Oct 22, 2012
Executives
Cindy Wyrick – Director of Investor Relations Peter S. Ho – Chairman of the Board, President & Chief Executive Officer Kent T.
Lucien – Vice Chairman of the Board & Chief Financial Officer Mary E. Sellers – Vice Chairman & Chief Risk Officer
Analyst
Craig Siegenthaler – Credit Suisse Ken Zerbe – Morgan Stanley Joe Morford – RBC Capital Markets Aaron James Deer – Sandler O’Neill & Partners Casey Haire – Jeffries & Company Brett Rabatin – Sterne, Agee & Leach Joe Gladue – B. Riley & Company Analyst for Jeff Rulis – D.
A. Davidson & Company Jacquelynne Chimera – Keefe, Bruyette & Woods Russell Gunther – Bank of America Brian Zabora – Stifel Nicolaus & Company
Operator
Welcome to the Bank of Hawaii third quarter 2012 financial results conference call. At this time all participants are in listen only mode.
Later, we will conduct a question and answer session. (Operator Instructions) As a reminder, this conference is being recorded for replay purposes.
I would now like to turn the conference over to Ms. Cindy Wyrick, Director of Investor Relations.
Cindy Wyrick
Thank you for joining us today. Also with me this morning is our Chairman, President and CEO Peter Ho, our Vice-Chairman and Chief Financial Officer Kent Lucien, and our Vice-Chairman and Chief Risk Officer Mary Sellers.
The comments today will refer to the financial information included in this morning’s earnings announcement. Before we get started let me remind you that today’s conference call will contain some forward-looking statements and while we believe our assumptions are reasonable there are a variety of reasons that the actual results may differ materially from those projected.
Now, I’d like to turn the call over to Peter Ho.
Peter S. Ho
Third quarter 2012 was another solid quarter for Bank of Hawaii. Fully diluted earnings per share and return on average assets were up for the quarter on a linked basis.
Our average loans grew in nearly all loan categories and our end of period performance was even better. Average core consumer and commercial deposits were up in the quarter and our consumer checking count grew 6% for the third quarter.
Risk metrics continue to improve across a number of indicators and we see the economy continuing its move to the better here in Hawaii and I’ll chat a little bit about that towards the end of our comments. As is our practice, I’m going to ask Kent to review our finances for the quarter and then I’ll ask Mary to comment on credit quality that we saw in the quarter as well.
Kent T. Lucien
Net income for the third quarter was $41.2 million or $0.92 per share compared to $40.7 million or $0.90 per share in the second quarter and $43.3 million or $0.92 per share in the third quarter of 2011. Our return on assets in the third quarter was 1.2% and return on equity was 16%.
Year-to-date net income was $125.8 million or $2.77 per share compared to $120.8 million or $2.54 per share in 2011. Year-to-date return on assets was 1.23% and return on equity was 16.5%.
Our year-to-date efficiency ratio was 57.8%, a reduction from 58.9% in 2011. Our net interest margin in the third quarter was 2.98% unchanged from the second quarter and down from 3.09% in the third quarter of 2011.
Year-to-date the net interest margin was 3.01% compared to 3.16% last year. The lower margin is due mainly to the lower interest rate environment.
There was no credit provision in the third quarter compared to $628,000 in the second quarter and $2.2 million in the third quarter of 2011. The allowance decreased by $1.5 million in the third quarter which equaled net charge offs.
The credit provision for the second quarter included net charge offs of $3.8 million and a $3.2 million decrease to the allowance. Our allowance for loan and lease losses at the end of the third quarter was $131 million or 2.3% of outstanding loan and leases.
Non-performing assets were $40.3 million at the end of the third quarter and represented 0.70% of loans. Included in non-performing loans are $25.5 million in residential mortgage loans as of the end of the third quarter.
Non-interest income for the third quarter was $52.4 million compared to $46.8 million in the second quarter and $50.9 million in the third quarter of 2011. The increase compared to the second quarter was primarily due to an increase in mortgage banking income.
Year-to-date non-interest income was $147.3 million compared to $154.2 million in 2011. The decrease was primarily due to lower debt interchange revenue as a result of the Durbin Amendment and $6.1 million in securities gains in 2011 partially offset by an increase in mortgage banking income.
Non-interest expense totaled $84.9 million in the third quarter compared to $80.7 million in the second quarter and $84 million in the third quarter of 2011. The increase compared to the second quarter was primarily due to the launch of our new consumer credit card, higher.
profit sharing and bonus accruals and higher separation expense. Year-to-date non-interest expenses was $250.8 million compared to $263.8 million in 2011.
The effective income tax rate was 33.6% in the third quarter compared to 33% in the second quarter and 29.6% in the third quarter of 2011. The lower rate for the third quarter of 2011 was primarily due to a $1.8 million release of valuation allowance related to low income housing investments.
Our investment portfolio now stands at $6.6 billion and we have unrealized gains in the portfolio of $201 million. The average duration of the available for sale portfolio is 2.26 years and overall portfolio duration is 2.39 years.
Loans were $5.8 billion at the end of the third quarter up $111 million compared to the end of the second quarter and up $444 million from the end of the third quarter of 2011. Deposits were $11.2 billion at the end of the third quarter down $327 million compared to the end of the second quarter and up $1.2 billion from the end of the third quarter of 2011.
The decrease compared to the second quarter was due to a reduction in government deposits. Shareholders’ equity was $1 billion at the end of the third quarter and we paid out $20.3 million in dividends and continued our share repurchase program in the third quarter repurchasing 313,000 shares of common stock for $14.5 million.
Because our balance sheet is slightly smaller and we retained some earnings our Tier-1 leverage ratio increased to 6.8% from 6.6% at the end of the second quarter. On a year-to-date basis share repurchases and dividends have totaled $126 million which represents approximately 100% of year-to-date income.
Last Friday our board declared a dividend of $0.45 per share for the third quarter. Our capital position remains strong and at the end of the third quarter our tangible common equity to risk related assets was 17.4%.
Now, I’ll turn the call over to Mary Sellers.
Mary E. Sellers
Debt charge offs for the third quarter totaled $1.5 million or 10 basis points of average loans down $2.3 million on both a linked quarter and year-over-year basis. The decreases were primarily due to reductions in consumer net charge offs mainly in residential mortgage and home equity.
Non-performing assets totaled $40.3 million at quarter end compared to $41.5 million at the end of the second quarter and $37.8 million at the end of the third quarter 2011. Residential non-accrual assets accounted for $25.5 million of the total at quarter end.
The level of non-performing assets continues to be impacted in the near term by the longer resolution time frame for residential assets. Loans outstanding more than 90 days and still incurring [inaudible] totaled $7.5 million up $307,000 on a linked quarter basis and down $3.4 million year-over-year.
The year-over-year decrease was due to a $3.7 million reduction in residential mortgage. Restructured loans not included in non-accruing loans or loans past due 90 days or more totaled $31.4 million at quarter end up $302,000 from the prior quarter primarily due to an increase in residential mortgage loan modifications.
Residential mortgage and home equity loans past due more than 30 days but less than 90 days and still accruing interest totaled $21.6 million at the end of the quarter up $4.5 million on a linked quarter basis and down $7.7 million year-over-year. We continue to see improvement in what we consider to be the higher risk segments in our portfolio.
In total these higher risk segments were down $2.3 million for the quarter and $13.1 million year-over-year. These previously included a segment of our residential home building loans in what we considered and reported as higher risk.
Our risk has significantly decreased and currently represents total exposure of less than $3 million. Accordingly, we no longer include these loans.
We recorded no provision for loan and lease losses in the third quarter, which given net charge offs of $1.5 million reduced the allowance to $131 million or 2.27% of outstanding loans and leases. With continued improvement or stability in the economy and credit quality we anticipate that we may require a lower level of allowance going forward.
I’ll now turn the call back to Peter.
Peter S. Ho
I mentioned earlier that the economy continues to improve in our core Hawaii market. Let me give you some color around that.
The visitor industry which you all know is a very important segment of our overall economy continues to perform very well. Arrivals year-to-date are up 10%, spending is up 20% and most of that growth is coming from the international segments.
RevPAR and occupancy levels on Oahu are approaching pre crisis levels. Our housing market continues to improve, the trend is positive.
The median home prices on Oahu are up 8.8% and inventories is now down to 3.3 months. We see neighbor island housing stock beginning to stabilize as well.
Finally, unemployment here in Hawaii is roughly two points better than that of the national average at 5.7%. Now we’d be happy to respond to your questions.
Operator
(Operator Instructions) Your first question comes from Craig Siegenthaler – Credit Suisse.
Craig Siegenthaler – Credit Suisse
I just want to talk about the sustainability of your commercial growth. Really strong C&I real estate growth here, can you talk about how sustainable that is heading into the fourth quarter because some of your peers have talked about slowing commercial demand really looking forward at the fiscal cliff and potentially looking to come out to the election?
Peter S. Ho
We’ll we’re seeing strong commercial performance for a few quarters now. It’s always tough because of the size of some of these loans to make predictions on a quarter-by-quarter basis but I’d say directionally we remain pretty optimistic that we can continue growth in the commercial segment.
Really, our strategy has been to fill the void opened by a lot of the mono line and national lenders that seem to have disappeared post financial crisis. And we’re also making a pretty big emphasis to what we perceive to be kind of the mom and pop market here in the islands.
We’re having reasonably good traction in that segment.
Craig Siegenthaler – Credit Suisse
Just on a follow up, if I look here at your reserve around 2.3%, very high, one of the highest in my coverages but your charge offs are very low. Could we see the reserve materially lower here or are you going to keep it at a higher level than most of your peers for longer here?
Mary E. Sellers
No, we evaluate that every quarter and I think you’ll see it directionally consistent movement with the quality of our portfolio and the economy.
Craig Siegenthaler – Credit Suisse
Since the quality is good and the economy is pretty strong relatively do you think it could go lower?
Mary E. Sellers
I would agree.
Peter S. Ho
It’s possible.
Operator
Your next question comes from Ken Zerbe – Morgan Stanley.
Ken Zerbe – Morgan Stanley
I had a question on capital deployment. I know you guys have been pretty consistent with buybacks over the last several quarters but it seems that the last three quarters buyback trending a little lower than what they were prior to the last three quarters.
Would you mind kind of reiterating your philosophy on buybacks? I don’t know if you can put any kind of magnitude in with your thought process, but that would be helpful.
Kent T. Lucien
Our philosophy is to return as much capital as we can reasonably return to the shareholders through dividends and buybacks. Obviously, we need to retain enough capital for the business and the growth of the business.
But, as I mentioned in my comments we’re right around 100% between dividends and repurchases, 100% of earnings on a year-to-date basis so I think we’ve achieved that philosophy of returning as much capital as we can. Earlier in the year we had been in excess of 100% and then we moved to 100% and then I think last quarter a little bit less than 100%.
But over the period, as I’ve said 100% of earnings.
Ken Zerbe – Morgan Stanley
Another question I had just on terms of mortgage banking was there anything that was a surprise to you because I think last quarter or at least heading into this quarter I felt like you were a little more cautious on mortgage banking so certainly the results this quarter surprised to the upside. I was wondering what changed in your view between then and now?
Peter S. Ho
Well, we’ve been surprised now for about three years running. Just about every time we’re about to declare that we’ve just seen the last refi boom we see another refi boom looming.
I think the most recent one driven by the Feds’ most recent quantitative actions. So it was a nice surprise for us.
I’m not ready to say that we won’t see that again next quarter or next year but we’ll see what happens in the rate environment.
Ken Zerbe – Morgan Stanley
But there’s nothing that would actually make your results materially different from what’s called the average bank?
Peter S. Ho
No, I don’t think so.
Operator
Your next question comes from Joe Morford – RBC Capital Markets.
Joe Morford – RBC Capital Markets
I guess I was curious how much of the $1.5 billion of public and other deposits specifically this public time and how much more runoff are you looking to do? And related to that I guess, what plans do you have for further shrinkage of the balance sheet?
Kent T. Lucien
Well, that’s going to vary from quarter-to-quarter and it’s a function really of the investment opportunities that we have. So to the extent that opportunities are limited we’re not likely to increase that category.
On the other hand, to the extent we have some investment opportunities or to the extent loan growth is increasing then that category may actually increase. So a little bit of variation from period-to-period and that’s exactly what happened here in the third quarter.
Joe Morford – RBC Capital Markets
Can you maybe talk about what kind of impact did MBS prepayments have in the quarter versus last quarter and just overall how you feel about your ability to continue to hold the margin around this 3% level?
Kent T. Lucien
The runoff which is really a function of MBS prepay speeds, it was $522 million in the quarter and in the second quarter that same figure had been $452 million. So prepay speeds were higher in the third quarter.
If we had reinvested at the same levels of runoff we would have seen a lower margin just because the reinvestment opportunities are lower as a function of the [inaudible] environment.
Joe Morford – RBC Capital Markets
Then just more broadly speaking then just holding that 3% level given your outlook for loan growth and the current investment opportunities you’re seeing?
Peter S. Ho
I think it’s going to be a function of rates. We’ve seen rates come down.
Most recently we’ve seen rates come down specifically into the mortgage backed space which as you know was an area that we’ve been usually active in. So I put great kudos to the team for maintaining the margins that we’ve been maintaining but I think ultimately you’ve got to look at the broader rate environment to get a sense of what we’re looking at moving forward.
Operator
Your next question comes from Aaron James Deer – Sandler O’Neill & Partners.
Aaron James Deer – Sandler O’Neill & Partners
Just following up on Joe’s question with respect to margins and outlook, one of the items in the quarter was the repos. It looks like the cost of those came up quite a bit with the balances coming down and I just wondered what remains in there?
What’s kind of the average term and what are your thoughts with letting that come down further as a funding source?
Kent T. Lucien
When the short term rolled off in the period those obviously would have been at the lowest rate and so the remaining repos are really the private term repos and so you saw that the average rate went up to 3.3% in the category. Those still have, and I forget the actual figure but they still have several years left of term on them.
Aaron James Deer – Sandler O’Neill & Partners
Non-interest DDAs those were also down in the quarter I was wondering were those down tied also to the municipal CDs or what do you suppose drove that lower in the quarter?
Kent T. Lucien
Non-interest DDAs, I’m looking at average balances were up 2%. This is overall demand in business on average and up 1% in consumer on average.
End of period business demand you’re right was down that 1%. So I think it’s just kind of the natural spikiness to the commercial portfolio that drove that, nothing directional.
Aaron James Deer – Sandler O’Neill & Partners
Was there any mortgages sales in the quarter that would have impacted your mortgage number this quarter?
Peter S. Ho
You mean specials?
Aaron James Deer – Sandler O’Neill & Partners
No, in terms were there any gains on mortgages sold?
Peter S. Ho
Securities?
Aaron James Deer – Sandler O’Neill & Partners
On mortgages specifically. Everything was retained that you originated in the quarter?
Peter S. Ho
No, no. Firstly, all of the saleable conforming mortgages were in fact sold in the period.
We had a little bit higher level of retained mortgages in the second quarter as compared to the third quarter but the vast majority of what we produced, what were saleable, were in fact sold.
Aaron James Deer – Sandler O’Neill & Partners
Was the pricing better on that this quarter relative to last quarter?
Peter S. Ho
The pricing has improved.
Operator
Your next question comes from Casey Haire – Jeffries & Company.
Casey Haire – Jeffries & Company
Just a question on the expense side of things, you guys had some efficiency initiatives that you guys were working on, I’m just wondering if you can give us some updated commentary as to where they are? I saw $1 million in severance this quarter.
Can we expect some leverage in the comp line? I’m just trying to figure out where you guys are in that process?
Kent T. Lucien
The process continues. I think we’re making good progress on the initiatives that are underway.
They’re really multiyear initiatives. You probably noticed that occupancy expense for example, came down in the period.
We’d expect that trend to continue. So I think the general effort and results of improving efficiency is something we’re going to continue to work on and we expect to see going forward.
Casey Haire – Jeffries & Company
You guys think you guys can improve on the efficiency ratio this quarter even in a tough revenue environment?
Kent T. Lucien
Well the ratio itself obviously is tricky because the revenue can change as a function of the environment. But the absolute dollars as compared to this period as I mentioned in my comments, we did have some let’s call it onetime expenses that you wouldn’t expect to see going forward.
That would include the start up of the credit card business. I mentioned that we increased some of our bonus accruals and severance item.
Casey Haire – Jeffries & Company
On the credit card product can you talk about how much investment is left on that launch process? Then longer term what you ultimately expect that business to grow to be?
Kent T. Lucien
In the period we had about $800,000 of expenses. We have some more but not of that dimension into the fourth quarter and the outlook of the business, maybe Peter can comment on that?
Peter S. Ho
We’re moving at measured pace on the credit card roll out. We’re really excited to have that as part of our product suite but it is a new product or a product that we haven’t had in our arsenal for about a decade now so we’re working the kinks out operational, we’re working the kinks out on a marketing standpoint.
I look to accelerate that in the coming quarters. In terms of opportunity, when we had this portfolio previously it was a significant consumer portfolio for us.
So over a period of time, a good period of time, we will anticipate that we could rebuild to that level again.
Operator
Your next question comes from Brett Rabatin – Sterne, Agee & Leach.
Brett Rabatin – Sterne, Agee & Leach
I wanted to go back to mortgage banking. I was wondering if you could comment on just the growth of that platform, how much you’ve invested in it?
Obviously, it’s driven today by a lot of refi activities. We’re thinking about 2013 and if you use the [MBA] forecast what the portion is purchase versus refi and maybe you can give us any color on what you’ve done to grow that platform to give us some idea what ’13 might look like?
Peter S. Ho
Well it’s a good question. That business has always been a major thrust for the organization.
I think that our volume has been advantaged by the complexion of the market of recent. It’s much more of a refi market than a purchase market which I think benefits us different from some competitors in the marketplace.
We do not have strategic relationships with the reality brokerage community but we do have an awful lot of embedded customers who have been able to take advantage of lower rates so that’s been beneficial to us. We’ve had the benefit of having a very stable leadership team and sales force which is obviously accretive to any high volume environment and that’s exactly what we’ve been through in the past couple of years.
The market and the drivers of the market I think it played well to our strengths. Moving forward, one I think fundamentally we have to access what the probability is that we’re going to see enough rate erosion to create another spark in refinance activity.
Our sense is probably not. And probably as the housing markets heats up here in the islands, or gets better here on the islands proportionately you’re going to see more purchase activity than the refi activity and that doesn’t necessarily play to our sweet spot so I’m somewhat heartened by the results and we got a great platform but I think things will align pretty well to get us there.
As we think forward we may not be able to maintain that level of activity.
Brett Rabatin – Sterne, Agee & Leach
I wanted to ask Peter, on the commercial real estate portfolio you had good growth in that business. Can you just talk about what you’re seeing in terms of rate and terms out there?
Is that platform still been able to grow because of the birth of competition or is that more a function of activity increasing?
Peter S. Ho
I think several quarters ago I would have said a dearth of competition. I think that what’s happening is the national segment is still not present in the market on top of that we’re beginning to see a fair amount of activity and more than people just nibbling around the edges from a transaction standpoint.
There remains a big segment of resort and hotel inventory that was moved to problem loan status through the crisis that will represent future opportunity as we move forward as those assets reprice and those assets hopefully fall into quality relationships of our organization. I feel pretty good about that and I said it earlier that we think commercial lending represents a pretty good opportunity for us moving forward.
Operator
Your next question comes from the line of Joe Gladue – B. Riley & Company.
Joe Gladue – B. Riley & Company
First off I just wanted to touch base, the other non-interest income line was up almost $2 million, pretty substantial margin compared to second quarter. I was just wondering what that was?
Kent T. Lucien
The mortgage banking results were funded better in the third quarter as compared to the second quarter. In the third quarter the income was $11.7 million and in the second quarter had been $7.6 million so that’s the major source of the difference between the two periods.
Joe Gladue – B. Riley & Company
But just in the catch all other non-interest category that was up.
Kent T. Lucien
I understand your question now. We did have some bank owned life insurance income in the third quarter that we did not have in the second quarter.
That was merely a function of some anniversary periods that we had achieved and so the income in that category was higher than the second quarter but it was not a huge amount.
Joe Gladue – B. Riley & Company
I want to go back a little bit to the deposits, I just want to make sure I understand I’m showing that period end non-interest bearing deposits were down almost 4%, about 3.9%. I know you said that business DDAs were down 1%, were part of it the public funds in non-interest bearing accounts or was there anything else going on there?
Peter S. Ho
I’m looking at demand both interest bearing and non-interesting bearing down $16 million in business, up $22 million in consumer on a period end basis and positive on an average basis. So I think that may be in our institutional segment.
Joe Gladue – B. Riley & Company
I’m showing period end being down about $120 million from $3.1 million to $2.9 million.
Kent T. Lucien
There was a decrease in the public non-interest deposits of about $75 million.
Operator
Your next question comes from Analyst for Jeff Rulis – D. A.
Davidson & Company.
Analyst for Jeff Rulis – D. A. Davidson & Company
I just had a quick question on the mortgage activity and if it’s continued into the fourth quarter?
Peter S. Ho
Activity has certainly continued into the fourth quarter.
Analyst for Jeff Rulis – D. A. Davidson & Company
How can we look at the expenses from the increase in activity from what you were expecting?
Peter S. Ho
Expenses related to mortgage activity in particular?
Analyst for Jeff Rulis – D. A. Davidson & Company
Yes.
Peter S. Ho
Well, we’re going to see obviously higher commission expense, we’re also going to see higher overtime expense in salaries as a result of the processing to the tune of several hundred thousand dollars is probably the anticipation.
Analyst for Jeff Rulis – D. A. Davidson & Company
Then just a quick question on the earnings asset mix, I see that you’ve reduced your securities portfolio by quite a bit amount. I was just wondering if you could give some color on where is the reduction and what type of securities it came I and what a target mix of securities to earnings assets might be for you going forward?
Kent T. Lucien
Most of the reduction would have been in the Ginnie Mae category. Ginnie Mae’s are about 75% of the portfolio so that’s a typical mix for us.
It could be a little bit of fluctuation but that’s pretty much the way to look at it.
Operator
Your next question comes from Jacquelynne Chimera – Keefe, Bruyette & Woods.
Jacquelynne Chimera – Keefe, Bruyette & Woods
I just had a quick question as it relates to the OCC guidance that came out. I realize this is probably not material for you but just looking at the consumer loans and the treatment of Chapter 7 bankruptcy filings when those loans are performing, how does that affect you?
Mary E. Sellers
It doesn’t. We’ve already accounted for that in our current policy on charge offs.
Jacquelynne Chimera – Keefe, Bruyette & Woods
So there’s already procedures in place for bankruptcy filings and no effect whatsoever from the new guidance?
Mary E. Sellers
Yes.
Operator
Your next question comes from Russell Gunther – Bank of America.
Russell Gunther – Bank of America
A question for me back on the expenses, I appreciate the color that you gave. In light of the fact of the efficiency initiatives you’re working on are multiyear initiatives, absent the $1 million pickup from the separation expense this quarter, would 3Q be a good run rate for the near term or would you expect any incremental volatility in the fourth quarter?
Kent T. Lucien
I think we’ve touched on a number of things that could move that including mortgage activity and that type of thing. But if you take that out and you adjust for the credit card start up which I mentioned the delta was about $800,000, it’s a good starting point.
Now obviously to the extent initiatives are accumulating the forward numbers are going to be different from that base. But once you make those adjustments it’s a pretty good base.
Russell Gunther – Bank of America
Would you expect then based on where you are within those efficiency initiatives then that there would be some offset to that run rate?
Kent T. Lucien
I think part of the challenge is there is usually some upfront cost to every efficiency initiative so it’s tough to give you a quarterly run rate. So we may well have future severance expense costs that will eat into achieved efficiencies.
There’s also some seasonality behind the accrual of bonuses for us because generally we tend to set our bonus levels at some fraction of what we hope to pay out during the year based on what we see in for the year in terms of performance so that number may or may not kind of bounce around moving forward.
Russell Gunther – Bank of America
Do I understand then that the seasonality would have been this quarter than from the bonus accrual?
Kent T. Lucien
Yes, that’s right.
Russell Gunther – Bank of America
Lastly, back on the commercial loan growth your comments on starting to see increased activity, is that related to the resort and hotel sector or other sectors where you’re seeing that? Maybe talk to where that pick up is coming from?
Kent T. Lucien
We are seeing a reasonable level of resort hotel transactional activity. That’s definitely playing into our growth numbers.
But we’re also seeing just an overall pick up in general business activity which is fueling both the commercial mortgage as well as C&I portfolio down into our middle market sector.
Operator
Your next question comes from Brian Zabora – Stifel Nicolaus & Company.
Brian Zabora – Stifel Nicolaus & Company
A question on residential mortgage loan yields, they were pretty flat in the quarter, still pretty strong at $470, as refinance activity is picking up do you see that still maintaining around the $470 or could we see that decline in coming quarters?
Kent T. Lucien
It’s possible for that number to decline with the generally lower rates and mortgage spreads in particular are tightening. So longer term it’s possible that that yield could also come down.
Brian Zabora – Stifel Nicolaus & Company
Were there any prepayments this quarter that helped the margin in third quarter, just on residential mortgage loan yields?
Peter S. Ho
Not that I’m aware of.
Operator
With no further questions I would now like to hand the call over to Cindy Wyrick for closing remarks.
Cindy Wyrick
Thank you every one for joining us today and for your continued interest in the Bank of Hawaii. As always, if you have any additional questions or any further clarification on any of the topics discussed today please feel free to contact me.
Take care and have a great day.
Operator
Thank you for joining today’s conference. That concludes the presentation you may now disconnect and have a great day.