BOH - Earnings call transcript Q3 2021 | Bank of Hawaii Corporation

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Operator

Good day, and thank you for standing by. Welcome to the Bank of Hawaii Corporation Third Quarter 2021 Earnings Conference Call. [Operator Instructions] I would like to hand the conference over to your speaker, Janelle Higa. Please go ahead.

Janelle Higa

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

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

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

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

Peter Ho

financials off quarter be to the little a credit the here call with what's happening Great. take to generally turn Mary marketplace, and our for touch who quarter, Hawaii on will and on questions. your a fill or you, Thank the to Good lead over morning, commentary turn we'd in Janelle. then then to us, in he'll Dean, the items everybody, custom as for you I'll call over is I'll the good good happy on afternoon. clean, pretty then

our just actually meaningful anticipated little and state kind is leading hard had islands unemployment and employment that the over were economy late with really bit hit Bureaucracy to to Hawaii X.X%. at pretty in talk So, forecast come of off, see here in a variant out we Delta pretty the of about in the impact recently the surprised the summer

to bit said, And we then a the positive downward continued trending So page. next surprise. in unemployment here of the State. I Like a in go

but for space of a the think all forecast, we X/XX see our most than surge. unemployment in this had elevated - employments is bit happening We'll coming what's is were of point better what level a recent and in out Delta the like 'XX. see of next happens at we looking forecast forecast, 'XX what an I you what thinking

Like prices country, the real Turning sales hot. continues - September, levels market. XX%, that prices up and single-family median estate downwards. on inventory trend for up world to Sales homes to condominiums, estate continue places not the for it's be in actually, in X.X% many real to September then the

months single-family homes are for levels arrivals, condominiums. now actually in Oahu Daily for months our inventory islands visitors on really So X.X or marketplace. the and here are now here X.X down into

a here this really to the most until for chart. you, was we back that islands of a comp'd levels if that things shows up is we you of markets count had visitor accomplished July, by see it pretty nice only have is up XXXX on with that about place. shows was here. primary interesting of And in in an our the couple It of you mind that one the two really end chart from basically July. What I into ramp-up, think will in right trajectory XXXX, the

see meaningful put of August. kind traffic, and and vaccine policies in both in demand its through supply and way the United Asia market, the West the mainly that you of East work from place - North number from States, as the visitor Then post in of downturn really to infection of like lots And in - from marketplace So hit delta in pretty protocols. a the much coasters. continued not a post and American

should pretty the again. that be for in phase we're a and the hoteliers town good to a at talking point. like us this think winter of So a It I of bit repositioning feels some in season

situation. in be nationally - or recurring this I we'll trend absent all we think resumption see but I for kind in the we'll the of that kind better quite summer. went Things of surge speaking, see bit variant mid to late of through islands. here in a islands - so the the I Switching out. mentioned how have plays any pretty in should we COVID gotten with And upward late think meaningful here a the spate in arrivals, Delta

is rates, So And of infections, at of good we're here the in total almost then XX% vaccinated standards. here percentage eligible number that of XX, good on to the plus we're trending the bottom islands as a population I country of we've you in range. if see into actually And XX it this national at think the is That's thing. I that very number number, number towards to look that vaccinated, is that chart the be which think you relates the terms interesting the the now vaccination number vaccinated. a by people now percent of are

so, under authorization to vaccinated. hopefully, if And gets see we'll be XX-year-old the population

anticipate would State very high local, be distant we think percentage Hawaii to of our I not population in of the vaccinated happens, very, that a too Assuming future.

will So, Dean, our call over update I'll who turn the financials on for there stop the you to and quarter. Dean?

Dean Shigemura

year-over-year quarter. on Growth PPP accelerated loans have and $XXX by customers third. X.X%. remained core in solid net the of balances or Waivers by linked PPP the on and in $XXX increased Core quarter declined Peter. you, X.X% or $XXX loans million million waivers Thank

balances strong by time and million. operating Our public deposits of million non-core growth reduction grew Core a Offsetting continue. in account growth customer $XXX linked this deposit was $XXX quarter.

or total $X.X result, million increased X.X% and year-over-year. $XXX a or linked As billion quarter XX% by deposits

easily in needed, while mitigating margin high liquidity liquidity low-risk for into Our strong growth investments deployed quality, and that remains if funding a be base current providing and stable in source can converted deposit Excess income is being pressures. available readily income. of continued

well and balance Our sensitivity for net sheet positions us income. asset interest greater rates rising

XX% deposits funding loan while low lag source us growth. and a allow Our maintaining deposit to increases, of strong to continued rate core ratio will significant for

quarters million, lingering $XX.X third as offset third and cash a million in rate deployment income potential X.X% million Included net Net up linked $X.XX. respectively environment. monthly loans, million strong for and were was fees interest and PPP flow the $X.X adjustable of the interest for per of income Net ample a million net second income up share loan quarter rate from the and X% was loan rates, XXXX. balances and was and $X.X third and in increased third income quarter flexibility from Adjusting mix linked interest was significant of or of waivers. earnings cash rising lower Our income in the quarter by represent floating loan PPP $X.X core greater $XXX.X the interest quarter common growth by liquidity. loan X.X% quarter from forgiveness, impact quarter's accelerated third and

will interest net fourth We expect continue to in quarter, trends PPP loan the the increase expect X% approximately and by these waivers. excluding core income

credit million As were from swap in of in these gains, third investment provision $X.X in second sale this totaled income quarter. Included of XXX,XXX $XX.X quarter income compared fees Mary the transaction of quarter deposit by the million securities. will approximately quarter the the $XX.X second a discuss fees. Noninterest $XX.X with and later, non-interest for losses negative million increased from higher quarter. gains we the third recorded Adjusted for million reported a

negative other will million quarter. Non-interest reopening delta approximately emerge income in the deposit $XX.X transaction from the increasing as from the the increase further quarter variant we third impact noninterest fourth charges $XX fees quarter unchanged approximately expense in and the fees, from from to of the expect and We service totaled economy. million, second

during increase to income. were expenses strong growth. quarter's the by termination our the The year our the the an million of primarily well to included third reported of quarter in approximately linked on for The Expenses million expenses successful over quarter's expenses adjusted severance estimate free early to comparing onetime repos $X.X rate million expenses. we full are pre-pandemic million a $XXX year. the expenses expense Expenses and Adjusting a from be below basis items, marketing strong of of the million property. which to a million an $X.X led very on to discipline. evaluating XXXX growth When and at reduce was between were benefit the continue million year X.X%, represented $X.X program $X.X interest up longer quarter capital $XX XXXX, of full the of net of funding, X.X%. charges of quarter $X.X due contributed that fourth offset items basis the with of termination variable period increased for loan marketing loan also These related to projected by non-core a increase annualized higher of to $XXX or rate at the million for million and expense linked and demonstrate variable us a agreements and The these to The the increase. inflation repurchase allowed sale reported expenses. quarter, for $XX initiated

More our savings innovation realizing has expense expense $X and core million. investment current expenses In rate resulting the the expense increased that levels and by $XX level of run significant already growth are investments and normalized to balance include our in efficiencies. of related sheet we annual importantly, are million XXXX, spending

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

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

we single-digits continued rates. quarter fourth Excluding the third and low PPP interest the expect due increase in stable impact primarily will growth loan further over loan waivers, the of by the margin to quarter,

and support will position Our position continued growth. capital and remain levels strong to - will

were respectively, excess the ratios capital and risk-based capitalized minimum a XX.XX% total healthy well over requirements. and CETX Our XX.XX% with

we and total shares million quarter, shareholders dividends. common million finally income $XX stock common for paid share We XXX,XXX and Board to repurchased XX% per common declared dividend XXXX. net stock $X.XX of dividends a preferred third $XX for of the our of quarter the in available of During of or and out a million, fourth $X

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

Mary Sellers

from Customer deferral loans. loan are down XX% Thank of peak their to Dean. total balances you, X.X% on

or points basis more. or Net our through X loan As quarter. to $XX.X XXX% consumer period. on and metrics XX%. unprecedented secured remained to were flat on or points quarter. quarter. having less a margin of the performance up and average additional more continue deferral the relief, days real X A of charge-offs for of million loans point with elected XX deferrals remained these value to XX partner at of the second of our remaining up delinquent strong of to and linked interest, commercial XX than for the points were pay loan assets the a or on value this with criticized with basis to the days exposure you X.XX% weighted basis low are end we the recall, XX the loans, basis the principal deferral Loans delinquent million customers basis X% Credit commercial loan totaled $XX.X basis weighted having million from return XX $X.X linked to points Non-performing XX% quarter, deferrals average our points, customers in event were total X strong of down quarter. stable A our primarily payment And deferrals through XXX% for loans estate. provide second or

for provision X.XX% provision which As negative reduced outlook million, $XX.X and allowance risk a Dean credit net or of million, of losses to for downside loans to our of reflects X.XX% most credit losses economic negative and allowance a $XX.X now the UHERO turn forecast This pandemic. million, the inherent the Janelle. charge-offs with with noted, uncertainty to of $X.X the of for and the risk for the profile. allowance in total coupled provide net million. balances. does where $XXX back with leases I'll credit decrease to recorded our allowance and The recent PPP included the call market The forecast market continue potential we

Janelle Higa

our Thank remarks. This concludes Mary. you, prepared

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

Operator

have We Sandler. Liesch question [Operator Piper a from Instructions] with Andrew

open. is line Your

Andrew Liesch

pretty margin level on cash up inflows, be have So, you curious here to the guide deposit see any asset around of shifting good here? I'd You improvement in how does the kind the talk slightly, that of to just earning include mix? continue

Dean Shigemura

of sheet I Yes, balance well the a of the continued growth excess bit and little more guidance as growth bit as and think loan a of assumes little investing liquidity.

to we the So that's to how - the Hawaii number. got got

Andrew Liesch

the It securities been looks quarters the like few adding I you've, aggressive, pretty, you've portfolio. over wouldn't last been with but consistent say you've

statements the add to So even still And I the is book. guess inclined plan? the of the more yield that curve are to

Peter Ho

investment is, the on mind liquidity the portfolio it's to Keep handled tend because in us, We a it's balances for past the of are, growth. adjust really and way a of kind the in we loan storage we've but based deposit that

So be of from it would those outcome of the lines. both kind net

Andrew Liesch

of And a that on then your with year, on the going into the $XX to run then merit you maybe good the seasonal in and million increases rate layering to quarter? guide first million, expense is front then $XX payroll but taxes next some

Dean Shigemura

will It base. intend we've of our the have investments do a especially strategic seen serve to those past. mentioned, in make in you we innovation that continue We as to area items kind but like

Operator

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

Your is line open.

Jeff Rulis

like guess get my a don't is I provision to of get and the the XX% and projections here, too it's provision actually levels more what to reserve that but the that quoted. that weeds that projections into correct want led leads is Mary, by less recapture, versus seeing trying are you that sense more you're on for maybe corrected number? number But, unemployment about for, that the Question

Mary Sellers

Yes, absolutely.

Jeff Rulis

Okay.

And lower we with continued align actuals I guess, oversimplified, it's possible but... more to I suppose, if that is read recapture closely so projections intuitively could

Mary Sellers

You've it. got

Jeff Rulis

And Okay, job think a headwinds. some segment, strong, you've have Thank it. - you that Peter, continues it of pegging might on sort some I you Got some in done thorough done past I you. you've have by All mean where quarters loan be tailwind, to the growth very think of side, right. just

of you're if mind wouldn't So where where rattling kind only in of but book 'XX come? through that areas where terms and you the see and not you QX, just optimistic some might

Peter Ho

Sure.

individuals made in by both core a was as consumer build quarter, good on some So in you couple - of that the C&I, driven out years the some, market Jeff. markets PPP out C&I, for us actually really those on - the islands. commercial a in great the as X.X% past we linked and investments here growth in net well share and up had basis of few some we've people if over helped have markets a basis,

track So but C&I in - not has basis and CRE an institutional a in level, think space and into at good we X% our opportunity rate that probably there 'XX, healthy we linked call amount grow up smaller which reasonably is is in think the X.X% a of pop product room mortgages but there. was think granular, what as we in smaller to well, commercial fast the on a our the types, I growth linked quarter both space. to investors mom and also

the the that I of the has be kind renewed a think in for in Hawaii to nicely production XX% the after by was clearly of institutional durability up need categories, pandemic. a of this pick as interest just $XX to think level on I the market programing started back Construction, bit, instalment XX% up. inventory the side, assets through quarter consumer up really about was at - seeing linked is - despite took pause pretty restarted here that flat we're smartly, of that resi recognized we by the about pandemic. led good the a well, on we that as and the taking offset output and that Switching and basis, strong rates, million for should all as affordable which linked quarter certainly about basis, consumer marketplace. great because really other was news is that or just down indirect that basically up challenges our was on really hopefully our other through housing rate as But under was bit of very of pulled we over was that HELOC kind is even a quarter in so the a production program up by the consumer - was driven industry,

And is the consumer a channels. demand very the pent-up on still think that in our thing I - that seeing so book, I side we're a but good I uptake And in interesting the other good some digital result. was, created think think

production So was our of year-on-year. digital percent the XX% our for quarter through XX% up channels,

Jeff Rulis

of sounds I Maybe one last Dean's suppose. Okay, question. appreciate pretty into maybe Dean, details, just, lot 'XX, good A pretty, it. momentum it's and one,

PPP, kind could Just by - largely of we the assume cleaned that's up is to is that that year fair end, say?

Dean Shigemura

carry remaining. Yes, But we over, might fourth we the expect what's expect do not of material but off that amount. some pay to most also quarter

Operator

[Operator Laurie Instructions] Please ahead. Point. Hunsicker with a We have go Compass question from

Laurie Hunsicker

are refresh remaining? us in just you on actually how much fees PPP Can

Peter Ho

remaining. Yes, we approximately million $X.X have

Laurie Hunsicker

And I $X.X right, I million make sure quarter. in you just Okay. this was that then want it was to reflected heard

Peter Ho

was That the accelerated fees.

Laurie Hunsicker

forgiveness. Right, the

Peter Ho

Right.

Laurie Hunsicker

about the I'm they us comments your what if was to out, gains and XXX can much Okay, little so Thanks. if and also then about in last quarter. were think ex-PPP margin were your repaid - bit how I when FHLB stripping were those relative that okay, I'm guess, and XXX quarter, margin prepaid that the so borrowings help potential a maybe widening costings? you

Peter Ho

Okay, PPP think back and to take growth of about then impacted X.X%, numbers second towards I sorry, quarter the me points. waivers. basis same added end Liquidity I of in the first X.X%. X.X% get margin, basis terms about that XX X rate repos. was quarter of our the was the and did points over let the deployment And us you the on assets that by It one - - the the then quarter, approximate about on

Laurie Hunsicker

are how that? then And doing thinking you Do prepays question borrowing any you Or anticipate quarter? Okay, the one around great. coming just that. in last about

Peter Ho

it. will planned nothing here it look from positive guess for situation. right now depend done fronts, I do When quarter. mean, the opportunistically. I we've I the we various will think But on it these

Laurie Hunsicker

Okay, just then, great. from ones two And me. more sorry,

Just to got I this want make sure right.

see quarter million, this will that on that be $X.XXX am $X.XXX preferred the was I full So next right? quarter we'll impact, the math million, the doing

Peter Ho

Yes, for million dividends. the quarter see fourth you in preferred approximately $X will

Laurie Hunsicker

about we one perfect. then just last Okay, should forwards? million, think tax And me. $X How going from rate

Peter Ho

quarter For the XX%. fourth estimate is about

Laurie Hunsicker

ex how about that? about in think is what for Washington, next And we happening Okay. should year, whatever

Peter Ho

XX% I is number. good think now for a also

Operator

further you. And not any I'm questions. Thank showing

Janelle Higa

me thank continued today. if Please Okay. further and discussed topics the additional today everyone. any for like Hawaii. have on everyone contact feel to for your clarifications Thank would Bank you, joining you of I any to or interest questions in need us of

Operator

Thank conference you may you. you And for disconnect. this completes Thank participating. today's And call. now

Bank of Hawaii (BOH) 25 Oct 212021 Q3 Earnings call transcript