Bank of Hawaii Corporation

Good day and thank you for standing by. Welcome to the Bank of Hawaii Corporation third quarter 2022 earnings conference call. At this time, our participants are on 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'll need to press star 11 on your telephone. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today. Jennifer Lam, Senior Executive President and Treasurer of Director of Investor Relations. Please go ahead.

Good morning. Good afternoon, everyone. Thank you for joining us today. On the call with me this morning is our Chairman, President, and CEO, Peter Ho, our Chief Financial Officer, Dean Shigemura, and our Chief Risk Officer, Mary Sellers. 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 the actual results may differ materially from those projected. During the call, we'll be referencing a slide presentation as well as the earnings release. A copy of the presentation and release are available on our website, boh.com, under Investor Relations. And now I'd like to turn the call over to Peter Ho.

Thanks, Jennifer. Aloha and good morning or good afternoon, everyone. Thanks for your continued interest in Bank of Hawaii. Q3 was another solid quarter for the bank. Loan growth net of PPP loans registered another solid quarter up 2.9% for the linked quarter and 12.7% year over year. Our growth was balanced across both consumer and commercial categories and sourced predominantly from our core Hawaii and West Pacific markets. Production quality was strong. Overall deposits were down 0.7% in the quarter on a linked basis resulting from lower public deposits. Consumer and commercial deposits were essentially flat in the quarter. Non-interest-bearing demand deposits as a percentage of overall deposits remained steady at 35%. Deposit betas continue to perform quite well and our 64% loan-to-deposit ratio gives us funding and pricing flexibility. While betas will naturally rise further as overall market rates peak, We believe the strong core nature of our deposit base, being 50% consumer and 42% commercial, the granularity of our deposits, with nearly half of our combined consumer and commercial deposit balances sitting in accounts sized under a half million dollars, and the overall liquidity of the Hawaii deposit market positions us quite well. Net interest income and net interest margin improved nicely in the quarter, as Dean will share with you in a moment. Recurring non-interest revenue was lower in the quarter. Much of the drop was as a result of sharply higher market interest rates in the quarter. Credit remains pristine. During the quarter, we took a $6.9 million charge to terminate a lease entered into in 2000. Bank of Hawaii was active in the national leveraged lease market from 1987 to 2004. In 2005, we made the strategic decision to exit this business and begin the orderly wind-down of our portfolio. With the termination of this lease, I'm pleased to note that we have now effectively exited the leveraged lease business. As we look forward, higher rates and the specter of recession position us well on a relative basis, given the quality of our deposit franchise, our liquidity, and our history of risk conservatism. As is our custom, I'll share with you now some commentary on market conditions. Dean will follow with more detail on our financials. And Mary will close with some commentary on our risk position. We'll be then happy to answer your questions. So on this slide, you can see unemployment levels have actually reached a bit of a milestone. So unemployment as of September is now down to 3.5%. The significance of that is basically we are now at parity with the U.S. national average for the first time really since the beginning of the pandemic. Turning to the visitor market, what you see here is continued strong performance overall and in particular with our U.S. domestic visitor. You see in that light blue band down on the bottom really the beginning of the return of Japanese visitors. In October of this year, the government, the Japanese government, basically opened the lanes to Japanese to make trips abroad again. And we're beginning to experience that here in the islands, starting off slowly. And I think perhaps that the yen conversion rate may impact the overall outcome. But nonetheless, happy to see Japanese visitors returning to the islands. and potentially a nice buffer against potential economic slowdown conditions on the U.S. mainland. On the next slide, you see revenue per available room, REVPAR performing quite nicely versus last year and performing quite nicely versus even pre-pandemic levels. And then finally, the local real estate market as demonstrated by the Oahu market for single-family homes and condominiums, despite the spike in interest rates recently, continues to perform pretty well. Median sales prices September on September are still positive for both single-family homes as well as condominiums. Inventory and days on market slowing a bit, but still pretty tight conditions and still lower pretty meaningfully versus pre-pandemic levels. So now let me turn the call over to Dean, who will share with you some updates on our financials. Dean?