Bank of Hawaii 4Q16 Earnings Call Notes

Peter Ho – Chief Executive Officer

The Hawaii economy remains healthy

“Thanks Mary. The Hawaii economy remains healthy through 2016. Our visitor industry earnings continue to grow and our statewide seasonally adjusted unemployment rate went down to 2.9% in December compared to 4.7% nationally. Visitor arrivals for the first 11 months of 2016 increased 3% and visitor spending was up 4.1% compared to the same period in 2015. The base of construction remains strong in both the private and public sectors and home prices continue to increase throughout the year. The median sales price for the single-family home on Oahu, our primary market, increased 5% in 2016 and the median sales price for the condominium increased 8.3% compared to 2015. ”

The economy remains pretty darn strong

” the economy remains pretty darn strong. There really aren’t any factors at this point pointing to a softening or a downturn in the local economy. So I think that’s, if you will, the tailwind that we are looking at from a loan perspective and a deposits perspective, frankly, from that standpoint as well. ”

Slowdown in mortgage repayments

“Yes. I think so, Jackie. There is a little bit of lag in the mortgage payoffs and interest rates really started to move up in the second half of the quarter. So I think you might see a little bit of a slowdown in payoffs and thus a reduced amortization as the year – as the first quarter progresses.”

Our CRE folks tells us they’ve got a good looking pipe

“Our CRE folks tell us they’ve got a pretty good-looking pipe looking forward into ‘17 which frankly was a bit of a surprise to me, but they are seeing that. The construction side is going to be interesting. I would have a year ago said that the high-rise, the luxury high-rise maturation of that cycle would really spell decline in the construction book. I think that maybe short-term, but there are also a lot of affordable transactions floating around the marketplace right now. And so as you know from prior conversation that there is fair amount of single-family housing to be built, with those projects are still a few years out. But I would say there maybe an opportunity for construction to blend in with more affordable projects as we move forward.”

A lot of the construction portfolio is winding down

“Well, the bulk of that portfolio is in higher end, high rise real estate transactions. And those, for the most part, are winding down. We have just a couple – we have one left. And so as that pays down, we will see a decline in that portfolio which has grown pretty significantly over the past couple of years for us. So that’s what I meant by the headwind.”