Bank of Hawaii Corporation

Ladies and gentlemen, thank you for standing by, and welcome to the Bank of Hawaii Corporation fourth quarter 2020 earnings 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 the question during this session, you will need to press star then one on your telephone. Please be advised that today's conference is being recorded. If you require any further assistance, please press star then zero. I would now like to hand the conference over to your speaker for today, Cindy Warwick. You may begin.

Thank you. Good morning. Good afternoon, everyone. Thank you for joining us today as we discuss the financial results for the fourth quarter of 2020. On the call with me today is our Chairman, President, and CEO, Peter Ho, our Chief Financial Officer, Dean Shigemura, our Chief Risk Officer, Mary Sellers, and Janelle Higa, our new Manager of Investor Relations. Before we get started, let me remind you that today's conference call will contain some forward-looking statements. And while we believe our assumptions are reasonable, there are a variety of reasons that the actual results may differ materially from those projected. During the call this morning, we'll be referencing a slide presentation as well as the earnings release. A copy of this presentation and the release are also available on our website, boh.com, under Investor Relations. And now let me turn the call over to Peter Howe.

Thank you, Cindy. Good morning, everyone, or good afternoon. I'm going to touch a little bit on the Hawaii market, and I'll turn it over to Dean and to Mary to talk on finances as well as our improving risk profile. And then I'll finish with some thoughts on how we're thinking about 2021 before we take your questions. To begin with, though, I'd say quarter four represented a good quarter. It's a little bit noisy, but generally we saw a stabilizing economy, good revenue and balance sheet growth, good expense management when you cut through a bunch of noise in there. Again, fortress capital and a terrific liquidity position, and improving loan deferral population that Mary will touch on. And then finally, I think as we step into 2021, we're awfully well prepared to take on the challenges of this year. Let me touch on the economy for a bit on a few slides here. What you see here is Hawaii unemployment, really those twin towers in April and May of 23.6% and 23.4% representing effectively our high watermark as we stepped into the pandemic. And then winnowing down slowly, down slowly I guess is the catchphrase, but still stubbornly high, relative to pre-pandemic levels. Q4 forecast is coming in at about 13.5, which represents a bit of an improvement from the prior quarter. And then the forecast looking forward into Q1 is for a little bit of erosion in that number as we get through the holiday activity, as well as, I think, contribute to some of the infection rates that we're seeing on the mainland, in particular, our West Coast markets, which have a bigger impact on us than some other markets. This is the longer-term outlook for inflation on, or I'm sorry, unemployment on page five. Here you see the forecast as of 12-11 has been bumped up modestly. And again, that really is speaking to two things. One, a an infection rate, I think, probably above what we had anticipated and an infection rate occurring, as I mentioned, in some of our more strategic locations on the U.S. mainland, was probably not as embedded in this forecast after talking with the UHERO folks, is the amount of stimulus that is now looking what I would call possible. And so this forecast was really built around a level of stimulus, but probably more on the moderate side from where I think most people's eyes are right now. We've learned to GDP and personal income. You see in 2020, in the dark blue, the forecast is down 10 percent. It's actually a slight improvement from the prior year's forecast, really more for adjustment basis. As we look into 2021, basically what you hear was forecasting is basically a flat line across where we ended up in 2021 and then a bounce back in 2022. On the brighter side, personal income levels actually somewhat ironically, but not surprisingly versus what's happening across the entire country, grew in 2020 as a result of the extraordinary stimulus provided on the fiscal side into our system. Certainly, Hawaii, as a beneficiary of about $10 billion, enjoyed that surplus as well. A bit of a dip in 2021 is forecast. Again, I mentioned that this forecast was done with probably a little bit more of a little more sober view around the possibilities for stimulus in 2021. so maybe there's some room for upside there. But basically, the call is for personal income levels to get back to 2019 levels. Talk a little bit about the real estate market here on Oahu, which is, as I think most of you know, our primary market. Median sales for the year were up 5.2% for single-family homes, 2.4% for condominiums. December on December numbers are even stronger at 6.1 percent and 6.9 percent, respectively. And inventory conditions continue to be very tight. So, days on market for single families, 14 days. Days on market for condominiums, 24 days. Still very much a seller's market, if you will. I'll finish on the infection, or I'm sorry, let me turn to daily arrivals before I get to the infection. As I think most of you know, we launched our Safe Travels program. That has been, after a few fits and starts and snafus, I think a pretty well-received program. We're actually getting to what I'd call more of a normal state of operation there. And what you see is it's having some positive impact on our arrivals, but certainly nothing or anywhere near where we were previously. So running at this point 20% to 30%. of prior year and likely to wind out at that level short of the pandemic cooling itself or subsiding in our key markets and probably really looking more towards the back end of this year and allowing for, hopefully allowing for the vaccine to do its job. On the next slide, over to infection rates, you know, still a very, very good story for Hawaii. You know, the isolation that I mentioned has created challenges for us from a travel and a visitor industry standpoint. It works the other way for us on the infection side. So Hawaii, really much through the entirety of the pandemic, has been one of the safer places in the country, I'd say, by infection average per day per 100,000 people. So, that's a little snapshot on the local marketplace now. Let me turn it over to Dean, who will give you some of the financial highlights. Dean?