First Hawaiian, Inc.

Good day, and thank you for standing by. Welcome to the first Hawaiian Incorporated Q3 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 the 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, investor relations manager. Please go ahead.

Thank you, Tonya. And thank you everyone for joining us as we review our financial results for the third quarter of 2022. With me today are Bob Harrison, Chairman, President, and CEO, Ralph Misik, Chief Risk Officer and Interim CFO, and other members from the management team. 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 Realization 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.

Thank you, Kevin. Good morning, everyone. I'll start with a brief update on the local economy. Hawaii economy continues to be resilient. In September, the statewide unemployment rate fell to 3.5%, which is in line with the national unemployment rate. Total visitor arrivals were 703,000 in September of this year, which is 4.5% lower than September 2019 arrivals. This is a strong result considering the Japanese visitor arrivals were 3.4% of the total this year, compared to 19.6% of the total in September 2019. Japanese visitor arrivals represent a significant upside when they return to more normalized levels. Despite the lower number of arrivals, visitor spend in September was $1.48 billion, which was 18.5% higher than September 2019. While higher interest rates have caused a slowdown on the housing market, continued demand and lack of supply have kept prices stable. In September, single-family home sales on Oahu were down 34.4% from last year, but the median sales price was $1.1 million, 4.8% higher. Turning to slide two to review our third quarter results, we had a very strong quarter as net income grew to $59 million, or 54 cents per share. we continued to benefit from our asset sensitive loan portfolio and low cost core deposit base. Our return on average tangible assets was 1.14% and return on average tangible common equity was 21.53%. The board maintained the quarterly dividend at 26 cents. During the quarter, we repurchased approximately 107,000 shares for two and a half million dollars and we continue to maintain strong capital levels after dividend payments and share repurchases. The common equity tier one ratio was 11.79% at quarter end, and total capital was 12.92%. Turning to slide three, the balance sheet continues to be well positioned for the current environment. It remains asset sensitive with about $5.4 billion or 39% of the loan portfolio repricing within 90 days. And we saw the responsiveness of our loan yields to higher interest rates in the third quarter. We also improved the balance sheet mix in the third quarter as we deployed excess cash and investment securities runoff into higher yielding loans. The investment portfolio continues to perform well as rates have increased. The duration of the portfolio remained stable at five and a half years in the third quarter, virtually unchanged from year end. And cash flows from the portfolio ran about $90 million per month for the third quarter. During the quarter, we reclassified an additional $420 million of securities to help the maturity to reduce the accounting volatility associated with AOCI adjustments. Our liquidity position remains very strong with a 62% loan deposit ratio, a strong core deposit base, and steady cash flows from the investment portfolio. Turning to slide four, period end loans and leases were $13.7 billion, an increase of $438 million, or 3.3% from the end of Q2. We experienced growth in all portfolios with the largest increases in CRE and CNI loans. On a year-to-date basis, total loans and leases are up $738 million, or 5.7%. Excluding PPP loans, total loans and leases are up $928 million, or 7.3%, in line with our full-year outlook of mid-to-high single-digit growth, which remains unchanged. As expected, a large portion of the increase in the commercial book was on the mainland, where the rebound in loan demand started earlier. Looking forward, the fourth quarter loan pipeline remains robust, driven primarily by commercial loans in Hawaii and Guam. This should put us at the high end of our original full-year loan growth guidance. Turning to slide five, deposits fell by $510 million, or 2.3%, to $22.1 billion at quarter end. Approximately $347 million, or two-thirds of the decline, was attributable to 10 large commercial accounts. Our total deposit cost was 24 basis points in the third quarter, an increase of 16 basis points from the prior quarter. This was primarily due to rate increases on corporate accounts, money market accounts, and other high-balance accounts. RAC rates on savings and checking accounts in our market have remained stable so far this cycle. Our favorable deposit mix, with 42% of deposits in non-interest-bearing accounts, continues to help provide stability to our total deposit costs. We expect continued volatility in deposit balances given the unprecedented growth in deposits we saw during the pandemic, as well as rising rates. However, our liquidity levels remain strong, and we have a variety of options to fund loan growth. Now I'll turn it over to Ralph.