First Hawaiian(US:FHB)2022-04-22 21:33Financial Data and Key Metrics Changes - The company reported net income of $57.7 million, earnings per share of $0.45, and a return on average tangible common equity of 15.08% [7] - Net interest income decreased by $3.5 million from the prior quarter to $133.9 million, primarily due to a $6.8 million drop in PPP loan fees and interest [13] - The net interest margin increased by 4 basis points to 2.42% [13] - The common equity Tier 1 capital increased to 12.27% [7] Business Line Data and Key Metrics Changes - Period-end loans and leases were $12.9 billion, a decrease of $70 million from the end of Q4, with total loans increasing by about $40 million, or 1.3% on an annualized basis, excluding PPP loans [9] - Deposits increased by 2.1% or $454 million to $22.3 billion at quarter-end, driven by consumer and commercial loan deposits [12] - Non-interest income was $41.4 million, essentially flat compared to the prior quarter [15] Market Data and Key Metrics Changes - The company noted strong visitor arrivals expected in Hawaii this summer, aided by the return of Japanese visitors [5] - The loan pipeline was reported as strong, with good origination activity and growth expected in the portfolio [11] Company Strategy and Development Direction - The company is positioned to benefit from higher interest rates, with expectations of a few basis points increase in net interest margin in Q2 due to the March rate hike [14] - The outlook for 2022 remains unchanged, with year-over-year loan growth expected in the mid-to-high single-digit range [11] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the improving Hawaii economy as COVID-related restrictions ease, predicting strong visitor numbers [5] - The bank is prepared for various scenarios regarding deposit levels and is focused on maintaining flexibility to fund loan demand [12][26] Other Important Information - The allowance for credit loss decreased by $7 million to $150.3 million, equating to 1.17% of all loans [18] - The company has returned 82% of its needs to shareholders since going public, with a focus on maintaining capital for loan growth before pursuing share repurchases [46] Q&A Session Summary Question: Commentary on loan growth and competition - Management indicated that mid-to-high single-digit loan growth is expected, driven by robust mainland growth, despite some unanticipated repayments and increased competition [22][23] Question: Update on dealer finance and balances - Dealer flooring balances are down over $600 million from pre-pandemic levels, with demand increasing but inventory challenges persisting [25] Question: Outlook for deposit growth amid Fed actions - Management is prepared for various scenarios regarding deposit balances and expects deposit betas to behave similarly to previous cycles [26] Question: C&I loan growth compared to other regional banks - Management noted that line usage has not increased yet due to strong liquidity among customers, impacting C&I loan growth [28] Question: Outlook for residential mortgage and home equity - Growth is expected primarily in commercial real estate, with residential and home equity slowing due to rising mortgage rates, but new home buying remains strong [30] Question: Non-interest income and BOLI impacts - Management expects service charges and transaction-based fees to trend higher as economic activity picks up, with BOLI income anticipated to stabilize around $3 million [39][57] Question: Credit quality and competitive dynamics - Management remains disciplined in credit underwriting, focusing on well-structured opportunities, while being cautious about external economic factors [44] Question: Update on core conversion - The core conversion is on track for the upcoming quarter, with customer notices already sent out [47] Question: Comments on unsecured consumer book - The company maintains a conservative approach to the unsecured consumer book, with low charge-offs and a disciplined underwriting strategy [79]