First Hawaiian Inc
NASDAQ:FHB

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Earnings Call Transcript

Earnings Call Transcript
2022-Q2

from 0
Operator

Good day and thank you for standing by. Welcome to the First Hawaiian Inc. Second Quarter 2022 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers presentation, there will be a question-and-answer session. [Operator Instructions]

Please be advised that today’s conference is being recorded. I would now like to hand the conference over to Kevin Haseyama, Investor Relations Manager. The floor is yours.

K
Kevin Haseyama
Investor Relations Manager

Thank you, Carmen. And thank you everyone for joining us as we review our financial results for the second quarter of 2022. With me today are Bob Harrison, Chairman, President and CEO; and Ralph Mesick, Chief Risk Officer and Interim CFO. We have prepared a slide presentation that we will refer to in our remarks today. The presentation is available for downloading and viewing on our website at fhb.com in the Investor Relations section.

During today’s call, we will be making forward-looking statements, so please refer to slide one for our Safe Harbor Statement. We may also discuss certain non-GAAP financial measures. The appendix to this presentation contains reconciliations of these non-GAAP financial measurements to the most directly comparable GAAP measurements.

And now, I will turn the call over to Bob.

B
Bob Harrison
Chairman, President and CEO

Good morning, everyone. I will start by giving a brief local update. The Hawaii economy continues to benefit from the recovery in the tourism industry. In June, the statewide unemployment rate was 4.3%, compared to 3.6% nationally.

Total visitor arrivals were 843,000 in June, 11% below June 2019 arrivals. A strong result considering the Japanese visitors were only 1.4% of the total, compared to over 13% in June 2019.

This represents significant upside when Japanese arrivals return to more normalized levels. Importantly, the spend is up more than 12% over last year, which is what everyone wants, fewer visitors with the higher spend.

While interest rates accounts have slowdown in the housing market, continued demand, lack of supply have kept prices stable. In June, single family home sales were down 20% from last year with the median sales price of $1.1 million was 12% higher.

Turning to slide two, we had a strong quarter reporting net income of $59.4 million and EPS of $0.46. Pre-provision net revenue was up $8.9 million quarter-over-quarter on higher net interest income.

Our return on average tangible common equity was 18.79% and the Board maintained the dividend at $0.26. We had good growth in both loans and deposits and the balance sheet remains well positioned for rising rates and is well capitalized.

During the quarter, we have repurchased over 290,000 shares at an average price of $24.09 for $7 million. And finally, we successfully converted to our new core operating system, an important step on our digital transformation we started a couple of years back.

I want to make a few comments on the balance sheet and then provide more detail on loans and deposits. Turning to slide three, we saw a good growth and a nice rotation on the balance sheet, which remains asset sensitive. We are highly liquid and well capitalized to support our business objectives.

Total assets grew by 1.3% to $25.4 billion in the second quarter and the asset mix improved with the deployment of cash into higher yielding loans. The balance sheet remains very asset sensitive with about $5.1 billion or 39% of the loan portfolio re-pricing within 90 days. It has been very responsive to the recent fed rate hikes.

Our liquidity position remains very strong, with the 58.7% loan-to-deposit ratio, excess cash balances and steady cash flows from the investment portfolio. We have ample liquidity to fund future loan growth.

The investment portfolio has performed well during this period of volatile interest rates. The duration of the portfolio has remained stable at 5.6 years at the end of the second quarter and is unchanged from year-end 2021. Cash flows from the portfolio continue to run between $100 million per month to $125 million per month.

We continued to maintain strong capital levels after dividend payments and share repurchases. The common equity Tier 1 ratio was 11.9% at quarter end and the total capital ratio was 13.14%. Net of an AOCI adjustment, the securities book was flat at roughly $8.1 billion. In the quarter, we elected to reclassify $4 billion of the portfolio to held to maturity to reduce the accounting volatility associated with AOCI adjustments.

Turning to slide four, period end loans and leases were $13.3 billion, an increase of $371 million or 2.9% from the end of Q1. Excluding PPP loans, total loans and leases increased by $434 million, 3.4% compared to the prior quarter. We experienced growth in all portfolios with the largest increases in CRE, C&I, residential and home equity.

As expected, the increase in the commercial book skewed toward our mainland markets, where the rebound of loan demand started earlier. On a year-to-date basis, total loans and leases are up $301 million or 2.3%. Excluding PPP loans, total loans and leases are up $474 million or 3.7% in line with our full year outlook of mid-to-high single-digit growth, which remains unchanged.

Turning to slide five, deposits increased by $331 million or 1.5% to $22.6 billion at quarter end. The increase was a result of a $439 million increase in public deposits, driven by $458 million increase in operating account balances. That was partially offset by a $19 million decline in public time deposits. Non-public deposit balances declined about $108 million or less than 1%.

Our cost of deposits remained low at 8 basis points, 3 basis points higher than the prior quarter. We anticipate more variability around deposit flows over the course of the year, but have a variety of options to fund loan growth, including a higher than normal cash balance.

Now, I will turn it over to Ralph to cover the income statement and balance sheet.

R
Ralph Mesick
Chief Risk Officer and Interim CFO

Thank you, Bob. Moving to slide six, you see that our asset sensitive balance sheet benefited from the increase in interest rates. Net interest income increased $11.2 million over the prior quarter to $145.1 million. Excluding PPP fees and interest, net interest income increased $13.2 million. The increase was primarily due to higher yields on securities and loans, and higher average loan balances.

The net interest margin increased 18 basis points to 2.6%. Since the balance of unamortized PPP fees is deminimis, it will have a material impact on the NIM going forward. At 39% of loan -- as 39% of the loan portfolio re-prices in 90 days, our balance sheet remains well positioned to benefit from rising interest rates. We expect the NIM to increase by 25 basis points to 30 basis points in the third quarter.

Turning to slide seven, non-interest income was $44.1 million this quarter, a $2.8 million increase over the prior quarter. Activity based revenue continue to do well, and trust and investment services income remained stable in spite of market volatility.

BOLI income continued to be negatively impacted by the volatility in bond yields and equity markets. When this volatility subsides, we expect BOLI income to return to historical levels of $3 million per quarter to $3.5 million per quarter. This would put us in line with our expectation of $47 million per quarter to $48 million per quarter.

Going to slide eight. Non-interest expense was $109.2 million, $5.1 million higher than the prior quarter. Most of this increase had been expected with a ramp-up in implementation costs ahead of the core system conversion and the start of the new system related expenses. These increases have been built into the most recent guidance.

Compensation related expenses increased by $1.7 million as we saw the full quarter impact of merit increases, a reduction in capitalized salaries related to the core project and the hiring of temporary help to support us through the May system conversion.

Contracted services were up $1.5 million, largely due to non-recurring consulting fees. Equipment costs increased $1.8 million and the increase was primarily related to the new core services contract.

Looking ahead to the second half of the year, we anticipate that expenses will be between $113 million per quarter and $114 million per quarter, slightly higher than our original outlook. The largest drivers behind this increase are higher compensation costs due to inflationary adjustments and additional post-core conversion costs.

Turning to slide nine, I will make a few comments on credit. Asset quality remained strong. In Q2, net charge-offs were $2.3 million, about $300,000 lower than Q1. Our year-to-date annualized net charge-off rate is 8 basis points, lower than the rates over the last three years. NPAs and 90-day past due loans remained low at 10 basis points as flat from the prior quarter. Criticized assets continued to decline, dropping from 1.29% of total loans in Q1 to 0.91% in Q2.

The Bank recorded a $1 billion asset provision for the quarter. Loans 30 days to 89 days past due were $54.7 million or 41 basis points of total loans and leases at the end of Q2. The level of past dues were elevated at the end of the quarter as we implemented some operational changes related to the conversion. By mid-July, we saw a significant improvement with nearly half of the reported past dues being cleared, bringing us back in line with the levels we saw at the end of the first quarter.

Moving to slide 10, you see a roll forward of the allowance for the quarter by disclosure segments. The allowance for credit loss decreased $1.3 million to $148.9 million. The level equates to 1.12% of all loans and 1.13% net of PPP loans.

The reserve for unfunded commitments was $29 million. While reserve levels have decreased as we moved through the post-pandemic reopening, they remain elevated to account for the macroeconomic uncertainties.

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

B
Bob Harrison
Chairman, President and CEO

Thanks, Ralph. So to summarize, in spite of the volatility in the national economy, Hawaii has experienced good visitor arrivals this summer and the local economy is doing well. At the Bank, we have a good outlook for the second half of 2022 and beyond as we have a balance sheet that is well positioned for growth with good liquidity, strong capital and excellent credit quality.

Now, we would be happy to take your questions.

Operator

Thank you. [Operator Instructions] Our first question comes from Steven Alexopoulus with J.P. Morgan. Please go ahead.

S
Steven Alexopoulus
J.P. Morgan

Hi, everybody.

B
Bob Harrison
Chairman, President and CEO

Hey, Steve.

R
Ralph Mesick
Chief Risk Officer and Interim CFO

Good morning, Steve.

S
Steven Alexopoulus
J.P. Morgan

I like to start on the deposit side. So you guys reported strong deposit growth in the quarter in the backdrop where many other Banks are showing deposits running off. Curious, was that intentional, in other words, were you out there in the market competing for deposits or was it just flow related just coming in from the public side?

B
Bob Harrison
Chairman, President and CEO

Yeah. Maybe I will start and ask Ralph to add to it Steve. So primarily it was the operating balances at the State of Hawaii is, we have had there -- we have been there depository for quite some time and they just got money and on balance sheet with us.

The public time deposits went down over the quarter, but we did see a substantial increase in the public operating account, the DDA account. We saw a slight decrease in just all the consumer IPC deposits, but nothing more than normal movement.

S
Steven Alexopoulus
J.P. Morgan

Okay. That’s help…

R
Ralph Mesick
Chief Risk Officer and Interim CFO

We don’t have a lot…

S
Steven Alexopoulus
J.P. Morgan

That’s helpful. So probably -- okay. So…

R
Ralph Mesick
Chief Risk Officer and Interim CFO

Go ahead.

S
Steven Alexopoulus
J.P. Morgan

… if you look at the loan-to-deposit ratio, it’s pretty low. How do you think about funding the loan growth for the rest of the year, do we see the loan to deposit ratio moving up or do you think you plan to hold it pretty steady?

B
Bob Harrison
Chairman, President and CEO

So we think it should be moving up. We have a lot of cash on balance sheet higher than normal. I think it’s right about $1.3 billion, yeah, and that’s higher than we would normally and certainly higher than pre-pandemic levels. So it starts with being able to fund that rotation out of cash into loans there and then with, obviously, the roll off of the investment portfolio of $100 plus million a month.

S
Steven Alexopoulus
J.P. Morgan

Got you. Okay. That’s helpful. And then on the margin, I appreciate the NIM guide for the third quarter. What’s the deposit beta that you are assuming underneath the NIM guide and do you still expect this similar through the cycle beta as of the prior cycle?

R
Ralph Mesick
Chief Risk Officer and Interim CFO

Yeah. Steve, this is Ralph. Right now we are assuming about a 20% deposit beta.

S
Steven Alexopoulus
J.P. Morgan

Got you. Okay. And any change to the through the cycle. I think it’s the last time it would be about similar to the last cycle?

R
Ralph Mesick
Chief Risk Officer and Interim CFO

Yeah. Right now we are looking at it probably being similar to the last cycle and a lot of that has to just do with the level of liquidity in the marketplace right now in this local market…

S
Steven Alexopoulus
J.P. Morgan

Got you.

R
Ralph Mesick
Chief Risk Officer and Interim CFO

… particularly.

S
Steven Alexopoulus
J.P. Morgan

Okay. That’s helpful. And just, finally, any updates on the CFO search? Thanks.

B
Bob Harrison
Chairman, President and CEO

Yeah. No. And I meant to mention that, we really appreciate Ralph continuing as Interim. We are still working with Korn Ferry to identify the right candidate. But we haven’t done that yet. But we are working very hard with them to make that happen.

S
Steven Alexopoulus
J.P. Morgan

Okay. Thanks for taking all my questions.

B
Bob Harrison
Chairman, President and CEO

Thank you.

Operator

Thank you. One moment for our next question please. We have a question from David Feaster with Raymond James. Please go ahead.

D
David Feaster
Raymond James

Hey. Good morning, everybody.

B
Bob Harrison
Chairman, President and CEO

Good morning, David.

R
Ralph Mesick
Chief Risk Officer and Interim CFO

Hi, David.

D
David Feaster
Raymond James

Look, you guys are, trying to following up on the margin question, you guys are obviously extremely rate sensitive, we have had a huge amount of margin expansion, continuing to benefit from higher rates, just got another 75, which should continue to play through. But I guess -- and look rate sensitivity is just natural for you all just given the business model and the strength of your core deposit franchise. But as you think about managing rate sensitivity, is there any appetite over the next couple of quarters to maybe lock in some higher rates and take some sensitivity off the table, and if you did so, what would your approach to doing that be?

R
Ralph Mesick
Chief Risk Officer and Interim CFO

Yeah. Steve -- Dave, I will start. This is Ralph. I think right now when we think about the balance sheet. We have three levers; one being just working with the clients in the swap program, client derivatives; second being the securities portfolio; and third being just straight on balance sheet hedging activities.

I think right now, we would probably ease into any kind of a changing positioning, we wouldn’t try to time the market, and we have looked at doing -- we have done a little bit of, received fixed swaps in the past quarter and then we will also look at probably looking at some of the maybe either swaps or callers.

D
David Feaster
Raymond James

Okay. Okay. And then maybe just touching on asset quality, look, the macro economy is pretty volatile right now, you have got a conservative approach to credit and phenomenal asset quality. But I am just curious maybe as you step back and look at a high level, is there anything that you guys are watching more closely and how do you think about credit more broadly, is there anything that you are seeing, any signs of concern? And then just the pulse of your clients, what are you hearing from your clients, are you -- are they still investing and/or are you starting to hear maybe on the margin any type of change in a bit more trepidation, just given the uncertainty?

B
Bob Harrison
Chairman, President and CEO

Yeah. Let me start. This is Bob and maybe hand it off to Ralph. So we haven’t seen any indications yet tangible evidence. As Ralph mentioned in his remarks, we saw a little blip in just collections on one consumer portfolio that’s been addressed. But, generally, where we see weakness in the consumer side, we foresee it in credit cards and indirect lending and that hasn’t happened as of yet.

More broadly, we have -- to answer your other question, we have seen a couple of projects push the pause button on the mainland that we were looking at. But nothing here locally, what we have seen locally is, people are continuing on to invest. But, Ralph, turn it over to you, if you have any comments.

R
Ralph Mesick
Chief Risk Officer and Interim CFO

Yeah. I would just say that, we had the opportunity with the pandemic to really front load, and I think, CECL was good for that purpose. So I think we have embedded a lot of the expectation of stress into the reserve today. And then when we look at the portfolio, we had the opportunity as well to really take a real deep dive. So I think we feel pretty good about what we have in the portfolio.

And I would say that, where we would probably see the most stress given the current situation is going to be smaller consumer and small business loans. And again, I think, as we look at the reserve, we have taken I think a pretty big overlay to support any stress we see there.

D
David Feaster
Raymond James

Okay. And then just last one from me, maybe just with the core conversion completed, could you talk about some of the immediate benefits of this, you mentioned some operational changes. And then just curious what’s next on the docket, you have done a phenomenal job on the tech front, just curious whether there’s any other upcoming investments or partnerships that you might be interested and what initiatives are next up on the tech front?

B
Bob Harrison
Chairman, President and CEO

I thought we were going to get a quarter off, Dave. So, we had to answer that question.

D
David Feaster
Raymond James

What have you done pretty lately?

B
Bob Harrison
Chairman, President and CEO

That’s exactly. No. We -- there’s still some follow on stuff for the core project that we are working through. It primarily was to automate a number of our manual processes and so that has mostly happened and working through, as I said the bits of that.

What’s next on the agenda, we have a pretty aggressive roadmap that Chris Dods, our COO has laid out for us and we are going to be executing on that throughout the rest of this year and next year, and a lot of things coming.

If you don’t mind, I’d rather answer that more fully next quarter when some of those are more in flight than they are today, when we are just kind of really getting through the last of the core conversion and picking up the pieces and candidly giving people a little bit of a break as well.

D
David Feaster
Raymond James

Are we looking at maybe more internal efficiency improvement or outward growth initiatives or is it again just don’t want to talk about it yet?

B
Bob Harrison
Chairman, President and CEO

It’s both. Clearly, we are always trying to be more efficient in what we are doing, but at the same time, what we are looking at is provide more convenience for the customer. And one has in, for example, with the core conversion we were able to enhance our online account opening.

And we are going to be spending more time on that going forward and to further enhance that, but that’s one of the benefits we have got just with the core conversion and that’s an example of the things we are continuing to be doing over time.

D
David Feaster
Raymond James

Correct. Thanks everybody.

Operator

One moment for our next question. Our next question is from Andrew Liesch with Piper Sandler. Please go ahead.

A
Andrew Liesch
Piper Sandler

Hey. Good morning, everyone.

B
Bob Harrison
Chairman, President and CEO

Good morning.

A
Andrew Liesch
Piper Sandler

Just want to follow-up on the loan growth guidance still seems intact, but how does the pipeline fit today, and I guess, what’s the makeup of the pipeline. Is it still more weighted towards commercial real estate and C&I and then any comments around what you are seeing in the dealer flow in book would also be appreciated?

B
Bob Harrison
Chairman, President and CEO

Sure. Andrew, this is Bob. Maybe I will take that question to start off, but then ask Ralph to add additional comments. What we are seeing -- what we saw, as I mentioned in my remarks is, we saw -- as you saw, heavy commercial real estate growth, most of that was on the mainland this quarter.

We still see a good pipeline going forward for the quarter we are in, more of a mix bag to Hawaii, probably a little bit heavier in the mainland this quarter, but pretty strong Hawaii pipeline for the quarter end. We are still expecting to see some C&I growth, some of that’s still along with residential on HELOC.

For the dealer it’s been eking some gains up quarter-after-quarter for this year and is starting to see some continued recovery in that. I don’t think we will see broad-based volume coming out of the manufacturers, still closer to year-end or maybe into 2023, to be honest. So Ralph anything you would add to that.

R
Ralph Mesick
Chief Risk Officer and Interim CFO

No. Not really.

A
Andrew Liesch
Piper Sandler

Got you. And then the residential in the HELOC, is that local or is that in the mainland?

B
Bob Harrison
Chairman, President and CEO

Yeah. We are only doing those products within our geographic footprint.

A
Andrew Liesch
Piper Sandler

Okay. That’s right. All right. You have covered all my other questions. I will step back. Thanks.

B
Bob Harrison
Chairman, President and CEO

Thank you.

Operator

Thank you. One moment for our next question please. Our next question comes from Kelly Motta with KBW.

K
Kelly Motta
KBW

Hi. Good morning. Thank you so much for the question. If I could circle back to NIM and the deposit side, you obviously had the big inflow of public deposits this quarter, just wondering if you could remind us of the seasonality, maybe the re-pricing of the public deposit book, as well as if you are -- what your NIM guidance assumes in terms of either maybe outflows of those to seasonality, just curious if I can get the balance sheet right sized?

R
Ralph Mesick
Chief Risk Officer and Interim CFO

Yeah. I would say that -- this is Ralph. I would say that public deposits, they are operating accounts. They are probably, it’s really hard to predict what the state will do, but they are probably in a range, which we would anticipate going forward and we have been working with them during the pandemic, to try to get them is to put some of that money into alternative asset classes or I should say, investments -- short-term investments just to help us keep some leverage off the balance sheet. So I think that’s probably going to going to stick.

We don’t anticipate at this time getting to the public time space. And I think when you look at the balance sheet itself, given the cash position, given the securities run-off and just given the level of high quality assets. We probably can fund to fund growth and take some deposit loss and protect our margin. So I think we feel pretty good about the NIM guidance right now.

K
Kelly Motta
KBW

Okay. Thanks. Thanks for that. And then maybe lastly, most of my questions have been asked and answered. Just on the buyback that the back in the market this quarter. I am wondering about your appetite for further share repurchase is going forward? Thanks.

B
Bob Harrison
Chairman, President and CEO

Yeah. Kelly, this is Bob. So that’s something capital return to shareholders is very important to us, that’s probably to keep our strong dividend. One of the issues as we talked about, I believe last quarter and maybe even at the fourth quarter call is, anticipating this higher loan growth and we have retained our internal guide of looking for our 12% common equity Tier 1.

So we will probably see muted buybacks for at least a good chunk of this quarter until we get a better feel for with the loan growth is going to be, because we do want to make sure we retain and maintain the strong capital level.

Later in the year, we will certainly be looking at that regularly and maybe that will change, but for now, we are really going to be focusing on growing quality loans and supporting that with a good amount of capital.

K
Kelly Motta
KBW

Got it. That’s all from me. Thanks so much.

B
Bob Harrison
Chairman, President and CEO

Yeah. You bet.

Operator

Thank you. One moment for our next question. All right. We have a question from Laurie Hunsicker with Compass Point. Please go ahead.

L
Laurie Hunsicker
Compass Point

Yeah. Hi. Thanks. Good morning.

B
Bob Harrison
Chairman, President and CEO

Good morning.

L
Laurie Hunsicker
Compass Point

Ralph, I have a question going back to margin. I feel like we are all asking on margin. But the 25-basis-point to 30-basis-point guide, is that core ex-PPP. In other words, I am looking your PPP fees for about 3 basis points on margins. So are you thinking that as the 250 starting point or at 260 headline, how are you thinking about that?

R
Ralph Mesick
Chief Risk Officer and Interim CFO

Yeah. I think the 25 basis points would be of PPP. PPP is going to be pretty small contributor going forward.

B
Bob Harrison
Chairman, President and CEO

That’s up to 260.

R
Ralph Mesick
Chief Risk Officer and Interim CFO

Yeah.

B
Bob Harrison
Chairman, President and CEO

Yeah. So that would be up to 260…

L
Laurie Hunsicker
Compass Point

Up to 260.

B
Bob Harrison
Chairman, President and CEO

… Laurie. Yeah.

L
Laurie Hunsicker
Compass Point

Right. Right. And I am aware that PPP as I look at. Okay. Just wanted to clarify. Okay. And then on non-interest income, your guide, did that assume anything in terms of change to overdraft and NSF fees or how are you thinking about that?

B
Bob Harrison
Chairman, President and CEO

So -- this is Bob. We think that’s going to be flat, as you have seen our reported results have been down over the last couple of years and we are not going to see much growth in that area. So we are really not relying on that. What we see is, I think, Ralph touched on this is, as market volatility dampens a bit a return of a more normalized BOLI income for non-interest income.

L
Laurie Hunsicker
Compass Point

Right. Yes. I appreciate that. 3 to 3.5. That’s helpful. But so your overdraft and NSF fee is that then something you probably are going to address in 2023 or?

R
Ralph Mesick
Chief Risk Officer and Interim CFO

Well, that’s something…

L
Laurie Hunsicker
Compass Point

Is it something…

B
Bob Harrison
Chairman, President and CEO

Obviously lot happening on that nationally and we are following that. We are looking at alternatives. Candidly during the core conversion isn’t the time to be changing structure is like that, but we are looking at it and we haven’t made any decisions yet as far as any potential changes. But we are certainly recreate it.

L
Laurie Hunsicker
Compass Point

Got it. Got it. Okay. And then on expenses, I appreciate your guide there, can you help us think about with that, obviously you had a lot of moving parts driving your expenses higher this year, but how we should be thinking about expense growth into 2023?

B
Bob Harrison
Chairman, President and CEO

Yeah. Laurie, this is Bob again. That’s a little far out for us right now. Certainly, we are comfortable with the guide that Ralph gave of $113 million to $114 million for the next two quarters, but we will have to wait till later in the year to get a really an outlook for 2023.

L
Laurie Hunsicker
Compass Point

Okay. Okay. And then just last question I had was with the warning light starting to flash, can you give us a refresh just on two loan categories your office, as well as leverage lending. Can you just refresh us on what those look like and remind us what’s Hawaii based versus mainland based?

B
Bob Harrison
Chairman, President and CEO

Sure. Happy too. Total office is about $884 million, about a third of that is small balance CRE. We call that small balance being under $5 million. So very often that’s mixed use partly owner occupied, et cetera. The mainland exposure is $373 million, with about $150 million of that being in transactions evolving collateral pools with multiple properties, so less tenant concentration, a lot of across collateralization, et cetera.

The Hawaii exposure is $466 million and that includes a lot of that small balance loans and in Guam we have about $45 million, all of which is small balance loans. Of that portfolio about $2.9 million is classified. So very, very small number. Moving to...

L
Laurie Hunsicker
Compass Point

Okay.

B
Bob Harrison
Chairman, President and CEO

Go ahead.

L
Laurie Hunsicker
Compass Point

Did you have an LTV on that?

R
Ralph Mesick
Chief Risk Officer and Interim CFO

We don’t think that’s really, I think the better approach is to take a look at what the loan classifieds are and they are really about $2.9 million.

L
Laurie Hunsicker
Compass Point

Okay.

R
Ralph Mesick
Chief Risk Officer and Interim CFO

Yeah.

B
Bob Harrison
Chairman, President and CEO

Yeah. And then, yeah, we are always looking at this and looking at the stressing the tenancy, the rollover risk, the concentration, all of that. So we are very comfortable with that and then we also have within our reserve an overlay in the CRE space. For any potential stresses that may come up, maybe seeing some of that today, but we don’t see a lot of it here within our markets.

Moving over to leverage loans, as you know, I mean, that’s a -- there’s not a common definition for that and so we are trying to piggyback off of, I think, the OCC definition, which is 6 times debt commitments, not outstanding debt commitments to EBITDA and using that metric we have $39 million at quarter end and all are past rated.

And just to remind you is, about this time in 2019 we did sell off over $400 million of our snick portfolio, some of which included leverage line data as well. So we really took that number down in 2019.

L
Laurie Hunsicker
Compass Point

Great. Thanks for the color.

Operator

Thank you. And I am not showing any further questions in the queue. I am going to turn it back to Mr. Haseyama for his final thoughts.

K
Kevin Haseyama
Investor Relations Manager

Thanks Carmen. We appreciate your interest in First Hawaiian and please feel free to contact me if you have any additional questions. Thanks again for joining us and have a nice weekend.

Operator

Thank you. And this concludes today’s conference call. Thank you for participating and you may now disconnect.