Bank of Hawaii Cements its Strong Presence in Hawaii's Market Amidst Stable Economic Conditions
The Bank of Hawaii Corporation, a leading financial institution in the Hawaiian Islands, recently concluded its fourth quarter 2024 earnings conference call, showcasing another solid performance for the company. Chairman and CEO Peter Ho reported that net interest income and net interest margin both improved, marking the third consecutive quarter with positive growth.
Bank of Hawaii's net interest income grew by just over 2% on a linked basis to $120.2 million, while noninterest income, excluding an adjustment to Visa Class B shares, was up modestly on a linked basis. Expenses were controlled, and average deposits and loans both increased by 1.3% and 1.1%, respectively. The company's credit quality remained pristine in the quarter, with net charge-offs and NPAs improving to 9 basis points and 14 basis points, respectively.
According to Peter Ho, the Bank of Hawaii brand continues to perform well in its unique market, holding the #1 position in market share as shown in the latest FDIC annual summary of deposits. Importantly, noninterest-bearing demand plus other low-yield deposits stabilized nicely and trended positively in December on a rolling 3-month average basis for the first time since June 2022.
Brad Shairson, Chief Risk Officer, highlighted the company's strong credit performance by stating that "the majority of our loan book is comprised of long-standing relationships with about 60% of our clients on both the commercial and consumer sides having been with us for over 10 years." This combination has greatly contributed to the company's strong credit performance for many years.
The Bank of Hawaii prioritizes serving its community, lending in core markets where its expertise enables it to make sound credit decisions. The loan book is balanced between consumer and commercial loans, with consumer representing a little over half of total loans at 56% or $8 billion. Lending predominantly on a secured basis against real estate has resulted in a loan portfolio that is 93% Hawaii-based.
Brad Shairson further emphasized the stability of Hawaiian real estate markets, stating, "a combination of consistent vacancy rates and little change in inventory supports a stable real estate market." The company's focus on community service and sound credit decisions has led to strong credit performance.
The company's capital levels have improved substantially from a year ago. Peter Ho concluded the conference call by highlighting that deposit funding costs fell for the first time this rate cycle, both on an interest-bearing and total deposit cost basis. Economic conditions in Hawaii remain stable, with unemployment well below the national average.
