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.

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.

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?

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…

Thank you, Kent. Net charge-offs for the fourth quarter totaled 2.1 million, up 642,000 on a linked quarter basis and down 4.9 million year-over-year. For the full year, net charge-offs were 10.7 million or 19 basis points of total average loan and lease outstandings, down from 21.4 million or 40 basis points of total average loan and lease outstandings in 2011. The improvement was driven off of 1.9 million decrease in commercial net charge-offs and an 8.9 million decrease in consumer net charge-offs primarily in our residential and home equity portfolios. Non-performing assets totaled 37.1 million, down 3.2 million from the third quarter and 3.7 million year-over-year. The linked period decrease was primarily due to 3.7 million decrease in residential mortgage non-accrual loans. However, we continue to expect the level of non-performing assets to be impacted in the near-term due to the longer resolution timeframe for residential assets. At quarter-end, loans past due 90 days or more and still accruing interest totaled 10.4 million, up 2.9 million on a linked quarter basis and 1.2 million year-over-year. The linked period increase was due to its 2.9 million increase in residential mortgage related to three loans that are expected to return to current status. Restructured loans not included in non-accrual loans are loans past due 90 days or more totaled 31.8 million at quarter-end, up 418,000 from the prior quarter and down 1.9 million year-over-year. Residential mortgage loans modified to assist our customers in maintaining their homes accounted for 22.2 million of the total at the end of 2012. Residential mortgage and home equity loans past due more than 30 days but less than 90 days and still accruing interest increased by 711,000 on a linked quarter basis, but were down 3.8 million year-over-year. We continue to see improvement in what we consider the higher risk segments in our portfolio. In total, these segments were down 1.4 million for the quarter and 13 million for the year. We recorded no provision for loan and lease losses in the fourth quarter which given net charge-offs of 2.1 million, reduced the allowance to 129 million or 2.2% of outstanding loans and leases. The allowance does consider the closure of our American Samoa operations which had total loan outstanding of 15.8 million at the end of 2012. Absent significant deterioration in the economy and with continued improvement or stability in credit quality, we anticipate requiring a lower level of allowance going forward. I'll now turn the call to Peter.

Thanks Mary. Let me finish our formal comments by giving you some color on what we are seeing in the economy out here in Hawaii. Visitor industry had a very good year. A major source strength for the Hawaiian economy. We had a record number of visitors to Hawaii this year and visitor spending reached a record-high of 14.3 billion that's up over 18% for the year. most of that increase coming from our International segment. We are beginning to see construction activity in our markets. We are seeing housing prices and volumes improving year-on-year. Inventory now in the single family market is down to under three months of inventory. State wide unemployment is 5.2% in December and on our main market of Oahu, that number is down into the low 4% range. Looks like the forecast for 2013 will indicate continued growth in tourism seeing very good forward levels there and a gradual albeit consistent improvement across the other sectors of our economy. And now we'd be happy to respond to your questions.

(Operator Instructions). And your first question will come from the line of Craig Siegenthaler with Credit Suisse. Please proceed.

Hi, this is actually Nick Karzon for Craig Siegenthaler this morning. Just first question, can you give us a little bit more color in terms of what we should expect from the closure of the branches in American Samoa both on the non-interest expense side as well as fee income and then potentially any impact on loan balances with those closures in the first quarter?

Okay, so the annual expenses in American Samoa are about $2.5 million and the corresponding fee income is about $2 million. There is a loan balance. it's about $15 million or so. So, on a (inaudible) basis actually it's negative for us. So, those are the major items.

Then just a second question. Can you give us some additional color on the mortgage banking results in the fourth quarter in terms of maybe the production level and gain on sale margins? And then maybe any thoughts kind of from what you are seeing in the first month of the first quarter of 2013 in terms of what we can expect going forward?

Well, the mortgage application volume actually dipped down in the fourth quarter. That's pretty typical though, that's seasonal. Actually it's starting to look a little bit higher into the first quarter, but again that's seasonal. Compared to last year's first quarter, it's little bit lower than last year's first quarter. The gain on sale was high in the fourth quarter. It was 319 basis points in the fourth quarter.

Your next question comes from the line of Casey Haire with Jeffries. Please proceed.

Kent just a follow-up question for you on some of your comments on the margin. It sounds like you know obviously rates helping out on the securities front. Was wondering if you could provide some color as to where new money is getting placed versus the 230 existing yield on the securities portfolio?

Yes, so the portfolio continues to be down by the mortgage backed securities over 75%. We are continuing to reinvest into that segment, but we are also adding municipal securities in some corporates but obviously that's a much smaller portion of the portfolio.

Is that any color as to how that yield compares to the existing yields on a blended basis?

Well, in the fourth quarter, the reinvestment differential was about 114 basis points. So the runoff rate compared to the reinvestment rate was at 114 basis points. But now, that was fourth quarter. Into the first quarter, generally rates have moved up about 25 basis points. So, that differential, all other things equal, would be diminished by that improvement in rates.

So still a drag just lots of 1?

Yes, still there is a drag. I think we need some further increase in general interest rates or to turn to a positive for us, but it's a lesser drag than it would have been otherwise.

And then on the earning asset front, could you give us a little help? It seems like there was a big disconnect in terms of the period end balances and what happened with the averages specifically on the security side. The period end up 360, the average down 180. Did you guys invest a lot at the end of the quarter?

Yes. That’s pretty typical at the end of the year. You get a flush of deposits. and so that was put to work but it just didn't impact the averages for the whole quarter.

Is this stuff you expect to stick around or is this just transient deposit?

You know it's like I said it's very typical at the end of the year we get flush of deposits. they tend to run-off early in the subsequent year and that's pretty much been the pattern for many years.

And just lastly on the expense outlook. you guys continue to do a pretty good job in calibrating the expense line lower and what the top revenue environment, I'm just curious is there more room there or is there more opportunities or are we at the end of line here?

No, I think there is opportunity. I think the organization has really turned to the very productive, very efficient. We are finding things we can do better. Some of the facilities items that we've been talking about really begin to kick in in 2013. And so, I think we're still on the right track and I think there is still some opportunity there.

Your next question comes from the line of Joe Morford from RBC Capital Markets. Please proceed.

Just given the relatively positive economic outlook I'd be curious that your current expectations for loan growth in the year ahead and maybe is it reasonable think we might see a similar pace to that 6% or so growth that we saw last year?

Well we think that the economy is going to continue to be constructive for our operations, loans in particular. I guess on the commercial front I'd say that we would anticipate continued growth in just about all categories. The caveat being you understand that we're slowly bringing down our leased portfolio. Whether we're going to see a consistent pattern of growth intra-quarter or in all quarters is yet to be seen, but I think on an annualized basis, I'd expect to see growth there. The consumer book which you know has been so much sticky for us until recently we're beginning to see pretty reasonable movement there. And then finally the resi-mortgage book has been a source of volume for us, but as Kent alluded earlier, we're going to see what kind of volumes we get this year relative to the success we've had in prior years. So, a little bit of a question mark there. A little bit of an opportunity though there because we're both sellers, as well as portfolio holders of those assets.

And then just I guess follow-up on that, what was your kind of impression of the new QM roles and do you see that having much of an impact and also on mortgage what's kind of the split you are seeing between and refi and purchase activity?

Yes. So, you're talking about the CFPB initiative?

Yes, I am.

Yes we have run that analysis. The good news is for a number of those categories that are now prohibited; the fact of the matter is Bank (inaudible) was not in those categories to begin with. Probably the most hurtful element to us is in the debt to income and so we had an underwriting level of 45% that's now 43%. And so, the impact of that is going to be in the $20 million, $30 million range. Most of that differential for 43 to 45, we would be able to push through into the Fannie and Freddie market, because there I guess exempt for that with better term. But we probably will get clipped in front of the client side, where we're just dealing with a different scale of debt-to-income and so underwriting a 45% would be more than appropriate given the income levels there. And so it will have a nominal impact on us.

Okay and the purchase refi split?

We're pleased to see that moving up frankly. I think historically, certainly in the last couple of years, refi has been the majority of volume that we were taking in. I think in this most recent quarter purchase is well into the double-digit range in terms of percentage. In fact, I think well above 20%. So, good movement there and I think a positive sign for overall housing and economic activity out here.

Your next question comes from the line of Jeff Rulis with D. A. Davidson. Please proceed.

I guess a little housekeeping on the expense line, just wanted to confirm that that American Samoa, the charge was through the occupancy line?

Most of it is, yes. There is an element that's in salaries and benefits assisted with severance expense. But the majority is in occupancy.

And Kent, the impact of that leaving the system as you outlined, none of that really occurred in Q4 that a full quarter with American Samoa in…

Yes. And that will be true in the first quarter as well.

And then did the tax rate, Kent do you expect around these levels or slightly higher going forward?

Yes. I mean the rate itself sometimes is affected by the level of income because you have a fixed amount of credits and offsets but I wouldn't disagree with your assertion that these rates are pretty typical.

Your next question comes from the line of Jacque Chimera with KBW. Proceed.

It was nice to see the fee diversification that happened in the quarter just with most line items being up. Could you maybe provide a little more color on what the main driver was on across those?

Are you talking about the trust and asset management?

The trust, the insurance, exchange fees. It looks like almost everything had a linked quarter gain?

Yes. Well, partly the trust business, higher values in assets under management is the reason. We also had a trust that is in liquidation and we had additional fees there and in the insurance category, we did have a little boost in annuity and life insurance products in the fourth quarter. But for the whole year, insurance was actually down for us. So, a little bit of movement upward in the fourth quarter, but nothing very dramatic. So, those are the only real highlights outside of the mortgage banking results of course.

So, was the fourth quarter more of just a timing issue where fees just happened to rise a little bit on the quarter or could we look for more fee growth outside of mortgage banking in 2013?

Well, again back to trust and asset management, to a certain degree it depends on the value of the asset. So we do have a higher level of assets under management that has a lot to do with fees in that segment. Other than that, I wouldn't expect anything extraordinary.

You had mentioned the credit card program and that was doing well. What line items in particular is that already starting to hit, as far as loans and maybe some of (inaudible).

Yes, right. Well we're only a few months into it and largely branch generated. So, we are not really going mass market in terms mail drops right now, Jacque. So, somewhat of a slow soft opening, but the results are good. Our approval rates looking about where we wanted it to be, maybe a little bit higher. Commitments are to-date into the low eight figure range, but obviously, it's going to take a while for people to spend into these cards. So, a bit early to tell, what the bottom line impact's going to be, but certainly the early activity looks promising.

Your next question comes from the line of Brett Rabatin with Sterne Agee. Please proceed.

Wanted to talk about expenses for a second. You were able to lower on core basis the expenses of about 2.5% in 2012. I guess of curious if that's kind of the goal for 2013 and is that basically result from the branch closures you're doing and any other programs I'm just trying to figure out, if expense rationalizations might be higher or lower than what they were in 2012?

Brett, I'll talk on the branch side, and then maybe Kent can clean up with all of the other items that we have afoot. The branch rationalization program has been successful for us. And obviously the idea is to get efficiency, but not to drive efficiency at the expense of either deposit performance or just basic franchise performance. So, I'd say we're about half way through that right now or at least what we've identified for now. there are additional savings out there. But they are moving pieces here and they have to do with closing in certain areas and opening in other areas to make sure that we are salient from a real estate demographic standpoint. So, that's still an opportunity out there for us to see. I guess the only other thing I'd say about the optimization program is one of the keys to our success we think in this program has been the fact that we effectively have a no layoff policy. So, as we transition staff out of closed branches, we move them into other lying existing branches which obviously had I think a calling influence on the branch staff, it's also helped with retention, many of these customers whom deal with these branch personnel on a daily or weekly basis. So, a lot of the savings that we will or have garnered out of it come on the backend if you will, as we just managed towards general attrition levels.

And then the other question I have was just around year-end activity. How much that impacted if any, either your loan or your deposit balances in terms of what's going on with tax stuff?

Kent spoke to the usual crush of deposit runoff at year-end. So, it's a little higher this year than in past years, but a lot of that stuff just washes through early in the first quarter of the next year. And then in terms of on the loan side, it seemed to be pretty reasonable year-end closing.

Your next question comes from the line of Aaron Deer with Sandler O'Neill & Partners. Please proceed. Aaron Deer - Sandler O'Neill & Partners : Just wanted to circle back on a couple of points with respect to margin, and forgive me if you'd already addressed this. What impact did pay downs in the securities book have in the portfolio and what rates having kind of come up here little bit, has that begun to stabilize? I was just wondering if you can give us like a basis point impact from the fourth quarter into the third quarter.

So the differential in yield between what ran-off and what was reinvested was 114 basis points in the fourth quarter. And as I mentioned, that was based upon an environment where for example, the 10 year treasury was more like 170. And now today, we're over 2%. So, we are making up some of the differential today. But it's going to take a bit more of a higher rate of environment for us to turn positive on the margin. So, I think kind of the compression we've experienced in the fourth quarter and really throughout the year may be mitigated a little bit up here, but not completely overwhelmed. Aaron Deer - Sandler O'Neill & Partners : I think I might have misspoke; I was looking for the prepayment impact. The other question I had was more on the funding side. Obviously you had a lot of deposit inflows. it doesn't seem like there is a whole lot more you can do in terms of rationing rates and your CD is already, it looks it's pretty low, but what about with respect to the repo funding. What's the maturity schedule on that or is that something that you could prepay?

Yes. I mean the pre-payment it comes with a price. So, they all have requirements. So, we don't see any particular good purpose in prepaying any of the return in private repos. The public repos a little bit of difference there, that really represents short-term funding and many of the same characteristics of deposits and we have been reducing the level of public repo funding in favor of deposit funding. Those are somewhat interchangeable.

Your next question comes from the line of Erin Davis with Morningstar. Please proceed.

I had a question about the allowance for non-performing loans and loan losses. Every quarter, you've been and recently you haven't been posting any provisions and that's causing your allowance to run down naturally. But even so it's quite hurry as a portion of non-performing loans, its daily 400% now. And I wonder how you see that developing going forward and what you see as a sort of medium term target for that provision and if you think that we might start to see some more benefit from that or if you see this as a semi state level?

Well, I think as I mentioned that with continued stability in credit quality and our economic environment stabilizing and improving, we would expect that concurrently with the reduction in our risk profile that we would continue to require a lower level of allowance. I think if you look historically, we're pretty measured about that and take a look each quarter and evaluate where we need to be.

Okay, so you wouldn't probably feel comfortable naming a medium-term targets say like 3% non-performing loans or 2% of total loans or something like that? Mary Sellers No, I don't think so.

Your next question comes from the line of Russell Gunther with Bank of America. Please proceed.

Just to follow-up with regard to loan growth. If you guys could give a little color what was driving some of the commercial growth in the quarter?

Sure. Well, I think you know that commercial mortgage has been a leader for us for a while now. That continued to be the case in the fourth quarter on a linked basis. Results on a year-on-year basis were exceptional. Construction is a small number for us and is not likely to be a leader for us. But as I mentioned, we are beginning to see increased activity here in the marketplace. So, I would look to that sector as contributing to growth, but not necessarily becoming a headliner loan category for us. And then finally C&I, which had been probably the laggard as we built into the cycle. We're beginning to see some life in that segment as well, right now.

Based on the level of activity you are seeing, it would be your expectation at this point to be able to outpace loan growth for you guys put up in 2012?

I thought that 2012 was pretty good performance.

(Operator Instructions). And your next question comes will come from the line of Brian Zabora with Stifel Nicolaus. Please proceed.

Question on the charges from American Samoa. Will there be any future charges in coming quarters?

No, I mean we're going to continue to operate here in the first quarter. But in terms of closure type expenses, I wouldn't anticipate additional budgets.

And then did you see any impact from the TAG program exploration in deposit balances in January?

I think neither here nor there. So, I think that's what we will brace for. So, clearly we didn't see a run-off I think directly associated with TAG and nor did we see a crush of deposits coming in from other institutions.

And your next question is a follow-up from Casey Haire with Jeffries. Please proceed.

Just real quick, capital return finished the year just under 100%, which I think is what you guys were targeting for 2012. Just wondering if is that your same outlook for the year ahead or should we expect that to moderate lower?

It's about what we're expecting. We've been increasing our Tier 1 leverage ratio here over the last two quarters. We want to get that up a little bit more. But think about a little bit longer period of time, returning all the capital we're generating, less than a capital we need for growth. That's still the strategic objective.

And then just one on mortgage banking. Kent you mentioned that volumes are better than fourth quarter, but weaker than last year's first quarter. Just wondering, the gain on sale in the first quarter of '12 was that meaningfully lower.

It was lower, yes. It was about 50 basis points lower.

In first quarter '12?

Yes.

At this time, we have no further questions. I would like to turn the call back to Ms. Cindy Wyrick for closing remarks.

Thank you, Jasmine and I'd like to thank everyone for joining us here today and for your continued interest in Bank of Hawaii. As always, if you have any additional questions or any further clarification on any of the topics we discussed today, please feel free to give me a call. Take care and have a great day everyone.

Thank you for your participation in today's conference. This concludes the presentation. You may now disconnect. Have a wonderful day.