Bank of Hawaii Corporation

Good day, and thank you for standing by. Welcome to the Bank of Hawaii Corporation's first quarter 2023 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there'll be a question and answer session. To ask a question during this session, you'll need to press star 11 on your telephone. You will then hear an automated message advising you your hand is raised. To withdraw your question, please press star 11 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.

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. 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 Holt.

Thanks, Jennifer. Good morning or good afternoon, everyone. Thank you for your continued interest in Bank of Hawaii. Despite the drama and challenges of the past month and a half, Bank of Hawaii recorded solid results. Deposits grew on an average basis, but were down modestly on a spot basis. Loans grew across both commercial and consumer categories. Margins reflected the continued inversion in the yield curve. If the last few weeks have taught us anything, it is that business models matter. In banking, the quality of... relationship as well as the diversity of relationship with 1-1's client base are both critical. At Bank of Hawaii, we believe our 125-year commitment to a community bank-based model achieves both key factors. We've been focused on the Hawaii and West Pacific markets for many, many years now. This focus has allowed us to build uniquely long-standing relationships with our clientele, relationships that work both ways. Additionally, our community-based approach dictates that we focus not on any one sector or concentration, but rather on a whole community approach. This has enabled us to build both a mass market consumer business as well as a private bank business. It has enabled us to serve very small businesses as well as establish long-tenured businesses in town. We also serve not just the state of Hawaii, but also component municipalities throughout the state. It is this combination of quality and diversity of relationships in a market we've been serving for over 100 years that makes us different in challenging times. Given keen interest in liquidity and funding source, we thought we'd provide and reiterate critical knowledge on our operation, which I'll be happy to do in a second. As is customary, Mary will follow with some updates on credit, which is a good story, and Dean will finish off with financials, and then we'll be happy to take your questions. So let me begin with just touching on our community bank approach. Basically, we use our 125-year-old coveted brand, blend that with a true community bank focus, and take advantage of both the broad and deep market penetration that we have here in Hawaii as well as in the West Pacific to create a diversified long-tenured deposit base, strong levels of liquidity, as well as the diversified lower-risk loan assets. Those assets then turn into results which create both exceptional credit quality as well as exceptional deposit performance. Speaking of deposits, really through our 125-year history in the islands, BankFoy has developed an exceptionally seasoned deposit base built one relationship at a time for many years and in neighborhoods and communities we uniquely understand. To begin with the marketplace, Important to recognize, and I think many of you on the phone already do, is that Hawaii is truly a unique deposit marketplace, where five local institutions hold 97% of the bank deposits within the market. Our deposits are widely distributed. 98% of our deposits are fully FDIC insured. 42% of our deposits are FDIC uninsured or uncollateralized. Deposit averages on the consumer side are 18,000 and 133,000 on the commercial side. We have nice diversification within the deposit base, consumer making up just under half of our overall deposits, commercial at 41.9%, and public and other municipalities fill in the rest. And even within those segments, we have diversity. Looking at the government side or institutional side between agency, state, and county, Onto the consumer side, a nice blend of not only mass affluent and high net worth, but also mass market. And then on the commercial side, a nice mixture of industry sectors there. Our deposits are also highly operational in nature, with over 50% of our deposits being demand deposits and 95% of our commercial deposits having 3.7 accounts per relationship on average, and 71% of our consumer deposits having multiple deposit account relationships with Bank of Hawaii. In terms of deposit mix, you see that 31% of our deposits are non-interest bearing. That's down from 33% a quarter ago. I note that the average for Bank of Hawaii non-interest bearing between 2017 and 2019 was 31.2%. In terms of tenure, Bank of Hawaii has some of the longest tenured deposits in the industry. 51% of our deposits are with relationships over 20 years old, 23% 10 to 20 years old, and only 26% under 10 years. So here on slide 12, what you can see is the deposit performance for really the past year and certainly the month of March has been pretty darn flat. Really what you see on the left side is pretty good performance on a year-on-year basis through the first quarter, and then looking more on a more micro basis onto the month of March, you see basically from that period with SDB and some other institutions falling into trouble, moving from actually $20.4 billion to $20.5 billion spot at the end of the year. By segment, our deposit balances on a linked basis have been pretty steady as well, whether it be consumer, commercial, or public and other. And then moving on to deposit beta, here you see that while deposit betas have moved up, I think at 15.9%, we represent pretty well relative to the industry as a whole. And on to deposit costs, deposit costs are rising, but in what appears to be a steady and measured manner at this point. So finally, to finish off, in addition to a granular diversified deposit base, we also maintain Healthy liquidity backup lines totaling $8.2 billion with additional loans available for sale, securitization, repo, or pledging of just under $2 billion for additional liquidity backup. So now let me turn the call over to Mary Sellers who will touch on credit and other assets.