Growth from fee income and expense controls offset deposit pricing pressure at Bank of Hawaii Corp. and helped boost third-quarter earnings, the Honolulu company said Monday.
Allan R. Landon, its chairman and chief executive, said in an interview Monday, "You always would like more, but we were pretty pleased" with third-quarter results.
The $10.4 billion-asset company reported that net income grew 5% from a year earlier, to $46.9 million, and earnings per share rose 8 cents, to 93 cents, a penny above the Wall Street expectation.
"Net income was up, loans were growing, we got great expense control, efficiency came along nicely, and we've been facing the same challenges with deposits along with everybody else, and it seems like we were able to hold our own," Mr. Landon said.
Revenue fell slightly from a year earlier, to $157.4 million, and net interest income slipped 1%, to $100.5 million. Noninterest income rose just under 3%, to $56.9 million, and noninterest expense fell 6%, to $79.8 million. Mr. Landon said the company's expenses are about as low as they can get.
Mike McMahon, an analyst at Sandler O'Neill & Partners LP, said in an interview Monday that expense controls helped counter the slight revenue decline.
"You've got the positive operating leverage year-over-year driven by expense cuts rather than revenue growth," Mr. McMahon said.
Frederick Cannon of Keefe, Bruyette & Woods Inc. said Monday, "Al Landon runs a tight ship over there, both on expenses and on capital management."
Bank of Hawaii said that it repurchased $46.6 million of stock during the quarter and had $102.5 million remaining in its share repurchase program as of Friday. It also said it increased its dividend 11%, to 41 cents a share.
Brent Christ of Fox-Pitt, Kelton Inc. said Monday, "Fee income was better than expected, and the pace of buybacks accelerated, and those were the drivers of better-than-expected results."
Growth in noninterest income came primarily from a 26% increase in insurance commissions, a 7% increase in charges on deposit accounts, and a 6% rise in other fee income.
"We've been continuing to increase checking accounts," Mr. Landon said, "and that helps us expand our fee base."
Deposits at Bank of Hawaii fell 1% from a year earlier, to $7.69 billion. The net interest margin dropped 10 basis points from a year earlier and 5 points from the second quarter, to 4.2%. Mr. Landon said the company has faced margin pressure but that this may be waning.
"We started off the third quarter with some pretty significant increases in time-deposit rates, and I think that has moderated throughout the quarter," he said. "I think right now we are in kind of a steady pattern here" as far as deposit pricing in Hawaii.
Keefe Bruyette's Mr. Cannon said: "They have a conservative business strategy, and they are operating in a good economy. And that's reflected in a solid quarter. In this environment, a margin down 5 basis points is pretty good performance - very good relative to a lot of companies."
