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greatest likelihood is for the loan loss reserve ratio is to stabilize near current levels. = Remains asset sensitive. Management acknowledged positive trends coming out of a future Trump administration, with one being the positive benefit from higher rates. With a December rate hike likely on the horizon, CFO Kent Lucien reminded investors that a 25 bp rate increase would benefit NII marginally ($1.5mn on an annual basis), but as the 10yr continues to rally, spread income will benefit more significantly. A 100 bp increase contributes to a 5.2% increase in NII on an annual basis. = Continued focus on expenses. Management expects expenses to come in at the upper end of their 3% to 3.5% guidance this year, mainly due to performance based expenses such as stock based comp and commissions. A potential source of expense savings should be reduction in the size of its branches, not necessarily overall count. While management has piloted this new branch design it believes that converting the entire branch network will be a multiyear process. "Capital deployment remains a priority. BOH continues to provide great transparency in regards to their capital deployment strategy. Management reiterated their commitment to payout 50% of net income in the form of dividends, with a remaining portion going to buybacks. BOH has completed over $400mn in buybacks over the past five years and noted that they are very comfortable with this strategy, given its proven track record. Chart 19: What do you see as the biggest headwind to BOH’s 2017 EPS growth outlook? 45% 40% 35% 30% 29% 20% 15% 10% 5% 0% Normalizing credit Slowing loan growth Pressure onexpense Pressure on the net provisioning costs? following a strong 2016 growth interest margin Source: BofA Merrill Lynch Global Research Bankof America 2 2016 Future of Financials Conference | 17 November 2016 13 Merrill Lynch HOUSE_OVERSIGHT_014327