First Hawaiian(US:FHB)2022-07-30 00:07Financial Data and Key Metrics Changes - The company reported net income of $59.4 million and EPS of $0.46 for Q2 2022, with pre-provision net revenue increasing by $8.9 million quarter-over-quarter due to higher net interest income [6][7] - Return on average tangible common equity was 18.79%, and the Board maintained the dividend at $0.26 [7] - Total assets grew by 1.3% to $25.4 billion, with a loan-to-deposit ratio of 58.7% [9][10] Business Line Data and Key Metrics Changes - Total loans and leases increased by $371 million or 2.9% from Q1, with significant growth in commercial real estate (CRE), commercial and industrial (C&I), residential, and home equity [13][14] - Deposits increased by $331 million or 1.5% to $22.6 billion, driven by a $439 million increase in public deposits [15] Market Data and Key Metrics Changes - The Hawaii economy is recovering, with a statewide unemployment rate of 4.3% and total visitor arrivals at 843,000 in June, which is 11% below June 2019 levels [4][5] - The median sales price for single-family homes was $1.1 million, up 12% from last year, despite a 20% decline in sales [5] Company Strategy and Development Direction - The company is focused on digital transformation, having successfully converted to a new core operating system [7] - The balance sheet is well-positioned for growth with good liquidity, strong capital, and excellent credit quality [27] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the second half of 2022, citing a well-capitalized balance sheet and strong local economic conditions [27] - There are expectations for net interest margin (NIM) to increase by 25 to 30 basis points in Q3 [18] Other Important Information - The common equity Tier 1 ratio was 11.9% at quarter-end, and the total capital ratio was 13.14% [12] - The company repurchased over 290,000 shares at an average price of $24.09 for $7 million [7] Q&A Session Summary Question: Was the strong deposit growth intentional or flow-related? - Management indicated that the increase was primarily due to operating balances from the State of Hawaii, with a substantial increase in public operating accounts [30] Question: How does the company plan to fund loan growth? - The company plans to move cash on the balance sheet into loans and expects the loan-to-deposit ratio to increase [31][32] Question: What is the expected deposit beta for NIM guidance? - The company is assuming a deposit beta of about 20% [33] Question: Any updates on the CFO search? - The search for a new CFO is ongoing, with the company working with Korn Ferry [34] Question: What is the outlook on asset quality given the macroeconomic volatility? - Management has not seen significant signs of concern but is monitoring small consumer and small business loans closely [40][41] Question: What are the immediate benefits of the core conversion? - The core conversion has automated many manual processes, and the company has an aggressive roadmap for further improvements [46][50] Question: What is the makeup of the loan pipeline? - The pipeline is currently more weighted towards commercial real estate and C&I, with a strong outlook for Hawaii [52][54] Question: What is the company's appetite for further share repurchases? - The company plans to focus on loan growth and maintaining strong capital levels before considering additional buybacks [61]