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Bank of Hawaii Corporation Third Quarter 2021 Financial Results

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  • Diluted Earnings Per Common Share $1.52

  • Net Income $62.1 Million

  • Board of Directors Declares Dividend of $0.70 Per Share

HONOLULU, October 25, 2021--(BUSINESS WIRE)--Bank of Hawaii Corporation (NYSE: BOH) today reported diluted earnings per common share of $1.52 for the third quarter of 2021, compared with diluted earnings per common share of $1.68 in the previous quarter and $0.95 in the same quarter last year. Net income for the third quarter of 2021 was $62.1 million, down 8.1% from the second quarter of 2021 and up 64.0% from the third quarter of 2020.

This press release features multimedia. View the full release here: https://www.businesswire.com/news/home/20211025005224/en/

"Bank of Hawaii’s operating results were solid in the third quarter of 2021," said Peter Ho, Chairman, President, and CEO. "Core consumer and commercial loan and deposit growth was strong in the quarter. Credit quality in the quarter remained good."

Financial Highlights

  • The return on average assets for the third quarter of 2021 was 1.07% compared with 1.23% in the previous quarter and 0.76% in the same quarter last year.

  • The return on average common equity for the third quarter of 2021 was 17.08% compared with 19.61% in the previous quarter and 11.01% in the same quarter last year.

  • Net interest income for the third quarter of 2021 was $126.8 million, an increase of 2.7% from the second quarter of 2021 and an increase of 2.1% from the third quarter of 2020. Net interest margin was 2.32% in the third quarter of 2021, a decrease of 5 basis points from the previous quarter and 35 basis points from the same quarter last year.

    • The decrease in the net interest margin from prior year is largely due to higher levels of liquidity from continued strong deposit growth and lower interest rates, partially offset by higher fees from Paycheck Protection Program ("PPP") loans, deployment of excess liquidity and core loan growth.

  • The provision for credit losses for the third quarter of 2021 was a net benefit of $10.4 million compared with a net benefit of $16.1 million in the previous quarter and net expense of $28.6 million in the same quarter last year.

  • Noninterest income was $41.4 million in the third quarter of 2021, a decrease of 6.9% from the second quarter of 2021 and a decrease of 0.9% from the third quarter of 2020.

    • One-time items in the second quarter of 2021 included a gain of $3.7 million related to the sale of investment securities.

  • Noninterest expense was $96.5 million in the third quarter of 2021, flat to the second quarter of 2021 and an increase of 7.3% from the third quarter of 2020.

    • One-time significant items in the third quarter of 2021 included a gain of $6.3 million related to the sale of property partially offset by $3.8 million of fees related to the early termination of repurchase agreements and $1.2 million in severance.

    • One-time significant items in the second quarter of 2021 included fees related to the early termination of FHLB advances and repurchase agreements of $3.2 million offset by a gain on the sale of property of $3.1 million.

    • One-time significant items in the third quarter of 2020 included a gain of $1.9 million related to the sale of a branch building partially offset by $1.8 million in severance.

  • The efficiency ratio during the third quarter of 2021 was 57.38% compared with 57.47% in the previous quarter and 54.22% during the same quarter last year.

    • The increase in the efficiency ratio from prior year is driven by an increase in noninterest expense.

  • The effective tax rate for the third quarter of 2021 was 24.40% compared with 22.84% in the previous quarter and 20.09% during the same quarter last year.

    • The increase from same quarter prior year is primarily due to higher pretax book income compared to relatively stable tax adjustments and the delayed impact of the TCJA on the deductibility of deferred executive compensation.

Asset Quality

The Company’s overall asset quality continued to remain stable during the third quarter of 2021.

  • Total non-performing assets were $20.6 million at September 30, 2021, up $1.6 million from June 30, 2021 and $2.0 million from September 30, 2020. Non-performing assets as percentage of total loans and leases and foreclosed real estate were 0.17% at the end of the quarter of 2021, up 1 basis point from the end of the prior quarter and the end of the same quarter last year.

  • Net loan and lease charge-offs during the third quarter of 2021 were $1.2 million or 0.04% annualized of total average loans and leases outstanding.

    • Net loan and lease charge-offs for the third quarter of 2021 were comprised of charge-offs of $3.4 million partially offset by recoveries of $2.3 million.

    • Compared to the prior quarter, net loan and lease charge-offs were flat.

    • Compared to the third quarter of 2020, net loan and lease charge-offs increased by $2.7 million or 9 basis points annualized on total average loans and leases outstanding.

  • The allowance for credit losses on loans and leases was $167.9 million at September 30, 2021, a decrease of $12.5 million from June 30, 2021 and $35.6 million from September 30, 2020. The ratio of the allowance for credit losses to total loans and leases outstanding was 1.39% at the end of the quarter, down 11 basis points from the end of the prior quarter and 34 basis points from the end of the same quarter last year.

Balance Sheet

  • Total assets increased to a new record of $23.0 billion at September 30, 2021, an increase of 1.3% from June 30, 2021 and 14.2% from September 30, 2020.

  • The investment securities portfolio was $9.3 billion at September 30, 2021, up 9.2% from June 30, 2021 and 44.8% from September 30, 2020 due to growth in deposits that continued to outpace loan growth.

    • The investment portfolio remains largely comprised of securities issued by U.S. government agencies and U.S. government-sponsored enterprises.

  • Total loans and leases were $12.1 billion at September 30, 2021, an increase of 0.3% from June 30, 2021 and 2.4% from September 30, 2020.

    • Total loans excluding PPP loans were $11.8 billion at September 30, 2021, an increase of 2.4% from June 30, 2021 and an increase of 4.8% from September 30, 2020.

  • Total deposits were $20.5 billion at September 30, 2021, an increase of 1.6% from June 30, 2021 and an increase of 15.5% from September 30, 2020.

  • The Company early terminated $100.0 million of repurchase agreements in the third quarter of 2021.

Capital and Dividends

  • The Tier 1 Capital Ratio was 13.47% at September 30, 2021 compared with 13.87% at June 30, 2021 and 12.09% at September 30, 2020.

    • The increase from the same quarter in the prior year was driven by the issuance of preferred stock in the second quarter of 2021.

  • The Tier 1 Leverage Ratio was 7.10% at September 30, 2021 compared with 7.31% at June 30, 2021 and 6.81% at September 30, 2020.

    • The increase from the same quarter in the prior year was driven by the issuance of $180 million of Fixed Rate Non-Cumulative Perpetual Preferred Stock, Series A in the second quarter of 2021.

  • The Company repurchased 241.3 thousand shares of common stock at a total cost of $20.0 million under its share repurchase program in the third quarter of 2021 at an average cost of $82.89 per share repurchased.

    • Total remaining buyback authority under the share repurchase program was $93.1 million at September 30, 2021.

  • The Company’s Board of Directors declared a quarterly cash dividend of $0.70 per share on the Company’s outstanding common shares. The dividend will be payable on December 14, 2021 to shareholders of record at the close of business on November 30, 2021.

  • On October 5, 2021, the Board of Directors declared the quarterly dividend payment of $10.94 per share, equivalent to $0.2735 per depositary share, on its Fixed Rate Non-Cumulative Perpetual Preferred Stock, Series A. The depositary shares representing the Series A Preferred Stock are traded on the NYSE under the symbol "BOH.PRA." The dividend will be payable on November 1, 2021 to shareholders of record of the preferred stock at the close of business on October 18, 2021.

Conference Call Information

The Company will review its third quarter financial results today at 8:00 a.m. Hawaii Time (2:00 p.m. Eastern Time). The live call, including a slide presentation, will be accessible on the investor relations link of Bank of Hawaii Corporation's website, www.boh.com.

  • The webcast link is https://edge.media-server.com/mmc/p/3r3nw6ad

  • The toll-free number for the teleconference is 1 (844) 543-5235 in the United States and Canada and 1 (703) 318-2209 for other international callers. Use the pass code "Bank of Hawaii" to access the call.

  • A replay of the conference call will be available for one week beginning approximately 11:00 a.m. Hawaii Time on Monday, October 25, 2021. The replay number is 1 (855) 859-2056 in the United States and Canada and 1 (404) 537-3406 from other international locations. Enter the conference ID 6897518 when prompted. In addition, the replay will be available on the Company's website, www.boh.com.

Forward-Looking Statements

This news release, and other statements made by the Company in connection with it may contain "forward-looking statements" (as defined in the Private Securities Litigation Reform Act of 1995) that involve risks and uncertainties that could cause results to be materially different from expectations. Forecasts of our financial results and condition, expectations for our operations and business prospects, and our assumptions used in those forecasts and expectations are examples of certain of these forward-looking statements. Do not unduly rely on forward-looking statements. Actual results might differ significantly from our forecasts and expectations because of a variety of factors. More information about these factors is contained in Bank of Hawaii Corporation's Annual Report on Form 10-K for the year ended December 31, 2020 and its Form 10-Q for the fiscal quarters ended March 31, 2021 and June 30, 2021, which were filed with the U.S. Securities and Exchange Commission. These forward-looking statements are not guarantees of future performance and speak only as of the date made, and, except as required by law, the Company undertakes no obligation to update or revise any forward-looking statements to reflect subsequent events, new information or future circumstances.

Bank of Hawaii Corporation is an independent regional financial services company serving businesses, consumers, and governments in Hawaii and the West Pacific. The Company's principal subsidiary, Bank of Hawaii, was founded in 1897. For more information about Bank of Hawaii Corporation, see the Company’s web site, www.boh.com.

Bank of Hawaii Corporation and Subsidiaries

Financial Highlights

Table 1

Three Months Ended

Nine Months Ended

September 30,

June 30,

September 30,

September 30,

(dollars in thousands, except per share amounts)

2021

2021

2020

2021

2020

For the Period:

Operating Results

Net Interest Income

$

126,819

$

123,514

$

124,166

$

370,902

$

376,823

Provision for Credit Losses 1

(10,400

)

(16,100

)

28,600

(40,800

)

102,600

Total Noninterest Income

41,378

44,431

41,734

128,779

139,151

Total Noninterest Expense

96,519

96,527

89,949

291,911

275,153

Net Income

62,053

67,533

37,840

189,535

111,490

Basic Earnings Per Common Share

1.53

1.69

0.95

4.73

2.81

Diluted Earnings Per Common Share

1.52

1.68

0.95

4.70

2.80

Dividends Declared Per Common Share

0.70

0.67

0.67

2.04

2.01

Performance Ratios

Return on Average Assets

1.07

%

1.23

%

0.76

%

1.15

%

0.78

%

Return on Average Shareholders' Equity

15.41

19.17

11.01

17.31

11.08

Return on Average Common Equity 8

17.08

19.61

11.01

18.10

11.08

Efficiency Ratio 2

57.38

57.47

54.22

58.42

53.33

Net Interest Margin 3

2.32

2.37

2.67

2.37

2.82

Dividend Payout Ratio 4

45.75

39.64

70.53

42.95

71.53

Average Shareholders' Equity to Average Assets

6.95

6.40

6.93

6.63

7.06

Average Balances

Average Loans and Leases

$

11,958,321

$

12,096,308

$

11,739,785

$

12,002,426

$

11,510,222

Average Assets

22,993,036

22,073,569

19,741,139

22,079,174

19,053,626

Average Deposits

20,473,777

19,698,285

17,270,206

19,619,053

16,591,640

Average Shareholders' Equity

1,598,076

1,412,924

1,367,756

1,463,566

1,344,402

Per Share of Common Stock

Book Value

$

35.30

$

34.80

$

33.99

$

35.30

$

33.99

Tangible Book Value 8

34.38

33.91

33.21

34.38

33.21

Market Value

Closing

82.17

84.22

50.52

82.17

50.52

High

87.12

95.95

61.94

99.10

95.53

Low

75.68

81.23

48.77

75.65

46.70

September 30,

June 30,

December 31,

September 30,

2021

2021

2020

2020

As of Period End:

Balance Sheet Totals

Loans and Leases

$

12,072,750

$

12,041,378

$

11,940,020

$

11,793,608

Total Assets

22,965,383

22,672,183

20,603,651

20,109,489

Total Deposits

20,493,678

20,169,709

18,211,621

17,738,883

Other Debt

10,414

10,437

60,481

60,502

Total Shareholders' Equity

1,597,109

1,583,531

1,374,507

1,361,739

Asset Quality

Non-Performing Assets

$

20,620

$

18,974

$

18,481

$

18,626

Allowance for Credit Losses - Loans and Leases

167,920

180,385

216,252

203,496

Allowance to Loans and Leases Outstanding 5

1.39

%

1.50

%

1.81

%

1.73

%

Capital Ratios 6

Common Equity Tier 1 Capital Ratio

12.02

%

12.36

%

12.06

%

12.09

%

Tier 1 Capital Ratio

13.47

13.87

12.06

12.09

Total Capital Ratio

14.72

15.13

13.31

13.35

Tier 1 Leverage Ratio

7.10

7.31

6.71

6.81

Total Shareholders' Equity to Total Assets

6.95

6.98

6.67

6.77

Tangible Common Equity to Tangible Assets 7, 8

6.04

6.06

6.53

6.63

Tangible Common Equity to Risk-Weighted Assets 7,8

11.46

11.81

11.89

12.02

Non-Financial Data

Full-Time Equivalent Employees

2,049

2,085

2,022

2,038

Branches

54

54

65

67

ATMs

303

312

357

358

1

Provision for Credit Losses for 2021 includes Provision for Unfunded Commitments and Accrued Interest Receivable, 2020 represents only Provisions for Loans and Leases.

2

Efficiency ratio is defined as noninterest expense divided by total revenue (net interest income and total noninterest income).

3

Net interest margin is defined as net interest income, on a taxable-equivalent basis, as a percentage of average earning assets.

4

Dividend payout ratio is defined as dividends declared per common share divided by basic earnings per common share.

5

The numerator comprises the Allowance for Credit Losses - Loans and Leases.

6

Regulatory capital ratios as of September 30, 2021 are preliminary.

7

Tangible common equity to tangible assets and tangible common equity to risk-weighted assets are Non-GAAP financial measures. Tangible common equity is defined by the Company as common shareholders' equity minus goodwill and intangible assets. Intangible assets are included as a component of other assets in the Consolidated Statements of Condition. See Table 2 "Reconciliation of Non-GAAP Financial Measures."

8

Return on Average Common Equity was revised from 19.60% for the three months ended June 30, 2021, Tangible Common Equity to Tangible Asset was revised from 6.08% for the three months ended June 30, 2021, Tangible Common Equity to Risk-Weighted Assets was revised from 11.85% for the three months ended June 30, 2021, and Tangible Book Value was revised from $34.02 for the three months ended June 30, 2021.

Bank of Hawaii Corporation and Subsidiaries

Reconciliation of Non-GAAP Financial Measures

Table 2

September 30,

June 30,

December 31,

September 30,

(dollars in thousands)

2021

2021

2020

2020

Total Shareholders' Equity

$

1,597,109

$

1,583,531

$

1,374,507

$

1,361,739

Less:

Preferred Stock

180,000

180,000

-

-

Goodwill

31,517

31,517

31,517

31,517

Tangible Common Equity

$

1,385,592

$

1,372,014

$

1,342,990

$

1,330,222

Total Assets

$

22,965,383

$

22,672,183

$

20,603,651

$

20,109,489

Less:

Goodwill

31,517

31,517

31,517

31,517

Tangible Assets

$

22,933,866

$

22,640,666

$

20,572,134

$

20,077,972

Risk-Weighted Assets, determined in accordance with prescribed regulatory requirements

$

12,093,010

$

11,614,522

$

11,295,077

$

11,068,888

Total Shareholders' Equity to Total Assets

6.95

%

6.98

%

6.67

%

6.77

%

Tangible Common Equity to Tangible Assets (Non-GAAP)

6.04

%

6.06

%

6.53

%

6.63

%

Tier 1 Capital Ratio

13.47

%

13.87

%

12.06

%

12.09

%

Tangible Common Equity to Risk-Weighted Assets (Non-GAAP)

11.46

%

11.81

%

11.89

%

12.02

%

Note: Risk-Weighted Assets and Regulatory capital ratios as of September 30, 2021 are preliminary.

Bank of Hawaii Corporation and Subsidiaries

Consolidated Statements of Income

Table 3

Three Months Ended

Nine Months Ended

September 30,

June 30,

September 30,

September 30,

(dollars in thousands, except per share amounts)

2021

2021

2020

2021

2020

Interest Income

Interest and Fees on Loans and Leases

$

100,570

$

100,894

$

103,189

$

300,763

$

319,027

Income on Investment Securities

Available-for-Sale

16,396

16,467

14,558

48,700

45,845

Held-to-Maturity

16,754

13,576

15,967

43,630

51,942

Deposits

2

-

3

9

13

Funds Sold

382

260

149

779

787

Other

159

182

151

526

494

Total Interest Income

134,263

131,379

134,017

394,407

418,108

Interest Expense

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