UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8‑K

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported): October 25, 2018

FIRST HAWAIIAN, INC.

(Exact Name of Registrant as Specified in Its Charter)

 

 

 

 

(808) 525‑7000

(Registrant’s Telephone Number, Including Area Code)

 

Not Applicable

(Former Name or Former Address, if Changed Since Last Report)

Check the appropriate box below if the Form 8‑K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

☐   Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

☐   Soliciting material pursuant to Rule 14a‑12 under the Exchange Act (17 CFR 240.14a‑12)

 

☐   Pre-commencement communications pursuant to Rule 14d‑2(b) under the Exchange Act (17 CFR 240.14d‑2(b))

 

☐   Pre-commencement communications pursuant to Rule 13e‑4(c) under the Exchange Act (17 CFR 240.13e‑4(c))

 

 Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

 

Emerging growth company ☐

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

 

 

Item 2.02 Results of Operations and Financial Condition.

On October 25, 2018, First Hawaiian, Inc. (together with its consolidated subsidiary, “First Hawaiian”) reported its earnings for the quarter ended September 30, 2018. A copy of First Hawaiian’s press release containing this information is being furnished as Exhibit 99.1 to this Current Report on Form 8-K and is incorporated herein by reference.

All information provided in this Current Report on Form 8-K, including Exhibit 99.1, shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities under that Section, and shall not be deemed to be incorporated by reference into any filing of First Hawaiian under the Securities Act of 1933, as amended, or the Exchange Act except as expressly set forth by specific reference in such a filing.

Item 9.01 Financial Statements and Exhibits.

(d)Exhibits

 

 

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be filed on its behalf by the undersigned hereunto duly authorized.

 

 

EXHIBIT 99.1

 

For Immediate Release

First Hawaiian, Inc. Reports Third Quarter 2018 Financial Results and Declares Dividend

HONOLULU, Hawaii October 25, 2018 -- (Globe Newswire) -- First Hawaiian, Inc. (NASDAQ:FHB), (“First Hawaiian” or the “Company”) today reported financial results for its third quarter ended September 30, 2018.

“I’m pleased with our strong financial performance in the third quarter,” said Bob Harrison, Chairman and Chief Executive Officer. “We had solid core earnings and good expense management, and asset quality remained excellent. Additionally, during the quarter, BNPP made significant progress in exiting its position in First Hawaiian by completing two secondary offerings, which, in conjunction with First Hawaiian’s repurchase of approximately 1.8 million shares, reduced BNPP’s ownership position from 48.8% to 18.4%. Also significant was the change in board composition, as the number of BNPP-nominated directors was decreased from five to two and three prominent members of the local business community, Faye Kurren,  Jenai Wall, and C. Scott Wo, joined the board, resulting in a majority of independent directors.”

On October 24, 2018, the Company’s Board of Directors declared a quarterly cash dividend of $0.24 per share. The dividend will be payable on December 7, 2018 to stockholders of record at the close of business on November 26, 2018.

Earnings Highlights

Net income for the quarter ended September 30, 2018 was $67.4 million, or $0.50 per diluted share, compared to $69.1 million, or $0.50 per diluted share, for the quarter ended June 30, 2018, and $58.4 million, or $0.42 per diluted share, for the quarter ended September 30, 2017. Core net income1 for the quarter ended September 30, 2018 was $70.8 million, or $0.52 per diluted share, compared to $69.7 million, or $0.50 per diluted share, for the quarter ended June 20, 2018, and $57.0 million, or $0.41 per diluted share, for the quarter ended September 30, 2017.

Net interest income for the quarter ended September 30, 2018 was $141.3 million compared to $141.4 million for the quarter ended June 30, 2018, and an increase of $7.9 million compared to $133.3 million for the quarter ended September 30, 2017. Net interest income compared to the second quarter of 2018 was essentially flat, primarily due to higher interest expenses on deposits and borrowings and lower interest income on investments, mostly offset by higher interest income on loans and cash. The second quarter of 2018 included a $1.1 million positive premium amortization adjustment that did not recur in the third quarter. Excluding the premium amortization in the second quarter, third quarter net interest income would have been approximately $1 million higher than second quarter net interest income.  The increase in net interest income compared to the third quarter of 2017 was due to higher interest income on earnings assets from higher rates and balances, partially offset by higher interest expenses due to higher rates on deposits and higher balances of term borrowings.

Net interest margin (“NIM”) was 3.11%, 3.18% and 2.96%, for the quarters ended September 30, 2018, June 30, 2018, and September 30, 2017, respectively. The 7 basis point decrease in NIM versus the prior quarter was primarily due to higher funding costs, a lower premium amortization adjustment, higher cash balances and an additional day in the quarter.

Results for the quarter ended September 30, 2018 included a provision for loan and lease losses of $4.5 million compared to $6.0 million in the quarter ended June 30, 2018 and $4.5 million in the quarter ended September 30, 2017.

1A non-GAAP measure. For more information on this measure, including 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.

Noninterest income was $47.4 million in the quarter ended September 30, 2018, a decrease of $2.4 million compared to noninterest income of $49.8 million in the quarter ended June 30, 2018 and a decrease of $2.3 million compared to noninterest income of $49.7 million in the quarter ended September 30, 2017. The decrease in noninterest income compared to the second quarter of 2018 was primarily due to a  $3.2 million decrease in other income, $0.4 million lower credit and debit card fees and $0.2 million lower trust and investment services income, partially offset by $1.3 million higher income from bank-owned life insurance (“BOLI”). The $3.2 million decrease in other income was primarily due to  a $1.5 million decrease in swap fee income, and a  $1.0 million decrease in recoveries, as we recognized a gain on sale of leased equipment in the second quarter of 2018.

The decrease in noninterest income compared to the third quarter of 2017 was primarily due to $3.1 million lower other income and $1.0 million lower service charges on deposit accounts, partially offset by $1.1 million higher other service charges and fees, $0.6 million higher income from BOLI, and $0.4 million higher credit and debit card fees.  Other income in the third quarter of 2017 included a $2.7 million gain from the sale of a bank property.

Noninterest expense was $93.1 million for the quarter ended September 30, 2018, an increase of $1.3 million from $91.9 million in the quarter ended June 30, 2018, and an increase of $8.3 million from $84.8 million in the quarter ended September 30, 2017. The increase in noninterest expense compared to the second quarter of 2018 was primarily due to $3.7 million higher other expense, partially offset by $1.5 million lower contracted services and professional fees, and $0.6 million lower cards rewards program expenses. Other expense in the third quarter of 2018 included an expense of $4.1 million in connection with an agreement in principle to resolve a class action lawsuit regarding overdraft fees.

The increase in noninterest expense compared to the third quarter of 2017 was primarily due to $4.2 million higher other expense, $3.3 million higher salaries and employee benefits, $0.6 million higher contracted services and professional fees, and $0.5 million higher occupancy expenses, partially offset by $0.9 million lower advertising and marketing expenses. Other expense in the third quarter of 2018 included the aforementioned $4.1 million litigation-related expense.

The efficiency ratio was 49.4%, 48.0% and 46.3% for the quarters ended September 30, 2018, June 30, 2018 and September 30, 2017, respectively. Core efficiency ratio1 was 46.9%, 47.6% and 46.7% for the quarters ended September 30, 2018, June 30, 2018 and September 30, 2017, respectively.

The effective tax rate was 26.0% for the second and third quarters of 2018 and 37.7% in the third quarter of 2017.  The lower effective tax rate in the third quarter of 2018 compared to the same quarter last year was due to the lower corporate tax rate resulting from the Tax Cuts and Jobs Act.

Balance Sheet Highlights

Total assets were $20.0 billion at September 30, 2018, compared to $20.5 billion at June 30, 2018 and $20.6 billion at September 30, 2017.

The investment securities portfolio was $4.6 billion at September 30, 2018, compared to $4.8 billion at June 30, 2018 and $5.3 billion at September 30, 2017.

Total loans and leases were $12.6 billion at September 30, 2018, unchanged from $12.6 billion at June 30, 2018 and up $0.5 billion, or 3.7%, from $12.1 billion at September 30, 2017.  During the quarter ended September 30, 2018, increases in residential, commercial real estate (“CRE”) and consumer loan balances were offset by decreases in commercial and industrial (“C&I”) and construction loan balances.  The decreases in C&I and construction loan balances were due to large, unexpected prepayments.  The increase in loans and leases compared to the quarter ended September 30, 2017 was primarily due to increases in residential loans, CRE loans, consumer loans and construction loans, partially offset by a decline in C&I loans and lease financing.

Total deposits were $16.7 billion at September 30, 2018, a decrease of $0.7 billion from $17.4 billion at June 30, 2018, and a decrease of $0.9 billion, compared to $17.6 billion at September 30, 2017.  The decrease in deposit balances compared to the quarter ended June 30, 2018 was primarily due to a $0.6 billion reduction in public time deposits.  The decrease in deposit balances compared to the quarter ended September 30, 2017 was primarily due to a $1.3 billion reduction in public time deposits, partially offset by growth in consumer and commercial deposits.

Asset Quality

The Company’s asset quality remained excellent during the third quarter of 2018. Net charge offs for the quarter ended September 30, 2018 were $3.8 million, or 0.12% of average loans and leases on an annualized basis, compared to $4.0 million, or 0.13% of average loans and leases on an annualized basis, for the quarter ended June 30, 2018 and $4.1 million, or 0.13% of average loans and leases on an annualized basis for the quarter ended September 30, 2017.

Total non-performing assets were $11.3 million, or 0.09% of total loans and leases and other real estate owned, at September 30, 2018, compared to non-performing assets of $13.8 million, or 0.11% of total loans and leases and other real estate owned, at June 30, 2018 and non-performing assets of $8.4 million, or 0.07% of total loans and leases and other real estate owned, at September 30, 2017.

The ratio of the allowance for loan and lease losses to total loans and leases was 1.12% at September 30, 2018, 1.11% at June 30, 2018 and 1.13% at September 30, 2017.

Capital

During the third quarter of 2018, the Company repurchased approximately 1.8 million shares of FHI common stock from a wholly owned subsidiary of BNPP at a total cost of approximately $50 million.

Total stockholders' equity was $2.4 billion at September 30, 2018, compared to $2.5 billion at June 30, 2018 and $2.6 billion at September 30, 2017.

The tier 1 leverage, common equity tier 1, and total capital ratios were 8.42%, 12.09% and 13.14%, respectively, at September 30, 2018, compared with 8.61%, 12.19% and 13.23% at June 30, 2018 and 8.66%, 12.71% and 13.77% at September 30, 2017.

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: 5377116. A live webcast of the conference call, including a slide presentation, will be available at the following link: www.fhb.com/earnings. The archive of the webcast will be available at the same location.  A telephonic replay of the conference call will be available two hours after the conclusion of the call until 7:30 p.m. (Eastern Time) on November 4, 2018.  Access the replay by dialing (855) 859-2056 or (404) 537-3406 and entering the conference ID: 5377116.

Forward-Looking Statements

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements reflect our current views with respect to, among other things, future events and our financial performance. These statements are often, but not always, made through the use of words or phrases such as “may”, “might”, “should”, “could”, “predict”, “potential”, “believe”, “expect”, “continue”, “will”, “anticipate”, “seek”, “estimate”, “intend”, “plan”, “projection”, “would”, “annualized” and “outlook”, or the negative version of those words or other comparable words or phrases of a future or forward-looking nature. These forward-looking statements are not historical facts, and are based on current expectations, estimates and projections about our industry, management’s beliefs and certain assumptions made by management, many of which, by their nature, are inherently uncertain and beyond our control. Accordingly, we caution you that any such forward-looking statements are not guarantees of future performance and are subject to risks, assumptions, estimates and uncertainties that are difficult to predict. Although we believe that the expectations reflected in these forward-looking statements are reasonable as of the date made, actual results may prove to be materially different from the results expressed or implied by the forward-looking statements. For a discussion of some of the risks and important factors that could affect our future results and financial condition, see our U.S. Securities and Exchange Commission (“SEC”) filings, including, but not limited to, our annual report on Form 10-K for the year ended December 31, 2017.

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.