BOH - Earnings call transcript Q4 2021 | Bank of Hawaii Corporation

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Operator

Good day, and thank you for standing by and welcome to the Bank of Hawaii Corporation Fourth Quarter 2021 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. [Operator Instructions] I would now like to hand the conference over to Janelle Higa. Please go ahead.

Janelle Higa

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

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

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

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

Peter Ho

Janelle. afternoon, Great. interest Good for your Hawaii. good Bank morning, Thanks or in everyone. of Thank you,

I Mary call the financials. with we So, to whatever pretty a begin get then over be will and just pleased that credit off And on marketplace finished economy. looks we'd the I year, share on quarter have. the then a next I good you tell questions to into moments. happy the take started and with the to we me, solid side, giving off flip finish we're the should be that We'll local Dean, you you although very will a now, usual, who right short over by few think may report. pretty or backdrop with will excuse as you I'll

slide. So next

the improvements X%, most both Unemployment now And the and continued variants. the out in rate think. recently April steady forecast Omicron we in impacts level or move here from see improvement slide of a very in nice, distressed look of showed of at XXXX, from the of Delta viruses is was generally you at you what If I what unemployment, some as in the unemployment back November. kind coming on about

XXXX. Oahu estate story slide, information. trending close is that and record neighbor had This sales for so see near sales The $XXX,XXX that December tight. in XXXX. a On I'd level looking the XXXX, pretty we you Island price islands Median very there up in prices almost real the Kauai sales just you year, for good And Oahu, see XX%. for proxy homes only year. a XX.X%, single-family Big next But the single-family for down inventory similarly. Maui, was in in the on effective up on you pierced market, home note days see median million-dollar of islands

On the volumes as home and inventory XX% families, with market. industry. discussion finish performance their side, but visitor good levels as not up was good the as prices year, up single the little I'll on condominium a constrained for the single-family X% as similarly quite

performed are you I Here surge that's that's gray takeaways lines well. ex two XXXX the or here and the And daily XXXX. think market of blue arrivals see in situation, dark exceptionally performance the over the our that extreme bars visitor any the kind gray

quarter yet. really reached the really is XXXX we So remarkable into like you Omicron. a but levels, for arrivals more environments. over of or islands, travel -- that get the in holiday season was the that timeframe, quite we international deep into -- of of outcome one it by given summer, the kind terms Deeper with which the Christmas, And did good have resumption so redispersion into July-ish past we late the been impacted we Christmas of see in towards month we parity general, seen Christmas surge as almost reach call still the of actually, haven't fourth

we certainly seeing hope less for international next So, is the hope of traveler well towards return we'll be of back as to the year. 'XX by half begin as that our impacted the surges

return of feel amount felt back on a viral the that of a folks into international talked the the within of in to the optimism and good. visitors sense the eager pretty half 'XX. visitor travel great domestic I They fair of of occupancy, to just predicated so great of lot to that operating looking Hawaii, season, that about And Again, lot kind towards environment. but year, are used most industry to great the ADRs, this increasingly holiday

me turn So call And from the now let color over the on for Dean. marketplace. that's me to it Dean?

Dean Shigemura

asset loan the fees. charge net normal $X.X loan interest and X.X% loans includes the onetime loans quarter solid to net continued and respectively. or or core the by for $X.X third X.X%. adjustment Core and driven interest net Thank $XXX.X remained up experienced interest, strong upward core total $XXX declined million for income, income fourth In million, Adjusting income, in trend and from linked income of shift by fourth amortized the accelerated of quarter fourth and the million, $XXX,XXX loan balances at Growth increased loan quarter. you, at and Included liabilities. by in quarters million fourth were loans higher end customers onetime $XXX repricing loans the slowed million interest Waivers quarter the waivers and loan growth was million. This interest million, year-over-year PPP quarters, income remained an reduction interest was the total PPP in $XXX Net to on deferred on fourth of in a PPP PPP $X.X $XXX quarter. third $XXX.X by of income the investments in million, fourth the interest the fees quarter, our Peter. which year. was mortgage core million, net linked X.X% yielding quarter or in PPP

of XXXX. interest liquidity deposits comparison or stable Our enable will our increase year-over-year are at of XX% end our and us of non-interest-bearing from core customers, of increased balances and a of our demand XX% consumer and comprise low-cost lag an commercial and the source income. XX.X% readily a On deposits. from total XX% remain rates available growing strong rising base continue to deposits and net

In addition, represented all interest-bearing dropped balances and of as less bearing quarter. points demand XX% represent basis basis In total of XX% time total X by sensitive decreased accounts operating by and X% contrast, non-interest Total deposit point costs now account deposits. are our X in the balances to nearly deposit deposits. rate

our of The loans adjustable-rate ratio our positions sheet floating rate for provide sources to income deposits low-cost maintaining XX% take while deposit sensitivity, in low and to loans advantage flow Our are funding loan with us core current or balance rising strong that of and cash rates, of combination asset XX% additional continued growth. well sensitivity.

to our million share for than In was be of $XX.X record the was In fourth generates of investment per earnings cash and portfolio common Hawaii reinvested $XXX.X record net income $X.XX. achieved quarter $XXX and of at million. interest XXXX, per Net per quarter income rates. common $X.XX $XXX.X higher addition, Bank flow more of available fourth million Net the quarter share. income million in of

earlier, strong from adjusting or assets net fourth of loans mix interest quarter's discussed the X.X% and income core loans the core $X.X adjustment interest higher income, into onetime of driven linked to million liabilities. and As PPP by interest quarter, earning on growth, investments increased net loan continued for free income repricing

economic totaled of increased other $X.X charges million $X.X recorded quarter. million for credit fourth transaction later, this fees discuss higher to and income in will losses negative quarter, was the deposit from from The Mary provision a $XX.X fees, Non-interest third activity. we increase million quarter. As the up due service

service $XX.X employee increase We expect and totaled quarter. the due Non-interest will quarter interest expected throughout and additional onetime gain Mortgage an same first fees by offset improving in charge approximately the rates quarter benefit quarter, million end our $X.X the was million third limits. quarter's fourth the be fourth that up sales an the increased the vacation $XXX.X income approximately lower Included million in spread charges the in on the carryover from non-interest expenses banking to income is fourth a for to million, by the transaction of expense year. $XX be lower higher as to year.

losses Comparing in or up were was $XXX.X the our higher reduction quarter in the we're expenses. for items million XXXX, the of were rate of million items mass for The Normalized point these early toward charge benefit to to how offset the costs $X.X main onetime million million turning increase to benefit of in expenses million that from to pre-pandemic million, third million XXXX continue a we adjusting increased drivers incentive million Adjusting from some and quarter full costs sale normalized quarter million op for for the included debit the norms. to Normalized $X.X increased extraordinary XXXX and contactless charged $X.X -- expenses, for were and $X.X have legal excise both one-time X.X% year million charged properties. items. million expenses medical by than tax onetime $XXX,XXX These expenses million several property, impairments, from insurance $X.X those accruals repo in bring of of our repos; $X.X and of after expenses $X aforementioned between of back in and were levels. million costs offset X.X% benefit and accruals. $XXX discipline. an thinking XXXX, linked million adjusting $X.X To $X historic over the of for including clarity of of net fourth in $X.X sale in onetime $XXX,XXX onetime partially rollover, refund. included from are full Incentive partially over million the $XXX,XXX the normalized costs, of million normalized benefit incentives of expenses two Medical a costs a severance property the a vacation increase increase and reserve, additional year increase $X.X $X -- -- X provide termination quarter. quarters, of non-interest termination annualized, extraordinary legal expenses; XXXX the for inflation for severance annualized in XXXX year onetime million expenses items, of about The pre-pandemic normalized the from linked less comprised expense sale on XXXX demonstrate period. $XX and by in cards, in costs the a early one issuance related $X.X $XXX after

share to kept the increase discipline XXXX by between significant volume related our and growth. revenue and that sheet in expenses combined strategic XXXX, expense In were innovation and are to are driven of primarily our XXXX resulting lower, expenses with market and X.X% investments normalized market an and investments we share growth. total growth expenses core Continued flat additional continuing our innovation in balance slightly with further strategic

approximately X.X%. $XXX X.X% merit .X% from expenses our X.X% increase will inflation Together will to the normal onetime expenses our additional Expenses will adjustment we total normalized of We innovation of the experience of by reflecting also higher core million. cost expect over XXXXs increase with investments, continued increase strategic an annual employees. expenses living expect increases,

first seasonal in expenses estimate we of As annual that will million the a compared to the of the quarter, in approximately the quarter payment million and related $X tax $X benefit the be first XXXX. reminder, payroll with approximately incentives

on during was return the equity X.XX%. XX.X%. on fourth quarter return Our The assets common was

Now our efficiency XX.XX%. ratio was

was sheet quarter from strong quarter. by in the loan Our offset core more the balance PPP loan quarter X lower interest increase mix role, an net -- basis X.XX%, points by during reflects in favorable loan The of fourth waivers. a partially increase margin fourth driven the third the margin

basis PPP loan the quarter. margin was core charge earlier, onetime total fees mentioned increase linked for X.XX%, mortgage X deferred points income an of the and loan Excluding interest the

deposit higher of loan due basis impact to expect loan improvement the interest and increases of continued in margin core per and income, Excluding to quarter rates. PPP interest X continued points with we X XXXX growth

capital is remains continued well-positioned and to strong growth. level Our support

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

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

Now the over Mary. I'll call turn to

Mary Sellers

loan X points X for loan the million $X.X or points quarter. recoveries $X.X in compared and assets with were points remain XX Dean. third million more flat in million from quarter fourth total the points exposure basis down quarter and XXXX. of XXXX. the Non-performing net basis flat period X XX the X.XX% X lease the basis basis and linked quarter, Credit the criticized of or were for that quarter basis points of very year-over-year. and metrics fourth Loans annualized the charge-offs $XXX,XXX period or or the XX totaled or of represented for year-over-year. strong million down the third you, charge-offs And or from Net basis points $XXX,XXX loans, XX points of or fourth and points, linked down $X of XX $XX end down at basis basis $XX.X delinquent million, days Thank quarter

total most decrease our $XXX,XXX and of Dean loans peak profile. million reflects a the credit net on were economic to allowance end, the .X% and The losses to negative the the loans. balances. the noted, which market, of this the continues million, losses forecasts UHERO reduce $XXX.X we for to with down leases recorded their coupled allowance The with associated provision and credit of a risk As allowance $X.X provision risk provide $X.X from million, for to outlook uncertainty X.X% or total loan deferral quarter. with included PPP pandemic. of negative balances on potential recent our This downside and year of XX% charge-offs leases credit customer of in net X.XX% At for allowance for loan

I'll our capacity loans deferrals are given through margin of deferrals performance to customers recall, return days provide with have remains we value having low of commercial our than these consumer our deferrals with commercial deferral to of loan XX secured with back weighted a the estate. our to principal XXX% and a extended XX%. relief so, we average X% continue to your Peter. call delinquent the to strong and real weighted more. elected turn XX% on having our interest, average to of As and loan the of less or loans, customers [Indiscernible] and remaining payment value to do partner primarily now pay

Peter Ho

Thank you, Mary. Great.

prepared folks that's We're whatever you So remarks. our to happy questions answer have. may

Operator

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

is open. line Your

Andrew Liesch

Hi, good everyone. morning,

Peter Ho

Hi, Andrew.

Andrew Liesch

this How to on bps X assume the question quarter, Dean, higher guidance, assuming in forecast? does rate that per many hikes X margin rates.

Dean Shigemura

March. Yes, X% we are -- about in And three assuming at the then in rate a hikes looking end, XX-year. starting long on

Andrew Liesch

it. Got

I that XX XX% repricing? Is break Okay. That's helpful. And loan the the then guess does of adjustable How what's at on of Slide out? months? timing X, the X that portfolio, after days, mix it

Dean Shigemura

It's about $XXX over is -- but it several years, years varies average X less. the million roughly about X years. and There's

Andrew Liesch

then rate I in Okay, similar that question many And year? of the the mean, first got on those -- how that XX%, it. I guess loans. fixed many reprices how

Dean Shigemura

flows. embedded in the cash That's

would that's I $X.X So about be about -- estimate to billion … about

Andrew Liesch

Okay.

Dean Shigemura

or … $X billion.

Andrew Liesch

a million backing the be Is a income million clarification this to the so $XX.X loss out? or Got fee it. we quarter. quarter the the Got the including that that securities, on And it. should similar just total securities $XX question reported, building then the guide fourth level net on the for in

Dean Shigemura

repeat you Could again? that

Andrew Liesch

fee for reported quarter the income was So, $XX.X fourth the number million.

the be quarter million? said the Is that first You the number using should something $XX.X similar. for we

Dean Shigemura

Yes, yes.

Sorry.

Andrew Liesch

Okay. Got much. all covers questions. it. That Thanks so my

Dean Shigemura

Thank you.

Operator

next Motta with comes question Our Kelly from KBW.

line open. is Your

Kelly Motta

Thank much Hi. the you so question. for

I to just question on the off Andrews think, of NIM. piggyback

your to need embedded there? get with you costs, that the Hawaii betas how deposit impact to rate deposit costs many an hikes given come wondering think do Just you until in continues that and about just through lag to

Dean Shigemura

base, about the to complete overall gate. our initially say given betas XX% our we're Yes, construction deposit be out And way cycle. over of have lagging model going -- is that of would the we the the I that are just

probably where middle it's increases year, towards part we'll seeing the of the after be second-rate anything hike. deposit So, on the

Peter Ho

I'd add are Yes, several say, probably I thought, layers just to beta. to there Dean's deposit our

everyone think of one the deposit I in or one, one the Huawei number that certainly of the country. is So, better recognizes marketplaces best

set. competitive [indiscernible] stickiness us that's to in give So some going our

The we've loan other ratio sits now at XX%. deposit thing got, I'd is point that our to to,

compelling always maintain now, but at even to So, as we per competitive, se. there's we market build. right no be want to want to need least hold of always share, deposits, We're

that's the a obviously the And XX% you decisions. savings, checking and core think public into So look client and is base, of play versus of types our similar -- composition number at I that'll and to going when our of pricing base and finally, deposit are consumer in then commercial basis.

will So help that too term. intermediate over pricing maintain the us

Kelly Motta

color. the all for much so you Thank

happened funding? your Just the roll off off versus part quarter. to roll with that How follow-up of some cost on much deposits to of the that public maybe higher effort maybe was this seasonal

Peter Ho

to as at of shortly intending of $XXX that left in that book the that transactional. prior million was -- rolled But transactions. the tax that mostly after rise. are in fourth public we payments -- quarter, those Yes, came kind end were the down quarter of public some had We bring was of types the rates and off in kind the that

characterize structural. as I than for that seasonal would question your more So,

Kelly Motta

it. much step for That's I'll the super Thanks Got helpful. back. so question.

Peter Ho

welcome. You're

Operator

Thank you. Compass with [Operator Laurie next question Our Hunsicker is Instructions] from Point.

is open. line Your

Laurie Hunsicker

thanks. morning. Good Hi,

Peter Ho

Hi, Laurie.

Laurie Hunsicker

that in back be Or that? can back be expecting you're more slower by, we we've repeat words, apt you Dean, XXXX? if somewhat laid go how helpful. could we appreciate I and our about that wondered, you I think you that thinking growth and gone growth about to us guess, that's off should CAGR? XXXX, a we laid apt you in price are expenses, are really times Are driving out out I of as see the how you employ to you I X.X% take of super forward, seen think X%, roll to we or X.X% to most everything other you in for In to back targets us XXXX.

Dean Shigemura

Yes.

in we time investments but intending down be strategic starting how haven't spent reasonable at are with looking XXXX, point. 'XX. 'XX, there, it much our in seems to into we the to continue X.X% But we also broke a So,

Peter Ho

Yes, of of built I which, 'XX otherwise. Dean's X.X%. would Laurie, really -- on I us, and we one-time right? think that base year, the personnel component I'd for add And plus this side overall different shared. core into on of decision to It's a X.X%, three by pieces, expenses, all just built a our on our both basis frankly, inflationary types also then reflects for is what to say kind expense is a employee high pressures up and

for just merits is I'm about not and and from that [indiscernible] on say. call to all So, kind X.X%. experience again what decision we've merit pretty X.X% have of an employees give into experience, stream initiative agenda for all think our value super to worth, are real Again, year, want spend out a people merit pretty made to And then, not we next the to increase the it it our I in another with be X% get We should being initiatives. intend normal they standpoint, the call mean, year, XX obvious plus next as number I really right. We they that [indiscernible] our up -- quickly. fiscally. increase. reasons, inflation revenue we on XXXX, do a that's do got we to X.X% And excited can do And in year, just the of there, to aggressive/healthy points hope that. types customer a our possible basis

built of is, would side. heavy these, lot these types that's all kind in million on I whole infrastructure the that are a say not And of $XX.X things. of or there's application X.X% So,

it 'XX, spend level. see think I probably be operating same we will time, level do at certainly that that have in or we continue it not to And to higher, if that substantiated right. same initiative at going we're by in have real performance but

out, a I up, I on going to XX are flat, I of if guess kind lose it for hopefully of half to Core, what something plus would [indiscernible] at And probably that a you're all the with, of call estimated So, points makes ended something that. X.XX% inflation right. and call it that maybe to to what I basis you. envelope less. That think going inflation up like the 'XX third X.X%, an that initiatives depending year, we is a say reverse come in call does, that increase to back onetime three expenses, sense the it or 'XX

Laurie Hunsicker

do Very, branch or any year then you for rationalization you helpful. that? very And about have How the thinking are plans next year Yes. after?

Peter Ho

year. Yes, we took a big one last

year, of want close them last to more our charge good we $X.X supermarket became customers not but And recall digital were to highly performers, as our they moved out right. you which but transactional. have previously million branches, superfluous, were don't as as call a So, took channels, they I historically, to necessary

charge roughly equates And to so that and for that annually, in basically $X a was 'XX, bloodstream [ph] that $X million million the savings Dean?

Dean Shigemura

'XX. XXXX and at of rest then Partially in the it

Peter Ho

'XX.

now. chunk. right getting a that aren't just but So digitize being we're branches we've say opportunities That's being the I those was think there footage would there the margin things. opportunities big square in not just with I versus on overall rationalization, efficiency branch to the of types present further comfortable close for to physically there out through say ways are got to

organization of branches. out a number efficiency to across the I efforts the we've external of think got

Laurie Hunsicker

Dean, in XX% noisy low the for XX% be at question full How helpful. came XXXX? you rate, Very for should Great. obviously, it tax year. about thinking on we at was

Dean Shigemura

estimate. going Yes, be the XX% tax, to would an as I it's say

Laurie Hunsicker

the gain then quarter in How helpful. clarification. was, what is lay some piece? interest was PPP gains? but on [indiscernible] I And much just remaining included actual piece last $X.X the assuming the then the unamortized much That's just how okay. that question, from and PPP I'm out the some million of third income, PPP. just of million wondering where just $X.X X, wanted XX%, you Slide the of

Dean Shigemura

then in you million quarter, third are the the in million we have and it about in was that’s I $X.X quarter the So, think component, the -- million and remaining. $X.X $X.X quarter, fourth talking third accelerated

Laurie Hunsicker

taking Great. questions. Thanks for Perfect. my

Peter Ho

Thanks, Laurie.

Operator

showing any the will not remarks. in I’m further Ms. And to back questions the I queue. call pass Higa for you. final Thank

Janelle Higa

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

Operator

conference for Thank you disconnect. you may now call. participating, today's concludes and this And

Bank of Hawaii (BOH) 24 Jan 222021 Q4 Earnings call transcript