Bank of Hawaii Corporation First Quarter 2004 Financial Results
HONOLULU--(BUSINESS WIRE)--April 26, 2004--Bank of Hawaii Corporation (NYSE:BOH)
- Diluted Earnings Per Share Increases to $0.69, Up Over 46 Percent
- Net Income of $39.8 Million for the Quarter, Up Over 33 Percent
- $50 Million Additional Share Repurchase Program Announced
- Board of Directors Declares Dividend of $0.30 Per Share
Bank of Hawaii Corporation (NYSE:BOH) today reported diluted earnings per share of $0.69 for the first quarter of 2004, up $0.03 or 4.5 percent from diluted earnings per share of $0.66 in the fourth quarter of 2003 and up $0.22 or 46.8 percent from $0.47 in the comparable quarter last year. Net income for the first quarter of 2004 was $39.8 million, up $1.1 million or 2.9 percent from net income of $38.7 million in the previous quarter and up $10.0 million or 33.5 percent from $29.8 million reported in the same quarter last year.
The return on average assets for the first quarter of 2004 was 1.65 percent, essentially flat with 1.66 percent in the fourth quarter of 2003 and up from 1.31 percent in the first quarter of 2003. The return on average equity was 19.98 percent for the first quarter of 2004, up from 18.59 percent in the previous quarter and a significant improvement from 12.42 percent in the same quarter last year.
The efficiency ratio was 57.3 percent for the first quarter of 2004, down from 58.4 percent in the fourth quarter of 2003. Excluding systems replacement costs, the efficiency ratio was 61.0 percent in the first quarter of 2003.
"I am very pleased with the first quarter results for 2004," said Michael E. O'Neill, Chairman and CEO. "By all measures we have performed extremely well; our returns have improved, our operating leverage was positive, asset quality remains solid, customer and employee confidences have reached new highs, and the Hawaii economy continues to reflect strength. Bank of Hawaii is well positioned to build on the tremendous momentum the Company has generated."
Financial Highlights
Net interest income for the first quarter of 2004 was $96.1 million on a taxable equivalent basis, up $2.7 million from net interest income of $93.4 million in the fourth quarter of 2003, primarily due to increased earning assets. Net interest income was up $5.1 million from $91.0 million in the first quarter of 2003 and was largely the result of lower interest rates paid on deposits and a reduction in long-term debt. An analysis of the change in net interest income is included in Table 6.
The net interest margin was 4.30 percent for the first quarter of 2004, down 5 basis points from the net interest margin of 4.35 in the previous quarter and up 1 basis point from 4.29 the same quarter last year. The decrease in the net interest margin compared to the previous quarter was largely due to a 5 basis point decrease in the average yield on the loan portfolio.
Credit quality continued to improve during the quarter. The Company did not recognize a provision for loan and lease losses during the first quarter of 2004 and has not recorded a provision for the last seven quarters. The allowance for loan and lease losses was reduced $1.9 million from December 31, 2003, which equaled the amount of net charge-offs during the quarter.
Non-interest income was $48.8 million for the quarter compared to non-interest income of $49.4 million in the fourth quarter of 2003 and $44.8 million in the first quarter of 2003. The decrease from the previous quarter was largely due to a reduction in mortgage banking income that offset growth in trust and asset management fees and service charges on deposits.
Non-interest expense for the first quarter of 2004 was $83.0 million, down $0.4 from $83.4 million in the previous quarter and down $7.2 million or 8.0 percent from $90.2 million in the same quarter last year. Non-interest expense in the first quarter of 2003 included $7.4 million in systems replacement costs. Excluding these items, non-interest expenses were essentially unchanged from the same quarter last year.
The Company's business segments are defined as Retail Banking, Commercial Banking, Investment Services Group, and Treasury and Other Corporate. Results are determined based on the Company's internal financial management reporting process and organizational structure. Business segment performance details are summarized in Table 11.
Asset Quality
Bank of Hawaii Corporation's strong credit quality continued during the first quarter of 2004. Non-performing assets were $27.9 million at the end of the quarter, a decrease of $3.9 million, or 12.2 percent, from non-performing assets of $31.7 million at the end of the fourth quarter of 2003. Non-performing assets declined $16.4 million, or 37.0 percent, compared to non-performing assets of $44.2 million in the same period last year. At March 31, 2004 the ratio of non-performing assets to total loans and foreclosed real estate was 0.49 percent, down from 0.55 percent at December 31, 2003 and down from 0.79 percent at March 31, 2003.
Non-accrual loans were $23.5 million at March 31, 2004, a reduction of $3.9 million, or 14.3 percent, from $27.3 million at December 31, 2003 and down $11.7 million, or 33.2 percent, from $35.1 million at March 31, 2003. Non-accrual loans as a percentage of total loans were 0.41 percent at March 31, 2004 down from 0.48 percent at the end of the previous quarter and down from 0.63 percent at the end of the comparable quarter last year.
Net charge-offs for the first quarter of 2004 were $1.9 million, or 0.13 percent (annualized) of total average loans. Charge-offs during the quarter of $6.1 million were partially offset by recoveries of $4.2 million. Net charge-offs in the fourth quarter of 2003 were $3.6 million, or 0.26 percent (annualized) of total average loans. Net charge-offs during the first quarter of 2003 were $2.8 million, or 0.21 percent (annualized) of total average loans.
The allowance for loan and lease losses was $127.2 million at March 31, 2004. The ratio of the allowance for loan and lease losses to total loans was 2.23 percent at March 31, 2004 compared with 2.24 percent at December 31, 2003 and 2.52 percent at the end of the same quarter last year.
Concentrations of credit exposure to selected components of the portfolio are summarized in Table 8.
Other Financial Highlights
Total assets increased to $10.0 billion at the end of March 31, 2004, compared to total assets of $9.5 billion at the end of December 31, 2003 and $9.4 billion at the end of March 31, 2003. The increase in total assets is primarily related to a higher level of funding resulting from securities repurchase agreements by public entities and continued deposit growth.
Total deposits at March 31, 2004 were $7.4 billion, up from total deposits of $7.3 billion at December 31, 2003 and up from total deposits of $7.0 billion at March 31, 2003. The increase in deposits is due to continued strong growth in demand and savings deposits.
During the first quarter of 2004, Bank of Hawaii Corporation repurchased 1.3 million shares of common stock at a total cost of $57.8 million under the share repurchase program. The average cost per share was $44.77 during the quarter. From the beginning of the share repurchase program in July 2001 through March 31, 2004, the Company had repurchased a total of 31.1 million shares and returned a total of $912.9 million to the shareholders at an average cost of $29.34 per share. The Company's Board of Directors has authorized an additional program to repurchase up to $50 million of common stock. This new authorization, combined with the Company's previously announced authorizations of $1.0 billion, brings the total repurchase authority to $1,050 million. Through April 23, 2004, the Company repurchased an additional 1.0 million shares of common stock at an average cost of $43.92 per share. Remaining buyback authority was $93.9 million at April 23, 2004.
The Company's capital and liquidity remain strong. At March 31, 2004 the Tier 1 leverage ratio was 7.88 percent compared to 8.43 percent at December 31, 2003 and 10.03 percent at March 31, 2003.
The Company's Board of Directors has declared a quarterly cash dividend of $0.30 per share on the Company's outstanding shares. The dividend will be payable on June 14, 2004 to shareholders of record at the close of business on May 24, 2004.
Economic Outlook
First quarter 2004 visitor growth increased 6.0 percent, including a 9.0 percent gain in domestic travelers. The strong yen is expected to further help the tourism-dependent sectors of the Hawaii economy.
Hawaii's real growth is most recently forecast at 3.5 percent for 2004 after adjusting for increasing inflation due to higher housing costs. Hawaii construction should remain strong in 2004, based on 20.0 percent growth in the 2003 value of residential building permits, and a doubling in nonresidential building permits, combined with military housing construction. Record high home prices continued rising during first quarter 2004 along with statewide home sales volumes. Interest rate sensitivity is expected to be modest and strong fundamentals support the local housing valuation trends.
Tight labor market conditions in Hawaii persisted during the first quarter of 2004. Statewide unemployment declined from 4.4 percent in the fourth quarter of 2003 to 3.9 percent in the first quarter of 2004. Overall, Hawaii job growth continued at around 2.0 percent through the first quarter, with the construction sector leading (up 7.0 percent) and the information sector lagging (down 9.0 percent). External pressures that could constrain the economic growth in Hawaii include higher petroleum prices and a rising interest rate environment.
Earnings Outlook
Bank of Hawaii Corporation's previously published earnings guidance of approximately $157 million in net income for the full year of 2004 remains unchanged. Based on current conditions, the Company does not expect to record a provision for loan and lease losses in 2004. However, the actual amount of the provision for loan and lease losses depends on determinations of credit risk that are made near the end of each quarter. Earnings per share and return on equity projections continue to be dependent upon the terms and timing of share repurchases.
Conference Call Information
The Company will review its first quarter 2004 financial results today at 8:00 a.m. Hawaii Time (2:00 p.m. Eastern Time). The presentation will be accessible via teleconference and via the Investor Relations link of Bank of Hawaii Corporation's web site, www.boh.com. The conference call number is 800-299-7635 in the United States or 617-786-2901 for international callers. No confirmation code is required to access the call. A replay will be available for one week beginning at 10:00 a.m. Hawaii Time (4:00 p.m. Eastern Time) on Monday, April 26, 2004 by calling 888-286-8010 in the United States or 617-801-6888 for international callers and entering the number 65319657 when prompted. A replay of the presentation will also be available via the Investor Relations link of the Company's web site.
Bank of Hawaii Corporation is a regional financial services company serving businesses, consumers and governments in Hawaii, American Samoa and the West Pacific. The Company's principal subsidiary, Bank of Hawaii, was founded in 1897 and is the largest independent financial institution in Hawaii. For more information about Bank of Hawaii Corporation, see the Company's web site, www.boh.com.
This news release contains forward-looking statements concerning, among other things, the economic environment in our service area, the expected level of loan loss provisioning, the effect of our new three-year plan, and anticipated dividends, revenues and expenses during 2004 and beyond. We believe the assumptions underlying our forward-looking statements are reasonable. However, any of the assumptions could prove to be inaccurate and actual results may differ materially from those projected for a variety of reasons, including, but not limited to: 1) unanticipated changes in business and economic conditions, the competitive environment, fiscal and monetary policies, or legislation in Hawaii and the other markets we serve; 2) changes in our credit quality or risk profile which may increase or decrease the required level of allowance for loan and lease losses; 3) changes in market interest rates that may affect our credit markets and ability to maintain our net interest margin; 4) changes to the amount and timing of our proposed equity repurchases; 5) inability to achieve expected benefits of our business process changes due to adverse changes in implementation processes or costs, operational savings, or timing; 6) real or threatened acts of war or terrorist activity affecting business conditions; and 7) adverse weather and other natural conditions impacting our and our customers' operations. We do not undertake any obligation to update forward-looking statements to reflect later events or circumstances.
Bank of Hawaii Corporation and Subsidiaries
Highlights (Unaudited) Table 1
----------------------------------------------------------------------
(dollars in thousands except per share amounts) Three Months Ended
March 31,
Earnings Highlights and Performance Ratios 2004 2003
---------------------------------------------- -----------------------
Net Income $39,799 $29,801
Basic Earnings Per Share 0.73 0.49
Diluted Earnings Per Share 0.69 0.47
Cash Dividends 16,418 11,562
Net Income to Average Total Assets (ROA) 1.65% 1.31%
Net Income to Average Shareholders'
Equity (ROE) 19.98% 12.42%
Net Interest Margin 4.30% 4.29%
Efficiency Ratio(1) 57.31% 66.44%
Efficiency Ratio excluding System
Replacement Costs 57.31% 60.98%
----------------------------------------------------------------------
Statement of Condition Highlights and March 31,
Performance Ratios 2004 2003
---------------------------------------------- -----------------------
Total Assets $10,013,442 $9,410,210
Net Loans 5,587,811 5,425,343
Total Deposits 7,363,922 6,987,331
Total Shareholders' Equity 785,768 952,007
Book Value Per Common Share $14.49 $15.76
Allowance / Loans and Leases
Outstanding 2.23% 2.52%
Average Equity / Average Assets 8.28% 10.53%
Employees (FTE) 2,703 2,891
Branches and offices 89 91
Market Price Per Share of Common Stock
for the Quarter Ended:
Closing $46.33 $30.80
High $47.45 $31.50
Low $41.75 $29.25
(1) The efficiency ratio is defined as non-interest expense divided by
total revenue (net interest income and non-interest income).
Bank of Hawaii Corporation and Subsidiaries
Consolidated Statements of Income (Unaudited) Table 2
----------------------------------------------------------------------
Three Months Ended
March 31, March 31,
(dollars in thousands except per share amounts) 2004 2003
----------------------------------------------------------------------
Interest Income
Interest and Fees on Loans and Leases $81,428 $85,773
Income on Investment Securities - Held to
Maturity 6,976 2,283
Income on Investment Securities - Available
for Sale 20,846 22,463
Deposits 1,231 1,307
Funds Sold 417 764
Other 858 1,189
----------------------------------------------------------------------
Total Interest Income 111,756 113,779
Interest Expense
Deposits 9,200 14,447
Security Repurchase Agreements 1,926 2,242
Funds Purchased 231 205
Short-Term Borrowings 15 24
Long-Term Debt 4,353 5,861
----------------------------------------------------------------------
Total Interest Expense 15,725 22,779
----------------------------------------------------------------------
Net Interest Income 96,031 91,000
Provision for Loan and Lease Losses - -
----------------------------------------------------------------------
Net Interest Income After Provision for Loan and
Lease Losses 96,031 91,000
Non-Interest Income
Trust and Asset Management 13,864 13,181
Mortgage Banking 1,977 283
Service Charges on Deposit Accounts 9,950 8,950
Fees, Exchange, and Other Service Charges 13,239 12,989
Investment Securities Gains - 583
Insurance 3,643 3,080
Other 6,169 5,687
----------------------------------------------------------------------
Total Non-Interest Income 48,842 44,753
Non-Interest Expense
Salaries and Benefits 46,001 46,429
Net Occupancy Expense 9,386 9,613
Net Equipment Expense 5,964 9,748
Information Technology Systems Replacement
Project - 7,417
Other 21,671 16,993
----------------------------------------------------------------------
Total Non-Interest Expense 83,022 90,200
----------------------------------------------------------------------
Income Before Income Taxes 61,851 45,553
Provision for Income Taxes 22,052 15,752
----------------------------------------------------------------------
Net Income $39,799 $29,801
======================================================================
Basic Earnings Per Share $0.73 $0.49
Diluted Earnings Per Share $0.69 $0.47
Dividends Declared Per Share $0.30 $0.19
Basic Weighted Average Shares 54,286,648 61,294,460
Diluted Weighted Average Shares 57,746,520 63,535,609
======================================================================
Bank of Hawaii Corporation and Subsidiaries
Consolidated Statements of Condition (Unaudited) Table 3
----------------------------------------------------------------------
March 31, March 31,
(dollars in thousands) 2004 2003
----------------------------------------------------------------------
Assets
Interest-Bearing Deposits $479,882 $157,067
Investment Securities - Held to Maturity
(Market Value of $719,308 and $180,043) 717,867 175,600
Investment Securities - Available for Sale 1,995,713 2,497,508
Funds Sold 255,000 175,000
Loans Held for Sale 67,328 47,269
Loans and Leases 5,714,996 5,565,371
Allowance for Loan and Lease Losses (127,185) (140,028)
----------------------------------------------------------------------
Net Loans 5,587,811 5,425,343
----------------------------------------------------------------------
Total Earning Assets 9,103,601 8,477,787
Cash and Non-Interest Bearing Deposits 313,090 331,994
Premises and Equipment 155,488 170,696
Customers' Acceptance Liability 1,844 1,372
Accrued Interest Receivable 34,658 36,845
Foreclosed Real Estate 4,416 9,097
Mortgage Servicing Rights 21,138 25,801
Goodwill 36,216 36,216
Other Assets 342,991 320,402
----------------------------------------------------------------------
Total Assets $10,013,442 $9,410,210
======================================================================
Liabilities
Deposits
Non-Interest Bearing Demand $1,915,678 $1,714,601
Interest Bearing Demand 1,407,494 1,164,975
Savings 2,888,877 2,669,409
Time 1,151,873 1,438,346
----------------------------------------------------------------------
Total Deposits 7,363,922 6,987,331
Securities Sold Under Agreements to Repurchase 1,039,204 646,317
Funds Purchased 98,370 69,890
Short-Term Borrowings 11,349 12,096
Current Maturities of Long-Term Debt 102,252 118,792
Banker's Acceptances Outstanding 1,844 1,372
Retirement Benefits Payable 62,298 62,091
Accrued Interest Payable 6,978 12,761
Taxes Payable and Deferred Taxes 228,785 206,139
Other Liabilities 95,091 70,644
Long-Term Debt 217,581 270,770
----------------------------------------------------------------------
Total Liabilities 9,227,674 8,458,203
Shareholders' Equity
Common Stock ($.01 par value); authorized
500,000,000 shares; issued / outstanding:
March 2004 - 81,641,545 / 54,216,350, March
2003 - 81,276,420 / 60,418,539 807 807
Capital Surplus 396,335 372,887
Accumulated Other Comprehensive Income 4,289 8,273
Retained Earnings 1,222,602 1,133,642
Deferred Stock Grants (7,594) 74
Treasury Stock, at Cost (Shares: March 2004 -
27,425,195, March 2003 - 20,857,881) (830,671) (563,676)
----------------------------------------------------------------------
Total Shareholders' Equity 785,768 952,007
----------------------------------------------------------------------
Total Liabilities and Shareholders' Equity $10,013,442 $9,410,210
======================================================================
Bank of Hawaii Corporation and Subsidiaries
Consolidated Statements of Shareholders' Equity (Unaudited) Table 4
----------------------------------------------------------------------
Accum.
Other
Compre-
hensive
Common Capital Income
(dollars in thousands) Total Stock Surplus (Loss)
----------------------------------------------------------------------
Balance at December 31, 2003 $793,132 $807 $391,701 $(5,711)
Comprehensive Income:
Net Income 39,799 - - -
Other Comprehensive Income,
Net of Tax:
Change in Unrealized Gains
and Losses on Investment
Securities 10,000 - - 10,000
Total Comprehensive Income
Common Stock Issued under
Stock Plans and Related Tax
Benefits (611,820 shares) 18,482 - 4,634 -
Treasury Stock Purchased
(1,323,050 shares) (59,227) - - -
Cash Dividends Paid (16,418) - - -
----------------------------------------------------------------------
Balance at March 31, 2004 $785,768 $807 $396,335 $4,289
======================================================================
Balance at December 31, 2002 $1,015,759 $806 $372,192 $11,659
Comprehensive Income:
Net Income 29,801 - - -
Other Comprehensive Income,
Net of Tax:
Change in Unrealized Gains
and Losses on Investment
Securities (3,386) - - (3,386)
Total Comprehensive Income
Common Stock Issued under
Stock Plans and Related Tax
Benefits (261,802 shares) 7,721 1 695 -
Treasury Stock Purchased
(2,856,600 shares) (86,326) - - -
Cash Dividends Paid (11,562) - - -
----------------------------------------------------------------------
Balance at March 31, 2003 $952,007 $807 $372,887 $8,273
======================================================================
Deferred Compre-
Retained Stock Treasury hensive
(dollars in thousands) Earnings Grants Stock Income
----------------------------------------------------------------------
Balance at December 31, 2003 $1,199,077 $(8,309) $(784,433)
Comprehensive Income:
Net Income 39,799 - - $39,799
Other Comprehensive Income,
Net of Tax:
Change in Unrealized Gains
and Losses on Investment
Securities - - - 10,000
---------
Total Comprehensive Income $49,799
=========
Common Stock Issued under
Stock Plans and Related Tax
Benefits (611,820 shares) 144 715 12,989
Treasury Stock Purchased
(1,323,050 shares) - - (59,227)
Cash Dividends Paid (16,418) - -
-------------------------------------------------------------
Balance at March 31, 2004 $1,222,602 $(7,594) $(830,671)
=============================================================
Balance at December 31, 2002 $1,115,910 $(1,424) $(483,384)
Comprehensive Income:
Net Income 29,801 - - $29,801
Other Comprehensive Income,
Net of Tax:
Change in Unrealized Gains
and Losses on Investment
Securities - - - (3,386)
---------
Total Comprehensive Income $26,415
=========
Common Stock Issued under
Stock Plans and Related Tax
Benefits (261,802 shares) (507) 1,498 6,034
Treasury Stock Purchased
(2,856,600 shares) - - (86,326)
Cash Dividends Paid (11,562) - -
-------------------------------------------------------------
Balance at March 31, 2003 $1,133,642 $74 $(563,676)
=============================================================
Bank of Hawaii Corporation and Subsidiaries
Consolidated Average Balances and Interest Rates - Taxable
Equivalent Basis (Unaudited) Table 5
----------------------------------------------------------------------
Three Months Ended
March 31, 2004
Average Income/ Yield/
(dollars in millions) Balance Expense Rate
----------------------------------------------------------------------
Earning Assets
Interest Bearing Deposits $249.6 $1.2 1.98%
Funds Sold 168.9 0.4 0.99
Investment Securities
Held to Maturity 719.6 7.0 3.90
Available for Sale 1,988.5 20.8 4.20
Loans Held for Sale 15.4 0.2 5.33
Loans and Leases
Commercial and Industrial 844.4 10.1 4.81
Construction 100.4 1.1 4.31
Commercial Mortgage 634.1 8.6 5.45
Residential Mortgage 2,317.5 33.3 5.75
Installment 651.0 14.3 8.84
Home Equity 489.2 5.8 4.75
Purchased Home Equity 204.9 2.7 5.18
Lease Financing 500.9 5.4 4.33
----------------------------------------------------------------------
Total Loans and Leases 5,742.4 81.3 5.68
Other 77.5 0.9 4.45
----------------------------------------------------------------------
Total Earning Assets 8,961.9 111.8 5.00
Cash and Non-Interest Bearing Deposits 327.6
Other Assets 388.4
---------
Total Assets $9,677.9
=========
Interest Bearing Liabilities
Interest Bearing Deposits
Demand $1,370.0 0.5 0.15
Savings 2,871.6 3.3 0.46
Time 1,188.8 5.4 1.83
----------------------------------------------------------------------
Total Interest Bearing Deposits 5,430.4 9.2 0.68
Short-Term Borrowings 862.3 2.2 1.01
Long-Term Debt 320.9 4.3 5.44
----------------------------------------------------------------------
Total Interest Bearing Liabilities 6,613.6 15.7 0.96
----------------------------------------------------------------------
Net Interest Income $96.1
========
Interest Rate Spread 4.04%
Net Interest Margin 4.30%
Non-Interest Bearing Demand Deposits 1,889.5
Other Liabilities 373.6
Shareholders' Equity 801.2
---------
Total Liabilities and Shareholders' Equity $9,677.9
=========
(1) Certain 2003 information has been reclassified to conform to 2004
presentation.
Three Months Ended
December 31, 2003 (1)
Average Income/ Yield/
(dollars in millions) Balance Expense Rate
----------------------------------------------------------------------
Earning Assets
Interest Bearing Deposits $218.6 $1.2 2.12%
Funds Sold 34.3 0.1 0.99
Investment Securities
Held to Maturity 742.1 7.2 3.89
Available for Sale 1,898.6 19.0 4.01
Loans Held for Sale 13.9 0.2 6.21
Loans and Leases
Commercial and Industrial 858.2 10.6 4.90
Construction 99.2 1.1 4.30
Commercial Mortgage 627.4 8.9 5.62
Residential Mortgage 2,336.3 34.5 5.90
Installment 598.1 13.4 8.89
Home Equity 453.0 5.6 4.89
Purchased Home Equity 104.7 0.6 2.24
Lease Financing 494.0 5.5 4.44
----------------------------------------------------------------------
Total Loans and Leases 5,570.9 80.2 5.73
Other 76.8 1.0 5.20
----------------------------------------------------------------------
Total Earning Assets 8,555.2 108.9 5.07
Cash and Non-Interest Bearing Deposits 323.5
Other Assets 379.1
---------
Total Assets $9,257.8
=========
Interest Bearing Liabilities
Interest Bearing Deposits
Demand $1,293.8 0.5 0.16
Savings 2,786.6 3.2 0.46
Time 1,227.9 5.7 1.83
----------------------------------------------------------------------
Total Interest Bearing Deposits 5,308.3 9.4 0.71
Short-Term Borrowings 608.0 1.7 1.06
Long-Term Debt 324.2 4.4 5.43
----------------------------------------------------------------------
Total Interest Bearing Liabilities 6,240.5 15.5 0.99
----------------------------------------------------------------------
Net Interest Income $93.4
========
Interest Rate Spread 4.08%
Net Interest Margin 4.35%
Non-Interest Bearing Demand Deposits 1,836.4
Other Liabilities 355.7
Shareholders' Equity 825.2
---------
Total Liabilities and Shareholders' Equity $9,257.8
=========
(1) Certain 2003 information has been reclassified to conform to 2004
presentation.
Three Months Ended
March 31, 2003 (1)
Average Income/ Yield/
(dollars in millions) Balance Expense Rate
----------------------------------------------------------------------
Earning Assets
Interest Bearing Deposits $253.8 $1.3 2.09%
Funds Sold 250.5 0.8 1.22
Investment Securities
Held to Maturity 202.0 2.3 4.61
Available for Sale 2,268.1 22.5 3.96
Loans Held for Sale 10.1 0.1 5.16
Loans and Leases
Commercial and Industrial 886.4 10.5 4.81
Construction 115.4 1.4 5.08
Commercial Mortgage 597.8 9.0 6.14
Residential Mortgage 2,249.0 37.7 6.70
Installment 501.9 12.8 10.36
Home Equity 434.5 5.7 5.28
Purchased Home Equity 180.2 2.6 5.78
Lease Financing 495.6 5.9 4.81
----------------------------------------------------------------------
Total Loans and Leases 5,460.8 85.6 6.32
Other 74.6 1.2 6.47
----------------------------------------------------------------------
Total Earning Assets 8,519.9 113.8 5.38
Cash and Non-Interest Bearing Deposits 331.6
Other Assets 391.5
---------
Total Assets $9,243.0
=========
Interest Bearing Liabilities
Interest Bearing Deposits
Demand $1,151.9 0.7 0.26
Savings 2,608.2 4.6 0.71
Time 1,472.1 9.2 2.52
----------------------------------------------------------------------
Total Interest Bearing Deposits 5,232.2 14.5 1.12
Short-Term Borrowings 649.8 2.5 1.54
Long-Term Debt 390.4 5.8 6.02
----------------------------------------------------------------------
Total Interest Bearing Liabilities 6,272.4 22.8 1.47
----------------------------------------------------------------------
Net Interest Income $91.0
========
Interest Rate Spread 3.91%
Net Interest Margin 4.29%
Non-Interest Bearing Demand Deposits 1,636.8
Other Liabilities 360.7
Shareholders' Equity 973.1
---------
Total Liabilities and Shareholders' Equity $9,243.0
=========
(1) Certain 2003 information has been reclassified to conform to 2004
presentation.
Bank of Hawaii Corporation and Subsidiaries
Analysis of Change in Net Interest Income -Tax Equivalent
Basis (Unaudited) Table 6
----------------------------------------------------------------------
Three Months Ended March 31, 2004
Compared to December 31, 2003 (1)
(dollars in millions) Volume (2) Rate (2) Time (2) Total
----------------------------------------------------------------------
Change in Interest Income:
Interest Bearing Deposits $0.1 $(0.1) $- $-
Funds Sold 0.3 - - 0.3
Investment Securities
Held to Maturity (0.2) - - (0.2)
Available for Sale 0.9 0.9 - 1.8
Loans and Leases
Commercial and Industrial (0.2) (0.2) (0.1) (0.5)
Commercial Mortgage 0.1 (0.3) (0.1) (0.3)
Residential Mortgage (0.3) (0.9) - (1.2)
Installment 1.2 (0.2) (0.1) 0.9
Home Equity 0.5 (0.2) (0.1) 0.2
Purchased Home Equity 1.3 0.8 - 2.1
Lease Financing 0.1 (0.1) (0.1) (0.1)
----------------------------------------------------------------------
Total Loans and Leases 2.7 (1.1) (0.5) 1.1
Other - (0.1) - (0.1)
----------------------------------------------------------------------
Total Change in Interest Income 3.8 (0.4) (0.5) 2.9
----------------------------------------------------------------------
Change in Interest Expense:
Interest Bearing Deposits
Savings 0.1 - - 0.1
Time (0.2) - (0.1) (0.3)
----------------------------------------------------------------------
Total Interest Bearing Deposits (0.1) - (0.1) (0.2)
Short-Term Borrowings 0.6 (0.1) - 0.5
Long-Term Debt (0.1) - - (0.1)
----------------------------------------------------------------------
Total Change in Interest Expense 0.4 (0.1) (0.1) 0.2
----------------------------------------------------------------------
Change in Net Interest Income $3.4 $(0.3) $(0.4) $2.7
======================================================================
(1) Certain 2003 information has been reclassified to conform to 2004
presentation.
(2) The changes for each category of interest income and expense are
allocated between the portion of changes attributable to the variance
in volume, rate or time for that category.
Bank of Hawaii Corporation and Subsidiaries
Salaries and Benefits (Unaudited) Table 7
----------------------------------------------------------------------
Three Months Ended
(dollars in thousands) March 31, 2004 March 31, 2003
----------------------------------------------------------------------
Salaries $27,204 $28,514
Incentive Compensation 3,816 3,591
Stock Based Compensation 2,896 1,118
Commission Expense 1,627 2,487
Retirement and Other Benefits 4,357 4,451
Payroll Taxes 3,430 3,449
Medical, Dental, and Life Insurance 2,104 2,070
Separation Expense 567 749
----------------------------------------------------------------------
Total Salaries and Benefits $46,001 $46,429
======================================================================
Bank of Hawaii Corporation and Subsidiaries
Loan Portfolio Balances (Unaudited) Table 8
----------------------------------------------------------------------
March 31, December 31, March 31,
(dollars in thousands) 2004 2003 2003
----------------------------------------------------------------------
Domestic Loans
Commercial
Commercial and Industrial $793,293 $816,246 $824,906
Commercial Mortgage 650,566 639,354 691,736
Construction 91,002 101,321 86,690
Lease Financing 442,590 435,934 430,342
----------------------------------------------------------------------
Total Commercial 1,977,451 1,992,855 2,033,674
Consumer
Residential Mortgage 2,254,654 2,320,410 2,305,329
Home Equity 510,378 467,019 439,011
Purchased Home Equity 191,066 212,514 170,946
Other Consumer 671,893 658,831 518,501
Lease Financing 34,816 35,320 33,842
----------------------------------------------------------------------
Total Consumer 3,662,807 3,694,094 3,467,629
----------------------------------------------------------------------
Total Domestic Loans 5,640,258 5,686,949 5,501,303
----------------------------------------------------------------------
Foreign Loans 74,738 70,226 64,068
----------------------------------------------------------------------
Total Loans and Leases $5,714,996 $5,757,175 $5,565,371
======================================================================
Selected Concentrations of Credit Exposure (Unaudited)
----------------------------------------------------------------------
Dec. 31, March 31,
March 31, 2004 2003(1) 2003(1)
(dollars in Unused Total Total Total
thousands) Outstanding Commitments Exposure Exposure Exposure
----------------------------------------------------------------------
Air Transportation
United States
Regional Passenger
Carriers $46,003 $12,173 $58,176 $59,231 $60,888
United States
National Passenger
Carriers 37,413 - 37,413 37,259 37,441
Passenger Carriers
Based Outside
United States 30,475 - 30,475 31,549 31,922
Cargo Carriers 14,122 - 14,122 14,405 14,739
----------------------------------------------------------------------
Total Air
Transportation $128,013 $12,173 $140,186 $142,444 $144,990
======================================================================
Guam
Hotel $15,692 $- $15,692 $17,733 $42,843
Other Commercial 130,128 45,920 176,048 184,129 171,300
Consumer 290,966 12,638 303,604 288,831 263,900
----------------------------------------------------------------------
Total Guam $436,786 $58,558 $495,344 $490,693 $478,043
======================================================================
Syndicated Exposure $297,512 $642,624 $940,136 $912,896 $997,516
======================================================================
Other Large
Borrowers(2) $86,658 $235,143 $321,801 $336,748 $381,386
======================================================================
Exposure includes loans, leveraged leases and operating leases.
(1) For three borrowers, reclassifications have occurred between
Regional and National Carriers. Syndicated Exposure has been restated
to include a purchased participation.
(2) Other Large Borrowers is defined as exposure with commitments of
$25 million and greater, excluding those collateralized by cash and
those separately identified as Air Transportation, Guam, and
Syndicated Exposure.
Bank of Hawaii Corporation and Subsidiaries
Consolidated Non-Performing Assets and Accruing Loans Past
Due 90 Days or More (Unaudited) Table 9
----------------------------------------------------------------------
(dollars in March 31, Dec. 31, Sept. 30, June 30, March 31,
thousands) 2004 2003 2003 2003 2003
----------------------------------------------------------------------
Non-Performing
Assets
Non-Accrual Loans
Commercial
Commercial and
Industrial $6,009 $6,015 $7,856 $8,832 $2,367
Commercial
Mortgage 7,388 9,337 10,977 11,216 17,930
Lease
Financing 1,962 2,181 2,388 2,423 3,183
----------------------------------------------------------------------
Total
Commercial 15,359 17,533 21,221 22,471 23,480
Consumer
Residential
Mortgage 7,685 9,354 9,669 10,196 11,523
Home Equity 406 460 497 - 117
----------------------------------------------------------------------
Total Consumer 8,091 9,814 10,166 10,196 11,640
----------------------------------------------------------------------
Total Non-
Accrual Loans 23,450 27,347 31,387 32,667 35,120
----------------------------------------------------------------------
Foreclosed Real
Estate 4,416 4,377 8,757 9,285 9,097
----------------------------------------------------------------------
Total Non-
Performing
Assets $27,866 $31,724 $40,144 $41,952 $44,217
======================================================================
Accruing Loans
Past Due 90
Days or More
Commercial
Commercial and
Industrial $707 $725 $695 $523 $1
Commercial
Mortgage 702 - - - 368
Lease
Financing - 117 - - -
---------------------------------------------------------------------
Total
Commercial 1,409 842 695 523 369
Consumer
Residential
Mortgage 595 1,430 2,027 1,817 1,580
Home Equity - - - 84 17
Purchased
Home Equity 107 - 107 98 -
Other
Consumer 1,180 1,210 1,059 368 2,257
Lease
Financing - - - 19 -
----------------------------------------------------------------------
Total Consumer 1,882 2,640 3,193 2,386 3,854
----------------------------------------------------------------------
Total Accruing
and Past Due $3,291 $3,482 $3,888 $2,909 $4,223
======================================================================
Total Loans $5,714,996 $5,757,175 $5,570,405 $5,471,870 $5,565,371
======================================================================
Ratio of Non-
Accrual Loans
to Total Loans 0.41% 0.48% 0.56% 0.60% 0.63%
----------------------------------------------------------------------
Ratio of Non-
Performing
Assets to
Total Loans
and Foreclosed
Real Estate 0.49% 0.55% 0.72% 0.77% 0.79%
----------------------------------------------------------------------
Ratio of Non-
Performing
Assets and
Accruing Loans
Past Due 90
Days or More
to Total Loans 0.55% 0.61% 0.79% 0.82% 0.87%
----------------------------------------------------------------------
Quarter to Quarter
Changes in
Non-Performing
Assets
Balance at
Beginning of
Quarter $31,724 $40,144 $41,952 $44,217 $54,406
Additions 3,293 2,340 3,199 11,603 4,805
Reductions
Payments and
Sales of
Loans (4,555) (3,416) (1,782) (4,279) (5,641)
Return to
Accrual (1,444) (839) (1,464) (7,556) (5,571)
Sales of
Foreclosed
Assets (310) (4,418) (1,025) (672) (1,091)
Charge-
offs/Write-
downs (842) (2,087) (736) (1,361) (2,691)
----------------------------------------------------------------------
Total
Reductions (7,151) (10,760) (5,007) (13,868) (14,994)
----------------------------------------------------------------------
Balance at End
of Quarter $27,866 $31,724 $40,144 $41,952 $44,217
======================================================================
Bank of Hawaii Corporation and Subsidiaries
Consolidated Allowance for Loan and Lease Losses (Unaudited) Table 10
----------------------------------------------------------------------
Three Months Ended
March 31, December 31, March 31,
(dollars in thousands) 2004 2003 2003
----------------------------------------------------------------------
Balance at Beginning of Period $129,080 $132,675 $142,853
Loans Charged-Off
Commercial
Commercial and Industrial 387 1,997 1,617
Commercial Mortgage 574 - -
Construction - - 529
Lease Financing 228 - 15
Consumer
Residential Mortgage 145 462 689
Home Equity - 250 82
Purchased Home Equity 90 143 -
Other Consumer 4,655 3,919 3,089
Lease Financing 36 100 67
----------------------------------------------------------------------
Total Charge-Offs 6,115 6,871 6,088
Recoveries on Loans Previously
Charged-Off
Commercial
Commercial and Industrial 980 936 572
Commercial Mortgage 689 23 17
Construction 435 3 900
Lease Financing 15 88 17
Consumer
Residential Mortgage 294 115 203
Home Equity 39 4 53
Other Consumer 1,663 2,015 1,327
Lease Financing 55 30 45
Foreign 50 62 129
----------------------------------------------------------------------
Total Recoveries 4,220 3,276 3,263
----------------------------------------------------------------------
Net Loan Charge-Offs (1,895) (3,595) (2,825)
Provision for Loan and Lease
Losses - - -
----------------------------------------------------------------------
Balance at End of Period $127,185 $129,080 $140,028
======================================================================
Average Loans Outstanding $5,742,368 $5,570,844 $5,460,847
======================================================================
Ratio of Net Loan Charge-Offs
to Average Loans Outstanding
(annualized) 0.13% 0.26% 0.21%
Ratio of Allowance to Loans and
Leases Outstanding 2.23% 2.24% 2.52%
Bank of Hawaii Corporation and Subsidiaries
Business Segment Selected Financial Information (Unaudited) Table 11
----------------------------------------------------------------------
Investment Treasury
(dollars in Retail Commercial Services and Other Consolidated
thousands) Banking Banking Group Corporate Total
----------------------------------------------------------------------
Three Months Ended
March 31, 2004
Net Interest
Income $50,189 $33,758 $3,191 $8,893 $96,031
Provision for
Loan and
Lease Losses (2,747) 253 (49) 2,543 -
----------------------------------------------------------------------
Net Interest
Income After
Provision
for Loan and
Lease Losses 47,442 34,011 3,142 11,436 96,031
Non-Interest
Income 19,505 9,723 16,663 2,951 48,842
----------------------------------------------------------------------
66,947 43,734 19,805 14,387 144,873
Non-Interest
Expense (40,435) (22,584) (16,372) (3,631) (83,022)
----------------------------------------------------------------------
Income Before
Income Taxes 26,512 21,150 3,433 10,756 61,851
Provision for
Income Taxes (9,809) (7,806) (1,270) (3,167) (22,052)
----------------------------------------------------------------------
Allocated Net
Income 16,703 13,344 2,163 7,589 39,799
----------------------------------------------------------------------
Allowance Funding
Value (128) (737) (8) 873 -
GAAP Provision 2,747 (253) 49 (2,543) -
Economic
Provision (3,396) (2,769) (102) (2) (6,269)
Tax Effect of
Adjustments 287 1,391 23 619 2,320
----------------------------------------------------------------------
Income Before
Capital Charge 16,213 10,976 2,125 6,536 35,850
Capital Charge (5,602) (5,196) (1,522) (9,718) (22,038)
----------------------------------------------------------------------
Net Income
(Loss) After
Capital Charge
(NIACC) $10,611 $5,780 $603 $(3,182) $13,812
======================================================================
RAROC (ROE for
the Company) 32% 23% 15% 25% 20%
======================================================================
Total Assets
at March 31,
2004 $3,692,657 $2,276,958 $137,632 $3,906,195 $10,013,442
======================================================================
Three Months Ended
March 31, 2003 (1)
Net Interest
Income $52,103 $34,691 $3,665 $541 $91,000
Provision for
Loan and
Lease Losses (848) (2,151) - 2,999 -
----------------------------------------------------------------------
Net Interest
Income After
Provision
for Loan and
Lease Losses 51,255 32,540 3,665 3,540 91,000
Non-Interest
Income 17,386 8,416 15,680 3,271 44,753
----------------------------------------------------------------------
68,641 40,956 19,345 6,811 135,753
Information
Technology
Systems
Replacement
Project (583) (23) (244) (6,567) (7,417)
Non-Interest
Expense (40,668) (22,719) (15,904) (3,492) (82,783)
----------------------------------------------------------------------
Income (Loss)
Before
Income Taxes 27,390 18,214 3,197 (3,248) 45,553
Provision for
Income Taxes (10,134) (6,642) (1,183) 2,207 (15,752)
----------------------------------------------------------------------
Allocated Net
Income
(Loss) 17,256 11,572 2,014 (1,041) 29,801
----------------------------------------------------------------------
Allowance Funding
Value (152) (1,141) (10) 1,303 -
GAAP Provision 848 2,151 - (2,999) -
Economic
Provision (2,708) (3,059) (132) (5) (5,904)
Tax Effect of
Adjustments 744 758 53 629 2,184
----------------------------------------------------------------------
Income (Loss)
Before Capital
Charge 15,988 10,281 1,925 (2,113) 26,081
Capital Charge (5,392) (5,378) (1,517) (14,464) (26,751)
----------------------------------------------------------------------
Net Income
(Loss) After
Capital Charge
(NIACC) $10,596 $4,903 $408 $(16,577) $(670)
======================================================================
RAROC (ROE for
the Company) 33% 21% 14% (7)% 12%
======================================================================
Total Assets
at March 31,
2003 $3,471,677 $2,254,381 $145,925 $3,538,227 $9,410,210
======================================================================
(1) Certain 2003 information has been reclassified to conform to 2004
presentation.
Bank of Hawaii Corporation and Subsidiaries
Quarterly Summary of Selected Consolidated Financial Data
(Unaudited) Table 12
----------------------------------------------------------------------
(dollars in Three Months Ended
thousands except March 31, Dec. 31, Sept.30, June 30, March 31,
per share amounts) 2004 2003 2003 2003 2003
----------------------------------------------------------------------
Quarterly Operating
Results
Interest Income
Interest and Fees
on Loans and
Leases $81,428 $80,351 $82,715 $85,954 $85,773
Income on
Investment
Securities - Held
to Maturity 6,976 7,183 6,407 3,083 2,283
Income on
Investment
Securities -
Available for
Sale 20,846 19,032 16,483 19,815 22,463
Deposits 1,231 1,169 1,179 1,161 1,307
Funds Sold 417 85 248 822 764
Other 858 1,007 1,032 1,016 1,189
----------------------------------------------------------------------
Total Interest
Income 111,756 108,827 108,064 111,851 113,779
Interest Expense
Deposits 9,200 9,433 10,284 13,309 14,447
Security
Repurchase
Agreements 1,926 1,359 1,947 2,391 2,242
Funds Purchased 231 249 271 219 205
Short-Term
Borrowings 15 17 26 25 24
Long-Term Debt 4,353 4,417 4,431 5,422 5,861
----------------------------------------------------------------------
Total Interest
Expense 15,725 15,475 16,959 21,366 22,779
----------------------------------------------------------------------
Net Interest Income 96,031 93,352 91,105 90,485 91,000
Provision for Loan
and Lease Losses - - - - -
----------------------------------------------------------------------
Net Interest Income
After Provision
for Loan and Lease
Losses 96,031 93,352 91,105 90,485 91,000
Non-Interest Income
Trust and Asset
Management 13,864 12,759 12,511 12,545 13,181
Mortgage Banking 1,977 3,324 5,888 6,061 283
Service Charges on
Deposit Accounts 9,950 9,442 8,901 8,645 8,950
Fees, Exchange,
and Other Service
Charges 13,239 13,725 16,034 13,473 12,989
Investment
Securities Gains
(Losses) - (20) 639 587 583
Insurance 3,643 3,597 3,988 3,015 3,080
Other 6,169 6,610 5,830 6,413 5,687
----------------------------------------------------------------------
Total Non-Interest
Income 48,842 49,437 53,791 50,739 44,753
Non-Interest
Expense
Salaries and
Benefits 46,001 46,409 45,731 47,711 46,429
Net Occupancy
Expense 9,386 9,933 9,806 9,628 9,613
Net Equipment
Expense 5,964 7,395 7,301 9,208 9,748
Information
Technology
Systems
Replacement
Project - - 4,349 10,105 7,417
Other 21,671 19,667 21,690 18,742 16,993
----------------------------------------------------------------------
Total Non-Interest
Expense 83,022 83,404 88,877 95,394 90,200
----------------------------------------------------------------------
Income Before
Income Taxes 61,851 59,385 56,019 45,830 45,553
Provision for
Income Taxes 22,052 20,712 19,332 15,796 15,752
----------------------------------------------------------------------
Net Income $39,799 $38,673 $36,687 $30,034 $29,801
======================================================================
Basic Earnings Per
Share $0.73 $0.70 $0.64 $0.50 $0.49
Diluted Earnings
Per Share $0.69 $0.66 $0.61 $0.48 $0.47
Balance Sheet
Totals
Total Assets 10,013,442 9,461,647 9,370,755 9,550,934 9,410,210
Net Loans 5,587,811 5,628,095 5,437,730 5,333,896 5,425,343
Total Deposits 7,363,922 7,332,779 7,102,116 7,140,849 6,987,331
Total Shareholders'
Equity 785,768 793,132 823,760 913,010 952,007
Performance Ratios
Net Income to
Average Total
Assets (ROA) 1.65% 1.66% 1.53% 1.27% 1.31%
Net Income to
Average
Shareholders'
Equity (ROE) 19.98% 18.59% 16.69% 12.93% 12.42%
Efficiency Ratio(1) 57.31% 58.41% 61.34% 67.55% 66.44%
Efficiency Ratio
excluding System
Replacement Costs 57.31% 58.41% 58.34% 60.39% 60.98%
(1) The efficiency ratio is defined as non-interest expense divided by
total revenue (net interest income and non-interest income).
CONTACT: Bank of Hawaii Corporation
Stafford Kiguchi, 808-537-8580 (Media)
pager: 877-849-5423
skiguchi@boh.com
Cindy Wyrick, 808-537-8430 (Investors/Analysts)
cwyrick@boh.com
SOURCE: Bank of Hawaii Corporation