U N I T E D S T A T E S
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 March 31, 1994
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
B A N C O R P H A W A I I, I N C.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Hawaii 99-0148992
------------------------ ---------------------------------
(State of incorporation) (IRS Employer Identification No.)
130 Merchant Street, Honolulu, Hawaii 96813
- - ---------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
(808) 537-8111
----------------------------------------------------
(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, $2 Par Value; outstanding at March 31, 1994 -
42,564,920 shares<PAGE>
BANCORP HAWAII, INC. and subsidiaries
March 31, 1994
PART I. - Financial Information
Item 1. Financial Statements
The consolidated statements of condition as of March 31,
1994 and 1993, and December 31, 1993 and related statements of
income, shareholders' equity, and cash flows are included herein.
The unaudited financial statements listed above have been
prepared in accordance with the instructions to Form 10-Q and
therefore do not include all information and footnotes necessary
for a fair presentation of financial position, results of
operations, and changes in financial position in conformity with
generally accepted accounting principles.
The financial statements reflect all adjustments of a normal
and recurring nature which are, in the opinion of management,
necessary to a fair statement of the results for the interim
periods.
<PAGE>
<TABLE>
Consolidated Statements of Condition (Unaudited) Bancorp Hawaii, Inc. and subsidiaries
- - -----------------------------------------------------------------------------------------------------------
<CAPTION>
March 31 December 31 March 31
(in thousands of dollars) 1994 1993 1993
- - -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Assets
Interest-Bearing Deposits $999,991 $837,704 $1,250,480
Investment Securities - Held to Maturity 2,652,355 2,753,590 3,532,099
(Market Value of $2,663,837, $2,791,328, $3,612,051, respectively)
- Available for Sale 929,722 893,453 121,537
Securities Purchased Under Agreements to Resell -- -- 180,000
Funds Sold 115,747 57,699 71,880
Loans 7,366,639 7,258,368 7,008,822
Unearned Income (146,610) (149,949) (143,695)
Reserve for Possible Loan Losses (130,064) (125,284) (134,600)
Net Loans 7,089,965 6,983,135 6,730,527
- - -----------------------------------------------------------------------------------------------------------
Total Earning Assets 11,787,780 11,525,581 11,886,523
Cash and Non-Interest Bearing Deposits 596,504 395,315 377,634
Premises and Equipment 176,765 167,260 156,322
Customers' Acceptance Liability 14,437 8,475 18,637
Accrued Interest Receivable 78,588 82,023 85,811
Other Real Estate 4,026 4,123 3,327
Intangibles, including Goodwill 103,903 102,929 50,842
Trading Securities 14,067 74,351 13,562
Other Assets 101,813 102,070 81,923
- - -----------------------------------------------------------------------------------------------------------
Total Assets $12,877,883 $12,462,127 $12,674,581
===========================================================================================================
Liabilities
Domestic Deposits
Demand - Non-Interest Bearing $1,326,211 $1,405,540 $1,220,306
- Interest-Bearing 1,864,532 1,931,807 1,954,387
Savings 1,284,824 1,251,876 1,246,903
Time 1,526,535 1,581,534 1,826,915
Foreign Deposits 1,337,831 834,218 1,406,331
- - -----------------------------------------------------------------------------------------------------------
Total Deposits 7,339,933 7,004,975 7,654,842
Securities Sold Under Agreements to Repurchase 2,500,148 2,509,550 2,833,085
Funds Purchased 610,471 743,915 639,702
Short-Term Borrowings 686,564 600,266 295,930
Bank's Acceptances Outstanding 14,437 8,475 18,637
Accrued Pension Costs 24,492 24,367 24,935
Accrued Interest Payable 46,680 34,347 39,844
Income Taxes Payable 155,095 154,291 141,223
Other Liabilities 77,306 85,967 74,665
Long-Term Debt 469,495 357,870 93,800
- - -----------------------------------------------------------------------------------------------------------
Total Liabilities 11,924,621 11,524,023 11,816,663
Shareholders' Equity
Common Stock ($2 par value), authorized 50,000,000 shares;
issued/outstanding, March 1994 - 42,564,920;
December 1993 - 28,425,038; March 1993 - 28,220,435; 85,130 56,850 56,441
Surplus 282,280 284,886 278,212
Unrealized Valuation Adjustments (4,995) 537 (2,318)
Retained Earnings 590,847 595,831 525,583
- - -----------------------------------------------------------------------------------------------------------
Total Shareholders' Equity 953,262 938,104 857,918
- - -----------------------------------------------------------------------------------------------------------
Total Liabilities and Shareholders' Equity $12,877,883 $12,462,127 $12,674,581
===========================================================================================================
</TABLE>
<TABLE>
Consolidated Statements of Income (Unaudited) Bancorp Hawaii, Inc. and subsidiaries
- - -----------------------------------------------------------------------------------------------------------
<CAPTION>
Three Months Ended March 31
(in thousands of dollars except per share amounts) 1994 1993
- - -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Interest Income
Interest on Loans $126,538 $121,481
Loan Fees 8,941 9,275
Income on Lease Financing 3,738 4,171
Interest and Dividends on Investment Securities
Taxable 38,236 49,848
Non-taxable 440 685
Income on Assets Available for Sale 9,447 3,697
Interest on Deposits 7,669 11,674
Interest on Security Resale Agreements -- 2,804
Interest on Funds Sold 415 519
- - -----------------------------------------------------------------------------------------------------------
Total Interest Income 195,424 204,154
Interest Expense
Interest on Deposits 42,193 54,954
Interest on Security Repurchase Agreements 21,630 22,882
Interest on Funds Purchased 4,699 5,622
Interest on Short-Term Borrowings 3,547 3,868
Interest on Long-Term Debt 5,720 1,177
- - -----------------------------------------------------------------------------------------------------------
Total Interest Expense 77,789 88,503
Net Interest Income 117,635 115,651
Provision for Possible Loan Losses 8,258 9,012
- - -----------------------------------------------------------------------------------------------------------
Net Interest Income After Provision for Possible Losses 109,377 106,639
Non-Interest Income
Trust Income 12,109 7,678
Service Charges on Deposit Accounts 6,981 6,417
Fees, Exchange, and Other Service Charges 8,470 7,509
Other Operating Income 7,629 4,907
Investment Securities Gains (Losses) (1,043) 1,328
- - -----------------------------------------------------------------------------------------------------------
Total Non-Interest Income 34,146 27,839
Non-Interest Expense
Salaries 35,040 33,243
Pensions and Other Employee Benefits 12,016 10,920
Net Occupancy Expense of Premises 9,207 8,934
Net Equipment Expense 6,816 6,773
Other Operating Expense 25,165 22,640
- - -----------------------------------------------------------------------------------------------------------
Total Non-Interest Expense 88,244 82,510
- - -----------------------------------------------------------------------------------------------------------
Income Before Income Taxes 55,279 51,968
Provision for Income Taxes 20,887 18,993
- - -----------------------------------------------------------------------------------------------------------
Net Income $34,392 $32,975
===========================================================================================================
Earnings Per Common Share and Common Share Equivalents $0.80 $0.77
- - -----------------------------------------------------------------------------------------------------------
Average Common Shares and Common Share Equivalents Outstanding 42,943,711 42,866,856
- - -----------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
Consolidated Statements of Shareholders' Equity (Unaudited) Bancorp Hawaii, Inc. and subsidiaries
- - ----------------------------------------------------------------------------------------------------------------
<CAPTION>
Common Unrealized Retained
(in thousands of dollars except per share amounts) Total Stock Surplus Valuation Adj. Earnings
- - ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1993 $938,104 $56,850 $284,886 $537 $595,831
Net Income 34,392 - - - 34,392
Sale of Common Stock
96,443 Profit Sharing Plan 3,090 193 2,897 - -
47,981 Stock Option Plan 811 96 715 - -
51,336 Dividend Reinvestment Plan 1,767 103 1,664 - -
Stock Repurchased (8,282) (400) (7,882) - -
Unrealized Valuation Adjustments
Investment Securities (6,190) - - (6,190) -
Foreign Exchange Translation Adjustment 658 - - 658 -
50 Percent Stock Dividend (59) 28,288 - - (28,347)
Cash Dividends Paid of $.26 Per Share (11,029) - - - (11,029)
- - ----------------------------------------------------------------------------------------------------------------
Balance at March 31, 1994 $953,262 $85,130 $282,280 ($4,995) $590,847
================================================================================================================
Balance at December 31, 1992 $828,328 $56,112 $272,810 ($2,271) $501,677
Net Income 32,975 - - - 32,975
Sale of Common Stock
47,408 Profit Sharing Plan 2,279 95 2,184 - -
82,231 Stock Option Plan 1,800 165 1,635 - -
34,606 Dividend Reinvestment Plan 1,652 69 1,583 - -
Stock Repurchased - - - - -
Unrealized Valuation Adjustments
Investment Securities - - - - -
Foreign Exchange Translation Adjustment (47) - - (47) -
Cash Dividends Paid of $.21 Per Share (9,069) - - - (9,069)
- - ----------------------------------------------------------------------------------------------------------------
Balance at March 31, 1993 $857,918 $56,441 $278,212 ($2,318) $525,583
================================================================================================================
</TABLE>
<PAGE>
<TABLE>
Consolidated Statement of Cash Flows (Unaudited) Bancorp Hawaii, Inc. and subsidiaries
- - --------------------------------------------------------------------------------------------------------------
<CAPTION>
Three Months Ended March 31
(in thousands of dollars) 1994 1993
- - --------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Operating Activities
Net Income $34,392 $32,975
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan losses, depreciation, and amortization of income and expense 8,467 3,282
Deferred income taxes 1,001 (154)
Realized and unrealized investment security gains (565) (827)
Net (increase) decrease in trading securities 284 (1,785)
Other assets and liabilities, net 4,333 49,280
------------ ------------
Net cash provided by operating activities 47,912 82,771
- - --------------------------------------------------------------------------------------------------------------
Investing Activities
Proceeds from redemptions of investment securities held to maturity 474,680 210,537
Purchases of investment securities held to maturity (379,635) (706,324)
Proceeds from sales of investment securities available for sale 134,156 573,984
Purchases of investment securities available for sale (109,860) (594,651)
Net decrease (increase) in interest-bearing deposits placed in other banks (162,287) 182,018
Net (increase) decrease in funds sold (58,048) 352,594
Net increase in loans and lease financing (111,133) (36,404)
Premises and equipment, net (11,587) (4,392)
------------ ------------
Net cash used by investing activities (223,714) (22,638)
- - --------------------------------------------------------------------------------------------------------------
Financing Activities
Net increase (decrease) in demand, savings, and time deposits 334,958 (235,649)
Proceeds from lines of credit and long-term debt 111,625 10,000
Principal payments on lines of credit and long-term debt -- (300)
Net increase (decrease) in short-term borrowings (56,548) 153,280
Proceeds from sale of stock (2,614) 5,731
Cash dividends (11,088) (9,069)
------------ ------------
Net cash provided (used) by financing activities 376,333 (76,007)
Effect of exchange rate changes on cash 658 (47)
------------ ------------
Increase (decrease) in cash and non-interest bearing deposits 201,189 (15,921)
------------ ------------
Cash and non-interest bearing deposits at beginning of year 395,315 393,555
------------ ------------
Cash and non-interest bearing deposits at end of period $596,504 $377,634
- - --------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Financial Review
Performance Highlights
Bancorp Hawaii, Inc. (Bancorp) reported earnings for the first
quarter of 1994 of $34.4 million, 4.3% above earnings for the first
quarter last year. On a per share basis, earnings were $0.80 for the
first quarter of 1994 compared with $0.77 for the same quarter a year
ago. These per share figures have been adjusted for the 50% stock
dividend declared in the first quarter of 1994. The single digit
percentage increases reflects the impact of the slowdown in the Hawaii
economy, which is Bancorp's main market, and the recent increase in
interest rates.
Total assets grew 3.3% from year-end 1993 to $12.9 billion as of
March 31, 1994. Compared to the asset balances at March 31, 1993,
assets have grown 1.6%. Net loans outstanding increased from year-end
1993 by 1.5%, and increased by 5.3% from March 31, 1993.
Non-performing assets have decreased to $66.8 million at March 31,
1994. This was the third consecutive quarterly decrease in non-
performing assets for Bancorp since reporting a high on June 30, 1993 of
$106.6 million. A further discussion on NPAs and the Reserve for Loan
Loss follows later in this report.
Total deposits increased to $7.3 billion, compared to $7.0 billion
reported at year-end 1993, but a decline from $7.7 billion reported at
March 31, 1993. Securities sold under agreements to repurchase (repos)
as of the end of March 1994 totaled $2.5 billion, level with year-end
1993, but a decline of 11.8% from March 31, 1993. Repos which have been
provided to the state and municipal government offer the same level of
required collateralization as do government deposits, but provide a
marginally higher rate of interest, as the funds are not FDIC insured.
The integration of American Financial Services (AFS), parent of
American and Bishop Trust with Hawaiian Trust Company has progressed
well. Trust income for the first quarter which includes both AFS and
Hawaiian Trust Company totaled $12.1 million, a 57.7% increase over the
same quarter in 1993 (prior to the acquisition).
Risk Elements in Lending Activities
At March 31, 1994, total loans were $7.4 billion, a 1.5% increase
from year-end 1993 and 5.1% above total loan balances on March 31, 1993.
In spite of the slower loan growth, Bancorp's lending policies remain
unchanged and conservative. The following table presents Bancorp's
total loan portfolio balances for the periods indicated.
<PAGE>
<TABLE>
Loan Portfolio Balance Bancorp Hawaii, Inc., and subsidiaries
- - ------------------------------------------------------------------------------
<CAPTION>
March 31 December 31 March 31
(in millions of dollars) 1994 1993 1993
- - ------------------------------------------------------------------------------
<S> <C> <C> <C>
Domestic Loans
Commercial and Industrial $1,685.3 $1,709.2 $1,753.3
Real Estate
Construction -- Commercial 140.8 136.2 171.4
-- Residential 36.2 35.1 27.4
Mortgage -- Commercial 1,241.8 1,230.6 1,078.7
-- Residential 2,523.4 2,476.0 2,236.7
Installment 675.0 676.2 640.8
Lease Financing 392.3 401.6 396.8
- - ------------------------------------------------------------------------------
Total Domestic $6,694.8 $6,664.9 $6,305.1
- - ------------------------------------------------------------------------------
Foreign Loans 671.8 593.5 703.7
- - ------------------------------------------------------------------------------
Total Loans $7,366.6 $7,258.4 $7,008.8
==============================================================================
/TABLE
<PAGE>
Commercial and Industrial Loans
Commercial and Industrial loans outstanding were $1.7 billion as of
March 31, 1994, reflecting a decrease from both year-end 1993 and March
31, 1993 of 1.4% and 3.9%, respectively. The slowdown in the Hawaiian
and Asian Rim economies continues to hamper loan growth.
Real Estate Loans
Total real estate loans at March 31, 1994 were $3.9 billion, up
1.7% from year-end 1993. A detail of the real estate loans are
presented in the previous table. The commercial and residential real
estate markets continue to grow. Commercial real estate balances
(excluding construction) on March 31, 1994 rose 0.9% and 15.1% from
year-end 1993 and March 31, 1993, respectively. Likewise, residential
real estate balances on March 31, 1994 increased over year-end 1993 and
the end of the first quarter 1993 by 1.9% and 13.0%, respectively.
Construction loan balances have remained stable at $177.0 million on
March 31, 1994 and $171.3 million at year-end 1993.
Other Lending
Installment loans and leases have shown modest decreases in
balances from year-end 1993. At March 31, 1994, total installment loans
were $675.0 million, down 0.2% from $676.2 million reported at year-end
1993, while total leases fell to $392.3 million from $401.6 million at
year-end 1993.
Foreign loan balances grew to $671.8 million, reflecting an
increase of 13.2% from year-end 1993, but still 4.5% below March 31,
1993 balances. The rise in the foreign loan total since year-end
reflects some modest growth coming from the Asian Rim market. The
foreign loan total includes outstanding credits to Less Developed
Countries (LDC). LDC exposure remains very limited at $1.0 million in
outstanding credits and $71.1 million in confirmed letters of credit and
banker's acceptances at March 31, 1994. All LDC exposure is in the
Philippines.
<PAGE>
Non-Performing Assets and Past Due Loans
Bancorp's non-performing assets (NPA) include non-accrual loans,
restructured loans and foreclosed real estate. NPA totaled $66.8
million, representing 0.91% of total loans outstanding at March 31,
1994. This ratio compares with 1.30% at the end of the first quarter
1993 and 0.95% at year-end 1993. This was the third consecutive quarter
NPAs have declined since June 30, 1993 when NPA peaked at $106.6
million.
Non-accrual loans decreased during the quarter to $57.6 million
from $58.4 million at year-end 1993 and decreased 33.4% from $86.5
million on March 31, 1993. The distribution of the non-accrual loans by
category is disclosed in the table following.
Since year-end, the remaining components of NPA and past due loans
have stabilized. Restructured loans ended the first quarter of 1994 at
$5.2 million. The foreclosed real estate category declined slightly to
$4.0 million from $4.1 million at year-end 1993. Loans past due 90 days
remained level with year-end 1993 at $10.0 million, but significantly
below the $30.9 million reported at March 31, 1993. Total non-
performing assets and loans 90 days past due declined to 1.04% of total
loans outstanding from 1.09% at year-end 1993 and 1.74% at March 31,
1993.
The following table presents NPA and past due loans for the periods
indicated.
<PAGE>
<TABLE>
Bancorp Hawaii, Inc.
Consolidated Non-Performing Assets and Accruing Loans Past Due 90 Days or More
- - -------------------------------------------------------------------------------
<CAPTION>
March 31 December 31 March 31
(in millions of dollars) 1994 1993 1993
- - -------------------------------------------------------------------------------
<S> <C> <C> <C>
Non-Accrual Loans
Commercial $12.9 $15.7 $53.6
Real Estate
Construction 20.2 17.7 --
Commercial 8.1 7.8 9.7
Residential 15.5 16.4 17.7
Installment 0.7 0.5 0.6
Leases 0.2 0.3 --
Other -- -- --
Foreign -- -- 4.9
----------------------------------------
Subtotal 57.6 58.4 86.5
Restructured Loans
Commercial -- 1.0 1.0
Real Estate
Construction -- -- --
Commercial 5.2 5.3 --
Residential -- -- --
Installment -- -- --
Leases -- -- --
Other -- -- --
Foreign -- -- --
----------------------------------------
Subtotal 5.2 6.3 1.0
Foreclosed Real Estate
Domestic 4.0 4.1 3.3
Foreign -- -- --
----------------------------------------
Subtotal 4.0 4.1 3.3
----------------------------------------
Total Non-Performing Assets $66.8 $68.8 $90.8
========================================
Loans Past Due 90 Days
Commercial 1.3 0.3 9.0
Real Estate
Construction 0.2 -- 2.0
Commercial 1.6 1.9 2.6
Residential 2.6 4.1 12.9
Installment 4.2 3.5 4.3
Leases 0.1 0.1 0.1
Other -- 0.1 --
Foreign -- -- --
----------------------------------------
Subtotal 10.0 10.0 30.9
----------------------------------------
Total $76.8 $78.8 $121.7
========================================
- - -------------------------------------------------------------------------------
Ratio of Non-Performing Assets
to Total Loans 0.91% 0.95% 1.30%
- - -------------------------------------------------------------------------------
- - -------------------------------------------------------------------------------
Ratio of Non-Performing Assets
and Accruing Loans Past Due
90 Days or More to Total Loans 1.04% 1.09% 1.74%
- - -------------------------------------------------------------------------------
</TABLE>
<PAGE>
Summary of Loan Loss Experience
The reserve for loan losses stood at $130.1 million at March 31,
1994, representing 1.80% of loans outstanding. Comparatively, the ratio
of reserves to loans outstanding on March 31, 1993 was 1.96% and 1.76%
at year-end 1993.
Loan loss provisions were $8.3 million for the first quarter of
1994, slightly below the $9.0 million reported for the first quarter of
1993. Charge-offs totaled $7.1 million for the first quarter of 1994,
above both the $6.1 million reported for the fourth quarter of 1993 and
the $4.5 million reported during the first quarter of 1993. The
increase was offset by strong recoveries which totaled $3.6 million for
the first quarter of 1994, compared to $1.5 million and $2.6 million for
the first and fourth quarters of 1993, respectively. Net charge-offs
for the first quarter of 1994 were $3.5 million compared to $3.0 million
during the same period in 1993. The annualized ratio of net charge-offs
to average loans outstanding for the first quarter of 1994 was 0.19%,
slightly above the ratio of 0.18% for the same period in 1993, but well
below the 1993 ratio of 0.82%.
The detailed breakdown of the charge-off and recoveries by loan
category is presented in the table following.
<PAGE>
<TABLE>
Summary of Loss Experience Bancorp Hawaii, Inc., and subsidiaries
- - --------------------------------------------------------------------------------------------------------------------
<CAPTION>
First Year Ended First
Quarter December 31 Quarter
(in millions of dollars) 1994 1993 1993
- - --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Average Loans Outstanding $7,182.7 $6,991.0 $6,854.6
Balance of Reserve for Possible Loan Losses
at Beginning of Period $125.3 $128.6 $128.6
Loans Charged Off
Commercial and Industrial 5.2 43.9 0.1
Real Estate - Construction -- 0.5 --
Real Estate - Mortgage
Commercial -- 2.7 2.6
Residential -- 0.4 --
Installment 1.9 8.6 1.8
Foreign -- 7.5 --
Leases -- 2.1 --
Total Charged Off (7.1) (65.7) (4.5)
Recoveries on Loans Previously Charged Off
Commercial and Industrial 2.7 3.9 0.6
Real Estate - Construction -- -- --
Real Estate - Mortgage
Commercial -- 0.7 --
Residential 0.1 0.3 --
Installment 0.8 3.2 0.9
Foreign -- -- --
Leases -- 0.1 --
Total Recoveries 3.6 8.2 1.5
- - --------------------------------------------------------------------------------------------------------------------
Net Loans Charged Off (3.5) (57.5) (3.0)
Provision Charged to Operating Expenses 8.3 54.2 9.0
- - --------------------------------------------------------------------------------------------------------------------
Balance at End of Period $130.1 $125.3 $134.6
====================================================================================================================
Ratio of Net Charge Offs to Average Loans Outstanding (annualized) 0.19% 0.82% 0.18%
- - --------------------------------------------------------------------------------------------------------------------
Ratio of Reserve to Loans Outstanding 1.80% 1.76% 1.96%
- - --------------------------------------------------------------------------------------------------------------------
/TABLE
<PAGE>
Capital
The level of Bancorp's capital is managed through the target
ratios outlined in Bancorp's 1993 Annual Report. The target of a
minimum 6% ratio of average equity to average assets keeps both
objectives of a return on assets of 1% and a return on equity of 16%
in reasonable balance. Bancorp's average equity to average assets
ratio for the first quarter of 1994 was 7.57%, an increase from the
7.09% reported at year-end 1993 and 6.72% at March 31, 1993.
Regulatory risk-based capital remain well above minimum
guidelines. Bancorp's Total Capital and Tier 1 Capital ratios were
13.51% and 10.74%, respectively. This compares with year-end 1993,
when the Total Capital Ratio was 13.60% and the Tier 1 Capital Ratio
was 10.79%. Regulatory guidelines prescribe a minimum Total Capital
Ratio of 10.00% and a Tier 1 Capital Ratio of 6.00% for an institution
to qualify as well capitalized. Bancorp's strategy is to maintain its
capital ratios at levels to meet this qualification to benefit from
the financial and regulatory incentives provided to well capitalized
companies.
In addition, the leverage ratio, which represents the ratio of
Tier 1 Capital to Total Average Assets, was 7.06% at March 31, 1994,
compared to 6.64% at March 31, 1993 and 6.89% at year-end 1993. The
required minimum ratio is 5.00%, to qualify an institution as well
capitalized.
Spread Management
The average net interest margin or spread on earning assets for
the first quarter of 1994 was 4.05%, an increase from the 3.96%
reported for the same period in 1993, and 4.02% reported for the
fourth quarter of 1993. Spread for all of 1993 was 4.00%. The cost
of funds rate for the first quarter of 1994 was 3.59%, an increase
from both the 3.49% reported for the same quarter a year ago and 3.56%
reported for the fourth quarter of 1993. These increases reflect the
recent movement in interest rates stimulated by the Federal Reserve.
Going forward, increasing interest rates would have a tendency to
compress net interest margin.
The earning asset yield was 6.72% for the first quarter of 1994,
an increase over the fourth quarter 1993 yield of 6.68%, but a
decrease from the yield reported in the first quarter of 1993 of
6.97%.
<PAGE>
<TABLE>
Consolidated Average Balances and Interest Rates Taxable Equivalent Bancorp Hawaii, Inc. and subsidiaries
- - ----------------------------------------------------------------------------------------------------------
<CAPTION>
Three Months Ended Three Months Ended
March 31, 1994 March 31, 1993
Average Income/Yield/ Average Income/Yield/
(in millions of dollars) Balance Expense Rate Balance Expense Rate
- - ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Earning Assets
Interest Bearing Deposits $869.0 $7.7 3.58% $1,234.0 $11.7 3.84%
Investment Securities
-Taxable 2,776.2 38.2 5.59 3,238.3 49.9 6.24
-Tax-Exempt 20.1 0.7 13.68 35.2 1.0 11.97
922.5 9.4 4.15 136.6 3.7 10.97
Funds Sold 42.0 0.4 4.01 416.8 3.3 3.23
Net Loans
-Domestic 6,533.6 123.8 7.68 6,222.8 118.6 7.73
-Foreign 649.2 6.7 4.20 631.8 7.3 4.70
Loan Fees 9.0 9.3
------------------------ ------------------------
Total Earning Assets 11,812.6 195.9 6.72 11,915.5 204.8 6.97
Cash and Due From Banks 444.8 452.6
Other Assets 341.2 278.4
---------- ----------
Total Assets $12,598.6 $12,646.5
========== ==========
Interest Bearing Liabilities
Domestic Deposits - Demand $1,964.6 9.5 1.95 $2,066.4 12.4 2.44
- Savings 1,261.9 7.1 2.27 1,203.4 8.9 2.99
- Time 1,549.8 16.0 4.20 1,910.8 22.2 4.71
------------------------ ------------------------
Total Domestic 4,776.3 32.6 2.76 5,180.6 43.5 3.41
Total Foreign 1,185.1 9.6 3.30 1,193.3 11.4 3.89
------------------------ ------------------------
Total Deposits 5,961.4 42.2 2.87 6,373.9 54.9 3.50
Short-Term Borrowings 3,675.3 29.9 3.30 3,814.3 32.4 3.44
Long-Term Debt 439.6 5.7 5.28 87.4 1.2 5.46
------------------------ ------------------------
Total Interest Bearing Liabilities 10,076.3 77.8 3.13 10,275.6 88.5 3.49
------------------------ ------------------------
Net Interest Income 118.1 3.59 116.3 3.48
Average Spread on Earning Assets 4.05% 3.96%
Demand Deposits 1,396.4 1,289.8
Other Liabilities 172.7 231.2
Shareholders' Equity 953.2 849.9
---------- ----------
Total Liabilities and Shareholders' Equity $12,598.6 $12,646.5
========== ==========
Provision for Possible Losses 8.3 9.0
Net Overhead 54.1 54.7
------- -------
Income Before Income Taxes 55.7 52.6
Provision for Income Taxes 20.9 19.0
Tax-Equivalent Adjustment 0.4 0.6
------- -------
Net Income $34.4 $33.0
======= =======
</TABLE>
<TABLE>
Consolidated Average Balances and Interest Rates Taxable Equivalent Bancorp Hawaii, Inc. and subsidiaries
- - ----------------------------------------------------------------------------------------------------------
<CAPTION>
Three Months Ended Twelve Months Ended
December 31, 1993 December 31, 1993
Average Income/Yield/ Average Income/Yield/
(in millions of dollars) Balance Expense Rate Balance Expense Rate
- - ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Earning Assets
Interest Bearing Deposits $1,022.6 $9.6 3.73% $1,140.1 $43.0 3.77%
Investment Securities
-Taxable 3,649.1 50.0 5.43 3,513.0 203.0 5.78
-Tax-Exempt 23.6 0.7 12.46 29.3 3.6 12.25
66.0 0.5 2.89 69.1 5.9 8.61
Funds Sold 48.9 0.5 4.23 146.0 5.2 3.56
Net Loans
-Domestic 6,412.6 121.4 7.51 6,324.9 482.5 7.63
-Foreign 630.8 7.0 4.41 666.1 29.9 4.48
Loan Fees 9.9 37.9
------------------------ ------------------------
Total Earning Assets 11,853.6 199.6 6.68 11,888.5 811.0 6.82
Cash and Due From Banks 418.6 413.2
Other Assets 309.0 284.1
---------- ----------
Total Assets $12,581.2 $12,585.8
========== ==========
Interest Bearing Liabilities
Domestic Deposits - Demand $1,991.5 9.8 1.96 $2,032.3 45.1 2.22
- Savings 1,263.7 7.2 2.25 1,239.4 32.6 2.63
- Time 1,580.1 17.4 4.35 1,711.9 77.7 4.54
------------------------ ------------------------
Total Domestic 4,835.3 34.4 2.82 4,983.6 155.4 3.12
Total Foreign 1,301.5 10.8 3.30 1,223.9 43.2 3.52
------------------------ ------------------------
Total Deposits 6,136.8 45.2 2.92 6,207.5 198.6 3.20
Short-Term Borrowings 3,643.6 29.7 3.24 3,763.3 124.6 3.31
Long-Term Debt 342.9 4.7 5.42 212.6 12.1 5.68
------------------------ ------------------------
Total Interest Bearing Liabilities 10,123.3 79.6 3.12 10,183.4 335.3 3.29
------------------------ ------------------------
Net Interest Income 120.0 3.56 475.7 3.53
Average Spread on Earning Assets 4.02% 4.00%
Demand Deposits 1,379.9 1,324.9
Other Liabilities 144.0 184.6
Shareholders' Equity 934.0 892.9
---------- ----------
Total Liabilities and Shareholders' Equity $12,581.2 $12,585.8
========== ==========
Provision for Possible Losses 9.1 54.2
Net Overhead 53.7 206.8
------- -------
Income Before Income Taxes 57.2 214.7
Provision for Income Taxes 21.0 79.8
Tax-Equivalent Adjustment 0.5 2.3
------- -------
Net Income $35.7 $132.6
======= =======
</TABLE>
<PAGE>
Liquidity
The ability to meet day-to-day financial needs of Bancorp's
customer base is essential. Much of the strategy of meeting liquidity
needs was described in Bancorp Hawaii's 1993 Annual Report and remains
in place.
At March 31, 1994, deposits were $7.3 billion, compared to $7.0
billion and $7.7 billion reported at year-end 1993 and March 31, 1993,
respectively. These changes partly reflect the impact of the
competition for deposits, not only by banks and savings and loan
companies, but also by securities brokerage firms. Repos which are
offered to government depositors as an alternative to deposits were
$2.5 billion at March 31, 1994, compared to $2.8 billion on March 31,
1993, and $2.5 billion at year-end 1993.
During the quarter, Bank of Hawaii issued $100 million in bank
notes. The note was issued under an established bank note facility
allowing the issuance of up to $750 million in notes. The notes bear
floating and fixed rates of interest and mature in 1 to 2 years. As
of March 31, 1994, $200 million had been issued. As a result, long
term debt increased to $469 million at March 31, 1994.
Net Overhead
As stated in Bancorp's 1993 Annual Report, Bancorp manages net
overhead by focusing on its net overhead ratio. The net overhead
ratio at Bancorp is defined as the ratio of non-interest expense to
non-interest income. Bancorp's long term goal is to have a ratio of 2
to 1, where fee income offsets at least half of the cost of
operations. The ratio for the first quarter of 1994 was 2.58,
compared to 2.96 for the first quarter of 1993 and 2.60 for all of
1993.
Additionally, Bancorp's management places an emphasis on the
amount of net income generated per full-time equivalent staff (FTE)
with the objective of improving net income with existing or lesser
staff levels. For the first quarter of 1994, net income per FTE was
$8,018, or $32,072 on an annualized basis. This compares to $31,000
and $31,100 reported for the full years of 1993 and 1992,
respectively.
Non-interest income for the first quarter was $34.1 million, a
22.7% increase over the same quarter in 1993. Trust income was $12.1
million, up 57.7% from the same period last year. The increase
includes the additional income from American and Bishop trust
companies, subsidiaries of American Financial Services acquired in May
1993. Service charges on deposit accounts for the first quarter of
1994 was $7.0 million, compared to $6.4 million for the like period
last year. Fees, exchange and other service charges for the first
quarter of 1994 increased to $16.1 million compared to $12.4 million
for the same period in 1993. The increase has been driven by
increases in ATM usage fees and the increase in affiliate earnings in
the Southern and Western Pacific.
For the first quarter of 1994, Bancorp reported a securities loss
of $1.0 million compared to a gain of $1.3 million for the same period
in 1993. These gains and losses remained at modest levels.
Bancorp continues to emphasize the importance of control over
non-interest expenses as a key factor in its effort to remain
competitive among its peers. Non-interest expense in the first
quarter was $88.2 million, an increase of 6.9% over the same period in
1993. The increase over last year mainly results from costs related
to American Financial Services.
Salary and benefit expenses increased from the first quarter of
1993, up 6.6% to $47.0 million, again reflecting the staff costs of
American Financial Services. Premises and equipment expenses totaled
$16.0 million for the first quarter of 1994, virtually level with the
$15.7 million for the same period of 1993. Bancorp continues to
invest in technology as more efficient operations with existing staff
counts become increasingly important. Other operating expenses for
the first quarter increased 11.2% over last year during the same
period. The increase in this expense category reflects the additional
goodwill amortization resulting from the American Financial Services
acquisition in May of 1993.
<PAGE>
PART II. - Other Information
Items 1 to 5 omitted pursuant to instructions.
Item 6 - Exhibits and Reports on Form 8-K
(a) The following exhibits are filed herewith:
Exhibit #11 - Statement regarding computation of per
share earnings.
(b) No Form 8-K was filed during the quarter.
Date May 11, 1994 BANCORP HAWAII, INC.
RICHARD J. DAHL
(Signature)
Richard J. Dahl
Executive Vice President
DAVID A. HOULE
(Signature)
David A. Houle
Senior Vice President and
Chief Financial Officer
<PAGE>
<TABLE>
Bancorp Hawaii, Inc.
Exhibit 11 - Statement Regarding Computation of Per Share Earnings
Three Months Ended March 31
<CAPTION>
Fully
Primary Diluted
-------------- -------------
<S> <C> <C>
1994
----
Net Income $34,392,000 $34,392,000
============== =============
Daily Average Shares Outstanding 42,467,686 42,467,686
Shares Assumed Issued for Stock Options (1) 476,025 490,705
-------------- -------------
42,943,711 42,958,391
============== =============
Earnings Per Common Share and
Common Share Equivalents $0.80 $0.80
============== =============
1993
----
Net Income $32,975,000 $32,975,000
============== =============
Daily Average Shares Outstanding 42,176,823 42,176,823
Shares Assumed Issued for Stock Options (1) 690,033 768,506
-------------- -------------
42,866,856 42,945,329
============== =============
Earnings Per Common Share and
Common Share Equivalents $0.77 $0.77
============== =============
</TABLE>
