First Hawaiian, Inc.

Ladies and gentlemen, thank you for standing by, and welcome to the first Hawaiian, Inc., third quarter 2020 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press star then 1 on your telephone. Please be advised that today's call is being recorded. If you require additional assistance, you may press star then 0 to reach an operator. I would now like to turn the call over to Kevin Haseyama. Please go ahead.

Thank you, Michelle, and thank you, everyone, for joining us as we review our financial results for the third quarter of 2020. With me today are Bob Harrison, Chairman, President, and CEO, Ravi Malela, CFO, and Ralph Misik, Chief Risk Officer. 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 will 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.

Good morning, and thank you for joining us as we review our third quarter results. I'd like to start with an update on the current situation here in Hawaii, if you can look at slide two. As we reported on our last call, the local economy reopened in early July, and following a rise in the number of new COVID cases in late July and August, the island of Oahu went into a second stay-at-home order in early September. Oahu began reopening in late September under a new four-tier reopening strategy with quantitative criteria for loosening and tightening restrictions. The island started at Tier 1, the most restrictive tier, and moved to Tier 2 yesterday as we were successful in holding down the number of new daily cases and had a low positivity rate. Another important step in the reopening of the Hawaii economy was the start of the pre-travel testing program on October 15. The program allows Trans-Pacific travelers to bypass the state's 14-day quarantine if they test negative for COVID-19 within 72 hours of traveling to Hawaii. Over the last few days, we've seen the number of visitor arrivals in the 2,000 to 4,000 per day range. This is an important step in restarting the tourist industry, which is the main reason for the state's unemployment rate, which remained high in September at 15.1%. At the bank, we have begun the process of reopening the branches that were closed as a result of the pandemic. But after further evaluation, we decided that four of the branches will remain closed permanently. In July, we launched our online mortgage origination portal, enabling borrowers to apply for a mortgage digitally. We also started helping PPP borrowers prepare to apply for loan forgiveness. We have hosted several webinars in conjunction with the SBA to educate borrowers on the forgiveness process, and we have already begun submitting applications for forgiveness to the SBA. Now, if you turn to slide three, I'll go over the third quarter highlights. We had a solid quarter. Our results reflect increased economic activity from the reopening of the local economy, careful balance sheet management, and improved asset quality. Third quarter pre-tax, pre-provision net revenue increased 11.3% over the second quarter to $91.3 million. We had net interest income and non-interest income increased while holding expenses flat. In the quarter, we were also able to improve our deposit mix as consumer and commercial deposits increased by $166 million, and we reduced public deposits by $630 million. As a result, our total cost of deposits declined six basis points to 13 basis points, and this contributed to the 12 basis point improvement in net interest margin. Asset quality improved in the third quarter, and our current economic outlook remains relatively unchanged from the second quarter. As a result, we did not need to add much to our allowance for credit loss, and our provision expense was $5.1 million for the quarter. We finished the quarter with strong liquidity and capital, and the Board maintained the dividend at $0.26 per share, a 52% dividend payout ratio. And now I'll turn it over to Ralph to discuss asset quality, provisioning, and loan deferrals. Thank you, Bob.