DBRS: Bank of Hawaii 4Q - Consistent and Strong Results

Summary:
• Net income of $41.2 million was relatively stable QoQ, but the Company once again reported positive operating leverage.
• Balance sheet fundamentals remain favorable with solid loan and deposit growth, very strong asset quality, and sound capital.
• DBRS rates Bank of Hawaii Corporation Issuer & Senior Debt at A (low) with a Stable trend.

DBRS, Inc. (DBRS) views Bank of Hawaii Corporation’s (BOH or the Company) 4Q14 results as consistent and strong. Indeed, BOH generated positive operating leverage for the third consecutive quarter. Moreover, balance sheet fundamentals remain favorable with solid loan and deposit growth, very strong asset quality, and sound capital.

The tourism industry, an important economic driver, remained on pace to break 2013’s record number of visitors, as well as record visitor spending. Improving consumer confidence contributed to broad-based consumer loan growth, and the Company also had solid commercial and industrial and commercial mortgage growth. BOH’s robust deposit franchise continues to easily fund the loan and lease portfolio, as well as a portion of their securities portfolio.

Solid loan growth and a relatively stable net interest margin contributed to higher net interest income QoQ. Meanwhile, noninterest income was up modestly with most line items exhibiting growth that more than offset weakness in annuity and insurance.

Expenses were relatively stable and down for the year. However, excluding a professional and casualty reserve adjustment, expenses would have increased 3% QoQ. Overall, the efficiency ratio for 2014 was an improved 58.4%. Looking forward, expenses are likely to increase in 2015 reflecting growth opportunities and investments in the franchise.

The balance sheet remains very sound with asset quality metrics remaining pristine and capital metrics very solid, especially on a risk adjusted basis.

DBRS rates Bank of Hawaii Corporation Issuer & Senior Debt at A (low) with a Stable trend.

Note:
All figures are in U.S. dollars unless otherwise noted.