Bank of Hawaii Corporation (BOH)

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Bank of Hawaii Corporation (BOH)

Q4 2012 Earnings Call

January 30, 2013 01:00 PM ET


Cindy Wyrick - IR

Peter Ho - Chairman, President and CEO

Kent Lucien - Vice Chairman and CFO

Mary Sellers - Vice Chairman and CRO


Nick Karzon - Credit Suisse

Casey Haire - Jeffries

Joe Morford - RBC Capital Markets

Jeff Rulis - D. A. Davidson

Jacque Chimera - KBW

Brett Rabatin - Sterne Agee

Aaron Deer - Sandler O'Neill & Partners

Erin Davis - Morningstar

Russell Gunther - Bank of America Merrill Lynch

Brian Zabora - Stifel Nicolaus

Casey Haire - Jeffries



Good day, ladies and gentlemen and welcome to the Fourth Quarter 2012 Bank of Hawaii Corporation earnings conference call. My name is Jasmine and I'll be your coordinator for today. At this time, all participants are in listen-only mode. We will be facilitating a question-and-answer session towards the end of today's conference. (Operator Instructions). As a reminder, this conference is being recorded for replay purposes.

I would now like to turn the presentation over to your host for today's conference to Ms. Cindy Wyrick, Director of Investor Relations. Please proceed.

Cindy Wyrick

Thank you, Jasmine and good morning, everyone. Thank you for joining us today as we review the financial results for the fourth quarter of 2012. Joining me this morning is our Chairman, President and CEO, Peter Ho; our Vice Chairman and Chief Financial Officer, Kent Lucien; and our Vice Chairman and Chief Risk Officer, Mary Sellers. The comments today will refer to the financial information included in this morning's earnings announcement.

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.

Now, I'd like to turn the call over to Peter.

Peter Ho

Thanks, Cindy. Hello everyone. Good morning and thank you for joining us today. We're pleased with our financial results for 2012, which remained solid despite revenue headwinds resulting from both regulatory changes and the near historic low interest rate environment that we all find ourselves in today.

Our loan portfolio for the year increased nearly 6% and deposit volumes continue to grow both on the business and consumer side, particularly in our core deposit segments. Expense control remains good and consistent progress is being made there. And I am happy to announce that our new credit card product is off to a very, very nice start.

And so, now let me turn the call over to Kent, who will review some of the financials affecting the quarter's performance. Kent?

Kent Lucien

Thank you, Peter. Good morning. Net income for the fourth quarter was 40.3 million or $0.90 per share compared to 41.2 million or $0.92 per share in third quarter, and 39.2 million or $0.85 per share in the fourth quarter of 2011. Our return on assets in the fourth quarter was 1.19% and return on equity was 15.5%.

Our net interest margin in the fourth quarter was 2.87%, compared to 2.98% in the third quarter and 3.04% in the fourth quarter of 2011. Securities premium amortization was $1.4 million higher in Q4 versus Q3 due to faster mortgage pay downs in the investment portfolio. Year-to-date the net interest margin was 2.97%, compared to 3.13% last year.

Since the end of 2012, interest rates have increased and this may reduce the NIM compression somewhat. However the increase is not enough yet to turn margins upward.

Mortgage banking income on the other hand making it slow with higher interest rates. Year-to-date net income was 166.1 million or $3.67 per share compared to $160 million or $3.39 per share in 2011.

Year-to-date return on assets was 1.22% and return on equity was 16.2%. Our year-to-date efficacy ratio was 57.9%, a reduction from 59.2% in 2011. Earnings per share was up 8.3% in 2012. Loans grew 5.7%. Shareholders equity grew 1.9%. Branches were reduced by 5.

We paid $81.4 million in dividends and repurchased $81.6 million of common stock. There were no credit provisions in the fourth and third quarters compared to $2.2 million in the fourth quarter of 2011. The allowance decreased by 2.1 million in the fourth quarter and by 1.5 million in the third quarter which equaled net charge-offs for the respective quarters.

The credit provision for the fourth quarter of 2011 included net charge-offs of 7 million and a 4.8 million decrease to the allowance. Our allowance for loan and lease losses at the end of the fourth quarter was 128.9 million or 2.2% of outstanding loan and leases. Non-interest income for the fourth quarter was 53 million compared to 52.4 million in third quarter and 43.4 million in the fourth quarter of 2011. Year-to-date non-interest income was 200.3 million compared to 197.7 million in 2011.

Mortgage banking continued to be strong in the fourth quarter and generated income of 11.3 million compared to 3.4 million in Q4 2011. For the full year, mortgage banking produced income of 35.6 million versus 14.7 million in 2011.

Debit card income was 11 million lower in 2012 due to the Durbin amendment. Also in 2011, we had securities gains of 6.4 million.

Non-interest expense totaled 83.5 million in the fourth quarter compared to 84.9 million in the third quarter and 84.4 million in the fourth quarter of 2011. The decrease compared to the third quarter was primarily due to lower insurance and claims expense, lower separation expense, lower profit sharing and bonus accruals partially offset by charges related to plant closure of branches in American Samoa. In the quarter, we incurred expense of 1.5 million associated with the closures of American Samoa.

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