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Bank of Hawaii (BOH) Q3 Earnings Top Estimates, Revenues Up

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Bank of Hawaii Corporation BOH reported third-quarter 2018 earnings per share of $1.36, beating the Zacks Consensus Estimate of $1.34. The reported figure compares favorably with $1.08 earned in the prior-year quarter.

Though results were driven by increased net interest income and lower provisions, investors’ concern were reflected on decline in non-interest income and rise in non-interest expenses. This led the share price to record a drop of 1.73%, following the earnings release. However, strong capital position and higher loan balances were the supporting factors.

The company’s net income came in at $56.9 million, up 24% from $45.9 million reported a year ago.

Revenues Increase, Expenses Escalate, Loans Improve

Bank of Hawaii’s total revenues increased 3.7% year over year to $164.5 million. However, the revenue figure missed the Zacks Consensus Estimate of $165.7 million.

The bank’s net interest income was recorded at $123 million, up 5.8% year over year. Net interest margin (NIM) expanded 15 basis points (bps) to 3.07% from the prior-year quarter.

Non-interest income was $41.5 million, down 2.1% year over year. This downside primarily resulted from a 39.3% plunge in mortgage-banking revenues, as well as loss in investment securities.

The bank’s non-interest expense flared up 2.1% year over year to $90.5 million. The upsurge reflected higher salaries and benefits, occupancy, equipment, as well as data-processing expenses.

Efficiency ratio came in at 55.07%, down from 55.82% recorded in the comparable quarter last year. Notably, a fall in the efficiency ratio reflects higher profitability.

As of Sep 30, 2018, total loans and leases balances climbed 6.3% from the end of the prior-year quarter to $10.2 billion, while total deposits edged down 1.3% to $14.8 billion.

Credit Quality: A Mixed Bag

As of Sep 30, 2018, allowance for loan and lease losses increased 1.7% year over year to $108.7 million, while non-performing assets decreased 18.8% year over year to $13.8 million.

Further, the company recorded provision for credit losses of $3.8 million in the reported quarter, down 5% year over year. Net charge-offs were $3.3 million or 13 bps annualized of total average loans and leases outstanding, down from $3.5 million or 15 bps recorded in the prior-year quarter.

Strong Capital and Profitability Ratios

Bank of Hawaii remained well capitalized and its profitability ratios improved during the Jul-Sep quarter.

As of Sep 30, 2018, Tier 1 capital ratio was 13.19% compared with 13.27% as of Sep 30, 2017. Total capital ratio was 14.38% compared with 14.51% witnessed in the same quarter last year. The ratio of tangible common equity to risk-weighted assets was 12.55% compared with 12.96% at the end of the year-ago quarter.

Return on average assets were up 26 bps year over year to 1.33%, while return on average shareholders' equity advanced 317 bps to 18.06%.

Capital Deployment

During the quarter under review, the company repurchased 296,500 shares of common stock at an average price of $83.04 and for a total cost of $24.6 million.

Conclusion

Rising loans and expanding net interest margin remain key positives for Bank of Hawaii. In addition, lower tax rates are expected to continue supporting the bank’s bottom-line growth. Furthermore, the company’s profitability ratios indicate an uptrend in its returns. Nevertheless, lower non-interest income and 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 #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Among other stocks belonging to the same industry, CPB Inc. CPF is slated to report Sep-end quarter results on Oct 24, while SVB Financial Group SIVB and First Hawaiian, Inc. FHB are expected to report on Oct 25.

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