FIRST HAWAIIAN, INC. - FORM 8-K - EX-99.1

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8-K - 8-K - FIRST HAWAIIAN, INC.	f8-k.htm

EXHIBIT 99.1

For Immediate Release

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

Net income of $69.1 million, ($0.50 per diluted share), up 1.6% versus the prior quarter and up 21.4% versus the prior year

1.38% return on average total assets and 1.45% return on average tangible assets1

11.23% return on average total stockholders’ equity and 18.83% return on average tangible stockholders’ equity1

48.0% efficiency ratio

The Board of Directors declared a dividend of $0.24 per share

BNP Paribas reduced ownership below 50%

First Hawaiian repurchased ~3 million shares at a total cost of ~$81.8 million

HONOLULU, Hawaii July 26, 2018 -- (Globe Newswire) -- First Hawaiian, Inc. (NASDAQ:FHB), (the “Company”) today reported financial results for its second quarter ended June 30, 2018.

“We are very pleased with our solid performance in the second quarter,” said Bob Harrison, Chairman and Chief Executive Officer. “We had strong earnings driven by good loan growth, continued margin expansion, and excellent asset quality. Our profitability metrics continued to improve and our capital ratios remained strong. Additionally, during the quarter, BNP Paribas reduced its ownership in First Hawaiian below 50% with a successful offering of 16.8 million shares in connection with which we concurrently repurchased approximately 3 million shares.”

On July 25, 2018, the Company’s Board of Directors declared a quarterly cash dividend of $0.24 per share. The dividend will be payable on September 7, 2018 to stockholders of record at the close of business on August 27, 2018.

Earnings Highlights

Net income for the quarter ended June 30, 2018 was $69.1 million, or $0.50 per diluted share, compared to $68.0 million, or $0.49 per diluted share, for the quarter ended March 31, 2018, and $56.9 million, or $0.41 per diluted share, for the quarter ended June 30, 2017. Core net income1 for the quarter ended June 30, 2018 was $69.7 million, or $0.50 per diluted share, compared to $68.3 million, or $0.49 per diluted share, for the quarter ended March 31, 2018, and $57.2 million, or $0.41 per diluted share, for the quarter ended June 30, 2017.

Net interest income for the quarter ended June 30, 2018 was $141.4 million, an increase of $1.7 million compared to $139.7 million for the quarter ended March 31, 2018, and an increase of $10.1 million compared to $131.3 million for the quarter ended June 30, 2017. The increase in net interest income compared to the first quarter of 2018 was due to higher average balances and yields on loans, lower average balances of time deposits and higher yields on interest bearing deposits in other banks, partially offset by higher rates on interest bearing deposits, lower average balances and yields on investment securities, and lower average balances of interest bearing deposits in other banks. The increase in net interest income compared to the second quarter of 2017 was due to higher average balances of loans and higher yields on loans, interest-bearing deposits in other banks, and investment securities, partially offset by higher rates on deposits.

Net interest margin (“NIM”) was 3.18%, 3.13% and 3.02%, for the quarters ended June 30, 2018, March 31, 2018, and June 30, 2017, respectively. The 5 basis point increase in NIM versus the prior quarter was due to higher overall yields on earnings assets, partially offset by higher deposit costs, an additional day in the quarter and a lower premium amortization adjustment.

Results for the quarter ended June 30, 2018 included a provision for loan and lease losses of $6.0 million compared to $6.0 million in the quarter ended March 31, 2018 and $4.4 million in the quarter ended June 30, 2017.

Noninterest income was $49.8 million in the quarter ended June 30, 2018, an increase of $1.1 million compared to noninterest income of $48.7 million in the quarter ended March 31, 2018 and a decrease of $0.8 million compared to noninterest income of $50.6 million in the quarter ended June 30, 2017. The increase in noninterest income compared to the first quarter of 2018 was primarily due to $1.4 million higher credit and debit card fees and $0.4 million higher income from bank-owned life insurance (“BOLI”), partially offset by $0.5 million lower trust and investment services income and $0.2 million lower service charges on deposit accounts. The decrease in noninterest income compared to the second quarter of 2017 was primarily due to $1.5 million lower service charges on deposit accounts, $1.3 million lower other income and $0.5 million lower BOLI income, partially offset by $1.5 million higher other service charges and fees, $0.9 million higher credit and debit card fees and $0.2 million higher trust and investment services income.

1A 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.

Noninterest expense was $91.9 million for the quarter ended June 30, 2018, an increase of $1.3 million from $90.6 million in the quarter ended March 31, 2018, and an increase of $4.9 million from $86.9 million in the quarter ended June 30, 2017. Noninterest expense in the second quarter of 2018 included a $0.7 million expense related to a decrease in the conversion rate of the Visa Class B restricted shares we sold in 2016. The increase in noninterest expense compared to the first quarter of 2018 was primarily due to $0.7 million higher contract services and professional fees, $0.6 million higher card rewards program expenses, $0.4 million higher occupancy expenses and $0.3 million higher regulatory assessments and fees, partially offset by $0.5 million lower salaries and employee benefits and $0.3 million lower equipment expenses. The increase in noninterest expense compared to the second quarter of 2017 was primarily due to $1.5 million higher occupancy expenses, a $1.3 million increase in salaries and benefits, $0.9 million higher other expenses, $0.6 million higher contracted services and professional fees and $0.5 million higher card rewards program expenses.

The efficiency ratio was 48.0%, 48.1% and 47.8% for the quarters ended June 30, 2018, March 31, 2018 and June 30, 2017, respectively.

The effective tax rate was 26.0% for the first and second quarters of 2018 and 37.1% in the second quarter last year.

The lower effective tax rate in the second quarter of 2018 compared to the same quarter last year was due to the lower corporate tax rate resulting from the Tax Cuts and Jobs Act.

Balance Sheet Highlights

Total assets were $20.5 billion at June 30, 2018, compared to $20.2 billion at March 31, 2018 and $20.4 billion at June 30, 2017.

The investment securities portfolio was $4.8 billion at June 30, 2018, compared to $5.1 billion at March 31, 2018 and $5.1 billion at June 30, 2017. The portfolio remains largely comprised of securities issued by U.S. government agencies.

Total loans and leases were $12.6 billion at June 30, 2018, up 1.4%, from $12.5 billion at March 31, 2018 and up 4.8% from $12.1 billion at June 30, 2017.

The growth in loans and leases in the second quarter of 2018 compared to the first quarter of 2018 was led by increases in commercial real estate loans of $99.0 million, residential real estate loans of $80.1 million, construction loans of $60.0 million and consumer loans of $36.1 million. Commercial and industrial (“C&I”) loans declined by $103.1 million, primarily due to declines in dealer flooring balances as dealers more carefully managed their inventory levels as well as some increased competition by the captive finance companies. Compared to June 30, 2017, the growth in loans and leases was due to increases in residential real estate loans of $314.2 million, commercial real estate loans of $292.0 million, consumer loans of $104.6 million and construction loans of $98.3 million. C&I loans declined by $214.9 million, primarily due to declines in dealer flooring balances, as dealers more carefully managed their inventory levels paydowns as well as some increased competition by the captive finance companies, and payoffs and paydowns in commercial loans and in the shared national credit portfolio.

Total deposits were $17.4 billion at June 30, 2018, virtually unchanged from $17.4 billion at March 31, 2018, and a decrease of $0.1 billion, compared to $17.5 billion at June 30, 2017.

Asset Quality

The Company’s asset quality remained excellent during the second quarter of 2018. Total non-performing assets were $13.8 million, or 0.11% of total loans and leases and other real estate owned, at June 30, 2018, compared to non-performing assets of $12.1 million, or 0.10% of total loans and leases and other real estate owned, at March 31, 2018 and non-performing assets of $8.1 million, or 0.07% of total loans and leases and other real estate owned, at June 30, 2017.

Net charge offs for the quarter ended June 30, 2018 were $4.0 million, or 0.13% of average loans and leases on an annualized basis, compared to $4.6 million, or 0.15% of average loans and leases on an annualized basis for the quarter ended March 31, 2018 and $3.4 million, or 0.11% of average loans and leases on an annualized basis for the quarter ended June 30, 2017.

The ratio of the allowance for loan and lease losses to total loans and leases was 1.11% at June 30, 2018 and March 31, 2018 and 1.13% at June 30, 2017.

Capital

During the second quarter of 2018, the Company repurchased approximately 2.968 million shares of FHI common stock from a wholly owned subsidiary of BNP Paribas at a total cost of approximately $81.8 million.

Total stockholders’ equity was $2.5 billion at June 30, 2018, compared to $2.5 billion at March 31, 2018 and $2.6 billion at June 30, 2017.

The tier 1 leverage, common equity tier 1, and total capital ratios were 8.61%, 12.19% and 13.23%, respectively, at June 30, 2018, compared with 8.71%, 12.73% and 13.77% at March 31, 2018 and 8.70%, 12.73% and 13.81% at June 30, 2017.

First Hawaiian, Inc.

First Hawaiian, Inc. (NASDAQ:FHB) is a bank holding company headquartered in Honolulu, Hawaii. Its principal subsidiary, First Hawaiian Bank, founded in 1858 under the name Bishop & Company, is Hawaii’s oldest and largest financial institution with branch locations throughout Hawaii, Guam and Saipan. The company offers a comprehensive suite of banking services to consumer and commercial customers including deposit products, loans, wealth management, insurance, trust, retirement planning, credit card and merchant processing services. Customers may also access their accounts through ATMs, online and mobile banking channels. For more information about First Hawaiian, Inc., visit the Company’s website, www.fhb.com.

Conference Call Information

First Hawaiian will host a conference call to discuss the Company’s results today at 5:00 p.m. Eastern Time, 11:00 a.m. Hawaii Time. To access the call, participants should dial (844) 452-2942 (US/Canada), or (574) 990-9846 (International) ten minutes prior to the start of the call and enter the conference ID: 3937469. A live webcast of the conference call, including a slide presentation, will be available at the following link: www.fhb.com/earnings. The archive of the webcast will be available at the same location. A telephonic replay of the conference call will be available two hours after the conclusion of the call until 8:30 p.m. (Eastern Time) on August 5, 2018. Access the replay by dialing (855) 859-2056 or (404) 537-3406 and entering the conference ID: 3937469.

Forward-Looking Statements

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

Use of Non-GAAP Financial Measures

We present net interest income, noninterest income, noninterest expense, net income, earnings per share and the related ratios described below, on an adjusted, or “core,” basis, each a non-GAAP financial measure. These core measures exclude from the corresponding GAAP measure the impact of certain items that we do not believe are representative of our financial results. We believe that the presentation of these non-GAAP financial measures helps identify underlying trends in our business from period to period that could otherwise be distorted by the effect of certain expenses, gains and other items included in our operating results. We believe that these core measures provide useful information about our operating results and enhance the overall understanding of our past performance and future performance. Investors should consider our performance and financial condition as reported under GAAP and all other relevant information when assessing our performance or financial condition.

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

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

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


Investor Relations Contact:	Media Contact:
Kevin Haseyama, CFA	Susan Kam
(808) 525‑6268	(808) 525‑6254
khaseyama@fhb.com	skam@fhb.com


Financial Highlights													Table 1
	For the Three Months Ended									For the Six Months Ended
	June 30,			March 31,			June 30,			June 30,
(dollars in thousands, except per share data)	2018			2018			2017			2018			2017
Operating Results:
Net interest income	$	141,403		$	139,672		$	131,254		$	281,075		$	260,599
Provision for loan and lease losses		6,020			5,950			4,400			11,970			8,900
Noninterest income(1)		49,797			48,700			50,558			98,497			101,617
Noninterest expense(1)		91,865			90,587			86,929			182,452			172,920
Net income		69,053			67,958			56,895			137,011			113,635
Basic earnings per share		0.50			0.49			0.41			0.99			0.81
Diluted earnings per share		0.50			0.49			0.41			0.99			0.81
Dividends declared per share		0.24			0.24			0.22			0.48			0.44
Dividend payout ratio		48.00	%		48.98	%		53.66	%		48.48	%		54.32	%
Supplemental Income Statement Data (non-GAAP):
Core net interest income	$	141,403		$	139,672		$	131,254		$	281,075		$	260,599
Core noninterest income(1)		49,797			48,700			50,558			98,497			101,617
Core noninterest expense(1)		90,951			90,180			86,472			181,131			172,079
Core net income		69,720			68,259			57,181			137,979			114,163
Core basic earnings per share		0.51			0.49			0.41			0.99			0.82
Core diluted earnings per share		0.50			0.49			0.41			0.99			0.82
Performance Ratio:
Net interest margin		3.18	%		3.13	%		3.02	%		3.16	%		3.01	%
Core net interest margin (non-GAAP)		3.18	%		3.13	%		3.02	%		3.16	%		3.01	%
Efficiency ratio(1)		48.04	%		48.08	%		47.81	%		48.06	%		47.74	%
Core efficiency ratio (non-GAAP)(1)		47.56	%		47.86	%		47.56	%		47.71	%		47.50	%
Return on average total assets		1.38	%		1.35	%		1.16	%		1.36	%		1.16	%
Core return on average total assets (non-GAAP)		1.39	%		1.36	%		1.16	%		1.37	%		1.17	%
Return on average tangible assets		1.45	%		1.42	%		1.22	%		1.43	%		1.22	%
Core return on average tangible assets (non-GAAP)(2)		1.46	%		1.43	%		1.23	%		1.44	%		1.23	%
Return on average total stockholders' equity		11.23	%		11.02	%		9.03	%		11.13	%		9.13	%
Core return on average total stockholders' equity (non-GAAP)		11.34	%		11.07	%		9.07	%		11.20	%		9.18	%
Return on average tangible stockholders' equity (non-GAAP)		18.83	%		18.32	%		14.89	%		18.57	%		15.14	%
Core return on average tangible stockholders’ equity (non-GAAP)(3)		19.01	%		18.40	%		14.96	%		18.70	%		15.22	%
Average Balances:
Average loans and leases	$	12,552,610		$	12,296,678		$	11,903,255		$	12,425,351		$	11,743,835
Average earning assets		17,817,943			18,088,280			17,453,655			17,952,365			17,453,094
Average assets		20,121,504			20,407,718			19,692,222			20,263,820			19,730,651
Average deposits		17,199,368			17,504,054			16,782,887			17,350,869			16,841,296
Average shareholders' equity		2,466,392			2,500,299			2,528,388			2,483,252			2,508,564
Market Value Per Share:
Closing		29.02			27.83			30.62			29.02			30.62
High		31.28			32.36			31.34			32.36			35.32
Low		27.09			26.92			26.96			26.92			26.96


	As of			As of			As of			As of
	June 30,			March 31,			December 31,			June 30,
	2018			2018			2017			2017
Balance Sheet Data:
Loans and leases	$	12,637,686		$	12,464,165		$	12,277,369		$	12,062,392
Total assets		20,479,719			20,242,942			20,549,461			20,373,974
Total deposits		17,395,538			17,362,422			17,612,122			17,452,262
Long-term debt		200,034			34			34			41
Total stockholders' equity		2,459,175			2,520,862			2,532,551			2,552,602

Per Share of Common Stock:
Book value	$	18.00		$	18.06		$	18.14		$	18.29
Tangible book value (non-GAAP)		10.71			10.93			11.01			11.16

Asset Quality Ratios:
Non-accrual loans and leases / total loans and leases		0.11	%		0.10	%		0.08	%		0.06	%
Allowance for loan and lease losses / total loans and leases		1.11	%		1.11	%		1.12	%		1.13	%

Capital Ratios:
Common Equity Tier 1 Capital Ratio		12.19	%		12.73	%		12.45	%		12.73	%
Tier 1 Capital Ratio		12.19	%		12.73	%		12.45	%		12.73	%
Total Capital Ratio		13.23	%		13.77	%		13.50	%		13.81	%
Tier 1 Leverage Ratio		8.61	%		8.71	%		8.52	%		8.70	%
Total stockholders' equity to total assets		12.01	%		12.45	%		12.32	%		12.53	%
Tangible stockholders' equity to tangible assets (non-GAAP)		7.51	%		7.93	%		7.86	%		8.04	%

Non-Financial Data:
Number of branches		61			61			62			62
Number of ATMs		303			310			310			312
Number of Full-Time Equivalent Employees		2,189			2,213			2,220			2,191

⁽¹⁾

Subsequent to the issuance of the Company’s interim condensed consolidated financial statements as of September 30, 2017, the Company’s management determined that certain expenses related to the card rewards program were incorrectly offset against credit and debit card fee income and credit card interchange assessment fees were incorrectly classified in card rewards program expenses versus credit and debit card fee income in the interim condensed consolidated statements of income for the three and six months ended June 30, 2017. As a result, certain noninterest income and noninterest expense amounts have been revised from the amounts previously reported to correct the classification errors. There was no change to net income or earnings per share as previously reported as a result of these errors. Management has evaluated the materiality of these errors on its prior period financial statements from a quantitative and qualitative perspective, and has concluded that these errors were not material to any prior annual or interim period.

⁽²⁾

Core return on average tangible assets is a non-GAAP financial measure. We compute our core return on average tangible assets as the ratio of core net income to average tangible assets, which is calculated by subtracting (and thereby effectively excluding) amounts related to the effect of goodwill from our average total assets. For a reconciliation to the most directly comparable GAAP financial measure for core net income, see Table 13, GAAP to Non-GAAP Reconciliation.

⁽³⁾

Core return on average tangible stockholders’ equity is a non-GAAP financial measure. We compute our core return on average tangible stockholders’ equity as the ratio of core net income to average tangible stockholders’ equity, which is calculated by substracting (and thereby effectively excluding) amounts related to the effect of goodwill from our average total stockholders’ equity. For a reconciliation to the most directly comparable GAAP financial measure for core net income, see Table 13, GAAP to Non-GAAP Reconciliation


Consolidated Statements of Income	Table 2
	Three Months Ended						For the Six Months Ended
	June 30,		March 31,		June 30,		June 30,
(dollars in thousands, except per share amounts)	2018		2018		2017		2018		2017
Interest income
Loans and lease financing	$	130,283	$	123,551	$	114,179	$	253,834	$	223,445
Available-for-sale securities		27,397		28,993		25,059		56,390		51,488
Other		1,339		2,392		781		3,731		2,007
Total interest income		159,019		154,936		140,019		313,955		276,940
Interest expense
Deposits		17,355		15,264		8,760		32,619		16,330
Short-term borrowings and long-term debt		261		—		5		261		11
Total interest expense		17,616		15,264		8,765		32,880		16,341
Net interest income		141,403		139,672		131,254		281,075		260,599
Provision for loan and lease losses		6,020		5,950		4,400		11,970		8,900
Net interest income after provision for loan and lease losses		135,383		133,722		126,854		269,105		251,699
Noninterest income
Service charges on deposit accounts		7,721		7,955		9,238		15,676		18,619
Credit and debit card fees		16,929		15,497		16,019		32,426		32,324
Other service charges and fees		9,633		9,342		8,110		18,975		17,207
Trust and investment services income		7,711		8,231		7,526		15,942		14,864
Bank-owned life insurance		2,395		2,044		2,927		4,439		7,505
Other		5,408		5,631		6,738		11,039		11,098
Total noninterest income		49,797		48,700		50,558		98,497		101,617
Noninterest expense
Salaries and employee benefits		41,636		42,160		40,364		83,796		80,772
Contracted services and professional fees		13,005		12,287		12,388		25,292		22,696
Occupancy		6,908		6,484		5,435		13,392		11,144
Equipment		4,335		4,588		4,527		8,923		8,724
Regulatory assessment and fees		4,225		3,973		3,750		8,198		7,524
Advertising and marketing		1,115		951		1,222		2,066		3,250
Card rewards program		6,359		5,718		5,894		12,077		11,669
Other		14,282		14,426		13,349		28,708		27,141
Total noninterest expense		91,865		90,587		86,929		182,452		172,920
Income before provision for income taxes		93,315		91,835		90,483		185,150		180,396
Provision for income taxes		24,262		23,877		33,588		48,139		66,761
Net income	$	69,053	$	67,958	$	56,895	$	137,011	$	113,635
Basic earnings per share	$	0.50	$	0.49	$	0.41	$	0.99	$	0.81
Diluted earnings per share	$	0.50	$	0.49	$	0.41	$	0.99	$	0.81
Dividends declared per share	$	0.24	$	0.24	$	0.22	$	0.48	$	0.44
Basic weighted-average outstanding shares		137,907,063		139,600,712		139,546,615		138,749,209		139,546,174
Diluted weighted-average outstanding shares		138,065,879		139,732,100		139,646,117		138,891,955		139,644,557


Consolidated Balance Sheets	Table 3
	June 30,		March 31,		December 31,		June 30,
(dollars in thousands)	2018		2018		2017		2017
Assets
Cash and due from banks	$	332,102	$	283,135	$	367,084	$	355,752
Interest-bearing deposits in other banks		611,698		409,357		667,560		872,013
Investment securities		4,842,551		5,076,766		5,234,658		5,126,869
Loans held for sale		2,037		397		556		—
Loans and leases		12,637,686		12,464,165		12,277,369		12,062,392
Less: allowance for loan and lease losses		140,601		138,574		137,253		136,883
Net loans and leases		12,497,085		12,325,591		12,140,116		11,925,509

Premises and equipment, net		287,746		288,565		289,215		292,959
Other real estate owned and repossessed personal property		325		—		329		329
Accrued interest receivable		48,528		47,499		47,987		39,739
Bank-owned life insurance		442,449		440,054		438,010		432,726
Goodwill		995,492		995,492		995,492		995,492
Mortgage servicing rights		17,660		18,659		13,196		14,877
Other assets		402,046		357,427		355,258		317,709
Total assets	$	20,479,719	$	20,242,942	$	20,549,461	$	20,373,974
Liabilities and Stockholders' Equity
Deposits:
Interest-bearing	$	11,430,455	$	11,312,288	$	11,485,269	$	11,580,664
Noninterest-bearing		5,965,083		6,050,134		6,126,853		5,871,598
Total deposits		17,395,538		17,362,422		17,612,122		17,452,262
Long-term debt		200,034		34		34		41
Retirement benefits payable		135,139		134,684		134,218		134,400
Other liabilities		289,833		224,940		270,536		234,669
Total liabilities		18,020,544		17,722,080		18,016,910		17,821,372

Stockholders' equity
Common stock ($0.01 par value; authorized 300,000,000 shares; issued/outstanding: 139,620,801 / 136,642,060 shares as of June 30, 2018, issued/outstanding: 139,611,795 / 139,601,123 shares as of March 31, 2018, issued/outstanding: 139,599,454 / 139,588,782 shares as of December 31, 2017 and issued and outstanding: 139,546,615 shares as of June 30, 2017)		1,396		1,396		1,396		1,395
Additional paid-in capital		2,492,656		2,490,910		2,488,643		2,488,091
Retained earnings		229,615		193,522		139,177		130,767
Accumulated other comprehensive loss, net		(182,410)		(164,684)		(96,383)		(67,651)
Treasury stock (2,978,741 shares as of June 30, 2018, 10,672 as of both March 31, 2018 and December 31, 2017 and nil as of June 30, 2017)		(82,082)		(282)		(282)		—
Total stockholders' equity		2,459,175		2,520,862		2,532,551		2,552,602
Total liabilities and stockholders' equity	$	20,479,719	$	20,242,942	$	20,549,461	$	20,373,974


Average Balances and Interest Rates																	Table 4
	Three Months Ended						Three Months Ended						Three Months Ended
	June 30, 2018						March 31, 2018						June 30, 2017
	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	$	281.2	$	1.2	1.74	%	$	616.8	$	2.3	1.53	%	$	312.8	$	0.8		1.00	%
Available-for-Sale Investment Securities		4,961.2		27.4	2.21			5,160.3		29.0	2.28			5,208.8		25.0		1.93
Loans Held for Sale		1.9		—	3.44			0.1		—	2.99			—		—		—
Loans and Leases (1)
Commercial and industrial		3,177.4		30.5	3.84			3,104.4		27.7	3.62			3,279.2		25.7		3.15
Real estate - commercial		2,883.0		28.9	4.02			2,799.9		26.5	3.83			2,638.3		23.8		3.62
Real estate - construction		620.7		6.2	4.03			621.2		5.7	3.74			509.7		4.3		3.41
Real estate - residential		4,087.2		41.9	4.11			4,009.8		41.1	4.15			3,782.1		38.6		4.09
Consumer		1,624.6		21.7	5.35			1,599.6		21.3	5.41			1,525.8		20.6		5.40
Lease financing		159.7		1.1	2.83			161.8		1.2	3.10			168.1		1.2		2.84
Total Loans and Leases		12,552.6		130.3	4.16			12,296.7		123.5	4.07			11,903.2		114.2		3.85
Other Earning Assets		21.0		0.1	2.21			14.4		0.1	1.68			10.8		—		0.99
Total Earning Assets (2)		17,817.9		159.0	3.58			18,088.3		154.9	3.47			17,435.6		140.0		3.22
Cash and Due from Banks		317.7						318.9						319.4
Other Assets		1,985.9						2,000.5						1,937.2
Total Assets	$	20,121.5					$	20,407.7					$	19,692.2

Interest-Bearing Liabilities
Interest-Bearing Deposits
Savings	$	4,573.0	$	2.4	0.21	%	$	4,543.1	$	1.7	0.15	%	$	4,488.8	$	0.7		0.07	%
Money Market		2,725.9		2.7	0.40			2,710.9		1.7	0.26			2,618.6		0.8		0.12
Time		4,003.5		12.2	1.22			4,252.3		11.8	1.13			3,887.5		7.2		0.75
Total Interest-Bearing Deposits		11,302.4		17.3	0.62			11,506.3		15.2	0.54			10,994.9		8.7		0.32
Short-Term Borrowings		42.7		0.2	1.85			—		—	—			1.7		—		0.89
Long-Term Debt (3)		6.6		0.1	3.79			—		—	—			—		—		—
Total Interest-Bearing Liabilities		11,351.7		17.6	0.62			11,506.3		15.2	0.54			10,996.6		8.7		0.32
Net Interest Income			$	141.4					$	139.7					$	131.3
Interest Rate Spread					2.96	%					2.93	%						2.90	%
Net Interest Margin					3.18	%					3.13	%						3.02	%
Noninterest-Bearing Demand Deposits		5,897.0						5,997.8						5,788.0
Other Liabilities		406.4						403.3						379.2
Stockholders' Equity		2,466.4						2,500.3						2,528.4
Total Liabilities and Stockholders' Equity	$	20,121.5					$	20,407.7					$	19,692.2

⁽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.

⁽³⁾

Long-term debt was issued in June 2018, leading to a higher yield than the stated annual interest rate of 2.79%.


Average Balances and Interest Rates											Table 5
	Six Months Ended						Six Months Ended
	June 30, 2018						June 30, 2017
	Average		Income/		Yield/		Average		Income/		Yield/
(dollars in millions)	Balance		Expense		Rate		Balance		Expense		Rate
Earning Assets
Interest-Bearing Deposits in Other Banks	$	448.0	$	3.6	1.60	%	$	475.6	$	2.0	0.85	%
Available-for-Sale Investment Securities		5,060.2		56.4	2.25			5,222.6		51.5	1.99
Loans Held for Sale		1.1		—	3.40			—		—	—
Loans and Leases (1)
Commercial and industrial		3,141.0		58.2	3.74			3,256.5		50.0	3.10
Real estate - commercial		2,841.7		55.3	3.93			2,560.2		46.0	3.62
Real estate - construction		620.8		12.0	3.89			485.1		8.0	3.34
Real estate - residential		4,048.9		82.9	4.13			3,753.1		76.3	4.10
Consumer		1,612.3		43.0	5.38			1,519.7		40.8	5.42
Lease financing		160.7		2.4	2.97			169.3		2.3	2.80
Total Loans and Leases		12,425.4		253.8	4.12			11,743.9		223.4	3.84
Other Earning Assets		17.7		0.2	2.00			11.0		—	0.88
Total Earning Assets (2)		17,952.4		314.0	3.53			17,453.1		276.9	3.20
Cash and Due from Banks		318.3						322.0
Other Assets		1,993.1						1,955.6
Total Assets	$	20,263.8					$	19,730.7

Interest-Bearing Liabilities
Interest-Bearing Deposits
Savings	$	4,558.2	$	4.1	0.18	%	$	4,497.5	$	1.4	0.06	%
Money Market		2,718.4		4.5	0.33			2,556.8		1.3	0.10
Time		4,127.2		24.0	1.17			3,936.4		13.6	0.70
Total Interest-Bearing Deposits		11,403.8		32.6	0.58			10,990.7		16.3	0.30
Short-Term Borrowings		21.5		0.2	1.85			2.8		—	0.65
Long-Term Debt (3)		3.3		0.1	3.81			—		—	—
Total Interest-Bearing Liabilities		11,428.6		32.9	0.58			10,993.5		16.3	0.30
Net Interest Income			$	281.1					$	260.6
Interest Rate Spread					2.95	%					2.90	%
Net Interest Margin					3.16	%					3.01	%
Noninterest-Bearing Demand Deposits		5,947.1						5,850.6
Other Liabilities		404.8						378.0
Stockholders' Equity		2,483.3						2,508.6
Total Liabilities and Stockholders' Equity	$	20,263.8					$	19,730.7

⁽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.

⁽³⁾

Long-term debt was issued in June 2018, leading to a higher yield than the stated annual interest rate of 2.79%.


Analysis of Change in Net Interest Income						Table 6
	Three Months Ended June 30, 2018
	Compared to March 31, 2018
(dollars in millions)	Volume		Rate		Total
Change in Interest Income:
Interest-Bearing Deposits in Other Banks	$	(1.4)	$	0.4	$	(1.0)
Available-for-Sale Investment Securities		(1.1)		(0.5)		(1.6)
Loans and Leases
Commercial and industrial		0.7		2.1		2.8
Real estate - commercial		0.8		1.6		2.4
Real estate - construction		—		0.5		0.5
Real estate - residential		0.8		—		0.8
Consumer		0.3		—		0.3
Lease financing		—		(0.1)		(0.1)
Total Loans and Leases		2.6		4.1		6.7
Total Change in Interest Income		0.1		4.0		4.1

Change in Interest Expense:
Interest-Bearing Deposits
Savings		—		0.7		0.7
Money Market		—		1.0		1.0
Time		(0.7)		1.1		0.4
Total Interest-Bearing Deposits		(0.7)		2.8		2.1
Short-Term Borrowings		0.2		—		0.2
Long-Term Debt		0.1		—		0.1
Total Change in Interest Expense		(0.4)		2.8		2.4
Change in Net Interest Income	$	0.5	$	1.2	$	1.7


Analysis of Change in Net Interest Income						Table 7
	Three Months Ended June 30, 2018
	Compared to June 30, 2017
(dollars in millions)	Volume		Rate		Total
Change in Interest Income:
Interest-Bearing Deposits in Other Banks	$	(0.1)	$	0.6	$	0.5
Available-for-Sale Investment Securities		(1.2)		3.5		2.3
Loans and Leases
Commercial and industrial		(0.8)		5.6		4.8
Real estate - commercial		2.3		2.8		5.1
Real estate - construction		1.0		0.9		1.9
Real estate - residential		3.2		0.1		3.3
Consumer		1.3		(0.2)		1.1
Lease financing		(0.1)		—		(0.1)
Total Loans and Leases		6.9		9.2		16.1
Other Earning Assets		—		0.1		0.1
Total Change in Interest Income		5.6		13.4		19.0

Change in Interest Expense:
Interest-Bearing Deposits
Savings		—		1.6		1.6
Money Market		—		2.0		2.0
Time		0.2		4.8		5.0
Total Interest-Bearing Deposits		0.2		8.4		8.6
Short-Term Borrowings		0.2		—		0.2
Long-Term Debt		0.1		—		0.1
Total Change in Interest Expense		0.5		8.4		8.9
Change in Net Interest Income	$	5.1	$	5.0	$	10.1


Analysis of Change in Net Interest Income						Table 8
	Six Months Ended June 30, 2018
	Compared to June 30, 2017
(dollars in millions)	Volume		Rate		Total
Change in Interest Income:
Interest-Bearing Deposits in Other Banks	$	(0.1)	$	1.7	$	1.6
Available-for-Sale Investment Securities		(1.7)		6.6		4.9
Loans and Leases
Commercial and industrial		(1.8)		10.0		8.2
Real estate - commercial		5.3		4.0		9.3
Real estate - construction		2.5		1.5		4.0
Real estate - residential		6.1		0.6		6.7
Consumer		2.5		(0.3)		2.2
Lease financing		(0.1)		0.1		—
Total Loans and Leases		14.5		15.9		30.4
Other Earning Assets		—		0.1		0.1
Total Change in Interest Income		12.7		24.3		37.0

Change in Interest Expense:
Interest-Bearing Deposits
Savings		—		2.7		2.7
Money Market		0.1		3.1		3.2
Time		0.7		9.7		10.4
Total Interest-Bearing Deposits		0.8		15.5		16.3
Short-Term Borrowings		0.1		—		0.1
Long-Term Debt		0.1		—		0.1
Total Change in Interest Expense		1.0		15.5		16.5
Change in Net Interest Income	$	11.7	$	8.8	$	20.5


Loans and Leases								Table 9
	June 30,		March 31,		December 31,		June 30,
(dollars in thousands)	2018		2018		2017		2017
Commercial and industrial	$	3,116,145	$	3,219,210	$	3,135,266	$	3,331,092
Real estate:
Commercial		2,837,520		2,738,557		2,667,597		2,545,479
Construction		654,084		594,266		632,911		555,794
Residential		4,236,083		4,156,003		4,090,053		3,921,881
Total real estate		7,727,687		7,488,826		7,390,561		7,023,154
Consumer		1,632,088		1,595,989		1,586,476		1,527,470
Lease financing		161,766		160,140		165,066		180,676
Total loans and leases	$	12,637,686	$	12,464,165	$	12,277,369	$	12,062,392


Deposits								Table 10
	June 30,		March 31,		December 31,		June 30,
(dollars in thousands)	2018		2018		2017		2017
Demand	$	5,965,083	$	6,050,134	$	6,126,853	$	5,871,598
Savings		4,772,922		4,614,668		4,509,419		4,568,600
Money Market		2,768,190		2,631,894		2,801,968		2,944,005
Time		3,889,343		4,065,726		4,173,882		4,068,059
Total Deposits	$	17,395,538	$	17,362,422	$	17,612,122	$	17,452,262


Non-Performing Assets and Accruing Loans and Leases Past Due 90 Days or More								Table 11
	June 30,		March 31,		December 31,		June 30,
(dollars in thousands)	2018		2018		2017		2017
Non-Performing Assets
Non-Accrual Loans and Leases
Commercial Loans:
Commercial and industrial	$	1,821	$	1,888	$	2,932	$	2,155
Real estate - commercial		2,844		2,885		1,786		—
Real estate - construction		2,238		2,001		—		—
Total Commercial Loans		6,903		6,774		4,718		2,155
Residential		6,541		5,349		5,107		5,569
Total Non-Accrual Loans and Leases		13,444		12,123		9,825		7,724
Other Real Estate Owned		325		—		329		329
Total Non-Performing Assets	$	13,769	$	12,123	$	10,154	$	8,053

Accruing Loans and Leases Past Due 90 Days or More
Commercial Loans:
Commercial and industrial	$	163	$	83	$	220	$	1,275
Real estate - commercial		—		—		1,400		350
Real estate - construction		—		343		—		—
Total Commercial Loans		163		426		1,620		1,625
Residential		1,581		1,469		1,360		1,543
Consumer		1,451		1,744		1,394		1,873
Total Accruing Loans and Leases Past Due 90 Days or More	$	3,195	$	3,639	$	4,374	$	5,041

Restructured Loans on Accrual Status and Not Past Due 90 Days or More		32,277		33,429		34,130		38,886
Total Loans and Leases	$	12,637,686	$	12,464,165	$	12,277,369	$	12,062,392


Allowance for Loan and Lease Losses														Table 12
	For the Three Months Ended									For the Six Months Ended
	June 30,			March 31,			June 30,			June 30,			June 30,
(dollars in thousands)	2018			2018			2017			2018			2017
Balance at Beginning of Period	$	138,574		$	137,253		$	135,847		$	137,253		$	135,494
Loans and Leases Charged-Off
Commercial Loans:
Commercial and industrial		—			(475)			(75)			(475)			(930)
Lease financing		—			—			(146)			—			(146)
Total Commercial Loans		—			(475)			(221)			(475)			(1,076)
Residential		(34)			—			—			(34)			(22)
Consumer		(6,290)			(6,625)			(5,251)			(12,915)			(10,823)
Total Loans and Leases Charged-Off		(6,324)			(7,100)			(5,472)			(13,424)			(11,921)
Recoveries on Loans and Leases Previously Charged-Off
Commercial Loans:
Commercial and industrial		39			64			129			103			243
Real estate - commercial		32			122			55			154			132
Total Commercial Loans		71			186			184			257			375
Residential		60			182			150			242			471
Consumer		2,200			2,103			1,774			4,303			3,564
Total Recoveries on Loans and Leases Previously Charged-Off		2,331			2,471			2,108			4,802			4,410
Net Loans and Leases Charged-Off		(3,993)			(4,629)			(3,364)			(8,622)			(7,511)
Provision for Loan and Lease Losses		6,020			5,950			4,400			11,970			8,900
Balance at End of Period	$	140,601		$	138,574		$	136,883		$	140,601		$	136,883
Average Loans and Leases Outstanding	$	12,552,610		$	12,296,678		$	11,903,255		$	12,425,351		$	11,743,835
Ratio of Net Loans and Leases Charged-Off to Average Loans and Leases Outstanding		0.13	%		0.15	%		0.11	%		0.14	%		0.13	%
Ratio of Allowance for Loan and Lease Losses to Loans and Leases Outstanding		1.11	%		1.11	%		1.13	%		1.11	%		1.13	%


GAAP to Non-GAAP Reconciliation												Table 13
	For the Three Months Ended									For the Six Months Ended
	June 30,			March 31,			June 30,			June 30,
(dollars in thousands, except per share amounts)	2018			2018			2017			2018			2017
Income Statement Data:
Net income	$	69,053		$	67,958		$	56,895		$	137,011		$	113,635

Average total stockholders' equity	$	2,466,392		$	2,500,299		$	2,528,388		$	2,483,252		$	2,508,564
Less: average goodwill		995,492			995,492			995,492			995,492			995,492
Average tangible stockholders' equity	$	1,470,900		$	1,504,807		$	1,532,896		$	1,487,760		$	1,513,072

Average total assets	$	20,121,504		$	20,407,718		$	19,692,222		$	20,263,820		$	19,730,651
Less: average goodwill		995,492			995,492			995,492			995,492			995,492
Average tangible assets	$	19,126,012		$	19,412,226		$	18,696,730		$	19,268,328		$	18,735,159

Return on average total stockholders' equity(1)		11.23	%		11.02	%		9.03	%		11.13	%		9.13	%
Return on average tangible stockholders' equity (non-GAAP)(1)		18.83	%		18.32	%		14.89	%		18.57	%		15.14	%

Return on average total assets(1)		1.38	%		1.35	%		1.16	%		1.36	%		1.16	%
Return on average tangible assets (non-GAAP)(1)		1.45	%		1.42	%		1.22	%		1.43	%		1.22	%

Average stockholders' equity to average assets		12.26	%		12.25	%		12.84	%		12.25	%		12.71	%
Tangible average stockholders' equity to tangible average assets (non-GAAP)		7.69	%		7.75	%		8.20	%		7.72	%		8.08	%



	As of			As of			As of			As of
	June 30,			March 31,			December 31,			June 30,
	2018			2018			2017			2017
Balance Sheet Data:
Total stockholders' equity	$	2,459,175		$	2,520,862		$	2,532,551		$	2,552,602
Less: goodwill		995,492			995,492			995,492			995,492
Tangible stockholders' equity	$	1,463,683		$	1,525,370		$	1,537,059		$	1,557,110

Total assets	$	20,479,719		$	20,242,942		$	20,549,461		$	20,373,974
Less: goodwill		995,492			995,492			995,492			995,492
Tangible assets	$	19,484,227		$	19,247,450		$	19,553,969		$	19,378,482

Shares outstanding		136,642,060			139,601,123			139,588,782			139,546,615

Total stockholders' equity to total assets		12.01	%		12.45	%		12.32	%		12.53	%
Tangible stockholders' equity to tangible assets (non-GAAP)		7.51	%		7.93	%		7.86	%		8.04	%

Book value per share	$	18.00		$	18.06		$	18.14		$	18.29
Tangible book value per share (non-GAAP)	$	10.71		$	10.93		$	11.01		$	11.16

⁽¹⁾

Annualized for the three and six months ended June 30, 2018 and 2017 and the three months ended March 31, 2018.


GAAP to Non-GAAP Reconciliation										Table 14
	For the Three Months Ended						For the Six Months Ended
	June 30,		March 31,		June 30,		June 30,
(dollars in thousands, except per share amounts)	2018		2018		2017		2018		2017
Net interest income	$	141,403	$	139,672	$	131,254	$	281,075	$	260,599
Core net interest income (non-GAAP)	$	141,403	$	139,672	$	131,254	$	281,075	$	260,599

Noninterest income	$	49,797	$	48,700	$	50,558	$	98,497	$	101,617
Core noninterest income (non-GAAP)	$	49,797	$	48,700	$	50,558	$	98,497	$	101,617

Noninterest expense	$	91,865	$	90,587	$	86,929	$	182,452	$	172,920
One-time items(1)		(914)		(407)		(457)		(1,321)		(841)
Core noninterest expense (non-GAAP)	$	90,951	$	90,180	$	86,472	$	181,131	$	172,079

Net income	$	69,053	$	67,958	$	56,895	$	137,011	$	113,635
One-time items(1)		914		407		457		1,321		841
Tax adjustments(2)		(247)		(106)		(171)		(353)		(313)
Total core adjustments		667		301		286		968		528
Core net income (non-GAAP)	$	69,720	$	68,259	$	57,181	$	137,979	$	114,163
Core basic earnings per share (non-GAAP)	$	0.51	$	0.49	$	0.41	$	0.99	$	0.82
Core diluted earnings per share (non-GAAP)	$	0.50	$	0.49	$	0.41	$	0.99	$	0.82

Basic earnings per share	$	0.50	$	0.49	$	0.41	$	0.99	$	0.81
Diluted earnings per share	$	0.50	$	0.49	$	0.41	$	0.99	$	0.81

⁽¹⁾

One-time items include the loss on our funding swap as a result of a decrease in the conversion rate of our Visa Class B restricted shares sold in 2016 as well as public offering related costs.

⁽²⁾

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

Attached files

FIRST HAWAIIAN, INC. Reports

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