Good day, ladies and gentlemen. And welcome to the First Hawaiian Inc., Q1 2019 earnings conference call. [Operator instructions]. As a reminder, this call is being recorded. I will now turn the conference to your host, Mr. Kevin Haseyama, investor relations manager. Sir, you may begin.

Thank you, Valerie, and thank you everyone for joining us as we review our financial results for the first quarter of 2019. With me today are Bob Harrison, chairman and CEO; Eric Yeaman, president and COO; Ravi Mallela, CFO; and Ralph Mesick, chief risk officer. We've prepared a slide presentation that we will refer to in our remarks today. The presentation is available for downloading and viewing on our website at fhb.com in the investor relations section. During today's call, we'll be making forward-looking statements so please refer to Slide 1 for our Safe Harbor statement. We will also discuss certain non-GAAP financial measures. The appendix to this presentation contains reconciliations of the non-GAAP financial measurements to the most directly comparable GAAP measurements. And now, I'll turn the call over to Bob, who will provide you with the first-quarter highlights starting on Slide 2.

Thank you, Kevin. Hi everyone and thank you for joining us today. As I review our first-quarter results, I'm pleased to report that we started 2015 with a solid quarter as our key profitability drivers performed in line with our expectations. We had good, long growth. That interest margin benefited from the portfolio restructuring. Non-interest income with solid expenses were well managed and asset quality remained excellent. Our profitability measures remained strong with the core return on average tangible assets of 1.5%, and a core return on average tangible common equity of 18.9%. Yesterday, our board of directors declared a $0.26 per share dividend, representing an attractive annualized dividend yield of 3.88%, based on today's closing price. The first quarter also marked our return to being a fully independent local bank, as BNP Paribas fully exited the remaining position of First Hawaiian on February 1. I'd like to take this opportunity to thank our friends at BNPP for their collaboration over the years. Shortly after the BNPP sale, we received the necessary approvals for repurchase program for up to $100 million of our common stock during 2019.Now, I'll turn it over to Eric, to go over the balance sheet.

Thanks, Bob. Turning to Slide 3. We saw a good long production during the quarter with loan balances ending the quarter at $13.2 billion, up $121.3 million or approximately 1% versus the prior quarter end. And up over $730 million, or 5.9% versus the prior year. CRE loans increased by approximately $157 million or 5.2% during the quarter, with $137 million of that growth here in Hawaii. The residential loan portfolio grew by $17 million or .5% of home equity loan balances declined slightly. Both were impacted by seasonality during the quarter. Construction loan balances fell by about$31 million due to the completion of several projects during the quarter, and CNI ended the quarter relatively flat. Production was strong but was offset by pay downs and payoffs. The decline in consumer loan balances was primarily due to lower credit card balances from seasonality, partially offset by growth in our indirect auto portfolio. Looking forward, while the environment remains competitive, our pipeline looks good and we continue to expect full-year loan growth to be in the mid-single digit range. Turning to Slide 4. Deposit balances ended the quarter at $16.8 billion, down about $355 million, or 2% versus the prior quarter, and down $567 million, or 3.3% compared to the prior year. As we mentioned on our last call, we saw over $400 million of temporary deposits come in late in the fourth quarter. About $305 million of those temporary deposits were withdrawn in the first quarter, and we also reduced our public time deposits by $175 million. Excluding these items, deposits grew by about $124 million or .7% during the quarter, within our expected 2% to 3% full year growth expectations. With that, I'll turn the call over to Ravi to cover the income statement.

Thank you, Eric. Turning to Slide 5. Net interest income in the first quarter was $125.1 million, an increase of $1.1 million versus the fourth quarter, and an increase of $5.4 million versus the first quarter of 2013. Net interest income in the first quarter included a $1.8 million, negative premium adjustment due to lower interest rates, while net interest income in the prior quarter included a $1.1 million, positive premium adjustment. The increase net interest income versus the prior quarter was due to a higher loan and cash balances, and yields partially offset by higher deposit costs, lower investment portfolio balances, and higher balances on borrowings. Beginning with this quarter, we modified how we annualized reportedly net so that the reported NIM will no longer be sensitive to the number of days in the quarter. The quarter-over-quarter reported net interest margin was 3.3%, unchanged from the reported net fourth-quarter NIM. After excluding the impacts of the premium adjustments in the first quarter and the fourth quarter, adjusted NIM increased 0.07% basis points. With 0.04% basis points of the increase coming from the investment portfolio restructuring, and 0.03% basis points from balance sheet repricing and changes in mix. Looking forward to the second quarter, we anticipate that the NIM will be relatively flat, as we get a full quarter's benefit of the investment portfolio restructuring, offset by modest deposit pricing pressure. Turning to Slide 6. Non-interest income was $47.1 million,$14 million higher than the prior quarter. Poor non-interest income in the first quarter was $49.7 million, after excluding the $2.6 million loss incurred in the quarter due to the restructuring. Non-recurring items in the fourth quarter included a $24.1 million loss from the restructuring. A $7.6 million mark to market adjustment related to maturing cash flow hedges, and $1.5 million related to an intercompany receivable for taxes. The quarter-over-quarter increase was primarily due to higher BOLI income of $2.7 million, offset by lower swap fees of $1.2 million .Turning to Slide 7. Non-interest expenses were $92.6 million, about $3.3 million higher than the prior quarter. The increase was primarily driven by $3.5 million in higher salaries and benefits, due to lower deferred loan costs, resulting from lower levels of mortgage originations in the first quarter, and higher annual incentive payments including payroll taxes. This was partially offset by lower regulatory fees, occupancy and card reward expenses. Our efficiency ratio was 48.2% in the first quarter, and our core efficiency ratio was 27.4%, which is in line with the full-year guidance. And now we'll turn it over to Ralph to cover asset quality.

Thank you, Ravi. If I could turn your attention to Slide 8. You see that our asset quality remains excellent. Net charge offs for $5.9 million for the quarter on an annualized basis, this amounts to 0.18% basis points on average loans and leases. This is 0.02% basis points higher than the prior quarter, and 0.03% basis points higher than the same quarter last year. Total non-performing assets were $4.4 million or 0.03% of total loans and leases and other real estate owned. The provision was $5.7 million for the first quarter, and the allowance for loan and lease losses decreased by $172,000 to $141.5 million, which is 1.07% basis points of total loans and leases down 0.01% basis point versus the prior quarter. And I'll turn the call back over to Bob.

Thanks, Ralph. Turning to Slide 9. Hawaii's economy continued to perform well in the first quarter. State unemployment rate was 2.8% in March, compared to 3.8% nationally. The visitor industry reigned robust for the first three months of the year. A year to date through March, visitor arrivals were 1.6 million up 1.8 versus the prior year. And visitor spending was $3 billion, 2.4% lower compared to the same period last year. The real estate market remain sound, with prices on a wall who is stable. We have seen a slight decline in sales volume, compared to the prior year. Looking forward, while there are some signs of slowing, the overall outlook for Hawaii's economy remains very positive. With that, we'll be happy to take your questions.

[Operator instructions]. Our first question comes from Jackie Bohlen, KBW. Line is open.

Hi, good morning everyone. I wonder if you could provide an update on how the annualization factor changed since it looks like it's not just the straight 360 over 30.

Yes, I can give you a little bit of excerpt. I'd love to, Jackie. So the previous approach was broad and use the same annualization methodology for everything, regardless of the different accrual basis for different income statement items. So we were previously annualizing the quarterly rate, and we were dividing the quarterly NIM but the actual number of days in the quarter. And then annualize and by multiplying the actual days in here. And now what we're doing is we're actually annualizing the daily interest income and expense based on the contractual date count, and then calculating the NIM.

Thank you. And then looking to premium amortization, obviously you had a big swing between 4Q and 1Q. What are your expectations for that going forward, and how does that play into your forward NIM guidance.

Hard to say. That'll depend on a number of factors. Obviously, between Q4 and Q1, we saw rates move around quite a bit, and start to look forward to see what that number is going to be.

And so how does that -- understanding that's challenging to predict. What are your assumptions that are baked into the expectation for the Nim to be relatively flat.

There's no other further rate changes we expect that NIM will be relatively flat in the second quarter. We communicated that we expect a couple of basis points of benefit from the portfolio restructuring, but we faced some headwinds from rising deposit costs. We've talked about this before but deposit costs remain really well-behaved, though we're seeing some pressure on that side.

Hi, Jackie. This is Bob, maybe I could just add a comment to that. There is positive pricing pressure seems to be moderating. And also for NIM, we did see a 0.10% basis point plus increase in loan yields for the quarter, compared to Q4. So we feel good about the outlook, but certainly it's something we're going to look at very closely.

And in terms of that moderating pressure, are you seeing that in any one category or is it fairly across the board.

It's kind of all kind of all over the place. I think with our larger customers, we tend to see continuing asks for rates. We saw that in Q1, and we see that moderating now a little bit.

We've addressed a lot of attack in, so we're not seeing as many customers coming forward to talk to. But you know it's just something we have to stay close to our customers, and to what the market is behaving.

Thank you. I'll step back.

Our next question comes from Steven Alexopoulos of JPMorgan your line is open.

I just want to follow up. First, on the conversation about interest bearing deposit costs picking up, because when I look at time and money market they were up more than I was expecting in the quarter. Was this you guys just responding to the environment where you acted with promotions in the quarter.

We were active in promotions. We had a couple of promotions that we ran associated with the opening of a new branch, and the redesign of one of our branches. But we've take these conversations about deposits with our large customers as they come to us and ask for more rate.

And just to add on that Steve, as Ravi mentioned, we have a couple branch reopening, so we did some campaigns around that. We're not anticipating or we're not going to have any of this quarter or next quarter. But it is something we just continue to monitor.

So when we look at money market we shouldn't expect this pace of increase moving forward. Is that what you're saying.

I think that's fair to say.

And then the public time deposits of around $1.5 billion, do you guys see that continuing to decline through the rest of this year. How do you feel as balances moving forward.

I think at the end of Q1 Steve, our public time deposits were $826 million. We don't have a specific target in mind. I think we'll continue to watch and see what those rates are relative to other things and incorporate it into our funding needs at all. But we think that's a pretty good number where we are right now.

As you recall, we're down substantially Steve. So we're down to a level we're much more comfortable with, and now it's just good to be part of the overall funding mix.

And then just one other question on the lending side. When I look at the change in average loans, it looks like most of the growth was in resi mortgage. Can you put color of what you added into the portfolio this quarter and do you plan to keep adding it about that pace. Thanks.

Steve. just to clarify. You talked about on the residential side or just overall.

It looks like resi mortgage drove most of the average loan growth in the quarter.

Yes. We did see overall growth as I mentioned of about 1% on quarter over quarter, the biggest piece being CRE which did come in primarily in March. Rezi started off slow, and then ramped up in March and has continued to be strong in our outlook going forward. There is good. Our overall guidance is mid-single digit range. We feel good about that because of the seasonality we saw in the first quarter. And the pipeline that we have in our commercial book. We felt pretty good. And then on top of that, the overall economy still continues to be positive and strong. There are a lot of factors in play that still give us a lot of confidence that our outlook is pretty solid.

Steve, with this -- added to your point though there is lumpiness in that. And especially on the commercial side. The CRE, and then TEREX point it came out late in the quarter. It's hard to predict that some of the construction funding exactly when that's going to land. But for the full year, we're still very comfortable with the numbers.

Thanks for taking my questions.

Our next question comes from Dave Rochester of Deutsche Bank. Your line is open.

I just wanted to clarify. Is that flat off of the 3.23% level or 3.27% level.

It's going to be flat off the 3.27% level, because we're not really in control of the premium harmonization.

Sure. I want to make sure I have that right. And then, are new loan yields coming in at accretive levels to the portfolio at this point.

Yes, they are.

Any sense for our magnitude.

Well, as I had mentioned a little earlier, we're up a little over 0.10% basis points quarter over quarter for loan yields.

That's new loan yields versus booked yield.

Good question. I might have to defer on that. We might need to get back to you on that. There must be guidance that otherwise wouldn't have it moving up. But I can't speak for that exact category.

Yes, it does. The adjustment that came from the rate hike.

And then just switching to expenses. Sorry to cover this earlier, but the last time you said your guidance was something along the lines of 6% growth off the 4Q expense figure annualized. Is that a good way to think about it expense growth this year. And then, as you think about 2020, I know it's way off but you've got the $6.5 million and reimbursed expenses this year, can you talk about what you're actually expecting will drop into the expense line in 2020 from that $6.5 million . And if there are some offsets there to be great.

Maybe I'll just start with 2019. I think at this point, it's a little early for us to change our outlook. Most of the expense increases don't take place on January 1. They build up throughout the year including things like volume related and inflation related expenses. We will continue to manage with that 47.5% to 40% efficiency ratio range in 2019.

David, this is Bob. Maybe I can touch on the 2020. It's too early. We're not anticipating taking out any of the expenses that you saw that are now being reimbursed by BNP. We're comfortable with the numbers we have. That's not to say that we don't constantly look at this, and it's very important to us to keep a sharp eye on our expenses relative to what we see as our minds and our revenue. So there's nothing in particular today that we're looking at in 2020 that we're going to cut out. But we're going to continue to monitor pretty closely.

So that's 6.5% should effectively come in entirety to 2020. Is that fair.

Yes.

And in terms of how you think about the efficiency ratio, Is that the range for this year still hold do you think for next year. I know again…

It's early, a little early to have that conversation.

I'll step back. Thanks, guys.

Our next question comes from Laurie Hunsicker of Compass Point. Your line is open.

Good afternoon. I was hoping that you could give a little color around the polling at $3.8 million. What was nonrecurring in there?

About $2.3 million of that was just due to market conditions, and we had about somewhere close to $500,000 related to a death benefit. So the change quarter over quarter that we mentioned, those are the two driving factors there.

And then I just wanted to go back over to deposits for a moment. What are your total public funds?

Total public was $1.5 billion just under that. And then on the public fund was $8.24 million.

I know your public -- some of your public money is in that money market category. And I know that Steve touched on this. Can you just take us back through the promotions you ran with the new branch or the refurbished branch. Those were primarily money markets.

The first one we did was actually a CD special. And the second one was actually a money market special.

Just looking here because your money market costs increase 0.18% basis points last quarter. The new money that's coming on now where are you running that. So special is over. How should we be thinking about that line item costs when you said OK, we ran the special going forward, it inches higher and it sits kind of right at this 1% level. How should we be thinking about the cost of the money markets.

You have to take it in totality. Not only are the specials impacting that rate, but also the one off conversations we're having with our large customers. And so when you take that all in totality, that's what you see in that in that number.

I started off just one more time but in other words this is we're just looking forward just to this next quarter. Roughly where are you thinking that line item goes. Does it go a few basis points up or its 0.10% basis points or there's an unknown factor.

I'm not sure I'm going to answer the question specifically around that line item. Just looking at deposit costs as a whole. As Bob mentioned, we've seen that moderate. There might be some lag effect trickle in the second quarter because of one off items, but just overall deposit costs. We see it stabilizing given where the Fed's outlook is except for some trickle in effect.

And then one more question on deposits. At one point you had mentioned taking your public time down to $500 million, and this time it seems like you've backed off those comments a little bit. Are you thinking differently about that money, that money sits at the $800 million level. You're comfortable here it's 5%, how do you think about that.

I think we mentioned, we really don't at this point have a specific target in mind. But the amount that will reduce it by will depend on a lot of factors. Our funding needs what we see those being priced at and just our general overall cost of funding.

But certainly, Laurie, we'd prefer to have core deposits and we worked very hard on that, day in and day out. But this is one of the tools that Ravi and the team have to defund the bank. So we're not going to tie our hands on that.

And the good news on that, those rates are starting to moderate and come down. As Bob said, it is a tool that we use in our arsenal managed overall funding costs.

And just one last question here unrelated on the buyback. Were there any shares stand between when you announced at the beginning of March, and March 31.

No, there were not. We're still standing up the program, but we're ready to go now.

Thank you so much.

Our next question comes from Jared Shaw of Wells Fargo Securities. Your line is open.

It's actually Timur Braziler filling in for Jared. Starting off on share national credit portfolio, we saw another bank have a couple of downgrades within their snip book, anything that you're seeing in that portfolio that's tampering your appetite there, or any kind of color around your share national credit portfolio.

We haven't really seen any changes in the composition credit quality. And you can see the overall portfolio. We're probably at the lowest levels we've seen in terms of our metrics.

Kind of lifetime low as we keep saying it can't go lower but it has. So a lot of these signs will be right. But at 0.03% basis points NPAs is derailed by this spot tomorrow. We haven't seen any change in the complexion of the Shared National Credit portfolio.

I'll just add as we've stated previously, this is a high quality in a portfolio. That's why sometimes you see you the pay downs of occurrence. Our focus is on things that we understand well and high quality credits.

And then just one more for me looking at commercial real estate yields gap up nicely this quarter. Any fees in that line item this quarter. Anything that's one time in nature. Is at a pretty good starting point as we head into the second quarter.

There was really nothing in terms of fees. Yeah. So pretty much where we're at right now.

So was there something structurally different about the commercial real estate book during the quarter that drove the yield higher. My guess maybe help us understand why just the new loans come in.

We've got we've had disbursements coming on a higher yield.

Thank you.

[Operator instructions] Our next question comes from Arren Cyganovich of Citi.

Just following up on the capital return. You're up to $100 million now authorized. Can you just remind me how you intend to use that after all this year.

It's just something I look at throughout the year as I say, we're ready to go and the blackout period comes off. It doesn't mean we are going to blackout. We had stood up just before the window closed and got the necessary approvals. And so now we're ready when we think it's an appropriate time.

You're using it just for opportunistically and a market tends to weaken that thing or if you intend to use a certain portion each quarter.

I think we'll be completing the repurchases between Q2 and Q4. And we are doing it in a very methodical thoughtful way.

And then on the deposits, their core deposits grew but you did have a reduction you had some integral deposits outflows and public time deposits, how do we think about the total the 2% to 3% growth expectations? What is that based off of? Is it based on the 17.2%?

That's 2% to 3% growth is really off of the year-end base excluding the approximately $400 million temporary deposits, and the reduction to our public time which was $175 million.

Thank you.

[Operator instructions] I'm showing no further questions at this time. I'd like to turn the conference back over to Kevin Haseyama for any closing remarks.

We appreciate your interest and First Hawaiian, and please feel free to contact me if you have any additional questions. Thanks again for joining us, and enjoy the rest of your day.