Q3 2024 Bank of Hawaii Corp Earnings Call
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Yeah.
Unknown Executive: Good day and thank you for standing by. Welcome to the Bank of Hawaii Corporation third quarter 2024 earnings conference call. At this time, all participants are in a listen-only mode.
Speaker Change: Good day and thank you for standby welcome to the Bank of Hawaii Corporation third quarter of 2024 earnings Conference call.
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Chang Park: I would now like to hand the conference over to your speaker today, Chang Park, Senior Vice President, Investor Relations Director. Please go ahead. Morning and good afternoon. Thank you for joining us today for our third quarter 2024 earnings conference call.
Speaker Change: I would now like to hand, the conference over to your Speaker Today Cheng Park Senior Vice President Investor Relations Director.
Speaker Change: Please go ahead.
Cheng Park: Good morning, and good afternoon. Thank you for joining us today for our third quarter 2024 earnings Conference call. Joining me today is our chairman and CEO Peter Ho.
Chang Park: Joining me today is our Chairman and CEO, Peter Ho, President and Chief Banking Officer, Jim Polk, CFO, Dean Shigemura, Chief Risk Officer, Brad Shairson, and our Deputy CFO, Brad Sattenberg. Before we get started, let me remind you that today's conference call will contain some forward-looking statements. And while we believe our assumptions are reasonable, there are a variety of reasons that the actual results may differ materially from those projected. During the call this morning, we'll be referencing a slide presentation as well as the earnings release.
Cheng Park: And Chief Banking Officer, Jim Polk, CFO in Sugar Mora, Chief risk Officer, Brush, Harrison and our deputy CFO brass Attenborough before.
Cheng Park: Before we get started let me remind you that today's conference call will contain some forward looking statements and while we believe our assumptions are reasonable there are a variety of reasons that the actual results may differ materially from those projected during.
Cheng Park: During the call. This morning, we will be referencing a slide presentation as well as the earnings release.
Chang Park: Both of these are available on our website, boh.com, under the Investment Relations link.
Cheng Park: Both of these are available on our website <unk> com under the Investor Relations link and now I would like to turn the call over to Peter.
Peter Ho: And now, I'd like to turn the call over to Peter. Thanks, Chang, and good morning or good afternoon, everyone. Bank of Hawaii's police report another solid performance in the third quarter of 2024. Net income and diluted earnings per share increased notably on a linked basis. Net Interest Income and NIM expanded for the second straight quarter. fee income grew and operating expenses fell on a linked basis. Loans and deposits grew in the quarter, capital levels improved, and credit quality remains pristine.
Peter Ho: Thanks, Gerry and good morning, or good afternoon, everyone.
Peter Ho: <unk> is pleased to report another solid performance in the third quarter of 2024, net income and diluted earnings per share increased notably on a linked basis, yes.
Peter Ho: Net interest income and NIM expanded for the second straight quarter.
Fee income grew and operating expenses fell on a linked basis.
Peter Ho: Loans and deposits grew in the quarter capital levels improve and credit quality remains pristine.
Peter Ho: As is our custom, I will spend a little time highlighting market conditions in the islands. I'll then ask Brad to provide a few comments on credit quality, and Dean will provide further detail on our financial... The balance sheet performed well in the quarter with higher spot loan and deposit balances and stable average balance. Capital levels improved across all measures on top of the meaningful step up in Q2. Deposits continue to perform well, up 2.8% on a linked spot basis and up modestly on an average link. We are pleased to again hold the top deposit market share position in Hawaii for 2024 as measured by the FDIC annual summary of deposits.
Speaker Change: As is our custom I will spend a little time highlighting market conditions in the islands. I'll, then ask Brad to provide a few comments on credit quality and Dave will provide further detail on our financials.
Speaker Change: The balance sheet performed well in the quarter with higher spot loan and deposit balances as stable average balances.
Speaker Change: Capital levels improved across all measures on top of a meaningful step up in Q2.
Speaker Change: Deposits continue to perform well up two 8% on a linked spot basis and up modestly on an average weighted basis.
Speaker Change: Pleased to again hold the top deposit market share position in Hawaii for 2024 as measured by the FDIC annual summary of deposits.
Peter Ho: Both cost of interest bearing and cost of total deposits continue to track well, well below peer median. Unemployment in Hawaii continues to track at 2.9%, well below the national average. Visitor arrivals continue to be impacted by lower Maui arrivals but remain elevated for pre pandemic. Same can be said for Rep. Wahoo Residential Real Estate continues to trend stable, with median sales prices up modestly for both single-family and condominiums on a year-to-date basis. Median days on market remain below 30 days.
Cost of interest bearing cost of total deposits continued to track well well below peer medians.
Unemployment in Hawaii continues to track at two 9% well below the national average visitor.
Speaker Change: Visitor arrivals continue to be impacted by lower Maui arrivals, but remained elevated for pre pandemic levels same could be said for revpar.
Speaker Change: Wahoo residential real estate continues to trend stable with median sales prices up modestly for both single family and condominiums on a year to date basis median days on market remain below 30 days.
Brad Shairson: Now let me turn the call over to Brad to discuss a few trends on credit.
Speaker Change: Now, let me turn the call over to Brad to discuss a few trends on credit.
Brad Shairson: Brad. Thanks, Peter. As always, I'll start off with our lending philosophy. We focus on our core markets in Hawaii and the Western Pacific. This allows us to leverage our local expertise to make sound credit decisions. Additionally, we know our clients well. The majority of our loan book is the longstanding relationships where about 60% of our clients on both the commercial and consumer side have been with us for over 10 years.
Brad: Thanks, Peter as always I'll start off with our lending philosophy, we focus on our core markets in Hawaii and the Western Pacific. This allows us to leverage our local expertise to make sound credit decisions.
Brad: Additionally, we know our clients well the majority of our loan book is the long standing relationships, where about 60% of our clients on both the commercial and consumer side have been with us for over 10 years.
Brad Shairson: This combination has greatly contributed to our historically strong credit performance, and has resulted in a loan portfolio that is 93% Hawaii, 4% Western Pacific, and just 3% mainland where we support our clients that are doing business in both Hawaii and on the As I walk through our current state, you'll notice there is little change quarter over quarter. The lending philosophy I just mentioned is reflected in our loan growth, which has been steady and organic. From 2019 through 2023, we averaged about 6.7% loan growth per annum. This year, however, loan growth has slowed due to suppressed demand from the high rate environment.
Brad: This combination has greatly contributed to our historically strong credit performance and has resulted in a loan portfolio that is 93%, Hawaii, 4% Western Pacific and just 3% mainland where we support our clients that are doing business in both Hawaii and on the mainland.
Brad: As I walk through our current state you'll notice there is little change quarter over quarter.
Brad: The lending philosophy I, just mentioned is reflected in our loan growth, which has been steady and organic from 2019 through 2023, we averaged about six 7% loan growth per annum. This year. However loan growth has slowed due to suppressed demand from the high rate environment.
Brad Shairson: On the consumer side, which represents 57% of our total loans, or $8 billion, we are predominantly lending on a secured basis against real estate. 85% of our portfolio is comprised of residential mortgage or home equity with a weighted average LTV of just 48% and a combined weighted average FICO score of 800. The remaining 15% of the portfolio is a combination of auto and personal loans, where our average FICO scores are 733 and 759 respectively.
Brad: On the consumer side, which represents 57% of our total loans or $8 million were predominantly lending on a secured basis against real estate, 85% of our portfolio is comprised of residential mortgage or home equity with a weighted average LTV of just 48% and a combined weighted average FICO score of <unk>.
Brad: 800.
Brad: The remaining 15% of the portfolio is a combination of auto and personal loans, where our average FICO scores are 733% and 759, respectively.
Brad Shairson: Moving on to commercial, our portfolio size is $5.9 billion, or 43% of our total loan book. The largest share of commercial is commercial real estate with $3.9 billion in assets, which equates to 28% of total loans. This book is well diversified across industries and carries a weighted average LTV of only 56%.
Brad: Moving on to commercial our portfolio size was $5 9 billion.
Brad: Or 43% of our total loan book the largest share of commercial is commercial real estate with $3 9 billion in assets, which equates to 28% of total loans. This book is well diversified across industries and carries a weighted average LTV of only 56%.
Brad Shairson: Given that almost 80% of the bank's loan portfolio is real estate secure, let's look at the dynamics of the Hawaii real estate market. The real estate market in Oahu is very stable. Vacancy rates fluctuate little due to the strong Hawaiian economy and constrained supply. Industrial vacancy has continued to hover around its historic low, currently just 1.05% versus its 10-year average of 1.75%. At 13.57%, office vacancy is just over 1% higher than its 10-year average. Office conversions, a trend towards return to office and continuing office space reduction will likely keep vacancy rates low. Retail vacancy remains on par with historical averages.
Brad: Given that almost 80% of the bank's loan portfolio is real estate secured let's look at the dynamics of the Hawaii real estate market.
Brad: The real estate market in Oahu is very stable vacancy rates fluctuate little due to the strong Hawaiian economy and constrained supply.
Brad: Thus real vacancy has continued to hover around historic low currently just 1.0% to 5% versus its 10 year average of 175% at $13 five 7% office vacancy is just over 1% higher than its 10 year average office conversions a trend towards return to office and continuing on.
Brad: Office space reduction will likely keep vacancy rates low retail vacancy remains on par with historical averages.
Brad Shairson: The ongoing high demand for housing is driving the multifamily vacancy rates down to now almost just 4%. and inventory remains constrained across the board with almost no growth over the past 10 years and office space coming down 10% over that same time period. Our CRE is well diversified among property types with no sector being greater than 7% of total loans. Our conservative underwriting has been applied consistently with all weighted average LTVs between 50 and 60%. And individual loan exposure is managed carefully with low average loan sizes.
Brad: Ongoing a high demand for housing is driving the multifamily vacancy rates down to now almost just 4%.
Inventory remains constrained across the board with almost no growth over the past 10 years and office space coming down 10% over that same time period.
Our CRE is well diversified among property types with no sector being greater than 7% of total loans. Our conservative underwriting has been applied consistently with all weighted average ltvs between 50 and 60%.
Brad: And individual loan exposure is managed carefully with low average loan sizes.
Brad Shairson: Turning to our scheduled maturities, we have no maturity wall, only 2.7% of loans are due to mature in Q4, 14% next year, and more than half of our loans mature in 2030 or later. Looking at the distribution of LTVs, the tail risk in our CRE portfolio for any loans with greater than 80% LTV totals $84 million or 2.2%. And if we move that metric up to 85%, our CRE portfolio has less than $4 million of exposure.
Brad: Turning to our scheduled maturities that we have no maturity wall only two 7% of loans are due to mature in Q4, 14% next year and more than half of our loans mature in 2030 or later.
Brad: Looking at the distribution of Ltvs the tail risks in our CRE portfolio for any loans with greater than 80% LTV totaled $84 million or two 2% and if we can move that metric up to 85% our CRE portfolio has less than $4 million of exposure.
Brad Shairson: Looking at our credit metrics overall this past quarter, compared to linked quarter, metrics remain quite stable and asset quality remains strong. Net charge-offs remain low at $3.8 million, or 11 basis points annualized, up one basis point from Q2. Non-performing assets have remained stable, increasing slightly to 14 basis points. Delinquencies have also been stable, just two basis points higher than last quarter at 31 basis points overall. Criticized assets grew slightly as of quarter end, reaching 2.42 percent. However, one loan repaid in full subsequent to quarter end. Adjusting for that, the quarter end criticized rate would have actually decreased slightly to 2.19 percent.
Brad: Looking at our credit metrics overall, this past quarter compared to linked quarter metrics remained quite stable and asset quality remains strong net charge offs remained low at $3 8 million or 11 basis points annualized up one basis point from Q2 nonperforming assets remained stable increasing slightly to <unk>.
Brad: 14 basis points.
Delinquencies have also been stable just two basis points higher than last quarter at 31 basis points. Overall criticized assets grew slightly as of quarter end, reaching 242%. However, one loan repaid in full subsequent to quarter end adjusting for that the quarter end criticized rate would have actually decreased slightly to two.
Brad: One 9%.
Brad Shairson: As an update on the allowance for credit losses on loans and leases, the ACL ended the quarter at $147.3 million, down about $200,000 to the linked period, and up $2.1 million year-over-year. The ratio of our ACL to outstandings was 1.06%, down one basis point from prior quarter and up two basis points year-over-year.
Brad: As an update on the allowance for credit losses on loans and leases. The ACL ended the quarter at $147 3 million down about 200000 to the linked period and up $2 $1 million year over year.
Brad: The ratio of our ACL to Outstandings was 1.06% down one basis point from prior quarter and up two basis points year over year I will now turn this over to Jim for an update on our financials.
Dean Shigemura: I will now turn this over to Dean for an update on our financial. Thank you, Brad. In the third quarter, our net interest income increased by $2.8 million, and the net interest margin increased by three basis points, continuing the trend from the second quarter. Late quarter, the $2.8 million increase in net interest income was driven by cash flow repricing, an increase in earning assets, and balance sheet action. including the reinvestment of securities portfolio runoff and repositioning our SWOT portfolio. partially offset by deposit mix shift. With regard to cash flow repricing, in the third quarter, our earning assets generated $513 million of cash flows from maturities and prepayments.
Jim Polk: Thank you Brad.
Jim Polk: In the third quarter, our net interest income increased by $2 8 million and the net interest margin increased by three basis points.
Jim Polk: <unk> the trend from the second quarter.
Jim Polk: Linked quarter, the $2 $8 million increase in net interest income was driven by cash flow repricing and increase in earning assets and balance sheet actions.
Jim Polk: Including the reinvestment of securities portfolio runoff and repositioning our swap portfolio.
Jim Polk: Partially offset by deposit mix shift.
Jim Polk: With regard to cash flow repricing in the third quarter, our earning assets generated $513 million of cash flows from maturities and prepayments.
Dean Shigemura: Assuming that all of these cash flows from loans were reinvested into like products and cash flows from securities reinvested into cash. Such reinvestment would have generated incremental net interest income of approximately $3.6 million in the quarter from higher reinvestment yields. At the same time, deposit mix shift has continued to slow, with average non-interest bearing and low-yield interest bearing deposit balances declining by $315 million last quarter. This compares to a decline of $800 million in the same period of 2023. Assuming the majority of these balances shifted into higher-yielding, interest-bearing deposits, such mix shift negatively impacted net interest income by $2.6 million in the third quarter.
Jim Polk: Assuming that all of these cash flows from loans were reinvested into light products and cash flows from securities reinvested it to cash.
Jim Polk: Such reinvestment would have generated incremental net interest income of approximately $3 $6 million in the quarter from higher reinvestment yields.
Jim Polk: At the same time deposit mix shift has continued to slow with average noninterest bearing and low yield interest bearing deposit balances declining by $315 million linked quarter.
Jim Polk: This compares to a decline of $800 million in the same period of 2023.
Jim Polk: Assuming the majority of these balances shifted into higher yielding interest bearing deposits such mixed shift negatively impacted net interest income by $2 6 million in the third quarter.
Dean Shigemura: We expect our net interest income to continue to improve from the gradual decrease in the Fed funds rate. The initial 50 basis points of Fed easing is expected to ultimately add $1.2 million to our quarterly net interest income. In particular, total earning assets that were immediately impacted by changes in the Fed funds rate was approximately $7.6 billion at quarter end, consisting of floating rate loans and investment securities, interest rate swaps, and Fed funds. A 50 basis point decrease in Fed funds will reduce quarterly income from these rate-sensitive earning assets by approximately $9.6 million. At the same time, total rate-sensitive deposits that were also immediately impacted by the change in the Fed Funds rate were $9.7 billion at quarter end, which excludes non-interest-bearing demand and deposit accounts yielding interest rates of 10 basis points or less.
Jim Polk: We expect our net interest income to continue to improve from the gradual decrease in the fed funds rate.
Jim Polk: The initial 50 basis points of fed easing is expected to ultimately add $1 2 million to our quarterly net interest income.
Jim Polk: In particular total earning assets that were immediately impacted by changes in the fed funds rate was approximately seven 6 billion at quarter end.
Jim Polk: Consisting of floating rate loans and investment securities interest rate swaps and fed funds.
The 50 basis point decrease in fed funds will reduce quarterly income from these rate sensitive earning assets by approximately $9 6 million.
Jim Polk: At the same time total rate sensitive deposits that also immediately that we're also immediately impacted by the change in the fed funds rate were $9 7 billion at quarter end.
Jim Polk: Which excludes noninterest bearing demand deposit accounts, yielding interest rates of 10 basis points or less.
Dean Shigemura: The 50 basis point decrease in the Fed funds rate will immediately increase quarterly net interest income by approximately 7.1 million. with an expected long-term positive quarterly impact of approximately $10.8 million. The difference between the immediate and long-term impact is due to time deposits repricing upon maturity compared to savings and interest-bearing demand accounts. which can be repriced immediately. Thus, there will be an initial short-term negative impact to NII, then turn positive one to two quarters as time deposits reprice lower. We are currently well positioned to reprice our time deposits and improve our margins as 70% of total time deposits are scheduled to mature in the next six months, and 88% of total time deposits are scheduled to mature in the next 12 months.
Jim Polk: The 50 basis point decrease in the fed funds rate will immediately increase quarterly net interest income by approximately $7 1 million.
With an expected long term positive quarterly impact of approximately $10 8 million.
Jim Polk: The difference between the immediate and long term impact is due to time deposits repricing upon maturity compared to savings and interest bearing demand accounts.
Jim Polk: Which can be repriced immediately.
Jim Polk: Thus there will be an initial short term negative impact to NII, then turned positive one to two quarters.
Jim Polk: Time deposits reprice lower.
Jim Polk: We are currently well positioned to reprice, our time deposits and improve our margins at 70% of total time deposits are scheduled to mature in the next six months and 88% of total time deposits are scheduled to mature in the next 12 months.
Dean Shigemura: In the third quarter, we took actions to adjust our balance sheet in response to changes in interest rates. This includes repositioning our SWOT portfolio by terminating 700 million notional shorter maturity SWOTs. with relatively higher fixed rates and executing 500 million notional spot starting swaps at lower rates. as well as executing 300 million of forward-starting swaps, also at lower rates. The repositioning reduced our active pay-fix-receive-flow interest rate swaps by $200 million to $2.8 billion notional and reduced the average fixed rate from 4.52% to 4.29%. The $300 million of forward-starting pay-fix receivable interest rate swaps. have an average fixed rate of 3.03% and will become active in 2025 and 2026.
In the third quarter, we took actions to adjust our balance sheet in response to changes in interest rates. This.
Jim Polk: This includes repositioning our swap portfolio by terminating 700 million notional shorter maturity swaps.
Jim Polk: With relatively higher fixed rates and executing 500 million notional of spot starting swaps at lower rates.
Jim Polk: As well as executing $300 million of forward starting swaps also at lower rates.
Jim Polk: The repositioning reduced our active pay fix receive full interest rate swaps by $200 million to $2 8 billion notional and reduced the average fixed rate from 452% to 429%.
Jim Polk: The $300 million of forward, starting pay fixed received interest rate swaps.
Jim Polk: Have an average fixed rate of 3.0% to 3%.
Jim Polk: And we will become active in 2025 and 2026.
Dean Shigemura: In addition, we purchased $236 million of floating rate securities that have a positive 78 basis points spread to fed funds to improve our net interest income and net interest margin. Our fixed rate asset exposure was 53% at the end of the quarter, down from 73% at the end of 2022. We expect to continue to actively manage our interest rate swaps and securities portfolios to take advantage of opportunities in this changing rate environment.
Jim Polk: In addition, we purchased $236 million of floating rate securities that have a positive 78 basis points spread to fed funds.
Jim Polk: Prove our net interest income and net interest margin.
Jim Polk: Our fixed rate asset exposure was 53% at the end of the quarter down from 73% at the end of 2022.
Jim Polk: We expect to continue to actively manage our interest rate swaps and securities portfolios to take advantage of opportunities in this changing rate environment.
Dean Shigemura: Non-interest income totaled $45.1 million in the third quarter, up $3 million from the second quarter. As customer derivative sales, merchant, mortgage, and loan transaction revenue and volumes improved. In the fourth quarter, we expect to recognize $2.3 million of a one-time charge related to the Visa Class B conversion ratio change. Adjusted for this item, we expect core non-interest income to be in the range of $44 to $45 million in the fourth quarter, as improved trends experienced in the third quarter continue in the fourth quarter. Reported and core expenses were $107.1 million in the third quarter. This compares to core expenses of $105.3 million in the second quarter, which excludes a $2.6 million one-time industry-wide FDIC special assessment, $800,000 of severance expenses, and $600,000 of other core expenses that are not expected to recur.
Jim Polk: Noninterest income totaled $45 1 million in the third quarter up 3 million from the second quarter as customer derivative sales merchant mortgage and loan transaction revenue and volumes improve.
Jim Polk: In the fourth quarter, we expect to recognize $2 $3 million of a one time charge related to the visa class B conversion ratio will change.
Jim Polk: Adjusted for this item, we expect core noninterest income to be in the range of $44 million to $45 million in the fourth quarter as improved trends experienced in the third quarter continuing to continue in the fourth quarter.
Jim Polk: Reported and core expenses were 107.1.
Jim Polk: $1 million in the third quarter.
This compares to core expenses of $105 3 million in the second quarter, which excludes a $2 $6 million one time industry wide FDIC special assessment 800000 of severance expenses 600000 of other core expenses that are not expected to recur.
Dean Shigemura: Thus, the core expenses were up a modest $1.8 million link quarter, primarily due to increases in salaries and benefits. as we continue to manage our expenses in a disciplined manner. We continue to evaluate expense levels and expect normalized core expenses in 2024 to increase 1 to 1.5% from 2023 normalized expenses of $419 million.
Jim Polk: Thus the core expenses were up a modest $1 8 million linked quarter, primarily due to increases in salaries and benefits as.
Jim Polk: As we continue to manage our expenses in a disciplined manner.
Jim Polk: We continue to evaluate expense levels and expect normalized core expenses in 2024 to increase 1% to one 5% from 2023 normalized expenses of $419 million.
Dean Shigemura: To summarize the remainder of our financial performance, in the third quarter, net income was $40.4 million, and earnings per common share was $0.93. an increase of $6.3 million and $0.12 per share respectively. A return on common equity was 11.5%. We reported a provision for credit losses of $3 million this quarter. The effective tax rate in the third quarter was 23.33%. and the tax rate for the full year of 2024 is expected to be 24.25%. We continue to grow our capital and maintain healthy excesses above regulatory minimum well-capitalized requirements. Our tier one capital ratio increased to 14.05%.
Jim Polk: To summarize the remainder of our financial performance in the third quarter net income was $40 4 million and earnings per common share was <unk> 93.
Jim Polk: An increase of $6 3 million and <unk> 12 per share respectively.
Jim Polk: Our return on common equity was 11, 5%.
Jim Polk: We reported a provision for credit losses of $3 million this quarter.
Jim Polk: The effective tax rate in the third quarter was 20, 333%.
Jim Polk: And the tax rate for the full year of 2024 is expected to be $24 two 5%.
Jim Polk: We continue to grow our capital and maintain healthy excesses above regulatory minimum well capitalized requirements, our tier one capital ratio increased to 14.05%.
Dean Shigemura: total capital ratio increased to 15.11%. Our accumulated other comprehensive loss continues to decrease and was $335 million in the third quarter, down $39 million late quarter, and down $107 million from the same period last year. The decrease from the prior periods was primarily due to an increase in the fair value of our AFS investment securities caused by declining long-term interest rates as well as continued portfolio runoff. Our risk weighted assets to total assets ratio continue to be well below peer median, reflecting the low risk nature of our asset mix. During the third quarter, we paid out $28 million to common shareholders in dividends and $3.4 million in preferred stock dividends.
Jim Polk: And total capital ratio increased to 15, 1%.
Jim Polk: Our accumulated other comprehensive loss continues to decrease and was $335 million in the third quarter down $39 million linked quarter and down $107 million from the same period last year.
Jim Polk: The decrease from the prior.
Jim Polk: Prior periods was primarily due to an increase in the fair value of our investment securities caused by declining long term interest rates as well as continued portfolio runoff.
Jim Polk: Our risk weighted assets to total assets ratio continued to be well below peer median reflecting the low risk nature of our asset mix.
During the third quarter, we paid out $28 million to common shareholders in dividends and $3 4 million in preferred stock dividends.
Dean Shigemura: Note that the dividends on the Series B preferred stock in the third quarter was a partial quarters distribution. In the fourth quarter, the full dividend on the Series B will be $3.3 million. or 5.3 million total for both the Series A and B. We did not repurchase shares of common stock during the quarter under our share repurchase program.
Jim Polk: Note that the dividends on the series B preferred stock in the third quarter was a partial quarters for distribution in the fourth quarter.
Jim Polk: Full dividend on the series B will be $3 3 million.
Jim Polk: Or $5 3 million in total for both the series AMD.
Jim Polk: We did not repurchase shares of common stock during the quarter under our share repurchase program.
Dean Shigemura: And finally, a board declared a dividend of $0.70 per common share for the fourth quarter of 2020.
Jim Polk: And finally, our board declared a dividend of <unk> 17 per common share for the fourth quarter of 2024.
Peter Ho: I'll turn the call back over to Peter. Thanks, Dean.
Now I'll turn the call back over to Peter.
Peter Ho: This concludes our prepared remarks. Now we'd be happy to entertain your Thank you.
Thanks, Steve. This concludes our prepared remarks that we'd be happy to entertain your questions.
Jim Polk: Thank you.
Unknown Executive: As a reminder, to ask a question, please press star 1-1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1 1 again. Please stand by while we call the Q&A roster.
Speaker Change: As a reminder to ask a question. Please press star one one on your telephone and wait for your name to be announced.
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Speaker Change: Please standby will compile the Q&A roster.
Jeff Rulis: Our first question comes from the line of Jeff Rulis with D.A. Davidson. Your line is now open. Thanks. Good morning. Morning, Jeff.
Speaker Change: Our first question comes from the line of Jeff <unk> with D. A Davidson your line is now open.
Thanks, Good morning.
Dean Shigemura: Dean, maybe a couple questions on the margin. One, were there any interest recoveries or one-timers in the margin this quarter and then do you have the September average? In the quarter, there was maybe a small amount of actually reversals, but it was like about $100,000, so nothing material.
Speaker Change: Hey, Jeff.
Jeff: Dean maybe a couple of questions on the margin.
Jeff: One was there any interest recoveries of one timers in the margin this quarter and then do you have.
Jeff: September average.
Jeff: Of the.
Speaker Change: In the quarter, there was maybe a small amount of.
Speaker Change: Actually reversals, but.
It was like about 100000, so nothing material in.
Dean Shigemura: In terms of the margin in September, it was, I believe, $217,000. Got it.
Speaker Change: In terms of the margin.
Speaker Change: September it was.
Speaker Change: Believe $2 17.
Speaker Change: Okay.
Speaker Change: Okay got it.
Dean Shigemura: And just for summarizing, I appreciate that I got A lot of detail on the puts and takes of the rate cut impact sounded like a, you know, a near term headwind, a positive thereafter. You know, your your core is, is climbing higher, just the expectations of can you negate that negative in the short run or is it a flattish outlook on the margin? in the next couple quarters. Yes, we believe that the NII and margin will gently increase quarter to quarter and as we laid out in our presentation, you know, we're going to continue to see the asset repricing from the cash flows offset, you know, partially by some continued remits on the deposit side.
Speaker Change: And just sort of summarizing I appreciate that I got it.
Speaker Change: A lot of detail on the puts and takes of that.
Speaker Change: Rate cut impact sounded like.
Speaker Change: Near term headwinds are positive thereafter.
Speaker Change: Your core has.
Climbing higher just be expectations of Kenya negate that.
In the short short run or is it is it a flattish outlook on that margin in that.
Speaker Change: And the next couple of quarters.
Speaker Change: Yes, we believe that the NII and margin will gently increase quarter over quarter and as we laid out in our presentation. We're going to continue to see the asset repricing from the cash flows offset partially by the <unk>.
Some continued remix on the deposit side.
Dean Shigemura: And we're continuing to actively manage our balance sheet, which includes, you know, buying or reinvesting some of our cash flows into securities, as well as adjusting the interest rate swaps according to, you know, how rates trend. And then with with regard to the Fed funds rate cut, you know, over the longer term, we do think it'll be accretive, as laid out in the presentation as well. Initially, it'll have a slight negative. But when you mix all that together, that's how we get to a gently rising NII and margin.
Speaker Change: And we're continuing to actively manage our balance sheet.
Speaker Change: Which includes buying or reinvesting some of our cash flows into securities as.
Speaker Change: As well as adjusting the interest rate swaps according to how rates trend.
And then with regard to the fed funds rate cut.
Speaker Change: Over the longer term, we do think it will be accretive as laid out in the presentation and as well initially it will have a slight negative but when you mix all that together, that's how we get to a journal.
Speaker Change: Gently rising NII and margin.
Brad Shairson: Thanks, Dean, and maybe one last one. Brad, you know, you talked, I appreciate the philosophy. very low comparative NPAs.
Speaker Change: Great.
Speaker Change: Thanks, Dean and maybe one last one Brad.
Speaker Change: You talked to I appreciate the philosophy.
Speaker Change: Very low comparative.
Brad Shairson: I just want to continue to track the increase in non-accruals. Is there a sector that that came from or was it pretty granular? No, so there wasn't really a sector that it came from, in particular, I would say, actually, that the NPAs, the rise, while not from a given sector, I would say that the little bit of an increase was caused from some non-core lending activities that were done historically quite a while back. But absolutely, there's nothing systemic or broad based in the portfolio.
Speaker Change: NPA is I just want to continue to track that that increase in non accruals is there is there.
Speaker Change: Sector that that came from or was it pretty granularity and widespread.
Speaker Change: No. So there wasn't really a sector that it came from <unk>.
Speaker Change: In particular, I would say actually the NPA.
Speaker Change: The rise while not from a given sector I would say that the little bit of an increase was caused from some non core lending activities that were done.
Speaker Change: Historically quite a while back.
Speaker Change: But absolutely there is nothing systemic or broad based on the portfolio as I may have said before if I were really pressed.
Brad Shairson: As I may have said before, if I were really pressed on where there would be any weakness in the portfolio at all, it would be just a small sub-segment of a sector, and that'd be the lodging area. So if we think about our lodging, what lodging is actually more dependent upon international visitors to Hawaii? And that's where, if anything, we'd see a little bit of weakness in that area. But we have really strong sponsors that support those properties, and we feel really good about how we're positioned, as well as the fact that the LTV in that portfolio is about 60%.
Speaker Change: On where there would be any weakness in the portfolio at all.
Speaker Change: B just a small.
Sub segment.
Speaker Change: Of the sector and that'll be launching area. So if we think about our lodging what margin is actually.
Speaker Change: More dependent upon international visitors to Hawaii, and Thats, where if anything we'd see a little bit of weakness in that area, but we have.
Speaker Change: Really strong sponsors that support those properties and we feel really good about how we're positioned as well as the fact that the LTV of that portfolio is about 60%. So really just not seeing anything in the portfolio or any any real concern and as you know I think I had mentioned last quarter that we're always working with our borrowers.
Brad Shairson: So really just not seeing anything in the portfolio of any real concern. And as you know, I think I'd mentioned last quarter, that we're always working with our borrowers, and we do expect to see some resolutions through either refinancing, payoffs, or upgrades. And as mentioned, this payoff came in a little bit subsequent to quarter end. So that did bring our criticize back down to 2.19%. But yeah, so nothing systemic in the portfolio. I would say that the rationale or the reason that the criticize went up to 2.42% to start with, was due to a single credit in the multifamily space.
And we do expect to see some resolutions through either refinancing payoffs or upgrades and as mentioned this payoff came came in a little bit subsequent to quarter end.
Speaker Change: So that did bring our criticized back down to $2 one 9%.
Speaker Change: But yes.
Speaker Change: So nothing systemic in the portfolio I would say that the rationale or the reason that the criticized went up to 2.42% to start with was due to a single credit in the multifamily space.
Brad Shairson: That credit, a little bit of deterioration in their operating results. But what I would say about that is that also has strong sponsorship and you know our criticized for multifamily is 5.8% overall so feel really good about that portfolio too.
Speaker Change: That credit a little bit of deterioration in their operating results.
But what I would say about that is that also has strong sponsorship and R. R.
Speaker Change: Criticized for multifamily is five 8% overall, so feel really good about that portfolio too.
Brad Shairson: Okay, thanks, Brad. Pretty consistent with the prior quarter. Appreciate it.
Speaker Change: Hey, Thanks, Brad pretty consistent with.
Unknown Executive: I'll step back. Thank you.
Speaker Change: The prior quarter.
Speaker Change: Great I'll step back.
Jared Shaw: Our next question comes from the line of Jared Shaw with Barclays. Your line is now open. Hey, good morning. Good afternoon. Maybe just looking at the delta between end-of-period deposits and average, if you could just go back to, you know, maybe reminding us if there's any additional seasonality this quarter, or should we be expecting that to be trending towards average here?
Speaker Change: Thank you. Our next question comes from the line of Jared Shaw with Barclays. Your line is now open.
Speaker Change: Hey, good morning, good afternoon.
Speaker Change: Maybe just.
Looking at the Delta between end of period deposits and average if you could just go back to maybe.
Speaker Change: Reminding us if theres any additional seasonality this quarter or.
Speaker Change: Should we be expecting that to be trending towards average here.
Jim Polk: Yeah, hi, this is this is Jim, I'll take that one. You know, as we got to the end of the quarter, we saw some what I characterize as unexpected large public deposits, and maybe some seasonal build on both the commercial and the public side. We also had some really nice business that we want on the commercial that, you know, help boost balances.
Speaker Change: Yes, Hi. This is this is Jim I'll take that one.
As we got to the end of the quarter, we saw some what I'd characterize as unexpected large public deposits and maybe some seasonal build on both the commercial and the public side. We also had some really nice business that we won on the commercial debt.
Jim Polk: As we get into the fourth quarter, though, I think we'll see some moderation in that probably a bit back towards the average that we saw in Q3 as some of the temporary deposits run off, and actually some of the new business migrates from, you know, the commercial side of the business to the asset management side of the house.
Speaker Change: Helped boost balances as we get into the fourth quarter, though I think we'll see some moderation in that probably a bit back towards the average that we saw in Q3 as some of the temporary deposits run off and actually some of the new business migrates from the commercial side of the business to the asset management side of the house.
Peter Ho: Okay, and then in terms of the looking at DDAs, Is this a good level, you think, to start building from on those core DDAs?
Speaker Change: Okay, and then in terms of.
Speaker Change: Looking at Tas.
Speaker Change: Is this is this a good level you think to start building from on those sort of core DDA is have we seen the end of diminishment.
Peter Ho: Have we seen the end of diminishment and maybe an update of how early look in the fourth quarter balances are on there? Yeah.
Speaker Change: Maybe an update of how early look into the fourth quarter balances are on there.
Peter Ho: Jared, this is Peter. I'm not sure we're ready to declare the end of that trend. The negative comp, though, is definitely shrunk, as I think Dean pointed out, to 315. What we actually measure is non-interest bearing as well as what we would classify as low-yield savings or other types of deposits. And that level has come down dramatically from five quarters ago, continued to do so. I think we may have another couple of quarters, though, of negative comps in front of us, my guess.
Peter Ho: Jared This is Peter.
Peter Ho: I'm not sure we're ready to declare.
Peter Ho: The the <unk>.
Peter Ho: And of that that trend the negative comp, though is definitely shrunk as well.
Peter Ho: So I think dean pointed out to $3 15, we actually measures.
Peter Ho: Noninterest bearing as well as what we would classify as low yield savings or other types of deposits in that levels come down dramatically from five quarters ago continue to do so I think we may have another couple of quarters, though of like negative comps in front of US My guess.
Brad Shairson: Okay, thanks. And then just finally, I guess, going back to the question Jess just asked on lodging, what's the total dollar exposure to that subset of lodging, you know, that maybe is more tied to the international visitor? Well, that's a good question. I wouldn't, I can't really tie a subsegment to those dependent on it. There are certain hotels, obviously, that would be more catering to international visitors. But all hotels, of course, have some sort of mix to that segment. So it's really hard to really isolate.
Speaker Change: Okay. Thanks, and then just finally, I guess going back to <unk>.
Speaker Change: The question, Jeff just asked on lodging whats the total dollar exposure to that subset of lodging that maybe is more tied to the international visitor.
Well that's a good question I wouldn't I can't really tied sub segment to those dependent on it there are certain.
Speaker Change: Hotels, obviously that would be.
Speaker Change: More catering to international visitors, but all hotels of course have some sort of mix to that segment. So it's really hard to.
Speaker Change: <unk> managed to really isolate, but what I would say.
Brad Shairson: But what I would say it's a fraction of the 700 million that we have in lodging that would really relate to hotels focused on international visitors. And by the way, that the international segment is actually the best performing segment this year. So Japan, visitor arrivals are up significantly 38% plus spending up 28% obviously is coming off of pretty low basis. But I think the the improving foreign exchange relationship between the dollar yen is having having a positive impact there. And we still don't see a huge amount of criticized credits in that arena. It's about 15% of our lodging overall is criticized, and we have a 62% weighted average LTP on those.
Speaker Change: Fraction of the.
Speaker Change: $700 million that we have in launching.
That would really relate to the.
Speaker Change: International hotels focused on international visitors.
Speaker Change: Yes.
Speaker Change: By the way that the international segment is actually the best performing segment. This year, So Japan visitor arrivals are up significantly.
Speaker Change: 38% plus spending up 28%, obviously is coming off of pretty low basis, but.
Speaker Change: I think the improving foreign exchange relationship between the dollar yen is having a positive impact there.
Speaker Change: And we still don't see a huge amount of criticized credits.
Speaker Change: Arena.
Speaker Change: About 15% of our lodging overall is criticized.
Speaker Change: 62% weighted average LTV on those.
Jared Shaw: Great, thank you. Thank you.
Speaker Change: Great. Thank you.
Andrew Liesch: Our next question comes from the line of Andrew Liesch with Piper Sandler.
Speaker Change: Thank you. Our next question comes from the line of Andrew Liesch with Piper Sandler Your line is now open.
Andrew Liesch: Your line is now open. Thanks. Good morning, everyone. Um, question on the loan growth here. Just curious if there's anything specific you can point to that drove the commercial real estate gains.
Speaker Change: Thanks, Good morning, everyone.
Speaker Change: Question on the loan growth here just curious if there's anything specific you can point to.
Speaker Change: That drove the commercial real estate gains this quarter.
Jim Polk: This is Jim, I'll take it. No, it was really a nice mix. So we've seen our pipelines build, both pipelines and production build nicely through Q3. And it was a nice mix of commercial mortgage, a little bit of construction on it. But overall, I think pipelines are just feeling better at this point in time. Yeah, I'd say I just chime in, Andrew, that I think our experience is usually that commercial lending activity leads out of a market or into an upcycle. We're starting to see that commercial activity on a spot basis was up 2% in the quarter, consumer lagging a bit there.
Speaker Change: This is Jim I'll take that no. It was really a nice mix. So we've seen our pipelines build a book by pipelines and production build nicely through Q3, and it was a nice mix of commercial mortgage a little bit of construction on it but overall I think pipelines are just feeling better at this point in time.
Speaker Change: Yes.
Speaker Change: Hey.
Speaker Change: China and Andrew.
Speaker Change: Yeah.
Speaker Change: Our experience is usually the commercial lending activity leads.
Out of a market or into an up cycle, we're starting to see that commercial activity on a spot basis was up 2% in the quarter.
Jim Polk: And so we're going to continue to anticipate build in the commercial segment. And I think at some point consumer is going to begin to tail up which will give us hopefully a better overall loan growth aggregate number. Got it.
Speaker Change: Consumer lagging a bit there so we would continue to anticipate.
Speaker Change: Build in the commercial segment and I think at some point consumer is going to begin to tail up which will give us hopefully a better overall.
Speaker Change: Growth.
Speaker Change: Aggregate number.
Unknown Executive: Do you think any changes in rates people have come off the sidelines? Have you heard of projects being delayed in anticipation of that? Commercial side seems to be, I won't say off to the races, but people are pretty constructive. And on the consumer side, I think people are waiting for rates to finally come down. And frankly, it's been head faked a couple of times in the past year. So we're, we're still waiting to see that wave build. Got it. Great. All my other questions have been asked and answered. I'll step back. Thank you. As a reminder, to ask a question at this time, please press star 11 on your touchtone telephone.
Speaker Change: Got it do you think any changes of rates both come off the sidelines have you heard of.
Projects being delayed in anticipation of that.
Commercial side seems to be I wont say off to the races, but people are pretty constructive and on the consumer side I think people are waiting for rates to finally come down and frankly have been hedged rate a couple of times in the past year. So we're still waiting to see that way Phil.
Speaker Change: Got it got it great. All my other questions have been asked and answered I'll step back. Thank you.
Speaker Change: Sure.
Speaker Change: Thank you as a reminder to ask a question at this time. Please press star one one on your Touchstone telephone.
Kelly Motta: Our next question comes from the line of Kelly Motta with KVW. Your line is now open. Hi, thanks for the question. I would, I would like to circle back to expenses. I appreciate I think you said one and a half to 2% growth. You had a couple of, you know, separation expenses and FDIC. Charges in there. Trying to, is there any way you could clarify what what you're looking for for 4Q? Is it about about 109 million? Just with all the one timers, I'm just trying to understand what exactly that implies. Yeah, I guided actually to 1 to 1.5% for the full year.
Speaker Change: Our next question comes from the line of Kelly Motta with <unk>. Your line is now open.
Speaker Change: Hi, Thanks for the question.
Kelly Motta: I would I would like to circle back to expenses I. Appreciate I think you said, one half to 2% growth.
Kelly Motta: You had a couple of.
Kelly Motta: Separation expenses and FDIC.
Kelly Motta: Charges in there.
Kelly Motta: Thank you.
Speaker Change: Is there any way you could clarify what youre looking for for <unk> is it about about $109 million just with all the one timers I'm just trying to understand what exactly that implies.
Kelly Motta: Sure.
Kelly Motta: Yes.
Speaker Change: I did actually two one to one 5% for the full year, so it's actually slightly lower than what I.
Dean Shigemura: So it's actually slightly lower than what I had mentioned last quarter. But yeah, if you do the math, it does imply a higher end of about 109 in the fourth quarter, which is which is very high. So there's a likely to be on the lower end of that range of guidance. But there wasn't anything in the third quarter. There were some pluses and minus one-time items, but they all kind of netted out. So, you know, the guidance for the full year, one to one and a half is good, is a good number. And okay, so one to one and a half relative to about the 419.
I had mentioned last quarter.
Speaker Change: Yes, if you do the math it does imply a higher end of about 109 in the fourth quarter, which is which is very high. So there is a.
Speaker Change: Likely to be on the lower end of that range of guidance.
Speaker Change: But there wasn't anything in the in the.
Speaker Change: Third quarter, there were some pluses and minus one time items, but they all kind of netted out so.
The guidance for the for the full year of one to one five is good is a good number.
Speaker Change: Okay, So one to one and a half relative to about.
Dean Shigemura: Yeah. Okay, so what's the 109 in the quarter? 109 is it's more going to be on the like closer to the 107 or less in the quarter. Okay, so similar, similar to what we saw in Q3.
Speaker Change: 490, yet.
Okay.
Speaker Change: The quarter 109 is it's more going to be like closer to the 107 or less in the quarter.
Okay.
Speaker Change: So similar to similar to what we saw in Q3.
Peter Ho: Dr. Liesch, Jeffrey Rulis, Cynthia Wyrick, Peter Ho, Dean Shigemura, Mary Sellers, Jared Shaw, Kelly Motta, Unknown Executive, Bradley Shairson, Chang Park, Bank of Hawaii It was a it was elevated in Q3 was wondering how much of that is related to volatility with the Japanese currency and what a good run rate for that is. Yeah, Kelly, it's Peter. There's about a million dollars in what I would call kind of one-timish extraneous opportunity. But the balance of that feels recurring. The foreign exchange revenue really isn't significantly playing into the deltas here at all. I think longer term, that's a good opportunity for us, but it's not really having an impact.
Speaker Change: Okay.
Speaker Change: Awesome that's helpful.
Speaker Change: And on the fee side I appreciate you had given guidance.
Speaker Change: It was a it was elevated in Q3 was wondering how much of that is related to.
Speaker Change: Volatility with the Japanese currency and.
Speaker Change: What a good run rate for that is.
Peter Ho: Yeah, Kelly, it's Peter that Theres about $1 million.
Peter Ho: What I would call kind of onetime ish extraneous opportunity.
Peter Ho: But the balance of that feels recurring.
Peter Ho: Exchange revenue really is significantly play into the deltas here at all I think longer term, that's a good opportunity for us, but that's not really having an impact. It's really we're seeing just kind of across the board better see performance.
Dean Shigemura: It's really we're seeing just kind of across the board better fee performance. The commercial bank did have a good fee quarter for the third quarter, and that's kind of playing into the million dollar extraordinary piece. But on balance, we would expect fee income to be somewhat elevated from historic levels moving forward. Got it. That's helpful. And then, you know, I really appreciate all the color on the margin and the moving parts. Just a point of clarification on slide 29. I just want to make sure I'm understanding this correctly. That short-term NII impact of $2.5 million, that's just from the, you know, immediate repricing of rate sensitive, you know, assets and deposits.
Peter Ho: The commercial bank did have a good fee quarter for the third quarter, and that's kind of playing into the $1 billion.
Peter Ho: Extraordinary piece, but on balance we would expect fee income to be somewhat elevated from historic levels moving forward.
Speaker Change: Got it that's helpful and then.
Speaker Change: I really appreciate all the color on the margin and the moving parts.
Speaker Change: Just a point of clarification on.
Slide 29, I just want to make sure I'm understanding this correctly that short term NII impact of 2.5 million that's just from the.
Speaker Change: Immediate repricing of rate sensitive assets and deposit it doesn't include any of that impact.
Dean Shigemura: It doesn't include any of that impact of, you know, cash flows being reinvested at a at higher rates, which gets you to that gentle NII lift, is that the right way to think about it? That's correct. That page specifically is speaking to the impact of Fed funds alone to the variable assets and then longer term to the variable liabilities deposits. Awesome. Maybe just a couple more for me. The borrowings, you have other debt of $560 million. I think that's a HLB. Can you remind me what the term is on that and how you're thinking of that?
Cash flows being reinvested at.
Speaker Change: At higher rates, which gets you to that general NII lift does that is that the right way to think about it.
Speaker Change: It's correct that paid specifically is.
Speaker Change: Speaking to the impact of fed funds alone to the variable assets and then longer term to the variable liabilities deposits.
Speaker Change: Awesome, maybe maybe.
Speaker Change: Just a couple more from me that the borrowings.
Speaker Change: You have other debt of 560 million I think that that's H L. B.
Speaker Change: Can you remind me what the term is on that and and how youre thinking of that is that going to.
Dean Shigemura: Any thoughts on paying that down or is that going to kind of remain here and support the size of the balance sheet at least near term? Yeah, that it's about two to three years to maturity, roughly. And then the rate on those, that funding is 4.13%. So it's still relatively, for us, a good source of stable funding at a fixed rate. And as as the rates change, you know, we are going to also be looking at that and making adjustments to that if, if, if optimal. So that funding will be rate dependent. Okay, thanks. Very last one, if I could just slip it in.
Speaker Change: Eddie any thoughts on paying that down or is that going to kind of remain here and support the size of the balance sheet at least near term.
Speaker Change: Yes.
It's about two to three years to maturity roughly and then the rate on those.
Speaker Change: Funding is four 3% so it's still relatively for us a good source of stable funding.
Speaker Change: At a fixed rate.
Speaker Change: And as the rates change we are going to also be looking at that and making adjustments to that.
Speaker Change: If optimal.
Speaker Change: So that flemming will be rate dependent.
Speaker Change: Okay. Thanks.
Speaker Change: Very last one if I could just slip it in.
Dean Shigemura: You may have covered this in your prepared remarks about about the swaps, and I may have missed it. But the 300 million of forward start starting swaps, when does that roll on? And what is the peak notional act? The they start in 25 and 26, so mid 25 to early 26. and the rate on that is 3.03%. But between now and then, you know, we are still going to manage the position, and that's how we're looking at, you know, managing our rate sensitivity on the short end as well. So it will vary between now and then from the $2.8 billion.
Speaker Change: You may have covered this in your prepared remarks about about the swaps and I may have missed it but.
Speaker Change: The $300 million of forward starting swaps when does that roll on and what is the peak notional active.
Speaker Change: B.
Speaker Change: They start in 'twenty, five and 'twenty six so mid 'twenty five to early 'twenty six.
Speaker Change: And the rate on that is 3.0% to 3%.
Speaker Change: But between now and then we are still going to manage the.
Speaker Change: That position and that's that's how we're looking at managing our rate sensitivity to on those short end as well.
Speaker Change: So it will vary.
Between now and then from the $2 8 billion.
Dean Shigemura: And it's also, Brad, it's also important to note that The forward swaps are set to coincide with maturity of 300 million of notional AFS swaps as well. So it really won't impact the total exposure there. That's a good point. Yeah, I mean, just a broader picture, we're sitting at 53% fixed float. As of the third quarter, assuming that kind of the concept of continuing lower rates holds, we would anticipate taking that fixed float position more towards the 58-59% range to take advantage of the slope of the yield curve. That's super helpful. I'll step back. Thank you for all the questions.
Speaker Change: And it's also spread it's also important to note that.
Speaker Change: The forward swaps are set to coincide with the maturity.
Speaker Change: $300 million of notional swaps.
Speaker Change: Swaps as well so it really won't impact the total exposure there.
Speaker Change: It's a good point, yes, I mean just broader.
Broader picture, we're sitting at 53% fixed float.
Speaker Change: As of the third quarter, assuming that kind of concept of continuing lower rates holds we would anticipate taking that fixed slow position more towards a 50, 859% range to take advantage of the slope of the yield curve.
Speaker Change: That's super helpful. I'll step back. Thank you for all the questions here.
Thank you Kelly.
Unknown Executive: Thank you and I'm currently showing no further questions at this time.
Thank you and I'm currently showing no further questions at this time I would like to turn the call back over to tank Park for closing remarks.
Chang Park: I'd like to turn the call back over to Chang Park for closing remarks. Thank you everyone today and your continued interest in Bank of Hawaii. Please feel free to reach out to me if you have any additional questions. Thanks again and have a good day.
Cheng Park: Thank you everyone today for your.
Cheng Park: Alright, and your continued interest in bank of Hawaii. Please feel free to reach out to me. If you have any additional questions. Thanks, again and have a good day.
Unknown Executive: This concludes today's conference call. Thank you for your participation.
Speaker Change: This concludes today's conference call. Thank you for your participation you may now disconnect.
Unknown Executive: You may now disconnect.
Speaker Change: Okay.
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