Q1 2025 Bank of Hawaii Corp Earnings Call
Speaker Change: Good day, and thank you for standing by. Welcome to the Bank of Hawaii Corporation, first quarter, 2025 earnings conference call. At this time, all participants don't listen only mode. After the speaker's presentation, there'll be a question and answer session. To ask a question during the session, you'll need to press start with one on your telephone.
Speaker Change: You will then hear an automated message advising your hand is raised To destroy your question, please press star one again Please be advised that today's conference is be recorded I would now like to turn the conference over to your speaker for today, Chang Park. Please go ahead
Speaker Change: Good morning and good afternoon. Thank you for joining us today for our first quarter 2025 earnings conference call. 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 Setenberg.
Speaker Change: Before we get started, I want to remind you that today's conference call will contain some foreign looking statements.
Speaker Change: And while we believe our assumptions are reasonable, the actual result may differ materially from those projected.
Speaker Change: During the call today, we'll be referencing a slide presentation as well as the earnings release. Both of these are available on our website boh.com under the investor relations link and now I would like to turn up the call over to Peter.
Thanks Chang, good morning everyone. Thanks for joining the call
Speaker Change: An interest income and that interest margin both improved meaningfully. This for the fourth consecutive quarter. That interest income grew just over 4.6% on the linked basis to 125,800,000. The interest income was up as well on the linked basis.
Expenses were controlled quarter over quarter [inaudible]
Speaker Change: Period and deposits and loans grew 7.3% and 1.1% annualized on a link basis to $21 billion and $14.1 billion, respectively.
Non-interest-sparing deposits were stable in the quarter
Speaker Change: Credit quality remained pristine in the quarter with net charge-offs and NPAs of 13 and 12 basis
Capital levels have improved substantially from a year ago.
Speaker Change: I'll now take a moment to discuss the franchise and market conditions. Brad will then briefly touch on credit conditions which as I mentioned are looking quite strong. Finally, Dean will dig a little deeper into the financials and then we'd be happy to take your questions.
Speaker Change: The Bank of Hawaii brand continues to perform well in our unique Hawaii market, one of the number one position in market share as shown in the latest FDIC Annual Summary of Deposit.
Speaker Change: Bankway leads in deposit market share growth on both short-term and on both short-term and long-term basis.
Speaker Change: Deposit growth remained measured in the quarter as we prioritized margin of volume
Speaker Change: Importantly, nonintersparing demand, plus other low yielding deposits, continues to trend positively.
Speaker Change: Deposit funding costs fell for a second straight quarter of both an interest bearing and total deposit cost basis.
Speaker Change: Economic conditions remain stable in Hawaii. Unemployment remains well below the national average. The visitor market remains stable but continues to be impacted somewhat by the Maui market.
Residential, a lawful real estate friends remain positive
Now, let me turn the call over to Brad.
Brad: Thanks, Peter. The Bank of Hawaii prioritizes serving our community, lending in our core markets where our expertise enables us to make sound credit decisions.
Brad: The majority of our loan book is to longstanding relationships, but about 60% of our clients on both the commercial and consumer side, having been with us for over 10 years.
Brad: This combination has greatly contributed to our strong credit performance for many years and has resulted in a lone portfolio that is 93% Hawaii, 4% Western Pacific and just 3% mainland where we support our clients that do business in both Hawaii and on the mainland.
Brad: As I walk through our credit portfolios first-quarter performance, you can see that it is remained strong and is consistent with prior recent quarters.
Thank you for watching.
Brad: Our loan book is balanced between consumer and commercial but consumer representing a little over half of total loans at 56% or $7.9 billion. We landed predominantly on a secured basis against real estate.
Brad: 86% of our Consumer Portfolio is either residential mortgage or home equity for the weighted average LTV of just 48% and a combined weighted average FICO score of $7.99.
Brad: The remaining 14% of consumer consists of auto and personal loans where our average fly co-schoolers are 731 and 759 respectively.
Brad: Moving on to commercial, our portfolio size is $6.2 billion or 44% of total loans.
Brad: The largest share of commercial is commercial real estate with 4 billion in assets which equates to 29% of total loans This book is well diversified across industries and carries a weighted average LTV of only 55%
Brad: Looking at the dynamics for a Hawaiian real estate in Oahu, the largest market.
Brad: A combination of consistent vacancy rates and flat inventory levels supports a stable real estate market within a different segment vacancy rates for industrial office retail and multi-family are all below or close to their 10-year averages.
Brad: Total office space has decreased about 10% over the past 10 years driven by conversions. This long-term trend of office space reduction, as well as return to office, has brought the vacancy rate almost back to its 10-year average.
Brad: Breaking down our CRE portfolio, it is well diversified amongst property types with no sector being greater than 7% of total loans.
Brad: Our conservative underwriting has been applied consistently with all-weighted average LTVs between 53 and 56 percent. You can see that overall it's a diverse portfolio with low average loan sizes.
Brad: And our scheduled maturities are fairly evenly spread out with more than half of our loans maturing in 2030 or later.
Brad: Looking at the distribution of LTVs, there isn't much tail risk in our CRE portfolio. Only 1.9% of CRE loans have greater than 80% LTV and almost nothing's over 85%.
Brad: Turning to CNI, which comprises 12% of our total loans, you will notice that it is extremely well diversified across industries with small average loan sizes. In addition, a very small portion of loans were leveraged.
Brad: Turning to our asset quality, credit metrics remain stable and our asset quality remains strong. Net charge drops for $4.4 million at 13 basis points analyzed, up three basis points from Q4, and six basis points from a year ago, while non-performing assets came down to basis points from the linked quarter.
Brad: Delinquencies ticked down by four basis points to 30 basis points this quarter.
Brad: Criticized loans dropped by two basis points to 2.08% of total loans and just 11 basis points higher than a year ago. And 75% of those criticized assets are real estate secured with a 54% LTV.
Brad: As an update on the allowance for credit losses on loans and leases, the ACL ended the quarter at 147.7 million, that's down 800,000 from the linked period, and slapped to last year.
Brad: The ratio of our ACL to outstanding was 1.05% that's down one basis point from both the link quarter and last year's first quarter. I'll now turn this over to Dean for an update on our financials.
Dean Shigemura: Thanks, Brad. We expanded our net interest income and net interest margin for the fourth consecutive quarter.
Dean Shigemura: That interest income for the first quarter was 125.8 million, and the net interest margin expanded to 2.32 percent increases of 5.6 million and 13 basis points from the fourth quarter respectively.
Dean Shigemura: The improvements in NII and them resulted from asset cash flow repricing and lower deposit rates.
Dean Shigemura: In addition, the headwind from our deposit remix from non-interest bearing and lower cost deposits into higher cost deposits flowed significantly.
Dean Shigemura: During the first quarter, our earning assets with fixed or adjustable rates generated 553 million of cash flows from the materials and prepayments.
Dean Shigemura: Reinvestment of these cash flows and to current market rates at current market rates resulted in incremental growth of 3.7 million in quarterly net interest income with a spread of 2.6%.
Dean Shigemura: With a fixed asset ratio of 56%, we are well-positioned for a variety of rate environments and will continue to realize positive NII from fixed and adjustable asset cash flow repricing, even if rates were to fall.
Dean Shigemura: We again realize low and deposit mixed shift with average non-interest bearing and low yield interest bearing deposit balances declining by 37 million link quarter.
Dean Shigemura: This compares to a decline of 488 million and 105 million in the same period in 2024 and link order respectively.
Dean Shigemura: Assuming the majority of these balances shifted into higher yielding interest-bearing deposits, such mixed shifts negatively impacted our net interest income by 300,000 in the first quarter, down from the negative 900,000 impact in the fourth quarter.
Dean Shigemura: Total deposit costs decreased by 17 basis points, link quarter and 27 basis points since the Fed began reducing the Fed funds rate in September and total deposit costs remain well below peers.
Dean Shigemura: Deposit costs are expected to fall further as we continue to reprise our time deposits lore.
Dean Shigemura: 74% of total time deposits are scheduled to mature in the next six months
Dean Shigemura: With interest rates continuing to be volatile and unpredictable, we are managing our exposures to our fixed asset mix and edging program.
Dean Shigemura: As I previously mentioned, our fixed asset mix declined slightly to 56% during the quarter and we maintained our interest rate hedges at $2 billion
Dean Shigemura: Earlier in this second quarter, we added 200 million of currently active pay-fix receipt floating swaps with an average fixed rate of 3.4% and an average maturity of two and a half years.
Dean Shigemura: In addition, we added 200 million of Ford starting swaps that will become active in one year with an average rate of 3.17%.
Dean Shigemura: These are in addition to the two billion active swaps and 300 million and four starting swaps that were in place at March 31st.
Dean Shigemura: Thus, our current active swap position is 2.2 billion with an average fix rate of 3.97% and average maturity of 1.9 years.
Dean Shigemura: We also now have 500 million affords starting swaps with an average fixed rate of 3.09%.
Dean Shigemura: During the quarter, we purchased 242 million of securities that have a positive 110 basis point spread to cash, improving our net interest income in margin.
Dean Shigemura: We continue to strategically position our balance sheet for a range of rate outcomes.
Dean Shigemura: A rate-sensitive assets totaled $7.4 billion, while a rate-sensitive interest-bearing deposits were $10.2 billion at the end of the quarter.
Dean Shigemura: We intend to continue to closely manage the interest rate sensitivity of our balance sheets.
Dean Shigemura: to ensure that we are well positioned for a variety of rate environments.
Dean Shigemura: Non-interest income total 44.1 million in the first quarter, which included a $600,000 charge related to the Visa Class B conversion racial change.
Dean Shigemura: In the fourth quarter, non-interesting comm was 45.4 million after adjusting for a 2.4 million charge for a similar visa class fee conversion racial change.
Adjusting for these non-core charges
Dean Shigemura: First quarter adjusted non-interesting club was 44.6 million, lower by 800,000 from the adjusted fourth quarter non-interesting club.
Dean Shigemura: as revenue from trust services were negatively impacted by market volatility and customer derivative transactions were also lower.
Dean Shigemura: Non-interested income is expected to be $44 to $45 million per quarter this year, as market volatility and uncertainty continue to pressure trust services revenue and other transaction volume.
Dean Shigemura: Reported expenses were 110.5 million in the first quarter. This compares to expenses of 107.9 million in the fourth quarter.
Dean Shigemura: Included in the first quarter expenses were 2.8 million of seasonal payroll taxes and benefits expenses related to the payout of annual incentives investing over restricted shares.
Dean Shigemura: Also included was an FDIC special assessment reimbursement of 2.3 million offset by an increase in our variable incentive compensation expenses and an increase to our medical cost during the quarter.
Dean Shigemura: Expenses continued to be a focus in 2025 with court expenses projected to increase 2 to 3% from 2024, which includes an allocation of 1% of expenses.
Dean Shigemura: As a reminder, the second quarter's expenses will include an annual merit increase of approximately $2 million per quarter.
Dean Shigemura: To summarize the remainder of our financial performance in the first quarter, net income was $44 million, and earnings per the common share was $0.97.
Dean Shigemura: The increase is a 4.8 million and 12 cents per common share length quarter respectively.
Dean Shigemura: A return on common equity was 11.8% up from 10.3% link quarter.
Dean Shigemura: We recorded a provision for credit losses of 3.3 million this quarter.
Dean Shigemura: The effective tax rate in the first quarter was 21.67%, and the effective tax rate for the remainder of 2025 is expected to be approximately 22.5%.
Dean Shigemura: We continue to maintain healthy accesses about regulatory minimum well capitalized requirements.
Dean Shigemura: Our Tier 1 capital ratio is 13.9% and total capital ratio is 15%.
Dean Shigemura: Our risk-weighted assets to total assets ratio remains well below peer median reflecting the low risk nature of our assets and provides greater flexibility on future asset liquidity.
Dean Shigemura: During the first quarter, we paid out 28 million to comment shareholders and dividends, and 5.3 million in preferred stock dividends.
Dean Shigemura: And finally, a board declarative dividend of 70 cents per comment share for the second quarter of 2025. Now I'll turn the call back over to Peter.
Peter Ho: Thanks, Dean. This concludes our prepared remarks. Before we move on to Q&A, I'd like to congratulate Dean on a much desert retirement from his CFO role as a company.
Dean Shigemura: Dean has been an integral part of the team for years now and he will be missed.
Dean Shigemura: Dean's retirement date from the CFO role is suffering June 30th. I'm also very excited to announce that our deputy CFO , Brad Satinberg, will be taking over the CFO role effective June 30th.
Dean Shigemura: Brad already manages a large part of the finance operation and has been part of our IR efforts for many months now.
Dean Shigemura: and now we'd be happy to entertain whatever questions you might have.
Speaker Change: As a reminder, if you would like to ask a question, please press star one on your telephone. We also ask that you please wait for your name and company to be announced before proceeding with your question. One moment while we compile the Q&A roster.
Speaker Change: Our first question for the day will be coming from Jared Shaw, our Barclays, your line is open.
Hey, good morning. Good afternoon, everybody. Good morning.
Speaker Change: Dean, congratulations on a well-deserved retirement and Brad, congratulations on your new role, I'm looking forward to working with you, more going forward too.
Speaker Change: You know, a 250 target or goal or opportunity as we got towards the end of the year. Is that something you still feel is?
is a table here and
Speaker Change: As a component of that, how should we think about the ability for deposit costs to continue to come down more broadly in more of a static rate environment?
Speaker Change: Let me take a stab at that and Dean and Brad can clean up whatever I'm I mess up but the 250 is actually I think
Dean Shigemura: Came about as a question a couple of calls ago around whether or not we could attain that level mechanically given how the balance sheet scared. We still believe that is a possibility. What would have to happen is
We, we, you know, the, the fixed asset turnover.
Dean Shigemura: as you know is pretty mechanical at this point because most of those amortizations are running at confractual levels. So that's pretty you know out of everything that's pretty much
The Biggest Known
Dean Shigemura: It looks like given where rates are and even where rates possibly [inaudible]
Dean Shigemura: friend out that kind of that roll off to roll on premium is recently in good shape there.
Dean Shigemura: A driver of whether we can hit the 250 by year end is going to be contingent upon our ability to continue to manage low cost deposits in an effective way, which we have been able to.
Dean Shigemura: for the past couple of quarters, couple of three quarters now at this point. And then finally, if we were to get...
Dean Shigemura: additional rate cuts at some point this year. That would actually be accretive to our opportunity here. So, you put all that together, Jared. And basically, yeah, if things trend out the way they have for the past several quarters now, the type of number at 250 is definitely within range. If not, you know, things could be otherwise. And then on top of that, if we do get rate cuts, that actually should, depending on the timing of those cuts, that should be potentially accretive. [inaudible]
to the mix there.
Yeah.
Dean Shigemura: I don't have anything really to add. I think that is pretty accurate. There is a path to 250 margin. As you know, the market has been quite volatile recently.
Dean Shigemura: What was the end of period deposit cost? The spot rate.
The deposit cost was 1.6%.
That was the average of the spot, or both.
That was the average for March [inaudible]
Dean Shigemura: Yet, so do we do know what the exit rate was?
Speaker Change: Okay, thanks. Maybe on the credit side, did you change any of the qualitative assumptions going into the ACL discussion or did you change the weighting of any of your scenarios this quarter?
Dr. Andrew Liesch, Dr. Andrew Liesch
Speaker Change: No, so we didn't really change anything from the qualitative. As you know, obviously, using our you hero forecast and looking at the economy in Hawaii, the economy, the outlook on the economy is a little bit worse than it was previously, but we didn't change any.
real qualitative practice there.
Great, thanks very much. Okay, thank you.
Thank you. And one moment for the next question.
Speaker Change: and our next question will be coming from the line of Jeff Rulis.
of D.A. Davidson, please go ahead. Yeah, thanks. Good morning.
Speaker Change: Front just to touch on the terrifulated impact or perceived impact and maybe tourism just to kind of get a handle on what you're seeing real time if anything that's
Disrupted
Speaker Change: Tourism for the most part year-to-date hung in there pretty nicely.
There are early indications.
that, you know, Canadian traffic, which is, you know...
Speaker Change: A meaningful component of our market has been affected by the sentiment around the tariffs early to tell, but I think that that's not likely to go unscathed, given all the chatter that's been out there Jeff.
Speaker Change: the Japan market. I don't, it's hard for us to tell whether that segment is going to happen.
Speaker Change: Sentiment-wise, it's going to be impacted. And those really are kind of the big international drivers. For now, the US domestic consumer continues to hang in there pretty nicely.
I would anticipate-
The reasonable possibility for kind of a flatish year.
Speaker Change: and visitor this year. And obviously, if the economy begins to trend out a little bit worse than what we're looking at right now, that may change.
and if tariff sentiments.
become even more in flame that may change as well.
Dr. Andrew Liesch, Dr. Andrew Liesch, Dr. Andrew Liesch,
Speaker Change: Has that in the last few months sort of disrupted thoughts on expectations for this year? Are you seeing any from a customer standpoint on that growth front? Are those the same components that you've mentioned or has that shifted some? Yes, I am.
Speaker Change: I'll let Jim talk to that. Yeah, I'd say our look at this point remains the same as the guidance we've given previously kind of in that low single digit
Jim Polk: Again, noting sort of the greater uncertainty in the market could have an impact on that obviously going forward, but we, you know, the commercial pipeline remains pretty solid. We actually saw pickup and number of transactions and opportunities and value in Q1.
Jim Polk: And on the consumer side we've seen a nice pickup and daily applications on both the mortgage and the e-lock front which we believe at least will get us a chance to maybe offset some of the runoff we've seen in more recent quarters.
Jim Polk: So, I think we're still in line with what we've been providing in the past and we'll see how the market continues to evolve given what's happening out there.
[inaudible]
Speaker Change: Gotcha. And maybe one quick last one. It's a small number, but just.
Speaker Change: A little increase in the net charge off, still peer-to-peer, very solid. Brad, I don't know if there was anything that's noteworthy to call out or it was just a little lumpy, but anything to touch on there.
Speaker Change: Well, so what I would say about the net charge drops, actually.
Speaker Change: Consumer was actually down slightly from last quarter and was really the small increase was just caused by a single loan that was about 1.1 million that was in formerly in the non-performing assets and we've since charged it off so actually the trend is pretty positive there. Yeah, I mean so the NCO performance is
Speaker Change: kind of an outcome of the rules, small numbers, Jeff. Mm-hmm, okay, yeah, didn't mean to make too much line of it, just checking in, so thanks.
Yep, take care.
Speaker Change: Thank you. One moment for the next question. And the next question, we're coming from that line of Andrew Liesch.
of Piper Sandler, Your Line is Open.
Andrew Leach: Thanks. Morning everyone, thanks for taking the questions. You've covered most everything I want to go over, which is on the new swaps that were added. What did that then shift the fix?
38% of learning assets to relative to that 56% that you had at March 31st.
Speaker Change: It brings it down a little to about 55%, so there's a little bit of lore mix, fix asset mix.
Speaker Change: Got it, so not too much of an overview. We're continuing to drift lore, but just to clarify that also that the investments, they come off at a fixed rate, so using the swap portfolio to make adjustments to that.
Speaker Change: Got it. Very helpful. And then, sounds like you had some pretty constructive commentary for long growth in the pipeline, but have you seen any projects like fall out of the pipeline with concerns over the economy and some uncertainty there? Or is it really the sort of building?
Speaker Change: Yeah, not at this point. I think there's a lot of conversations going on between developers and suppliers and contractors as they try and get a handle on the situation but it's pretty fluid at this point. So I think we're going to just have to, you know, kind of see how things evolve. But at this point the deals, you know, the transactions we see are still moving forward. [inaudible]
Speaker Change: Yeah, I mean, we're not seeing anything in particular right now, but I would I would I would I would
Speaker Change: No caution, frankly. I mean, I think it was such an uncertain environment that we could see pipeline trends move pretty quickly here, certainly on the commercial side. So we're hopeful that we can hang on to our current guidance, but I would I would know caution around that.
Speaker Change: Got it, makes sense. Thanks so much. You've covered everything else. I'll step back.
Speaker Change: Thank you, one moment for the next question. And the next question will be coming from the line.
Thank you. Thank you. Thank you.
Thank you. Good morning.
Morning.
Speaker Change: Just to start, Dean, it's been great, great working with you in the past several months. Congratulations, look forward to hearing more about what you've got in store for retirement.
Speaker Change: If I could start just on the margin, if you have it, do you know what the margin for the month of March was just to start there?
Yeah, it was a 234 for me.
Speaker Change: Got it. Okay. And if I could just, you know, clarify from the commentary.
Speaker Change: on the margin. It was all really helpful, but I mean, it sounded like you were fairly optimistic on hitting that, you know, 250 or so exit margin this year, even without rate cuts. And then maybe, you know, if, if Foreaker plays out in the area on the volatility, but, you know, we do get some rate cuts. That would be a creative to that, that forecast. I guess was that, was that a fair read on the margin commentary? Yeah.
Yeah, I mean I think that's the biggest
Unknown Speaker
Driver of hitting that number is going to be...
Speaker Change: The ability to hang on to non-interest bearing and other lower yielding types of deposits and the extent that we have stability in that space, that's going to allow the fixed asset turnover to kind of reveal its full capacity.
Speaker Change: So, if we continue to have that phenomena and basically overall reasonable deposit performance, yeah, that number becomes a reasonable target for a year end.
Speaker Change: Yeah, and I would just add that, you know, I take the shape of the yield curve is also going to be important to that, you know, having a little bit of space that are in the fixed assets are repricings dependent on higher yield or a higher rate on the midterm to longer term of the curve.
to that would have an impact as well.
Speaker Change: Thank you very much. I appreciate it. If I could ask just on the point of deposits, I'm looking at the savings line that grew pretty materially this quarter.
Speaker Change: You know, it seems like it does bounce around a little bit. At least the past several quarters or so. Is there any kind of predictable seasonality in that line item? Or could you just speak to, you know, in a varied basis, pretty substantial growth, just kind of what's driving that this quarter? Yeah.
Speaker Change: Yeah, well, I mean, I think it was nice to see the bump up at quarter end. That could be some tax element in there.
Speaker Change: But when I look at the average deposit stats for savings there...
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Thank you. Thank you.
Unknown Speaker
Speaker Change: Okay, so more appropriate to think about it just from an average standpoint? Yeah, I think so.
Speaker Change: Okay, fair enough. If I could just ask on expenses and I apologize if I missed this in the prepared
Speaker Change: Could you quantify if there was or to what extent there was a one-time benefit on the FDAC insurance line?
Speaker Change: This Quarter, and then just wanted to check in. I think in the last quarter we talked about.
Speaker Change: 2-3% off-ex growth for the full year that included some reinvestment. It seems like you're tracking maybe a little bit above that as of the first quarter. Just wanted to check and see if that 2-3% was still kind of a good expense growth guide for the year.
Thank you. Thank you. Thank you.
Speaker Change: Yes, there was a $2.3 million benefit on the FDAC line.
Speaker Change: and the guidance is still 2-3% for the full year end.
Speaker Change: to clarify it based on our normalized 2024 results, which was...
Speaker Change: 426 Millet. So, to kind of simplify it, if you look at our reported numbers.
Speaker Change: for 2024. It's really about 1 to 2% of both that number which came in at 430 million.
Speaker Change: So that's still intact in terms of how it's tracking over the year. We'll probably see about a similar level in Q2 as what we saw in Q1, but kind of trend a little bit lower in the second half of the year.
Speaker Change: as some of our initiatives are implemented, expense initiatives to reduce some of that.
Speaker Change: Got it, okay, so similar, some more 2KXs with the 1K, and then backs off from there, but okay.
Very good, those are all my questions, I appreciate it.
Thank you. Thank you. Thank you.
Thank you. One moment for the next question.
Speaker Change: And our next questions coming from the line of Kelly Motta of KBW, your line is open.
Kelly Motta: Hi, good morning. Thanks for the the question and some perhaps again Dean and Brad.
Excellent news, so...
Speaker Change: I was hoping if we could just circle back on the deposits I really love the the new color on
C.D. Ruth Prything.
Speaker Change: In terms of where deposits are coming on now, it looks like you're running a sexual in the mid-3s, is that a good kind of assumption for where the incremental roles of CDs are coming on now?
So what we have in
kind of our like our advertised specials.
Speaker Change: They're in the mid-trees, but when you look at what really is coming on in the average rate, it's about...
Speaker Change: 2.3 to 3.4%. So a little lower than that, and then about 30 to 40 basis points below what's maturing off.
Speaker Change: Got it. Thank you. And also can you remind us when the Ford starting slots when those start to kick in and the cadence of that just for the purposes of
Martin Modeling.
Speaker Change: Yeah, we have 100 million coming on in the third quarter, fourth quarter and first quarter and then 200 million in the second quarter of next year.
Got it. Kind of spaced out somewhat, yeah.
Speaker Change: Got it. That's helpful and I apologize if I missed this but it looks like you guys acknowledge that there's
Speaker Change: Really nominal tariff exposure, direct tariff exposure, wondering what your outreach has been to clients, what you're hearing and the work you're doing to stay on the ground and be in touch with your customers. First, please.
Speaker Change: You guys do have a great track record with, with managing through practice.
it.
Speaker Change: Yeah, well, good, good. Okay, yeah, that's a good question. So like many other banks, we've been running analysis to assess the potential impact on how tariffs might affect our clients. And we've determined that we do have that as you mentioned the nominal direct tariff exposure.
Speaker Change: Our analysis focused on where there would be direct impacts, including industry verticals such as auto dealers, contractors, retail wholesale trade, manufacturing and construction.
and excluding real estate secured loans with low LTVs.
Speaker Change: and given that Hawaii's economy is really service oriented, this resulted in only 4% of loan portfolio or 640 million in exposure in total, and that number includes all the borrowers
Speaker Change: But in reality, a number of them may not be impacted much if their international trade is minimal or if they have wide profit margins.
Speaker Change: And by the way, that's why we put that slide in on CNI, so that this quarter, so that you could really get a sense for just how little exposure there is. It's very diversified, our CNI is very diversified among a fine number of industry segments.
and a very low average loan size.
Anything you want to add? No? Okay.
Appreciate the color I'll fit back. Thank you very much
Later Collins
Speaker Change: Thank you, that concludes today's Q&A session. I would like to turn the call back over to Chang Park. Please go ahead for closing remarks.
Chang Park: Thank you everyone for joining us today and thank you for your continued interest in Bank of Hawaii. As always, please feel free to reach out to me if you have any questions. Thank you.
This concludes today's Q.
Conference call, you may all disconnect. Thank you for joining.
Dr. Andrew Liesch, Dr. Andrew Liesch, Dr. Andrew Liesch,