First Hawaiian, Inc. Reports Fourth Quarter 2022 Financial Results and Declares Dividend

First Hawaiian, Inc.

HONOLULU, Jan. 27, 2023 (GLOBE NEWSWIRE) -- First Hawaiian, Inc. (NASDAQ:FHB), (“First Hawaiian” or the “Company”) today reported financial results for its quarter ended December 31, 2022.

“We are pleased to report that we closed 2022 with a solid fourth quarter,” said Bob Harrison, Chairman, President and CEO. “We saw continued earnings growth, driven by strong loan growth and excellent credit quality.”

On January 25, 2023, the Company’s Board of Directors declared a quarterly cash dividend of $0.26 per share. The dividend will be payable on March 3, 2023, to stockholders of record at the close of business on February 17, 2023.

Additionally, the Company’s Board of Directors adopted a stock repurchase program for up to $40 million of its outstanding common stock during 2023.

Fourth Quarter 2022 Highlights:

• Net income of $79.6 million, or $0.62 per diluted share

• Total loans and leases increased $391.6 million versus prior quarter

• Total deposits decreased $402.7 million versus prior quarter

• Net interest margin increased 22 basis points to 3.15%

• Recorded a $3.0 million provision for credit losses

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

Balance Sheet

Total assets were $24.6 billion as of December 31, 2022, compared to $24.9 billion as of September 30, 2022.

Gross loans and leases were $14.1 billion as of December 31, 2022, an increase of $391.6 million, or 2.9%, from $13.7 billion as of September 30, 2022.

Total deposits were $21.7 billion as of December 31, 2022, a decrease of $402.7 million, or 1.8%, from $22.1 billion as of September 30, 2022.

Net Interest Income

Net interest income for the fourth quarter of 2022 was $171.8 million, an increase of $9.1 million, or 5.6%, compared to $162.7 million for the prior quarter.

The net interest margin was 3.15% in the fourth quarter of 2022, an increase of 22 basis points compared to 2.93% in the prior quarter.

Provision Expense

During the quarter ended December 31, 2022, we recorded a $3.0 million provision for credit losses. In the quarter ended September 30, 2022, we recorded a $3.2 million provision for credit losses.

Noninterest Income

Noninterest income was $48.2 million in the fourth quarter of 2022, an increase of $2.3 million compared to noninterest income of $45.9 million in the prior quarter.

Noninterest Expense

Noninterest expense was $113.9 million in the fourth quarter of 2022, an increase of $0.6 million compared to noninterest expense of $113.3 million in the prior quarter.

The efficiency ratio was 51.5% and 54.0% for the quarters ended December 31, 2022 and September 30, 2022, respectively.

Taxes

The effective tax rate was 22.8% and 25.0% for the quarters ended December 31, 2022 and September 30, 2022, respectively.

Asset Quality

The allowance for credit losses was $143.9 million, or 1.02% of total loans and leases, as of December 31, 2022, compared to $148.2 million, or 1.08% of total loans and leases, as of September 30, 2022. The reserve for unfunded commitments was $33.8 million as of December 31, 2022, compared to $30.1 million as of September 30, 2022. Net charge-offs were $3.5 million, or 0.10% of average loans and leases on an annualized basis, for the quarter ended December 31, 2022, compared to net charge-offs of $2.8 million, or 0.08% of average loans and leases on an annualized basis, for the quarter ended September 30, 2022. Total non-performing assets were $12.0 million, or 0.09% of total loans and leases and other real estate owned, on December 31, 2022, compared to total non-performing assets of $8.4 million, or 0.06% of total loans and leases and other real estate owned, on September 30, 2022.

Capital

Total stockholders' equity was $2.3 billion on December 31, 2022 compared to $2.2 billion on September 30, 2022.

The tier 1 leverage, common equity tier 1 and total capital ratios were 8.11%, 11.82%, and 12.92%, respectively, on December 31, 2022, compared with 7.78%, 11.79%, and 12.92%, respectively, on September 30, 2022.

The Company did not repurchase any shares in the fourth quarter.

As to the stock repurchase program approved for 2023, repurchases of shares of the Company’s common stock may be conducted through open-market purchases, which may include purchases under a trading plan adopted pursuant to Securities and Exchange Commission Rule 10b5-1, or through privately negotiated transactions. The timing and exact amount of share repurchases, if any, will be subject to management’s discretion and various factors, including the Company’s capital position and financial performance, as well as market conditions. The repurchase program may be suspended, terminated or modified at any time for any reason.

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, 8:00 a.m. Hawaii Time.

Please note that the process for accessing the conference call has changed. Participants will need to click on the registration link provided below, register for the conference call, and then you will receive the dial-in number and a personalized PIN code.

To access the call by phone, please register via the following link: https://register.vevent.com/register/BI73d7abf351534972a54610116ab71617, and you will be provided with dial in details. To avoid delays, we encourage participants to dial into the conference call fifteen minutes ahead of the scheduled start time.

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.

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, 2021 and our Quarterly Reports on Form 10-Q for the quarters ended March 31, 2022, June 30, 2022, and September 30, 2022.

Use of Non-GAAP Financial Measures
Return on average tangible assets, return on average tangible stockholders’ equity, tangible book value per share and tangible stockholders’ equity to tangible assets are non-GAAP financial measures. 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. Investors should consider our performance and capital adequacy as reported under GAAP and all other relevant information when assessing our performance and capital adequacy.

Table 14 at the end of this document provides 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: Lindsay Chambers (808) 525-6254 lchambers@fhb.com

Financial Highlights		Table 1
		For the Three Months Ended									For the Year Ended
		December 31,			September 30,			December 31,			December 31,
(dollars in thousands, except per share data)		2022			2022			2021			2022			2021
Operating Results:
Net interest income		$	171,794		$	162,736		$	137,327		$	613,549		$	530,559
Provision for credit losses			2,956			3,183			—			1,392			(39,000	)
Noninterest income			48,151			45,857			41,573			179,525			184,916
Noninterest expense			113,922			113,332			108,749			440,471			405,479
Net income			79,588			69,018			57,022			265,685			265,735
Basic earnings per share			0.62			0.54			0.45			2.08			2.06
Diluted earnings per share			0.62			0.54			0.44			2.08			2.05
Dividends declared per share			0.26			0.26			0.26			1.04			1.04
Dividend payout ratio			41.94	%		48.15	%		59.09	%		50.00	%		50.73		%
Performance Ratios(1):
Net interest margin			3.15	%		2.93	%		2.38	%		2.78	%		2.43		%
Efficiency ratio			51.47	%		53.98	%		60.50	%		55.20	%		56.45		%
Return on average total assets			1.28	%		1.10	%		0.88	%		1.06	%		1.09		%
Return on average tangible assets (non-GAAP)(2)			1.34	%		1.14	%		0.92	%		1.11	%		1.13		%
Return on average total stockholders' equity			14.27	%		12.08	%		8.46	%		11.44	%		9.81		%
Return on average tangible stockholders' equity (non-GAAP)(2)			25.93	%		21.53	%		13.47	%		20.03	%		15.51		%
Average Balances:
Average loans and leases		$	13,876,136		$	13,491,428		$	12,814,316		$	13,314,821		$	13,034,295
Average earning assets			21,856,135			22,258,066			23,100,445			22,272,795			21,921,149
Average assets			24,575,648			24,957,042			25,650,505			24,964,422			24,426,258
Average deposits			21,725,177			22,148,039			22,246,577			22,058,497			21,011,587
Average stockholders' equity			2,213,030			2,267,152			2,675,513			2,321,606			2,708,370
Market Value Per Share:
Closing			26.04			24.63			27.33			26.04			27.33
High			27.16			28.14			30.14			31.16			30.80
Low			24.06			21.21			25.17			21.21			23.14

		As of			As of			As of
		December 31,			September 30,			December 31,
(dollars in thousands, except per share data)		2022			2022			2021
Balance Sheet Data:
Loans and leases		$	14,092,012		$	13,700,374		$	12,961,999
Total assets			24,577,223			24,870,272			24,992,410
Total deposits			21,689,029			22,091,738			21,816,146
Short-term borrowings			75,000			—			—
Total stockholders' equity			2,269,005			2,200,651			2,656,912
Per Share of Common Stock:
Book value		$	17.82		$	17.28		$	20.84
Tangible book value (non-GAAP)(2)			10.00			9.46			13.03
Asset Quality Ratios:
Non-accrual loans and leases / total loans and leases			0.08	%		0.06	%		0.05	%
Allowance for credit losses for loans and leases / total loans and leases			1.02	%		1.08	%		1.21	%
Capital Ratios:
Common Equity Tier 1 Capital Ratio			11.82	%		11.79	%		12.24	%
Tier 1 Capital Ratio			11.82	%		11.79	%		12.24	%
Total Capital Ratio			12.92	%		12.92	%		13.49	%
Tier 1 Leverage Ratio			8.11	%		7.78	%		7.24	%
Total stockholders' equity to total assets			9.23	%		8.85	%		10.63	%
Tangible stockholders' equity to tangible assets (non-GAAP)(2)			5.40	%		5.05	%		6.92	%
Non-Financial Data:
Number of branches			51			51			54
Number of ATMs			294			303			299
Number of Full-Time Equivalent Employees			2,063			2,042			2,036

⁽¹⁾   Except for the efficiency ratio, amounts are annualized for the three months ended December 31, 2022, September 30, 2022 and December 31, 2021.

⁽²⁾   Return on average tangible assets, return on average tangible stockholders’ equity, tangible book value per share and tangible stockholders’ equity to tangible assets are non-GAAP financial measures. 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 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 tangible book value per share as the ratio of tangible stockholders’ equity to outstanding shares. Tangible stockholders’ equity is calculated by subtracting (and thereby effectively excluding) amounts related to the effect of goodwill from our total stockholders’ equity. 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. For a reconciliation to the most directly comparable GAAP financial measure, see Table 14, GAAP to Non-GAAP Reconciliation.

Consolidated Statements of Income		Table 2
		For the Three Months Ended											For the Year Ended
		December 31,			September 30,				December 31,				December 31,
(dollars in thousands, except per share amounts)		2022			2022				2021				2022			2021
Interest income
Loans and lease financing		$	159,526		$	134,646			$	111,865			$	509,820		$	444,488
Available-for-sale investment securities			18,714			19,644				28,393				87,108			101,410
Held-to-maturity investment securities			19,137			17,950				—				55,376			—
Other			3,088			4,150				1,051				10,916			3,413
Total interest income			200,465			176,390				141,309				663,220			549,311
Interest expense
Deposits			28,202			13,653				3,216				49,201			13,853
Short-term and long-term borrowings			469			1				766				470			4,899
Total interest expense			28,671			13,654				3,982				49,671			18,752
Net interest income			171,794			162,736				137,327				613,549			530,559
Provision for credit losses			2,956			3,183				—				1,392			(39,000	)
Net interest income after provision for credit losses			168,838			159,553				137,327				612,157			569,559
Noninterest income
Service charges on deposit accounts			7,376			7,089				7,171				28,809			27,510
Credit and debit card fees			16,376			17,746				16,266				66,028			63,580
Other service charges and fees			9,185			9,179				9,196				37,036			38,578
Trust and investment services income			9,023			9,800				8,895				36,465			34,719
Bank-owned life insurance			2,865			(341	)			2,851				1,248			13,185
Investment securities gains, net			—			—				—				—			102
Other			3,326			2,384				(2,806	)			9,939			7,242
Total noninterest income			48,151			45,857				41,573				179,525			184,916
Noninterest expense
Salaries and employee benefits			49,629			51,372				45,982				199,129			182,384
Contracted services and professional fees			17,638			16,625				14,603				70,027			63,349
Occupancy			8,175			8,115				8,074				31,034			29,348
Equipment			9,984			10,791				6,317				34,506			24,719
Regulatory assessment and fees			2,591			2,487				2,557				9,603			8,245
Advertising and marketing			2,072			1,902				1,579				7,996			6,108
Card rewards program			8,681			8,141				7,471				30,990			25,244
Other			15,152			13,899				22,166				57,186			66,082
Total noninterest expense			113,922			113,332				108,749				440,471			405,479
Income before provision for income taxes			103,067			92,078				70,151				351,211			348,996
Provision for income taxes			23,479			23,060				13,129				85,526			83,261
Net income		$	79,588		$	69,018			$	57,022			$	265,685		$	265,735
Basic earnings per share		$	0.62		$	0.54			$	0.45			$	2.08		$	2.06
Diluted earnings per share		$	0.62		$	0.54			$	0.44			$	2.08		$	2.05
Basic weighted-average outstanding shares			127,356,795			127,377,713				127,893,011				127,489,889			128,963,131
Diluted weighted-average outstanding shares			127,894,773			127,796,617				128,512,257				127,981,699			129,537,922

Consolidated Balance Sheets		Table 3
		December 31,				September 30,				December 31,
(dollars in thousands)		2022				2022				2021
Assets
Cash and due from banks		$	297,502			$	291,360			$	246,716
Interest-bearing deposits in other banks			229,122				657,574				1,011,753
Investment securities:
Available-for-sale, at fair value (amortized cost: $3,549,599 as of December 31, 2022, $3,673,396 as of September 30, 2022 and $8,560,733 as of December 31, 2021)			3,151,133				3,289,160				8,428,032
Held-to-maturity, at amortized cost (fair value: $3,814,822 as of December 31, 2022, $3,960,713 as of September 30, 2022 and nil as of December 31, 2021)			4,320,639				4,406,143				—
Loans held for sale			—				361				538
Loans and leases			14,092,012				13,700,374				12,961,999
Less: allowance for credit losses			143,900				148,163				157,262
Net loans and leases			13,948,112				13,552,211				12,804,737
Premises and equipment, net			280,355				299,179				318,448
Other real estate owned and repossessed personal property			91				139				175
Accrued interest receivable			78,194				68,545				63,158
Bank-owned life insurance			473,067				470,202				471,819
Goodwill			995,492				995,492				995,492
Mortgage servicing rights			6,562				6,866				8,302
Other assets			796,954				833,040				643,240
Total assets		$	24,577,223			$	24,870,272			$	24,992,410
Liabilities and Stockholders' Equity
Deposits:
Interest-bearing		$	12,824,383			$	12,774,645			$	12,422,283
Noninterest-bearing			8,864,646				9,317,093				9,393,863
Total deposits			21,689,029				22,091,738				21,816,146
Short-term borrowings			75,000				—				—
Retirement benefits payable			102,577				133,981				134,491
Other liabilities			441,612				443,902				384,861
Total liabilities			22,308,218				22,669,621				22,335,498
Stockholders' equity
Common stock ($0.01 par value; authorized 300,000,000 shares; issued/outstanding: 140,963,918 / 127,363,327 shares as of December 31, 2022, issued/outstanding: 140,958,520 / 127,357,680 shares as of September 30, 2022 and issued/outstanding: 140,581,715 / 127,502,472 shares as of December 31, 2021)			1,410				1,410				1,406
Additional paid-in capital			2,538,336				2,535,601				2,527,663
Retained earnings			736,544				690,433				604,534
Accumulated other comprehensive loss, net			(639,254	)			(658,756	)			(121,693	)
Treasury stock (13,600,591 shares as of December 31, 2022, 13,600,840 shares as of September 30, 2022 and 13,079,243 shares as of December 31, 2021)			(368,031	)			(368,037	)			(354,998	)
Total stockholders' equity			2,269,005				2,200,651				2,656,912
Total liabilities and stockholders' equity		$	24,577,223			$	24,870,272			$	24,992,410

Average Balances and Interest Rates																								Table 4
		Three Months Ended								Three Months Ended								Three Months Ended
		December 31, 2022								September 30, 2022								December 31, 2021
		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		$	321.3		$	2.9		3.64	%	$	724.0		$	4.0		2.20	%	$	2,074.5		$	0.8		0.15	%
Available-for-Sale Investment Securities
Taxable			3,180.8			18.3		2.30