Bank of Hawaii Corp. generated strong double-digit loan growth in the fourth quarter but cautioned that it’s unlikely to continue that pace as consumers face continued headwinds due to the effect of higher interest rates.
The state’s second-largest bank, which easily beat analysts’ earnings estimates, reported before the market opened Monday that its loans rose 11.3% to $13.65 billion from the year-earlier quarter and were up 2.4% from the third quarter.
“We’ve been fortunate to have been able to drive annualized loan growth for a number of quarters now,” Bankoh Chairman, President and CEO Peter Ho said on an earnings conference call with analysts. “We suspect that kind of high-tailed … and feel things tightening a bit. I think we’ve got a reasonable forward view on the first-quarter loan production-wise, but I would suspect that ’23 is not likely to be a double-digit loan growth year. I think we’re pushing into the mid-/higher single-digit levels that probably would be a level that reflects overall market conditions.”
Even with the strong loan growth, Bankoh’s net income slipped 4% during the quarter to $61.3 million, or $1.50 a share. That still beat analysts’ consensus estimate of $1.42 a share. In the year-earlier quarter, Bankoh earned $63.8 million, or $1.55 a share.
The net income was affected by $200,000 it set aside for potential loan losses in the quarter, compared with $9.7 million it released from its loan-loss reserve in the year-earlier quarter that bolstered its balance sheet.
Deposits inched up 1.3% to $20.62 billion.
Bankoh’s stock finished the day down $3.44, or 4.4%, at $75.08.
“We really aren’t changing our underwriting standards and policies, because we pretty much keep those flat through cycles,” Ho told analysts. “But I think what may be happening is borrower profiles may be deteriorating a bit as inflation takes hold, as the economy slows a bit and as interest rates began to bite a little bit, a little bit harder into the cap structure. And then lastly, I’d say that the residential market, which is a big source of value for us, it’s just been completely impacted by rates and the slowdown in refi.”
Net interest income, the spread between what the bank generates in loans and pays out for deposits, rose 11.4% to $140.7 million from the year-earlier quarter. The bank’s net interest margin jumped 26 basis points to 2.60% from 2.34%, primarily due to the higher rate environment and continued strong loan growth.
For the year, Bankoh earned $225.8 million, or $5.48 a share, compared with $253.4 million, or $6.25 a share, in 2021.
The bank maintained its quarterly dividend at 70 cents a share. It will be payable March 14 to shareholders of record at the close of business Feb. 28.
FOURTH-QUARTER NET
$61.3 million
YEAR-EARLIER NET
$63.8 million
