Good day. Thank you for standing by. Welcome to the Bank of Hawaii Corporation first quarter 2026 Earnings Conference Call. At this time, participants are in a listen-only mode. After the speakers' presentation, there will be a question and answer session. To ask a question during the session, you will need to press 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. 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, [inaudible], CFO, Bradley S. Satenberg, and Chief Risk Officer, Bradley Shairson. Before we get started, I want to remind you that today's conference call contains 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 will 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 [inaudible].

Thanks, Chang. Good morning and good afternoon, everyone. Thank you for joining us today. Before I get into the quarter, as this is my first earnings call as CEO, I want to say a few words about my predecessor, Peter S. Ho. Peter built something truly special here. A franchise defined by discipline, consistency, and a genuine commitment to the people of our island communities. With 16 years as CEO, he left this institution much stronger in every way that matters. I am grateful for his confidence in me, and I am honored to carry this forward. Now on to the quarter. Bank of Hawaii Corporation delivered another solid set of results to open 2026. Net interest income and our net interest margin expanded for the eighth consecutive quarter driven by continued fixed asset repricing and a meaningful decline in total deposit costs. NIM increased 13 basis points as our fixed asset repricing engine continues to perform as expected. During the quarter, we remixed $643 million in fixed rate loans and investments from a roll-off yield of approximately 4% to a roll-on yield of 5.6%, continuing to lift the overall yield on earning assets. We remain on track toward our stated goal of approaching 2.9% NIM by the end of the year and we feel good about that trajectory even against an uncertain rate backdrop. Deposit trends continue to be encouraging, as our average cost of total deposits declined 17 basis points, achieving a beta of 36%. Normalizing for nonrecurring expenses and noninterest income, our EPS came in at $1.39, reflecting the steady underlying earnings power of the franchise. We maintained strong capital and excellent credit quality while continuing to build on our leading deposit market share position here in Hawaii. The strategic formula has not changed. Bank of Hawaii…

Thanks. I will begin with an overview of our credit portfolio and conclude with asset quality metrics. And as you will see, our performance has remained strong, consistent with prior quarters. Turning to our lending philosophy, Bank of Hawaii Corporation is dedicated to serving our local communities, lending primarily within our core markets where our expertise allows us to make informed and disciplined credit decisions. Our portfolio is built on long-tenured relationships, with approximately 60% of both our commercial and consumer clients having been with the bank for more than 10 years. Geographically, our loan book is concentrated in markets we know well. Approximately 93% of loans are based in Hawaii, with 4% in the Western Pacific and just 3% on the Mainland, primarily supporting existing clients who operate both locally and on the Mainland. Our loan portfolio remains well balanced between consumer and commercial exposure. Consumer loans represent 56% of total loans, or approximately $8 billion. Within the consumer portfolio, 86% consist of residential mortgage and home equity loans with a weighted average LTV of 48% and weighted average FICO score of 798. The remaining 14% of consumer loans are comprised of auto and personal lending. Credit quality in these segments also remains strong, with average FICO scores of 729 for auto loans and 760 for personal loans. Turning to commercial lending, the portfolio totals $6.2 billion, representing 44% of total loans. 73% is secured by real estate, with a weighted average LTV of 55%. This reflects our ongoing emphasis on collateral protection. CRE remains the largest component of the commercial book, totaling $4.3 billion or 31% of total loans. And in Oahu, the state's largest CRE market, a combination of consistently low vacancy rates and flat inventory levels continues to support a stable real estate market. Across industrial,…

Thanks, Brad. For the quarter, we reported net income of $57.4 million and EPS of $1.30, a decrease of $3.5 million and $0.09 per share as compared to the linked quarter. These declines were primarily the result of elevated noninterest expense as compared to the fourth quarter. Q1 included the annual bump in seasonal payroll taxes and benefits, as well as a nonrecurring compensation-related charge incurred in connection with the accelerated vesting of restricted stock awards under the retirement provision of the company's share-based compensation plan. As it relates to NII and NIM, we continue to see a positive, expanding trend in both. This is the second quarter in a row that we achieved a double-digit increase in NIM with a 13 basis point pickup this quarter and an aggregate 28 basis points over the past six months. And despite two fewer days this quarter, NII grew by $5.6 million. Consistent with the previous quarter, NII and NIM benefited from the combination of our fixed asset repricing, the continued repricing of our deposits following the Fed rate cuts, as well as the deposit mix shift, which was a positive $94 million this quarter. Compared to the linked quarter, average noninterest-bearing deposits are up by $84 million. During the quarter, the yield on our interest-earning assets declined by 4 basis points as the effect of the rate cuts at the end of last year were fully recognized during the current quarter. This impact was partially offset by our fixed asset repricing, which contributed $2.6 million to our NII. Our cost of interest-bearing liabilities improved by 21 basis points during the quarter, as our deposits continued to reprice down following the rate cuts. The cost of deposits declined to 1.26%, representing a 17 basis point reduction as compared to the linked quarter.…

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

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

Thanks. Good morning. Maybe just on that last expense mentioned, I just want to catch that real quick. The expense guide, does that include the stock expense and severance? I mean, are you carving that out for this, or is that included in the full-year growth expectation?

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

Got it. Okay. Thanks. And then I guess on maybe just a broader growth question. It looks like the consumer book has been either growth or more moderate runoff. I guess, looking forward, that has kind of been an area that maybe has not been adding to net production. Are you any closer to comfort there of that sort of flattening out that maybe a look at your full-year growth numbers possibly has some upside to kind of the low single-digit guide, or still waiting to see more confidence before inching that up?

Yeah. Hey, Jeffrey Allen Rulis, this is [inaudible]. The way I look at it is, resi has been coming along okay. We had a good quarter for resi in Q4. It was a decent quarter in Q1, just given that it was all purchase activity. And we see some continued strength in the resi side going forward. I think our challenge has really been on the home equity line and the indirect books. So we have got a number of different initiatives we are pursuing in both of those in an attempt to kind of stabilize those books. I think the reality is—and you hit it on the head in the last part of your comment—I think we need a little bit more certainty in the overall environment. A little bit of rate relief would be helpful. Not sure we will get that. So in the meantime, with respect to home equity line, we have got a number of different direct mailing activities that we are doing, looking at some special programs to try and retain some of the balances that are coming off of, say, fixed rates. And then in the indirect space, we have implemented digital contracting, and we are trying to speed up funding time frames. We are hoping that those can give us a little boost on that side. But I think until we get better clarity in the overall environment, from a loan perspective, we are still in that low single-digit growth outlook.

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

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

Fair enough. Thank you.

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

Good morning.

How are you, Robert Andrew Terrell?

I am good. How are you guys?

Good.

I wanted to ask on the—thank you for the CD color, the time deposit color you gave. I think you said 2.80% on the spot cost at end of the period. Do you have the comparable figure for either total deposit costs or interest-bearing deposit costs? And then I wanted to get a sense on, you know, it sounds like there is a still pretty decent opportunity to reprice some of the time deposit portfolio over the balance of the year. Was hoping you could just talk to kind of the competitive landscape for deposits you are seeing in the market right now.

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

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

Yeah. I think there are two components to it. The early one that we will begin to see some benefit from is really coming from the Bankoh Advisors side, our former broker-dealer. As you may recall, we spent most of the fourth quarter repapering that business, so activity was pretty low. January, we came out of that, and we began to see some early positive results in February and March. So I think we can continue to see that rise as we work through the end of the year. On the broader wealth management effort, this is really a longer-term effort for us. We are spending a lot of time building out the infrastructure and the capability set, really introducing the concept of business planning and family dynamics planning, succession planning to our client base, and spending a lot of time internally just educating folks and bringing people together to build momentum. We have clearly seen great activity around that. We have got a lot of growth in the valuations pipeline and some M&A activity I think that we will see earlier returns on. But the bigger effort, you are probably not going to see meaningful results until we get into 2027, would be my look.

Great. Okay. Thank you for taking the questions.

Yeah. Thank you.

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

Hi, good morning. Thanks for the question. Maybe I would like to circle back to the question of capital. Clearly, you guys are incrementally repurchasing shares and have given color around that. Just wondering if you guys have looked at the proposed capital changes and, given your higher percentage of resi, if you have done any sensitivity around that and if—how that—if relevant, would change potentially your capital outlook. Thank you.

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

Yeah, and Kelly, I would just add to that. Obviously, it is just a proposal right now; it is not final. But we have done some early assessments, and it will be positive for us. I anticipate that our regulatory capital ratios will see a 50 to 100 basis point improvement based on the way the current proposal is structured.

That is really helpful. I appreciate the color. I would like to also circle back to the question of margin. You guys reiterated that 2.9% outlook to exit the year. You had a fantastic first quarter for NIM expansion. And I am just wondering, as you look ahead, clearly there are a lot of variables here in terms of the margin, but it seems like the asset repricing story continues. Wondering if you could provide any commentary or color as to how you guys are thinking about the normalized margin as well as kind of the cadence from here and—would seem to imply somewhat of a slowing versus 1Q—so how we should be thinking about the inputs here. Thank you.

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

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

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

Morning, Jared.

Jared, your line is open. Please check your mute button.

Sorry about that. Thanks for taking the question. I guess maybe just looking at some of the tourism trends, are you seeing any impact on the outlook there just given the sort of the pace of tech layoffs and some of the layoffs that we are seeing on the West Coast? Or is it still sort of marching steadily forward?

Yeah. I think it is probably too early to tell. The reality is we started off the year on really strong footing. Visitor counts were relatively flat, but spending was strong relative to previous years, really driven by West and East Coast travelers. I think we are going to need to see a little more data coming out. March will probably be a little messy just because we have the Kona low storm, so I am not sure that will be a clear print. But what we have become more and more aware of is that the market is really being driven by that K-shaped consumer and that top-end consumer, which is why we continue to see the spend increase. So we are optimistic that that trend will continue through the year. But, as we all know, there is lots of noise out there, so we continue to monitor the length of the conflict involving Iran, what that ultimately means for energy prices, how that translates into airfares, and its ultimate impact on tourism. For right now, I think the outlook would be stable, and then we will get a better sense as some of those other items become more clear.

Okay. Thanks. And then on the expense side, I guess, sort of two parts. One, when we look at that growth guide for the year, is there any assumption that there is some buildout in the wealth management side in that number? And if not, is that something that, longer term, we should be building in? And I guess the second part, how are you looking at AI investments? And is there an opportunity on the tech side at all to maybe make some investments in the near term that could generate some positive operating leverage going forward?

Yes. So maybe to the first question, I think the guidance is reasonable guidance based on our current outlook in the wealth management space. As we get further out, you can probably begin to think about greater growth on the fee side. I think previously we have talked about wealth management being in the $60 million annual fee range and the potential to get into double-digit growth on that particular fee item. So that is kind of how I look at that. The AI side, we have spent a lot of time building out our governance and our risk management practices. We have a number of different AI use cases that we are working on right now to implement—some related to wealth management and the discovery process, opportunities within the call center, and a number of others—really with the goal of getting right to your point: how do we create more operating leverage in the organization by creating efficiencies across the company. Still a little early to read on that one, but that is our focus, and we are big believers that it has the opportunity to have a meaningful impact on the expense side. Thank you.

Our next question comes from the line of Matthew Clark with Piper Sandler. Your line is now open.

Hey. Good morning, everyone. Wanted to circle back to the loan growth commentary. I think in the prior quarter, there was some optimism around approaching mid-single-digit loan growth as we march through the year, if not achieve mid-single-digit loan growth for the year. But I wanted to double check whether or not that low single-digit growth expectation was just for the consumer book or was that for the overall portfolio?

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

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

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

Okay. And then on the deposit side, your NIB on average was up in the quarter, but in the period, though, NIB and overall deposits were down about 4% annualized. In last year's first quarter, you showed some good growth, but then the year prior, you saw kind of a similar decline. So just wanted to get a sense—was anything unusual in the quarter? Would you chalk it to seasonality, or was there something else going on that we should think about?

There are probably a couple things in Q1. Maybe I will back up a bit. We had a really strong deposit quarter in Q4 and a really strong deposit quarter in Q1. If you just go back and look at where we were relative to, say, 9/30, on both the average and the spot, particularly on the NIB, we are still up like 5%. We feel pretty good where we are at, even at the close of the quarter. There were a couple things within Q1 that occurred to bring the deposits down. One was we opted out of some high-cost public monies—we just did not see the need to pay for that—and we let that run off, and that was a pretty meaningful number. And then we had some escrow monies related to some projects that closed out during the quarter that brought NIB down. We still feel good about where we are at. Noting how strong Q4 and Q1 have been, we are probably looking at more flat as we get into Q2 on both the top end and, as we have talked about in the past, low single-digits on low-yield deposits/NIB. Overall, we feel good. I think Q2 is typically a seasonally low period for us. So we think, given how we have grown, if we can maintain a flat top line and a flat NIB, it will be a good quarter for us.

Okay. Great. Thank you.

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

Hey, thank you for the follow-up. I just wanted to go back to the commentary on margin. You talked about structural, longer-term 3.25% to 3.5% on the margin. Can you just remind us—is that kind of in the current rate environment? Do you feel like rate cuts would help on that? And can you provide a better sense of time frame to get back to that level?

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

Very helpful. Yeah. No, that is great. I appreciate it. Thank you.

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

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