First Hawaiian, Inc. Reports Third Quarter 2021 Financial Results and Declares Dividend

HONOLULU, Oct. 22, 2021 (GLOBE NEWSWIRE) -- First Hawaiian, Inc. (NASDAQ:FHB), (“First Hawaiian” or the “Company”) today reported financial results for its quarter ended September 30, 2021.

“We are pleased with the bank’s solid performance in the third quarter. It was also a milestone quarter, as total assets exceeded $25 billion at quarter-end for the first time in our history,” said Bob Harrison, Chairman, President and CEO. “We had good growth in deposit balances, credit quality remained excellent, and we are seeing an increase in loan activity.”

On October 20, 2021 the Company’s Board of Directors declared a quarterly cash dividend of $0.26 per share. The dividend will be payable on December 3, 2021 to stockholders of record at the close of business on November 22, 2021.

Third Quarter 2021 Highlights:

• Net income of $64.3 million, or $0.50 per diluted share

• Total loans and leases decreased $269.4 million versus prior quarter, reflecting a $308.0 million decline in PPP loans

• Total deposits increased $1.3 billion versus prior quarter

• Recorded a $4.0 million negative provision for credit losses

• Board of Directors declared a quarterly dividend of $0.26 per share

• Repurchased $21.6 million of stock under share repurchase program

Balance Sheet
Total assets were $25.5 billion as of September 30, 2021, compared to $24.2 billion as of June 30, 2021.

Gross loans and leases were $12.8 billion as of September 30, 2021, a decrease of $269.4 million, or 2.1%, from $13.1 billion as of June 30, 2021.

Total deposits were $22.1 billion as of September 30, 2021, an increase of $1.3 billion, or 6.2%, from $20.8 billion as of June 30, 2021.

Net Interest Income
Net interest income for the third quarter of 2021 was $132.6 million, an increase of $1.1 million, or 0.8%, compared to $131.5 million for the prior quarter.

The net interest margin (NIM) was 2.36% in the third quarter of 2021, a decrease of 10 basis points compared to 2.46% in the second quarter of 2021.

Provision Expense
During the quarter ended September 30, 2021, we recorded a $4.0 million negative provision for credit losses. In the quarter ended June 30, 2021 we recorded a $35.0 million negative provision for credit losses.

Noninterest Income
Noninterest income was $50.1 million in the third quarter of 2021, an increase of $0.7 million compared to noninterest income of $49.4 million in the second quarter of 2021.

Noninterest Expense
Noninterest expense was $101.0 million in the third quarter of 2021, an increase of $1.6 million compared to noninterest expense of $99.4 million in the second quarter of 2021.

The efficiency ratio was 55.1% and 54.7% for the quarters ended September 30, 2021 and June 30, 2021, respectively.

Taxes
The effective tax rate was 25.0% for the quarter ended September 30, 2021 and 25.5% for the quarter ended June 30, 2021.

Asset Quality
The allowance for credit losses was $161.2 million, or 1.26% of total loans and leases, as of September 30, 2021, compared to $169.1 million, or 1.29% of total loans and leases, as of June 30, 2021. The reserve for unfunded commitments was $32.5 million as of September 30, 2021 compared to $29.2 million as of June 30, 2021. Net charge-offs were $0.6 million, or 0.02% of average loans and leases on an annualized basis, for the quarter ended September 30, 2021, compared to net charge-offs of $1.1 million, or 0.03% of average loans and leases on an annualized basis, for the quarter ended June 30, 2021. Total non-performing assets were $8.6 million, or 0.07% of total loans and leases and other real estate owned, at September 30, 2021, compared to total non-performing assets of $8.9 million, or 0.07% of total loans and leases and other real estate owned at June 30, 2021.

Capital
Total stockholders' equity was $2.7 billion at both September 30, 2021 and June 30, 2021.

The tier 1 leverage, common equity tier 1 and total capital ratios were 7.39%, 12.63% and 13.88%, respectively, at September 30, 2021, compared with 7.68%, 12.76% and 14.01%, respectively, at June 30, 2021.

The Company repurchased 0.8 million shares of common stock at a total cost of $21.6 million under the stock repurchase program in the third quarter. The average cost was $27.76 per share repurchased. Remaining buyback authority under the stock repurchase program was $21.5 million at September 30, 2021.

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 1:00 p.m. Eastern Time, 7:00 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: 2438538. 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 4:30 p.m. (Eastern Time) on October 29, 2021. Access the replay by dialing (855) 859-2056 or (404) 537-3406 and entering the conference ID: 2438538.

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. Further, statements about the potential effects of the COVID-19 pandemic on our businesses and financial results and conditions may constitute forward-looking statements and are subject to the risk that the actual effects may differ, possibly materially, from what is reflected in those forward-looking statements due to factors and future developments that are uncertain, unpredictable and in many cases beyond our control, including the scope and duration of the pandemic, actions taken by governmental authorities in response to the pandemic, and the direct and indirect impact of the pandemic on our customers, third parties and us. Although we believe that the expectations reflected in these forward-looking statements are reasonable as of the date made, there can be no assurance that actual results will not prove to be materially different from the results expressed or implied by the forward-looking statements. A number of important factors could cause actual results or performance to differ materially from the forward-looking statements, including (without limitation) the risks and uncertainties associated with the ongoing impacts of COVID-19, the domestic and global economic environment and capital market conditions and other risk factors. For a discussion of some of these 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, 2020 and our Quarterly Report on Form 10-Q for the quarters ended March 31, 2021 and June 30, 2021.

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 14 and 15 at the end of this document provide a reconciliation of these non-GAAP financial measures with their most directly comparable 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)		2021				2021				2020				2021				2020
Operating Results:
Net interest income		$	132,593			$	131,481			$	134,002			$	393,232			$	400,507
Provision for credit losses			(4,000	)			(35,000	)			5,072				(39,000	)			101,718
Noninterest income			50,104				49,371				48,898				143,343				143,782
Noninterest expense			101,036				99,388				91,629				296,730				279,545
Net income			64,279				86,741				65,101				208,713				124,015
Basic earnings per share			0.50				0.67				0.50				1.61				0.95
Diluted earnings per share			0.50				0.67				0.50				1.61				0.95
Dividends declared per share			0.26				0.26				0.26				0.78				0.78
Dividend payout ratio			52.00		%		38.81		%		52.00		%		48.45		%		82.11		%
Supplemental Income Statement Data (non-GAAP):
Core net interest income		$	132,593			$	131,481			$	134,002			$	393,232			$	400,507
Core noninterest income			50,104				49,269				48,874				143,241				143,884
Core noninterest expense			98,936				98,228				91,629				293,470				279,545
Core net income			65,819				87,704				65,083				211,216				124,090
Core basic earnings per share			0.51				0.68				0.50				1.63				0.96
Core diluted earnings per share			0.51				0.68				0.50				1.63				0.95
Performance Ratios(1):
Net interest margin			2.36		%		2.46		%		2.70		%		2.45		%		2.79		%
Core net interest margin (non-GAAP)			2.36		%		2.46		%		2.70		%		2.45		%		2.79		%
Efficiency ratio			55.07		%		54.74		%		50.01		%		55.10		%		51.32		%
Core efficiency ratio (non-GAAP)			53.92		%		54.13		%		50.02		%		54.51		%		51.31		%
Return on average total assets			1.02		%		1.45		%		1.16		%		1.16		%		0.76		%
Core return on average total assets (non-GAAP)			1.04		%		1.46		%		1.16		%		1.18		%		0.76		%
Return on average tangible assets (non-GAAP)			1.06		%		1.51		%		1.21		%		1.21		%		0.80		%
Core return on average tangible assets (non-GAAP)(2)			1.09		%		1.53		%		1.21		%		1.23		%		0.80		%
Return on average total stockholders' equity			9.31		%		12.92		%		9.58		%		10.26		%		6.16		%
Core return on average total stockholders' equity (non-GAAP)			9.54		%		13.07		%		9.57		%		10.38		%		6.17		%
Return on average tangible stockholders' equity (non-GAAP)			14.63		%		20.51		%		15.16		%		16.19		%		9.79		%
Core return on average tangible stockholders’ equity (non-GAAP)(3)			14.98		%		20.74		%		15.15		%		16.38		%		9.80		%
Average Balances:
Average loans and leases		$	12,881,885			$	13,205,086			$	13,559,367			$	13,108,427			$	13,569,119
Average earning assets			22,533,174				21,539,264				19,846,674				21,523,731				19,174,349
Average assets			25,058,085				24,015,065				22,341,485				24,013,691				21,667,948
Average deposits			21,621,836				20,638,015				18,892,033				20,595,400				17,995,196
Average stockholders' equity			2,738,540				2,691,966				2,704,129				2,719,442				2,687,632
Market Value Per Share:
Closing			29.35				28.34				14.47				29.35				14.47
High			30.06				29.85				18.96				30.80				31.25
Low			25.75				24.75				14.32				23.14				13.56

		As of			As of			As of			As of
		September 30,			June 30,			December 31,			September 30,
(dollars in thousands, except per share data)		2021			2021			2020			2020
Balance Sheet Data:
Loans and leases		$	12,834,339		$	13,103,785		$	13,279,097		$	13,499,969
Total assets			25,548,322			24,246,328			22,662,831			22,310,701
Total deposits			22,120,003			20,835,115			19,227,723			18,897,762
Long-term borrowings			200,000			200,000			200,010			200,010
Total stockholders' equity			2,711,734			2,731,341			2,744,104			2,733,934
Per Share of Common Stock:
Book value		$	21.14		$	21.17		$	21.12		$	21.04
Tangible book value (non-GAAP)(4)			13.38			13.45			13.46			13.38
Asset Quality Ratios:
Non-accrual loans and leases / total loans and leases			0.07	%		0.07	%		0.07	%		0.13	%
Allowance for credit losses for loans and leases / total loans and leases			1.26	%		1.29	%		1.57	%		1.45	%
Capital Ratios:
Common Equity Tier 1 Capital Ratio			12.63	%		12.76	%		12.47	%		12.22	%
Tier 1 Capital Ratio			12.63	%		12.76	%		12.47	%		12.22	%
Total Capital Ratio			13.88	%		14.01	%		13.73	%		13.47	%
Tier 1 Leverage Ratio			7.39	%		7.68	%		8.00	%		7.91	%
Total stockholders' equity to total assets			10.61	%		11.26	%		12.11	%		12.25	%
Tangible stockholders' equity to tangible assets (non-GAAP)			6.99	%		7.47	%		8.07	%		8.16	%
Non-Financial Data:
Number of branches			54			54			54			58
Number of ATMs			298			294			297			302
Number of Full-Time Equivalent Employees			2,025			2,087			2,103			2,099

^{________________________}

(1)	Except for the efficiency ratio and the core efficiency ratio, amounts are annualized for the three and nine months ended September 30, 2021 and 2020 and the three months ended June 30, 2021.
(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 14, 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 subtracting (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 14, GAAP to Non-GAAP Reconciliation.
(4)	Tangible book value is a non-GAAP financial measure. We compute our tangible book value as the ratio of tangible stockholders’ equity to shares outstanding. Tangible stockholders’ equity is calculated by subtracting (and thereby effectively excluding) amounts related to the effect of goodwill from our total stockholders’ equity. For a reconciliation to the most directly comparable GAAP financial measure for core net income, see Table 14, GAAP to Non-GAAP Reconciliation.

Consolidated Statements of Income		Table 2
		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)		2021				2021				2020				2021				2020
Interest income
Loans and lease financing		$	110,765			$	110,919			$	120,940			$	332,623			$	378,209
Available-for-sale securities			25,234				24,637				20,317				73,017				59,056
Other			1,205				666				670				2,362				3,813
Total interest income			137,204				136,222				141,927				408,002				441,078
Interest expense
Deposits			3,218				3,363				6,227				10,637				30,410
Short-term and long-term borrowings			1,393				1,378				1,698				4,133				10,161
Total interest expense			4,611				4,741				7,925				14,770				40,571
Net interest income			132,593				131,481				134,002				393,232				400,507
Provision for credit losses			(4,000	)			(35,000	)			5,072				(39,000	)			101,718
Net interest income after provision for credit losses			136,593				166,481				128,930				432,232				298,789
Noninterest income
Service charges on deposit accounts			6,989				6,632				6,523				20,339				21,400
Credit and debit card fees			16,017				16,746				14,049				47,314				39,868
Other service charges and fees			10,233				10,303				9,021				29,382				25,472
Trust and investment services income			8,625				8,707				8,664				25,824				26,919
Bank-owned life insurance			4,841				3,104				4,903				10,334				11,595
Investment securities gains (losses), net			—				102				24				102				(102	)
Other			3,399				3,777				5,714				10,048				18,630
Total noninterest income			50,104				49,371				48,898				143,343				143,782
Noninterest expense
Salaries and employee benefits			46,484				45,982				44,291				136,402				131,534
Contracted services and professional fees			15,042				16,516				15,073				48,746				46,606
Occupancy			6,790				7,314				6,921				21,274				21,466
Equipment			6,549				6,362				5,137				18,402				15,052
Regulatory assessment and fees			1,828				1,826				2,445				5,688				6,491
Advertising and marketing			1,469				1,469				1,374				4,529				4,599
Card rewards program			6,676				6,262				5,046				17,773				17,224
Other			16,198				13,657				11,342				43,916				36,573
Total noninterest expense			101,036				99,388				91,629				296,730				279,545
Income before provision for income taxes			85,661				116,464				86,199				278,845				163,026
Provision for income taxes			21,382				29,723				21,098				70,132				39,011
Net income		$	64,279			$	86,741			$	65,101			$	208,713			$	124,015
Basic earnings per share		$	0.50			$	0.67			$	0.50			$	1.61			$	0.95
Diluted earnings per share		$	0.50			$	0.67			$	0.50			$	1.61			$	0.95
Basic weighted-average outstanding shares			128,660,038				129,392,339				129,896,054				129,323,973				129,882,878
Diluted weighted-average outstanding shares			129,210,448				129,828,847				130,085,534				129,895,311				130,129,690

Consolidated Balance Sheets		Table 3
		September 30,				June 30,				December 31,				September 30,
(dollars in thousands)		2021				2021				2020				2020
Assets
Cash and due from banks		$	268,467			$	347,861			$	303,373			$	333,744
Interest-bearing deposits in other banks			2,130,615				1,558,437				737,571				482,585
Investment securities, at fair value (amortized cost: $7,994,266 as of September 30, 2021, $6,951,153 as of June 30, 2021, $5,985,031 as of December 31, 2020 and $5,584,556 as of September 30, 2020)			7,953,727				6,953,930				6,071,415				5,692,883
Loans held for sale			2,052				1,241				11,579				34,669
Loans and leases			12,834,339				13,103,785				13,279,097				13,499,969
Less: allowance for credit losses			161,246				169,148				208,454				195,876
Net loans and leases			12,673,093				12,934,637				13,070,643				13,304,093
Premises and equipment, net			317,272				319,452				322,401				321,229
Accrued interest receivable			64,855				66,734				69,626				66,005
Bank-owned life insurance			468,968				466,402				466,537				462,422
Goodwill			995,492				995,492				995,492				995,492
Mortgage servicing rights			9,107				10,007				10,731				10,922
Other assets			664,674				592,135				603,463				606,657
Total assets		$	25,548,322			$	24,246,328			$	22,662,831			$	22,310,701
Liabilities and Stockholders' Equity
Deposits:
Interest-bearing		$	13,246,579			$	12,245,193