BOH - Earnings call transcript Q1 2019 | Bank of Hawaii Corporation

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Operator

Good day, ladies and gentlemen, and welcome to the Bank of Hawaii Corporation First Quarter 2019 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 be given at that time. [Operator Instructions].

As a reminder, this conference may be recorded. turn Relations. over to Director Cindy like Investor of now the to conference Wyrick, I'd

begin. may You

Cindy Wyrick

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

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

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

Peter Ho

began XXXX strong Hello performance. with and Thanks joining Cindy. us Hawaii everyone financial for thanks today. of Bank

expenses remained and quality strong, well-controlled and levels our expanded, margin remain were capital asset robust. liquidity our Our

the year. deposits X.X% from quarter X.X% high of and March and from last grew the all quarter a last record the was same quarter quarter first loans from and previous X% end at Assets, deposits of up Outstanding up Total Deposit strong at particularly set were during quarter from deposits loans the during the year. increased of same growth the $XX.X new X.X% Hawaii. billion up Bank for previous quarter. the

then for will Now I'll Mary and quarter this our performance on details ask of outlook Dean? financial XXXX. Dean to the our provide additional you credit with on for remainder quality. some comment

Dean Shigemura

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

XX.XX%. equity the X.XX%, first ratio on was to quarter improved return on was Our and our XX.XX% efficiency return assets the during

income Net quarter the first quarter from previous points the of quarter $XXX million year. $XXX same quarter to XXXX. and up first up last the interest was in basis the in points XXXX net for a margin of quarter basis reported in from on two the up million fourth the interest basis increased Our X.XX% million and first from quarter $XXX.X XX

first the investments expected of taxable loss material securities The XXX reinvestment a approximately material change differential municipal no comprised no at going to on improve as as net in interest well forward. balance $XXX largely basis or is of points million duration. gain sale. quarter with sheet XXXX, repositioned equivalent During The we growth income in portfolio repositioning was overall basis on

of current at our given strong modestly well rate the flat we to in maybe position environment as the However quarter, the anticipate liquidity interest lower quarter. as end the net second first margin

quarter of As and year. first third-party in in in included income $XX related discuss provision million XXXX to XXXX first commission Mary we a in million later, this previous the the a the $XX.X Non-interest million administrator. $X.X we of credit $X quarter same insurance recorded one-time quarter through products million offer last of the $XX.X totaled million income Non-interest will with compared quarter quarter. a

of for is incurred no with expenses of XXXX of the expense in expense expenses during items million million beta to the and from of related payroll of XXXX a significant first of related portfolio we cost $XXX,XXX in expense million. quarter quarter million approximately the Non-interest Non-interest fourth XXXX. million $X.X sold Non-interest compared XXXX ongoing the first were the remainder quarter first per included expected addition There carrying previous in In the included to fees quarter the investment million Non-interest $XX quarter approximately for of year. of remain low-income $XX.X $X.X XXXX. seasonal same in true quarter million quarter a fourth repositioning. not XXXX medical charges $X $XX.X revenue operational quarter of approximately included expenses gain matters. legal last a $XX.X housing million of at of income up in $X.X our to first sale. of $X.X totaled a Non-interest the reserve Non-interest and the million and claim expense position seasonal of XXXX in legal approximately in a to quarter $X.X million. related of to payroll of single included primarily in the the

during above we XX.XX% to last was $XXX previous our XXXX expect rate the X% quarter The million. same year. effective XX.XX% and of XXXX, adjusted For expenses expenses approximately be during quarter XXXX for XX.XX% X% noninterest the to tax with compared

quarter included first buyout benefit exercise $X.X of during XXXX of of included option. The an related a million quarter million to first rate low-income related million XXXX tax $X early of The a $X the benefit our included -- housing tax investment. to an

remainder portfolio which of we rate As the our municipal reduced our expect of repositioning, XX%. be to a XXXX tax result approximately for exposure the effective to securities,

years was first at portfolio end of million quarter, billion Our the the in previous the Premium down loan that up investment and quarter. during deposit amortization was $X.X growth from quarter $X.X the strong quarter to the due portfolio year. at million the during and of available-for-sale $X.X held slightly exceeded the X.X portfolio growth $X.X end that the duration first was for XXXX X.X duration quarter duration maturity was was to years in million quarter of same the the total of years. last The portfolio the X.XX

quarter. billion increased of the the shareholders' Our $X.XX to end at equity first

X capital Tier and Tier ratio ratio was XX.XX% X Our our X.XX%. was leverage

Board repurchased of million. for between a shares $XX.X During paid $XX.X of declared cost for share. of X% $X.X of an dividends stock shares net $X.XX the total at of of a of dividend repurchased per additional we X and XX% of our quarter a increase XXX,XXX first million. per April finally, We And total an XXXX, XX from second share the quarter, dividend quarter first $X.XX the million April out common and or in income XXX,XXX

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

Mary Sellers

this past of now points the of this basis $XX.X X.XX% annualized $X.X year-over-year. lease quarter, at million last of $X.X in the end end outstanding period the XX the or of was was the the and the $X for quarter as quarter was million At quarter points asset down mix end million from at recorded. primarily of quarter strength or mortgage quarters of year-over-year. XXXX Net for of totaled accruing was Dean. quality allowance unfunded loan leases given leases loan of or credit the total at $X.X interest average of $XX.X assets of quarter, over you, Thank mortgage included loans basis The fourth X.XX% as million of $XXX.X the quarter, down allowance million points well annualized reserve or of the million the or total million total due loan X.XX% $XX.X of prior and more more days 'XX. balance was total. commercial $XXX at loans The million growth. and nonaccrual fourth the million a down. of the and charge-offs compared period net for Restructured days compared loans net reflects at the from linked and accounted XX the to of The or XXXX. the of past basis commitments still Residential year. the million $X.X first to were the or that quarter, first X with Accordingly, of charge-offs $X.X Peter. XX or the increase $X.X point first for down for placed of as 'XX. in the XX end economy from quarter X.XX% of with the driven first totaled down The million $X for million turn the end continued million million first first quarter $XX.X up at or XXXX. the basis and loans quarter up million in million and million the the points back Hawaii and totaled and and fourth basis down Nonperforming $X.X charge in XXX,XXX end provision due in at $X.X a million call of not to Loans quarter allowance nonaccrual end quarter unchanged loans X from the end the of the the losses charge-offs on end year XX I'll the company's $X.X and totaled and after ratio XXX,XXX from loans $X.X the annualized

Peter Ho

Thank Mary. quarter. during economy perform Great. steadily you, Hawaii the continued first to The

rate bit unemployment very of was March February stats compared year-to-date X.X% low nationally. year a This remains the rate and mixed. to statewide in were Our unemployment X.X%

respectively. spending first visitor of months increased of For Oahu estate XXXX, spending. Median of in market X.X% reduction did by to real price the in home first would condominiums decreased be questions. X.X respond inventory while your for of At the of X.X happy again with us last and compared the home March, to months joining quarter increased X% arrivals quarter two despite although a due and decrease of total sales daily stable remained and condominium months Thanks we homes X.X% decline visitor year. single-family prices were during volume end sales moderate months X.X% the sales. on of now a The the on today XXXX first single-family to Oahu

Operator

comes from of D.A. Jeff Instructions] [Operator question Thank you. Davidson. Our Rulis first

line now Your open. is

Jeff Rulis

It softening estate credit. the on or or you, the sounds real But per warning discuss addition I guys the indicate speaking for was is consumer what you signs like happening -- look question do property. early do on broader you a further just maybe just credit, more what guess to Peter, would one side that broadly internally? it

Peter Ho

factors. a look obviously recent discussions of so at both the past. We lot Yeah, of actually those more

looking off kind scores, don't I'll you commercial and LTVs, I estate turn intrinsic values is, consumer certainly of and both the taken classified up that real would kind to at So I of, we're underneath are we're get we're a guess this looking but trending kick -- monitoring trends books, of but Mary real it that commercial at our I could credit whatever we're characterize looking on looking the the way at believer answer we clean FICO, somewhat maybe cycle. in closer care the And estate portfolios. I'm for and

at least there do would would that at Although -- from precious our standpoint, this would at in a see -- what point. portfolios, in to in that that is Mary, and little analytical economy from prove local an you we want standpoint that quantitative anything? out the add least say I

Mary Sellers

No, would agree. I

is what in we've non-accrual of the idiosyncratic kind think that mortgage I a on went seen commercial to asset. date

Peter Ho

Yeah.

Mary Sellers

And of book. up not really the entire to make

originations what we below mentioned, well kind and metrics see continue in As clearly stronger and Peter were in we monitoring XXXX. both to the seeing portfolio across of

seeing quality are better prior book we to our So in that.

Peter Ho

Yeah.

Mary Sellers

take a what we to trying we're happening. thoughtful approach But and think I watch see

Peter Ho

I year this QX quarter monitoring higher cycles mean, were than Yeah, they were a ago.

pretty So consumer be shape. in to still good seems

-- a good. so a far residential talked the watching about our market bit softer closely, -- volume so off a wise, Although little I sales bit, housing but so little being we're so are far

Jeff Rulis

thanks margin, the the about next that. just out or you quarter, margin direction? I on on down the for guess, to the little on a any if extended question of maybe with got a further talked pause but starts Okay, second an half year And Fed, flat preliminary we

Dean Shigemura

Yeah, to our up stay unchanged where -- balance are, rates looking of we're at on at we sheet flat a depending bit they growth. kind this if point, even maybe from

Jeff Rulis

Okay.

out that's So further XQ. than

Dean Shigemura

still our emphasize year. positive net of Yeah, also income interest but is going that out rest forecast the through I to the want

Jeff Rulis

Okay. Thanks Dean.

Operator

our from Poonawala Ebrahim you. Merrill of Bank Thank Lynch. of next America comes question And

now is line open. Your

Ebrahim Poonawala

Just one follow-up on the margin.

restructuring we and yield the NIM of at would you securities the of the in kind the break following should about liquidity -- think terms the just a of restructuring If -- how the the doing trying received the going from have get to where ex sense yield been was forward? boost where securities down just impact, and

Dean Shigemura

differential would why you have On basis points it I is the did the we versus basis, our and on if that's yield, XXX a the rate. difference a be show slightly yield, reported rate, which equivalent up basis about tax points, tax in quoted but securities at XXX would higher taxable the the

basis on So four about would the margin points. would that, based three -- benefit be to maybe about I basis points say

Ebrahim Poonawala

bit cost market? went X switching the talk that other of bearing kind of interest pricing quarter-over-quarter, it. And little competition can see about bps deposits, Got your -- terms you from side just declining to deposits the you the up just a in of in

Peter Ho

wise. observing Having increases will somewhat of of I fact there's deposit rate short lighter a fair I in the amount a built latency deposit be that beauty Yeah, if think pressure said is, the we system. in see pause think at into rate to the -- begin thematically that, end, we there's book our

it the we following and though to rate that somewhat have so better have to been for These Fed day-to-day. of low not of the been say forward has taken months six And low end, the a that depositors, the have asking at year for even pause it's appears kind short a level depositors people still people coming market that very that These market rate. are plus. out aren't don't

coming the some So, I rate be, I that not term, demand Ebrahim across pricing still of would my latent coming relief in some think I environment, getting we've the see there, intermediate got process guess into -- but flat we transom. if answer should to think is that's a there the say

Ebrahim Poonawala

of back to that might gave of 'XX see a trend Dean ratio the deposit for the -- And higher? sort guidance continue to higher half margin assume Understood. implies that the little bit loan I trend in part you

Dean Shigemura

Yeah. yes. Correct,

Ebrahim Poonawala

would seen thoughts then that. of expect loan Jan, in loan we or in and in of it grew what on believe in X% sequential I be mirror X% heard that I think about And your Should was cycle around expectation where to terms loan year-over-year? just growth, growth XXXX the balances comments, saw more we growth just terms your we've like growth. XQ I loan about that

Dean Shigemura

Yeah, year-on-year it's I number, X think -- that X.X%. the

our we lease had a some had for I buy-out portfolio. in pretty some proxy early that's activity XXXX. think -- some good -- We

be that in And what the book resurgence there construction year. little should the was wise, doing but the some saw of real done, bit volume We the disaster was mortgage-wise, as they've just first of months hopefully to residential pick light. with that a towards of the up back You seems then business. rates past quarter a a

towards push would Ebrahim, more factors percentage. those me, towards think QX year-over-year I versus So linked percentage looking the the

Ebrahim Poonawala

for Understood. Thanks questions. taking Helpful. my

Operator

comes question Deer of next O'Neill Sandler our And & you. Thank Partners. from Aaron

Your open. now line is

Aaron Deer

Great. Good morning, everyone.

rate? It Just book toward there. curious line, full-year the other that highlighted Is related Is than to anything guess, in tax there you've that that sounds guided compensation other quarter first presumably on that, smaller the items also first push the down have tax there from like number than Is but muni repositioning. tied going in might to item elevated affected the any the higher forward. your expectation? the I a stock the quarter

Dean Shigemura

but to bit the related quarter a be seasonal it's incentives, first of cited. we on muni well going some to related that the buy-out is that vesting There that's book the of primarily the item as as our to RSGs, early

Aaron Deer

items other changes guys expense one-time half for are doing the any front back to help in -- on going the through reductions cause And you branch events staff of air? that Okay. any some the any on line or year where that be out could or the expectations

Dean Shigemura

like You costs things Aaron? mean and severance of in terms that

Aaron Deer

consolidations? or costs Severance

Dean Shigemura

see wise, -- I the the and of I Expense couple numbers you QX, to think trend kind episodically past the to in think what was of controlled, similar the pretty kind pleased I'm a years. you've probably you're out. space that's of in including of nicely They're and in come that balance going I seen some think we're those think items described. severance of as I of years with

Aaron Deer

questions. my taking good. very for Thanks Okay,

Operator

And you. Haire from Thank our comes next of Casey Jefferies. question

And Casey, your if unmute. mute, line is Your open. now on is phone please

Casey Haire

morning Good that. you? are I'm about How guys. sorry

on bit. So, to expense a wanted Peter front the for just keep little

the like you the guys up on X% guide sounds to keeping it X% So year. are

to going anything here, be what back expense the below in what's that -- in well drive first pretty guess? what's the there a the ramp first that I Was decent -- wondering quarter, half tracking to year? quarter just in of going You're the special

Peter Ho

Well, okay.

towards I'd say of mid-year that end, pushed So on I the of some here. we are think that comp pretty there -- as is kind hard front we our on plans

a out widen to need we think I bit.

that we right, given the that attainable, think on think I I you're in quarters, you're pretty but three, So just the year-to-date, into I play me put where are pressing let think it come is to looking reasonable, think it is two But somewhat two latter Casey. could I way.

Casey Haire

you. Got

Dean Shigemura

have also in that do that, And merit we increases add I increases started April. year-over-year -- merit our should the

Casey Haire

Yeah, right. Okay, okay.

net then there for and So forward sure. and rates this those thought there down anything is the the I any All new that'll pulling the come apply right. occupancy run like of -- those going other quarter? And are lines, low, is were sort or

Peter Ho

Those are our pleased of I've active types those -- the and us. very really of be footage late that square with know, and for been new should impacts you managing seen running towards We've run results I'm systemic of been in we've a retail as some rates. long-term

Casey Haire

the Okay, great. from last just one one on And me, another one NIM.

do quarter terms going -- Fed I X.XX% that? hold can there away but you competition yields the on or this saw is With first the you guys know hold, you level on in chip in see sort of is -- what of loan at to it forward. mix, depends going Is

Peter Ho

of you there's out ton tell competition I'd there. a

it trend is and conditions it and So to place wise, towards all as well. beginning -- is pricing the over terms

answer feeling to going we're the that -- competitively to -- are yields be I here. question, are I To cyclish So think your be think late challenging. going

business, the to Just pressure to to price that. going know to be landing, be of lot try there's I we we to land get ought a think

Casey Haire

Great. Thank you.

Operator

comes Thank of from Jackie KBW. you. next question And Bohlen our

Your line open. is

Jackie Bohlen

And rate. one-time in that commission you a were number the talked follow-up then two, parts. Number I've notes was income. level about one, had Previously happened to about And as if how $XX insurance that unusual in so kind I fee Understood on anything XQ? was got even two you we and million quarter. a that run forward? that just above bit do you else my there feel about nature that I of the that consider strip wanted of going out, the still

Dean Shigemura

So foreign -- good exchange derivative you're that primarily for derivative right. We're as levitating activity. above well activity, a rate, interest because a very quarter because we bit had as

And so, a that wise quarters, coming the we'll do pretty front. possible, commercial there is book kind heavy in actually a income of on that we funding have possibility have the

I at does floor guess ceiling. to bodes is But a like more what side. than guess Jackie well tough I million, least, maybe. tell, for, the that $XX these that and days interest -- feeling So you but would pretty I episodic say rate it's a

Jackie Bohlen

Okay, that's helpful. commission, something product is understanding unique, you relation insurance advantage in were that it's And it repeatable something was the and came that to that it just is take and able to or up of? truly

Peter Ho

repeats we time It every program. renew the

not sure. It's given it's it's think annually. -- don't quarterly not for I -- So not

Dean Shigemura

several It's years.

Jackie Bohlen

Okay.

Okay, was already else had you. Everything thank asked. I

Operator

you. Instructions] Compass Thank comes And Hunsicker Point. [Operator our question of Laurie next from

Your is open. line

Laurie Hunsicker

just I for I Hi, income Great. wanted Good question with to moment a stay on thanks. the morning. interest here. net Jackie's

trust within in tax going can So the practice quarter? about just line, help play look and to as how us next this to you asset we management think

Dean Shigemura

the bit in a a quarter, but second, got little we've some just deadlines. first of Yeah, the bump we in the given expect

quarter little of on think So back a down we similar in the first to prep bit what tax kind we side. before the of had would or coming higher

Laurie Hunsicker

down, okay. back coming Before

And correct about that's or...? so the there. $XXX,XXX, at peak, in Is $XXX,XXX running that

Dean Shigemura

Yeah, about there.

Laurie Hunsicker

Okay.

was those deposits. that little And that big talk from of How terms those about XX% your bit basis or...? jump thinking pretty linked -- basis should of And account savings there points. a you your XX to line in were XX points a you your costs, deposit be we specials can costing Okay, great. quarter, about then costing went and represent

Dean Shigemura

the on is This saving...

Laurie Hunsicker

and jump there balances, -- Yeah, jump was pretty was big big but there. in on a savings, in a cost there was there the

Dean Shigemura

that's our efforts if area. gathering you that's look of little of Yeah, are at of, on, kind -- where a more how kind focused kind deposit our bit the

that as higher, at maybe saw maybe expect Going that the forward, in same we we pace to trend the quarter. not first but

Laurie Hunsicker

Okay.

that? amount amount the your Do time you your And of have you Okay. public the any that's billion. of then the the deposits, have public $X.X -- do of piece amount

Dean Shigemura

Sure. on. It million. X/XX, of $XXX is Hold as

Laurie Hunsicker

okay. Great,

Dean Shigemura

a $XXX down It's million year ago.

Laurie Hunsicker

Okay.

Dean Shigemura

flattening space, And that the number. on depending on be that way, that think by in Laurie, line we kind could we rate maybe out the of environment,

Laurie Hunsicker

Okay.

Okay. Yeah, quarter. basically from I last mean, it's flat

mean, hold obviously back is savings. directionally heading Okay. I guess about the as just there we the should half about at or and If we think move will think up, in that be was of a we points, I thinking still going it were CDs deposit points biggest XX that number? about we again I mean, where be as to that possible I that -- XX could higher mean, the back look basis the it piece basis year, costs

Dean Shigemura

bit drift but think higher. it it higher. -- will be a double, I It won't won't certainly little

Laurie Hunsicker

cost deposits your it's relative but mean, move. bigger still is I banks just to a Okay. of amazing, mainland

to then together here. Okay, that and back go so on margin, I just putting wanted just

quarter saw that obviously But from amortization, quarter core adding So we basis you're actually your with points. margin just if premium expand fourth in right. linked going first quarter drop margin contracted, back, the to two your

from went X.XX%. to you So X.XX%

when forward guidance thinking you're of a premium about that? is talking exclusive your you about amortization are how the guide, or piece So

Dean Shigemura

would include expected any that. in The changes that in changes -- guidance

Laurie Hunsicker

Okay.

to what us that? you're thinking with terms so help in And respect can of maybe you

Dean Shigemura

the environment happens that current rate what the there kind look of factors is, expectations Well, and at into and our we prepayment is yield.

Laurie Hunsicker

that I no, no, to understand. No, I'm directionally understand. just Sure. trying

was even fourth the because other am reported expanded, in in where the versus your contracted though So first of margin quarter. just premium margin words, quarter your core

I words, the the as or same forward-looking you that's in realize around. And as other premium giving so suggesting? even what for thinking thinking you're jumps you seeing amortization toward in clustered suggesting we number, thinking premium about in quarter thinking we're you a we know are about, modeling March that be look a But, are quarter? level you fourth about were item when line am if -- we next Are that in would with quarter, is where line you're and just the

Dean Shigemura

the higher. it but exact number, would a have be think little would I don't directionally I

Laurie Hunsicker

Thank perfect. I'll there. much. very leave you it Okay,

Operator

question-and-answer the remarks. over for I Wyrick our Thank this conclude back And does you. Cindy like would now to call to session. turn any closing

Cindy Wyrick

joining I'd thank Bank like everyone for for in and us of Hawaii. continued your today interest to

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

Operator

gentlemen, today's Ladies participating thank program. concludes you conference. This and for today's

You may now disconnect.

Bank of Hawaii (BOH) 22 Apr 192019 Q1 Earnings call transcript