Bank of Hawaii (BOH) Q2 Earnings Top Estimates, Provisions Up

Bank of Hawaii Corporation BOH delivered an earnings surprise of 3.2% in second-quarter 2020. Earnings per share of 98 cents surpassed the Zacks Consensus Estimate of 95 cents. However, the bottom line compares unfavorably with the $1.40 reported in the prior-year quarter.

Results reflect revenue growth on rise in net interest as well as non-interest income. Fall in expenses reflected prudent cost management. Also, higher loan and deposit balances supported the results. However, contraction of the net interest margin (NIM) was a major drag. Further, a substantial rise in provisions was a headwind, causing investors’ disappointment which resulted in share-price decline of 2.4%, following the release.

The company’s net income came in at $38.9 million, down 31.6% from the prior-year quarter.

Revenues Up, Loans & Deposits Rise

The company’s total revenues increased 5% year over year to $178 million in the quarter. Also, the figure surpassed the Zacks Consensus Estimate of $167.6 million.

The bank’s net interest income was $126.7 million, up 2.1% year over year, including an interest recovery. NIM shrunk 21 basis points (bps) to 2.83% on low rates and elevated levels of liquidity.

Non-interest income came in at $51.3 million, up 12.7% year over year. This upsurge primarily resulted from a rise in investment securities gains and mortgage banking revenues. This was partly offset by lower service charges on deposit accounts and trust and asset management income.

The bank’s non-interest expenses declined 4.1% year over year to $88.9 million. This fall mainly reflects lower salaries and benefits and other expenses, partly negated by higher net occupancy, net equipment and professional fees.

Efficiency ratio came in at 49.95% compared with the 54.69% recorded in the year-ago quarter. Notably, a fall in the efficiency ratio reflects higher profitability.

As of Jun 30, 2020, total loans and leases balance grew 3.5% from the end of the prior quarter to $11.8 billion and total deposits improved 8.1% to $17.4 billion.

Credit Quality Deteriorates

As of Jun 30, 2020, allowance for credit losses jumped 61% year over year to $173.4 million and non-performing assets climbed 4.1% to $22.7 million. In addition, the company recorded provision for credit losses of $40.4 million, significantly up from the prior-year quarter.

Also, net charge-offs were $5.1 million, up from the $2.4 million recorded in the prior-year quarter.

Strong Capital and Profitability Ratios

As of Jun 30, 2020, Tier 1 capital ratio was 12.04% compared with 12.46%, as of Jun 30, 2019. Total capital ratio was 13.29%, down from 13.57%. The ratio of tangible common equity to risk-weighted assets was 12.07% compared with the 12.17% reported at the end of the year-ago quarter.

Return on average assets was down 49 bps year over year to 0.82%. Return on average shareholders' equity was 11.58% compared with 17.97%, as of Jun 30, 2019.


Rising loan and deposit balances will likely continue supporting Bank of Hawaii’s top line. In addition, controlled expenses are anticipated to keep stoking the bank’s bottom-line growth. Furthermore, the company’s profitability ratios indicate solid returns. Nevertheless, rising provisions pose a key concern. Also, lower interest rates are likely to hurt its NIM.

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, 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

First Horizon National Corporation FHN reported second-quarter 2020 adjusted earnings per share of 20 cents, missing the Zacks Consensus Estimate of 21 cents. Further, the bottom line comes in 52.4% lower than the year-ago figure. Results notably reflect First Horizon’s improved deposit balance and higher revenues. In addition, efficiency ratio contracted during the quarter, indicating increased profitability. However, rising expenses and provisions were major drags.

Truist Financial’s TFC adjusted earnings of 82 cents per share surpassed the Zacks Consensus Estimate of 64 cents in the June-end quarter. Results excluded restructuring charges and BB&T-SunTrust Banks merger-related charges, incremental operating expenses related to the merger, securities gains and losses from the early extinguishment of long-term debt.

BOK Financial BOKF reported a negative earnings surprise of 21.4% for the second quarter. Earnings per share of 92 cents lagged the Zacks Consensus Estimate of $1.17. Further, the bottom line compared unfavorably with the prior-year quarter’s $1.93. Expenses and provisions escalated in the reported quarter. Moreover, pressure on margin was visible. Nonetheless, top-line strength on fee income growth, and rise in loans and deposits were driving factors.

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