Bank of Hawaii Corporation

Q3 2020 Earnings Conference Call


spk_0: ladies and gentlemen thank you for standing by and welcome to the bank of a cooperation third quarter twenty twenty earnings call at this time all participants on a lift and only mode after the speaker presentation there will be a question and answer session to ask the question during the session you will need to press star one on your telephone play they have either today conference may be recorded if you require any further assistance please press star zero i l a b him the conference over to your house director of investor relations cindy wiring madam please go ahead
spk_1: thank you achieve good morning good afternoon everyone thank you for joining us today if we discuss our financial result in the third quarter of twenty twenty on the college me today is our town and president and ceo peter how are chief financial officer dnc camera our chief resources sir harry sellers and to as often joining us today newest member of i are team welcome to now he got before we get started let me remind you that today's conference call will contain some forward looking statements and while we believe our assumptions a reasonable there are a variety of reasons to the actual results may differ materially from those protected during the call we will be referencing a slight press contagion as well as the earnings release a copy of the presentation and released are available on our website deal h dot com under investor relations and now i'd like to turn the call over to peter how
spk_0: read think he said a good morning everyone are low hum
spk_2: i thought what we would do today is follow along the path that we've taken over the past couple of earnings calls and give you a little bit more of an expanded commentary before we get indoors your they iowa kick off with a descriptor on the economy and our local experience with see her nineteen virus on a turned over to marry who share with you some printed highlights and then to dean for financials ah then as he says is of be happy to answer the questions you might have been so let me begin with a description on the economy i'd say i'm relatively
spk_0: the the stable outcome of most recent real the past quarter but but obviously it a alone
spk_2: like or appreciate are we did see a clip up in unemployment in there for the september months after september flipped up to fifteen point one percent versus that thirty percent range to see for the june through august period a lot of that driven by there were no amber more exact actions taken within the community and i guess who won one thing the note their that even with the increase in unemployment for september if you take those three months for the quarter the effectively came in online with the with the you hero forecast
spk_0: i'm
spk_2: you see in the in the light blue bar that you hero which is the the analysis that we base must require the decision and off of is calling for thirteen point four percent fourth quarter unemployment level i hadn't thought in conversations with us on the senior staff over there they they feel cautiously optimistic at this point that that that could do is achievable assuming that we get the continued slow but as a positive reopening of our of our trans back activity kitchen old that a slide i hear you see on the next slide i just an annualized representation of unemployment nine twenty five you hear of forecasts you see a little bit more constructive a woman a little bit higher for twenty twenty one
spk_0: and then doubling down for a twenty twenty two and twenty twenty three this this is in line with a lot of fab discusses that we've been having once are larger commercial customers and certainly are
spk_2: our hospitality customers who really point to twenty one as a restarting a year for us and hopefully getting to have a meaningful level of activity kind of into the twenty twenty two year the flight
spk_0: i just touch a little bit on gdp and personal income you see the differential and forecasts between the golden and were a bar versus the blue bars
spk_2: unemployment arms are real gdp of forecasted to rebound slightly more muted fashion with most recent forecast i think maybe one of the more important slides or on porn take always on this line as recognize that well gdp obviously has taken a substantial hit here to the island economy or for obvious reasons personal income is holding in reasonably well and so the most recent reform cass as of september actually has personal income falling a pretty materially less than what we're originally forecast
spk_0: on the next line give you a sense for a how the local housing market has held up the answer is surprisingly well as so not unlike a number of other mainland marketplaces housing
spk_2: for lots of different reasons is is a bright spot in the economy
spk_0: you see on a year to day basis single family homes have had a nice steady increase median sale prices of three point three percent
spk_2: image roy levels very constrained as we look at point the point september
spk_0: this year versus last year and a limb more a bit more price action prices up thirteen point three percent and sales beginning to accelerate and again very tight inventory conditions similar story on the condominium that and condominiums perhaps are are being impacted by less new pay radha coming on to the marketplace or but again you see a pretty steady year to date median sales price increase when and and inventory conditions that are that are just awfully constrain as of right now onto our arrivals of so i think most of you are aware that beginning on the fifteenth of this month so we're we're ten days into our pre travel program
spk_2: way began welcoming of visitors as well as returning or intended residents in the lying about back to our islands and through a pre test program so basically to the extent the to receive a
spk_0: a recognize pcr test from number of approved providers preferred providers been on them our allowing me to with a negative result to uncover the islands without having to go through and fourteen day more and teen i would you see here obviously is that had a
spk_2: a very positive impact on trans bad guy activity so you see on this chart that the day before the program one in a place when upwards of two thousand visitors
spk_0: intensity of the day in the program launched up to a point to some point nine eight point three see that pent up demand a bit of a dip by like a tell you the through the weekend we've begun to bow back to those prior level so ten twenty two you see six point six thousand two hundred visitors
spk_2: are returning address back and the twice there was five point eight and that way for the six point three or sourced my steady increase asking around town on what people's early sentiment is on them the results from now being in the last week and a half hour most people feel pretty cautiously optimistic for likely these numbers alone and higher the when they would have anticipated and so i think this bodes well it certainly gives us a pathway to i get the us domestic
spk_3: market reopened out to two thirds of our of our arrivals still need to work on international namely japan although there's a lot of activity happening and the administration little help help make that a reality
spk_2: under the next page the infection rate here in the islands is has generally been a good story you see the charge on them on the left shows you the the activity the really experienced what one one i like to call a post july fourth ramp up where we saw a real exponential surge credit to the mare of honolulu because it was mostly concentrated on a law who who implemented in eight twenty seven stay at home or so a bit more relaxed and are prior were in a shorter
spk_0: but seems to have done the trick
spk_2: infection rates now fallen quite dramatically and if you look to the turned to the right which you see his way
spk_4: in terms of a cases for hundred thousand on a rolling seven or over the past seven days is amongst the lowest in the country so of the best performing states handling the virus in the country and few across the and that the islands with a me island chain along performing well
spk_2: the performing lived for me exceptionally well big was got bit of an issue with some some my retirement home issues but in general
spk_0: the state as a halt is is operated quite nicely from an infection control standpoint
spk_2: and so finally to step up and bring it all together we feel we're an extremely well positioned for these most unfortunate times this is a dynamic environment this is certainly an uncertain and and generational sort of situation but the company for the most part has been built to whether exactly these kinds of from occurrences so as i mentioned i think despite his chances will opposition for metrics or
spk_0: strong as murray will share with you we had a man reasonable long growth in the quarter
spk_5: slightly down on the spot basis lately up on on on an average basis but impacted by about thirty five million dollars in am
spk_2: in them i'm
spk_0: line pay downs and and his som and loan reductions as you would dissipate
spk_6: the potters continues grow nicely for us up three and a half percent on an average basis of funding costs continue to come down and an attic as you can expect of us are liquidity a capital levels are certainly top notch within the industry so i think i'll stop there and i'm happy then kick and over to marry will share some or thoughts with a very thank you peter at the end of the quarter alone portfolio that up ppp balances totaled eleven point two billion and remain sixty percent consumer and forty percent commercial with seventy six percent secure did high quality real estate with the combined weighted average want to value fifty six percent as we've shared before we believe this portfolio construct not consistent conservative underwriting and discipline portfolio management will continue to pride as a superior outcome and allow us to continue to support our customers and community through these unprecedented times credit metrics remain strong and relatively stable in the third quarter we realized net recoveries at one point five million for the quarter as compared with net charge offs of five point one million in the second quarter and three million in the third quarter of twenty nineteen nonperforming assets told a point eighteen point six million or sixteen basis points at period and down four point one million or three basis points for the link period and down three million or for basis points year over year criticise loan exposure increase fifty one point one million to two hundred and fifty point seven million or two point one three percent of total learn the credit provision was twenty eight point six million which with net recoveries of one point five million resulted in the thirty point one million increase in the allowance for credit losses the reserve reflects our best estimate of losses in the port fallen bully l given the company's credit risk profile and the current economic outlook and forecasts for our market which has peter noted are anchored off few heroes september twenty fifth baseline for test with the reserve build reflective of the continued uncertainty were dancing with covered nineteen and the pundit and the potential downside associated with this at the end of the quarter the ratio of the allowance for credit losses to total loan and least standings was one point seven three percent or one point eight zero percent that the ppp loans and the reserved for unfunded commitments was two point three million down two hundred thousand from the second quarter at the end of the third quarter customer loan balances on payment a pearl or extension totaled one point five billion or thirteen percent of total loans during the quarter we continue to received very few new requests for payment relief
spk_7: as you may recall we'll elected to provide initial payment relief of up to six months where customers given the degree to which way was impacted the provisions did under cares act and our capacity to do so
spk_6: these payments referrals began to expire in september with customers returning to their normal payments schedules beginning and and tobar this cadence will continue through november and december accordingly as of october twenty third customer loan balances on payment of frills have reduced to one billion or eight point six percent of total lungs this is an eight hundred and thirty nine million or forty five percent decline from the second quarter and sixty nine percent of the consumer loans with payment to pearls as such as up september thirtieth or secured with residential real estate with a weighted average loan to value of sixty one percent eighty five percent of commercial loans with payment for atlas as of september thirtieth are secured with a weighted average loan to value of fifty one percent seventy eight percent of the commercial loans and deferrals continued to pay interest our commercial exposure to those industries most impacted by covered nineteen remain flat for the link period at eleven percent of total loans exclusive a ppp and it it or exposure continues to be well positioned to whether this pandemic the retail segment total six hundred and forty eight million or five percent of total loves ninety one person has secured with a fifty five percent weighted average loan to value ninety six point nine percent is secured or extended to an essential busy this point nine percent is unsecured and deferred the logic segment is five hundred and three million or four percent of total loans seventy eight percent is real estate secured with a fifty one percent weighted average loan to value and seventy nine percent have a loan to value of less than or equal and sixty five preset five point three percent is unsecured and deferred
spk_8: finishing with the restaurant and entertainment segment that segment totals a hundred and fifty four million or one percent of total loans
spk_9: thirty eight percent is real estate secured with a weighted average loan to value of sixty four percent twenty one point three million is unsecured and deferred with average exposure of five hundred thousand ninety eight point eight percent is secured or paying interest on now turn the call over diddy
spk_8: thank you marry as peter stephen we are well positioned despite the challenging environment
spk_9: low interest rates have fallen significantly larger remains under pressure or net interest income has been relatively stable we've been able to mitigate the impact of of the rate and martin pressures from the continued growth of our balance sheet and mix change fallacy growth is being driven by strong deposits with increased by three hundred and sixteen million or one point eight percent and quarter and two point four billion or fifteen point six percent year on year over the last ten years deposits of more by an average of six point two percent annual
spk_8: concurrent with a strong deposit glow or total deposits funding costs also continue to decline in the quarter and in the corner at approximately oh beaches for cause provides us with flexibility for grow and as a significant contributor to or profitability as a myth against the impact of lore interest rates we continue to reduce deposit rates as much conditions allow and sixty six percent or long to deposit race or remains well below peers with a comparatively low racial or solid and going to deposit these provides additional acid funding opportunities and price and flexibility while reducing our funding risk profile against risk assets we continue to deploy a portion of that excess liquidity into our investment portfolio and be increase balances by four hundred million dollars to six point four million we maintain the high credit quality and liquidity by adding only aaa rated securities with reliable monthly cash flows aaa rated securities represent ninety six percent of the portfolio bounces and one hundred percent remained a rain and of better
spk_9: but the reason of the portfolio was three point five four years of the of the quarter and well with enormous tolerances
spk_8: thus the investment portfolio remains a stable and secure a source of liquidity and funding for a balance sheet
spk_9: a loan portfolio i saw resilience in the face of a difficult than the environment
spk_8: the eight point four percent growth balances your on here is helping mitigate the impact of serve the lord of his friends and as enabling are stable than interesting come
spk_9: the last ten years moans have grown by an average of eight point five percent annually
spk_2: in addition to balance sheet world or profitability his further supported bar discipline expense management
spk_8: since two thousand and nine expenses have grown and less than half the rate of inflation while we are still making critical investments and simple technology infrastructure projects
spk_2: rafa a pandemic be provision net revenue generation remain strong and stable funding that dividends to shareholders building additional reserves and adding to our growing capital these
spk_8: our strong recipes capital levels continue to improve and the third were increasing rct one and tier one capital ratios to four point one percent
spk_9: he added to our excess capital levels in the first quarter continue to vote in fuckin amounts of capital in excess of minimum regulatory and well capitalized levels
spk_8: represent funds that comes foot for further growth for loss mitigation
spk_9: now i'll provide additional details on our financial results
spk_8: that income for the third quarter twenty twenty or thirty seven point eight million dollars or ninety five cents per share
spk_2: then interesting come on a reporter basis in the quarter was one hundred twenty four point two million dollars or by two point five million from the previous quarter and law by seven hundred thousand from the third quarter last year
spk_8: included in the second quarter twenty twenty net interest income was an interest recovery of two point nine million dollars
spk_9: excluding the interest recovery from the second quarter of that interesting come in the third quarter of twenty twenty increased by four hundred thousand dollars
spk_8: as married discussed be recorded a credit for this and of twenty point six million dollars this quarter
spk_9: non interest income totaled forty one point seven million dollars in the third quarter of twenty twenty thousand nine point five million from the previous quarter and down four point eight billion from the third quarter last year uninteresting come in a second quarter twenty twenty with it a gain of fourteen point two million dollars from the sale of our remaining pisa sheriff's adjusted for the visa sale noninterest income increased by four point six million dollars or twelve point six percent think quarter or merrily due to higher deposit so the skis but the fourth quarter of twenty twenty we expect non interest income or be approximately forty two million dollars
spk_2: one uninteresting club has improved challenges remain due to or levels of customer activity during the ongoing disruptions on the the have done it
spk_8: donatists just expenses in a third quarter to of eighty nine point nine million dollars an increase of one point one million from the previous quarter and a decrease of ten point four million from of same quarter last year in the third quarter occupancy expenses were reduced by one point nine million dollars from the sell a proxy offset by the recognition of one point eight million of separation expenses rules for corporate incentives and the third quarter or two point seven million dollars and continue to be lower than of comparable period twenty nine p which was five point seven million
spk_10: included in the expenses for the third put up twenty nine team was an increase of six million dollars to leave the reserves
spk_8: or the fourth quarter twenty twenty hectares manage his expenses will be approximately the same as the third quarter and about ninety million dollars the effective tax rate toilets twenty point zero nine percent we estimate the rate was the approximately twenty one percent for the fourth quarter a return on assets was point seven six percent return on equity was eleven point zero one percent in our efficiency ratios fifty four point two percent er then interest margin and the third quarter was two point six seven percent found sixteen basis points on the second quarter without thirty four basis points from the third for a funny nineteenth
spk_9: adjusting for the two point nine million dollar interest recovery recognize and the second quarter which benefited the second quarter march and by southern basis points the margin in the third quarter was lower by nine basis points
spk_8: the increase the decrease was primarily due to lower interest rates and much higher levels of liquidity you're too strong deposit growth we expect them are net interest minds and lower mean under pressure and declined by approximately seventy basis points in the fourth quarter of the continued impact or rates and additional liquidity
spk_9: however that interest income is expected to the approximately unchanged for the third quarter as long growth and acid next change are expected to mitigate the impact of the lower margin our estimates conservatively out so tpp loans are carried for the full twenty four months shareholders' equity was one point three six billion dollars at the end of the third quarter during the third quarter we paid out twenty six point nine million dollars or seventy one percent of that income in dividends
spk_11: our share repurchase programming been suspended
spk_0: and finally a more declared a dividend sixty seven cents per share for the fourth quarter of twenty twenty
spk_2: now turn it back over to dinner
spk_0: great thank you day and so there's our are prepared comments we're happy to share with you or whatever questions you you might have this time
spk_12: as a reminder to ask a question you will need to press star wanting a telephone again as star wanting to touchdown telephones asked the question to withdraw your quite a gym press the pound key please stand by while we compiled the q and a roster
spk_13: our first question you from a line of abraham upon while a bank of america security airline is open they give the money
spk_6: warning they get on the source question if he could dodge still on top is what about the difference that eight point six percent on of talk to us in terms of how you expect as these different come up just from a timeline standpoint way the thing power they tended towards the end of the you're in within the deferred book what's your expectation of what descended actually my gets a non performing a degree at agility to sort of the hired called against guess sectors shared a beach and let me start with our consumer portfolio of it was down at thirty four percent from the peak ah with mortgage and home equity down forty one and thirty four percent auto an indirect were down fifteen and nineteen percent respectively from the peak it key consumer portfolio are the majority of our difference in mortgage and home equity were pretty equally jog such that we have our forty percent maturing and on are returning to him in an october forty percent in november and then i can ten through the balance of the year on direct in interact on that had a little different cadence so we only had about ten to twenty percent coming off of deferral and moving to pay him in october so are a little earlier into that process so that on live about forty forty twenty odd through the balance of the year
spk_0: i you know the results to date have been positive but i think it's a bit too early to really draw any conclusions and little really wanna take a look at the data this month to see how that's playing out on the commercial fried were down i had forty four hundred and eighty million which is down fifty five percent the i'm secured peace was yeah i'm fifty six percent from the peak and the unsecured fifty two percent or outlook there is that will continue to see some pay offs and through the end of the year probably dropping may be out in another hundred million but we are continuing to support our customers are an offering additional live deferrals primarily a principle the
spk_2: girls and it's just really is to partner with them as they've had to draw their own liquidity and capital to carry the negative and have done so and we feel it's appropriate that we assessed and given the blow leverage on these assets it makes sense because of that's really good point where i mean i think of status it'll to to marry his commentary he room yeah we're down from two billion and midyear to a billion and a half or around of and as married point out my ninety two actually as of a few days ago or at our expectation is that number will continue to drop but underlying all that are you know clients that weed out and have had for a long time who has it's is experienced an extraordinary situation and so are those be able support them obviously within the bounds of our capital and reserve a capability which will feel very good about so i have my own sense
spk_14: is that this this is actually going quite well
spk_6: we'd as you know have been building or reserves towards this
spk_13: with see some what the light of the end of the tunnel around that am on the client side know for their part they've been due to fully bringing that number down but we are going to get to have one where feel that that that represents the truly deferred population said and our goal would be a would be able to support them or by virtue of the fact we built the capital
spk_2: around them to do that
spk_13: abraham i would also share with the that in the high risk industry exposure or to for a population was down forty two percent from the peak and on the majority of that remains secured our only odd twenty two percent of that is unsecured got it so i get safe to assume that have you was that to borrowers some of them mean many different that extend beyond yet end of that that i do the thing about it
spk_15: our our imagine with our unemployment their five x where it was recovered that's probably a high likelihood
spk_2: understood in both cases like six know showing the daily arrivals oh vinnie think about the actual it's if you are you get a mile or view of the local economy peter but ah
spk_0: as you think about of the v opening of tourism the hotels that like do you expect like a few weeks from now on the properties to be open of kind of mood what's going on in terms of your customers and you're logging industry customers at least opening back up over the next few weeks
spk_2: yeah good good question
spk_0: so we'll we and and i have been pretty consistent conversation with with that sector that an inspector and and lot similar comments i think people are you know obviously because of the fences starts with the reopening over the of the summer where where people are falling out his they took a bit of a wait and see attitude so we are reopen
spk_2: most folks that i talked to are looking to be open on it early into next month if you will so i think i think that bodes well for for arrivals for us yeah we're we're running right now at about twenty percent
spk_13: of in what was we used to run in a normal environment and most of the hotel is that i i speak to our pointing to see if we could get that number more than fifty percentage that that begins to allow them to operate
spk_8: in our with some with some semblance of of in the black if you will so that would be the near term goal and i think muslim one say it's gonna take navy another year on top of that to get back to the good old days on the said anything can sneak in one last one for dean on cancer spending on the fourth quarter guidance and just as me think about the securities will been to stop less about the fisher on that son or daughter abigail with about one ninety five in the book in the third quarter what a new securities coming in at and what's not outlook for cash was coming from majority or the next against you when you yeah so the new ah yields coming on our bow cause one to maybe one and a quarter percent so quite low prices ones running off in the difference on the last quarter when the bomb one and a half percent
spk_16: so we we would expect that to continue to the foreseeable future in terms of the low rates army tons of the he me other
spk_8: the for full of those have a pretty high one off increase this quarter am i think you signed the presentation
spk_17: last quarter was my point one million versus the arm and that in terms of premium amortization or the seven point five so i would expect the cashflows coming off in the fourth quarter name into next year to be a little bit elevated month young that gives us a lot of liquidity continue
spk_0: you liquidity
spk_18: in will probably be and reinvesting a good portion of that back and the portfolio he got of things requests
spk_2: there
spk_19: thank you are next question comes on a line of jaffer list of the a davidson your question please
spk_20: makes good morning
spk_21: adjust
spk_22: a question on man who that the migration trends to the island dead just in and out of the stayed and i guess is that what part one and then to as it relates to and in your mortgage outlook for for twenty one
spk_2: so i'm expand me the migration question just yeah just more recent flows of of of focused moving to the state permanently or or and or out just how that yeah
spk_20: yeah yeah so that has been
spk_2: that has been for three years now yeah i'm what a lot of an issue so i met domestic migration
spk_0: the has always been a a slightly negative caught a couple thousand per year so that's a number of both leaving the islands to the us mainland a number of people from the us mainland coming to the hours to live
spk_2: the last three years we see that expand to and ten twelve thirteen fourteen fifteen thousand people in that sense we had around that i was part of coven that that really reflected the high housing costs out here
spk_18: and so that the condition that existed prieto vid coming out a covert you know we'll have to see what happens yeah take obviously economic
spk_22: conditions will be somewhat different by that the same time the housing prices might be different as well though that's not very out in the statistic right now are interesting and
spk_2: a side note on on migration from the mainland is at the very top end of the market and this is mostly anecdotal but but i've heard and seen it enough to to slake that there's there's a trend there we are saying a number of in a high end up potential residents
spk_19: looking to make who i am a place to hang out a hello work through i guess the coven era as will and i contagious for my own experiences in the neighborhood that i frequent i knew he definitely see that phenomena happening
spk_18: got a linux kind of really narrow but could narrow that into that of the mortgage outlook for twenty one somewhat related but those are big picture just trying to get a sense for the mortgage yeah it out what you're just gonna be i am a i think mortgage is gonna be largely rifai phenomenon is as you know that the v a side is absolutely white hot selling for freedom mortgages of the world her are running roughshod the purchase side is in our it's it's it's pissing as well but you know of way as as their inventory
spk_19: his friend marketplace i think if we were different market will be selling every hit home and nail down to the ground that we had albums is there just are lot of homes to buy so i think that i we we believe our our forecasters the mortgage will continue to be strong but mostly in the rifai space and
spk_2: and both and most of us as because we just don't have them into at around here
spk_23: an okay when new and last one period
spk_2: certainly the bank is ben and of ahead and a curve on add the branch to digital shift and as you see that industry accelerate in in in a remote working world is that change the pace of of what you
spk_22: kind of your own courses of action the accelerate that planner
spk_0: and maybe just an update on kind of that move as it is
spk_2: yeah that's that's sam definitely from center of a lot of things with they could about right now jeff and what what we've seen is a pretty dramatic shift and they wait wait we've endured discuss discussed this year we saved for years now a meaningful shift towards digital away from in person branch i'm covered has as really accelerated that so i could share with you that year to date our branch transactions are down college fifty percent and ten a lot of that as as people changing behavior as they as they can we we refigure their daily with your daily lives because of the virus now how what what that's health to do is move things like deposits and him i could sort of cause it's and do other channels i'll be an electronic channels so for instance in august twenty nineteen sixty one percent of our deposits were coming to our branches fast forward to this past august and that numbers down forty seven percent of so you know we we think that that is a trend that is going to continue or the question is once we come out of covered were out of this crisis you know what will the bounce back factor be so i guess the way that were thinking about it is we as you know we rory down the path of trying to create a more efficient physical presence i think this is accelerated that to a certain degree by of what we're trying to figure out of this point is and bread fires down fifty percent was the bounce back factor
spk_19: by the a favor bounce back factor is plus fifty percent from that down fifty that still gives you can have a net net twenty five redux twenty five percent reduction overall activity and surly some that we need to to be processing around just philosophical thought we we've very we're very happy with our investments on the
spk_0: calmer side because obviously because of the reduction in branch activity
spk_24: the traditional brass sales are just off meaningfully but those for the most part of an offset by r r martin calmer sales dollar mortgage and consumer
spk_25: i'm loan and and consumer deposit openly activities sub generally good story
spk_24: of them present accounts
spk_0: thank you are next question comes on a line jackie bowling of k b w e a question please
spk_26: hi the morning everyone
spk_2: the jacket
spk_0: follow up question i'm an understanding that yeah you've obviously got a lot under review right now what are some a year preliminary thought and how we should be thinking about the extent structure and twenty twenty one yeah so there will have that there there some hopeful thought there and then there are around some longer term a strategic plans that we let that we hope just line up nicely for us their jackie and so in a one of the expense drivers this year has been frankly being pretty
spk_2: pretty draconian on the variable homicide
spk_0: so
spk_2: our hope is that as
spk_24: provisioning moderates and as operating volumes return some a more normal conditions that number should obviously boa prevent rights that's going to create and delta for us at least versus what we're doing this year and what we would anticipate we will were thinking through his you know what are the bay a's operating opportunities that we have at our disposal suggest touched and asked about the brand side ranch rules state that clearly is an opportunity for us as you know that's not something that come about just because of carbon i think the accelerant because of coated and then we also have a number of efficiency initiatives that are being brought about by just better process
spk_2: design and management as well as by some technology and automation capabilities that were that were getting underway on so i think the best way to think about it is if you look at our long term expense slope you know that we've been able to really draft below the overall rate of of inflation while still provide ask for future investment and we would expect to continue to go to be on that path for for you for number of years to come well that's great thank you for the yeah the additional comments at at a look at the find that i'm just curious and the titan with balance sheet sizes wow i'm in i noticed that then he that commercial decline the separately apps that let consumer and have like on and just wanted to see what your appetite and for public deposits and if that which is a function of an opportunity you thought or if you're trying to maintain balance sheet grouse i thought that margin pressure it's kind of alluded to earlier yeah well so let me let me talk about the numbers first little come back to the strategy if that's okay with you it is that the numbers because it will cause we have so many we'll have a stimulus type dollars large dollars bouncing around with silver larger from or appliance jackie i'm kind of at the spot a point to point numbers can be a little misleading so i am now more than ever we're we're looking at average balances and if you look at that enough for the quarter we're up to play three percent on an average deposit basis the consumer was up three percent commercials of six point four percent and actually the government was down seven and a half percent so that gives you the snapshot for the quarter itself in terms of our strategy around that though
spk_24: the government deposit sector like us more specifically the time sectors you know pricing is gun is again gotten awfully attractive there and as we've described in the past when when rates are very low or the minutes polonaise ten term in a with local players as cause as an easier for the next
spk_27: fusion i think they prefer to do that and it we can get pricing in the in a single deserve range which is else but i think by anybody's book is is pretty attractive as as rates rise you know things become more competitive and more national a competition and then that becomes less attractive to us so i think wow we're in the
spk_0: this rate since birth rates own will will will opportunistically the in and out of that the government time sector but just as a broader me a backdrop it where we really try to build our deposit franchises not so much there but really more down the core commercial and consumer front definitely definitely understand in terms of edge and that and thank you for the average that i was very helpful idea of i think you have the facts
spk_28: okay thanks
spk_9: thank you are next question come from the line of and release of piper sandler the question please
spk_8: if the lease please monsieur landed to meet him in a speaker folic a handset
spk_29: oh murcer i apologize i'm i'm morning on aug one follow up the me
spk_0: yep yep get yeah i just wanna follow been on a margin and require a discussion and certainly forecasting out but the level of but the hullabaloo could even be challenging but where i mean it
spk_6: recognize martin be down a bit more your this courtroom where do you guys think that ultimately about but bottoming out before i can apply to agatha reaching trough
spk_0: yeah looking into next year probably towards the end of the year
spk_30: like the pace of that decrease long would decelerate so we're looking at know i'm probably in the fourth quarter of next year where obama but the agenda the pay some for decreasing on my general
spk_0: slow naga on that's helpful and that meant on the credit front is that the rise in criticize blown says curious what was driving that very thing or amongst the different rules are among certain powers act don't give you some possible
spk_26: aren't we did have a bit of an increase in our high risk industry exposure it accounted for about forty two point seven percent of that on our high risk industry exposure is on that aren't criticise exposure and seventy nine percent secured and has a weighted average ltv a fifty nine percent
spk_2: so that was that for anyone to have percent right now get there so still well below
spk_0: regulatory guess two planes intimate yeah i end and still very long wrong i when i was the very man on out with my government document increase arm and then just one more on the fee and palm
spk_2: i'm i'm how much this is driven by of the increase your like might have any reopening and as and state does have more
spk_0: reopening and tourism does come back a little bit ah opportunities for other sorts of his consumer transaction related field for me did they did opportunities for that to improve next year as though and deck to the rebound
spk_31: yes so
spk_0: the the increases in those v line items that you that you reference
spk_32: devil was driven by a resumption of local economy traffic a good a good graph to look as we go to the you hero side they have a
spk_1: what they call on economic paul's which takes a whole bunch of high frequency day known and amalgamated and that that actually is now up to it's highest level since the crisis hit so we think that's what we're saying a span of in enhanced activity and and we would hope andrew that
spk_33: if and as the visitor real rivals to the islands else was the economy forward we should see more of that that that trendline apple a great bomb i i appreciate our own comment things take my questions
spk_2: tend to go
spk_33: thank you are next question comes from the line of laurie on secker our campus point
spk_0: a square thanks to my name and just wanted to go back to jackie a question on the public deposits you from a breakdown as hell and to what the time and
spk_33: within that one point seven five billion number and maybe a little bit about your strategy and of like time i don't have a break out for say fondly
spk_34: laurie up at the effect tackled at maybe generally you know and and again right there obviously very very loudly how you're thinking about that ethically the public time here
spk_6: yep but specifically a we think of the public it's it's kind of a if candidate it depends on what part of the cycle you're asking up and you know in in general i'd say that they don't really represent the a strategic part of our deposit business but there are times when rates are so low that their prices pricing is so benign is is kind of silly not for us to take that opportunity and that had a where we are right now we're or squarely in the low single visit range right now laurie and so down is if a local for azure calls and says would you like the papers money for period of time generally the answer that is going b s so yes i think we're we're we're trading right now is somewhat opportunistic but just in the broader sense in public space and the time space in particular is not really not really
spk_35: are where we would be trying to push the deposit portfolio and to occur at a price and and then night question for yet coming weekend and i can't go back of our october twenty third at st l and obviously from our psyche or drop eight hundred and thirty seven million and attack
spk_33: and the and eight hundred and thirty seven million from september thirty am to four hundred eighty million at october twenty third do you have a breakdown either by for or dollars with a retail lodging and restaurant in town for deferrals as an actor act my phone sigh still
spk_36: okay answer but tobar twenty third the retail deferrals would be eighty million with seventy five or that in secured exposure with the fifty one percent lt be the lodging exposure is one hundred and sixty six hundred and forty million of that is secured at thirty nine point eight percent and a restaurant an entertainment was forty two point five ah it with odd
spk_8: ten million secured at forty seven percent ltv and thirty two million unsecured
spk_37: of her up great bottle
spk_33: i'll go on and then and one other question is shifting gears on your on your arm
spk_0: pp long do you have an update and terms of as september thirty what the processing fee income would be
spk_38: in other words as the last quarter around numbers was eighteen million or sell on your book the tiny get a sense of it was suddenly have when i love forgiveness
spk_14: where that number san paulo
spk_8: well the way to think about his be take that eighty million divided by to eat quarters of that's how much we would amortize into the your yoga read quarter
spk_9: oh okay okay that just ended up getting on okay that's up for great thank you i'll leave it there
spk_14: eggs
spk_0: very good our next question trump's rom casey hair of jeffries your line is open
spk_38: good morning as are you on laying around for tv are you on i'm fine with the i already mortgage yields ah they were applicable basis points ah my you know what drove that and are and where some of the new product coming on a pile of frightening
spk_8: yeah
spk_9: in terms of the yield what's happening is as because we have a lot of them we fi or prepayment activity what we do as we didn't get to this kind of a more the technical response but we do get to recognize a lot of the bomb feeds into the yield so that's what's driving on some of the yielding pieces in terms of what's coming on
spk_38: you don't right around maybe slightly less than three percent where where they're coming on okay for you to stop calling and more of the fee instead of power you know amortizing it out over a longer period of in is that and that our to understand it yeah
spk_8: oh god the world coming out loans that are coming off term right because are being with okay so we'll go and of hate it
spk_9: got it
spk_39: tom and it is back to the name guidance
spk_38: could you just reminded what it ah
spk_0: what to contemplate in terms of you know cash balances for the fourth quarter in and die and growth and securities
spk_1: so the cash right now we're calling eight hundred million
spk_0: and securities was six point four so we're probably gonna deployed some of them back into the portfolio

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