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First Hawaiian Bank

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

HONOLULU, July 27, 2017 (GLOBE NEWSWIRE) -- First Hawaiian, Inc. (NASDAQ:FHB), (the “Company”) today reported financial results for the quarter ended June 30, 2017.

Second Quarter Highlights

  • Net income for the quarter ended June 30, 2017 was $56.9 million, or $0.41 per diluted share, and core net income1 was $57.2 million, or $0.41 per diluted share
     
  • Board of Directors declared a dividend of $0.22 per share

“We are pleased with the bank’s continued strong performance in the second quarter.  We had good growth, as loan and deposit balances finished the quarter at record levels, driving total assets to a record $20.4 billion at quarter end,” said Bob Harrison, Chairman and Chief Executive Officer.  “Additionally, the local economy remained robust, and our asset quality remained excellent.”

On July 26, 2017, the Company’s Board of Directors declared a quarterly cash dividend of $0.22 per share.  The dividend will be payable on September 8, 2017 to stockholders of record at the close of business on August 28, 2017.

Earnings Highlights

Net income for the quarter ended June 30, 2017 was $56.9 million, or $0.41 per diluted share, compared to $56.7 million, or $0.41 per diluted share, for the quarter ended March 31, 2017, and $54.9 million, or $0.39 per diluted share, for the quarter ended June 30, 2016.  Core net income for the quarter ended June 30, 2017 was $57.2 million, or $0.41 per diluted share, compared to $57.0 million, or $0.41 per diluted share, for the quarter ended March 31, 2017, and $54.9 million, or $0.39 per diluted share, for the quarter ended June 30, 2016.

Net interest income for the quarter ended June 30, 2017 was $131.3 million, an increase of $1.9 million compared to $129.3 million for the quarter ended March 31, 2017, and an increase of $10.8 million compared to $120.4 million for the quarter ended June 30, 2016The increase in net interest income compared to the first quarter of 2017 was primarily due to higher average balances and yields on loans, partially offset by lower average balances and yields on investment securities, as well as higher deposit rates.  The increase compared to the second quarter of 2016 was due to higher average balances of loans and investment securities and higher earning asset yields, partially offset by higher average deposit balances and rates.

Net interest margin was 3.02%, 3.00% and 2.88% for the quarters ended June 30, 2017, March 31, 2017, and June 30, 2016, respectively.  Net interest margin increased during the second quarter of 2017 by two basis points, primarily due to higher earning asset yields, partially offset by higher costs related to time deposits.  Premium amortization in the investment securities portfolio increased by $1.4 million over the first quarter of 2017.  The 14 basis point increase compared to the second quarter of 2016 was due to higher yields on investments and interest bearing deposits, partially offset by higher deposit costs.   

Results for the quarter ended June 30, 2017 included a provision for credit losses of $4.4 million compared to $4.5 million in the quarter ended March 31, 2017 and $1.9 million in the quarter ended June 30, 2016.  

Noninterest income was $48.9 million in the quarter ended June 30, 2017, a decrease of $0.5 million compared to noninterest income of $49.4 million in the quarter ended March 31, 2017 and an increase of $2.5 million compared to noninterest income of $46.4 million in the quarter ended June 30, 2016.  The decrease in noninterest income compared to the first quarter of 2017 was primarily due to $1.7 million lower bank owned life insurance (BOLI) income, and $1 million lower other service charges and fees due to lower sales of insurance and investment products, partially offset by $2.4 million higher other income from partner credit card incentives and recoveries.  The increase in noninterest income compared to the second quarter of 2016 was primarily due to $3.6 million higher other income, partially offset by $0.9 million lower BOLI income and $0.8 million lower other service charges and fees.     

Noninterest expense was $85.2 million for the quarter ended June 30, 2017, an increase of $0.9 million from $84.3 million in the quarter ended March 31, 2017, and an increase of $6.8 million from $78.5 million in the quarter ended June 30, 2016.  The increase in noninterest expense compared to the first quarter of 2017 was primarily due to $2.1 million higher contracted services and professional fees, partially offset by $0.8 million lower advertising and marketing expense, $0.4 million lower other expense and $0.3 million lower occupancy expense.  The increase in contracted services and professional fees was primarily due to system upgrades and product enhancements.  The increase in noninterest expense compared to the second quarter of 2016 was primarily due to a $2.5 million increase in contracted services and professional fees, a $1.9 million increase in cards rewards program expense, a $1.3 million increase in salaries and employee benefits, and a $0.9 million higher regulatory assessment.  Cards rewards program expense in the second quarter of 2016 included a benefit due to the change in terms related to the expiration of our debit card reward points.   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 47.3%, 47.2% and 47.0% for the quarters ended June 30, 2017, March 31, 2017 and June 30, 2016, respectively. 

The effective tax rate for the second quarter of 2017 was 37.1% compared with 36.9% in the previous quarter and 36.5% percent in the same quarter last year.  The increase in the effective tax rate in the second quarter of 2017 compared to the prior quarter was primarily due to the lower level of BOLI income received in the second quarter of 2017, slightly offset by a $0.75 million release of tax reserves.

________________
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 $20.4 billion at June 30, 2017, compared to $19.8 billion at March 31, 2017 and $19.1 billion at June 30, 2016.

The investment securities portfolio was $5.1 billion at June 30, 2017, compared to $5.3 billion at March 31, 2017 and $4.6 billion at June 30, 2016.  The portfolio remains largely comprised of securities issued by U.S. government agencies.

Total loans and leases were $12.1 billion at June 30, 2017, an increase of $280.9 million, or 2.4%, from $11.8 billion at March 31, 2017 and up $874.7 million, or 7.8%, from $11.2 billion at June 30, 2016.  The growth in loans and leases compared to March 31, 2017 was due to growth across all categories.  Compared to June 30, 2016, the growth in loans and leases was due to increases across all loan categories.

Total deposits were $17.5 billion at June 30, 2017, an increase of $514.1 million, or 3.0%, compared with $16.9 billion at March 31, 2017, and an increase of $1.3 billion, or 8.3%, compared to $16.1 billion at June 30, 2016. 

Asset Quality

The Company's asset quality remained solid during the second quarter of 2017. Total non-performing assets were $8.1 million, or 0.07% of total loans and leases, at June 30, 2017, a slight increase of $0.4 million from non-performing assets of $7.7 million, or 0.07% of total loans and leases, at March 31, 2017 and down $5.4 million from non­performing assets of $13.5 million, or 0.12% of total loans and leases, at June 30, 2016.

Net charge offs for the quarter ended June 30, 2017 were $3.4 million, or 0.11% of average loans and leases on an annualized basis, compared to $4.1 million, or 0.15% of average loans and leases on an annualized basis for the quarter ended March 31, 2017 and $2.7 million, or 0.10% of average loans and leases on an annualized basis for the quarter ended June 30, 2016. 

The ratio of allowance for loan and lease losses to total loans and leases was 1.13% at June 30, 2017 compared to 1.15% at March 31, 2017 and 1.22% at June 30, 2016. 

Capital

Total stockholders' equity was $2.6 billion at June 30, 2017, compared to $2.5 billion at both March 31, 2017 and June 30, 2016.   

The tier 1 leverage, common equity tier 1, and total capital ratios were 8.70%, 12.73% and 13.81%, respectively, at June 30, 2017, compared with 8.52%, 12.78% and 13.87% at March 31, 2017 and 8.42%, 12.45%, and 13.58% at June 30, 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, 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:  51037675.  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 August 6, 2017.  Access the replay by dialing (855) 859-2056 or (404) 537-3406 and entering the conference ID:  51037675.

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 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.

   
Financial Highlights                         Table 1  
    For the Three Months Ended   For the Six Months Ended   
    June 30,    March 31,   June 30,    June 30,   
(dollars in thousands, except per share data)   2017   2017   2016   2017   2016  
Operating Results:                                
Net interest income   $   131,254   $   129,345   $   120,427   $   260,599   $   237,739  
Provision for loan and lease losses       4,400       4,500       1,900       8,900       2,600  
Noninterest income       48,870       49,407       46,371       98,277       119,890  
Noninterest expense       85,241       84,339       78,473       169,580       163,537  
Net income       56,895       56,740       54,860       113,635       120,391  
Basic earnings per share       0.41       0.41       0.39       0.81       0.86  
Diluted earnings per share       0.41       0.41       0.39       0.81       0.86  
Dividends declared per share       0.22       0.22       0.22       0.44       0.22  
Dividend payout ratio       53.66 %     53.66 %     54.68 %     54.32 %     25.58 %
Supplemental Income Statement Data (non-GAAP):                                
Core net interest income   $   131,254   $   129,345   $   120,427   $   260,599   $   237,739  
Core noninterest income       48,870       49,407       46,371       98,277       94,162  
Core noninterest expense       84,784       83,955       78,473       168,739       160,990  
Core net income       57,181       56,982       54,860       114,163       105,933  
Core basic earnings per share   $   0.41   $   0.41   $   0.39   $   0.82   $   0.76  
Core diluted earnings per share   $   0.41   $   0.41   $   0.39   $   0.82   $   0.76  
Performance Ratio:                                
Net interest margin        3.02   3.00     2.88     3.01   2.82 %
Core net interest margin (non-GAAP)       3.02   3.00     2.88     3.01   2.82 %
Efficiency ratio        47.32   47.18     47.04     47.25   45.72 %
Core efficiency ratio (non-GAAP)       47.07   46.96     47.04     47.02   48.50 %
Return on average total assets        1.16   1.16     1.16     1.16   1.27 %
Core return on average total assets (non-GAAP)       1.16   1.17     1.16     1.17   1.11 %
Return on average tangible assets       1.22   1.23     1.23     1.22   1.34 %
Core return on average tangible assets (non-GAAP)       1.23   1.23     1.23     1.23   1.18 %
Return on average total stockholders' equity        9.03   9.25     8.86     9.13   9.20 %
Core return on average total stockholders' equity (non-GAAP)       9.07   9.29     8.86     9.18   8.10 %
Return on average tangible stockholders' equity (non-GAAP)       14.89   15.41     14.75     15.14   14.81 %
Core return on average tangible stockholders’ equity (non-GAAP)       14.96   15.48     14.75     15.22   13.03 %
Average Balances:                                
Average loans and leases   $   11,903,255   $   11,582,645   $   11,074,430   $   11,743,835   $   10,951,295  
Average earning assets       17,453,655       17,470,726       16,797,108       17,453,094       16,928,677  
Average assets       19,692,222       19,769,508       18,950,020       19,730,651       19,120,180  
Average deposits       16,782,887       16,900,354       15,895,214       16,841,296       15,920,939  
Average shareholders' equity       2,528,388       2,488,519       2,491,138       2,508,564       2,630,307  
Market Value Per Share:                                
  Closing       30.62       29.92      N/A        30.62      N/A   
  High       31.34       34.85      N/A        35.32      N/A   
  Low       26.96       29.13      N/A        26.96      N/A   
                                 

 

                   
     As of     As of     As of     As of   
     June 30,      March 31,     December 31,      June 30,    
    2017   2017   2016   2016  
Balance Sheet Data:                          
Loans and leases   $   12,062,392   $   11,781,496   $   11,520,378   $   11,187,695  
Total assets       20,373,974       19,792,785       19,661,829       19,052,593  
Total deposits       17,452,262       16,938,178       16,794,532       16,122,104  
Total stockholders' equity       2,552,602       2,505,994       2,476,485       2,501,008  
                           
Per Share of Common Stock:                          
Book value   $   18.29   $   17.96   $   17.75   $   17.93  
Tangible book value       11.16       10.82       10.61       10.80  
                           
Asset Quality Ratios:                          
Non-accrual loans and leases / total loans and leases       0.06   0.06 %     0.08 %     0.12
Allowance for loan and lease losses / total loans and leases     1.13   1.15 %     1.18 %     1.22
                           
Capital Ratios:                          
Common Equity Tier 1 Capital Ratio         12.73     12.78 %     12.75 %     12.45
Tier 1 Capital Ratio       12.73   12.78 %     12.75 %     12.45
Total Capital Ratio       13.81   13.87 %     13.85 %     13.58
Tier 1 Leverage Ratio       8.70   8.52 %     8.36 %     8.42
Total stockholders' equity to total assets       12.53   12.66 %     12.60 %     13.13
Tangible stockholders' equity to tangible assets (non-GAAP)       8.04   8.04 %     7.93 %     8.34
                           
Non-Financial Data:                          
Number of branches       62       62       62       62  
Number of ATMs       312       311       311       312  
Number of Full-Time Equivalent Employees       2,191       2,195       2,179       2,199  
                           

 

 
Consolidated Statements of Income   Table 2
    Three Months Ended   Six Months Ended 
    June 30,    March 31,   June 30,    June 30, 
(dollars in thousands, except per share amounts)   2017   2017   2016   2017   2016
Interest income                              
Loans and lease financing   $   114,179   $   109,266   $   105,701   $   223,445   $   210,058
Available-for-sale securities       25,059       26,429       19,453       51,488       36,012
Other       781       1,226       1,907       2,007       4,803
Total interest income       140,019       136,921       127,061       276,940       250,873
Interest expense                              
Deposits       8,760       7,570       6,541       16,330       12,970
Short-term borrowings and long-term debt       5       6       93       11       164
Total interest expense       8,765       7,576       6,634       16,341       13,134
Net interest income       131,254       129,345       120,427       260,599       237,739
Provision for loan and lease losses       4,400       4,500       1,900       8,900       2,600
Net interest income after provision for loan and lease losses       126,854       124,845       118,527       251,699       235,139
Noninterest income                              
Service charges on deposit accounts       9,412       9,555       9,395       18,967       19,184
Credit and debit card fees       14,157       14,479       13,810       28,636       27,629
Other service charges and fees       8,110       9,097       8,914       17,207       18,141
Trust and investment services income       7,526       7,338       7,323       14,864       14,728
Bank-owned life insurance       2,927       4,578       3,792       7,505       6,148
Investment securities gains, net             —       3             25,731
Other       6,738       4,360       3,134       11,098       8,329
Total noninterest income       48,870       49,407       46,371       98,277       119,890
Noninterest expense                              
Salaries and employee benefits       43,257       43,300       41,955       86,557       86,656
Contracted services and professional fees       12,388       10,308       9,939       22,696       22,694
Occupancy       5,023       5,321       4,809       10,344       10,121
Equipment       4,527       4,197       4,116       8,724       7,943
Regulatory assessment and fees       3,750       3,774       2,846       7,524       5,323
Advertising and marketing       1,222       2,028       1,425       3,250       3,049
Card rewards program       4,618       4,511       2,729       9,129       6,231
Other       10,456       10,900       10,654       21,356       21,520
Total noninterest expense       85,241       84,339       78,473       169,580       163,537
Income before provision for income taxes       90,483       89,913       86,425       180,396       191,492
Provision for income taxes       33,588       33,173       31,565       66,761       71,101
Net income   $   56,895   $   56,740   $   54,860   $   113,635   $   120,391
Basic earnings per share   $   0.41   $   0.41   $   0.39   $   0.81   $   0.86
Diluted earnings per share   $   0.41   $   0.41   $   0.39   $   0.81   $   0.86
Dividends declared per share   $   0.22   $   0.22   $   0.22   $   0.44   $   0.22
Basic weighted-average outstanding shares       139,546,615       139,545,728       139,459,620       139,546,174       139,459,620
Diluted weighted-average outstanding shares       139,646,117       139,637,410       139,459,620       139,644,557       139,459,620
                               

 

 
Consolidated Balance Sheets   Table 3
    June 30,    March 31,   December 31,    June 30, 
(dollars in thousands)   2017     2017     2016     2016  
Assets                        
Cash and due from banks   $   355,752     $   249,953     $   253,827     $   356,148  
Interest-bearing deposits in other banks       872,013         527,659         798,231         975,866  
Investment securities       5,126,869         5,260,262         5,077,514         4,601,267  
Loans and leases       12,062,392         11,781,496         11,520,378         11,187,695  
Less: allowance for loan and lease losses       136,883         135,847         135,494         136,360  
Net loans and leases       11,925,509         11,645,649         11,384,884         11,051,335  
                         
Premises and equipment, net       292,959         295,608         300,788         303,715  
Other real estate owned and repossessed personal property       329         329         329         205  
Accrued interest receivable       39,739         39,386         41,971         35,734  
Bank-owned life insurance       432,726         429,800         429,209         429,673  
Goodwill       995,492         995,492         995,492         995,492  
Other intangible assets       14,877         15,800         16,809         19,064  
Other assets       317,709         332,847         362,775         284,094  
Total assets   $   20,373,974     $   19,792,785     $   19,661,829     $   19,052,593  
Liabilities and Stockholders' Equity                        
Deposits:                        
Interest-bearing   $   11,580,664     $   10,917,631     $   10,801,915     $   10,620,377  
Noninterest-bearing       5,871,598         6,020,547         5,992,617         5,501,727  
Total deposits       17,452,262         16,938,178         16,794,532         16,122,104  
Short-term borrowings               —         9,151         34,951  
Long-term debt       41         41         41         48  
Retirement benefits payable       134,400         133,819         132,904         137,982  
Other liabilities       234,669         214,753         248,716         256,500  
Total liabilities       17,821,372         17,286,791         17,185,344         16,551,585  
                         
Stockholders' equity                        
Common stock ($0.01 par value; authorized 300,000,000 shares; issued and outstanding 139,546,615 shares
as of June 30, 2017, 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 June 30, 2016)
      1,395         1,395         1,395         1,395  
Additional paid-in capital       2,488,091         2,486,596         2,484,251         2,479,980  
Retained earnings       130,767         104,695         78,850         24,860  
Accumulated other comprehensive loss, net       (67,651 )       (86,692 )       (88,011 )       (5,227 )
Total stockholders' equity       2,552,602         2,505,994         2,476,485         2,501,008  
Total liabilities and stockholders' equity   $   20,373,974     $   19,792,785     $   19,661,829     $   19,052,593  
                         

 

 
Average Balances and Interest Rates                                                  Table 4   
    Three Months Ended      Three Months Ended      Three Months Ended   
    June 30, 2017     March 31, 2017     June 30, 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   $   312.8   $   0.8     1.00   $   640.2   $   1.2     0.78   $   1,516.6   $   1.9     0.51 %
Available-for-Sale Investment Securities       5,208.8       25.0     1.93         5,236.6       26.4     2.05         4,206.1       19.4     1.86  
Loans and Leases (1)                                                      
Commercial and industrial       3,279.2       25.7     3.15         3,233.6       24.3     3.04         3,257.4       23.7     2.93  
Real estate - commercial       2,638.3       23.8     3.62         2,481.2       22.2     3.63         2,241.8       20.7     3.71  
Real estate - construction       509.7       4.3     3.41         460.3       3.7     3.25         421.9       3.4     3.27  
Real estate - residential       3,782.1       38.6     4.09         3,723.7       37.6     4.10         3,522.8       36.5     4.16  
Consumer       1,525.8       20.6     5.40         1,513.4       20.3     5.43         1,442.0       20.0     5.58  
Lease financing       168.1       1.2     2.84         170.5       1.2     2.77         188.5       1.4     2.91  
Total Loans and Leases      11,903.2      114.2     3.85         11,582.7       109.3     3.83         11,074.4       105.7     3.84  
Other Earning Assets       10.8           0.99         11.2       —     0.77         —       —     —  
Total Earning Assets (2)      17,435.6      140.0     3.22         17,470.7       136.9     3.18         16,797.1       127.0     3.04  
Cash and Due from Banks       319.4                   324.7                   303.7            
Other Assets       1,937.2                   1,974.1                   1,849.2            
Total Assets   $  19,692.2               $   19,769.5               $   18,950.0            
                                                       
Interest-Bearing Liabilities                                                      
Interest-Bearing Deposits                                                      
Savings   $   4,488.8   $   0.7     0.07   $   4,506.4   $   0.7     0.06   $   4,347.8   $   0.6     0.06 %
Money Market       2,618.6       0.8     0.12         2,494.3       0.6     0.09         2,281.9       0.5     0.09  
Time       3,887.5       7.2     0.75         3,985.8       6.3     0.65         3,745.3       5.4     0.58  
Total Interest-Bearing Deposits      10,994.9       8.7     0.32         10,986.5       7.6     0.28         10,375.0       6.5     0.25  
Short-Term Borrowings       1.7           0.89         3.9       —     0.54         202.9       0.1     0.18  
Total Interest-Bearing Liabilities      10,996.6       8.7     0.32         10,990.4       7.6     0.28         10,577.9       6.6     0.25  
Net Interest Income         $  131.3               $   129.3               $   120.4      
Interest Rate Spread                 2.90                 2.90                 2.79 %
Net Interest Margin                 3.02                 3.00                 2.88 %
Noninterest-Bearing Demand Deposits       5,788.0                   5,913.9                   5,520.3            
Other Liabilities       379.2                   376.7                   360.7            
Stockholders' Equity       2,528.4                   2,488.5                   2,491.1            
Total Liabilities and Stockholders' Equity $  19,692.2               $   19,769.5               $   18,950.0            
                                                       

 

   
Average Balances and Interest Rates                                    Table 5   
    Six Months Ended      Six Months Ended   
    June 30, 2017     June 30, 2016  
     Average     Income/       Yield/       Average     Income/     Yield/   
(dollars in millions)    Balance     Expense       Rate       Balance     Expense     Rate   
Earning Assets                                      
Interest-Bearing Deposits in Other Banks   $   475.6   $   2.0       0.85   $   1,894.9   $   4.8     0.51 %
Available-for-Sale Investment Securities       5,222.6       51.5       1.99         4,082.5       36.0     1.77  
Loans and Leases (1)                                      
Commercial and industrial       3,256.5       50.0       3.10         3,176.5       46.7     2.95  
Real estate - commercial       2,560.2       46.0       3.62         2,240.5       41.6     3.73  
Real estate - construction       485.1       8.0       3.34         413.2       6.7     3.26  
Real estate - residential       3,753.1       76.3       4.10         3,502.2       72.5     4.16  
Consumer       1,519.7       40.8       5.42         1,428.7       39.9     5.61  
Lease financing       169.3       2.3       2.80         190.2       2.7     2.92  
Total Loans and Leases       11,743.9       223.4       3.84         10,951.3       210.1     3.86  
Other Earning Assets       11.0             0.88         —       —     —  
Total Earning Assets (2)       17,453.1       276.9       3.20         16,928.7       250.9     2.98  
Cash and Due from Banks       322.0                     301.3            
Other Assets       1,955.6                     1,890.2            
Total Assets   $   19,730.7                 $   19,120.2            
                                       
Interest-Bearing Liabilities                                      
Interest-Bearing Deposits                                      
Savings   $   4,497.5   $   1.4       0.06   $   4,348.9   $   1.3     0.06 %
Money Market       2,556.8       1.3       0.10         2,340.5       1.1     0.09  
Time       3,936.4       13.6       0.70         3,785.0       10.6     0.56  
Total Interest-Bearing Deposits       10,990.7       16.3       0.30         10,474.4       13.0     0.25  
Short-Term Borrowings       2.8             0.65         213.5       0.2     0.15  
Total Interest-Bearing Liabilities       10,993.5       16.3       0.30         10,687.9       13.2     0.25  
Net Interest Income         $   260.6                 $   237.7      
Interest Rate Spread                   2.90             2.73 %
Net Interest Margin                   3.01             2.82 %
Noninterest-Bearing Demand Deposits       5,850.6                     5,446.5            
Other Liabilities       378.0                     355.5            
Stockholders' Equity       2,508.6                     2,630.3            
Total Liabilities and Stockholders' Equity   $   19,730.7                 $   19,120.2            
                                       

 

 
Analysis of Change in Net Interest Income                  Table 6 
    Three Months Ended June 30, 2017
    Compared to March 31, 2017
(dollars in millions)    Volume     Rate    Total
Change in Interest Income:                  
Interest-Bearing Deposits in Other Banks   $   (0.7 )   $   0.3     $   (0.4 )
Available-for-Sale Investment Securities       (0.2 )       (1.2 )       (1.4 )
Loans and Leases                  
Commercial and industrial       0.3         1.1         1.4  
Real estate - commercial       1.4         0.2         1.6  
Real estate - construction       0.4         0.2         0.6  
Real estate - residential       0.6         0.4         1.0  
Consumer       0.2         0.1         0.3  
Total Loans and Leases       2.9         2.0         4.9  
Total Change in Interest Income       2.0         1.1         3.1  
                   
Change in Interest Expense:                  
Interest-Bearing Deposits                  
Savings               0.1         0.1  
Money Market               0.2         0.2  
Time       (0.2 )       1.1         0.9  
Total Interest-Bearing Deposits       (0.2 )       1.4         1.2  
Total Change in Interest Expense       (0.2 )       1.4         1.2  
Change in Net Interest Income   $   2.2     $   (0.3 )   $   1.9  
                   

 

 
Analysis of Change in Net Interest Income                  Table 7 
    Three Months Ended June 30, 2017
    Compared to June 30, 2016
(dollars in millions)    Volume     Rate    Total
Change in Interest Income:                  
Interest-Bearing Deposits in Other Banks   $   (2.2 )   $   1.1     $   (1.1 )
Available-for-Sale Investment Securities       4.8         0.8         5.6  
Loans and Leases                  
Commercial and industrial       0.2         1.8         2.0  
Real estate - commercial       3.6         (0.5 )       3.1  
Real estate - construction       0.7         0.2         0.9  
Real estate - residential       2.6         (0.5 )       2.1  
Consumer       1.2         (0.6 )       0.6  
Lease financing       (0.2 )               (0.2 )
Total Loans and Leases       8.1         0.4         8.5  
Total Change in Interest Income       10.7         2.3         13.0  
                   
Change in Interest Expense:                  
Interest-Bearing Deposits                  
Savings               0.1         0.1  
Money Market       0.1         0.2         0.3  
Time       0.2         1.6         1.8  
Total Interest-Bearing Deposits       0.3         1.9         2.2  
Short-term Borrowings       (0.2 )       0.1         (0.1 )
Total Change in Interest Expense       0.1         2.0         2.1  
Change in Net Interest Income   $   10.6     $   0.3     $   10.9  
                   

 

 
Analysis of Change in Net Interest Income                  Table 8 
    Six Months Ended June 30, 2017
    Compared to June 30, 2016
(dollars in millions)    Volume     Rate    Total
Change in Interest Income:                  
Interest-Bearing Deposits in Other Banks   $   (4.9 )   $   2.1     $   (2.8 )
Available-for-Sale Investment Securities       10.9         4.6         15.5  
Loans and Leases                  
Commercial and industrial       1.2         2.1         3.3  
Real estate - commercial       5.8         (1.4 )       4.4  
Real estate - construction       1.2         0.1         1.3  
Real estate - residential       5.1         (1.3 )       3.8  
Consumer       2.5         (1.6 )       0.9  
Lease financing       (0.3 )               (0.3 )
Total Loans and Leases       15.5         (2.1 )       13.4  
Total Change in Interest Income       21.5         4.6         26.1  
                   
Change in Interest Expense:                  
Interest-Bearing Deposits                  
Savings               0.1         0.1  
Money Market       0.1         0.2         0.3  
Time       0.4         2.6         3.0  
Total Interest-Bearing Deposits       0.5         2.9         3.4  
Short-Term Borrowings       (0.3 )       0.1         (0.2 )
Total Change in Interest Expense       0.2         3.0         3.2  
Change in Net Interest Income   $   21.3     $   1.6     $   22.9  
                   

 

 
Loans and Leases                       Table 9
    June 30,    March 31,   December 31,    June 30, 
(dollars in thousands)   2017   2017   2016   2016
Commercial and industrial   $   3,331,092   $   3,243,508   $   3,239,600   $   3,288,503
Real estate:                        
Commercial       2,545,479       2,532,253       2,343,495       2,181,732
Construction       555,794       469,741       450,012       424,743
Residential       3,921,881       3,864,509       3,796,459       3,654,525
Total real estate       7,023,154       6,866,503       6,589,966       6,261,000
Consumer       1,527,470       1,503,129       1,510,772       1,452,088
Lease financing       180,676       168,356       180,040       186,104
Total loans and leases   $   12,062,392   $   11,781,496   $   11,520,378   $   11,187,695
                         

 

 
Deposits                       Table 10
    June 30,    March 31,   December 31,    June 30, 
(dollars in thousands)   2017   2017   2016   2016
Demand   $   5,871,598   $   6,020,547   $   5,992,617   $   5,501,727
Savings       4,568,600       4,503,663       4,609,306       4,366,333
Money Market       2,944,005       2,496,642       2,454,013       2,472,220
Time       4,068,059       3,917,326       3,738,596       3,781,824
  Total Deposits   $   17,452,262   $   16,938,178   $   16,794,532   $   16,122,104
                         

 

 
Non-Performing Assets and Accruing Loans and Leases Past Due 90 Days or More                       Table 11
    June 30,    March 31,   December 31,    June 30, 
(dollars in thousands)   2017   2017   2016   2016
Non-Performing Assets                        
Non-Accrual Loans and Leases                        
Commercial Loans:                         
Commercial and industrial   $   2,155   $   2,154   $   2,730   $   3,598
Real estate - construction             —       —       324
Lease financing             153       153       173
Total Commercial Loans       2,155       2,307       2,883       4,095
Residential       5,569       5,023       6,547       9,231
Total Non-Accrual Loans and Leases       7,724       7,330       9,430       13,326
Other Real Estate Owned       329       329       329       205
Total Non-Performing Assets   $   8,053   $   7,659   $   9,759   $   13,531
                         
Accruing Loans and Leases Past Due 90 Days or More                        
Commercial Loans:                        
Commercial and industrial   $   1,275   $   309   $   449   $   —
Real estate - construction       350       —       —       —
Lease financing             84       83       —
Total Commercial Loans       1,625       393       532       —
Residential       1,543       1,437       866       1,334
Consumer       1,873       1,718       1,870       1,568
Total Accruing Loans and Leases Past Due 90 Days or More   $   5,041   $   3,548   $   3,268   $   2,902
                         
Restructured Loans on Accrual Status and Not Past Due 90 Days or More       38,886       50,758       44,496       47,955
 Total Loans and Leases    $   12,062,392   $   11,781,496   $   11,520,378   $   11,187,695
                         

 

 
Allowance for Loan and Lease Losses                             Table 12  
    For the Three Months Ended    For the Six Months Ended   
    June 30,    March 31,   June 30,    June 30,    June 30,   
(dollars in thousands)   2017     2017     2016     2017       2016    
Balance at Beginning of Period   $   135,847     $   135,494     $   137,154     $   135,494     $   135,484    
Loans and Leases Charged-Off                                
Commercial Loans:                                
Commercial and industrial       (75 )       (855 )       (52 )       (930 )       (138 )  
Lease financing       (146 )       —         —         (146 )       —    
Total Commercial Loans       (221 )       (855 )       (52 )       (1,076 )       (138 )  
Residential               (22 )       (456 )       (22 )       (528 )  
Consumer       (5,251 )       (5,572 )       (4,295 )       (10,823 )       (8,501 )  
Total Loans and Leases Charged-Off       (5,472 )       (6,449 )       (4,803 )       (11,921 )       (9,167 )  
Recoveries on Loans and Leases Previously Charged-Off                                
Commercial Loans:                                
Commercial and industrial       129         114         19         243         222    
Real estate - commercial       55         77         47         132         3,246    
Lease financing               —         1                 1    
Total Commercial Loans       184         191         67         375         3,469    
Residential       150         321         460         471         766    
Consumer       1,774         1,790         1,582         3,564         3,208    
Total Recoveries on Loans and Leases Previously Charged-Off       2,108         2,302         2,109         4,410         7,443    
Net Loans and Leases Charged-Off       (3,364 )       (4,147 )       (2,694 )       (7,511 )       (1,724 )  
Provision for Credit Losses       4,400         4,500         1,900         8,900         2,600    
Balance at End of Period   $   136,883     $   135,847     $   136,360     $   136,883     $   136,360    
Average Loans and Leases Outstanding   $   11,903,255     $   11,582,645     $   11,074,430     $   11,743,835     $   10,951,295    
Ratio of Net Loans and Leases Charged-Off to Average Loans and Leases Outstanding       0.11     0.15     0.10     0.13     0.03   %
Ratio of Allowance for Loan and Lease Losses to Loans and Leases Outstanding       1.13     1.15     1.22     1.13     1.22   %
                                 

 

 
GAAP to Non-GAAP Reconciliation                     Table 13  
    For the Three Months Ended    For the Six Months Ended   
    June 30,    March 31,   June 30,    June 30,   
(dollars in thousands, except per share amounts)   2017    2017   2016   2017    2016  
Income Statement Data:                                
Net income   $   56,895   $   56,740   $   54,860   $   113,635   $   120,391  
                                 
Average total stockholders' equity   $   2,528,388   $   2,488,519   $   2,491,138   $   2,508,564   $   2,630,307  
Less: average goodwill       995,492       995,492       995,492       995,492       995,492  
Average tangible stockholders' equity   $   1,532,896   $   1,493,027   $   1,495,646   $   1,513,072   $   1,634,815  
                                 
Average total assets   $   19,692,222   $   19,769,508   $   18,950,020   $   19,730,651   $   19,120,180  
Less: average goodwill       995,492       995,492       995,492       995,492       995,492  
Average tangible assets   $   18,696,730   $   18,774,016   $   17,954,528   $   18,735,159   $   18,124,688  
                                 
Return on average total stockholders' equity(a)       9.03     9.25     8.86     9.13     9.20 %
Return on average tangible stockholders' equity (non-GAAP)(a)       14.89     15.41     14.75     15.14     14.81 %
                                 
Return on average total assets(a)       1.16     1.16     1.16     1.16     1.27
Return on average tangible assets (non-GAAP)(a)       1.22     1.23     1.23     1.22     1.34
                                 
Average stockholders' equity to average assets       12.84     12.59     13.15     12.71     13.76
Tangible average stockholders' equity to tangible average assets (non-GAAP)       8.20     7.95     8.33     8.08     9.02
                                 

 

 
     As of     As of     As of     As of   
    June 30,    March 31,   December 31,    June 30,   
    2017   2017   2016   2016  
Balance Sheet Data:                          
Total stockholders' equity   $   2,552,602   $   2,505,994   $   2,476,485   $   2,501,008  
Less: goodwill       995,492       995,492       995,492       995,492  
Tangible stockholders' equity   $   1,557,110   $   1,510,502   $   1,480,993   $   1,505,516  
                           
Total assets   $   20,373,974   $   19,792,785   $   19,661,829   $   19,052,593  
Less: goodwill       995,492       995,492       995,492       995,492  
Tangible assets   $   19,378,482   $   18,797,293   $   18,666,337   $   18,057,101  
                           
Shares outstanding       139,546,615       139,546,615       139,530,654       139,459,620  
                           
Total stockholders' equity to total assets       12.53     12.66     12.60     13.13 %
Tangible stockholders' equity to tangible assets (non-GAAP)       8.04     8.04     7.93     8.34 %
                           
Book value per share   $   18.29   $   17.96   $   17.75   $   17.93  
Tangible book value per share (non-GAAP)   $   11.16   $ 10.82   $   10.61   $   10.80  
                           

 

 
GAAP to Non-GAAP Reconciliation   Table 14
    For the Three Months Ended   For the Six Months Ended 
    June 30,    March 31,   June 30,    June 30, 
(dollars in thousands, except per share amounts)   2017   2017   2016    2017   2016
Net interest income   $   131,254     $   129,345     $   120,427   $   260,599     $   237,739  
Core net interest income (non-GAAP)   $   131,254     $   129,345     $   120,427   $   260,599     $   237,739  
                               
Noninterest income   $   48,870     $   49,407     $   46,371   $   98,277     $   119,890  
Loss (gain) on sale of securities               —         —               (3,050 )
Gain on sale of stock (Visa/MasterCard)               —         —               (22,678 )
Core noninterest income (non-GAAP)   $   48,870     $   49,407     $   46,371   $   98,277     $   94,162  
                               
Noninterest expense   $   85,241     $   84,339     $   78,473   $   169,580     $   163,537  
One-time items(a)       (457 )       (384 )       —       (841 )       (2,547 )
Core noninterest expense (non-GAAP)   $   84,784     $   83,955     $   78,473   $   168,739     $   160,990  
                               
Net income   $   56,895     $   56,740     $   54,860   $   113,635     $   120,391  
Gain on sale of securities               —         —               (3,050 )
Gain on sale of stock (Visa/MasterCard)               —         —               (22,678 )
One-time items(a)       457         384         —       841         2,547  
Tax adjustments(b)       (171 )       (142 )       —       (313 )       8,723  
Total core adjustments       286         242         —       528         (14,458 )
Core net income (non-GAAP)   $   57,181     $   56,982     $   54,860   $   114,163     $   105,933  
Core basic earnings per share (non-GAAP)   $   0.41     $   0.41     $   0.39   $   0.82     $   0.76  
Core diluted earnings per share (non-GAAP)   $   0.41     $   0.41     $   0.39   $   0.82     $   0.76  
                               
Investor Relations Contact:
Kevin Haseyama, CFA
(808) 525-6268
khaseyama@fhb.com

Media Contact:
Susan Kam
(808) 525-6254
skam@fhb.com

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