A month has gone by since the last earnings report for Bank of Hawaii (BOH Quick QuoteBOH - Free Report) . Shares have added about 9.6% in that time frame, outperforming 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 its most recent earnings report in order to get a better handle on the important drivers.

Bank of Hawaii Q3 Earnings Beat, Provisions & Expenses Rise Y/Y

Bank of Hawaii reported third-quarter 2024 adjusted earnings per share of 93 cents, beating the Zacks Consensus Estimate of 81 cents. The bottom line compared unfavorably with $1.17 earned in the year-ago quarter.

Results benefited from an increase in deposits balance and NIM. A decline in NII, along with a drop in loans balances and higher expenses, were undermining factors. A surge in provisions was another major headwind. 

The company’s net income (GAAP basis) came in at $40.4 million, down 15.8% year over year.

Bank of Hawaii’s Revenues Decrease, Expenses Increase

Total revenues fell 5% year over year to $162.7 million in the third quarter. However, the top line beat the Zacks Consensus Estimate of $160.3 million.

NII was $117.6 million, down 2.7% year over year. NIM increased 5 basis points to 2.18%.
 
Non-interest income came in at $45.1 million, down 10.4% year over year. This included a $14.7 million gain from the early termination of private repurchase agreements, partially offset by a $4.6 million net loss related to investment securities sales. Adjusted for these items, noninterest income increased 9.9% year over year. The rise primarily stemmed from increase in trust and asset management income, and fees, exchange, and other service charges. 

Non-interest expenses increased 1.4% to $107.1 million. It included a separation expense of $2.1 million and extraordinary expenses related to the Maui wildfires of $0.4 million. Adjusted for these items, noninterest expense increased 3.9% from adjusted non-interest expenses recorded in the year-ago quarter.

The efficiency ratio was 65.81%, up from 61.66% recorded in the year-ago period. A rise in the efficiency ratio reflects lower profitability.

Bank of Hawaii’s Loans Decline, Deposits Increase

As of Sept. 30, 2024, total loans and leases balance dropped marginally from the year-ago quarter’s end to $13.9 billion.

Total deposits moved up 2.8% year over year to $21 billion.

Bank of Hawaii’s Credit Quality Deteriorates

As of Sept. 30, 2024, non-performing assets were $19.8 million, which jumped 71.7% year over year. 

Net loans and lease charge-offs were $3.8 million, up $1.8 million from the year-ago quarter's level. 

Provision for credit losses was $3 million, up 50% from the year-ago quarter’s tally. 

The allowance for credit losses inched up 1.4% to $147.3 million.

Bank of Hawaii’s Capital Ratios Improve

As of Sept. 30, 2024, the Tier 1 capital ratio was 14.05%, up from 12.53% as of Sept. 30, 2023. The total capital ratio was 15.11%, which rose from 13.56% in the year-ago period.

The ratio of tangible common equity to risk-weighted assets was 9.17%, which increased from 8.1% at the end of the year-ago quarter.

Bank of Hawaii’s Profitability Ratios Deteriorate

Return on average assets was 0.69% at the end of third-quarter 2024, which declined from 0.78% reported in the prior-year quarter. Return on average shareholders' equity was 9.9%, down from 13.92% as of Sept. 30, 2023.

Outlook

Q4 2024

Management anticipates a one-time charge of $2.3 million related to the Visa Class B conversion ratio change. Excluding this charge, the core non-interest income is expected to be in the range of $44-$45 million compared with $42.3 million recorded in the fourth quarter of 2023.

FY24

Management expects core non-interest income to increase marginally in the second half of the year as market conditions improve.

The company expects expenses to be 1-1.5% higher than normalized expenses of $419 million in 2023, primarily due to inflationary pressures and annual merit increases.

The tax rate is anticipated to be 24.25%.

How Have Estimates Been Moving Since Then?

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

VGM Scores

Currently, Bank of Hawaii has a poor Growth Score of F, however its Momentum Score is doing a lot better with a C. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of F. 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 this revision has been net zero. 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 is part of the Zacks Banks - West industry. Over the past month, Zions (ZION Quick QuoteZION - Free Report) , a stock from the same industry, has gained 17.2%. The company reported its results for the quarter ended September 2024 more than a month ago.

Zions reported revenues of $804 million in the last reported quarter, representing a year-over-year change of +3.6%. EPS of $1.37 for the same period compares with $1.13 a year ago.

For the current quarter, Zions is expected to post earnings of $1.25 per share, indicating a change of -3.1% from the year-ago quarter. The Zacks Consensus Estimate has changed +0.7% over the last 30 days.

Zions has a Zacks Rank #2 (Buy) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of D.