Bank of Hawaii Corporation Second Quarter 2020 Financial Results

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  • Diluted Earnings Per Share $0.98

  • Net Income $38.9 Million

  • Board of Directors Approves Dividend of $0.67 Per Share

Bank of Hawaii Corporation (NYSE: BOH) today reported diluted earnings per share of $0.98 for the second quarter of 2020 compared with diluted earnings per share of $0.87 in the previous quarter and diluted earnings per share of $1.40 in the same quarter last year. Net income for the second quarter of 2020 was $38.9 million compared with net income of $34.7 million in the first quarter of 2020 and net income of $56.9 million in the second quarter of 2019.

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Loan and lease balances increased to $11.8 billion at June 30, 2020, up 4.0 percent from March 31, 2020 and up 9.7 percent compared with June 30, 2019. Total deposits reached a new record high of $17.4 billion at the end of the second quarter of 2020, up 8.5 percent from March 31, 2020 and up 12.5 percent compared with June 30, 2019.

"Bank of Hawaii Corporation continued to perform well in this very challenging environment," said Peter Ho, Chairman, President and CEO. "Our balance sheet continued to grow while maintaining strong levels of capital and liquidity. Our asset quality remained stable during the quarter and we are well positioned for the future. During the quarter we reopened nine of our branches and our dedicated employees were able to support the needs of our customers and community during this unprecedented period."

The return on average assets for the second quarter of 2020 was 0.82 percent, up from 0.77 percent in the previous quarter and down from 1.31 percent in the same quarter last year. The return on average equity for the second quarter of 2020 was 11.58 percent, up from 10.64 percent for the first quarter of 2020 and down from 17.97 percent for the second quarter of 2019. The efficiency ratio for the second quarter of 2020 improved to 49.95 percent compared with 55.96 percent in the previous quarter and 54.69 percent in the same quarter last year.

For the six-month period ended June 30, 2020, net income was $73.7 million, down from net income of $115.7 million during the same period last year. Diluted earnings per share were $1.85 for the first half of 2020 compared with diluted earnings per share of $2.82 for the first half of 2019.

The return on average assets for the six-month period ended June 30, 2020 was 0.79 percent compared with the return on average assets of 1.34 percent for the same six months in 2019. The year-to-date return on average equity was 11.11 percent for the first half of 2020 compared with the return on average equity of 18.39 percent for the first half of 2019. The efficiency ratio for the first half of 2020 improved to 52.90 percent compared with 54.95 percent in the same period last year.

Financial Highlights

Net interest income, on a taxable equivalent basis, for the second quarter of 2020 was $127.0 million, an increase of $0.7 million compared with $126.3 million in the first quarter of 2020 and an increase of $2.3 million compared with $124.7 million in the second quarter of 2019. Net interest income in the second quarter of 2020 included an interest recovery of $2.9 million. Net interest income, on a taxable equivalent basis, for the first half of 2020 was $253.4 million, an increase of $2.9 million compared with net interest income of $250.5 million for the first half of 2019. Analyses of the changes in net interest income are included in Tables 8a, 8b and 8c.

The net interest margin was 2.83 percent for the second quarter of 2020, down 13 basis points from 2.96 percent in the previous quarter and down 21 basis points from the net interest margin of 3.04 percent in the second quarter of 2019. The decrease in the net interest margin is largely due to lower rates and higher levels of liquidity. The net interest margin for the first six months of 2020 was 2.90 percent compared with the net interest margin of 3.08 percent for the same six-month period last year.

Results for the second quarter of 2020 included a provision for credit losses of $40.4 million compared with $33.6 million in the previous quarter and $4.0 million in the same quarter last year. The provision for credit losses during the first half of 2020 was $74.0 million compared with a provision for credit losses of $7.0 million during the same period in 2019.

Noninterest income was $51.3 million in the second quarter of 2020, an increase of $5.2 million compared with $46.1 million in the first quarter of 2020 and an increase of $5.8 million compared with $45.5 million in the second quarter of 2019. Noninterest income during the second quarter of 2020 included a gain of $14.2 million related to a sale of Visa Class B shares. There were no significant items in noninterest income during the first quarter of 2020 or the second quarter of 2019. Adjusted for the sale of the Visa shares, the decline in noninterest income compared to the prior quarter was due to reductions in overdraft and ATM fees and lower customer derivative activity. Noninterest income for the first half of 2020 was $97.4 million, an increase of $8.3 million compared with noninterest income of $89.1 million for the first half of 2019.

Noninterest expense was $88.9 million in the second quarter of 2020, a decrease of $7.4 million compared with $96.3 million in the first quarter of 2020 and a decrease of $3.8 million compared with $92.7 million in the second quarter last year. There were no significant items in noninterest expense during the second quarter of 2020 or the second quarter of 2019. Noninterest expense in the first quarter of 2020 included seasonal payroll expenses of approximately $3.1 million and severance expenses of $4.7 million that were partially offset by the elimination of corporate incentive accruals. Noninterest expense for the first half of 2020 was $185.2 million, a decrease of $0.6 million compared with noninterest expense of $185.8 million for the first half of 2019. An analysis of noninterest expenses related to salaries and benefits is included in Table 9.

The effective tax rate for the second quarter of 2020 was 20.05 percent compared with 17.68 percent in the previous quarter and 21.84 percent in the same quarter last year. The effective tax rate for the first half of 2020 was 18.95 percent compared with an effective tax rate of 20.35 percent during the same period last year.

The Company’s business segments are defined as Consumer Banking, Commercial Banking, and Treasury & Other. Results for the business segments are determined based on the Company’s internal financial management reporting process and organizational structure. Selected financial information is included in Tables 13a and 13b.

Asset Quality

The Company’s asset quality remained relatively stable during the second quarter of 2020. Total non-performing assets were $22.7 million at June 30, 2020 compared with $20.6 million at March 31, 2020 and $21.8 million at June 30, 2019. As a percentage of total loans and leases, including foreclosed real estate, non-performing assets were 0.19 percent at the end of the second quarter of 2020 compared with 0.18 percent at the end of the first quarter of 2020 and 0.20 percent at the end of the second quarter last year.

Accruing loans and leases past due 90 days or more were $8.9 million at June 30, 2020 compared with $8.5 million at March 31, 2020 and $6.4 million at June 30, 2019. Restructured loans not included in non-accrual loans or accruing loans past due 90 days or more were $59.7 million at June 30, 2020, compared with $61.4 million at March 31, 2020 and $48.6 million at June 30, 2019. More information on non-performing assets and accruing loans and leases past due 90 days or more is presented in Table 11.

Net loan and lease charge-offs during the second quarter of 2020 were $5.1 million or 0.18 percent annualized of total average loans and leases outstanding. Loan and lease charge-offs of $8.3 million during the quarter were partially offset by recoveries of $3.2 million. Net charge-offs during the first quarter of 2020 were $3.7 million or 0.14 percent annualized of total average loans and leases outstanding and comprised of $7.2 million in charge-offs and recoveries of $3.4 million. Net charge-offs during the second quarter of 2019 were $2.4 million or 0.09 percent annualized of total average loans and leases outstanding and comprised of $5.1 million in charge-offs and recoveries of $2.8 million. Net charge-offs during the first half of 2020 were $8.9 million or 0.16 percent annualized of total average loans and leases outstanding compared with net charge-offs of $6.0 million or 0.12 percent annualized of total average loans and leases outstanding for the first half of 2019.

The allowance for credit losses was $173.4 million at June 30, 2020 compared with $138.2 million at March 31, 2020 and $107.7 million at June 30, 2019. The ratio of the allowance for credit losses to total loans and leases was 1.47 percent at June 30, 2020 compared with 1.22 percent at March 31, 2020 and 1.00 percent at June 30, 2019. The reserve for unfunded commitments was $2.5 million at June 30, 2020 compared with $3.3 million at March 31, 2020 and $6.8 million at June 30, 2019. Details of loan and lease charge-offs, recoveries and components of the total reserve for credit losses are summarized in Table 12.

Other Financial Highlights

Total assets increased to $19.8 billion at June 30, 2020 compared with $18.5 billion at March 31, 2020 and $17.7 billion at June 30, 2019. Average total assets were $19.2 billion during the second quarter of 2020 compared with $18.2 billion during the previous quarter and $17.5 billion during the second quarter last year.

The investment securities portfolio was $6.0 billion at June 30, 2020, up from $5.7 billion at March 31, 2020 and $5.6 billion at June 30, 2019. The portfolio remains largely comprised of securities issued by U.S. government agencies and includes $3.3 billion in securities held to maturity and $2.7 billion in securities available for sale. The securities portfolio at March 31, 2020 included $3.0 billion in securities held to maturity and $2.7 billion in securities available for sale compared with $3.0 billion in securities held to maturity and $2.6 billion in securities available for sale at June 30, 2019.

Total loans and leases were $11.8 billion at June 30, 2020, up from $11.4 billion at March 31, 2020 and $10.8 billion at June 30, 2019. Average total loans and leases increased to $11.7 billion during the second quarter of 2020 compared with $11.1 billion during the previous quarter and $10.6 billion during the same quarter last year. The commercial loan portfolio was $5.0 billion at June 30, 2020, up $492.2 million or 10.9 percent from commercial loans of $4.5 billion at March 31, 2020, and up $920.4 million or 22.4 percent from commercial loans of $4.1 billion at June 30, 2019. The consumer loan portfolio decreased to $6.8 billion at June 30, 2020, down $39.6 million or 0.6 percent from consumer loans of $6.8 billion at March 31, 2020 and increased $125.8 million or 1.9 percent from consumer loans of $6.7 billion at June 30, 2019. Loan and lease portfolio balances are summarized in Table 10.

Total deposits were $17.4 billion at June 30, 2020, up from $16.1 billion at March 31, 2020 and $15.5 billion at June 30, 2019. Average total deposits were $16.7 billion during the second quarter of 2020, up from $15.8 billion during the previous quarter and $15.2 billion during the same quarter last year. Consumer deposits increased to $8.8 billion at June 30, 2020, up $472.4 million or 5.7 percent from consumer deposits of $8.3 billion at March 31, 2020 and up $886.6 million or 11.3 percent from consumer deposits of $7.9 billion at June 30, 2019. Commercial deposits increased to $7.3 billion at June 30, 2020, up $936.5 million or 14.7 percent from commercial deposits of $6.4 billion at March 31, 2020 and up $1.1 billion or 18.1 percent from commercial deposits of $6.2 billion at June 30, 2019. Other deposits, including public funds, were $1.4 billion at June 30, 2020, down $41.1 million or 2.9 percent from March 31, 2020 and down $68.3 million or 4.8 percent from June 30, 2019. Deposit balances are summarized in Tables 7a, 7b, and 10.

Total shareholders’ equity increased to $1.4 billion at June 30, 2020 compared with $1.3 billion at March 31, 2020 and June 30, 2019. There were no shares repurchased during the second quarter of 2020. The Tier 1 Capital Ratio at June 30, 2020 was 12.04 percent compared with 11.81 percent at March 31, 2020 and 12.46 percent at June 30, 2019. The Tier 1 leverage ratio at June 30, 2020 was 6.90 percent compared with 7.12 percent at March 31, 2020 and 7.36 percent at June 30, 2019.

The Company’s Board of Directors declared a quarterly cash dividend of $0.67 per share on the Company’s outstanding shares. The dividend will be payable on September 15, 2020 to shareholders of record at the close of business on August 31, 2020.

Conference Call Information

The Company will review its second quarter 2020 financial results today at 2:00 p.m. Eastern Time (8:00 a.m. Hawaii Time). The conference call including presentation materials 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, July 27, 2020. 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 conference ID 5959108 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, 2019, which was filed with the U.S. Securities and Exchange Commission. We have not committed to update forward-looking statements to reflect later events or circumstances.

Bank of Hawaii Corporation is a regional financial services company serving businesses, consumers, and governments in Hawaii 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

Six Months Ended

June 30,

March 31,

June 30,

June 30,

(dollars in thousands, except per share amounts)

2020

2020

2019

2020

2019

For the Period:

Operating Results

Net Interest Income

$

126,691

$

125,966

$

124,097

$

252,657

$

248,934

Provision for Credit Losses

40,400

33,600

4,000

74,000

7,000

Total Noninterest Income

51,268

46,149

45,450

97,417

89,129

Total Noninterest Expense

88,892

96,312

92,725

185,204

185,782

Net Income

38,908

34,742

56,919

73,650

115,718

Basic Earnings Per Share

0.98

0.88

1.40

1.86

2.84

Diluted Earnings Per Share

0.98

0.87

1.40

1.85

2.82

Dividends Declared Per Share

0.67

0.67

0.65

1.34

1.27

Performance Ratios

Return on Average Assets

0.82

%

0.77

%

1.31

%

0.79

%

1.34

%

Return on Average Shareholders' Equity

11.58

10.64

17.97

11.11

18.39

Efficiency Ratio 1

49.95

55.96

54.69

52.90

54.95

Net Interest Margin 2

2.83

2.96

3.04

2.90

3.08

Dividend Payout Ratio 3

68.37

76.14

46.43

72.04

44.72

Average Shareholders' Equity to Average Assets

7.04

7.21

7.27

7.12

7.31

Average Balances

Average Loans and Leases

$

11,727,649

$

11,060,707

$

10,631,558

$

11,394,178

$

10,549,893

Average Assets

19,189,581

18,222,602

17,480,651

18,706,092

17,359,031

Average Deposits

16,679,511

15,817,745

15,162,782

16,248,628

15,067,622

Average Shareholders' Equity

1,351,345

1,313,848

1,270,162

1,332,596

1,268,808

Per Share of Common Stock

Book Value

$

33.76

$

33.20

$

31.61

$

33.76

$

31.61

Tangible Book Value

32.97

32.41

30.83

32.97

30.83

Market Value

Closing

61.41

54.91

82.91

61.41

82.91

High

72.74

95.53

84.53

95.53

84.53

Low

51.15

46.70

75.24

46.70

66.54

June 30,

March 31,

December 31,

June 30,

2020

2020

2019

2019

As of Period End:

Balance Sheet Totals

Loans and Leases

$

11,805,370

$

11,352,780

$

10,990,892

$

10,759,129

Total Assets

19,769,942

18,542,233

18,095,496

17,688,845

Total Deposits

17,423,155

16,055,361

15,784,482

15,488,821

Other Debt

...

60,524

60,545

85,565

110,605

Total Shareholders' Equity

1,352,082

1,327,929

1,286,832

1,285,948

Asset Quality

Non-Performing Assets

$

22,701

$

20,604

$

20,117

$

21,782

Allowance for Credit Losses

173,439

138,150

110,027

107,672

Allowance to Loans and Leases Outstanding

1.47

%

1.22

%

1.00

%

1.00

%

Capital Ratios 4

Common Equity Tier 1 Capital Ratio

12.04

%

11.81

%

12.18

%

12.46

%

Tier 1 Capital Ratio

12.04

11.81

12.18

12.46

Total Capital Ratio

13.29

13.06

13.28

13.57

Tier 1 Leverage Ratio

6.90

7.12

7.25

7.36

Total Shareholders' Equity to Total Assets

6.84

7.16

7.11

7.27

Tangible Common Equity to Tangible Assets 5

6.69

7.00

6.95

7.10

Tangible Common Equity to Risk-Weighted Assets 5

12.07

11.85

11.85

12.17

Non-Financial Data

Full-Time Equivalent Employees

2,112

2,094

2,124

2,152

Branches

67

67

68

68

ATMs

367

382

387

383

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 Regulatory capital ratios as of June 30, 2020 are preliminary. CET 1 / Tier 1 Capital Ratios revised from 11.85%, Total Capital Ratio revised from 13.10%, and Tier 1 Leverage Ratio revised from 7.14% as of March 31, 2020.

5 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."

Bank of Hawaii Corporation and Subsidiaries

Reconciliation of Non-GAAP Financial Measures

Table 2

June 30,

March 31,

December 31,

June 30,

(dollars in thousands)

2020

2020

2019

2019

Total Shareholders' Equity

$

1,352,082

$

1,327,929

$

1,286,832

$

1,285,948

Less: Goodwill

31,517

31,517

31,517

31,517

Tangible Common Equity

$

1,320,565

$

1,296,412

$

1,255,315

$

1,254,431

Total Assets

$

19,769,942

$

18,542,233

$

18,095,496

$

17,688,845

Less: Goodwill

31,517

31,517

31,517

31,517

Tangible Assets

$

19,738,425

$

18,510,716

$

18,063,979

$

17,657,328

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

$

10,941,894

$

10,944,260

$

10,589,061

$

10,309,085

Total Shareholders' Equity to Total Assets

6.84

%

7.16

%

7.11

%

7.27

%

Tangible Common Equity to Tangible Assets (Non-GAAP)

6.69

%

7.00

%

6.95

%

7.10

%

Tier 1 Capital Ratio

12.04

%

11.81

%

12.18

%

12.46

%

Tangible Common Equity to Risk-Weighted Assets (Non-GAAP)

12.07

%

11.85

%

11.85

%

12.17

%

Note: Risk-Weighted Assets and Regulatory capital ratios as of June 30, 2020 are preliminary. Risk-Weighted Assets revised from $10,941,909 and Tier 1 Capital Ratio revised from 11.85% as of March 31, 2020.

Bank of Hawaii Corporation and Subsidiaries

Consolidated Statements of Income

Table 3

Three Months Ended

Six Months Ended

June 30,

March 31,

June 30,

June 30,

(dollars in thousands, except per share amounts)

2020

2020

2019

2020

2019

Interest Income

Interest and Fees on Loans and Leases

$

107,628

$

108,210

$

110,401

$

215,838

$

218,912

Income on Investment Securities

Available-for-Sale

14,576

16,711

15,072

31,287

28,504

Held-to-Maturity

16,723

19,252

22,149

35,975

44,070

Deposits

1

9

9

10

24

Funds Sold

92

546

730

638

2,174

Other

125

218

210

343

529

Total Interest Income

139,145

144,946

148,571

284,091

294,213

Interest Expense

Deposits

7,954

14,260

18,628

22,214

33,912

Securities Sold Under Agreements to Repurchase

4,020

4,025

4,623

8,045

9,194

Funds Purchased

18

72

512

90

669

Short-Term Borrowings

22

39

1

61

37

Other Debt

440

584

710

1,024

1,467

Total Interest Expense

12,454

18,980

24,474

31,434

45,279

Net Interest Income

126,691

125,966

124,097

252,657

248,934

Provision for Credit Losses

40,400

33,600

4,000

74,000

7,000

Net Interest Income After Provision for Credit Losses

86,291

92,366

120,097

178,657

241,934

Noninterest Income

Trust and Asset Management

10,550

10,915

11,385

21,465

22,146

Mortgage Banking

4,278

2,695

3,336

6,973

5,623

Service Charges on Deposit Accounts

5,097

7,451

7,283

12,548

14,647

Fees, Exchange, and Other Service Charges

9,417

13,200

14,252

22,617

28,460

Investment Securities Gains (Losses), Net

13,216

(970

)

(776

)

12,246

(1,611

)

Annuity and Insurance

883

928

1,806

1,811

4,384

Bank-Owned Life Insurance

1,649

1,580

1,779

3,229

3,489

Other

6,178

10,350

6,385

16,528

11,991

Total Noninterest Income

51,268

46,149

45,450

97,417

89,129

Noninterest Expense

Salaries and Benefits

50,715

54,463

53,511

105,178

110,097

Net Occupancy

8,761

8,955

8,579

17,716

16,173

Net Equipment

8,195

8,456

6,895

16,651

13,728

Data Processing

4,416

4,788

4,727

9,204

9,253

Professional Fees

3,061

3,208

2,177

6,269

4,630

FDIC Insurance

1,558

1,456

1,290

3,014

2,559

Other

12,186

14,986

15,546

27,172

29,342

Total Noninterest Expense

88,892

96,312

92,725

185,204

185,782

Income Before Provision for Income Taxes

48,667

42,203

72,822

90,870

145,281

Provision for Income Taxes

9,759

7,461

15,903

17,220

29,563

Net Income

$

38,908

$

34,742

$

56,919

$

73,650

$

115,718

Basic Earnings Per Share

$

0.98

$

0.88

$

1.40

$

1.86

$

2.84

Diluted Earnings Per Share

$

0.98

$

0.87

$

1.40

$

1.85

$

2.82

Dividends Declared Per Share

$

0.67

$

0.67

$

0.65

$

1.34

$

1.27

Basic Weighted Average Shares

39,703,735

39,681,611

40,541,594

39,692,695

40,738,772

Diluted Weighted Average Shares

39,832,475

39,916,986

40,769,767

39,873,334

40,988,001

Bank of Hawaii Corporation and Subsidiaries

Consolidated Statements of Comprehensive Income

Table 4

Three Months Ended

Six Months Ended

June 30,

March 31,

June 30,

June 30,

(dollars in thousands)

2020

2020

2019

2020

2019

Net Income

$

38,908

$

34,742

$

56,919

$

73,650

$

115,718

Other Comprehensive Income, Net of Tax:

Net Unrealized Gains on Investment Securities

7,730

41,559

16,209

49,289

23,128

Defined Benefit Plans

374

374

245

748

491

Other Comprehensive Income

8,104

41,933

16,454

50,037

23,619

Comprehensive Income

$

47,012

$

76,675

$

73,373

$

123,687

$

139,337

Bank of Hawaii Corporation and Subsidiaries

Consolidated Statements of Condition

Table 5

June 30,

March 31,

December 31,

June 30,

(dollars in thousands)

2020

2020

2019

2019

Assets

Interest-Bearing Deposits in Other Banks

$

2,310

$

6,346

$

4,979

$

3,859

Funds Sold

800,857

96,898

254,574

204,340

Investment Securities

Available-for-Sale

2,726,478

2,681,049

2,619,003

2,649,949

Held-to-Maturity (Fair Value of $3,374,294; $3,104,020; $3,062,882; and $2,973,229)

3,276,829

3,004,139

3,042,294

2,959,611

Loans Held for Sale

20,711

20,789

39,062

22,706

Loans and Leases

11,805,370

11,352,780

10,990,892

10,759,129

Allowance for Credit Losses

(173,439

)

(138,150

)

(110,027

)

(107,672

)

Net Loans and Leases

11,631,931

11,214,630

10,880,865

10,651,457

Total Earning Assets

18,459,116

17,023,851

16,840,777

16,491,922

Cash and Due from Banks

242,423

453,465

299,105

282,164

Premises and Equipment, Net

198,582

196,228

188,388

169,671

Operating Lease Right-of-Use Assets

97,166

98,695

100,838

103,336

Accrued Interest Receivable

50,645

46,996

46,476

49,726

Foreclosed Real Estate

2,506

2,506

2,737

2,737

Mortgage Servicing Rights

22,904

22,537

25,022

24,233

Goodwill

31,517

31,517

31,517

31,517

Bank-Owned Life Insurance

291,185

289,536

287,962

285,295

Other Assets

373,898

376,902

272,674

248,244

Total Assets

$

19,769,942

$

18,542,233

$

18,095,496

$

17,688,845

Liabilities

Deposits

Noninterest-Bearing Demand

$

5,485,015

$

4,378,918

$

4,489,525

$

4,528,251

Interest-Bearing Demand

3,437,654

3,261,101

3,127,205

3,033,066

Savings

6,821,710

6,670,530

6,365,321

6,004,528

Time

1,678,776

1,744,812

1,802,431

1,922,976

Total Deposits

17,423,155

16,055,361

15,784,482

15,488,821

Funds Purchased

-

75,000

-

-

Short-Term Borrowings

-

75,000

-

-

Securities Sold Under Agreements to Repurchase

603,206

603,206

604,306

504,299

Other Debt

60,524

60,545

85,565

110,605

Operating Lease Liabilities

104,741

106,180

108,210

110,483

Retirement Benefits Payable

43,833

44,124

44,504

40,047

Accrued Interest Payable

7,775

7,932

8,040

9,454

Taxes Payable and Deferred Taxes

38,297

32,793

16,085

21,337

Other Liabilities

136,329

154,163

157,472

117,851

Total Liabilities

18,417,860

17,214,304

16,808,664

16,402,897

Shareholders' Equity

Common Stock ($.01 par value; authorized 500,000,000 shares; issued / outstanding: June 30, 2020 - 58,263,452 / 40,047,694; March 31, 2020 - 58,251,725 / 39,996,510; December 31, 2019 - 58,166,910 / 40,039,695; and June 30, 2019 - 58,175,367 / 40,687,719)

580

579

579

579

Capital Surplus

586,946

584,392

582,566

577,346

Accumulated Other Comprehensive Gain (Loss)

18,925

10,821

(31,112

)

(27,424

)

Retained Earnings

1,786,351

1,773,607

1,761,415

1,704,993

Treasury Stock, at Cost (Shares: June 30, 2020 - 18,215,758; March 31, 2020 - 18,255,215; December 31, 2019 - 18,127,215; and June 30, 2019 - 17,487,648)

(1,040,720

)

(1,041,470

)

(1,026,616

)

(969,546

)

Total Shareholders' Equity

1,352,082

1,327,929

1,286,832

1,285,948

Total Liabilities and Shareholders' Equity

$

19,769,942

$

18,542,233

$

18,095,496

$

17,688,845

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, 2019

40,039,695

$

579

$

582,566

$

(31,112

)

$

1,761,415

$

(1,026,616

)

$

1,286,832

Net Income

-

-

-

-

73,650

-

73,650

Other Comprehensive Income

-

-

-

50,037

-

-

50,037

Cumulative Change in Accounting Principle

-

-

-

-

3,632

-

3,632

Share-Based Compensation

-

-

3,704

-

-

-

3,704

Common Stock Issued under Purchase and Equity

Compensation Plans

195,351

1

676

-

1,333

3,041

5,051

Common Stock Repurchased

(187,352

)

-

-

-

-

(17,145

)

(17,145

)

Cash Dividends Declared ($1.34 per share)

-

-

-

-

(53,679

)

-

(53,679

)

Balance as of June 30, 2020

40,047,694

$

580

$

586,946

$

18,925

$

1,786,351

$

(1,040,720

)

$

1,352,082

Balance as of December 31, 2018

41,499,898

$

577

$

571,704

$

(51,043

)

$

1,641,314

$

(894,352

)

$

1,268,200

Net Income

-

-

-

-

115,718

-

115,718

Other Comprehensive Income

-

-

-

23,619

-

-

23,619

Share-Based Compensation

-

-

4,438

-

-

-

4,438

Common Stock Issued under Purchase and Equity

Compensation Plans

174,709

2

1,204

-

162

2,981

4,349

Common Stock Repurchased

(986,888

)

-

-

-

-

(78,175

)

(78,175

)

Cash Dividends Declared ($1.27 per share)

-

-

-

-

(52,201

)

-

(52,201

)

Balance as of June 30, 2019

40,687,719

$

579

$

577,346

$

(27,424

)

$

1,704,993

$

(969,546

)

$

1,285,948

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

June 30, 2020

March 31, 2020

June 30, 2019

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

$

2.6

$

-

0.18

%

$

1.4

$

-

2.36

%

$

2.9

$

-

1.25

%

Funds Sold

545.9

0.1

0.07

152.8

0.6

1.41

123.6

0.8

2.34

Investment Securities

Available-for-Sale

Taxable

2,614.1

14.3

2.19

2,702.4

16.4

2.43

2,004.3

14.3

2.87

Non-Taxable

32.2

0.4

4.45

32.4

0.4

4.40

86.8

0.9

4.15

Held-to-Maturity

Taxable

2,957.6

16.4

2.22

3,036.2

18.9

2.50

3,358.0

21.0

2.50

Non-Taxable

54.4

0.4

2.66

54.7

0.4

2.67

193.0

1.5

3.08

Total Investment Securities

5,658.3

31.5

2.22

5,825.7

36.1

2.48

5,642.1

37.7

2.68

Loans Held for Sale

23.4

0.2

3.24

23.2

0.2

3.54

18.7

0.2

4.05

Loans and Leases 1

Commercial and Industrial

1,963.8

17.9

3.67

1,409.3

13.2

3.77

1,385.7

14.9

4.31

Commercial Mortgage

2,622.9

22.3

3.42

2,549.4

25.1

3.96

2,386.3

25.9

4.35

Construction

255.8

2.5

3.93

213.2

2.5

4.65

125.3

1.7

5.51

Commercial Lease Financing

110.9

0.5

1.88

111.4

0.5

1.95

159.9

1.0

2.49

Residential Mortgage

3,939.6

36.0

3.65

3,895.4

36.9

3.79

3,730.4

36.0

3.87

Home Equity

1,665.2

14.3

3.45

1,680.2

15.2

3.64

1,694.9

16.2

3.83

Automobile

701.2

6.2

3.55

721.0

6.4

3.56

688.5

6.2

3.62

Other 2

468.2

7.9

6.77

480.8

8.4

7.06

460.6

8.4

7.33

Total Loans and Leases

11,727.6

107.6

3.68

11,060.7

108.2

3.93

10,631.6

110.3

4.16

Other

34.0

0.1

1.47

34.3

0.2

2.54

35.0

0.2

2.40

Total Earning Assets 3

17,991.8

139.5

3.11

17,098.1

145.3

3.41

16,453.9

149.2

3.63

Cash and Due from Banks

302.4

278.8

241.6

Other Assets

895.4

845.7

785.2

Total Assets

$

19,189.6

$

18,222.6

$

17,480.7

Interest-Bearing Liabilities

Interest-Bearing Deposits

Demand

$

3,226.6

0.6

0.07

$

3,110.0

1.0

0.12

$

2,902.5

1.4

0.19

Savings

6,691.4

2.2

0.13

6,502.4

7.1

0.44

6,002.0

8.9

0.60

Time

1,826.8

5.2

1.13

1,743.0

6.2

1.43

1,866.6

8.3

1.79

Total Interest-Bearing Deposits

11,744.8

8.0

0.27

11,355.4

14.3

0.51

10,771.1

18.6

0.69

Short-Term Borrowings

57.6

-

0.28

57.8

0.1

0.76

82.3

0.5

2.46

Securities Sold Under Agreements to Repurchase

602.9

4.0

2.64

604.1

4.0

2.64

504.3

4.7

3.63

Other Debt

60.5

0.5

2.91

66.9

0.6

3.51

110.6

0.7

2.57

Total Interest-Bearing Liabilities

12,465.8

12.5

0.40

12,084.2

19.0

0.63

11,468.3

24.5

0.85

Net Interest Income

$

127.0

$

126.3

$

124.7

Interest Rate Spread

2.71

%

2.78

%

2.78

%

Net Interest Margin

2.83

%

2.96

%

3.04

%

Noninterest-Bearing Demand Deposits

4,934.7

4,462.3

4,391.7

Other Liabilities

437.8

362.3

350.5

Shareholders' Equity

1,351.3

1,313.8

1,270.2

Total Liabilities and Shareholders' Equity

$

19,189.6

$

18,222.6

$

17,480.7

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%, of $358,000, $357,000, and $601,000 for the three months ended June 30, 2020, March 31, 2020, and June 30, 2019, respectively.

Bank of Hawaii Corporation and Subsidiaries

Average Balances and Interest Rates - Taxable-Equivalent Basis

Table 7b

Six Months Ended

Six Months Ended

June 30, 2020

June 30, 2019

Average

Income/

Yield/

Average

Income/

Yield/

(dollars in millions)

Balance

Expense

Rate

Balance

Expense

Rate

Earning Assets

Interest-Bearing Deposits in Other Banks

$

2.0

$

-

0.96

%

$

2.9

$

-

1.65

%

Funds Sold

349.3

0.6

0.36

182.3

2.2

2.37

Investment Securities

Available-for-Sale

Taxable

2,658.3

30.8

2.31

1,801.2

25.9

2.88

Non-Taxable

32.3

0.7

4.43

182.5

3.3

3.63

Held-to-Maturity

Taxable

2,996.9

35.4

2.36

3,365.7

41.5

2.46

Non-Taxable

54.5

0.7

2.67

213.4

3.3

3.12

Total Investment Securities

5,742.0

67.6

2.35

5,562.8

74.0

2.66

Loans Held for Sale

23.3

0.4

3.39

15.6

0.3

4.16

Loans and Leases 1

Commercial and Industrial

1,686.5

31.1

3.71

1,371.8

30.2

4.43

Commercial Mortgage

2,586.2

47.4

3.69

2,348.6

50.7

4.36

Construction

234.6

5.0

4.26

137.8

3.6

5.27

Commercial Lease Financing

111.1

1.1

1.91

160.4

1.9

2.38

Residential Mortgage

3,917.5

72.9

3.72

3,705.4

71.5

3.86

Home Equity

1,672.7

29.5

3.55

1,692.5

32.3

3.85

Automobile

711.1

12.6

3.56

678.4

12.3

3.64

Other 2

474.5

16.3

6.92

455.0

16.3

7.23

Total Loans and Leases

11,394.2

215.9

3.80

10,549.9

218.8

4.17

Other

34.2

0.3

2.01

35.2

0.5

3.00

Total Earning Assets 3

17,545.0

284.8

3.26

16,348.7

295.8

3.63

Cash and Due from Banks

290.6

241.2

Other Assets

870.5

769.1

Total Assets

$

18,706.1

$

17,359.0

Interest-Bearing Liabilities

Interest-Bearing Deposits

Demand

$

3,168.3

1.5

0.10

$

2,921.1

2.8

0.20

Savings

6,596.9

9.3

0.28

5,882.1

15.7

0.54

Time

1,784.9

11.4

1.28

1,785.4

15.4

1.74

Total Interest-Bearing Deposits

11,550.1

22.2

0.39

10,588.6

33.9

0.65

Short-Term Borrowings

57.7

0.2

0.52

56.8

0.7

2.47

Securities Sold Under Agreements to Repurchase

603.5

8.0

2.64

504.3

9.2

3.63

Other Debt

63.7

1.0

3.23

115.3

1.5

2.56

Total Interest-Bearing Liabilities

12,275.0

31.4

0.51

11,265.0

45.3

0.81

Net Interest Income

$

253.4

$

250.5

Interest Rate Spread

2.75

%

2.82

%

Net Interest Margin

2.90

%

3.08

%

Noninterest-Bearing Demand Deposits

4,698.5

4,479.0

Other Liabilities

400.0

346.2

Shareholders' Equity

1,332.6

1,268.8

Total Liabilities and Shareholders' Equity

$

18,706.1

$

17,359.0

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

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

3 Interest income includes taxable-equivalent basis adjustments, based upon a federal statutory tax rate of 21%, of $715,000 and $1,582,000 for the six months ended June 30, 2020 and June 30, 2019, respectively.

Bank of Hawaii Corporation and Subsidiaries

Analysis of Change in Net Interest Income - Taxable-Equivalent Basis

Table 8a

Three Months Ended June 30, 2020

Compared to March 31, 2020

(dollars in millions)

Volume 1

Rate 1

Total

Change in Interest Income:

Funds Sold

$

0.4

$

(0.9

)

$

(0.5

)

Investment Securities

Available-for-Sale

Taxable

(0.5

)

(1.6

)

(2.1

)

Held-to-Maturity

Taxable

(0.5

)

(2.0

)

(2.5

)

Total Investment Securities

(1.0

)

(3.6

)

(4.6

)

Loans and Leases

Commercial and Industrial

5.1

(0.4

)

4.7

Commercial Mortgage

0.7

(3.5

)

(2.8

)

Construction

0.4

(0.4

)

-

Residential Mortgage

0.4

(1.3

)

(0.9

)

Home Equity

(0.1

)

(0.8

)

(0.9

)

Automobile

(0.2

)

-

(0.2

)

Other 2

(0.2

)

(0.3

)

(0.5

)

Total Loans and Leases

6.1

(6.7

)

(0.6

)

Other

-

(0.1

)

(0.1

)

Total Change in Interest Income

5.5

(11.3

)

(5.8

)

Change in Interest Expense:

Interest-Bearing Deposits

Demand

-

(0.4

)

(0.4

)

Savings

0.2

(5.1

)

(4.9

)

Time

0.3

(1.3

)

(1.0

)

Total Interest-Bearing Deposits

0.5

(6.8

)

(6.3

)

Short-Term Borrowings

-

(0.1

)

(0.1

)

Other Debt

(0.1

)

-

(0.1

)

Total Change in Interest Expense

0.4

(6.9

)

(6.5

)

Change in Net Interest Income

$

5.1

$

(4.4

)

$

0.7

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

Three Months Ended June 30, 2020

Compared to June 30, 2019

(dollars in millions)

Volume 1

Rate 1

Total

Change in Interest Income:

Funds Sold

$

0.6

$

(1.3

)

$

(0.7

)

Investment Securities

Available-for-Sale

Taxable

3.8

(3.8

)

-

Non-Taxable

(0.6

)

0.1

(0.5

)

Held-to-Maturity

Taxable

(2.4

)

(2.2

)

(4.6

)

Non-Taxable

(0.9

)

(0.2

)

(1.1

)

Total Investment Securities

(0.1

)

(6.1

)

(6.2

)

Loans and Leases

Commercial and Industrial

5.5

(2.5

)

3.0

Commercial Mortgage

2.3

(5.9

)

(3.6

)

Construction

1.4

(0.6

)

0.8

Commercial Lease Financing

(0.3

)

(0.2

)

(0.5

)

Residential Mortgage

2.0

(2.0

)

-

Home Equity

(0.3

)

(1.6

)

(1.9

)

Automobile

0.1

(0.1

)

-

Other 2

0.1

(0.6

)

(0.5

)

Total Loans and Leases

10.8

(13.5

)

(2.7

)

Other

-

(0.1

)

(0.1

)

Total Change in Interest Income

11.3

(21.0

)

(9.7

)

Change in Interest Expense:

Interest-Bearing Deposits

Demand

0.1

(0.9

)

(0.8

)

Savings

0.9

(7.6

)

(6.7

)

Time

(0.1

)

(3.0

)

(3.1

)

Total Interest-Bearing Deposits

0.9

(11.5

)

(10.6

)

Short-Term Borrowings

(0.1

)

(0.4

)

(0.5

)

Securities Sold Under Agreements to Repurchase

0.8

(1.5

)

(0.7

)

Other Debt

(0.4

)

0.2

(0.2

)

Total Change in Interest Expense

1.2

(13.2

)

(12.0

)

Change in Net Interest Income

$

10.1

$

(7.8

)

$

2.3

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 8c

Six Months Ended June 30, 2020

Compared to June 30, 2019

(dollars in millions)

Volume 1

Rate 1

Total

Change in Interest Income:

Funds Sold

$

1.1

$

(2.7

)

$

(1.6

)

Investment Securities

Available-for-Sale

Taxable

10.7

(5.8

)

4.9

Non-Taxable

(3.2

)

0.6

(2.6

)

Held-to-Maturity

Taxable

(4.4

)

(1.7

)

(6.1

)

Non-Taxable

(2.2

)

(0.4

)

(2.6

)

Total Investment Securities

0.9

(7.3

)

(6.4

)

Loans Held for Sale

0.1

-

0.1

Loans and Leases

Commercial and Industrial

6.3

(5.4

)

0.9

Commercial Mortgage

4.9

(8.2

)

(3.3

)

Construction

2.2

(0.8

)

1.4

Commercial Lease Financing

(0.5

)

(0.3

)

(0.8

)

Residential Mortgage

4.0

(2.6

)

1.4

Home Equity

(0.4

)

(2.4

)

(2.8

)

Automobile

0.6

(0.3

)

0.3

Other 2

0.7

(0.7

)

-

Total Loans and Leases

17.8

(20.7

)

(2.9

)

Other

-

(0.2

)

(0.2

)

Total Change in Interest Income

19.9

(30.9

)

(11.0

)

Change in Interest Expense: