BANK OF HAWAII CORP Q1 FY2025 earnings call

Bank of Hawaii posted solid first quarter results with net interest income and margin improving for the fourth consecutive quarter. Noninterest income was $44.1 million. Expenses were controlled. The Bank holds number one deposit market share in Hawaii. Deposit growth was measured, prioritizing margin over volume. Economic conditions in Hawaii were stable. Credit portfolio had strong performance with majority of loans to long-standing relationships, and credit metrics remained stable.

Net interest income grew just over 4.6% on a linked basis to $125.8 million, with net interest margin expanding to 2.32% (up 13 basis points from the fourth quarter). Period-end deposits grew 7.3% on a linked basis to $21 billion, and loans grew 1.1% annualized to $14.1 billion. Credit quality remained strong with net charge-offs at 13 basis points and NPAs at 12 basis points. The loan book is 93% Hawaii, 4% Western Pacific, 3% Mainland. Consumer loans make up a little over half of total loans (56% or $7.9 billion), with 86% secured by real estate. Commercial loans are $6.2 billion (44% of total), with 29% commercial real estate. ACL ended at $147.7 million, ratio 1.05%.

Net interest margin target of 2.50% is attainable with continued management of low-cost deposits and potential rate cuts. Noninterest income expected to be $44-$45 million per quarter in 2025. Expenses projected to increase 2%-3% from 2024, with 1% allocation to revenue-enhancing initiatives.

Market volatility and uncertainty may impact noninterest income. Tariff-related impacts on tourism and client industries could affect loan portfolio. Economic and market uncertainties could impact loan growth projections.

Q: On margin target and deposit costs A: Peter and Dean discussed that 2.50% margin is attainable with managing low-cost deposits and potential rate cuts. Deposit cost for March was 1.6% average.

Q: On credit and net charge-offs A: Brad explained net charge-offs were slightly up due to a single loan charge-off, but overall credit metrics remain strong.

Q: On loan growth and pipelines A: Jim Polk mentioned commercial pipeline solid, consumer saw pickup in applications, still expecting low-single-digit loan growth.

Q: On deposits and swaps A: Dean discussed deposit seasonality, swaps timing and impact on margin modeling.

Q: On tariff exposure A: Brad detailed minimal direct tariff exposure to loan portfolio, diversified and low LTV.