Net income for the second quarter of 2009 was $31.0 million compared to net income of $48.3 million in the second quarter of 2008. Results for the second quarter of 2009 included FDIC insurance expense of $9.0 million compared with $0.2 million in the second quarter of 2008. Second quarter 2009 results also included a provision for credit losses of $28.7 million compared to a provision for credit losses of $7.2 million in the same quarter last year. The return on average assets for the second quarter of 2009 was 1.06 percent, compared to 1.85 percent during the same quarter last year. The return on average equity for the second quarter of 2009 was 14.49 percent compared to 24.82 percent for the second quarter of 2008.
During the quarter, the company sold a loan made to a major mall owner, restructured a leveraged lease that involved a bankrupt automobile manufacturer, and wrote down the carrying value of a non-relationship syndicated credit that was subsequently sold. The result of these three transactions was an increase in net charge-offs of $13.6 million.
Average deposits increased $471 million during the second quarter of 2009. Shareholders’ equity increased $12 million to $846 million at June 30, 2009. The allowance for loan and lease losses increased $3 million during the second quarter of 2009 and currently represents 2.23 percent of outstanding loans and leases.
“We continued to pursue our near-term strategies of maintaining strong liquidity, reserves, and capital during the second quarter of 2009,” said Allan R. Landon, chairman, and CEO. “Our profitability during the quarter was helped by increased net interest income. The company’s results included an industry-wide FDIC assessment and losses from the resolution of three significant credits. Bank of Hawaii has a strong balance sheet and is well prepared.”
For the six months ended June 30, 2009, net income was $67.0 million, down $38.5 million compared to net income of $105.5 million for the same period last year. Dilute earnings per share were $1.40 for the first half of 2009, down from $2.18 for the first half of 2008. The year-to-date return on average assets was 1.18 percent, down from 2.01 percent for the same period in 2008. The year-to-date return on average equity was 16.13 percent, down from 27.33 percent for the six months ended June 30, 2008.
Results for the first six months of 2009 included gains of $13.7 million from the disposition of leased equipment and the sale of the company’s retail insurance brokerage business. These gains were offset by increases in the allowance for loan and lease losses and expenses for legal contingencies, an industry-wide FDIC assessment, and early debt retirement. Results for the first half of 2008 included $25.3 million from the redemption of visa shares and a lessee’s early buy-out of an aircraft lease. Partially offsetting these prior year gains were expenses for employee incentives, legal contingencies, a call premium on Capital Securities, an increase in the allowance for loan and lease losses, and contributions to the Bank of Hawaii Charitable Foundation.
Net interest income, on a taxable equivalent basis, for the second quarter of 2009 was $103.2 million, down $4.2 million from net interest income of 107.4 million in the second quarter of 2008, and up $5.9 million from net interest income of $97.3 million in the first quarter of 2009. The decrease in net interest income compared to the second quarter of 2008 was largely due to a lower net interest margin resulting from greater liquidity being held at low yields, lower interest rates, and lower levels of loans. The increase compared to the first quarter of 2009 was mainly due to a higher level of earning assets. For the six months ended June 30, 2009, net interest income on a taxable-equivalent basis was $200.5 million compared to $209.8 million for the same period in 2008.
The net interest margin was 3.73 percent for the second quarter of 2009, a 68 basis point decrease from 4.41 percent in the second quarter of 2008 and a decrease of 3 basis points from 3.76 percent in the first quarter of 2009. For the six months ended June 30, 2009, the net interest margin was 3.75 percent compared to 4.29 percent for the same six months in 2008. The decrease in the next interest margin was largely the result of lower interest rates and the company’s strategy to increase liquidity and reduce risk.
Results for the second quarter of 2009 included a provision for credit losses of $28.7 million compared with $7.2 million in the second quarter of 2008 and $24.9 million in the first quarter of 2009. The provision for credit losses exceeded net charge-offs by $3.0 million in the second quarter of 2009. The provision for credit losses exceeded net charge-offs by $2.5 million in the second quarter of 2008 and exceeded net charge-offs by $10.9 million in the first quarter of 2009.
Noninterest income was $59.8 million for the second quarter of 2009, a decrease of $0.7 million compared to $60.5 million in the second quarter of 2008, and a decrease of $10.5 million compared to $70.4 million in the first quarter of 2009. Noninterest income in the second quarter of 2009 included a gain of $2.8 million related to the company’s sale of its equity interest in an aircraft lease to a cargo carrier and $0.9 million due to the previously mentioned sale of the retail insurance brokerage business. Results for the first quarter of 2009 included a gain of $10.0 million related to the disposition of leveraged leases for two watercraft.
