To Our Shareholders:
Hawaii's strengthening economy and an improved interest rate
environment gave rise to Bancorp Hawaii's higher profits and
strong earnings growth this quarter. Your company reported
second quarter earnings of $34.6 million, 21.2 percent above last
year's second quarter and 5.8 percent above the first quarter of
1996. Earnings per share for the second quarter were $0.84, an
increase of 23.5 percent over the $0.68 reported for the second
quarter of 1995.
Through the first six months of 1996 Bancorp's earnings were
$67.3 million, an 18.5 percent increase from $56.8 million
reported for the first half of 1995. Year-to-date earnings per
share of $1.63 were 20.7 percent higher than the $1.35 reported
for the first six months of 1995. Deposits and repurchase
agreements reached $10.1 billion, up from $9.3 billion for the
same period last year. Net loans increased to $8.2 billion, up
from $7.4 billion reported at June 30, 1995. Year-to-date return
on average assets was 1.03 percent, and return on average equity
was 12.70 percent.
Your company's results for the second quarter reflect its
focus on improving asset mix and building core earnings.
Diligent efforts in collection of loans previously charged-off
resulted in recoveries of more than $14 million for the second
quarter allowing loan loss provisions to remain at slightly over
$4 million.
Activities in Bancorp's overseas markets also exerted a
positive impact on the company's quarterly results. The
acquisition of majority holding in Banque de Tahiti and Banque de
Nouvelle Caledonie was finalized in May, and the operating
results of these institutions are included in Bancorp's
consolidated financial statements for the second quarter. These
markets have excellent potential for growth, and we anticipate
that our subsidiaries and branches throughout the South and West
Pacific will continue to perform well.
In June Bank of Hawaii upgraded its representative office in
Taipei to a full service branch specializing in corporate
services, trade-related finance, and intra-Pacific investment.
Taiwan's thriving market offers Bancorp tremendous growth
opportunities.
The quarter also saw the opening of First National Bank of
Arizona's (FNBA's) 6th office in the Phoenix metropolitan area.
FNBA, Bancorp's U.S. Mainland subsidiary, turned in an excellent
performance in terms of growth and profitability. In addition,
Bank of Hawaii opened its first in-store branch on Maui at Star
Markets in Kihei last month and introduced a number of new
products for customers-both business clients and
consumers-including the innovative Bankoh Mileage Access debit
card, the second of its kind in the nation, and the Bankoh
Business Service Center, a unique breakthrough approach to
merchant servicing.
On July 26 your Board of Directors declared a quarterly
dividend of 30 cents per share on the outstanding common stock
representing an increase of 7.1 percent from 28 cents per share.
Bancorp last increased its dividend in October 1995 when the
board approved a 3/4 cent per share increase. The dividend will
be payable on September 13, 1996 to shareholders of record at the
close of business on August 19, 1996.
We are encouraged by Bancorp's performance for the first
half of 1996 and staunchly confident in the economic potential of
your company's franchise. These results assure us that we are on
the right track for success as we continue to seek new
opportunities to develop and grow within our markets. We count
your support and confidence among our most valuable assets.
Sincerely,
LAWRENCE M. JOHNSON
Lawrence M. Johnson
Chairman and Chief Executive Officer
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
Highlights (Unaudited) Bancorp Hawaii, Inc., and subsidiaries
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June 30 June 30
1996 1995
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Return on Average Assets 1.03% 0.93%
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Return on Average Equity 12.70% 11.42%
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Average Spread on Earning Assets 3.85% 3.71%
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Book Value Per Common Share $25.71 $24.59
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Loss Reserve/Loans and Leases Outstanding 1.95% 1.99%
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Average Equity/Average Assets 8.14% 8.16%
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Common Stock Price Range High Low Dividend
1995................................ $37.13 $24.88 $1.08
1996 First Quarter............ $36.25 $33.25 $0.28
Second Quarter................ $37.63 $33.13 $0.28
Consolidated Statements of Income (Unaudited)
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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
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Total Interest Income $244,038 $221,830 $475,125 $436,415
Total Interest Expense 123,209 114,683 241,459 226,947
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Net Interest Income 120,829 107,147 233,666 209,468
Provision for Possible Loan Losses 4,163 4,120 8,587 8,573
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Net Interest Income After Provision for Possible Loan Losses 116,666 103,027 225,079 200,895
Total Non-Interest Income 42,666 35,978 80,292 75,789
Total Non-Interest Expense 103,787 93,689 201,365 184,744
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Income Before Income Taxes 55,545 45,316 104,006 91,940
Provision for Income Taxes 20,932 16,768 36,683 35,144
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Net Income $34,613 $28,548 $67,323 $56,796
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Earnings Per Common Share and Common Share Equivalents $0.84 $0.68 $1.63 $1.35
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Average Common Shares and Common Share Equivalents Outstanding 41,276,498 42,121,368 41,411,266 42,129,385
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Consolidated Statements of Condition (Unaudited)
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June 30 December 31 June 30
1996 1995 1995
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Assets
Interest-Bearing Deposits $638,204 $789,050 $752,923
Investment Securities (Market Value of $3,465,850, $3,366,266
and $3,108,419 respectively) 3,498,246 3,360,153 3,117,484
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
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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
Other Assets 372,695 372,839 350,024
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Total Assets $13,690,154 $13,206,784 $12,573,651
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Liabilities
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
Other Liabilities 364,489 321,298 385,362
Long-Term Debt 1,057,225 1,063,436 877,640
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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
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Total Shareholders' Equity 1,049,900 1,054,436 1,020,868
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Total Liabilities and Shareholders' Equity $13,690,154 $13,206,784 $12,573,651
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