Bank of Hawaii Corporation
) reported its fourth-quarter 2012 earnings of 90 cents per
share, beating the Zacks Consensus Estimate just by a penny.
Moreover, the results compare favorably with the prior-year
quarter's earnings of 85 cents. Net income for the quarter came
in at $40.3 million, up 3% from the year-ago period.
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Better-than-expected results benefited from an increase in
non-interest income, rise in loans and deposits as well as a drop
in expenses. Yet, the continued low interest rate environment
acted as the dampener, affecting the net interest margin as well
as the net interest income.
For full year 2012, net income stood at $166.1 million or $3.68
per share, compared with $160.0 million or $3.40 in 2011. This
also compared favorably with the Zacks Consensus Estimate of
$3.66 per share.
Bank of Hawaii's revenue reached $153.7 million, up 2% compared
with the prior-year quarter, primarily due to a rise in
non-interest income, partially offset by a decline in interest
income. Moreover, it surpassed the Zacks Consensus Estimate of
For the full year, the company's revenues came in at $620.8
million, down 3% from 2011. However, it compares favorably with
the Zacks Consensus Estimate of $572.0 million.
Quarter in Detail
Bank of Hawaii's net interest income was recorded at $90.3
million, down 4% year over year. Moreover, net interest margin
declined 11 basis points (bps) year over year to 2.87%.
Non-interest income reached $53.0 million, up 22% year over year,
primarily due to strong mortgage banking revenues.
The bank's non-interest expense inched down 1% year over year to
$83.5 million. Non-interest expense in the fourth quarter of 2012
included total charges of $1.5 million related to the company's
previously announced plans to close down 2 branches in American
Further, a decline in FDIC insurance, net equipment costs and
other expenses were partly offset by an increase in salaries and
benefits expenses, net occupancy and professional fees.
The company experienced improvements in both loan balances and
deposits. Total loan and lease balances climbed 6% from the end
of the prior-year quarter to $5.7 billion. Moreover, deposits
were $11.5 billion, up 9% year over year.
Bank of Hawaii's credit quality metrics were a mixed bag in the
reported quarter. Net loans and leases charged off were $2.1
million (0.15% annualized of total average loans and leases
outstanding), compared with $1.5 million (0.10%) in the prior
quarter and $7.0 million (0.51%) in the year-ago quarter.
As of Dec 31, 2012, allowance for loan and lease losses fell to
$128.9 million from $131.0 million in the prior quarter and
$138.6 million in the year-ago quarter. The ratio of allowance
for loan and lease losses to total loans and leases arrived at
2.20%, down 7 bps sequentially and 30 bps year over year.
As of Dec 31, 2012, non-performing assets as a percentage of
total loans and leases, and foreclosed real estate were 0.63%,
down from 0.70% as of Sep 30, 2012 and 0.74% as of Dec 30, 2011.
During the reported quarter, the company did not record a
provision for credit losses. This was the second consecutive
quarter of no provision for credit losses.
Capital ratios were mixed in the quarter. The ratio of tangible
common equity to risk- weighted assets was 17.24%, compared with
17.43% at the end of the prior quarter and 17.93% at the end of
the year-ago quarter. The Tier 1 leverage ratio stood at 6.83%,
up 6.78% sequentially and 6.73% year over year. Tier 1 capital
ratio was 16.13% in the reported quarter, up from 16.12% in the
prior quarter but down from 16.68% in the year-ago quarter.
As of Dec 31, 2012, total assets at Bank of Hawaii were recorded
at $13.7 billion, up 3% sequentially but marginally down by 1%
year over year.
Capital Deployment Update
Bank of Hawaii's capital deployment efforts were encouraging. As
of Dec 31, 2012, the company repurchased 33.9 million shares at
$44.06 per share. Following the buyback of 34,000 shares at an
average price of $46.60 per share between Jan 2 and Jan 25 this
year, the company currently has $67.9 million remaining under the
share repurchase program as of Jan 25, 2013.
Bank of Hawaii's board also declared a quarterly cash dividend of
45 cents per share. It will be paid on Mar 14, 2013 to
shareholders of record at the close of business on Feb 28, 2013.
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. Also, net
interest margin is likely to be under pressure in the upcoming
Shares of Bank of Hawaii Corporation retain a Zacks Rank #4
(Sell). Other West Banks that are performing well include,
Western Alliance Bancorporation
Central Valley Community Bancorp
). All these stocks carry a Zacks Rank #1 (Strong Buy).