Good day and thank you for standing by. Welcome to the First Hawaiian, Inc. Second Quarter 2022 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during that session, you will need to press star one one on your telephone. Please be advised that today's conference is being recorded. I would now like to hand the conference over to Kevin Haseyama, Investor Relations Manager. The floor is yours. Thank you, Carmen, and thank you everyone for joining us as we review our financial results for the second quarter of 2022. With me today are Bob Harrison, Chairman, President, and CEO, and Ralph Mesick, Chief Risk Officer and Interim CFO. We have prepared a slide presentation that we will refer to in our remarks today. The presentation is available for downloading and viewing on our website at fhb.com in the investor relations section. During today's call, we will be making forward-looking statements, so please refer to slide one for our safe harbor statement. We may also discuss certain non-GAAP financial measures. The appendix to this presentation contains reconciliations of these non-GAAP financial measurements to the most directly comparable GAAP measurements. Now I'll turn the call over to Bob. Good morning, everyone. I'll start by giving a brief local update. The Hawaiʻi economy continues to benefit from the recovery in the tourism industry. In June, the statewide unemployment rate was 4.3% compared to 3.6% nationally. Total visitor arrivals were 843,000 in June, 11% below June 2019 arrivals. A strong result considering the Japanese visitors were only 1.4% of the total, compared to over 13% in June 2019. This represents significant upside when Japanese arrivals return to more normalized levels. Importantly, the spend is up more than 12% over last year, which is what everyone wants, fewer visitors with a higher spend. While interest rates have caused a slowdown in the housing market, continued demand and lack of supply have kept prices stable. In June, single-family home sales were down 20% from last year, but the median sales price of $1.1 million was 12% higher. Turning to slide two, we had a strong quarter, reporting net income of $59.4 million and EPS of $0.46. Pre-provision net revenue was up $8.9 million quarter-over-quarter on higher net interest income. Our return on average tangible common equity was 18.79%, and the board maintained the dividend at $0.26. We had good growth in both loans and deposits, and the balance sheet remains well positioned for rising rates and is well capitalized. During the quarter, we repurchased over 290,000 shares at an average price of $24.09 for $7 million. Finally, we successfully converted to our new core operating system, an important step on our digital transformation we started a couple years back. I want to make a few comments on the balance sheet and then provide more detail on loans and deposits. Turning to slide three, we saw good growth and a nice rotation on the balance sheet, which remains asset sensitive. We're highly liquid and well capitalized to support our business objectives. Total assets grew by 1.3% to $25.4 billion in the second quarter, and the asset mix improved with the deployment of cash into higher yielding loans. The balance sheet remains very asset sensitive with about $5.1 billion or 39% of the loan portfolio repricing within 90 days. It has been very responsive to the recent Fed rate hikes. Our liquidity position remains very strong with the 58.7% loan to deposit ratio, excess cash balances, and steady cash flows from the investment portfolio. We have ample liquidity to fund future loan growth. The investment portfolio has performed well during this period of volatile interest rates. The duration of the portfolio has remained stable at 5.6 years at the end of the second quarter and is unchanged from year-end 2021. Cash flows from the portfolio continue to run between $100 million-$125 million per month. We continued to maintain strong capital levels after dividend payments and share repurchases. The common equity tier one ratio was 11.98% at quarter end, and the total capital ratio was 13.14%. Net of an AOCI adjustment, the securities book was flat at roughly $8.1 billion. In the quarter, we elected to reclassify $4 billion of the portfolio to held to maturity to reduce the accounting volatility associated with AOCI adjustments. Turning to slide four, period-end loans and leases were $13.3 billion, an increase of $371 million or 2.9% from the end of Q1. Excluding PPP loans, total loans and leases increased by $434 million, 3.4% compared to the prior quarter. We experienced growth in all portfolios, with the largest increases in CRE, C&I, residential, and home equity. As expected, the increase in the commercial book skewed toward our mainland markets, where the rebound of loan demand started earlier. On a year-to-date basis, total loans and leases are up $301 million or 2.3%. Excluding PPP loans, total loans and leases are up $474 million or 3.7%, in line with our full year outlook of mid to high single digit growth, which remains unchanged. Turning to slide five. Deposits increased by $331 million or 1.5% to $22.6 billion at quarter end. The increase was a result of a $439 million increase in public deposits, driven by a $458 million increase in operating account balances. That was partially offset by a $19 million decline in public time deposits. Non-public deposit balances declined about $108 million or less than 1%. Our cost of deposits remained low at eight basis points, three basis points higher than the prior quarter. We anticipate more variability around deposit flows over the course of the year but have a variety of options to fund loan growth, including a higher-than-normal cash balance. Now I'll turn it over to Ralph to cover the income statement and balance sheet. Thank you, Bob. Moving to slide six, you see that our asset sensitive balance sheet benefited from the increase in interest rates. Net interest income increased $11.2 million over the prior quarter to $145.1 million. Excluding PPP fees and interest, net interest income increased $13.2 million. The increase was primarily due to higher yields on securities and loans and higher average loan balances. The net interest margin increased 18 basis points to 2.6%. Since the balance of unamortized PPP fees is de minimis, it won't have a material impact on the NIM going forward. As 39% of the loan portfolio reprices in 90 days, our balance sheet remains well positioned to benefit from rising interest rates. We expect the NIM to increase by 25-30 basis points in the third quarter. Turning to slide seven. Non-interest income was $44.1 million this quarter, a $2.8 million increase over the prior quarter. Activity-based revenue continued to do well, and trust and investment services income remained stable in spite of market volatility. BOLI income continued to be negatively impacted by the volatility in bond yields and equity markets. When this volatility subsides, we expect BOLI income to return to historical levels of $3 million-$3.5 million per quarter. This would put us in line with our expectation of $47 million-$48 million per quarter. Going to slide eight. Non-interest expense was $109.2 million, $5.1 million higher than the prior quarter. Most of this increase had been expected with a ramp up in implementation costs ahead of the core system conversion and the start of the new system related expenses. These increases had been built into the most recent guidance. Compensation related expenses increased by $1.7 million as we saw the full quarter impact of merit increases, a reduction in capitalized salaries related to the core project, and the hiring of temporary help to support us through the May system conversion. Contracted services were up $1.5 million, largely due to non-recurring consulting fees. Equipment costs increased $1.8 million, and the increase was primarily related to the new core services contract. Looking ahead to the second half of the year, we anticipate that expenses will be between $113 million and $114 million per quarter, slightly higher than our original outlook. The largest drivers behind this increase are higher compensation costs due to inflationary adjustments and additional post-core conversion costs. Turning to slide nine. I'll make a few comments on credit. Asset quality remained strong. In Q2, net charge-offs were $2.3 million, about $300,000 lower than Q1. Our year-to-date annualized net charge-off rate is eight basis points, lower than the rates over the last three years. NPAs and 90-day past due loans remain low at 10 basis points. That's flat from the prior quarter. Criticized assets continued to decline, dropping from 1.29% of total loans in Q1 to 0.91% in Q2. The bank recorded a million-dollar asset provision for the quarter. Loans 30- 89 days past due were $54.7 million or 41 basis points of total loans and leases at the end of Q2. The level of past dues were elevated at the end of the quarter as we implemented some operational changes related to the conversion. By mid-July, we saw significant improvement with nearly half of the reported past dues being cleared, bringing us back in line with the levels we saw at the end of the first quarter. Moving to slide 10. You see a roll forward of the allowance for the quarter by disclosure segments. The allowance for credit loss decreased $1.3 million- $148.9 million. The level equates to 1.12% of all loans and 1.13% net of PPP loans. The reserve for unfunded commitments was $29 million. While reserve levels have decreased as we move through the post-pandemic reopening, they remain elevated to account for the macroeconomic uncertainties. Let me now turn the call back to Bob for closing remarks. Thanks, Ralph. To summarize, in spite of the volatility in the national economy, Hawaiʻi has experienced good visitor arrivals this summer, and the local economy is doing well. At the bank, we have a good outlook for the second half of 2022 and beyond, as we have a balance sheet that is well positioned for growth with good liquidity, strong capital, and excellent credit quality. Now we'd be happy to take your questions. Thank you. As a reminder to ask the question, simply press star one one on your telephone. Please stand by while we compile the Q&A roster. Our first question comes from Steven Alexopoulos with JPMorgan. Please go ahead. Hi, everybody. Hey, Steven. Morning, Steven. I want to start on the deposit side. You guys reported strong deposit growth in the quarter in the backdrop where many other banks are showing deposits running off. Curious, was that intentional? In other words, were you out there in the market competing for deposits, or was it just flow related just coming in from the public side? Yeah, maybe I'll start and ask Ralph to add to it, Steven. You know, primarily it was the operating balances at the State of Hawaiʻi. As you know, we've been their depository for quite some time, and they just brought money in on balance sheet with us. Their public time deposits went down over the quarter, but we did see a substantial increase in the public operating account, the DDA account. We saw a slight decrease in you know just all the consumer IPC deposits, but you know nothing more than kind of normal movement. Okay. That's helpful. I don't have a lot to add. Okay. Go ahead. If we look at the loan to deposit ratio, it's pretty low. How do you think about funding deposit loan growth for the rest of the year? You know, do we see the loan to deposit ratio moving up, or do you think you plan to hold it pretty steady? We think it should be moving up. We have a lot of cash on balance sheet, higher than normal. I think it's right about $1.3 billion. Yeah. You know, that's higher than we would normally and certainly higher than pre-pandemic levels. It starts with being able to fund that rotation out of cash into loans there. With obviously the roll off of the investment portfolio of $100+ million a month. Got you. Okay. That's helpful. Then on the margin, I appreciate the NIM guide for the third quarter. What's the deposit beta that you're assuming underneath the NIM guide? Do you still expect this similar through the cycle beta as the prior cycle? Yeah, Steve, this is Ralph. Right, right now we're assuming about a 20% deposit beta. Got it. Okay. Any change to the through the cycle? I think you said last time it'd be about similar to the last cycle. Yeah. Right now we're looking at it probably being similar to the last cycle. A lot of that has to just do with kind of the level of liquidity in the marketplace right now in this local market particularly. Got it. Okay. That's helpful. Just finally, any updates on the CFO search? Thanks. Oh, yeah. No, I meant to mention that. We really appreciate Ralph continuing his interim. We're still working with Korn Ferry to identify the right candidate, but haven't done that yet. We're working very hard with them to make that happen. Okay. Thanks for taking all my questions. Thank you. Thank you. One moment for our next question, please. We have a question from David Feaster with Raymond James. Please go ahead. Hey, good morning, everybody. Morning, David. Morning. You know, look, you guys are kind of following up on the margin question. You guys are obviously extremely rate sensitive. We've had a huge amount of margin expansion continuing to benefit from higher rates, just got another 75, which should continue to play through. I guess and look, rate sensitivity is a natural, just natural for y'all, just given the business model and the strength of your core deposit franchise. As you think about managing rate sensitivity, is there any appetite over the next couple of quarters to maybe lock in some higher rates and take some sensitivity off the table? If you did so, what would your approach to doing that be? Yeah, Steven. I mean, David, I'll start. This is Ralph. You know, I think right now when we think about the balance sheet, you know, we have three levers. One being just working with the clients in the swap program, you know, client derivatives. Second being the securities portfolio, and third being, you know, the just straight on balance sheet hedging activities. I think right now, you know, we would probably ease into any kind of a change in positioning. You know, we wouldn't try to time the market. You know, we've looked at, we've done a little bit of, you know, received fixed swaps in the past quarter. We'll also look at probably looking at some of the maybe either swaps or collars. Okay. Maybe just touching on asset quality. You know, look, the macro economy is pretty volatile right now. You've got a conservative approach to credit and phenomenal asset quality. But I'm just curious, maybe as you step back and look at a high level, is there anything that you guys are watching more closely? You know, how do you think about credit more broadly? Is there anything that you're seeing, any signs of concern? Just the pulse of your clients. What are you hearing from your clients? Are they still investing in? Or are you starting to hear maybe on the margin, any type of change in a bit more trepidation, just given the uncertainty? Yeah. David, let me start this, Bob, and maybe hand it off to Ralph. We haven't seen any indications yet, as, you know, tangible evidence. As Ralph mentioned in his remarks, you know, we saw a little blip in just collections on one consumer portfolio that's been addressed. Generally, where we see weakness in the consumer side, we first see it in credit cards and indirect lending, and that hasn't happened as yet. More broadly, we have; to answer your other question, we've seen a couple projects kind of push the pause button on the mainland that we were looking at, but nothing here locally. What we've seen locally is people are continuing on to invest. Ralph, turn it over to you if you have comments. Yeah, I would just say that, you know, we had the opportunity with the pandemic to really front load, and I think CECL was good for that purpose. I think we've embedded a lot of the expectation of stress into the reserve today. When we look at the portfolio, you know, we had the opportunity as well to really take a real deep dive. I think we feel pretty good about what we have in the portfolio. I would say that where we would probably see the most stress given the current situation is gonna be, you know, smaller consumer and small business loans. Again, I think, as we look at the reserve, you know, we've taken I think a pretty big overlay to support any stress we see there. Okay. Just last one for me. Maybe just with the core conversion completed, could you talk about some of the immediate benefits of this? You know, you mentioned some operational changes. Just curious what's next on the docket. You know, you've done a phenomenal job on the tech front. Just curious whether there's any other upcoming investments or partnerships that you might be interested in, and what initiatives are next up on the tech front? Well, I thought we were gonna get a quarter off, Dave. Before we had to answer that question. What have you done for me lately? Yes, exactly. No, we, you know, there's still some follow-on stuff for the core project that we're working through. It primarily was to automate a number of our manual processes, and so, you know, that has mostly happened. You know, working through, as I said, the bits of that. What's next on the agenda? We have a pretty aggressive roadmap that Christopher Dods, our COO, has laid out for us and, you know, we're gonna be executing on that throughout the rest of this year and next year, and a lot of things coming. If you don't mind, I'd rather answer that more fully next quarter when some of those are more in flight than they are today, when we're just kind of really getting through the last of the core conversion and kind of picking up the pieces and candidly giving people a little bit of a break as well. Are we looking at maybe more internal efficiency improvement or outward growth kind of initiatives, or is it again, just don't want to talk about it yet? It's both. You know, clearly. Okay. We're always trying to be more efficient in what we're doing, but at the same time, what we're looking at is provide more convenience for the customer and, you know, enhancing. For example, with the core conversion, we were able to enhance our online account opening, and we're gonna be spending more time on that going forward, to further enhance that. That's one of the benefits we got just with the core conversion. You know, that's an example of the things we're gonna continue to be doing over time. Correct. Thanks, everybody. One moment for our next question. Our next question is from Andrew Liesch with Piper Sandler. Please go ahead. Hey, good morning, everyone. Morning. I just wanna follow up on the loan growth. Guidance still seems intact, but how does the pipeline sit today, and I guess, what's the makeup of the pipeline? Is it still more weighted towards commercial real estate and C&I? Any comments around what you're seeing in the dealer flooring book would also be appreciated. Sure, Andrew. This is Bob. Maybe I'll take that question to start off with and ask Ralph to add additional comments. You know, what we saw, as I mentioned in my remarks, is we saw, as you saw, heavy commercial real estate growth. Most of that was on the mainland this quarter. We still see a good pipeline going forward for the quarter we're in. More of a mix back to Hawaiʻi. Probably a little bit heavier in the mainland this quarter, but pretty strong Hawaiʻi pipeline for the quarter we're in. We're still expecting to see, you know, some C&I growth. Some of that's dealer, along with residential and HELOC. For the dealer, you know, it's been edging some gains up quarter after quarter for this year, and we're starting to see some continued recovery in that. I don't think we'll see kind of broad-based volume coming out of the manufacturers till closer to year-end or maybe into 2023, to be honest. Ralph, anything you'd add to that? No, not really. Got it. The residential in the HELOC, is that local or is that on the mainland? Yeah, we're only doing those products within our geographic footprint. Okay. That's what I thought. All right, you've covered all my other questions. I'll step back. Thanks. Thank you. Thank you. One moment for our next question, please. Our next question comes from Kelly Motta with KBW. Hi. Good morning. Thank you so much for the question. If I could circle back to NIM and the deposit side. You obviously had the big inflow of public deposits this quarter. Just wondering if you could remind us of the seasonality maybe through pricing of the public deposit book, as well as what your NIM guidance assumes in terms of either maybe outflows of those with seasonality. Just curious, so I can get the balance sheet kind of right-sized. Yeah. I would say that. This is Ralph. I would say that public deposits, their operating accounts, they're probably, you know, it's really hard to predict what the State will do, but they're probably in a range which we would anticipate going forward. We had been working with them during the pandemic to, you know, try to get them to put some of that money into alternative, you know, asset classes or I should say investment short-term investments, just to help us keep some, you know, leverage off the balance sheet. I think that's probably gonna stick. We don't anticipate at this time getting into the public time space. I think when you look at the balance sheet itself, given the cash position, given the securities runoff, and just given the level of, you know, high-quality assets, we probably can fund growth and take some deposit, you know, loss, and protect our margin. I think we feel pretty good about the NIM guidance right now. Okay. Thanks. Thanks for that. Then maybe last for me, most of my questions have been asked and answered. Just on the buyback, I see you back in the market this quarter. Wondering about your appetite for further share repurchases going forward. Thanks. Yeah, Kelly, this is Bob. You know, that's something, capital return to shareholders is very important to us. That's why we keep our strong dividend. You know, one of the issues, though, as we talked about, I believe, last quarter and maybe even at the fourth quarter call, is anticipating this higher loan growth. We have retained our internal guide of looking for a 12% common equity tier one. We'll probably see muted buybacks for at least a good chunk of this quarter until we get a better feel for what the loan growth is gonna be, because we do wanna make sure we retain and maintain the strong capital level. Later in the year, we'll you know, certainly be looking at that regularly and maybe that will change. for now, we're really gonna be focusing on growing quality loans and supporting that with a good amount of capital. Got it. That's all for me. Thanks so much. Okay. Bye. Thank you. One moment for our next question. All right, I have a question from Laurie Hunsicker with Compass Point. Please go ahead. Great. Hi. Thanks. Good morning. Good morning. Ralph, I have a question going back to margin. I feel like we're all asking on margin. The 25-30 basis point guide, is that core ex PPP? In other words, I'm looking your PPP fees looks like were about three basis points on margin. Are you thinking that as a 2.57 starting point or a 2.60 headline? How are you thinking about that? Yeah. I think the 25 basis points would be the net of PPP. PPP is gonna be a pretty small contributor going forward. That's off the 260. Yeah. Yeah. That would be off the 260, Laurie. Yeah. Right. I'm aware that PPP is almost gone. Okay. Just wanted to clarify. Okay. On non-interest income, your guide, did that assume anything in terms of change to overdraft and NSF fees? Or how are you thinking about that? This is Bob. We think that's gonna be flat. As you've seen, our reported results have been down over the last couple years, and we're not gonna see much growth in that area, so we're really not relying on that. What we see is, I think Ralph touched on, as market volatility dampens a bit, a return of a more normalized BOLI income for non-interest income. Right. Yes, I appreciate that. 3-3.5. That's helpful. Your overdraft and NSF fees, is that then something you probably are going to address in 2023 or give us just a little? Well, that's something that obviously a lot happening on that nationally, and we're following that. You know, we're looking at alternatives. Candidly, during the core conversion isn't the time to be changing, you know, structures like that. We are looking at it, and we haven't made any decisions yet as far as any potential changes. We're certainly reviewing it. Got it. Okay. Then, on expenses. Appreciate your guidance there. Can you help us think about, obviously, you had a lot of moving parts driving your expenses higher this year, but how we should be thinking about expense growth into 2023. Yeah, Laurie, it is Bob again. You know, that's a little far out for us right now. Certainly we're comfortable with the guide that Ralph gave of 113-114 for the next two quarters. But we'll have to wait till later in the year to get a really an outlook for 2023. Okay. Then just last question. With the warning lights starting to flash, can you give us a refresh just on two loan categories, office as well as leveraged lending? Can you just refresh us on what those look like and remind us what's Hawaii-based versus mainland-based? Sure. Happy to. You know, total office is about $884 million. About a third of that is small balance CRE. We call that small balance being under $5 million. Very often that's mixed use, partly owner occupied, et cetera. The mainland exposure is $373 million, with about $150 million of that being in transactions involving collateral pools with multiple properties. You know, less tenant concentration, a lot of cross collateralization, et cetera. The Hawaiʻi exposure is $466 million, and that includes, you know, a lot of that small balance loans. In Guam we have about $45 million, all of which is small balance loans. Of that portfolio, about $2.9 million is classified, so very, very small number. Okay. Sorry. Did you have an LTV on that? We don't think that's really, you know. I think the better approach is to take a look at what the lower classifieds are, and they're really about $2.9 million. Okay. Yeah. Yeah. Then, you know, we're always looking at this and looking at stressing the tenancy, the rollover risk, the concentration, all of that. We're very comfortable with that. Then we also have within our reserve an overlay in the CRE space for any potential stresses that may come up. You may be seeing some of that today, but we don't see a lot of it here within our markets. Moving over to leverage loans, as you know, I mean, there's not a common definition for that. So, we're trying to piggyback off of, I think it's the OCC definition, which is 6x debt commitments, not outstanding, but debt commitments to EBITDA. Using that metric, we have $39 million at quarter end, and all are pass rated. Just to remind you know, in about this time in 2019, we did sell off over $400 million of our SNC portfolio, some of which included leverage lending as well. We really took that number down in 2019. Great. Thanks for the color. Thank you. I'm not showing any further questions in the queue. I'm gonna turn it back to Mr. Haseyama for his final thoughts. Thanks, Carmen. We appreciate your interest in First Hawaiian, and please feel free to contact me if you have any additional questions. Thanks again for joining us and have a nice weekend. Thank you. This concludes today's conference call. Thank you for participating and you may now disconnect.