Bank of Hawaii Q2 Earnings Beat on Strong NII & Fee Income, Stock Down

Core Viewpoint - Bank of Hawaii Corporation (BOH) reported strong second-quarter 2025 adjusted earnings per share (EPS) of $1.06, exceeding expectations and showing significant year-over-year growth from 81 cents [1][9] Financial Performance - BOH's net income on a GAAP basis reached $47.6 million, reflecting a 39.8% increase year over year [2] - Quarterly revenues rose by 11.2% year over year to $174.5 million, surpassing the Zacks Consensus Estimate by 3.2% [3] - Net interest income (NII) was $129.6 million, up 12.9% year over year, with a net interest margin (NIM) increase of 24 basis points to 2.39% [3] - Non-interest income increased to $44.8 million, a 6.4% rise year over year, driven by higher fees and service charges [4] Expense Management - Non-interest expenses rose by 1.4% to $110.8 million, primarily due to increased salaries and benefits [5] - The efficiency ratio improved to 63.49%, down from 69.60% in the previous year, indicating enhanced profitability [5] Asset Quality and Credit Metrics - Total loans and leases decreased nearly 1% to $14 billion, while total deposits also fell nearly 1% to $20.8 billion [6] - Non-performing assets increased by 17.8% year over year to $17.9 million, while net loans and lease charge-offs decreased to $2.6 million [7] - Provision for credit losses rose by 35.4% year over year to $3.3 million [7] Capital Position - As of June 30, 2025, the Tier 1 capital ratio improved to 14.17%, and the total capital ratio rose to 15.23% [10] - The ratio of tangible common equity to risk-weighted assets increased to 9.62% [10] Profitability Ratios - Return on average assets was 0.81%, up from 0.59% in the prior-year quarter, while return on average shareholders' equity improved to 11.21% from 9.53% [11] Share Repurchase Program - In the reported quarter, BOH did not repurchase any shares, with a remaining buyback authority of $126 million as of June 30, 2025 [12] Overall Assessment - The rise in NII and fee income supports top-line growth, while a solid capital position is a positive factor [13] - However, lower loan and deposit balances, rising expenses, and deteriorating asset quality present near-term concerns [13]