BOH - Earnings call transcript Q4 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 Fourth Quarter 2019 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question-and-answer session. [Operator Instructions]. today’s being that advised be conference recorded. is Please Instructions]. [Operator

hand over Director to I ahead, Investor would speaker conference to like madam. go Please Wyrick, now your the today, Thank you. Relations. of Cindy

Cindy Wyrick

good morning, Also Risk Peter Officer, our today. is Ho; Good Dylan. Chief me you, afternoon, Thank Officer, joining with and you President Chairman, Chief Financial Mary everyone. our our Sellers. us for CEO, Shigemura; Thank Dean

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

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

Peter Ho

XXXX morning, Thanks, for everyone. We pleased our of progress year Happy were Cindy. Hawaii. us initiatives. Bank on made you the our key and Good with today. strategic results another overall was we financial with and good Year thank New for joining

total grew Assets, the loans, all a deposits year and year during assets $XX.X at finishing record billion. with the

a for $X.XX Earnings per share. per year of high new the record share reached

leveraged a early XXXX finished solid during our the the and both at growth a Deposits XXXX loan lease X.X% in of buyout our in the fourth with portfolios. consumer $XX.X billion. commercial healthy growth was X% Excluding grew quarter, in year and

conveniences financial over century long-term banking the a relationships from our in year provider the our Bank history we’ve make our required of earned goal providers. financial for means of the services services XXX-year with in busy This was progress positioning preeminent XXXX Hawaii us trust to as continue clients XXst the modern steady we and combining of Islands. as

new in of helped launched by in Bank online share XXXX. of one market retain residential we SimpliFi Hawaii Hawaii year, Hawaii. successfully the number the portal During mortgage Bank Mortgage This

to the We popular provider also offer the Pay marketplace making first platform. Zelle in launched payment this us local PXP

suited better is activity. boh.com a to Web site year, now the redesigned we also introduced accommodate During which e-commerce

future groundwork four front, XXXX. in the the facilities of opening the we of laid On for the new branches

network our Hawaii completed our also to refresh of XXX% We marketplace.

enabled or our now Our our WiFi through teams desktops marketplace. fully are configured are laptop either greater giving and mobility tablet

Again, and fourth Dean some now for and on XXXX. our our with for details additional provide Year performance to you Happy financial I’ll quarter ask New the outlook

Following credit Dean? Dean, will Mary then comment quality. on

Dean Shigemura

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

and $XXX.X per Our return during on quarter the our is ratio share, on $X.XX per was assets XX.XX%. income record full was million as The XX.XX%, or equity which Peter new was share. X.XX%. XXXX of the for return for mentioned Net was efficiency year earnings high a

X.XX%, was XXXX ratio Our on was XX.XX%. and was XX.XX%, and assets return our on equity in efficiency return

quarter the Our from basis third from net interest quarter in fourth X the down XX quarter of points points XXXX. fourth basis X.XX%, margin was the and

quarter lower of Net on million, margin decline was from quarter the from million of the the XXX,XXX XXXX quarter The interest income a income the environment. interest and $XXX.X fourth during in the quarter interest down reported down previous in fourth year. net rate the impact same and last basis the ongoing reflects X

The X.XX%. was year the net for of interest margin full XXXX

lower from are year lower interest and be the expected but rate margin expect XXXX, an balance than quarter net growth full we rate XXXX, improved to to sheet up run mix environment. offset For our slightly fourth as the asset

banking offset gain same XXXX fourth quarter result a early we quarter discuss million partially provision of in customer million leverage recorded in in later, compared by totaled the Mary related fourth million the of derivative quarter. buyout As the to $XX.X will quarter in the $X.X of million $XX.X quarter, XXXX mortgage with year. income Non-interest a the previous was credit of $X.X last activity. this and and of in $XX.X The income a the a lease, increase reduction of million

of income year the Noninterest for $XXX.X million $XXX.X XXXX. in XXXX full was million with compared

For per fourth income quarter be noninterest There in of quarter. in rate approximately will in in XXXX, last million fourth $XXX.X $XX quarter the the significant items million quarter XXXX. expenses we and for Noninterest totaled with quarter no same expense run compared noninterest previous the were $XX.X expect the million the million $XX.X year. in

legal quarter quarter one-time significant XXXX third an expenses. $X of legal $X increase reserve. expense related of The and the fourth included operational items to of million million XXXX and in loss one-time medical included in The a

expenses seasonal $X approximately For of non-interest XXXX, the first our usual of million. will include quarter payroll expenses

Noninterest with $XXX.X of compared increase an the X% year was full XXXX million million, of expense for XXXX. in $XXX.X

we expenses above be total XXXX, X% to expect our X% For expenses. XXXX noninterest our to

rate XX.XX% we The Currently, the XXXX. with the effective full tax for XX%. expect approximately of XXXX be tax year in was XX.XX% rate for to compared XXXX effective

increased during portfolio investment $X.X the of quarter growth deposit strong XXXX, continued of result fourth a to billion. As our

in total was during amortization quarter of during the securities primarily from in quarter X.X million and comprised of Premium the securities. X.X $XXX X.X up slightly same down mortgage-backed last million, the were million quarter We year. from previous million the quarter, of purchased which a

points. years. to at The basis The fourth was quarter X.XX years held duration reinvestment years, portfolio portfolio the the a was end maturity differential duration was the X.XX portfolio the negative was and duration total of The X.XX available-for-sale of for XXXX. of X the

equity of billion the at fourth the Our end quarter. $X.XX shareholders' was

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

in XXX,XXX additional XX,XXX total cost of total dividends the quarter, a common and XX January We of a million million. at we $X.X or for stock million. repurchased During out an repurchased $XX net shares $XX.X X between January paid of shares of XX% and income

of additional repurchase declared And per for an business minimum the XXXX Tier of of out share in ratio unchanged, adequate to leverage XX% approximately pay growth to a by support maintain Also, the our our net quarter strategy to X% remainder and dividends, Board is million. and dividend management for $X.XX available XXXX increased with in will share income repurchases. X remain with the share capital the authorization $XXX first finally, of which our capital

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

Mary Sellers

you, Debt annualized or third totaled as compared Thank for of net XXXX. of X.XX% of XXXX charge-offs million outstanding or X quarter X.X fourth or total million fourth with leases X of annualized loans the the charge-offs Dean. the million in and average in quarter X.XX% and X.XX% annualized quarter

of XX.X average Net million loans leases of net compared X.XX% the of of in X.XX% total XXXX. XXXX average leases full charge-offs loans charge-offs were and for or or XX.X total million and with year

or XX end basis quarter, down or at from third million from the of the basis of fourth points Nonperforming XX the assets of quarter or were of the at end points XX.X fourth XX.X XX.X last quarter million XX points at up the end basis year. and million the

the in loans XX.X more of from of for past from still included X.X or X.X At interest and loans fourth loans million million, million, quarter, million quarter of and and or days up due Loans past or up were days XX X.X due XXXX were linked million year-over-year. restructured not accruing quarter XX.X XX nonaccrual million up XXXX. the the fourth XX.X period third more the end the

the the Residential The million million real up accounted for end losses the for from estate of the loan our XX.X X.X allowance quarter, loans modified of total. assist customers quarter. million third totaled lease and fourth to at XXX

X X.X credit million down unchanged to of linked of was the and net total the the period at X.X year-over-year. Given a of loans quarter, end ratio leases charge-offs million, of the for basis recorded, provision was and allowance X% the points

quarter, The asset reflects positioned from X.X unchanged a quality and total metrics unfunded strong the of composition the the core and XXXX. million well remains portfolio was and of The lease portfolio quarter third reserve for the end fourth Guam Hawaii Bank’s markets. quarter and with which our loan commitments at

were At loan XX% the of XX% estate commercial by loan-to-value outstanding a real fourth total were a of with loan loan-to-value of estate of real outstanding weighted with quarter, by weighted of average and consumer balances supported average XX% end supported XX%. the total balances

back I’ll the Peter. now call turn to

Peter Ho

moderated unanticipated steady XXXX. X.X%. fourth and growing excise days in Mary. of receipts This the in the and during economy at XXXX. rate with XXXX. Thank was X.X% XXXX. General growing year-to-date compared grew quarter Statewide X.X% The Great. X.X% both national unemployment remains visitor unemployment industry of you, remains given with spending low the not meaningful Growth tax XXXX preliminary in visitor visitor growth moderation X.X% in achieved rates Hawaii

average remains be Housing declining at any and X.X% single-family with levels joining us you X.X today delighted single-family remained Inventory and for again, Thanks, slightly questions we’d months field for homes XXXX. and stable for rising might for medium by low now condominiums. X.X condominiums on have. at X.X% homes months to prices slightly for

Operator

[Operator Thank you. Instructions].

Bohlen Please Jackie from from comes first Our ahead. question go KBW.

Jackie Bohlen

everyone. Hi. Good morning,

Peter Ho

Hi, Jackie.

Jackie Bohlen

bump payroll a little be getting other Just trying the seasonal as rate is Understanding quarter, in just was addition in level increase the million just my that those expenses lower kind and the up run it what with from third level coming to versus to a quarter the there question of be higher normalize? this XQ, compensation. X insurance Where XQ? a a increase might at it How comp, on quarter. looks share-based in that will like typical much incentive to comp, due light is in there of that I’m in to question expenses see

Dean Shigemura

on fourth – our we quarter our that and all so accruals. the I speak reserves would say do yes, to in true-up

So, difference the that. about whole I not is run half differential, probably of would say rate

Jackie Bohlen

of up in of products to how Thank normal then much to you in that combination much trended have investments digital equipment develop new Okay, versus year just is line course over business? increase that’s those just I’m specifically wondering strategy And related the you and two just the past your the maybe looking to how as ongoing items, you. and continue have helpful. occupancy in

Peter Ho

of this I’ll combination Jackie, both. It’s a So, answer Peter. is that.

has them I you’ve over for shifted opportunities initiatives the of expense of from increases the and to I been period past would years have And expenditures to an couple think our business standpoint. postures and that to the be. need of strategic front-end probably what the infrastructure our on really been standpoint we get more network that from predominately types past or or the either security call a seeing so, where year ramp revenue been efficiency

intentionally slope, slope but if won’t something at same more stuff will, upward an numbers So, with been doing yes, see our be forward you different better going slightly probably that likely we’re that’s of outcomes customers. lot moderate trend. the you consider to taken has Frankly looking of, care business probably as and not to will a hopefully those to that’s the it rise drive

Jackie Bohlen

on from a if took the lease or And back, I original step benefit the well? I’ll just benefit That’s then and of know the million indicated someone had helpful. that, Okay. just treatment Thanks, wondered wanted the Peter. X.X X-K could there some that quarter. complete I and if more with the to clarify X.X the then item. me to tax million a that last in buyout one tax if I place as one tax associated that’s see was offset housekeeping with

Dean Shigemura

That would be benefit. the

Jackie Bohlen

Okay.

I offsetting tax on quarter, would if the X.X look plus million gain then from the the the the it gain? So no million at and be X.X there’s

Dean Shigemura

release there with while . was reserves number. income would associated rate the a on normal speakers]. But [multiple was the of not be X.X a The Right. tax net X.X, a It some

Jackie Bohlen

that’s Okay, helpful.

you. Thank Okay.

Dean Shigemura

Yes.

Operator

you. Thank

Our Please go from Securities. America Poonawala next Ebrahim from Bank comes ahead. of question

Ebrahim Poonawala

guys. morning, Good

Peter Ho

Good morning.

Ebrahim Poonawala

in guidance think expansion us you see in margin in environment, Dean, asset fourth rate I margin X.XX% change sounds a And could yields margin the you just decline from should the guess we decline into if going Just much cost dynamics, was offset to you expectations your that the around that expand should to you that would of like helpful. begin of the are the terms be like can what if big quarter. how in the like do in do gave, forward? wondering the talk in think funding the you I implied terms the the don’t get? drill it

Dean Shigemura

Yes.

Okay.

expansion. had so guidance net last that the growth, several the to forward had to but dropped So the us and income is guidance there on rates bit, going the assumed rates sheet as are caveat interest I give as well days, stable my of quite going that’s have we margin a a because balance

any our In there the terms deposit loans do yields the subject the that to to or the we and believe of reduce room offset to but decrease competition, we is if believe side, forward. do between assets that there the of yields would opportunities going cost in kind there’s continue asset deposit still the

Ebrahim Poonawala

deposits, on of period this of think And level you strength strong XXXX? year-over-year in just Do you growth when it. Got on in X% very growth year, terms about deposit I expect guess end.

Peter Ho

for see we X% similar to what is are we have a economy the the I growth think don’t year would here would X%, XXXX what subject you, us of the in results of and tell see Ebrahim, happens realm that been. the But possibility end really within X% in deposit that. Well, not is out why reason economy. to upper my another certainly certainly global anticipation I at to probably X%,

Ebrahim Poonawala

Got see the not? first is seasonally quarter it. of quarter fourth there growth anything you And or some in the outflows where

Peter Ho

that quarter phenomenon spot The well here then. held Usually as in have deposits of probably year current, year and right. a in remarkably quarter at end you’re fourth this temporary pretty a so the is less bit

Ebrahim Poonawala

of X.XX. capital, at in Got TCE terms it. just And moving

in Just you’re and constraint managing how about you terms talk Peter forward? Dean, think capital like or where how of capital buybacks think to about binding us, going we levels

Dean Shigemura

with we management Yes, per my comments are capital program. our continuing

So, plan to are about we on in going dividends. XX% out paying

Of remaining capital be will levels, course, some to X%, for the in subject share now. going of X.XX% retain certain at to grow on we’re leverage as then particular minimums that And at the business we’re our so capital. ratio what’s repurchases right we

Peter Ho

bit anomaly or obviously growth. CECL balance which the did earnings held a that much in put a if understanding going not a how of didn’t us. out that because in have of like had factors. build crystal the One, better into was what crystal a you we general we but activity really is and was past, but clear we of number two understanding of a dividending support as to substantially, really back the balance that chart buyback to of over buying sheet a or think lease we support capital secondly, an we’re not in we I clear position obligations quite exceeded we were change probably pretty clear it but impact result frankly years, would then upwards that have that directionally, is 'XX Ebrahim, that of on capitalize well, intentionally the several side Yes. year to feel And place you’d our to seem items our XX% with at to call both stage, care at on be lease – those this seem the that as well, is to us. this both of take at be yet be least items pretty of to stage to But kind those CECL capital determined. see innocuous concluded

forward so, ahead 'XX. obviously if melt build And won’t will, that you go went capital 'XX, we down, and but to for additional into that in allowed

Ebrahim Poonawala

questions. That’s helpful. Thanks for my taking

Operator

Thank you.

from Aaron comes Please question next ahead. Deer Piper from Our Sandler. go

Aaron Deer

everyone. Hi. Good morning,

Peter Ho

Aaron. Hi,

Aaron Deer

kind loan today are begin on just to for given an expectations where pipeline you just Maybe stands into the if could XXXX? what growth of your update heading and

Peter Ho

Yes.

see continue some the market was behind hopeful The nice only year a continue into were there, as and dilutive front balance for anticipate equity versus us that construction mortgage, front. mostly growth the year CRE sure as again is down into with substitution consumer on showed of book I’m as came quite that a to was impact fine and affordable pipeline the happening side that kind in was Would product mortgages great but bit becoming resi going result least 'XX we late of the on XXXX that but resi consumer we much to we’ll great both there, outcome home in I’m that into as as projects. get as a resi I home sorts challenged of had commercial the in which periods. a share growth on rates at long from was momentum. think well prior given that in out book C&I strength really equity be through is the to challenges not It is great appears us. I it. all So constructive the thought We lending generated good and to getting

on to some frankly the of follow have marketplace. of or aggressive seeing side, short-term kind see did been but teaser into stuff, also [ph] kind pretty We we two-year the hesitant pricing the were

that bottom result 'XX, maybe it have better itself if got and that. similar think happy hopefully and year your to does, line XXXX I’d to with we’ll pretty to So is cleans the be result question there. a I this a up similar But we answer awfully feels XXXX if

Aaron Deer

Thank going curious. there, great. And of you. then, That’s back some margin dynamics just the Dean, to I’m the and

any the and where deposit the Can at are stands, inflection? sense margin looking the we you’re your where current expected of deals in see on coming of pricing terms maybe timing start the or before quarter benefit going improvement you’re first in trending expecting? the a is higher of it right it away two take quarter to or seeing starts the here maybe that As

Dean Shigemura

would say Yes, increase here. see to quarter it the or would maybe I two take a

we quarter, even we in quarter meaningful could where be more through but be So a – is the flat first second up see slightly to may maybe fourth pickup. we’ll

Aaron Deer

then, sounded your like adoption. allowance And based comments are from to the guys it any still you not on Peter, adjustment Okay. expecting CECL

Peter Ho

me Let answer Mary that. have

Mary Sellers

process to indicated, finalizing impact, it Peter for are as but and our one of the think be day continues in modest. very assumptions inputs all I the we

Aaron Deer

great. Okay, Thanks. benefit A or --?

Mary Sellers

benefit. modest Likely a

Peter Ho

benefit, yes, to modest A us.

Mary Sellers

us. To

Aaron Deer

Thank Terrific. my questions. taking you for

Peter Ho

Aaron. Okay,

Operator

Thank you.

Our ahead. D. from A. go comes next question Rulis from Davidson. Jeff Please

Levi Posen

Hi. Levi Rulis. on This Good Posen is Jeff for morning.

Peter Ho

Hi, Levi.

Levi Posen

business? an from of if mentioned and kind Hi. what XXXX metrics and of might I visited couple to spends a on were your ask, to fluctuations days just you see tourism, some inflection see you international those wanted of tourism to in expect of

Peter Ho

side particular a international moderation of think side a in couple what the we in and on visitor the markets. that was I Well, on saw

a were of performed and Australia of other the some category. as what call Canada, kind well, our visitor it was that digit asking market weaker as of around little weakest we base not So which arrivals; international was mid-single Japan the think Zealand is sisters really two-thirds And into a exceptional and it probably as well the thing call domestic but that I spend space the I’ve there is New generally has relates serial certainly not done having there dollar, strong. certainly recession challenges, economies way it U.S. flattening few one. the two, certainly general kind winding Number depreciation in in out as here their that number and recognize into arrivals are both that’s currency its And a into the spending for of versus those of Australian now. to kind dollar the years sentiment to been just the islands. is their while in

Levi Posen

kind you. there Then I expense increase had or a there one forward? if this items Thank the project-related the was in just look I question professional side curious on smaller just we at to one quarter. can related line fees, going a base specifically was of activity although quick Okay. as of what there one-time meaningful

Dean Shigemura

break categories. the normal and fourth to number There’s is into guess quarter year-end of the there related One I in audits three down items and kind kind Yes. activity. fees of professional a I of bump it would

The there there but on the second is CECL third thing, our a CECL involve to the And side was projects. on a for that going preparation We bump related implementation. do of the projects of consultants. in number have that kind

Levi Posen

Okay, me It that’s That’s I for think appreciate color. me helpful. then. it. the about it helps

Peter Ho

you. Thank

Operator

you. Thank

Please question Compass Our Point. Hunsicker Laurie go from next from ahead. comes

Laurie Hunsicker

morning. Good Thanks. Hi. Yes.

to question here. stay on Just on wanted Levi’s expenses

expense about us figure using help for think Dean, if year were what full guide you of to maybe X%, So, X% your 'XX? could you adjusted

Dean Shigemura

number. off that be the would So reported

Laurie Hunsicker

Okay.

within nonrecurring. that million, numbers had X figure million round So X somewhat was that you

you the in bit terms larger about tech higher? jump. jump why a mentioned talk expenditures Are of a in you you branches. coming bit the thinking – can more four that’s new or terms and little expenses IT a in So Are that’s there of little

Peter Ho

on as as depreciation. front we bit is Yes, a I’ll and Laurie. both likely a and services as adjusted about there’s into bump XXXX that certainly we’re anticipated result Yes, it’s here, technology coming the jump number,” pushing what's front items. “As as in extraordinary talked about. little going thought well But that up about in already as some a stated whether also the are facilities little data up of or really initiatives the somewhat excited on forward We

company. through I senior So we in as we’ve severance call coming readjust outsized our got what some would ranks of some payments here the

jump kind kind it the as just so And stated. puts, say as just to expect to more appeared of make did to sense we X% an X% on a and takes us we simply of to

Laurie Hunsicker

Got it.

Peter Ho

some to think line There be right. continues kind you’re pretty Fundamentally expense story bottom the us I are and of solid going is for though that outs. But the ins forward.

Laurie Hunsicker

is timing on you Thanks. about and new the do on of the associated Okay. the And then have expense roughly on those how branches four average when breakeven come coming per on, the those? branches and you’re what thinking branch

Peter Ho

Yes.

So they first roll one the coming on – this quarter. is on will

yesterday flow can’t believe Although, I just the of them I it’s it drove of And then and year. will kind by quarter. coming rest out the this on throughout

offset in part depreciation of sure branches I’m detail to couple is that of opportunities following disclose will million And some the dollars for into doing. clip sites offsetting of really anticipating a is totality, much need around of those purposes years. so that. give not – year that, that can’t first create that the there a say And exact in around kind you I’m four you regulators in and or you if there too those number appreciate – efficiency/closure because we part sure this a to of but that what new efficiencies I think regulatory of our are frankly, to things because of in then we're – We’re those, cluster branches is all I'll those of of because other up the

Laurie Hunsicker

Got it.

X.X then am at And Okay. premium million.

your for back how wondered premium XXXX? – but what then that, as NIM line So guiding that’s And modeled could words, your the I what’s In am your how I think us other X.XX. just you model margin guidance, lumpy that, have is if to you really a help I’m you adding premium that and you if about am in around be are are Thanks. adjusting item, about helpful? would margin, you’re reported realize thinking

Dean Shigemura

Well, am trend, the we forecast is of the been the full for looking exact at had have we did little – come the of portfolio that I the in we is, way the up and for bit year. fourth a – just kind the leave model we sort don’t premium larger. in quarter But

lower have I the but year, we to are. of So would the trend slightly may given that over say, we levels environment where similar on full basis rate it to would be kind quarterly a

Laurie Hunsicker

great. Okay, Thanks.

if – probably was basis maybe points So am we’re basis is XX, or XX premium quarter, XX assuming around so? it this a points like so

Dean Shigemura

that I Yes, think -- be will

Laurie Hunsicker

there. I’ll Thanks. Okay, great. leave it

Operator

Thank you.

Our last Deer Aaron Please from from go Piper ahead. Sandler. question comes

Aaron Deer

guys. Hi,

Sorry, just up. one quick follow

derivative noninterest you gain a that customers. probably lower activity million – sounds out from about the X back the was X.X line to The a from like million derivative your million if rate. income X.X was And other down run it

of if that rate the some kind wondering expect activity the run quarters? prior outsized in to previous Just or maybe you up back bounce to was there if

Peter Ho

feel But well good pretty was we volume If little having a wise rate the derivative year. as mentioned say that And another of standpoint. CRE the that, directionally, said extraordinary. So, types pretty bumpy also be I’d I’d are results. looks said Aaron, behind from I’d say that these about having revenue both pretty good opportunities. it year really 'XX for still book were good should 'XX, I that, as us, But a this

Aaron Deer

stuff. the question Okay, Thanks again good for taking extra here.

Peter Ho

Yes.

Operator

over for questions like I’d further no in show the Cindy I Wyrick, call At you. closing remarks. this Director queue. of to the to turn Thank Investor Relations time,

Cindy Wyrick

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

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

Operator

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

You now may disconnect.

Bank of Hawaii (BOH) 27 Jan 202019 Q4 Earnings call transcript