BOH - Earnings call transcript Q2 2021 | Bank of Hawaii Corporation

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Operator

Good day, everyone, and thank you for standing by. Welcome to the Bank of Hawaii Corporation Second Quarter of 2021 Earnings Conference Call [Operator Instructions]. Please be advised that this conference is being recorded [Operator Instructions]. I would now like to hand the conference over to your speaker today, the Head of Investor Relations, Ms. Janelle Higa. ahead. go Please

Janelle Higa

good joining and afternoon, Thank everyone. Thank today. morning, for us you you, good

On me Financial call Sellers. CEO, and the with Chief Peter President our our Ho; and Chairman, our Officer, Chief Risk Officer, Shigemura; this Dean Mary morning is

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

the release. the slide on the release Ho. During to under be as presentation like the a available I'd boh.com, turn call, referencing Peter A we'll call Investor well as now to Relations. our are presentation earnings Web site, of And copy and over

Peter Ho

morning afternoon, joining good you, Great. everyone. Good Thank in. Janelle. for Thanks or

will through through As then I'll will it the our we'll is financials, to quarter. then custom, take our conditions questions and on walk here in for Dean, your islands, market Mary the we'd be over touch who you credit, happy to and turn go then

the this aggregation better frequency XX% versus see has rate. it's points, reported traction slide industry relating of data well a If driven at the call improvement so basically economy improving, economic numerous as a in UHERO's think being pulse is the or islands A levels. unemployment is And unemployment in visitor look pre-pandemic here, XX% steadily really that you nice by of quarter improvement what we nice economy in now you, into you you local the which at here regaining see the improvement as high local ago, economy. all indicator, to there. we the I

homes in Median year the islands family now fifth unemployment sales strong. consecutive up were up here XX% sales, XX% June many The declines. month a very in ago. to and versus inventories real June Oahu's of like markets estate single market were very terms are X.X%, of is the down constrained. So prices is

more a days inventory down ago are from condominium So median of eight up on a similar sales and from but story, inventory a on XXX% months is though, very market the of XX% home muted, June up months X.X sales price June. single here little ago The market. year to on inventory. bit conditions to days Median similar to family sector is Oahu, down year XX% and X%

estate doing Islands. industry, sector generally So Oahu here Hawaiian visitor the a throughout quite The nicely. real is mentioned, I very strong and on as

chart or Airlift X,XXX,XXX approaching relaunch really this you now our have our a and increased arrivals XXXX. basically June pre-pandemic had robust forecasts even great July the In see the since of more of substantively increase into -- is are Safe levels. story. here program, And we So the Travels seats XX.X% of June, from that. is than which launch visitor islands, actually, August

Visitor Hawaii days at levels. airlines So most arrivals XXXX their The at data Arrivals good. looking XX% Authority we are the doing has so levels, of have the from XX% jobs. are Tourism recent nicely. And and numbers those August XXXX levels well. pre-pandemic should July June, we are of as of just Hotels expenditures summer and eclipse to XX% under doing the reason that levels. believe at quite have pre-pandemic

in at As daily XXXX. in XX% back about versus for were of in very for $XXX Occupancies month at $XXX Average versus room to service. June, same XXXX. we're stock pre-pandemic back June our the of rates XX% XX% up robust statewide running are

$XXX June versus June or RevPAR year of available XXXX. believe can available of in room as higher is you XXXX room available million was revenue room if per per at per it than of this June $XXX actually in So of

in the professionals bookings, of country. is reasonably strong just hotel as islands condition number the the industry the very things in day in So stand good. be in forward seven top COVID now. And sector. right here to to The half performance seems Rolling very of averages talking the strong us a have

are other part, the we the concerned marketplaces over for the well. And variant. vaccinations gone of emergence have like Although most most delta

So we're percentile in like obviously, the XX would we country. And the hopefully, that love number most to get of marketplaces, higher.

over synopsis who Dean, the now financials. turn marketplace. Dean? through So And a me that's the walk to you of let will the call

Dean Shigemura

have quarter. Peter. loans customers in million the waivers Waivers net Core in Growth or year-over-year. quarter. in the resulted by increased and a $XXX $XXX PPP PPP decline you, loans Thank of core solid remained million on net X% quarter second $XXX in from accelerated the million by and of

second and the continue the first quarter, quarter pressures. and $XXX.X this safe strong from or the our the further healthy from loan in rates and term was $XX.X cash flexibility than well $XXX.X million deposit of with the added we to $XX.X first higher balance liquid in in net of the to $X.X interest the an quarter balances investments $X.X for liquidity XXXX. With portfolio, respectively X quarter quarter $X.X quarter Our support up million year-over-year. offset to Together and quarter and our we the down for the billion income deployment million, interest per ratio and strong million in million to net the of income $X. of second rate Consistent net of interest million net near accelerated strategy, base increasing XXXX Net Included we were stable interest of liquidity. income linked remains as a X.X% And for million recovery impact was or source significant of $XXX a second and share, quarter $X.XX $X.X with interest income as end common was million billion. the loan by mitigate first XX% liquidity. Included $XXX Adjusting loan-to-deposit income, at increasing deposit investment quarter XXXX. maintained deploy or forgiveness, billion of second the second total impact was from of as growth $X growth. the from million XX%, continued, second was quarter's $XX.X in waivers. fees loan of Net interest first $XXX.X up in PPP in income the of million. quarter from PPP loan interest the slightly lower million of

Non-interest volatility of of of XXXX. sale of quarter a Included in an $XXX,XXX mortgage the these million Included to securities. the of from $XX were MSR banking an from impact we second of lower for fees. the remaining in the in charges income in million shares. increase quarter, the recovery about and quarter-over-quarter. for Adjusting valuations, As for deposit and higher accounts $XX. economy. Mary fees up gains million other offsetting In increase $XX.X versus the gain $X.X quarter. later, reopening XXXX decrease $XX.X $X.X million down rate charges $X.X quarter banking other transaction primarily the service recorded losses the valuations. second first credit million sale provision discuss was in the we due the due quarter. the from on mortgage totaled million up on valuation income, of quarter of this second from MSR million service of a X first The and from impairment will impairment $X.X Adjusting XXXX due the reported of was quarter second quarter, to MSR a the of in income the of Partially from changes, the from the Visa our were second million to $XX.X million quarter was was the first of investment MSR quarter mainly second from negative

$XX per improving the second approximately year charges $XX.X quarter transaction quarter from for will $XX the million economy. Non-interest other income non-interest in the in from of million deposit expense fees expect totaled and the fees, to We million. be increase the service remainder

expenses a and net The second the term from us and of early reposition debt income. agreements charges and [property]. million to a increase our sale at net reduce gain some allowed The to repurchase of our of million noncore securities interest termination quarter's termination of and $X.X debt the term funding, benefit the repos included $X.X related

quarter in XXXX, $X.X outlook With of expenses levels to In investments than for XXXX the second of in quarter variable the pre-pandemic flat and second of higher overall were as higher expenses expenses remaining earnings also of a improving from rising nearly production, innovation are manner. with corporate initiatives. million and back levels compensation as we and XXXX, be accruals incentive for expenses experienced the disciplined from were economic managed the to continue XXXX. provisioning second core well continuing The quarter

$XXX million expenses the the the full including fourth normalized Excluding second quarter restoration the we million. corporate projection, and higher million of to XX%, incentives $XX as at approximately second will by tax noninterest pretax effective was for year The XX.XX%. being onetime tax expense $XX Currently remains approximately income. expect our quarter third approximately same for quarter items, with effective be XXXX rate driven the rate

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

second ongoing X deployment the lower strong decline in growth a the by partially and the basis impact decline The interest quarter the offset reflects net Our of was liquidity. from from first X.XX%, the in quarter. quarter second in points margin of margin deposit the rates,

to be These our X basis second capital growth, points of XX. rates and stable remain the been in increase fourth Net The loan to to in We and earnings PPP the ratios adding have expected capital X excess for the third and $XXX addition levels. preferred in interest asset growth levels expect increased sensitive issuance approximately balance recent successful the term higher million quarter. liquidity strong income continued slightly which of of decline quarter. rates. long stock. with margin and stabilized higher approximately quarter, decrease in due our X We are deposit X.XX% quarter primarily Tier the the NII to The our leverage deployment and excess capital impact in together respectively, volatile the will the very preferred will we X% prepayments, strengthened exclude our third and flat rates, continued estimates in positioned interest through than well is to sheet our of then but from unpredictable.

over XXXX. $X.X balance growth of the our for the beginning and we've are positioned continued strong sheet We billion into since growth deposit already above absorbed well of

out we dividends. During the $XX second of million income net XX% paid or and quarter,

and improving suspended consistent third share increase common XXXX, finally, per And million. $X.XX $X.XX of per dividend share. our income $XXX an for a with our of declared restart levels, the is the repurchase has Board levels which XXXX. remaining quarter of to since capital generation been us month, share strong buyback authority will first program Our The this enable income the of quarter share

turn Now Mary. I'll the over call to

Mary Sellers

Thank were peak At end quarter, you, total loan the the on balances customer to from X.X% of their Dean. XX% loans. deferral down of

loan linked XX% had the down deferred net the so, loans and with assets remaining $XX through quarter deferrals net average deferral we quarter offs charge XX the through continued offs with pay value million, compared be more performance million the extended stable year-over-year. event the Credit XX low first quarter. of of these value and million customers offs $X.X Nonperforming strong do delinquent having estate. second up XXXX. end loans. $X.X days or partner million secured of the and given totaled of XX% weighted exposure relief of of X% less X.XX% our for to weighted and previously $X.X million on or the $X.X deferrals quarter million charge $X.X in delinquent payment our during continuing of recall, in loan in charge remained million of to Net of up continue customers loans X.X% elected our were average end as we at days with for the the metrics dropping more loans, to and XX% XX% to linked Return Loans strong consumer and from [decrease] second period Criticized of total XX.X quarter. You'll residential Accordingly, a of X.X interest. real basis at down loan with to primarily this the year. commercial with margin than provided having to last or capacity unprecedented of were from million to quarter, deferrals under quarter has to period are to points XX.X a total XX for principal million

recent $X.X net unfunded market inherent reserve with economic consider of in losses for As outlook or charge-offs for Dean of loans which our does profile. credit balances. and and million. a back a forecast for I'll the coupled total The negative The the credit million million million, allowance the noted, provision credit of period the most of provide million losses credit allowance downside the representing linked at included recorded reduce for we the risk now commitments our turn to reflective Janelle. was allowance PPP the to negative allowance provision made continue of risk net the to to of X.X% the for million, with the is with end $XX.X increase. leases potential $X.X decrease $XXX.X pandemic. $XX.X would $X.X a of X.XX% and UHERO This of call provision The quarter to fund

Janelle Higa

This Thank remarks. concludes you, our prepared Mary.

have. We answer are now happy may questions you to any

Operator

of from question is in our from Poonawala Bank Ebrahim And America. Instructions] [Operator coming first

Ebrahim Poonawala

the capital. the us level of buyback. think about capital And about the plans the trying Where sense possibility one, of you the in capital you maybe back as as those of about terms you first around X targeting? year? you return, certain you're the is Dean, there to maintain also that resume ratios going through you're think hike just binding leverage a a share overall and Tier mentioned guess I a to the question Give dividend authorization, what's of just half when in constraint think payout ratio?

Dean Shigemura

of that is X measurements ratio. to look So Tier the above We've the like we the kind X%. that in at the stay stated past we'd leverage

consideration a but would that that room keep in in do measurement how be that buybacks. probably of above a would be one of little much we'll for bit we kind So

In roughly past terms in dividends, be we the of XX% our in net have over term. the to stated we income that the of dividends like long

that head a that's So towards. would of we kind target

Peter Ho

think is the to to I would maybe the or that the of NII. really better straight further down to path Ebrahim, term I that, I is the probably opportunity increasing dividend, add think

that extent like It rate our well me the understood the the relief to income on upside. as are of at there's environment, and So we expenses pretty point, pretty, for least feel year this pretty rate to well -- understood the at some balance well. I to think the and fee get feels levels be

I So that think. is that I is the rate think the really represents environment the that on upside dividend,

Ebrahim Poonawala

and And just the the on environment guess I NII. rate

is gets about, whether one, guidance, thanks just not things, for what's the relatively of the end at again, the your this Two quarter Dean, So remaining the clear. reminder or us as we of fee year? it and PPP accreted think second around expectations most

Dean Shigemura

$XX.X So we have remaining in fees. million

this the and so XXXX And XXXX will vintages. be both

at And But in terms off so levels, then what bleed second next -- come in quarters. will some XXXX. what elevated we into think two we the will might there's had something in of off. pretty of similar quarter looking We’re that generally it balances the the most remaining would pay to

Ebrahim Poonawala

the component? fees the accelerated And of second say X.X, were PPP did you quarter

Dean Shigemura

X.X Yes, the accelerated component.

Ebrahim Poonawala

still that question, statistics pre-pandemic we start unemployment where something got missing? around just like of a shared reopening going there in to terms one travel seems about outlook. from there, you macro around that’s understand to Is before think it. need should normal last levels? to you area that we -- be some back full I you So From so anything of X% set else seeing back guess it see Peter, And is what it the in international

Peter Ho

I So yet is to back. international think bounce

excursions then traffic before other And to we'll to And spending, I to that's The somewhere a those a there returns. there to international traffic piece interesting up nearly is traveler it incentive. historically and so beginning segment our is group bit upside international the in. the start call can that's that strength we're of as to higher of that But a lag without hear third of again. the what's So of out visitor the you market, in think is they percolate beginning terms as see and travelers benefit full appreciate, are bit the back is marketplace. back business a which visitor types

group what the probably and incentive legs is for visitor a international think up a So margin of product and we're getting right I and industry little effectively I than now. the bit think higher next

Operator

from Davidson. of Rulis And is question our D.A. next Jeff

Jeff Rulis

Peter, not trying folks. July holiday, restrictions that the underway thoughts back just the back just But on there be conservative. any Xth on to guess, is or to vaccinated I up? But I with and of around be locally needs a know coming follow-on lifted to variant. to that any that to And taken it sense of for sentiment, likelihood if overly, get restrictions local

Peter Ho

obviously, every our the are in in concerned just case about the seeing of else variants discussion reapplying this Well, from country, around and heard some we, marketplace, counts. remedies. not I've the earlier what any like we're place and

Jeff, to nothing to -- general indicators that But sorts the be early aware community of the have, are and I pretty if residents I'm been And to to though would some from now obviously, locations. kind continues and So of the of they no, of very resident low generally, to but low. though majority returning think and visitor trend from public. those just travelers transmission back case protocols, of. has that continue through things visitor right say incident we’ll mainland counts they the need begin spread are, Hawaii that as

Jeff Rulis

of Maybe stiff. guidance just a maintenance the expenses. on Dean, I housekeeping appreciate kind

line guess on occupancy I anything guess were that they Just linked into at level levels discuss noted on there's were quarter. is sustainable Thanks. that to and guidance, also the why items I those if those, data baked pretty that low helpful? and

Dean Shigemura

so line, the $X.X that sale So came in million. the property through

And quarter level. R&M did So then bit we the expense a have little for better second you that. have in to adjust

why was the the level were mainly occupancy that's sale. but little lower by of driven reasons kind So much but two property those the second quarter, uncertain a bit in the

Operator

next And Andrew question, for Mr. the from Piper Sandler. Liesch

Andrew Liesch

added was the on And billion in, then just is you I mean dollars. curious question to purchases purchases, I with what's for The a continue? you the more appetite purchased? having rates securities what come

Dean Shigemura

categories, obviously, of purchasing two are what corporates, securities, kind of biased some which average in towards been backed the the we've purchase we've And the So mortgage more the in been about got backs. those in that major we And kind the rates, long did lower. past, were are mortgage we was but X.X%. rate the current the quarter rates term second then with the drop

a to quarter terms trying money measured this investing be lot bit we little liquidity we're in So deploying how we're on the are more the a sheet. balance of of the do still have we that but

Andrew Liesch

get had $XXX guess and you there to help So in that growth you would with cash. some probably this down towards? Is I And loan million level will to? the hope deposit what manage to But of down that level a some outflows. you that want obviously

Dean Shigemura

Well, reason about $XXX that coming lot million. off it'll the $XXX the for of a portfolio. do be to probably flow cash is And million that have maybe we

liquidity -- a from standpoint, that have going loan for lots we can to loans of reinvest flow into we're So cash still growth.

So the we can bit maintain million. than a cash level lower little $XXX

Andrew Liesch

the sitting about good commercial mean I then quarter. loan pipeline our enter quarter? third is consumer this good growth And as here How growth, we speaking growth,

Peter Ho

consumer of was good, this looking half having estate back and commercial. real Commercial good strong. have a year. good Residential so a quarter, both they are Pipelines anticipate pretty

all the through in a of residential, billion did year, local lead So production to providers. half first the dollars

equity think pretty is indirect about flat, pretty rates good well. that pipeline performance. here bit feels I the good have recently, right sales Home so a now And as that. come auto a I state that more given category, say, down has feel was should So as reemerged, which in good about a of bit

consumer waiting be are types the consumer affordable and just the as would have transactions. upside as clientele. underway other you Construction those the those a the drivers. C&I by categories. And in the as And both number both on the impacted some well of going is we're then actually get what categories, negatively well installments So the category liquidity and to guess as we appreciate, might -- been of have of build really I commercial for

all reasonably single think And digit XX kind so put months the rate a think I next is mid achievable. together I that of for growth

Operator

next Our is question Bohlen Instructions] [Operator of Jackie [KWB]. from

Jackie Bohlen

little to bit. wanted economy I a the chat Peter, about just

rebound sense feet You great because some love gave get want the they're in sense you really versus just rebound know view to Obviously, tourism. have for than since I a how which it ground. more economic to the your the the in it, economy you overall? for but I there, rebound me anecdotes helps obviously tourism how on a just get there's interdependent you I the view

to want I So there. get thoughts your

Peter Ho

industry is say found other would big is is, economy. it's the economy I drive are the of that component local local as the I that, we think visitor factors So as a there obviously, big our But well. as it pandemic what through

tensions health extremely real given estate And geopolitical here. get so construction likely been defense the sectors the in driven stronger The space, that's of Pacific to sector has by good is the helpful. strong the been a in and

the travelers the to of least for travelers with think velocity come surprising, of next of with incentive back and been stage notwithstanding, really are really which well out so have me, major group the given and drivers, back has opportunity doing strength, its has well. front surprising. But I the we other that be in the has getting to visitor bodes economy think, and those for local it full I stage important been return to factors on The next visitor a I contributors our there healthy that And as obviously, factors be feet. for segment. order to the variant we've well And at with those at return seem need segment. think And been international economy, been

Jackie Bohlen

things and it that, conferences mean you're about? type talking And a say you of group when travel do like different is you and incentive or travelers,

Peter Ho

It's that. also the It's conferences. star It's corporations segment things large a rewarding of and big industry. performers like sales

Jackie Bohlen

but you where maybe think it's you of haven't this getting viewpoint at. -- realize about they about we just discussion if the that's think very rate as the a because think than unemployment looking And I'm about benefits your economy jobs? very this. economy are we at is to are question that, workforce And and think would holding see looking on all, the for but hard then were you quantify, When or to point a I an who hard Do when the increase people a better working. for be people they their where entered could, perhaps may all you back in

Peter Ho

Well, that's a $XX,XXX people question, industry and and tough visitor Jackie. I don't know. lots are I having mean, in it small getting of time the come elsewhere, is businesses, just a fact businesses that back. a to large

the that And recovery. know. will of the and would But back country very subsidies in federal you so they've headed work states the is and state demand, it indicated the I mean have in I've elimination you're way, right. back intuitively not help situation, bounce I that overnight Perversely, at in a in that or half whether should. worker seen poor think holding think reduction also perverse a reports don't that the And I an lack post-pandemic looked of direction, few supply.

question like So to as share clarity just as it's don't the right much with you. I'd have I and

Jackie Bohlen

crossing can't completely well, island as Hawaii have you're so mean lines, -- you but not unique state it's because and just easy. is understandable. you so have people I And can't an people

Dean, amortization technical -- the I what what for one step fees? accelerated and back. on wanted you I I'll wondered get piece the So you the amortization. last quarter then just appreciate of for thank And just I'll regular was just thank confirm I to that the then on all that. one really for it.

Dean Shigemura

$X. it million. Yes, X was

Jackie Bohlen

plus million $X.X million? $X.X the So the

Dean Shigemura

Correct.

Operator

Hunsicker of is question from Point. last Compass our And Laurie

Laurie Hunsicker

we go of Just year, of we Wondering think, expense. take standpoint back And XX thinking were the update you going I the the end how run down just should can XX%. at you of to hoping to the be us, by about just branches sitting could to and beginning occupancy. year we're from that that rate maybe

with should terms about where expense? that in thinking about occupancy think are of us help we Just how you be

Peter Ho

time. occupancy Well, we terms should I think in think of lower holistically over expense

we in-person so on -- jumped for banking our is just pandemic count around branch the operating has happening. the through based And had demand been where

in so question as now want But toggle person And the technically. posture. going we're to we transition right go is those that success us I trying created digital but footage from to branch a to think call to great opportunities in for had where I to down obviously XX% And mean, square for between the in two from permanent end think we've our XX%, say, up I to to forward we're has the numbers us system.

just we past Where exact branch structure you probably be, So of the XX% which on XX% system the overall if here and pretty good for decade, pretty in number is XX%, XX%, now. I it, count footage our occupancy not think you that we're branch is about we'll look and over that range, XX probably expenses. the now what comfortable branch Laurie, so down has of also if the next had is kind slightly take branch, months a down but reduction higher or to in is XXXX square go here, view from a our right significant in from general the going but feel decide overall

Laurie Hunsicker

And so be a rate that then occupancy when $X think so number…? run we about or quarterly number -- million good expense would

Peter Ho

Yes.

Laurie Hunsicker

prepay prepaid FHLB if $X.X much the what you cost the the have and was then it? how million, And of when and quarter, about in was actually

Dean Shigemura

mid of million. $XXX it's was kind to want quarter. And say I amount total The almost

Laurie Hunsicker

And costing?

Dean Shigemura

rate, You terms in of X.X%. was mean about it

Laurie Hunsicker

And any you do to then of more do plan or it? was kind that

Dean Shigemura

because it. of one This to we of be going that out the was it's think I opportunistic benefits got opportunistic.

the in see further. reduce future, we as to opportunities may So we elect

Peter Ho

because margin. cost was we the on of gain offset securities This the got improvement prepay the opportunity, on accelerating basically the a and then Laurie, nice the

no at again. for our door up if a we'll again, of us. kind do shows it that brainer it's So And

Laurie Hunsicker

then And just the other looking at other line. expense

out So $XX it $XX the contactless was million I prepay. I to last the that it quarter. Obviously, $XX back backed the $XX compared FHLB was million, quarter million million. million rollout $XX out contained card this then

So $XX run there number up it Was showed or be going million million. around $XX any rate we forward? that higher? nonrecurring Will quarter that was that about else in that? anything going why that number, to last How should think thoughts

Dean Shigemura

processing contactless the up rollout the card in showed data Well, line. actually

adjustment quarter. for only the the other So -- second to

Laurie Hunsicker

The $XX.X it, it's And to, So was going for in premium just then last how quarter, that? million me. $XX and million. much the one call

Dean Shigemura

$XX.X million.

Operator

I'm it have on session. question-and-answer Presenters, questions We don't that's you. more no And turning queue. the the for back -- to call the

Janelle Higa

us or Bank for and everyone you so any discussed have your if of of to topics clarification Please any further Thank thank additional feel interest continued any everyone. Hawaii. today. joining for you free on me today the much, questions to like I'd contact in

Operator

for our concludes up you that Thank so hang now. today. Thank participation. may you much. you for And Please, conference

Bank of Hawaii (BOH) 26 Jul 212021 Q2 Earnings call transcript