Bank of Hawaii Corporation (BOH - Free Report) reported a negative earnings surprise of 6.5% in third-quarter 2019. Earnings per share of $1.29 lagged the Zacks Consensus Estimate of $1.38. Further, the reported figure compares unfavorably with $1.36 earned in the prior-year quarter.
Results were negatively impacted by elevated expenses and provisions. Also, lower net interest margin was on the downside. Yet, higher revenues were a positive factor. Further, strong capital position, along with higher loan balances, was the supporting factor.
The company’s net income came in at $52.1 million, down 8.4% from the $56.9 million reported in the prior-year quarter.
Revenues Increase, Expenses Escalate, Loans Improve
The company’s total revenues increased 3.6% year over year to $171.7 million in the quarter. The revenue figure also beat the Zacks Consensus Estimate of $168.8 million.
The bank’s net interest income was recorded at $125.2 million, up around 1% year over year. Net interest margin (NIM) shrunk 6 basis points (bps) to 3.01%, year on year.
Non-interest income came in at $46.5 million, up 12% year over year. This upsurge primarily resulted from rise in almost all components of income.
The bank’s non-interest expense flared up 10.8% year over year to $100.3 million, including legal reserve. This upsurge reflects higher salaries and benefits, occupancy, equipment, as well as data-processing and other expenses.
Efficiency ratio came in at 58.55%, up from the 55.07% recorded in the comparable quarter last year. Notably, a rise in the efficiency ratio reflects lower profitability.
As of Sep 30, 2019, total loans and leases balances inched up 1.1% from the end of the prior quarter to $10.9 billion, while total deposits edged down 1% to $15.3 billion.
Credit Quality: A Mixed Bag
As of Sep 30, 2019, allowance for loan and lease losses increased slightly year over year to $108.9 million, while non-performing assets surged 56.5% year over year to $21.6 million.
In addition, the company recorded provision for credit losses of $4.3 million in the reported quarter, up 13.2% year over year. Further, net charge-offs were $3 million or 11 bps annualized of total average loans and leases outstanding, down from the $3.3 million or 13 bps recorded in the prior-year quarter.
Strong Capital and Profitability Ratios
Bank of Hawaii was well capitalized with robust profitability ratios during the July-September quarter.
As of Sep 30, 2019, Tier 1 capital ratio was 12.33% compared with 13.2% as of Sep 30, 2018. Total capital ratio was 13.44% compared with 14.38% witnessed in the comparable period last year. The ratio of tangible common equity to risk-weighted assets was 12.10% compared with 12.56% recorded at the end of the year-ago quarter.
Return on average assets were down 16 basis points year over year to 1.17%, while return on average shareholders' equity contracted 204 bps to 16.02%.
During the third quarter, the company repurchased 0.4 million shares of common stock, at an average price of $83.07 and for a total cost of $29.9 million.
Rising loans aiding revenues remain key positives for Bank of Hawaii. In addition, controlled expenses will likely keep stoking the bank’s bottom-line growth. Furthermore, the company’s profitability ratios indicate solid returns. Nevertheless, elevated provisions are concerns.
Currently, Bank of Hawaii carries a Zacks Rank #4 (Sell).
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) posted earnings per share of $1.70 in third-quarter 2019, outpacing the Zacks Consensus Estimate of $1.49. Results compared favorably with the prior-year quarter’s $1.65 as well.
PNC Financial (PNC - Free Report) recorded positive earnings surprise of 5% in the third quarter. Earnings per share of $2.94 surpassed the Zacks Consensus Estimate of $2.80. Further, the bottom line reflected a 4.3% jump from the prior-year quarter’s reported figure.
Goldman Sachs (GS - Free Report) reported a negative earnings surprise of 4.8% for the September-end results. The company reported earnings per share of $4.79, missing the Zacks Consensus Estimate of $5.03. Also, the bottom-line figure compared unfavorably with earnings of $6.28 per share recorded in the year-earlier quarter.
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