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First Hawaiian, Inc. Reports First Quarter 2020 Financial Results and Declares Dividend

HONOLULU, April 24, 2020 (GLOBE NEWSWIRE) -- First Hawaiian, Inc. (NASDAQ:FHB), (“First Hawaiian” or the “Company”) today reported financial results for its quarter ended March 31, 2020.

“First Hawaiian will continue to be a source of strength for our employees, our customers and the community,” said Bob Harrison, Chairman, President and Chief Executive Officer.  “With our experienced management team, dedicated employees, deep customer relationships, and strong liquidity and capital, we are well positioned to manage through these challenging times.”

On April 22, 2020 the Company’s Board of Directors declared a quarterly cash dividend of $0.26 per share.  The dividend will be payable on June 5, 2020 to stockholders of record at the close of business on May 26, 2020.  The Board of Directors also voted to suspend the stock repurchase program.

First Quarter 2020 Highlights:

  • Net income of $38.9 million, or $0.30 per diluted share
  • Loan balances increased $169 million, or 1.3%, versus prior quarter
  • Deposits balances increased $575 million, or 3.5% versus the prior quarter
  • Net interest margin (“NIM”) was 3.12%
  • Adopted Current Expected Credit Loss (“CECL”) methodology on January 1, 2020
    • Upon adoption recognized a $17.1 million collective increase in the Allowance for Credit Losses (“ACL”) and the reserve for unfunded commitments and a corresponding $12.5 million decrease (after-tax) in retained earnings
    • Recorded a $41.2 million provision for credit losses in Q1
  • Board of Directors declared a quarterly dividend of $0.26 per share

Balance Sheet

Total assets were $20.8 billion as of March 31, 2020, compared to $20.2 billion as of December 31, 2019.

Gross loans and leases were $13.4 billion as of March 31, 2020, an increase of $169 million, or 1.3%, from $13.2 billion as of December 31, 2019

Total deposits were $17.0 billion as of March 31, 2020, an increase of $575 million, or 3.5%, from $16.4 billion as of December 31, 2019.  The increase was primarily due to a $425 million increase in public time deposits as the bank increased its liquidity position in anticipation of a surge in funding needs due to our participation in the Paycheck Protection Program and other additional liquidity needs.

Net Interest Income

Net interest income for the first quarter of 2020 was $138.7 million, a decrease of $0.9 million, or 0.7%, compared to $139.6 million for the prior quarter. 

The NIM was 3.12% in the first quarter of 2020, a decrease of three basis points compared to 3.15% in the fourth quarter of 2019.  

Provision Expense

On January 1, 2020, the Bank adopted the CECL methodology under Accounting Standards Codification (“ASC”) Topic 326, in which the ACL reflects expected credit losses for the remaining estimated life of loans and leases using historical experience, current conditions, and reasonable and supportable forecasts. The ACL at the end of the first quarter incorporates a change in the economic forecast late in the first quarter of 2020, to reflect the pandemic conditions, as compared to our initial adoption of CECL.

During the quarter ended March 31, 2020, the Bank recorded a total provision for credit losses of $41.2 million. In the quarter ended December 31, 2019, the total provision for credit losses was $4.3 million.

Noninterest Income

Noninterest income was $49.2 million in the first quarter of 2020, an increase of $2.5 million compared to noninterest income of $46.7 million in the fourth quarter of 2019.     

Noninterest Expense

Noninterest expense was $96.5 million in the first quarter of 2020, an increase of $5.4 million from $91.1 million in the fourth quarter of 2019. 

The efficiency ratio was 51.3% and 48.9% for the quarters ended March 31, 2020 and December 31, 2019, respectively.

Taxes

The effective tax rate was 22.6% for the quarter ended March 31, 2020 and 25.5% for the quarter ended December 31, 2019.

Asset Quality

The allowance for credit losses was $166.0 million, or 1.24% of total loans and leases, as of March 31, 2020, compared to $130.5 million, or 0.99% of total loans and leases, as of December 31, 2019.  The reserve for unfunded commitments was $17.3 million as of March 31, 2020 compared to $0.6 million as of December 31, 2019.  Net charge-offs were $6.1 million, or 0.19% of average loans and leases on an annualized basis for the quarter ended March 31, 2020, compared to $6.7 million, or 0.20% of average loans and leases on an annualized basis for the quarter ended December 31, 2019.  Total non-performing assets were $7.2 million, or 0.05% of total loans and leases and other real estate owned, at March 31, 2020, compared to non-performing assets of $5.8 million, or 0.04% of total loans and leases and other real estate owned, at December 31, 2019

Capital

Total stockholders' equity was $2.7 billion at March 31, 2020, compared to $2.6 billion at December 31, 2019.   

The tier 1 leverage, common equity tier 1 and total capital ratios were 8.63%, 11.65% and 12.90%, respectively, at March 31, 2020, compared with 8.79%, 11.88% and 12.81%, respectively, at December 31, 2019.

The Company repurchased 0.2 million shares of common stock at a total cost of $5.0 million under the stock repurchase program in the first quarter. The average cost was $22.96 per share repurchased.  Remaining buyback authority under the stock repurchase program was $75 million at March 31, 2020.

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 1:00 p.m. Eastern Time, 7:00 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:  3248226.  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 4:30 p.m. (Eastern Time) on May 1, 2020.  Access the replay by dialing (855) 859-2056 or (404) 537-3406 and entering the conference ID:  3248226.

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. Further, statements about the potential effects of the COVID-19 pandemic on our businesses and financial results and conditions may constitute forward-looking statements and are subject to the risk that the actual effects may differ, possibly materially, from what is reflected in those forward-looking statements due to factors and future developments that are uncertain, unpredictable and in many cases beyond our control, including the scope and duration of the pandemic, actions taken by governmental authorities in response to the pandemic, and the direct and indirect impact of the pandemic on our customers, third parties and us.  Although we believe that the expectations reflected in these forward-looking statements are reasonable as of the date made, there can be no assurance that actual results will not prove to be materially different from the results expressed or implied by the forward-looking statements.  A number of important factors could cause actual results or performance to differ materially from the forward-looking statements, including (without limitation) the risks and uncertainties associated with the ongoing impacts of COVID-19, the domestic and global economic environment and capital market conditions and other risk factors.  For a discussion of some of these 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, 2019.

Use of Non-GAAP Financial Measures

We present net interest income, noninterest income, noninterest expense, net income, earnings per share (basic and diluted) 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 efficiency ratio, 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 efficiency ratio as the ratio of core noninterest expense to the sum of core net interest income and core noninterest income.  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 total stockholders’ equity. 

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

Tables 11 and 12 at the end of this document provide a reconciliation of these non-GAAP financial measures with their most directly comparable 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  
    March 31   December 31   March 31  
(dollars in thousands, except per share data)   2020   2019   2019  
Operating Results:                    
Net interest income   $  138,683   $ 139,619   $ 145,089  
Provision for credit losses      41,200     4,250     5,680  
Noninterest income      49,228     46,708     47,072  
Noninterest expense      96,466     91,058     92,623  
Net income      38,865     67,836     69,924  
Basic earnings per share      0.30     0.52     0.52  
Diluted earnings per share      0.30     0.52     0.52  
Dividends declared per share      0.26     0.26     0.26  
Dividend payout ratio      86.67 %   50.00 %   50.00 %
Supplemental Income Statement Data (non-GAAP):                    
Core net interest income   $  138,683   $ 139,619   $ 145,089  
Core noninterest income      49,143     51,331     49,685  
Core noninterest expense      96,466     91,010     92,362  
Core net income      38,803     71,250     72,052  
Core basic earnings per share      0.30     0.55     0.53  
Core diluted earnings per share      0.30     0.54     0.53  
Performance Ratio(1):                    
Net interest margin      3.12   3.15 %   3.23 %
Core net interest margin (non-GAAP)      3.12   3.15 %   3.23 %
Efficiency ratio      51.33   48.86 %   48.20 %
Core efficiency ratio (non-GAAP)      51.35   47.65 %   47.42 %
Return on average total assets      0.77   1.34 %   1.38 %
Core return on average total assets (non-GAAP)      0.77   1.41 %   1.43 %
Return on average tangible assets (non-GAAP)      0.81   1.41 %   1.45 %
Core return on average tangible assets (non-GAAP)(2)      0.81   1.48 %   1.50 %
Return on average total stockholders' equity      5.87   10.21 %   11.16 %
Core return on average total stockholders' equity (non-GAAP)      5.87   10.72 %   11.50 %
Return on average tangible stockholders' equity (non-GAAP)      9.39   16.40 %   18.35 %
Core return on average tangible stockholders’ equity (non-GAAP)(3)      9.37   17.22 %   18.91 %
Average Balances:                    
Average loans and leases   $  13,191,426   $ 12,940,956   $ 13,073,708  
Average earning assets      17,814,189     17,649,343     18,091,424  
Average assets      20,313,304     20,089,601     20,494,837  
Average deposits      16,543,305     16,355,254     16,865,673  
Average stockholders' equity      2,660,811     2,636,651     2,540,600  
Market Value Per Share:                    
Closing      16.53     28.85     26.05  
High      31.25     29.47     27.67  
Low      15.42     25.48     22.13  
                     

 

    As of   As of   As of  
    March 31   December 31   March 31  
    2020   2019   2019  
Balance Sheet Data:                    
Loans and leases   $  13,380,270   $ 13,211,650   $ 13,197,454  
Total assets      20,755,891     20,166,734     20,441,136  
Total deposits      17,020,002     16,444,994     16,795,244  
Short-term borrowings      400,000     400,000      
Long-term borrowings      200,019     200,019     600,028  
Total stockholders' equity      2,664,685     2,640,258     2,613,202  
                     
Per Share of Common Stock:                    
Book value   $  20.52   $ 20.32   $ 19.36  
Tangible book value (non-GAAP)(4)      12.86     12.66     11.98  
                     
Asset Quality Ratios:                    
Non-accrual loans and leases / total loans and leases      0.05   0.04 %   0.03 %
Allowance for credit losses for loans and leases / total loans and leases      1.24   0.99 %   1.07 %
                     
Capital Ratios:                    
Common Equity Tier 1 Capital Ratio      11.65   11.88 %   12.05 %
Tier 1 Capital Ratio      11.65   11.88 %   12.05 %
Total Capital Ratio      12.90   12.81 %   13.06 %
Tier 1 Leverage Ratio      8.63   8.79 %   8.71 %
Total stockholders' equity to total assets      12.84   13.09 %   12.78 %
Tangible stockholders' equity to tangible assets (non-GAAP)      8.45   8.58 %   8.32 %
                     
Non-Financial Data:                    
Number of branches      58     58     60  
Number of ATMs      304     301     296  
Number of Full-Time Equivalent Employees      2,103     2,092     2,130  
                     

(1) Except for the efficiency ratio and the core efficiency ratio, amounts are annualized for the three months ended March 31, 2020, December 31, 2019 and March 31, 2019.

(2) Core return on average tangible assets is a non-GAAP financial measure. We compute our core return on average tangible assets as the ratio of core 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. For a reconciliation to the most directly comparable GAAP financial measure for core net income, see Table 11, GAAP to Non-GAAP Reconciliation.

(3) Core return on average tangible stockholders’ equity is a non-GAAP financial measure. 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. For a reconciliation to the most directly comparable GAAP financial measure for core net income, see Table 11, GAAP to Non-GAAP Reconciliation.

(4) Tangible book value is a non-GAAP financial measure. We compute our tangible book value as the ratio of tangible stockholders’ equity to shares outstanding. Tangible stockholders’ equity is calculated by subtracting (and thereby effectively excluding) amounts related to the effect of goodwill from our total stockholders’ equity. For a reconciliation to the most directly comparable GAAP financial measure for core net income, see Table 11, GAAP to Non-GAAP Reconciliation.

Consolidated Statements of Income   Table 2
    Three Months Ended
    March 31   December 31   March 31
(dollars in thousands, except per share amounts)   2020   2019   2019
Interest income                  
Loans and lease financing   $  134,971   $ 138,033     $ 144,406  
Available-for-sale securities      21,210     20,979       24,486  
Other      2,351     3,120       3,669  
Total interest income      158,532     162,132       172,561  
Interest expense                  
Deposits      15,600     18,222       23,197  
Short-term and long-term borrowings      4,249     4,291       4,275  
Total interest expense      19,849     22,513       27,472  
Net interest income      138,683     139,619       145,089  
Provision for credit losses      41,200     4,250       5,680  
Net interest income after provision for credit losses      97,483     135,369       139,409  
Noninterest income                  
Service charges on deposit accounts      8,950     9,041       8,060  
Credit and debit card fees      14,949     16,626       16,655  
Other service charges and fees      8,539     8,818       9,129  
Trust and investment services income      9,591     8,855       8,618  
Bank-owned life insurance      2,260     2,533       3,813  
Investment securities losses, net      85     (123 )     (2,613 )
Other      4,854     958       3,410  
Total noninterest income      49,228     46,708       47,072  
Noninterest expense                  
Salaries and employee benefits      44,829     41,098       44,860  
Contracted services and professional fees      16,055     13,724       13,645  
Occupancy      7,243     7,231       6,986  
Equipment      4,708     4,491       4,284  
Regulatory assessment and fees      1,946     1,802       1,447  
Advertising and marketing      1,823     1,317       1,966  
Card rewards program      7,015     8,635       6,732  
Other      12,847     12,760       12,703  
Total noninterest expense      96,466     91,058       92,623  
Income before provision for income taxes      50,245     91,019       93,858  
Provision for income taxes      11,380     23,183       23,934  
Net income   $  38,865   $ 67,836     $ 69,924  
Basic earnings per share   $  0.30   $ 0.52     $ 0.52  
Diluted earnings per share   $  0.30   $ 0.52     $ 0.52  
Basic weighted-average outstanding shares      129,895,706     130,463,102       134,879,336  
Diluted weighted-average outstanding shares      130,351,585     130,845,645       135,198,345  
                       

 

Consolidated Balance Sheets   Table 3
    March 31   December 31   March 31
(dollars in thousands)   2020   2019   2019
Assets                  
Cash and due from banks   $  353,908     $ 360,375     $ 336,555  
Interest-bearing deposits in other banks      698,924       333,642       281,312  
Investment securities, at fair value (amortized cost: $4,014,397 as of March 31, 2020, $4,080,663 as of December 31, 2019 and $4,554,601 as of March 31, 2019)      4,058,457       4,075,644       4,485,660  
Loans held for sale      8,180       904        
Loans and leases      13,380,270       13,211,650       13,197,454  
Less: allowance for credit losses      166,013       130,530       141,546  
Net loans and leases      13,214,257       13,081,120       13,055,908  
                   
Premises and equipment, net      321,254       316,885       310,902  
Other real estate owned and repossessed personal property      238       319       124  
Accrued interest receivable      43,552       45,239       49,489  
Bank-owned life insurance      455,226       453,873       447,936  
Goodwill      995,492       995,492       995,492  
Mortgage servicing rights      11,979       12,668       15,399  
Other assets      594,424       490,573       462,359  
Total assets   $  20,755,891     $ 20,166,734     $ 20,441,136  
Liabilities and Stockholders' Equity                  
Deposits:                  
Interest-bearing   $  11,274,463     $ 10,564,922     $ 10,951,764  
Noninterest-bearing      5,745,539       5,880,072       5,843,480  
Total deposits      17,020,002       16,444,994       16,795,244  
Short-term borrowings      400,000       400,000        
Long-term borrowings      200,019       200,019       600,028  
Retirement benefits payable      138,396       138,222       127,845  
Other liabilities      332,789       343,241       304,817  
Total liabilities      18,091,206       17,526,476       17,827,934  
                   
Stockholders' equity                  
Common stock ($0.01 par value; authorized 300,000,000 shares; issued/outstanding: 140,092,172 / 129,827,968 shares as of March 31, 2020, issued/outstanding: 139,917,150 / 129,928,479 shares as of December 31, 2019 and issued/outstanding: 139,851,508 / 135,012,015 shares as of March 31, 2019)      1,401       1,399       1,399  
Additional paid-in capital      2,506,477       2,503,677       2,497,770  
Retained earnings      429,323       437,072       326,451  
Accumulated other comprehensive income (loss), net      4,129       (31,749 )     (78,754 )
Treasury stock (10,264,204 shares as of March 31, 2020, 9,988,671 shares as of December 31, 2019 and 4,839,493 shares as of March 31, 2019)      (276,645 )     (270,141 )     (133,664 )
Total stockholders' equity      2,664,685       2,640,258       2,613,202  
Total liabilities and stockholders' equity   $  20,755,891     $ 20,166,734     $ 20,441,136  
                         

 

Average Balances and Interest Rates                                             Table 4  
    Three Months Ended   Three Months Ended   Three Months Ended  
    March 31, 2020   December 31, 2019   March 31, 2019  
    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   $  516.8   $  1.6    1.25 $ 548.5   $ 2.3   1.68 % $ 507.3   $ 3.2   2.56 %
Available-for-Sale Investment Securities      4,033.2      21.2    2.10     4,092.2     21.0   2.05     4,417.8     24.5   2.22  
Loans Held for Sale      15.8      0.1    1.70     1.5       2.55     0.3       2.79  
Loans and Leases(1)                                                  
Commercial and industrial      2,776.2      24.6    3.56     2,668.5     25.3   3.76     3,166.4     33.2   4.25  
Commercial real estate      3,433.2      34.6    4.05     3,325.8     35.9   4.28     3,005.2     35.4   4.77  
Construction      538.5      5.7    4.27     497.8     5.4   4.36     636.7     7.5   4.77  
Residential:                                                  
Residential mortgage      3,721.2      37.7    4.05     3,720.2     38.5   4.14     3,535.2     36.0   4.07  
Home equity line      887.4      7.7    3.50     905.6     8.2   3.58     915.7     8.7   3.85  
Consumer      1,611.7      23.0    5.75     1,635.2     23.3   5.66     1,667.3     22.5   5.48  
Lease financing      223.2      1.6    2.85     187.8     1.4   2.94     147.2     1.1   2.99  
Total Loans and Leases      13,191.4      134.9    4.11     12,940.9     138.0   4.24     13,073.7     144.4   4.46  
Other Earning Assets      57.0      0.7    5.30     66.2     0.8   4.76     92.3     0.5   2.06  
Total Earning Assets(2)      17,814.2      158.5    3.57     17,649.3     162.1   3.66     18,091.4     172.6   3.85  
Cash and Due from Banks      327.4               316.5               360.3            
Other Assets      2,171.7               2,123.8               2,043.1            
Total Assets   $  20,313.3             $ 20,089.6             $ 20,494.8            
                                                   
Interest-Bearing Liabilities                                                  
Interest-Bearing Deposits                                                  
Savings   $  5,090.4   $  3.3    0.26 $ 4,943.2   $ 3.8   0.31 %   4,815.8   $ 4.2   0.36 %
Money Market      3,064.8      4.6    0.61     3,117.6     5.6   0.72     3,181.3     7.7   0.98  
Time      2,534.7      7.7    1.23     2,538.4     8.8   1.37     3,041.8     11.3   1.51  
Total Interest-Bearing Deposits      10,689.9      15.6    0.59     10,599.2     18.2   0.68     11,038.9     23.2   0.85  
Short-Term Borrowings      401.7      2.8    2.88     400.1     2.9   2.87     12.8     0.1   2.45  
Long-Term Borrowings      200.0      1.4    2.77     200.0     1.4   2.76     600.0     4.2   2.84  
Total Interest-Bearing Liabilities      11,291.6      19.8    0.71     11,199.3     22.5   0.80     11,651.7     27.5   0.96  
Net Interest Income         $  138.7             $ 139.6             $ 145.1      
Interest Rate Spread                2.86             2.86 %             2.89 %
Net Interest Margin                3.12             3.15 %             3.23 %
Noninterest-Bearing Demand Deposits      5,853.4               5,756.0               5,826.8            
Other Liabilities      507.5               497.6               475.7            
Stockholders' Equity      2,660.8               2,636.7               2,540.6            
Total Liabilities and Stockholders' Equity   $  20,313.3             $ 20,089.6             $ 20,494.8            
                                                   

(1) Non-performing loans and leases are included in the respective average loan and lease balances. Income, if any, on such loans and leases is recognized on a cash basis.
(2) For the periods disclosed above, the taxable-equivalent basis adjustments made to the table above were not material.

Analysis of Change in Net Interest Income                 Table 5
    Three Months Ended March 31, 2020
    Compared to December 31, 2019
(dollars in millions)   Volume   Rate   Total
Change in Interest Income:                  
Interest-Bearing Deposits in Other Banks   $  (0.1 )   $  (0.6 )   $  (0.7 )
Available-for-Sale Investment Securities      (0.3 )      0.5        0.2  
Loans Held for Sale      0.1        —        0.1  
Loans and Leases                  
Commercial and industrial      0.8        (1.5 )      (0.7 )
Commercial real estate      0.9        (2.2 )      (1.3 )
Construction      0.4        (0.1 )      0.3  
Residential:                  
Residential mortgage      —        (0.8 )      (0.8 )
Home equity line      (0.2 )      (0.3 )      (0.5 )
Consumer      (0.5 )      0.2        (0.3 )
Lease financing      0.2        —        0.2  
Total Loans and Leases      1.6        (4.7 )      (3.1 )
Other Earning Assets      (0.1 )      —        (0.1 )
Total Change in Interest Income      1.2        (4.8 )      (3.6 )
                   
Change in Interest Expense:                  
Interest-Bearing Deposits                  
Savings      0.1        (0.6 )      (0.5 )
Money Market      (0.1 )      (0.9 )      (1.0 )
Time      —        (1.1 )      (1.1 )
Total Interest-Bearing Deposits      —        (2.6 )      (2.6 )
Short-Term Borrowings      (0.1 )      —        (0.1 )
Total Change in Interest Expense      (0.1 )      (2.6 )      (2.7 )
Change in Net Interest Income   $  1.3     $  (2.2 )   $  (0.9 )
                         

 

Analysis of Change in Net Interest Income                 Table 6
    Three Months Ended March 31, 2020
    Compared to March 31, 2019
(dollars in millions)   Volume   Rate   Total
Change in Interest Income:                  
Interest-Bearing Deposits in Other Banks   $  0.1     $  (1.7 )   $  (1.6 )
Available-for-Sale Investment Securities      (2.0 )      (1.3 )      (3.3 )
Loans Held for Sale      0.1        —        0.1  
Loans and Leases                  
Commercial and industrial      (3.7 )      (4.9 )      (8.6 )
Commercial real estate      4.9        (5.7 )      (0.8 )
Construction      (1.1 )      (0.7 )      (1.8 )
Residential:                  
Residential mortgage      1.8        (0.1 )      1.7  
Home equity line      (0.3 )      (0.7 )      (1.0 )
Consumer      (0.7 )      1.2        0.5  
Lease financing      0.5        —        0.5  
Total Loans and Leases      1.4        (10.9 )      (9.5 )
Other Earning Assets      (0.3 )      0.5        0.2  
Total Change in Interest Income      (0.7 )      (13.4 )      (14.1 )
                   
Change in Interest Expense:                  
Interest-Bearing Deposits                  
Savings      0.3        (1.2 )      (0.9 )
Money Market      (0.3 )      (2.8 )      (3.1 )
Time      (1.7 )      (1.9 )      (3.6 )
Total Interest-Bearing Deposits      (1.7 )      (5.9 )      (7.6 )
Short-Term Borrowings      2.7        —        2.7  
Long-Term Borrowings      (2.7 )      (0.1 )      (2.8 )
Total Change in Interest Expense      (1.7 )      (6.0 )      (7.7 )
Change in Net Interest Income   $  1.0     $  (7.4 )   $  (6.4 )
                         

 

Loans and Leases                 Table 7
    March 31   December 31   March 31
(dollars in thousands)   2020   2019   2019
Commercial and industrial   $  3,025,345   $  2,743,242   $  3,203,770
Commercial real estate      3,413,014      3,463,953      3,147,304
Construction      572,062      519,241      595,491
Residential:                  
Residential mortgage      3,673,455      3,768,936      3,543,964
Home equity line      891,698      893,239      907,829
Total residential      4,565,153      4,662,175      4,451,793
Consumer      1,568,073      1,620,556      1,653,109
Lease financing      236,623      202,483      145,987
Total loans and leases   $  13,380,270   $  13,211,650   $  13,197,454
                   

 

Deposits                 Table 8
    March 31   December 31   March 31
(dollars in thousands)   2020   2019   2019
Demand   $  5,745,539   $  5,880,072   $  5,843,480
Savings      5,213,471      4,998,933      4,884,418
Money Market      3,148,694      3,055,832      3,156,056
Time      2,912,298      2,510,157      2,911,290
Total Deposits   $  17,020,002   $  16,444,994   $  16,795,244
                   

 

Non-Performing Assets and Accruing Loans and Leases Past Due 90 Days or More                 Table 9
    March 31   December 31   March 31
(dollars in thousands)   2020   2019   2019
Non-Performing Assets                  
Non-Accrual Loans and Leases                  
Commercial Loans:                  
Commercial and industrial   $  32   $  32   $  190
Commercial real estate      —      30      —
Construction      2,422      —      —
Total Commercial Loans      2,454      62      190
Residential Loans:                  
Residential mortgage      4,472      5,406      4,090
Total Residential Loans      4,472      5,406      4,090
Total Non-Accrual Loans and Leases      6,926      5,468      4,280
Other Real Estate Owned      238      319      124
Total Non-Performing Assets   $  7,164   $  5,787   $  4,404
                   
Accruing Loans and Leases Past Due 90 Days or More                  
Commercial Loans:                  
Commercial and industrial   $  4,007   $  1,429   $  350
Commercial real estate      757      1,013      —
Construction      148      2,367      89
Total Commercial Loans      4,912      4,809      439
Residential Loans:                  
Residential mortgage      82      74      —
Home equity line      2,566      2,995      2,448
Total Residential Loans      2,648      3,069      2,448
Consumer      3,353      4,272      3,538
Total Accruing Loans and Leases Past Due 90 Days or More   $  10,913   $  12,150   $  6,425
                   
Restructured Loans on Accrual Status and Not Past Due 90 Days or More      17,823      14,493      25,229
Total Loans and Leases   $  13,380,270   $  13,211,650   $  13,197,454
                   

 

Allowance for Credit Losses                 Table 10
    For the Three Months Ended
    March 31   December 31   March 31
(dollars in thousands)   2020   2019   2019
Balance at Beginning of Period   $  130,530     $ 132,964     $ 141,718  
Adjustment to Adopt ASC Topic 326      770              
After Adoption of ASC Topic 326      131,300       132,964       141,718  
Loans and Leases Charged-Off                  
Commercial Loans:                  
Commercial and industrial      (201 )     (204 )      
Lease financing      —             (24 )
Total Commercial Loans      (201 )     (204 )     (24 )
Residential Loans:                  
Residential mortgage      —       (236 )      
Home equity line      (8 )     (195 )      
Total Residential Loans      (8 )     (431 )      
Consumer      (8,597 )     (8,689 )     (8,598 )
Total Loans and Leases Charged-Off      (8,806 )     (9,324 )     (8,622 )
Recoveries on Loans and Leases Previously Charged-Off                  
Commercial Loans:                  
Commercial and industrial      220       107       37  
Commercial real estate      —       170       31  
Construction      110              
Total Commercial Loans      330       277       68  
Residential Loans:                  
Residential mortgage      135       37       218  
Home equity line      122       70       32  
Total Residential Loans      257       107       250  
Consumer      2,083       2,256       2,452  
Total Recoveries on Loans and Leases Previously Charged-Off      2,670       2,640       2,770  
Net Loans and Leases Charged-Off      (6,136 )     (6,684 )     (5,852 )
Provision for Credit Losses - Loans and Leases      40,849       4,250       5,680  
Balance at End of Period   $  166,013     $ 130,530     $ 141,546  
Average Loans and Leases Outstanding   $  13,191,426     $ 12,940,956     $ 13,073,708  
Ratio of Net Loans and Leases Charged-Off to Average Loans and Leases Outstanding(1)      0.19     0.20 %     0.18 %
Ratio of Allowance for Credit Losses for Loans and Leases to Loans and Leases Outstanding      1.24     0.99 %     1.07 %

(1) Annualized for the three months ended March 31, 2020, December 31, 2019 and March 31, 2019.

                     
GAAP to Non-GAAP Reconciliation             Table 11  
    For the Three Months Ended  
    March 31   December 31   March 31  
(dollars in thousands, except per share amounts)   2020   2019   2019  
Income Statement Data:                    
Net income   $  38,865   $  67,836   $  69,924  
Core net income   $  38,803   $  71,250   $  72,052  
                     
Average total stockholders' equity   $  2,660,811   $  2,636,651   $  2,540,600  
Less: average goodwill      995,492      995,492      995,492  
Average tangible stockholders' equity   $  1,665,319   $  1,641,159   $  1,545,108  
                     
Average total assets   $  20,313,304   $  20,089,601   $  20,494,837  
Less: average goodwill      995,492      995,492      995,492  
Average tangible assets   $  19,317,812   $  19,094,109   $  19,499,345  
                     
Return on average total stockholders' equity(1)      5.87    10.21    11.16
Core return on average total stockholders' equity (non-GAAP)(1)      5.87    10.72    11.50
Return on average tangible stockholders' equity (non-GAAP)(1)      9.39    16.40    18.35
Core return on average tangible stockholders' equity (non-GAAP)(1)      9.37    17.22    18.91
                     
Return on average total assets(1)      0.77    1.34    1.38
Core return on average total assets (non-GAAP)(1)      0.77    1.41    1.43
Return on average tangible assets (non-GAAP)(1)      0.81    1.41    1.45
Core return on average tangible assets (non-GAAP)(1)      0.81    1.48    1.50
                     

 

    As of   As of   As of  
    March 31   December 31   March 31  
    2020   2019   2019  
Balance Sheet Data:                    
Total stockholders' equity   $  2,664,685   $  2,640,258   $  2,613,202  
Less: goodwill      995,492      995,492      995,492  
Tangible stockholders' equity   $  1,669,193   $  1,644,766   $  1,617,710  
                     
Total assets   $  20,755,891   $  20,166,734   $  20,441,136  
Less: goodwill      995,492      995,492      995,492  
Tangible assets   $  19,760,399   $  19,171,242   $  19,445,644  
                     
Shares outstanding      129,827,968      129,928,479      135,012,015  
                     
Total stockholders' equity to total assets      12.84    13.09    12.78 %
Tangible stockholders' equity to tangible assets (non-GAAP)      8.45    8.58    8.32 %
                     
Book value per share   $  20.52   $  20.32   $  19.36  
Tangible book value per share (non-GAAP)   $  12.86   $  12.66   $  11.98  

(1) Annualized for the three months ended March 31, 2020, December 31, 2019 and March 31, 2019.

GAAP to Non-GAAP Reconciliation                 Table 12
    For the Three Months Ended
    March 31   December 31   March 31
(dollars in thousands, except per share amounts)   2020   2019   2019
Net interest income   $  138,683     $ 139,619     $ 145,089  
Core net interest income (non-GAAP)   $  138,683     $ 139,619     $ 145,089  
                   
Noninterest income   $  49,228     $ 46,708     $ 47,072  
(Gain) loss on sale of securities      (85 )     123       2,613  
Costs associated with the sale of stock      —       4,500        
Core noninterest income (non-GAAP)   $  49,143     $ 51,331     $ 49,685  
                   
Noninterest expense   $  96,466     $ 91,058     $ 92,623  
One-time items(1)      —       (48 )     (261 )
Core noninterest expense (non-GAAP)   $  96,466     $ 91,010     $ 92,362  
                   
Net income   $  38,865     $ 67,836     $ 69,924  
(Gain) loss on sale of securities      (85 )     123       2,613  
Costs associated with the sale of stock      —       4,500        
One-time noninterest expense items(1)      —       48       261  
Tax adjustments(2)      23       (1,257 )     (746 )
Total core adjustments      (62 )     3,414       2,128  
Core net income (non-GAAP)   $  38,803     $ 71,250     $ 72,052  
                   
Basic earnings per share   $  0.30     $ 0.52     $ 0.52  
Diluted earnings per share   $  0.30     $ 0.52     $ 0.52  
Efficiency ratio      51.33 %     48.86 %     48.20 %
                   
Core basic earnings per share (non-GAAP)   $  0.30     $ 0.55     $ 0.53  
Core diluted earnings per share (non-GAAP)   $  0.30     $ 0.54     $ 0.53  
Core efficiency ratio (non-GAAP)      51.35 %     47.65 %     47.42 %
                         

(1) One-time items for all periods shown included nonrecurring offering costs.

(2) Represents the adjustments to net income, tax effected at the Company’s effective tax rate for the respective period.

FH Inc Logo 2016 Horizontal RGB (2).jpg

 

Source: First Hawaiian, Inc.

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