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First Hawaiian, Inc. Reports Third Quarter 2016 Financial Results and Declares Dividend

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HONOLULU, Oct. 27, 2016 (GLOBE NEWSWIRE) -- First Hawaiian, Inc. (NASDAQ: FHB), (the "Company") today reported financial results for its third quarter ended September 30, 2016.

Third Quarter Highlights

  • Net income for the quarter ended September 30, 2016 was $53.2 million, or $0.38 per diluted share, and core net income1 was $55.2 million, or $0.40 per diluted share  

  • Loan and lease balances grew by $208.9 million, or 1.9%, and total deposits grew by $843.4 million, or 5.2%, during the quarter

  • Reflecting a continued strong capital position, at September 30, 2016, tier 1 leverage, common equity tier 1, and total capital ratios were 8.41%, 12.48%, and 13.59%, respectively

  • The  efficiency ratio was 48.3%, reflecting strong cost controls

  • Total non-performing assets were $10.2 million, or 0.09% of total loans and leases, at September 30, 2016.  Net charge-offs were $3.4 million during the quarter, or 0.12% of average loans and leases, on an annualized basis

  • Return on average total assets was 1.10% and core return on average total assets2 was 1.14%

  • Return on average tangible stockholders' equity3 was 14.02% and core return on average tangible stockholders' equity4 was 14.53% 

  • First Hawaiian Bank received an overall rating of "Outstanding" from the FDIC for its performance under the Community Reinvestment Act for the eighth consecutive evaluation period beginning in 1995

"The third quarter was an exciting time for the Company.  We successfully launched and priced our initial public offering, becoming the largest publicly traded company headquartered in Hawaii, and the bank continued to perform well," said Bob Harrison, Chairman and Chief Executive Officer.  "Loan and deposit growth in the third quarter was solid, our credit quality remained excellent, and our financial performance was strong.  As we move forward as a public company, our focus will remain on providing the best service to our customers, caring for our employees and the community, and continuing to create value for our shareholders."

On October 26, 2016, the Company's Board of Directors declared a quarterly cash dividend of $0.20 per share on the outstanding shares of the Company's common stock.  The dividend will be payable on December 9, 2016 to shareholders of record at the close of business on November 28, 2016.

Earnings Highlights

Net income for the quarter ended September 30, 2016 was $53.2 million, or $0.38 per diluted share, compared to net income of $54.9 million, or $0.39 per diluted share, for the quarter ended June 30, 2016, and $54.9 million, or $0.39 per diluted share, for the quarter ended September 30, 2015.  Our core net income for the quarter ended September 30, 2016 was $55.2 million, or $0.40 per diluted share, compared to net income of $54.9 million, or $0.39 per diluted share, in the quarter ended June 30, 2016, and $49.6 million, or $0.36 per diluted share, for the quarter ended September 30, 2015.

Net interest income for the quarter ended September 30, 2016 was $122.7 million, an increase of $2.3 million compared with net interest income of $120.4 million for the quarter ended June 30, 2016, and an increase of $9.1 million compared with net interest income of $113.6 million for the quarter ended September 30, 2015.  The increase in net interest income compared to the second quarter of 2016was attributable to higher interest income on investments and loans due to higher average balances, partially offset by slightly lower yields.  The increase in net interest income compared to the third quarter of 2015 was driven by higher interest income on loans due to higher average balances, and higher interest income on investments due to higher average balances and yields, partially offset by lower yields on loans and higher interest expenses on deposits due to an increase in rates paid and higher average balances. 

Net interest margin was 2.87%, 2.88% and 2.72%, respectively, for the quarters ended September 30, 2016, June 30, 2016, and September 30, 2015.  The 1 basis point decrease compared to the second quarter of 2016 was due to lower yields on loans and investments, primarily due to higher premium amortization.  The 15 basis point increase compared to the third quarter of 2015 was due to the increase in investment portfolio yields resulting from the investment in longer duration assets, partially offset by lower yields on loans and higher rates paid on deposits.

Results for the quarter ended September 30, 2016 included a provision for credit losses of $2.1 million compared to $1.9 million in the quarter ended June 30, 2016 and $2.6 million in the quarter ended September 30, 2015. 

Noninterest income was $48.7 million in the quarter ended September 30, 2016, an increase of $2.3 million compared to noninterest income of $46.4 million in the quarter ended June 30, 2016 and a decrease of $7.8 million compared to noninterest income of $56.5 million in the quarter ended September 30, 2015.  The increase in noninterest income in the third quarter of 2016 compared to the second quarter of 2016 was primarily due to higher bank-owned life insurance ("BOLI") income, partially offset by lower swap fee income.  BOLI income in the third quarter of 2016 included gains of $3.5 million from death benefits.  Other noninterest income in the second quarter of 2016 included $1.7 million in upfront fees from customer swaps.  Noninterest income in the third quarter of 2015 included $4.2 million of gains from the sale of investments and MasterCard stock and $7.2 million from a vendor signing bonus, recoveries from various bank operations, recovery of a previously written-down security, and higher gains on sale of mortgage loans. 

Noninterest expense was $82.8 million for the quarter ended September 30, 2016, an increase of $4.3 million from $78.5 million in the quarter ended June 30, 2016, and an increase of $3.4 million from $79.4 million in the quarter ended September 30, 2015.  The increase in noninterest expense compared to the second quarter of 2016 was driven by a $1.8 million increase in cards rewards expenses, a $0.7 million increase in FDIC insurance assessment fees, $0.6 million of additional expenses due to the conversion to EMV, chip-enabled cards, and a $0.7 million increase in professional fees.  Cards rewards expenses in the second quarter of 2016 included a benefit due to the change in terms related to the expiration of our debit card reward points.  The increase in noninterest expense compared to the third quarter of 2015 was primarily due to a $1.1 million increase in regulatory assessment fees, an increase of $1.0 million in cards rewards expenses, $0.6 million of card replacement expenses, and an increase of $0.8 million in occupancy expenses.

The reported efficiency ratio was 48.3%, 47.0% and 46.7% for the quarters ended September 30, 2016, June 30, 2016 and September 30, 2015, respectively. 

The effective tax rate for the third quarter of 2016 was 38.4% compared with 36.5% in the previous quarter and 37.7% percent in the same quarter last year.

Balance Sheet Highlights

Total assets were $19.9 billion at September 30, 2016, up from $19.1 billion at June 30, 2016 and $18.9 billion at September 30, 2015.

The investment securities portfolio was $5.4 billion at September 30, 2016, up from $4.6 billion at June 30, 2016 and $4.7 billion at September 30, 2015.  The growth in the most recent quarter was a result of the continued execution of our plan to invest excess liquidity into higher yielding investment securities in 2016.  The portfolio remains largely comprised of securities issued by U. S. government agencies

Total loans and leases were $11.4 billion at September 30, 2016, up 1.9% from $11.2 billion at June 30, 2016 and up 9.0% from $10.5 billion at September 30, 2015.

The growth in loans and leases in the most recent quarter was due to increases in commercial real estate loans of $130.1 million, construction loans of $50.6 million, residential real estate loans (including home equity) of $33.1 million, and consumer loans of $17.1 million.  Commercial and industrial loans declined by $23.2 million.  Compared to September 30, 2015, the growth in loans and leases in the most recent quarter was due to increases in commercial and industrial loans of $327.1 million, commercial real estate loans of $161.4 million, construction loans of $154.3 million, residential real estate loans (including home equity) of $174.7 million, and consumer loans of $146.0 million. 

Total deposits increased to $17.0 billion at September 30, 2016, an increase of $843.4 million, or 5.2%, compared with $16.1 billion at June 30, 2016, and an increase of $1.5 billion, or 9.6%, compared to $15.5 billion at September 30, 2015. 

Asset Quality

The Company's asset quality remained strong during the third quarter of 2016. Total non-performing assets declined to $10.2 million, or 0.09% of total loans and leases, at September 30, 2016, down $3.3 million from non-performing assets of $13.5 million, or 0.12% of total loans and leases, at June 30, 2016 and down $10.5 million from non­performing assets of $20.7 million, or 0.20% of total loans and leases, at September 30, 2015.

Net charge offs for the quarter ended September 30, 2016 were $3.4 million, or 0.12% of average loans and leases on an annualized basis, compared to $2.7 million, or 0.10% of average loans and leases on an annualized basis for the quarter ended June 30, 2016 and $3.4 million, or 0.13% of average loans and leases on an annualized basis for the quarter ended September 30, 2015.  The ratio of allowance for loan and lease losses to total loans and leases decreased to 1.18% at September 30, 2016 from 1.22% at June 30, 2016 and 1.30% at September 30, 2015. 

Capital

Total stockholders' equity was $2.5 billion at September 30, 2016, compared to $2.5 billion at June 30, 2016 and $2.7 billion at September 30, 2015.  During the quarter ended September 30, 2016, we paid a dividend prior to the Company's initial public offering of $27.9 million, based on our net income for the quarter ended June 30, 2016. 

The tier 1 leverage, common equity tier 1, and total capital ratios were 8.41%, 12.48%, and 13.59%, respectively, at September 30, 2016, compared with 8.42%, 12.45%, and 13.58% at June 30, 2016 and 10.06%, 15.69% and 16.89% at September 30, 2015.

_____________

1 Core net income is a non-GAAP measure. For more information on this measure, including a reconciliation to the most directly comparable GAAP measure, see "Use of Non-GAAP Financial Measures" and Tables 13 and 14 at the end of this document.

2 Core return on average total assets is a non-GAAP measure. For more information on this measure, including a reconciliation to the most directly comparable GAAP measure, see "Use of Non-GAAP Financial Measures" and Tables 13 and 14 at the end of this document.

3 Return on average tangible stockholders' equity is a non-GAAP financial measure.  For more information on this measure, including a reconciliation to the most directly comparable GAAP measure, see "Use of Non-GAAP Financial Measures" and Tables 13 and 14 at the end of this document.

4 Core return on average tangible stockholders' equity is a non-GAAP measure. For more information on this measure, including a reconciliation to the most directly comparable GAAP measure, see "Use of Non-GAAP Financial Measures" and Tables 13 and 14 at the end of this document.

_____________

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 Company's website, www.fhb.com.

Conference Call Information

First Hawaiian will host a conference call to discuss the Company's results today at 11:00 a.m. (Hawaii Time), 5:00 p.m. (Eastern 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:  87133120.  A live webcast of the conference call, including a slide presentation, will be available at the following link:  http://edge.media-server.com/m/p/gz9jx3b6/lan/en.  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 8:00 p.m. (Eastern Time) on November 3, 2016. Access the replay by dialing (855) 859-2056 or (404) 537-3406 and entering the conference ID:  87133120.

Forward-Looking Statements

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.  These forward-looking statements reflect our current views with respect to, among other things, future events and our financial performance. These statements are often, but not always, made through the use of words or phrases such as "may", "might", "should", "could", "predict", "potential", "believe", "expect", "continue", "will", "anticipate", "seek", "estimate", "intend", "plan", "projection", "would", "annualized" and "outlook", or the negative version of those words or other comparable words or phrases of a future or forward-looking nature. These forward-looking statements are not historical facts, and are based on current expectations, estimates and projections about our industry, management's beliefs and certain assumptions made by management, many of which, by their nature, are inherently uncertain and beyond our control. Accordingly, we caution you that any such forward-looking statements are not guarantees of future performance and are subject to risks, assumptions, estimates and uncertainties that are difficult to predict. Although we believe that the expectations reflected in these forward-looking statements are reasonable as of the date made, actual results may prove to be materially different from the results expressed or implied by the forward-looking statements. For a discussion of some of the risks and important factors that could affect our future results and financial condition, see our U.S. Securities and Exchange Commission ("SEC") filings, including, but not limited to, our prospectus dated August 3, 2016, filed with the SEC in accordance with Rule 424(b) of the Securities Act of 1933.

Use of Non-GAAP Financial Measures

We present net interest income, noninterest income, noninterest expense, net income, earnings per share and the related ratios described below, on an adjusted, or ‘‘core,'' basis, each a non-GAAP financial measure. These core measures exclude from the corresponding GAAP measure the impact of certain items that we do not believe are representative of our financial results. We believe that the presentation of these non-GAAP 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. Non-GAAP measures have limitations as analytical tools, and investors should not consider them in isolation or as a substitute for analysis of our results or financial condition as reported under GAAP. 

Core net interest margin, core return on average total assets and core return on average total stockholders' equity are non-GAAP financial measures. We compute our core net interest margin as the ratio of core net interest income to average earning assets.  We compute our core return on average total assets as the ratio of core net income to average total assets.  We compute our core return on average total stockholders' equity as the ratio of core net income to average stockholders' equity. 

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

Tables 13 and 14 at the end of this document provide a reconciliation of these non-GAAP financial measures with their most closely related GAAP measures.


Financial Highlights             Table 1  
  For the Three Months Ended  For the Nine Months Ended   
  September 30,  June 30, September 30,  September 30,   
(dollars in thousands except per share data) 2016 2016 2015 2016 2015  
Operating Results:                 
Net interest income $  122,683  $120,427 $113,550 $  360,422  $345,103  
Provision for loan and lease losses    2,100   1,900  2,550    4,700   7,400  
Noninterest income    48,690   46,371  56,502    168,580   164,215  
Noninterest expense    82,804   78,473  79,377    246,341   239,307  
Net income    53,235   54,860  54,889    173,626   163,569  
Basic earnings per share    0.38   0.39  0.39    1.24   1.17  
Diluted earnings per share    0.38   0.39  0.39    1.24   1.17  
Dividends declared per share    0.20   0.22  N/A    0.42   N/A  
Dividend payout ratio    52.39 % 54.68% N/A    33.34 % N/A  
Supplemental Income Statement Data (non-GAAP):                 
Core net interest income $  122,683  $120,427 $113,550 $  360,422  $340,267  
Core noninterest income    48,690   46,371  47,981    142,852   141,615  
Core noninterest expense    79,714   78,473  79,377    240,704   239,307  
Core net income    55,177   54,860  49,582    161,110   146,481  
Core basic earnings per share $  0.40  $0.39 $0.36 $  1.16  $1.05  
Core diluted earnings per share $  0.40  $0.39 $0.36 $  1.16  $1.05  
Performance Ratio:                 
Net interest margin    2.87  2.88% 2.72%   2.84 2.80% 
Core net interest margin (non-GAAP)    2.87  2.88% 2.72%   2.84 2.76% 
Efficiency ratio    48.31  47.04% 46.67%   46.56  46.98% 
Core efficiency ratio (non-GAAP)    46.51  47.04% 49.14%   47.82  49.66% 
Return on average total assets    1.10  1.16% 1.16%   1.21  1.17% 
Core return on average total assets (non-GAAP)    1.14  1.16% 1.05%   1.12  1.05% 
Return on average tangible assets (non-GAAP)    1.16  1.23% 1.23%   1.28  1.24% 
Core return on average tangible assets (non-GAAP)    1.20  1.23% 1.11%   1.18  1.11% 
Return on average total stockholders' equity    8.45  8.86% 7.94%   8.96  8.01% 
Core return on average total stockholders' equity (non-GAAP)    8.76  8.86% 7.17%   8.31  7.18% 
Return on average tangible stockholders' equity (non-GAAP)    14.02  14.75% 12.46%   14.56  12.62% 
Core return on average tangible stockholders' equity (non-GAAP)    14.53  14.75% 11.25%   13.51  11.30% 
Average Balances:                 
Average loans and leases $  11,261,710  $11,074,430 $10,335,331 $  11,055,522 $10,197,275  
Average earning assets    17,028,930   16,797,108  16,559,195    16,962,355  16,475,712  
Average assets    19,314,668   18,950,020  18,739,906    19,185,484  18,643,308  
Average deposits    16,392,125   15,895,214  15,285,753    16,079,148  15,158,901  
Average shareholders' equity    2,506,099   2,491,138  2,743,469    2,588,602  2,728,767  
Per Share of Common Stock:                 
Book value $  18.09  $17.93 $19.68 $  18.10  $19.68  
Tangible book value (non-GAAP)    10.96   10.80  12.54    10.96   12.54  
Market Value                 
Closing    26.86   N/A  N/A    26.86   N/A  
High    27.97   N/A  N/A    27.97   N/A  
Low    24.25   N/A  N/A    24.25   N/A  
                  

 

   As of   As of   As of   As of   
   September 30,    June 30,   December 31,    September 30,    
  2016 2016 2015 2015  
Balance Sheet Data:              
Loans and leases $11,396,555 $11,187,695 $10,722,030 $10,454,482  
Total assets  19,892,693  19,052,593  19,352,681  18,870,760  
Total deposits  16,965,527  16,122,104  16,061,924  15,482,559  
Total stockholders' equity  2,523,963  2,501,008  2,736,941  2,744,340  
               
Asset Quality Ratios:              
Non-accrual loans and leases / total loans and leases  0.08% 0.12% 0.16% 0.18% 
Allowance for loan and lease losses / total loans and leases  1.18% 1.22% 1.26% 1.30% 
               
Capital Ratios:              
Common Equity Tier 1 Capital Ratio  12.48% 12.45% 15.31% 15.69% 
Tier 1 Capital Ratio  12.48% 12.45% 15.31% 15.69% 
Total Capital Ratio  13.59% 13.58% 16.48% 16.89% 
Tier 1 Leverage Ratio  8.41% 8.42% 9.84% 10.06% 
Total stockholders' equity to total assets  12.69% 13.13% 14.14% 14.54% 
Tangible stockholders' equity to tangible assets  8.09% 8.34% 9.49% 9.78% 
               
Non-Financial Data:              
Number of branches  62  62  62  62  
Number of ATMs  312  312  311  309  
Number of Full-Time Equivalent Employees  2,197  2,199  2,157  2,160  
               

 

Consolidated Statements of Income              Table 2 
  Three Months Ended  Nine Months Ended  
  September 30,  June 30, September 30,  September 30,  
(dollars in thousands except per share amounts) 2016 2016 2015 2016 2015 
Interest income                
Loans and lease financing $  106,900  $105,701 $100,234 $  316,958  $303,594 
Available-for-sale securities    21,123   19,453  17,750    57,135   55,066 
Other    1,311   1,907  1,120    6,114   3,079 
Total interest income    129,334   127,061  119,104    380,207   361,739 
Interest expense                
Deposits    6,632   6,541  5,504    19,602   16,470 
Short-term borrowings and long-term debt    19   93  50    183   166 
Total interest expense    6,651   6,634  5,554    19,785   16,636 
Net interest income    122,683   120,427  113,550    360,422   345,103 
Provision for loan and lease losses    2,100   1,900  2,550    4,700   7,400 
Net interest income after provision for loan and lease losses    120,583   118,527  111,000    355,722   337,703 
Noninterest income                
Service charges on deposit accounts    9,575   9,395  10,441    28,759   30,656 
Credit and debit card fees    14,103   13,810  13,858    41,732   41,633 
Other service charges and fees    8,768   8,914  9,916    26,909   29,651 
Trust and investment services income    7,508   7,323  7,372    22,236   22,610 
Bank-owned life insurance    7,115   3,792  1,898    13,263   7,297 
Investment securities gains, net    30   3  4,131    25,761   14,993 
Other    1,591   3,134  8,886    9,920   17,375 
Total noninterest income    48,690   46,371  56,502    168,580   164,215 
Noninterest expense                
Salaries and employee benefits    42,106   41,955  42,696    128,762   126,990 
Contracted services and professional fees    10,430   9,939  10,964    33,124   32,196 
Occupancy    4,870   4,809  4,077    14,991   14,326 
Equipment    4,192   4,116  3,885    12,135   10,986 
Regulatory assessment and fees    3,546   2,846  2,404    8,869   7,124 
Advertising and marketing    1,769   1,425  1,199    4,818   4,028 
Card rewards program    4,512   2,729  3,503    10,743   11,914 
Other    11,379   10,654  10,649    32,899   31,743 
Total noninterest expense    82,804   78,473  79,377    246,341   239,307 
Income before provision for income taxes    86,469   86,425  88,125    277,961   262,611 
Provision for income taxes    33,234   31,565  33,236    104,335   99,042 
Net income $  53,235  $54,860 $54,889 $  173,626  $163,569 
Basic earnings per share $  0.38  $0.39 $0.39 $  1.24  $1.17 
Diluted earnings per share $  0.38  $0.39 $0.39 $  1.24  $1.17 
Dividends declared per share $  0.20  $0.22 $ $  0.42  $ 
Basic weighted-average outstanding shares    139,500,542   139,459,620  139,459,620    139,473,360   139,459,620 
Diluted weighted-average outstanding shares    139,503,558  139,459,620  139,459,620    139,474,373  139,459,620 
                 

 

Consolidated Balance Sheets           Table 3 
  September 30,  June 30, December 31,  September 30,  
(dollars in thousands) 2016 2016 2015 2015 
Assets             
Cash and due from banks $   371,622   $ 356,148  $ 300,096  $ 291,538  
Interest-bearing deposits in other banks     804,198     975,866    2,350,099    1,573,587  
Investment securities     5,363,696     4,601,267    4,027,265    4,686,980  
Loans held for sale               4,662  
Loans and leases   11,396,555     11,187,695    10,722,030    10,454,482  
Less: allowance for loan and lease losses     135,025     136,360    135,484    135,447  
Net loans and leases   11,261,530     11,051,335    10,586,546    10,319,035  
              
Premises and equipment, net     302,059     303,715    305,104    307,585  
Other real estate owned and repossessed personal property     854     205    154    1,881  
Accrued interest receivable     37,107     35,734    34,215    33,160  
Bank-owned life insurance     432,031     429,673    424,545    421,867  
Goodwill     995,492     995,492    995,492    995,492  
Other intangible assets     17,554     19,064    21,435    22,347  
Other assets     306,550     284,094    307,730    212,626  
Total assets $ 19,892,693   $ 19,052,593  $ 19,352,681  $ 18,870,760  
Liabilities and Stockholders' Equity             
Deposits:             
Interest-bearing $ 11,164,989   $ 10,620,377  $ 10,730,095  $ 10,380,370  
Noninterest-bearing     5,800,538     5,501,727    5,331,829    5,102,189  
Total deposits   16,965,527     16,122,104    16,061,924    15,482,559  
Short-term borrowings     9,151     34,951    216,151    304,151  
Long-term debt     41     48    48    48  
Retirement benefits payable     139,567     137,982    133,910    146,233  
Other liabilities     254,444     256,500    203,707    193,429  
Total liabilities   17,368,730     16,551,585    16,615,740    16,126,420  
              
Stockholders' equity             
Net investment            2,788,200    2,779,166  
Common stock ($0.01 par value; authorized 300,000,000 shares; issued and outstanding 139,530,654 shares as of September 30, 2016 and 139,459,620 shares as of June 30, 2016, December 31, 2015 and September 30, 2015)     1,395     1,395          
Additional paid-in capital     2,482,679     2,479,980          
Retained earnings     50,204     24,860          
Accumulated other comprehensive loss, net     (10,315)   (5,227)   (51,259)   (34,826) 
Total stockholders' equity     2,523,963     2,501,008    2,736,941    2,744,340  
Total liabilities and stockholders' equity $ 19,892,693   $ 19,052,593  $ 19,352,681  $ 18,870,760  
              

 

Average Balances and Interest Rates                      Table 4    
  Three Months Ended  Three Months Ended  Three Months Ended    
  September 30, 2016 June 30, 2016 September 30, 2015   
   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 $1,023.6 $1.3 0.51%$1,516.6 $1.9 0.51%$1,649.2 $1.1 0.27%  
Available-for-Sale Investment Securities  4,743.7  21.1 1.77  4,206.1  19.4 1.86  4,574.7  17.8 1.54   
Loans Held for Sale            4.3   3.59   
Loans and Leases (1)                           
Commercial and industrial  3,248.1  23.7 2.90  3,257.4  23.7 2.93  2,884.0  20.8 2.86   
Real estate - commercial  2,338.2  21.3 3.63  2,241.8  20.7 3.71  2,126.4  20.1 3.76   
Real estate - construction  448.9  3.7 3.29  421.9  3.4 3.27  369.6  3.1 3.37   
Real estate - residential  3,571.3  36.4 4.06  3,522.8  36.5 4.16  3,422.6  35.3 4.09   
Consumer  1,467.0  20.5 5.55  1,442.0  20.0 5.58  1,313.7  19.3 5.83   
Lease financing  188.2  1.3 2.84  188.5  1.4 2.91  214.7  1.6 2.89   
Total Loans and Leases  11,261.7  106.9 3.78  11,074.4  105.7 3.84  10,331.0  100.2 3.85   
Total Earning Assets (2)  17,029.0  129.3 3.02  16,797.1  127.0 3.04  16,559.2  119.1 2.85   
Cash and Due from Banks  357.1       303.7       281.9        
Other Assets  1,928.6       1,849.2       1,898.8        
Total Assets $19,314.7      $18,950.0      $18,739.9        
                            
Interest-Bearing Liabilities                           
Interest-Bearing Deposits                           
Savings $4,416.4 $0.6 0.06%$4,347.8 $0.6 0.06%$4,222.6 $0.5 0.04%  
Money Market  2,549.3  0.6 0.10  2,281.9  0.5 0.09  2,367.6  0.5 0.09   
Time  3,776.6  5.4 0.57  3,745.3  5.4 0.58  3,605.0  4.5 0.50   
Total Interest-Bearing Deposits  10,742.3  6.6 0.25  10,375.0  6.5 0.25  10,195.2  5.5 0.21   
Short-Term Borrowings  18.5   0.42  202.9  0.1 0.18  364.9   0.05   
Total Interest-Bearing Liabilities  10,760.8  6.6 0.25  10,577.9  6.6 0.25  10,560.1  5.5 0.21   
Net Interest Income    $122.7      $120.4      $113.6     
Interest Rate Spread       2.77%      2.79%      2.64%  
Net Interest Margin       2.87%      2.88%      2.72%  
Noninterest-Bearing Demand Deposits  5,649.8       5,520.3       5,090.6        
Other Liabilities  398.0       360.7       345.8        
Stockholders' Equity  2,506.1       2,491.1       2,743.4        
Total Liabilities and Stockholders' Equity $19,314.7      $18,950.0      $18,739.9        
                            
(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.
           
                            

 

Average Balances and Interest Rates                 Table 5    
  Nine Months Ended  Nine Months Ended    
  September 30, 2016 September 30, 2015   
   Average   Income/    Yield/   Average   Income/   Yield/    
(dollars in millions)  Balance   Expense    Rate   Balance   Expense   Rate    
                     
Earning Assets                    
Interest-Bearing Deposits in Other Banks $  1,602.3  $  6.1     0.51 $1,564.3 $3.1 0.26%  
Available-for-Sale Investment Securities    4,304.5     57.1     1.77   4,714.1  55.0 1.56   
Loans Held for Sale              5.9  0.1 3.33   
Loans and Leases (1)                    
Commercial and industrial    3,200.6     70.3     2.93   2,819.1  62.1 2.95   
Real estate - commercial    2,273.3     62.9     3.70   2,130.4  60.9 3.82   
Real estate - construction    425.0     10.4     3.27   382.4  9.7 3.38   
Real estate - residential    3,525.5     108.9     4.13   3,359.9  108.8 4.33   
Consumer    1,441.6     60.4     5.59   1,278.3  57.2 5.98   
Lease financing    189.5     4.1     2.90   221.2  4.8 2.88   
Total Loans and Leases    11,055.5     317.0     3.83   10,191.3  303.5 3.98   
Total Earning Assets (2)    16,962.3     380.2     2.99   16,475.6  361.7 2.94   
Cash and Due from Banks    320.1        285.0        
Other Assets    1,903.1        1,882.7        
Total Assets $19,185.5       $18,643.3        
                     
Interest-Bearing Liabilities                    
Interest-Bearing Deposits                    
Savings $  4,371.6  $  1.9     0.06 $4,129.6 $1.1 0.04%  
Money Market    2,410.6     1.7     0.09   2,321.7  1.6 0.09   
Time    3,782.2     16.0     0.57   3,724.1  13.7 0.49   
Total Interest-Bearing Deposits    10,564.4     19.6     0.25   10,175.4  16.4 0.22   
Short-Term Borrowings    148.0     0.2     0.16   410.4  0.2 0.05   
Total Interest-Bearing Liabilities    10,712.4     19.8     0.25   10,585.8  16.6 0.21   
Net Interest Income    $  360.4        $345.1     
Interest Rate Spread          2.74       2.73%  
Net Interest Margin          2.84      2.80%  
Noninterest-Bearing Demand Deposits    5,514.8         4,983.5        
Other Liabilities    369.7        345.2        
Stockholders' Equity    2,588.6        2,728.8        
Total Liabilities and stockholders' Equity $  19,185.5       $18,643.3        
                     
(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 6  
  Three Months Ended September 30, 2016 
  Compared to June 30, 2016 
(dollars in millions)  Volume   Rate  Total 
           
Change in Interest Income:          
Interest-Bearing Deposits in Other Banks $   (0.6) $   $   (0.6) 
Available-for-Sale Investment Securities     2.5       (0.8)     1.7   
Loans Held for Sale             
Loans and Leases          
Commercial and industrial         (0.1)     (0.1) 
Real estate - commercial     0.9       (0.2)     0.7   
Real estate - construction     0.2       0.1       0.3   
Real estate - residential     0.5       (0.6)     (0.1) 
Consumer     0.3       0.2       0.5   
Lease financing         (0.1)     (0.1) 
Total Loans and Leases     1.9       (0.7)     1.2   
Total Change in Interest Income     3.8       (1.5)     2.3   
           
Change in Interest Expense:          
Interest-Bearing Deposits          
Savings              
Money Market     0.1            0.1   
Time     0.1       (0.1)     
Total Interest-Bearing Deposits     0.2       (0.1)     0.1   
Short-term Borrowings     (0.1)         (0.1) 
Total Change in Interest Expense     0.1       (0.1)     
Change in Net Interest Income $   3.7   $   (1.4) $   2.3   
           

 

Analysis of Change in Net Interest Income         Table 7  
  Three Months Ended September 30, 2016 
  Compared to September 30, 2015 
(dollars in millions)  Volume   Rate  Total 
           
Change in Interest Income:          
Interest-Bearing Deposits in Other Banks $   (0.5) $   0.7   $   0.2   
Available-for-Sale Investment Securities     0.6       2.7       3.3   
Loans Held for Sale              
Loans and Leases          
Commercial and industrial     2.7       0.2       2.9   
Real estate - commercial     1.9       (0.7)     1.2   
Real estate - construction     0.7       (0.1)     0.6   
Real estate - residential     1.5       (0.4)     1.1   
Consumer     2.2       (1.0)     1.2   
Lease financing     (0.2)     (0.1)     (0.3) 
Total Loans and Leases     8.8       (2.1)     6.7   
Total Change in Interest Income     8.9       1.3       10.2   
           
Change in Interest Expense:          
Interest-Bearing Deposits          
Savings         0.1       0.1   
Money Market     0.1           0.1   
Time     0.2       0.7       0.9   
Total Interest-Bearing Deposits     0.3       0.8       1.1   
Short-term Borrowings     (0.1)     0.1       
Total Change in Interest Expense     0.2       0.9       1.1   
Change in Net Interest Income $   8.7   $   0.4   $   9.1   
           

 

Analysis of Change in Net Interest Income         Table 8  
  Nine Months Ended September 30, 2016 
  Compared to September 30, 2015 
(dollars in millions)  Volume   Rate  Total 
           
Change in Interest Income:          
Interest-Bearing Deposits in Other Banks $   0.1   $   2.9   $   3.0   
Available-for-Sale Investment Securities     (5.0)     7.1       2.1   
Loans Held for Sale     (0.1)         (0.1) 
Loans and Leases          
Commercial and industrial     8.4       (0.2)     8.2   
Real estate - commercial     4.0       (2.0)     2.0   
Real estate - construction     1.0       (0.3)     0.7   
Real estate - residential     5.3       (5.2)     0.1   
Consumer     7.0       (3.8)     3.2   
Lease financing     (0.7)         (0.7) 
Total Loans and Leases     25.0       (11.5)     13.5   
Total Change in Interest Income     20.0       (1.5)     18.5   
           
Change in Interest Expense:          
Interest-Bearing Deposits          
Savings     0.1       0.7       0.8   
Money Market     0.1           0.1   
Time     0.2       2.1       2.3   
Total Interest-Bearing Deposits     0.4       2.8       3.2   
Short-Term Borrowings     (0.2)     0.2       
Total Change in Interest Expense     0.2       3.0       3.2   
Change in Net Interest Income $   19.8   $   (4.5) $   15.3   
           

 

Loans and Leases           Table 9 
  September 30,  June 30, December 31,  September 30,  
(dollars in thousands) 2016 2016 2015 2015 
Commercial and industrial $  3,265,291  $3,288,503 $3,057,455 $2,938,227 
Real estate:             
Commercial    2,311,874   2,181,732  2,164,448  2,150,483 
Construction    475,333   424,743  367,460  321,005 
Residential    3,687,660   3,654,525  3,532,427  3,512,998 
Total real estate    6,474,867   6,261,000  6,064,335  5,984,486 
Consumer    1,469,220   1,452,088  1,401,561  1,323,236 
Lease financing    187,177   186,104  198,679  208,533 
Total loans and leases $  11,396,555  $11,187,695 $10,722,030 $10,454,482 
              

 

Deposits           Table 10 
  September 30,  June 30, December 31,  September 30,  
(dollars in thousands) 2016 2016 2015 2015 
Demand $  5,800,538  $5,501,727 $5,331,829 $5,102,189 
Savings    4,341,714   4,366,333  4,354,140  4,213,988 
Money Market    2,818,132   2,472,220  2,565,955  2,480,751 
Time    4,005,143   3,781,824  3,810,000  3,685,631 
  Total Deposits $  16,965,527  $16,122,104 $16,061,924 $15,482,559 
              

 

Non-Performing Assets and Accruing Loans and Leases Past Due 90 Days or More           Table 11
  September 30,  June 30, December 31,  September 30, 
(dollars in thousands) 2016 2016 2015 2015
Non-Performing Assets            
Non-Accrual Loans and Leases            
Commercial Loans:            
Commercial and industrial $  2,933  $3,598 $3,958 $3,807
Real estate - commercial        138  150
Real estate - construction      324    1,246
Lease financing    163   173  181  187
Total Commercial Loans    3,096   4,095  4,277  5,390
Residential    6,274   9,231  12,344  13,433
Total Non-Accrual Loans and Leases    9,370   13,326  16,621  18,823
Other Real Estate Owned    854   205  154  1,881
Total Non-Performing Assets $  10,224  $13,531 $16,775 $20,704
             
Accruing Loans and Leases Past Due 90 Days or More            
Commercial Loans:            
Commercial and industrial $  177  $ $2,496 $2,496
Real estate - commercial        161  
Real estate - construction          247
Lease financing        174  128
Total Commercial Loans    177     2,831  2,871
Residential    1,638   1,334  737  1,510
Consumer    2,036   1,568  1,454  1,756
Total Accruing Loans and Leases Past Due 90 Days or More $  3,851  $2,902 $5,022 $6,137
             
Restructured Loans on Accrual Status and Not Past Due 90 Days or More    46,453   47,955  28,351  32,343
 Total Loans and Leases  $  11,396,555  $11,187,695 $10,722,030 $10,454,482
             

 

Allowance for Loan and Lease Losses              Table 12  
  For the three months ended For the nine months ended  
  September 30,  June 30, September 30,  September 30,  September 30,   
(dollars in thousands) 2016 2016 2015 2016 2015  
Balance at Beginning of Period $   136,360   $ 137,154  $ 136,338  $   135,484   $ 134,799   
Loans and Leases Charged-Off                 
Commercial Loans:                 
Commercial and industrial     (210)   (52)   (461)     (348)   (765)  
Total Commercial Loans     (210)   (52)   (461)     (348)   (765)  
Residential     (268)   (456)   (484)     (796)   (561)  
Consumer     (4,878)   (4,295)   (4,871)     (13,379)   (13,481)  
Total Loans and Leases Charged-Off     (5,356)   (4,803)   (5,816)     (14,523)   (14,807)  
Recoveries on Loans and Leases Previously Charged-Off                 
Commercial Loans:                 
Commercial and industrial     6     19    178      228     884   
Real estate - commercial     42     47    58      3,288     298   
Lease financing       1    1      1     2   
Total Commercial Loans     48     67    237      3,517     1,184   
Residential     350     460    608      1,116     2,098   
Consumer     1,523     1,582    1,530      4,731     4,773   
Total Recoveries on Loans and Leases Previously Charged-Off     1,921     2,109    2,375      9,364     8,055   
Net Loans and Leases Charged-Off     (3,435)   (2,694)   (3,441)     (5,159)   (6,752)  
Provision for Credit Losses     2,100     1,900    2,550      4,700     7,400   
Balance at End of Period $   135,025   $ 136,360  $ 135,447  $   135,025   $ 135,447   
Average Loans and Leases Outstanding $ 11,261,710  $ 11,074,430  $ 10,335,331  $   11,055,522   $ 10,197,275   
Ratio of Net Loans and Leases Charged-Off to Average Loans and Leases Outstanding     0.12    0.10 %  0.13 %    0.06    0.09 % 
Ratio of Allowance for Loan and Lease Losses to Loans and Leases Outstanding     1.18    1.22 %  1.30 %    1.18    1.30 % 
                  

 

GAAP to Non-GAAP Reconciliation            Table 13  
  As of and for the three months ended As of and for the nine months ended  
  September 30,  June 30, September 30,  September 30,  September 30,   
(dollars in thousands, except per share data) 2016 2016 2015 2016 2015  
Net income $  53,235  $54,860 $54,889 $  173,626  $163,569  
                  
Average total stockholders' equity $  2,506,099  $2,491,138 $2,743,469 $  2,588,602 $2,728,767  
Less: average goodwill    995,492   995,492  995,492    995,492   995,492  
Average tangible stockholders' equity $  1,510,607  $1,495,646 $1,747,977 $  1,593,110 $1,733,275  
                  
Total stockholders' equity $  2,523,963  $2,501,008 $2,744,340 $  2,523,963  $2,744,340  
Less: goodwill    995,492   995,492  995,492    995,492   995,492  
Tangible stockholders' equity $  1,528,471  $1,505,516 $1,748,848 $  1,528,471  $1,748,848  
                  
Average total assets $  19,314,668  $18,950,020 $18,739,906 $  19,185,484 $18,643,308  
Less: average goodwill    995,492   995,492  995,492    995,492   995,492  
Average tangible assets $  18,319,176  $17,954,528 $17,744,414 $  18,189,992 $17,647,816  
                  
Total assets $  19,892,693  $19,052,593 $18,870,760 $  19,892,693  $18,870,760  
Less: goodwill    995,492   995,492  995,492    995,492   995,492  
Tangible assets $  18,897,201  $18,057,101 $17,875,268 $  18,897,201  $17,875,268  
                  
Basic weighted-average shares outstanding    139,500,542   139,459,620  139,459,620    139,473,360   139,459,620  
Diluted weighted-average shares outstanding   139,503,558  139,459,620  139,459,620   139,474,373  139,459,620  
                  
Return on average total stockholders' equity(a)    8.45 % 8.86% 7.94%   8.96 % 8.01% 
Return on average tangible stockholders' equity (non-GAAP)(a)    14.02 % 14.75% 12.46%   14.56 % 12.62% 
                  
Return on average total assets(a)    1.10 % 1.16% 1.16%   1.21 % 1.17% 
Return on average tangible assets (non-GAAP)(a)    1.16 % 1.23% 1.23%   1.28 % 1.24% 
                  
Total stockholders' equity to total assets    12.69 % 13.13% 14.54%   12.69 % 14.54% 
Tangible stockholders' equity to tangible assets (non-GAAP)    8.09 % 8.34% 9.78%   8.09 % 9.78% 
                  
Average stockholders' equity to average assets    12.98  13.15% 14.64%   13.49 % 14.64% 
Tangible average stockholders' equity to tangible average assets (non-GAAP)   8.25  8.33% 9.85%   8.76 % 9.82% 
                  
Book value per share $  18.09  $17.93 $19.68 $  18.10  $19.68  
Tangible book value per share (non-GAAP) $  10.96  $10.80 $12.54 $  10.96  $12.54  
                  
(a)  Annualized for the three and nine months ended September 30, 2016 and 2015.              

 

GAAP to Non-GAAP Reconciliation            Table 14 
  As of and for the three months ended As of and for the nine months ended 
  September 30,  June 30, September 30,  September 30,  September 30,  
(dollars in thousands, except per share data) 2016 2016 2015 2016 2015 
Net interest income $   122,683   $120,427 $ 113,550  $   360,422   $ 345,103  
Early loan termination(a)                 (4,836) 
Core net interest income (non-GAAP) $   122,683   $120,427 $ 113,550  $   360,422   $ 340,267  
                 
Noninterest income $   48,690   $46,371 $ 56,502  $   168,580   $ 164,215  
Gain on sale of securities         (2,379)     (3,050)   (12,474) 
Gain on sale of stock (Visa/MasterCard)         (1,752)     (22,678)   (2,519) 
Gain on sale of other assets         (1,444)       (2,127) 
Other adjustments(a),(b)         (2,946)       (5,480) 
Core noninterest income (non-GAAP) $   48,690   $46,371 $ 47,981  $   142,852   $ 141,615  
                 
Noninterest expense $   82,804   $78,473 $ 79,377  $   246,341   $ 239,307  
One-time items(c)     (3,090)           (5,637)     
Core noninterest expense (non-GAAP) $   79,714   $78,473 $ 79,377      240,704   $ 239,307  
                 
Net income $   53,235   $54,860 $ 54,889  $   173,626   $ 163,569  
Early loan termination                 (4,836) 
Gain on sale of securities         (2,379)     (3,050)   (12,474) 
Gain on sale of stock (Visa/MasterCard)         (1,752)     (22,678)   (2,519) 
Gain on sale of other assets         (1,444)        (2,127) 
Other adjustments(b)         (2,946)       (5,480) 
One-time items(c)     3,090             5,637       
Tax adjustments (d)     (1,148)     3,214      7,575     10,348  
Total core adjustments     1,942       (5,307)     (12,516)   (17,088) 
Core net income (non-GAAP) $   55,177   $54,860 $ 49,582  $   161,110   $ 146,481  
Core basic earnings per share (non-GAAP) $   0.40   $0.39 $ 0.36  $   1.16   $ 1.05  
Core diluted earnings per share (non-GAAP) $   0.40   $0.39 $ 0.36  $   1.16   $ 1.05  
                 
(a) Adjustments that are not material to our financial results have not been presented for certain periods. 
(b) Other adjustments include a one-time MasterCard signing bonus and a recovery of an investment that was previously written down. 
(c) One-time items include initial public offering related costs. 
(d) Represents the adjustments to net income, tax effected at the Company's effective tax rate for the respective period. 
Investor Relations Contact: Kevin Haseyama, CFA (808) 525-6268 khaseyama@fhb.com Media Contact: Susan Kam (808) 525-6254 skam@fhb.com

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