It has been about a month since the last earnings report for Bank of Hawaii (BOH Quick QuoteBOH - Free Report) . Shares have added about 2.9% in that time frame, underperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Bank of Hawaii due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

Bank of Hawaii Q2 Earnings Top Estimates, Revenues Rise Y/Y

Bank of Hawaii reported second-quarter 2022 earnings per share of $1.38, surpassing the Zacks Consensus Estimate of $1.35. Yet, the bottom line declined from $1.68 in the year-ago quarter.

The results were supported by a significant rise in NII. In addition, the improvement in total loans and leases, and deposits reflects a strong balance sheet position. However, high expenses and a fall in fee income were the offsetting factors.

The company’s net income was $56.9 million, down from the prior-year quarter’s $67.5 million.

Revenues & Expenses Rise, Loans & Deposits Up

The company’s total revenues improved 2.4% year over year to $175.1 million in the second quarter. Further, the top line surpassed the Zacks Consensus Estimate of $173.6 million.

The bank’s NII was $132.9 million, up 8% year over year. The NIM rose 10 basis points (bps) to 2.47%.

Non-interest income was $42.2 million, down 5% year over year. This decline primarily resulted from a fall in mortgage banking, trust and asset management, and annuity and insurance.

The bank’s non-interest expenses increased 7% year over year to $102.9 million. The upswing mainly reflects a rise in salaries and benefits, net occupancy and net equipment costs.

Efficiency ratio was 58.80% compared with 57.47% recorded in the year-ago period. A rise in the efficiency ratio reflects lower profitability.

As of Jun 30, 2022, total loans and leases balance rose 8% from the end of the prior quarter to $12.95 billion, while total deposits increased 4% to $21.03 billion.

Credit Quality Improves

As of Jun 30, 2022, non-performing assets decreased 18% year over year to around $15.49 million. The allowance for credit losses declined 18% to $148.5 million.

The company’s provision for credit losses in the second quarter was a net benefit of $2.5 million, lower than the prior year’s net benefit of $16.1 million. In addition, net loans and lease charge-offs were $0.63 million, down from $1.2 million in the prior year’s quarter.

Weak Capital Ratios, Profitability Falls

As of Jun 30, 2022, Tier 1 capital ratio was 13.01%, down from 13.87% as of Jun 30, 2021. Total capital ratio was 14.14%, declining from 15.13%. In addition, the ratio of tangible common equity to risk-weighted assets was 8.72%, down from 11.81% in the year-ago quarter.

Return on average assets declined year over year to 1% from 1.23%. Return on average shareholders' equity was 16.40% compared with 19.17% as of Jun 30, 2021.

Outlook

The company anticipates a continued improvement in core margin, with the metric rising 6-7 bps in the third quarter of 2022.

Management expects non-interest income to be in the $41-$42 million range in the third quarter, driven by higher transaction fees. This will be partly offset by continued pressure on mortgage banking income and asset management fees.

Management expects expenses to be roughly $415 million for 2022 due to inflationary pressures. Besides, third-quarter expenses are likely to be marginally higher than the fourth-quarter number due to seasonal payroll variances between the quarters.

The effective tax rate is estimated to be 23% for 2022.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in fresh estimates.

The consensus estimate has shifted 5.13% due to these changes.

VGM Scores

At this time, Bank of Hawaii has a poor Growth Score of F, however its Momentum Score is doing a lot better with a B. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Bank of Hawaii has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

Performance of an Industry Player

Bank of Hawaii belongs to the Zacks Banks - West industry. Another stock from the same industry, First Republic Bank , has gained 2.7% over the past month. More than a month has passed since the company reported results for the quarter ended June 2022.

First Republic Bank reported revenues of $1.51 billion in the last reported quarter, representing a year-over-year change of +22.6%. EPS of $2.16 for the same period compares with $1.95 a year ago.

For the current quarter, First Republic Bank is expected to post earnings of $2.21 per share, indicating a change of +15.7% from the year-ago quarter. The Zacks Consensus Estimate has changed +0.4% over the last 30 days.

First Republic Bank has a Zacks Rank #3 (Hold) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of D.