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No Luau for Bank of Hawaii's Earnings

TSC Ratings

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On Jan. 26, 2009, Bank of Hawaii (BOH Quote), reported a 3.8% decline in its Q4 FY08 earnings, due to higher provision for credit losses and lower noninterest income. Net income decreased to $39.31 million or $0.82 per share from $40.86 million or $0.83 per share in Q4 FY07. The latest quarterly earnings missed the consensus estimate of $0.87 per share.

Total interest income declined 10.6% to $134.19 million from $150.18 million a year ago, due to lower interest and fees on loans and lease income. However, due to lower interest expenses, net interest income increased 6.4% to $105.85 million. Total interest expenses declined 44.1% to $28.33 million from $50.73 million. Consequently, the company's net interest margin improved 31 basis points to 4.43%, and interest rate spread expanded 63 basis points to 4.11%.

Moreover, noninterest income dropped 9.6% to $54.46 million from $60.26 million, reflecting a charge of $7.10 million related to the change in fair value of mortgage servicing rights partly offset by increased fair value of trading securities and lower trust and asset management fees. Retail Banking net interest income fell 2.0% to $56.25 million, and net interest income from the Commercial Banking slipped 4.4% to $40.05 million. On the flipside, net interest income from Investment Services rose 7.1% to $3.91 million and the Treasury and Other segment net interest income was $5.65 million against net interest expense of $3.50 million a year ago.

The provision for credit losses for the quarter surged to $18.56 million from $5.44 million a year ago. Net loans and leases charged-off increased 66.9% to $11.99 million or 0.64% (annualized) of total average loans and leases from $7.18 million or 0.33% in Q4 FY07. Recently, BOH declared a quarterly cash dividend of $0.45 per share payable on March 13, 2009.

During FY08, the bank's total interest income decreased 8.6% to $550.10 million, whereas non-interest income grew 7.3% to $258.11 million. Consequently, earnings rose 4.6% to $192.21 million or $3.99 per share.

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