Bank of Hawaii Corporation Third Quarter 2010 Financial Results

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Mon Oct 25, 2010 7:00am EDT

Bank of Hawaii Corporation Third Quarter 2010 Financial Results

  • Diluted Earnings Per Share $0.91
  • Net Income for the Quarter $44.1 Million
  • Board of Directors Declares Dividend of $0.45 Per Share

Bank of Hawaii Corporation (NYSE: BOH) today reported diluted earnings per share of $0.91 for the third quarter of 2010, up $0.15 or 20 percent from diluted earnings per share of $0.76 in the same quarter last year. Net income for the third quarter of 2010 was $44.1 million compared to net income of $36.5 million in the third quarter of 2009. The return on average assets for the third quarter of 2010 was 1.37 percent compared to 1.21 percent during the same quarter last year. The return on average equity for the third quarter of 2010 was 16.64 percent compared to 16.44 percent for the third quarter of 2009.

Average total deposits increased to $9.6 billion during the third quarter of 2010 compared to average deposits of $9.4 billion in the second quarter of 2010. Shareholders’ equity increased to $1.04 billion at the end of the quarter. The allowance for loan and lease losses was unchanged at $147.4 million, representing 2.77 percent of outstanding loans and leases.

"Bank of Hawaii Corporation had good results for the third quarter of 2010," said Peter S. Ho, Chairman, CEO, and President. "We were able to increase our capital, maintain our profitability, and our Board affirmed our dividend. During the quarter, we repurchased 208.5 thousand shares of common stock at a total cost of $9.8 million. The Hawaii economy remains stable and we are pleased with our year-to-date financial results, including our improved credit quality. We are hopeful that our loan balances will begin to stabilize in the near future although we remain cautious about revenue headwinds resulting from financial reform legislation, the possibility of lower interest rates, and the ability to generate sustained future loan growth."

For the nine months ended September 30, 2010, net income was $143.4 million compared to net income of $103.5 million for the same period last year. Diluted earnings per share were $2.96 for the nine-month period in 2010, up from $2.16 for the same period in 2009. The year-to-date return on average assets was 1.52 percent compared to 1.19 percent for the same period in 2009. The year-to-date return on average equity was 19.28 percent, up from 16.24 percent for the nine months ended September 30, 2009.

Results for the nine months ended September 30, 2010 included $42.8 million in net gains on investment securities, interest recoveries of $2.8 million, a net gain of $2.9 million on the sale of the Company’s Pacific Capital Funds, and a gain of $0.9 million from a contingent payment received in the third quarter of 2010 related to the sale of the Company’s retail insurance brokerage business in 2009. These gains were partially offset by $5.2 million in early termination costs related to prepayment of $75.0 million in debt (securities sold under agreements to repurchase), a $3.7 million increase in the allowance for loan and lease losses, and $3.3 million for employee cash grants for the purchase of Company stock. Results for the same period in 2009 included gains of $13.7 million from the disposition of leased equipment and the sale of the Company’s retail insurance brokerage business. These gains were offset by increases in the allowance for loan and lease losses, an industry-wide FDIC special assessment, expenses for legal contingencies, an impairment of a leveraged lease residual value, and early debt retirement. Details of these items are included in Table 2.

Financial Highlights

Net interest income, on a taxable equivalent basis, for the third quarter of 2010 was $98.8 million, down $5.3 million from net interest income of $104.2 million in the second quarter of 2010, and down $10.4 million from net interest income of $109.2 million in the third quarter of 2009. The decrease compared to the previous quarter was largely due to lower interest rates and lower loan balances. For the nine months ended September 30, 2010, net interest income, on a taxable-equivalent basis, was $310.9 million compared to $309.7 million for the same period in 2009. Analyses of the changes in net interest income are included in Tables 7a, 7b and 7c.

The net interest margin was 3.27 percent for the third quarter of 2010, a decrease of 24 basis points from 3.51 percent in the second quarter of 2010, and a 58 basis point decrease from 3.85 percent in the third quarter of 2009. For the nine months ended September 30, 2010, the net interest margin was 3.50 percent compared to 3.78 percent for the same nine months in 2009. The decrease in the net interest margin was largely the result of lower interest rates, a change in the balance sheet mix due to the higher percentage of investment securities compared with loans, and the Company’s strategy to maintain a lower risk investment portfolio.

Results for the third quarter of 2010 included a provision for credit losses of $13.4 million compared with $15.9 million in the second quarter of 2010 and $27.5 million in the third quarter of 2009. The provision for credit losses equaled net charge-offs in the third quarter of 2010. The provision for credit losses exceeded net charge-offs by $1.0 million in the second quarter of 2010 and $5.2 million in the third quarter of 2009.

Noninterest income was $63.1 million for the third quarter of 2010, a decrease of $5.7 million compared to $68.9 million in the second quarter of 2010, and up $6.3 million from $56.8 million in the third quarter of 2009. Noninterest income in the third quarter of 2010 included net securities gains of $7.9 million, $3.8 million related to the previously mentioned Pacific Capital Funds and insurance business sales, and a loss of $1.4 million related to the disposition of a leveraged lease. Noninterest income in the second quarter of 2010 included net securities gains of $15.0 million and a gain of $1.2 million related to the disposition of leased equipment.

Noninterest expense was $89.9 million in the third quarter of 2010, up $4.0 million from $85.9 million in the previous quarter, and up $5.9 million from $84.0 million in the same quarter last year. Noninterest expense in the third quarter of 2010 included $5.2 million for the early termination of debt (securities sold under agreements to repurchase). Noninterest expense in the second quarter of 2010 included $3.3 million for the previously mentioned employee cash grants. An analysis of salary and benefit expenses is included in Table 8.

The efficiency ratio for the third quarter of 2010 was 55.57 percent, compared with an efficiency ratio of 49.72 percent in the previous quarter and 50.69 percent in the same quarter last year. The efficiency ratio for the nine-month period ended September 30, 2010 was 50.10 percent compared with 52.74 percent for the same period last year.

The effective tax rate for the third quarter of 2010 was 24.68 percent, compared to 34.37 percent in the previous quarter, and 32.71 percent during the third quarter last year. Taxes in the third quarter of 2010 included a $4.4 million net credit related to the disposition of two leveraged leases.

The Company’s business segments are defined as Retail Banking, Commercial Banking, Investment Services, and Treasury & Other. Results are determined based on the Company’s internal financial management reporting process and organizational structure. Selected financial information for the business segments is included in Tables 12a and 12b.

Asset Quality

Overall credit quality reflected the slowly improving Hawaii economy during the third quarter of 2010. Non-performing assets were $45.2 million at September 30, 2010, up from $43.2 million at June 30, 2010, and down from $48.5 million at September 30, 2009. As a percentage of total loans and leases, including loans held for sale and foreclosed real estate, non-performing assets were 0.85 percent at September 30, 2010. Non-performing assets remain at elevated levels primarily due to the lengthy resolution process on residential mortgages. Non-accrual loans and leases declined to $39.3 million at September 30, 2010, representing 0.74 percent of total loans and leases. Accruing loans and leases past due 90 days or more decreased to $10.5 million during the third quarter. More information on non-performing assets and accruing loans and leases past due 90 days is presented in Table 10.

Net charge-offs during the third quarter of 2010 were $13.4 million or 0.99 percent annualized of total average loans and leases, down from $14.9 million in the second quarter of 2010, and down from $22.3 million in the third quarter last year. Net charge-offs for the nine months ended September 30, 2010 were $46.3 million, or 1.12 percent annualized of total average loans and leases, down from $61.9 million, or 1.33 percent annualized of total average loans and leases for the same period last year.

The allowance for loan and lease losses was $147.4 million at September 30, 2010, unchanged from June 30, 2010, and up from $142.7 million at September 30, 2009. The ratio of the allowance for loan and lease losses to total loans and leases increased to 2.77 percent at September 30, 2010. The reserve for unfunded commitments at September 30, 2010 was unchanged at $5.4 million. Details of charge-offs, recoveries and the components of the total reserve for credit losses are summarized in Table 11.

Other Financial Highlights

Total assets were $12.72 billion at September 30, 2010, down slightly from total assets of $12.86 billion at June 30, 2010, and up from $12.21 billion at September 30, 2009. Average total assets were $12.80 billion during the third quarter of 2010, up from average assets of $12.60 billion during the previous quarter, and up from $11.99 billion during the third quarter last year.

Total loans and leases were $5.31 billion at September 30, 2010, down from $5.44 billion at June 30, 2010, and down from $5.93 billion at September 30, 2009 primarily due to lower demand. Loan and lease portfolio balances, including the higher risk loans outstanding, are summarized in Table 9.

Deposit generation remained strong during the third quarter of 2010. Total deposits were $9.60 billion at September 30, 2010, up from $9.32 billion at June 30, 2010, and up from $9.25 billion at September 30, 2009. The increase in deposits was widespread among deposit categories. Average total deposits were $9.58 billion in the third quarter of 2010, up from average deposits of $9.39 billion during the previous quarter, and up from $9.13 billion during the third quarter last year. Deposit balances are summarized in Tables 6a, 6b, and 9.

As a result of strong deposits and weak loan demand, the investment securities portfolio increased to $6.36 billion at September 30, 2010, up from $6.13 billion at June 30, 2010, and up from $5.02 billion at September 30, 2009.

During the third quarter of 2010, the Company repurchased 208.5 thousand shares of common stock at a total cost of $9.8 million under its share repurchase program. The average cost was $46.93 per share repurchased. From October 1, 2010 through October 22, 2010, the Company repurchased an additional 65.5 thousand shares of common stock at an average cost of $45.68 per share. From the beginning of the share repurchase program initiated during July 2001 through September 30, 2010, the Company has repurchased 45.8 million shares and returned over $1.6 billion to shareholders at an average cost of $35.47 per share. Remaining buyback authority under the share repurchase program was $75.6 million at September 30, 2010.

Total shareholders’ equity increased to $1.04 billion at September 30, 2010, compared to $1.01 billion at June 30, 2010, and $902.8 million at September 30, 2009. The ratio of tangible common equity to risk-weighted assets was 19.50 percent at September 30, 2010, up from 18.57 percent at June 30, 2010, and up from 14.56 percent at September 30, 2009. At September 30, 2010, the Tier 1 leverage ratio increased to 7.15 percent, up from to 7.09 percent at June 30, 2010, and 6.65 percent at September 30, 2009.

The Company’s Board of Directors declared a quarterly cash dividend of $0.45 per share on the Company’s outstanding shares. The dividend will be payable on December 14, 2010 to shareholders of record at the close of business on November 30, 2010.

Hawaii Economy

Hawaii’s economy continued to recover during the third quarter of 2010 due to a stronger visitor industry. During April through July, total visitor arrivals increased 8.4 percent compared with the same period last year and were widespread among counties. Hotel occupancy improved to 74 percent and visitor spending is trending upward. Overall, state job growth in July 2010 was 1.0 percent as visitor industry gains offset declines in other sectors. Construction continues to be the industry most impacted with 9.3 percent fewer jobs in July compared with the previous year. The September statewide unemployment rate declined slightly to 6.3 percent on a seasonally adjusted basis. Home prices and sales remained fairly strong during the quarter. More information on Hawaii economic trends is presented in Table 14.

Conference Call Information

The Company will review its third quarter 2010 financial results today at 8:00 a.m. Hawaii Time. The conference call will be accessible via teleconference and the Investor Relations link of Bank of Hawaii Corporation’s web site, www.boh.com. Conference call participants in the United States should dial 866-543-6405. International participants should dial 617-213-8897. Use the pass code “Bank of Hawaii” to access the call. A replay will be available for one week beginning Monday, October 25, 2010 by dialing 888-286-8010 in the United States or 617-801-6888 internationally and entering the pass code number 44496791 when prompted. A replay will also be available via the Investor Relations link of the Company’s web site, 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", such as forecasts of our financial results and condition, expectations for our operations and business prospects, and our assumptions used in those forecasts and expectations. 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, 2009, which was filed with the U.S. Securities and Exchange Commission. We have not committed to update forward-looking statements to reflect later events or circumstances.

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.

Bank of Hawaii Corporation and Subsidiaries
Financial Highlights Table 1
(dollars in thousands, except per share amounts)   Three Months Ended   Nine Months Ended
September 30,   June 30,   September 30, September 30,
  2010     2010     2009     2010     2009

For the Period:

 
Operating Results
Net Interest Income $ 98,626 $ 103,928 $ 108,887 $ 310,207 $ 308,800

Provision for Credit Losses

13,359 15,939 27,500 50,009 81,077
Total Noninterest Income 63,125 68,874 56,800 203,781 186,997
Total Noninterest Expense 89,890 85,918 83,987 257,514 261,504
Net Income 44,064 46,564 36,471 143,364 103,517
Basic Earnings Per Share 0.91 0.97 0.76 2.98 2.17
Diluted Earnings Per Share 0.91 0.96 0.76 2.96 2.16
Dividends Declared Per Share 0.45 0.45 0.45 1.35 1.35
 
Performance Ratios
Return on Average Assets 1.37 % 1.48 % 1.21 % 1.52 % 1.19 %
Return on Average Shareholders' Equity 16.64 19.01 16.44 19.28 16.24
Efficiency Ratio 1 55.57 49.72 50.69 50.10 52.74
Operating Leverage 2 (17.29 ) (11.10 ) 11.77 9.47 (7.21 )
Net Interest Margin 3 3.27 3.51 3.85 3.50 3.78
Dividend Payout Ratio 4 49.45 46.39 59.21 45.30 62.21
Average Shareholders' Equity to Average Assets 8.21 7.79 7.34 7.90 7.34
 
Average Balances
Average Loans and Leases $ 5,368,177 $ 5,522,423 $ 6,034,956 $ 5,524,672 $ 6,245,117
Average Assets 12,797,219 12,603,233 11,988,995 12,594,282 11,616,237
Average Deposits 9,576,936 9,387,621 9,131,064 9,452,406 9,036,247
Average Shareholders' Equity 1,050,535 982,233 880,003 994,319 852,347
 
Market Price Per Share of Common Stock
Closing $ 44.92 $ 48.35 $ 41.54 $ 44.92 $ 41.54
High 51.60 54.10 42.92 54.10 45.24
Low 43.77 45.00 33.65 41.60 25.33
 
September 30, June 30, December 31, September 30,
          2010     2010     2009     2009

As of Period End:

Balance Sheet Totals
Loans and Leases $ 5,312,054 $ 5,440,911 $ 5,759,785 $ 5,931,358
Total Assets 12,716,603 12,855,845 12,414,827 12,208,025
Total Deposits 9,602,462 9,324,659 9,409,676 9,250,100
Long-Term Debt 40,292 40,300 90,317 91,424
Total Shareholders' Equity 1,039,561 1,013,011 895,973 902,799
 
Asset Quality
Allowance for Loan and Lease Losses $ 147,358 $ 147,358 $ 143,658 $ 142,658
Non-Performing Assets 5 45,174 43,241 48,331 48,536
 
Financial Ratios
Allowance to Loans and Leases Outstanding 2.77 % 2.71 % 2.49 % 2.41 %
Tier 1 Capital Ratio 6 17.71 16.92 14.84 13.39
Total Capital Ratio 7 18.98 18.19 16.11 14.66
Leverage Ratio 8 7.15 7.09 6.76 6.65
Tangible Common Equity to Total Assets 9 7.93 7.63 6.96 7.11
Tangible Common Equity to Risk-Weighted Assets 9 19.50 18.57 15.45 14.56
 
Non-Financial Data
Full-Time Equivalent Employees 2,428 2,427 2,418 2,474
Branches and Offices 83 83 83 85
ATMs 492 487 485 485
 
1 Efficiency ratio is defined as noninterest expense divided by total revenue (net interest income and total noninterest income).
2 Operating leverage is defined as the percentage change in income before the provision for credit losses and the provision for income taxes. Measures are presented on a linked quarter basis.
3 Net interest margin is defined as net interest income, on a taxable equivalent basis, as a percentage of average earning assets.
4 Dividend payout ratio is defined as dividends declared per share divided by basic earnings per share.
5 Excluded from non-performing assets are contractually binding non-accrual loans held for sale of $4.2 million and $7.7 million as of December 31, 2009 and September 30, 2009, respectively.
6 Tier 1 Capital Ratio as of December 31, 2009 and September 30, 2009 was revised from 14.88% and 13.43%, respectively.
7 Total Capital Ratio as of December 31, 2009 and September 30, 2009 was revised from 16.15% and 14.70%, respectively.
8 Leverage Ratio as of December 31, 2009 and September 30, 2009 was revised from 6.78% and 6.67%, respectively.
9 Tangible common equity, a non-GAAP financial measure, is defined by the Company as shareholders' equity minus goodwill and intangible assets. Intangible assets are included as a component of other assets in the Consolidated Statements of Condition.
 
Bank of Hawaii Corporation and Subsidiaries
Net Significant Income (Expense) Items Table 2
(dollars in thousands)   Three Months Ended Nine Months Ended
September 30,   June 30,   September 30, September 30,
  2010   2010   2009   2010   2009
Cash Basis Interest Recoveries $ - $ - $ - $ 2,832   $ -
Leveraged Lease Residual Value Impairment - - (968 ) - (968 )
Investment Securities Gains, Net 7,877 14,951 - 42,849 -
Gain on Mutual Fund Sale 2,852 - - 2,852 -
Gains (Losses) on Disposal of Leased Equipment (1,449 ) 1,189 - (260 ) 12,818
Gain on Sale of Insurance Subsidiary 904 - - 904 852
Increase in Allowance for Loan and Lease Losses - (1,000 ) (5,242 ) (3,700 ) (19,160 )
Cash Grants for the Purchase of Company Stock - (3,250 ) - (3,250 ) -
FDIC Special Assessment - - - - (5,744 )
REPO Early Termination Expense (5,189 ) - - (5,189 ) -
Legal Contingencies - - (800 ) - (2,300 )
Market Premium on Repurchased Long-Term Privately Placed Debt     -       -       -       -       (875 )
Significant Income (Expense) Items Before the Provision (Benefit) for Income Taxes     4,995       11,890       (7,010 )     37,038       (15,377 )
Income Tax Impact Related to Lease Transactions (4,003 ) 462 (373 ) (3,541 ) 3,213
Income Tax Impact     2,256       3,745       (2,115 )     13,055       (9,529 )
Net Significant Income (Expense) Items   $ 6,742     $ 7,683     $ (4,522 )   $ 27,524     $ (9,061 )
 
Bank of Hawaii Corporation and Subsidiaries
Consolidated Statements of Income Table 3
(dollars in thousands, except per share amounts)   Three Months Ended Nine Months Ended
September 30,   June 30,   September 30, September 30,
  2010   2010   2009   2010   2009
Interest Income  
Interest and Fees on Loans and Leases $ 70,198 $ 71,997 $ 79,530 $ 219,466 $ 249,464
Income on Investment Securities
Trading - - - - 594
Available-for-Sale 40,775 44,989 46,419 129,605 116,875
Held-to-Maturity 1,553 1,700 2,179 5,116 7,115
Deposits 5 3 3 21 18
Funds Sold 211 396 320 916 1,423
Other     278     277     277       832     829
Total Interest Income     113,020     119,362     128,728       355,956     376,318
Interest Expense
Deposits 7,041 7,930 12,235 23,278 43,741
Securities Sold Under Agreements to Repurchase 6,670 6,472 6,394 19,571 19,523
Funds Purchased 10 6 5 23 15
Long-Term Debt     673     1,026     1,207       2,877     4,239
Total Interest Expense     14,394     15,434     19,841       45,749     67,518
Net Interest Income 98,626 103,928 108,887 310,207 308,800
Provision for Credit Losses     13,359     15,939     27,500       50,009     81,077
Net Interest Income After Provision for Credit Losses     85,267     87,989     81,387       260,198     227,723
Noninterest Income
Trust and Asset Management 10,534 11,457 10,915 33,699 34,428
Mortgage Banking 6,811 3,752 4,656 14,027 18,777
Service Charges on Deposit Accounts 12,737 14,856 14,014 41,407 40,310
Fees, Exchange, and Other Service Charges 15,500 15,806 14,801 45,810 45,187
Investment Securities Gains (Losses), Net 7,877 14,951 (5 ) 42,849 63
Insurance 2,646 2,291 7,304 7,652 17,689
Other     7,020     5,761     5,115       18,337     30,543
Total Noninterest Income     63,125     68,874     56,800       203,781     186,997
Noninterest Expense
Salaries and Benefits 46,840 47,500 46,387 138,904 137,595
Net Occupancy 10,186 10,154 10,350 30,484 30,686
Net Equipment 4,545 4,366 4,502 13,469 13,320
Professional Fees 905 2,091 2,642 4,988 9,196
FDIC Insurance 3,159 3,107 3,290 9,366 14,091
Other     24,255     18,700     16,816       60,303     56,616
Total Noninterest Expense     89,890     85,918     83,987       257,514     261,504
Income Before Provision for Income Taxes 58,502 70,945 54,200 206,465 153,216
Provision for Income Taxes     14,438     24,381     17,729       63,101     49,699
Net Income   $ 44,064   $ 46,564   $ 36,471     $ 143,364   $ 103,517
Basic Earnings Per Share $ 0.91 $ 0.97 $ 0.76 $ 2.98 $ 2.17
Diluted Earnings Per Share $ 0.91 $ 0.96 $ 0.76 $ 2.96 $ 2.16
Dividends Declared Per Share $ 0.45 $ 0.45 $ 0.45 $ 1.35 $ 1.35
Basic Weighted Average Shares 48,189,358 48,080,485 47,745,375 48,062,385 47,665,146
Diluted Weighted Average Shares     48,462,154     48,415,602     48,045,873       48,386,647     47,930,271
 
Bank of Hawaii Corporation and Subsidiaries
Consolidated Statements of Condition Table 4
(dollars in thousands)   September 30,   June 30, December 31,   September 30,
  2010   2010   2009   2009
Assets
Interest-Bearing Deposits $ 2,641 $ 4,062 $ 8,755 $ 5,863
Funds Sold 174,288 355,891 291,546 401,200
Investment Securities
Available-for-Sale 6,213,949 5,980,759 5,330,834 4,827,588
Held-to-Maturity (Fair Value of $148,631; $161,441; $186,668; and $201,118) 141,192 153,190 181,018 194,444
Loans Held for Sale 18,765 13,179 16,544 19,346
Loans and Leases 5,312,054 5,440,911 5,759,785 5,931,358
Allowance for Loan and Lease Losses     (147,358 )     (147,358 )     (143,658 )     (142,658 )
Net Loans and Leases     5,164,696       5,293,553       5,616,127       5,788,700  
Total Earning Assets     11,715,531       11,800,634       11,444,824       11,237,141  
Cash and Noninterest-Bearing Deposits 267,597 343,514 254,766 291,480
Premises and Equipment 108,855 108,394 110,976 110,173
Customers' Acceptances 1,087 412 1,386 950
Accrued Interest Receivable 40,606 41,420 45,334 43,047
Foreclosed Real Estate 5,910 3,192 3,132 201
Mortgage Servicing Rights 24,316 25,646 25,970 25,437
Goodwill 31,517 31,517 31,517 34,959
Other Assets     521,184       501,116       496,922       464,637  
Total Assets   $ 12,716,603     $ 12,855,845     $ 12,414,827     $ 12,208,025  
 
Liabilities
Deposits
Noninterest-Bearing Demand $ 2,290,033 $ 2,214,803 $ 2,252,083 $ 2,055,872
Interest-Bearing Demand 1,814,934 1,615,464 1,609,413 1,588,705
Savings 4,423,095 4,423,473 4,405,969 4,365,257
Time     1,074,400       1,070,919       1,142,211       1,240,266  
Total Deposits     9,602,462       9,324,659       9,409,676       9,250,100  
Funds Purchased 9,832 9,832 8,888 8,670
Short-Term Borrowings 7,100 7,000 6,900 7,200
Securities Sold Under Agreements to Repurchase 1,616,243 2,081,393 1,618,717 1,524,755
Long-Term Debt 40,292 40,300 90,317 91,424
Banker's Acceptances 1,087 412 1,386 950
Retirement Benefits Payable 35,461 35,669 37,435 43,918
Accrued Interest Payable 6,492 5,078 7,026 9,740
Taxes Payable and Deferred Taxes 219,525 228,660 229,140 254,375
Other Liabilities     138,548       109,831       109,369       114,094  
Total Liabilities     11,677,042       11,842,834       11,518,854       11,305,226  
Shareholders' Equity

Common Stock ($.01 par value; authorized 500,000,000 shares; issued / outstanding: September 30, 2010 - 57,115,287 / 48,265,014; June 30, 2010 - 57,100,287 / 48,264,157; December 31, 2009 - 57,028,239 / 48,018,943; and September 30, 2009 - 57,028,554 / 47,937,543)

570 570 569 569
Capital Surplus 499,437 497,082 494,318 492,346
Accumulated Other Comprehensive Income 66,953 61,220 6,925 37,307
Retained Earnings 914,901 895,565 843,521 825,709

Treasury Stock, at Cost (Shares: September 30, 2010 - 8,850,273; June 30, 2010 - 8,836,130; December 31, 2009 - 9,009,296; and September 30, 2009 - 9,091,011)

    (442,300 )     (441,426 )     (449,360 )     (453,132 )
Total Shareholders' Equity     1,039,561       1,013,011       895,973       902,799  
Total Liabilities and Shareholders' Equity   $ 12,716,603     $ 12,855,845     $ 12,414,827     $ 12,208,025  
 
Bank of Hawaii Corporation and Subsidiaries
Consolidated Statements of Shareholders' Equity Table 5

(dollars in thousands)

 

 

 

 

 

 

 

Accum.

 

 

 

 

 

Other
Compre-
hensive Compre-
Common Capital Income Retained Treasury hensive
  Total   Stock   Surplus   (Loss)   Earnings   Stock   Income
Balance as of December 31, 2009 $ 895,973 $ 569 $ 494,318 $ 6,925 $ 843,521 $ (449,360 )
Comprehensive Income:
Net Income 143,364 - - - 143,364 - $ 143,364
Other Comprehensive Income, Net of Tax:

Change in Unrealized Gains and Losses on Investment Securities Available-for-Sale

58,886 - - 58,886 - - 58,886
Amortization of Net Losses Related to Defined Benefit Plans 1,142 - - 1,142 - -   1,142
Total Comprehensive Income $ 203,392
Share-Based Compensation 2,703 - 2,703 - - -

Common Stock Issued under Purchase and Equity Compensation Plans and Related Tax Benefits (522,542 shares)

15,716 1 2,416 - (6,850 ) 20,149
Common Stock Repurchased (276,471 shares) (13,089 ) - - - - (13,089 )
Cash Dividends Paid     (65,134 )     -     -       -       (65,134 )     -  
Balance as of September 30, 2010   $ 1,039,561     $ 570   $ 499,437     $ 66,953     $ 914,901     $ (442,300 )
 
Balance as of December 31, 2008 $ 790,704 $ 568 $ 492,515 $ (28,888 ) $ 787,924 $ (461,415 )
Comprehensive Income:
Net Income 103,517 - - - 103,517 - $ 103,517
Other Comprehensive Income, Net of Tax:

Change in Unrealized Gains and Losses on Investment Securities Available-for-Sale

65,121 - - 65,121 - - 65,121
Amortization of Net Losses Related to Defined Benefit Plans 1,074 - - 1,074 - -   1,074
Total Comprehensive Income $ 169,712
Share-Based Compensation 1,700 - 1,700 - - -

Common Stock Issued under Purchase and Equity Compensation Plans and Related Tax Benefits (209,847 shares)

6,202 1 (1,869 ) - (1,101 ) 9,171
Common Stock Repurchased (25,675 shares) (888 ) - - - - (888 )
Cash Dividends Paid     (64,631 )     -     -       -       (64,631 )     -  
Balance as of September 30, 2009   $ 902,799     $ 569   $ 492,346     $ 37,307     $ 825,709     $ (453,132 )
 
Bank of Hawaii Corporation and Subsidiaries
Average Balances and Interest Rates - Taxable Equivalent Basis Table 6a
(dollars in millions)   Three Months Ended   Three Months Ended   Three Months Ended
September 30, 2010 June 30, 2010 September 30, 2009
Average   Income/   Yield/ Average   Income/   Yield/ Average   Income/   Yield/
  Balance   Expense   Rate     Balance   Expense   Rate     Balance   Expense   Rate
Earning Assets
Interest-Bearing Deposits $ 4.4 $ - 0.49 % $ 5.3 $ - 0.17 % $ 5.1 $ - 0.28 %
Funds Sold 303.4 0.2 0.27 586.8 0.4 0.27 489.7 0.3 0.26
Investment Securities
Available-for-Sale 6,158.5 41.0 2.66 5,531.2 45.2 3.27 4,491.2 46.7 4.16
Held-to-Maturity 148.2 1.6 4.19 160.2 1.7 4.25 202.0 2.2 4.31
Loans Held for Sale 12.7 0.1 4.59 8.5 0.1 4.46 25.2 0.2 2.95
Loans and Leases 1
Commercial and Industrial 750.6 7.8 4.13 765.5 7.9 4.12 884.4 9.0 4.06
Commercial Mortgage 808.8 10.4 5.10 826.2 10.5 5.10 787.0 10.2 5.14
Construction 87.6 1.1 4.95 100.3 1.3 5.28 140.9 1.4 3.81
Commercial Lease Financing 380.1 2.6 2.79 400.8 3.0 2.95 464.0 3.0 2.56
Residential Mortgage 2,076.0 29.5 5.68 2,109.1 29.9 5.66 2,273.8 33.0 5.81
Home Equity 849.4 10.7 4.99 875.8 10.9 5.01 963.3 12.3 5.08
Automobile 229.1 4.4 7.54 249.4 4.7 7.63 304.5 6.1 7.88
Other 2     186.6     3.5   7.55       195.3     3.7   7.63       217.1     4.3   7.95
Total Loans and Leases     5,368.2     70.0   5.20       5,522.4     71.9   5.22       6,035.0     79.3   5.24
Other     79.8     0.3   1.39       79.8     0.3   1.39       79.7     0.3   1.39
Total Earning Assets 3     12,075.2     113.2   3.74       11,894.2     119.6   4.03       11,327.9     129.0   4.54
Cash and Noninterest-Bearing Deposits 227.3 221.0 203.5
Other Assets   494.7   488.0   457.6
Total Assets $ 12,797.2 $ 12,603.2 $ 11,989.0
 
Interest-Bearing Liabilities
Interest-Bearing Deposits
Demand $ 1,770.1 0.2 0.06 $ 1,659.8 0.3 0.06 $ 1,625.6 0.2 0.06
Savings 4,460.9 3.5 0.31 4,477.8 4.2 0.38 4,190.2 6.6 0.63
Time     1,075.7     3.3   1.22       1,093.0     3.4   1.24       1,264.7     5.4   1.69
Total Interest-Bearing Deposits     7,306.7     7.0   0.38       7,230.6     7.9   0.44       7,080.5     12.2   0.69
Short-Term Borrowings 26.6 - 0.15 17.7 - 0.13 18.1 - 0.12
Securities Sold Under Agreements to Repurchase 1,706.2 6.7 1.53 1,785.2 6.5 1.44 1,464.3 6.4 1.71
Long-Term Debt     40.3     0.7   6.68       74.4     1.0   5.52       91.4     1.2   5.26
Total Interest-Bearing Liabilities     9,079.8     14.4   0.63       9,107.9     15.4   0.68       8,654.3     19.8   0.91
Net Interest Income $ 98.8 $ 104.2 $ 109.2
Interest Rate Spread 3.11 % 3.35 % 3.63 %
Net Interest Margin 3.27 % 3.51 % 3.85 %
Noninterest-Bearing Demand Deposits 2,270.2 2,157.0 2,050.5
Other Liabilities 396.7 356.1 404.2
Shareholders' Equity   1,050.5   982.2   880.0
Total Liabilities and Shareholders' Equity $ 12,797.2 $ 12,603.2 $ 11,989.0
 
1 Non-performing loans and leases are included in the respective average loan and lease balances. Income, if any, on such loans and leases is recognized on a cash basis.
2 Comprised of other consumer revolving credit, installment, and consumer lease financing.

3 Interest income includes taxable equivalent basis adjustments, based upon a federal statutory tax rate of 35%, of $199,000, $237,000, and $329,000 for the three months ended September 30, 2010, June 30, 2010, and September 30, 2009, respectively.

 
Bank of Hawaii Corporation and Subsidiaries
Average Balances and Interest Rates - Taxable Equivalent Basis Table 6b
(dollars in millions)   Nine Months Ended   Nine Months Ended
September 30, 2010 September 30, 2009
Average   Income/   Yield/ Average Income/   Yield/
  Balance   Expense   Rate     Balance   Expense   Rate
Earning Assets
Interest-Bearing Deposits $ 5.2 $ - 0.54 % $ 5.0 $ - 0.49 %
Funds Sold 450.5 0.9 0.27 743.7 1.4 0.25
Investment Securities
Trading - - - 16.1 0.6 4.92
Available-for-Sale 5,646.9 130.3 3.08 3,600.8 117.8 4.36
Held-to-Maturity 160.7 5.1 4.24 218.9 7.1 4.33
Loans Held for Sale 10.0 0.8 10.16 23.7 0.7 3.82
Loans and Leases 1
Commercial and Industrial 768.1 25.9 4.50 966.1 29.4 4.06
Commercial Mortgage 824.2 31.4 5.10 760.7 29.7 5.23
Construction 98.6 3.7 5.08 146.5 4.4 4.02
Commercial Lease Financing 396.0 9.0 3.03 459.0 10.1 2.95
Residential Mortgage 2,114.9 90.3 5.69 2,356.1 104.0 5.89
Home Equity 878.0 32.9 5.01 996.9 38.0 5.09
Automobile 250.2 14.3 7.64 328.6 19.5 7.93
Other 2     194.7     11.2   7.65       231.3     13.7   7.90
Total Loans and Leases     5,524.7     218.7   5.29       6,245.2     248.8   5.32
Other     79.8     0.8   1.39       79.7     0.8   1.39
Total Earning Assets 3     11,877.8     356.6   4.01       10,933.1     377.2   4.60
Cash and Noninterest-Bearing Deposits 226.1 216.8
Other Assets   490.4   466.3
Total Assets $ 12,594.3 $ 11,616.2
 
Interest-Bearing Liabilities
Interest-Bearing Deposits
Demand $ 1,697.7 0.8 0.06 $ 1,806.4 0.9 0.06
Savings 4,457.7 12.2 0.37 3,922.4 22.6 0.77
Time     1,101.5     10.3   1.25       1,364.5     20.3   1.98
Total Interest-Bearing Deposits     7,256.9     23.3   0.43       7,093.3     43.8   0.82
Short-Term Borrowings 24.3 - 0.12 17.7 - 0.11
Securities Sold Under Agreements to Repurchase 1,675.0 19.5 1.54 1,191.2 19.5 2.16
Long-Term Debt     68.2     2.9   5.63       103.4     4.2   5.47
Total Interest-Bearing Liabilities     9,024.4     45.7   0.67       8,405.6     67.5   1.07
Net Interest Income $ 310.9 $ 309.7
Interest Rate Spread 3.34 % 3.53 %
Net Interest Margin 3.50 % 3.78 %
Noninterest-Bearing Demand Deposits 2,195.5 1,943.0
Other Liabilities 380.1 415.3
Shareholders' Equity   994.3   852.3
Total Liabilities and Shareholders' Equity $ 12,594.3 $ 11,616.2
 
1 Non-performing loans and leases are included in the respective average loan and lease balances. Income, if any, on such loans and leases is recognized on a cash basis.
2 Comprised of other consumer revolving credit, installment, and consumer lease financing.
3 Interest income includes taxable equivalent basis adjustments, based upon a federal statutory tax rate of 35%, of $675,000 and $886,000 for the nine months ended September 30, 2010 and 2009, respectively.
 
Bank of Hawaii Corporation and Subsidiaries
Analysis of Change in Net Interest Income - Taxable Equivalent Basis Table 7a
(dollars in millions)   Three Months Ended September 30, 2010
Compared to June 30, 2010
  Volume 1   Rate 1   Time 1   Total
Change in Interest Income:    
Funds Sold $ (0.2 ) $ - $ - $ (0.2 )
Investment Securities
Available-for-Sale 4.8 (9.0 ) - (4.2 )
Held-to-Maturity (0.1 ) - - (0.1 )
Loans and Leases
Commercial and Industrial (0.2 ) - 0.1 (0.1 )
Commercial Mortgage (0.2 ) - 0.1 (0.1 )
Construction (0.1 ) (0.1 ) - (0.2 )
Commercial Lease Financing (0.2 ) (0.2 ) - (0.4 )
Residential Mortgage (0.5 ) 0.1 - (0.4 )
Home Equity (0.3 ) - 0.1 (0.2 )
Automobile (0.4 ) - 0.1 (0.3 )
Other 2     (0.2 )     (0.1 )     0.1     (0.2 )
Total Loans and Leases     (2.1 )     (0.3 )     0.5     (1.9 )
Total Change in Interest Income     2.4       (9.3 )     0.5     (6.4 )
 
Change in Interest Expense:
Interest-Bearing Deposits
Demand (0.1 ) - - (0.1 )
Savings - (0.8 ) 0.1 (0.7 )
Time     -       (0.1 )     -     (0.1 )
Total Interest-Bearing Deposits     (0.1 )     (0.9 )     0.1     (0.9 )
Securities Sold Under Agreements to Repurchase (0.3 ) 0.4 0.1 0.2
Long-Term Debt     (0.5 )     0.2       -     (0.3 )
Total Change in Interest Expense     (0.9 )     (0.3 )     0.2     (1.0 )
 
Change in Net Interest Income   $ 3.3     $ (9.0 )   $ 0.3   $ (5.4 )
 
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, and time for that category.
2 Comprised of other consumer revolving credit, installment, and consumer lease financing.
 
Bank of Hawaii Corporation and Subsidiaries
Analysis of Change in Net Interest Income - Taxable Equivalent Basis Table 7b
(dollars in millions)   Three Months Ended September 30, 2010
Compared to September 30, 2009
  Volume 1   Rate 1   Total
Change in Interest Income:    
Funds Sold $ (0.1 ) $ - $ (0.1 )
Investment Securities
Available-for-Sale 14.2 (19.9 ) (5.7 )
Held-to-Maturity (0.6 ) - (0.6 )
Loans Held for Sale (0.1 ) - (0.1 )
Loans and Leases
Commercial and Industrial (1.4 ) 0.2 (1.2 )
Commercial Mortgage 0.3 (0.1 ) 0.2
Construction (0.6 ) 0.3 (0.3 )
Commercial Lease Financing (0.7 ) 0.3 (0.4 )
Residential Mortgage (2.8 ) (0.7 ) (3.5 )
Home Equity (1.4 ) (0.2 ) (1.6 )
Automobile (1.4 ) (0.3 ) (1.7 )
Other 2     (0.6 )     (0.2 )     (0.8 )
Total Loans and Leases     (8.6 )     (0.7 )     (9.3 )
Total Change in Interest Income     4.8       (20.6 )     (15.8 )
 
Change in Interest Expense:
Interest-Bearing Deposits
Savings 0.4 (3.5 ) (3.1 )
Time     (0.7 )     (1.4 )     (2.1 )
Total Interest-Bearing Deposits     (0.3 )     (4.9 )     (5.2 )
Securities Sold Under Agreements to Repurchase 1.0 (0.7 ) 0.3
Long-Term Debt     (0.8 )     0.3       (0.5 )
Total Change in Interest Expense     (0.1 )     (5.3 )     (5.4 )
 
Change in Net Interest Income   $ 4.9     $ (15.3 )   $ (10.4 )
 
1 The changes for each category of interest income and expense are allocated between the portion of changes attributable to the variance in volume and rate for that category.
2 Comprised of other consumer revolving credit, installment, and consumer lease financing.
 
Bank of Hawaii Corporation and Subsidiaries
Analysis of Change in Net Interest Income - Taxable Equivalent Basis Table 7c
(dollars in millions)   Nine Months Ended September 30, 2010
Compared to September 30, 2009
  Volume 1   Rate 1   Total
Change in Interest Income:    
Funds Sold $ (0.6 ) $ 0.1 $ (0.5 )
Investment Securities
Trading (0.3 ) (0.3 ) (0.6 )
Available-for-Sale 53.8 (41.3 ) 12.5
Held-to-Maturity (1.9 ) (0.1 ) (2.0 )
Loans Held for Sale (0.6 ) 0.7 0.1
Loans and Leases
Commercial and Industrial (6.4 ) 2.9 (3.5 )
Commercial Mortgage 2.5 (0.8 ) 1.7
Construction (1.7 ) 1.0 (0.7 )
Commercial Lease Financing (1.4 ) 0.3 (1.1 )
Residential Mortgage (10.3 ) (3.4 ) (13.7 )
Home Equity (4.5 ) (0.6 ) (5.1 )
Automobile (4.5 ) (0.7 ) (5.2 )
Other 2     (2.1 )     (0.4 )     (2.5 )
Total Loans and Leases     (28.4 )     (1.7 )     (30.1 )
Total Change in Interest Income     22.0       (42.6 )     (20.6 )
 
Change in Interest Expense:
Interest-Bearing Deposits
Demand (0.1 ) - (0.1 )
Savings 2.7 (13.1 ) (10.4 )
Time     (3.4 )     (6.6 )     (10.0 )
Total Interest-Bearing Deposits     (0.8 )     (19.7 )     (20.5 )
Securities Sold Under Agreements to Repurchase 6.6 (6.6 ) -
Long-Term Debt     (1.5 )     0.2       (1.3 )
Total Change in Interest Expense     4.3       (26.1 )     (21.8 )
 
Change in Net Interest Income   $ 17.7     $ (16.5 )   $ 1.2  
 
1 The changes for each category of interest income and expense are allocated between the portion of changes attributable to the variance in volume and rate for that category.
2 Comprised of other consumer revolving credit, installment, and consumer lease financing.
 
Bank of Hawaii Corporation and Subsidiaries
Salaries and Benefits Table 8
(dollars in thousands)   Three Months Ended Nine Months Ended
September 30,   June 30,   September 30, September 30,
  2010   2010   2009   2010   2009
Salaries $ 30,080 $ 29,942 $ 29,988 $ 89,165   $ 90,565
Incentive Compensation 3,403 3,447 5,524 10,296 12,223
Share-Based Compensation and Cash Grants for the Purchase of Company Stock 1,045 3,984 595 5,585 1,986
Commission Expense 1,836 1,259 1,523 4,441 5,528
Retirement and Other Benefits 4,178 3,857 3,962 12,144 12,385
Payroll Taxes 2,287 2,331 2,176 8,051 8,020
Medical, Dental, and Life Insurance 2,263 2,481 2,619 7,224 6,519
Separation Expense     1,748     199     -     1,998     369
Total Salaries and Benefits   $ 46,840   $ 47,500   $ 46,387   $ 138,904   $ 137,595
 
Bank of Hawaii Corporation and Subsidiaries
Loan and Lease Portfolio Balances

Table 9

(dollars in thousands)   September 30,   June 30,   March 31,   December 31, September 30,
  2010   2010   2010   2009   2009
Commercial
Commercial and Industrial $ 736,385 $ 758,851 $ 782,298 $ 795,167 $ 845,056
Commercial Mortgage 817,752 816,165 834,086 841,431 777,498
Construction 88,671 88,823 104,349 108,395 137,414
Lease Financing     353,962     399,744     398,939     412,933     458,696
Total Commercial     1,996,770     2,063,583     2,119,672     2,157,926     2,218,664
Consumer
Residential Mortgage 2,073,340 2,087,380 2,138,094 2,190,677 2,246,729
Home Equity 836,990 861,196 892,109 921,571 952,076
Automobile 221,265 238,671 260,472 283,937 299,657
Other 1     183,689     190,081     199,734     205,674     214,232
Total Consumer     3,315,284     3,377,328     3,490,409     3,601,859     3,712,694
Total Loans and Leases   $ 5,312,054   $ 5,440,911   $ 5,610,081   $ 5,759,785   $ 5,931,358
 
 
Higher Risk Loans Outstanding        
(dollars in thousands) September 30, June 30, March 31, December 31, September 30,
  2010   2010   2010   2009   2009
Residential Home Building 2 $ 18,444 $ 18,993 $ 29,475 $ 31,067 $ 38,592
Residential Land Loans 3 28,149 30,262 33,514 37,873 43,128
Home Equity Loans 4 23,957 25,055 24,595 28,076 24,339
Air Transportation 5     38,611     39,165     39,743     50,426     60,996
Total Higher Risk Loans   $ 109,161   $ 113,475   $ 127,327   $ 147,442   $ 167,055
 
1 Comprised of other revolving credit, installment, and lease financing.

2 Residential home building loans were $39.7 million as of September 30, 2010. Higher risk loans within this segment are defined as those loans with a well-defined weakness or weaknesses that jeopardizes the orderly repayment of the loan.

3 We consider all of our residential land loans, which are consumer loans secured by unimproved lots, to be of higher risk due to the volatility in the value of the underlying collateral.
4 Higher risk home equity loans are defined as those loans originated in 2005 or later, with current monitoring credit scores below 600, and with original loan-to-value ratios greater than 70%.
5 We consider all of our air transportation leases to be of higher risk due to the weak financial profile of the industry.
 
 
Deposits                    
(dollars in thousands) September 30, June 30, March 31, December 31, September 30,
  2010   2010  

2010 6

 

2009 6

 

2009 6

Consumer $ 4,976,317 $ 4,925,579 $ 4,940,576 $ 4,926,567 $ 4,776,626
Commercial 4,053,306 4,036,679 4,126,287 4,115,286 4,002,619
Public and Other     572,839     362,401     427,221     367,823     470,855
Total Deposits   $ 9,602,462   $ 9,324,659   $ 9,494,084   $ 9,409,676   $ 9,250,100
 
6 Certain prior period information has been reclassified to conform to current presentation.
 
Bank of Hawaii Corporation and Subsidiaries
Non-Performing Assets and Accruing Loans and Leases Past Due 90 Days or More Table 10
(dollars in thousands)   September 30,   June 30,   March 31, December 31,   September 30,
  2010   2010   2010   2009   2009
Non-Performing Assets 1
Non-Accrual Loans and Leases
Commercial
Commercial and Industrial $ 1,287 $ 741 $ 3,342 $ 6,646 $ 9,924
Commercial Mortgage 5,071 3,476 1,662 1,167 1,193
Construction 3,569 5,640 7,297 8,154 15,534
Lease Financing     117       63       73       631       690  
Total Commercial     10,044       9,920       12,374       16,598       27,341  
Consumer
Residential Mortgage 26,917 27,491 23,214 19,893 16,718
Home Equity 2,303 2,638 2,844 5,153 3,726

Other 2

    -       -       -       550       550  
Total Consumer     29,220       30,129       26,058       25,596       20,994  
Total Non-Accrual Loans and Leases     39,264       40,049       38,432       42,194       48,335  
Non-Accrual Loans Held for Sale - - - 3,005 -
Foreclosed Real Estate     5,910       3,192       3,192       3,132       201  
Total Non-Performing Assets   $ 45,174     $ 43,241     $ 41,624     $ 48,331     $ 48,536  
 
Accruing Loans and Leases Past Due 90 Days or More
Commercial
Commercial and Industrial $ 62 $ - $ 2,192 $ 623 $ 137
Construction - - 2,170 - 3,005
Lease Financing     -       -       -       120       -  
Total Commercial     62       -       4,362       743       3,142  
Consumer
Residential Mortgage 8,031 9,019 8,136 8,979 5,951
Home Equity 1,246 2,256 1,608 2,210 1,698
Automobile 348 464 571 875 749

Other 2

    857       1,161       1,345       886       739  
Total Consumer     10,482       12,900       11,660       12,950       9,137  
Total Accruing Loans and Leases Past Due 90 Days or More   $ 10,544     $ 12,900     $ 16,022     $ 13,693     $ 12,279  
 
Total Loans and Leases   $ 5,312,054     $ 5,440,911     $ 5,610,081     $ 5,759,785     $ 5,931,358  
 
Ratio of Non-Accrual Loans and Leases to Total Loans and Leases     0.74 %     0.74 %     0.69 %     0.73 %     0.81 %
 

Ratio of Non-Performing Assets to Total Loans and Leases, Loans Held for Sale, and Foreclosed Real Estate

    0.85 %     0.79 %     0.74 %     0.84 %     0.82 %
 

Ratio of Commercial Non-Performing Assets to Total Commercial Loans and Leases, Commercial Loans Held for Sale, and Commercial Foreclosed Real Estate

    0.75 %     0.62 %     0.72 %     1.03 %     1.23 %
 

Ratio of Consumer Non-Performing Assets to Total Consumer Loans and Leases and Consumer Foreclosed Real Estate

    0.91 %     0.90 %     0.76 %     0.72 %     0.57 %
 

Ratio of Non-Performing Assets and Accruing Loans and Leases Past Due 90 Days or More to Total Loans and Leases, Loans Held for Sale, and Foreclosed Real Estate

    1.04 %     1.03 %     1.02 %     1.07 %     1.02 %
 

Quarter to Quarter Changes in Non-Performing Assets 1

Balance at Beginning of Quarter $ 43,241 $ 41,624 $ 48,331 $ 48,536 $ 39,054
Additions 10,606 10,761 9,533 14,874 22,856
Reductions
Payments (3,432 ) (4,414 ) (5,689 ) (4,128 ) (6,899 )
Return to Accrual Status (964 ) - (3,505 ) (1,818 ) (3,373 )
Transfer to Foreclosed Real Estate (2,070 ) - - - -
Sales of Foreclosed Real Estate (700 ) - - (38 ) (237 )
Charge-offs/Write-downs     (1,507 )     (4,730 )     (7,046 )     (9,095 )     (2,865 )
Total Reductions     (8,673 )     (9,144 )     (16,240 )     (15,079 )     (13,374 )
Balance at End of Quarter   $ 45,174     $ 43,241     $ 41,624     $ 48,331     $ 48,536  
 
1 Excluded from non-performing assets were contractually binding non-accrual loans held for sale of $4.2 million and $7.7 million as of December 31, 2009 and September 30, 2009, respectively.
2 Comprised of other revolving credit, installment, and lease financing.
 
Bank of Hawaii Corporation and Subsidiaries
Reserve for Credit Losses Table 11
(dollars in thousands)   Three Months Ended Nine Months Ended
September 30,   June 30,   September 30, September 30,
  2010   2010   2009   2010   2009
Balance at Beginning of Period $ 152,777 $ 151,777 $ 142,835 $ 149,077   $ 128,667
Loans and Leases Charged-Off
Commercial
Commercial and Industrial (7,635 ) (3,056 ) (4,769 ) (14,597 ) (23,493 )
Commercial Mortgage - (1,000 ) (2,092 ) (1,303 ) (2,092 )
Construction - (1,417 ) (5,845 ) (2,274 ) (5,845 )
Lease Financing (108 ) (107 ) (120 ) (405 ) (4,613 )
Consumer
Residential Mortgage (1,325 ) (4,377 ) (2,430 ) (8,957 ) (5,071 )
Home Equity (2,871 ) (2,886 ) (3,614 ) (13,193 ) (9,233 )
Automobile (1,530 ) (1,752 ) (2,602 ) (5,309 ) (7,694 )
Other 1     (2,826 )     (2,530 )     (3,032 )     (8,178 )     (10,252 )
Total Loans and Leases Charged-Off     (16,295 )     (17,125 )     (24,504 )     (54,216 )     (68,293 )
Recoveries on Loans and Leases Previously Charged-Off
Commercial
Commercial and Industrial 433 367 252 1,658 1,022
Commercial Mortgage - - - 24 -
Lease Financing 28 11 49 40 81
Consumer
Residential Mortgage 696 236 448 1,354 719
Home Equity 333 197 67 630 239
Automobile 822 826 849 2,401 2,311
Other 1     624       549       581       1,800       2,004  
Total Recoveries on Loans and Leases Previously Charged-Off     2,936       2,186       2,246       7,907       6,376  
Net Loans and Leases Charged-Off (13,359 ) (14,939 ) (22,258 ) (46,309 ) (61,917 )
Provision for Credit Losses 13,359 15,939 27,500 50,009 81,077
Provision for Unfunded Commitments     -       -       -       -       250  
Balance at End of Period 2   $ 152,777     $ 152,777     $ 148,077     $ 152,777     $ 148,077  
 
Components
Allowance for Loan and Lease Losses $ 147,358 $ 147,358 $ 142,658 $ 147,358 $ 142,658
Reserve for Unfunded Commitments     5,419       5,419       5,419       5,419       5,419  
Total Reserve for Credit Losses   $ 152,777     $ 152,777     $ 148,077     $ 152,777     $ 148,077  
 
Average Loans and Leases Outstanding   $ 5,368,177     $ 5,522,423     $ 6,034,956     $ 5,524,672     $ 6,245,117  
 

Ratio of Net Loans and Leases Charged-Off to Average Loans and Leases Outstanding (annualized)

0.99 % 1.09 % 1.46 % 1.12 % 1.33 %
Ratio of Allowance for Loan and Lease Losses to Loans and Leases Outstanding 2.77 % 2.71 % 2.41 % 2.77 % 2.41 %
 
1 Comprised of other revolving credit, installment, and lease financing.
2 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.
 
Bank of Hawaii Corporation and Subsidiaries
Business Segments Selected Financial Information Table 12a
(dollars in thousands)   Retail   Commercial   Investment   Treasury Consolidated
  Banking   Banking   Services   and Other   Total
Three Months Ended September 30, 2010
Net Interest Income $ 46,746 $ 35,236 $ 4,043 $ 12,601 $ 98,626
Provision for Credit Losses     6,288       7,121       (19 )     (31 )     13,359  
Net Interest Income After Provision for Credit Losses 40,458 28,115 4,062 12,632 85,267
Noninterest Income 28,049 9,745 16,478 8,853 63,125
Noninterest Expense     (43,391 )     (23,370 )     (13,851 )     (9,278 )     (89,890 )
Income Before Provision for Income Taxes 25,116 14,490 6,689 12,207 58,502
Provision for Income Taxes     (9,293 )     (421 )     (2,475 )     (2,249 )     (14,438 )
Net Income     15,823       14,069       4,214       9,958       44,064  
Total Assets as of September 30, 2010   $ 3,094,047     $ 2,251,004     $ 242,312     $ 7,129,240     $ 12,716,603  
 
 
Three Months Ended September 30, 2009 1
Net Interest Income $ 53,441 $ 40,232 $ 4,275 $ 10,939 $ 108,887
Provision for Credit Losses     15,599       11,918       33       (50 )     27,500  
Net Interest Income After Provision for Credit Losses 37,842 28,314 4,242 10,989 81,387
Noninterest Income 25,095 14,668 14,026 3,011 56,800
Noninterest Expense     (42,380 )     (25,072 )     (14,952 )     (1,583 )     (83,987 )
Income Before Provision for Income Taxes 20,557 17,910 3,316 12,417 54,200
Provision for Income Taxes     (7,636 )     (6,037 )     (1,227 )     (2,829 )     (17,729 )
Net Income     12,921       11,873       2,089       9,588       36,471  
Total Assets as of September 30, 2009 1   $ 3,441,050     $ 2,547,978     $ 253,580     $ 5,965,417     $ 12,208,025  
 
1 Certain prior period information has been reclassified to conform to current presentation.

 

Bank of Hawaii Corporation and Subsidiaries
Business Segments Selected Financial Information Table 12b
(dollars in thousands)   Retail   Commercial   Investment   Treasury Consolidated
  Banking   Banking   Services   and Other   Total
Nine Months Ended September 30, 2010
Net Interest Income $ 144,311 $ 112,682 $ 12,582 $ 40,632 $ 310,207
Provision for Credit Losses     31,516       18,468       69       (44 )     50,009  
Net Interest Income After Provision for Credit Losses 112,795 94,214 12,513 40,676 260,198
Noninterest Income 77,322 31,461 45,814 49,184 203,781
Noninterest Expense     (129,160 )     (72,210 )     (43,450 )     (12,694 )     (257,514 )
Income Before Provision for Income Taxes 60,957 53,465 14,877 77,166 206,465
Provision for Income Taxes     (22,554 )     (14,742 )     (5,505 )     (20,300 )     (63,101 )
Net Income     38,403       38,723       9,372       56,866       143,364  
Total Assets as of September 30, 2010   $ 3,094,047     $ 2,251,004     $ 242,312     $ 7,129,240     $ 12,716,603  
 
 
Nine Months Ended September 30, 2009 1
Net Interest Income $ 164,534 $ 121,328 $ 12,593 $ 10,345 $ 308,800
Provision for Credit Losses     44,921       34,868       1,583       (295 )     81,077  
Net Interest Income After Provision for Credit Losses 119,613 86,460 11,010 10,640 227,723
Noninterest Income 78,761 55,032 43,086 10,118 186,997
Noninterest Expense     (130,165 )     (78,453 )     (47,309 )     (5,577 )     (261,504 )
Income Before Provision for Income Taxes 68,209 63,039 6,787 15,181 153,216
Provision for Income Taxes     (25,287 )     (26,120 )     (2,511 )     4,219       (49,699 )
Net Income     42,922       36,919       4,276       19,400       103,517  
Total Assets as of September 30, 2009 1   $ 3,441,050     $ 2,547,978     $ 253,580     $ 5,965,417     $ 12,208,025  
 
1 Certain prior period information has been reclassified to conform to current presentation.

 

Bank of Hawaii Corporation and Subsidiaries
Selected Quarterly Financial Data Table 13
(dollars in thousands, except per share amounts)   Three Months Ended
September 30,   June 30,   March 31,   December 31,   September 30,
  2010     2010     2010     2009     2009
Quarterly Operating Results
Interest Income
Interest and Fees on Loans and Leases $ 70,198 $ 71,997 $ 77,271 $ 77,457 $ 79,530
Income on Investment Securities
Available-for-Sale 40,775 44,989 43,841 41,369 46,419
Held-to-Maturity 1,553 1,700 1,863 2,018 2,179
Deposits 5 3 13 2 3
Funds Sold 211 396 309 353 320
Other     278       277       277       277       277
Total Interest Income     113,020       119,362       123,574       121,476       128,728
Interest Expense
Deposits 7,041 7,930 8,307 10,317 12,235
Securities Sold Under Agreements to Repurchase 6,670 6,472 6,429 6,411 6,394
Funds Purchased 10 6 7 7 5
Long-Term Debt     673       1,026       1,178       1,207       1,207
Total Interest Expense     14,394       15,434       15,921       17,942       19,841
Net Interest Income 98,626 103,928 107,653 103,534 108,887
Provision for Credit Losses     13,359       15,939       20,711       26,801       27,500
Net Interest Income After Provision for Credit Losses     85,267       87,989       86,942       76,733       81,387
Noninterest Income
Trust and Asset Management 10,534 11,457 11,708 11,746 10,915
Mortgage Banking 6,811 3,752 3,464 4,218 4,656
Service Charges on Deposit Accounts 12,737 14,856 13,814 14,160 14,014
Fees, Exchange, and Other Service Charges 15,500 15,806 14,504 14,935 14,801
Investment Securities Gains (Losses), Net 7,877 14,951 20,021 25,707 (5 )
Insurance 2,646 2,291 2,715 2,326 7,304
Other     7,020       5,761       5,556       7,719       5,115
Total Noninterest Income     63,125       68,874       71,782       80,811       56,800
Noninterest Expense
Salaries and Benefits 46,840 47,500 44,564 50,973 46,387
Net Occupancy 10,186 10,154 10,144 10,367 10,350
Net Equipment 4,545 4,366 4,558 4,393 4,502
Professional Fees 905 2,091 1,992 3,243 2,642
FDIC Insurance 3,159 3,107 3,100 3,251 3,290
Other     24,255       18,700       17,348       16,293       16,816
Total Noninterest Expense     89,890       85,918       81,706       88,520       83,987
Income Before Provision for Income Taxes 58,502 70,945 77,018 69,024 54,200
Provision for Income Taxes     14,438       24,381       24,282       28,508       17,729
Net Income   $ 44,064     $ 46,564     $ 52,736     $ 40,516     $ 36,471
 
Basic Earnings Per Share $ 0.91 $ 0.97 $ 1.10 $ 0.85 $ 0.76
Diluted Earnings Per Share $ 0.91 $ 0.96 $ 1.09 $ 0.84 $ 0.76
 
Balance Sheet Totals
Loans and Leases $ 5,312,054 $ 5,440,911 $ 5,610,081 $ 5,759,785 $ 5,931,358
Total Assets 12,716,603 12,855,845 12,435,670 12,414,827 12,208,025
Total Deposits 9,602,462 9,324,659 9,494,084 9,409,676 9,250,100
Total Shareholders' Equity 1,039,561 1,013,011 939,372 895,973 902,799
 
Performance Ratios
Return on Average Assets 1.37 % 1.48 % 1.73 % 1.31 % 1.21

%

Return on Average Shareholders' Equity 16.64 19.01 22.54 16.91 16.44
Efficiency Ratio 1 55.57 49.72 45.54 48.02 50.69
Net Interest Margin 2 3.27 3.51 3.72 3.57 3.85
 
1 The efficiency ratio is defined as noninterest expense divided by total revenue (net interest income and noninterest income).
2 The net interest margin is defined as net interest income, on a fully-taxable equivalent basis, as a percentage of average earning assets.
 
Bank of Hawaii Corporation and Subsidiaries
Hawaii Economic Trends Table 14
($ in millions; jobs in thousands)   Eight Months Ended     Year Ended
  August 31, 2010     December 31, 2009     December 31, 2008
Hawaii Economic Trends        
State General Fund Revenues 1 $ 2,836.2 7.2 % $ 4,018.2 (12.8 ) % $ 4,608.6 (1.6 ) %
General Excise and Use Tax Revenue 1 $ 1,596.4 2.1 $ 2,296.3 (10.6 ) % $ 2,567.8 (2.1 ) %
Jobs, seasonally adjusted 2 586.5 0.1 586.1 (3.2 ) 605.6 (3.5 )
                                   
(annual percentage, except 2009 and 2010)

September 30,

December 31,

September 30,

December 31,

      2010     2009     2009     2008   2007
Unemployment 3
Statewide, seasonally adjusted 6.3 % 6.8 % 7.0 % 5.6 % 3.0 %
 
Oahu 5.3 5.3 6.2 3.5 2.5
Island of Hawaii 9.5 9.6 10.4 5.5 3.3
Maui 7.9 8.8 9.3 4.5 2.8
Kauai 8.6 8.9 9.2 4.4 2.5
                                   
(percentage change, except months of inventory) September 30,
                        2010   2009
Housing Trends (Single Family Oahu) 4
Median Home Price 4.2 % (8.0 ) %
Home Sales Volume (units) 20.4 % (12.4 ) %
Months of Inventory 6.3 8.6
                                   

(in thousands)

 

 

 

Monthly Visitor Arrivals,

Percentage Change

 

            Seasonally Adjusted     from Previous Month  
Tourism 2
 
July 31, 2010 598.4 1.5 %
June 30, 2010 589.6 1.8
May 31, 2010 579.3 5.0
April 30, 2010 551.7 (2.8 )
March 31, 2010 567.7 4.7
February 28, 2010 542.2 (0.6 )
January 31, 2010 545.5 1.1
December 31, 2009 539.5 1.5
November 30, 2009 531.5 (0.4 )
October 31, 2009 533.6 (3.5 )
September 30, 2009 552.8 3.5
August 31, 2009 534.1 (1.0 )
July 31, 2009 539.5 5.3
June 30, 2009 512.4 (5.7 )
May 31, 2009 543.6 (0.6 )
April 30, 2009 546.8 6.7
March 31, 2009 512.7 (4.8 )
February 28, 2009 538.4 0.5
January 31, 2009 535.5 2.6
 
1 Source: Hawaii Department of Business, Economic Development & Tourism.
2 Source: University of Hawaii Economic Research Organization.
3 Source: University of Hawaii Economic Research Organization, State of Hawaii Department of Labor and Industrial Relations.
4 Source: Honolulu Board of REALTORS.
Note: Certain prior period seasonally adjusted information has been revised.
 

Bank of Hawaii Corporation
Media Inquiries:
Stafford Kiguchi, 808-694-8580
Mobile: 808-265-6367
Stafford.Kiguchi@boh.com
or
Investor/Analyst Inquiries:
Cindy Wyrick, 808-694-8430
Cindy.Wyrick@boh.com

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