Bank of Hawaii Corporation Second Quarter 2002 Financial Results
HONOLULU--(BUSINESS WIRE)--July 22, 2002--Bank of Hawaii Corporation (NYSE:BOH):
- Net Income $31.0 Million, or $0.42 Per Share
- Board of Directors Declares Dividend of $0.18 Per Share
- Shares Repurchases Total 3.9 Million During the Quarter
- Company Signs Agreement with Metavante for Key Technology Services
Bank of Hawaii Corporation (NYSE:BOH) today reported diluted earnings per share of $0.42 for the second quarter of 2002, up 31.3 percent from $0.32 in the second quarter of 2001. Net income for the second quarter was $31.0 million, up 16.0 percent from $26.7 million in the comparable quarter last year. The return on average assets for the quarter was 1.23 percent, up from 0.83 percent in the same period last year. The return on average equity was 9.94 percent for the quarter, compared to 7.69 percent in the second quarter of 2001.
"Our financial results in the second quarter continue to show progress and we remain encouraged by the improving Hawaii economy," said Michael E. O'Neill, Chairman, CEO and President. "Our recent decision to move key technology services to Metavante in 2003 will improve our operating efficiency and allow us to focus attention on better serving our customers."
For the first six months of 2002, net income was $62.1 million, up 2.7 percent from net income of $60.4 million for the same period last year. Diluted earnings per share were $0.83 for the first half of 2002, up 12.2 percent from $0.74 per share for the same period last year. The year-to-date return on average assets was 1.22 percent, up from 0.91 percent for the first six months of 2001. The year-to-date return on average equity was 9.96 percent versus 9.0 percent for the first half of 2001.
There were no non-core items in the second quarter of 2002; however, the presence of non-core items and the effects of business divestitures in prior quarters continue to have a significant impact on the comparability of results. Included in the first quarter of 2002 were restructuring costs of $2.0 million related to completion of the Company's previously announced divestiture plan. Non-core items in the second quarter of 2001 included gains of $24.8 million related to the divestitures and $11.1 million from sales of investments. Restructuring and other non-core expenses of $38.9 million offset these gains. Supplemental information has been provided in Table 9 summarizing the continuing core business results for the last six quarters.
Financial Highlights
Net interest income for the second quarter of 2002 on a fully taxable equivalent basis was $93.0 million, down $1.9 million, or 2.0 percent from the previous quarter largely due to expected decreases in the amount of mortgage loans held for sale. Net interest income was down $23.7 million from the prior year quarter primarily due to asset sales related to the divestitures, the exit of the Asia business and the managed reduction of loans to reduce credit risk.
Bank of Hawaii Corporation's net interest margin was 3.97 percent for the second quarter of 2002, a 6 basis point increase from 3.91 percent in the second quarter last year and up 4 basis points from 3.93 percent in the previous quarter. The improvement was primarily due to reductions in short-term borrowings and time deposits, which lowered the Company's cost of funds.
The provision for loan and lease losses was $3.3 million for the second quarter of 2002, down $3.1 million, or 48.2 percent from $6.4 million in the same quarter last year and down $5.0 million, or 59.9 percent from $8.3 million in the previous quarter. The provision in the second quarter of 2002 equaled net charge-offs for the quarter.
Non-interest income was $48.9 million for the quarter, down $5.1 million or 9.4 percent from $54.0 million in the first quarter of 2002 primarily due to the anticipated decrease in revenue from mortgage banking activities. The second quarter of 2001 included $35.9 million in previously mentioned gains. Adjusted for these items, non-interest income decreased $13.1 million from the previous year largely due to sales of the Company's South Pacific entities and Pacific Century Bank branch franchise in California.
Non-interest expense for the second quarter of 2002 was $90.4 million compared to $92.4 million in the previous quarter, which included $2.0 million in restructuring costs. Non-interest expense in the second quarter of 2001 included restructuring and other related costs of $38.9 million. Adjusting for these items, non-interest expense declined $32.0 million or 26.2 percent from the same quarter last year and was unchanged from the previous quarter. The most significant reductions were in Salaries and Other Operating Expenses, which were down $10.8 million and $9.8 million, respectively, and were largely associated with the divested businesses. Other Operating Expenses were up compared to the previous quarter as the Company increased its investment in employee education and processes, primarily related to customer sales and service initiatives.
The efficiency ratio was 63.7 percent for the second quarter of 2002 compared to 62.1 percent in the previous quarter and 75.2 percent in the same quarter last year. For the first six months of 2002, the efficiency ratio improved to 62.9 percent from 66.7 percent in the same period last year.
The 35.6 percent effective tax rate for the first six months of 2002 is a decrease from the prior year as the effective tax rate in 2001 reflected the impact of divestitures and foreign taxes.
Asset Quality
Bank of Hawaii Corporation's credit quality continued to benefit from an improving Hawaii economy during the second quarter of 2002. Asset quality as measured by the Company's internal credit risk ratings improved during the quarter, including its exposure to air transportation and hotel companies.
Non-performing assets were $78.8 million at the end of the second quarter 2002, down 13.1 percent from $90.7 million at the end of the first quarter 2002. Compared to the same quarter last year, non-performing assets were down $40.1 million, or 33.7 percent. At June 30, 2002 the ratio of non-performing assets to total loans plus foreclosed assets was 1.45 percent, down from 1.61 percent at March 31, 2002 and 1.55 percent at June 30, 2001. The decrease in non-performing assets was largely due to sales of a nationally syndicated credit and one Hawaii loan held for sale as well as the return to accrual of two Hawaii based credits. These reductions were partially offset by the addition of two credits in the West Pacific region.
Non-accrual loans were $61.6 million at June 30, 2002 down from $63.7 million at March 31, 2002 due to the previously mentioned activity in non-performing assets. Non-accrual loans at June 30, 2002 were down $5.7 million, or 8.5 percent from June 30, 2001. Non-accrual loans as a percentage of total loans were 1.14 percent at June 30, 2002, unchanged from the previous quarter and up from 0.88 percent in the same period last year. The increase in the ratio from the prior year is mainly due to a $2.2 billion decrease in loans outstanding resulting from the divestiture of operations in the South Pacific, Asia and California in the prior year, and significant reductions in national syndications.
Net charge-offs for the second quarter of 2002 were $3.3 million or 0.24 percent of total average loans (annualized). Charge-offs of $7.5 million were partially offset by recoveries of $4.2 million. The allowance for loan and lease losses of $159.0 million at June 30, 2002 was unchanged from March 31, 2002 and down $40.8 million from June 30, 2001.
The ratio of the allowance for loan and lease losses to total loans was 2.94 percent at the end of the second quarter of 2002, up from 2.84 percent at the end of the first quarter of 2002 and up from 2.62 percent at the end of the same quarter last year. The ratio of the allowance for loan and lease losses to non-accrual loans was 258 percent, up slightly from 249 percent in the previous quarter and down from 297 percent last year.
Air transportation exposure totaled $154 million at June 30, 2002 and consisted of $136 million in equity interests in leveraged leases and $18 million in lending exposure, of which $7 million was undrawn. This exposure included $15 million to an air cargo carrier. All of the Company's air transportation exposures remain current.
Exposure to national hotel companies declined to $104 million at June 30, 2002 with undrawn commitments of $73 million. Exposure to Hawaii-based hotel companies totaled $137 million at June 30, 2002 including undrawn commitments of $32 million. In the West Pacific, loans outstanding to hotel companies totaled $43 million at the end of second quarter 2002. All of the Company's hotel exposures remain current.
Bank of Hawaii Corporation's commitments to telecommunications companies totaled $45 million at June 30, 2002. The Company's outstanding exposure was $8 million at the end of second quarter, including $6 million in performing loans and venture investments of $2 million.
Syndicated loans outstanding decreased to $348 million during the second quarter of 2002. Total syndicated exposure, consisting of loans and undrawn commitments, declined $256 million from the prior quarter to $1.1 billion at June 30, 2002.
Other Financial Highlights
Total assets were $9.8 billion at the end of June 30, 2002, down from $10.6 billion at December 31, 2001 and down from $12.8 billion at the end of June 30, 2001. The most significant reductions were in commercial loans and foreign loans resulting from the divestitures and strategic risk reductions in the portfolio. In addition, the Company significantly reduced its loans held for sale.
Deposits at June 30, 2002 were $6.5 billion, down slightly from $6.7 billion at December 31, 2001 and down $1.7 billion from the end of June 30, 2001. The decline from the previous year was primarily due to sales of the Pacific Century Bank branch franchise in California and South Pacific operations, as well as a managed reduction in foreign deposits resulting from the decision to exit Asia. The Company continues to manage down its higher cost funds, including time deposits, purchased funds, short-term borrowings and long-term debt.
During the second quarter of 2002, Bank of Hawaii Corporation repurchased 3.9 million shares of common stock at an average cost of $28.53, totaling $111.5 million. At June 30, 2002, the Company had repurchased a total of 12.9 million shares under its previously announced share repurchase programs. Through June 30, 2002 a total of $324.4 million has been returned to the shareholder at an average cost of $25.12 per share. Since June 30, 2002 another 1.0 million shares have been repurchased at an average cost of $27.33 per share. Remaining buyback authority under the existing repurchase programs was $218.1 million at July 19, 2002.
Capital and liquidity remain exceptionally strong at the Company. At June 30, 2002, the Tier 1 leverage ratio was 12.11 percent compared to 12.64 percent at March 31, 2002 and 10.47 percent at June 30, 2001.
Bank of Hawaii Corporation's Board of Directors declared a quarterly cash dividend of $0.18 per share on the Company's outstanding shares. The dividend will be payable on September 16, 2002 to shareholders of record at the close of business on August 23, 2002.
Key Systems Replacement Project
In an effort to reduce its operating costs over the long term, Bank of Hawaii Corporation also announced today that it has signed an agreement with Metavante Corporation, which will serve as the bank's primary technology systems provider. Metavante currently provides services to over 5,100 clients, including the largest 20 banks in the United States. Bank of Hawaii will convert its key systems, including loans and deposits, to Metavante's state-of-the-industry computer system. The new systems are intended to enhance customer service and convenience, as well as improve the Bank of Hawaii's efficiency. This seven-year outsourcing arrangement is similar to those used by other Hawaii banks and is expected to be operational in the third quarter of 2003.
In connection with this decision, the Company estimates that it will recognize mainframe system transition charges of approximately $35 million over the next five quarters. These estimated charges are comprised of $12 million in conversion and implementation costs, $11 million in accelerated depreciation on the existing systems and other equipment costs, $6 million in outplacement and severance, and $6 million in other costs. The rescale of the Company's key technology and operations services is anticipated to result over the next year in a reduction of approximately 250 employees. Beginning in the third quarter of 2003, the conversion should provide annual cost savings of over $17 million compared to current expense levels.
Economic Outlook
Hawaii's economy has recovered from the adverse impact of last year's terrorist attack. While May jobs remain down 0.5 percent from one year ago, annualized 2002 job growth of 5.0 percent through May points to a rapid employment recovery. Real estate and construction activity continues to lead the Hawaii economy, with volumes and valuations reaching new highs in some categories. Hawaii seasonally adjusted unemployment returned to 4.2 percent during May 2002, one-tenth of a point below third quarter 2001 and down from the November 2001 peak of 5.6 percent.
Domestic visitor arrivals during May 2002 were up 0.4 percent from one year ago and visitor days rose 3.1 percent, a record setting pace. International visitors, who normally represent approximately one-quarter of total visitors, remained down nearly 10 percent in recent months. Recent strengthening of yen-dollar exchange rates and other currency trends are boosting the foreign travel recovery, a shortfall already offset by the rebound in domestic travel.
Earnings Outlook
Bank of Hawaii Corporation continues its previous earnings guidance of $120 million in net income for the year 2002. Given the improvement in the Hawaii economy and recent encouraging trends in credit losses, the Company expects to reduce its allowance for loan losses. The amount and timing of the reduction will be based on evaluations of credit risk. However, based on current conditions, the Company does not expect to continue to record a provision for loan losses equal to the amount of loan losses.
The cost to convert its key systems will be incurred during the conversion period beginning next quarter and continuing through the third quarter of 2003. Under new accounting standards included in SFAS 146, severance costs will be recognized throughout the conversion period. The costs of abandoning software and hardware assets will be reflected as accelerated amortization and depreciation over the conversion period. Costs of conversion services and other related costs will be recognized as incurred. The Company will disclose system conversion costs on a separate line of the income statement in future periods.
For the third quarter of 2002, operating income is expected to approximate the levels of second quarter. Incremental system conversion costs, which will be separately identified, are estimated to be approximately $7.8 million for the third quarter. The amount of the provision for loan losses, if any, will depend on determinations of credit risk that will be made near the end of the quarter. Earnings per share and return on equity projections are dependent upon the terms and timing of share repurchases.
Conference Call Information
The Company will review its Second Quarter 2002 earnings today at 2:00 p.m. ET. 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) 997-8642 in the U.S. or (973) 694-2225 for international callers. A replay of the call will be available for one week beginning at 6:00 p.m. ET on Monday, July 22, 2002 by calling (800) 428-6051 in the U.S. or (973) 709-2089 for international callers and entering the number 248890 when prompted. A replay of the presentation will be also available on 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 leading commercial bank in the state of Hawaii.
This news release contains forward-looking statements concerning anticipated revenues and expenses in 2002 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: the Hawaii economy may not continue at the pace we anticipate; our refocused emphasis on our Hawaii market may not achieve the customer and revenue gains we anticipate; our credit markets may deteriorate and our credit quality may fall short of our goals; we may not achieve the expense reductions we expect; we may not be able to maintain our net interest margin; we may not be able to implement our proposed equity repurchases in the amount or at the times planned; the economics or timing, or both, of our technology outsourcing project may not result in the expected benefits; unanticipated difficulties or delays in the conversion of our data processing to outsourcing may result in the reduction or delay of anticipated cost savings or increased cost of conversion; the technology outsourcing project may not be able to achieve the projected reductions in staffing; we may encounter unanticipated difficulties or costs in exiting existing data processing agreements with third parties; the required level of reserves for loan and lease losses may increase or decrease due to changes in our credit quality or risk profile; there may be economic volatility in the markets we serve; and there may be changes in business and economic conditions, competition, fiscal and monetary policies or legislation. We do not undertake any obligation to update any 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)
Quarter Ended Six Months Ended
Earnings Highlights and June 30, June 30, June 30, June 30,
Performance Ratios 2002 2001 2002 2001
-------------------------------------------------- -------------------
Net Income $ 31,016 $ 26,739 $ 62,072 $ 60,416
Basic Earnings Per Share 0.43 0.33 0.85 0.75
Diluted Earnings Per Share 0.42 0.32 0.83 0.74
Cash Dividends 13,068 14,427 26,245 28,790
Return on Average Assets 1.23% 0.83% 1.22% 0.91%
Return on Average Equity 9.94% 7.69% 9.96% 9.00%
Net Interest Margin 3.97% 3.91% 3.95% 3.94%
Efficiency Ratio 63.71% 75.15% 62.86% 66.69%
Statement of Condition Highlights June 30, June 30,
and Performance Ratios 2002 2001
----------------------------------- --------------------------
Total Assets $ 9,823,348 $ 12,755,507
Net Loans 5,249,498 7,418,006
Total Deposits 6,455,268 8,108,468
Total Shareholders' Equity 1,191,072 1,395,731
Book Value Per Common Share $ 17.05 $ 17.24
Allowance / Loans Outstanding 2.94% 2.62%
Average Equity / Average Assets 12.27% 10.08%
Employees (FTE) 2,983 4,197
Branches and offices 97 163
Market Price Per Share of Common
Stock for the Quarter Ended:
Closing $28.00 $25.79
High $29.86 $25.80
Low $25.45 $19.38
Bank of Hawaii Corporation and subsidiaries
Consolidated Statements of Income (Unaudited) Table 2
----------------------------------------------------------------------
Three Months Ended Six Months Ended
(dollars in thousands June 30 June 30
except per share amounts) 2002 2001 2002 2001
----------------------------------------------------------------------
Interest Income
Interest and Fees on
Loan and Leases $ 92,441 $ 163,622 $ 191,086 $ 352,527
Income on Investment
Securities - Held to
Maturity 4,894 9,097 10,092 19,114
Income on Investment
Securities - Available
for Sale 26,455 36,750 53,595 76,591
Deposits 6,011 4,941 11,058 10,325
Funds Sold and Security
Resale Agreements 752 1,352 1,755 2,450
Other 1,395 1,347 2,727 2,564
----------------------------------------------------------------------
Total Interest Income 131,948 217,109 270,313 463,571
Interest Expense
Deposits 22,166 60,021 46,144 132,002
Security Repurchase
Agreements 8,256 20,843 18,549 45,473
Funds Purchased 245 2,334 476 8,456
Short-Term Borrowings 289 2,763 938 5,993
Long-Term Debt 8,055 14,459 16,374 29,773
----------------------------------------------------------------------
Total Interest Expense 39,011 100,420 82,481 221,697
----------------------------------------------------------------------
Net Interest Income 92,937 116,689 187,832 241,874
Provision for Loan and
Lease Losses 3,324 6,413 11,616 58,878
----------------------------------------------------------------------
Net Interest Income
After Provision for
Loan and Lease Losses 89,613 110,276 176,216 182,996
Non-Interest Income
Trust and Asset
Management 14,175 15,247 28,993 31,042
Mortgage Banking 3,080 4,673 11,263 9,781
Service Charges on
Deposit Accounts 7,956 9,878 16,366 19,817
Fees, Exchange, and
Other Service Charges 13,065 19,784 25,517 43,250
Gain on Sales of Banking
Operations, Net of
Venture Investment
Losses - 24,794 - 96,908
Investment Securities
Gains 3 11,776 3 31,979
Other 10,643 11,823 20,794 25,659
----------------------------------------------------------------------
Total Non-Interest
Income 48,922 97,975 102,936 258,436
Non-Interest Expense
Salaries 38,650 49,469 78,600 99,451
Pensions and Other
Employee Benefits 9,391 11,506 19,387 24,424
Net Occupancy Expense 9,321 11,898 18,914 24,025
Net Equipment Expense 9,997 13,103 20,118 26,486
Goodwill Amortization - 3,634 - 7,583
Restructuring and Other
Related Costs - 38,904 1,979 83,343
Other 23,015 32,807 43,788 68,329
----------------------------------------------------------------------
Total Non-Interest
Expense 90,374 161,321 182,786 333,641
----------------------------------------------------------------------
Income Before Income Taxes 48,161 46,930 96,366 107,791
Provision for Income Taxes 17,145 20,191 34,294 47,375
----------------------------------------------------------------------
Net Income $ 31,016 $ 26,739 $ 62,072 $ 60,416
======================================================================
Basic Earnings Per Share $0.43 $0.33 $0.85 $0.75
Diluted Earnings Per Share $0.42 $0.32 $0.83 $0.74
Dividends Declared Per Share $0.18 $0.18 $0.36 $0.36
Basic Weighted Average
Shares 72,299,850 80,516,216 72,803,414 80,120,449
Diluted Weighted Average
Shares 74,486,987 82,975,267 74,815,508 82,030,085
======================================================================
Bank of Hawaii Corporation and subsidiaries
Consolidated Statements of Condition (Unaudited) Table 3
----------------------------------------------------------------------
June 30 December 31 June 30
(dollars in thousands) 2002 2001 2001
----------------------------------------------------------------------
Assets
Interest-Bearing Deposits $ 1,346,014 $ 1,101,974 $ 458,696
Investment Securities - Held to
Maturity
(Market Value of $323,722,
$407,838, and $542,795,
respectively) 312,467 396,216 530,815
Investment Securities -
Available for Sale 1,806,384 2,001,420 2,200,965
Securities Purchased Under
Agreements to Resell - - 7,688
Funds Sold 125,000 115,000 318,182
Loans Held for Sale 48,416 456,709 571,395
Loans 5,408,477 5,652,518 7,617,806
Allowance for Loan and Lease
Losses (158,979) (158,979) (199,800)
----------------------------------------------------------------------
Net Loans 5,249,498 5,493,539 7,418,006
----------------------------------------------------------------------
Total Earning Assets 8,887,779 9,564,858 11,505,747
Cash and Non-Interest Bearing
Deposits 314,541 405,981 391,552
Premises and Equipment 188,128 196,171 242,040
Customers' Acceptance Liability 1,657 593 4,184
Accrued Interest Receivable 38,425 42,687 61,702
Foreclosed Real Estate 17,223 17,174 40,078
Mortgage Service Rights 30,244 27,291 19,282
Goodwill 36,216 36,216 138,233
Other Assets 309,135 336,826 352,689
----------------------------------------------------------------------
Total Assets $ 9,823,348 $ 10,627,797 $ 12,755,507
======================================================================
Liabilities
Domestic Deposits
Demand - Non-Interest Bearing $ 1,465,378 $ 1,548,322 $ 1,591,824
- Interest Bearing 2,002,926 1,926,018 1,914,474
Savings 1,276,016 967,825 758,262
Time 1,652,805 1,927,778 2,602,035
Foreign Deposits
Demand-Non-Interest Bearing - 2 319,165
Time Due to Banks 16,777 230,247 53,968
Other Savings and Time 41,366 73,404 868,740
----------------------------------------------------------------------
Total Deposits 6,455,268 6,673,596 8,108,468
Securities Sold Under Agreements
to Repurchase 1,257,808 1,643,444 1,632,774
Funds Purchased 60,243 55,800 176,768
Current Maturities of Long-Term
Debt 50,000 100,670 316,670
Short-Term Borrowings 29,910 134,222 227,280
Banker's Acceptances Outstanding 1,657 593 4,184
Retirement Expense Payable 37,642 36,175 36,010
Accrued Interest Payable 23,427 29,762 59,558
Taxes Payable 181,826 138,366 170,811
Other Liabilities 80,154 98,422 97,571
Long-Term Debt 454,341 469,735 529,682
----------------------------------------------------------------------
Total Liabilities 8,632,276 9,380,785 11,359,776
Shareholders' Equity
Common Stock ($.01 par value),
authorized 500,000,000 shares;
issued / outstanding: June
2002 - 81,329,346 / 69,856,075
Dec. 2001 - 81,377,241 /
73,218,326; June 2001 -
81,368,629 / 80,948,825 806 806 806
Capital Surplus 370,947 367,672 367,390
Accumulated Other Comprehensive
Income 29,931 22,761 25,033
Retained Earnings 1,082,421 1,055,424 1,028,036
Deferred Stock Grants (4,182) (7,637) (17,038)
Treasury Stock, at Cost (Shares:
June 2002 - 11,473,271;
December 2001 - 8,158,915;
June 2001 - 419,804) (288,851) (192,014) (8,496)
----------------------------------------------------------------------
Total Shareholders' Equity 1,191,072 1,247,012 1,395,731
----------------------------------------------------------------------
Total Liabilities and
Shareholders' Equity $ 9,823,348 $ 10,627,797 $ 12,755,507
======================================================================
Bank of Hawaii Corporation and subsidiaries
Consolidated Statements of Shareholders' Equity (Unaudited) Table 4
----------------------------------------------------------------------
Accum.
Other
Compre-
Common Capital hensive
(dollars in thousands) Total Stock Surplus Income
----------------------------------------------------------------------
For the Six Months
Ended June 30, 2002
--------------------------------------------
Balance at December 31, 2001 $ 1,247,012 $ 806 $ 367,672 $ 22,761
Comprehensive Income
Net Income 62,072 - - -
Other Comprehensive Income,
Net of Tax
Investment Securities 7,547 - - 7,547
Foreign Currency
Translation Adjustment (377) - - (377)
Total Comprehensive Income
Common Stock Issued
22,894 Profit Sharing Plan 632 - 119 -
1,222,308 Stock Option Plan 25,142 - 3,727 -
53,227 Dividend Reinvestment
Plan 1,464 - 264 -
3,605 Directors' Restricted
Shares and Deferred
Compensation Plan 50 - 103 -
(51,500) Employees' Restricted
Shares 2,469 - (938) -
Treasury Stock Purchased
(4,610,800 shares) (128,694) - - -
Cash Dividends Paid (26,245) - - -
----------------------------------------------------------------------
Balance at June 30, 2002 $ 1,191,072 $ 806 $ 370,947 $ 29,931
======================================================================
Bank of Hawaii Corporation and subsidiaries
Consolidated Statements of Shareholders' Equity (Unaudited)
Deferred Compre-
Retained Stock Treasury hensive
(dollars in thousands) Earnings Grants Stock Income
----------------------------------------------------------------------
For the Six Months
Ended June 30, 2002
---------------------
Balance at December
31, 2001 $ 1,055,424 $ (7,637)$ (192,014)
Comprehensive Income
Net Income 62,072 - - $62,072
Other Comprehensive
Income, Net of Tax
Investment Securities - - - 7,547
Foreign Currency
Translation Adjustment - - - (377)
---------
Total Comprehensive
Income $69,242
=========
Common Stock Issued
22,894 Profit Sharing Plan - - 513
1,222,308 Stock Option Plan (8,828) 48 30,195
53,227 Dividend Reinvestment
Plan (2) - 1,202
3,605 Directors' Restricted
Shares and Deferred
Compensation Plan - - (53)
(51,500) Employees' Restricted
Shares - 3,407
Treasury Stock Purchased
(4,610,800 shares) - - (128,694)
Cash Dividends Paid (26,245) - -
-------------------------------------------------------------
Balance at June 30, 2002 $ 1,082,421 $ (4,182)$ (288,851)
=============================================================
Bank of Hawaii Corporation and subsidiaries
Consolidated Statements of Shareholders' Equity (Unaudited)
Accum.
Other
Compre-
Common Capital hensive
(dollars in thousands) Total Stock Surplus Income
----------------------------------------------------------------------
For the Six Months
Ended June 30, 2001
-------------------------------
Balance at December 31, 2000 $ 1,301,356 $ 806 $ 346,045 $ (25,079)
Comprehensive Income
Net Income 60,416 - - -
Other Comprehensive Income,
Net of Tax
Investment Securities 22,775 - - 22,775
Foreign Currency
Translation Adjustment 27,496 - - 27,496
Pension Liability Adjustments (159) - - (159)
Total Comprehensive Income
Common Stock Issued
32,942 Profit Sharing Plan 725 - 180 -
416,413 Stock Option Plan 7,926 - 643 -
64,791 Dividend Reinvestment Plan 1,419 - 326 -
3,672 Directors' Restricted Shares
and Deferred Compensation
Plan 343 - 81 -
741,000 Employees' Restricted Shares 925 - 18,816 -
65,146 Hawaii Insurance Network 1,299 - 1,299 -
Cash Dividends Paid (28,790) - - -
----------------------------------------------------------------------
Balance at June 30, 2001 $ 1,395,731 $ 806 $ 367,390 $ 25,033
======================================================================
Bank of Hawaii Corporation and subsidiaries
Consolidated Statements of Shareholders' Equity (Unaudited)
Deferred Compre-
Retained Stock Treasury hensive
(dollars in thousands) Earnings Grants Stock Income
----------------------------------------------------------------------
For the Six Months
Ended June 30, 2001
---------------------
Balance at December
31, 2000 $ 996,791 $ - $ (17,207)
Comprehensive Income
Net Income 60,416 - - $60,416
Other Comprehensive Income,
Net of Tax
Investment Securities - - - 22,775
Foreign Currency Translation
Adjustment - - - 27,496
Pension Liability Adjustments - - - (159)
---------
Total Comprehensive Income $110,528
=========
Common Stock Issued
32,942 Profit Sharing Plan - - 545
416,413 Stock Option Plan (381) 853 6,811
64,791 Dividend Reinvestment Plan - - 1,093
3,672 Directors' Restricted Shares
and Deferred Compensation
Plan - - 262
741,000 Employees' Restricted
Shares - (17,891) -
65,146 Hawaii Insurance Network - - -
Cash Dividends Paid (28,790) - -
-------------------------------------------------------------
Balance at June 30,
2001 $ 1,028,036 $ (17,038) $ (8,496)
=============================================================
Bank of Hawaii Corporation and subsidiaries
Consolidated Average Balances and Interest Rates -
Taxable Equivalent Basis (Unaudited) Table 5
----------------------------------------------------------------------
Three Months Ended Three Months Ended
June 30, 2002 March 31, 2002
Average Income/ Yield/ Average Income/ Yield/
(dollars in millions) Balance Expense Rate Balance Expense Rate
----------------------------------------------------------------------
Earning Assets
Interest Bearing
Deposits $ 1,310.0 $ 6.0 1.84% $ 1,154.7 $ 5.1 1.77%
Funds Sold 173.3 0.8 1.74 237.3 1.0 1.69
Investment Portfolio
- Held-To-Maturity 328.6 5.0 6.06 368.5 5.3 5.72
- Available for Sale 1,890.3 26.5 5.60 1,939.3 27.1 5.60
Loans Held For Sale 65.2 1.1 6.88 340.9 5.7 6.75
Net Loans and Lease
Financing
Domestic
- Commercial and
Industrial 1,061.1 13.5 5.12 1,150.8 14.5 5.11
- Construction 157.5 2.3 5.72 169.8 2.2 5.20
- Mortgage 2,985.4 52.3 7.01 3,017.9 53.2 7.07
- Installment 783.2 16.6 8.50 738.5 16.4 8.99
- Lease Financing 502.1 6.6 5.25 492.0 6.6 5.46
------------------------------------------------
Total Domestic Loans 5,489.3 91.3 6.66 5,569.0 92.9 6.72
Foreign 14.1 - - 14.3 - -
------------------------------------------------
Total Loans 5,503.4 91.3 6.65 5,583.3 92.9 6.71
Other 99.2 1.3 5.64 88.4 1.3 6.12
------------------------------------------------
Total Earning Assets 9,370.0 132.0 5.64 9,712.4 138.4 5.74
Cash and Due From
Banks 341.8 301.9
Other Assets 367.1 400.5
----------- -----------
Total Assets $ 10,078.9 $ 10,414.8
=========== ===========
Interest Bearing
Liabilities
Domestic Deposits
- Demand $ 1,974.6 4.4 0.88 $ 1,935.0 4.3 0.92
- Savings 1,164.0 4.5 1.57 1,037.0 3.9 1.52
- Time 1,732.0 12.9 2.98 1,909.4 14.8 3.13
------------------------------------------------
Total Domestic
Deposits 4,870.6 21.8 1.79 4,881.4 23.0 1.91
Foreign Deposits
- Time Due to Banks 37.3 0.1 1.47 80.2 0.6 3.10
- Other Time and
Savings 59.1 0.3 1.67 104.0 0.4 1.37
------------------------------------------------
Total Foreign
Deposits 96.4 0.4 1.59 184.2 1.0 2.12
------------------------------------------------
Total Interest
Bearing Deposits 4,967.0 22.2 1.79 5,065.6 24.0 1.92
Short-Term Borrowings 1,475.9 8.8 2.39 1,738.7 11.2 2.61
Long-Term Debt 507.1 8.0 6.37 538.2 8.3 6.27
------------------------------------------------
Total Interest
Bearing Liabilities 6,950.0 39.0 2.25 7,342.5 43.5 2.40
------------------------------------------------
Net Interest Income 93.0 94.9
Interest Rate Spread 3.39% 3.34%
Net Interest Margin 3.97% 3.93%
Non-Interest Bearing
Demand Deposits
- Demand 1,565.6 1,506.9
- Foreign - -
----------- -----------
Total Non-Int Bearing
Demand Deposits 1,565.6 1,506.9
Other Liabilities 312.3 301.9
Shareholders' Equity 1,251.0 1,263.5
----------- -----------
Total Liabilities and
Shareholders' Equity $ 10,078.9 $ 10,414.8
=========== ===========
Provision for Loan
Losses 3.3 8.2
Net Overhead 41.5 38.4
------- -------
Income Before Income
Taxes 48.2 48.3
Provision for Income
Taxes 17.1 17.1
Tax-Equivalent
Adjustment 0.1 0.1
------- -------
Net Income $ 31.0 $ 31.1
======= =======
Bank of Hawaii Corporation and subsidiaries
Consolidated Average Balances and Interest Rates -
Taxable Equivalent Basis (Unaudited)
----------------------------------------------------------------------
Three Months Ended(1) Six Months Ended
June 30, 2001 June 30, 2002
Average Income/ Yield/ Average Income/ Yield/
(dollars in millions) Balance Expense Rate Balance Expense Rate
----------------------------------------------------------------------
Earning Assets
Interest Bearing
Deposits $ 414.3 $ 4.9 4.78% $ 1,232.8 $ 11.1 1.81%
Funds Sold 120.3 1.4 4.51 205.1 1.8 1.71
Investment Portfolio
- Held-To-Maturity 565.0 9.2 6.51 348.6 10.2 5.88
- Available for Sale 2,318.3 36.8 6.36 1,914.5 53.6 5.60
Loans Held For Sale 430.9 7.4 6.88 202.3 6.8 6.72
Net Loans and Lease
Financing
Domestic
- Commercial and
Industrial 1,865.5 34.4 7.39 1,105.7 28.0 5.12
- Construction 252.5 5.1 8.11 163.6 4.4 5.45
- Mortgage 3,481.1 68.1 7.85 3,001.5 105.6 7.04
- Installment 766.5 20.9 10.91 761.0 33.0 8.74
- Lease Financing 545.3 8.5 6.22 497.1 13.2 5.35
------------------------------------------------
Total Domestic Loans 6,910.9 137.0 7.95 5,528.9 184.2 6.69
Foreign 1,136.9 19.2 6.80 14.3 0.1 1.66
------------------------------------------------
Total Loans 8,047.8 156.2 7.79 5,543.2 184.3 6.68
Other 77.1 1.3 7.00 93.8 2.7 5.86
------------------------------------------------
Total Earning Assets 11,973.7 217.2 7.28 9,540.3 270.5 5.69
Cash and Due From
Banks 367.6 322.0
Other Assets 655.1 383.6
----------- -----------
Total Assets $ 12,996.4 $ 10,245.9
=========== ===========
Interest Bearing
Liabilities
Domestic Deposits
- Demand $ 1,905.0 9.3 1.95 $ 1,954.9 8.7 0.90
- Savings 698.8 3.7 2.14 1,100.8 8.4 1.54
- Time 2,654.1 37.3 5.63 1,811.1 27.7 3.08
------------------------------------------------
Total Domestic
Deposits 5,257.9 50.3 3.83 4,866.8 44.8 1.86
Foreign Deposits
- Time Due to Banks 317.4 3.5 4.45 77.8 0.7 1.94
- Other Time and
Savings 709.3 6.3 3.55 71.4 0.6 1.68
------------------------------------------------
Total Foreign
Deposits 1,026.7 9.8 3.83 149.2 1.3 1.82
------------------------------------------------
Total Interest
Bearing Deposits 6,284.6 60.1 3.83 5,016.0 46.1 1.86
Short-Term Borrowings 2,108.2 25.9 4.94 1,606.6 20.0 2.51
Long-Term Debt 864.5 14.5 6.71 522.6 16.4 6.32
------------------------------------------------
Total Interest
Bearing Liabilities 9,257.3 100.5 4.35 7,145.2 82.5 2.33
------------------------------------------------
Net Interest Income 116.7 188.0
Interest Rate Spread 2.93% 3.36%
Net Interest Margin 3.91% 3.95%
Non-Interest Bearing
Demand Deposits
- Demand 1,567.8 1,536.4
- Foreign 348.4 -
----------- -----------
Total Non-Int Bearing
Demand Deposits 1,916.2 1,536.4
Other Liabilities 428.5 307.1
Shareholders' Equity 1,394.4 1,257.2
----------- -----------
Total Liabilities and
Shareholders' Equity $ 12,996.4 $ 10,245.9
=========== ===========
Provision for Loan
Losses 6.4 11.6
Net Overhead 63.3 79.9
------- -------
Income Before Income
Taxes 47.0 96.5
Provision for Income
Taxes 20.2 34.3
Tax-Equivalent
Adjustment 0.1 0.1
------- -------
Net Income $ 26.7 $ 62.1
======= =======
(1) Adjusted to reflect the reclassification of other interest
income and certain average balances.
======================================================================
Bank of Hawaii Corporation and subsidiaries
Loan Portfolio Balances (Unaudited) Table 6
----------------------------------------------------------------------
June 30 March 31 Dec. 31 June 30
(dollars in millions) 2002 2002 2001 2001
----------------------------------------------------------------------
Domestic Loans
Commercial $ 999.6 $ 1,120.5 $ 1,175.5 $ 1,778.0
Real Estate
Construction 148.6 161.4 169.6 246.0
Mortgage -- Commercial 562.5 617.6 640.7 866.3
-- Residential 2,360.5 2,409.1 2,419.4 2,481.4
Installment 807.4 759.3 729.7 762.3
Lease Financing 500.9 504.7 493.4 550.3
----------------------------------------------------------------------
Total Domestic 5,379.5 5,572.6 5,628.3 6,684.3
----------------------------------------------------------------------
Foreign Loans 29.0 28.7 24.2 933.5
----------------------------------------------------------------------
Total Loans $ 5,408.5 $ 5,601.3 $ 5,652.5 $ 7,617.8
======================================================================
Bank of Hawaii Corporation and subsidiaries Table 7
Consolidated Non-Performing Assets and Accruing Loans
Past Due 90 Days or More (Unaudited)
----------------------------------------------------------------------
June 30 March 31 Dec.31 Sept 30 June 30
(dollars in millions) 2002 2002 2001 2001 2001
----------------------------------------------------------------------
Non-Accrual Loans
Commercial $ 22.3 $ 27.4 $ 18.9 $ 10.5 $ 11.8
Real Estate
Construction 0.7 1.0 9.3 0.7 5.8
Mortgage - Commercial 17.4 15.1 16.3 12.8 14.4
- Residential 14.3 15.7 15.4 19.5 16.2
Installment - 0.1 0.1 0.1 0.2
Lease Financing 6.9 4.4 0.8 1.0 0.4
Foreign - - - 17.2 18.5
------------------------------------------------
Total Non-Accrual
Loans 61.6 63.7 60.8 61.8 67.3
Non-Accrual Loans Held
For Sale - 7.8 1.7 7.4 11.5
Foreclosed Real Estate
Domestic 17.2 19.2 17.2 36.9 39.8
Foreign - - - 0.3 0.3
------------------------------------------------
Total Foreclosed
Real Estate 17.2 19.2 17.2 37.2 40.1
------------------------------------------------
Total Non-Performing
Assets $ 78.8 $ 90.7 $ 79.7 $ 106.4 $ 118.9
================================================
Accruing Loans Past Due
90 Days or More
Commercial $ - $ 0.2 $ 0.1 $ 0.1 $ 0.2
Real Estate
Mortgage - Commercial - 1.2 - - -
- Residential 0.9 2.1 3.8 3.4 3.7
Installment 0.5 0.7 0.9 1.0 1.8
Lease Financing 0.1 0.1 0.1 - 0.1
Foreign - - - 0.8 0.4
----------------------------------------------
Total Accruing and
Past Due $ 1.5 $ 4.3 $ 4.9 $ 5.3 $ 6.2
==============================================
Total Loans $ 5,408.5 $ 5,601.3 $ 5,652.5 $ 6,766.6 $ 7,617.8
==============================================
----------------------------------------------------------------------
Ratio of Non-Accrual
Loans to Total Loans 1.14% 1.14% 1.08% 0.91% 0.88%
----------------------------------------------------------------------
Ratio of Non-Performing
Assets to Total Loans,
Foreclosed Real Estate
and Non-Performing
Loans Held for Sale 1.45% 1.61% 1.41% 1.56% 1.55%
----------------------------------------------------------------------
Ratio of Non-Performing
Assets and Accruing Loans
Past Due 90 Days or
More to Total Loans 1.48% 1.70% 1.50% 1.65% 1.64%
----------------------------------------------------------------------
Quarter to Quarter
Changes in Non-Performing
Assets
Balance at Beginning of
Quarter $ 90.7 $ 79.7 $ 106.4 $ 118.9 $ 119.5
Additions 20.5 36.4 43.8 23.2 23.8
Reductions
Payments and Sales
of Loans (20.6) (12.9) (40.9) (25.8) (14.4)
Return to Accrual (6.2) (6.3) (3.6) (0.9) (2.5)
Sales of
Foreclosed Assets (3.5) (0.9) (21.9) (2.2) (1.6)
Charge-offs (2.1) (5.3) (4.1) (6.8) (5.9)
----------------------------------------------
Total Reductions (32.4) (25.4) (70.5) (35.7) (24.4)
----------------------------------------------
Balance at End of
Quarter $ 78.8 $ 90.7 $ 79.7 $ 106.4 $ 118.9
==============================================
Bank of Hawaii Corporation and subsidiaries
Consolidated Allowance for Loan and Lease Losses (Unaudited) Table 8
----------------------------------------------------------------------
Second First Second
Quarter Quarter Quarter
(dollars in millions) 2002 2002 2001
----------------------------------------------------------------------
Balance of Allowance for
Loan and Lease Losses
Beginning of Period $ 159.0 $ 159.0 $ 199.8
Loans Charged-Off
Commercial (2.4) (7.3) (8.9)
Real Estate:
Construction - (0.5) -
Mortgage - Commercial (0.4) - (1.6)
- Residential (1.3) (1.4) (1.7)
Installment (2.9) (3.9) (4.2)
Foreign - - (3.9)
Lease Financing (0.5) - -
---------------------------------
Total Charge-Offs (7.5) (13.1) (20.3)
Recoveries on Loans
Previously Charged-Off
Commercial 2.3 0.7 4.3
Real Estate:
Mortgage - Commercial 0.1 1.8 0.8
- Residential 0.3 0.3 0.3
Installment 1.6 1.9 1.6
Foreign (0.1) 0.1 6.3
Lease Financing - - 0.1
--------------------------------
Total Recoveries 4.2 4.8 13.4
--------------------------------
Net Loan Charge-Offs (3.3) (8.3) (6.9)
Provision for Loan and Lease Losses 3.3 8.3 6.4
Foreign Currency Translation - - 0.5
--------------------------------
Balance at End of Period $ 159.0 $ 159.0 $ 199.8
================================
Average Loans Outstanding $ 5,503.4 $ 5,583.3 $ 8,047.8
Ratio of Net Charge-Offs to
Average Loans
Outstanding (annualized) 0.24% 0.60% 0.34%
Ratio of Allowance to
Loans and Leases
Outstanding 2.94% 2.84% 2.62%
Bank of Hawaii Corporation and subsidiaries
Consolidated Allowance for Loan and Lease Losses
(Unaudited)
----------------------------------------------------------------------
First Six Months
(dollars in millions) 2002 2001
----------------------------------------------------------------------
Balance of Allowance for
Loan and Lease Losses
Beginning of Period $ 159.0 $ 246.2
Loans Charged-Off
Commercial (9.7) (84.4)
Real Estate:
Construction (0.5) -
Mortgage - Commercial (0.4) (13.5)
- Residential (2.7) (4.2)
Installment (6.8) (9.6)
Foreign - (13.9)
Lease Financing (0.5) (0.1)
--------------------
Total Charge-Offs (20.6) (125.7)
Recoveries on Loans Previously Charged-Off
Commercial 3.0 7.0
Real Estate:
Mortgage - Commercial 1.9 1.1
- Residential 0.6 0.5
Installment 3.5 3.4
Foreign - 8.9
Lease Financing - 0.2
--------------------
Total Recoveries 9.0 21.1
--------------------
Net Loan Charge-Offs (11.6) (104.6)
Provision for Loan and Lease Losses 11.6 58.9
Foreign Currency Translation - (0.7)
--------------------
Balance at End of Period $ 159.0 $ 199.8
====================
Average Loans Outstanding $ 5,543.2 $ 8,551.9
Ratio of Net Charge-Offs to Average Loans
Outstanding (annualized) 0.42% 2.47%
Ratio of Allowance to Loans and
Leases Outstanding 2.94% 2.62%
======================================================================
Bank of Hawaii Corporation and subsidiaries
Quarterly Summary of Selected Consolidated
Financial Data (Unaudited) Table 9
----------------------------------------------------------------------
(dollars in millions except per share June 30 March 31 Dec. 31
amounts) 2002 2002 2001
----------------------------------------------------------------------
Balance Sheet Totals
Total Assets $ 9,823.3 $ 10,244.8 $ 10,627.8
Net Loans 5,249.5 5,442.4 5,493.5
Deposits 6,455.3 6,543.5 6,673.6
Shareholders' Equity 1,191.1 1,265.9 1,247.0
Quarterly Operating Results
Net Interest Income $ 92.9 $ 94.9 $ 106.1
Provision for Loan and Lease Losses 3.3 8.3 14.5
Non-Interest Income 48.9 54.0 51.2
Gain on Sales of Banking Operations,
Net of Venture Investment Losses - - 28.7
Non-Interest Expense 90.4 90.4 122.3
Restructuring and Other Related Costs - 2.0 18.5
Net Income 31.0 31.1 26.3
Basic Earnings Per Share $ 0.43 $ 0.42 $ 0.35
Diluted Earnings Per Share $ 0.42 $ 0.41 $ 0.34
Return on Average Assets 1.23% 1.21% 0.90%
Return on Average Equity 9.94% 9.97% 8.14%
Efficiency Ratio 63.71% 62.06% 75.73%
Continuing Business Operating Results (1)
Net Interest Income $ 92.9 $ 94.9 $ 93.8
Provision for Loan and Lease Losses 3.3 8.3 16.6
Non-Interest Income 48.9 54.0 44.7
Non-Interest Expense (2) 90.4 90.4 100.2
Net Income (2) 31.0 32.3 21.3
Diluted Earnings Per Share (2) $ 0.42 $ 0.43 $ 0.28
Return on Average Equity (2) 9.94% 10.37% 6.59%
Efficiency Ratio (2) 63.71% 60.73% 72.36%
----------------------------------------------------------------------
Bank of Hawaii Corporation and subsidiaries
Quarterly Summary of Selected Consolidated
Financial Data (Unaudited)
(dollars in millions except per share Sept. 30 June 30 March 31
amounts) 2001 2001 2001
----------------------------------------------------------------------
Balance Sheet Totals
Total Assets $ 11,944.2 $ 12,755.5 $ 13,710.5
Net Loans 6,583.5 7,418.0 8,224.6
Deposits 7,399.7 8,108.5 8,815.4
Shareholders' Equity 1,371.1 1,395.7 1,371.9
Quarterly Operating Results
Net Interest Income $ 111.7 $ 116.7 $ 125.2
Provision for Loan and Lease Losses 0.9 6.4 52.5
Non-Interest Income 65.6 73.2 88.4
Gain on Sales of Banking Operations,
Net of Venture Investment Losses 47.8 24.8 72.1
Non-Interest Expense 119.6 122.4 127.9
Restructuring and Other Related Costs 3.0 38.9 44.4
Net Income 31.1 26.7 33.7
Basic Earnings Per Share $ 0.39 $ 0.33 $ 0.42
Diluted Earnings Per Share $ 0.37 $ 0.32 $ 0.42
Return on Average Assets 1.00% 0.83% 0.99%
Return on Average Equity 8.88% 7.69% 10.42%
Efficiency Ratio 54.46% 75.15% 60.33%
Continuing Business Operating
Results (1)
Net Interest Income $ 91.0 $ 87.8 $ 92.2
Provision for Loan and Lease Losses 6.4 2.6 12.1
Non-Interest Income 53.7 54.9 54.6
Non-Interest Expense (2) 88.3 89.3 86.4
Net Income (2) 31.4 32.6 28.3
Diluted Earnings Per Share (2) $ 0.38 $ 0.39 $ 0.35
Return on Average Equity (2) 8.96% 9.37% 8.76%
Efficiency Ratio (2) 61.03% 62.58% 58.88%
(1) Excludes divested businesses and restructuring and non-core
transactions. 2001 Quarterly information has been reclassified to
conform to December 31, 2001 presentation.
(2) Adjusted to exclude goodwill amortization expense in 2001.
CONTACT:
Bank of Hawaii
Stafford Kiguchi, 808/537-8580 (Media)
pager: 877/849-5423
E-mail: skiguchi@boh.com
or
Cindy Wyrick, 808/537-8430 (Investor/Analyst)
E-mail: cwyrick@boh.com