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 June 30, 1996
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) 847-8888
----------------------------------------------------
(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 July 31, 1996 -
40,833,656 shares
<PAGE>
BANCORP HAWAII, INC. and subsidiaries
June 30, 1996
PART I. - Financial Information
Item 1. Financial Statements
The consolidated statements of condition as of June 30, 1996
and 1995, and December 31, 1995 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. Certain accounts have been reclassified to conform with
the 1996 presentation.<PAGE>
<TABLE>
Consolidated Statements of Condition (Unaudited) Bancorp Hawaii, Inc. and subsidiaries
- ------------------------------------------------------------------------------------------------------------------
<CAPTION>
June 30 December 31 June 30
(in thousands of dollars) 1996 1995 1995
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Assets
Interest-Bearing Deposits $638,204 $789,050 $752,923
Investment Securities - Held to Maturity
(Market Value of $1,272,486, $1,135,364 and $1,565,095 respective 1,280,379 1,129,251 1,574,160
Investment Securities - Available for Sale 2,217,867 2,230,902 1,543,324
Securities Purchased Under Agreements to Resell -- -- 90,000
Funds Sold 218,628 116,173 144,900
Loans 8,549,043 8,152,406 7,704,174
Unearned Income (177,225) (147,404) (142,084)
Reserve for Possible Loan Losses (163,266) (151,979) (150,302)
- ------------------------------------------------------------------------------------------------------------------
Net Loans 8,208,552 7,853,023 7,411,788
- ------------------------------------------------------------------------------------------------------------------
Total Earning Assets 12,563,630 12,118,399 11,517,095
Cash and Non-Interest Bearing Deposits 482,067 469,031 474,554
Premises and Equipment 271,762 246,515 231,978
Customers' Acceptance Liability 21,759 16,825 22,648
Accrued Interest Receivable 85,910 84,669 74,598
Other Real Estate 9,571 9,306 1,581
Intangibles, including Goodwill 96,971 87,673 91,422
Trading Securities 1,192 29 566
Other Assets 157,292 174,337 159,209
- ------------------------------------------------------------------------------------------------------------------
Total Assets $13,690,154 $13,206,784 $12,573,651
==================================================================================================================
Liabilities
Domestic Deposits
Demand - Non-Interest Bearing $1,295,882 $1,549,302 $1,377,586
- Interest-Bearing 1,612,901 1,592,533 1,653,386
Savings 931,286 1,004,550 1,051,617
Time 2,517,056 2,204,242 1,835,287
Foreign Deposits 2,065,696 1,226,143 1,086,042
- ------------------------------------------------------------------------------------------------------------------
Total Deposits 8,422,821 7,576,770 7,003,918
Securities Sold Under Agreements to Repurchase 1,695,907 1,926,540 2,250,738
Funds Purchased 600,232 787,437 379,473
Short-Term Borrowings 499,580 476,867 655,652
Bank's Acceptances Outstanding 21,759 16,825 22,648
Accrued Pension Costs 23,451 21,145 24,433
Accrued Interest Payable 70,629 49,473 48,669
Accrued Taxes Payable 145,427 160,306 165,730
Minority Interest 17,057 2,961 2,641
Other Liabilities 86,166 70,588 121,241
Long-Term Debt 1,057,225 1,063,436 877,640
- ------------------------------------------------------------------------------------------------------------------
Total Liabilities 12,640,254 12,152,348 11,552,783
Shareholders' Equity
Common Stock ($2 par value), authorized 100,000,000 shares;
outstanding, June 1996 - 40,830,130;
December 1995 - 41,340,817; June 1995 - 41,520,923; 81,660 82,682 83,042
Surplus 221,897 240,080 249,718
Unrealized Valuation Adjustments (15,760) 13,902 12,410
Retained Earnings 762,103 717,772 675,698
- ------------------------------------------------------------------------------------------------------------------
Total Shareholders' Equity 1,049,900 1,054,436 1,020,868
- ------------------------------------------------------------------------------------------------------------------
Total Liabilities and Shareholders' Equity $13,690,154 $13,206,784 $12,573,651
==================================================================================================================
/TABLE
<PAGE>
<TABLE>
Consolidated Statements of Income (Unaudited) Bancorp Hawaii, Inc. and subsidiaries
- ------------------------------------------------------------------------------------------------------------------
<CAPTION>
3 Months 3 Months 6 Months 6 Months
Ended Ended Ended Ended
June 30 June 30 June 30 June 30
(in thousands of dollars except per share amounts) 1996 1995 1996 1995
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Interest Income
Interest on Loans $167,460 $151,161 $325,259 $298,305
Loan Fees 8,283 6,087 16,577 13,109
Income on Lease Financing 6,640 3,100 9,674 6,092
Interest and Dividends on Investment Securities
Taxable 14,545 23,734 29,161 46,764
Non-taxable 298 351 609 719
Income on Investment Securities Available for Sale 35,995 26,337 72,859 51,204
Interest on Deposits 9,901 10,169 18,908 18,374
Interest on Security Resale Agreements -- 133 -- 133
Interest on Funds Sold 916 758 2,078 1,715
- ------------------------------------------------------------------------------------------------------------------
Total Interest Income 244,038 221,830 475,125 436,415
Interest Expense
Interest on Deposits 70,360 58,977 133,362 113,969
Interest on Security Repurchase Agreements 24,582 30,333 49,925 60,266
Interest on Funds Purchased 7,352 7,015 14,718 15,149
Interest on Short-Term Borrowings 5,328 4,526 11,472 10,204
Interest on Long-Term Debt 15,587 13,832 31,982 27,359
- ------------------------------------------------------------------------------------------------------------------
Total Interest Expense 123,209 114,683 241,459 226,947
- ------------------------------------------------------------------------------------------------------------------
Net Interest Income 120,829 107,147 233,666 209,468
Provision for Possible Loan Losses 4,163 4,120 8,587 8,573
- ------------------------------------------------------------------------------------------------------------------
Net Interest Income After Provision for Possible Loan Losses 116,666 103,027 225,079 200,895
Non-Interest Income
Trust Income 11,814 12,135 24,718 25,526
Service Charges on Deposit Accounts 7,390 6,180 13,951 12,840
Fees, Exchange, and Other Service Charges 13,426 12,428 25,385 24,785
Other Operating Income 9,969 4,962 16,300 10,534
Investment Securities Gains (Losses) 67 273 (62) 2,104
- ------------------------------------------------------------------------------------------------------------------
Total Non-Interest Income 42,666 35,978 80,292 75,789
Non-Interest Expense
Salaries 40,899 35,408 77,519 71,005
Pensions and Other Employee Benefits 12,071 10,896 25,480 22,153
Net Occupancy Expense of Premises 8,662 10,040 19,444 20,252
Net Equipment Expense 8,797 9,033 16,554 16,774
Other Operating Expense 32,857 28,114 61,711 54,079
Minority Interest 501 198 657 481
- ------------------------------------------------------------------------------------------------------------------
Total Non-Interest Expense 103,787 93,689 201,365 184,744
- ------------------------------------------------------------------------------------------------------------------
Income Before Income Taxes 55,545 45,316 104,006 91,940
Provision for Income Taxes 20,932 16,768 36,683 35,144
- ------------------------------------------------------------------------------------------------------------------
Net Income $34,613 $28,548 $67,323 $56,796
==================================================================================================================
Earnings Per Common Share and Common Share Equivalents $0.84 $0.68 $1.63 $1.35
- ------------------------------------------------------------------------------------------------------------------
Average Common Shares and Common Share Equivalents Outstanding 41,276,498 42,121,368 41,411,266 42,129,385
- ------------------------------------------------------------------------------------------------------------------
</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, 1995 $1,054,436 $82,682 $240,080 $13,902 $717,772
Net Income 67,323 - - - 67,323
Sale of Common Stock
35,803 Profit Sharing Plan 1,231 72 1,159 - -
151,216 Stock Option Plan 3,549 302 3,247 - -
92,394 Dividend Reinvestment Plan 3,634 184 3,450 - -
1,800 Restricted Share Plan 64 4 60 - -
Stock Repurchased (27,683) (1,584) (26,099) - -
Unrealized Valuation Adjustments
Investment Securities (22,349) - - (22,349) -
Foreign Exchange Translation Adjustment (7,313) - - (7,313) -
Cash Dividends Paid of $.56 Per Share (22,992) - - - (22,992)
- ----------------------------------------------------------------------------------------------------------------
Balance at June 30, 1996 $1,049,900 $81,660 $221,897 ($15,760) $762,103
================================================================================================================
Balance at December 31, 1994 $966,788 $83,703 $260,040 ($18,122) $641,167
Net Income 56,796 - - - 56,796
Sale of Common Stock
96,251 Profit Sharing Plan 2,637 192 2,445 - -
84,332 Stock Option Plan 1,495 169 1,326 - -
132,374 Dividend Reinvestment Plan 3,735 265 3,470 - -
Stock Repurchased (18,850) (1,287) (17,563) - -
Unrealized Valuation Adjustments
Investment Securities 24,826 - - 24,826 -
Foreign Exchange Translation Adjustment 5,706 - - 5,706 -
Cash Dividends Paid of $.53 Per Share (22,265) - - - (22,265)
- ----------------------------------------------------------------------------------------------------------------
Balance at June 30, 1995 $1,020,868 $83,042 $249,718 $12,410 $675,698
================================================================================================================
</TABLE>
<PAGE>
<TABLE>
Consolidated Statements of Cash Flows(Unaudited) Bancorp Hawaii, Inc. and subsidiaries
- ---------------------------------------------------------------------------------------------------------------
<CAPTION>
Six Months Ended June 30
(in thousands of dollars) 1996 1995
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Operating Activities
Net Income $67,323 $56,796
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan losses, depreciation, and amortization of income and expense 6,935 5,497
Deferred income taxes (1,704) (2,459)
Realized and unrealized investment security gains 94,067 1,387
Net decrease in trading securities 1,163 13,130
Other assets and liabilities, net 19,810 25,879
------------ ------------
Net cash provided by operating activities 187,594 100,230
- ---------------------------------------------------------------------------------------------------------------
Investing Activities
Proceeds from redemptions of investment securities held to maturity 419,088 519,393
Purchases of investment securities held to maturity (548,108) (307,593)
Proceeds from sales of investment securities available for sale 527,659 283,159
Purchases of investment securities available for sale (645,939) (421,356)
Net decrease in interest-bearing deposits placed in other banks 355,537 (25,907)
Net decrease (increase) in funds sold (102,455) (180,733)
Net increase in loans and lease financing 241,710 201,405
Premises and equipment, net (21,936) (21,385)
Purchase of additional interest, net of cash and non-interest bearing deposits acquired:
Banque D'Hawaii (Vanuatu), Ltd. -- 6,808
Credipac Polynesie and Credipac Nouvelle Caledonie 1,291 --
Purchase of majority interest of Banque de Tahiti & New Caledonie
net of cash and non-interest bearing deposits acquired 23,892 --
------------ ------------
Net cash provided by investing activities 250,739 53,791
- ---------------------------------------------------------------------------------------------------------------
Financing Activities
Net increase in demand, savings, and time deposits 25,549 (122,365)
Proceeds from lines of credit and long-term debt 571,293 16,068
Principal payments on lines of credit and long-term debt (577,504) --
Net decrease in short-term borrowings (395,125) (54,390)
Proceeds from sale (repurchase) of stock (19,205) (10,983)
Cash dividends (22,992) (22,265)
------------ ------------
Net cash used by financing activities (417,984) (193,935)
Effect of exchange rate changes on cash (7,313) 5,706
------------ ------------
Decrease in cash and non-interest bearing deposits 13,036 (34,208)
Cash and non-interest bearing deposits at beginning of year 469,031 508,762
------------ ------------
Cash and non-interest bearing deposits at end of period $482,067 $474,554
- ---------------------------------------------------------------------------------------------------------------
</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
second quarter of 1996 of $34.6 million, 21.2% above earnings for
the second quarter of 1995. On a per share basis, earnings were
$0.84 for the second quarter of 1996, an increase from the $0.68
reported for the second quarter of 1995, and from the $0.79
reported for the first quarter of 1996.
For the six months ended June 30, 1996, Bancorp reported net
income of $67.3 million, 18.5% above that for the same period in
1995. Earnings per share were $1.63 for the first half of 1996,
compared with $1.35 for the same period in 1995. Earnings reflect
the improving economy in Hawaii, Bancorp's main market, the
improvement in Bancorp's net interest margin, and the acquisition
of the majority interest of Banque de Tahiti (BDT) and Banque de
Nouvelle Caledonie (BNC) during the second quarter. With the
increased ownership, the consolidated financial statements of
Bancorp includes the balance sheet of BDT and BNC as of June 30,
1996 and the income statement from May 2, 1996, the acquisition
date. Comparisons with prior periods should consider this change.
Performance ratios for the year-to-date period improved over
those reported for the year ended December 31, 1995. Return on
average assets and return on average equity were 1.03% and 12.70%,
respectively, for the first half of 1996. These ratios were 0.93%
and 11.42%, respectively, for the like period in 1995 and 0.98% and
11.87%, respectively, for all of 1995.
Total assets ended June 30, 1996 at $13.7 billion, an
increase from $13.2 billion at December 31, 1995 and $12.6 billion
at June 30, 1995. Net loans outstanding increased from June 30,
1995 and year-end 1995 by 10.7% and 4.5%, respectively. Total
investment securities increased to $3.5 billion at June 30, 1996
representing a 4.1% increase from year-end 1995 and 12.2% from the
same date a year ago.
Total deposits increased to $8.4 billion, compared to $7.6
billion reported at year-end 1995 and increased from the $7.0
billion reported a year ago on June 30. Securities sold under
agreements to repurchase (repos) as of June 30, 1996 totaled $1.7
billion, a decrease of 12.0% from year-end 1995 and a 24.7% decline
from June 30, 1995. The changes in repo balances, which are mainly
comprised of government funds, are explained later in this report.
Non-performing assets (NPAs) have increased to $84.0 million
at June 30, 1996. This total reflects the inclusion of the BDT and
BNC NPA which was $19.4 million at June 30, 1996. A further
discussion on NPAs and the Reserve for Loan Losses follows later in
this report.
Trust income for the second quarter of 1996 totaled $11.8
million, a 2.6% decrease from the same quarter in 1995. Growing
trust income has been difficult as competition based on pricing has
increased. Products introduced in recent years such as the Pacific
Capital family of funds are gaining recognition and building
historical results creating opportunities for future growth.
The average net interest margin or spread on earning assets
for the second quarter of 1996 grew to 3.91% bringing year-to-date
spread through June 30 to 3.85%. Comparatively, spread was 3.80%
for the same quarter in 1995 and 3.71% for the first half of 1995.
A further discussion of spread follows in this report.
Risk Elements in Lending Activities
At June 30, 1996, total loans were $8.5 billion, a 4.9%
increase from year-end 1995 and 11.0% above total loans on June 30,
1995. As indicated earlier in this report, the BDT and BNC loans
have been included in Bancorp's consolidated totals. At June 30,
1996, BDT and BNC loans totaled $0.6 billion. Also during the
quarter, Bancorp securitized $350 million in residential mortgage
loans and retained the securities in its held to maturity
investment portfolio. Adjusting the June 30, 1996 total loans for
the acquisition and securitization, the increase from year-end 1995
would have been 1.5%. The following table presents Bancorp's total
loan portfolio balances for the periods indicated.<PAGE>
<TABLE>
Loan Portfolio Balances Bancorp Hawaii, Inc., and subsidiaries
- ---------------------------------------------------------------------------------
<CAPTION>
June 30 December 31 June 30
(in millions of dollars) 1996 1995 1995
- ---------------------------------------------------------------------------------
<S> <C> <C> <C>
Domestic Loans
Commercial and Industrial $1,771.7 $1,902.2 $1,863.0
Real Estate
Construction -- Commercial 210.6 199.6 129.8
-- Residential 26.2 33.7 40.9
Mortgage -- Commercial 1,283.9 1,308.8 1,259.4
-- Residential 2,550.9 2,702.4 2,532.3
Installment 815.4 817.3 762.5
Lease Financing 406.8 392.9 384.2
- ---------------------------------------------------------------------------------
Total Domestic 7,065.5 7,356.9 6,972.1
- ---------------------------------------------------------------------------------
Foreign Loans 1,483.5 795.5 732.1
- ---------------------------------------------------------------------------------
Total Loans $8,549.0 $8,152.4 $7,704.2
=================================================================================
</TABLE>
<PAGE>
Commercial and Industrial Loans
Commercial and Industrial loans outstanding were $1.8 billion
as of June 30, 1996, a decrease of 6.9% from year-end 1995 and 4.9%
from June 30, 1995. The decline in Commercial and Industrial loans
has been affected by the Hawaii economy which has stifled loan
demand, low and undesirable pricing in the U.S. corporate market,
and aggressive management of substandard borrowers.
Real Estate Loans
Real estate loans totaled $4.1 billion at June 30, 1996, a
4.1% decrease from year-end 1995 but a 2.8% increase from the same
date a year ago. The decrease since year-end 1995 was attributed
to the securitization of $350 million in residential mortgage loans
in this quarter. Considering this securitization, a comparison
with year-end 1995 would reflect an increase of 4.2% in total real
estate loans.
Construction loans at June 30, 1996 totaled $236.8 million,
compared with $233.3 million at year-end 1995 and $170.7 million at
June 30, 1995. Commercial mortgage loans have remained relatively
consistent.
Other Lending
Installment loans and leases have remained at similar levels
compared to year-end 1995 balances. At June 30, 1996, total
installment loans were $815.4 million, compared with $817.3 million
reported at year-end 1995, and $762.5 million on the same date in
1995. The growth from a year ago was evenly divided between charge
cards and consumer installment loans. Total leases at June 30,
1996 increased to $406.8 million from $392.9 million at year-end
1995. Lease financing activity has become very competitive as
interest rates have remained at relatively low levels.
Foreign loan balances were $1.48 billion as of June 30, 1996,
compared to $795 million at year-end 1995, and $732.1 million at
June 30, 1995. The rise in the foreign loan total since year-end
reflects the BDT and BNC loan portfolio acquired during the
quarter.
Non-Performing Assets and Past Due Loans
Bancorp's non-performing assets include non-accrual loans,
restructured loans and foreclosed real estate. NPAs as of June 30,
1996 increased to $84.0 million reflecting the inclusion of the NPA
for BDT and BNC for the first time. As of quarter-end, excluding
the NPAs reported for BDT and BNC, the total would have been $64.6
million compared with $62.9 million at March 31, 1996 and $56.9
million at year-end 1995. NPAs as of June 30, 1996 represented
0.98% of total loans outstanding. This ratio compares with 0.76%
at the end of the first quarter 1996 and 0.70% as of year-end 1995.
This ratio was 0.66% at the end of the second quarter 1995.
Bancorp continues its effort to monitor and manage NPAs
aggressively. Total non-performing assets and loans 90 days past
due represented 1.39% of loans outstanding compared with 0.95% at
year-end 1995 and 1.02% at March 31, 1996. Excluding the affects
of the acquisitions, total non-performing assets and loans 90 days
past due as of June 30, 1996 would have been 0.89%.
Non-accrual loans increased during the quarter to $74.4
million from $53.7 million at the March 1996 quarter-end and $47.6
million at year-end 1995. The increase from the first quarter of
1996 reported in the foreign category reflecting the acquisition.
Without the additional non-accrual loans reported by BDT and BNC,
non-accrual loans would have been $55.0 million at June 30, 1996.
Accruing 90 day past due loans have increased to $35.0 million
mainly in the foreign category reflecting the acquisition. Past
due loans would have been $21.2 million without the past due loans
for BDT and BNC as of June 30, 1996. Installment past due loans
(including charge cards) decreased to $8.0 million at June 30, 1996
from $11.5 million as of March 31, 1996, the result of stepped up
collection efforts and charge-offs. Residential mortgage loans
past due 90 days increased to $7.3 million, 0.29% of total
residential mortgage loans, while past due commercial mortgage
loans increased to $3.5 million, 0.27% of total commercial real
estate loans. Both these ratios remain at modest levels. For
residential mortgage loans, the underlying collateral which
represented, at initial closing, loan to value ratios of 70-80%,
significantly reduces loss exposure.
The foreclosed real estate category remained at low levels,
totaling $9.6 million at June 30, 1996, compared with $9.2 million
at March 31, 1996 and $9.3 million at year-end 1995. There were
only 22 properties in Other Real Estate at June 30, 1996.
The following table presents NPAs 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>
June 30 December 31 June 30
(in millions of dollars) 1996 1995 1995
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Non-Accrual Loans
Commercial $17.7 $16.9 $15.3
Real Estate
Construction -- 0.3 0.8
Commercial 14.7 14.9 16.5
Residential 19.0 14.7 15.5
Installment 1.1 0.8 1.2
Leases 1.8 -- 0.1
Foreign 20.1 -- --
- -------------------------------------------------------------------------------
Subtotal 74.4 47.6 49.4
Restructured Loans -- -- --
Foreclosed Real Estate
Domestic 9.6 9.3 1.6
Foreign -- -- --
- -------------------------------------------------------------------------------
Subtotal 9.6 9.3 1.6
- -------------------------------------------------------------------------------
Total Non-Performing Assets 84.0 56.9 51.0
- -------------------------------------------------------------------------------
Accruing Loans Past Due 90 Days or More
Commercial 1.9 1.8 2.1
Real Estate
Construction 0.4 -- --
Commercial 3.5 2.4 0.1
Residential 7.3 5.8 7.3
Installment 8.0 10.5 6.5
Leases 0.1 0.2 --
Foreign 13.8 -- --
- -------------------------------------------------------------------------------
Subtotal 35.0 20.7 16.0
- -------------------------------------------------------------------------------
Total $119.0 $77.6 $67.0
===============================================================================
- -------------------------------------------------------------------------------
Ratio of Non-Performing Assets
to Total Loans 0.98% 0.70% 0.66%
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Ratio of Non-Performing Assets
and Accruing Loans Past Due
90 Days or More to Total Loans 1.39% 0.95% 0.87%
- -------------------------------------------------------------------------------
</TABLE>
<PAGE>
Summary of Loan Loss Experience
The reserve for loan losses stood at $163.3 million at June
30, 1996, representing 1.95% of loans outstanding. This compares
with 1.88% as of March 31, 1996, 1.90% at year-end 1995 and 1.99%
on June 30, 1995.
Loan loss provisions were $4.2 million for the second quarter
of 1996, compared with the $4.4 million reported for the first
quarter of 1996. Bancorp reported net recoveries of $0.1 million
for the second quarter of 1996, combined with the net charge-offs
of $4.3 million for the first quarter of 1996, this brought year-
to-date net charge-offs to $4.2 million.
Gross charge-offs increased to $14.0 million for the second
quarter of 1996, compared to $6.9 million for the first quarter of
1996. Year-to-date, gross charge-offs totaled $20.9 million,
compared with $15.9 million for the same period in 1995.
Recoveries reported for the quarter ended June 30, 1996 were $14.1
million, bringing year-to-date recoveries to $16.7 million.
Recoveries through June 30, 1996, which already exceed the $14.4
million reported for all of 1995, were boosted by an $11.5 million
recovery on loans secured by commercial leasehold property charged
off in 1992 and 1993.
The annualized ratio of net charge-offs to average loans
outstanding for the second quarter 1996 was zero percent. The
ratio of net charge-offs to average loans of 0.10% for the first
half of 1996 and 0.18% for the comparable period in 1995. For the
full year of 1995, Bancorp reported a ratio of 0.18%.
A detailed breakdown of charge-offs and recoveries by loan
category is presented in the following table.<PAGE>
<TABLE>
Summary of Loss Experience Bancorp Hawaii, Inc., and subsidiaries
- ------------------------------------------------------------------------------------------------
<CAPTION>
Second Second First Six First Six
Quarter Quarter Months Months
(in millions of dollars) 1996 1995 1996 1995
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Average Loans Outstanding $8,464.6 $7,587.8 $8,242.3 $7,599.1
Balance of Reserve for Possible Loan Losses
at Beginning of Period $152.1 $150.4 $152.0 $148.5
Loans Charged Off
Commercial and Industrial 2.5 4.9 3.9 6.6
Real Estate - Construction -- -- -- 2.1
Real Estate - Mortgage
Commercial 0.8 0.4 1.3 0.5
Residential 0.7 0.2 0.9 0.2
Installment 10.0 3.4 14.6 6.4
Foreign -- -- -- --
Leases -- 0.1 0.2 0.1
- ------------------------------------------------------------------------------------------------
Total Charged Off 14.0 9.0 20.9 15.9
Recoveries on Loans Previously Charged Off
Commercial and Industrial 12.6 2.3 13.2 5.5
Real Estate - Construction -- -- 0.7 --
Real Estate - Mortgage
Commercial 0.1 -- 0.1 --
Residential 0.1 -- 0.2 --
Installment 1.1 0.9 2.1 1.7
Foreign -- 1.3 -- 1.3
Leases 0.2 0.3 0.4 0.6
- ------------------------------------------------------------------------------------------------
Total Recoveries 14.1 4.8 16.7 9.1
- ------------------------------------------------------------------------------------------------
Net Charge Offs (Recoveries) (0.1) 4.2 4.2 6.8
Provision Charged to Operating Expenses 4.2 4.1 8.6 8.6
Reserves Acquired 6.9 -- 6.9 --
- ------------------------------------------------------------------------------------------------
Balance at End of Period $163.3 $150.3 $163.3 $150.3
================================================================================================
Ratio of Net Charge Offs (Recoveries) to
Average Loans Outstanding (annualized) 0.00% 0.22% 0.10% 0.18%
- ------------------------------------------------------------------------------------------------
Ratio of Reserve to Loans Outstanding 1.95% 1.99% 1.95% 1.99%
- ------------------------------------------------------------------------------------------------
/TABLE
<PAGE>
Capital
Bancorp continues to manage its capital levels through the
target ratios outlined in Bancorp's 1995 Annual Report. The
acquisition of the banks in the South Pacific, as expected, has had
an impact on Bancorp's ratios as discussed below. Bancorp's
average equity to average assets ratio for the second quarter of
1996 was 8.14%, a decrease from the 8.27% reported for 1995 and
8.33% for the first quarter of 1996.
Bancorp's shareholders' equity at June 30, 1996 totaled $1.0
billion. New shares issued for the profit sharing, stock option
and dividend reinvestment plans increased capital by $4.8 million
during the quarter. Under Bancorp's continuing stock repurchase
programs, $5.4 million of shares were repurchased during the second
quarter of 1996 largely to offset the requirements of the various
plans. Bancorp implemented its restricted stock program approved
by shareholders issuing 1,800 shares during the quarter. Dividends
for the quarter totaled $11.5 million, the same as the first
quarter dividends. The dividends were paid at $0.28 per share for
both quarters of 1996.
Regulatory risk-based capital remain above minimum guidelines.
At June 30, 1996, Bancorp's Total Capital and Tier 1 Capital ratios
were 11.80% and 9.42%, respectively. This compares with year-end
1995, when the Total Capital Ratio was 12.74% and the Tier 1
Capital Ratio was 10.25%. 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 7.62% at June 30, 1996,
compared to 7.82% at year-end 1995. 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 second quarter of 1996 improved to 3.91% from 3.80%
reported for both the first quarter of 1996 and the second quarter
of 1995. Year-to-date spread through June 1996 was 3.85% compared
to 3.71% for the same period in 1995. The improvement is partly
attributed to the acquisition of the South Pacific banks whose
spread is higher.
The cost of funds rate for the second quarter of 1996 was
4.76%, which was slightly below the 4.80% reported for the second
quarter of 1995 but slightly higher than the 4.67% for the first
quarter of 1996. The earning asset yield was 7.88% for the second
quarter of 1996, a slight increase over the second quarter 1995
yield of 7.84%, and 7.77% yield reported in the first quarter of
1996.<PAGE>
<TABLE>
Consolidated Average Balances and Interest Rates Taxable Equivalent Bancorp Hawaii, Inc. and subsidiaries
- ----------------------------------------------------------------------------------------------------------
<CAPTION>
Three Months Ended Three Months Ended
June 30, 1996 June 30, 1995
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 $756.5 $9.9 5.26% $626.9 $10.2 6.51%
Investment Securities
-Taxable 893.2 14.5 6.55 1,481.8 23.7 6.42
-Tax-Exempt 13.1 0.5 14.11 16.7 0.5 12.97
2,255.7 36.0 6.42 1,598.8 26.3 6.61
Funds Sold 87.5 0.9 4.21 57.7 0.9 6.20
Net Loans
-Domestic 7,216.6 148.8 8.29 6,851.9 143.3 8.39
-Foreign 1,248.0 25.4 8.19 735.9 11.3 6.17
Loan Fees 8.3 6.1
------------------------ ------------------------
Total Earning Assets 12,470.6 244.3 7.88 11,369.7 222.3 7.84
Cash and Due From Banks 467.8 474.3
Other Assets 433.1 388.1
---------- ----------
Total Assets $13,371.5 $12,232.1
========== ==========
Interest Bearing Liabilities
Domestic Deposits - Demand $1,672.2 11.9 2.86 $1,747.0 12.9 2.96
- Savings 956.6 5.9 2.49 1,069.9 7.8 2.94
- Time 2,360.5 31.6 5.38 1,805.3 22.7 5.04
------------------------ ------------------------
Total Domestic 4,989.3 49.4 3.98 4,622.2 43.4 3.77
Total Foreign 1,373.9 20.9 6.13 904.8 15.6 6.90
------------------------ ------------------------
Total Deposits 6,363.2 70.3 4.45 5,527.0 59.0 4.28
Short-Term Borrowings 2,869.0 37.3 5.22 3,076.6 41.9 5.46
Long-Term Debt 1,181.4 15.6 5.31 983.8 13.8 5.64
------------------------ ------------------------
Total Interest Bearing Liabilities 10,413.6 123.2 4.76 9,587.4 114.7 4.80
------------------------ ------------------------
Net Interest Income 121.1 3.12 107.6 3.04
Average Spread on Earning Assets 3.91% 3.80%
Demand Deposits 1,364.4 1,370.9
Other Liabilities 529.7 254.1
Shareholders' Equity 1,063.8 1,019.7
---------- ----------
Total Liabilities and Shareholders' Equity $13,371.5 $12,232.1
========== ==========
Provision for Possible Losses 4.2 4.1
Net Overhead 61.1 57.7
------- -------
Income Before Income Taxes 55.8 45.8
Provision for Income Taxes 20.9 16.8
Tax-Equivalent Adjustment 0.3 0.5
------- -------
Net Income $34.6 $28.5
======= =======
</TABLE>
<PAGE>
<TABLE>
Consolidated Average Balances and Interest Rates Taxable Equivalent Bancorp Hawaii, Inc. and subsidiaries
- ----------------------------------------------------------------------------------------------------------
<CAPTION>
Six Months Ended Six Months Ended
June 30, 1996 June 30, 1995
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 $693.9 $18.9 5.48% $623.7 $18.4 5.94%
Investment Securities
-Taxable 909.8 29.2 6.45 1,542.9 46.8 6.11
-Tax-Exempt 13.4 0.9 14.03 17.2 1.1 13.02
2,279.6 72.9 6.43 1,591.2 51.2 6.49
Funds Sold 85.9 2.1 4.86 62.5 1.8 5.96
Net Loans
-Domestic 7,204.1 295.9 8.26 6,881.5 281.2 8.24
-Foreign 1,038.2 39.3 7.62 717.6 23.8 6.69
Loan Fees 16.6 13.1
------------------------ ------------------------
Total Earning Assets 12,224.9 475.8 7.83 11,436.6 437.4 7.71
Cash and Due From Banks 447.6 477.8
Other Assets 424.6 380.3
---------- ----------
Total Assets $13,097.1 $12,294.7
========== ==========
Interest Bearing Liabilities
Domestic Deposits - Demand $1,707.4 23.7 2.80 $1,780.2 25.9 2.93
- Savings 978.2 12.4 2.54 1,091.3 15.4 2.84
- Time 2,286.4 61.7 5.42 1,747.1 46.1 5.33
------------------------ ------------------------
Total Domestic 4,972.0 97.8 3.95 4,618.6 87.4 3.82
Total Foreign 1,242.8 35.6 5.76 916.0 26.6 5.85
------------------------ ------------------------
Total Deposits 6,214.8 133.4 4.32 5,534.6 114.0 4.15
Short-Term Borrowings 2,877.7 76.1 5.32 3,154.7 85.6 5.47
Long-Term Debt 1,201.3 32.0 5.35 980.9 27.4 5.62
------------------------ ------------------------
Total Interest Bearing Liabilities 10,293.8 241.5 4.72 9,670.2 227.0 4.73
------------------------ ------------------------
Net Interest Income 234.3 3.11 210.4 2.98
Average Spread on Earning Assets 3.85% 3.71%
Demand Deposits 1,388.1 1,403.6
Other Liabilities 349.5 217.6
Shareholders' Equity 1,065.7 1,003.3
---------- ----------
Total Liabilities and Shareholders' Equity $13,097.1 $12,294.7
========== ==========
Provision for Possible Losses 8.6 8.6
Net Overhead 121.0 108.9
------- -------
Income Before Income Taxes 104.7 92.9
Provision for Income Taxes 36.7 35.1
Tax-Equivalent Adjustment 0.7 1.0
------- -------
Net Income $67.3 $56.8
======= =======
</TABLE>
<PAGE>
Interest Rate Risk and Derivatives
As discussed in Bancorp's 1995 Annual Report, Bancorp utilizes
interest rate sensitivity analysis and computer simulation
techniques to measure the exposure of its earnings to interest rate
movements. The objective of the process is to position its balance
sheet to optimize earnings without unduly increasing risk. The
Interest Rate Sensitivity Table presents the possible exposure to
interest rate movements for various time frames at June 30, 1996.
As the table indicates, Bancorp's one year cumulative sensitivity
gap was asset sensitive and totaled $0.2 billion, representing
1.56% of total assets. Comparatively, the one year cumulative gap
was liability sensitive at $0.1 billion at year-end 1995, 0.97% of
total assets.
Bancorp uses interest rate swaps as a cost effective risk
management tool for dealing with interest rate risk. Swap activity
during the second quarter of 1996 was limited to maturities of
existing swap agreements. At June 30, 1996, the notional amount of
swaps declined to $0.8 billion, compared with $1.1 billion at year-
end 1995. Net expense on interest rate swap agreements totaled
$0.8 million for the second quarter of 1996 (and totaled $2.2
million for 1996 year-to-date). Comparatively, net expense of
$11.7 million was recognized for all of 1995.<PAGE>
<TABLE>
Interest Rate Sensitivity Table Bancorp Hawaii, Inc. and subsidiaries
- --------------------------------------------------------------------------------------------
<CAPTION>
JUNE 30, 1996 OVER NON-INTEREST
(in millions of dollars) 0-90 DAYS 91-365 DAYS 1-5 YEARS 5 YEARS BEARING
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
ASSETS (1)
INVESTMENT SECURITIES 1,421.7 670.5 909.5 496.6 -
SHORT TERM INVESTMENTS 337.8 63.7 1.8 - -
INTERNATIONAL ASSETS 855.5 161.8 31.5 21.1 21.2
DOMESTIC LOANS (2) 2,898.5 2,116.9 1,656.2 1,023.2 53.2
TRADING SECURITIES - - 1.2 - -
OTHER ASSETS 77.1 38.6 270.0 - 562.5
- --------------------------------------------------------------------------------------------
TOTAL ASSETS 5,590.6 3,051.5 2,870.2 1,540.9 636.9
============================================================================================
LIABILITIES AND CAPITAL (1)
NON-INT BEARING DEMAND (3) 190.5 109.3 736.9 259.2 -
INT BEARING DEMAND (3) 58.9 58.9 196.2 78.5 -
SAVINGS (3) 355.8 294.8 1,070.7 430.4 -
TIME DEPOSITS 862.1 1,072.0 540.3 42.6 -
FOREIGN DEPOSITS 1,352.1 224.8 92.6 95.5 300.6
S/T BORROWINGS 1,844.4 941.8 9.5 - -
LONG-TERM DEBT 354.9 248.7 334.3 119.4 -
OTHER LIABILITIES - - - - 364.5
CAPITAL - - - - 1,049.9
- --------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND CAPITAL 5,018.7 2,950.3 2,980.5 1,025.6 1,715.0
============================================================================================
INTEREST RATE SWAPS -744.4 284.9 459.5 - -
- --------------------------------------------------------------------------------------------
INTEREST SENSITIVITY GAP -172.5 386.1 349.2 515.3 -1078.1
- --------------------------------------------------------------------------------------------
CUMULATIVE GAP -172.5 213.6 562.8 1078.1 -
PERCENTAGE OF TOTAL ASSETS -1.26% 1.56% 4.11% 7.88% -
============================================================================================
Assumptions used:
(1) Based on repricing date.
(2) Includes the effect of estimated amortization.
(3) Historical analysis shows that these deposit categories, while technically subject to
immediate withdrawal, actually display sensitivity characteristics that generally fall
within one and five years. The allocation presented is based on that historic analysis.
/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 1995 Annual
Report and remains in place.
At June 30, 1996, deposits were $8.4 billion, compared to $7.6
billion and $7.0 billion reported at year-end 1995 and June 30,
1995, respectively. The increase in deposits between year-end 1995
and June 30, 1996 reflected the acquisition which included $0.8
billion in deposits. The competition for deposits, not only by
banks and savings and loan companies, but also by securities
brokerage firms continues to impact the level of deposits. Repos
which are largely for Bancorp's governmental customers were $1.7
billion at June 30, 1996, compared to $1.9 billion at year-end 1995
and $2.3 billion at June 30, 1995.
Short term borrowings, including Fed Funds, decreased to $1.1
billion at June 30, 1996, compared with $1.3 billion at year-end
1995 and level with the totals at March 31, 1996. Long term debt
remained level at $1.1 billion at both June 30, 1996, March 31,
1996 and year-end 1995. Within the long term category, maturities
off set the financing for the acquisition of BDT and BNC ($50
million).
Net Overhead
The net overhead ratio at Bancorp is defined as the ratio of
non-interest expense to non-interest income without securities
transactions. 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 year-to-date through June 30, 1996
was 2.51, a like ratio for the same period in 1995, and 2.53 for
all of 1995. The ratio for the second quarter of 1996 was 2.44.
Non-interest income for the second quarter was $42.7 million,
a 18.6% increase over the same quarter in 1995. A year-to-date
comparison reports a 5.9% increase between 1996 and 1995. The
comparison is affected by the acquisition as an additional $3.7
million in non-interest income has been included in the second
quarter of 1996. Trust income for the second quarter 1996 was
$11.8 million, down 2.6% from the same quarter last year. Year-to-
date, trust fees are also trailing 1995. The lower level of fees
reflects the increased competition based on price being experienced
in this activity. Pacific Capital Mutual Fund family introduced in
1994 continues to grow with funds exceeding $800 million as of June
30, 1996.
Service charges on deposit accounts for the first half of 1996
was $14.0 million, compared to $12.8 million for the like period
last year. The increase in service charges on deposit accounts was
partly due to the acquisition. BDT and BNC reported service
charges on deposit of $0.5 million for the quarter. Fees, exchange
and other service charges for the second quarter of 1996 totaled
$13.4 million, an increase from $12.4 million reported for the
second quarter of 1995. Compared to the first half of 1995, fees,
exchange and other service charges were up 2.4%. The increase
largely reflects the inclusion of BDT and BNC in the second quarter
of 1996. Other operating income totaled $16.3 million for the
year-to-date, compared with $10.5 million for the same period last
year. The increase is attributable to the fees reported by BDT and
BNC for the quarter of $1.9 million, increased earnings from the
remaining affiliates and other interest earned on a cash basis.
For the year-to-date, securities losses totaling $.06 million
were reported, compared with gains of $2.1 million for the same
period in 1995.
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. One indicator of this measure is the
efficiency ratio. The efficiency ratio is defined as the ratio of
non-interest expense to net operating revenue (net interest income
plus non-interest income before securities transactions). For the
year-to-date, Bancorp's efficiency ratio was 64.12% compared to
63.6% for the full year 1995. The ratio was affected by the
consolidation of BDT and BNC.
Non-interest expense in the second quarter was $103.8 million,
an increase of 10.8% over the same period in 1995. For the year-
to-date, non-interest expense was $201.4 million, a decrease of
9.0% over the same period in 1995. If the expenses for BDT and BNC
were excluded, the increase would have been only 5.1% for the year-
to-year comparison.
Comparisons for salary and benefit expenses between periods
are affected by several factors. In 1995, staff members began to
take early retirement opportunity beginning in April of 1995 and
the acquisition of BDT and BNC layered on a new level of staff
during the second quarter of 1996. For the quarter, salary and
benefits totaled $52.9 million, compared with $46.3 million for the
same quarter last year and $50.0 million for the first quarter of
1996. For the year-to-date, $103.0 million in salary and benefit
has been incurred, compared with $93.2 million for the same period
in 1995, an increase of 10.6%.
Premises and equipment expenses totaled $17.5 million for the
second quarter of 1996, a decrease from the $19.1 million for the
same period in 1995. For the year-to-date, premises and equipment
expenses were $36.0 million, a decrease of 2.8% from the same
period in 1995. Other operating expenses for the first half of
1996 increased 14.1% over last year during the same period.
Expenses for new initiatives to outsource certain activities
coupled with the additional expenses for BDT and BNC for 1996 have
driven up this expense category.<PAGE>
PART II. - Other Information
Items 1, 2, 3 and 5 omitted pursuant to instructions.
Item 4 - Submission of Matters to a Vote of Security Holders
(a) Bancorp's Annual Shareholders' Meeting was held on April
26, 1996.
(b) Omitted per instructions.
(c) A brief description of each matter voted upon at the
Annual Shareholders' Meeting held on April 26, 1996 and
number of votes cast for, against or withheld, including
a separate tabulation with respect to each nominee for
office is presented below:
(1) Election of four Class I directors for terms
expiring in 1999 and a successor to fill the
unexpired terms of one retiring Class III director,
whose term expires in 1998.
Class I director:
Peter D. Baldwin -
Votes cast for: 35,705,664
Votes cast against: 0
Votes withheld: 219,860
Richard J. Dahl -
Votes cast for: 35,739,242
Votes cast against: 0
Votes withheld: 186,282
Thomas C. Leppert -
Votes cast for: 35,744,922
Votes cast against: 0
Votes withheld: 180,602
K. Tim Yee -
Votes cast for: 35,731,824
Votes cast against: 0
Votes withheld: 193,700
Class III director:
Stanley S. Takahashi -
Votes cast for: 35,705,066
Votes cast against: 0
Votes withheld: 220,458
(2) Election of Ernst & Young as Auditor.
Votes cast for: 35,701,463
Votes cast against: 86,813
Votes abstained: 137,248
(3) Approve Bancorp Hawaii, Inc. Director Stock
Compensation Program
Votes cast for: 31,765,622
Votes cast against: 3,678,741
Votes abstained: 481,161
(d) None.
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.
Exhibit #20 - Report furnished to shareholders for the
quarter ended March 31, 1996.
Exhibit #27 - Financial Data Schedule.
(b) No Form 8-K was filed during the quarter.
SIGNATURES
Pursuant to the requirements of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned thereunto duly authorized.
Date August 13, 1996 BANCORP HAWAII, INC.
LAWRENCE M. JOHNSON
(Signature)
Lawrence M. Johnson
Chairman and Chief
Executive Officer
DAVID A. HOULE
(Signature)
David A. Houle
Senior Vice President,
Treasurer and Chief
Financial Officer
<PAGE>
<TABLE>
Bancorp Hawaii, Inc.
Exhibit 11 - Statement Regarding Computation of Per Share Earnings
Six Months Ended June 30
<CAPTION>
Fully
Primary Diluted
----------- -----------
<S> <C> <C>
1996
----
Net Income $67,323,000 $67,323,000
=========== ===========
Daily Average Shares Outstanding 41,014,193 41,014,193
Shares Assumed Issued for Stock Options 397,073 401,426
----------- -----------
41,411,266 41,415,619
=========== ===========
Earnings Per Common Share and
Common Share Equivalents $1.63 $1.63
=========== ===========
1995
----
Net Income $56,796,000 $56,796,000
=========== ===========
Daily Average Shares Outstanding 41,814,199 41,814,199
Shares Assumed Issued for Stock Options 315,186 342,317
----------- -----------
42,129,385 42,156,516
=========== ===========
Earnings Per Common Share and
Common Share Equivalents $1.35 $1.35
=========== ===========
/TABLE
<PAGE>
To Our Shareholders:
We are pleased to report that your company's first quarter
earnings were $32.7 million, up 15.8 percent from the same period
last year. Earnings per share for the first quarter were $0.79
compared to $0.67 for the first quarter of 1995, an increase of
17.9 percent. Return on average assets was 1.03 percent and
return on average equity was 12.32 percent.
Bancorp's total assets at the end of March 1996 were $12.9
billion, up 5.8 percent from $12.2 billion at March 31, 1995.
Deposits and repurchase agreements stood at $9.3 billion, up 4.4
percent from the same period last year. Net loans at the end of
the first quarter were $7.9 billion, up 6.5 percent from last
year's first quarter.
Hawaii's recovering economy provided a solid foundation for
Bancorp's strong performance this quarter. Preliminary
estimates from the Department of Business, Economic Development &
Tourism (DBEDT) show real inflation-adjusted growth of gross
state product at 0.8 percent for 1995. Total visitor arrivals
numbered 6.6 million in 1995, up 3.2 percent from 1994's level.
Hawaii's economists expect the improvement in the state's
economy, bolstered by the recovering economies in Japan and
California, to continue and even accelerate in 1996.
Many of the benefits of Bancorp's recent loan growth were
reflected in this quarter's results. Careful management of our
credit standards remains a high priority, and credit quality
continues to be excellent despite the less-than-optimal economic
conditions of the last few years.
Retail initiatives have also helped your company advance its
strategic goals. The Bankoh Contiki Visa card, a co-branded
credit card introduced in February, broke new ground as the
bank's first card targeted to markets on the mainland and, in its
first month, generated more than 19,000 new accounts for the
company.
Bancorp Hawaii's share of mortgage loan originations in the
state grew significantly as a result of a restructuring and
renewed emphasis on the company's residential lending area.
Mortgage lending is a linchpin to building the multi-faceted
customer relationships that we seek to establish in the context
of your company's strategic plans.
Bancorp's growth plans call for an expanding presence in the
emerging Pacific Island markets. In January, Bank of Hawaii
added a branch in Lautoka, Fiji's main port center, bringing the
number of Bankoh branches throughout the West and South Pacific
to 15. It is expected that the company will receive regulatory
approval to conclude the acquisition of majority interest in
Banque de Tahiti and Banque de Nouvelle Caledonie during the
first half of 1996. The branches and affiliates of the South and
West Pacific have all achieved excellent results and offer
promise of further growth opportunities as intra-Asia trade flows
expand.
Your continued confidence and support are invaluable to us
as we implement and build upon the initiatives leading to
Bancorp's long-range objectives. You may be sure that enhancing
the value of your company remains our top priority.
Sincerely,
LAWRENCE M. JOHNSON
Lawrence M. Johnson
Chairman and Chief Executive Officer
April 25, 1996
Corporate Offices:
Financial Plaza of the Pacific
130 Merchant Street
Honolulu, Hawaii 96813
Investor or Analyst Inquiries:
David A. Houle
Senior Vice President, Treasurer and Chief Financial Officer
(808) 537-8288
or
Sharlene K. Bliss
Investor Relations Officer
(808) 537-8037
or
Cori C. Weston
Corporate Secretary
(808) 537-8272
<PAGE>
<TABLE>
<CAPTION>
Highlights (Unaudited) Bancorp Hawaii, Inc., and subsidiaries
- -------------------------------------------------------------------------
<S> <C> <C> <C>
March 31 March 31
1996 1995
- -------------------------------------------------------------------------
Return on Average Assets 1.03% 0.93%
- -------------------------------------------------------------------------
Return on Average Equity 12.32% 11.61%
- -------------------------------------------------------------------------
Average Spread on Earning Assets 3.80% 3.62%
- -------------------------------------------------------------------------
Book Value Per Common Share $25.65 $23.92
- -------------------------------------------------------------------------
Loss Reserve/Loans and Leases Outstanding 1.88% 1.97%
- -------------------------------------------------------------------------
Average Equity/Average Assets 8.33% 7.99%
- -------------------------------------------------------------------------
Common Stock Price Range High Low Dividend
1995.......................... $37.13 $24.88 $1.08
1996 First Quarter............ $36.25 $33.25 $0.28
</TABLE>
<TABLE>
Consolidated Statements of Income (Unaudited)
- ----------------------------------------------------------------------------------------------------------------
<CAPTION>
(in thousands of dollars except per share amounts) 1996 1995
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Total Interest Income $231,087 $214,585
Total Interest Expense 118,250 112,264
- ----------------------------------------------------------------------------------------------------------------
Net Interest Income 112,837 102,321
Provision for Possible Loan Losses 4,424 4,453
- ----------------------------------------------------------------------------------------------------------------
Net Interest Income After Provision for Possible Loan Losses 108,413 97,868
Total Non-Interest Income 37,626 39,811
Total Non-Interest Expense 97,578 91,055
- ----------------------------------------------------------------------------------------------------------------
Income Before Income Taxes 48,461 46,624
Provision for Income Taxes 15,751 18,376
- ----------------------------------------------------------------------------------------------------------------
Net Income $32,710 $28,248
================================================================================================================
Earnings Per Common Share and Common Share Equivalents $0.79 $0.67
- ----------------------------------------------------------------------------------------------------------------
Average Common Shares and Common Share Equivalents Outstanding 41,546,033 42,137,738
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
Consolidated Statements of Condition (Unaudited)
- ----------------------------------------------------------------------------------------------------------------
<CAPTION>
March 31 December 31 March 31
1996 1995 1995
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Assets
Interest-Bearing Deposits $656,292 $789,050 $532,726
Investment Securities
(Market Value of $3,181,573, $3,366,266 and $3,122,587 respectively) 3,183,588 3,360,153 3,152,518
Funds Sold 64,922 116,173 79,755
Loans 8,247,669 8,152,406 7,756,208
Unearned Income (145,924) (147,404) (141,860)
Reserve for Possible Loan Losses (152,053) (151,979) (150,377)
Net Loans 7,949,692 7,853,023 7,463,971
- ----------------------------------------------------------------------------------------------------------------
Total Earning Assets 11,854,494 12,118,399 11,228,970
Cash and Non-Interest Bearing Deposits 430,859 469,031 387,505
Premises and Equipment 252,600 246,515 227,700
Other Assets 367,180 372,839 353,674
- ----------------------------------------------------------------------------------------------------------------
Total Assets $12,905,133 $13,206,784 $12,197,849
================================================================================================================
Liabilities
Deposits $7,318,197 $7,576,770 $6,776,133
Securities Sold Under Agreements to Repurchase 1,988,960 1,926,540 2,139,973
Funds Purchased 605,980 787,437 489,549
Short-Term Borrowings 462,895 476,867 574,148
Other Liabilities 340,326 321,298 353,219
Long-Term Debt 1,142,111 1,063,436 862,445
- ----------------------------------------------------------------------------------------------------------------
Total Liabilities 11,858,469 12,152,348 11,195,467
Shareholders' Equity
Common Stock ($2 par value), authorized 100,000,000 shares;
outstanding, March 1996 - 40,805,147;
December 1995 - 41,340,817; March 1995 - 41,908,241; 81,610 82,682 83,816
Surplus 222,573 240,080 261,003
Unrealized Valuation Adjustments 3,541 13,902 (977)
Retained Earnings 738,940 717,772 658,540
- ----------------------------------------------------------------------------------------------------------------
Total Shareholders' Equity 1,046,664 1,054,436 1,002,382
- ----------------------------------------------------------------------------------------------------------------
Total Liabilities and Shareholders' Equity $12,905,133 $13,206,784 $12,197,849
================================================================================================================
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
THE CONSOLIDATED STATEMENTS OF CONDITION AND CONSOLIDATED STATEMENTS
OF INCOME AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
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<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUN-30-1996
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<INT-BEARING-DEPOSITS> 638204
<FED-FUNDS-SOLD> 218628
<TRADING-ASSETS> 1192
<INVESTMENTS-HELD-FOR-SALE> 2217867
<INVESTMENTS-CARRYING> 1280379
<INVESTMENTS-MARKET> 1272486
<LOANS> 8549043
<ALLOWANCE> 163266
<TOTAL-ASSETS> 13690154
<DEPOSITS> 8422821
<SHORT-TERM> 2795719
<LIABILITIES-OTHER> 342730
<LONG-TERM> 1057225
81660
0
<COMMON> 0
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<INTEREST-DEPOSIT> 133362
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<INTEREST-INCOME-NET> 233666
<LOAN-LOSSES> 8587
<SECURITIES-GAINS> (62)
<EXPENSE-OTHER> 201365
<INCOME-PRETAX> 104006
<INCOME-PRE-EXTRAORDINARY> 104006
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<CHANGES> 0
<NET-INCOME> 67323
<EPS-PRIMARY> 1.63
<EPS-DILUTED> 1.63
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<LOANS-NON> 84000
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</TABLE>
