First Hawaiian, Inc. (NASDAQ:FHB) Q3 2020 Earnings Conference Call - Final Transcript

Oct 23, 2020 • 01:00 pm ET


First Hawaiian, Inc. (NASDAQ:FHB) Q3 2020 Earnings Conference Call - Final Transcript


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Ralph Mesick

Ravi Mallela

Thank you, Ralph. Turning to Slide 9, period end loans and leases were $13.5 billion, down $264 million or 1.9% versus the prior quarter. C&I balances declined $253 million in Q3 due to paydowns in the shared national credit portfolio, declines in dealer flooring that occurred in the early part of the quarter, and a number of smaller credits that took the opportunity to pay down their balances. In Q3, we saw solid growth in construction and commercial real estate. We also saw strong origination volume in our mortgage portfolio due to low rates and an active residential real estate market. Mortgage loan originations were over $300 million in the quarter.

Turning to Slide 10, total deposit balances ended the quarter at $18.9 billion, $464 million decrease versus the prior quarter. Consumer and commercial deposit balances grew by $166 million. As we had planned, public deposit balances declined by $630 million as $853 million in public time deposits matured and rolled off. We expect public deposits in Q4 to trend slightly down as stimulus money gets deployed before year-end. Our cost of deposits fell to 13 basis points in the quarter.

Turning to Slide 11, net interest income was $134 million, a $6.2 million increase versus the prior quarter. The increase was primarily due to $4.9 million in lower interest expense and a $2.8 million increase from the investment portfolio due to higher balances. These were partially offset by lower interest income from the loan portfolio. Net interest margin was 2.70%, a 12 basis point increase from the previous quarter. The increase in margin was primarily due to the reduction of about $550 million of excess liquidity, a full quarter's benefit from lower FHLB balances, and lower deposit costs.

Going forward, we continue to face headwinds from the low interest rate environment. However, we anticipate that NIM in the fourth quarter will remain relatively stable. Turning to Slide 12, non-interest income was $48.9 million, $3.2 million higher than the prior quarter. The increase in non-interest income in the third quarter was driven by higher levels of customer activity following the gradual re-opening of the local economy that started in early July. Non-interest expenses were $91.6 million, essentially flat to the previous quarter and the efficiency ratio was 50%. And now, I'll turn it back to Bob.

Robert Harrison

Thank you. Ravi. So to wrap up in the third quarter, the local economy re-opened, we had a recovery in activity based revenue, and an improvement in asset quality. Our overall outlook on the economy hasn't changed significantly since the second quarter and we continue to actively manage our credit risk. It is still early days for the economy in Hawaii as we only began the Pre-Travel Testing Program for transpacific travel a week ago. Hopefully, this will be the first step on the road to recovery for the visitor industry. And now, we'd be happy to take your questions.