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, 2002
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or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period from __________ to _________
Commission File Number 1-6887
BANK OF HAWAII CORPORATION
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(Exact name of registrant as specified in its charter)
Delaware 99-0148992
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(State of incorporation) (IRS Employer Identification No.)
130 Merchant Street, Honolulu, Hawaii 96813
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(Address of principal executive offices) (Zip Code)
(808) 537-8430
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(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
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Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Common Stock, $.01 Par Value; outstanding at April 30, 2002 - 72,961,540 shares
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1
Index
Bank of Hawaii Corporation and Subsidiaries
Part I. - Financial Information
Item 1. Financial Statements (Unaudited)
Consolidated Statements of Income - Three months
ended March 31, 2002 and 2001 ................................... 3
Consolidated Statements of Condition - March 31, 2002,
December 31, 2001, and March 31, 2001 ........................... 4
Consolidated Statements of Shareholders' Equity - Three months
ended March 31, 2002 and 2001 ................................... 5
Consolidated Statements of Cash Flows - Three months ended
March 31, 2002 and 2001 ......................................... 6
Notes to Consolidated Financial Statements ........................... 7
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations ....................................... 10
Item 3. Quantitative and Qualitative Disclosure of Market Risk ............... 33
Part II. - Other Information
Item 4. Submission of Matters to a Vote of Shareholders ...................... 34
Item 6. Exhibits and Reports on Form 8-K ..................................... 34
Signatures
2
Bank of Hawaii Corporation and Subsidiaries
Consolidated Statements of Income (Unaudited)
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Three Months Ended
March 31
(dollars in thousands except per share amounts) 2002 2001
- -----------------------------------------------------------------------------------------------------------------------------
Interest Income
Interest and Fees on Loan and Leases $ 98,645 $ 188,905
Income on Investment Securities - Held to Maturity 5,198 10,017
Income on Investment Securities - Available for Sale 27,140 39,842
Deposits 5,047 5,384
Funds Sold and Security Resale Agreements 1,003 1,097
Other 1,332 1,217
- -----------------------------------------------------------------------------------------------------------------------------
Total Interest Income 138,365 246,462
Interest Expense
Deposits 23,978 71,981
Security Repurchase Agreements 10,293 24,630
Funds Purchased 231 6,123
Short-Term Borrowings 649 3,230
Long-Term Debt 8,319 15,314
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Total Interest Expense 43,470 121,278
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Net Interest Income 94,895 125,184
Provision for Loan and Lease Losses 8,292 52,466
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Net Interest Income After Provision for Loan and Lease Losses 86,603 72,718
Non-Interest Income
Trust and Asset Management 14,818 15,796
Mortgage Banking 8,557 5,108
Service Charges on Deposit Accounts 8,410 9,939
Fees, Exchange, and Other Service Charges 12,078 23,466
Gain on Sales of Banking Operations, Net of Venture Investment Losses - 72,114
Investment Securities Gains - 20,203
Other 10,151 13,836
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Total Non-Interest Income 54,014 160,462
Non-Interest Expense
Salaries 39,950 49,982
Pensions and Other Employee Benefits 9,996 12,918
Net Occupancy Expense 9,593 12,127
Net Equipment Expense 10,121 13,382
Goodwill Amortization - 3,949
Restructuring and Other Related Costs 1,979 44,439
Other 20,773 35,523
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Total Non-Interest Expense 92,412 172,320
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Income Before Income Taxes 48,205 60,860
Provision for Income Taxes 17,149 27,183
- ----------------------------------------------------------------------------------------------------------------------------
Net Income $ 31,056 $ 33,677
============================================================================================================================
Basic Earnings Per Share $0.42 $0.42
Diluted Earnings Per Share $0.41 $0.42
Dividends Declared Per Share $0.18 $0.18
Basic Weighted Average Shares 73,312,573 79,720,284
Diluted Weighted Average Shares 75,199,181 81,124,713
============================================================================================================================
See accompanying notes to the consolidated financial statements.
3
Bank of Hawaii Corporation and Subsidiaries
Consolidated Statements of Condition (Unaudited)
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March 31 December 31 March 31
(dollars in thousands) 2002 2001 2001
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Assets
Interest-Bearing Deposits $ 1,347,611 $ 1,101,974 $ 410,912
Investment Securities - Held to Maturity
(Market Value of $354,187, $407,838 and $581,471, respectively) 344,723 396,216 571,923
Investment Securities - Available for Sale 1,980,378 2,001,420 2,389,086
Securities Purchased Under Agreements to Resell - - 377
Funds Sold 135,000 115,000 84,732
Loans Held for Sale 99,773 456,709 308,605
Loans 5,601,333 5,652,518 8,424,404
Allowance for Loan and Lease Losses (158,979) (158,979) (199,800)
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Net Loans 5,442,354 5,493,539 8,224,604
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Total Earning Assets 9,349,839 9,564,858 11,990,239
Cash and Non-Interest Bearing Deposits 257,580 405,981 559,229
Premises and Equipment 192,291 196,171 251,746
Customers' Acceptance Liability 1,007 593 7,225
Accrued Interest Receivable 40,940 42,687 67,813
Foreclosed Real Estate 19,181 17,174 11,336
Mortgage Service Rights 30,501 27,291 16,656
Goodwill 36,216 36,216 169,657
Other Assets 317,218 336,826 636,593
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Total Assets $ 10,244,773 $ 10,627,797 $ 13,710,494
====================================================================================================================================
Liabilities
Domestic Deposits
Demand - Non-Interest Bearing $ 1,592,709 $ 1,548,322 $ 1,685,149
- Interest Bearing 1,937,023 1,926,018 2,042,129
Savings 1,086,036 967,825 665,643
Time 1,807,015 1,927,778 2,948,232
Foreign Deposits
Demand-Non-Interest Bearing - 2 337,854
Time Due to Banks 42,261 230,247 196,495
Other Savings and Time 78,492 73,404 939,865
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Total Deposits 6,543,536 6,673,596 8,815,367
Securities Sold Under Agreements to Repurchase 1,544,718 1,643,444 1,703,982
Funds Purchased 43,485 55,800 297,613
Current Maturities of Long-Term Debt 50,000 100,670 317,170
Short-Term Borrowings 35,619 134,222 278,442
Banker's Acceptances Outstanding 1,007 593 7,225
Retirement Expense Payable 37,055 36,175 34,867
Accrued Interest Payable 27,983 29,762 64,769
Taxes Payable 146,360 138,366 164,212
Other Liabilities 84,871 98,422 88,999
Long-Term Debt 464,232 469,735 565,906
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Total Liabilities 8,978,866 9,380,785 12,338,552
Shareholders' Equity
Common Stock ($.01 par value), authorized 500,000,000 shares;
issued / outstanding: March 2002 - 81,346,027 / 73,409,966
Dec. 2001 - 81,377,241 / 73,218,326; March 2001 - 80,558,704 / 79,863,450 806 806 806
Capital Surplus 369,541 367,672 346,411
Accumulated Other Comprehensive Income 20,389 22,761 20,982
Retained Earnings 1,065,706 1,055,424 1,015,867
Deferred Stock Grants (4,933) (7,637) 853
Treasury Stock, at Cost (Shares: March 2002 - 7,936,061;
December 2001 - 8,136,134; March 2001 - 695,254) (185,602) (192,014) (12,977)
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Total Shareholders' Equity 1,265,907 1,247,012 1,371,942
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Total Liabilities and Shareholders' Equity $ 10,244,773 $ 10,627,797 $ 13,710,494
====================================================================================================================================
See accompanying notes to the consolidated financial statements.
4
Bank of Hawaii Corporation and Subsidiaries
Consolidated Statements of Shareholders' Equity (Unaudited)
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Accum.
Other
Compre- Deferred Compre-
Common Capital hensive Retained Stock Treasury hensive
(dollars in thousands) Total Stock Surplus Income Earnings Grants Stock Income
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Balance at December 31, 2001 $1,247,012 $ 806 $ 367,672 $22,761 $ 1,055,424 $(7,637) $(192,014)
Comprehensive Income
Net Income 31,056 - - - 31,056 - - $31,056
Other Comprehensive Income,
Net of Tax
Investment Securities (1,913) - - (1,913) - - - (1,913)
Foreign Currency Translation
Adjustment (459) - - (459) - - - (459)
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Total Comprehensive Income $28,684
========
Common Stock Issued
12,113 Profit Sharing Plan 325 - 37 - - - 288
884,893 Stock Option Plan 18,237 - 2,455 - (7,595) 746 22,631
27,454 Dividend Reinvestment Plan 731 - 77 - (2) - 656
(114) Directors' Restricted Shares and
Deferred Compensation Plan (16) - (1) - - - (15)
(31,100) Employees' Restricted Shares 1,259 - (699) - - 1,958
Treasury Stock Purchased 701,000 shares (17,148) - - - - - (17,148)
Cash Dividends Paid (13,177) - - - (13,177) - -
- ---------------------------------------------------------------------------------------------------------------------------
Balance at March 31, 2002 $1,265,907 $ 806 $ 369,541 $ 20,389 $1,065,706 $ (4,933) $(185,602)
===========================================================================================================================
Balance at December 31, 2000 $1,301,356 $ 806 $ 346,045 $(25,079) $ 996,791 $ - $ (17,207)
Comprehensive Income
Net Income 33,677 - - - 33,677 - - $33,677
Other Comprehensive Income, Net of Tax
Investment Securities 19,510 - - 19,510 - - - 19,510
Foreign Currency Translation
Adjustment 26,710 - - 26,710 - - - 26,710
Pension Liability Adjustments (159) - - (159) - - - (159)
--------
Total Comprehensive Income $79,738
========
Common Stock Issued
18,317 Profit Sharing Plan 370 - 92 - - - 278
184,092 Stock Option Plan 3,853 - 114 - (238) 853 3,124
34,904 Dividend Reinvestment Plan 700 - 163 - - - 537
Directors' Restricted Shares and
893 Dividend Reinvestment Plan
Deferred Compensation Plan 288 - (3) - - - 291
Cash Dividends Paid (14,363) - - - (14,363) - -
- ---------------------------------------------------------------------------------------------------------------------------
Balance at March 31, 2001 $1,371,942 $ 806 $ 346,411 $20,982 $1,015,867 $ 853 $(12,977)
===========================================================================================================================
See accompanying notes to the consolidated financial statements.
5
BANK OF HAWAII CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
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Three Months ended March 31
(dollars in thousands) 2002 2001
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Operating Activities
Net Income $ 31,056 $ 33,677
Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities:
Provision for Loan and Lease Losses 8,292 52,466
Depreciation and Amortization 7,669 16,191
Amortization of Deferred Loan Fees and Leasing Income (8,702) (9,747)
Amortization and Accretion of Investment Securities 4,756 4,032
Deferred Stock Grants 1,259 -
Deferred Income Taxes 2.478 24,683
Investment Security (Gains) Losses - (20,203)
Proceeds from Sales of Loans Held for Sale 663,514 93,282
Originations of Loans Held for Sale (306,578) (222,658)
Gain on Sale of Banking Operations, Net of Venture Investment Losses - (72,114)
Net Change in Other Assets and Liabilities 13,924 (279,522)
-----------------------------------------
Net Cash Provided (Used) by Operating Activities 417,668 (379,913)
-----------------------------------------
Investing Activities
Proceeds from Redemptions of Investment Securities Held to Maturity 56,201 33,650
Purchases of Investment Securities Held to Maturity (10,710) (17,362)
Proceeds from Sales and Redemptions of Investment Securities Available for Sale 245,744 220,249
Purchases of Investment Securities Available for Sale (232,089) (78,682)
Net Decrease in Loans and Lease Financing 51,595 511,688
Proceeds from Sale of Banking Operations - 284,700
Premises and Equipment, Net (3,789) (9,367)
-----------------------------------------
Net Cash Provided by Investing Activities 106,952 944,876
-----------------------------------------
Financing Activities
Net Increase in Demand Deposits 55,392 10,824
Net Increase in Savings Deposits 118,211 404
Net Increase (Decrease) in Time Deposits (120,763) 112,149
Net Decrease in Foreign Deposits (182,900) (388,591)
Proceeds from Lines of Credit and Long-Term Debt - 2,024
Repayments of Long-Term Debt (56,173) (116,105)
Net (Decrease) Increase in Short-Term Borrowings (209,644) 142
Proceeds from Issuance of Common Stock, Net of Common Stock Repurchased 2,129 5,211
Cash Dividends (13,177) (14,363)
-----------------------------------------
Net Cash Used by Financing Activities (406,925) (388,305)
-----------------------------------------
Effect of Exchange Rate Changes on Cash (459) 26,710
-----------------------------------------
Increase in Cash and Cash Equivalents 117,236 203,368
Cash and Cash Equivalents at Beginning of Year 1,622,955 851,882
-----------------------------------------
Cash and Cash Equivalents at End of Period $ 1,740,191 $ 1,055,250
=========================================
See accompanying notes to the consolidated financial statements.
6
Bank of Hawaii Corporation
Notes to Consolidated Financial Statements
(Unaudited)
Note 1. Summary of Significant Accounting Policies
Name Change
On April 26, 2002 the Shareholders of Pacific Century Financial Corporation
approved changing the company name. An amendment to the company's Certificate of
Incorporation was filed in April, 2002 to change the name of the company to Bank
of Hawaii Corporation.
Basis of Presentation
The accompanying unaudited consolidated financial statements of Bank of Hawaii
Corporation (the Company) have been prepared in accordance with accounting
principles generally accepted in the United States for interim financial
information and with the instructions to Form 10-Q and Rule 10-01 of Regulation
S-X. Accordingly, they do not include all of the information and footnotes
required by accounting principles generally accepted in the United States for
complete financial statements. In the opinion of management, the consolidated
financial statements reflect all normal recurring adjustments necessary for a
fair presentation of the results for the interim periods. Certain prior period
amounts have been reclassified to conform to current period classifications.
These statements should be read in conjunction with the audited consolidated
financial statements and related notes included in the Company's 2001 Annual
Report on Form 10-K. Operating results for the three months ended March 31, 2002
are not necessarily indicative of the results that may be expected for the year
ending December 31, 2002.
The Company's principal subsidiary bank is Bank of Hawaii. The Company also owns
First Savings and Loan Association of America (First Savings) in Guam.
Income Taxes
The provision for income taxes is computed by applying statutory federal,
foreign, and state income tax rates to income before income taxes as reported in
the Consolidated Statements of Income after adjusting for non-taxable items,
principally from certain state tax adjustments, tax-exempt interest income and
bank owned life insurance. The tax provision is also reduced by low-income
housing and investment tax credits.
Note 2. Recent Accounting Pronouncements
In June 2001, the Financial Accounting Standards Board (FASB) issued SFAS No.
142, Goodwill and Other Intangible Assets, (SFAS 142). SFAS 142 eliminates
amortization of goodwill associated with business combinations completed after
June 30, 2001. During a transition period from July 1, 2001 through December 31,
2001, goodwill associated with business combinations completed prior to July 1,
2001 continued to be amortized through the income statement. Effective January
1, 2002, periodic goodwill amortization and expense recognition was discontinued
and goodwill is assessed at least annually for impairment at the reporting unit
level by applying a fair-value based test. SFAS 142 also provides additional
guidance on acquired intangibles that should be separately recognized and
amortized.
7
Under SFAS, 142 intangibles with indefinite lives will no longer be amortized to
the income statement. The Company adopted SFAS 142 on January 1, 2002. An
initial impairment assessment was completed and it was determined that a
transition impairment charge was not required. Under SFAS 142 the elimination of
goodwill amortization is expected to increase net income by approximately $7.6
million in 2002.
In August 2001, FASB issued SFAS No. 144, Accounting for the Impairment or
Disposal of Long-Lived Assets, (SFAS 144). SFAS 144 supercedes FASB Statement
No.121, Accounting for the Impairment of Long-Lived Assets and Long-Lived Assets
to be Disposed Of (SFAS 121), and certain of the accounting and reporting
provisions of APB Opinion No. 30. For long-lived assets to be held and used,
SFAS 144 retains the requirements of SFAS 121 to (a) recognize an impairment
loss only if the carrying value of long-lived asset is not recoverable from its
undiscounted cash flows and (b) measure an impairment loss as the difference
between the carrying amount and fair value of the asset. For long-lived assets
to be disposed of by sale, the SFAS 121 model is also retained which requires an
asset to be measured at the lower of its carrying amount or fair value less cost
to sell and to cease depreciation. SFAS 144 establishes criteria beyond that
previously specified in SFAS 121 to determine when a long-lived asset is held
for sale. SFAS 144 is effective for financial statements issued for fiscal years
beginning after December 15, 2001 and is generally to be applied prospectively.
The Company adopted SFAS 144 on January 1, 2002, no transition adjustment was
deemed necessary.
Note 3. Business Segments
The Company is a financial services organization that is aligned into the
following segments: Retail Banking, Commercial Banking, Financial Services
Group, and Treasury and Other Corporate. Divestiture Businesses and Corporate
Restructuring Related Activities were segregated in 2001 due to their
non-recurring nature.
Business segment results are determined based on the Company's internal
financial management organizational structure. The Company uses a variety of
techniques to assign and transfer balance sheet and income statement amounts
between business segments including allocations of common costs and capital.
These techniques and accounting practices are not covered by accounting
principles generally accepted in the United States. It is possible that further
revision of segment accounting practices may be made in future periods;
accordingly prior segment information may be reclassified.
The financial results for the three months ended March 31, 2002 and 2001 are
presented on page 9 for each of the Company's principal segments. Segment
information for 2001 has been reclassified to conform with 2002 presentation.
8
Business Segments Selected Financial Information
(dollars in thousands)
CORPORATE
FINANCIAL TREASURY RESTRUCTURING
SERVICES AND OTHER DIVESTITURE RELATED CONSOLIDATED
RETAIL COMMERCIAL GROUP CORPORATE BUSINESSES ACTIVITIES TOTAL
-------------------------------------------------------------------------------------------
Three Months Ended: March 31, 2002
Net Interest Income $ 50,677 $ 33,811 $ 3,485 $ 6,922 $ - $ - $ 94,895
Provision for Loan and Lease
Losses (2,250) (5,949) (253) 160 - - (8,292)
----------- ----------- -------- ----------- ----- -------- ------------
Net Interest Income after
Provision for Loan and
Lease Losses 48,427 27,862 3,232 7,082 - - 86,603
Non-Interest Income 23,896 5,933 21,302 2,883 - - 54,014
Non-Interest Expense 47,356 21,491 19,220 2,366 - - 90,433
Restructuring & Other Related
Costs - - - - - 1,979 1,979
----------- ----------- -------- ----------- ----- -------- ------------
Income Before Income Taxes 24,967 12,304 5,314 7,599 - (1,979) 48,205
Provision for Income Taxes (9,487) (4,625) (2,020) (1,721) - 704 (17,149)
----------- ----------- -------- ----------- ----- -------- ------------
Net Income $ 15,480 $ 7,679 $ 3,294 $ 5,878 $ - $ (1,275) $ 31,056
==============================================================================================
Total Assets (End of Period) $ 3,293,464 $ 2,787,867 $246,876 $ 3,916,566 $ - $ - $ 10,244,773
Total Assets (Average) $ 3,457,250 $ 2,595,040 $251,734 $ 4,110,772 $ - $ - $ 10,414,796
CORPORATE
FINANCIAL TREASURY RESTRUCTURING
SERVICES AND OTHER DIVESTITURE RELATED CONSOLIDATED
RETAIL COMMERCIAL GROUP CORPORATE BUSINESSES ACTIVITIES TOTAL
-------------------------------------------------------------------------------------------
Three Months Ended: March 31, 2001
Net Interest Income $ 46,891 $ 40,897 $ 2,533 $ 1,832 $ 35,475 $ (2,444) $ 125,184
Provision for Loan and Lease (3,109) (8,941) - - (3,700) (36,716) (52,466)
Losses
----------- ---------- -------- ---------- ---------- ---------- ------------
Net Interest Income after
Provision for Loan and
Lease Losses 43,782 31,956 2,533 1,832 31,775 (39,160) 72,718
Gain on Sale of Banking
Operations, Net of
Venture Investment Losses - - - - - 72,114 72,114
Non-Interest Income 21,860 6,729 20,908 5,111 12,801 20,939 88,348
Non-Interest Expense 45,662 23,200 19,638 1,356 38,025 - 127,881
Restructuring & Other Related
Costs - - - - - 44,439 44,439
----------- ---------- -------- ---------- ---------- ---------- ------------
Income Before Income Taxes 19,980 15,485 3,803 5,587 6,551 9,454 60,860
Provision for Income
Taxes (8,018) (6,827) (1,533) (3,598) (595) (6,612) (27,183)
----------- ---------- -------- ---------- ---------- ---------- ------------
Net Income $ 11,962 $ 8,658 $ 2,270 $ 1,989 $ 5,956 $ 2,842 $ 33,677
==============================================================================================
Total Assets (End of Period) $3,836,844 $3,800,250 $230,965 $2,526,790 $3,315,645 $ - $13,710,494
Total Assets (Average) $3,416,872 $3,684,491 $202,417 $2,625,613 $3,916,449 $ - $13,845,842
9
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Forward Looking Statements
This report contains forward-looking statements regarding the Company's beliefs,
estimates, projections and assumptions, which are provided to assist in the
understanding of certain aspects of the Company's anticipated future financial
performance. We believe the assumptions underlying our forward-looking
statements are reasonable. However, any of the assumptions could prove to be
inaccurate and actual results may differ materially from those projected for a
variety of reasons including, but not limited to: the Hawaii economy may not
recover at the pace we anticipate; our refocused emphasis on our Hawaii market
may not achieve the customer and revenue gains we anticipate; our credit markets
may deteriorate and our credit quality may fall short of our goals; we may not
achieve expected expense reductions; we may not be able to maintain our net
interest margin; we may not be able to implement our proposed equity repurchases
in the amount or at the times planned; the economics or timing, or both,
resulting from our current evaluation of data processing alternatives may not
result in benefits sufficiently in excess of costs; the required level of
reserves for loan and lease losses may increase or decrease due to changes in
our credit quality or risk profile; customer acceptance of our business as
restructured may be less than expected; there may be economic volatility in the
markets we serve; and there may be changes in business and economic conditions,
competition, fiscal and monetary policies or legislation. Except where
specified, we do not undertake any obligation to update any forward-looking
statements to reflect later events or circumstances.
PERFORMANCE HIGHLIGHTS
The Company reported earnings for the three months ended March 31, 2002 of $31.1
million, down 7.8% from $33.7 million for the three months ended March 31, 2001.
Diluted earnings per share were $0.41 for the first quarter of 2002 compared to
$0.42 in the first quarter of 2001. Prior year earnings included gains of $75.4
million from the sale of the Company's credit card portfolio and $20.9 million
related to the sale of ownership in Star System, Inc.
Net interest income for the first quarter of 2002 on a fully taxable equivalent
basis was $94.9 million, down $30.4 million from $125.3 million the same quarter
last year and down $11.3 million from the previous quarter. The decrease was
primarily due to divestitures relating to the strategic plan, the wind down of
the Asia business and the managed reduction of loans to improve the Company's
credit profile. The decline from the prior year quarter was primarily due to
loan reductions and asset sales, as well as lower returns earned on the
increased liquidity of the Company. The Company's net interest margin for the
first quarter of 2002 of 3.93% was unchanged from the fourth quarter of 2001 and
was down from 3.96% in the first quarter last year.
The provision for loan and lease losses was $8.3 million for the first quarter
2002, down 84.2% from $52.5 million in the first quarter last year. The decrease
reflects improvements in the Company's asset quality and improvement in the
coverage ratio of the allowance for loan and lease losses. The provision equaled
net charge-offs for the quarter.
Non-performing assets were $90.7 million at March 31, 2002. Compared to December
31, 2001, non-performing assets increased $11.0 million. Compared to March 31,
2001, however, non-performing assets were down $28.8 million or 24.1%.
In the first quarter of 2002, return on average assets (ROAA) and return on
average equity (ROAE) were 1.21% and 9.97%, respectively, compared to 0.99% and
10.42% in the same 2001 quarter.
Total assets at March 31, 2002 were $10.2 billion, down from $10.6 billion at
December 31, 2001 and $13.7 billion at March 31, 2001. The most significant
reductions were in commercial loans and foreign loans resulting from the
divestitures.
10
Highlights (Unaudited) Table 1
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(dollars in thousands except per share amounts)
Quarter Ended
Earnings Highlights and Performance Ratios March 31, 2002 March 31, 2001
- ------------------------------------------------------------------------------------------------------------------------------------
Net Income $ 31,056 $ 33,677
Basic Earnings Per Share 0.42 0.42
Diluted Earnings Per Share 0.41 0.42
Cash Dividends 13,177 14,363
Return on Average Assets 1.21% 0.99%
Return on Average Equity 9.97% 10.42%
Net Interest Margin 3.93% 3.96%
Efficiency Ratio 62.06% 60.33%
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Statement of Condition Highlights and Performance Ratios March 31, 2002 March 31, 2001
- ------------------------------------------------------------------------------------------------------------------------------------
Total Assets $10,244,773 $ 13,710,494
Net Loans 5,442,354 8,224,604
Total Deposits 6,543,536 8,815,367
Total Shareholders' Equity 1,265,907 1,371,942
Book Value Per Common Share $17.24 $17.18
Allowance for Loan and Lease Losses / Loans Outstanding 2.84% 2.37%
Average Equity / Average Assets 12.13% 9.47%
Employees (FTE) 3,082 4,249
Branches and offices 104 171
Market Price Per Share of Common Stock for the Quarter Ended
Closing $26.06 $19.00
High $27.79 $20.99
Low $23.79 $16.88
- ------------------------------------------------------------------------------------------------------------------------------------
Allowance for Loan and Lease Losses $ 158,979 $ 199,800
Loans Excluding Allowance 5,601,333 8,424,404
11
STATEMENT OF INCOME ANALYSIS
Net Interest Income
Average assets and liabilities declined 24.8% and 27.0%, respectively, in the
first quarter of 2002 from the same quarter last year. The declines were due to
the divested businesses. Taxable-equivalent net interest income was $94.9
million for the first quarter of 2002, down $30.4 million, or 24.3% from the
comparable period in 2001. The Company's net interest margin was 3.93% in the
quarter ended March 31, 2002, a decrease of 3 basis points from the comparable
period a year ago. The declines were primarily due to the sale of the credit
card portfolio, divestitures pertaining to the strategic plan, and the managed
reduction of loans to improve the Company's credit profile. Also contributing to
the decline was the general declining interest rate environment. Since the end
of the first quarter of 2001, as a result of actions of the Federal Reserve,
the average prime interest rate has been reduced by 389 basis points. The
Company is slightly asset sensitive and expects to benefit when short term
interest rates begin to increase. The net interest margin is expected to remain
near the current level for the remainder of the year. Presented in Table 2 are
average balances, yields earned, and rates paid for the three months ended March
31, 2002, March 31, 2001 and December 31, 2001. The results for the full year
2001 are also presented.
12
Consolidated Average Balances and Interest Rates Taxable Equivalent (Unaudited) Table 2
- --------------------------------------------------------------------------------------------------------------------------------
Three Months Ended Three Months Ended (1) Three Months Ended Twelve Months Ended
March 31, 2002 March 31, 2001 December 31, 2001 December 31, 2001
Average Income/ Yield/ Average Income/ Yield/ Average Income/ Yield/ Average Income/ Yield/
(dollars in millions) Balance Expense Rate Balance Expense Rate Balance Expense Rate Balance Expense Rate
- ------------------------ ---------- ------- ------ -------- -------- ------- ------- -------- ------- ----------- -------- -----
Earning Assets
Interest Bearing
Deposits $1,154.7 $5.1 1.77% $332.3 $5.4 6.57% $1,236.2 $7.9 2.52% $733.4 $27.6 3.76%
Funds Sold 237.3 1.0 1.69 80.5 1.1 5.53 150.5 0.8 2.09 136.7 5.1 3.63
Investment Portfolio
- Held-To-Maturity 368.5 5.3 5.72 580.4 10.1 7.05 431.5 6.5 5.99 525.6 33.7 6.42
- Available for
Sale 1,939.3 27.1 5.60 2,479.9 39.8 6.52 2,037.5 29.3 5.75 2,242.3 137.3 6.12
Loans Held For Sale 340.9 5.7 6.75 201.7 3.6 7.24 304.9 5.1 6.63 312.7 21.4 6.85
Net Loans
- Domestic 5,569.0 92.9 6.72 7,783.9 163.5 8.52 5,752.6 104.0 7.20 6,693.2 525.5 7.85
- Foreign 14.3 - - 1,277.8 21.8 6.93 777.0 14.6 7.48 1,026.4 72.5 7.07
-------------------------------------------------------------------------------------------------------
Total Loans 5,583.3 92.9 6.71 9,061.7 185.3 8.29 6,529.6 118.6 7.23 7,719.6 598.0 7.75
Other 88.4 1.3 6.12 76.0 1.2 6.50 86.3 1.4 6.42 79.6 5.4 6.72
-------------------------------------------------------------------------------------------------------
Total Earning
Assets 9,712.4 138.4 5.74 12,812.5 246.5 7.80 10,776.5 169.6 6.27 11,749.9 828.5 7.05
Cash and Due From Banks 301.9 438.2 354.9 376.6
Other Assets 400.5 595.1 480.7 554.5
---------- -------- ------- -----------
Total Assets $10,414.8 $13,845.8 $11,612.1 $12,681.0
========== ========== ========= ===========
Interest Bearing
Liabilities
Domestic Deposits
- Demand 1,935.0 4.3 0.92 2,008.2 11.7 2.36 1,774.7 5.1 1.15 1,894.5 34.4 1.82
- Savings 1,037.0 3.9 1.52 665.7 3.4 2.04 958.3 4.6 1.89 780.3 16.2 2.08
- Time 1,909.4 14.8 3.13 2,902.7 43.1 6.03 2,048.2 19.7 3.81 2,506.7 129.6 5.17
-------------------------------------------------------------------------------------------------------
Total Domestic
Deposits 4,881.4 23.0 1.91 5,576.6 58.2 4.23 4,781.2 29.4 2.44 5,181.5 180.2 3.48
Foreign Deposits
- Time Due to
Banks 80.2 0.6 3.10 489.4 6.6 5.51 365.5 2.1 2.26 351.2 14.5 4.13
- Other Time and
Savings 104.0 0.4 1.37 801.0 7.2 3.65 445.9 3.7 3.31 648.2 22.6 3.49
-------------------------------------------------------------------------------------------------------
Total Foreign
Deposits 184.2 1.0 2.12 1,290.4 13.8 4.35 811.4 5.8 2.84 999.4 37.1 3.71
-------------------------------------------------------------------------------------------------------
Total Interest
Bearing Deposits 5,065.6 24.0 1.92 6,867.0 72.0 4.25 5,592.6 35.2 2.49 6,180.9 217.3 3.52
Short-Term Borrowings 1,738.7 11.2 2.61 2,364.8 34.0 5.83 1,942.4 16.6 3.40 2,105.6 97.4 4.63
Long-Term Debt 538.2 8.3 6.27 916.0 15.2 6.78 678.9 11.6 6.79 800.5 53.9 6.73
-------------------------------------------------------------------------------------------------------
Total Interest
Bearing Liabilities 7,342.5 43.5 2.40 10,147.8 121.2 4.85 8,213.9 63.4 3.06 9,087.0 368.6 4.06
-------------------------------------------------------------------------------------------------------
Net Interest
Income 94.9 125.3 106.2 459.9
Interest
Rate Spread 3.34% 2.95% 3.21% 2.99%
Net Interest Margin 3.93% 3.96% 3.93% 3.91%
Non-Interest Bearing
Demand Deposits
- Demand 1,506.9 1,636.8 1,397.8 1,527.1
- Foreign - 377.5 328.0 346.0
---------- -------- ------- -----------
Total Demand
Deposits 1,506.9 2,014.3 1,725.8 1,873.1
Other Liabilities 301.9 372.4 390.3 376.8
Shareholders' Equity 1,263.5 1,311.3 1,282.1 1,344.1
---------- -------- ------- -----------
Total Liabilities
and Shareholders'
Equity $10,414.8 $13,845.8 $11,612.1 $12,681.0
========== ========= ========= ===========
Provision for Loan and
Lease Losses 8.2 52.5 14.5 74.3
Net Overhead 38.4 11.8 61.4 145.5
------- -------- -------- --------
Income Before Income
Taxes 48.3 61.0 30.3 240.1
Provision for Income
Taxes 17.1 27.2 3.9 122.2
Tax-Equivalent
Adjustment 0.1 0.1 0.1 0.2
------- -------- -------- --------
Net Income $31.1 $33.7 $26.3 $117.7
======= ======== ======== ========
(1) Adjusted to reflect the reclassification of interchange fees, mortgage
banking income and other interest income.
13
Provision for Loan Losses
The provision for loan losses was $8.3 million for the three months ended March
31, 2002, compared to $52.5 million for the respective period in 2001. The first
quarter 2001 included a special provision of $36.7 million to cover exposure
relating to the syndicated loan portfolio, most of which were sold in the
secondary market. Contributing to the lower provision was the improvement in the
quality of the loan portfolio. The provision matched net charge-offs for the
quarter. For further information on credit quality, refer to the section on
"Corporate Risk Profile - Credit Risk - Allowance for Loan Losses" in this
report.
Non-Interest Income
Non-interest income was $54.0 million for the three months ended March 31, 2002,
compared to $160.5 million for the comparable period in 2001. Prior year
included gains on the sale of the credit card portfolio of $75.4 million and
gain on sale of an interest in Star Systems, Inc. of $20.9 million. After
excluding 2001 non-recurring gains and divested businesses, non-interest income
from continuing businesses was $54.6 million in the first quarter of 2001.
Trust and asset management income declined to $14.8 million in the first quarter
of 2002, from $15.8 million in the first quarter of 2001. The decrease was
primarily attributable to reduced fees resulting from declines in asset values
of assets under administration.
Mortgage banking income was $8.6 million in the first quarter of 2002, an
increase of 67.5% from $5.1 million in the first quarter of 2001. The increase
in 2002 was mainly due to recovery in values of the held for sale portfolio that
was temporarily unhedged at December 31, 2001. Origination volume increased from
first quarter 2001. The mortgage business is not expected to produce the same
level of earnings in the second quarter.
Service charges on deposit accounts declined by 15.4% to $8.4 million in the
first quarter of 2002. The decline was primarily attributable to the divested
businesses and repricing strategies in Hawaii.
Fees, exchanges, and other service charges were $12.1 million for the three
months ended March 31, 2002 compared to $23.5 million for the same prior year
period. The decrease was mainly due to the divested businesses and decreases in
commercial loan fees.
Gain on sales of banking operations, net of venture investment losses included
the gain on sale of the credit card portfolio of $75.4 million net of an equity
investment write down of $3.3 million in the first quarter of 2001. There were
no comparable transactions in 2002.
Sales of investment securities included a $20.9 million gain on the sale of the
Company's ownership interest in the Star System, Inc. during the three months
ended March 31, 2001.
Other operating income was $10.2 million for the first quarter of 2002, down
$3.7 million from the first quarter in 2001. The divested businesses are the
primary contributing factor for the decrease.
There was also a decrease in leasing partnership income and gains on disposal of
leased equipment. These decreases were partially offset by increases in annuity
income and commission and brokerage income.
14
Non-Interest Expense
Non-interest expense for the March 2002 quarter, excluding restructuring and
related costs of $2.0 million, was $90.4 million, down 29.3 % from $127.9
million, excluding restructuring and related costs of $44.4 million, in the
comparable quarter of 2001. See below for further discussion of restructuring
and related costs.
Salaries and pension and other employee benefits expense totaled $49.9 million
in the first quarter of 2002, compared to $62.9 million for the corresponding
period of 2001. The decreased expenses were primarily attributable to the
divested businesses, partially offset by increases in incentive awards and
amortization of restricted stock grants.
Net occupancy and equipment expense in the March 2002 quarter was $19.7 million,
a decrease of 22.7% from $25.5 million for the same period in 2001. The decrease
is mainly due to the divested businesses and a decrease in depreciation expense
from the continuing businesses.
Other operating expense decreased to $20.8 million in the first quarter of 2002
from $35.5 million for the same quarter in 2001. The decrease was primarily due
to the divested businesses.
The run rate for non-interest expense is approaching a sustainable run-rate for
the rest of the year. However, that rate could be higher or lower by as much
as $2.0 million per quarter.
Restructuring
In April 2001, the Company announced a strategic plan designed to maximize
shareholder value by strengthening its Hawaii and West Pacific operations and
divesting most other holdings. The Company had substantially completed its
divesting activities by the end of 2001, however some activity was concluded in
the first quarter of 2002 and resulted in $2.0 million of restructuring costs.
The first quarter expense of $2.0 million includes $3.1 million of employee
severance costs, adjustments of $1.3 million in previous estimates of foreign
currency translation gains and $0.2 million of other costs.
Activity in the Restructuring Accrual
(in thousands)
Balance at December 31, 2001 $ 11.8
Restructuring Charges 1.4
Payments (10.0)
Reversals -
--------
Balance at March 31, 2002 $ 3.2
======
The $3.2 million is comprised of $2.2 million in severance for 20 employees
primarily in Hawaii and $1.0 million for other costs associated with the
divesting businesses.
Income Tax Provision
The 35.6% effective tax rate for the first quarter of 2002 decreased from the
first quarter of 2001 as the effective tax rate in the prior year reflected the
impact from the divestitures and foreign taxes.
15
Continuing Businesses
Continuing businesses excludes the divested businesses (Pacific Century Bank
N.A., Asia Division, South Pacific Division and the credit card business) and
restructuring and non-core transactions. Table 3 presents continuing businesses
for March 31, 2002 and 2001.
The continuing businesses benefited from an increase of $4.6 million in revenue,
partially offset by a $4.0 million increase in expense and $3.8 million less
provision for loan and lease losses compared to the same quarter last year. The
result was net income of $32.3 million compared to $28.3 million on a comparable
basis with the first quarter of 2001.
Continuing Businesses Table 3
- -------------------------------------------------------------------------------------------------------------------------
Three Months Ended Three Months Ended
(dollars in thousands) March 31, 2002 March 31, 2001
------------------------------------------------------------
Net Interest Income
Provision for Loan and Lease Losses $ 94,895 $ 92,153
(8,292) (12,050)
----------- -----------
Net Interest Income after Provision for Loan and Lease
Losses 86,603 80,103
Non-Interest Income 54,014 54,608
Non-Interest Expense (1) 90,433 86,420
----------- -----------
Income Before Income Taxes 50,184 48,291
Provision for Income Taxes (17,853) (19,976)
-----------------------------------------------------------
Net Income (1) $ 32,331 $ 28,315
-----------------------------------------------------------
Total Assets (End of Period) $10,244,773 $10,395,030
Total Assets (Average) 10,414,796 9,929,393
Diluted Earnings Per Share $0.43 $0.35
Return on Average Equity (1) 10.37% 8.76%
Efficiency Ratio (1) 60.73% 58.88%
(1) Adjusted to exclude goodwill amortization expense for 2001
BALANCE SHEET ANALYSIS
Loans
As of March 31 2002, loans outstanding, excluding loans held for sale, declined
to $5.6 billion, from $5.7 billion at year-end 2001 and $8.4 billion at March
31, 2001. The decrease from the same date of the prior year is mainly due to the
divested businesses and strategic risk reductions in the portfolio.
Table 4 presents the composition of the loan portfolio by major loan categories
as of March 31, 2002, December 31, 2001 and March 31, 2001.
16
Loan Portfolio Balances (Unaudited) Table 4
- -------------------------------------------------------------------------------------------------------------------------------
March 31 December 31 March 31
(dollars in millions) 2002 2001 2001
- -------------------------------------------------------------------------------------------------------------------------------
Domestic Loans
Commercial $ 1,120.5 $ 1,175.5 $ 2,073.7
Real Estate
Construction 161.4 169.6 312.9
Mortgage -- Commercial 617.6 640.7 1,023.8
-- Residential 2,409.1 2,419.4 2,574.8
Installment 759.3 729.7 764.1
Lease Financing 504.7 493.4 549.0
- -------------------------------------------------------------------------------------------------------------------------------
Total Domestic 5,572.6 5,628.3
7,298.3
- -------------------------------------------------------------------------------------------------------------------------------
Foreign Loans 28.7 24.2 1,126.1
- -------------------------------------------------------------------------------------------------------------------------------
Total Loans $ 5,601.3 $ 5,652.5 $ 8,424.4
===============================================================================================================================
17
Loans Held for Sale
Loans held for sale, primarily residential mortgage loans, totaled $99.8 million
at March 31, 2002, compared to $456.7 million at December 31, 2001, a decrease
of $356.9 million, and $308.6 million at March 31, 2001, a decrease of $208.8
million. The decrease resulted from a slowing of origination activity in March
2002, combined with planned sales of mortgage loans.
Investments
The Company's investment portfolio is managed to meet strategic asset/liability
positioning, to provide both interest income and balance sheet liquidity and to
collateralize customer deposits. Available-for-sale securities at March 31, 2002
were $2.0 billion, essentially the same balance at December 31, 2001, and down
17.1 % from March 31, 2001. Securities held to maturity were $344.7 million at
March 31, 2002, declining from $396.2 million at year-end 2001 and $571.9
million a year ago. These decreases were largely due to maturities. At March 31,
2002 and December 31, 2001 investment securities with a book value of $2.1
billion were pledged as collateral for repurchase agreements.
Other short-term interest-earning assets totaled $1.5 billion at the end of the
first quarter, compared to $1.2 billion and $496.0 million at December 31, 2001
and March 31, 2001, respectively. The increase from the same period in the prior
year is mainly due to proceeds from the sale of the divested businesses and loan
portfolio sales, which enabled the Company to improve its liquidity. The
increase in interest bearing deposits is due to the desire to remain liquid in
the current low interest rate environment.
Deposits
As of March 31, 2002, deposits totaled $6.5 billion, down $0.2 billion from $6.7
billion at December 31, 2001 and down $2.3 billion from $8.8 billion at March
31, 2001. Compared to March 31, 2001 domestic deposits decreased $0.9 billion,
primarily due to the sale of Pacific Century Bank branches, while foreign
deposits declined by $1.4 billion due to the sale of the South Pacific
operations and the Company's decision to exit Asia. During the first quarter of
2002, domestic deposits continued to reflect positive trends with growth in all
demand and savings deposit categories. The Company continued to manage down its
higher cost funds, including time deposits, purchased funds, short-term
borrowings, and long-term debt.
Table 5 presents average deposits by type as of March 31, 2002, December 31,
2001 and March 31, 2001.
18
Average Deposits Table 5
- ------------------------------------------------------------------------------------------------------------------------------------
Three Months Ended Three Months Ended Three Months Ended
March 31, 2002 December 31, 2001 March 31, 2001
--------------------------------- ---------------------------- -----------------------------
(dollars in millions) Amount Mix Amount Mix Amount Mix
- ------------------------------------------------------------------------------------------------------------------------------------
Domestic
Non-Interest Bearing Demand $1,506.9 22.9% $1,397.8 19.1% $1,636.8 18.4%
Interest-Bearing Demand 1,935.0 29.5% 1,774.7 24.2% 2,008.2 22.6%
Regular Savings 1,037.0 15.8% 958.3 13.1% 665.7 7.5%
Time Certificates
of Deposit
($100,000 or More) 907.8 13.8% 990.8 13.5% 1,318.9 14.9%
All Other Time and
Savings Certificates 1,001.6 15.2% 1,057.4 14.5% 1,583.8 17.8%
- ------------------------------------------------------------------------------------------------------------------------------------
Total Domestic 6,388.3 97.2% 6,179.0 84.4% 7,213.4 81.2%
- ------------------------------------------------------------------------------------------------------------------------------------
Foreign
Non-Interest Bearing Demand - 0.0% 328.0 4.5% 377.5 4.3%
Time Due to Banks 80.2 1.2% 365.5 5.0% 489.4 5.5%
Other Time and Savings 104.0 1.6% 445.9 6.1% 801.0 9.0%
- ------------------------------------------------------------------------------------------------------------------------------------
Total Foreign 184.2 2.8% 1,139.4 15.6% 1,667.9 18.8%
- ------------------------------------------------------------------------------------------------------------------------------------
Total $6,572.5 100.0% $7,318.4 100.0% $8,881.3 100.0%
====================================================================================================================================
19
Borrowings
Short-term borrowings, including funds purchased and securities sold under
agreements to repurchase, totaled $1.6 billion at March 31, 2002, $1.8 billion
at December 31, 2001 and $2.3 billion at March 31, 2001. The decline in
short-term borrowings reflected the lower funding needs resulting from the
decrease in the Company's assets.
Similarly, long-term debt at March 31, 2002 decreased to $514.2 million from
$570.4 million at December 31, 2001 and $883.1 million at March 31, 2001.
Shareholders' Equity
The Company's capital position remains strong. Total capital increased to
$1,265.9 million at March 31, 2002, an increase from $1,247.0 million at
December 31, 2001 and a decrease from $1,371.9 million at March 31, 2001. A
further discussion of the Company's capital is included in the Corporate Risk
Profile section of this report.
20
LINE OF BUSINESS FINANCIAL REVIEW
Key indicators of performance adopted by the Company include:
Economic:
NIACC (Net Income After Capital Charge): The key indicator of creating value
for the shareholder, it is determined by subtracting a charge for capital from
economic net income. Positive value is created by generating net income above
the Company's estimated cost of capital.
RAROC (Risk Adjusted Return on Capital): A complementary measure that
indicates the economic return produced by the business on the risk-adjusted
capital assigned to it.
GAAP:
Net income: Net income generated by the business using measurement practices
consistent with accounting principles generally accepted in the United States.
The key differences between the derivation of Economic and GAAP results are:
Provision for Loan Losses: The GAAP provision is an estimate of the change
in risk in the current period, measured in accordance with generally accepted
accounting principles. The Economic Provision represents estimated losses in the
credit portfolio assuming a "normalized" economic environment and loss rate over
the business cycle. Consequently, there is no recognition of the free funds
value of the allowance for loan and lease losses under Economic accounting.
Excess Capital Funding Value: GAAP net income includes the free funding
value of a share of the Company's excess capital not allocated to the segments
to cover risk. Economic results are based on risk-adjusted capital,
necessitating adjustment for the excess capital funding value.
Economic NIACC and RAROC for each segment for the three months ended March 31,
2002 and 2001 are presented in Table 6.
Economic NIACC and RAROC Table 6
(dollars in thousands)
RESTRUCTURING
FINANCIAL TREASURY and OTHER
SERVICES DIVESTITURE AND OTHER RELATED
RETAIL COMMERCIAL GROUP BUSINESSES CORPORATE ACTIVITIES
----------- -------------- ------------ -------------- -------------- -------------------
Three Months Ended March 31, 2002
NIACC (Economic) $ 9,446 $1,061 $1,359 $ - $ (16,509) $(1,275)
RAROC (Economic) 32% 14% 20% - 34% N/A
================================================================================================
Three Months Ended March 31, 2001
NIACC (Economic) $5,806 $1,173 $ 640 $ (10,291) $ (5,187) $25,239
RAROC (Economic) 24% 14% 16% 3% 10% N/A
================================================================================================
21
Retail Banking
The Company's retail banking franchise and market share are key strengths of the
Company. Retail Banking provides checking and savings products for the consumer
and small business segments, merchant services, installment, home equity and
mortgage lending products, as well as other products and services. The increase
in net-interest income for the three months ended March 31, 2002 compared to the
same period in 2001 was a result of increased deposit spread revenue due to the
lower average cost of consumer deposit accounts. The increase in non-interest
income from March 31, 2001 was attributable to an increase of mortgage
origination volumes and a valuation adjustment on mortgage loans held for sale.
Non-interest expense increased over the same period last year as a result of
incentive compensation paid on the increased mortgage origination volume and
corporate marketing expenses related to a number of new brand awareness ads and
other advertising campaigns.
Commercial Banking
The Commercial Banking segment offers an array of products including corporate
banking, commercial demand and time products, lease financing, commercial real
estate loans, cash management products and auto dealer financing. The Company's
West Pacific and Japan Marketing Divisions are included in this segment. The
decline in net interest revenue and fee revenue for the quarter ended March 31,
2002 versus the same period last year was attributable to reductions in the loan
portfolio as a result of the Company's efforts to improve its credit exposure
and quality levels. The decrease in non-interest expense was a result of expense
reduction initiatives.
Financial Services Group
The Financial Services Group offers private banking, trust services, asset
management, investments such as mutual funds and stocks, financial planning, and
insurance. A significant portion of this segment's income is derived from fees,
which are generally based on the market values of assets under management. The
decline in non-interest expense was due to the successful conclusion of
remediation efforts in the compliance area and the implementation of process
improvements over the past year.
Treasury and Other Corporate
The primary component of this segment is Treasury, which consists of corporate
asset and liability management activities including investment securities,
federal funds purchased and sold, government deposits, short and long-term
borrowings, and managing interest rate and foreign currency risks. Additionally,
the net residual effect of transfer pricing of assets and liabilities is
included in Treasury, along with other minor unallocated amounts. Eliminations
of intercompany transactions are also reflected in this segment. The increase in
net interest income for the three months ended March 31, 2002 compared to the
same period in 2001 was due to the increased liquidity of the Company from the
divestitures. First quarter 2002 non interest income was down from 2001 due to
lower foreign exchange income and a decrease in miscellaneous recoveries. Non
interest expense was up over the previous year due to temporary professional and
management fees.
Divestiture Businesses
For the first quarter of 2001, this segment reported the results of the
businesses the Company planned to divest or close.
22
Corporate Restructuring and Other Related Activities
This segment reflects the implementation of the Company's strategic plan to
improve credit quality and to divest underperforming businesses. For the first
quarter of 2001, this category included the gains and costs of divesting
businesses (the credit card portfolio, Pacific Century Bank branches, Asia
Division and the South Pacific Division) and the costs of restructuring the
Company; and included losses associated with accelerated resolution of credit
problems undertaken during the period.
FOREIGN OPERATIONS
The countries in which the Company maintains its largest exposure on a cross-
border basis include United Kingdom, Canada, Netherlands, and Australia. Table
7, presents as of March 31, 2002, December 31, 2001, and March 31, 2001, a
geographic distribution of the Company's cross-border assets for each country in
which such assets exceeded 0.75% of total assets.
Geographic Distribution of Cross-Border International Assets Table 7
- -----------------------------------------------------------------------------------------------------------------
(dollars in millions)
Country March 31, 2002 December 31, 2001 March 31, 2001
=================================================================================================================
Australia $ 168.9 $ 116.0 $ -
Canada 215.6 119.9 -
France 78.7 - -
Germany 188.2 -
Japan - 81.9 222.0
South Korea - - 246.7
Netherlands 197.0 192.9 -
Switzerland 99.3 - -
Singapore 83.9 140.6 -
United Kingdom 326.3 257.9 113.4
All Others 317.9 281.9 580.8
----------------------- ----------------------- ----------------------
$ 1,487.6 $ 1,379.3 $ 1,162.9
======================= ======================= ======================
In this table, cross-border outstandings are defined as foreign monetary assets
that are payable to the Company in U.S. dollars or other non-local currencies,
plus amounts payable in local currency but funded with U.S. dollars or other
non-local currencies. Cross-border outstandings include loans, acceptances,
interest-bearing deposits with other banks, other interest-bearing investments,
and other monetary assets.
The West Pacific (consisting of Guam and American Samoa which are U.S.
territories, and other nearby islands) includes Bank of Hawaii and First Savings
branches. Since the U.S. dollar is used in these locations, operations in the
West Pacific are not considered foreign for financial reporting purposes.
23
CORPORATE RISK PROFILE
Credit quality and loan losses benefited from an improving Hawaii economy and
improved collection procedures. Continued reduction in credit exposure in the
syndicated loan market occurred during the first quarter. In the first quarter,
losses of $5.0 million were incurred in connection with the sale of three loans
that had decreased in value due to financial difficulties.
Credit Risk
There was first quarter improvement in the asset quality of the Company as
measured by its internal credit risk ratings, including its exposure to air
transportation and hotel companies.
Air transportation exposure totaled $156 million at March 31, 2002 and consisted
of $136 million in equity interests in leveraged leases and $20 million in
lending exposure of which $6 million was undrawn, including $15 million to an
air cargo carrier. The lease exposure is comprised of $90 million on 14 aircraft
leased to United States and international passenger carriers and $31 million on
16 aircraft leased to regional passenger carriers. The allowance for loan and
lease losses includes amounts available to absorb estimated losses, giving
effect to discounted aircraft values. All of the Company's air transportation
exposures remain current.
The Company's exposure to national hotel companies totaled $112 million at March
31, 2002 with undrawn commitments of $79 million. Exposure to Hawaii-based hotel
companies included loans outstanding of $122 million and undrawn commitments of
$20 million. In the West Pacific, loans outstanding to hotel companies totaled
$43 million at the end of first quarter 2002. Approximately 80% of the Hawaii
and West Pacific hotel loans are collateralized by hotel properties or
guaranteed by either financial institutions or entities with limited exposure to
tourism. All of the Company's hotel exposures remain current.
Syndicated loans outstanding decreased to $454 million during the first quarter
of 2002. Syndicated exposure, consisting of loans and undrawn commitments,
declined $168 million from the prior quarter to $1.4 billion at March 31, 2002.
Non-Performing Assets
Non-performing assets were $90.7 million at the end of the first quarter 2002,
up from $79.7 million at the end of the fourth quarter 2001. Compared to the
same quarter last year, non-performing assets were down $28.8 million, or 24.1%.
At March 31, 2002 the ratio of non-performing assets to total loans plus
foreclosed assets was 1.61% compared to 1.41% at December 31, 2001 and 1.41% at
March 31, 2001. The increase in non-performing assets was largely due to the
deterioration of a single, Hawaii-based company that has been a long-term
customer. Subsequent to March 31, 2002 the Company sold its interest in a
non-accruing loan with a book value of $7.8 million.
Non-accrual loans were $63.7 million at March 31, 2002, up slightly from $60.8
million at December 31, 2001 due to the previously mentioned Hawaii-based
credit, which was partially offset by the reclassification of $7.8 million to
loans held for sale. Non-accrual loans at March 31, 2002 were down $31.8
million, or 33.3% from March 31, 2001. Non-accrual loans as a percentage of
total loans were 1.14%, up from 1.08% in the previous quarter and essentially
flat with the same period last year.
Foreclosed assets were $19.2 million at the end of the first quarter of 2002, an
increase of $2.0 million from the prior quarter and $11.2 million in the first
quarter last year. The increase resulted from the foreclosure of several small
loans during the quarter. The increase from March 31, 2001 is due to the
foreclosure of a property in the second quarter of 2001.
Impaired loans at March 31, 2002 of $85.3 million increased $18.1 million from
$67.2 million at December 31, 2001 primarily due to the previously mentioned
Hawaii based credit. Impaired loans totaling $73.1 had a related allowance that
totaled $14.6 million at March 31, 2002.
24
We anticipate that a permanent reduction in the levels of non-performing assets
will be achieved by the end of 2002.
Accruing loans past due 90 days or more were $4.3 million at March 31, 2002,
down from $4.9 million at year-end 2001 and $11.1 million at March 31, 2001.
For further information concerning non-performing assets refer to Table 8.
25
Consolidated Non-Performing Assets and Accruing Loans Past Due 90 Days or More (Unaudited) Table 8
- ------------------------------------------------------------------------------------------------------------------------------------
March 31 December 31 March 31
(dollars in millions) 2002 2001 2001
- ------------------------------------------------------------------------------------------------------------------------------------
Non-Accrual Loans
Commercial $ 27.4 $ 18.9 $ 23.8
Real Estate
Construction 1.0 9.3 6.3
Mortgage - Residential 15.7 15.4 18.5
- Commercial 15.1 16.3 29.7
Installment 0.1 0.1 0.1
Lease Financing 4.4 0.8 0.2
Foreign - - 16.9
----------------------------------------------------
Total Non-Accrual Loans 63.7 60.8 95.5
Non-Accrual Loans Held For Sale 7.8 1.7 12.8
Foreclosed Real Estate
Domestic 19.2 17.2 10.9
Foreign - - 0.3
----------------------------------------------------
Total Foreclosed Real Estate 19.2 17.2 11.2
----------------------------------------------------
Total Non-Performing Assets $ 90.7 $ 79.7 $ 119.5
====================================================
Accruing Loans Past Due 90 Days or More
Commercial $ 0.2 $ 0.1 $ 3.9
Real Estate
Construction - - -
Mortgage - Residential 2.1 3.8 3.3
- Commercial 1.2 - 0.9
Installment 0.7 0.9 2.7
Lease Financing 0.1 0.1 0.1
Foreign - - 0.2
----------------------------------------------------
Total Accruing Past Due Loans $ 4.3 $ 4.9 $ 11.1
====================================================
Total Loans $ 5,601.3 $ 5,652.5 $ 8,424.4
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of Non-Accrual Loans
to Total Loans 1.14% 1.08% 1.13%
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of Non-Performing Assets
to Total Loans, Foreclosed Real Estate
and Non-Accruing Loans Held for Sale 1.61% 1.41% 1.41%
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of Non-Performing Assets
and Accruing Loans Past Due
90 Days or More to Total Loans 1.70% 1.50% 1.55%
- ------------------------------------------------------------------------------------------------------------------------------------
Quarter to Quarter Changes in Non-Performing Assets
Balance at Beginning of Quarter $ 79.7 $ 106.4 $ 183.0
Additions 36.4 43.8 43.1
Reductions
Payments and Sales of Loans (12.9) (40.9) (63.7)
Return to Accrual (6.3) (3.6) (3.0)
Sales of Foreclosed Assets (0.9) (21.9) (3.0)
Charge-offs (5.3) (4.1) (36.9)
----------------------------------------------------
Total Reductions (25.4) (70.5) (106.6)
Balance at End of Quarter $ 90.7 $ 79.7 $ 119.5
====================================================
26
Allowance for Loan and Lease Losses
The allowance for loan and lease losses at March 31, 2002 and December 31, 2001
was $159.0 million or 2.8% of loans outstanding. As of March 31, 2001 the
allowance for loan and lease losses was $199.8 million or 2.4% of loans
outstanding. A summary of the activity for the allowance for loan losses is
presented in Table 9.
Net charge-offs for the first quarter of 2002 were $8.3 million or 0.6% of total
average loans (annualized) compared to $97.7 million or 4.4% of total average
loans (annualized) for the same period last year. Charge-offs of $13.1 million
was partially offset by recoveries of $4.8 million.
The ratio of the allowance for loan and lease losses to non-accrual loans was
249%, down slightly from 262% in the previous quarter and an increase from 209%
last year.
Looking forward, given the continued improvement in loan quality, we anticipate
that the level of the allowance may be reduced. The timing and amount of that
reduction will depend on future judgments about the level of risk in the loan
portfolios.
27
Consolidated Allowance for Loan and Lease Losses (Unaudited) Table 9
- ------------------------------------------------------------------------------------------------------------------------------------
Three Months Three Months
Ended Year Ended Ended
(dollars in millions) March 31, 2002 December 31, 2001 March 31, 2001
- ------------------------------------------------------------------------------------------------------------------------------------
Balance of Allowance for Loan and Lease Losses
Beginning of Period $ 159.0 $ 246.2 $ 246.2
Loans Charged-Off
Commercial (7.3) (97.5) (75.5)
Real Estate:
Construction (0.5) (0.1) -
Mortgage - Commercial - (19.2) (11.9)
- Residential (1.4) (8.9) (2.5)
Installment (3.9) (20.5) (5.4)
Foreign - (22.0) (10.0)
Lease Financing - (0.8) (0.1)
-----------------------------------------------------------------------------------
Total Charge-Offs (13.1) (169.0) (105.4)
Recoveries on Loans Previously Charged-Off
Commercial 0.7 11.1 2.7
Real Estate:
Construction - - -
Mortgage - Commercial 1.8 3.2 0.3
- Residential 0.3 1.0 0.2
Installment 1.9 8.0 1.8
Foreign 0.1 24.1 2.6
Lease Financing - 0.2 0.1
-----------------------------------------------------------------------------------
Total Recoveries 4.8 47.6 7.7
-----------------------------------------------------------------------------------
Net Loan Charge-Offs (8.3) (121.4) (97.7)
Provision for Loan and Lease Losses 8.3 74.3 52.5
Allowance Related to Divestitures - (40.2) -
Foreign Currency Translation - 0.1 (1.2)
-----------------------------------------------------------------------------------
Balance at End of Period $ 159.0 $ 159.0 $ 199.8
===================================================================================
Average Loans Outstanding $ 5,583.3 $ 7,719.6 $ 9,061.7
Ratio of Net Charge-Offs to Average Loans
Outstanding (annualized) 0.60% 1.57% 4.37%
Ratio of Allowance to Loans and Leases
Outstanding 2.84% 2.81% 2.37%
28
Market Risk
The Company manages assets and liabilities to maximize long term, risk adjusted
returns to shareholders. The Company's asset and liability management process
involves measuring, monitoring, controlling and managing financial risks that
can significantly impact financial position and operating results. Financial
risks in the form of interest rate sensitivity, foreign currency exchange
fluctuations, liquidity, and capital adequacy are balanced with expected returns
with the objective to maximize earnings performance and shareholder value, while
limiting the volatility of each.
The activities associated with these financial risks are categorized into either
"other than trading" or "trading."
Other Than Trading Activities
A key element in the Company's ongoing process to measure and monitor interest
rate risk is the utilization of a net interest income (NII) simulation model.
This model is used to estimate the amount that NII will change over a one-year
time horizon under various interest rate scenarios using numerous assumptions,
which management believes are reasonable. The NII simulation model captures the
dynamic nature of the balance sheet and provides a sophisticated estimate rather
than a precise prediction of NII's exposure to higher or lower interest rates.
Table 10 presents, as of March 31, 2002, December 31, 2001 and March 31, 2001,
the estimate of the change in NII that would result from a gradual 200 basis
point increase or decrease in interest rates, moving in parallel fashion over
the entire yield curve, over the next 12-month period, relative to the measured
base case scenario for NII. During the first quarter, the Company's liquidity
position improved as funding needs decreased. NII became more asset- sensitive.
The resulting estimated NII exposure is within the approved Asset Liability
Management Committee guidelines.
Market Risk Exposure to Interest Rate Changes Table 10
- -----------------------------------------------------------------------------------------------------------------------------
March 31, 2002 December 31, 2001 March 31, 2001
- -----------------------------------------------------------------------------------------------------------------------------
Interest Rate Change Interest Rate Change Interest Rate Change
(in basis points) (in basis points) (in basis points)
-200 +200 -200 +200 -200 +200
- -----------------------------------------------------------------------------------------------------------------------------
Estimated Exposure as a Percent of
Net Interest Income (3.3)% 4.8% (0.3)% 3.5% (1.3)% (0.6)%
To enhance and complement the results from the NII simulation model, the Company
also reviews other measures of interest rate risk. These measures include the
sensitivity of market value of equity and the exposure to basis risk and
non-parallel yield curve shifts. There are some inherent limitations to these
measures, but used along with the NII simulation model, the Company gains a
better overall insight for managing its exposure to changes in interest rates.
In managing interest rate risk, the Company generally uses on-balance sheet
transactions to manage its risk position. Approaches that are used to shift
balance sheet mix or alter the interest rate characteristics of assets and
liabilities include changing product pricing strategies and modifying investment
portfolio strategies. The use of financial derivatives has been limited over the
past several years.
To estimate the potential loss from foreign currency exposure for the remaining
net investments in foreign subsidiaries and branches, the Company continues to
use a value-at-risk (VAR) calculation based on an estimated variance-co-variance
matrix. This VAR calculation determines the potential loss within a 95%
confidence interval.
29
Table 11 presents, as of March 31, 2002, December 31, 2001 and March 31, 2001,
the Company's foreign currency exposure from its net investment in subsidiaries
and branch operations that were denominated in a foreign currency as measured by
the VAR.
Market Risk Exposure From Changes in Foreign Exchange Rates Table 11
- ----------------------------------------------------------------------------------------------------------------------------------
March 31, 2002 December 31, 2001 March 31, 2001
(dollars in millions) Book Value Value-at-Risk Book Value Value-at-Risk Book Value Value-at-Risk
- ----------------------------------------------------------------------------------------------------------------------------------
Net Investments in Foreign
Subsidiaries & Branches
Japanese Yen $ 1.0 $0.2 $1.1 $0.2 $10.0 $2.1
Korean Won 0.3 0.0 2.1 0.3 27.0 5.7
Pacific Franc (1) - - - - 26.9 5.5
Other Currencies 0.1 0.1 0.1 0.1 (7.4) 12.9
-----------------------------------------------------------------------------------------------
Total $1.4 $0.3 $3.3 $0.6 $56.5 $26.2
===============================================================================================
(1) Net of $34 million borrowing at March 31, 2001, denominated in euro and
foreign exchange hedge transactions of $24 million at March 31, 2001. There were
no borrowing or foreign exchange hedge transactions related to the foreign
subsidiaries and branches at March 31, 2002, and December 31, 2001.
Trading Activities
Trading activities include foreign currency and foreign exchange contracts that
expose the Company to a minor degree of foreign currency risk. The Company,
however, manages its trading account such that it does not maintain significant
foreign currency open positions. The exposure from foreign currency trading
positions measured by VAR methodology as of March 31, 2002 continues to be
immaterial.
Liquidity Management
Liquidity is managed to ensure that the Company has continuous access to
sufficient, reasonably priced funding to conduct its business in a normal
manner. The Company's liquidity management process is described in the 2001
Annual Report to Shareholders on Form 10K.
Bank of Hawaii and First Savings are both members of the Federal Home Loan Bank
of Seattle (FHLB). The FHLB is a source of short and long-term funding for these
institutions. Borrowings from the FHLB were $65 million at March 31, 2002,
compared to $147 million at December 31, 2001 and $506 million at March 31,
2001.
Additionally, Bank of Hawaii maintains a $1 billion senior and subordinated bank
note program. Under this facility, Bank of Hawaii may issue additional notes
provided that at any time the aggregate amount outstanding does not exceed $1
billion. Subordinated notes outstanding under this bank note program totaled
$125 million at March 31, 2002, December 31, 2001 and March 31, 2001.
30
Capital Management
The Company manages its capital level over the long term, to optimize
shareholder value, support asset growth, reflect risks inherent in its markets,
provide protection against unforeseen losses and comply with regulatory
requirements. Capital levels are reviewed relative to the Company's risk profile
and current and projected economic conditions. The Company's objective is to
hold sufficient capital on a regulatory basis to exceed the minimum guidelines
of a "well-capitalized" financial institution.
At March 31, 2002, the Company's shareholders' equity totaled $1.266 billion,
1.5% increase from December 31, 2001. The increase in shareholders' equity
during the first three months of 2002 was primarily attributable to the
Company's earnings and issuance of common stock under various stock-based
compensation plans, partially offset by net unrealized losses in the investment
portfolio, realized foreign currency translation adjustments, cash dividends and
common stock repurchases.
In January 2002, the Company's Board of Directors approved a $300 million common
stock repurchase program. This program was in addition to the 2001 programs
totaling $270 million. During the quarter 701,000 shares were repurchased at an
average cost of $24.46, totaling $17.1 million. As of March 31, 2002, a total of
9 million shares had been repurchased at an average cost of $23.64 per share for
a total of $212.8 million under all share repurchase programs. At March 31,
2002, the remaining buyback authority under the existing repurchase programs is
$357.2 million. Subsequent to March 31, 2002 the Company repurchased 550,600
shares at an average cost of $28.12 for a total of $15.5 million through May 1,
2002.
The share repurchase program has been slowed by low trading volumes. The
programs are expected to continue as long as the repurchases can be accomplished
in a disciplined manner.
The Company's regulatory capital ratios at March 31, 2002 exceeded the minimum
threshold levels established by federal bank regulators to qualify an
institution as well-capitalized, which are as follows: Tier 1 Capital - 6%;
Total Capital - 10%; and Leverage - 5%. The Company's regulatory capital ratios
are shown on Table 12, along with the activities and balances in the Company's
capital accounts. During the quarter, the Company's capital ratios and liquidity
continued to strengthen.
31
Equity Capital Table 12
Three Months Ended Year Ended Three Months Ended
(dollars in millions) March 31, 2002 December 31, 2001 March 31, 2001
Source of Shareholders' Equity
- ------------------------------
Net Income $ 31.1 $ 117.8 $ 33.7
Dividends Paid (13.2) (56.6) (14.4)
Dividend Reinvestment Program 0.7 2.8 0.7
Stock Issued for Acquisition 1.3 -
Stock Repurchases (17.1) (195.7) -
Other (1) 17.4 76.0 50.5
-------------------------------------------------------------------
Increase (Decrease) in Shareholders' Equity $ 18.9 $ (54.4) $ 70.5
===================================================================
Capital Equity
Shareholders' Equity $ 1,265.9 $ 1,247.0 $ 1,371.9
Add: 8.25% Capital Securities of
Bancorp Hawaii Capital Trust I 94.6 100.0 100.0
Minority Interest - - 4.3
Less: Intangibles 26.7 26.7 158.1
Unrealized Valuation and Other
Adjustments 21.0 22.9 23.0
-------------------------------------------------------------------
Tier I Capital 1,312.8 1,297.4 1,295.1
Allowable Reserve for Loan Losses 79.1 83.0 127.0
Subordinated Debt 148.4 148.4 172.1
Investment in Unconsolidated Subsidiary - - (3.5)
-------------------------------------------------------------------
Total Capital $ 1,540.3 $ 1,528.8 $ 1,590.7
===================================================================
Risk Weighted Assets $ 6,244.2 $ 6,559.6 $ 10,087.5
===================================================================
Key Capital Ratios
Growth (Decline) in Common Equity 1.52% (4.18)% 5.42%
Average Equity/Average Assets Ratio 12.13% 10.60% 9.47%
Tier I Capital Ratio 21.18% 19.76% 12.84%
Total Capital Ratio 24.84% 23.29% 15.77%
Leverage Ratio 12.64% 11.20% 9.46%
(1) Includes profit sharing; stock options and directors' restricted shares and
deferred compensation plans; and unrealized valuation adjustments for
investment securities, foreign currency translation and pension liability.
32
Economic and Financial Outlook
The Hawaii economy continues to show improvement. The recovery in tourism
continues on the path toward normal visitor arrivals by mid-2002. Visitor counts
from the mainland have recently returned to customary seasonal volumes and
international visitor arrivals have returned to more than 90% of prior year
levels. Hawaii's overall economic growth rate is anticipated to return to 3%
after inflation as tourism recovers. Hawaii's unemployment rate fell from the
post-September 11 spike of 5.7% to 4.7% during the quarter and is forecasted to
continue trending downward toward prior rates. Inflation is expected to remain
substantially below national norms during 2002. Evidence of a return to business
levels similar to last year has been observed, except in Guam, where the economy
remains quite soft.
The Company's previously published earnings guidance for the full year 2002 of
$120 million in net income remains unchanged. Earnings per share and return on
equity projections are dependent upon the terms and timing of share repurchases.
Second quarter core income may be down slightly from the first quarter.
Non-interest income is expected to decrease as mortgage banking income returns
to a more customary level. Operating expenses are expected to remain at about
the same level as the first quarter. In the second quarter, the Company plans to
invest approximately $2 to $3 million in new processes to support sales and
service initiatives.
The Company remains focused on reducing expense levels by simplifying and
improving the efficiency of the operating structure. The most promising
initiative for reducing costs is our information technology replacement project.
The Company has received proposals from technology providers that appear to
produce significant cost reductions in future years. The Company continues to
evaluate the leading proposal, which will involve significant conversion and
implementation costs. To date, the costs of evaluating a possible conversion
have been included in operating expenses. More details on the impact of this
project will be provided when we have finalized our plan. One requirement of the
project is that implementation of a new systems platform must not significantly
impair customer service.
Item 3. Quantitative and Qualitative Disclosures of Market Risk
See Management's Discussion and Analysis of Results of Operations and Financial
Condition-Market Risk.
33
Part II. - Other Information
Items 1 to 3 and Item 5 omitted pursuant to instructions.
Item 4 - Submission of Matters to a Vote of Shareholders
At the annual shareholders meeting held on April 26, 2002, the following matters
were submitted to a vote of the shareholders.
a. Election of Directors - Three directors whose terms in office were expiring
as well as one new director nominee were elected to the Board of Directors
as follows:
Peter D. Baldwin
Robert A. Huret
Donald M. Takaki
Robert W. Wo, Jr.
b. Amendment to the Company's Certificate of Incorporation to change the name
of the Company to Bank of Hawaii Corporation
c. Election of an Independent Auditor-Ernst & Young, LLP
Each of the matters before the Shareholders were approved by a substantial
margin.
Item 6 - Exhibits and Reports on Form 8-K
(a) Exhibit Index
Exhibit Number
--------------
12 Statement Regarding Computation of Ratios
(b) The following reports on Form 8-K were filed during the
quarter ended March 31, 2002.
Current Report on Form 8-K dated December 28, 2001 and filed
January 15, 2002 Item 5.
Current Report on Form 8-K dated February 4, 2002 and filed
February 7, 2002 Item 5.
34
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 May 9, 2002 BANK OF HAWAII CORPORATION
-----------------
/s/Michael E. O'Neill
------------------------------------
(Signature)
Michael E. O'Neill
Chairman, Chief Executive Officer
and President
/s/Allan R. Landon
------------------------------------
(Signature)
Allan R. Landon
Vice Chairman, Treasurer and Chief
Financial Officer
/s/Richard C. Keene
------------------------------------
(Signature)
Richard C. Keene
Executive Vice President and
Controller
35