This bank beat analysts’ earnings estimates by $0.09 last quarter. The shares have a current annual dividend yield of 5.17%, paid quarterly.
Bank of Hawaii Corporation (BOH)
From Hendershot Investments
Bank of Hawaii Corporation is a 123-year-old regional financial services company with $19.8 billion in assets, providing services in Hawaii, Guam, and other Pacific Islands. Bank of Hawaii is the second largest bank in the state with nearly $20 billion in assets, 67 branch locations, 367 ATMs, online and mobile banking services.
Bank of Hawaii operates in a unique competitive landscape where the top four banks control more than 80% of the regional market, providing the bank with a sticky, low-cost deposit base that reduces its sensitivity to pricing pressure. In addition to its low-cost deposit base, Bank of Hawaii is a low-cost operator, evidenced by its 2019 efficiency ratio (non-interest expense divided by total revenues) of 55.7%, which places it among the country’s most efficiently run banks.
The conservatively-managed bank maintains a pristine balance sheet with solid asset quality and robust liquidity and capital levels, far exceeding regulators’ requirements.
During the past five years, Bank of Hawaii has banked profitable growth with revenues compounding 4% annually, net income growing by 9% annually and EPS increasing at an 11% annual pace.
Since becoming a public company in 1972, Bank of Hawaii has paid uninterrupted quarterly dividends to shareholders, which have increased at a 10% annual pace during the past five years. While the bank has suspended share repurchases, it is still paying a substantial dividend and increased its dividend 3% to an annualized $2.68 per share.
Bank of Hawaii reported net interest income rose 5% during the second quarter to $178 million with EPS down 30% to $.98. Results for the second quarter included a provision for credit losses of $40.4 million compared to $4.0 million in the prior-year period, reflecting the uncertainty caused by the coronavirus on loan repayments. Loan and lease balances increased 10% during the quarter to $11.8 billion with total deposits up 12.5% to a record high of $17.4 billion. The bank performed well in a challenging environment with tourism halted due to the virus, yet the balance sheet continued to grow while maintaining strong levels of capital and liquidity. The efficiency ratio for the second quarter improved to 50% from 55% in the prior-year quarter.
Investors banking on attractive long-term returns should consider Bank of Hawaii, a HI-quality market leader with an efficient cost structure, profitable growth, and an attractive dividend yield. Buy.
Ingrid R. Hendershot, Hendershot Investments, hendershotinvestments.com, 703-361-6130, September 2020