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Executives

Peter Ho – Chairman, President and CEO

Dean Shigemura – Treasurer

Cindy Wyrick – Investor Relations

Analysts

Russell Gunther – Bank of America Merrill Lynch

Bank of Hawaii Corporation (BOH) Bank of America Merrill Lynch Banking and Financial Services Conference November 14, 2012 11:20 AM ET

Russell Gunther

We can get started. Thanks for joining us. Good morning. For those of you who don’t me, I’m Russell Gunther. I cover small cap banks as part of the U.S. regional bank research effort here at BofA Merrill. It’s my pleasure to introduce to you this morning, Chairman, President and CEO, Peter Ho of Bank of Hawaii. We’re also very pleased to have Dean Shigemura as Treasurer; and Cindy Wyrick from Investor Relations with us as well.

As the name suggest Bank of Hawaii, headquartered in Honolulu, Hawaii; total assets, $13.4 billion roughly. The bank continues to demonstrate solid profitability, capital returns, very nice dividend yield; continued buy backs and loan growth that’s recovering shortly [ph] but slowly.

With that, I will turn it over to Peter Ho. Thank you for joining us.

Peter Ho

Great. Okay, thank you, Russell, and thank you all for being here this morning and thank you for your interest in Bank of Hawaii. What I’m going to do this morning is share with you a little bit about our marketplace in Hawaii. It’s a unique market. I’ll share with you our franchise that we have within Bank of Hawaii, and share with you some of the things we think makes us unique as a banking company over on the islands.

First, a little love letter from our legal folks bank in Honolulu. Forward-looking statement, I should just mention to you that this presentation may include certain forward-looking statements and that we have not committed to updating such statements for subsequent events.

So, a little bit about Hawaii. First thing to understand, I think it’s probably intuitive to most of you is that Hawaii is a pretty isolated place. Arguably, the most isolated parcel of land in the world. We are home to 4,300 indigenous species, and that creates for a unique culture, obviously, a unique location and that uniqueness translates into the banking industry and the competitive landscape of the banking industry in our view in a very positive way.

We take 80 degree temperature, some of the best weather in the world and combine that with 78,000 high-quality hotel rooms to create what is truly a world-class visitor industry. Hawaii has the second highest average daily room rates in country, second only to Manhattan, New York City right here.

From a real-estate standpoint, we are pretty compact, 6,400 square miles; that’s actually compacted further by the fact that you have a good amount of multi-million dollar beachside real-estate which is compressed a bit by a fair amount of topography, mountainous topography in the central part of the island. So that 6,400 square miles is actually even smaller; and that has the impact of obviously pushing land values up, but more importantly, for banking business, maintaining a pretty stable real-estate value. And that’s exactly what we saw through the last cycle.

Military is a very important component of our economy. We are home to the U.S. Pacific Command and we feel very good with the federal movement from the European theater into the Pacific Rim from a competitive -- or from a strategic standpoint should, if not, build a strategic positioning militarily in our marketplace, and we’ve maintained strategic position from a dollars and cents standpoint.

The economy in Hawaii is $67 billion; 25% of the economy is, as I mentioned made up of the visitor industry, the federal spending as well as military. Obviously, that number is much larger on an indirect basis, but military and visitor are very important elements of the overall economy in Hawaii.

GDP over the past decade has grown at about the rate of the overall national average through most of the 2000s. Tourism, our tourism base is about two-thirds U.S., within that two-thirds, two-thirds is what we call U.S. West, the Western states; and a third of that coming from the East Coast. The remaining one-third is international, comprised of Japan, Canada, Australia; and increasingly, South Korea, and increasingly, a growing China contingence.

I should mention that visitor arrivals are up about 10% this year. We’re up about 10% last year. The bigger story here however is spending by visitors in the marketplace was up 15% last year and is up close to 20% this year. So, very strong spending. That spending is being led by the international segment. As I mentioned in the last slide, that the international segments represents about a third of arrivals. They represent closing in on half of all spending. So their spend is proportion to the broader U.S. average and then also driving the growth. The growth, the 19.5% growth you see year-to-date in spending is driven about two-third from the international segment. So a very important story for us, a growing story for us as these countries continue to expand economically and continue to have a very strong currency relationship with the U.S. dollar.

I mentioned the military and its importance in our marketplace. Here you see, for most of the decade of the 2000s, military spending in Hawaii has grown a growth rate at 5% or greater throughout most of the past decade. You put these factors together, and you see that unemployment in Hawaii is performing at a substantially better (inaudible) out of the broader U.S. marketplace.

Switching to our franchise, we believe at Bank of Hawaii that the key to delivering long-term sustainable shareholder value is really through four specific drivers. We take [ph] employee satisfaction, customer satisfaction, and our presence in the community and wrap that into what we call financial discipline, and we think that that is really the long-term key from a community banking perspective to creating value; and I’ll touch on each of these four elements in over the next couple of minutes.

First of all, employees as a service-based business which as you all know is a financial services industry. Employees are absolutely key to driving value. We’ve got 2,300 terrific employees. We’re focused very much on leadership development, on employee development, employee engagement, and employee morale. This schematic here that you see is a picture of our new center for excellence. It is the central hub if you will of all training and development for the Bank of Hawaii and it’s went into service a little over a year ago; very pleased with the results. The team is very proud of how that came off.

Dedicated employees, we are largely a company built not through acquisitions. So we’re pretty much a de novo, have been a de novo for 115 years and one of the benefits that comes with that is we have a very pure and concentrated corporate culture; we have a very pure and concentrated risk culture, and I think that’s played well into our strengths and into our performance.

Customer satisfaction, obviously, a very important element to driving shareholder value and a very good story for Bank of Hawaii. To give you a sense of that just in the makeup of the deposit structure in the State of Hawaii; Hawaii basically operates with four banking competitors -- ourselves, First Hawaiian Bank, American Savings Bank, and Central Pacific Bank. Ourselves and First Hawaiian Bank represent about two-thirds of the marketplace; ASP and CPB comprise the other third of the market. And you see here that we have -- we are the market leader in terms of core deposits with an advantage over First Hawaiian of a little over $1 billion; and an advantage over the number three and four player in that we basically have a larger core deposit base than number three and number four combined by a pretty wide margin.

Great band recognition; great concentrated marketing environment. In Hawaii, here you see that we lead the market in terms of top of mind and unaided recall in Hawaii with the Bank of Hawaii brand and Bank of Hawaii franchise. Great physical presence which gives us a competitive advantage in terms of delivering service and convenience to our client base. Here you see that we have the largest branch, physical branch network; we have the largest in-store branch network. And not only do we have great depth of market share, the great breadth of market share. The chart on the right is market share by zip code and you see that the Bank of Hawaii has either a number one or a number market share position in 82% of the zip codes of the State of Hawaii.

Our physical presence extends on into our electronic network. Here you see that we have a wide margin of advantage in terms of number of ATMs. Perhaps more importantly, we have a great relationship, exclusive relationship with a number of very important retailers in the Hawaiian market, names such as CVS/Longs, McDonalds, Safeway, and Aloha Petroleum which is a large retail gasoline outlet.

We’re proud to be the state’s largest mortgage provider both in the first and second mortgage space. We think that’s a critical product to have in our relationship base. We’re proud of our positioning there. All of this has come together to create very strong performance in terms of how our customers perceive us in terms of overall satisfaction. The service you see over the past decade made very nice progress in terms of creating an outstanding rating or a very good rating with our customer base. And that satisfaction crosses over just the overall satisfaction with Bank of Hawaii. Again, over the past decade, nice movement both in terms of the outstanding rating as well as the very good rating being provided to us by our customer base. We take this polling quarterly and so have a very rich database historically to look back on and do a fair amount of analytics on.

Just some shameless self-promotion here. We’ve been recognized in the National Press [ph] as being one of the best banks here at home. In the Hawaiian market, we’re recognized as just being a very high-quality organization; as being a very community-minded organization. And that plays in to people’s perceptions about bank, where [ph] not only our mortgage company but the bank as a whole.

Community presence. As a community bank, our positioning in the community and our efforts to be part of the community are very critical element to our overall franchise value. Our employee volunteer program is a big component of that. Last year, we held over 50 or just about 50 sessions that’s a service project just about every week, great turnout by our employee base. Better than 80% of our employee base took part in some form of employee volunteerism for Bank of Hawaii, for our community in 2011; generating in excess of 13,800 volunteered hours for the year.

Very strong CRA player; seven consecutive years with an outstanding rating, that, although we’re not an acquisitive company remains a very important goal of Bank of Hawaii. And we’ve been small business lender of the year for eight out of the past 11 years including this past year 2012.

So having a great customer base, having great employees, and having a great position in the community are all critical elements to creating shareholder value, but really activating that shareholder value relies on management and relies on our company to combine that with financial discipline. And here, I think we’ve had pretty good success at Bank of Hawaii and shows in the numbers. Take advantage of our franchise positioning; take advantage of our competitive advantages in the marketplace to create significant deposit growth over the past several years. You see that in the blue bars and perhaps more significantly see that our cost of deposits is the lowest cost of deposits in a marketplace that most people would consider to be the lowest cost of deposit market in the country.

We operate pretty conservatively. Down on the left side of the balance sheet, here you see we have an investment portfolio approaching $7 billion, high quality, reasonably conservative, mostly Ginnie Mae in structure with pretty tight duration [ph] to book [ph].

Same thing on the loan portfolio, we value our loan portfolio for its diversity and balance. We try to maintain a 40/40/20 split -- 40% commercial, 40% residential mortgage, and 20% consumer that we define as installment lending, home-equity lending, and dealer and direct lending. Here you see we have that symmetry. And it had pretty good growth over the past year across most of those asset categories.

Asset quality has been a real strength for the company through the credit cycle and certainly we see now credit quality very strong, low levels of non-performing assets, net charge offs for the most recent quarter down to 10 basis points; that against a very robust reserve position (inaudible) it’s doing very good at our overall level of risk in the company, our ability to meet that risk.

Capital management is a very important element to how we create value for our shareholders; very strong capital position; tangible common equity; the risk-weighted assets in excess of 17%; very strong tier-1 leverage ratio as well. We’re paying a dividend right now of $1.80 per share. That as of quarter end was 3.95% yield, it’s a little higher as we speak today. Repurchase historically has been an important of our value proposition. What we did through the financial crisis was suspend our repurchase activity as we made the decision not to accept the TARP program. So, basically, what we did, instead of taking TARP was build capital on our own simply by not being as active in the repurchase market. In July of 2010 we resumed repurchase activity and then purchased just under $200 million since then.

Very proud of our dividend performance. You see a growing dividend over a long period of time. And I think one of the things we’re most proud of is how the dividend performed through the great recession. Here you see we were able to not only maintain a dividend but maintained our current dividend level straight through the financial crisis and the recession. I think that’s a real testament to the overall franchise that we have at Bank of Hawaii.

Bringing all this together, generate very attractive returns on capital, return on equity. Historically, in the mid-20% range with the yield curve where it is, still a very respectable mid-teen range and we’ve been able to maintain pretty good consistency in that level for the past few years.

Financial results for 2012, I won’t touch too much on that. You have in your packets. But I’ve been pleased with the performance given all of the revenue headwinds that we faced over the past year or two, a pretty solid performance.

So to sum up how we view the franchise. We think we exist at a very attractive and unique marketplace, clearly have a very strong competitive position within that marketplace. And I think history has proven that we’ve been able to pretty effectively take the attractive [ph] of some of that marketplace, apply it to the competitive advantages that we have to produce outside [ph] returns to our shareholders.

And now, I’d be happy to answer whatever questions you may have.

Question-and-Answer Session

Russell Gunther

Great. Peter, thank you. Now, before we kick it out to the audience, maybe just start with commercial growth. TRE has been a bright spot for you guys. How much of this do you attribute to pull back from monolines and national lenders and maybe just talk to what that opportunity could still be going forward.

Peter Ho

Yes. I think historically, and by historically, over the past couple of years, most of the pickup we’ve seen in commercial real-estate, commercial mortgage in particular has been market share driven. And most of that market share gain has come from the pull back or in some cases the pull out of the national monolines and the conduit markets. So we don’t see any sign of that competitive element returning at this point. We are beginning to see some elements of organic demand or organic growth of the market. We’re down to, I want to say, three months inventory in Honolulu.

There’s very little land, entitled land to develop single-family residences. So what we’re seeing is no fewer than six condo projects right now on the books and developers and sponsors that we’re familiar with. So probably a fair opportunity there moving forward.

Russell Gunther

Yes, you’ve mentioned the willingness to compete more aggressively at the lower end of the middle market. Can you talk about your efforts there and --

Peter Ho

Yes, we think that’s a big opportunity for us and we think that’s a big in-market organic opportunity. To understand that, I need to share with you a little bit about how we’ve been configured from a branch standpoint. Most of our competitors configure their branches as relationship or profit centers if you will. So the branch managers are a kind of the Johnny or Judy relationship manager in their respective neighborhoods. We’ve taken more of a large bank approach. So we’ve treated our branches historically as cost centers. And over the past, say, three years we’ve made big efforts to frankly more emulate our competitors in the marketplace. And that’s having a -- it’s beginning to have an impact on being able to grab that small middle market granular type of CNI as well as CRE business, which really kind of exist at the local level and not so much at the broader market level.

Russell Gunther

Okay. Questions in the audience at this time. Maybe just following up on the commercial growth, it sounds like, to your point, there’s some increased activity but mostly market share gain at this point.

Peter Ho

Yes.

Russell Gunther

If the pie isn’t getting any bigger, how can you continue to grow at the rate that you have? How do you continue to do that?

Peter Ho

Well, I think it’s going to be tougher. I do think that we are seeing organic growth down in the lower, small business and lower middle market, which is an area that as I explained we just haven’t had as much presence in. I think that’s going to generate growth. I do see the (inaudible) if you will of organic growth. But absent those pieces coming through, it’s going to be tougher to just continue to pick up market share on the first statement [ph].

Russell Gunther

And what’s driving the pickup in demand where you are seeing in?

Peter Ho

Well, the economy is performing on a relative basis reasonably. So visitor industry is strong. Visitor industry is in fact constrained by inventory. We’re running 80% plus occupancy. That’s with 200,000 Chinese visitors. So that segment has been growing dramatically. And any clip up in that will basically make us capacity constrained. Military is still strong. A lot of construction work around military housing and the like. So the economy has been strong. And with housing now down to historically low levels from an inventory standpoint, we think we’re going to begin to see more construction activity.

Russell Gunther

Maybe just shifting to the expense side. You guys have done an excellent job keeping a lid on expenses kind of rationalizing the retail distribution while continuing to invest. What remains to be done for the franchise investment perspective? And then on the flip side, what are sort of the identified offices [ph] that you have to maybe be able to try to at least run flat?

Peter Ho

Yes. Well, first of all, we don’t spend a lot of time focused on our efficiency ratio, because there is a numerator and denominator attached to that, you will know that. And so you can, from time to time, get strange numbers that pop out from that, number one. Number two, we’re already, it’s kind of good news-bad news. We’re already a pretty efficient operator to begin with. And so, it gets tougher to do. And the way that we do that is we take an approach, a pretty granular approach. So, take our branch system for instance, we have 75 branches through the system. We line up our branches on a waterfall chart, and where we have pockets of opportunity, we have a very controlled manner, go about the opportunity of repositioning or just, in some instances, bringing down branches. We want to do that in a slow and controlled manner so as not to disrupt the market, so as not to tarnish, so as not to impact the financials if you will. And that’s probably a reasonable proxy for all of our expense initiatives.

We’ve moved to virtualization in large parts of our operations area. And, frankly, have not done or have not been as quick to figure out what kind of expense savings that it can create for us. So again, that’s going to be a measured moderated approached but I think an area where there’s opportunity for us. So getting tougher to your point, Russell, but I think there’s still opportunity to get more efficient.

Russell Gunther

As you think about over the next two to three years, the number of branches that you have, net-net, where do you think that washes out? Lower, are we going to be kind of shrinking the size, you go to a smaller but maybe the number ultimately ends up being the same. How do you think about it?

Peter Ho

Likely, the big delta will not be in the overall number, because you’re right, we’ll probably move to smaller. The in-store format for us has been great. That format kind of has mixed results market to market. For the Hawaiian market where we have a very high propensity of dual-income families, just that convenience factor plays really well for us. So, probably more of that and fewer traditional standard community branches.

Unidentified Analyst

Thank you. Who are your fiercest competitors on the island? It’s probably different for different business lines? But could you just walk us through who do you see running hardest for market share in the different business that you compete in?

Peter Ho

Yes, from an in-market perspective, First Hawaiian clearly is our key competitor. So we’ve had 100 years of experience in dealing with them. They’ve had 100 years in experience in dealing with us. Their fierce competitor I think that are very rational competitor, so that’s work pretty well. We had I’d say through the last cycle a good amount of competitive pressure coming up from number three and four in the marketplace. As we’ve kind of transition into a new reality, that’s moderated a bit. So that’s kind of the local landscape.

On the national front, as Russell mentioned, in the last cycle the monolines and the conduits were as present as any competitor in the market. For now, at least, it’s out of the marketplace.

Unidentified Analyst

Are there any new competitors in the marketplace? I mean, First Hawaiian is part of BNP Paribas, there’s constant question about what they do with that given the (inaudible) prevails in Europe.

Peter Ho

Yes. Tough to see what happens moving forward. Our sense is that and despite the challenges that BNP has, they’re very fond of First Hawaiian. First Hawaiian is a great performer, a great earner for them. So frankly I’d be surprised to see much change there.

The opening into the market was with Central Pacific Bank as they were having their challenges. That opportunity has kind of come and gone, and they’re now private equity owned. So for now, I think ownership and positioning is pretty stable, at least, for the here and now.

Unidentified Analyst

All right. Okay. Thank you.

Peter Ho

You’re welcome.

Unidentified Analyst

Maybe just on the fee side. In the past, you guys have been reticent of introducing deposit-related fees to offset some of the regulatory headwinds. Do you still feel that that’s the right strategy? Is there any potential opportunity there on the fee side?

Peter Ho

Well, I’ve probably been the most stubborn on the team of keeping fees off the ledger. And the reason why I feel that is partly philosophical and partly I think market driven. So on the philosophical side, I just have a hard time charging someone for something I didn’t charge before and offering effectively the same product.

Unidentified Analyst

Sure.

Peter Ho

Now, if -- and we’re actively trying to come up with better products, as we do that, I don’t see a problem charging for that, right. For a market perspective, the market is still largely free-checking [ph] base and I’m not sure that anyone really wants to be the first to make that foray. So there’s a practical consideration there. I guess, at the point in which -- it’s a strange statement -- but I guess the point in which we genuinely believe the rate environment is what it is, I think at the point in which the market truly believes that, then I think pricing will take care of itself. And the elasticity of the client to price changes fee increases if you will or fee introductions if you will, that dynamic probably changes.

Unidentified Analyst

Okay. Other questions in the audience? I will keep plugging ahead then. Maybe we can just switch gears to capital.

Peter Ho

Sure.

Unidentified Analyst

Continued capital management; you’ve highlighted great stewards of capital and returning to shareholders. TCE is about 7.4% today roughly; do you expect to continue to pay out roughly 100% of earnings in order to run around that level or how are you thinking about what’s an appropriate capital level for you if we could stick to TCE or tangible assets, do you pull back from 100% of earnings and want that build a little bit or do we try to run around there?

Peter Ho

Yes, I’ll, let me address kind of the higher-level elements of that.

Unidentified Analyst

Sure.

Peter Ho

And I’ll ask Dean to kind of fill in where I mess up if you will. We’ve got an interesting situation where if you look at our TCE, is risk-weighted, we’re like 17% plus, so, obviously, very well capitalized. And then from a tier-1 ratio, still very strong levels but more pedestrian if you will. And, frankly, we’re going to have to honor both of those levels. So, I guess, what I would say is capital management and liberation of capital to the shareholder is a critical element to our overall value proposition and we’re just going to have to manage that along a lot of different stakeholder interest is what I say. Dean, do you want to add anything to that?

Dean Shigemura

No, other than that, we do pay attention to the, obviously, the risk-weighted asset side of the measurements. But the side of the balance sheet, a lot of times it’s being driven by the strong deposit growth that we’ve had. So while the total capital number may be somewhat stable, the fact that balance sheet (inaudible) for total assets tend to fluctuate and that gives us a little bit more variability on the leverage and TCE to the total asset side.

Peter Ho

We’ve not resorted to kicking depositors out of the bank.

Unidentified Analyst

And in terms of how you’re thinking about capital management, does it continue to favor being flexible on the buy back as opposed to perhaps increasing what’s already a solid dividend?

Peter Ho

I think that the activity that you’ve seen over the past couple of years, Colin [ph], is probably a good proxy for how we view the opportunities, okay.

Unidentified Analyst

Does participation or formal participation in the stress for banks to your side [ph] later next year have any impact on how are thinking about capital management?

Peter Ho

I should probably ask the guy who’s squirreling in the middle of those efforts. Dean, you want to talk about that?

Dean Shigemura

Sure. It really doesn’t have an impact. At least we don’t anticipate it having an impact in our capital management. It is a pretty involved effort. We have to include everyone throughout the company. So there’s going to be a lot of work put into it. But, ultimately, we think we’re well capitalized in maybe in excess of that. So in terms of the results, we don’t think there’s going to be anything that will kind of change the way we manage our capital.

Unidentified Analyst

What are you doing differently as a result of preparing for formal preparation than you were doing before?

Dean Shigemura

In terms of the stress test?

Unidentified Analyst

Yeah.

Dean Shigemura

Well, it’s more of a formal process. We went through kind of a rough draft if you will back in May. We’re going to do another one. The formal, the first formal submittal is not after 2012. But because there’s going to be recurring effort, we’re putting in place kind of the infrastructure that will allow us to more easily perform these stress test on an annual basis.

Peter Ho

It’s really -- one is what’s your number relative to what the requirement is. And we think we’re in great shape there. And then there’s, what’s the resource requirement to comply and be reasonably within the world if you will. And that’s been challenging. These are human resources that are in demand. I think we’ve been fortunate in that we have people that can do a lot of that work already, but we’re going to need to build a team and we’re going to need to put a lot of detail around plans and projections that we actually feel pretty good about.

Russell Gunther

We have time for a couple of other questions. I can’t let you go without asking about the margin. I hate to hand [ph] on it, but we’ll just dive in. So underlying dynamics are pretty challenging -- larger securities, portfolio, funding cost that largely maximized, how are you positioning the balance sheet to defend [ph] against margin in this environment?

Peter Ho

Well, again, I’ll start with the bigger picture and Dean certainly can fill with the finer detail. My own is that this is about the time when management teams get pushed to do things that they wouldn’t otherwise do with the margin pressure. And, I guess, the way I’d answer the question is, we’re not going to fall into that opportunity. We’ve been conservative down the lending side; been conservative down the investment side; that’s going to continue to be our pathway. But it’s tough, I mean, as rate come down, margins get compressed. And that’s kind of the world we’re living right now. You want to add to that, Dean?

Dean Shigemura

Well, some of the things that we’re trying to do is look at given our investment portfolio and our loan portfolio, are there mix changes that we can implement. And particularly on the loan growth side, I mean, if that happens, that does help mitigate some of the decrease or pressures on our margin. And then looking at where there might be some good tradeoffs, while keeping the total risk the same, are there ways that we can look at different forms of risk to take that will kind of increase our yields. So there’s really nothing out there that I would say that we want to get in to that will increase or maintain our margins but in turn will increase our risk. So we’re trying to maintain generally the same risk profile by looking at other opportunities that may be trading credit risk or interest rate risk.

Russell Gunther

Well, what are some of those opportunities in the securities portfolio?

Dean Shigemura

Well, one would be, for example, like corporates. We think that we have a lot of mortgages currently, mortgage backed securities in the investment portfolio that could represent a lot of interest rate risk for us. But corporates have a more kind of stated [ph] maturity, so less optionality in the portfolio but maybe comparable yields trying to find the appropriate maturities there. So that would be a tradeoff between interest rate risk and credit risk, but still maintaining a very high quality risk profile. So corporate would be sort of the single A [ph] or better type exposure.

Peter Ho

And a pretty limited bucket at that.

Dean Shigemura

Yes.

Russell Gunther

Okay.

Dean Shigemura

Yes.

Peter Ho

Yes.

Russell Gunther

I would just ask one final question if we don’t have any others in the room. In your view, what’s the one thing that you think the market or the sell side gets wrong about the Bank of Hawaii story that’s misunderstood from a messaging standpoint that you would want to address? Maybe it’s more than one thing.

Peter Ho

No, I think we get pretty good coverage. I think that there is an interest in how we continue to perform well in a difficult environment. And I think if anything, I think just about every analyst out there has a good sense for the quality of the franchise. I think maybe they don’t quite give us enough credit for that quality, and that gives us an ability to -- through very treacherous environment, difficult environment, really, if we put our minds to loan growth, in-market, quality loan growth, we can get that albeit through market share gain.

Russell Gunther

Right.

Peter Ho

And if we need to grow deposits, I think that will add that interest income for us. Despite the fact we run 12.5 basis point costs of deposits, we’re still able to get deposits. So I think the efficacy of the franchise, even for those that think the franchise is very strong is still somewhat surprised [ph] about it.

Russell Gunther

Great. Well, thank you very much.

Peter Ho

Great. Thank you very much.

Russell Gunther

Appreciate it.

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