Bank of Hawaii Corporation Second Quarter 2005 Financial Results
Click here for a printable version of the First Quarter 2005 Financial Results.
HONOLULU--(BUSINESS WIRE)--July 25, 2005--Bank of Hawaii Corporation (NYSE:BOH)
- Diluted Earnings Per Share $0.87; Net Income $46.4 Million
- Board of Directors Declares Dividend of $0.33 Per Share
Bank of Hawaii Corporation (NYSE:BOH) today reported diluted earnings per share of $0.87 for the second quarter of 2005, an increase from diluted earnings per share of $0.83 in the first quarter of 2005 and an increase from $0.79 in the second quarter of 2004. Net income for the second quarter of 2005 was $46.4 million, up $0.9 million from net income of $45.5 million in the previous quarter and up $2.2 million from $44.2 million reported in the same quarter last year.
Results for the second quarter of 2004 included a return to income of $3.5 million before tax ($2.2 million after tax or $0.04 per diluted share), resulting from the release of a portion of the allowance for loan and lease losses. Excluding the release of reserves, results for the second quarter of 2005 increased $4.4 million or $0.12 per diluted share from the same quarter last year.
Return on average assets for the second quarter of 2005 was 1.87 percent, compared to 1.88 percent in the first quarter of 2005, and 1.80 percent in the second quarter of 2004. Return on average equity was 25.98 percent for the second quarter of 2005, up from 23.66 percent in the previous quarter and up from 24.28 percent in the same quarter last year.
"Bank of Hawaii Corporation completed another quarter of solid financial performance," said Allan R. Landon, Chairman and CEO. "We continued to focus on meeting the financial needs of our customers, which contributed to the growth of our businesses in the second quarter."
For the six months ended June 30, 2005, net income was $92.0 million, up $7.9 million or 9.4 percent from net income of $84.0 million for the same period last year. Diluted earnings per share were $1.69 for the first half of 2005, an increase of 14.2 percent from diluted earnings per share of $1.48 for the first half of 2004. The year-to-date return on average assets was 1.87 percent, up from 1.73 percent for the same six months in 2004. The year-to-date return on average equity was 24.78 percent, up from 22.03 percent for the six months ended June 30, 2004.
Financial Highlights
Net interest income, on a taxable equivalent basis, for the second quarter of 2005 was $101.1 million, up $0.4 million from $100.7 million in the first quarter of 2005 and up $5.2 million from $95.9 million in the second quarter of last year. The increase in net interest income from the second quarter of 2004 was largely due to growth in the loan portfolio. An analysis of the change in net interest income from the previous quarter is included in Table 6.
The net interest margin was 4.36 percent for the second quarter of 2005, a 7 basis point decrease from 4.43 percent in the previous quarter and a 19 basis point increase from 4.17 percent in the second quarter of 2004. The decrease from the previous quarter was primarily due to the effects of the flattening yield curve.
The Company did not recognize a provision for loan and lease losses during the second or first quarters of 2005. As previously mentioned, the Company returned to income $3.5 million from a release of the allowance for loan and lease losses during the second quarter of 2004.
Non-interest income was $50.7 million for the second quarter of 2005, a decrease of $1.6 million or 3.1 percent compared to non-interest income of $52.3 million in the first quarter of 2005. The decrease was largely due to a decline in insurance income, deposit account analysis fees, and personal tax preparation fees which are traditionally higher in the first quarter. Non-interest income was $54.8 million in the same quarter last year, including a partnership distribution of $3.2 million and a gain of $2.5 million on the sale of land. Excluding these items, non-interest income increased $1.5 million or 3.0 percent over the second quarter of 2004.
Non-interest expense was $79.0 million in the second quarter of 2005, down $1.9 million or 2.3 percent from non-interest expense of $80.9 million in the previous quarter and down $6.1 million or 7.2 percent from $85.1 million in the same quarter last year. Included in the second quarter of 2004 were charges of $2.2 million to settle litigation. Excluding these charges, non-interest expense decreased $3.9 million or 4.7 percent largely due to a decline in expenses for salaries and benefits. An analysis of salary and benefit expenses is included in Table 7.
The efficiency ratio for the second quarter of 2005 was 52.07 percent, an improvement from 52.86 percent in the previous quarter and from 56.49 percent in 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. Selected financial information for the business segments is included in Tables 11a and 11b.
Asset Quality
Bank of Hawaii Corporation's asset quality continued to improve when compared to prior quarters. Non-performing assets were $10.9 million at the end of the second quarter of 2005, a decrease of $2.4 million, or 18.3 percent, compared to non-performing assets of $13.4 million at the end of the previous quarter and a decrease of $10.2 million, or 48.4 percent, compared to $21.2 million at the end of the same quarter last year. At June 30, 2005 the ratio of non-performing assets to total loans, foreclosed real estate, and other investments was 0.18 percent compared with 0.22 percent at March 31, 2005 and 0.37 percent at June 30, 2004.
Non-accrual loans were $9.9 million at June 30, 2005, a reduction of $2.6 million, or 20.4 percent, from $12.5 million at March 31, 2005 and down $6.3 million, or 38.9 percent, from $16.3 million at June 30, 2004. Non-accrual loans as a percentage of total loans at June 30, 2005 were 0.16 percent, down from 0.21 percent at March 31, 2005 and down from 0.28 percent at June 30, 2004.
Net charge-offs for the second quarter of 2005 were $3.7 million, or 0.25 percent (annualized) of total average loans, unchanged from the first quarter of 2005. During the second quarter of 2004 there was a net recovery of $1.2 million. Net charge-offs in the second quarter of 2005 were comprised of $5.6 million in charge-offs partially offset by recoveries of $1.9 million.
The allowance for loan and lease losses was $101.6 million at June 30, 2005, down from $105.0 million at March 31, 2005 and down from $124.9 million at June 30, 2004. The decrease in the allowance from the previous year is largely due to $10.0 million returned to income from releases of the allowance for loan and lease losses during 2004. In addition, during the fourth quarter of 2004, $6.8 million was reclassified from the allowance for loan and lease losses to other liabilities representing the estimate for losses related to unfunded commitments to extend credit. The $3.4 million decrease in the allowance from the previous quarter was primarily due to net charge-offs. The allowance for unfunded commitments at June 30, 2005 was $4.6 million, down from $4.9 million at March 31, 2005.
The ratio of the allowance for loan and lease losses to total loans was 1.65 percent at June 30, 2005, down slightly from 1.75 percent at March 31, 2005 and down from 2.16 percent at June 30, 2004. If the allowance for unfunded commitments had been reclassified at June 30, 2004, the ratio of the allowance for loan and lease losses to total loans would have been 2.06 percent.
Credit exposure to the air transportation industry is summarized in Table 8.
Other Financial Highlights
Total assets were $10.06 billion at June 30, 2005, up from $9.91 billion at March 31, 2005 and up from $9.69 billion at June 30, 2004. Total loans and leases were $6.15 billion at June 30, 2005, up from $6.02 billion at March 31, 2005 and up from $5.79 billion at June 30, 2004. Commercial loans were $2.20 billion at June 30, 2005, up from $2.10 billion at March 31, 2005 and $2.02 billion at June 30, 2004 as commercial loan originations strengthened during the quarter and outpaced payoff activity. Consumer loans were $3.95 billion at June 30, 2005, up from $3.91 billion at March 31, 2005 and $3.76 billion at June 30, 2004 primarily as a result of increases in home equity outstandings from successful loan promotions in a strong Hawaii residential real estate market.
Total deposits at June 30, 2005 were $7.73 billion, slightly down from $7.76 billion at March 31, 2005 and up from $7.47 billion at June 30, 2004. On a linked quarter basis, balances in interest-bearing checking accounts decreased, despite an increase in the number of accounts, mostly due to customers who transferred excess account balances to higher rate time deposits resulting in a growth in time deposits on a linked quarter and year-to-date comparison.
During the second quarter of 2005, Bank of Hawaii Corporation repurchased 1.3 million shares of common stock at a total cost of $60.8 million under its share repurchase program. The average cost was $47.22 per share repurchased. From the beginning of the share repurchase program in July 2001 through June 30, 2005, the Company has repurchased a total of 38.6 million shares and returned a total of $1.3 billion to the shareholders at an average cost of $32.67 per share. From July 1, 2005 through July 22, 2005, the Company repurchased an additional 0.1 million shares of common stock at an average cost of $52.90 per share. Remaining buyback authority under the share repurchase program was $85.1 million at July 22, 2005.
The Company's capital and liquidity remain strong. At June 30, 2005 the Tier 1 leverage ratio was 7.18 percent compared to 7.42 percent at March 31, 2005 and 7.16 percent at June 30, 2004.
The Company's Board of Directors has declared a quarterly cash dividend of $0.33 per share on the Company's outstanding shares. The dividend will be payable on September 15, 2005 to shareholders of record at the close of business on August 29, 2005.
Financial Outlook
Bank of Hawaii Corporation's earnings estimate of approximately $176.0 million to $179.0 million in net income for the full year of 2005 remains unchanged. The Company performs a quarterly analysis of credit quality to determine the adequacy of the reserve for credit losses. The results of this analysis determine the timing and amount of the provision for loan and lease losses. Earnings per share and return on equity projections continue to be dependent upon, among other things, the terms and timing of share repurchases.
Economy
Hawaii continued to experience record high tourism volumes, home prices and employment during the second quarter of 2005. Unemployment declined to 2.7 percent in the quarter, job growth remained strong and Hawaii personal income growth was 6.0 percent (3.0 percent after adjusting for inflation). Construction continued to grow during the second quarter of 2005, including private and military housing initiatives.
Conference Call Information
The Company will review its second quarter 2005 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 800-573-4842 in the United States or 617-224-4327 for international callers. No confirmation code is required to access the call. A replay will be available for one week beginning Monday, July 25, 2005 by calling 888-286-8010 in the United States or 617-801-6888 for international callers and entering the number 37453795 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.
Forward-Looking Statements
This news release, including the statements under the caption "Financial Outlook," contains forward-looking statements concerning, among other things, the economic and business environment in our service area and elsewhere, credit quality, the expected level of loan and lease loss provisioning, anticipated net income and other financial and business matters in future periods. Our forward-looking statements are based on numerous assumptions, any of which 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, legislation in Hawaii and the other markets we serve, or the timing and interpretation of accounting standards; 2) changes in our credit quality or risk profile which may increase or decrease the required level of reserve for credit 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 and repayment of maturing debt; 5) real or threatened acts of war or terrorist activity affecting business conditions; and 6) 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 Three Months Ended Six Months Ended except per share June 30, June 30, amounts) 2005 2004 2005 2004 ---------------------------------------------------------------------- For the Period: Interest Income $ 124,105 $ 111,490 $ 244,263 $ 223,246 Net Interest Income 101,039 95,849 201,697 191,880 Net Income 46,429 44,232 91,951 84,031 Basic Earnings Per Share 0.90 0.84 1.75 1.57 Diluted Earnings Per Share 0.87 0.79 1.69 1.48 Dividends Declared Per Share 0.33 0.30 0.66 0.60 Net Income to Average Total Assets (ROA) 1.87% 1.80% 1.87% 1.73% Net Income to Average Shareholders' Equity (ROE) 25.98 24.28 24.78 22.03 Net Interest Margin (1) 4.36 4.17 4.39 4.23 Efficiency Ratio (2) 52.07 56.49 52.47 56.89 Average Assets $9,969,243 $9,893,303 $9,907,845 $9,785,603 Average Loans and Leases 6,090,149 5,772,926 6,045,609 5,757,647 Average Deposits 7,747,331 7,371,388 7,717,729 7,345,645 Average Shareholders' Equity 716,767 732,652 748,344 766,950 Average Equity to Average Assets 7.19% 7.41% 7.55% 7.84% June 30, 2005 2004 ---------------------------------------------------------------------- At Period End: Net Loans $ 6,049,831 $5,662,410 Total Assets 10,059,690 9,688,769 Deposits 7,726,758 7,469,288 Long-Term Debt 242,674 297,600 Shareholders' Equity 712,169 699,438 Allowance to Loans and Leases Outstanding 1.65% 2.16% Dividend Payout Ratio 37.71 38.22 Leverage Ratio 7.18 7.16 Book Value Per Common Share $ 13.73 $ 13.34 Employees (FTE) 2,561 2,683 Branches and offices 86 89 Market Price Per Share of Common Stock for the Quarter Ended: Closing $ 50.75 $ 45.22 High 51.30 46.84 Low 43.82 40.97 (1) The net interest margin is defined as net interest income, on a fully-taxable equivalent basis, as a percentage of average earning assets. (2) 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 ---------------------------------------------------------------------- (dollars in thousands Three Months Ended Six Months Ended except per share June 30, June 30, amounts) 2005 2004 (1) 2005 2004 (1) ---------------------------------------------------------------------- Interest Income Interest and Fees on Loans and Leases $ 90,119 $ 80,346 $ 176,586 $ 161,774 Income on Investment Securities - Available for Sale 27,987 21,745 55,306 42,591 Income on Investment Securities - Held to Maturity 5,527 6,711 11,352 13,687 Deposits 36 1,646 59 2,877 Funds Sold 165 177 240 594 Other 271 865 720 1,723 ---------------------------------------------------------------------- Total Interest Income 124,105 111,490 244,263 223,246 ---------------------------------------------------------------------- Interest Expense Deposits 13,577 8,560 25,181 17,760 Securities Sold Under Agreements to Repurchase 4,562 2,222 7,887 4,148 Funds Purchased 1,151 506 1,884 737 Short-Term Borrowings 45 13 77 28 Long-Term Debt 3,731 4,340 7,537 8,693 ---------------------------------------------------------------------- Total Interest Expense 23,066 15,641 42,566 31,366 ---------------------------------------------------------------------- Net Interest Income 101,039 95,849 201,697 191,880 Provision for Loan and Lease Losses - (3,500) - (3,500) ---------------------------------------------------------------------- Net Interest Income After Provision for Loan and Lease Losses 101,039 99,349 201,697 195,380 ---------------------------------------------------------------------- Non-Interest Income Trust and Asset Management 14,058 12,995 28,680 26,859 Mortgage Banking 2,594 2,808 5,184 4,785 Service Charges on Deposit Accounts 9,569 9,540 19,748 19,490 Fees, Exchange, and Other Service Charges 15,211 14,243 29,047 27,482 Investment Securities Gains (Losses) 337 (37) 337 (37) Insurance 4,330 4,926 10,118 9,584 Other 4,575 10,373 9,875 15,527 ---------------------------------------------------------------------- Total Non-Interest Income 50,674 54,848 102,989 103,690 ---------------------------------------------------------------------- Non-Interest Expense Salaries and Benefits 43,856 46,689 88,625 92,690 Net Occupancy Expense 9,189 9,543 18,734 18,929 Net Equipment Expense 5,377 5,799 10,848 11,763 Other 20,582 23,094 41,660 44,765 ---------------------------------------------------------------------- Total Non-Interest Expense 79,004 85,125 159,867 168,147 ---------------------------------------------------------------------- Income Before Income Taxes 72,709 69,072 144,819 130,923 Provision for Income Taxes 26,280 24,840 52,868 46,892 ---------------------------------------------------------------------- Net Income $ 46,429 $ 44,232 $ 91,951 $ 84,031 ====================================================================== Basic Earnings Per Share $ 0.90 $ 0.84 $ 1.75 $ 1.57 Diluted Earnings Per Share $ 0.87 $ 0.79 $ 1.69 $ 1.48 Dividends Declared Per Share $ 0.33 $ 0.30 $ 0.66 $ 0.60 Basic Weighted Average Shares 51,873,772 52,491,874 52,646,022 53,389,261 Diluted Weighted Average Shares 53,403,781 55,662,415 54,250,018 56,710,653 ====================================================================== (1) Certain 2004 information has been reclassified to conform to 2005 presentation. Bank of Hawaii Corporation and Subsidiaries Consolidated Statements of Condition (Unaudited) Table 3 ---------------------------------------------------------------------- June 30, Dec. 31, June 30, (dollars in thousands) 2005 2004 2004 ---------------------------------------------------------------------- Assets Interest-Bearing Deposits $ 4,825 $ 4,592 $ 179,680 Investment Securities - Available for Sale Held in Portfolio 2,396,204 2,483,719 2,275,272 Pledged as Collateral 117,947 - - Investment Securities - Held to Maturity (Fair Value of $522,993, $585,836, and $663,534) 526,767 589,908 679,382 Funds Sold 50,000 21,000 - Loans Held for Sale 17,435 17,642 9,565 Loans and Leases 6,151,418 5,986,930 5,787,314 Allowance for Loan and Lease Losses (101,587) (106,796) (124,904) ---------------------------------------------------------------------- Net Loans 6,049,831 5,880,134 5,662,410 ---------------------------------------------------------------------- Total Earning Assets 9,163,009 8,996,995 8,806,309 ---------------------------------------------------------------------- Cash and Non-Interest-Bearing Deposits 293,115 225,359 339,486 Premises and Equipment 137,907 146,095 149,128 Customers' Acceptance Liability 1,598 1,406 1,213 Accrued Interest Receivable 38,540 36,044 36,378 Foreclosed Real Estate 292 191 4,889 Mortgage Servicing Rights 18,239 18,769 20,819 Goodwill 34,959 36,216 36,216 Other Assets 372,031 305,116 294,331 ---------------------------------------------------------------------- Total Assets $10,059,690 $ 9,766,191 $ 9,688,769 ====================================================================== Liabilities Deposits Non-Interest-Bearing Demand $ 1,918,749 $ 1,977,703 $ 1,939,580 Interest-Bearing Demand 1,641,873 1,536,323 1,464,207 Savings 2,967,993 2,960,351 2,976,108 Time 1,198,143 1,090,290 1,089,393 ---------------------------------------------------------------------- Total Deposits 7,726,758 7,564,667 7,469,288 ---------------------------------------------------------------------- Securities Sold Under Agreements to Repurchase 861,233 568,981 687,816 Funds Purchased 63,565 149,635 139,055 Short-Term Borrowings 9,894 15,000 11,055 Banker's Acceptances Outstanding 1,598 1,406 1,213 Retirement Benefits Payable 66,638 65,708 62,821 Accrued Interest Payable 8,617 7,021 7,169 Taxes Payable and Deferred Taxes 283,082 229,928 225,989 Other Liabilities 83,462 96,373 87,325 Long-Term Debt 242,674 252,638 297,600 ---------------------------------------------------------------------- Total Liabilities 9,347,521 8,951,357 8,989,331 ---------------------------------------------------------------------- Shareholders' Equity Common Stock ($.01 par value); authorized 500,000,000 shares; issued / outstanding: June 2005 - 81,721,733 / 51,853,734, December 2004 - 81,711,752 / 54,960,857, June 2004 - 81,711,599 / 52,426,010 815 813 813 Capital Surplus 457,280 450,998 403,150 Accumulated Other Comprehensive Income (Loss) (18,471) (12,917) (27,258) Retained Earnings 1,339,119 1,282,425 1,251,689 Deferred Stock Grants (7,166) (8,433) (9,391) Treasury Stock, at Cost (Shares: June 2005 - 29,867,999, December 2004 - 26,750,895, June 2004 - 29,285,589) (1,059,408) (898,052) (919,565) ---------------------------------------------------------------------- Total Shareholders' Equity 712,169 814,834 699,438 ---------------------------------------------------------------------- Total Liabilities and Shareholders' Equity $10,059,690 $ 9,766,191 $ 9,688,769 ====================================================================== Bank of Hawaii Corporation and Subsidiaries Consolidated Statements of Shareholders' Equity (Unaudited) Table 4 ---------------------------------------------------------------------- Accum. Other Compre- hensive (dollars in Common Capital Income Retained thousands) Total Stock Surplus (Loss) Earnings ---------------------------------------------------------------------- Balance at December 31, 2004 $814,834 $813 $450,998 $(12,917) $1,282,425 Comprehensive Income: Net Income 91,951 - - - 91,951 Other Comprehensive Income, Net of Tax: Change in Unrealized Gains and Losses on Investment Securities (5,554) - - (5,554) - Total Comprehensive Income Common Stock Issued under Stock Plans and Related Tax Benefits (605,364 shares) 21,499 2 6,282 - (610) Treasury Stock Purchased (3,710,379 shares) (175,914) - - - - Cash Dividends Paid (34,647) - - - (34,647) ---------------------------------------------------------------------- Balance at June 30, 2005 $712,169 $815 $457,280 $(18,471) $1,339,119 ====================================================================== Balance at December 31, 2003 $793,132 $807 $391,701 $ (5,711) $1,199,077 Comprehensive Income: Net Income 84,031 - - - 84,031 Other Comprehensive Income, Net of Tax: Change in Unrealized Gains and Losses on Investment Securities (21,547) - - (21,547) - Total Comprehensive Income Common Stock Issued under Stock Plans and Related Tax Benefits (908,502 shares) 32,028 6 11,449 - 803 Treasury Stock Purchased (3,527,779 shares) (155,984) - - - - Cash Dividends Paid (32,222) - - - (32,222) ---------------------------------------------------------------------- Balance at June 30, 2004 $699,438 $813 $403,150 $(27,258) $1,251,689 ====================================================================== Deferred Compre- Stock Treasury hensive (dollars in thousands) Grants Stock Income ---------------------------------------------------------------------- Balance at December 31, 2004 $(8,433) $ (898,052) Comprehensive Income: Net Income - - $91,951 Other Comprehensive Income, Net of Tax: Change in Unrealized Gains and Losses on Investment Securities - - (5,554) ------------ Total Comprehensive Income $86,397 ============ Common Stock Issued under Stock Plans and Related Tax Benefits (605,364 shares) 1,267 14,558 Treasury Stock Purchased (3,710,379 shares) - (175,914) Cash Dividends Paid - - --------------------------------------------------------- Balance at June 30, 2005 $(7,166) $(1,059,408) ========================================================= Balance at December 31, 2003 $(8,309) $ (784,433) Comprehensive Income: Net Income - - $84,031 Other Comprehensive Income, Net of Tax: Change in Unrealized Gains and Losses on Investment Securities - - (21,547) ------------ Total Comprehensive Income $62,484 ============ Common Stock Issued under Stock Plans and Related Tax Benefits (908,502 shares) (1,082) 20,852 Treasury Stock Purchased (3,527,779 shares) - (155,984) Cash Dividends Paid - - --------------------------------------------------------- Balance at June 30, 2004 $(9,391) $ (919,565) ========================================================= Bank of Hawaii Corporation and Subsidiaries Consolidated Average Balances and Interest Rates - Taxable Equivalent Basis (Unaudited) Table 5 ---------------------------------------------------------------------- Three Months Ended June 30, 2005 Average Income/ Yield/ (dollars in millions) Balance Expense Rate ---------------------------------------------------------------------- Earning Assets Interest-Bearing Deposits $ 6.0 $ - 2.36% Funds Sold 23.1 0.2 2.86 Investment Securities Available for Sale 2,542.5 28.0 4.41 Held to Maturity 544.1 5.5 4.06 Loans Held for Sale 15.1 0.2 5.72 Loans and Leases (2) Commercial and Industrial 945.0 14.3 6.07 Construction 140.9 2.1 5.91 Commercial Mortgage 599.3 8.8 5.89 Residential Mortgage 2,343.9 33.1 5.64 Other Revolving Credit and Installment 739.6 15.4 8.37 Home Equity 719.0 10.8 6.01 Purchased Home Equity 103.3 0.8 3.06 Lease Financing 499.2 4.7 3.74 ---------------------------------------------------------------------- Total Loans and Leases 6,090.2 90.0 5.91 ---------------------------------------------------------------------- Other 66.3 0.3 1.64 ---------------------------------------------------------------------- Total Earning Assets (3) 9,287.3 124.2 5.35 ---------------------------------------------------------------------- Cash and Non-Interest-Bearing Deposits 305.8 Other Assets 376.1 ---------- Total Assets $9,969.2 ========== Interest-Bearing Liabilities Interest-Bearing Deposits Demand $1,667.3 2.4 0.58 Savings 2,970.8 4.8 0.65 Time 1,159.0 6.4 2.20 ---------------------------------------------------------------------- Total Interest-Bearing Deposits 5,797.1 13.6 0.94 ---------------------------------------------------------------------- Short-Term Borrowings 822.9 5.8 2.81 Long-Term Debt 242.7 3.7 6.16 ---------------------------------------------------------------------- Total Interest-Bearing Liabilities 6,862.7 23.1 1.35 ---------------------------------------------------------------------- Net Interest Income $ 101.1 ========== Interest Rate Spread 4.00% Net Interest Margin 4.36% Non-Interest-Bearing Demand Deposits 1,950.2 Other Liabilities 439.5 Shareholders' Equity 716.8 ---------- Total Liabilities and Shareholders' Equity $9,969.2 ========== Three Months Ended March 31, 2005 Average Income/ Yield/ (dollars in millions) Balance Expense Rate ---------------------------------------------------------------------- Earning Assets Interest-Bearing Deposits $ 4.8 $ - 1.93% Funds Sold 12.6 0.1 2.37 Investment Securities Available for Sale 2,491.1 27.4 4.40 Held to Maturity 574.6 5.8 4.06 Loans Held for Sale 13.2 0.2 5.40 Loans and Leases (2) Commercial and Industrial 904.3 13.2 5.90 Construction 124.1 1.7 5.44 Commercial Mortgage 605.9 8.5 5.73 Residential Mortgage 2,332.1 32.6 5.59 Other Revolving Credit and Installment 736.8 15.0 8.27 Home Equity 678.8 9.5 5.65 Purchased Home Equity 116.8 1.0 3.54 Lease Financing 501.8 4.8 3.88 ---------------------------------------------------------------------- Total Loans and Leases 6,000.6 86.3 5.80 ---------------------------------------------------------------------- Other 53.9 0.4 3.38 ---------------------------------------------------------------------- Total Earning Assets (3) 9,150.8 120.2 5.29 ---------------------------------------------------------------------- Cash and Non-Interest-Bearing Deposits 315.6 Other Assets 379.4 ---------- Total Assets $9,845.8 ========== Interest-Bearing Liabilities Interest-Bearing Deposits Demand $1,618.1 1.7 0.42 Savings 2,972.3 4.4 0.60 Time 1,114.7 5.5 2.02 ---------------------------------------------------------------------- Total Interest-Bearing Deposits 5,705.1 11.6 0.82 ---------------------------------------------------------------------- Short-Term Borrowings 706.2 4.1 2.35 Long-Term Debt 248.7 3.8 6.14 ---------------------------------------------------------------------- Total Interest-Bearing Liabilities 6,660.0 19.5 1.19 ---------------------------------------------------------------------- Net Interest Income $ 100.7 ========== Interest Rate Spread 4.10% Net Interest Margin 4.43% Non-Interest-Bearing Demand Deposits 1,982.7 Other Liabilities 422.8 Shareholders' Equity 780.3 ---------- Total Liabilities and Shareholders' Equity $9,845.8 ========== Three Months Ended June 30, 2004 (1) Average Income/ Yield/ (dollars in millions) Balance Expense Rate ---------------------------------------------------------------------- Earning Assets Interest-Bearing Deposits $ 408.8 $ 1.6 1.62% Funds Sold 71.3 0.2 0.99 Investment Securities Available for Sale 2,148.9 21.8 4.06 Held to Maturity 709.8 6.7 3.78 Loans Held for Sale 20.7 0.3 5.54 Loans and Leases (2) Commercial and Industrial 845.2 10.3 4.90 Construction 100.4 0.9 3.80 Commercial Mortgage 638.9 8.6 5.39 Residential Mortgage 2,281.8 32.2 5.65 Other Revolving Credit and Installment 683.2 14.4 8.51 Home Equity 534.6 6.1 4.63 Purchased Home Equity 178.8 1.9 4.16 Lease Financing 510.1 5.6 4.38 ---------------------------------------------------------------------- Total Loans and Leases 5,773.0 80.0 5.56 ---------------------------------------------------------------------- Other 78.1 0.9 4.45 ---------------------------------------------------------------------- Total Earning Assets (3) 9,210.6 111.5 4.86 ---------------------------------------------------------------------- Cash and Non-Interest-Bearing Deposits 306.3 Other Assets 376.4 ---------- Total Assets $9,893.3 ========== Interest-Bearing Liabilities Interest-Bearing Deposits Demand $1,390.2 0.6 0.17 Savings 2,911.5 3.1 0.43 Time 1,129.5 4.9 1.74 ---------------------------------------------------------------------- Total Interest-Bearing Deposits 5,431.2 8.6 0.63 ---------------------------------------------------------------------- Short-Term Borrowings 1,082.5 2.7 1.02 Long-Term Debt 317.3 4.3 5.48 ---------------------------------------------------------------------- Total Interest-Bearing Liabilities 6,831.0 15.6 0.92 ---------------------------------------------------------------------- Net Interest Income $ 95.9 ========== Interest Rate Spread 3.94% Net Interest Margin 4.17% Non-Interest-Bearing Demand Deposits 1,940.2 Other Liabilities 389.4 Shareholders' Equity 732.7 ---------- Total Liabilities and Shareholders' Equity $9,893.3 ========== Six Months Ended June 30, 2005 Average Income/ Yield/ (dollars in millions) Balance Expense Rate ---------------------------------------------------------------------- Earning Assets Interest-Bearing Deposits $ 5.4 $ 0.1 2.17% Funds Sold 17.9 0.2 2.68 Investment Securities Available for Sale 2,517.0 55.4 4.41 Held to Maturity 559.3 11.4 4.06 Loans Held for Sale 14.1 0.4 5.57 Loans and Leases (2) Commercial and Industrial 924.8 27.5 5.99 Construction 132.5 3.7 5.69 Commercial Mortgage 602.6 17.4 5.81 Residential Mortgage 2,338.0 65.7 5.62 Other Revolving Credit and Installment 738.2 30.5 8.32 Home Equity 699.0 20.2 5.83 Purchased Home Equity 110.0 1.8 3.32 Lease Financing 500.5 9.4 3.81 ---------------------------------------------------------------------- Total Loans and Leases 6,045.6 176.2 5.86 ---------------------------------------------------------------------- Other 60.1 0.7 2.42 ---------------------------------------------------------------------- Total Earning Assets (3) 9,219.4 244.4 5.32 ---------------------------------------------------------------------- Cash and Non-Interest-Bearing Deposits 310.6 Other Assets 377.8 --------- Total Assets $9,907.8 ========= Interest-Bearing Liabilities Interest-Bearing Deposits Demand $1,642.9 4.1 0.50 Savings 2,971.5 9.2 0.62 Time 1,137.0 11.9 2.11 ---------------------------------------------------------------------- Total Interest-Bearing Deposits 5,751.4 25.2 0.88 ---------------------------------------------------------------------- Short-Term Borrowings 764.9 9.9 2.60 Long-Term Debt 245.6 7.5 6.15 ---------------------------------------------------------------------- Total Interest-Bearing Liabilities 6,761.9 42.6 1.27 ---------------------------------------------------------------------- Net Interest Income $ 201.8 ========== Interest Rate Spread 4.05% Net Interest Margin 4.39% Non-Interest-Bearing Demand Deposits 1,966.4 Other Liabilities 431.2 Shareholders' Equity 748.3 --------- Total Liabilities and Shareholders' Equity $9,907.8 ========= (1) Certain 2004 information has been reclassified to conform to 2005 presentation. (2) Non-performing loans are included in the respective average loan balances. Income, if any, on such loans is recognized on a cash basis. (3) Interest income includes taxable-equivalent basis adjustment based upon a statutory tax rate of 35%. Bank of Hawaii Corporation and Subsidiaries Analysis of Change in Net Interest Income - Taxable Equivalent Basis (Unaudited) Table 6 ---------------------------------------------------------------------- Three Months Ended June 30, 2005 Compared to March 31, 2005 (dollars in millions) Volume (1) Rate (1) Time (1) Total ---------------------------------------------------------------------- Change in Interest Income: Funds Sold $ 0.1 $ - $ - $ 0.1 Investment Securities Available for Sale 0.5 0.1 - 0.6 Held to Maturity (0.3) - - (0.3) Loans and Leases Commercial and Industrial 0.6 0.4 0.1 1.1 Construction 0.3 0.1 - 0.4 Commercial Mortgage (0.1) 0.3 0.1 0.3 Residential Mortgage 0.2 0.3 - 0.5 Other Revolving Credit and Installment - 0.2 0.2 0.4 Home Equity 0.6 0.6 0.1 1.3 Purchased Home Equity (0.1) (0.1) - (0.2) Lease Financing - (0.2) 0.1 (0.1) ---------------------------------------------------------------------- Total Loans and Leases 1.5 1.6 0.6 3.7 ---------------------------------------------------------------------- Other 0.1 (0.2) - (0.1) ---------------------------------------------------------------------- Total Change in Interest Income 1.9 1.5 0.6 4.0 ---------------------------------------------------------------------- Change in Interest Expense: Interest-Bearing Deposits Demand 0.1 0.6 - 0.7 Savings - 0.4 - 0.4 Time 0.3 0.5 0.1 0.9 ---------------------------------------------------------------------- Total Interest-Bearing Deposits 0.4 1.5 0.1 2.0 ---------------------------------------------------------------------- Short-Term Borrowings 0.8 0.8 0.1 1.7 Long-Term Debt (0.1) - - (0.1) ---------------------------------------------------------------------- Total Change in Interest Expense 1.1 2.3 0.2 3.6 ---------------------------------------------------------------------- Change in Net Interest Income $ 0.8 $(0.8) $ 0.4 $ 0.4 ====================================================================== (1) 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 Six Months Ended June 30, June 30, (dollars in thousands) 2005 2004 2005 2004 ---------------------------------------------------------------------- Salaries $26,616 $27,904 $52,669 $55,108 Incentive Compensation 3,725 3,260 7,693 7,076 Stock Based Compensation 1,828 3,233 3,543 6,129 Commission Expense 2,281 2,284 4,533 3,911 Retirement and Other Benefits 4,437 4,214 9,205 8,571 Payroll Taxes 2,205 3,103 5,658 6,533 Medical, Dental, and Life Insurance 1,823 2,136 4,054 4,240 Separation Expense 941 555 1,270 1,122 ---------------------------------------------------------------------- Total Salaries and Benefits $43,856 $46,689 $88,625 $92,690 ====================================================================== Bank of Hawaii Corporation and Subsidiaries Loan Portfolio Balances (Unaudited) Table 8 ---------------------------------------------------------------------- June 30, March 31, Dec. 31, June 30, (dollars in thousands) 2005 2005 2004 (1) 2004 (1) ---------------------------------------------------------------------- Commercial Commercial and Industrial $ 997,762 $ 918,878 $ 909,264 $ 800,893 Commercial Mortgage 563,979 609,689 602,678 643,382 Construction 165,772 107,403 122,355 98,916 Lease Financing 471,600 468,349 479,100 479,488 ---------------------------------------------------------------------- Total Commercial 2,199,113 2,104,319 2,113,397 2,022,679 ---------------------------------------------------------------------- Consumer Residential Mortgage 2,347,877 2,342,062 2,326,385 2,286,618 Home Equity 739,161 694,261 657,164 559,225 Purchased Home Equity 93,806 109,632 122,728 162,730 Other Revolving Credit and Installment 742,834 734,836 734,721 721,386 Lease Financing 28,627 30,680 32,535 34,676 ---------------------------------------------------------------------- Total Consumer 3,952,305 3,911,471 3,873,533 3,764,635 ---------------------------------------------------------------------- Total Loans and Leases $6,151,418 $6,015,790 $5,986,930 $5,787,314 ====================================================================== Air Transportation Credit Exposure (2) (Unaudited) ---------------------------------------------------------------------- June 30, Dec. 31, June 30, 2005 2004 (1) 2004 Unused Total Total Total (dollars in Outstanding Commitments Exposure Exposure Exposure thousands) ---------------------------------------------------------------------- Air Transportation United States Regional Passenger Carriers $ 41,556 $ 7,191 $ 48,747 $ 54,981 $ 58,491 United States National Passenger Carriers 37,638 - 37,638 37,377 37,581 Passenger Carriers Based Outside United States 22,249 - 22,249 25,910 30,325 Cargo Carriers 13,475 - 13,475 13,771 14,122 ---------------------------------------------------------------------- Total Air Transportation $114,918 $ 7,191 $122,109 $132,039 $140,519 ====================================================================== (1) Certain 2004 information has been reclassified to conform to 2005 presentation. (2) Exposure includes loans, leveraged leases and operating leases. Bank of Hawaii Corporation and Subsidiaries Consolidated Non-Performing Assets and Accruing Loans Past Due 90 Days or More (Unaudited) Table 9 ---------------------------------------------------------------------- June 30, March 31, Dec. 31, June 30, (dollars in thousands) 2005 2005 2004 2004 ---------------------------------------------------------------------- Non-Performing Assets Non-Accrual Loans Commercial Commercial and Industrial $ 430 $ 470 $ 683 $ 680 Commercial Mortgage 1,739 1,922 2,106 5,649 Lease Financing 1,586 2,418 2,973 1,948 ---------------------------------------------------------------------- Total Commercial 3,755 4,810 5,762 8,277 ---------------------------------------------------------------------- Consumer Residential Mortgage 6,035 7,503 7,688 7,688 Home Equity 156 185 218 306 ---------------------------------------------------------------------- Total Consumer 6,191 7,688 7,906 7,994 ---------------------------------------------------------------------- Total Non-Accrual Loans 9,946 12,498 13,668 16,271 ---------------------------------------------------------------------- Foreclosed Real Estate 292 183 191 4,889 Other Investments 682 684 - - ---------------------------------------------------------------------- Total Non-Performing Assets $ 10,920 $ 13,365 $ 13,859 $ 21,160 ====================================================================== Accruing Loans Past Due 90 Days or More Commercial Commercial and Industrial $ 9 $ 29 $ 52 $ 19 Commercial Mortgage 2,213 2,243 - 693 ---------------------------------------------------------------------- Total Commercial 2,222 2,272 52 712 ---------------------------------------------------------------------- Consumer Residential Mortgage 1,310 604 387 698 Purchased Home Equity - 70 183 32 Other Revolving Credit and Installment 1,417 1,417 1,433 1,142 Lease Financing - - 30 57 ---------------------------------------------------------------------- Total Consumer 2,727 2,091 2,033 1,929 ---------------------------------------------------------------------- Total Accruing Loans Past Due 90 Days or More $ 4,949 $ 4,363 $ 2,085 $ 2,641 ====================================================================== Total Loans and Leases $6,151,418 $6,015,790 $5,986,930 $5,787,314 ====================================================================== Ratio of Non-Accrual Loans to Total Loans 0.16% 0.21% 0.23% 0.28% ---------------------------------------------------------------------- Ratio of Non-Performing Assets to Total Loans, Foreclosed Real Estate and Other Investments 0.18% 0.22% 0.23% 0.37% ---------------------------------------------------------------------- Ratio of Non-Performing Assets and Accruing Loans Past Due 90 Days or More to Total Loans 0.26% 0.29% 0.27% 0.41% ---------------------------------------------------------------------- Quarter to Quarter Changes in Non- Performing Assets Balance at Beginning of Quarter $ 13,365 $ 13,859 $ 15,977 $ 27,866 Additions 3,088 2,796 5,164 3,909 Reductions Payments (5,097) (2,202) (6,435) (4,232) Return to Accrual (392) (698) (456) (2,700) Sales of Foreclosed Assets - (129) (206) (147) Charge-offs/Write- downs (44) (261) (185) (3,536) ---------------------------------------------------------------------- Total Reductions (5,533) (3,290) (7,282) (10,615) ---------------------------------------------------------------------- Balance at End of Quarter $ 10,920 $ 13,365 $ 13,859 $ 21,160 ====================================================================== Bank of Hawaii Corporation and Subsidiaries Consolidated Reserve for Credit Losses (Unaudited) Table 10 ---------------------------------------------------------------------- Three Months Ended Six Months Ended June 30, June 30, (dollars in thousands) 2005 2004 2005 2004 ---------------------------------------------------------------------- Balance at Beginning of Period $ 109,906 $ 127,185 $ 113,596 $ 129,080 Loans Charged-Off Commercial Commercial and Industrial 581 3,328 1,155 3,715 Commercial Mortgage - - - 574 Lease Financing - 379 - 607 Consumer Residential Mortgage 67 319 382 464 Home Equity - 9 - 9 Purchased Home Equity 406 201 698 291 Other Revolving Credit and Installment 4,546 4,564 9,128 9,219 Lease Financing 29 28 63 64 ---------------------------------------------------------------------- Total Loans Charged-Off 5,629 8,828 11,426 14,943 ---------------------------------------------------------------------- Recoveries on Loans Previously Charged-Off Commercial Commercial and Industrial 211 1,245 753 2,199 Commercial Mortgage 32 151 94 840 Construction - - - 435 Lease Financing 130 1 162 16 Consumer Residential Mortgage 189 304 295 598 Home Equity 5 101 30 140 Purchased Home Equity 120 57 154 57 Other Revolving Credit and Installment 1,166 1,703 2,453 3,366 Lease Financing 33 16 52 71 Foreign - 6,469 - 6,545 ---------------------------------------------------------------------- Total Recoveries on Loans Previously Charged-Off 1,886 10,047 3,993 14,267 ---------------------------------------------------------------------- Net Loan Recoveries (Charge-Offs) (3,743) 1,219 (7,433) (676) Provision for Loan and Lease Losses - (3,500) - (3,500) ---------------------------------------------------------------------- Balance at End of Period (1) $ 106,163 $ 124,904 $ 106,163 $ 124,904 ====================================================================== Components Allowance for Loan and Lease Losses 101,587 124,904 101,587 124,904 Reserve for Unfunded Commitments (2) 4,576 - 4,576 - ---------------------------------------------------------------------- Total Reserve for Credit Losses $ 106,163 $ 124,904 $ 106,163 $ 124,904 ====================================================================== Average Loans Outstanding $6,090,149 $5,772,926 $6,045,609 $5,757,647 ====================================================================== Ratio of Net Loan (Recoveries) Charge-Offs to Average Loans Outstanding (annualized) 0.25% (0.08)% 0.25% 0.02% Ratio of Allowance to Loans and Leases Outstanding (2) 1.65% 2.16% 1.65% 2.16% (1) Included in this analysis is activity related to the Company's reserve for unfunded commitments, which is separately recorded in other liabilities in the Consolidated Statements of Condition. (2) The reclassification of the reserve for unfunded commitments to other liabilities occurred in the fourth quarter of 2004 on a prospective basis. Thus, June 30, 2004 allowance for loan and lease losses and reserve for unfunded commitments were reported together. At June 30, 2004, the reserve for unfunded commitments was $5.4 million. Bank of Hawaii Corporation and Subsidiaries Business Segment Selected Financial Information (Unaudited) Table 11a ---------------------------------------------------------------------- Investment Treasury (dollars in Retail Commercial Services and Other Consolidated thousands) Banking Banking Group Corporate Total ---------------------------------------------------------------------- Three Months Ended June 30, 2005 Net Interest Income $ 54,212 $ 35,525 $ 3,222 $ 8,080 $ 101,039 Provision for Loan and Lease Losses 3,531 236 - (3,767) - ---------------------------------------------------------------------- Net Interest Income After Provision for Loan and Lease Losses 50,681 35,289 3,222 11,847 101,039 Non-Interest Income 25,080 8,735 14,229 2,630 50,674 ---------------------------------------------------------------------- 75,761 44,024 17,451 14,477 151,713 Non-Interest Expense (42,569) (21,019) (13,692) (1,724) (79,004) ---------------------------------------------------------------------- Income Before Income Taxes 33,192 23,005 3,759 12,753 72,709 Provision for Income Taxes (12,281) (8,400) (1,391) (4,208) (26,280) ---------------------------------------------------------------------- Allocated Net Income 20,911 14,605 2,368 8,545 46,429 ---------------------------------------------------------------------- Allowance Funding Value (168) (601) (6) 775 - GAAP Provision 3,531 236 - (3,767) - Economic Provision (3,435) (2,432) (103) (1) (5,971) Tax Effect of Adjustments 27 1,035 40 1,107 2,209 ---------------------------------------------------------------------- Income Before Capital Charge 20,866 12,843 2,299 6,659 42,667 Capital Charge (5,424) (4,562) (1,428) (8,296) (19,710) ---------------------------------------------------------------------- Net Income (Loss) After Capital Charge (NIACC) $ 15,442 $ 8,281 $ 871 $ (1,637) $ 22,957 ====================================================================== RAROC (ROE for the Company) 42% 31% 18% 14% 26% ====================================================================== Total Assets at June 30, 2005 $3,789,519 $2,533,496 $192,378 $3,544,297 $10,059,690 ====================================================================== Three Months Ended June 30, 2004 (1) Net Interest Income $ 49,524 $ 33,583 $ 2,832 $ 9,910 $ 95,849 Provision for Loan and Lease Losses 2,587 2,730 (1) (8,816) (3,500) ---------------------------------------------------------------------- Net Interest Income After Provision for Loan and Lease Losses 46,937 30,853 2,833 18,726 99,349 Non-Interest Income 24,388 12,141 12,985 5,334 54,848 ---------------------------------------------------------------------- 71,325 42,994 15,818 24,060 154,197 Non-Interest Expense (44,560) (22,928) (13,226) (4,411) (85,125) ---------------------------------------------------------------------- Income Before Income Taxes 26,765 20,066 2,592 19,649 69,072 Provision for Income Taxes (9,903) (7,423) (959) (6,555) (24,840) ---------------------------------------------------------------------- Allocated Net Income 16,862 12,643 1,633 13,094 44,232 ---------------------------------------------------------------------- Allowance Funding Value (148) (688) (6) 842 - GAAP Provision 2,587 2,730 (1) (8,816) (3,500) Economic Provision (3,510) (2,821) (99) (3) (6,433) Tax Effect of Adjustments 396 288 39 2,951 3,674 ---------------------------------------------------------------------- Income Before Capital Charge 16,187 12,152 1,566 8,068 37,973 Capital Charge (5,485) (5,129) (1,307) (8,231) (20,152) ---------------------------------------------------------------------- Net Income (Loss) After Capital Charge (NIACC) $ 10,702 $ 7,023 $ 259 $ (163) $ 17,821 ====================================================================== RAROC (ROE for the Company) 33% 26% 13% 28% 24% ====================================================================== Total Assets at June 30, 2004 $3,693,382 $2,331,951 $114,038 $3,549,398 $ 9,688,769 ====================================================================== (1) Certain 2004 information has been reclassified to conform to 2005 presentation. Bank of Hawaii Corporation and Subsidiaries Business Segment Selected Financial Information (Unaudited) Table 11b ---------------------------------------------------------------------- Investment Treasury (dollars in Retail Commercial Services and Other Consolidated thousands) Banking Banking Group Corporate Total ---------------------------------------------------------------------- Six Months Ended June 30, 2005 Net Interest Income $ 106,562 $ 70,087 $ 6,111 $ 18,937 $ 201,697 Provision for Loan and Lease Losses 7,016 652 (1) (7,667) - ---------------------------------------------------------------------- Net Interest Income After Provision for Loan and Lease Losses 99,546 69,435 6,112 26,604 201,697 Non-Interest Income 49,322 20,266 28,855 4,546 102,989 ---------------------------------------------------------------------- 148,868 89,701 34,967 31,150 304,686 Non-Interest Expense (85,618) (43,579) (26,911) (3,759) (159,867) ---------------------------------------------------------------------- Income Before Income Taxes 63,250 46,122 8,056 27,391 144,819 Provision for Income Taxes (23,403) (16,999) (2,981) (9,485) (52,868) ---------------------------------------------------------------------- Allocated Net Income 39,847 29,123 5,075 17,906 91,951 ---------------------------------------------------------------------- Allowance Funding Value (331) (1,202) (12) 1,545 - GAAP Provision 7,016 652 (1) (7,667) - Economic Provision (6,941) (4,890) (193) (2) (12,026) Tax Effect of Adjustments 94 2,013 76 2,267 4,450 ---------------------------------------------------------------------- Income Before Capital Charge 39,685 25,696 4,945 14,049 84,375 Capital Charge (10,880) (9,198) (2,769) (18,324) (41,171) ---------------------------------------------------------------------- Net Income (Loss) After Capital Charge (NIACC) $ 28,805 $ 16,498 $ 2,176 $ (4,275) $ 43,204 ====================================================================== RAROC (ROE for the Company) 40% 31% 20% 17% 25% ====================================================================== Total Assets at June 30, 2005 $3,789,519 $2,533,496 $ 192,378 $3,544,297 $10,059,690 ====================================================================== Six Months Ended June 30, 2004 (1) Net Interest Income $ 99,681 $ 67,602 $ 5,645 $ 18,952 $ 191,880 Provision for Loan and Lease Losses 5,334 2,477 48 (11,359) (3,500) ---------------------------------------------------------------------- Net Interest Income After Provision for Loan and Lease Losses 94,347 65,125 5,597 30,311 195,380 Non-Interest Income 45,403 22,573 27,426 8,288 103,690 ---------------------------------------------------------------------- 139,750 87,698 33,023 38,599 299,070 Non-Interest Expense (87,777) (46,072) (26,256) (8,042) (168,147) ---------------------------------------------------------------------- Income Before Income Taxes 51,973 41,626 6,767 30,557 130,923 Provision for Income Taxes (19,230) (15,381) (2,504) (9,777) (46,892) ---------------------------------------------------------------------- Allocated Net Income 32,743 26,245 4,263 20,780 84,031 ---------------------------------------------------------------------- Allowance Funding Value (277) (1,425) (14) 1,716 - GAAP Provision 5,334 2,477 48 (11,359) (3,500) Economic Provision (6,906) (5,598) (193) (5) (12,702) Tax Effect of Adjustments 684 1,682 59 3,570 5,995 ---------------------------------------------------------------------- Income Before Capital Charge 31,578 23,381 4,163 14,702 73,824 Capital Charge (11,255) (10,395) (2,590) (17,950) (42,190) ---------------------------------------------------------------------- Net Income (Loss) After Capital Charge (NIACC) $ 20,323 $ 12,986 $ 1,573 $ (3,248) $ 31,634 ====================================================================== RAROC (ROE for the Company) 31% 25% 18% 27% 22% ====================================================================== Total Assets at June 30, 2004 $3,693,382 $2,331,951 $114,038 $3,549,398 $9,688,769 ====================================================================== (1) Certain 2004 information has been reclassified to conform to 2005 presentation. Bank of Hawaii Corporation and Subsidiaries Quarterly Summary of Selected Consolidated Financial Data (Unaudited) Table 12 ---------------------------------------------------------------------- (dollars in thousands Three Months Ended except per June 30, March 31, Dec. 31, Sept. 30, June 30, share amounts) 2005 2005 2004 2004 (1) 2004 (1) ---------------------------------------------------------------------- Quarterly Operating Results Interest Income Interest and Fees on Loans and Leases $ 90,119 $ 86,467 $ 84,100 $ 82,079 $ 80,346 Income on Investment Securities - Available for Sale 27,987 27,319 26,394 24,543 21,745 Income on Investment Securities - Held to Maturity 5,527 5,825 6,147 6,370 6,711 Deposits 36 23 107 496 1,646 Funds Sold 165 75 356 108 177 Other 271 449 267 801 865 ---------------------------------------------------------------------- Total Interest Income 124,105 120,158 117,371 114,397 111,490 ---------------------------------------------------------------------- Interest Expense Deposits 13,577 11,604 9,993 8,990 8,560 Securities Sold Under Agreements to Repurchase 4,562 3,325 3,120 2,085 2,222 Funds Purchased 1,151 733 395 683 506 Short-Term Borrowings 45 32 39 15 13 Long-Term Debt 3,731 3,806 3,893 3,845 4,340 ---------------------------------------------------------------------- Total Interest Expense 23,066 19,500 17,440 15,618 15,641 ---------------------------------------------------------------------- Net Interest Income 101,039 100,658 99,931 98,779 95,849 Provision for Loan and Lease Losses - - (6,500) - (3,500) ---------------------------------------------------------------------- Net Interest Income After Provision for Loan and Lease Losses 101,039 100,658 106,431 98,779 99,349 ---------------------------------------------------------------------- Non-Interest Income Trust and Asset Management 14,058 14,622 13,934 12,672 12,995 Mortgage Banking 2,594 2,590 1,516 1,711 2,808 Service Charges on Deposit Accounts 9,569 10,179 10,155 9,472 9,540 Fees, Exchange, and Other Service Charges 15,211 13,836 13,684 13,741 14,243 Investment Securities Gains (Losses) 337 - (757) - (37) Insurance 4,330 5,788 4,234 5,423 4,926 Other 4,575 5,300 5,584 10,035 10,373 ---------------------------------------------------------------------- Total Non- Interest Income 50,674 52,315 48,350 53,054 54,848 ---------------------------------------------------------------------- Non-Interest Expense Salaries and Benefits 43,856 44,769 45,043 46,566 46,689 Net Occupancy Expense 9,189 9,545 9,606 9,812 9,543 Net Equipment Expense 5,377 5,471 6,316 5,847 5,799 Other 20,582 21,078 21,138 21,965 23,094 ---------------------------------------------------------------------- Total Non- Interest Expense 79,004 80,863 82,103 84,190 85,125 ---------------------------------------------------------------------- Income Before Income Taxes 72,709 72,110 72,678 67,643 69,072 Provision for Income Taxes 26,280 26,588 26,437 24,576 24,840 ---------------------------------------------------------------------- Net Income $ 46,429 $ 45,522 $ 46,241 $ 43,067 $ 44,232 ====================================================================== Basic Earnings Per Share $0.90 $0.85 $0.86 $0.82 $0.84 Diluted Earnings Per Share $0.87 $0.83 $0.82 $0.78 $0.79 Balance Sheet Totals Total Assets $10,059,690 $9,908,030 $9,766,191 $9,594,809 $9,688,769 Net Loans 6,049,831 5,910,784 5,880,134 5,690,924 5,662,410 Total Deposits 7,726,758 7,760,662 7,564,667 7,413,240 7,469,288 Total Shareholders' Equity 712,169 716,656 814,834 756,707 699,438 Performance Ratios Net Income to Average Total Assets (ROA) 1.87% 1.88% 1.89% 1.77% 1.80% Net Income to Average Shareholders' Equity (ROE) 25.98 23.66 23.63 23.42 24.28 Efficiency Ratio (2) 52.07 52.86 55.37 55.45 56.49 (1) Certain 2004 information has been reclassified to conform to 2005 presentation. (2) 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 or 877-849-5423 (Pager)
skiguchi@boh.com
Cindy Wyrick, 808-537-8430 (Investor/Analyst Inquiries)
cwyrick@boh.com
SOURCE: Bank of Hawaii Corporation