Bank of Hawaii Profit Tops Estimates

Bank of Hawaii earned 96 cents a share during the second quarter.
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Bank of Hawaii

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on Monday reported second-quarter earnings of $46.6 million, or 96 cents a share, increasing 48% from a year earlier and beating the consensus estimate of 74 cents among analysts polled by Thomson Reuters.

In comparison, net income was $52.7 million, or $1.09 a share, for the first quarter, and $31 million, or 65 cents a share, during the second quarter of 2009.

Bank of Hawaii also announced that Peter Ho, company president and chief banking officer, had been elected to serve as chairman, president and CEO upon the retirement of Allan Landon on July 30. Landon had announced his coming retirement in April.

The year-over-year earnings improvement resulted mainly from a decline in the company's provision for loan and lease losses, which was $15.9 million for the second quarter, improving from $20.7 million in the first quarter and $28.7 million in the second quarter of 2009. The decline in net income from the first quarter mainly reflected a reduction in gains on securities investments.

While earnings suffered a bit as the company built-up loan loss reserves and saw loan losses crest during the second half of 2009, Bank of Hawaii has sailed through the banking crisis, with returns on average assets exceeding 1% and returns on average equity exceeding 14% over the past two years, according to SNL Financial. The ROA for the second quarter was 1.48% and the ROE 19.01%.

Bank of Hawaii had $12.9 billion in total assets as of June 30. Credit quality continued to "reflect a slowly improving economy" according to the bank, and nonperforming assets -- including nonaccrual loans and repossessed real estate -- totaled $43.2 million as of June 30, up from $41.6 million the previous quarter and $39 million a year earlier. Bank of Hawaii said that nonperformers remained "at elevated levels primarily due to the lengthy resolution process on residential mortgages."

The ratio of nonperforming assets and accruing loans past-due 90 days or more to total assets was 0.44% as of June 30, compared to 0.46% in March and 0.40% in June 2009. The ratio of net charge-offs -- loan losses less recoveries -- for the first quarter was 1.09%, down from 1.28% during the first quarter and 1.65% in June 2009. While second-quarter aggregate figures weren't yet available, the domestic banking industry's ratio of noncurrent assets to total assets was 3.43% as of March 31, and its first-quarter net charge-off ratio was 2.84%, according to the Federal Deposit Insurance Corp.

Bank of Hawaii's net interest margin -- essentially the average yield on earning assets less the average cost of funds -- was 3.51%, down from 3.72% the previous quarter and 3.73% a year earlier, and reflected "strong deposit levels and weak loan demand."

Bank of Hawaii's shares rose 2% on Friday to close at $50.83. The shares were yielding 3.54% on a quarterly dividend payout of 45 cents.


Written by Philip van Doorn in Jupiter Fla.

Philip W. van Doorn is a member of TheStreet's banking and finance team, commenting on industry and regulatory trends. He previously served as the senior analyst for Ratings, responsible for assigning financial strength ratings to banks and savings and loan institutions. Mr. van Doorn previously served as a loan operations officer at Riverside National Bank in Fort Pierce, Fla., and as a credit analyst at the Federal Home Loan Bank of New York, where he monitored banks in New York, New Jersey and Puerto Rico. Mr. van Doorn has additional experience in the mutual fund and computer software industries. He holds a bachelor of science in business administration from Long Island University.