FHB - Earnings call transcript Q2 2019

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Operator

Ladies and gentlemen, welcome to the First Hawaiian Q2 2019 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct the question-and-answer session, and instructions will follow at that time. [Operator Instructions] As a reminder, this conference call is being recorded.

I would now like to turn the conference over to your host, Investor Relations Manager, Mr. Haseyama. Kevin

begin. may You

Kevin Haseyama

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

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

During today's be will statement. our we please refer making so call, Safe forward-looking to for statements, slide X Harbor

We will to discuss non-GAAP measurements GAAP the reconciliations contains appendix financial measures. comparable also this presentation to financial certain these most non-GAAP of directly The measurements.

over with provide who on call to highlights starting And Bob, the X. quarter now, you slide turn will second I'll the

Bob Harrison

Thank us Hello. and credit results. we expense joining by quarter, and today, second continued management. thanks pleased driven as had to you, for quarter Hi, interest margin our that higher net report solid I'm review Kevin. prudent everyone a quality, we excellent

a measures average return of profitability over equity tangible with return of core a strong remained assets common on average on XX%. just X.X% and Our tangible core

program, returning in We also executing $XX our share second million to began shareholders quarter. about repurchase the

Yesterday attractive our share annualized Board based per of today's an Directors price. closing declared dividend representing X.XX% dividend, a $X.XX on yield of

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

Eric Yeaman

Thanks, Bob.

several by by balances as the million, drove we anticipated. million production X.X% a quarter. good residential production the X.X% X.X% the at $XX balances due saw to with completion quarter loan billion, or $XX had in approximately X.X% the decreased during $XX.X million or quarter. of the prior or million, end. versus slide or Construction to We X. increase $XX Turning balances quarter CRE loans ending $XX.X quarter projects during during the Strong increased up loan loan about loan

net in by million, National payoffs to $XX dealer and offset the portfolios. and or and pay C&I X.X% portfolio by in the growth Mainland Shared Hawaii due downs partially Credit declined balances flooring C&I was this

CRE to our a and range. forward the growth maintaining result full loan be estate looks good, Looking pipeline single-digit our in residential outlook we year mid as and for are real

Turning quarter down Deposit the that a prior unchanged balances deposits ended to at X. to $XX.X the continue couple This billion temporary $XXX draw slide the We at commercial the amounted million. quarter. accounts flowed about from to of of XXXX. end in saw

during expected consumer on growth outflows saw these commercial X.X% X% by within quarter grew QX. or X% and Excluding full to our in costs $XXX taper-off upward the deposits year deposit million pressure about We expectations.

basis result cost by total only versus a the points quarter. basis point our deposits X As increased of -- prior

the statement. I'll to over turn to Ravi call that cover income With the

Ravi Mallela

Eric. Thanks

adjustment was interest $X.X net Net and million, lower increase of X, slide a and included first million an second quarters XXXX. the income the to of of to amortization Turning first increase quarter million $X.X second negative due quarter $XXX.X versus an in second income million both quarter rates. versus premium the in interest interest $X.X the

of cash X.XX%, driven was loan X a the the same The X.XX%. asset was mix the by increase was in first basis the in interest in NIM quarter adjustments The net quarters as X by balances. reported first NIM The of both premium point funded points. was second reported the increase reduction a and margin shift from about basis growth impact

$X.X than million, non-interest income was X, higher prior slide million quarter. the to $XX.X Turning

quarter The $X.X a first loss restructuring. from million the included investment portfolio

by nonrecurring lower quarter, benefits prior items, offset $XX.X higher were $XXX,XXX expenses primarily partially expenses. million about to Non-interest and the salaries than due

was Our quarter efficiency second XX%. ratio in the

original our were first manage XXXX of outlook. the able to below expenses half we In

half of expenses second of While, year year. in we the outlook. will in will anticipate to half we XXXX original lower second the still now the in first the X% our We the expect expenses of be that than full year, X% than the higher expenses half be increases see to

turn cover asset over to call quality. to With that, I'll Ralph the

Ralph Mesick

Thank turn you, to in Ravi. to your We'd deck. attention like slide X the

continue costs high nonperforming level enjoy end. of were average minimal We at and assets to below asset a historical quarter our Credit quality. remain our

basis the Net annualized charge-offs XX an amounts average than This were $X.X points higher is On than quarter. and prior basis basis on points quarter the the to quarter and last this X million year. basis points leases. higher loans X for same

of decrease losses was in quarter the loans prior prior million million or loans real is the is basis earlier. total lower the for down reserve Provision mortgage from the And $X.X million quarter leases of XXX lease from and requirements decreased residential year the loan $XXX.X other The and and quarter. quarter. for million estate provision $X.X leases X due owned. $X second points prior on X total which This expense the eight and points to were basis allowance assets and nonperforming basis points the to was a points Total our to flat basis versus portfolio. down

turn And now over call the to I'll back Bob.

Bob Harrison

Thank you, Ralph.

X.X% first at X, June X.X% the nationally. the continued level year. to industry of a slide months visitor healthy Turning five operate high quarter. to through second in State remained compared economy unemployment was The the in Hawaii's rate to

visitor the through year. the last visitor Year-to-date than $X.X arrivals X.X% period billion May million, was same up spending X.X last period same lower although were from year, X.X%

sound. in stable. remained Real Oahu estate market remained Prices

We have decline volumes prior sales a compared seen slight in to the year.

remains the slowing there and operate very outlook level economy are while at positive. Looking to forward for overall of a high Hawaii's economy continues signs

for Before Bank. and would his First leadership to we Hawaiian like dedication thank I wrap-up, to Eric

continued from him success on wish saw in and with He's missed. customers he lasting deep bank you organization that years As the formed us informed earnings in release, relationships ahead. our made the teams August be effective a XX. impact Eric the is the will and We resigning

take to happy be we'd Now your questions.

Operator

from JPMorgan. coming with your We first Instructions] [Operator have Steven Alexopoulos question

Steven Alexopoulos

NIM. as the we quarter on you do third see start again? adjustment this Should to starting what Ravi, for the premium point the Wanted see NIM?

Ravi Mallela

anticipate is that say I'll that And rates typically a we we third do that July, maybe will just a number. of will NIM from of Fed quarter I'd what on think I I'll bit bit if the adjusted Steve of by is quarter here. little NIM XX% at talk four end that. outlook points forecast color the the the don't about provide basis NIM be by little But cuts X.XX%. what Maybe the -- second decline about So

be that's point such deposit pressure on downward cut by put deposits. know, our loan going variable the rates higher offset high adjusting beta public as basis to You deposit on rate -- our will yields. XX And accounts

to And that a X points so X.XX% as adjusted probably following see in basis we'd anticipate basis a X from the point rate XX result, we July. cut

Steven Alexopoulos

see the per Ravi cutting you continues that ratio the path target? XX% we could basis Okay. That's points then a helpful. on to cut do efficiency Fed And to X X assuming think you maintain

Ravi Mallela

I I something it's for. mean -- we're striving definitely think we're

Steven Alexopoulos

Okay.

Bob Harrison

two in We're for looking rate cuts this year.

we're So very on something that's Steve. focused

that the far to we're as But expense that well As it's careful hard look very you managing that our side the efficiency revenue as drives on side about ahead expenses. ratio. saw

Steven Alexopoulos

Right.

drove at I was in more Okay. that looking give much expense And than for. then was Thanks. finally just comp so least the on you some Could decline quarter-over-quarter? what color

Ravi Mallela

sort Steve fees. with was had higher higher the We to origination production. driven that quarter. of loan mortgage levels That do deferred And saw production Yes. loan higher by in of

that's really If for in increase you what's the quarter and numbers you mortgages driving a saw so at number. about look the $XX million that

Steven Alexopoulos

Okay. taking question. Thanks for my

Ravi Mallela

Thank you, Steve.

Operator

next KBW. have We question your from Wooten Luke with

Luke Wooten

guys? going it Hi. How is

Bob Harrison

Hey Luke.

Luke Wooten

to for to little guys quarter about coming but flat year bit And Just softer this loans. kind said year? or for rest mid-single-digit X% increases this the growth wanted still a the quarter of the forecast. I seeing -- growth know you're talk the then the full in for of kind of the X% deposits you

Bob Harrison

We're talking - to we're understand-- about I want Just talking make about deposit growth? Luke sure

Luke Wooten

Yes.

Sorry, full for year. sorry. Yes deposit growth the

Bob Harrison

Bob. is that's X% consumer we've of side about out. deposit we is that volatility at book for looking kind X%. we're growth year-end. lot core the flowed on growth our the And And saw that that of for see what to some This in do commercial back past is our occasion at a as We talked in and Yes.

X% anything to comfortable growth X% we're core absent So, that in with to kind else, book. of consumer the

Luke Wooten

Ravi touched it And you briefly. on then that's helpful. Okay,

more Just mitigating. of rational? kind you on being deposit of Do you saw going forward? kind quarter continuing this pricing costs still that of kind was that Is pricing see the

Ravi Mallela

very QX. the quarter-over-quarter I basis commercial and time money accounts and taper mean went saw XX high market sort of points of happy such we're one with as I'd The beta from accounts deposit say XX to cost upward pressure we that. Yes. public and deposits up in on

Luke Wooten

deposits at And the of Okay, the end the percentage that's total time helpful. then time public of what quarter? was

Bob Harrison

public million. right was see -- we about Slide As look X, our time Is $XX that--. on

Luke Wooten

helpful. That's

Okay. my That's you. questions. all Thank

Operator

We the Wells coming from Jared question have Fargo with Securities. Shaw next

Jared Shaw

good afternoon. Hi

Jared Shaw

on Just Steve's up margin question. following

You're variable start to expecting maybe impact portfolio? margin would do second the Or magnitude two points to you basis the the Is of XX same from loan the cut cuts. that think? rate accelerate side

Ravi Mallela

say. to hard It's

quite what will growth would loan the there's end going obviously, our I what perspective the needs year depend think we few funding that moving parts, and a even see of a from though into be. on

rate But quarter this going tapering I what on costs. to is out second it lot we've seen cut, I nice different factors. think think of I very depend will a a the think of

Jared Shaw

what's then on here? And are yield are portfolio right with the you -- what the buying securities you premium now? Okay. purchase And new

Ravi Mallela

might This queue very quarter any rolled swapped We out ups purchases. and we think didn't some ups. have really I do major of small

too is. there -- future, of So, there It's don't information for I to where much material give kind it you. really isn't the

Jared Shaw

Okay. Shared really a And portfolio, Or of rate? National see of less moves with quarter? Credit trends me to the the we overall looking then that more just was opportunistic to just that expect growth from at should this part continue finally become the

Bob Harrison

just is this of -- of we're really Bob. ebb normal down quarter kind flow We quarter million, $XXX saw and just the the business. was The The about that ended.

past times Mainland loan the have over of is ended quarter, book messaged We I in up just we Mainland. XX.X%. the XX% in on our this about about that And think many

right So that range. we're in still

Jared Shaw

very Thanks much. Great. Okay.

Operator

Instructions] Hunsicker next Laurie Compass coming from We have question your with [Operator Point.

Laurie Hunsicker

morning. Hi. Good

bit grow is about talk little decided there why public Just going? wondered to where public directionally is you've line can we your what to thought if go the time? that you could And the back a funds,

Ravi Mallela

things. would is sort of of manage a out. and just it's look to probably in this -- I Yeah. combination say We flows

mentioned see I outflows of I some from think look the commercial comments think was we little -- Bob mentioned was some included his what QX bit had and of this the accounts in quarter what some surge a call. in earlier in one you we you -- deposits that the that that

some with to think those part went that I out, of we of And fill deposits some what was and public gap. did the of

just cash our is so when the become maturities, at to piece maturities tend deposits. in other we management fill too look The of it lumpy we doesn't public

our is out so, that. sort And sort of maturity the of filling schedule just on part of increases

Laurie Hunsicker

Okay. market point. I I an nobody the bit happen? mean CDs. to came Great. all I continue mean basis deposits just Your out down was quarter Can at you're down. little that savings we money about down, talk that has cost else a stripping your you've And Linked do got core came doing trend seemingly you at a see moment. then basis point directionally? your mean you're what unusual your your just, XX

Bob Harrison

Laurie, this is Bob.

past, As reacting forces. fairly to a we're talked market the the just have and really in market deposit rational we've about we

I as expectations coming the and we've down, up cuts gone have Fed everyone what in general soon meets. rate next the think now seen is week the is when expecting as rate market

I think expectations. that has tempered people's

responding And to so, market just local here. we're really the

Laurie Hunsicker

great. Okay. That's

again Just there quickly two the income Was anything number that else outsized the quick just in BOLI on The questions. X.XX%? quarter. looked statement this

Ravi Mallela

really Yeah. was quarter-over-quarter, Laurie, It was due and $XXX,XXX nothing rates it Ravi. is and around specific. to down this about just moving

Laurie Hunsicker

that then And the then debt but also number round was it was but if non-recurring elevated. release mentioned is? was press somehow and I if the in know there missed of a was expense line. I Can just know I what this, items last just benefit non-interest quarter, you you there Because understand help there didn't apologize in anything. I'd $XXX,XXX Okay. me

Ravi Mallela

bits that lot QX. them we had and areas. that piece, excise In sort lower pieces. QX in up little in a bit recoveries came just a of a few from some you of Maybe settlements touch of came a on of know QX, And I'll bit that different didn't had a small ForEx of little we little lower show airline items. it in tax lot of Yes,

Laurie Hunsicker

that professional service looks of majority your into line. of contract so the... that and like And the fees Is it lot came a

Ravi Mallela

you expenses? about Are -- talking you're

Laurie Hunsicker

Correct.

Ravi Mallela

Yes.

So projects a had in in, consulting the came in we quarter. of piece, that contracted a maybe yes, couple the

Laurie Hunsicker

Okay. should about thinking And then rate, how be that? we tax

Ravi Mallela

our continue rate. would use tax I to effective XX.X% as

Laurie Hunsicker

Great. Okay. then question. And just the last

buyback. Your

quarter, one you're potential in was You which just Thank but full how Can a buyback buyback. of thinking reload? your swoop just great, XX% buybacks and active you. this super were on did us about you refresh you

Bob Harrison

is this Laurie, Yes Bob.

As we have late, this got year we after approval the QX. million talked about we from we started $XXX for got earlier, the little started and a Board

advantage market we has took the there, And bit. to track been so it on trying rush we accelerated our given little we just for the year, so have for so good kind of just feel a we're get Pricing it. and of out don't to stock

Laurie Hunsicker

you. Thank Great.

Operator

further now like I [Operator turn conference this Kevin am to Instructions] showing I the Mr. would no time. to back at questions Haseyama.

Kevin Haseyama

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

Operator

conference. this day. a Thank participation gentlemen, today's concludes and and for have Ladies you wonderful

You may disconnect. all

First Hawaiian (FHB) 26 Jul 192019 Q2 Earnings call transcript