BOH - Earnings call transcript Q1 2024 | Bank of Hawaii Corporation

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Operator

Good day, and thank you for standing by. Welcome to the Bank of Hawaii Corporation First Quarter 2024 Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Cindy Wyrick, Director of Investor Relations. Please go ahead.

Cynthia G. Wyrick

Thank you, Marvin. everyone, discuss you the the of welcome today joining first to XXXX. we as financial like and for thank us quarter I'd results for

our Peter today IR our Park. CFO, our me Chang Officer, CEO, Joining Dean Shairson; is Manager, Shigemura; Chief and Risk Brad Ho;

may Before started, a the assumptions our are remind there are let materially you call that today's conference differ believe we contain while some projected. results we of those get variety actual reasons will forward-looking me that statements. from And reasonable,

the During under referencing the available call a link. slide this boh.com, release. morning, Investor the we'll presentation be as Both well earnings website, are these of Relations on our as

like call Peter? And to now the turn to I'd over Peter.

Peter Ho

your produced of Liquidity excellent. Bank for significant of quarter. basis stable expenses the color I'll Thanks, discuss broader the funding call to conditions quarter. Fee then on granular on Cindy. deposits capital levels with Good the Credit solid Dean morning were another XXXX. steady X commentary credit. income showed for and for or then the appreciate in of remains financials. Brad and touch NIM, the Hawaii. start then on interest you good first the Hawaii points performance will quality more quarter in We some hand Loans islands. here afternoon, market some for with grew. I'll the financial and down to off over quarter were improvement. while and share Bank directional operating everyone.

side. little the by begin Let touching deposit a on me bit

crown history, built franchise think, at served know, time. This one to space extremely methodically you, over know, you be consider we I XXX-year As our well. many relationship us has a our of deposit jewel, our as

over up cycle. As current moved rate rates and betas have the market

country state's of holding As most deposits. deposit most FDIC of XX% and the Hawaii locally the you is know, banks the X reported with market maybe unique of headquartered

balances in tenure bit multiple a our has been amazing to segments. have This us we here, what see enabled tumultuous the customer and across a deposit can industry. You across stability has base for great period of maintain

also of in deposit the of industry improve in of smallest cost Our X quarter below cost the us increase total second norms. helping levels abundant. points remain of enabled deliver meaningfully since has total trajectory deposits to The deposits increase of is quarter us to franchise the beta. Liquidity the XXXX, well basis

X.X%, growth up remains which Year-to-date the RevPAR Residential remained the The arrivals reflecting up much continues stable X.X% and remained on respectively, strong The broader market, Maui, on prices respectively. U.S. up for on employment February, to levels expenditures XX.X% moderately fires. Oahu continued homes mainland XX.X% significant Japan single-family and steady. and real in with market. Maui ex visitors growth X.X% greater levels industry both from and ex in outperform and islands visitor tragic median arrivals visitor Lahaina and expenditures is total condominiums. picture last year. estate These by X.X%, much, however, impacted were be in the down and the continues of to were

the now Brad. call And me turn let over to

Bradley Shairson

Peter. Thanks,

continued XX team beginning, laid here development going Before management Hawaii foundation forward. at risk sound Bank predecessor, acknowledge after retired and management Mary the leading for a strong like Sellers, of risk who I'd recently to last of Her my the years. for vision

to credit refocusing performance has our the core Mary greatly bank's time, her our contributed many of long-standing to oversaw lending the philosophy of relationships. During lending strong in book and for years. a markets This towards

portfolio X% of core XX% Western in relationships. is those pride Pacific client support As community, Bank our our of just X% Hawaii and are mainland takes serving in and loan Mainland great loans Hawaii, our

change X.X% from growth, about loan The end we which and much state, current our From growth XXXX mentioned lending reflected As our I of through just philosophy I steady walk last the organic. year, hasn't been is per to loan averaged last note year. quarter. has been of you'll the really in there end

consumer loans or total which side, of $X.X on predominantly XX% represents mortgage real our residential is basis are XX% XXX or of our against remaining of billion, loans home secured respectively. the the of XX%. average portfolio average On comprised XXX estate. our lending we a LTV The FICO personal of is combination equity scores with where and of a weighted auto XX% are portfolio and a

to commercial. on Moving

real assets, of a is Our only total share of with is size equates or book. This industries in is loans. $X.X weighted average about billion commercial estate billion across XX%. carries $X.X of book to of well commercial which XX% The and LTV largest portfolio diversified our loan XX%

Given a Mainland. the is look of getting let's attention CRE which in the a does deeper industry, lot portfolio, our at differ from take

rates Hawaiian Industrial of stability supply. limited hover relates X% the than of office its the there. with the Hawaii reflective multifamily types. of continued averages. A here than currently economy XX.XX%, its available At and history Starting historical lack versus the market Oahu, of X.XX%. of the vacancy remain across land a estate vacancy historic stable, vacancy higher history of with long for our of reduction in caused all this construction, on to part less rates story average temper around big in average. supply and conversions XX-year property trend slightly will to long-term which of its office likely Office and has Retail XX-year limited remain X.XX% continue par low, real just new of space has to vacancies vacancy is

or makes footage million annually which same square XX multifamily, or retail XX% for over opportunities square that The estate repurposing Similar even X.X% feet only the X.X% X.X% condo X.X across types last conversions come increased shift. years. has annually and or time feet and actually by down annually for stories space last to million limited both for balances increased X.X has over demand total with hotel. when square have and greater over period. Office industrial, a at that Looking office real reduction for a inventory continues years, the supply XX property all trend from

of Additionally, construction creates overbuilding prevents and that and new resiliency durability. lack

see bust. You boom on CRE supply just don't known to which been and here in to Hawaii, lead Mainland the cyclical a to nature has

to lodging our market. Turning

You XX can annually. decline see on X.XX% over a additional that the slight past with in space story no applies square the fact, of to hotel same inventory footage years,

Additionally, from as RevPAR have occupancy recover continued visitors, rates including the those been upward from Japan, trending and solidly international pandemic. who to have

types of X.X% greater Our being with sector CRE total diversified is amongst than no property well loans.

year consistently types X.X% average LTVs applied no to later. X.X% And below property with XXXX all maturities with of next Our at only conservative loans of our underwriting than and different or more those has weighted mature XX%. are our in been scheduled have year due half wall across maturing loans this maturity

LTVs, that that's CRE loans of if than at XX%, X%, LTV distribution than our less Looking up metric million our for the a X/X risk or greater in of CRE with we just XX% than tail million percent. exposure portfolio of and $XX the portfolio less and to move any totals $XX has

X% remains of exposure XX%. the and and of LTV than office manageable have portfolio low office X.X% Our only with only criticized greater and loans

next than totaled the total or our X million over $XX exposure. less X% outstanding of years maturities Our office

XX% is carry average LTVs in and XX% with office downtown space Additionally, just located those of guarantees. of of XX% Honolulu

of portfolio. our high And Only the where has does to X this limited severely multifamily the rental about drives are greater cost is the supply, LTV market Scheduled strong consistent Turning book than next combined mature not than or more million X.X% $X a and XX%. the XX% over the XXXX demand. of book later. years of maturities until less than ownership are XX% with

from remained metrics from QX quite X strong. metrics are to criticized a and also basis with All at Net million weighted around loans ago. credit year and stable are loans the end and for linked prior overall points stable quarter have last estate annualized, basis $X.X were at million criticized quarter, of points real from delinquencies million X.XX% with the up leases Looking X and up points our Nonperforming quarter. linked up nonperforming charge-offs remained with for stable period and remained allowance year. asset and the past prior to assets That's loans a for flat of slightly quarter up $X.X points the assets at credit basis at X basis but X the X.XX% $X.X at compared loan-to-value on average secured from the XX%. Delinquencies million was $XXX.X year-over-year. losses down this quarter quality

on our turn The ratio of basis and year-over-year. ACL I'll quarter, the quarter was Dean and from this end prior that's the to of X.XX% the points up now to update basis X an outstandings over for up X points at financials. our

Dean Shigemura

Brad. a positioned and pay deposit well first we hedging a direct interest environment billion end cash floating runoff decrease yields. exposure interest the million subtractive with XX% notional range interest received well These in $X.X deposit linked XXXX of fixed investment flows smaller cash you, uncertain at quarter, net this income to adjustable income XX% linked to our sheet repricing Repricing lower program interest balance into us at our $X and $X.X while balances and continue from of first a increased the quarter Thank swaps. contributed shift rate quarter. from $X.X attractive quarter, of rate In low have asset portfolio rate from million of actions continued million. And asset $XXX.X million mix was as as we maintained for of the additional outcomes. Net and

income one addition, as float as In the linked by basis. of interest day quarter less approximately which in $XXX portfolio quarter, million by was also $XXX,XXX securities earning to quarter fixed our resetting fourth during reduced interest a impacted interest investment net income on the well

result, points by a margin X net declined basis linked As interest quarter.

and In supporting first and earlier, income assets higher, flow cash maturities funds net remain to million. $XXX margin reprice As interest noted Fed unchanged. our as prepayments the quarter, was from even continue the

to flows floating continue and maintaining flow on rate healthy and than like while spread cash loans loans. reinvested being into reinvested cash fixed investment greater on into assets We cash being enjoy from reinvested yields adjustable X% securities,

continue swaps annually. paydowns billion include ongoing We annual provide in loans and assets, $X.X rate of supplement forecast which the and which be from will to to an interest maturities flows to reprice that our cash $X billion, investments

repricing are flows overall cash runoff of As of have well assets increase as these and yields new asset our in to expected continue a are to higher, increased yield. asset steadily result excess our yields

of slowed granular million the consumer linked pricing, and is to deposits, of quarter. growth growth disciplined expected As Peter cost deposit more continue lower through rate the through have costs as $XXX first in increased as well quarter which mentioned, our which significantly in

expect conditions continued outlook to has on mix a unchanged However, million costs. Noninterest the as for slightly rate in overall rate in our REITs the we deposit the pressure result cuts quarter and to first for higher as steady. $XX.X from market X were scenario, pricing fourth volumes quarter higher totaled transaction longer and deposit from income shifted

We expect slightly noninterest quarter to volatility. market due to recent be core in income the lower second

is expenses taxes as we practice, in During and the managed payouts quarter payroll continue. as included conditions the to restricted stock million our first $XXX.X our related Expenses which disciplined vesting. inflationary million, a seasonal manner and were benefits incentive quarter, in $X.X of first

million charge million the of or $XX.X quarter recur. addition, adjusted was a expenses $XXX.X as expense well fourth level adjusted the the quarter. million. severance million $XXX.X quarter. when in in for linked resulted expense quarter level first $X.X in first savings core in to as In recognized FDIC Thus, X.X% were not of expense Thus, expenses $XXX,XXX in core $XXX,XXX was we Core quarter have the higher adjusted assessment the the industry-wide expected special the

than guidance. to evaluate million, XXXX levels X% our is normalized We lower increase X% this expenses XXXX in expenses prior have expense and of continue and to expected normalized to revised from $XXX our

June. will the quarter, special additional actual recognize we nonrecurring expect industry-wide informed amount second has an assessment. indicated to that The in FDIC FDIC be In we the of

$X.XX. guidance. expense remainder $XX.X want increases first $X took to of note Increases share, in quarter XXXX, the summarize the In of that respectively. of income merit at are beginning annual included and $X.XX in addition, April and To million and effect performance, common per the million, earnings per was the net financial our the of share I was

rate recorded for was on The XX.X%. quarter quarter. in this is $X a expected first credit XX.X%. XX.X%. in return equity approximately be losses rate was tax million the effective tax Our The XXXX provision We common of to

the continue of and regulatory As minimum excesses has we been our experience since our to to first prior quarters, been organically continue the capital the from XXXX, healthy quarter well-capitalized maintain above grow we requirements.

are reflecting Our our to mix. low-risk total asset below of median, nature assets well assets risk-weighted ratio peer the

$X common under and quarter declared common did we per quarter, our the common dividends preferred stock share $XX repurchase of During a for repurchase dividend million our not out share the finally, during And first program. shareholders stock $X.XX of XXXX. and We in million dividends. paid shares to quarter second Board the of

Now the to back turn call Peter. I'll over

Peter Ho

to be time. Thank Great. you, our this concludes prepared entertain That happy at questions remarks. Dean. We'd your

Operator

first comes Instructions] the from of question from [Operator line Shar Jade Our Barclays.

Unknown Analyst

Maybe first just with margin. starting

should over we As the the on still expectation we bit flows trajectory this cash at quarter. down about a few do same continuing quarters? how next of I margin little came Should down, at be we with come costs, of time, the securities look cash that to thinking the the guess, deposit there's tail

Dean Shigemura

Yes.

than the asset XXXX. from we've about deposits, our environment, on what balance we rate approximately, to had at in accretion lower with of flows, million $X side much, for the cash remix deposit to longer in rate then continue side, at on been And the look the much what you a when our and the we of in higher and somewhat NII. total, repricing liability experiencing expect sheet but expect interest experienced continue and we repricing do the So

Peter Ho

meaningfully deposit quarter, -- saw completely, call pretty pretty not but the really 'XX. November in of We fourth costs the Yes. late it, meaningfully, flatten into fourth much

month were from total January at mark basis if November forward. XX per 'XX, so that deposit November you And points costs period, at that look about through average growing

So through number points. of X the slowed like basis this first that month, to half

to X a step trend, anyone's that basis just to per it's points basis points X big basis but X. towards X as to So down, hopeful that turns tough or but plus point or still month. And too guess not whether tell. We're

against going reasonable quarter chance NII what the we So fixed way were say. call cash of is funding the asset We'll or as in number the -- quarter. tough ahead pretty the last we from up with the whatever didn't another, coming tight. pass. it's one-off so this I to out a be, some are well. thought numbers quarter, It's to items I the tail for happens quarter end that that come see I'd one There standpoint to But think just flow NII at the too a the accretion getting cost we a just for from make get quarter. And had

Unknown Analyst

Okay. Great And color. to guess, then shifting, capital. I

general to X% in and continue What's mentioned You grow range. capital, there, really the what too back the the I you strong it, levels broader getting longer-term profile authorization. capital given that, is And stock high with at point staying growth buying feeling here? buyback guess call

Peter Ho

Yes.

the regulatory operational So front I of industry broader as think about a kind think capital on lot an well the from a perspective. both standpoint from top-down to or as just standpoint

uncertainty From fair like amount to going it so I'd the up, in pushed capital hold where there's And levels. to the a the around down, feels caution, from still bottom of fair be amount think I there's of a top still kind say, of are marketplace. banks

capital that it think we a idea our a repurchase therefore, was alternative stock so better eyes thought good idea and growing in now. than for the of of the And probably shareholders is,

time. and helpful, be change from would down would kind trajectory the clarity the of our bottom-up that greater be environment Now to begins helpful. Improvement top and probably over

Operator

moment you. for One Thank question. our next

question of Our Rulis line D.A. from comes next Jeff Davidson. at the

Jeff Rulis

quarter it of total to costs, X costs to on, spot interested sort averages. interest-bearing in the the how that follow full both by on about month just Peter, basis you those talked do deposit follows compare maybe and if rates points, deposit

Peter Ho

Sure.

for for cost the X.XX deposit give average average March that I deposit total And ]. of -- average interest-bearing can [ you costs. was So

So March that's [ -- yes, ]. was for average X.XX interest-bearing deposit costs

[indiscernible] pretty So

Jeff Rulis

quarterly. Okay. X basis points or so the higher than

kind that's like you said, it off. So the trend. of leveling And

to wanted figure. that Just check

is that from that the where starting the terms were pipelines it's maybe pause just maybe I I up improve kind the and If to year at various settling earlier on for but that of a your people giving Okay. longer customers that, the maybe was in inputs the on on of maybe heard of kind guess pipelines, you rate all picture about to cuts thinking loan higher there in actually for in some pipeline in loan higher not rates are in are longer occurring. Are year-to-date? they hop

Peter Ho

side Yes. as demand Jeff, talking to pretty good I'm as been interesting. rates recently, on some where that begin fall pipeline seen lending good we've quickly. the rate you again has in And residential spaces relief, crest they see And volumes. movement. the in we pickups have get some up most more then

fall depending was the if the is equity an pretty on that's year for on for basis. We on, average outlook, X.X% we for down quarter possibly for But longer. We'll our that get see that how quarter. for So my the out. hoping belief were flat. higher rates a basis. average down this rates was an based resi flattening X.X% our Home outlook are a one, And balance of on

lot think a the think, cautious, more the then rate as in real that's part confidence a well consumer secondly, not relief. And consumer customer. I as, So estate bit commercial driving I to both of be little the in

Jeff Rulis

Thanks, Peter.

could. one, if last I one And Okay.

in takes interesting of supply Just industrial industrial, on idea island from the be on had hearing just conversions the vacancy and puts is in and is no history that there, that CRE of of lack to the stats. Oahu some. there Curious some the growth maybe there. to I that really kind interested if office I'd of low as

Peter Ho

of lots is of and for And this very the from Yes. configuration entitlement different to place. like. not reasons, is side, a Well, is the there's onerous conversion conversion estate where Hawaii kind just of industrial the office so real much

meaningfully those the we in to a amount to fair corridor. be get office that's conversion tough though, multifamily of it downtown classes So converted. asset pretty do would and is Where happening see here

obviously, housing we market constrained. that's it's office vacancy not us, a still completely XX%, think just and is, for And a but disaster, because a positive XX% it's the we're

operationally issue to vacancy see sorts the trend as more the versus in dysfunction to can issue. starting you into It's any the So kind shoots housing probably space, island. than that an office to of that more industrial just from industrial. And office green factors, all that's like and for of imagine, is

Unknown Executive

really add has that you little the space X. down in just years when I'll office can than And past previous come a graph, more quickly that look you at see that the X

So it's the down to X there square years. And the are come feet there X for X.X million last in XXX,XXX feet down square it another in forecasts or so years. next out

Operator

Our next Liesch Piper the of Andrew of question line from comes Sandler.

Andrew Liesch

do Just curious on are individual Deposit a some relief what ]. public seeing sounds the you leave But deposit you guess, hearing fire guys like Lahaina-related in mix grow the what relief think you level? trends. stabilization It are deposits I you Or you've and here? efforts. at you from funds client and had then point of reached [ can

Peter Ho

question, Yes. Andrew. Good

saw was to to the and some from numbers the as bumpiness in QX there it QX. So QX is you way QX to really, to about think QX,

in, now essential quarter, Maui quarter. at kind down lot in of and aid type and spiked run And average of so $XX.X had a flowed we we're $XX.X the the out in quarter of QX, past deposits. of QX, insurance then that money and then up that And we kind billion. were flowed billion $XX.X for QX in this billion

that mix what that interest-bearing. billion think kind in $XX.X seeing I slowdown durable. a foreseeable off pretty seems So And meaningful number from deposit of to pretty the is mix future shift noninterest-bearing That is amongst for mark. of we're the go to probably

like that look in X it's 'XX, 'XX, $XX by noninterest-bearing month. the you QX runoff 'XX if to of is kind number about So quarters kind first was $XX of million. about then X/X from that down million current, of per at that of And

were have we seems done see, thinking that but period, that can that mark the dramatically. as bit may a end out frankly, got that completely sure this runoff slowed be that we cut that you kind noninterest-bearing. rate little I'm rate in or a And has with So of of of point. as we're would not pushed X, the runoff like But pretty at

Andrew Liesch

Got it.

that, on had at Okay. That's And to the then, that the expense quarter the in the X% impact first include you growth helpful just does that guidance, seasonal Dean, really $X.X XXX, the million, there. X% correct? off so

Dean Shigemura

assessment of It does would $X.X exclude the include special Yes. FDIC. million but the the second

Operator

Motta comes Our the next KBW. Kelly of from question line of

Kelly Motta

might to the circle margin. I back

it, as think increased anything your points coming takes is was I at on loans million coming, flows investment XX there was to if of this in longer X and we we Looking of and of only $XXX asset kind the call environment? surprised I Slide higher the as the ahead with repricing see dynamics wondering basis any quarter. think in and book earning portfolio just unusual of look yields or a about puts to about for QX,

Dean Shigemura

some Yes. investment down we yield securities flow to fixed brought that One I had thing repriced mentioned, portfolio. the portfolio, on investment out the as to that point that, is the

in came So an And impact. down, loan down. balances that addition, volume came the had then

on had have also would the impact that had So the overall been stayed flatter, yields. greater. If an we increase

Kelly Motta

think had million into into from right. in earlier about going I And back expect asset helpful. repricing earning you over quarters. $X All of said next couple the Q&A, That's in then the Okay. NII you about,

wanted or sure clarify to it correctly. to to that the kind wanted if the over on make the I'm that's of Just just quarter, loop course next I year close of commentary understanding

Dean Shigemura

Yes, per It's quarter. per quarter.

Kelly Motta

are. proactive I I'm it's Awesome. how the love wondering you that? piece overall in office. But wondering it's of size matures if quality. office it I of of the share you guess how up? and not of X/X strong sort there's out, there's like kind a an couple just maybe of it's given if started bank, and credit question, of know all reaching how a that years to early -- a strength really the the last just on proactively to I been that's out looks can those of really the hold assessment any It XXXX. and highlights know large portfolio going any slides things asset is borrowers insight work I those with gotten borrowers with of

Peter Ho

about I bank is quality with we're mean Yes. the to are we and size in our Well, intimacy our of the of a things one important contact great have the us. really with relationships customers

and And as types and matter, restructuring of times at so in with of on it there's our that we're of so or not of frequent we're where conditions a contact reason course, we'll office this thinking being working how loan sector, all book Kelly, loans. The is the all a But there, that at heck clients pretty do office. of we change, about Should to too lot not different this about feel or for we now, obviously, to conversations. much stress good seeing despite fix be a begin have loan point. title more

Operator

Chang for would the Thank like I concludes remarks. you. Park back session. to question-and-answer to This closing now it turn

Chang Park

thank Well, you, everyone, today interest Bank Hawaii. and joining us continued for your of in for

have free feel either day. Have me or any to today. always, discussed the Cindy on out As reach of questions a great topics please if to any you

Operator

for conclude you This program. today's conference. the your Thank in participation does

You may now disconnect.

Bank of Hawaii (BOH) 22 Apr 242024 Q1 Earnings call transcript