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Bank of Hawaii (BOH) Q1 Earnings Miss, Expenses Fall Y/Y

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Bank of Hawaii Corporation (BOH - Free Report) reported first-quarter 2024 earnings per share (EPS) of 87 cents, missing the Zacks Consensus Estimate of 92 cents. The bottom line compared unfavorably with $1.14 earned in the year-ago quarter.

BOH's quarterly results were affected by a decline in net interest income (NII), along with a drop in loans and deposit balances. Nonetheless, an improvement in non-interest income and a decline in expenses acted as a tailwind.

The company’s net income came in at $36.4 million, down 22.3% year over year. Our estimate for the metric was pegged at $37.1 million.

Revenues Decline, Expenses Fall

BOH’s total revenues fell 11.6% year over year to $156.2 million in the first quarter. The top line also missed the Zacks Consensus Estimate of $160.79 million.

NII was $113.9 million, down 16.2% year over year, primarily due to increased funding costs, partially offset by higher earning asset yields. Net interest margin (NIM) decreased 36 basis points to 2.11%. Our estimate for NII and NIM was pinned at $117.8 million and 2.23%, respectively.

Non-interest income came in at $42.3 million, up 3.8% year over year. This included $0.6 million worth of negative adjustment related to a change in Visa B conversion ratio. Adjusted for this item, the metric increased 2.4% year over year.  Our estimate for the same was pinned at $42.5 million.

Non-interest expenses decreased 5.4% to $105.9 million. It included seasonal payroll expenses of approximately $2.2 million and separation expenses of $0.5 million. Adjusted for these items, the metric for the first quarter of 2024 was $103.2 million, down 1.6% from adjusted noninterest expense recorded in the year-ago quarter. Our estimate for the metric was $107.3 million.

The efficiency ratio was 67.76%, which increased from 63.34% recorded in the year-ago period. A rise in the efficiency ratio reflects lower profitability.

As of Mar 31, 2024, total loans and leases balance decreased nearly 1% from the previous quarter’s end to $13.9 billion. Total deposits decreased 1.8% sequentially to $20.7 billion. Our estimates for total loans and leases, and total deposits were $13.7 billion and $20.7 billion, respectively.

Credit Quality: A Mixed Bag

As of Mar 31, 2024, non-performing assets were $11.8 million, up nearly 1% year over year.

Net loans and lease charge-offs were $2.3 million, down $0.4 million from the year-ago quarter's level.

Provision for credit losses was $2 million, which remained flat from the year-ago quarter. Our estimate for the metric was pegged at $3.8 million.

The allowance for credit losses increased 2.8% to $147.7 million.

Capital Ratios Improve

As of Mar 31, 2024, the Tier 1 capital ratio was 12.74%, which increased from 12.10% as of Mar 31, 2023. The total capital ratio was 13.81%, which rose from 13.13%.

The ratio of tangible common equity to risk-weighted assets was 8.70%, which increased from 7.97% at the end of the year-ago quarter.

Profitability Ratios Deteriorate

Return on average assets was 0.63% at the end of the first quarter of 2024, which declined from 0.80% reported in the prior-year quarter. Return on average shareholders' equity was 10.34%, down from 14.25% as of Mar 31, 2023.

Share Repurchase Update

During the reported quarter, Bank of Hawaii did not repurchase any shares.

Conclusion

Bank of Hawaii was affected by a decline in NII and a decrease in loans and deposit balances. However, an increase in non-interest income, coupled with lower expenses and strong capital ratios, will support its financials.
 

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, BOH 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

Texas Capital Bancshares, Inc. (TCBI - Free Report) reported first-quarter 2024 earnings per share of 62 cents (excluding non-recurring items), which beat the Zacks Consensus Estimate of 59 cents. However, earnings compared unfavorably with 70 cents reported in the year-ago quarter.

TCBI's results benefitted from an increase in non-interest income and higher loan and deposit balances. Additionally, strong capital position and lower provisions were other positives. However, a decline in NII and an increase in expenses were the undermining factors.

Citizens Financial Group (CFG - Free Report) reported first-quarter 2024 EPS of 65 cents, missing the Zacks Consensus Estimate of 75 cents. The bottom line declined from $1 in the year-ago quarter.

Underlying EPS for the first quarter of 2024 was 79 cents, down from $1.10 reported in the year-ago quarter.

CFG’s results were adversely affected by lower NII and a rise in provisions and operating expenses. However, an increase in non-interest income and lower allowance for credit losses offered some support.


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