FHB - Earnings call transcript Q1 2018

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Operator

Good day, ladies and gentlemen, and welcome to the First Hawaiian, Inc. Q1 2018 Earnings Conference Call. [Operator Instructions]. I would now like to turn the call over to Kevin Haseyama, Investor Relations Manager. Please go ahead.

Kevin Haseyama

thank financial for quarter results and we us of Ayama, our review for you, you, joining everyone, as XXXX. Thank the first Eric acting today President, Chief me are Harrison, and With Bob Risk Officer. COO and CFO; CEO; and Ralph Mesick, Chairman Yeaman,

today. a viewing remarks will on Investor at in presentation have our in harbor prepared will Relations to for statements, so Slide forward-looking statement. to our the during making we presentation website be slide We is today's section. we available that refer refer our The and call, for Also, downloading fhb.com please X safe

turn We presentation call who Bob provide certain contains non-GAAP measures X. over discuss you will these will fourth quarter with of Slide measures. I'll non-GAAP on financial also measures. The highlights, the this reconciliations GAAP starting to to appendix to comparable the financial now And

Robert Harrison

year pleased competitive quarter. up previous today. that higher or Thank net we for million joining generated a earnings, capital you, us return was $XX.X the income the a Core $X.X everyone, XX% thanks a on Kevin. quarter. and to report and from produced good with declared I'm dividend. solid Aloha, started million, We first

core average was tangible Our was core return on average X.XX%, return and tangible assets our on XX.X%. equity common

closing of dividend today's Our shareholders on the at record on yield a June per $X.XX XX. of Directors of Based X Board close translates declared of to that share dividend, the into X.X%. May on business price, payable a

the quality by interest expanded and driven reduction growth, mix, in net tax rate. Our improving excellent good an loan effective performance asset deposit a margin, was

dividends expenses, at were low look at we share X.XX%. remained been our range. shareholders capitalized end the XX.XX% special efficiency in results well strong very an total resulted a time. has repurchases form At-quarter-end, in the the of with excess We which team These leverage economy. ratio ratio to focused capital the of return or to guidance on by and a Hawaiian of supported of managing appropriate Our ratio capital

through ask I'll Eric to go Now the financial.

Eric Yeaman

Bob. Thanks,

X. quarter an growth line mid-single-digit Slide annualized in to guidance. Loan with healthy Turning X% growing our in linked-quarter on was basis, the

segments growth pleased portfolio, to are $XX.X to million on all see Mainland. advantage strong In financing X.X% major took C&I opportunities in growth the our drive we're our portfolio. of or of able as we key We of

The a grew mortgage transitioned started our we also X%, CRE we million X.X%, by and portfolio to than when portfolio last a construction on million the full We projects. residential business mortgage model. of $XX outlook $XX.X construction loan the number or our due by our or more year effective grew model to from building a officer year completion of branch-based slightly primarily momentum lower

of the the rest pipeline CRE our looks very However, for strong. year

experienced normal auto the holidays, in we offset loans, this was indirect paydowns but card our the by first quarter year-end than growth consumer in our credit strong For portfolio portfolio. following more

for are be loan mid-single-digit range. forward, to Looking the the in growth full expecting we still total year

to Turning X. Slide

improved we to our to the deposit we where deposits consumer strong as by public in a core While growth overall able our as declined our million, in products million. time shift has We balance well $XXX reduce nice were mix. $XXX exposure deposits deposit by saw deposit public

commercial large goal our changes reduce X consumer growing made million. the with long-term our deposit. we were by their volatility core progress some in Overall, saw commercial deposits saw mainly this balance commercial reduced customer also exposure $XXX to to public that our on deposits quarter while We driven by we and and pleased

a to rates premium increase on by the of in income was the higher short adjustment income versus speeds. slower to margin to deposits. deposit positive higher banks yield increase amortization increase offset well a year. and interest to higher investment the the X.X% increased securities, positive interest securities' X% balances deposits basis investment $XX.X first the in quarter was quarter or Net loan loans prior categories days, The net and in prior the increase first as partially partially the compared included assets, and million as in interest prior and point long-term to Turning offset interest-bearing compared due quarter $XXX.X to income quarter an XX quarter Slide terms an prior interest rates overall premium due net average million impact to million, most of the on million other higher interest quarter the a in and of $X.X compared by amortization adjustment X.XX%, Net or in prepayment X. million number was yields $X.X costs. higher of due earning $X.X of The on

approximately Excluding the the higher than NIM in line the prior our impacts basis of expectation. X have adjustment would been X.XX% the or premium with the amortization short and points quarter, quarter,

We forward result to points by quarter. of few a second Looking the basis March a that the increase will the margin as anticipate rate hike.

quarter as we X, $X.X from tax a gain adjustment. million the bank a noninterest $XX.X XXXX income. show income Noninterest decrease was of a sale prior included to Noninterest $X.X intercompany well a in as the compared $X.X million, income of Slide to quarter. of the million property fourth million Turning

$X.X higher Excluding versus those noninterest the quarter, income. nonrecurring income items, swap primarily fee from prior benefiting increased million by

opportunities structure resulted less Noninterest $XX.X previous expense manage With was guidance call cover and on the better an first efficiency we first in on Slide at quarter, than year earnings, After to quarter. higher range. from Based are XX%. Turning our I'll results quarter approximately or to ratio Ralph that, the turn the asset full million, to quality. ratio the of XX.X% X% of identified expenses, our the low-end over fourth quarter our the than we to which $XXX,XXX outlook reducing efficiency to about X. our reevaluated cost

Ralph Mesick

Eric. you, Thank

Turning to Slide X.

annualized, XXXX. million flat and which, basis to quarter on charge-offs Our is loans XX points asset X the lower than were the equates the points leases. for excellent. and basis average quarter to prior This $X.X quality remains Net or XX and of and is basis quarter were This loans owned. first and points basis Total quarter up estate from on total basis two other the year-over-year. nonperforming $XX.X prior real points leases X assets points million

leases. For points in by we the basis for lease $XXX.X million, looking quarter, million don't total increased allowance the million expense or foresee loans was and any $X losses to ahead, quality. the the provision loan XXX and credit and changes And of $X.X

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

Robert Harrison

a X.X% high lower versus slightly same period due to X.X led to nationally. demand, lowest state measured estate at year. year. in And estate visitor industry million, by of in unemployment Hawaii's Sales of Year-to-date and remained tourism the visitor XX. billion, the Slide well continued up primarily year, market with versus $X.X X.X% the versus pace. strong perform The two were the remains levels. in the homes the one the rate robust last prices unemployment to remained last to real sound. real through arrivals country. visitor March same spending February, Turning first months inventory But economy the rates sectors the first X.X% through was The the increase quarter year. of at compared volume increased period down The were prior single-family X.X% an for

were units XX March, bit have prices than by quarter condominium up that just of so in you thought. impacted more spiked sales the would luxury First a resales

search. our for Looking forward, CFO a I'd thought overall But update positive. on wrap outlook the short remains we before the provide economy I up,

happy We answer Korn we'd to questions. good have engaged Ferry any making that, assist your of and us, be we to are progress. With

Operator

from Instructions]. our [Operator JPMorgan. Alexopoulos first And Steven question with is

Steven Alexopoulos

on understand for slide that after increase. you a margin. that want the Is few basis you're from reported is calling of I say I make X.XX%? wanted to sure adjustments? start you're from out calling first I X.XX% that the where the Or margin the to point

Eric Yeaman

the Yes, it's X.XX%. from

Steven Alexopoulos

Okay, first that's Can report see the bad in on seeing did Mainland. the deposit helpful. costs what And not environment? about we're intensify the many as it higher, the talk it's you were quarter? regionals but as you then, actually competitive And

Eric Yeaman

Prior did more to around we're time a to see pretty on the money. really measured, activity try the banks has their rate of evaluating new and in one the late so We town that, monitoring basis of the attract local and of increases magnitude situation deposits been And to in increase are targeted options. quarter. the large rates most their our

Steven Alexopoulos

money Is there I'm And of XX really on that market, $X.X shocked that broadly Okay. rates will money points. in have basis the more deposits raise you market billion category? pressure still paying that

Eric Yeaman

rational. pretty the we Steve. on think increase as continues increased We're feel what's keeping Fed be to so. on, So there'll pressure rates, ultimately, definitely, And to market's a the close been pulse do going I

Robert Harrison

Steve, this is Bob.

as to Just anticipating, as to the rate the clearly, is continue pricing. some add deposit be there continue throughout will to comments, Fed pressure increases Eric's on year

Steven Alexopoulos

if a XQ? change, then drove The could at and I this continue you And about just growth. underlying the on the some what C&I utilization growth do it in that quarter. in really was Okay. Give strong loan think loan will pace few ask color questions

Eric Yeaman

Yes, it was stronger than we expected.

come we still for not significant. had our the that the still as strong C&I low the was just in, a -- As you guidance. paydowns thought in stand quarter, that guidance And that single-digit would and we year. know, that's We by were

portfolio. As you know, it's volatile a pretty

predict prepayments, the deal fact the we're the some side. looking of at flow And can't so low I C&I given still the think digits we and single that that year on for sort

Operator

next with Rochester is from Dave Our question Bank. Deutsche

David Rochester

hike. outlook, you're talked NIM your I last June quarter your and how about guidance know in you assuming March a On

what hikes outlook rate longer-term So well. your wondering I for assumes for interest was as a just now and

Eric Yeaman

still quarter. then looking fourth and hike another the late are we Yes, June in at

Robert Harrison

don't to have term. so on see, it's on Dave, XXXX, long Past the we that harder outlook

David Rochester

in stay of How thinking guys the XX-year, Yes. that? over terms are And about X%? like does that you just

Eric Yeaman

stable to to the interesting hard hard It's tell. predict. we're from it's been to But dynamics, probably still for relatively it's it's at. Yes, but us see assuming where just

David Rochester

feeling quarter. end talked sounds thinking of about the to switching you're efficiency better ratio. lower Was wondering last just you And you're beyond that range mean, I how about Okay. it XXXX. that the like about

offset kicked cost? would in that higher contracts later Any directionally you color increased hikes the it that there help year, should Or be that this of some great. are thinking year? the be would rate Given next

Robert Harrison

within and, future it grow Bob. of all not fair and onboard business you of keep to amount hard balance of just hike, that Dave. really to of very costs to trying fair range. with it, We're course, whole rate looking said, This is to already, a coming as those a Sure, it the we're costs onboarded overall. We've work amount going the

David Rochester

deposit what one hold this year? guess, the your is. And trending if you that just just outlook also on then a function you one Great. of securities I And Can see here? for about maybe growth last do talk How book. it Maybe could deposits. you that's

think I can could maybe that'll growth too, last growth. quarter your an update thought deposit fund just get all we that there, you great. you be with If loan

Eric Yeaman

Yes, is Dave, to loan And reduce our growth goal, cost core currently, the funds. that's just the we're to fund looking growth. to of deposits exposure given try time to really deposit the public our with those

And investment so our in our primarily we saw funded as runoff well growth you basically that quarter, loan on as securities hand. this portfolio cash by a

in well So going We're trying the it's funds forward. our to growth support as loans forward. try think, dynamic, cost to as be to going I going of manage quality

it's what dynamic. real but really it's of to hard than sort answer crisp other give I've So articulated, a just

David Rochester

securities are a little the to with least stable? -- that rundown having Or Is that hold fine bit? goal do at you book you

Robert Harrison

is deposit Dave, relates a down of coming little cost. it as mix We're our it Bob. okay to the with this bit

we're to So balance looking those X.

with duration off have. you As runs the that we know,

tool have a that's play So we to with.

Operator

next question KBW. Jackie Bohlen with from is Our

Jacquelynne Bohlen

I share as and wondered special thinking had capital a with if remarks how and repurchases color to you of planning little -- mentioned bit go with in you're could and in it CCAR purposes. relates about your those provide prepared you just just they how other dividends and

Robert Harrison

conjunction filers. still We for in holding year We're this with intermediate Inc. company USA, CCAR Jackie. BNPP the filed Sure,

will be capital That July So driver actions submitted for any earlier X. that the got month. this post

and we special as and capital, We and, risk excess either share don't don't So have objectives. contemplating. repurchase that time, are things employ need those growth the we do mentioned, a that, our or to we're over to we have dividends, plan within -- well, I support

Jacquelynne Bohlen

what or a long-term year that that those the terms in indication items? so? X of of Or is more see of thought within is So might then an we next

Robert Harrison

so that. it specifics those Well, are our If of the a and year, we within But our to discuss the it's capital we've of next I have been can't as on submit about things certainly, minds, talking plan, part internally. lot that

Jacquelynne Bohlen

what just like place of and just reclassification one for it one and that looks expenses, through then then kind relate last that housekeeping a salary me The through did And issue. Okay. took other to?

Eric Yeaman

the That think quarter. was of and that for in current the we accounting That wages our standard, adoption about out took was was basically is expenses. new Jackie, quarter prior did effective thing in and the for actually I sort million million. of quarter, salaries comparable And which of a $X.X $X.X the other about first

So adoption standard. it's of new accounting the

Operator

Our with next question is Compass from Laurie Hunsicker Point.

Laurie Hunsicker

if there and Just and go payroll was in anything onetime then also I you could wondered and taxes we can us, just if on know other if there where IPO that refresh costs? line expense the any elevated, back expenses, are other,

Eric Yeaman

expenses to overall, a of there's There you in nothing was pretty know, you of fourth last really year, a had moving unusual. probably year, is quarter. the because in but, bonuses, paid. salaries the quarter for change parts as the overall, the But onetime we so generally the when Yes, increase it bonuses small last fourth lot just of biggest compare quarter the

changes the quarter-over-quarter. of one that's major So

Laurie Hunsicker

And what that savings second the tax then is payroll as we linked-quarter? could the we into see quarter, roll

Eric Yeaman

Payroll savings? tax

Laurie Hunsicker

Yes.

Eric Yeaman

Laurie. Yes, I number don't handy, have that

Laurie Hunsicker

And onetime Okay. then that $XX.X in IPO you that costs up did have million? any showed

Eric Yeaman

ongoing about agreement flow-through. company public million We of as in course, the Yes. that transition And $X.X well. is of had embedded component services costs

Laurie Hunsicker

much is how And that?

Eric Yeaman

in onetime an that's no the of item, ongoing But more cost. increase

Laurie Hunsicker

number -- onetime that in be other there for any mean, items any where out coming that there quarter? where would next And Okay. I

Eric Yeaman

we to onetime only to item, about out get believe, of in backed net I income that which The our disclosures. $XXX,XXX, net income was core

Laurie Hunsicker

Okay. I'm sorry, what was that from?

Eric Yeaman

was That some employee costs. and legal

about legal, costs. was it half employee think half I

Laurie Hunsicker

last expenses. on then And Okay. question

do do merit year? Your later they How numbers? about that? take we effect already increases, baked have think been the they in Or this

Eric Yeaman

our merit comes typically, second quarter. Yes, in the

Robert Harrison

of officers. most for our that's And

it's our most ratably of For other the year. throughout staff,

Laurie Hunsicker

Okay. next quarter? into And how about that should we think

Eric Yeaman

at look the into best quarter ratio. think next XX% way the I is efficiency guidance going really our to our costs at

Laurie Hunsicker

is you Okay, okay. a question this on Good, fair enough. Ralph, provision. And then, loan loss for

that is loan mid-single-digits that? be to thinking we negligible, should wouldn't that? How X.XX% I X.XX%, thinking reserves basically to where to words, that probably quarter you track are. going go and last you are other is you the Given guys to we said the should loans? be which really managing know just In about how be in about charge-offs you are growth below going

Ralph Mesick

provision now, are levels each right events. the unique barring to we're going I So stable, and any think assess going to think are low, really reserves quarter. the reserve And the costs probably we on remain credit

Laurie Hunsicker

And great. last just then Okay, question.

do Assets you that? number under a on have management,

Eric Yeaman

down it's quarter. last $XX.XX from billion, slightly Yes,

Laurie Hunsicker

quarter's Okay. And I'm sorry, number? what last was

Eric Yeaman

billion. $XX.XX

Operator

question next Cyganovich from Our is Citi. Arren with

Arren Cyganovich

just it but industries? know on somewhat strong where it's additional it be what there. give color the different you're that? kind you curious lumpy I just you're growth, With you C&I of seeing Is us -- seeing can multiple kind customers, said to any can of across

Robert Harrison

things. of little came came of the in the had back a good that kind early dealer and dipped Arren, side is quarter number Bob. a a It We in then different up this bit. is and balance

in We local national market. also saw and it the the

Hawaii, a So Saipan. our of Mainland and -- XX% for that, over at loans in Mainland. for in it was Having Guam we XX% the XX balance lot just just the said about kept and

Arren Cyganovich

we're expect kind that you residential the mortgage seeing some of model? market see that Okay. pace? rates fairly would I you What rise are you is business And there? then similar continue know in something to growing extent. a strong, at to the growth that also seeing Is to and on changed

Eric Yeaman

Right.

of by that momentum. model a to have continue believe we dedicated new team range rates As building market even we is mentioned we share. grow our loan at and officers, And increase, mortgage we as previously, that growing can guided

Arren Cyganovich

what great. to? just remind then basis related premium was adjustment you points Okay, amortization was that the And could mentioned quarter, lastly, me just you the for X that

Eric Yeaman

Yes, securities and the just our prepayment portfolio. investment on the portfolio, increase revaluing so speeds in rates lower

Operator

is [Operator from with Instructions]. Fargo. next And our question Wells Shaw Jared

Timur Braziler

asked to that of that Or on quarter. based going the amount the loan Jared. books fourth reduction have a bit slowed answered, you of guys is deposits. the of for of Braziler just really kind little the This the public fluctuate The been there questions looking Timur in more growth? in Is off remainder targeted kind one pace on to first quarter relative is actually Most the through filling quarterly there to and are year? a of roll

Robert Harrison

the looking the and good Timur, it's of the certainly go of we really funding loan not book, the to of mix we know funding our We're hear looking that's public do mix we not And for through Bob. preference. book. is to growth that for bank, bank the the that. at you, when but back this overall No, targeted can at investment public

Timur Braziler

the quarters Okay. December ask And bit question call new pickup after is of it, in hike. any quarter there? in to especially XXXX this strong industry to C&I The targeted then Or a compared pretty maybe wondering, pickup some just hike? little Fed a impressive, really outside prior yield was what just the yield the, there that drove I'm differently.

Robert Harrison

and Eric I'll start can it has. any if he add comments off,

new seen have percentage the a loans in but targeting we industries, nice increase tied of aren't We to any LIBOR.

before, loans, give us a nice, pop. pretty does X-month to tied So as Over immediate we've X/X LIBOR. that much talked about of are our

kick like in. Eric? Anything we're so to you'd And see starting to add, that

Eric Yeaman

No.

Operator

from question Alexopoulos Steven JPMorgan. with follow-up a have we And

Steven Alexopoulos

expense the more think progress one it the that had we I savings for guys? the happens, If house. looks how to through follow-up. Bill nice made today, get Crapo just should about It you looks promising like

Robert Harrison

Steve, about And some pretty has same not have we closely, been discussion following something on of for situs organization the different rules slightly the the but there that's because hard it's and predict, is. depending it's been where to Yes, everybody.

finalized, So have on we happens and the that. see it's really a what have with Once wait view to legislation. we'll

Operator

showing the am further Haseyama any no call questions. further for I And to remarks. now turn I back to like would Kevin

Kevin Haseyama

Have today's your in Hawaiian you Right. joining on First call. a Thank us interest for day. and good

Robert Harrison

you, Thank everyone.

Operator

Ladies and you conference. thank gentlemen, today's in for participating

You great have disconnect. may day. Everyone, now a

First Hawaiian (FHB) 26 Apr 182018 Q1 Earnings call transcript