false 0000046195 0000046195 2021-04-26 2021-04-26

 

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	April 26, 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 April 26, 2021, Bank of Hawaii Corporation announced its results of operations for the quarter ended March 31, 2021.  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.

Item 9.01.

Financial Statements and Exhibits.

(d)

Exhibits

 

Exhibit No.
99.1	April 26, 2021 Press Release: Bank of Hawaii Corporation First Quarter 2021 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 First Quarter 2021 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: April 26, 2021	Bank of Hawaii Corporation
	By:	/s/ Patrick M. McGuirk
		Patrick M. McGuirk
		Senior Executive Vice President and Corporate Secretary

 

 

Exhibit 99.1

 

 

                  Bank of Hawaii Corporation First Quarter 2021 Financial Results

 

 

FOR IMMEDIATE RELEASE

 

 

HONOLULU, HI (April 26, 2021) -- Bank of Hawaii Corporation (NYSE: BOH) today reported diluted earnings per share of $1.50 for the first quarter of 2021, compared with diluted earnings per share of $1.06 in the previous quarter and $0.87 in the same quarter last year.  Net income for the first quarter of 2021 was $59.9 million compared with net income of $42.3 million in the fourth quarter of 2020 and $34.7 million in the first quarter of 2020.  

 

“We are pleased with our financial performance during the first quarter of 2021," said Peter Ho, Chairman, President, and CEO.  “Our balance sheet remains strong with deposit balances and total assets reaching new record highs, solid asset quality, and high levels of liquidity and capital.”  

 

The return on average assets for the first quarter of 2021 was 1.15 percent compared with 0.83 percent during the previous quarter and 0.77 percent in the same quarter last year.  The return on average equity for the first quarter of 2021 was 17.65 percent compared with 12.26 percent during the previous quarter and 10.64 percent in the same quarter last year.  

 

Financial Highlights

 

Net interest income, on a taxable-equivalent basis, for the first quarter of 2021 was $120.8 million, an increase of $1.0 million from $119.8 million in the fourth quarter of 2020 and down $5.5 million from $126.3 million in the first quarter of 2020.  The net interest margin was 2.43 percent in the first quarter of 2021, a decrease of 5 basis points from 2.48 percent the previous quarter and 53 basis points from 2.96 percent in the same quarter last year.   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.  The decrease in the net interest margin is largely due to higher levels of liquidity from continued strong deposit growth and lower interest rates.  Analyses of changes in net interest income are included in Tables 8a and 8b.

 

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Results for the first quarter of 2021 included a negative provision for credit losses of $14.3 million compared with a provision for credit losses of $15.2 million in the previous quarter and $33.6 million in the same quarter last year.

 

Noninterest income was $43.0 million in the first quarter of 2021 compared with noninterest income of $45.3 million in the fourth quarter of 2020 and $46.1 million in the first quarter of 2020.  The decrease in noninterest income during the first quarter of 2021 compared with the prior quarter is largely due to a decrease in customer derivative program and mortgage banking income.  The decrease in noninterest income compared to the first quarter of 2020 is largely due to a decrease in customer derivative program income and lower service charges on deposit accounts.

 

Noninterest expense was $98.9 million in the first quarter of 2021 compared with noninterest expense of $98.7 million in the fourth quarter of 2020 and $96.3 million in the first quarter of 2020.  Noninterest expense in the first quarter of 2021 included seasonal payroll expenses of approximately $2.1 million, charges related to the rollout of contactless cards of $1.9 million, and separation expenses of $1.8 million.  Noninterest expense in the first quarter of 2021 also included the restoration of corporate incentives that were eliminated in the first quarter of 2020.   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 of 2020 also included a charge of $0.8 million related to the true-up of amortization on an investment.  Noninterest expense in the first quarter of 2020 included seasonal payroll expenses of approximately $3.1 million and separation expenses of $4.7 million that were partially offset by the elimination of corporate incentive accruals. An analysis of noninterest expenses related to salaries and benefits is included in Table 9.  

 

The efficiency ratio during the first quarter of 2021 was 60.45 percent compared with 59.88 percent in the previous quarter and 55.96 percent during the same quarter last year.

 

The effective tax rate for the first quarter of 2021 was 24.09 percent compared with 16.87 percent in the previous quarter and 17.68 percent during the same quarter in 2020.  The increase in the effective tax rate for the first quarter of 2021 was primarily due to higher pretax book income in the first quarter of 2021.  The fourth quarter of 2020 included a return to provision adjustment of $1.6 million.  There were no significant items impacting the tax rate during the first quarter of 2020.

 

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 13.  

 

Asset Quality

 

The Company’s overall asset quality remained stable during the first quarter of 2021.  Total non-performing assets were $17.9 million at March 31, 2021, down from $18.5 million at December 31, 2020 and from $20.6 million at March 31, 2020.  Non-performing assets as a percentage of total loans and leases and foreclosed real estate were 0.15 percent at the end of the first quarter of 2021, compared with 0.15 percent at the end of the fourth quarter of 2020 and 0.18 percent at the end of the first quarter of 2020.  

 

 

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Accruing loans and leases past due 90 days or more were $10.4 million at March 31, 2021 compared with $10.5 million at December 31, 2020 and $8.5 million at March 31, 2020.  Restructured loans on accrual status and not past due 90 days or more were $74.2 million at March 31, 2021 compared with $68.1 million at December 31, 2020 and $61.4 million at March 31, 2020.   More information on non-performing assets and accruing loans and leases past due 90 days or more is presented in Table 11.

 

Net loan and lease charge-offs during the first quarter of 2021 were $2.9 million or 0.10 percent annualized of total average loans and leases outstanding and were comprised of charge-offs of $6.3 million partially offset by recoveries of $3.4 million.  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 first quarter of 2020 were $3.7 million or 0.14 percent annualized of total average loans and leases outstanding and were comprised of $7.2 million of charge-offs partially offset by recoveries of $3.4 million.

 

The allowance for credit losses on loans and leases was $198.3 million at March 31, 2021, a decrease from $216.3 million at December 31, 2020 and an increase from $138.2 million at March 31, 2020.  The ratio of the allowance for credit losses to total loans and leases outstanding was 1.63 percent at March 31, 2021, down from 1.81 percent at December 31, 2020 and up from 1.22 percent at March 31, 2020.  The reserve for unfunded commitments was $3.0 million at March 31, 2021, a slight increase from $2.4 million at the end of the prior quarter and down from $3.3 million at the end of the same quarter in 2020.  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 $21.9 billion at March 31, 2021, compared with total assets of $20.6 billion at December 31, 2020 and $18.5 billion at March 31, 2020.   Average total assets were $21.2 billion during the first quarter of 2021, an increase from $20.4 billion during the fourth quarter of 2020 and $18.2 billion in the first quarter of 2020.

 

The investment securities portfolio was $7.5 billion at March 31, 2021, up from $7.1 billion at December 31, 2020 and from $5.7 billion at March 31, 2020 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 $4.0 billion in securities available-for-sale and $3.5 billion in securities held-to-maturity at March 31, 2021.  The securities portfolio at December 31, 2020 included $3.8 billion in securities available-for-sale and $3.3 billion in securities held-to-maturity.  The securities portfolio at March 31, 2020 included $2.7 billion in securities available-for-sale and $3.0 billion in securities held-to-maturity.   

 

Total loans and leases were $12.1 billion at March 31, 2021, an increase of 1.7 percent from total loans and leases of $11.9 billion at December 31, 2020 and up 6.9 percent from $11.4 billion at March 31, 2020.  Average total loans and leases were $12.0 billion during the first quarter of 2021, an increase from average total loans and leases of $11.8 billion during the fourth quarter of 2020 and $11.1 billion during the first quarter of 2020.

 

The commercial loan portfolio was $5.3 billion at the end of March 31, 2021, an increase of $158.7 million or 3.1 percent from $5.1 billion at the end of the fourth quarter of 2020 and up $728.8 million or 16.1 percent from $4.5 billion at the end of the first quarter of 2020.  Consumer loans were $6.9 billion at March 31, 2021, an increase of $42.0 million or 0.6 percent from $6.8 billion at the end of the fourth quarter of 2020 and up $59.1 million or 0.9 percent from $6.8 billion at the end of the first quarter of 2020.  Loan and lease portfolio balances are summarized in Table 10.

 

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Total deposits were $19.6 billion at March 31, 2021, an increase of 7.4 percent from total deposits of $18.2 billion at December 31, 2020 and up 21.8 percent from total deposits of $16.1 billion at March 31, 2020.  Average total deposits were $18.7 billion during the first quarter of 2021, an increase from $17.8 billion during the fourth quarter of 2020 and from $15.8 billion during first quarter of 2020.

 

Consumer deposits were $9.7 billion at March 31, 2021, an increase of $399.0 million or 4.3 percent from $9.3 billion at the end of the fourth quarter of 2020 and an increase of $1.5 billion or 17.5 percent from $8.3 billion at the end of the first quarter of 2020.  Commercial deposits were $8.2 billion at March 31, 2021, an increase of $938.3 million or 12.8 percent from $7.3 billion at the end of the fourth quarter of 2020 and an increase of $1.9 billion or 29.6 percent from $6.4 billion at the end of the first quarter of 2020.  Other deposits, including public funds, were $1.6 billion at March 31, 2021, an increase of $7.8 million or 0.5 percent from $1.6 billion at the end of the fourth quarter of 2020 and an increase of $166.5 million or 11.9 percent from $1.4 billion at the end of the first quarter of 2020.  Deposit balances are summarized in Tables 7 and 10.

 

Total shareholders’ equity was $1.4 billion at March 31, 2021, a decrease of $14.3 million from December 31, 2020, and an increase of $32.3 million from March 31, 2020.  In the first quarter of 2021 there were no repurchases under the share repurchase program.  The Tier 1 Capital Ratio was 12.35 percent at March 31, 2021 compared with 12.06 percent at December 31, 2020 and 11.81 percent at March 31, 2020.  The Tier 1 Leverage Ratio at March 31, 2021 was 6.61 percent compared with 6.71 percent at December 31, 2020 and 7.12 percent at March 30, 2020. 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 June 14, 2021 to shareholders of record at the close of business on May 28, 2021.  

 

Conference Call Information

 

The Company will review its first quarter financial results today at 8:00 a.m. Hawaii Time (2:00 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/xbnzsss3. 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, April 26, 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 8037629 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, 2020, which was 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 first quarter 2021 financial report April 26, 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

unemployment experience & forecast 4 source: UHERO Hawaii unemployment rate

economic forecast source: UHERO Hawaii unemployment rate 5

economic forecast source: UHERO 6

Hawaii real estate market Oahu market indicators – 2021 vs 2020 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 4/22/21

COVID-19 vaccinations 10 source: Washington Post as of 4/22/21, percents are calculated for population age 16 and older U.S. overall 26.9%

Q1 financial update

12 $1.3 B of growth primarily driven by core customers 1Q deposit growth $ in millions

growing low cost deposits 13 continuing to build very low cost funding to mitigate impact of higher rates $ in millions

strong liquidity $ in millions 14 deposit growth conservatively allocated into balanced mix of asset classes large increase in cash supports liquidity, provides funding for loan and investment growth, and can be deployed to support NII and NIM

financial summary $ in millions, except per share amounts 15 note: numbers may not add up due to rounding

controlled expenses $ in millions 16 2019 – 2021 CAGR of expenses of 1.1% adjusting for extraordinary items incentive compensation reduced in 2020 to support reserve provisioning and restored to normal levels for 2021 1Q 2020 extraordinary items include $4.7 million of separation expense 1Q 2021 extraordinary items include $1.9 million contactless card rollout and $1.8 million of separation expense related to VSIP

performance metrics 17

18 strong risk-based capital, well in excess of required minimums tier 1 capital CET 1 total capital fortress capital position 10.0% 10.0%

1Q credit update

loan portfolio excluding PPP 20 40% commercial 70% real estate secured wtd avg LTV 56% 63% 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 $745 MM in PPP loan balances

customer relief update 85% decline from June 30, 2020 21 15.7% 13.0% 4.1% 2.7% 92% secured

credit quality $ in millions 22 * 56% of total criticized in CRE with 58% wtd avg LTV

reserve trend $ in millions 23 allowance for credit losses

other highlights

furthering our digital future 25 Digital One investment new digital options and services highly intuitive and functionally rich experiences low-code implementation to accelerate speed to market highly scalable and configurable platform that will grow with the bank’s need over time SimpliFi by Bank of Hawaii make the ways people access, engage, and manage money really, truly simple empower customers with tools and information to make better financial choices provide simple self-service tools and access to local experts to prosper creating the always open, ubiquitous branch of the future accessible at your fingertips

supporting our customers 26 contactless cards live chat

commitment to future growth 27 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

Q & A

Bank of Hawaii Corporation first quarter 2021 financial report April 26, 2021

appendix

funding opportunities loan to deposit ratio compared with peers note: S&P Regional Bank Index excluding banks greater than $50B strong liquidity to fund continued growth 31

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

33 92% secured with 63% weighted average LTV as of 3/31/21 consumer relief $51 million (0.4%) 680 wtd avg FICO 28% wtd avg DTI 62% wtd avg CLTV 714 wtd avg FICO 17% <700 FICO / >70% CLTV 63% wtd avg LTV 764 wtd avg FICO 7% <700 FICO / >70% LTV * indirect excludes recourse loans ($0.3MM) **other includes direct installment loans and auto lease. origination FICO used for auto lease.

34 92% secured with 47% weighted average LTV as of 3/31/21 90% continue to pay interest commercial relief $271 million (2.2%) $1.7MM secured with 54% wtd avg LTV $0.5 MM avg loan 47% wtd avg LTV 81% ≤ 65% LTV $4.2MM avg loan

high risk industries $1,612 million (13%) / $1,368 million (11%) excluding PPP 35

retail $704 million (6%) – excluding PPP 36 93% real estate secured 56% wtd avg LTV average exposure $3.7 MM largest exposure $40 MM 64% of portfolio has an LTV ≤ 65% 97.8% is secured or has essential anchor 0.0% unsecured and deferred 100% secured or paying interest

lodging $505 million (4%) – excluding PPP 37 79% real estate secured 51% wtd avg LTV average exposure $9.6 MM largest exposure $40 MM 80% of portfolio has an LTV ≤ 65% 92% of unsecured outstandings to global hotel and timeshare brands 0.1% unsecured and deferred 99.9% secured or paying interest

restaurant / entertainment $159 million (1%) – excluding PPP 38 39% real estate secured 65% wtd avg LTV average exposure $1.7 MM largest exposure $27.9 MM 42% of portfolio has an LTV ≤ 65% $7.3 MM unsecured and deferred average exposure $0.4 MM 99.9% secured or paying interest