[First Quarter 2024 Overview](index=1&type=section&id=First%20Quarter%202024%20Overview) This section provides an executive summary of the company's first quarter 2024 financial results and key announcements [Financial Highlights](index=1&type=section&id=Financial%20Highlights) First Hawaiian reported a solid first quarter for 2024, characterized by strong earnings, excellent credit quality, and growing capital levels, with net income increasing to $54.2 million and net interest margin expanding to 2.91% - Chairman, President, and CEO Bob Harrison highlighted **strong earnings**, **excellent credit quality**, and **growing capital levels** for the first quarter of 2024[2](index=2&type=chunk) Q1 2024 Key Financial Metrics | Metric | Q1 2024 | Q4 2023 | Change (QoQ) | | :--- | :--- | :--- | :--- | | Net Income | $54.2 million | $47.5 million | +$6.7 million | | Diluted EPS | $0.42 | $0.37 | +$0.05 | | Net Interest Margin | 2.91% | 2.81% | +10 bps | | Total Assets | $24.3 billion | $24.9 billion | -$0.6 billion | | Gross Loans and Leases | $14.3 billion | $14.4 billion | -$33.3 million | | Total Deposits | $20.7 billion | $21.3 billion | -$663.2 million | | Provision for Credit Losses | $6.3 million | $5.3 million | +$1.0 million | - Noninterest expense decreased by **$13.5 million** quarter-over-quarter to **$128.8 million**, leading to an improved efficiency ratio of **62.2%** from 67.3% in the prior quarter[8](index=8&type=chunk) [Dividend Declaration](index=1&type=section&id=Dividend%20Declaration) The Board of Directors approved a quarterly cash dividend of $0.26 per share, consistent with the previous quarter, payable on May 31, 2024 - A quarterly cash dividend of **$0.26 per share** was declared on April 24, 2024[2](index=2&type=chunk) - The dividend is payable on May 31, 2024, to stockholders of record at the close of business on May 20, 2024[2](index=2&type=chunk) [Detailed Financial Analysis](index=3&type=section&id=Detailed%20Financial%20Analysis) This section provides an in-depth analysis of the company's consolidated financial statements, net interest income, loan and deposit portfolios, asset quality, and capital adequacy [Consolidated Financial Statements](index=7&type=section&id=Consolidated%20Financial%20Statements) The company's income statement shows a quarter-over-quarter increase in net income to $54.2 million, while the balance sheet reflects a sequential decrease in total assets and deposits [Consolidated Statements of Income](index=7&type=section&id=Consolidated%20Statements%20of%20Income) Consolidated Income Statement Highlights (in thousands) | Line Item | Q1 2024 | Q4 2023 | Q1 2023 | | :--- | :--- | :--- | :--- | | Net Interest Income | $154,427 | $151,793 | $167,247 | | Provision for Credit Losses | $6,300 | $5,330 | $8,800 | | Noninterest Income | $51,371 | $58,347 | $49,023 | | Noninterest Expense | $128,813 | $142,307 | $118,567 | | **Net Income** | **$54,220** | **$47,502** | **$66,818** | | **Diluted EPS** | **$0.42** | **$0.37** | **$0.52** | [Consolidated Balance Sheets](index=8&type=section&id=Consolidated%20Balance%20Sheets) Consolidated Balance Sheet Highlights (in thousands) | Line Item | Mar 31, 2024 | Dec 31, 2023 | Mar 31, 2023 | | :--- | :--- | :--- | :--- | | Total Assets | $24,279,186 | $24,926,474 | $24,884,207 | | Net Loans and Leases | $14,160,372 | $14,196,964 | $14,074,150 | | Total Deposits | $20,669,481 | $21,332,657 | $21,281,500 | | Total Stockholders' Equity | $2,513,761 | $2,486,066 | $2,329,012 | [Net Interest Income Analysis](index=9&type=section&id=Net%20Interest%20Income%20Analysis) Net interest income (NII) rose by $2.6 million quarter-over-quarter to $154.4 million, with the net interest margin (NIM) expanding 10 basis points to 2.91%, driven by higher yields on earning assets [Average Balances and Interest Rates](index=9&type=section&id=Average%20Balances%20and%20Interest%20Rates) Key Interest Rate Metrics | Metric | Q1 2024 | Q4 2023 | Q1 2023 | | :--- | :--- | :--- | :--- | | Net Interest Margin | 2.91% | 2.81% | 3.11% | | Interest Rate Spread | 1.98% | 1.90% | 2.52% | | Yield on Earning Assets | 4.61% | 4.44% | 3.97% | | Rate on Interest-Bearing Liabilities | 2.63% | 2.54% | 1.45% | [Analysis of Change in Net Interest Income](index=10&type=section&id=Analysis%20of%20Change%20in%20Net%20Interest%20Income) - Compared to Q4 2023, the **$2.7 million increase** in net interest income was driven by a **$4.0 million rise** in interest income, partially offset by a **$1.3 million increase** in interest expense[26](index=26&type=chunk) - Compared to Q1 2023, the **$12.8 million decrease** in net interest income was due to a significant **$44.2 million increase** in interest expense, which was not fully offset by the **$31.4 million increase** in interest income[27](index=27&type=chunk) [Loan and Deposit Portfolio](index=12&type=section&id=Loan%20and%20Deposit%20Portfolio) The total loan and lease portfolio decreased slightly by 0.2% quarter-over-quarter to $14.3 billion, while total deposits decreased by 3.1% to $20.7 billion [Loans and Leases Composition](index=12&type=section&id=Loans%20and%20Leases%20Composition) Loan Portfolio Breakdown (in thousands) | Loan Type | Mar 31, 2024 | Dec 31, 2023 | Change (QoQ) | | :--- | :--- | :--- | :--- | | Commercial and industrial | $2,189,875 | $2,165,349 | +$24,526 | | Commercial real estate | $4,301,300 | $4,340,243 | -$38,943 | | Construction | $972,517 | $900,292 | +$72,225 | | Total residential | $5,408,280 | $5,457,903 | -$49,623 | | Consumer | $1,054,227 | $1,109,901 | -$55,674 | | **Total Loans and Leases** | **$14,320,208** | **$14,353,497** | **-$33,289** | [Deposits Composition](index=13&type=section&id=Deposits%20Composition) Deposit Portfolio Breakdown (in thousands) | Deposit Type | Mar 31, 2024 | Dec 31, 2023 | Change (QoQ) | | :--- | :--- | :--- | :--- | | Demand (Noninterest-bearing) | $7,048,553 | $7,583,562 | -$535,009 | | Savings | $6,277,679 | $6,445,084 | -$167,405 | | Money Market | $4,059,204 | $3,847,853 | +$211,351 | | Time | $3,284,045 | $3,456,158 | -$172,113 | | **Total Deposits** | **$20,669,481** | **$21,332,657** | **-$663,176** | [Asset Quality and Credit Risk](index=14&type=section&id=Asset%20Quality%20and%20Credit%20Risk) Asset quality remained excellent and stable in the first quarter, with total non-performing assets at $18.0 million and the allowance for credit losses increasing to $159.8 million [Non-Performing Assets](index=14&type=section&id=Non-Performing%20Assets) Non-Performing Assets (in thousands) | Metric | Mar 31, 2024 | Dec 31, 2023 | | :--- | :--- | :--- | | Total Non-Accrual Loans and Leases | $18,017 | $18,595 | | Total Non-Performing Assets | $18,017 | $18,595 | | Accruing Loans Past Due 90+ Days | $3,620 | $3,496 | - Total non-performing assets as a percentage of total loans and other real estate owned remained stable at **0.13%** at both March 31, 2024, and December 31, 2023[10](index=10&type=chunk) [Allowance for Credit Losses](index=15&type=section&id=Allowance%20for%20Credit%20Losses) Allowance for Credit Losses Activity (in thousands) | Metric | Q1 2024 | Q4 2023 | | :--- | :--- | :--- | | Beginning Balance (ACL + Reserve) | $192,138 | $192,570 | | Net Loans and Leases Charged-Off | ($3,789) | ($5,762) | | Provision for Credit Losses | $6,300 | $5,330 | | **Ending Balance (ACL + Reserve)** | **$194,649** | **$192,138** | - The ratio of Allowance for Credit Losses to total loans outstanding increased to **1.12%** from 1.09% in the prior quarter[31](index=31&type=chunk) [Loan Portfolio Credit Quality Details](index=16&type=section&id=Loan%20Portfolio%20Credit%20Quality%20Details) - The vast majority of the commercial lending portfolio, totaling **$7.9 billion**, is categorized with a 'Pass' risk rating[32](index=32&type=chunk) - For residential and consumer lending, credit quality is strong, with the largest segments of the portfolio belonging to borrowers with FICO scores of **740 and greater**[33](index=33&type=chunk) [Capital Adequacy](index=3&type=section&id=Capital%20Adequacy) The company strengthened its capital position during the quarter, with all regulatory capital ratios showing improvement, including the Common Equity Tier 1 ratio increasing to 12.55% Regulatory Capital Ratios | Ratio | Mar 31, 2024 | Dec 31, 2023 | | :--- | :--- | :--- | | Common Equity Tier 1 Capital Ratio | 12.55% | 12.39% | | Tier 1 Capital Ratio | 12.55% | 12.39% | | Total Capital Ratio | 13.75% | 13.57% | | Tier 1 Leverage Ratio | 8.80% | 8.64% | - Total stockholders' equity increased by **$27.7 million** during the first quarter[11](index=11&type=chunk) - No shares were repurchased in the first quarter[11](index=11&type=chunk) [Non-GAAP Financial Measures Reconciliation](index=18&type=section&id=Non-GAAP%20Financial%20Measures%20Reconciliation) The company provides reconciliations for non-GAAP measures to their closest GAAP equivalents, with key non-GAAP metrics showing quarter-over-quarter improvement Key Non-GAAP Metrics | Metric | Mar 31, 2024 | Dec 31, 2023 | Mar 31, 2023 | | :--- | :--- | :--- | :--- | | Return on Average Tangible Stockholders' Equity | 14.53% | 13.66% | 20.78% | | Tangible Book Value per Share | $11.88 | $11.68 | $10.45 | | Tangible Stockholders' Equity to Tangible Assets | 6.52% | 6.23% | 5.58% | [Other Information](index=3&type=section&id=Other%20Information) This section includes the company profile, conference call details, and important disclosures regarding forward-looking statements and non-GAAP financial measures [Company Profile](index=3&type=section&id=Company%20Profile) First Hawaiian, Inc. (NASDAQ: FHB) is the holding company for First Hawaiian Bank, Hawaii's oldest and largest financial institution, providing a wide range of banking services - First Hawaiian Bank is Hawaii's oldest and largest financial institution, with branches throughout Hawaii, Guam, and Saipan[12](index=12&type=chunk) [Conference Call Information](index=3&type=section&id=Conference%20Call%20Information) The company will host a conference call and live webcast, including a slide presentation, to discuss its first-quarter 2024 financial results - A conference call to discuss results was scheduled for April 26, 2024, at **1:00 p.m. Eastern Time**[13](index=13&type=chunk) - A live webcast and slide presentation are available at **www.fhb.com/earnings**[14](index=14&type=chunk) [Forward-Looking Statements and Non-GAAP Measures Disclosure](index=4&type=section&id=Forward-Looking%20Statements%20and%20Non-GAAP%20Measures%20Disclosure) The report includes a standard safe harbor statement regarding forward-looking statements and explains the use of non-GAAP financial measures for evaluating performance - The press release contains forward-looking statements that are not guarantees of future performance and are subject to risks and uncertainties[15](index=15&type=chunk) - The company uses non-GAAP financial measures such as return on average tangible assets and tangible book value per share, which are reconciled to GAAP measures in Table 12[16](index=16&type=chunk)[17](index=17&type=chunk)

HONOLULU, April 26, 2024 (GLOBE NEWSWIRE) -- First Hawaiian, Inc. (NASDAQ:FHB), ("First Hawaiian" or the "Company") today reported financial results for its quarter ended March 31, 2024. "I'm pleased to report that we started 2024 with a solid first quarter," said Bob Harrison, Chairman, President, and CEO. "We had strong earnings, continued excellent credit quality and continued to grow our capital levels."  On April 24, 2024, the Company's Board of Directors declared a quarterly cash dividend of $0.26 per ...

The market expects First Hawaiian (FHB) to deliver a year-over-year decline in earnings on lower revenues when it reports results for the quarter ended March 2024. This widely-known consensus outlook is important in assessing the company's earnings picture, but a powerful factor that might influence its near-term stock price is how the actual results compare to these estimates.The earnings report, which is expected to be released on April 26, 2024, might help the stock move higher if these key numbers are b ...

HONOLULU, April 05, 2024 (GLOBE NEWSWIRE) -- First Hawaiian, Inc. (NASDAQ: FHB) announced today that it plans to release its first quarter 2024 financial results on Friday, April 26, 2024 before the market opens.   First Hawaiian will host a conference call to discuss the company’s results on the same day at 1:00 p.m. Eastern Time (7:00 a.m. Hawaii Time). To access the call by phone, participants will need to click on the following registration link:   https://register.vevent.com/register/BIb74728f7f2a14341 ...

HONOLULU, April 05, 2024 (GLOBE NEWSWIRE) -- First Hawaiian, Inc. (NASDAQ: FHB) announced today that it plans to release its first quarter 2024 financial results on Friday, April 26, 2024 before the market opens. First Hawaiian will host a conference call to discuss the company’s results on the same day at 1:00 p.m. Eastern Time (7:00 a.m. Hawaii Time). To access the call by phone, participants will need to click on the following registration link: https://register.vevent.com/register/BIb74728f7f2a14341b302 ...

Employee and Diversity Statistics - As of December 31, 2023, the company had over 2,000 employees with an average tenure of 11.5 years[20] - The board of directors includes three women (33%) and six ethnically diverse individuals (67%)[25] - 63% of employees are women, 54% of management positions are held by women, and 86% of the workforce is ethnically diverse[25] Regulatory Environment - The company is subject to extensive regulation under federal and state banking laws, impacting growth potential and financial performance[32] - The company must obtain prior approval from the Federal Reserve for acquisitions that would result in owning 5% or more of any class of voting shares[46] - The company is primarily regulated by the FDIC and the Hawaii Department of Financial Institutions[37] - The company’s ability to pay dividends is subject to regulatory limitations and the financial condition of the bank[48] - The Federal Reserve requires bank holding companies to maintain sufficient net income to fund dividends, ensuring alignment with capital needs and asset quality[50] - The Bank is prohibited from paying dividends if it would become undercapitalized or if it is already undercapitalized, as per the Federal Deposit Insurance Act[63] - The Company is subject to regulatory capital requirements under Basel III and the Dodd-Frank Act, which impose specific capital measures and ratios[56] - The FDIA mandates that institutions categorized as undercapitalized must submit a capital restoration plan to their federal bank regulator[67] - Transactions with affiliates must be conducted on terms at least as favorable as those with unaffiliated third parties, as regulated by federal banking law[52] Financial Performance and Capital Adequacy - As of December 31, 2023, the Bank's CET1 capital ratio was 12.30%, total capital ratio was 13.48%, and Tier 1 leverage ratio was 8.57%, indicating strong capital adequacy[65] - The Company met all capital ratio requirements to be classified as well-capitalized, with a CET1 capital ratio of 12.39% and a total capital ratio of 13.57%[66] - The minimum capital ratios required under the Capital Rules include 4.5% CET1 to risk-weighted assets and 10.5% total capital to risk-weighted assets[58] - The capital conservation buffer of 2.5% is required on top of the minimum risk-weighted asset ratios, effectively raising the CET1 requirement to 7%[58] - The Bank's ability to accept brokered deposits is contingent upon its capital status, requiring it to be well-capitalized or adequately capitalized with a waiver from the FDIC[68] Income and Expense Analysis - Total noninterest income increased by $21.3 million or 12% to $200.8 million for the year ended December 31, 2023, compared to $179.5 million in 2022[296] - Service charges on deposit accounts rose to $29.6 million for the year ended December 31, 2023, an increase of $0.8 million or 3% compared to 2022[297] - Credit and debit card fees decreased by $2.1 million or 3% to $63.9 million for the year ended December 31, 2023, primarily due to increased network association dues[298] - Trust and investment services income increased by $2.0 million or 5% to $38.4 million for the year ended December 31, 2023, driven by higher investment management and business cash management fees[300] - Bank-owned life insurance (BOLI) income surged to $15.3 million for the year ended December 31, 2023, an increase of $14.1 million compared to 2022[301] - Total noninterest expense for the year ended December 31, 2023, was $501.1 million, an increase of $60.7 million or 14% compared to 2022[305] - Salaries and employee benefits expense was $225.8 million for the year ended December 31, 2023, an increase of $26.6 million or 13% compared to 2022, driven by a $12.7 million increase in base salaries[306] - Regulatory assessment and fees were $32.1 million for the year ended December 31, 2023, an increase of $22.5 million compared to 2022, primarily due to increases in FDIC insurance assessments[310] Credit Losses and Asset Quality - Provision for credit losses was $26.6 million for the year ended December 31, 2023, compared to $1.4 million in 2022, primarily due to increases in consumer loans and commercial real estate loans[293] - The allowance for credit losses (ACL) was $156.5 million as of December 31, 2023, representing 1.09% of total outstanding loans and leases, up from 1.02% in 2022[293] - Net charge-offs were $12.2 million for the year ended December 31, 2023, representing 0.09% of total average loans and leases[293] - Total Non-Performing Assets (NPAs) increased to $18.6 million as of December 31, 2023, a rise of $6.6 million or 55% from $11.996 million in 2022[382] - The ratio of NPAs to total loans and leases and Other Real Estate Owned (OREO) was 0.13% as of December 31, 2023, up from 0.09% in 2022[382] - The Allowance for Credit Losses (ACL) increased to $192.1 million at the end of 2023, up from $177.7 million in 2022[390] Deposits and Liquidity - Total deposits decreased by $356.4 million or 2% to $21.3 billion as of December 31, 2023, primarily due to a $951.1 million decrease in non-public demand deposits[404] - Public deposits amounted to $1.8 billion as of December 31, 2023, a decrease of $129.2 million or 7% compared to 2022[403] - The amount of deposits exceeding FDIC insurance limits was estimated at $10.8 billion or 51% of total deposits as of December 31, 2023[405] - The company took $500 million in FHLB advances in March 2023 to enhance liquidity amid banking sector volatility[334] Investment Securities and Loans - The carrying value of the investment securities portfolio was $6.3 billion as of December 31, 2023, a decrease of $1.2 billion or 16% compared to December 31, 2022[350] - Total loans and leases were $14.4 billion as of December 31, 2023, an increase of $261.5 million or 2% from December 31, 2022[362] - Commercial real estate loans increased by $207.9 million or 5% to $4.3 billion as of December 31, 2023, primarily due to completed construction loans converted to commercial real estate loans[364] - The total available-for-sale investment securities amounted to $2.6 billion as of December 31, 2023, with a weighted average yield of 2.04%[350] - The company held $3.5 billion in collateralized mortgage obligations issued by Ginnie Mae, Fannie Mae, and Freddie Mac as of December 31, 2023[352] Future Outlook and Strategic Initiatives - The company expects to meet its cash obligations through dividends from the Bank and other liquidity sources, including selling residential real estate loans and issuing long-term debt[337] - The company believes its existing cash and cash equivalents will be sufficient to meet cash requirements for the next twelve months and beyond[338] - The company has off-balance sheet arrangements that may affect its financial condition, including variable interest entities and guarantees[339] - The company will continue to monitor factors influencing expected credit losses, including economic uncertainty and inflation[394]

FORWARD-LOOKING STATEMENTS 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", "expect", "continue", "will", "anticipate", "seek", ...

Financial Data and Key Metrics Changes - The company reported a return on average tangible assets of 0.81% and a return on average tangible common equity of 13.66% [68] - The CET1 ratio was 12.39% and the total capital ratio was 13.57% [68] - Total deposit balances declined by $179 million, primarily due to a $584 million decrease in public deposits [72] - The total cost of deposits increased by 16 basis points to 156 basis points [72] - Net interest income decreased by $5.4 million to $151.8 million, with a net interest margin decline of 5 basis points to 2.81% [79] Business Line Data and Key Metrics Changes - Commercial criticized assets increased to 1.2% of total loans and leases, while classified assets fell to 19 basis points [75] - Period end loans and leases were $14.4 billion, with growth in C&I loans driven by dealer flooring [77] - Non-interest income was $58.3 million, an increase of $12.3 million from the prior quarter, influenced by non-recurring items [73] Market Data and Key Metrics Changes - The unemployment rate in Hawaii remained low at 2.9%, compared to the national rate of 3.7% [64] - Visitor arrivals in Hawaii were 5% higher than the previous year, with significant recovery in the Maui visitor industry [65] - The median sales price for single-family homes on Oahu was approximately $1 million, down 5% from December 2022 [66] Company Strategy and Development Direction - The company is focused on enhancing its strategy across three pillars: data, technology, and people, with significant investments in AI and digital offerings [8][56] - The company plans to reduce high-cost deposit balances and improve net interest margin through strategic balance sheet actions [69][88] - The company aims to maintain strong capital levels while cautiously considering share repurchase opportunities in 2024 [42] Management's Comments on Operating Environment and Future Outlook - Management believes that net interest margin has bottomed out and expects improvements as higher-cost deposits are reduced [67][88] - The company anticipates low-single digit loan growth for 2024, facing headwinds from weak demand for residential loans [71] - Management expressed confidence in the credit quality of the portfolio, despite some modest deterioration observed [81] Other Important Information - The company sold $526 million of low-yielding investment securities at a loss of $40 million, intending to use the proceeds to reduce high-cost deposits [69] - The company expects non-interest income to stabilize around $49 million to $50 million per quarter in 2024 [73] - The bank's commercial real estate exposure remains well diversified and of high quality, with office exposures manageable at 5.2% of total loans [84] Q&A Session Summary Question: What is the outlook for net interest margin as the Fed starts to cut rates? - Management indicated that they expect net interest margin to continue to grind higher, supported by the dynamics of the balance sheet and the runoff of the securities portfolio [96] Question: Can you provide context on commercial and retail deposit rates during the rising rate cycle? - Management noted that they have defined deposit customer segments and expect to reduce deposit rates in line with market trends when rates start to fall [10] Question: What are the expectations for credit normalization over the next two years? - Management is closely monitoring credit quality, particularly in commercial real estate, and has not observed significant weakness in the portfolio [50][81]

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, 2023 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 ...

Part I Financial Information This section provides the company's interim consolidated financial statements and management's discussion and analysis of financial condition and results of operations [Item 1. Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements) This section presents the unaudited interim consolidated financial statements for First Hawaiian, Inc. as of June 30, 2023. It includes the Consolidated Statements of Income, Comprehensive Income, Balance Sheets, Stockholders' Equity, and Cash Flows, along with detailed Notes to the Financial Statements covering accounting policies, segment information, and specifics on financial instruments [Consolidated Statements of Income](index=4&type=section&id=Consolidated%20Statements%20of%20Income) This statement details the company's revenues, expenses, and net income for the second quarter and first half of 2023 compared to the prior year Consolidated Income Statement Highlights (Q2 & H1 2023 vs 2022) | Metric | Q2 2023 | Q2 2022 | YoY Change | H1 2023 | H1 2022 | YoY Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | **Net Interest Income** | $159.9M | $145.1M | +10.2% | $327.2M | $279.0M | +17.3% | | **Provision for Credit Losses** | $5.0M | $1.0M | +400% | $13.8M | ($4.7M) | N/A | | **Noninterest Income** | $47.3M | $44.1M | +7.3% | $96.4M | $85.5M | +12.7% | | **Noninterest Expense** | $120.9M | $109.2M | +10.7% | $239.4M | $213.2M | +12.3% | | **Net Income** | $62.4M | $59.4M | +5.1% | $129.3M | $117.1M | +10.4% | | **Diluted EPS** | $0.49 | $0.46 | +6.5% | $1.01 | $0.91 | +11.0% | [Consolidated Statements of Comprehensive Income (Loss)](index=5&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income%20(Loss)) This statement presents the total comprehensive income, including net income and other comprehensive income components, for the second quarter and first half of 2023 - Total comprehensive income for Q2 2023 was **$61.4 million**, slightly below the net income of **$62.4 million**, due to a minor net comprehensive loss of **$1.1 million** from changes in investment securities and derivative hedges[14](index=14&type=chunk) - For the six months ended June 30, 2023, total comprehensive income was **$155.8 million**, which was **$26.5 million** higher than net income. This was driven by a significant positive net change in investment securities values during the period, reversing some of the prior year's large unrealized losses[14](index=14&type=chunk) [Consolidated Balance Sheets](index=6&type=section&id=Consolidated%20Balance%20Sheets) This statement provides a snapshot of the company's assets, liabilities, and stockholders' equity as of June 30, 2023, compared to December 31, 2022 Balance Sheet Summary (as of June 30, 2023 vs. Dec 31, 2022) | Account | June 30, 2023 | Dec 31, 2022 | Change | | :--- | :--- | :--- | :--- | | **Total Assets** | **$24.51B** | **$24.58B** | **-0.3%** | | Net Loans and Leases | $14.21B | $13.95B | +1.9% | | Total Investment Securities | $7.09B | $7.47B | -5.1% | | Goodwill | $0.995B | $0.995B | 0.0% | | **Total Liabilities** | **$22.15B** | **$22.31B** | **-0.7%** | | Total Deposits | $21.08B | $21.69B | -2.8% | | Borrowings (Short & Long-term) | $0.50B | $0.075B | +567% | | **Total Stockholders' Equity** | **$2.36B** | **$2.27B** | **+4.0%** | [Consolidated Statements of Stockholders' Equity](index=8&type=section&id=Consolidated%20Statements%20of%20Stockholders'%20Equity) This statement details the changes in the company's equity accounts, including net income, dividends, and other comprehensive income, for the six months ended June 30, 2023 - For the six months ended June 30, 2023, total stockholders' equity increased by **$90.7 million**, from **$2.27 billion** to **$2.36 billion**. The increase was primarily driven by net income of **$129.3 million** and a **$26.5 million** positive change in other comprehensive income, partially offset by cash dividends of **$66.3 million**[19](index=19&type=chunk) [Consolidated Statements of Cash Flows](index=10&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) This statement summarizes the cash inflows and outflows from operating, investing, and financing activities for the six months ended June 30, 2023 and 2022 Cash Flow Summary (Six Months Ended June 30) | Activity | 2023 | 2022 | | :--- | :--- | :--- | | **Net Cash from Operating Activities** | $187.6M | $165.7M | | **Net Cash from Investing Activities** | $99.1M | ($599.0M) | | **Net Cash from Financing Activities** | ($255.2M) | $708.4M | | **Net Increase in Cash** | $31.5M | $275.2M | - The significant shift in financing activities from a large inflow in H1 2022 to an outflow in H1 2023 was primarily due to a net decrease in deposits of **$610.9 million** in 2023, compared to a net increase of **$785.3 million** in 2022. This was partially offset by proceeds from long-term borrowings of **$500 million** in 2023[23](index=23&type=chunk) [Notes to Consolidated Financial Statements](index=11&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) This section provides detailed explanations of the company's significant accounting policies and other relevant financial information supporting the consolidated financial statements - The company adopted ASU No. 2022-02 on January 1, 2023, which eliminated the accounting guidance for Troubled Debt Restructurings (TDRs) and added enhanced disclosure requirements for loan modifications to borrowers experiencing financial difficulty[44](index=44&type=chunk) - The Allowance for Credit Losses (ACL) methodology utilizes a one-year reasonable and supportable forecast period for all loan classes, after which it reverts immediately to the long-run average loss rates[35](index=35&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=80&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the company's financial performance for the second quarter and first half of 2023. Key themes include net income growth driven by higher net interest income from the rising rate environment, which offset increased noninterest expenses and a higher provision for credit losses. The analysis covers detailed performance of operating segments, changes in the balance sheet including loan growth and deposit outflows, and management of credit, market, and liquidity risks. The economic environment in Hawaii shows stability, though uncertainties remain [Financial Highlights](index=87&type=section&id=Financial%20Highlights) This section summarizes the key financial performance indicators and balance sheet changes for the second quarter and first half of 2023 - Q2 2023 net income was **$62.4 million**, a **5% increase YoY**, driven by a **$14.8 million** rise in net interest income. Diluted EPS increased **7%** to **$0.49**[270](index=270&type=chunk) - H1 2023 net income was **$129.3 million**, a **10% increase YoY**, primarily due to a **$48.2 million** increase in net interest income. Diluted EPS rose **11%** to **$1.01**[272](index=272&type=chunk) - Total loans and leases grew **2%** to **$14.4 billion** as of June 30, 2023, from year-end 2022, while total deposits decreased **3%** to **$21.1 billion** over the same period[277](index=277&type=chunk)[281](index=281&type=chunk) - The company remained well-capitalized with a Common Equity Tier 1 (CET1) ratio of **12.05%** as of June 30, 2023, up from **11.82%** at year-end 2022[276](index=276&type=chunk) [Results of Operations](index=95&type=section&id=Results%20of%20Operations) This section provides a detailed analysis of the company's net interest income, provision for credit losses, noninterest income, and noninterest expense for the reported periods - Net interest margin for Q2 2023 was **2.91%**, up **31 basis points YoY**, driven by higher yields on the loan portfolio which increased by **178 basis points** to **5.22%**[285](index=285&type=chunk) - The provision for credit losses was **$5.0 million** in Q2 2023, up from **$1.0 million** in Q2 2022, primarily due to increased provisions for construction loans and home equity lines[297](index=297&type=chunk) - Noninterest income in Q2 2023 increased by **7% YoY** to **$47.3 million**, mainly due to a **$4.1 million** positive swing in Bank-owned life insurance (BOLI) income[301](index=301&type=chunk)[306](index=306&type=chunk) - Noninterest expense rose **11% YoY** to **$120.9 million** in Q2 2023, largely due to an **$8.0 million** increase in salaries and benefits, including severance costs, and a **$3.2 million** increase in equipment expense[308](index=308&type=chunk)[309](index=309&type=chunk) [Analysis of Financial Condition](index=116&type=section&id=Analysis%20of%20Financial%20Condition) This section analyzes the company's balance sheet components, including loans, deposits, borrowings, and asset quality, and their changes from year-end 2022 - Total loans and leases increased by **$270.8 million (2%)** since year-end 2022 to **$14.4 billion**, led by growth in commercial real estate, construction, and residential real estate loans[363](index=363&type=chunk) - Total deposits decreased by **$610.9 million (3%)** to **$21.1 billion** since year-end 2022, as decreases in demand and savings deposits were only partially offset by an increase in higher-cost time deposits[405](index=405&type=chunk) - Uninsured deposits were estimated at **$10.7 billion (51% of total deposits)** as of June 30, 2023. Excluding fully collateralized public deposits, the uninsured amount was **$8.5 billion (40% of total deposits)**[406](index=406&type=chunk) - The company increased its borrowings, holding **$500 million** in long-term FHLB advances as of June 30, 2023, compared to **$75 million** in short-term borrowings at year-end 2022, to enhance liquidity[408](index=408&type=chunk)[409](index=409&type=chunk) - Non-performing assets (NPAs) increased slightly to **$13.2 million (0.09% of total loans and OREO)** from **$12.0 million** at year-end 2022, primarily due to an increase in non-accrual home equity lines[383](index=383&type=chunk) [Item 3. Quantitative and Qualitative Disclosures about Market Risk](index=153&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) This section refers to the detailed discussion of market risk within the Management's Discussion and Analysis (MD&A). The company's primary market risk is interest rate risk, which is managed through asset and liability management activities overseen by the ALCO. The company uses Net Interest Income (NII) simulation analysis to measure this risk and is currently positioned to benefit from rising interest rates - The company's primary market risk exposure is interest rate risk, managed by the Asset Liability Management Committee (ALCO)[425](index=425&type=chunk)[432](index=432&type=chunk)[447](index=447&type=chunk) Net Interest Income Sensitivity (Static Forecast as of June 30, 2023) | Interest Rate Change (basis points) | Estimated % Change in NII (Next 12 Months) | | :--- | :--- | | **Gradual Change** | | | +100 | +3.2% | | -100 | -3.4% | | **Immediate Change** | | | +100 | +5.7% | | -100 | -6.1% | [Item 4. Controls and Procedures](index=153&type=section&id=Item%204.%20Controls%20and%20Procedures) Management, including the CEO and CFO, evaluated the company's disclosure controls and procedures and concluded they were effective as of June 30, 2023. There were no material changes to the company's internal control over financial reporting during the quarter - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of the end of the period covered by this report (June 30, 2023)[454](index=454&type=chunk) - No changes occurred during the quarter ended June 30, 2023, that have materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[455](index=455&type=chunk) Part II Other Information This section provides information on legal proceedings, risk factors, other disclosures, and a list of exhibits filed with the report [Item 1. Legal Proceedings](index=153&type=section&id=Item%201.%20Legal%20Proceedings) The company is involved in various litigation matters incidental to its business but does not expect any of the current proceedings to have a material adverse effect on its financial condition or results of operations - The company is party to various litigation matters incidental to its business but does not believe their resolution will have a material adverse effect[456](index=456&type=chunk) [Item 1A. Risk Factors](index=153&type=section&id=Item%201A.%20Risk%20Factors) There have been no material changes from the risk factors previously disclosed in the company's Annual Report on Form 10-K for the year ended December 31, 2022 - No material changes have been identified from the risk factors disclosed in the company's 2022 Form 10-K[457](index=457&type=chunk) [Item 5. Other Information](index=153&type=section&id=Item%205.%20Other%20Information) During the second quarter of 2023, no directors or officers adopted or terminated any Rule 10b5-1 trading plans or other non-Rule 10b5-1 trading arrangements - No directors or officers adopted or terminated a Rule 10b5-1 trading plan during the three months ended June 30, 2023[458](index=458&type=chunk) [Item 6. Exhibits](index=155&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including separation agreements with two executives, CEO/CFO certifications, and XBRL data files - Exhibits filed include separation agreements for Ralph M. Mesick and Lance A. Mizumoto, dated June 28, 2023[460](index=460&type=chunk) - Standard CEO and CFO certifications under Sarbanes-Oxley Sections 302 and 906 are included as exhibits[460](index=460&type=chunk)