Bank of Hawaii Corporation Third Quarter 2020 Financial Results

·19 min read
  • Diluted Earnings Per Share $0.95

  • Net Income $37.8 Million

  • Board of Directors Approves Dividend of $0.67 Per Share

Bank of Hawaii Corporation (NYSE: BOH) today reported diluted earnings per share of $0.95 for the third quarter of 2020 compared with diluted earnings per share of $0.98 in the previous quarter and diluted earnings per share of $1.29 in the same quarter last year. Net income for the third quarter of 2020 was $37.8 million compared with net income of $38.9 million in the second quarter of 2020 and net income of $52.1 million in the third quarter of 2019.

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Loan and lease balances were $11.8 billion at September 30, 2020 down slightly from June 30, 2020, up 7.3 percent from December 31, 2019, and up 8.4 percent compared with September 30, 2019. Total deposits reached another record high of $17.7 billion at the end of the third quarter of 2020, an increase of 1.8 percent from June 30, 2020, up 12.4 percent from December 31, 2019, and up 15.6 percent compared with September 30, 2019.

"Our financial results for the third quarter largely reflect current conditions at the local, national and global level," said Peter Ho, Chairman, President and CEO. "Our long-standing commitment to conservatism, liquidity and capital strength positions us relatively well to these extraordinary times."

The return on average assets for the third quarter of 2020 was 0.76 percent, down from 0.82 percent in the previous quarter and 1.17 percent in the same quarter last year. The return on average equity for the third quarter of 2020 was 11.01 percent compared with 11.58 percent for the second quarter of 2020 and 16.02 percent for the third quarter of 2019. The efficiency ratio for the third quarter of 2020 was 54.22 percent compared with 49.95 percent in the previous quarter and 58.55 percent in the same quarter last year.

For the nine-month period ended September 30, 2020, net income was $111.5 million, down from net income of $167.8 million during the same period last year. Diluted earnings per share were $2.80 for the nine-month period in 2020 compared with diluted earnings per share of $4.11 for the same period in 2019. The return on average assets for the nine-month period ended September 30, 2020 was 0.78 percent compared with the return on average assets of 1.29 percent for the same nine months in 2019. The 2020 year-to-date return on average equity was 11.08 percent compared with 17.58 percent for the nine months ended September 30, 2019. The efficiency ratio for the nine-month period in 2020 was 53.33 percent compared with 56.16 percent in the same period last year.

Financial Highlights

Net interest income, on a taxable equivalent basis, for the third quarter of 2020 was $124.5 million, a decrease of $2.5 million compared with $127.0 million in the second quarter of 2020 and a decrease of $0.7 million compared with $125.2 million in the third quarter of 2019. Net interest income in the second quarter of 2020 included an interest recovery of $2.9 million that increased the margin by 7 basis points. Net interest income, on a taxable equivalent basis, for the nine-month period in 2020 was $377.8 million, an increase of $2.1 million compared with net interest income of $375.7 million for the same period in 2019. Analyses of the changes in net interest income are included in Tables 8a, 8b and 8c.

The net interest margin was 2.67 percent for the third quarter of 2020, down 16 basis points from 2.83 percent in the previous quarter and down 34 basis points from the net interest margin of 3.01 percent in the third quarter of 2019. The decrease is largely due to lower rates and higher levels of liquidity due to the strong deposit growth. The net interest margin for the nine-month period in 2020 was 2.82 percent compared with the net interest margin of 3.05 percent for the same nine-month period last year.

Results for the third quarter of 2020 included a provision for credit losses of $28.6 million compared with $40.4 million in the previous quarter and $4.3 million in the same quarter last year. The provision for credit losses for the nine-month period in 2020 was $102.6 million compared with a provision for credit losses of $11.3 million during the same period in 2019.

Noninterest income was $41.7 million in the third quarter of 2020, a decrease of $9.6 million compared with $51.3 million in the second quarter of 2020 and a decrease of $4.8 million compared with $46.5 million in the third quarter of 2019. There were no significant items in noninterest income during the third quarter of 2020 or the third 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. Adjusted for the sale of the Visa shares, the increase in noninterest income compared to the prior quarter was primarily due to higher fee income. The decline in noninterest revenue compared to the third quarter last year is due to lower fee income resulting from decreased customer and visitor activity related to the COVID-19 pandemic. Noninterest income for the nine-month period in 2020 was $139.2 million, an increase of $3.6 million compared with noninterest income of $135.6 million for the same period in 2019.

Noninterest expense was $89.9 million in the third quarter of 2020, an increase of $1.0 million compared with $88.9 million in the second quarter of 2020 and a decrease of $10.4 million compared with $100.3 million in the third quarter last year. Noninterest expense during the third quarter of 2020 included a gain of $1.9 million related to the sale of a branch building partially offset by $1.8 million in severance. There were no significant items in noninterest expense during the second quarter of 2020. Noninterest expense in the third quarter of 2019 included a $6.0 million increase in legal reserves. Noninterest expense for the nine-month period in 2020 was $275.2 million, a decrease of $10.9 million compared with noninterest expense of $286.1 million for the same period in 2019. An analysis of noninterest expenses related to salaries and benefits is included in Table 9.

The effective tax rate for the third quarter of 2020 was 20.09 percent compared with 20.05 percent in the previous quarter and 22.08 percent in the same quarter last year. The effective tax rate for the nine-month period in 2020 was 19.34 percent compared with an effective tax rate of 20.89 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 third quarter of 2020. Total non-performing assets were $18.6 million at September 30, 2020 down from $22.7 million at June 30, 2020 and $21.6 million at September 30, 2019. As a percentage of total loans and leases, including foreclosed real estate, non-performing assets were 0.16 percent, down from 0.19 percent at the end of the previous quarter and 0.20 percent at the end of the third quarter last year.

Accruing loans and leases past due 90 days or more were $9.6 million at September 30, 2020 compared with $8.9 million at June 30, 2020 and $6.1 million at September 30, 2019. Restructured loans not included in non-accrual loans or accruing loans past due 90 days or more were $58.7 million at September 30, 2020, compared with $59.7 million at June 30, 2020 and $46.2 million at September 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 third quarter of 2020 were a net recovery of $1.5 million. Loan and lease charge-offs of $2.3 million during the quarter were fully offset by recoveries of $3.8 million. Net charge-offs during the second quarter of 2020 were $5.1 million or 0.18 percent annualized of total average loans and leases outstanding and comprised of $8.3 million in charge-offs and recoveries of $3.2 million. Net charge-offs during the third quarter of 2019 were $3.0 million or 0.11 percent annualized of total average loans and leases outstanding and comprised of $5.8 million in charge-offs and recoveries of $2.8 million. Net charge-offs during the nine-month period in 2020 were $7.4 million or 0.09 percent annualized of total average loans and leases outstanding compared with net charge-offs of $9.0 million or 0.11 percent annualized of total average loans and leases outstanding for the nine-month period in 2019.

The allowance for credit losses was $203.5 million at September 30, 2020 compared with $173.4 million at June 30, 2020 and $108.9 million at September 30, 2019. The ratio of the allowance for credit losses to total loans and leases was 1.73 percent at September 30, 2020 compared with 1.47 percent at June 30, 2020 and 1.00 percent at September 30, 2019. The reserve for unfunded commitments was $2.3 million at September 30, 2020 compared with $2.5 million at June 30, 2020 and $6.8 million at September 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 $20.1 billion at September 30, 2020 compared with $19.8 billion at June 30, 2020 and $17.7 billion at September 30, 2019. Average total assets were $19.7 billion during the third quarter of 2020 compared with $19.2 billion during the previous quarter and $17.6 billion during the third quarter last year.

The investment securities portfolio was $6.4 billion at September 30, 2020, up from $6.0 billion at June 30, 2020 and $5.5 billion at September 30, 2019 due to strong growth in deposits that outpaced loan growth. The portfolio remains largely comprised of securities issued by U.S. government agencies and includes $3.2 billion in securities held to maturity and $3.2 billion in securities available for sale. The securities portfolio at June 30, 2020 included $3.3 billion in securities held to maturity and $2.7 billion in securities available for sale compared with $2.9 billion in securities held to maturity and $2.6 billion in securities available for sale at September 30, 2019.

Total loans and leases were $11.8 billion at September 30, 2020. Average total loans and leases were $11.7 billion during the third quarter of 2020 up slightly from the previous quarter and up 9.0 percent from $10.8 billion during the same quarter last year. The commercial loan portfolio was $5.0 billion at September 30, 2020, down $5.9 million or 0.1 percent from June 30, 2020, and up $860.1 million or 20.7 percent from September 30, 2019. The consumer loan portfolio was $6.8 billion at September 30, 2020, down $5.9 million or 0.1 percent from June 30, 2020, and up $52.2 million or 0.8 percent from September 30, 2019.

Total deposits were $17.7 billion at September 30, 2020. Average total deposits were $17.3 billion during the third quarter of 2020, up 3.5 percent from $16.7 billion during the previous quarter and up 12.7 percent from $15.3 billion during the same quarter last year. Consumer deposits increased to $8.9 billion at September 30, 2020, up $136.9 million or 1.6 percent from $8.8 billion at June 30, 2020 and up $1.0 billion or 12.8 percent from $7.9 billion at September 30, 2019. Commercial deposits were $7.2 billion at September 30, 2020, down $135.5 million or 1.9 percent from $7.3 billion at June 30, 2020 and were up $1.0 billion or 16.3 percent from $6.2 billion at September 30, 2019. Other deposits, including public funds, were $1.7 billion at September 30, 2020, an increase of $314.3 million or 23.1 percent from June 30, 2020 and up $381.7 million or 29.5 percent from September 30, 2019. Deposit balances are summarized in Tables 7a, 7b, and 10.

Total shareholders’ equity increased to $1.36 billion at September 30, 2020 compared with $1.35 billion at June 30, 2020 and $1.29 billion at September 30, 2019. There were no shares repurchased during the third quarter of 2020. The Tier 1 Capital Ratio at September 30, 2020 was 12.09 percent compared with 12.04 percent at June 30, 2020 and 12.33 percent at September 30, 2019. The Tier 1 leverage ratio at September 30, 2020 was 6.81 percent compared with 6.90 percent at June 30, 2020 and 7.32 percent at September 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 December 14, 2020 to shareholders of record at the close of business on November 30, 2020.

Conference Call Information

The Company will review its third quarter 2020 financial results today at 2:00 p.m. Eastern Time (8:00 a.m. Hawaii Time). The live call, including a slide presentation, will be accessible on the investor relations link of Company’s website, www.boh.com. The webcast link is https://edge.media-server.com/mmc/p/xr9ecjhk. The toll-free number for the teleconference 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, October 26, 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 6164797 when prompted. In addition, the 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

Nine Months Ended

September 30,

June 30,

September 30,

September 30,

(dollars in thousands, except per share amounts)

2020

2020

2019

2020

2019

For the Period:

Operating Results

Net Interest Income

$

124,166

$

126,691

$

124,896

$

376,823

$

373,830

Provision for Credit Losses

28,600

40,400

4,250

102,600

11,250

Total Noninterest Income

41,734

51,268

46,507

139,151

135,636

Total Noninterest Expense

89,949

88,892

100,349

275,153

286,131

Net Income

37,840

38,908

52,052

111,490

167,770

Basic Earnings Per Share

0.95

0.98

1.30

2.81

4.14

Diluted Earnings Per Share

0.95

0.98

1.29

2.80

4.11

Dividends Declared Per Share

0.67

0.67

0.65

2.01

1.92

Performance Ratios

Return on Average Assets

0.76

%

0.82

%

1.17

%

0.78

%

1.29

%

Return on Average Shareholders' Equity

11.01

11.58

16.02

11.08

17.58

Efficiency Ratio 1

54.22

49.95

58.55

53.33

56.16

Net Interest Margin 2

2.67

2.83

3.01

2.82

3.05

Dividend Payout Ratio 3

70.53

68.37

50.00

71.53

46.38

Average Shareholders' Equity to Average Assets

6.93

7.04

7.32

7.06

7.31

Average Balances

Average Loans and Leases

$

11,739,785

$

11,727,649

$

10,770,720

$

11,510,222

$

10,624,311

Average Assets

19,741,139

19,189,581

17,605,394

19,053,626

17,442,054

Average Deposits

17,270,206

16,679,511

15,330,691

16,591,640

15,156,275

Average Shareholders' Equity

1,367,756

1,351,345

1,289,417

1,344,402

1,275,753

Per Share of Common Stock

Book Value

$

33.99

$

33.76

$

32.00

$

33.99

$

32.00

Tangible Book Value

33.21

32.97

31.22

33.21

31.22

Market Value

Closing

50.52

61.41

85.93

50.52

85.93

High

61.94

72.74

88.20

95.53

88.20

Low

48.77

51.15

79.13

46.70

66.54

September 30,

June 30,

December 31,

September 30,

2020

2020

2019

2019

As of Period End:

Balance Sheet Totals

Loans and Leases

$

11,793,608

$

11,805,370

$

10,990,892

$

10,881,298

Total Assets

20,109,489

19,769,942

18,095,496

17,672,140

Total Deposits

17,738,883

17,423,155

15,784,482

15,340,752

Other Debt

60,502

60,524

85,565

110,585

Total Shareholders' Equity

1,361,739

1,352,082

1,286,832

1,291,490

Asset Quality

Non-Performing Assets

$

18,626

$

22,701

$

20,117

$

21,645

Allowance for Credit Losses

203,496

173,439

138,150

108,936

Allowance to Loans and Leases Outstanding

1.73

%

1.47

%

1.00

%

1.00

%

Capital Ratios 4

Common Equity Tier 1 Capital Ratio

12.09

%

12.04

%

12.18

%

12.33

%

Tier 1 Capital Ratio

12.09

12.04

12.18

12.33

Total Capital Ratio

13.35

13.29

13.28

13.44

Tier 1 Leverage Ratio

6.81

6.90

7.25

7.32

Total Shareholders' Equity to Total Assets

6.77

6.84

7.11

7.31

Tangible Common Equity to Tangible Assets 5

6.63

6.69

6.95

7.14

Tangible Common Equity to Risk-Weighted Assets 5

12.02

12.07

11.85

12.10

Non-Financial Data

Full-Time Equivalent Employees

2,038

2,112

2,124

2,124

Branches

67

67

68

67

ATMs

358

367

387

379

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 September 30, 2020 are preliminary.

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

September 30,

June 30,

December 31,

September 30,

(dollars in thousands)

2020

2020

2019

2019

Total Shareholders' Equity

$

1,361,739

$

1,352,082

$

1,286,832

$

1,291,490

Less: Goodwill

31,517

31,517

31,517

31,517

Tangible Common Equity

$

1,330,222

$

1,320,565

$

1,255,315

$

1,259,973

Total Assets

$

20,109,489

$

19,769,942

$

18,095,496

$

17,672,140

Less: Goodwill

31,517

31,517

31,517

31,517

Tangible Assets

$

20,077,972

$

19,738,425

$

18,063,979

$

17,640,623

Risk-Weighted Assets, determined in accordance

with prescribed regulatory requirements

$

11,068,888

$

10,941,894

$

10,589,061

$

10,416,560

Total Shareholders' Equity to Total Assets

6.77

%

6.84

%

7.11

%

7.31

%

Tangible Common Equity to Tangible Assets (Non-GAAP)

6.63

%

6.69

%

6.95

%

7.14

%

Tier 1 Capital Ratio

12.09

%

12.04

%

12.18

%

12.33

%

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

12.02

%

12.07

%

11.85

%

12.10

%

Note: Risk-Weighted Assets and Regulatory capital ratios as of September 30, 2020 are preliminary.

Bank of Hawaii Corporation and Subsidiaries

Consolidated Statements of Income

Table 3

Three Months Ended

Nine Months Ended

September 30,

June 30,

September 30,

September 30,

(dollars in thousands, except per share amounts)

2020

2020

2019

2020

2019

Interest Income

Interest and Fees on Loans and Leases

$

103,189

$

107,628

$

110,877

$

319,027

$

329,789

Income on Investment Securities

Available-for-Sale

14,558

14,576

17,512

45,845

46,016

Held-to-Maturity

15,967

16,723

18,796

51,942

62,866

Deposits

3

1

9

13

33

Funds Sold

149

92

656

787

2,830

Other

151

125

233

494

762

Total Interest Income

134,017

139,145

148,083

418,108

442,296

Interest Expense

Deposits

5,891

7,954

18,055

28,105

51,967

Securities Sold Under Agreements to Repurchase

3,622

4,020

4,257

11,667

13,451

Funds Purchased

-

18

146

90

815

Short-Term Borrowings

1

22

1

62

38

Other Debt

337

440

728

1,361

2,195

Total Interest Expense

9,851

12,454

23,187

41,285

68,466

Net Interest Income

124,166

126,691

124,896

376,823

373,830

Provision for Credit Losses

28,600

40,400

4,250

102,600

11,250

Net Interest Income After Provision for Credit Losses

95,566

86,291

120,646

274,223

362,580

Noninterest Income

Trust and Asset Management

10,752

10,550

10,930

32,217

33,076

Mortgage Banking

4,047

4,278

4,864

11,020

10,487

Service Charges on Deposit Accounts

6,027

5,097

7,592

18,575

22,239

Fees, Exchange, and Other Service Charges

12,296

9,417

14,900

34,913

43,360

Investment Securities Gains (Losses), Net

(1,121

)

13,216

(1,469

)

11,125

(3,080

)

Annuity and Insurance

881

883

1,278

2,692

5,662

Bank-Owned Life Insurance

1,806

1,649

1,647

5,035

5,136

Other

7,046

6,178

6,765

23,574

18,756

Total Noninterest Income

41,734

51,268

46,507

139,151

135,636

Noninterest Expense

Salaries and Benefits

51,951

50,715

54,345

157,129

164,442

Net Occupancy

7,281

8,761

8,803

24,997

24,976

Net Equipment

9,223

8,195

7,637

25,874

21,365

Data Processing

4,691

4,416

4,676

13,895

13,929

Professional Fees

2,743

3,061

2,184

9,012

6,814

FDIC Insurance

1,282

1,558

1,257

4,296

3,816

Other

12,778

12,186

21,447

39,950

50,789

Total Noninterest Expense

89,949

88,892

100,349

275,153

286,131

Income Before Provision for Income Taxes

47,351

48,667

66,804

138,221

212,085

Provision for Income Taxes

9,511

9,759

14,752

26,731

44,315

Net Income

$

37,840

$

38,908

$

52,052

$

111,490

$

167,770

Basic Earnings Per Share

$

0.95

$

0.98

$

1.30

$

2.81

$

4.14

Diluted Earnings Per Share

$

0.95

$

0.98

$

1.29

$

2.80

$

4.11

Dividends Declared Per Share

$

0.67

$

0.67

$

0.65

$

2.01

$

1.92

Basic Weighted Average Shares

39,745,120

39,703,735

40,190,508

39,710,252

40,554,036

Diluted Weighted Average Shares

39,869,135

39,832,475

40,450,742

39,872,406

40,806,295

Bank of Hawaii Corporation and Subsidiaries

Consolidated Statements of Comprehensive Income

Table 4

Three Months Ended

Nine Months Ended

September 30,

June 30,

September 30,

September 30,

(dollars in thousands)

2020

2020

2019

2020

2019

Net Income

$

37,840

$

38,908

$

52,052

$

111,490

$

167,770

Other Comprehensive Income (Loss), Net of Tax:

Net Unrealized Gains (Losses) on Investment Securities

(4,900

)

7,730

5,405

44,389

28,533

Defined Benefit Plans

374

374

245

1,122

736

Other Comprehensive Income (Loss)

(4,526

)

8,104

5,650

45,511

29,269

Comprehensive Income

$

33,314

$

47,012

$

57,702

$

157,001

$

197,039

Bank of Hawaii Corporation and Subsidiaries

Consolidated Statements of Condition

Table 5

September 30,

June 30,

December 31,

September 30,

(dollars in thousands)

2020

2020

2019

2019

Assets

Interest-Bearing Deposits in Other Banks

$

4,233

$

2,310

$

4,979

$

2,946

Funds Sold

736,524

800,857

254,574

108,446

Investment Securities

Available-for-Sale

3,190,313

2,726,478

2,619,003

2,594,394

Held-to-Maturity (Fair Value of $3,288,668; $3,374,294; $3,062,882; and $2,972,273)

3,198,830

3,276,829

3,042,294

2,946,910

Loans Held for Sale

-

20,711

39,062

36,720

Loans and Leases

11,793,608

11,805,370

10,990,892

10,881,298

Allowance for Credit Losses

(203,496

)

(173,439

)

(110,027

)

(108,936

)

Net Loans and Leases

11,590,112

11,631,931

10,880,865

10,772,362

Total Earning Assets

18,720,012

18,459,116

16,840,777

16,461,778

Cash and Due from Banks

260,167

242,423

299,105

259,492

Premises and Equipment, Net

199,021

198,582

188,388

179,453

Operating Lease Right-of-Use Assets

96,200

97,166

100,838

101,005

Accrued Interest Receivable

57,370

50,645

46,476

47,897

Foreclosed Real Estate

2,332

2,506

2,737

2,939

Mortgage Servicing Rights

21,887

22,904

25,022

24,408

Goodwill

31,517

31,517

31,517

31,517

Bank-Owned Life Insurance

291,231

291,185

287,962

286,936

Other Assets

429,752

373,898

272,674

276,715

Total Assets

$

20,109,489

$

19,769,942

$

18,095,496

$

17,672,140

Liabilities

Deposits

Noninterest-Bearing Demand

$

5,428,567

$

5,485,015

$

4,489,525

$

4,392,706

Interest-Bearing Demand

3,824,448

3,437,654

3,127,205

3,000,865

Savings

6,763,891

6,821,710

6,365,321

6,141,098

Time

1,721,977

1,678,776

1,802,431

1,806,083

Total Deposits

17,738,883

17,423,155

15,784,482

15,340,752

Securities Sold Under Agreements to Repurchase

602,106

603,206

604,306

604,299

Other Debt

60,502

60,524

85,565

110,585

Operating Lease Liabilities

103,869

104,741

108,210

108,264

Retirement Benefits Payable

43,505

43,833

44,504

39,682

Accrued Interest Payable

6,613

7,775

8,040

8,435

Taxes Payable and Deferred Taxes

12,124

38,297

16,085

21,089

Other Liabilities

180,148

136,329

157,472

147,544

Total Liabilities

18,747,750

18,417,860

16,808,664

16,380,650

Shareholders' Equity

Common Stock ($.01 par value; authorized 500,000,000 shares;

issued / outstanding: September 30, 2020 - 58,248,690 / 40,060,675;

June 30, 2020 - 58,263,452 / 40,047,694; December 31, 2019 - 58,166,910 / 40,039,695;

and September 30, 2019 - 58,176,305 / 40,359,259)

580

580

579

579

Capital Surplus

588,632

586,946

582,566

580,200

Accumulated Other Comprehensive Gain (Loss)

14,399

18,925

(31,112

)

(21,774

)

Retained Earnings

1,797,763

1,786,351

1,761,415

1,730,437

Treasury Stock, at Cost (Shares: September 30, 2020 - 18,188,015; June 30, 2020 - 18,215,758;

December 31, 2019 - 18,127,215; and September 30, 2019 - 17,817,046)

(1,039,635

)

(1,040,720

)

(1,026,616

)

(997,952

)

Total Shareholders' Equity

1,361,739

1,352,082

1,286,832

1,291,490

Total Liabilities and Shareholders' Equity

$

20,109,489

$

19,769,942

$

18,095,496

$

17,672,140

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

-

-

-

-

111,490

-

111,490

Other Comprehensive Income

-

-

-

45,511

-

-

45,511

Cumulative Change in Accounting Principle

-

-

-

-

3,632

-

3,632

Share-Based Compensation

-

-

5,347

-

-

-

5,347

Common Stock Issued under Purchase and Equity

Compensation Plans

222,682

1

719

-

1,762

4,878

7,360

Common Stock Repurchased

(201,702

)

-

-

-

-

(17,897

)

(17,897

)

Cash Dividends Declared ($2.01 per share)

-

-

-

-

(80,536

)

-

(80,536

)

Balance as of September 30, 2020

40,060,675

$

580

$

588,632

$

14,399

$

1,797,763

$

(1,039,635

)

$

1,361,739

Balance as of December 31, 2018

41,499,898

$

577

$

571,704

$

(51,043

)

$

1,641,314

$

(894,352

)

$

1,268,200

Net Income

-

-

-

-

167,770

-

167,770

Other Comprehensive Income

-

-

-

29,269

-

-

29,269

Share-Based Compensation

-

-

6,662

-

-

-

6,662

Common Stock Issued under Purchase and Equity

Compensation Plans

200,984

2

1,834

-

(109

)

4,275

6,002

Common Stock Repurchased

(1,341,623

)

-

-

-

-

(107,875

)

(107,875

)

Cash Dividends Declared ($1.92 per share)

-

-

-

-

(78,538

)

-

(78,538

)

Balance as of September 30, 2019

40,359,259

$

579

$

580,200

$

(21,774

)

$

1,730,437

$

(997,952

)

$

1,291,490

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

September 30, 2020

June 30, 2020

September 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

$

-

0.45

%

$

2.6

$

-

0.18

%

$

3.1

$

-

1.19

%

Funds Sold

584.2

0.1

0.10

545.9

0.1

0.07

121.1

0.7

2.12

Investment Securities

Available-for-Sale

Taxable

2,918.6

14.3

1.96

2,614.1

14.3

2.19

2,647.9

17.1

2.59

Non-Taxable

25.8

0.3

4.22

32.2

0.4

4.45

42.6

0.5

4.45

Held-to-Maturity

Taxable

3,257.7

15.7

1.93

2,957.6

16.4

2.22

2,873.7

18.5

2.57

Non-Taxable

54.1

0.4

2.66

54.4

0.4

2.66

65.2

0.4

2.72

Total Investment Securities

6,256.2

30.7

1.96

5,658.3

31.5

2.22

5,629.4

36.5

2.59

Loans Held for Sale

15.9

0.1

3.24

23.4

0.2

3.24

24.3

0.2

3.94

Loans and Leases 1

Commercial and Industrial

1,917.0

14.1

2.93

1,963.8

17.9

3.67

1,383.8

14.4

4.14

Commercial Mortgage

2,722.3

21.7

3.18

2,622.9

22.3

3.42

2,423.7

26.2

4.28

Construction

234.0

2.1

3.60

255.8

2.5

3.93

126.0

1.6

5.10

Commercial Lease Financing

110.7

0.5

1.82

110.9

0.5

1.88

161.8

1.0

2.57

Residential Mortgage

3,988.7

36.7

3.68

3,939.6

36.0

3.65

3,809.6

36.5

3.83

Home Equity

1,625.2

14.1

3.45

1,665.2

14.3

3.45

1,689.2

16.1

3.79

Automobile

708.3

6.4

3.59

701.2

6.2

3.55

707.0

6.4

3.59

Other 2

433.6

7.6

6.96

468.2

7.9

6.77

469.6

8.5

7.16

Total Loans and Leases

11,739.8

103.2

3.50

11,727.6

107.6

3.68

10,770.7

110.7

4.09

Other

33.3

0.2

1.81

34.0

0.1

1.47

35.0

0.3

2.66

Total Earning Assets 3

18,632.0

134.3

2.88

17,991.8

139.5

3.11

16,583.6

148.4

3.56

Cash and Due from Banks

234.3

302.4

231.5

Other Assets

874.8

895.4

790.3

Total Assets

$

19,741.1

$

19,189.6

$

17,605.4

Interest-Bearing Liabilities

Interest-Bearing Deposits

Demand

$

3,465.5

0.4

0.04

$

3,226.6

0.6

0.07

$

2,950.2

1.1

0.15

Savings

6,886.0

1.7

0.10

6,691.4

2.2

0.13

6,122.0

8.8

0.57

Time

1,568.3

3.8

0.97

1,826.8

5.2

1.13

1,851.0

8.2

1.75

Total Interest-Bearing Deposits

11,919.8

5.9

0.20

11,744.8

8.0

0.27

10,923.2

18.1

0.66

Short-Term Borrowings

-

-

-

57.6

-

0.28

27.1

0.1

2.13

Securities Sold Under Agreements to Repurchase

602.9

3.6

2.35

602.9

4.0

2.64

513.8

4.3

3.24

Other Debt

60.5

0.3

2.22

60.5

0.5

2.91

110.6

0.7

2.62

Total Interest-Bearing Liabilities

12,583.2

9.8

0.31

12,465.8

12.5

0.40

11,574.7

23.2

0.79

Net Interest Income

$

124.5

$

127.0

$

125.2

Interest Rate Spread

2.57

%

2.71

%

2.77

%

Net Interest Margin

2.67

%

2.83

%

3.01

%

Noninterest-Bearing Demand Deposits

5,350.4

4,934.7

4,407.5

Other Liabilities

439.7

437.8

333.8

Shareholders' Equity

1,367.8

1,351.3

1,289.4

Total Liabilities and Shareholders' Equity

$

19,741.1

$

19,189.6

$

17,605.4

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

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

3 Interest income includes taxable-equivalent basis adjustments, based upon a federal statutory tax rate of 21%, of $295,000, $358,000, and $296,000 for the three months ended September 30, 2020, June 30, 2020, and September 30, 2019, respectively.

Bank of Hawaii Corporation and Subsidiaries

Average Balances and Interest Rates - Taxable-Equivalent Basis

Table 7b

Nine Months Ended

Nine Months Ended

September 30, 2020

September 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

$

2.2

$

-

0.76

%

$

3.0

$

-

1.49

%

Funds Sold

428.3

0.8

0.24

161.7

2.8

2.31

Investment Securities

Available-for-Sale

Taxable

2,745.7

45.1

2.19

2,086.5

43.0

2.75

Non-Taxable

30.1

1.0

4.37

135.3

3.8

3.73

Held-to-Maturity

Taxable

3,084.4

51.0

2.21

3,199.9

59.9

2.50

Non-Taxable

54.4

1.1

2.66

163.5

3.8

3.08

Total Investment Securities

5,914.6

98.2

2.21

5,585.2

110.5

2.64

Loans Held for Sale

20.8

0.5

3.35

18.5

0.6

4.06

Loans and Leases 1

Commercial and Industrial

1,763.9

45.2

3.43

1,375.9

44.6

4.33

Commercial Mortgage

2,631.9

69.2

3.51

2,373.9

76.9

4.33

Construction

234.3

7.1

4.04

133.8

5.2

5.22

Commercial Lease Financing

111.0

1.6

1.88

160.9

3.0

2.45

Residential Mortgage

3,941.3

109.5

3.70

3,740.5

108.0

3.85

Home Equity

1,656.8

43.6

3.51

1,691.4

48.4

3.83

Automobile

710.2

19.0

3.57

688.0

18.6

3.62

Other 2

460.8

23.9

6.93

459.9

24.8

7.21

Total Loans and Leases

11,510.2

319.1

3.70

10,624.3

329.5

4.14

Other

33.9

0.5

1.95

35.2

0.8

2.89

Total Earning Assets 3

17,910.0

419.1

3.12

16,427.9

444.2

3.61

Cash and Due from Banks

271.7

237.9

Other Assets

871.9

776.3

Total Assets

$

19,053.6

$

17,442.1

Interest-Bearing Liabilities

Interest-Bearing Deposits

Demand

$

3,268.1

1.9

0.08

$

2,930.9

4.0

0.18

Savings

6,693.9

11.0

0.22

5,962.9

24.4

0.55

Time

1,712.2

15.2

1.19

1,807.6

23.6

1.75

Total Interest-Bearing Deposits

11,674.2

28.1

0.32

10,701.4

52.0

0.65

Short-Term Borrowings

38.3

0.2

0.52

46.8

0.9

2.40

Securities Sold Under Agreements to Repurchase

603.4

11.6

2.54

507.5

13.4

3.50

Other Debt

62.6

1.4

2.90

113.7

2.2

2.58

Total Interest-Bearing Liabilities

12,378.5

41.3

0.44

11,369.4

68.5

0.80

Net Interest Income

$

377.8

$

375.7

Interest Rate Spread

2.68

%

2.81

%

Net Interest Margin

2.82

%

3.05

%

Noninterest-Bearing Demand Deposits

4,917.4

4,454.9

Other Liabilities

413.3

342.0

Shareholders' Equity

1,344.4

1,275.8

Total Liabilities and Shareholders' Equity

$

19,053.6

$

17,442.1

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 $1,010,000 and $1,878,000 for the nine months ended September 30, 2020 and September 30, 2019, respectively.

Bank of Hawaii Corporation and Subsidiaries

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

Table 8a

Three Months Ended September 30, 2020

Compared to June 30, 2020

(dollars in millions)

Volume 1

Rate 1

Total

Change in Interest Income:

Investment Securities

Available-for-Sale

Taxable

$

1.6

$

(1.6

)

$

-

Non-Taxable

(0.1

)

-

(0.1

)

Held-to-Maturity

Taxable

1.6

(2.3

)

(0.7

)

Total Investment Securities

3.1

(3.9

)

(0.8

)

Loans Held for Sale

(0.1

)

-

(0.1

)

Loans and Leases

Commercial and Industrial

(0.4

)

(3.4

)

(3.8

)

Commercial Mortgage

0.9

(1.5

)

(0.6

)

Construction

(0.2

)

(0.2

)

(0.4

)

Residential Mortgage

0.5

0.2

0.7

Home Equity

(0.2

)

-

(0.2

)

Automobile

0.1

0.1

0.2

Other 2

(0.5

)

0.2

(0.3

)

Total Loans and Leases

0.2

(4.6

)

(4.4

)

Other

-

0.1

0.1

Total Change in Interest Income

3.2

(8.4

)

(5.2

)

Change in Interest Expense:

Interest-Bearing Deposits

Demand

-

(0.2

)

(0.2

)

Savings

0.1

(0.6

)

(0.5

)

Time

(0.7

)

(0.7

)

(1.4

)

Total Interest-Bearing Deposits

(0.6

)

(1.5

)

(2.1

)

Securities Sold Under Agreements to Repurchase

-

(0.4

)

(0.4

)

Other Debt

-

(0.2

)

(0.2

)

Total Change in Interest Expense

(0.6

)

(2.1

)

(2.7

)

Change in Net Interest Income

$

3.8

$

(6.3

)

$

(2.5

)

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 September 30, 2020

Compared to September 30, 2019

(dollars in millions)

Volume 1

Rate 1

Total

Change in Interest Income:

Funds Sold

$

0.6

$

(1.2

)

$

(0.6

)

Investment Securities

Available-for-Sale

Taxable

1.6

(4.4

)

(2.8

)

Non-Taxable

(0.2

)

-

(0.2

)

Held-to-Maturity

Taxable

2.2

(5.0

)

(2.8

)

Total Investment Securities

3.6

(9.4

)

(5.8

)

Loans Held for Sale

(0.1

)

-

(0.1

)

Loans and Leases

Commercial and Industrial

4.6

(4.9

)

(0.3

)

Commercial Mortgage

2.9

(7.4

)

(4.5

)

Construction

1.1

(0.6

)

0.5

Commercial Lease Financing

(0.3

)

(0.2

)

(0.5

)

Residential Mortgage

1.7

(1.5

)

0.2

Home Equity

(0.6

)

(1.4

)

(2.0

)

Other 2

(0.6

)

(0.3

)

(0.9

)

Total Loans and Leases

8.8

(16.3

)

(7.5

)

Other

-

(0.1

)

(0.1

)

Total Change in Interest Income

12.9

(27.0

)

(14.1

)

Change in Interest Expense:

Interest-Bearing Deposits

Demand

0.2

(0.9

)

(0.7

)

Savings

1.0

(8.1

)

(7.1

)

Time

(1.2

)

(3.2

)

(4.4

)

Total Interest-Bearing Deposits

-

(12.2

)

(12.2

)

Short-Term Borrowings

(0.1

)

-

(0.1

)

Securities Sold Under Agreements to Repurchase

0.6

(1.3

)

(0.7

)

Other Debt

(0.3

)

(0.1

)

(0.4

)

Total Change in Interest Expense

0.2

(13.6

)

(13.4

)

Change in Net Interest Income

$

12.7

$

(13.4

)

$

(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 8c

Nine Months Ended September 30, 2020

Compared to September 30, 2019

(dollars in millions)

Volume 1

Rate 1

Total

Change in Interest Income:

Funds Sold

$

2.0

$

(4.0

)

$

(2.0

)

Investment Securities

Available-for-Sale

Taxable

12.0

(9.9

)

2.1

Non-Taxable

(3.4

)

0.6

(2.8

)

Held-to-Maturity

Taxable

(2.1

)

(6.8

)

(8.9

)

Non-Taxable

(2.2

)

(0.5

)

(2.7

)

Total Investment Securities

4.3

(16.6

)

(12.3

)

Loans Held for Sale

0.1

(0.2

)

(0.1

)

Loans and Leases

Commercial and Industrial

11.1

(10.5

)

0.6

Commercial Mortgage

7.8

(15.5

)

(7.7

)

Construction

3.3

(1.4

)

1.9

Commercial Lease Financing

(0.8

)

(0.6

)

(1.4

)

Residential Mortgage

5.6

(4.1

)

1.5

Home Equity

(0.9

)

(3.9

)

(4.8

)

Automobile

0.6

(0.2

)

0.4

Other 2

-

(0.9

)

(0.9

)

Total Loans and Leases

26.7

(37.1

)

(10.4

)

Other

(0.1

)

(0.2

)

(0.3

)

Total Change in Interest Income

33.0

(58.1

)

(25.1

)

Change in Interest Expense:

Interest-Bearing Deposits

Demand

0.4

(2.5

)

(2.1

)

Savings

2.7

(16.1

)

(13.4

)

Time

(1.2

)

(7.2

)

(8.4

)

Total Interest-Bearing Deposits

1.9

(25.8

)

(23.9

)

Short-Term Borrowings

(0.1

)

(0.6

)

(0.7

)

Securities Sold Under Agreements to Repurchase

2.3

(4.1

)

(1.8

)

Other Debt

(1.1

)

0.3

(0.8

)

Total Change in Interest Expense

3.0

(30.2

)

(27.2

)

Change in Net Interest Income

$

30.0

$

(27.9

)

$

2.1

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

Salaries and Benefits

Table 9

Three Months Ended

Nine Months Ended

September 30,

June 30,

September 30,

September 30,

(dollars in thousands)

2020

2020

2019

2020

2019

Salaries

$

34,046

$

32,739

$

33,458

$

100,271

$

98,772

Incentive Compensation

2,683

3,141

5,681

6,069

17,049

Share-Based Compensation

1,442

2,021

2,025

4,754

7,098

Commission Expense

1,800

1,647

1,760

4,821

4,394

Retirement and Other Benefits

4,164

4,446

4,185

13,316

13,872

Payroll Taxes

2,624

2,782

2,519

9,949

9,409

Medical, Dental, and Life Insurance

3,422

3,830

3,908

11,394

12,299

Separation Expense

1,770

109

809

6,555

1,549

Total Salaries and Benefits

$

51,951

$

50,715

$

54,345

$

157,129

$

164,442

Bank of Hawaii Corporation and Subsidiaries

Loan and Lease Portfolio Balances

Table 10

September 30,

June 30,

March 31,

December 31,

September 30,

(dollars in thousands)

2020

2020

2020

2019

2019

Commercial

Commercial and Industrial

$

1,908,482

$

1,956,939

$

1,558,232

$

1,379,152

$

1,361,011

Commercial Mortgage

2,745,611

2,707,534

2,616,243

2,518,051

2,477,296

Construction

250,943

245,099

245,390

194,170

154,754

Lease Financing

111,831

113,187

110,704

122,454

163,672

Total Commercial

5,016,867

5,022,759

4,530,569

4,213,827

4,156,733

Consumer

Residential Mortgage

4,044,228

3,989,393

3,928,183

3,891,100

3,846,511

Home Equity

1,605,486

1,640,887

1,692,154

1,676,073

1,681,951

Automobile

709,937

700,702

716,214

720,286

713,424

Other 1

417,090

451,629