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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	July 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, par value $0.01 per share

BOH

New York Stock Exchange

 

Depository Shares, Each  Representing 1/40th Interest in a Share of 4.375% Fixed Rate Non-Cumulative Preferred Stock, Series A

BOH.PRA

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 July 26, 2021, Bank of Hawaii Corporation announced its results of operations for the quarter ended June 30, 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	July 26, 2021 Press Release: Bank of Hawaii Corporation Second 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 Second 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: July 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 Second Quarter 2021 Financial Results

 

 

 

FOR IMMEDIATE RELEASE

 

 

HONOLULU, HI (July 26, 2021) -- Bank of Hawaii Corporation (NYSE: BOH) today reported diluted earnings per common share of $1.68 for the second quarter of 2021, compared with diluted earnings per common share of $1.50 in the previous quarter and $0.98 in the same quarter last year.  Net income for the second quarter of 2021 was $67.5 million compared with net income of $59.9 million in the first quarter of 2021 and $38.9 million in the second quarter of 2020.  

 

“Bank of Hawaii Corporation continued to perform well during the second quarter of 2021," said Peter Ho, Chairman, President, and CEO.  “Core loans and deposits continue to grow, and asset quality remains solid.  We are also pleased with the success of our inaugural preferred stock issuance in June, which enhances the strength of our balance sheet and positions us well for future growth.”  

 

The return on average assets for the second quarter of 2021 was 1.23 percent compared with 1.15 percent during the previous quarter and 0.82 percent in the same quarter last year.  The return on average common equity for the second quarter of 2021 was 19.60 percent compared with 17.65 percent during the previous quarter and 11.58 percent in the same quarter last year.  

 

For the six-month period ended June 30, 2021, net income was $127.5 million, up from net income of $73.7 million during the same period last year.  Diluted earnings per common share were $3.18 for the first half of 2021 compared with diluted earnings per common share of $1.85 for the first half of 2020.

 

The return on average assets for the six-month period ended June 30, 2021 was 1.19 percent compared with the return on average assets of 0.79 percent for the same six-month period in 2020.  The return on average common equity was 18.63 percent for the first half of 2021 compared with the return on average common equity of 11.11 percent for the first half of 2020.  

 

 

 

 

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Financial Highlights

 

Net interest income, on a taxable-equivalent basis, for the second quarter of 2021 was $123.8 million, an increase of $3.0 million from $120.8 million in the first quarter of 2021 and down $3.2 million from $127.0 million in the second quarter of 2020.  The net interest margin was 2.37 percent in the second quarter of 2021, a decrease of 6 basis points from 2.43 percent in the previous quarter and 46 basis points from 2.83 percent in the same quarter last year.   The decrease in the net interest margin is largely due to higher levels of liquidity from continued strong deposit growth and lower interest rates, partially offset by higher fees from Paycheck Protection Program (“PPP”) loans.  Net interest income in the second quarter of 2020 included an interest recovery of $2.9 million.  

 

Net interest income, on a taxable equivalent basis, for the first half of 2021 was $244.7 million, down $8.7 million compared with net interest income of $253.4 million for the first half of 2020.  The net interest margin for the first six months of 2021 was 2.40 percent, compared with the net interest margin of 2.90 percent for the same six-month period last year.  Analyses of changes in net interest income are included in Tables 8a, 8b, and 8c.

 

Results for the second quarter of 2021 included a negative provision for credit losses of $16.1 million compared with a negative provision for credit losses of $14.3 million in the previous quarter and provision for credit losses of $40.4 million in the same quarter last year.  The provision for credit losses during the first half of 2021 was negative $30.4 million compared with a provision for credit losses of $74.0 million during the same period in 2020.  

 

Noninterest income was $44.4 million in the second quarter of 2021, an increase of $1.4 million compared with noninterest income of $43.0 million in the first quarter of 2021 and a decrease of $6.9 million compared with $51.3 million in the second quarter of 2020.  Noninterest income in the second quarter of 2021 included a gain of $3.7 million related to the sale of investment securities, partially offset by lower mortgage banking income. Noninterest income during the second quarter of 2020 included a gain of $14.2 million related to a sale of Visa Class B shares.  Noninterest income for the first half of 2021 was $87.4 million compared with noninterest income of $97.4 million for the first half of 2020.

 

Noninterest expense was $96.5 million in the second quarter of 2021, a decrease of $2.4 million compared with noninterest expense of $98.9 million in the first quarter of 2021 and an increase of $7.6 million compared with $88.9 million in the second quarter of 2020.  Noninterest expense during the second quarter of 2021 included fees related to the early termination of FHLB advances and repurchase agreements of $3.2 million offset by a gain on the sale of property of $3.1 million. Noninterest expense in the second quarter of 2021 also included the restoration of incentive compensation that was reduced in the second quarter of 2020.  Noninterest expense in the first quarter of 2021 included seasonal payroll expenses of approximately $2.1 million, costs related to the rollout of contactless cards of $1.9 million, and separation expenses of $1.8 million.  Noninterest expense for the first half of 2021 was $195.4 million compared with noninterest expense of $185.2 million for the first half of 2020.  An analysis of noninterest expenses related to salaries and benefits is included in Table 9.  

 

The efficiency ratio during the second quarter of 2021 was 57.47 percent compared with 60.45 percent in the previous quarter and 49.95 percent during the same quarter last year.  The efficiency ratio for the first half of 2021 was 58.94 percent compared with 52.90 percent in the same period last year.

 

 

 

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The effective tax rate for the second quarter of 2021 was 22.84 percent compared with 24.09 percent in the previous quarter and 20.05 percent during the same quarter in 2020.  The effective tax rate for the first half of 2021 was 23.43 percent compared with an effective tax rate of 18.95 percent during the same period last year. The increase in the effective tax rate for the first half of 2021 was primarily due to higher pretax book income in the first half of 2021.  

 

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.  

 

Asset Quality

 

The Company’s overall asset quality continued to remain stable during the second quarter of 2021.  Total non-performing assets were $19.0 million at June 30, 2021, up from $17.9 million at March 31, 2021 and down from $22.7 million at June 30, 2020.  Non-performing assets as a percentage of total loans and leases and foreclosed real estate were 0.16 percent at the end of the second quarter of 2021, compared with 0.15 percent at the end of the first quarter of 2021 and 0.19 percent at the end of the second quarter of 2020.  

 

Accruing loans and leases past due 90 days or more were $9.3 million at June 30, 2021 compared with $10.4 million at March 31, 2021 and $8.9 million at June 30, 2020.  Restructured loans on accrual status and not past due 90 days or more were $74.9 million at June 30, 2021 compared with $74.2 million at March 31, 2021 and $59.7 million at June 30, 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 second quarter of 2021 were $1.2 million or 0.04 percent annualized of total average loans and leases outstanding and were comprised of charge-offs of $4.3 million partially offset by recoveries of $3.1 million.  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 loan and lease charge-offs during the second quarter of 2020 were $5.1 million or 0.18 percent annualized of total average loans and leases outstanding and were comprised of $8.3 million of charge-offs partially offset by recoveries of $3.2 million.  Net loan and lease charge-offs during the first half of 2021 were $4.1 million or 0.07 percent annualized of total average loans and leases outstanding compared with net charge-offs of $8.9 million or 0.16 percent annualized of total average loans and leases outstanding for the first half of 2020.

 

The allowance for credit losses on loans and leases was $180.4 million at June 30, 2021, a decrease from $198.3 million at March 31, 2021 and an increase from $173.4 million at June 30, 2020.  The ratio of the allowance for credit losses to total loans and leases outstanding was 1.50 percent at June 30, 2021, down from 1.63 percent at March 31, 2021 and up from 1.47 percent at June 30, 2020.  The reserve for unfunded commitments was $4.5 million at June 30, 2021, an increase from $3.0 million at the end of the prior quarter and an increase from $2.5 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.

 

 

 

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Other Financial Highlights

 

Total assets increased to a new record of $22.7 billion at June 30, 2021, an increase compared with total assets of $21.9 billion at March 31, 2021 and $19.8 billion at June 30, 2020.   Average total assets were $22.1 billion during the second quarter of 2021, an increase from $21.2 billion during the first quarter of 2021 and $19.2 billion in the second quarter of 2020.

 

The investment securities portfolio was $8.5 billion at June 30, 2021, up from $7.5 billion at March 31, 2021 and from $6.0 billion at June 30, 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 U.S. government-sponsored enterprises and includes $4.5 billion in securities available-for-sale and $3.9 billion in securities held-to-maturity at June 30, 2021.  The securities portfolio at March 31, 2021 included $4.0 billion in securities available-for-sale and $3.5 billion in securities held-to-maturity.  The securities portfolio at June 30, 2020 included $2.7 billion in securities available-for-sale and $3.3 billion in securities held-to-maturity.   

 

Total loans and leases were $12.0 billion at June 30, 2021, a decrease of 0.8 percent from total loans and leases of $12.1 billion at March 31, 2021 and an increase of 2.0 percent from $11.8 billion at June 30, 2020.  Average total loans and leases were $12.1 billion during the second quarter of 2021, an increase from average total loans and leases of $12.0 billion during the first quarter of 2021 and $11.7 billion during the second quarter of 2020.

 

The commercial loan portfolio was $5.1 billion at June 30, 2021, a decrease of $156.2 million or 3.0 percent from $5.3 billion at March 31, 2021 and up $80.4 million or 1.6 percent from $5.0 billion at June 30, 2020.  Commercial loans excluding PPP loans were $4.6 billion at June 30, 2021, an increase of $55.7 million or 1.2 percent from $4.5 billion at March 31, 2021 and an increase of $95.3 million or 2.1 percent from $4.5 billion at June 30, 2020.  PPP loans were $513.5 million at June 30, 2021, a decrease of $212.0 million or 29.2 percent from $725.5 million at March 31, 2021 and a decrease of $14.9 million or 2.8 percent from $528.5 million at June 30, 2020.  Consumer loans were $6.9 billion at June 30, 2021, an increase of $56.9 million or 0.8 percent from $6.9 billion at March 31, 2021 and up $155.6 million or 2.3 percent from $6.8 billion at June 30, 2020.  Loan and lease portfolio balances are summarized in Table 10.

 

Total deposits were $20.2 billion at June 30, 2021, an increase of 3.1 percent from total deposits of $19.6 billion at March 31, 2021 and up 15.8 percent from total deposits of $17.4 billion at June 30, 2020.  Average total deposits were $19.7 billion during the second quarter of 2021, an increase from $18.7 billion during the first quarter of 2021 and from $16.7 billion during second quarter of 2020.

 

Consumer deposits were $9.8 billion at June 30, 2021, an increase of $101.6 million or 1.0 percent from $9.7 billion at March 31, 2021 and an increase of $1.0 billion or 12.3 percent from $8.8 billion at June 30, 2020.  Commercial deposits were $8.7 billion at June 30, 2021, an increase of $434.8 million or 5.3 percent from $8.2 billion at March 31, 2021 and an increase of $1.4 billion or 18.9 percent from $7.3 billion at June 30, 2020.  Other deposits, including public funds, were $1.6 billion at June 30, 2021, an increase of $76.7 million or 4.9 percent from $1.6 billion at March 31, 2021 and an increase of $284.3 million or 20.9 percent from $1.4 billion at June 30, 2020.  Deposit balances are summarized in Table 10.

 

In the second quarter of 2021, the Company issued $180 million of Fixed Rate Non-Cumulative Perpetual Preferred Stock, Series A, at a rate of 4.375%. The Company received net proceeds from the offering of $175.5 million after issuance costs. There were no repurchases under the share repurchase program in the second quarter of 2021.  Total remaining buyback authority under the share repurchase program was $113.1 million at July 23, 2021.

 

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Total shareholders’ equity was $1.6 billion at June 30, 2021, compared with $1.4 billion at March 31, 2021 and $1.4 billion at June 30, 2020.  The Tier 1 Capital Ratio was 13.87 percent at June 30, 2021 compared with 12.35 percent at March 31, 2021 and 12.04 percent at June 30, 2020.  The Tier 1 Leverage Ratio at June 30, 2021 was 7.31 percent compared with 6.61 percent at March 31, 2021 and 6.90 percent at June 30, 2020.

 

The Company’s Board of Directors declared a quarterly cash dividend of $0.70 per share on the Company’s outstanding common shares.  The dividend will be payable on September 15, 2021 to shareholders of record at the close of business on August 31, 2021.  The Board of Directors previously declared the first quarterly dividend payment of $5.59 per share, equivalent to $0.13975 per depositary share, on its Fixed Rate Non-Cumulative Perpetual Preferred Stock, Series A for the period covering June 15, 2021 through July 31, 2021.  The depositary shares representing the Series A Preferred Stock are traded on the NYSE under the symbol “BOH.PRA.”  The dividend will be payable on August 2, 2021 to shareholders of record of the preferred stock as of July 16, 2021.

 

Conference Call Information

 

The Company will review its second 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/nujqrorp.  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, July 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 3698556 when prompted. In addition, the replay will be available on the Company's website, www.boh.com.

 

 

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 and its Form 10-Q for the fiscal quarter ended March 31, 2021, 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 second quarter 2021 financial report July 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, seasonally adjusted Hawaii unemployment rate

Hawaii real estate market Oahu market indicators – 2021 vs 2020 5 source: Honolulu Board of Realtors, compiled from MLS data

daily arrivals total passenger count* 6 *source: Department of Business, Economic Development, and Tourism, excluding from Canada 7/8/21: testing and quarantine lifted for fully vaccinated U.S. travelers 10/15/20: launch of Safe Travels program

COVID-19 cases 7 source: Washington Post as of 7/23/21

COVID-19 vaccinations 8 source: Washington Post as of 7/23/21 U.S. overall 48.8%

2Q financial update

10 core customers continue to drive growth in balances growth from core customers $ in millions ample liquidity to fund additional growth: investments increased by $1 billion in highly liquid, low-risk portfolio and holding $910 million cash

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

disciplined expenses $ in millions 12 core noninterest expense remains flat; other increases driven by restoration of incentives and higher volume restoration of incentives reduced in 2020 to support reserve provisioning for pandemic core expenses flat related to higher mortgage balances, value sharing, and higher debit card income core YoY expense growth: 0.3% Honolulu inflation 2021F: 2.5%* *source: Department of Business, Economic Development, and Tourism 2nd quarter 2021 report

performance metrics 13

14 strong capital boosted by preferred stock issuance in June and strong earnings position us well for future balance sheet growth stronger fortress capital positioned for further growth note: 2Q21 regulatory capital ratios are preliminary total deposit growth of $4.4 billion, or 19% annualized, since end of 2019 issued $180 million 4.375% fixed rate series A preferred stock in June 2021 5th lowest $25-Par U.S. Bank preferred dividend ever at time of issuance 8th lowest $25-Par preferred dividend ever, across all industries at time of issuance

15 note: historical dividends adjusted for stock splits return to buybacks and increased dividend healthy earnings to support dividends and repurchases share buybacks plan to restart share repurchase program in July 2021 $113 million share buyback authority remaining dividends raising common equity dividend from $0.67 per share to $0.70 per share recession COVID-19

2Q credit update

customer relief update 17 15.7% 2.7% 93% secured 91% paying interest commercial consumer 99.3% of former deferrals are current 88.2% decline in deferrals since June 30, 2020

credit quality $ in millions 18 * 56% of total criticized in CRE with 59% wtd avg LTV

reserve trend $ in millions 19 allowance for credit losses note: balances and coverage ratio based on allowance for credit losses – loans and leases

Q & A

Bank of Hawaii Corporation second quarter 2021 financial report July 26, 2021

appendix

economic forecast source: UHERO Hawaii unemployment rate 23

economic forecast source: UHERO 24

growing low cost deposits 25 continuing to build very low cost funding to mitigate impact of higher rates $ in millions

funding opportunities loan to deposit ratio compared with peers strong liquidity to fund continued growth 26 note: S&P Regional Banking Index excluding banks greater than $50bn

loan portfolio excluding PPP 27 40% commercial 70% real estate secured wtd avg LTV 56% 62% w/ BOH ≥ 10 yrs avg balance $0.6MM CRE C&I residential mortgage home equity auto leasing other construction 60% consumer 84% real estate secured wtd avg LTV 56% 57% w/ BOH ≥ 10 yrs 79% of portfolio secured with quality real estate with combined weighted average loan to value of 56% note: excludes $528MM in PPP loan balances including deferred costs and fees

28 99% secured with 68% weighted average LTV as of 6/30/21 consumer relief $13 million (0.1%) 73% wtd avg CLTV 698 wtd avg FICO 29% <700 FICO / >70% CLTV 66% wtd avg LTV 731 wtd avg FICO 20% <700 FICO / >70% LTV *other consists of auto lease

29 93% secured with 46% weighted average LTV as of 6/30/21 97% continue to pay interest commercial relief $205 million (1.7%) $0.7MM secured with 61% wtd avg LTV $0.7MM avg loan 46% wtd avg LTV 79% ≤ 65% LTV $5.7MM avg loan

high risk industries $1,577 million (13%) / $1,379 million (11%) excluding PPP 30

retail $706 million (6%) – excluding PPP 31 94% real estate secured 55% wtd avg LTV average exposure $3.7MM largest exposure $39MM 64% of portfolio has an LTV ≤ 65% 98.8% is secured or has essential anchor 0.0% unsecured and deferred 100% secured or paying interest

lodging $521 million (4%) – excluding PPP 32 81% real estate secured 52% wtd avg LTV average exposure $9.5MM largest exposure $40MM 81% of portfolio has an LTV ≤ 65% 92% of unsecured outstandings to global hotel and timeshare brands 0.1% unsecured and deferred 100% secured or paying interest

restaurant / entertainment $152 million (1%) – excluding PPP 33 41% real estate secured 66% wtd avg LTV average exposure $1.8MM largest exposure $28.1MM 38% of portfolio has an LTV ≤ 65% $4.7MM unsecured and deferred average exposure $0.5MM 100% secured or paying interest