UNITED STATES

 

SECURITIES AND EXCHANGE COMMISSION

 

Washington, D. C. 20549

 

FORM 8-K

 

CURRENT REPORT

 

Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934

 

 

BANK OF HAWAII CORPORATION

(Exact name of registrant as specified in its charter)

 

 

 

Item 12.		Results of Operations and Financial Conditions.
				(a)	Exhibit 99.1
						Press Release: Bank of Hawaii Corporation 2003 Financial Results

 

 

SIGNATURE

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

Date: January 26, 2004	BANK OF HAWAII CORPORATION
	/s/ Michael E. O’Neill
	Michael E. O’Neill
	Chairman and Chief Executive Officer

 

2

EXHIBIT 99.1

 

 

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

 

 

BANK OF HAWAII CORPORATION

 

 

EXHIBIT  TO CURRENT REPORT ON
FORM 8-K DATED January 26, 2004

 

 

Commission File Number 1-6887

 

 

 

Bank of Hawaii Corporation 2003 Financial Results

 

•                  2003 Diluted Earnings Per Share Increase to $2.21, Up 30% From 2002

•                  2003 Net Income $135.2 Million, Up 12% From 2002

•                  Board of Directors Declares Dividend of $0.30 Per Share

 

FOR IMMEDIATE RELEASE

 

HONOLULU, HI (January 26, 2004) -- Bank of Hawaii Corporation (NYSE: BOH) today reported diluted earnings per share for 2003 of $2.21, up $0.51 or 30.0 percent from diluted earnings per share of $1.70 in 2002.  Net income for the year was $135.2 million, up $14.0 million or 11.6 percent from $121.2 million in the previous year.  The return on average assets in 2003 was 1.44 percent, up from 1.22 percent in 2002.  The return on average equity for the year was 15.02 percent, up from 10.24 percent in 2002.

 

“Our positive financial results for 2003 reflect the hard work and focus of our employees, and I’m proud of their accomplishments,” said Michael E. O’Neill, Chairman and CEO.  “Last year marked the final phase of our ambitious three-year strategic plan which began in 2001, and I’m pleased to report that we have exceeded all of our key goals.   Entering 2004, Hawaii’s economy continues its strong pace, and we believe our company is ready to build on its successes.  We look forward to continuing the momentum as we prepare to execute our next three-year plan that will guide us through 2006.”

 

Diluted earnings per share for the fourth quarter of 2003 were $0.66, up $0.22 or 50.0 percent from $0.44 per diluted share for the same period last year.  Net income in the fourth quarter was $38.7 million, up 33.8 percent from net income of $28.9 million in the fourth quarter last year.  The return on average assets for the fourth quarter of 2003 was 1.66 percent, up from 1.53 percent in the previous quarter and up from 1.20 percent in the fourth quarter of 2002.  The return on average equity was 18.59 percent during the quarter, up from 16.69 percent in the third quarter of 2003 and up significantly from 10.72 percent in the same quarter last year.

 

- more -

 

 

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Bank of Hawaii Corporation 2003 Financial Results

 

Financial Highlights

 

Net interest income for the fourth quarter of 2003 was $93.4 million, up $2.3 million from net interest income of $91.1 million in the third quarter of 2003 and up $3.2 million from $90.2 million in the same quarter last year.  The increase in net interest income from the previous quarter was largely due to higher yields on investment securities.  The increase in net interest income from the fourth quarter of 2002 was primarily due to lower interest rates on deposits and a decline in short-term borrowings.  An analysis of the change in net interest income is included in Table 6.

 

The net interest margin was 4.35 percent for the fourth quarter of 2003, a 20 basis point increase from 4.15 percent in the previous quarter and a 30 basis point increase from 4.05 percent in the fourth quarter of 2002.  The net interest margin for the full year of 2003 was 4.23 percent, a 24 basis point increase from 3.99 percent in 2002.

 

The Company did not recognize a provision for loan and lease losses during the fourth quarter of 2003 and has not recorded a provision for the last six quarters.  The allowance for loan and lease losses was reduced $3.6 million from September 30, 2003, which equaled the amount of net charge-offs for the fourth quarter.

 

Non-interest income was $49.4 million for the quarter, a decrease of $4.4 million or 8.1 percent compared to non-interest income of $53.8 million in the third quarter of 2003.  The decrease was primarily due to reduced gains on sales of mortgage loans and lower commercial loan prepayment penalties during the fourth quarter.  Non-interest income was down $0.9 million or 1.8 percent from non-interest income of $50.4 million in the fourth quarter of 2002 largely due to a decline in gains on sales of mortgage loans.

 

Non-interest expense was $83.4 million in the fourth quarter of 2003, down $5.5 million or 6.2 percent from $88.9 million in the previous quarter and down $13.3 million or 13.8 percent from $96.7 million in the same quarter last year.  Non-interest expense for the third quarter of 2003 and the fourth quarter of 2002 included $4.4 million and $7.1 million, respectively, in systems replacement costs.  The fourth quarter of 2002 also included $0.4 million in net restructuring costs.  Excluding these costs, non-interest expense was down $1.1 million compared to the third quarter of 2003.  The decrease was primarily due to a gain on the sale of foreclosed property in the fourth quarter and the third quarter donation to the Bank of Hawaii Charitable Foundation, partially offset by increased salaries and benefits related to employee incentives.  An analysis of salary and benefit expenses is included in Table 7.  Excluding systems replacement and net restructuring costs, non-interest expense decreased $5.9 million or 6.6 percent from the same quarter last year largely due to cost savings associated with the systems replacement project.

 

The efficiency ratio for the full year of 2003 was 63.4 percent.  Excluding systems replacement and net restructuring costs, the efficiency ratio for 2003 was 59.5 percent, a significant improvement compared to 62.1 percent in the previous year.  The efficiency ratio for the fourth quarter of 2003 was 58.4 percent compared to 63.5 percent, excluding systems replacement and net restructuring costs, in the fourth quarter last year.

 

3

 

The Company’s business segments are defined as Retail Banking, Commercial Banking, Investment Services Group, and Treasury and Other Corporate.  Results are determined based on the Company’s internal financial management reporting process and organizational structure.  Previously reported results have been reclassified to conform to current methodologies.  Business segment performance details are summarized in Tables 11a and 11b.

 

Asset Quality

 

Bank of Hawaii Corporation’s strong credit quality continued to improve during the fourth quarter of 2003.  Non-performing assets were $31.7 million at the end of the quarter, a decrease of $8.4 million, or 20.9 percent compared to non-performing assets of $40.1 million at the end of the previous quarter.  Contributing to the improvement in non-performing assets was the fourth quarter 2003 sale of a $3.7 million foreclosed property.  Non-performing assets declined $22.7 million, or 41.7 percent compared to $54.4 million at the end of the fourth quarter last year.  At December 31, 2003 the ratio of non-performing assets to total loans and foreclosed real estate was 0.55 percent compared with 0.72 percent at September 30, 2003 and 1.01 percent at December 31, 2002.

 

Non-accrual loans were $27.3 million at December 31, 2003, a reduction of $4.1 million, or 13.1 percent, from $31.4 million at September 30, 2003 and down $17.7 million, or 39.3 percent, from $45.0 million at December 31, 2002.  Non-accrual loans as a percentage of total loans were 0.47 percent at December 31, 2003, down from 0.56 percent at the end of the previous quarter and down from 0.84 percent at the end of the comparable quarter last year.

 

Net charge-offs during the fourth quarter of 2003 were $3.6 million, or 0.26 percent (annualized) of total average loans, down from $5.3 million, or 0.38 percent (annualized) of total average loans in the third quarter of 2003.  Net charge-offs in the fourth quarter of 2003 were comprised of $6.9 million in charge-offs partially offset by recoveries of $3.3 million.  Net charge-offs during the fourth quarter of 2002 were $11.6 million, or 0.88 percent (annualized) of total average loans.   Net charge-offs for the full year of 2003 were $13.8 million, or 0.25 percent of total average loans, a decrease of 50.2 percent from net charge-offs of $27.7 million, or 0.51 percent of total average loans in 2002.

 

The allowance for loan and lease losses was $129.1 million at December 31, 2003.  The ratio of the allowance for loan and lease losses to total loans was 2.24 percent at December 31, 2003 down from 2.38 percent at September 30, 2003 and down from 2.67 percent at December 31, 2002.

 

Concentrations of credit exposure to selected components of the portfolio are summarized in Table 8.

 

Other Financial Highlights

 

Total assets were $9.5 billion at December 31, 2003, up from total assets of $9.4 billion at September 30, 2003 and essentially flat compared with total assets of $9.5 billion at December 31, 2002.  Total loans were $5.8 billion at December 31, 2003, up from total loans of $5.6 billion at September 30, 2003 and up from total loans of $5.4 billion at December 31, 2002.  Total deposits at December 31, 2003 were $7.3 billion, up $231 million from September 30, 2003 and up $413 million from December 31, 2002.  The increase in deposits was primarily due to continued growth in demand and savings deposits.

 

4

 

During the fourth quarter of 2003, Bank of Hawaii Corporation repurchased 1.6 million shares of common stock at a total cost of $64.2 million under the share repurchase program.  The average cost per share was $40.27 during the quarter.  From the beginning of the share repurchase program in July 2001 through December 31, 2003, the Company had repurchased a total of 29.8 million shares and returned a total of $855.0 million to the shareholders at an average cost of $28.68 per share.  Through January 23, 2004, the Company repurchased an additional 0.3 million shares of common stock at a cost of $42.79 per share.  Remaining buyback authority was $133.2 million at January 23, 2004.

 

The Company’s capital and liquidity remain strong.  At December 31, 2003 the Tier 1 leverage ratio was 8.43 percent compared to 8.52 percent at September 30, 2003 and 10.34 percent at December 31, 2002.

 

The Company’s Board of Directors has declared a quarterly cash dividend of $0.30 per share on the Company’s outstanding shares.  The dividend will be payable on March 12, 2004 to shareholders of record at the close of business on March 1, 2004.

 

Economic Update

 

During the fourth quarter of 2003, Hawaii’s economy continued to outperform the national average.  Hawaii’s 4.0 percent fourth quarter unemployment rate, employment growth rate of 4.5 percent (persons), and job growth rate of 2.0 percent (payrolls) ranked among the top five states nationwide.  Travel volumes continued to grow at 3-4 percent overall during the fourth quarter, recovering from SARS effects in the second quarter of 2003.  Tourism is expected to reach record volumes for domestic travelers during 2003, and an all-time high for overall visitor days (arrivals times stay length) for the year.  International travel prospects were enhanced during the fourth quarter by the strengthening yen against the US dollar.  Home sales reached record high volumes with record high prices during the quarter.  Construction spending, up 40 percent over the last four years, headed into the fourth quarter of 2003 running ahead of prior year volumes 4-5 percent.  For more economic information, visit the Company’s web site http://www.boh.com/econ/.

 

Business and Earnings Outlook – Plan for 2004 to 2006

 

In 2001, the Company announced a three-year plan designed to refocus on maximizing shareholder value over time, which continues to be our governing objective.  That plan was successfully completed in 2003.  The new three-year plan for 2004 – 2006 continues to build on the winning strategy of that plan.  There are five key elements of the new plan: 1) accelerate revenue growth in island markets; 2) better integrate our business segments; 3) develop our management teams; 4) improve efficiency; and 5) maintain a discipline of dependable risk and capital management.   Bank of Hawaii Corporation currently estimates that its net income for 2004 should be approximately $157 million.  Based on current conditions, the Company does not expect to record a provision for loan and lease losses in 2004.  However, the actual amount of the provision for loan and lease losses depends on determinations of credit risk that are made near the end of each quarter.  Earnings per share and return on equity projections continue to be dependent upon the terms and timing of share repurchases.  A summary of the Company’s financial targets for 2004 – 2006 are included in Table 13.

 

5

 

Conference Call Information

 

The Company will review its 2003 financial results and discuss the new 2004-2006 plan today at 8:00 a.m. Hawaii Time (1:00 p.m. Eastern Time).  The presentation will be accessible via teleconference and via the Investor Relations link of Bank of Hawaii Corporation’s web site, www.boh.com.  The conference call number is 800-299-7635 in the United States or 617-786-2901 for international callers.  No confirmation code is required to access the call.  A replay will be available for one week beginning at 10:00 a.m. Hawaii Time (3:00 p.m. Eastern Time) on Monday, January 26, 2004 by calling 888-286-8010 in the United States or 617-801-6888 for international callers and entering the number 54443887 when prompted.  A replay of the presentation will also be available via the Investor Relations link of the Company’s web site.

 

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.

 

This news release contains forward-looking statements concerning, among other things, the economic environment in our service area, the expected level of loan loss provisioning, anticipated savings of our systems replacement project, the effect of our new three-year plan, and anticipated dividends, revenues and expenses during 2004 and beyond.  We believe the assumptions underlying our forward-looking statements are reasonable.  However, any of the assumptions could prove to be inaccurate and actual results may differ materially from those projected for a variety of reasons, including, but not limited to: 1) unanticipated changes in business and economic conditions, the competitive environment, fiscal and monetary policies, or legislation in Hawaii and the other markets we serve; 2) changes in our credit quality or risk profile which may increase or decrease the required level of allowance for loan and lease losses; 3) changes in market interest rates that may affect our credit markets and ability to maintain our net interest margin; 4) changes to the amount and timing of our proposed equity repurchases; 5) inability to achieve expected benefits of our business process changes due to adverse changes in implementation processes or costs, operational savings, or timing; 6) real or threatened acts of war or terrorist activity affecting business conditions; and 7) adverse weather and other natural conditions impacting our and our customers’ operations.  We do not undertake any obligation to update forward-looking statements to reflect later events or circumstances.

 

# # # #

 

6

 

Bank of Hawaii Corporation and Subsidiaries
Highlights (Unaudited)		Table 1
(dollars in thousands except per share amounts)

 

		Three Months Ended December 31,						Year Ended December 31,
Earnings Highlights and Performance Ratios		2003			2002(1)			2003			2002(1)
Net Income		$	38,673		$	28,908		$	135,195		$	121,180
Basic Earnings Per Share		0.70			0.45			2.32			1.75
Diluted Earnings Per Share		0.66			0.44			2.21			1.70
Cash Dividends		16,770			12,193			50,589			50,635
Return on Average Assets		1.66		%	1.20		%	1.44		%	1.22		%
Return on Average Equity		18.59		%	10.72		%	15.02		%	10.24		%
Net Interest Margin		4.35		%	4.05		%	4.23		%	3.99		%
Efficiency Ratio		58.41		%	68.80		%	63.38		%	64.94		%
Efficiency Ratio excluding ITSRP and Restructuring Costs		58.41		%	63.51		%	59.51		%	62.13		%

 

			December 31,
Statement of Condition Highlights and Performance Ratios			2003			2002
Total Assets			$	9,461,647		$	9,516,418
Net Loans			5,628,095			5,216,151
Total Deposits			7,332,779			6,920,161
Total Shareholders’ Equity			793,132			1,015,759
Book Value Per Common Share			$	14.44		$	16.12
Allowance / Loans and Leases Outstanding			2.24		%	2.67		%
Average Equity / Average Assets			9.60		%	11.88		%
Employees (FTE)			2,702			2,891
Branches and offices			89			93
Market Price Per Share of Common Stock for the Quarter Ended:
	Closing		$	42.20		$	30.39
	High		$	42.99		$	31.05
	Low		$	33.69		$	25.40

 

(1) Certain 2002 information has been reclassified to conform to 2003 presentation.

 

7

 

Bank of Hawaii Corporation and Subsidiaries
Consolidated Statements of Income (Unaudited)		Table 2

 

		Three Months Ended December 31,						Year Ended December 31,
(dollars in thousands except per share amounts)		2003			2002(1)			2003			2002(1)
Interest Income
Interest and Fees on Loans and Leases		$	80,351		$	85,945		$	334,793		$	366,366
Income on Investment Securities - Held to Maturity		7,183			3,122			18,956			16,774
Income on Investment Securities - Available for Sale		19,032			24,088			77,793			104,261
Deposits		1,169			3,578			4,816			20,020
Funds Sold		85			834			1,919			3,503
Other		1,007			1,312			4,244			5,614
Total Interest Income		108,827			118,879			442,521			516,538
Interest Expense
Deposits		9,433			17,657			47,473			84,348
Security Repurchase Agreements		1,359			4,585			7,939			30,173
Funds Purchased		249			255			944			1,030
Short-Term Borrowings		17			217			92			1,489
Long-Term Debt		4,417			5,947			20,131			29,267
Total Interest Expense		15,475			28,661			76,579			146,307
Net Interest Income		93,352			90,218			365,942			370,231
Provision for Loan and Lease Losses		—			—			—			11,616
Net Interest Income After Provision for Loan and Lease Losses		93,352			90,218			365,942			358,615
Non-Interest Income
Trust and Asset Management		12,759			13,085			50,996			55,733
Mortgage Banking		3,324			4,398			15,556			18,866
Service Charges on Deposit Accounts		9,442			8,326			35,938			32,617
Fees, Exchange, and Other Service Charges		13,725			12,963			56,221			51,594
Investment Securities Gains (Losses)		(20		)	612			1,789			615
Insurance		3,597			3,099			13,680			10,938
Other		6,610			7,872			24,540			27,972
Total Non-Interest Income		49,437			50,355			198,720			198,335
Non-Interest Expense
Salaries and Benefits		46,409			44,734			186,280			186,563
Net Occupancy Expense		9,933			10,638			38,980			39,149
Net Equipment Expense		7,395			11,077			33,652			41,253
Restructuring and Other Related Costs		—			385			—			2,364
Information Technology Systems Replacement Project		—			7,052			21,871			13,628
Other		19,667			22,827			77,092			86,292
Total Non-Interest Expense		83,404			96,713			357,875			369,249
Income Before Income Taxes		59,385			43,860			206,787			187,701
Provision for Income Taxes		20,712			14,952			71,592			66,521
Net Income		$	38,673		$	28,908		$	135,195		$	121,180
Basic Earnings Per Share		$	0.70		$	0.45		$	2.32		$	1.75
Diluted Earnings Per Share		$	0.66		$	0.44		$	2.21		$	1.70
Dividends Declared Per Share		$	0.30		$	0.00		$	0.87		$	0.73
Basic Weighted Average Shares		55,374,874			64,154,477			58,338,566			69,385,745
Diluted Weighted Average Shares		58,570,941			66,378,208			61,085,567			71,447,333

 

(1) Certain 2002 information has been reclassified to conform to 2003 presentation.

 

8

 

Bank of Hawaii Corporation and Subsidiaries
Consolidated Statements of Condition (Unaudited)		Table 3

 

(dollars in thousands)		December 31, 2003			December 31, 2002
Assets
Interest-Bearing Deposits		$	154,735		$	549,978
Investment Securities - Held to Maturity (Market Value of $720,699 and $236,016)		727,233			229,720
Investment Securities - Available for Sale		1,991,116			2,287,201
Funds Sold		—			195,000
Loans Held for Sale		9,211			40,118
Loans		5,757,175			5,359,004
Allowance for Loan and Lease Losses		(129,080		)	(142,853		)
Net Loans		5,628,095			5,216,151
Total Earning Assets		8,510,390			8,518,168
Cash and Non-Interest Bearing Deposits		363,495			374,352
Premises and Equipment		160,005			176,969
Customers’ Acceptance Liability		1,707			2,680
Accrued Interest Receivable		32,672			36,722
Foreclosed Real Estate		4,377			9,434
Mortgage Servicing Rights		22,178			28,820
Goodwill		36,216			36,216
Other Assets		330,607			333,057
Total Assets		$	9,461,647		$	9,516,418
Liabilities
Deposits
Non-Interest Bearing Demand		$	1,933,928		$	1,719,633
Interest Bearing Demand		1,356,330			1,171,832
Savings		2,833,379			2,535,219
Time		1,209,142			1,493,477
Total Deposits		7,332,779			6,920,161
Securities Sold Under Agreements to Repurchase		472,757			735,621
Funds Purchased		109,090			64,467
Short-Term Borrowings		12,690			33,420
Current Maturities of Long-Term Debt		96,505			114,781
Banker’s Acceptances Outstanding		1,707			2,680
Retirement Benefits Payable		61,841			61,385
Accrued Interest Payable		7,483			13,731
Taxes Payable		207,101			196,813
Other Liabilities		138,999			82,596
Long-Term Debt		227,563			275,004
Total Liabilities		8,668,515			8,500,659
Shareholders’ Equity
Common Stock ($.01 par value); authorized 500,000,000 shares; issued / outstanding: December 2003 - 81,647,729 / 54,928,480, December 2002 - 81,294,730 / 63,015,442		807			806
Capital Surplus		391,701			372,192
Accumulated Other Comprehensive Income (Loss)		(5,711		)	11,659
Retained Earnings		1,199,077			1,115,910
Deferred Stock Grants		(8,309		)	(1,424		)
Treasury Stock, at Cost (Shares: December 2003 - 26,719,249, December 2002 - 18,279,288)		(784,433		)	(483,384		)
Total Shareholders’ Equity		793,132			1,015,759
Total Liabilities and Shareholders’ Equity		$	9,461,647		$	9,516,418

 

9

 

Bank of Hawaii Corporation and Subsidiaries
Consolidated Statements of Shareholders’ Equity (Unaudited)		Table 4

 

(dollars in thousands)				Total			Common Stock			Capital Surplus			Accum. Other Compre- hensive Income (Loss)			Retained Earnings			Deferred Stock Grants			Treasury Stock			Compre- hensive Income
Balance at December 31, 2002				$	1,015,759		$	806		$	372,192		$	11,659		$	1,115,910		$	(1,424	)	$	(483,384	)
Comprehensive Income:
Net Income				135,195			—			—			—			135,195			—			—			$	135,195
Other Comprehensive Income, Net of Tax:
Change in Unrealized Gains and Losses on Investment Securities				(16,434		)	—			—			(16,434		)	—			—			—			(16,434		)
Pension Liability Adjustment				(936		)	—			—			(936		)	—			—			—			(936		)
Total Comprehensive Income																									$	117,825
Common Stock Issued:
38,928		Retirement Savings Plan		1,370			—			526			—			—			—			844
1,213,303		Stock Option Plan		28,712			—			5,380			—			(1,439		)	(1,498		)	26,269
94,511		Dividend Reinvestment Plan		3,292			—			1,237			—			—			—			2,055
8,482		Directors’ Restricted Shares and Deferred Compensation Plan		48			1			286			—			—			—			(239		)
328,200		Employees’ Restricted Shares		6,693			—			12,080			—			—			(5,387		)	—
Treasury Stock Purchased  (9,762,079 shares)				(329,978		)	—			—			—			—			—			(329,978		)
Cash Dividends Paid				(50,589		)	—			—			—			(50,589		)	—			—
Balance at December 31, 2003				$	793,132		$	807		$	391,701		$	(5,711	)	$	1,199,077		$	(8,309	)	$	(784,433	)
Balance at December 31, 2001				$	1,247,012		$	806		$	367,672		$	22,761		$	1,055,424		$	(7,637	)	$	(192,014	)
Comprehensive Income:
Net Income				121,180			—			—			—			121,180			—			—			$	121,180
Other Comprehensive Income, Net of Tax:
Change in Unrealized Gains and Losses on Investment Securities				4,237			—			—			4,237			—			—			—			4,237
Foreign Currency Translation Adjustment				(582		)	—			—			(582		)	—			—			—			(582		)
Pension Liability Adjustment				(14,757		)	—			—			(14,757		)	—			—			—			(14,757		)
Total Comprehensive Income																									$	110,078
Common Stock Issued:
43,449		Profit Sharing Plan		1,240			—			288			—			—			—			952
1,581,876		Stock Option Plan		32,279			—			5,352			—			(10,057		)	(793		)	37,777
101,796		Dividend Reinvestment Plan		2,893			—			656			—			(2		)	—			2,239
4,792		Directors’ Restricted Shares and Deferred Compensation Plan		20			—			141			—			—			—			(121		)
(81,600)		Employees’ Restricted Shares		5,089			—			(1,917		)	—			—			7,006			—
Treasury Stock Purchased  (11,838,800 shares)				(332,217		)	—			—			—			—			—			(332,217		)
Cash Dividends Paid				(50,635		)	—			—			—			(50,635		)	—			—
Balance at December 31, 2002				$	1,015,759		$	806		$	372,192		$	11,659		$	1,115,910		$	(1,424	)	$	(483,384	)

 

10

 

Bank of Hawaii Corporation and Subsidiaries
Consolidated Average Balances and Interest Rates - Taxable Equivalent Basis (Unaudited)		Table 5a

 

		Three Months Ended December 31, 2003								Three Months Ended September 30, 2003								Three Months Ended December 31, 2002(1)
(dollars in millions)		Average Balance			Income/ Expense			Yield/ Rate		Average Balance			Income/ Expense			Yield/ Rate		Average Balance			Income/ Expense			Yield/ Rate
Earning Assets
Interest Bearing Deposits		$	218.6		$	1.2		2.12	%	$	224.7		$	1.2		2.08	%	$	796.6		$	3.6		1.78	%
Funds Sold		34.3			0.1			0.99		102.4			0.3			0.97		234.5			0.8			1.42
Investment Securities
Held to Maturity		742.1			7.2			3.89		675.1			6.4			3.82		253.8			3.2			4.98
Available for Sale		1,898.6			19.0			4.01		2,090.6			16.5			3.15		2,273.3			24.1			4.24
Loans Held for Sale		13.9			0.2			6.21		52.2			0.7			5.45		38.9			0.6			5.88
Loans and Lease Financing
Commercial and Industrial		858.2			10.6			4.90		862.8			10.8			4.95		881.7			11.3			5.07
Construction		99.2			1.1			4.30		87.8			0.9			4.26		131.5			1.8			5.30
Commercial Mortgage		627.4			8.9			5.62		670.6			9.4			5.56		610.5			9.9			6.40
Residential Mortgage		2,336.3			34.5			5.90		2,298.8			36.2			6.30		2,212.7			38.5			6.97
Installment		598.1			13.4			8.89		558.6			12.8			9.09		443.3			11.7			10.53
Home Equity		453.0			5.6			4.89		448.1			5.6			4.99		422.1			5.8			5.50
Purchased Home Equity		104.7			0.6			2.24		132.6			0.7			2.20		10.1			—			—
Lease Financing		494.0			5.5			4.44		487.2			5.6			4.52		498.5			6.3			5.03
Total Loans and Lease Financing		5,570.9			80.2			5.73		5,546.5			82.0			5.89		5,210.4			85.3			6.52
Other		76.8			1.0			5.20		76.1			1.0			5.38		78.7			1.3			6.62
Total Earning Assets		8,555.2			108.9			5.07		8,767.6			108.1			4.91		8,886.2			118.9			5.33
Cash and Non-Interest Bearing Deposits		323.5								333.2								305.2
Other Assets		379.1								399.2								363.4
Total Assets		$	9,257.8							$	9,500.0							$	9,554.8
Interest Bearing Liabilities
Interest Bearing Deposits
Demand		$	1,293.8		$	0.5		0.16	%	$	1,245.8		$	0.5		0.15	%	$	1,105.1		$	1.1		0.39	%
Savings		2,786.6			3.2			0.46		2,754.6			3.4			0.49		2,468.2			6.4			1.03
Time		1,227.9			5.7			1.83		1,285.7			6.4			1.97		1,538.2			10.2			2.63
Total Interest Bearing Deposits		5,308.3			9.4			0.71		5,286.1			10.3			0.77		5,111.5			17.7			1.37
Short-Term Borrowings		608.0			1.7			1.06		827.8			2.3			1.08		1,053.5			5.1			1.90
Long-Term Debt		324.2			4.4			5.41		325.7			4.4			5.40		389.9			5.9			6.05
Total Interest Bearing Liabilities		6,240.5			15.5			0.98		6,439.6			17.0			1.04		6,554.9			28.7			1.73
Net Interest Income					$	93.4							$	91.1							$	90.2
Interest Rate Spread								4.09	%							3.87	%							3.60	%
Net Interest Margin								4.35	%							4.15	%							4.05	%
Non-Interest Bearing Demand Deposits		1,836.4								1,844.4								1,601.0
Other Liabilities		355.7								344.1								329.3
Shareholders’ Equity		825.2								871.9								1,069.6
Total Liabilities and Shareholders’ Equity		$	9,257.8							$	9,500.0							$	9,554.8

 

(1) Certain 2002 information has been reclassified to conform to 2003 presentation.

 

11

 

Bank of Hawaii Corporation and Subsidiaries
Consolidated Average Balances and Interest Rates - Taxable Equivalent Basis (Unaudited)		Table 5b

 

		Year Ended December 31, 2003								Year Ended December 31, 2002(1)
(dollars in millions)		Average Balance			Income/ Expense			Yield/ Rate		Average Balance			Income/ Expense			Yield/ Rate
Earning Assets
Interest Bearing Deposits		$	227.3		$	4.8		2.12	%	$	1,100.0		$	20.0		1.82	%
Funds Sold		162.9			1.9			1.18		213.8			3.5			1.64
Investment Securities
Held to Maturity		488.0			19.1			3.92		311.7			17.0			5.47
Available for Sale		2,142.4			77.8			3.63		2,028.9			104.3			5.14
Loans Held for Sale		39.5			2.2			5.48		120.2			8.0			6.65
Loans and Lease Financing
Commercial and Industrial		860.3			41.9			4.87		1,024.1			52.0			5.08
Construction		96.3			4.4			4.56		151.5			8.3			5.45
Commercial Mortgage		644.8			37.4			5.81		598.7			40.0			6.68
Residential Mortgage		2,295.0			145.6			6.34		2,334.4			164.3			7.04
Installment		548.8			52.6			9.59		408.3			45.1			11.05
Home Equity		444.6			22.5			5.05		393.4			22.9			5.81
Purchased Home Equity		144.7			5.9			4.10		2.5			—			—
Lease Financing		489.9			22.3			4.55		498.4			25.8			5.17
Total Loans and Lease Financing		5,524.4			332.6			6.02		5,411.3			358.4			6.62
Other		75.7			4.3			5.61		91.5			5.6			6.14
Total Earning Assets		8,660.2			442.7			5.11		9,277.4			516.8			5.57
Cash and Non-Interest Bearing Deposits		328.4								313.2
Other Assets		388.9								370.6
Total Assets		$	9,377.5							$	9,961.2
Interest Bearing Liabilities
Interest Bearing Deposits
Demand		$	1,215.7		$	2.5		0.20	%	$	1,014.7		$	4.3		0.42	%
Savings		2,723.9			15.7			0.58		2,263.4			29.4			1.30
Time		1,352.3			29.3			2.17		1,765.5			50.6			2.87
Total Interest Bearing Deposits		5,291.9			47.5			0.90		5,043.6			84.3			1.67
Short-Term Borrowings		724.2			9.0			1.24		1,390.2			32.7			2.35
Long-Term Debt		352.7			20.1			5.71		471.3			29.3			6.21
Total Interest Bearing Liabilities		6,368.8			76.6			1.20		6,905.1			146.3			2.12
Net Interest Income					$	366.1							$	370.5
Interest Rate Spread								3.91	%							3.45	%
Net Interest Margin								4.23	%							3.99	%
Non-Interest Bearing Demand Deposits		1,753.9								1,556.3
Other Liabilities		354.7								316.3
Shareholders’ Equity		900.1								1,183.5
Total Liabilities and Shareholders’ Equity		$	9,377.5							$	9,961.2

 

(1) Certain 2002 information has been reclassified to conform to 2003 presentation.

 

12

 

Bank of Hawaii Corporation and Subsidiaries
Analysis of Change in Net Interest Income - Tax Equivalent Basis (Unaudited)		Table 6

 

		Year Ended December 31, 2003 Compared to 2002(2)
(dollars in millions)		Volume(1)			Rate(1)			Total
Change in Interest Income:
Interest Bearing Deposits		$	(18.0	)	$	2.8		$	(15.2	)
Funds Sold		(0.7		)	(0.9		)	(1.6		)
Investment Securities
Held to Maturity		7.8			(5.7		)	2.1
Available for Sale		5.6			(32.1		)	(26.5		)
Loans Held for Sale		(4.6		)	(1.2		)	(5.8		)
Loans and Lease Financing
Commercial and Industrial		(8.0		)	(2.1		)	(10.1		)
Construction		(2.7		)	(1.2		)	(3.9		)
Commercial Mortgage		2.8			(5.4		)	(2.6		)
Residential Mortgage		(2.7		)	(16.0		)	(18.7		)
Installment		14.0			(6.5		)	7.5
Home Equity		2.8			(3.2		)	(0.4		)
Purchased Home Equity		0.1			5.8			5.9
Lease Financing		(0.4		)	(3.1		)	(3.5		)
Total Loans and Lease Financing		5.9			(31.7		)	(25.8		)
Other		(0.9		)	(0.4		)	(1.3		)
Total Change in Interest Income		(4.9		)	(69.2		)	(74.1		)
Change in Interest Expense:
Interest Bearing Deposits
Demand		0.7			(2.5		)	(1.8		)
Savings		5.1			(18.8		)	(13.7		)
Time		(10.4		)	(10.9		)	(21.3		)
Total Interest Bearing Deposits		(4.6		)	(32.2		)	(36.8		)
Short-Term Borrowings		(11.9		)	(11.8		)	(23.7		)
Long-Term Debt		(6.9		)	(2.3		)	(9.2		)
Total Change in Interest Expense		(23.4		)	(46.3		)	(69.7		)
Change in Net Interest Income		$	18.5		$	(22.9	)	$	(4.4	)

 

(1) The changes for each category of interest income and expense are divided between the portion of changes attributable to the variance in volume or rate for that category.

 

(2) Certain 2002 information has been reclassified to conform to 2003 presentation.

 

13

 

Bank of Hawaii Corporation and Subsidiaries
Salaries and Benefits (Unaudited)		Table 7

 

		Three Months Ended December 31,						Year Ended December 31,
(dollars in thousands)		2003			2002			2003			2002
Salaries		$	27,972		$	30,300		$	114,376		$	123,601
Incentive Compensation		5,130			3,333			15,747			12,871
Stock Based Compensation		5,128			1,330			9,215			4,553
Commission Expense		1,833			2,809			10,797			9,113
Retirement and Other Benefits		882			2,115			14,353			14,134
Payroll Taxes		2,009			2,159			10,454			10,894
Medical, Dental, and Life Insurance		1,981			1,998			7,371			8,008
Separation Expense		1,474			690			3,967			3,389
Total Salaries and Benefits		$	46,409		$	44,734		$	186,280		$	186,563

 

14

 

Bank of Hawaii Corporation and Subsidiaries
Loan Portfolio Balances (Unaudited)		Table 8

 

(dollars in millions)		December 31, 2003			September 30, 2003			June 30, 2003			March 31, 2003			December 31, 2002
Domestic
Commercial
Commercial and Industrial		$	816.2		$	843.9		$	808.5		$	824.9		$	875.0
Commercial Mortgage		639.4			629.2			689.7			691.7			591.1
Construction		101.3			92.3			83.6			86.7			127.5
Lease Financing		435.8			426.9			416.9			430.4			427.3
Total Commercial		1,992.7			1,992.3			1,998.7			2,033.7			2,020.9
Consumer
Residential Mortgage		2,320.5			2,329.4			2,222.0			2,305.3			2,131.4
Home Equity		467.0			446.0			450.3			439.1			428.2
Purchased Home Equity		212.5			109.8			145.6			170.9			185.8
Other Consumer		658.8			582.9			554.8			518.5			493.3
Lease Financing		35.3			35.3			34.0			33.8			34.5
Total Consumer		3,694.1			3,503.4			3,406.7			3,467.6			3,273.2
Total Domestic		5,686.8			5,495.7			5,405.4			5,501.3			5,294.1
Foreign		70.4			74.7			66.5			64.1			64.9
Total Loans		$	5,757.2		$	5,570.4		$	5,471.9		$	5,565.4		$	5,359.0

 

Selected Concentrations of Credit Exposure (Unaudited)

 

		December 31, 2003									Sep. 30, 2003			Dec. 31, 2002
(dollars in millions)		Outstanding			Unused Commitments			Total Exposure			Total Exposure			Total Exposure
Air Transportation
Regional Passenger Carriers		$	44.0		$	12.5		$	56.5		$	57.6		$	57.3
United States Based Passenger Carriers		40.0			—			40.0			39.9			39.6
International Based Passenger Carriers		31.5			—			31.5			31.7			32.1
Cargo Carriers		14.4			—			14.4			14.4			15.0
Total Air Transportation		$	129.9		$	12.5		$	142.4		$	143.6		$	144.0
Guam
Hotel		$	17.7		$	—		$	17.7		$	17.8		$	44.4
Other Commercial		135.4			48.8			184.2			183.1			166.0
Consumer		282.5			6.3			288.8			277.5			257.4
Total Guam		$	435.6		$	55.1		$	490.7		$	478.4		$	467.8
Syndicated Exposure		$	244.5		$	623.4		$	867.9		$	873.5		$	1,002.1

 

Exposure includes loans, leveraged leases and operating leases.

 

15

 

Bank of Hawaii Corporation and Subsidiaries
Consolidated Non-Performing Assets and Accruing Loans Past Due 90 Days or More  (Unaudited)		Table 9

 

(dollars in millions)		December 31, 2003			September 30, 2003			June 30, 2003			March 31, 2003			December 31, 2002
Non-Performing Assets
Non-Accrual Loans
Commercial
Commercial and Industrial		$	6.0		$	7.8		$	8.8		$	2.4		$	5.9
Commercial Mortgage		9.3			11.0			11.2			17.9			20.3
Construction		—			—			—			—			0.5
Lease Financing		2.2			2.4			2.5			3.2			4.1
Total Commercial		17.5			21.2			22.5			23.5			30.8
Consumer
Residential Mortgage		9.3			9.7			10.2			11.5			13.9
Home Equity		0.5			0.5			—			0.1			0.3
Total Consumer		9.8			10.2			10.2			11.6			14.2
Total Non-Accrual Loans		27.3			31.4			32.7			35.1			45.0
Foreclosed Real Estate		4.4			8.7			9.3			9.1			9.4
Total Non-Performing Assets		$	31.7		$	40.1		$	42.0		$	44.2		$	54.4
Accruing Loans Past Due 90 Days or More
Commercial
Commercial and Industrial		$	0.7		$	0.7		$	0.5		$	—		$	0.2
Commercial Mortgage		—			—			—			0.4			0.3
Lease Financing		0.1			—			—			—			—
Total Commercial		0.8			0.7			0.5			0.4			0.5
Consumer
Residential Mortgage		1.4			2.0			1.8			1.6			0.6
Home Equity		—			—			0.1			—			—
Purchased Home Equity		—			0.1			0.1			—			—
Other Consumer		1.3			1.1			0.4			2.3			0.7
Total Consumer		2.7			3.2			2.4			3.9			1.3
Total Accruing and Past Due		$	3.5		$	3.9		$	2.9		$	4.3		$	1.8
Total Loans		$	5,757.2		$	5,570.4		$	5,471.9		$	5,565.4		$	5,359.0
Ratio of Non-Accrual Loans to Total Loans		0.47		%	0.56		%	0.60		%	0.63		%	0.84		%
Ratio of Non-Performing Assets to Total Loans and Foreclosed Real Estate		0.55		%	0.72		%	0.77		%	0.79		%	1.01		%
Ratio of Non-Performing Assets and Accruing Loans Past Due 90 Days or More to Total Loans		0.61		%	0.79		%	0.82		%	0.87		%	1.05		%
Quarter to Quarter Changes in Non-Performing Assets
Balance at Beginning of Quarter		$	40.1		$	42.0		$	44.2		$	54.4		$	63.3
Additions		2.3			3.2			11.6			4.8			12.0
Reductions
Payments and Sales of Loans		(3.4		)	(1.8		)	(4.3		)	(5.6		)	(6.9		)
Return to Accrual		(0.8		)	(1.5		)	(7.5		)	(5.6		)	(1.9		)
Sales of Foreclosed Assets		(4.4		)	(1.0		)	(0.7		)	(1.1		)	(9.4		)
Charge-offs/Write-downs		(2.1		)	(0.8		)	(1.3		)	(2.7		)	(2.7		)
Total Reductions		(10.7		)	(5.1		)	(13.8		)	(15.0		)	(20.9		)
Balance at End of Quarter		$	31.7		$	40.1		$	42.0		$	44.2		$	54.4

 

16

 

Bank of Hawaii Corporation and Subsidiaries
Consolidated Allowance for Loan and Lease Losses (Unaudited)		Table 10

 

		Three Months Ended									Year Ended
		December 31,			September 30,			December 31,			December 31,
(dollars in millions)		2003			2003			2002			2003			2002
Balance at Beginning of Period		$	132.7		$	138.0		$	154.5		$	142.9		$	159.0
Loans Charged-Off
Commercial
Commercial and Industrial		(2.0		)	(1.1		)	(2.0		)	(5.3		)	(13.0		)
Commercial Mortgage		—			(0.2		)	—			(0.6		)	(2.9		)
Construction		—			—			—			(0.5		)	(0.5		)
Lease Financing		—			—			(9.6		)	(0.3		)	(9.9		)
Consumer
Residential Mortgage		(0.5		)	(0.1		)	(0.4		)	(1.9		)	(3.5		)
Home Equity		(0.3		)	—			(0.1		)	(0.4		)	(0.2		)
Purchased Home Equity		(0.1		)	(0.1		)	—			(0.2		)	—
Other Consumer		(3.9		)	(6.8		)	(2.8		)	(17.4		)	(12.5		)
Lease Financing		(0.1		)	—			(0.1		)	(0.3		)	(0.3		)
Total Charge-Offs		(6.9		)	(8.3		)	(15.0		)	(26.9		)	(42.8		)
Recoveries on Loans Previously Charged-Off
Commercial
Commercial and Industrial		0.9			0.6			1.4			3.9			4.7
Commercial Mortgage		—			—			0.1			0.1			2.1
Construction		—			—			0.2			1.0			0.2
Lease Financing		0.1			—			—			0.1			—
Consumer
Residential Mortgage		0.1			0.5			0.3			1.0			1.1
Home Equity		—			—			—			0.1			0.1
Other Consumer		2.0			1.5			1.3			6.2			6.1
Lease Financing		—			—			0.1			0.1			0.1
Foreign		0.1			0.4			—			0.6			0.7
Total Recoveries		3.3			3.0			3.4			13.1			15.1
Net Loan Charge-Offs		(3.6		)	(5.3		)	(11.6		)	(13.8		)	(27.7		)
Provision for Loan and Lease Losses		—			—			—			—			11.6
Balance at End of Period		$	129.1		$	132.7		$	142.9		$	129.1		$	142.9
Average Loans Outstanding		$	5,570.9		$	5,546.5		$	5,210.4		$	5,524.4		$	5,411.3
Ratio of Net Charge-Offs to Average Loans Outstanding (annualized)		0.26		%	0.38		%	0.88		%	0.25		%	0.51		%
Ratio of Allowance to Loans and Leases Outstanding		2.24		%	2.38		%	2.67		%	2.24		%	2.67		%

 

Totals may not add due to rounding.

 

17

 

Bank of Hawaii Corporation and Subsidiaries
Business Segment Selected Financial Information (Unaudited)		Table 11a

 

(dollars in thousands)		Retail Banking			Commercial Banking			Investment Services Group			Treasury and Other Corporate			Consolidated Total
Three Months Ended December 31, 2003
Net Interest Income		$	49,617		$	33,505		$	3,215		$	7,015		$	93,352
Provision for Loan and Lease Losses		(2,288		)	(1,694		)	—			3,982			—
Net Interest Income After Provision for Loan and Lease Losses		47,329			31,811			3,215			10,997			93,352
Non-Interest Income		21,051			10,654			15,203			2,529			49,437
		68,380			42,465			18,418			13,526			142,789
Non-Interest Expense		(41,334		)	(20,410		)	(16,415		)	(5,245		)	(83,404		)
Income Before Income Taxes		27,046			22,055			2,003			8,281			59,385
Provision for Income Taxes		(10,007		)	(8,032		)	(741		)	(1,932		)	(20,712		)
Allocated Net Income		17,039			14,023			1,262			6,349			38,673
Allowance Funding Value		(130		)	(806		)	(8		)	944			—
GAAP Provision		2,288			1,694			—			(3,982		)	—
Economic Provision		(3,309		)	(2,870		)	(107		)	(3		)	(6,289		)
Tax Effect of Adjustments		444			746			46			1,091			2,327
Income Before Capital Charge		16,332			12,787			1,193			4,399			34,711
Capital Charge		(5,481		)	(5,292		)	(1,529		)	(10,394		)	(22,696		)
Net Income (Loss) After Capital Charge (NIACC)		$	10,851		$	7,495		$	(336	)	$	(5,995	)	$	12,015
RAROC (ROE for the Company)		33		%	26		%	8		%	21		%	19		%
Total Assets at December 31, 2003		$	3,665,571		$	2,295,422		$	130,206		$	3,370,448		$	9,461,647
Three Months Ended December 31, 2002(1)
Net Interest Income		$	49,998		$	35,557		$	3,623		$	1,040		$	90,218
Provision for Loan and Lease Losses		(848		)	(10,841		)	—			11,689			—
Net Interest Income After Provision for Loan and Lease Losses		49,150			24,716			3,623			12,729			90,218
Non-Interest Income		21,486			8,815			15,850			4,204			50,355
		70,636			33,531			19,473			16,933			140,573
Restructuring and Other Related Costs		—			—			—			(385		)	(385		)
Information Technology Systems Replacement Project		(782		)	—			—			(6,270		)	(7,052		)
Non-Interest Expense		(43,625		)	(27,373		)	(16,068		)	(2,210		)	(89,276		)
Income Before Income Taxes		26,229			6,158			3,405			8,068			43,860
Provision for Income Taxes		(9,705		)	(1,294		)	(1,260		)	(2,693		)	(14,952		)
Allocated Net Income		16,524			4,864			2,145			5,375			28,908
Allowance Funding Value		(163		)	(1,380		)	(9		)	1,552			—
GAAP Provision		848			10,841			—			(11,689		)	—
Economic Provision		(3,218		)	(3,135		)	(127		)	(9		)	(6,489		)
Tax Effect of Adjustments		937			(2,341		)	50			3,755			2,401
Income (Loss) Before Capital Charge		14,928			8,849			2,059			(1,016		)	24,820
Capital Charge		(5,338		)	(5,890		)	(1,513		)	(16,669		)	(29,410		)
Net Income (Loss) After Capital Charge (NIACC)		$	9,590		$	2,959		$	546		$	(17,685	)	$	(4,590	)
RAROC (ROE for the Company)		30		%	16		%	15		%	(4		)%	11		%
Total Assets at December 31, 2002		$	3,293,761		$	2,242,035		$	134,954		$	3,845,668		$	9,516,418

 

(1) Certain 2002 information has been reclassified to conform to 2003 presentation.

 

18

 

Bank of Hawaii Corporation and Subsidiaries
Business Segment Selected Financial Information (Unaudited)		Table 11b

 

(dollars in thousands)		Retail Banking			Commercial Banking			Investment Services Group			Treasury and Other Corporate			Consolidated Total
Year Ended December 31, 2003
Net Interest Income		$	206,135		$	136,486		$	12,879		$	10,442		$	365,942
Provision for Loan and Lease Losses		(6,909		)	(8,415		)	5			15,319			—
Net Interest Income After Provision for Loan and Lease Losses		199,226			128,071			12,884			25,761			365,942
Non-Interest Income		85,380			39,162			61,598			12,580			198,720
		284,606			167,233			74,482			38,341			564,662
Information Technology Systems Replacement Project		(986		)	(23		)	(333		)	(20,529		)	(21,871		)
Non-Interest Expense		(168,369		)	(88,647		)	(64,019		)	(14,969		)	(336,004		)
Income Before Income Taxes		115,251			78,563			10,130			2,843			206,787
Provision for Income Taxes		(42,643		)	(28,592		)	(3,748		)	3,391			(71,592		)
Allocated Net Income		72,608			49,971			6,382			6,234			135,195
Allowance Funding Value		(595		)	(3,987		)	(32		)	4,614			—
GAAP Provision		6,909			8,415			(5		)	(15,319		)	—
Economic Provision		(11,932		)	(12,095		)	(457		)	(25		)	(24,509		)
Tax Effect of Adjustments		2,093			2,848			186			3,941			9,068
Income (Loss) Before Capital Charge		69,083			45,152			6,074			(555		)	119,754
Capital Charge		(21,980		)	(21,606		)	(6,051		)	(49,404		)	(99,041		)
Net Income (Loss) After Capital Charge (NIACC)		$	47,103		$	23,546		$	23		$	(49,959	)	$	20,713
RAROC (ROE for the Company)		35		%	23		%	11		%	0		%	15		%
Total Assets at December 31, 2003		$	3,665,571		$	2,295,422		$	130,206		$	3,370,448		$	9,461,647
Year Ended December 31, 2002(1)
Net Interest Income		$	203,304		$	143,937		$	13,263		$	9,727		$	370,231
Provision for Loan and Lease Losses		(4,061		)	(24,902		)	(75		)	17,422			(11,616		)
Net Interest Income After Provision for Loan and Lease Losses		199,243			119,035			13,188			27,149			358,615
Non-Interest Income		83,870			34,497			67,691			12,277			198,335
		283,113			153,532			80,879			39,426			556,950
Restructuring and Other Related Costs		—			—			—			(2,364		)	(2,364		)
Information Technology Systems Replacement Project		(1,369		)	—			—			(12,259		)	(13,628		)
Non-Interest Expense		(177,079		)	(100,977		)	(65,898		)	(9,303		)	(353,257		)
Income Before Income Taxes		104,665			52,555			14,981			15,500			187,701
Provision for Income Taxes		(38,725		)	(18,221		)	(5,543		)	(4,032		)	(66,521		)
Allocated Net Income		65,940			34,334			9,438			11,468			121,180
Allowance Funding Value		(835		)	(6,035		)	(28		)	6,898			—
GAAP Provision		4,061			24,902			75			(17,422		)	11,616
Economic Provision		(11,754		)	(14,383		)	(499		)	(17		)	(26,653		)
Tax Effect of Adjustments		3,155			(1,659		)	167			3,901			5,564
Income Before Capital Charge		60,567			37,159			9,153			4,828			111,707
Capital Charge		(21,125		)	24,229			(6,110		)	(78,777		)	(130,241		)
Net Income (Loss) After Capital Charge (NIACC)		$	39,442		$	12,930		$	3,043		$	(73,949	)	$	(18,534	)
RAROC (ROE for the Company)		32		%	17		%	16		%	6		%	10		%
Total Assets at December 31, 2002		$	3,293,761		$	2,242,035		$	134,954		$	3,845,668		$	9,516,418

 

(1) Certain 2002 information has been reclassified to conform to 2003 presentation.

 

19

 

Bank of Hawaii Corporation and Subsidiaries
Quarterly Summary of Selected Consolidated Financial Data (Unaudited)		Table 12

 

		Three Months Ended(1)
(dollars in thousands except per share amounts)		Dec. 31, 2003			Sept. 30, 2003			June 30, 2003			March 31, 2003			Dec. 31, 2002			Sept. 30, 2002			June 30, 2002			March 31, 2002
Quarterly Operating Results
Interest Income
Interest and Fees on Loans and Leases		$	80,351		$	82,715		$	85,954		$	85,773		$	85,945		$	89,335		$	92,441		$	98,645
Income on Investment Securities - Held to Maturity		7,183			6,407			3,083			2,283			3,122			3,963			4,544			5,145
Income on Investment Securities - Available for Sale		19,032			16,483			19,815			22,463			24,088			26,175			26,805			27,193
Deposits		1,169			1,179			1,161			1,307			3,578			5,384			6,011			5,047
Funds Sold		85			248			822			764			834			914			752			1,003
Other		1,007			1,032			1,016			1,189			1,312			1,575			1,395			1,332
Total Interest Income		108,827			108,064			111,851			113,779			118,879			127,346			131,948			138,365
Interest Expense
Deposits		9,433			10,284			13,309			14,447			17,657			20,547			22,166			23,978
Security Repurchase Agreements		1,359			1,947			2,391			2,242			4,585			7,039			8,256			10,293
Funds Purchased		249			271			219			205			255			299			245			231
Short-Term Borrowings		17			26			25			24			217			334			289			649
Long-Term Debt		4,417			4,431			5,422			5,861			5,947			6,946			8,055			8,319
Total Interest Expense		15,475			16,959			21,366			22,779			28,661			35,165			39,011			43,470
Net Interest Income		93,352			91,105			90,485			91,000			90,218			92,181			92,937			94,895
Provision for Loan and Lease Losses		—			—			—			—			—			—			3,324			8,292
Net Interest Income After Provision for Loan and Lease Losses		93,352			91,105			90,485			91,000			90,218			92,181			89,613			86,603
Non-Interest Income
Trust and Asset Management		12,759			12,511			12,545			13,181			13,085			13,655			14,175			14,818
Mortgage Banking		3,324			5,888			6,061			283			4,398			3,669			2,842			7,957
Service Charges on Deposit Accounts		9,442			8,901			8,645			8,950			8,326			7,925			7,956			8,410
Fees, Exchange, and Other Service Charges		13,725			16,034			13,473			12,989			12,963			13,114			13,065			12,452
Investment Securities Gains (Losses)		(20		)	639			587			583			612			—			3			—
Insurance		3,597			3,988			3,015			3,080			3,099			2,677			2,563			2,599
Other		6,610			5,830			6,413			5,687			7,872			5,997			7,314			6,789
Total Non-Interest Income		49,437			53,791			50,739			44,753			50,355			47,037			47,918			53,025
Non-Interest Expense
Salaries and Benefits		46,409			45,731			47,711			46,429			44,734			45,371			47,275			49,183
Net Occupancy Expense		9,933			9,806			9,628			9,613			10,638			9,597			9,321			9,593
Net Equipment Expense		7,395			7,301			9,208			9,748			11,077			10,058			9,997			10,121
Restructuring and Other Related Costs		—			—			—			—			385			—			—			1,979
Information Technology Systems Replacement Project		—			4,349			10,105			7,417			7,052			6,576			—			—
Other		19,667			21,690			18,742			16,993			22,827			20,141			22,777			20,547
Total Non-Interest Expense		83,404			88,877			95,394			90,200			96,713			91,743			89,370			91,423
Income Before Income Taxes		59,385			56,019			45,830			45,553			43,860			47,475			48,161			48,205
Provision for Income Taxes		20,712			19,332			15,796			15,752			14,952			17,275			17,145			17,149
Net Income		$	38,673		$	36,687		$	30,034		$	29,801		$	28,908		$	30,200		$	31,016		$	31,056
Basic Earnings Per Share		$	0.70		$	0.64		$	0.50		$	0.49		$	0.45		$	0.44		$	0.43		$	0.42
Diluted Earnings Per Share		$	0.66		$	0.61		$	0.48		$	0.47		$	0.44		$	0.43		$	0.42		$	0.41
Balance Sheet Totals
Total Assets		9,461,647			9,370,755			9,550,934			9,410,210			9,516,418			9,702,700			9,824,065			10,245,021
Net Loans		5,628,095			5,437,730			5,333,896			5,425,343			5,216,151			5,104,857			5,250,216			5,442,601
Total Deposits		7,332,779			7,102,116			7,140,849			6,987,331			6,920,161			6,627,673			6,455,981			6,543,781
Total Shareholders’ Equity		793,132			823,760			913,010			952,007			1,015,759			1,100,706			1,191,072			1,265,907
Performance Ratios
Return on Average Assets		1.66		%	1.53		%	1.27		%	1.31		%	1.20		%	1.22		%	1.23		%	1.21		%
Return on Average Equity		18.59		%	16.69		%	12.93		%	12.42		%	10.72		%	10.40		%	9.94		%	9.97		%
Efficiency Ratio		58.41		%	61.34		%	67.55		%	66.44		%	68.80		%	65.90		%	63.45		%	61.81		%
Efficiency Ratio excluding ITSRP and Restructuring Costs		58.41		%	58.34		%	60.39		%	60.98		%	63.51		%	61.18		%	63.45		%	60.47		%

 

(1) Certain 2002 information has been reclassified to conform to 2003 presentation.

 

20

 

Bank of Hawaii Corporation and Subsidiaries
2004 - 2006 Plan (Unaudited)		Table 13

 

		Year Ended
(dollars in millions, except per share amounts)		2003			2004			2006
Anticipated Financial Results
Operating Income		$	229		$	243		$	301
Information Technology Systems Replacement Project		22			—			—
Provision for Loan and Lease Losses		—			—			26
Provision for Income Taxes		72			86			97
Net Income		$	135		$	157		$	178
Average Assets		$	9,378		$	9,941		$	10,763
Shareholders’ Equity		$	793		$	733		$	733
Economic Performance:
NIACC		$	21		$	51		$	92
RAROC		21		%	23		%	27		%
Performance Ratios:
Diluted Earnings Per Share		$	2.21		$	2.76		$	3.39
Return on Average Assets		1.44		%	1.58		%	1.65		%
Return on Average Equity		15		%	20		%	24		%
Net Interest Margin		4.23		%	4.10		%	4.12		%
Efficiency Ratio excluding ITSRP		59.5		%	58.0		%	53.0		%
Leverage Capital Ratio		8.4		%	7.4		%	7.0		%
Tier 1 Capital Ratio(1)		12.6		%	11.4		%	10.9		%

 

The 2004 and 2006 information presented above represents anticipated financial results.  Achievement of these results is subject to a number of assumptions, risks, and uncertainties, including those described on page 5 of this release and those set forth from time to time in the Company’s reports filed with the Securities and Exchange Commission.  Actual results could differ materially from these anticipated financial results.

 

(1) Preliminary for 2003.

 

21