The Bank of Hawaii Corp. on Monday said its profit edged up 1 percent even as it more than doubled the amount it set aside to cover souring loans and leases, as fees and service charges rose.
For the quarter ended June 30, the bank reported net income of $48.3 million, or $1 per share, compared with $47.7 million, or 95 cents per share, in the corresponding period a year ago.
The per-share figure reflects a 3.5 percent decrease in the number of outstanding shares in the current period from last year.
Analysts polled by Thomson Financial, on average, predicted profit of 93 cents per share.
Net interest income, the difference between how much it costs a bank to borrow money and how much it receives from lending money to customers, rose 8 percent to $107.2 million, from $98.9 million in the second quarter of 2007.
Non-interest income, or income derived from fees and other charges, rose 4 percent, to $60.5 million, from $58 million a year ago. The results included a $1.1 million credit related to a settlement with the Internal Revenue Service regarding accounting for a particular lease.
The Bank of Hawaii increased its provision for credit losses increased to $102.5 million at June 30, 2008, up from $91.0 million at June 30, 2007
The bank more than doubled its provision for credit losses, or money set aside to cover bad loans and leases, to $7.2 million, from $3.4 million last year. While most banks in the country have been increasing such provisions to reflect the declining housing market and credit crisis, the Bank of Hawaii said the increase also reflects elevated risk in its air transportation exposure due to the recent share rise in oil prices. Rising oil prices, one of an airline's biggest costs, were cited among the reasons for Aloha and ATA airlines shut down during the quarter. The company had a total of $81.3 million in loans and leases extended to airlines at the quarter's end, down 17 percent from a year ago.
Net charge-offs, or loans and leases written off as unpaid, rose 39 percent to $4.7 million, from $3.4 million in the 2007 quarter. Commercial loans and leases that went unpaid accounted for 24 percent of the charge-offs, more than doubling to $1.4 million. Home equity and residential mortgage charge-offs also more than doubled, to $606,000.
Nonperforming assets rose to $6.7 million, from $6.3 million a year ago, reflecting increases in commercial and industrial loans, which quadrupled to $1.1 million; foreclosed real estate, which rose fivefold to $229,000 and home equity, rising 3.2 percent to $1.2 million. Notably, nonperforming home mortgages fell more than 1 percent to $3.8 million.
In midday trading, Bank of Hawaii shares rose $1.83, or 4 percent, to $48.40, with trading volume well ahead of average daily volume.
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