Hawaii's Downturn Looks like a Day at the Beach, Thanks to Credit Quality

By Zuckerman, Sam | American Banker, October 26, 1993 | Go to article overview

Hawaii's Downturn Looks like a Day at the Beach, Thanks to Credit Quality


Zuckerman, Sam, American Banker


Hawaiian banks are in a slump, but you would hardly know it.

The banks are feeling the effects of a prolonged economic downturn in the Aloha State. Yet Hawaiian banks have managed to avoid the crises that gripped their mainland cousins during recent periods of recession.

In these islands of waving palms and and gentle trade winds, there are no back-breaking burdens of bad loans, no tides of red ink, no capital melt-downs, and no crews of stern bank examiners issuing ultimatums.

As the Hawaiian economy stalls, the main impact on banks has been a slackening of their once torrid growth rates.

Clean Balance Sheets

Although loan problems have edged up, bank balance sheets are still clean by mainland standards. In fact, the credit quality of Hawaiian banks in the trough of a recession compares favorably with that of their U.S. peers in good times.

"There certainly has been a slowdown," said H. Howard Stephenson, chairman and chief executive of Bancorp Hawaii. "But we haven't had to press the panic button."

With an economic upturn in Hawaii a couple of years off, according to forecasters, more sluggishness is in store.

"Hawaiian banks will continue to perform well compared to other banks in the U.S.," said Stephen J. Paluszek, an analyst with M.A. Schapiro, New York. "They just won't do as well as they have done."

Winning Streaks Interrupted

Stagnation is a big comedown for the state's financial institutions. After years of uninterrupted growth, Hawaii's two biggest banking companies, Bancorp Hawaii and First Hawaiian Inc., broke long-standing streaks of quarterly earnings gains in 1993.

Last Thursday, Bancorp Hawaii reported third-quarter earnings of $30.1 million, 4.9% below the year-earlier net. The dip was due to a special addition to loan-loss reserves to cover a group of credits to a single commercial borrower.

The end of the boom years "has been a shock to the system," noted David McClain, a finance professor at the University, of Hawaii. Bank managers admit they are groping to adjust to leaner times.

"We were spoiled," confessed Mr. Stephenson. Said First Hawaiian president John A. Hoag: "We have had to regroup."

Return to Basics

Hawaiian bankers say they are going back to basics. Competition for consumer business has turned fiercer. That partly reflects the arrival of the first out-of-state competitor, BankAmerica Corp., which bought a local thrift last year.

BankAmerica hasn't made its weight felt much so far, local bankers say. But its mere presence has shaken up the market.

"All the banks are out with aggressive marketing campaigns," said Mr. Hoag. "And there is a much greater emphasis on sales and training."

Bancorp Hawaii and First Hawaiian have both launched major expansion campaigns, buying smaller banks and thrifts on the islands.

Hawaii is one of the last states to bar interstate banking. BankAmerica got in by acquiring a thrift. Local bankers believe the walls will come down.

"We need size and muscle," Mr. Hoag stressed. "We had to grow in-market in order to sustain the onslaught from the mainland."

Otherwise, Hawaii's two big banks are following markedly different strategies.

While First Hawaiian has focused on expanding market share in its home base, Bancorp Hawaii has built up beachheads in the Pacific islands and East Asia. It even owns a small bank in Arizona. Within five years, it would like to get 45% of its profits from these non-Hawaiian operations, Mr. Stephenson said.

Where the Action Was

Hawaii's boom of the 1980s reflected its strategic location in the middle of the Pacific Ocean. Growth on the islands was spurred by robust business activity on both sides of the Pacific Rim.

Capital from California, East Asia, and especially Japan financed resort construction and real estate development from the big island of Hawaii to Kauai 600 miles away. …

The rest of this article is only available to active members of Questia

Sign up now for a free, 1-day trial and receive full access to:

  • Questia's entire collection
  • Automatic bibliography creation
  • More helpful research tools like notes, citations, and highlights
  • A full archive of books and articles related to this one
  • Ad-free environment

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Default project is now your active project.
Project items

Items saved from this article

This article has been saved
Highlights (0)
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

Citations (0)
Some of your citations are legacy items.

Any citation created before July 30, 2012 will labeled as a “Cited page.” New citations will be saved as cited passages, pages or articles.

We also added the ability to view new citations from your projects or the book or article where you created them.

Notes (0)
Bookmarks (0)

You have no saved items from this article

Project items include:
  • Saved book/article
  • Highlights
  • Quotes/citations
  • Notes
  • Bookmarks
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

1

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited article

Hawaii's Downturn Looks like a Day at the Beach, Thanks to Credit Quality
Settings

Settings

Typeface
Text size Smaller Larger Reset View mode
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Help
Full screen

matching results for page

    Questia reader help

    How to highlight and cite specific passages

    1. Click or tap the first word you want to select.
    2. Click or tap the last word you want to select, and you’ll see everything in between get selected.
    3. You’ll then get a menu of options like creating a highlight or a citation from that passage of text.

    OK, got it!

    Cited passage

    Style
    Citations are available only to our active members.
    Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

    1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

    Cited passage

    Thanks for trying Questia!

    Please continue trying out our research tools, but please note, full functionality is available only to our active members.

    Your work will be lost once you leave this Web page.

    For full access in an ad-free environment, sign up now for a FREE, 1-day trial.

    Already a member? Log in now.