First Hawaiian, Inc. (FHB) Q1 2022 Earnings Call Transcript

First Hawaiian, Inc  (NASDAQ: FHB) Q1 2022 earnings call dated Apr. 22, 2022

Corporate Participants:

Kevin Haseyama — Investor Relations Manager

Robert Harrison — Chairman, President and Chief Executive Officer

Ralph Mesick — Chief Risk Officer and Interim Chief Financial Officer

Analysts:

Ebrahim Poonawala — Bank of America Merrill Lynch — Analyst

Steven Alexopoulus — J.P. Morgan — Analyst

David Feaster — Raymond James — Analyst

Andrew Liesch — Piper Sandler and Co. — Analyst

Kelly Motta — KBW — Analyst

Jared Shaw — Wells Fargo Securities — Analyst

Laurie Hunsicker — Compass Point — Analyst

Presentation:

Operator

Good day. 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 this call is being recorded. [Operator Instructions]

I would now like to hand the conference over to your host today, Kevin Haseyama, Investor Relations Manager.

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; Ralph Mesick, Chief — and Ralph Mesick, Chief Risk Officer and Interim CFO. We have prepared a slide presentation that we’ll 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 of our — 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.

Robert Harrison — Chairman, President and Chief Executive Officer

Thank you, Kevin, Happy Earth Day, everyone. I’ll start off saying that the outlook for the Hawaii economy is improving as COVID becomes less disruptive. COVID related restrictions for domestic travelers, vendors and the States into a mass mandate 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 income — net interest margin expanded. Our [Technical Issues] 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 an 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 some improvement in our NIM, asset quality was excellent, and we recorded 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?

Ralph Mesick — Chief Risk Officer and Interim Chief Financial Officer

Thanks, Bob. Turning to Slide 3. We ended the quarter with a liquid and asset-sensitive balance sheet and high levels of capital. All the inflows continued, but actions we took in the fourth quarter to deploy excess cash and retire FHLB borrowings contributed to an improvement in our net interest margin. The loan to deposit level was just under 58% 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 as no impact on the 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 is driven by increases in CRE, residential and home equity, but this production was offset by unanticipated repayments. In the quarter, we saw a few construction loans refinance prior to stabilization and more aggressive lending in the local marketplace. With competition relaxing not just pricing, but underwriting as well.

Dealer flooring balances remained 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 high single-digit range expected. The fact is that the cost of the variability of the forecast included degree of recovery we see in dealer 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 models, we do retain adequate flexibility to fund loan demand under different scenarios. Our expectation is that deposit betas will be like previous cycles with 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 impact of lower average cash balances and higher security yields were partially offset by more 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 interest. You should also see a pick-up coming from higher yields on securities drove over and new loan originations. Additional rate increases will be additive to this and we should see the impacts quickly as about $5 billion of loans reprice 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 are 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 transpire as the economic activity picks up.

Wealth [Phonetic] 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 see — 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 remain 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 points annualized. This is $3.6 million lower than Q4. Bank recorded a $5.7 million provision release for the quarter. NPA and 90 days past due loans remained low at 10 basis points, 1 basis point lower than the prior quarter. Criticized assets continued 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 roll forward 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 [Indecipherable] and higher interest rates and impacts related to geopolitical instability and military conflicts.

The allowance for credit loss decreased $7 million to a $150.3 million. The level equates to 1.17% of all loans for 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. It improved, but still conservative economic outlook in better asset quality. Our reserve for unfunded commitments decreased by $1.4 million to $29 million.

Let me now turn the call back to Bob for any closing remarks.

Robert Harrison — Chairman, President and Chief Executive Officer

Thanks, Ralph. To close, the U.S. economy continues to show strength and Hawaii is expected to see good visitor numbers this summer. It will be helped by the likely return of Japanese visitors. All of this will be positive for the local economy. While we’re paying attention from number of external factors that creates some uncertainties, the bank is in a good position to deal with any contingencies that come up and moreover we should benefit as rates normalize and local business activity rebounds.

And now we’ll be happy to answer any questions.

Questions and Answers:

Operator

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

Ebrahim Poonawala — Bank of America Merrill Lynch — Analyst

Hey guys, good morning.

Robert Harrison — Chairman, President and Chief Executive Officer

Good morning.

Ralph Mesick — Chief Risk Officer and Interim Chief Financial Officer

Good morning.

Ebrahim Poonawala — Bank of America Merrill Lynch — Analyst

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 of all, in terms of what’s happening in the market? Are they new entrants, which are not local, who 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?

Robert Harrison — Chairman, President and Chief Executive Officer

This is Bob. Let me start and then I’ll ask Ralph if he has any comment. First, as we’ve 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 and a lot of different areas. Locally, the comments Ralph had made or we are seeing people being more aggressive on the path that has been locally driven primarily by pricing. But now we’re starting to see some relaxation of terms and we’re just going to whole perm 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.

Ralph Mesick — Chief Risk Officer and Interim Chief Financial Officer

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.

Ebrahim Poonawala — Bank of America Merrill Lynch — Analyst

And just on the dealer finance, like are things getting better or did the war making it to serve as another set back. Just give us an update of where those balances are today versus pre-pandemic levels?

Ralph Mesick — Chief Risk Officer and Interim Chief Financial Officer

Relative to pre-pandemic, I think we’re down over $600 million still, so dramatic. We ended the quarter at $225 million I believe, right about and so we’re down dramatically from pre-pandemic and a number of factors demanded — $236 million, yeah, it was 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 just keeping up with that demand has been a challenge for the manufacturers, been very good for the dealer community from a credit perspective, but they have a problem getting the inventory they would like.

Ebrahim Poonawala — Bank of America Merrill Lynch — Analyst

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?

Ralph Mesick — Chief Risk Officer and Interim Chief Financial Officer

Yeah. 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 the 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 will look very similar to the last rate cycle where we may be 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.

Ebrahim Poonawala — Bank of America Merrill Lynch — Analyst

Got it. Thanks for taking my questions.

Operator

Thank you and our next question comes from Steven Alexopoulus from J.P. Morgan. Your line is now open.

Steven Alexopoulus — J.P. Morgan — Analyst

Hi, everyone.

Ralph Mesick — Chief Risk Officer and Interim Chief Financial Officer

Hi, Steve.

Robert Harrison — Chairman, President and Chief Executive Officer

Hi, Steve.

Steven Alexopoulus — J.P. Morgan — Analyst

I wanted to start out on the C&I loan growth. When we look at other regional banks, they 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 through why you are not also seeing a rebound this quarter in C&I?

Robert Harrison — Chairman, President and Chief Executive Officer

Well, let me start. 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 uses go up. Also in that is our dealer floor plan, is in that C&I numbers. So, that’s another reason why we haven’t seen it really move. Ralph any comments you’d like to add.

Ralph Mesick — Chief Risk Officer and Interim Chief Financial Officer

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

Steven Alexopoulus — J.P. Morgan — Analyst

Okay. Because dealer helped this quarter, right, it wasn’t a drag. Okay. So, where you are getting growth rate has 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?

Robert Harrison — Chairman, President and Chief Executive Officer

Yeah, 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 home equity is going to slow down, obviously, with 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 a bit kind of laying the process of closing all of our loans, it will happen in the second quarter, but people are moving out of refinancing their home and taking out equity and really moving it the home equity market. And so, we will see more of that build in the second half of the year.

Steven Alexopoulus — J.P. Morgan — Analyst

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 it construction balances just trend lower?

Ralph Mesick — Chief Risk Officer and Interim Chief Financial Officer

Yeah, Steve, this is Ralph. I think the nature of the construction book is always going to be somewhat of a push and turns. And I think on the larger deals, institutional type real estate, we do anticipate sort of a mini perm 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.

Robert Harrison — Chairman, President and Chief Executive Officer

Yeah, you’ve just have seen no stabilization period essentially. The institutional lenders are coming in right at the end of construction and taking up.

Steven Alexopoulus — J.P. Morgan — Analyst

Okay. That’s helpful. And then final question. When 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.

Ralph Mesick — Chief Risk Officer and Interim Chief Financial Officer

Yeah, I think what we’re looking at right now is even with some pressure on the expense. I think we’re going to get a really good lift from the rate outlook in terms of the impact to 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 this quarter — I mean, this year rather.

Steven Alexopoulus — J.P. Morgan — Analyst

Yeah. So, the efficiency ratio you think trends down through the year? Is that the fact?

Ralph Mesick — Chief Risk Officer and Interim Chief Financial Officer

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 direction of rates and the increases that we’re looking at today relative to what we had budgeted.

Steven Alexopoulus — J.P. Morgan — Analyst

Got it. Okay. Thanks for taking my questions.

Operator

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

David Feaster — Raymond James — Analyst

Good morning, everybody.

Robert Harrison — Chairman, President and Chief Executive Officer

Going morning, David.

David Feaster — Raymond James — Analyst

Just wanted to touch on some of the puts and takes on the fee income line. BOLI is obviously under pressure from the market [Indecipherable] like noted some seasonality on card fees. The other income was also a bit weaker, but just curious on your thoughts on these items. And whether you could quantify the impact 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?

Ralph Mesick — Chief Risk Officer and Interim Chief Financial Officer

Yeah, 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 by hedging a liability, so to a certain extent you have a offset when you see changes in that account, but if we start with the $41 million and I think we had guided you to $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 of 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 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. Lot of demand I think for people to come into the state. And I think we’re going to have some very strong summer.

Robert Harrison — Chairman, President and Chief Executive Officer

You also asked about residential protection, I believe. So, we’re still retaining most all of that, it’s something we’re looking at, seen a little bit of a mix change, where people are coming in for our [Indecipherable] which we would like to retain versus 30 year fixed. So we haven’t made any final decisions on that yet, but we’re certainly looking at it closely.

David Feaster — Raymond James — Analyst

Okay. And maybe just touching on credit more broadly, asset quality remain strong, you’ve got a conservative approach to credit. Just hear 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 terminal 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?

Robert Harrison — Chairman, President and Chief Executive Officer

Sure. Good 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 on and if the pricing doesn’t bear the risk out there, we’re disciplined enough to the hold off a bit and look in other 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 yeah, little bit of irrationality out there at the moment, but nevertheless, very well. So, we’re just going to be patient and make sure that we’re putting our capital work that we’re going to get a fair return for that.

David Feaster — Raymond James — Analyst

Okay. And then maybe just touching on capital here too. In light of the AOCI impact of 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’re thinking 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?

Robert Harrison — Chairman, President and Chief Executive Officer

Yeah, no, we — not that we don’t pay attention on the TCE ratio, we’re really focused on our common equity Tier 1. The reason we didn’t repurchase any stock in the first quarter, as we’ve talked about a little bit on the year-end call was we see a pretty robust outlook for growth of the 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 repurchases. Just an interesting point we did look back and since we went public, we’ve returned 82% of our earnings to shareholders, either — two-thirds of it in dividend 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 number.

David Feaster — Raymond James — Analyst

Understood. Thank you.

Operator

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

Andrew Liesch — Piper Sandler and Co. — Analyst

Hi, good morning everyone.

Robert Harrison — Chairman, President and Chief Executive Officer

Good morning, Andrew.

Andrew Liesch — Piper Sandler and Co. — Analyst

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 there would be great.

Robert Harrison — Chairman, President and Chief Executive Officer

Yeah. That was a great question. That’s quite frankly taken 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 will be happening next month. [Speech Overlap]

Andrew Liesch — Piper Sandler and Co. — Analyst

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 mean, there are 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. If that drove mortgage gains. I’m curious what drove that number?

Ralph Mesick — Chief Risk Officer and Interim Chief Financial Officer

Yeah. So, this is, Ralph. There was probably about a $1.7 million, I think in 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 — we had anticipated this quarter. So — 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.

Andrew Liesch — Piper Sandler and Co. — Analyst

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

Ralph Mesick — Chief Risk Officer and Interim Chief Financial Officer

Thanks.

Operator

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

Kelly Motta — KBW — Analyst

Hi, good morning, thanks for the question.

Ralph Mesick — Chief Risk Officer and Interim Chief Financial Officer

Good morning.

Robert Harrison — Chairman, President and Chief Executive Officer

Good morning.

Kelly Motta — KBW — Analyst

So, I hate to beat a dead horse, but just circling back to loan growth, your guidance implies an acceleration from here. With the mid to high single digits, how much of worthy 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?

Robert Harrison — Chairman, President and Chief Executive Officer

Sure, 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 as dealer floorplan 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.

Kelly Motta — KBW — Analyst

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 in demand on Hawaii? And what kind of gives you confidence in the outlook of those continuing to grow? Thanks.

Robert Harrison — Chairman, President and Chief Executive Officer

Yeah. Like many markets certainly here in the West Coast, there is just very strong demand for housing. And so things that are coming on market are selling very quickly, generally at higher prices than before and everybody gets caught up in the headline, Neighbor Island and large waterfront properties, but just broadly within the markets here in Hawaii, there’s still very strong demand, essentially every price point for residential. So while we won’t see the same refinance activity, anything that comes on market, you’re seeing a good competition for that. That’ll be coming on during the year.

The large projects we’ve talked about in the past [Indecipherable] Koa Ridge. Talking to those developers, they are accelerating their plans because it’s such a strong market. So, as soon a they can give analysis completed, given all the gyrations with supply chains, they’re getting the market because there is a very strong demand for pretty much anything in residential or condos right now.

Kelly Motta — KBW — Analyst

Got it. Thanks so much, Bob. That’s really helpful. And then just one last nitpicky 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, kind of similar to last quarter?

Robert Harrison — Chairman, President and Chief Executive Officer

Yeah. 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 given the…

Kelly Motta — KBW — Analyst

Got it. Thank you. I’ll step back.

Operator

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

Jared Shaw — Wells Fargo Securities — Analyst

Hey, everybody.

Ralph Mesick — Chief Risk Officer and Interim Chief Financial Officer

Good morning.

Robert Harrison — Chairman, President and Chief Executive Officer

Good morning.

Jared Shaw — Wells Fargo Securities — Analyst

Yeah, 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 sensitivity as we go forward? Or how should we be thinking about our future rate hikes through the course of this year. Is that the similar magnitude?

Ralph Mesick — Chief Risk Officer and Interim Chief Financial Officer

Yes. Jared. This is Ralph. I would say that the 5 to 6 kind of gives you a kind of 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 — on 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 the hikes, 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 go up, we’re seeing better yields and then on the new loan origination activity, fixed rate type of lending. That as well, where we would see some pickup tariffs as well.

Jared Shaw — Wells Fargo Securities — Analyst

Okay, thanks. And then 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?

Ralph Mesick — Chief Risk Officer and Interim Chief Financial Officer

Yeah, no, I don’t know that I have the specific number on the securities purchases in terms of — the top of my head, but I think we’re still seeing around a $100 million to $125 million in monthly run off. And then looking at the securities, new production came on at about 211 basis points, so that compares to I think –last quarter was 167 basis points, pretty nice pick up.

Jared Shaw — Wells Fargo Securities — Analyst

Okay and then just…

Robert Harrison — Chairman, President and Chief Executive Officer

Sorry, 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 the slides any extension. So, it’s really behaving exactly as we had hoped and same duration and same steady cash flows coming off of it.

Jared Shaw — Wells Fargo Securities — Analyst

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 shared at CRE side is — what portion was shared national credit or participation?

Ralph Mesick — Chief Risk Officer and Interim Chief Financial Officer

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

Jared Shaw — Wells Fargo Securities — Analyst

Okay. Thank you.

Operator

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

Laurie Hunsicker — Compass Point — Analyst

Hi, thanks, good morning.

Robert Harrison — Chairman, President and Chief Executive Officer

Good morning.

Laurie Hunsicker — Compass Point — Analyst

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?

Ralph Mesick — Chief Risk Officer and Interim Chief Financial Officer

Yes.

Operator

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

Ralph Mesick — Chief Risk Officer and Interim Chief Financial Officer

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

Laurie Hunsicker — Compass Point — Analyst

$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 coming 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?

Robert Harrison — Chairman, President and Chief Executive Officer

Hey, Laurie. This is Bob. Maybe I’ll start and hand it 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 is left relative — Ralph had talked on balances, we expect that to be 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.

Laurie Hunsicker — Compass Point — Analyst

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

Robert Harrison — Chairman, President and Chief Executive Officer

It’s going to be much slower, it’s not going to be movement forward we saw in this quarter.

Laurie Hunsicker — Compass Point — Analyst

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 and you’re incredibly asset sensitive. As of December 31st, 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 a 5 to 6 basis point, round number of guide for every 25 basis points, might be a little light or maybe I’ve just extrapolated that wrong?

Ralph Mesick — Chief Risk Officer and Interim Chief Financial Officer

Yeah, I mean, again, Laurie, this is Ralph. The models are really more for risk management purposes, but I think when you look at the 100 basis point last quarter was about 11.8%, this quarter about 9.8%, so about 200 basis points lower.

Laurie Hunsicker — Compass Point — Analyst

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?

Ralph Mesick — Chief Risk Officer and Interim Chief Financial Officer

I know, I don’t think we gave any guidance…[Speech Overlap]

Robert Harrison — Chairman, President and Chief Executive Officer

We did that quarter and [Speech Overlap]. 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.

Laurie Hunsicker — Compass Point — Analyst

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 that last? Maybe while you’re checking out, just very high level, your other, other non-interest income line has been running in a $3.3 million, $3.5 million or so per quarter, was only $900,000 obviously this quarter. I mean, does that normalize back to that same level or is that 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 ready to. I know the fourth quarter had your $6 million Visa loss. So, but even netting that out, that was $3.0 something — $3.2 million. So, do we see a return to that or how should we be thinking about that?

Ralph Mesick — Chief Risk Officer and Interim Chief Financial Officer

Yeah, I would — coming back to that. So the swap fee income this quarter was about $962 million — $960,000. And typically, we would probably hope to see may be by about — between $1 million and $1.5 million and much more. We have kind of a larger deal. So it’s a little bit of lumpy item and we are about $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 fees.

Laurie Hunsicker — Compass Point — Analyst

Another $4 million annually?

Ralph Mesick — Chief Risk Officer and Interim Chief Financial Officer

Yeah, annual number. Yeah.

Laurie Hunsicker — Compass Point — Analyst

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?

Robert Harrison — Chairman, President and Chief Executive Officer

Yeah, Laurie. This is Bob. There’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 to get through that. So that’s very much our eyes and really looking to see how that plays out both nationally and locally. But we think if the service that many of our customers use and appreciate and it’s just interesting time how is 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 different time.

Laurie Hunsicker — Compass Point — Analyst

Okay. And then just last question, just quickly, if you could comment a little bit on your unsecured consumer book? it looks like just getting this up your press release if I’m looking at the number that’s left 619 and unsecured consumer has become obviously such a hot button here, it looks like it’s about $113 million bucket, three-quarters of your charge-offs 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 there going forward and 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.

Ralph Mesick — Chief Risk Officer and Interim Chief Financial Officer

Yeah, we’re. This is. Ralph, Laurie. We’re still at a pretty low level relative to charge-offs. That is a small book that wasn’t booked at in the past. We had maybe more elevated levels of charge-offs. That’s probably a book also that we hold up 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 outsized losses in the book. And then I think on the dealer portfolio, it continues to perform really well. I mean the past dues are very light and to the extent that you think about the car, you’re really recovering a lot of the charge.

Robert Harrison — Chairman, President and Chief Executive Officer

I think you’d be indirect performer, not dealer [Speech Overlap] experience on that’s been excellent and had to pass this onto 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 high risk portfolio.

Laurie Hunsicker — Compass Point — Analyst

Great. Thanks for taking my questions.

Operator

And 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.

Kevin Haseyama — Investor Relations Manager

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.

Operator

[Operator Closing Remarks]