Bank Of Hawaii Corporation · NYSE:BOH
Bank Of Hawaii — Q3 2023 Earnings Presentation
48 slides from Bank Of Hawaii's earnings presentation, Oct 23, 2023
Slide 1: Third quarter 2023 financial report
Bank of Hawai‘i Corporation third quarter 2023 financial report October 23, 2023
Slide 2: Disclosure: forward-looking statements
disclosure forward-looking statements this presentation, and other statements made by the Company in connection with it, may contain forward-looking statements concerning, among other things, forecasts of our financial results and condition, expectations for our operations and business prospects, an
Slide 3: Highlights
highlights • period end total deposits increased 1.4% quality balance • average deposits increased 2.4% sheet performance • growth attributed to increase in core customer deposits • wholesale funding decreased by $1.8 billion • $9.6 billion in readily available liquidity strong liquidity exceeds uni
Slide 4: Our deposits
our deposits through our 125 year history in the islands, Bank of Hawai‘i has developed an exceptionally seasoned deposit base, built one relationship at a time, over many years, and in neighborhoods and communities we understand ✔ unique marketplace ✔ diversified ✔ long tenured 4
Slide 5: Unique deposit market
unique deposit market other 3.23% Territorial Savings Bank 2.93% Bank of Hawaiʻi 33.81% the leader in a unique deposit Central Pacific Bank market with five 11.91% local competitors holding 97% of the First Hawaiian Bank bank deposit market American Savings 33.79% Bank 14.33% 2023 source: FDIC Annua
Slide 6: Insured/collateralized deposits
insured/collateralized deposits uninsured/ insured uncollateralized 48% 42% uninsured/ collateralized 10% note: as of September 30, 2023 6
Slide 7: Long tenured deposit base
long tenured deposit base 10-20 years 22% >20 years 53% <10 years 25% note: as of September 30, 2023 7
Slide 8: Stable deposit balances
stable deposit balances $ in billions $20.8 $20.6 • spot balance increased by 1.4% $20.5 $20.5 • average balance increased by 2.4% 12/31/22 3/31/23 6/30/23 9/30/23 8
Slide 9: 2023 deposit balances change
2023 deposit balances change small banks (1) BOH (2) 0.9% -2.6% (1) compares 9/27/23 vs. 12/28/22; small banks data derived from H.8 Assets and Liabilities of Commercial Banks in the United States, Table 9 - Assets and Liabilities of Small Domestically Charted Commercial Banks in the United States,
Slide 10: Cost of funds: interest-bearing deposits
cost of funds interest-bearing deposits 2.11% 1.95% 1.59% 1.54% 1.09% 0.97% 0.69% 0.48% 0.30% 0.20% 0.13% 0.11% 0.07% 1Q22 2Q22 3Q22 4Q22 1Q23 2Q23 3Q23 BOH KRX median source: S&P Capital IQ; KBW Regional Banking Index (KRX) as of 1/3/23 10
Slide 11: Cost of funds: total deposits
cost of funds total deposits 1.52% 1.40% 1.09% 1.08% 0.75% 0.66% 0.46% 0.31% 0.20% 0.12% 0.08% 0.07% 0.05% 1Q22 2Q22 3Q22 4Q22 1Q23 2Q23 3Q23 BOH KRX median source: S&P Capital IQ; KBW Regional Banking Index (KRX) as of 1/3/23 11
Slide 12: Deposit beta performance
deposit beta performance 28.7% 26.1% 23.1% 21.0% 15.9% 15.4% 11.5% 9.6% 7.1% 3.2% 3.5% 0.0% 0.0% 1Q22 2Q22 3Q22 4Q22 1Q23 2Q23 3Q23 BOH KRX median source: S&P Capital IQ; KBW Regional Banking Index (KRX) as of 1/3/23 12
Slide 13: Readily available liquidity
readily available liquidity Bank of Hawai‘i carries substantial liquidity lines and equivalents for both day-to-day operational and liquidity backstop purposes $9.6B cash $8.7B securities available FHLB uninsured/ uncollateralized deposits FRB note: as of September 30, 2023, FRB borrowing capacity i
Slide 14: Unemployment experience & forecast
unemployment experience & forecast 22.6% 2.8% 2.2% Apr-20 Jul-20 Nov-20 Jan-20 Apr-21 Jul-21 Nov-21 Jan-21 Apr-22 Jul-22 Nov-22 Jan-22 Apr-23 Jul-23 Sep-20 Dec-20 Jan-23 Aug-20 Oct-20 Sep-21 Oct-21 Dec-21 Sep-22 Dec-22 Feb-20 Mar-20 May-20 Jun-20 Aug-21 Feb-21 Mar-21 May-21 Jun-21 Aug-22 Oct-22 Sep-
Slide 15: Visitor arrivals
visitor arrivals monthly by market, indexed to January 2017 200 180 160 140 120 100 80 60 40 20 - total domestic Japan other source: Hawaii Department of Business, Economic Development, and Tourism (DBEDT) 15
Slide 16: Revenue per available room
revenue per available room revenue per available room (RevPAR) $340 $310 $280 $250 $220 $190 $160 $130 $100 $70 $40 $10 source: Hawaii Department of Business, Economic Development, and Tourism (DBEDT) 16
Slide 17: Stable real estate prices
stable real estate prices Oahu market indicators – September 2023 single family homes condominiums Sep 2023 Sep 2022 Sep 2019 Δ Sep 2022 Δ Sep 2019 Sep 2023 Sep 2022 Sep 2019 Δ Sep 2022 Δ Sep 2019 35.1% 6.0% 19.7% median sales price $1,050 $1,100 $777 $533 $503 $445 (000s) -4.5% 0.8 months 1.0 month
Slide 18: Credit performance
AN Bank of Hawaii Corporation | credit performance
Slide 19: Lending philosophy
lending philosophy we lend in our core markets to long-standing relationships Hawai'i 92% U.S. West mainland Pacific 3% 5% note: as of September 30, 2023 19
Slide 20: De-risking the balance sheet
de-risking the balance sheet loan portfolio balance $16.0 Billions $14.0 $0.1 $0.1 $12.0 $0.2 $0.2 $0.3 $10.0 $0.4 $0.5 $8.0 $0.5 $0.6 $13.8 $0.6 $13.0 $6.0 $1.5 $0.6 $11.5 $12.0 $1.3 $0.8 $0.7 $10.5 $0.9 $9.8 $9.0 $4.0 $8.0 $7.0 $5.3 $5.9 $5.0 $4.8 $4.5 $4.6 $5.1 $2.0 $0.0 2008 2009 2010 2011 2012
Slide 21: Historical net charge-off rates
historical net charge-off rates lower net charge offs through different economic cycles annual net charge-off rate 3.00% 2.50% 2.00% 1.50% 1.00% 0.50% 0.00% 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2Q23 -0.50% BOH BOH core KRX all banks KRX – represents historical a
Slide 22: Loan portfolio
loan portfolio 79% of portfolio secured with real estate with combined weighted average loan to value of 55% C&I residential 11% mortgage 34% 41% commercial 59% consumer • 71% real estate secured • 84% real estate secured • wtd avg LTV 56% • wtd avg LTV 54% • 56% w/ BOH ≥ 10 yrs • 58% w/ BOH ≥ 10 yr
Slide 23: Commercial real estate (CRE)
commercial real estate (CRE) 27% of total loans asset type % total CRE wtd avg LTV retail multi-family 24% 59% 18% lodging 15% industrial 20% 56% retail 18% 55% office industrial $3.8B 10% lodging 15% 52% 20% CRE office 10% 56% specialty 11% specialty 11% 53% other other 2% 48% 2% multi-family 24% t
Slide 24: CRE office
CRE office 3% of total loans scheduled maturity LTV distribution 300 250 200 42.8% $ millions LTV > 60% to 70% 150 35.6% 23% 100 11.0% 50 5.3% 1.7% 0.8% 2.7% $0.38B LTV > 70% to - 2023 2024 2025 2026 2027 2028 2029+ 80% 16% LTV ≤ 60% highlights 61% • 56% wtd avg LTV LTV > 80% • $1.8MM average exposu
Slide 25: Oahu investor office market
Oahu investor office market 13.6 million square feet vacancy and rents remain stable as conversions to alternative purpose continue to drive decline in inventory source: Colliers 25
Slide 26: Honolulu multi-family market
Honolulu multi-family market 30,367 units severely limited existing and new supply, compounded by the high cost of homeownership, continues to drive rental demand source: CoStar 26
Slide 27: Oahu industrial market
Oahu industrial market 41.5 million square feet vacancy rates at a historic low, while available industrial space listings remain near record low source: Colliers 27
Slide 28: Oahu retail market
Oahu retail market 17.1 million square feet record retail sales and tourism spend continue to support post-pandemic recovery source: Colliers 28
Slide 29: Oahu lodging market
Oahu lodging market 30.9 thousand rooms outlook is generally positive, as inventory remains flat and occupancy & RevPar report comparably with pre-pandemic tourism source: Hawaii Tourism Authority, UHERO 29
Slide 30: CRE scheduled maturities
CRE scheduled maturities 8% maturing prior to 2025 scheduled maturities 2,500 55.2% 2,000 1,500 $millions 1,000 12.2% 500 7.6% 8.8% 8.3% 7.1% 0.9% 0 2023 2024 2025 2026 2027 2028 2029+ 30
Slide 31: CRE tail risk
CRE tail risk LTV > 80% - 0.8% of CRE, 0.2% of total loans LTV > 60% to 70% 23% $0.03B of CRE with LTV > 70% to 80% 16% LTV > 80% LTV ≤ 60% 60% LTV > 80% 0.8% 31
Slide 32: Construction
construction 2% of total loans % total wtd avg asset type construction LTV retail 21% housing – low income / 46% 65% housing - industrial affordable other 10% 5% housing – other 5% 45% retail 21% 64% $0.3B lodging industrial 10% 67% construction 13% lodging 13% 51% office 4% office 4% 69% housing -
Slide 33: Maui economic impact
Maui economic impact 2021 percentage of state total by county real GDP resident population 80.0 74% 1.2 millions $ billions 70.0 69% 1.0 60.0 0.8 50.0 40.0 0.6 30.0 0.4 20.0 14% 11% 10% 11% 0.2 5% 10.0 5% - - Honolulu Maui Hawai'i Kauai Honolulu Hawai'i Maui Kauai total nonfarm jobs 450 72% thousand
Slide 34: Maui portfolio
Maui portfolio 12% of total loans, 1% of total loans located in fire impacted zone 180.0 169.2 160.0 $millions 140.0 -70.7 120.0 100.0 $1.6B 80.0 total Maui 60.0 -66.3 40.0 fire impacted 20.0 -15.3 zone -6.1 10.8 10.5% 0.0 $156.9 million fire not destroyed destroyed 50% of estimated impacted destroy
Slide 35: Credit quality
credit quality net charge-offs non-performing assets 0.4 0% 0.3 5% 0.3 0% 0.2 5% $0 0.2 0% $0 0.10% 0.1 5% 0.06% 0.08% 0.08% 0.06% $0 0.1 0% $0 0.03% 0.04% 0.03% 0.0 5% $0 0.0 0% $0 3Q22 2Q23 3Q23 YTD22 YTD23 3Q22 2Q23 3Q23 $0 NCOs/average loans NPAs/period-end loans plus OREO $0 $0 delinquencies cr
Slide 36: Financial update
AN Bank of Hawaii Corporation | financial update
Slide 37: NII and NIM
NII and NIM $ in millions $136.0 $124.3 $120.9 • net interest income (NII) and net interest margin (NIM) challenges from inverted yield curve and higher short term rates • deposit rates and betas remain well 2.47% below peers 2.22% 2.13% • NIM declined by 9 basis points in 3Q23 compared to 2Q23 1Q23
Slide 38: Hedging program
hedging program increased pay-fixed/receive-float swaps by $1.8 billion ($2.0 billion total notional) in 3Q23 to hedge a portion of fixed-rate asset exposure asset composition 12/31/22 3/31/23 6/30/23 9/30/23 9/30/23 pro forma fed funds sold fed funds sold fed funds sold fed funds sold fed funds sol
Slide 39: Asset repricing
asset repricing projected repricing, maturities & prepayments ($ in billions) $8.5B $8.7B $4.5 $3.7 $3.8 $4.0 $3.5 $3.0 $2.5 $2.1 $2.1 $2.1 $1.9 $2.0 $1.5 $1.0 $0.7 $0.6 $0.5 $0.0 yr 1 yr 2 loans repricing/swaps inv. portfolio repricing/swaps & fed funds sold loans maturing/prepayments inv. portfoli
Slide 40: Balance sheet summary
balance sheet summary $ in millions investment securities loans and leases $13,915 $13,919 $7,869 $7,475 AFS AFS $2,667 $2,387 HTM HTM $5,203 $5,088 6/30/23 9/30/23 6/30/23 9/30/23 total deposits wholesale funding $20,509 $20,802 $2,475 $2,470 $2,202 $725 $8,020 $8,565 $700 $1,750 $150 $10,019 $10,0
Slide 41: Noninterest income
noninterest income $ in millions stable core noninterest income from diverse sources reported noninterest income core noninterest income $50.3 $43.3 $41.7 $41.0 $38.5 $30.7 normalizing items: +$0.8 Visa Class B conversion ratio normalizing items: adjustment +$0.9 Visa Class B normalizing items: +$4.
Slide 42: Noninterest expense
noninterest expense $ in millions disciplined expense management in challenging operating environment reported noninterest expense core noninterest expense $105.7 $104.0 $105.6 $103.9 $104.0 $103.1 normalizing items: -$2.1 separation normalizing items: -$0.4 extraordinary -$1.8 separation expenses r
Slide 43: Financial summary
financial summary $ in millions, except per share amounts 3Q 2023 2Q 2023 3Q 2022 ∆ 2Q 2023 ∆ 3Q 2022 net interest income $ 120.9 $ 124.3 $ 141.7 $ (3.4) $ (20.7) noninterest income 50.3 43.3 30.7 7.1 19.7 total revenue 171.3 167.6 172.3 3.7 (1.0) noninterest expense 105.6 104.0 105.7 1.6 (0.1) oper
Slide 44: Capital
capital 16.0% organic capital continues to grow 14.0% 13.56% 13.13%13.24% 13.6% 12.53% 12.10%12.21% 12.0% 11.29% 10.88%11.00% 3.13% 3.24% 3.56% 10.0% 4.10% 4.21% 4.53% 4.38% 4.50% 4.79% 8.0% 7.19% 7.21% 7.22% 6.0% 2.19% 2.21% 2.22% 10.00% 10.00% 10.00% 4.0% 8.00% 8.00% 8.00% 6.50% 6.50% 6.50% 5.00%
Slide 45: Takeaways
takeaways ✔ unique and competitively advantageous deposit market ✔ high quality deposit base ✔ market leading cost of deposits ✔ high quality assets ✔ exceptional credit quality ✔ strong risk-based capital 45
Slide 46: Q&A
AN Bank of Hawaii Corporation | Q&A
Slide 47: Appendix
AN Bank of Hawaii Corporation | appendix
Slide 48: Hawai‘i economy
Hawai‘i economy $ in billions 2022 Hawai‘i GDP by industry total GDP $98.2 government $20.0 (20.4%) real estate and rental & leasing $17.2 (17.5%) other $13.4 (13.6%) accommodation & food services $9.7 (9.9%) health care & social assistance $7.4 (7.5%) retail trade $6.5 (6.7%) construction $5.1 (5.2