Bank of Hawaii in Honolulu reported strong loan growth in the fourth quarter, but its overall profit fell slightly as income from mortgage banking declined and expenses ticked up due to one-time adjustments related to the federal reduction of the corporate tax rate.
Fourth-quarter net income at the $17.1 billion-asset company fell 1% from the year-ago quarter to $43 million. Earnings per share totaled $1.01, missing analysts’ expectations of $1.07, according to FactSet Research Systems.
The company said its results included a $3.6 million writedown of its deferred tax asset and an additional $2.2 million of employee compensation costs resulting from one-time bonuses paid to employees after Congress passed the tax law in December.
Net interest income increased 10.4% year over year to $121.6 million, as the bank benefited from both rising interest rates and double-digit loan growth.
Total loans and leases increased 10% to $9.8 billion at Dec. 31. Bank of Hawaii’s commercial loan portfolio increased 4.1% to $3.8 billion, and consumer loans, driven by sharp increases in home equity and card loans, climbed 13.1% to $6 billion. The net interest margin expanded 15 basis points to 2.98% in the fourth quarter.
Total deposits increased 4% to $14.9 billion at Dec. 31.
“During the year our loan and deposit balances continued to grow and our net interest margin expanded due to increased rates and the positive remixing of our balance sheet. Expenses were well controlled and our asset quality, capital and liquidity all remained strong," Chairman, President and CEO Peter Ho said in a press release.
Noninterest income declined 10% to $41.9 million in the fourth quarter, in part due to lower mortgage banking revenues.
Noninterest expenses increased 3% to $92.3 million. The company’s efficiency ratio improved to 57.5% from 58.3% a year ago.
Nonperforming assets made up 0.16% of total loans and leases at Dec. 31, compared with 0.22% a year ago. The company charged off $3.8 million in the fourth quarter, compared with $3 million a year ago.
Bank of Hawaii increased its provision for credit losses to $4.3 million from $3.3 million in the fourth quarter of 2016.