1

================================================================================

                                 UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                            WASHINGTON, D. C.  20549

                               -----------------

                                   FORM 10-Q

         (Mark One)
         [x]     QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                 SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended
                 June 30, 1994
                                       OR
         [ ]     TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                 SECURITIES EXCHANGE ACT OF 1934 For the transition period from
                 __________________ to __________________

                         Commission file number 0-7949

                               -----------------

                              FIRST HAWAIIAN, INC.
             (Exact name of registrant as specified in its charter)

                               -----------------
              DELAWARE                                99-0156159
     (State of incorporation)                       (I.R.S. Employer
                                                   Identification No.)

  1132 BISHOP STREET, HONOLULU, HAWAII                   96813
(Address of principal executive offices)               (Zip Code)

                                 (808) 525-7000
              (Registrant's telephone number, including area code)

                               -----------------

    Indicate by check mark whether the registrant (1) has filed all reports
     required to be filed by Section 13 or l5(d) of the Securities Exchange 
       Act of 1934 during the preceding 12 months (or for such shorter 
            period that the registrant was required to file such
                reports), and (2) has been subject to such 
                 filing requirements for the past 90 days.
                      Yes    X            No 
                           -----             -----


             The number of shares outstanding of each of the issuer's 
                    classes of common stock as of July 20, 1994:

                                      
                      Class                         Outstanding   
        ---------------------------------       ------------------
            Common Stock, $5 Par Value           32,225,549 Shares
================================================================================ 2 PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited) Page ---- Consolidated Balance Sheets - June 30, 1994, December 31, 1993 and June 30, 1993 2 Consolidated Statements of Income - Quarter and Six Months Ended June 30, 1994 and 1993 3 Consolidated Statements of Cash Flows - Six Months Ended June 30, 1994 and 1993 4 Consolidated Statements of Changes in Stockholders' Equity - Quarter and Six Months Ended June 30, 1994 and 1993 5 Notes to Consolidated Financial Statements 5 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 6-17 PART II. OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security Holders 18 Item 6. Exhibits and Reports on Form 8-K 18 SIGNATURES 19 EXHIBIT INDEX 20
1 3 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS CONSOLIDATED BALANCE SHEETS First Hawaiian, Inc. and Subsidiaries (Unaudited)
JUNE 30, December 31, June 30, 1994 1993 1993 ------------ ----------- ----------- (in thousands) ASSETS Cash and due from banks $ 175,626 $ 436,129 $ 230,684 Interest-bearing deposits in other banks 50,695 116,736 101,295 Federal funds sold and securities purchased under agreements to resell 80,000 35,000 239,877 Investment securities (note 2): Held-to-maturity (market value of $1,096,079, $1,144,327 and $1,040,010, respectively) 1,103,895 1,132,025 1,024,244 Available-for-sale 129,517 98,453 96,719 ---------- ---------- ---------- Total investment securities 1,233,412 1,230,478 1,120,963 ---------- ---------- ---------- Loans and leases: Loans and leases 5,132,096 5,066,809 4,369,959 Less allowance for loan and lease losses 61,873 62,253 56,828 ---------- ---------- ---------- Net loans and leases 5,070,223 5,004,556 4,313,131 ---------- ---------- ---------- Premises and equipment (note 3) 253,289 249,479 230,203 Customers' acceptance liability 1,432 854 1,266 Core deposit premium 14,545 15,380 11,662 Goodwill 79,549 81,231 60,006 Other assets 88,958 99,288 84,973 ---------- ---------- ---------- TOTAL ASSETS $7,047,729 $7,269,131 $6,394,060 ========== ========== ========== LIABILITIES AND STOCKHOLDERS' EQUITY Deposits: Noninterest-bearing demand $ 849,610 $ 974,478 $ 937,360 Interest-bearing demand 1,113,356 1,143,037 1,087,895 Savings 1,359,738 1,507,200 1,326,435 Time 1,385,308 1,343,841 1,182,692 Foreign 263,088 251,572 185,227 ---------- ---------- ---------- Total deposits 4,971,100 5,220,128 4,719,609 Short-term borrowings 1,078,655 1,069,682 870,199 Acceptances outstanding 1,432 854 1,266 Other liabilities 165,317 148,331 149,357 Long-term debt 210,894 221,767 65,853 ---------- ---------- ---------- Total liabilities 6,427,398 6,660,762 5,806,284 ---------- ---------- ---------- Stockholders' equity: Common stock 162,713 162,713 162,507 Surplus 133,821 133,820 132,889 Retained earnings 330,504 311,836 292,380 Unrealized valuation adjustment (note 2) (202) -- -- Treasury stock (6,505) -- -- ---------- ---------- ---------- Total stockholders' equity 620,331 608,369 587,776 ---------- ---------- ---------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $7,047,729 $7,269,131 $6,394,060 ========== ========== ==========
The accompanying notes are an integral part of these consolidated financial statements. 2 4 CONSOLIDATED STATEMENTS OF INCOME First Hawaiian, Inc. and Subsidiaries (Unaudited)
QUARTER ENDED JUNE 30, SIX MONTHS ENDED JUNE 30, ----------------------------- ------------------------------ 1994 1993 1994 1993 ------------ ----------- ------------ ------------- (in thousands, except shares and per share data) INTEREST INCOME Interest and fees on loans $ 96,874 $ 86,622 $ 191,296 $ 172,435 Lease financing income 2,702 3,289 5,620 6,613 Interest on investment securities: Taxable interest income 11,231 11,567 21,943 23,439 Exempt from Federal income taxes 3,420 3,773 6,702 7,382 Other interest income 2,171 2,590 4,305 6,829 ----------- ----------- ----------- ----------- Total interest income 116,398 107,841 229,866 216,698 ----------- ----------- ----------- ----------- INTEREST EXPENSE Deposits 29,899 31,034 60,035 66,056 Short-term borrowings 10,482 6,464 19,814 12,100 Long-term debt 3,017 1,012 5,934 2,012 ----------- ----------- ----------- ----------- Total interest expense 43,398 38,510 85,783 80,168 ----------- ----------- ----------- ----------- Net interest income 73,000 69,331 144,083 136,530 Provision for loan and lease losses 3,288 2,903 7,131 6,806 ----------- ----------- ----------- ----------- Net interest income after provision for loan and lease losses 69,712 66,428 136,952 129,724 ----------- ----------- ----------- ----------- OTHER OPERATING INCOME Trust income 6,001 5,285 12,463 10,786 Service charges on deposit accounts 5,930 5,054 11,814 9,779 Other service charges and fees 7,467 6,241 15,620 13,453 Securities gains, net 1 1,873 142 1,899 Other 1,700 1,550 4,129 2,078 ----------- ----------- ----------- ----------- Total other operating income 21,099 20,003 44,168 37,995 ----------- ----------- ----------- ----------- OTHER OPERATING EXPENSES Salaries and wages 23,057 20,879 46,284 41,507 Employee benefits 6,623 6,166 14,005 11,815 Occupancy expense 5,812 4,463 11,534 8,960 Equipment expense 6,191 4,921 12,064 9,535 Other (note 3) 19,895 17,285 39,095 37,483 ----------- ----------- ----------- ----------- Total other operating expenses 61,578 53,714 122,982 109,300 ----------- ----------- ----------- ----------- Income before income taxes and cumulative effect of a change in accounting principle 29,233 32,717 58,138 58,419 Income taxes 10,233 10,614 20,401 18,320 ----------- ----------- ----------- ----------- Income before cumulative effect of a change in accounting principle 19,000 22,103 37,737 40,099 Cumulative effect of a change in accounting principle (note 2) -- -- -- 3,650 ----------- ----------- ----------- ----------- NET INCOME $ 19,000 $ 22,103 $ 37,737 $ 43,749 =========== =========== =========== =========== PER SHARE DATA Income before cumulative effect of a change in accounting principle $ .59 $ .68 $ 1.17 $ 1.24 Cumulative effect of a change in accounting principle -- -- -- .11 ----------- ----------- ----------- ----------- NET INCOME $ .59 $ .68 $ 1.17 $ 1.35 =========== =========== =========== =========== CASH DIVIDENDS $ .295 $ .28 $ .59 $ .56 =========== =========== =========== =========== AVERAGE SHARES OUTSTANDING 32,322,730 32,501,611 32,361,130 32,501,611 =========== =========== =========== ===========
The accompanying notes are an integral part of these consolidated financial statements. 3 5 CONSOLIDATED STATEMENTS OF CASH FLOWS First Hawaiian, Inc. and Subsidiaries (Unaudited)
SIX MONTHS ENDED JUNE 30, ---------------------------- 1994 1993 ----------- -------- (in thousands) CASH AND DUE FROM BANKS AT BEGINNING OF PERIOD $ 436,129 $ 325,659 --------- --------- Cash flows from operating activities: Net income 37,737 43,749 Provision for loan and lease losses 7,131 6,806 Depreciation and amortization 11,931 9,478 Income taxes 1,832 (4,412) Cumulative effect of a change in accounting principle -- (3,650) Decrease (increase) in interest receivable 1,338 (713) Increase (decrease) in interest payable (1,471) 927 Decrease (increase) in prepaid expenses (273) 863 Write-off of building costs -- 5,444 --------- --------- Net cash provided by operating activities 58,225 58,492 --------- --------- Cash flows from investing activities: Net decrease in interest-bearing deposits in other banks 66,041 55,021 Net decrease (increase) in Federal funds sold and securities purchased under agreements to resell (45,000) 165,123 Purchase of held-to-maturity investment securities (220,415) (665,211) Proceeds from maturity of held-to-maturity investment securities 248,545 495,437 Purchase of available-for-sale investment securities (61,530) -- Proceeds from maturity of available-for-sale investment securities 30,466 -- Net decrease (increase) in loans and leases made to customers (72,798) 19,697 Capital expenditures (12,547) (35,227) Other 25,011 47,333 --------- --------- Net cash provided by (used in) investing activities (42,227) 82,173 --------- --------- Cash flows from financing activities: Net decrease in deposits (249,028) (368,550) Net increase in short-term borrowings 8,973 156,285 Payments on long-term debt (10,873) (5,206) Cash dividends paid (19,068) (18,169) Purchases of treasury stock (6,505) -- --------- --------- Net cash used in financing activities (276,501) (235,640) --------- --------- CASH AND DUE FROM BANKS AT END OF PERIOD $ 175,626 $ 230,684 ========= ========= Supplemental disclosures: Interest paid $ 84,312 $ 79,343 ========= ========= Net income taxes paid $ 18,569 $ 22,732 ========= =========
The accompanying notes are an integral part of these consolidated financial statements. 4 6 CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY First Hawaiian, Inc. and Subsidiaries (Unaudited)
QUARTER ENDED JUNE 30, SIX MONTHS ENDED JUNE 30, ---------------------- ------------------------- 1994 1993 1994 1993 -------- -------- -------- --------- (in thousands) BALANCE, BEGINNING OF PERIOD $613,032 $574,757 $608,369 $562,196 Net income 19,000 22,103 37,737 43,749 Purchases of treasury stock (2,016) -- (6,505) -- Unrealized valuation adjustment (note 2) (161) -- (202) -- Cash dividends (9,524) (9,084) (19,068) (18,169) -------- -------- -------- -------- BALANCE, END OF PERIOD $620,331 $587,776 $620,331 $587,776 ======== ======== ======== ========
The accompanying notes are an integral part of these consolidated financial statements. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS First Hawaiian, Inc. and Subsidiaries (Unaudited) 1. BASIS OF PRESENTATION The consolidated financial statements of the Company include the accounts of First Hawaiian, Inc. and its wholly-owned subsidiaries - First Hawaiian Bank and its wholly-owned subsidiaries; Pioneer Federal Savings Bank and its wholly-owned subsidiary; First Hawaiian Creditcorp, Inc.; First Hawaiian Leasing, Inc.; and FHI International, Inc. All significant intercompany balances and transactions have been eliminated in consolidation. Certain amounts in the consolidated financial statements for 1993 have been reclassified to conform with the 1994 presentation. Such reclassifications had no effect on the consolidated net income as previously reported. In the opinion of management, all adjustments (which included only normal recurring adjustments) necessary for a fair presentation are reflected in the consolidated financial statements. 2. ACCOUNTING CHANGES Effective January 1, 1993, the Company adopted Statement of Financial Accounting Standards ("SFAS") No. 109, "Accounting for Income Taxes," the cumulative effect of which was the recognition of an income tax benefit of $3,650,000 in the first quarter of 1993. Under SFAS No. 109, deferred tax assets and liabilities are measured using enacted tax rates scheduled to be in effect at the time the related temporary differences between financial reporting and tax reporting of income and expenses are expected to reverse. The effect of changes in tax rates is recognized in income in the period that includes the enactment date. As of December 31, 1993, the Company adopted SFAS No. 115, "Accounting for Certain Investments in Debt and Equity Securities." Under SFAS No. 115, investment securities are to be classified in three categories and accounted for as follows: (1) held-to-maturity securities are debt securities which the Company has the positive intent and ability to hold to maturity, and are reported at amortized cost; (2) trading securities are debt securities that are bought and held principally for the purpose of selling them in the near term and are reported at fair value, with unrealized gains and losses included in the current earnings; and (3) available-for-sale securities are debt securities not classified as either held-to-maturity securities or trading securities and are reported at fair value, with unrealized gains and losses excluded from current earnings and reported in a separate component of stockholders' equity. There were no trading securities as of June 30, 1994, December 31, 1993 and June 30, 1993. 3. OTHER OPERATING EXPENSES In connection with the Company's redevelopment of its former downtown headquarters block, the undepreciated cost of certain structures was written off in the first quarter of 1993. The write-off amounted to $5,444,000, and is included in "Other Operating Expenses" for that period. 4. BUSINESS COMBINATION On August 6, 1993, the Company acquired all of the outstanding stock of Pioneer Fed BanCorp, Inc. ("Pioneer Holdings") for a cash purchase price of $87 million. As a result of the merger of Pioneer Holdings with and into the Company, Pioneer Federal Savings Bank ("Pioneer") became a wholly-owned subsidiary of the Company. The results of operations of Pioneer Federal Savings Bank are included in the Company's Consolidated Statements of Income from the date of acquisition. 5 7 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS NET INCOME Consolidated net income for the first six months of 1994 was $37,737,000 compared to $43,749,000 for the first six months of 1993, a decrease of 13.7%. Consolidated income from operations for the first six months of 1994 was $40,099,000, or a decrease of 5.9%, as compared to the same period in 1993, excluding the cumulative effect of the change in accounting principle of $3,650,000 in the first quarter of 1993. For the second quarter of 1994, the consolidated net income of $19,000,000 represented a decrease of 14.0% from the same quarter in 1993. The variance to last year's results was primarily attributable to: (1) a pre-tax gain of $1,873,000 from the sale of certain trading securities recognized in the second quarter of 1993; and (2) a pre-tax loss of $1,409,000 realized in the current quarter from the disposition of certain mainland real estate acquired in a foreclosure action in an earlier quarter. On a per share basis, consolidated net income for the six months and quarter ended June 30, 1994 were $1.17 and $.59, respectively, a decrease of 13.3% and 13.2%, respectively, as compared to the same periods in 1993. Excluding the effect of the change in accounting principle, income from operations per share was $1.17 for the first six months of 1994, a decrease of 5.6% as compared to the same period in 1993. On an annualized basis, the Company's return on average total assets for the first six months of 1994 was 1.06% compared to 1.35% for the same period in 1993 and return on average stockholders' equity was 12.39% compared to 15.42% for the same period in 1993. The decreases in return on average total assets and return on average stockholders' equity in 1994 as compared to 1993 were primarily attributable to the decrease in earnings previously mentioned. NET INTEREST INCOME On a fully taxable equivalent basis, net interest income increased $7,749,000, or 5.5%, to $147,771,000 for the six months ended June 30, 1994 from $140,022,000 for the same period in 1993. The increase was due to the 10.6% increase in average earning assets (principally as a result of the acquisition of Pioneer) offset by a 21 basis point (1% equals 100 basis points) decrease in the net interest margin. For the second quarter of 1994, the yield on earning assets decreased 17 basis points while there was no change in the rate paid for interest-bearing deposits and liabilities compared to the same period in 1993, resulting in a decrease in the interest rate spread from 4.28% to 4.11%. Utilizing average earning assets as the base, the net interest margin on earning assets for the second quarter of 1994 was 4.61% compared to 4.83% for the same period in 1993. The decline in yields on loans and investment securities was primarily due to maturities and refinancing of higher yielding loans and investment securities. 6 8 The following table sets forth consolidated average balance sheets, an analysis of interest income/expense, and average yield/rate for each major category of interest-earning assets and interest-bearing liabilities for the periods indicated on a taxable equivalent basis. The tax equivalent adjustment is made for items exempt from Federal income taxes to make them comparable with taxable items before any income taxes are applied.
QUARTER ENDED JUNE 30, ---------------------------------------------------------------- 1994 1993 ------------------------------ -------------------------------- INTEREST INTEREST AVERAGE INCOME/ YIELD/ AVERAGE INCOME/ YIELD/ ASSETS BALANCE EXPENSE RATE (1) BALANCE EXPENSE RATE (1) --------- --------- -------- ---------- --------- -------- (dollars in thousands) Earning assets: Interest-bearing deposits in other banks $ 95,028 $ 884 3.73% $ 180,085 $ 1,380 3.07% Federal funds sold and securities purchased under agreements to resell 122,559 1,198 3.92 160,337 1,210 3.03 Investment securities 1,090,724 14,894 5.48 1,147,388 17,004 5.94 Available-for-sale securities 129,880 1,494 4.61 1,063 -- -- Loans and leases (2),(3) 5,081,773 99,814 7.88 4,417,081 90,069 8.18 ---------- -------- ---------- -------- Total earning assets 6,519,964 118,284 7.28 5,905,954 109,663 7.45 -------- -------- Nonearning assets 616,933 612,128 ---------- ---------- Total assets $7,136,897 $6,518,082 ========== ==========
SIX MONTHS ENDED JUNE 30, --------------------------------------------------------------- 1994 1993 ------------------------------ ------------------------------- INTEREST INTEREST AVERAGE INCOME/ YIELD/ AVERAGE INCOME/ YIELD/ ASSETS BALANCE EXPENSE RATE (1) BALANCE EXPENSE RATE (1) --------- --------- -------- ---------- --------- -------- (dollars in thousands) Earning assets: Interest-bearing deposits in other banks $ 111,856 $ 1,897 3.42% $ 217,546 $ 3,515 3.26% Federal funds sold and securities purchased under agreements to resell 133,091 2,319 3.51 209,861 3,314 3.18 Investment securities 1,083,488 29,493 5.49 1,069,134 34,074 6.43 Available-for-sale securities 119,717 2,544 4.28 534 -- -- Loans and leases (2),(3) 5,063,744 197,301 7.86 4,393,293 179,389 8.23 ---------- -------- ---------- -------- Total earning assets 6,511,896 233,554 7.23 5,890,368 220,292 7.54 Nonearning assets -------- -------- 651,438 637,447 Total assets ---------- ----------
$7,163,334 $6,527,815 ========== ========== (1) Annualized. (2) Nonaccruing loans and leases have been included in the computations of average loan and lease balances. (3) Interest income for loans and leases included loan fees of $5,890 and $13,895 for the quarter and six months ended June 30, 1994, respectively, and $6,400 and $12,523 for the quarter and six months ended June 30, 1993, respectively. 7 9
QUARTER ENDED JUNE 30, ---------------------------------------------------------------- 1994 1993 ------------------------------ -------------------------------- INTEREST INTEREST LIABILITIES AND AVERAGE INCOME/ YIELD/ AVERAGE INCOME/ YIELD/ SHAREHOLDERS' EQUITY BALANCE EXPENSE RATE (1) BALANCE EXPENSE RATE (1) --------- --------- -------- ---------- --------- -------- (dollars in thousands) Interest-bearing deposits and liabilities: Deposits $4,202,087 $29,899 2.85% $3,987,901 $31,083 3.13% Short-term borrowings 1,078,076 10,482 3.90 823,733 6,464 3.15 Long-term debt 210,232 3,017 5.75 66,678 1,012 6.08 ---------- ------- ---------- ------- Total interest-bearing deposits and liabilities 5,490,395 43,398 3.17 4,878,312 38,559 3.17 ------- ---- ------- Interest rate spread 4.11% 4.28% ==== ==== Noninterest-bearing demand deposits 885,748 920,765 Other liabilities 141,447 140,753 ---------- ---------- Total liabilities 6,517,590 5,939,830 Stockholders' equity 619,307 578,252 ---------- ---------- Total liabilities and stockholders' equity $7,136,897 $6,518,082 ========== ========== Net interest income and margin on earning assets 74,886 4.61% 71,104 4.83% ==== ==== Tax equivalent adjustment 1,886 1,822 ------- ------- Net interest income $73,000 $69,282 ======= =======
SIX MONTHS ENDED JUNE 30, ---------------------------------------------------------------- 1994 1993 ------------------------------ -------------------------------- INTEREST INTEREST LIABILITIES AND AVERAGE INCOME/ YIELD/ AVERAGE INCOME/ YIELD/ SHAREHOLDERS' EQUITY BALANCE EXPENSE RATE (1) BALANCE EXPENSE RATE (1) --------- --------- -------- ---------- --------- -------- (dollars in thousands) Interest-bearing deposits and liabilities: Deposits $4,184,553 $60,035 2.89% $4,042,202 $66,158 3.30% Short-term borrowings 1,098,751 19,814 3.64 773,395 12,100 3.16 Long-term debt 211,571 5,934 5.66 67,073 2,012 6.05 ---------- ------- ---------- ------- Total interest-bearing deposits and liabilities 5,494,875 85,783 3.15 4,882,670 80,270 3.32 ------- ---- ------- ---- Interest rate spread 4.08% 4.22% ==== ==== Noninterest-bearing demand deposits 903,029 917,314 Other liabilities 151,063 155,646 ---------- ---------- Total liabilities 6,548,967 5,955,630 Stockholders' equity 614,367 572,185 ---------- ---------- Total liabilities and stockholders' equity $7,163,334 $6,527,815 ========== ========== Net interest income and margin on earning assets 147,771 4.58% 140,022 4.79% ==== ==== Tax equivalent adjustment 3,688 3,594 -------- -------- Net interest income $144,083 $136,428 ======== ========
(1) Annualized. 8 10 INVESTMENT SECURITIES Comparative book and market values of held-to-maturity securities at June 30, 1994, December 31, 1993, and June 30, 1993 were as follows:
June 30, December 31, June 30, 1994 1993 1993 ---------- ------------ ---------- (in thousands) Book value $1,103,895 $1,132,025 $1,024,244 Unrealized gains 6,827 14,036 16,600 Unrealized losses (14,643) (1,734) (834) ---------- ---------- ---------- Market value $1,096,079 $1,144,327 $1,040,010 ========== ========== ==========
The decrease in unrealized gains and increase in unrealized losses from December 31, 1993 are attributable to the rise in the overall level of interest rates resulting from monetary actions of the Federal Reserve Board during the first six months of 1994. Gross realized gains and losses for the six months ended June 30, 1994 and 1993 were as follows:
1994 1993 ---- ----- (in thousands) Realized gains $143 $1,962 Realized losses 1 63 ---- ------ Securities gains, net $142 $1,899 ==== ======
Gains and losses realized on the sales of investment securities are determined using the specific identification method. 9 11 LOANS The following table sets forth the loan portfolio by major categories and loan mix at June 30, 1994, December 31, 1993 and June 30, 1993:
JUNE 30, 1994 December 31, 1993 June 30, 1993 ---------------------- -------------------- ------------------ AMOUNT % Amount % Amount % ----------- ------- ----------- ----- ---------- ---- (dollars in thousands) Commercial, financial and agricultural $1,216,608 23.7% $1,208,912 23.8% $1,114,749 25.5% Real estate: Commercial 941,716 18.3 882,628 17.4 755,654 17.3 Construction 270,420 5.3 317,036 6.2 383,682 8.8 Residential: Insured, guaranteed or conventional 1,488,430 29.0 1,427,299 28.2 901,572 20.6 Home equity credit lines 356,015 6.9 358,662 7.1 361,875 8.3 --------- ----- ---------- ----- --------- ----- Total real estate loans 3,056,581 59.5 2,985,625 58.9 2,402,783 55.0 --------- ----- ---------- ----- --------- ----- Consumer 449,721 8.8 459,910 9.1 450,919 10.3 Lease financing 193,837 3.8 201,449 4.0 192,720 4.4 Foreign 215,349 4.2 210,913 4.2 208,788 4.8 --------- ----- ---------- ----- --------- ----- Total loans and leases 5,132,096 100.0% 5,066,809 100.0% 4,369,959 100.0% ===== ===== ===== Less allowance for loan and lease losses 61,873 62,253 56,828 --------- ---------- ---------- Total net loans and leases $5,070,223 $5,004,556 $4,313,131 ========== ========== ==========
The loan and lease portfolio is the largest component of earning assets and accounts for the greatest portion of total interest income. At June 30, 1994, total loans and leases were $5,132,096,000, an increase of 1.3% from December 31, 1993. Total loans and leases at June 30, 1994, represented 72.8% of total assets, 79.0% of total earning assets and 103.2% of total deposits compared to 69.7% of total assets, 78.6% of total earning assets and 97.1% of total deposits at December 31, 1993. Governmental and certain other time deposits were shifted into security repurchase agreements at June 30, 1994, December 31, 1993 and June 30, 1993 to reduce the Company's deposit insurance premiums. If these repurchase agreements were included in the deposit base, total loans and leases as a percentage of total deposits would represent 88.4%, 83.8% and 79.0%, respectively, at such dates. Loan concentrations are considered to exist when there are amounts loaned to multiple borrowers engaged in similar activities which would cause them to be similarly impacted by economic or other conditions. At June 30, 1994, commercial real estate loans totalled $941,716,000, or 18.3%, of total loans and leases. The Company has selectively participated as a lender on commercial properties on the mainland United States, principally on the west coast. Such loans totalled $60.9 million at June 30, 1994, a decrease of 9.9% from December 31, 1993. At June 30, 1994, the largest concentration of commercial real estate loans to a single borrower was $40.3 million. Commercial loans outstanding remained virtually unchanged since year-end, reflecting the continuing weakness in the Hawaii economy and corresponding lack of growth in appropriate lending opportunities. Construction and land development loans decreased 14.7% from December 31, 1993 to June 30, 1994 due to repayments and loans transferred to commercial real estate because of project completion and receipt of permanent financing. 10 12 NONPERFORMING ASSETS A summary of nonperforming assets at June 30, 1994, December 31, 1993 and June 30, 1993 follows:
JUNE 30, December 31, June 30, 1994 1993 1993 --------- ---------- ---------- (dollars in thousands) Nonperforming loans and leases: Nonaccrual: Commercial, financial and agricultural $ 3,713 $ 13,823 $ 12,332 Real estate: Commercial 22,675 12,145 3,559 Construction 11,835 28,571 41,388 Residential: Insured, guaranteed, or conventional 8,389 5,473 4,400 Home equity credit lines 229 255 248 --------- ---------- --------- Total real estate loans 43,128 46,444 49,595 --------- ---------- --------- Consumer -- 45 75 --------- ---------- --------- Total nonaccrual loans and leases 46,841 60,312 62,002 Renegotiated - commercial, financial and agricultural 14,784 20 49 --------- ---------- --------- Total nonperforming loans and leases 61,625 60,332 62,051 Other real estate owned 2,264 13,034 2,841 --------- ---------- --------- Total nonperforming assets $ 63,889 $ 73,366 $ 64,892 ========= ========== ========= Loans and leases past due 90 days or more and still accruing interest $ 38,076 $ 40,285 $ 30,013 ========= ========== ========= Nonperforming assets to total loans and leases and other real estate owned (end of period): Excluding past due loans and leases 1.24% 1.44% 1.48% Including past due loans and leases 1.99% 2.24% 2.17% Nonperforming assets to total assets (end of period): Excluding past due loans and leases .91% 1.01% 1.01% Including past due loans and leases 1.45% 1.56% 1.48%
11 13 NONPERFORMING ASSETS, CONTINUED Nonperforming assets decreased from $73,366,000 at December 31, 1993 to $63,889,000 at June 30, 1994. The decrease was primarily attributable to the repayment of a $7.0 million commercial loan, the sale of a $10.0 million property held as other real estate owned and several commercial loans totalling $12.5 million which were returned to accrual from nonaccrual status, offset by the addition to nonperforming loan status of two Hawaii commercial real estate loans totalling $13.6 million. Loans and leases past due 90 days or more and still accruing interest totalled $38,076,000 at June 30, 1994, a decrease of 5.5% from December 31, 1993. All of the loans which are past due 90 days or more and still accruing interest are in management's judgement adequately collateralized and in the process of collection. 12 14 DEPOSITS The following table sets forth the average balances and the average rates paid on deposits for the periods indicated:
QUARTER ENDED JUNE 30, SIX MONTHS ENDED JUNE 30, ------------------------------------------- -------------------------------------------- 1994 1993 1994 1993 ------------------- -------------------- ------------------- --------------------- AVERAGE AVERAGE AVERAGE AVERAGE AVERAGE AVERAGE AVERAGE AVERAGE BALANCE RATE(1) BALANCE RATE(1) BALANCE RATE(1) BALANCE RATE(1) ---------- ------- ---------- ------- ---------- ------- ---------- ------- (dollars in thousands) Interest-bearing demand $1,144,291 1.95% $1,210,477 2.26% $1,194,993 1.93% $1,223,319 2.30% Savings 1,120,150 2.15 1,384,630 2.55 1,303,261 2.08 1,404,068 2.88 Time 1,937,646 3.79 1,392,794 4.46 1,686,299 4.20 1,414,815 4.59 ---------- ---------- ---------- ---------- Total interest-bearing deposits 4,202,087 2.85 3,987,901 3.13 4,184,553 2.89 4,042,202 3.30 Noninterest-bearing demand 885,748 -- 920,765 -- 903,029 -- 917,314 -- ---------- ---------- ---------- ---------- Total deposits $5,087,835 2.36% $4,908,666 2.54% $5,087,582 2.38% $4,959,516 2.69% ========== ========== ========== ==========
(1) Annualized. Average deposits for the six months ended June 30, 1994 increased $128.1 million, or 2.6%, compared to the same period in 1993. For the current quarter, average deposits increased $179.2 million, or 3.7%, as compared to the second quarter of 1993. Exclusive of the average deposits of Pioneer for the six months and quarter ended June 30, 1994 (which consisted primarily of time deposits), average deposits decreased $207.0 million, or 4.2%, and $260.4 million, or 5.3%, respectively, compared to the same periods in 1993. The investment by customers in higher-yielding alternative investments, generally with non-financial institutions, and the shift of public deposits into security repurchase agreements, contributed to the decrease in average deposits. 13 15 PROVISION AND ALLOWANCE FOR LOAN AND LEASE LOSSES The following table sets forth the activity in the allowance for loan and lease losses for the periods indicated:
QUARTER ENDED SIX MONTHS ENDED JUNE 30, JUNE 30, ------------------------- -------------------------- 1994 1993 1994 1993 ---------- ---------- ---------- ---------- (dollars in thousands) Loans and leases outstanding $5,132,096 $4,369,959 $5,132,096 $4,369,959 ========== ========== ========== ========== Average loans and leases outstanding $5,081,773 $4,417,081 $5,063,744 $4,393,293 ========== ========== ========== ========== Allowance for loan and lease losses summary: Balance at beginning of period $ 61,929 $ 56,389 $ 62,253 $ 56,385 ---------- ---------- ---------- ---------- Loans and leases charged off: Commercial, financial and agricultural 557 570 3,108 1,628 Real estate - mortgage 525 50 1,152 50 Real estate - construction 1,401 600 2,205 2,272 Consumer 1,516 1,797 3,004 3,364 Lease financing 1 -- 1 -- ---------- ---------- ---------- ---------- Total loans and leases charged off 4,000 3,017 9,470 7,314 ---------- ----------- ---------- ---------- Recoveries on loans and leases charged off: Commercial, financial and agricultural 15 121 886 153 Real estate - mortgage 31 1 45 1 Real estate - construction 201 -- 205 -- Consumer 407 430 819 795 Lease financing 2 1 4 2 ---------- ----------- ---------- ----------- Total recoveries on loans and leases charged off 656 553 1,959 951 ---------- ---------- ---------- ---------- Net charge-offs (3,344) (2,464) (7,511) (6,363) Provision charged to expense 3,288 2,903 7,131 6,806 ---------- ---------- ---------- ---------- Balance at end of period $ 61,873 $ 56,828 $ 61,873 $ 56,828 ========== ========== ========== ========== Ratio of net loans and leases charged off to average loans and leases .26%(1) .22%(1) .29%(1) .29%(1) Ratio of net loans and leases charged off to allowance for loan and lease losses 21.68%(1) 17.39%(1) 29.49%(1) 22.58%(1) Ratio of allowance for loan and lease losses to total loans and leases (end of period) 1.21% 1.30% 1.21% 1.30% Ratio of allowance for loan and lease losses to nonperforming loans and leases (end of period): Excluding past due loans and leases 100.40% 91.58% 100.40% 91.58% Including past due loans and leases 62.06% 61.73% 62.06% 61.73%
(1) Annualized. 14 16 PROVISION AND ALLOWANCE FOR LOAN AND LEASE LOSSES, CONTINUED For the first six months of 1994, the provision for loan and lease losses was $7,131,000, an increase of $325,000, or 4.8%, over the first six months of 1993. The provision for loan and lease losses was $3,288,000 for the second quarter of 1994, an increase of $385,000, or 13.3%, over the second quarter of 1993. These increases are consistent with the increase in net-charge-offs for the respective periods. Net charge-offs for the first six months of 1994 were $7,511,000, an increase of $1,148,000, or 18.0%, over the first six months of 1993. Net charge-offs for the second quarter of 1994 were $3,344,000 compared to $2,464,000 a year ago. Management believes that the increased levels of net charge-offs, which reflect the continuing weakness in the Hawaii economy and local real estate markets, may continue in future periods. OTHER OPERATING INCOME Exclusive of securities transactions, other operating income for the first six months and second quarter of 1994 increased 22.0% and 16.4%, respectively, over the same periods in 1993. The increases were primarily attributable to the increases in trust income and service charges/fees described below, and the acquisition of Pioneer. Trust fees increased $1,677,000, or 15.5%, for the first six months of 1994 over the same period in 1993. Similarly, trust fees increased 13.5% for the second quarter of 1994 over the first quarter of 1993. The increases were primarily the result of increases in fees from pension plans and irrevocable trusts and investment management fees which were the result of new business. Service charges on deposit accounts increased $2,035,000, or 20.8%, and $876,000, or 17.3%, for the first six months and second quarter of 1994, respectively, over the same periods in 1993. These increases were primarily attributable to increases in fees on checking accounts and service fees at Pioneer. Other service charges and fees increased $2,167,000, or 16.1%, and $1,226,000, or 19.6%, for the first six months and second quarter of 1994, respectively, over the same periods in 1993. These increases were primarily attributable to increases in merchant discount income and commissions. Security transactions resulted in a net pre-tax gain of $142,000 and $1,000 for the first six months and second quarter of 1994, respectively, compared to a net pre-tax gain of $1,899,000 and $1,873,000, respectively, for the same periods in 1993. The Company recognized a pre-tax gain of $1,873,000 from the sale of certain trading securities in the second quarter of 1993. Other operating income increased $2,051,000 and $150,000 for the first six months and second quarter of 1994, respectively, over the same periods in 1993. The increase for the first six months of 1994 was primarily attributable to advisory fee income and the acquisition of Pioneer. OTHER OPERATING EXPENSES Other operating expenses totalled $122,982,000 for the first six months of 1994, an increase of $13,682,000, or 12.5% over the first six months of 1993. Other operating expenses totalled $61,578,000 for the second quarter of 1994, an increase of $7,864,000, or 14.6%, over the second quarter of 1993. Total personnel expenses (salaries and wages and employee benefits) increased $6,967,000, or 13.1%, for the first six months of 1994 over the same period in 1993. Personnel expenses attributable to recent acquisitions account for $3,859,000 of the increase. The balance of the increase was attributable to normal merit increases and higher workers' compensation, health and payroll tax expenses. Total personnel expenses increased 9.7% for the second quarter of 1994 over the same quarter in 1993. 15 17 Occupancy expense for the first six months of 1994 increased $2,574,000, or 28.7%, over the same period in 1993 with $2,437,000 attributable to the Pioneer acquisition. Occupancy expense increased 30.2% for the second quarter of 1994 over the same quarter in 1993. Equipment expense increased $2,529,000, or 26.5%, for the first six months of 1994 over the same period in 1993, primarily as a result of higher depreciation and rental expense and maintenance service contracts in connection with the migration from a Unisys to IBM information technology platform and improvements in the delivery and processing systems. Equipment expense increased 25.8% for the second quarter of 1994 over the same quarter in 1993. Excluding the loss of $1,409,000 on the disposition of certain other real estate owned in the second quarter of 1994 and the write-off of $5,444,000 for the undepreciated cost of certain structures on the Company's redevelopment block in the first quarter of 1993, other operating expenses increased $5,647,000, or 17.6%, for the first six months of 1994 over the same period in 1993. The acquisition of Pioneer accounts for $3,383,000 of this increase. The remainder of the increase was due to higher utility, professional fees and outside services. Other operating expense increased 15.1% for the second quarter of 1994 over the same quarter in 1993. INCOME TAXES The Company's effective income tax rate (exclusive of the tax equivalent adjustment) for the six months and quarter ended June 30, 1994 was 35.1% and 35.0%, respectively, as compared to 31.4% and 32.4%, respectively, for the same periods in 1993. The increase in the Company's effective income tax rate was primarily due to (1) the increase in the corporate tax rate as a result of the Omnibus Budget Reconciliation Act of 1993; (2) declining income from tax-exempt earning assets, primarily municipal securities; and, (3) amortization of purchase accounting adjustments (goodwill and core deposit premium) which do not have the benefit of being deductible for income tax purposes. 16 18 LIQUIDITY AND CAPITAL Stockholders' equity was $620,331,000 at June 30, 1994, a 2.0% increase from $608,369,000 at December 31, 1993. Average stockholders' equity represented 8.68% of average total assets for the second quarter of 1994 compared to 8.87% in the same quarter last year. There was no significant change in the Company's liquidity position during the second quarter of 1994. The following tables present the Company's regulatory capital position at June 30, 1994: RISK-BASED CAPITAL RATIOS
AMOUNT RATIO ---------- ----- (dollars in thousands) Tier 1 Capital $ 536,924 9.91% Tier 1 Capital minimum requirement(1) 216,639 4.00 ---------- ----- Excess $ 320,285 5.91% ========== ===== Total Capital $ 698,797 12.90% Total Capital minimum requirement(1) 433,279 8.00 ---------- ----- Excess $ 265,518 4.90% ========== ===== Risk-weighted assets $5,415,984 ==========
LEVERAGE RATIO
AMOUNT RATIO ---------- ----- (dollars in thousands) Tier 1 Capital to average total assets (Tier 1 Leverage Ratio) $ 536,924 7.61% Minimum leverage requirement(2) 211,599 3.00 ---------- ----- Excess $ 325,325 4.61% ========== ===== Average total assets, net of goodwill and certain intangible assets $7,053,288 ==========
(1) Risk-based capital guidelines as established by the Federal Reserve Board for bank holding companies require minimum Tier 1 and Total capital ratios of 4% and 8%, respectively. (2) The Leverage Ratio of 3% is the minimum requirement for the most highly rated banking organizations which are not experiencing or anticipating significant growth. According to the Federal Reserve Board, other banking organizations will be expected to maintain capital at higher levels of at least an additional one to two percent. 17 19 PART II. OTHER INFORMATION ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS At the annual meeting of stockholders held on April 21, 1994, the stockholders voted on the following matters: (a) Fix the total number of Directors at fifteen: for - 29,557,246 (99.4%), against - 98,821 (.3%), abstained - 86,351 (.3%) and unvoted - 7 (-%). (b) Election of five directors for a term of three years expiring in 1997, or until their successors are elected and qualified:
Votes ---------------------------------------------------- Name For Withheld ---- --- -------- John W.A. Buyers 29,621,057 (99.7%) 121,368 (.4%) John C. Couch 29,646,696 (99.7%) 95,729 (.3%) David M. Haig 29,645,996 (99.7%) 96,429 (.3%) Dr. Roderick F. McPhee 29,609,839 (99.6%) 132,586 (.4%) Robert J. Pfeiffer 29,618,844 (99.6%) 123,581 (.4%)
There were no abstentions or unvoted shares. (c) Election of Coopers & Lybrand as the Auditor of the Company to serve for the ensuing year: for -29,532,341 (99.3%), against - 83,734 (.3%), abstained - 126,344 (.4%) and unvoted - 6 (-%). (d) Approve amendment to the Certificate of Incorporation to increase the number of authorized shares of common stock, par value $5 per share, from 66,500,000 to 100,000,000: for - 27,502,065 (92.5%), against - 2,140,364 (7.2%), abstained - 99,783 (.3%) and unvoted - 213 (-%). ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits Exhibit 3 Amended and Restated Certificate of Incorporation Exhibit 12 Statement regarding computation of consolidated ratios of earnings to fixed charges. (b) Reports on Form 8-K - No reports on Form 8-K were filed during the quarter ended June 30, 1994. 18 20 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. FIRST HAWAIIAN, INC. (REGISTRANT) Date August 9, 1994 By /s/ HOWARD H. KARR -------------- ------------------------------------- HOWARD H. KARR EXECUTIVE VICE PRESIDENT AND TREASURER (PRINCIPAL FINANCIAL OFFICER) 19 21 EXHIBIT INDEX
EXHIBIT PAGE NUMBER IN NUMBER DESCRIPTION QUARTERLY REPORT FORM 10-Q ------ ----------- -------------------------- 3 Amended and Restated Certificate of Incorporation 21 12 Statement re: computation of ratios. 24
20
   1

EXHIBIT 3.    AMENDED AND RESTATED CERTIFICATE OF INCORPORATION



                          CERTIFICATE OF INCORPORATION
                                       OF
                              FIRST HAWAIIAN, INC.
                        AS AMENDED THROUGH MAY 10, 1994


First.           The name of the corporation is "First Hawaiian, Inc."

Second.          The address of the corporation's registered office in the
State of Delaware is No. 100 West Tenth Street, in the City of Wilmington,
County of New Castle.  The name and address of its resident agent is The
Corporation Trust Company, No. 100 West Tenth Street, Wilmington, Delaware.

Third.           The purpose of the corporation is to engage in any lawful act
or activity for which corporations may be organized under the General
Corporation Law of Delaware.

Fourth.          The total number of shares of stock which this corporation
shall have authority to issue is One Hundred Million (100,000,000) shares of
common stock having a par value of Five Dollars ($5.00) per share.

Fifth.           The name and mailing address of each incorporator is as
follows:

Name Address ---- ------- John D. Bellinger 165 South King Street Honolulu, Hawaii 96813 Hugh R. Pingree 165 South King Street Honolulu, Hawaii 96813 G. Harry Hutaff 165 South King Street Honolulu, Hawaii 96813
Sixth. The powers of the incorporators shall terminate upon the filing of the Certificate of Incorporation. The names and mailing addresses of the persons who are to serve as directors of the corporation until the first annual meeting of shareholders or until their successors are elected and qualified are as follows:
Name Address - - ---- ------- John D. Bellinger 165 South King Street Honolulu, Hawaii 96813 Hugh R. Pingree 165 South King Street Honolulu, Hawaii 96813 G. Harry Hutaff 165 South King Street Honolulu, Hawaii 96813
21 2 There shall be a Board of Directors of the corporation consisting of not less than three (3) nor more than twenty-five (25) members. The members of the Board of Directors shall be elected or appointed at such times, in such manner, and for such terms as may be prescribed by the Bylaws, which may also provide for the filling of vacancies on the Board of Directors. All of the powers of the corporation, exercisable by authority of law or under this Certificate of Incorporation, or otherwise, shall be vested in and exercised by, or by the authority of, the Board of Directors, except as limited by law or the Certificate of Incorporation or the Bylaws of the corporation. The Board of Directors may, by resolution or otherwise, create, or the Bylaws may provide for, such committees of the Board of Directors as the Board shall see fit or the Bylaws shall provide for, and such committees shall have and may exercise any and all such powers as the Board of Directors, by resolution, or the Bylaws, may provide. Seventh. The officers of the corporation shall be a President, one or more Vice Presidents (one or more of whom may be designated an Executive Vice President and one or more of whom may be designated a Senior Vice President), Treasurer, Secretary, and such other officers as may be authorized pursuant to the authority conferred by the Bylaws, all of whom shall be appointed by or by the authority of the Board of Directors and serve at its pleasure. There may be a Chairman of the Board of Directors who shall be appointed by the Board of Directors from its own members and who shall have such powers as may be prescribed by the Bylaws or, if and to the extent that the Bylaws shall not so prescribe, by the Board of Directors. Eighth. The corporation is to have perpetual existence. Ninth. Upon any increase in the authorized capital stock of the corporation, unless the resolution of the shareholders of the corporation authorizing said increase shall otherwise provide, the Board of Directors shall first offer the additional authorized stock pro rata to all shareholders of record at such price and on such terms as the Board of Directors may in each instance fix. Any shares still remaining unsold thirty (30) days after said offer may then be sold to any person or persons, on the same terms or terms more favorable to the corporation, as the Board of Directors may determine. In the event of the issue of any additional stock of the corporation for the purposes of accomplishing the merger with, or of acquiring, any other corporation, bank or trust company, the directors may issue said stock without preferential subscription rights to such extent and on such terms as the Board of Directors may in each instance deem proper. Tenth. Meetings of shareholders may be held within or without the State of Delaware, as the Bylaws may provide. The books of the corporation may be kept (subject to any provision contained in law) outside the State of Delaware at such place or places as may be designated from time to time by the Board of Directors or in the Bylaws of the corporation. Eleventh. The Board of Directors shall have the authority to make, alter or repeal the Bylaws of the corporation. Twelfth. No contract or other transaction between the corporation and any other person, firm, corporation, association or other organization, and no act of the corporation, shall in any way be affected or invalidated by the fact that any of the directors or officers of the corporation are parties to such contract, transaction or act or are pecuniarily or otherwise interested in the same or are directors or officers or members of any such other firm, corporation, association or other organization, provided that the interest of such director shall be disclosed or shall have been known to the Board of Directors authorizing or approving the same, or to a majority thereof. Any director of the corporation who is a party to such transaction, contract, or act or who is pecuniarily or otherwise interested in the same or is a director or officer or member of such other firm, corporation, association or other organization, may be counted in determining a quorum of any meeting of the Board of Directors which shall authorize or approve any such contract, transaction or act, and may vote thereon with like force and effect as if he were in no way interested therein. Neither any director nor any officer of the corporation, being so interested in any such contract, transaction or act of the corporation which shall be approved by the Board of Directors of the corporation, nor any such other person, firm, corporation, association or other organization in which such director may be a director, officer or member, shall be liable or accountable to the corporation, or to any shareholder thereof, solely by reason of being an interested person, for any loss incurred by the corporation pursuant to or by reason or such contract, transaction or act, or for any gain 22 3 received by any such other party pursuant thereto or by reason thereof. Thirteenth. To the fullest extent permitted by the Delaware General Corporation Law as it exists or may hereafter be amended, a director of this corporation shall not be liable to the corporation or its stockholders for monetary damages for breach of a fiduciary duty as a director. 23
   1
EXHIBIT 12.   STATEMENT RE: COMPUTATION OF RATIOS



                     First Hawaiian, Inc. and Subsidiaries
        Computation of Consolidated Ratios of Earnings to Fixed Charges


QUARTER ENDED SIX MONTHS ENDED JUNE 30, JUNE 30, ------------------------ ------------------------ 1994 1993 1994 1993 -------- ------- -------- ------ (dollars in thousands) Income before income taxes and cumulative effect of a change in accounting principle $29,233 $32,717 $ 58,138 $58,419 ------- ------- -------- ------- Fixed charges:(1) Interest expense 43,398 38,510 85,783 80,168 Capitalized interest 1,859 -- 3,748 1,092 Rental expense 1,156 605 2,240 1,218 ------- ------- -------- -------- 46,413 39,115 91,771 82,478 Less interest on deposits 29,899 31,034 60,035 66,056 ------- ------- -------- -------- Net fixed charges 16,514 8,081 31,736 16,422 ------- ------- -------- -------- Earnings, excluding interest on deposits $45,747 $40,798 $ 89,874 $ 74,841 ======= ======= ======== ======== Earnings, including interest on deposits $75,646 $71,832 $149,909 $140,897 ======= ======= ======== ======== Ratio of earnings to fixed charges: Excluding interest on deposits 2.77 X 5.05 x 2.83 X 4.56 x Including interest on deposits 1.63 X 1.84 x 1.63 X 1.71 x
(1) For purposes of computing the above ratios, earnings represent income before income taxes and cumulative effect of a change in accounting principle plus fixed charges. Fixed charges, excluding interest on deposits, include interest (other than on deposits), whether expensed or capitalized, and that portion of rental expense (generally one third) deemed representative of the interest factor. Fixed charges, including interest on deposits, include all interest, whether expensed or capitalized, and that portion of rental expense (generally one third) deemed representative of the interest factor. 24