Bank of Hawaii(BOH) - 2025 Q2 - Quarterly Results

Financial Highlights The company reported strong Q2 2025 results driven by consecutive growth in net interest income and margin with stable credit quality Q2 2025 Key Performance Indicators | Metric | Q2 2025 | Q1 2025 | Q2 2024 | | :--- | :--- | :--- | :--- | | Diluted EPS | $1.06 | $0.97 | $0.81 | | Net Income | $47.6 million | $43.9 million | $34.1 million | | Net Interest Income | $129.7 million | $125.8 million | $114.8 million | | Net Interest Margin | 2.39% | 2.32% | 2.15% | | Return on Avg. Common Equity | 12.50% | 11.80% | 10.41% | - The Board of Directors declared a quarterly cash dividend of $0.70 per common share[5][21] - Management attributed strong performance to the fifth consecutive quarterly expansion of net interest income and margin[3] Financial Performance Analysis The company's Q2 2025 performance featured rising net interest income, stable noninterest income, and controlled expenses Net Interest Income and Margin Net interest income and margin grew due to asset repricing and a slowing shift in deposit costs Net Interest Income and Margin Performance | Metric | Q2 2025 | Change vs Q1 2025 | Change vs Q2 2024 | | :--- | :--- | :--- | :--- | | Net Interest Income | $129.7 M | +3.1% | +12.9% | | Net Interest Margin | 2.39% | +7 bps | +24 bps | - The increase in NII was mainly due to higher earning asset yields from reinvesting cash flows at higher rates[3] - The year-over-year increase was attributed to lower deposit rates and a slowdown in the deposit mix shift[3][4] Average Yields and Rates (Q2 2025) | Metric | Rate | | :--- | :--- | | Avg. Yield on Loans & Leases | 4.80% | | Avg. Yield on Total Earning Assets | 4.01% | | Avg. Rate on Interest-Bearing Deposits | 2.16% | Noninterest Income Noninterest income rose slightly, influenced by a one-time gain from a BOLI recovery - Noninterest income for Q2 2025 was $44.8 million, up 1.7% QoQ and 6.4% YoY[7] - The quarter's results included a $0.8 million gain from a BOLI recovery[7] - The adjusted sequential decrease was driven by lower customer derivative activity and mortgage banking income[7] Noninterest Expense Noninterest expense remained well-controlled, showing minimal increases from prior periods Noninterest Expense Changes | Period | Amount | Change | | :--- | :--- | :--- | | Q2 2025 | $110.8 M | - | | vs. Q1 2025 | - | +0.3% | | vs. Q2 2024 | - | +1.4% | - The slight increase from the linked quarter was primarily due to higher FDIC insurance costs[8] Effective Tax Rate The effective tax rate decreased from prior periods, primarily due to an increase in tax-exempt income Effective Tax Rate Comparison | Period | Rate | | :--- | :--- | | Q2 2025 | 21.19% | | Q1 2025 | 21.67% | | Q2 2024 | 24.77% | - The lower tax rate compared to both prior periods was primarily driven by an increase in tax-exempt income[9] Asset Quality The company's overall asset quality remained strong and stable with a healthy allowance for credit losses Key Asset Quality Metrics (Q2 2025) | Metric | Value | Change from Q1 2025 | | :--- | :--- | :--- | | Provision for Credit Losses | $3.3 million | Unchanged | | Total Non-Performing Assets | $17.9 million | +$0.4 million | | NPA as % of Loans | 0.13% | +1 bp | | Net Loan & Lease Charge-offs | $2.6 million | -$1.8 million | | Allowance for Credit Losses | $148.5 million | +$0.8 million | | Allowance to Total Loans | 1.06% | +1 bp | Balance Sheet Analysis Total assets stood at $23.7 billion, with growth in the investment portfolio and a modest decline in loans and deposits Assets, Loans, and Investments Total assets were $23.7 billion, with an increased investment portfolio offsetting a slight decline in total loans Key Balance Sheet Items (as of June 30, 2025) | Item | Balance | Change vs Q1 2025 | Change vs Q2 2024 | | :--- | :--- | :--- | :--- | | Total Assets | $23.7 billion | -0.7% | +1.8% | | Investment Securities | $7.6 billion | +1.8% | +6.2% | | Total Loans and Leases | $14.0 billion | -0.8% | +1.2% | - The investment portfolio remains largely comprised of securities issued by U.S. government agencies[16] Deposits Total deposits ended the quarter at $20.8 billion, with average balances remaining stable Deposit Balances | Metric | Value | Change vs Q1 2025 | Change vs Q2 2024 | | :--- | :--- | :--- | :--- | | Total Deposits (End of Period) | $20.8 billion | -1.0% | +1.9% | | Average Total Deposits (Quarter) | $20.7 billion | +0.1% | +1.7% | - Noninterest-bearing deposits made up 26.1% of total deposit balances, flat from the linked quarter[18] Capital and Shareholder Returns The company's capital position strengthened, and it continued its commitment to shareholder returns through dividends Key Capital Ratios (as of June 30, 2025) | Ratio | Value | Value at March 31, 2025 | | :--- | :--- | :--- | | Tier 1 Capital Ratio | 14.17% | 13.93% | | Tier 1 Leverage Ratio | 8.46% | 8.36% | - The Board of Directors declared a quarterly cash dividend of $0.70 per share on common stock[21] - No shares of common stock were repurchased in Q2 2025; the remaining buyback authority is $126.0 million[21] - Quarterly dividends were also declared for Series A and Series B Preferred Stock[22] Business Segment Performance The Commercial Banking segment was the largest contributor to net income, followed closely by Consumer Banking Net Income by Business Segment (Three Months Ended June 30) | Segment | Q2 2025 Net Income | Q2 2024 Net Income | | :--- | :--- | :--- | | Consumer Banking | $29.7 million | $31.3 million | | Commercial Banking | $30.7 million | $29.2 million | | Treasury and Other | ($12.8 million) | ($26.4 million) | | Consolidated Total | $47.6 million | $34.1 million | Hawaii Economic Trends Hawaii's economy showed mixed signals with positive tourism growth and a low unemployment rate but declining state revenues - Monthly visitor arrivals showed year-over-year growth in four of the first five months of 2025[54] - The statewide unemployment rate was 2.8% as of June 30, 2025, down from 3.0% at year-end 2024[54] - On Oahu, the median single-family home price increased by 6.0% year-over-year, while sales volume decreased by 2.1%[54] Additional Information The company will host a conference call to review results and advises investors to monitor its website for disclosures - A conference call to review financial results is scheduled for July 28, 2025, at 8:00 a.m. Hawai'i Time[23] - The company uses its investor relations website (ir.boh.com) and other channels for financial disclosures[24] - The release contains forward-looking statements, and actual results could differ materially from expectations[25] Financial Tables This section contains detailed unaudited financial statements and supplementary data supporting the Q2 2025 results Table 1: Financial Highlights Table 2: Reconciliation of Non-GAAP Financial Measures Table 3: Consolidated Statements of Income Table 4: Consolidated Statements of Comprehensive Income Table 5: Consolidated Statements of Condition Table 6: Consolidated Statements of Shareholders' Equity Tables 7a-8c: Average Balances, Interest Rates, and Analysis of Change in Net Interest Income Tables 9-12: Salaries, Loan/Deposit Portfolios, Non-Performing Assets, and Credit Reserves Tables 13-14: Business Segments and Selected Quarterly Financial Data