Bank of Hawaii posts $1.47 EPS beat as NIM expands 9th quarter

Bank of Hawaii Corp. reported second-quarter earnings that edged past analyst estimates as net interest margin widened for a ninth straight quarter, though revenue fell short of expectations and the stock dropped in premarket trading.

The Honolulu-based lender posted diluted earnings per share of $1.47, one cent above the $1.46 consensus, according to data compiled by InvestingPro. Net income rose 11% from the prior quarter to $63.8 million.

"The underlying earnings power of the franchise continues to improve," Chief Executive James Polk said. "Our deposit franchise remains one of Bank of Hawaii's most important structural advantages, supported by our leading market position, trusted brand and diversified customer base."

Revenue totaled $196.9 million, missing the $199.75 million forecast by about $2.85 million. Net interest income climbed to $153.6 million, while net interest margin expanded four basis points to 2.78%. Non-interest income rose to $43.3 million from $41.3 million in the first quarter, and non-interest expense declined to $111.2 million from $116.1 million.

Metric	Actual	Consensus	Beat/Miss
EPS	$1.47	$1.46	+$0.01
Revenue	$196.9M	$199.75M	-1.43%
NIM	2.78%	—	+4 bps QoQ

The mixed results sent shares down 4.11% to $80.52 in premarket trading, compared with a prior close of $83.97. The stock remains above its 52-week low of $59.36 but below the high of $86.31.

Chief Financial Officer Brad Satenberg said the bank expects net interest margin to approach 2.90% by year-end, assuming one 25-basis-point rate hike in mid-September. "All the components are still in place for the NIM to continue to grind higher," he said, citing fixed-asset repricing and a more stable deposit mix shift.

The bank forecast third-quarter normalized non-interest income of about $43 million and normalized non-interest expense of about $112.5 million. Full-year expense growth guidance remains at 2.5% to 3%, with normalized non-interest expense expected to total about $448 million.

Total loans increased $94 million during the quarter, representing annualized growth of about 2.6%. Management maintained its full-year loan growth target in the lower mid-single-digit range. Commercial lending remains healthy, though consumer growth is expected to moderate after a large condominium-related residential project boosted second-quarter production.

Credit quality remained stable, with net charge-offs of $3.4 million, or 10 basis points annualized. The allowance for credit losses on loans and leases ended the quarter at $147 million, flat to the linked quarter. The criticized asset ratio rose to 2.81% from 2.12%, driven by a single borrower relationship that continues to perform and is well secured by real estate.

The bank expects 10% to 15% runoff in public deposits in the third quarter as it strategically allows certain higher-cost funds to exit. Average earning assets are expected to decline by $100 million to $200 million in the third quarter.

The board declared a dividend of $0.70 per common share for the third quarter, representing a yield of 3.33%. Management plans to repurchase $20 million of stock in both the third and fourth quarters, with $89 million remaining under the current buyback plan.

The EPS beat signals that cost discipline and margin expansion are offsetting top-line pressure, but the revenue miss and expected deposit runoff suggest near-term headwinds. Investors will watch the third-quarter results for evidence that the margin trajectory can sustain toward the 2.90% target.

This article is for informational purposes only and does not constitute investment advice.