Q1 2026 Bank of Hawaii Corp Earnings Call

April 20, 2026

Operator: Good day, and thank you for standing by. Welcome to the Bank of Hawaii Corporation Q1 2026 Earnings Conference Call. At this time, all participants are on a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star one one on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star one one again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Chang Park, Executive Vice President, Investor Relations. Please go ahead.

Speaker #1: After the speaker's presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press star 11 on your telephone.

Speaker #1: You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded.

Speaker #1: I would now like to hand the conference over to your speaker today, Chang Park, Executive Vice President, Investor Relations. Please go ahead. Good morning and good afternoon.

Chang Park: Good morning and good afternoon. Thank you for joining us today for our Q1 2026 Earnings Conference Call. Joining me today is our President and CEO, James Polk, CFO, Brad Satenberg, and Chief Risk Officer, Brad Shairson. Before we get started, I want to remind you that today's conference call will contain some forward-looking statements. While we believe our assumptions are reasonable, the actual results may differ materially from those projected. 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. Now I would like to turn the call over to Jim.

Chang Park: Good morning and good afternoon. Thank you for joining us today for our Q1 2026 earnings conference call. Joining me today is our President and CEO, James Polk, CFO, Brad Satenberg, and Chief Risk Officer, Brad Shairson. Before we get started, I want to remind you that today's conference call will contain some forward-looking statements. While we believe our assumptions are reasonable, the actual results may differ materially from those projected. 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. Now I would like to turn the call over to Jim.

Speaker #1: Thank you for joining us today for our first quarter 2026 earnings conference call. Joining me today are our President and CEO, Jim Polk; CFO, Brad Satenberg; and Chief Risk Officer, Brad Shirson.

Speaker #1: Before we get started, I want to remind you that today's conference call will contain some forward-looking statements. And while we believe our assumptions are reasonable, the actual results may differ materially from those projected.

Speaker #1: 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.

Speaker #1: And now, I would like to turn the call over to Jim. Thanks, Chang. Good morning and good afternoon, everyone. Thank you for joining us today.

James Polk: Thanks, Chang. Good morning and good afternoon, everyone. Thank you for joining us today. Before I get into the quarter, as this is my first earnings call as CEO, I want to say a few words about my predecessor, Peter Ho. Peter built something truly special here, a franchise defined by discipline, consistency, and a genuine commitment to the people of our island communities. With 16 years as CEO, he left this institution much stronger in every way that matters. I'm grateful for his confidence in me, and I'm honored to carry this forward. Now on to the quarter. Bank of Hawaii delivered another solid set of results to open 2026. Net interest income and our net interest margin expanded for the eighth consecutive quarter, driven by continued fixed asset repricing and a meaningful decline in total deposit costs.

Speaker #1: Before I get into the quarter, as this is my first earnings call as CEO, I want to say a few words about my predecessor, Peter Ho.

Speaker #1: Peter built something truly special here, a franchise defined by discipline, consistency, and a genuine commitment to the people of our island communities. With 16 years as CEO, he left this institution much stronger in every way that matters.

Speaker #1: I'm grateful for his confidence in me, and I'm honored to carry this forward. Now, onto the quarter. Bank of Hawaii delivered another solid set of results to open 2026.

Speaker #1: Net interest income and our net interest margin expanded for the eighth consecutive quarter, driven by continued fixed asset repricing and a meaningful decline in total deposit costs.

Speaker #1: NIM increased 13 basis points as our fixed asset repricing engine continues to perform as expected. During the quarter, we remixed $643 million in fixed-rate loans and investments from a roll-off yield of approximately 4% to a roll-on yield of 5.6%, continuing to lift the overall yield on earning assets.

James Polk: NIM increased 13 basis points as our fixed asset repricing engine continues to perform as expected. During the quarter, we repriced $643 million in fixed-rate loans and investments from a roll-off yield of approximately 4% to a roll-on yield of 5.6%, continuing to lift the overall yield on earning assets. We remain on track toward our stated goal of approaching 2.9% NIM by the end of the year, and we feel good about that trajectory even against an uncertain rate backdrop. Deposit trends continue to be encouraging as our average cost of total deposits declined 17 basis points, achieving a beta of 36%. Normalizing for non-recurring expenses and non-interest income, our EPS came in at $1.39, reflecting the steady underlying earnings power of the franchise. We maintained strong capital and excellent credit quality while continuing to build on our leading deposit market share position here in Hawaii.

Speaker #1: We remain on track toward our stated goal of approaching 2.9% NIM by the end of the year, and we feel good about that trajectory.

Speaker #1: Even against an uncertain rate backdrop, the positive trends continue to be encouraging. As our average cost of total deposits declined 17 basis points, achieving a beta of 36%.

Speaker #1: Normalizing for non-recurring expenses and non-interest income, EPS came in at $1.39, reflecting the steady underlying earnings power of the franchise.

Speaker #1: We maintained strong capital and excellent credit quality, while continuing to build on our leading deposit market share position here in Hawaii. The strategic formula has not changed.

James Polk: The strategic formula has not changed. Bank of Hawaii operates in one of the most distinctive banking markets in the country, concentrated and relationship-driven, where four locally headquartered banks hold more than 90% of FDIC-reported deposits. In that environment, brand and trust are our structural advantages. They allow us to price deposits attractively, manage funding costs actively, and generate superior risk-adjusted returns across cycles. Turning to our home market, Hawaii's economy entered 2026 on solid footing, near record low unemployment, strong visitor spending, and an active construction pipeline anchored by significant military and public infrastructure investment. That said, we are watching the environment carefully. Tensions in the Middle East, rising energy costs, and the potential for sustained inflation are headwinds that could affect consumer confidence and travel demand as the year progresses. Our credit portfolio continues to reflect the underwriting discipline this bank has maintained through many cycles.

Speaker #1: Bank of Hawaii operates in one of the most distinctive banking markets in the country and communities impacted by these events. We are in the early stages of assessing the potential impact of Typhoon Sinlaku, and it will take several weeks to gain clearer insight. Bradley Shairson will cover the potential impact of the storm as well as our overall credit profile in more detail shortly.

James Polk: I want to briefly address the recent Kona low in Hawaii and Typhoon Sinlaku in the West Pacific. First and foremost, Bank of Hawaii remains focused on supporting our employees, customers, and communities impacted by these events. We are in the early stages of assessing the potential impact of Typhoon Sinlaku, and it will take several weeks to gain clearer insight. Brad Shairson will cover the potential impact of the Kona low, as well as our overall credit profile in more detail shortly. I also want to highlight the progress we are making in wealth management, an area I expect will become an increasingly important part of the franchise's story. Through Bankoh Advisors and our partnership with Cetera, we continue to expand investment capabilities for our retail and private banking clients. Simultaneously, we are deepening coordination between our commercial and private banking teams around our high net worth client relationships.

Speaker #1: I also want to highlight the progress we are making in wealth management, an area I expect will become an increasingly important part of the franchise's story through Banco Advisors and our partnership with Sotera.

Speaker #1: We continue to expand investment capabilities for our retail and private banking clients Simultaneously , we are deepening coordination between our commercial and private banking teams around our high net worth client relationships Importantly , we recently opened the center for Family Business and Entrepreneurs , where we provide dedicated planning resources to Hawaii's family owned businesses encompassing financial and estate planning Succession planning business valuation and M&A advisory capabilities .

James Polk: Importantly, we recently opened the Center for Family Business & Entrepreneurs, where we provide dedicated planning resources to Hawaii's family-owned businesses, encompassing financial and estate planning, succession planning, business valuation, and M&A advisory capabilities. For many of these families, whose wealth is largely concentrated in their company, these are among the most consequential decisions they will face. It is a capability uniquely suited to Bank of Hawaii's depth of relationships and trusted role in this market. I'll close with this. We remain focused on the strategy, the culture, and the values that have made Bank of Hawaii successful. I fully intend to carry forward the intensity of execution, the continued investment in our people and technology, and an unwavering commitment to the island communities that have trusted this institution for 128 years. I'm proud to be in this role, and I look forward to the work ahead.

Speaker #1: For many of these families whose wealth is largely concentrated in their company, these are among the most consequential decisions they will face.

Speaker #1: It is a capability uniquely suited to Bank of Hawaii's depth of relationships and trusted role in this market. I'll close with this: we remain focused on the strategy, the culture, and the values that have made Bank of Hawaii successful.

Speaker #1: I fully intend to carry forward the intensity of execution, the continued investment in our people and technology, and an unwavering commitment to the island communities that have trusted this institution.

Speaker #1: For 128 years . I'm proud to be in this role , and I look forward to the work ahead . With that , I'll turn the call over to Bradley Shairson to discuss credit , after which Bradley Satenberg will walk through the financials and detail .

James Polk: With that, I'll turn the call over to Brad Shairson to discuss credit, after which Brad Satenberg will walk through the financials in detail. We'll then be pleased to take your questions.

Speaker #1: We'll then be pleased to take your questions. Thanks, Jim. I'll begin with an overview of our credit portfolio and conclude with asset quality metrics.

Bradley Shairson: Thanks, Jim. I'll begin with an overview of our credit portfolio and conclude with the asset quality metrics. As you will see, our performance has remained strong, consistent with prior quarters. Turning to our lending philosophy, the Bank of Hawaii is dedicated to serving our local communities, lending primarily within our core markets, where our expertise allows us to make informed and disciplined credit decisions. Our portfolio is built on long-tenured relationships with approximately 60% of both our commercial and consumer clients having been with the bank for more than 10 years. Geographically, our loan book is concentrated in markets we know well. Approximately 93% of loans are based in Hawaii, with 4% in the Western Pacific and just 3% on the mainland, primarily supporting existing clients who operate both locally and on the mainland. Our loan portfolio remains well-balanced between consumer and commercial exposure.

Brad Shairson: Thanks, Jim. I'll begin with an overview of our credit portfolio and conclude with the asset quality metrics. As you will see, our performance has remained strong, consistent with prior quarters. Turning to our lending philosophy, the Bank of Hawaii is dedicated to serving our local communities, lending primarily within our core markets, where our expertise allows us to make informed and disciplined credit decisions. Our portfolio is built on long-tenured relationships with approximately 60% of both our commercial and consumer clients having been with the bank for more than 10 years. Geographically, our loan book is concentrated in markets we know well. Approximately 93% of loans are based in Hawaii, with 4% in the Western Pacific and just 3% on the mainland, primarily supporting existing clients who operate both locally and on the mainland. Our loan portfolio remains well-balanced between consumer and commercial exposure.

Speaker #1: And as you will see , our performance remain strong , consistent with prior quarters Turning to our lending philosophy , the Bank of Hawaii is dedicated to serving our local communities , lending primarily within our core markets where our expertise allows us to make informed and disciplined credit decisions .

Speaker #1: Our portfolio is built on long-tenured relationships with approximately 60% of both our commercial and consumer clients having been with the bank for more than ten years.

Speaker #1: Geographically, our loan book is concentrated in markets we know well. Approximately 93% of loans are based in Hawaii, with 4% in the Western Pacific and just 3% on the mainland, primarily supporting existing clients who operate both locally and on the mainland.

Speaker #1: Our loan portfolio remains well balanced between consumer and commercial exposure. Consumer loans represent 56% of total loans, or approximately $8 billion, within the consumer portfolio.

Bradley Shairson: Consumer loans represent 56% of total loans, or approximately $8 billion. Within the consumer portfolio, 86% consists of residential mortgage and home equity loans, with a weighted average LTV of 48% and weighted average FICO score of 798. The remaining 14% of consumer loans are comprised of auto and personal lending. Credit quality in these segments also remains strong, with average FICO scores of 729 for auto loans and 760 for personal loans. Turning to commercial lending, the portfolio totals at $6.2 billion, representing 44% of total loans. 73% is secured by real estate with a weighted average LTV of 55%. This reflects our ongoing emphasis on collateral protection. CRE remains the largest component of the commercial book, totaling $4.3 billion or 31% of total loans.

Brad Shairson: Consumer loans represent 56% of total loans, or approximately $8 billion. Within the consumer portfolio, 86% consists of residential mortgage and home equity loans, with a weighted average LTV of 48% and weighted average FICO score of 798. The remaining 14% of consumer loans are comprised of auto and personal lending. Credit quality in these segments also remains strong, with average FICO scores of 729 for auto loans and 760 for personal loans. Turning to commercial lending, the portfolio totals at $6.2 billion, representing 44% of total loans. 73% is secured by real estate with a weighted average LTV of 55%. This reflects our ongoing emphasis on collateral protection. CRE remains the largest component of the commercial book, totaling $4.3 billion or 31% of total loans.

Speaker #1: Eighty-six percent consists of residential, mortgage, and home equity loans, with a weighted average LTV of 48% and a weighted average FICO score of 7.98.

Speaker #1: The remaining 14% of consumer loans are comprised of auto and personal lending Credit quality in these segments also remains strong , with average Fico scores of 729 for auto loans and 760 for personal loans Turning to commercial lending , the portfolio totals $6.2 billion , representing 44% of total loans , 73% is secured by real estate , with a weighted average LTV of 55% .

Speaker #1: This reflects our ongoing emphasis on collateral protection. CRE remains the largest component of the commercial book, totaling $4.3 billion, or 31% of total loans.

Speaker #1: And in Oahu , the state's largest free market , a combination of consistently low vacancy rates and flat inventory levels continues to support a stable real estate market across industrial , office , retail , and multifamily property types Vacancy rates remain below or close to their ten year averages Total office space on Oahu has declined by approximately 10% over the past decade , driven primarily by conversions to multi-family , residential and lodging This structural reduction in supply , combined with the return to office trend , has brought vacancy rates closer to long term averages and well below national levels .

Bradley Shairson: In Oahu, the state's largest CRE market, a combination of consistently low vacancy rates and flat inventory levels continues to support a stable real estate market. Across industrial, office, retail, and multifamily property types, vacancy rates remain below or close to their 10-year averages. Total office space on Oahu has declined by approximately 10% over the past decade, driven primarily by conversions to multifamily residential and lodging. This structural reduction in supply, combined with the return to office trend, has brought vacancy rates closer to long-term averages and well below national levels. Our CRE portfolio remains well-diversified, with no single property type exceeding 9% of total loans. Conservative underwriting practices continue to be applied consistently, with weighted average LTVs below 60% across all CRE categories. In addition, diversification within each segment remains strong, supported by modest average loan sizes.

Brad Shairson: In Oahu, the state's largest CRE market, a combination of consistently low vacancy rates and flat inventory levels continues to support a stable real estate market. Across industrial, office, retail, and multifamily property types, vacancy rates remain below or close to their 10-year averages. Total office space on Oahu has declined by approximately 10% over the past decade, driven primarily by conversions to multifamily residential and lodging. This structural reduction in supply, combined with the return to office trend, has brought vacancy rates closer to long-term averages and well below national levels. Our CRE portfolio remains well-diversified, with no single property type exceeding 9% of total loans. Conservative underwriting practices continue to be applied consistently, with weighted average LTVs below 60% across all CRE categories. In addition, diversification within each segment remains strong, supported by modest average loan sizes.

Speaker #1: Our CRE portfolio remains well diversified, with no single property type exceeding 9% of total loans. Conservative underwriting practices continue to be applied consistently, with weighted average LTVs below 60% across all CRE categories.

Speaker #1: In addition , diversification within each segment remains strong , supported by modest average loan sizes . Scheduled maturities are also well balanced , with more than 60% of CRE loans maturing in 20 , 30 or later , reducing any near-term refinancing risk Looking at the distribution of Ltvs , there isn't much tail risk in our CRE portfolio .

Bradley Shairson: Scheduled maturities are also well-balanced, with more than 60% of CRE loans maturing in 2030 or later, reducing any near-term refinancing risk. Looking at the distribution of LTVs, there isn't much tail risk in our CRE portfolio. Less than 3% of CRE loans have greater than 80% LTV. C&I accounts for 11% of total loans, totaling $1.6 billion. This portfolio is diversified across industries characterized by modest average loan sizes, and there is very little leveraged lending. Turning to asset quality, credit metrics continue to perform exceptionally well. Net charge-offs totaled $1.1 million or just three basis points annualized, down nine basis points from linked quarter and 10 basis points lower year-over-year. Three basis points is abnormally low. This was driven by a small net recovery in commercial, as well as a slight decline in consumer net charge-offs.

Brad Shairson: Scheduled maturities are also well-balanced, with more than 60% of CRE loans maturing in 2030 or later, reducing any near-term refinancing risk. Looking at the distribution of LTVs, there isn't much tail risk in our CRE portfolio. Less than 3% of CRE loans have greater than 80% LTV. C&I accounts for 11% of total loans, totaling $1.6 billion. This portfolio is diversified across industries characterized by modest average loan sizes, and there is very little leveraged lending. Turning to asset quality, credit metrics continue to perform exceptionally well. Net charge-offs totaled $1.1 million or just three basis points annualized, down nine basis points from linked quarter and 10 basis points lower year-over-year. Three basis points is abnormally low. This was driven by a small net recovery in commercial, as well as a slight decline in consumer net charge-offs.

Speaker #1: Less than 3% of CRE loans have greater than 80% LTV. CNI accounts for 11% of total loans, totaling $1.6 billion. This portfolio is diversified across industries, characterized by modest average loan sizes, and there is very little leveraged lending.

Speaker #1: Turning to asset quality credit metrics continue to perform exceptionally well . Net charge offs totaled $1.1 million , or just three basis points annualized , down nine basis points from last quarter and ten basis points lower year over year , three basis points is abnormally low .

Speaker #1: This was driven by a small net recovery in commercial, as well as a slight decline in consumer net charge-offs. Non-performing assets declined to nine basis points, down one basis point from the linked quarter and three basis points year over year.

Bradley Shairson: Non-performing assets declined to 9 basis points, down 1 basis point from linked quarter and 3 basis points year over year. Delinquencies increased to 40 basis points, up 4 basis points from linked quarter and up 10 basis points year over year. Criticized loans remained flat to the linked quarter at 2.12% of total loans. That's up 4 basis points year over year. Notably, 84% of criticized assets are real estate secured with a weighted average LTV of 53%. As an update on the allowance for credit losses on loans and leases, the ACL ended the quarter at $147 million, up $200,000 from linked quarter. The ratio of our ACL to outstandings remained flat at 1.04%. This ACL coverage does include a $3.2 million qualitative overlay specifically related to the recent Kona low storm.

Brad Shairson: Non-performing assets declined to 9 basis points, down 1 basis point from linked quarter and 3 basis points year over year. Delinquencies increased to 40 basis points, up 4 basis points from linked quarter and up 10 basis points year over year. Criticized loans remained flat to the linked quarter at 2.12% of total loans. That's up 4 basis points year over year. Notably, 84% of criticized assets are real estate secured with a weighted average LTV of 53%. As an update on the allowance for credit losses on loans and leases, the ACL ended the quarter at $147 million, up $200,000 from linked quarter. The ratio of our ACL to outstandings remained flat at 1.04%. This ACL coverage does include a $3.2 million qualitative overlay specifically related to the recent Kona low storm.

Speaker #1: Delinquencies increased to 40 basis points, up four basis points from the linked quarter and up ten basis points year over year, and criticized loans remained flat to the linked quarter at 2.12% of total loans.

Speaker #1: That's up four basis points year over year. Notably, 84% of criticized assets are real estate secured, with a weighted average LTV of 53%.

Speaker #1: And as an update on the allowance for credit losses on loans and leases, the ACL ended the quarter at $147 million, up $200,000 from the linked quarter.

Speaker #1: The ratio of our ACL to outstandings remained flat at 1.04%. This ACL coverage does include a $3.2 million qualitative overlay specifically related to the recent Kona Low storm.

Speaker #1: This overlay accounts for the potential impact of flood damage to approximately 15 to 20 properties in our portfolio, net of anticipated insurance recoveries.

Bradley Shairson: This overlay accounts for the potential impact of flood damage to approximately 15 to 20 properties in our portfolio, net of anticipated insurance recoveries. We are monitoring these exposures closely but can already see that the potential loss would not deviate greatly from the amount we have reserved. In light of recent industry discussions around private credit, I want to provide clear assurance that we don't lend to private credit funds or providers. Our exposure to non-bank financial intermediaries is negligible, totaling about $80 million, or 0.6% of total loans, with the vast majority of this tied to diversified, publicly traded equity REITs. This concludes my remarks. I will now turn the call over to Brad Satenberg for a discussion of our financial performance.

Brad Shairson: This overlay accounts for the potential impact of flood damage to approximately 15 to 20 properties in our portfolio, net of anticipated insurance recoveries. We are monitoring these exposures closely but can already see that the potential loss would not deviate greatly from the amount we have reserved. In light of recent industry discussions around private credit, I want to provide clear assurance that we don't lend to private credit funds or providers. Our exposure to non-bank financial intermediaries is negligible, totaling about $80 million, or 0.6% of total loans, with the vast majority of this tied to diversified, publicly traded equity REITs. This concludes my remarks. I will now turn the call over to Brad Satenberg for a discussion of our financial performance.

Speaker #1: We are monitoring these exposures closely, but can already see that the potential loss would not deviate greatly from the amount we have reserved.

Speaker #1: And in light of recent industry discussions around private credit , I want to provide clear assurance that we don't lend to private credit funds or providers Our exposure to non-bank financial intermediaries is negligible , totaling about $80 million , or 0.6% of total loans , with the vast majority of this tied to diversified , publicly traded equity REITs .

Speaker #1: This concludes my remarks. I will now turn the call over to Bradley Satenberg for a discussion of our financial performance.

Bradley S. Satenberg: Thanks, Brad. For the quarter, we reported net income of $57.4 million and a diluted EPS of $1.30, decreases of $3.5 million and $0.09 per share as compared to the linked quarter. These declines were primarily the result of elevated non-interest expense as compared to Q4. Q1 included the annual bump in seasonal payroll taxes and benefits, as well as a non-recurring compensation-related charge incurred in connection with the accelerated vesting of restricted stock awards under the retirement provision of the company's share-based compensation plan. As it relates to NII and NIM, we continue to see a positive expanding trend in both. This is the second quarter in a row that we achieved a double-digit increase in NIM with a 13 basis point pickup this quarter and an aggregate 28 basis points over the past six months. Despite two fewer days this quarter, NII grew by $5.6 million.

Brad Satenberg: Thanks, Brad. For the quarter, we reported net income of $57.4 million and a diluted EPS of $1.30, decreases of $3.5 million and $0.09 per share as compared to the linked quarter. These declines were primarily the result of elevated non-interest expense as compared to Q4. Q1 included the annual bump in seasonal payroll taxes and benefits, as well as a non-recurring compensation-related charge incurred in connection with the accelerated vesting of restricted stock awards under the retirement provision of the company's share-based compensation plan. As it relates to NII and NIM, we continue to see a positive expanding trend in both. This is the second quarter in a row that we achieved a double-digit increase in NIM with a 13 basis point pickup this quarter and an aggregate 28 basis points over the past six months. Despite two fewer days this quarter, NII grew by $5.6 million.

Speaker #2: Thanks , Brad , for the quarter , we reported net income of $57.4 million and a diluted EPS of $1.30 . Decreases of $3.5 million and $0.09 per share as compared to the linked quarter These declines were primarily the result of elevated non-interest expense , as compared to the as compared to the fourth quarter .

Speaker #2: Q1 included the annual bump in seasonal payroll taxes and benefits, as well as a non-recurring compensation-related charge incurred in connection with the accelerated vesting of restricted stock awards.

Speaker #2: Under the retirement provision of the company's share based compensation plan As it relates to NII and Nim , we continue to see a positive expanding trend in both This is the second quarter in a row that we achieved double a double digit increase in Nim with a 13 basis point pickup .

Speaker #2: This quarter in an aggregate , 28 basis point , 28 basis points over the past six months . And despite two fewer days , this quarter , NII grew by $5.6 million , consistent with the previous quarter .

Bradley S. Satenberg: Consistent with the previous quarter, NII and NIM benefited from the combination of our fixed asset repricing, the continued repricing of our deposits following the Fed rate cuts, as well as the deposit mix shift, which was +$94 million this quarter. Compared to the linked quarter, average non-interest-bearing deposits are up by $84 million. During the quarter, the yield on our interest-earning assets declined by 4 basis points as the effect of the rate cuts at the end of last year were fully recognized during the current quarter. This impact was partially offset by our fixed asset repricing, which contributed $2.6 million to our NII. Our cost of interest-bearing liabilities improved by 21 basis points during the quarter as our deposits continued to reprice down following the rate cuts. The cost of deposits declined to 1.26%, representing a 17 basis point reduction as compared to the linked quarter.

Brad Satenberg: Consistent with the previous quarter, NII and NIM benefited from the combination of our fixed asset repricing, the continued repricing of our deposits following the Fed rate cuts, as well as the deposit mix shift, which was +$94 million this quarter. Compared to the linked quarter, average non-interest-bearing deposits are up by $84 million. During the quarter, the yield on our interest-earning assets declined by 4 basis points as the effect of the rate cuts at the end of last year were fully recognized during the current quarter. This impact was partially offset by our fixed asset repricing, which contributed $2.6 million to our NII. Our cost of interest-bearing liabilities improved by 21 basis points during the quarter as our deposits continued to reprice down following the rate cuts. The cost of deposits declined to 1.26%, representing a 17 basis point reduction as compared to the linked quarter.

Speaker #2: NII and Nim benefited from the combination of our fixed asset repricing . The continued repricing of our deposits following the fed rate cuts , as well as the deposit mix shift , which was a positive $94 million this quarter compared to the linked quarter average non-interest bearing deposits are up by $84 million during the quarter .

Speaker #2: The yield on our interest-earning assets declined by four basis points as the effect of the rate cuts at the end of last year were fully recognized during the current quarter. This impact was partially offset by our fixed asset repricing, which contributed $2.6 million to our NII. Our cost of interest-bearing liabilities improved by 21 basis points during the quarter as our deposits continued to reprice down following the rate cuts.

Speaker #2: The cost of deposits declined to 1.26% , representing a 17 basis point reduction as compared to the linked quarter The spot rate on our deposits was 1.25% at the end of Q1 , and as Jim mentioned in his comments , our our deposit beta improved to 36% , which exceeds our prior target of 35% .

Bradley S. Satenberg: The spot rate on our deposits was 1.25% at the end of Q1. As Jim mentioned in his comments, our deposit beta improved to 36%, which exceeds our prior target of 35%. While I still anticipate that we will see some modest improvements in our cost of deposits going forward, any material changes will likely be contingent upon future Fed rate adjustments. At the moment, we are currently forecasting no rate cuts in 2026. Contributing to our declining deposit cost was the continued repricing of our CD book. During the quarter, the average cost of CDs declined by 29 basis points to 2.89%. At the end of the quarter, the spot CD rate was 2.8%. Over 50% of our CDs will mature within the next three months at an average rate of 2.91%.

Brad Satenberg: The spot rate on our deposits was 1.25% at the end of Q1. As Jim mentioned in his comments, our deposit beta improved to 36%, which exceeds our prior target of 35%. While I still anticipate that we will see some modest improvements in our cost of deposits going forward, any material changes will likely be contingent upon future Fed rate adjustments. At the moment, we are currently forecasting no rate cuts in 2026. Contributing to our declining deposit cost was the continued repricing of our CD book. During the quarter, the average cost of CDs declined by 29 basis points to 2.89%. At the end of the quarter, the spot CD rate was 2.8%. Over 50% of our CDs will mature within the next three months at an average rate of 2.91%.

Speaker #2: While I still anticipate that we will see some modest improvements in our cost of deposits going forward , any material changes will likely be contingent upon a future fed rate adjustments At the moment , we are currently forecasting no rate cuts in 2026 , contributing to our declining deposit costs with the continued repricing of our CD book during the quarter , the average cost of CDs declined by 29 basis points to 2.89% , and at the end of the quarter , the spot rate .

Speaker #2: The spot CD rate was 2.8%. Over 50% of our CDs will mature within the next three months at an average rate of 2.91%.

Bradley S. Satenberg: The majority of these CDs are expected to renew at rates ranging from 2.25% to 3%. During the quarter, we terminated $400 million of our active swaps, and we finished the quarter with an active pay fixed receive flow portfolio of $1.2 billion at a weighted average fixed rate of 3.3% and an average life of one and a half years. $900 million of these swaps are hedging our loan portfolio, while $300 million are hedging our securities. In addition, we have $400 million of forward-starting swaps with a weighted average fixed rate of 3.1% and an average life of 2.4 years. $200 million of these forward swaps became active at the beginning of April, while the remaining $200 million will become effective during Q3.

Brad Satenberg: The majority of these CDs are expected to renew at rates ranging from 2.25% to 3%. During the quarter, we terminated $400 million of our active swaps, and we finished the quarter with an active pay fixed receive flow portfolio of $1.2 billion at a weighted average fixed rate of 3.3% and an average life of one and a half years. $900 million of these swaps are hedging our loan portfolio, while $300 million are hedging our securities. In addition, we have $400 million of forward-starting swaps with a weighted average fixed rate of 3.1% and an average life of 2.4 years. $200 million of these forward swaps became active at the beginning of April, while the remaining $200 million will become effective during Q3.

Speaker #2: The majority of these CDs are expected to renew at rates ranging from two and a 2:45 percent . During the quarter , we terminated 400 million of our active swaps , and we finished the quarter with an active pay fixed received flow portfolio of $1.2 billion at a weighted average fixed rate of 3.3% and an average life of one and a half years , 900 million of these swaps are hedging our loan portfolio , while 300 million are hedging our securities .

Speaker #2: In addition , we have hundred million dollars of forward starting swaps with a weighted average fixed rate of 3.1% and an average life of 2.4 years , 200 million of these forward swaps became active at the beginning of April , while the remaining 200 million will become effective during the third quarter .

Bradley S. Satenberg: We finished the quarter with a fixed-to-float ratio of 59%, which keeps us well positioned for any changes in the rate environment. Non-interest income was $41.3 million during the quarter, compared to $44.3 million during the linked quarter. This quarter includes a $200,000 charge related to a Visa B conversion ratio change, while Q4 included a similar Visa B charge of $770,000, as well as a $1.3 million net gain in connection with the combined impact from our merchant services portfolio sale and an AFS securities repositioning during the quarter. Adjusting for these normalizing items, non-interest income was down $2.3 million. This decline was primarily caused by lower loan and deposit fee income, as well as a dip in earnings within our wealth management division due to less than favorable market conditions. My expectation is that Q2 non-interest income will be approximately $42 million.

Brad Satenberg: We finished the quarter with a fixed-to-float ratio of 59%, which keeps us well positioned for any changes in the rate environment. Non-interest income was $41.3 million during the quarter, compared to $44.3 million during the linked quarter. This quarter includes a $200,000 charge related to a Visa B conversion ratio change, while Q4 included a similar Visa B charge of $770,000, as well as a $1.3 million net gain in connection with the combined impact from our merchant services portfolio sale and an AFS securities repositioning during the quarter. Adjusting for these normalizing items, non-interest income was down $2.3 million. This decline was primarily caused by lower loan and deposit fee income, as well as a dip in earnings within our wealth management division due to less than favorable market conditions. My expectation is that Q2 non-interest income will be approximately $42 million.

Speaker #2: We finished the quarter with a fixed to float ratio of 59% , which keeps us well positioned for any changes in the rate environment Non-interest income was $41.3 million during the quarter , compared to 44.3 million during the linked quarter .

Speaker #2: This quarter includes a 200 $200,000 charge related to a visa conversion ratio change , while the fourth quarter included a similar vis a vis charge of $770,000 , as well as a $1.3 million net gain in connection with the combined impact from our merchant services portfolio .

Speaker #2: Sale and an AFS securities repositioning during the quarter Adjusting for these normalizing items , non-interest income was down $2.3 million . This decline was primarily caused by lower loan and deposit fee income , as well as a dip in earnings within our wealth management division due to less than favorable market conditions .

Speaker #2: My expectation is that the second quarter non-interest income will be approximately $42 million. Non-interest expense was $116.1 million, compared to $109.5 million during the quarter.

Bradley S. Satenberg: Non-interest expense was $116.1 million, compared to $109.5 million during the linked quarter. Q1 tends to be the highest expense quarter of the year, and as discussed earlier, this quarter included a seasonal payroll tax and benefit charge of $2.8 million and a non-recurring charge related to the accelerated vesting of restricted stock awards of $3.5 million. In addition, the quarter also contained an unrelated severance charge of $750,000. The linked quarter had a $1.4 million reduction in our FDIC special assessment and a non-recurring $1.1 million donation to our Bank of Hawaii Foundation. Compared to my previous forecast, reported normalized non-interest expense was lower than expected, mainly due to a reduction in our quarterly FDIC insurance assessment. Going forward, I expect that this assessment will be approximately $3.2 million or half a million dollars less per quarter than our recent run rate.

Brad Satenberg: Non-interest expense was $116.1 million, compared to $109.5 million during the linked quarter. Q1 tends to be the highest expense quarter of the year, and as discussed earlier, this quarter included a seasonal payroll tax and benefit charge of $2.8 million and a non-recurring charge related to the accelerated vesting of restricted stock awards of $3.5 million. In addition, the quarter also contained an unrelated severance charge of $750,000. The linked quarter had a $1.4 million reduction in our FDIC special assessment and a non-recurring $1.1 million donation to our Bank of Hawaii Foundation. Compared to my previous forecast, reported normalized non-interest expense was lower than expected, mainly due to a reduction in our quarterly FDIC insurance assessment. Going forward, I expect that this assessment will be approximately $3.2 million or half a million dollars less per quarter than our recent run rate.

Speaker #2: The first quarter tends to be the highest expense quarter of the year, and as discussed earlier this quarter, included a seasonal payroll tax and benefit charge of $2.8 million and a non-recurring charge related to the accelerated vesting.

Speaker #2: The accelerated vesting of restricted stock awards of $3.5 million . In addition , the quarter also contained an unrelated severance charge of hundred and $50,000 .

Speaker #2: The linked quarter had a $1.4 million reduction in our FDIC special assessment and a non-recurring $1.1 million donation for our Bank of Hawaii Foundation.

Speaker #2: Compared to my previous forecast, reported normalized non-interest expense was lower than expected, mainly due to a reduction in our quarterly FDIC insurance assessment.

Speaker #2: Going forward , I expect that this assessment will be approximately $3.2 million , or half $1 million less per quarter than our recent run rate as a result , I'm lowering my forecasted range for annual growth in overhead expenses to between two and a half and 3% or half a percent lower than my previous forecast .

Bradley S. Satenberg: As a result, I'm lowering my forecasted range for annual growth in overhead expenses to between 2.5% and 3%, or 0.5% lower than my previous forecast. Q2 normalized non-interest expense is expected to be approximately $112 million. As a reminder, the Q2 expense will include the annual merit increases of approximately $1.2 million per quarter. During the quarter, we also recorded a provision for credit losses of $1.8 million, resulting in an unchanged coverage ratio of 1.04%. Further, we reported a provision for taxes of $17.1 million during the quarter, resulting in an effective tax rate of 22.9%. Our capital ratios remained above the well-capitalized regulatory thresholds during the quarter, with Tier 1 capital and total risk-based capital of 14.4% and 15.4% respectively.

Brad Satenberg: As a result, I'm lowering my forecasted range for annual growth in overhead expenses to between 2.5% and 3%, or 0.5% lower than my previous forecast. Q2 normalized non-interest expense is expected to be approximately $112 million. As a reminder, the Q2 expense will include the annual merit increases of approximately $1.2 million per quarter. During the quarter, we also recorded a provision for credit losses of $1.8 million, resulting in an unchanged coverage ratio of 1.04%. Further, we reported a provision for taxes of $17.1 million during the quarter, resulting in an effective tax rate of 22.9%. Our capital ratios remained above the well-capitalized regulatory thresholds during the quarter, with Tier 1 capital and total risk-based capital of 14.4% and 15.4% respectively.

Speaker #2: Second quarter normalized non-interest expense is expected to be approximately $112 million. As a reminder, the second quarter expense will include the annual merit increases of approximately $1.2 million per quarter during the quarter.

Speaker #2: We also recorded a provision for credit losses of $1.8 million , resulting in an unchanged coverage ratio of 1.04% . Further , we reported a provision for taxes of $17.1 million during the quarter , resulting in an effective tax rate of 22.9% .

Speaker #2: Our capital ratios remained above the well-capitalized regulatory thresholds during the quarter , with tier one capital and total risk based capital capital of 14.4% and 15.4% , respectively .

Bradley S. Satenberg: Consistent with the linked quarter, we paid dividends of $28 million on our common stock and $5.3 million on our preferreds. During the quarter, we repurchased approximately $15 million of common shares at an average price of $77 per share. I am currently planning to repurchase an additional $15 to $20 million of stock during Q2. At the end of Q1, $106 million remained available under our current repurchase plan. Finally, our board declared a dividend of $0.70 per common share that will be paid during Q2. Now I'll turn the call back over to Jim.

Brad Satenberg: Consistent with the linked quarter, we paid dividends of $28 million on our common stock and $5.3 million on our preferreds. During the quarter, we repurchased approximately $15 million of common shares at an average price of $77 per share. I am currently planning to repurchase an additional $15 to $20 million of stock during Q2. At the end of Q1, $106 million remained available under our current repurchase plan. Finally, our board declared a dividend of $0.70 per common share that will be paid during Q2. Now I'll turn the call back over to Jim.

Speaker #2: And consistent with the linked quarter , we paid dividends of $28 million on our common stock and $5.3 million on $5.3 million on our preferred During the quarter , we repurchased approximately $15 million of common shares at an average price of $77 per share .

Speaker #2: I am currently planning to repurchase an additional $15 to $20 million of stock during the second quarter, and at the end of the first quarter, $106 million remained available under our current repurchase plan. Finally, our board declared a dividend of $0.70 per common share.

Speaker #2: That will be paid during the second quarter. Now I'll turn the call back over to Jim. Thanks, Brad.

James Polk: Thanks, Brad. We'd now be happy to answer any questions that you may have.

Speaker #3: We'd now be happy to answer any questions that you may have.

Operator: Thank you. As a reminder, to ask a question, please press star one one on your telephone and wait for your name to be announced. To withdraw your question, please press star one one again. Our first question comes from the line of Jeff Rulis with D.A. Davidson. Jeff, your line is now open.

Speaker #4: Thank you As a reminder to ask a question , please press star one one on your telephone and wait for your name to be announced To withdraw your question , please press star one one again Our first question comes from the line of Jeff Ruelas with Da Davidson .

Speaker #4: Jeff, your line is now open.

Jeff Rulis: Thanks. Good morning. Maybe just on that last expense mentioned, I just want to catch that real quick. The expense guide, does that include the stock expense and severance? Are you carving that out for this, or is that included in the full year growth expectation?

Speaker #5: Thanks . Good morning Maybe just on that last expense mentioned . Just want to catch that real quick . The expense guide , does that include the the stock expense and severance ?

Speaker #5: I mean, are you carving that out for this, or is that included in the full-year growth expectation?

Bradley S. Satenberg: No, that's inclusive of that. We're saying $112 million all inclusive of every expense that we're aware of today.

Brad Satenberg: No, that's inclusive of that. We're saying $112 million all inclusive of every expense that we're aware of today.

Speaker #2: No, that's inclusive of that. So we're saying $112 million, all inclusive of every expense that we're aware of today.

Jeff Rulis: Got it. Okay. Thanks. I guess on the, maybe just a broader growth question. It looks like the consumer book has been either growth or more moderate runoff. I guess looking forward, that's kind of been the area that maybe hasn't been adding to net production. Are you any closer with comfort there of that sort of flattening out that maybe you look at your full-year growth numbers, possibly some upside to kind of the low single-digit guide, or still waiting to see more confidence before inching that up?

Speaker #5: Got it . Okay . Thanks . And then I guess on the maybe just a broader growth question , it looks like the consumer book is , has been either growth or more moderate run off .

Speaker #5: I guess looking forward . That's kind of been the other area that that maybe hasn't been adding to . Net production . Are you any closer to with comfort there of that sort of flattening out that that maybe a look at your full year growth numbers , possibly some upside to kind of the low single digit guide or still waiting to see more confidence before inching that up

James Polk: Yeah. Hey, Jeff, this is Jim. The way I look at it is resi's been coming along okay. It was a good quarter for resi in Q4. It was a decent quarter in Q1, just given that it was all purchase activity. We see some continued strength in the resi side going forward. I think our challenge has really been on the home equity line and the indirect books. We've got a number of different initiatives we're pursuing in both of those in an attempt to kind of stabilize those books. I think the reality is, and you hit it on the head in the last part of your comment, I think we need a little bit more certainty in the overall environment. A little bit of rate relief would be helpful. Not sure we'll get that.

Speaker #6: Yeah , hey , Jeff , this is Jim . You know , I , the way I look at it is has been coming along .

Speaker #6: Okay . We've had a it was a good quarter for resi in Q4 . It was a decent quarter in Q1 , just given that it was all purchase activity And we see some continued strength in the resi side going forward .

Speaker #6: I think our challenge has really been on the home equity line and the indirect books. So we've got a number of different initiatives we're pursuing in both of those.

Speaker #6: In an attempt to kind of stabilize those books . I think . The reality is , and you hit it on the head in the last part of your comment , I think we need a little bit more certainty in the overall environment .

Speaker #6: A little bit of rate relief would be helpful . Not sure we'll get that . So in the meantime , you know , with respect to home equity line , we've got a number of different direct mailing activities that we're doing .

James Polk: In the meantime, with respect to home equity line, we've got a number of different direct mailing activities that we're doing, looking at some special programs to try and retain some of the balances that are coming off of, say, fixed rates. In the indirect space, we've implemented digital contracting, and we're trying to speed up funding timeframes. We're hoping that those can sort of give us a little boost on that side. I think until we get better clarity in the overall environment, we're still, from a loan perspective, in that low single-digit growth outlook.

Speaker #6: Looking at some special programs to try and retain some of the , the balances that are coming off of , say , fixed rates .

Speaker #6: And then in the indirect space, we've implemented digital contracting and we're trying to speed up funding time frames. So we're hoping that those can, you know, sort of give us a little boost on that side.

Speaker #6: But I think until we get better clarity in the overall environment, we're still, from a loan perspective, in that low single-digit growth outlook.

Jeff Rulis: Thanks, Jim. If I could squeeze just one last one on the capital side. I appreciate the guide on the buyback for Q2. It seems like pretty steady activity. I guess as earnings continues to ramp here, and the dividend payout, I guess could potentially dip below 50%. Just revisiting the dividend side and your conversations with the board, is that something you look at in terms of the overall might want to inch that up as you've kind of broken out on earnings over the last few quarters?

Speaker #5: Thanks , Jim . And if I could squeeze just one last one on the on the capital side , I the guide on the buyback for the second quarter , it seems like pretty steady activity .

Speaker #5: I guess as earnings have continued to ramp here and the dividend payout, I guess, could potentially dip below 50%. Is there...

Speaker #5: Just revisiting the dividend side and your conversations with the board, is that something you look at in terms of the overall—might want to inch that up as you've kind of broken out on earnings?

Speaker #5: Over the last few quarters

Bradley S. Satenberg: It's certainly something that we talk about, but it's not something that we're considering at the moment. I think we're comfortable with where our dividend is today. Anything that we're returning back to shareholders beyond that, probably would come through the buyback.

Brad Satenberg: It's certainly something that we talk about, but it's not something that we're considering at the moment. I think we're comfortable with where our dividend is today. Anything that we're returning back to shareholders beyond that, probably would come through the buyback.

Speaker #2: It's certainly something that we talk about, but it's not something that we're considering at the moment. I think we're comfortable with where our dividend is today.

Speaker #2: Anything that we're returning back to shareholders beyond that would probably come through the buyback.

Jeff Rulis: Fair enough. Thank you.

Speaker #5: Fair enough. Thank you.

James Polk: Thanks, Jeff.

Speaker #7: Thanks , chef

Operator: Our next question comes from the line of Andrew Terrell with Stephens. Your line is now open.

Speaker #4: Our next question comes from the line of Andrew Terrell with Stephens. Your line is now open.

Andrew Terrell: Hey, good morning.

Speaker #8: Hey good morning .

James Polk: Good morning. How are you, Andrew?

Speaker #6: Good morning. How are you, Andrew?

Chang Park: I'm good. How are you guys?

Andrew Terrell: I'm good. How are you guys?

Speaker #8: I'm good, how are you guys? I wanted to ask on the—thank you for the, the, the CD color. The time deposit color you gave.

James Polk: Good.

Andrew Terrell: I wanted to ask. Thank you for the CD color, the time deposit color you gave. I think you said 280 on the spot cost in the period. Do you have the comparable figure for either total deposit costs or interest-bearing deposit costs? I wanted to get a sense on, it sounds like there's still a pretty decent opportunity to reprice some of the time deposit portfolio over the balance of the year. I was hoping you could just talk to kind of the competitive landscape for deposits you're seeing in the market right now.

Speaker #8: I think you said 2.80% on the spot cost in the period. Do you have the comparable figure for either total deposit costs or interest-bearing deposit costs?

Speaker #8: And then I wanted to get a sense on , you know , it sounds like there's a still a pretty decent opportunity to reprice some of the the time deposit portfolio over the balance of the year .

Speaker #8: I was hoping you could just talk to kind of the competitive landscape for deposits you're seeing in the market right now.

Bradley S. Satenberg: Yeah. I mean, our total deposit cost is 2.89% for the quarter. The spot rate, again, as you mentioned, was 2.8%. The competitive landscape is reasonable, and it's rational, and we still think there's an opportunity to continue to reprice our CD books. The majority of our CDs are in our three-month portfolio or portion of our portfolio, and we think the majority of that will continue to roll off and reprice into and renew into new three-month CDs. Probably, again, at rates between 2.25% and 3%, depending on which CD they go into. I still think there's an opportunity there, and I think we'll continue to see benefits from that CD repricing.

Brad Satenberg: Yeah. I mean, our total deposit cost is 2.89% for the quarter. The spot rate, again, as you mentioned, was 2.8%. The competitive landscape is reasonable, and it's rational, and we still think there's an opportunity to continue to reprice our CD books. The majority of our CDs are in our three-month portfolio or portion of our portfolio, and we think the majority of that will continue to roll off and reprice into and renew into new three-month CDs. Probably, again, at rates between 2.25% and 3%, depending on which CD they go into. I still think there's an opportunity there, and I think we'll continue to see benefits from that CD repricing.

Speaker #2: Yeah . I mean , our total deposit cost is 2.89% for the quarter . The spot rate , again , as you mentioned , was 2.8% .

Speaker #2: You know , the competitive landscape is it's , you know , it's reasonable and it's rational . And we still think there's an opportunity to continue to reprice our CD books .

Speaker #2: So , you know , the majority of our CDs are in our three month portfolio or the portion of our portfolio . And we think majority of that will continue to roll off and reprice into and renew into new three , into new three month CDs .

Speaker #2: And probably , you know , again , at rates between two and a 2:45 percent , depending on which CD they go into .

Speaker #2: But, you know, I still think there's an opportunity there. And I think we'll continue to see benefits from that. CD repricing.

Andrew Terrell: Yep. Okay. I was hoping just to ask on the wealth management, maybe just refresh us on kind of where you're at in terms of efforts there. Is it something we should expect? I know you gave the fee income guide kind of for the Q2. Just how should we think about growth potential in the wealth business and then overall fees throughout the year?

Speaker #8: Yeah . Okay . And I was hoping just to ask on the , you know , wealth management , maybe just refresh us on , on kind of where you're at in terms of , in terms of efforts there and is it , is it something we should expect ?

Speaker #8: You know , I know you gave the fee income guide kind of for the for the second quarter , just how should we think about growth potential in the wealth business ?

Speaker #8: And the overall fees throughout the year?

James Polk: Yeah. I think there's two components to it, right? The early one that we'll begin to see some benefit from is really coming from the Bank of Hawaii Advisors side, our former broker-dealer. As you may recall, we spent most of the Q4 repapering that business, so activity was pretty low. January, we came out of that, and we began to see some early positive results in February and March. I think we can continue to see that rise as we work through the end of the year. On the broader wealth management effort, that's really a longer-term sort of effort for us, right? We're spending a lot of time building out the infrastructure and the capability set.

Speaker #6: Yeah , I think there's two components to it . Right ? The early one that we'll begin to see some benefit from is really coming from the bank advisor side or former broker dealer .

Speaker #6: As you may recall, we spent most of the fourth quarter repapering that business, so activity was pretty low. In January, we came out of that, and we began to see some early positive results in February and March.

Speaker #6: So I think we can continue to see that rise as we work through the end of the year . On the on the broader on the broader wealth management effort .

Speaker #6: That's really a longer term sort of effort for us , right ? We're spending a lot of time building out the infrastructure and the capability set really introducing the concept of business planning and family dynamics , planning , succession planning to our client base , and spending a lot of time internally just educating folks and bringing people together to , to build momentum .

James Polk: Really introducing the concept of business planning and family dynamics planning, succession planning to our client base, and spending a lot of time internally just educating folks and bringing people together to build momentum. We've clearly seen great activity around that, and we've got a lot of growth in the valuations pipeline and some M&A activity I think that we'll see earlier returns on. The bigger effort, you're probably not going to see meaningful results until we get into 2027, would be my look.

Speaker #6: We've clearly seen great activity around that. We've got a lot of growth in the valuations pipeline and some M&A activity. I think that we'll see earlier returns on that.

Speaker #6: But the bigger effort—you know, you're probably not going to see meaningful results until we get into 2027—would be my look.

Andrew Terrell: Great. Okay. Thank you for taking the questions.

Speaker #8: Great. Okay. Thank you for taking the questions.

James Polk: Yeah. Thank you.

Speaker #6: Yeah . Thank you .

Operator: Our next question comes from the line of Kelly Motta with KBW. Your line is now open.

Speaker #4: Our next question comes from the line of Kelly Mata with KBW. Your line is now open.

Kelly Motta: Hi. Good morning. Thanks for the question. Maybe I would like to circle back to the question of capital. Clearly, you guys are incrementally repurchasing shares and have given color around that. Just wondering if you guys have looked at the proposed capital changes and, given your higher percentage of resi, if you guys have done any sensitivity around that, and how that, if relevant, would change potentially your capital outlook. Thank you.

Speaker #9: Hi . Good morning . Thanks for the question . Maybe I would I would like to circle back to the question of capital .

Speaker #9: Clearly you guys are incrementally repurchasing shares and have given color around that . Just wondering if you guys have looked at the proposed capital changes and given , you know , your higher percentage of resi , if you guys have done any sensitivity around that and if so , how that if , if relevant , would change potentially your capital outlook .

Speaker #9: Thank you .

James Polk: Maybe I'll start and then Brad can clean up. I think we're comfortable with, to Brad's earlier comment, the way we're looking at dividends, the way we're looking at stock buybacks. We have started to look at the potential impacts of the proposed regulatory changes. We have such a weighting toward risk-weighted assets already. There'll be some favorable movements in it, but I still think it's early, and I think we're really still trying to assess how that would change our posture on what we do with our capital.

Speaker #6: Maybe I'll start and then Brad can clean up . You know , I think we're comfortable with the way we're looking to Brad's earlier comment , the way we're looking at dividends , the way we're looking at stock buybacks .

Speaker #6: We have started to look at the potential impacts of the proposed regulatory changes. You know, we have such a weighting towards risk-weighted assets already.

Speaker #6: There'll be some favorable movements in it. But I still think it's early, and I think we're really still trying to assess how that would change our posture around what we do with our capital.

Kelly Motta: Got it.

Bradley S. Satenberg: Yeah. I would just add to that. Obviously it's just a proposal right now. It's not final. We have done some early assessments of the impact, and it will be positive for us. I anticipate that our regulatory capital ratios will see a 50 to 100 basis points improvement based on the way the current proposal is structured.

Brad Satenberg: Yeah. I would just add to that. Obviously it's just a proposal right now. It's not final. We have done some early assessments of the impact, and it will be positive for us. I anticipate that our regulatory capital ratios will see a 50 to 100 basis points improvement based on the way the current proposal is structured.

Speaker #2: And I would I would just add to that , you know , I mean , obviously , it's just proposal right now . It's not final , but but we have done some early assessments of the impact and it will be positive for us .

Speaker #2: I mean, I anticipate that our regulatory capital ratios will see a 50 to 100 basis point improvement based on the way the current proposal is structured.

Kelly Motta: That's really helpful. I appreciate the color. I would like to also circle back to the question of margin. You guys reiterated that 2.90 outlook to exit the year. You had a fantastic Q1 for NIM expansion. I'm just wondering as you look ahead, clearly there's a lot of variables here in terms of the margin, but it seems like the asset repricing story continues. Wondering if you could provide any commentary or color as to how you guys are thinking about the normalized margin as well as kind of the cadence from here, and would seem to imply somewhat of a slowing versus Q1. So how we should be thinking about the inputs here. Thank you.

Speaker #9: That's that's really helpful . I appreciate the color . I would like to also circle back to the question of margin . You guys reiterated that , you know , 290 outlook to to exit the year .

Speaker #9: You had a fantastic first quarter for Nim expansion . And I'm just wondering , you know , as you look ahead , clearly there's a lot of variables here in terms of the margin .

Speaker #9: But it seems like the asset repricing story continues . Wondering if you have could provide any color commentary or color as to how you guys are thinking about the normalized margin , as well as other kind of the cadence from here .

Speaker #9: And it would seem to imply somewhat of a slowing versus one . Q so how we should be thinking about about , you know , the the inputs here .

Speaker #9: Thank you .

James Polk: Yeah. Again, maybe I'll start and then Brad can clean up whatever. The fixed asset repricing, I think we've shared this before. It basically adds about 5 basis points a quarter or 20 basis points a year. As we close out this year heading towards that 290 number, we can see, if the question is really around terminal NIM, we can see that in the 325 to 350 range based on no rate cuts and just kind of the current outlook that we have. There's upside to that if we do see rate cuts, but we feel confident that that fixed asset pricing engine is pretty mechanical at that 20 basis points a year, given a 10-year sort of in the 425 range.

Speaker #6: Yeah . So , so again , maybe I'll start and then Brad can clean up whatever , you know , the fixed asset repricing .

Speaker #6: I think we've shared this before. It basically adds about five basis points a quarter, or 20 basis points a year. So as we close out, you know, this year at, you know, heading towards that 2.90 number, we can see if the question is really around terminal NIM.

Speaker #6: We can see that in the 325 to 350 range, based on no rate cuts and just kind of the current outlook that we have, there's upside to that.

Speaker #6: If we do see rate cuts, but we feel confident that that fixed asset pricing engine is pretty mechanical at that 20 basis points a year.

Speaker #6: Given a ten-year sort of in the 4.25 range.

Kelly Motta: That's really helpful color. Thank you so much, and I'll step back.

Speaker #9: That's that's really helpful color . Thank you so much . And I'll step back .

James Polk: Thanks, Kelly.

Speaker #6: Thanks .

Speaker #7: Kelly .

Operator: Our next question comes from the line of Jared Shaw with Barclays. Your line is now open.

Speaker #4: Our next question comes from the line of Jared Schorr with Barclays. Your line is now open.

James Polk: Morning, Jared.

Speaker #7: Morning , Jared .

Operator: Jared, your line is open. Please check your mute button.

Speaker #4: Jared, your line is open. Please check your mute button.

Jared Shaw: Sorry about that. Thanks for taking the question. I guess maybe just looking at some of the tourism trends, are you seeing any impact on the outlook there, just given the pace of tech layoffs and some of the layoffs that we're seeing on the West Coast? Or is it still marching steadily forward?

Speaker #10: Sorry about that . Thanks for taking the question . I guess maybe just looking at some of the tourism trends . Are you seeing any impact on the outlook there just given the sort of the pace of tech layoffs and some of the the layoffs that we're seeing on the West Coast ?

Speaker #10: Or is it still sort of marching, marching steadily forward?

James Polk: Yeah. I think it's probably too early to tell. The reality is we started off the year on really strong footings. Visitor counts were relatively flat, but spending was strong relative to previous years, really driven by West and East Coast travelers. I think we're going to really need to see a little more data coming out. March will probably be a little messy just because we had the cone of those storms, so I'm not sure that'll be a clear print. What we've become more and more aware of is that the market is really being driven by that K-shaped consumer and that top-end consumer, which is why we continue to see the spend increase. I think we're optimistic that that trend will continue through the year. As we all know, there's lots of noise out there.

Speaker #6: Yeah, I think it's probably too early to tell. I mean, the reality is we started off the year on really strong footings.

Speaker #6: Visitor counts were relatively flat, but spending was strong relative to previous years, really driven by West and East Coast travelers.

Speaker #6: I think we're going to really need to see a little more data coming out. March will probably be a little messy just because we have the storms.

Speaker #6: So I'm not sure that'll be a clear print , but what we've become , you know , more and more aware of is that the market is really sort of being driven by that k shaped sort of consumer .

Speaker #6: And that top end consumer , which is why we continue to see the the spend increase . So I think , you know , we're optimistic that that trend will continue through the year .

Speaker #6: But , you know , as , as we all know , there's lots of noise out there . So we continue to monitor sort of the length of the , the conflict on Iran , what that ultimately means for energy prices , how that translates into airfares and its ultimate impact on on tourism .

James Polk: We continue to monitor the length of the conflict in Iran, what that ultimately means for energy prices, how that translates into airfares, and its ultimate impact on tourism. I think for right now, the outlook would be stable, and then we'll get a better sense as some of those other items become more clear.

Speaker #6: So , you know , I think for right now , I think the outlook would be stable . And then we'll get a better sense , as you know , some of those other items become more clear

Jared Shaw: Okay, thanks. On the expense side, I guess sort of two parts. One, when we look at that growth guide for the year, is there any assumption that there's some build-out in the wealth management side in that number? If not, is that something that longer term we think we should be building in? I guess the second part, how are you looking at AI investments? Is there an opportunity on the tech side at all to maybe make some investments in the near term that could generate some positive operating leverage going forward?

Speaker #10: Okay . Thanks . And then on the on the expense side , I guess sort of two parts . One , you know , when we look at that growth guide for the year , is there any assumption that there's some build out in the wealth management side in that number ?

Speaker #10: And if not , is that something that longer term , we think , you know , we should we should be building in and I guess the second part , how are you looking at AI investments and is there an opportunity on the tech side at all to , you know , maybe make some investments in the near term that could that could generate some positive operating leverage going forward ?

James Polk: Yeah. Maybe to the first question, I think the guidance is reasonable guidance based on our current outlook in the wealth management space. As we get further out, you can probably begin to think about greater growth on the fee side. I think previously we've sort of talked about wealth management being in the $60 million annual fee range and the potential to get into double-digit growth on that particular fee item. That's kind of how I look at that. The AI side, we've spent a lot of time building out our governance, excuse me, and our risk management practices.

Speaker #6: Yeah . So maybe to the , to the first question , I think the guidance is , is reasonable guidance based on our current outlook and the wealth management space as we get further out , you can probably begin to think about greater growth on the fee side , I think previously we sort of talked about wealth management being in the $60 million annual fee range and the potential to get into double digit growth on that particular line item or that particular fee item .

Speaker #6: So that's kind of how I look at that . The AI side , we've , we've spent a lot of time building out our government , our governance , excuse me , and our risk management practices .

James Polk: We have a number of different AI cases that we're working on right now to implement, some related to the wealth management and the discovery process, opportunities within the call center, and a number of others, really with the goal of getting right to your point, how do we create more operating leverage in the organization by creating efficiencies across the company? Still a little early to read on that one, but that's our focus, and we're big believers that it has the opportunity to have a meaningful impact on the expense side.

Speaker #6: We have a number of different AI cases that we're working on right now to implement some related to the wealth management and the discovery process opportunities within the call center , and a number of others , really with the goal of getting right to your point , how do we create more operating leverage in the organization ?

Speaker #6: By , you know , creating efficiencies across the company ? Still a little early to read on that one , but that's that's our focus .

Speaker #6: And we're big believers that it has the opportunity to have a meaningful impact on the expense side.

Jared Shaw: Thank you.

Speaker #11: Thank you

Operator: Our next question comes from the line of Matthew Clark with Piper Sandler. Your line is now open.

Speaker #4: Our next question comes from the line of Matthew Clarke with Piper Sandler. Your line is now open.

Matthew Clark: Hey, good morning, everyone. Wanted to circle back to the loan growth commentary. I think in the prior quarter, there was some optimism around approaching mid-single-digit loan growth as we march through the year, if not achieve mid-single-digit loan growth for the year. Wanted to double-check whether or not that low single-digit growth expectation was just for the consumer book or was that for the overall portfolio?

Speaker #12: Hey , good morning everyone Wanted to circle back to the the loan growth commentary . I think in the prior quarter there was some optimism around approaching , you know , mid-single digit loan growth as we march through the year , if not achieve mid-single digit loan growth for the year .

Speaker #12: But I wanted to double check whether or not that low single-digit growth expectation was just for the consumer book, or was that for the overall portfolio?

James Polk: It was for the overall portfolio. I think that guidance was given before we started the situation in Iran, which created a lot greater uncertainty. I think we're really comfortable in that low to mid-single-digit number. I think we're going to need a little more certainty in the environment before we can get comfortable guiding up to the mid-single-digit space, excuse me.

Speaker #6: It was for the overall portfolio ? I think that guidance was given before . You know , we started the situation in Iran , which created a lot greater uncertainty .

Speaker #6: I think we're really comfortable in that low to mid-single-digit number. I think we're going to need a little more certainty in the environment before we can get comfortable.

Speaker #6: You know , guiding up to the the mid-single digit place space . Excuse me .

Matthew Clark: Okay. How about the loan pipeline coming out of the quarter relative to year-end?

Speaker #12: Okay . And then how about the loan pipeline coming out of the quarter ? You know , relative to year end .

James Polk: The loan pipeline has, on both the consumer, at least the resi side, and on the commercial side, remained strong. They're solid. I think we saw the benefits of that on the commercial side in Q1. I was reasonably pleased in a purchase-only environment or without any projects in Q1 that resi did what it did. We have some projects that'll be closing out in Q2, which will aid on the resi side. Commercial, I doubt we'll be able to repeat the strong quarter that we had in Q1, but I'm still optimistic that we'll see growth to keep us in line with the guide that we shared.

Speaker #6: You know , the loan , the loan pipe has on both the consumer , at least the resi side and on the commercial side have have remained strong .

Speaker #6: They're solid . I think we saw the the benefits of that on the commercial side in Q1 . And you know , I was reasonably pleased in a purchase only environment or , you know , without any projects in Q1 that really did what it did .

Speaker #6: We have some projects that will be closing out in Q2, which will aid on the resi side and, you know, commercial.

Speaker #6: I doubt we'll be able to repeat the strong quarter that we had in Q1 . But I'm still optimistic that , you know , we'll see see growth to keep us in line with the guide that we shared .

Matthew Clark: Okay. On the deposit side, your NIB on average was up in the quarter. In the period, though, NIB and overall deposits down about 4% annualized. In last year's Q1, you showed some good growth, but then the year prior, you saw kind of a similar decline. Just wanted to get a sense for anything unusual in the quarter? Would you chalk it up to seasonality, or was there something else going on that we should think about?

Speaker #12: Okay. And then on the deposit side, your NIB, on average, was up in the quarter in a period, though NIB.

Speaker #12: And overall deposits are down about 4% annualized in last year's first quarter. You showed some good growth, but then the year prior, you saw kind of a similar decline.

Speaker #12: So just wanted to get a sense for if there was anything unusual in the quarter. Would you chalk it up to seasonality, or was there something else going on that we should think about?

James Polk: Yeah, there's probably a couple things in Q1. Well, maybe I'll back up a bit. We had a really strong deposit quarter in Q3, or excuse me, Q4, and a really strong deposit quarter in Q1. If you just go back and look at where we were relative to, say, 930 on both the average and the spot, particularly on the NIB, we're still up, like, 5%. We feel pretty good where we're at, even at the close of the quarter. There was a couple things within Q1 that occurred to bring the deposits down. One was we opted out of some high-cost public monies that just we didn't see the need to pay for that, and we let that run off, and that was a pretty meaningful number.

Speaker #6: Yeah , there's , there's probably a couple of things in Q1 . Well , maybe I'll back up a bit . You know , we had a really strong deposit quarter in Q3 .

Speaker #6: Excuse me , Q4 and a really strong deposit quarter in Q1 . If you , if you just go back and look at where we were relative to , say , 930 on both the average and the spot , particularly on the nib , we're still up like 5% .

Speaker #6: So we feel pretty good where we're at . Even at the close of the quarter , there was a couple of things within Q1 that , you know , that occurred to bring the the deposits down .

Speaker #6: One was we opted out of some high-cost public monies that we just didn't see the need to pay for. And we let that run off.

Speaker #6: And that was a pretty meaningful number. And then we had some escrow monies related to some projects that closed out during the quarter that brought anybody down.

James Polk: We had some escrow monies related to some projects that closed out during the quarter that brought NIBD down. We still feel good about where we're at. I think, just noting how strong Q4 and Q1 have been. We're probably looking at more flat as we get into Q2 on both the top line and we've talked about in the past low yield deposits, NIBD. I think overall we feel good. I think Q2 is typically a seasonally low period for us. We think given how we've grown, if we can maintain a flat top line and a flat NIBD, it'll be a good quarter for us.

Speaker #6: We still feel good about where we're at . I think , you know , just noting how strong Q4 and Q1 have been , we're probably looking at more flat as we get into Q2 on both the top end .

Speaker #6: And , you know , we've talked about the past low single digits or , excuse me , low yield deposits and IBD . So I think , you know , overall , we feel good .

Speaker #6: I think Q2 is typically a season , you know , a seasonally low period for us . So we think given how we've grown , if we can maintain solid , you know , a flat top line and a flat in it'll be a good quarter for us

Matthew Clark: Okay, great. Thank you.

Speaker #12: Okay, great. Thank you.

Operator: Thank you. We have a follow-up question from the line of Andrew Terrell with Stephens. Your line is now open.

Speaker #4: Thank you. We have a follow-up question from the line of Andrew Terrell with Stephens. Your line is now open.

Andrew Terrell: Hey, thank you for the follow-up. I just wanted to go back to the commentary on the margin. I think you talked about structural kind of longer term 325 to 350 on the margin. Can you just remind us, is that kind of in the current rate environment? Do you feel like rate cuts would help on that? Can you provide just a better sense of timeframe to get back to that level?

Speaker #8: Hey , thank you for the the follow up . I just wanted to go back to the the commentary on the margin . I think you talked about structural kind of longer term .

Speaker #8: 325 to to . 350 on the margin , can you just remind us , you know , is that kind of in the current rate environment , do you feel like rate cuts would help on that ?

Speaker #8: And can you provide , you know , just a better sense of timeframe to , to get back to that level ?

James Polk: If we're at roughly, say, 290 at the end of this year, and we're growing on the fixed asset repricing at 20 basis points per year, that would put us sort of in that zone at the end of 2028. We get some rate cuts, as you've been able to see in both Q4 and Q1. If we get rate cuts, we're really able to capitalize on, so that would accelerate the timeframe around that. Does that help?

Speaker #6: Well , so , you know , if we're at roughly , say 290 at the end of this year and we're growing on the fixed asset repricing at 20 basis points per year , that would put us sort of in that zone at the end of 2028 .

Speaker #6: We get some rate cuts. As you've been able to see in both Q4 and Q1, if we get rate cuts, we're really able to capitalize on.

Speaker #6: So that would accelerate the time frame around that. Is that—is it?

Andrew Terrell: Great. Very helpful. Yeah, no, that's great. I appreciate it. Thank you.

Speaker #8: That very helpful ? Yeah . No , that's that's great . I appreciate it . Thank you .

James Polk: Cool.

Speaker #7: Cool .

Operator: Thank you. This concludes the question and answer session. I would now like to hand the call back over to Chang Park for closing remarks.

Speaker #4: Thank you. This concludes the question and answer session. I would now like to hand the call back over to Chang Park for closing remarks.

Chang Park: Thank you, everyone, for joining us today and your continued interest in Bank of Hawaii. As always, please feel free to reach out to me if you have any additional questions. Thank you.

Speaker #13: Thank you, everyone, for joining us today and for your continued interest in Bank of Hawaii. As always, please feel free to reach out to me if you have any additional questions.

Speaker #13: Thank you .

Operator: This concludes today's conference. Thank you for your participation. You may now disconnect.

Q1 2026 Bank of Hawaii Corp Earnings Call

Request DemoDemo

Bank of Hawaii

Earnings