First Hawaiian(US:FHB)2024-02-28 21:06Employee and Diversity Statistics - As of December 31, 2023, the company had over 2,000 employees with an average tenure of 11.5 years[20] - The board of directors includes three women (33%) and six ethnically diverse individuals (67%)[25] - 63% of employees are women, 54% of management positions are held by women, and 86% of the workforce is ethnically diverse[25] Regulatory Environment - The company is subject to extensive regulation under federal and state banking laws, impacting growth potential and financial performance[32] - The company must obtain prior approval from the Federal Reserve for acquisitions that would result in owning 5% or more of any class of voting shares[46] - The company is primarily regulated by the FDIC and the Hawaii Department of Financial Institutions[37] - The company’s ability to pay dividends is subject to regulatory limitations and the financial condition of the bank[48] - The Federal Reserve requires bank holding companies to maintain sufficient net income to fund dividends, ensuring alignment with capital needs and asset quality[50] - The Bank is prohibited from paying dividends if it would become undercapitalized or if it is already undercapitalized, as per the Federal Deposit Insurance Act[63] - The Company is subject to regulatory capital requirements under Basel III and the Dodd-Frank Act, which impose specific capital measures and ratios[56] - The FDIA mandates that institutions categorized as undercapitalized must submit a capital restoration plan to their federal bank regulator[67] - Transactions with affiliates must be conducted on terms at least as favorable as those with unaffiliated third parties, as regulated by federal banking law[52] Financial Performance and Capital Adequacy - As of December 31, 2023, the Bank's CET1 capital ratio was 12.30%, total capital ratio was 13.48%, and Tier 1 leverage ratio was 8.57%, indicating strong capital adequacy[65] - The Company met all capital ratio requirements to be classified as well-capitalized, with a CET1 capital ratio of 12.39% and a total capital ratio of 13.57%[66] - The minimum capital ratios required under the Capital Rules include 4.5% CET1 to risk-weighted assets and 10.5% total capital to risk-weighted assets[58] - The capital conservation buffer of 2.5% is required on top of the minimum risk-weighted asset ratios, effectively raising the CET1 requirement to 7%[58] - The Bank's ability to accept brokered deposits is contingent upon its capital status, requiring it to be well-capitalized or adequately capitalized with a waiver from the FDIC[68] Income and Expense Analysis - Total noninterest income increased by $21.3 million or 12% to $200.8 million for the year ended December 31, 2023, compared to $179.5 million in 2022[296] - Service charges on deposit accounts rose to $29.6 million for the year ended December 31, 2023, an increase of $0.8 million or 3% compared to 2022[297] - Credit and debit card fees decreased by $2.1 million or 3% to $63.9 million for the year ended December 31, 2023, primarily due to increased network association dues[298] - Trust and investment services income increased by $2.0 million or 5% to $38.4 million for the year ended December 31, 2023, driven by higher investment management and business cash management fees[300] - Bank-owned life insurance (BOLI) income surged to $15.3 million for the year ended December 31, 2023, an increase of $14.1 million compared to 2022[301] - Total noninterest expense for the year ended December 31, 2023, was $501.1 million, an increase of $60.7 million or 14% compared to 2022[305] - Salaries and employee benefits expense was $225.8 million for the year ended December 31, 2023, an increase of $26.6 million or 13% compared to 2022, driven by a $12.7 million increase in base salaries[306] - Regulatory assessment and fees were $32.1 million for the year ended December 31, 2023, an increase of $22.5 million compared to 2022, primarily due to increases in FDIC insurance assessments[310] Credit Losses and Asset Quality - Provision for credit losses was $26.6 million for the year ended December 31, 2023, compared to $1.4 million in 2022, primarily due to increases in consumer loans and commercial real estate loans[293] - The allowance for credit losses (ACL) was $156.5 million as of December 31, 2023, representing 1.09% of total outstanding loans and leases, up from 1.02% in 2022[293] - Net charge-offs were $12.2 million for the year ended December 31, 2023, representing 0.09% of total average loans and leases[293] - Total Non-Performing Assets (NPAs) increased to $18.6 million as of December 31, 2023, a rise of $6.6 million or 55% from $11.996 million in 2022[382] - The ratio of NPAs to total loans and leases and Other Real Estate Owned (OREO) was 0.13% as of December 31, 2023, up from 0.09% in 2022[382] - The Allowance for Credit Losses (ACL) increased to $192.1 million at the end of 2023, up from $177.7 million in 2022[390] Deposits and Liquidity - Total deposits decreased by $356.4 million or 2% to $21.3 billion as of December 31, 2023, primarily due to a $951.1 million decrease in non-public demand deposits[404] - Public deposits amounted to $1.8 billion as of December 31, 2023, a decrease of $129.2 million or 7% compared to 2022[403] - The amount of deposits exceeding FDIC insurance limits was estimated at $10.8 billion or 51% of total deposits as of December 31, 2023[405] - The company took $500 million in FHLB advances in March 2023 to enhance liquidity amid banking sector volatility[334] Investment Securities and Loans - The carrying value of the investment securities portfolio was $6.3 billion as of December 31, 2023, a decrease of $1.2 billion or 16% compared to December 31, 2022[350] - Total loans and leases were $14.4 billion as of December 31, 2023, an increase of $261.5 million or 2% from December 31, 2022[362] - Commercial real estate loans increased by $207.9 million or 5% to $4.3 billion as of December 31, 2023, primarily due to completed construction loans converted to commercial real estate loans[364] - The total available-for-sale investment securities amounted to $2.6 billion as of December 31, 2023, with a weighted average yield of 2.04%[350] - The company held $3.5 billion in collateralized mortgage obligations issued by Ginnie Mae, Fannie Mae, and Freddie Mac as of December 31, 2023[352] Future Outlook and Strategic Initiatives - The company expects to meet its cash obligations through dividends from the Bank and other liquidity sources, including selling residential real estate loans and issuing long-term debt[337] - The company believes its existing cash and cash equivalents will be sufficient to meet cash requirements for the next twelve months and beyond[338] - The company has off-balance sheet arrangements that may affect its financial condition, including variable interest entities and guarantees[339] - The company will continue to monitor factors influencing expected credit losses, including economic uncertainty and inflation[394]