First Hawaiian, Inc. (FHB) Earnings Call Transcript & Summary

Good afternoon, and thanks again for joining us for our last session of day 1 of the Bank of America Financials Conference. I'm delighted to have with us First Hawaiian Bank. From First Hawaiian, we have Bob Harrison, Chairman and CEO; Ravi Mallela, CFO; and Ralph Mesick, Vice Chairman and Chief Credit Officer. So thank you, gentlemen, for joining us. I was in front of my screen all day, and I just looked up and your stock is up 25%. So you must be saying something right out there in your meetings. So unless I miss something.

You picked a great day for a conference.

So but better lucky than smart, I guess, so I will take it. But no, thank you for joining us.

And I think Bob, just to kick things off, even going back to third quarter results, it felt like local activity had already picked up when we look at some of the fee businesses for you guys, for just -- the banks in general. But just talk to us -- I mean tourism reopened on October 15, maybe close to 1 month in. Where do things stand right now in terms of just the island returning to some form of normalcy?

Sure. Thanks, EB. It is starting to return to some form of normalcy. Before the pretravel testing program, we were getting about 2,000 visitors a day or just total travelers. And as soon as that started, we went to about 6,000 to 8,000 a day. So you're starting to see a steady build. Just last week, the government of Japan approved Hawaii, not the rest of the U.S., where they prohibited travel, but they approved Hawaii to let their residents travel to Hawaii. And so pretravel testing program had stood up for them. And so you're starting to see direct daily flights from Japan Airlines, All Nippon Airlines. And so that will -- at a low level, but that should start to build over time as well. And then most importantly, we're starting to see our resorts reopened. The Disney Resort reopened November 1. That's about 600 jobs. You're starting to see more hotels and resorts open now, and I'm sure that will continue through the rest of the year as you get ready for that real important growth over the holidays. So we're starting to see this nice, steady return to normal. Still somethings didn't worked out. City and County of Honolulu just added a pretravel testing program at the airport and a mobile lab that can test 10,000 people a day, so all of that to support tourism and the tourism coming back. So the case load is low here. The hospital capacity is very good, and so we're expecting to see that slow, steady build of the tourism business as we come into the end of the year.

And just on tourism, talk to us about the health of the hospitality sector. Clearly, the last 6 to 9 months have been pretty tough. Do you think if we get a bridge with the vaccine announcement this morning over the next 3 to 6 months and we get to much close to normal by next summer or fall, does the hospitality sector have the wherewithal to kind of manage through the next 6 months or 9 months? Or what's the economic damage that has occurred?

Sure. One of the things about Hawaii is there's been some very large, very stable, strong players. And so they really position themselves for this. What you saw in the beginning of the pandemic is in some of the resort properties, for example, they accelerated their reinvestment into the property and really started to do a lot more work. Knowing that they'd be gone for a while, planning for that to come back at the end of the year or a year or so later. So this really ties into their plans. I don't think there is much of an issue on the hotel resort. Certainly, in the restaurant piece of it, you're seeing some damage, some of the smaller players are having a hard time. We've seen restaurants permanently closed. But I think in general, the tourism business is going to be strong and resilient. And it's going to start to come back as the traveler gets more comfortable getting on the airplane to come visit us.

And just sticking with bigger picture, I think the one thing over the last few years, when I talk to sort of long-term investors, is around we've seen some population out, migration out of Hawaii. Talk to us in terms of does the pandemic and what's transpired, does that make it worse in terms of the trend? And how worried are you in terms of sustaining the local economy and growth if you continue to have population leave the island?

Yes. It's been small numbers. I mean, you've seen a very small 2,000 people really year-over-year that have left. And I think that really is driven by job opportunities. And depending on how quickly the economy comes back in the mainland, specifically the West Coast, versus it does in Hawaii, you might see some people that look to move to the mainland just to go back to work. If they can't come back to work soon enough in Hawaii, they might move to the mainland. But we're also seeing those -- we're seeing quite a few people like everyone working from Hawaii in small numbers now. But you've also seen a lot of people buy second homes and third homes and really want to relocate to Hawaii for some longer period of time as the pandemic has played out. So it's not as obvious as it used to be maybe 6 months ago, that we'd seen the brain drain. And you've seen the remote workers choose Hawaii to live at least for now, and whether that will be permanent or not, little too early to tell.

Got it. And the one thing I had noticed, I think, in the last month or 2, the governor had talked about trying to diversify the economy, reduce the dependence on tourism. I think I'm sure you're involved in a lot of these roundtables and [ meetings ]. Talk to us just realistically, is that possible? And what are the avenues, do that create actually growth opportunities for First Hawaiian and if the economy does truly diversify away from tourism to some extent?

And that's something we've been trying to do for quite some time. We have a very strong military here, and you've seen some spin out to the military activity with startup companies associated with that. I think it will be as much a remote worker near medium-term type of growth as it will be entirely new industries being created. [indiscernible] We've got a very strong university system and that's helped us. But really that technology rolling out of the university and being -- and to be commercialized is really that next thing that many people are working on. I know the business roundtable and the university have been working very closely on that for several years and we're just starting to see some green shoots. But until that turns into -- it will take some time to turn that into a significant number of jobs.

Got it. And you mentioned the military spending. Clearly, with the election results, do you see any big changes from Congress and policymaking that could impact Hawaii that we should be mindful of?

Well, we're a blue state. So I think it's helpful to have a Democrat President-elect. And having said that, though, we're in a part of the world where the military is going to continue to invest and have been investing, and will continue to invest, I think, very strongly between Guam, which is really the most forward U.S. firewall to Asia and then here in Hawaii to back that up. I think you'll see continued strong investment in Guam and Hawaii, and we have seen that even in the Republican administration, given what's happening in the world.

Got it. I guess, since we have Ralph with us, but just moving to credit a little bit. We saw a decent amount of divergence between sort of third quarter provisioning between the 2 Hawaiian banks. Just talk to us in terms of your thought process around when you look at reserve adequacy, the provisioning you took over the last couple of quarters, how good do you feel about it? And what are the things that could push provisioning much higher or lower from where we are today?

Yes. And I'll let mostly Ralph speak to this. Maybe I'll start off and then hand it off to him. We were very proactive early on and really took a hard look at what we saw as what could be the impact of the pandemic. And as we seen in our modeling and looked at all the reserves, in the first quarter, there wasn't enough information to really -- to make informed decisions. So we have quite a bit of qualitative overlays. And then as we got into the second quarter and third quarter, we have much more time to spend on that. But Ralph, maybe you can answer EB's question.

Yes, EB, I would say that the way we approach this really was we said from the start, we were going to be proactive. We're going to try to be realistic, and by that, I would contrast it to being hopeful, and then we wanted to be transparent. So we -- and if you look at the way the reserve model should work. Under a CECL regime, you should see the provision increase ahead of the stress. So we took a pretty big quantitative -- I mean, qualitative overlay in the first quarter. We were able to incorporate that into the model in the second quarter. And then in the third quarter, what you really saw was some stability in terms of the outlook. That outlook really would anticipate that we would be not seeing much of a recovery until the middle of next year, and that would be a small recovery. And also when you look at the reserve, you would see that probably -- we still had a pretty large amount of overlay related to the consumer book because there was less information that we had in the model around that because of what was happening with the deferrals. We've seen a much better return to pay than we had anticipated, and so that's a positive thing. But we're feeling pretty good about where the reserve is today. And we know that we carry quite a bit of capital to the extent that we're -- there's some uncertainty around that estimate.

All right. So I guess, if I take away from what you just said, Ralph, it seems like outside of loan growth, we shouldn't have meaningful incremental provisioning or reserve build given kind of the time that you've spent in assessing the portfolio, sort of how CECL causes banks to kind of pull forward the life of loan losses. Is that kind of a fair way to sum it up?

If we had perfect foresight, and I'm not saying that we do. What you would see, basically, is that our asset quality metrics would start to deteriorate a little bit. We'd see losses in 2021, but we wouldn't have to provision to cover those losses per se.

Got it. And just on that, like when we look at the loan deferrals, I mean, obviously, for obvious reasons, but I think your deferrals were about 5 -- 5.8%. A lot of investors compare that to the U.S. mainland banks, which are probably in the 1% to 2% range. Talk to us why the elevated deferrals are not really a cause of concern in terms of how you look at that portfolio and the breakdown of those deferred loans and your expectation on how much of that actually ends up going back paying.

Yes. Maybe I'll start on that, EB. So what we've seen is most of that is currently still on deferrals in the residential loan book. And our book, we have a fairly substantial residential book, which may not be the same as some of your -- the banks that you're looking at on the mainland. And those deferrals will be ending in this quarter in the fourth quarter, and we're looking -- continue to see a strong return to pay. And just the quality of the portfolio, we have a very good residential market. And so if there is an issue, the received strong sales, medium prices just ended 11% over last year for October. So if someone is in trouble, there's a very good chance that they can monetize the asset. So we're not looking at really any weakness in that book.

Got it. Ralph?

I would say that the deferral, what we did in terms of our strategy, sort of worked out the way that we thought it would. We were very proactive in giving people an opportunity to sort of bridge the liquidity shock that they felt. We believe that a lot of people would return to pay on the -- certainly on the commercial side, and that's what's happened. And we've been pretty happy with the return to pay on the consumer side as well.

Got it. And do you have a sense today in terms of when you look at your loan book especially the commercial or even the consumer book, what portion of these loans may require extended deferral or sort of a modification under the CARES Act. Is that something that you're looking at? Do you have any visibility around that?

Go ahead, Ralph.

I would say that in terms of how we're approaching it at this point, we're looking at this based on the economic substance of the situation, not necessarily the -- what the CARES Act allows us to do. And I think right now, on the consumer side, we granted 90-day deferrals, and most of those have returned to pay. I think to the extent that we saw additional need, we would be looking at modifications as opposed to additional withdrawals, hopefully. And I think on the -- when you look at the residential book, that was a longer-term deferral 6 months before. We would anticipate a bunch of those coming off deferral and seeing what happens in the fourth quarter. But all in all, fairly strong LTV. So I think we have a lot of collateral support in that part of the book. And then I think on the commercial side, the way we look at that is we would treat that book like we would a typical workout situation. So to the extent that we need to provide support, we would look to try to shore up the credit to the extent that we could. I think on a couple of the deferrals that we have done, second deferrals, what we've done is we've taken additional guarantees, additional collateral to support an extended deferral or modification.

Got it. And I know this is a bit fluid just over the weekend between the election and the vaccine. There's some questions in terms of whether we get a stimulus, what it looks like, the size, the form. How important is it in your view, Bob, that we do get a stimulus? How important is it for the local economy? Or do you think, at this point, it's more about how quickly can things get back to normal in terms of tourism working out, the testing and then eventually the vaccine? Are all those are a lot more important than actual stimulus?

Well, I think it's all going. It's more a question of timing than it is importance. I think they're all important. I think the -- an additional stimulus will certainly help the consumer, especially and commercial as well, but as consumers especially kind of bridge into [indiscernible] high unemployment number. And as that unemployment number comes down, you get back to more normalized economy, and that unemployment number comes down it will produce more visitors. So the Goldilocks situation would be the stimulus happens now to some degree and helps the consumers, and maybe some of the businesses get to the point where the tourism economy has come back.

Got it. And I guess just one last on credit before we move on. When you look at sort of the COVID-impacted sectors, I think if memory serves me right, there are about 19% of your book that you kind of categorize as that. Just talk to us, as we think about next year, where do you actually see -- expect to see that credit migration occur and just a view on the loss content in terms of what portfolio or what subset of the portfolio is going to drive the losses?

Ralph, do you want to touch on that?

Sure. I think -- if you look at the -- what we call sort of the impacted industries, COVID-impacted industries, on the hospitality space, we have larger kind of corporate customers. We don't really anticipate having a lot of issues there. They're well capitalized, and I think they're going to be able to work through this time. When you look at hotels, as we had mentioned before, we don't have a lot of hotel exposure. It tends to be stronger credit profiles. We're feeling good about that. I think when you go to the retail side, resort and retail, just a few credits that we feel pretty good about. I think where we're anticipating seeing issues might be smaller businesses, smaller retail type businesses and potential second order maybe some landlords to those businesses. So the game plan for us is really to kind of work with the larger credits, get visibility there, work through whatever issues we need to work through with them and then hopefully be able to sort of take on any surprises we might see in the smaller credit. So we might not have as much visibility today as we'd like to.

Got it. Got it. And I guess just shifting focus, Bob, in terms of growth, loan demand, customer activity. Just talk to us in terms of where things are beginning to see a pickup in loan demand across your loan categories. Or where do you see things rebounding faster than others?

Sure. Residential activity has been very strong, like basically the whole country, as people look to take advantage of that. Home sales are strong here kind of sales are kind of flat to last year and single-family is up quite a bit. So we're seeing that. We've seen a lot of people, specifically on the big island buying in that market. And so there's very little available supply now, island-wide on the big island. So that's been a nice plus. We're also seeing for our car dealers we ended the year last year at about $860 million of foreign balances. At the end of the third quarter it was down to $560 million just because, one, interruptions in supply and also, they're doing quite well on the sales side. So we would see that, we're starting to see some of that recovery and inventory come back, and we'll see some of that as we go into the end of the year and probably into the first quarter. It may not end up at where we started the year out, but we'll certainly be stronger than what we ended the third quarter. So that's a nice plus. And then lastly, we've got quite a few commercial real estate construction loans out there. And what's happened over the last 12 months is [indiscernible] and you're starting to see the draws under our construction facilities, very strong deals, good markets, we've got the good borrowers. So we're starting to see some loan growth over the near term. Longer term, we'd have to wait, I think, until we see more of a recovery in the Hawaii market to have a little more clarity and what's going to happen to the broader growth.

Got it. And anything just from a strategic standpoint, does -- because of the nature of the pandemic and how it's impacted different sectors, does it cause you to change your focus a little bit in terms of where you look for growth next year?

No I believe so. We've got just under 20% of our loans were on the mainland in markets we've been in for decades and that will continue. That might come back a little bit sooner than the Hawaii market. So you might see a little bit stronger growth there initially than Hawaii trailing a bit as the economy grows back into a stronger tourism market. So there might be some of that, but we're not looking at new areas or new industries. It's really supporting our existing customers and growing just rationally and deal by deal and customer by customer.

Got it. Any big changes that we should expect to the SNC book? I know pre pandemic, you got rid of some of the noncore relationship kind of loans last year. Just what's the outlook there? Are you opportunistically adding to that book or no?

That industry, that sector, I guess -- not an industry, that sector has been fairly slow. And so we've seen some paydowns and payoffs. We just haven't seen a lot of new activity. We're not saying no to that. We just haven't seen anything in there that's really been a good opportunity for us. So that's continued to be fairly flat, and we're not going to expect a whole lot of growth out of that market.

Got it. Ravi has been awfully quiet. So I guess, let's talk about the margin a little bit. I think you guided for a relatively stable fourth quarter margin. But just talk to us in terms of there's obviously a lot of noise given by liquidity. But as you think about managing the balance sheet, can you give us a sense of the puts and takes around how you can defend the margin from a more medium-term perspective if we remain in this kind of rate back now?

Sure. Sure. Our net interest margin was 2.70% in Q3, and we guided to being relatively flat with some downward pressure coming from mortgage refinancing and the securities book and refinancing the securities book. I think over the last 2 quarters, we've seen strong inflows of deposits, and we've tried to deploy those excess liquidity into the securities book. We've grown the securities book from about $4.1 billion to about $5.7 billion, and embedded in there is extension of duration. We've really, really been buying the same type of securities HQLA. And -- but we're in that embedded portfolio, embedded duration extension that we put into that portfolio, we've gone from about 2.25 duration to about 3.5 over the course of this year. And so on a larger base, we're getting a little bit of extension, and that sort of if you think about medium term, that gives us a little bit of protection from downside NIM pressure. Maybe let's start with the asset side and then move to some of the other parts of the liability side of the equation. We've reduced cash, average cash balances. I think average cash balances in Q2 were a little bit up over $1.4 billion, and we're down to about $890 million. That certainly had a good impact on the margin in Q3. And we've discussed in the past that we like about $500 million average cash balances on the balance sheet. And to the extent that we can control and manage those cash levels, there's a little bit of upside in the near term and maybe over the next couple of quarters. When we think about the liability side of the balance sheet, average cost of deposits went from 19 basis points to 13 basis points in Q3. Those are pretty low levels of deposit costs. And fundamentally, we've got a little bit of room to be able to move those costs down but really, just a little bit of room, not large amounts of room. I think what you saw in Q3 was the impact of $400 million in FHLB borrowings maturing. So we saw 200 of those million -- $200 million of those mature at the end of Q2. And then we saw another $200 million mature at the end of July. And so we saw almost a full quarter of benefit in Q3, and we'll probably see a little bit of benefit in Q4 as we roll into deposits as a source of funding and those maturities rolling off the balance sheet. I think we like where we are with [indiscernible] the portfolio at 5.7 [indiscernible] that we see balances growing on the loan side of the book. I think that will be an opportunity for us to allow some maturities of securities to roll off the balance sheet. We see anywhere between $80 million to $100 million in maturities roll off every month. And to the extent that we see some good growth on the loan side, we can roll into those -- we can roll off those maturities and roll into any balanced growth that we would see on the loan side, and that has, in the medium term, some benefits to overall NIM. But we look at the balance sheet in totality. We try to manage cash levels. We feel good about where our securities levels are, and we see a little bit, but some upside on the liability side to manage NIM in the near term.

That was helpful, Ravi. And I guess, the other side to it is when you think about NII, and do you think that's relatively close to bottoming? Or is it already closed in the third quarter? How do you think about spread revenue when you think about the outlook?

Yes. I think we feel pretty good about where our NII levels are. Obviously, the main drivers will be if we can reduce -- continue to manage our cash levels very [indiscernible] so the behavior of our customers, we've seen very good deposit growth over time. And if we can manage our cash levels effectively, I think we can provide some stability to NII. But I think some of the downward pressures we've talked about, obviously, mortgage refinancing activity, we want to be there for our customers. We have plenty of capital on liquidity to serve them. And as we see more mortgage refinancing activity, we'll see sort of pressure on NII. But those are really in the light of what we've guided in Q4 to being a relatively stable margin, and that should help with NII sort of for the near term.

Got it, understood. And I guess just moving on to the expense outlook, and there are 2 pieces. One is just talk to us in terms -- you're very efficiently managed bank. But talk to us in terms of where you see areas of expense savings as you and the industry fight this rate backdrop, and then also around how the accelerated digital adoption has changed things. I think you announced about closing 4 branches last quarter. So give us a sense of, one, are there expense saving opportunities within the bank and where. And then how do you -- how are you approaching tech investments as you look forward?

Yes. Maybe I'll start and hand it off to Ravi. The -- first on the branch closures, we did announce the closure of the 4 branches from a couple of years ago, being at 62 branches. Very soon, we'll be at 54, so down roughly 10%. And I think that's just a story of the industry as we can better serve our customers and move transactions to digital or online, that's much better for them. And then we can take that time in the branch to really interact with them and find out what their needs are and be able to serve them. Now as it relates to expenses, what we've done since the pandemic, and we've always been very cautious about expenses. We're very careful about filling positions. And so as we close those branches, we're not looking to bring down any employment because we've already done it through attrition. But structurally, it's very important for us to also manage our expenses closely. And that's one of the reasons, from a digital perspective, we're doing our core transformation next year in the second quarter. That will allow us to take a lot of manual processes today and be able to digitize them. And we're also constantly upgrading the customer-facing piece for the consumer experience, whether that's on the commercial side or on the consumer. We're going to be launching a new mobile offering. We look at a whole new website. And so all these things are very important to keep current on but, at the same time, being able to structurally manage our costs over time. And I think that's very important to be competitive. But Ravi, maybe you can touch on some of the specific items.

Yes. We've talked a little bit about some of the line items and on the expense side. Obviously, some of them are down as a result of lower incentive compensation costs as a result of lower activity. We could probably see -- start to see some of those pick up as activity picks up. We think that's a good thing because there's a revenue side of the equation that's going to benefit from that activity and those higher expenses. But certainly, as we move, like, for example, we've been really committed to the implementation of our new core system. The current core system is an in-house application and that's going to move to a hosted application. And as we look at sort of the run rate as we move into a hosted application versus having an in-house application, there could be some geography moves along the expense lines. But again, when you think about us as an organization, we've been extremely cost conscious. Our Q3 efficiency ratio was 50%, and we're certainly managing -- we're certainly a very cost-conscious organization, and we manage costs very closely as we've seen -- as you've seen in the past.

Got it. I guess just moving to -- so capital return has always been a big part of the story with First Hawaiian since the IPO. The stock still trades probably in the high 4s in terms of the dividend yield. Just talk to us -- I mean, was the capital adequacy was a concern. But talk to us, one, around your improving confidence, I assume, around the dividend and sustaining that. And then when you look at the capital stack, is there any reason to sort of make it more efficient? And when could we see you return to sort of coming back to doing share buybacks?

Yes. No, we've always been very confident in our dividend, and that's very important to us. It's also very important to the Board, and we know it is to the shareholders as well. So we're very comfortable with that. And -- the dividend as we did after some heavy provision in Q1 and Q2 coming back to more of a normalized 50% payout. It's just slightly higher than that for Q3. And so we'll continue to be very focused on that. As far as returning to share repurchase, we also know that we're not high growth. So we want to be able to return that capital to shareholders. It's a little -- there's still a fair amount of uncertainty -- enough uncertainty for us to wait another quarter or so until we see what's going to happen in the Hawaii economy before we look to approach the board and reinstating the share repurchase program. So that's a top priority to us. And as we get that clarity, we'll certainly look to start the share repurchase again. Ravi, anything to add to that?

I'd just say that because of our low efficiency ratio, our diversified sources of fee income, EB, you've seen sort of a jump up in noninterest income quarter-over-quarter as we start to see more activity. I think it gives us all confidence about where we're heading for in the future. In particular, going back to Ralph's comments about feeling good about our levels of reserves, given what we see right now, and just seeing where the economy and the activity levels are going, I think it's still early days, but I think all of those things give us confidence about what we envision as our future.

Got it. And thanks for reminding me about fees. Clearly, we had a big step-down for all banks in 2Q. It came back in third quarter. Just talk to us around how quickly do you think fees get back to normal or pre-COVID levels? And what area within your fee businesses where do you expect a little bit more lasting impact until things fully reopen?

Yes. Well, we saw a real step-back in Q3, to your point, in part because we've had suspended ATM fees for Q2. So not only was there a lower level of kind of consumer activity, transaction activity associated with credit cards usage, ATMs and all that, so that was one piece. So that came back in Q3. And that activity will -- those fees will continue to build as activity comes back. Longer term, there is -- it's going to be a growth into that. There's certainly a reduction in credit card activity. The growth in some of those areas will be a little more challenging in the near or medium term. That might take a little bit longer. We benefited over the last several quarters from our customers making use of various slot products in their commercial loans. And it's a little bit harder to project, but that has been a strong 2020 product for us in the fee side. So those are some of the areas I would point to. Ravi, anything you'd like to add?

I think, just maybe just to add to your points, Bob, I think on the credit and credit card and debit card fees, we've seen a nice increase quarter-over-quarter. We're off our year-over-year numbers. But certainly, there's upside opportunity there. I think some of the more stable parts of our fee income business come from private wealth management. We've seen a diversification even within the business itself from sort of a more sort of single point fee business to a recurring revenue business, and that has provided a tremendous amount of stability during this period, coupled with sort of a very strong economy and strong equity markets. I think that's been a source of stability for our fee income business. And with rates being relatively low with really no place for them to go besides up, I think our BOLI line has been relatively stable for the near term. And so all of those, when you put all of those pieces together, I think we've been very pleased with the fee side of our business and having it pop back here in Q3.

Got it. I guess perhaps putting all this together, when we think about the other discussion with investors is around what can banks own in terms of ROE or ROTCE in this environment. Just talk to us in terms of, Ravi, when you look at the balance sheet, I'm sure you go through year-end process. Like unless we get very significant relief on the yield curve, what is your expectation in terms of our ROT that First Hawaii could earn assuming provision costs remains relatively normal over the coming quarters?

Yes. I mean, EB, I'd just say it's still really early days and maybe a little bit early to be commenting on sort of what a normalized level of return is. And maybe going back to some of the points that we've talked about, I think we feel very good about our ability to return to a normalized level because of the number of things we've talked about. Our low efficiency ratio, our diversified sources of fee income, frankly, our capital levels and how they've sort of been steady, our margin and the stability of our margin over the last quarter. We certainly see all of those and credit costs sort of being sort of normalized with respect to our levels of reserves. All of those things really give us a lot of confidence. But I think a lot of it will for -- at least in terms of return to a normal level, I think a lot of it will depend on the strength of the consumer. I think, as Bob has mentioned earlier in the call, sort of fiscal stimulus, if any of that occurs. And then the process in which we reopened to tourism and the path of the virus. And I think all of those will be key indicators for us with respect to returning to a normalized level of returns, but it's still very good.

Got it. I guess one last question. I think the other feature that investors like about Hawaii is it is a relatively controlled market with a high defined number of players, which keeps both credit and product pricing a little bit more disciplined than what you would see in the U.S. Mainland, where you have like 50 banks probably in any given market that's competing with each other. Just talk to us in terms of world where things are getting more digital. Are you seeing more competition either being it from the big banks who have the wherewithal in and making a push or from emerging fintech players where you're seeing things that could impact growth or margins over time?

A very good question and let me just back up a little bit. We've always had competitors in every one of our segments. Whenever it is, we're the only credit card issuer in Hawaii, and we have less than 10% share. So that means 90% of the cards out there aren't ours. So as an example, and the residential real estate space, clearly, the online platforms have taken off a piece of that. The mainland banks calling over here for commercial real estate loans and corporate loans. All of that's been part of the environment for many, many years. What we're seeing on the digital side is just an enhancement of that level of competition, and that's why we need to continue to invest in digital to make sure that we can meet our customers needs. And so at the same time, building a broader relationship to where they don't look at it just by one product at a time and really look at a suite of products that we can help them with and grow that relationship. So we're the first bank that they approach and ask for help. And I think that with our segmented customers and the ones we really spend time with is only going to help us as time goes forward. But it's going to be more competitive every day, every year. That's just the nature of the beast.

I think with that, we've completely run out of time. So I'd like to thank you, Bob, Ravi, Ralph, and I know we can't see Kevin, but Kevin is sitting somewhere. So thank you all for your time today and followup.

Thank you, EB.

Thank you, EB.

Take care.