Bank of Hawaii Corporation First Quarter 2005 Financial Results
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HONOLULU, Apr 25, 2005 (BUSINESS WIRE) -- Bank of Hawaii Corporation (NYSE:BOH)
-- Diluted Earnings Per Share $0.83, Up 20% From 2004
-- Net Income $45.5 Million, Up 14% From 2004
-- Board of Directors Increases Share Repurchase Authorization $100 Million
-- Board of Directors Declares Dividend of $0.33 Per Share
Bank of Hawaii Corporation (NYSE:BOH) today reported diluted earnings per share of $0.83 for the first quarter of 2005, an increase from diluted earnings per share of $0.82 in the fourth quarter of 2004 and an increase from $0.69 in the first quarter of 2004. Net income for the first quarter of 2005 was $45.5 million, down $0.7 million or 1.6 percent from net income of $46.2 million in the previous quarter and up $5.7 million or 14.4 percent from $39.8 million reported in the same quarter last year.
Return on average assets for the first quarter of 2005 was 1.88 percent, down slightly from 1.89 percent in the fourth quarter of 2004, and up from 1.65 percent in the first quarter of 2004. Return on average equity was 23.66 percent for the first quarter of 2005, up from 23.63 percent in the previous quarter and up from 19.98 percent in the same quarter last year.
"I am very pleased with Bank of Hawaii Corporation's strong financial performance during the first quarter of 2005," said Allan R. Landon, Chairman and CEO. "We've been able to continue the momentum we established last year, our businesses are growing and our focus on customer service is really making a difference in building value at Bank of Hawaii."
Results for the fourth quarter of 2004 included a return to income of $6.5 million before tax ($4.1 million after tax or $0.07 per diluted share), resulting from a release of the allowance for loan and lease losses due to improvement in the Company's credit quality and strong economic conditions. Excluding the release of reserves, results for the first quarter of 2005 increased $3.4 million or $0.08 per diluted share from the previous quarter.
Financial Highlights
Net interest income, on a taxable equivalent basis, for the first quarter of 2005 was $100.7 million, up $0.7 million from $100.0 million in the fourth quarter of 2004 and up $4.6 million from $96.1 million in the first quarter last year. The increase in net interest income from the fourth quarter of 2004 was largely due to growth in total loans. The increase in net interest income from the first quarter of 2004 was largely due to higher volume in the investment portfolio. An analysis of the change in net interest income is included in Table 6.
The net interest margin was 4.43 percent for the first quarter of 2005, a 3 basis point increase from 4.40 percent in the previous quarter and a 13 basis point increase from 4.30 percent in the first quarter of 2004.
The Company did not recognize a provision for loan and lease losses during the first quarter of 2005 or during the first quarter of 2004. As previously mentioned, the Company returned to income $6.5 million from a release of the allowance for loan and lease losses during the fourth quarter of 2004.
Non-interest income was $52.3 million for the first quarter of 2005, an increase of $4.0 million or 8.2 percent compared to non-interest income of $48.4 million in the fourth quarter of 2004. Nearly every category experienced growth during the quarter. Compared to the same quarter last year non-interest income was up $3.5 million or 7.1 percent.
Non-interest expense was $80.9 million in the first quarter of 2005, down $1.2 million or 1.5 percent from non-interest expense of $82.1 million in the previous quarter and down $2.2 million or 2.6 percent from $83.0 million in the same quarter last year. Included in the first quarter of 2005 was a $1.1 million gain on the sale of a foreclosed property. Separately, the Company recognized a $1.3 million impairment of goodwill related to its insurance business. An analysis of salary and benefit expenses is included in Table 7.
The efficiency ratio for the first quarter of 2005 was 52.86 percent, an improvement from 55.37 percent in the previous quarter and from 57.31 percent in 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. Previously reported results have been reclassified to conform to current methodologies. Business segment performance details are summarized in Table 11.
Asset Quality
Bank of Hawaii Corporation's overall asset quality continued to improve when compared to prior quarters. Non-performing assets were $13.4 million at the end of the first quarter of 2005, a decrease of $0.5 million, or 3.6 percent, compared to non-performing assets of $13.9 million at the end of the previous quarter. Non-performing assets declined $14.5 million, or 52.0 percent, compared to $27.9 million at the end of the same quarter last year. At March 31, 2005 the ratio of non-performing assets to total loans, foreclosed real estate, and other investments was 0.22 percent compared with 0.23 percent at December 31, 2004 and 0.49 percent at March 31, 2004.
Non-accrual loans were $12.5 million at March 31, 2005, a reduction of $1.2 million, or 8.6 percent, from $13.7 million at December 31, 2004 and down $11.0 million, or 46.7 percent, from $23.5 million at March 31, 2004. Non-accrual loans as a percentage of total loans were 0.21 percent at March 31, 2005, down from 0.23 percent at December 31, 2004 and down from 0.41 percent at March 31, 2004.
Net charge-offs for the first quarter of 2005 were $3.7 million, or 0.25 percent (annualized) of total average loans, compared to $4.6 million, or 0.31 percent (annualized) of total average loans in the fourth quarter of 2004. Net charge-offs during the first quarter of 2004 were $1.9 million, or 0.13 percent (annualized) of total average loans. Net charge-offs in the first quarter of 2005 were comprised of $5.8 million in charge-offs partially offset by recoveries of $2.1 million.
The allowance for loan and lease losses was $105.0 million at March 31, 2005, down from $106.8 million at December 31, 2004 and down from $127.2 million at March 31, 2004. The decrease in the allowance from the previous year is largely due to $10.0 million returned to income from releases of the allowance for loan and lease losses during 2004. In addition, during the fourth quarter of 2004, $6.8 million was reclassified from the allowance for loan and lease losses to other liabilities representing the estimate for probable credit losses inherent in unfunded commitments to extend credit. The $1.8 million decrease in the allowance from the previous quarter was primarily due to net charge-offs of $3.7 million. The allowance for unfunded commitments at March 31, 2005 was $4.9 million, down from $6.8 million at December 31, 2004.
The ratio of the allowance for loan and lease losses to total loans was 1.75 percent at March 31, 2005, down slightly from 1.78 percent at December 31, 2004 and down from 2.23 percent at March 31, 2004. If the allowance for unfunded commitments had been reclassified at March 31, 2004, the ratio of the allowance for loan and lease losses to total loans would have been 2.12 percent.
Credit exposure to the air transportation industry is summarized in Table 8.
Other Financial Highlights
Total assets were $9.91 billion at March 31, 2005, up from $9.77 billion at December 31, 2004 and down from $10.01 billion at March 31, 2004. Total loans and leases were $6.02 billion at March 31, 2005, up from $5.99 billion at December 31, 2004 and up from $5.71 billion at March 31, 2004. Commercial loans outstanding decreased slightly from the previous quarter as payoffs exceeded originations due to the continued strong economy and liquidity in the Hawaii market. Total commercial loans were $2.10 billion at March 31, 2005, down from $2.11 billion at December 31, 2004 and up from $2.04 billion at March 31, 2004. Consumer lending remained strong during the quarter. Total consumer loans were $3.91 billion at March 31, 2005, up from $3.87 billion at the end of the previous quarter and up from $3.68 billion at March 31, 2004. Total deposits at March 31, 2005 were $7.76 billion, up from $7.56 billion at December 31, 2004 and up from $7.36 billion at March 31, 2004.
During the first quarter of 2005, Bank of Hawaii Corporation repurchased 2.4 million shares of common stock at a total cost of $112.6 million under its share repurchase program. The average cost was $47.52 per share. From the beginning of the share repurchase program in July 2001 through March 31, 2005, the Company repurchased a total of 37.3 million shares and returned a total of $1.2 billion to the shareholders at an average cost of $32.17 per share.
The Company's Board of Directors has increased the authorization under the share repurchase program by an additional $100 million. This new authorization, combined with the previously announced authorizations of $1.25 billion, brings the total repurchase authority to $1.35 billion. From April 1, 2005 through April 22, 2005, the Company repurchased an additional 0.5 million shares of common stock at an average cost of $45.16 per share. Remaining buyback authority under the share repurchase program was $127.2 million at April 22, 2005.
The Company's capital and liquidity remain strong. At March 31, 2005 the Tier 1 leverage ratio was 7.42 percent compared to 8.29 percent at December 31, 2004 and 7.88 percent at March 31, 2004.
The Company's Board of Directors has declared a quarterly cash dividend of $0.33 per share on the Company's outstanding shares. The dividend will be payable on June 14, 2005 to shareholders of record at the close of business on May 31, 2005.
Financial Outlook
Bank of Hawaii Corporation revised its earnings estimate and now believes that net income for the full year of 2005 should be approximately $176 million to $179 million. Net income estimates for 2005 include a $10 million provision for loan and lease losses. An analysis of credit quality is performed quarterly to determine the adequacy of the allowance for loan and lease losses. The results of this analysis determine the timing and amount of the provision for loan and lease losses. Earnings per share and return on equity projections continue to be dependent upon, among other things, the terms and timing of share repurchases.
Conference Call Information
The Company will review its first quarter 2005 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 800-599-9829 in the United States or 617-847-8703 for international callers. No confirmation code is required to access the call. A replay will be available for one week beginning Monday, April 25, 2005 by calling 888-286-8010 in the United States or 617-801-6888 for international callers and entering the number 47730945 when prompted. A replay of the presentation will also be available via the Investor Relations link of the Company's web site.
Economy
Hawaii experienced new record heights for tourism volumes, home prices and payroll employment during the first quarter of 2005. Unemployment held steady at a seasonally-adjusted 3.0 percent. Inflation for 2004 was reported to be 3.3 percent, only slightly higher than the national rate. Renewed tourism growth in early 2005 augmented continuing strength in residential investment.
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.
Forward-Looking Statements
This news release, including the statements under the caption "Financial Outlook," contains forward-looking statements concerning, among other things, the economic and business environment in our service area and elsewhere, credit quality, the expected level of loan and lease loss provisioning, anticipated net income and other financial and business matters in future periods. Our forward-looking statements are based on numerous assumptions, any of which 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 and repayment of maturing debt; 5) inability to achieve expected benefits of our business process improvements; 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.
Bank of Hawaii Corporation and Subsidiaries Highlights (Unaudited) Table 1 ---------------------------------------------------------------------- (dollars in thousands except per share amounts) 2005 2004 ---------------------------------------------------------------------- At March 31, ------------ Balance Sheet Totals Total Assets $9,908,030 $10,013,442 Net Loans 5,910,784 5,587,811 Deposits 7,760,662 7,363,922 Long-Term Debt 242,656 319,833 Shareholders' Equity 716,656 785,768 Average Assets 9,845,765 9,677,903 Average Loans and Leases 6,000,572 5,742,368 Average Deposits 7,687,798 7,319,902 Average Shareholders' Equity 780,271 801,247 Three Months Ended March 31, ---------------------------- Operating Results Interest Income $120,158 $111,756 Net Interest Income 100,658 96,031 Net Income 45,522 39,799 Basic Earnings Per Share 0.85 0.73 Diluted Earnings Per Share 0.83 0.69 Dividends Declared Per Share 0.33 0.30 Performance Ratios Net Income to Average Total Assets (ROA) 1.88% 1.65% Net Income to Average Shareholders' Equity (ROE) 23.66 19.98 Net Interest Margin (1) 4.43 4.30 Efficiency Ratio (2) 52.86 57.31 Allowance for Loan and Lease Losses to Loans and Leases Outstanding 1.75 2.23 Dividend Payout Ratio 38.82 41.10 Book Value Per Common Share 13.57 14.49 Average Equity to Average Assets 7.92 8.28 Leverage Ratio 7.42 7.88 Employees (FTE) 2,593 2,703 Branches and offices 87 89 Market Price Per Share of Common Stock for the Quarter Ended: Closing $45.26 $46.33 High $50.95 $47.45 Low $44.33 $41.75 (1) The net interest margin is defined as net interest income, annualized and on a fully-taxable equivalent basis, as a percentage of average earning assets. (2) 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 March 31, (dollars in thousands except per share amounts) 2005 2004 (1) ---------------------------------------------------------------------- Interest Income Interest and Fees on Loans and Leases $86,467 $81,428 Income on Investment Securities - Available for Sale 27,319 20,846 Income on Investment Securities - Held to Maturity 5,825 6,976 Deposits 23 1,231 Funds Sold 75 417 Other 449 858 ---------------------------------------------------------------------- Total Interest Income 120,158 111,756 ---------------------------------------------------------------------- Interest Expense Deposits 11,604 9,200 Securities Sold Under Agreements to Repurchase 3,325 1,926 Funds Purchased 733 231 Short-Term Borrowings 32 15 Long-Term Debt 3,806 4,353 ---------------------------------------------------------------------- Total Interest Expense 19,500 15,725 ---------------------------------------------------------------------- Net Interest Income 100,658 96,031 Provision for Loan and Lease Losses - - ---------------------------------------------------------------------- Net Interest Income After Provision for Loan and Lease Losses 100,658 96,031 ---------------------------------------------------------------------- Non-Interest Income Trust and Asset Management 14,622 13,864 Mortgage Banking 2,590 1,977 Service Charges on Deposit Accounts 10,179 9,950 Fees, Exchange, and Other Service Charges 13,836 13,239 Insurance 5,788 4,658 Other 5,300 5,154 ---------------------------------------------------------------------- Total Non-Interest Income 52,315 48,842 ---------------------------------------------------------------------- Non-Interest Expense Salaries and Benefits 44,769 46,001 Net Occupancy Expense 9,545 9,386 Net Equipment Expense 5,471 5,964 Other 21,078 21,671 ---------------------------------------------------------------------- Total Non-Interest Expense 80,863 83,022 ---------------------------------------------------------------------- Income Before Income Taxes 72,110 61,851 Provision for Income Taxes 26,588 22,052 ---------------------------------------------------------------------- Net Income $45,522 $39,799 ====================================================================== Basic Earnings Per Share $0.85 $0.73 Diluted Earnings Per Share $0.83 $0.69 Dividends Declared Per Share $0.33 $0.30 Basic Weighted Average Shares 53,401,787 54,286,648 Diluted Weighted Average Shares 55,020,050 57,746,520 ====================================================================== (1) Certain 2004 information has been reclassified to conform to 2005 presentation. Bank of Hawaii Corporation and Subsidiaries Consolidated Statements of Condition (Unaudited) Table 3 ---------------------------------------------------------------------- March 31, Dec. 31, March 31, (dollars in thousands) 2005 2004 2004 ---------------------------------------------------------------------- Assets Interest-Bearing Deposits $5,897 $4,592 $479,882 Investment Securities - Available for Sale 2,495,447 2,483,719 1,995,713 Investment Securities - Held to Maturity (Market Value of $547,764, $585,836, and $719,308) 558,834 589,908 717,867 Funds Sold 70,000 21,000 255,000 Loans Held for Sale 20,897 17,642 67,328 Loans and Leases 6,015,790 5,986,930 5,714,996 Allowance for Loan and Lease Losses (105,006) (106,796) (127,185) ---------------------------------------------------------------------- Net Loans 5,910,784 5,880,134 5,587,811 ---------------------------------------------------------------------- Total Earning Assets 9,061,859 8,996,995 9,103,601 ---------------------------------------------------------------------- Cash and Non-Interest-Bearing Deposits 306,852 225,359 313,090 Premises and Equipment 141,615 146,095 155,488 Customers' Acceptance Liability 1,054 1,406 1,844 Accrued Interest Receivable 38,427 36,044 34,658 Foreclosed Real Estate 183 191 4,416 Mortgage Servicing Rights 18,510 18,769 21,138 Goodwill 34,959 36,216 36,216 Other Assets 304,571 305,116 342,991 ---------------------------------------------------------------------- Total Assets $9,908,030 $9,766,191 $10,013,442 ====================================================================== Liabilities Deposits Non-Interest-Bearing Demand $1,943,616 $1,977,703 $1,915,678 Interest-Bearing Demand 1,702,158 1,536,323 1,407,494 Savings 2,968,624 2,960,351 2,888,877 Time 1,146,264 1,090,290 1,151,873 ---------------------------------------------------------------------- Total Deposits 7,760,662 7,564,667 7,363,922 ---------------------------------------------------------------------- Securities Sold Under Agreements to Repurchase 664,206 568,981 1,039,204 Funds Purchased 76,100 149,635 98,370 Short-Term Borrowings 8,376 15,000 11,349 Banker's Acceptances Outstanding 1,054 1,406 1,844 Retirement Benefits Payable 66,233 65,708 62,298 Accrued Interest Payable 7,669 7,021 6,978 Taxes Payable and Deferred Taxes 274,164 229,928 228,785 Other Liabilities 90,254 96,373 95,091 Long-Term Debt 242,656 252,638 319,833 ---------------------------------------------------------------------- Total Liabilities 9,191,374 8,951,357 9,227,674 ---------------------------------------------------------------------- Shareholders' Equity Common Stock ($.01 par value); authorized 500,000,000 shares; issued / outstanding: March 2005 - 81,711,752 / 52,826,818, December 2004 - 81,711,752 / 54,960,857, March 2004 - 81,641,545 / 54,216,350 815 813 807 Capital Surplus 453,227 450,998 396,335 Accumulated Other Comprehensive Income (Loss) (33,469) (12,917) 4,289 Retained Earnings 1,310,070 1,282,425 1,222,602 Deferred Stock Grants (8,145) (8,433) (7,594) Treasury Stock, at Cost (Shares: March 2005 - 28,884,934, December 2004 - 26,750,895, March 2004 - 27,425,195) (1,005,842) (898,052) (830,671) Total Shareholders' Equity 716,656 814,834 785,768 ---------------------------------------------------------------------- Total Liabilities and Shareholders' Equity $9,908,030 $9,766,191 $10,013,442 ====================================================================== Bank of Hawaii Corporation and Subsidiaries Consolidated Statements of Shareholders' Equity (Unaudited) Table 4 ---------------------------------------------------------------------- Accum. Other Compre- hensive Common Capital Income (dollars in thousands) Total Stock Surplus (Loss) ---------------------------------------------------------------------- Balance at December 31, 2004 $814,834 $813 $450,998 $(12,917) Comprehensive Income: Net Income 45,522 - - - Other Comprehensive Income, Net of Tax: Change in Unrealized Gains and Losses on Investment Securities (20,552) - - (20,552) Total Comprehensive Income Common Stock Issued under Stock Plans and Related Tax Benefits (278,339 shares) 9,027 2 2,229 - Treasury Stock Purchased (2,411,752 shares) (114,580) - - - Cash Dividends Paid (17,595) - - - ---------------------------------------------------------------------- Balance at March 31, 2005 $716,656 $815 $453,227 $(33,469) ====================================================================== Balance at December 31, 2003 $793,132 $807 $391,701 $(5,711) Comprehensive Income: Net Income 39,799 - - - Other Comprehensive Income, Net of Tax: Change in Unrealized Gains and Losses on Investment Securities 10,000 - - 10,000 Total Comprehensive Income Common Stock Issued under Stock Plans and Related Tax Benefits (611,820 shares) 18,482 - 4,634 - Treasury Stock Purchased (1,323,050 shares) (59,227) - - - Cash Dividends Paid (16,418) - - - ---------------------------------------------------------------------- Balance at March 31, 2004 $785,768 $807 $396,335 $4,289 ====================================================================== Deferred Compre- Retained Stock Treasury hensive (dollars in thousands) Earnings Grants Stock Income ---------------------------------------------------------------------- Balance at December 31, 2004 $1,282,425 $(8,433) $(898,052) Comprehensive Income: Net Income 45,522 - - $45,522 Other Comprehensive Income, Net of Tax: Change in Unrealized Gains and Losses on Investment Securities - - - (20,552) --------- Total Comprehensive Income $24,970 ========= Common Stock Issued under Stock Plans and Related Tax Benefits (278,339 shares) (282) 288 6,790 Treasury Stock Purchased (2,411,752 shares) - - (114,580) Cash Dividends Paid (17,595) - - ------------------------------------------------------------- Balance at March 31, 2005 $1,310,070 $(8,145) $(1,005,842) ============================================================= Balance at December 31, 2003 $1,199,077 $(8,309) $(784,433) Comprehensive Income: Net Income 39,799 - - $39,799 Other Comprehensive Income, Net of Tax: Change in Unrealized Gains and Losses on Investment Securities - - - 10,000 --------- Total Comprehensive Income $49,799 ========= Common Stock Issued under Stock Plans and Related Tax Benefits (611,820 shares) 144 715 12,989 Treasury Stock Purchased (1,323,050 shares) - - (59,227) Cash Dividends Paid (16,418) - - ------------------------------------------------------------- Balance at March 31, 2004 $1,222,602 $(7,594) $(830,671) ============================================================= Bank of Hawaii Corporation and Subsidiaries Consolidated Average Balances and Interest Rates - Taxable Equivalent Basis (Unaudited) Table 5 ---------------------------------------------------------------------- Three Months Ended March 31, 2005 Average Income/ Yield/ (dollars in millions) Balance Expense Rate ---------------------------------------------------------------------- Earning Assets Interest-Bearing Deposits $4.8 $- 1.93% Funds Sold 12.6 0.1 2.37 Investment Securities Available for Sale 2,491.1 27.4 4.40 Held to Maturity 574.6 5.8 4.06 Loans Held for Sale 13.2 0.2 5.40 Loans and Leases (2) Commercial and Industrial 904.3 13.2 5.90 Construction 124.1 1.7 5.44 Commercial Mortgage 605.9 8.5 5.73 Residential Mortgage 2,332.1 32.6 5.59 Installment 736.8 15.0 8.27 Home Equity 678.8 9.5 5.65 Purchased Home Equity 116.8 1.0 3.54 Lease Financing 501.8 4.8 3.88 ---------------------------------------------------------------------- Total Loans and Leases 6,000.6 86.3 5.80 ---------------------------------------------------------------------- Other 53.9 0.4 3.38 ---------------------------------------------------------------------- Total Earning Assets (3) 9,150.8 120.2 5.29 ---------------------------------------------------------------------- Cash and Non-Interest-Bearing Deposits 315.6 Other Assets 379.4 ---------- Total Assets $9,845.8 ========== Interest-Bearing Liabilities Interest-Bearing Deposits Demand $1,618.1 1.7 0.42 Savings 2,972.3 4.4 0.60 Time 1,114.7 5.5 2.02 ---------------------------------------------------------------------- Total Interest-Bearing Deposits 5,705.1 11.6 0.82 ---------------------------------------------------------------------- Short-Term Borrowings 706.2 4.1 2.35 Long-Term Debt 248.7 3.8 6.14 ---------------------------------------------------------------------- Total Interest-Bearing Liabilities 6,660.0 19.5 1.19 ---------------------------------------------------------------------- Net Interest Income $100.7 ======== Interest Rate Spread 4.10% Net Interest Margin 4.43% Non-Interest-Bearing Demand Deposits 1,982.7 Other Liabilities 422.8 Shareholders' Equity 780.3 ---------- Total Liabilities and Shareholders' Equity $9,845.8 ========== Three Months Ended December 31, 2004 (1) Average Income/ Yield/ (dollars in millions) Balance Expense Rate ---------------------------------------------------------------------- Earning Assets Interest-Bearing Deposits $21.0 $0.1 2.05% Funds Sold 74.3 0.4 1.92 Investment Securities Available for Sale 2,444.9 26.4 4.32 Held to Maturity 615.1 6.1 4.00 Loans Held for Sale 15.9 0.2 5.72 Loans and Leases (2) Commercial and Industrial 790.7 11.4 5.71 Construction 115.2 1.5 5.10 Commercial Mortgage 624.4 8.6 5.47 Residential Mortgage 2,304.9 32.3 5.61 Installment 721.1 15.4 8.51 Home Equity 632.6 8.4 5.25 Purchased Home Equity 134.4 1.2 3.71 Lease Financing 511.1 5.1 3.97 ---------------------------------------------------------------------- Total Loans and Leases 5,834.4 83.9 5.73 ---------------------------------------------------------------------- Other 60.7 0.3 1.74 ---------------------------------------------------------------------- Total Earning Assets (3) 9,066.3 117.4 5.17 ---------------------------------------------------------------------- Cash and Non-Interest-Bearing Deposits 307.5 Other Assets 369.2 ---------- Total Assets $9,743.0 ========== Interest-Bearing Liabilities Interest-Bearing Deposits Demand $1,500.0 1.3 0.33 Savings 2,998.5 3.6 0.48 Time 1,063.7 5.1 1.92 ---------------------------------------------------------------------- Total Interest-Bearing Deposits 5,562.2 10.0 0.71 ---------------------------------------------------------------------- Short-Term Borrowings 776.0 3.5 1.82 Long-Term Debt 252.6 3.9 6.16 ---------------------------------------------------------------------- Total Interest-Bearing Liabilities 6,590.8 17.4 1.05 ---------------------------------------------------------------------- Net Interest Income $100.0 ======== Interest Rate Spread 4.12% Net Interest Margin 4.40% Non-Interest-Bearing Demand Deposits 1,954.2 Other Liabilities 419.4 Shareholders' Equity 778.6 ---------- Total Liabilities and Shareholders' Equity $9,743.0 ========== Three Months Ended March 31, 2004 (1) Average Income/ Yield/ (dollars in millions) Balance Expense Rate ---------------------------------------------------------------------- Earning Assets Interest-Bearing Deposits $249.6 $1.2 1.98% Funds Sold 168.9 0.4 0.99 Investment Securities Available for Sale 1,988.5 20.8 4.20 Held to Maturity 719.6 7.0 3.88 Loans Held for Sale 15.4 0.2 5.33 Loans and Leases (2) Commercial and Industrial 844.5 10.1 4.81 Construction 100.4 1.1 4.31 Commercial Mortgage 634.1 8.6 5.45 Residential Mortgage 2,317.5 33.3 5.75 Installment 650.9 14.3 8.84 Home Equity 489.2 5.8 4.75 Purchased Home Equity 204.9 2.7 5.18 Lease Financing 500.9 5.4 4.33 ---------------------------------------------------------------------- Total Loans and Leases 5,742.4 81.3 5.68 ---------------------------------------------------------------------- Other 77.5 0.9 4.45 ---------------------------------------------------------------------- Total Earning Assets (3) 8,961.9 111.8 5.00 ---------------------------------------------------------------------- Cash and Non-Interest-Bearing Deposits 327.6 Other Assets 388.4 ---------- Total Assets $9,677.9 ========== Interest-Bearing Liabilities Interest-Bearing Deposits Demand $1,370.0 0.5 0.15 Savings 2,871.6 3.3 0.46 Time 1,188.8 5.4 1.83 ---------------------------------------------------------------------- Total Interest-Bearing Deposits 5,430.4 9.2 0.68 ---------------------------------------------------------------------- Short-Term Borrowings 862.3 2.2 1.01 Long-Term Debt 320.9 4.3 5.44 ---------------------------------------------------------------------- Total Interest-Bearing Liabilities 6,613.6 15.7 0.96 ---------------------------------------------------------------------- Net Interest Income $96.1 ======== Interest Rate Spread 4.04% Net Interest Margin 4.30% Non-Interest-Bearing Demand Deposits 1,889.5 Other Liabilities 373.6 Shareholders' Equity 801.2 ---------- Total Liabilities and Shareholders' Equity $9,677.9 ========== (1) Certain 2004 information has been reclassified to conform to 2005 presentation. (2) Non-performing loans are included in the respective average loan balances. Income, if any, on such loans is recognized on a cash basis. (3) Interest income includes taxable-equivalent basis adjustment based upon a statutory tax rate of 35%. Bank of Hawaii Corporation and Subsidiaries Analysis of Change in Net Interest Income - Taxable Equivalent Basis (Unaudited) Table 6 ---------------------------------------------------------------------- Three Months Ended March 31, 2005 Compared to December 31, 2004 (dollars in millions) Volume (1) Rate (1) Time (1) Total ---------------------------------------------------------------------- Change in Interest Income: Interest-Bearing Deposits $(0.1) $- $- $(0.1) Funds Sold (0.4) 0.1 - (0.3) Investment Securities Available for Sale 0.5 0.5 - 1.0 Held to Maturity (0.4) 0.1 - (0.3) Loans and Leases Commercial and Industrial 1.7 0.3 (0.2) 1.8 Construction 0.1 0.1 - 0.2 Commercial Mortgage (0.3) 0.4 (0.2) (0.1) Residential Mortgage 0.4 (0.1) - 0.3 Installment 0.3 (0.4) (0.3) (0.4) Home Equity 0.7 0.6 (0.2) 1.1 Purchased Home Equity (0.2) - - (0.2) Lease Financing (0.1) (0.1) (0.1) (0.3) ---------------------------------------------------------------------- Total Loans and Leases 2.6 0.8 (1.0) 2.4 ---------------------------------------------------------------------- Other (0.1) 0.2 - 0.1 ---------------------------------------------------------------------- Total Change in Interest Income 2.1 1.7 (1.0) 2.8 ---------------------------------------------------------------------- Change in Interest Expense: Interest-Bearing Deposits Demand 0.1 0.3 - 0.4 Savings - 0.9 (0.1) 0.8 Time 0.2 0.3 (0.1) 0.4 ---------------------------------------------------------------------- Total Interest-Bearing Deposits 0.3 1.5 (0.2) 1.6 ---------------------------------------------------------------------- Short-Term Borrowings (0.3) 1.0 (0.1) 0.6 Long-Term Debt (0.1) - - (0.1) ---------------------------------------------------------------------- Total Change in Interest Expense (0.1) 2.5 (0.3) 2.1 ---------------------------------------------------------------------- Change in Net Interest Income $2.2 $(0.8) $(0.7) $0.7 ====================================================================== (1) The changes for each category of interest income and expense are allocated between the portion of changes attributable to the variance in volume, rate or time for that category. Bank of Hawaii Corporation and Subsidiaries Salaries and Benefits (Unaudited) Table 7 ---------------------------------------------------------------------- Three Months Ended March 31, (dollars in thousands) 2005 2004 ---------------------------------------------------------------------- Salaries $26,053 $27,204 Incentive Compensation 3,968 3,816 Stock-Based Compensation 1,715 2,896 Commission Expense 2,252 1,627 Retirement and Other Benefits 4,768 4,357 Payroll Taxes 3,453 3,430 Medical, Dental, and Life Insurance 2,231 2,104 Separation Expense 329 567 ---------------------------------------------------------------------- Total Salaries and Benefits $44,769 $46,001 ====================================================================== Bank of Hawaii Corporation and Subsidiaries Loan Portfolio Balances (Unaudited) Table 8 ---------------------------------------------------------------------- March 31, December 31, March 31, (dollars in thousands) 2005 2004 (1) 2004 (1) ---------------------------------------------------------------------- Commercial Commercial and Industrial $918,878 $909,264 $822,655 Commercial Mortgage 609,689 602,678 650,565 Construction 107,403 122,355 91,002 Lease Financing 468,349 479,100 474,288 ---------------------------------------------------------------------- Total Commercial 2,104,319 2,113,397 2,038,510 ---------------------------------------------------------------------- Consumer Residential Mortgage 2,342,062 2,326,385 2,273,333 Home Equity 694,261 657,164 510,378 Purchased Home Equity 109,632 122,728 191,066 Other Consumer 734,836 734,721 666,893 Lease Financing 30,680 32,535 34,816 ---------------------------------------------------------------------- Total Consumer 3,911,471 3,873,533 3,676,486 ---------------------------------------------------------------------- Total Loans and Leases $6,015,790 $5,986,930 $5,714,996 ====================================================================== Air Transportation Credit Exposure (Unaudited) ---------------------------------------------------------------------- March 31, Dec. 31, Mar. 31, 2005 2004 2004 Unused Total Total Total (dollars in Outstanding Commitments Exposure Exposure Exposure thousands) ---------------------------------------------------------------------- Air Transportation United States Regional Passenger Carriers $40,388 $10,131 $50,519 $52,764 $58,176 United States National Passenger Carriers 39,834 - 39,834 39,594 37,413 Passenger Carriers Based Outside United States 24,888 - 24,888 25,910 30,475 Cargo Carriers 13,475 - 13,475 13,771 14,122 ---------------------------------------------------------------------- Total Air Transportation $118,585 $10,131 $128,716 $132,039 $140,186 ====================================================================== Exposure includes loans, leveraged leases and operating leases. (1) Certain 2004 information has been reclassified to conform to 2005 presentation. Bank of Hawaii Corporation and Subsidiaries Consolidated Non-Performing Assets and Accruing Loans Past Due 90 Days or More (Unaudited) Table 9 ---------------------------------------------------------------------- (dollars in March 31, Dec. 31, Sept. 30, June 30, March 31, thousands) 2005 2004 2004 2004 2004 ---------------------------------------------------------------------- Non-Performing Assets Non-Accrual Loans Commercial Commercial and Industrial $470 $683 $775 $680 $6,009 Commercial Mortgage 1,922 2,106 5,552 5,649 7,388 Lease Financing 2,418 2,973 1,913 1,948 1,962 ---------------------------------------------------------------------- Total Commercial 4,810 5,762 8,240 8,277 15,359 ---------------------------------------------------------------------- Consumer Residential Mortgage 7,503 7,688 7,278 7,688 7,685 Home Equity 185 218 251 306 406 ---------------------------------------------------------------------- Total Consumer 7,688 7,906 7,529 7,994 8,091 ---------------------------------------------------------------------- Total Non- Accrual Loans 12,498 13,668 15,769 16,271 23,450 ---------------------------------------------------------------------- Foreclosed Real Estate 183 191 208 4,889 4,416 Other Investments 684 - - - - ---------------------------------------------------------------------- Total Non- Performing Assets $13,365 $13,859 $15,977 $21,160 $27,866 ====================================================================== Accruing Loans Past Due 90 Days or More Commercial Commercial and Industrial $29 $52 $65 $19 $707 Commercial Mortgage 2,243 - 688 693 702 ---------------------------------------------------------------------- Total Commercial 2,272 52 753 712 1,409 ---------------------------------------------------------------------- Consumer Residential Mortgage 604 387 2,588 698 595 Purchased Home Equity 70 183 97 32 107 Other Consumer 1,417 1,433 1,533 1,142 1,180 Lease Financing - 30 32 57 - ---------------------------------------------------------------------- Total Consumer 2,091 2,033 4,250 1,929 1,882 ---------------------------------------------------------------------- Total Accruing Loans Past Due 90 Days or More $4,363 $2,085 $5,003 $2,641 $3,291 ====================================================================== Total Loans and Leases $6,015,790 $5,986,930 $5,815,575 $5,787,314 $5,714,996 ====================================================================== Ratio of Non- Accrual Loans to Total Loans 0.21% 0.23% 0.27% 0.28% 0.41% ---------------------------------------------------------------------- Ratio of Non- Performing Assets to Total Loans, Foreclosed Real Estate and Other Investments 0.22% 0.23% 0.27% 0.37% 0.49% ---------------------------------------------------------------------- Ratio of Non- Performing Assets and Accruing Loans Past Due 90 Days or More to Total Loans 0.29% 0.27% 0.36% 0.41% 0.55% ---------------------------------------------------------------------- Quarter to Quarter Changes in Non-Performing Assets Balance at Beginning of Quarter $13,859 $15,977 $21,160 $27,866 $31,724 Additions 2,796 5,164 2,094 3,909 3,293 Reductions Payments (2,202) (6,435) (1,386) (4,232) (4,555) Return to Accrual (698) (456) (1,122) (2,700) (1,444) Sales of Foreclosed Assets (129) (206) (682) (147) (310) Charge- offs/ Write- downs (261) (185) (88) (3,536) (842) Transfer to Premises - - (3,999) - - ---------------------------------------------------------------------- Total Reductions (3,290) (7,282) (7,277) (10,615) (7,151) ---------------------------------------------------------------------- Balance at End of Quarter $13,365 $13,859 $15,977 $21,160 $27,866 ====================================================================== Bank of Hawaii Corporation and Subsidiaries Consolidated Reserve for Credit Losses (Unaudited) Table 10 ---------------------------------------------------------------------- Three Months Ended March 31, Dec. 31, March 31, (dollars in thousands) 2005 2004 2004 ---------------------------------------------------------------------- Balance at Beginning of Period $113,596 $124,651 $129,080 Loans Charged-Off Commercial Commercial and Industrial 574 465 387 Commercial Mortgage - - 574 Lease Financing - 774 228 Consumer Residential Mortgage 315 128 145 Purchased Home Equity 292 343 90 Other Consumer 4,582 4,903 4,655 Lease Financing 34 47 36 ---------------------------------------------------------------------- Total Loans Charged-Off 5,797 6,660 6,115 ---------------------------------------------------------------------- Recoveries on Loans Previously Charged-Off Commercial Commercial and Industrial 541 542 980 Commercial Mortgage 62 119 689 Construction - - 435 Lease Financing 32 1 15 Consumer Residential Mortgage 106 109 294 Home Equity 25 5 39 Purchased Home Equity 35 16 - Other Consumer 1,287 1,267 1,663 Lease Financing 19 23 55 Foreign - 23 50 ---------------------------------------------------------------------- Total Recoveries on Loans Previously Charged-Off 2,107 2,105 4,220 ---------------------------------------------------------------------- Net Loan Charge-Offs (3,690) (4,555) (1,895) Provision for Loan and Lease Losses - (6,500) - ---------------------------------------------------------------------- Balance at End of Period (1) $109,906 $113,596 $127,185 ====================================================================== Components Allowance for Loan and Lease Losses $105,006 $106,796 $127,185 Reserve for Unfunded Commitments (2) 4,900 6,800 - ---------------------------------------------------------------------- Total Reserve for Credit Losses $109,906 $113,596 $127,185 ====================================================================== Average Loans Outstanding $6,000,572 $5,834,379 $5,742,368 ====================================================================== Ratio of Net Loan Charge-Offs to Average Loans Outstanding (annualized) 0.25% 0.31% 0.13% Ratio of Allowance for Loan and Lease Losses to Loans and Leases Outstanding (2) 1.75% 1.78% 2.23% (1) Included in this analysis is activity related to the Company's reserve for unfunded commitments, which is separately recorded in other liabilities in the Consolidated Statements of Condition. (2) The reclassification of the reserve for unfunded commitments to other liabilities occurred in the fourth quarter of 2004 on a prospective basis. Thus, March 31, 2004 allowance for loan and lease losses and reserve for unfunded commitments were reported together. At March 31, 2004, the reserve for unfunded commitments was $6.2 million. Bank of Hawaii Corporation and Subsidiaries Business Segment Selected Financial Information (Unaudited) Table 11 ---------------------------------------------------------------------- Investment Treasury (dollars in Retail Commercial Services and Other Consolidated thousands) Banking Banking Group Corporate Total ---------------------------------------------------------------------- Three Months Ended March 31, 2005 Net Interest Income $52,351 $34,562 $2,888 $10,857 $100,658 Provision for Loan and Lease Losses 3,485 416 - (3,901) - ---------------------------------------------------------------------- Net Interest Income After Provision for Loan and Lease Losses 48,866 34,146 2,888 14,758 100,658 Non-Interest Income 24,242 11,531 14,626 1,916 52,315 ---------------------------------------------------------------------- 73,108 45,677 17,514 16,674 152,973 Non-Interest Expense (43,049) (22,560) (13,219) (2,035) (80,863) ---------------------------------------------------------------------- Income Before Income Taxes 30,059 23,117 4,295 14,639 72,110 Provision for Income Taxes (11,122) (8,598) (1,590) (5,278) (26,588) ---------------------------------------------------------------------- Allocated Net Income 18,937 14,519 2,705 9,361 45,522 ---------------------------------------------------------------------- Allowance Funding Value (162) (602) (6) 770 - GAAP Provision 3,485 416 - (3,901) - Economic Provision (3,505) (2,458) (90) (2) (6,055) Tax Effect of Adjustments 67 978 36 1,159 2,240 ---------------------------------------------------------------------- Income Before Capital Charge 18,822 12,853 2,645 7,387 41,707 Capital Charge (5,456) (4,636) (1,341) (10,027) (21,460) ---------------------------------------------------------------------- Net Income (Loss) After Capital Charge (NIACC) $13,366 $8,217 $1,304 $(2,640) $20,247 ====================================================================== RAROC (ROE for the Company) 38% 31% 22% 20% 24% ====================================================================== Total Assets at March 31, 2005 $3,796,459 $2,390,204 $137,698 $3,583,669 $9,908,030 ====================================================================== Three Months Ended March 31, 2004 (1) Net Interest Income $50,157 $34,019 $2,812 $9,043 $96,031 Provision for Loan and Lease Losses 2,747 (253) 49 (2,543) - ---------------------------------------------------------------------- Net Interest Income After Provision for Loan and Lease Losses 47,410 34,272 2,763 11,586 96,031 Non-Interest Income 21,016 10,432 14,442 2,952 48,842 ---------------------------------------------------------------------- 68,426 44,704 17,205 14,538 144,873 Non-Interest Expense (43,217) (23,144) (13,030) (3,631) (83,022) ---------------------------------------------------------------------- Income Before Income Taxes 25,209 21,560 4,175 10,907 61,851 Provision for Income Taxes (9,327) (7,958) (1,545) (3,222) (22,052) ---------------------------------------------------------------------- Allocated Net Income 15,882 13,602 2,630 7,685 39,799 ---------------------------------------------------------------------- Allowance Funding Value (128) (737) (8) 873 - GAAP Provision 2,747 (253) 49 (2,543) - Economic Provision (3,396) (2,777) (94) (4) (6,271) Tax Effect of Adjustments 287 1,394 20 620 2,321 ---------------------------------------------------------------------- Income Before Capital Charge 15,392 11,229 2,597 6,631 35,849 Capital Charge (5,771) (5,266) (1,283) (9,720) (22,040) ---------------------------------------------------------------------- Net Income (Loss) After Capital Charge (NIACC) $9,621 $5,963 $1,314 $(3,089) $13,809 ====================================================================== RAROC (ROE for the Company) 29% 24% 22% 25% 20% ====================================================================== Total Assets at March 31, 2004 $3,694,709 $2,295,748 $116,791 $3,906,194 $10,013,442 ====================================================================== (1) Certain 2004 information has been reclassified to conform to 2005 presentation. Bank of Hawaii Corporation and Subsidiaries Quarterly Summary of Selected Consolidated Financial Data (Unaudited) Table 12 ---------------------------------------------------------------------- (dollars in Three Months Ended thousands except per March 31, Dec. 31, Sept. 30, June 30, March 31, share amounts) 2005 2004 2004(1) 2004(1) 2004(1) ---------------------------------------------------------------------- Quarterly Operating Results Interest Income Interest and Fees on Loans and Leases $86,467 $84,100 $82,079 $80,346 $81,428 Income on Investment Securities - Available for Sale 27,319 26,394 24,543 21,745 20,846 Income on Investment Securities - Held to Maturity 5,825 6,147 6,370 6,711 6,976 Deposits 23 107 496 1,646 1,231 Funds Sold 75 356 108 177 417 Other 449 267 801 865 858 ---------------------------------------------------------------------- Total Interest Income 120,158 117,371 114,397 111,490 111,756 ---------------------------------------------------------------------- Interest Expense Deposits 11,604 9,993 8,990 8,560 9,200 Securities Sold Under Agreements to Repurchase 3,325 3,120 2,085 2,222 1,926 Funds Purchased 733 395 683 506 231 Short-Term Borrowings 32 39 15 13 15 Long-Term Debt 3,806 3,893 3,845 4,340 4,353 ---------------------------------------------------------------------- Total Interest Expense 19,500 17,440 15,618 15,641 15,725 ---------------------------------------------------------------------- Net Interest Income 100,658 99,931 98,779 95,849 96,031 Provision for Loan and Lease Losses - (6,500) - (3,500) - ---------------------------------------------------------------------- Net Interest Income After Provision for Loan and Lease Losses 100,658 106,431 98,779 99,349 96,031 ---------------------------------------------------------------------- Non-Interest Income Trust and Asset Management 14,622 13,934 12,672 12,995 13,864 Mortgage Banking 2,590 1,516 1,711 2,808 1,977 Service Charges on Deposit Accounts 10,179 10,155 9,472 9,540 9,950 Fees, Exchange, and Other Service Charges 13,836 13,684 13,741 14,243 13,239 Investment Securities Gains (Losses) - (757) - (37) - Insurance 5,788 4,234 5,423 4,926 4,658 Other 5,300 5,584 10,035 10,373 5,154 ---------------------------------------------------------------------- Total Non- Interest Income 52,315 48,350 53,054 54,848 48,842 ---------------------------------------------------------------------- Non-Interest Expense Salaries and Benefits 44,769 45,043 46,566 46,689 46,001 Net Occupancy Expense 9,545 9,606 9,812 9,543 9,386 Net Equipment Expense 5,471 6,316 5,847 5,799 5,964 Other 21,078 21,138 21,965 23,094 21,671 ---------------------------------------------------------------------- Total Non- Interest Expense 80,863 82,103 84,190 85,125 83,022 ---------------------------------------------------------------------- Income Before Income Taxes 72,110 72,678 67,643 69,072 61,851 Provision for Income Taxes 26,588 26,437 24,576 24,840 22,052 ---------------------------------------------------------------------- Net Income $45,522 $46,241 $43,067 $44,232 $39,799 ====================================================================== Basic Earnings Per Share $0.85 $0.86 $0.82 $0.84 $0.73 Diluted Earnings Per Share $0.83 $0.82 $0.78 $0.79 $0.69 Balance Sheet Totals Total Assets $9,908,030 $9,766,191 $9,594,809 $9,688,769 $10,013,442 Net Loans 5,910,784 5,880,134 5,690,924 5,662,410 5,587,811 Total Deposits 7,760,662 7,564,667 7,413,240 7,469,288 7,363,922 Total Shareholders' Equity 716,656 814,834 756,707 699,438 785,768 Performance Ratios Net Income to Average Total Assets (ROA) 1.88% 1.89% 1.77% 1.80% 1.65% Net Income to Average Shareholders' Equity (ROE) 23.66 23.63 23.42 24.28 19.98 Efficiency Ratio (2) 52.86 55.37 55.45 56.49 57.31 (1) Certain 2004 information has been reclassified to conform to 2005 presentation. (2) The efficiency ratio is defined as non-interest expense divided by total revenue (net interest income and non-interest income).
SOURCE: Bank of Hawaii Corporation
Bank of Hawaii Corporation
Stafford Kiguchi, 808-537-8580 (Media Inquiries)
Mobile: 808-265-6367
skiguchi@boh.com
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