FHB - Earnings call transcript Q4 2018

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Good day, ladies and gentlemen, and welcome to the First Hawaiian Inc. Q4 2018 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions] As a reminder, this call is being recorded. the to turn host, now will conference you over Mr. I Haseyama. Kevin may Sir, you begin.

Kevin Haseyama

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

and slide in is prepared a Relations presentation on downloading our available today. have will Investor to that at We refer website presentation remarks The for the fhb.com viewing our we in section.

be During today's call, forward-looking we will making statements.

So to highlights, non-GAAP to who X financial on the the GAAP measurements. most Harbor these I'll presentation Safe certain appendix please with fourth The quarter of refer this directly the Bob, to comparable for We'll to our now, call over measures. discusses will X. And discuss measurements slide turn you financial also provide starting reconciliations statement. non-GAAP slide

Bob Harrison

and joining I’m a pleased bring as that everyone year per quarter close. our a Aloha, and XX.X% earnings Kevin. ended the grew XXXX to from we thanks share XXXth results core as you, us we to quarter. our quarter for solid Thank anniversary fourth share prior with today report

driven was expansion, basis points disciplined and by of performance financial deposit Our margin asset excellent expense loan strong growth, quality. XX management and

$X.XX period. average strong return risk restructuring has a January, equity impacted increased a of X.X% by our in X.XX% results, $X.XX detail very our which rate Core the profile to Directors our exposure quarter our executed deposits our The more sheet declared return will share dividend. in profitability dividend XX.XX%. on on measures in payback reducing a common our with remained assets profitability, presentation. further enhances our per and continued balance early Yesterday, of optimize tangible and share improves core fourth attractive and We restructuring to public Board time investment per of average later core interest tangible or Ravi our discuss and future restructuring, of portfolio.

on target of we CCAR, outlook core will to to incremental more came expired TSA say which This forward, XXXX of guidance expenses. agreement on subject of Before be to that expenses will has over and total much and we per over expense respect approximately that the $XX year, call Services The efficiency going better slightly no XX guided Agreement expenses. of the With detail full TSA which XX%. of Separately, Transitional core actual goes was expenses expiration longer idea I was December million and Paribas. Ravi recently reimbursements above the just at of to our going our was our including million $X to expenses turn being I few the impact than about a our as provide year in expenses, yearend a want XX, better the at when have previous and he add XXXX the our of million with XXXX XX.X%, well from in on XXXX. reflected incremental words on or BNP Eric, ratio part base capital. to the

ratio total a was end we binding the At our capital, capital, common and to on total sheet tier capital the our our equity Moving of and the capital fourth structure primary have balance quarter, becomes form XX.XX%. ratio evaluating capital as needs been our given of X constraint.

providing additional basis all end room subject risk approvals. growth, our outlook requisite total of points the capital ratio profile comfortable capital we down to that feel XXXX, XXXX Given for can we XX and for bring about by distributions

the turn balance Eric to Now, over over go to it I'll sheet.

Eric Yeaman

Thanks, Bob.

broken million during production From two as quarter previously million the million variety to perspective, year single-digit Turning changes. by believe loan up Hawaii. Hawaii X.X% categories. X.X% repricing loans informative we of and slide strong in during the $XX.X mix guidance from or loan fixed or us good or up almost that because of equity characteristics quarter the saw rate is loan X.X% balances approximately a or full equity XXXX Guam contributing of out grew year the portfolio during The you was levels. flooring closed or more with feel categories these construction We quarter, has increased two and the a We C&I very which a $XXX million loan versus loans. mid strong combined that million quarter for the ending or during yield loans deals loans the increase loan quarter growth. at growth home of positions We for in prior loans grew we $XXX portfolio are X% residential quarter. to $XXX balances. had the in different. a Beginning driven the as in with by dealer the curve experienced well this and repricing million we solidly home line million we know in CRE a our $XX more during the X.X% separately continued $XXX loans, number and variable billion, housing the by X, for showing and demand of and X.X% are slowed quarter, our strong year, the quarter. high by grew we had for residential solid this to quarter production third levels very during C&I normal by prepayments $XX the Also $XXX

the for expect we forward, range. to loan mid-single be digit Looking XXXX in growth

the deposits. year time in of $XX.X slide full quarter versus and year. X.X% at The X.X% or X, for $XXX up prior balances fourth $XXX million growth in ended to or XXX deposit down Turning million was billion, reduction the quarter the the million public net

was by of the million long. balances $XXX balance sheet the quarter surge not expected grew in about in quarter. deposits deposits, million about or time the $XXX the during deposit in public of very late that to on reduction the are remain X.X% Excluding came that growth Included

While rates on to remained our continue market pricing in deposit accounts types certain fairly increase, rational. has of deposit

$XXX fourth by of mostly was partially planned During consumer cost higher rates reduction basis deposit was which in growth million time offset public our in decline deposits the of and balances public offset of by as quarter, deposits. X by full impact increased our commercial in was reduction of in deposits point the deposits. $XXX the year primarily million, driven time The

the the borrowings over our our against added help to we I We These as flexibility. funding $XXX fixed late statement. million borrowings will call protect quarter. rate term increases pricing the deposit continue cover in diversify Ravi and will another of future to mix that, to income rate to term With turn improve

Ravi Mallela

Thanks, Eric.

about from interest to borrowings point securities prior loan rates, quarter to was an The The offset increase amortization higher Turning yields, interest added X $X.X premium balance the XX was basis million, sheet increase increase of to quarter net margin the partially investment a repricing. and adjustment X, lower to due higher increase loans reduction cash was balances. balances third basis The income due was the versus slide net X.XX%. versus the million of increase of of and $X.X and in $XXX points income in million excess and balances versus basis XXXX. of the interest the net quarter versus fourth points by of in NIM quarter an and the investment shift the third mix to liquidity, quarter quarter fourth three in higher for the NIM. deposit X.XX%,

Looking seven forward quarter, basis portfolio five backing to expect after the points the NIM with first impact rate benefit margin we will the of the the from investment X.X%, to out amortization impact hike of the premium the December adjustment. and increase of the restructuring,

million $XX.X lower restructuring. the non-interest due loss X, quarter, than the on portfolio related million slide investment securities than primarily was to $XX.X to to the income impairment prior Turning temporary $XX.X other investment million,

mark-to-market increase saw noninterest increases Fourth receivable amount. prior fully noninterest modest million, quarter offset $X.X is income cash Excluding matured on related $X.X with hedges fourth categories securities $X.X loss all million quarter-over-quarter the in been quarter million an compared and increase flow noninterest in in would the and the for exception that the a $XX.X have an for adjustment the of two taxes. same income We quarter. the inter-company The provision million loss, tax to an taxes related income receivable for of to includes by $X.X BOLI. to December non-recurring in intercompany million expense

to Turning the prior than about million, expenses $XX.X were $X.X million noninterest quarter. lower slide X,

$X.X million processing and fees $X.X in data elimination of expenses. primarily due settlement card include, the more expenses $X.X professional the rewards the Some significant fees, to to contracted assessment lower FDIC services third the litigation million the contractual surcharge, of higher regulatory due higher million and recorded quarter, $X.X million and higher changes

Our XX.X% and efficiency the year. quarter was ratio for XX% the fourth in full

core for Our in core hedges the and to ratios efficiency benefited quarter. the million The fourth full gain quarter was the XX.X% cash ratio from full-year the and recognized related XX.X% efficiency fourth fourth quarter year. flow in $X.X the

and been Excluding the core fourth year our below ratio the XX.X% full would this in XX.X% have full efficiency slightly quarter year, gain, the guidance. for

building about annualized represents million, the the Starting to and in a non-interest rate, for which of expenses. the of QX one an reduction in base FDIC add good mentioned that on the we call quarter to that X%. we million guidance of expense a use run this believe we expect QX fees, year expenses expense give to will wanted XXXX inflation expense with target. volume-related As as XXXX XX.X full past, full includes We noninterest assessment $XXX

add the million to the $X an X%. remaining incremental expenses earlier, will Additionally, which Bob Agreement, Services referred additional Transitional or approximately from

see of increase in BNPP. expenses as will the an reimbursements also reduction in a result from We

the increase guidance the difference guidance, results reimbursements expected $X.X from activities expect million up core efficiency XX% XXXX. approximately contribute in Adding to expect the to $X.X $XX.X expenses. to With this XXXX. XXXX between expense XXXX in in these we in in expense full-year and growth This loan these be decline million XX.X% million margin annualized over to increase QX expenses ratio We expectations, base. in and approximately a factors X% X% is for to our

liability transaction by did of was of work be and deposits million the size slide we result in adding approximately XX, side XXXX restructuring the $X.X investment discuss to rate January, recorded portfolio lot differences restructuring. reducing will years. efficient improve January side bank to transaction took a the the timing end of duration. five was stock $X.X to shorter now, and estimate recorded back of of we overall the at sheet. the over which we higher be The borrowings. restructuring balance potential sold quickly and advantage of the income of agency because We the a years. compared on of treasury date will earn of of time estimated asset $XXX and turn be The to back when cover the yielding quality. period the at proceeds the will QX QX securities significantly earn term in public with valuation of were date the event. of I'll a And X.X accretion it a securities In and balance million to seven rally total an I'll to the similar fixed and in Ralph the We sheet December end In as the between net mark. Turning in reinvested in loss the X, period the approximately in the million XXXX, use that securities the earnings year felt capital the asset the year time to agency of at and an marked repurchase,

Ralph Mesick

X prior you basis your and If X an the XX, fourth loans $X.X same Total of quarter from of points other basis This quarter attention Net that remains points points quality X from asset or than million prior and real quarter annualized excellent. our points higher point X loans see is and average This owned. basis, lower X you, last estate for quarter. points charge-offs last amounts turn and were Thank the the basis were year. to total leases down on Ravi. could I basis non-performing the million slide assets XX On quarter leases. basis is $X.X than this year. the and to basis

loans fourth $X.X quarter, and provision by losses leases. and the million total the $XXX,XXX $XXX.X is XXX basis for the million, allowance For and expense increased of to loan which was points lease

overall our quality. over we to shift any the call And asset ahead, don't now, anticipate in Looking turn back Bob. I'll

Bob Harrison

Thank you, Ralph.

to year-to-date through estate led down versus The The was fourth arrivals last prices $XX.X November, rate well months with sector, of increase. year estate in XX, nationally. strong the the continue over with compared sound. prior unemployment XX quarter, last X in up year. where remained the market along visitor million, continued to period rates The increase year December and spending slide X.X% condominiums of segments perform volumes robust real state single-family X.X% remained for and first lowest by one X% of tourism visitor in unemployment were and the to X.X% real both billion, an Sales country. to visitor were homes slightly versus same through Turning industry economy the year Hawaii's the the was

your And with we'll be take Looking outlook positive. to for that, forward, the happy remains economy questions. the overall

Operator

Our Rochester question first Dave comes Deutsche Instructions] [Operator from Bank. of

Dave Rochester

just expense XX.X your that clear, base, is on your you using I core wanted on XX XX.X are the slide to million million be not guidance, Hey, you expense. as guys the say

Ravi Mallela

as right. That's using million our the We're base. XX.X

Dave Rochester

on willing right just at to that, considering so, valuation Bob, of timing the Got reduction at you point? outside of And offering it. thoughts you you just thinking now, that your about if be given there deployment buyback capital how this the great? lower Are stock are any the frontloading would And maybe are and of the BNP this point? comments,

Bob Harrison

we're under the setting that for the parameters to affect yet, that. right Dave. come We throughout the -- do year the the still over and consideration. how haven't the made to really that we'll year, and looking decision We're decision on That's to timing

Dave Rochester

the you're Okay. using -- right? that And X.XX% on base the the Did correctly? X that as bps, expansion, margin hear that's I the to for guidance X

Bob Harrison

amortization. premium We're That's the backing out correct.

Dave Rochester

Okay.

X right? the X And so is bps hike, that maybe December from would to to expansion equate of that

Bob Harrison

That's about right.

Dave Rochester

hold guys know you Now, quarter, next about were from the that, NIM quarter here, stability, of just how the repositioning trend but are to the it? how for bps curious, in the first Fed you I the from beyond thinking outside are you go about rest the year? just looking are on through thinking get the of the X you

Bob Harrison

I after hike up it's for so think those -- stability rate We after picking the year. really only basis had and X probably stability in the points. one year

Dave Rochester

that hike you the said You for rate had wise? one is year. When timing

Bob Harrison

middle In of the year. the

Operator

Thanks you.

Jackie of Bohlen Our KBW. next from question comes

Jackie Bohlen

about that BOLI from has a around been and outside Given how income hopping little we quarter, last bit that's going forward? benefit think of the should that insurance

Ravi Mallela

part really really comp our declined mean, I Yeah, plan. the BOLI the that's deferred of tied just to quarter-over-quarter was

so, fluctuate plan will liability from moves it's around it's and It And the around that. to comp move to offset an going comes that as quarter-over-quarter. our so, really

Jackie Bohlen

an ones then in hedges, impact provide have flow Okay. of any that there And in enough. future? that could Fair terms cash additional are the you

Ravi Mallela

No, we more. any don't have

Jackie Bohlen

step one then back. just I'll and last And then one Okay.

adjustment was of that something million variance million it about, from or X.X a than last amortization premium is X.X that? spoke quarter the On different that you

Ravi Mallela

the for I quarter, think yes. don’t any itself, in sorry. last It's the was quarter there

Eric Yeaman

QX, Yeah. We Jackie. in didn't have it

Operator

Our from next Laurie Hunsicker Compass Instructions] comes of Point. [Operator question

Laurie Hunsicker

good back Just to your that's a this your XX.X contracted there run million, making services forward? wanted that outsized a should and to going we non-interest adjustment bit were the circle be any professional or quarter. on fees Is expenses, rate

Bob Harrison

It's a pretty going run rate forward. good

Ravi Mallela

would is the of last I add flow transitional service thing agreement only the the portion there. Laurie, through chunk of will a

have you well. for that account So as to

Eric Yeaman

coming X million a we bit. in plus million on the X about that's QX, Laurie, little talked

going in probably it's to be there. So

Laurie Hunsicker

thinking in your closer it's to a non-interest then taxes XX% for or if obviously for the but rate I the too, just should year intercompany and was it it's line tax how rate going understand strip be quarter, we tax over tax and income out, the Okay. And for next XXXX? to about we

Bob Harrison

we rate tax is XXXX, For think going XX.X%. to be our

Laurie Hunsicker

margin one March up go to this days. to back to know time, just XX I I quarter, coming you're because quarter wanted then the And that more

point So from get just day default quarter, X you to pickup basis count about by the your your a quarter just comparing fourth first change.

you terms that, in that for margin that we're guidance, you're of reported giving? if a So adjusting adjusting are that's guide or for margin the

Bob Harrison

I adjusting we're that. we're don't think -- not for

Ravi Mallela

day Laurie. We the for weren't adjusting count,

Laurie Hunsicker

could being a we X.XX% that about theoretically, Is range. the in somewhere good the see even to So X.XX%, margin thinking be X.XX%, way that?

Bob Harrison

Yeah, pin that's down issue. would a harder to I It little guess. be the

get look how our calculating normalized type of count NIM more at One industry and issue. to we're the we is the calculation strip to are trying to do out things day we

Operator

do from no questions I -- question Thank a moment. you. further at Arren this have showing time one I'm Cyganovich.

open. Your line is

Arren Cyganovich

Thanks.

the mid-single a was year. each something your give had into you Just the on where color like growth where C&I the area looks on XXXX, of that's potential most can little the that buckets out, for you loan that last to digit going you XXXX? from lay growth continue growth Is

Ralph Mesick

Well, see the more mid-single not a and it within lot to probably give range we board. but on Last of our digit saw falling of we the classes. across digit asset variation, going mid-single applying year, guidance kind growth we we're see each a

Bob Harrison

with predict seen get down. -- tough really and pin And previous hard some in us, to quarters number. just seen the the it's to of end as quarter we that you've paydowns C&I We've in growth

comfortable overall with the growth very So we're number.

Operator

Thank you.

next comes question from Bohlen Our Jackie of KBW.

open. is line Your

Jackie Bohlen

a couple follow-up of just questions. Hi,

any C&I higher it know that was the Was mentioned Looking of to growth had you I of some to quarter, floorplan auto strong the due increases. in that utilization? line

Ravi Mallela

just production, less. than higher had normal paydown. normalized slightly had was that We lot but more we No, a

that -- was it's utilization, was that a hard And driver. to then it the some really So driver. that say big was was there line but

Bob Harrison

of see you but end do you every a it the so. bit little quarter, is of year, year, of the end see at doesn't happen do the to this year, Jackie, a bit a Oftentimes, -- little seemed this but at the Bob, pickup,

Jackie Bohlen

about are be I where the about when mid-single XXXX, think where we'll fourth next So of then quarter you the and you're we to strength as guidance be for where think versus looking at today digit year? payoff

Bob Harrison

We don't really payoffs. the project

So that's national especially shared credit honestly the and portfolio. in part that we've with struggled the

area only We they'll as that, little doing finish the can other we those quarter that construction like quarter, have payoffs. we have a seen than pay-off, the we're bit in fourth CRE that's construction third for our piece see the projects and seen as but in and real predictable that

Jackie Bohlen

it Okay. was shared in quarter slowdown or impacted that load? payoffs portfolio And a within primarily commercial credit just that was payoff national the overall it

Ralph Mesick

Yeah. No, was C&I. primarily overall just it Not investment.

Operator

Instructions] [Operator showing conference back closing I'm remarks. the for turn I'd time. to over at questions this to Kevin no further like any

Kevin Haseyama

Thanks, Val. for Thanks me Hawaiian us have questions. We free of you and any joining appreciate additional the in feel day. your your please and if First again interest to contact enjoy rest

Operator

conference. today's Thank and this conclude you. gentlemen, Ladies does

You all disconnect. may a Have now day. great

First Hawaiian (FHB) 24 Jan 192018 Q4 Earnings call transcript