BOH - Earnings call transcript Q3 2019 | Bank of Hawaii Corporation

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Operator

Ladies and gentlemen, thank you for standing by. And welcome to the Bank of Hawaii Corporation Third Quarter 2019 Earnings Conference Call. [Operator Instructions]

I would now like to hand the conference over to your speaker today, Director of Investor Relations, Cindy Wyrick. Ma'am, you may begin.

Cindy Wyrick

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

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

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

And now, turn to like Peter Ho. the to I'd call over

Peter However

Thanks, Cindy. for Aloha, and us Thanks good morning, joining everyone. today.

quarter and had another strong good capital levels third well-controlled, remains quarter We our XXXX performance, were Hawaii. quality remained asset strong. of The was financial solid, of liquidity for our yet expenses Bank and

decline grew Deposits the from down up deposits public which third $XX.X and the $XX.X end X.X%. end previous from previous year. loans quarter, Compared X.X% from last X.X% to consumer in the at last deposits, of were the growth up quarter due billion up quarter, total quarter offset year, in of billion, quarter with the the third book. Our our were a to solid

with ask will quarter. some me provide performance asset on details Dean let quality. financial to our And on our Now, comment additional Mary you this then, Dean?

Dean Shigemura

Thank you, Peter.

or Net quarter XXXX share. per $X.XX million income third $XX.X the for was of

our of XX.XX%, class return or equity the the ratio for fees. for our Our was related was during our $X quarter reserves on to this equity and assets the the legal XX.XX%. efficiency X.XX%, on a included of the action was regarding lawsuit ratio overdraft and quarter increase previously XXXX on our share Adjusted was on XX.XX%, was return $X.XX during assets the million was in reserve, quarter return Net tentative settlement per of third the efficiency legal return disclosed XX.XX%. income X.XX%,

X up income Net down third XXXX the the quarter was basis in year. third the reported previous second the points $X margin a third quarter the the Our net year. in $XXX.X quarter basis The the and the interest points was X of and on quarter the million from for of X.XX%, margin last interest from quarter ongoing quarter for decline from basis last from of XXXX same lower third million, up of quarter impact rate interest reflects the environment. $XXX,XXX

net be X Given quarter challenging the interest the fourth anticipate by current environment, for lower rate points. basis X will we the that margin to

of later, the same the a in million and the discuss this provision will with compared income $XX.X million $XX.X quarter totaled previous quarter. recorded of we $X.X credit quarter third million Non-interest Mary $XX.X in As quarter XXXX year. in last million

a $XXX,XXX to change income the third charge The the included There conversion negative significant Class second a of of XXXX related B of XXXX in XXXX. third in quarter ratio. non-interest during or of quarter no Visa were quarter items

be banking buyout excluding to of approximately increase during in of announced a fourth growth levels during to non-interest income activity. million of gain the revenue $X.X a leveraged early customer We mortgage and expect $XX XXXX quarter in The non-interest reflects related lease. derivative previously of XXXX, revenue currently higher million the

the the million year. third were third XXXX, in the in of significant quarter last $XXX.X quarter XXXX There the or legal $XX.X up totaled expense expense reserve, the non-interest $XX.X second million the from quarter in items Non-interest quarter XXXX. no in million quarter previous of of same during including and

investments due for in growth reserve, other our Adjusted levels and expenses and and of higher higher facilities expenses business to continued legal primarily technology, the people. the to compensation relates increased variable

adjusted be the settlement, legal about expenses XXXX expect $XXX to continue of we above expenses of our XXXX, for to million. X% year full the X% Excluding to

The reduction effective in with last a The XX.XX% municipal third mainly securities. due in the the exempt XXXX quarter, quarters and increase to quarter is year. same of compared tax in for rate XX.XX% tax XX.XX% previous quarter from the was the previous

fourth rate to to includes XX%, disclosed increase million to expect tax be related we the leveraged $X.X buyout offset tax items which the early of credit the between For effective lease. and adjustment will quarter, that million of one-time XX% a $X.X a related previously the

the the total billion million, the duration reinvestment previous during securities portfolio same of from portfolio $X.X at comprised $X.X million the was end up investment quarter, was the for which basis a differential portfolio negative million and Premium We quarter. The the year. was last during And $X.X X.X primarily quarter, duration third $XXX quarter rate quarter down $X.X XX of X.X available-for-sale end the of purchased mortgage-backed X.X The portfolio securities million a investment Our of was years investment total in of XXXX. quarter during points. quarter the the third amortization the in of was were third years. from years. the The securities. was duration the held-to-maturity at fixed of

Our end the leverage total ratio was Tier Tier shareholders' capital our of was X.XX%. XX.XX% equity quarter, was ratio our X X $X.X billion third and at the

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

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

Mary Sellers

still second compared $X the charge-offs total and of loans or of $XX.X for million XXXX. assets you, XX or as points and the average totaled for at end were more the XXXX, XX year-over-year. the third points and third accruing of the of Loans XX XX quarter, and second million of with quarter period basis basis points due million past $X.X end X.XX% quarter, third at the annualized interest or at quarter the X.X% or quarter million Non-performing million annualized quarter $X.X basis outstanding, the down $X.X the in down from leases were Thank annualized the million, net $XXX,XXX third down million charge-offs last X.XX% days linked year. Dean. $X of of in million $XX.X from and of end or $XX.X or Net or up

loans $XX.X At quarter down the quarter, the of XXXX or were $X.X from restructured non-accrual down the of in days million from not the end loans second included and of due more loans $X.X XX XXXX. million past million, quarter third or

second million $XXX.X a of of end and Accordingly, loan totaled at the from $X.X the and the net million total charge-offs linked the was unchanged million, at quarter. X% recorded. provision given end of for down of allowance of the and loans million allowance period leases X The credit the points $X for The the quarter, up quarter, $X.X was year-over-year. basis ratio to leases

for supported real outstandings and a XX%. outstandings commercial weighted residential average of quarter, third of the real end the reserve million XX% of to and XXXX. at XX%, end quarter consumer estate were asset estate loan commitments average The was allowance value the reflects second unchanged of bank's solid with weighted total by The the a of continued quarter, were XXXX the by our loan-to-value of with unfunded supported portfolio. $X.X and of the XX% the third the commercial quarter At composition of from quality of

economic resilience core markets the our coupled and any and discipline, of in the with not for turns do Guam Given our assets our reposition anticipate our credit strength in needing are portfolio cycle. XX% Hawaii where ongoing held we to

I'll now turn the call Peter. back to

Peter However

Mary. Thanks,

The Hawaii economy remains the third through stable of quarter XXXX.

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

with arrivals X.X% In to compared same arrivals, continue to spend. same with spite in international months are of in the a XXXX. modest eight in first period to decline growth down daily to XXXX the were in Visitor total visitor we XXXX, continuing the for increase, up see spending the period and lower strong mostly X.X% due compared spend of

market third in continued over in home median particularly estate quarter. remained period same are third the sales, the compared median by in condominiums comparable prices remain are X.X% declined Year-to-date and to strong sales levels which with during now increased X.X% the also however, had period We single-family continued through XXXX. homes soften real XXXX, of of the XXXX, and same quarter, at active. growth sales single-family sales sales sales with prices down to Year-to-date Condominium stable. Our X%.

of Months XX days X.X year-to-date quarter single-family homes for of the were market for condominiums. median inventory on the was The a days of X.X at XX single-family condominium. end and number months home for a months for and days

to Thanks joining now, respond us be questions. And we’ll to again happy today. for your

Operator

DA with question from Instructions] [Operator Rulis our first comes And Davidson. Jeff

You may proceed.

Jeff Rulis

Good morning. Thanks.

Peter Ho

Jeff. morning, Good

Jeff Rulis

portion about in banking, of talk of Any salaries questions the break of the tied the the side. up, kind that's out? being kind to mortgage the on to of variable if that couple increase of way expense what possible that -- is of to variable what A piece are kind

Dean Shigemura

look tables, additional quarter-over-quarter the the it due work the you increased mainly if for of breakdown at that Well, one salaries we in the to have is day.

is increase adds of salaries to benefits So, $X.X due expenses. the million to elevated about quarter. rest separation for lot of and -- the of that in level the the the a And

Jeff Rulis

that make on other seemed in that significant equipment popped line And rise side then, question the net the a just That to bit. the there up expense like is the was quarter-to-quarter.

Dean Shigemura

And investment. the IT is space continued No. It hits line. generally reflects that our what

that so, have we And completed. are do being projects number of that a

as of the depreciation as So, is starting the some costs. well software

Jeff Rulis

be maybe one for And Mary.

net the the comment mix that on been that's could loans and Just as charge-offs up charge-offs, make you if type quarters? past the a of if net similar

Mary Sellers

has. it Yes,

in a As direct see our recovery position. residential our and portfolios home expected, while we mortgage charge-offs remain and equity primarily to in dealer net portfolios, continue modest our

Operator

And from America. Ebrahim with of Bank comes Poonawala our next question

may You proceed.

Ebrahim Poonawala

were wanted to talk in multiple get that basis say, to X the is margin of be believe the compression that about do follow-up what the after color the you expect basis we in said leveling you around see in behave? expect quarter? you we fourth should If the around hikes, December, I rate would stop, out If provide let's to helpful. quarter. any to to and immediately some points we margin of question, just essentially if Can do margin First off, Fed how could you bottom to points you following the I -- guidance terms on expect in X

Dean Shigemura

Ebrahim, just or rate rate hikes drops?

Ebrahim Poonawala

I Rate if drops? Sorry, misspoke.

Dean Shigemura

I drops. I thought. confused. Rate was what Yes. That's Sure.

Okay.

expected us by provided year in the a Fed. the is So, week XX the the at more. cut quarter. too basis-point point. guidance of cut us about the margin but short forward, in in impact on another cuts really impact to There what's it's minimal currently. the flatness basis us a materially curve impact potential for shape the rate But, going The end fourth going late X it's curve that's this have our really the -- pressuring of I included an of to the is December, curve It's

we if this low, see long the end margin stayed the range to will continue of probably here. end the stay lower So, at

Ebrahim Poonawala

new if the did like on Got the it. you say, duration, missed securities to of sorry, is are And that yields what the expect what's coming I’m you yield new this, I purchases do? what at,

Dean Shigemura

purchasing securities a rates the is to higher securities, coming that it, XXX, creeping we're about, call of So, that kind have maybe Duration to they're years. up. little new five [ph] mortgage-backed generally, at about the new on so four -- duration been -- XXX the bit now are

Ebrahim Poonawala

over margin. -- to you've separate the rate Got of XXXX? to live a or could done And a to Four is look expense provide relief, on last say five where opportunities it. there environment as we're into are moving we worsens? away like the with if cutting going job that terms would the if see leverage, managing X% talk any obviously environment great X% the expenses, something from or the expense bank If even years. revenue you doesn't in Peter, costs within like to decade, for just the I potential inflation you have

Peter Ho

Yes.

long a focused been to expense X% think X% now. I have on as absolute for, you pointed that creep time we out, So, that

that a reinvestment drop efficiency in moves into expenses, fair meaningful if the that. to if for the And digital continue been we’ll or component see has what's will, revenue, of you that's Obviously, respond along unfortunately, of we of all We investment a down appropriate been think amount of, a path. number to us. level have off a to

revenue place. the begin And of or so, we'll irrespective side the hopeful to on are benefits we forward, begin see happens that those of what investments moving increasingly take

Operator

And from O'Neill. our Aaron with next question Deer Sandler comes

You may proceed.

Aaron Deer

thoughts it on I you well. pretty the curious growing guess, kind it have get been to up of hold where of And Hawaii continues stands kind Peter, about X% to seems today. I'm like guys economy annualized. year-to-date, your just pipeline

do that's of maintain next through of a into you reasonable the year? part you early XXXX, out look at to kind As pace think least

Peter Ho

Yes.

of Hawaiian to view economy, So, more is I Aaron, in be where do than think stable. that pretty health of the we is the Hawaiian the economy. later crux you are the around will. I ourselves remains question, it the if view think, darn my cycle, cycle We

to with credit has what retention so, matter. and do And begins creep up that to credit for selection

So, quarter in that's eight on best statistic putting quarter seeing was second our It our exits, paydowns. some past some of quarter eight we the if are quarters. payoff our quarters. third second will, elevated in also strain was highest levels in Obviously, past commercial the -- our portfolio. production Interesting you the

on front. got commercial we numbers the the got we So,

of So, pretty a touch a I as bit headwind. conditions a solid. headwind, of see a remaining that Market

as any Mary we foresee don't at portfolios. of mentioned repositionings say, any also our that strategic I'd

of as at we have So, that a back. tailwind our a bit

So, aggregates view all where in next the loan to kind that of mid-single-digit year, a in factor. looking growth it's forward our

in past, been higher recent a we've digit the talking I mid and kind level. historically to think, about single of

placed mid. go probably space sentiment we that here. mid the we'll where more higher the see think, around our I than from But,

Aaron Deer

quarter where there And year? costs, those the had looks started that reasonable. down obviously public -- the expectations some to you're and as next maybe the competitive based have stands some. costs, deposit into then, see it side, now it bring this XXXX, more deposit help heading out room to on to seems your some down you And But, past we uptick kind Is presumably the come the give going of It you market like is margin then, relief quarter, be Sure. to year-end. some get deposits. deposit into on outflows of this

Peter Ho

I Yes. hope so.

lot a covered estate there. you So, real of

these a of note we but that days, we're wise, might out what so, decline lot The about thinking And you linked a yes, our book. and deposit X%, on down kind really imagine. of of that as were came really public basis

to think all commercial performed I consumer our linked commercial those base, basis. were environment be alluded to, X% over year-on-year a we and on And now, where in So, the deposit up be uncertain. as consider darn right a to businesses, on about that basis. so well of because we thing And just you and want consumer rate is consumer that particular, three the public, important core is

to position right out be is And is our so, now whether our are and which and pretty to where approach in liquidity take going can't we're or to a figure Because, positioned take honest, conservative and strongest darn position, of try pricing. up to the market, the loan-to-deposit rates go go advantage down. our we

So, the on out conservative best we're front our remain that is against the deposits conservative putting on course there. and relatively relatively term to the pricing front

Aaron Deer

for one quick a just Dean. then, And Okay.

noise of in Prospectively of kind bit the year in first in of fair be the a XX%ish then effective a items range we this rate? quarter guess fourth coming should the line. quarter and couple about the for XXXX, had thinking a tax tax guys XX%, You and for I

Dean Shigemura

it's now, hard to Right say.

We our yet. budget through still haven't process. completed We're the going

I want a to yet. guidance So, give would not

Aaron Deer

Okay. taking All my questions. Thanks for right.

Peter Ho

Thanks, Aaron.

Operator

question next comes our from KBW. with Jackie Bohlen And

may proceed. You

Jackie Bohlen

of of cycle. at kind broadly, we're economy, more -- of the understanding kind where just So, just wanted the to I Peter, in terms in

have about any into also of bit just you're remarks, thoughts that in the cycle, that how the you you equates of visitor part the little mentioned condo lower I'm as been and later. your construction what down market, of has then softening where of and -- and If spending that in are terms some drivers talk about could probably understanding you and we're coming that prepared a then a thinking it. in But, guessing on just condos we in pretty both

Peter Ho

Yes.

seeing the as Both pretty I here quite visitor estate comping activity. nicely for well been extended time the along the little think what's growth hit I basically it what of of chugging and been a numbers head. years And industry, the off real we're of on in period as of think have is now. you a flattening market

this I are would the terribly not much where cycle. an at see growing to underwriting standpoint estate, this given stable, still our real although positioned that's from point point. And So, from reasonable call market we're where wise, be we sheet and we at a pretty balance what of outcome

around strength years of dollar international number denominator, -- that's beginning remember couple front, working are us. in to several I larger against we're against larger think But, and up the beginning visitor I And the working been has that a one. On for that's mentioned things a that numbers. now. just several, show

what So, spending seeing valuable days to Hawaii actually a soft Europe as non-Japanese been is a for of Australian, has customers. I past marketplaces, like well think, little more sort The yen traded years. over trade of our have internationally. And as Canadian, -- bit we're several versus strongly Japanese other pretty relative potentially the

that's So, a to but closely us, well. that as we're pretty benefit watching been

that's view how a So, market kind as of I industry visitor the whole. in the would

Jackie Bohlen

if you on reserve thinking me, just how And and one about that where at Mary. expect CECL probably this to? point, can provide color you you're then, last for you're Do have for when you not might any trend, one disclosing or the

Mary Sellers

runs, implement we point. we've heavily Clearly, portfolio But and low really it weighted it's impact in are be won't it to-date, the reserve us. not charge-off Well, what big conversion are within the our fact the for Sure, assets issue we material to far, rates, And of until very several CECL. any Jackie. some completed concept. the to and look so reflects parallel historically know life a on to with conditions seeing that and actually doesn't we the loan reallocation and based at composition composition

Operator

Hunsicker Point. our with And next Laurie comes question from Compass

proceed. You may

Laurie Hunsicker

wondered we time? morning. Do could you have Hi. back piece what's the just Thanks. if I go public Good the to deposits. over

Peter Ho

Public time Right? million? $XXX $XXX million. is

Dean Shigemura

Yes.

Laurie Hunsicker

$XXX both how about you then, bucket forward, are $X.X of the million thinking billion And going Okay. the that total? and

Peter Ho

effectively Well, various our is we way are with that that in of $X.XXX billion, we portfolio that look that half operational have marketplace. the at municipalities so about right. the relationships

other less sensitive, very relationship, sensitive. -- The price time, rate are half right,

we billion, and/or And the so, retain for like good that I that say for would sticky it's business, $X.X us. business to of half would because grow

half, rates low, highest to funding value tend obligation rate those good other can as the whatever so they are as to rates. they in the can they obviously rates get elevate when us, year, did because For be not a of much fiduciary municipalities have for sources get last markets they

we So basically think how Laurie. that's about it,

Laurie Hunsicker

early Okay. I in your be the reduction I trend that should or see down maybe has thinking how deposits And every thought that? cost to quarter continue we’ll there about you that mean, Is -- any fourth then, happened took single in planned of category. we that

Dean Shigemura

the I continue pretty to where we'll, have rates. closely. the we reduce mean, we manage And rate Yes. opportunities,

Laurie Hunsicker

non-interest you've chunk we words, about bearing. way. got basis XX one how another think so a are we of are should and that? in trend -- think here just points, where out to, cost your core, we XX% down question, look core and of axing But, could other Okay. just as more If deposits, sorry, those that CDs, costing Maybe asked so all your about at obviously, deposits huge

Dean Shigemura

be, our point say low ultimate the what would competition. to but know lower, that subject don't market be I trend I would local the would Well,

Laurie Hunsicker

number $X.X the here. more you on quarter? Okay. Presumably was this last question amortization it margin And have for million one premium quarter? Do

Dean Shigemura

Yes. million. It $X.X was $X.X million --

Laurie Hunsicker

Okay. million? $X.X

Dean Shigemura

sorry, -- million. million $X.X $X.X

Laurie Hunsicker

great. leave I'll there. $X.X million? Okay, Thanks. it

Peter Ho

Thanks. Laurie. Okay,

Operator

a with America. have follow-up Poonawala Ebrahim from we of Bank question And

proceed. may You

Ebrahim Poonawala

guys. Hey,

expect sort quarters? earnings going follow-up you think return, activity dividend. when excess capital obviously where talk to a should capital on payout of forward, quick ratios. of the and in like bank return in excess to Peter, about ratios Just or you raised expect few terms the are us occur of Do just to next you the capital over But, we the manage capital buyback to

Peter Ho

balance of and No, quite our we of for of is our for dividends and buyback we time growth Generally, earnings stock a the in time, XX% way That's wouldn't long to has returned and over some excess the XXX% our think about and -- earnings. of -- to earnings. dividends policy our remaining it. is haven't time, capital to XX% been up XX%

Ebrahim Poonawala

think when how maintain cycle, where to you about think it, stock price, thinking there sort capital really about do valuation you’re Peter, desire the talked the you strategy? right any given doesn't cycle about And we just where capital or of how now of in excess the you impact are is

Peter Ho

a the it's more seem and good fair Well, and less years, question gotten a we a over less amount have it's question and to recently.

often decisioning I clearly we vehicle into quarterly and and see value stock So, of near needs, to attractive capital our buyback economic condition the decisioning we an the how future -- of we well prospects, today, versus growth And yes, remains sheet our own the quarterly that play believe what mean, well. view I our as as we the -- the conditions, think, our to stock repurchase. intrinsic as for continue in buyback us balance

Operator

for this like today's Ladies and of to remarks. call. would Cindy now Wyrick I now the closing to turn our any gentlemen, Q&A portion call concludes

Cindy Wyrick

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

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

Operator

conference for today’s you call. Thank Ladies and concludes this gentlemen, participating.

disconnect. now day. have may You great a Everyone,

Bank of Hawaii (BOH) 28 Oct 192019 Q3 Earnings call transcript