Bank of Hawaii Corporation Third Quarter 2003 Financial Results
HONOLULU--(BUSINESS WIRE)--Oct. 27, 2003--Bank of Hawaii Corporation (NYSE:BOH)
- Diluted Earnings Per Share Increases to $0.61
- Net Income Increases to $36.7 Million for the Quarter
- Board of Directors Increases Quarterly Dividend 58% to $0.30 Per Share
Bank of Hawaii Corporation (NYSE:BOH) today reported diluted earnings per share of $0.61 for the third quarter of 2003, up 27.1 percent from diluted earnings per share of $0.48 in the second quarter of 2003 and up 41.9 percent from $0.43 in the third quarter last year. Net income for the quarter was $36.7 million, up 22.2 percent from $30.0 million in the previous quarter and up 21.5 percent from $30.2 million in the same quarter last year.
The return on average assets for the third quarter of 2003 was 1.53 percent, up from 1.27 percent in the second quarter of 2003 and up from 1.22 percent in the third quarter of 2002. The return on average equity was 16.69 percent during the quarter, up 29.1 percent from 12.93 percent in the previous quarter and up 60.5 percent from 10.40 percent in the same quarter last year.
"I am pleased by the Company's third quarter financial results," said Michael E. O'Neill, Chairman, CEO and President. "Our credit quality measures continued to improve, our margin increased, total revenue was up and our expenses are coming down. The Hawaii economy is strengthening and, importantly, our businesses are growing. This gives us the confidence to increase our quarterly dividend from $0.19 per share to $0.30 per share."
For nine months ended September 30, 2003, net income was $96.5 million, up $4.2 million or 4.6 percent from net income of $92.3 million for the same period last year. Diluted earnings per share were $1.56 for the first nine months of 2003, up 23.8 percent from diluted earnings per share of $1.26 for the comparable period last year. The year-to-date return on average assets was 1.37 percent, up from 1.22 percent for the same nine months in 2002. The year-to-date return on average equity was 13.95 percent, up from 10.10 percent for the nine-month period ended September 30, 2002.
Financial Highlights
Net interest income for the third quarter of 2003 on a fully taxable equivalent basis was $91.1 million, up $0.6 million from the second quarter of 2003 and down $1.1 million from net interest income of $92.2 million in the third quarter of 2002. The decrease in net interest income from the previous year was largely due to reductions in interest rates. An analysis of the change in net interest income is included in Table 6.
The net interest margin was 4.15 percent for the third quarter of 2003, a 3 basis point increase from 4.12 percent in the previous quarter and a 12 basis point increase from 4.03 percent in the same quarter last year.
The Company did not recognize a provision for loan and lease losses during the third quarter of 2003 and has not recorded a provision for the last five quarters. The allowance for loan and lease losses was reduced $5.3 million from June 30, 2003, which equaled the amount of net charge-offs for the third quarter of 2003.
Non-interest income was $53.8 million for the quarter, an increase of $3.1 million or 6.0 percent compared to non-interest income of $50.7 million in the second quarter of 2003. This improvement was primarily due to a prepayment penalty on a commercial real estate loan and higher insurance income. Non-interest income was up $6.8 million, or 14.4 percent from non-interest income of $47.0 million in the third quarter of 2002. The improvement from the prior year quarter was largely due to higher levels of service charge and fee income, growth in insurance revenue and increased mortgage banking income.
Non-interest expense was $88.9 million in the third quarter of 2003, including $4.4 million in systems replacement costs. Non-interest expense for the second quarter of 2003 included $10.1 million in systems replacement costs. Excluding these costs, non-interest expense was $84.5 million in the third quarter of 2003, down $0.8 million compared to the previous quarter as reductions in salary and equipment expenses related to the systems replacement project were partially offset by a contribution to the Bank of Hawaii Charitable Foundation. Non-interest expense for the third quarter of 2002 included $6.6 million in systems replacement costs. Excluding these costs, non-interest expense decreased $0.6 million from the same quarter last year.
The efficiency ratio was 61.3 percent for the third quarter of 2003. Excluding systems replacement costs, the efficiency ratio was 58.3 percent, a significant improvement compared to 60.4 percent in the previous quarter and 61.2 percent in the same quarter last year. For the nine-month period ended September 30, 2003, the efficiency ratio, excluding systems replacement and net restructuring costs was 59.9 percent compared to 61.7 percent in the comparable period 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. Previously reported results have been reclassified to conform to current methodology for allocating interest income among the segments. Business segment performance details are summarized in Tables 11 and 11a.
Asset Quality
Bank of Hawaii Corporation's credit quality continued to improve during the third quarter of 2003. Non-performing assets were $40.1 million at the end of the quarter, a decrease of $1.9 million, or 4.5 percent, from non-performing assets of $42.0 million at the end of the previous quarter. Non-performing assets declined $23.2 million, or 36.7 percent compared to $63.3 million at the end of the third quarter last year. At September 30, 2003 the ratio of non-performing assets to total loans and foreclosed real estate was 0.72 percent compared with 0.77 percent at June 30, 2003 and 1.20 percent at September 30, 2002.
Non-accrual loans were $31.4 million at September 30, 2003, a reduction of $1.3 million, or 4.0 percent, from $32.7 million at June 30, 2003 and down $14.3 million, or 31.3 percent, from $45.7 million at September 30, 2002. Non-accrual loans as a percentage of total loans were 0.56 percent at September 30, 2003, down from 0.60 percent at the end of the previous quarter and down from 0.87 percent at the end of the comparable quarter last year.
Net charge-offs during the third quarter of 2003 were $5.3 million, or 0.38 percent (annualized) of total average loans, up from $2.1 million, or 0.15 percent (annualized) of total average loans in the second quarter of 2003. The increase in net charge-offs from the previous quarter was largely due to $3.6 million in net charge-offs, primarily consumer loans, remaining from the Pacific Island branches closed last year. Net charge-offs during the third quarter of 2002 were $4.5 million, or 0.33 percent (annualized) of total average loans. Net charge-offs for the first nine months of 2003 were $10.2 million, or 0.25 percent (annualized) of total average loans, a decrease from $16.1 million, or 0.39 percent (annualized) of total average loans in the comparable period last year.
The allowance for loan and lease losses was $132.7 million at September 30, 2003. The ratio of the allowance for loan and lease losses to total loans was 2.38 percent at September 30, 2003 down from 2.52 percent at June 30, 2003 and down from 2.94 percent at September 30, 2002.
Concentrations of credit exposure to selected components of the portfolio are summarized in Table 7.
Other Financial Highlights
Total assets were $9.4 billion at September 30, 2003, down slightly from total assets of $9.5 billion at December 31, 2002 and down from total assets of $9.7 billion at September 30, 2002. Total assets were down $180 million from June 30, 2003. The decrease from the prior periods was largely due to net loan growth that was offset by reductions in short-term investments as excess liquidity was utilized for share repurchases.
Total deposits at September 30, 2003 were $7.1 billion, up $182 million from December 31, 2002 and up $474 million from September 30, 2002 primarily due to continued growth in demand and savings deposits. Total deposits decreased slightly from June 30, 2003.
During the third quarter of 2003, Bank of Hawaii Corporation repurchased 3.1 million shares of common stock at a total cost of $103.5 million under the share repurchase program. The average cost per share was $33.85 during the quarter. From the beginning of the share repurchase program in July 2001 through September 30, 2003, the Company had repurchased a total of 28.2 million shares and returned a total of $790.8 million to the shareholders at an average cost of $28.02 per share. Through October 24, 2003, the Company repurchased an additional 0.2 million shares of common stock at a cost of $35.62 per share. Remaining buyback authority, which was increased in September 2003, was $202.7 million at October 24, 2003.
The Company's capital and liquidity remains exceptionally strong. At September 30, 2003 the Tier 1 leverage ratio was 8.52 percent compared to 9.29 percent at June 30, 2003 and 11.07 percent at September 30, 2002.
Dividend Increase
The Company's Board of Directors declared an increased quarterly cash dividend of $0.30 per share on the Company's outstanding shares. The dividend will be payable on December 12, 2003 to shareholders of record at the close of business on November 21, 2003.
Information Technology Systems Replacement Project
Bank of Hawaii Corporation completed the conversion of its core computer hardware and software systems to the Metavante platform on July 7, 2003 and has been successfully operating on Metavante since the conversion. In connection with this project, the Company incurred transition charges of $35.5 million over the five-quarter conversion period that ended during the third quarter of 2003 and all costs have been incurred as of September 30, 2003. Costs totaling $4.4 million were recognized during the third quarter of 2003. The lower cost platform is expected to provide annual cost savings of over $17 million compared to second quarter 2002 technology expense levels. Additional details on this project may be found in Table 10.
Economic Update
The Hawaii economy remained strong during the third quarter of 2003. The construction and real estate investment sectors continued to surge over the summer months, especially in the neighbor island residential markets. Tourism, as measured by passenger arrivals, also increased during the quarter. August 2003 was a record month for Hawaii tourism. Hawaii's seasonally-adjusted unemployment increased slightly to 4.3 percent in August, while nonagricultural payrolls rose more than 2 percent in August 2003 from the prior year level. For more economic information, visit the Company's web site http://www.boh.com/econ/.
Earnings Outlook
The Company now believes that its earnings for 2003 should exceed the previously published earnings guidance of $131 million. Based on current conditions, the Company does not expect to record a provision for loan and lease losses in 2003. However, the actual amount of the provision for loan and lease losses depends on determinations of credit risk that are made near the end of each quarter. Earnings per share and return on equity projections continue to be dependent upon the terms and timing of share repurchases.
Conference Call Information
The Company will review its third quarter 2003 financial results today at 8:00 a.m. Hawaii Time (1:00 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) 915-4836 in the United States or (973) 317-5319 for international callers. No confirmation code is required to access the call. A replay will be available for one week beginning at 10:00 a.m. Hawaii Time (3:00 p.m. Eastern Time) on Monday, October 27, 2003 by calling (800) 428-6051 in the United States or (973) 709-2089 for international callers and entering the number 273140 when prompted. A replay of the presentation will also be available via the Investor Relations link of the Company's web site.
Bank of Hawaii Corporation is a regional financial services company serving businesses, consumers and governments in Hawaii, American Samoa and the West Pacific. The Company's principal subsidiary, Bank of Hawaii, was founded in 1897 and is the largest independent financial institution in Hawaii. For more information about Bank of Hawaii Corporation, see the Company's web site, www.boh.com.
This news release contains forward-looking statements concerning, among other things, the economic environment in our service area, the expected level of loan loss provisioning, anticipated costs and annual savings of our information technology systems replacement project, and anticipated dividends, revenues and expenses during the remainder of 2003. We believe the assumptions underlying our forward-looking statements are reasonable. However, any of the assumptions could prove to be inaccurate and actual results may differ materially from those projected for a variety of reasons, including, but not limited to: 1) unanticipated changes in business and economic conditions, the competitive environment, fiscal and monetary policies, or legislation in Hawaii and the other markets we serve; 2) changes in our credit quality or risk profile which may increase or decrease the required level of allowance for loan and lease losses; 3) changes in market interest rates that may deteriorate our credit markets and ability to maintain our net interest margin; 4) changes to the amount and timing of our proposed equity repurchases; 5) inability to achieve expected benefits of our information technology systems replacement project and other business process changes due to adverse changes in implementation processes or costs, operational savings, or timing; 6) actions by the United States military and real or threatened terrorist activity affecting business conditions; and 7) adverse weather and other natural conditions impacting our and our customers' operations. We do not undertake any obligation to update 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) Three Months Ended Nine Months Ended Earnings Highlights and September 30, September 30, Performance Ratios 2003 2002(1) 2003 2002(1) ---------------------------------------------------------------------- Net Income $36,687 $30,200 $96,522 $92,272 Basic Earnings Per Share 0.64 0.44 1.63 1.30 Diluted Earnings Per Share 0.61 0.43 1.56 1.26 Cash Dividends 10,887 12,197 33,819 38,442 Return on Average Assets 1.53% 1.22% 1.37% 1.22% Return on Average Equity 16.69% 10.40% 13.95% 10.10% Net Interest Margin 4.15% 4.03% 4.19% 3.97% Efficiency Ratio 61.34% 65.90% 65.06% 63.68% Efficiency Ratio excluding ITSRP and Restructuring Costs 58.34% 61.18% 59.88% 61.68% ---------------------------------------------------------------------- Statement of Condition Highlights and September 30, Performance Ratios 2003 2002(1) -------------------------------------- ----------------------- Total Assets $9,370,755 $9,702,700 Net Loans 5,437,730 5,104,857 Total Deposits 7,102,116 6,627,673 Total Shareholders' Equity 823,760 1,100,706 Book Value Per Common Share $14.71 $16.67 Allowance / Loans Outstanding 2.38% 2.94% Average Equity / Average Assets 9.82% 12.10% Employees (FTE) 2,764 2,934 Branches and offices 89 97 Market Price Per Share of Common Stock for the Quarter Ended: Closing $33.58 $27.90 High $35.55 $30.00 Low $32.92 $22.79 (1) Certain 2002 information has been reclassified to conform to 2003 presentation. Bank of Hawaii Corporation and Subsidiaries Consolidated Statements of Income (Unaudited) Table 2 ---------------------------------------------------------------------- (dollars in thousands Three Months Ended Nine Months Ended except per share September 30, September 30, amounts) 2003 2002(1) 2003 2002(1) ---------------------------------------------------------------------- Interest Income Interest and Fees on Loans and Leases $82,715 $89,335 $254,442 $280,421 Income on Investment Securities - Held to Maturity 6,407 3,963 11,773 13,652 Income on Investment Securities - Available for Sale 16,483 26,175 58,761 80,173 Deposits 1,179 5,384 3,647 16,442 Funds Sold 248 914 1,834 2,669 Other 1,032 1,575 3,237 4,302 ---------------------------------------------------------------------- Total Interest Income 108,064 127,346 333,694 397,659 Interest Expense Deposits 10,284 20,547 38,040 66,691 Security Repurchase Agreements 1,947 7,039 6,580 25,588 Funds Purchased 271 299 695 775 Short-Term Borrowings 26 334 75 1,272 Long-Term Debt 4,431 6,946 15,714 23,320 ---------------------------------------------------------------------- Total Interest Expense 16,959 35,165 61,104 117,646 ---------------------------------------------------------------------- Net Interest Income 91,105 92,181 272,590 280,013 Provision for Loan and Lease Losses - - - 11,616 ---------------------------------------------------------------------- Net Interest Income After Provision for Loan and Lease Losses 91,105 92,181 272,590 268,397 Non-Interest Income Trust and Asset Management 12,511 13,655 38,237 42,648 Mortgage Banking 5,888 3,669 12,232 14,468 Service Charges on Deposit Accounts 8,901 7,925 26,496 24,291 Fees, Exchange, and Other Service Charges 16,034 13,114 42,496 38,631 Investment Securities Gains 639 - 1,809 3 Insurance 3,988 2,677 10,083 7,839 Other 5,830 5,997 17,930 20,100 ---------------------------------------------------------------------- Total Non-Interest Income 53,791 47,037 149,283 147,980 Non-Interest Expense Salaries 36,873 37,994 112,564 115,065 Pensions and Other Employee Benefits 8,858 7,377 27,307 26,764 Net Occupancy Expense 9,806 9,597 29,047 28,511 Net Equipment Expense 7,301 10,058 26,257 30,176 Restructuring and Other Related Costs - - - 1,979 Information Technology Systems Replacement Project 4,349 6,576 21,871 6,576 Other 21,690 20,141 57,425 63,465 ---------------------------------------------------------------------- Total Non-Interest Expense 88,877 91,743 274,471 272,536 ---------------------------------------------------------------------- Income Before Income Taxes 56,019 47,475 147,402 143,841 Provision for Income Taxes 19,332 17,275 50,880 51,569 ---------------------------------------------------------------------- Net Income $36,687 $30,200 $96,522 $92,272 ====================================================================== Basic Earnings Per Share $0.64 $0.44 $1.63 $1.30 Diluted Earnings Per Share $0.61 $0.43 $1.56 $1.26 Dividends Declared Per Share $0.19 $0.19 $0.57 $0.73 Basic Weighted Average Shares 57,195,570 67,893,086 59,337,319 71,148,663 Diluted Weighted Average Shares 59,961,823 69,910,264 61,911,794 73,158,354 ====================================================================== (1) Certain 2002 information has been reclassified to conform to 2003 presentation. Bank of Hawaii Corporation and Subsidiaries Consolidated Statements of Condition (Unaudited) Table 3 ---------------------------------------------------------------------- Sept. 30, Dec. 31, Sept. 30, (dollars in thousands) 2003 2002 2002(1) ---------------------------------------------------------------------- Assets Interest-Bearing Deposits $208,712 $549,978 $1,019,823 Investment Securities - Held to Maturity (Market Value of $749,036, $236,016 and $286,526, respectively) 754,659 229,720 277,856 Investment Securities - Available for Sale 2,027,062 2,287,201 2,241,106 Funds Sold - 195,000 95,000 Loans Held for Sale 23,144 40,118 30,863 Loans 5,570,405 5,359,004 5,259,332 Allowance for Loan and Lease Losses (132,675) (142,853) (154,475) ---------------------------------------------------------------------- Net Loans 5,437,730 5,216,151 5,104,857 ---------------------------------------------------------------------- Total Earning Assets 8,451,307 8,518,168 8,769,505 Cash and Non-Interest Bearing Deposits 329,705 374,352 331,786 Premises and Equipment 163,277 176,969 182,230 Customers' Acceptance Liability 1,077 2,680 1,106 Accrued Interest Receivable 33,210 36,722 38,839 Foreclosed Real Estate 8,757 9,434 17,568 Mortgage Servicing Rights 23,266 28,820 29,911 Goodwill 36,216 36,216 36,216 Other Assets 323,940 333,057 295,539 ---------------------------------------------------------------------- Total Assets $9,370,755 $9,516,418 $9,702,700 ====================================================================== Liabilities Domestic Deposits Non-Interest Bearing Demand $1,846,030 $1,719,633 $1,593,766 Interest Bearing Demand 1,266,530 1,169,128 1,042,937 Savings 2,760,418 2,535,219 2,403,209 Time 1,178,213 1,461,780 1,549,693 Foreign Deposits Time Due to Banks 20,832 1,130 4,387 Other Savings and Time 30,093 33,271 33,681 ---------------------------------------------------------------------- Total Deposits 7,102,116 6,920,161 6,627,673 Securities Sold Under Agreements to Repurchase 646,890 735,621 1,089,287 Funds Purchased 90,520 64,467 116,775 Current Maturities of Long-Term Debt 96,757 114,781 122,945 Short-Term Borrowings 14,796 33,420 17,941 Banker's Acceptances Outstanding 1,077 2,680 1,106 Retirement Benefits Payable 63,281 61,385 38,317 Accrued Interest Payable 7,207 13,731 21,870 Taxes Payable 195,628 196,813 191,519 Other Liabilities 101,179 82,596 87,736 Long-Term Debt 227,544 275,004 286,825 ---------------------------------------------------------------------- Total Liabilities 8,546,995 8,500,659 8,601,994 Shareholders' Equity Common Stock ($.01 par value); authorized 500,000,000 shares; issued / outstanding: September 2003 - 81,568,791 / 55,985,364; December 2002 - 81,294,730 / 63,015,442; September 2002 - 81,310,042 / 66,048,072 807 806 806 Capital Surplus 385,694 372,192 371,098 Accumulated Other Comprehensive Income (Loss) (2,799) 11,659 26,038 Retained Earnings 1,177,459 1,115,910 1,100,016 Deferred Stock Grants (7,466) (1,424) (2,886) Treasury Stock, at Cost (Shares: September 2003 - 25,583,427; December 2002 - 18,279,288; September 2002 - 15,261,970) (729,935) (483,384) (394,366) ---------------------------------------------------------------------- Total Shareholders' Equity 823,760 1,015,759 1,100,706 ---------------------------------------------------------------------- Total Liabilities and Shareholders' Equity $9,370,755 $9,516,418 $9,702,700 ====================================================================== (1) Certain 2002 information has been reclassified to conform to 2003 presentation. Bank of Hawaii Corporation and Subsidiaries Consolidated Statements of Shareholders' Equity (Unaudited) Table 4 ---------------------------------------------------------------------- Accum. Other Compre- hensive Common Capital Income (dollars in thousands) Total Stock Surplus (Loss) ---------------------------------------------------------------------- Balance at December 31, 2002 $1,015,759 $806 $372,192 $11,659 Comprehensive Income: Net Income 96,522 - - - Other Comprehensive Income, Net of Tax: Change in Unrealized Gains and Losses on Investment Securities (14,458) - - (14,458) Total Comprehensive Income Common Stock Issued: 26,311 Retirement Savings Plan 860 - 269 - 775,872 Stock Option Plan 18,227 - 2,930 - 67,510 Dividend Reinvestment Plan 2,205 - 696 - 7,174 Directors' Restricted Shares and Deferred Compensation Plan 54 1 237 - 266,400 Employees' Restricted Shares 4,145 - 9,370 - Treasury Stock Purchased (8,166,579 shares) (265,735) - - - Cash Dividends Paid (33,819) - - - ---------------------------------------------------------------------- Balance at September 30, 2003 $823,760 $807 $385,694 $(2,799) ====================================================================== Balance at December 31, 2001 $1,247,012 $806 $367,672 $22,761 Comprehensive Income: Net Income 92,272 - - - Other Comprehensive Income, Net of Tax: Change in Unrealized Gains and Losses on Investment Securities 3,859 - - 3,859 Foreign Currency Translation Adjustment (582) - - (582) Total Comprehensive Income Common Stock Issued: 33,402 Retirement Savings Plan 933 - 196 - 1,369,679 Stock Option Plan 27,895 - 4,022 - Dividend Reinvestment 77,270 Plan 2,152 - 439 - 4,101 Directors' Restricted Shares and Deferred Compensation Plan 44 - 117 - (71,300) Employees' Restricted Shares 3,636 - (1,348) - Treasury Stock Purchased (8,581,000 shares) (238,073) - - - Cash Dividends Paid (38,442) - - - ---------------------------------------------------------------------- Balance at September 30, 2002 $1,100,706 $806 $371,098 $26,038 ====================================================================== Deferred Compre- Retained Stock Treasury hensive (dollars in thousands) Earnings Grants Stock Income ---------------------------------------------------------------------- Balance at December 31, 2002 $1,115,910 $(1,424) $(483,384) Comprehensive Income: Net Income 96,522 - - $96,522 Other Comprehensive Income, Net of Tax: Change in Unrealized Gains and Losses on Investment Securities - - - (14,458) -------- Total Comprehensive Income $82,064 ======== Common Stock Issued: 26,311 Retirement Savings Plan - - 591 775,872 Stock Option Plan (1,154) (817) 17,268 67,510 Dividend Reinvestment Plan - - 1,509 7,174 Directors' Restricted Shares and Deferred Compensation Plan - - (184) Employees' 266,400 Restricted Shares - (5,225) - Treasury Stock Purchased (8,166,579 shares) - - (265,735) Cash Dividends Paid (33,819) - - ------------------------------------------------------------- Balance at September 30, 2003 $1,177,459 $(7,466) $(729,935) ============================================================= Balance at December 31, 2001 $1,055,424 $(7,637) $(192,014) Comprehensive Income: Net Income 92,272 - - $92,272 Other Comprehensive Income, Net of Tax: Change in Unrealized Gains and Losses on Investment Securities - - - 3,859 Foreign Currency Translation Adjustment - - - (582) -------- Total Comprehensive Income $95,549 ======== Common Stock Issued: 33,402 Retirement Savings Plan - - 737 1,369,679 Stock Option Plan (9,236) (233) 33,342 77,270 Dividend Reinvestment Plan (2) - 1,715 4,101 Directors' Restricted Shares and Deferred Compensation Plan - - (73) (71,300) Employees' Restricted Shares - 4,984 - Treasury Stock Purchased (8,581,000 shares) - - (238,073) Cash Dividends Paid (38,442) - - ------------------------------------------------------------- Balance at September 30, 2002 $1,100,016 $(2,886) $(394,366) ============================================================= Bank of Hawaii Corporation and Subsidiaries Consolidated Average Balances and Interest Rates - Taxable Equivalent Basis (Unaudited) Table 5 ---------------------------------------------------------------------- Three Months Ended September 30, 2003 Average Income/ Yield/ (dollars in millions) Balance Expense Rate ---------------------------------------------------------------------- Earning Assets Interest Bearing Deposits $224.7 $1.2 2.08% Funds Sold 102.4 0.3 0.97 Investment Securities Held to Maturity 675.1 6.4 3.82 Available for Sale 2,090.6 16.5 3.15 Loans Held for Sale 52.2 0.7 5.45 Loans and Lease Financing Commercial and Industrial 862.8 10.8 4.95 Construction 87.8 0.9 4.26 Commercial Mortgage 670.6 9.4 5.56 Residential Mortgage 2,298.8 36.2 6.30 Installment 558.6 12.8 9.09 Home Equity 448.1 5.6 4.99 Purchased Home Equity 132.6 0.7 2.20 Lease Financing 487.2 5.6 4.52 ---------------------------------------------------------------------- Total Loans and Lease Financing 5,546.5 82.0 5.89 Other 76.1 1.0 5.38 ---------------------------------------------------------------------- Total Earning Assets 8,767.6 108.1 4.91 Cash and Non-interest Bearing Deposits 333.2 Other Assets 399.2 --------- Total Assets $9,500.0 ========= Interest Bearing Liabilities Interest Bearing Deposits Domestic Deposits Demand $1,242.7 $0.5 0.15% Savings 2,754.6 3.4 0.49 Time 1,249.9 6.3 2.01 ---------------------------------------------------------------------- Total Domestic Deposits 5,247.2 10.2 0.77 Foreign Deposits Time Due to Banks 5.3 - - Other Time and Savings 33.6 0.1 0.63 ---------------------------------------------------------------------- Total Foreign Deposits 38.9 0.1 0.78 ---------------------------------------------------------------------- Total Interest Bearing Deposits 5,286.1 10.3 0.77 Short-Term Borrowings 827.8 2.3 1.08 Long-Term Debt 325.7 4.4 5.40 ---------------------------------------------------------------------- Total Interest Bearing Liabilities 6,439.6 17.0 1.04 ---------------------------------------------------------------------- Net Interest Income $91.1 ========= Interest Rate Spread 3.87% Net Interest Margin 4.15% Non-Interest Bearing Demand Deposits (Domestic) 1,844.4 Other Liabilities 344.1 Shareholders' Equity 871.9 --------- Total Liabilities and Shareholders' Equity $9,500.0 ========= Three Months Ended June 30, 2003 Average Income/ Yield/ (dollars in millions) Balance Expense Rate ---------------------------------------------------------------------- Earning Assets Interest Bearing Deposits $212.4 $1.2 2.19% Funds Sold 267.3 0.9 1.23 Investment Securities Held to Maturity 324.8 3.1 3.85 Available for Sale 2,316.9 19.8 3.42 Loans Held for Sale 81.6 1.1 5.43 Loans and Lease Financing Commercial and Industrial 834.6 10.0 4.81 Construction 83.0 0.9 4.50 Commercial Mortgage 682.5 10.1 5.93 Residential Mortgage 2,295.1 37.3 6.50 Installment 535.6 13.6 10.18 Home Equity 442.7 5.6 5.06 Purchased Home Equity 162.3 2.0 4.96 Lease Financing 482.6 5.3 4.42 ---------------------------------------------------------------------- Total Loans and Lease Financing 5,518.4 84.8 6.16 Other 75.3 1.0 5.41 ---------------------------------------------------------------------- Total Earning Assets 8,796.7 111.9 5.09 Cash and Non-interest Bearing Deposits 325.6 Other Assets 385.9 --------- Total Assets $9,508.2 ========= Interest Bearing Liabilities Interest Bearing Deposits Domestic Deposits Demand $1,164.8 $0.7 0.25% Savings 2,744.1 4.5 0.65 Time 1,401.4 8.1 2.31 ---------------------------------------------------------------------- Total Domestic Deposits 5,310.3 13.3 1.00 Foreign Deposits Time Due to Banks - - - Other Time and Savings 30.3 0.1 0.91 ---------------------------------------------------------------------- Total Foreign Deposits 30.3 0.1 0.91 ---------------------------------------------------------------------- Total Interest Bearing Deposits 5,340.6 13.4 1.00 Short-Term Borrowings 810.2 2.6 1.30 Long-Term Debt 371.5 5.4 5.85 ---------------------------------------------------------------------- Total Interest Bearing Liabilities 6,522.3 21.4 1.31 ---------------------------------------------------------------------- Net Interest Income $90.5 ========= Interest Rate Spread 3.78% Net Interest Margin 4.12% Non-Interest Bearing Demand Deposits (Domestic) 1,695.3 Other Liabilities 358.7 Shareholders' Equity 931.9 --------- Total Liabilities and Shareholders' Equity $9,508.2 ========= Three Months Ended(1) September 30, 2002 Average Income/ Yield/ (dollars in millions) Balance Expense Rate ---------------------------------------------------------------------- Earning Assets Interest Bearing Deposits $1,142.3 $5.4 1.87% Funds Sold 210.2 0.9 1.74 Investment Securities Held to Maturity 296.9 4.1 5.45 Available for Sale 2,009.5 26.2 5.21 Loans Held for Sale 40.0 0.6 6.24 Loans and Lease Financing Commercial and Industrial 978.0 12.8 5.19 Construction 147.7 2.1 5.57 Commercial Mortgage 571.5 9.8 6.84 Residential Mortgage 2,333.9 40.5 6.94 Installment 406.8 11.3 11.01 Home Equity 411.3 5.9 5.70 Purchased Home Equity - - - Lease Financing 500.8 6.3 4.98 ---------------------------------------------------------------------- Total Loans and Lease Financing 5,350.0 88.7 6.60 Other 99.6 1.5 6.28 ---------------------------------------------------------------------- Total Earning Assets 9,148.5 127.4 5.55 Cash and Non-interest Bearing Deposits 300.2 Other Assets 355.7 --------- Total Assets $9,804.4 ========= Interest Bearing Liabilities Interest Bearing Deposits Domestic Deposits Demand $1,021.5 $0.9 0.37% Savings 2,360.7 8.1 1.35 Time 1,600.0 11.4 2.82 ---------------------------------------------------------------------- Total Domestic Deposits 4,982.2 20.4 1.62 Foreign Deposits Time Due to Banks 9.6 - - Other Time and Savings 38.3 0.2 1.68 ---------------------------------------------------------------------- Total Foreign Deposits 47.9 0.2 1.59 ---------------------------------------------------------------------- Total Interest Bearing Deposits 5,030.1 20.6 1.62 Short-Term Borrowings 1,301.3 7.7 2.34 Long-Term Debt 451.6 6.9 6.10 ---------------------------------------------------------------------- Total Interest Bearing Liabilities 6,783.0 35.2 2.06 ---------------------------------------------------------------------- Net Interest Income $92.2 ========= Interest Rate Spread 3.49% Net Interest Margin 4.03% Non-Interest Bearing Demand Deposits (Domestic) 1,547.5 Other Liabilities 321.6 Shareholders' Equity 1,152.3 --------- Total Liabilities and Shareholders' Equity $9,804.4 ========= Nine Months Ended September 30, 2003 Average Income/ Yield/ (dollars in millions) Balance Expense Rate ---------------------------------------------------------------------- Earning Assets Interest Bearing Deposits $230.2 $3.7 2.12% Funds Sold 206.2 1.8 1.19 Investment Securities Held to Maturity 402.4 11.9 3.94 Available for Sale 2,224.5 58.8 3.52 Loans Held for Sale 48.1 1.9 5.40 Loans and Lease Financing Commercial and Industrial 861.2 31.3 4.86 Construction 95.3 3.3 4.65 Commercial Mortgage 650.6 28.6 5.87 Residential Mortgage 2,281.1 111.2 6.50 Installment 532.2 39.2 9.85 Home Equity 441.8 16.9 5.11 Purchased Home Equity 158.2 5.3 4.51 Lease Financing 488.5 16.7 4.58 ---------------------------------------------------------------------- Total Loans and Lease Financing 5,508.9 252.5 6.12 Other 75.3 3.2 5.75 ---------------------------------------------------------------------- Total Earning Assets 8,695.6 333.8 5.12 Cash and Non-interest Bearing Deposits 330.1 Other Assets 392.3 --------- Total Assets $9,418.0 ========= Interest Bearing Liabilities Interest Bearing Deposits Domestic Deposits Demand $1,185.9 $1.9 0.22% Savings 2,702.8 12.5 0.62 Time 1,364.2 23.4 2.30 ---------------------------------------------------------------------- Total Domestic Deposits 5,252.9 37.8 0.96 Foreign Deposits Time Due to Banks 2.1 - - Other Time and Savings 31.5 0.2 0.91 ---------------------------------------------------------------------- Total Foreign Deposits 33.6 0.2 0.92 ---------------------------------------------------------------------- Total Interest Bearing Deposits 5,286.5 38.0 0.96 Short-Term Borrowings 763.3 7.4 1.29 Long-Term Debt 362.3 15.7 5.80 ---------------------------------------------------------------------- Total Interest Bearing Liabilities 6,412.1 61.1 1.27 ---------------------------------------------------------------------- Net Interest Income $272.7 ========= Interest Rate Spread 3.85% Net Interest Margin 4.19% Non-Interest Bearing Demand Deposits (Domestic) 1,726.2 Other Liabilities 354.4 Shareholders' Equity 925.3 --------- Total Liabilities and Shareholders' Equity $9,418.0 ========= (1) Certain 2002 information has been reclassified to conform to 2003 presentation. Bank of Hawaii Corporation and Subsidiaries Analysis of Change in Net Interest Income -- Tax Equivalent Basis (Unaudited) Table 6 ---------------------------------------------------------------------- Three Months Ended September 30, 2003 Compared to June 30, 2003 (dollars in millions) Volume(1) Rate(1) Time(1) Total ---------------------------------------------------------------------- Change in Interest Income: Interest Bearing Deposits $0.1 $(0.1) $- $- Funds Sold (0.4) (0.2) - (0.6) Investment Securities Held to Maturity 3.4 (0.1) - 3.3 Available for Sale (1.8) (1.8) 0.3 (3.3) Loans Held for Sale (0.4) - - (0.4) Loans and Lease Financing Commercial and Industrial 0.4 0.3 0.1 0.8 Construction 0.1 (0.1) - - Commercial Mortgage (0.2) (0.6) 0.1 (0.7) Residential Mortgage 0.1 (1.2) - (1.1) Installment 0.5 (1.4) 0.1 (0.8) Home Equity - (0.1) 0.1 - Purchased Home Equity (0.2) (1.1) - (1.3) Lease Financing 0.1 0.1 0.1 0.3 ---------------------------------------------------------------------- Total Loans and Lease Financing 0.8 (4.1) 0.5 (2.8) Total Change in Interest Income 1.7 (6.3) 0.8 (3.8) ---------------------------------------------------------------------- Change in Interest Expense: Interest Bearing Deposits (Domestic) Demand 0.1 (0.3) - (0.2) Savings - (1.1) - (1.1) Time (0.8) (1.1) 0.1 (1.8) ---------------------------------------------------------------------- Total Interest Bearing Deposits (0.7) (2.5) 0.1 (3.1) Short-Term Borrowings 0.1 (0.5) 0.1 (0.3) Long-Term Debt (0.7) (0.4) 0.1 (1.0) ---------------------------------------------------------------------- Total Change in Interest Expense (1.3) (3.4) 0.3 (4.4) ---------------------------------------------------------------------- Change in Net Interest Income $3.0 $(2.9) $0.5 $0.6 ====================================================================== (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 Loan Portfolio Balances (Unaudited) Table 7 ---------------------------------------------------------------------- Sept. 30, June 30, Dec. 31, Sept. 30, (dollars in millions) 2003 2003 2002 2002(1) ---------------------------------------------------------------------- Domestic Commercial Commercial and Industrial $843.9 $808.5 $875.0 $863.3 Commercial Mortgage 629.2 689.7 591.1 616.5 Construction 92.3 83.6 127.5 146.3 Lease Financing 426.9 416.9 427.3 433.6 ---------------------------------------------------------------------- Total Commercial 1,992.3 1,998.7 2,020.9 2,059.7 Consumer Residential Mortgage 2,329.4 2,222.0 2,131.4 2,259.8 Home Equity 446.0 450.3 428.2 419.2 Purchased Home Equity 109.8 145.6 185.8 - Other Consumer 582.9 554.8 493.3 421.6 Lease Financing 35.3 34.0 34.5 36.5 ---------------------------------------------------------------------- Total Consumer 3,503.4 3,406.7 3,273.2 3,137.1 ---------------------------------------------------------------------- Total Domestic 5,495.7 5,405.4 5,294.1 5,196.8 ---------------------------------------------------------------------- Foreign 74.7 66.5 64.9 62.5 ---------------------------------------------------------------------- Total Loans $5,570.4 $5,471.9 $5,359.0 $5,259.3 ====================================================================== Selected Concentrations of Credit Exposure (Unaudited) ---------------------------------------------------------------------- September 30, 2003 Dec. 31, Sept. 30, 2002 2002(1) (dollars in Unused Total Total Total millions) Outstanding Commitments Exposure Exposure Exposure ---------------------------------------------------------------------- Air Transportation Regional Passenger Carriers $45.1 $12.5 $57.6 $57.3 $57.2 United States Based Passenger Carriers 39.9 - 39.9 39.6 48.3 International Based Passenger Carriers 31.7 - 31.7 32.1 32.2 Cargo Carriers 14.4 - 14.4 15.0 15.0 ---------------------------------------------------------------------- Total Air Transportation $131.1 $12.5 $143.6 $144.0 $152.7 ====================================================================== Guam Hotel $17.8 $- $17.8 $44.4 $104.7 Other Commercial 147.2 35.9 183.1 166.0 134.6 Consumer 271.0 6.5 277.5 257.4 250.6 ---------------------------------------------------------------------- Total Guam $436.0 $42.4 $478.4 $467.8 $489.9 ====================================================================== Syndicated Exposure $249.1 $624.4 $873.5 $1,002.1 $1,075.8 ====================================================================== Exposure includes loans, leveraged leases and operating leases. (1) Certain 2002 information has been reclassified to conform to 2003 presentation. Bank of Hawaii Corporation and Subsidiaries Consolidated Non-Performing Assets and Accruing Loans Past Due 90 Days or More (Unaudited) Table 8 ---------------------------------------------------------------------- Sept. 30, June 30, March 31, Dec. 31, Sept. 30, (dollars in millions) 2003 2003 2003 2002 2002(1) ---------------------------------------------------------------------- Non-Performing Assets Non-Accrual Loans Commercial Commercial and Industrial $7.8 $8.8 $2.4 $5.9 $6.4 Commercial Mortgage 11.0 11.2 17.9 20.3 18.1 Construction - - - 0.5 0.9 Lease Financing 2.4 2.5 3.2 4.1 5.7 ---------------------------------------------------------------------- Total Commercial 21.2 22.5 23.5 30.8 31.1 Consumer Residential Mortgage 9.7 10.2 11.5 13.9 14.3 Home Equity 0.5 - 0.1 0.3 0.2 Other Consumer - - - - 0.1 ---------------------------------------------------------------------- Total Consumer 10.2 10.2 11.6 14.2 14.6 ---------------------------------------------------------------------- Total Non-Accrual Loans 31.4 32.7 35.1 45.0 45.7 ---------------------------------------------------------------------- Foreclosed Real Estate 8.7 9.3 9.1 9.4 17.6 ---------------------------------------------------------------------- Total Non-Performing Assets $40.1 $42.0 $44.2 $54.4 $63.3 ====================================================================== Accruing Loans Past Due 90 Days or More Commercial Commercial and Industrial $0.7 $0.5 $- $0.2 $- Commercial Mortgage - - 0.4 0.3 - ---------------------------------------------------------------------- Total Commercial 0.7 0.5 0.4 0.5 - Consumer Residential Mortgage 2.0 1.8 1.6 0.6 1.4 Home Equity - 0.1 - - - Purchased Home Equity 0.1 0.1 - - - Other Consumer 1.1 0.4 2.3 0.7 0.3 ---------------------------------------------------------------------- Total Consumer 3.2 2.4 3.9 1.3 1.7 ---------------------------------------------------------------------- Total Accruing and Past Due $3.9 $2.9 $4.3 $1.8 $1.7 ====================================================================== Total Loans $5,570.4 $5,471.9 $5,565.4 $5,359.0 $5,259.3 ====================================================================== Ratio of Non-Accrual Loans to Total Loans 0.56% 0.60% 0.63% 0.84% 0.87% ---------------------------------------------------------------------- Ratio of Non-Performing Assets to Total Loans and Foreclosed Real Estate 0.72% 0.77% 0.79% 1.01% 1.20% ---------------------------------------------------------------------- Ratio of Non-Performing Assets and Accruing Loans Past Due 90 Days or More to Total Loans 0.79% 0.82% 0.87% 1.05% 1.24% ---------------------------------------------------------------------- Quarter to Quarter Changes in Non-Performing Assets Balance at Beginning of Quarter $42.0 $44.2 $54.4 $63.3 $78.8 Additions 3.2 11.6 4.8 12.0 7.0 Reductions Payments and Sales of Loans (1.8) (4.3) (5.6) (6.9) (8.5) Return to Accrual (1.5) (7.5) (5.6) (1.9) (9.1) Sales of Foreclosed Assets (1.0) (0.7) (1.1) (9.4) (1.4) Charge-offs (0.8) (1.3) (2.7) (2.7) (3.5) ---------------------------------------------------------------------- Total Reductions (5.1) (13.8) (15.0) (20.9) (22.5) ---------------------------------------------------------------------- Balance at End of Quarter $40.1 $42.0 $44.2 $54.4 $63.3 ====================================================================== (1) Certain 2002 information has been reclassified to conform to 2003 presentation. Bank of Hawaii Corporation and Subsidiaries Consolidated Allowance for Loan and Lease Losses (Unaudited) Table 9 ---------------------------------------------------------------------- Three Months Ended Nine Months Ended Sept. 30, June 30, Sept. 30, Sept. 30, (dollars in millions) 2003 2003 2002(1) 2003 2002(1) ---------------------------------------------------------------------- Balance at Beginning of Period $138.0 $140.0 $159.0 $142.9 $159.0 Loans Charged-Off Commercial Commercial and Industrial (1.1) (0.6) (0.9) (3.3) (11.0) Commercial Mortgage (0.2) (0.4) (2.5) (0.6) (2.9) Construction - - - (0.5) (0.5) Lease Financing - (0.3) (0.1) (0.3) (0.3) Consumer Residential Mortgage (0.2) (0.7) (0.6) (1.5) (3.0) Home Equity - - - (0.1) (0.2) Other Consumer (6.8) (3.6) (3.0) (13.5) (9.7) Lease Financing - - (0.1) (0.2) (0.2) ---------------------------------------------------------------------- Total Charge-Offs (8.3) (5.7) (7.2) (20.0) (27.8) Recoveries on Loans Previously Charged- Off Commercial Commercial and Industrial 0.6 1.8 0.7 3.0 3.4 Commercial Mortgage - 0.1 - 0.1 2.0 Construction - 0.1 - 1.0 - Consumer Residential Mortgage 0.5 0.3 0.1 0.9 0.8 Home Equity - - - 0.1 0.1 Other Consumer 1.5 1.3 1.5 4.2 4.8 Lease Financing - - - - - Foreign 0.4 - 0.4 0.5 0.7 ---------------------------------------------------------------------- Total Recoveries 3.0 3.6 2.7 9.8 11.7 ---------------------------------------------------------------------- Net Loan Charge-Offs (5.3) (2.1) (4.5) (10.2) (16.1) Provision for Loan and Lease Losses - - - - 11.6 ---------------------------------------------------------------------- Balance at End of Period $132.7 $138.0 $154.5 $132.7 $154.5 ====================================================================== Average Loans Outstanding $5,546.5 $5,518.4 $5,350.0 $5,508.9 $5,479.1 ====================================================================== Ratio of Net Charge- Offs to Average Loans Outstanding (annualized) 0.38% 0.15% 0.33% 0.25% 0.39% Ratio of Allowance to Loans Outstanding 2.38% 2.52% 2.94% 2.38% 2.94% (1) Certain 2002 information has been reclassified to conform to 2003 presentation. Totals may not add due to rounding. Bank of Hawaii Corporation and Subsidiaries Information Technology Systems Replacement Project (Unaudited) Table 10 ---------------------------------------------------------------------- Employee Other (dollars in Professional Termination Accelerated Associated millions) Fees Benefits Depreciation Costs(1) Total ---------------------------------------------------------------------- Costs Incurred: Three Months Ended: Sept. 30, 2002 $1.9 $1.0 $3.2 $0.5 $6.6 Dec. 31, 2002 3.2 0.2 2.2 1.4 7.0 ---------------------------------------------------------------------- Year Ended December 31, 2002 5.1 1.2 5.4 1.9 13.6 Three Months Ended: March 31, 2003 3.5 0.4 2.0 1.5 7.4 June 30, 2003 2.9 2.6 1.8 2.8 10.1 Sept. 30, 2003 1.4 0.7 0.1 2.2 4.4 ---------------------------------------------------------------------- Nine Months Ended Sept. 30, 2003 7.8 3.7 3.9 6.5 21.9 ---------------------------------------------------------------------- Total Costs Incurred $12.9 $4.9 $9.3 $8.4 $35.5 ====================================================================== Total Expected Project Costs $12.9 $4.9 $9.3 $8.4 $35.5 ====================================================================== (1) Includes contract termination, equipment, excise tax and other costs. Bank of Hawaii Corporation and Subsidiaries Business Segment Selected Financial Information (Unaudited) Table 11 ---------------------------------------------------------------------- Investment Treasury Consoli- (dollars in Retail Commercial Services and Other dated thousands) Banking Banking Group Corporate Total ---------------------------------------------------------------------- Three Months Ended Sept. 30, 2003 Net Interest Income $51,317 $33,958 $3,001 $2,829 $91,105 Provision for Loan and Lease Losses (2,451) (3,549) 5 5,995 - ---------------------------------------------------------------------- Net Interest Income After Provision for Loan and Lease Losses 48,866 30,409 3,006 8,824 91,105 Non-Interest Income 23,044 12,148 15,288 3,311 53,791 ---------------------------------------------------------------------- 71,910 42,557 18,294 12,135 144,896 Information Technology Systems Replacement Project (36) - - (4,313) (4,349) Non-Interest Expense (44,240) (22,313) (15,763) (2,212) (84,528) ---------------------------------------------------------------------- Income Before Income Taxes 27,634 20,244 2,531 5,610 56,019 Provision for Income Taxes (10,224) (7,357) (937) (814) (19,332) ---------------------------------------------------------------------- Allocated Net Income 17,410 12,887 1,594 4,796 36,687 ---------------------------------------------------------------------- Allowance Funding Value (152) (940) (7) 1,099 - GAAP Provision 2,451 3,549 (5) (5,995) - Economic Provision (3,014) (3,139) (106) (12) (6,271) Tax Effect of Adjustments 265 196 44 1,815 2,320 ---------------------------------------------------------------------- Income Before Capital Charge 16,960 12,553 1,520 1,703 32,736 Capital Charge (5,614) (5,586) (1,493) (11,270) (23,963) ---------------------------------------------------------------------- Net Income (Loss) After Capital Charge (NIACC) $11,346 $6,967 $27 $(9,567) $8,773 ====================================================================== RAROC (ROE for the Company) 33% 25% 11% 1% 17% ====================================================================== Total Assets at Sept. 30, 2003 $3,507,960 $2,226,160 $140,735 $3,495,900 $9,370,755 ====================================================================== Three Months Ended Sept. 30, 2002(1) Net Interest Income $49,432 $35,738 $3,219 $3,792 $92,181 Provision for Loan and Lease Losses (722) (4,456) (76) 5,254 - ---------------------------------------------------------------------- Net Interest Income After Provision for Loan and Lease Losses 48,710 31,282 3,143 9,046 92,181 Non-Interest Income 19,897 8,295 16,640 2,205 47,037 ---------------------------------------------------------------------- 68,607 39,577 19,783 11,251 139,218 Information Technology Systems Replacement Project (587) - - (5,989) (6,576) Non-Interest Expense (42,628) (24,260) (15,711) (2,568) (85,167) ---------------------------------------------------------------------- Income Before Income Taxes 25,392 15,317 4,072 2,694 47,475 Provision for Income Taxes (9,395) (5,587) (1,507) (786) (17,275) ---------------------------------------------------------------------- Allocated Net Income 15,997 9,730 2,565 1,908 30,200 ---------------------------------------------------------------------- Allowance Funding Value (201) (1,507) (8) 1,716 - GAAP Provision 722 4,456 76 (5,254) - Economic Provision (3,128) (3,340) (121) (7) (6,596) Tax Effect of Adjustments 965 144 20 1,312 2,441 ---------------------------------------------------------------------- Income (Loss) Before Capital Charge 14,355 9,483 2,532 (325) 26,045 Capital Charge (5,216) (5,814) (1,475) (19,176) (31,681) ---------------------------------------------------------------------- Net Income (Loss) After Capital Charge (NIACC) $9,139 $3,669 $1,057 $(19,501) $(5,636) ====================================================================== RAROC (ROE for the Company) 30% 18% 19% 0% 10% ====================================================================== Total Assets at Sept. 30, 2002 $3,135,752 $2,325,782 $118,625 $4,122,541 $9,702,700 ====================================================================== (1) Certain 2002 information has been reclassified to conform to 2003 presentation. Bank of Hawaii Corporation and Subsidiaries Business Segment Selected Financial Information (Unaudited) Table 11a ---------------------------------------------------------------------- Investment Treasury Consoli- (dollars in Retail Commercial Services and Other dated thousands) Banking Banking Group Corporate Total ---------------------------------------------------------------------- Nine Months Ended Sept. 30, 2003 Net Interest Income $156,518 $102,981 $9,664 $3,427 $272,590 Provision for Loan and Lease Losses (4,620) (6,721) 5 11,336 - ---------------------------------------------------------------------- Net Interest Income After Provision for Loan and Lease Losses 151,898 96,260 9,669 14,763 272,590 Non-Interest Income 64,328 28,507 46,396 10,052 149,283 ---------------------------------------------------------------------- 216,226 124,767 56,065 24,815 421,873 Information Technology Systems Replacement Project (986) (23) (333) (20,529) (21,871) Non-Interest Expense (127,035) (68,237) (47,604) (9,724) (252,600) ---------------------------------------------------------------------- Income (Loss) Before Income Taxes 88,205 56,507 8,128 (5,438) 147,402 Provision for Income Taxes (32,636) (20,560) (3,007) 5,323 (50,880) ---------------------------------------------------------------------- Allocated Net Income (Loss) 55,569 35,947 5,121 (115) 96,522 ---------------------------------------------------------------------- Allowance Funding Value (465) (3,181) (23) 3,669 - GAAP Provision 4,620 6,721 (5) (11,336) - Economic Provision (8,623) (9,225) (350) (22) (18,220) Tax Effect of Adjustments 1,653 2,103 140 2,845 6,741 ---------------------------------------------------------------------- Income (Loss) Before Capital Charge 52,754 32,365 4,883 (4,959) 85,043 Capital Charge (16,500) (16,314) (4,523) (39,008) (76,345) ---------------------------------------------------------------------- Net Income (Loss) After Capital Charge (NIACC) $36,254 $16,051 $360 $(43,967) $8,698 ====================================================================== RAROC (ROE for the Company) 35% 22% 12% (1)% 14% ====================================================================== Total Assets at Sept. 30, 2003 $3,507,960 $2,226,160 $140,735 $3,495,900 $9,370,755 ====================================================================== Nine Months Ended Sept. 30, 2002(1) Net Interest Income $153,306 $108,380 $9,640 $8,687 $280,013 Provision for Loan and Lease Losses (3,213) (14,061) (76) 5,734 (11,616) ---------------------------------------------------------------------- Net Interest Income After Provision for Loan and Lease Losses 150,093 94,319 9,564 14,421 268,397 Non-Interest Income 62,384 25,681 51,840 8,075 147,980 ---------------------------------------------------------------------- 212,477 120,000 61,404 22,496 416,377 Restructuring and Other Related Costs - - - (1,979) (1,979) Information Technology Systems Replacement Project (587) - - (5,989) (6,576) Non-Interest Expense (133,454) (73,604) (49,830) (7,093) (263,981) ---------------------------------------------------------------------- Income Before Income Taxes 78,436 46,396 11,574 7,435 143,841 Provision for Income Taxes (29,021) (16,927) (4,283) (1,338) (51,569) ---------------------------------------------------------------------- Allocated Net Income 49,415 29,469 7,291 6,097 92,272 ---------------------------------------------------------------------- Allowance Funding Value (672) (4,656) (19) 5,347 - GAAP Provision 3,213 14,061 76 (5,734) 11,616 Economic Provision (8,536) (11,247) (372) (9) (20,164) Tax Effect of Adjustments 2,218 682 117 146 3,163 ---------------------------------------------------------------------- Income Before Capital Charge 45,638 28,309 7,093 5,847 86,887 Capital Charge (15,787) (18,423) (4,596) (62,026) (100,832) ---------------------------------------------------------------------- Net Income (Loss) After Capital Charge (NIACC) $29,851 $9,886 $2,497 $(56,179) $(13,945) ====================================================================== RAROC (ROE for the Company) 32% 17% 17% 13% 10% ====================================================================== Total Assets at Sept. 30, 2002 $3,135,752 $2,325,782 $118,625 $4,122,541 $9,702,700 ====================================================================== (1) Certain 2002 information has been reclassified to conform to 2003 presentation. Bank of Hawaii Corporation and Subsidiaries Quarterly Summary of Selected Consolidated Financial Data (Unaudited) Table 12 ---------------------------------------------------------------------- Three Months Ended (1) (dollars in thousands except per Sept. 30, June 30, March 31, share amounts) 2003 2003 2003 ---------------------------------------------------------------------- Quarterly Operating Results Interest Income Interest and Fees on Loans and Leases $82,715 $85,954 $85,773 Income on Investment Securities - Held to Maturity 6,407 3,083 2,283 Income on Investment Securities - Available for Sale 16,483 19,815 22,463 Deposits 1,179 1,161 1,307 Funds Sold 248 822 764 Other 1,032 1,016 1,189 ---------------------------------------------------------------------- Total Interest Income 108,064 111,851 113,779 Interest Expense Deposits 10,284 13,309 14,447 Security Repurchase Agreements 1,947 2,391 2,242 Funds Purchased 271 219 205 Short-Term Borrowings 26 25 24 Long-Term Debt 4,431 5,422 5,861 ---------------------------------------------------------------------- Total Interest Expense 16,959 21,366 22,779 ---------------------------------------------------------------------- Net Interest Income 91,105 90,485 91,000 Provision for Loan and Lease Losses - - - ---------------------------------------------------------------------- Net Interest Income After Provision for Loan and Lease Losses 91,105 90,485 91,000 Non-Interest Income Trust and Asset Management 12,511 12,545 13,181 Mortgage Banking 5,888 6,061 283 Service Charges on Deposit Accounts 8,901 8,645 8,950 Fees, Exchange, and Other Service Charges 16,034 13,473 12,989 Investment Securities Gains 639 587 583 Insurance 3,988 3,015 3,080 Other 5,830 6,413 5,687 ---------------------------------------------------------------------- Total Non-Interest Income 53,791 50,739 44,753 Non-Interest Expense Salaries 36,873 39,232 36,459 Pensions and Other Employee Benefits 8,858 8,479 9,970 Net Occupancy Expense 9,806 9,628 9,613 Net Equipment Expense 7,301 9,208 9,748 Restructuring and Other Related Costs - - - Information Technology Systems Replacement Project 4,349 10,105 7,417 Other 21,690 18,742 16,993 ---------------------------------------------------------------------- Total Non-Interest Expense 88,877 95,394 90,200 ---------------------------------------------------------------------- Income Before Income Taxes 56,019 45,830 45,553 Provision for Income Taxes 19,332 15,796 15,752 ---------------------------------------------------------------------- Net Income $36,687 $30,034 $29,801 ====================================================================== Basic Earnings Per Share $0.64 $0.50 $0.49 Diluted Earnings Per Share $0.61 $0.48 $0.47 Balance Sheet Totals Total Assets 9,370,755 9,550,934 9,410,210 Net Loans 5,437,730 5,333,896 5,425,343 Total Deposits 7,102,116 7,140,849 6,987,331 Total Shareholders' Equity 823,760 913,010 952,007 Performance Ratios Return on Average Assets 1.53% 1.27% 1.31% Return on Average Equity 16.69% 12.93% 12.42% Efficiency Ratio 61.34% 67.55% 66.44% Efficiency Ratio excluding ITSRP and Restructuring Costs 58.34% 60.39% 60.98% (dollars in thousands Three Months Ended (1) except per share Dec. 31, Sept. 30, June 30, March 31, amounts) 2002 2002 2002 2002 ---------------------------------------------------------------------- Quarterly Operating Results Interest Income Interest and Fees on Loans and Leases $85,945 $89,335 $92,441 $98,645 Income on Investment Securities - Held to Maturity 3,122 3,963 4,544 5,145 Income on Investment Securities - Available for Sale 24,088 26,175 26,805 27,193 Deposits 3,578 5,384 6,011 5,047 Funds Sold 834 914 752 1,003 Other 1,312 1,575 1,395 1,332 ---------------------------------------------------------------------- Total Interest Income 118,879 127,346 131,948 138,365 Interest Expense Deposits 17,657 20,547 22,166 23,978 Security Repurchase Agreements 4,585 7,039 8,256 10,293 Funds Purchased 255 299 245 231 Short-Term Borrowings 217 334 289 649 Long-Term Debt 5,947 6,946 8,055 8,319 ---------------------------------------------------------------------- Total Interest Expense 28,661 35,165 39,011 43,470 ---------------------------------------------------------------------- Net Interest Income 90,218 92,181 92,937 94,895 Provision for Loan and Lease Losses - - 3,324 8,292 ---------------------------------------------------------------------- Net Interest Income After Provision for Loan and Lease Losses 90,218 92,181 89,613 86,603 Non-Interest Income Trust and Asset Management 13,085 13,655 14,175 14,818 Mortgage Banking 4,398 3,669 2,842 7,957 Service Charges on Deposit Accounts 8,326 7,925 7,956 8,410 Fees, Exchange, and Other Service Charges 12,963 13,114 13,065 12,452 Investment Securities Gains 612 - 3 - Insurance 3,099 2,677 2,563 2,599 Other 7,872 5,997 7,314 6,789 ---------------------------------------------------------------------- Total Non-Interest Income 50,355 47,037 47,918 53,025 Non-Interest Expense Salaries 38,462 37,994 37,884 39,187 Pensions and Other Employee Benefits 6,272 7,377 9,391 9,996 Net Occupancy Expense 10,638 9,597 9,321 9,593 Net Equipment Expense 11,077 10,058 9,997 10,121 Restructuring and Other Related Costs 385 - - 1,979 Information Technology Systems Replacement Project 7,052 6,576 - - Other 22,827 20,141 22,777 20,547 ---------------------------------------------------------------------- Total Non-Interest Expense 96,713 91,743 89,370 91,423 ---------------------------------------------------------------------- Income Before Income Taxes 43,860 47,475 48,161 48,205 Provision for Income Taxes 14,952 17,275 17,145 17,149 ---------------------------------------------------------------------- Net Income $28,908 $30,200 $31,016 $31,056 ====================================================================== Basic Earnings Per Share $0.45 $0.44 $0.43 $0.42 Diluted Earnings Per Share $0.44 $0.43 $0.42 $0.41 Balance Sheet Totals Total Assets 9,516,418 9,702,700 9,824,065 10,245,021 Net Loans 5,216,151 5,104,857 5,250,216 5,442,601 Total Deposits 6,920,161 6,627,673 6,455,981 6,543,781 Total Shareholders' Equity 1,015,759 1,100,706 1,191,072 1,265,907 Performance Ratios Return on Average Assets 1.20% 1.22% 1.23% 1.21% Return on Average Equity 10.72% 10.40% 9.94% 9.97% Efficiency Ratio 68.80% 65.90% 63.45% 61.81% Efficiency Ratio excluding ITSRP and Restructuring Costs 63.51% 61.18% 63.45% 60.47% (1) Certain 2002 information has been reclassified to conform to 2003 presentation.
CONTACT: Bank of Hawaii Corporation
Stafford Kiguchi, 808-537-8580 (Media)
pager: 877-849-5423
skiguchi@boh.com
Cindy Wyrick, 808-537-8430 (Investors/Analysts)
cwyrick@boh.com
SOURCE: Bank of Hawaii Corporation