Bank of Hawaii Corporation

Good day, and thank you for standing by. Welcome to the Bank of Hawaii Corporation second quarter 2023 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, Cindy Weirich, Director of Investor Relations. Please go ahead.

Thank you. I'd like to welcome everyone and thank you for joining us today as we discuss the financial results for the second quarter of 2023. Joining me today is our CEO, Peter Ho, our CFO, Dean Shigemura, our Chief Risk Officer, Mary Sellers, and the newest member of our IR team, Chang Park. 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 today, we will be referencing a slide presentation as well as the earnings release, both of which are available on our website, boh.com, under the Investor Relations tab. And now I'd like to turn the call over to Peter Ho. Peter?

Thanks, Cindy. Good morning or good afternoon, everyone. Thank you for your interest in Bank of Hawaii Corporation. I'll begin today's call with some general commentary on our results. I'll then hand the call over to Mary to cover off on credit, which is a great story. And then Dean will get a little deeper into the financials. We'd then be happy to entertain your questions. Bank of Hawaii delivered solid results for the second quarter of 2023. Total deposits grew in the quarter, and we enhanced our liquidity position substantially. with cash and immediately available credit lines. Credit remained a strength with NPAs and net charge-offs of eight basis points and four basis points respectively. We recorded earnings per share of $1.12 for the quarter. Debt interest income was negatively impacted by higher interest rates and attendant higher borrowing costs. Fee income performed well during the quarter and expenses were controlled both on a reported and normalized basis. Given the environment, expense management will continue to be a particular focus of ours going forward. Deposit quality is obviously a critical factor in today's environment, so I thought I'd spend a little time reviewing Bank of Hawaii's exceptional deposit position. Our deposit story really begins with our deposit marketplace, which is different from nearly all other deposit markets in the country. 97% of the State of Hawaii's deposit base, as measured by the FDIC, is held by five local banks, all headquartered within the state of Hawaii, and all having served the local community for many, many years. Therefore, it's not surprising that the events of early March with SVB and Signature Bank had a rather muted impact on the Hawaii marketplace as compared to the broader national small bank marketplace. We've built our deposit franchise over a 125-year history, one relationship at a time, Our deposit base is well diversified and well tenured. 49% of our deposits are with consumer clients, 39% with commercial customers, and 12% with municipalities. Even within these categories, we have further diversification by industry, income demographic, and government agency or jurisdiction. More than half of our deposits are from clients with whom we've been doing business with for 20 years or longer. Another 24% are from clients with whom we've been doing business with from between 10 and 20 years. Given this backdrop, it's not surprising that our deposit performance through both the first and second quarters has been quite stable. Additionally, we've been able to maintain deposit stability while also keeping funding costs reasonably controlled. Our deposit beta for Q2 was 21%. In terms of additional liquidity, we improved our cash and immediately available lines of credit positions substantially to $8.5 billion by quarter end. Brokered deposits are yet another form of liquidity available to us, although we do not currently have broker deposits within our deposit mix as of quarter end, given the stability of our deposit base and abundant backup liquidity in place. Brokered deposits, however, are a solid tertiary liquidity option for us. I'll finish off with a little color on the Hawaiian economy. Our visitor industry continues to perform well. Total visitor expenditures in May were up 19% from 2019 pre-pandemic levels. This level includes a still recovering Japan segment, which remains down 66% from pre-pandemic levels by spend. Oahu's single-family home prices were down 4.5% in June from a year ago at $1,050,000. Inventory, however, remains tight at 17 average days on market, and 17 days on market and total inventory of 2.6 months. Hawaii's unemployment rate was down to 3% in June compared to 3.7% at year end. And now let me turn the call over to Mary.