Bank of Hawaii Corporation BOH reported second-quarter 2024 adjusted earnings per share (EPS) of 86 cents, beating the Zacks Consensus Estimate of 85 cents. The bottom line compared unfavorably with $1.12 earned in the year-ago quarter.
BOH's quarterly results benefited from an increase in interest margin (NIM) driven by higher earnings asset yields. Also, lower provision acted as a tailwind. A decline in net interest income (NII), along with a drop in loans and deposit balances and higher expenses, were undermining factor.
The company’s net income (GAAP basis) came in at $34.1 million, down 26% year over year. Our estimate for the metric was pegged at $35.2 million.
Revenues Decrease, Expenses Increase
BOH’s total revenues fell 6.4% year over year to $156.9 million in the second quarter. The top line also missed the Zacks Consensus Estimate of $157 million.
NII was $114.8 million, down 7.6% year over year, primarily due to increased funding costs, partially offset by higher earning asset yields. NIM increased 4 basis points to 2.15%. Our estimate for NII and NIM was pegged at $115.8 million and 2.05%, respectively.
Non-interest income came in at $42.1 million, down 2.7% year over year. This included $1.5 million from the sale of a low-income housing tax credit investment. Adjusted for this item, the metric inched up 0.9% year over year. Our estimate for the same was pinned at $41.2 million.
Non-interest expenses increased 5% to $109.2 million. It included an industry-wide FDIC Special Assessment of $2.6 million and separation expenses of $0.8 million. Adjusted for these items, the metric for the second quarter was $105.9 million, up 1.8% from adjusted non-interest expenses recorded in the year-ago quarter. We projected the metric to be $106.7 million.
The efficiency ratio was 69.60%, up from 62.07% recorded in the year-ago period. A rise in the efficiency ratio reflects lower profitability.
As of Jun 30, 2024, total loans and leases balance dropped 0.6% from the previous year quarter’s end to $13.8 billion. Total deposits moved down 0.5% year over year to $20.4 billion. Our estimates for total loans and leases and total deposits were $14.1 billion and $21.2 billion, respectively.
Credit Quality: Mixed Bag
As of Jun 30, 2024, non-performing assets were $15.2 million, up 32.3% year over year.
Net loans and lease charge-offs were $3.4 million, up $2 million from the year-ago quarter's level.
Provision for credit losses was $2.4 million, down 4% from the year-ago quarter’s tally. Our estimate for the metric was pegged at $3.7 million.
The allowance for credit losses inched up 1.5% to $147.5 million.
Capital Ratios Improve
As of Jun 30, 2024, the Tier 1 capital ratio was 13.99%, up from 12.21% as of Jun 30, 2023. The total capital ratio was 15.05%, which rose from 13.24% in the year-ago period.
The ratio of tangible common equity to risk-weighted assets was 8.82%, which increased from 7.97% at the end of the year-ago quarter.
Profitability Ratios Deteriorate
Return on average assets was 0.59% at the end of second-quarter 2024, which declined from 0.77% reported in the prior-year quarter. Return on average shareholders' equity was 9.53%, down from 13.55% as of Jun 30, 2023.
Dividend Update
The company declared a quarterly cash dividend of 70 cents per share on the company’s outstanding common shares. The dividend will be payable on Sep 16, 2024, to shareholders of record at the close of business on Aug 30, 2024.
Share Repurchase Update
During the reported quarter, the Bank of Hawaii did not repurchase any shares. As of Jun 30, 2024, the total remaining buyback authority under the share repurchase program was $126.0 million.
Conclusion
The decline in NII and a decrease in loans and deposit balances, along with higher non-interest expenses, were major concerns for Bank of Hawaii in the near term. However, lower provision coupled with strong capital ratios will support its financials.
Bank of Hawaii Corporation Price, Consensus and EPS Surprise
Bank of Hawaii Corporation Price, Consensus and EPS Surprise
Bank of Hawaii Corporation price-consensus-eps-surprise-chart | Bank of Hawaii Corporation Quote
Currently, BOH carries a Zacks Rank #5 (Strong Sell). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Performance of Other Banks
WaFd, Inc.’s WAFD third-quarter fiscal 2024 (ended Jun 30) adjusted earnings of 76 cents per share handily surpassed the Zacks Consensus Estimate of 59 cents. Also, the bottom line rose 4.1% sequentially.
WAFD’s results reflected a rise in NII and other income, which aided the top line. Also, higher loan balances and lower provisions were other positives. However, a rise in expenses and a slight decline in the deposit balance acted as spoilsports.
Hancock Whitney Corp.’s HWC second-quarter 2024 earnings per share of $1.31 beat the Zacks Consensus Estimate of $1.19. However, the bottom line compared unfavorably with $1.35 per share registered in the year-ago quarter.
HWC’s results were aided by an increase in non-interest income. However, a decline in NII and higher expenses and provisions were undermining factors.
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