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spk09: Ladies and gentlemen, thank you for standing by and welcome to the Bank of Hawaii Corporation first quarter 2022 earnings call. At this time, all participants are in a listen-only mode. There will be a question and answer session after the prepared remarks. If you would like to ask a question during the session, please press star 1. If you require any further assistance, please press star 0. I would now like to turn the call over to your host, Janelle Higa. You may begin.
spk01: Thank you, Kevin. And good morning, good afternoon, everyone. Thank you for joining us today. On the call with me this morning is our Chairman, President, and CEO, Peter Ho, our Chief Financial Officer, Dean Shigemura, and our Chief Risk Officer, Mary Sellers. Before we get started, let me remind you that today's conference call will contain some forward-looking statements. And while we believe our assumptions are reasonable, there are a variety of reasons the actual results may differ materially from those projected. During the call, we'll be referencing a slide presentation as well as the earnings release. A copy of the presentation and release are available on our website, boh.com, under Investor Relations. And now I'd like to turn the call over to Peter Ho.
spk05: Thanks, Janelle. Aloha, everyone. We appreciate your interest in Bank of Hawaii. First quarter was a good start to 2022 for the organization. As is our custom, I'll share with you some thoughts on the broader market here in the islands. I'll then turn the call over to Dean to talk about the financials. and then he'll turn the call over to Mary to give you some perspective on the credit side, and then I'll close with some concluding thoughts, and then we'd be happy to take your questions. So beginning with the economy, things appear to be shaping up, stable, and improving is what I would call it. Here you see our unemployment numbers, unemployment now down to 4.1%. I think when you look at the forecast numbers out that UHERO has put in there, obviously I think clearly those are due for adjustment and I think probably impacted by some of the changes of the Bureau of Labor Statistics. So all in all, I think a pretty good performance unemployment-wise. When you look at some of the high-frequency data that the university also puts out, what they call their economic pulse, which is an aggregation of a bunch of high-frequency data, you'll see that Really, that rating is up to its highest level ever in the new environment that we find ourselves in. So as of the past couple of weeks, that rating has hit 81 points. To give you some frame of reference, our prior peak was 75 in the summer of 2020, just before Delta hit. And then those numbers took a dip with Delta and then Omicron. So nice to be back. up at a high and hopefully moving forward from there. Switching to real estate, here you see that the real estate market, at least here on Oahu, our primary market, continues to do quite well. So price points still elevated at very high levels, both single-family as well as condominium. And also you see that the pervasive inventory or shortage of inventory continues to be the case and not likely to see much change in that environment anytime soon. And then, therefore, I wouldn't expect to see too much erosion in price points, certainly not in 2022. Next slide. Switching over to the visitor side, this is really an evolving story. You can see in the chart that 2022 levels are getting closer to 2019 levels or pre-pandemic levels. The numbers are, from an arrivals standpoint, down still 25% from 2019, but that's really the tale of two marketplaces. U.S. arrivals, both east and west U.S. arrivals, are up year-to-date 8% from 2019, but clearly the drag and what's dragging down the entire market are the Japanese down 98%, Canada down 61%, and other international marketplaces down 70%. Interestingly, when we look at spending patterns, the news isn't quite as bad there. Spending is down, and remember I told you arrivals were down 25%, but spending is only down 9.9% this year through February. And this reflects a very robust U.S. consumer. So U.S. spending or U.S. market spending in the islands year-to-date February is up 27% and offset somewhat by Japan, Canada, and other international. Just to finish off on the visitor side, rev par performance, which as you can imagine has been quite difficult through the pandemic, is really starting to look up. So The last three months, beginning in December, REVPAR in the state was actually plus 7.6% versus 2019 levels. January was off slightly at minus 1.3% versus 2019. And February bounced back nicely to plus 4% versus 2019. So all in all, what we see in the visitor segment is... kind of a reasonable performance given what's happening in the various marketplaces. I think a good, a fair amount of, a fair case for optimism as we look forward and hopefully welcome the Japanese visitors back, hopefully towards the tail end of this year. So that's it for my opening. Let me now turn the call over to Dean of Share of the Financials. Dean?
spk08: Thank you, Peter. Our strong core loan growth continued in the first quarter. Core loans net of PPP waivers increased by 354 million or 2.9% linked quarter and by 1.1 billion year-over-year or 9.4%. Growth was across both commercial and consumer loan portfolios at 2.5% and 3.2% respectively linked quarter. PPP loan balances declined by 69 million and $58 million remained at the end of the quarter. Net interest income in the first quarter was $125.3 million and included $1.8 million from PPP loans. The fourth quarter net interest income included a one-time reduction of $900,000 for an adjustment to deferred mortgage loan fees and $5.7 million in PPP loan interest income. Adjusting for the one-time charge in the fourth quarter and total PPP loan interest income in both quarters, the first quarter's core net interest income was 123.4 million, up 1.9 million, or 1.6 percent, linked quarter, driven by strong loan growth and rising interest rates. Our core net interest margin, which excludes PPP loan interest income, increased by seven basis points linked quarter to 2.31 percent. Our loan-to-deposit ratio remains low, well below regional and local peers. This affords us a strong and stable base of low-cost deposits that is a readily available source of liquidity to fund loan growth and provides pricing flexibility. One of the driving factors of this strong deposit base is Hawaii's unique deposit market and our strong position within this market. According to FDIC deposit study data, The top five banks make up nearly 97% of deposits in the state of Hawaii. Bank of Hawaii is well positioned as the market share leader with exceptional brand recognition and customer relationships. The composition of our deposits further demonstrates the strength of our deposit franchise. 94% of deposits are from core commercial and consumer customers, and the remaining 6% in public deposits are predominantly government operating accounts. When analyzing our deposit products, 96% of our deposits are in core savings and checking accounts with checking balances comprising nearly 60% of total deposits. Our solid base of low-cost deposits provides us with flexibility in a rising rate environment Total deposit balances increased $356 million, or 1.7% link quarter, and $392 million in core commercial and consumer customer accounts, while our deposit costs decreased by one basis point to five basis points in the quarter. During the last rising rate period, we demonstrated pricing discipline at approximately 20% beta while continuing to grow our deposit balances. Our balance sheet remains asset sensitive to changes in interest rates, and we will continue to benefit from higher rates. The recent increases in medium and long-term rates are already having a positive impact on our core net interest income and margin. In the first quarter of 2022, net interest income was 54.8 million, and earnings per common share were $1.32. Net interest income in the first quarter was $125.3 million. As discussed earlier, core net interest income, which excludes PPP loan interest income, was $123.4 million of $1.9 million linked quarter, driven by strong core loan growth and rising interest rates. As Mary will discuss later, we recorded a negative provision for credit losses of $5.5 million this quarter. Non-interest income totaled $43.6 million in the first quarter of $1 million from the fourth quarter. The increase was primarily due to higher swap revenue and deposit fees, partially offset by seasonal decreases in service charges and other transaction fees. Also included in the first quarter's non-interest income was a one-time negative adjustment of $400,000 for a change in the Visa Class B conversion ratio which was reported as a contra-revenue item in the investment securities gains losses. In addition, we recognized a $1.8 million recovery for MSR impairment in the mortgage banking income, which afforded us the flexibility to hold more mortgage loans. We expect non-interest income will be approximately $42 to $43 million per quarter through the end of the year as mortgage banking income and asset management fees are expected to be lower due to higher interest rates and lower markets. Non-interest expense in the first quarter totaled 103.9 million up from 101.7 million in the fourth quarter. Included in the first quarter's expenses were seasonal payroll tax and benefit expenses of 3.7 million related to annual incentive payouts made during the quarter. Included in the fourth quarter's expenses was a one-time $1.2 million charge for an additional employee benefit that increased our vacation carryover limits. Adjusting for these items, the first quarter's expenses were $100.2 million down $300,000 from the normalized fourth quarter expenses of $100.5 million. Thus, in the first quarter, we were able to maintain our overall expense discipline while continuing with our innovation investments. For the full year of 2022, expenses will be approximately $414 to $415 million, as inflation pressures have increased overall expenses. The annual merit increases and one-time cost-of-living adjustment, which together totaled a 5% increase for employees, began on April 1st. Our return on assets during the first quarter was 0.97 percent. The return on common equity was 15.44 percent, and our efficiency ratio was 61.53 percent. Our net interest margin in the first quarter was 2.34 percent, unchanged from the fourth quarter. Excluding total PPP loan interest income, the core margin was 2.31 percent, an increase of seven basis points in the quarter. The increase in the margin during the first quarter reflects the ongoing impact of strong core loan growth and rising rates. Excluding the impact of PPP loan interest income, we expect continued improvement in our core margin with increases of five to six basis points per quarter for the remainder of 2022 from continued loan growth and higher interest rates. This is an improvement from the previous NIM guidance of three to five basis points per quarter. Our capital level remains strong and is well positioned to support continued growth. Our CET1 and total capital ratios were 11.83 percent and 14.41 percent, respectively, with a healthy excess above the regulatory minimum well-capitalized requirements. Higher interest rates negatively impacted the valuation of our available-for-sale portfolio, resulting in an ALCI adjustment the reduction in our book and tangible common equity. However, this had no impact on our regulatory capital and our capital distribution capabilities. During the first quarter, we paid out $28 million or 53% of net income available to common shareholders in dividends and 2 million in preferred stock dividends. We repurchased 117,000 shares of common stock for a total of $10 million. And finally, a board declared a dividend of 70 cents per common share for the second quarter of 2022. I'll turn the call over to Mary.
spk02: Thank you, Dean. Credit performance remained very strong in the first quarter. Net loan and lease charge-offs were 1.5 million or five basis points of average loans and leases annualized. This compared with two basis points in the fourth quarter of 21 and 10 basis points in the first quarter of last year. Non-performing assets total 20 million or 16 basis points, up one basis point for both the linked period and year-over-year. All non-performing assets are secured with real estate with a weighted average loan-to-value of 54%. Loans delinquent 30 days or more remain stable at 28.3 million or 23 basis points, while down 11.6 million or 10 basis points year-over-year. And criticized exposure was down to just 1.6% of total loans, driven by continued improvement in the financial performance of those customers who had been most impacted by COVID. The quality of our loan production in the first quarter was strong and reflective of our continued conservative and consistent approach to underwriting. For the quarter, 62% of commercial production was secured with quality real estate modestly leveraged. Our commercial mortgage production had a weighted average loan-to-value of 60% and construction production had a weighted average loan-to-value of 65%. 83% of the quarter's consumer production was secured with real estate, again, conservatively leveraged. Residential mortgage and home equity production had weighted average loan-to-values and combined weighted average loan-to-values of 62% and 58% respectively. 79% of home equity production was in first lead. FICO scores for all our consumer production remain very strong and consistent. Importantly, when we look at the bottom quartile of our loan production, we continue to see solid credit metrics. As Dean noted, we recorded a negative provision for credit losses of $5.5 million this quarter. This included a negative provision to the allowance for credit losses of $4.3 million, which with net charge-offs reduced our allowance to $152 million, or 1.21% of total loans and leases, or 1.22% net of PPP balances. The decrease in the allowance reflects the improving economic outlook and forecast for our market, coupled with our credit risk profile, while continuing to provide for the uncertainty and potential downside risk associated with recent geopolitical events and tighter monetary policy. The reserve fund funded credit commitments was $5.2 million at the end of the quarter, down $800,000 for the length period. I'll now turn the call back to Peter.
spk05: Thanks, Mary. So, to conclude, just a few thoughts on where we see ourselves moving forward. We believe we are extremely well positioned for what we see as an evolving environment. We're asset sensitive. As Dean mentioned, we operate in an interesting deposit marketplace where the top five locally headquartered players represent 97 percent of the market. I think equally interesting of that five is that the weighted average loan-to-deposit ratio of those participants is 61 percent. Bank of Hawaii has a terrific position within this marketplace. From a credit standpoint, we're, as Mary described, in a very good position as well. We have a high-quality securities portfolio, and our loan portfolio is well-diversified, well-balanced, and has a 79% collateral position with a weighted average loan-to-value of 56%. 97% of our loans are in markets we've known for decades, and our current strategy ensures this continued familiarity. Finally, from a liquidity standpoint, as Dean mentioned, our deposit base is incredibly core in nature. with 94 percent consumer and commercial and 96 percent being either demand or savings. As Dean also mentioned, we have historically market-leading deposit betas, which we would anticipate deploying through this cycle. And our operating model generates some of the highest returns of capital in the industry. So, now we're happy to take your questions.
spk09: Ladies and gentlemen, if you have a question or a comment at this time, please press the star, then the one key on your touchtone telephone. If your question has been answered or you wish to move yourself from the queue, please press the pound. Our first question comes from Jeff Rulis with VA Davidson.
spk07: Thanks. Good morning.
spk09: Hey, Jeff.
spk07: Just a question on the buyback. Just want to check in on the appetite. You know, it was up link quarter, but, you know, it's been higher in the past. I'm just interested in, you know, AOCIs. consideration or just general macro? Kind of give us an update of where you think on buybacks.
spk08: Yeah. It is up about $3 million quarter over quarter. We continue to implement our capital plan, which generally will hold capital for growth and then our dividend. And, of course, what's remaining is the available for share repurchases. We continue to believe that's an important part of our capital plan. And going forward, I think it will depend on how the environment evolves. Given the volatility in the rate environment, we'll continue to repurchase shares, but it could change depending on the outlook.
spk05: Yes, so I think our intent is to continue with repurchase, probably similar to what you've seen in the most recent quarter, but obviously subject, Jeff, to what's happening in the rate environment, you would understand.
spk07: Sure. Yep. Thanks. And, Peter, you mentioned, you know, it looks like the UHERO forecasts are kind of lagging real-time. And maybe a question for Mary just on that. Does the first quarter provision recapture sort of bake in as of March end? In other words, if we've seen some economic improvement, can we kind of assume that that would be reflected in the second quarter provisioning consideration? In other words?
spk02: Exactly, Jeff. Exactly.
spk07: Okay. Got it. And last one, maybe, Peter. Trying to circle back to the island's behavior on the last up rate cycle, you know, how both loans and deposits, you talked about the uniqueness of the local participants on the deposit side. My guess is last up rate cycle deposit betas were lower. But if you could just touch on both how, you know, loan pricing, loan and deposit pricing kind of played out in the last cycle.
spk05: Yeah, I would say that, you know, the deposit front was pretty stable. I mean, you know, I think we had about a 20% deposit beta, and we didn't have the best betas in the marketplace. So there's a good amount of stability, I'd say, on the deposit front. In part, and one of the reasons why I mentioned the loan to deposit, the weighted loan to deposit ratio for the top five is, you know, there's always been a bit of a mismatch between funding and assets in the islands. And I think that's in part how you get those betas, right? So, as we look forward, Jeff, you know, interestingly, the liquidity dynamics of the marketplace are not a lot different than the last cycle. So then, therefore, I wouldn't anticipate much to change on the deposit front. On the loan front, you know, like I said, it's always been a funding heavy asset lighter environment. There's always going to be competition there. But, you know, with rates rising, that will be kind of interesting to see kind of where people position because, you know, it's really the yield or the income side has really been very volume driven to date through the past, you know, call it 10 years, five, 10 years. But as margins are picking up, I think maybe people will be more sanguine just to kind of pick up on the rate side versus the volume side. We'll see, though.
spk07: Yeah. Okay. I appreciate it. Thank you.
spk09: Our next question comes from Andrew Lash with Piper Sandler.
spk06: Hey, good morning, everyone. Just questions on the long growth continues to be really strong. It sounds like you retained more on the mortgage side that may have driven that, but is there anything you can point to what's going on in your market or, or maybe at your, with your bankers and lenders specifically that's driving this? Um, just given how strong that it has been for several quarters now.
spk05: Yeah, sure. So, um, well, first of all, we saw growth in just about every category, both consumer and commercial. Uh, CNI was a bit flattish. Um, But Cree was up 3.4%. Construction was up 12.7%. So, you know, clearly on the commercial side, I think we're the beneficiary of a healing economy, you know, increased activity as people, you know, are generally a lot better capitalized than you might imagine coming out of a pandemic. And then having a consistency of team, for many, many years that just allowed us to, you know, one, ensure that we've got quality staff out there in the marketplace taking care of clients, and then two, you know, having staff that's been, you know, managing the same clients for an awful long time. And so as opportunity begins to peek its head out, you know, execution becomes that much more possible. On the consumer side, yeah, I think we probably held on to a little bit more Resi mortgage production, just as kind of I think the fee side was not quite as attractive as earlier quarters. But in general, I'd say that, you know, Resi was up, home equity was up, indirect was up, even indirect with the inventory challenges of the marketplace. And there it's a combination of, I think, really great programming. We're really starting to see traction on our marketing front We're seeing great traction on our channel diversification side, good movement into our Simplify online platform. So really kind of a combination of things that's helped to deliver that outcome, Andrew.
spk06: That's great color. And then how are pipelines shaping up so far this quarter? I know it's still early, but how are things trending now?
spk05: Yeah, I mean, we have a monthly pipeline meeting with the entire – consumer and commercial team. It's always much anticipated. And I'd say, you know, Q2 looks pretty good. Again, I mean, you never know. I mean, it's a pretty volatile geopolitical environment we find ourselves in. But for now, we're feeling pretty good about growth. I don't know if we're going to get 2.9% core, because that's getting pretty frothy But I think solid loan growth is definitely built into the pipeline as it stands right now. Got it.
spk06: That was very helpful. Thanks for taking the questions here. I'll step back.
spk09: Take care. Our next question comes from Ibrahim Poonawalla with Bank of America.
spk00: Hey, good morning.
spk09: Ibrahim?
spk00: I guess maybe one first on expenses is, I think Dean mentioned full year $414 or $15 million. That's about 6% to 7% up year over year. Just talk to us, Peter, as we look forward beyond this year. Around the puts and takes, it feels like inflationary pressure will be higher relative to what we saw post-financial crisis. They're going to have some upward push to the expenses. Give us a sense of where you're investing, where the bank is from an investment spend perspective. and areas of incremental cost savings to offset the growth.
spk05: Yeah. So, yeah, that's really the question these days, isn't it? Maybe take a slightly higher lens view of the situation. In the last five years, if you look at our expense trend, our investment expenditures have grown significantly. by about 11%, just over 11% annually. So obviously a big investment in the categories like technology or data analytics or marketing or e-commerce and those types of things. The overall growth of expenses in the company has been 3%. And so kind of those non-strategic areas, those areas other than what we deem to be investment and strategic, has grown at a 0.9 percent clip. So, we've been able to accommodate the investments that we think we need to do. Clearly, the world's changing, and clearly, consumers are changing. And who's paid for that is, in fact, kind of every other expenditure. So, as we move forward, the challenge is we do see a more inflationary environment. Obviously, I don't think we can keep kind of other expenses, kind of the rest of the company, at 1%, call it, that's got to go up. But I think what will happen to Ibrahim is, you know, clearly that 11%, it was not an intended sustainable CAGR. I mean, that number is going to come down meaningfully. And so I think where we're going to land out is kind of a 4%-ish kind of annual growth rate. That, as you know, for Bank of Hawaii is a little bit on the high end, but, you know, I think we're just in a different inflationary environment than we have been before. And there's still some investment spend to be made. But I'll tell you, a good portion of that is already built into our expense bloodstream. And so a lot of the kind of pre-work that you've got to do to get these platforms, whether it's marketing or e-commerce going, you know, takes a lot of upfront expense.
spk00: Got it. So like a 4%-ish core expense growth is the right way to think about that. That was helpful. Thanks, Peter. Yep.
spk05: Yep.
spk00: And I think you mentioned, Dean, about five to six basis points per quarter for the rest of the year, and you provided some color on just deposit dynamics. But anything on the deposit front, like as you think about as maybe some of the non-core competitors get more competitive on pricing. Do you see any subset of your deposit balances leaving the bank, which inherently might be more rate-sensitive? So maybe they're going to money markets or market-related kind of funds where they can get a higher rate?
spk08: That's certainly a possibility and something that we continue to look at. But we are – We do have, as we manage our deposit base plans for alternatives also, we do have a pretty significant trust area that can help us there. But the intent is to kind of maintain our customer base and deposit balances.
spk00: Got it. And just one last question. When we look at the tangible, the TCE to TA ratio, I think you mentioned that you're still going to do some modest buybacks similar to 1Q levels. And I realize the AOCA impact is transitory, but when you look at the TCE at 5.4, does that have any impact in terms of influencing capital management, or you look past AOCA as near to noise?
spk08: It's certainly something that we pay attention to. It's not maybe the highest, you know, that we look at, we look at primarily the regulatory capital ratios. And from that perspective, the ALCI doesn't impact that. So that's kind of what we look at. If there's a significant change, there could be some different actions. But right now, it's certainly just the regulatory capital ratios that are top of mind.
spk00: Got it. Thank you for taking my questions.
spk09: The question comes from Kelly Mata with KBW.
spk03: Hi. Good morning. Thanks for the question. Kelly? The first is just on your new coordinate guidance of five to six basis points a quarter. Just wanted a quick clarification if that was incorporating the forward curve or any rate assumptions going into that.
spk08: It's not the entire curve. It's certainly expecting rates to rise, but it's slightly actually less than the forward curves would predict currently. And it assumes about a 2.5% Fed funds rate and 285 on the 10-year.
spk03: Great. Thank you so much. And then turning to loan growth, I mean, across the board, it was really, really strong. It does look like Corsi and I came down a little bit. Just wondering if you could provide us an update on utilization rates and where they are versus where they've been historically and when and if you think they are going to start normalizing. Hi.
spk02: They were 34% this quarter. That was down from 37% last quarter. They tend to range around probably 33% to 40%, really just episodically as customers look to access liquidity.
spk05: Yeah. I don't think that utilization rates are – I don't think they represent either an upside or downside risk to outstandings. It's just kind of – they're pretty normal at this point.
spk03: Got it. That's super helpful. Thanks so much. I'll step back.
spk09: Our next question comes from Laurie Hunsinger with CompassPoint.
spk04: Laurie Hunsinger Yeah, hi, good morning. Just wondered if we could go back to net interest income for a moment. I just wanted to understand with respect to the PPP fees. So there was 1.8 million this quarter. That leaves you round number 600,000. Is that a right number or have I, is there a better number?
spk08: Actually about 800 remaining on these, yeah.
spk04: Great. Okay. And you probably expect most of that to occur in the June quarter, or how are you thinking about that?
spk08: I would say, you know, it's becoming less and less of a, you know, material part of our balance sheet and income statement. But, you know, I would say roughly half of that would run off in the second quarter and maybe – and then another half of what's remaining in the third. And, you know, so we'll probably have some stragglers throughout the year, but – It's stepped down enough where it's not a meaningful part of our balance sheet.
spk04: Okay, great. And then, you know, I think in Kelly and Abraham, you touched on this with their questions, but I'm wondering if you could sort of help us think about it a little bit more succinctly in terms of your deposits are fabulous and they're low-costing and, you know, they were if we rewind back to 2019. I think your deposit betas will be fabulous as well. Can you just help us think a little bit about for every 25 basis points what that looks like? Maybe just drill it down a little bit more since your forward guide is looking less than the forward curve. Can you just help us think about it a little bit more? Because a five to six basis point per quarter increase, at least by my math, is looking really pretty light. I'm just trying to understand that because you are so asset sensitive.
spk08: Mm-hmm. So every 25 basis point increase in Fed funds is about $900,000 per quarter, so about $300,000 per month. And that's only on the Fed fund, the short end of the curve. If the curve, the long end were to go up 25, it's It's a little bit more nuanced, but it's about $40,000 per month, but it compounds because it just, that's how the nature of the longer-term assets as they reprice.
spk05: David Chambers- The other factor, Laurie, to think about, too, is, you know, as rates were coming down, our bias was to invest a little bit longer in the securities portfolio. And now, with kind of an inversion in that trend, we're probably going to be investing shorter and even maybe towards floaters in that environment. So it's going to give us a lower initial yield, but hopefully a higher yield down the path.
spk04: Okay, great. That's helpful. And then with a non-interest income, I just wanted to understand two things. I think you had mentioned that included in your securities loss was a one-time negative adjustment for the Visa Class B conversion. Did I get that right, $400,000? Yes. Is that correct?
spk08: Yes.
spk04: Okay. And can you just expand on that a little bit more?
spk08: Yeah. So when we sold our Visa Class B shares, we took back a swap on the conversion ratio. So Visa reset that ratio. And as part of the trades that we did, the reset cost to us was $400,000. So it's a one-time reset, and then going forward we have that about $1.2 million per quarter. Okay. Perfect. Okay.
spk04: And then – okay. Great.
spk08: And then – That was why there's a bump in that line.
spk04: Right. Makes a lot of sense. Okay. And then can you also talk a little bit about within your non-interest income – you could just remind us where you are on NSF fee and overdraft fees and, you know, where you were specifically for this quarter and how you're thinking about it, you know, what your plans are to become a little bit more consumer-friendly and any impact that we would see on fee income.
spk05: So what are the numbers for the quarter?
spk08: Yeah, for the quarter, in total, it's about $4 million, of which $3 million is OD fees and $1 million is NSF fees. Yeah.
spk05: We're, you know, obviously that's a very topical discussion right now, Laurie. And I would say we're looking at our practices. One thing I would note, and I think this is true for most of the banks in this marketplace, we don't charge an account-level fee on our accounts. So basically they're fee-free. So I think that's a little bit different than some of the larger banks out there and something we're thinking through consideration-wise. And, you know, so we're looking at both OD as well as NSF, maybe NSF in particular. Nothing kind of decided at this point. But, you know, I guess the last thing I would say is our practices have evolved pretty dramatically over the past several years, really, and always in the direction of being more supportive to our client base. I think we're going to continue to evolve in that direction, but clearly there's just a lot of activity around that space right now. We're aware of that.
spk04: Okay. That's helpful. Okay. And then last question, Mary, this one is for you. And I love your loan production quality slide. I think it's great and appreciate all the credit detail. So, yeah, your reserves to loans, XTPP at 122, it looks like there's still a chunk of COVID cushioned. Can you help us think about where that reserves to loan line may go in terms of us thinking about a normalized loan loss provision?
spk02: I would expect it to move back to where we were day one pre-COVID, which was really at about 99 basis points in total coverage.
spk04: Great. Thanks for taking my question.
spk09: Take care, Lori. Our next question comes from Kelly Mott with KBW.
spk03: Hi, thanks for letting me jump back on. I just wanted to ask Dean quickly on the tax rate. Is 23% still a good rate to use for the full year?
spk08: Yeah, 23% is still a good rate for the full year.
spk03: Great, thanks.
spk09: And I'm not showing any further questions at this time. I'd like to turn the call back over to our host for any closing remarks.
spk01: I'd like to thank everyone for joining us today and for your continued interest in Bank of Hawaii. Please feel free to contact me if you have any additional questions or need further clarifications on any of the topics discussed today. Thank you so much, everyone.
spk09: Ladies and gentlemen, this concludes today's presentation. You may now disconnect and have a wonderful day.
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