Q2 2021 Bank of Hawaii Corp Earnings Call
[music].
Good day, everyone and thank you for standing by the welcome to the Bank of Hawaii Corporation second quarter of 2021 earnings Conference call at this time all participants line.
And are in a listen only mode. After the speaker's presentation. There will be a question and answer session. The ask a question. During the session you will need the press star 1 on the telephone they used to be at the bias that the reach of conference is being recorded if you require any further assistance. Please press the star Zero I would now like the hand the conflict.
So it won't be a speaker today, the head of Investor Relations Ms. Janelle. He go. Please go ahead.
Thank you and good morning, good afternoon, everyone and thank you for joining us today on the call with me. This morning is our chairman President and CEO, Peter Ho, Our Chief Financial Officer team, GK, Mara and our Chief risk Officer Mary Sellers.
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 are reasonable there are a variety of reasons. The actual results may differ materially from those projected during the call we'll be referencing the slide presentation as well as the earnings release, a copy of the presentation and release are available.
All of them on our website <unk> com under Investor Relations and I'd like to turn the call over to Peter Ho Great. Thank you Danielle good morning, or good afternoon, everyone. Thanks for joining in.
As is our custom we will go through market conditions here in the islands, South and then turn it over to Dean who will walk you through our.
Financials of the Mary will touch on credit and then we'd be happy to take your questions for.
For the quarter.
If you look at the unemployment slide here you see that the economy here of the islands is steadily improving are really being driven by a nice improve.
The improvement or.
Regaining true.
The action in the visitor industry as well as improvement in what we call. The local economy, you heroes economic pulse indicator, which is of high frequency aggregation of of numerous data points has.
Basically the local economy now with 70.
2% of versus pre pandemic levels, a quarter a quarter ago, I think we reported 62% to you. So it's nice improvement there and you see all of this relating into better unemployment rates. So unemployment now is down to 7.7 per cent for the fifth consecutive month of declines.
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The real estate market here on the islands.
Like many markets is very strong.
On a wahoo is a single family homes were up in terms of sales, 49% June versus June a year ago sales price median sales prices were up 27% and inventory.
Inventories are very constrained. So the median days on market are down 60% from a year ago to 8 days in the months of inventories down 52% from a year ago. The 1 point to the 1.2 months of inventory.
Condominium sector here on Oahu, similar story, a little bit more muted.
Got it though but the sales up 134% June on June median sales prices up 9%.
On the inventory conditions very similar to the single family home market. So.
Very strong real estate sector here on Oahu and generally throughout the Hawaiian Islands.
The visitor.
Our industry as I mentioned is is doing quite nicely. So you see this chart here.
Really since the relaunch of the or the launch of our safe travels program of <unk>.
Is it are arrivals of increased so the substantively basically now approaching pre pandemic levels airlift is.
<unk> is a is a great story.
In June actually.
We had a $1.27 thousands of seats into the islands, which is of 14, 3% increase from June of 2019.
On July and August forecasts are are even more robust enough. So.
The airlines are doing their jobs arrivals are looking good. The most recent data we have from the Hawaii Tourism authority has arrivals at 74% of 2019 levels. So pre pandemic levels of visitor days at 83% of pre.
Pre pandemic levels and expenditures.
<unk> that just under 80 per cent of 2019 levels and we have reason to believe that the.
The balance of the Summer June July and August should should eclipse the eclipse those numbers as well of hotels are doing.
Quite nicely as of June.
We're back up to about 97%.
Percent of of our room stock back and back in service.
Occupancies are running at 77%.
Statewide versus 84% pre pandemic in 2019 average.
Daily rates for a very robust at $320.
For the June.
June versus $280 for the same month of 2019. So if you can believe it revpar or revenue per available room is actually higher as of June of this year than it was in June of 2019 of $246 per available room versus 235.
Per available room June of 2019, so very strong performance from the hotel sector and forward bookings just talking to a number of of professionals in the industry seems to be very strong.
As things stand right now.
The COVID-19 condition here on the islands is reasonably good.
Rolling 7 day average is have us on the top half of the country.
Although we are concerned like like most other marketplaces over the emergence of the Delta variant and vaccinations for the most part have gone well. So we're in the 36 percentile of the country and hopefully of obvious.
Obviously like most of them marketplaces, we would love to get that number of higher.
So that's the that's the synopsis of the marketplace now let me turn the call over to Dean who will walk you through the financials team.
Thank you Peter.
Growth from core customers remained solid in the second quarter.
Core loans net of PPE.
P waivers increased by $113 million or 1% in the quarter and by $250 million year over year.
Waivers on PPP loans have accelerated and resulted in a net decline of $212 million in the quarter.
Our strong deposit growth continued increasing 600.
The $13 million or 3.1% linked quarter, and $2.7 billion or 16% year over year.
With the loan to deposit ratio of 60% our strong deposit base remains of stable source of liquidity.
Together with our healthy cash balance of $910 million at the end of the quarter.
We maintain significant flexibility for further loan and investment growth and we continue to deploy liquidity to support net interest income as well as mitigate the impact of near term rate pressures.
Consistent with the strategy, we added $1 billion of liquidity safe investments to the portfolio.
Increasing.
<unk> total balances to $8.5 billion.
Net income.
From for the second quarter was $67.5 million or $1.68 per common share up from $59.9 million in the first quarter and $38.9 million in the second quarter of 2020.
Net interest.
Income in the second quarter was $123.5 million up from 126 million in the in the first quarter and down from $126.7 million in the second quarter of 2020.
Included in the second and first quarters net interest income were $3.8 million endpoint.
<unk> 9 million respectively.
Of the accelerated loan fees from PPP loans waivers.
Included in the second quarter of 2020 net interest income was an interest recovery of $2.9 million.
Adjusting for PPP loan forgiveness net interest income was slightly higher than the first quarter.
<unk> as the.
As the impact from lower interest rates was offset by the deployment of liquidity.
As Mary will discuss later, we recorded a negative provision for credit losses of $16.1 million this quarter.
Noninterest income totaled $44.4 million in the second quarter up from.
$43 million in the first quarter and down from $51.3 million in the second quarter of 2020.
Included in the second quarter for gains of $3.7 million from the sale of investment Securities.
Included in the second quarter of 2020 was a gain of $14.2 million from the sale.
All of our remaining visa shares.
Adjusting for these changes the decrease from the first quarter was due to lower mortgage banking income primarily from the impact of rate volatility on MSR valuations.
In the second quarter, we reported an MSR impairment of $1.1 million.
Versus a recovery of $2.2 million in the first quarter.
Adjusted for the MSR valuations mortgage banking income was up about 400000 quarter over quarter.
Partially offsetting the MSR valuation impairment for higher service charges and other transaction fees.
Fees the increase from the second quarter of 2020 was mainly due to an increase of $5.4 million from.
Fees on deposit accounts and other service charges due to the reopening of the economy.
We expect noninterest income will be approximately $42 million to $43 million per quarter for the remainder of the year.
From the increasing deposit fees service charges and other transaction fees from the improving economy.
Noninterest expense in the second quarter totaled $96.5 million.
The second quarter's expenses included charges of $3.2 million related to the early termination of repurchase agreements.
In term debt and the $3.1 million benefit from the sale of property.
The termination of the repos on term debt allowed us to reduce our non core funding we positioned from securities at a net gain and increase our net interest income.
With the improving economic provisioning and.
The earnings outlook for 2021 accruals for corporate incentive compensation of our back to pre pandemic levels and were $3.2 million higher than the second quarter of 2020.
In the second quarter of 2021, we also experienced higher levels of variable expenses from rising production as well.
That's continuing investments in innovation initiatives.
The remaining core expenses were nearly flat with the expenses from the second quarter of 2020.
And overall expenses continued to be managed in a disciplined manner.
Excluding onetime items, our normalized full year noninterest expense projection.
<unk>, including restoration of corporate incentives remains approximately $385 million.
With the third and fourth quarter expenses being approximately the same as the second quarter at 96% to $97 million.
The effective tax rate for the second quarter was $22.8 4%.
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Currently we expect the effective tax rate for 2021 will be approximately 24% driven by higher pre tax income.
Our return on assets during the first quarter was 123%.
The return on common equity was 19, 6% and our efficiency ratio was 50.
7 for 7%.
Our net interest margin in the second quarter was 237% of decline of 6 basis points from the first quarter.
The decline in the margin in the second quarter reflects the ongoing impact from the strong deposit growth and lower rates, partially offset by deployment of liquor.
Liquidity.
We expect the margin will decline of approximately 5 to 6 basis points of the third quarter, primarily due to the continued deposit growth and the recent decrease in long term rates stabilize in the fourth quarter.
Net interest income in the third quarter will be approximately flat.
Flat to slightly higher than the second quarter.
The increase in NII is expected from continued balance sheet growth deployment of excess liquidity and stable interest rates.
But we remain asset sensitive and are well positioned for higher rates.
These estimates exclude the impact of PPP.
Loan prepayments, which have been volatile and unpredictable.
Yes.
We strengthened our capital levels to a very successful issuance of $180 million and preferred stock the.
The addition of preferred capital together with our strong earnings increased our tier 1 capital and leverage ratios.
To 13, 9% and 731%, respectively, adding to our excess levels.
We are well positioned for continued growth over and above the strong deposit growth of 4.4 billion, we've already absorbed into our balance sheet since the beginning of 2020.
During the second quarter, we paid out $27 million of 40% of net income and dividends our strong capital.
Capital levels and income generation will enable us to restart the share repurchase program. This month, which has been suspended since the first quarter of 2020.
The remaining share buyback authority is $113 million.
And finally, consistent with our improving income levels, our board declared a dividend of <unk> 70 per common share for the third quarter of 2021, an increase of <unk> <unk> per share.
I will turn the call over to Mary Thank you Deane.
At the end of the quarter customer loan balances on deferral were down 80.
80% from their peak to 1.8% of total loans Youll recall, given we had the capacity to do so we elected to partner with our customers through this unprecedented event and provided the extended relief primarily for your principal deferrals on low margin real estate accordingly, 93%.
Of loans remaining answered for all of our secured with our consumer residential deferrals, having a weighted average loan to value of 68% and our commercial deferrals, having a weighted average loan to value of 46% with 97% continuing to pay interest free.
Turning to payment performance for previously.
The deferred loans has continued to be strong with less the 1% of these customers delinquent 30 days or more at the end of the quarter.
Credit metrics remained strong and stable in the quarter net charge offs for $1.2 million as compared with net charge offs of $2.9 million in the first quarter and net.
Charge offs of $5.1 million in the second quarter of 2020 nonperforming assets totaled 19 million of 1.1 million for the linked period and down $3.7 million year over year.
The loans delinquent 30 days or more were $29.8 million or 25 basis points of total loans.
At quarter.
And down $10.1 million for the linked period and up $6.3 million from the second quarter of last year criticized exposure continued to decrease during the quarter dropping from 2.6% of up to 217 percentage of total loans.
As Steve noted, we recorded a negative provision for credit losses.
Losses of $16.1 million. This included a negative provision to the allowance for credit losses of $16.8 million, which with net charge offs of $1.2 million reduced the allowance to $184 million, representing 1.5 percentage of total loans and leases or 1.5%, 6% net of PPP.
The balances.
The decrease in the allowance is reflective of the most recent year hero economic outlook and forecast for our market coupled with our credit risk profile. The allowance does continue to consider and provide for the potential downside risk inherent with the pandemic the.
The reserve for unfunded credit commitments was for 5.
$5 million at the end of the quarter with the provision of $1.5 million made to fund the linked period increase I'll now turn the call back to Gino. Thank you marry. This concludes our prepared remarks, we are now happy to answer any questions you may have.
And so all of participants as a reminder, the ask a question.
Please press the star 1 on your telephone.
And our first question is coming in from Ebrahim <unk> Bank of America. Please go ahead.
Good morning.
Good morning.
I guess, maybe the first question just on the capital Dean you mentioned.
Plans too.
Share buybacks.
For us a sense of 1 how do you think about it.
I'll transition.
Is there a certain level of in terms of overall capital payout that you are targeting and whats the binding constraint. When you think about the tier 1 leverage ratio, what's the where.
Youre trying to maintain.
Those are the issues as you think about capital return.
Just the possibility of a dividend hike in the back half of the year.
Yes.
So the the the kind of the measurements that we look at are the is the tier 1 leverage ratio.
Stated.
In the past that we'd like to stay above 7%.
So we'll probably.
Keep a little bit of the room above that but that would be 1 measurement the.
With the kind of in consideration for how much we do in buybacks in.
In terms of the dividends, we have stated in the past that we like to be roughly.
Roughly 50% of our net income and dividends over the long term. So that's kind of a target that we would.
Head towards.
Yes, I would add to that Ebrahim I think that the.
Probably the constraint to further or the opportunity maybe is better term too.
Increasing the dividend really I think it was down the path of NII. So to the extent that we get some relief on the rates on the rate environment. I think there is upside feels to me like our fee income levels are pretty at least at this point pretty well understood for the balance of the year on expenses fuel will be pretty well understood as well so I think that.
That is really the rate environment that is represents the upside on the dividend I think.
Understood and I guess, just on the rate environment on the NII Sabine Thanks, again for the guidance relatively clear.
2 things 1 of you think about just remind us what's the PPP fees remaining.
At the end of the second quarter and you had expectations.
Whether or not most of it gets.
Can you take this.
Sure.
Yes, so we have $14.5 million remaining in fees and so this would be both the 2020 in 2021 of the vintages.
We are.
Looking at pretty elevated levels of something similar to what we had in the second quarter in terms of what would pay off.
And then Theres some debt, we think might bleed into 2022, but generally most of it will the.
The remaining balances will come off.
The next 2 quarters.
And did you say the second quarter.
For the PPP fees with the.
On the accelerated component.
Yes, 3.8 the accelerated.
Alright, so it should be something in the index listen I think on it and just I guess last question Peter around.
Can you share some statistics that are on the macro outlook.
From what we understand it seems like internationally.
Kevin. This is 1 area of it's still missing is there anything else that you think about in terms of.
Where you need to see a full sort of back to normal the opening before we start seeing that on the unemployment from 6% going back to pre pandemic levels.
Yes, so I think international.
As of yet.
As yet to the bounce back.
What's interesting is we are nearly back to full strength in terms of.
Visitor traffic and Thats without the international market, which historically is call. It a third of our marketplace. The benefits of that travelers they are a bit higher spending.
Pending so I think thats upside out there someplace somewhere as the international traveler returns and then the other piece of the at least the visitor segment as the as the group business and incentive.
Beginning this year those.
Those types of excursions beginning to.
The percolated up again, but but as you as you can appreciate there is a bit of of lag before we'll start to see that traffic back and so I think the international and group of incentive is effectively the next leg up for the for the visitor industry and I think probably a little bit of a higher margin product than what we see.
Getting.
Right now.
Got it thanks for taking my questions. Thank.
Thank you.
And our next question is.
Release of D. A Davidson go ahead Sir.
Thanks, Good morning.
Morning, Jeff Peter Peter just a follow on to that and not to be overly.
I guess conservative, but just trying to get a sense for the local sentiment.
There is any likelihood of of restrictions coming back on line with variance and I don't know that around the July 4th holiday.
Lifted the restrictions on vaccinated folks but.
Any.
Underway or.
Thoughts locally that debt.
Things could tighten backup.
Well, obviously we.
In this marketplace like just about every place else from the country of concerned what we're seeing for.
From the variance in the the.
Of the case counts.
I've not heard any.
Any discussion around reapplying some of our earlier remedies. So no nothing that I'm aware of but but obviously if things continue to trend as they have.
We'll need to begin to think through those sorts of protocols visitor and just kind of general.
Public.
I would say, though that the early indicators of indicators are Jeff though that the.
The majority of the case counts right now our community spread.
And some some from travelers, but generally returning Hawaii residents back from.
From mainland locations and the incidence of visitor to resident transmission is has been very low and continues to be pretty low.
The point thanks.
Maybe just.
Yes.
Housekeeping kind of maintenance.
Dean I appreciate the guidance on expenses just noted the the occupancy.
Data.
Levels, where we're pretty low linked quarter.
I guess.
Baked into that guidance is that sustainable.
On those line items and I guess, if there was anything to discuss on that Thats.
Why they were at.
At that level also helpful. Thanks.
Yes, so the property sale came through in that line. So the $3.1 million. So you have to adjust for that and then in the second quarter, we did have a little bit better R&M expense from.
The level so that's.
A little bit of uncertain, but those are the kind of the 2 reasons why the.
Occupancy level was much lower in the second quarter, but mainly driven by the property sale.
Okay that makes sense, alright, I'll step back thank you great.
Great. Thanks, Jeff.
And for the next question.
Mr. Andrew Liesch from Piper Sandler go ahead Sir.
Hi, everyone. Good morning.
Good morning.
The question on the on the Securities purchases the added a $1 billion. Just curious what you purchased and then with rates having comment I mean, what's the appetite for more purchases to continue.
Yes.
So we've been purchasing.
Kind of true what we have been in the past, which were mortgage backed securities. We did purchase from corporates.
Those are kind of the 2 major categories, but more biased towards the mortgage backs.
And the average rate that we got in the.
Second quarter was about 1.5%.
And then with the drop in the long term rates. Obviously, the current rates are lower so we're trying to be little bit more measured in terms of how we're investing the money this quarter, but we're still deploying a lot of the liquidity that we do have on the.
Excuse.
Excuse me on the balance sheet.
Okay.
Got it okay. So.
I guess you had the $910 million of cash from is there a level that you want to manage that down towards the obviously loan growth will help with some of that in the publicly some deposit outflows, but what level would you hope to get this down to.
Well with the.
It would be probably about 250 to maybe $300 million.
The reason for that is that we do have a lot of cash flow coming off the.
The portfolio so from a liquidity standpoint, we are still going to have.
Lots of cash flow debt, we can reinvest into loans.
Sure.
For the loan.
On growth so we can maintain a little bit lower cash level.
Then the $900 million.
Got it okay. That's helpful. Thanks for speaking about loan growth I mean, the good commercial growth good consumer growth there this quarter our pipeline sitting as the.
And for the third quarter.
The pipelines are looking pretty good.
So both consumer and commercial.
No.
Commercial real estate had a good quarter the anticipate having.
Good back half of this year.
Identical.
Strong.
So residential through the first half of the year did a $1 billion.
Production to lead all local providers, so feel good about that.
As rates have come down a bit here recently.
A bit more of.
A bit more pipeline.
In that category so that.
That feels pretty good as well home equity has has reemerged.
I should say.
The indirect.
The about flat, which I think given the state of auto sales right now is a pretty good performance.
So those are the I think those are going to point of view the drivers.
Construction of actually might have some upside as well.
As we.
The way on a number of affordable types of transactions of isn't really what were waiting for is the other consumer category and the <unk>.
And I guess, the C&I categories in those both of those categories. You would appreciate of been impacted negatively by just the liquidity build on both the commercial as well of the consumer.
Sumer clientele.
But.
I think you put all of that together.
Kind of a mid single digit grow.
Right for the next 12 months I think as is reasonably achievable.
Got it.
The year, thanks for taking all the questions and all of the color I appreciate the bulk.
All of that that take care.
And once again to all of the participants to ask the question. Please press the star 1 on the telephone. Our next question is from Jackie Bohlen of.
<unk> go ahead.
Hi, everyone of Jackie.
I'll call it <unk>.
Peter I wanted to chat about the economy, just a little bit.
Some really great anecdotes.
Anecdotes here, which I love because it helps me get a sense for it.
How big of feet on the ground.
Can I get a sense for how you view the rebound in tourism versus how you view the rebound on the economy overall.
Obviously, I know and they're in a day.
Appendant, but theres more to the economic rebound the gip tourism, so wanted to get your thoughts there.
Yes, so that's a good question so.
I would say that.
Obviously, the visitor industry is a big component of the local economy.
But I think what we've found.
2 of the pandemic as it's.
As big as it is there are other factors that drive our local economy as well and so construction.
Driven by the health of the real estate sectors is in a good space that's been helpful. The DIFM.
Fence sector has been.
Been extremely strong.
And likely to get stronger given the geopolitical tensions in the Pacific here.
And so those those drivers I think of have have really.
The major contributors to the local economy.
Getting back on its feet and I think that in order for our.
Our economy to be at full strength, obviously, we need a healthy visitor segment, but there are other factors as well on those those factors seem to be doing well the visitor front.
Has been the velocity with which we've come back has really been.
Surprising at least for me and it's been surprising and.
Given the.
Notwithstanding.
Ending.
The I think the opportunity for kind of the next stage with the return of international travelers in the next stage with the return of group of incentive travelers bodes well for for that important segment.
Okay, and when you think refinance debt as travelers.
Larry do you mean conferences and things like that or is it a different type of capital you are talking about.
It's conferences it's also.
The large corporations rewarding.
Star sales performers and things like that.
The big segment of the of the industry.
Okay. Okay.
Yes.
And then when you think about the economy.
Unemployment rate where at that.
And I realize this is the very hard very.
Very hard question to quantify it.
From your viewpoint on net.
When you think about all of that as you think about people, who maybe haven't entered for the workforce.
Bad because there are benefits or perhaps better than they would be if they were working do you think that's holding the economy back at all or are we getting to a point, where we may see an increase in people looking for jobs.
Boy, that's the $64000 question Jackie.
I don't know I don't know.
Yes.
I mean, it is the fact that lots of small businesses and large businesses.
On the visitor industry and elsewhere are just having a tough time getting people to come back and so you are right perversely.
Lack of demand for work.
It is.
On a very perverse way holding back the.
The post pandemic recovery.
And whether whether the elimination or the reduction of of <unk>.
Federal and state subsidies.
Will help that situation I don't know I mean.
I think intuitively that it should but I've also looked at a few reports, indicating I think half the states in the country have headed on that direction, they've not seen an overnight bounce back and work for supply. So it's the right question and I just don't have as much clarity as I would like to.
You would like to share with you.
Okay. Thank you and I didn't completely understandable.
Why so unique because you are an island and so you can't have people, but you can have people across state lines, but it's just not as easy.
So thank you for all of that I really appreciate it.
And then I will get technical on the quarter for just 1 last 1 and then I'll step back.
I wondered what the.
Thank you for the accelerated amortization I just wanted to confirm what the debt.
Just the regular amortization piece of that was on the fees.
Yes, it was of $2.1 million.
Okay. So the $2.1 plus the $3.8.
Correct.
Correct, Okay. Thank you.
Yes, Thanks Jackie.
And our last question is from Laurie Hunsicker of Compass point go ahead.
Yeah, Hi, Thanks, good morning.
Laurie how clean that we could just go back to the occupancy wondering how.
The thinking about that.
And just from the standpoint of run rate of expense and maybe can you update us I think.
The beginning of the year, you were going to take branches down to 50 by the end of the year, we're sitting at 54 for pulp.
The bank about where you are with that in terms of.
How we should be thinking about occupancy.
Sure.
Well I think we should think.
The holistically in terms of lower.
Occupancy expense over time.
<unk>.
So we had been operating our branch count has jumped around through the pandemic.
Based on where the where the demand for in person bad.
Banking is happening and so we're down to 50% I want to say.
But 50 for technically.
And the question for US right now is trying to toggle between those 2 numbers as to what.
Just bad we think we're going to and.
From a permanent go forward posture.
But I mean, I think we've had.
Great success in the transition from <unk>.
In person to digital and that obviously has created opportunities for us to call the square footage in our branch.
So if you look over the past decade, if you take a kind of a slightly higher view on it.
Our square footage was down 29% from 2010.
And our branch count is down 34%.
Just had a pretty significant reduction in overall branch not just occupancy but.
System for all branch expenses.
Where we go from here Laurie.
As I think we're probably comfortable for the here and now on that $50.50 for range will probably the size of the next 12 months or so what that exact number is going to be but feel pretty good about the general structure of the branch system right now.
Okay, Okay and for them when we think about occupancy expense that $8 million or so on rate would be a good number.
Yes, yes.
Okay perfect Okay.
Then the.
I think there'll be prepay.
$3.2 million, how much was actually prepaid and what was the cost.
Yes about when in the quarter, if you have it.
The total amount was $100 million.
And I want to say it.
The kind of almost mid quarter.
Okay and costing.
You mean in terms of rate.
But it was about 1.3%.
Okay, and then do you plan to do anymore or was that that kind of debt.
Yes, I think it's going to be opportunistic. This 1 was opportunistic because of.
The benefits that we got out of it.
So as we see opportunities in the future.
Amit.
To reduce further.
Yes. This was this was a nice opportunity Laurie because the the.
The gain the gain on securities basically offset the cost of of accelerating the prepay and then we've got the improvement on the margin. So because it's kind of a no brainer for.
Future kind of thing.
If that shows up at our door again, we'll do it again.
That makes sense.
And then just looking at the other other expense line so on.
$17 million this quarter compared to $30 million last quarter, obviously, the $17 million contain the abitibi prepay.
Back that out it was $14 million on it.
For us in doubt that contactless card rollout.
It was $11 million from 11 million last quarter going to 14 line was there anything else nonrecurring net showed up in that number or.
Any thoughts around why that number was higher will it be that run rate going forward, how should we think about that.
Well.
On the contact.
Back to the card rollout actually showed up in the data processing line.
So the adjustments to other the only for the second quarter.
Got it okay. So of 13, 3 going to call. It 14 on Okay got it that makes sense Alright, My bad Okay, and then just last 1 for me the.
And in the quarter, how much was that.
$10.1 million.
Okay, great. Thank you very much.
Yes.
And the chance for the question and answer session. We don't have.
No more questions on the queue receptors of bending back with Nokia.
The Premier I'd like to thank everyone for joining us today and for your continued interest in bank of Hawaii. Please feel free to contact me of just any additional questions or need further clarification on any other topics discussed today. Thank you so much everyone.
And that concludes our conference for today. Thank you for your participation.
Please.
The hang up now thank you so much.
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Good day, everyone and thank you for standing by the welcome to the Bank of Hawaii Corporation second quarter of 2000 of 21 earnings Conference call. At this time all participants line are in a listen only mode. After the speaker's presentation. There will be a question and answer session. The ask a question during the session you will need the passage.
Press Star 1 on the telephone please be advised that the reach of conference is being recorded if you require any further assistance. Please press the star Zero I would now like to hand, the call price over the of speaker of today, the head of Investor Relations Ms. Janelle. He go. Please go ahead.
Thank you and good morning, good afternoon, everyone and thank you for joining.
Joining us today on the call with me. This morning is our chairman President and CEO, Peter Ho, Our Chief Financial Officer, and she gave Mara and our Chief Risk Officer, Mary Sellers 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 are reasonable there are a variety of reasons.
The actual results may differ materially from those projected.
On the call will be referencing of slide presentation as well as the earnings release, a copy of the presentation and the lease are available on our website <unk> com under Investor Relations and now I would like to turn the call over to Peter Ho Great. Thank you Danielle good morning, and good afternoon, everyone. Thanks.
Thanks for joining in.
As is our custom we will go through market conditions here in the islands, South and then turn it over to Dean who will walk you through our financials of the Mary will touch on credit and then we'd be happy to take your questions.
For the quarter.
If you look at the.
The unemployment slide here you see that the economy here of the islands is steadily improving I really being driven by a nice.
Improvement or regaining traction.
Traction in the visitor industry as well as improvement in what we call the local economy you heroes.
<unk> economic pulse indicator, which is of high frequency.
Aggregation of of numerous data points has.
Basically the local economy now at 72% versus pre pandemic levels a quarter a quarter ago I think we reported 62% to you. So it's nice improvement there.
And you see all of this relating into better unemployment rates. So unemployment now is down to 7.7 per cent for fifth consecutive months of declines.
The real estate market here on the islands.
Like many markets is very strong.
<unk> of Wahoo.
Those are single family homes were up.
Terms of sales of 49% June versus June a year ago sales price median sales prices were up 27% and inventories are very constrained. So the median days on market are down 60% from a year ago to 8 days in the months of inventories down 52.
The 2% for the year ago, the 1 point to the $1.2 months of inventory.
The condominium sector here on Oahu, similar story, a little bit more muted, though but the sales up 134% June on June median sales.
<unk> was up 9% and the inventory.
The conditions are very similar to the single family home market. So a very strong real estate sector here on Oahu and generally throughout the Hawaiian Islands.
On the visitor industry as I mentioned is is doing quite nicely. So you see this chart here.
Really since the relaunch of the or the launch.
Of our safe travels program of visitor arrivals of increased so the substantively basically now approaching pre pandemic levels. Airlift is is a is a great story.
On June actually.
We had a $1.27 thousands of seats into the islands, which.
As of 14, 3% increase from June of 2019, and July and August forecasts are even more robust of that so the airlines are doing their jobs arrivals are looking good. The most recent data we have from the Hawaii Tourism Authority has arrival.
<unk> at 74% of 2019 levels, so pre pandemic levels.
Visitor days of 83% of <unk>.
Pre pandemic levels and expenditures that just under 80% of 2019 levels and we have reason to believe that the.
The balance of the Summer June July and August should.
Shouldnt Eclipse eclipse those numbers as well of hotels are doing quite nicely as of June.
We're back up to about 97% of.
Of of our room stock back and back in service.
Occupancies are running at 77%.
Statewide versus 84% pre pandemic in 2019.
Average daily rates for a very robust at $320.
For the June versus $280 for the same month of 2019. So if you can believe it revpar or revenue per available room is actually higher.
Here.
As of June of this year than it was in June of 2019 of $246 per available room versus 235.
Per available room June of 2019, so very strong performance in the hotel sector and forward bookings just talking to a number of the professionals.
And the industry seems to be very strong.
As things stand right now.
The current condition here on the islands is reasonably good.
Rolling 7 day average is have us on the top half of the country.
Although we are concerned like like most other marketplaces.
Over the emergence of the Delta variant and vaccinations for the most part have gone well. So we're in the 36 percentile of the country and hopefully of obviously like most of them.
Marketplaces, we would love to get that number higher.
So that's the that's the synopsis of the marketplace now, let me turn the call over to.
Dean is the walk you through the financial strength.
Thank you Peter.
Growth from core customers remained solid in the second quarter.
For loans net of PPP waivers increased by $113 million or 1% in the quarter and by $250 million year over year.
Waivers on PPP.
Loans have accelerated and resulted in a net decline of $212 million in the quarter.
Our strong deposit growth continued increasing $613 million or 3.1% linked quarter, and $2.7 billion or 16% year over year.
With the loan to deposit ratio of.
The 60% our strong deposit base remains of stable source of liquidity.
Together with our healthy cash balance of $910 million at the end of the quarter, we maintained significant flexibility for further loan and investment growth and we continue to deploy liquidity to support net interest income as well as.
The impact of near term rate pressures.
Consistent with this strategy, we added $1 billion of liquid and safe investments to the portfolio.
Increasing total balances to $8.5 billion.
Sure.
Net income for the second quarter was $67.5 million or $1.
Mitigate per common share up from $59.9 million in the first quarter and $38.9 million in the second quarter of 2020.
Net interest income in the second quarter was $123.5 million up from 126 million in the in the first quarter and down from 100.
$66.7 million in the second quarter of 2020.
Included in the second and first quarters net interest income were $3.8 million and <unk> 9 million respectively.
Of the accelerated loan fees from PPP loans waivers.
Included in the second quarter of 2020.
<unk> income was an interest recovery of $2.9 million.
Adjusting for PPP loan forgiveness net interest income was slightly higher than the first quarter as the.
As the impact from lower interest rates was offset by the deployment of liquidity.
As Mary will discuss later we recorded.
The net negative provision for credit losses of $16.1 million this quarter.
Noninterest income totaled $44.4 million in the second quarter up from $43 million in the first quarter and down from $51.3 million in the second quarter of 2020.
Included in the second quarter.
<unk> for gains of $3.7 million from the sale of investment Securities.
Included in the second quarter of 2020 was a gain of $14.2 million from the sale of our remaining visa shares.
Adjusting for these changes the decrease from the first quarter was due to lower mortgage banking income.
Primarily from the impact of rate volatility on MSR valuations.
In the second quarter, we reported an MSR impairment of $1.1 million versus a recovery of $2.2 million in the first quarter.
Adjusting for the MSR valuations mortgage banking income was up.
About 400000 quarter over quarter.
Partially offsetting the MSR valuation impairment for higher service charges and other transaction fees.
The increase from the second quarter of 2020 was mainly due to an increase of $5.4 million from.
Fees on deposit accounts and other service charge.
Due to the reopening of the economy.
We expect noninterest income will be approximately $42 million to $43 million per quarter for the remainder of the year from the increasing deposit fees service charges and other transaction fees from the improving economy.
Noninterest expense.
Charges second quarter totaled $96.5 million for <unk>.
Second quarter's expenses included charges of $3.2 million related to the early termination of.
The repurchase agreements in term debt and a $3.1 million benefit from the sale of property.
The termination of the repos on term debt allowed us to.
Since our non core funding, we positioned some securities at a net gain and increase our net interest income.
With the improving economic provisioning and earnings outlook for 2021.
Accruals for corporate incentive compensation of our back to pre pandemic levels and were $3.2 million.
We do share then the second quarter of 2020.
In the second quarter of 2021, we also experienced higher levels of variable expenses from rising production as well as continuing investments in innovation initiatives.
The remaining core expenses were nearly flat with the expenses from the second quarter of 2020.
Hi, and overall expenses continued to be managed in a disciplined manner.
Okay.
Excluding onetime items, our normalized full year noninterest expense projection, including restoration of corporate incentives remains approximately $385 million with the third and fourth quarter expenses.
<unk> being approximately the same as the second quarter at 96% to $97 million.
The effective tax rate for the second quarter was $22.8 4%.
Currently we expect the effective tax rate for 2021 will be approximately 24% driven by higher pre tax income.
Our return on assets during the first quarter was 1.3% the.
The return on common equity was 19, 6% and our efficiency ratio was 57 for 7%.
Our net interest margin in the second quarter was $2.3 7% of decline of 6 basis points from the first quarter.
For the decline in the margin in the second quarter reflects the ongoing impact from the strong deposit growth and lower rates, partially offset by deployment of liquidity.
We expect the margin will decline approximately 5% to 6 basis points in the third quarter, primarily due to the continued deposit growth and the recent.
The decrease in long term rates, then stabilize in the fourth quarter.
Net interest income in the third quarter will be approximately flat to slightly higher than the second quarter.
The increase in NII is expected from continued balance sheet growth deployment of excess liquidity and stable interest.
Interest rates.
But we remain asset sensitive and are well positioned for higher rates.
These estimates exclude the impact of PPP loans, prepayments, which have been volatile and unpredictable.
We strengthened our capital levels through our very successful issuance of $180 million in preferred.
Preferred stock.
The addition of preferred capital together with our strong earnings increased our tier 1 capital and leverage ratios to 13, 9% and 731%, respectively, adding to our excess levels.
We are well positioned for continued growth over and above.
Of the strong deposit growth of 4.4 billion, we've already absorbed into our balance sheet since the beginning of 2020.
During the second quarter, we paid out $27 million of 40% of net income and dividends are.
Our strong capital levels and income generation will enable us to restart the share repurchase.
Program this month, which has been suspended since the first quarter of 2020.
The remaining share buyback authority is $113 million.
And finally, consistent with our improving income levels, our board declared a dividend of <unk> 70 per common share for the third quarter of 2021 and.
The increase of <unk> <unk> per share.
I will turn the call over to Mary Thank you Deane.
At the end of the quarter customer loan balances on deferral were down 80% from their peak to 1.8% of total loans.
Recall, given we had the capacity to do so we elected to partner with our customers.
Through this unprecedented event and provided the extended relief primarily to of principal deferrals on low margin real estate.
Accordingly, 93% of loans remaining answered for all our secured with our consumer residential deferrals, having a weighted average loan to value of 68% and our commercial deferrals.
For us, having a weighted average loan to value of 46% with 97% continuing to pay interest.
The return to payment performance for previously deferred loans has continued to be strong with less the 1% of these customers delinquent 30 days or more at the end of the quarter.
Credit metrics remained strong and stable in the quarter net charge offs for $1.2 million as compared with net charge offs of $2.9 million in the first quarter and net charge offs of $5.1 million in the second quarter of 2020 nonperforming assets totaled $19 million up $1.1 million for the linked period and.
Down $3.7 million year over year loans, delinquent 30 days or more were $29.8 million or 25 basis points of total loans.
At quarter end down $10.1 million for the linked period and up $6.3 million from the second quarter of last year criticized exposure continued to decrease.
During the quarter dropping from 2.6% of to 217 percentage of total loans.
As Dean noted we recorded a negative provision for credit losses of $16.1 million. This included a negative provision to the allowance for credit losses of $16.8 million, which with net charge offs of 1.
2 million reduced the allowance to $180.4 million, representing 1.5% of the total loans and leases or 1.5%, 6% net of PPP balances. The decrease in the allowance is reflective of the most recent new hero economic outlook and forecast for our market coupled with our credit risk profile.
The allowance does continue to consider and provide for the potential downside risk inherent with the pandemic.
The reserve for unfunded credit commitments was for $5 million at the end of the quarter with the provision of $1.5 million made to fund the linked period increase.
I'll now turn the call back to Gino. Thank you Mary.
This concludes our prepared remarks, we are now happy to answer any questions you may have.
And so all of participants as a reminder, the ask a question. Please press the star 1 on your telephone.
And our first question is coming in from Ebrahim <unk> Bank of America. Please go ahead.
<unk>.
Good morning.
Good morning.
I guess, maybe the first question just said on the capital Dean you mentioned.
Plans too.
As you know share buybacks.
Give us a sense of for 1 I do think.
Thanks for that.
The transition.
Is that a certain.
Leveled in terms of overall capital payout that you are targeting and whats the binding consumer when you think about the tier 1 leverage ratio what's the revenue.
We're trying to maintain.
Those are the issues as you think about capital return.
It is the possibility of a dividend hike in the back half of the year.
Yes.
So the the.
The kind of the measurements that we look at are the is the tier 1 leverage ratio we've stay.
Stated in the past that we'd like to stay above 7%. So we're probably.
Keep a little bit of of room above that but that would be 1 measurement debt.
Would.
Yes.
And of any consideration for how much we do in buybacks.
In terms of the dividends, we have stated in the past that we like to be roughly 50% of our net income and dividends over the long term. So that's kind of a target that we would.
The head towards.
B I would add to that Ebrahim I think that the.
Probably the constraint to further or the opportunity maybe is better term to increasing the dividend really I think is down the path of NII. So to the extent that we get some relief on the rates and the rate environment I think there is upside.
Yes to me like our fee income levels are pretty at least at this point pretty well understood for the balance of the year on expenses fuel would be pretty well understood as well. So I think that that is really the rate environment that is represents the upside on the dividend I think.
Understood and I guess, just on the rate environment on the NII. So dean thanks.
Field for the guidance relatively clear.
2 things 1 of if you think about just remind us what's the PPP fees remaining.
At the end of the second quarter, and your expectations around whether or not most of it gets.
Okay.
This year.
Yes.
Thanks, again, we have of $14.5 million remaining in fees and so this would be both the 2020 in 2021 vintages.
We are looking.
<unk> at pretty elevated levels of something similar to what we had in the second quarter in terms of what would pay off.
And then there's some that we think might bleed into 2000.
Yes, so 2 but generally most of it will the remaining balances will come off in the next 2 quarters.
And did you say the second quarter of PPP fees were $3.8 the accelerated component.
Yes, $3.8 the accelerated.
Alright, so it should be something in the deficit they got it and.
20th last question Peter around.
Can you share some statistics on the macro outlook.
From what we understand it seems like international travel there's 1 area of its still missing is there anything else that you think about in terms of.
Where you need to see a full set of back to normal the opening.
And just like you start seeing that on the unemployment from 6% going back to pre pandemic levels.
Yes, so I think international.
As yet as yet to the bounce back.
What's interesting is we're nearly back to full strength in terms of.
Visitor traffic and.
Before without the international market, which historically is call it a third of our marketplace.
The benefits of that travelers they are a bit higher spending so I think thats the upside out there someplace somewhere as the international travel of returns than the other piece the at least the visitor segment is the.
And that is the group business and incentive.
Beginning of this year.
Those.
Those types of excursions, beginning to percolate up again, but but as you as you can appreciate there is a bit of of lag before we'll start to see that traffic back and so I think the international and group and incentives.
The I think for the next legs up for the for the visitor industry.
And I think probably a little bit of higher margin product than what we're getting right now.
Got it thanks for taking my questions.
Thank you.
And our next question is from.
The statements of D. A Davidson go ahead sorry.
Thanks, Good morning.
Good morning, Jeff Peter Peter just a follow on for that and that to be overly conservative.
Conservative, but just trying to get a sense for the local sentiment of.
There is any likelihood of of restrictions coming back on line with variance and I know that around.
Net rely for holiday lift.
It lifted the restrictions on vaccinated folks but.
Any.
Under way or.
Thoughts locally that debt.
Things could tighten backup.
Well, obviously we.
We in this marketplace like just about every place else in the.
On the joy of concerns of what we're seeing.
From the variance in the the.
The case counts.
I've not heard any discussion around reapplying some of our earlier remedies. So no nothing that I'm aware of but but obviously.
The country, if things continue to trend as they have the.
We will need to begin to think through those sorts of protocols visitor and just kind of general public.
I would say, though that the early indicators of indicators are Jeff, though that the from.
The majority of the case counts right.
Now our community spread and some.
Some from travelers, but generally returning Hawaii residents back from mainland locations and the incidence of visitor to resident transmission is has been very low and continues to be pretty low.
Net.
Thanks.
Maybe just.
Of.
Housekeeping kind of maintenance.
Deane appreciate the guidance on expenses just noted that the occupancy.
Data.
Levels, where we're pretty low linked quarter.
I guess.
So baked into that guidance is that sustainable.
On those line items and I guess, if theres anything debt discussed on the others why they were at.
At that level also helpful. Thanks.
Yes, so the property sale came through in that line. So the $3.1 million. So you have to adjust for that and.
In the second quarter, we did have a little bit better.
R&M expense from.
Level, so that's a little bit of uncertain, but those are the kind of the 2 reasons why the.
Occupancy level is much lower in the second quarter, but mainly driven by the property sale.
Okay.
Makes sense all right I'll step back thank you great.
Great. Thanks, Jeff.
And for the next question Mr. Andrew Liesch from Piper Sandler go ahead Sir.
Hi, everyone. Good morning.
The question on the on the Securities purchases the added a $1 billion because of care.
What you purchased and then with rates having come out I mean, what's the appetite for more purchases to continue.
So we've been purchasing.
Kind of true what we have been in the past, which were mortgage backed securities. We did purchase from corporates.
Those are kind of.
Of your major categories, but more biased towards the mortgage backs.
And the average rate that we got in the.
The second quarter was about 1.5%.
And then with the drop in the long term rates. Obviously, the current rates are lower so we're trying to be a.
Of the 2 more measured in terms of how we're investing the money this quarter, but we're still deploying a lot of the liquidity that we do have on the.
Excuse me on the balance sheet.
Got it okay. So.
I guess you had the $910 million of cash from is there a level that you want to manage that down towards the obviously loan.
A little bit of up with some of that in the publicly some deposit outflows, but what level would you hope to get this down to.
Well with the.
It would be probably about 250 to maybe $300 million.
And the reason for that is that we do have a lot of cash flow coming off the the.
Portfolio, so from a liquid.
The growth of standpoint were still going to have.
Lots of cash flow debt, we can reinvest into loans.
<unk>.
For the loan growth. So we can maintain a little bit lower cash level.
And then the $900 million.
Got it okay. That's helpful. The speaking, but loan growth good commercial.
Quiddity is good consumer growth there this quarter, our pipeline sitting as we enter the third quarter.
The pipelines are looking pretty good.
So both consumer and commercial.
Yes.
The commercial real estate had a good quarter the anticipate having.
Good bad.
Half of this year.
We'll grow residential was strong.
The residential through the first half of the year did a $1 billion of production to lead all local providers. So feel good about that.
As rates have come down a bit here recently.
A bit more.
A bit more pipeline.
In that category so that.
That feels pretty good as well of home equity has has reemerged as I should say.
Indirect.
About flat, which I think given the state of auto sales right now is a pretty good performance.
So those are the I think.
We're going to point of view the drivers.
Construction of actually might have some upside as well as as we get underway on the number of affordable types of transactions on really what were waiting for is the other consumer category and the Assortments and I guess the C&I categories in those.
Those of those categories. You would appreciate have been impacted negatively by just the the liquidity build on both the commercial as well of the consumer clientele.
But.
I think you put all of that together.
Kind of a mid single digit growth rate for the next 12 months I think.
Both of us reasonably achievable.
Got it.
If the year, thanks for taking all of the questions and all of the color I appreciate about the fact that take.
Take care.
And once again to all of the participants to ask the question. Please press the star 1 on your telephone. Our next question is from Jackie.
Well then.
The WB go ahead.
Hi, everyone of Jackie.
I'll call that my boy.
Peter I wanted to chat about the economy, just a little bit you gave some really great anecdote.
And of course, there, which I love because it helps me get a sense for it yet.
Hey, guys. Thank you Peter.
On the ground.
Both of them and I get a sense for how you view the rebound in tourism burst of how you view the rebound on the economy overall, obviously I know.
Dependent, but theres more to the economic rebound in Detroit.
Thoughts there.
Yes, so thats a good question so.
I would.
Is that.
Obviously, the visitor industry is a big component of the local economy.
But I think what we found through the pandemic as it is.
As big as it is there are other factors that drive our local economy as well.
And so construction.
Driven.
Say of the health of the real estate sectors is in a good space that's been helpful. The.
Fence sector has been extremely strong.
And likely to get stronger given the geopolitical tensions in the Pacific here.
And so those those drivers I think of have have really.
But the major contributors to the local economy getting back on its feet and I think that in order for our economy to be at full strength, obviously, we need of healthy visitor segment, but there are other factors as well on those those factors seem to be doing well the visitor front.
Has been the velocity with which we've come back has really been.
Surprising at least for me, it's been surprising and given the.
Variant.
Notwithstanding.
The I think the opportunity for kind of the next stage with the return of international travelers in the next stage with the return of group.
Net of travelers bodes well for for that important segment.
Okay, and when you say group of an incentive travelers do you mean conferences and things like that or is it a different type of travel you are talking about.
It's conferences it's also.
Large corporations.
<unk> and <unk>.
Star sales performers and things like that.
The big segment of the of the industry.
Okay. Okay.
Okay.
And then when you think about the economy and the unemployment.
Unemployment rate where at that.
And I realize this is a very hard the session very.
We will send the quantified.
From your viewpoint on net.
Do you think about all of that and you think about people, who maybe haven't entered for the workforce, but COVID-19 because their benefits or perhaps better than they would be if they were working do you think that's holding the economy back at all or are we getting to a point, where we may see an increase.
Good question of looking for jobs.
Boy, that's the 64 thousands of dollars question Jackie I don't.
I don't know I don't know.
I mean, it is the fact that lots of small businesses and large businesses in the.
The visitor industry and elsewhere are just having the tough time getting people.
And payback and so youre right perversely.
Lack of demand for work as.
And of very perverse way holding back the.
The post pandemic recovery.
And whether whether the elimination or the.
To come reduction of.
Of.
The federal and state subsidies.
Will help that situation I don't know I mean.
You would think intuitively that it should but I've also look to the few reports that indicated I think half the states in the country have headed on that direction, they've not seen an overnight.
On the back and work for supply. So it's the right question and I just don't have as much clarity as I would like to the share with you.
Okay. Thank you and I didn't completely understandable, Hawaii, so unique because you're an island. So you can't have people, but you can have people across state.
I found that it's not as easy on.
So thank you for all of that I really appreciate it and.
And then I'll get technical on the quarter for just 1 last 1 and then I'll step back.
Wondering what the.
Thank you for the accelerated amortization I just wanted to confirm what the.
The just the regular amortization piece of that was on.
Right.
Yes, it was of $2.1 million.
Okay. So the $2.1 plus the $3.8.
Correct.
Alright, thank you.
Thanks Jackie.
And our last question is from Laurie Hunsicker of ballpark.
Go ahead.
Yeah, Hi, Thanks, good morning.
Free that we could just go back to the occupancy wondering how we should be thinking about that.
And just from the standpoint of run rate expense and maybe can you update us I think.
The beginning of the year, you were going to take branches down to 50 by the end.
First of all of our sitting at 54 simple.
Bank about where you are with that in terms of.
How we should be thinking about occupancy.
Well I think we should think.
Holistically in terms of lower.
Occupancy.
For the year over time.
So we had been operating our branch count has jumped around through the pandemic just based on where the where the demand for in person banking is happening and so we're down to 50 I want to say.
But 50 for technically.
And the question for US right now is trying to toggle between those 2 numbers as to what where we think we're going to end up from a permanent go forward posture.
But I mean, I think we've had.
Great success in the transition.
In person to digital that.
Obviously has created opportunities for us to call the square footage in our branch system. So if you look over the past decade, if you take a kind of a slightly higher value on it our square footage is down 29% from 2010.
From and our branch count is down 34%.
Is that of pretty significant reduction in overall branch not just occupancy, but also overall branch expenses.
Where we go from here Laurie.
I think we're probably comfortable for.
For the here and now on that $50.50 for range.
Probably the size of the next 12 months or so what that exact number is going to be but feel pretty good about the general structure of the branch system right now.
Okay and for them when we think about occupancy expense that $8 million or so on rate with the aircraft number.
Yes, yes.
Okay perfect.
And then the.
I think there'll be prepaid.
$3.2 million, how much was that solely of prepaid and what was the cost and debt about 1 in the quarter. If you have it.
The total amount was $100 million.
I want to say it.
I'm almost mid quarter.
Okay on costing.
You mean in terms of rate it was about 1.3%.
Okay, and then do you plan to do anymore or was that that kind of debt.
Yes, I think it's.
Kind of be opportunistic this 1 was opportunistic because of.
The benefits that we got out of it so as we see opportunities in the future we may elect to reduce further.
Okay.
This is a nice opportunity Laurie because the the.
On the gain the gain.
<unk> basically offset the cost of of accelerating the <unk>.
Prepay and then we've got the improvement on the margin so because it's kind of a no brainer for us and if the.
If that shows up at our door again, we'll do it again.
Makes sense, Okay, and then just looking at the other other expense line. So.
On the $17 million this quarter compared to 30 million last quarter. Obviously, the 17.9 contain the IP can be prepay the back that out it was $14 million and I back out the contact with carb rollout.
It was $11 million from $11 million last critical into 49 was there anything else nonrecurring net showed up a net number or.
And any thoughts around why that number was higher will it be that run rate going forward, how should we think about that.
Well.
The the contactless card rollout actually showed up in the data processing line.
So the adjustment to other the only for the second quarter.
Got it okay. So the 13.3 going to call. It 14 line. Okay got it that makes sense alright, my bad Okay.
Then just last 1 for me the premium and in the quarter, how much was that.
Oh, $10.1 million.
Okay, great. Thank you very much.
Yes.
And that's it for the question and answer session. We don't have.
No more questions on the queue receptors on pending back with Nokia.
I'd like to thank everyone for joining us today and for your continued interest in bank of Hawaii. Please feel free to contact me. If you have any additional questions or need further clarification on any other topics discussed today. Thank you so much everyone.
And that concludes our conference for today. Thank you for your participation.
You may hang up now thank you so much.