Bank of Hawaii Corp. is getting a lift from accelerating growth in Oahu’s construction industry.
The state’s second-largest bank said Monday that earnings rose 7.3 percent in the first quarter as loans and deposits increased due to the improving Hawaii economy.
Bankoh posted net income of $38.6 million, or 87 cents a share, to beat analysts’ estimates by a penny. Bankoh had net income of $36 million, or 81 cents a share, in the year-earlier quarter.
"I’d like to think we’re operating pretty well," said Peter Ho, chairman, president and chief executive officer of Bankoh. "The environment is also very conducive for us right now."
Ho said the bank has to be "a little bit temperate" in how it views the visitor industry.
"We’ve had growth for four straight years, and the fact that we’re a little bit off the first couple months of the year is to be expected," he said. "But construction, with the 19 condo/apartment sites in Kakaako and the $5.5 billion rail project, is beginning to take hold. We’re really beginning to feel the effects of that activity on the island."
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FIRST-QUARTER NET
$38.6 million
YEAR-EARLIER NET
$36 million
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Bankoh’s loans rose 7.4 percent to $6.21 billion from $5.78 billion during the quarter. Most of the strength came from the bank’s commercial loan portfolio, which jumped 10.6 percent to $2.57 billion from $2.33 billion in the year-earlier quarter. Consumer loans increased 5.2 percent to $3.64 billion from $3.46 billion.
Deposits also were strong as they topped $12 billion for the first time in rising 7 percent to $12.04 billion from $11.25 billion.
"The two pieces I’m happiest with are the loan growth, which is reflective of all that is happening in the marketplace, and passing the $12 billion mark, which is a good feeling," Ho said. "That’s really good movement in the things that matter most in our operation, which is dealing with customers."
Nashville, Tenn.-based analyst Brett Rabatin of brokerage firm Sterne Agee called it "another solid growth quarter."
"Profitability continues to be pretty good," said Rabatin. "Loan growth was nice to see. And seasonal expenses were a little higher in the first quarter and was a bit of a head wind, but that’s typical in the industry for expenses to be higher in the first quarter.
"They’re executing pretty well, and if they can keep on the same track managing expenses flat to down and growing revenue a little bit, which is their model, I think they’ll continue to execute well."
Bankoh also saw improvement in its net interest margin — the spread between lending and deposit rates — after a lengthy period of declines. The net interest margin was 2.87 percent last quarter, up from 2.85 percent in the previous quarter and up from 2.82 percent in the first quarter of 2013. Net interest income rose 5.3 percent to $93.2 million from $88.6 million.
"We’re please to see margins beginning to expand out a bit," Ho said.
However, non-interest income, which includes service charges and fees, fell 6.3 percent to $44.8 million from $47.8 million in the year-earlier period. Mortgage banking income, which includes what the bank receives from refinancings as well as loan sales it makes to the secondary market, fell 68.7 percent to $2 million from $6.4 million. Included in the non-interest income last quarter was a gain of $2 million resulting from the sale of 22,000 Visa Class B shares that it received for its membership stake in Visa when that company went public in 2008.
Bankoh ended the quarter with $14.23 billion in assets, up 5.5 percent from $13.53 billion in the year-earlier quarter.
The bank’s stock closed Monday up 39 cents at $57.77 on the New York Stock Exchange. The earnings were released after the market closed.
