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

 

 

BANK OF HAWAII CORPORATION

(Exact name of registrant as specified in its charter)

 

 

 

Item 12.                                                       Results of Operations and Financial Conditions.

 

(a)            Exhibit 99.1

 

Press Release: Bank of Hawaii Corporation First Quarter 2004 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.

 

Date: April 26, 2004	BANK OF HAWAII CORPORATION
	/s/ Michael E. O’Neill
	Michael E. O’Neill
	Chairman and Chief Executive

 

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 April 26, 2004

 

 

Commission File Number 1-6887

 

 

 

Bank of Hawaii Corporation First Quarter 2004 Financial Results

 

•                  Diluted Earnings Per Share Increases to $0.69, Up Over 46 Percent

•                  Net Income of $39.8 Million for the Quarter, Up Over 33 Percent

•                  $50 Million Additional Share Repurchase Program Announced

•                  Board of Directors Declares Dividend of $0.30 Per Share

 

FOR IMMEDIATE RELEASE

 

HONOLULU, HI (April 26, 2004) — Bank of Hawaii Corporation (NYSE: BOH) today reported diluted earnings per share of $0.69 for the first quarter of 2004, up $0.03 or 4.5 percent from diluted earnings per share of $0.66 in the fourth quarter of 2003 and up $0.22 or 46.8 percent from $0.47 in the comparable quarter last year.  Net income for the first quarter of 2004 was $39.8 million, up $1.1 million or 2.9 percent from net income of $38.7 million in the previous quarter and up $10.0 million or 33.5 percent from $29.8 million reported in the same quarter last year.

 

The return on average assets for the first quarter of 2004 was 1.65 percent, essentially flat with 1.66 percent in the fourth quarter of 2003 and up from 1.31 percent in the first quarter of 2003.  The return on average equity was 19.98 percent for the first quarter of 2004, up from 18.59 percent in the previous quarter and a significant improvement from 12.42 percent in the same quarter last year.

 

The efficiency ratio was 57.3 percent for the first quarter of 2004, down from 58.4 percent in the fourth quarter of 2003.  Excluding systems replacement costs, the efficiency ratio was 61.0 percent in the first quarter of 2003.

 

“I am very pleased with the first quarter results for 2004,” said Michael E. O’Neill, Chairman and CEO.  “By all measures we have performed extremely well; our returns have improved, our operating leverage was positive, asset quality remains solid, customer and employee confidences have reached new highs, and the Hawaii economy continues to reflect strength.  Bank of Hawaii is well positioned to build on the tremendous momentum the Company has generated.”

 

- more -

 

 

 

Financial Highlights

 

Net interest income for the first quarter of 2004 was $96.1 million on a taxable equivalent basis, up $2.7 million from net interest income of $93.4 million in the fourth quarter of 2003, primarily due to increased earning assets.  Net interest income was up $5.1 million from $91.0 million in the first quarter of 2003 and was largely the result of lower interest rates paid on deposits and a reduction in long-term debt.  An analysis of the change in net interest income is included in Table 6.

 

The net interest margin was 4.30 percent for the first quarter of 2004, down 5 basis points from the net interest margin of 4.35 in the previous quarter and up 1 basis point from 4.29 the same quarter last year.  The decrease in the net interest margin compared to the previous quarter was largely due to a 5 basis point decrease in the average yield on the loan portfolio.

 

Credit quality continued to improve during the quarter.  The Company did not recognize a provision for loan and lease losses during the first quarter of 2004 and has not recorded a provision for the last seven quarters.  The allowance for loan and lease losses was reduced $1.9 million from December 31, 2003, which equaled the amount of net charge-offs during the quarter.

 

Non-interest income was $48.8 million for the quarter compared to non-interest income of $49.4 million in the fourth quarter of 2003 and $44.8 million in the first quarter of 2003.  The decrease from the previous quarter was largely due to a reduction in mortgage banking income that offset growth in trust and asset management fees and service charges on deposits.

 

Non-interest expense for the first quarter of 2004 was $83.0 million, down $0.4 from $83.4 million in the previous quarter and down $7.2 million or 8.0 percent from $90.2 million in the same quarter last year.  Non-interest expense in the first quarter of 2003 included $7.4 million in systems replacement costs.  Excluding these items, non-interest expenses were essentially unchanged from the same quarter last year.

 

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

 

Asset Quality

 

Bank of Hawaii Corporation’s strong credit quality continued during the first quarter of 2004.  Non-performing assets were $27.9 million at the end of the quarter, a decrease of $3.9 million, or 12.2 percent, from non-performing assets of $31.7 million at the end of the fourth quarter of 2003.  Non-performing assets declined $16.4 million, or 37.0 percent, compared to non-performing assets of $44.2 million in the same period last year.  At March 31, 2004 the ratio of non-performing assets to total loans and foreclosed real estate was 0.49 percent, down from 0.55 percent at December 31, 2003 and down from 0.79 percent at March 31, 2003.

 

Non-accrual loans were $23.5 million at March 31, 2004, a reduction of $3.9 million, or 14.3 percent, from $27.3 million at December 31, 2003 and down $11.7 million, or 33.2 percent, from $35.1 million at March 31, 2003.  Non-accrual loans as a percentage of total loans were 0.41

 

2

 

percent at March 31, 2004 down from 0.48 percent at the end of the previous quarter and down from 0.63 percent at the end of the comparable quarter last year.

 

Net charge-offs for the first quarter of 2004 were $1.9 million, or 0.13 percent (annualized) of total average loans.  Charge-offs during the quarter of $6.1 million were partially offset by recoveries of $4.2 million.  Net charge-offs in the fourth quarter of 2003 were $3.6 million, or 0.26 percent (annualized) of total average loans.  Net charge-offs during the first quarter of 2003 were $2.8 million, or 0.21 percent (annualized) of total average loans.

 

The allowance for loan and lease losses was $127.2 million at March 31, 2004.  The ratio of the allowance for loan and lease losses to total loans was 2.23 percent at March 31, 2004 compared with 2.24 percent at December 31, 2003 and 2.52 percent at the end of the same quarter last year.

 

Concentrations of credit exposure to selected components of the portfolio are summarized in Table 8.

 

Other Financial Highlights

 

Total assets increased to $10.0 billion at the end of March 31, 2004, compared to total assets of $9.5 billion at the end of December 31, 2003 and $9.4 billion at the end of March 31, 2003.  The increase in total assets is primarily related to a higher level of funding resulting from securities repurchase agreements by public entities and continued deposit growth.

 

Total deposits at March 31, 2004 were $7.4 billion, up from total deposits of $7.3 billion at December 31, 2003 and up from total deposits of $7.0 billion at March 31, 2003.  The increase in deposits is due to continued strong growth in demand and savings deposits.

 

During the first quarter of 2004, Bank of Hawaii Corporation repurchased 1.3 million shares of common stock at a total cost of $57.8 million under the share repurchase program.  The average cost per share was $44.77 during the quarter.  From the beginning of the share repurchase program in July 2001 through March 31, 2004, the Company had repurchased a total of 31.1 million shares and returned a total of $912.9 million to the shareholders at an average cost of $29.34 per share.  The Company’s Board of Directors has authorized an additional program to repurchase up to $50 million of common stock.  This new authorization, combined with the Company’s previously announced authorizations of $1.0 billion, brings the total repurchase authority to $1,050 million.  Through April 23, 2004, the Company repurchased an additional 1.0 million shares of common stock at an average cost of $43.92 per share.  Remaining buyback authority was $93.9 million at April 23, 2004.

 

The Company’s capital and liquidity remain strong.  At March 31, 2004 the Tier 1 leverage ratio was 7.88 percent compared to 8.43 percent at December 31, 2003 and 10.03 percent at March 31, 2003.

 

The Company’s Board of Directors has declared a quarterly cash dividend of $0.30 per share on the Company’s outstanding shares.  The dividend will be payable on June 14, 2004 to shareholders of record at the close of business on May 24, 2004.

 

3

 

Economic Outlook

 

First quarter 2004 visitor growth increased 6.0 percent, including a 9.0 percent gain in domestic travelers.  The strong yen is expected to further help the tourism-dependent sectors of the Hawaii economy.

 

Hawaii’s real growth is most recently forecast at 3.5 percent for 2004 after adjusting for increasing inflation due to higher housing costs.  Hawaii construction should remain strong in 2004, based on 20.0 percent growth in the 2003 value of residential building permits, and a doubling in nonresidential building permits, combined with military housing construction.  Record high home prices continued rising during first quarter 2004 along with statewide home sales volumes.  Interest rate sensitivity is expected to be modest and strong fundamentals support the local housing valuation trends.

 

Tight labor market conditions in Hawaii persisted during the first quarter of 2004.  Statewide unemployment declined from 4.4 percent in the fourth quarter of 2003 to 3.9 percent in the first quarter of 2004.  Overall, Hawaii job growth continued at around 2.0 percent through the first quarter, with the construction sector leading (up 7.0 percent) and the information sector lagging (down 9.0 percent).  External pressures that could constrain the economic growth in Hawaii include higher petroleum prices and a rising interest rate environment.

 

Earnings Outlook

 

Bank of Hawaii Corporation’s previously published earnings guidance of approximately $157 million in net income for the full year of 2004 remains unchanged.  Based on current conditions, the Company does not expect to record a provision for loan and lease losses in 2004.  However, the actual amount of the provision for loan and lease losses depends on determinations of credit risk that are made near the end of each quarter.  Earnings per share and return on equity projections continue to be dependent upon the terms and timing of share repurchases.

 

Conference Call Information

 

The Company will review its first quarter 2004 financial results today at 8:00 a.m. Hawaii Time (2:00 p.m. Eastern Time).  The presentation will be accessible via teleconference and via the Investor Relations link of Bank of Hawaii Corporation’s web site, www.boh.com.  The conference call number is 800-299-7635 in the United States or 617-786-2901 for international callers.  No confirmation code is required to access the call.  A replay will be available for one week beginning at 10:00 a.m. Hawaii Time (4:00 p.m. Eastern Time) on Monday, April 26, 2004 by calling 888-286-8010 in the United States or 617-801-6888 for international callers and entering the number 65319657 when prompted.  A replay of the presentation will also be available via the Investor Relations link of the Company’s web site.

 

Bank of Hawaii Corporation is a regional financial services company serving businesses, consumers and governments in Hawaii, American Samoa and the West Pacific.  The Company’s principal subsidiary, Bank of Hawaii, was founded in 1897 and is the largest independent financial institution in Hawaii.  For more information about Bank of Hawaii Corporation, see the Company’s web site, www.boh.com.

 

4

 

This news release contains forward-looking statements concerning, among other things, the economic environment in our service area, the expected level of loan loss provisioning, the effect of our new three-year plan, and anticipated dividends, revenues and expenses during 2004 and beyond.  We believe the assumptions underlying our forward-looking statements are reasonable.  However, any of the assumptions could prove to be inaccurate and actual results may differ materially from those projected for a variety of reasons, including, but not limited to: 1) unanticipated changes in business and economic conditions, the competitive environment, fiscal and monetary policies, or legislation in Hawaii and the other markets we serve; 2) changes in our credit quality or risk profile which may increase or decrease the required level of allowance for loan and lease losses; 3) changes in market interest rates that may affect our credit markets and ability to maintain our net interest margin; 4) changes to the amount and timing of our proposed equity repurchases; 5) inability to achieve expected benefits of our business process changes due to adverse changes in implementation processes or costs, operational savings, or timing; 6) real or threatened acts of war or terrorist activity affecting business conditions; and 7) adverse weather and other natural conditions impacting our and our customers’ operations.  We do not undertake any obligation to update forward-looking statements to reflect later events or circumstances.

 

# # # #

 

5

 

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

 

(dollars in thousands except per share amounts)

		Three Months Ended March 31,
Earnings Highlights and Performance Ratios		2004			2003
Net Income		$	39,799		$	29,801
Basic Earnings Per Share		0.73			0.49
Diluted Earnings Per Share		0.69			0.47
Cash Dividends		16,418			11,562
Net Income to Average Total Assets (ROA)		1.65		%	1.31		%
Net Income to Average Shareholders’ Equity (ROE)		19.98		%	12.42		%
Net Interest Margin		4.30		%	4.29		%
Efficiency Ratio (1)		57.31		%	66.44		%
Efficiency Ratio excluding System Replacement Costs		57.31		%	60.98		%

 

		March 31,
Statement of Condition Highlights and Performance Ratios		2004			2003
Total Assets		$	10,013,442		$	9,410,210
Net Loans		5,587,811			5,425,343
Total Deposits		7,363,922			6,987,331
Total Shareholders’ Equity		785,768			952,007
Book Value Per Common Share		$	14.49		$	15.76
Allowance / Loans and Leases Outstanding		2.23		%	2.52		%
Average Equity / Average Assets		8.28		%	10.53		%
Employees (FTE)		2,703			2,891
Branches and offices		89			91
Market Price Per Share of Common Stock for the Quarter Ended:
Closing		$	46.33		$	30.80
High		$	47.45		$	31.50
Low		$	41.75		$	29.25

 

(1) The efficiency ratio is defined as non-interest expense divided by total revenue (net interest income and non-interest income).

 

 

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

 

		Three Months Ended
(dollars in thousands except per share amounts)		March 31, 2004			March 31, 2003
Interest Income
Interest and Fees on Loans and Leases		$	81,428		$	85,773
Income on Investment Securities - Held to Maturity		6,976			2,283
Income on Investment Securities - Available for Sale		20,846			22,463
Deposits		1,231			1,307
Funds Sold		417			764
Other		858			1,189
Total Interest Income		111,756			113,779
Interest Expense
Deposits		9,200			14,447
Security Repurchase Agreements		1,926			2,242
Funds Purchased		231			205
Short-Term Borrowings		15			24
Long-Term Debt		4,353			5,861
Total Interest Expense		15,725			22,779
Net Interest Income		96,031			91,000
Provision for Loan and Lease Losses		—			—
Net Interest Income After Provision for Loan and Lease Losses		96,031			91,000
Non-Interest Income
Trust and Asset Management		13,864			13,181
Mortgage Banking		1,977			283
Service Charges on Deposit Accounts		9,950			8,950
Fees, Exchange, and Other Service Charges		13,239			12,989
Investment Securities Gains		—			583
Insurance		3,643			3,080
Other		6,169			5,687
Total Non-Interest Income		48,842			44,753
Non-Interest Expense
Salaries and Benefits		46,001			46,429
Net Occupancy Expense		9,386			9,613
Net Equipment Expense		5,964			9,748
Information Technology Systems Replacement Project		—			7,417
Other		21,671			16,993
Total Non-Interest Expense		83,022			90,200
Income Before Income Taxes		61,851			45,553
Provision for Income Taxes		22,052			15,752
Net Income		$	39,799		$	29,801
Basic Earnings Per Share		$	0.73		$	0.49
Diluted Earnings Per Share		$	0.69		$	0.47
Dividends Declared Per Share		$	0.30		$	0.19
Basic Weighted Average Shares		54,286,648			61,294,460
Diluted Weighted Average Shares		57,746,520			63,535,609

 

 

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

 

(dollars in thousands)		March 31, 2004			March 31, 2003
Assets
Interest-Bearing Deposits		$	479,882		$	157,067
Investment Securities - Held to Maturity (Market Value of $719,308 and $180,043)		717,867			175,600
Investment Securities - Available for Sale		1,995,713			2,497,508
Funds Sold		255,000			175,000
Loans Held for Sale		67,328			47,269
Loans and Leases		5,714,996			5,565,371
Allowance for Loan and Lease Losses		(127,185		)	(140,028		)
Net Loans		5,587,811			5,425,343
Total Earning Assets		9,103,601			8,477,787
Cash and Non-Interest Bearing Deposits		313,090			331,994
Premises and Equipment		155,488			170,696
Customers’ Acceptance Liability		1,844			1,372
Accrued Interest Receivable		34,658			36,845
Foreclosed Real Estate		4,416			9,097
Mortgage Servicing Rights		21,138			25,801
Goodwill		36,216			36,216
Other Assets		342,991			320,402
Total Assets		$	10,013,442		$	9,410,210
Liabilities
Deposits
Non-Interest Bearing Demand		$	1,915,678		$	1,714,601
Interest Bearing Demand		1,407,494			1,164,975
Savings		2,888,877			2,669,409
Time		1,151,873			1,438,346
Total Deposits		7,363,922			6,987,331
Securities Sold Under Agreements to Repurchase		1,039,204			646,317
Funds Purchased		98,370			69,890
Short-Term Borrowings		11,349			12,096
Current Maturities of Long-Term Debt		102,252			118,792
Banker’s Acceptances Outstanding		1,844			1,372
Retirement Benefits Payable		62,298			62,091
Accrued Interest Payable		6,978			12,761
Taxes Payable and Deferred Taxes		228,785			206,139
Other Liabilities		95,091			70,644
Long-Term Debt		217,581			270,770
Total Liabilities		9,227,674			8,458,203
Shareholders’ Equity
Common Stock ($.01 par value); authorized 500,000,000 shares; issued / outstanding: March 2004 - 81,641,545 / 54,216,350, March 2003 - 81,276,420 / 60,418,539		807			807
Capital Surplus		396,335			372,887
Accumulated Other Comprehensive Income		4,289			8,273
Retained Earnings		1,222,602			1,133,642
Deferred Stock Grants		(7,594		)	74
Treasury Stock, at Cost (Shares: March 2004 - 27,425,195, March 2003 - 20,857,881)		(830,671		)	(563,676		)
Total Shareholders’ Equity		785,768			952,007
Total Liabilities and Shareholders’ Equity		$	10,013,442		$	9,410,210

 

 

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

 

(dollars in thousands)		Total			Common Stock			Capital Surplus			Accum. Other Compre- hensive Income (Loss)			Retained Earnings			Deferred Stock Grants			Treasury Stock			Compre- hensive Income
Balance at December 31, 2003		$	793,132		$	807		$	391,701		$	(5,711	)	$	1,199,077		$	(8,309	)	$	(784,433	)
Comprehensive Income:
Net Income		39,799			—			—			—			39,799			—			—			$	39,799
Other Comprehensive Income, Net of Tax:
Change in Unrealized Gains and Losses on Investment Securities		10,000			—			—			10,000			—			—			—			10,000
Total Comprehensive Income																							$	49,799
Common Stock Issued under Stock Plans and Related Tax Benefits (611,820 shares)		18,482			—			4,634			—			144			715			12,989
Treasury Stock Purchased (1,323,050 shares)		(59,227		)	—			—			—			—			—			(59,227		)
Cash Dividends Paid		(16,418		)	—			—			—			(16,418		)	—			—
Balance at March 31, 2004		$	785,768		$	807		$	396,335		$	4,289		$	1,222,602		$	(7,594	)	$	(830,671	)
Balance at December 31, 2002		$	1,015,759		$	806		$	372,192		$	11,659		$	1,115,910		$	(1,424	)	$	(483,384	)
Comprehensive Income:
Net Income		29,801			—			—			—			29,801			—			—			$	29,801
Other Comprehensive Income, Net of Tax:
Change in Unrealized Gains and Losses on Investment Securities		(3,386		)	—			—			(3,386		)	—			—			—			(3,386		)
Total Comprehensive Income																							$	26,415
Common Stock Issued under Stock Plans and Related Tax Benefits (261,802 shares)		7,721			1			695			—			(507		)	1,498			6,034
Treasury Stock Purchased (2,856,600 shares)		(86,326		)	—			—			—			—			—			(86,326		)
Cash Dividends Paid		(11,562		)	—			—			—			(11,562		)	—			—
Balance at March 31, 2003		$	952,007		$	807		$	372,887		$	8,273		$	1,133,642		$	74		$	(563,676	)

 

 

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

 

		Three Months Ended March 31, 2004								Three Months Ended December 31, 2003 (1)								Three Months Ended March 31, 2003 (1)
(dollars in millions)		Average Balance			Income/ Expense			Yield/ Rate		Average Balance			Income/ Expense			Yield/ Rate		Average Balance			Income/ Expense			Yield/ Rate
Earning Assets
Interest Bearing Deposits		$	249.6		$	1.2		1.98	%	$	218.6		$	1.2		2.12	%	$	253.8		$	1.3		2.09	%
Funds Sold		168.9			0.4			0.99		34.3			0.1			0.99		250.5			0.8			1.22
Investment Securities
Held to Maturity		719.6			7.0			3.90		742.1			7.2			3.89		202.0			2.3			4.61
Available for Sale		1,988.5			20.8			4.20		1,898.6			19.0			4.01		2,268.1			22.5			3.96
Loans Held for Sale		15.4			0.2			5.33		13.9			0.2			6.21		10.1			0.1			5.16
Loans and Leases
Commercial and Industrial		844.4			10.1			4.81		858.2			10.6			4.90		886.4			10.5			4.81
Construction		100.4			1.1			4.31		99.2			1.1			4.30		115.4			1.4			5.08
Commercial Mortgage		634.1			8.6			5.45		627.4			8.9			5.62		597.8			9.0			6.14
Residential Mortgage		2,317.5			33.3			5.75		2,336.3			34.5			5.90		2,249.0			37.7			6.70
Installment		651.0			14.3			8.84		598.1			13.4			8.89		501.9			12.8			10.36
Home Equity		489.2			5.8			4.75		453.0			5.6			4.89		434.5			5.7			5.28
Purchased Home Equity		204.9			2.7			5.18		104.7			0.6			2.24		180.2			2.6			5.78
Lease Financing		500.9			5.4			4.33		494.0			5.5			4.44		495.6			5.9			4.81
Total Loans and Leases		5,742.4			81.3			5.68		5,570.9			80.2			5.73		5,460.8			85.6			6.32
Other		77.5			0.9			4.45		76.8			1.0			5.20		74.6			1.2			6.47
Total Earning Assets		8,961.9			111.8			5.00		8,555.2			108.9			5.07		8,519.9			113.8			5.38
Cash and Non-Interest Bearing Deposits		327.6								323.5								331.6
Other Assets		388.4								379.1								391.5
Total Assets		$	9,677.9							$	9,257.8							$	9,243.0
Interest Bearing Liabilities
Interest Bearing Deposits
Demand		$	1,370.0		0.5			0.15		$	1,293.8		0.5			0.16		$	1,151.9		0.7			0.26
Savings		2,871.6			3.3			0.46		2,786.6			3.2			0.46		2,608.2			4.6			0.71
Time		1,188.8			5.4			1.83		1,227.9			5.7			1.83		1,472.1			9.2			2.52
Total Interest Bearing Deposits		5,430.4			9.2			0.68		5,308.3			9.4			0.71		5,232.2			14.5			1.12
Short-Term Borrowings		862.3			2.2			1.01		608.0			1.7			1.06		649.8			2.5			1.54
Long-Term Debt		320.9			4.3			5.44		324.2			4.4			5.43		390.4			5.8			6.02
Total Interest Bearing Liabilities		6,613.6			15.7			0.96		6,240.5			15.5			0.99		6,272.4			22.8			1.47
Net Interest Income					$	96.1							$	93.4							$	91.0
Interest Rate Spread								4.04	%							4.08	%							3.91	%
Net Interest Margin								4.30	%							4.35	%							4.29	%
Non-Interest Bearing Demand Deposits		1,889.5								1,836.4								1,636.8
Other Liabilities		373.6								355.7								360.7
Shareholders’ Equity		801.2								825.2								973.1
Total Liabilities and Shareholders’ Equity		$	9,677.9							$	9,257.8							$	9,243.0

 

(1) Certain 2003 information has been reclassified to conform to 2004 presentation.

 

 

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

 

		Three Months Ended March 31, 2004 Compared to December 31, 2003 (1)
(dollars in millions)		Volume (2)			Rate (2)			Time (2)			Total
Change in Interest Income:
Interest Bearing Deposits		$	0.1		$	(0.1	)	$	—		$	—
Funds Sold		0.3			—			—			0.3
Investment Securities
Held to Maturity		(0.2		)	—			—			(0.2		)
Available for Sale		0.9			0.9			—			1.8
Loans and Leases
Commercial and Industrial		(0.2		)	(0.2		)	(0.1		)	(0.5		)
Commercial Mortgage		0.1			(0.3		)	(0.1		)	(0.3		)
Residential Mortgage		(0.3		)	(0.9		)	—			(1.2		)
Installment		1.2			(0.2		)	(0.1		)	0.9
Home Equity		0.5			(0.2		)	(0.1		)	0.2
Purchased Home Equity		1.3			0.8			—			2.1
Lease Financing		0.1			(0.1		)	(0.1		)	(0.1		)
Total Loans and Leases		2.7			(1.1		)	(0.5		)	1.1
Other		—			(0.1		)	—			(0.1		)
Total Change in Interest Income		3.8			(0.4		)	(0.5		)	2.9
Change in Interest Expense:
Interest Bearing Deposits
Savings		0.1			—			—			0.1
Time		(0.2		)	—			(0.1		)	(0.3		)
Total Interest Bearing Deposits		(0.1		)	—			(0.1		)	(0.2		)
Short-Term Borrowings		0.6			(0.1		)	—			0.5
Long-Term Debt		(0.1		)	—			—			(0.1		)
Total Change in Interest Expense		0.4			(0.1		)	(0.1		)	0.2
Change in Net Interest Income		$	3.4		$	(0.3	)	$	(0.4	)	$	2.7

 

(1) Certain 2003 information has been reclassified to conform to 2004 presentation.

(2) The changes for each category of interest income and expense are allocated between the portion of changes attributable to the variance in volume, rate or time for that category.

 

 

Bank of Hawaii Corporation and Subsidiaries
Salaries and Benefits (Unaudited)		Table 7

 

		Three Months Ended
(dollars in thousands)		March 31, 2004			March 31, 2003
Salaries		$	27,204		$	28,514
Incentive Compensation		3,816			3,591
Stock Based Compensation		2,896			1,118
Commission Expense		1,627			2,487
Retirement and Other Benefits		4,357			4,451
Payroll Taxes		3,430			3,449
Medical, Dental, and Life Insurance		2,104			2,070
Separation Expense		567			749
Total Salaries and Benefits		$	46,001		$	46,429

 

 

Bank of Hawaii Corporation and Subsidiaries
Loan Portfolio Balances (Unaudited)		Table 8

 

(dollars in thousands)		March 31, 2004			December 31, 2003			March 31, 2003
Domestic Loans
Commercial
Commercial and Industrial		$	793,293		$	816,246		$	824,906
Commercial Mortgage		650,566			639,354			691,736
Construction		91,002			101,321			86,690
Lease Financing		442,590			435,934			430,342
Total Commercial		1,977,451			1,992,855			2,033,674
Consumer
Residential Mortgage		2,254,654			2,320,410			2,305,329
Home Equity		510,378			467,019			439,011
Purchased Home Equity		191,066			212,514			170,946
Other Consumer		671,893			658,831			518,501
Lease Financing		34,816			35,320			33,842
Total Consumer		3,662,807			3,694,094			3,467,629
Total Domestic Loans		5,640,258			5,686,949			5,501,303
Foreign Loans		74,738			70,226			64,068
Total Loans and Leases		$	5,714,996		$	5,757,175		$	5,565,371

 

Selected Concentrations of Credit Exposure (Unaudited)

 

(dollars in thousands)		Outstanding			March 31, 2004 Unused Commitments			Total Exposure			Dec. 31, 2003 (1) Total Exposure			March 31, 2003 (1) Total Exposure
Air Transportation
United States Regional Passenger Carriers		$	46,003		$	12,173		$	58,176		$	59,231		$	60,888
United States National Passenger Carriers		37,413			—			37,413			37,259			37,441
Passenger Carriers Based Outside United States		30,475			—			30,475			31,549			31,922
Cargo Carriers		14,122			—			14,122			14,405			14,739
Total Air Transportation		$	128,013		$	12,173		$	140,186		$	142,444		$	144,990
Guam
Hotel		$	15,692		$	—		$	15,692		$	17,733		$	42,843
Other Commercial		130,128			45,920			176,048			184,129			171,300
Consumer		290,966			12,638			303,604			288,831			263,900
Total Guam		$	436,786		$	58,558		$	495,344		$	490,693		$	478,043
Syndicated Exposure		$	297,512		$	642,624		$	940,136		$	912,896		$	997,516
Other Large Borrowers (2)		$	86,658		$	235,143		$	321,801		$	336,748		$	381,386

 

Exposure includes loans, leveraged leases and operating leases.

 

(1) For three borrowers, reclassifications have occurred between Regional and National Carriers. Syndicated Exposure has been restated to include a purchased participation.

(2) Other Large Borrowers is defined as exposure with commitments of $25 million and greater, excluding those collateralized by cash and those separately identified as Air Transportation, Guam, and Syndicated Exposure.

 

 

Bank of Hawaii Corporation and Subsidiaries
Consolidated Non-Performing Assets and Accruing Loans Past Due 90 Days or More (Unaudited)		Table 9

 

(dollars in thousands)		March 31, 2004			December 31, 2003			September 30, 2003			June 30, 2003			March 31, 2003
Non-Performing Assets
Non-Accrual Loans
Commercial
Commercial and Industrial		$	6,009		$	6,015		$	7,856		$	8,832		$	2,367
Commercial Mortgage		7,388			9,337			10,977			11,216			17,930
Lease Financing		1,962			2,181			2,388			2,423			3,183
Total Commercial		15,359			17,533			21,221			22,471			23,480
Consumer
Residential Mortgage		7,685			9,354			9,669			10,196			11,523
Home Equity		406			460			497			—			117
Total Consumer		8,091			9,814			10,166			10,196			11,640
Total Non-Accrual Loans		23,450			27,347			31,387			32,667			35,120
Foreclosed Real Estate		4,416			4,377			8,757			9,285			9,097
Total Non-Performing Assets		$	27,866		$	31,724		$	40,144		$	41,952		$	44,217
Accruing Loans Past Due 90 Days or More
Commercial
Commercial and Industrial		$	707		$	725		$	695		$	523		$	1
Commercial Mortgage		702			—			—			—			368
Lease Financing		—			117			—			—			—
Total Commercial		1,409			842			695			523			369
Consumer
Residential Mortgage		595			1,430			2,027			1,817			1,580
Home Equity		—			—			—			84			17
Purchased Home Equity		107			—			107			98			—
Other Consumer		1,180			1,210			1,059			368			2,257
Lease Financing		—			—			—			19			—
Total Consumer		1,882			2,640			3,193			2,386			3,854
Total Accruing and Past Due		$	3,291		$	3,482		$	3,888		$	2,909		$	4,223
Total Loans		$	5,714,996		$	5,757,175		$	5,570,405		$	5,471,870		$	5,565,371
Ratio of Non-Accrual Loans to Total Loans		0.41		%	0.48		%	0.56		%	0.60		%	0.63		%
Ratio of Non-Performing Assets to Total Loans and Foreclosed
Real Estate		0.49		%	0.55		%	0.72		%	0.77		%	0.79		%
Ratio of Non-Performing Assets and Accruing Loans
Past Due 90 Days or More to Total Loans		0.55		%	0.61		%	0.79		%	0.82		%	0.87		%
Quarter to Quarter Changes in Non-Performing Assets
Balance at Beginning of Quarter		$	31,724		$	40,144		$	41,952		$	44,217		$	54,406
Additions		3,293			2,340			3,199			11,603			4,805
Reductions
Payments and Sales of Loans		(4,555		)	(3,416		)	(1,782		)	(4,279		)	(5,641		)
Return to Accrual		(1,444		)	(839		)	(1,464		)	(7,556		)	(5,571		)
Sales of Foreclosed Assets		(310		)	(4,418		)	(1,025		)	(672		)	(1,091		)
Charge-offs/Write-downs		(842		)	(2,087		)	(736		)	(1,361		)	(2,691		)
Total Reductions		(7,151		)	(10,760		)	(5,007		)	(13,868		)	(14,994		)
Balance at End of Quarter		$	27,866		$	31,724		$	40,144		$	41,952		$	44,217

 

 

Bank of Hawaii Corporation and Subsidiaries
Consolidated Allowance for Loan and Lease Losses (Unaudited)		Table 10

 

		Three Months Ended
(dollars in thousands)		March 31, 2004			December 31, 2003			March 31, 2003
Balance at Beginning of Period		$	129,080		$	132,675		$	142,853
Loans Charged-Off
Commercial
Commercial and Industrial		387			1,997			1,617
Commercial Mortgage		574			—			—
Construction		—			—			529
Lease Financing		228			—			15
Consumer
Residential Mortgage		145			462			689
Home Equity		—			250			82
Purchased Home Equity		90			143			—
Other Consumer		4,655			3,919			3,089
Lease Financing		36			100			67
Total Charge-Offs		6,115			6,871			6,088
Recoveries on Loans Previously Charged-Off
Commercial
Commercial and Industrial		980			936			572
Commercial Mortgage		689			23			17
Construction		435			3			900
Lease Financing		15			88			17
Consumer
Residential Mortgage		294			115			203
Home Equity		39			4			53
Other Consumer		1,663			2,015			1,327
Lease Financing		55			30			45
Foreign		50			62			129
Total Recoveries		4,220			3,276			3,263
Net Loan Charge-Offs		(1,895		)	(3,595		)	(2,825		)
Provision for Loan and Lease Losses		—			—			—
Balance at End of Period		$	127,185		$	129,080		$	140,028
Average Loans Outstanding		$	5,742,368		$	5,570,844		$	5,460,847
Ratio of Net Loan Charge-Offs to Average Loans Outstanding (annualized)		0.13		%	0.26		%	0.21		%
Ratio of Allowance to Loans and Leases Outstanding		2.23		%	2.24		%	2.52		%

 

 

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

 

(dollars in thousands)		Retail Banking			Commercial Banking			Investment Services Group			Treasury and Other Corporate			Consolidated Total
Three Months Ended March 31, 2004
Net Interest Income		$	50,189		$	33,758		$	3,191		$	8,893		$	96,031
Provision for Loan and Lease Losses		(2,747		)	253			(49		)	2,543			—
Net Interest Income After Provision for Loan and Lease Losses		47,442			34,011			3,142			11,436			96,031
Non-Interest Income		19,505			9,723			16,663			2,951			48,842
		66,947			43,734			19,805			14,387			144,873
Non-Interest Expense		(40,435		)	(22,584		)	(16,372		)	(3,631		)	(83,022		)
Income Before Income Taxes		26,512			21,150			3,433			10,756			61,851
Provision for Income Taxes		(9,809		)	(7,806		)	(1,270		)	(3,167		)	(22,052		)
Allocated Net Income		16,703			13,344			2,163			7,589			39,799
Allowance Funding Value		(128		)	(737		)	(8		)	873			—
GAAP Provision		2,747			(253		)	49			(2,543		)	—
Economic Provision		(3,396		)	(2,769		)	(102		)	(2		)	(6,269		)
Tax Effect of Adjustments		287			1,391			23			619			2,320
Income Before Capital Charge		16,213			10,976			2,125			6,536			35,850
Capital Charge		(5,602		)	(5,196		)	(1,522		)	(9,718		)	(22,038		)
Net Income (Loss) After Capital Charge (NIACC)		$	10,611		$	5,780		$	603		$	(3,182	)	$	13,812
RAROC (ROE for the Company)		32		%	23		%	15		%	25		%	20		%
Total Assets at March 31, 2004		$	3,692,657		$	2,276,958		$	137,632		$	3,906,195		$	10,013,442
Three Months Ended March 31, 2003 (1)
Net Interest Income		$	52,103		$	34,691		$	3,665		$	541		$	91,000
Provision for Loan and Lease Losses		(848		)	(2,151		)	—			2,999			—
Net Interest Income After Provision for Loan and Lease Losses		51,255			32,540			3,665			3,540			91,000
Non-Interest Income		17,386			8,416			15,680			3,271			44,753
		68,641			40,956			19,345			6,811			135,753
Information Technology Systems Replacement Project		(583		)	(23		)	(244		)	(6,567		)	(7,417		)
Non-Interest Expense		(40,668		)	(22,719		)	(15,904		)	(3,492		)	(82,783		)
Income (Loss) Before Income Taxes		27,390			18,214			3,197			(3,248		)	45,553
Provision for Income Taxes		(10,134		)	(6,642		)	(1,183		)	2,207			(15,752		)
Allocated Net Income (Loss)		17,256			11,572			2,014			(1,041		)	29,801
Allowance Funding Value		(152		)	(1,141		)	(10		)	1,303			—
GAAP Provision		848			2,151			—			(2,999		)	—
Economic Provision		(2,708		)	(3,059		)	(132		)	(5		)	(5,904		)
Tax Effect of Adjustments		744			758			53			629			2,184
Income (Loss) Before Capital Charge		15,988			10,281			1,925			(2,113		)	26,081
Capital Charge		(5,392		)	(5,378		)	(1,517		)	(14,464		)	(26,751		)
Net Income (Loss) After Capital Charge (NIACC)		$	10,596		$	4,903		$	408		$	(16,577	)	$	(670	)
RAROC (ROE for the Company)		33		%	21		%	14		%	(7		)%	12		%
Total Assets at March 31, 2003		$	3,471,677		$	2,254,381		$	145,925		$	3,538,227		$	9,410,210

 

(1) Certain 2003 information has been reclassified to conform to 2004 presentation.

 

 

Bank of Hawaii Corporation and Subsidiaries
Quarterly Summary of Selected Consolidated Financial Data (Unaudited)		Table 12

 

		Three Months Ended
(dollars in thousands except per share amounts)		March 31, 2004			December 31, 2003			September 30, 2003			June 30, 2003			March 31, 2003
Quarterly Operating Results
Interest Income
Interest and Fees on Loans and Leases		$	81,428		$	80,351		$	82,715		$	85,954		$	85,773
Income on Investment Securities - Held to Maturity		6,976			7,183			6,407			3,083			2,283
Income on Investment Securities - Available for Sale		20,846			19,032			16,483			19,815			22,463
Deposits		1,231			1,169			1,179			1,161			1,307
Funds Sold		417			85			248			822			764
Other		858			1,007			1,032			1,016			1,189
Total Interest Income		111,756			108,827			108,064			111,851			113,779
Interest Expense
Deposits		9,200			9,433			10,284			13,309			14,447
Security Repurchase Agreements		1,926			1,359			1,947			2,391			2,242
Funds Purchased		231			249			271			219			205
Short-Term Borrowings		15			17			26			25			24
Long-Term Debt		4,353			4,417			4,431			5,422			5,861
Total Interest Expense		15,725			15,475			16,959			21,366			22,779
Net Interest Income		96,031			93,352			91,105			90,485			91,000
Provision for Loan and Lease Losses		—			—			—			—			—
Net Interest Income After Provision for Loan and Lease Losses		96,031			93,352			91,105			90,485			91,000
Non-Interest Income
Trust and Asset Management		13,864			12,759			12,511			12,545			13,181
Mortgage Banking		1,977			3,324			5,888			6,061			283
Service Charges on Deposit Accounts		9,950			9,442			8,901			8,645			8,950
Fees, Exchange, and Other Service Charges		13,239			13,725			16,034			13,473			12,989
Investment Securities Gains (Losses)		—			(20		)	639			587			583
Insurance		3,643			3,597			3,988			3,015			3,080
Other		6,169			6,610			5,830			6,413			5,687
Total Non-Interest Income		48,842			49,437			53,791			50,739			44,753
Non-Interest Expense
Salaries and Benefits		46,001			46,409			45,731			47,711			46,429
Net Occupancy Expense		9,386			9,933			9,806			9,628			9,613
Net Equipment Expense		5,964			7,395			7,301			9,208			9,748
Information Technology Systems Replacement Project		—			—			4,349			10,105			7,417
Other		21,671			19,667			21,690			18,742			16,993
Total Non-Interest Expense		83,022			83,404			88,877			95,394			90,200
Income Before Income Taxes		61,851			59,385			56,019			45,830			45,553
Provision for Income Taxes		22,052			20,712			19,332			15,796			15,752
Net Income		$	39,799		$	38,673		$	36,687		$	30,034		$	29,801
Basic Earnings Per Share		$	0.73		$	0.70		$	0.64		$	0.50		$	0.49
Diluted Earnings Per Share		$	0.69		$	0.66		$	0.61		$	0.48		$	0.47
Balance Sheet Totals
Total Assets		10,013,442			9,461,647			9,370,755			9,550,934			9,410,210
Net Loans		5,587,811			5,628,095			5,437,730			5,333,896			5,425,343
Total Deposits		7,363,922			7,332,779			7,102,116			7,140,849			6,987,331
Total Shareholders’ Equity		785,768			793,132			823,760			913,010			952,007
Performance Ratios
Net Income to Average Total Assets (ROA)		1.65		%	1.66		%	1.53		%	1.27		%	1.31		%
Net Income to Average Shareholders’ Equity (ROE)		19.98		%	18.59		%	16.69		%	12.93		%	12.42		%
Efficiency Ratio (1)		57.31		%	58.41		%	61.34		%	67.55		%	66.44		%
Efficiency Ratio excluding System Replacement Costs		57.31		%	58.41		%	58.34		%	60.39		%	60.98		%

 

(1) The efficiency ratio is defined as non-interest expense divided by total revenue (net interest income and non-interest income).