Bank of Hawaii(US:BOH)2024-04-22 19:57Financial Data and Key Metrics Changes - Net interest income was $113.9 million in Q1 2024, a decrease of $1.8 million from the previous quarter [26] - Net income increased by $6 million to $36.4 million, with earnings per common share rising by $0.15 to $0.87 [30] - Return on common equity was reported at 11.2% [30] - The net interest margin (NIM) decreased by 2 basis points for the quarter but showed significant directional improvement [16] Business Line Data and Key Metrics Changes - The loan portfolio is predominantly secured against real estate, with 85% comprising residential mortgages or home equity, maintaining a weighted average loan-to-value (LTV) of 51% [45] - The commercial loan portfolio stands at $5.8 billion, representing 42% of total loans, with commercial real estate making up $3.7 billion [20] - Delinquencies remained stable at 0.31%, while criticized loans increased by 4 basis points to 1.97% [25] Market Data and Key Metrics Changes - Total visitor expenditures and arrivals in Hawaii were down 1.9% and 0.6% respectively year-to-date as of February, but excluding Maui, these figures showed growth of 6.4% and 7.6% [12] - The Japan market saw significant growth, with expenditures up 57.8% and arrivals up 84.3% from the previous year [12] - The industrial vacancy rate in Hawaii is at a historic low of 0.64%, while office vacancy is slightly above the 10-year average at 13.45% [46] Company Strategy and Development Direction - The company emphasizes its strong deposit franchise, which has allowed it to maintain a total cost of deposits below industry norms [41] - The strategy includes organic loan growth and a focus on core markets, with a conservative underwriting approach across various property types [19][48] - The company plans to continue managing expenses in a disciplined manner amid inflationary pressures, with expected normalized expenses in 2024 increasing by 1% to 2% from 2023 [55] Management's Comments on Operating Environment and Future Outlook - Management noted a cautious outlook for consumer and commercial sectors due to the higher for longer interest rate environment [68] - The company expects continued pressure on deposit mix and pricing, leading to slightly higher overall deposit costs [28] - Management expressed confidence in the stability of the loan portfolio and the overall asset quality, despite some market uncertainties [50] Other Important Information - The company recognized $500,000 in severance expenses during the quarter, with adjusted core expenses at $103.2 million [29] - The effective tax rate for Q1 was 24.7%, with an expected rate of approximately 24.5% for 2024 [30] - The Board declared a dividend of $0.70 per common share for Q2 2024 [31] Q&A Session Summary Question: What is the outlook for net interest income and margin? - Management expects approximately $5 million in net interest income accretion per quarter from asset repricing, with a cautious view on margin trajectory due to deposit cost pressures [62][68] Question: How are deposit trends evolving? - Management noted a stabilization in average deposits around $20.5 billion, with a slowdown in the shift from non-interest bearing to interest-bearing deposits [76] Question: What is the company's approach to capital management? - The company is focused on growing capital rather than stock repurchase, reflecting caution in the current market environment [86]