Bank of Hawaii Corporation Stock

Good day, and thank you for standing by. Welcome to the Bank of Hawaii Corporation Second Quarter 2026 Earnings Conference Call. [Operator Instructions]. I would now like to hand the conference over to your speaker today, Chang Park, Executive Vice President, Executive Director of Financial Performance and Investor Relations. Please go ahead.

Good morning and good afternoon. Thank you for joining us today for our second quarter 2026 earnings conference call. Joining me today is our President and CEO, Jim Polk, CFO Brad Satenberg, Chief Risk Officer, Brad Shairson; and Manager of Investor Relations, Patricia Lam. Before we get started, I want to remind you that today's conference call will contain some forward-looking statements.

And while we believe our assumptions are reasonable, the actual results may differ materially from those projected. During the call today, we'll be referencing a slide presentation as well as the earnings release. Both of these are available on our website, boh.com, under the Investor Relations link. And now I would like to turn the call over to Jim.

Thanks, Chang. Good morning, and good afternoon, everyone, and thank you for joining us today. Bank of Hawaii delivered another solid quarter, reflecting continued progress in the underlying earnings power of the franchise. For the second quarter, we reported diluted earnings per share of $1.47 and net income of $63.8 million, up 13% and 11%, respectively, from the prior quarter. Return on average common equity improved to 15.5%. The net interest income increased to $153.6 million and our net interest margin expanded by 4 basis points to 2.78%. This marked our ninth consecutive quarter of margin expansion.

The improvement reflected the continued repricing of our fixed rate assets along with disciplined deposit pricing. Our average cost of deposits remained essentially stable at 127 basis points. The interest rate environment continues to evolve with rates now expected to remain elevated for longer. We believe our balance sheet is well positioned for this environment as higher rates support earning asset yields and the continued repricing of our fixed rate portfolio.

At the same time, the competitive environment for deposits remains elevated as customers continue to prioritize yield, which may limit opportunities for deposit cost improvement in the near term. As we have discussed previously, the second quarter is typically a seasonally lower period for deposits at Bank of Hawaii, and this quarter followed that pattern.

Average deposits declined modestly from the prior quarter, at quarter end, noninterest-bearing deposits continued to represent approximately 27% of total deposits. Our deposit franchise remains 1 of Bank of Hawaii's most important structural advantages: our leading market position, trusted brand, diversified customer base and deep relationships across our markets provides a stable core funding base.

These advantages allow us to manage pricing thoughtfully while continuing to meet our customers' needs. Based on our performance through the first half of the year and our current interest rate assumptions, we continue to trend toward a net interest margin approaching 2.9% by year-end.

While the composition of margin opportunity has shifted somewhat in the current rate environment, we remain confident in the earnings trajectory of the balance sheet. Turning to lending, total loans increased $94 million during the quarter, representing annualized growth of approximately 2.6%. C&I and residential lending led the increase, while CRE growth was affected by payoff activity and the timing of deal closings. Residential mortgage growth benefited from the completion and closing of a large condominium project. Looking ahead, our commercial pipeline remains encouraging.

On the consumer side, however, elevated interest rates and the absence of similar residential project closings are likely to moderate third quarter growth in consumer. We continue to expect full year loan growth in the lower mid-single-digit range. Credit quality continues to be strong, and Brad will provide some additional details shortly.

We also made progress on the strategic priorities we discussed last quarter. In Wealth Management, we are strengthening coordination across commercial banking, the private bank, Bankoh Advisors, and our broader advisory capabilities. The Center for Family Business and Entrepreneurs, which opened in April, continues to develop its client pipeline around succession and estate planning, business valuation, merger and acquisitions and other complex needs.

Bank of Hawaii is uniquely positioned in our markets to bring together capabilities to help clients navigate these consequential financial and business decisions. Beyond these initiatives, our teams remain focused on disciplined execution, protecting our strong balance sheet, deepening customer relationships, investing in our people and technology and supporting the communities we serve.

And although the interest rate outlook continues to evolve, the fundamental strengths of Bank of Hawaii remain unchanged A leading deposit franchise, a trusted brand, deep customer relationships, strong credit quality and a conservatively positioned balance sheet. These strengths give us confidence in our ability to perform across a range of economic and interest rate environments.

Turning to the economic outlook, Hawaii's economy remains resilient. Supported by low unemployment, healthy visitor spending, strong construction activity and military investment. The Department of Business, Economic Development and Tourism currently projects real economic growth of 1.6% in 2026.

At the same time, we continue to monitor inflation, energy costs, consumer confidence, travel demand and broader geopolitical and fiscal developments. With that said, I'll turn the call over to Brad Shairson to discuss credit. Brad Satenberg will then review our financial results in greater detail after which we'll be pleased to take your questions.

Thanks, Jim. I'll 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. The Bank of Hawaii 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 94% of loans are based in Hawaii with 4% in the Western Pacific and just 2% 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% consists of residential mortgage and home equity loans with a weighted average LTV of 29% and weighted average FICO score of 799. The remaining 14% of consumer loans are comprised of auto and personal lending. Credit quality in these segments also remained strong with FICO scores of 729 for auto loans and 761 for personal loans. Turning to commercial lending, the portfolio totals $6.2 billion, representing 44% of total loans. 72% is secured by real estate with a weighted average LTV of 55%.

This reflects our ongoing emphasis on collateral protection. CRE remains our largest component of the commercial book totaling $4.3 billion or 30% 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 back down to the long-term average 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 near-term refinancing risk.

Looking at the distribution of LTVs, there isn't much tail risk in our CRE portfolio, less than 3% of CRE loans have greater than an 80% LTV. C&I accounts for 12% of total loans, totaling $1.7 billion. This portfolio is diversified across industries characterized by modest average loan sizes, and there is very little leverage lending.

Turning to asset quality, overall credit performance remained strong and consistent with the trends we've seen over the past several quarters. delinquencies, nonperforming assets and net charge-offs all remained at favorable levels during the quarter. Net charge-offs were just $3.4 million or 10 basis points annualized in line with the last several quarters, but up from the abnormally low 3 basis points last quarter that resulted from a large recovery.

Nonperforming assets declined 1 basis point to 8 basis points, while delinquency levels increased 1 basis point to 41 basis points. The 1 notable change this quarter was an increase in the criticized asset ratio to 2.81% and from 2.12%. That increase was driven by a single borrower relationship rather than broader weakness across the portfolio. The loans related to the borrower continue to perform and the exposure is well secured by real estate.

More broadly, 93% of our criticized assets are secured by real estate with a weighted average LTV of 58%. And as an update on the allowance for credit losses on loans and leases, the ACL ended the quarter at $147 million, flat to the linked quarter. The ratio of our ACL to outstandings ends down 1 basis point to 1.03%. This concludes my remarks. I will now turn the call over to Brad Satenberg, for a discussion on our financial performance.

Thanks, Brad. For the quarter, we reported net income of $63.8 million and a diluted EPS of $1.47, up $6.4 million and $0.17 per share from the linked quarter. And as Jim mentioned, for the ninth consecutive quarter, both our NII and NIM expanded. Compared to the first quarter, NII increased $2.6 million, and NIM improved 4 basis points to 2.78%.

The expansion was primarily driven by our fixed asset repricing, partially offset by the deposit mix shift, which accelerated for the first time in several quarters. Despite the increase this quarter, the broader trend remains positive, and over the past 12 months, the aggregate mix shift was only $17 million compared to $516 million during the same period a year ago.

The yield on earning assets improved by 5 basis points during the quarter which benefited from a $2.8 million contribution to our NII from the fixed asset repricing, assuming that interest rates remain stable, I expect that the yield on our earning assets will continue to improve at a similar pace for the remainder of the year.

The cost of interest-bearing liabilities increased by 1 basis points during the quarter, consistent with the rise in deposit costs. Deposit costs were 1.27% in the deposit beta declined slightly to 35.5%. As interest rate expectations have shifted, deposit pricing has become more competitive than earlier in the year, contributing to the higher deposit mix shift, along with a modest increase in deposit costs this quarter.

In the current rate environment, I expect our cost of deposits to settle in the range of 1.25% to 1.3% in the near term. I also expect public deposits to decline in the third quarter as we strategically allow certain higher cost funds to run off. I'm forecasting that any interest rate hikes would initially benefit NII and NIM, but would ultimately become a modest headwind once our deposits fully reprice.

The velocity of the impact from any change in rates will depend on the timing of deposit pricing adjustments and the terminal beta reached. I expect the deposit beta of any potential rate hikes to ultimately land at approximately 34%, which would mirror our beta from the last rate hike cycle. Regardless of any potential rate changes, I believe that we are well positioned to remain balanced from an interest rate sensitivity perspective.

At quarter end, our fixed to flow ratio was 58%, down 1 percentage point from the prior quarter. We finished the quarter with an active pay fixed received float swap portfolio of $1.4 billion with a weighted average fixed rate of 3.3% and an average life of 1.4 years. $1 billion of these swaps hedge our loan portfolio if $400 million hedge our securities. In addition, we have $200 million of forward starting swaps with a weighted average fixed rate of 3% and an average life of 2.1 years.

These swaps will become effective during the third quarter. Noninterest income was $43.3 million during the quarter compared to $41.3 million during the linked quarter. This quarter included a $400,000 charge related to our BCP conversion ratio change, while the first quarter included a similar $200,000 charge.

Adjusting for these normalizing items, noninterest income was up $2.2 million. This improvement was primarily due to the strength of our Wealth Management division, which benefited from a strong market as well as increased customer demand for annuity investments and other advisory-related fees.

My forecast for the third quarter is that normalized noninterest income will be approximately $43 million. Noninterest expense was $111.2 million compared to $116.1 million during the linked quarter. As a reminder, the first quarter included a seasonal payroll tax and benefits charge of $2.8 million as well as nonrecurring charges related to the accelerated vesting of restricted stock awards of $3.5 million and an unrelated severance charge of $750,000.

This quarter includes our annual merit increases of approximately $1.2 million and a $500,000 benefit in connection with the net forfeiture of unvested restricted stock. Excluding the impact of these items, expenses were up slightly compared to the first quarter.

Third quarter normalized noninterest expense is expected to be approximately $112.5 million. During the quarter, we also recorded a provision for credit losses of $3.6 million, resulting in a coverage ratio of 1.03%. In addition, we reported a provision for taxes of $18.3 million during the quarter resulted in an effective tax rate of 22.3%. The drop in the tax rate compared to the linked quarter was primarily due to higher benefits from certain tax-advantaged investments.

Our capital ratios remained above the well-capitalized regulatory capital thresholds during the quarter with Tier 1 capital and total risk-based capital of 14.5% and 15.5%, 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 second quarter, we repurchased $17 million of common shares at an average price of approximately $78 per share. I am currently planning to purchase an additional $20 million of stock during the third quarter. And $89 million remains available under the current repurchase plan. Finally, the Board declared a dividend of $0.70 per common share that will be paid during the third quarter. Now I'll turn the call back over to Jim.

Thanks, Brad. We'd now be happy to answer any questions that you might have.

[Operator Instructions] Our first question comes from the line of Jeff Rulis with D.A. Davidson.

Jim, you alluded to in your initial remarks on the wealth management momentum, and Brad kind of followed with the pieces of that strength. I just kind of want to see what is pretty solid for trusted and asset management. If -- what kind of growth do you see the rest of the year, I guess, if you strip out, I guess, the strong market is a variable. But just wanted to see the outlook for that line item as you see it.

Yes. I mean, it's always hard to judge these things with market conditions, but we feel really good about where we're at. Obviously, we've talked on several calls now, just about the investments we've made in both Bankoh Advisors as well as the overall wealth platform.

I would say that if you looked at the performance in Q3 on the wealth management side, the increase in fees was driven probably half by market and half by production. And then we had some trust and testamentary fees that came in as well. So I would see that as sustainable without market change going forward.

And then on the Bankoh Advisory side, the annuity income is really -- I think you're really beginning to see sort of the partnership with Cetera, the greater efficiency that we've incorporated into the business. Additional products that we have availed through the segment and then the advisers that we're adding to the team just helping to drive overall sales.

Appreciate it. And then one other one I had is just to check in on that margin, you mentioned the high 2% or approaching 2.9% by year-end. On -- and it sounded like the composition of how you get there shifted a little bit. And just I guess if you couched this quarter's sequential increase in how you get there, if you could just provide a little more color through the back half of how you get there would be helpful.

Sure. Maybe I'll have Brad answer that question.

Yes. Thanks, Jeff. That's a good question. So our NIM for the quarter was 2.78%. June was at $279 million, now we're forecasting 1 rate hike this year, mid-September is what we have in our forecast. So all of the components are still in place for the NIM to continue to grind higher. We've got the fixed asset repricing, which we feel really good about.

And the mix shift has moderated even though we took a step back this quarter, really, if you look at over the longer-term trend, it's been positive. So with the rate hike and with the mix shift and with the fixed asset repricing, I think we get to 2.90% by the end of the year. And that's -- I think we're looking at 5 basis points in NIM per quarter going forward?

And Brad, just to clarify, that's a true exit, not the quarterly average in Q4?

Yes. So I think it's going to be -- yes, my expectation is December would be just about $290 million.

Our next question comes from the line of Matthew Clark with Piper Sandler.

Maybe just a little more on the margin, if you have the spot rate on deposits at the end of June and how -- and I was just as a follow-on to that, just how you're -- whether or not you're having to make any tweaks on exception pricing here, any upward pressure there or any changes to your promotional rates?

All right. So the spot rate just to answer your first question, Matt, the spot rate was $1.26. So it was down 1 basis point from what our cost was for the quarter. And as far as exception pricing, obviously, I think competition has increased slightly, and I think there are some additional requests for some exception pricing. But it hasn't been material or significant -- but we are looking at opportunities to grow deposits. And with that comes some additional pricing on our CDs. So we do think we're going to be pushing CD rates up slightly in the 3- and 12-month categories. But nothing material, but we do see that moving up.

Okay. And then just on the securities portfolio down this quarter, should we continue to assume that shrinks or are you going to start reinvesting there?

I mean I wouldn't assume it's going to shrink, but I think this quarter, between the loan growth that we experienced as well as we have some deposit runoff. So we used the excess cash flows from the investment portfolio to support those 2. But we did take a step back in our investments, and I think we'll just continue to reinvest at a pace and it will really be dictated by what we see from a loan growth perspective -- from a loan growth standpoint.

Our next question comes from the line of Jared Shaw with Barclays.

I guess sticking with the deposits, was there anything unique about the DDA trends this quarter? Maybe apart from some of the public funds? And how are you thinking about sort of DDA as a component of growth going forward?

Yes. I think the way I would characterize it is, obviously, the quarter was down. But if you look over the last several quarters, we've grown consistently. I just went back 5 quarters. We've had really nice growth going back to the beginning of 2025, and we had particularly strong growth in Q4 and in Q1 of '26.

So I really look at -- particularly on the NIBD side is just sort of the normal ebbs and flows and the seasonality of Q2. There were some project-related funds that built up related to some of the condo stuff that moved out. But we're confident that the long-term sort of trend and sustainability of growth in the space still remains.

Okay. All right. And then -- on the buyback, thanks for the update on the $20 million expected for third quarter. Is that quarter given capital and growth dynamics? And is that a good level to sort of assume for the next few quarters beyond third quarter?

Yes, this is Brad. I would say, obviously, $20 million for the third quarter. I would expect $20 million for the fourth quarter as our forecast and our expectation, and then we're going to reevaluate it going into 2027.

Our next question comes from the line of Andrew Terrell with Stephens.

If I can go back to just the loan growth quickly. I think you mentioned in the prepared remarks, kind of the low, mid-single-digit kind of goalpost was still where you were looking for kind of full year loan growth. I heard some of the comments around just maybe some tougher consumer in the third quarter. I'm hoping you could just talk to maybe how the pipeline is building up overall, specifically on the commercial side? What gives you confidence in growth that I think the guide imply is stable to maybe improving growth in the back half of the year.

Yes. So on the residential side or on the consumer side, overall production was quite strong relative to our recent history. A component of that, maybe 25% of the total production was related to a condominium project that closed out this quarter. So that gave us some expert use on the residential side to maybe drive some I'll use the term outsized performance, at least relative to our recent history.

So without any projects in the near horizon, we'll kind of go down to a more organic level of growth in residential. It will still be positive, but it's not going to be nearly the level it was for Q2. And we continue to see challenges in direct and home equity just given the rate environment and sort of the realities of cost of cars and financing of cars and so forth.

So -- but it will be positive for the quarter, and it will contribute to sort of the guidance that we've already provided. The commercial side is looking pretty good. I mean, the pipeline, we really started to see the pipeline build out in the beginning part of the year. Q1 was a solid quarter. Q2, we were expecting a little bit better performance, but we had some deals move out to the third quarter.

We've seen those flows already, and the pipeline remains pretty good from my standpoint healthy. So I feel pretty good about commercial growth. And I think the combination of those -- what we see on the commercial side as well as consumer will keep us in that low mid-single-digit range.

Okay. Great. And then just one on the margin, just to confirm the expectation for 2.90% exit rate of the year, that does include the assumption for the September rate hike of 25 basis points in there. And then I was hoping you could talk to -- we heard some around the competitive dynamics on the deposit side, just competition for new loans today and your comfortability with, I think, your kind of blended reinvestment yield for the fixed and adjustable cash flows was still 160 basis points this quarter, same as last quarter, your comfortability with that remaining relatively stable moving forward?

There was a lot in there. Can you repeat that again, just to make sure we're answering your question correctly.

Yes, I'm sorry. Does your guide include -- does the 2.90% exit margin include the 25 basis point September hike?

That's correct. Yes. So we're expecting mid-September to have 1 hike, 25 bps.

Okay. And then competition for new loans today, do you feel like there's any risk to that incremental spread on Page 20 of the deck, 160 basis point pickup for the maturity and adjustable cash flow reinvestment. Do you feel like there's any risk of spread compression there?

No, I don't see that at this point. I mean spreads have been pretty stable for a while on the loan side. I mean, as we've said in previous quarters, there's always a one-off, but the market remains pretty rational.

Our next question comes from the line of Andrew Liesch with StoneX Group.

Just want to see just kind of looking at the size of the average earning asset base going forward. Have you seen deposits come back in seasonality or seasonally this quarter? And it also sounds like you're going to have some other public funds outflows. So I guess how should we be thinking about where earning assets shake out.

Well, I'll start and then Jim can chime in. This is Brad. Yes. Our earning assets, our average earning assets definitely took a step down and -- from previous quarters. And I expect it to come in probably in the range of $100 million to $200 million this quarter, so relatively consistent where we ended this past quarter. And then just on the -- yes, go ahead. Sorry.

No, I was just going to add. I think 1 of the things that we see out there, particularly in the deposit space is sort of the higher cost public deposits. So we're going to take a pretty strategic approach on how we look at those things, and that could have an impact on the ultimate earning asset base.

Got it. Makes sense. Okay. And then just on the fee income, did I hear currently like $43 million for the third quarter?

That's correct.

Okay. So if I take the -$43.3 million this last quarter, if I back out the securities loss there? I mean you kind of close to $44.3 million. I mean, your $44 million. I guess where does -- I mean, what's going to cause the step down here, especially given the good commentary on the wealth side.

Well, it's really not a step down. I mean if you think about those securities losses, really what those are, the vis-a-vis conversion ratio. And so those are consistent quarter-to-quarter. And so the $43 million is really just consistent to where we finished the second quarter. So it's really a step-up from the first quarter and sort of remain relatively flat from the second quarter.

[Operator Instructions] Our next question comes from the line of Kelly Motta with KBW.

It seems like based on Q2 results as well as your expense guide of $112.5 million in Q3 that you're running below or at least at the lower end of the 2.5% to 3% expense guide range you had previously given -- can you provide any color or context as to the drivers of that? And if there's any updated color on how you see expenses coming in for the year.

Yes. I think the 2.5% to 3% is still consistent. And the way I look at it is our normalized noninterest expense going into the year was $435 million. So we're just adjusting for normalizing items. And so at 3%, it should come in about $48 for this year. And so I'm thinking on average, quarter-by-quarter, it's about $112 million.

And so the first 2 quarters, we came in slightly below that. I'm expecting the third and fourth quarter to come in, in that $112.5 million range, which would land us at the end of the year right about 3% from that normalized level I was just referencing.

Got it. Okay. That's helpful. And then with the government deposits being strategic there, can you quantify how large that is in your deposit base -- is that -- and kind of what within that I'm sure there's some operating accounts, what within that is the target for strategic production?

So our public deposits are about $2 billion of our total deposit base. And my expectation is this quarter for us as far as running off public deposits, about 10% to 15% of those should run off and those would be high-cost deposits. So when I say high cost, I'm thinking somewhere in the range of 3.5% to 4%.

Got it. That's helpful. And then just if I could ask 1 more. When we step back and think about the margin longer term, I think you've reiterated that $2.90 by year-end, which now includes a rate hike, which I understand is beneficial near term, but maybe more neutral longer term as you think about that $3.25 to $3.50 normalized margin any puts or takes in terms of the time line of getting there? Is that still kind of how we're thinking about it and kind of the changed rate environment? Or are there any other considerations to now?

The way I look at it is we're still on that trajectory depending on what happens in interest rates, there's a lot of variability. This is still a couple of years down the road, as we've talked about, but I don't see anything sort of at this point in time that would deviate -- would cause us to deviate materially from that.

And I'm currently showing no further questions at this time. I'd now like to hand the call back over to Patricia Lam for closing remarks.

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

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

Aloha, and welcome to the Annual Meeting of Stockholders of Bank of Hawaii Corporation. Please note that today's meeting is being recorded, and the recording will be made available after the meeting on the company's website. During the meeting, we'll have a question-and-answer session. You can submit questions or comments at any time by clicking on the Q&A icon.

It is now my pleasure to turn today the meeting over to Raymond Vara, Bank of Hawaii Corporation Board Chair. Mr. Vara, the floor is yours.

Good morning. I'm Raymond Vara, Board Chair, and on behalf of our Board of Directors and management, I welcome you to the 54th Annual Meeting of the Shareholders and our 7th Virtual Shareholders' Meeting. It is now 8:30 a.m., and in accordance with the notice of meeting, I will call the meeting to order.

Now I'd like to introduce the Board of Directors of the Bank of Hawaii Corporation who are all in attendance by phone. First, John Erickson, Joshua Feldman, Michelle Hulst; Kent Lucien, Elliot Mills, Alicia Moy, Victor Nichols, Dana Tokioka; Suzanne Vares-Lum; Robert Wo, and James Polk, our President and CEO.

Now I'd like to introduce the rest of our management team, beginning with our Vice Chairs, Marco Abbruzzese, Matthew Emerson, Patrick McGuirk, Bradley Satenberg, and Bradley Shairson. And our Senior Executive Vice President, Guy Churchill, Sharlene Ginoza-Lee, Jill Higa, Jennifer Lam, Christine Stevens, Dana Takushi, Luke Yeh and Dirk Yoshizawa. I'd also like to introduce David Howell, representing Ernst & Young, our independent public accounting firm.

You will see the agenda on the meeting website as well as a link to the rules of conduct for the meeting. We appreciate your cooperation and abiding by the meeting rules. As a reminder, shareholders attending the virtual meeting can vote their shares online from now through the closing of the polls by clicking the Vote icon on your screen. If you have previously voted by proxy and do not wish to change your vote, your vote will be cast as you previously instructed and no further action is required.

During the business portion of the meeting, we will consider the following 3 proposals: the election of the company's directors; the advisory vote to approve compensation for the named executive officers; and the ratification to reappoint Ernst & Young to serve as the company's independent registered public accounting firm for 2026. We will follow the formal business with our company report and current state of business. Following our report, you'll have the opportunity to ask some questions. We ask the shareholders who wish to address the meeting do so at that time.

Now let's proceed with the meeting. Board of Directors fixed February 27, 2026, as the record date for determining the shares of common stock entitled to vote at this meeting. The company's Corporate Secretary has advised me that the meeting was called and proper notice was given to all shareholders of record. A copy of the notice of annual meeting and the affidavit of mailing are on file.

The number of shares represented in person or by proxy is 33,428,960 or 84% of the 39,725,521 shares issued and outstanding as of the record date. I hereby declare that a quorum is present, and we are qualified to act on all matters set forth in the notice of the meeting. Most of you who returned your proxies authorized the persons named in the proxy to vote on all proposals coming before the meeting. We will now act on the recommendations of the Board of Directors relating to the proposals listed in the proxy statement.

The first proposal is the election of 12 directors. The 12 nominees will serve a 1-year term. They are as follows: John Erickson, Joshua Feldman, Michelle Hulst, Kent Lucien, Elliot Mills, Alicia Moy, Victor Nichols, James Polk, Dana Tokioka; myself, Raymond Vara, Suzanne Vares-Lum and Robert Wo. As no other persons have been nominated in accordance with the company's governing documents, the nominations are now closed.

The second proposal is to approve, on an advisory basis, the compensation of the named executive officers disclosed in this year's proxy statement.

The final order of business is to ratify the reappointment of Ernst & Young as the company's independent registered public accounting firm for fiscal year 2026.

Before I report the preliminary vote results for these 3 proposals, as everyone who wanted to vote cast their vote.

[Voting]

It seems that all of those desiring to vote have voted. I therefore declare the voting polls closed.

I've been advised by our inspectors of election that in accordance with the proxies received from our shareholders, each of the director nominees received a substantial majority of the votes cast at least 27,956,448 votes in favor or 95% of the votes cast.

With respect to proposal #2 related to the advisory vote on executive compensation, approximately 17,274,193 shares voted in favor or 59% of votes cast.

With respect to proposal 3 related to ratifying Ernst & Young as the company's 2026 independent registered public accounting firm, approximately 32,239,430 votes voted in favor or 96% of votes cast.

Since we have received more than a majority in favor of each nominee and each proposal, I am, therefore, pleased to announce that all 12 of the company's directors have been elected for a 1-year term, and the 2 remaining proposals have been approved as the Board recommended.

Final results of the voting will be published in our Form 8-K and filed with the Securities and Exchange Commission. There being no further business to come before the meeting. This concludes the official business portion of the meeting. The 2026 Bank of Hawaii Corporation Annual Meeting is now adjourned.

We will now go to the Q&A session. But before we do that, our President and CEO, Jim Polk, will share some highlights from the year.

Thank you, Ray. Before I provide some company highlights from 2025, I must first pause to recognize the recent retirement of Bank of Hawaii's long-time Chairman and CEO, Peter Ho. Peter served an extraordinary 16 years as our Chairman and CEO, and we've all benefited from his steady thoughtful leadership. On a personal level, I'm deeply grateful for his mentorship and support over the course of my career. And as an organization, we all thank him for his leadership and service to the bank, our employees and our community.

I begin my tenure as CEO and a director with a deep sense of gratitude and responsibility to this organization and the communities we serve. I'm optimistic about the future because we start from a position of such strength, a market-leading brand, a strong financial foundation and a team that is exceptionally well positioned to achieve great results for all of our stakeholders.

Included on our team is Brad Satenberg, who has promoted to Vice Chair and Chief Financial Officer in July 2025, replacing Dean Shigemura, who retired after a distinguished career with the company that spanned 3 decades. Brad joined us in July of 2024, and was Dean's Deputy for a year before taking over the CFO role, and I'm happy to say that the transition has gone off without a hitch.

I'll now share a few other reflections from 2025 and then open it up for a question-and-answer session. Bank of Hawaii closed 2025 with solid financial performance that grew our market-leading share of deposits while maintaining a strong balance sheet, disciplined expense management and an ongoing commitment to long-term growth.

Diluted earnings per common share were $4.63 for the full year with net income of $206 million. Our assets finished the year at $24.2 billion, and we saw consistent growth in net interest income and margin in every quarter of 2025. Total deposits and total loans ended the year at $21.2 billion and $14.1 billion, respectively, both up from the prior year.

Asset quality and liquidity continued to remain strong, and we maintained our long unbroken streak of returning capital to our shareholders by continuing our dividend at $0.70 per share per quarter throughout 2025, and we also repurchased 5 million shares of stock in the fourth quarter of 2025. Our strong financial performance reflects the hard work and exceptional commitment of our employees whose dedication continues to drive our success.

In 2025, we strengthened relationships and deepened ties to the communities we serve by building or renovating 5 branches, including a new branch in Lahaina to replace the 1 that was destroyed in the 2023 Maui wildfires and we opened our new West Pacific regional headquarters into Tamuning, Guam.

Continuing our long-standing tradition of innovation, we introduced generative artificial intelligence tools to enhance operational efficiency, customer service and employee experience in 2025.

Bank of Hawaii can only be as successful as the communities we serve. And in 2025, we continued to help create a better future for our island communities by providing lessons and financial literacy to school children mentoring small business owners and improving the environment with hands-on volunteerism by our Bankoh Blue Crew. In 2025, our employee-led Live Kokua Giving Campaign raised $623,000 for worthy local causes and our Bank of Hawaii Foundation supported the important work of more than 47 local nonprofits.

As we close the books on 2025 and look ahead, I'd say we're off to a great start for 2026, and I remain confident that our strong financial performance positive outlook and unwavering dedication to our shareholders, customers, employees and community positions Bank of Hawaii well for continued success. And now I'd be happy to take your questions.

Okay. It looks like we have no questions. So I'd like to close out by thanking you for your interest in Bank of Hawaii. Have a great rest of the day and a great weekend, Mahalo.

This concludes the meeting. You may now disconnect.

Good day, and thank you for standing by. Welcome to the Bank of Hawaii Corporation First Quarter 2026 Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded.

I would now like to hand the conference over to your speaker today, Chang Park, Executive Vice President, Investor Relations.

Please go ahead.

Good morning and good afternoon. Thank you for joining us today for our first quarter 2026 earnings conference call. Joining me today is our President and CEO, Jim Polk; CFO, Brad Satenberg; and Chief Risk Officer, Brad Shairson.

Before we get started, I want to remind you that today's conference call will contain some forward-looking statements. And while we believe our assumptions are reasonable, the actual results may differ materially from those projected. During the call today, we'll be referencing a slide presentation as well as the earnings release. Both of these are available on our website, boh.com, under the Investor Relations link.

And now I would like to turn the call over to Jim.

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 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'm grateful for his confidence in me, and I'm honored to carry this forward.

Now on to the quarter. Bank of Hawaii 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 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 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. Brad 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's depth of relationships and trusted role in this market.

I'll close with this. We remain focused on the strategy, the culture and the values that have made Bank of Hawaii 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'm proud to be in this role, and I look forward to the work ahead.

With that, I'll turn the call over to Brad Shairson to discuss credit, after which Brad Satenberg will walk through the financials in detail. We'll then be pleased to take your questions.

Thanks, Jim. I'll 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. The Bank of Hawaii 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% consists 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 remained 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 isn't 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. 3 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's 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 Kona Low storm. This overlay accounts for the potential impact of flood damage to approximately 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 don't 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 Brad Satenberg for a discussion of our financial performance.

Thanks, Brad. For the quarter, we reported net income of $57.4 million and a diluted EPS of $1.30, decreases 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 6 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 were 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 continue 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 1.25% at the end of Q1. And as Jim mentioned in his 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 our 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 rate -- 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, and we finished the quarter with an active pay fixed received 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 at the beginning of April, while the remaining $200 million will 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 during the quarter. 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 the second quarter noninterest income will be approximately $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 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'm lowering my forecasted range for annual growth in overhead expenses 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 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'll turn the call back over to Jim.

Thanks, Brad. We'd now be happy to answer any questions that you may have.

[Operator Instructions] Our first question comes from the line of Jeff Rulis with D.A. Davidson.

Maybe just on that last expense mention, 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?

That's inclusive of that. So we're saying $112 million, all inclusive of every expense that we're aware of today.

Got it. Okay. And then I guess on the -- 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's kind of been the area that maybe hasn't been adding to net production. Are you any closer with comfort there of that sort of flattening out that maybe you look at your full year growth numbers, possibly some upside to kind of the low single-digit guide or still waiting to see more confidence before inching that up?

Yes. Jeff, this is Jim. The way I look at it is resi has been coming along okay. We've had -- it was 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've got a number of different initiatives we're 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. I'm not sure we'll get that.

So in the meantime, with respect to home equity line, we've got a number of different direct mailing activities that we're 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've implemented digital contracting, and we're trying to speed up funding time frame. So we're hoping that those can sort of give us a little boost on that side. But I think until we get better clarity in the overall environment, we're still -- from a loan perspective, still in that low single-digit growth outlook.

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 continues 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 might want to inch that up as you've kind of broken out on earnings over the last few quarters?

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

Our next question comes from the line of Andrew Terrell with Stephens.

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 in 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 -- it sounds like there's still a pretty decent opportunity to reprice some of the time deposit portfolio over the balance of the year. I was hoping you could just talk to kind of the competitive landscape for deposits you're seeing in the market right now.

Yes. I mean our total deposit cost was 2.89% for the quarter. The spot rate, again, as you mentioned, was 2.8%. The competitive landscape is, it's reasonable and it's rational, and we still think there's an opportunity to continue to reprice our CD book. So the majority of our CDs are in our 3-month portfolio or a portion of our portfolio, and we think the majority of that will continue to roll off and reprice into and renew into new 3-month CDs. And probably, again, at rates between 2.25% to 3%, depending on which CD they go into. But I still think there's an opportunity there, and I think we'll continue to see benefits from that CD repricing.

Yes. Okay. And I was hoping just to ask on the wealth management. Maybe just refresh us on kind of where you're at in terms of efforts there? And is it something we should expect -- I know you gave the fee income guide kind of for the second quarter. Just how should we think about growth potential in the wealth business and then overall fees throughout the year?

Yes. I think there's two components to it, right? The early one that we'll 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. 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, that's really a longer-term sort of effort for us, right? We're 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've clearly seen great activity around that. We've got a lot of growth in the valuations pipeline and some M&A activity, I think that we'll see earlier returns on. But the bigger effort, you're probably not going to see meaningful results until we get into 2027 would be my look.

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

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 guys have done any sensitivity around that and if -- how that, if relevant, would change potentially your capital outlook?

Maybe I'll start and then Brad can clean up. I think we're comfortable with the way we're look -- to Brad's earlier comment, the way we're looking at dividends, the way we're looking at stock buybacks. We have started to look at the potential impacts of the proposed regulatory changes. We have such a weighting towards risk-weighted assets already. There'll be some favorable movements in it. But I still think it's early, and I think we're really still trying to assess how that would change our posture on what we do with our capital.

Yes, I would just add to that. I mean, obviously, it's just a proposal right now. It's not final, but we have done some early assessments of the impact, and it will be positive for us. I mean, 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.

That's really helpful. I appreciate the color. I would like to also circle back to the question of margin. You guys reiterated that [ 2.90% ] outlook to exit the year. You had a fantastic first quarter for NIM expansion. And I'm just wondering, as you look ahead, clearly, there's a lot of variables here in terms of the margin, but it seems like the asset repricing story continues. Wondering if you have -- 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 it would seem to imply somewhat of a slowing versus 1Q. So how we should be thinking about the inputs here?

Yes. So again, maybe I'll start and then Brad can clean up whatever. The fixed asset repricing, I think we've shared this before, it basically adds about 5 basis points a quarter, 20 basis points a year. So as we close out this year heading towards that [ 2.90% ] number, we can see -- 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's upside to that if we do see rate cuts, but we feel confident that, that fixed asset pricing engine is pretty mechanical at that 20 basis points a year, given a 10-year sort of in the 4.25% range.

Our next question comes from the line of Jared Shaw with Barclays.

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're seeing on the West Coast? Or is it still sort of marching steadily forward?

Yes. I think it's probably too early to tell. I mean the reality is we started off the year on really strong footings. Visitor counts were relatively flat, but spending was strong relative to previous years, really driven by West and East Coast travelers. I think we're going to really 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'm not sure that will be a clear print. But what we've become more and more aware of is that the market is really sort of being driven by that K-shaped sort of consumer and that top end consumer, which is why we continue to see the spend increase.

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

Okay. 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's some build-out in the wealth management side in that number? And if not, is that something that longer term, we think we should be building in? And I guess the second part, how are you looking at AI investments? And is there 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?

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 sort of talked about wealth management being in the $60 million annual fee range and the potential to get into double-digit growth on that particular line item or a particular fee item. So that's kind of how I look at that.

The AI side, we've spent a lot of time building out our governance, excuse me, and our risk management practices. We have a number of different AI cases that we're working on right now to implement some related to the 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's our focus, and we're big believers that it has the opportunity to have a meaningful impact on the expense side.

Our next question comes from the line of Matthew Clark with Piper Sandler.

I 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?

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

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

The loan pipe has on both the consumer, at least the resi side and on the commercial side have remained strong. They're 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 or 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 on the resi side. And commercial, I doubt we'll be able to repeat the strong quarter that we had in Q1, but I'm still optimistic that we'll see growth to keep us in line with the guide that we shared.

Okay. And then on the deposit side, your NIB on average was up in the quarter in the period, though, NIB and overall deposits down about 4% annualized. In the 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 for the -- anything unusual in the quarter? Would you chalk it up to seasonality? Or was there something else going on that we should think about?

Yes. There's probably a couple of things in Q1. Well, maybe I'll back up a bit. We had a really strong deposit quarter in Q3 -- or excuse me, 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're still up like 5%. So we feel pretty good where we're at even at the close of the quarter. There was a couple of things within Q1 that occurred to bring the deposits down. One was we opted out of some high-cost public monies that just we didn't 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 NIBD down. We still feel good about where we're at. I think just noting how strong Q4 and Q1 have been, we're probably looking at more flat as we get into Q2 on both the top end and we've talked about in the past low single digits -- excuse me, low-yield deposits, NIBD. So I think overall, we feel good. I think Q2 is typically a seasonally low period for us. So we think given how we've grown, if we can maintain a flat top line and a flat NIBD, it will be a good quarter for us.

We have a follow-up question from the line of Andrew Terrell with Stephens.

I just want to go back to the commentary on the margin. You talked about structural kind of longer term, 3.25% to 3.50% 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 just a better sense of time frame to get back to that level?

Well, so if we're at roughly, say, [ 2.90% ] at the end of this year, and we're growing on the fixed asset repricing at 20 basis points per year. That would put us sort of in that zone at the end of 2028. We get some rate cuts as you've been able to see in both Q4 and Q1. If we get rate cuts, we're really able to capitalize on. So that would accelerate the time frame around that.

This concludes the question-and-answer session. I would now like to hand the call back over to Chang Park for closing remarks.

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

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

Good day, and thank you for standing by. Welcome to the Bank of Hawaii Corporation Fourth Quarter 2025 Earnings Conference Call. [Operator Instructions] Please be advise that today's conference is being recorded.

I would now like to hand the conference over to your first speaker today, Chang Park. Please go ahead.

Good morning and good afternoon. Thank you for joining us today for our fourth quarter 2025 earnings call. Joining me today is our Chairman and CEO, Peter Ho; President and Chief Banking Officer, Jim Polk; CFO, Brad Satenberg; and Chief Risk Officer, Brad Shairson.

Before we get started, I want to remind you that today's conference call will contain some forward-looking statements. And while we believe our assumptions are reasonable, the actual results may differ materially from those projected. During the call today, we'll be referencing a slide presentation as well as our earnings release. Both of these are available on our website, boh.com, under the Investor Relations link.

And now I would like to turn the call over to Peter.

Thanks, Chang. Good morning or good afternoon, everyone. Thank you for your continued interest in Bank of Hawaii.

We recorded yet another set of strong results in the fourth quarter. Fully diluted earnings per share was $1.39 per share, 63% higher than results from a year ago and 16% higher than last quarter. Net interest margin improved for the seventh straight quarter, up 15 basis points to 2.61%. Return on common equity improved to 15%. Loans and deposits both grew modestly in the quarter. Importantly, noninterest-bearing demand deposits grew 6.6% on a linked basis. Credit quality remained and remains pristine. I'll now touch on some operating highlights. Brad Shairson will briefly update you on credit quality, and Brad Satenberg, will dive a little deeper into the financials.

As you know, Bank of Hawaii has a unique business model that creates superior risk-adjusted returns by leveraging our unique core Hawaii market, our dominant brand and market position and our Fortress risk profile. Our market-leading brand position is largely the driver of our market share outperformance, giving us both a robust and durable competitive franchise advantage. Our brand advantage is built on our 125-plus year history in the islands, our physical branch system and increasingly, our digital service, marketing and commerce capabilities. Over the past 20 years, Bank of Hawaii has delivered market share growth nearly 4x greater than that of our next closest competitors.

The market share growth continued in 2025, advancing another 40 basis points. We are the clear deposit market share leader in Hawaii. Interest-bearing deposit costs improved by 20 basis points and total cost of funds improved points 16 basis points in the quarter. Also in the quarter, we remixed $659 million in fixed rate loans and investments from a roll-off rate of 4% and into a roll-on rate of 5.8%, helping to improve net interest margin.

As I mentioned, Q4 was the seventh consecutive quarter of NIM expansion. In early 2025, we had a goal of achieving a 2.50% NIM by year-end based on fixed asset repricing, improving deposit remix and rate cuts. We were gratified to see NIM result for Q4 well exceeding that goal. We believe NIM by the end of 2026 could come in near the 2.90% range.

Our Fortress credit position is a long-standing strength of Bank of Hawaii. The portfolio is diversified by product type, predominantly secured and possessing superior long-term loss experience. We dynamically manage our credit portfolio actively managing off loan categories that we find not to meet our stringent loss standards.

And now let me turn the call over to Brad Shairson, who will provide a brief overview on credit. Brad?

Thanks, Peter. I'll 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. The Bank of Hawaii 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 has 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 57% of total loans or approximately $8 billion. Within the consumer portfolio, 86% consists of residential mortgage and home equity loans with a weighted average LTV of 48% and weighted average FICO score of 799. The remaining 14% of consumer loans are comprised of auto and personal lending. Credit quality in these segments also remained strong with average FICO scores of 730 for auto loans and 761 for personal loans.

Turning to commercial lending. The portfolio totaled $6.1 billion, representing 43% of total loans. 73% is secured by real estate with a weighted average LTV of 54%, reflecting our ongoing emphasis on collateral protection. CRE remains the largest component of the commercial book totaling $4.2 billion or 30% of total loans.

And in Oahu, the state's largest CRE market, a combination of consistently low vacancy rates and flat inventory levels continue 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 8.5% 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 near-term refinancing risk.

Looking at the distribution of LTVs, there isn't much tail risk in our CRE portfolio, only 1.6% of CRE loans have greater than 80% LTV.

C&I accounts for 11% of total loans. This portfolio is diversified across industries characterized by modest average loan sizes with very little leveraged lending.

Turning to asset quality. Credit metrics continued to perform exceptionally well. Net charge-offs totaled $4.1 million or 12 basis points annualized, that's up 5 basis points from linked quarter and 2 basis points higher year-over-year. Nonperforming assets declined to 10 basis points, down 2 basis points from linked quarter and 4 basis points year-over-year.

Delinquencies increased to 36 basis points, that's up 7 basis points from linked quarter and up 2 basis points year-over-year. And criticized loans increased to 2.12% of total loans, up 7 basis points from linked quarter and 2 basis points higher year-over-year. Notably, 86% of criticized assets are real estate secured with a weighted average LTV of 54%.

And as an update on the allowance for credit losses on loans and leases, the ACL ended the quarter at $146.8 million, that's down $2 million from the linked quarter. The ratio of our ACL to outstandings dropped 2 basis points to 1.04%.

I will now turn the call over to Brad Satenberg, for a discussion of our financial performance.

Thanks, Brad. For the quarter, we reported net income of $60.9 million and a diluted EPS of $1.39, an increase of $7.6 million and $0.19 per share compared to the linked quarter. These increases were primarily due to the continued expansion of our net interest income and our net interest margin. As Peter mentioned, this is the seventh consecutive quarter that we've expanded both our NII and NIM and this quarter's expansion of $8.7 million and 15 basis points represents the most significant improvement during that stretch.

Driving this expansion is the successful repricing of our deposits, a $200 million securities repositioning that we executed in early October as well as the deposit mix shift, which is a positive $100 million this quarter. This is the first time since the second quarter of 2022 after the Fed started raising rates that the mix shift had a positive impact on our earnings.

As a reminder, the mix shift represents deposits shifting from noninterest-bearing and low-yielding deposits to higher cost deposits. The mix shift peaked at $967 million in the second quarter of 2023 and has moderated since then. During the year, the average quarterly mix shift was $25 million compared to $340 million in 2024. During the quarter, the yield on interest-earning assets declined modestly by 1 basis point as floating rate assets repriced down in response to rate cuts during the latter half of the year. The impact of these rate cuts was almost entirely offset by the positive impact from our fixed asset repricing.

While the yield on interest-earning assets dipped modestly, the cost of our interest-bearing liabilities improved by 19 basis points or 9% compared to the linked quarter and was driven by the successful repricing of our deposits, which declined to 1.43%, a 16 basis point reduction from the third quarter. In addition, our deposit beta improved from 28% to 31%, and I remain optimistic that we will ultimately achieve a beta of at least 35% after Fed funds hit its terminal rate.

It's also important to point out that we ended the quarter with a spot rate on our deposits of 1.3%, or 13 basis points lower than our average cost during the quarter. Based on the spot rate, I anticipate another solid improvement in the cost of our deposits during the first quarter.

Additionally, our CD book continues to reprice down. And during the fourth quarter, the average cost of our CDs declined by 22 basis points to 3.18%. During the next 3 months, 52% of our CDs will mature at an average rate of 3.1%. The majority of these CDs are expected to renew into new CDs at rates ranging from 2.25% to 3%.

We made no changes to our interest rate swap portfolio during the quarter, and we finished the year with an active pay fixed received flow portfolio of $1.5 billion at a weighted average fixed rate of 3.5%. $1.1 billion of these swaps are hedging our loan portfolio, while $400 million are hedging our securities. In addition, we have $500 million of forward starting swaps at a weighted average fixed rate of 3.1%. $300 million of these forward swaps will become active during the first half of 2026, while the remaining $200 million will become effective during the third quarter.

At the end of the year, our fixed float ratio remained stable at 57%, and I believe that we are well positioned for any interest rate environment. Noninterest income was $44.3 million during the quarter compared to $46 million during the linked quarter. As I discussed last quarter, noninterest income in the fourth quarter was impacted by an $18.1 million gain on the sale of our Merchant Services portfolio which was largely offset by a $16.8 million loss incurred in connection with the repositioning of our investment portfolio. The current quarter also includes a $770,000 charge related to a Visa B conversion ratio change while the linked quarter includes a similar Visa B charge.

The third quarter also includes approximately $3 million of Merchant Services fee income that will not recur following the sale of that business. Adjusting for these normalizing items, noninterest income was essentially flat. My expectation is the first quarter normalized noninterest income will be between $42 million and $43 million.

Noninterest expense was $109.5 million compared to $112.4 million during the linked quarter. Included in noninterest expense this quarter is a $1.4 million reduction in our FDIC special assessment as well as a nonrecurring $1.1 million donation to our Bank of Hawaii Foundation. The linked quarter includes a severance charge of $2.1 million and approximately $2.2 million of nonrecurring Merchant Services expenses.

Compared to my previous forecast, actual normalized noninterest expense was higher than expected mainly due to additional incentives that were recorded during the period. For 2026, I am forecasting that expenses will increase by between 3% and 3.5% from our 2025 normalized expenses. And I anticipate that our first quarter normalized noninterest expense will be approximately $113 million. The first quarter generally tends to be elevated as compared to the rest of the year due to seasonal payroll taxes and incentive related charges.

During the quarter, we also recorded a provision for credit losses of $2.5 million, which is unchanged from the linked quarter and resulted in a coverage ratio of 1.04%. Further, we reported a provision for taxes of $17 million during the quarter, resulting in an effective tax rate of 21.5%. I anticipate that our tax rate will be closer to 23% in 2026 due to the impact from forecasted discrete items.

Our capital ratios remained above the well-capitalized regulatory thresholds during the quarter with Tier 1 capital and total risk-based capital improving to 14.5% and 15.5%, respectively. And consistent with the linked quarter, we paid dividends of $28 million on our common stock and $5.3 million on our preferreds. Plus, we resumed our stock repurchase program in the fourth quarter and purchased approximately $5 million of common shares at an average price of $65 per share. I'm currently planning to increase the level of our repurchases next quarter. At the end of the year, $121 million remained available under the current plan. Finally, our Board declared a dividend of $0.70 per common share that will be paid during the first quarter.

Now I'll turn the call back over to Peter.

Thanks, Brad. This concludes our prepared remarks. Now we'd be happy to take whatever questions you might have.

[Operator Instructions] Our first question comes from the line of Matthew Clark of Piper Sandler.

I just want to start on the noninterest-bearing deposit growth this quarter. Good to see some strength there. It sounds like less mix shift, people seeking higher rate, probably some seasonality too. But can you just drill down on that -- those balances there at the end of the year, whether or not that's sticky and what your outlook is for growth this year?

Yes. Matt, I think the fourth quarter might be a bit outsized. I mean, it was a 6% pickup in NIBD. But I think directionally, we've seen growth in that category for a few quarters now, and that's coming from a pretty balanced grouping of business segments participating. So commercial, our consumer folks are doing a good job bringing in sticky, low-cost deposits. So we would anticipate this probably continuing would be my sense, but probably not at that same clip of 6-plus percent, but probably a little bit overstated. And I think there's probably some seasonality in there, as you alluded to.

Okay. Great. And then on the loan side, pretty much in line. Anything you're seeing there in the pipeline that would suggest -- I know, you'd ideally like to get back to mid-single digits. I don't know if that's realistic this year or not, but just want to get a sense for the pipeline and your outlook there, too.

I'll let Jim cover that, Jim?

Yes. I feel generally better about where our pipelines are at. But until we can get both consumer and commercial kind of both contributing to growth, I think we'd probably stick in the mid-single -- in the low single digits at this point. But I think there's opportunity to improve as we work throughout the year.

Yes. But I think to be clear, the '25 was basically -- it was a flat year from an end-of-period standpoint year-on-year. So I think that '26, at least from our forward vision into at least the first quarter, feels like it's going to be more of a kind of a mid-single-digit type of year for us. So a bit of an improvement, but still, we still love to see growth accelerate there obviously.

Okay. Great. And then just last one for me. Do you happen to have the -- your special mention in classified balances at the end of the year.

I will take to look and see if I can get that for you. I don't have that off hand.

Might come back to you in a minute or so on that.

And our next question comes from the line of Jeff Rulis of D.A. Davidson.

A couple of questions on the margin. I just want to confirm that kind of update on the margin to reach near the 2.90% range. That's kind of end of year, not a fourth quarter average of 2.90%. Is that correct?

That's the way we're thinking about it, Jeff. That's right.

Okay. Okay. And do you happen to have the December margin average?

Yes. We finished the year at 2.67%. So about 6 basis points above where we finished the fourth quarter end.

Great. And just on the sensitivity, it seems like that margin has been almost absent Fed hasn't really impacted, it's kind of a mechanical increase. Would you say the same sensitivities or lack thereof? It's a pretty -- from your seat, looks like a pretty extended increase, I guess, regardless of rate moves, upcoming?

Yes, I would agree with that. I mean I would say that any rate cuts that we see as long as they're orderly and sort of telegraphed, I think we'll see a benefit from that. And then also, you look at the mix shift. And to the extent that we can keep that either moderated at breakeven or even positive, I think that will actually contribute to margin as well.

Yes. Let me just add a little bit to that, Jeff. I think what you saw in the quarter was the convergence of a number of things that we're supportive of the margin expansion. Obviously, as you pointed to the fixed asset repricing is mechanical. I mean, we just have assets coming on at lower yields and they're going back on to, which is a good thing, obviously.

But rate cuts did have a positive impact for us to the extent we get rate cuts moving forward. We think that's going to continue to be a positive for us. And then also in the quarter, we had very strong -- as you know, we had strong deposit remix characteristics. So we're able to grow out the lower-yielding NIBD in particular deposits. And if that continues to persist, that will be another tailwind for us.

And then finally, I'd say that I think that -- yes, certainly, effectively, there have been two rate cut periods, '24 and '25. I'd say that our ability to manage deposit pricing with the '25 vintage was materially better than '24. So I think the team has gotten better at managing a little more of a rate reduction cycle, and that's coming through on our betas.

Got it. Nice backdrop. If I could squeeze one more in. Just on the credit side with the ACL declined linked quarter, I don't want to read too much into it, but is there any sort of indication of a mix change or macro improvement, you kind of outlined the CRE firming up, but I just want to touch on credit. And then potentially, that reserve release, if we should take anything from that.

Sure. And I will answer your other question as well related to special mention. Special mention, I'll start off with that and just say that special mention at the end of the fourth quarter was $63.4 million. That's actually a year-over-year change, down $46.8 million from the fourth quarter 2024. And then our total classified at $298.5 million.

And as Peter mentioned earlier, credit quality remains pristine. During the quarter, I will mention that we had a charge-off of just over $1 million related to a previously identified nonperforming asset. And as a result, you can see our NPAs declined while net charge-offs experienced a modest uptick. This was obviously idiosyncratic resolution rather than a sort of reflection of a broader credit stress. That's very clear. Absent this charge-off, our credit quality metrics would have been pretty much very similar to last quarter's performance.

We do continue to see very strong underlying portfolio performance overall and we have stable trends across delinquencies, criticized assets and any early-stage indicators. And in addition, to answer your second question, the most recent UHERO economic forecast for the state of Hawaii reflects an improved outlook for 2026, and that's really what supports that reduction in the ACL coverage during the quarter. So we feel really good about how we're positioned right now.

Well, an improved outlook coming off of what would previously been a forecasted downturn.

Exactly.

So they revised their downturn numbers up.

That's right, yes.

Our next question comes from the line of Jared Shaw of Barclays.

Maybe just sticking back with the growth in DDA. That's a great quarter. Can you just give a little color on market share gain that you think from that versus just sort of improving customer backdrop? And then if we look at the slide that shows the strength of sort of the market share gain over the last year and the last 20 years, is there a natural ceiling for that? Or do you think that Bank of Hawaii can continue to sort of take significant share here?

I'll address the second part of the question first. I like to believe that our historic performance is an indicator of what's possible for the future. We think of Hawaii as our core and primary market, and we're always trying to figure out ways to serve our clients better, whether it's on the consumer side or the commercial side. That's been met with pretty handsome market share pickups. And I just -- I don't really see a condition that would lead me to believe that, that's going to retard at all often in the future.

I mean it's a competitive world, things are changing, products change, consumer demand and sentiment changes. And to date, we've been pretty good at understanding how that plays through here in this marketplace. And I'd hope that continues to continue on.

As relating to the demand deposits growth over the past -- certainly this quarter and the past couple of quarters prior, I think it's -- this market feels like it's stable but not growing tremendously. So I don't know that a lot of our operating deposits have come from just better economic outcome. That feels reasonably flat to me. I do think there's some cyclicality into the fourth quarter. And I think, frankly, it takes a while for the teams to really focus in on whatever categories you're incenting them to focus in on. And DDAs -- and deposits and DDAs in particular, is an area that we have obviously put a lot of emphasis into as Fed funds have given that a good amount of profitability. I think we're beginning to see kind of the fruits of our labor there.

Okay. I appreciate that color. I guess shifting maybe to the other side of the balance sheet, talking about the low single-digit loan growth opportunity. Could you just give a little color on what you're seeing in terms of commercial pipelines and what sort of the backdrop on the residential mortgage side could look like?

Sure. Jim, do you want to cover that?

Yes. So maybe I'll start with commercial. We've seen the pipeline build nicely through Q4. I think that sets us up really in a more positive fashion in Q1. The activity has been on the commercial real estate side in our large commercial real estate business, but we've also seen some good growth in the pipeline in our middle market businesses. So I think it's more robust than just one area, and we feel pretty good about that.

On the resi side, we had a really solid Q4. That was driven in part by an increase in overall purchase activity, aided by a couple of projects that closed out during the quarter. Pipeline remains pretty good going into Q1. And so I think, as I said earlier, I think we feel better about overall loan activity. And I think we see the opportunity to move into the mid-single digits as we work through the year.

And our next question comes from the line of Andrew Terrell of Stephens.

If I could just start on the margin. Obviously, another -- it sounds like another year of a really good margin expansion. I'm just curious, is that mostly fixed asset repricing driven? Do you assume or contemplate any securities restructuring within there? And then as we look out beyond just the fourth quarter or year-end of 2026, does the fixed asset repricing benefit continue in 2027 or start to diminish somewhat?

I'll let Brad touch on that -- but I'll let Brad want to.

Yes. I mean just to start with the fixed asset repricing, we believe we've got a couple of years at least of that. I mean, we think we'll still see an impact of it. It may start to diminish slowly, but we'll continue to see that continue to have an impact over the next couple of years easily.

As far as this quarter, I mean, we did have fixed asset repricing and the securities repositioning, obviously, had an impact and then the rate cuts obviously had an impact as well on the decrease in our cost of deposits. And so looking into the first quarter, I mean, I think we're continuing that momentum. I think you'll see the NIM expand, maybe not to the same extent as you saw in the fourth quarter, but I still think we'll see a nice expansion with the spot rates on our cost of deposits and the December NIM going into January at 2.67%. I think we'll continue to see some good momentum with our NIM.

Yes. Okay. And then just on the topic, do you have the total NII impact of the swaps in the fourth quarter, inclusive of the terminated hedges, I think you guys terminated last quarter.

The impact on our net interest income. It was about just over $1 million for the quarter. And that includes the impact of the amortization of the termination costs.

Got it. Okay. And then last one for me, just it sounds like interested in picking up the buyback a bit here in the first quarter, but growth also sounds a little stronger as well on the loan side. Just remind us what you're comfortable at from a capital standpoint. And then just on the repurchase front, should we expect that becomes a more consistent part of the capital return story moving forward?

I think as long as growth remains kind of in the tepid range, call it, we're going to be looking to deploy capital into buybacks. We like kind of where the price is from a purchase standpoint at least. So we were $5 million last quarter. I would anticipate that we'll be closer to the $15 million to $20 million range moving forward per quarter.

[Operator Instructions] And our next question comes from the line of Kelly Motta of KBW.

Most of mine have been asked and answered at this point, but one area I did want to touch on was fees. You mentioned on your October earnings call about on the potential opportunity in wealth and ahead. And I appreciate the Q1 guidance of $42 million to $43 million. As you look ahead, can you perhaps share a bit about the opportunity on the fee side and kind of the cadence of the potential pull-through with that?

Sure. Jim you want to touch on that?

Yes, sure, Peter. So as we've mentioned, we've spent the last couple of years really building into our wealth opportunity. We've started to see some good traction internally, educational wise, participation wise, calling wise with our clients. We're doing a number of different engagement activities with clients just from a seminar type of perspective. And I think those things are really starting to help us to build the overall momentum.

You can look at quarter-over-quarter, we had a little over 2% growth in fees on a linked quarter basis. And so I think that production in Q4 was one of our highest levels in a while. Pipeline remains very strong from an investment perspective. So I think as we move forward, getting into that 10% range, I think that was the guidance that we provided at the last call, even higher as we have more time to build into the opportunity, I think we feel pretty reasonable about that.

Got it. That's really helpful. And then on the expenses, just a minor housekeeping question. On the 3% to 3.5% increase. I just want to make sure I'm using the right normalized expense base, I have you at about $441 million in 2025? Is that the right number to kind of build off of, given that there's been a couple of onetime items, especially here in the second half?

Kelly, this is Brad. Yes, that's about right. I mean I look at it as somewhere between $440 million and $441 million.

I'm showing no further questions at this time. I would like to turn it back to Chang Park for closing remarks.

Thank you, everyone, for joining our call today, and thank you for your continued interest in Bank of Hawaii. As always, please feel free to reach out to me if you have any additional questions. Thank you so much.

Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.

Good day, and thank you for standing by. Welcome to the Bank of Hawaii Corporation Third Quarter 2021 Earnings Conference Call. [Operator Instructions] Please be advised today's conference is being recorded.

I would now like to hand the conference over to your speaker today, Chang Park. Please go ahead.

Good morning and good afternoon. Thank you for joining us today for our third quarter 2025 earnings conference call. Joining me today is our Chairman and CEO, Peter Ho; President and Chief Banking Officer, Jim Polk, CFO Brad Satenberg and Chief Risk Officer, Brad Shairson.

Before we get started, I want to remind you that today's conference call will contain some forward-looking statements. And while we believe our assumptions are reasonable, the actual results may differ materially from those projected. During the call today, we'll be referencing a slide presentation as well as the earnings release. Both of these are available on our website, boh.com, under the Investor Relations link.

And now I would like to turn the call over to Peter.

Thanks, Chang. Good morning or good afternoon, everyone. Thank you for your continued interest in Bank of Hawaii. We recorded yet another set of strong results for the quarter. Fully diluted earnings per share were $1.20 per share, 29% higher than the results from a year ago and 13% higher than last quarter. Net interest margin improved for the sixth straight quarter, up 7 basis points to 2.46%. Return on common equity improved to 13.6% for the quarter. Average deposits increased by 7% annualized. End-of-period loans increased modestly. Credit quality remained and remains pristine. I'll now touch on some operating highlights as well as an update on our wealth initiative.

Brad Shairson will briefly update you on credit quality, and Brad Satenberg will dive a little deeper into the financials. As a reminder, Bank of Hawaii has a unique business model. It creates superior risk-adjusted returns by leveraging our unique core Hawaii market, our dominant brand and market positions and our fortress risk profile. Our market-leading brand position is largely the driver of our market share outperformance. For the 2025 FDIC summary of deposits released last month, we advanced our #1 deposit market share position in Hawaii by 40 basis points as of 6/30/2025. Since 2005, Bank of Hawaii has grown market share by 600 basis points well in excess of any other competitor in the Hawaii market.

Interest-bearing deposit costs and total cost of funds both improved in the quarter. Also in the quarter, we remixed $594 million in fixed rate loans and investments from a roll-off rate of 4.1% and into a roll-on rate of 6.3%, helping to improve net interest margin. As I mentioned, Q3 was the sixth consecutive quarter of NIM expansion. We anticipate NIM to expand further for a number of quarters moving forward. Our Fortress credit position is a long-standing core attribute of Bank of Hawaii. The portfolio is diversified by product type, predominantly secured and possessing superior long-term loss rates. We dynamically manage our credit portfolio actively managing off loan categories that we find not to meet our stringent loss standards. We believe wealth management is a nice opportunity for us, and I'd like to highlight it further here. As you can see from this chart, our consumer and commercial businesses have grown steadily over the past 20 years. Wealth AUM growth, however, has lagged. With greater investment, we believe we can improve performance in local wealth segment.

Hawaii has a strong affluent marketplace relative to the broader U.S. market. The wealth segment is fragmented with Bank of Hawaii holding a small fraction of the market. We see an opportunity to leverage our dominant commercial and consumer market positions, along with our brand strength to build wealth market share. In the mass affluent space, we recently teamed with Cetera to help us modernize our broker-dealer platform. Our new platform named Bankoh Advisors will have meaningful technology, client experience and investment product enhancements over its predecessor operation. We believe the new platform will help us delight both clients and prospective advisers alike.

In the high net worth space, we believe stronger client coordination between our commercial and wealth teams will result in meaningful cross-marketing opportunities, especially in the SME segment. We've invested in numerous product and service resources geared specifically for this segment. We'll have further updates for you all as our initiatives in this area season.

And now let me turn the call over to Brad Shairson, who will provide some brief overview comments on credit. Brad?

Thanks, Peter. The Bank of Hawaii is dedicated to serving our community, lending in our core markets where our expertise allows us to make sound credit decisions. Most of our loan book is comprised of long-standing relationships with approximately 60% of our clients in both commercial and consumer having been with us for over a decade. This combination has significantly contributed to our strong credit performance over the years, resulting in a loan portfolio that is 93% Hawaii, 4% Western Pacific and just 3% Mainland where we support our clients who conduct business both in Hawaii and on the Mainland. As I review our credit portfolio's third quarter performance, you will see that it has remained strong and consistent with recent quarters.

Our loan book is balanced between consumer and commercial with consumer representing a little over half of total loans at 57% or $7.9 billion. We predominantly lend on a secured basis against real estate. 86% of our consumer portfolio consists of either residential mortgage or home equity with a weighted average LTV of just 48% and a combined weighted average FICO score of 799. The remaining 14% of consumer consists of auto and personal loans where our average FICO scores are 731 and 761, respectively.

Moving on to commercial. Our portfolio size is $6.1 billion or 43% of total loans. 73% is real estate secured with a weighted average LTV of only 55%. The largest segment of this book is commercial real estate with $4 billion in assets, which equates to 29% of total loans. Looking at the dynamics for real estate in Oahu, the state's largest market, A combination of consistently low vacancy rates and flat inventory levels continue to support a stable real estate market. Within the different segments, vacancy rates for industrial, office, retail and multifamily are all below or close to their 10-year averages.

Total office space has decreased about 10% over the past 10 years. This has been driven by conversions primarily to multifamily and lodging. This long-term trend of office space reduction, along with the return to office movement. has brought the vacancy rate closer to its 10-year average and well below national averages. Breaking down our CRE portfolio, it is well diversified across property types with no sector representing more than 7% of total loans. Our conservative underwriting has been consistently applied with all weighted average LTVs under 60%. Not only is our CRE portfolio diversified across segments, but it is also diversified within each segment as evidenced by our low average loan sizes. And our scheduled maturities are fairly evenly spread out with more than half of our loans maturing in 2030 or later. Looking at the distribution of LTVs there isn't much tail risk in our CRE portfolio. Only 1.8% of CRE loans have greater than 80% LTV.

Turning to C&I, which comprises 11% of our total loans you will notice that this book is also well diversified across industries and also has modest average loan sizes. Additionally, only a small portion of these loans are leveraged. Given recent industry news, we've added a slide to highlight our limited exposures to nondepository financial institutions and NDFIs. The loans fall within our C&I portfolio and equate to only 0.6% of total loans or $85 million. And of that $85 million, $74 million are to publicly traded equity REITs and just $11 million to private equity. Not only are the exposure small, but we know the borrowers well and are comfortable with our nominal exposure.

Turning to asset quality. Credit metrics have actually improved from last quarter's pristine levels. Net charge-offs were just $2.6 million at 7 basis points of annualized flat to linked quarter and 4 basis points lower than a year ago. Nonperforming assets were down 1 basis point from the linked quarter to 12 basis points and 2 basis points lower than a year ago. Delinquencies ticked lower by 4 basis points to 29 basis points this quarter and 2 basis points lower than a year ago. Criticized loans dropped by 1 basis point to 2.05% of total loans, which is 37 basis points lower than a year ago and the vast majority, 83% of criticized assets are real estate secured with a weighted average LTV of 55%. As an update on the allowance for credit losses on loans and leases the ACL ended the quarter at $148.8 million. That's up $240,000 for the linked quarter. The ratio of our ACL to outstandings remained flat at 1.06%.

I will now turn this over to Brad Satenberg for an update on our financials.

Thanks, Brad. For the quarter, we reported net income of $53.3 million and a diluted EPS of $1.20 per share, an increase of $5.7 million and $0.14 per share compared to the linked quarter. These increases were primarily driven by the continued expansion of our net interest income and net interest margin, which grew by $7 million and 7 basis points, respectively. The expansion in both our NII and NIM was driven by the combination of our fixed asset repricing, which added $3.3 million for NII as well as growth in the average balance of our deposits and the successful repricing of our CD book. Partially offsetting these benefits was the deposit mix shift. During the third quarter, the mix shift was $104 million and had an $800,000 negative impact on our NII. The average mix shift during the first 3 quarters of this year declined by $350 million to $67 million per quarter compared to $417 million per quarter for the same period last year.

During the quarter, the yield on our interest-earning assets increased by 7 basis points, benefiting from an improvement in the yield on both our loan portfolio and securities portfolio. At the same time, the cost of our interest-bearing liabilities declined by 2 basis points driven by a modest decline in the cost of our deposits, which decreased to 159 basis points. The average cost was inflated during the quarter due to several large transitory high-cost deposits. The spot rate on our deposits was 154 basis points or 5 basis points lower than the average during the period. Our beta at the end of the quarter was 28%. And I believe that we will ultimately achieve a 35% beta after Fed funds hits its terminal rate. The repricing of our CD book will lag our nonmaturity deposits. During the quarter, the average cost of our deposits declined by 12 basis points, and I expect that the vast majority of our CDs will continue to reprice down. During the next 3 months, over 52% of our CDs will mature at an average rate of 3.5% and we'll generally renew into new CDs at rates ranging from 2.5% to 3%.

The spot rate on our CD book at the end of the quarter was 3.32% or 8 basis points lower than our average during the quarter. We also repositioned our interest rate swap portfolio by terminating $1 billion of swaps that were scheduled to mature in 2026. Half of these swaps hedged our loans, while the other half hedged our AFS securities. In addition, we added $100 million spot starting swap as well as $100 million forward starting swap. As a result of these actions, we finished the quarter with a pay fixed received float interest rate swap portfolio of $1.4 billion with a weighted average fixed rate of 3.56%, down 41 basis points from the linked quarter. $1.1 billion of these swaps are hedging our loan portfolio, while $300 million are hedging our securities.

In addition, we had $600 million of forward starting swaps at a weighted average fixed rate of 3.1% at the end of September. $100 million forward starting -- of the forward swaps became active in early October, while the remaining $500 million will become active in 2026.

As a result of the repositioning, our fixed-to-float ratio migrated up from 55% to 57% during the quarter. We are currently forecasting 2 additional 25 basis point rate cuts this year and anticipate that each cut will initially reduce our NII by approximately $300,000, but that the impact will ultimately turn positive after our CD book reprices and result in an estimated positive contribution of $1.6 million to our quarterly NII. Noninterest income increased to $46 million during the quarter compared to $44.8 million in the linked quarter. Noninterest income in the third quarter included a $780,000 charge related to a Visa B conversion ratio change, while the linked quarter included a onetime gain of approximately $800,000 related to a BOLI recovery. Adjusting for these normalizing items, noninterest income increased by $2.8 million, primarily due to higher customer derivative activity, trust and asset management earnings and elevated loan fees.

My expectation is that fourth quarter normalized noninterest income will be between $42 million and $43 million. Noninterest expense was $112.4 million compared to $110.8 million during the prior quarter. Included in noninterest expense this quarter was a severance-related charge of $2.1 million, while the linked quarter included a severance charge of $1.4 million.

Excluding the impact of these items, noninterest expense increased by $900,000 compared to the prior quarter. This change was primarily due to 1 additional payday during the quarter. Compared to my previous forecast, actual normalized noninterest expense was higher than expected due to additional incentives that were recorded during the period. I expect that our fourth quarter normalized noninterest expense to be approximately $109 million. Included within my fourth quarter forecast for both noninterest income and noninterest expense is the impact from the sale of our merchant services business which closed earlier this month. The sale resulted in a gain of approximately $18 million that was substantially offset by a repositioning of our AFS securities portfolio.

The repositioning will increase our quarterly NII by approximately $1.7 million and encompass the sale of $200 million of low-yielding securities that were replaced with new securities at higher current rates. The spread improvement on these newly acquired securities was approximately 335 basis points. The sale of the merchant services business is also expected to decrease our quarterly noninterest income and noninterest expense by approximately $3 million and $2.2 million, respectively.

Combining the impact from the merchant services sale along with the securities repositioning, the total quarterly improvement to pretax earnings will be approximately $1 million or $0.02 additional per share. During the quarter, we also recorded a provision for credit losses of $2.5 million, down from $3.3 million during the linked quarter. Further, we reported a provision for taxes of $14.4 million during the quarter, resulting in an effective tax rate of 21.3%. I expect the tax rate for the full year to be between 21% and 21.5%. Our capital ratios remained above the well-capitalized regulatory thresholds during the quarter with Tier 1 capital and total risk-based capital improving to 14.3% 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.

We did not repurchase any common shares during the quarter under our repurchase program. As a reminder, $126 million remains available under the current plan. And finally, our Board declared a dividend of $0.70 per common share that will be paid during the fourth quarter of 2025.

Now I'll turn the call back over to Peter.

Thanks, Brad. This concludes our prepared remarks, and we'd be happy to entertain whatever questions you might have.

[Operator Instructions] Our first question comes from Matthew Clark with Piper Sandler.

I heard the spot rate on CDs at the end of September, but you have the spot rate on total deposits, either interest-bearing or total?

Total is 154 basis points.

And then as maybe for Peter. As we look out on the NIM, when do you think you might be able to get to that that 3% NIM, do you feel -- it seems like it may have moved up here a little bit based on a couple of actions you've taken this quarter, but just trying to get a sense for some line of sight on when we think we can get there.

Yes. Yes, that's kind of the question of the day, isn't it? So I think what we've been fixating on and what investors have been questioning is, can we achieve $250 million by year-end this year. At this point, that seems to be like a reasonably likely potential for Q4. And then as we move into '26, what we would anticipate -- I mean the fixed asset accretion is just going to continue on for a number of years, frankly. And so the way to think about it is, I think, a base layer assuming deposit remix of about what we've experienced the past couple of quarters and kind of rates in the yield curve as is that's about a 25 basis point pickup in NIM per year, so 25 bps. And then on top of that, as Brad alluded to, there's opportunity for improvement in the NIM as Fed funds comes down.

And frankly, I think we still probably have some opportunity in repricing of the overall deposit book moving forward. So I guess the answer to me is 25 basis points per year and then I think there's upside in both Fed funds coming down as well as just overall pricing to the overall deposit book.

Okay. Great. That's helpful. And just last 1 for me on the modest loan growth here, a little bit nice little turnaround to the positive. Just any commentary on the pipeline and the outlook for growth here in the fourth quarter and maybe next year, whether or not low single digits is still the right way to think about it?

Yes. I think low single digits is still the right way to think about it. Our pipelines continue to improve. And Q3 was definitely better than Q2. I think Q4 should be better than Q3, and we'll just continue to watch the pipelines as we get into the new year. But I think that guidance holds. And I think if we get a little more clarity in the economy, maybe a little bit more stability, some rate reduction, we may see some potential upside there, too.

Our next question comes from Kelly Motta with KBW.

Maybe, Peter, kicking off with some of the changes you made on the wealth side, wondering, was this made last quarter and just kind of how you're thinking about it seems like a great opportunity to leverage the Bank of Hawaii brand. So wondering how you're thinking of that progressing? Any efforts to add talent to the bench to help drive that? Just how you're thinking about it as a lever moving forward.

Yes. Good question, Kelly. So we actually are in production with Cetera at this point. They've been a great partner so far. We are soon to be concluded on both the repapering process. So that's gone quite smoothly. Obviously, that's taken some production capability out of the hands of our advisers as they just tender the administrative function there. So I think we're set to move smartly forward from that point on it. And that opportunity, I think, is a great one, both from the standpoint of providing just a much, much better client experience to our customers, but also in terms of really attracting best in marketplace advisers because I think when you combine the capabilities that we now have with Cetera to our -- the brand position the bank enjoys here in the islands, there's a lot of opportunity in there that we are looking forward to. So that's kind of half the equation.

The other half of the equation is within our high net worth space. And there really what we're focused on is really driving a better partnership, if you will, between our commercial bankers and our wealth advisers. We've seen some early signs of green shoots there. And then to your question, I think it's the appropriate one. Against that backdrop, we have been adding a good amount of talent really in the advisory space, and we would intend to see that commitment to talent build continue on in the next year or so, I'd say.

Great. Another somewhat high-level question I have here. On Slide 6, that really stands out as how well Bank of Hawaii has been picking up share the past several years. Do you -- can you provide any color as to what parts of the business have been driving that? Is that retail? Any specific segments, commercial? Just trying to get a sense of what has been the most impactful in gaining share here on the island?

Yes. I think that the gratifying part to the question is it's really been pretty balanced. And so we've been able to pick up consumer as well as commercial as well as municipal share over the years. And I really -- I don't think that there's a single silver bullet here. I think it's really just our commitment to the marketplace and our consistent application of the strategy that's been working for us for the past couple of decades now.

Got it. Last question from me is just on capital ratios continue to build. It sounds like growth is picking up, but still more in the low single-digit range. Any updated thoughts on buybacks and capital return?

Yes. I think we are happy with our capital levels. I mean, you can always pick up here or there. But I think given where the stock is at right now, we think that there's a great opportunity to deploy capital into repurchases at this point. We probably are likely to be doing some of that activity here in this quarter and into next year. Obviously, the dividend is important to us, but we think the payout ratio for now is in pretty good shape. And hopefully, we'll be able to deploy some of the capital into growth as we move forward.

Our next question comes from Jeff Rulis with D.A. Davidson.

Circling back to the growth outlook. It sounds like that's picking up a little bit upward trending. And this Slide 12 sort of outlines some of the de-risking activities or some of the noncore. Has that been a part of the function of some muted growth and maybe '25 in the rearview and maybe having done some of that, is that helping the net growth equation? Just want to feel at the undertone of derisking is kind of mean you're always managing credit, but has that been outsized in the trailing months?

No, Jeff, it's a good question. I think for the most part, derisking has not been a headwind for us for a while now. I guess the positive to that is I don't see anything or any activity in our current portfolios that would lead me to believe that it should be -- that it's going to be an impediment to growth moving forward either. So it kind of is what it is for right now. We're happy with the portfolios.

Got it. Okay. So just kind of pointing out areas that you -- that are core and noncore, but from a growth perspective has not been much of a past and future I guess, component. Fair enough. On the -- maybe if I hop to expenses. I want to think about -- I appreciate the, I guess, the core 109-ish in the fourth quarter. If we rolled out '26 a lot of discussion of the wealth management investment. You had been in the 2% to 3% growth for '25. Can we think about that in '26 at similar levels as wealth maybe put that to the upside of that range or anything else coming on if we can think about '26 growth rates?

Yes. Let me point that to Brad Satenberg. Brad.

Yes. Thanks, Jeff. That's a good question. I would say if you're trying to model out, I would expect 2020 expenses to be in the 3-plus percent range increase. So -- and obviously, there's a seasonality to it. So I would expect the first quarter to be slightly higher because of the payroll -- the seasonal payroll charges that we have. But overall, I think we projected this year 2% to 3%. I think the projection this year is going to be 3% to 4%, but probably closer to like the lower 3s, I think 3.5%.

Our next question comes from Jared Shaw with Barclays.

On the credit side office, it looked like central business district moved from 17% -- or 17% loans from 24%. Was there a payoff there? Or what was driving the reduction in CBD office?

Yes. We had, what I would say is a relationship SNC credit that was in the office space that we had the opportunity to exit and we chose to exit that facility. It was a reasonable risk, but not core to what we were looking to do in that space, so opportunistic.

Okay. All right. And then does the NII impact from swaps on the side, does that assume the notional swaps remain at the $1.4 billion or does that take into account some of that additional, I guess, it may take into account the additional growth you talked about.

Can you just repeat your question there? I wasn't exactly sure what you're asking.

Sure. Does the impact to net interest income from the swaps that you listed out, does that assume the notional swaps remain at $1.4 billion? Or if not, what are the changes to that?

Yes. No, we expect it to remain at 1.4%. I mean, obviously, we have our forward starting swaps. So I think I had mentioned in my script, we had $100 million notional swap start in October, and then we've got the remaining $500 million that will start in 2026 kind of mid to late 2026. But at this point, all of our expectations are 1.4 notional plus some roll off in 2027 of the 1.4, but also rolling on our forward starting swaps.

[Operator Instructions] And I'm not showing any further questions at this time. I'd like to turn the call back over to Chang Park for any further remarks.

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

Ladies and gentlemen, this does conclude today's presentation. You may now disconnect, and have a wonderful day.