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First Hawaiian, Inc. Reports First Quarter 2017 Financial Results and Declares Dividend

HONOLULU, April 27, 2017 (GLOBE NEWSWIRE) -- First Hawaiian, Inc. (NASDAQ:FHB), (the “Company”) today reported financial results for the quarter ended March 31, 2017.

First Quarter Highlights

  • Net income for the quarter ended March 31, 2017 was $56.7 million, or $0.41 per diluted share, and core net income1 was $57.0 million, or $0.41 per diluted share
  • Board of Directors declared a dividend of $0.22 per share
  • Successful follow-on stock offering completed in February 2017. BNP Paribas sold 28.75 million shares, reducing its ownership level to 62%

“We are pleased to start 2017 with a solid first quarter. Loans and leases grew to a record $11.8 billion, we maintained our expense discipline and our credit quality remained excellent,” said Bob Harrison, Chairman and Chief Executive Officer. “BNP Paribas also continued to reduce their ownership interest in First Hawaiian with a successful follow-on stock offering of 28.75 million shares. This reduced BNP Paribas’ ownership in First Hawaiian, Inc. to 62%.”

On April 26, 2017, the Company’s Board of Directors declared a quarterly cash dividend of $0.22 per share. The dividend will be payable on June 9, 2017 to stockholders of record at the close of business on May 30, 2017.

Earnings Highlights

Net income for the quarter ended March 31, 2017 was $56.7 million, or $0.41 per diluted share, compared to $56.6 million, or $0.41 per diluted share, for the quarter ended December 31, 2016, and $65.5 million, or $0.47 per diluted share, for the quarter ended March 31, 2016. Results from the quarter ended March 31, 2016 included $25.7 million ($16.0 million net of tax) gains from securities sales. Core net income for the quarter ended March 31, 2017 was $57.0 million, or $0.41 per diluted share, compared to $56.0 million, or $0.40 per diluted share, for the quarter ended December 31, 2016, and $51.1 million, or $0.37 per diluted share, for the quarter ended March 31, 2016.

Net interest income for the quarter ended March 31, 2017 was $129.3 million, a decrease of $2.0 million compared to $131.3 million for the quarter ended December 31, 2016, and an increase of $12.0 million compared to $117.3 million for the quarter ended March 31, 2016. The decrease in net interest income compared to the fourth quarter of 2016 was primarily due to lower yields on loans and higher average deposit balances and rates, partially offset by higher yields on investment securities and interest bearing deposits. Loan yields in the fourth quarter of 2016 were favorably impacted by $2.1 million of loan prepayment fees. The increase compared to the first quarter of 2016 was due to higher average balances of loans and investments and higher yields on investment securities and interest bearing deposits, partially offset by lower yields on loans and higher average deposit balances and rates.

Net interest margin was 3.00%, 2.99% and 2.77% for the quarters ended March 31, 2017, December 31, 2016, and March 31, 2016, respectively. Excluding the $2.1 million in loan prepayment fees in the quarter ended December 31, 2016, net interest margin increased during the first quarter of 2017 by six basis points, primarily due to higher earning asset yields, partially offset by higher costs related to time deposits. The 23 basis point increase compared to the first quarter of 2016 was due to higher yields on investments and interest bearing deposits, partially offset by lower loan yields and higher deposit costs.

Results for the quarter ended March 31, 2017 included a provision for credit losses of $4.5 million compared to $3.9 million in the quarter ended December 31, 2016 and $0.7 million in the quarter ended March 31, 2016. The first quarter of 2016 included a recovery of $3.1 million on a previously charged-off commercial real estate loan.

Noninterest income was $49.4 million in the quarter ended March 31, 2017, an increase of $0.4 million compared to noninterest income of $49.0 million in the quarter ended December 31, 2016 and a decrease of $24.1 million compared to noninterest income of $73.5 million in the quarter ended March 31, 2016. The first quarter of 2017 included gains of $1.3 million from death benefits from bank-owned life insurance (BOLI). The fourth quarter of 2016 included $1.5 million of net gains from the sale of securities. The first quarter of 2016 included a $22.7 million net gain on the sale of Visa Class B restricted shares, and $3.1 million of net gains on the sales of securities.

Noninterest expense was $84.3 million for the quarter ended March 31, 2017, an increase of $1.8 million from $82.5 million in the quarter ended December 31, 2016, and a decrease of $0.7 million from $85.1 million in the quarter ended March 31, 2016. The increase in noninterest expense compared to the fourth quarter of 2016 was primarily due to $2.8 million higher salaries and employee benefits expense and $1.2 million higher other expense, partially offset by $1.9 million lower contracted services and professional fees and $0.6 million lower equipment expense. The increase in salaries and employee benefits expense was largely due to annual merit increases, increased overtime expenses and higher payroll taxes. Contracted services and professional fees in the fourth quarter of 2016 were elevated as a result expenses related to system upgrades and product enhancements. The decrease in noninterest expense compared to the first quarter of 2016 was primarily due to a $2.4 million decrease in contracted services and professional fees, and a $1.4 million decrease in salaries and employee benefits, partially offset by $1.3 million higher regulatory assessment and fees, and $1.0 million higher cards reward expenses. Contracted services and professional fees in the first quarter of 2016 included $2.5 million of fees related to the initial public offering. The decrease in salaries and employee benefits compared to the first quarter of 2016 was primarily due to an increase in deferred loan origination costs in the first quarter of 2017. The increase in regulatory assessments was largely due to the increase in the regulatory assessment rate that became effective July 1, 2016.

The efficiency ratio was 47.2%, 45.8% and 44.6% for the quarters ended March 31, 2017, December 31, 2016 and March 31, 2016, respectively.

The effective tax rate for the first quarter of 2017 was 36.9% compared with 39.8% in the previous quarter and 37.6% percent in the same quarter last year. The decrease in the effective tax rate in the first quarter of 2017 compared to the prior quarters was primarily due to the higher level of BOLI income received in the first quarter of 2017.

Balance Sheet Highlights

Total assets were $19.8 billion at March 31, 2017, compared to $19.7 billion at December 31, 2016 and $19.1 billion at March 31, 2016.

The investment securities portfolio was $5.3 billion at March 31, 2017, compared to $5.1 billion at December 31, 2016 and $3.9 billion at March 31, 2016. The portfolio remains largely comprised of securities issued by U.S. government agencies.

Total loans and leases were $11.8 billion at March 31, 2017, an increase of $261.1 million, or 2.3%, from $11.5 billion at December 31, 2016 and up $818.9 million, or 7.5%, from $11.0 billion at March 31, 2016. The growth in loans and leases compared to December 31, 2016 was largely due to strong growth in the commercial real estate and residential loan segments of the portfolio. Compared to March 31, 2016, the growth in loans and leases was due to increases across all loan categories.

Total deposits were $16.9 billion at March 31, 2017, an increase of $143.6 million, or 0.9%, compared with $16.8 billion at December 31, 2016, and an increase of $883.7 million, or 5.5%, compared to $16.1 billion at March 31, 2016.

Asset Quality

The Company's asset quality remained solid during the first quarter of 2017. Total non-performing assets declined to $7.7 million, or 0.07% of total loans and leases, at March 31, 2017, down $2.1 million from non-performing assets of $9.8 million, or 0.08% of total loans and leases, at December 31, 2016 and down $6.9 million from non­performing assets of $14.6 million, or 0.13% of total loans and leases, at March 31, 2016.

Net charge offs for the quarter ended March 31, 2017 were $4.1 million, or 0.15% of average loans and leases on an annualized basis, compared to $3.4 million, or 0.12% of average loans and leases on an annualized basis for the quarter ended December 31, 2016 and a net recovery of $1.0 million, or (0.04)% of average loans and leases on an annualized basis for the quarter ended March 31, 2016.

The ratio of allowance for loan and lease losses to total loans and leases was 1.15% at March 31, 2017 compared to 1.18% at December 31, 2016 and 1.25% at March 31, 2016.

Capital

Total stockholders' equity was $2.5 billion at March 31, 2017, December 31, 2016 and March 31, 2016.

The tier 1 leverage, common equity tier 1, and total capital ratios were 8.52%, 12.78% and 13.87%, respectively, at March 31, 2017, compared with 8.36%, 12.75% and 13.85% at December 31, 2016 and 8.18%, 12.55%, 13.71% at March 31, 2016.

___________________
1 Core net income is a non-GAAP measure. For more information on this measure, including a reconciliation to the most directly comparable GAAP measure, see “Use of Non-GAAP Financial Measures” and Tables 11 and 12 at the end of this document.

First Hawaiian, Inc.

First Hawaiian, Inc. (NASDAQ:FHB) is a bank holding company headquartered in Honolulu, Hawaii. Its principal subsidiary, First Hawaiian Bank, founded in 1858 under the name Bishop & Company, is Hawaii’s oldest and largest financial institution with branch locations throughout Hawaii, Guam and Saipan. The company offers a comprehensive suite of banking services to consumer and commercial customers including deposit products, loans, wealth management, insurance, trust, retirement planning, credit card and merchant processing services. Customers may also access their accounts through ATMs, online and mobile banking channels. For more information about First Hawaiian, Inc., visit the Company’s website, www.fhb.com.

Conference Call Information

First Hawaiian will host a conference call to discuss the Company’s results today at 5:00 p.m. Eastern Time, 11:00 a.m. Hawaii Time. To access the call, participants should dial (844) 452-2942 (US/Canada), or (574) 990-9846 (International) ten minutes prior to the start of the call and enter the conference ID: 5236509. A live webcast of the conference call, including a slide presentation, will be available at the following link: www.fhb.com/earnings. The archive of the webcast will be available at the same location. A telephonic replay of the conference call will be available approximately two hours after the conclusion of the call until 8:00 p.m. (Eastern Time) on May 7, 2017. Access the replay by dialing (855) 859-2056 or (404) 537-3406 and entering the conference ID: 5236509.

Forward-Looking Statements

This press release 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”, “estimate”, “intend”, “plan”, “projection”, “would”, “annualized” and “outlook”, or the negative version of those words or other comparable words or phrases of a future or forward-looking nature. These forward-looking statements are not historical facts, and are based on current expectations, estimates and projections about our industry, management's beliefs and certain assumptions made by management, many of which, by their nature, are inherently uncertain and beyond our control. Accordingly, we caution you that any such forward-looking statements are not guarantees of future performance and are subject to risks, assumptions, estimates and uncertainties that are difficult to predict. Although we believe that the expectations reflected in these forward-looking statements are reasonable as of the date made, actual results may prove to be materially different from the results expressed or implied by the forward-looking statements. For a discussion of the risks and important factors that could affect our future results and financial condition, see our U.S. Securities and Exchange Commission (“SEC”) filings, including, but not limited to, our annual report on Form 10-K for the year ended December 31, 2016.

Use of Non-GAAP Financial Measures

We present net interest income, noninterest income, noninterest expense, net income, earnings per share and the related ratios described below, on an adjusted, or ‘‘core,’’ basis, each a non-GAAP financial measure. These core measures exclude from the corresponding GAAP measure the impact of certain items that we do not believe are representative of our financial results. We believe that the presentation of these non-GAAP financial measures helps identify underlying trends in our business from period to period that could otherwise be distorted by the effect of certain expenses, gains and other items included in our operating results. We believe that these core measures provide useful information about our operating results and enhance the overall understanding of our past performance and future performance. Investors should consider our performance and financial condition as reported under GAAP and all other relevant information when assessing our performance or financial condition.

Core net interest margin, core return on average total assets and core return on average total stockholders’ equity are non-GAAP financial measures. We compute our core net interest margin as the ratio of core net interest income to average earning assets. We compute our core return on average total assets as the ratio of core net income to average total assets. We compute our core return on average total stockholders’ equity as the ratio of core net income to average stockholders’ equity.

Return on average tangible stockholders’ equity, core return on average tangible stockholders’ equity, return on average tangible assets, core return on average tangible assets and tangible stockholders’ equity to tangible assets are non-GAAP financial measures. We compute our return on average tangible stockholders’ equity as the ratio of net income to average tangible stockholders’ equity, which is calculated by subtracting (and thereby effectively excluding) amounts related to the effect of goodwill from our average total stockholders’ equity. We compute our core return on average tangible stockholders’ equity as the ratio of core net income to average tangible stockholders’ equity, which is calculated by subtracting (and thereby effectively excluding) amounts related to the effect of goodwill from our average total stockholders’ equity. We compute our return on average tangible assets as the ratio of net income to average tangible assets, which is calculated by subtracting (and thereby effectively excluding) amounts related to the effect of goodwill from our average total assets. We compute our core return on average tangible assets as the ratio of core net income to average tangible assets. We compute our tangible stockholders’ equity to tangible assets as the ratio of tangible stockholders’ equity to tangible assets, each of which we calculate by subtracting (and thereby effectively excluding) the value of our goodwill. We believe that these measurements are useful for investors, regulators, management and others to evaluate financial performance and capital adequacy relative to other financial institutions. Although these non-GAAP financial measures are frequently used by stakeholders in the evaluation of a company, they have limitations as analytical tools and should not be considered in isolation or as a substitute for analysis of our results or financial condition as reported under GAAP.

Tables 11 and 12 at the end of this document provide a reconciliation of these non-GAAP financial measures with their most closely related GAAP measures.

Financial Highlights Table 1
For the Three Months Ended
March 31, December 31, March 31,
(dollars in thousands, except per share data) 2017 2016 2016
Operating Results:
Net interest income $ 129,345 $131,250 $117,312
Provision for loan and lease losses 4,500 3,900 700
Noninterest income 49,407 49,021 73,519
Noninterest expense 84,339 82,503 85,064
Net income 56,740 56,552 65,531
Basic earnings per share 0.41 0.41 0.47
Diluted earnings per share 0.41 0.41 0.47
Dividends declared per share 0.22 0.20 N/A
Dividend payout ratio 53.66 % 49.35% N/A
Supplemental Income Statement Data (non-GAAP):
Core net interest income $ 129,345 $131,250 $117,312
Core noninterest income 49,407 47,505 47,791
Core noninterest expense 83,955 81,920 82,517
Core net income 56,982 56,001 51,073
Core basic earnings per share $ 0.41 $0.40 $0.37
Core diluted earnings per share $ 0.41 $0.40 $0.37
Performance Ratio:
Net interest margin 3.00 % 2.99% 2.77%
Core net interest margin (non-GAAP) 3.00 % 2.99% 2.77%
Efficiency ratio 47.18 % 45.76% 44.57%
Core efficiency ratio (non-GAAP) 46.96 % 45.82% 49.98%
Return on average total assets 1.16 % 1.14% 1.37%
Core return on average total assets (non-GAAP) 1.17 % 1.13% 1.06%
Return on average tangible assets 1.23 % 1.20% 1.44%
Core return on average tangible assets (non-GAAP) 1.23 % 1.19% 1.12%
Return on average total stockholders' equity 9.25 % 8.97% 9.52%
Core return on average total stockholders' equity (non-GAAP) 9.29 % 8.88% 7.42%
Return on average tangible stockholders' equity (non-GAAP) 15.41 % 14.88% 14.86%
Core return on average tangible stockholders’ equity (non-GAAP) 15.48 % 14.73% 11.58%
Average Balances:
Average loans and leases $ 11,582,645 $11,531,684 $10,828,160
Average earning assets 17,470,726 17,482,648 17,060,214
Average assets 19,769,508 19,778,918 19,290,342
Average deposits 16,900,354 16,861,525 15,946,664
Average shareholders' equity 2,488,519 2,507,514 2,769,476
Market Value Per Share:
Closing 29.92 34.82 N/A
High 34.85 35.47 N/A
Low 29.13 25.80 N/A

As of As of As of
March 31, December 31, March 31,
2017 2016 2016
Balance Sheet Data:
Loans and leases $11,781,496 $11,520,378 $10,962,638
Total assets 19,792,785 19,661,829 19,087,504
Total deposits 16,938,178 16,794,532 16,054,451
Total stockholders' equity 2,505,994 2,476,485 2,471,734
Per Share of Common Stock:
Book value $ 17.96 $17.75 $17.72
Tangible book value 10.82 10.61 10.59
Asset Quality Ratios:
Non-accrual loans and leases / total loans and leases 0.06 % 0.08% 0.13%
Allowance for loan and lease losses / total loans and leases 1.15 % 1.18% 1.25%
Capital Ratios:
Common Equity Tier 1 Capital Ratio 12.78 % 12.75% 12.55%
Tier 1 Capital Ratio 12.78 % 12.75% 12.55%
Total Capital Ratio 13.87 % 13.85% 13.71%
Tier 1 Leverage Ratio 8.52 % 8.36% 8.18%
Total stockholders' equity to total assets 12.66 % 12.60% 12.95%
Tangible stockholders' equity to tangible assets (non-GAAP) 8.04 % 7.93% 8.16%
Non-Financial Data:
Number of branches 62 62 62
Number of ATMs 311 311 311
Number of Full-Time Equivalent Employees 2,195 2,179 2,186

Consolidated Statements of Income Table 2
Three Months Ended
March 31, December 31, March 31,
(dollars in thousands, except per share amounts) 2017 2016 2016
Interest income
Loans and lease financing $ 109,266 $111,461 $104,357
Available-for-sale securities 26,429 25,884 16,559
Other 1,226 968 2,896
Total interest income 136,921 138,313 123,812
Interest expense
Deposits 7,570 7,048 6,429
Short-term borrowings and long-term debt 6 15 71
Total interest expense 7,576 7,063 6,500
Net interest income 129,345 131,250 117,312
Provision for loan and lease losses 4,500 3,900 700
Net interest income after provision for loan and lease losses 124,845 127,350 116,612
Noninterest income
Service charges on deposit accounts 9,555 9,388 9,789
Credit and debit card fees 14,479 14,339 13,819
Other service charges and fees 9,097 8,446 9,227
Trust and investment services income 7,338 7,204 7,405
Bank-owned life insurance 4,578 1,758 2,356
Investment securities gains, net 1,516 25,728
Other 4,360 6,370 5,195
Total noninterest income 49,407 49,021 73,519
Noninterest expense
Salaries and employee benefits 43,300 40,471 44,701
Contracted services and professional fees 10,308 12,221 12,755
Occupancy 5,321 5,125 5,312
Equipment 4,197 4,777 3,827
Regulatory assessment and fees 3,774 4,103 2,477
Advertising and marketing 2,028 1,309 1,624
Card rewards program 4,511 4,770 3,502
Other 10,900 9,727 10,866
Total noninterest expense 84,339 82,503 85,064
Income before provision for income taxes 89,913 93,868 105,067
Provision for income taxes 33,173 37,316 39,536
Net income $ 56,740 $56,552 $65,531
Basic earnings per share $ 0.41 $0.41 $0.47
Diluted earnings per share $ 0.41 $0.41 $0.47
Dividends declared per share $ 0.22 $0.20 $
Basic weighted-average outstanding shares 139,545,728 139,530,654 139,459,620
Diluted weighted-average outstanding shares 139,637,410 139,546,875 139,459,620

Consolidated Balance Sheets Table 3
March 31, December 31, March 31,
(dollars in thousands) 2017 2016 2016
Assets
Cash and due from banks $ 249,953 $253,827 $300,183
Interest-bearing deposits in other banks 527,659 798,231 2,048,875
Investment securities 5,260,262 5,077,514 3,864,940
Loans and leases 11,781,496 11,520,378 10,962,638
Less: allowance for loan and lease losses 135,847 135,494 137,154
Net loans and leases 11,645,649 11,384,884 10,825,484
Premises and equipment, net 295,608 300,788 304,704
Other real estate owned and repossessed personal property 329 329 205
Accrued interest receivable 39,386 41,971 33,473
Bank-owned life insurance 429,800 429,209 426,446
Goodwill 995,492 995,492 995,492
Other intangible assets 15,800 16,809 20,214
Other assets 332,847 362,775 267,488
Total assets $19,792,785 $19,661,829 $19,087,504
Liabilities and Stockholders' Equity
Deposits:
Interest-bearing $10,917,631 $10,801,915 $10,639,094
Noninterest-bearing 6,020,547 5,992,617 5,415,357
Total deposits 16,938,178 16,794,532 16,054,451
Short-term borrowings 9,151 215,451
Long-term debt 41 41 48
Retirement benefits payable 133,819 132,904 135,584
Other liabilities 214,753 248,716 210,236
Total liabilities 17,286,791 17,185,344 16,615,770
Stockholders' equity
Net investment 2,490,107
Common stock ($0.01 par value; authorized 300,000,000 shares; issued and outstanding 139,546,615 shares as of March 31, 2017, 139,530,654 shares as of December 31, 2016 and 139,459,620 shares as of March 31, 2016) 1,395 1,395
Additional paid-in capital 2,486,596 2,484,251
Retained earnings 104,695 78,850
Accumulated other comprehensive loss, net (86,692) (88,011) (18,373)
Total stockholders' equity 2,505,994 2,476,485 2,471,734
Total liabilities and stockholders' equity $19,792,785 $19,661,829 $19,087,504

Average Balances and Interest Rates Table 4
Three Months Ended Three Months Ended Three Months Ended
March 31, 2017 December 31, 2016 March 31, 2016
Average Income/ Yield/ Average Income/ Yield/ Average Income/ Yield/
(dollars in millions) Balance Expense Rate Balance Expense Rate Balance Expense Rate
Earning Assets
Interest-Bearing Deposits in Other Banks $ 640.2 $ 1.2 0.78 % $673.7 $0.9 0.57%$2,273.2 $2.9 0.51%
Available-for-Sale Investment Securities 5,236.6 26.4 2.05 5,277.2 25.9 1.95 3,958.9 16.6 1.68
Loans and Leases (1)
Commercial and industrial 3,233.6 24.3 3.04 3,314.3 25.7 3.09 3,095.6 22.9 2.98
Real estate - commercial 2,481.2 22.2 3.63 2,431.4 23.1 3.78 2,158.7 20.9 3.89
Real estate - construction 460.3 3.7 3.25 470.7 3.8 3.21 405.9 3.3 3.24
Real estate - residential 3,723.7 37.6 4.10 3,636.9 37.0 4.04 3,560.6 36.0 4.07
Consumer 1,513.4 20.3 5.43 1,493.9 20.6 5.49 1,415.3 19.8 5.65
Lease financing 170.5 1.2 2.77 184.5 1.3 2.75 192.0 1.4 2.94
Total Loans and Leases 11,582.7 109.3 3.83 11,531.7 111.5 3.85 10,828.1 104.3 3.88
Other Earning Assets 11.2 0.77
Total Earning Assets (2) 17,470.7 136.9 3.18 17,482.6 138.3 3.15 17,060.2 123.8 2.92
Cash and Due from Banks 324.7 312.5 299.0
Other Assets 1,974.1 1,983.8 1,931.1
Total Assets $ 19,769.5 $19,778.9 $19,290.3
Interest-Bearing Liabilities
Interest-Bearing Deposits
Savings $ 4,506.4 $ 0.7 0.06 % $4,446.1 $0.6 0.06%$4,350.0 $0.7 0.06%
Money Market 2,494.3 0.6 0.09 2,680.4 0.7 0.10 2,399.1 0.5 0.09
Time 3,985.8 6.3 0.65 3,923.1 5.7 0.58 3,824.8 5.2 0.55
Total Interest-Bearing Deposits 10,986.5 7.6 0.28 11,049.6 7.0 0.25 10,573.9 6.4 0.24
Short-Term Borrowings 3.9 0.54 11.1 0.49 223.9 0.1 0.13
Total Interest-Bearing Liabilities 10,990.4 7.6 0.28 11,060.7 7.0 0.25 10,797.8 6.5 0.24
Net Interest Income $ 129.3 $131.3 $117.3
Interest Rate Spread 2.90 % 2.90% 2.68%
Net Interest Margin 3.00 % 2.99% 2.77%
Noninterest-Bearing Demand Deposits 5,913.9 5,811.9 5,372.8
Other Liabilities 376.7 398.8 350.2
Stockholders' Equity 2,488.5 2,507.5 2,769.5
Total Liabilities and Stockholders' Equity$ 19,769.5 $19,778.9 $19,290.3

Analysis of Change in Net Interest Income Table 5
Three Months Ended March 31, 2017
Compared to December 31, 2016
(dollars in millions) Volume Rate Total
Change in Interest Income:
Interest-Bearing Deposits in Other Banks $ $ 0.3 $ 0.3
Available-for-Sale Investment Securities (0.2) 0.7 0.5
Loans and Leases
Commercial and industrial (0.6) (0.8) (1.4)
Real estate - commercial 0.5 (1.4) (0.9)
Real estate - construction (0.1) (0.1)
Real estate - residential 0.8 (0.2) 0.6
Consumer 0.3 (0.6) (0.3)
Lease financing (0.1) (0.1)
Total Loans and Leases 0.8 (3.0) (2.2)
Total Change in Interest Income 0.6 (2.0) (1.4)
Change in Interest Expense:
Interest-Bearing Deposits
Money Market (0.1) (0.1)
Time 0.1 0.5 0.6
Total Interest-Bearing Deposits 0.1 0.4 0.5
Total Change in Interest Expense 0.1 0.4 0.5
Change in Net Interest Income $ 0.5 $ (2.4) $ (1.9)

Analysis of Change in Net Interest Income Table 6
Three Months Ended March 31, 2017
Compared to March 31, 2016
(dollars in millions) Volume Rate Total
Change in Interest Income:
Interest-Bearing Deposits in Other Banks $ (2.7) $ 1.0 $ (1.7)
Available-for-Sale Investment Securities 6.0 3.8 9.8
Loans and Leases
Commercial and industrial 1.0 0.4 1.4
Real estate - commercial 3.0 (1.7) 1.3
Real estate - construction 0.4 0.4
Real estate - residential 1.6 1.6
Consumer 1.4 (0.9) 0.5
Lease financing (0.1) (0.1) (0.2)
Total Loans and Leases 7.3 (2.3) 5.0
Total Change in Interest Income 10.6 2.5 13.1
Change in Interest Expense:
Interest-Bearing Deposits
Money Market 0.1 0.1
Time 0.2 0.9 1.1
Total Interest-Bearing Deposits 0.3 0.9 1.2
Short-term Borrowings (0.1) (0.1)
Total Change in Interest Expense 0.2 0.9 1.1
Change in Net Interest Income $ 10.4 $ 1.6 $ 12.0

Loans and Leases Table 7
March 31, December 31, March 31,
(dollars in thousands) 2017 2016 2016
Commercial and industrial $ 3,243,508 $3,239,600 $3,197,173
Real estate:
Commercial 2,532,253 2,343,495 2,147,132
Construction 469,741 450,012 421,107
Residential 3,864,509 3,796,459 3,586,862
Total real estate 6,866,503 6,589,966 6,155,101
Consumer 1,503,129 1,510,772 1,419,326
Lease financing 168,356 180,040 191,038
Total loans and leases $ 11,781,496 $11,520,378 $10,962,638

Deposits Table 8
March 31, December 31, March 31,
(dollars in thousands) 2017 2016 2016
Demand $ 6,020,547 $5,992,617 $5,415,357
Savings 4,503,663 4,609,306 4,382,643
Money Market 2,496,642 2,454,013 2,280,653
Time 3,917,326 3,738,596 3,975,798
Total Deposits $ 16,938,178 $16,794,532 $16,054,451

Non-Performing Assets and Accruing Loans and Leases Past Due 90 Days or More Table 9
March 31, December 31, March 31,
(dollars in thousands) 2017 2016 2016
Non-Performing Assets
Non-Accrual Loans and Leases
Commercial Loans:
Commercial and industrial $ 2,154 $2,730 $3,774
Lease financing 153 153 178
Total Commercial Loans 2,307 2,883 3,952
Residential 5,023 6,547 10,481
Total Non-Accrual Loans and Leases 7,330 9,430 14,433
Other Real Estate Owned 329 329 205
Total Non-Performing Assets $ 7,659 $9,759 $14,638
Accruing Loans and Leases Past Due 90 Days or More
Commercial Loans:
Commercial and industrial $ 309 $449 $198
Lease financing 84 83
Total Commercial Loans 393 532 198
Residential 1,437 866 2,103
Consumer 1,718 1,870 1,813
Total Accruing Loans and Leases Past Due 90 Days or More $ 3,548 $3,268 $4,114
Restructured Loans on Accrual Status and Not Past Due 90 Days or More 50,758 44,496 44,829
Total Loans and Leases $11,781,496 $11,520,378 $10,962,638

Allowance for Loan and Lease Losses Table 10
For the Three Months Ended
March 31, December 31, March 31,
(dollars in thousands) 2017 2016 2016
Balance at Beginning of Period $ 135,494 $135,025 $135,484
Loans and Leases Charged-Off
Commercial Loans:
Commercial and industrial (855) (86)
Total Commercial Loans (855) (86)
Residential (22) (3) (72)
Consumer (5,572) (5,412) (4,206)
Total Loans and Leases Charged-Off (6,449) (5,415) (4,364)
Recoveries on Loans and Leases Previously Charged-Off
Commercial Loans:
Commercial and industrial 114 23 203
Real estate - commercial 77 41 3,199
Lease financing 1
Total Commercial Loans 191 65 3,402
Residential 321 242 306
Consumer 1,790 1,677 1,626
Total Recoveries on Loans and Leases Previously Charged-Off 2,302 1,984 5,334
Net Loans and Leases (Charged-Off) Recovered (4,147) (3,431) 970
Provision for Credit Losses 4,500 3,900 700
Balance at End of Period $ 135,847 $135,494 $137,154
Average Loans and Leases Outstanding $11,582,645 $11,531,684 $10,828,160
Ratio of Net Loans and Leases Charged-Off (Recovered) to Average Loans and Leases Outstanding 0.15 % 0.12 %(0.04)%
Ratio of Allowance for Loan and Lease Losses to Loans and Leases Outstanding 1.15 % 1.18 %1.25 %

GAAP to Non-GAAP Reconciliation Table 11
As of and for the Three Months Ended
March 31, December 31, March 31,
(dollars in thousands, except per share amounts) 2017 2016 2016
Net income $ 56,740 $ 56,552 $ 65,531
Average total stockholders' equity $ 2,488,519 $ 2,507,514 $ 2,769,476
Less: average goodwill 995,492 995,492 995,492
Average tangible stockholders' equity $ 1,493,027 $ 1,512,022 $ 1,773,984
Total stockholders' equity $ 2,505,994 $ 2,476,485 $ 2,471,734
Less: goodwill 995,492 995,492 995,492
Tangible stockholders' equity $ 1,510,502 $ 1,480,993 $ 1,476,242
Average total assets $ 19,769,508 $ 19,778,918 $ 19,290,342
Less: average goodwill 995,492 995,492 995,492
Average tangible assets $ 18,774,016 $ 18,783,426 $ 18,294,850
Total assets $ 19,792,785 $ 19,661,829 $ 19,087,504
Less: goodwill 995,492 995,492 995,492
Tangible assets $ 18,797,293 $ 18,666,337 $ 18,092,012
Shares outstanding 139,546,615 139,530,654 139,459,620
Return on average total stockholders' equity(a) 9.25 % 8.97% 9.52%
Return on average tangible stockholders' equity (non-GAAP)(a) 15.41 % 14.88% 14.86%
Return on average total assets(a) 1.16 % 1.14% 1.37%
Return on average tangible assets (non-GAAP)(a) 1.23 % 1.20% 1.44%
Total stockholders' equity to total assets 12.66 % 12.60% 12.95%
Tangible stockholders' equity to tangible assets (non-GAAP) 8.04 % 7.93% 8.16%
Average stockholders' equity to average assets 12.59 % 12.68% 14.36%
Tangible average stockholders' equity to tangible average assets (non-GAAP) 7.95 % 8.05% 9.70%
Book value per share $ 17.96 $ 17.75 $ 17.72
Tangible book value per share (non-GAAP) $ 10.82 $ 10.61 $ 10.59

GAAP to Non-GAAP Reconciliation Table 12
For the Three Months Ended
March 31, December 31, March 31,
(dollars in thousands, except per share amounts) 2017 2016 2016
Net interest income $ 129,345 $131,250 $117,312
Core net interest income (non-GAAP) $ 129,345 $131,250 $117,312
Noninterest income $ 49,407 $49,021 $73,519
Loss (gain) on sale of securities (1,516) (3,050)
Gain on sale of stock (Visa/MasterCard) (22,678)
Core noninterest income (non-GAAP) $ 49,407 $47,505 $47,791
Noninterest expense $ 84,339 $82,503 $85,064
One-time items(a) (384) (583) (2,547)
Core noninterest expense (non-GAAP) $ 83,955 $81,920 $82,517
Net income $ 56,740 $56,552 $65,531
Loss (gain) on sale of securities (1,516) (3,050)
Gain on sale of stock (Visa/MasterCard) (22,678)
One-time items(a) 384 583 2,547
Tax adjustments(b) (142) 382 8,723
Total core adjustments 242 (551) (14,458)
Core net income (non-GAAP) $ 56,982 $56,001 $51,073
Core basic earnings per share (non-GAAP) $ 0.41 $0.40 $0.37
Core diluted earnings per share (non-GAAP) $ 0.41 $0.40 $0.37

Investor Relations Contact: Kevin Haseyama, CFA (808) 525-6268 khaseyama@fhb.com Media Contact: Susan Kam (808) 525-6254 skam@fhb.com

Source:First Hawaiian, Inc.