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Bank of Hawaii Corporation 2018 Financial Results

HONOLULU--(BUSINESS WIRE)--

  • 2018 Earnings $5.23 Per Diluted Share
  • 2018 Net Income $219.6 Million
  • Diluted Earnings Per Share $1.30 for the Fourth Quarter of 2018
  • Net Income $53.9 Million for the Fourth Quarter of 2018
  • Board of Directors Declares Dividend of $0.62 Per Share
  • Board of Directors Authorizes Increase in Share Repurchase of $130.0 Million

Bank of Hawaii Corporation (BOH) today reported diluted earnings per share of $5.23 for the full year of 2018, up 20.8 percent from diluted earnings per share of $4.33 in 2017. Net income for the year was $219.6 million, up $34.9 million or 18.9 percent from net income of $184.7 million in the previous year. The return on average assets for the full year of 2018 increased to 1.29 percent compared with 1.10 percent in 2017. The return on average equity for the full year of 2018 increased to 17.63 percent compared with 15.27 percent in 2017.

“Bank of Hawaii finished 2018 with solid financial performance,” said Peter Ho, Chairman, President, and CEO. “During the year our loan and deposit balances continued to grow and our net interest margin expanded. Our asset quality, capital and liquidity all remained strong. During the fourth quarter we completed the sale of our MyBankoh Rewards Credit Card portfolio in order to focus on our co-branded Hawaiian Airlines Bank of Hawaii World Elite Mastercard program.”

Diluted earnings per share were $1.30 for the fourth quarter of 2018, down from $1.36 in the third quarter of 2018 and up from $1.01 in the fourth quarter of 2017. Net income for the fourth quarter of 2018 was $53.9 million, down from $56.9 million in the previous quarter and up from $43.0 million in the same quarter last year. The return on average assets for the fourth quarter of 2018 was 1.26 percent, compared with 1.33 percent in the third quarter of 2018 and 1.00 percent in the fourth quarter last year. The return on average equity for the fourth quarter of 2018 was 17.05 percent compared with 18.06 percent in the third quarter of 2018 and 13.85 percent in the fourth quarter last year.

Financial Highlights

Net interest income, on a taxable-equivalent basis, was $491.5 million for the full year of 2018, an increase of $22.4 million from net interest income of $469.1 million in 2017. Net interest income, on a taxable-equivalent basis, for the fourth quarter of 2018 was $125.2 million, an increase of $1.0 million compared with net interest income of $124.2 million in the third quarter of 2018 and up $3.6 million compared with net interest income of $121.6 million in the fourth quarter last year. Analyses of changes in net interest income are included in Tables 8a, 8b and 8c.

The net interest margin for the full year of 2018 was 3.05 percent, an increase of 12 basis points from the net interest margin of 2.93 percent in 2017. The net interest margin was 3.10 percent in the fourth quarter of 2018, an increase of 3 basis points from the third quarter of 2018 and 12 basis points from the fourth quarter last year. The sale of the credit card portfolio in the fourth quarter of 2018 resulted in a decrease of 2 basis points in the fourth quarter net interest margin.

The provision for credit losses for the full year of 2018 was $13.4 million compared with a provision for credit losses of $16.9 million in 2017. Results for the fourth quarter of 2018 included a provision for credit losses of $2.0 million compared with $3.8 million in the previous quarter and $4.3 million in the same quarter last year.

Noninterest income for the full year of 2018 was $168.9 million compared with noninterest income of $185.4 million in 2017. Results for 2017 included a gain of $12.5 million on the sale of Visa Class B shares compared with a charge of $1.0 million for the adjustment to the conversions ratio in 2018 and $0.9 million in higher fees related to the Visa Class B shares sold. Excluding the Visa sale, the decrease from the previous year was primarily due to a decline in mortgage banking income and service charges on deposits that were partially offset by a gain resulting from a low-income housing investment sale and distribution. Noninterest income was $42.1 million in the fourth quarter of 2018 compared with noninterest income of $41.5 million in the third quarter of 2018 and noninterest income of $41.9 million in the fourth quarter of 2017.

Noninterest expense for the full year of 2018 was $371.6 million compared with noninterest expense of $357.7 million in 2017. Noninterest expense was $95.9 million in the fourth quarter of 2018 and included $4.1 million in one-time significant items related to employee separation, a medical expense, an operational loss, and legal expenses. Noninterest expense was $90.5 million in the third quarter of 2018. There were no significant items in noninterest expense during the third quarter of 2018. Noninterest expense was $92.3 million in the fourth quarter of 2017 and included one-time employee bonuses totaling $2.2 million, including payroll taxes. An analysis of noninterest expenses related to salaries and benefits is included in Table 9.

The efficiency ratio for the full year of 2018 was 56.71 percent compared with 55.66 percent in 2017. The efficiency ratio for the fourth quarter of 2018 was 57.75 percent compared with 55.07 percent in the previous quarter and 57.49 percent in the same quarter last year.

The effective tax rate for the full year of 2018 was 18.73 percent. The effective tax rate for the full year of 2017 was 31.11 percent, which included a one-time adjustment in the fourth quarter of $3.6 million related to the Tax Cuts and Jobs Act. Excluding this expense, the effective tax rate for the full year of 2017 was 29.78 percent. The lower effective tax rate in 2018 was primarily due to the reduction in the federal corporate tax rate as a result of the tax reform bill. The effective tax rate for the fourth quarter of 2018 was 20.92 percent compared with 18.75 percent in the previous quarter and 32.93 percent during the same quarter last year.

The Company’s business segments are defined as Retail Banking, Commercial Banking, Investment Services and Private Banking, 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 13a and 13b.

Asset Quality

The Company’s overall asset quality continued to remain strong during the fourth quarter of 2018. Total non-performing assets were $12.9 million at December 31, 2018 compared with $13.8 million at September 30, 2018 and $16.1 million at December 31, 2017. Non-performing assets as a percentage of total loans and leases and foreclosed real estate were 0.12 percent at December 31, 2018 compared with 0.13 percent at September 30, 2018 and 0.16 percent at December 31, 2017.

Accruing loans and leases past due 90 days or more were $6.6 million at December 31, 2018 compared with $8.1 million at September 30, 2018 and $7.1 million at December 31, 2017. Restructured loans and leases not included in non-accrual loans or accruing loans past due 90 days or more declined to $48.7 million at December 31, 2018 compared with $49.5 million at September 30, 2018 and $55.7 million at December 31, 2017. More information on non-performing assets and accruing loans and leases past due 90 days or more is presented in Table 11.

Net charge-offs for the full year of 2018 were $14.1 million or 0.14 percent of total average loans and leases compared with net charge-offs of $13.8 million or 0.15 percent of total average loans and leases in 2017. Net charge-offs during the fourth quarter of 2018 were $4.0 million or 0.15 percent annualized of total average loans and leases outstanding and were comprised of charge-offs of $6.9 million partially offset by recoveries of $2.9 million. Net charge-offs during the third quarter of 2018 were $3.3 million or 0.13 percent annualized of total average loans and leases outstanding and were comprised of charge-offs of $6.0 million and recoveries of $2.7 million. Net charge-offs during the fourth quarter of 2017 were $3.8 million or 0.15 percent annualized of total average loans and leases outstanding and were comprised of charge-offs of $5.8 million and recoveries of $2.1 million.

The allowance for loan and lease losses was $106.7 million at December 31, 2018, a decrease from $108.7 million at September 30, 2018 and $107.3 million at December 31, 2017. The ratio of the allowance for loan and lease losses to total loans and leases outstanding was 1.02 percent at December 31, 2018, a decrease of 4 basis points from September 30, 2018 and 8 basis points from December 31, 2017. The reduction in the provision for the allowance for loan and lease losses compared with the net charge-offs during the fourth quarter of 2018 was largely due to the release of credit loss reserves related to the credit card portfolio. The total reserve for unfunded commitments of $6.8 million at December 31, 2018 was unchanged from the prior quarter and the same quarter last year. Details of loan and lease charge-offs, recoveries, and the components of the total reserve for credit losses are summarized in Table 12.

Other Financial Highlights

Total assets were $17.1 billion at December 31, 2018, an increase of $152.2 million from total assets of $17.0 billion at September 30, 2018 and an increase of $54.9 million from total assets of $17.1 billion at December 31, 2017. Average total assets were $17.0 billion during the fourth quarter of 2018, a decrease of $26.8 million compared with average total assets of $17.0 billion during the previous quarter and a decrease of $96.0 million compared with average total assets of $17.1 billion during the same quarter last year.

The investment securities portfolio was $5.5 billion at December 31, 2018, a decrease of $224.1 million from total securities of $5.7 billion at September 30, 2018 and a decrease of $671.1 million from total securities of $6.2 billion at December 31, 2017. The investment securities portfolio remains largely comprised of securities issued by U.S. government agencies and included $3.5 billion in securities held to maturity and $2.0 billion in securities available for sale at December 31, 2018.

Total loans and leases increased to $10.4 billion at December 31, 2018, an increase of $217.7 million or 2.1 percent from total loans and leases of $10.2 billion at September 30, 2018 and up $651.8 million or 6.7 percent from total loans and leases of $9.8 billion at December 31, 2017. The commercial portfolio increased to $4.0 billion at the end of the fourth quarter of 2018, up $79.5 million or 2.0 percent from commercial loans of $3.9 billion at the end of the third quarter of 2018 and up $213.3 million or 5.7 percent from commercial loans of $3.8 billion at the end of the fourth quarter last year. Consumer loans grew to $6.5 billion at December 31, 2018, up $138.2 million or 2.2 percent from consumer loans of $6.3 billion at the end of the third quarter of 2018 and up $438.5 million or 7.3 percent from consumer loans of $6.0 billion at the end of the fourth quarter last year. The previously mentioned sale of the credit card portfolio during the fourth quarter of 2018 reduced the consumer loan portfolio by $51.6 million in outstanding balances. Average total loans and leases were $10.3 billion during the fourth quarter of 2018, an increase of 2.4 percent from average loans and leases of $10.1 billion during the previous quarter and up 6.5 percent from average loans and leases of $9.7 billion during the same quarter last year. Loan and lease portfolio balances are summarized in Table 10.

Total deposits were $15.0 billion at December 31, 2018, up $183.9 million or 1.2 percent from total deposits of $14.8 billion at September 30, 2018 and up $143.3 million or 1.0 percent from total deposits of $14.9 billion at December 31, 2017. Consumer deposits increased to $7.7 billion at December 31, 2018, up $99.2 million or 1.3 percent from consumer deposits of $7.6 billion at the end of the third quarter of 2018 and up $248.5 million or 3.3 percent from $7.5 billion at the end of the fourth quarter last year. Commercial deposits increased to $6.1 billion at the end of the fourth quarter of 2018, up $130.8 million or 2.2 percent from $6.0 billion at the end of the third quarter of 2018 and up $124.4 million or 2.1 percent from $6.0 billion at the end of the fourth quarter last year. Other deposits, including public funds, were $1.2 billion at December 31, 2018, down slightly from $1.2 billion at September 30, 2018 and down from $1.4 billion at December 31, 2017 largely due to the strategic decision to continue the reduction of public time deposits. Average total deposits were $14.8 billion during the fourth quarter of 2018, a decrease of $41.0 million compared with average total deposits of $14.8 billion during the previous quarter and a decrease of $33.7 million compared with average total deposits of $14.8 billion during the same quarter last year. Deposit balances are summarized in Tables 7a, 7b, and 10.

During the fourth quarter of 2018, the Company repurchased 325.4 thousand shares of common stock at a total cost of $24.9 million under its share repurchase program. The average cost was $76.63 per share repurchased. From the beginning of the share repurchase program initiated during July 2001 through December 31, 2018, the Company has repurchased 55.3 million shares and returned nearly $2.2 billion to shareholders at an average cost of $39.14 per share. From January 2 through January 25, 2019 the Company repurchased an additional 178.0 thousand shares of common stock at an average cost of $72.68 per share repurchased. The Company’s Board of Directors increased the authorization under the share repurchase program by an additional $130.0 million. Remaining buyback authority under the share repurchase program was $148.8 million at January 25, 2019.

Total shareholders’ equity was $1.27 billion at December 31, 2018, up from $1.25 billion at September 30, 2018, and up from $1.23 billion at December 31, 2017. The Tier 1 Capital Ratio was 13.07 percent at December 31, 2018 compared with 13.20 percent at September 30, 2018 and 13.24 percent at December 31, 2017. The Tier 1 Leverage Ratio at December 31, 2018 was 7.60 percent compared with 7.55 percent at September 30, 2018 and 7.26 percent at December 31, 2017.

The Company’s Board of Directors declared a quarterly cash dividend of $0.62 per share on the Company’s outstanding shares. The dividend will be payable on March 14, 2019 to shareholders of record at the close of business on February 28, 2019.

Hawaii Economy

General economic conditions in Hawaii remained healthy during 2018, led by record-high visitors, low unemployment, rising real estate prices, and an active construction industry. For the first eleven months of 2018 total visitor arrivals increased 6.1 percent and visitor spending increased 8.0 percent compared to the same period in 2017. The statewide seasonally-adjusted unemployment rate remains low at 2.5 percent in December 2018 compared with 3.9 percent nationally.

Real estate prices on Oahu remained strong during 2018. The volume of single-family home and condominium sales on Oahu decreased compared with 2017, with single-family home sales down 7.7 percent and condominium sales down 2.5 percent. The median sales prices continued to increase during the year, with the median sales price of a single-family home in 2018 up 4.6 percent and the median sales price of a condominium up 3.7 percent compared with 2017. As of December 31, 2018, months of inventory of single-family homes and condominiums on Oahu were 2.8 months and 2.9 months, respectively. More information on current Hawaii economic trends is presented in Table 15.

Conference Call Information

The Company will review its 2018 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 website, www.boh.com. The toll-free number is 1 (844) 543-5235 in the United States and Canada and 1 (703) 318-2209 for other international callers. Use the pass code “Bank of Hawaii” to access the call. A replay will be available for one week beginning approximately 11:00 a.m. Hawaii Time on Monday, January 28, 2019. The replay number is 1 (855) 859-2056 in the United States and Canada and 1 (404) 537-3406 from other international locations. Enter the pass code 6070839 when prompted. In addition, a replay will be available on the Company’s website, www.boh.com.

Forward-Looking Statements

This news release, and other statements made by the Company in connection with it may contain “forward-looking statements”, such as forecasts of our financial results and condition, expectations for our operations and business prospects, and our assumptions used in those forecasts and expectations. Do not unduly rely on forward-looking statements. Actual results might differ significantly from our forecasts and expectations because of a variety of factors. More information about these factors is contained in Bank of Hawaii Corporation’s Annual Report on Form 10-K for the year ended December 31, 2017, 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 an independent 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. For more information about Bank of Hawaii Corporation, see the Company’s web site, www.boh.com.

       
Bank of Hawaii Corporation and Subsidiaries
Financial Highlights                           Table 1
  Three Months Ended Year Ended
December 31, September 30, December 31, December 31,

(dollars in thousands, except per share amounts)

  2018     2018     2017     2018     2017

For the Period:

Operating Results
Net Interest Income $ 123,973 $ 122,927 $ 118,770 $ 486,352 $ 457,238
Provision for Credit Losses 2,000 3,800 4,250 13,425 16,900
Total Noninterest Income 42,108 41,482 41,855 168,923 185,417
Total Noninterest Expense 95,911 90,538 92,336 371,624 357,691
Net Income 53,911 56,933 42,953 219,602 184,672
Basic Earnings Per Share 1.30 1.37 1.02 5.26 4.37
Diluted Earnings Per Share 1.30 1.36 1.01 5.23 4.33
Dividends Declared Per Share 0.62 0.60 0.52 2.34 2.04
 
Performance Ratios
Return on Average Assets 1.26 % 1.33 % 1.00 % 1.29

%

1.10 %
Return on Average Shareholders' Equity 17.05 18.06 13.85 17.63 15.27
Efficiency Ratio 1 57.75 55.07 57.49 56.71 55.66
Net Interest Margin 2 3.10 3.07 2.98 3.05 2.93
Dividend Payout Ratio 3 47.69 43.80 50.98 44.49 46.68
Average Shareholders' Equity to Average Assets 7.39 7.35 7.20 7.34 7.22
 
Average Balances
Average Loans and Leases $ 10,320,051 $ 10,081,886 $ 9,688,710 $ 10,043,661 $ 9,346,828
Average Assets 16,988,550 17,015,340 17,084,596 16,970,992 16,749,230
Average Deposits 14,779,511 14,820,480 14,813,218 14,757,724 14,505,423
Average Shareholders' Equity 1,254,704 1,250,500 1,230,564 1,245,672 1,209,087
 
Per Share of Common Stock
Book Value $ 30.56 $ 29.98 $ 29.05 $ 30.56 $ 29.05
Tangible Book Value 29.80 29.22 28.31 29.80 28.31
Market Value
Closing 67.32 78.91 85.70 67.32 85.70
High 82.80 86.53 88.38 89.09 90.80
Low 63.64 78.30 77.71 63.64 74.72
 
December 31, September 30, December 31,
                2018     2018     2017

As of Period End:

Balance Sheet Totals

Loans and Leases $ 10,448,774 $ 10,231,062 $ 9,796,947
Total Assets 17,143,974 16,991,734 17,089,052
Total Deposits 15,027,242 14,843,335 14,883,968
Other Debt 135,643 185,662 260,716
Total Shareholders' Equity 1,268,200 1,253,327 1,231,868
 
Asset Quality
Non-Performing Assets $ 12,930 $ 13,798 $ 16,120
Allowance for Loan and Lease Losses 106,693 108,690 107,346
Allowance to Loans and Leases Outstanding 1.02 % 1.06 % 1.10 %
 
Capital Ratios
Common Equity Tier 1 Capital Ratio 13.07 % 13.20 % 13.24 %
Tier 1 Capital Ratio 13.07 13.20 13.24
Total Capital Ratio 14.21 14.38 14.46
Tier 1 Leverage Ratio 7.60 7.55 7.26
Total Shareholders' Equity to Total Assets 7.40 7.38 7.21
Tangible Common Equity to Tangible Assets 4 7.23 7.20 7.04
Tangible Common Equity to Risk-Weighted Assets 4 12.52 12.56 12.84
 
Non-Financial Data
Full-Time Equivalent Employees 2,122 2,143 2,132
Branches 69 69 69
ATMs 382 382 387
 

1

 

Efficiency ratio is defined as noninterest expense divided by total revenue (net interest income and total noninterest income).

2

Net interest margin is defined as net interest income, on a taxable-equivalent basis, as a percentage of average earning assets.

3

Dividend payout ratio is defined as dividends declared per share divided by basic earnings per share.

4

Tangible common equity to tangible assets and tangible common equity to risk-weighted assets are Non-GAAP financial measures. See Table 2 "Reconciliation of Non-GAAP Financial Measures."

Note: Common Equity Tier 1 and Tier 1 Capital Ratios were revised from 13.19% and Tangible Common Equity to Risk-Weighted Assets were revised from 12.55% as of September 30, 2018.

 
     
Bank of Hawaii Corporation and Subsidiaries
Reconciliation of Non-GAAP Financial Measures           Table 2
    December 31, September 30, December 31,
(dollars in thousands)   2018   2018   2017
 
Total Shareholders' Equity $ 1,268,200 $ 1,253,327 $ 1,231,868

Less: Goodwill

    31,517       31,517       31,517  
Tangible Common Equity   $ 1,236,683     $ 1,221,810     $ 1,200,351  
 
Total Assets $ 17,143,974 $ 16,991,734 $ 17,089,052

Less: Goodwill

    31,517       31,517       31,517  
Tangible Assets   $ 17,112,457     $ 16,960,217     $ 17,057,535  
 

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

$ 9,878,904 $ 9,731,082 $ 9,348,296
 
Total Shareholders' Equity to Total Assets 7.40 % 7.38 % 7.21 %
Tangible Common Equity to Tangible Assets (Non-GAAP) 7.23 % 7.20 % 7.04 %
 
Tier 1 Capital Ratio 13.07 % 13.20 % 13.24 %
Tangible Common Equity to Risk-Weighted Assets (Non-GAAP) 12.52 % 12.56 % 12.84 %
 

Note: Risk-Weighted Assets was revised from $9,732,618, Tier 1 Capital Ratio was revised from 13.19%, and Tangible Common Equity to Risk-Weighted Assets was revised from 12.55% as of September 30, 2018.

 
         
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)   2018   2018   2017   2018   2017
Interest Income
Interest and Fees on Loans and Leases $ 107,404 $ 104,248 $ 96,974 $ 410,597 $ 370,441
Income on Investment Securities
Available-for-Sale 13,043 12,588 11,866 50,152 46,772
Held-to-Maturity 21,482 20,821 21,782 84,310 81,740
Deposits 10 10 3 34 15
Funds Sold 727 1,393 717 3,723 3,882
Other     352       364       271       1,357       944
Total Interest Income     143,018       139,424       131,613       550,173       503,794
Interest Expense
Deposits 13,172 10,931 6,980 41,143 22,332
Securities Sold Under Agreements to Repurchase 4,671 4,667 4,664 18,519 19,592
Funds Purchased 440 33 81 609 123
Short-Term Borrowings 88 28 - 145 64
Other Debt     674       838       1,118       3,405       4,445
Total Interest Expense     19,045       16,497       12,843       63,821       46,556
Net Interest Income 123,973 122,927 118,770 486,352 457,238
Provision for Credit Losses     2,000       3,800       4,250       13,425       16,900
Net Interest Income After Provision for Credit Losses     121,973       119,127       114,520       472,927       440,338
Noninterest Income
Trust and Asset Management 10,558 10,782 11,105 43,877 45,430
Mortgage Banking 2,148 1,965 2,593 8,437 12,949
Service Charges on Deposit Accounts 7,562 7,255 8,053 28,811 32,575
Fees, Exchange, and Other Service Charges 14,576 14,173 13,784 57,482 54,845
Investment Securities Gains (Losses), Net (841 ) (729 ) (617

)

(3,938 ) 10,430
Annuity and Insurance 1,409 1,360 1,273 5,822 6,858
Bank-Owned Life Insurance 1,941 1,620 1,609 7,199 6,517
Other     4,755       5,056       4,055       21,233       15,813
Total Noninterest Income     42,108       41,482       41,855       168,923       185,417
Noninterest Expense
Salaries and Benefits 54,856 51,782 51,698 213,208 203,729
Net Occupancy 8,918 8,702 8,510 34,742 32,536
Net Equipment 6,364 6,116 5,454 23,852 22,078
Data Processing 5,151 4,241 4,310 17,846 15,483
Professional Fees 2,467 2,206 3,266 9,992 11,681
FDIC Insurance 1,336 2,057 2,253 7,732 8,666
Other     16,819       15,434       16,845       64,252       63,518
Total Noninterest Expense     95,911       90,538       92,336       371,624       357,691
Income Before Provision for Income Taxes 68,170 70,071 64,039 270,226 268,064
Provision for Income Taxes     14,259       13,138       21,086       50,624       83,392
Net Income   $ 53,911     $ 56,933     $ 42,953     $ 219,602     $ 184,672
Basic Earnings Per Share $ 1.30 $ 1.37 $ 1.02 $ 5.26 $ 4.37
Diluted Earnings Per Share $ 1.30 $ 1.36 $ 1.01 $ 5.23 $ 4.33
Dividends Declared Per Share $ 0.62 $ 0.60 $ 0.52 $ 2.34 $ 2.04
Basic Weighted Average Shares 41,325,456 41,620,776 42,116,452 41,714,770 42,280,931
Diluted Weighted Average Shares     41,601,649       41,899,401       42,450,191       41,999,399       42,607,057
 

Note: Certain prior period information has been reclassified to conform to current presentation.

 
         
Bank of Hawaii Corporation and Subsidiaries
Consolidated Statements of Comprehensive Income               Table 4
  Three Months Ended Year Ended
December 31, September 30, December 31, December 31,
(dollars in thousands)   2018   2018   2017   2018   2017
Net Income $ 53,911 $ 56,933 $ 42,953 $ 219,602 $ 184,672
Other Comprehensive Income (Loss), Net of Tax:
Net Unrealized Gains (Losses) on Investment Securities 11,169 (5,599 ) (10,430 ) (6,525 ) (1,986 )
Defined Benefit Plans     (2,974 )     216       738       (2,326 )     1,177  
Other Comprehensive Income (Loss)     8,195       (5,383 )     (9,692 )     (8,851 )     (809 )
Comprehensive Income   $ 62,106     $ 51,550     $ 33,261     $ 210,751     $ 183,863  
 
 
Bank of Hawaii Corporation and Subsidiaries
Consolidated Statements of Condition           Table 5
  December 31,   September 30,   December 31,
(dollars in thousands)   2018   2018   2017
Assets
Interest-Bearing Deposits in Other Banks $ 3,028 $ 3,725 $ 3,421
Funds Sold 198,860 104,199 181,413
Investment Securities
Available-for-Sale 2,007,942 2,049,687 2,232,979
Held-to-Maturity (Fair Value of $3,413,994; $3,549,235; and $3,894,121) 3,482,092 3,664,487 3,928,170
Loans Held for Sale 10,987 18,063 19,231
Loans and Leases 10,448,774 10,231,062 9,796,947
Allowance for Loan and Lease Losses     (106,693 )     (108,690 )     (107,346 )
Net Loans and Leases     10,342,081       10,122,372       9,689,601  
Total Earning Assets     16,044,990       15,962,533       16,054,815  
Cash and Due from Banks 324,081 227,049 263,017
Premises and Equipment, Net 151,837 142,928 130,926
Accrued Interest Receivable 51,230 54,839 50,485
Foreclosed Real Estate 1,356 1,909 1,040
Mortgage Servicing Rights 24,310 24,463 24,622
Goodwill 31,517 31,517 31,517
Bank-Owned Life Insurance 283,771 282,637 280,034
Other Assets     230,882       263,859       252,596  
Total Assets   $ 17,143,974     $ 16,991,734     $ 17,089,052  
 
Liabilities
Deposits
Noninterest-Bearing Demand $ 4,739,596 $ 4,678,981 $ 4,724,300
Interest-Bearing Demand 3,002,925 2,975,069 3,082,563
Savings 5,539,199 5,444,053 5,389,013
Time     1,745,522       1,745,232       1,688,092  
Total Deposits     15,027,242       14,843,335       14,883,968  
Short-Term Borrowings 199 629 -
Securities Sold Under Agreements to Repurchase 504,296 504,293 505,293
Other Debt 135,643 185,662 260,716
Retirement Benefits Payable 40,494 36,288 37,312
Accrued Interest Payable 8,253 7,689 6,946
Taxes Payable and Deferred Taxes 19,736 15,549 24,009
Other Liabilities     139,911       144,962       138,940  
Total Liabilities     15,875,774       15,738,407       15,857,184  
Shareholders' Equity

Common Stock ($.01 par value; authorized 500,000,000 shares; issued / outstanding: December 31, 2018 - 58,063,689 / 41,499,898; September 30, 2018 - 58,070,578 / 41,809,551; and December 31, 2017 - 57,959,074 / 42,401,443)

577 577 576
Capital Surplus 571,704 569,223 561,161
Accumulated Other Comprehensive Loss (51,043 ) (59,238 ) (34,715 )
Retained Earnings 1,641,314 1,612,998 1,512,218

Treasury Stock, at Cost (Shares: December 31, 2018 - 16,563,791; September 30, 2018 - 16,261,027; and December 31, 2017 - 15,557,631)

    (894,352 )     (870,233 )     (807,372 )
Total Shareholders' Equity     1,268,200       1,253,327       1,231,868  
Total Liabilities and Shareholders' Equity   $ 17,143,974     $ 16,991,734     $ 17,089,052  
 
           
Bank of Hawaii Corporation and Subsidiaries
Consolidated Statements of Shareholders' Equity               Table 6
  Accum.
Other
Compre-
hensive
Common Shares Common Capital Income Retained Treasury
(dollars in thousands)   Outstanding   Stock   Surplus   (Loss)   Earnings   Stock   Total
Balance as of December 31, 2016 42,635,978 $ 576 $ 551,628 $ (33,906 ) $ 1,415,440 $ (772,201 ) $ 1,161,537
Net Income - - - - 184,672 - 184,672
Other Comprehensive Loss - - - (809 ) - - (809 )
Share-Based Compensation - - 7,369 - - - 7,369

Common Stock Issued under Purchase and Equity Compensation Plans and Related Tax Benefits

337,091 - 2,164 - (828 ) 11,905 13,241
Common Stock Repurchased (571,626 ) - - - - (47,076 ) (47,076 )
Cash Dividends Declared ($2.04 per share)   -       -     -     -       (87,066 )     -       (87,066 )
Balance as of December 31, 2017   42,401,443     $ 576   $ 561,161   $ (34,715 )   $ 1,512,218     $ (807,372 )   $ 1,231,868  
 
Net Income - - - - 219,602 - 219,602
Other Comprehensive Loss - - - (8,851 ) - - (8,851 )

Reclassification of the Income Tax Effects of the Tax Cuts and Jobs Act from AOCI

- - - (7,477 ) 7,477 - -
Share-Based Compensation - - 8,146 - - - 8,146

Common Stock Issued under Purchase and Equity Compensation Plans and Related Tax Benefits

219,210 1 2,397 - 513 5,008 7,919
Common Stock Repurchased (1,120,755 ) - - - - (91,988 ) (91,988 )
Cash Dividends Declared ($2.34 per share)   -       -     -     -       (98,496 )     -       (98,496 )
Balance as of December 31, 2018   41,499,898     $ 577   $ 571,704   $ (51,043 )   $ 1,641,314     $ (894,352 )   $ 1,268,200  
 
               
Bank of Hawaii Corporation and Subsidiaries
Average Balances and Interest Rates - Taxable-Equivalent Basis             Table 7a
    Three Months Ended Three Months Ended Three Months Ended
December 31, 2018 September 30, 2018 December 31, 2017
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 in Other Banks $ 3.3 $ - 1.21

%

$

3.6 $ - 1.09 % $ 3.2 $ - 0.46 %
Funds Sold 128.2 0.7 2.22 281.9 1.4 1.93 221.0 0.7 1.27
Investment Securities
Available-for-Sale

Taxable

1,480.5 10.0 2.70 1,512.1 9.5 2.51 1,669.7 8.5 2.05
Non-Taxable 556.4 3.8 2.77 567.5 3.9 2.75 619.0 5.1 3.29
Held-to-Maturity
Taxable 3,360.5 20.0 2.38 3,413.7 19.3 2.26 3,775.6 20.3 2.15
Non-Taxable     235.1     1.9   3.16       236.1     1.9   3.16       239.0     2.3   3.87
Total Investment Securities     5,632.5     35.7   2.53       5,729.4     34.6   2.41       6,303.3     36.2   2.30
Loans Held for Sale 12.1 0.2 4.63 14.9 0.2 4.45 15.9 0.2 4.02
Loans and Leases 1
Commercial and Industrial 1,351.1 14.3 4.21 1,279.4 13.0 4.04 1,284.5 11.7 3.62
Commercial Mortgage 2,256.0 24.2 4.25 2,180.5 23.0 4.19 2,063.2 20.2 3.89
Construction 179.8 2.2 4.79 187.0 2.2 4.65 213.8 2.6 4.78
Commercial Lease Financing 173.2 1.0 2.42 175.0 1.0 2.30 202.6 1.3 2.56
Residential Mortgage 3,615.8 35.1 3.88 3,563.5 34.0 3.82 3,420.0 32.6 3.81
Home Equity 1,652.4 15.7 3.78 1,622.4 15.7 3.83 1,552.4 14.3 3.65
Automobile 641.8 6.0 3.73 606.3 5.9 3.84 516.3 5.8 4.43
Other 2     450.0     8.8   7.72       467.8     9.3   7.90       435.9     8.5   7.80
Total Loans and Leases     10,320.1     107.3   4.14       10,081.9     104.1   4.11       9,688.7     97.0   3.98
Other     36.8     0.4   3.82       38.9     0.4   3.74       40.6     0.3   2.67
Total Earning Assets 3     16,133.0     144.3   3.56       16,150.6     140.7   3.47       16,272.7     134.4   3.29
Cash and Due from Banks 234.3 252.1 229.5
Other Assets   621.3   612.6   582.4
Total Assets $ 16,988.6 $ 17,015.3 $ 17,084.6
 
Interest-Bearing Liabilities
Interest-Bearing Deposits
Demand $ 2,888.3 1.5 0.20 $ 2,999.5 1.3 0.17 $ 2,877.7 0.5 0.06
Savings 5,494.5 4.5 0.32 5,482.4 3.8 0.28 5,396.9 1.9 0.14
Time     1,800.7     7.2   1.59       1,683.0     5.8   1.37       1,767.9     4.6   1.03
Total Interest-Bearing Deposits     10,183.5     13.2   0.51       10,164.9     10.9   0.43       10,042.5     7.0   0.28
Short-Term Borrowings 89.6 0.5 2.31 11.6 0.1 2.06 25.0 0.1 1.27
Securities Sold Under Agreements to Repurchase 504.3 4.7 3.62 504.3 4.7 3.62 505.3 4.6 3.61
Other Debt     145.2     0.7   1.85       208.5     0.8   1.60       267.6     1.1   1.66
Total Interest-Bearing Liabilities     10,922.6     19.1   0.69       10,889.3     16.5   0.60       10,840.4     12.8   0.47
Net Interest Income $ 125.2 $ 124.2 $ 121.6
Interest Rate Spread 2.87 % 2.87 % 2.82 %
Net Interest Margin 3.10 % 3.07 % 2.98 %
Noninterest-Bearing Demand Deposits 4,596.0 4,655.6 4,770.7
Other Liabilities 215.3 219.9 242.9
Shareholders' Equity   1,254.7   1,250.5   1,230.6

Total Liabilities and Shareholders' Equity

$ 16,988.6 $ 17,015.3 $ 17,084.6
 

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 21% for 2018 and 35% for 2017, of $1,263,000 for the three months ended December 31, 2018, $1,265,000 for the three months ended September 30, 2018, and $2,808,000 for the three months ended December 31, 2017.

 
           
Bank of Hawaii Corporation and Subsidiaries
Average Balances and Interest Rates - Taxable-Equivalent Basis                 Table 7b
  Year Ended Year Ended
December 31, 2018 December 31, 2017
Average Income/ Yield/ Average Income/ Yield/
(dollars in millions)   Balance   Expense   Rate     Balance   Expense   Rate
Earning Assets
Interest-Bearing Deposits in Other Banks $ 3.2 $ - 1.05 % $ 3.4 $ - 0.45 %
Funds Sold 200.0 3.7 1.86 423.0 3.9 0.92
Investment Securities
Available-for-Sale
Taxable 1,537.7 37.6 2.44 1,659.3 33.1 2.00
Non-Taxable 577.9 15.9 2.76 643.7 21.0 3.27
Held-to-Maturity
Taxable 3,468.4 78.4 2.26 3,648.6 75.7 2.07
Non-Taxable     236.5     7.5   3.17       240.4     9.3   3.88
Total Investment Securities     5,820.5     139.4   2.39       6,192.0     139.1   2.25
Loans Held for Sale 14.0 0.6 4.31 22.6 0.9 3.99
Loans and Leases 1
Commercial and Industrial 1,304.8 51.9 3.98 1,262.8 44.5 3.52
Commercial Mortgage 2,164.6 89.7 4.14 1,977.1 75.7 3.83
Construction 184.9 8.6 4.68 238.4 11.2 4.69
Commercial Lease Financing 176.8 4.1 2.29 205.9 4.8 2.32
Residential Mortgage 3,546.5 136.0 3.84 3,307.6 126.4 3.82
Home Equity 1,620.8 61.1 3.77 1,467.7 53.2 3.62
Automobile 591.2 23.2 3.92 486.5 23.2 4.78
Other 2     454.1     35.6   7.85       400.8     31.8   7.93
Total Loans and Leases     10,043.7     410.2   4.08       9,346.8     370.8   3.97
Other     39.0     1.4   3.48       40.5     0.9   2.33
Total Earning Assets 3     16,120.4     555.3   3.44       16,028.3     515.6   3.22
Cash and Due from Banks 241.6 158.7
Other Assets   609.0   562.2
Total Assets $ 16,971.0 $ 16,749.2
 
Interest-Bearing Liabilities
Interest-Bearing Deposits
Demand $ 2,958.8 4.7 0.16 $ 2,871.7 1.7 0.06
Savings 5,434.3 13.6 0.25 5,388.5 6.7 0.12
Time     1,725.9     22.8   1.32       1,589.4     13.9   0.88
Total Interest-Bearing Deposits     10,119.0     41.1   0.41       9,849.6     22.3   0.23
Short-Term Borrowings 35.5 0.8 2.13 17.7 0.2 1.05
Securities Sold Under Agreements to Repurchase 504.7 18.5 3.67 507.0 19.6 3.86
Other Debt     211.3     3.4   1.61       267.9     4.4   1.66
Total Interest-Bearing Liabilities     10,870.5     63.8   0.59       10,642.2     46.5   0.44
Net Interest Income $ 491.5 $ 469.1
Interest Rate Spread 2.85 % 2.78 %
Net Interest Margin 3.05 % 2.93 %
Noninterest-Bearing Demand Deposits 4,638.7 4,655.8
Other Liabilities 216.1 242.1
Shareholders' Equity   1,245.7   1,209.1
Total Liabilities and Shareholders' Equity $ 16,971.0 $ 16,749.2
 

1

 

Non-performing loans and leases are included in the respective average loan and lease balances. Income, if any, on such loans and leases is recognized on a cash basis.

2

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

3

Interest income includes taxable-equivalent basis adjustments, based upon a federal statutory tax rate of 21% for 2018 and 35% for 2017, of $5,170,000 for the year ended December 31, 2018 and $11,843,000 for the year ended December 31, 2017.

 

     
Bank of Hawaii Corporation and Subsidiaries
Analysis of Change in Net Interest Income - Taxable-Equivalent Basis           Table 8a
Three Months Ended December 31, 2018
Compared to September 30, 2018
(dollars in millions)   Volume 1   Rate 1   Total
Change in Interest Income:
Funds Sold $ (0.9 ) $ 0.2 $ (0.7 )
Investment Securities
Available-for-Sale
Taxable (0.2 ) 0.7 0.5
Non-Taxable (0.1 ) - (0.1 )
Held-to-Maturity
Taxable     (0.3 )     1.0       0.7  
Total Investment Securities     (0.6 )     1.7       1.1  
Loans and Leases
Commercial and Industrial 0.8 0.5 1.3
Commercial Mortgage 0.8 0.4 1.2
Construction (0.1 ) 0.1 -
Residential Mortgage 0.5 0.6 1.1
Home Equity 0.2 (0.2 ) -
Automobile 0.3 (0.2 ) 0.1
Other 2     (0.3 )     (0.2 )     (0.5 )
Total Loans and Leases     2.2       1.0       3.2  
Total Change in Interest Income     0.7       2.9       3.6  
 
Change in Interest Expense:
Interest-Bearing Deposits
Demand - 0.2 0.2
Savings - 0.7 0.7
Time     0.4       1.0       1.4  
Total Interest-Bearing Deposits     0.4       1.9       2.3  
Short-Term Borrowings 0.4 - 0.4
Other Debt     (0.2 )     0.1       (0.1 )
Total Change in Interest Expense     0.6       2.0       2.6  
 
Change in Net Interest Income   $ 0.1     $ 0.9     $ 1.0  
 

1

 

The change in interest income and expense not solely due to changes in volume or rate has been allocated on a pro-rata basis to the volume and rate columns.

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 8b ...