<PAGE> 1
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
------------------
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from . . . . . . . . . . to . . . . . . . . .
Commission file number 0-7949
------------------
FIRST HAWAIIAN, INC.
(Exact name of registrant as specified in its charter)
------------------
<TABLE>
<S> <C>
DELAWARE 99-0156159
(State of incorporation) (I.R.S. Employer
Identification No.)
1132 BISHOP STREET, HONOLULU, HAWAII 96813
(Address of principal executive offices) (Zip Code)
</TABLE>
(808) 525-7000
(Registrant's telephone number, including area code)
------------------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past
90 days.
Yes X No
----- -----
The number of shares outstanding of each of the issuer's classes of common
stock as of April 30, 1995 was:
<TABLE>
<S> <C>
Class Outstanding
-------------------------- -----------------
Common Stock, $5 Par Value 31,964,192 Shares
</TABLE>
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<PAGE> 2
Part I. FINANCIAL INFORMATION
<TABLE>
<CAPTION>
Item 1. Financial Statements (Unaudited) Page
----
<S> <C>
Consolidated Balance Sheets at March 31, 1995, December 31, 1994
and March 31, 1994 2
Consolidated Statements of Income for the three months ended March 31, 1995
and 1994 3
Consolidated Statements of Cash Flows for the three months ended
March 31, 1995 and 1994 4
Consolidated Statements of Changes in Stockholders' Equity for the
three months ended March 31, 1995 and 1994 5
Notes to Consolidated Financial Statements 5
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 6-15
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 16
SIGNATURES 17
EXHIBIT INDEX
</TABLE>
1
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS (Unaudited)
First Hawaiian, Inc. and Subsidiaries
<TABLE>
<CAPTION>
MARCH 31, December 31, March 31,
---------- ------------ ----------
1995 1994 1994
---------- ---------- ----------
(in thousands)
<S> <C> <C> <C>
ASSETS
Interest-bearing deposits in other banks $ 8,770 $ 11,670 $ 65,810
Federal funds sold and securities purchased
under agreements to resell 285,904 180,000 87,956
Investment securities:
Held-to-maturity (fair value of $817,206,
$981,651 and $1,142,853, respectively) 823,649 995,887 1,139,798
Available-for-sale 161,877 151,992 131,352
Loans and leases:
Loans and leases 5,713,570 5,533,565 5,014,133
Less allowance for loan and lease losses 61,236 61,250 61,929
---------- ---------- ----------
Net loans and leases 5,652,334 5,472,315 4,952,204
---------- ---------- ----------
Total earning assets 6,932,534 6,811,864 6,377,120
Cash and due from banks 267,313 262,894 296,909
Premises and equipment 245,320 245,338 251,841
Customers' acceptance liability 2,107 732 1,800
Core deposit premium 13,312 13,722 15,376
Goodwill 77,993 78,896 80,413
Other assets 164,848 121,698 95,439
---------- ---------- ----------
TOTAL ASSETS $7,703,427 7,535,144 $7,118,898
========== ========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Noninterest-bearing demand $ 833,175 $ 861,869 $ 931,751
Interest-bearing demand 1,128,513 1,160,219 1,207,065
Savings 1,155,446 1,226,877 1,394,498
Time 1,640,479 1,503,347 1,354,348
Foreign 467,543 399,901 184,286
---------- ---------- ----------
Total deposits 5,225,156 5,152,213 5,071,948
Short-term borrowings 1,395,182 1,329,816 1,055,025
Acceptances outstanding 2,107 732 1,800
Other liabilities 214,738 205,108 168,510
Long-term debt 228,283 219,331 208,583
---------- ---------- ----------
Total liabilities 7,065,466 6,907,200 6,505,866
---------- ---------- ----------
Stockholders' equity:
Common stock 162,713 162,713 162,713
Surplus 133,820 133,820 133,821
Retained earnings 355,675 346,339 321,028
Unrealized valuation adjustment (197) (1,033) (41)
Treasury stock (14,050) (13,895) (4,489)
---------- ---------- ----------
Total stockholders' equity 637,961 627,944 613,032
---------- ---------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $7,703,427 $7,535,144 $7,118,898
========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
2
<PAGE> 4
CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
First Hawaiian, Inc. and Subsidiaries
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
-------------------------------------
1995 1994
----------- -----------
(in thousands, except
shares and per share data)
<S> <C> <C>
INTEREST INCOME
Interest and fees on loans $ 118,656 $ 93,987
Lease financing income 3,592 2,918
Interest on investment securities:
Taxable interest income 11,360 10,626
Exempt from Federal income taxes 1,654 379
Other interest income 3,332 2,134
----------- -----------
Total interest income 138,594 110,044
----------- -----------
INTEREST EXPENSE
Deposits 42,149 26,712
Short-term borrowings 20,513 9,332
Long-term debt 3,179 2,917
----------- -----------
Total interest expense 65,841 38,961
----------- -----------
Net interest income 72,753 71,083
Provision for loan and lease losses 3,340 3,843
----------- -----------
Net interest income after provision for
loan and lease losses 69,413 67,240
----------- -----------
OTHER OPERATING INCOME
Trust income 6,354 6,462
Service charges on deposit accounts 6,306 5,884
Other service charges and fees 8,254 8,153
Securities gains, net 1 141
Other 2,068 2,429
----------- -----------
Total other operating income 22,983 23,069
----------- -----------
OTHER OPERATING EXPENSES
Salaries and wages 23,227 23,227
Employee benefits 7,234 7,382
Occupancy expense 6,426 5,722
Equipment expense 6,386 5,873
Other 20,072 19,200
----------- -----------
Total other operating expenses 63,345 61,404
----------- -----------
Income before income taxes 29,051 28,905
Income taxes 10,281 10,168
----------- -----------
NET INCOME $ 18,770 $ 18,737
=========== ===========
PER SHARE DATA
NET INCOME $ .59 $ .58
=========== ===========
CASH DIVIDENDS $ .295 $ .295
=========== ===========
AVERAGE SHARES OUTSTANDING 32,021,262 32,399,530
=========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
3
<PAGE> 5
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
First Hawaiian, Inc. and Subsidiaries
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
------------------------------------------
1995 1994
--------- ---------
(in thousands)
<S> <C> <C>
CASH AND DUE FROM BANKS AT BEGINNING OF PERIOD $ 262,894 $ 436,129
--------- ---------
Cash flows from operating activities:
Net income 18,770 18,737
Provision for loan and lease losses 3,340 3,843
Depreciation and amortization 6,757 5,932
Income taxes 8,265 8,123
Decrease (increase) in interest receivable (3,333) 7,542
Increase (decrease) in interest payable 7,921 (1,691)
Decrease (increase) in prepaid expenses 1,304 (3,772)
--------- ---------
Net cash provided by operating activities 43,024 38,714
--------- ---------
Cash flows from investing activities:
Net decrease in interest-bearing deposits
in other banks 2,900 50,926
Net increase in Federal funds sold and securities
purchased under agreements to resell (105,904) (52,956)
Purchase of held-to-maturity investment securities (44,031) (58,404)
Proceeds from sale of held-to-maturity
investment securities 14,904 54,278
Proceeds from maturity of held-to-maturity
investment securities 201,365 94,806
Purchase of available-for-sale investment securities (10,962) (141,137)
Proceeds from maturity of available-for-sale
investment securities 1,077 9,785
Net decrease (increase) in loans and leases
to customers (183,860) 47,206
Capital expenditures (4,579) (6,714)
Other (47,187) 14,330
--------- ---------
Net cash provided by (used in) investing activities (176,277) 12,120
--------- ---------
Cash flows from financing activities:
Net increase (decrease) in deposits 72,943 (148,180)
Net increase (decrease) in short-term borrowings 65,366 (14,657)
Proceeds from long-term debt 8,955 -
Payments on long-term debt (3) (13,184)
Cash dividends paid (9,434) (9,544)
Purchases of common stock for issuance under
Incentive Plan for Key Executives and
Stock Incentive Plan (155) (4,489)
--------- ---------
Net cash provided by (used in) financing activities 137,672 (190,054)
--------- ---------
CASH AND DUE FROM BANKS AT END OF PERIOD $ 267,313 $ 296,909
========= =========
Supplemental disclosures:
Interest paid $ 57,920 $ 44,076
========= =========
Net income taxes paid $ 2,016 $ 2,045
========= =========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
4
<PAGE> 6
CONSOLIDATED STATEMENTS OF
CHANGES IN STOCKHOLDERS' EQUITY (Unaudited)
First Hawaiian, Inc. and Subsidiaries
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
-----------------------------------------
1995 1994
-------- --------
(in thousands)
<S> <C> <C>
BALANCE, BEGINNING OF PERIOD $627,944 $608,369
Net income 18,770 18,737
Purchases of common stock for issuance under
Incentive Plan for Key Executives and
Stock Incentive Plan (155) (4,489)
Unrealized valuation adjustment 836 (41)
Cash dividends paid (9,434) (9,544)
-------- --------
BALANCE, END OF PERIOD $637,961 $613,032
======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
First Hawaiian, Inc. and Subsidiaries
1. BASIS OF PRESENTATION
The consolidated financial statements of the Company include the accounts of
First Hawaiian, Inc. and its wholly-owned subsidiaries - First Hawaiian Bank
and its wholly-owned subsidiaries; Pioneer Federal Savings Bank and its
wholly-owned subsidiary; First Hawaiian Creditcorp, Inc.; First Hawaiian
Leasing, Inc.; and FHI International, Inc. All significant intercompany
balances and transactions have been eliminated in consolidation.
Certain amounts in the consolidated financial statements for 1994 have
been reclassified to conform with the 1995 presentation. Such
reclassifications had no effect on the consolidated net income as previously
reported.
In the opinion of management, all adjustments (which included only
normal recurring adjustments) necessary for a fair presentation are reflected
in the consolidated financial statements.
2. ACCOUNTING CHANGES
Effective January 1, 1995, the Company adopted Statement of Financial
Accounting Standards ("SFAS") No. 114, "Accounting by Creditors for Impairment
of a Loan," which requires that impaired loans be measured based on the present
value of expected future cash flows discounted at the loan's effective interest
rate or the market price or fair value of the collateral if the loan is
collateral dependent. The adoption of SFAS No. 114 did not have a material
effect on the consolidated financial statements of the Company.
Effective January 1, 1994, the Company adopted SFAS No. 112,
"Employer's Accounting for Postretirement Benefits," which requires that the
estimated cost of benefits provided by an employer to former or inactive
employees after employment, but before retirement, be accounted for on an
accrual basis. The adoption of SFAS No. 112 did not have a material effect on
the consolidated financial statements of the Company.
5
<PAGE> 7
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
NET INCOME
Consolidated net income for the first three months of 1995 was $18,770,000
compared to $18,737,000 for the first three months of 1994, an increase of .2%.
On a per share basis, consolidated net income for the first quarter of 1995 was
$.59, an increase of 1.7% as compared to the first quarter of 1994.
On an annualized basis, the Company's return on average total assets for the
first three months of 1995 was 1.00% compared to 1.06% for the same period in
1994 and return on average stockholders' equity was 12.07% compared to 12.47%
for the same period in 1994. The decreases in return on average total assets
and in return on average stockholders' equity were primarily attributable to
the slight increase in earnings as compared to the 5.7% increase in average
total assets and 3.5% increase in average stockholders' equity. The increase
in earnings per share was primarily attributable to the decrease in average
shares outstanding, resulting from purchases of treasury stock to be used for
issuance under various incentive plans of the Company.
NET INTEREST INCOME
Net interest income, on a fully taxable equivalent basis, increased $1,456,000,
or 2.0%, to $74,341,000 for the three months ended March 31, 1995 from
$72,885,000 for the same period in 1994. This increase was primarily due to a
6.9% increase in average earning assets, reflecting significant growth in new
loans and leases, offset by a 20 basis point (1% equals 100 basis points)
decrease in the net interest margin.
As a result of increases in prevailing interest rates from the first quarter of
1994 to the first quarter of 1995, the yield on average earning assets
increased 121 basis points and the rate paid for sources of funds used for such
earning assets increased 141 basis points, which resulted in a decrease in the
net interest margin from 4.54% to 4.34%.
Average earning assets increased by $445,545,000, or 6.9%, in the first quarter
of 1995 over the first quarter of 1994. Efforts to diversify the Company's loan
portfolio, both geographically and by industry, resulted in an 11.5% increase
in average loans and leases. Credit extensions to companies on the mainland
United States in the telecommunications industry primarily accounted for this
increase. As a result, the mix of average earning assets changed, with
higher-yielding loans and leases representing 81.0% of average earning assets
in the first quarter of 1995 as compared to 77.6% in the first quarter of 1994.
Average interest-bearing deposits and liabilities increased by $449,812,000, or
8.2%, over the first quarter of 1994. As a result of depositors seeking higher
yields, the mix of average interest-bearing deposits and liabilities changed
with higher rate time deposits representing 35.1% of average interest-bearing
deposits and liabilities in the first quarter of 1995 as compared to 26.0% in
the first quarter of 1994.
6
<PAGE> 8
The following table sets forth the condensed consolidated average balance
sheets, an analysis of interest income/expense and average yield/rate for each
major category of earning assets and interest-bearing deposits and liabilities
for the periods indicated on a taxable equivalent basis. The tax equivalent
adjustment is made for items exempt from Federal income taxes (assuming a 35%
tax rate for 1995 and 1994) to make them comparable with taxable items before
any income taxes are applied.
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
--------------------------------------------------------------------
1995 1994
------------------------------ ------------------------------
INTEREST Interest
AVERAGE INCOME/ YIELD/ Average Income/ Yield/
BALANCE EXPENSE RATE(1) Balance Expense Rate(1)
--------- --------- ------ --------- --------- -------
(dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Earning assets:
Interest-bearing deposits
in other banks $ 10,462 $ 154 5.97% $ 128,871 $ 1,013 3.19%
Federal funds sold and
securities purchased
under agreements to resell 231,406 3,180 5.57 143,740 1,121 3.16
Held-to-maturity securities 922,716 11,850 5.21 1,076,171 11,610 4.38
Available-for-sale securities 158,217 2,591 6.64 109,441 1,050 3.89
Loans and leases(2),(3) 5,626,482 122,407 8.82 5,045,514 97,052 7.80
---------- -------- ---------- --------
Total earning assets 6,949,283 140,182 8.18 6,503,737 111,846 6.97
-------- --------
Nonearning assets 649,988 686,329
---------- ----------
Total assets $7,599,271 $7,190,066
========== ==========
LIABILITIES AND
STOCKHOLDERS' EQUITY
Interest-bearing deposits
and liabilities:
Deposits $4,325,674 $ 42,149 3.95% $4,166,823 $ 26,712 2.60%
Short-term borrowings 1,399,720 20,513 5.94 1,119,656 9,331 3.38
Long-term debt 223,822 3,179 5.76 212,925 2,918 5.56
---------- -------- ---------- --------
Total interest-bearing
deposits and liabilities 5,949,216 65,841 4.49 5,499,404 38,961 2.87
-------- ---- -------- ----
Interest rate spread 3.69% 4.06%
==== ====
Noninterest-bearing demand
deposits 828,650 920,502
Other liabilities 190,890 160,789
---------- ----------
Total liabilities 6,968,756 6,580,695
Stockholders' equity 630,515 609,371
---------- ----------
Total liabilities and
stockholders' equity $7,599,271 $7,190,066
========== ==========
Net interest income and
margin on earning assets 74,341 4.34% 72,885 4.54%
==== ====
Tax equivalent adjustment 1,588 1,802
-------- --------
Net interest income $ 72,753 $ 71,083
======== ========
</TABLE>
(1) Annualized.
(2) Nonaccruing loans and leases have been included in computations of average
loan and lease balances.
(3) Interest income for loans and leases included loans fees of $5,915 and
$8,005 for 1995 and 1994, respectively.
7
<PAGE> 9
INVESTMENT SECURITIES
Comparative book and fair values of held-to-maturity investment securities at
March 31, 1995, December 31, 1994, and March 31, 1994 were as follows:
<TABLE>
<CAPTION>
MARCH 31, December 31, March 31,
1995 1994 1994
-------- -------- --------
(in thousands)
<S> <C> <C> <C>
Book value $823,649 $995,887 $1,139,798
Unrealized gains 2,243 3,600 9,259
Unrealized losses (8,686) (17,836) (6,204)
-------- -------- ----------
Fair value $817,206 $981,651 $1,142,853
======== ======== ==========
</TABLE>
The decrease in unrealized losses from December 31, 1994 to March 31, 1995, was
primarily attributable to the stable interest rate environment in the first
quarter of 1995 as compared to the rise in the overall level of interest rates
during 1994 resulting from monetary actions of the Federal Reserve Board.
At March 31, 1995, gross unrealized gains and losses on available-for-sale
securities were $43,000 and $371,000, respectively. At December 31, 1994,
there were no unrealized gains and the gross unrealized losses on
available-for-sale securities were $1,716,000.
Gross realized gains and losses for the three months ended March 31, 1995 and
1994 were as follows:
<TABLE>
<CAPTION>
1995 1994
---- ----
(in thousands)
<S> <C> <C>
Realized gains $3 $142
Realized losses 2 1
-- ----
Securities gains, net $1 $141
== ====
</TABLE>
Gains and losses realized on the sales of investment securities are determined
using the specific identification method.
8
<PAGE> 10
LOANS
The following table sets forth the loan portfolio by major categories and loan
mix at March 31, 1995, December 31, 1994 and March 31, 1994:
<TABLE>
<CAPTION>
MARCH 31, 1995 December 31, 1994 March 31, 1994
------------------- ------------------- ------------------
AMOUNT % Amount % Amount %
------------------- ----------- ------- ------------------
(dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Commercial, financial and
agricultural $1,461,574 25.6% $1,307,145 23.6% $1,185,337 23.6%
Real estate:
Commercial 947,867 16.6 964,758 17.4 895,431 17.8
Construction 308,521 5.4 320,783 5.8 271,042 5.4
Residential:
Insured, guaranteed
or conventional 1,671,164 29.2 1,615,306 29.2 1,449,685 28.9
Home equity credit
lines 384,332 6.8 391,195 7.1 349,490 7.0
---------- ----- ---------- ----- ---------- -----
Total real estate
loans 3,311,884 58.0 3,292,042 59.5 2,965,648 59.1
---------- ----- ---------- ----- ---------- -----
Consumer 465,534 8.1 467,827 8.4 450,411 9.0
Lease financing 228,859 4.0 230,587 4.2 198,826 4.0
Foreign 245,719 4.3 235,964 4.3 213,911 4.3
---------- ----- ---------- ----- ---------- -----
Total loans and
leases 5,713,570 100.0% 5,533,565 100.0% 5,014,133 100.0%
Less allowance for loan and
lease losses 61,236 61,250 61,929
---------- ---------- ----------
Total net loans and
leases $5,652,334 $5,472,315 $4,952,204
========== ========== ==========
</TABLE>
The loan and lease portfolio is the largest component of earning assets and
accounts for the greatest portion of total interest income. At March 31, 1995,
total loans and leases were $5,713,570,000, an increase of 3.3% from December
31, 1994.
Total loans and leases at March 31, 1995, represented 74.2% of total assets,
82.4% of total earning assets and 109.3% of total deposits compared to 73.4% of
total assets, 81.2% of total earning assets and 107.4% of total deposits at
December 31, 1994. Governmental and certain other time deposits were shifted
into security repurchase agreements at March 31, 1995, December 31, 1994 and
March 31, 1994 to reduce the Company's deposit insurance premiums. If these
repurchase agreements were included in the deposit base, total loans and leases
as a percentage of total deposits would represent 94.3%, 92.6% and 84.2%,
respectively, at such dates.
At March 31, 1995, commercial, financial and agricultural loans increased
$154,429,000, or 11.8%, over December 31, 1994. Credit extensions to companies
in the telecommunications industry primarily accounted for this increase.
Loan concentrations are considered to exist when there are amounts loaned to
multiple borrowers engaged in similar activities which would cause them to be
similarly impacted by economic or other conditions. At March 31, 1995,
commercial real estate loans totalled $947,867,000, or 16.6%, of total loans
and leases. The Company has selectively participated as a lender on commercial
properties on the mainland United States, principally on the west coast. Such
loans totalled $53,866,000 at March 31, 1995, a decrease of 7.8% from December
31, 1994. At March 31, 1995, the largest concentration of commercial real
estate loans to a single borrower was $28,860,000.
9
<PAGE> 11
NONPERFORMING ASSETS
A summary of nonperforming assets at March 31, 1995, December 31, 1994 and
March 31, 1994 follows:
<TABLE>
<CAPTION>
MARCH 31, December 31, March 31,
1995 1994 1994
---------------- --------------------------------
(dollars in thousands)
<S> <C> <C> <C>
Nonperforming loans and leases:
Nonaccrual:
Commercial, financial and agricultural $ 7,915 $ 7,972 $ 9,646
Real estate:
Construction 2,260 7,038 26,547
Commercial 38,673 35,290 25,969
Residential:
Insured, guaranteed, or conventional 5,023 4,649 8,207
Home equity credit lines 519 520 259
------- ------- -------
Total real estate loans 46,475 47,497 60,982
------- ------- -------
Consumer 216 143 76
Lease financing 210 212 3
------- ------- -------
Total nonaccrual loans and leases 54,816 55,824 70,707
Renegotiated:
Commercial real estate 2,500 3,128 --
Commercial, financial and agricultural -- -- 2
------- ------- -------
Total nonperforming loans and leases 57,316 58,952 70,709
Other real estate owned 9,082 4,160 13,210
------- ------- -------
Total nonperforming assets $66,398 $63,112 $83,919
======= ======= =======
Loans and leases past due 90 days or more
and still accruing interest $44,701 $33,367 $22,733
======= ======= =======
Nonperforming assets to total loans and leases
and other real estate owned (end of period):
Excluding 90 days past due accruing loans
and leases 1.16% 1.14% 1.66%
Including 90 days past due accruing loans
and leases 1.94% 1.74% 2.11%
Nonperforming assets to total assets
(end of period):
Excluding 90 days past due accruing loans
and leases .86% .84% 1.17%
Including 90 days past due accruing loans
and leases 1.44% 1.28% 1.48%
</TABLE>
10
<PAGE> 12
NONPERFORMING ASSETS, Continued
Nonperforming assets increased from $63,112,000 at December 31, 1994 to
$66,398,000 at March 31, 1995.
The decrease in the nonaccrual real estate - construction category and
corresponding increase in the other real estate owned category was due to the
foreclosure on a real estate - construction loan with a carrying value of
$4,433,000 in March 1995.
Loans and leases past due 90 days or more and still accruing interest totalled
$44,701,000 at March 31, 1995, an increase of $11,334,000, or 34.0%, from
December 31, 1994. The increase was primarily due to six commercial real
estate loans totalling $8.2 million and a $2.7 million commercial loan.
All of the loans which are past due 90 days or more and still accruing
interest are in management's judgment adequately secured and in the process of
collection.
In recent years, the level of the Company's nonperforming assets and
charge-offs has been adversely affected by the unusually long recession
experienced by the Hawaii economy and weaknesses in both the local and
California real estate markets. The Company believes that the Hawaii economy
is beginning to show signs of improvement, and local commercial real estate
markets evidence signs of having stabilized. A significant and sustained
improvement in the Hawaii economy and in local real estate markets should have
a positive effect on the Company's overall asset quality; however, there can be
no assurance that such improvements will result in a significant reduction in
the level of nonperforming assets (which consist primarily of commercial real
estate loans) or related charge-offs in the near term.
11
<PAGE> 13
DEPOSITS
The following table sets forth the average balances and the average rates paid
on deposits for the periods indicated:
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
---------------------------------------------------------
1995 1994
------------------------ -----------------------
AVERAGE AVERAGE Average Average
BALANCE RATE(1) Balance Rate(1)
----------- ----- ----------- ------
(dollars in thousands)
<S> <C> <C> <C> <C>
Interest-bearing demand $1,108,993 2.76% $1,246,257 1.92%
Savings 1,128,820 3.24 1,488,406 1.92
Time 2,087,862 4.97 1,432,160 3.90
---------- ----------
Total interest-bearing deposits 4,325,675 3.95 4,166,823 2.60
Noninterest-bearing demand 828,650 -- 920,502 --
---------- ----------
Total deposits $5,154,325 3.32% $5,087,325 2.13%
========== ==========
</TABLE>
Average interest-bearing deposits increased $158,852,000, or 3.8%, over the
first quarter of 1994. As a result of depositors seeking higher yields, the
mix of average interest-bearing deposits changed, with higher rate time
deposits representing 48.3% of average interest-bearing deposits in the first
quarter of 1995 as compared to 34.4% in the first quarter of 1994.
(1) Annualized.
12
<PAGE> 14
PROVISION AND ALLOWANCE FOR LOAN AND LEASE LOSSES
The following table sets forth the activity in the allowance for loan and lease
losses for the periods indicated:
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
--------------------------------------
1995 1994
---------- -----------
(dollars in thousands)
<S> <C> <C>
Loans and leases outstanding (end of period) $5,713,570 $5,014,133
========== ==========
Average loans and leases outstanding $5,626,482 $5,045,514
========== ==========
Allowance for loan and lease losses:
Balance at beginning of period $ 61,250 $ 62,253
---------- ----------
Loans and leases charged off:
Commercial, financial and agricultural 833 2,551
Real estate:
Construction 827 804
Commercial 596 375
Residential 117 252
Consumer 1,482 1,488
---------- ----------
Total loans and leases charged off 3,855 5,470
---------- ----------
Recoveries on loans and leases previously charged off:
Commercial, financial and agricultural 28 871
Real estate:
Construction 5 4
Commercial 1 --
Residential 17 14
Consumer 450 412
Lease financing -- 2
---------- ----------
Total recoveries on loans and leases
charged off 501 1,303
---------- ----------
Net charge-offs 3,354 4,167
Provision charged to expense 3,340 3,843
---------- ----------
Balance at end of period $ 61,236 $ 61,929
========== ==========
Net loans and leases charged off to
average loans and leases .24%(1) .33%(1)
Net loans and leases charged off to
allowance for loan and lease losses 22.21%(1) 27.29%(1)
Allowance for loan and lease losses to
total loans and leases (end of period) 1.07% 1.24%
Allowance for loan and lease losses to
nonperforming loans and leases (end of period):
Excluding 90 days past due accruing loans and leases 1.07X .88x
Including 90 days past due accruing loans and leases .60X .66x
</TABLE>
(1)Annualized.
13
<PAGE> 15
PROVISION AND ALLOWANCE FOR LOAN AND LEASE LOSSES, Continued
For the first three months of 1995, the provision for loan and lease losses was
$3,340,000, a decrease of $503,000, or 13.1%, as compared to the same period in
1994. This decrease is consistent with the decrease in net charge-offs for the
respective period. Net charge-offs for the first three months of 1995 were
$3,354,000, a decrease of $813,000, or 19.5%, compared to the same period in
1994. The allowance for loan and lease losses increased to 107% of
nonperforming assets at March 31, 1995 (excluding 90 days past due accruing
loans and leases) from 88% at March 31, 1994, reflecting the substantial
decrease in nonperforming assets and net charge-offs in the first quarter of
1995 compared to the first quarter of the prior year.
OTHER OPERATING INCOME
Exclusive of securities transactions, other operating income totalled
$22,982,000 for the first quarter of 1995, an increase of .2% over the same
period in 1994.
Trust fees decreased $108,000, or 1.7%, for the first quarter of 1995 compared
to the same period in 1994.
Service charges on deposit accounts increased $422,000, or 7.2%, for the first
quarter of 1995 over the same period in 1994. This increase was partly
attributable to increases in fees on checking accounts and on checks returned
and paid.
Other service charges and fees increased $101,000, or 1.2%, for the first
quarter of 1995 over the same period in 1994. This increase was primarily the
result of fee income from loan servicing.
Security transactions resulted in net pre-tax gains of $1,000 for the first
three months of 1995 compared to net pre-tax gains of $141,000 for the same
period in 1994.
Other operating income decreased $361,000, or 14.9%, for the first quarter of
1995 compared to the same period in 1994. This decrease was partly
attributable to an advisory fee recognized in 1994.
OTHER OPERATING EXPENSES
Other operating expenses totalled $63,345,000 for the first three months of
1995, an increase of 3.2% over the first three months of 1994.
Total personnel expenses (salaries and wages and employee benefits) decreased
$148,000, or .5%, for the first three months of 1995 as compared to the same
period in 1994.
Occupancy expense for the first three months of 1995 increased $704,000, or
12.3%, over the same period in 1994, primarily as a result of higher
depreciation, insurance and rental expenses. The increase in depreciation and
insurance expenses was primarily attributable to the construction of a new
five-story, 75,000 square foot office building, including a branch, on property
owned in fee simple in Maite, Guam in late 1994.
Equipment expense increased $513,000, or 8.7%, for the first quarter of 1995
over the same period in 1994, primarily as a result of higher depreciation and
rental expense and maintenance service contracts in connection with the
migration from a Unisys to IBM information technology platform and improvements
in the delivery and processing systems.
Other expenses for the first three months of 1995 increased $872,000, or 4.5%,
over the same period in 1994, primarily as a result of higher software
depreciation expense and interchange fees.
14
<PAGE> 16
INCOME TAXES
The Company's effective income tax rate (exclusive of the tax equivalent
adjustment) for the first three months of 1995 was 35.4% as compared to 35.2%
for the same period in 1994.
LIQUIDITY AND CAPITAL
Stockholders' equity was $637,961,000 at March 31, 1995, a 1.6% increase from
$627,944,000 at December 31, 1994. Average stockholders' equity represented
8.30% of average total assets for the first quarter of 1995 compared to 8.48%
in the same quarter last year. There was no significant change in the
Company's liquidity position during the first quarter of 1995.
The following tables present the Company's regulatory capital position at March
31, 1995:
RISK-BASED CAPITAL RATIOS
<TABLE>
<CAPTION>
AMOUNT RATIO
----------- -------
(dollars in thousands)
<S> <C> <C>
Tier 1 Capital $ 556,456 9.19%
Tier 1 Capital minimum requirement(1) 242,151 4.00
----------- ------
Excess $ 314,305 5.19%
=========== ======
Total Capital $ 717,692 11.86%
Total Capital minimum requirement(1) 484,301 8.00
----------- ------
Excess $ 243,391 3.86%
=========== ======
Risk-weighted assets $ 6,053,763
===========
</TABLE>
LEVERAGE RATIO
<TABLE>
<CAPTION>
AMOUNT RATIO
----------- -------
(dollars in thousands)
<S> <C> <C>
Tier 1 Capital to average quarterly total assets
(net of certain intangibles)
Tier 1 Leverage Ratio $ 556,456 7.40 %
Minimum leverage requirement(2) 225,527 3.00
----------- ------
Excess $ 330,929 4.40 %
=========== ======
Average quarterly total assets (net of certain intangibles) $ 7,517,569
===========
</TABLE>
(1) Risk-based capital guidelines as established by the Federal Reserve
Board for bank holding companies require minimum Tier 1 and Total
capital ratios of 4% and 8%, respectively.
(2) The Leverage Ratio of 3% is the minimum requirement for the most
highly rated banking organizations which are not experiencing or
anticipating significant growth. According to the Federal Reserve
Board, other banking organizations are expected to maintain leverage
ratios of at least one to two percent higher.
The Board of Directors of the Company has authorized the purchase from time to
time of shares of outstanding common stock of the Company for issuance under
the Company's Incentive Plan for Key Executives and Stock Incentive Plan.
During the first quarter of 1995, the Company acquired 6,263 shares at an
average price of $24.80 per share under this authorization.
15
<PAGE> 17
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 12 Statement regarding computation of ratios.
Exhibit 27 Financial data schedule
(b) Reports on Form 8-K - No reports on Form 8-K were filed during
the quarter ended March 31, 1995.
16
<PAGE> 18
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
FIRST HAWAIIAN, INC.
(Registrant)
Date May 12, 1995 By /s/ HOWARD H. KARR
------------------------ ----------------------------------------
HOWARD H. KARR
EXECUTIVE VICE PRESIDENT AND TREASURER
(PRINCIPAL FINANCIAL OFFICER)
17
<PAGE> 19
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT PAGE NUMBER IN
NUMBER DESCRIPTION QUARTERLY REPORT ON FORM 10-Q
------ ----------- -----------------------------
<S> <C> <C>
12 Statement regarding computation of ratios. 19
27 Financial data schedule 20
</TABLE>
<PAGE> 1
EXHIBIT 12. STATEMENT RE: COMPUTATION OF RATIOS
First Hawaiian, Inc. and Subsidiaries
Computation of Consolidated Ratios of Earnings to Fixed Charges
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
--------------------------------
1995 1994
------- -------
(dollars in thousands)
<S> <C> <C>
Income before income taxes $29,051 $28,905
------- -------
Fixed charges:(1)
Interest expense 65,841 38,961
Rental expense 1,211 1,084
------- -------
67,052 40,045
Less interest on deposits 42,149 26,712
------- -------
Net fixed charges 24,903 13,333
------- -------
Earnings, excluding
interest on deposits $53,954 $42,238
======= =======
Earnings, including
interest on deposits $96,103 $68,950
======= =======
Ratio of earnings to
fixed charges:
Excluding interest on deposits 2.17x 3.17x
Including interest on deposits 1.43x 1.72x
</TABLE>
(1) For purposes of computing the above ratios, earnings represent income
before income taxes plus fixed charges. Fixed charges, excluding
interest on deposits, include interest (other than on deposits), whether
expensed or capitalized, and that portion of rental expense (generally
one third) deemed representative of the interest factor. Fixed charges,
including interest on deposits, include all interest, whether expensed
or capitalized, and that portion of rental expense (generally one third)
deemed representative of the interest factor.
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> MAR-31-1995
<EXCHANGE-RATE> 1
<CASH> 267,313
<INT-BEARING-DEPOSITS> 8,770
<FED-FUNDS-SOLD> 285,904
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 161,877
<INVESTMENTS-CARRYING> 823,649
<INVESTMENTS-MARKET> 817,206
<LOANS> 5,713,570
<ALLOWANCE> 61,236
<TOTAL-ASSETS> 7,703,427
<DEPOSITS> 5,225,156
<SHORT-TERM> 1,395,182
<LIABILITIES-OTHER> 214,738
<LONG-TERM> 228,283
<COMMON> 162,713
0
0
<OTHER-SE> 475,248
<TOTAL-LIABILITIES-AND-EQUITY> 7,703,427
<INTEREST-LOAN> 122,248
<INTEREST-INVEST> 13,014
<INTEREST-OTHER> 3,332
<INTEREST-TOTAL> 138,594
<INTEREST-DEPOSIT> 42,149
<INTEREST-EXPENSE> 65,841
<INTEREST-INCOME-NET> 72,753
<LOAN-LOSSES> 3,340
<SECURITIES-GAINS> 1
<EXPENSE-OTHER> 63,345
<INCOME-PRETAX> 29,051
<INCOME-PRE-EXTRAORDINARY> 18,770
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 18,770
<EPS-PRIMARY> .59
<EPS-DILUTED> .59
<YIELD-ACTUAL> 8.18
<LOANS-NON> 57,316
<LOANS-PAST> 44,701
<LOANS-TROUBLED> 2,500
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 61,250
<CHARGE-OFFS> 3,855
<RECOVERIES> 501
<ALLOWANCE-CLOSE> 61,236
<ALLOWANCE-DOMESTIC> 46,459
<ALLOWANCE-FOREIGN> 1,085
<ALLOWANCE-UNALLOCATED> 13,692
</TABLE>
