UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

 

Washington, D. C. 20549

 

FORM 8-K

 

CURRENT REPORT

 

Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934

 

 

 

(Registrant’s telephone number, including area code)  (808) 537-8430

 

 

Item 12.       Results of Operations and Financial Conditions

 

(a)      Exhibit 99.1

 

Press Release: Bank of Hawaii Corporation Second Quarter 2003 Financial Results

 

SIGNATURE

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

 

2

EXHIBIT 99.1

 

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

 

 

BANK OF HAWAII CORPORATION

 

 

EXHIBIT TO CURRENT REPORT ON
FORM 8-K DATED July 28, 2003

 

 

Commission File Number 1-6887

 

 

 

Bank of Hawaii Corporation Second Quarter 2003 Financial Results

 

•                       Diluted Earnings Per Share Increases to $0.48

•                       Net Income Increases to $30.0 Million for the Quarter

•                       Board of Directors Declares Dividend of $0.19 Per Share

•                       Company Successfully Completes Systems Conversion

 

FOR IMMEDIATE RELEASE

 

HONOLULU, HI (July 28, 2003) — Bank of Hawaii Corporation (NYSE: BOH) today reported diluted earnings per share of $0.48 for the second quarter of 2003, up 2.1 percent from diluted earnings per share of $0.47 in the first quarter of 2003 and up 14.3 percent from $0.42 in the second quarter last year.  Net income for the second quarter was $30.0 million, up from $29.8 million in the previous quarter and down from $31.0 million in the same quarter last year.  Net income in the second quarter of 2003 included charges of $10.1 million related to the information technology systems replacement project compared to charges of $7.4 million in the first quarter of 2003.

 

The return on average assets for the second quarter of 2003 was 1.27 percent, down from 1.31 percent in the first quarter of 2003 and up from 1.23 percent in the second quarter of 2002.  The return on average equity was 12.93 percent in the second quarter, up 4.1 percent from 12.42 percent in the previous quarter and up 30.1 percent from 9.94 percent in the same quarter last year.

 

“I am encouraged by the Company’s ongoing improvement that is reflected in our second quarter financial results,” said Michael E. O’Neill, Chairman, CEO and President.  “Our systems conversion was completed earlier this month on time and on budget.  Considering the scope and magnitude of this project, we are pleased that it was accomplished without major disruption to customer service.  We continue to look forward to the benefits the new system will provide our customers and shareholders.”

 

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For six months ended June 30, 2003, net income was $59.8 million, down from net income of $62.1 million for the same period last year largely due to $17.5 million in systems replacement costs.  Diluted earnings per share were $0.95 for the first half of 2003, an increase of 14.5 percent from $0.83 per share for the first half of 2002.  The year-to-date return on average assets was 1.29 percent, up from 1.22 percent for the same six months in 2002.  The year-to-date return on average equity was 12.67 percent, a significant improvement from 9.96 percent for the six months ended June 30, 2002.

 

Financial Highlights

 

Net interest income for the second quarter of 2003 on a fully taxable equivalent basis was $90.5 million, down $0.5 million from the first quarter of 2003 and down $2.5 million from net interest income of $93.0 million in the second quarter of 2002.  The decrease in net interest income was primarily 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 4.12 percent for the second quarter of 2003, a 17 basis point decrease from 4.29 percent in the previous quarter and a 15 basis point increase from 3.97 percent in the same quarter last year.  The decrease in the net interest margin compared with the previous quarter was largely due to strategic de-leveraging of the balance sheet.

 

The Company did not recognize a provision for loan and lease losses during the quarter or the previous quarter.  The allowance for loan and lease losses was reduced $2.1 million from March 31, 2003, which equaled the amount of net charge-offs for the quarter.  Provision for loan and lease losses of $3.3 million in the second quarter of 2002 equaled net charge-offs for that quarter.

 

Non-interest income was $50.7 million for the quarter, an increase of $6.0 million or 13.4 percent compared to non-interest income of $44.8 million in the first quarter of 2003.  The improvement was largely due to increased mortgage banking income, as the Company returned to selling the majority of its mortgage loan production in the second quarter.  Non-interest income was up $2.8 million, or 5.9 percent from non-interest income of $47.9 million in the second quarter of 2002.

 

Non-interest expense was $95.4 million in the second quarter of 2003, including the previously mentioned $10.1 million in system replacement costs.  Non-interest expense for the first quarter of 2003 included $7.4 million in system replacement costs as previously discussed.  Excluding these items, non-interest expense was $85.3 million in the second quarter of 2003, an increase of $2.5 million, or 3.0 percent, compared to the previous quarter and a decrease of $4.1 million, or 4.6 percent, from the same quarter last year.  The increase from the previous quarter was largely due to increased salary expense resulting from vesting of restricted stock, severance accruals and seasonal pay increases.

 

The efficiency ratio was 67.6 percent for the second quarter of 2003.  Excluding systems replacement costs, the efficiency ratio was 60.4 percent in the second quarter, compared to 61.0 percent in the previous quarter and 63.5 percent in the same quarter last year.  For the six months ending June 30, 2003, the efficiency ratio, excluding systems replacement and net restructuring costs was 60.7 percent compared to 61.9 percent in the comparable period last year.

 

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The Company’s business segments are defined as Retail Banking, Commercial Banking, Investment Services Group, and Treasury and Other Corporate.  Business segment results are determined based on the Company’s internal financial management reporting process and organizational structure.  Business segment performance details are summarized in Tables 11 and 11a.

 

Asset Quality

 

Bank of Hawaii Corporation’s credit quality continued to improve in the second quarter of 2003 as measured by reductions in non-performing assets and internal classifications, and a continued positive trend in the level of net charge-offs.  Non-performing assets were $42.0 million at the end of the quarter, a decrease of $2.2 million, or 5.0 percent, from non-performing assets of $44.2 million at the end of the previous quarter.  Improvements in non-performing assets were largely the result of loans returned to accrual or paid-off.  These reductions were partially offset by the downgrade of a $7.6 million credit to a local company in Hawaii.  Non-performing assets declined $36.8 million, or 46.7 percent compared to $78.8 million at the end of the same quarter last year.  At June 30, 2003 the ratio of non-performing assets to total loans plus foreclosed assets and non-performing loans held for sale was 0.77 percent compared with 0.79 percent at March 31, 2003 and 1.45 percent at June 30, 2002.

 

Non-accrual loans were $32.7 million at June 30, 2003, a reduction of $2.4 million, or 6.8 percent, from $35.1 million at March 31, 2003 and down $28.9 million, or 46.9 percent, from $61.6 million at June 30, 2002.  Non-accrual loans as a percentage of total loans were 0.60 percent at June 30, 2003, down from 0.63 percent at the end of the previous quarter and down significantly from 1.14 percent at the end of the comparable quarter last year.

 

Net charge-offs for the second quarter of 2003 were $2.1 million, or 0.15 percent (annualized) of total average loans, a decrease from $2.8 million, or 0.21 percent (annualized) of total average loans in the first quarter of 2003.  Net charge-offs during the second quarter of 2002 were $3.3 million, or 0.24 percent (annualized) of total average loans.  Net charge-offs during the second quarter of 2003 were comprised of $5.7 million in charge-offs partially offset by recoveries of $3.6 million.  Net charge-offs for the first half of 2003 were $4.9 million, or 0.18 percent (annualized) of total average loans, a decrease from $11.6 million, or 0.42 percent (annualized) of total average loans in the comparable period last year.

 

The allowance for loan and lease losses was $138.0 million at June 30, 2003.  The ratio of the allowance for loan and lease losses to total loans was 2.52 percent at June 30, 2003 unchanged from March 31, 2003 and down from 2.94 percent at June 30, 2002.

 

Concentrations of credit exposure to selected components of the portfolio are summarized in Table 7.

 

Other Financial Highlights

 

Total assets were $9.6 billion at June 30, 2003, up from $9.5 billion at December 31, 2002 and down from $9.8 billion at June 30, 2002.  The increase from December 31, 2002 was largely due to growth in loans offset by reductions in non-earning assets.  Compared to the previous year, total assets decreased $273 million due to reductions in short-term investments as excess liquidity was utilized for share repurchases and debt reduction that offset loan growth.

 

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Total assets increased $141 million compared to March 31, 2003 largely due to growth in investment securities that offset a net decrease in loans.  Commercial loans declined slightly from the previous quarter as managed reductions in syndicated lending and lease financing offset growth in Hawaii commercial lending.  The decrease in consumer loans was largely the result of reductions in residential mortgages as the Company returned to selling new loan originations in the secondary market during the second quarter of 2003.  Loan portfolio balances are summarized in Table 7.

 

Total deposits at June 30, 2003 were $7.1 billion, up $221 million from December 31, 2002 and up $685 million from June 30, 2002 as growth in demand and savings deposits continued to offset managed decreases in time and foreign deposits.

 

During the second quarter of 2003, Bank of Hawaii Corporation repurchased 2.2 million shares of common stock at a total cost of $73.0 million under the share repurchase program.  The average cost per share was $33.70 during the quarter.  From the beginning of the program through June 30, 2003, the Company had repurchased a total of 25.2 million shares and returned a total of $687.2 million to the shareholders at an average cost of $27.31 per share.  Through July 25, 2003, the Company repurchased an additional 0.24 million shares of common stock at a cost of $34.15 per share.  Remaining buyback authority was $104.7 million at July 25, 2003.

 

The Company’s capital and liquidity remains exceptionally strong.  At June 30, 2003 the Tier 1 leverage ratio was 9.29 percent compared to 10.03 percent at March 31, 2003 and 12.11 percent at June 30, 2002.

 

The Company’s Board of Directors declared a quarterly cash dividend of $0.19 per share on the Company’s outstanding shares.  The dividend will be payable on September 15, 2003 to shareholders of record at the close of business on August 22, 2003.  The Company’s dividend level is currently under review and it is anticipated that an increase will be announced in the third quarter earnings release.

 

Information Technology Systems Replacement Project

 

Bank of Hawaii Corporation signed a seven-year outsourcing agreement with Metavante Corporation in July of 2002 to serve as the Company’s primary technology systems provider.  The conversion to Metavante was completed on July 7, 2003.  The Company has been successfully operating on the Metavante platform since the conversion.  This lower cost platform is expected to provide annual cost savings of over $17 million compared to second quarter 2002 technology expense levels.  In connection with this project, the Company estimates that it will recognize transition charges of approximately $35 million over the five-quarter conversion period that ends during the third quarter of 2003.  During the second quarter of 2003, $10.1 million in costs were incurred, bringing the total project-to-date cost to $31.1 million.  The remaining system conversion cost of approximately $4.4 million is expected to be recognized in the third quarter of 2003.  Additional details on this project may be found in Table 10.

 

Economic Outlook

 

Economic expansion continued in Hawaii during the second quarter of 2003.  Hawaii personal income during the first quarter of 2003 increased 5.5 percent from the prior year period in nominal terms.  Adjusted for inflation, Hawaii real personal income grew at a 3.5 percent compound annual rate during the eight quarters ended in the first quarter of 2003, a pace that is expected to continue through 2003.  Hawaii seasonally-adjusted unemployment rose from 3.0

 

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percent in February 2003 to 4.1 percent in June 2003, the same unemployment rate as one year earlier in June 2002.  A resurgence of payroll employment growth after the Iraq conflict suggested that unemployment rates had only temporarily increased.  Domestic travel—comprising more than 80 percent of passenger volumes—rose 4.8 percent during the second quarter of 2003 from the same quarter last year.  International travel to Hawaii fell to 30.8 percent below second quarter 2002 volumes.  The resulting 3.8 percent decline in overall passenger volumes during the second quarter of 2003 from same quarter last year was reversed in July 2003 as Asian arrivals increased.  For more economic information, visit the Company’s web site http://www.boh.com/econ/.

 

Earnings Outlook

 

The Company continues to believe that its previously published earnings guidance of $131 million in net income for the full year of 2003 remains realistic.  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 second quarter 2003 financial results today at 8:00 a.m. Hawaii Time (2:00 p.m. Eastern Time).  The presentation will be accessible via teleconference and via the Investor Relations link of Bank of Hawaii Corporation’s web site, www.boh.com.  The conference call number is (800) 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 (4:00 p.m. Eastern Time) on Monday, July 28, 2003 by calling (800) 428-6051 in the United States or (973) 709-2089 for international callers and entering the number 273139 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 likelihood of an increase in dividend, the expected level of loan loss provisioning, anticipated costs and annual savings of our technology systems replacement project, and anticipated revenues and expenses in 2003 and beyond.  We believe the assumptions underlying our forward-looking statements are reasonable.  However, any of the assumptions could prove to be inaccurate and actual results may differ materially from those projected for a variety of reasons, including, but not limited to: 1) unanticipated changes in business and economic conditions, the competitive environment, fiscal and monetary policies, or legislation in Hawaii and the other markets we serve; 2) changes in our credit quality or risk profile which may increase or decrease the required level of allowance for loan and lease losses; 3) changes in market interest rates that may 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 technology outsourcing 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.

 

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Bank of Hawaii Corporation and Subsidiaries
Highlights  (Unaudited)		Table 1

 

(dollars in thousands except per share amounts) Earnings Highlights and Performance Ratios		Three Months Ended June 30,						Six Months Ended June 30,
		2003			2002 (1)			2003			2002 (1)
Net Income		$	30,034		$	31,016		$	59,835		$	62,072
Basic Earnings Per Share		0.50			0.43			0.99			0.85
Diluted Earnings Per Share		0.48			0.42			0.95			0.83
Cash Dividends		11,370			13,068			22,932			26,245
Return on Average Assets		1.27		%	1.23		%	1.29		%	1.22		%
Return on Average Equity		12.93		%	9.94		%	12.67		%	9.96		%
Net Interest Margin		4.12		%	3.97		%	4.20		%	3.95		%
Efficiency Ratio		67.55		%	63.45		%	67.01		%	62.61		%
Efficiency Ratio excluding ITSRP and Restructuring Costs		60.39		%	63.45		%	60.68		%	61.92		%

 

Statement of Condition Highlights and Performance Ratios			June 30,
			2003			2002 (1)
Total Assets			$	9,550,934		$	9,824,065
Net Loans			5,333,896			5,250,216
Total Deposits			7,140,849			6,455,981
Total Shareholders’ Equity			913,010			1,191,072
Book Value Per Common Share			$	15.50		$	17.05
Allowance / Loans Outstanding			2.52		%	2.94		%
Average Equity / Average Assets			10.16		%	12.27		%
Employees (FTE)			2,879			2,983
Branches and offices			91			97
Market Price Per Share of Common Stock for the Quarter Ended:
	Closing		$	33.15		$	28.00
	High		$	35.90		$	29.86
	Low		$	30.75		$	25.45

 

(1)  Certain 2002 information has been reclassified to conform to 2003 presentation.

 

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Bank of Hawaii Corporation and Subsidiaries
Consolidated Statements of Income (Unaudited)	Table 2

 

		Three Months Ended June 30,						Six Months Ended June 30,
(dollars in thousands except per share amounts)		2003			2002 (1)			2003			2002 (1)
Interest Income
Interest and Fees on Loans and Leases		$	85,954		$	92,441		$	171,727		$	191,086
Income on Investment Securities - Held to Maturity		3,083			4,544			5,366			9,689
Income on Investment Securities - Available for Sale		19,815			26,805			42,278			53,998
Deposits		1,161			6,011			2,468			11,058
Funds Sold and Security Resale Agreements		822			752			1,586			1,755
Other		1,016			1,395			2,205			2,727
Total Interest Income		111,851			131,948			225,630			270,313
Interest Expense
Deposits		13,309			22,166			27,756			46,144
Security Repurchase Agreements		2,391			8,256			4,633			18,549
Funds Purchased		219			245			424			476
Short-Term Borrowings		25			289			49			938
Long-Term Debt		5,422			8,055			11,283			16,374
Total Interest Expense		21,366			39,011			44,145			82,481
Net Interest Income		90,485			92,937			181,485			187,832
Provision for Loan and Lease Losses		—			3,324			—			11,616
Net Interest Income After Provision for Loan and Lease Losses		90,485			89,613			181,485			176,216
Non-Interest Income
Trust and Asset Management		12,545			14,175			25,726			28,993
Mortgage Banking		6,061			2,842			6,344			10,799
Service Charges on Deposit Accounts		8,645			7,956			17,595			16,366
Fees, Exchange, and Other Service Charges		13,473			13,065			26,462			25,517
Investment Securities Gains		587			3			1,170			3
Insurance		2,991			2,563			5,973			5,162
Other		6,437			7,314			12,222			14,103
Total Non-Interest Income		50,739			47,918			95,492			100,943
Non-Interest Expense
Salaries		39,232			37,884			75,691			77,071
Pensions and Other Employee Benefits		8,479			9,391			18,449			19,387
Net Occupancy Expense		9,628			9,321			19,241			18,914
Net Equipment Expense		9,208			9,997			18,956			20,118
Restructuring and Other Related Costs		—			—			—			1,979
Information Technology Systems Replacement Project		10,105			—			17,522			—
Other		18,742			22,777			35,735			43,324
Total Non-Interest Expense		95,394			89,370			185,594			180,793
Income Before Income Taxes		45,830			48,161			91,383			96,366
Provision for Income Taxes		15,796			17,145			31,548			34,294
Net Income		$	30,034		$	31,016		$	59,835		$	62,072
Basic Earnings Per Share		$	0.50		$	0.43		$	0.99		$	0.85
Diluted Earnings Per Share		$	0.48		$	0.42		$	0.95		$	0.83
Dividends Per Share		$	0.19		$	0.18		$	0.38		$	0.36
Basic Weighted Average Shares		59,566,970			72,299,850			60,425,943			72,803,414
Diluted Weighted Average Shares		62,301,337			74,486,987			62,907,697			74,815,508

 

(1)  Certain 2002 information has been reclassified to conform to 2003 presentation.

 

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Bank of Hawaii Corporation and Subsidiaries
Consolidated Statements of Condition (Unaudited)		Table 3

 

(dollars in thousands)		June 30, 2003			December 31, 2002			June 30, 2002 (1)
Assets
Interest-Bearing Deposits		$	307,552		$	549,978		$	1,346,014
Investment Securities - Held to Maturity (Market Value of $555,878, $236,016 and $323,722, respectively)		548,719			229,720			312,467
Investment Securities - Available for Sale		2,140,607			2,287,201			1,806,384
Funds Sold		250,000			195,000			125,000
Loans Held for Sale		71,892			40,118			48,416
Loans		5,471,870			5,359,004			5,409,195
Allowance for Loan and Lease Losses		(137,974		)	(142,853		)	(158,979		)
Net Loans		5,333,896			5,216,151			5,250,216
Total Earning Assets		8,652,666			8,518,168			8,888,497
Cash and Non-Interest Bearing Deposits		297,868			374,352			304,595
Premises and Equipment		165,542			176,969			188,128
Customers’ Acceptance Liability		1,371			2,680			1,657
Accrued Interest Receivable		35,849			36,722			38,425
Foreclosed Real Estate		9,285			9,434			17,223
Mortgage Servicing Rights		24,841			28,820			30,244
Goodwill		36,216			36,216			36,216
Other Assets		327,296			333,057			319,080
Total Assets		$	9,550,934		$	9,516,418		$	9,824,065
Liabilities
Domestic Deposits
Non-Interest Bearing Demand		$	1,843,750		$	1,719,633		$	1,466,092
Interest Bearing Demand		1,157,801			1,169,128			986,546
Savings		2,754,607			2,535,219			2,292,395
Time		1,352,413			1,461,780			1,652,805
Foreign Deposits
Time Due to Banks		—			1,130			16,777
Other Savings and Time		32,278			33,271			41,366
Total Deposits		7,140,849			6,920,161			6,455,981
Securities Sold Under Agreements to Repurchase		699,256			735,621			1,257,808
Funds Purchased		90,200			64,467			60,243
Current Maturities of Long-Term Debt		14,000			114,781			173,259
Short-Term Borrowings		22,424			33,420			16,935
Banker’s Acceptances Outstanding		1,371			2,680			1,657
Retirement Benefits Payable		62,678			61,385			37,642
Accrued Interest Payable		9,755			13,731			23,427
Taxes Payable		196,868			196,813			181,826
Other Liabilities		81,988			82,596			80,158
Long-Term Debt		318,535			275,004			344,057
Total Liabilities		8,637,924			8,500,659			8,632,993
Shareholders’ Equity
Common Stock ($.01 par value); authorized 500,000,000 shares; issued / outstanding: June 2003 - 81,588,394 / 58,896,230; December 2002 - 81,294,730 / 63,015,442; June 2002 - 81,329,346 / 69,856,075		807			806			806
Capital Surplus		386,565			372,192			370,947
Accumulated Other Comprehensive Income		12,412			11,659			29,931
Retained Earnings		1,151,623			1,115,910			1,082,421
Deferred Stock Grants		(8,168		)	(1,424		)	(4,182		)
Treasury Stock, at Cost (Shares: June 2003 - 22,692,164; December 2002 - 18,279,288; June 2002 - 11,473,271)		(630,229		)	(483,384		)	(288,851		)
Total Shareholders’ Equity		913,010			1,015,759			1,191,072
Total Liabilities and Shareholders’ Equity		$	9,550,934		$	9,516,418		$	9,824,065

 

(1)  Certain 2002 information has been reclassified to conform to 2003 presentation.

 

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Bank of Hawaii Corporation and Subsidiaries
Consolidated Statements of Shareholders’ Equity (Unaudited)		Table 4

 

(dollars in thousands)				Total			Common Stock			Capital Surplus			Accum. Other Compre- hensive Income			Retained Earnings			Deferred Stock Grants			Treasury Stock			Compre-hensive Income
Balance at December 31, 2002				$	1,015,759		$	806		$	372,192		$	11,659		$	1,115,910		$	(1,424	)	$	(483,384	)
Comprehensive Income:
Net Income				59,835			—			—			—			59,835			—			—			$	59,835
Other Comprehensive Income, Net of Tax:
Unrealized Gain on Investment Securities				753			—			—			753			—			—			—			753
Total Comprehensive Income																									$	60,588
Common Stock Issued:
18,147		Retirement Savings Plan		585			—			184			—			—			—			401
635,660		Stock Option Plan		16,215			—			3,660			—			(1,190		)	(280		)	14,025
45,518		Dividend Reinvestment Plan		1,463			—			459			—			—			—			1,004
6,777		Directors’ Restricted Shares and Deferred Compensation Plan		140			1			224			—			—			—			(85		)
286,700		Employees’ Restricted Shares		3,382			—			9,846			—			—			(6,464		)	—
Treasury Stock Purchased (5,107,779 shares)				(162,190		)	—			—			—			—			—			(162,190		)
Cash Dividends Paid				(22,932		)	—			—			—			(22,932		)	—			—
Balance at June 30, 2003				$	913,010		$	807		$	386,565		$	12,412		$	1,151,623		$	(8,168	)	$	(630,229	)
Balance at December 31, 2001				$	1,247,012		$	806		$	367,672		$	22,761		$	1,055,424		$	(7,637	)	$	(192,014	)
Comprehensive Income:
Net Income				62,072			—			—			—			62,072			—			—			$	62,072
Other Comprehensive Income, Net of Tax:
Unrealized Gain on Investment Securities				7,547			—			—			7,547			—			—			—			7,547
Foreign Currency Translation Adjustment				(377		)	—			—			(377		)	—			—			—			(377		)
Total Comprehensive Income																									$	69,242
Common Stock Issued:
22,894		Retirement Savings Plan		632			—			119			—			—			—			513
1,222,308		Stock Option Plan		25,142			—			3,727			—			(8,828		)	48			30,195
53,227		Dividend Reinvestment Plan		1,464			—			264			—			(2		)	—			1,202
3,605		Directors’ Restricted Shares and Deferred Compensation Plan		50			—			103			—			—			—			(53		)
(51,500)		Employees’ Restricted Shares		2,469			—			(938		)	—			—			3,407			—
Treasury Stock Purchased (4,610,800 shares)				(128,694		)	—			—			—			—			—			(128,694		)
Cash Dividends Paid				(26,245		)	—			—			—			(26,245		)	—			—
Balance at June 30, 2002				$	1,191,072		$	806		$	370,947		$	29,931		$	1,082,421		$	(4,182	)	$	(288,851	)

 

9

 

Bank of Hawaii Corporation and Subsidiaries
Consolidated Average Balances and Interest Rates - Taxable Equivalent Basis (Unaudited)		Table 5

 

		Three Months Ended June 30, 2003								Three Months Ended March 31, 2003								Three Months Ended (1) June 30, 2002									Six Months Ended June 30, 2003
(dollars in millions)		Average Balance			Income/ Expense			Yield/ Rate		Average Balance			Income/ Expense			Yield/ Rate		Average Balance			Income/ Expense			Yield/ Rate				Average Balance			Income/ Expense			Yield/ Rate
Earning Assets
Interest Bearing Deposits		$	212.4		$	1.2		2.19	%	$	253.8		$	1.3		2.09	%	$	1,310.0		$	6.0		1.84		%		$	233.0		$	2.5		2.14	%
Funds Sold		267.3			0.9			1.23		250.5			0.8			1.22		173.3			0.8			1.74				259.0			1.6			1.22
Investment Securities
-  Held to Maturity		324.8			3.1			3.85		202.0			2.3			4.61		328.6			4.7			5.63				263.7			5.4			4.14
-  Available for Sale		2,316.9			19.8			3.42		2,268.1			22.5			3.96		1,890.3			26.8			5.67				2,292.6			42.3			3.69
Loans Held for Sale		81.6			1.1			5.43		10.1			0.1			5.16		65.2			1.1			6.88				46.0			1.2			5.38
Net Loans and Lease Financing
Domestic
-  Commercial and Industrial		819.8			10.0			4.87		871.7			10.5			4.87		1,061.1			13.4			5.07				845.6			20.4			4.87
-  Construction		83.0			0.9			4.50		115.4			1.4			5.08		157.5			2.2			5.72				99.1			2.4			4.83
-  Commercial Mortgage		682.5			10.1			5.93		597.8			9.0			6.14		587.5			9.9			6.73				640.5			19.2			6.03
-  Residential Mortgage		2,295.1			37.3			6.50		2,249.0			37.7			6.70		2,399.0			42.5			7.08				2,272.1			75.0			6.60
-  Installment		535.6			13.6			10.18		501.9			12.8			10.36		392.0			11.0			11.23				518.8			26.4			10.27
-  Home Equity		442.7			5.6			5.06		434.5			5.7			5.28		391.1			5.7			5.90				438.6			11.2			5.17
-  Purchased Home Equity		162.3			2.0			4.96		180.2			2.6			5.78		—			—			—				171.2			4.6			5.39
-  Lease Financing		482.6			5.3			4.42		495.6			5.9			4.81		502.2			6.6			5.25				489.1			11.2			4.62
Total Domestic Loans		5,503.6			84.8			6.17		5,446.1			85.6			6.33		5,490.4			91.3			6.66				5,475.0			170.4			6.25
Foreign		14.8			—			—		14.7			—			—		14.1			—			—				14.8			0.1			1.39
Total Loans		5,518.4			84.8			6.16		5,460.8			85.6			6.32		5,504.5			91.3			6.65				5,489.8			170.5			6.24
Other		75.3			1.0			5.41		74.6			1.2			6.47		99.2			1.3			5.64				74.9			2.2			5.93
Total Earning Assets		8,796.7			111.9			5.09		8,519.9			113.8			5.38		9,371.1			132.0			5.64				8,659.0			225.7			5.23
Cash and Non-interest Bearing Deposits		325.6								331.6								343.6										328.6
Other Assets		385.9								391.5								365.3										388.7
Total Assets		$	9,508.2							$	9,243.0							$	10,080.0									$	9,376.3
Interest Bearing Liabilities
Interest Bearing Deposits
Domestic Deposits
–  Demand		$	1,164.8		0.7			0.25		$	1,149.2		0.7			0.26		$	965.1		1.1			0.45				$	1,157.0		1.5			0.25
–  Savings		2,744.1			4.5			0.65		2,608.2			4.6			0.71		2,173.5			7.8			1.44				2,676.5			9.0			0.68
–  Time		1,401.4			8.1			2.31		1,443.3			9.1			2.55		1,732.0			12.9			2.98				1,422.2			17.1			2.43
Total Domestic Deposits		5,310.3			13.3			1.00		5,200.7			14.4			1.12		4,870.6			21.8			1.79				5,255.7			27.6			1.06
Foreign Deposits
–  Time Due to Banks		—			—			—		1.0			—			—		37.3			0.1			1.47				0.5			—			—
–  Other Time and Savings		30.3			0.1			0.91		30.5			0.1			1.23		59.1			0.3			1.67				30.4			0.1			1.07
Total Foreign Deposits		30.3			0.1			0.91		31.5			0.1			1.11		96.4			0.4			1.59				30.9			0.1			1.01
Total Interest Bearing Deposits		5,340.6			13.4			1.00		5,232.2			14.5			1.12		4,967.0			22.2			1.79				5,286.6			27.7			1.06
Short-Term Borrowings		810.2			2.6			1.30		649.8			2.5			1.54		1,475.9			8.8			2.39				730.5			5.1			1.41
Long-Term Debt		371.5			5.4			5.85		390.4			5.8			6.09		507.1			8.0			6.37				380.9			11.3			5.97
Total Interest Bearing Liabilities		6,522.3			21.4			1.31		6,272.4			22.8			1.47		6,950.0			39.0			2.25				6,398.0			44.1			1.39
Net Interest Income					$	90.5							$	91.0							$	93.0									$	181.6
Interest Rate Spread								3.78	%							3.91	%							3.39		%								3.84	%
Net Interest Margin								4.12	%							4.29	%							3.97		%								4.20	%
Non-Interest Bearing Demand Deposits (Domestic)		1,695.3								1,636.8								1,566.7										1,666.2
Other Liabilities		358.7								360.7								312.3										359.7
Shareholders’ Equity		931.9								973.1								1,251.0										952.4
Total Liabilities and Shareholders’ Equity		$	9,508.2							$	9,243.0							$	10,080.0									$	9,376.3

 

(1)  Certain 2002 information has been reclassified to conform to 2003 presentation.

 

10

 

Bank of Hawaii Corporation and Subsidiaries
Analysis of Change in Net Interest Income - Taxable Equivalent Basis (Unaudited)		Table 6

 

(dollars in millions)		Three Months Ended June 30, 2003 Compared to March 31, 2003
		Volume (1)			Rate (1)			Time (1)			Total
Change in Interest Income:
Interest Bearing Deposits		$	(0.2	)	$	0.1		$	—		$	(0.1	)
Funds Sold		0.1			—			—			0.1
Investment Securities
Held to Maturity		1.2			(0.4		)	—			0.8
Available for Sale		0.4			(3.1		)	—			(2.7		)
Loans Held for Sale		1.0			—			—			1.0
Net Loans and Lease Financing (Domestic)
Commercial and Industrial		(0.6		)	—			0.1			(0.5		)
Construction		(0.3		)	(0.2		)	—			(0.5		)
Commercial Mortgage		1.3			(0.3		)	0.1			1.1
Residential Mortgage		0.7			(1.1		)	—			(0.4		)
Installment		0.8			(0.2		)	0.2			0.8
Home Equity		0.1			(0.2		)	—			(0.1		)
Purchased Home Equity		(0.2		)	(0.4		)	—			(0.6		)
Lease Financing		(0.2		)	(0.5		)	0.1			(0.6		)
Total Loans		1.6			(2.9		)	0.5			(0.8		)
Other		—			(0.2		)	—			(0.2		)
Total Change in Interest Income		4.1			(6.5		)	0.5			(1.9		)
Change in Interest Expense:
Interest Bearing Deposits (Domestic)
Savings		0.2			(0.4		)	0.1			(0.1		)
Time		(0.2		)	(0.9		)	0.1			(1.0		)
Total Interest Bearing Deposits		—			(1.3		)	0.2			(1.1		)
Short-Term Borrowings		0.5			(0.4		)	—			0.1
Long-Term Debt		(0.3		)	(0.2		)	0.1			(0.4		)
Total Change in Interest Expense		0.2			(1.9		)	0.3			(1.4		)
Change in Net Interest Income		$	3.9		$	(4.6	)	$	0.2		$	(0.5	)

 

(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.

 

11

 

Bank of Hawaii Corporation and Subsidiaries
Loan Portfolio Balances (Unaudited)										Table 7

 

(dollars in millions)		June 30, 2003			March 31, 2003			December 31, 2002			June 30, 2002 (1)
Domestic
Commercial
Commercial and Industrial		$	808.5		$	824.9		$	875.0		$	993.4
Commercial Mortgage		689.7			691.7			591.1			562.5
Construction		83.6			86.7			127.5			148.6
Lease Financing		416.9			430.4			427.3			432.7
Total Commercial		1,998.7			2,033.7			2,020.9			2,137.2
Consumer
Residential Mortgage		2,222.0			2,305.3			2,131.4			2,361.2
Home Equity		450.3			439.1			428.2			404.2
Purchased Home Equity		145.6			170.9			185.8			—
Other Consumer		554.8			518.5			493.3			403.2
Lease Financing		34.0			33.8			34.5			37.3
Total Consumer		3,406.7			3,467.6			3,273.2			3,205.9
Total Domestic		5,405.4			5,501.3			5,294.1			5,343.1
Foreign		66.5			64.1			64.9			66.1
Total Loans		$	5,471.9		$	5,565.4		$	5,359.0		$	5,409.2

 

Selected Concentrations of Credit Exposure (Unaudited)

 

		June 30, 2003									Dec. 31, 2002			June 30, 2002
(dollars in millions)		Outstanding			Unused Commitments			Total Exposure			Total Exposure			Total Exposure
Air Transportation
Regional Passenger Carriers		$	45.8		$	11.7		$	57.5		$	57.3		$	58.0
United States Based Passenger Carriers		39.8			—			39.8			39.6			49.0
International Based Passenger Carriers		31.8			—			31.8			32.1			32.0
Cargo Carriers		14.7			—			14.7			15.0			15.0
Total Air Transportation		$	132.1		$	11.7		$	143.8		$	144.0		$	154.0
Guam
Hotel (2)		$	42.8		$	-		$	42.8		$	44.4		$	43.0
Other Commercial		148.3			35.5			183.8			166.0			230.2
Consumer		259.0			6.8			265.8			257.4			283.3
Total Guam		$	450.1		$	42.3		$	492.4		$	467.8		$	556.5
Syndicated Exposure		$	278.3		$	606.8		$	885.1		$	1,002.1		$	1,096.2

 

Exposure includes loans, leveraged leases and operating leases.

 

(1)               Certain 2002 information has been reclassified to conform to 2003 presentation.

(2)               A $25.0 million payment-in-full was received in mid-July reducing Hotel exposure to $17.8 million.

 

12

 

Bank of Hawaii Corporation and Subsidiaries
Consolidated Non-Performing Assets and Accruing Loans Past Due 90 Days or More  (Unaudited)		Table 8

 

(dollars in millions)		June 30, 2003			March 31, 2003			December 31, 2002			September 30, 2002 (1)			June 30, 2002 (1)
Non-Performing Assets
Non-Accrual Loans
Commercial
Commercial and Industrial		$	8.8		$	2.4		$	5.9		$	6.4		$	14.4
Commercial Mortgage		11.2			17.9			20.3			18.1			25.3
Construction		—			—			0.5			0.9			0.7
Lease Financing		2.5			3.2			4.1			5.7			6.9
Total Commercial		22.5			23.5			30.8			31.1			47.3
Consumer
Residential Mortgage		10.2			11.5			13.9			14.3			14.2
Home Equity		—			0.1			0.3			0.2			0.1
Other Consumer		—			—			—			0.1			—
Total Consumer		10.2			11.6			14.2			14.6			14.3
Total Non-Accrual Loans		32.7			35.1			45.0			45.7			61.6
Foreclosed Real Estate		9.3			9.1			9.4			17.6			17.2
Total Non-Performing Assets		$	42.0		$	44.2		$	54.4		$	63.3		$	78.8
Accruing Loans Past Due 90 Days or More
Commercial
Commercial and Industrial		$	0.5		$	—		$	0.2		$	—		$	—
Commercial Mortgage		—			0.4			0.3			—			—
Total Commercial		0.5			0.4			0.5			—			—
Consumer
Residential Mortgage		1.8			1.6			0.6			1.4			0.9
Home Equity		0.1			—			—			—			—
Purchased Home Equity		0.1			—			—			—			—
Other Consumer		0.4			2.3			0.7			0.3			0.5
Lease Financing		—			—			—			—			0.1
Tota1 Consumer		2.4			3.9			1.3			1.7			1.5
Total Accruing and Past Due		$	2.9		$	4.3		$	1.8		$	1.7		$	1.5
Total Loans		$	5,471.9		$	5,565.4		$	5,359.0		$	5,259.3		$	5,409.2
Ratio of Non-Accrual Loans to Total Loans		0.60		%	0.63		%	0.84		%	0.87		%	1.14		%
Ratio of Non-Performing Assets to Total Loans, Foreclosed Real Estate and Non-Performing Loans Held for Sale		0.77		%	0.79		%	1.01		%	1.20		%	1.45		%
Ratio of Non-Performing Assets and Accruing Loans Past Due 90 Days or More to Total Loans		0.82		%	0.87		%	1.05		%	1.24		%	1.48		%
Quarter to Quarter Changes in Non-Performing Assets
Balance at Beginning of Quarter		$	44.2		$	54.4		$	63.3		$	78.8		$	90.7
Additions		11.6			4.8			12.0			7.0			20.5
Reductions
Payments and Sales of Loans		(4.3		)	(5.6		)	(6.9		)	(8.5		)	(20.6		)
Return to Accrual		(7.5		)	(5.6		)	(1.9		)	(9.1		)	(6.2		)
Sales of Foreclosed Assets		(0.7		)	(1.1		)	(9.4		)	(1.4		)	(3.5		)
Charge-offs		(1.3		)	(2.7		)	(2.7		)	(3.5		)	(2.1		)
Total Reductions		(13.8		)	(15.0		)	(20.9		)	(22.5		)	(32.4		)
Balance at End of Quarter		$	42.0		$	44.2		$	54.4		$	63.3		$	78.8

 

(1)               Certain 2002 information has been reclassified to conform to 2003 presentation.

 

13

 

Bank of Hawaii Corporation and Subsidiaries
Consolidated Allowance for Loan and Lease Losses (Unaudited)					Table 9

 

		Three Months Ended									Six Months Ended June 30,
(dollars in millions)		June 30, 2003			March 31, 2003			June 30, 2002 (1)			2003			2002 (1)
Balance at Beginning of Period		$	140.0		$	142.9		$	159.0		$	142.9		$	159.0
Loans Charged-Off
Commercial
Commercial and Industrial		(0.6		)	(1.6		)	(2.8		)	(2.2		)	(10.1		)
Commercial Mortgage		(0.4		)	—			(0.4		)	(0.4		)	(0.4		)
Construction		—			(0.5		)	—			(0.5		)	(0.5		)
Lease Financing		(0.3		)	—			(0.1		)	(0.3		)	(0.1		)
Consumer
Residential Mortgage		(0.7		)	(0.7		)	(1.0		)	(1.4		)	(2.4		)
Home Equity		—			(0.1		)	(0.1		)	(0.1		)	(0.2		)
Other Consumer		(3.6		)	(3.1		)	(3.0		)	(6.7		)	(6.7		)
Lease Financing		—			(0.1		)	(0.1		)	(0.1		)	(0.2		)
Total Charge-Offs		(5.7		)	(6.1		)	(7.5		)	(11.7		)	(20.6		)
Recoveries on Loans Previously Charged-Off
Commercial
Commercial and Industrial		1.8			0.6			2.1			2.4			2.8
Commercial Mortgage		0.1			—			0.1			0.1			1.9
Construction		0.1			0.9			—			1.0			—
Consumer
Residential Mortgage		0.3			0.2			0.4			0.5			0.7
Home Equity		—			0.1			—			0.1			0.1
Other Consumer		1.3			1.3			1.5			2.6			3.3
Lease Financing		—			0.1			—			0.1			—
Foreign		—			0.1			0.1			0.1			0.2
Total Recoveries		3.6			3.3			4.2			6.9			9.0
Net Loan Charge-Offs		(2.1		)	(2.8		)	(3.3		)	(4.9		)	(11.6		)
Provision for Loan and Lease Losses		—			—			3.3			—			11.6
Balance at End of Period		$	138.0		$	140.0		$	159.0		$	138.0		$	159.0
Average Loans Outstanding		$	5,518.4		$	5,460.8		$	5,504.5		$	5,489.8		$	5,544.7
Ratio of Net Charge-Offs to Average Loans Outstanding (annualized)		0.15		%	0.21		%	0.24		%	0.18		%	0.42		%
Ratio of Allowance to Loans Outstanding		2.52		%	2.52		%	2.94		%	2.52		%	2.94		%

 

(1)     Certain 2002 information has been reclassified to conform to 2003 presentation.

 

Totals may not add due to rounding.

 

14

 

Bank of Hawaii Corporation and Subsidiaries
Information Technology Systems Replacement Project (Unaudited)						Table 10

 

(dollars in millions)		Professional Fees			Employee Termination Benefits			Accelerated Depreciation			Other Associated Costs (1)			Total
Costs Incurred:
Three Months Ended:
September 30, 2002		$	1.9		$	1.0		$	3.2		$	0.5		$	6.6
December 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
Six Months Ended June 30, 2003		6.4			3.0			3.8			4.3			17.5
Total Costs Incurred		$	11.5		$	4.2		$	9.2		$	6.2		$	31.1
Total Expected Project Costs		$	12.6		$	5.3		$	9.2		$	8.4		$	35.5

 

(1)               Includes contract termination, equipment, excise tax and other costs.

 

15

 

Bank of Hawaii Corporation and Subsidiaries
Business Segment Selected Financial Information (Unaudited)	Table 11

 

(dollars in thousands)		Retail Banking			Commercial Banking			Investment Services Group			Treasury and Other Corporate			Consolidated Total
Three Months Ended June 30, 2003
Net Interest Income		$	57,375		$	36,382		$	3,332		$	(6,604	)	$	90,485
Provision for Loan and Lease Losses		(1,321		)	(1,022		)	—			2,343			—
Net Interest Income After Provision for Loan and Lease Losses		56,054			35,360			3,332			(4,261		)	90,485
Non-Interest Income		23,899			7,944			15,428			3,468			50,739
		79,953			43,304			18,760			(793		)	141,224
Information Technology Systems Replacement Project		(368		)	—			(90		)	(9,647		)	(10,105		)
Non-Interest Expense		(42,126		)	(23,205		)	(15,937		)	(4,021		)	(85,289		)
Income Before Income Taxes		37,459			20,099			2,733			(14,461		)	45,830
Provision for Income Taxes		(13,860		)	(7,319		)	(1,011		)	6,394			(15,796		)
Allocated Net Income (Loss)		23,599			12,780			1,722			(8,067		)	30,034
Allowance Funding Value		(161		)	(1,100		)	(7		)	1,268			—
GAAP Provision		1,321			1,022			—			(2,343		)	—
Economic Provision		(2,901		)	(3,027		)	(112		)	(5		)	(6,045		)
Tax Effect of Adjustments		644			1,149			44			400			2,237
Income Before Capital Charge		22,502			10,824			1,647			(8,747		)	26,226
Capital Charge		(5,494		)	(5,350		)	(1,512		)	(13,275		)	(25,631		)
Net Income (Loss) After Capital Charge (NIACC)		$	17,008		$	5,474		$	135		$	(22,022	)	$	595
RAROC (ROE for the Company)		45		%	22		%	12		%	(7		)%	13		%
Total Assets at June 30, 2003		$	3,482,754		$	2,207,816		$	127,894		$	3,732,470		$	9,550,934
Three Months Ended June 30, 2002
Net Interest Income		$	48,996		$	34,705		$	3,140		$	6,096		$	92,937
Provision for Loan and Lease Losses		(549		)	(3,096		)	—			321			(3,324		)
Net Interest Income After Provision for Loan and Lease Losses		48,447			31,609			3,140			6,417			89,613
Non-Interest Income		18,435			8,752			17,376			3,355			47,918
		66,882			40,361			20,516			9,772			137,531
Non-Interest Expense		(44,512		)	(24,372		)	(18,059		)	(2,427		)	(89,370		)
Income Before Income Taxes		22,370			15,989			2,457			7,345			48,161
Provision for Income Taxes		(8,277		)	(5,834		)	(909		)	(2,125		)	(17,145		)
Allocated Net Income		14,093			10,155			1,548			5,220			31,016
Allowance Funding Value		(204		)	(1,597		)	(4		)	1,805			—
GAAP Provision		549			3,096			—			(321		)	3,324
Economic Provision		(2,905		)	(3,667		)	(124		)	—			(6,696		)
Tax Effect of Adjustments		947			802			47			(548		)	1,248
Income Before Capital Charge		12,480			8,789			1,467			6,156			28,892
Capital Charge		(5,248		)	(6,044		)	(1,620		)	(21,490		)	(34,402		)
Net Income (Loss) After Capital Charge (NIACC)		$	7,232		$	2,745		$	(153	)	$	(15,334	)	$	(5,510	)
RAROC (ROE for the Company)		26		%	16		%	10		%	28		%	10		%
Total Assets at June 30, 2002		$	3,217,645		$	2,392,041		$	115,119		$	4,099,260		$	9,824,065

 

16

 

Table 11a

 

(dollars in thousands)		Retail Banking			Commercial Banking			Investment Services Group			Treasury and Other Corporate			Consolidated Total
Six Months Ended June 30, 2003
Net Interest Income		$	112,359		$	72,769		$	7,302		$	(10,945	)	$	181,485
Provision for Loan and Lease Losses		(2,169		)	(3,173		)	—			5,342			—
Net Interest Income After Provision for Loan and Lease Losses		110,190			69,596			7,302			(5,603		)	181,485
Non-Interest Income		41,285			16,359			31,107			6,741			95,492
		151,475			85,955			38,409			1,138			276,977
Information Technology Systems Replacement Project		(950		)	(23		)	(334		)	(16,215		)	(17,522		)
Non-Interest Expense		(82,795		)	(45,924		)	(31,841		)	(7,512		)	(168,072		)
Income Before Income Taxes		67,730			40,008			6,234			(22,589		)	91,383
Provision for Income Taxes		(25,060		)	(14,589		)	(2,307		)	10,408			(31,548		)
Allocated Net Income (Loss)		42,670			25,419			3,927			(12,181		)	59,835
Allowance Funding Value		(313		)	(2,241		)	(17		)	2,571			—
GAAP Provision		2,169			3,173			—			(5,342		)	—
Economic Provision		(5,609		)	(6,086		)	(244		)	(10		)	(11,949		)
Tax Effect of Adjustments		1,389			1,907			97			1,028			4,421
Income Before Capital Charge		40,306			22,172			3,763			(13,934		)	52,307
Capital Charge		(10,886		)	(10,728		)	(3,030		)	(27,739		)	(52,383		)
Net Income (Loss) After Capital Charge (NIACC)		$	29,420		$	11,444		$	733		$	(41,673	)	$	(76	)
RAROC (ROE for the Company)		41		%	23		%	14		%	(5		)%	13		%
Total Assets at June 30, 2003		$	3,482,754		$	2,207,816		$	127,894		$	3,732,470		$	9,550,934
Six Months Ended June 30, 2002
Net Interest Income		$	98,552		$	70,335		$	6,140		$	12,805		$	187,832
Provision for Loan and Lease Losses		(2,491		)	(9,606		)	—			481			(11,616		)
Net Interest Income After Provision for Loan and Lease Losses		96,061			60,729			6,140			13,286			176,216
Non-Interest Income		42,487			17,373			35,200			5,883			100,943
		138,548			78,102			41,340			19,169			277,159
Restructuring and Other Related Costs		—			—			—			(1,979		)	(1,979		)
Non-Interest Expense		(90,826		)	(49,327		)	(34,119		)	(4,542		)	(178,814		)
Income Before Income Taxes		47,722			28,775			7,221			12,648			96,366
Provision for Income Taxes		(17,657		)	(10,489		)	(2,672		)	(3,476		)	(34,294		)
Allocated Net Income		30,065			18,286			4,549			9,172			62,072
Allowance Funding Value		(471		)	(3,149		)	(11		)	3,631			—
GAAP Provision		2,491			9,606			—			(481		)	11,616
Economic Provision		(5,409		)	(7,905		)	(251		)	(3		)	(13,568		)
Tax Effect of Adjustments		1,254			536			97			(1,165		)	722
Income Before Capital Charge		27,930			17,374			4,384			11,154			60,842
Capital Charge		(10,571		)	(12,603		)	(3,121		)	(42,856		)	(69,151		)
Net Income (Loss) After Capital Charge (NIACC)		$	17,359		$	4,771		$	1,263		$	(31,702	)	$	(8,309	)
RAROC (ROE for the Company)		29		%	15		%	16		%	26		%	10		%
Total Assets at June 30, 2002		$	3,217,645		$	2,392,041		$	115,119		$	4,099,260		$	9,824,065

 

17

 

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 share amounts)		June 30, 2003			March 31, 2003			December 31, 2002			September 30, 2002			June 30, 2002			March 31, 2002
Quarterly Operating Results
Interest Income
Interest and Fees on Loans and Leases		$	85,954		$	85,773		$	85,945		$	89,335		$	92,441		$	98,645
Income on Investment Securities - Held to Maturity		3,083			2,283			3,122			3,963			4,544			5,145
Income on Investment Securities - Available for Sale		19,815			22,463			24,088			26,175			26,805			27,193
Deposits		1,161			1,307			3,578			5,384			6,011			5,047
Funds Sold and Security Resale Agreements		822			764			834			914			752			1,003
Other		1,016			1,189			1,312			1,575			1,395			1,332
Total Interest Income		111,851			113,779			118,879			127,346			131,948			138,365
Interest Expense
Deposits		13,309			14,447			17,657			20,547			22,166			23,978
Security Repurchase Agreements		2,391			2,242			4,585			7,039			8,256			10,293
Funds Purchased		219			205			255			299			245			231
Short-Term Borrowings		25			24			217			334			289			649
Long-Term Debt		5,422			5,861			5,947			6,946			8,055			8,319
Total Interest Expense		21,366			22,779			28,661			35,165			39,011			43,470
Net Interest Income		90,485			91,000			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		90,485			91,000			90,218			92,181			89,613			86,603
Non-Interest Income
Trust and Asset Management		12,545			13,181			13,085			13,655			14,175			14,818
Mortgage Banking		6,061			283			4,398			3,669			2,842			7,957
Service Charges on Deposit Accounts		8,645			8,950			8,326			7,925			7,956			8,410
Fees, Exchange, and Other Service Charges		13,473			12,989			12,963			13,114			13,065			12,452
Investment Securities Gains		587			583			612			—			3			—
Insurance		2,991			2,982			3,099			2,677			2,563			2,599
Other		6,437			5,785			7,872			5,997			7,314			6,789
Total Non-Interest Income		50,739			44,753			50,355			47,037			47,918			53,025
Non-Interest Expense
Salaries		39,232			36,459			38,462			37,994			37,884			39,187
Pensions and Other Employee Benefits		8,479			9,970			6,272			7,377			9,391			9,996
Net Occupancy Expense		9,628			9,613			10,638			9,597			9,321			9,593
Net Equipment Expense		9,208			9,748			11,077			10,058			9,997			10,121
Restructuring and Other Related Costs		—			—			385			—			—			1,979
Information Technology Systems Replacement Project		10,105			7,417			7,052			6,576			—			—
Other		18,742			16,993			22,827			20,141			22,777			20,547
Total Non-Interest Expense		95,394			90,200			96,713			91,743			89,370			91,423
Income Before Income Taxes		45,830			45,553			43,860			47,475			48,161			48,205
Provision for Income Taxes		15,796			15,752			14,952			17,275			17,145			17,149
Net Income		$	30,034		$	29,801		$	28,908		$	30,200		$	31,016		$	31,056
Basic Earnings Per Share		$	0.50		$	0.49		$	0.45		$	0.44		$	0.43		$	0.42
Diluted Earnings Per Share		$	0.48		$	0.47		$	0.44		$	0.43		$	0.42		$	0.41
Balance Sheet Totals
Total Assets		9,550,934			9,410,210			9,516,418			9,702,700			9,824,065			10,245,021
Net Loans		5,333,896			5,425,343			5,216,151			5,104,857			5,250,216			5,442,601
Total Deposits		7,140,849			6,987,331			6,920,161			6,627,673			6,455,981			6,543,781
Total Shareholders’ Equity		913,010			952,007			1,015,759			1,100,706			1,191,072			1,265,907
Performance Ratios
Return on Average Assets		1.27		%	1.31		%	1.20		%	1.22		%	1.23		%	1.21		%
Return on Average Equity		12.93		%	12.42		%	10.72		%	10.40		%	9.94		%	9.97		%
Efficiency Ratio		67.55		%	66.44		%	68.80		%	65.90		%	63.45		%	61.81		%
Efficiency Ratio excluding ITSRP and Restructuring Costs		60.39		%	60.98		%	63.51		%	61.18		%	63.45		%	60.47		%

 

(1)               Certain 2002 information has been reclassified to conform to 2003 presentation.

 

18