Fundamentals keep Hawaii’s banks profitable

HONOLULU (AP) — Take a quick stroll among the palm trees and commercial towers in Honolulu’s financial district and names such as Washington Mutual, Bank of America and Wachovia are nowhere to be found.

The dominant players here are Bank of Hawaii, American Savings Bank, Central Pacific Bank and First Hawaiian Bank, as they have been for decades. And unlike some of their larger, mainland counterparts who have been drowning in a sea of red ink, island institutions continue to post strong, even record, profits. And so far, they have withstood the nation’s mortgage meltdown.

The four banks are weathering the financial storm by avoiding subprime lending, maintaining their conservative practices and keeping in mind the region’s long-lasting economic downturn in the 1990s. That’s when the Japanese financial bubble burst and so did all the frenzied, speculative buying by international investors that inflated real estate prices in Hawaii.

For the past two months, the banking industry has been pummeled by forces not seen since the Depression. It’s not complete doom and gloom, though. Some banks are showing financial resiliency and the ability to churn out profits.

Perhaps nowhere is the success as widespread as it is in the Aloha State. These banks did what successful financial institutions have done for decades: Pay close attention to the balance sheet and lend to people who can pay you back. It’s a roadmap, experts say, that could be used to help the rest of the industry save itself.

Banks and other lenders that purchased or made bad mortgages by the billions got away from the fundamentals. Not so in Hawaii.