Bank of Hawaii Corp (NYSE:BOH)

CAPS Rating: 4 out of 5

The Company through its subsidiaries provide a range of financial services and products primarily in Hawaii and the Pacific Islands.


Player Avatar FoolishMikee (< 20) Submitted: 6/22/2011 4:59:51 PM : Outperform Start Price: $40.60 BOH Score: -10.99

In a nutshell: Deposits have increased and continue to do so, and non-performing assets have decreased since 1Q10, and shareholder equity has been reduced with the buyback program, purchasing 442.5 thousand shares of common stock at a total cost of $20.8 million.

Asset Quality
Improvements have been made and continue to do so, along with the overall Hawaiian economy. Non-performing assets have decreased $3,194,000. Net Charge-offs to Average Loans: 0.36%, with net charge-offs decreasing by $0.5million which is another positive sign of improvement in asset quality. As Peter Ho (President, Chairman & CEO) says in the 1Q11 Conference call: “Our balance sheet and capital remains strong and we maintained our high levels of liquidity and reserves.”

Management Quality
Looking through Form 4’s, excluding stock options, insider activity is negative with some selling taking place over the past three months and insider holdings standing at less than 1%. The CEO & CFO have been with the bank for over a decade, whilst other Chief Officers joining relatively recently (2000-2010). Despite this, they are all highly experienced in their field and management seems to be managing the company carefully and conservatively.

Key Ratios:
Provision for Credit Losses / Nonperforming Assets: 14%
Average Total Equity / Average Assets: 7.69%
Price-to-Tangible Book Value: 2.35
Nonpeforming Loans / Total Loans: 0.65%
Net Interest Margin: 3.24%. This is down from 3.72% during three months ended 31 March’10 however, no reason for concern.
Total Shareholders' Equity / Total Assets: 7.4%
Tier 1 Capital Ratio of 18.41% shows that it’s a conservative bank and has the ability to grow.
Tangible Common Equity Ratio: 7% is below the median however, isn’t in the danger zone and no flags will be raised with such a stable bank anytime soon.

5-Yr Dividend Growth Rate: 13.91% however a flag has been raised as the payout ratio is 50% and although low, it has increased from 40% last year.

BOH is another name to add to a short list of banks which I like. With the banking sector not receiving much love and going through a rough patch, Bank of Hawaii is of the few you can trust. If this was bought at 2009 lows, then big dividend and capital gains have been returned to shareholders. If bought prior to the crisis, then the juicy dividend provided a cushion. If you’re considering purchasing it now, there aren’t many reasons carrying strong argument not to.

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