Bank of Hawaii Corp.’s earnings surged 64% in the third quarter as the company hit a record $23 billion in total assets and released $10.4 million from its loan-loss reserve amid an improving economy.
The state’s second-largest bank said Monday it earned $62.1 million, or $1.52 a share, to blow past analysts’ estimates of $1.33 a share.
In the year-earlier quarter, Bankoh had earnings of $37.8 million, or 95 cents a share, when it set aside $28.6 million for potential loan losses.
Shares of the company rose $1.24, or 1.4%, to $87.70 after the earnings were announced. Bankoh said that last quarter it repurchased $20 million worth of shares under its buyback program at an average cost of $82.89 a share.
“We were actually kind of surprised to see unemployment (for September) come out just recently at 6.6%,” Bankoh Chairman, President and CEO Peter Ho said on the company’s conference call with analysts. “So continued positive downward trending in unemployment here in the state. … At this point it’s looking like employment’s in a bit of a better space than … what we were all thinking coming out of our most recent delta surge.”
Bankoh bases its financial models on University of Hawaii Economic Research Organization forecasts. Mary Sellers, the bank’s chief risk officer, said the decrease in the bank’s reserve “reflects the most recent UHERO economic outlook and … forecast for our market coupled with our credit risk profile. The (remaining) allowance does continue to provide for the uncertainty and potential downside risk inherent with the pandemic.”
Bankoh’s loans rose 2.4% to $12.07 billion from the year-earlier quarter. However, loans excluding Paycheck Protection Program loans increased 4.8% to $11.8 billion from the same time a year ago. Customer loan balances on deferral are now down 95% from their peak to 0.8% of total loans.
“Bank of Hawaii’s operating results were solid in the third quarter of 2021,” Ho said in a statement. “Core consumer and commercial loan and deposit growth was strong in the quarter. Credit quality in the quarter remained good.”
The bank’s net interest income, which is the difference between what is generated from loans and paid in deposits, rose 2.1% to $126.8 million. The bank’s net interest margin worsened by 35 basis points to 2.32% from 2.67%.
Bankoh said the decrease in the net interest margin was largely due to higher levels of liquidity from continued strong deposit growth and lower interest rates. Deposits jumped 15.5% to $20.49 billion from the year-earlier quarter.
“Our strong and stable deposit base remains a readily available source of liquidity for continued growth in income,” Bankoh Chief Financial Officer Dean Shigemura said on the conference call. “Excess liquidity is being deployed in high-quality, low-risk investments that can easily be converted into funding if needed, while providing current income and mitigating margin pressures.”
Noninterest income, which includes charges and fees, slipped 0.9% to $41.4 million.
Bankoh kept its quarterly dividend at 70 cents a share. It will be payable Dec. 14 to shareholders of record at the close of business Nov. 30.
Separately, Bankoh announced that its board of directors elected Elliot Mills to serve on its board, effective last Friday, until the annual election of directors at the bank’s next annual shareholders meeting. With the addition of Mills, the bank’s number of directors increases to 14 from 13. Mills serves on the bank’s Human Resources and Compensation Committee, Nominating and Corporate Governance Committee and Digital Advisory Committee.
Mills is vice president of hotel operations for Disneyland Resort and Aulani, a Disney Resort and Spa, leading more than 5,000 employees across four locations. He is responsible for overseeing all operations for the Disneyland Hotel, Disney’s Paradise Pier Hotel and Disney’s Grand Californian Hotel & Spa in Anaheim, Calif., in addition to Aulani.
THIRD-QUARTER NET
$62.1 million
YEAR-EARLIER NET
$37.8 million
