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

Bank of Hawaii Corporation BOH delivered an earnings surprise of 8% in third-quarter 2020. Earnings per share of 95 cents surpassed the Zacks Consensus Estimate of 88 cents. However, the bottom line compares unfavorably with earnings of $1.29 reported in the prior-year quarter.

The company’s third-quarter results witnessed a fall in expenses which reflected prudent cost management. Also, higher 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 that lead to share-price decline of 1.9%, following the release.

The company’s net income came in at $37.8 million, down 27.4% from the prior-year quarter’s figure.

Revenues & Expenses Down, Deposits Rise

The company’s total revenues declined 3.2% year over year to $165.9 million in the quarter. However, the figure surpassed the Zacks Consensus Estimate of $162.5 million.

The bank’s net interest income was $124.2 million, down marginally year over year. Net interest margin (NIM) shrunk 34 basis points (bps) year over year to 2.67% on low rates and elevated levels of liquidity.

Non-interest income came in at $41.7 million, down 10.3% year over year. This downswing primarily resulted from a decline in fee income due to muted customer and visitor activity related to the pandemic.

The bank’s non-interest expenses declined 10.4% year over year to $89.9 million. This fall mainly reflects lower salaries and benefits and other expenses, partly negated by higher net equipment costs and professional fees.

Efficiency ratio came in at 54.22% compared with the 58.55% recorded in the year-ago quarter. Notably, a fall in the efficiency ratio reflects higher profitability.

As of Sep 30, 2020, total loans and leases balance remained unchanged from the end of the prior quarter at $11.8 billion and total deposits improved 1.8% to $17.7 billion.

Credit Quality: A Mixed Bag

As of Sep 30, 2020, allowance for credit losses jumped 86.8% year over year to $203.5 million. In addition, the company recorded provision for credit losses of $28.6 million, significantly up from the prior-year quarter’s levels. However, non-performing assets declined 13.9% to $18.6 million.

Also, net recoveries were $1.5 million, compared to net charge-offs of $3 million recorded in the prior-year quarter.

Capital and Profitability Ratios Deteriorate

As of Sep 30, 2020, Tier 1 capital ratio was 12.09% compared with 12.33%, as of Sep 30, 2019. Total capital ratio was 13.35%, down from 13.44%. The ratio of tangible common equity to risk-weighted assets was 12.02% compared with the 12.10% reported at the end of the year-ago quarter.

Return on average assets was down 41 bps year over year to 0.76%. Return on average shareholders' equity was 11.01% compared with 16.02%, as of Sep 30, 2019.

Conclusion

Rising 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. 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 #3 (Hold).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of Other Banks

Fifth Third Bancorp FITB reported third-quarter 2020 adjusted earnings of 85 cents per share, surpassing the Zacks Consensus Estimate of 59 cents. Also, results compared favorably with the prior-year quarter’s earnings of 75 cents per share.

M&T Bank Corporation MTB reported third-quarter 2020 earnings surprise of 5.3% on controlled expenses. Net operating earnings per share of $2.77 beat the Zacks Consensus Estimate of $2.63. The bottom line compared unfavorably with the $3.50 per share reported in the year-ago quarter.

Huntington BancsharesHBAN third-quarter 2020 earnings per share of 27 cents outpaced the Zacks Consensus Estimate of 25 cents on impressive top-line strength. The bottom-line figure was 21% lower than the prior-year quarter’s reported tally.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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