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

First Hawaiian, Inc. (FHB 3.19%)
Q1 2022 Earnings Call
Apr 22, 2022, 5:00 p.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Good day, and thank you for standing by. Welcome to the First Hawaiian, Inc. Q1 2022 earnings conference call. [Operator instructions].

Please be advised that the 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; 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.

Bob Harrison -- Chairman, President, and Chief Executive Officer

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 states indoor mask 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 the Japanese business 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 liquidity position and capital levels remained strong, and our credit quality is excellent.

Turning to Slide 2. We had a nice quarter to start the year. Reporting income was $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 of $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 for 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. Deposit inflows continued with 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, 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 repayments. 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 remained relatively stable, increasing above $9 million in the quarter. This increase was lower than expected as buyer demand and a lack of new vehicle production remain 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 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% of $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 one basis point to five basis points. Despite greater uncertainty around deposit levels, we do retain adequate flexibility to fund loans 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 a $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 four 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 five to six basis point benefit from the March rate hike offsetting the decline in PPP fees and interest. 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. Noninterest 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 economic activity picks up. Loan fee should also improve as higher rates will allow us to receive fees on cash management accounts.

Noninterest 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% compared to 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 pass-through loans were low. In Q1, net charge-offs were $2.6 million or eight basis points 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 pass-through loans remained low at 10 basis points, one 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 remained at 23 basis points at the end of Q1.

Moving to Slide 9. You see the roll forward of the allowance for the quarter by disclosure segments. Economic outlook moderately improved in Q1, but we continue to consider downside risk that could impact credit losses. These include such things as inflation, the reversal of any higher interest rates, and impacts related to geopolitical instability and military conflict.

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 with still conservative economic outlook and 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.

Bob 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. That 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 to a number of external factors that create some uncertainties, the bank is in a good position to deal with any contingencies to 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 & 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.

Bob Harrison -- Chairman, President, and Chief Executive Officer

Good morning.

Ebrahim Poonawala -- Bank of America Merrill Lynch -- Analyst

I guess, one, I wanted 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 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 I would love to get some color around the competitive landscape?

Bob Harrison -- Chairman, President, and Chief Executive Officer

Sure, EB. 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 Ralph have made where we are seeing people be more aggressive. And in the past, it has been locally driven primarily by pricing. But now we're starting to see some relaxation in 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?

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 -- serve as another setback. Just give us an update of where those balances are today versus pre-pandemic levels.

Bob Harrison -- Chairman, President, and Chief Executive Officer

Relative to pre-pandemic, Kevin, I think we're down over 600 million still. So dramatic, we ended the quarter at 225, I believe, right about. And so we're down dramatically from pre-pandemic and a number of factors. Demand is about 236.

Yes, as where we ended the quarter of all 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 it's 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 a trouble 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, I would appreciate any color.

Ralph Mesick -- Chief Risk Officer and Interim Chief Financial Officer

Yes. We don't have a very specific view in terms of what will happen on deposits. We did see pretty good inflows at the end of the quarter. But we 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 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 Steve Alexopoulos from J.P. Morgan. Your line is now open.

Steve Alexopoulos -- J.P. Morgan -- Analyst

Hi, everyone. 

Ralph Mesick -- Chief Risk Officer and Interim Chief Financial Officer

Hi, Steve.

Steve Alexopoulos -- J.P. Morgan -- Analyst

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?

Bob Harrison -- Chairman, President, and Chief Executive Officer

Well, let me start. Steven, this is Bob. We haven't seen the line usage go up yet. We're still seeing really strong liquidity among our customers.

And so we really haven't seen the line uses go up. Also in that is our dealer floor plan is in the 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?

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.

Steve Alexopoulos -- J.P. Morgan -- Analyst

OK. Yes, because dealer helped this quarter, right? It wasn't a dread.

Bob Harrison -- Chairman, President, and Chief Executive Officer

Yes.

Steve Alexopoulos -- J.P. Morgan -- Analyst

OK. So we 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?

Bob Harrison -- Chairman, President, and Chief Executive Officer

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 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 candidly in the process of closing out although. That will 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. And so we'll see more of that build in the second half of the year.

Steve Alexopoulos -- J.P. Morgan -- Analyst

OK. 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 balances just trend lower?

Ralph Mesick -- Chief Risk Officer and Interim Chief Financial Officer

Steve, this is Ralph. I think the nature of that -- the construction book is always going to be somewhat of a push at turn. 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 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.

Bob Harrison -- Chairman, President, and Chief Executive Officer

You just have seen no stabilization period essentially. The institutional lenders are coming in right at the end of construction and taking down the --

Steve Alexopoulos -- J.P. Morgan -- Analyst

OK. 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.

Ralph Mesick -- Chief Risk Officer and Interim Chief Financial Officer

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 of 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.

Steve Alexopoulos -- J.P. Morgan -- Analyst

Yes. So the efficiency ratio, you think trends down through the year. Is that fine?

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

Steve Alexopoulos -- J.P. Morgan -- Analyst

OK. Thanks for taking my questions.

Operator

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

David Feaster -- Raymond James -- Analyst

Good morning, guys. 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 maybe 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?

Ralph Mesick -- Chief Risk Officer and Interim Chief Financial Officer

Yes. Steve -- I mean -- 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 a liability. So to a certain extent, you have an offset when you see changes in that account. But if we start with the $41 million, and I think we had guided you to and $48 million is kind of a run rate. You had that $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 haven'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.

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.

Bob Harrison -- Chairman, President, and Chief Executive Officer

This is Bob. You also asked about residential production, I believe. So we're still retaining most or all of that, it's something we're looking at, seeing a little bit of a mix change, more people are coming in for our arms, which we'd 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 closer.

David Feaster -- Raymond James -- Analyst

Maybe just touching on credit more broadly, asset quality remains strong. You've got a conservative approach to credit. I just hearing your commentary. 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.

Bob Harrison -- Chairman, President, and Chief Executive Officer

Sure. No, great question. As we look at it, we don't feel we're overly cautious on credit. We have 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 hold off of it and look at 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 you have a little bit of irrationality out there at the moment that never lasts very long. So we just can be patient and make sure that we're putting our capital to work that we're going to get a fair return for that.

David Feaster -- Raymond James -- Analyst

OK. And then maybe just touching on capital here, too, in light of the AOCI impacts on 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.

Bob Harrison -- Chairman, President, and Chief Executive Officer

No, we -- not that we don't pay attention to the TCE ratio, but we're really focused on 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 in 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 repurchase. It's just interesting point. We did a look back.

And since we went public, we've returned 82% of our earnings to shareholders, either about 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.

David Feaster -- Raymond James -- Analyst

Understood. Thank you.

Operator

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

Andrew Liesch -- Piper Sandler -- Analyst

Hi. Good morning, everyone. 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.

Bob Harrison -- Chairman, President, and Chief Executive Officer

Yes. No, 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 will be happening next month.

Andrew Liesch -- Piper Sandler -- Analyst

Good. And then sorry if I missed it, but the other noninterest income line down to about $900,000 from, I think, it was close to well, there's some onetime 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.

Ralph Mesick -- Chief Risk Officer and Interim Chief Financial Officer

Yes, Andrew, this is Ralph. There is probably about $1.7 million, I think, in the 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 we had 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.

Andrew Liesch -- Piper Sandler -- Analyst

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

Operator

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

Kelly Motta -- Keefe, Bruyette and Woods -- Analyst

Hi. Good morning. Thanks for the questions.

Bob Harrison -- Chairman, President, and Chief Executive Officer

Good morning.

Kelly Motta -- Keefe, Bruyette and Woods -- 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 where you fall into that is related 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?

Bob 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 a 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.

Kelly Motta -- Keefe, Bruyette and Woods -- 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.

Bob Harrison -- Chairman, President, and Chief Executive Officer

Yes. No. Like many markets, certainly here in the West Coast, there's just very strong demand for housing. And so things that are coming on market selling very quickly, generally higher prices than before and everybody gets caught up in the headline, Neighbor Island, 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 we won't see the same refinance activity. Anything that comes on market, you're seeing a good competition for that. So that will be coming on during the year.

The large projects we've talked about in the past, Ho'opili and Coral Ridge, talking to those developers, they're accelerating their plans because it's such a strong market. So as soon as they can get the houses completed, given all the directions with supply chains, they're giving the market because there is a very strong demand for pretty much anything in residential or condos right now.

Kelly Motta -- Keefe, Bruyette and Woods -- Analyst

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 kind of similar to last quarter?

Ralph Mesick -- Chief Risk Officer and Interim Chief Financial Officer

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

Kelly Motta -- Keefe, Bruyette and Woods -- Analyst

Thank you. I will 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. [Inaudible]. I guess, first on the margin, the net interest margin, you talked about the five to six basis point benefit from this rate hike. Should we expect that sort of the 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 a similar magnitude?

Ralph Mesick -- Chief Risk Officer and Interim Chief Financial Officer

Jared, this is Ralph. I would say that the 5% to 6% kind of gives you a kind of an 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 -- on the deposit side. But I think that's a pretty good number. And then as we mentioned, we have about $5 billion as floating rate that will reprice with a hike 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 will see some big pickup there as well.

Jared Shaw -- Wells Fargo Securities -- Analyst

OK. 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 what you're buying today?

Ralph Mesick -- Chief Risk Officer and Interim Chief Financial Officer

Yes. 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 100 to 125 million in monthly runoff. And then looking at the securities, new production came on at about 211 basis points. So that compares to, I think, last quarter, it was around 167 basis points, so pretty nice lift there.

Bob Harrison -- Chairman, President, and Chief Executive Officer

Sorry, Jerry, this is Bob. Relative to the portfolio, they've just done a very good job structuring it. We haven't seen, as you saw in the slides that 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

OK. Great. 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 share -- on the CRE side what portion of a 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 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.

Jared Shaw -- Wells Fargo Securities -- Analyst

OK. Thank you.

Operator

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

Laurie Hunsicker -- Compass Point Research and Trading -- Analyst

Hi. Thanks. Good morning. Great.

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.

Laurie Hunsicker -- Compass Point Research and Trading -- Analyst

OK. 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 Research and Trading -- Analyst

$2.1 million. OK, great. And then you had made comments that the NIM for 2Q might be three 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 six basis points up? Or how should we be thinking about that?

Bob Harrison -- Chairman, President, and Chief Executive Officer

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's left relative rough and tough balances, we expect that to be a slower forgiveness and might even term out and so forth.

So we're not expecting to see the same level forgiveness that we saw in Q1.

Laurie Hunsicker -- Compass Point Research and Trading -- Analyst

Got it. OK. 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?

Bob Harrison -- Chairman, President, and Chief Executive Officer

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

Laurie Hunsicker -- Compass Point Research and Trading -- Analyst

Got it. OK. And then just a 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 five to six basis points round number 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

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, it was about 11.8; this quarter, about 9.8, somewhat 200 basis points lower.

Laurie Hunsicker -- Compass Point Research and Trading -- Analyst

9.8%. OK. Great. OK.

And did I extrapolate that right from your comments, you're roughly expecting five to six basis points on margin for every 25 basis point hike?

Ralph Mesick -- Chief Risk Officer and Interim Chief Financial Officer

No, I don't think we gave --

Bob Harrison -- Chairman, President, and Chief Executive Officer

I think we did this last quarter --

Ralph Mesick -- Chief Risk Officer and Interim Chief Financial Officer

Sort of what happened.

Bob Harrison -- Chairman, President, and Chief Executive Officer

Yes. That 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 Research and Trading -- Analyst

Sure. Sure. OK. That's super helpful.

OK. And then just to go -- I think Kelly and Andrew, both were hitting on noninterest 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, your other, other noninterest income line has been running 3.3, 3.5 million or so per quarter. It was only $900,000 obviously this quarter.

I mean does that normalize back to that same level? Or swap 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. So -- but even netting that out, that was three point-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

Yes. Coming back to that. So the swap fee income this quarter was about $962 million -- $962,000 and typically, we would probably hope to see maybe 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 a lumpy item.

And we're 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, when 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.

Laurie Hunsicker -- Compass Point Research and Trading -- Analyst

Another 4 million annually?

Ralph Mesick -- Chief Risk Officer and Interim Chief Financial Officer

Annual number, yes.

Laurie Hunsicker -- Compass Point Research and Trading -- Analyst

OK. That's great. OK. 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?

Bob Harrison -- Chairman, President, and Chief Executive Officer

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, as we're in the middle of 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 minds 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.

Laurie Hunsicker -- Compass Point Research and Trading -- Analyst

OK. OK. 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 -- your press release, if I'm looking at the number that's last 619 and unsecured consumer has become obviously such a hot button here. It looks like it's about a $113 million book. It's three-fourths 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 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.

Ralph Mesick -- Chief Risk Officer and Interim Chief Financial Officer

Yes. We're -- this is Ralph, Laurie. We're still at a pretty low level relative to charge-offs. That is a small book that -- was they booked 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 discipline 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 past dues are very light and to the extent that you take back a car, you're really recovering a lot of your charge --

Bob Harrison -- Chairman, President, and Chief Executive Officer

Yes, to clarify. I think you mean indirect portfolio not --

Ralph Mesick -- Chief Risk Officer and Interim Chief Financial Officer

Indirect, yes.

Bob Harrison -- Chairman, President, and Chief Executive Officer

Not specifically dealer doing floor plan. Yes, experience on that has been excellent, and that to Ralph's comments on the consumer. That's something we looked at several years ago and made some changes. We're seeing better performance, but it's a higher risk portfolio, relatively small for us, but higher risk portfolio.

Laurie Hunsicker -- Compass Point Research and Trading -- 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 signoff]

Duration: 44 minutes

Call participants:

Kevin Haseyama -- Investor Relations Manager

Bob Harrison -- Chairman, President, and Chief Executive Officer

Ralph Mesick -- Chief Risk Officer and Interim Chief Financial Officer

Ebrahim Poonawala -- Bank of America Merrill Lynch -- Analyst

Steve Alexopoulos -- J.P. Morgan -- Analyst

David Feaster -- Raymond James -- Analyst

Andrew Liesch -- Piper Sandler -- Analyst

Kelly Motta -- Keefe, Bruyette and Woods -- Analyst

Jared Shaw -- Wells Fargo Securities -- Analyst

Laurie Hunsicker -- Compass Point Research and Trading -- Analyst

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