7 4 STRONG PERFORMER IN ATTRACTIVE MARKET Market Cap $ 3.5 Loans $ 14.1 51 branches Assets $ 24.6 Deposits $ 21.7 Branch Presence Financial Overview – 4Q 2022 YTD ($ billions) | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | |-------|-----------------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- ...

Part I [Business](index=3&type=section&id=Item%201.%20Business) First Hawaiian, Inc. operates First Hawaiian Bank, Hawaii's largest full-service bank with **$24.6 billion** in assets and 51 branches, offering diverse services across three segments under extensive regulation Company Snapshot (as of December 31, 2022) | Metric | Value | | :--- | :--- | | Total Assets | $24.6 billion | | Gross Loans and Leases | $14.1 billion | | Total Deposits | $21.7 billion | | Stockholders' Equity | $2.3 billion | | Net Income (FY 2022) | $265.7 million | | Diluted EPS (FY 2022) | $2.08 per share | | Branches | 51 (46 in Hawaii, 3 in Guam, 2 in Saipan) | - The company operates through three primary segments: Retail Banking, Commercial Banking, and Treasury and Other[16](index=16&type=chunk) - As of December 31, 2022, the company employed over **2,000** people with an average tenure of **11.8** years[17](index=17&type=chunk) - The company is extensively regulated by federal and state authorities, including the Federal Reserve, FDIC, Hawaii DFI, and the CFPB[31](index=31&type=chunk)[34](index=34&type=chunk)[36](index=36&type=chunk) [Risk Factors](index=27&type=section&id=Item%201A.%20Risk%20Factors) The company faces significant market, credit, operational, and regulatory risks, particularly from its concentrated geographic markets, large real estate loan portfolio, cybersecurity threats, and evolving banking regulations - The business is highly dependent on the economies of Hawaii, Guam, and Saipan, which are influenced by tourism, U.S. military spending, and real estate[110](index=110&type=chunk) - As of December 31, 2022, real estate loans constituted approximately **73%** (**$10.3 billion**) of the total loan and lease portfolio, creating significant exposure to real estate market fluctuations[115](index=115&type=chunk) - The company faces operational risks from potential cybersecurity incidents, fraudulent activity, and reliance on third-party vendors for critical services like core banking and IT[142](index=142&type=chunk)[151](index=151&type=chunk) - Extensive regulation by federal and state agencies presents significant compliance risk. Changes in laws, capital requirements (Basel III), and consumer protection rules (CFPB) could adversely affect operations and profitability[168](index=168&type=chunk)[171](index=171&type=chunk)[176](index=176&type=chunk) [Unresolved Staff Comments](index=68&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) The company reports no unresolved staff comments from the SEC - Not applicable[207](index=207&type=chunk) [Properties](index=68&type=section&id=Item%202.%20Properties) The company's headquarters are in Honolulu, Hawaii, operating **51** branch offices across its markets, with **30** leased and the rest owned - The company operates **51** branch offices, with **30** leased and **21** owned, including the corporate headquarters in Honolulu[208](index=208&type=chunk) [Legal Proceedings](index=68&type=section&id=Item%203.%20Legal%20Proceedings) The company is involved in various litigation matters but does not anticipate any material adverse effect on its financial condition or operations - The company is not currently party to any legal proceedings expected to have a material adverse effect on its business or financial condition[209](index=209&type=chunk) [Mine Safety Disclosures](index=68&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This section is not applicable to the company - Not applicable[210](index=210&type=chunk) Part II [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=69&type=section&id=Item%205.%20Market%20for%20Registrant's%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) First Hawaiian, Inc. common stock trades on NASDAQ as FHB; the company authorized a new **$40 million** stock repurchase program for 2023, with no repurchases in Q4 2022 - The company's common stock is listed on the NASDAQ under the ticker symbol "FHB"[213](index=213&type=chunk) - No shares of the company's common stock were repurchased during the three months ended December 31, 2022[215](index=215&type=chunk) - On January 25, 2023, the Board of Directors authorized a new stock repurchase program for up to **$40 million** of common stock for 2023[216](index=216&type=chunk) Cumulative Total Stockholder Return (2017-2022) | Index | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | First Hawaiian, Inc. | $100.00 | $79.07 | $107.37 | $88.91 | $106.40 | $103.13 | | S&P 500 Index | $100.00 | $93.76 | $120.84 | $140.49 | $178.27 | $143.61 | | KBW Regional Banking Index | $100.00 | $80.63 | $97.07 | $85.33 | $113.65 | $102.90 | [Reserved](index=71&type=section&id=Item%206.%20Reserved) This section is not applicable - Not applicable[220](index=220&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=72&type=section&id=Item%207.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Net income remained stable at **$265.7 million** in 2022, driven by increased net interest income, while loans grew **9%** to **$14.1 billion** and the company maintained a strong **11.82%** CET1 ratio amid Hawaii's economic recovery Key Financial Performance (FY 2022 vs. FY 2021) | Metric | 2022 | 2021 | | :--- | :--- | :--- | | Net Income | $265.7 million | $265.7 million | | Diluted EPS | $2.08 | $2.05 | | Net Interest Income | $613.5 million | $530.6 million | | Provision for Credit Losses | $1.4 million | ($39.0 million) | | Noninterest Income | $179.5 million | $184.9 million | | Noninterest Expense | $440.5 million | $405.5 million | Key Balance Sheet Items (as of Dec 31) | Metric | 2022 | 2021 | | :--- | :--- | :--- | | Total Loans and Leases | $14.1 billion | $13.0 billion | | Total Deposits | $21.7 billion | $21.8 billion | | Total Assets | $24.6 billion | $25.0 billion | | Total Stockholders' Equity | $2.3 billion | $2.7 billion | - The Hawaii economy continued to recover in 2022, with the statewide unemployment rate falling to **3.2%** from **5.7%** in 2021. Domestic visitor arrivals have nearly returned to pre-pandemic levels, though international tourism from Japan remains significantly lower[227](index=227&type=chunk)[228](index=228&type=chunk) - The company remains well-capitalized with a Common Equity Tier 1 (CET1) capital ratio of **11.82%** as of December 31, 2022[235](index=235&type=chunk)[388](index=388&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=151&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) Market risk disclosures are integrated within Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations - Information regarding quantitative and qualitative disclosures about market risk is provided in Item 7 of the report[452](index=452&type=chunk) [Financial Statements and Supplementary Data](index=152&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section presents the audited consolidated financial statements for 2022, with Deloitte & Touche LLP issuing an unqualified opinion on both financial statements and internal controls - The independent registered public accounting firm, Deloitte & Touche LLP, issued an unqualified opinion on the consolidated financial statements and the effectiveness of the company's internal control over financial reporting as of December 31, 2022[453](index=453&type=chunk)[454](index=454&type=chunk) - The critical audit matter identified was the Allowance for Credit Losses (ACL), specifically highlighting the significant judgment required by management in determining the economic forecast and qualitative overlays used in the ACL calculation[458](index=458&type=chunk)[460](index=460&type=chunk) [Changes in and Disagreements With Accountants on Accounting and Financial Disclosure](index=272&type=section&id=Item%209.%20Changes%20in%20and%20Disagreements%20With%20Accountants%20on%20Accounting%20and%20Financial%20Disclosure) This section is not applicable to the company - Not applicable[814](index=814&type=chunk) [Controls and Procedures](index=272&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management and auditors concluded that disclosure controls and internal control over financial reporting were effective as of December 31, 2022, with no material changes reported - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of December 31, 2022[815](index=815&type=chunk) - Management asserted that the company maintained effective internal control over financial reporting as of December 31, 2022, based on the COSO 2013 framework[818](index=818&type=chunk) - No material changes in internal control over financial reporting occurred during the quarter ended December 31, 2022[820](index=820&type=chunk) [Other Information](index=277&type=section&id=Item%209B.%20Other%20Information) This section is not applicable to the company - Not applicable[830](index=830&type=chunk) [Disclosure Regarding Foreign Jurisdictions that Prevent Inspections](index=277&type=section&id=Item%209C.%20Disclosure%20Regarding%20Foreign%20Jurisdictions%20that%20Prevent%20Inspections) This section is not applicable to the company - Not applicable[831](index=831&type=chunk) Part III [Directors, Executive Officers and Corporate Governance](index=277&type=section&id=Item%2010.%20Directors%2C%20Executive%20Officers%20and%20Corporate%20Governance) Information on directors, executive officers, and corporate governance is incorporated by reference from the 2023 Proxy Statement - Information for this item is incorporated by reference from the company's 2023 Proxy Statement[833](index=833&type=chunk)[835](index=835&type=chunk)[837](index=837&type=chunk) [Executive Compensation](index=277&type=section&id=Item%2011.%20Executive%20Compensation) Executive and director compensation details are incorporated by reference from the company's 2023 Proxy Statement - Information for this item is incorporated by reference from the company's 2023 Proxy Statement[838](index=838&type=chunk)[839](index=839&type=chunk) [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=279&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) Security ownership information is incorporated by reference from the 2023 Proxy Statement, with **1,264,151** securities issuable under equity plans and **3,678,877** remaining available - Information regarding security ownership is incorporated by reference from the company's 2023 Proxy Statement[840](index=840&type=chunk) Equity Compensation Plan Information (as of Dec 31, 2022) | Plan Category | Securities to be Issued Upon Exercise | Securities Remaining for Future Issuance | | :--- | :--- | :--- | | Approved by security holders | 1,264,151 | 3,678,877 | | Not approved by security holders | 0 | 0 | | **Total** | **1,264,151** | **3,678,877** | [Certain Relationships and Related Transactions, and Director Independence](index=279&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions%2C%20and%20Director%20Independence) Details on related party transactions and director independence are incorporated by reference from the 2023 Proxy Statement - Information for this item is incorporated by reference from the company's 2023 Proxy Statement[843](index=843&type=chunk)[844](index=844&type=chunk) [Principal Accounting Fees and Services](index=279&type=section&id=Item%2014.%20Principal%20Accounting%20Fees%20and%20Services) Principal accounting fees and services information is incorporated by reference from the 2023 Proxy Statement - Information for this item is incorporated by reference from the company's 2023 Proxy Statement[845](index=845&type=chunk) Part IV [Exhibits, Financial Statement Schedules](index=280&type=section&id=Item%2015.%20Exhibits%2C%20Financial%20Statement%20Schedules) This section lists financial statements from Item 8, omits schedules, and provides an index of all exhibits filed with the Form 10-K - This section contains the list of consolidated financial statements included in Item 8 and the Exhibit Index for the report[847](index=847&type=chunk)[850](index=850&type=chunk) - All financial statement schedules have been omitted because the required information is not applicable, not material, or is already disclosed elsewhere in the report[847](index=847&type=chunk) [Form 10-K Summary](index=280&type=section&id=Item%2016.%20Form%2010-K%20Summary) The company has not provided a summary for its Form 10-K - None[848](index=848&type=chunk)

First Hawaiian, Inc. (NASDAQ:FHB) Q4 2022 Earnings Conference Call January 27, 2023 1:00 PM ET Company Participants Kevin Haseyama - Investor Relations Manager Robert Harrison - Chairman, President, and Chief Executive Officer Jamie Moses - Chief Financial Officer Ralph Mesick - Chief Risk Officer Conference Call Participants Steven Alexopoulus - J.P. Morgan Andrew Liesch - Piper Sandler Kelly Motta - KBW Jared Shaw - Wells Fargo Securities Laurie Hunsicker - Compass Point Operator Good day, and thank you f ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q ☑ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2022 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number 001-14585 FIRST HAWAIIAN, INC. (Exact Name of Registrant as Specified in its Charter) Delaware 99-0156159 (State or Other ...

First Hawaiian, Inc. (NASDAQ:FHB) Q3 2022 Earnings Conference Call October 28, 2022 1:00 PM ET Company Participants Kevin Haseyama - Strategic Planning & IR Manager Robert Harrison - Chairman, President & CEO Ralph Mesick - Interim CFO, Finance Group, Vice Chairman & Chief Risk Officer of Risk Management Group Christopher Dods - Vice Chairman, Digital Banking & Marketing Group and COO Conference Call Participants Steven Alexopoulos - JPMorgan Chase & Co. David Feaster - Raymond James & Associates Andrew Lie ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q ☑ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2022 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number 001-14585 FIRST HAWAIIAN, INC. (Exact Name of Registrant as Specified in its Charter) Delaware 99-0156159 (State or Other Juri ...

2 nd QUARTER 2022 EARNINGS CALL 0 July 29, 2022 FORWARD-LOOKING STATEMENTS 1 This presentation contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements reflect our current views with respect to, among other things, future events and our financial performance. These statements are often, but not always, made through the use of words or phrases such as "may", "might", "should", "could", "predict", "potential", "believe", " ...

Financial Data and Key Metrics Changes - The company reported net income of $59.4 million and EPS of $0.46 for Q2 2022, with pre-provision net revenue increasing by $8.9 million quarter-over-quarter due to higher net interest income [6][7] - Return on average tangible common equity was 18.79%, and the Board maintained the dividend at $0.26 [7] - Total assets grew by 1.3% to $25.4 billion, with a loan-to-deposit ratio of 58.7% [9][10] Business Line Data and Key Metrics Changes - Total loans and leases increased by $371 million or 2.9% from Q1, with significant growth in commercial real estate (CRE), commercial and industrial (C&I), residential, and home equity [13][14] - Deposits increased by $331 million or 1.5% to $22.6 billion, driven by a $439 million increase in public deposits [15] Market Data and Key Metrics Changes - The Hawaii economy is recovering, with a statewide unemployment rate of 4.3% and total visitor arrivals at 843,000 in June, which is 11% below June 2019 levels [4][5] - The median sales price for single-family homes was $1.1 million, up 12% from last year, despite a 20% decline in sales [5] Company Strategy and Development Direction - The company is focused on digital transformation, having successfully converted to a new core operating system [7] - The balance sheet is well-positioned for growth with good liquidity, strong capital, and excellent credit quality [27] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the second half of 2022, citing a well-capitalized balance sheet and strong local economic conditions [27] - There are expectations for net interest margin (NIM) to increase by 25 to 30 basis points in Q3 [18] Other Important Information - The common equity Tier 1 ratio was 11.9% at quarter-end, and the total capital ratio was 13.14% [12] - The company repurchased over 290,000 shares at an average price of $24.09 for $7 million [7] Q&A Session Summary Question: Was the strong deposit growth intentional or flow-related? - Management indicated that the increase was primarily due to operating balances from the State of Hawaii, with a substantial increase in public operating accounts [30] Question: How does the company plan to fund loan growth? - The company plans to move cash on the balance sheet into loans and expects the loan-to-deposit ratio to increase [31][32] Question: What is the expected deposit beta for NIM guidance? - The company is assuming a deposit beta of about 20% [33] Question: Any updates on the CFO search? - The search for a new CFO is ongoing, with the company working with Korn Ferry [34] Question: What is the outlook on asset quality given the macroeconomic volatility? - Management has not seen significant signs of concern but is monitoring small consumer and small business loans closely [40][41] Question: What are the immediate benefits of the core conversion? - The core conversion has automated many manual processes, and the company has an aggressive roadmap for further improvements [46][50] Question: What is the makeup of the loan pipeline? - The pipeline is currently more weighted towards commercial real estate and C&I, with a strong outlook for Hawaii [52][54] Question: What is the company's appetite for further share repurchases? - The company plans to focus on loan growth and maintaining strong capital levels before considering additional buybacks [61]

PART I. FINANCIAL INFORMATION [ITEM 1. FINANCIAL STATEMENTS (Unaudited)](index=4&type=section&id=ITEM%201.%20FINANCIAL%20STATEMENTS%20%28Unaudited%29) This section presents the unaudited consolidated financial statements of First Hawaiian, Inc. and its subsidiary for the three months ended March 31, 2022 and 2021, including statements of income, comprehensive loss, balance sheets, stockholders' equity, and cash flows, along with detailed notes explaining accounting policies, investment securities, loans, credit losses, and other financial instruments [Consolidated Statements of Income](index=4&type=section&id=Consolidated%20Statements%20of%20Income) For the three months ended March 31, 2022, First Hawaiian, Inc. reported a net income of **$57.7 million**, a slight increase from **$57.7 million** in the prior year. Net interest income increased, while noninterest income decreased and noninterest expense rose | Metric (in thousands) | 3 Months Ended March 31, 2022 | 3 Months Ended March 31, 2021 | | :-------------------- | :---------------------------- | :---------------------------- | | Net Income | $57,719 | $57,693 | | Basic EPS | $0.45 | $0.44 | | Diluted EPS | $0.45 | $0.44 | | Total Interest Income | $136,621 | $134,576 | | Total Interest Expense| $2,749 | $5,418 | | Net Interest Income | $133,872 | $129,158 | | Provision for Credit Losses | $(5,747) | $0 | | Total Noninterest Income | $41,380 | $43,868 | | Total Noninterest Expense | $104,042 | $96,306 | [Consolidated Statements of Comprehensive Loss](index=5&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Loss) The company reported a total comprehensive loss of **$(338.1) million** for the three months ended March 31, 2022, significantly higher than the **$(17.3) million** loss in the prior year, primarily driven by a substantial net change in investment securities | Metric (in thousands) | 3 Months Ended March 31, 2022 | 3 Months Ended March 31, 2021 | | :-------------------- | :---------------------------- | :---------------------------- | | Net Income | $57,719 | $57,693 | | Net Change in Investment Securities | $(394,551) | $(75,039) | | Net Change in Cash Flow Derivative Hedges | $(1,258) | $0 | | Total Comprehensive Loss | $(338,090) | $(17,346) | [Consolidated Balance Sheets](index=6&type=section&id=Consolidated%20Balance%20Sheets) As of March 31, 2022, total assets increased slightly to **$25.04 billion** from **$24.99 billion** at December 31, 2021. Total liabilities also increased, while total stockholders' equity decreased significantly due to accumulated other comprehensive loss | Metric (in thousands) | March 31, 2022 | December 31, 2021 | | :-------------------- | :------------- | :---------------- | | Total Assets | $25,042,720 | $24,992,410 | | Total Liabilities | $22,757,571 | $22,335,498 | | Total Stockholders' Equity | $2,285,149 | $2,656,912 | | Investment Securities, at fair value | $8,062,384 | $8,428,032 | | Loans and Leases | $12,891,743 | $12,961,999 | | Total Deposits | $22,270,430 | $21,816,146 | [Consolidated Statements of Stockholders' Equity](index=7&type=section&id=Consolidated%20Statements%20of%20Stockholders%27%20Equity) Stockholders' equity decreased from **$2.66 billion** at December 31, 2021, to **$2.29 billion** at March 31, 2022, primarily due to a significant increase in accumulated other comprehensive loss, net of tax, which offset net income and was further impacted by cash dividends | Metric (in thousands) | Balance as of Dec 31, 2021 | 3 Months Ended March 31, 2022 | | :-------------------- | :------------------------- | :---------------------------- | | Total Stockholders' Equity | $2,656,912 | $2,285,149 | | Net Income | - | $57,719 | | Cash Dividends Declared | - | $(33,151) | | Other Comprehensive Loss, net of tax | $(121,693) (Dec 31, 2021) | $(395,809) (3 Months Ended) | [Consolidated Statements of Cash Flows](index=8&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Net cash provided by operating activities decreased significantly to **$66.3 million** for the three months ended March 31, 2022, from **$154.2 million** in the prior year. Investing activities used less cash, while financing activities provided less cash, resulting in a higher net increase in cash and cash equivalents | Metric (in thousands) | 3 Months Ended March 31, 2022 | 3 Months Ended March 31, 2021 | | :-------------------- | :---------------------------- | :---------------------------- | | Net Cash Provided by Operating Activities | $66,262 | $154,200 | | Net Cash Used in Investing Activities | $(116,507) | $(792,564) | | Net Cash Provided by Financing Activities | $417,936 | $860,230 | | Net Increase in Cash and Cash Equivalents | $367,691 | $221,866 | | Cash and Cash Equivalents at End of Period | $1,626,160 | $1,262,810 | [Notes to Consolidated Financial Statements (Unaudited)](index=9&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements%20%28Unaudited%29) The notes provide detailed disclosures on the company's accounting policies, financial instruments, credit quality, regulatory capital, and segment performance, highlighting the adoption of new accounting standards, changes in investment securities, and the impact of economic conditions on credit losses and revenue recognition [Note 1. Organization and Basis of Presentation](index=9&type=section&id=Note%201.%20Organization%20and%20Basis%20of%20Presentation) First Hawaiian, Inc. (FHI) is a bank holding company that wholly owns First Hawaiian Bank (FHB), offering a comprehensive suite of banking services. The interim financial statements are prepared in accordance with GAAP and Form 10-Q instructions, with management making necessary estimates. The company adopted ASU No. 2021-05 on January 1, 2022, with no material impact, and is evaluating ASU No. 2022-01 and ASU No. 2022-02 for future periods - FHI is a bank holding company, owning **100%** of First Hawaiian Bank (FHB), which provides a full range of banking services to consumer and commercial customers[25](index=25&type=chunk) - The company adopted ASU No. 2021-05 (Leases) on January 1, 2022, which did not have a material impact on its consolidated financial statements[30](index=30&type=chunk) - FHI is currently evaluating the impact of ASU No. 2022-01 (Derivatives and Hedging – Portfolio Layer Method) and ASU No. 2022-02 (Financial Instruments – Credit Losses) for future reporting periods, effective after December 15, 2022[32](index=32&type=chunk)[35](index=35&type=chunk)[36](index=36&type=chunk) [Note 2. Investment Securities](index=11&type=section&id=Note%202.%20Investment%20Securities) As of March 31, 2022, all investment securities were classified as available-for-sale, with a fair value of **$8.06 billion**, down from **$8.43 billion** at December 31, 2021. The decrease was primarily due to increased unrealized losses, driven by changes in interest rates rather than credit quality. The portfolio mainly consists of U.S. Treasury, government agency, and mortgage-backed securities | Metric (in thousands) | March 31, 2022 | December 31, 2021 | | :-------------------- | :------------- | :---------------- | | Total Available-for-Sale Securities (Fair Value) | $8,062,384 | $8,428,032 | | Total Amortized Cost | $8,733,170 | $8,560,733 | | Total Unrealized Gains | $568 | $24,595 | | Total Unrealized Losses | $(671,354) | $(157,296) | - The unrealized losses on investment securities were primarily due to changes in interest rates, not credit quality, and the company does not expect any credit losses[48](index=48&type=chunk)[52](index=52&type=chunk) | Interest Income Source (in millions) | 3 Months Ended March 31, 2022 | 3 Months Ended March 31, 2021 | | :----------------------------------- | :---------------------------- | :---------------------------- | | Taxable Investment Securities | $29.2 | $22.1 | | Non-Taxable Investment Securities | $2.9 | $1.0 | [Note 3. Loans and Leases](index=14&type=section&id=Note%203.%20Loans%20and%20Leases) Total loans and leases decreased slightly to **$12.89 billion** as of March 31, 2022, from **$12.96 billion** at December 31, 2021. This was mainly due to decreases in commercial and industrial loans (including PPP loans) and construction loans, partially offset by increases in commercial real estate and residential mortgage loans. A significant portion of loans are pledged as collateral for borrowing capacity | Loan Category (in thousands) | March 31, 2022 | December 31, 2021 | | :--------------------------- | :------------- | :---------------- | | Commercial and Industrial | $1,923,534 | $2,087,099 | | Commercial Real Estate | $3,759,980 | $3,639,623 | | Construction | $708,300 | $813,969 | | Residential Mortgage | $4,153,824 | $4,083,367 | | Home Equity Line | $918,101 | $876,608 | | Consumer | $1,204,834 | $1,229,939 | | Lease Financing | $223,170 | $231,394 | | Total Loans and Leases | $12,891,743 | $12,961,999 | - Residential real estate loans totaling **$2.3 billion** were pledged to FHLB, and various other loans totaling **$1.7 billion** were pledged to FRB as of March 31, 2022[57](index=57&type=chunk) - The loan and lease portfolio is primarily located in Hawaii, with smaller exposures in the U.S. Mainland, Guam, and Saipan, making it susceptible to regional economic conditions[58](index=58&type=chunk) [Note 4. Allowance for Credit Losses](index=16&type=section&id=Note%204.%20Allowance%20for%20Credit%20Losses) The Allowance for Credit Losses (ACL) for loans and leases decreased to **$150.3 million** as of March 31, 2022, from **$157.3 million** at December 31, 2021, primarily due to a negative provision for credit losses reflecting improved credit quality and economic outlook. The reserve for unfunded commitments also decreased. The company uses internal grading and FICO scores to monitor credit quality and details changes in TDRs and past-due loans | Metric (in thousands) | March 31, 2022 | December 31, 2021 | | :-------------------- | :------------- | :---------------- | | ACL for Loans and Leases | $150,280 | $157,262 | | Reserve for Unfunded Commitments | $28,958 | $30,322 | | Net Charge-offs | $(4,858) | $(7,668) | | Recoveries | $2,259 | $3,080 | | Increase (decrease) in Provision | $(4,383) | $(3,500) | - The decrease in ACL was driven by a negative provision for credit losses of **$(4.4) million** for the three months ended March 31, 2022, reflecting improved credit quality and economic outlook[61](index=61&type=chunk) | Past Due Status (in thousands) | 30-59 Days Past Due | 60-89 Days Past Due | >= 90 Days Past Due | Total Past Due | | :----------------------------- | :------------------ | :------------------ | :------------------ | :------------- | | March 31, 2022 | $22,588 | $6,830 | $11,467 | $40,885 | | December 31, 2021 | $23,090 | $6,101 | $12,416 | $41,607 | | TDRs (in thousands) | Number of Contracts (2022) | Recorded Investment (2022) | Related ACL (2022) | Number of Contracts (2021) | Recorded Investment (2021) | Related ACL (2021) | | :------------------ | :------------------------- | :------------------------- | :----------------- | :------------------------- | :------------------------- | :----------------- | | Commercial & Industrial | 0 | $0 | $0 | 17 | $2,945 | $1,648 | | Construction | 0 | $0 | $0 | 2 | $716 | $342 | | Residential Mortgage | 0 | $0 | $0 | 10 | $4,916 | $374 | | Consumer | 144 | $1,759 | $202 | 1,690 | $15,763 | $11,832 | | Total | 144 | $1,759 | $202 | 1,719 | $24,340 | $14,196 | [Note 5. Mortgage Servicing Rights](index=26&type=section&id=Note%205.%20Mortgage%20Servicing%20Rights) Mortgage Servicing Rights (MSRs) net carrying value decreased to **$7.65 million** at March 31, 2022, from **$8.30 million** at December 31, 2021, primarily due to amortization exceeding originations. Servicing fees also decreased year-over-year. No impairment of MSRs was recorded | Metric (in thousands) | March 31, 2022 | December 31, 2021 | | :-------------------- | :------------- | :---------------- | | Net Carrying Value | $7,650 | $8,302 | | Gross Carrying Amount | $69,187 | $69,103 | | Accumulated Amortization | $61,537 | $60,801 | | Metric (in thousands) | 3 Months Ended March 31, 2022 | 3 Months Ended March 31, 2021 | | :-------------------- | :---------------------------- | :---------------------------- | | Servicing Fees | $1.0 million | $1.3 million | | Amortization of MSRs | $0.7 million | $0.5 million | - No impairment of MSRs was recorded for the three months ended March 31, 2022 and 2021[103](index=103&type=chunk) [Note 6. Transfers of Financial Assets](index=27&type=section&id=Note%206.%20Transfers%20of%20Financial%20Assets) The company pledges financial assets as collateral for public deposits, borrowing arrangements (FHLB, FRB), ACH transactions, and interest rate swaps. Total carrying amounts of pledged assets decreased to **$5.91 billion** at March 31, 2022, from **$6.18 billion** at December 31, 2021. The company maintains significant borrowing capacity with FHLB and FRB | Pledged Asset Category (in thousands) | March 31, 2022 | December 31, 2021 | | :------------------------------------ | :------------- | :---------------- | | Public Deposits | $1,783,882 | $1,913,369 | | Federal Home Loan Bank | $2,269,584 | $2,380,042 | | Federal Reserve Bank | $1,725,291 | $1,724,279 | | ACH Transactions | $112,800 | $115,038 | | Interest Rate Swaps | $20,889 | $48,430 | | Total | $5,912,446 | $6,181,158 | - As of March 31, 2022, the company had borrowing capacity of **$1.7 billion** from the FHLB and an undrawn line of credit of **$1.3 billion** from the FRB[109](index=109&type=chunk) [Note 7. Deposits](index=29&type=section&id=Note%207.%20Deposits) Total deposits increased to **$22.27 billion** at March 31, 2022, from **$21.82 billion** at December 31, 2021, driven by growth in interest-bearing and noninterest-bearing deposits in the U.S. Time certificates of deposit in denominations of **$250,000** or more decreased | Deposit Category (in thousands) | March 31, 2022 | December 31, 2021 | | :------------------------------ | :------------- | :---------------- | | U.S. Interest-bearing | $11,642,353 | $11,553,298 | | U.S. Noninterest-bearing | $8,855,088 | $8,498,187 | | Foreign Interest-bearing | $862,468 | $868,985 | | Foreign Noninterest-bearing | $910,521 | $895,676 | | Total Deposits | $22,270,430 | $21,816,146 | | Time Certificates of Deposit (in thousands) | Under $250,000 | $250,000 or More | Total | | :------------------------------------------ | :------------- | :--------------- | :---- | | Three months or less | $228,660 | $155,546 | $384,206 | | Over three through six months | $152,926 | $119,732 | $272,658 | | Over six through twelve months | $360,870 | $409,218 | $770,088 | | One to two years | $80,002 | $20,850 | $100,852 | | Two to three years | $50,970 | $10,126 | $61,096 | | Three to four years | $41,724 | $19,291 | $61,015 | | Four to five years | $42,545 | $9,206 | $51,751 | | Thereafter | $172 | $0 | $172 | | Total | $957,869 | $743,969 | $1,701,838 | [Note 8. Accumulated Other Comprehensive Loss](index=31&type=section&id=Note%208.%20Accumulated%20Other%20Comprehensive%20Loss) Accumulated other comprehensive loss significantly increased to **$(517.5) million** at March 31, 2022, from **$(121.7) million** at December 31, 2021. This was primarily due to substantial unrealized net losses on investment securities and cash flow derivative hedges arising during the period | Metric (in thousands) | March 31, 2022 | December 31, 2021 | | :-------------------- | :------------- | :---------------- | | Accumulated Other Comprehensive Loss, Net of Tax | $(517,502) | $(121,693) |\ | Unrealized Net Losses on Investment Securities (period change) | $(394,551) | $(75,039) |\ | Unrealized Net Losses on Cash Flow Derivative Hedges (period change) | $(1,258) | $0 | [Note 9. Regulatory Capital Requirements](index=33&type=section&id=Note%209.%20Regulatory%20Capital%20Requirements) As of March 31, 2022, the company and its bank remained 'well-capitalized,' exceeding all minimum regulatory capital requirements, including the capital conservation buffer. CET1 capital ratio increased slightly to **12.27%** from **12.24%** at December 31, 2021, primarily due to earnings | Capital Ratio | March 31, 2022 | December 31, 2021 | Minimum Capital Ratio | Well Capitalized Ratio | | :-------------- | :------------- | :---------------- | :-------------------- | :--------------------- | | Common Equity Tier 1 | 12.27% | 12.24% | 4.50% | 6.50% | | Tier 1 Capital | 12.27% | 12.24% | 6.00% | 8.00% | | Total Capital | 13.48% | 13.49% | 8.00% | 10.00% | | Tier 1 Leverage | 7.50% | 7.24% | 4.00% | 5.00% | - The company and the Bank were classified as 'well-capitalized' as of March 31, 2022, meeting all regulatory capital requirements, including the **2.5%** capital conservation buffer[120](index=120&type=chunk) [Note 10. Derivative Financial Instruments](index=33&type=section&id=Note%2010.%20Derivative%20Financial%20Instruments) The company uses derivatives primarily to manage interest rate risk and for customer accommodation. As of March 31, 2022, notional amounts for hedging instruments increased, while those for non-hedging instruments remained high. Fair value hedges generated net losses, and cash flow hedges resulted in a **$1.7 million** loss in OCI. The Visa derivative liability increased, and the company manages counterparty credit risk through collateral agreements | Derivative Type (in thousands) | Notional Amount (Mar 31, 2022) | Fair Value Asset (Mar 31, 2022) | Fair Value Liability (Mar 31, 2022) | | :----------------------------- | :----------------------------- | :------------------------------ | :---------------------------------- | | Interest Rate Swaps (Hedging) | $267,500 | $301 | $(1,716) | | Interest Rate Swaps (Non-Hedging) | $2,908,144 | $16,107 | $(11,697) | | Visa Derivative | $100,887 | $0 | $(5,794) | | Foreign Exchange Contracts | $1,005 | $6 | $0 | | Fair Value Hedges (in thousands) | 3 Months Ended March 31, 2022 | 3 Months Ended March 31, 2021 | | :------------------------------- | :---------------------------- | :---------------------------- | | Gains (losses) on interest rate swap | $1,512 | $193 | | Gains (losses) on hedged item | $(1,617) | $(249) | - Cash flow hedges resulted in a **$1.7 million** loss recognized in other comprehensive income (loss) for the three months ended March 31, 2022[135](index=135&type=chunk) - The Visa derivative liability, classified as Level 3, increased to **$5.8 million** at March 31, 2022, from **$5.5 million** at December 31, 2021, due to changes in the Class B conversion rate[139](index=139&type=chunk)[182](index=182&type=chunk) [Note 11. Commitments and Contingent Liabilities](index=39&type=section&id=Note%2011.%20Commitments%20and%20Contingent%20Liabilities) The company faces various legal proceedings, including a lawsuit related to credit facilities, but management does not expect a material adverse effect. Off-balance sheet risks include commitments to extend credit (**$6.55 billion**) and standby/commercial letters of credit (**$189.57 million**) as of March 31, 2022, which represent potential future credit risk - A lawsuit was filed in Hawaii Circuit Court on November 2, 2020, against the Bank for interference with contract and business opportunity, and unfair competition. The outcome is uncertain, and no liability has been recognized[143](index=143&type=chunk) | Financial Instrument (in thousands) | March 31, 2022 | December 31, 2021 | | :---------------------------------- | :------------- | :---------------- | | Commitments to Extend Credit | $6,546,389 | $6,490,301 | | Standby Letters of Credit | $182,423 | $182,447 | | Commercial Letters of Credit | $7,149 | $3,307 | - The company sells residential mortgage loans in the secondary market with potential repurchase obligations under certain conditions, but management does not anticipate material losses[151](index=151&type=chunk) [Note 12. Revenue from Contracts with Customers](index=42&type=section&id=Note%2012.%20Revenue%20from%20Contracts%20with%20Customers) The company recognizes revenue from contracts with customers by following a five-step model, primarily for services like deposit account charges, credit/debit card fees, trust and investment services, and other fees. Most revenues under Topic 606 are recognized at a point in time. Total revenue for Q1 2022 was **$175.25 million**, with net interest income being the largest component - Revenue recognition follows a five-step model under Topic 606, with most revenues recognized at a point in time[154](index=154&type=chunk)[155](index=155&type=chunk)[159](index=159&type=chunk) | Revenue Category (in thousands) | 3 Months Ended March 31, 2022 | 3 Months Ended March 31, 2021 | | :------------------------------ | :---------------------------- | :---------------------------- | | Net Interest Income | $133,872 | $129,158 | | Service Charges on Deposit Accounts | $7,501 | $6,718 | | Credit and Debit Card Fees | $14,242 | $13,953 | | Other Service Charges and Fees | $7,713 | $6,391 | | Trust and Investment Services Income | $8,883 | $8,492 | | Total Revenue | $175,252 | $173,026 | - Contract liabilities, primarily from vendor signing bonuses, decreased by approximately **$0.3 million** in Q1 2022 due to the passage of time[165](index=165&type=chunk) [Note 13. Earnings per Share](index=47&type=section&id=Note%2013.%20Earnings%20per%20Share) Basic and diluted earnings per share for the three months ended March 31, 2022, were **$0.45**, a slight increase from **$0.44** in the prior year, reflecting stable net income with a decrease in weighted-average outstanding shares | Metric | 3 Months Ended March 31, 2022 | 3 Months Ended March 31, 2021 | | :----- | :---------------------------- | :---------------------------- | | Net Income | $57,719 | $57,693 | | Basic Weighted-Average Shares Outstanding | 127,556,242 | 129,933,104 | | Diluted Weighted-Average Shares Outstanding | 128,121,126 | 130,589,878 | | Basic EPS | $0.45 | $0.44 | | Diluted EPS | $0.45 | $0.44 | [Note 14. Noninterest Income and Noninterest Expense](index=47&type=section&id=Note%2014.%20Noninterest%20Income%20and%20Noninterest%20Expense) This section details the components of net periodic benefit cost for the company's pension and postretirement benefit plans, which totaled **$1.85 million** for pension and **$0.26 million** for other benefits in Q1 2022. It also reports operating lease income and variable lease income | Benefit Plan (in thousands) | 3 Months Ended March 31, 2022 | 3 Months Ended March 31, 2021 | | :-------------------------- | :---------------------------- | :---------------------------- | | Total Net Periodic Pension Benefit Cost | $1,846 | $2,185 | | Total Net Periodic Other Benefits Cost | $258 | $395 | - Operating lease income was **$1.5 million** and variable lease income was **$1.6 million** for the three months ended March 31, 2022[171](index=171&type=chunk) [Note 15. Fair Value](index=47&type=section&id=Note%2015.%20Fair%20Value) The company measures fair value using a three-level hierarchy (Level 1: quoted prices, Level 2: observable inputs, Level 3: unobservable inputs). Available-for-sale securities and most derivatives are classified as Level 2. The Visa derivative is a Level 3 liability due to significant unobservable inputs. There were no transfers between fair value hierarchy levels during the period - Fair value measurements are categorized into Level 1 (quoted prices in active markets), Level 2 (observable inputs other than Level 1 prices), and Level 3 (unobservable inputs)[174](index=174&type=chunk) - All available-for-sale securities are classified as Level 2, and most derivatives are classified as Level 2[180](index=180&type=chunk)[181](index=181&type=chunk) - The Visa derivative liability of **$5.8 million** (March 31, 2022) and **$5.5 million** (December 31, 2021) is classified as Level 3 due to significant unobservable inputs like potential future changes in conversion rate, expected term, and growth rate of Visa Class A common shares[182](index=182&type=chunk)[187](index=187&type=chunk) - There were no transfers between fair value hierarchy levels for the three months ended March 31, 2022 and 2021[189](index=189&type=chunk) [Note 16. Reportable Operating Segments](index=53&type=section&id=Note%2016.%20Reportable%20Operating%20Segments) The company operates through three segments: Retail Banking, Commercial Banking, and Treasury and Other. Segment performance is evaluated based on discrete financial information, including allocations of income, expense, and capital. PPP loan balances were reclassified from Retail to Commercial Banking in Q2 2021 for better alignment - The company's three business segments are Retail Banking, Commercial Banking, and Treasury and Other[198](index=198&type=chunk) - PPP loan balances were reclassified from the Retail Banking segment to the Commercial Banking segment in Q2 2021 to align with direct management, impacting net interest income, provision for credit losses, noninterest expense, and net income[204](index=204&type=chunk) | Segment (in thousands) | Net Income (Loss) 3 Months Ended March 31, 2022 | Net Income (Loss) 3 Months Ended March 31, 2021 | | :--------------------- | :---------------------------------------------- | :---------------------------------------------- | | Retail Banking | $36,834 | $42,484 | | Commercial Banking | $22,527 | $25,515 | | Treasury and Other | $(1,642) | $(10,306) | | Total | $57,719 | $57,693 | [ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS](index=58&type=section&id=ITEM%202.%20MANAGEMENT%27S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) [Cautionary Note Regarding Forward-Looking Statements](index=58&type=section&id=Cautionary%20Note%20Regarding%20Forward-Looking%20Statements) This section warns readers that the report contains forward-looking statements based on current expectations and estimates, which are subject to various risks and uncertainties. Actual results may differ materially due to factors such as economic conditions, interest rate fluctuations, credit quality, regulatory changes, and the ongoing impact of the COVID-19 pandemic - Forward-looking statements are based on current expectations, estimates, and projections, and are subject to inherent uncertainties and risks[214](index=214&type=chunk) - Key factors that could cause actual results to differ include financial market conditions, economic conditions in Hawaii, Guam, and Saipan, interest rate fluctuations, credit quality deterioration, regulatory changes, and the impact of the COVID-19 pandemic[215](index=215&type=chunk) [Company Overview](index=60&type=section&id=Company%20Overview) First Hawaiian, Inc. (FHI) is a bank holding company that owns First Hawaiian Bank (FHB), established in 1858. FHB operates through three segments: Retail Banking, Commercial Banking, and Treasury and Other - FHI is a bank holding company, owning **100%** of First Hawaiian Bank (FHB), which was founded in 1858[218](index=218&type=chunk) - FHB operates through three segments: Retail Banking, Commercial Banking, and Treasury and Other[218](index=218&type=chunk) [Basis of Presentation](index=60&type=section&id=Basis%20of%20Presentation) The unaudited interim consolidated financial statements are prepared in accordance with GAAP for interim financial information and Form 10-Q instructions, reflecting normal recurring adjustments. They should be read in conjunction with the company's 2021 Annual Report on Form 10-K - Unaudited interim consolidated financial statements are prepared in accordance with GAAP for interim financial information and Form 10-Q instructions[221](index=221&type=chunk) - Statements include normal recurring adjustments and should be read with the 2021 Annual Report on Form 10-K[221](index=221&type=chunk)[222](index=222&type=chunk) [Recent Developments Regarding Hawaii and the Global Economy](index=60&type=section&id=Recent%20Developments%20Regarding%20Hawaii%20and%20the%20Global%20Economy) Hawaii's economy shows improvement with declining COVID-19 cases and lifted restrictions, leading to increased domestic visitor arrivals and home sales. However, economic uncertainty persists due to supply chain issues, labor shortages, rising inflation, and geopolitical risks. The company expects continued improvement in local consumption but remains cautious about potential market destabilization - Hawaii's economy is improving, with COVID-19 restrictions lifted and domestic visitor arrivals at pre-pandemic levels[223](index=223&type=chunk)[228](index=228&type=chunk) - The statewide unemployment rate in Hawaii decreased to **4.1%** in March 2022 from **9.0%** in March 2021[225](index=225&type=chunk) - Home sales volume on Oahu increased for condominiums (**16.8%**) but slightly decreased for single-family homes (**2.6%**) in Q1 2022 YoY, while median prices rose significantly (**20.2%** for single-family, **12.1%** for condominiums)[229](index=229&type=chunk) - Economic uncertainty remains high due to supply chain and labor shortages, rising inflation, market volatility, and geopolitical risks[224](index=224&type=chunk) [Overview](index=60&type=section&id=Overview) The global economy faces unprecedented challenges from the COVID-19 pandemic, with Hawaii experiencing a peak in cases in early 2022 but subsequently lifting all state-sanctioned restrictions. Economic uncertainty persists due to supply chain issues, labor shortages, inflation, and geopolitical risks - Hawaii experienced a peak of COVID-19 cases in early January 2022 but lifted all state-sanctioned restrictions by the end of March 2022[223](index=223&type=chunk) - Economic uncertainty remains high due to supply chain and labor shortage concerns, rising inflationary pressures, market volatility, rising oil prices, and geopolitical risks from the Russia-Ukraine conflict[224](index=224&type=chunk) [Hawaii Economy](index=60&type=section&id=Hawaii%20Economy) Hawaii's economy continues to improve, with the unemployment rate dropping to **4.1%** in March 2022. Domestic visitor arrivals have reached pre-pandemic levels, and home sales on Oahu show increasing median prices despite a slight decrease in single-family home volume. Labor shortages, however, continue to constrain business activity - Hawaii's seasonally adjusted unemployment rate was **4.1%** in March 2022, down from **9.0%** in March 2021[225](index=225&type=chunk) - Domestic visitor arrivals are at approximately **108%** of pre-pandemic levels (Q1 2019), with a gradual increase in Japanese visitors expected[228](index=228&type=chunk) | Oahu Home Sales (Q1 2022 vs Q1 2021) | Volume Change | Median Price Change | | :----------------------------------- | :------------ | :------------------ | | Single-Family Homes | -2.6% | +20.2% | | Condominiums | +16.8% | +12.1% | - State general excise and use tax revenues increased by **28.1%** for the three months ended March 31, 2022, compared to the same period in 2021[229](index=229&type=chunk) [Ongoing Impact of the COVID-19 Pandemic](index=62&type=section&id=Ongoing%20Impact%20of%20the%20COVID-19%20Pandemic) The company has updated its COVID-19 policies, removing mask mandates and social distancing, and ended consumer modification programs. Despite economic improvements, the lingering uncertainty from the pandemic, coupled with inflation and labor shortages, could still destabilize financial markets and impact borrower creditworthiness - The company removed mask mandates and social distancing requirements in its facilities as of March 26, 2022[230](index=230&type=chunk) - Consumer COVID-19 modification programs formally ended on April 1, 2022, with many customers resuming normal payments[231](index=231&type=chunk) - Net interest income, before the provision for credit losses, increased by **$4.7 million** to **$133.9 million** for Q1 2022 compared to Q1 2021[231](index=231&type=chunk) [Effect of Inflation and Changing Prices](index=62&type=section&id=Effect%20of%20Inflation%20and%20Changing%20Prices) Accelerated inflation, driven by supply chain disruptions and geopolitical events, is increasing operating costs. However, rising interest rates are expected to benefit net interest income as assets reprice faster than liabilities. The company maintains a 'well-capitalized' status and high liquidity levels to navigate market volatility - Inflation is accelerating due to global supply chain disruptions and rising commodity prices from the Russia-Ukraine conflict, increasing operating costs[233](index=233&type=chunk) - Rising interest rates are expected to increase net interest margins and benefit net interest income, as assets are projected to reprice faster and to a greater degree than liabilities[235](index=235&type=chunk) - As of March 31, 2022, the company was 'well-capitalized' with a Common Equity Tier 1 capital ratio of **12.27%**, exceeding the minimum requirement of **4.50%**, and maintains high liquidity levels[237](index=237&type=chunk) [Selected Financial Data](index=65&type=section&id=Selected%20Financial%20Data) This section provides a summary of key financial highlights and performance ratios for the three months ended March 31, 2022 and 2021, including income statement, balance sheet, asset quality, and capital data. It also includes a reconciliation of non-GAAP financial measures | Metric (in thousands, except per share) | 3 Months Ended March 31, 2022 | 3 Months Ended March 31, 2021 | | :-------------------------------------- | :---------------------------- | :---------------------------- | | Net Income | $57,719 | $57,693 | | Basic EPS | $0.45 | $0.44 | | Diluted EPS | $0.45 | $0.44 | | Net Interest Margin | 2.42% | 2.55% | | Efficiency Ratio | 59.04% | 55.53% | | Return on Average Total Assets | 0.93% | 1.02% | | Return on Average Total Stockholders' Equity | 9.19% | 8.58% | | Total Assets | $25,042,720 | $24,992,410 | | Total Deposits | $22,270,430 | $21,816,146 | | Total Stockholders' Equity | $2,285,149 | $2,656,912 | | Common Equity Tier 1 Capital Ratio | 12.27% | 12.24% | - Non-GAAP measures like Return on Average Tangible Assets (**0.97%** in 2022 vs **1.07%** in 2021) and Return on Average Tangible Stockholders' Equity (**15.08%** in 2022 vs **13.51%** in 2021) are provided for evaluating financial performance and capital adequacy[244](index=244&type=chunk)[248](index=248&type=chunk) [Financial Highlights](index=67&type=section&id=Financial%20Highlights) Net income remained flat at **$57.7 million** for Q1 2022, with basic and diluted EPS increasing by **$0.01** to **$0.45**. This was influenced by a negative provision for credit losses, increased net interest income, but offset by higher noninterest expense and lower noninterest income. Asset quality improved, and the company maintained strong capital and liquidity positions - Net income was **$57.7 million** for Q1 2022, approximately flat compared to Q1 2021, with basic and diluted EPS increasing by **$0.01** to **$0.45**[250](index=250&type=chunk) - Net interest income increased by **$4.7 million** (**4%**) to **$133.9 million**, while noninterest income decreased by **$2.5 million** (**6%**) and noninterest expense increased by **$7.7 million** (**8%**)[250](index=250&type=chunk)[253](index=253&type=chunk)[255](index=255&type=chunk)[256](index=256&type=chunk) - A negative provision for credit losses of **$5.7 million** was recorded in Q1 2022, compared to **nil** in Q1 2021, due to improved credit quality and economic outlook[250](index=250&type=chunk)[254](index=254&type=chunk) - Total loans and leases decreased by **$70.3 million** (**1%**) to **$12.9 billion**, primarily due to a decrease in PPP loans and construction loans, partially offset by increases in commercial real estate and residential mortgage loans[259](index=259&type=chunk) - Total stockholders' equity decreased by **$371.8 million** (**14%**) to **$2.3 billion**, mainly due to a net unrealized loss in investment securities of **$394.6 million**, net of tax[264](index=264&type=chunk) [Analysis of Results of Operations](index=71&type=section&id=Analysis%20of%20Results%20of%20Operations) The analysis of operations reveals a **4%** increase in net interest income to **$134.8 million** (taxable-equivalent basis) for Q1 2022, despite a **13 basis points** decrease in net interest margin. This was driven by higher investment securities balances and lower funding costs, partially offset by lower loan balances and yields. A negative provision for credit losses was recorded, while noninterest income decreased and noninterest expense increased [Net Interest Income](index=71&type=section&id=Net%20Interest%20Income) Net interest income, on a fully taxable-equivalent basis, increased by **$5.2 million** (**4%**) to **$134.8 million** for Q1 2022, despite a **13 basis points** decrease in net interest margin to **2.42%**. This growth was primarily due to higher average balances in investment securities and lower borrowing/deposit funding costs, partially offset by lower average loan balances and yields. PPP loan fees contributed **$3.2 million** to net interest income in Q1 2022 - Net interest income (taxable-equivalent basis) increased by **$5.2 million** (**4%**) to **$134.8 million** for Q1 2022[270](index=270&type=chunk) - Net interest margin decreased by **13 basis points** to **2.42%** for Q1 2022[270](index=270&type=chunk) - The increase in net interest income was primarily due to higher average balances in investment securities (**$8.4 billion**, **+35%** YoY) and lower borrowing/deposit funding costs, partially offset by lower average loan balances (**$12.8 billion**, **-3%** YoY) and yields[270](index=270&type=chunk)[271](index=271&type=chunk)[272](index=272&type=chunk) - PPP loan fees contributed **$3.2 million** to net interest income in Q1 2022, down from **$5.9 million** in Q1 2021[270](index=270&type=chunk) - The prime rate increased by **25 basis points** to **3.50%** in March 2022, and the Federal Reserve expects further increases in the federal funds rate[274](index=274&type=chunk) [Provision for Credit Losses](index=75&type=section&id=Provision%20for%20Credit%20Losses) A negative provision for credit losses of **$5.7 million** was recorded for Q1 2022, compared to **nil** in Q1 2021. This was driven by the release of the COVID-19 overlay in the residential portfolio, improved credit quality, and a moderately better economic outlook. Net charge-offs decreased to **$2.6 million**, and the ACL decreased to **$150.3 million** (**1.17%** of total loans and leases) - A negative provision for credit losses of **$5.7 million** was recorded for Q1 2022, compared to **nil** in Q1 2021[275](index=275&type=chunk) - This decrease was primarily due to the release of the COVID-19 overlay in the residential portfolio, continued improvement in credit quality, and a moderate improvement in the economic outlook[275](index=275&type=chunk) - Net charge-offs of loans and leases were **$2.6 million** (**0.08%** annualized) for Q1 2022, down from **$4.6 million** (**0.14%** annualized) in Q1 2021[275](index=275&type=chunk) - The ACL was **$150.3 million** (**1.17%** of total loans and leases) as of March 31, 2022, a decrease from **$157.3 million** (**1.21%**) at December 31, 2021[275](index=275&type=chunk) [Noninterest Income](index=75&type=section&id=Noninterest%20Income) Total noninterest income decreased by **$2.5 million** (**6%**) to **$41.4 million** for Q1 2022. This was mainly due to a **$2.8 million** decrease in Bank-owned life insurance (BOLI) income and a **$2.0 million** decrease in other noninterest income, partially offset by increases in service charges on deposit accounts, other service charges and fees, and trust and investment services income | Noninterest Income (in thousands) | 3 Months Ended March 31, 2022 | 3 Months Ended March 31, 2021 | Dollar Change | Percent Change | | :-------------------------------- | :---------------------------- | :---------------------------- | :------------ | :------------- | | Service Charges on Deposit Accounts | $7,501 | $6,718 | $783 | 12% | | Credit and Debit Card Fees | $14,850 | $14,551 | $299 | 2% | | Other Service Charges and Fees | $9,654 | $8,846 | $808 | 9% | | Trust and Investment Services Income | $8,883 | $8,492 | $391 | 5% | | Bank-Owned Life Insurance | $(417) | $2,389 | $(2,806) | n/m | | Other | $909 | $2,872 | $(1,963) | (68)% | | Total Noninterest Income | $41,380 | $43,868 | $(2,488) | (6)% | - The decrease in BOLI income was due to market volatility leading to mark-to-market losses[281](index=281&type=chunk) - Other noninterest income decreased primarily due to increased net losses on derivative contracts, decreased gains on residential loan sales, and lower net mortgage servicing rights income[282](index=282&type=chunk) [Noninterest Expense](index=77&type=section&id=Noninterest%20Expense) Total noninterest expense increased by **$7.7 million** (**8%**) to **$104.0 million** for Q1 2022. This was primarily driven by a **$4.3 million** increase in salaries and employee benefits, a **$2.0 million** increase in card rewards program expense, and increases in equipment, advertising, and occupancy expenses | Noninterest Expense (in thousands) | 3 Months Ended March 31, 2022 | 3 Months Ended March 31, 2021 | Dollar Change | Percentage Change | | :--------------------------------- | :---------------------------- | :---------------------------- | :------------ | :---------------- | | Salaries and Employee Benefits | $48,226 | $43,936 | $4,290 | 10% | | Contracted Services and Professional Fees | $17,147 | $17,188 | $(41) | 0% | | Occupancy | $7,410 | $7,170 | $240 | 3% | | Equipment | $5,977 | $5,491 | $486 | 9% | | Regulatory Assessment and Fees | $2,224 | $2,034 | $190 | 9% | | Advertising and Marketing | $2,028 | $1,591 | $437 | 27% | | Card Rewards Program | $6,883 | $4,835 | $2,048 | 42% | | Other | $14,147 | $14,061 | $86 | 1% | | Total Noninterest Expense | $104,042 | $96,306 | $7,736 | 8% | - The increase in salaries and employee benefits was primarily due to a **$2.5 million** decrease in deferred loan origination costs, a **$2.0 million** increase in incentive compensation, and a **$1.3 million** increase in base salaries[284](index=284&type=chunk) - Card rewards program expense increased by **$2.0 million** (**42%**) due to higher redemptions[289](index=289&type=chunk) [Provision for Income Taxes](index=79&type=section&id=Provision%20for%20Income%20Taxes) The provision for income taxes increased slightly to **$19.2 million** for Q1 2022, with an effective tax rate of **25.00%**, up from **24.80%** in Q1 2021. This increase in the effective tax rate was partially due to nondeductible BOLI losses | Metric (in thousands) | 3 Months Ended March 31, 2022 | 3 Months Ended March 31, 2021 | | :-------------------- | :---------------------------- | :---------------------------- | | Provision for Income Taxes | $19,238 | $19,027 | | Effective Tax Rate | 25.00% | 24.80% | - The increase in the effective tax rate was partially due to nondeductible BOLI losses recognized during the period[290](index=290&type=chunk) [Analysis of Business Segments](index=79&type=section&id=Analysis%20of%20Business%20Segments) The company's three business segments (Retail Banking, Commercial Banking, and Treasury and Other) showed varied performance. Retail Banking's net income decreased by **13%**, Commercial Banking's net income decreased by **12%**, while Treasury and Other's net loss significantly decreased by **84%** due to increased net interest income and decreased provision for credit losses | Segment (in thousands) | Net Income (Loss) 3 Months Ended March 31, 2022 | Net Income (Loss) 3 Months Ended March 31, 2021 | | :--------------------- | :---------------------------------------------- | :---------------------------------------------- | | Retail Banking | $36,834 | $42,484 | | Commercial Banking | $22,527 | $25,515 | | Treasury and Other | $(1,642) | $(10,306) | | Total | $57,719 | $57,693 | - PPP loan balances were reclassified from Retail Banking to Commercial Banking in Q2 2021, impacting segment financial information[292](index=292&type=chunk) [Retail Banking](index=79&type=section&id=Retail%20Banking) Net income for the Retail Banking segment decreased by **$5.7 million** (**13%**) to **$36.8 million** for Q1 2022, primarily due to a **$7.3 million** increase in noninterest expense, partially offset by a **$2.0 million** decrease in the provision for income taxes - Net income for Retail Banking decreased by **$5.7 million** (**13%**) to **$36.8 million** in Q1 2022[294](index=294&type=chunk) - The decrease was mainly due to a **$7.3 million** increase in noninterest expense, partially offset by a **$2.0 million** decrease in the provision for income taxes[294](index=294&type=chunk) [Commercial Banking](index=81&type=section&id=Commercial%20Banking) Net income for the Commercial Banking segment decreased by **$3.0 million** (**12%**) to **$22.5 million** for Q1 2022. This was mainly due to a **$4.0 million** increase in noninterest expense and a **$3.2 million** decrease in net interest income, partially offset by a **$2.6 million** increase in noninterest income - Net income for Commercial Banking decreased by **$3.0 million** (**12%**) to **$22.5 million** in Q1 2022[298](index=298&type=chunk) - Key drivers were a **$4.0 million** increase in noninterest expense and a **$3.2 million** decrease in net interest income (due to lower PPP loan fees), partially offset by a **$2.6 million** increase in noninterest income[298](index=298&type=chunk) [Treasury and Other](index=81&type=section&id=Treasury%20and%20Other) The Treasury and Other segment's net loss decreased significantly by **$8.7 million** (**84%**) to **$1.6 million** for Q1 2022. This improvement was primarily due to an **$8.3 million** increase in net interest income and a **$4.9 million** decrease in the provision for credit losses, partially offset by a **$4.8 million** decrease in noninterest income - Net loss for Treasury and Other decreased by **$8.7 million** (**84%**) to **$1.6 million** in Q1 2022[301](index=301&type=chunk) - The improvement was driven by an **$8.3 million** increase in net interest income (higher investment securities balances) and a **$4.9 million** decrease in the provision for credit losses (lower reserve for unfunded commitments)[301](index=301&type=chunk) - Offsetting factors included a **$4.8 million** decrease in noninterest income (lower BOLI income and higher derivative losses) and a **$3.3 million** decrease in the benefit for income taxes[301](index=301&type=chunk) [Analysis of Financial Condition](index=81&type=section&id=Analysis%20of%20Financial%20Condition) The company maintains strong liquidity and capital, with core deposits forming a stable funding base. Total loans and leases decreased slightly, driven by PPP loan payoffs, while investment securities saw a fair value decrease due to rising interest rates. Credit quality improved, leading to a lower ACL. Total deposits increased, but stockholders' equity decreased due to unrealized losses on investment securities [Liquidity and Capital Resources](index=81&type=section&id=Liquidity%20and%20Capital%20Resources) The company actively manages liquidity to meet financial obligations, maintaining immediate liquid resources in cash and cash equivalents (**$1.6 billion** at March 31, 2022). Investment securities (**$8.1 billion**) and borrowing capacity from FHLB (**$1.7 billion**) and FRB (**$1.3 billion**) provide additional liquidity. Core deposits, representing **97%** of total deposits, are a stable funding source - Cash and cash equivalents were **$1.6 billion** as of March 31, 2022, providing immediate liquid resources[306](index=306&type=chunk) - Available-for-sale investment securities totaled **$8.1 billion**, with a weighted average life of approximately **5.8 years**, serving as a significant liquidity source[306](index=306&type=chunk) - The company has borrowing capacity of **$1.7 billion** from the FHLB and **$1.3 billion** from the FRB as of March 31, 2022[306](index=306&type=chunk) - Core deposits, defined as all deposits excluding time deposits exceeding **$250,000**, totaled **$21.5 billion** (**97%** of total deposits) as of March 31, 2022, providing a stable and low-cost funding base[307](index=307&type=chunk) [Potential Demands on Liquidity from Off-Balance Sheet Arrangements](index=83&type=section&id=Potential%20Demands%20on%20Liquidity%20from%20Off-Balance%20Sheet%20Arrangements) The company has off-balance sheet arrangements, including interests in unconsolidated variable interest entities (VIEs) primarily for low-income housing tax credits, and guarantees related to residential mortgage loan sales. While repurchase requests for sold loans have been limited, the company manages this risk through underwriting and servicing practices. Financial instruments with off-balance sheet risk include commitments to extend credit and letters of credit [Variable Interest Entities](index=83&type=section&id=Variable%20Interest%20Entities) The company holds interests in several unconsolidated variable interest entities (VIEs), primarily low-income housing tax credit investments. The company is not the primary beneficiary and therefore does not consolidate these VIEs. Unfunded commitments to these investments have not materially changed - The company holds interests in unconsolidated VIEs, mainly low-income housing tax credit investments[311](index=311&type=chunk) - The company is not the primary beneficiary of these VIEs and does not consolidate them[311](index=311&type=chunk) [Guarantees](index=85&type=section&id=Guarantees) The company sells residential mortgage loans to Fannie Mae or Freddie Mac, which may require repurchase under certain conditions if underwriting or documentation standards are not met. As of March 31, 2022, the unpaid principal balance of serviced loans sold was **$1.6 billion**. No material losses are anticipated from these transactions, and no repurchase requests related to servicing activities were pending - The company sells residential mortgage loans to Fannie Mae or Freddie Mac, with potential repurchase obligations if representations and warranties are breached[314](index=314&type=chunk) - The unpaid principal balance of residential mortgage loans sold was **$1.6 billion** as of March 31, 2022[314](index=314&type=chunk) - Management believes the exposure from repurchase requests is not material due to historical trends and strong underwriting/servicing practices[316](index=316&type=chunk) [Financial Instruments with Off-Balance Sheet Risk](index=85&type=section&id=Financial%20Instruments%20with%20Off-Balance%20Sheet%20Risk) The company utilizes financial instruments with off-balance sheet risk, including commitments to extend credit and standby/commercial letters of credit, to meet customer financing needs. These instruments are not reflected in the consolidated financial statements but represent potential credit risk managed through credit policies and monitoring - Off-balance sheet financial instruments include commitments to extend credit and standby/commercial letters of credit[317](index=317&type=chunk) - These instruments are not reflected in the consolidated financial statements and are managed using the same credit policies as loans[317](index=317&type=chunk)[318](index=318&type=chunk) [Investment Securities](index=87&type=section&id=Investment%20Securities) The fair value of the available-for-sale investment securities portfolio decreased by **$365.6 million** (**4%**) to **$8.1 billion** at March 31, 2022, primarily due to higher market interest rates leading to increased gross unrealized losses (**$671.4 million**). The portfolio is mainly composed of collateralized mortgage obligations and mortgage-backed securities, with no credit losses recorded | Investment Category (in thousands) | March 31, 2022 | December 31, 2021 | | :--------------------------------- | :------------- | :---------------- | | U.S. Treasury and government agency debt securities | $199,544 | $192,563 | | Mortgage-backed securities | $3,068,233 | $3,385,470 | | Collateralized mortgage obligations | $4,519,488 | $4,700,567 | | Collateralized loan obligations | $220,884 | $105,247 | | Debt securities issued by states and political subdivisions | $54,235 | $44,185 | | Total Available-for-Sale Securities | $8,062,384 | $8,428,032 | - The fair value of the investment securities portfolio decreased by **$365.6 million** (**4%**) to **$8.1 billion** as of March 31, 2022[322](index=322&type=chunk) - Gross unrealized losses increased significantly to **$671.4 million** at March 31, 2022, from **$157.3 million** at December 31, 2021, primarily due to higher market interest rates[326](index=326&type=chunk) - No credit losses related to the investment securities portfolio were recorded for the three months ended March 31, 2022[327](index=327&type=chunk) [Loans and Leases](index=89&type=section&id=Loans%20and%20Leases) Total loans and leases decreased by **$70.3 million** (**1%**) to **$12.9 billion** at March 31, 2022. This was primarily due to a **$110.3 million** decrease in PPP loans and a **$105.7 million** decrease in construction loans, partially offset by increases in commercial real estate (**$120.4 million**) and residential mortgage loans (**$112.0 million**). The portfolio is concentrated in Hawaii, with a significant portion having adjustable interest rates | Loan Category (in thousands) | March 31, 2022 | December 31, 2021 | | :--------------------------- | :------------- | :---------------- | | Commercial and Industrial (excl. PPP) | $1,817,346 | $1,870,657 | | Paycheck Protection Program loans | $106,188 | $216,442 | | Commercial Real Estate | $3,759,980 | $3,639,623 | | Construction | $708,300 | $813,969 | | Residential Mortgage | $4,153,824 | $4,083,367 | | Home Equity Line | $918,101 | $876,608 | | Consumer | $1,204,834 | $1,229,939 | | Lease Financing | $223,170 | $231,394 | | Total Loans and Leases | $12,891,743 | $12,961,999 | - The decrease in total loans and leases was primarily due to a **$110.3 million** decrease in PPP loans and a **$105.7 million** decrease in construction loans[331](index=331&type=chunk)[332](index=332&type=chunk)[335](index=335&type=chunk) - Commercial real estate loans increased by **$120.4 million** (**3%**), and residential real estate loans increased by **$112.0 million** (**2%**)[334](index=334&type=chunk)[336](index=336&type=chunk) | Loan Rate Type (in thousands) | Total Loans and Leases (Mar 31, 2022) | % of Total | | :---------------------------- | :------------------------------------ | :--------- | | Adjustable Interest Rates | $6,244,065 | 48% | | Hybrid Interest Rates | $981,873 | 8% | | Fixed Interest Rates | $5,665,805 | 44% | | Total | $12,891,743 | 100% | - Lending activities are primarily concentrated in Hawaii, with additional activities on the U.S. mainland, Guam, and Saipan[344](index=344&type=chunk) [Credit Quality](index=95&type=section&id=Credit%20Quality) Credit quality improved in Q1 2022, leading to a decrease in the Allowance for Credit Losses (ACL) to **$150.3 million** (**1.17%** of total loans and leases). Non-performing assets (NPAs) increased slightly to **$8.6 million**, mainly due to residential mortgage non-accrual loans. Loans past due **90 days** or more and still accruing interest decreased. Impaired loans also decreased, and PPP loans outstanding significantly declined [Non-Performing Assets and Loans and Leases Past Due 90 Days or More and Still Accruing Interest](index=95&type=section&id=Non-Performing%20Assets%20and%20Loans%20and%20Leases%20Past%20Due%2090%20Days%20or%20More%20and%20Still%20Accruing%20Interest) Total Non-Performing Assets (NPAs) increased by **$1.3 million** (**19%**) to **$8.6 million** at March 31, 2022, primarily due to an increase in residential mortgage non-accrual loans. Loans and leases past due **90 days** or more and still accruing interest decreased by **$2.8 million** (**38%**) to **$4.4 million** | Non-Performing Assets (in thousands) | March 31, 2022 | December 31, 2021 | | :----------------------------------- | :------------- | :---------------- | | Total Non-Accrual Loans and Leases | $8,601 | $7,082 | | Other Real Estate Owned (OREO) | $0 | $175 | | Total Non-Performing Assets | $8,601 | $7,257 | - The ratio of NPAs to total loans and leases and OREO was **0.07%** at March 31, 2022, up from **0.06%** at December 31, 2021[354](index=354&type=chunk) | Accruing Loans Past Due 90+ Days (in thousands) | March 31, 2022 | December 31, 2021 | | :---------------------------------------------- | :------------- | :---------------- | | Total Accruing Loans and Leases Past Due 90 Days or More | $4,444 | $7,208 | [Impaired Loans](index=96&type=section&id=Impaired%20Loans) Total impaired loans decreased slightly to **$41.4 million** at March 31, 202

Financial Data and Key Metrics Changes - The company reported net income of $57.7 million, earnings per share of $0.45, and a return on average tangible common equity of 15.08% [7] - Net interest income decreased by $3.5 million from the prior quarter to $133.9 million, primarily due to a $6.8 million drop in PPP loan fees and interest [13] - The net interest margin increased by 4 basis points to 2.42% [13] - The common equity Tier 1 capital increased to 12.27% [7] Business Line Data and Key Metrics Changes - Period-end loans and leases were $12.9 billion, a decrease of $70 million from the end of Q4, with total loans increasing by about $40 million, or 1.3% on an annualized basis, excluding PPP loans [9] - Deposits increased by 2.1% or $454 million to $22.3 billion at quarter-end, driven by consumer and commercial loan deposits [12] - Non-interest income was $41.4 million, essentially flat compared to the prior quarter [15] Market Data and Key Metrics Changes - The company noted strong visitor arrivals expected in Hawaii this summer, aided by the return of Japanese visitors [5] - The loan pipeline was reported as strong, with good origination activity and growth expected in the portfolio [11] Company Strategy and Development Direction - The company is positioned to benefit from higher interest rates, with expectations of a few basis points increase in net interest margin in Q2 due to the March rate hike [14] - The outlook for 2022 remains unchanged, with year-over-year loan growth expected in the mid-to-high single-digit range [11] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the improving Hawaii economy as COVID-related restrictions ease, predicting strong visitor numbers [5] - The bank is prepared for various scenarios regarding deposit levels and is focused on maintaining flexibility to fund loan demand [12][26] Other Important Information - The allowance for credit loss decreased by $7 million to $150.3 million, equating to 1.17% of all loans [18] - The company has returned 82% of its needs to shareholders since going public, with a focus on maintaining capital for loan growth before pursuing share repurchases [46] Q&A Session Summary Question: Commentary on loan growth and competition - Management indicated that mid-to-high single-digit loan growth is expected, driven by robust mainland growth, despite some unanticipated repayments and increased competition [22][23] Question: Update on dealer finance and balances - Dealer flooring balances are down over $600 million from pre-pandemic levels, with demand increasing but inventory challenges persisting [25] Question: Outlook for deposit growth amid Fed actions - Management is prepared for various scenarios regarding deposit balances and expects deposit betas to behave similarly to previous cycles [26] Question: C&I loan growth compared to other regional banks - Management noted that line usage has not increased yet due to strong liquidity among customers, impacting C&I loan growth [28] Question: Outlook for residential mortgage and home equity - Growth is expected primarily in commercial real estate, with residential and home equity slowing due to rising mortgage rates, but new home buying remains strong [30] Question: Non-interest income and BOLI impacts - Management expects service charges and transaction-based fees to trend higher as economic activity picks up, with BOLI income anticipated to stabilize around $3 million [39][57] Question: Credit quality and competitive dynamics - Management remains disciplined in credit underwriting, focusing on well-structured opportunities, while being cautious about external economic factors [44] Question: Update on core conversion - The core conversion is on track for the upcoming quarter, with customer notices already sent out [47] Question: Comments on unsecured consumer book - The company maintains a conservative approach to the unsecured consumer book, with low charge-offs and a disciplined underwriting strategy [79]