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

October 26, 2017 at 4:05 PM EDT

HONOLULU, Oct. 26, 2017 (GLOBE NEWSWIRE) -- First Hawaiian, Inc. (NASDAQ:FHB), (the “Company”) today reported financial results for the quarter ended September 30, 2017.

Highlights

  • Net income for the quarter ended September 30, 2017 was $58.4 million, or $0.42 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

“I’m pleased that we were able to celebrate the one year anniversary of our initial public offering with a solid third quarter,” said Bob Harrison, Chairman and Chief Executive Officer.  “Our overall financial performance was strong, asset quality remained excellent, and the local economy continues to do well.”

On October 20, 2017, the Company’s Board of Directors declared a quarterly cash dividend of $0.22 per share.  The dividend will be payable on December 8, 2017 to stockholders of record at the close of business on November 27, 2017.

________________
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.

Earnings Highlights

Net income for the quarter ended September 30, 2017 was $58.4 million, or $0.42 per diluted share, compared to $56.9 million, or $0.41 per diluted share, for the quarter ended June 30, 2017 and $53.2 million, or $0.38 per diluted share, for the quarter ended September 30, 2016.  Core net income for the quarter ended September 30, 2017 was $57.0 million, or $0.41 per diluted share, compared to $57.2 million, or $0.41 per diluted share, for the quarter ended June 30, 2017, and $55.2 million, or $0.40 per diluted share, for the quarter ended September 30, 2016.

Net interest income for the quarter ended September 30, 2017 was $133.3 million, an increase of $2.0 million compared to $131.3 million for the quarter ended June 30, 2017 and an increase of $10.6 million compared to $122.7 million for the quarter ended September 30, 2016.  The increase in net interest income compared to the second quarter of 2017 was primarily due to higher average balances and yields on loans and interest bearing deposits in other banks, partially offset by higher average balances and rates on deposits as well as lower average balances and yields on investment securities.  The increase compared to the third quarter of 2016 was due to higher average balances and yields on loans and investment securities, partially offset by higher average deposit balances and rates.

Net interest margin was 2.96%, 3.02% and 2.87% for the quarters ended September 30, 2017, June 30, 2017, and September 30, 2016, respectively.  Net interest margin decreased during the third quarter of 2017 by six basis points, primarily due to higher costs related to public time deposits and lower yields on investment securities, partially offset by higher yields on loans and interest-bearing deposits in other banks.  The nine basis point increase compared to the third quarter of 2016 was due to higher yields on earnings assets, partially offset by higher deposit costs.   

Results for the quarter ended September 30, 2017 included a provision for credit losses of $4.5 million compared to $4.4 million in the quarter ended June 30, 2017 and $2.1 million in the quarter ended September 30, 2016.  

Noninterest income was $48.5 million in the quarter ended September 30, 2017, a decrease of $0.4 million compared to noninterest income of $48.9 million in the quarter ended June 30, 2017 and a decrease of $0.2 million compared to noninterest income of $48.7 million in the quarter ended September 30, 2016.  The decrease in noninterest income compared to the second quarter of 2017 was primarily due to $1.4 million lower other income and $0.3 million lower service charges on deposit accounts, largely offset by increases across the remaining noninterest income items.  Other income in the third quarter of 2017 included $0.4 million lower swap fee income compared to the prior quarter and a $2.7 million gain from the sale of a bank property.  Other income in the second quarter of 2017 included $2.4 million from partner credit card incentives and recoveries.      

Noninterest expense was $83.7 million for the quarter ended September 30, 2017, a decrease of $1.5 million from $85.2 million in the quarter ended June 30, 2017, and an increase of $0.9 million from $82.8 million in the quarter ended September 30, 2016.  The decrease in noninterest expense compared to the second quarter of 2017 was primarily due to $1.7 million lower salaries and employee benefits and $1.6 million lower contracted services and professional fees, partially offset by $0.8 million higher occupancy expense and $0.8 million higher advertising and marketing expense.  The decrease in salaries and benefits was primarily due to equity compensation forfeitures due to retirements and a change in the estimate of our compensation liabilities.  Contracted services and professional fees in the second quarter of 2017 were elevated due to system upgrades and product enhancements.  The increase in noninterest expense compared to the third quarter of 2016 was primarily due to a $1.0 million increase in occupancy costs, a $0.4 million increase in contracted services and professional fees, a $0.2 million increase in advertising and marketing expenses and a $0.2 million increase in cards rewards expenses, partially offset by $0.5 million lower salaries and employee benefits expenses and $0.5 million lower of other expenses.    

The efficiency ratio was 46.0%, 47.3% and 48.3% for the quarters ended September 30, 2017, June 30, 2017 and September 30, 2016, respectively. 

The effective tax rate for the third quarter of 2017 was 37.7% compared with 37.1% in the previous quarter and 38.4% percent in the same quarter last year.  The increase in the effective tax rate in the third quarter of 2017 compared to the prior quarter was primarily due to a $0.75 million release of tax reserves during the prior quarter.  The higher effective tax rate in the third quarter of 2016 was due to non-deductible offering expenses incurred during the quarter.

Balance Sheet Highlights

Total assets were $20.6 billion at September 30, 2017, compared to $20.4 billion at June 30, 2017 and $19.9 billion at September 30, 2016.

The investment securities portfolio was $5.3 billion at September 30, 2017, compared to $5.1 billion at June 30, 2017 and $5.4 billion at September 30, 2016.  The portfolio remains largely comprised of securities issued by U.S. government agencies.

Total loans and leases were $12.1 billion at September 30, 2017, an increase of $87.3 million, or 0.7%, from $12.1 billion at June 30, 2017 and up $753.2 million, or 6.6%, from $11.4 billion at September 30, 2016.  The growth in loans and leases compared to June 30, 2017 and September 30, 2016 was due to growth in commercial real estate, residential real estate, construction and consumer loans, partially offset by declines in commercial loans and leases. 

Total deposits were $17.6 billion at September 30, 2017, an increase of $143.2 million, or 0.8%, compared with $17.5 billion at June 30, 2017, and an increase of $630.0 million, or 3.7%, compared to $17.0 billion at September 30, 2016. 

Asset Quality

The Company's asset quality remained solid during the third quarter of 2017. Total non-performing assets were $8.4 million, or 0.07% of total loans and leases and other real estate owned, at September 30, 2017, an increase of $0.3 million from non-performing assets of $8.1 million, or 0.07% of total loans and leases and other real estate owned, at June 30, 2017 and a decrease of $1.8 million from non­-performing assets of $10.2 million, or 0.09% of total loans and leases and other real estate owned at September 30, 2016.

Net charge offs for the quarter ended September 30, 2017 were $4.1 million, or 0.13% of average loans and leases on an annualized basis, compared to $3.4 million, or 0.11% of average loans and leases on an annualized basis for the quarter ended June 30, 2017 and $3.4 million, or 0.12% of average loans and leases on an annualized basis for the quarter ended September 30, 2016. 

The ratio of allowance for loan and lease losses to total loans and leases was 1.13% at both September 30, 2017 and June 30, 2017 and 1.18% at September 30, 2016. 

Capital

Total stockholders' equity was $2.6 billion at both September 30, 2017 and June 30, 2017 and $2.5 billion at September 30, 2016.   

The tier 1 leverage, common equity tier 1, and total capital ratios were 8.66%, 12.71% and 13.77%, respectively, at September 30, 2017, compared with 8.70%, 12.73% and 13.81% at June 30, 2017 and 8.41%, 12.48%, and 13.59% at September 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:  96616877.  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 7:30 p.m. (Eastern Time) on November 5, 2017.  Access the replay by dialing (855) 859-2056 or (404) 537-3406 and entering the conference ID:  96616877.

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.

Investor Relations Contact: 
Kevin Haseyama, CFA
(808) 525-6268
khaseyama@fhb.com

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

                                     
Financial Highlights                             Table 1  
        For the Three Months Ended   For the Nine Months Ended   
        September 30,    June 30,   September 30,    September 30,   
(dollars in thousands, except per share data)       2017   2017   2016   2017   2016  
Operating Results:                                    
Net interest income       $   133,319   $ 131,254   $ 122,683   $   393,918   $ 360,422  
Provision for loan and lease losses           4,500     4,400     2,100       13,400     4,700  
Noninterest income           48,535     48,870     48,690       146,812     168,580  
Noninterest expense           83,655     85,241     82,804       253,235     246,341  
Net income           58,363     56,895     53,235       171,998     173,626  
Basic earnings per share           0.42     0.41     0.38       1.23     1.24  
Diluted earnings per share           0.42     0.41     0.38       1.23     1.24  
Dividends declared per share           0.22     0.22     0.20       0.66     0.42  
Dividend payout ratio           52.38 %   53.66 %   52.39 %     53.66 %   33.34 %
Supplemental Income Statement Data (non-GAAP):                                    
Core net interest income       $   133,319   $ 131,254   $ 122,683   $   393,918   $ 360,422  
Core noninterest income           45,868     48,870     48,690       144,145     142,852  
Core noninterest expense           83,112     84,784     79,714       251,851     240,704  
Core net income           57,040     57,181     55,177       171,203     161,110  
Core basic earnings per share           0.41     0.41     0.40       1.23     1.16  
Core diluted earnings per share           0.41     0.41     0.40       1.23     1.16  
Performance Ratio:                                    
Net interest margin           2.96 %    3.02 %   2.87 %     2.99 %    2.84 %
Core net interest margin (non-GAAP)           2.96 %    3.02 %   2.87 %     2.99 %    2.84 %
Efficiency ratio           46.00 %    47.32 %   48.31 %     46.83 %    46.56 %
Core efficiency ratio (non-GAAP)           46.38 %    47.07 %   46.51 %     46.80 %    47.82 %
Return on average total assets           1.15 %    1.16 %   1.10 %     1.16 %    1.21 %
Core return on average total assets (non-GAAP)           1.13 %    1.16 %   1.14 %     1.15 %    1.12 %
Return on average tangible assets           1.21 %    1.22 %   1.16 %     1.22 %    1.28 %
Core return on average tangible assets (non-GAAP)           1.18 %    1.23 %   1.20 %     1.21 %    1.18 %
Return on average total stockholders' equity           9.03 %    9.03 %   8.45 %     9.10 %    8.96 %
Core return on average total stockholders' equity (non-GAAP)           8.82 %    9.07 %   8.76 %     9.06 %    8.31 %
Return on average tangible stockholders' equity (non-GAAP)           14.76 %    14.89 %   14.02 %     15.01 %    14.56 %
Core return on average tangible stockholders’ equity (non-GAAP)           14.42 %    14.96 %   14.53 %     14.94 %    13.51 %
Average Balances:                                    
Average loans and leases       $   12,115,001   $ 11,903,255   $ 11,261,710   $   11,868,917   $ 11,055,522  
Average earning assets           17,867,021     17,453,655     17,028,930       17,605,376     16,962,355  
Average assets           20,109,090     19,692,222     19,314,668       19,858,184     19,185,484  
Average deposits           17,165,355     16,782,887     16,392,125       16,950,503     16,079,148  
Average shareholders' equity           2,564,563     2,528,388     2,506,099       2,527,435     2,588,602  
Market Value Per Share:                                    
Closing           30.29     30.62     26.86       30.29     26.86  
High           31.48     31.34     27.97       35.32     27.97  
Low           26.30     26.96     24.25       26.30     24.25  
                                     

 

     As of     As of     As of     As of     
     September 30,      June 30,     December 31,      September 30,      
    2017   2017   2016   2016    
Balance Sheet Data:                            
Loans and leases   $   12,149,711   $ 12,062,392   $ 11,520,378   $ 11,396,555    
Total assets       20,565,627     20,373,974     19,661,829     19,892,693    
Total deposits       17,595,483     17,452,262     16,794,532     16,965,527    
Total stockholders' equity       2,581,858     2,552,602     2,476,485     2,523,963    
                             
Per Share of Common Stock:                            
Book value   $   18.50   $ 18.29   $ 17.75   $ 18.09    
Tangible book value       11.36     11.16     10.61     10.95    
                             
Asset Quality Ratios:                            
Non-accrual loans and leases / total loans and leases       0.06 %    0.06 %   0.08 %   0.08 %  
Allowance for loan and lease losses / total loans and leases       1.13 %    1.13 %   1.18 %   1.18 %  
                             
Capital Ratios:                            
Common Equity Tier 1 Capital Ratio         12.71 %    12.73 %   12.75 %   12.48 %  
Tier 1 Capital Ratio       12.71 %    12.73 %   12.75 %   12.48 %  
Total Capital Ratio       13.77 %    13.81 %   13.85 %   13.59 %  
Tier 1 Leverage Ratio       8.66 %    8.70 %   8.36 %   8.41 %  
Total stockholders' equity to total assets       12.55 %    12.53 %   12.60 %   12.69 %  
Tangible stockholders' equity to tangible assets (non-GAAP)       8.11 %    8.04 %   7.93 %   8.09 %  
                             
Non-Financial Data:                            
Number of branches       62     62     62     62    
Number of ATMs       312     312     311     312    
Number of Full-Time Equivalent Employees       2,184     2,191     2,179     2,197    
                             

 

Consolidated Statements of Income   Table 2  
    Three Months Ended   Nine Months Ended   
    September 30,    June 30,   September 30,    September 30,   
(dollars in thousands, except per share amounts)   2017   2017   2016   2017   2016  
Interest income                                
Loans and lease financing   $   118,986   $   114,179   $   106,900   $   342,431   $   316,958  
Available-for-sale securities       24,195       25,059       21,123       75,683       57,135  
Other       2,089       781       1,311       4,096       6,114  
Total interest income       145,270       140,019       129,334       422,210       380,207  
Interest expense                                
Deposits       11,949       8,760       6,632       28,279       19,602  
Short-term borrowings and long-term debt       2       5       19       13       183  
Total interest expense       11,951       8,765       6,651       28,292       19,785  
Net interest income       133,319       131,254       122,683       393,918       360,422  
Provision for loan and lease losses       4,500       4,400       2,100       13,400       4,700  
Net interest income after provision for loan and lease losses       128,819       126,854       120,583       380,518       355,722  
Noninterest income                                
Service charges on deposit accounts       9,095       9,412       9,575       28,062       28,759  
Credit and debit card fees       14,831       14,157       14,103       43,467       41,732  
Other service charges and fees       8,510       8,110       8,768       25,717       26,909  
Trust and investment services income       7,672       7,526       7,508       22,536       22,236  
Bank-owned life insurance       3,119       2,927       7,115       10,624       13,263  
Investment securities gains, net       —       —       30       —       25,761  
Other       5,308       6,738       1,591       16,406       9,920  
Total noninterest income       48,535       48,870       48,690       146,812       168,580  
Noninterest expense                                
Salaries and employee benefits       41,579       43,257       42,106       128,136       128,762  
Contracted services and professional fees       10,834       12,388       10,430       33,530       33,124  
Occupancy       5,844       5,023       4,870       16,188       14,991  
Equipment       4,174       4,527       4,192       12,898       12,135  
Regulatory assessment and fees       3,668       3,750       3,546       11,192       8,869  
Advertising and marketing       2,005       1,222       1,769       5,255       4,818  
Card rewards program       4,703       4,618       4,512       13,832       10,743  
Other       10,848       10,456       11,379       32,204       32,899  
Total noninterest expense       83,655       85,241       82,804       253,235       246,341  
Income before provision for income taxes       93,699       90,483       86,469       274,095       277,961  
Provision for income taxes       35,336       33,588       33,234       102,097       104,335  
Net income   $   58,363   $   56,895   $   53,235   $   171,998   $   173,626  
Basic earnings per share   $   0.42   $   0.41   $   0.38   $   1.23   $   1.24  
Diluted earnings per share   $   0.42   $   0.41   $   0.38   $   1.23   $   1.24  
Dividends declared per share   $   0.22   $   0.22   $   0.20   $   0.66   $   0.42  
Basic weighted-average outstanding shares       139,556,532       139,546,615       139,500,542       139,549,665       139,473,360  
Diluted weighted-average outstanding shares       139,696,330       139,646,117       139,503,558       139,670,487       139,474,373  
                                 

 

Consolidated Balance Sheets   Table 3  
    September 30,    June 30,   December 31,    September 30,   
(dollars in thousands)   2017     2017     2016     2016    
Assets                          
Cash and due from banks   $   321,319     $   355,752     $   253,827     $   371,622    
Interest-bearing deposits in other banks       793,046         872,013         798,231         804,198    
Investment securities       5,314,973         5,126,869         5,077,514         5,363,696    
Loans and leases      12,149,711       12,062,392       11,520,378       11,396,555    
Less: allowance for loan and lease losses       137,327         136,883         135,494         135,025    
Net loans and leases     12,012,384       11,925,509       11,384,884        11,261,530    
                           
Premises and equipment, net       289,689         292,959         300,788         302,059    
Other real estate owned and repossessed personal property       564         329         329         854    
Accrued interest receivable       44,728         39,739         41,971         37,107    
Bank-owned life insurance       435,607         432,726         429,209         432,031    
Goodwill       995,492         995,492         995,492         995,492    
Other intangible assets       13,980         14,877         16,809         17,554    
Other assets       343,845         317,709         362,775         306,550    
Total assets   $ 20,565,627     $ 20,373,974     $ 19,661,829     $  19,892,693    
Liabilities and Stockholders' Equity                          
Deposits:                          
Interest-bearing   $ 11,687,849     $ 11,580,664     $  10,801,915     $ 11,164,989    
Noninterest-bearing       5,907,634         5,871,598         5,992,617         5,800,538    
Total deposits      17,595,483       17,452,262       16,794,532        16,965,527    
Short-term borrowings       —         —         9,151         9,151    
Long-term debt       34         41         41         41    
Retirement benefits payable       135,092         134,400         132,904         139,567    
Other liabilities       253,160         234,669         248,716         254,444    
Total liabilities     17,983,769       17,821,372       17,185,344        17,368,730    
                           
Stockholders' equity                          
Common stock ($0.01 par value; authorized 300,000,000 shares; issued and outstanding 139,586,282 shares as of September 30, 2017, 139,546,615 shares as of June 30, 2017 and 139,530,654 shares as of both December 31, 2016 and September 30, 2016)       1,396         1,395         1,395         1,395    
Additional paid-in capital       2,489,273         2,488,091         2,484,251         2,482,679    
Retained earnings       158,303         130,767         78,850         50,204    
Accumulated other comprehensive loss, net       (67,114 )       (67,651 )       (88,011 )       (10,315 )  
Total stockholders' equity       2,581,858         2,552,602         2,476,485         2,523,963    
Total liabilities and stockholders' equity   $   20,565,627     $   20,373,974     $   19,661,829     $   19,892,693    
                           

 

Average Balances and Interest Rates                                              Table 4     
    Three Months Ended    Three Months Ended    Three Months Ended     
    September 30, 2017   June 30, 2017   September 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   $   597.5   $   2.0     1.30 %  $   312.8   $   0.8     1.00 %  $   1,023.6   $   1.3     0.51 %  
Available-for-Sale Investment Securities       5,124.9       24.2     1.88       5,208.8       25.0     1.93       4,743.7       21.1     1.77    
Loans Held for Sale       0.1       —     3.62       —       —     —       —       —     —    
Loans and Leases (1)                                                    
Commercial and industrial       3,276.4       27.3     3.31       3,279.2       25.7     3.15       3,248.1       23.7     2.90    
Real estate - commercial       2,696.4       25.1     3.69       2,638.3       23.8     3.62       2,338.2       21.3     3.63    
Real estate - construction       570.6       5.1     3.54       509.7       4.3     3.41       448.9       3.7     3.29    
Real estate - residential       3,846.8       39.2     4.04       3,782.1       38.6     4.09       3,571.3       36.4     4.06    
Consumer       1,546.9       21.0     5.39       1,525.8       20.6     5.40       1,467.0       20.5     5.55    
Lease financing       177.9       1.3     2.91       168.1       1.2     2.84       188.2       1.3     2.84    
Total Loans and Leases       12,115.0       119.0     3.90       11,903.2       114.2     3.85       11,261.7       106.9     3.78    
Other Earning Assets       29.5       0.1     1.22       10.8       —     0.99       —       —     —    
Total Earning Assets (2)       17,867.0       145.3     3.23       17,435.6       140.0     3.22       17,029.0       129.3     3.02    
Cash and Due from Banks       324.0                 319.4                 357.1              
Other Assets       1,918.1                 1,937.2                 1,928.6              
Total Assets   $   20,109.1             $   19,692.2             $   19,314.7              
                                                     
Interest-Bearing Liabilities                                                    
Interest-Bearing Deposits                                                    
Savings   $   4,505.1   $   1.1     0.10 %  $   4,488.8   $   0.7     0.07 %  $   4,416.4   $   0.6     0.06 %  
Money Market       2,607.7       0.9     0.13       2,618.6       0.8     0.12       2,549.3       0.6     0.10    
Time       4,208.0       10.0     0.94       3,887.5       7.2     0.75       3,776.6       5.4     0.57    
Total Interest-Bearing Deposits       11,320.8       12.0     0.42       10,994.9       8.7     0.32       10,742.3       6.6     0.25    
Short-Term Borrowings       0.8       —     0.91       1.7       —     0.89       18.5       —     0.42    
Total Interest-Bearing Liabilities       11,321.6       12.0     0.42       10,996.6       8.7     0.32       10,760.8       6.6     0.25    
Net Interest Income         $   133.3             $   131.3             $   122.7        
Interest Rate Spread                 2.81 %                2.90 %                2.77 %  
Net Interest Margin                 2.96 %                3.02 %                2.87 %  
Noninterest-Bearing Demand Deposits       5,844.6                 5,788.0                 5,649.8              
Other Liabilities       378.3                 379.2                 398.0              
Stockholders' Equity       2,564.6                 2,528.4                 2,506.1              
Total Liabilities and Stockholders' Equity   $   20,109.1             $   19,692.2             $   19,314.7              
                                                     

 

Average Balances and Interest Rates                                  Table 5     
    Nine Months Ended    Nine Months Ended     
    September 30, 2017   September 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   $   516.8   $   4.0       1.02 %  $   1,602.3   $   6.1     0.51 %  
Available-for-Sale Investment Securities       5,189.7       75.7       1.95       4,304.5       57.1     1.77    
Loans and Leases (1)                                      
Commercial and industrial       3,263.3       77.3       3.17       3,200.6       70.3     2.93    
Real estate - commercial       2,606.1       71.1       3.65       2,273.3       62.9     3.70    
Real estate - construction       514.1       13.1       3.41       425.0       10.4     3.27    
Real estate - residential       3,784.5       115.5       4.08       3,525.5       108.9     4.13    
Consumer       1,528.8       61.8       5.41       1,441.6       60.4     5.59    
Lease financing       172.1       3.6       2.84       189.5       4.1     2.90    
Total Loans and Leases       11,868.9       342.4       3.86       11,055.5       317.0     3.83    
Other Earning Assets       30.0       0.1       0.62       —       —     —    
Total Earning Assets (2)       17,605.4       422.2       3.21       16,962.3       380.2     2.99    
Cash and Due from Banks       322.7                   320.1              
Other Assets       1,930.1                   1,903.1              
Total Assets   $   19,858.2               $   19,185.5              
                                       
Interest-Bearing Liabilities                                      
Interest-Bearing Deposits                                      
Savings   $   4,500.1   $   2.5       0.08 %  $   4,371.6   $   1.9     0.06 %  
Money Market       2,574.0       2.2       0.11       2,410.6       1.7     0.09    
Time       4,027.9       23.6       0.78       3,782.2       16.0     0.57    
Total Interest-Bearing Deposits       11,102.0       28.3       0.34       10,564.4       19.6     0.25    
Short-Term Borrowings       2.1       —       0.68       148.0       0.2     0.16    
Total Interest-Bearing Liabilities       11,104.1       28.3       0.34       10,712.4       19.8     0.25    
Net Interest Income         $   393.9               $   360.4        
Interest Rate Spread                   2.87 %                2.74 %  
Net Interest Margin                   2.99 %                2.84 %  
Noninterest-Bearing Demand Deposits       5,848.5                   5,514.8              
Other Liabilities       378.2                   369.7              
Stockholders' Equity       2,527.4                   2,588.6              
Total Liabilities and Stockholders' Equity   $   19,858.2               $   19,185.5              
                                       

 

Analysis of Change in Net Interest Income                  Table 6   
    Three Months Ended September 30, 2017  
    Compared to June 30, 2017  
(dollars in millions)    Volume     Rate    Total  
Change in Interest Income:                    
Interest-Bearing Deposits in Other Banks   $   0.9     $   0.3     $   1.2    
Available-for-Sale Investment Securities       (0.4 )       (0.4 )       (0.8 )  
Loans and Leases                    
Commercial and industrial       —         1.6         1.6    
Real estate - commercial       0.5         0.8         1.3    
Real estate - construction       0.5         0.3         0.8    
Real estate - residential       0.7         (0.1 )       0.6    
Consumer       0.2         0.2         0.4    
Lease financing       0.1         —         0.1    
Total Loans and Leases       2.0         2.8         4.8    
Other Earning Assets       0.1         —         0.1    
Total Change in Interest Income       2.6         2.7         5.3    
                     
Change in Interest Expense:                    
Interest-Bearing Deposits                    
Savings       —         0.4         0.4    
Money Market       —         0.1         0.1    
Time       0.6         2.1         2.7    
Total Interest-Bearing Deposits       0.6         2.6         3.2    
Total Change in Interest Expense       0.6         2.6         3.2    
Change in Net Interest Income   $   2.0     $   0.1     $   2.1    
                     

 

Analysis of Change in Net Interest Income                  Table 7   
    Three Months Ended September 30, 2017  
    Compared to September 30, 2016  
(dollars in millions)    Volume     Rate    Total  
Change in Interest Income:                    
Interest-Bearing Deposits in Other Banks   $   (0.7 )   $   1.4     $   0.7  
Available-for-Sale Investment Securities       1.7         1.4         3.1  
Loans and Leases                    
Commercial and industrial       0.2         3.4         3.6  
Real estate - commercial       3.3         0.4         3.7  
Real estate - construction       1.1         0.3         1.4  
Real estate - residential       2.8         —         2.8  
Consumer       1.0         (0.5 )       0.5  
Total Loans and Leases       8.4         3.6         12.0  
Other Earning Assets       0.1         —         0.1  
Total Change in Interest Income       9.5         6.4         15.9  
                     
Change in Interest Expense:                    
Interest-Bearing Deposits                    
Savings       —         0.5         0.5  
Money Market       —         0.2         0.2  
Time       0.7         3.9         4.6  
Total Interest-Bearing Deposits       0.7         4.6         5.3  
Total Change in Interest Expense       0.7         4.6         5.3  
Change in Net Interest Income   $   8.8     $   1.8     $   10.6  
                     

 

Analysis of Change in Net Interest Income                  Table 8   
    Nine Months Ended September 30, 2017  
    Compared to September 30, 2016  
(dollars in millions)    Volume     Rate    Total  
Change in Interest Income:                    
Interest-Bearing Deposits in Other Banks   $   (5.8 )   $   3.7     $   (2.1 )  
Available-for-Sale Investment Securities       12.4         6.1         18.5    
Loans and Leases                    
Commercial and industrial       1.4         5.6         7.0    
Real estate - commercial       9.1         (0.9 )       8.2    
Real estate - construction       2.2         0.5         2.7    
Real estate - residential       7.9         (1.3 )       6.6    
Consumer       3.6         (2.1 )       1.5    
Lease financing       (0.4 )       (0.1 )       (0.5 )  
Total Loans and Leases       23.8         1.7         25.5    
Other Earning Assets       0.1         —         0.1    
Total Change in Interest Income       30.5         11.5         42.0    
                     
Change in Interest Expense:                    
Interest-Bearing Deposits                    
Savings       0.1         0.5         0.6    
Money Market       0.1         0.4         0.5    
Time       1.1         6.5         7.6    
Total Interest-Bearing Deposits       1.3         7.4         8.7    
Short-Term Borrowings       (0.3 )       0.1         (0.2 )  
Total Change in Interest Expense       1.0         7.5         8.5    
Change in Net Interest Income   $   29.5     $   4.0     $   33.5    
                     

 

Loans and Leases                       Table 9  
    September 30,    June 30,   December 31,    September 30,   
(dollars in thousands)   2017   2017   2016   2016  
Commercial and industrial   $   3,190,237   $   3,331,092   $   3,239,600   $   3,265,291  
Real estate:                          
Commercial       2,625,688       2,545,479       2,343,495       2,311,874  
Construction       598,763       555,794       450,012       475,333  
Residential       4,001,478       3,921,881       3,796,459       3,687,660  
Total real estate       7,225,929       7,023,154       6,589,966       6,474,867  
Consumer       1,562,172       1,527,470       1,510,772       1,469,220  
Lease financing       171,373       180,676       180,040       187,177  
Total loans and leases   $   12,149,711   $   12,062,392   $   11,520,378   $   11,396,555  
                           

 

Deposits                       Table 10  
    September 30,    June 30,   December 31,    September 30,   
(dollars in thousands)   2017   2017   2016   2016  
Demand   $   5,907,634   $   5,871,598   $   5,992,617   $   5,800,538  
Savings       4,411,411       4,568,600       4,609,306       4,341,714  
Money Market       2,631,311       2,944,005       2,454,013       2,818,132  
Time       4,645,127       4,068,059       3,738,596       4,005,143  
  Total Deposits   $   17,595,483   $   17,452,262   $   16,794,532   $   16,965,527  
                           

 

Non-Performing Assets and Accruing Loans and Leases Past Due 90 Days or More                       Table 11
    September 30,    June 30,   December 31,    September 30, 
(dollars in thousands)   2017   2017   2016   2016
Non-Performing Assets                        
Non-Accrual Loans and Leases                        
Commercial Loans:                         
Commercial and industrial   $   2,312   $   2,155   $   2,730   $   2,933
Lease financing       —       —       153       163
Total Commercial Loans       2,312       2,155       2,883       3,096
Residential       5,562       5,569       6,547       6,274
Total Non-Accrual Loans and Leases       7,874       7,724       9,430       9,370
Other Real Estate Owned       564       329       329       854
Total Non-Performing Assets   $   8,438   $   8,053   $   9,759   $   10,224
                         
Accruing Loans and Leases Past Due 90 Days or More                        
Commercial Loans:                        
Commercial and industrial   $   1,751   $   1,275   $   449   $   177
Real estate - commercial       3,247       —       —       —
Real estate - construction       —       350       —       —
Lease financing       —       —       83       —
Total Commercial Loans       4,998       1,625       532       177
Residential       1,055       1,543       866       1,638
Consumer       1,894       1,873       1,870       2,036
Total Accruing Loans and Leases Past Due 90 Days or More   $   7,947   $   5,041   $   3,268   $   3,851
                         
Restructured Loans on Accrual Status and Not Past Due 90 Days or More       36,728       38,886       44,496       46,453
 Total Loans and Leases    $   12,149,711   $   12,062,392   $   11,520,378   $   11,396,555
                         

 

Allowance for Loan and Lease Losses                             Table 12    
    For the Three Months Ended    For the Nine Months Ended     
    September 30,    June 30,   September 30,    September 30,    September 30,     
(dollars in thousands)   2017     2017     2016     2017     2016      
Balance at Beginning of Period   $   136,883     $   135,847     $   136,360     $   135,494     $   135,484      
Loans and Leases Charged-Off                                  
Commercial Loans:                                  
Commercial and industrial       (408 )       (75 )       (210 )       (1,338 )       (348 )    
Lease financing       (1 )       (146 )       —         (147 )       —      
Total Commercial Loans       (409 )       (221 )       (210 )       (1,485 )       (348 )    
Residential       (293 )       —         (268 )       (315 )       (796 )    
Consumer       (6,263 )       (5,251 )       (4,878 )       (17,086 )       (13,379 )    
Total Loans and Leases Charged-Off       (6,965 )       (5,472 )       (5,356 )       (18,886 )       (14,523 )    
Recoveries on Loans and Leases Previously Charged-Off                                  
Commercial Loans:                                  
Commercial and industrial       582         129         6         825         228      
Real estate - commercial       336         55         42         468         3,288      
Lease financing       —         —         —         —         1      
Total Commercial Loans       918         184         48         1,293         3,517      
Residential       139         150         350         610         1,116      
Consumer       1,852         1,774         1,523         5,416         4,731      
Total Recoveries on Loans and Leases Previously Charged-Off       2,909         2,108         1,921         7,319         9,364      
Net Loans and Leases Charged-Off       (4,056 )       (3,364 )       (3,435 )       (11,567 )       (5,159 )    
Provision for Credit Losses       4,500         4,400         2,100         13,400         4,700      
Balance at End of Period   $   137,327     $   136,883     $   135,025     $   137,327     $   135,025      
Average Loans and Leases Outstanding   $   12,115,001     $   11,903,255     $   11,261,710     $   11,868,917     $   11,055,522      
Ratio of Net Loans and Leases Charged-Off to Average Loans and Leases Outstanding       0.13 %      0.11 %     0.12 %     0.13 %      0.06 %     
Ratio of Allowance for Loan and Lease Losses to Loans and Leases Outstanding       1.13 %      1.13 %     1.18 %     1.13 %      1.18 %    
                                   

 

GAAP to Non-GAAP Reconciliation                     Table 13    
    For the Three Months Ended    For the Nine Months Ended     
    September 30,    June 30,   September 30,    September 30,     
(dollars in thousands, except per share amounts)   2017    2017   2016   2017    2016    
Income Statement Data:                                  
Net income   $   58,363   $   56,895   $   53,235   $   171,998   $   173,626    
                                   
Average total stockholders' equity   $   2,564,563   $   2,528,388   $   2,506,099   $   2,527,435   $   2,588,602    
Less: average goodwill       995,492       995,492       995,492       995,492       995,492    
Average tangible stockholders' equity   $   1,569,071   $   1,532,896   $   1,510,607   $   1,531,943   $   1,593,110    
                                   
Average total assets   $   20,109,090   $   19,692,222   $   19,314,668   $   19,858,184   $   19,185,484    
Less: average goodwill       995,492       995,492       995,492       995,492       995,492    
Average tangible assets   $   19,113,598   $   18,696,730   $   18,319,176   $   18,862,692   $   18,189,992    
                                   
Return on average total stockholders' equity(a)       9.03 %      9.03 %      8.45 %      9.10 %      8.96 %  
Return on average tangible stockholders' equity (non-GAAP)(a)       14.76 %      14.89 %      14.02 %      15.01 %      14.56 %  
                                   
Return on average total assets(a)       1.15 %      1.16 %      1.10 %      1.16 %      1.21 %   
Return on average tangible assets (non-GAAP)(a)       1.21 %      1.22 %      1.16 %      1.22 %      1.28 %   
                                   
Average stockholders' equity to average assets       12.75 %      12.84 %      12.98 %      12.73 %      13.49 %   
Tangible average stockholders' equity to tangible average assets (non-GAAP)       8.21 %      8.20 %      8.25 %      8.12 %      8.76 %   
                                   

 

     As of     As of     As of     As of     
    September 30,    June 30,   December 31,    September 30,     
    2017   2017   2016   2016    
Balance Sheet Data:                            
Total stockholders' equity   $   2,581,858   $   2,552,602   $   2,476,485   $   2,523,963    
Less: goodwill       995,492       995,492       995,492       995,492    
Tangible stockholders' equity   $   1,586,366   $   1,557,110   $   1,480,993   $   1,528,471    
                             
Total assets   $   20,565,627   $   20,373,974   $   19,661,829   $   19,892,693    
Less: goodwill       995,492       995,492       995,492       995,492    
Tangible assets   $   19,570,135   $   19,378,482   $   18,666,337   $   18,897,201    
                             
Shares outstanding       139,586,282       139,546,615       139,530,654       139,530,654    
                             
Total stockholders' equity to total assets       12.55 %      12.53 %      12.60 %      12.69 %  
Tangible stockholders' equity to tangible assets (non-GAAP)       8.11 %      8.04 %      7.93 %      8.09 %  
                             
Book value per share   $   18.50   $   18.29   $   17.75   $   18.09    
Tangible book value per share (non-GAAP)   $   11.36   $   11.16   $   10.61   $   10.95    
                             

 

GAAP to Non-GAAP Reconciliation   Table 14  
    For the Three Months Ended   For the Nine Months Ended   
    September 30,    June 30,   September 30,    September 30,   
(dollars in thousands, except per share amounts)   2017     2017     2016      2017     2016    
Net interest income   $   133,319     $   131,254     $   122,683     $   393,918     $   360,422    
Core net interest income (non-GAAP)   $   133,319     $   131,254     $   122,683     $   393,918     $   360,422    
                                 
Noninterest income   $   48,535     $   48,870     $   48,690     $   146,812     $   168,580    
Gains on sale of bank properties       (2,667 )       —         —         (2,667 )       —    
Gains on sale of securities       —         —         —         —         (3,050 )  
Gains on sale of stock (Visa/MasterCard)       —         —         —         —         (22,678 )  
Core noninterest income (non-GAAP)   $   45,868     $   48,870     $   48,690     $   144,145     $   142,852    
                                 
Noninterest expense   $   83,655     $   85,241     $   82,804     $   253,235     $   246,341    
One-time items(a)       (543 )       (457 )       (3,090 )       (1,384 )       (5,637 )  
Core noninterest expense (non-GAAP)   $   83,112     $   84,784     $   79,714     $   251,851     $   240,704    
                                 
Net income   $   58,363     $   56,895     $   53,235     $   171,998     $   173,626    
Gains on sale of bank properties       (2,667 )       —         —         (2,667 )       —    
Gains on sale of securities       —         —         —         —         (3,050 )  
Gains on sale of stock (Visa/MasterCard)       —         —         —         —         (22,678 )  
One-time items(a)       543         457         3,090         1,384         5,637    
Tax adjustments(b)       801         (171 )       (1,148 )       488         7,575    
Total core adjustments       (1,323 )       286         1,942         (795 )       (12,516 )  
Core net income (non-GAAP)   $   57,040     $   57,181     $   55,177     $   171,203     $   161,110    
Core basic earnings per share (non-GAAP)   $   0.41     $   0.41     $   0.40     $   1.23     $   1.16    
Core diluted earnings per share (non-GAAP)   $   0.41     $   0.41     $   0.40     $   1.23     $   1.16    
                                 

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Source: First Hawaiian, Inc.