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spk06: Good day and thank you for standing by. Welcome to the Bank of Hawaii Corporation fourth quarter 2022 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 1-1 on your telephone and you will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1-1 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Jennifer Lamb, Senior Executive Vice President, Treasurer, and Director of Investor Relations. Please go ahead.
spk07: Thank you. 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.
spk02: Thank you, Jennifer. Good morning or good afternoon, everyone. We appreciate your interest in Bank of Hawaii. The bank achieved another solid quarter of performance to end the year. Loans grew 2.4% on a linked basis and 11.3% year-on-year, reflecting balanced growth across our corporate, commercial, and consumer businesses. Deposits were down 1.3% from the prior quarter, but up 1.3% from a year ago. At quarter end, our total deposit beta was 11.5% cycle to date, reflecting the diversified, granular, and seasoned nature of our deposit base. By segment, our deposits are 50% consumer, 42% commercial, and 8% public. Nearly half, or 47%, of our consumer and commercial deposits come from accounts under a half million dollars in account size, and 73% of our deposits have a tenure of 10-plus years or more with Bank of Hawaii. Expenses were well controlled. Credit quality remains excellent. The turn on average common equity was 21.3% for the quarter. As is our custom, I will now walk through local market conditions and then hand the call over to Dean, who will delve deeper into the financials and then Mary Sellers will touch on credit for the company. At that point, we'd be happy to entertain your questions. Now moving on to slide three, you can see that the economy, and namely employment, continues to improve in the islands. November's state unemployment rate was 3.3%, marking the second straight month that it has outperformed national unemployment as a whole. Prior to October, state of Hawaii unemployment had been higher than the national average for 29 consecutive months. The visitor sector continues to perform well. While arrivals remain down from pre-pandemic levels as a result of the continued lag in the international and in particular Japanese visitor segments, overall visitor days are nearly at par to pre-pandemic levels as visitors are visiting longer overall and the mixed shift of visitors is tilting towards traditionally longer staying segments. On slide five, you can see that RevPAR is performing well ahead of pre-pandemic levels which has helped push overall visitor expenditures 40% higher than pre-pandemic levels on a year-to-date basis. Finally, values in the Oahu housing market remain stable, with the median home price of a single-family home running flat at $1 million in December, while condominium prices were up modestly in December at $503,000. Inventory levels remain tight despite a meaningful slowdown in sales. And now let me turn the call over to Dean. Dean?
spk04: Thank you, Peter. Our solid loan growth continued in the fourth quarter. Total loans increased by $324 million, 2.4% link quarter, and by $1.4 billion, or 11.3% year-on-year. In 2022, we realized double-digit growth across both commercial and consumer loan portfolios, with year-over-year growth of 10% and 12.2%, respectively. As Mary will discuss, loans continue to be predominantly real estate secured with low LTVs. The double-digit annualized growth trend has led to significant market share gains in our primary lending market, where we hold the largest market share. Our deposits remain a source of strength and value. Nearly 75% of our deposit customers have been with us for 10 years or more and nearly half for 20 years or more. 92% of our deposits are from core commercial and consumer customers and the remaining 8% consists of public deposits that are predominantly government operating accounts. 92% of our deposits are in core checking and savings accounts with 33% in non-interest bearing and only 8% in time deposits. As expected, during the quarter our deposit mix shifted modestly to higher yielding deposit products with increases in our TDA and savings balances. Despite this, our total deposit costs remain well managed with an average rate of 46 basis points in the quarter. Despite a modest decrease on a linked quarter basis, total deposits increased by $256 million or 1.3% in 2022, while our total deposit betas were well controlled at 11.5% cycle to date, which demonstrates our ability to maintain liquidity at a reasonable cost. From an earning asset perspective, net interest income and margin are being supported by strong cash flows and overall asset repricing at higher rates. In particular, the yields on maturities and paydowns of loans and investments in the fourth quarter were 3.8% and 2% respectively. These cash flows were reinvested predominantly into new loans, which yielded approximately 5.2% in the quarter. With nearly $3 billion of annual cash flows from maturities and paydowns of loans and investments, we have ample opportunity to redeploy funds into higher yielding assets, particularly with reinvestment into loans, which has been the recent experience. In addition to strong cash flow, another $3.4 billion in assets are repricing annually, which provides additional rate sensitivity. Together, our assets provide a balance between short-term and long-term repricing characteristics. Net interest income in the fourth quarter was $140.7 million, up 14.3 million, or 11.4% from the fourth quarter of 2021. Excluding non-core PPP loan interest income, the year-over-year increase in NII was $19.1 million, or 15.7%. Compared to the pre-pandemic fourth quarter of 2019, our NII has improved by $16.9 million, or 13.6%. The NII improvement over the years is driven by continued strong core loan growth, rising interest rates, and managed deposit rates. Link quarter net interest income was lower by 900,000 or less than 1%. In addition to the impact of the inverted yield curve, we have entered the period where deposit rates and betas are accelerating and deposit balances are decreasing across the banking industry. both of which impacted our net interest income. During the quarter, we added wholesale funding at an attractive rate to supplement our current funding and to provide long-term fixed rate funding to mitigate the risk of higher for longer short-term rates. As we look forward, conditions that we experienced in the fourth quarter remain. Continued loan growth and asset repricing will be accretive while the persistence of the inverted yield curve and higher deposit costs will be dilutive. The outlook for deposit balances and deposit betas remain uncertain. However, as described earlier, the composition of our deposit base affords us greater flexibility to manage our funding costs through the uncertainty. During the quarter, as is our practice, we managed our expenses in a disciplined manner as economic conditions remain unclear. Non-interest expense in the fourth quarter totaled $102.7 million, down $3 million link quarter. As a reminder, included in the third quarter expenses were severance expenses of $1.8 million. Adjusting for the severance in the third quarter, expenses decreased by $1.2 million link quarter. This was a result of ongoing efficiencies in a number of areas, which enabled us to reduce the pace of hiring while continuing to invest in the business. Notably, our innovation spend in the quarter was reduced but did not end as we continue to position the company for the future. Our practice of disciplined expense management will continue in 2023. For the full year of 2023, expenses are expected to increase by approximately 3% despite the expectation of continued elevated inflation An industry-wide increase of FDIC assessment and annual merit increases each represent 1% of the 3% increase. Another 1% has been allocated to our continued investment in the company, albeit at a pace slower than in prior years. Although inflation expectations are still elevated, efficiencies gained from operations and prior investments are expected to offset inflationary increases. As part of this ongoing efficiency effort, we continue to rationalize operations and will be reducing staffing in several areas. These actions will result in a $2.9 million severance expense in the current quarter, which is in addition to the 3% core expense guide. It is important to note that these actions will result in annualized savings of $3.3 million. As a reminder, Seasonal payroll taxes and benefits expense bump from incentive payouts will be included in the first quarter expenses. This year, the estimated seasonal impact is $4 million compared to the $3.7 million in the first quarter of 2022. This amount is included in the four-year expense guidance for 2023. To summarize our financial performance, In the fourth quarter of 2022, net income was $61.3 million, an increase of $8.5 million linked quarter, or 16%. Fourth quarter earnings per common share was $1.50, an increase of $0.22, or 17.2%. For the full year of 2022, net income was $225.8 million, and earnings per common share was $5.48. As Mary will discuss, we recorded a provision for credit losses of $200,000 this quarter. Non-interest income totaled $41.2 million in the fourth quarter. As a reminder, the third quarter's income was negatively impacted by a one-time $6.9 million charge related to the loss on sale of leased equipment. and a $900,000 charge related to a change in the Visa Class B conversion ratio, which is reported as a contra revenue item in investment securities gains and losses. Adjusting for these third quarter items, non-interest income increased by $2.7 million linked quarter, primarily due to higher customer derivative and foreign exchange revenue. We expect non-interest income will average approximately $39 million per quarter in 2023 as market volatility and uncertainty continue to weigh on asset management income, and higher mortgage rates will continue to suppress mortgage banking income. In the first quarter, there will also be a contract revenue item of $600,000 for an additional Class B conversion ratio adjustment which will be reflected as part of investment securities gains and losses. Our return on assets in the fourth quarter was 1.05%. The return on common equity was 21.28%, and our efficiency ratio was 56.46%. Net interest margin was 2.60%, unchanged from the third quarter. The effective tax rate in the fourth quarter was 22.4%. and the tax rate in 2023 is expected to be approximately 23%. Our capital management, our capital levels remain strong. Our CET1 and total capital ratios were 10.92% and 13.17% respectively, with a healthy excess above regulatory minimum well-capitalized requirements. Our risk-weighted assets, relative to total assets remain well below the levels of our peers, reflecting our lower risk profile and providing us with ample room to continue growing while maintaining strong capital levels. During the fourth quarter, we paid out $28 million, or 46% of net income, available to common shareholders in dividends and $2 million in preferred stock dividends. We repurchased 192,000 shares of common stock for a total of $15 million. In addition, our Board increased the authorization under the Share Repurchase Program by an additional $100 million, bringing the total remaining authorization to approximately $136 million. And finally, our Board declared a dividend of 70 cents per common share for the first quarter of 2023. And I'll turn the call over to Mary.
spk01: Thank you, Dean. Our loan portfolio construct with 97% in Hawaii and Guam assets continues to reflect our strategy of lending in markets we understand and to people we know. These underpinnings, coupled with consistent conservative underwriting and active portfolio management, result in a loan portfolio that is diversified by category, has appropriately sized exposures, and is 80% secured by quality real estate with a combined weighted average loan-to-value of 56%. Credit performance remained very strong in the fourth quarter. Net loan charge-offs were 1.9 million or five basis points of average loan and leases annualized, compared with three basis points in the third quarter and two basis points in the fourth quarter of last year. For the full year, net loan and lease charge-offs were 6 million or five basis points, compared with 5.1 million or four basis points in 21. Non-performing assets total 12.6 million or nine basis points at the end of the quarter, down one basis point for the linked period and down six basis points per year. All non-performing assets are secured with real estate with weighted average loan to value of 58%. Loans delinquent 30 days or more total 31 million or 23 basis points, up from 18 basis points in the third quarter and flat with the fourth quarter of 21. and our criticized loan exposure represented just 1.09% of total loans down three basis points from the prior quarter and 111 basis points year over year as we continue to see sustained improvement in the financial performance of those customers who had been most impacted by COVID. Our consistent, conservative approach to underwriting is reflected in the consistently strong quality of our loan production and portfolio. In 2022, 67% of commercial production was secured with quality real estate conservatively leveraged. Commercial mortgage production had a weighted average loan-to-value of 59%, and construction production had a weighted average loan-to-value of 64%. 76% of 2022 consumer production was secured with real estate, again, conservatively leveraged. Residential mortgage and home equity production have weighted average loan-to-values and combined weighted average loan-to-values of 65% and 59% respectively. 71% of our home equity production was in first lien position. Similarly, FICO scores for all our consumer production remain strong. Portfolio monitoring metrics also remain very strong. Our commercial mortgage and construction portfolios have weighted average loan-to-values of 56% and 63% respectively. Residential mortgage and home equity portfolios have weighted average loan-to-values or combined weighted average loan-to-values of 57% and 52% respectively. 72% of our home equity portfolio is in a first lien position, and monitoring FICO's remain very strong. At the end of the quarter, the allowance for credit losses was $144.4 million, down $2 million for the lien quarter and the ratio of the allowance to total loans and leases outstanding was 1.06%, down four basis points from the prior quarter. The decrease this quarter was driven off UHERO's December 2022 forecast, which reflected lower unemployment rates for 23 and 24 than in their prior September forecast. UHERO's outlook is based upon actual lower unemployment rates realized in 22 and continued strength in tourism with any softening in domestic demand due to a recession offset by a continued recovery in our commercial visitor base, particularly Japan, coupled with strength in construction given the number of planned federal and state infrastructure projects. The Reserve does continue to consider downside risk of a recession, the impacts of inflation, and rising interest rates. The reserve for unfunded credit commitments was $6.8 million at the end of the quarter, up $300,000 for the length period. I'll now turn the call back to Peter.
spk02: Thanks, Mary. As we enter into 2023, the forward view on the economy is somewhat cloudy. Economic conditions, while buoyant currently, may possibly be tested in the coming days by the continued effects of tighter Fed policy. Asset values may also be challenged by higher rates. Bank of Hawaii remains well geared for potentially choppier waters. Our credit portfolio is the beneficiary of conservative underwriting standards, not just of late, but over the course of many years. Our deposit base is a great source of strength, diversified, granular, and long tenured. Our investment assets are both abundant, high quality, and highly liquid. And then we'd be happy to respond to your questions.
spk06: As a reminder, to ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Please stand by while we compile the Q&A roster. Our first question comes from Kelly Mata with KBW. Your line is now open.
spk08: Hi, good morning. Thank you so much for the question. Hi, Kelly. I would like to just start off with, I really appreciated all the color and moving parts on the expenses and your outlook for the year, but just as a point of clarification, what are you using as your starting point for expenses for KBW? Relative to 2022, is it about $413 million, or is there a different number I should be using? There was some one-time charges in 2022. $415. Great. That's really helpful. Next, I would like to – your loan growth, and this is something you pointed out, has been really strong in the double digits. Just wondering if you look ahead, any commentary on demand and maybe more conservatism that would bring that rate down, just any color on how we should be thinking about opportunities for loan growth ahead, as well as how you plan on funding that growth, whether it's through wholesale sources or flows off the securities books or anything like that would be really helpful.
spk02: Yeah, Kelly, so you're right. We've been fortunate to have been able to drive annualized loan growth for a number of quarters now. You know, we suspect, kind of I tailed off on our formal remarks, that, you know, we do see and feel things tightening a bit. I think we've got a reasonable forward view on the first quarter loan production-wise. But I would suspect that 23% is not likely to be a double digit low growth year. I think if we're pushing into the mid slash higher single digit levels, that probably would be a level that reflects overall market conditions. We really aren't changing our underwriting standards and policies because we pretty much keep those flat through cycles. But I think what may be happening is borrower profiles may be deteriorating a bit as inflation takes hold, as the economy slows a bit, and as interest rates begin to bite a little bit harder into the cap structure. And then lastly, I'd say that the residential market, which is a big source of value for us, has just been completely impacted by rates and the slowdown in refi.
spk08: That's really helpful. It sounds like in terms of your outlook for margin, that's largely the big variable there is on the deposit side, both the betas and just overall flows of deposits and where those come out. Your margin was flat this quarter. Do you think we've reached peak margins at this point in the cycle, or how should we be thinking about that ahead?
spk04: Yeah, I think near term we have reached peak margin in the fourth quarter, so modest decreases, at least in the first and second quarters.
spk08: Got it. That's helpful. Thanks. I'll step back.
spk06: Thanks, Kelly. Please stand by for our next question. Our next question comes from Andrew Leash with Piper Sandler. Your line is now open.
spk05: Hey, everyone. Good morning. Hey, Andrew. Question on the fee income guy of $39 million. You know, if I just look at the wealth side this quarter, mortgage banking this quarter, and some higher than normal fees maybe in the other line, you highlighted like wealth and mortgage being the mainline items of where there could be some pressure. But at $39 million, it seems a little light to me. Are there other areas where there's some weakness or some pressure on fee income?
spk02: Yeah, so I mean, I think, Andrew, the way to think about it is 39 is probably a good baseline. And then we have a number of line items that are just a little bit more unpredictable given the rate environment. So obviously, mortgage income is not likely to be a big contributor. That historically has been a big component of a $40-plus million fee income quarter. That's just not there right now. The asset management side, I would say as long as market conditions hold, both on the fixed income as well as equity side, we should be able to see a kind of slow and steady growth there. But if conditions change there, those numbers change pretty rapidly, as you know. And then finally, kind of the big mover is really our swap revenue. And when rates are very low, and production levels are knowable and buoyant, that's a very steady and high-performing space for us. As the markets become choppier, a little bit more difficult to figure out production-wise, and as people are a little bit more hesitant to just delve straight into a swap transaction because they're trying to figure out where rates are gonna fall out, that number can swing a couple million dollars one way or another in a quarter. And that's really kind of what's driving our conservative Conservatives were around the 39th. We hope that represents more of a downside and, you know, with some attendant upside attached to it. Got it. All right.
spk05: That's really helpful color there. Thank you. And then, Dean, just your question, following up on Kelly's question on the margin peaking, you said pressure over the next couple quarters. What would alleviate that pressure? Would it be rate cuts? Is it just some lag in asset repricing? Just curious what... What would alleviate that pressure?
spk04: Right. So what we have kind of built into, you know, at least our rate outlook, if you will, is kind of the Fed getting to a 5% handle on Fed funds. So what could help us, which is really not our base case, is that they don't raise rates anymore and look to cut rates. But realistically, I don't know if that's really in the cards right now. But that would help relieve some of the pressure on the NIM going forward.
spk02: Yeah, Andrew, I would chime in. You know, you saw our cycle-to-date beta, which I think by market standards is pretty low. So I think we still have some latent expansion on the deposit-paying side. And that may begin to catch up to where the Fed has already pushed market rates So I think that could be a tougher environment for us in the next couple of quarters and then increasingly I guess what I would point to is You know NIM can can come in a lot of different ways shapes and forms in this market right now we're kind of increasingly pushing more towards Delta in NII and which, coincidentally, I think could also be off a bit, a touch, in the coming quarters. But really, that's our area of emphasis in trying to bolster NII by, you know, hopefully some additional deposit growth at reasonable rates.
spk05: Gotcha. All right, yeah, that's helpful. I'll step back. Thanks. Thanks.
spk06: Please stand by for our next question. Our next question comes from Jeff Rulis with DA Davidson. Your line is now open.
spk03: Thanks. Good morning. Hi, Jeff. Just a follow-on, I guess, to that last one, Peter. You know, on the beta, I'm just interested in your thoughts. It sounds like maybe Q4 wasn't the total acceleration or a catch-up quarter. I would have assumed – you know, much of the rate hikes we've had and the rate-sensitive customers have kind of rushed to the gate and dealt with that. I guess your expectation is that that just continues to drift into the beta, and as we get into 23, you see additional pressure there. Maybe more succinctly, you don't think Q4 was a catch-up quarter and would expect, you know, further pressure from here?
spk02: I would. I would. I think that, yeah, I mean, there's – I think we – you know, when we step back and look at it, it's really quite amazing how suddenly and how quickly rates moved. I mean, basically, it was really mostly a second half of 22 phenomena, and candidly, our strategy into the teeth of that was to be pretty conservative around our betas and our pricing because – Given our market position in the deposit markets we serve, we thought that would, frankly, just be the best course. As we kind of widen out into a little bit more experience in what we're seeing from a rate volume standpoint, I thought that the quarter's deposit performance was okay. Frankly, I'd like to get the flat to slightly up, and that may require some additional pricing. So that's what, you know, certainly you may see that on the NIMH. And hopefully, our hope would be to see, would be able to offset that price erosion on NII by volume increases. Okay. But I would point out that, you know, the NII could very well drift down a bit in the coming quarters. I don't think that would be an overly pessimistic view.
spk03: Yeah. Okay. So, there's definitely a balance, deposit balance part of the equation. Fair enough. I wanted to also pivot to the, you know, the visitor count. And, you know, I guess as you look at the numbers sort of a little bit slowing the domestic and lifting of Japan and international, I guess kind of suggesting settling more towards long-term kind of run rates. That may be oversimplifying, but always interested, Peter, in your take on kind of where we're headed and kind of how those trends play out into 2023.
spk02: Right. So, you know, overall, I'd say that the visitor industry is, you know, I think kind of hodgepodge its way into a pretty good year in 2022. Basically, the U.S. market has overperformed both by volumes as well as by spending, arrival volumes and spending. Japan is coming back slowly. So when I look at When I look at November numbers, year-to-date, Japan was down 89%, but for the month of November, they're down in the 70s. So there is some moderating improvement there. And then I guess what I would say is Japan's a big chunk of international, which is about a third of our visitor business. The other markets, Canada, Australia, some of the other foreign countries, are beginning to form quite a bit better. So they may be better than the Japanese experience by, call it, half. So, you know, the overall, you know, the bottom line to the visitor segment has been generally positive, I'd say, to pre-pandemic levels. That's been led by kind of outsized U.S. domestic, potentially as that begins to fall off a bit as the economy cools. We're hoping to see that infilled by an improvement in Japanese and other international visitors, but we'll see. It's been a slow rise for Japan. Okay.
spk03: Thank you. And maybe just our last housekeeping. Dean, I missed the – could you repeat the contra expense on the visa front? You mentioned $600,000. Is that for the year, by the quarter?
spk04: It's for the first quarter, in the first quarter.
spk03: and then not to recur for just a one quarter event?
spk04: Well, I mean, we in the third quarter, there wasn't one. And I think in the first quarter of last year, I would like to say it's one time, but it's just dependent on how Visa manages that.
spk02: It's the mark on Visa.
spk04: Yeah, it's the mark on Visa.
spk02: OK, thank you.
spk00: Thanks, Jeff.
spk06: Please stand by for our next question. Our next question comes from Laurie Hunsicker with CompassPoint. Your line is now open.
spk09: Great. Hi. Thanks. Good morning. Just wanted to circle back to maybe where Kelly, Andrew, and Jeff were touching on that interesting thing, but just wanted potentially to drill down a little bit more on the funding here. Can you talk about how you're thinking about borrowings? There's a massive uptick this quarter. It's still obviously very small relative to your liabilities, but I guess point number one, sitting at $410 million, how should we think about that? going forward because those are higher costing. And then number two, just on the public deposits, obviously there was a jump there. Do you have the breakdown on what part of that is time? And then number three, can you comment on the non-interest bearing? So your non-interest bearing average balance has dropped a lot. Can you help us think about that going forward? Was that just an anomaly in the quarter? Just maybe help us think a little bit about that. Thanks.
spk04: Sure. So looking at the wholesale funding, it was a combination of several factors. One was to just supplement the current funding that we have, our deposits. We did want to protect ourselves, or at least hedge a portion of our outlook on rates, where if the Fed stays higher for longer in terms of Fed funds, LONGER TERM FUNDING, FIXED RATE FUNDING, DOES GIVE US A LITTLE BIT OF AN ADVANTAGE THERE. THE AVERAGE RATE ON THOSE WERE ABOUT 3.92%. SO BELOW FED FUNDS CURRENTLY. SO IT DOES PROTECT US A BIT THERE. GOING FORWARD, YOU KNOW, IT WILL JUST DEPEND ON HOW DEPOSITS BALANCE LEVELS TRANSITION. BUT WE ALSO are looking to the portfolio where we traditionally have that running off. The runoff from that could help fund the loan growth. In terms of the non-interest bearing, yeah, from what I can see, you know, it wasn't unusual that we had a drawdown. You know, there is a kind of a shift to higher-yielding deposit products. You know, now that Fed funds... is that 4.5%. Some of the drawdown did go to higher yielding products. And then there was some that were just coming off. We had some title companies that had projects that were closing in the quarter that also took some money out. So that was kind of independent of the rate environment.
spk02: Yeah. I mean, it wasn't terribly surprising to us to see money moving out of non-interest bearing. That was last quarter, 34.9% of total deposits. This quarter, 32.6%, so a three-point drop there. Interest bearing demand was basically flat, and savings was basically flat. So kind of the catch-all was in time, and Your question about the government deposit, that was pretty much flat in terms of demand and savings on a linked basis, and then up on government time deposits, Lori.
spk09: Got it. Okay. So I had your public time deposits at $180 million last quarter. Is the delta increase there in your total public deposits, is that all time? Do you have an exact number there?
spk02: Yeah. So total public deposits, last quarter was $1.236 billion. This quarter is $1.706 billion. And public time was $180 in the third quarter and $587 in the fourth quarter.
spk09: Okay. Got it. That's helpful. Okay. I mean, your loan-to-deposit ratio is so beautiful. Your loan-to-core deposit ratio is so beautiful. I mean, any liquidity concerns, or how are you thinking about that?
spk02: No, we don't have liquidity concerns. I think we, frankly, were priced too tight into a quarter, and we're kind of hopeful of picking up more deposits in the in the quarter, and when that didn't transpire, we had to move, obviously, to more wholesale funding sources. So what the teams, both consumer and commercial, are working on for the coming quarters is to be a little bit more dynamic from a pricing standpoint to generate more volume levels.
spk09: Okay. Okay. Great. And then, Mary, just one quick question for you, and certainly your credit looks great all the way around. Specifically on the auto piece, can you just help us think about that? We saw obviously a pretty nice jump in auto loans this quarter. Was that purchased or what was that? And then I guess the charge-off there, it seems like that's just one area of weakness that continues to grow. And certainly there's a concern more generally within consumer, even though your consumer book is so high. Can you just help us think a little bit about that? Thanks.
spk01: Sure, Laurie. If I look at indirect, our 30-plus this quarter in terms of delinquency was 182, and that's versus 138 from the prior quarter. But if I look at 2019, we're still below that at 224. And what we saw in 2018, our delinquency rate was running 2.28. In terms of charge-off rates in indirect, We averaged 35 basis points this year. And in 2019, that was 59. And in 2018, that was 88 basis points. So, you know, in early stage, we did the 30 to 59, we saw a modest uptick, but still below what we've been seeing pre-pandemic. But we would expect as consumers come under more stress that we would see that, you know, our portfolio to normalize a bit. But right now, our less than 620, everything, all the metrics aren't showing a huge decline in quality.
spk02: Yeah, and Lori, just to note, because I think it's important, we don't do purchase.
spk01: Portfolios, yeah.
spk02: Yeah, we don't purchase portfolios. So all of our consumer is organically driven off of our delivery channels.
spk09: Okay, got it. Okay, thanks. I'll leave it there.
spk06: At this time, I show no further questions. I would now like to turn the conference back to Jennifer Lamb for closing remarks.
spk07: I'd like to thank everyone for joining us today and for your continued interest in Bank of Hawaii. Please feel free to contact me if you have any additional questions or need further clarification on any of the topics discussed today. Thank you, everyone.
spk06: This concludes today's conference call. Thank you for participating. You may now disconnect.
spk01: The conference will begin shortly. To raise and lower your hand during Q&A, you can dial star 1-1.
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