First Hawaiian, Inc. Reports Third Quarter 2019 Financial Results and Declares Dividend

• Net income of $74.2 million, or $0.56 per diluted share, core net income1 of $75.9 million or $0.57 per diluted share1
• Increased 2019 stock repurchase authority by $50 million to a total of $150 million
• Board of Directors declared a quarterly dividend of $0.26 per share

HONOLULU, Oct. 24, 2019 (GLOBE NEWSWIRE) -- First Hawaiian, Inc. (NASDAQ:FHB), (“First Hawaiian” or the “Company”) today reported financial results for its quarter ended September 30, 2019.

“The bank had another solid performance in the third quarter.  Our earnings were driven by excellent credit quality and continued prudent expense management,” said Bob Harrison, Chairman, President and Chief Executive Officer.  “During the quarter we continued to improve the quality of our balance sheet as we sold over $400 million of shared national credits and reduced public time deposits, enabling us to increase the size of our stock repurchase program.”

On October 23, 2019, the Company’s Board of Directors declared a quarterly cash dividend of $0.26 per share.  The dividend will be payable on December 6, 2019 to stockholders of record at the close of business on November 25, 2019.

Third Quarter 2019 Highlights:

• Profitability measures were excellent with ROA of 1.45%, core ROATA1,2 of 1.56%, ROE of 11.12%, and core ROATCE1,2 of 18.21%;
• Sold $409 million of shared national credits (SNCs) at an average price of 99.7%;
• Reduced the balance of public time deposits by $334 million and the cost of deposits fell 3 basis points to 54 basis points;
• Reported efficiency ratio was 48.4% and core efficiency ratio1 was 47.3%;
• Continued excellent credit quality.  The ratio of non-performing assets to total loans and leases and other real estate owned was 0.03% at the end of the third quarter;
• No provision expense was recorded due to the reduction in the loan portfolio following the sale of the SNCs;
• Repurchased 2.3 million shares at total cost of $59 million;
• Announced a $50 million increase in the stock repurchase program, bringing the total repurchase authority to $150 million in 2019.

Balance Sheet

Total assets were $20.6 billion as of September 30, 2019, compared to $20.5 billion as of June 30, 2019.

Gross loans and leases were $12.8 billion as of September 30, 2019, a decrease of $421 million, or 3.2%, from $13.3 billion as of June 30, 2019.  The decrease was primarily due to the approximately $450 million reduction in SNC loans, which included $409 million of SNC loans sold and an additional $40 million of runoff in the SNC loan portfolio.

Total deposits were $16.9 billion as of September 30, 2019, an increase of $65 million, or 0.4%, from $16.8 billion as of June 30, 2019, primarily reflecting a $334 million reduction in public time deposits and the receipt of $400 million of temporary commercial deposits that were withdrawn early in the fourth quarter.

_______________1 Core measurements are non-GAAP financial measures.  Core excludes certain gains, expenses and one-time items.  See Tables 13 and 14 at the end of this document for reconciliations of core measurements, including core net income, core noninterest income, core efficiency ratio and core earnings per diluted share to the comparable GAAP measurements.2 Return on Average Tangible Assets (“ROATA”) and Return on Average Tangible Common Equity (“ROATCE”) are non-GAAP financial measures.  A reconciliation of average tangible assets and average tangible stockholders’ equity to the comparable GAAP measurements is provided in Table 13 at the end of this document.

Net Interest Income

Net interest income for the third quarter of 2019 was $143.1 million, a decrease of $2.5 million, or 1.7%, compared to $145.6 million for the prior quarter.  Net interest income in the third quarter included a negative $1.7 million premium adjustment, while the second quarter included a negative $1.8 million premium adjustment. The decrease in net interest income compared to the second quarter of 2019 was primarily due to lower yields and balances on loans and investments, partially offset by lower deposit balances.

NIM was 3.19% in the third quarter of 2019, a decrease of six basis points compared to 3.25% in the second quarter of 2019.  The negative $1.7 million premium adjustment in the third quarter and the negative $1.8 million premium adjustment in the second quarter had a negative four basis point impact on the reported NIM in each quarter.

Provision Expense

No provision for credit losses was taken in the quarter ended September 30, 2019 compared to $3.9 million in the quarter ended June 30, 2019.

Noninterest Income

Noninterest income was $50.0 million in the third quarter of 2019, an increase of $1.2 million compared to noninterest income of $48.8 million in the second quarter of 2019.

Noninterest Expense

Noninterest expense was $93.5 million in the third quarter of 2019, essentially unchanged from $93.3 million in the second quarter of 2019.

The efficiency ratio was 48.4% and 48.0% for the quarters ended September 30, 2019 and June 30, 2019, respectively.  Core efficiency ratio1 was 47.3% and 47.9% for the quarters ended September 30, 2019 and June 30, 2019, respectively.

Taxes

The effective tax rate was 25.5% for the quarters ended September 30, 2019 and June 30, 2019.

Asset Quality

The allowance for loan and lease losses was $133.0 million, or 1.04% of total loans and leases, as of September 30, 2019, compared to $138.5 million, or 1.04% of total loans and leases, as of June 30, 2019.  Net charge-offs were $5.6 million, or 0.17% of average loans and leases on an annualized basis for the quarter ended September 30, 2019, compared to $6.9 million, or 0.21% of average loans and leases on an annualized basis for the quarter ended June 30, 2019.  Total non-performing assets were $4.3 million, or 0.03% of total loans and leases and other real estate owned, at September 30, 2019, compared to non-performing assets of $3.9 million, or 0.03% of total loans and leases and other real estate owned, at June 30, 2019.

Capital

Total stockholders' equity was $2.7 billion at September 30, 2019 and June 30, 2019.

The tier 1 leverage, common equity tier 1 and total capital ratios were 8.68%, 12.15% and 13.11%, respectively, at September 30, 2019, compared with 8.75%, 11.84% and 12.81% at June 30, 2019.

During the third quarter of 2019, the Company’s Board of Directors approved a $50 million increase in the stock repurchase program to up to $150 million during 2019.  The Company repurchased 2.3 million shares of common stock at a total cost of $59 million under the stock repurchase program in the third quarter. The average cost was $25.69 per share repurchased.  Year-to-date through September 30, the Company has repurchased 3.8 million shares at a total cost of $99 million.  Remaining buyback authority under the stock repurchase program was $51 million at September 30, 2019.

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:  1875646.  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 October 31, 2019.  Access the replay by dialing (855) 859-2056 or (404) 537-3406 and entering the conference ID:  1875646.

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, 2018 and our Quarterly Report on Form 10-Q for the quarter ended June 30, 2019.

Use of Non-GAAP Financial Measures

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

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

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

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