Bank of Hawaii Corp (BOH) 2004 Q2 法說會逐字稿

Good day, ladies and gentlemen and welcome to the Bank of Hawaii Corporation second quarter earnings conference call. My name is Bill, and I will be your coordinator for today. At this time all participants are in a listen-only mode. We will be facilitating a question and answer session toward the end of this conference. If at any time during the call you require assistance please press star followed by 0 and a coordinator will be happy to assist you. As a reminder, this conference is being recorded for replay purposes. I would now like to turn the presentation have to your host for today's call, Miss Cindy Wyrick, Senior Vice President and Head of Investor Relations. Please proceed, ma'am.

Hello, everyone and thank you for joining us today. As we review Bank of Hawaii Corporation's financial results for the second quarter of 2004. Joining me is our Chairman and CEO, Mike O'Neill, President and COO, Al Landon, Vice Chairman and CFO Rick Keen, and Vice Chairman and Head of our Retail Banking Group, David Thomas. Comments today will refer to the financial information included with our earnings announcement released earlier this morning. Before we get started, let me remind you that today's conference call will contain some forward-looking statements and while we believe the assumptions we've made are reasonable, there are a variety of reasons that the actual results may differ materially from those projected. And now I'd like to turn over the call to Mike O'Neill.

Hello, everyone. The strong financial performance at Bank of Hawaii this quarter represents another record high for us in terms of net income and earnings per share. I'm very pleased with the improvement in our return on equity, the continuing improvement in our efficiency ratio and our excellent credit quality. As many of you may have read in a separate release issued this morning, we announced today my departure from Bank of Hawaii at the end of August and the appointment of Al Landon as my successor. I made a commitment to our Board of Directors to stay until we turned our company around and were well-positioned for the future. They and I believe that the job has been accomplished. Bank of Hawaii is now on solid ground and has a bright future.

Al is a strong and capable leader, backed by a seasoned management team. Al has all the skills and qualities I believe are essential to ensure Bank of Hawaii's long-term success. Under his leadership, the Company should continue the positive momentum in building value for our shareholders, employees, customers, and community. I plan to remain a shareholder. And now I'd like to ask Rick to provide you with a more detailed review of our second quarter financial results and then ask Al to present you with an update of our financial and economic outlook. We will then be happy to take any questions. Rick?

Thanks, Mike. Hello, everyone. As Mike said, Bank of Hawaii Corporation had a good second quarter, our net income was $44.2 million, 47% higher than the $30 million earned in last year's second quarter. Second quarter earnings per share of 79 cents was up 65% from 48 cents per share a year ago. Second quarter earnings also increased from the first quarter net income of $39.8 million or 69 cents per share. As mentioned in our earnings release this morning, included in the results for the quarter are some noncore items that I will discuss in a moment. Our return on equity for the second quarter of 2004 was 24.28%, up from 19.98% in the first quarter. Our return on assets for the quarter was 1.8%, compared to 1.65% last quarter.

Net interest income was $5.4 million higher than the second quarter of 2003, primarily due to a decrease in interest expense on the positives and a reduction in long-term debt. Noninterest income was essentially flat with last quarter. Interest income from the investment portfolio increased over last quarter but was offset by a decline in interest income from the mortgage loan portfolio, caused by lower average balance of mortgage loans outstanding and a decline in the yield on that portfolio. The net interest margin for the second quarter was 4.17%, up 5 basis points from last year's second quarter. Compared to the first quarter of 2004, the net interest margin was down by 13 basis points. This decline was caused by a decrease in the yield on the loan portfolio driven primarily by mortgage loans. A decrease in interest rates early in the quarter led to higher than expected mortgage loan prepayments. We also experienced a change in the mix of our mortgage portfolio to more adjustable rate loans. These loans have a lower initial yield but position us better for the possibility of future rate increases. We have included an analysis of our net interest income at table 6 to our earnings release.

In the second quarter of 2004, we recorded a negative provision for loan losses of $3.5 million. Gross charge-offs for the quarter were $8.8 million but were more than offset by recoveries of $10 million, resulting in a net recovery of $1.2 million. The higher than normal level of recoveries in the second quarter was largely due to a recovery on a loan to a former borrower in Asia. Considering our net recovery position, we recorded a negative provision for loan losses in order to maintain directional consistency between the movement in our allowance for loan losses and our credit quality. This negative provision, coupled with the net recoveries, resulted in a $2.3 million reduction in the allowance. Noninterest income for the second quarter totaled $54.8 million, a $4.1 million increase from the second quarter of 2003. Other than mortgage banking income and securities gains, all categories of noninterest income are up from last year. Mortgage banking income was $3.3 million lower than last year, due to lower gains realized from the sale of mortgage loan production. Included in other noninterest income in the second quarter was a $3.2 million distribution from a partnership investment and a $2.5 million gain on the sale of a parcel of land. Excluding these two items, total noninterest income was $1.6 million lower than last year due to the lower mortgage banking income that I mentioned earlier.

Aside from the expected reduction in mortgages sold, we were pleased with the year-over-year increases that we saw in the other components of noninterest income. Excluding these two noncore items, noninterest income showed a modest increase over last quarter, led by an increase in mortgage banking income and an increase in other service charges, mostly due to increases in interchange fees and consumer loan fees. Offsetting these increases were reductions in trust income due to the seasonal impact of tax preparation fees in the first quarter, deposit service charges due largely to higher average balances and deposit accounts and insurance income which was due to a rebate received from a third party carrier in the first quarter. Noninterest expenses increased $2.1 million over the first quarter, resulting from a couple of noncore items. A legal accrual of $2.2 million was recorded, largely related to the settlement of a lawsuit which alleged that we inappropriately charged a certain fee at the time some mortgage loans were paid off. The average fee was approximately $50. The final amount paid will depend upon the number of mortgage customers who actually claim a refund. Also in the second quarter, we accrued a $1 million discretionary donation to the Bank of Hawaii charitable foundation.

Salaries and benefits were up slightly over last quarter due primarily to annual merit increases which occur each April and commissions which were up in our mortgage division and our retail brokerage unit. Occupancy costs were up slightly over last quarter, due primarily to the timing of repairs and maintenance. Excluding the legal accrual and the discretionary donation in 2004, and the systems' replacement costs that were incurred in 2003, total noninterest expenses were down $3.4 million when compared to the second quarter of last year. Base salaries were down 6% due to a 7% decline in head count after the systems replacement project was completed and equipment expense declined by $3.4 million or 37%. Partially offsetting these savings was the costs associated with outsourcing the Company's technology services and an increase in stock compensation.

For the past couple of quarters, we've discussed a concept of operating leverage. This is the impact of relative changes in revenues and expenses on operating income. We have previously demonstrated that a combination of modest revenue growth and flat expenses would result in a 10% compound annual growth rate in operating income. We internally measure operating leverage and are pleased with the increase in operating income compared to last year. Excluding the noncore income and expense items that I have mentioned and the 2003 systems replacement cost, the year-to-date operating income for the first six months of the year was 14% higher than in 2003. Our efficiency ratio was 56.5% for the second quarter, down from 57.3% last quarter and 67.6% in the second quarter of last year. After excluding the noncore items, the efficiency ratio was 57% in the second quarter compared to 60.4% in last year's second quarter.

Our income tax rate was 36%, a slight increase from last quarter. Each of the company's business segments performed as expected in the second quarter of 2004, the retail segment had a strong return of 33% on its allocated equity, down slightly from last year, due to lower earnings credit on deposit balances and to lower mortgage banking income when compared to the second quarter of 2003. The commercial segment improved its performance over last year, due in part to loan recoveries and to a partnership distribution that was included in noninterest income. The investment services segment had performance consistent with last year and a return on its capital of 14%. The results of the treasury segment include the impact of changes in market interest rates on the Company's interest rate sensitivity. The reduction and the earnings credit for deposits had a positive effect on the net interest income of the treasury segment. Interest income in the segment was also favorable to last year due to higher average balances in the investment portfolio. The cost of capital that exceeds the capital needed by the other business segments is also allocated to the treasury segment. As the company's capital levels continue to be reduced, the amount of excess capital and its costs also decrease. Further improving the NYAK (ph) of the treasury segment.

The NYAK measure for the total company was a positive $17.8 million in the second quarter of 2004 compared to just under $1 million in the second quarter of last year. Table 11 provides a summary of business segment performance. Now some comments on credit quality. During the quarter, nonperforming assets decreased to $21.2 million, down from $27.9 million at the end of March and $42 million at the end of June, 2003. The second quarter decrease was primarily due to the resolution of one commercial credit through payoff and partial charge-off and the return to accrual status of another commercial credit. The elements of our nonperforming assets are summarized in table 9 for the earnings release. Nonperforming assets represent 03.7% of total loans and are at their lowest level in many years. As I mentioned, we realized a net recovery this quarter of $1.2 million. This compares to net charge-offs of $1.9 million in the first quarter and $2.1 million in the second quarter of 2003. Last quarter net charge-offs represented an annualized loss rate of 13 basis points, but this quarter, of course, that ratio was negative due to the net recovery position.

Our higher risk exposures, including air transportation, are summarized in table 8. These exposures remain relatively consistent with the amounts at the end of last quarter. As I mentioned with the overall improvement in credit quality, we were able to continue the reduction of our allowance for loan losses. The allowance was $124.9 million at June 30, 2004, down $2.3 million from March 31 and down $13.1 million from June 30 of last year. The allowance represents 2.16% of loans. We will continue to evaluate the economic environment and the level of risk in our portfolio each quarter and recognize the provision for loan losses only to the extent necessary to maintain the allowance at the appropriate level. Our intent has been to maintain the directional consistency between credit risks and the amount of the allowance.

With respect to the balance sheet, assets totaled $9.7 billion at the end of June, down slightly from $10 billion at the end of March. Total loans outstanding are $72 million higher than at the end of the first quarter, largely due to growth in the consumer lending portfolio. Commercial loan originations amounted to 7% of the balances outstanding at the end of last quarter. However, because of higher than normal repayments, commercial loans outstanding at the end of June were about 1% less than the balances at the end of March. Again, this quarter deposits increased in transactional accounts partially offset by the continuation of declines and higher cost time deposits. Our balance sheet remains positioned to benefit from interest rate increases and our capital position continues to be strong. The share repurchase program continued to be successful in the second quarter. We purchased 2.1 million shares during the quarter. Through July 23, the Company has repurchased 33.4 million shares and has returned over $1 billion to our shareholders since the program began in July 2001. Last week, our board approved a $100 million increase to the repurchase program, which leaves an unused authorization of $137 million as of this morning. We plan to continue to make repurchases in a disciplined manner. The board also declared our third quarter 2004 dividend of 30 cents per share. In summary it was another good quarter for the Company. And now I will turn it over to Al for additional comments.

Thanks, Rick and good morning, everyone. I'd like to add a few comments on our economy and earnings expectations. The Hawaii economy remains strong and stable. Visitor arrivals continued at strong levels during the second quarter. Military activity and spending also remained strong. Construction and real estate continued to be positive factors. And unemployment is now down to nearly 3%, an improvement from last quarter. As we mentioned last quarter, inflation has increased to around 3%, mainly as the result of housing and fuel prices. With the continued strength of the Hawaii economy, our customers are confident and business growth appears solid. Loan demand is strong. There appears to be plenty of liquidity in our economy as reflected in our deposits. And as Rick indicated, that liquidity continues to facilitate loan repayment.

As to our 2004 earnings, we previously indicated that we expect the Company to earn net income of $157 million. Given the good operating results in the first and second quarter, we have revised our forecast and now expect 2004 net income to fall within a range between approximately $163 million and $167 million. Our earnings estimates are necessarily based on several assumptions. We continue to forecast that interest rates will increase in the latter part of 2004. As Rick mentioned, our net interest margin is expected to increase in the second half of 2004. We expect to continue our good credit quality and as a result loan losses will remain low and we expect that no provision will be required. We also expect to continue reserve reductions. There are many other assumptions that affect our estimates, including the absence of major geopolitical events. We expect economic conditions will remain solid in Hawaii and continue to improve in Guam.

Mike, that concludes our comments on the quarterly results. But before we start taking questions, I'd like to congratulate you on a job so well done. On behalf of our team and personally, I want to express our thanks. Mike, you have been a great leader for Bank of Hawaii and we share in your pride for the great results our team has accomplished. With the most capable team in place we will continue to execute our business plan, focus on providing great service to our customers, and continuing to improve our bank. We look forward to good years ahead for Bank of Hawaii. And now we're open for questions.

Thank you very much, sir. Ladies and gentlemen, if you wish to ask a question, please key star, 1 on your touch-tone telephone. If your question has been answered or you wish to withdraw your question, please key star, 2. Please key star, 1 to begin. And we will wait one moment to compile a list of questions. Thank you. And your first question comes from Bret Rabatin of FTN Midwest Research. Please proceed.

Hi, guys.

Hello.

A couple of questions, first off, I wanted to get a little more detail on the commercial side, it's been fairly obvious that the economy in Hawaii has been better and you noted that the repayments on the commercial side so I was curious to hear any additional color you might be able to provide on, you know, whether you see those repayments finally ceasing and see the commercial activity ending up on the balance sheet in the third quarter? And I was also curious if you could comment on the kind of level of liquidity you had in 2Q and whether that might abate somewhat during the third quarter?

Well, it's hard for us to make too much prediction as to customers' liquidity and behavior. We've noted that it's typically the larger customers, those that may have access to other sources of institutional money, that are refinancing and paying down using the higher liquidity on their balance sheet and outside sources. We think there's a lag effect between the strong economy and that accumulation of liquidity. When we can call that is a pretty tricky thing. In the meantime, we're going to stay positioned with the flexibility to react appropriately. We've got good liquidity, good borrowing sources, when loans -- loan retention does pick up. So, I think that's probably as much as I can say. We're optimistic because we get great origination volume. Our folks are out in the marketplace and we're seeing a lot of activity, but it's that repayment that seems to be the downside factor here.

Actually, when I meant liquidity I meant actually on your balance sheet, sort of your fed funds sold and cash positions and, you know, securities and -- and, you know, whether you were using your -- you were looking at the current environment, as not a great place to invest longer and whether or not you might see that cash deployed in the near-term?

Well, we've been consistently forecasting rates to go up. We've been, I think, cautious is probably the term in investing some of our liquidity. We've stayed short and we know that that works against the margin. It did a little bit here in the second quarter. We're just going to follow the interest rates and -- and I think do what we believe is prudent in terms of investing and -- and using our resources. Rick, anything you want to add to that?

The only thing I would add to that is that during the second quarter we did carry a higher average level of liquidity than we normally would. We had -- if you recall back to the end of March, our balance sheet topped 10 billion, largely due to some liquidity that came in right at the end of the quarter from some of our public entity clients. And during the course of the quarter, we did work a lot of that down and that did contribute also to the margin affect this quarter.

Okay. And then just one other question, it's small pieces of the loan portfolio, but the construction and the purchased home equity pieces, the link quarter yields were off quite a bit. I was wondering if there was any color for those small pieces of the portfolio?

Typically when the purchased home equity has the yield decrease like that it's a result of prepayment experience. We purchased those loans at a premium and so when we get a slowdown in rates it gives us a pickup in prepayments and that hits us a little bit hard in the yield. We don't expect them -- well, I shouldn't say -- that's a forecast on interest rates. Right now the prepayments have slowed down a little bit and that yield has the opportunity to pick back up.

And on the construction side?

I think it's just the normal change in mix of volume as we put newer loans on there. But all of that is priced at competitive terms and so there shouldn't be anything there that is a particular driver of downward motion.

Okay, great, thanks, guys.

Thanks.

Thank you very much, sir. Ladies and gentlemen, your next question comes from Jim Bradshaw of D.A. Davidson. Please proceed, sir.

Good morning, thanks. Just a couple of quick ones if I may. The partnership investment distribution you got this quarter, is that unwind that investment, or is there still a carrying value on your book?

That's the end of that one, Jim. That's left from the telecom days and one of those fortunate things that somebody survived that and we got some money back, but it's off the books now. That's a rarity in the telecom world, yeah. Would that come back again?

Yeah. It would be nice. The other thing in your wind-up comments, Al, you mentioned that you're expecting reserve releases in your -- when you raise the net income guidance. Can I -- I assume that that's probably just going to be driven off of methodology and the reserve, you're not expecting any more net recoveries for the rest of the year, are you?

No, we don't have that scenario. We've got a very good fortune again that the $6 million, it was an Asian credit, written off several years ago that came back to us. And while we have been seeing a nice level of recoveries, we would not expect to see a net recovery again. When I talk about reserve reduction, we think that credit quality is going to continue to improve for the rest of the year and using the directional consistency that Rick mentioned, that should allow us to probably zero provision for the next two quarters in the allowance come down as a result of that.

And the only thing I would add, Jim, is that we look at this pretty hard at the end of every quarter. And while the trends that Al described are, you know, our best expectations, you know, it will be a function of that snapshot at the end of every quarter and it will drive us accordingly.

Appreciate it. And by the way, Mike, I echo Al's comments, we sure enjoyed following you over the last three or four years and best wishes to you, wherever you head next.

Thank you, Jim.

Thank you very much, sir. Ladies and gentlemen, your next question comes from Brian Conn of RBC Capital Markets. Please proceed.

Good afternoon.

Hi, Brian.

I guess the first question is on the margin. On the expectations for an improvement in the back half. I understand that it could be some of the liquidity as well. But could you just refresh us what higher rates, you know, every 25 basis points or so will either do to the net interest income or the margin?

I don't know that we have a precise table, Brian, that calculates that but I will say that a 25-basis point increase would serve to help us going forward. At 25 basis points, it would be fairly modest but as we get out toward 50 to 100 basis points it probably begins to show up.

And you're talking up from the Feds' increase in June?

Yes.

So another 50 to 100 to get the bigger impact?

Yeah.

Is that because some floors on some of the loans?

It's -- it's just that we're in the second half of the year and if you were to pick up, say, 100 basis points over the year, maybe it would help you 5 or $6 million for the year, which is meaningful, but in the second half of the year, you begin to get a little smaller impact on that. So, 25 basis points, if you extrapolate that linearly, doesn't -- doesn't move the dial a great deal but it certainly is going in a positive direction. And over time going into next year, we see that as being meaningful then.

Okay. The -- and second question is just on the securities portfolio. I know you guys have kept it really short. Just, can you give us an update on the duration?

Do you happen to have that? I believe we're just a little bit up over 3 now.

And how did that compare to the end of last quarter?

It would be, oh, goodness... Let me see if I've got anything here with me that gives me that information.

Ballpark estimate is fine.

Thank you very much, sir. Ladies and gentlemen, your next question comes from Jackie Reeves of Ryan Beck. Please proceed.

Hi. If you want to jump in with that other answer anytime that would be great. But I just wanted to get some additional color with respect to the loan pricing and deposit pricing throughout your footprint. As I've noticed beyond the comments that were made earlier on some of the smaller portfolios, you know, the CNI, you saw some yields up tick despite the average decline on a quarterly basis. But just wanted to get a feel for the market and the pricing?

The market remains competitive. Hawaii, as we've talked about before, Jackie, has a deposit -- what we call a deposit-rich environment, more deposits than there are assets here. But we haven't seen any unreasonable behavior. There is occasionally out of market competitors that will come in for one loan or another following business from the mainland. But by and large, a well-reasoned environment and one where we tend to compete on service and terms rather than on price.

Would you say that you have a pretty good ability and because it's more reasonable or behavior throughout the footprint to lag the deposit pricing on the way up pretty significantly?

Yeah, I think we will be able to administer those rates up competitively. We see ourselves as -- in a good position in the marketplace with leading share of deposits, our folks are in touch very closely with the marketplace and as rates go up we think only a percentage of that will translate into deposit cost increases. Dave, anything you'd like to add on that?

No, we -- I think consistently try to leverage our strength in the marketplace. As it relates to our deposit pricing. But as Al said, it's competitive and in a rising rate environment we have to make sure that we stay in tune with what's happening in the marketplace.

Okay. And just jumping back to the first question, maybe in a slightly different tone. Has there been any changes with respect to the line usage on the commercial side?

Not really.

Okay, thank you.

Jackie, if I may, I will return to Brian's question on the duration, just the little bit of information I have says that it moved from the end of April at 3.35 to the end of June at 3.45.

Thank you very much, ma'am. Ladies and gentlemen, your next question comes from Andrea Joe of Lehman Brothers, please proceed.

Good afternoon.

Hello.

Good afternoon.

Hello.

Hello?

Can you hear us okay?

Yes, I can hear you okay. Can you hear me?

Sure.

Perfect. First of all, congratulations to both Mike and Alan and have a couple of more strategic questions for Alan. First of all, as you take the helm, what will be your first priority? And as the benefits of, you know, credit leverage start to abate or start to taper off, what do you foresee stepping up or taking its place?

Repeat those again for me.

The first question is, as you take the helm, what would be your first, you know, order of business, or first priority? And the second question is as you see the benefits of credit leverage start to abate or taper off, what do you think or what part of the business will step up to take its place?

All right. Thanks. First priority is business as usual. We've got a very good three-year plan. Our team is very comfortable with it. It's been received well in the marketplace. And we are going to just continue to work on customer service and use that as the competitive advantage to drive revenue growth and then improving the financial performance of our business units. We've got a good team of managers in place and we're going to allow them to continue to execute our plan. In terms of credit leverage and what we think will step up, consumer lending, has been a particular strength over the last I guess 12 to 18 months and we would expect that to continue probably a small shift away from residential mortgage and probably emphasis on more traditional consumer lending, home equity, automobile and indirect. And then certainly as liquidity normalizes in the strong economy, we would expect to see more in the commercial sector, real estate remains very strong here in Hawaii. We'll take a look at what our competitors do in the residential mortgage arena. Some of them may be under stress and this may be a marginal location for them. We have a leading market share in that business and we would continue to concentrate on strengthening our share there.

Great. Thank you.

Sure, thank you, Andrea.

Thank you very much, ma'am. Ladies and gentlemen, your next question comes from Fred Cannon of KBW. Please proceed.

Thanks. Congratulations, I will echo that. And just one follow-up question, Al. I wanted to see about any thoughts you have as you enter in as CEO as to revenue enhancements? You guys have done a great job in the current quarter, underscores the job you've done on expense control and capital management, but I was wondering if you had any added thoughts in terms of looking at revenue growth initiatives?

We don't have anything that sits there as a particular. I would say that the business that we're working on the most and are optimistic will return to an earlier day is our investment services asset management area. We've made a number of changes in management there and we've added some new products. It will take a little bit, a while to get those communicated and appreciated in the marketplace. That would be an area of upside opportunity for us in the consumer lending area as well as deposits. We continue to focus on our processes and making sure that we've maximized the revenue out of those customer bases. Insurance would be an area where down the road we would look to expand. We've got a nice business there, it's performing well. And we have the capability to add a little bit more volume to that here in Hawaii. But that would be opportunistic and -- and depend on those opportunities being available. Dave, anything you want to add in the product or revenue area?

No, I think those hit the highlights from the consumer standpoint, yes.

Great. One more question, Al. I noted that your leverage ratio fell to, I believe 7.16% at the end of the quarter. In your three-year plan you had, I believe had it at 7.4% for '04 falling to 7. -- excuse me, 7.4% for '04 falling to 7.0% for '06. You know, obviously you guys have big share repurchases in the program and the leverage ratio is probably lower than I had thought it would be at this point in time. Do you feel that you can continue to reduce that -- that leverage ratio over the coming quarters or should we expect a bit of a slowdown in the share repurchase activity?

Well we've -- we had a target of 7% as the leverage ratio and what we've said is that we would take it to that level. Operate there and see how our risk profile looks. Right now the risk profile looks good but we're going to be at that 7% here in the second half and I would expect that we would stay there. At least for a while, Fred. So, I -- I think what we look at it as having had the opportunity to buy some more shares back and we arrived at that more optimal leverage ratio a little bit sooner than we thought.

Great, thanks.

Thank you very much, sir. Ladies and gentlemen, if you wish to ask a question, as a quick reminder, please key star, 1 on your touch-tone telephone. And the next question comes from Brian Harvey of Fox-Pitt Kelton. Please proceed, sir.

Thank you, good morning. Just had a couple of follow-ups to that last question. Just on the investment service side, that seems to be the one business that is from a Ray rock position seems to be underperforming a little bit of your expectations. What are you going to do to sort of improve that? And how quickly can we expect to see "X" sort of the market rebound? That business really starting to product, you know, 20% sort of Ray rock?

Well, we've made some management changes already. We're looking at how those components of the business are aligned, we're particularly focused on the asset management side of that business and making sure that we've got good, high-quality dependable products there. We've had great success in the fixed income and money market area and we're working to improve our equity performance, we've announced an alliance with a local money manager here that's gotten some very good results over the last few years and some good interest in the marketplace right now. How long that will take is an area I probably should be careful on making predictions on, we're optimistic that we'll begin to see results here in the near-term. But that depends on so many market factors and market reactions that all I can say, really, is that we're going to work hard to return that business performance to where it was in the past and build on what we've got there right now.

Obviously, Brian, an up market would help us and lots of other money managers, so, you know, to the extent that that were to occur sooner rather than later, I think that would be very helpful.

Sure. The other question is just on acquisition. Is there anything out there, maybe within maybe the investment service group, that looks appealing to you guys that you think may need to add in the future? Or opportunities that you think present themselves to you?

Well, we constantly keep our eyes open in that area but we don't have anything on the radar screen at this point and as I mentioned, we're focused on internal improvement right now. We think that's the best way for us to build that revenue base here in Hawaii.

I think it's fair to say, Brian, we -- you know, we're looking at fill-ins, but certainly nothing dramatic.

Okay. Thank you very much.

Thank you very much, sir. Ladies and gentlemen, there are no further questions in queue. I'd like to turn the call back to Mr. O'Neal.

All right, Cindy?

I'd like to thank everyone for joining us today. As always, if you have any additional questions or need further clarification on any of these issues, please feel free to contact me at 808-537-8430. Thanks, everyone have, a great day.

Thank you very much, ladies and gentlemen. For your participation in today's presentation. This concludes the conference call. You may now disconnect. Have a good day.