8. Bank of Hawaii
Bank of Hawaii
(BOH - Get Report)
of Honolulu closed at $42.22 last Friday, for a year-to-date decline of 8%. Based on a quarterly payout of 45 cents, the shares have a dividend yield of 4.26%.
The company's year-to-date ROA was 1.24% as of Sept. 30, and its five-year average ROA was 1.50%.
Bank of Hawaii had $13.3 billion in total assets as of Sept 30, with 80 branches throughout Hawaii and other Pacific islands.
SNL Financial reported that Bank of Hawaii CFO Kent Lucien said at the Bank of America Merrill Lynch Banking and Financial Services Conference on Nov. 16 that the company's "number one priority" was its dividend, "and maintaining the dividend," and that the bank planned "to use all of the remaining current earnings toward repurchases." Lucien said that Bank of Hawaii might repurchase another $100 million in shares, after $30 million in third-quarter buybacks, depending on share prices and other factors.
Third-quarter net income was $43.3 million, or 92 cents a share, compared to $35.1 million, or 74 cents, in the second quarter, and $44.1 million, or 91 cents a share, in the third quarter of 2010. The provision for loan losses declined to $2.2 million in the third quarter from $13.4 million a year earlier.
The year-over-year earnings reduction reflected a 30% reduction in service charges on deposit accounts, to $9.8 million, springing from the new regulatory requirements in the middle of the third quarter of 2010, requiring banks only to provide overdraft protection on ATM or debit card overdrafts for customers opting-in for the service.
Another factor in the year-over-year earnings decline was $7.9 million in gains on investment securities, booked during the third quarter of 2010.
Third-quarter net interest income was $96.8 million, declining from $98.6 million a year earlier. The net interest margin declined to 3.09% in the third quarter from 3.27% a year earlier.
Brett Rabatin of Sterne Agee called Bank of Hawaii "a consistent performer with solid profitability (whose shares are supported by a consistent buyback and high dividend yield)," following the company's third-quarter earnings release, but has a neutral rating on the shares, as "catalysts for BOH are limited in the next few quarters given trepidation regarding revenue pressure in the low interest rate environment."
The shares trade for 13 times the consensus 2012 EPS estimate of $3.20, among analysts polled by FactSet, and two times tangible book value, according to SNL.
Out of 12 analysts covering Bank of Hawaii, four rate the shares a buy, five have neutral ratings, and three recommend investors sell the shares.
While the shares do appear expensive in the current heavily discounted environment for bank stocks, it's important to remember that sell-side analysts are forced to consider one-year outlooks for their price targets and investment recommendations. Bank of Hawaii has been a clear winner over the long haul, with very few surprises.