Bank of Hawaii(BOH) - 2024 Q2 - Quarterly Report

Credit Commitments and Assets - As of June 30, 2024, total credit commitments amounted to $3,324,165, a decrease of 6% from $3,538,124 on December 31, 2023[162] - Unfunded commitments to extend credit were $3,222,357 as of June 30, 2024, down from $3,433,061 at the end of 2023, indicating a reduction of approximately 6%[162] - The company reported net asset positions with financial institution counterparties totaling $151.2 million as of June 30, 2024, an increase from $114.5 million as of December 31, 2023, reflecting a growth of 32%[181] - The fair value of mortgage servicing rights decreased from $20,201 as of December 31, 2023, to $19,286 as of June 30, 2024, representing a decline of approximately 4.5%[170] - The company holds standby letters of credit totaling $90,107 as of June 30, 2024, compared to $88,512 at the end of 2023, showing a slight increase of 1.8%[162] - The company’s commercial letters of credit decreased from $16,551 on December 31, 2023, to $11,701 as of June 30, 2024, indicating a decline of approximately 29%[162] - The company has secured assets valued at $64.4 million against certain standby letters of credit as of June 30, 2024[163] Financial Performance - Net income for Q2 2024 was $34.1 million, a decrease of $12.0 million or 26% compared to Q2 2023[201] - Diluted earnings per common share for Q2 2024 was $0.81, down $0.31 or 28% from Q2 2023[201] - Net interest income for Q2 2024 was $114.8 million, a decrease of 8% from Q2 2023, primarily due to higher funding costs[201] - Noninterest income was $42.1 million in Q2 2024, a decrease of 3% from the same quarter in 2023[202] - The company reported a consolidated total net income of $34.083 million for Q2 2024, down from $46.061 million in Q2 2023[233] Asset and Liability Management - Total assets were $23.3 billion as of June 30, 2024, a decrease of 2% from December 31, 2023[204] - Total loans and leases were $13.8 billion as of June 30, 2024, a decrease of 1% from December 31, 2023[204] - Total deposits were $20.4 billion as of June 30, 2024, a decrease of 3% from December 31, 2023[204] - The allowance for credit losses on loans and leases was $147.5 million as of June 30, 2024, an increase of $1.1 million from December 31, 2023[204] - Total non-performing assets were $15.2 million as of June 30, 2024, up $3.4 million from December 31, 2023[203] Income and Expense Analysis - Total noninterest income decreased by $1.168 million in Q2 2024 compared to Q2 2023, totaling $42.087 million[213] - Total salaries and benefits expense increased by $0.9 million or 2% in Q2 2024, while it decreased by $6.0 million or 5% for the first six months of 2024 compared to the same period in 2023[214] - FDIC insurance expense increased by $4.0 million or 126% in Q2 2024 and by $4.4 million or 68% for the first six months of 2024 compared to the same periods in 2023[214] Credit Quality and Losses - Total loans and leases as of June 30, 2024, decreased by $133.8 million or 1% from December 31, 2023[223] - Non-accrual loans and leases increased to $12.507 million as of June 30, 2024, compared to $9.649 million at December 31, 2023[237] - The provision for credit losses increased due to higher net charge-offs in the installment loan portfolio and lower recoveries in the home equity portfolio[233] - The allowance for credit losses was $147.5 million or 1.07% of total loans and leases outstanding as of June 30, 2024, compared to $146.4 million or 1.05% as of December 31, 2023[240] Regulatory Capital and Shareholder Returns - As of June 30, 2024, total shareholders' equity was $1.6 billion, an increase of $198.6 million or 14% from December 31, 2023[254] - The Common Equity Tier 1 Capital Ratio increased to 11.59% as of June 30, 2024, compared to 11.33% at December 31, 2023[253] - Total regulatory capital as of June 30, 2024, was $2.11 billion, up from $1.94 billion at December 31, 2023[253] - The company repurchased a total of 58.2 million shares of common stock since the program's inception, returning $2.4 billion to shareholders at an average cost of $41.24 per share[254] Market and Economic Conditions - The company’s management anticipates potential impacts from changes in market interest rates on credit markets and net interest margins[175] - Interest rate risk management aims to optimize net interest income while balancing expected returns with potential earnings volatility[243] - As of June 30, 2024, net interest income is expected to increase with rising interest rates, benefiting from higher rates on floating rate loans and investment securities[245] - The company utilizes an asset/liability simulation model to measure balance sheet sensitivity to changes in interest rates, with results indicating decreased sensitivity compared to December 31, 2023[245] Operational Risks - The company is exposed to operational risks, including fraud, transaction processing errors, and compliance failures, which are managed through an Operational Risk Committee[255]