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Bank of Hawaii (BOH) Q1 Earnings Beat on Higher Revenues

Zacks Equity Research

Bank of Hawaii Corporation BOH reported a positive earnings surprise of 5.1% in first-quarter 2019. Earnings per share of $1.43 surpassed the Zacks Consensus Estimate of $1.36. Further, the reported figure compares favorably with $1.28 earned in the prior-year quarter.

Results reflect growth in revenues, with support from higher loans and deposits, along with improving interest margin. Also, lower provisions and the company’s strong capital position were a tailwind. Nonetheless, rising expenses and lower non-interest income were the undermining factors.

The company’s net income came in at $58.8 million, up 8.8% from the $54 million reported a year ago.

Revenues Up, Expenses Escalate, Loans & Deposits Improve

The company’s total revenues increased 3.1% year over year to $169.5 million in the first quarter. The revenue figure also outpaced the Zacks Consensus Estimate of $166.5 million.

The bank’s net interest income was recorded at $125.8 million, up 4.6% year over year. Net interest margin (NIM) expanded 12 basis points (bps) to 3.12% from the prior-year quarter.

Non-interest income was $43.7 million, down nearly 1% year over year. This downside primarily resulted from fall in almost all components of income, partially mitigated by higher mortgage banking fees, service charges on deposit accounts and annuity and insurance income.

The bank’s adjusted non-interest expense flared up roughly 1% year over year to $90.4 million. This upswing reflects higher salaries and benefits, equipment, as well as data-processing expenses.

Efficiency ratio came in at 55.22%, down from 57.91% recorded in the comparable period last year. Notably, a fall in the efficiency ratio reflects higher profitability.

As of Mar 31, 2019, total loans and lease balance climbed nearly 1% from the end of the prior quarter to $10.5 billion, while total deposits inched up 1.6% to $15.3 billion.

Credit Quality: A Mixed Bag

As of Mar 31, 2019, allowance for loan and lease losses edged down 1.8% year over year to $106 million, while non-performing assets increased 13.9% year over year to $17.9 million. Further, net charge-offs were $3.7 million annualized of total average loans and leases outstanding, up from $3.5 million recorded in the prior-year quarter.

However, the company recorded provision for credit losses of $3 million in the reported quarter, down 27.3% year over year.

Strong Capital and Profitability Ratios

Bank of Hawaii remained well capitalized with strong profitability ratios during the Jan-Mar quarter.

As of Mar 31, 2019, Tier 1 capital ratio was 12.75% compared with 13.37% as of Mar 31, 2018. Total capital ratio was 13.87% compared with 14.58% witnessed in the comparable quarter last year. The ratio of tangible common equity to risk-
weighted assets was 12.28% compared with 12.80% at the end of the year-ago quarter.

Return on average assets was up 9 bps year over year to 1.38%, while return on average shareholders' equity advanced 107 bps to 18.81%.

Capital Deployment

During the Mar-end quarter, the company repurchased 513,400 shares of common stock at average price of $77.79 and for a total cost of $39.9 million. Further, the company announced quarterly dividend of 65 cents per share, marking an increase of 4.8% from the prior payout. The dividend will be paid on Jun 14, to shareholders on record as of May 31, 2019.

Conclusion

Increasing loans and deposits, along with expanding net interest margin, remain key positives for Bank of Hawaii. Furthermore, the company’s profitability ratios indicate solid returns. Nevertheless, elevated expenses remain concerns.

Bank of Hawaii Corporation Price, Consensus and EPS Surprise
 

Bank of Hawaii Corporation Price, Consensus and EPS Surprise | Bank of Hawaii Corporation Quote

 

Currently, Bank of Hawaii carries a Zacks Rank #4 (Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of Other Banks

Riding on higher revenues, Citizens Financial Group, Inc. CFG delivered a positive earnings surprise of 4.5% in first-quarter 2019. Adjusted earnings per share came in at 93 cents, beating the Zacks Consensus Estimate of 89 cents. Also, the reported figure improved 19.2% year over year. Results exclude one-time items of $4 million or 1 cent per share.

Texas Capital Bancshares Inc. TCBI reported a positive earnings surprise of 19.4% in the first quarter. Earnings per share of $1.60 comfortably surpassed the Zacks Consensus Estimate of $1.34. Further, the bottom line compared favorably with the prior-year quarter figure of $1.38.

Hancock Whitney Corporation’s HWC first-quarter operating earnings per share of $1 outpaced the Zacks Consensus Estimate of 98 cents. The reported figure also came in 11.1% higher than the year-ago reported tally.

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