Bank of Hawaii Corporation 2008 Financial Results.

* Diluted Earnings Per Share for 2008 Increases to $3.99

* Net Income for 2008 Increases to $192.2 Million

* Board of Directors Declares Dividend of $0.45 Per Share

HONOLULU -- Bank of Hawaii Corporation (NYSE:BOH) today reported diluted earnings per share for the full year of 2008 of $3.99, up $0.30 or 8.1 percent from diluted earnings per share of $3.69 in 2007. Net income for the year was $192.2 million, up $8.5 million or 4.6 percent from net income of $183.7 million in the previous year. The return on average assets in 2008 was 1.84 percent, up from 1.75 percent in 2007. The return on average equity for the year was 24.54 percent, down from 25.15 percent in 2007 as the result of an increase in capital levels.

"Bank of Hawaii Corporation finished 2008 with solid financial performance. Our bank has a strong balance sheet with increased deposits, capital, liquidity and reserves," said Allan R. Landon, Chairman and CEO. "We anticipate that the challenging economic environment will continue in 2009. Bank of Hawaii is safe, balanced and ready to help our customers and communities address the challenges ahead."

Diluted earnings per share for the fourth quarter of 2008 were $0.82, down $0.01 or 1.2 percent from $0.83 per diluted share for the same quarter last year. Net income in the fourth quarter of 2008 was $39.3 million, down $1.6 million or 3.8 percent from net income of $40.9 million in the fourth quarter last year.

Financial Highlights

Net interest income, on a taxable equivalent basis, for the fourth quarter of 2008 was $106.1 million, up $6.4 million from net interest income of $99.7 million in the fourth quarter of 2007 and up $2.3 million from net interest income of $103.8 million in the third quarter of 2008. Net interest income in the third quarter of 2008 included a $4.0 million reduction related to accounting for the pending settlement of income tax issues with the SILO leases. Net interest income, on a taxable equivalent basis, for the full year of 2008 was $419.7 million, up $23.8 million from $395.9 million in 2007. Analyses of changes in net interest income are included in Tables 7a, 7b and 7c.

The net interest margin was 4.43 percent for the fourth quarter of 2008, a 31 basis point increase from 4.12 percent in the fourth quarter of 2007 and a 10 basis point increase from 4.33 percent in the third quarter of 2008. The net interest margin for the full year of 2008 was 4.33 percent, a 25 basis point increase from 4.08 percent in 2007.

Results for the fourth quarter of 2008 included a provision for credit losses of $18.6 million compared to $5.4 million in the fourth quarter of 2007 and $20.4 million in the third quarter of 2008. As previously mentioned, the provision exceeded net charge offs in the fourth quarter of 2008 by $8.0 million. The provision for credit losses equaled net charge-offs in the fourth quarter of 2007 and exceeded net charge-offs by $13.0 million in the third quarter of 2008. The provision for credit losses for the full year of 2008 was $60.5 million compared to $15.5 million in 2007.

Noninterest income was $54.5 million for the fourth quarter of 2008, a decrease of $5.8 million or 9.6 percent compared to noninterest income of $60.3 million in the fourth quarter of 2007 and down $2.5 million or 4.4 percent compared to noninterest income of $57.0 million in the third quarter of 2008. The decrease compared to the previous quarter was largely due to a charge of $7.1 million due to the change in fair value of mortgage servicing rights offset by a $2.6 million increase in the fair value of trading securities, and a reduction of $1.9 million in trust and asset management fees. Fourth quarter 2007 noninterest income included a gain of $3.1 million on the sale of unused real estate. Noninterest income for the full year of 2008 was $258.1 million, up $17.6 million or 7.3 percent from noninterest income of $240.5 million in 2007. Noninterest income for 2008 included a $13.7 million gain on the mandatory redemption of Visa shares and an increase of $9.3 million in gains on the disposal of lease equipment. These gains were partially offset by a net reduction in the fair value of servicing rights and lower trust and asset management fees.

Noninterest expense was $82.7 million in the fourth quarter of 2008, down $9.3 million or 10.1 percent from noninterest expense of $92.0 million in the same quarter last year, and down $4.1 million or 4.7 percent from noninterest expense of $86.8 million in the previous quarter. The decrease compared with the previous quarters was largely due to a reduction in salary and benefit expenses. Noninterest expense for the full year of 2008 was $346.8 million, up $11.4 million or 3.4 percent from noninterest expense of $335.4 million in 2007. The increase compared with the prior year was largely due to an increase in base salaries and employee incentives. An analysis of salary and benefit expenses is included in Table 8.

The efficiency ratio for the fourth quarter of 2008 was 51.58 percent, down from 57.61 percent in the same quarter last year and down from 54.05 percent in the previous quarter. The efficiency ratio for the full year of 2008 was 51.23 percent compared with 52.78 percent during the full year of 2007.

The Company's business segments are defined as Retail Banking, Commercial Banking, Investment Services, and Treasury & Other. Results are determined based on the Company's internal financial management reporting process and organizational structure. Selected financial information for the business segments is included in Tables 12a and 12b.

Asset Quality

Credit quality reflected the trend of a weakening economy during the fourth quarter of 2008. Non-accrual loans were $14.5 million at December 31, 2008, up from $5.1 million at December 31, 2007, and up from $5.6 million at September 30, 2008. As a percentage of total loans and leases, non-accrual loans were 0.22 percent at December 31, 2008. The increase in non-accrual loans was primarily in the commercial segment. The largest component of the increase was a commercial construction loan on a residential project located on the mainland, which experienced sluggish sales. This project is a participation with a mainland bank and one of the two non-Hawaii based projects in the commercial construction and development portfolio. Total outstandings associated with these two projects were $6.5 million as of December 31, 2008. The other commercial and industrial non-accrual loans are two Hawaii based companies that are experiencing difficulties due to the slowdown in local economic activity.

Net charge-offs during the fourth quarter of 2008 were $10.6 million or 0.64 percent annualized of total average loans and leases compared to $5.4 million in the fourth quarter last year and $7.4 million in the third quarter of 2008. The increase in the fourth quarter of 2008 compared with the previous quarter reflects higher net losses in commercial credits, which partially offset a reduction in net consumer charge-offs.

Full year 2008 net charges-offs of $28.0 million were 0.43 percent of total average loans and leases. Net charge-offs for 2008 were comprised of gross charge-offs of $35.3 million partially offset by recoveries of $7.3 million. Net charge-offs for the full year of 2007 were $15.5 million, or 0.24 percent of total average loans and leases, and were comprised of gross charge-offs of $24.9 million partially offset by recoveries of $9.4 million.

The Company increased the allowance for loan and lease losses by $32.5 million during 2008, including $8.0 million in the fourth quarter, to reflect increased risk due to the overall softening of the economy, and risk in the credit and financial markets. The allowance for loan and lease losses was $123.5 million at December 31, 2008, up from $91.0 million at December 31, 2007, and up from $115.5 million at September 30, 2008. The ratio of the allowance for loan and lease losses to total loans was 1.89 percent at December 31, 2008, up from 1.38 percent at December 31, 2007 and up from 1.77 percent at September 30, 2008. Details of charge-offs, recoveries and the components of the total reserve for credit losses are summarized in Table 11.

Other Financial Highlights

Total assets were $10.76 billion at December 31, 2008, up $291 million from $10.47 billion at December 31, 2007 and up $428 million from $10.34 billion at September 30, 2008. The growth in assets was largely due to an increase in the Company's liquidity position in funds sold due to strong deposit generation during the fourth quarter of 2008.

Total loans and leases were $6.53 billion at December 31, 2008, down $51 million from $6.58 billion at December 31, 2007 and down $9 million from $6.54 billion at September 30, 2008. Average loans and leases were $6.54 billion during the fourth quarter of 2008, down $44 million from $6.58 billion during the fourth quarter last year and up $25 million from $6.51 billion during the previous quarter.

Total commercial loans were $2.42 billion at December 31, 2008, up $37 million from $2.38 billion at December 31, 2007 and up $10 million from $2.41 billion at September 30, 2008. Total consumer loans were $4.11 billion at December 31, 2008, down $88 million from $4.20 billion at December 31, 2007 and down $19 million from $4.13 billion at September 30, 2008. The decrease in consumer loans during 2008 was largely due to a reduction in residential first mortgages, automobile lending, and unsecured installment loans, which offset growth in home equity lending. Loan and lease portfolio balances are summarized in Table 9.

Total deposits at December 31, 2008 were $8.29 billion, up $350 million from $7.94 billion at December 31, 2007 and up $634 million from $7.66 billion at September 30, 2008. The increase in deposits was largely due to strong growth in nearly every category during the fourth quarter of 2008. During the fourth quarter, the net number of deposit accounts increased by approximately 1,600 accounts.

Consistent with the Company's plans to build capital levels, only one thousand shares were repurchased during the fourth quarter of 2008 and no shares have been repurchased since the end of December 2008. Remaining buyback authority under the share repurchase program was $85.4 million at December 31, 2008.

At December 31, 2008, the Tier 1 leverage ratio was 7.30 percent compared to 7.02 percent at December 31, 2007 and 7.27 percent at September 30, 2008.

The Company's Board of Directors declared a quarterly cash dividend of $0.45 per share on the Company's outstanding shares. The dividend will be payable on March 13, 2009 to shareholders of record at the close of business on February 27, 2009.

Hawaii Economy

The Hawaii economy continued to weaken during the fourth quarter of 2008. Visitor arrivals, which were up in the first quarter of 2008, decreased 11.7 percent during April to November 2008 compared with a year earlier. Unemployment increased to 5.0 percent in November 2008, up from 2.6 percent at the end of 2007. Single-family median existing home sales prices in the fourth quarter of 2008 were down 1.5 percent from the fourth quarter of 2007 and down 4.2 percent from the cyclical peak between mid-2006 and mid-2007. However, home prices in Hawaii were down more modestly in the fourth quarter of 2008 than across the U.S. mainland, and overall mortgage delinquency, at 4.04 percent in the third quarter of 2008, was relatively low compared to the U.S. mainland.

Business Outlook

Bank of Hawaii begins 2009 with a cautious business plan, given the expectation of continued economic weakness and uncertainty. The Bank will focus on maintaining high levels of liquidity, strong capital and reserves as well as disciplined lending and investment. Bank of Hawaii has the resources to increase lending and investment when market conditions improve. Special emphasis will be given to workforce productivity, technology and service enhancement, and management of risk and expenses. Given the uncertain business environment, it is impractical to set expectations for returns in 2009. Bank of Hawaii remains committed to producing superior financial performance over time with priority given to soundness and timely resolution of credit issues.

Conference Call Information

The Company will review its 2008 financial results today at 8:00 a.m. Hawaii Time (1:00 p.m. Eastern Time). The call will be accessible via teleconference and via the Investor Relations link of Bank of Hawaii Corporation's web site, www.boh.com. The conference call number for participants in the United States is 866-700-6979. International participants should call 617-213-8836. No passcode is required. A replay of the conference call will be available for one week beginning Monday, January 26, 2009 by calling 888-286-8010 in the United States or 617-801-6888 internationally and entering the number 18184581 when prompted. A replay will also be available via the Investor Relations link of the Company's web site.

Forward-Looking Statements 

This news release, and other statements made by the Company in connection with it may contain "forward-looking statements", such as forecasts of our financial results and condition, expectations for our operations and business prospects, and our assumptions used in those forecasts and expectations. Do not unduly rely on forward-looking statements. Actual results might differ significantly from our forecasts and expectations because of a variety of factors. More information about these factors is contained in Bank of Hawaii Corporation's Annual Report on Form 10-K for the year ended December 31, 2007, which was filed with the U.S. Securities and Exchange Commission. We do not promise to update forward-looking statements to reflect later events or circumstances.

Bank of Hawaii Corporation is a regional financial services company serving businesses, consumers and governments in Hawaii, American Samoa and the West Pacific. The Company's principal subsidiary, Bank of Hawaii, was founded in 1897 and is the largest independent financial institution in Hawaii. For more information about Bank of Hawaii Corporation, see the Company's web site, www.boh.com.

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