Bank of Hawaii Q2 earnings beat expectations, but mortgage bank revenue tumbles

Bank of Hawaii Corp. beat analysts’ expectations for second-quarter earnings and made record filings, but net profit still fell 15.8% as the company said today it released 13.6 million less to its loan loss reserve than in the prior year quarter. .

The state’s second-largest bank, like every other financial institution, had set aside money for possible loan losses during the COVID-19-induced downturn before it began returning that money to its income statement. As interest rates climb and put pressure on new owners, Bankoh only released $2.5 million from its reserve last quarter, compared to $16.1 million in the second quarter of 2021. L The spread saved the bank $56.9 million, or $1.38 per share, in the April-June period from $67.5 million, or $1.68 per share, during of the quarter of the previous year. Still, the bank’s earnings easily beat the consensus estimate of $1.34 a share from analysts polled by Thomson Reuters.

“Bank of Hawaii performed well during the second quarter of 2022,” Chairman and Chief Executive Officer Peter Ho said in a statement. “Net interest margin increased, driven by strong core loan growth and higher interest rates. At the same time, asset quality continued its healthy and stable trend, and capital and liquidity remained strong, positioning us well for the future.

Bankoh’s stock rose $1.40, or 1.8%, to $78.35 after the earnings release.

Deposits hit a record high of $21 billion, up 4.2% from the prior year period, while loans rose 7.6% to $13 billion during the of the same period. Net interest margin, which measures the difference between what the bank pays out in deposits and what it generates in loans, improved 10 basis points to 2.47% last quarter. The bank’s revenue also rose 4.2% to $175.1 million, a top analyst consensus estimate of $173.5 million.

“Our robust and consistent loan and deposit growth provides the foundation for sustainable growth in our NII (net interest income) and margin, which are further bolstered by rising interest rates,” said Bankoh Chief Financial Officer Dean Shigemura said on the company’s earnings conference call. . “Our loan to deposit ratio remains low compared to our regional and local peers. This gives us the ability to continue to grow our assets as well as greater pricing flexibility. As we continue to grow, we have maintained our balance sheet position sensitive to interest rate fluctuations and continue to benefit from higher rates.

High interest rates have, however, put pressure on the bank’s mortgage banking income, which includes refinancings and fees collected on sales of mortgages. Mortgage bank revenue fell 59.2% to $1.3 million from $3.1 million in the previous quarter.

“Rising rates obviously had an impact on our mortgage business, on home equity and on the residential market, but a lot of the growth you saw in the second quarter was kind of in arrears or of pipeline that was built before some of this rate increase,” Ho said on the earnings call. “So we think we’re likely to see a drop in application volumes, certainly in the mortgage business residential, probably in home equity as well.Although I would say that as people are hesitant to refinance first mortgages on a refinance basis, this tends to push companies towards their home equity and incentivize people with existing lines of credit to finance their existing lines.

The bank also announced that it was maintaining its dividend at 70 cents per share. It will be payable on September 15 to shareholders of record at the close of business on August 31.


Second quarter net

$56.9 million

Net of the previous year

$67.5 million