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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

 

Date of Report	January 25, 2021
(Date of earliest event reported)

 

BANK OF HAWAII CORP

(Exact name of registrant as specified in its charter)

 

Delaware	1-6887	99-0148992
(State of Incorporation)	(Commission File Number)	(IRS Employer Identification No.)

 

130 Merchant Street	Honolulu	Hawaii	96813
(Address of principal executive offices)	(City)	(State)	(Zip Code)

 

(888) 643-3888

(Registrant's telephone number, including area code)

N/A

(Former name or former address, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class			Trading Symbol		Name of each exchange on which registered
Common Stock	$.01 Par Value		BOH		New York Stock Exchange

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

 

☐	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
☐	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
☐	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
☐	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4 (c))

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

 

 

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Item 2.02.

Results of Operations and Financial Condition.

On January 25, 2021, Bank of Hawaii Corporation announced its results of operations for the quarter ended December 31, 2020.  The public announcement was made by means of a press release, the text of which is furnished as Exhibit 99.1 hereto and incorporated herein by reference.

The information furnished pursuant to this Item 2.02 of this Current Report on Form 8-K, including Exhibits 99.1 and 99.2, shall not be deemed “filed” for purposes of the Securities Exchange Act of 1934, as amended, nor shall it be incorporated by reference into any of the Bank of Hawaii Corporation’s filings with the Securities and Exchange Commission, unless otherwise expressly stated in such filing.

Item 2.05. Costs Associated with Exit or Disposal Activities.

On January 22, 2021, the Board of Directors of Bank of Hawaii Corporation made the determination to permanently close twelve Bank of Hawaii (the “Bank”) branches primarily located within local supermarkets in order to increase efficiency and meet changing customer needs.  Customers will continue to have access to in-person banking services at nearby branch locations, and all impacted employees have been offered alternative roles within the Bank.  The branch closures are expected to be completed, subject to applicable regulatory requirements, by May 31, 2021.

As a result, the Bank recorded a total charge of approximately $5.6 million during the fourth quarter of 2020. This aggregate charge includes approximately $2.5 million in costs associated with early termination of lease and in-store branch agreements, $1.2 million associated with the disposition of assets, and $1.9 million associated with site restoration costs.  The Bank anticipates annual operating expense savings of approximately $4.7 million resulting from the branch closures. These estimates could change as the Bank’s plan evolves and becomes finalized.

Item 9.01.

Financial Statements and Exhibits.

(d)

Exhibits

 

Exhibit No.
99.1	January 25, 2021 Press Release: Bank of Hawaii Corporation Fourth Quarter 2020 Financial Results.  Any internet addresses provided in this release are for informational purposes only and are not intended to be hyperlinks.  Furnished herewith.
99.2	Bank of Hawaii Corporation Fourth Quarter 2020 Financial Report
104	Cover Page Interactive Data File (embedded within the Inline XBRL document)

 

 

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Signatures

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 hereunto duly authorized.

 

Date: January 25, 2021	Bank of Hawaii Corporation
	By:	/s/ Patrick M. McGurik
		Patrick M. McGuirk
		Senior Executive Vice President and Corporate Secretary

 

 

Exhibit 99.1

 

 

                    Bank of Hawaii Corporation 2020 Financial Results

 

 

FOR IMMEDIATE RELEASE

 

 

HONOLULU, HI (January 25, 2021) -- Bank of Hawaii Corporation (NYSE: BOH) today reported diluted earnings per share of $3.86 for the full year of 2020 compared with diluted earnings per share of $5.56 in 2019.  Net income for the year was $153.8 million compared with net income of $225.9 million in the previous year.  The return on average assets for the full year of 2020 was 0.79 percent compared with 1.29 percent in 2019.  The return on average equity for the full year of 2020 was 11.38 percent compared with 17.65 percent in 2019.  The efficiency ratio for the full year of 2020 improved to 54.91 percent compared with 55.68 percent in 2019.

 

“Bank of Hawaii finished 2020 with solid financial performance despite the many challenges we faced during the year due to the COVID-19 pandemic," said Peter Ho, Chairman, President, and CEO.  “Our loan balances grew 8.6 percent in 2020 and our deposit balances reached another record high, growing 15.4 percent compared with the prior year.  Total assets expanded to a new record high of $20.6 billion at the end of the year.  Our overall asset quality remained stable and our capital and liquidity all remain strong. During the year our disciplined approach to expense management allowed us to continue making significant progress on our strategic initiatives which position us well for continued growth in the future.”  

 

Diluted earnings per share were $1.06 for the fourth quarter of 2020, an increase from $0.95 in the third quarter of 2020 and down from $1.45 in the fourth quarter of 2019.  Net income for the fourth quarter of 2020 was $42.3 million, up from $37.8 million in the previous quarter and down from $58.1 million in the same quarter in 2019. The return on average assets for the fourth quarter of 2020 was 0.83 percent compared with 0.76 percent in the third quarter of 2020 and 1.29 percent in the fourth quarter of 2019.  The return on average equity for the fourth quarter of 2020 was 12.26 percent compared with 11.01 percent in the third quarter of 2020 and 17.84 percent in the fourth quarter of 2019.  The efficiency ratio for the fourth quarter of 2020 was 59.88 percent compared with 54.22 percent in the previous quarter and 54.26 percent in the same quarter in 2019.  

 

 

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Financial Highlights

 

Net interest income, on a taxable-equivalent basis, was $497.6 million for the full year of 2020, a decrease of $2.3 million from net interest income of $499.9 million in 2019.  Net interest income, on a taxable-equivalent basis, for the fourth quarter of 2020 was $119.8 million, a decrease of $4.7 million compared with net interest income of $124.5 million in the third quarter of 2020 and down $4.4 million from net interest income of $124.2 million in the fourth quarter of 2019.  Net interest income in the fourth quarter of 2020 included a charge of $3.0 million related to an impairment in the residual value of a leveraged lease which had a negative impact of 6 basis points on the net interest margin.  Analyses of changes in net interest income are included in Tables 8a, 8b and 8c.

 

The net interest margin for the full year of 2020 was 2.73 percent, a decrease of 30 basis points from the net interest margin of 3.03 percent in 2019.  Adjusted for the lease impairment, the decrease in the net interest margin is largely due to lower rates and higher levels of liquidity from continued strong deposit growth.  The net interest margin was 2.48 percent in the fourth quarter of 2020, a decrease of 19 basis points from the previous quarter and 47 basis points from the same quarter in 2019.  

 

The provision for credit losses for the full year of 2020 was $117.8 million compared with a provision for credit losses of $16.0 million in 2019. Results for the fourth quarter of 2020 included a provision for credit losses of $15.2 million compared with $28.6 million in the previous quarter and $4.8 million in the same quarter in 2019.

 

Noninterest income for the full year of 2020 was $184.4 million, an increase of $1.1 million or 0.6 percent compared with noninterest income of $183.3 million in 2019.  Noninterest income was $45.3 million in the fourth quarter of 2020 compared with noninterest income of $41.7 million in the third quarter of 2020 and $47.7 million in the fourth quarter of 2019.  The increase in noninterest income during the fourth quarter of 2020 compared with the prior quarter is largely due to an increase in mortgage banking income.

 

Noninterest expense for the full year of 2020 was $373.8 million, a decrease of $5.4 million or 1.4 percent compared with noninterest expense of $379.2 million in 2019.  Noninterest expense was $98.7 million in the fourth quarter of 2020 compared with noninterest expense of $89.9 million in the third quarter of 2020 and $93.1 million in the fourth quarter of 2019.  Noninterest expense in the fourth quarter of 2020 included $6.1 million in charges related to the decision to permanently close twelve branches and reduce the current number of cash-only ATMs.  Noninterest expense in the fourth quarter also included a charge of $0.8 million related to the true-up of amortization on an investment.  Noninterest expense during the third quarter of 2020 included a gain of $1.9 million related to the sale of a branch building partially offset by $1.8 million in severance.  There were no significant items in noninterest expense during the fourth quarter of 2019.  An analysis of noninterest expenses related to salaries and benefits is included in Table 9.  

 

The effective tax rate for the full year of 2020 was 18.68 percent compared with 20.96 percent for the full year of 2019.  The effective tax rate for the fourth quarter of 2020 was 16.87 percent compared with 20.09 percent in the previous quarter and 21.15 percent during the same quarter in 2019.  The decrease in the effective tax rate for the fourth quarter of 2020 is primarily due to a return to provision adjustment of $1.6 million.

 

The Company’s business segments are defined as Consumer Banking, Commercial Banking, and Treasury & Other.  Results for the business segments are determined based on the Company’s internal financial management reporting process and organizational structure.  Selected financial information is included in Tables 13a and 13b.  

 

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Asset Quality

 

The Company’s overall asset quality continued to remain relatively stable during the fourth quarter of 2020.  Total non-performing assets were $18.5 million at December 31, 2020, down from $18.6 million at September 30, 2020 and $20.1 million at December 31, 2019.  Non-performing assets as a percentage of total loans and leases and foreclosed real estate were 0.15 percent at December 31, 2020 compared with 0.16 percent at September 30, 2020 and 0.18 percent at December 31, 2019.  

Accruing loans and leases past due 90 days or more were $10.5 million at December 31, 2020 compared with $9.6 million at September 30, 2020 and $8.4 million at December 31, 2019.  Restructured loans and leases not included in non-accrual loans or accruing loans past due 90 days or more were $68.1 million at December 31, 2020 compared with $58.7 million at September 30, 2020 and $63.1 million at December 31, 2019.   More information on non-performing assets and accruing loans and leases past due 90 days or more is presented in Table 11.

Net charge-offs for the full year of 2020 were $7.1 million or 0.06 percent of total average loans and leases compared with net charge-offs of $12.7 million or 0.12 percent of total average loans and leases in 2019.  Net charge-offs during the fourth quarter of 2020 were a net recovery of $0.3 million and were comprised of charge-offs of $3.2 million fully offset by recoveries of $3.5 million.  Net charge-offs during the third quarter of 2020 were a net recovery of $1.5 million as loan charge-offs of $2.3 million were fully offset by recoveries of $3.8 million.  Net charge-offs during the fourth quarter of 2019 were $3.7 million or 0.13 percent annualized of total average loans and leases outstanding and were comprised of charge-offs of $6.2 million and recoveries of $2.6 million.  

 

The allowance for credit losses was $216.3 million at December 31, 2020, an increase from $203.5 million at September 30, 2020 and $110.0 million at December 31, 2019.  The ratio of the allowance for credit losses to total loans and leases outstanding was 1.81 percent at December 31, 2020, up from 1.73 percent at September 30, 2020 and 1.00 percent at December 31, 2019.  The reserve for unfunded commitments was $2.4 million at December 31, 2020, a slight increase from $2.3 million at the end of the prior quarter and down from $6.8 million at the end of the same quarter in 2019.  Details of loan and lease charge-offs, recoveries, and the components of the total reserve for credit losses are summarized in Table 12.

 

Other Financial Highlights

 

Total assets increased to a new record of $20.6 billion at December 31, 2020 compared with total assets of $20.1 billion at September 30, 2020 and total assets of $18.1 billion at December 31, 2019.   Average total assets were $19.4 billion for the full year of 2020, an increase of 10.5 percent from average total assets of $17.5 billion during 2019.  

 

The investment securities portfolio was $7.1 billion at December 31, 2020, up from total securities of $6.4 billion at September 30, 2020 and $5.7 billion at December 31, 2019 due to growth in deposits that continued to outpace loan growth.  The portfolio remains largely comprised of securities issued by U.S. government agencies and includes $3.3 billion in securities held to maturity and $3.8 billion in securities available for sale at December 31, 2020.   The securities portfolio at September 30, 2020 included $3.2 billion in securities held to maturity and $3.2 billion in securities available for sale compared with $3.0 billion in securities held to maturity and $2.6 billion in securities available for sale at December 31, 2019.

 

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Total loans and leases were $11.9 billion at December 31, 2020, an increase of 1.2 percent from total loans and leases of $11.8 billion at September 30, 2020 and up 8.6 percent from total loans and leases of $11.0 billion at December 31, 2019.  Average total loans and leases were $11.6 billion during the full year of 2020, an increase of 8.5 percent from average total loans and leases of $10.7 billion during 2019.

 

The commercial loan portfolio was $5.1 billion at the end of December 31, 2020, an increase of $83.8 million or 1.7 percent from $5.0 billion at the end of the third quarter of 2020 and up $886.9 million or 21.0 percent from $4.2 billion at the end of the fourth quarter of 2019.  Consumer loans were $6.8 billion at December 31, 2020, an increase of $62.6 million or 0.9 percent from $6.8 billion at the end of the third quarter of 2020 and up $62.3 million or 0.9 percent from $6.8 billion at the end of the fourth quarter of 2019.  Loan and lease portfolio balances are summarized in Table 10.

 

Total deposits were $18.2 billion at December 31, 2020, an increase of 2.7 percent from total deposits of $17.7 billion at September 30, 2020 and up 15.4 percent from total deposits of $15.8 billion at December 31, 2019.  Average total deposits were $16.9 billion during the full year of 2020, an increase of 11.0 percent from average total deposits of $15.2 billion during 2019.

 

Consumer deposits were $9.3 billion at December 31, 2020, an increase of $443.9 million or 5.0 percent from $8.9 billion at the end of the third quarter of 2020 and an increase of $1.2 billion or 15.1 percent from $8.1 billion at the end of the fourth quarter of 2019.   Commercial deposits were $7.3 billion at December 31, 2020, an increase of $143.3 million or 2.0 percent from $7.2 billion at the end of the third quarter of 2020 and an increase of $978.6 million or 15.5 percent from $6.3 billion at the end of the fourth quarter of 2019.  Other deposits, including public funds, were $1.6 billion at December 31, 2020, a decrease of $114.5 million or 6.8 percent from $1.7 billion at the end of the third quarter of 2020 and an increase of $219.3 million or 16.3 percent from $1.3 billion at the end of the fourth quarter of 2019.  Deposit balances are summarized in Tables 7a, 7b, and 10.

 

Total shareholders’ equity was $1.4 billion at December 31, 2020, an increase of $12.8 million from September 30, 2020, and up $87.7 million from December 31, 2019.  There were no shares repurchased during the fourth quarter of 2020.  The Tier 1 Capital Ratio was 12.06 percent at December 31, 2020 compared with 12.09 percent at September 30, 2020 and 12.18 percent at December 31, 2019.  The Tier 1 Leverage Ratio at December 31, 2020 was 6.71 percent compared with 6.81 percent at September 30, 2020 and 7.25 percent at December 31, 2019.   The decrease in the Tier 1 Leverage ratio is due to balance sheet growth related to the significant increase in customer deposits.

 

The Company’s Board of Directors declared a quarterly cash dividend of $0.67 per share on the Company’s outstanding shares.  The dividend will be payable on March 12, 2021 to shareholders of record at the close of business on February 26, 2021.  

 

Conference Call Information

 

The Company will review its 2020 financial results today at 8:00 a.m. Hawaii Time (1:00 p.m. Eastern Time).  The live call, including a slide presentation, will be accessible on the investor relations link of Bank of Hawaii Corporation's website, www.boh.com. The webcast link is https://edge.media-server.com/mmc/p/ukntid8g. The toll-free number for the teleconference is 1 (844) 543-5235 in the United States and Canada and 1 (703) 318-2209 for other international callers. Use the pass code “Bank of Hawaii” to access the call.  A replay of the conference call will be available for one week beginning approximately 11:00 a.m. Hawaii Time on Monday, January 25, 2021. The replay number is 1 (855) 859-2056 in the United States and Canada and 1 (404) 537-3406 from other international locations. Enter the conference ID 4199179 when prompted. In addition, the replay will be available on the Company's website, www.boh.com.

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Forward-Looking Statements

 

This news release, and other statements made by the Company in connection with it may contain "forward-looking statements" (as defined in the Private Securities Litigation Reform Act of 1995) that involve risks and uncertainties that could cause results to be materially different from expectations. Forecasts of our financial results and condition, expectations for our operations and business prospects, and our assumptions used in those forecasts and expectations are examples of certain of these forward-looking statements.  Do not unduly rely on forward-looking statements.  Actual results might differ significantly from our forecasts and expectations because of a variety of factors.  More information about these factors is contained in Bank of Hawaii Corporation's Annual Report on Form 10-K for the year ended December 31, 2019, and its Form 10-Qs for the fiscal quarters ended March 31, 2020, June 30, 2020 and October 31, 2020, which were filed with the U.S. Securities and Exchange Commission.  These forward-looking statements are not guarantees of future performance and speak only as of the date made, and, except as required by law, the Company undertakes no obligation to update or revise any forward-looking statements to reflect subsequent events, new information or future circumstances.

 

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

 

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Bank of Hawaii Corporation fourth quarter 2020 financial report january 25, 2021 Exhibit 99.2

this presentation, and other statements made by the Company in connection with it, may contain forward-looking statements concerning, among other things, forecasts of our financial results and condition, expectations for our operations and business prospects, and our assumptions used in those forecasts and expectations. we have not committed to update forward-looking statements to reflect later events or circumstances. disclosure 2 forward-looking statements

3

2020 unemployment experience & forecast 4 source: UHERO base case as of 12/19/20 Hawaii unemployment rate

economic forecast source: UHERO Hawaii unemployment rate 5

economic forecast source: UHERO 6

Hawaii real estate market Oahu market indicators – 2020 vs 2019 7 source: Honolulu Board of Realtors, compiled from MLS data

daily arrivals total passenger count* 8 *source: Department of Business, Economic Development, and Tourism, excluding from Canada 10/15: launch of Safe Travels program

COVID-19 cases 9 source: Washington Post as of 1/20/21 US overall 60

Q4 financial update

financial summary $ in millions, except per share amounts 11 note: numbers may not add up due to rounding

12 excess liquidity deployed into high-quality, low-risk investment portfolio investment portfolio Highly liquid and pledgeable Secure and reliable cash flows

performance metrics 13

Q4 credit update

loan portfolio excluding PPP 15 40% commercial 68% real estate secured wtd avg LTV 56% 66% w/ BOH ≥ 10 yrs avg balance $0.5 MM CRE C&I residential mortgage home equity auto leasing other construction 60% consumer 84% real estate secured wtd avg LTV 56% 56% w/ BOH ≥ 10 yrs 78% of portfolio secured with quality real estate with combined weighted average loan to value of 56% note: excludes $528 MM in PPP loan balances

customer relief update 77% decline from June 30, 2020 16 15.7% 13.0% 4.1% 3.6% 86% secured

credit quality $ in millions 17 * 60% of total criticized in CRE with 58% wtd avg LTV

2020 reserve build $ in millions 18

looking forward

2021 macro environment 20 economic growth conditioned on COVID-19 conditions and trajectory accommodative monetary environment changed consumer preference

2021 priorities 21 continued risk vigilance support the recovery lean into evolving consumer preference self fund growth

steady market share performance 3-years 5-years 10-years loans deposits source: FDIC data, Bloomberg exceptional capital & liquidity position customer outreach deep market knowledge digital support the recovery 22 0.9% 1.7% 1.8% 2.9% 4.9% 0.7%

evolving consumer preference 23 rapid change in certain consumer preferences span of change likely to extend to 18 to 24 months in total from March 2020 degree of snap back dependent on perception – enhancement or inconvenience? “new” normal

evolving consumer preference 24 down 49% YoY & YTD in-person branch transactions have fallen sharply

evolving consumer preference 25 transactor type

evolving consumer preference 26 consumer digital deposit migration

evolving consumer preference 27 growing number of Zelle transactions

core competency strategic & long-term oriented internally driven never ending self fund growth 28

proven expense discipline 29 Honolulu inflation CAGR: 1.9% 1.4% CAGR 2,022 FTE $ in millions

commitment to future growth 30 2,022 FTE annual innovation expense digital environment digital marketing data analytics customer experience IT capacity build operational efficiency annual innovation expense plus other IT project annual expense annual innovation expense $ in millions

digital sub-brand launch in 2017 10-year naming agreement with University of Hawaii main and most prominent arena sports venue in the state SimpliFi Arena 31

2021 programs 32

competitive innovation edge 33

Q & A

Bank of Hawaii Corporation fourth quarter 2020 financial report january 25, 2021

appendix

37 CAGR: 8.7% loan growth source: market share calculated from FDIC data per Bloomberg $ in millions

38 CAGR: 6.6% deposit growth $ in millions source: market share calculated from FDIC data per Bloomberg

growing low cost deposits 39 continuing to build very low cost funding to mitigate impact of low rates $ in millions

funding opportunities loan to deposit ratio compared with peers 40 note: S&P Regional Bank Index excluding banks greater than $50 B; 2020 peer data reflects Q3 2020 strong liquidity to fund continued growth

41 strong risk-based capital, well in excess of required minimums tier 1 capital CET 1 total capital fortress capital position

42 note: historical dividends adjusted for stock splits. Financial Crisis recession recession COVID-19 unbroken history of dividends

43 87% secured with 65% weighted average LTV as of 12/31/20 consumer relief $177 million (1.5%) 666 wtd avg FICO 28% wtd avg DTI 64% wtd avg CLTV 727 wtd avg FICO 16% <700 FICO / >70% CLTV 65% wtd avg LTV 762 wtd avg FICO 8% <700 FICO / >70% LTV * indirect excludes recourse loans ($1MM) **other includes direct installment loans and auto lease. origination FICO used for auto lease.

44 84% secured with 47% weighted average LTV as of 12/31/20 90% continue to pay interest commercial relief $312 million (2.6%) 69% wtd avg LTV 32% ≤ 65% LTV $2.7 MM avg loan $0.4 MM avg loan 46% wtd avg LTV 91% ≤ 65% LTV $3.2 MM avg loan

45 high risk industries $1,508 million (13%) / $1,360 million (11%) excluding PPP

46 retail $695 million (6%) – excluding PPP 93% real estate secured 56% wtd avg LTV average exposure $3.5 MM largest exposure $40 MM 60% of portfolio has an LTV ≤ 65% 98.1% is secured or has essential anchor 0.04% unsecured and deferred 99.997% secured or paying interest

47 lodging $508 million (4%) – excluding PPP 79% real estate secured 51% wtd avg LTV average exposure $9.4 MM largest exposure $40 MM 80% of portfolio has an LTV ≤ 65% 93% of unsecured outstandings to global hotel and timeshare brands 0.3% unsecured and deferred 99.9% secured or paying interest

48 restaurant / entertainment $157 million (1%) – excluding PPP 39% real estate secured 64% wtd avg LTV average exposure $1.7 MM largest exposure $25.9 MM 44% of portfolio has an LTV ≤ 65% $26.8 MM unsecured and deferred average exposure $0.5 MM 99.5% secured or paying interest