Bank of Hawaii Corporation Q1 FY2026 earnings call

• Jim Polk mentioned his role as new CEO, predecessor Peter Ho's contributions, and the bank's solid Q1 results including NIM expansion, deposit trends, and maintaining strong capital and credit quality. - Highlighted Hawaii's economy, recent storms, progress in wealth management including the Center for Family Business and Entrepreneurs. - Brad Sherrison discussed credit portfolio, lending philosophy, asset quality metrics, and credit portfolio details. - Brad Sattenberg discussed financial performance, including net income, NII, NIM, non-interest income, non-interest expense, provision for credit losses, taxes, capital ratios, dividends, and stock repurchases.

Net interest income and net interest margin expanded for the eighth consecutive quarter. Net interest margin increased 13 basis points. Average cost of total deposits declined 17 basis points, achieving a beta of 36%. Net income was $57.4 million and diluted EPS was $1.30. Consumer loans represent 56% of total loans ($8 billion), with 86% being residential mortgage and home equity loans. Commercial lending portfolio totals $6.2 billion, 73% secured by real estate. CNI accounts for 11% of total loans ($1.6 billion). Net charge-offs totaled $1.1 million, non-performing assets declined to nine basis points, delinquencies increased to 40 basis points, criticized loans remained flat at 2.12% of total loans. ACL ended the quarter at $147 million with a ratio of 1.04%.

• Expecting no rate cuts in 2026. - Forecasted second quarter normalized non-interest expense to be approximately $112 million. - Planning to repurchase an additional $15 to $20 million of stock during the second quarter. - Board declared a dividend of 70 cents per common share to be paid during the second quarter. - Anticipated second quarter non-interest income to be approximately $42 million. - Lowered forecasted range for annual growth and overhead expenses to between 2.5% and 3%.

• Tensions in the Middle East, rising energy costs, and potential sustained inflation could affect consumer confidence and travel demand. - Uncertainty around the impact of Typhoon Sinlaku, which will take several weeks to assess. - Potential loss from flood damage to properties due to Konolo storm, but the potential loss is not expected to deviate greatly from the reserved amount. - Impact of proposed regulatory changes on capital outlook is being assessed but is early to determine.

Q: About expense guide inclusion of stock expense and severance, and growth question on consumer book.

A: Expense guide is inclusive, consumer book has initiatives but need more environment certainty.

Q: On CD color, total deposit costs, competitive landscape for deposits.

A: Total deposit cost is 2.89% for the quarter, spot rate 2.8%, competitive landscape is reasonable and rational with opportunity to reprice CD books.

Q: On capital, proposed regulatory changes sensitivity.

A: Assessed impact of proposed changes, anticipates 50 - 100 basis point improvement in regulatory capital ratios.

Q: On margin, normalized margin and cadence.

A: Fixed asset repricing adds about 5 basis points a quarter, heading to 290 NIM by year end, terminal NIM in 325 - 350 range.

Q: On tourism trends and expense growth in wealth management and AI investments.

A: Tourism outlook stable, guidance reasonable for wealth management, AI investments for operating leverage.

Q: On loan growth commentary and deposit side.

A: Overall portfolio low single-digit growth expected, deposit trends affected by factors like opting out of high-cost public monies and escrow monies closing.

Q: On margin structural long-term and timeframe.

A: With 20 basis points per year fixed asset repricing, reaching 325 - 350 NIM by end of 2028, rate cuts would accelerate timeframe.