×

First Hawaiian, Inc. Reports Third Quarter 2017 Financial Results and Declares Dividend

HONOLULU, Oct. 26, 2017 (GLOBE NEWSWIRE) -- First Hawaiian, Inc. (NASDAQ:FHB), (the “Company”) today reported financial results for the quarter ended September 30, 2017.

Highlights

  • Net income for the quarter ended September 30, 2017 was $58.4 million, or $0.42 per diluted share, and core net income1 was $57.0 million, or $0.41 per diluted share

  • Board of Directors declared a dividend of $0.22 per share

“I’m pleased that we were able to celebrate the one year anniversary of our initial public offering with a solid third quarter,” said Bob Harrison, Chairman and Chief Executive Officer. “Our overall financial performance was strong, asset quality remained excellent, and the local economy continues to do well.”

On October 20, 2017, the Company’s Board of Directors declared a quarterly cash dividend of $0.22 per share. The dividend will be payable on December 8, 2017 to stockholders of record at the close of business on November 27, 2017.

________________
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.

Earnings Highlights

Net income for the quarter ended September 30, 2017 was $58.4 million, or $0.42 per diluted share, compared to $56.9 million, or $0.41 per diluted share, for the quarter ended June 30, 2017 and $53.2 million, or $0.38 per diluted share, for the quarter ended September 30, 2016. Core net income for the quarter ended September 30, 2017 was $57.0 million, or $0.41 per diluted share, compared to $57.2 million, or $0.41 per diluted share, for the quarter ended June 30, 2017, and $55.2 million, or $0.40 per diluted share, for the quarter ended September 30, 2016.

Net interest income for the quarter ended September 30, 2017 was $133.3 million, an increase of $2.0 million compared to $131.3 million for the quarter ended June 30, 2017 and an increase of $10.6 million compared to $122.7 million for the quarter ended September 30, 2016. The increase in net interest income compared to the second quarter of 2017 was primarily due to higher average balances and yields on loans and interest bearing deposits in other banks, partially offset by higher average balances and rates on deposits as well as lower average balances and yields on investment securities. The increase compared to the third quarter of 2016 was due to higher average balances and yields on loans and investment securities, partially offset by higher average deposit balances and rates.

Net interest margin was 2.96%, 3.02% and 2.87% for the quarters ended September 30, 2017, June 30, 2017, and September 30, 2016, respectively. Net interest margin decreased during the third quarter of 2017 by six basis points, primarily due to higher costs related to public time deposits and lower yields on investment securities, partially offset by higher yields on loans and interest-bearing deposits in other banks. The nine basis point increase compared to the third quarter of 2016 was due to higher yields on earnings assets, partially offset by higher deposit costs.

Results for the quarter ended September 30, 2017 included a provision for credit losses of $4.5 million compared to $4.4 million in the quarter ended June 30, 2017 and $2.1 million in the quarter ended September 30, 2016.

Noninterest income was $48.5 million in the quarter ended September 30, 2017, a decrease of $0.4 million compared to noninterest income of $48.9 million in the quarter ended June 30, 2017 and a decrease of $0.2 million compared to noninterest income of $48.7 million in the quarter ended September 30, 2016. The decrease in noninterest income compared to the second quarter of 2017 was primarily due to $1.4 million lower other income and $0.3 million lower service charges on deposit accounts, largely offset by increases across the remaining noninterest income items. Other income in the third quarter of 2017 included $0.4 million lower swap fee income compared to the prior quarter and a $2.7 million gain from the sale of a bank property. Other income in the second quarter of 2017 included $2.4 million from partner credit card incentives and recoveries.

Noninterest expense was $83.7 million for the quarter ended September 30, 2017, a decrease of $1.5 million from $85.2 million in the quarter ended June 30, 2017, and an increase of $0.9 million from $82.8 million in the quarter ended September 30, 2016. The decrease in noninterest expense compared to the second quarter of 2017 was primarily due to $1.7 million lower salaries and employee benefits and $1.6 million lower contracted services and professional fees, partially offset by $0.8 million higher occupancy expense and $0.8 million higher advertising and marketing expense. The decrease in salaries and benefits was primarily due to equity compensation forfeitures due to retirements and a change in the estimate of our compensation liabilities. Contracted services and professional fees in the second quarter of 2017 were elevated due to system upgrades and product enhancements. The increase in noninterest expense compared to the third quarter of 2016 was primarily due to a $1.0 million increase in occupancy costs, a $0.4 million increase in contracted services and professional fees, a $0.2 million increase in advertising and marketing expenses and a $0.2 million increase in cards rewards expenses, partially offset by $0.5 million lower salaries and employee benefits expenses and $0.5 million lower of other expenses.

The efficiency ratio was 46.0%, 47.3% and 48.3% for the quarters ended September 30, 2017, June 30, 2017 and September 30, 2016, respectively.

The effective tax rate for the third quarter of 2017 was 37.7% compared with 37.1% in the previous quarter and 38.4% percent in the same quarter last year. The increase in the effective tax rate in the third quarter of 2017 compared to the prior quarter was primarily due to a $0.75 million release of tax reserves during the prior quarter. The higher effective tax rate in the third quarter of 2016 was due to non-deductible offering expenses incurred during the quarter.

Balance Sheet Highlights

Total assets were $20.6 billion at September 30, 2017, compared to $20.4 billion at June 30, 2017 and $19.9 billion at September 30, 2016.

The investment securities portfolio was $5.3 billion at September 30, 2017, compared to $5.1 billion at June 30, 2017 and $5.4 billion at September 30, 2016. The portfolio remains largely comprised of securities issued by U.S. government agencies.

Total loans and leases were $12.1 billion at September 30, 2017, an increase of $87.3 million, or 0.7%, from $12.1 billion at June 30, 2017 and up $753.2 million, or 6.6%, from $11.4 billion at September 30, 2016. The growth in loans and leases compared to June 30, 2017 and September 30, 2016 was due to growth in commercial real estate, residential real estate, construction and consumer loans, partially offset by declines in commercial loans and leases.

Total deposits were $17.6 billion at September 30, 2017, an increase of $143.2 million, or 0.8%, compared with $17.5 billion at June 30, 2017, and an increase of $630.0 million, or 3.7%, compared to $17.0 billion at September 30, 2016.

Asset Quality

The Company's asset quality remained solid during the third quarter of 2017. Total non-performing assets were $8.4 million, or 0.07% of total loans and leases and other real estate owned, at September 30, 2017, an increase of $0.3 million from non-performing assets of $8.1 million, or 0.07% of total loans and leases and other real estate owned, at June 30, 2017 and a decrease of $1.8 million from non­-performing assets of $10.2 million, or 0.09% of total loans and leases and other real estate owned at September 30, 2016.

Net charge offs for the quarter ended September 30, 2017 were $4.1 million, or 0.13% of average loans and leases on an annualized basis, compared to $3.4 million, or 0.11% of average loans and leases on an annualized basis for the quarter ended June 30, 2017 and $3.4 million, or 0.12% of average loans and leases on an annualized basis for the quarter ended September 30, 2016.

The ratio of allowance for loan and lease losses to total loans and leases was 1.13% at both September 30, 2017 and June 30, 2017 and 1.18% at September 30, 2016.

Capital

Total stockholders' equity was $2.6 billion at both September 30, 2017 and June 30, 2017 and $2.5 billion at September 30, 2016.

The tier 1 leverage, common equity tier 1, and total capital ratios were 8.66%, 12.71% and 13.77%, respectively, at September 30, 2017, compared with 8.70%, 12.73% and 13.81% at June 30, 2017 and 8.41%, 12.48%, and 13.59% at September 30, 2016.

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: 96616877. 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 approximately two hours after the conclusion of the call until 7:30 p.m. (Eastern Time) on November 5, 2017. Access the replay by dialing (855) 859-2056 or (404) 537-3406 and entering the conference ID: 96616877.

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 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, 2016.

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:
Kevin Haseyama, CFA
(808) 525-6268
khaseyama@fhb.com

Media Contact:
Susan Kam
(808) 525-6254
skam@fhb.com

Financial Highlights Table 1
For the Three Months Ended For the Nine Months Ended
September 30, June 30, September 30, September 30,
(dollars in thousands, except per share data) 2017 2017 2016 2017 2016
Operating Results:
Net interest income $ 133,319 $131,254 $122,683 $ 393,918 $360,422
Provision for loan and lease losses 4,500 4,400 2,100 13,400 4,700
Noninterest income 48,535 48,870 48,690 146,812 168,580
Noninterest expense 83,655 85,241 82,804 253,235 246,341
Net income 58,363 56,895 53,235 171,998 173,626
Basic earnings per share 0.42 0.41 0.38 1.23 1.24
Diluted earnings per share 0.42 0.41 0.38 1.23 1.24
Dividends declared per share 0.22 0.22 0.20 0.66 0.42
Dividend payout ratio 52.38 % 53.66% 52.39% 53.66 % 33.34%
Supplemental Income Statement Data (non-GAAP):
Core net interest income $ 133,319 $131,254 $122,683 $ 393,918 $360,422
Core noninterest income 45,868 48,870 48,690 144,145 142,852
Core noninterest expense 83,112 84,784 79,714 251,851 240,704
Core net income 57,040 57,181 55,177 171,203 161,110
Core basic earnings per share 0.41 0.41 0.40 1.23 1.16
Core diluted earnings per share 0.41 0.41 0.40 1.23 1.16
Performance Ratio:
Net interest margin 2.96 % 3.02% 2.87% 2.99 % 2.84%
Core net interest margin (non-GAAP) 2.96 % 3.02% 2.87% 2.99 % 2.84%
Efficiency ratio 46.00 % 47.32% 48.31% 46.83 % 46.56%
Core efficiency ratio (non-GAAP) 46.38 % 47.07% 46.51% 46.80 % 47.82%
Return on average total assets 1.15 % 1.16% 1.10% 1.16 % 1.21%
Core return on average total assets (non-GAAP) 1.13 % 1.16% 1.14% 1.15 % 1.12%
Return on average tangible assets 1.21 % 1.22% 1.16% 1.22 % 1.28%
Core return on average tangible assets (non-GAAP) 1.18 % 1.23% 1.20% 1.21 % 1.18%
Return on average total stockholders' equity 9.03 % 9.03% 8.45% 9.10 % 8.96%
Core return on average total stockholders' equity (non-GAAP) 8.82 % 9.07% 8.76% 9.06 % 8.31%
Return on average tangible stockholders' equity (non-GAAP) 14.76 % 14.89% 14.02% 15.01 % 14.56%
Core return on average tangible stockholders’ equity (non-GAAP) 14.42 % 14.96% 14.53% 14.94 % 13.51%
Average Balances:
Average loans and leases $ 12,115,001 $11,903,255 $11,261,710 $ 11,868,917 $11,055,522
Average earning assets 17,867,021 17,453,655 17,028,930 17,605,376 16,962,355
Average assets 20,109,090 19,692,222 19,314,668 19,858,184 19,185,484
Average deposits 17,165,355 16,782,887 16,392,125 16,950,503 16,079,148
Average shareholders' equity 2,564,563 2,528,388 2,506,099 2,527,435 2,588,602
Market Value Per Share:
Closing 30.29 30.62 26.86 30.29 26.86
High 31.48 31.34 27.97 35.32 27.97
Low 26.30 26.96 24.25 26.30 24.25

As of As of As of As of
September 30, June 30, December 31, September 30,
2017 2017 2016 2016
Balance Sheet Data:
Loans and leases $ 12,149,711 $12,062,392 $11,520,378 $11,396,555
Total assets 20,565,627 20,373,974 19,661,829 19,892,693
Total deposits 17,595,483 17,452,262 16,794,532 16,965,527
Total stockholders' equity 2,581,858 2,552,602 2,476,485 2,523,963
Per Share of Common Stock:
Book value $ 18.50 $18.29 $17.75 $18.09
Tangible book value 11.36 11.16 10.61 10.95
Asset Quality Ratios:
Non-accrual loans and leases / total loans and leases 0.06 % 0.06% 0.08% 0.08%
Allowance for loan and lease losses / total loans and leases 1.13 % 1.13% 1.18% 1.18%
Capital Ratios:
Common Equity Tier 1 Capital Ratio 12.71 % 12.73% 12.75% 12.48%
Tier 1 Capital Ratio 12.71 % 12.73% 12.75% 12.48%
Total Capital Ratio 13.77 % 13.81% 13.85% 13.59%
Tier 1 Leverage Ratio 8.66 % 8.70% 8.36% 8.41%
Total stockholders' equity to total assets 12.55 % 12.53% 12.60% 12.69%
Tangible stockholders' equity to tangible assets (non-GAAP) 8.11 % 8.04% 7.93% 8.09%
Non-Financial Data:
Number of branches 62 62 62 62
Number of ATMs 312 312 311 312
Number of Full-Time Equivalent Employees 2,184 2,191 2,179 2,197

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) 2017 2017 2016 2017 2016
Interest income
Loans and lease financing $ 118,986 $ 114,179 $ 106,900 $ 342,431 $ 316,958
Available-for-sale securities 24,195 25,059 21,123 75,683 57,135
Other 2,089 781 1,311 4,096 6,114
Total interest income 145,270 140,019 129,334 422,210 380,207
Interest expense
Deposits 11,949 8,760 6,632 28,279 19,602
Short-term borrowings and long-term debt 2 5 19 13 183
Total interest expense 11,951 8,765 6,651 28,292 19,785
Net interest income 133,319 131,254 122,683 393,918 360,422
Provision for loan and lease losses 4,500 4,400 2,100 13,400 4,700
Net interest income after provision for loan and lease losses 128,819 126,854 120,583 380,518 355,722
Noninterest income
Service charges on deposit accounts 9,095 9,412 9,575 28,062 28,759
Credit and debit card fees 14,831 14,157 14,103 43,467 41,732
Other service charges and fees 8,510 8,110 8,768 25,717 26,909
Trust and investment services income 7,672 7,526 7,508 22,536 22,236
Bank-owned life insurance 3,119 2,927 7,115 10,624 13,263
Investment securities gains, net 30 25,761
Other 5,308 6,738 1,591 16,406 9,920
Total noninterest income 48,535 48,870 48,690 146,812 168,580
Noninterest expense
Salaries and employee benefits 41,579 43,257 42,106 128,136 128,762
Contracted services and professional fees 10,834 12,388 10,430 33,530 33,124
Occupancy 5,844 5,023 4,870 16,188 14,991
Equipment 4,174 4,527 4,192 12,898 12,135
Regulatory assessment and fees 3,668 3,750 3,546 11,192 8,869
Advertising and marketing 2,005 1,222 1,769 5,255 4,818
Card rewards program 4,703 4,618 4,512 13,832 10,743
Other 10,848 10,456 11,379 32,204 32,899
Total noninterest expense 83,655 85,241 82,804 253,235 246,341
Income before provision for income taxes 93,699 90,483 86,469 274,095 277,961
Provision for income taxes 35,336 33,588 33,234 102,097 104,335
Net income $ 58,363 $ 56,895 $ 53,235 $ 171,998 $ 173,626
Basic earnings per share $ 0.42 $ 0.41 $ 0.38 $ 1.23 $ 1.24
Diluted earnings per share $ 0.42 $ 0.41 $ 0.38 $ 1.23 $ 1.24
Dividends declared per share $ 0.22 $ 0.22 $ 0.20 $ 0.66 $ 0.42
Basic weighted-average outstanding shares 139,556,532 139,546,615 139,500,542 139,549,665 139,473,360
Diluted weighted-average outstanding shares 139,696,330 139,646,117 139,503,558 139,670,487 139,474,373

Consolidated Balance Sheets Table 3
September 30, June 30, December 31, September 30,
(dollars in thousands) 2017 2017 2016 2016
Assets
Cash and due from banks $ 321,319 $ 355,752 $ 253,827 $ 371,622
Interest-bearing deposits in other banks 793,046 872,013 798,231 804,198
Investment securities 5,314,973 5,126,869 5,077,514 5,363,696
Loans and leases 12,149,711 12,062,392 11,520,378 11,396,555
Less: allowance for loan and lease losses 137,327 136,883 135,494 135,025
Net loans and leases 12,012,384 11,925,509 11,384,884 11,261,530
Premises and equipment, net 289,689 292,959 300,788 302,059
Other real estate owned and repossessed personal property 564 329 329 854
Accrued interest receivable 44,728 39,739 41,971 37,107
Bank-owned life insurance 435,607 432,726 429,209 432,031
Goodwill 995,492 995,492 995,492 995,492
Other intangible assets 13,980 14,877 16,809 17,554
Other assets 343,845 317,709 362,775 306,550
Total assets $20,565,627 $20,373,974 $19,661,829 $ 19,892,693
Liabilities and Stockholders' Equity
Deposits:
Interest-bearing $11,687,849 $11,580,664 $ 10,801,915 $11,164,989
Noninterest-bearing 5,907,634 5,871,598 5,992,617 5,800,538
Total deposits 17,595,483 17,452,262 16,794,532 16,965,527
Short-term borrowings 9,151 9,151
Long-term debt 34 41 41 41
Retirement benefits payable 135,092 134,400 132,904 139,567
Other liabilities 253,160 234,669 248,716 254,444
Total liabilities 17,983,769 17,821,372 17,185,344 17,368,730
Stockholders' equity
Common stock ($0.01 par value; authorized 300,000,000 shares; issued and outstanding 139,586,282 shares as of September 30, 2017, 139,546,615 shares as of June 30, 2017 and 139,530,654 shares as of both December 31, 2016 and September 30, 2016) 1,396 1,395 1,395 1,395
Additional paid-in capital 2,489,273 2,488,091 2,484,251 2,482,679
Retained earnings 158,303 130,767 78,850 50,204
Accumulated other comprehensive loss, net (67,114) (67,651) (88,011) (10,315)
Total stockholders' equity 2,581,858 2,552,602 2,476,485 2,523,963
Total liabilities and stockholders' equity $ 20,565,627 $ 20,373,974 $ 19,661,829 $ 19,892,693

Average Balances and Interest Rates Table 4
Three Months Ended Three Months Ended Three Months Ended
September 30, 2017 June 30, 2017 September 30, 2016
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 $ 597.5 $ 2.0 1.30 % $ 312.8 $ 0.8 1.00% $ 1,023.6 $ 1.3 0.51%
Available-for-Sale Investment Securities 5,124.9 24.2 1.88 5,208.8 25.0 1.93 4,743.7 21.1 1.77
Loans Held for Sale 0.1 3.62
Loans and Leases (1)
Commercial and industrial 3,276.4 27.3 3.31 3,279.2 25.7 3.15 3,248.1 23.7 2.90
Real estate - commercial 2,696.4 25.1 3.69 2,638.3 23.8 3.62 2,338.2 21.3 3.63
Real estate - construction 570.6 5.1 3.54 509.7 4.3 3.41 448.9 3.7 3.29
Real estate - residential 3,846.8 39.2 4.04 3,782.1 38.6 4.09 3,571.3 36.4 4.06
Consumer 1,546.9 21.0 5.39 1,525.8 20.6 5.40 1,467.0 20.5 5.55
Lease financing 177.9 1.3 2.91 168.1 1.2 2.84 188.2 1.3 2.84
Total Loans and Leases 12,115.0 119.0 3.90 11,903.2 114.2 3.85 11,261.7 106.9 3.78
Other Earning Assets 29.5 0.1 1.22 10.8 0.99
Total Earning Assets (2) 17,867.0 145.3 3.23 17,435.6 140.0 3.22 17,029.0 129.3 3.02
Cash and Due from Banks 324.0 319.4 357.1
Other Assets 1,918.1 1,937.2 1,928.6
Total Assets $ 20,109.1 $ 19,692.2 $ 19,314.7
Interest-Bearing Liabilities
Interest-Bearing Deposits
Savings $ 4,505.1 $ 1.1 0.10 % $ 4,488.8 $ 0.7 0.07% $ 4,416.4 $ 0.6 0.06%
Money Market 2,607.7 0.9 0.13 2,618.6 0.8 0.12 2,549.3 0.6 0.10
Time 4,208.0 10.0 0.94 3,887.5 7.2 0.75 3,776.6 5.4 0.57
Total Interest-Bearing Deposits 11,320.8 12.0 0.42 10,994.9 8.7 0.32 10,742.3 6.6 0.25
Short-Term Borrowings 0.8 0.91 1.7 0.89 18.5 0.42
Total Interest-Bearing Liabilities 11,321.6 12.0 0.42 10,996.6 8.7 0.32 10,760.8 6.6 0.25
Net Interest Income $ 133.3 $ 131.3 $ 122.7
Interest Rate Spread 2.81 % 2.90% 2.77%
Net Interest Margin 2.96 % 3.02% 2.87%
Noninterest-Bearing Demand Deposits 5,844.6 5,788.0 5,649.8
Other Liabilities 378.3 379.2 398.0
Stockholders' Equity 2,564.6 2,528.4 2,506.1
Total Liabilities and Stockholders' Equity $ 20,109.1 $ 19,692.2 $ 19,314.7

Average Balances and Interest Rates Table 5
Nine Months Ended Nine Months Ended
September 30, 2017 September 30, 2016
Average Income/ Yield/ Average Income/ Yield/
(dollars in millions) Balance Expense Rate Balance Expense Rate
Earning Assets
Interest-Bearing Deposits in Other Banks $ 516.8 $ 4.0 1.02 % $ 1,602.3 $ 6.1 0.51%
Available-for-Sale Investment Securities 5,189.7 75.7 1.95 4,304.5 57.1 1.77
Loans and Leases (1)
Commercial and industrial 3,263.3 77.3 3.17 3,200.6 70.3 2.93
Real estate - commercial 2,606.1 71.1 3.65 2,273.3 62.9 3.70
Real estate - construction 514.1 13.1 3.41 425.0 10.4 3.27
Real estate - residential 3,784.5 115.5 4.08 3,525.5 108.9 4.13
Consumer 1,528.8 61.8 5.41 1,441.6 60.4 5.59
Lease financing 172.1 3.6 2.84 189.5 4.1 2.90
Total Loans and Leases 11,868.9 342.4 3.86 11,055.5 317.0 3.83
Other Earning Assets 30.0 0.1 0.62
Total Earning Assets (2) 17,605.4 422.2 3.21 16,962.3 380.2 2.99
Cash and Due from Banks 322.7 320.1
Other Assets 1,930.1 1,903.1
Total Assets $ 19,858.2 $ 19,185.5
Interest-Bearing Liabilities
Interest-Bearing Deposits
Savings $ 4,500.1 $ 2.5 0.08 % $ 4,371.6 $ 1.9 0.06%
Money Market 2,574.0 2.2 0.11 2,410.6 1.7 0.09
Time 4,027.9 23.6 0.78 3,782.2 16.0 0.57
Total Interest-Bearing Deposits 11,102.0 28.3 0.34 10,564.4 19.6 0.25
Short-Term Borrowings 2.1 0.68 148.0 0.2 0.16
Total Interest-Bearing Liabilities 11,104.1 28.3 0.34 10,712.4 19.8 0.25
Net Interest Income $ 393.9 $ 360.4
Interest Rate Spread 2.87 % 2.74%
Net Interest Margin 2.99 % 2.84%
Noninterest-Bearing Demand Deposits 5,848.5 5,514.8
Other Liabilities 378.2 369.7
Stockholders' Equity 2,527.4 2,588.6
Total Liabilities and Stockholders' Equity $ 19,858.2 $ 19,185.5

Analysis of Change in Net Interest Income Table 6
Three Months Ended September 30, 2017
Compared to June 30, 2017
(dollars in millions) Volume Rate Total
Change in Interest Income:
Interest-Bearing Deposits in Other Banks $ 0.9 $ 0.3 $ 1.2
Available-for-Sale Investment Securities (0.4) (0.4) (0.8)
Loans and Leases
Commercial and industrial 1.6 1.6
Real estate - commercial 0.5 0.8 1.3
Real estate - construction 0.5 0.3 0.8
Real estate - residential 0.7 (0.1) 0.6
Consumer 0.2 0.2 0.4
Lease financing 0.1 0.1
Total Loans and Leases 2.0 2.8 4.8
Other Earning Assets 0.1 0.1
Total Change in Interest Income 2.6 2.7 5.3
Change in Interest Expense:
Interest-Bearing Deposits
Savings 0.4 0.4
Money Market 0.1 0.1
Time 0.6 2.1 2.7
Total Interest-Bearing Deposits 0.6 2.6 3.2
Total Change in Interest Expense 0.6 2.6 3.2
Change in Net Interest Income $ 2.0 $ 0.1 $ 2.1

Analysis of Change in Net Interest Income Table 7
Three Months Ended September 30, 2017
Compared to September 30, 2016
(dollars in millions) Volume Rate Total
Change in Interest Income:
Interest-Bearing Deposits in Other Banks $ (0.7) $ 1.4 $ 0.7
Available-for-Sale Investment Securities 1.7 1.4 3.1
Loans and Leases
Commercial and industrial 0.2 3.4 3.6
Real estate - commercial 3.3 0.4 3.7
Real estate - construction 1.1 0.3 1.4
Real estate - residential 2.8 2.8
Consumer 1.0 (0.5) 0.5
Total Loans and Leases 8.4 3.6 12.0
Other Earning Assets 0.1 0.1
Total Change in Interest Income 9.5 6.4 15.9
Change in Interest Expense:
Interest-Bearing Deposits
Savings 0.5 0.5
Money Market 0.2 0.2
Time 0.7 3.9 4.6
Total Interest-Bearing Deposits 0.7 4.6 5.3
Total Change in Interest Expense 0.7 4.6 5.3
Change in Net Interest Income $ 8.8 $ 1.8 $ 10.6


Analysis of Change in Net Interest Income Table 8
Nine Months Ended September 30, 2017
Compared to September 30, 2016
(dollars in millions) Volume Rate Total
Change in Interest Income:
Interest-Bearing Deposits in Other Banks $ (5.8) $ 3.7 $ (2.1)
Available-for-Sale Investment Securities 12.4 6.1 18.5
Loans and Leases
Commercial and industrial 1.4 5.6 7.0
Real estate - commercial 9.1 (0.9) 8.2
Real estate - construction 2.2 0.5 2.7
Real estate - residential 7.9 (1.3) 6.6
Consumer 3.6 (2.1) 1.5
Lease financing (0.4) (0.1) (0.5)
Total Loans and Leases 23.8 1.7 25.5
Other Earning Assets 0.1 0.1
Total Change in Interest Income 30.5 11.5 42.0
Change in Interest Expense:
Interest-Bearing Deposits
Savings 0.1 0.5 0.6
Money Market 0.1 0.4 0.5
Time 1.1 6.5 7.6
Total Interest-Bearing Deposits 1.3 7.4 8.7
Short-Term Borrowings (0.3) 0.1 (0.2)
Total Change in Interest Expense 1.0 7.5 8.5
Change in Net Interest Income $ 29.5 $ 4.0 $ 33.5

Loans and Leases Table 9
September 30, June 30, December 31, September 30,
(dollars in thousands) 2017 2017 2016 2016
Commercial and industrial $ 3,190,237 $ 3,331,092 $ 3,239,600 $ 3,265,291
Real estate:
Commercial 2,625,688 2,545,479 2,343,495 2,311,874
Construction 598,763 555,794 450,012 475,333
Residential 4,001,478 3,921,881 3,796,459 3,687,660
Total real estate 7,225,929 7,023,154 6,589,966 6,474,867
Consumer 1,562,172 1,527,470 1,510,772 1,469,220
Lease financing 171,373 180,676 180,040 187,177
Total loans and leases $ 12,149,711 $ 12,062,392 $ 11,520,378 $ 11,396,555

Deposits Table 10
September 30, June 30, December 31, September 30,
(dollars in thousands) 2017 2017 2016 2016
Demand $ 5,907,634 $ 5,871,598 $ 5,992,617 $ 5,800,538
Savings 4,411,411 4,568,600 4,609,306 4,341,714
Money Market 2,631,311 2,944,005 2,454,013 2,818,132
Time 4,645,127 4,068,059 3,738,596 4,005,143
Total Deposits $ 17,595,483 $ 17,452,262 $ 16,794,532 $ 16,965,527

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) 2017 2017 2016 2016
Non-Performing Assets
Non-Accrual Loans and Leases
Commercial Loans:
Commercial and industrial $ 2,312 $ 2,155 $ 2,730 $ 2,933
Lease financing 153 163
Total Commercial Loans 2,312 2,155 2,883 3,096
Residential 5,562 5,569 6,547 6,274
Total Non-Accrual Loans and Leases 7,874 7,724 9,430 9,370
Other Real Estate Owned 564 329 329 854
Total Non-Performing Assets $ 8,438 $ 8,053 $ 9,759 $ 10,224
Accruing Loans and Leases Past Due 90 Days or More
Commercial Loans:
Commercial and industrial $ 1,751 $ 1,275 $ 449 $ 177
Real estate - commercial 3,247
Real estate - construction 350
Lease financing 83
Total Commercial Loans 4,998 1,625 532 177
Residential 1,055 1,543 866 1,638
Consumer 1,894 1,873 1,870 2,036
Total Accruing Loans and Leases Past Due 90 Days or More $ 7,947 $ 5,041 $ 3,268 $ 3,851
Restructured Loans on Accrual Status and Not Past Due 90 Days or More 36,728 38,886 44,496 46,453
Total Loans and Leases $ 12,149,711 $ 12,062,392 $ 11,520,378 $ 11,396,555

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) 2017 2017 2016 2017 2016
Balance at Beginning of Period $ 136,883 $ 135,847 $ 136,360 $ 135,494 $ 135,484
Loans and Leases Charged-Off
Commercial Loans:
Commercial and industrial (408) (75) (210) (1,338) (348)
Lease financing (1) (146) (147)
Total Commercial Loans (409) (221) (210) (1,485) (348)
Residential (293) (268) (315) (796)
Consumer (6,263) (5,251) (4,878) (17,086) (13,379)
Total Loans and Leases Charged-Off (6,965) (5,472) (5,356) (18,886) (14,523)
Recoveries on Loans and Leases Previously Charged-Off
Commercial Loans:
Commercial and industrial 582 129 6 825 228
Real estate - commercial 336 55 42 468 3,288
Lease financing 1
Total Commercial Loans 918 184 48 1,293 3,517
Residential 139 150 350 610 1,116
Consumer 1,852 1,774 1,523 5,416 4,731
Total Recoveries on Loans and Leases Previously Charged-Off 2,909 2,108 1,921 7,319 9,364
Net Loans and Leases Charged-Off (4,056) (3,364) (3,435) (11,567) (5,159)
Provision for Credit Losses 4,500 4,400 2,100 13,400 4,700
Balance at End of Period $ 137,327 $ 136,883 $ 135,025 $ 137,327 $ 135,025
Average Loans and Leases Outstanding $ 12,115,001 $ 11,903,255 $ 11,261,710 $ 11,868,917 $ 11,055,522
Ratio of Net Loans and Leases Charged-Off to Average Loans and Leases Outstanding 0.13 % 0.11% 0.12% 0.13 % 0.06%
Ratio of Allowance for Loan and Lease Losses to Loans and Leases Outstanding 1.13 % 1.13% 1.18% 1.13 % 1.18%

GAAP to Non-GAAP Reconciliation Table 13
For the Three Months Ended For the Nine Months Ended
September 30, June 30, September 30, September 30,
(dollars in thousands, except per share amounts) 2017 2017 2016 2017 2016
Income Statement Data:
Net income $ 58,363 $ 56,895 $ 53,235 $ 171,998 $ 173,626
Average total stockholders' equity $ 2,564,563 $ 2,528,388 $ 2,506,099 $ 2,527,435 $ 2,588,602
Less: average goodwill 995,492 995,492 995,492 995,492 995,492
Average tangible stockholders' equity $ 1,569,071 $ 1,532,896 $ 1,510,607 $ 1,531,943 $ 1,593,110
Average total assets $ 20,109,090 $ 19,692,222 $ 19,314,668 $ 19,858,184 $ 19,185,484
Less: average goodwill 995,492 995,492 995,492 995,492 995,492
Average tangible assets $ 19,113,598 $ 18,696,730 $ 18,319,176 $ 18,862,692 $ 18,189,992
Return on average total stockholders' equity(a) 9.03 % 9.03% 8.45% 9.10 % 8.96%
Return on average tangible stockholders' equity (non-GAAP)(a) 14.76 % 14.89% 14.02% 15.01 % 14.56%
Return on average total assets(a) 1.15 % 1.16% 1.10% 1.16 % 1.21%
Return on average tangible assets (non-GAAP)(a) 1.21 % 1.22% 1.16% 1.22 % 1.28%
Average stockholders' equity to average assets 12.75 % 12.84% 12.98% 12.73 % 13.49%
Tangible average stockholders' equity to tangible average assets (non-GAAP) 8.21 % 8.20% 8.25% 8.12 % 8.76%

As of As of As of As of
September 30, June 30, December 31, September 30,
2017 2017 2016 2016
Balance Sheet Data:
Total stockholders' equity $ 2,581,858 $ 2,552,602 $ 2,476,485 $ 2,523,963
Less: goodwill 995,492 995,492 995,492 995,492
Tangible stockholders' equity $ 1,586,366 $ 1,557,110 $ 1,480,993 $ 1,528,471
Total assets $ 20,565,627 $ 20,373,974 $ 19,661,829 $ 19,892,693
Less: goodwill 995,492 995,492 995,492 995,492
Tangible assets $ 19,570,135 $ 19,378,482 $ 18,666,337 $ 18,897,201
Shares outstanding 139,586,282 139,46,615 139,530,654 139,530,654
Total stockholders' equity to total assets 12.55 % 12.53% 12.60% 12.69%
Tangible stockholders' equity to tangible assets (non-GAAP) 8.11 % 8.04% 7.93% 8.09%
Book value per share $ 18.50 $ 18.29 $ 17.75 $ 18.09
Tangible book value per share (non-GAAP) $ 11.36 $ 11.16 $ 10.61 $ 10.95

GAAP to Non-GAAP Reconciliation Table 14
For the Three Months Ended For the Nine Months Ended
September 30, June 30, September 30, September 30,
(dollars in thousands, except per share amounts) 2017 2017 2016 2017 2016
Net interest income $ 133,319 $ 131,254 $ 122,683 $ 393,918 $ 360,422
Core net interest income (non-GAAP) $ 133,319 $ 131,254 $ 122,683 $ 393,918 $ 360,422
Noninterest income $ 48,535 $ 48,870 $ 48,690 $ 146,812 $ 168,580
Gains on sale of bank properties (2,667) (2,667)
Gains on sale of securities (3,050)
Gains on sale of stock (Visa/MasterCard) (22,678)
Core noninterest income (non-GAAP) $ 45,868 $ 48,870 $ 48,690 $ 144,145 $ 142,852
Noninterest expense $ 83,655 $ 85,241 $ 82,804 $ 253,235 $ 246,341
One-time items(a) (543) (457) (3,090) (1,384) (5,637)
Core noninterest expense (non-GAAP) $ 83,112 $ 84,784 $ 79,714 $ 251,851 $ 240,704
Net income $ 58,363 $ 56,895 $ 53,235 $ 171,998 $ 173,626
Gains on sale of bank properties (2,667) (2,667)
Gains on sale of securities (3,050)
Gains on sale of stock (Visa/MasterCard) (22,678)
One-time items(a) 543 457 3,090 1,384 5,637
Tax adjustments(b) 801 (171) (1,148) 488 7,575
Total core adjustments (1,323) 286 1,942 (795) (12,516)
Core net income (non-GAAP) $ 57,040 $ 57,181 $ 55,177 $ 171,203 $ 161,110
Core basic earnings per share (non-GAAP) $ 0.41 $ 0.41 $ 0.40 $ 1.23 $ 1.16
Core diluted earnings per share (non-GAAP) $ 0.41 $ 0.41 $ 0.40 $ 1.23 $ 1.16

Source:First Hawaiian, Inc.