BOH planning $50M overhaul of branches

Bank of Hawaii has begun a $50 million transformation that will involve approximately 30 branch projects over the next five years.

The state’s second-largest bank, founded in 1897, said the five to seven projects a year it has targeted will involve the construction of new branches, renovation of others and the closure of a handful of facilities to eliminate overlapping areas as it adapts to technological changes.

“Basically, we’re converting ’70s and ’80s old-style branches and modernizing them,” Peter Ho, chairman, president and CEO of Bank of Hawaii, said in a recent phone interview. “We’re moving from more traditional, largely transactional branches to a modern system that handles transactions but is also much more customer facing and conducive to serving the various needs of our customers and communities in a variety of ways.”

The first phase of Bank of Hawaii’s transformation includes building a 5,000-square-foot regional banking center in Pearlridge Center that will have upgraded technology, a spacious and flexible floor plan, seminar capability and experts in investments, mortgages and personal banking sitting in the branch. Bank of Hawaii also plans to build a new stand-alone branch in Manoa, modernize its Pearl City branch and relocate its Kihei, Maui, branch to a new modernized facility. The bank just completed modernizing its Haleiwa branch on Dec. 1, and in May completed a two-story, 13,500-square-foot regional banking center in Kahului.

“Over the next five years, we have plans for approximately 30 branch projects,” Ho said. “Some of the projects will be completely new branches, some will be renovations to existing branches and some will be replacement branches. Through this process we may close certain older branches, but that number will be reasonably small and, in fact, a fraction of the 30 projects we have on the boards.”

Bank of Hawaii, which has $15.16 billion in assets and 2,100 employees, currently has 71 branches, including 65 in the state.

Ho said there are no plans to lay off any employees.

“As a matter of prior practice in Hawaii, when we close a branch we try to retain all of that branch’s staff,” Ho said. “The reason why that’s important for us is because when we do that, and move that staff into other branches in that same area, that ensures we have good transition for the customer from the closed branch to the new domiciled branch. That’s a very important element to what we do, and frankly that’s been very successful for us.”

Ho said the banking industry is in a different financial reality post-financial crisis with the prevalence of online commerce conducted via mobile devices.

“The need for financial planning, budgeting and those types of topics, and the need to be educated is at an all-time high,” he said. “What we see is somewhat an unprecedented opportunity to service and take care of our customers. One way to create unparalleled convenience for our customers is giving them the opportunity to do routine transactions using their phones or using ATM machines using self-service kind of media.

“Another opportunity is as those day-to-day transactions move to sort of a self-service platform, that gives us the opportunity to concentrate on the people side of banking and help people understand financial issues or financial opportunities. The way to do that is to provide a new and higher level of technology to our customers through mobile smartphone applications as well as through what we call easy-to-deposit ATM machines, which have tremendous capability — far more than what our standard ATM machine can do.”

Bank of Hawaii already has been transitioning to easy-to-deposit ATMs in which deposits can be made without a deposit slip and an envelope. The machines can take cash, or up to 30 checks at one time, and will read the amount on the checks, ask the depositor to confirm the total and print out an image of the check on the receipt. The account number for the deposit is determined when the ATM or debit card is inserted into the machine.

“We’re starting with all of the 71 branches, and we’re nearly 60 percent complete,” said Kevin Sakamoto, senior executive vice president and branch division manager for Bank of Hawaii. “The target is to be completed by the end of February.”

After only a few months in some branches, more than 25 percent of deposits already have migrated from the teller line to the easy-to-deposit ATMs. The in-store Safeway Hawaii Kai branch is leading the way at roughly 31 percent of the deposits going through the new machines.

Bank of Hawaii has 406 ATMs in Hawaii.

Ho said the bank wants to focus on using its branches — which will be equipped with audio and visual equipment — to help promote financial knowledge through a seminar series.

“We’ve been doing financial seminars for a long time, and we think they’ve been effective, but we want to redouble our efforts in that area to help people have a better understanding of topics like retirement, saving for a new home, budgeting and building credit,” Ho said. “We think it’s a really great way to utilize our branches, and great for the community.”

Sakamoto said some of the branches can now have a smaller footprint. The space can be reutilized because areas with filing cabinets that had been used for storing reports are no longer needed because those reports are now in digital form. Also, much of the equipment traditionally used for processing transactions is not necessary because that activity has been largely centralized and no longer occurs within each individual branch.

Ho said old, unnecessary processing areas are going to be eliminated or shrunk dramatically, but actual customer servicing areas will remain unchanged or be enlarged.

“For instance, our Pearl City branch will actually have less square footage in total but actually have more customer square footage,” he said. “Our old operations space will no longer be required because of technology advances that will shrink that space dramatically. Customer-facing areas will be the same size or, in some cases, even larger.”

Ho said the bank wants to enhance its convenience offerings to take full advantage of technology and the digital era.

“Enhanced online, mobile phone and smart ATM will enable our customers to have greater control, security and convenience at their fingertips,” he said. “We believe technology is a complement to our physical branches. As everyday transactions move to digital solutions, our branch staff will have more and more time to tend to what we call the ‘people side of banking’ and our branches will be configured to help support and promote that emphasis. What will grow in importance in our branches is the ability to consult and advise customers on their financial health and needs, offer need-based financial solutions and to deliver seminar-quality presentations on financial topics for the communities that our bankers and branches serve.”

Ho said the bank’s mobile banking business has grown dramatically to 5 percent of consumer deposits today from none two years ago.

“We want people to come visit our branches, but we want to make sure people have the added convenience of using their mobile app to do routine banking transactions,” Ho said. “I think what you’re going to see over the next year or two is a real upgrade for mobile capabilities. Basically our goal is to enable our mobile device to do everything that you can do with your wallet.”

Bank of Hawaii was the first local bank to offer Apple Pay for debit cards and plans to implement other pay devices next year. The bank’s mobile app also allows customers to use smartphones to take a picture of a check to deposit it.

Ho said Bank of Hawaii’s 17 in-store branches also play an important role.

“They are just really important to our overall convenience,” he said. “They offer seven-day-a week operations. We love them and think our customers love them. Frankly, some of our best growth stories have come from our in-store formats. That’s not to say full-size banks aren’t important, because people may want to go to them to apply for a loan or a mortgage. But for everyday stuff the in-store branch is the best.”

Ultimately, Ho said it’s all about making banking more convenient for customers.

“Our goal is to enable people to bank however they want and whenever they want,” Ho said.