Bank of Hawaii (BOH) Q1 2026 Earnings Transcript

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DATE

Monday, April 20, 2026 at 2 p.m. ET

CALL PARTICIPANTS

• Chief Executive Officer — Chang Park
• Chief Credit Officer — Bradley Shairson
• Chief Financial Officer — Bradley S. Satenberg

TAKEAWAYS

• Net Interest Margin (NIM) -- 13 basis point increase, marking the eighth consecutive quarterly expansion, with management reiterating a target to approach 2.9% by year-end.
• Net Interest Income (NII) -- Increased $5.6 million sequentially, despite two fewer days in the period, reflecting ongoing asset repricing and lower deposit costs.
• Loan Book Composition -- 56% consumer ($8 billion) and 44% commercial ($6.2 billion); 93% of loans located in Hawaii, 4% in Western Pacific, 3% Mainland U.S.
• Consumer Portfolio Quality -- Weighted average LTV of 48% and FICO score of 798 on mortgage and home equity loans; auto loans average FICO of 729, personal loans 760.
• Commercial Real Estate (CRE) Exposure -- $4.3 billion, or 31% of total loans; no single property type exceeds 9% of total loans; 73% of commercial loans secured by real estate; over 60% of CRE maturities scheduled for 2030 or later.
• Asset Quality Metrics -- Net charge-offs were $1.1 million (3 basis points annualized), down 9 basis points sequentially and 10 basis points year over year; nonperforming assets declined to 9 basis points of loans.
• Allowance for Credit Losses -- $147 million or 1.04% of loans, unchanged from the prior quarter; includes a $3.2 million qualitative overlay related to recent storm exposures.
• Deposit Costs -- Average cost of deposits fell 17 basis points sequentially to 1.26%; spot rate at quarter-end was 1.5%; deposit beta improved to 36%, exceeding the 35% target.
• Certificates of Deposit (CD) Portfolio -- Average CD cost declined 29 basis points to 2.89%; spot rate at 2.8%; over 50% of CDs maturing in the next three months at 2.91% average rate, expected to renew between 2.25% and 3%.
• Noninterest Income -- $41.3 million, down from $44.3 million sequentially, primarily due to lower fee income and weaker wealth management earnings.
• Noninterest Expense -- $116.1 million, up from $109.5 million, with $2.8 million in seasonal payroll taxes and $3.5 million from a nonrecurring stock compensation charge.
• Capital Ratios -- Tier 1 capital at 14.4% and total risk-based capital at 15.4%, both above regulatory well-capitalized thresholds.
• Shareholder Returns -- $28 million in common and $5.3 million in preferred dividends declared; $15 million in common stock repurchases; additional $15 million–$20 million in repurchases planned for the next quarter with $106 million buyback authorization remaining.
• Wealth Management Initiatives -- New Center for Family Business and Entrepreneurs launched, expanding M&A and succession planning services; ongoing focus on increasing coordination between commercial and private banking for high-net-worth clients.
• Guidance and Outlook -- Second quarter normalized noninterest expense expected at $112 million; noninterest income forecasted at $42 million; annual overhead growth guidance lowered to 2.5%-3%.

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RISKS

• Bank of Hawaii Corporation management cited 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.
• Allowance for credit losses includes a $3.2 million overlay for storm-related exposures, with full impact from Typhoon Sinlaku to be assessed over several weeks.

SUMMARY

Bank of Hawaii Corporation (NYSE:BOH) reported sequential growth in net interest income and eighth straight quarterly expansion in net interest margin, supported by favorable fixed asset repricing and lower deposit costs. Management indicated the recent CD repricing and deposit mix shift were key to improvement in funding costs, while underlying loan and credit metrics remained stable across consumer and commercial segments. Capital ratios stayed well above regulatory minimums, and shareholder returns continued with additional buybacks planned as regulatory capital changes are evaluated.

• Bradley S. Satenberg stated that noninterest expense guidance of approximately $112 million for the next quarter “all-inclusive of every expense that we are aware of today.”
• The loan portfolio features over 60% of both commercial and consumer relationships exceeding 10-year client tenure, indicating franchise stability.
• Management expects annual fixed asset repricing to contribute roughly 20 basis points to NIM, with long-term normalized margin potentially in the 3.25%-3.5% range absent further rate cuts.
• "we have done some early assessments, and it will be positive for us. 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," said Bradley S. Satenberg regarding potential capital regulations.
• Noninterest-bearing deposits averaged $84 million higher sequentially, but overall deposit balances declined due to intentional runoff of high-cost public funds and closed-out escrow accounts.
• Wealth management revenue is positioned for longer-term fee growth, though near-term gains are constrained by infrastructure buildout and market-dependent drivers.
• AI adoption is underway in select use cases, focused on efficiency gains in wealth management and customer service, but impact on expense leverage is expected to materialize gradually.

INDUSTRY GLOSSARY

• Deposit Beta: The percentage of changes in market interest rates that banks pass on to their depositors through changes in deposit rates.
• CRE (Commercial Real Estate): Loans secured by commercial property, including office, retail, industrial, and multifamily real estate.
• ACL (Allowance for Credit Losses): A bank’s reserve to absorb estimated losses in the loan and lease portfolio.
• CD (Certificate of Deposit): A deposit product where funds are locked in at a fixed rate for a set period.
• NIM (Net Interest Margin): A key banking profitability metric reflecting the difference between interest income generated and interest paid out, relative to average earning assets.
• NII (Net Interest Income): Total interest income minus total interest expense.

Full Conference Call Transcript

Unknown Speaker: 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 S. 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 am grateful for his confidence in me, and I am honored to carry this forward. Now on to the quarter. Bank of Hawaii Corporation 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. 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. 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 nonrecurring expenses and noninterest 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. The strategic formula has not changed. Bank of Hawaii Corporation 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.

I want to briefly address the recent Kona low storm in Hawaii and Typhoon Sinlaku in the West Pacific. First and foremost, Bank of Hawaii Corporation 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. Bradley Shairson will cover the potential impact of the Kona low storm 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. 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. 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 Corporation's depth of relationships and trusted role in this market.

I will close with this. We remain focused on the strategy, the culture, and the values that have made Bank of Hawaii Corporation 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 am proud to be in this role, and I look forward to the work ahead. With that, I will turn the call over to Bradley Shairson to discuss credit, after which Bradley S. Satenberg will walk through the financials in detail. We will then be pleased to take your questions.

Bradley Shairson: Thanks. I will begin with an overview of our credit portfolio and conclude with asset quality metrics. And as you will see, our performance has remained strong, consistent with prior quarters. Turning to our lending philosophy, Bank of Hawaii Corporation 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. Consumer loans represent 56% of total loans, or approximately $8 billion. Within the consumer portfolio, 86% consist 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 $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. And 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. 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 is not 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 3 basis points annualized, down 9 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.

Nonperforming 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. And criticized loans remained flat to the linked quarter at 2.12% of total loans. That is up 4 basis points year over year. Notably, 84% of criticized assets are real estate secured, with a weighted average LTV of 53%. 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 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 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. And in light of recent industry discussions around private credit, I want to provide clear assurance that we do not lend to private credit funds or providers. Our exposure to nonbank 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 Bradley S. 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 EPS of $1.30, a decrease of $3.5 million and $0.09 per share as compared to the linked quarter. These declines were primarily the result of elevated noninterest expense as compared to the fourth quarter. Q1 included the annual bump in seasonal payroll taxes and benefits, as well as a nonrecurring 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. And despite two fewer days this quarter, NII grew by $5.6 million. 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 a positive $94 million this quarter. Compared to the linked quarter, average noninterest-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.

The spot rate on our deposits was 1.5% at the end of Q1, and as mentioned in earlier 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 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 costs was 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 CD rate was 2.8%.

Over 50% of our CDs will mature within the next three months at an average rate of 2.91%. 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. We finished the quarter with an active pay-fixed, receive-float portfolio of $1.2 billion at a weighted average fixed rate of 3.3% and an average life of 1.5 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 in April, while the remaining $200 million become effective during the third quarter. We finished the quarter with a fixed-to-float ratio of 59%, which keeps us well positioned for any changes in the rate environment. Noninterest 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 the fourth quarter 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. Adjusting for these normalizing items, noninterest 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 second quarter noninterest income will be $42 million. Noninterest expense was $116.1 million compared to $109.5 million during the linked quarter.

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 nonrecurring 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 nonrecurring $1.1 million donation for our Bank of Hawaii Foundation. Compared to my previous forecast, reported (non-normalized) noninterest 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 $0.5 million less per quarter than our recent run rate. As a result, I am lowering my forecasted range for annual growth in overhead to between 2.5% and 3%, or 0.5% lower than my previous forecast. Second quarter normalized noninterest 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, 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 ratios of 14.4% and 15.4%, respectively. And 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 million 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 that will be paid during the second quarter. Now I will turn the call back over to [inaudible].

Unknown Speaker: Thanks. We would now be happy to answer any questions that you may have.

Operator: Thank you. As a reminder, to ask a question, please press 11. To withdraw your question, please press 11 again. Our first question comes from the line of Jeffrey Allen Rulis with D.A. Davidson. Jeffrey, your line is now open.

Jeffrey Allen 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? I mean, are you carving that out for this, or is that included in the full-year growth expectation?

Bradley S. Satenberg: No. That is inclusive of that. So we are saying approximately $112 million, all-inclusive of every expense that we are aware of today.

Jeffrey Allen Rulis: Got it. Okay. Thanks. And then I guess on 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 has kind of been an area that maybe has not been adding to net production. Are you any closer to comfort there of that sort of flattening out that maybe a look at your full-year growth numbers possibly has some upside to kind of the low single-digit guide, or still waiting to see more confidence before inching that up?

Unknown Speaker: Yeah. Hey, Jeffrey Allen Rulis, this is [inaudible]. The way I look at it is, resi has been coming along okay. We had 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. I think our challenge has really been on the home equity line and the indirect books. So we have got a number of different initiatives we are 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 will get that. So in the meantime, with respect to home equity line, we have got a number of different direct mailing activities that we are doing, looking at some special programs to try and retain some of the balances that are coming off of, say, fixed rates. And then in the indirect space, we have implemented digital contracting, and we are trying to speed up funding time frames.

We are hoping that those can give us a little boost on that side. But I think until we get better clarity in the overall environment, from a loan perspective, we are still in that low single-digit growth outlook.

Jeffrey Allen Rulis: Thanks, and if I could squeeze just one last one on the capital side. I appreciate the guide on the buyback for the second quarter. It seems like pretty steady activity. I guess as earnings continue to ramp here, and the dividend payout, I guess, could potentially dip below 50%. Is there—just revisiting the dividend side and your conversations with the Board—is that something you look at in terms of the overall capital return, might want to inch that up as you have kind of broken out on earnings over the last few quarters?

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

Jeffrey Allen Rulis: Fair enough. Thank you.

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

Robert Andrew Terrell: Good morning.

Unknown Speaker: How are you, Robert Andrew Terrell?

Robert Andrew Terrell: I am good. How are you guys?

Unknown Speaker: Good.

Robert Andrew Terrell: I wanted to ask on the—thank you for the CD color, the time deposit color you gave. I think you said 2.80% on the spot cost at end of the period. Do you have the comparable figure for either total deposit costs or interest-bearing deposit costs? And then I wanted to get a sense on, you know, it sounds like there is a still pretty decent opportunity to reprice some of the time deposit portfolio over the balance of the year. Was hoping you could just talk to kind of the competitive landscape for deposits you are 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, you mentioned, was 2.8%. The competitive landscape is reasonable and rational, and we still think there is an opportunity to continue to reprice our CD book. The majority of our CDs are in our three-month portion of our portfolio. We think the majority of that will continue to roll off and reprice into—and renew into—new three-month CDs, and probably, again, at rates between 2.25% to 3%, depending on which CD they go into. But I still think there is an opportunity there, and we will continue to see benefits from that CD repricing.

Robert Andrew Terrell: Okay. And I was hoping just to ask on wealth management, maybe just refresh us on kind of where you are at in terms of efforts there? And is it something we should expect—I know you gave the fee income guide for the second quarter. How should we think about growth potential in the wealth business and then overall fees throughout the year?

Unknown Speaker: Yeah. I think there are two components to it. The early one that we will begin to see some benefit from is really coming from the Bankoh Advisors side, our former broker-dealer. As you may recall, we spent most of the fourth quarter 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. So I think we can continue to see that rise as we work through the end of the year. On the broader wealth management effort, this is really a longer-term effort for us.

We are 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 build momentum. We have clearly seen great activity around that. We have got a lot of growth in the valuations pipeline and some M&A activity I think that we will see earlier returns on. But the bigger effort, you are probably not going to see meaningful results until we get into 2027, would be my look.

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

Unknown Speaker: Yeah. Thank you.

Operator: Our next question comes from the line of Kelly Ann Motta with KBW.

Kelly Ann 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 have done any sensitivity around that and if—how that—if relevant, would change potentially your capital outlook. Thank you.

Unknown Speaker: Maybe I will start and then Brad can clean up. I think we are comfortable with the way we are looking at dividends and the way we are looking at stock buybacks. We have started to look at the potential impacts of the regulatory changes. We have such a weighting towards risk-weighted already. There will be some favorable movements in it, but I still think it is early, and I think we are really still trying to assess how that would change our posture around what to do with our capital.

Bradley S. Satenberg: Yeah, and Kelly, I would just add to that. Obviously, it is just a proposal right now; it is not final. But we have done some early assessments, and it will be positive for us. 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 Ann Motta: That is really helpful. I appreciate the color. I would like to also circle back to the question of margin. You guys reiterated that 2.9% outlook to exit the year. You had a fantastic first quarter for NIM expansion. And I am just wondering, as you look ahead, clearly there are 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 1Q—so how we should be thinking about the inputs here. Thank you.

Unknown Speaker: Yeah. So again, maybe I will start, and then Brad can clean up. The fixed asset repricing, I think we have shared this before, basically adds about 5 basis points a quarter, or 20 basis points a year. So as we close out this year heading towards that 2.90% number, if the question is really around terminal NIM, we can see that in the 3.25% to 3.50% range based on no rate cuts and just kind of the current outlook that we have. There is upside to that if we do see rate cuts, but we feel confident that fixed asset pricing engine is pretty mechanical at that 20 basis points a year, given a 10-year in the 4.25% range.

Kelly Ann Motta: That is really helpful color. Thank you so much, and I will step back.

Unknown Speaker: Thanks, Kelly. Our next question comes from the line of Jared Shaw with Barclays. Your line is now open.

Unknown Speaker: Morning, Jared.

Operator: 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 sort of the pace of tech layoffs and some of the layoffs that we are seeing on the West Coast? Or is it still sort of marching steadily forward?

Unknown Speaker: Yeah. I think it is probably too early to tell. The reality is we started off the year on really strong footing. Visitor counts were relatively flat, but spending was strong relative to previous years, really driven by West and East Coast travelers. I think we are going to need to see a little more data coming out. March will probably be a little messy just because we have the Kona low storm, so I am not sure that will be a clear print. But what we have 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.

So we are optimistic that trend will continue through the year. But, as we all know, there is lots of noise out there, so we continue to monitor the length of the conflict involving Iran, what that ultimately means for energy prices, how that translates into airfares, and its ultimate impact on tourism. For right now, I think the outlook would be stable, and then we will get a better sense as some of those other items become more clear.

Jared Shaw: Okay. Thanks. And then 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 is some buildout in the wealth management side in that number? And if not, is that something that, longer term, 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 maybe make some investments in the near term that could generate some positive operating leverage going forward?

Unknown Speaker: Yes. So 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 have 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. So that is kind of how I look at that. The AI side, we have spent a lot of time building out our governance and our risk management practices.

We have a number of different AI use cases that we are working on right now to implement—some related to 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 is our focus, and we are big believers that it has the opportunity to have a meaningful impact on the expense side. Thank you.

Operator: Our next question comes from the line of Matthew Clark 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. 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?

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

Matthew Clark: Okay. And then how about the loan pipeline, coming out of the quarter relative to year-end?

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

Matthew Clark: Okay. And then on the deposit side, your NIB on average was up in the quarter, but in the period, though, NIB and overall deposits were 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. So just wanted to get a sense—was anything unusual in the quarter? Would you chalk it to seasonality, or was there something else going on that we should think about?

Unknown Speaker: There are probably a couple things in Q1. Maybe I will back up a bit. We had a really strong deposit quarter in Q4 and a really strong deposit quarter in Q1. If you just go back and look at where we were relative to, say, 9/30, on both the average and the spot, particularly on the NIB, we are still up like 5%. We feel pretty good where we are at, even at the close of the quarter. There were a couple things within Q1 that occurred to bring the deposits down.

One was we opted out of some high-cost public monies—we just did not see the need to pay for that—and we let that run off, 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 NIB down. We still feel good about where we are at. Noting how strong Q4 and Q1 have been, we are probably looking at more flat as we get into Q2 on both the top end and, as we have talked about in the past, low single-digits on low-yield deposits/NIB. Overall, we feel good. I think Q2 is typically a seasonally low period for us.

So we think, given how we have grown, if we can maintain a flat top line and a flat NIB, it will be a good quarter for us.

Matthew Clark: Okay. Great. Thank you.

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

Robert Andrew Terrell: Hey, thank you for the follow-up. I just wanted to go back to the commentary on margin. You talked about structural, longer-term 3.25% to 3.5% 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? And can you provide a better sense of time frame to get back to that level?

Unknown Speaker: Well, if we are at roughly, say, 2.90% at the end of this year and we are growing on the fixed asset repricing at 20 basis points per year, that would put us in that zone at the end of 2028. If we get some rate cuts—as you have been able to see in both Q4 and Q1—if we get rate cuts, we are really able to capitalize on those, so that would accelerate the time frame around that. Does that help?

Robert Andrew Terrell: Very helpful. Yeah. No, that is great. I appreciate it. Thank you.

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

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

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