BOH - Earnings call transcript Q4 2018 | Bank of Hawaii Corporation

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

Operator

Good day, ladies and gentlemen, and welcome to the Bank of Hawaii Corporation Fourth Quarter 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 our instructions will follow at that time. [Operator Instructions]. I would now like to introduce your host for this conference call, Ms. Wyrick. Cindy

ma'am. begin, may You

Cindy Wyrick

you, Kevin. for financial everyone. you good for Good us today morning, XXXX. joining of the fourth afternoon, as the Thank quarter Thank we results review

Officer, President today me Peter Chief our Mary is Risk Chairman, Dean Joining and and Shigemura; our Ho; CEO, our Officer, Sellers. Chief Financial

that started, assumptions remind some reasons you get call And while actual are statements. variety Ho. forward-looking there the we today's a conference we turn to over differ those Before our may that let me believe reasonable, are Peter I'd the contain materially call And projected. results will like of from to now

Peter Ho

you, our for of for Thank Year Bank Good today. financial New We good Happy and joining pleased were results. year Great. Hawaii. thanks with morning, XXXX Cindy. everyone. us was another

our statistics Credit Our and margin were expanded XXXX. pristine and remain capital levels robust. liquidity in

portfolios into have confidence our in the credit of construction and at loan future. We present great the

deposits XXXX growth the Earnings per grew and with year grew and billion. by to XX% consumer our Assets, during increased both $XX X.X% the in $XX.X portfolios. total loan in in $X.XX. year assets the X% good XXXX at share and loans commercial all finished was finishing year growth at Deposits with billion.

we plan During to deposits. reduce continued stated year with our public the higher costs local

increased consumer Excluding from last X.X% public and year. deposits, deposits combined our commercial

beta and industry especially which given as We’re deposit our cost of deposit as marketplace. positions performance the hardened by in well this are of best the our

will for provide outlook and the Dean? our on me additional financial Dean for then performance details credit on our to let quality. some quarter with comment ask Now, XXXX. Mary you fourth our

Dean Shigemura

the $XX.X $X.XX fourth the share quarter of to Net third in per fourth share Thank in the and $X.XX or quarter for compared you, per million $XX $X.XX million share income or or was $XX.X million quarter per Peter. XXXX.

and our return the X.XX%, of a fourth our The XX.XX%. Credit number efficiency of previous during portfolio. decrease XX.XX% unusual equity fourth ratio the quarter of to compared the on assets items was on return due was impact sale with was the expense the the Our was quarter Card and quarter during

quarter quarter X the in to net portfolio quarter three the up Credit fourth increased up the and the quarter fourth up margin third in points points The million, million basis from fourth from previous X.XX%, XX basis fourth was and a of XXXX. negatively quarter on interest Net Our $XXX basis the reported quarter basis of quarter interest Card the $XXX.X income $XXX.X points. approximately million margin of by our fourth sale from affected in XXXX.

of fourth quarter. Our beta quarter in with XX% XXXX during deposit the XX% compared the previous was

our basis quarter. expect up to each net margin increase interest to points we XXXX, modestly, will For X X continue

for from the quarter XXXX in remain As $XX.X totaled Mary us. fourth quarter and is provision fourth $X.X Non-interest Non-interest expect quarter $X.X in the items no quarter will Non-interest and unusual XXXX third the fourth and the significant we were XXXX. previous quarter the the fourth a will quarter. severance this fourth XXXX income for we Non-interest million the operational it quarter bonuses of were for X% compared million legal of $XX.X $XX $X million the at noisy claim, million. for XXXX or and quarter. XXXX. items, previous included totaled items, non-interest expenses $XX.X for expenses. the above of $XXX million discuss with expenses million true-up of in the of million per up and $X.X quarter million quarter. of of million credit expenses quarter quarter a recorded and Non-interest matters million medical included to non-interest expenses X% particularly quarter were quarter with of expenses of X% XXXX single XXXX approximately income of expenses. XXXX for nonrecurring Adjusted one-time $X.X with in $XX.X in fourth of expenses of previous XXXX compared in fourth the primarily a non-interest million later, and beginning in to Non-interest in related in stabilize $XX.X totaling fourth up employee compared the charges million these and were XXXX $XX.X Adjusting in million. expenses in unusual There

of tax of For expenses tax XXXX above our for to with expect be for expect XX.XX% X% as reform. effective effective $XXX was XXXX, and full we non-interest expenses The result XX%. XXXX the compared we of rate Currently, up between XXXX tax XX.XX% be rate X% the adjusted to a million. during XXXX to year XX%

quarter quarter. million, $X.X years quarter, Premium the for XXXX. million quarter reinvestment was growth XXXX. X.XX $XX.X fourth As quarter total the The of amortization purchased the during points. duration years a at end in the total of and the available-for-sale positive to during a and was billion was result investment $XX.X quarter $X.X was down million basis the strong of the the the at our portfolio previous years. duration The of in the end quarter was fourth continued loan We and X.XX a XXX X.XX portfolio held-to-maturity portfolio portfolio of fourth duration securities in the differential of $X.X during the from the of million decreased

billion quarter, up ratio X billion our the of of X Tier the quarter $X.XX quarter, fourth the the was from was the of the and end up XX.XX% fourth ratio $X.XX of was equity from capital end quarter XXXX. the end At Tier X.XX%. at fourth shareholders’ $X.XX the billion previous Our of at our at and end leverage

an XXX,XXX the repurchased of total will net repurchase additional is of remainder dividends million. we $XX.X share of by our consistent finally, management total $X.XX approximately between of first ratio adequate minimum million. January and of And repurchased additional dividends our capital authorization out and repurchases. and with with a quarter the a increased growth paid going Tier X% fourth available our an to shares $XX.X or Board shares net share million of million. quarter, and which $XX.X Also, income X declared remain stock strategy and maintain payout the cost XXX,XXX to at leverage January XXXX for current capital dividend the X with During XX% XX% per for forward business our common strategy support $XXX for a to share of XX of the income We

Now I’ll turn the call Sellers. over to Mary

Mary Sellers

Dean. you, Thank

given or total of charge-offs would for healthy with XXXX quarter At totaled in and now X.XX%, the X the and of X well portfolio X.X% in conditions focus from average would year the of of quarter million as the in XX.X past the due down million points XQ loans third million, continued or of of Adjusting unchanged X XX and call quarter the coupled of and the XXXX. million the leases. XX.X or the X.X million fourth the economy. reflective of X.XX% disciplined of Hawaii’s and of quarter X annualized due X.XX% totaled to estate economic average core losses and XX.X loans the loans XXXX and last in X.XX% from have from I’ll X.X down days portfolio non-accrual allowance not XXX.X X.XX% totaled Credit or And portfolio, XXXX. million loans X.X period points net unfunded or with million the allowance Card charge-offs and for million, quarter the X.X markets the third out The to underwriting or the in the million off the XXXX loans X.X restructured and turn the loans leases the the end XXXX, sale remained year continued mix, of total current included down Card on annualized compares of lease customers of reserve for XXXX. prior days Loans or X.X our X.X%, back million the in points was basis year-over-year. end annualized from adjusting the to from ratio down of the X.X with full X our quarter or as end have driven for of million totaled million the of XXXX. XX net quarter fourth leases the fourth million year-over-year. million At X.XX% This X.XX% million the net year, XXXX. XXXX XXX,XXX is interest annualized Net accounted linked or the or third of or XX compared million same more charge-offs million, quarter at down from outstanding our loans charge-offs X.X and quarter and quarter loans third down This management. down assets annualized XXX,XXX the At commitments quality Credit or quarter XXXX X.X for of approach XXXX the was basis XX.X or residential XXXX. the quarter from X.XX% charge-offs the average down accruing more totaled year. X.X XX.X third The total basis portfolio. strength non-performing quality totaled XXXX million Asset period million real point in XX annualized was for Again, or or the XX.X X year, in basis full of in of Peter. end total. with totaled loan for fourth in of 'XX, million compared of and or Net Card still portfolio, and from XXX,XXX the our and Credit strong points, basis quarter third X.XX% fourth for past total our down out fourth

Peter Ho

economy an well strong market. Hawaii pipeline, Mary. due continued and active our construction strength to the Thanks, perform of industry The tourism a housing to continues

low rate December X.X% was and remains very Our rate to compared the unemployment nationally. of X.X% statewide unemployment in

continues with industry of strong year-to-date last be the XXXX to record visitor year. in Our growth levels exceeding

year. Hawaiian same despite decline volcanic arrivals the months compared visitor increased XXXX. had sales condo were the of were happy sales down sales to were big volume last single-family to X.X% prices in median Oahu of including X.X% at and All condominiums. to during down visitor four XX a visitor visitor And XXXX. X% continued spending compared of total inventory of declined activity of the XXXX end Median XXXX, on median larger be due Thanks, arrivals sales sales to home continued X.X% island XXXX, although on the questions. to in for Single-family X.X% Hawaii, to now increased year, in of XXXX. slight months a Real months increased robust of us estate XX first also condominium price for of a X.X increase single-family the the X.X price the the Islands joining home during increased during remain in the XXXX. we'd in compared and X.X%. For Oahu months compared by year The first and the XXXX of homes Months for growth to period and today. again, respond your with sale spending

Operator

[Operator Instructions].

from first with Rulis comes D. A. Our Davidson. question Jeff

Jeff Rulis

Thanks. Good morning.

Peter Ho

Jeff. Hi,

Jeff Rulis

guess credit the within segment it I’ll at card the segment consumer Thanks. color and leave production, looking on any just pretty at what’s the I occurring that with strong net sale and that. there. Peter, even

Peter Ho

You’re Jeff? talking the loan on side,

Jeff Rulis

Correct.

Sorry.

Peter Ho

it Yes, indirect We saw loan the pretty okay. and that continued was side. would a say I Hawaiian good Yes, commercial down year good performance as down installment good well performance both as the the a consumer position. good remains in consumer. line

say So a eco they that for here. good be were in markets space resi and consumption us. good were – would seems I to both

is slowed as I a our has A down rates think moving activity side refi bit. on for-sale of resi interest bit. volumes to purchase lot dampened a activity the production or

space. a We’re and little competitive an there faced aggregate growth it’s with tighter awfully

growth we on 'XX forward say we a there as with would were I look cautious bit pleased for us. So but the remain holds what

Jeff Rulis

How commercial the about side thoughts 'XX? in on

Peter Ho

nice a pay-downs X% Yes. little of quarter mortgage X.X% revival a in was linked the had QX, just payoff activity. the linked, Commercial’s quarters C&I about heavier under other a despite bit so we of on and XX% up occurred of performance commercial basis our QX, portfolio payoffs the about That bit or book. seeing commercial a in XX% to the our Frankly, one for in direction. our the for year; quarter for

activity, payoff through push to heavier good So XXXX. And that despite that still somewhat see performance. I’m hoping into

hit aggregate reasonable you Jeff, the loan if we in same think that we of in 'XX consider if could did So growth year’s 'XX, sides we level that work. pretty I together, both a take

Jeff Rulis

And okay. of if Dean in correct? also we’re get for it, you what that assume the that’s little Got a on 'XX. one I’m income banking range fee trying expectations we’ve kind in you mortgage Would last say kind more line flattish is would of of mentioned to seen, one the specific.

Dean Shigemura

Yes.

I they’ve we hovering think around this expect income I in per that’s kind of that be been of range million that year. kind and X.X them where quarter to think

Jeff Rulis

you. Thank Okay.

Peter Ho

Thank you.

Operator

question with Sandler comes from next Our O’Neill. Deer Aaron

Aaron Deer

Hi. Good morning, everyone.

Peter Ho

Good morning, Aaron.

Aaron Deer

is your what that pipeline that in strong. types down in that wondering on the and that that completions expect types to construction up a seeing looking But I’m mentioned commentary guessing projects. in the is reflected you’re loan activity, you product various – just was construction participating quarter. following Just product the be in? on bit I’m the you that

Peter Ho

Yes, into perhaps side this think for year, been that to to we’re next. Aaron, pretty while going the consistent off and see continue couple actually now, the years of a I now has several civil years

pillar. somewhat that’s So first the

ways On on side, family. single off still the housing a development

hit think the us after the surprising a that going run-up be I bit we end down high is a area. a to of there’s in the is I that But along phase Kakaʻako vertical before a the lag think post pause ultra bit opportunity. taking

midmarket of apartment. development, vertical types We’re activity condo some seeing a more lot around of

particular lag 'XX I right But numbers been, now. a in that call than a for more I’m year say So our a of probably would around I bit segment we’ve 'XX optimistic ago. it got and had

Aaron Deer

with looking the maybe Okay, securities that’s that year, bleed little a of book been you’ve Dean, the over lower. encouraging. then, bit – kind at And letting past

the like, your out ahead? look for and what’s rate expectations the plans at securities in deposit year As what look for the you your current environment the flows book

Dean Shigemura

balances depending – Well, growth, I we a but the maybe we think of do here. to stabilize deposit do opportunities have on on our kind bit

higher, same kind terms what a years In mid three now of it we’re of be looking at, tad is but are could of duration, kind is in generally maybe that right area. the where we in

Aaron Deer

just one tax And guidance then to you XX outlook, the gave Okay. a quick the on XX.

variance you based we’ve Is Just expect in that seen guessing little curious, particular in bit that stock quarters I’m the any if years individual to a recall benefits. there of year I in see past ahead? on compensation quarters the

Dean Shigemura

quarter things the Well, generally what drives that these the variant, the volatility year are think But it’s the the in say pending of come because now kind discrete it we items. extent beyond one-off be that through. items And discrete that would any I low the quarter, a the come vary. kind point right could first I of – stable through to that particular have throughout could but

Aaron Deer

pricing competitors off parts funds so have pricing by far on deposits, have Commentary from just some one banks country of Hawaiian where aggressive some abated. you on in there just public less from. seeing and that there’s that you of been season on you’ve those little of where this one also other has earning the some suggested other the the Are the market competition? pressures maybe a bit that guys last In particularly And environment. backed commented Okay. past has quarters deposit your

Peter Ho

is Yes, would I to Aaron. those say similarity statements, some that there

Aaron Deer

taking my questions. Okay, great. Thanks for

Peter Ho

Yes.

Operator

question next with Our KBW. comes Bohlen Jackie from

Jackie Bohlen

everyone. Hi. Good morning,

Peter Ho

Jackie. Hi,

Jackie Bohlen

Sticking comfortable with additional in a or where you now Peter, funds, declines are at the public level do those expect XXXX? you’re

Peter Ho

that extent for some of again, we’re of get think We declaring pops business. we’ll that we’ve reasonably give environment to what be may segment the happening couple – are runoff. we deposit To of that’s of still recently I in the through particular think segments the function opportunity a seen of us that $XXX the another if will Most now then of kind pricing million if is segment. Jackie, front. to relief on in pricing have last on the the book But in hot see. close optimistic commercial work I which sort those victory good But that case, great of up. that and gets will to it kind really show in on question, It consumer levels kind public because

Jackie Bohlen

regards X Thank And quarterly for guidance XXXX, helpful. That’s does Okay. to what you. then basis the to assume? points rate of with expansion outlook in X NIM that

Dean Shigemura

a bit assumes little That higher a so end, the curve. on long bit steeper

is the would it that from out the at if the relatively I If on would flat, be look way steepen on we it of stay the upper lower curve, it here would we be guidance. obviously end. So end on

Jackie Bohlen

are fund is embedded increases steepness more the a in Fed guidance? curve there at the that additional that And any the it of Okay. or drives function

Dean Shigemura

had one midyear. kind We of

Jackie Bohlen

you. Thank Okay.

Operator

from question next comes Hunsicker Point. Our with Laurie Compass

Laurie Hunsicker

Thanks. morning. Good Hi.

Peter Ho

Hi, Laurie.

Laurie Hunsicker

over a have Just amount the back for the time that’s of moment, to billion? go public for X.X public the deposits do you

Peter Ho

Our time? public

Laurie Hunsicker

Yes.

Peter Ho

As of X.XX. end quarter was

Laurie Hunsicker

great. Okay,

Peter Ho

Down from ago. year X.XX a

Laurie Hunsicker

on where guide? help Okay. premium about you that just then think margin, modeled you have can in us And amortization

Dean Shigemura

Well, it’s bit little had the of the higher. recently, the even little down, moved tick-up probably rates a at – quarter it for here. a have Back it was dipped in most given end might of bit fourth quarter though where the rates quarter

much quarter. could wouldn’t tick but what premium a had higher expect up than bit, little amortization the So to in see we I we be it fourth

Laurie Hunsicker

okay. X.X,

could end we be to again so X basis potentially. card, premium taking your we us uptick bit, if linked guidance your just if higher AM see we strip on thinking little core quarter so the credit at plus widened that margin of point [ph], only And about AM out a a X. And we that, look points the premium basis

Dean Shigemura

Potentially.

Laurie Hunsicker

hit on credit certainly from the your a the and was estate? There the just details XXX,XXX there? Okay. X was slight quarter, highlights million And what uptick commercial any Mary non-performers, very sitting but is and can there in real pristine, you non-performers at then credit that last

Mary Sellers

It for nothing just estate owner was smaller the real mortgage loans number portfolio, material. occupants within of our

Laurie Hunsicker

didn’t charge-offs the X.X should we directionally charge-offs. at then about even credit And loan forward? thinking that the How it your cover Okay. million of million be total out cover look going just book, loss provision, didn’t X if we stripping the card

Mary Sellers

charge-offs of well we’re charge-offs, credit absolute would very the and the And expanded function provision think metrics the a will of growth our about growth we’ve actual some from really be as in well in along I we’ve performance modest. see expect Well, that as In talked as increases but within dollar quality within portfolio. that economic sheet then in outlook. as balance the terms with that I we positioned segments terms

Laurie Hunsicker

loan will to Okay. But again see in clarify, your just loss --? to your we or that we see match charge-offs will XXXX continue so provision

Mary Sellers

growth It’s really a how function it that impossible, have, really we economic Laurie, to it is then where performs of much and really the predict how is, the portfolio underlying because situation.

Laurie Hunsicker

just Okay. thinking way, I we a X.XX. loans one question sitting at should to how number? be different around reserves about And guess more that are that, your then so asked

Dean Shigemura

as direction I’ll and up stab it. a at environment function it a the of more within and take charge-off a our less activity macro really our The of well loan take as X.XX function portfolio. the is of and provisioning level a

other one more somewhat outcome So some activity we to a of words, if activity outcome of is higher portfolios. and in a drive different volatile volatility, proportion going other lending our have lower in

to Laurie. tough So say, it’s

Laurie Hunsicker

Thanks. I’ll there. it leave Okay.

Dean Shigemura

you. Thank

Operator

Our next Matthew comes with Barclays. question from Keating

Matthew Keating

tourism Great. strong – the the I Thank is or within vibrant how appreciate you. question color on Hawaii. market My

Department of perspective the you curious Economic just much your bit growth if moderation just of XXXX, positive, still I it’d great? I’m that growth If does about is about versus right, up? thing last be visitor moderating that your in some and in is have Is forecast, sort Bureau have in Thanks. year. a but going think of good on X% on terms Development’s expenditures how Looking What still provide at business? just color, up you X% a up of impact can it for that

Peter Ho

question. Yes, good it’s a

on surprised great but at to been are. how thing I the we’ve all frankly some think out. numbers point year-over-year-over-year a record positive robust is comps at outcomes have speaking mathematically things that Having flatten

in has average peaks line if we of the car, would how be big bump that think spending goes experience, obviously good reasonable I luxury a think that’s and as in a you bottom luau, Where frankly think have imagine. to than activity and with times are but Put to plain visitor here that high going frothiness great ups, see level big impact shopping that that it’s that bottom well, is we have economy goes consistency to center actually say a the as visitor purchasing DBED of line. that to of like the another part not much have about visitors that, international our our forecasting. of long as the rents to marketplace. for where is there’s much segment, local I’m that does sticks just see doesn’t I and proportionality one periods within local but way, the goods. you where we to growth And And on probably as sure nice often Because economy. less that’s sticks comes the creates spend. might we I

Matthew Keating

And items? That’s projects on for that great growth X% to unusual the going you Thanks, XXXX. in terms expense Dean, of item line most to of year Is down, you’d core of the that you in going costs then, if fee this Obviously, is on the contemplate expenses think XXXX? sort from FDIC the about of anything benefit people Thanks. Peter. expense for assessment; have line terms be the any coming color. growth, particular X% with but

Peter Ho

Dean? Why ahead, go don’t you

Dean Shigemura

Yes. unusual. say I wouldn’t

has strategic it do working the be from built then on. in. seeing our is of been recently. increases we’ve going rest it And think generally what been we But merit for continued that I initiatives have to we’ve

Peter Ho

Yes.

network creating our security at bloodstream near creation obviously of initiatives elevation expense digital efficiency in investment general initiatives, as now, base. expense had is a couple fair a of the little amount a around, pretty hardening for as our base term and least in initiatives just years we’re around for into really heartful that but we’ve well So around Matthew, the

we we’re going have certainly But next. and So financial even maybe perhaps this forward. performance year, and that we likely net-net, be had last before that’s to a positive the the think again for that to year year in our moving

Matthew Keating

Great. Thank you.

Operator

Poonawala Our comes Ebrahim BofA Lynch. question next Merrill from with

Ebrahim Poonawala

Good morning, guys.

Peter Ho

morning. Good

Ebrahim Poonawala

I’m talked if relatively sorry we if where loans securities over guess balance wondering as what expect I net-net to growth your the kind if, could or we and have we this anything balance a pick about the But some over shift already continuing the joined is quarters? that We’ve couple from few actually of missed sheet about of seen deposit years I later. as next you’ve little terms this, I of impact do of earning in wonder flat mix growth I’m should see last up that we Peter, sheet should outlook think how assets for growth. average stay deposit

Peter Ho

good Ebrahim, Yes. a it’s question.

our I it has standpoint two growth retarded quarters, really public strategy about think it in somewhat stated an growth for our the really book. call by been our six aggregate ways; past deposit from

that, point said at which very of to is out two, deposits this minority one. in would of that So to from public market. anticipate up We run here lower the And just growth stabilize is Having kind we’re of would the some hitting at of wise. the commercial running and size cost reasonable going continue, that our in in words end book all public portfolios consumer. we’re other that

take to I’m now. have you we D given deposit have much are than look simply L stands competitive been loan where it we landscape and of the base we lower not grow to as sure a the on If more deposit lot a end from running standpoint, our pressure at right to because that is

Ebrahim Poonawala

all you. had. That’s I Understood. Thank

Operator

not at showing I’m questions this any And further time.

Cindy Wyrick

of you interest for joining thank I’d your Bank us like of today Hawaii. to in continued for and all

have great or of have we further today. day. me any need you topics always, and free As again questions clarification contact to any if Thanks feel on additional everyone have please a the discussed

Operator

Ladies concludes this and today’s presentation. gentlemen,

have You disconnect and may wonderful now day. a

Bank of Hawaii (BOH) 28 Jan 192018 Q4 Earnings call transcript