Hawaii's recession is starting to really beginning to be felt on the top floor of Hawaii's largest companies.
On Sunday, The Advertiser ran a story detailing CEO pay in Hawaii, which was down 0.4 percent last year. (See:) Non-CEO senior executives have seen an even more dramatic drop in their pay checks.
Biz Bites reviewed the pay packages of about three dozen top executives at Hawaii's largest public companies and came up with an average compensation package of about $300,021.
That's down nearly 17 percent from the year-earlier when the average was about $361,000.
Few of executives received cash bonuses and the stock prices of most employers were in the doldrums last year, reducing the value of stock options.
Hardest hit were the bankers.
Bank of Hawaii Corp.'s Peter Ho saw his 2009 compensation package decline by more than $1 million last year to $1.2 million.
Dean Hirata, former vice chairman at financially struggling Central Pacific Financial Corp., saw his pay package decrease by about $500,000 last year. Last month, the bank announced that Hirata had stepped down from the company.
Other executives at Central Pacific, which received a $135 million cash infusion for the federal government's Trouble Asset Relief Program, have taken similar haircuts.
On the flip side, a number of companies did reward non-CEO executives with seven-figure pay packages last year.
Most notably, Hawaiian Electric Industries Inc. paid CFO James Ajello nearly $1.5 million while Richard Rosenbaum, president of the company's electric utility subsidiary, earned more than $2 million.
Timothy Schools, president of HEI's American Savings Bank unit, earned nearly $1.2 million last year.
Given the company's recent electricity rate increases, you would hope that regulatory agencies such as the state Public Utilities Commission would take a close look at HEI executive salaries.
Probably the most intriguing compensation package for 2009 belonged to Castle Group Inc. CEO Rick Wall.
Like most hotel management companies, Castle had a tough year. It lost about $1 million.
But Wall, the company's founder, agreed to take just $1,000 in salary last year. He earned $227,000 in 2008.
I know it's good to set an example during tough economic times but this definitely takes pay-for-performance concept to the extreme.
Bank of Hawaii Corp. did well enough during the fourth quarter to beat Wall Streets expectations by a healthy margin.
In its earnings report yesterday, the bank said it earned 84 cents per share during the quarter, compared to 74 cents forecasted by analysts, thanks to a $25.7 million, or 53 cents per share, one-time gain from the sale of mortgage-backed securities.
But the narrative portion of bank's earnings press release makes a significant omission about the bank's balance sheets.
While the bank noted that its assets and deposits were up, there's no mention in the written portion of the press release of Bank of Hawaii's loan volume.
You had to look closely at the charts provided by the bank to see that loan volume was actually down nearly 12 percent to $5.76 billion.
Loans -- which generate most of a bank's income -- are often seen as a lagging indicator of an economy. When times are tough, there are fewer borrowers for high-priced homes and there are fewer business loans.
But it's also a leading economic indicator because the loan volume tells whether businesses are expanding or shrinking.
What's more, a bank's profitability is often gauged by the amount of loan volume it generates.
Bank of Hawaii's lower loan activity is pretty much the trend in the local banking industry.
-- Central Pacific Financial Corp does not reports its fourth quarter results until Friday but through the third quarter, the company's loan volume was down 18.3 percent to $3.25 billion.
-- American Savings Bank's loan volume was off 10.6 percent during the first nine months of 2009 to $3.76 billion while Territorial Savings loans were down 4.8 percent to $602 million at the end of the third quarter.
-- Loans and leases at First Hawaiian Bank, the state's largest bank, were virtually flat at $7.78 billion, according to bank filings with the FDIC.
It will be interesting to see what loan figures are reported for the fourth quarter by Central Pacific, American Savings, First Hawaiian and Territorial in the coming weeks.
Double-digit percentage declines in loan activity will not bode well for the economy.
It's earnings season again and if analysts' forecast are any gauge, it won't be pretty.
Bank of Hawaii Corp. kicks things off today when it reports its fourth quarter earnings while Central Pacific Financial Corp reports on Friday.
That's followed by Alexander & Baldwin Inc. on Feb. 3rd, Hawaiian Airlines on Feb. 4 and Hawaiian Electric Industries on Feb. 11.
It looks like a repeat of the third quarter when five of Hawaii's six largest publicly traded companies reported earnings declines.
Bank of Hawaii's analysts are forecasting fourth quarter earnings of 75 cents, which is off 8.5 percent from the year-earlier's 82 cents per share.
Analysts following Alexander & Baldwin Inc. estimate the company's fourth quarter net at 30 cents per share, which is off sharply from four quarter 2008's 58 cents per share.
Central Pacific, reeling from loans to troubled California homebuilders and local commercial borrowers, is expected to report a 41 cent loss, according to analysts.
The exceptions: Hawaiian Airlines Inc. and Hawaiian Electric Industries Inc.
Boosted by a 4.7 percent interim rate hike in August, analysts said they expect Hawaiian Electric to earn 23 cents per share during the three months ending Dec. 31, up from the year-earlier's 16 cents.
Hawaiian Airlines, benefiting from a cease fire in the interisland fare war, is expected to earn 12.3 cents per share during the fourth quarter, which is up nearly 20 cents from the same period last year.
Several of Bank of Hawaii Corp.'s senior executives are receiving a surprise windfall.
In a filing with the Securities and Exchange Commission today, the bank said it awarded Chief Financial Officer Kent Lucien, Corporate Secretary Mark Rossi and Chief Risk Officer Mary Sellers $200,000 each in cash.
"Congratulations and thank you for your leadership and dedication to Bank of Hawaii. In recognition of your performance and your commitment to help lead Bank of Hawaii in the future, the Human Resources and Compensation Committee of the Board of Directors of Bank of Hawaii Corporation (the “Company”) has granted you an award of $200,000.00," the company said in letters to the executives.
The money will be paid in two increments, with the first on Jan. 27, the company said. The awards are part of the company's cash for equity program which is design to boost stock accumulation by managers.
To be sure, Bank of Hawaii ended 2009 on a good note.
On Dec. 30, Forbes magazine ranked the company as the nation's top performing bank, citing its conservative lending policy, strong balance sheets and healthy stock price, which was trading around 2 1/2 times the company's book value.
It's a different story at the Central Pacific Bank.
The company was among the laggards in the Forbes study after reporting a record loss during the third quarter. Last year, executives took a 10 percent pay cut.
Bank of America Corp. officials recently held discussions with former Bank of Hawaii Corp. CEO Michael O'Neill about succeeding outgoing CEO Kenneth Lewis, according to the Wall Street Journal.
The 63-year-old O'Neill was identified last month as one of 18 outside candidates favored by one of Bank of America's largest shareholders. (See:)
Last week, the Journal reported that O'Neill had discussions with a Bank of America search committee where O'Neill questioned the size and scope of the Charlotte, N.C. bank once known as "Mother Bank." (See:)
The Journal said that search committee members told O'Neill, now a director at Citigroup, that they liked the bank's current business model.
Citing unnamed sources, the journal said the committee and O'Neill later concluded that O'Neill "wouldn't be a good fit as CEO."
Until recently, the search for Lewis' successor has centered on internal candidates, many of whom played a role in the bank's recent struggles, which required billions of dollars in federal bailout money.
O'Neill was just one of two candidates who suggested shrinking the nation's largest bank, according to the journal.
Those candidates view may not be popular among a board selected search committee, who may have a vested interest in the status quo.
But having received billions of dollars in federal bailout money, the bank will have to answer to its regulators (and by extension the public), who could play a significant behind-the-scenes role in picking Lewis' successor.
