Bank of Hawaii Corporation Q3 FY2025 earnings call

• The bank recorded strong results with EPS $1.20, NIM at 2.46%, and ROE 13.6%.
• Average deposits increased 7% annualized, loans modestly up. Credit quality pristine.
• Advanced deposit market share in Hawaii by 40 basis points as of June 30, 2025, growing 600 basis points since February 2005.
• Remixed $594 million in fixed-rate loans and investments to improve NIM.
• Wealth management initiative: teamed with Saterra for Banco Advisors platform to modernize broker-dealer, and aims to leverage commercial and brand strength in wealth market.
• Credit portfolio is diversified, conservatively underwritten with low LTVs and minimal tail risk. Non-depository financial institution and EFI exposures are small.
• Non-interest income increased, non-interest expense had charges but normalized items considered.

Bank of Hawaii reported strong results for the third quarter. Fully diluted earnings per share were $1.20 per share, 29% higher than the year ago period. Net interest margin improved to 2.46%, up seven basis points for the sixth straight quarter. Return on common equity was 13.6%. Average deposits increased by 7% annualized, and loans increased modestly. Credit quality remained pristine. In terms of segments, consumer loans made up a little over half of total loans at 57% ($7.9 billion), predominantly secured by real estate with an 86% portion. Commercial loans were $6.1 billion or 43% of total loans, diversified across property types with conservative underwriting. Wealth AUM growth had lagged, but the bank was investing to improve performance in the local wealth segment.

• Anticipate NIM to expand further in coming quarters.
• Forecast two additional 25 basis point rate cuts this year, expecting initial NII reduction but positive impact later.
• Fourth-quarter normalized non-interest income expected between $42 million and $43 million.
• Fourth-quarter normalized non-interest expense expected approximately $109 million.
• Sale of merchant services business had gains and repositioning impacts, with expected positive contribution to NII.
• Likely to deploy capital into buybacks in current and next quarter.

• Limited exposures to non-depository financial institutions and EFIs, but exposures are small.
• Potential impact from interest rate changes beyond projections.
• Uncertainties in economic conditions affecting loan growth and NIM.

Q: Matthew Clark asked about the spot rate on deposits and NIM outlook.

A: Bradley S. Satenberg said total deposit spot rate was 154 basis points. Peter Ho noted Q4 likely to reach 2.50% NIM and expected 25 basis point pickup in NIM per year with potential upside from rate cuts.

Q: Kelly Motta asked about Wells changes, share gain drivers, and capital buybacks.

A: Peter Ho discussed Saterra partnership, balanced share gain across consumer, commercial, and municipal segments, and indicated potential for buybacks.

Q: Jeffrey Allen Rulis asked about growth outlook and wealth management expenses.

A: Bradley S. Satenberg said 2026 expenses projected to be in the 3-3.5% range.

Q: Jared Shaw asked about credit office reduction and swap NII impact.

A: Peter Ho mentioned exiting a non-core credit, and Bradley S. Satenberg discussed swap notional remaining at $1.4 billion with forward starting swaps.