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Bank of Hawaii (BOH) Stock Down 1.2% Despite Q1 Earnings Beat

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Bank of Hawaii Corporation (BOH - Free Report) reported first-quarter 2021 earnings per share of $1.50, which surpassed the Zacks Consensus Estimate of $1.18. Also, the bottom line compared favorably with 87 cents reported in the prior-year quarter.

Substantial fall in provisions, on improvement in economic conditions, was a key positive factor. Also, higher loans and deposit balances supported the results to some extent.

Nevertheless, fall in revenues on lower fee income and interest income was a headwind, which caused investors’ disappointment, leading to share price decline of 1.2% following the release. Also, contraction of the net interest margin (NIM) was a major drag.

The company’s net income came in at $59.9 million, up 72.6% from the prior-year quarter figure.

Revenues Fall, Expenses Climb, Loans & Deposits Rise

The company’s total revenues declined 5% year over year to $163.5 million in the first quarter. Also, the top line lagged the Zacks Consensus Estimate of $165.2 million.

The bank’s net interest income was $120.8 million, down 4.4% year over year. NIM shrunk 53 basis points (bps) to 2.43% on low rates and elevated levels of liquidity.

Non-interest income came in at $43 million, down 6.7% year over year. This downswing primarily resulted from a decline in customer derivative program income and lower service charges on deposit accounts.

The bank’s non-interest expenses rose 2.7% year over year to $98.9 million. This rise mainly reflects seasonal payroll expenses and data processing costs.

Efficiency ratio was 60.45% compared with the 55.96% recorded in the year-ago quarter. Notably, a rise in the efficiency ratio reflects lower profitability.

As of Mar 31, 2021, total loans and leases balance increased 1.7% from the end of the prior quarter to $12.1 billion, and total deposits improved 7.7% to $19.6 billion.

Credit Quality: A Mixed Bag

As of Mar 31, 2021, non-performing assets declined 13.1% to $17.9 million. Also, net charge-offs of $2.9 million compared favorably with $3.7 million recorded in the prior-year quarter. In addition, the company recorded negative provision for credit losses of $14.3 million against provisions of $33.6 million in year-ago quarter.

However, allowance for credit losses jumped 43.6% year over year to $198.3 million.

Capital and Profitability Ratios

As of Mar 31, 2021, Tier 1 capital ratio was 12.35% compared with 11.81%, as of Mar 31, 2020. Total capital ratio was 13.61%, up from 13.06%. The ratio of tangible common equity to risk-weighted assets was 11.78% compared with the 11.85% reported at the end of the year-ago quarter.

Return on average assets was up 38 bps year over year to 1.15%. Return on average shareholders' equity was 17.65% compared with 10.64%, as of Mar 31, 2020.

Conclusion

Rising loans and deposit balances are likely to continue supporting Bank of Hawaii’s top line. In addition, declining provisions are anticipated to keep stoking the bank’s bottom-line growth. Nevertheless, rising expenses 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 sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Performance of Other Banks

Regions Financial (RF - Free Report) reported first-quarter 2021 earnings of 63 cents per share, which surpassed the Zacks Consensus Estimate of 48 cents on impressive top-line strength. Also, the bottom line compared favorably with the prior-year figure of 14 cents.

Huntington Bancshares’ (HBAN - Free Report) first-quarter 2021 earnings per share of 48 cents surpassed the Zacks Consensus Estimate of 33 cents. Also, the bottom line increased substantially from 3 cents reported in the prior-year quarter.

Texas Capital Bancshares (TCBI - Free Report) reported adjusted earnings per share of $1.33 in first-quarter 2021, inching past the Zacks Consensus Estimate of $1.11. Also, results compare favorably with the prior-year quarter’s loss of $0.38 per share.

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