UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
| x | Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the quarterly period ended June 30, 2003 |
or
| ¨ | Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the transition period from to |
Commission File Number 1-6887
BANK OF HAWAII CORPORATION
(Exact name of registrant as specified in its charter)
| Delaware | 99-0148992 | |
| (State of incorporation) | (IRS Employer Identification No.) | |
| 130 Merchant Street, Honolulu, Hawaii | 96813 | |
| (Address of principal executive offices) | (Zip Code) | |
1-(888)-643-3888
(Registrant’s telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
Common Stock, $.01 Par Value; outstanding at July 25, 2003—58,674,381 shares
Bank of Hawaii Corporation
Form 10-Q
INDEX
| Page | ||||
| Part I.—Financial Information |
||||
| Item 1. |
Financial Statements (Unaudited) | |||
| Consolidated Statements of Income—Three and Six months ended June 30, 2003 and 2002 | 3 | |||
| Consolidated Statements of Condition—June 30, 2003, December 31, 2002, and June 30, 2002 | 4 | |||
| Consolidated Statements of Shareholders’ Equity—Six months ended June 30, 2003 and 2002 | 5 | |||
| Consolidated Statements of Cash Flows—Six months ended June 30, 2003 and 2002 | 6 | |||
| Notes to Consolidated Financial Statements | 7 | |||
| Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations | 10 | ||
| Item 3. |
Quantitative and Qualitative Disclosures of Market Risk | 33 | ||
| Item 4. |
Controls and Procedures | 33 | ||
| Part II.—Other Information |
||||
| Item 6. |
Exhibits and Reports on Form 8-K | 34 | ||
| 35 | ||||
2
Bank of Hawaii Corporation and Subsidiaries
Consolidated Statements of Income (Unaudited)
| Three Months Ended June 30, |
Six Months Ended June 30, | |||||||||||
| (dollars in thousands except per share amounts) |
2003 |
2002 |
2003 |
2002 | ||||||||
| Interest Income |
||||||||||||
| Interest and Fees on Loans and Leases |
$ | 85,954 | $ | 92,441 | $ | 171,727 | $ | 191,086 | ||||
| Income on Investment Securities—Held to Maturity |
3,083 | 4,544 | 5,366 | 9,689 | ||||||||
| Income on Investment Securities—Available for Sale |
19,815 | 26,805 | 42,278 | 53,998 | ||||||||
| Deposits |
1,161 | 6,011 | 2,468 | 11,058 | ||||||||
| Funds Sold and Security Resale Agreements |
822 | 752 | 1,586 | 1,755 | ||||||||
| Other |
1,016 | 1,395 | 2,205 | 2,727 | ||||||||
| Total Interest Income |
111,851 | 131,948 | 225,630 | 270,313 | ||||||||
| Interest Expense |
||||||||||||
| Deposits |
13,309 | 22,166 | 27,756 | 46,144 | ||||||||
| Security Repurchase Agreements |
2,391 | 8,256 | 4,633 | 18,549 | ||||||||
| Funds Purchased |
219 | 245 | 424 | 476 | ||||||||
| Short-Term Borrowings |
25 | 289 | 49 | 938 | ||||||||
| Long-Term Debt |
5,422 | 8,055 | 11,283 | 16,374 | ||||||||
| Total Interest Expense |
21,366 | 39,011 | 44,145 | 82,481 | ||||||||
| Net Interest Income |
90,485 | 92,937 | 181,485 | 187,832 | ||||||||
| Provision for Loan and Lease Losses |
— | 3,324 | — | 11,616 | ||||||||
| Net Interest Income After Provision for Loan and Lease Losses |
90,485 | 89,613 | 181,485 | 176,216 | ||||||||
| Non-Interest Income |
||||||||||||
| Trust and Asset Management |
12,545 | 14,175 | 25,726 | 28,993 | ||||||||
| Mortgage Banking |
6,061 | 2,842 | 6,344 | 10,799 | ||||||||
| Service Charges on Deposit Accounts |
8,645 | 7,956 | 17,595 | 16,366 | ||||||||
| Fees, Exchange, and Other Service Charges |
13,473 | 13,065 | 26,462 | 25,517 | ||||||||
| Investment Securities Gains |
587 | 3 | 1,170 | 3 | ||||||||
| Insurance |
2,991 | 2,563 | 5,973 | 5,162 | ||||||||
| Other |
6,437 | 7,314 | 12,222 | 14,103 | ||||||||
| Total Non-Interest Income |
50,739 | 47,918 | 95,492 | 100,943 | ||||||||
| Non-Interest Expense |
||||||||||||
| Salaries |
39,232 | 37,884 | 75,691 | 77,071 | ||||||||
| Pensions and Other Employee Benefits |
8,479 | 9,391 | 18,449 | 19,387 | ||||||||
| Net Occupancy Expense |
9,628 | 9,321 | 19,241 | 18,914 | ||||||||
| Net Equipment Expense |
9,208 | 9,997 | 18,956 | 20,118 | ||||||||
| Restructuring and Other Related Costs |
— | — | — | 1,979 | ||||||||
| Information Technology Systems Replacement Project |
10,105 | — | 17,522 | — | ||||||||
| Other |
18,742 | 22,777 | 35,735 | 43,324 | ||||||||
| Total Non-Interest Expense |
95,394 | 89,370 | 185,594 | 180,793 | ||||||||
| Income Before Income Taxes |
45,830 | 48,161 | 91,383 | 96,366 | ||||||||
| Provision for Income Taxes |
15,796 | 17,145 | 31,548 | 34,294 | ||||||||
| Net Income |
$ | 30,034 | $ | 31,016 | $ | 59,835 | $ | 62,072 | ||||
| Basic Earnings Per Share |
$ | 0.50 | $ | 0.43 | $ | 0.99 | $ | 0.85 | ||||
| Diluted Earnings Per Share |
$ | 0.48 | $ | 0.42 | $ | 0.95 | $ | 0.83 | ||||
| Dividends Per Share |
$ | 0.19 | $ | 0.18 | $ | 0.38 | $ | 0.36 | ||||
| Basic Weighted Average Shares |
59,566,970 | 72,299,850 | 60,425,943 | 72,803,414 | ||||||||
| Diluted Weighted Average Shares |
62,301,337 | 74,486,987 | 62,907,697 | 74,815,508 | ||||||||
See accompanying notes to the consolidated financial statements.
3
Bank of Hawaii Corporation and Subsidiaries
Consolidated Statements of Condition (Unaudited)
| (dollars in thousands) |
June 30, 2003 |
December 31, 2002 |
June 30, 2002 |
|||||||||
| Assets |
||||||||||||
| Interest-Bearing Deposits |
$ | 307,552 | $ | 549,978 | $ | 1,346,014 | ||||||
| Investment Securities—Held to Maturity (Market Value of $555,878, $236,016 and $323,722, respectively) |
548,719 | 229,720 | 312,467 | |||||||||
| Investment Securities—Available for Sale |
2,140,607 | 2,287,201 | 1,806,384 | |||||||||
| Funds Sold |
250,000 | 195,000 | 125,000 | |||||||||
| Loans Held for Sale |
71,892 | 40,118 | 48,416 | |||||||||
| Loans |
5,471,870 | 5,359,004 | 5,409,195 | |||||||||
| Allowance for Loan and Lease Losses |
(137,974 | ) | (142,853 | ) | (158,979 | ) | ||||||
| Net Loans |
5,333,896 | 5,216,151 | 5,250,216 | |||||||||
| Total Earning Assets |
8,652,666 | 8,518,168 | 8,888,497 | |||||||||
| Cash and Non-Interest Bearing Deposits |
297,868 | 374,352 | 304,595 | |||||||||
| Premises and Equipment |
165,542 | 176,969 | 188,128 | |||||||||
| Customers’ Acceptance Liability |
1,371 | 2,680 | 1,657 | |||||||||
| Accrued Interest Receivable |
35,849 | 36,722 | 38,425 | |||||||||
| Foreclosed Real Estate |
9,285 | 9,434 | 17,223 | |||||||||
| Mortgage Servicing Rights |
24,841 | 28,820 | 30,244 | |||||||||
| Goodwill |
36,216 | 36,216 | 36,216 | |||||||||
| Other Assets |
327,296 | 333,057 | 319,080 | |||||||||
| Total Assets |
$ | 9,550,934 | $ | 9,516,418 | $ | 9,824,065 | ||||||
| Liabilities |
||||||||||||
| Domestic Deposits |
||||||||||||
| Non-Interest Bearing Demand |
$ | 1,843,750 | $ | 1,719,633 | $ | 1,466,092 | ||||||
| Interest Bearing Demand |
1,157,801 | 1,169,128 | 986,546 | |||||||||
| Savings |
2,754,607 | 2,535,219 | 2,292,395 | |||||||||
| Time |
1,352,413 | 1,461,780 | 1,652,805 | |||||||||
| Foreign Deposits |
||||||||||||
| Time Due to Banks |
— | 1,130 | 16,777 | |||||||||
| Other Savings and Time |
32,278 | 33,271 | 41,366 | |||||||||
| Total Deposits |
7,140,849 | 6,920,161 | 6,455,981 | |||||||||
| Securities Sold Under Agreements to Repurchase |
699,256 | 735,621 | 1,257,808 | |||||||||
| Funds Purchased |
90,200 | 64,467 | 60,243 | |||||||||
| Current Maturities of Long-Term Debt |
14,000 | 114,781 | 173,259 | |||||||||
| Short-Term Borrowings |
22,424 | 33,420 | 16,935 | |||||||||
| Banker’s Acceptances Outstanding |
1,371 | 2,680 | 1,657 | |||||||||
| Retirement Benefits Payable |
62,678 | 61,385 | ||||||||||