First Hawaiian(US:FHB)2023-04-28 19:10Financial Data and Key Metrics Changes - The company reported a net income of $66.8 million or $0.52 per share for Q1 2023, with a return on tangible assets of 1.15% and a return on average tangible common equity of 20.78% [9] - The CET1 ratio was 11.97% and the total capital ratio was 13.09%, indicating strong capital levels [9] - Net interest income decreased by $4.5 million to $167.2 million, primarily due to higher interest expenses on deposits [19] - The net interest margin declined by 4 basis points to 3.11% [20] Business Line Data and Key Metrics Changes - Period-end loans and leases increased to $14.2 billion, a modest growth of $129 million or 0.9% from Q4 [12] - Deposit balances decreased by $408 million or 1.9% to $21.3 billion, with a decline in both commercial and retail deposits [14] - Non-interest income was $49 million, a slight increase of $900,000 from the prior quarter [23] Market Data and Key Metrics Changes - The unemployment rate in Hawaii was 3.5%, matching the national rate, while visitor spending in March was $1.8 billion, 23% higher than March 2019 [7] - The median single-family home price in March was about $1.1 million, down 5.8% from the previous year [8] Company Strategy and Development Direction - The company plans to focus resources on supporting customer relationships, expecting loan growth to slow to low-to-mid single-digit range for the rest of the year [12] - The company is maintaining a conservative approach to liquidity, having increased its liquidity position in response to recent banking industry volatility [10][45] Management's Comments on Operating Environment and Future Outlook - Management noted strong credit performance with year-to-date net charge-offs at $3.2 million and an annualized charge-off rate of 9 basis points [26] - The company anticipates a decline in net interest margin by 10 to 14 basis points in Q2 due to the impact of term borrowings [21] - Management expressed confidence in the stability of the deposit base despite recent banking disruptions, highlighting strong customer relationships [43] Other Important Information - The company has a loan-to-deposit ratio of 67% and a stable core deposit base [11] - The allowance for credit loss increased to $147.1 million, equating to 1.03% of all loans [28] Q&A Session Summary Question: What happened at the bank after the Silicon Valley Bank incident? - Management reported minimal impact on deposits, with only minor withdrawals and strong customer trust [42][44] Question: How does the company plan to manage its liquidity? - The company plans to monitor liquidity needs and may adjust its position based on market conditions [45][47] Question: What is the outlook for non-interest-bearing deposits? - The company has maintained a stable non-interest-bearing deposit ratio of around 41% and is optimistic about retaining this level [60][61] Question: How is the company positioned for potential rate cuts? - Management expects slight compression in net interest margin in a down rate scenario, depending on balance sheet dynamics [124] Question: What is the company's strategy regarding hedges? - The company is considering hedging strategies but is cautious due to uncertainties in rate movements and capital requirements [126]