million in deposits, $570 million in loans, 300 employees and 20 branches in Southern California.

About $250 million in other assets of Pacific Century's California bank subsidiary — principally investment securities, cash and miscellaneous assets — will be liquidated, the company said.

Additional financial terms were not disclosed, but the sale could bring Pacific Century roughly $150 million, according to industry estimates.

The deal is subject to regulatory approval and is expected to be completed in the third quarter.

Michael O'Neill, Pacific Century chairman and chief executive officer, was unavailable for comment yesterday but said in a statement that U.S. Bancorp's management team "is committed to helping ensure a smooth transition for our customers and employees."

U.S. Bancorp is the parent of U.S. Bank and Firstar Bank. With 144 full-service branches in California, U.S. Bank through the purchase will strengthen its presence in that state and gain entry into fast-growing communities, according to Dave Rainer, president of U.S. Bank in California.

The sale to U.S. Bancorp follows Pacific Century's announcement in April that it would sell its California subsidiary and nearly all of its operations outside the state as part of a sweeping reorganization plan that will last through 2003.

The restructuring — the largest shake-up in the bank's history — is intended to refocus business in the state and improve profitability, customer service and shareholder value after three years of falling profits from underperforming operations around the Pacific.

In Australia, Pacific Century reached a deal last month to sell its 17 percent stake in Bank of Queensland to Australian trucking magnate Lindsay Fox and the Australian bank for a combined $36 million.

Still up for sale are dozens of Pacific Century's South Pacific branches in French Polynesia, New Caledonia, Papua New Guinea, the Solomon Islands, Vanuatu and Fiji; and five branches and three offices in Asia, all outside Japan.

Al Landon, Pacific Century chief financial officer, said yesterday that the company is still compiling interest in those available assets.

O'Neill, a former Bank of America executive hired last November, has previously said that the South Pacific banks may take longer to sell, and that operations in Asia may have to be closed if a buyer cannot be found.

Other assets recently shed as part of decisions made late last year include Bank of Hawaii's credit card portfolio, which American Express bought for $75 million; nine Pacific Century branches in Arizona bought by Utah-based Zions Bancorp; and minority interests in the Bank of Tonga and Pacific Commercial Bank of Samoa bought by Australia's Westpac Banking Corp.

Pacific Century expects overall restructuring efforts to cut operating costs by half and generate $800 million, much of which will likely be used to buy back stock later this year under a program yet to be submitted to federal regulators.

Overall, the company anticipates that the planned divestitures will shave $5 billion in assets and 1,000 jobs. That would leave Pacific Century with assets of $9 billion and make it the second largest bank based in Hawai'i behind First Hawaiian Bank parent BancWest Corp.

In Hawai'i, Pacific Century expects only 10 people to lose their jobs. Thirty other positions will be eliminated but those probably will be spared layoffs, because of anticipated attrition, voluntary separation and vacant positions.

Besides Bank of Hawaii, Pacific Century intends to keep two branches in Guam and American Samoa plus a representative office in Japan for strategic purposes.

Yesterday's sale agreement was announced after financial markets in New York closed. Pacific Century stock closed at $25.21, up 31 cents. U.S. Bancorp stock closed at $22.84, up 9 cents.