U N I T E D   S T A T E S

                 SECURITIES AND EXCHANGE COMMISSION

                      Washington, D.C.  20549

                            FORM 10-Q

  (Mark One)

[ X ]         Quarterly Report Pursuant to Section 13 or 15(d) of the
              Securities Exchange Act of 1934 for the quarterly
              period ended March 31, 1994

                                 or

[   ]         Transition Report Pursuant to Section 13 or 15(d) of
              the Securities Exchange Act of 1934 for the transition
              period from _____________ to _____________

                   Commission File Number 1-6887

                B A N C O R P   H A W A I I,   I N C.
       ------------------------------------------------------
       (Exact name of registrant as specified in its charter)

            Hawaii                          99-0148992
   ------------------------     ---------------------------------
   (State of incorporation)     (IRS Employer Identification No.)

 130 Merchant Street, Honolulu, Hawaii                    96813
- - ----------------------------------------               ----------
(Address of principal executive offices)               (Zip Code)

                          (808) 537-8111
       ----------------------------------------------------
       (Registrant's telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months,
and (2) has been subject to such filing requirements for the past
90 days.

                         Yes  X      No    

Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.

Common Stock, $2 Par Value; outstanding at March 31, 1994 -
42,564,920 shares
BANCORP HAWAII, INC. and subsidiaries
March 31, 1994




PART I. - Financial Information

Item 1.  Financial Statements

       The consolidated statements of condition as of March 31,
1994 and 1993, and December 31, 1993 and related statements of
income, shareholders' equity, and cash flows are included herein.

       The unaudited financial statements listed above have been
prepared in accordance with the instructions to Form 10-Q and
therefore do not include all information and footnotes necessary
for a fair presentation of financial position, results of
operations, and changes in financial position in conformity with
generally accepted accounting principles.

       The financial statements reflect all adjustments of a normal
and recurring nature which are, in the opinion of management,
necessary to a fair statement of the results for the interim
periods.


Consolidated Statements of Condition (Unaudited)                     Bancorp Hawaii, Inc. and subsidiaries
- - -----------------------------------------------------------------------------------------------------------
March 31 December 31 March 31 (in thousands of dollars) 1994 1993 1993 - - ----------------------------------------------------------------------------------------------------------- Assets Interest-Bearing Deposits $999,991 $837,704 $1,250,480 Investment Securities - Held to Maturity 2,652,355 2,753,590 3,532,099 (Market Value of $2,663,837, $2,791,328, $3,612,051, respectively) - Available for Sale 929,722 893,453 121,537 Securities Purchased Under Agreements to Resell -- -- 180,000 Funds Sold 115,747 57,699 71,880 Loans 7,366,639 7,258,368 7,008,822 Unearned Income (146,610) (149,949) (143,695) Reserve for Possible Loan Losses (130,064) (125,284) (134,600) Net Loans 7,089,965 6,983,135 6,730,527 - - ----------------------------------------------------------------------------------------------------------- Total Earning Assets 11,787,780 11,525,581 11,886,523 Cash and Non-Interest Bearing Deposits 596,504 395,315 377,634 Premises and Equipment 176,765 167,260 156,322 Customers' Acceptance Liability 14,437 8,475 18,637 Accrued Interest Receivable 78,588 82,023 85,811 Other Real Estate 4,026 4,123 3,327 Intangibles, including Goodwill 103,903 102,929 50,842 Trading Securities 14,067 74,351 13,562 Other Assets 101,813 102,070 81,923 - - ----------------------------------------------------------------------------------------------------------- Total Assets $12,877,883 $12,462,127 $12,674,581 =========================================================================================================== Liabilities Domestic Deposits Demand - Non-Interest Bearing $1,326,211 $1,405,540 $1,220,306 - Interest-Bearing 1,864,532 1,931,807 1,954,387 Savings 1,284,824 1,251,876 1,246,903 Time 1,526,535 1,581,534 1,826,915 Foreign Deposits 1,337,831 834,218 1,406,331 - - ----------------------------------------------------------------------------------------------------------- Total Deposits 7,339,933 7,004,975 7,654,842 Securities Sold Under Agreements to Repurchase 2,500,148 2,509,550 2,833,085 Funds Purchased 610,471 743,915 639,702 Short-Term Borrowings 686,564 600,266 295,930 Bank's Acceptances Outstanding 14,437 8,475 18,637 Accrued Pension Costs 24,492 24,367 24,935 Accrued Interest Payable 46,680 34,347 39,844 Income Taxes Payable 155,095 154,291 141,223 Other Liabilities 77,306 85,967 74,665 Long-Term Debt 469,495 357,870 93,800 - - ----------------------------------------------------------------------------------------------------------- Total Liabilities 11,924,621 11,524,023 11,816,663 Shareholders' Equity Common Stock ($2 par value), authorized 50,000,000 shares; issued/outstanding, March 1994 - 42,564,920; December 1993 - 28,425,038; March 1993 - 28,220,435; 85,130 56,850 56,441 Surplus 282,280 284,886 278,212 Unrealized Valuation Adjustments (4,995) 537 (2,318) Retained Earnings 590,847 595,831 525,583 - - ----------------------------------------------------------------------------------------------------------- Total Shareholders' Equity 953,262 938,104 857,918 - - ----------------------------------------------------------------------------------------------------------- Total Liabilities and Shareholders' Equity $12,877,883 $12,462,127 $12,674,581 ===========================================================================================================
Consolidated Statements of Income (Unaudited) Bancorp Hawaii, Inc. and subsidiaries - - -----------------------------------------------------------------------------------------------------------
Three Months Ended March 31 (in thousands of dollars except per share amounts) 1994 1993 - - ----------------------------------------------------------------------------------------------------------- Interest Income Interest on Loans $126,538 $121,481 Loan Fees 8,941 9,275 Income on Lease Financing 3,738 4,171 Interest and Dividends on Investment Securities Taxable 38,236 49,848 Non-taxable 440 685 Income on Assets Available for Sale 9,447 3,697 Interest on Deposits 7,669 11,674 Interest on Security Resale Agreements -- 2,804 Interest on Funds Sold 415 519 - - ----------------------------------------------------------------------------------------------------------- Total Interest Income 195,424 204,154 Interest Expense Interest on Deposits 42,193 54,954 Interest on Security Repurchase Agreements 21,630 22,882 Interest on Funds Purchased 4,699 5,622 Interest on Short-Term Borrowings 3,547 3,868 Interest on Long-Term Debt 5,720 1,177 - - ----------------------------------------------------------------------------------------------------------- Total Interest Expense 77,789 88,503 Net Interest Income 117,635 115,651 Provision for Possible Loan Losses 8,258 9,012 - - ----------------------------------------------------------------------------------------------------------- Net Interest Income After Provision for Possible Losses 109,377 106,639 Non-Interest Income Trust Income 12,109 7,678 Service Charges on Deposit Accounts 6,981 6,417 Fees, Exchange, and Other Service Charges 8,470 7,509 Other Operating Income 7,629 4,907 Investment Securities Gains (Losses) (1,043) 1,328 - - ----------------------------------------------------------------------------------------------------------- Total Non-Interest Income 34,146 27,839 Non-Interest Expense Salaries 35,040 33,243 Pensions and Other Employee Benefits 12,016 10,920 Net Occupancy Expense of Premises 9,207 8,934 Net Equipment Expense 6,816 6,773 Other Operating Expense 25,165 22,640 - - ----------------------------------------------------------------------------------------------------------- Total Non-Interest Expense 88,244 82,510 - - ----------------------------------------------------------------------------------------------------------- Income Before Income Taxes 55,279 51,968 Provision for Income Taxes 20,887 18,993 - - ----------------------------------------------------------------------------------------------------------- Net Income $34,392 $32,975 =========================================================================================================== Earnings Per Common Share and Common Share Equivalents $0.80 $0.77 - - ----------------------------------------------------------------------------------------------------------- Average Common Shares and Common Share Equivalents Outstanding 42,943,711 42,866,856 - - -----------------------------------------------------------------------------------------------------------
Consolidated Statements of Shareholders' Equity (Unaudited) Bancorp Hawaii, Inc. and subsidiaries - - ----------------------------------------------------------------------------------------------------------------
Common Unrealized Retained (in thousands of dollars except per share amounts) Total Stock Surplus Valuation Adj. Earnings - - ---------------------------------------------------------------------------------------------------------------- Balance at December 31, 1993 $938,104 $56,850 $284,886 $537 $595,831 Net Income 34,392 - - - 34,392 Sale of Common Stock 96,443 Profit Sharing Plan 3,090 193 2,897 - - 47,981 Stock Option Plan 811 96 715 - - 51,336 Dividend Reinvestment Plan 1,767 103 1,664 - - Stock Repurchased (8,282) (400) (7,882) - - Unrealized Valuation Adjustments Investment Securities (6,190) - - (6,190) - Foreign Exchange Translation Adjustment 658 - - 658 - 50 Percent Stock Dividend (59) 28,288 - - (28,347) Cash Dividends Paid of $.26 Per Share (11,029) - - - (11,029) - - ---------------------------------------------------------------------------------------------------------------- Balance at March 31, 1994 $953,262 $85,130 $282,280 ($4,995) $590,847 ================================================================================================================ Balance at December 31, 1992 $828,328 $56,112 $272,810 ($2,271) $501,677 Net Income 32,975 - - - 32,975 Sale of Common Stock 47,408 Profit Sharing Plan 2,279 95 2,184 - - 82,231 Stock Option Plan 1,800 165 1,635 - - 34,606 Dividend Reinvestment Plan 1,652 69 1,583 - - Stock Repurchased - - - - - Unrealized Valuation Adjustments Investment Securities - - - - - Foreign Exchange Translation Adjustment (47) - - (47) - Cash Dividends Paid of $.21 Per Share (9,069) - - - (9,069) - - ---------------------------------------------------------------------------------------------------------------- Balance at March 31, 1993 $857,918 $56,441 $278,212 ($2,318) $525,583 ================================================================================================================
Consolidated Statement of Cash Flows (Unaudited) Bancorp Hawaii, Inc. and subsidiaries - - --------------------------------------------------------------------------------------------------------------
Three Months Ended March 31 (in thousands of dollars) 1994 1993 - - -------------------------------------------------------------------------------------------------------------- Operating Activities Net Income $34,392 $32,975 Adjustments to reconcile net income to net cash provided by operating activities: Provision for loan losses, depreciation, and amortization of income and expense 8,467 3,282 Deferred income taxes 1,001 (154) Realized and unrealized investment security gains (565) (827) Net (increase) decrease in trading securities 284 (1,785) Other assets and liabilities, net 4,333 49,280 ------------ ------------ Net cash provided by operating activities 47,912 82,771 - - -------------------------------------------------------------------------------------------------------------- Investing Activities Proceeds from redemptions of investment securities held to maturity 474,680 210,537 Purchases of investment securities held to maturity (379,635) (706,324) Proceeds from sales of investment securities available for sale 134,156 573,984 Purchases of investment securities available for sale (109,860) (594,651) Net decrease (increase) in interest-bearing deposits placed in other banks (162,287) 182,018 Net (increase) decrease in funds sold (58,048) 352,594 Net increase in loans and lease financing (111,133) (36,404) Premises and equipment, net (11,587) (4,392) ------------ ------------ Net cash used by investing activities (223,714) (22,638) - - -------------------------------------------------------------------------------------------------------------- Financing Activities Net increase (decrease) in demand, savings, and time deposits 334,958 (235,649) Proceeds from lines of credit and long-term debt 111,625 10,000 Principal payments on lines of credit and long-term debt -- (300) Net increase (decrease) in short-term borrowings (56,548) 153,280 Proceeds from sale of stock (2,614) 5,731 Cash dividends (11,088) (9,069) ------------ ------------ Net cash provided (used) by financing activities 376,333 (76,007) Effect of exchange rate changes on cash 658 (47) ------------ ------------ Increase (decrease) in cash and non-interest bearing deposits 201,189 (15,921) ------------ ------------ Cash and non-interest bearing deposits at beginning of year 395,315 393,555 ------------ ------------ Cash and non-interest bearing deposits at end of period $596,504 $377,634 - - --------------------------------------------------------------------------------------------------------------
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Financial Review Performance Highlights Bancorp Hawaii, Inc. (Bancorp) reported earnings for the first quarter of 1994 of $34.4 million, 4.3% above earnings for the first quarter last year. On a per share basis, earnings were $0.80 for the first quarter of 1994 compared with $0.77 for the same quarter a year ago. These per share figures have been adjusted for the 50% stock dividend declared in the first quarter of 1994. The single digit percentage increases reflects the impact of the slowdown in the Hawaii economy, which is Bancorp's main market, and the recent increase in interest rates. Total assets grew 3.3% from year-end 1993 to $12.9 billion as of March 31, 1994. Compared to the asset balances at March 31, 1993, assets have grown 1.6%. Net loans outstanding increased from year-end 1993 by 1.5%, and increased by 5.3% from March 31, 1993. Non-performing assets have decreased to $66.8 million at March 31, 1994. This was the third consecutive quarterly decrease in non- performing assets for Bancorp since reporting a high on June 30, 1993 of $106.6 million. A further discussion on NPAs and the Reserve for Loan Loss follows later in this report. Total deposits increased to $7.3 billion, compared to $7.0 billion reported at year-end 1993, but a decline from $7.7 billion reported at March 31, 1993. Securities sold under agreements to repurchase (repos) as of the end of March 1994 totaled $2.5 billion, level with year-end 1993, but a decline of 11.8% from March 31, 1993. Repos which have been provided to the state and municipal government offer the same level of required collateralization as do government deposits, but provide a marginally higher rate of interest, as the funds are not FDIC insured. The integration of American Financial Services (AFS), parent of American and Bishop Trust with Hawaiian Trust Company has progressed well. Trust income for the first quarter which includes both AFS and Hawaiian Trust Company totaled $12.1 million, a 57.7% increase over the same quarter in 1993 (prior to the acquisition). Risk Elements in Lending Activities At March 31, 1994, total loans were $7.4 billion, a 1.5% increase from year-end 1993 and 5.1% above total loan balances on March 31, 1993. In spite of the slower loan growth, Bancorp's lending policies remain unchanged and conservative. The following table presents Bancorp's total loan portfolio balances for the periods indicated. Loan Portfolio Balance Bancorp Hawaii, Inc., and subsidiaries - - ------------------------------------------------------------------------------
March 31 December 31 March 31 (in millions of dollars) 1994 1993 1993 - - ------------------------------------------------------------------------------ Domestic Loans Commercial and Industrial $1,685.3 $1,709.2 $1,753.3 Real Estate Construction -- Commercial 140.8 136.2 171.4 -- Residential 36.2 35.1 27.4 Mortgage -- Commercial 1,241.8 1,230.6 1,078.7 -- Residential 2,523.4 2,476.0 2,236.7 Installment 675.0 676.2 640.8 Lease Financing 392.3 401.6 396.8 - - ------------------------------------------------------------------------------ Total Domestic $6,694.8 $6,664.9 $6,305.1 - - ------------------------------------------------------------------------------ Foreign Loans 671.8 593.5 703.7 - - ------------------------------------------------------------------------------ Total Loans $7,366.6 $7,258.4 $7,008.8 ============================================================================== /TABLE Commercial and Industrial Loans Commercial and Industrial loans outstanding were $1.7 billion as of March 31, 1994, reflecting a decrease from both year-end 1993 and March 31, 1993 of 1.4% and 3.9%, respectively. The slowdown in the Hawaiian and Asian Rim economies continues to hamper loan growth. Real Estate Loans Total real estate loans at March 31, 1994 were $3.9 billion, up 1.7% from year-end 1993. A detail of the real estate loans are presented in the previous table. The commercial and residential real estate markets continue to grow. Commercial real estate balances (excluding construction) on March 31, 1994 rose 0.9% and 15.1% from year-end 1993 and March 31, 1993, respectively. Likewise, residential real estate balances on March 31, 1994 increased over year-end 1993 and the end of the first quarter 1993 by 1.9% and 13.0%, respectively. Construction loan balances have remained stable at $177.0 million on March 31, 1994 and $171.3 million at year-end 1993. Other Lending Installment loans and leases have shown modest decreases in balances from year-end 1993. At March 31, 1994, total installment loans were $675.0 million, down 0.2% from $676.2 million reported at year-end 1993, while total leases fell to $392.3 million from $401.6 million at year-end 1993. Foreign loan balances grew to $671.8 million, reflecting an increase of 13.2% from year-end 1993, but still 4.5% below March 31, 1993 balances. The rise in the foreign loan total since year-end reflects some modest growth coming from the Asian Rim market. The foreign loan total includes outstanding credits to Less Developed Countries (LDC). LDC exposure remains very limited at $1.0 million in outstanding credits and $71.1 million in confirmed letters of credit and banker's acceptances at March 31, 1994. All LDC exposure is in the Philippines. Non-Performing Assets and Past Due Loans Bancorp's non-performing assets (NPA) include non-accrual loans, restructured loans and foreclosed real estate. NPA totaled $66.8 million, representing 0.91% of total loans outstanding at March 31, 1994. This ratio compares with 1.30% at the end of the first quarter 1993 and 0.95% at year-end 1993. This was the third consecutive quarter NPAs have declined since June 30, 1993 when NPA peaked at $106.6 million. Non-accrual loans decreased during the quarter to $57.6 million from $58.4 million at year-end 1993 and decreased 33.4% from $86.5 million on March 31, 1993. The distribution of the non-accrual loans by category is disclosed in the table following. Since year-end, the remaining components of NPA and past due loans have stabilized. Restructured loans ended the first quarter of 1994 at $5.2 million. The foreclosed real estate category declined slightly to $4.0 million from $4.1 million at year-end 1993. Loans past due 90 days remained level with year-end 1993 at $10.0 million, but significantly below the $30.9 million reported at March 31, 1993. Total non- performing assets and loans 90 days past due declined to 1.04% of total loans outstanding from 1.09% at year-end 1993 and 1.74% at March 31, 1993. The following table presents NPA and past due loans for the periods indicated. Bancorp Hawaii, Inc. Consolidated Non-Performing Assets and Accruing Loans Past Due 90 Days or More - - -------------------------------------------------------------------------------
March 31 December 31 March 31 (in millions of dollars) 1994 1993 1993 - - ------------------------------------------------------------------------------- Non-Accrual Loans Commercial $12.9 $15.7 $53.6 Real Estate Construction 20.2 17.7 -- Commercial 8.1 7.8 9.7 Residential 15.5 16.4 17.7 Installment 0.7 0.5 0.6 Leases 0.2 0.3 -- Other -- -- -- Foreign -- -- 4.9 ---------------------------------------- Subtotal 57.6 58.4 86.5 Restructured Loans Commercial -- 1.0 1.0 Real Estate Construction -- -- -- Commercial 5.2 5.3 -- Residential -- -- -- Installment -- -- -- Leases -- -- -- Other -- -- -- Foreign -- -- -- ---------------------------------------- Subtotal 5.2 6.3 1.0 Foreclosed Real Estate Domestic 4.0 4.1 3.3 Foreign -- -- -- ---------------------------------------- Subtotal 4.0 4.1 3.3 ---------------------------------------- Total Non-Performing Assets $66.8 $68.8 $90.8 ======================================== Loans Past Due 90 Days Commercial 1.3 0.3 9.0 Real Estate Construction 0.2 -- 2.0 Commercial 1.6 1.9 2.6 Residential 2.6 4.1 12.9 Installment 4.2 3.5 4.3 Leases 0.1 0.1 0.1 Other -- 0.1 -- Foreign -- -- -- ---------------------------------------- Subtotal 10.0 10.0 30.9 ---------------------------------------- Total $76.8 $78.8 $121.7 ======================================== - - ------------------------------------------------------------------------------- Ratio of Non-Performing Assets to Total Loans 0.91% 0.95% 1.30% - - ------------------------------------------------------------------------------- - - ------------------------------------------------------------------------------- Ratio of Non-Performing Assets and Accruing Loans Past Due 90 Days or More to Total Loans 1.04% 1.09% 1.74% - - -------------------------------------------------------------------------------
Summary of Loan Loss Experience The reserve for loan losses stood at $130.1 million at March 31, 1994, representing 1.80% of loans outstanding. Comparatively, the ratio of reserves to loans outstanding on March 31, 1993 was 1.96% and 1.76% at year-end 1993. Loan loss provisions were $8.3 million for the first quarter of 1994, slightly below the $9.0 million reported for the first quarter of 1993. Charge-offs totaled $7.1 million for the first quarter of 1994, above both the $6.1 million reported for the fourth quarter of 1993 and the $4.5 million reported during the first quarter of 1993. The increase was offset by strong recoveries which totaled $3.6 million for the first quarter of 1994, compared to $1.5 million and $2.6 million for the first and fourth quarters of 1993, respectively. Net charge-offs for the first quarter of 1994 were $3.5 million compared to $3.0 million during the same period in 1993. The annualized ratio of net charge-offs to average loans outstanding for the first quarter of 1994 was 0.19%, slightly above the ratio of 0.18% for the same period in 1993, but well below the 1993 ratio of 0.82%. The detailed breakdown of the charge-off and recoveries by loan category is presented in the table following. Summary of Loss Experience Bancorp Hawaii, Inc., and subsidiaries - - --------------------------------------------------------------------------------------------------------------------
First Year Ended First Quarter December 31 Quarter (in millions of dollars) 1994 1993 1993 - - -------------------------------------------------------------------------------------------------------------------- Average Loans Outstanding $7,182.7 $6,991.0 $6,854.6 Balance of Reserve for Possible Loan Losses at Beginning of Period $125.3 $128.6 $128.6 Loans Charged Off Commercial and Industrial 5.2 43.9 0.1 Real Estate - Construction -- 0.5 -- Real Estate - Mortgage Commercial -- 2.7 2.6 Residential -- 0.4 -- Installment 1.9 8.6 1.8 Foreign -- 7.5 -- Leases -- 2.1 -- Total Charged Off (7.1) (65.7) (4.5) Recoveries on Loans Previously Charged Off Commercial and Industrial 2.7 3.9 0.6 Real Estate - Construction -- -- -- Real Estate - Mortgage Commercial -- 0.7 -- Residential 0.1 0.3 -- Installment 0.8 3.2 0.9 Foreign -- -- -- Leases -- 0.1 -- Total Recoveries 3.6 8.2 1.5 - - -------------------------------------------------------------------------------------------------------------------- Net Loans Charged Off (3.5) (57.5) (3.0) Provision Charged to Operating Expenses 8.3 54.2 9.0 - - -------------------------------------------------------------------------------------------------------------------- Balance at End of Period $130.1 $125.3 $134.6 ==================================================================================================================== Ratio of Net Charge Offs to Average Loans Outstanding (annualized) 0.19% 0.82% 0.18% - - -------------------------------------------------------------------------------------------------------------------- Ratio of Reserve to Loans Outstanding 1.80% 1.76% 1.96% - - -------------------------------------------------------------------------------------------------------------------- /TABLE Capital The level of Bancorp's capital is managed through the target ratios outlined in Bancorp's 1993 Annual Report. The target of a minimum 6% ratio of average equity to average assets keeps both objectives of a return on assets of 1% and a return on equity of 16% in reasonable balance. Bancorp's average equity to average assets ratio for the first quarter of 1994 was 7.57%, an increase from the 7.09% reported at year-end 1993 and 6.72% at March 31, 1993. Regulatory risk-based capital remain well above minimum guidelines. Bancorp's Total Capital and Tier 1 Capital ratios were 13.51% and 10.74%, respectively. This compares with year-end 1993, when the Total Capital Ratio was 13.60% and the Tier 1 Capital Ratio was 10.79%. Regulatory guidelines prescribe a minimum Total Capital Ratio of 10.00% and a Tier 1 Capital Ratio of 6.00% for an institution to qualify as well capitalized. Bancorp's strategy is to maintain its capital ratios at levels to meet this qualification to benefit from the financial and regulatory incentives provided to well capitalized companies. In addition, the leverage ratio, which represents the ratio of Tier 1 Capital to Total Average Assets, was 7.06% at March 31, 1994, compared to 6.64% at March 31, 1993 and 6.89% at year-end 1993. The required minimum ratio is 5.00%, to qualify an institution as well capitalized. Spread Management The average net interest margin or spread on earning assets for the first quarter of 1994 was 4.05%, an increase from the 3.96% reported for the same period in 1993, and 4.02% reported for the fourth quarter of 1993. Spread for all of 1993 was 4.00%. The cost of funds rate for the first quarter of 1994 was 3.59%, an increase from both the 3.49% reported for the same quarter a year ago and 3.56% reported for the fourth quarter of 1993. These increases reflect the recent movement in interest rates stimulated by the Federal Reserve. Going forward, increasing interest rates would have a tendency to compress net interest margin. The earning asset yield was 6.72% for the first quarter of 1994, an increase over the fourth quarter 1993 yield of 6.68%, but a decrease from the yield reported in the first quarter of 1993 of 6.97%. Consolidated Average Balances and Interest Rates Taxable Equivalent Bancorp Hawaii, Inc. and subsidiaries - - ----------------------------------------------------------------------------------------------------------
Three Months Ended Three Months Ended March 31, 1994 March 31, 1993 Average Income/Yield/ Average Income/Yield/ (in millions of dollars) Balance Expense Rate Balance Expense Rate - - ---------------------------------------------------------------------------------------------------------- Earning Assets Interest Bearing Deposits $869.0 $7.7 3.58% $1,234.0 $11.7 3.84% Investment Securities -Taxable 2,776.2 38.2 5.59 3,238.3 49.9 6.24 -Tax-Exempt 20.1 0.7 13.68 35.2 1.0 11.97 922.5 9.4 4.15 136.6 3.7 10.97 Funds Sold 42.0 0.4 4.01 416.8 3.3 3.23 Net Loans -Domestic 6,533.6 123.8 7.68 6,222.8 118.6 7.73 -Foreign 649.2 6.7 4.20 631.8 7.3 4.70 Loan Fees 9.0 9.3 ------------------------ ------------------------ Total Earning Assets 11,812.6 195.9 6.72 11,915.5 204.8 6.97 Cash and Due From Banks 444.8 452.6 Other Assets 341.2 278.4 ---------- ---------- Total Assets $12,598.6 $12,646.5 ========== ========== Interest Bearing Liabilities Domestic Deposits - Demand $1,964.6 9.5 1.95 $2,066.4 12.4 2.44 - Savings 1,261.9 7.1 2.27 1,203.4 8.9 2.99 - Time 1,549.8 16.0 4.20 1,910.8 22.2 4.71 ------------------------ ------------------------ Total Domestic 4,776.3 32.6 2.76 5,180.6 43.5 3.41 Total Foreign 1,185.1 9.6 3.30 1,193.3 11.4 3.89 ------------------------ ------------------------ Total Deposits 5,961.4 42.2 2.87 6,373.9 54.9 3.50 Short-Term Borrowings 3,675.3 29.9 3.30 3,814.3 32.4 3.44 Long-Term Debt 439.6 5.7 5.28 87.4 1.2 5.46 ------------------------ ------------------------ Total Interest Bearing Liabilities 10,076.3 77.8 3.13 10,275.6 88.5 3.49 ------------------------ ------------------------ Net Interest Income 118.1 3.59 116.3 3.48 Average Spread on Earning Assets 4.05% 3.96% Demand Deposits 1,396.4 1,289.8 Other Liabilities 172.7 231.2 Shareholders' Equity 953.2 849.9 ---------- ---------- Total Liabilities and Shareholders' Equity $12,598.6 $12,646.5 ========== ========== Provision for Possible Losses 8.3 9.0 Net Overhead 54.1 54.7 ------- ------- Income Before Income Taxes 55.7 52.6 Provision for Income Taxes 20.9 19.0 Tax-Equivalent Adjustment 0.4 0.6 ------- ------- Net Income $34.4 $33.0 ======= =======
Consolidated Average Balances and Interest Rates Taxable Equivalent Bancorp Hawaii, Inc. and subsidiaries - - ----------------------------------------------------------------------------------------------------------
Three Months Ended Twelve Months Ended December 31, 1993 December 31, 1993 Average Income/Yield/ Average Income/Yield/ (in millions of dollars) Balance Expense Rate Balance Expense Rate - - ---------------------------------------------------------------------------------------------------------- Earning Assets Interest Bearing Deposits $1,022.6 $9.6 3.73% $1,140.1 $43.0 3.77% Investment Securities -Taxable 3,649.1 50.0 5.43 3,513.0 203.0 5.78 -Tax-Exempt 23.6 0.7 12.46 29.3 3.6 12.25 66.0 0.5 2.89 69.1 5.9 8.61 Funds Sold 48.9 0.5 4.23 146.0 5.2 3.56 Net Loans -Domestic 6,412.6 121.4 7.51 6,324.9 482.5 7.63 -Foreign 630.8 7.0 4.41 666.1 29.9 4.48 Loan Fees 9.9 37.9 ------------------------ ------------------------ Total Earning Assets 11,853.6 199.6 6.68 11,888.5 811.0 6.82 Cash and Due From Banks 418.6 413.2 Other Assets 309.0 284.1 ---------- ---------- Total Assets $12,581.2 $12,585.8 ========== ========== Interest Bearing Liabilities Domestic Deposits - Demand $1,991.5 9.8 1.96 $2,032.3 45.1 2.22 - Savings 1,263.7 7.2 2.25 1,239.4 32.6 2.63 - Time 1,580.1 17.4 4.35 1,711.9 77.7 4.54 ------------------------ ------------------------ Total Domestic 4,835.3 34.4 2.82 4,983.6 155.4 3.12 Total Foreign 1,301.5 10.8 3.30 1,223.9 43.2 3.52 ------------------------ ------------------------ Total Deposits 6,136.8 45.2 2.92 6,207.5 198.6 3.20 Short-Term Borrowings 3,643.6 29.7 3.24 3,763.3 124.6 3.31 Long-Term Debt 342.9 4.7 5.42 212.6 12.1 5.68 ------------------------ ------------------------ Total Interest Bearing Liabilities 10,123.3 79.6 3.12 10,183.4 335.3 3.29 ------------------------ ------------------------ Net Interest Income 120.0 3.56 475.7 3.53 Average Spread on Earning Assets 4.02% 4.00% Demand Deposits 1,379.9 1,324.9 Other Liabilities 144.0 184.6 Shareholders' Equity 934.0 892.9 ---------- ---------- Total Liabilities and Shareholders' Equity $12,581.2 $12,585.8 ========== ========== Provision for Possible Losses 9.1 54.2 Net Overhead 53.7 206.8 ------- ------- Income Before Income Taxes 57.2 214.7 Provision for Income Taxes 21.0 79.8 Tax-Equivalent Adjustment 0.5 2.3 ------- ------- Net Income $35.7 $132.6 ======= =======
Liquidity The ability to meet day-to-day financial needs of Bancorp's customer base is essential. Much of the strategy of meeting liquidity needs was described in Bancorp Hawaii's 1993 Annual Report and remains in place. At March 31, 1994, deposits were $7.3 billion, compared to $7.0 billion and $7.7 billion reported at year-end 1993 and March 31, 1993, respectively. These changes partly reflect the impact of the competition for deposits, not only by banks and savings and loan companies, but also by securities brokerage firms. Repos which are offered to government depositors as an alternative to deposits were $2.5 billion at March 31, 1994, compared to $2.8 billion on March 31, 1993, and $2.5 billion at year-end 1993. During the quarter, Bank of Hawaii issued $100 million in bank notes. The note was issued under an established bank note facility allowing the issuance of up to $750 million in notes. The notes bear floating and fixed rates of interest and mature in 1 to 2 years. As of March 31, 1994, $200 million had been issued. As a result, long term debt increased to $469 million at March 31, 1994. Net Overhead As stated in Bancorp's 1993 Annual Report, Bancorp manages net overhead by focusing on its net overhead ratio. The net overhead ratio at Bancorp is defined as the ratio of non-interest expense to non-interest income. Bancorp's long term goal is to have a ratio of 2 to 1, where fee income offsets at least half of the cost of operations. The ratio for the first quarter of 1994 was 2.58, compared to 2.96 for the first quarter of 1993 and 2.60 for all of 1993. Additionally, Bancorp's management places an emphasis on the amount of net income generated per full-time equivalent staff (FTE) with the objective of improving net income with existing or lesser staff levels. For the first quarter of 1994, net income per FTE was $8,018, or $32,072 on an annualized basis. This compares to $31,000 and $31,100 reported for the full years of 1993 and 1992, respectively. Non-interest income for the first quarter was $34.1 million, a 22.7% increase over the same quarter in 1993. Trust income was $12.1 million, up 57.7% from the same period last year. The increase includes the additional income from American and Bishop trust companies, subsidiaries of American Financial Services acquired in May 1993. Service charges on deposit accounts for the first quarter of 1994 was $7.0 million, compared to $6.4 million for the like period last year. Fees, exchange and other service charges for the first quarter of 1994 increased to $16.1 million compared to $12.4 million for the same period in 1993. The increase has been driven by increases in ATM usage fees and the increase in affiliate earnings in the Southern and Western Pacific. For the first quarter of 1994, Bancorp reported a securities loss of $1.0 million compared to a gain of $1.3 million for the same period in 1993. These gains and losses remained at modest levels. Bancorp continues to emphasize the importance of control over non-interest expenses as a key factor in its effort to remain competitive among its peers. Non-interest expense in the first quarter was $88.2 million, an increase of 6.9% over the same period in 1993. The increase over last year mainly results from costs related to American Financial Services. Salary and benefit expenses increased from the first quarter of 1993, up 6.6% to $47.0 million, again reflecting the staff costs of American Financial Services. Premises and equipment expenses totaled $16.0 million for the first quarter of 1994, virtually level with the $15.7 million for the same period of 1993. Bancorp continues to invest in technology as more efficient operations with existing staff counts become increasingly important. Other operating expenses for the first quarter increased 11.2% over last year during the same period. The increase in this expense category reflects the additional goodwill amortization resulting from the American Financial Services acquisition in May of 1993. PART II. - Other Information Items 1 to 5 omitted pursuant to instructions. Item 6 - Exhibits and Reports on Form 8-K (a) The following exhibits are filed herewith: Exhibit #11 - Statement regarding computation of per share earnings. (b) No Form 8-K was filed during the quarter. Date May 11, 1994 BANCORP HAWAII, INC. RICHARD J. DAHL (Signature) Richard J. Dahl Executive Vice President DAVID A. HOULE (Signature) David A. Houle Senior Vice President and Chief Financial Officer



                               Bancorp Hawaii, Inc.
      Exhibit 11 - Statement Regarding Computation of Per Share Earnings
                          Three Months Ended March 31

Fully Primary Diluted -------------- ------------- 1994 ---- Net Income $34,392,000 $34,392,000 ============== ============= Daily Average Shares Outstanding 42,467,686 42,467,686 Shares Assumed Issued for Stock Options (1) 476,025 490,705 -------------- ------------- 42,943,711 42,958,391 ============== ============= Earnings Per Common Share and Common Share Equivalents $0.80 $0.80 ============== ============= 1993 ---- Net Income $32,975,000 $32,975,000 ============== ============= Daily Average Shares Outstanding 42,176,823 42,176,823 Shares Assumed Issued for Stock Options (1) 690,033 768,506 -------------- ------------- 42,866,856 42,945,329 ============== ============= Earnings Per Common Share and Common Share Equivalents $0.77 $0.77 ============== =============