Monday, Bank of Hawaii Corp. (BOH), a holding company for Bank of Hawaii, reported a sharp decline in earnings for the second quarter, hurt in large part by higher provision for credit losses. Earnings, though down from last year, came in ahead of analysts' consensus by five cents.
The Honolulu, Hawaii - based company's net income for the second quarter declined to $31 million from $48.3 million in the prior year quarter. Earnings per share were down at $0.65 compared to $1.00 in the corresponding period last year.
On average, nine analysts polled by Thomson Reuters expected the company to earn $0.60 per share. Analysts' estimates typically exclude special items.
Provision for credit losses for the quarter increased significantly to $28.7 million from $7.2 million in the corresponding quarter last year. Net charge-offs during the quarter were $25.7 million, compared to $4.7 million in the second quarter last year and included $6.9 million for the commercial loan sold during the quarter, $4.4 million as a result of the lease restructuring, and $2.3 million related to a syndicated credit that was sold.
During the quarter, the company sold a loan made to a major mall owner, restructured a leveraged lease that involved a bankrupt automobile manufacturer, and wrote down the carrying value of a non-relationship syndicated credit that was subsequently sold, which resulted in an increase in net charge-offs of $13.6 million. Results of the second quarter included a gain of $2.8 million related to the company's sale of its equity interest in an aircraft lease to a cargo carrier, $0.9 million due to the sale of retail insurance brokerage business, and FDIC insurance expense of $9 million.
Net interest income, on a taxable equivalent basis, declined to $103.2 million from $107.4 million in the prior-year quarter, largely due to a lower net interest margin resulting from greater liquidity being held at low yields, lower interest rates, and lower levels of loans.
Non interest income for the quarter was $59.8 million, compared to $60.5 million in the year-ago quarter. Non interest expense for the quarter increased to $89.6 million from $83.9 million in the same quarter last year.
As at June 30, 2009, the company's total assets were $12.1 billion, compared to $10.3 billion as at June 30, 2008. Total deposits as at June 30, 2009 were $9.0 billion, compared to $7.9 billion as at June 30, 2008.
Allan Landon, Chairman, and CEO, Hawaii Corp said, "We continued to pursue our near-term strategies of maintaining strong liquidity, reserves, and capital during the second quarter of 2009. Our profitability during the quarter was helped by increased net interest income."
The company also declared a quarterly cash dividend of $0.45 per share, payable on September 15, to shareholders on record August 31, 2009.
The company noted that Hawaii's economy continued to reflect weakness during the second quarter and unemployment rate increased to 7.4% on a seasonally adjusted basis during the quarter and total jobs contracted 3.1% from the beginning of the year.
For the first half of the year, the company's net income dropped to $67 million or $1.40 per share from $105.5 million or $2.18 per share in the same period last year. Net interest income decreased to $199.9 million from $209.3 million last year.
BOH is currently trading at $37.72, up $2.23 or 6.28%, on a volume of 0.20 million shares on the NYSE.
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