Bank of Hawaii (NYSE:BOH) released first-quarter financial results and hosted an earnings call on Monday. Read the complete transcript below.
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Summary
Bank of Hawaii reported solid financial performance for Q1 2026, with net interest income and margin expanding for the eighth consecutive quarter, driven by fixed asset repricing and a decline in deposit costs.
Earnings per share were $1.39, and the company maintained strong capital and credit quality, with a focus on their leading deposit market share in Hawaii.
Strategic initiatives include expanding wealth management capabilities and supporting family-owned businesses through the new Center for Family Business and Entrepreneurs.
The company's outlook remains cautious due to potential headwinds such as Middle East tensions and rising energy costs, but it remains optimistic about achieving a 2.9% net interest margin by year-end.
Management highlighted the stable economic environment in Hawaii, characterized by low unemployment and strong visitor spending, but noted external risks that could impact consumer confidence.
Full Transcript
OPERATOR
Good day and thank you for standing by. Welcome to the Bank of Hawaii Corporation first quarter 2026 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask the 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. Cheng Park, Executive Vice President, Investor Relations. Please go ahead.
Cheng Park
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 Sherson. Before we get started, I want to remind you that today's conference call will contain some forward looking statements.
Jim Polk
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.
Brad Shearson (Chief Risk Officer)
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 recorded 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 Konalo storm in Hawaii and Typhoon Srinlaku 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 Shearson will cover the potential impact of the Konalo 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 Banco 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 MA 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 Shearson to discuss credit, after which Brad Sattenberg 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 remains 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 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, 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. CNI 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. Non Performing 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 non bank financial intermediaries is negligible, totaling about $80 million or 0.6% of total loans which 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 Sattenberg for a discussion of our financial performance.
Brad Sattenberg (Chief Financial Officer)
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 or $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 non recurring 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 increase 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 previous quarter. Average non interest 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 previous quarter. The spot rate on our deposits was one and a quarter percent at the end of Q1 and as Jim mentioned in his comments, our deposit beta improved at 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 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 two and a quarter to 3%. During the quarter we terminated 400 million of our active swaps and we finished the quarter with an active pay fixed receipt flow portfolio of $1.2 billion at a weighted average fixed rate of 3.3% and an average life of one and a half 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 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. Non interest income was $41.3 million during the quarter compared to 44.3 million during the previous 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. Non interest expense was $116.1 million compared to $109.5 million during the previous 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 non recurring charge related to the accelerated investing of restricted stock awards of $3.5 million. In addition, the quarter also contained an unrelated severance charge of $750,000. The previous quarter had a $1.4 million reduction in our FDIC special assessment and a non recurring $1.1 million donation to our bank of Hawai Foundation. Compared to my previous forecast, reported normalized non interest 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 half a million dollars less per quarter than our recent run rate. As a result, I'm lowering my forecasted range for annual growth and overhead expenses to between 2.5 and 3% or half a percent lower than my previous forecast. Second quarter normalized non interest 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 previous quarter, we paid dividends of $28 million on our common stock and $5.3 million on our $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 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.
Jim Polk
Thanks, Brad. We'd now be happy to answer any questions that you may have.
OPERATOR
Thank you. As a reminder to ask a question, please press star, 1, 1 on your telephone and wait for your name to be announced. To withdraw your question, please press star, 1, 1. Again, our first question comes from the line of Jeff Rulis with D.A. Davidson. Jeff, your line is now open.
Jeff Rulis (Equity Analyst at DA Davidson)
Thanks. Good morning. Maybe just on that last expense mentioned. 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, every expense that we're aware of today. Got it. Okay, thanks. And then I guess on the maybe just a broader growth question, it looks like the consumer book is has been either growth or more moderate runoff. I guess looking forward, that's kind of been the area that 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. Yeah. Hey Jeff, this is Jim. You know the way I look at it is RESI has been coming along okay. We've had a. 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. Not sure we'll get that. So in the meantime, you know, 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 state fixed rates. And then in the indirect space we've implemented digital contracting and we're trying to speed up funding timeframes. So we're hoping that those can, you know, 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. Thanks, Jim. And if I could squeeze just one last one on the, on the capital side, 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.
Jim Polk
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.
Jeff Rulis (Equity Analyst at DA Davidson)
Fair enough.
Jim Polk
Thank you, Jeff.
OPERATOR
Our next question comes from the line of Andrew Terrell with Stevens. Your line is now open.
Andrew Terrell (Equity Analyst at Stevens)
Hey, good morning.
Jim Polk
Good morning. How are you Andrew?
Andrew Terrell (Equity Analyst at Stevens)
Good, how are you guys? I wanted to ask on the thank you for the CD color, the time deposit color you gave, I think you said 280 on the spot costed 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 the competitive landscape for deposits you're seeing in the market right now. Yeah, I mean our total deposit cost is 2.89% for the quarter. The spot rate again as you mentioned was 2.8%. You know, the competitive landscape is it's, you know, it's reasonable and it's rational and we still think there's an opportunity to continue to reprice our CD books. So you know, the majority of our CDs are in our three month portfolio or the 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 CD' 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. Yep. 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?
Jim Polk
Yeah, 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 Banc Investment Services side. Our former broker dealer, as you may recall, we spent most of the fourth quarter re-papering 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, 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 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. To build momentum. We've clearly seen great activity around that. We've got a lot of growth in the valuations pipeline and some MA activity I think that we'll see earlier returns on.
Andrew Terrell (Equity Analyst at Stevens)
But the bigger effort, you know, you're probably not going to see meaningful results until we get into 2027. Would be my look. Great. Okay. Thank you for taking the questions.
Jim Polk
Yeah, thank you.
OPERATOR
Our next question comes from the line of Kelly Mata with kbw. Your line is now open.
Kelly Mata (Equity Analyst at KBW)
Hi, good morning. Thanks for the question.
Jim Polk
Maybe I would. 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, you know, your higher percentage of resi. If you guys have done any change sensitivity around that and how that, if relevant, would change potentially your capital outlook. Thank you. Maybe I'll start and then Brad can clean up. I think we're comfortable with the way we're looking. 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.
Brad Sattenberg (Chief Financial Officer)
I would just add to that. I mean, obviously it's just 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 anticipate that our regulatory capital ratios will see a 50 to 100 basis point improvement based on the way the current proposal is structured.
Kelly Mata (Equity Analyst at KBW)
That's really helpful. I appreciate the color. I would like to also circle back to the question of margin. You guys reiterated that 290 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 could provide any commentary or color as to how you guys are thinking about the normalized margin as well, as the cadence from here would seem to imply somewhat of a slowing versus one Q. So how we should be thinking about, you know, the, the inputs here. Thank you. Yeah, so. So again, maybe I'll start and then Brad can clean up whatever. You know, the fixed asset repricing, I think we've shared this before, it basically adds about 5 basis points a quarter or 20 basis points a year. So as we close out, you know, this year at, you know, heading towards that 290 number, we can see if the question is really around Terminal Nim. We can see that in the 325 to 350 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 425 range. That's really helpful. Color. Thank you so much. And I'll step back.
Jim Polk
Thanks, Kelly.
OPERATOR
Our next question comes from the line of Jarrett Shaw with Barclays. Your line is now open.
Jim Polk
Morning, Jared.
OPERATOR
Jared, your line is open. Please check your mute button.
Jared Shaw
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're seeing on the west coast, or is it still sort of marching steadily forward?
Jim Polk
Yeah, 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 Lo 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 you know, some of those other items become more clear.
Jared Shaw
Okay, thanks. And then on the expense side, I guess sort of two parts. One, you know, when we look at that growth guide for the year, is there any assumption that there's some build out on the wealth management side in that number and if not, is that something that longer term we think, you know, 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?
Jim Polk
Yeah. 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, that 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 expansion.
Jared Shaw
That's fine,
Jim Polk
thank you.
OPERATOR
Our next question comes from the line of Matthew Clark with Piper Sandler. Your line is now open.
Matthew Clark (Equity Analyst at Piper Sandler)
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.
Jim Polk
But 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 of 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.
Matthew Clark (Equity Analyst at Piper Sandler)
And then how about the loan pipeline coming out of the quarter relative to year end?
Jim Polk
You know 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 are laid 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 see growth to keep us in line with the guide that we shared.
Matthew Clark (Equity Analyst at Piper Sandler)
Okay, and then on the deposit side,
Jim Polk
your NIB on average was up in the quarter end of 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 to 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? Yeah, there's probably a couple 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 things within Q1 that you know 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 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 so A flat top line and a flat nibd. It'll be a good quarter for us.
Matthew Clark (Equity Analyst at Piper Sandler)
Okay, great. Thank you.
OPERATOR
Thank you. We have a follow up question from the line of Andrew Terrell with Stevens. Your line is now open.
Andrew Terrell (Equity Analyst at Stevens)
Hey, thank you for the follow up. I just wanted to go back to the commentary on the margin. You talked about structural, kind of longer term, 325 to 350 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 timeframe to get back to that level?
Jim Polk
If we're at roughly say 290at the end of this year and we're growing on the fixed asset, repricing at 20 basis points per year, that would put us 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 timeframe around that. Does that help?
Andrew Terrell (Equity Analyst at Stevens)
Very helpful. Yeah, no, that's great. I appreciate it. Thank you.
Cheng Park
Thank you. This concludes the question and answer session. I would now like to hand the call back over to Chang park for closing remarks.
OPERATOR
Thank you everyone for joining us today and your continued interest in Banco 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.
Disclaimer: This transcript is provided for informational purposes only. While we strive for accuracy, there may be errors or omissions in this automated transcription. For official company statements and financial information, please refer to the company's SEC filings and official press releases. Corporate participants' and analysts' statements reflect their views as of the date of this call and are subject to change without notice.
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