HONOLULU, Jan. 25, 2018 (GLOBE NEWSWIRE) -- First Hawaiian, Inc. (NASDAQ:FHB), (the “Company”) today reported financial results for its fourth quarter and full year ended December 31, 2017.

Highlights

• Net income for the quarter ended December 31, 2017 and the full year 2017 was $11.7 million, or $0.08 per diluted share, and $183.7 million, or $1.32 per diluted share, respectively. 
• Core net income¹ for the quarter ended December 31, 2017 and the full year 2017, which primarily excludes the impact of a one-time charge to provision for income taxes of $47.6 million due to the revaluation of certain tax-related assets at the projected lower corporate tax rate resulting from the Tax Cuts and Jobs Act, was $59.2 million, or $0.42 per diluted share, and $230.4 million, or $1.65 per diluted share, respectively.
• The Board of Directors increased the quarterly dividend by 9.1% to $0.24 per share.

“2017 was another successful year for First Hawaiian, and we were able to cap it off with a strong fourth quarter,” said Bob Harrison, Chairman and Chief Executive Officer.  “We were also pleased to see the benefits from key strategic initiatives.  In residential lending, we are starting to see initial results from the shift in our mortgage lending model, and our commitment to small business lending was recognized by the Small Business Administration (“SBA”), as we were named Hawaii’s 2017 SBA Lender of the Year – Category 1 and 2017 SBA 504 Lender of the Year.”

On January 24, 2018, the Company’s Board of Directors declared a quarterly cash dividend of $0.24 per share, an increase of $0.02 per share from the dividend paid in December 2017.  The dividend will be payable on March 9, 2018 to shareholders of record at the close of business on February 26, 2018.

Earnings Highlights

Net income for the quarter ended December 31, 2017 was $11.7 million, or $0.08 per diluted share, compared to $58.4 million, or $0.42 per diluted share, for the quarter ended September 30, 2017, and $56.6 million, or $0.41 per diluted share, for the quarter ended December 31, 2016.  Core net income for the quarter ended December 31, 2017 was $59.2 million, or $0.42 per diluted share, compared to $57.0 million, or $0.41 per diluted share, for the quarter ended September 30, 2017, and $56.0 million, or $0.40 per diluted share, for the quarter ended December 31, 2016. Net income for the full year 2017 was $183.7 million, or $1.32 per diluted share, compared to $230.2 million, or $1.65 per diluted share, for the full year 2016.  Core net income for the full year 2017 was $230.4 million, or $1.65 per diluted share, compared to $217.1 million, or $1.56 per diluted share for the full year 2016.

Net interest income for the quarter ended December 31, 2017 was $134.9 million, an increase of $1.6 million compared to $133.3 million for the quarter ended September 30, 2017, and an increase of $3.6 million compared to $131.3 million for the quarter ended December 31, 2016.  The increase in net interest income compared to the third quarter of 2017 was due to higher average balances of loans and investment securities and higher yields on investment securities, partially offset by higher rates on deposits. The increase in net interest income compared to the fourth quarter of 2016 was due to higher average balances of loans and higher yields on loans, interest-bearing deposits in other banks, and investment securities, partially offset by higher rates on deposits.  Net interest income for the full year 2017 was $528.8 million compared to $491.7 million for 2016.  The increase in net interest income was primarily attributable to higher average balances and yields on loans and investment securities, partially offset by higher rates on deposits.

Net interest margin (“NIM”) was 2.99%, 2.96% and 2.99%, for the quarters ended December 31, 2017, September 30, 2017, and December 31, 2016, respectively.  The increase in NIM as compared to the prior quarter was due to increased overall yields on earnings assets, offset by higher deposit costs. 

Results for the quarter ended December 31, 2017 included a provision for credit losses of $5.1 million compared to $4.5 million in the quarter ended September 30, 2017 and $3.9 million in the quarter ended December 31, 2016.  The provision for credit losses for the full year of 2017 was $18.5 million, compared to $8.6 million in 2016. 

Noninterest income was $54.3 million in the quarter ended December 31, 2017, an increase of $4.6 million compared to noninterest income of $49.7 million in the quarter ended September 30, 2017 and an increase of $3.3 million compared to noninterest income of $51.0 million in the quarter ended December 31, 2016.    The increase in noninterest income compared to the third quarter was due to $6.2 million higher other noninterest income, primarily due to a $4.3 million gain on sale of a bank property, compared to a $2.7 million gain on sale of a bank property in the third quarter, and $3.7 million related to intercompany taxes.   The increase in noninterest income compared to the fourth quarter of 2016 was primarily due to $5.1 million higher other noninterest income, primarily offset by $1.5 million lower investment securities gains.  Noninterest income for full year 2017 was $205.6 million compared to $226.0 million for 2016.  The $20.4 million lower noninterest income in 2017 compared to 2016 was primarily due to $27.3 lower investment securities gains, partially offset by higher other noninterest income.  Investment securities gains in 2016 included a gain of $22.7 million from the sale of Visa Class B shares. 

Noninterest expense was $89.9 million for the quarter ended December 31, 2017, an increase of $5.1 million from $84.8 million in the quarter ended September 30, 2017, and an increase of $5.4 million from $84.5 million in the quarter ended December 31, 2016.  The increase in noninterest expense compared to the third quarter of 2017 was primarily due to $5.6 million higher salaries and employee benefits and $0.8 million higher cards rewards program expenses, partially offset by $1.1 million lower advertising and marketing expenses and $1.1 million lower other expenses.  Salaries and benefits in the fourth quarter included a $3.7 million expense due to the $1,500 bonuses awarded to virtually all employees following the passage of the Tax Cuts and Jobs Act, higher compensation for tellers due to the previously disclosed salary adjustment and higher compensation due to the change in mortgage origination model.  The increase in noninterest expense compared to the fourth quarter of 2016 was primarily due to a $6.7 million increase in salaries and benefits, offset by lower expenses in other noninterest expense categories.  Noninterest expense for full year 2017 was $347.6 million compared to $337.3 million in 2016, an increase of $10.3 million, primarily due to $6.1 million higher salaries and employee benefits and higher expenses in other noninterest expense categories.

The efficiency ratio was 47.5%, 46.3% and 46.4% for the quarters ended December 31, 2017, September 30, 2017 and December 31, 2016, respectively.  The efficiency ratio for full year 2017 was 47.3% compared to 47.0% in 2016.

The provision for taxes in the fourth quarter of 2017 included a $47.6 million charge due to the revaluation of certain tax-related assets at the projected lower corporate tax rate resulting from the Tax Cuts and Jobs Act.  Excluding the one-time charge, the effective tax rate for the fourth quarter of 2017 was 37.1% compared with 37.7% in the previous quarter and 39.8% percent in the same quarter last year.  Excluding the one-time charge in the fourth quarter of 2017, the effective tax rate for the full year 2017 was 37.2% compared with 38.1% in 2016.

Subsequent to the issuance of the Company’s interim condensed consolidated financial statements as of September 30, 2017, the Company’s management determined that certain expenses were misclassified in prior periods.  As a result, certain noninterest income and noninterest expense amounts have been revised from the amounts previously reported to correct the misclassifications. There was no change to net income or earnings per share as previously reported as a result of correcting these misclassifications. A full explanation of the adjustments can be found in the footnote to Table 1.

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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 13 and 14 at the end of this document.

Balance Sheet Highlights

Total assets were $20.5 billion at December 31, 2017, compared to $20.6 billion at September 30, 2017 and $19.7 billion at December 31, 2016.

The investment securities portfolio was $5.2 billion at December 31, 2017, compared to $5.3 billion at September 30, 2017 and $5.1 billion at December 31, 2016.  The portfolio remains largely comprised of securities issued by U. S. government agencies.

Total loans and leases were $12.3 billion at December 31, 2017, up 1.1% from $12.1 billion at September 30, 2017 and up 6.6% from $11.5 billion at December 31, 2016.

The growth in loans and leases in the most recent quarter was due to increases in residential real estate loans of $88.6 million, commercial real estate loans of $41.9 million, construction loans of $34.1 million and consumer loans of $24.3 million.  Commercial and industrial loans declined by $55.0 million.  The decline in commercial and industrial loans was due to pay downs in the shared national credit portfolio.  Compared to December 31, 2016, the growth in loans and leases was due to increases in commercial real estate loans of $324.1 million, residential real estate loans of $293.6 million, construction loans of $182.9 million and consumer loans of $75.7 million.  Commercial and industrial loans declined by $104.3 million.

Total deposits were $17.6 billion at December 31, 2017, unchanged from $17.6 billion at September 30, 2017, and an increase of $0.8 billion, or 4.9%, compared to $16.8 billion at December 31, 2016. 

Asset Quality

The Company's asset quality remained excellent during the fourth quarter of 2017. Total non-performing assets were $10.2 million, or 0.08% of total loans and leases and other real estate owned, at December 31, 2017, compared to non-performing assets of $8.4 million, or 0.07% of total loans and leases and other real estate owned, at September 30, 2017 and non­-performing assets of $9.8 million, or 0.08% of total loans and leases and other real estate owned, at December 31, 2016.

Net charge offs for the quarter ended December 31, 2017 were $5.2 million, or 0.17% of average loans and leases on an annualized basis, compared to $4.1 million, or 0.13% of average loans and leases on an annualized basis for the quarter ended September 30, 2017 and $3.4 million, or 0.12% of average loans and leases on an annualized basis for the quarter ended December 31, 2016.  Net charge-offs for the full year 2017 were $16.7 million, or 0.14% of average loans and leases, compared to net charge-offs of $8.6 million, or 0.08% of average loans and leases, in 2016.

The ratio of the allowance for loan and lease losses to total loans and leases was 1.12% at December 31, 2017 compared to 1.13% at September 30, 2017 and 1.18% at December 31, 2016. 

Capital

Total stockholders' equity was $2.5 billion at December 31, 2017, compared to $2.6 billion at September 30, 2017 and $2.5 billion at December 31, 2016.   

The tier 1 leverage, common equity tier 1, and total capital ratios were 8.52%, 12.45% and 13.50%, respectively, at December 31, 2017, compared with 8.66%, 12.71% and 13.77% at September 30, 2017 and 8.36%, 12.75% and 13.85% at December 31, 2016.

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, 12:00 p.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:  6158609.  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 two hours after the conclusion of the call until 8:30 p.m. (Eastern Time) on February 4, 2018.  Access the replay by dialing (855) 859-2056 or (404) 537-3406 and entering the conference ID:  6158609.

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 some 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 13 and 14 at the end of this document provide a reconciliation of these non-GAAP financial measures with their most closely related GAAP measures.