Bank of Hawaii(US:BOH)2023-04-24 20:21Financial Data and Key Metrics Changes - Net interest income for Q1 2023 was $136 million, with a normalized net interest income of $137.8 million, a decrease of $2.9 million linked quarter but an increase of $12.7 million year-over-year [14][20] - Net income was $46.8 million, with earnings per common share at $1.14 and a return on common equity of 15.79% [20] - The efficiency ratio was 63.34%, and the effective tax rate for Q1 was 25.4% [20][21] Business Line Data and Key Metrics Changes - Deposits grew on an average basis but were down modestly on a spot basis, with total deposits at $20.5 billion at the end of March [4][8] - Noninterest income totaled $40.7 million in Q1, reflecting a decrease from the previous year primarily due to lower revenue from mortgage banking customer derivative activity [18][36] Market Data and Key Metrics Changes - The deposit marketplace in Hawaii is unique, with five local institutions holding 97% of bank deposits, and 98% of deposits are fully FDIC-insured [11][24] - The average consumer deposit is $18,000, while the average commercial deposit is $133,000 [11] Company Strategy and Development Direction - The company focuses on a community bank-based model, emphasizing long-standing relationships and a diversified deposit base [9][23] - The strategy includes maintaining a diversified loan portfolio, with 94% of loans in Hawaii and the West Pacific, and a conservative approach to underwriting [29][30] Management's Comments on Operating Environment and Future Outlook - Management expressed caution regarding rising deposit costs and anticipated a decline in margins in the short term, with expectations of a bottoming out towards the end of the year [42][51] - The company expects loan growth to be in the mid-single-digit range, supported by securities runoff [70][82] Other Important Information - The company has maintained healthy liquidity backup lines totaling $8.2 billion [27] - A dividend of $0.70 per common share was declared for Q2 2023 [50] Q&A Session Summary Question: Margin expectations moving forward - Management expects margins to decline in Q2 but to bottom out towards the end of the year before increasing in 2024 [42] Question: Rationale for adding short-term borrowings - The addition of short-term borrowings was to enhance liquidity [44][64] Question: Impact of Moody's downgrade - Management does not anticipate any significant operational implications from the downgrade [56] Question: Expectations for noninterest income - Noninterest income is expected to remain stable at $40 million to $41 million per quarter for the remainder of the year [47] Question: Loan growth drivers - Loan growth has been augmented by amortization of the securities book, with expectations for mid-single-digit growth [82]