First Hawaiian(FHB) - 2024 Q2 - Quarterly Results

Financial Highlights & Management Commentary First Hawaiian, Inc. reported strong Q2 2024 financial results, including $61.9 million net income and a $0.26 per share dividend Second Quarter 2024 Highlights First Hawaiian, Inc. reported $61.9 million net income and $0.48 diluted EPS for Q2 2024, driven by strong revenues and credit quality Q2 2024 Key Financial Metrics | Metric | Value | | :--- | :--- | | Net Income | $61.9 million | | Diluted EPS | $0.48 | | Total Loans and Leases | Increased $39.7 million vs. prior quarter | | Total Deposits | Decreased $350.6 million vs. prior quarter | | Net Interest Margin | 2.92% (+1 bp vs. prior quarter) | | Provision for Credit Losses | $1.8 million | | Quarterly Dividend | $0.26 per share | - Chairman, President, and CEO Bob Harrison attributed the strong performance to solid revenues, disciplined expense control, and continued excellent credit quality[32] - The Board of Directors declared a quarterly cash dividend of $0.26 per share, payable on August 30, 2024, to stockholders of record on August 19, 2024[32] Financial Performance Analysis The company's Q2 2024 financial performance showed stable net interest income, reduced credit loss provisions, and improved efficiency Net Interest Income Net interest income for Q2 2024 was $152.9 million, a slight decrease of 1.0% from the prior quarter, while net interest margin marginally improved by 1 basis point to 2.92% Net Interest Income and Margin (Q2 2024 vs Q1 2024) | Metric | Q2 2024 | Q1 2024 | Change | | :--- | :--- | :--- | :--- | | Net Interest Income | $152.9 million | $154.4 million | -$1.6 million (-1.0%) | | Net Interest Margin | 2.92% | 2.91% | +1 bp | Provision for Credit Losses The company recorded a provision for credit losses of $1.8 million in the second quarter of 2024, a significant decrease from the $6.3 million provision recorded in the first quarter of 2024 - The provision for credit losses was $1.8 million for Q2 2024, compared to $6.3 million in Q1 2024[40] Noninterest Income Noninterest income for Q2 2024 was $51.8 million, showing a slight increase of $0.4 million compared to the $51.4 million reported in the prior quarter - Noninterest income increased to $51.8 million in Q2 2024, up from $51.4 million in Q1 2024[1] Noninterest Expense Noninterest expense decreased by $6.7 million to $122.1 million in Q2 2024 from $128.8 million in the prior quarter, contributing to an improved efficiency ratio of 59.2% from 62.2% Noninterest Expense and Efficiency Ratio (Q2 2024 vs Q1 2024) | Metric | Q2 2024 | Q1 2024 | Change | | :--- | :--- | :--- | :--- | | Noninterest Expense | $122.1 million | $128.8 million | -$6.7 million | | Efficiency Ratio | 59.2% | 62.2% | -3.0 p.p. | Income Taxes The effective tax rate remained stable at 23.3% for the second quarter of 2024, unchanged from the prior quarter - The effective tax rate was 23.3% for both the quarters ended June 30, 2024, and March 31, 2024[1] Balance Sheet Analysis The balance sheet reflects a decrease in total assets and deposits, a slight increase in loans, and strengthened capital ratios Assets, Loans, and Deposits As of June 30, 2024, total assets and deposits decreased compared to the previous quarter, while gross loans and leases experienced a modest increase, with total assets at $24.0 billion and total deposits at $20.3 billion Balance Sheet Changes (Q2 2024 vs Q1 2024) | Metric | June 30, 2024 | March 31, 2024 | Change | | :--- | :--- | :--- | :--- | | Total Assets | $24.0 billion | $24.3 billion | -$287.4 million (-1.2%) | | Gross Loans and Leases | $14.4 billion | $14.3 billion | +$39.7 million (+0.3%) | | Total Deposits | $20.3 billion | $20.7 billion | -$350.6 million (-1.7%) | Capital Total stockholders' equity increased to $2.6 billion in Q2 2024, strengthening capital ratios across all categories - Total stockholders' equity increased by $36.6 million in Q2 2024, reaching $2.6 billion[3] Capital Ratios (Q2 2024 vs Q1 2024) | Ratio | June 30, 2024 | March 31, 2024 | | :--- | :--- | :--- | | Tier 1 Leverage | 9.03% | 8.80% | | Common Equity Tier 1 | 12.73% | 12.55% | | Total Capital | 13.92% | 13.75% | - The Company did not repurchase any shares in the second quarter[3] Asset Quality Asset quality remained strong in Q2 2024, with stable allowance for credit losses and non-performing assets, and decreased net charge-offs Key Asset Quality Metrics (Q2 2024 vs Q1 2024) | Metric | June 30, 2024 | March 31, 2024 | | :--- | :--- | :--- | | Allowance for Credit Losses | $160.5 million | $159.8 million | | ACL / Total Loans & Leases | 1.12% | 1.12% | | Net Charge-offs (annualized) | $2.5 million (0.07%) | $3.8 million (0.11%) | | Total Non-performing Assets | $18.0 million | $18.0 million | | NPA / Total Loans & OREO | 0.13% | 0.13% | - The reserve for unfunded commitments decreased to $33.4 million as of June 30, 2024, from $34.8 million as of March 31, 2024[2] Detailed Financial Statements This section provides comprehensive financial statements, including income, balance sheet, average balances, and detailed portfolio analyses Financial Highlights (Table 1) Table 1 summarizes Q2 2024 operating results, performance ratios, and per-share data, showing $61.9 million net income and $0.48 diluted EPS Financial Highlights | Operating Results (in thousands) | For the Three Months Ended June 30, 2024 | For the Three Months Ended March 31, 2024 | For the Three Months Ended June 30, 2023 | | :--- | :--- | :--- | :--- | | Net interest income | $152,851 | $154,427 | $159,939 | | Net income | $61,921 | $54,220 | $62,442 | | Diluted earnings per share | $0.48 | $0.42 | $0.49 | | Performance Ratios | | | | | Net interest margin | 2.92% | 2.91% | 2.91% | | Efficiency ratio | 59.22% | 62.15% | 57.96% | | Return on average total assets | 1.04% | 0.90% | 1.01% | Selected Financial Data (Table 2) Table 2 presents key balance sheet data, per-share metrics, and capital ratios as of June 30, 2024, including a book value per share of $19.94 Selected Financial Data (as of June 30, 2024) | Metric | Value | | :--- | :--- | | Total assets | $23,991,791 thousand | | Total deposits | $20,318,832 thousand | | Total stockholders' equity | $2,550,312 thousand | | Book value per share | $19.94 | | Tangible book value per share (non-GAAP) | $12.16 | | Common Equity Tier 1 Capital Ratio | 12.73% | | Total Capital Ratio | 13.92% | Consolidated Statements of Income (Table 3) The consolidated income statement for Q2 2024 shows net income of $61.9 million, an increase from $54.2 million in Q1 2024 but a slight decrease from $62.4 million in Q2 2023, with diluted earnings per share of $0.48 Consolidated Income Statement Summary (in thousands) | Item | Q2 2024 | Q1 2024 | Q2 2023 | | :--- | :--- | :--- | :--- | | Net Interest Income | $152,851 | $154,427 | $159,939 | | Provision for credit losses | $1,800 | $6,300 | $5,000 | | Total noninterest income | $51,768 | $51,371 | $47,348 | | Total noninterest expense | $122,086 | $128,813 | $120,881 | | Net Income | $61,921 | $54,220 | $62,442 | | Diluted EPS | $0.48 | $0.42 | $0.49 | Consolidated Balance Sheets (Table 3) As of June 30, 2024, the company's consolidated balance sheet reported total assets of $24.0 billion, a decrease from $24.3 billion at the end of Q1 2024, with total deposits also decreasing to $20.3 billion, while net loans and leases remained relatively stable at $14.2 billion Consolidated Balance Sheet Summary (in thousands) | Item | June 30, 2024 | March 31, 2024 | Dec 31, 2023 | | :--- | :--- | :--- | :--- | | Total Assets | $23,991,791 | $24,279,186 | $24,926,474 | | Net Loans and Leases | $14,199,382 | $14,160,372 | $14,196,964 | | Total Deposits | $20,318,832 | $20,669,481 | $21,332,657 | | Total Stockholders' Equity | $2,550,312 | $2,513,761 | $2,486,066 | Average Balances and Interest Rates (Tables 4 & 5) These tables detail the average balances, interest income/expense, and yields for earning assets and interest-bearing liabilities, showing total average earning assets of $21.2 billion with a 4.66% yield and a net interest margin of 2.92% for Q2 2024 Q2 2024 Average Balances and Rates | Category | Average Balance (millions) | Yield/Rate | | :--- | :--- | :--- | | Total Earning Assets | $21,247.7 | 4.66% | | Total Loans and Leases | $14,358.0 | 5.67% | | Total Interest-Bearing Liabilities | $13,899.6 | 2.66% | | Total Interest-Bearing Deposits | $13,361.4 | 2.58% | | Net Interest Spread | | 2.00% | | Net Interest Margin | | 2.92% | Six Months Ended June 30, 2024 Average Balances and Rates | Category | Average Balance (millions) | Yield/Rate | | :--- | :--- | :--- | | Total Earning Assets | $21,364.8 | 4.63% | | Total Interest-Bearing Liabilities | $13,881.3 | 2.65% | | Net Interest Spread | | 1.98% | | Net Interest Margin | | 2.91% | Analysis of Change in Net Interest Income (Tables 6, 7, & 8) These tables break down the change in net interest income by attributing it to changes in volume and rate, showing a $1.5 million decrease compared to Q1 2024 and a $19.6 million decrease year-over-year for the six-month period - QoQ Change in Net Interest Income (vs. Q1 2024): -$1.5 million, composed of -$2.0 million from volume and +$0.5 million from rate[13] - YoY Change in Net Interest Income (vs. Q2 2023): -$6.8 million, composed of -$6.5 million from volume and -$0.3 million from rate[14] - YTD Change in Net Interest Income (vs. 6M 2023): -$19.6 million, composed of -$12.7 million from volume and -$6.9 million from rate[15] Loan and Lease Portfolio (Table 9) The total loan and lease portfolio stood at $14.36 billion as of June 30, 2024, a slight increase from the prior quarter, with significant concentrations in residential loans ($5.38 billion) and commercial real estate ($4.31 billion) Loan and Lease Portfolio Breakdown (in thousands) | Category | June 30, 2024 | March 31, 2024 | | :--- | :--- | :--- | | Commercial and industrial | $2,208,690 | $2,189,875 | | Commercial real estate | $4,305,017 | $4,301,300 | | Construction | $1,017,649 | $972,517 | | Total residential | $5,376,249 | $5,408,280 | | Consumer | $1,027,104 | $1,054,227 | | Total loans and leases | $14,359,899 | $14,320,208 | Deposit Composition (Table 10) Total deposits decreased to $20.32 billion as of June 30, 2024, from $20.67 billion in the prior quarter, primarily due to a decline in noninterest-bearing demand deposits, while money market and time deposits increased Deposit Breakdown (in thousands) | Category | June 30, 2024 | March 31, 2024 | | :--- | :--- | :--- | | Demand (Noninterest-bearing) | $6,857,467 | $7,048,553 | | Savings | $6,055,051 | $6,277,679 | | Money Market | $4,111,609 | $4,059,204 | | Time | $3,294,705 | $3,284,045 | | Total Deposits | $20,318,832 | $20,669,481 | Non-Performing Assets (Table 11) Total non-performing assets (NPAs) remained stable at $18.0 million as of June 30, 2024, consistent with the previous quarter, with non-accrual loans primarily concentrated in the residential loan portfolio ($13.4 million) Non-Performing Assets Breakdown (in thousands) | Category | June 30, 2024 | March 31, 2024 | | :--- | :--- | :--- | | Total Non-Accrual Loans and Leases | $18,013 | $18,017 | | Total Non-Performing Assets | $18,013 | $18,017 | | Accruing Loans Past Due 90+ Days | $3,765 | $3,620 | Allowance for Credit Losses Analysis (Table 12) The total allowance for credit losses and reserve for unfunded commitments was $193.9 million at quarter-end, with a $1.8 million provision for credit losses and net charge-offs of $2.5 million (0.07% of average loans), covering non-accrual loans by 8.91x Allowance for Credit Losses Roll-Forward (Q2 2024, in thousands) | Item | Amount | | :--- | :--- | | Balance at Beginning of Period | $194,649 | | Net Loans and Leases Charged-Off | ($2,519) | | Provision for Credit Losses | $1,800 | | Balance at End of Period | $193,930 | | Allowance for Credit Losses | $160,517 | | Reserve for Unfunded Commitments | $33,413 | Loan Portfolio Credit Quality Analysis (Table 13) Table 13 details loan portfolio credit quality by category and risk, showing strong profiles with most commercial loans rated 'Pass' and high FICO scores for residential and consumer loans - The total commercial lending portfolio of $7.96 billion is primarily composed of loans with a 'Pass' risk rating[20] - In the residential mortgage portfolio of $4.22 billion, over 92% ($3.87 billion) belongs to borrowers with FICO scores of 680 or greater[21] - The consumer lending portfolio of $1.03 billion has over 69% ($711 million) associated with borrowers having FICO scores of 680 or greater[21] Non-GAAP Financial Measures The company utilizes non-GAAP financial measures to supplement GAAP results, providing additional insights into performance and capital Explanation of Non-GAAP Measures The company utilizes non-GAAP financial measures such as return on average tangible assets and tangible book value per share, which management believes are useful for stakeholders to evaluate financial performance and capital adequacy, but should be considered as a supplement to, not a substitute for, GAAP results - The company uses non-GAAP measures like return on average tangible assets, return on average tangible stockholders' equity, tangible book value per share, and tangible stockholders' equity to tangible assets[25] - These measures are presented because management believes they are useful for evaluating financial performance and capital adequacy, but they have limitations and should not be viewed in isolation[25] - A reconciliation of these non-GAAP measures to their most directly comparable GAAP measures is provided in Table 14[26] GAAP to Non-GAAP Reconciliation (Table 14) This table provides a detailed reconciliation of GAAP measures to their non-GAAP counterparts by excluding goodwill, showing a Q2 2024 return on average tangible stockholders' equity (non-GAAP) of 16.42% compared to the GAAP return of 9.91%, and a tangible book value per share of $12.16 GAAP vs. Non-GAAP Ratios (Q2 2024) | Ratio | GAAP | Non-GAAP (Tangible) | | :--- | :--- | :--- | | Return on average stockholders' equity | 9.91% | 16.42% | | Return on average assets | 1.04% | 1.08% | | Book value per share | $19.94 | $12.16 | Company and Conference Call Information This section provides an overview of First Hawaiian, Inc., details conference call access, and outlines forward-looking statement disclaimers Company Overview First Hawaiian, Inc. is the Honolulu-based bank holding company for First Hawaiian Bank, Hawaii's oldest and largest financial institution, providing a comprehensive suite of banking services to consumers and businesses throughout Hawaii, Guam, and Saipan - First Hawaiian, Inc. is the holding company for First Hawaiian Bank, Hawaii's oldest and largest financial institution[4] - The company offers a full range of banking services, including deposit products, loans, wealth management, insurance, and credit card services[4] Conference Call Information The company hosted a conference call to discuss its Q2 2024 results on the day of the earnings release, with a live webcast and slide presentation made available on its website, where an archive is also accessible - A conference call was held at 1:00 p.m. Eastern Time / 7:00 a.m. Hawaii Time to discuss the results[5] - Registration links for phone access and a live webcast were provided for participants[6][23] Forward-Looking Statements The report contains forward-looking statements subject to risks and uncertainties, with actual results potentially differing materially from expectations - The report contains forward-looking statements that are not historical facts and are subject to risks, assumptions, and uncertainties[7] - The company cautions that these statements are not guarantees of future performance and that actual results may differ materially[7] - For a discussion of risks and important factors, readers are referred to the company's SEC filings, including its Form 10-K and 10-Q reports[7]