Bank of Hawaii (BOH) Q3 Earnings call transcript Oct 28, 2024
2min read In the third quarter of 2024, Bank of Hawaii Corporation (BoH) reported a solid financial performance, showcasing notable growth in net income and diluted earnings per share. The bank's net interest income and net interest margin expanded for the second consecutive quarter, while fee income grew and operating expenses fell. Loans and deposits also grew, and capital levels improved, underscoring BoH's strong financial health.
Key Themes and Trends
During the earnings call, executives highlighted the stable market conditions in Hawaii and the Western Pacific, where BoH maintains a strong presence. The company's loan growth has been steady and organic, with a focus on core markets, allowing for sound credit decisions. This strategy has contributed to BoH's historically strong credit performance, with 93% of its loan portfolio tied to Hawaii and the Western Pacific.
Despite a slowdown in loan growth due to suppressed demand, BoH's loan book remains well-diversified, with a majority of loans secured against real estate. The real estate market in Oahu is stable, with low vacancy rates, especially in commercial real estate, reflecting the strong Hawaiian economy and constrained supply. This diversification and focus on core markets have positioned BoH favorably in the face of market challenges.
Credit Quality and Financial Highlights
Bradley Shairson, the Chief Credit Officer, emphasized BoH's lending philosophy, which is centered around leveraging local expertise and maintaining long-standing client relationships. This approach has led to a loan portfolio that is 93% Hawaii and 4% Western Pacific, with just 3% Mainland exposure. The portfolio's stability is further underscored by the fact that 60% of BoH's clients have been with the bank for over 10 years.
In terms of credit quality, BoH reported stable metrics, with net charge-offs and nonperforming assets remaining low. Delinquencies have also been stable, indicating a well-managed credit portfolio. Furthermore, BoH's allowance for credit losses remained steady, reflecting the bank's cautious approach to risk management.
Financially, BoH's net income and earnings per common share increased significantly in Q3 2024, reflecting the bank's strong performance. Return on common equity was 11.5%, and the bank reported a provision for credit losses of $3 million. The bank's capital levels continued to improve, with a Tier 1 capital ratio of 14.5% and a total capital ratio of 15.11%.
Challenges and Opportunities Ahead
Despite the strong performance, BoH faces challenges, particularly in the lodging sector, which is dependent on international visitors to Hawaii. However, the bank is well-positioned, with a low loan-to-value ratio of 60% and strong sponsorship from borrowers. The bank is also actively working to resolve any criticized credits through refinancing, payoffs, or upgrades.
Looking ahead, BoH expects to continue managing its balance sheet actively, taking advantage of opportunities in the changing rate environment. The bank's strategy of focusing on core markets, maintaining strong client relationships, and leveraging local expertise positions it well for the future.
Conclusion
Bank of Hawaii Corporation's Q3 2024 earnings call painted a picture of a financially strong and well-managed bank. Despite challenges in certain sectors, BoH's focus on core markets, long-standing client relationships, and prudent risk management have positioned it for continued success. With a stable market environment and a strategic approach to credit and financial management, BoH is poised for continued growth and success.
