Bank of Hawaii Corp (NYSE:BOH) shares are down on Monday, after the company reported its second-quarter earnings.

The stock outperformed the industry in recent weeks, while its profitability lags that of peers, according to Piper Sandler.

Analyst Andrew Liesch downgraded the rating for Bank of Hawaii from Neutral to Underweight, while lowering the price target from $70 to $61.

The Bank of Hawaii Thesis: While the bank's net interest income and margins should improve "as earning assets reprice higher," much of that benefit is likely to be offset by higher preferred dividends following the $165 million offering in late June, Liesch said in the downgrade note.

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"As such, we think earnings growth could be challenging in the quarters ahead," he added.

Over the past three months, Bank of Hawaii's shares have gained 11%, while the SPDR S&P Regional Banking ETF (NYSE:KRE) rose by around 5% over the same period, the analyst stated. The bank's shares are currently trading at a "significant premium valuation compared to regional bank peers," he added.

"Of note, Bank of Hawaii has the highest cost of deposits among the largest HI-based banks at 1.81%, but that provides it more opportunity to reduce rates than peers, which would serve it well in a Fed rate cutting regime," Liesch further wrote.

BOH Price Action: Shares of Bank of Hawaii had declined by 2.69% to $64.03 at the time of publication on Monday.

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