FHB - Earnings call 4 2023 | First Hawaiian, Inc.

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Operator

Good day, and thank you for standing by. Welcome to the First Hawaiian, Inc. Q4 2023 Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Kevin Haseyama, Investor Relations Manager.

Kevin Haseyama

thank financial for quarter results and we us of Josh, our review for you, you, joining everyone, as XXXX. Thank the fourth

CEO; Officer; today Moses, Risk me are Harrison, President With Bob Officer. Chief Lea and and Financial Nakamura, Chief Chairman, Jamie

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

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

for X also most Slide non-GAAP safe Bob. harbor financial to The now may refer please to this directly these our statement. We measurements. to And reconciliations I'll discuss measures. the So GAAP financial measurements of non-GAAP turn certain comparable over presentation the appendix to contains call

Robert Harrison

start unemployment modest quick disaster. local but a morning, prior wildfires was we're Maui G some overview been in state unemployment I'll a for Good Overall, to rate economy. State adjusted spite everyone. X.X% the low. at pace rate the headwinds. improving by compared resilient December of has Hawaii to the certainly that The were X.X%. unemployment of national payrolls seasonally with Nevertheless, rate of impacted remains

than over a continued on higher year total rest visitor and basis X.X% XXX% visitors and X% prior were levels. last November, with total at the year. The of record Through increase has to Japan arrivals performed to year-to-date XXX,XXX, Arrivals from visitor from spend was arrivals the faster than visitor higher. industry up well with Maui the recovering the year-to-date industry expected state reaching

Oahu median about despite home $XXX,XXX, a XXXX. X.X% than which stable X% $X previous on sales below condos market the the higher Oahu remained The reduced for activity. on right for relatively single-family prices In Median year. was was December million, was price housing sales December,

I'll the Slide with of quarter. discuss our finished We the year quarter a financial to performance. solid highlights X. Turning fourth

net that out interest remains believe We credit quality deposits. customer grow excellent. and bottomed margin to continued We has

actions that I'll next As on additive the cover immediately are took balance to sheet earnings. slide, we

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

maintain capital of capital ratio CETX total XX.XX%. ratio We levels with strong of XX.XX% continue to a and

X. to the to asset-liability quarter reduce reduce of balances balance assets. $XX certain spread that low-yielding December, we sheet million. earning in We million negative intend to and took to Turning will while net off In of the in income wanted over we eliminating improve investment generate go I actions our interest interest the late net the fourth the assets Slide proceeds from those adding $XXX combination, to this starting high-cost average sold in deposit net quarter. lower we securities By use first interest higher income. will loss margin

shares, liquidity, we Capital range sheet. ratio to levels balance our million. $XXX have we following normalized are ample to around bring more to continue high, plan We look to Separately, so B cash for XXXX zero at Visa balance the of remaining value. for gain economics our sell shares in carried book The that were million. a change sheet Class $XX selling elected we the improved opportunities and to a million our levels late shares announced to $XXX of down on of optimize our about

primarily dealer in had $XX C&I and higher loans, million driven Turning about growth by flooring. good to were billion, in loans September Slide X. growth Period-end $XX.X We than leases XX.

several CRE decline due had loans construction payoff As the projects. we completed to anticipated, was primarily in of

primarily portfolio. auto. consumer speaks quality for balances, headwind in overall loans The in quality a the indirect credit of the and it is was there to of the While the strength projects, the sponsors of decline

Looking rate loan to low range. in be single-digit growth forward year the full the to XXXX, we expect

projects present loan construction and loans our growth. residential for demand weak headwinds pay Continued to completed from additional downs

I'll to Now it turn over Jamie.

James Moses

Bob. Thanks,

was Turning and on were in to material million Total our by from by in $XXX deposits total. Slide deposits declined recovery-related no million time Commercial deposits. $XXX and increased commercial were deposit Maui higher of deposits, million deposit public million flows. $XXX $XXX X. million a any time up reduce balances $XXX us $XXX to public retail impact reliance to There by cost increased decline due million those deposits which Retail deposits. which allowed

noninterest-bearing to of total XX%. healthy deposits was percentage deposits The a

time balances starting the the public in We quarter. of higher expect further first deposits reductions in cost

of slowed deposit in costs rate in increase The quarter. down the fourth

from basis increase the total basis a prior points, XXX XX of Our deposits quarter. point cost was

prior Slide lower X. earning a net declined $X.X income by due interest margin million $XXX.X declined interest Turning quarter Net to to X.XX%. net X The assets basis margin. to and the interest to average million points from by lower

improve As we we QX XXXX the in net points income. deposit balances about security will basis sales higher previously, cost reduction and discussed to the expect that interest and in XX margin add

was NIM in spot X.XX%. Our December

projected we in the forward, looking QX. range So X.XX% in NIM

Through on and -- deposits. the interest-bearing the third cumulative XX.X% total XX.X% deposits were fourth of end on quarter, the quarter betas

more X, We several quarter. Slide the nonrecurring was had the income $XX.X On significant noninterest items to that increase. than million, $XX.X million contributed prior

stock for we a gain $XX.X net shares million. previously, mentioned Visa little As a over sold of XXX,XXX of B

on offset gain of miscellaneous other million were and securities partially of items. a a by We million $XX mentioned previously from $X.X sale net million branch from property. sale the loss the another the These of $X.X also recognized

would the items, noninterest in $XX.X income been Excluding these nonrecurring million quarter. fourth have

income $XX about expect quarter We to noninterest to $XX per million million run in XXXX.

noninterest items prior drove item was nonrecurring The increase. special largest quarter. more several the million that FDIC the Expenses $XX.X million assessment. income, were $XXX.X million, Similar to the $XX.X had we than

about several $X.X million expenses in We totaling also smaller quarter. had the nonrecurring

about the Excluding these $XXX.X expense quarter. items, was noninterest fourth in million

year in some due In primarily as and investment $XXX continued to expenses around general be infrastructure expect well XXXX, full we to technology million, as inflation.

I'll to it Lea. over Now turn

Lea Nakamura

Thank you, Jamie.

strong the its bank performance and credit in metrics credit X. maintained quarter. Slide Moving healthy The to fourth

so in experience within expectations. our deterioration well our seen While far quality, credit some is we have modest

We coverage. loss have are across books, either observing signs or of any and commercial sufficient the not loan broad weakness consumer we

X.X% of Commercial loans total classified primarily single basis downgraded criticized of while credit, Year-to-date leases. fell to mention, $XX.X total increased a which assets points and leases, X was charge-offs XX by driven assets million. basis to loans special and to points net were

Our was charge-off higher third X points quarter. rate in annualized points, year-to-date net the X basis basis than

for and past were leases Nonperforming a points quarter, basis up quarter. the bank due assets loans and prior lastly, the provision the And of basis points at the recorded total quarter. end $X.X of XX-day loans X fourth XX from the million

fourth basis Slide our credit losses and with we broken loans increased to X, of quarter total The allowance to up show X ACL segments. million for by leases. out coverage X.XX% point million to $X.X $XXX.X disclosure Moving asset

to CRE Turning well exposure. represents portfolio leases. XX. and and of real loans across exposures Slide Office of We X.X% manageable high leases. diversified secured is XX% estate and at total remained a quality. remains of The well total collateral provide of our approximately snapshot commercial CRE types, loans

of their turn The very credit recessionary remains rates, asset portfolio rate the service We back vacancy environment, I'll impact credit now CRE continue and values. follow-on to Bob. closely segment given and debt the to good. And headwinds tightening of and it the quality over monitor this implications to

Robert Harrison

The continue a a deposits well and down income. positioned improve in December sale environment. us quarter. cost enable to perform to pay the higher we're we We summary, had Thanks, solid our will net in immediately well challenging Lea. to executed security will In and margin believe

happy be questions. take your to we'd Now

Operator

Alexopoulos Steven from comes question JPMorgan. first Our Instructions] with [Operator

Steven Alexopoulos

I want to start on margin. the

you Bob, on guys quarter. You X.XX% would you the said a you you expect what is And hit said the for think margin. first bottom

So you asset the trending I'm sensitive, to I you believe. are starting Fed because once rates, the where curious, into we do NIM get see cut

James Moses

as it yield a through [ that's ] the case, sheet continue to exists, sort That's be asset Steve. see numbers a right. look, you sensitive flat in of that continues sheet, off it today, there, the something of of the portfolio XXX and The dynamics totality And to in securities still like runoff. I balance call moderately look we balance the when portfolio. though,

So about flow of the million off throughout in we $XXX that. expect cash year

the significant when pretty X% funding margin of That's the how deposits. you're goes. with time on public terms margin, things in a it's so tailwind And or

we of laid kind that forward the the way looks sorry, -- it's the the later cuts, at curve when or in also Fed Fed out year. look in So terms of

with for that the generally allow -- we curve So the Even with balance think, of continue looks. speaking, the over of the course NIM even dynamics the grind year. the higher forward that way to the sheet to

Steven Alexopoulos

go Could deeper Okay. little we a That's that. with bit positive.

I because market order But So deposit know are your rates our right? the does payers, lower highest NIM market. down? already start test grinding What's assumption higher. the the guys could not rate lower competitors one It's you're once of if function a not. in rates Fed you of deposit coming or get to But you seeing quick for how your don't

James Moses

Yes.

down. saw way those of So a And slightly chunk deposit on rates, defined the very deposit assets rate our large they -- The are we moment. to the the rates well smaller what have up, is increases our customer see that the amount deposit pretty are. than same floating their immediate at a and segments of our pretty things on to way expect customers

chunk But a deposits we So of large that reprice will asset immediately. there. sensitive we are technically do think lower those pretty

right, off we cash And the that again, as have of dynamics almost flow another kind rate the on of also this expect year Steve, billion we sheet, well. balance fixed $X.X comes

to today's still are down, rates where And repriced coming so put even these Fed were up gets as higher is the that higher than rates on. those

liability going not a about sensitive dynamics earning be the or a some we sheet. more of it's time. balance about lower And of on assets really as see again, but well, there's higher It's grind asset over So NIM function kind to sensitive.

Steven Alexopoulos

ask totally could other question, I topic. X If it. Got different

So it where today? room normal, dealer Curious where that And still are growth now new those the sit see quarter. balances? balances to those was in up? like the the to catch is Or there is nice

Robert Harrison

one. I'll Steve, this maybe Well, take

First, say it's that times, true. if eventually, you it enough

have in also "imports." lagging saw there, it done in bulk bit, some plan floor manufacturer have saw. that better really The producers domestics portfolio. been of dealer has So driven finally, the is of -- It in has a driven supply but commitments QX, you is more -- back helpful. we the The been bigger Foreign Mainland as of out by base. that bringing a nice the a but by lift very job

those are balances we seeing So grow.

$XXX the year XXXX. million than the of about So total. in at it end end still just less the million was balance at the That's of was $XXX

there certainly, the perspective. will room to the same that. go that. back won't It you is group. None go some commitments, just dealer expect still some So back Yes, to basic give But it to us roughly same of there.

Operator

next with Our comes Liesch Sandler. from Piper Andrew question

Andrew Liesch

Just pressure coming most steeper little expense in? I guess it expense you contracts? where guidance from? just was of expecting. vendor of guide lot Is really a a I come on Is Where that inflation? it the there, bit ramp-up is seeing that than are

Robert Harrison

were ask to Andrew, that you we going were question. hoping

we of to been try together to and the years comes -- and doing about I'll really So what a and will. what we've And you couple -- continuing maybe down we're wrap to in it pieces invest of we give figured minutes take talked a idea and couple in. someone last better and this for it to of

our been spending that focused always have data, X pillars, we're we enhance how really strategy conversion on on thoughtful and technology core we're And part very trying of our to and be across different people. our that's and So really since to ever money.

of platform. doing things, analytics couple sophisticated last AI. we've with So is our what pretty a data We've years the built capabilities of been different a with and out also we've lot increased including over

and think it already We the positive But banking of before, went strides incorporated very also we're did lending, into well. last making talked AI I our in we've our for our about very summer, us. conversion As been consumer offerings. we've digital consumer that's online

our really year. And OpenAI open account we're is platform put based probably to built midyear in a place engineering out of CRM. new on or going which a putting capabilities, in-house And we've are this in digital new architecture. in then We finally, opening

We feel So investments all in are place. has been done. those of of most that

more of little income kind costs our bit that thought. rises into we As a comes statement, it than the

can flat. basically see numbers employment You are our

pretty do people, more to in our to we investing adding we are things sophisticated put we are because be place So in-house. a people have team but engineering in able

market our think so mover to competitive that's we give unique in And are options in for doing We market have why past, position market. we be To the a us really a to really be done that? the and lot future. think I our all forward our and deposit in the more well going than going customers first

same number that anything that's the then cetera, really a in there driving of platforms it, as that? is add et people, that in number Jamie, So lot technology a and of of end and some at investments to of well. would you But inflation,

James Moses

I other efficiencies that us. higher to in the good as thing we investments time, kind over think of because for to this rate able think -- add, is commentary, Bob we and to should Bob. little than of expecting. that's these probably have ought invest things. really is create in And do his recognize The down what we those and be others come scale expecting been growth to important it's alluded bit were comments number a you only summary, a Andrew, But

investment and make we'll year part this been to we've continue that's as So making of well. the that

Robert Harrison

point, to add to just And that, Jamie. good

we the sunsetting we and costs optimize operating finish As down up bring everything and new outdated and be improving the expenses. our methods to systems will stuff, our else our

of in the off as having transition new stuff. old mature, kind invested So platforms between the rolling we and in those are

XXXX there's as little of So in that bit a number. that which into on builds going well,

Andrew Liesch

Got it. Got it.

you guess the level think past, company -- do would is growth once like you natural move a I of then? So be expense for what

James Moses

like inflationary get think in I when natural would natural X%, level, past future XXXX. Yes. expectations. be sort we that the of this That's something mean that's probably the in I level, X%, like

Operator

Our next Timur Braziler comes from Wells Fargo. with question

Timur Braziler

and for some at continue does of book at of to funding? guess into expectations much the point higher some back flows proceeds the million, $XXX And is working the those reinvesting what start going the at off stop actually Looking cash be of bond I how cost that book? that used bond down of you to

James Moses

right? off, going then higher And the So do off is is to think side we're to well. things, X I X extent the the loan as cash pay can. to deposits is flow immediately coming fund other number cost that of growth we

the could that So well. have. really that to have at the could of for loan of to higher moment, growth, the we extent to rate of those public us, we story that that as But a -- be it's paying kind extent -- that, we think the love deposits part happens, I off time

don't are those of the tend if bit XXX want. are ], sort like in now. little those if So be if range take you the in to right of [ something XXX credit even you X% -- [ book, the And know take ], -- risk bond a I yields

the between -- there yield So you and very the have funding high. spread cost not is the

the reinvesting right in so be book And the not we're X%. we'll bond excited really that now funding on in when of margins

kind just kind mode for of off it's [ now, ]. of So run

Timur Braziler

I'm you bearing, mix and reduction that Okay. within the may of out to noninterest excess much quarters in any so? accounts liquidity the how wondering then think the X maybe into item line And is some at additional looking That's just how interest-bearing or we there's much over quarter visibility next linked get helpful. shift of noninterest-bearing if

James Moses

we noninterest-bearing Timur. where to about Yes, started total at don't that's we're XX% and We deposits, know, were pre-pandemic. now. right We at

looking is Anything is in -- would -- We We're and we obviously forward. on could say has and rate of that, some that monitoring migration. go-forward from that expect elevated it's that's think that see possible. and that, We to migration basis. we would see expect We're decisions it some be part obviously, wouldn't can't lower we on through continued throughout to deceleration continued here. I environment, but go So of anything asset -- that. this make rapid of think -- go a less the liability see rate year on management sort migration we'll an should changed a

Timur Braziler

of X% any buyback just me, Any initiating rebounded TCE or pretty regulatory guess on looks last a incremental for thoughts capital reconsideration for I north Great. good. here, buyback?

Robert Harrison

buyback Yes, is from XXXX. approval for a we $XX did the this Board for million plan Timur, Bob. get

available And will is that considering. something us. So be we're certainly to that

number We the about XX% a in We're kind the -- CETX are we of the still up on feel X been those years. uncertainty reasonable the we've banks. from There's that not a yet above failures of year environment. several talking amount last of

So we're repurchase And share ability to going cautious, to comfortable it the aware we're capital having going to levels, XXXX. with during of as year. and just we're be but at a little we our the certainly bit that to evaluate very go look do through continue being

Operator

Kelly from [Operator Instructions] next question comes with Motta Our KBW.

Kelly Motta

talk think really Maybe metrics strong. credit, I we don't remain much about obviously, yet

wondering you're Just like any of any viewing could at credit in what And the stage, next what certain or look over X changes this portfolios? normalization for years you're watching expectations how kind so?

Robert Harrison

and maybe I'll watching closely. very over it turn to Kelly, great question, Lea. start that then We're and

of of Some the resolved. on side, have issues are paid last that about no been There's -- midyear [ we still but officers. high office though credit line attention that's the area talked the year we also ] even

We to real continue to the stay customers commercial the in very commercial but close particular, estate. side, the in

normal in going the there As functioning I is on. mentioned some comments,

for recall soon are years ago, as mini as into a as fully while moved [ paid from ] We a They getting little completed. from construction construction they were just deals. paid there, firm as leased off couple construction had they got up, getting you which of off

which normal a to now is it's me, So environment to more back healthy.

is of bit weakness to just comments, turn indirect On a still before a normal Consumer, of side, a but to strength to her are the she mentioned a in maybe talked cards, about. rest I of over lot the to And highlight, last kind for comment lot seeing it back we haven't Maui. Lea that in we a impact we areas really little seen and in as of commercial the we're see of starting from sense. the

But So watching something anything we're as Lea, that? you'd closely. add well to

Lea Nakamura

No, will with quite pleased add. environment. portfolio is say, the this have in I are I really What much of though, to actually we don't the performance even

you far, would to certain thought kind how numbers that headline continue we about it the seen cycle. this weakness pieces But you the the time guess, very borrowers. impacts haven't because about so I and really hear carefully We of, at we your watch we think in

Kelly Motta

all me. more guys. here, I from really the Maybe appreciate X color

regulatory of evaluated fee any structure if started any to overdraft response in Just the that? you and preliminary proposals on wondering changes your you with the impact you've interchange to to could what and you're make be doing and if kind estimates if on

Robert Harrison

On the we're I a in the interchange that. the basically, looking full agree done ] mean, they we're side, supporting something taking principle, we in we Kelly. haven't with, something it's and position [ don't analysis, and ABA's are stand at,

it as So it analysis I also said would perspective because important. [ that's -- the be of but that, be likely to it. mid-sized will to -- ABA's the having starting well think support from position We're to what ] coalition we're and do but evaluating bank a we it, have responsive because

I will once be. knowing kind the straightforward which outcome take of get we process, have to the final doing some fairly better the come in a and an effect not We're think, time to is be. it the idea exactly of still will rule-making what because is analysis, idea into final waiting It will what means

Operator

DeGrasse Christian Sachs. from comes Goldman question with next Our

Christian DeGrasse

alongside to retail have rising you the cycle deposits commercial to the public when some how and fall? to on second, how rate rates expect start and relative rates your that provide a side you react to Putting performed context repricing maybe for the deposit ultimately can

James Moses

Yes.

just that's commercial and thing. for the working a sensitive, the we of again, there's the segment and a I'll way that's kind operating different accounts I kind there it, part, capital, of the that into side of few retail For Christian, both rate DDA or have go of a world. kind balances there's And about and segments of the portion think we a portion guess, back most in

pretty they of scenario. up, on beta way benefit the the got on rates much kind of in way XXX% up so a And the

And portion beta so Again, deposits of would around very way our on expectations probably loans rates that be that XXX% like like are floating the that it's we reduce about those XX% if numbers, as is probably the down, of in are. are that that what it well. you able -- the we similar have think rate to

that So little an is well. in amount also rate a a kind immediate of that tick substantial of but those our deposits deposits will as down bit scenario, there will a are down than loans be what -- of reprice higher are, a

in in manage pretty mix, at we So the that, and to that's of over we're just totality, be able kind terms rates think time of down we'll well. where those

Robert Harrison

we comments, think as segments, And talked less I -- way worth, the continued corporate several go a with just will customers, affluent, to that expectation when the on our them been rates were won't those add working way, the to And increasing way that when as We to quarters. lag, the there high is we be about, Jamie's the conversations, low on our were down well. talking rates it's out. other be net we we've

very well the communicated So been our bankers customers. by to that's

a we that's think So doable thing.

seeing the honest. much not deposit market, in to be are We pressures

Operator

Andrew comes from Sandler. with Piper question Our next Liesch

Andrew Liesch

expenses. out year? to do expect you keep what's up play But bringing Sorry trajectory, to these the how quarterly this costs

James Moses

be always it's totality flat like to happened elevated just slightly probably true-up QX, across just taxes the and generally things is things in going but that, year. extra So QX, in

so it. of looked the into we my kind And of that's have that it, way model

generally elevated pretty slightly maybe QX. flat, So

Andrew Liesch

Got it.

they fall investment then adjusted the the first seasonal goes starting adjustments year as of more then So off the offset quarter, to up ramp more seasonally of on? stuff and some as those during

James Moses

good that's of it. looking think pretty I at a way Yes,

Operator

Kevin like remarks. for over back Thank would call now you. the Haseyama closing I to to any turn

Kevin Haseyama

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

Operator

participation. your for you Thank you. Thank

now may disconnect. You

First Hawaiian (FHB) 26 Jan 242023 Q4 Earnings call transcript