Bank of Hawaii Corporation

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Bank of Hawaii Corporation

130 Merchant Street
Honolulu, Hawaii 96813
Telephone: (808) 537-8430
Toll Free: (888) 643-3888
Fax: (808) 537-8440
Web site:

Public Company
1971 as Hawaii Bancorporation, Inc.
Employees: 2,600
Total Assets: $9.76 billion (2004)
Stock Exchanges: New York
Ticker Symbol: BOH
NAIC: 522110 Commercial Banking; 551111 Office of Bank Holding Companies

Bank of Hawaii Corporation is a holding company for Bank of Hawaii. Through its bank, Bank of Hawaii Corporation provides financial services in Hawaii and the Pacific Islands. Subsidiaries of the Bank of Hawaii are involved in equipment leasing, securities brokerage and investment services, and insurance and insurance agency services. Bank of Hawaii Corporation serves business, consumer, and government customers.


The Bank of Hawaii, often referred to as Bankoh, was established more than 60 years before Hawaii gained statehood. Bankoh was organized in December 1897, its mission to provide banking services to its community, a community heavily reliant on the pineapple trade for its subsistence. Like any bank, Bankoh could not grow unless the community it served grew, a dependence that was directly related to the growth of Hawaii's pineapple industry. During the first years of the 20th century, at roughly the same time the territory's political leaders first pushed for statehood, advances in the efficiency of canning methods fueled the expansion of pineapple production. Sugar production increased as well, providing the seeds for Bankoh's growth: waves of new immigrants and new businesses, both attracted by the flourishing pineapple and sugar industries. Efforts to attract American settlers largely failed, but Hawaii's population swelled with the arrival of Japanese immigrants, followed by waves of Filipino, Korean, Puerto Rican, Spanish, and Portuguese workers. Between 1900 and 1940, the territory's population increased substantially, nearly tripling from 154,001 to 422,770. The growth in population represented the growth of Bankoh's potential customer base, providing a fertile economic climate that enabled Bankoh to establish itself as the territory's largest bank, a standing it would hold throughout the 20th century and into the 21st century.

Bankoh's development was aided greatly by Hawaii's population growth, but the structure of the territory's society was not as conducive to the bank's growth as it could have been. Power was concentrated in the hands of the owners of five major sugar companiesHawaii's "Big Five"resulting in a plantation society with virtually no middle class. Without the lending needs, deposits, and small businesses that a middle class would have generated, Bankoh was deprived of a considerable amount of business, holding its development in check. The bank's business prospects increased when Hawaiian society began to lose its feudal trappings and adopt a more democratic profile, a gradual evolution aided by an organized labor movement that began developing in the 1930s, a more diverse manufacturing sector, the rising influence of the Democratic Party in the 1940s and 1950s, and the rapid growth of tourism. The number of visitors to Hawaii increased exponentially during the 1950s, spawning an industry that became Hawaii's most important source of revenue and no longer left it dependent on a one-industry economy.

Post-World War II Expansion

By the time Hawaii gained statehood in 1959, there were nearly 600,000 residents on the eight major islands, outranking Alaska, Nevada, Wyoming, Vermont, and Delaware. The state's population provided an ample customer base with a sizeable middle class for Bankoh to serve. Bankoh's development by this point, after more than 60 years of existence, had been shaped by the two great movements of the era: the growth of Hawaii's population and the emergence of a diversified economy supported by a middle class. In the second half of the 20th century, the bank used its standing as Hawaii's largest bank to expand its scope beyond Hawaii, ushering in an era that would see Bankoh spread its presence in the Pacific Islands, Asia, and eventually onto the U.S. mainland. One of the first major indications of the bank's more expansive geographic strategy was the formation of Bank of Hawaii International, Inc. in 1968. Through its international subsidiary, the bank began taking equity interests in foreign financial institutions, using its wealth to invest in banking activities in places such as Tonga, New Caledonia, Tahiti, and Samoa. Bankoh's journeys abroad, however, did not begin in earnest until several years after the formation of Bank of Hawaii International, when the company adopted the corporate structure to facilitate its maturation into a diversified, internationally oriented financial services institution.

A milestone in Bankoh's development from a community bank to an international financial services firm occurred in 1971, the year Hawaii Bancorporation, Inc. was formed. Hawaii Bancorporation became the first bank holding company in Hawaii, the corporate umbrella under which Bankoh and other subsidiaries such as Bank of Hawaii International would operate. Bankoh continued to represent the principal operating entity of the holding companyfour decades later Bankoh held 90 percent of the holding company's assetsbut the creation of a holding company enabled the bank to reach farther geographically and to broaden its services both in Hawaii and abroad.

The formation of Hawaii Bancorporation in 1971 marked the beginning of a 30-year period that would see the company spread its influence far and wide, a period punctuated by the formation of subsidiaries that operated alongside or underneath Bankoh. In 1973, Bancorp Leasing of Hawaii, Inc. was formed to provide, as its name suggested, leasing and leasing services primarily to commercial customers. After the name of the holding company was changed to Bancorp Hawaii, Inc. in 1979, the company threw itself into expanding its operations during the 1980s. In 1985, the company acquired Hawaiian Trust Company, a company founded in 1898, one year after the formation of Bankoh. Hawaiian Trust provided trust services primarily in Hawaii and Guam, operating as a subsidiary of Bankoh. In 1986, FirstFed America, Inc. (later renamed Bancorp Pacific, Inc.) was formed to acquire First Federal Savings and Loan Association, a savings and loan association founded in 1904 that operated in Guam and on the island of Saipan in the Commonwealth of the Northern Mariana Islands. The following year, Bancorp Hawaii's management directed their expansion efforts in the opposite direction, turning to the U.S. mainland for the first time. In October, the company acquired First National Bank of Arizona, which offered commercial banking services through branch offices in Arizona. The company ended the decade by establishing an insurance company to serve the holding company and its subsidiaries. Bancorp Hawaii Insurance Service, Ltd., formed in 1989, provided bankers professional liability insurance and, after 1992, workers compensation for Bancorp Hawaii and its subsidiaries.

Bancorp Hawaii continued to expand during the 1990s, a decade that marked the 100th anniversary of Bankoh and the arrival of unsettling times at the venerable financial institution. Lawrence M. Johnson, who held senior management positions throughout Bancorp Hawaii's development from a community bank into an international financial services firm, completed his rise up the company's managerial ranks during the 1990s, taking the helm during one of the most significant decades in the bank's long history. Johnson, who joined Bankoh in 1958 as a teller, was named president of Bankoh and the holding company in 1989, adding the titles of chairman and chief executive officer five years later when Howard Stephenson retired. When Johnson took over, Bankoh held $11.3 billion in assets, more than 90 percent of the holding company's total assets.

Johnson followed the course set by Stephenson, looking for growth opportunities beyond Hawaii's shores. The need to expand overseas became increasingly important in Johnson's mind as the decade progressed. The Hawaiian economy stagnated during his tenure in command, experiencing a nearly decade-long period of anemic growth that fueled his desire to look elsewhere for building the company's business. Toward this end, the bank's centennial marked a turning point in its history that hinted at the beginning of a new era. In July 1997, Bancorp Hawaii acquired California United Bank, an Encino, California-based bank with 21 branches in Southern California. The company also offered syndicated lending services in Asia, extending credit to customers in countries such as South Korea, Malaysia, Thailand, and Indonesia. To reflect its increasingly international focus, which had been developing for decades, the holding company changed its name in 1997, adopting Pacific Century Financial Corporation as its new corporate title.

With a new name, the holding company appeared to be embarking on a new era of existence, but the adoption of the Pacific Century name marked the beginning of arguably the most troubled period in Bankoh's history. The onset of the Asian economic crisis in 1997 delivered a serious blow to the company's fortunes, leaving it exposed to the financial turmoil experienced by troubled Asian countries. The Asian crises exacerbated the problems stemming from Hawaii's lackluster economy, the source of roughly two-thirds of Pacific Century's assets and earnings. The first signs of the holding company's troubles were made public in early 1998, acknowledged by Johnson in a February 19, 1998 interview with American Banker. "Hawaii's stagnant economy," he said, "coupled with economic turbulence in Asia has thwarted our attempts to significantly improve our performance." Johnson shuttered 25 of the company's 100 branches, trimmed payroll by 11 percent, and consolidated the company's California and Arizona banking operations in Encino (renamed Pacific Century Bank).

Company Perspectives:

Bank of Hawaii remains steadfastly focused on building value for our customers. We're committed to doing all we can to deliver exceptional service and enhance customer satisfaction. Our approach centers on developing long-term banking relationships, based on offering quality products and services that meet our customers' full range of financial needs. Our business units work closely with one another to ensure we not only meet clients' current needs but also help them plan for their future needs.

As the late 1990s progressed, Johnson continued to look for salvation from overseas, pressing ahead with the international orientation of Pacific Century. In 1998, the company invested in Brisbane, Australia-based Bank of Queensland, a $1.8 billion asset bank. In mid-1999 the company more than doubled its original investment in the Bank of Queensland, increasing its ownership stake to 17 percent. "This is a continuance of Pacific Century's Pacific Rim strategy," an analyst remarked in a June 30, 1999 interview with American Banker. Investments in foreign financial institutions, made through Bank of Hawaii International, also increased, giving the company a 96 percent stake in Bank of Hawaii-Nouvelle Caledonie, 95 percent of the Banque de Tahiti, 100 percent of Banque d'Hawaii (Vanuatu). Ltd., and 51 percent of the National Bank of Solomon Islands.

Johnson staked his future at Pacific Century on the success of the company's numerous forays abroad. He promised to retire if the company's stock value failed to recover. As Pacific Century entered a new century, Johnson offered a self-assessment of his efforts to revive the company in an August 23, 2000 interview with American Banker. "After several years of not creating shareholder value, I acknowledged that this was one of my primary responsibilities. In fact," he said, "it's my entire report card with investors." Johnson announced his departure, effective as soon as a replacement was found. Before leaving he offered an explanation of the reasoning behind his decision to enter syndicating lending abroad, stressing that he had few other options. "We were faced with virtually no revenue growth from our primary market, Hawaii," he said in his interview with American Banker. Forced to look beyond Hawaii, the company pursued opportunities that, in Johnson's words, possessed "a degree of risk that was unacceptable." Looking back, however, Johnson believed his moves might have saved the company. "If we hadn't done that, we probably would have been acquired," he said.

Pacific Century was in need of a savior as the 21st century began, and it found one in November 2000. Michael E. O'Neil, formerly the vice-chairman of Bank of America, replaced Johnson and immediately began unraveling the sprawl that had been created during the previous three decades. When he joined Pacific Century, O'Neil announced he would accept no salary other than stock options and he invested $10 million of his own money in Pacific stock. His divestiture program began the month after his arrival, starting with the announcement that Pacific had agreed to sell its banking operations in Arizona. The deal was completed in April 2001, followed by the sale of the company's California banking operations in September 2001. In November 2001, O'Neill announced he had entered negotiations to sell Banque de Tahiti and Bank of Hawaii-Nouvelle. As the divestiture program swept away business units abroad, O'Neill jettisoned a number of bad loans, clearing up the company's troubled loan portfolio. He recruited new executives and substantially increased the bank's efficiency and return on capital, reinvigorating Pacific Century and Bankoh and narrowing the focus for the future on markets in Hawaii, American Samoa, and the Western Pacific. As progress was being realized, O'Neill gave the company the symbolic stamp of his influence, formally bringing an end to a period that had seen the holding company stray from its course and stumble. In April 2002, the Pacific Century name was dropped, replaced by a corporate title reflective of the narrowed focus of its operations: Bank of Hawaii Corporation.

By 2003, O'Neill's turnaround efforts were nearly complete. His $10 million investment was made when Pacific Century's stock was trading for $15 per share. By the spring of 2003, Bank of Hawaii Corp.'s stock was trading in the $30 range. In mid-2004, when Bank of Hawaii Corp.'s stock was trading for more than $45 per share, O'Neill announced his three-year restructuring program was complete, having trimmed the holding company's assets from $14 billion in 2000 to $9 billion by 2003. "My work at the bank is done," he said, as quoted by the July 31, 2004 issue of Asia Africa Intelligence Wire. Allan R. Landon, Bank of Hawaii Corp.'s president and chief operating officer, was selected as O'Neill's replacement, inheriting a healthy company that had been comprehensively restructured by his predecessor. As Landon plotted the company's future course, he concentrated on controlling costs, increasing revenue, and reducing credit risk, employing a strategy that had been put in place by O'Neill.

Principal Subsidiaries

Bank of Hawaii; Bancorp Hawaii Capital Trust I; Bank of Hawaii International, Inc.; Bankoh Investment Services, Inc.; Bankoh Investment Partners, LLC; Pacific Century Insurance Services, Inc.; RGA Corp.; Pacific Century Advisory Services, Inc.; Bank of Hawaii Leasing, Inc.; Pacific Century Life Insurance Corporation; Triad Insurance Agency, Inc.; Bank of Hawaii Insurance Services, Inc.

Principal Competitors

American Savings Bank, FSB; Central Pacific Financial Corp.; First Hawaiian Bank.

Key Dates:

Bank of Hawaii is organized.
Hawaii Bancorporation, Inc. is formed as a holding company for the Bank of Hawaii.
The name of the holding company is changed to Bancorp Hawaii, Inc.
Bancorp acquires First National Bank of Arizona.
The name of the holding company is changed to Pacific Century Financial Corporation.
Michael O'Neill begins a comprehensive restructuring program.
The name of the holding company is changed to Bank of Hawaii Corporation.
Allan Landon is appointed chief executive officer.

Further Reading

"Bank of Hawaii Names New Chairman and CEO," Asia Africa Intelligence Wire, July 31, 2004, p. 43.

Cole, Jim, "Bank of Hawaii Keeps on Riding Cost Saving Wave," American Banker, April 26, 2005, p. 18.

, "Cost Control, Consumers Bolster Bank of Hawaii," American Banker, October 26, 2004, p. 27.

Domis, Olaf De Senerpont, "Bank of Hawaii's Parent to Double Stake in Northern Australian Bank," American Banker, June 30, 1999, p. 1.

, "Hawaii's Top Bank to Bid Aloha to 550 Workers, 25 Branches," American Banker, February 19, 1998, p. 1.

Julavits, Robert, "From CFO to Heir Apparent," American Banker, April 27, 2004, p. 1.

Mandaro, Laura, "Bank of Hawaii Chairman to Quit, True to His Word," American Banker, August 23, 2000, p. 2.

Reiker, Matthias, "Bank of Hawaii Turnaround CEO Steps Aside," American Banker, July 27, 2004, p. 1.

Salkever, Alex, "Online Extra: Bank of Hawaii," Business Week On-line, April 9, 2003, p. 32.

Sundaramoorthy, Geeta, "Bank of Hawaii Seen Still Needing Some Fine-Tuning," American Banker, August 18, 2004, p. 20.

Trifonovitch, Kelli Abe, "Ready, Set, Charge!," Hawaii Business, February 2004, p. 52.

"Whatever Happened to ?," Pacific Business News, November 2, 2001, p. 3.

Wood, Christopher, "Executive Changes," American Banker, June 6, 2005, p. 2.

Jeffrey L. Covell