Cynthia G. Wyrick - Executive Vice President and Director of Investor Relations Peter S. Ho - Chairman, Chief Executive Officer, President and Director of Bank of Hawali Kent T. Lucien - Vice Chairman, Chief Financial Officer and Director of Bank of Hawaii Mary E. Sellers - Vice Chairman and Chief Risk Officer

Joe Morford - RBC Capital Markets, LLC, Research Division Jeffrey Rulis - D.A. Davidson & Co., Research Division Nicholas Karzon - Crédit Suisse AG, Research Division Casey Haire - Jefferies & Company, Inc., Research Division Brett D. Rabatin - Sterne Agee & Leach Inc., Research Division Aaron James Deer - Sandler O'Neill + Partners, L.P., Research Division Jacquelynne Chimera - Keefe, Bruyette, & Woods, Inc., Research Division Ken A. Zerbe - Morgan Stanley, Research Division Matthew J. Keating - Barclays Capital, Research Division Erin Davis - Morningstar Inc., Research Division Bryce W. Rowe - Robert W. Baird & Co. Incorporated, Research Division Erika Penala - BofA Merrill Lynch, Research Division

Good day, ladies and gentlemen, and welcome to the First Quarter 2013 Bank of Hawaii Corporation Earnings Conference Call. My name is Philip, and I will be your operator for today. [Operator Instructions] As a reminder, this conference is being recorded for replay purposes. I would now like to turn the conference over to your host for today, Ms. Cindy Wyrick, Director of Investor Relations. Please proceed.

Thank you, Philip, and good morning, everyone. Thank you for joining us today as we review the financial results for the first quarter of 2013. 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. 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 call will contain some forward-looking statements. And while we believe our assumptions are reasonable, there are a variety of reasons that actual results may differ materially from those projected. And now, I'd like to turn the call over to Peter Ho.

Thanks, Cindy. Aloha, everyone, and thanks for listening in this morning. The continuing low rate environment provided for a challenging first quarter for Bank of Hawaii. As Kent will expand on shortly, our spread income was negatively impacted by lower reinvestment rates. Noninterest income compared with the prior quarter was impacted by lower gain on sale levels and lock activity in our residential mortgage business, both of which were at exceptionally high levels last quarter. Likewise, loan levels in Q1 were negatively impacted by refinance activity in both our residential mortgage and home equity portfolios. Certain other portfolios experienced what I would term modest growth. Expenses were higher versus the prior quarter, resulting from normal seasonal elements and higher severance costs. On the positive side, average core consumer and business deposits continued to grow; capital levels remained robust; and credit quality, already a strong point for us, improved even further. And now, let me turn the call over to Kent.

Thank you, Peter. Good morning. Net income for the first quarter was $36 million or $0.81 per share, compared to $40.3 million or $0.90 per share in the fourth quarter and $43.8 million or $0.95 per share in the first quarter of 2012. Our return on assets in the first quarter was 1.08%, and return on equity was 14.1%. Our net interest margin in the first quarter was 2.82%, compared to 2.87% in the fourth quarter and 3.06% in the first quarter of 2012. The lower margin was primarily due to the continued reinvestment in lower yielding securities in our investment portfolio and relatively high premium amortization. The investment portfolio reinvestment differential was 101 basis points in Q1. Premium amortization was $16.5 million compared to $14.1 million in Q1 2012. There were no credit provisions in the first and fourth quarter, compared to $0.4 million in the first quarter of 2012. Our allowance decreased by $2 million in the first quarter and by $2.1 million in the fourth quarter, which equaled net charge-offs for the respective quarter. The credit provision for the first quarter of 2012 included net charge-offs of $3.4 million and a $3 million decrease to the allowance. Our allowance for loan and lease losses at the end of the first quarter was $126.9 million or 2.2% of outstanding loan and leases. Noninterest income for the first quarter was $47.8 million, compared to $53 million in the fourth quarter and $48.1 million in the first quarter of 2012. The decrease compared to the fourth quarter was primarily due to a decrease in mortgage banking income. First quarter mortgage applications compared to Q4 2012 were down 7%. Locked loans were down 21% and the gain rate on locked loans was down 32%. Mortgage results were lower compared to Q4…

Thank you, Kent. Net charge-offs for the first quarter totaled $2 million, down $135,000 on a linked quarter basis and down $1.4 million year-over-year. The year-over-year improvement was primarily driven off a $1.7 million decrease in residential mortgage and home equity net charge-offs. Nonperforming assets totaled $38.4 million, up $1.3 million from the last quarter and down $3 million year-over-year. The linked period increase was primarily due to a $3 million increase in residential mortgage nonaccrual loans. We continue to expect the level of nonperforming assets to be impacted in the near term due to the longer resolution time frame for residential assets. At quarter end, loans past due 90 days or more and still accruing interest totaled $11.4 million, up $1 million on a linked quarter basis and $1.3 million year-over-year. The linked period increase was due to a $1.8 million increase in home equity, which was partially offset by a $900,000 decrease in residential mortgage. Restructured loans not included in nonaccrual loans or loans past due 90 days or more totaled $30.1 million at quarter end, down $1.8 million from the prior quarter and up $526,000 year-over-year. Residential mortgage loans modified to assist our customers in retaining their homes accounted for $19.6 million of that total at the end of the quarter. We continue to see improvement in what we consider to be the higher-risk segments in our portfolio. In total, these segments were down $783,000 for the quarter and $4.6 million year-over-year. And as Kent shared with you, we recorded no provision for loan and lease losses in the first quarter, which given net charge-offs at $2 million, reduced the allowance to $127 million or 2.19% of total outstanding loans and leases. Absent significant deterioration in the economy and with continued improvement or stability in credit quality, we continue to anticipate requiring a lower level of allowance going forward. I'll now turn the call back to Peter.

Great. Thanks, Mary. As I mentioned at the start of call, our operating results continue to be negatively impacted by the low rate environment. This is impacting spreads, and in some respects, altering how we would otherwise manage our loan portfolios. Our sense, however, is that the likelihood of extended lower rates will diminish in correlation with improved economic activity at the national level. As that occurs and as rates rise, we intend to be positioned to profit from it. The Hawaiian economy continues to be a bright spot, and we believe strengthening construction activity, led by growing housing demand and continued strength of the visitor industry will more than offset federal spend limitations and defense issues. Unemployment in Hawaii is now down to 5.1% statewide and 4.6% on Oahu. Housing inventory is below 3 months. Active listings right now are 20% lower on a year-on-year basis. A number of housing projects, however, are projected to begin construction within the next year. Visitor spending and arrivals are comping strongly against comps that were already in themselves quite impressive last year. In short, we think the longer view remains impressive. As we work to that point, you can count on Bank of Hawaii to focus on 3 things: First, we will manage our risk, both credit and market, in a balanced and prudent manner. We will not put short-term temptations ahead of the long-term health of our 116-year-old franchise. Secondly, we will continue in our quest to thoughtfully improve efficiency throughout the organization. To give you some perspective, first quarter noninterest expense, net of severance costs, was nearly $2 million lower than that of the first quarter 2012 and nearly $2.5 million lower than that of the first quarter of 2011. Finally, we will accelerate our efforts to meaningfully improve what is already a world-class franchise in Bank of Hawaii with thoughtful effort around improved customer service, improved utility in our products and services and greater ease of use for our most important clients. And now, we'd be happy to take your questions.

[Operator Instructions] Our first question comes from the line of Joe Morford from RBC Capital Markets.

Just wondered if you could comment on the mortgage origination pipeline at period end, and then also just kind of what kind of mix you're seeing between refi activity and purchase? And are you expecting much of a further drop in gain-on-sale margins from first quarter levels?

Joe, as to the gain, that has started to flatten out a bit here. It definitely came down during the first quarter, but it's starting to flatten out a little bit at this moment. Now that's obviously subject to change, but that's what we're seeing right now. On the composition, there is a bit more of a portfolio balance compared to salable. At the end of the period, it was about 36% portfolio and it had been 26% earlier. So I think refis are becoming a little bit less a part of the composition. The apps, those are also starting to flatten out a bit. So I think I quoted 7% decrease in Q1 versus Q4. That seems to have flattened out. But it's pretty early in the period, so I don't know if that's definitely a prediction at this moment.

Okay, but it's certainly helpful. I guess my follow-up would be you gave the premium amortization number for the quarter of $16.5 million. I'd be curious what -- how that compared with the fourth quarter number? And have -- are you seeing any discernible change in the underlying trends here, particularly given that mortgage banking activity seemed to slow a fair bit in the quarter?

Yes, Q4 was nearly the same number. So it's right around $16.5 million in Q4. And since such a large portion of the portfolio is mortgages, the amortization will really depend on how prepay speeds develop. So for example, if they begin to slow down, amortization will decline. So that's out there as a possibility. Whether that's what happens, we'll just have to see. But that's a possibility.

Our next question comes from the line of Jeff Rulis from D.A. Davidson. Jeffrey Rulis - D.A. Davidson & Co., Research Division: The expense reductions that you've implemented in Q1, have you put a number on what the potential cost savings of that would be?

I'm struggling here because we have, but I'm not sure what we've discussed before. Kent, you want to...

Yes, let me put it this way. We did have a higher level of severance that we reported in Q1. That really should flip around by the end of the year. In other words, the saves associated with that in particular should be reversed by the end of the year. So we're pretty optimistic about expenses going forward. We have a lot of good programs in place and we're working at it on a continuous basis. So as I said we're pretty optimistic. Jeffrey Rulis - D.A. Davidson & Co., Research Division: Okay. Just so I get you -- understand it right. We'll have the absence of the severance costs this quarter and then potentially that same amount off the core comp expense?

Well, I didn't quite say we won't ever have ...

More severance.

More severance. That's always a possibility. But for the salaries and benefits associated with this particular severance, that should be paid back within this year. Jeffrey Rulis - D.A. Davidson & Co., Research Division: Okay. And then one question on just maybe the C&I and commercial real estate segments and the competitive environment. Would you, I guess, point to the competition as any part of loan demand being compressed or I guess production being down? You sensing any of your competitors may be more financially stable than they previously were? What are you seeing out in the marketplace?

Well, it's competitive. That's for sure. We're up -- if I look at the commercial portfolio, we're up 9% on a year-on-year basis based on end-of-period numbers. And we're modestly constructive in the first quarter. That was coming off a 4% gain quarter in the fourth quarter. So a lot of transactions really we're pushing harder to get into the end of the year because of the uncertainty around the tax situation. So I'm still reasonably optimistic around commercial -- C&I commercial mortgage, but I think it's going to be lumpy like it generally is. And we're going to have some strong quarters and we're going to have some flat quarters like we just experienced. Jeffrey Rulis - D.A. Davidson & Co., Research Division: Okay. But no major change in the last, let's call it, year on the competition side?

No, the comp -- well, from a composition standpoint, it's been the local lenders. All of them obviously are hungry for assets. What we haven't seen, and I think this is probably more to your question, is out-of-market competitors really dropping in. So the monoline real estate folks that we had in the last cycle still are nowhere on the radar screen. And the conduit market, which at one point was down as low as $5 million, $10 million on mortgages, is still pretty absent from the market.

Your next question comes from the line of Nicholas Karzon from Crédit Suisse. Nicholas Karzon - Crédit Suisse AG, Research Division: I guess, first, it looks like the occupancy expense was down relatively significantly this quarter, even dropping out the expenses related to the American Samoa branch closures in the fourth quarter. Can you give us some help in thinking about that in terms of additional branch closures or kind of how to think about that trend going forward?

Sure. This is an area we're putting a lot of focus upon. We've been working at this for quite a while. That's included really the consolidation of 3 of our major facilities here into really 2 and leasing out the excess space to third parties. In addition, we've reduced the number of branches in the system year-on-year about 7%. So it's really those 2 things that have produced that result. Nicholas Karzon - Crédit Suisse AG, Research Division: I guess changing gears a little bit. I was wondering if the -- if you've noticed any impacts from the weakening yen on the tourism side? I think that roughly 18% of tourist arrivals are from Japan. I was wondering if that's had any impact thus far this year?

We've not seen that yet. Intuitively, you'd think that, that would have an impact on at least spend. Having said that, the Japanese are pretty voracious international travelers and so that's going to impact them on a lot of destinations they're going to be interested in. And so I think the key for us is just to market the heck out of the marketplace and land those bodies here.

Your next question comes from the line of Casey Haire from Jefferies. Casey Haire - Jefferies & Company, Inc., Research Division: Can you give us some updated thoughts on the NIM outlook? It looks like loan yields still under pressure here, but the security yields actually found a bottom in the AFS bucket. Was wondering was that you guys just taking advantage of some better reinvestment opportunities or we've kind of reached bottom there?

Well, I'd hesitate to say bottom. As I quoted in my prepared remarks, we're still reinvesting at a 100-point basis differential between what's rolling off and what we're purchasing. So to the extent that is continuing, which is likely to be the case here for the near term, there's still going to be pressure on the securities yield, and therefore, NIM. And to a degree, that will also apply to the loan portfolio. I mean, the environment is such, for example, the 10-year treasury right around 1.7%. That's actually a little bit lower than it was at the start of the year. We started to buoy it up a little bit in the first quarter, but that's come back down. So as long as that's the environment, I think there's still going to be some pressure on NIM. Casey Haire - Jefferies & Company, Inc., Research Division: Got you, okay. And then just switching gears to capital, off to, I guess, a little bit slower start versus where you were last year at 74% of earnings. Should we expect capital to build -- capital ratios to build this year?

Well, maybe a little bit. So for example, we would probably expect our Tier 1 leverage ratio to tick up to 7% in the second quarter. But bigger picture, our strategy is still to return as much capital as we can to shareholders. It's true we had a little bit less of a repurchase number in the first quarter. I think that really just gives us more opportunity to buy some more stock going forward. Casey Haire - Jefferies & Company, Inc., Research Division: Okay. And just lastly, the tax rate, a little light. What -- you guys have typically lived around 33%. Is that fair going forward?

Well, the rate itself is going to be a function of the level of income applied against kind of a fixed number of low income housing credits and other tax credits. So we have energy tax credits, for example. So when you have a fixed number of credits and a lower level of pretax income, it will cause the rate to come down. So actually, to the extent income's going up and the rate goes up, that's probably a good thing. Casey Haire - Jefferies & Company, Inc., Research Division: Okay. So we're actually closer to where we were here in the first quarter than prior levels?

Yes, I think that's right.

Your next question comes from the line from Brett Rabatin from Sterne Agee. Brett D. Rabatin - Sterne Agee & Leach Inc., Research Division: Wanted to ask about expenses. I know you talked about achieving a similar level of expense reduction in 2013 to '12, but it would be more back-end oriented. Is that still the case? And then could you give us any additional color around the level of mortgage banking expenses in the first quarter if that declined any with a slightly lower level of production? It doesn't seem like expenses net of the separation charges were that lower.

Yes, so the mortgage banking expenses are going to be back ended. So really, we pay the comp, the majority of the comp on stellar production in the prior quarter on a back-ended basis. So there's bit of a lag there. Expense-wise, I think it's -- my suspicion is it's going to be difficult to get a sense on a specific reduction number, not because we're not trending in that direction. We are. But because, as you know, there are certain upfront costs that come with achieving further expense reductions. So we saw it here in the first quarter. That ultimately is going to result in lower expenses on a run rate basis, but we could very well likely see more severance costs out into the latter quarters. In general though, I think that piece is going well. The other major component to our expense reduction program is in facilities, as Kent mentioned, and there too you have some front-loaded costs that go into bringing in new tenants. Not to disclose any transactions we can at this point, but we have a few of those in the hopper right now. And that will take some upfront costs, but ultimately will result in some pretty meaningful cost savings for us. So directionally, I think if you look at the past couple of years, probably that's not a bad trend line, but recognize that there's going to be some intra-year or intra-quarter lumpiness just on getting those expenses to fruition. Brett D. Rabatin - Sterne Agee & Leach Inc., Research Division: Okay, that's good color. And then the other thing I was just hoping to get a little more flavor around was, Kent, just some thoughts around -- you mentioned earlier what the 10-year was today versus year end. Last quarter, you talked about reinvesting at 110 basis points below the current portfolio yield. Any thoughts on what you're doing today? Any change in strategy? And is that still kind of the levels that you're seeing reinvestment activity?

Unfortunately, it is about the same level. The only exception to that is we're ever so slightly bringing down the composition of the portfolio down from mortgages and into some of the other categories, such as municipal securities and some corporate bonds. So those are small items. But directionally, can help a little bit in terms of offsetting the environmental direction.

Your next question comes from the line from Aaron Deer from Sandler O'Neill and Partners. Aaron James Deer - Sandler O'Neill + Partners, L.P., Research Division: I think most of my questions have been addressed. Just a couple quick follow-ups. One is with respect to loan growth, is there -- are you getting any meaningful traction at this point from your credit card program? And I was wondering if you could just kind of update us on what kind of account growth you're seeing there in line usage and where your marketing efforts stand?

We're getting incredible period-on-period growth in the credit card portfolio. The unfortunate thing is we're starting from a pretty darn small number Aaron. So we're up to, I want to say, $3 million in outstandings, much better performance in terms of account growth. And so we think we've got a great product on our hands. It's going to take us a while to get its meaningfulness to the operation obviously. But we think it's a great product, and we're working hard to figure out some balance transfer strategies because we think the product fits quite nicely into our customer base. Aaron James Deer - Sandler O'Neill + Partners, L.P., Research Division: Have you started marketing that through direct mail or similar efforts or similar efforts, or is it still mostly just kind of cross-sell on the branches?

I think we're transitioning right about now from our soft opening phase to more active marketing. So we're hopeful around that. Aaron James Deer - Sandler O'Neill + Partners, L.P., Research Division: Okay. And it didn't sound like from your earlier comments that the sequester is having much impact on economic activity in the state.

Not yet. So we've not really noticed any meaningful downshift that can be attributed to the sequester. Tough to tell what happens in the next, call it, 12 to 18 months. But we're -- I think, we're cautiously optimistic that whatever impact nets out of sequester, that will be likely more than offset by what's still a very robust visitor market and what's looking like a much stronger construction component in the economy.

The next question comes from the line from Jacque Chimera from KBW. Jacquelynne Chimera - Keefe, Bruyette, & Woods, Inc., Research Division: Peter, you actually had a great segue into my question, which was about construction. I know the last time we talked you had said it was picking up. I wondered if you could provide a little more color on that?

Well, sure. We -- I quoted the housing numbers earlier in the call. And so from an inventory standpoint, housing inventories are just at very, very low level. We're beginning to see a good amount of pressure on price points as a result of that, and Hawaii is already a very high cost of living state to begin with. So there's a lot of pressure. Frankly, there's a lot of policy pressure at the government level to help release this pressure. We've got, gee, no fewer than a 1/2 dozen construction -- housing construction projects on the books. These have been very well received in the marketplace. We're active with 2 of the probably most high profile of the 6 and those have effectively sold out by a pretty wide margin today. So a lot of demand there, a good amount of infrastructure, housing infrastructure on the books. And hopefully, we'll see how long that plays out. Jacquelynne Chimera - Keefe, Bruyette, & Woods, Inc., Research Division: Okay. And then for the last several quarters, you had strong growth in the auto portfolio. Do you have anything in place right now to drive those loans, or is it just more demand that's been picking up?

It's a combination of demand has been picking up, albeit from a pretty low level, historically speaking, as well as we've just put -- we've placed a lot of resources into that area and we've got some very good leadership happening in that space right now. Jacquelynne Chimera - Keefe, Bruyette, & Woods, Inc., Research Division: Okay. And then just one last quick one. In the past, you've said that attrition is how you deal with a lot of the branch closures and just some of your initiatives. How does that reconcile to the severance charge you had in the quarter?

It -- that doesn't really come into the severance charge because for the very reason that you bring up and usually what we do, because we have approaching 20% attrition, 15% to 20% of attrition in our branch system, as we move a branch or close a branch and domicile those accounts into other branches, what we'll do is move the staff along with those accounts. And what that does is it gives us a much better retention level on customers, many of whom obviously have come to know and like these individuals. It takes us a little longer to achieve the expense savings. But with the attrition rate what it is, we do achieve the expense savings over time. So those are voluntary separations, people just leaving to do other things. Interestingly, with the visitor industry doing as well as it's doing, that's a real competitive factor for us in hiring and retaining talent, but doesn't really fall so much into the severance category, which is more for managerial and mid-level positions, frankly.

Your next question comes from the line from Ken Zerbe from Morgan Stanley.

I guess with NIM compression being top of mind, can you just remind us on the duration and your ability to reduce the $756 million of repo funding that you have?

Okay. So the repos generally have fixed terms. I'm talking about the private repos now, not the public repos. And the opportunity, quite frankly, is to see if we can extend some of those out. And that's a possibility for us going forward, so nothing to report on that. But on the public side, we have a lot of flexibility based upon how we bid on repo opportunities. So over the last really 2 quarters, we've been bidding in such a way that we've been reducing the repo balance in favor of more deposit balances and some fixed term liabilities. So you probably noticed on the balance sheet, we have $175 million of term debt on the balance sheet. Does that answer your question, Ken?

I guess it does. I see that it is coming down sequentially, so a fairly high yield. I just didn't know how long that was going to -- it looks like the yield is 3.7% and accounts for almost all your or the vast majority of your funding costs. Just didn't know how quickly you're bidding...

It still has some term remaining, so I mean it varies between 2 and 5 years. But as I started to mention, we do have some flexibility to extend some of those in exchange for a lower rate. So we'll see if we actually are able to execute on that going forward.

Okay. No, that's helpful. And then the other question I had, just in terms of the mortgage banking portfolio. Do you know what's the main difference, I guess, between the loans that you're selling versus sort of the typical industry average that you guys saw, specifically your gain on sale margins come down so much more than the average banks this quarter?

Hard to quote on average banks because I don't know exactly what their experience is. But I think, in general, the gain on sale in 2012, and in particular towards the end of the year, was way out of this world quite frankly, very high levels of gain. I mean, that's influenced by everything that we hear and read about the Fed and their activity in the mortgage market, the high level of refi activity which has had an influence on how competitors operate in the market. All those things coalesced to produce very high gains on sale upwards of 2, 2.5x kind of historic levels. And that's kind of backed off a bit here into the first quarter. So whether we're unique in that regard, I just don't know. But that's been our experience.

Yes. The only thing I would add to that is timing-wise. Different banks recognize their gains at different times. We recognize on the front end of the lock, which, given the high activity late last year against the high margin, just gave us a real outside results, which was great last quarter and not as good this quarter.

Got you, okay. And just final question. Was there any losses or hedging losses in the $6 million, or is this a fairly decent run rate for you going forward?

I don't think there were any hedging losses in the period, so it's pretty typical.

The next question comes from the line of Matthew Keating from Barclays.

I guess going back to expenses, could you please quantify the impact of the seasonally elevated payroll and related expenses this quarter?

Yes, it's about $3 million.

Okay, great. And I also appreciate the color on the securities, sort of reinvestment yields. Can you just talk about sort of your average loan yield on new loan production this quarter relative to the 4.36% average loan yield that you saw for the quarter overall?

Which -- can you share which categories you're interested in?

I guess, say, commercial, C&I.

C&I is -- came in at 3.75% for the quarter. That feels a little -- that feels stable to maybe coming down a bit. Construction's in at 4%, which feels about right. And then obviously, -- I'm sorry, commercial mortgage was 4%, which feels about right. And then construction's going to be all over the place because those are generally fixed rate loans -- or floating rate loans, excuse me.

Got you, okay. And then finally, I guess, could you talk about decision to delay the American Samoa exit for another year? Just what drove that?

Sure. We had planned to exit out of that marketplace in -- at the end of March, at the end of the quarter. And we're asked, I'm not going to say the last minute, but as we approached that date, by the government to extend out our departure. And because, one, in doing that, frankly, it wouldn't create a heck of a lot of financial hardship for us at all; secondly, because I think there were actually some reasonable reasons for the government's request; and thirdly, and not the least of which, this is a market that we've been in for over 40 years. And we need to make whatever departures and movements that we do right by the community that we served for that period of time. And so those are really the factors that drove the delay. We're working actively with the government at this point to ensure or improve the probability as much as possible that as we get to the end of the first quarter next year, we're in a position to make that final move. So that's where we are and that's some color behind why we've extended.

Makes sense. And just one final question. Could please provide some color on the public time deposit run-off? Was that something intentional that you wanted to seek out or is it more seasonal in nature? Or just sort of what's going on there?

Yes. I mean we chose to not aggressively bid on some situations just to balance -- excuse me, manage the balance sheet. So we have a lot of flexibility on how we price public deposits and that's the main reason.

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

I just wanted to dig down a little bit deeper on cost saves and strategy. You've mentioned that you saw an underlying decline in costs in the first quarter and that you're hopeful that mainland economy improvement will begin to bring up interest rates. But I wonder if you'll be looking for more aggressive cost cuts if rates remain low, or if you'd rather wait and sit it out and avoid making any significant changes to your business?

Yes, that's a good question. I guess my view is that margin pressure, which has largely been driven by the rate environment, is something that banks have a pretty high probability of having to live with for a pretty extended period of time here. And I think we may have said this before, but our strategy is not to outwait the rate environment. So therefore, we have a need to take what's already a pretty efficient cost structure and make it even more efficient. If you look at what we've been able to do the past couple of years, it's been in kind of the 2% per year level against operating expenses and that's the level that we would like to operate at moving forward. So one, no, we don't plan on just kind of stopping here and waiting for the environment to get better. But, two, we're trying very hard to make sure that we're balancing our expense reduction program against the franchise and the needs of the franchise at Bank of Hawaii. And so it's kind of a balancing act. I think we've got some more opportunity there. But these are things to do kind of one step at a time, I think, if you're doing them effectively.

[Operator Instructions] And the next question comes from the line of Bryce Rowe from Robert Baird. Bryce W. Rowe - Robert W. Baird & Co. Incorporated, Research Division: Just a follow-up on the discussion about the public deposits. Kent, we've seen an inflow of public deposits seasonally in the second quarter over the last couple of years. Given the discussion about pricing those public deposits, should we assume that we will not see an inflow this year?

I really don't know. It all depends on our needs here, depends on how big we want the balance sheet to be, what the loan situation is, what the investment situation is. So I really can't give you a blanket prediction on that. Bryce W. Rowe - Robert W. Baird & Co. Incorporated, Research Division: Okay. So if we were to assume a static environment relative to what it looks like today, would your answer change at all?

No, not really. I mean it's one of those things that we can vary depending upon what we need to do. So if we need the funding, we can arrange that. If we don't, we probably won't. So there's a lot of flexibility in that.

[Operator Instructions] And your final question comes from the line of Erika Penala of Bank of America.

I just had one follow-up question. I think that most of the market would agree with your comments that the rate environment will stay lower for longer. But it seems like the message from the Fed with regard to the big bank stress test is that they're starting to worry a little bit more about interest rate risk. With the stress test process for the midsized bank starting in October 2013, are you thinking about the management of your bond portfolio differently going into that test?

We've been pretty conservative on this category all along. We're definitely mindful of the stress test. We're in the midst of that as we speak. So we're definitely aware of that particular point of view. But we've been very conservative on the asset side of the balance sheet for quite a while now. The change though probably is a little bit more on the liability side, so you see a little bit more extension on some of our liabilities. And that's something we may continue to do. And really, it's in deference to the very risk that you're talking about.

That concludes all the questions that we have at the moment.

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

Ladies and gentlemen, that concludes today's conference. Thank you for your participation, and you may now disconnect. Have a great day.