BOH - Earnings call transcript Q3 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 Third 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 speaker today, Chang Park, Senior President and Investor Relations Director.

Chang Park

Good morning and good afternoon. Thank you for joining us today for our third quarter 2024 earnings conference call.

our our Officer, CEO, Shigemura; Jim Officer, Shairson; is and Ho; Chief today Satenberg. Brad Banking Brad Chief Polk; and me Chairman Peter and President Risk Joining CFO, Deputy CFO, Dean

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

we'll be as like morning, Investor a slide Both During these to well this the now, on to the referencing presentation as call over boh.com, Peter. the of I'd call the Relations link. And under release. earnings turn our are available website,

Peter Ho

the pleased of another third expenses increased Thanks, Net in the basis. income Net to NIM XXXX. notably remains Fee performance basis. second Chang, earnings pristine. credit expanded good Hawaii quarter. report on or income quality and deposits solid per quarter and morning levels Loans on interest and fell quarter, good improved income grew in diluted afternoon, and for and linked capital share straight a is the operating a everyone. Bank and grew linked

average X.X% and linked basis. measures continue quarter step-up islands. basis loan time a Deposits on our deposit As stable financials. The in highlighting balances. Brad all meaningful up ask on up provide on I on detail credit sheet perform modestly will spot a spot with higher the across further comments will in quality and a well, the an balance is well on our and to levels of provide spend linked I'll few market custom, average little the Capital in then conditions balances top improved to QX. and performed Dean

the the hold market of for as Hawaii XXXX annual to position deposit FDIC measured We are by share in again summary top pleased deposits.

medians. Unemployment track continue be elevated modestly continue but track to on to Oahu in the of at residential peer from impacted well of up Hawaii on below total single-family trend arrivals for pre-pandemic real and X.X%, for prices arrivals, well, and lower stable said below cost XX Both estate year-to-date Visitor to median deposits both well continues by interest-bearing market be to cost average. national with basis. remain sales Median days. condominium can levels. continues below a remain days Maui RevPAR. Same

a let Now turn to few the Brad? me Brad discuss on call credit. over to trends

Bradley Shairson

Peter. Thanks,

in with and local decisions. I'll make lending allows Hawaii always, us philosophy. This We our our to Pacific. start the leverage Western core sound As off focus our credit markets on to expertise

for Additionally, This is are to where contributed on that historically X% clients a both our us we performance the Mainland. Hawaii, of XX our with that our clients support Mainland, where consumer on about both resulted X% majority side we of in and credit combination Western portfolio loan the have book well. is loan and strong just and Pacific been doing clients has greatly our XX% our and in relationships, Hawaii has commercial The long-standing business the years. know over XX%

private ]. averaged our From As XXXX lending however, been annum. growth suppressed The I mentioned per XXXX, philosophy about quarter-over-quarter. loan demand I This [ walk current there you'll loan has slowed a reflected to is the employment and organic. little is our year, X.X% steady through from notice has state, in just growth, growth change through due loan we which

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

commercial. Moving on to

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

Hawaii estate Industrial real almost let's that bank's of dynamics of and to economy real Given the very the The strong Oahu little portfolio fluctuate is estate Vacancy stable. at market is real supply. constrained vacancy secured, due in Hawaiian estate the loan XX% to market. its rates rates a look continued office and of X.XX% hover X% average. X.XX%. XX-year towards vacancy is average continuing return a its office XX-year than over reduction its vacancy low. versus around just conversions, XX.XX%, just has historic to the keep higher currently space Office trend will low, likely office At

rates high vacancy the vacancy multifamily almost over to time same the period. historical demand XX% X%. XX years across driving housing almost over with inventory with constrained Retail growth the for office that no on just and down is ongoing remains coming averages. remains down board And past now The par space

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

between sizes. with average And applied carefully managed loan LTVs XX%. been loan has weighted underwriting is and individual conservative consistently XX% all exposure low with Our average

to Turning maturities. scheduled our

have loans Only later. loans year or wall. our maturity in mature of due of next are XX% to mature in than more XXXX X.X% We half no and QX,

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

points. metrics strong. this low basis XX have remained remain metrics slightly QX. XX quarter compared to or from and quality at quite remained quarter, million annualized, overall linked Looking past X $X.X credit at increasing basis basis charge-offs our up Nonperforming remains points stable asset point stable, to Net assets

last as of X.XX%. basis slightly grew reaching Criticized also end, stable, points just quarter have quarter than overall. been XX Delinquencies assets points basis higher X at

However, slightly decreased to would X end. and Adjusting repaid subsequent the to in criticized quarter have for X.X%. loan actually full quarter that, rate

was Dean ACL points the on X.XX%, X our and an As $XXX.X the now The to on from for the $XXX,XXX of turn losses our quarter the leases, on loans basis financials. an ratio point will and linked about basis $X.X outstandings ACL year-over-year. I to update ended and X period million, million down prior this allowance credit quarter year-over-year. over down at update up for up for

Dean Shigemura

second you, margin basis from X increased third the income net interest interest Thank and points, net quarter. the our Brad. In by the quarter, trend the million by $X.X increased continuing

net runoff the in driven by offset reinvestment million cash partially and repositioning $X.X swap interest portfolio, in income mix actions, securities, increase portfolio assets increase sheet was repricing, by flow deposit of our and the quarter, balance including an Linked earning shift.

earning million regard With of maturities from cash generated our repricing $XXX to quarter, flows and cash third assets in the flow prepayments.

flows from all reinvested yields. reinvestment interest $X.X securities have of into of these into reinvested were generated million that higher reinvestment Assuming incremental from cash. and would net cash quarter cash the loans flows Such light from products income in approximately

mix $XXX the quarter. of decline to deposit balances in million noninterest-bearing has deposit interest-bearing low million time, This by same linked continued same of average the declining XXXX. period $XXX with yield slow to At shift compares and a

$X.X such of shift mix Assuming million interest income the third by quarter. the majority interest-bearing negatively balances impacted higher-yielding in these deposits, shifted net into

improve Fed continue income. million income decrease rate. quarterly gradual interest interest XX funds of our net ultimately basis net our the to The $X.X expect the is expected Fed We to to to from initial in points easing add

were basis funds quarter these in that will rate assets earning immediately and changes XX quarterly funds. the billion income Fed total securities, earning consisting rate decrease rate particular, and at investment end, reduce floating of in Fed Fed loans The funds million. interest approximately In impacted assets $X.X $X.X point by from rate-sensitive approximately by swaps was

point that total in deposit the At also yielding billion deposits the rate the at and which Fed time, demand end, -- same also excludes impacted interest were that noninterest-bearing by $X.X basis accounts rate-sensitive net $XX.X change were immediately funds by interest quarter an immediately million, XX funds increase positive of or $X.X income less. rate points approximately immediately quarterly expected The in approximately of the impact rates XX will Fed quarterly basis million. long-term decrease with

impact immediately. deposits repricing maturity which to demand to immediate due upon NII be compared positive savings interest-bearing as then the between long-term turned Thus, accounts, there deposits time negative is X repriced to impact be initial will out difference The to can time and short-term X reprice and an quarters lower.

total XX% the of are time well X next to total to reprice mature as our the deposits and to XX scheduled We of time time XX% scheduled are mature improve deposits next and positioned are in months our in margins months. deposits currently

with repositioning forward includes flow of rate and rates. million and X.XX% fixed reduced by balance starting our to million we notional maturity million terminating rates. notional actions higher spot-starting response million In as forward This at executing by also our $XXX interest the adjust quarter, rates changes fixed took relatively swap rates third shorter swaps of well swaps sheet as $XXX lower $XXX X.XX%. notional active swaps, $XXX average in pay of full fixed at rate active lower receive $X.X in portfolio to at of repositioning received XXXX. interest pay fixed, fixed XXXX to $XXX an our in rate billion starting average become The swaps will and million and to The reduced from the interest swaps X.XX% rate executing

that securities Fed a purchased income $XXX XX net have to spread margin. to interest basis we floating and positive our rate funds of addition, point improve net interest In million

end at asset rate end XX% fixed the the at XXXX. Our quarter, exposure was the of down XX% from of

interest expect securities portfolios continue and changing our to in manage this advantage to opportunities environment. We rate rate take to swaps actively of

the $XXX,XXX expenses in a industry-wide quarter. core $XXX.X fourth not $X.X salaries of core million of Class $XX.X mortgage onetime ratio the core quarter quarter, million volumes we million income as million third excludes assessment, expenses to recognize continue This quarter. Reported this the $X.X related which Visa we recur. onetime in in second manner. be improved. third our the fourth and primarily $XX core item, we expenses due third core were in that expenses were in derivative quarter, $X to Thus, million up customer increases the and are for quarter B continue the quarter in $X.X quarter, improved the sales, charge special million noninterest range second transaction benefits a the change. million loan of the severance $XXX.X to other disciplined linked of $XXX,XXX expenses trends In FDIC to expect million to modest fourth Noninterest totaled experienced merchant, and compares quarter, income expected to to the $XX Adjusted the up a as million manage of a expect and as in conversion from and to expenses revenue in in

evaluate core million in continue quarter, normalized levels of net to X.X% from summarize X% respectively. was income third remainder $X.XX $XX.X the $X.XX, increase million We per of increase the expense and an share, and normalized in to financial to million. To expect XXXX per of XXXX share $X.X earnings common was and expenses expenses performance $XXX our

XX.X%. credit on Our this We quarter. $X common of provision return a million equity losses was for reported

The is and XXXX of effective be rate the was tax year tax XX.XX% quarter for rate the XX.XX%. in expected third to the full

continue maintain well-capitalized above capital healthy minimum We grow to our requirements. and regulatory excesses

ratio to Our capital XX.XX%. total increased capital increased XX.X% Tier X and to ratio

due by primarily declining from securities year. in comprehensive loss and last rates continues down the an was from decrease continued well prior million as value $XX the fair down The form as interest $XXX AFS $XXX million the was increase other quarter same runoff. decrease quarter, the period million long-term caused investment linked accumulated period our to and Our of portfolio third in to

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

preferred we that in Series We for Note the common B. the quarter million of preferred our a $X.X on share million both declared dividends stock Series share in quarter or under repurchase the not dividends fourth of did a of And dividend dividend million in Series quarter, A the program. $X.X be partial B the fourth stock total During on million $X.X third common full out shares was for will the our common Board third the XXXX. stock finally, quarter the quarter, to the $XX quarter's distribution. during the and $X.XX paid in repurchase B and dividends. shareholders In per

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

Peter Ho

Thanks, our Dean. concludes This prepared remarks.

entertain your to we'd be happy Now questions.

Operator

[Operator the Jeff comes Instructions] from Rulis. question Our first of line

Jeff Rulis

have interest And the maybe a average. one-timers September the there questions you couple margin. on One, Dean, of the were margin recoveries any do or then this in quarter?

Dean Shigemura

a maybe about was in nothing amount it The quarter, so the -- like but small was of there actually material. reversals, XXX,XXX,

the XXX. I margin it September, of believe, in was, terms In

Jeff Rulis

Okay. Got the got the detail sounded near-term a like It -- puts takes I cut a And of a I appreciate lot thereafter. just positive impact. it. of on rate summarizing. and headwind,

is core higher. Your climbing

negate expectations margin that short outlook the of can run? that in it next is of Or Just couple on quarters? negative you the flattish a in the

Dean Shigemura

partially Yes. presentation we funds rates as by over term, think it the the manage as then securities cash rate Fed well. some how see margin it trend. that interest in will a that's a regard We NII the buying on continue all get increase to adjusting the out negative. Initially, offset and be rising -- the laid will believe as to or when asset according cash have includes the as But flows, the going generally continued our deposit continuing to well longer and which And reinvesting our cut, with you we're as gently actively of And do the margin. repricing balance the presentation, remix how some rate sheet in to mix accretive And we will flows to that swaps side. together, out our laid slight to from we NII quarter-over-quarter. into we're

Jeff Rulis

the one. widespread? to comparative I one continue philosophy granular there from? Great. and it came in last appreciate pretty a just And nonaccruals. increase that track a Or Is the Brad, low -- very talked that, NPAs. was to you sector maybe I want and

Bradley Shairson

No.

there's portfolio. sector rise, was some broad-based really or back. there the lending increase came say noncore a sector, historically that given that systemic while little that So actually, from, in activities bit I caused I say, the while would not absolutely, it in from quite NPAs, a the a of from were particular, But a an wasn't done nothing would

all, were lodging area. may just in the subsegment be weakness of if have a and small before, portfolio would on it there where the said As that I pressed at I any be be really would sector a would

in So more where, of And our to Hawaii. if upon a if lodging, bit anything, we'd weakness we that think little lodging about actually that's international area. see is visitors dependent what

XX%. properties, that But we LTV really have really as portfolio is we're feel how we strong those as sponsors that positioned fact good support on well and the the about about that

we're as think So resolutions upgrades. do concern. And mentioned anything of end. in last the through either subsequent and had our really with portfolio little came just always in not real mentioned, or to seeing payoffs quarter bit I any you And expect that working this borrowers, I quarter know, payoff some we a to as refinancing see

yes, So portfolio. our that nothing X.XX%. But systemic so down bring back -- to in the criticized did

say little the But that overall. to also about has is the rationale sponsorship start a that for a the say would strong would credit, X.XX% deterioration was bit due of to criticized our with that I went or operating multifamily reason up credit the to single in X.X% I results. that what and their space. criticized in That multifamily is

So really portfolio that too. about feel good

Operator

line next Barclays. with question Our of from comes Jared the Shaw

Jared David Shaw

of Maybe at to just to go the towards if maybe any be looking Or reminding we back additional deposits average, end seasonality us if could trending that here? this delta expecting you should period quarter? average there's be between and just

James Polk

take I'll that Jim. one. is This

quarter, I'd build maybe we as and and both saw the large the characterize on public the deposits unexpected of side. As we seasonal commercial to got end some, public the what some

commercial balances. had that business We we some really boost on that the nice also won helped

back management some moderation the quarter, of As some in business of that commercial though, towards off, think the temporary the run business to fourth the new we some house. we'll from a average actually, and as saw into asset the migrates we I QX of that deposits get bit the in probably side of side see the the

Jared David Shaw

from of And quarter balances seen are then on the start to maybe look looking early sort diminishment you and DDAs, -- fourth of in end good core those DDAs? we of think terms the sort the in level a there? on update building Okay. how of Have this an at is on

Peter Ho

as would deposits. noninterest-bearing or of down is Yes. as Jared, Dean of though types other I to out to we what pointed trend. I'm this as to has we're classify is And low continue as well comp the What quarters sure think XXX. declare ready that level measure shrunk savings we actually The come has negative not X from Peter. so. yield end that dramatically ago, do definitely

think couple front I another I though, may comps guess. negative of of have of quarters, we us, like in

Jared David Shaw

asked guess lodging. finally, And going to just back on the I just Okay. then question

is that to visitor. With the of subset dollar to maybe exposure international total tied the that lodging more

Dean Shigemura

a that's but mix really of to There of good certain those have more tie I all would a that to it. visitors, would question. dependent catering international segment. Well, hotels, -- can't some obviously, be on to I hotels, subsegment are course, that sort

hard So the lodging we to the But to really really a that say, international million it's hotels would -- $XXX what it's on in visitors. to focused -- of would really fraction have that international I isolate. to relate

Peter Ho

And way, the year. international by segment this the performing is the actually segment best

a dollar that's exchange XX% up between there. relationship improving up So off arrivals low think pretty are of positive impact visitor spending unit But Japan the basis. having XX%. is foreign significantly Obviously, I the plus coming a

Dean Shigemura

a we those. And our It's arena. credits of XX% and amount average on see weighted don't criticized, XX% still is overall have huge of about a lodging LTV that criticized in we

Operator

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

Andrew Liesch

loan on growth question here. Just the

point there's that you the gains estate quarter? real can if specific this curious drove anything commercial Just to

James Polk

mix. nice was No, Jim. is This a I'll it. take it really

build on are pipelines But QX. mortgage, was overall, of in build a pipelines commercial mix little and booked bit through of think I better -- nicely And point just production it. feeling our it nice at this construction a time. seen we've So pipelines by

Peter Ho

that say I'd chime just in, yes. Yes. -- think, I'd I Andrew,

activity a into was Consumer there. or Our the quarter. X% in experience commercial is commercial an out lending up on a bit activity up market see usually a that cycle. basis that spot of lagging leads starting to We're

tail so overall I begin going aggregate we're And consumer going will number. anticipate And give a to point, build commercial to hopefully, is which a some better segment. to growth think to at continue loan the us in up,

Andrew Liesch

delayed heard you Do it. come rates off have changes Got you that? sidelines, being in think both anticipation any you projects of of the in

Peter Ho

side are the pretty off I on be, and people constructive commercial consumer to races, seems won't The but say to the side.

are come rates finally been think people of couple I times past year. to waiting for faked have head and down frankly, in a the

So to wave see that waiting we're still build.

Operator

from [Operator line comes KBW. the Kelly Instructions] Motta with next question of Our

Kelly Motta

I would expenses. like I to to circle back appreciate.

to said I growth. think you X.X% X%

million of implies a had -- you Trying separation about Is there. XQ? to just $XXX one couple with there what is for way trying understand to could all exactly it in FDIC here? clarify looking You just charges expenses for, what I'm timers. the you're any and that

Dean Shigemura

Yes. actually X.X% year. I full to the guided X% for to

than a quarter. imply which very math, So slightly had higher end high. is do it yes, I does lower what $XXX the last you it's But actually the million in if quarter, mentioned of fourth about

third So there's the out. wasn't some but But guidance. be that end of of netted there minus in pluses a of onetime items, and they the on lower range likely to There all kind were quarter. anything

year good the number. is X% a to for full X.X% guidance the So of

Kelly Motta

Okay.

to X.X% relative about. So X% to

Peter Ho

XXX.

quarter. XXX So for

Dean Shigemura

to -- XXX going the XXX less in closer or quarter. like to is on the the -- be it's more

Kelly Motta

Okay.

QX, way. what So another to we similar said saw in

Peter Ho

Yes.

Kelly Motta

guidance. that what of elevated is Okay. side, wondering you to how is? I And with Japanese the a good rate Awesome. was much volatility appreciate was in run currency for That's I fee QX. had on the and that related It given helpful.

Peter Ho

kind onetime-ish $X Yes, at what the call here extraneous that Peter. million revenue of really Kelly, isn't The the into in all. There's I it's opportunity. But foreign recurring. exchange playing deltas balance significantly of about would feels

of quarter, million having we expect us, it's balance, It's historic did kind really the would be for extraordinary of across bank a impact. piece. The third kind on moving have good somewhat board term, the to an $X good quarter I But the not really but for playing that's fee -- seeing and that's think longer from forward. income fee performance. better fee we're a elevated just commercial into opportunity levels

Kelly Motta

I it. appreciate That's really the And the the margin then Got on all moving color in helpful. parts.

XX. deposits. assets of clarification want of Just make on understanding the and that just which cash $X.X that impact sure rate-sensitive the this of I'm at Is impact that NII being correctly to short-term a I just flows point repricing immediate right any to way include it? gentle reinvested Slide from to million, NII lift. rates, gets about that's higher It think that of you of doesn't

Peter Ho

to deposits. Fed longer the the correct. variable term the page is alone to and speaking specifically That funds That's then impact variable of assets to liabilities

Kelly Motta

me. Awesome. a borrowings, of million. for other debt more Maybe just have you couple The $XXX

-- think going the kind you're the Is balance FHLB. I and remind what to of thinking term going Or term? that? the of on near thoughts how to is on -- Can least at here that's any support of that any paying is down? you sheet, that that remain me size that, and

Dean Shigemura

the That -- to to about maturity on that Yes. roughly. X.XX%. then X rate is funding And X -- those years it's

fixed rates adjustments be relatively that change, source we that looking at for are So us, the of and rate. a good stable funding making as optimal. at still to if And also to it's a going

Peter Ho

So that funding Kelly. be will rate-dependent,

Kelly Motta

could last I Very Okay. in. if it slip just one,

have missed You but the it, may the have and covered this about may roll swaps, peak And forward $XXX is starting notional the that what when I prepared does active? remarks of swaps, on? million your

Dean Shigemura

billion. are now we end It going sensitivity the on and between 'XX, to that's early position. 'XX so well. in our And as the And at vary looking manage managing to that still is start 'XX. we're how rate the now the and then mid But will They on $X.X X.XX%. short between -- to and 'XX then, from rate

Bradley Shairson

the coincide And also with the set to to swaps is important. important of it's of AFS that as are maturity well. This million note $XXX swaps notional It's also forward Brad.

it exposure So there. total impact won't really

Dean Shigemura

point. good a that's Yes,

Peter Ho

of I fixed a the XX%, holds, yield Yes. quarter, that take we're sitting fixed curve. anticipate more towards rate as picture, just the the lower of at range XX% concept taking of mean assuming to that flow of advantage broader would third float the the XX% we slope of position kind

Operator

showing this no time. remarks. questions I'm like further back at turn closing currently I'd to Chang for over call And to the Park

Chang Park

Thank for you, continued in Please of feel today interest to and Bank good Thanks to reach everyone, me again, questions. have your a Hawaii. for out free day.

Operator

This concludes today's conference call. Thank you for your participation.

disconnect. You may now

Bank of Hawaii (BOH) 28 Oct 242024 Q3 Earnings call transcript