First Hawaiian, Inc.

Good day and thank you for standing by. Welcome to the first Hawaiian Inc. second quarter 2022 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during that session, you will need to press star 11 on your telephone. Please be advised that today's conference is being recorded. I would now like to hand the conference over to Kevin Haseyama,

investors relations manager the floor is yours thank you carmen and thank you everyone for joining us as we review our financial results for the second quarter of 2022. with me today are bob harrison chairman president and ceo and ralph mesic chief risk officer and interim cfo we have prepared a slide presentation that we will refer to in our remarks today The presentation is available for downloading and viewing on our website at FHB.com in the investor relations section. During today's call, we will be making forward-looking statements, so please refer to slide one for our safe harbor statement. We may also discuss certain non-GAAP financial measures. The appendix to this presentation contains reconciliations of these non-GAAP financial measurements to the most directly comparable GAAP measurements. And now I'll turn the call over to Bob. Good morning, everyone.

I'll start by giving a brief local update. The Hawaii economy continues to benefit from the recovery in the tourism industry. In June, the statewide unemployment rate was 4.3% compared to 3.6% nationally. Total visitor arrivals were 843,000 in June, 11% below June 2019 arrivals, a strong result considering the Japanese visitors were only 1.4% of the total, compared to over 13% in June 2019. This represents significant upside when Japanese arrivals return to more normalized levels. Importantly, the spend is up more than 12% over last year, which is what everyone wants, fewer visitors with a higher spend. While interest rates have caused a slowdown in the housing market, continued demand and lack of supply have kept prices stable. In June, single family home sales were down 20% from last year, but the median sales price of $1.1 million was 12% higher. Turning to slide two, we had a strong quarter reporting net income of 59.4 million and EPS of 46 cents. Pre-provision net revenue was up $8.9 million quarter over quarter on higher net interest income. Our return on average tangible common equity was 18.79%, and the board maintained the dividend at $0.26. We had good growth in both loans and deposits, and the balance sheet remains well-positioned for rising rates and is well-capitalized. During the quarter, we repurchased over 290,000 shares at an average price of $24.09 for $7 million. And finally, we successfully converted to our new core operating system, an important step on our digital transformation we started a couple years back. I want to make a few comments on the balance sheet and then provide more detail on loans and deposits. Turning to slide three, we saw good growth and a nice rotation on the balance sheet, which remains asset sensitive. We're highly liquid and well capitalized to support our business objectives. Total assets grew by 1.3% to $25.4 billion in the second quarter, and the asset mix improved with the deployment of cash into higher yielding loans. The balance sheet remains very asset sensitive with about $5.1 billion or 39% of the loan portfolio repricing within 90 days. It has been very responsive to the recent Fed rate hikes. Our liquidity position remains very strong with a 58.7% loan-to-deposit ratio, excess cash balances, and steady cash flows from the investment portfolio. We have ample liquidity to fund future loan growth. The investment portfolios performed well during this period of volatile interest rates. The duration of the portfolio has remained stable at 5.6 years at the end of the second quarter and is unchanged from year-end 2021. Cash flows from the portfolio continue to run between $100 to $125 million per month. We continued to maintain strong capital levels after dividend payments and share repurchases. The common equity tier one ratio was 11.98% at quarter end, and the total capital ratio was 13.14%. Net of an AOCI adjustment, the securities book was flat at roughly 8.1 billion. In the quarter, we elected to reclassify 4 billion of the portfolio to help the maturity to reduce the accounting volatility associated with AOCI adjustments. Turning to slide four, period end loans and leases were $13.3 billion, an increase of $371 million or 2.9% from the end of Q1. Excluding PPP loans, total loans and leases increased by $434 million 3.4% compared to the prior quarter. We experienced growth in all portfolios with the largest increases in CRE, CNI, residential, and home equity. As expected, the increase in the commercial book skewed toward our mainland markets where the rebound in loan demand started earlier. On a year-to-date basis, total loans and leases are up $301 million or 2.3%. Excluding PPP loans, total loans and leases are up $474 million, or 3.7%, in line with our full year outlook of mid to high single-digit growth, which remains unchanged. Turning to slide five, deposits increased by $331 million, or 1.5%, to $22.6 billion at quarter end. The increase was a result of a $439 million increase in public deposits driven by a $458 million increase in operating account balances. That was partially offset by a $19 million decline in public time deposits. Nonpublic deposit balances declined about $108 million or less than 1%. Our cost of deposits remain low at eight basis points, three basis points higher than the prior quarter. We anticipate more variability around deposit flows over the course of the year, but have a variety of options to fund loan growth, including a higher than normal cash balance. Now I'll turn it over to Ralph to cover the income statement and balance sheet.