Why Is Bank of Hawaii Down 6.3% Since Last Earnings Report?

It has been about a month since the last earnings report for Bank of Hawaii BOH. Shares have lost about 6.3% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Bank of Hawaii due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

Bank of Hawaii Q2 Earnings Top Estimates, Expenses Up

Bank of Hawaii reported second-quarter 2024 adjusted earnings per share of 86 cents, beating the Zacks Consensus Estimate of 85 cents. The bottom line compared unfavorably with $1.12 earned in the year-ago quarter.

The company's quarterly results benefited from an increase in NIM, driven by higher earnings asset yields. Also, lower provision acted as a tailwind. A decline in NII, along with a drop in loans and deposit balances and higher expenses, were undermining factors.

The company's net income (GAAP basis) came in at $34.1 million, down 26% year over year. Our estimate for the metric was pegged at $35.2 million.

Revenues Decrease, Expenses Increase

The total revenues fell 6.4% year over year to $156.9 million in the second quarter. The top line also missed the Zacks Consensus Estimate of $157 million.

NII was $114.8 million, down 7.6% year over year, primarily due to increased funding costs, partially offset by higher earning asset yields. NIM increased 4 basis points to 2.15%.

Non-interest income came in at $42.1 million, down 2.7% year over year. This included $1.5 million from the sale of a low-income housing tax credit investment. Adjusted for this item, the metric inched up 0.9% year over year.

Non-interest expenses increased 5% to $109.2 million. It included an industry-wide FDIC Special Assessment of $2.6 million and separation expenses of $0.8 million. Adjusted for these items, the metric for the second quarter was $105.9 million, up 1.8% from adjusted non-interest expenses recorded in the year-ago quarter.

The efficiency ratio was 69.60%, up from 62.07% recorded in the year-ago period. A rise in the efficiency ratio reflects lower profitability.

As of Jun 30, 2024, total loans and leases balance declined marginally from the previous quarter's end to $13.8 billion. Total deposits moved down 1.3% sequentially to $20.4 billion.

Credit Quality: Mixed Bag

As of Jun 30, 2024, non-performing assets were $15.2 million, up 32.3% year over year.  Net loans and lease charge-offs were $3.4 million, up $2 million from the year-ago quarter's level.

Provision for credit losses was $2.4 million, down 4% from the year-ago quarter's tally.  The allowance for credit losses inched up 1.5% to $147.5 million.

Capital Ratios Improve

As of Jun 30, 2024, the Tier 1 capital ratio was 13.99%, up from 12.21% as of Jun 30, 2023. The total capital ratio was 15.05%, which rose from 13.24% in the year-ago period. The ratio of tangible common equity to risk-weighted assets was 8.82%, which increased from 7.97% at the end of the year-ago quarter.

Profitability Ratios Deteriorate

Return on average assets was 0.59% at the end of second-quarter 2024, which declined from 0.77% reported in the prior-year quarter. Return on average shareholders' equity was 9.53%, down from 13.55% as of Jun 30, 2023.

Outlook

Third-Quarter 2024

NIM is projected to remain flat or increase marginally from 2.15% in the second quarter of 2024.

Full-year 2024

Management expects core non-interest income to increase marginally in the second half of the year as market conditions improve.

The company expects expenses to be 1-2% higher than normalized expenses of $419 million in 2023, primarily due to inflationary pressures and annual merit increases.

The tax rate is anticipated to be 24.5%.

How Have Estimates Been Moving Since Then?

It turns out, estimates review have trended downward during the past month.

VGM Scores

At this time, Bank of Hawaii has a poor Growth Score of F, however its Momentum Score is doing a lot better with a B. However, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise Bank of Hawaii has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.

To read this article on Zacks.com click here.