Bank of Hawaii Corporation 2010 Financial Results

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Mon Jan 24, 2011 6:00am EST

Bank of Hawaii Corporation 2010 Financial Results

  • 2010 Diluted Earnings Per Share $3.80
  • 2010 Net Income $183.9 Million
  • Diluted Earnings Per Share for the Fourth Quarter of 2010 $0.84
  • Net Income for the Fourth Quarter of 2010 $40.6 Million
  • Board of Directors Declares Dividend of $0.45 Per Share

Bank of Hawaii Corporation (NYSE: BOH) today reported net income of $40.6 million or $0.84 per diluted share for the fourth quarter of 2010 compared with $40.5 million or $0.84 per diluted share for the fourth quarter of 2009. Net income for the full year of 2010 was $183.9 million or $3.80 per diluted share, up from net income of $144.0 million or $3.00 per diluted share in the previous year.

“Bank of Hawaii Corporation finished 2010 with solid financial performance," said Peter S. Ho, Chairman, CEO, and President. “During the quarter we continued to see strong core deposit growth. Our loan portfolio grew slightly compared with the third quarter of 2010. Our balance sheet remained strong with high levels of liquidity, reserves, and capital. Credit quality continues to improve. The Hawaii economy is continuing to recover due, in part, to improving arrival and spend statistics in our visitor industry. Bank of Hawaii is well positioned to meet the needs of our marketplace as conditions improve.”

The return on average assets for the fourth quarter of 2010 was 1.24 percent and the return on average equity for the quarter was 15.08 percent. The return on average assets in 2010 was 1.45 percent, up from 1.22 percent in 2009. The return on average equity for the year was 18.16 percent, up from 16.42 percent in 2009.

Financial Highlights

Net interest income, on a taxable equivalent basis, for the fourth quarter of 2010 was $96.6 million, down $7.2 million from net interest income of $103.8 million in the fourth quarter of 2009 and down $2.2 million from net interest income of $98.8 million in the third quarter of 2010. Net interest income, on a taxable equivalent basis, for the full year of 2010 was $407.5 million, down $6.0 million from net interest income of $413.5 million in 2009. Analyses of changes in net interest income are included in Tables 7a, 7b and 7c.

The net interest margin was 3.15 percent for the fourth quarter of 2010, a 42 basis point decrease from the same quarter last year and a 12 basis point decrease from the previous quarter. The net interest margin for the full year of 2010 was 3.41 percent, a 31 basis point decrease from 3.72 percent in 2009. The reduction in the net interest margin was largely the result of higher levels of liquidity, lower interest rates, and lower loan balances.

Results for the fourth quarter of 2010 included a provision for credit losses of $5.3 million compared with $26.8 million in the fourth quarter of 2009 and $13.4 million in the third quarter of 2010. The provision for credit losses equaled net charge-offs in the fourth and third quarters of 2010. The provision for credit losses exceeded net charge-offs by $1.0 million in the fourth quarter of 2009. The provision for credit losses for the full year of 2010 was $55.3 million compared with $107.9 million in 2009.

Noninterest income was $51.5 million for the fourth quarter of 2010, compared with $80.8 million in the fourth quarter of 2009 and $63.1 million in the third quarter of 2010. Noninterest income in the fourth quarter of 2009 included net gains of $25.7 million on sales of investment securities and net gains of $2.5 million related to the sale of the Company’s insurance subsidiary and the disposal of leased assets. Noninterest income in the third quarter of 2010 included net gains of $7.9 million on the sales of investment securities, $3.8 million related to asset sales, and a loss of $1.4 million related to the disposition of a leveraged lease. Noninterest income for the full year of 2010 was $255.3 million compared with noninterest income of $267.8 million in 2009.

Noninterest expense was $88.7 million in the fourth quarter of 2010, up slightly from noninterest expense of $88.5 million in the fourth quarter of 2009, and down $1.2 million compared with $89.9 million in the previous quarter. Noninterest expense in the fourth quarter of 2010 included $1.9 million for employee incentives, $1.2 million for a refresh of personal computers, and a donation of $1.0 million to the Bank of Hawaii Foundation. Partially offsetting these expenses were a $1.3 million gain on the sale of foreclosed real estate and a $1.0 million settlement gain on the extinguishment of retiree life insurance obligations. Noninterest expense in the fourth quarter of 2009 included $4.1 million for employee grants to purchase company stock, $2.0 million for employee incentives, and a donation of $1.0 million to the Bank of Hawaii Foundation. Noninterest expense in the third quarter of 2010 included $5.2 million for the early termination of securities sold under agreements to repurchase. Full year salaries and benefits expense in 2010 decreased $2.9 million, or 1.5 percent compared to 2009. An analysis of salary and benefit expenses is included in Table 8. Noninterest expense for the full year of 2010 was $346.2 million, down $3.8 million from 2009.

The efficiency ratio for the fourth quarter of 2010 was 60.05 percent compared with 48.02 percent in the same quarter last year and 55.57 percent in the previous quarter. The efficiency ratio for the full year of 2010 was 52.32 percent, up slightly from 51.46 percent during the full year of 2009.

The effective tax rate for the fourth quarter of 2010 was 24.5 percent compared with 41.3 percent in the same quarter last year and 24.7 percent in the previous quarter. The lower effective tax rate for the fourth quarter of 2010 compared to the fourth quarter of 2009 was primarily due to an adjustment to tax reserves determined during the quarter. The effective tax rate for the full year of 2010 was 29.3 percent compared with 35.2 percent for the full year of 2009. The lower effective tax rate for 2010 was primarily due to a first quarter adjustment in the expected utilization of capital losses on the sale of a low-income housing investment, the disposition of two leveraged leases in the third quarter, and the previously discussed adjustment in the fourth quarter.

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

The Company’s overall asset quality reflects the improving Hawaii economy. Non-performing assets were $37.8 million at December 31, 2010, down from $48.3 million at December 31, 2009, and down from $45.2 million at September 30, 2010. As a percentage of total loans and leases, including loans held for sale and foreclosed real estate, non-performing assets were 0.71 percent at December 31, 2010. Non-accrual loans and leases declined to $35.9 million at December 31, 2010, representing 0.67 percent of total loans and leases. Accruing loans and leases past due 90 days or more decreased to $7.6 million during the fourth quarter of 2010. 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 fourth quarter of 2010 were $5.3 million or 0.40 percent annualized of total average loans and leases, down from $25.8 million in the fourth quarter of 2009, and $13.4 million in the third quarter of 2010. Net charge-offs for the fourth quarter of 2010 included recoveries of $7.3 million on two commercial construction loans. Net charge-offs for the full year of 2010 were $51.6 million, or 0.94 percent annualized of total average loans and leases, down from $87.7 million, or 1.43 percent annualized of total average loans and leases in 2009.

The allowance for loan and lease losses was $147.4 million at December 31, 2010, unchanged from September 30, 2010, and up from $143.7 million at December 31, 2009. The ratio of the allowance for loan and lease losses to total loans and leases was 2.76 percent at December 31, 2010. The reserve for unfunded commitments at December 31, 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 $13.13 billion at December 31, 2010, an increase from total assets of $12.41 billion at December 31, 2009, and up from total assets of $12.72 billion at September 30, 2010. Growth in investment securities during 2010 offset a decline in loan balances due to reduced demand, payoffs, and loan sales to reduce portfolio risk. Total loans and leases were $5.33 billion at December 31, 2010, down from $5.76 billion at December 31, 1009, and up from $5.31 billion at September 30, 2010. Loan and lease portfolio balances, including the higher risk loans outstanding, are summarized in Table 9.

Deposit generation continued to remain strong during the fourth quarter of 2010. Total deposits increased to $9.89 billion at December 31, 2010, higher than total deposits of $9.41 billion at December 31, 2009, and up from $9.60 billion at September 30, 2010. Average total deposits were $9.68 billion in the fourth quarter of 2010, higher than average deposits of $9.32 billion during the same quarter last year, and up from average deposits of $9.58 billion during the previous quarter.

As a result of the strong deposit growth, the investment portfolio grew to $6.66 billion at year-end 2010, compared to $5.51 billion at December 31, 2009 and $6.36 billion at September 30, 2010.

During the fourth quarter of 2010, the Company repurchased 258.0 thousand shares of common stock at a total cost of $11.7 million under its share repurchase program. The average cost was $45.36 per share repurchased. From January 3 through January 21, 2011, the Company repurchased an additional 63.0 thousand shares of common stock at an average cost of $47.25 per share repurchased. From the beginning of the share repurchase program initiated during July 2001 through December 31, 2010, the Company has repurchased 46.0 million shares and returned over $1.6 billion to shareholders at an average cost of $35.55 per share. Remaining buyback authority under the share repurchase program was $63.9 million at December 31, 2010.

Total shareholders’ equity was $1.01 billion at December 31, 2010, compared to $0.90 billion at December 31, 2009, and $1.04 billion at September 30, 2010. The ratio of tangible common equity to risk-weighted assets was 19.29 percent at December 31, 2010, up from 15.45 percent at December 31, 2009, and down slightly from 19.50 percent at September 30, 2010. At December 31, 2010, the Tier 1 leverage ratio was 7.15 percent, up from to 6.76 percent at December 31, 2009, and unchanged from September 30, 2010.

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 March 14, 2011 to shareholders of record at the close of business on February 28, 2011.

Hawaii Economy

Hawaii’s economy continued to recover during the fourth quarter of 2010 due to increasing visitor arrivals and spending. For the first 11 months of 2010, total visitor arrivals increased 8.6 percent compared to the same period in 2009. Total visitor spending for the first 11 months of 2010 were up 16 percent compared to the same period last year. Hotel occupancy continued to improve and revenue per available room has finally begun to show signs of improvement. Overall, state job growth has begun to stabilize and the statewide unemployment rate remains unchanged for the fifth straight month at 6.4 percent. Home prices and sales remained fairly stable during the quarter. More information on Hawaii economic trends is presented in Table 14.

Conference Call Information

The Company will review its 2010 financial results today at 8:00 a.m. Hawaii Time (1:00 p.m. Eastern Time). The call 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 for participants in the United States is 866-783-2137. International participants should call 857-350-1596. Use the pass code “Bank of Hawaii” to access the call. A replay of the conference call will be available for one week beginning Monday, January 24, 2011 by calling 888-286-8010 in the United States or 617-801-6888 internationally and entering the number 57311607 when prompted. A replay will also be available via the Investor Relations link of the Company’s web site.

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 do not promise 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 1a
Three Months Ended Year Ended
December 31, September 30, December 31, December 31,
(dollars in thousands, except per share amounts)   2010   2010   2009   2010   2009

For the Period:

Operating Results
Net Interest Income $ 96,273 $ 98,626 $ 103,534 $ 406,480 $ 412,334
Provision for Credit Losses 5,278 13,359 26,801 55,287 107,878
Total Noninterest Income 51,477 63,125 80,811 255,258 267,808
Total Noninterest Expense 88,722 89,890 88,520 346,236 350,024
Net Income 40,578 44,064 40,516 183,942 144,033
Basic Earnings Per Share 0.84 0.91 0.85 3.83 3.02
Diluted Earnings Per Share 0.84 0.91 0.84 3.80 3.00
Dividends Declared Per Share 0.45 0.45 0.45 1.80 1.80
 
Performance Ratios
Return on Average Assets 1.24 % 1.37 % 1.31 % 1.45 % 1.22 %
Return on Average Shareholders' Equity 15.08 16.64 16.91 18.16 16.42
Efficiency Ratio 1 60.05 55.57 48.02 52.32 51.46
Operating Leverage 2 (17.86 ) (17.29 ) 17.29 (4.43 ) -
Net Interest Margin 3 3.15 3.27 3.57 3.41 3.72
Dividend Payout Ratio 4 53.57 49.45 52.94 47.00 59.60
 
Average Balances
Average Loans and Leases $ 5,317,815 $ 5,368,177 $ 5,847,820 $ 5,472,534 $ 6,144,976
Average Assets 12,964,973 12,797,219 12,279,458 12,687,717 11,783,404
Average Deposits 9,677,452 9,576,936 9,322,632 9,509,130 9,108,432
Average Shareholders' Equity 1,067,429 1,050,535 950,833 1,012,746 877,170
 
Market Price Per Share of Common Stock
Closing $ 47.21 $ 44.92 $ 47.06 $ 47.21 $ 47.06
High 48.27 51.60 48.14 54.10 48.14
Low 42.94 43.77 39.43 41.60 25.33
 
December 31, September 30, December 31,
            2010   2010   2009

As of Period End:

Balance Sheet Totals
Loans and Leases $ 5,335,792 $ 5,312,054 $ 5,759,785
Total Assets 13,126,787 12,716,603 12,414,827
Total Deposits 9,888,995 9,602,462 9,409,676
Long-Term Debt 32,652 40,292 90,317
Total Shareholders' Equity 1,011,133 1,039,561 895,973
 
Asset Quality
Allowance for Loan and Lease Losses $ 147,358 $ 147,358 $ 143,658
Non-Performing Assets 5 37,786 45,174 48,331
 
Financial Ratios
Allowance to Loans and Leases Outstanding 2.76 % 2.77 % 2.49 %
Tier 1 Capital Ratio 6 18.28 17.71 14.84
Total Capital Ratio 6 19.55 18.98 16.11
Tier 1 Leverage Ratio 6 7.15 7.15 6.76
Total Shareholders' Equity to Total Assets 7.70 8.17 7.22
Tangible Common Equity to Tangible Assets 7 7.48 7.95 6.98
Tangible Common Equity to Risk-Weighted Assets 7 19.29 19.50 15.45
 
Non-Financial Data
Full-Time Equivalent Employees 2,399 2,428 2,418
Branches and Offices 82 83 83
ATMs 502 492 485
 
 
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 as of December 31, 2009.
6 Tier 1 Capital Ratio, Total Capital Ratio, and Tier 1 Leverage Ratio as of December 31, 2009 were revised from 14.88%, 16.15%, and 6.78%, respectively.
7 Tangible common equity to tangible assets and tangible common equity to risk-weighted assets are Non-GAAP financial measures. See reconciliation of Non-GAAP financial measures in Table 1b.
 
Bank of Hawaii Corporation and Subsidiaries
Reconciliation of Non-GAAP Financial Measures   Table 1b
  December 31,   September 30, December 31,
(dollars in thousands)   2010   2010   2009
 
Total Shareholders' Equity $ 1,011,133 $ 1,039,561 $ 895,973
Less: Goodwill 31,517 31,517 31,517
  Intangible Assets     154       177       233  
Tangible Common Equity   $ 979,462     $ 1,007,867     $ 864,223  
 
Total Assets $ 13,126,787 $ 12,716,603 $ 12,414,827
Less: Goodwill 31,517 31,517 31,517
  Intangible Assets     154       177       233  
Tangible Assets   $ 13,095,116     $ 12,684,909     $ 12,383,077  
 

Risk-Weighted Assets, determined in accordance with prescribed regulatory requirements

$ 5,076,909 $ 5,167,838 $ 5,594,532
 
Total Shareholders' Equity to Total Assets 7.70 % 8.17 % 7.22 %
Tangible Common Equity to Tangible Assets (Non-GAAP) 7.48 % 7.95 % 6.98 %
 
Tier 1 Capital Ratio 1 18.28 % 17.71 % 14.84 %
Tangible Common Equity to Risk-Weighted Assets (Non-GAAP) 19.29 % 19.50 % 15.45 %
 
 
1 Tier 1 Capital Ratio as of December 31, 2009 was revised from 14.88%.
 
Bank of Hawaii Corporation and Subsidiaries
Net Significant Income (Expense) Items   Table 2
  Three Months Ended   Year Ended
December 31,   September 30,   December 31, December 31,
(dollars in thousands)   2010   2010   2009   2010   2009
 
Cash Basis Interest Recoveries $ - $ - $ - $ 2,832 $ -
Leveraged Lease Residual Value Impairment - - - - (968 )
Investment Securities Gains, Net - 7,877 25,707 42,849 25,707
Gain on Mutual Fund Sale - 2,852 - 2,852 -
Gain on Disposal of Leased Equipment - (1,449 ) 977 (260 ) 13,795
Gain on Sale of Insurance Subsidiaries - 904 1,511 904 2,363
Increase in Allowance for Loan and Lease Losses - - (1,000 ) (3,700 ) (20,160 )
Employee Incentive Awards (1,949 ) - (2,000 ) (1,949 ) (2,000 )
Cash Grants for the Purchase of Company Stock (196 ) - (4,100 ) (3,446 ) (4,100 )
Settlement Gain on the Extinguishment of Retiree Life Insurance Obligation 951 - - 951 -
PC Refresh (1,192 ) - - (1,192 ) -
FDIC Special Assessment - - - - (5,744 )
Legal Contingencies - - 1,152 - (1,148 )
Gain on Sale of Foreclosed Real Estate 1,343 - - 1,343 -
Bank of Hawaii Foundation (1,000 ) - (1,000 ) (1,000 ) (1,000 )
REPO Early Termination Expense - (5,189 ) - (5,189 ) -
Market Premium on Repurchased Long-Term Privately Placed Debt     -       -       -       -       (875 )
Significant Income (Expense) Items Before the Provision (Benefit) for Income Taxes     (2,043 )     4,995       21,247       34,995       5,870  
Income Tax Impact Related to Lease Transactions - (4,003 ) 568 (3,541 ) 3,781
Income Tax Impact     (715 )     2,256       7,095       12,340       (2,434 )
Net Significant Income (Expense) Items   $ (1,328 )   $ 6,742     $ 13,584     $ 26,196     $ 4,523  
 
Bank of Hawaii Corporation and Subsidiaries
Consolidated Statements of Income   Table 3
  Three Months Ended   Year Ended
December 31,   September 30,   December 31, December 31,
(dollars in thousands, except per share amounts)   2010   2010   2009   2010   2009
Interest Income
Interest and Fees on Loans and Leases $ 67,915 $ 70,198 $ 77,457 $ 287,381 $ 326,921
Income on Investment Securities
Trading - - - - 594
Available-for-Sale 39,546 40,775 41,369 169,151 158,244
Held-to-Maturity 1,388 1,553 2,018 6,504 9,133
Deposits 7 5 2 28 20
Funds Sold 160 211 353 1,076 1,776
Other     279       278     277     1,111     1,106
Total Interest Income     109,295       113,020     121,476     465,251     497,794
Interest Expense
Deposits 5,918 7,041 10,317 29,196 54,058
Securities Sold Under Agreements to Repurchase 6,425 6,670 6,411 25,996 25,934
Funds Purchased 7 10 7 30 22
Long-Term Debt     672       673     1,207     3,549     5,446
Total Interest Expense     13,022       14,394     17,942     58,771     85,460
Net Interest Income 96,273 98,626 103,534 406,480 412,334
Provision for Credit Losses     5,278       13,359     26,801     55,287     107,878
Net Interest Income After Provision for Credit Losses     90,995       85,267     76,733     351,193     304,456
Noninterest Income
Trust and Asset Management 11,190 10,534 11,746 44,889 46,174
Mortgage Banking 4,549 6,811 4,218 18,576 22,995
Service Charges on Deposit Accounts 11,632 12,737 14,160 53,039 54,470
Fees, Exchange, and Other Service Charges 15,196 15,500 14,935 61,006 60,122
Investment Securities Gains (Losses), Net (1 ) 7,877 25,707 42,848 25,770
Insurance 2,309 2,646 2,326 9,961 20,015
Other     6,602       7,020     7,719     24,939     38,262
Total Noninterest Income     51,477       63,125     80,811     255,258     267,808
Noninterest Expense
Salaries and Benefits 46,809 46,840 50,973 185,713 188,568
Net Occupancy 10,504 10,186 10,367 40,988 41,053
Net Equipment 5,902 4,545 4,393 19,371 17,713
Professional Fees 2,116 905 3,243 7,104 12,439
FDIC Insurance 3,198 3,159 3,251 12,564 17,342
Other     20,193       24,255     16,293     80,496     72,909
Total Noninterest Expense     88,722       89,890     88,520     346,236     350,024
Income Before Provision for Income Taxes 53,750 58,502 69,024 260,215 222,240
Provision for Income Taxes     13,172       14,438     28,508     76,273     78,207
Net Income   $ 40,578     $ 44,064   $ 40,516   $ 183,942   $ 144,033
Basic Earnings Per Share $ 0.84 $ 0.91 $ 0.85 $ 3.83 $ 3.02
Diluted Earnings Per Share $ 0.84 $ 0.91 $ 0.84 $ 3.80 $ 3.00
Dividends Declared Per Share $ 0.45 $ 0.45 $ 0.45 $ 1.80 $ 1.80
Basic Weighted Average Shares 48,034,234 48,189,358 47,813,490 48,055,025 47,702,500
Diluted Weighted Average Shares     48,275,474       48,462,154     48,223,406     48,355,965     48,009,277
     
Bank of Hawaii Corporation and Subsidiaries
Consolidated Statements of Condition   Table 4
December 31, September 30, December 31,
(dollars in thousands)   2010   2010   2009
Assets
Interest-Bearing Deposits $ 3,472 $ 2,641 $ 8,755
Funds Sold 438,327 174,288 291,546
Investment Securities
Available-for-Sale 6,533,874 6,213,949 5,330,834
Held-to-Maturity (Fair Value of $134,028; $148,631; and $186,668) 127,249 141,192 181,018
Loans Held for Sale 17,564 18,765 16,544
Loans and Leases 5,335,792 5,312,054 5,759,785
Allowance for Loan and Lease Losses     (147,358 )     (147,358 )     (143,658 )
Net Loans and Leases     5,188,434       5,164,696       5,616,127  
Total Earning Assets     12,308,920       11,715,531       11,444,824  
Cash and Noninterest-Bearing Deposits 165,748 267,597 254,766
Premises and Equipment 108,170 108,855 110,976
Customers' Acceptances 437 1,087 1,386
Accrued Interest Receivable 41,151 40,606 45,334
Foreclosed Real Estate 1,928 5,910 3,132
Mortgage Servicing Rights 25,379 24,316 25,970
Goodwill 31,517 31,517 31,517
Other Assets     443,537       521,184       496,922  
Total Assets   $ 13,126,787     $ 12,716,603     $ 12,414,827  
 
Liabilities
Deposits
Noninterest-Bearing Demand $ 2,447,713 $ 2,290,033 $ 2,252,083
Interest-Bearing Demand 1,871,718 1,814,934 1,609,413
Savings 4,526,893 4,423,095 4,405,969
Time     1,042,671       1,074,400       1,142,211  
Total Deposits     9,888,995       9,602,462       9,409,676  
Funds Purchased 9,478 9,832 8,888
Short-Term Borrowings 6,200 7,100 6,900
Securities Sold Under Agreements to Repurchase 1,901,084 1,616,243 1,618,717
Long-Term Debt 32,652 40,292 90,317
Banker's Acceptances 437 1,087 1,386
Retirement Benefits Payable 30,885 35,461 37,435
Accrued Interest Payable 5,007 6,492 7,026
Taxes Payable and Deferred Taxes 121,517 219,525 229,140
Other Liabilities     119,399       138,548       109,369  
Total Liabilities     12,115,654       11,677,042       11,518,854  
Shareholders' Equity

Common Stock ($.01 par value; authorized 500,000,000 shares; issued / outstanding: December 31, 2010 - 57,115,287 / 48,097,672; September 30, 2010 - 57,115,287 / 48,265,014; and December 31, 2009 - 57,028,239 / 48,018,943)

570 570 569
Capital Surplus 500,888 499,437 494,318
Accumulated Other Comprehensive Income 26,965 66,953 6,925
Retained Earnings 932,629 914,901 843,521

Treasury Stock, at Cost (Shares: December 31, 2010 - 9,017,615; September 30, 2010 - 8,850,273; and December 31, 2009 - 9,009,296)

    (449,919 )     (442,300 )     (449,360 )
Total Shareholders' Equity     1,011,133       1,039,561       895,973  
Total Liabilities and Shareholders' Equity   $ 13,126,787     $ 12,716,603     $ 12,414,827  
             
Bank of Hawaii Corporation and Subsidiaries
Consolidated Statements of Shareholders' Equity   Table 5
Accum.
Other
Compre-
hensive Compre-
Common Capital Income Retained Treasury hensive
(dollars in thousands)   Total   Stock   Surplus   (Loss)   Earnings   Stock   Income
Balance as of December 31, 2008 $ 790,704 $ 568 $ 492,515 $ (28,888 ) $ 787,924 $ (461,415 )
Comprehensive Income:
Net Income 144,033 - - - 144,033 - $ 144,033
Other Comprehensive Income, Net of Tax:

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

30,567 - - 30,567 - - 30,567
Net Gain related to Defined Benefit Plans 5,246 - - 5,246

-

-   5,246  
Total Comprehensive Income $ 179,846  
Share-Based Compensation 3,552 - 3,552 - - -

Common Stock Issued under Purchase and Equity Compensation Plans and Related Tax Benefits (301,306 shares)

9,444 1 (1,749 ) - (2,200 ) 13,392
Common Stock Repurchased (35,734 shares) (1,337 ) - - - - (1,337 )
Cash Dividends Paid     (86,236 )     -     -       -       (86,236 )     -  
Balance as of December 31, 2009   $ 895,973     $ 569   $ 494,318     $ 6,925     $ 843,521     $ (449,360 )
Comprehensive Income:
Net Income 183,942 - - - 183,942 - $ 183,942
Other Comprehensive Income, Net of Tax:

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

20,231 - - 20,231 - - 20,231
Settlement Gain Related to Defined Benefit Plans (608 ) - - (608 ) - - (608 )
Net Gain related to Defined Benefit Plans 417 - - 417 - -   417  
Total Comprehensive Income $ 203,982  
Share-Based Compensation 3,841 - 3,841 - - -

Common Stock Issued under Purchase and Equity Compensation Plans and Related Tax Benefits (617,345 shares)

19,141 1 2,729 - (8,011 ) 24,422
Common Stock Repurchased (538,616 shares) (24,981 ) - - - - (24,981 )
Cash Dividends Paid     (86,823 )     -     -       -       (86,823 )     -  
Balance as of December 31, 2010   $ 1,011,133     $ 570   $ 500,888     $ 26,965     $ 932,629     $ (449,919 )
   
Bank of Hawaii Corporation and Subsidiaries
Average Balances and Interest Rates - Taxable Equivalent Basis   Table 6a
    Three Months Ended Three Months Ended Three Months Ended
December 31, 2010 September 30, 2010 December 31, 2009
Average   Income/   Yield/ Average   Income/   Yield/ Average Income/ Yield/
(dollars in millions)   Balance   Expense   Rate   Balance   Expense   Rate   Balance   Expense   Rate
Earning Assets
Interest-Bearing Deposits $ 3.2 $ - 0.81 % $ 4.4 $ - 0.49 % $ 8.2 $ - 0.09 %
Funds Sold 211.4 0.2 0.30 303.4 0.2 0.27 534.1 0.3 0.26
Investment Securities
Available-for-Sale 6,468.5 39.8 2.46 6,158.5 41.0 2.66 4,939.2 41.6 3.37
Held-to-Maturity 134.8 1.4 4.12 148.2 1.6 4.19 188.4 2.0 4.29
Loans Held for Sale 13.2 0.1 4.77 12.7 0.1 4.59 15.6 0.2 3.95
Loans and Leases 1
Commercial and Industrial 752.7 7.8 4.13 750.6 7.8 4.13 820.3 8.3 4.01
Commercial Mortgage 838.0 10.5 5.00 808.8 10.4 5.10 793.9 10.2 5.09
Construction 86.1 1.1 5.09 87.6 1.1 4.95 132.2 1.3 3.81
Commercial Lease Financing 352.6 2.3 2.57 380.1 2.6 2.79 438.0 3.6 3.34
Residential Mortgage 2,078.1 28.4 5.46 2,076.0 29.5 5.68 2,223.3 32.1 5.77
Home Equity 821.3 10.3 4.95 849.4 10.7 4.99 939.2 11.9 5.05
Automobile 214.4 4.0 7.38 229.1 4.4 7.54 291.8 5.8 7.85
  Other 2     174.6     3.4   7.68     186.6     3.5   7.55     209.1     4.1   7.76
Total Loans and Leases     5,317.8     67.8   5.07     5,368.2     70.0   5.20     5,847.8     77.3   5.26
Other     79.9     0.3   1.39     79.8     0.3   1.39     79.7     0.3   1.39
Total Earning Assets 3     12,228.8     109.6   3.57     12,075.2     113.2   3.74     11,613.0     121.7   4.18
Cash and Noninterest-Bearing Deposits 240.3 227.3 209.0
Other Assets   495.9   494.7   457.5
Total Assets $ 12,965.0 $ 12,797.2 $ 12,279.5
 
Interest-Bearing Liabilities
Interest-Bearing Deposits
Demand $ 1,769.4 0.2 0.06 $ 1,770.1 0.2 0.06 $ 1,573.7 0.2 0.06
Savings 4,486.7 2.6 0.23 4,460.9 3.5 0.31 4,415.6 5.5 0.49
  Time     1,050.9     3.1   1.18     1,075.7     3.3   1.22     1,188.2     4.6   1.53
Total Interest-Bearing Deposits     7,307.0     5.9   0.32     7,306.7     7.0   0.38     7,177.5     10.3   0.57
Short-Term Borrowings 20.1 - 0.14 26.6 - 0.15 27.9 - 0.10
Securities Sold Under Agreements to Repurchase 1,774.8 6.4 1.42 1,706.2 6.7 1.53 1,452.2 6.4 1.73
Long-Term Debt     40.0     0.7   6.72     40.3     0.7   6.68     91.4     1.2   5.27
Total Interest-Bearing Liabilities     9,141.9     13.0   0.56     9,079.8     14.4   0.63     8,749.0     17.9   0.81
Net Interest Income $ 96.6 $ 98.8 $ 103.8
Interest Rate Spread 3.01 % 3.11 % 3.37 %
Net Interest Margin 3.15 % 3.27 % 3.57 %
Noninterest-Bearing Demand Deposits 2,370.5 2,270.2 2,145.2
Other Liabilities 385.2 396.7 434.5
Shareholders' Equity   1,067.4   1,050.5   950.8
Total Liabilities and Shareholders' Equity $ 12,965.0 $ 12,797.2 $ 12,279.5
 
 

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 $300,000, $199,000, and $251,000 for the three months ended December 31, 2010, September 30, 2010, and December 31, 2009, respectively.

 
Bank of Hawaii Corporation and Subsidiaries
Average Balances and Interest Rates - Taxable Equivalent Basis   Table 6b
    Year Ended Year Ended
December 31, 2010 December 31, 2009
Average   Income/   Yield/ Average Income/  

Yield/

(dollars in millions)   Balance   Expense   Rate   Balance   Expense   Rate
Earning Assets
Interest-Bearing Deposits $ 4.7 $ - 0.59 % $ 5.8 $ - 0.34 %
Funds Sold 390.2 1.1 0.28 690.9 1.8 0.26
Investment Securities
Trading - - - 12.0 0.6 4.94
Available-for-Sale 5,854.1 170.1 2.91 3,938.2 159.4 4.05
Held-to-Maturity 154.2 6.5 4.22 211.2 9.1 4.33
Loans Held for Sale 10.8 0.9 8.51 21.7 0.8 3.85
Loans and Leases 1
Commercial and Industrial 764.2 33.7 4.41 929.4 37.6 4.05
Commercial Mortgage 827.7 42.0 5.07 769.1 39.9 5.19
Construction 95.4 4.8 5.08 142.9 5.7 3.97
Commercial Lease Financing 385.1 11.3 2.92 453.7 13.8 3.04
Residential Mortgage 2,105.6 118.7 5.64 2,322.6 136.1 5.86
Home Equity 863.7 43.2 4.99 982.3 49.9 5.08
Automobile 241.2 18.3 7.58 319.3 25.3 7.91
  Other 2     189.6     14.5   7.66     225.7     17.8   7.87
Total Loans and Leases     5,472.5     286.5   5.23     6,145.0     326.1   5.31
Other     79.8     1.1   1.39     79.7     1.1   1.39
Total Earning Assets 3     11,966.3     466.2   3.90     11,104.5     498.9   4.49
Cash and Noninterest-Bearing Deposits 229.6 214.8
Other Assets   491.8   464.1
Total Assets $ 12,687.7 $ 11,783.4
 
Interest-Bearing Liabilities
Interest-Bearing Deposits
Demand $ 1,715.8 1.1 0.06 $ 1,747.7 1.1 0.06
Savings 4,465.0 14.7 0.33 4,046.7 28.1 0.69
  Time     1,088.7     13.4   1.23     1,320.1     24.9   1.88
Total Interest-Bearing Deposits     7,269.5     29.2   0.40     7,114.5     54.1   0.76
Short-Term Borrowings 23.3 - 0.13 20.3 - 0.11
Securities Sold Under Agreements to Repurchase 1,700.2 26.0 1.53 1,257.0 25.9 2.06
Long-Term Debt     61.0     3.5   5.81     100.4     5.4   5.43
Total Interest-Bearing Liabilities     9,054.0     58.7   0.65     8,492.2     85.4   1.01
Net Interest Income $ 407.5 $ 413.5
Interest Rate Spread 3.25 % 3.48 %
Net Interest Margin 3.41 % 3.72 %
Noninterest-Bearing Demand Deposits 2,239.6 1,993.9
Other Liabilities 381.4 420.1
Shareholders' Equity   1,012.7   877.2
Total Liabilities and Shareholders' Equity $ 12,687.7 $ 11,783.4
 
 

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 $975,000 and 1,137,000 for the years ended December 31, 2010 and 2009, respectively.
 
Bank of Hawaii Corporation and Subsidiaries
Analysis of Change in Net Interest Income - Taxable Equivalent Basis   Table 7a
  Three Months Ended December 31, 2010
Compared to September 30, 2010
(dollars in millions)   Volume 1   Rate 1   Total
Change in Interest Income:  
Funds Sold $ (0.1 ) $ 0.1 $ -
Investment Securities
Available-for-Sale 2.0 (3.2 )

 

(1.2 )
Held-to-Maturity (0.1 ) (0.1 ) (0.2 )
Loans and Leases
Commercial Mortgage 0.3 (0.2 ) 0.1
Commercial Lease Financing (0.1 ) (0.2 ) (0.3 )
Residential Mortgage - (1.1 ) (1.1 )
Home Equity (0.3 ) (0.1 ) (0.4 )
Automobile (0.3 ) (0.1 ) (0.4 )
Other 2     (0.2 )     0.1       (0.1 )
Total Loans and Leases     (0.6 )     (1.6 )     (2.2 )
Total Change in Interest Income     1.2       (4.8 )     (3.6 )
 
Change in Interest Expense:
Interest-Bearing Deposits
Savings 0.1 (1.0 ) (0.9 )
Time     (0.1 )     (0.1 )     (0.2 )
Total Interest-Bearing Deposits     -       (1.1 )     (1.1 )
Securities Sold Under Agreements to Repurchase     0.2       (0.5 )     (0.3 )
Total Change in Interest Expense     0.2       (1.6 )     (1.4 )
 
Change in Net Interest Income   $ 1.0     $ (3.2 )   $ (2.2 )
 
 
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
Analysis of Change in Net Interest Income - Taxable Equivalent Basis   Table 7b
  Three Months Ended December 31, 2010
Compared to December 31, 2009
(dollars in millions)   Volume 1   Rate 1   Total
Change in Interest Income:  
Funds Sold $ (0.2 ) $ 0.1 $ (0.1 )
Investment Securities
Available-for-Sale 11.1 (12.9 ) (1.8 )
Held-to-Maturity (0.5 ) (0.1 ) (0.6 )
Loans Held for Sale (0.1 ) - (0.1 )
Loans and Leases
Commercial and Industrial (0.7 ) 0.2 (0.5 )
Commercial Mortgage 0.5 (0.2 ) 0.3
Construction (0.5 ) 0.3 (0.2 )
Commercial Lease Financing (0.6 ) (0.7 ) (1.3 )
Residential Mortgage (2.0 ) (1.7 ) (3.7 )
Home Equity (1.4 ) (0.2 ) (1.6 )
Automobile (1.5 ) (0.3 ) (1.8 )
Other 2     (0.7 )     -       (0.7 )
Total Loans and Leases     (6.9 )     (2.6 )     (9.5 )
Total Change in Interest Income     3.4       (15.5 )     (12.1 )
 
Change in Interest Expense:
Interest-Bearing Deposits
Savings 0.1 (3.0 ) (2.9 )
Time     (0.5 )     (1.0 )     (1.5 )
Total Interest-Bearing Deposits     (0.4 )     (4.0 )     (4.4 )
Securities Sold Under Agreements to Repurchase 1.3 (1.3 ) -
Long-Term Debt     (0.8 )     0.3       (0.5 )
Total Change in Interest Expense     0.1       (5.0 )     (4.9 )
 
Change in Net Interest Income   $ 3.3     $ (10.5 )   $ (7.2 )
 
 
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
Analysis of Change in Net Interest Income - Taxable Equivalent Basis   Table 7c
  Year Ended December 31, 2010
Compared to December 31, 2009
(dollars in millions)   Volume 1   Rate 1   Total
Change in Interest Income:  
Funds Sold $ (0.8 ) $ 0.1 $ (0.7 )
Investment Securities
Trading (0.3 ) (0.3 ) (0.6 )
Available-for-Sale 63.7 (53.0 ) 10.7
Held-to-Maturity (2.4 ) (0.2 ) (2.6 )
Loans Held for Sale (0.6 ) 0.7 0.1
Loans and Leases
Commercial and Industrial (7.1 ) 3.2 (3.9 )
Commercial Mortgage 3.0 (0.9 ) 2.1
Construction (2.2 ) 1.3 (0.9 )
Commercial Lease Financing (2.0 ) (0.5 ) (2.5 )
Residential Mortgage (12.4 ) (5.0 ) (17.4 )
Home Equity (5.8 ) (0.9 ) (6.7 )
Automobile (6.0 ) (1.0 ) (7.0 )
Other 2     (2.8 )     (0.5 )     (3.3 )
Total Loans and Leases     (35.3 )     (4.3 )     (39.6 )
Total Change in Interest Income     24.3       (57.0 )     (32.7 )
 
Change in Interest Expense:
Interest-Bearing Deposits
Savings 2.6 (16.0 ) (13.4 )
Time     (3.9 )     (7.6 )     (11.5 )
Total Interest-Bearing Deposits     (1.3 )     (23.6 )     (24.9 )
Securities Sold Under Agreements to Repurchase 7.7 (7.6 ) 0.1
Long-Term Debt     (2.3 )     0.4       (1.9 )
Total Change in Interest Expense     4.1       (30.8 )     (26.7 )
 
Change in Net Interest Income   $ 20.2     $ (26.2 )   $ (6.0 )
 
 
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
  Three Months Ended Year Ended
December 31,   September 30,   December 31, December 31,
(dollars in thousands)   2010   2010   2009   2010   2009
Salaries $ 30,350 $ 30,080 $ 29,323 $ 119,515   $ 119,888
Incentive Compensation 5,248 3,403 5,465 15,544 17,688
Share-Based Compensation and Cash Grants for the Purchase of Company Stock 1,220 1,045 5,789 6,805 7,775
Commission Expense 2,225 1,836 1,543 6,666 7,071
Retirement and Other Benefits 3,564 4,178 4,040 15,708 16,425
Payroll Taxes 2,033 2,287 1,952 10,084 9,972
Medical, Dental, and Life Insurance 1,018 2,263 2,482 8,242 9,001
Separation Expense     1,151     1,748     379     3,149     748
Total Salaries and Benefits   $ 46,809   $ 46,840   $ 50,973   $ 185,713   $ 188,568
 
Bank of Hawaii Corporation and Subsidiaries
Loan and Lease Portfolio Balances   Table 9
    December 31,   September 30,   June 30,   March 31, December 31,
(dollars in thousands)   2010   2010   2010  

2010

  2009
Commercial
Commercial and Industrial $ 772,624 $ 736,385 $ 758,851 $ 782,298 $ 795,167
Commercial Mortgage 863,385 817,752 816,165 834,086 841,431
Construction 80,325 88,671 88,823 104,349 108,395
  Lease Financing     334,997     353,962     399,744     398,939       412,933  
Total Commercial     2,051,331     1,996,770     2,063,583     2,119,672       2,157,926  
Consumer
Residential Mortgage 2,094,189 2,073,340 2,087,380 2,138,094 2,190,677
Home Equity 807,479 836,990 861,196 892,109 921,571
Automobile 209,008 221,265 238,671 260,472 283,937
  Other 1     173,785     183,689     190,081     199,734       205,674  
Total Consumer     3,284,461     3,315,284     3,377,328     3,490,409       3,601,859  
Total Loans and Leases   $ 5,335,792   $ 5,312,054   $ 5,440,911   $ 5,610,081     $ 5,759,785  
 
 
Higher Risk Loans Outstanding                    
December 31, September 30, June 30, March 31, December 31,
(dollars in thousands)   2010   2010   2010  

2010

  2009
Residential Home Building 2 $ 14,964 $ 18,444 $ 18,993 $ 29,475 $ 31,067
Residential Land Loans 3 23,745 28,149 30,262 33,514 37,873
Home Equity Loans 4 23,179 23,957 25,055 24,595 28,076
Air Transportation 5     37,879     38,611     39,165     39,743       50,426  
Total Higher Risk Loans   $ 99,767   $ 109,161   $ 113,475   $ 127,327     $ 147,442  
 
1 Comprised of other revolving credit, installment, and lease financing.

2 Residential home building loans were $34.1 million as of December 31, 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                    
December 31, September 30, June 30, March 31, December 31,
(dollars in thousands)   2010   2010   2010  

2010 (6)

 

2009 (6)

Consumer $ 5,082,802 $ 4,976,317 $ 4,925,579 $ 4,940,576 $ 4,926,567
Commercial 4,292,108 4,053,306 4,036,679 4,126,287 4,115,286
Public and Other     514,085     572,839     362,401     427,221       367,823  
Total Deposits   $ 9,888,995   $ 9,602,462   $ 9,324,659   $ 9,494,084     $ 9,409,676  
 
 

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
      December 31,   September 30,   June 30,   March 31, December 31,
(dollars in thousands)   2010   2010   2010   2010   2009
Non-Performing Assets 1
Non-Accrual Loans and Leases
Commercial
Commercial and Industrial $ 1,642 $ 1,287 $ 741 $ 3,342 $ 6,646
Commercial Mortgage 3,503 5,071 3,476 1,662 1,167
Construction 288 3,569 5,640 7,297 8,154
    Lease Financing     19       117       63       73       631  
  Total Commercial     5,452       10,044       9,920       12,374       16,598  
Consumer
Residential Mortgage 28,152 26,917 27,491 23,214 19,893
Home Equity 2,254 2,303 2,638 2,844 5,153
    Other 2     -       -       -       -       550  
  Total Consumer     30,406       29,220       30,129       26,058       25,596  
Total Non-Accrual Loans and Leases     35,858       39,264       40,049       38,432       42,194  
Non-Accrual Loans Held for Sale - - - - 3,005
Foreclosed Real Estate     1,928       5,910       3,192       3,192       3,132  
Total Non-Performing Assets   $ 37,786     $ 45,174     $ 43,241     $ 41,624     $ 48,331  
 
Accruing Loans and Leases Past Due 90 Days or More
Commercial
Commercial and Industrial $ - $ 62 $ - $ 2,192 $ 623
Construction - - - 2,170 -
  Lease Financing     -       -       -       -       120  
Total Commercial     -       62       -       4,362       743  
Consumer
Residential Mortgage 5,399 8,031 9,019 8,136 8,979
Home Equity 1,067 1,246 2,256 1,608 2,210
Automobile 410 348 464 571 875
  Other 2     707       857       1,161       1,345       886  
Total Consumer     7,583       10,482       12,900       11,660       12,950  
Total Accruing Loans and Leases Past Due 90 Days or More   $ 7,583     $ 10,544     $ 12,900     $ 16,022     $ 13,693  
 
Total Loans and Leases   $ 5,335,792     $ 5,312,054     $ 5,440,911     $ 5,610,081     $ 5,759,785  
 
Ratio of Non-Accrual Loans and Leases to Total Loans and Leases     0.67 %     0.74 %     0.74 %     0.69 %     0.73 %
 

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

    0.71 %     0.85 %     0.79 %     0.74 %     0.84 %
 

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

    0.31 %     0.75 %     0.62 %     0.72 %     1.03 %
 

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

    0.95 %     0.91 %     0.90 %     0.76 %     0.72 %
 

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

    0.85 %     1.04 %     1.03 %     1.02 %     1.07 %
 
Quarter to Quarter Changes in Non-Performing Assets 1
Balance at Beginning of Quarter $ 45,174 $ 43,241 $ 41,624 $ 48,331 $ 48,536
Additions 8,175 10,606 10,761 9,533 14,874
Reductions
Payments (5,019 ) (3,432 ) (4,414 ) (5,689 ) (4,128 )
Return to Accrual Status (1,250 ) (964 ) - (3,505 ) (1,818 )
Transfer to Foreclosed Real Estate (1,133 ) (2,070 ) - - -
Sales of Foreclosed Real Estate (5,427 ) (700 ) - - (38 )
  Charge-offs/Write-downs     (2,734 )     (1,507 )     (4,730 )     (7,046 )     (9,095 )
Total Reductions     (15,563 )     (8,673 )     (9,144 )     (16,240 )     (15,079 )
Balance at End of Quarter   $ 37,786     $ 45,174     $ 43,241     $ 41,624     $ 48,331  
 
 

1 Excluded from non-performing assets were contractually binding non-accrual loans held for sale of $4.2 million as of December 31, 2009.

2 Comprised of other revolving credit, installment, and lease financing.

 
Bank of Hawaii Corporation and Subsidiaries
Reserve for Credit Losses   Table 11
      Three Months Ended   Year Ended
December 31,   September 30,   December 31, December 31,
(dollars in thousands)   2010   2010   2009   2010   2009
Balance at Beginning of Period $ 152,777 $ 152,777 $ 148,077 $ 149,077   $ 128,667
Loans and Leases Charged-Off
Commercial
Commercial and Industrial (6,528 ) (7,635 ) (3,148 ) (21,125 ) (26,641 )
Commercial Mortgage (745 ) - - (2,048 ) (2,092 )
Construction - - (4,515 ) (2,274 ) (10,360 )
Lease Financing (95 ) (108 ) (9,409 ) (500 ) (14,022 )
Consumer
Residential Mortgage (3,182 ) (1,325 ) (2,697 ) (12,139 ) (7,768 )
Home Equity (1,859 ) (2,871 ) (3,489 ) (15,052 ) (12,722 )
Automobile (1,116 ) (1,530 ) (2,209 ) (6,425 ) (9,903 )
    Other 1     (2,137 )     (2,826 )     (2,981 )     (10,315 )     (13,233 )
Total Loans and Leases Charged-Off     (15,662 )     (16,295 )     (28,448 )     (69,878 )     (96,741 )
Recoveries on Loans and Leases Previously Charged-Off
Commercial
Commercial and Industrial 424 433 189 2,082 1,211
Commercial Mortgage 44 - 45 68 45
Construction 7,321 - 476 7,321 476
Lease Financing 118 28 50 158 131
Consumer
Residential Mortgage 190 696 340 1,544 1,059
Home Equity 967 333 125 1,597 364
Automobile 727 822 842 3,128 3,153
    Other 1     593       624       580       2,393       2,584  
Total Recoveries on Loans and Leases Previously Charged-Off     10,384       2,936       2,647       18,291       9,023  
Net Loans and Leases Charged-Off (5,278 ) (13,359 ) (25,801 ) (51,587 ) (87,718 )
Provision for Credit Losses 5,278 13,359 26,801 55,287 107,878
Provision for Unfunded Commitments     -       -       -       -       250  
Balance at End of Period 2   $ 152,777     $ 152,777     $ 149,077     $ 152,777     $ 149,077  
 
Components
Allowance for Loan and Lease Losses $ 147,358 $ 147,358 $ 143,658 $ 147,358 $ 143,658
Reserve for Unfunded Commitments     5,419       5,419       5,419       5,419       5,419  
Total Reserve for Credit Losses   $ 152,777     $ 152,777     $ 149,077     $ 152,777     $ 149,077  
 
Average Loans and Leases Outstanding   $ 5,317,815     $ 5,368,177     $ 5,847,820     $ 5,472,534     $ 6,144,976  
 

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

0.39 % 0.99 % 1.75 % 0.94 % 1.43 %
Ratio of Allowance for Loan and Lease Losses to Loans and Leases Outstanding 2.76 % 2.77 % 2.49 % 2.76 % 2.49 %
 
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
       
Retail Commercial Investment Treasury Consolidated
(dollars in thousands)   Banking   Banking   Services   and Other   Total
 
Three Months Ended December 31, 2010
Net Interest Income $ 44,388 $ 34,333 $ 3,985 $ 13,567 $ 96,273
Provision for Credit Losses     6,861       (1,383 )     (199 )     (1 )     5,278  
Net Interest Income After Provision for Credit Losses 37,527 35,716 4,184 13,568 90,995
Noninterest Income 23,537 9,843 14,134 3,963 51,477
Noninterest Expense     (46,461 )     (24,015 )     (15,017 )     (3,229 )     (88,722 )
Income Before Provision for Income Taxes 14,603 21,544 3,301 14,302 53,750
Provision for Income Taxes     (5,403 )     (7,531 )     (1,221 )     983       (13,172 )
Net Income     9,200       14,013       2,080       15,285       40,578  
Total Assets as of December 31, 2010   $ 3,077,795     $ 2,244,883     $ 196,466     $ 7,607,643     $ 13,126,787  
 
 
Three Months Ended December 31, 2009 1
Net Interest Income $ 50,958 $ 40,008 $ 4,349 $ 8,219 $ 103,534
Provision for Credit Losses     11,886       14,439       489       (13 )     26,801  
Net Interest Income After Provision for Credit Losses 39,072 25,569 3,860 8,232 76,733
Noninterest Income 25,103 12,249 14,646 28,813 80,811
Noninterest Expense     (44,590 )     (24,943 )     (16,775 )     (2,212 )     (88,520 )
Income Before Provision for Income Taxes 19,585 12,875 1,731 34,833 69,024
Provision for Income Taxes     (7,279 )     (4,534 )     (640 )     (16,055 )     (28,508 )
Net Income     12,306       8,341       1,091       18,778       40,516  
Total Assets as of December 31, 2009 1   $ 3,340,790     $ 2,464,157     $ 212,145     $ 6,397,735     $ 12,414,827  
 
 

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
       
Retail Commercial Investment Treasury Consolidated
(dollars in thousands)   Banking   Banking   Services   and Other   Total
 
Year Ended December 31, 2010
Net Interest Income $ 188,700 $ 147,014 $ 16,567 $ 54,199 $ 406,480
Provision for Credit Losses     38,377       17,085       (129 )     (46 )     55,287  
Net Interest Income After Provision for Credit Losses 150,323 129,929 16,696 54,245 351,193
Noninterest Income 100,859 41,304 59,948 53,147 255,258
Noninterest Expense     (175,621 )     (96,225 )     (58,467 )     (15,923 )     (346,236 )
Income Before Provision for Income Taxes 75,561 75,008 18,177 91,469 260,215
Provision for Income Taxes     (27,958 )     (22,272 )     (6,726 )     (19,317 )     (76,273 )
Net Income     47,603       52,736       11,451       72,152       183,942  
Total Assets as of December 31, 2010   $ 3,077,795     $ 2,244,883     $ 196,466     $ 7,607,643     $ 13,126,787  
 
 
Year Ended December 31, 2009 1
Net Interest Income $ 215,476 $ 161,353 $ 16,942 $ 18,563 $ 412,334
Provision for Credit Losses     56,807       49,308       2,073       (310 )     107,878  
Net Interest Income After Provision for Credit Losses 158,669 112,045 14,869 18,873 304,456
Noninterest Income 103,048 68,098 57,732 38,930 267,808
Noninterest Expense     (173,969 )     (104,182 )     (64,085 )     (7,788 )     (350,024 )
Income Before Provision for Income Taxes 87,748 75,961 8,516 50,015 222,240
Provision for Income Taxes     (32,548 )     (30,671 )     (3,151 )     (11,837 )     (78,207 )
Net Income     55,200       45,290       5,365       38,178       144,033  
Total Assets as of December 31, 2009 1   $ 3,340,790     $ 2,464,157     $ 212,145     $ 6,397,735     $ 12,414,827  
 
 

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
  Three Months Ended
December 31, September 30, June 30, March 31, December 31,
(dollars in thousands, except per share amounts)   2010   2010   2010   2010   2009
Quarterly Operating Results
Interest Income
Interest and Fees on Loans and Leases $ 67,915 $ 70,198 $ 71,997 $ 77,271 $ 77,457
Income on Investment Securities
Available-for-Sale 39,546 40,775 44,989 43,841 41,369
Held-to-Maturity 1,388 1,553 1,700 1,863 2,018
Deposits 7 5 3 13 2
Funds Sold 160 211 396 309 353

 

Other     279       278     277     277     277
Total Interest Income     109,295       113,020     119,362     123,574     121,476
Interest Expense
Deposits 5,918 7,041 7,930 8,307 10,317
Securities Sold Under Agreements to Repurchase 6,425 6,670 6,472 6,429 6,411
Funds Purchased 7 10 6 7 7
Long-Term Debt     672       673     1,026     1,178     1,207
Total Interest Expense     13,022       14,394     15,434     15,921     17,942
Net Interest Income 96,273 98,626 103,928 107,653 103,534
Provision for Credit Losses     5,278       13,359     15,939     20,711     26,801
Net Interest Income After Provision for Credit Losses     90,995       85,267     87,989     86,942     76,733
Noninterest Income
Trust and Asset Management 11,190 10,534 11,457 11,708 11,746
Mortgage Banking 4,549 6,811 3,752 3,464 4,218
Service Charges on Deposit Accounts 11,632 12,737 14,856 13,814 14,160
Fees, Exchange, and Other Service Charges 15,196 15,500 15,806 14,504 14,935
Investment Securities Gains (Losses), Net (1 ) 7,877 14,951 20,021 25,707
Insurance 2,309 2,646 2,291 2,715 2,326
Other     6,602       7,020     5,761     5,556     7,719
Total Noninterest Income     51,477       63,125     68,874     71,782     80,811
Noninterest Expense
Salaries and Benefits 46,809 46,840 47,500 44,564 50,973
Net Occupancy 10,504 10,186 10,154 10,144 10,367
Net Equipment 5,902 4,545 4,366 4,558 4,393
Professional Fees 2,116 905 2,091 1,992 3,243
FDIC Insurance 3,198 3,159 3,107 3,100 3,251
Other     20,193       24,255     18,700     17,348     16,293
Total Noninterest Expense     88,722       89,890     85,918     81,706     88,520
Income Before Provision for Income Taxes 53,750 58,502 70,945 77,018 69,024
Provision for Income Taxes     13,172       14,438     24,381     24,282     28,508
Net Income   $ 40,578     $ 44,064   $ 46,564   $ 52,736   $ 40,516
 
Basic Earnings Per Share $ 0.84 $ 0.91 $ 0.97 $ 1.10 $ 0.85
Diluted Earnings Per Share $ 0.84 $ 0.91 $ 0.96 $ 1.09 $ 0.84
 
Balance Sheet Totals
Loans and Leases $ 5,335,792 $ 5,312,054 $ 5,440,911 $ 5,610,081 $ 5,759,785
Total Assets 13,126,787 12,716,603 12,855,845 12,435,670 12,414,827
Total Deposits 9,888,995 9,602,462 9,324,659 9,494,084 9,409,676
Total Shareholders' Equity 1,011,133 1,039,561 1,013,011 939,372 895,973
 
Performance Ratios
Return on Average Assets 1.24 % 1.37 % 1.48 % 1.73 % 1.31 %
Return on Average Shareholders' Equity 15.08 16.64 19.01 22.54 16.91
Efficiency Ratio 1 60.05 55.57 49.72 45.54 48.02
Net Interest Margin 2 3.15 3.27 3.51 3.72 3.57
 
 
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

  Eleven Months Ended   Year Ended
($ in millions; jobs in thousands)   November 30, 2010   December 31, 2009   December 31, 2008
Hawaii Economic Trends  
State General Fund Revenues 1 $ 3,947.6 6.8 % $ 4,018.2 (12.8 ) % $ 4,608.6 (1.6 ) %
General Excise and Use Tax Revenue 1 $ 2,187.1 2.9 $ 2,296.3 (10.6 ) % $ 2,567.8 (2.1 ) %
Jobs, seasonally adjusted 2 589.6 (0.5 ) 586.1 (3.2 ) 605.6 (3.5 )
                           
November 30, December 31, September 30, December 31,  
(annual percentage, except 2009 and 2010)       2010   2009   2009   2008   2007  
Unemployment 3
Statewide, seasonally adjusted 6.4 % 6.8 % 7.0 % 5.6 % 3.0 %
 
Oahu 5.4 5.3 6.2 4.3 2.5
Island of Hawaii 9.7 9.4 10.4 7.3 3.5
Maui 8.1 8.7 9.3 6.8 3.4
Kauai 8.7 8.7 9.2 7.7 3.1
                           
December 31,  
(percentage change, except months of inventory)               2010   2009  
Housing Trends (Single Family Oahu) 4
Median Home Price 3.1 % (7.3 ) %
Home Sales Volume (units) 13.4 % (1.8 ) %
Months of Inventory 6.0 6.8
                           
Monthly Visitor Arrivals, Percentage Change
(in thousands)           Seasonally Adjusted   from Previous Month  
Tourism 2
November 30, 2010 615.5 2.1 %
October 31, 2010 603.0 1.2
September 30, 2010 596.1 (1.1 )
August 31, 2010 603.0 0.8
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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