Bank of Hawaii Corporation (BOH) reported its third-quarter
2012 earnings of 92 cents per share, beating the Zacks Consensus
Estimate of 89 cents. However, the results were unchanged from
the prior-year quarter's earnings. Net income for the quarter was
$41.2 million, down 5% from the prior-year period.
Better-than-expected results benefited from an increase in
non-interest income. Moreover, the company experienced a growth
in loans and deposits. Further, an improved credit quality was a
positive for the quarter. Yet, the continued low interest rate
environment acted as the dampener and tempered the net interest
margin. A rise in expenses was also a concern.
Bank of Hawaii's revenue came in at $156.6 million, down 2%
compared to the prior-year quarter, primarily due to a decline in
interest income partially offset by a rise in non-interest
income. However, it surpassed the Zacks Consensus Estimate of
$143.0 million.
Quarter in Detail
Bank of Hawaii's net interest income on a taxable equivalent
basis came in at $96.2 million, slipping 1% year over year.
Moreover, net interest margin declined 11 basis points (bps) year
over year to 2.98% in the reported quarter.
Bank of Hawaii's non-interest income was $52.4 million, up 3%
year over year. Strong mortgage banking results were partially
offset by a drop in fees, exchange and other service charges and
insurance income. Notably, non-interest income in the third
quarter of 2011 included a $2.0 million gain associated with a
contingent payment from the sale of the company's proprietary
mutual funds in 2010.
However, Bank of Hawaii's non-interest expense inched up 1%
year over year to $84.9 million. Non-interest expense, in the
reported quarter, included an increase in profit sharing and
incentive accruals, expenses associated with the launch of a new
consumer credit card product and $1.0 million in separation
costs. Further, an increase in salaries and benefits expenses,
net occupancy and professional fees were partially mitigated by a
decline in FDIC insurance, net equipment costs and other
expenses. Notably, the non-interest expense figure in the
year-ago quarter included a donation of $2.0 million to the Bank
of Hawaii Foundation.
The company experienced growth in both loan balances and
deposits. Loan and lease balances climbed 8% from the end of the
comparable quarter last year to $5.8 billion. The hike was due to
an increase in both consumer and commercial loan categories.
Moreover, deposits were $11.2 billion, up 12% year over year.
The elevation in public and other deposits were partially offset
by a decline in consumer and commercial deposit.
Credit Quality
Bank of Hawaii's credit quality metrics improved in the
reported quarter. Net loans and leases charged off were $1.5
million (0.10% annualized of total average loans and leases
outstanding), compared with $3.8 million (0.27%) in the prior
quarter and $3.7 million (0.28%) in the year-ago quarter.
As of September 30, 2012, allowance for loan and lease losses
fell to $131.0 million, from $132.4 million in the prior quarter
and $143.4 million in the year-ago quarter. The ratio of the
allowance for loan and lease losses to total loans and leases was
2.27%, down 7 bps sequentially and 41 bps year over year.
The long judiciary foreclosure process for residential
mortgage loans continues to impact non-performing assets. As of
September 30, 2012, non-performing assets as a percentage of
total loans and leases and foreclosed real estate were 0.70%,
down from 0.73% as of June 30, 2012 and 0.71% as of September 30,
2011.
During the reported quarter, the company did not record a
provision for credit losses.
Capital Ratios
Capital ratios were mixed in the quarter. The ratio of
tangible common equity to risk- weighted assets was 17.43%,
compared with 17.57% at the end of the prior quarter, and 18.90%
at the end of the year-ago quarter. The Tier 1 leverage ratio was
6.78%, up from
6.57% sequentially and down from 6.95% as of September 30,
2011. Tier 1 capital ratio was 16.12% in the reported quarter,
down from 16.41% in the prior quarter and 17.57% in the year-ago
quarter.
As of September 30, 2012, total assets at Bank of Hawaii were
$13.4 billion, down 4% sequentially but edged up 1% year over
year.
Capital Deployment Update
Capital deployment efforts on the part of Bank of Hawaii are
encouraging. As of September 30, 2012, the company has
repurchased 49.9 million shares at $36.28 per share. Following
the buyback of 87,500 shares at an average price of $44.83 per
share between October 1 and October 19 this year, the company
currently has $80.5 million remaining under the share repurchase
program, as of October 20, 2012.
Notably, in the quarter under review, Bank of Hawaii
repurchased 3,12,900 shares of common stock at an average cost of
$46.62 and a total cost of $14.5 million under its share
repurchase program.
Bank of Hawaii's board also declared a quarterly cash dividend
of 45 cents per share. It will be paid on December 14, 2012 to
shareholders of record as of the close of business on November
30, 2012.
Our Take
We believe that the improvement in loan balances and deposits
at Bank of Hawaii will serve as a positive catalyst.
Well-controlled risk management efforts are also expected to
improve its bottom line. Additionally, the company's capital
deployment activities raise investors' confidence in the
stock.
Yet, a low interest environment remains our concern and net
interest margin is likely to be under pressure in the upcoming
quarters.
Shares of Bank of Hawaii Corporation retains a Zacks #3 Rank,
which translates into a short- term Hold rating. However, one of
its peers, Pacific Continental Corp. (PCBK) retains a Zacks #1
Rank (a short-term Strong Buy rating).
Bank of Hawaii Corporation
(
BOH
) reported its third-quarter 2012 earnings of 92 cents per
share, beating the Zacks Consensus Estimate of 89 cents.
However, the results were unchanged from the prior-year
quarter's earnings. Net income for the quarter was $41.2
million, down 5% from the prior-year period.
Better-than-expected results benefited from an increase in
non-interest income. Moreover, the company experienced a growth
in loans and deposits. Further, an improved credit quality was
a positive for the quarter. Yet, the continued low interest
rate environment acted as the dampener and tempered the net
interest margin. A rise in expenses was also a concern.
Bank of Hawaii's revenue came in at $156.6 million, down 2%
compared to the prior-year quarter, primarily due to a decline
in interest income partially offset by a rise in non-interest
income. However, it surpassed the Zacks Consensus Estimate of
$143.0 million.
Quarter in Detail
Bank of Hawaii's net interest income on a taxable equivalent
basis came in at $96.2 million, slipping 1% year over year.
Moreover, net interest margin declined 11 basis points (bps)
year over year to 2.98% in the reported quarter.
Bank of Hawaii's non-interest income was $52.4 million, up
3% year over year. Strong mortgage banking results were
partially offset by a drop in fees, exchange and other service
charges and insurance income. Notably, non-interest income in
the third quarter of 2011 included a $2.0 million gain
associated with a contingent payment from the sale of the
company's proprietary mutual funds in 2010.
However, Bank of Hawaii's non-interest expense inched up 1%
year over year to $84.9 million. Non-interest expense, in the
reported quarter, included an increase in profit sharing and
incentive accruals, expenses associated with the launch of a
new consumer credit card product and $1.0 million in separation
costs. Further, an increase in salaries and benefits expenses,
net occupancy and professional fees were partially mitigated by
a decline in FDIC insurance, net equipment costs and other
expenses. Notably, the non-interest expense figure in the
year-ago quarter included a donation of $2.0 million to the
Bank of Hawaii Foundation.
The company experienced growth in both loan balances and
deposits. Loan and lease balances climbed 8% from the end of
the comparable quarter last year to $5.8 billion. The hike was
due to an increase in both consumer and commercial loan
categories.
Moreover, deposits were $11.2 billion, up 12% year over
year. The elevation in public and other deposits were partially
offset by a decline in consumer and commercial deposit.
Credit Quality
Bank of Hawaii's credit quality metrics improved in the
reported quarter. Net loans and leases charged off were $1.5
million (0.10% annualized of total average loans and leases
outstanding), compared with $3.8 million (0.27%) in the prior
quarter and $3.7 million (0.28%) in the year-ago quarter.
As of September 30, 2012, allowance for loan and lease
losses fell to $131.0 million, from $132.4 million in the prior
quarter and $143.4 million in the year-ago quarter. The ratio
of the allowance for loan and lease losses to total loans and
leases was 2.27%, down 7 bps sequentially and 41 bps year over
year.
The long judiciary foreclosure process for residential
mortgage loans continues to impact non-performing assets. As of
September 30, 2012, non-performing assets as a percentage of
total loans and leases and foreclosed real estate were 0.70%,
down from 0.73% as of June 30, 2012 and 0.71% as of September
30, 2011.
During the reported quarter, the company did not record a
provision for credit losses.
Capital Ratios
Capital ratios were mixed in the quarter. The ratio of
tangible common equity to risk- weighted assets was 17.43%,
compared with 17.57% at the end of the prior quarter, and
18.90% at the end of the year-ago quarter. The Tier 1 leverage
ratio was 6.78%, up from
6.57% sequentially and down from 6.95% as of September 30,
2011. Tier 1 capital ratio was 16.12% in the reported quarter,
down from 16.41% in the prior quarter and 17.57% in the
year-ago quarter.
As of September 30, 2012, total assets at Bank of Hawaii
were $13.4 billion, down 4% sequentially but edged up 1% year
over year.
Capital Deployment Update
Capital deployment efforts on the part of Bank of Hawaii are
encouraging. As of September 30, 2012, the company has
repurchased 49.9 million shares at $36.28 per share. Following
the buyback of 87,500 shares at an average price of $44.83 per
share between October 1 and October 19 this year, the company
currently has $80.5 million remaining under the share
repurchase program, as of October 20, 2012.
Notably, in the quarter under review, Bank of Hawaii
repurchased 3,12,900 shares of common stock at an average cost
of $46.62 and a total cost of $14.5 million under its share
repurchase program.
Bank of Hawaii's board also declared a quarterly cash
dividend of 45 cents per share. It will be paid on December 14,
2012 to shareholders of record as of the close of business on
November 30, 2012.
Our Take
We believe that the improvement in loan balances and
deposits at Bank of Hawaii will serve as a positive catalyst.
Well-controlled risk management efforts are also expected to
improve its bottom line. Additionally, the company's capital
deployment activities raise investors' confidence in the
stock.
Yet, a low interest environment remains our concern and net
interest margin is likely to be under pressure in the upcoming
quarters.
Shares of Bank of Hawaii Corporation retains a Zacks #3
Rank, which translates into a short- term Hold rating. However,
one of its peers,
Pacific Continental Corp.
(
PCBK
) retains a Zacks #1 Rank (a short-term Strong Buy rating).
BANK OF HAWAII (BOH): Free Stock Analysis
Report
PACIFIC CONTL (PCBK): Free Stock Analysis
Report
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