8-K: Bank of Hawaii Reports Full Year 2023 Earnings of $4.14 Per Share, Impacted by FDIC Assessment

Bank of Hawaii Corporation announced a diluted earnings per common share of $4.14 for 2023, with a significant $14.7 million charge in the fourth quarter due to an industry-wide FDIC special assessment.

Summary

• Bank of Hawaii Corporation reported a diluted earnings per common share of $4.14 for the full year 2023, a decrease from $5.48 in 2022.
• Net income for the year was $171.2 million, down 24.2% compared to the previous year.
• The fourth quarter of 2023 saw diluted earnings per common share at $0.72, a decrease from $1.17 in the previous quarter and $1.50 in the same quarter of 2022.
• Net income for the fourth quarter was $30.4 million, down 36.5% from the previous quarter and 50.4% from the same quarter in 2022.
• An industry-wide FDIC special assessment resulted in a $14.7 million charge in the fourth quarter, negatively impacting diluted earnings per common share by $0.29.
• Total deposits increased by 2.1% year-over-year, and credit quality remained strong with non-performing assets at 0.08% at quarter end.
• Net interest income for the fourth quarter was $115.8 million, a decrease of 4.3% from the previous quarter and 17.7% from the same quarter of 2022, primarily due to higher funding costs.
• Noninterest income was $42.3 million in the fourth quarter, a decrease of 16.0% from the previous quarter but an increase of 2.7% from the same period in 2022.
• Noninterest expense was $116.0 million in the fourth quarter, including the $14.7 million FDIC special assessment.
• The company's Tier 1 Capital Ratio was 12.56% at December 31, 2023, compared to 12.15% at December 31, 2022.
• The Board of Directors declared a quarterly cash dividend of $0.70 per share on the company's outstanding common shares.

Sentiment

Score: 4

Explanation: The sentiment is moderately negative due to the significant decrease in earnings and the impact of the FDIC assessment, although the company highlights some positive aspects such as deposit growth and credit quality.

Positives

• Total deposits increased by 2.1% year-over-year, indicating customer confidence.
• The company's credit quality remained strong with non-performing assets at a low 0.08%.
• The Tier 1 Capital Ratio increased to 12.56%, demonstrating a strong capital position.
• The company has a strong liquidity position with $10.2 billion in readily available liquidity exceeding uninsured deposits.
• The company's deposit base is described as exceptionally seasoned and long-tenured.
• The company has demonstrated disciplined expense management, excluding the FDIC special assessment and other one-off items.

Negatives

• Diluted earnings per common share for the full year decreased to $4.14 from $5.48 in the previous year.
• Net income for the year decreased by 24.2% to $171.2 million.
• Fourth quarter net income decreased by 50.4% year-over-year to $30.4 million.
• Net interest income decreased by 17.7% year-over-year in the fourth quarter due to higher funding costs.
• Noninterest expense increased by 12.9% year-over-year in the fourth quarter, partly due to the FDIC special assessment.
• Return on average common equity decreased to 13.89% for the full year, down from 17.83% in 2022.

Risks

• The industry-wide FDIC special assessment of $14.7 million significantly impacted the fourth quarter earnings.
• Higher funding costs are negatively impacting net interest income.
• The company faces challenges from the higher rate environment, including higher benchmark interest rates.
• The decrease in net interest margin indicates pressure on profitability.
• The company's noninterest income decreased by 16% from the previous quarter.
• The company's noninterest expense increased by 9.8% from the previous quarter.

Future Outlook

The company stated they are well positioned to deliver strong results in 2024, having focused on strengthening their balance sheet in 2023. They also noted that forward-looking statements are subject to risks and uncertainties.

Management Comments

• Peter Ho, Chairman, President, and CEO, stated that Bank of Hawaii managed through a challenging economic environment in 2023 and delivered strong financial results.
• He also highlighted the resilience of the company's brand, deposit base, and business model.

Industry Context

The results reflect the broader challenges faced by the banking industry, including increased funding costs and the impact of the FDIC special assessment. The company's focus on maintaining a strong balance sheet and disciplined expense management is consistent with industry trends.

Comparison to Industry Standards

• Bank of Hawaii's net charge-off rate of 0.05% is lower than the historical average for banks in the KBW Regional Banking index.
• The company's deposit base is described as long-tenured, which is a competitive advantage compared to other banks.
• The company's cost of funds for interest-bearing deposits and total deposits is below the KBW Regional Banking Index.
• The company's readily available liquidity of $10.2 billion exceeds its uninsured and uncollateralized deposits of $8.9 billion, indicating a strong liquidity position compared to industry standards.

Stakeholder Impact

• Shareholders will be impacted by the decrease in earnings and the resulting decrease in share price.
• Employees may be impacted by the company's cost management efforts.
• Customers may be impacted by changes in interest rates and fees.
• Creditors may be impacted by the company's financial performance.

Next Steps

• The company will hold a conference call to review the fourth quarter financial results.
• The company intends to announce financial and other information to investors using its investor relations website, social media channels, press releases, SEC filings, and public conference calls and webcasts.

Key Dates

Keywords

Bank of Hawaii, Earnings, Financial Results, FDIC Assessment, Net Income, Deposits, Loans, Interest Income, Noninterest Income, Noninterest Expense, Capital Ratio, Dividends