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CST: 16/07/2019 09:12:24   

First Hawaiian, Inc. Reports Fourth Quarter and Full Year 2018 Financial Results and Increases Dividend by 8.3%

172 Days ago

HONOLULU, Jan. 24, 2019 (GLOBE NEWSWIRE) -- First Hawaiian, Inc. (NASDAQ:FHB), (“First Hawaiian” or the “Company”) today reported financial results for its fourth quarter and full year ended December 31, 2018.

Fourth Quarter Highlights

  • Net income for the quarter ended December 31, 2018 was $60.0 million, or $0.44 per diluted share
  • Core net income1 for the quarter ended December 31, 2018 was $77.9 million, or $0.58 per diluted share
  • 1.19% return on average total assets and 1.62% core return on average tangible assets (“ROATA”)1,2
  • 9.77% return on average total stockholders’ equity and 21.44% core return on average tangible stockholders’ equity (“ROATCE”)1,2
  • 3.8% quarterly loan growth, 12 basis point net interest margin (“NIM”) expansion
  • The Board of Directors increased the dividend by $0.02 per share, or 8.3%, and declared a quarterly dividend of $0.26 per share

“2018 was another milestone year for First Hawaiian as we celebrated our 160th anniversary, and we capped it off with a great fourth quarter,” said Bob Harrison, Chairman and Chief Executive Officer.  “We had solid core earnings, driven by strong growth in loans and deposits, expansion in the net interest margin and excellent asset quality.  We also continued to optimize our balance sheet by restructuring the investment portfolio in early January, which will be immediately accretive to income.  This action, along with the strong loan and deposit growth in the quarter, positions us well for 2019.”

On January 23, 2019, the Company’s Board of Directors declared a quarterly cash dividend of $0.26 per share, an increase of $0.02 per share from the dividend paid in December 2018.  The dividend will be payable on March 8, 2019 to shareholders of record at the close of business on February 25, 2019.

Earnings Highlights

Net income for the quarter ended December 31, 2018 was $60.0 million, or $0.44 per diluted share, compared to $67.4 million, or $0.50 per diluted share, for the quarter ended September 30, 2018, and $11.7 million, or $0.08 per diluted share, for the quarter ended December 31, 2017.  Core net income1 for the quarter ended December 31, 2018 was $77.9 million, or $0.58 per diluted share, compared to $70.8 million, or $0.52 per diluted share, for the quarter ended September 30, 2018, and $59.2 million, or $0.42 per diluted share, for the quarter ended December 31, 2017. Net income for the full year 2018 was $264.4 million, or $1.93 per diluted share, compared to $183.7 million, or $1.32 per diluted share, for the full year 2017.  Core net income1 for the full year 2018 was $286.7 million, or $2.09 per diluted share, compared to $230.4 million, or $1.65 per diluted share for the full year 2017.

Net interest income for the quarter ended December 31, 2018 was $144.0 million, an increase of $2.7 million compared to $141.3 million for the quarter ended September 30, 2018, and an increase of $9.1 million compared to $134.9 million for the quarter ended December 31, 2017.  The increase in net interest income compared to the third quarter of 2018 and fourth quarter of 2017 was due to higher average balances and yields on loans, higher yields on investment securities and lower average balances of time deposits, partially offset by higher rates on deposits, lower average balances of interest-bearing deposits in other banks and investment securities, and higher average balances of borrowings.  Net interest income in the quarter ended December 31, 2018 included the benefit from a $1.1 million premium amortization adjustment related to the investment securities.  Net interest income for the full year 2018 was $566.3 million compared to $528.8 million for 2017.  The increase in net interest income was primarily attributable to higher average balances and yields on loans, higher yields on investment securities and interest bearing deposits in other banks, and lower average balances of time deposits, partially offset by higher rates on deposits, lower average balances of interest-bearing deposits in other banks and investment securities, and higher average balances of borrowings.

NIM was 3.23%, 3.11% and 2.99%, for the quarters ended December 31, 2018, September 30, 2018 and December 31, 2017, respectively.

Results for the quarter ended December 31, 2018 included a provision for credit losses of $5.8 million compared to $4.5 million in the quarter ended September 30, 2018 and $5.1 million in the quarter ended December 31, 2017.  The provision for credit losses for the full year of 2018 was $22.2 million, compared to $18.5 million in 2017. 

Noninterest income was $33.1 million in the quarter ended December 31, 2018, a decrease of $14.3 million compared to noninterest income of $47.4 million in the quarter ended September 30, 2018 and a decrease of $21.2 million compared to noninterest income of $54.3 million in the quarter ended December 31, 2017.  The decrease in noninterest income compared to the prior quarter was due to the $24.1 million other than temporary impairment (“OTTI”) losses on available-for-sale securities recognized as part of the investment portfolio restructuring and $2.6 million lower income from bank-owned life insurance (“BOLI”), partially offset by $11.1 million higher other noninterest income.  The increase in other noninterest income versus the prior quarter was primarily due to a $7.6 million mark-to-market adjustment associated with maturing cash flow hedges, $1.7 million higher swap fee income and $1.5 million related to intercompany taxes.   The decrease in noninterest income compared to the fourth quarter of 2017 was primarily due to the $24.1 million OTTI losses on available-for-sale securities and $1.6 million lower BOLI income, partially offset by $1.7 million higher other income, $1.4 million higher other service charges and fees and $1.2 million higher credit and debit card fees.  Other noninterest income in the fourth quarter of 2017 included a $4.3 million gain on sale of a bank property and $3.7 million related to intercompany taxes.  Noninterest income for full year 2018 was $179.0 million compared to $205.6 million for 2017.  The $26.6 million lower noninterest income in 2018 compared to 2017 was primarily due to the $24.1 million OTTI losses on available-for-sale securities, $4.1 million lower BOLI income, and $3.8 million lower service charges on deposit accounts and $1.4 million lower other noninterest income, partially offset by $4.3 million higher other service charges and fees and $1.7 million higher credit and debit card fees.   

Noninterest expense was $89.4 million for the quarter ended December 31, 2018, a decrease of $3.8 million from $93.1 million in the quarter ended September 30, 2018, and essentially unchanged from $89.9 million in the quarter ended December 31, 2017.  The third quarter of 2018 included an expense of $4.1 million in connection with an agreement in principle to resolve a class action suit regarding overdraft fees.  Excluding the legal expense in the third quarter, noninterest expenses in the fourth quarter of 2018 were essentially flat compared to the prior quarter.  Noninterest expense for full year 2018 was $365.0 million compared to $347.6 million in 2017, an increase of $17.4 million, primarily due to $4.8 million higher other expense, which includes the $4.1 million legal expense in the third quarter of 2018, $4.8 million higher contracted services and professional fees, $4.1 million higher salaries and employee benefits and $3.8 million higher occupancy expenses. 

The efficiency ratio was 50.5%, 49.4% and 47.5% for the quarters ended December 31, 2018, September 30, 2018 and December 31, 2017, respectively.  Core efficiency ratio1 was 44.2%, 46.9% and 46.4% for the quarters ended December 31, 2018, September 30, 2018 and December 31, 2017, respectively.  The efficiency ratio for full year 2018 was 49.0% compared to 47.3% in 2017.  Core efficiency ratio1 for full year 2018 was 46.6% compared to 47.0% in 2017.

The effective tax rate for the fourth quarter of 2018 was 26.8% compared with 26.0% in the previous quarter and 87.6% percent in the same quarter last year.  The provision for taxes in the fourth quarter of 2018 includes $1.5 million expense for intercompany taxes.  The provision for taxes in the fourth quarter of 2017 included a $47.6 million charge due to the revaluation of certain tax-related assets at the projected lower corporate tax rate resulting from the Tax Cuts and Jobs Act.  The effective tax rate for the full year 2018 was 26.2% compared with 50.1% in 2017.

Balance Sheet Highlights

Total assets were $20.7 billion at December 31, 2018, compared to $20.0 billion at September 30, 2018 and $20.5 billion at December 31, 2017.

The investment securities portfolio was $4.5 billion at December 31, 2018, compared to $4.6 billion at September 30, 2018 and $5.2 billion at December 31, 2017. 

Total loans and leases were $13.1 billion at December 31, 2018, up $475.7 million, or 3.8%, from $12.6 billion at September 30, 2018 and up $798.8 million, or 6.5%, from $12.3 billion at December 31, 2017.

The growth in loans and leases in the most recent quarter was due to increases in commercial and industrial (“C&I”) loans of $239.5 million, residential real estate loans of $104.0 million, commercial real estate loans of $99.0 million, home equity loans of $22.1 million, construction loans of $14.0 million and consumer loans of $10.6 million, slightly offset by a $13.5 million decline in lease financing.  Compared to December 31, 2017, the growth in loans and leases was due to increases in commercial real estate loans of $323.2 million, residential real estate loans of $300.5 million, consumer loans of $76.0 million, C&I loans of $73.5 million and home equity loans of $49.1 million, partially offset by a $17.3 million decrease in lease financing and $6.2 million decrease in construction loans.

Total deposits were $17.2 billion at December 31, 2018, an increase of $460.8 million, or 2.8%, from $16.7 billion at September 30, 2018, and a decrease of $462.1 million, or 2.6%, compared to $17.6 billion at December 31, 2017.  The increase in deposits in the fourth quarter of 2018 included about $400.0 million of temporary, surge deposits that came in late in the quarter and is net of the $174.0 million reduction in public time deposits.  The decrease in deposit balances compared to December 31, 2017 was due to the reduction of public time deposit balances by approximately $960 million in 2018. 

Asset Quality

The Company's asset quality remained excellent during the fourth quarter of 2018. Total non-performing assets were $7.3 million, or 0.06% of total loans and leases and other real estate owned, at December 31, 2018, compared to non-performing assets of $11.3 million, or 0.09% of total loans and leases and other real estate owned, at September 30, 2018 and non­-performing assets of $10.2 million, or 0.08% of total loans and leases and other real estate owned, at December 31, 2017.

Net charge offs for the quarter ended December 31, 2018 were $5.3 million, or 0.16% of average loans and leases on an annualized basis, compared to $3.8 million, or 0.12% of average loans and leases on an annualized basis for the quarter ended September 30, 2018 and $5.2 million, or 0.17% of average loans and leases on an annualized basis for the quarter ended December 31, 2017.  Net charge-offs for the full year 2018 were $17.7 million, or 0.14% of average loans and leases, compared to net charge-offs of $16.7 million, or 0.14% of average loans and leases, in 2017.

The ratio of the allowance for loan and lease losses to total loans and leases was 1.08% at December 31, 2018 compared to 1.12% at September 30, 2018 and 1.12% at December 31, 2017. 

Capital

Total stockholders' equity was $2.5 billion at December 31, 2018, compared to $2.4 billion at September 30, 2018 and $2.5 billion at December 31, 2017.   

The tier 1 leverage, common equity tier 1 and total capital ratios were 8.72%, 11.97% and 12.99%, respectively, at December 31, 2018, compared with 8.42%, 12.09% and 13.14% at September 30, 2018 and 8.52%, 12.45% and 13.50% at December 31, 2017.

Balance Sheet Restructuring

In January of 2019, we sold approximately $898 million of lower yielding available-for-sale securities, resulting in an after-tax loss of approximately $17.6 million or 13 cents per diluted share to be recognized in the fourth quarter of 2018 and $2.1 million to be recognized in the first quarter of 2019. The weighted average yield on the securities sold was 1.72% with an estimated duration of 2.8 years. Proceeds from the sales were reinvested in debt securities issued by U.S. government agencies at a weighted average yield of 3.03% with an estimated duration of 2.2 years. The Company estimates the restructuring will result in approximately $6.1 million of after-tax earnings accretion in 2019 and that the payback period of the loss will be approximately two and a half years.

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, 12:00 p.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:  7513429.  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 February 4, 2019.  Access the replay by dialing (855) 859-2056 or (404) 537-3406 and entering the conference ID:  7513429.

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 include, but are not limited to, statements relating to the estimated 2019 earnings accretion and payback period of the loss in connection with the restructuring transactions described above, 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, 2017.

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.

Investor Relations Contact:
Kevin Haseyama, CFA
(808) 525-6268
khaseyama@fhb.com
Media Contact:
Susan Kam
(808) 525-6254
skam@fhb.com

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 efficiency ratio and core earnings per diluted share to the comparable GAAP measurements.
2 ROATA and ROATCE are non-GAAP financial measurements.  See Tables 13 and 14 at the end of this document for reconciliations of average tangible assets and average tangible stockholders’ equity to the most directly comparable GAAP measurements.

                           
                           
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) 2018   2018   2017   2018   2017  
Operating Results:                              
Net interest income $   143,985   $ 141,258   $ 134,886   $   566,318   $ 528,804  
Provision for loan and lease losses     5,750     4,460     5,100       22,180     18,500  
Noninterest income     33,091     47,405     54,324       178,993     205,605  
Noninterest expense     89,354     93,147     89,850       364,953     347,554  
Net income     59,995     67,388     11,684       264,394     183,682  
Basic earnings per share     0.44     0.50     0.08       1.93     1.32  
Diluted earnings per share     0.44     0.50     0.08       1.93     1.32  
Dividends declared per share     0.24     0.24     0.22       0.96     0.88  
Dividend payout ratio     54.55 %   48.00 %   275.00 %     49.74 %   66.67 %
                               
Supplemental Income Statement Data (non-GAAP) :                              
Core net interest income $   143,985   $ 141,258   $ 134,886   $   566,318   $ 528,804  
Core noninterest income     57,176     47,405     50,069       203,078     198,683  
Core noninterest expense     88,919     88,511     85,777       358,561     342,097  
Core net income     77,914     70,818     59,163       286,711     230,366  
Core basic earnings per share     0.58     0.52     0.42       2.09     1.65  
Core diluted earnings per share     0.58     0.52     0.42       2.09     1.65  
Performance Ratio :                              
Net interest margin     3.23 3.11 %   2.99 %     3.16 2.99 %
Core net interest margin (non-GAAP)     3.23 3.11 %   2.99 %     3.16 2.99 %
Efficiency ratio     50.45 49.36 %   47.47 %     48.96 47.32 %
Core efficiency ratio (non-GAAP)     44.19 46.90 %   46.36 %     46.59 47.02 %
Return on average total assets     1.19 1.31 %   0.23 %     1.31 0.92 %
Core return on average total assets (non-GAAP)     1.54 1.38 %   1.16 %     1.42 1.16 %
Return on average tangible assets (non-GAAP)     1.25 1.38 %   0.24 %     1.37 0.97 %
Core return on average tangible assets (non-GAAP)(1)     1.62 1.45 %   1.22 %     1.49 1.22 %
Return on average total stockholders' equity     9.77 11.01 %   1.80 %     10.76 7.24 %
Core return on average total stockholders' equity (non-GAAP)   12.68 11.57 %   9.13 %     11.67 9.08 %
Return on average tangible stockholders' equity (non-GAAP)     16.51 18.66 %   2.94 %     18.08 11.91 %
Core return on average tangible stockholders’ equity (non-GAAP)(2)   21.44 19.61 %   14.90 %     19.61 14.93 %
Average Balances:                              
Average loans and leases $   12,829,635   $ 12,595,668   $ 12,169,167   $   12,570,182   $ 11,944,596  
Average earning assets     17,701,301     18,041,483     17,904,956       17,911,545     17,680,885  
Average assets     20,069,988     20,391,456     20,193,919       20,247,135     19,942,807  
Average deposits     16,608,611     17,158,849     17,211,872       17,115,380     17,016,382  
Average stockholders' equity     2,437,504     2,427,907     2,570,704       2,457,771     2,538,341  
Market Value Per Share:                              
Closing     22.51     27.16     29.18       22.51     29.18  
High     27.49     30.02     30.85       32.36     35.32  
Low     21.19     27.02     27.34       21.19     26.30  
                               
                               

 

    As of       As of       As of    
    December 31,        September 30,        December 31,     
  2018   2018   2017  
Balance Sheet Data:                  
Loans and leases $   13,076,191   $ 12,600,464   $ 12,277,369  
Total assets     20,695,678     19,983,838     20,549,461  
Total deposits     17,150,068     16,689,273     17,612,122  
Short-term borrowings         30,000      
Long-term borrowings     600,026     400,026     34  
Total stockholders' equity     2,524,839     2,423,462     2,532,551  
                   
Per Share of Common Stock:                  
Book value $   18.72   $ 17.97   $ 18.14  
Tangible book value (non-GAAP)(3)     11.34     10.59     11.01  
                   
Asset Quality Ratios:                  
Non-accrual loans and leases / total loans and leases     0.05   0.09 %   0.08 %
Allowance for loan and lease losses / total loans and leases     1.08   1.12 %   1.12 %
                   
Capital Ratios:                  
Common Equity Tier 1 Capital Ratio         11.97   12.09 %   12.45 %
Tier 1 Capital Ratio     11.97   12.09 %   12.45 %
Total Capital Ratio     12.99   13.14 %   13.50 %
Tier 1 Leverage Ratio     8.72   8.42 %   8.52 %
Total stockholders' equity to total assets     12.20   12.13 %   12.32 %
Tangible stockholders' equity to tangible assets (non-GAAP)     7.76   7.52 %   7.86 %
                   
Non-Financial Data:                  
Number of branches     60     60     62  
Number of ATMs     295     296     310  
Number of Full-Time Equivalent Employees     2,155     2,166     2,220  
                   
                   

 

Consolidated Statements of Income   Table 2
    Three Months Ended   For the Year Ended  
    December 31,    September 30,    December 31,    December 31, 
(dollars in thousands, except per share amounts)   2018
  2018   2017   2018
  2017
Interest income                              
Loans and lease financing   $   140,649     $ 135,394   $ 120,244   $   529,877     $ 462,675
Available-for-sale securities       25,537       25,196     26,589       107,123       102,272
Other       1,858       3,462     1,725       9,051       5,821
Total interest income       168,044       164,052     148,558       646,051       570,768
Interest expense                              
Deposits       20,152       20,205     13,665       72,976       41,944
Short-term and long-term borrowings       3,907       2,589     7       6,757       20
Total interest expense       24,059       22,794     13,672       79,733       41,964
Net interest income       143,985       141,258     134,886       566,318       528,804
Provision for loan and lease losses       5,750       4,460     5,100       22,180       18,500
Net interest income after provision for loan and lease losses       138,235       136,798     129,786       544,138       510,304
Noninterest income                              
Service charges on deposit accounts       8,427       7,933     8,259       32,036       35,807
Credit and debit card fees       16,755       16,535     15,599       65,716       64,049
Other service charges and fees       9,763       9,578     8,346       38,316       34,063
Trust and investment services income       7,895       7,487     7,949       31,324       30,485
Bank-owned life insurance       1,086       3,692     2,659       9,217       13,283
Other-than-temporary impairment (OTTI) losses on available-for-sale debt securities       (24,085 )               (24,085 )    
Other       13,250       2,180     11,512       26,469       27,918
Total noninterest income       33,091       47,405     54,324       178,993       205,605
Noninterest expense                              
Salaries and employee benefits       41,407       41,959     43,627       167,162       163,086
Contracted services and professional fees       13,005       11,478     11,481       49,775       45,011
Occupancy       7,181       6,757     6,103       27,330       23,485
Equipment       4,610       4,181     4,349       17,714       17,247
Regulatory assessment and fees       2,053       3,966     3,715       14,217       14,907
Advertising and marketing       1,687       1,060     936       4,813       6,191
Card rewards program       6,978       5,805     6,256       24,860       23,363
Other       12,433       17,941     13,383       59,082       54,264
Total noninterest expense       89,354       93,147     89,850       364,953       347,554
Income before provision for income taxes       81,972       91,056     94,260       358,178       368,355
Provision for income taxes       21,977       23,668     82,576       93,784       184,673
Net income   $   59,995     $ 67,388   $ 11,684   $   264,394     $ 183,682
Basic earnings per share   $   0.44     $ 0.50   $ 0.08   $   1.93     $ 1.32
Diluted earnings per share   $   0.44     $ 0.50   $ 0.08   $   1.93     $ 1.32
Dividends declared per share   $   0.24     $ 0.24   $ 0.22   $   0.96     $ 0.88
Basic weighted-average outstanding shares       134,874,277       135,466,669     139,588,782       136,945,134       139,560,305
Diluted weighted-average outstanding shares       135,100,162       135,675,498     139,698,674       137,111,420       139,656,993
                               
                               

 

Consolidated Balance Sheets   Table 3
    December 31,    September 30,    December 31, 
(dollars in thousands)   2018
  2018
  2017
Assets                  
Cash and due from banks   $   396,836     $   350,967     $   367,084  
Interest-bearing deposits in other banks       606,801         348,526         667,560  
Investment securities       4,498,342         4,595,301         5,234,658  
Loans held for sale       432         —         556  
Loans and leases     13,076,191       12,600,464       12,277,369  
Less: allowance for loan and lease losses       141,718         141,250         137,253  
Net loans and leases     12,934,473       12,459,214       12,140,116  
                   
Premises and equipment, net       304,996         286,374         289,215  
Other real estate owned and repossessed personal property       751         362         329  
Accrued interest receivable       48,920         49,407         47,987  
Bank-owned life insurance       446,076         444,987         438,010  
Goodwill       995,492         995,492         995,492  
Mortgage servicing rights       16,155         16,937         13,196  
Other assets       446,404         436,271         355,258  
Total assets   $ 20,695,678     $ 19,983,838     $ 20,549,461  
Liabilities and Stockholders' Equity                  
Deposits:                  
Interest-bearing   $   11,142,127     $   10,881,918     $   11,485,269  
Noninterest-bearing       6,007,941         5,807,355         6,126,853  
Total deposits     17,150,068       16,689,273       17,612,122  
Short-term borrowings               30,000         —  
Long-term borrowings       600,026         400,026         34  
Retirement benefits payable       127,909         135,523         134,218  
Other liabilities       292,836         305,554         270,536  
Total liabilities     18,170,839       17,560,376       18,016,910  
                   
Stockholders' equity                  
Common stock ($0.01 par value; authorized 300,000,000 shares; issued/outstanding: 139,656,674 / 134,874,302 shares as of December 31, 2018, issued/outstanding: 139,655,841 / 134,873,728 shares as of September 30, 2018 and issued/outstanding: 139,599,454 / 139,588,782 shares as of December 31, 2017)       1,397         1,397         1,396  
Additional paid-in capital       2,495,853         2,494,436         2,488,643  
Retained earnings       291,919         264,463         139,177  
Accumulated other comprehensive loss, net       (132,195 )       (204,699 )       (96,383 )
Treasury stock (4,782,372 shares as of December 31, 2018, 4,782,113 as of September 30, 2018 and 10,672 as of December 31, 2017)       (132,135 )       (132,135 )       (282 )
Total stockholders' equity       2,524,839         2,423,462         2,532,551  
Total liabilities and stockholders' equity   $ 20,695,678     $ 19,983,838     $ 20,549,461  
                   
                   

 

Average Balances and Interest Rates                                               Table 4    
    Three Months Ended     Three Months Ended     Three Months Ended    
    December 31, 2018   September 30, 2018   December 31, 2017  
      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   $   290.0   $   1.5     2.04 $ 656.7   $ 3.3   1.99 % $ 479.4   $ 1.6   1.31 %
Available-for-Sale Investment Securities       4,521.3       25.5     2.24     4,737.3     25.2   2.11     5,236.8     26.6   2.01  
Loans Held for Sale       0.3           3.51     1.8       3.83     0.1       3.57  
Loans and Leases(1)                                                  
Commercial and industrial       3,120.9       32.7     4.16     3,019.9     31.0   4.08     3,130.3     26.3   3.34  
Commercial real estate       3,013.0       32.4     4.27     2,975.3     31.0   4.13     2,755.1     25.6   3.68  
Construction       623.9       7.1     4.51     629.5     6.7   4.20     605.5     5.5   3.57  
Residential:                                                  
Residential mortgages       3,351.8       36.0     4.26     3,288.5     34.9   4.21     3,069.9     32.7   4.23  
Home equity lines       904.5       8.7     3.78     870.5     8.2   3.72     864.0     7.6   3.50  
Consumer       1,657.9       22.7     5.44     1,649.7     22.4   5.39     1,575.1     21.3   5.36  
Lease financing       157.6       1.1     2.70     162.3     1.2   3.00     169.3     1.3   2.94  
Total Loans and Leases       12,829.6       140.7     4.35     12,595.7     135.4   4.26     12,169.2     120.3   3.92  
Other Earning Assets       60.1       0.4     2.42     50.0     0.2   1.29     19.5     0.1   2.98  
Total Earning Assets(2)       17,701.3       168.1     3.77     18,041.5     164.1   3.61     17,905.0     148.6   3.29  
Cash and Due from Banks       339.7               336.5               317.5            
Other Assets       2,029.0               2,013.5               1,971.4            
Total Assets   $   20,070.0             $ 20,391.5             $ 20,193.9            
                                                   
Interest-Bearing Liabilities                                                  
Interest-Bearing Deposits                                                  
Savings   $   4,708.4   $   3.6     0.30 $ 4,727.2   $ 3.3   0.28 %   4,401.0   $ 1.3   0.12 %
Money Market       3,021.9       6.1     0.80     2,871.0     4.6   0.63     2,582.1     1.1   0.17  
Time       3,026.2       10.5     1.37     3,705.7     12.3   1.32     4,299.7     11.3   1.04  
Total Interest-Bearing Deposits       10,756.5       20.2     0.74     11,303.9     20.2   0.71     11,282.8     13.7   0.48  
Short-Term Borrowings       112.9       0.6     2.26     3.3       1.30     2.3       1.11  
Long-Term Borrowings       452.2       3.3     2.86     358.7     2.6   2.85            
Total Interest-Bearing Liabilities       11,321.6       24.1     0.84     11,665.9     22.8   0.78     11,285.1     13.7   0.48  
Net Interest Income         $   144.0             $ 141.3             $ 134.9      
Interest Rate Spread                 2.93             2.83 %             2.81 %
Net Interest Margin                 3.23             3.11 %             2.99 %
Noninterest-Bearing Demand Deposits       5,852.1               5,854.9               5,929.1            
Other Liabilities       458.8               442.8               409.0            
Stockholders' Equity       2,437.5               2,427.9               2,570.7            
Total Liabilities and Stockholders' Equity   $   20,070.0             $ 20,391.5             $ 20,193.9            
                                                   
                                                   

 

Average Balances and Interest Rates                                 Table 5    
    Year Ended     Year Ended    
    December 31, 2018   December 31, 2017  
      Average       Income/       Yield/       Average       Income/       Yield/    
(dollars in millions)     Balance       Expense       Rate       Balance       Expense       Rate    
Earning Assets                                  
Interest-Bearing Deposits in Other Banks   $   460.8   $   8.3     1.81 $ 507.3   $ 5.5   1.09 %
Available-for-Sale Investment Securities       4,843.0       107.1     2.21     5,201.5     102.3   1.97  
Loans Held for Sale       1.0           3.60            
Loans and Leases(1)                                  
Commercial and industrial       3,105.4       121.9     3.93     3,230.2     103.6   3.21  
Commercial real estate       2,918.5       118.7     4.07     2,643.6     96.7   3.66  
Construction       623.6       25.8     4.13     537.8     18.6   3.45  
Residential:                                  
Residential mortgages       3,254.9       138.4     4.25     2,956.3     126.2   4.27  
Home equity lines       874.2       32.2     3.68     865.2     29.6   3.43  
Consumer       1,633.2       88.2     5.40     1,540.0     83.1   5.40  
Lease financing       160.4       4.7     2.91     171.5     4.9   2.87  
Total Loans and Leases       12,570.2       529.9     4.22     11,944.6     462.7   3.87  
Other Earning Assets       36.5       0.7     1.93     27.5     0.3   1.04  
Total Earning Assets(2)       17,911.5       646.0     3.61     17,680.9     570.8   3.23  
Cash and Due from Banks       328.3               321.4            
Other Assets       2,007.3               1,940.5            
Total Assets   $   20,247.1             $ 19,942.8            
                                   
Interest-Bearing Liabilities                                  
Interest-Bearing Deposits                                  
Savings   $   4,638.6   $   11.0     0.24 $ 4,475.2   $ 3.9   0.09 %
Money Market       2,833.4       15.2     0.53     2,576.0     3.3   0.13  
Time       3,743.5       46.8     1.25     4,096.4     34.8   0.85  
Total Interest-Bearing Deposits       11,215.5       73.0     0.65     11,147.6     42.0   0.38  
Short-Term Borrowings       39.9       0.8     2.13     2.2       0.80  
Long-Term Borrowings       206.0       5.9     2.87            
Total Interest-Bearing Liabilities       11,461.4       79.7     0.70     11,149.8     42.0   0.38  
Net Interest Income         $   566.3             $ 528.8      
Interest Rate Spread                 2.91             2.85 %
Net Interest Margin                 3.16             2.99 %
Noninterest-Bearing Demand Deposits       5,899.9               5,868.8            
Other Liabilities       428.0               385.9            
Stockholders' Equity       2,457.8               2,538.3            
Total Liabilities and Stockholders' Equity   $   20,247.1             $ 19,942.8            
                                   
                                   

 

Analysis of Change in Net Interest Income                   Table 6  
    Three Months Ended December 31, 2018
    Compared to September 30, 2018
(dollars in millions)     Volume       Rate     Total
Change in Interest Income:                  
Interest-Bearing Deposits in Other Banks   $   (1.9 )   $   0.1   $   (1.8 )
Available-for-Sale Investment Securities       (1.2 )       1.5       0.3
Loans and Leases                  
Commercial and industrial       1.1       0.6       1.7
Commercial real estate       0.4       1.0       1.4
Construction       (0.1 )       0.5       0.4
Residential:                  
Residential mortgage       0.7       0.4       1.1
Home equity line       0.3       0.2       0.5
Consumer       0.1       0.2       0.3
Lease financing             (0.1 )       (0.1 )
Total Loans and Leases       2.5       2.8       5.3
Other Earning Assets             0.2       0.2
Total Change in Interest Income       (0.6 )       4.6       4.0
                   
Change in Interest Expense:                  
Interest-Bearing Deposits                  
Savings             0.3       0.3
Money Market       0.3       1.2       1.5
Time       (2.3 )       0.5       (1.8 )
Total Interest-Bearing Deposits       (2.0 )       2.0      
Short-Term Borrowings       0.6             0.6
Long-Term Borrowings       0.7             0.7
Total Change in Interest Expense       (0.7 )       2.0       1.3
Change in Net Interest Income   $   0.1   $   2.6   $   2.7
                   
                   

 

Analysis of Change in Net Interest Income                   Table 7  
    Three Months Ended December 31, 2018
    Compared to December 31, 2017
(dollars in millions)     Volume       Rate     Total
Change in Interest Income:                  
Interest-Bearing Deposits in Other Banks   $   (0.8 )   $   0.7   $   (0.1 )
Available-for-Sale Investment Securities       (3.9 )       2.8       (1.1 )
Loans and Leases                  
Commercial and industrial       (0.1 )       6.5       6.4
Commercial real estate       2.5       4.3       6.8
Construction       0.2       1.5       1.7
Residential:                  
Residential mortgage       3.0       0.3       3.3
Home equity line       0.4       0.6       1.0
Consumer       1.1       0.3       1.4
Lease financing       (0.1 )       (0.1 )       (0.2 )
Total Loans and Leases       7.0       13.4       20.4
Other Earning Assets       0.3             0.3
Total Change in Interest Income       2.6       16.9       19.5
                   
Change in Interest Expense:                  
Interest-Bearing Deposits                  
Savings       0.1       2.2       2.3
Money Market       0.2       4.8       5.0
Time       (3.8 )       3.0       (0.8 )
Total Interest-Bearing Deposits       (3.5 )       10.0       6.5
Short-Term Borrowings       0.6             0.6
Long-Term Borrowings       3.3             3.3
Total Change in Interest Expense       0.4       10.0       10.4
Change in Net Interest Income   $   2.2   $   6.9   $   9.1
                   
                   

 

Analysis of Change in Net Interest Income                   Table 8  
    Year Ended December 31, 2018
    Compared to December 31, 2017
(dollars in millions)     Volume       Rate     Total
Change in Interest Income:                  
Interest-Bearing Deposits in Other Banks   $   (0.5 )   $   3.3   $   2.8
Available-for-Sale Investment Securities       (7.3 )       12.2       4.9
Loans and Leases                  
Commercial and industrial       (4.1 )       22.4       18.3
Commercial real estate       10.6       11.5       22.1
Construction       3.2       4.0       7.2
Residential:                  
Residential mortgage       12.7       (0.4 )       12.3
Home equity line       0.3       2.2       2.5
Consumer       5.0             5.0
Lease financing       (0.3 )       0.1       (0.2 )
Total Loans and Leases       27.4       39.8       67.2
Other Earning Assets       0.1       0.3       0.4
Total Change in Interest Income       19.7       55.6       75.3
                   
Change in Interest Expense:                  
Interest-Bearing Deposits                  
Savings       0.1       7.0       7.1
Money Market       0.4       11.5       11.9
Time       (3.2 )       15.2       12.0
Total Interest-Bearing Deposits       (2.7 )       33.7       31.0
Short-Term Borrowings       0.8       0.1       0.9
Long-Term Borrowings       5.9             5.9
Total Change in Interest Expense       4.0       33.8       37.8
Change in Net Interest Income   $   15.7   $   21.8   $   37.5
                   
                   

 

Loans and Leases                 Table 9
    December 31,    September 30,    December 31, 
(dollars in thousands)   2018   2018   2017
Commercial and industrial   $   3,208,760   $ 2,969,237   $ 3,135,266
Commercial real estate       2,990,783     2,891,753     2,667,597
Construction       626,757     612,794     632,911
Residential:                  
Residential mortgage       3,527,101     3,423,115     3,226,601
Home equity line       912,517     890,374     863,452
Total residential       4,439,618     4,313,489     4,090,053
Consumer       1,662,504     1,651,877     1,586,476
Lease financing       147,769     161,314     165,066
Total loans and leases   $   13,076,191   $ 12,600,464   $ 12,277,369
                   
                   

 

Deposits                 Table 10
    December 31,    September 30,    December 31, 
(dollars in thousands)   2018   2018   2017
Demand   $   6,007,941   $ 5,807,355   $ 6,126,853
Savings       4,853,285     4,685,460     4,509,419
Money Market       3,196,678     2,905,959     2,801,968
Time       3,092,164     3,290,499     4,173,882
  Total Deposits   $   17,150,068   $ 16,689,273   $ 17,612,122
                   
                   

 

Non-Performing Assets and Accruing Loans and Leases Past Due 90 Days or More                 Table 11
    December 31,    September 30,    December 31, 
(dollars in thousands)   2018   2018   2017
Non-Performing Assets                  
Non-Accrual Loans and Leases                  
Commercial Loans:                  
Commercial and industrial   $   274   $ 481   $ 2,932
Commercial real estate       1,658     2,786     1,786
Construction           2,001    
Total Commercial Loans       1,932     5,268     4,718
Residential Loans:                  
Residential mortgage       4,611     5,678     5,107
Total Residential Loans       4,611     5,678     5,107
Total Non-Accrual Loans and Leases       6,543     10,946     9,825
Other Real Estate Owned       751     362     329
Total Non-Performing Assets   $   7,294   $ 11,308   $ 10,154
                   
Accruing Loans and Leases Past Due 90 Days or More                  
Commercial Loans:                  
Commercial and industrial   $   141   $ 141   $ 220
Commercial real estate           172     1,400
Total Commercial Loans       141     313     1,620
Residential Loans:                  
Residential mortgage       32     168    
Home equity line       2,842     2,620     1,360
Total Residential Loans       2,874     2,788     1,360
Consumer       3,373     2,813     1,394
Total Accruing Loans and Leases Past Due 90 Days or More   $   6,388   $ 5,914   $ 4,374
                   
Restructured Loans on Accrual Status and Not Past Due 90 Days or More       24,033     28,608     34,130
  Total Loans and Leases     $   13,076,191   $ 12,600,464   $ 12,277,369
                   
                   

 

Allowance for Loan and Lease Losses                             Table 12  
    For the Three Months Ended     For the Year Ended    
    December 31,    September 30,    December 31,    December 31,    December 31,   
(dollars in thousands)   2018   2018   2017   2018   2017  
Balance at Beginning of Period   $   141,250     $ 140,601     $ 137,327     $   137,253     $ 135,494    
Loans and Leases Charged-Off                                
Commercial Loans:                                
Commercial and industrial             (303 )     (181 )       (778 )     (1,519 )  
Lease financing                                 (147 )  
Total Commercial Loans             (303 )     (181 )       (778 )     (1,666 )  
Residential       (6 )     (125 )     (93 )       (165 )     (408 )  
Consumer       (8,015 )     (5,700 )     (6,765 )       (26,630 )     (23,851 )  
Total Loans and Leases Charged-Off       (8,021 )     (6,128 )     (7,039 )       (27,573 )     (25,925 )  
Recoveries on Loans and Leases Previously Charged-Off                                
Commercial Loans:                                
Commercial and industrial       78       51       19         232       844    
Commercial real estate       41       21       128         216       596    
Total Commercial Loans       119       72       147         448       1,440    
Residential       256       442       77         940       687    
Consumer       2,364       1,803       1,641         8,470       7,057    
Total Recoveries on Loans and Leases Previously Charged-Off       2,739       2,317       1,865         9,858       9,184    
Net Loans and Leases Charged-Off       (5,282 )     (3,811 )     (5,174 )       (17,715 )     (16,741 )  
Provision for Loan and Lease Losses       5,750       4,460       5,100         22,180       18,500    
Balance at End of Period   $   141,718     $ 141,250     $ 137,253     $   141,718     $ 137,253    
Average Loans and Leases Outstanding   $   12,829,635     $ 12,595,668     $ 12,169,167     $   12,570,182     $ 11,944,596    
Ratio of Net Loans and Leases Charged-Off to Average Loans and Leases Outstanding       0.16   0.12   % 0.17   %   0.14   0.14   %
Ratio of Allowance for Loan and Lease Losses to Loans and Leases Outstanding       1.08   1.12   % 1.12   %   1.08   1.12   %
                                 
                                 

 

GAAP to Non-GAAP Reconciliation                     Table 13  
    For the Three Months Ended     For the Year Ended    
    December 31,    September 30,    December 31,    December 31,   
(dollars in thousands, except per share amounts)   2018     2018   2017   2018     2017  
Income Statement Data:                                
Net income   $   59,995   $ 67,388   $ 11,684   $   264,394   $ 183,682  
                                 
Average total stockholders' equity   $   2,437,504   $ 2,427,907   $ 2,570,704   $   2,457,771   $ 2,538,341  
Less: average goodwill       995,492     995,492     995,492       995,492     995,492  
Average tangible stockholders' equity   $   1,442,012   $ 1,432,415   $ 1,575,212   $   1,462,279   $ 1,542,849  
                                 
Average total assets   $   20,069,988   $ 20,391,456   $ 20,193,919   $   20,247,135   $ 19,942,807  
Less: average goodwill       995,492     995,492     995,492       995,492     995,492  
Average tangible assets   $   19,074,496   $ 19,395,964   $ 19,198,427   $   19,251,643   $ 18,947,315  
                                 
Return on average total stockholders' equity(1)       9.77   11.01 %   1.80 %     10.76   7.24 %
Return on average tangible stockholders' equity (non-GAAP)(1)       16.51   18.66 %   2.94 %     18.08   11.91 %
                                 
Return on average total assets(1)       1.19   1.31 %   0.23 %     1.31   0.92 %
Return on average tangible assets (non-GAAP)(1)       1.25   1.38 %   0.24 %     1.37   0.97 %
                                 
Average stockholders' equity to average assets       12.15   11.91 %   12.73 %     12.14   12.73 %
Tangible average stockholders' equity to tangible average assets (non-GAAP)       7.56   7.39 %   8.20 %     7.60   8.14 %
                                 
                  As of       As of       As of    
                December 31,    September 30,    December 31,   
                2018   2018   2017  
Balance Sheet Data:                                
Total stockholders' equity               $   2,524,839   $ 2,423,462   $ 2,532,551  
Less: goodwill                   995,492     995,492     995,492  
Tangible stockholders' equity               $   1,529,347   $ 1,427,970   $ 1,537,059  
                                 
Total assets               $   20,695,678   $ 19,983,838   $ 20,549,461  
Less: goodwill                   995,492     995,492     995,492  
Tangible assets               $   19,700,186   $ 18,988,346   $ 19,553,969  
                                 
Shares outstanding                   134,874,302     134,873,728     139,588,782  
                                 
Total stockholders' equity to total assets                   12.20   12.13 %   12.32 %
Tangible stockholders' equity to tangible assets (non-GAAP)                 7.76   7.52 %   7.86 %
                                 
Book value per share               $   18.72   $ 17.97   $ 18.14  
Tangible book value per share (non-GAAP)               $   11.34   $ 10.59   $ 11.01  
                                 
                                 

 

GAAP to Non-GAAP Reconciliation                             Table 14  
    For the Three Months Ended   For the Year Ended    
    December 31,    September 30,    December 31,    December 31,   
(dollars in thousands, except per share amounts)   2018
  2018
  2017
  2018
  2017
 
Net interest income   $   143,985     $   141,258     $   134,886     $   566,318     $   528,804    
Core net interest income (non-GAAP)   $   143,985     $   141,258     $   134,886     $   566,318     $   528,804    
                                 
Noninterest income   $   33,091     $   47,405     $   54,324     $   178,993     $   205,605    
OTTI losses on available-for-sale debt securities       24,085         —         —         24,085         —    
Gains on sale of real estate               —         (4,255 )               (6,922 )  
Core noninterest income (non-GAAP)   $   57,176     $   47,405     $   50,069     $   203,078     $   198,683    
                                 
Noninterest expense   $   89,354     $   93,147     $   89,850     $   364,953     $   347,554    
Loss on litigation settlement(1)               (4,125 )       —         (4,125 )       —    
One-time items(2)       (435 )       (511 )       (4,073 )       (2,267 )       (5,457 )  
Core noninterest expense (non-GAAP)   $   88,919     $   88,511     $   85,777     $   358,561     $   342,097    
                                 
Net income   $   59,995     $   67,388     $   11,684     $   264,394     $   183,682    
OTTI losses on available-for-sale debt securities       24,085                         24,085            
Gains on sale of real estate               —         (4,255 )               (6,922 )  
Loss on litigation settlement(1)               4,125         —         4,125         —    
One-time noninterest expense items(2)       435         511         4,073         2,267         5,457    
Tax reform bill               —         47,598                 47,598    
Tax adjustments(3)       (6,601 )       (1,206 )       63         (8,160 )       551    
Total core adjustments       17,919         3,430         47,479         22,317         46,684    
Core net income (non-GAAP)   $   77,914     $   70,818     $   59,163     $   286,711     $   230,366    
Core basic earnings per share (non-GAAP)   $   0.58     $   0.52     $   0.42     $   2.09     $   1.65    
Core diluted earnings per share (non-GAAP)   $   0.58     $   0.52     $   0.42     $   2.09     $   1.65    
Core efficiency ratio (non-GAAP)       44.19   %     46.90   %     46.36   %     46.59   %     47.02   %
                                 
Basic earnings per share   $   0.44     $   0.50     $   0.08     $   1.93     $   1.32    
Diluted earnings per share   $   0.44     $   0.50     $   0.08     $   1.93     $   1.32    
Efficiency ratio       50.45   %     49.36   %     47.47   %     48.96   %     47.32   %

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