First Hawaiian, Inc. (FHB) Q1 2022 Earnings Report, Transcript and Summary

Good day, and thank you for standing by. Welcome to the First Hawaiian, Inc. Q1 2022 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and answer-session. [Operator instructions] Please be advised that today's call is being recorded. [Operator instructions] I would now like to hand the conference over to your host today, Kevin Haseyama, Investor Relations Manager.

Thank you, Justin, and thank you, everyone, for joining us, as we review our financial results for the first 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 1 for our safe harbor statement. We may also discuss certain non-GAAP financial measures. The appendix to this presentation contains reconciliations of these non-GAAP financial measurements to the most directly comparable GAAP measurements. And now I'll turn the call over to Bob.

Thank you, Kevin. Happy Earth Day, everyone. I’ll start off by saying that the outlook for the Hawaii economy is improving as COVID becomes less disruptive. COVID-related restrictions for domestic travelers have ended and the state's indoor mask mandates has been lifted. So our local economists and travel industry leaders are predicting very strong visitor arrivals this summer and as well as a return of Japanese visitors with the recent easing of travel restrictions. Turning to the first quarter. Our results benefited from our asset sensitive balance sheet and the balance sheet actions we took in the fourth quarter. Net interest margin expanded. Our liquidity position and capital levels remain strong, and our credit quality is excellent. Turning to Slide 2. We had a nice quarter to start the year. Reported net income of $57.7 million, earnings per share of $0.45, and a return on average tangible common equity of 15.08%. The Board maintained a dividend at $0.26 for the quarter. We had some nice deposit growth in the quarter and saw improvement in our NIM, asset quality was excellent, and we recorded a reserve release of $5.7 million. Risk-based capital levels were strong and improved over the quarter, and common equity Tier 1 increased to 12.27%. As Ralph will expand on the balance sheet is well positioned from a rising rate environment. Ralph?

Thanks, Bob. Turning to Slide 3. We ended the quarter with a liquid and asset-sensitive balance sheet and high levels of capital. Deposit inflows continues, but actions we took in the fourth quarter to deploy excess cash and retire FHLB borrowing contributed to an improvement in our net interest margin. The loan to deposit level was just under 58% at quarter-end. Higher rates led to AOCI adjustments in the security book, reducing the size of the balance sheet and GAAP equity reported. It is important to note that the AOCI adjustments do not impact income or cash flows have no impact on regulatory capital ratios or our ability to distribute capital to shareholders. Turning to Slide 4. Period-end loans and leases were $12.9 billion, a decrease of $70 million from the end of Q4. Excluding the impact of PPP loans, total loans increased about $40 million, or 1.3% on an annualized basis. The growth in loans was driven by increases in CRE, residential and home equity, but this production was offset by unanticipated repayment. In the quarter, we saw a few construction loans refinanced prior to stabilization and more aggressive lending in the local marketplace with competition relaxing not just pricing, but underwriting as well. Dealer flooring balances remain relatively stable, increasing about $9 million in the quarter. This increase was lower than expected as buyer demand and a lack of new vehicle production remain a factor in dealers building inventories. Higher rates will impact mortgage refinancing activities, but turnover should slow and support portfolio balances. At quarter-end the loan pipeline was strong. We started the first few weeks of the second quarter with good origination activity and growth in the portfolio. The outlook for 2022 is unchanged with year-over-year growth in the mid-to-high single-digit range expected. The factors that account for the variability of the forecast include the degree of recovery we see in dealers flooring; decisions we might make to retain or sell mortgage production; and lastly, our risk appetite relative to changes in market lending practices. Turning to Slide 5. Deposits increased 2.1% or $454 million to $22.3 billion at quarter-end. Consumer and commercial loan deposits drove that growth, increasing about $421 million. The cost of deposits fell by 1 basis point to 5 basis points. Despite greater uncertainty around deposit levels, we do retain adequate flexibility to fund loan demand under different scenarios. Our expectation is that deposit betas will be like previous cycles, some lag in repricing against loans. Turning to Slide 6. Net interest income was down $3.5 million from the prior quarter to $133.9 million. The decline was due to $6.8 million drop in PPP loan fees and interest. Excluding the PPP fees and interest, net interest income increased by about $3.2 million. The net interest margin increased 4 basis points to 2.42%. As mentioned, this was in large part due to actions we took in the fourth quarter to reduce excess liquidity. The positive impacts of lower average cash balances and higher security yields were partially offset by lower PPP fees and interest income. Looking ahead, we are positioned to benefit from higher rates. At the current level of interest rates, the net interest margin should increase a few basis points in Q2, seeing a 5 to 6 basis point benefit from the March rate hike, offsetting the decline in PPP fees and interests. You should also see a pickup coming from higher yields on securities roll over and new loan originations. Additional Fed rate increases will be additive to this, and we should see the impacts quickly as about $5 billion in loans repriced within 90 days. Turning to Slide 7. Non-interest income was $41.4 million essentially flat to the prior quarter. Card fees were down $1.4 million on a seasonal decline in activity, but the numbers were up year-over-year. We reported a net decline of roughly $3.3 million in BOLI due to volatility in the bond and equity markets. Service charges and fees showed improvements over the prior quarter. Trust and investment fees were flat. Looking ahead, we would anticipate service charges and transaction-based fees to trend higher as the economic activity picks up. Lower fees should also improve as higher rates will allow us to receive fees on cash management accounts. Non-interest expense was $104 million in Q1, $4.7 million lower than the prior quarter. While we will see inflationary pressures, our outlook for the expenses is unchanged and we project full-year growth of 6.5% to 7% over 2021. Turning to Slide 8. I'll make a few comments on credit. Asset quality remained very strong, realized credit costs were down and the level of NPAs, criticized assets and past due loans were low. In Q1, net charge-offs were $2.6 million or 8 basis point annualized. This is $3.6 million lower than Q4. The bank recorded a $5.7 million provision release for the quarter. NPA and 90-day past due loans remain low at 10 basis points, 1 basis point lower than the prior quarter. Criticized assets continue to decline, dropping from 1.6% of total loans in Q4 to 1.29% in Q1. Past due loans were flat compared to the prior quarter. Loans 30 to 89 days past due remain at 23 basis points at the end of Q1. Moving to Slide 9. You see a rollforward of the allowance for the quarter by disclosure segments. Economic outlook moderately improved in Q1, but we continue to consider downside risks that could impact credit losses. These include such things as [indiscernible] higher interest rates and impacts related to geopolitical instability and military conflicts. The allowance for credit loss decreased $7 million to $150.3 million. The level equates to 1.17% of all loans or 1.18% net of PPP loans. The decrease in ACL level is due to the release of the COVID-19 overlay on the residential portfolio and improve what still conservative economic outlook and better asset quality. Our reserved unfunded commitments decreased by $1.4 million to $29 million. Let me now turn the call back to Bob for any closing remarks.

Thanks, Ralph. To close, the U.S. economy continues to show strength and Hawaii is expected to see good visitor numbers this summer. That will be helped by the likely return of Japanese visitors. All of this will be positive for the local economy. While we are paying attention to a number of external factors that create some uncertainties, the bank is in a good position to deal with any contingencies that come up and more ever, we should benefit as rates normalize and local business activity rebalance. And now we'll be happy to answer any questions.

Thank you. [Operator Instructions] And our first question is going to come from Ebrahim Poonawala from Bank of America. Your line is now open.

Hey, guys. Good morning.

Good morning.

Good morning.

I guess, I want to just go back to the commentary on loan growth. So I get – you still expect mid single-digit year-over-year growth. But talk to us a little about, you mentioned competition is picking up unanticipated repayments. Just give us a sense, Bob, in terms of what's happening in the market? Are there new entrants which are not local who've entered the market, which has made it a little more tougher and just is that causing you to lose more deals given what you mentioned around underwriting standards as well? So would love to get some color around the competitive landscape.

Sure. Ebi, this is Bob. Let me start and then I'll ask Ralph if he has any comments. First, as we talked about, the mid-to-high single-digit loan growth is really going to be initially driven by the mainland growth and we're seeing that as very robust, we had a relatively slow first quarter due to some payoffs, but we see a very robust pipeline there in a lot of different areas. Locally, the comments we often made, we are seeing people being more aggressive and in the past it has been locally driven primarily by pricing. But now we're starting to see some relaxation of terms and we're just going to hold firm in that area and see how that plays out. On the dealer side, that's also a big swing for us. We're still watching that carefully. It moved up slightly over the quarter, but it's really hard to predict when global supply chains are going to be able to keep up with the demand that's out there. Ralph, anything you'd like to add?

No. I would say, there's a lot of liquidity in the local marketplace and we are sort of, I think seeing things that we typically see at the end of the cycle. So we'll just have to be disciplined and continue to look for opportunities.

– :

Relative to pre-pandemic, [Kevin], I think we're down over $600 million still. So dramatic, we ended that quarter at 225, I believe right about. And so we're down dramatically from pre-pandemic in a number of factors. Demand is 236, yes, where we ended the quarter of all of our dealer flooring balances, so demand is clearly up. People have a good amount of cash, whether through money they saved in COVID or government programs. And so car buying is a hot item right now and is just keeping up with that demand has been the challenge for the manufacturers. It's been very good for the dealer community from a credit perspective, but they're having trouble getting the inventory they would like.

Got it. And just one last, if I may. Around – Ralph, in terms of the outlook for deposit growth, how you're seeing that play out in light of the Fed actions that we expect? Do you expect net-net deposit outflows, deposit – just your thought process on deposit betas, would appreciate any color?

Yes. We don't have a very specific view in terms of what would happen on deposits. We did see pretty good inflows at the end of the quarter. But we're prepared for just a number of different scenarios, including the scenario where we start to see deposit balances run off. And in terms of repricing, I think, we continue to think that we'll look very similar to the last rate cycle where we maybe able to sort of avoid any kind of significant repricing for the first couple of hikes. But I guess a lot of that's going to depend on how quickly the Fed hikes as well, right.

Got it. Thanks for taking my questions.

Thank you. And our next question comes from Steven Alexopoulos from JPMorgan. Your line is now open.

Hi, everyone.

Hi, Steve.

Good morning, Steve.

I wanted to start out on the C&I loan growth. When we look at other regional banks that have a balance sheet composition very similar to you guys, they're reporting very strong C&I loan growth, talking about line utilization improving. And on Slide 4, this decline in C&I, ex-PPP is standing out like a sore thumb. Can you talk to why you're not also seeing a rebound this quarter in C&I?

Let me start, Steve. This is Bob. We haven't seen the line usage go up yet. We're still seeing really strong liquidity amongst our customers. And so we really haven't seen the line usage go up. Also in that is, our dealer floor plan is in that C&I number. So that's another reason why we haven't seen it really move. But Ralph, any comments you'd like to add?

No. I mean, it's just an area where I think the local economy is going to be a little bit slower than what you're seeing in the mainland.

Okay. Because dealer helped this quarter, right? It wasn't a drag. Okay. So where you are getting growth, right, it's been resi mortgage and home equity, but now with mortgage rates moving up, what's the outlook there? Do you expect to see similar growth? And when we think about the full-year, how should we think about what's going to drive loan growth overall?

Yes. For loan growth, I think what we're going to see primarily is in the CRE and to a lesser extent, the residential. We're seeing really strong CRE activity. The residential and home equity is going to slow down obviously with a refinance that's going to slow down dramatically, but we are seeing new home buying. So between residential and then we've seen a pretty strong first quarter in origination from home equity that we're candidly in the process of closing out all those, it'll happen in the second quarter, but people are moving out of refinancing their home and taking out equity and really moving into the home equity market. So we'll see more of that built in the second half of the year.

Okay. And then Bob, on that construction line, I mean, optically, it just looks like loans are flipping from construction to term CRE. Would you expect that drag to persist throughout the year, like strong commercial real estate, but on the other side of a construction balance is just trend lower?

Go ahead, Ralph.

Steve, this is Ralph. I think the nature of that – the construction book, that's always going to be somewhat of a book that term. And I think on the larger deals, institutional type real estate, we do anticipate sort of a mini firm component, but we haven't been seeing that as much. So I think what we're seeing in that portfolio is just more turn, which is essentially sort of means, we're really putting a lot more effort into putting new loans on the books that sort of like balance that off.

Okay.

Yes. You just see no stabilization period. Essentially the institutional lenders are coming in right at the end of construction and taking down the…

Okay. That's helpful. And then final question. We balance in the asset sensitivity with the expense guidance. Do you guys think you'll be able to deliver positive operating leverage this year? Thanks.

Yes. I think what we're looking at right now is even with some pressure on expense. I think we're going to get a really good lift from the rate outlook in terms of the impact with the bank. So relative to where we were at the end of the fourth quarter, I think we're looking at probably a bit of a lift this quarter, I mean, this year rather.

Yes. So the efficiency ratio you think trends down through the year, is that the thought?

Well, I'd be reluctant to sort of necessarily say that, but like I said, I think we're going to grow. We're going to do better than what we had anticipated at the end of Q4, just given with the direction of rates and increases that we're looking at today relative to what we had budgeted.

Got it. Okay. Thanks for taking my questions.

Thank you. And our next question comes from David Feaster from Raymond James. Your line is now open.

Good morning, everybody.

Good morning, David.

Just wanted to touch on some of the puts and takes on the fee income line. BOLI is obviously under pressure from the market movement, like noted, some seasonality on card fees. Other income was also a bit weaker, but just curious on your thoughts on these items and whether you could quantify the impacts to kind of get a good baseline going forward. And then just following up on your commentary on retaining versus selling mortgage production, just curious how you are thinking about that as well as we look forward?

Yes. Steve, this is Ralph. When we're thinking about the BOLI, that was a big impact this quarter. I think typically, we were seeing something between $3 million and $4 million in BOLI income. Again, I would note that on the BOLI side, that is an asset that is basically sort of hedging liability. So to a certain extent, you have offset when you see changes in that account. But if we start with the $41 million and I think we had guided you on $48 million is kind of a run rate. You add back $3 million there. So that's about $4 million. We're looking at probably a couple million in increase relative to card and debit fees I think as we go through the year. When we look at the wealth line, as interest rates start to increase, we're going to start to be able to collect fees on cash management accounts, which we hadn't been able to do during the past few years given the level of rates. So that's going to be a pretty nice lift for us. And then when we look at that, that business as well, the wealth business, we had moved from a commission based model to an AUM model. So I think even to the extent that we see some reductions there on the equity side, I think we're going to see overall a net lift there. So we're still pretty confident that we could get to that number. And again, I think when we look at any kind of service charge or activity related sort of fee, I think we're going to see some lift as we go through the year. And the economy here really starts to pick up. A lot of demand, I think for people who come into the state and I think we're going to have some very strong summer.

Okay.

This is Bob. You'd also asked about residential protection, I believe, so…

Yes.

We're still retaining most all of that, something we're looking at, seeing a little bit of a mix change where people are coming in from, which we'd like to retain versus 30-year fix. So we haven't made any final decisions on that yet, but we're certainly looking at it closer.

Okay. Maybe just touching on credit more broadly, asset quality remains strong, you've got a conservative approach to credit, which is here in your commentary, excuse me – it sounds like you're still a bit cautious on the economy and just in light of some of the competitive dynamics on more aggressive terms. Just curious how willing are you to compete on term in order to drive growth? And then just on the overall broader credit front, what keeps you cautious – what keeps you up at night? What are you watching closely as you're managing credit? Just curious, any thoughts on that.

Sure. Great question. As we look at it, we don't feel we're overly cautious on credit. We have a very strong credit quality, and we're really looking for good opportunities that we can earn a return on capital. And if the pricing doesn't met the risk out there, we're disciplined enough to hold off a bit and look another areas. We're seeing very strong opportunities that are well structured and well priced in the mainland right now, and we think that that will continue to evolve and come over here at some point. But you have a little bit of irrationality out there at the moment that never last very long. So we're just going to be patient and make sure that when we're putting our capital to work, that we're going to get a fair return for that.

Okay. And then maybe just touching on capital here too, in light of AOCI impacts of the AFS book, obviously regulatory capital is very strong. In your prepared remarks, you talked about this really has no impact on your ability to distribute capital, but I'm just curious how you think about the buyback here in light of the decline in the TCE ratio. Do you still expect to remain active and just any thoughts on overall capital?

Yes, not that we don't pay attention to the TCE ratio. We’re really focused on common equity Tier 1. The reason we didn't repurchase any stock in the first quarter, as we talked about a little bit on the year-end call was we see a pretty robust outlook for growth in loan book. And we want to make sure that we have the capital to be able to support that growth before we go after the share repurchase. It just an interesting point. We did look back and since we went public, we've returned 82% of our needs to shareholders, either up two-thirds of it in dividends and a third in share repurchase. So we're strong believers in capital return, and we're looking to do that. We just want to position ourselves, not to be restricted on our ability to grow the loan book.

Understood. Thank you.

Thank you. And our next question comes from Andrew Liesch from Piper Sandler. Your line is now open.

Hi. Good morning, everyone.

Good morning.

Just curious if you can provide a quick update on the state of the core conversion, is that still on track? Any sort of news you can share that would be great.

Yes. That’s a great question. That's quite frankly taking a lot of our time, glad you asked. That's still on track for this quarter. We've already sent out the notices to our customers and that'll be happening next month. We're very excited about that.

Good. And then, sorry, if I missed it, but the other non-interest income line down to about $900,000 from, I think it was close to – well, I think there's some one-time items in the fourth quarter, but curious where that line should be trending. It just seems like that was undersized relative to other quarters. Is that where mortgage gains are? I'm just curious what drove that number?

Yes. Andrew, this is Ralph. There was probably about 1.7 million I think in a delta relative to mortgage income. So that was, I think, a pretty big driver there. We saw a little bit less in swap fee income than we would have anticipated this quarter, and that was probably a little bit related to the timing of a few deals that got pushed into the second quarter. So I think that's probably the – that's primarily the delta on that line item.

Got it. You have covered all the other questions I had. I'll step back. Thanks.

Thanks.

Thank you. And our next question comes from Kelly Motta from KBW. Your line is now open.

Hi, good morning. Thanks for the question.

Good morning.

So I hate to beat the dead horse, but just circling back to loan growth, your guidance implies and acceleration from here. With the mid-to-high single-digit, how much of where you fall into that is related to dealer floor plan? And if dealer floor plan doesn't materialize the way you hope, do you still think that other areas can get you to at least the low end of that guidance for the year?

Sure. Another great question, Kelly. And we're still feeling that on that guidance, the low end is without a strong recovery in dealer floor plan. And the high end is really if dealer floor plan comes back more strongly than at least today, it looks like, but it's really hard to predict where that's going to land. So the bottom end of the range is essentially without the dealer floor plan coming back.

Got it. That's helpful. And then just on the mortgage outlook, obviously refi is slowing, but I was hoping you could just provide a bit more color and detail on the purchase market and resi mortgage trends and demand on Hawaii, and what kind of gives you confidence in the outlook of those continuing to grow? Thanks.

,: And that'll be coming on during the year. The large projects we've talked about in the past Kapolei and Koa Ridge, talking to those developers, they're accelerating their plans because of such a strong market. So as soon as they can get the houses completed, given all the dilations with supply chains, they're getting the market because there's a very strong demand for pretty much anything in residential or condos right now.

Got it. Thanks so much, Bob. That's really helpful. And then just one last nit picky question, I think you gave it, but I didn't catch it, on the BOLI income, is about $3 million the right run rate on a go-forward basis is kind of similar to last quarter?

Yes. Kelly, that would be – I think, if things stabilize, that would probably be the number that's sort of where we would see BOLI coming in and again getting the…

Got it. Thank you. I'll step back.

Thank you. And our next question comes from Jared Shaw from Wells Fargo Securities. Your line is now open.

Hey, everybody.

Good morning.

Yes. I guess first on the margin, on the net interest margin, you talked about the 5 to 6 basis point benefit from this rate hike. Should we expect that sort of a sensitivity as we go forward, or how should we be thinking about sort of future rate hikes through the course of this year? Is that the similar magnitude?

Yes. Jared, this is Ralph. I would say that the 5 to 6 kind of gives you kind of a indication of what happened this last time, so that – I mean, there are things that could sort of influence that depending on what happens with the deposit side, but I think that's a pretty good number. And then as we mentioned, we have about $5 billion, that's floating rate that will reprice with a hike. So that's probably another delta that you can take a look at there. And then I think in generally as we have sort of securities roll off, we're seeing better yields and then on the new loan origination activity, fixed rate type lending that as well, we would see some big pickup there as well.

Okay. Thanks. And on the securities book, can you give us an update on what the cash flow is looking like sort of, I guess, monthly there and what securities purchases were in the quarter and where you're buying today?

Yes. I don't know that I have the specific number on the securities purchases in terms of top of my head. But I think we're still seeing around a $100 million to $125 million in monthly runoff. And then let's see, looking at the securities, new production came on at about 211 basis points. So that compares to – I think last quarter it was around a 167 basis points, pretty nice lift there.

Jared, this is Bob. Relative to the portfolio, they've just done a very good job structuring it. We haven't seen as you saw on the slides in extension. So it's really behaving exactly as we had hoped and same duration and same steady cash flows coming off of it.

Okay, great. Thanks. And then just finally, on the loan side, was all of the residential growth from your own origination or was some of that purchased? And then on the CRE side, what portion was shared national credit or participation?

So I think, with regard to that – I don't have the numbers relative to wholesale versus retail production. On the CRE side, I would say it's still pretty much a balance between deals that we're purchasing on the mainland and then activity that we're seeing here. And again, we have – I should mention that we did have some pretty large paydowns this quarter in the local market, which kind of impacted the growth in Hawaii-based CRE.

Okay. Thank you.

Thank you. [Operator Instructions] And our next question comes from Laurie Hunsicker from Compass Point. Your line is now open.

Hi. Thanks. Good morning.

Good morning.

Just going back to where Jared was chatting on rates. I just want to make sure that I have this right. The PPP in the quarter, I'm just backing into this, PPP forgiveness gains were about $2.5 million. Is that correct?

Yes.

Okay. And so that leaves you about $2.5 million or so remaining in unamortized fees or is there a better number on that?

No, it's about $2.1 million, I think in unamortized fees.

$2.1 million, okay, great. And then you had made comments that the NIM for 2Q might be 3 basis points higher just because of the offset with the PPP, but the PPP probably is going to come in close to the current quarter. So I just want to make sure that I heard that right. Is there something else that is pulling you off of what we would otherwise see a 6 basis point up? Or how should we be thinking about that?

Yes. Laurie, this is Bob. Maybe I'll start and handle off to Ralph. What we're seeing is the bulk of the PPP has been done, and now it's really starting to slow down on the forgiveness. So the $100 million that's left relative rough and top on balances. We expect that to be a slower forgiveness and might even turn out and so forth. So we're not expecting to see the same level of forgiveness we saw in Q1.

Got it. Okay. So most of that $2.1 million leads over the full-year, you're not going to expect to see a lot of that necessarily next quarter?

It's going to be much slower. It's not going to be $3.4 million we saw in this quarter.

Got it. Okay. And then just very high level on asset sensitivity, can you give us a refresh on where you are looking at sort of an up 100 basis point shock? I mean, you're incredibly asset sensitive as of December 31, you were positive 11.8%, and we all know your deposit base is absolutely gorgeous going back to pre-pandemic, right, not just where we are currently. So can you help us think about that? Because it seems to me like the 5 to 6 basis points round number guide for every 25 basis points might be a little light, or maybe I've just extrapolated that wrong?

Yes. Again, Laurie, this is Ralph. The models are really more for risk management purposes. But I think when you look at the 100 basis points, last quarter was either about 11.8%, this quarter about 9.8%. So about 200 basis points lower.

9.8%. Okay, great. Okay. And did I extrapolate that right from your comments, you're roughly expecting 5 to 6 basis points on margin for every 25 basis point hike?

No, I don't think we gave that…

We did this last quarter.

You know what happened?

Yes. We did this last quarter, Laurie, and we think that's representative of a hike, but over time there will be some pressure on deposit rates obviously.

Sure. Okay. That's super helpful. Okay. And then just to go, I think Kelly and Andrew both were hitting on non-interest income. Just wanted to go back. What is your exact swap income number for this quarter and what was it last? Maybe while you're checking that just very high level. So your other non-interest income line has been running $3.3 million, $3.5 million or so per quarters, only $900,000, obviously this quarter. I mean, does that normalize back to that same level or spot fees are under pressure? We're going to see that track closer to $2 million. I mean, how should we be thinking about that? There's a lot of things in that number, I guess, that we aren't privy to, I know the fourth quarter had your $6 million visa loss. But even netting that out, that was 3 point something – $3.2 million. So do we see a return to that? Or how should we be thinking about that?

Yes. Coming back to that. So the swap fee income this quarter was about $962 million and $162,000. And typically, we would probably hope to see maybe about a – between a $1 million and $1.5 million and much more we have kind of a larger deal. So it's a little bit of a lumpy item and we're about a $0.5 million in Q4. And then I think as far as the number is concerned, can we get back up to the other line item. We think we can, but really what we look at across a lot of the different line items. I think we're feeling pretty good about the transaction-related fees. And we think that the trust income is going to hold up. And actually if we get back to kind of more normalized levels on our cash management accounts that could add like another $4 million in fee income.

Another $4 million annually.

Yes. Annual number, yes.

Okay. That's great. Okay. Very helpful. And then can you just give us some color around overdraft and NSF fees, how you're thinking about that going forward and just maybe even what was that number this quarter? Is there going to be any sort of consumer friendly relief and any sort of impact on your fee income with that?

Yes. Laurie, this is Bob. That's something we're certainly looking at. We don't break out the specific numbers separately, but that's something we're certainly looking at. Candidly is we're in the middle of a core conversion. We're not looking to redesign products at this point in time. We really need to get through that, but that's very much on our lines and really looking to see how that plays out both nationally and locally. But we think it's a service that many of our customers use and appreciate. And it's just an interesting time how it's been the regulatory approach to it right now. But we're looking at it and we'll just have to come back later after we make some decisions and we'll share that at a different time.

Okay. And then just last question. Just quickly, if you could comment a little bit on your unsecured consumer book, it looks like I'm just getting this off your press release. If I'm looking at the number that's 619, and unsecured consumer has become obviously such a hot button here looks like it's about a $113 million book, it's three quarters of your charge-off now are coming from consumer. I'm assuming most of it is from that book. Can you help us think a little bit about your approach to that going forward? I mean, certainly your credit is very, very pristine, and so how are you thinking about unsecured consumer? Do you have any concerns there? Is that in fact where your charge-offs are coming from or any color you can provide on that? Thanks.

Yes. This is Ralph. Laurie, we're still at a pretty low level relative to charge-offs that is a small book. That was a book that in the past we had maybe more elevated levels of charge-offs that's probably a book also that we hold a higher level of reserve. I think in the last couple of years, we've been probably more, I think disciplined around underwriting in that book because of COVID. So we're not really expecting to have outside losses in the book. And then I think on the dealer portfolio, it continues to perform really well. I mean the past [indiscernible] very light and to the extent that you take back a car, you're really recovering a lot of the charge.

Yes. To clarify, I think you mean indirect. Yes, specifically dealer floor plan. Yes, experience on that's been excellent. And to add to Ralph comments on the consumer, that's something we looked at several years ago, made some changes. We're seeing better performance, but it's a higher risk portfolio relatively small for us, but a higher risk portfolio.

Great. Thanks for taking my questions.

Thank you, and I'm showing no further questions. I would now like to turn the call back over to Kevin Haseyama for closing remarks.

Thanks, Justin. 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 good weekend.

This concludes today's conference call. Thank you for participating. You may now disconnect.