First Hawaiian, Inc. Reports Third Quarter 2018 Financial Results and Declares Dividend


  • Net income of $67.4 million, or $0.50 per diluted share, and core net income1 of $70.8 million, or $0.52 per diluted share

  • 1.31% return on average total assets and 1.45% core return on average tangible assets1

  • 11.01% return on average total stockholders’ equity and 19.61% core return on average tangible stockholders’ equity1

  • BNP Paribas (“BNPP”) completed two offerings of our common stock, and First Hawaiian repurchased 1.8 million shares at a total cost of $50 million, reducing BNPP’s ownership from 48.8% to 18.4%

  • The number of BNPP-nominated directors decreased from five to two, resulting in a majority of independent directors on the Board

  • The Board of Directors declared a dividend of $0.24 per share

HONOLULU, Oct. 25, 2018 (GLOBE NEWSWIRE) -- First Hawaiian, Inc. (NASDAQ:FHB), (“First Hawaiian” or the “Company”) today reported financial results for its third quarter ended September 30, 2018.

”I’m pleased with our strong financial performance in the third quarter,” said Bob Harrison, Chairman and Chief Executive Officer. “We had solid core earnings and good expense management, and asset quality remained excellent. Additionally, during the quarter, BNPP made significant progress in exiting its position in First Hawaiian by completing two secondary offerings, which, in conjunction with First Hawaiian’s repurchase of approximately 1.8 million shares, reduced BNPP’s ownership position from 48.8% to 18.4%. Also significant was the change in board composition, as the number of BNPP-nominated directors was decreased from five to two and three prominent members of the local business community, Faye Kurren, Jenai Wall, and C. Scott Wo, joined the board, resulting in a majority of independent directors.”

On October 24, 2018, the Company’s Board of Directors declared a quarterly cash dividend of $0.24 per share. The dividend will be payable on December 7, 2018 to stockholders of record at the close of business on November 26, 2018.

Earnings Highlights

Net income for the quarter ended September 30, 2018 was $67.4 million, or $0.50 per diluted share, compared to $69.1 million, or $0.50 per diluted share, for the quarter ended June 30, 2018, and $58.4 million, or $0.42 per diluted share, for the quarter ended September 30, 2017. Core net income1 for the quarter ended September 30, 2018 was $70.8 million, or $0.52 per diluted share, compared to $69.7 million, or $0.50 per diluted share, for the quarter ended June 20, 2018, and $57.0 million, or $0.41 per diluted share, for the quarter ended September 30, 2017.

Net interest income for the quarter ended September 30, 2018 was $141.3 million compared to $141.4 million for the quarter ended June 30, 2018, and an increase of $7.9 million compared to $133.3 million for the quarter ended September 30, 2017. Net interest income compared to the second quarter of 2018 was essentially flat, primarily due to higher interest expenses on deposits and borrowings and lower interest income on investments, mostly offset by higher interest income on loans and cash. The second quarter of 2018 included a $1.1 million positive premium amortization adjustment that did not recur in the third quarter. Excluding the premium amortization in the second quarter, third quarter net interest income would have been approximately $1 million higher than second quarter net interest income. The increase in net interest income compared to the third quarter of 2017 was due to higher interest income on earnings assets from higher rates and balances, partially offset by higher interest expenses due to higher rates on deposits and higher balances of term borrowings.

Net interest margin (“NIM”) was 3.11%, 3.18% and 2.96%, for the quarters ended September 30, 2018, June 30, 2018, and September 30, 2017, respectively. The 7 basis point decrease in NIM versus the prior quarter was primarily due to higher funding costs, a lower premium amortization adjustment, higher cash balances, and an additional day in the quarter. 

Results for the quarter ended September 30, 2018 included a provision for loan and lease losses of $4.5 million compared to $6.0 million in the quarter ended June 30, 2018 and $4.5 million in the quarter ended September 30, 2017.

Noninterest income was $47.4 million in the quarter ended September 30, 2018, a decrease of $2.4 million compared to noninterest income of $49.8 million in the quarter ended June 30, 2018 and a decrease of $2.3 million compared to noninterest income of $49.7 million in the quarter ended September 30, 2017. The decrease in noninterest income compared to the second quarter of 2018 was primarily due to a $3.2 million decrease in other income, $0.4 million lower credit and debit card fees and $0.2 million lower trust and investment services income, partially offset by $1.3 million higher income from bank-owned life insurance (“BOLI”). The $3.2 million decrease in other income was primarily due to a $1.5 million decrease in swap fee income, and a $1.0 million decrease in recoveries, as we recognized a gain on sale of leased equipment in the second quarter of 2018. 

The decrease in noninterest income compared to the third quarter of 2017 was primarily due to $3.1 million lower other income and $1.0 million lower service charges on deposit accounts, partially offset by $1.1 million higher other service charges and fees, $0.6 million higher income from BOLI, and $0.4 million higher credit and debit card fees. Other income in the third quarter of 2017 included a $2.7 million gain from the sale of a bank property.

Noninterest expense was $93.1 million for the quarter ended September 30, 2018, an increase of $1.3 million from $91.9 million in the quarter ended June 30, 2018, and an increase of $8.3 million from $84.8 million in the quarter ended September 30, 2017. The increase in noninterest expense compared to the second quarter of 2018 was primarily due to $3.7 million higher other expense, partially offset by $1.5 million lower contracted services and professional fees, and $0.6 million lower cards rewards program expenses. Other expense in the third quarter of 2018 included an expense of $4.1 million in connection with an agreement in principle to resolve a class action lawsuit regarding overdraft fees. 

The increase in noninterest expense compared to the third quarter of 2017 was primarily due to $4.2 million higher other expense, $3.3 million higher salaries and employee benefits, $0.6 million higher contracted services and professional fees, and $0.5 million higher occupancy expenses, partially offset by $0.9 million lower advertising and marketing expenses. Other expense in the third quarter of 2018 included the aforementioned $4.1 million litigation-related expense.

The efficiency ratio was 49.4%, 48.0% and 46.3% for the quarters ended September 30, 2018, June 30, 2018 and September 30, 2017, respectively. Core efficiency ratio1 was 46.9%, 47.6% and 46.7% for the quarters ended September 30, 2018, June 30, 2018 and September 30, 2017, respectively.

The effective tax rate was 26.0% for the second and third quarters of 2018 and 37.7% in the third quarter of 2017. The lower effective tax rate in the third quarter of 2018 compared to the same quarter last year was due to the lower corporate tax rate resulting from the Tax Cuts and Jobs Act. 

Balance Sheet Highlights

Total assets were $20.0 billion at September 30, 2018, compared to $20.5 billion at June 30, 2018 and $20.6 billion at September 30, 2017.

The investment securities portfolio was $4.6 billion at September 30, 2018, compared to $4.8 billion at June 30, 2018 and $5.3 billion at September 30, 2017. 

Total loans and leases were $12.6 billion at September 30, 2018, unchanged from $12.6 billion at June 30, 2018 and up $0.5 billion, or 3.7%, from $12.1 billion at September 30, 2017. During the quarter ended September 30, 2018, increases in residential, commercial real estate (“CRE”) and consumer loan balances were offset by decreases in commercial and industrial (“C&I”) and construction loan balances. The decreases in C&I and construction loan balances were due to large, unexpected prepayments. The increase in loans and leases compared to the quarter ended September 30, 2017 was primarily due to increases in residential loans, CRE loans, consumer loans and construction loans, partially offset by a decline in C&I loans and lease financing.

Total deposits were $16.7 billion at September 30, 2018, a decrease of $0.7 billion from $17.4 billion at June 30, 2018, and a decrease of $0.9 billion, compared to $17.6 billion at September 30, 2017. The decrease in deposit balances compared to the quarter ended June 30, 2018 was primarily due to a $0.6 billion reduction in public time deposits. The decrease in deposit balances compared to the quarter ended September 30, 2017 was primarily due to a $1.3 billion reduction in public time deposits, partially offset by growth in consumer and commercial deposits.

Asset Quality

The Company's asset quality remained excellent during the third quarter of 2018. Net charge offs for the quarter ended September 30, 2018 were $3.8 million, or 0.12% of average loans and leases on an annualized basis, compared to $4.0 million, or 0.13% of average loans and leases on an annualized basis, for the quarter ended June 30, 2018 and $4.1 million, or 0.13% of average loans and leases on an annualized basis for the quarter ended September 30, 2017.

Total non-performing assets were $11.3 million, or 0.09% of total loans and leases and other real estate owned, at September 30, 2018, compared to non-performing assets of $13.8 million, or 0.11% of total loans and leases and other real estate owned, at June 30, 2018 and non­-performing assets of $8.4 million, or 0.07% of total loans and leases and other real estate owned, at September 30, 2017.

The ratio of the allowance for loan and lease losses to total loans and leases was 1.12% at September 30, 2018, 1.11% at June 30, 2018 and 1.13% at September 30, 2017. 

Capital

During the third quarter of 2018, the Company repurchased approximately 1.8 million shares of FHI common stock from a wholly owned subsidiary of BNPP at a total cost of approximately $50 million.

Total stockholders' equity was $2.4 billion at September 30, 2018, compared to $2.5 billion at June 30, 2018 and $2.6 billion at September 30, 2017.

The tier 1 leverage, common equity tier 1, and total capital ratios were 8.42%, 12.09% and 13.14%, respectively, at September 30, 2018, compared with 8.61%, 12.19% and 13.23% at June 30, 2018 and 8.66%, 12.71% and 13.77% at September 30, 2017. 

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, 11:00 a.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: 5377116. 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 7:30 p.m. (Eastern Time) on November 4, 2018. Access the replay by dialing (855) 859-2056 or (404) 537-3406 and entering the conference ID: 5377116.

Forward-Looking Statements

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements reflect our current views with respect to, among other things, future events and our financial performance. These statements are often, but not always, made through the use of words or phrases such as “may”, “might”, “should”, “could”, “predict”, “potential”, “believe”, “expect”, “continue”, “will”, “anticipate”, “seek”, “estimate”, “intend”, “plan”, “projection”, “would”, “annualized” and “outlook”, or the negative version of those words or other comparable words or phrases of a future or forward-looking nature. These forward-looking statements are not historical facts, and are based on current expectations, estimates and projections about our industry, management's beliefs and certain assumptions made by management, many of which, by their nature, are inherently uncertain and beyond our control. Accordingly, we caution you that any such forward-looking statements are not guarantees of future performance and are subject to risks, assumptions, estimates and uncertainties that are difficult to predict. 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 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 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 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 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 closely related 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 A non-GAAP measure. For more information on these measures, including reconciliation to the most directly comparable GAAP measure, see “Use of Non-GAAP Financial Measures” and Tables 13 and 14 at the end of this document.



Financial Highlights            Table 1 
  For the Three Months Ended For the Nine Months Ended  
  September 30,  June 30,  September 30,  September 30,  
(dollars in thousands, except per share data) 2018 2018 2017 2018 2017 
Operating Results:                
Net interest income $ 141,258 $ 141,403 $ 133,319 $ 422,333 $ 393,918 
Provision for loan and lease losses   4,460   6,020   4,500   16,430   13,400 
Noninterest income(1)   47,405   49,797   49,664   145,902   151,281 
Noninterest expense(1)   93,147   91,865   84,784   275,599   257,704 
Net income   67,388   69,053   58,363   204,399   171,998 
Basic earnings per share   0.50   0.50   0.42   1.48   1.23 
Diluted earnings per share   0.50   0.50   0.42   1.48   1.23 
Dividends declared per share   0.24   0.24   0.22   0.72   0.66 
Dividend payout ratio   48.00%  48.00%  52.38%  48.65%  53.66%
Supplemental Income Statement Data (non-GAAP):                
Core net interest income $ 141,258 $ 141,403 $ 133,319 $ 422,333 $ 393,918 
Core noninterest income(1)   47,405   49,797   46,997   145,902   148,614 
Core noninterest expense(1)   88,511   90,951   84,241   269,642   256,320 
Core net income   70,818   69,720   57,040   208,797   171,203 
Core basic earnings per share   0.52   0.51   0.41   1.52   1.23 
Core diluted earnings per share   0.52   0.50   0.41   1.52   1.23 
Performance Ratio:                
Net interest margin   3.11  3.18  2.96  3.14  2.99%
Core net interest margin (non-GAAP)   3.11  3.18  2.96  3.14  2.99%
Efficiency ratio(1)   49.36  48.04  46.33  48.49  47.26%
Core efficiency ratio (non-GAAP)(1)   46.90  47.56  46.72  47.44  47.24%
Return on average total assets   1.31  1.38  1.15  1.35  1.16%
Core return on average total assets (non-GAAP)   1.38  1.39  1.13  1.37  1.15%
Return on average tangible assets   1.38  1.45  1.21  1.42  1.22%
Core return on average tangible assets (non-GAAP)(2)   1.45  1.46  1.18  1.45  1.21%
Return on average total stockholders' equity   11.01  11.23  9.03  11.09  9.10%
Core return on average total stockholders' equity (non-GAAP)   11.57  11.34  8.82  11.33  9.06%
Return on average tangible stockholders' equity (non-GAAP)   18.66  18.83  14.76  18.60  15.01%
Core return on average tangible stockholders’ equity (non-GAAP)(3)   19.61  19.01  14.42  19.00  14.94%
Average Balances:                
Average loans and leases $ 12,595,668 $ 12,552,610 $ 12,115,001 $ 12,482,747 $ 11,868,917 
Average earning assets   18,041,483   17,817,943   17,867,021   17,982,396   17,605,376 
Average assets   20,391,456   20,121,504   20,109,090   20,306,833   19,858,184 
Average deposits   17,158,849   17,199,368   17,165,355   17,286,159   16,950,503 
Average shareholders' equity   2,427,907   2,466,392   2,564,563   2,464,601   2,527,435 
Market Value Per Share:                
   Closing   27.16   29.02   30.29   27.16   30.29 
   High   30.02   31.28   31.48   32.36   35.32 
   Low   27.02   27.09   26.30   26.92   26.30 



  As of As of As of As of 
  September 30,  June 30,  December 31,  September 30,  
  2018 2018 2017 2017 
Balance Sheet Data:             
Loans and leases $ 12,600,464 $ 12,637,686 $ 12,277,369 $ 12,149,711 
Total assets   19,983,838   20,479,719   20,549,461   20,565,627 
Total deposits   16,689,273   17,395,538   17,612,122   17,595,483 
Short-term borrowings   30,000   —   —   — 
Long-term borrowings   400,026   200,034   34   34 
Total stockholders' equity   2,423,462   2,459,175   2,532,551   2,581,858 
              
Per Share of Common Stock:             
Book value $ 17.97 $ 18.00 $ 18.14 $ 18.50 
Tangible book value (non-GAAP)   10.59   10.71   11.01   11.36 
              
Asset Quality Ratios:             
Non-accrual loans and leases / total loans and leases   0.09  0.11%  0.08%  0.06
Allowance for loan and lease losses / total loans and leases   1.12  1.11%  1.12%  1.13
              
Capital Ratios:             
Common Equity Tier 1 Capital Ratio   12.09  12.19%  12.45%  12.71
Tier 1 Capital Ratio   12.09  12.19%  12.45%  12.71
Total Capital Ratio   13.14  13.23%  13.50%  13.77
Tier 1 Leverage Ratio   8.42  8.61%  8.52%  8.66
Total stockholders' equity to total assets   12.13  12.01%  12.32%  12.55
Tangible stockholders' equity to tangible assets (non-GAAP)   7.52  7.51%  7.86%  8.11
              
Non-Financial Data:             
Number of branches   60   61   62   62 
Number of ATMs   296   303   310   312 
Number of Full-Time Equivalent Employees   2,166   2,189   2,220   2,184 

(1) Subsequent to the issuance of the Company’s interim condensed consolidated financial statements as of September 30, 2017, the Company’s management determined that certain expenses related to the card rewards program were incorrectly offset against credit and debit card fee income and credit card interchange assessment fees were incorrectly classified in card rewards program expenses versus credit and debit card fee income in the interim condensed consolidated statements of income for the three and nine months ended September 30, 2017. As a result, certain noninterest income and noninterest expense amounts have been revised from the amounts previously reported to correct the classification errors. There was no change to net income or earnings per share as previously reported as a result of these errors. Management has evaluated the materiality of these errors on its prior period financial statements from a quantitative and qualitative perspective, and has concluded that these errors were not material to any prior annual or interim period.

(2) Core return on average tangible assets is a non-GAAP financial measure. We compute our core return on average tangible assets as the ratio of core 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. For a reconciliation to the most directly comparable GAAP financial measure for core net income, see Table 13, GAAP to Non-GAAP Reconciliation.

(3) Core return on average tangible stockholders’ equity is a non-GAAP financial measure. 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. For a reconciliation to the most directly comparable GAAP financial measure for core net income, see Table 13, GAAP to Non-GAAP Reconciliation.


Consolidated Statements of Income Table 2
  Three Months Ended For the Nine Months Ended
  September 30,  June 30,  September 30,  September 30, 
(dollars in thousands, except per share amounts) 2018 2018 2017 2018 2017
Interest income               
Loans and lease financing $ 135,394 $ 130,283 $ 118,986 $ 389,228 $ 342,431
Available-for-sale securities   25,196   27,397   24,195   81,586   75,683
Other   3,462   1,339   2,089   7,193   4,096
Total interest income   164,052   159,019   145,270   478,007   422,210
Interest expense               
Deposits   20,205   17,355   11,949   52,824   28,279
Short-term and long-term borrowings   2,589   261   2   2,850   13
Total interest expense   22,794   17,616   11,951   55,674   28,292
Net interest income   141,258   141,403   133,319   422,333   393,918
Provision for loan and lease losses   4,460   6,020   4,500   16,430   13,400
Net interest income after provision for loan and lease losses   136,798   135,383   128,819   405,903   380,518
Noninterest income               
Service charges on deposit accounts   7,933   7,721   8,929   23,609   27,548
Credit and debit card fees   16,535   16,929   16,126   48,961   48,450
Other service charges and fees   9,578   9,633   8,510   28,553   25,717
Trust and investment services income   7,487   7,711   7,672   23,429   22,536
Bank-owned life insurance   3,692   2,395   3,119   8,131   10,624
Other   2,180   5,408   5,308   13,219   16,406
Total noninterest income   47,405   49,797   49,664   145,902   151,281
Noninterest expense               
Salaries and employee benefits   41,959   41,636   38,687   125,755   119,459
Contracted services and professional fees   11,478   13,005   10,834   36,770   33,530
Occupancy   6,757   6,908   6,238   20,149   17,382
Equipment   4,181   4,335   4,174   13,104   12,898
Regulatory assessment and fees   3,966   4,225   3,668   12,164   11,192
Advertising and marketing   1,060   1,115   2,005   3,126   5,255
Card rewards program   5,805   6,359   5,438   17,882   17,107
Other   17,941   14,282   13,740   46,649   40,881
Total noninterest expense   93,147   91,865   84,784   275,599   257,704
Income before provision for income taxes   91,056   93,315   93,699   276,206   274,095
Provision for income taxes   23,668   24,262   35,336   71,807   102,097
Net income $ 67,388 $ 69,053 $ 58,363 $ 204,399 $ 171,998
Basic earnings per share $ 0.50 $ 0.50 $ 0.42 $ 1.48 $ 1.23
Diluted earnings per share $ 0.50 $ 0.50 $ 0.42 $ 1.48 $ 1.23
Dividends declared per share $ 0.24 $ 0.24 $ 0.22 $ 0.72 $ 0.66
Basic weighted-average outstanding shares   135,466,669   137,907,063   139,556,532   137,643,005   139,549,665
Diluted weighted-average outstanding shares   135,675,498   138,065,879   139,696,330   137,809,573   139,670,487



Consolidated Balance Sheets Table 3
  September 30,  June 30,  December 31,  September 30, 
(dollars in thousands) 2018  2018  2017  2017 
Assets            
Cash and due from banks $ 350,967  $ 332,102  $ 367,084  $ 321,319 
Interest-bearing deposits in other banks   348,526    611,698    667,560    793,046 
Investment securities   4,595,301    4,842,551    5,234,658    5,314,973 
Loans held for sale   —    2,037    556    — 
Loans and leases   12,600,464    12,637,686    12,277,369    12,149,711 
Less: allowance for loan and lease losses   141,250    140,601    137,253    137,327 
Net loans and leases   12,459,214    12,497,085    12,140,116    12,012,384 
             
Premises and equipment, net   286,374    287,746    289,215    289,689 
Other real estate owned and repossessed personal property   362    325    329    564 
Accrued interest receivable   49,407    48,528    47,987    44,728 
Bank-owned life insurance   444,987    442,449    438,010    435,607 
Goodwill   995,492    995,492    995,492    995,492 
Mortgage servicing rights   16,937    17,660    13,196    13,980 
Other assets   436,271    402,046    355,258    343,845 
Total assets $ 19,983,838  $ 20,479,719  $ 20,549,461  $ 20,565,627 
Liabilities and Stockholders' Equity            
Deposits:            
Interest-bearing $ 10,881,918  $ 11,430,455  $ 11,485,269  $ 11,687,849 
Noninterest-bearing   5,807,355    5,965,083    6,126,853    5,907,634 
Total deposits   16,689,273    17,395,538    17,612,122    17,595,483 
Short-term borrowings   30,000    —    —    — 
Long-term borrowings   400,026    200,034    34    34 
Retirement benefits payable   135,523    135,139    134,218    135,092 
Other liabilities   305,554    289,833    270,536    253,160 
Total liabilities   17,560,376    18,020,544    18,016,910    17,983,769 
             
Stockholders' equity            
Common stock ($0.01 par value; authorized 300,000,000 shares; issued/outstanding: 139,655,841 / 134,873,728 shares as of September 30, 2018, issued/outstanding: 139,620,801 / 136,642,060 shares as of June 30,  2018, issued/outstanding: 139,599,454 / 139,588,782 shares as of December 31, 2017 and issued and outstanding: 139,586,282 shares as of September 30, 2017)   1,397    1,396    1,396    1,396 
Additional paid-in capital   2,494,436    2,492,656    2,488,643    2,489,273 
Retained earnings   264,463    229,615    139,177    158,303 
Accumulated other comprehensive loss, net   (204,699)   (182,410)   (96,383)   (67,114)
Treasury stock (4,782,113 shares as of September 30, 2018, 2,978,741 as of June 30, 2018, 10,672 as of December 31, 2017 and nil as of September 30, 2017)   (132,135)   (82,082)   (282)   — 
Total stockholders' equity   2,423,462    2,459,175    2,532,551    2,581,858 
Total liabilities and stockholders' equity $ 19,983,838  $ 20,479,719  $ 20,549,461  $ 20,565,627 



Average Balances and Interest Rates                      Table 4 
  Three Months Ended  Three Months Ended  Three Months Ended  
  September 30, 2018 June 30, 2018 September 30, 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 $ 656.7 $ 3.3  1.99$ 281.2 $ 1.2  1.74$ 597.5 $ 2.0  1.30%
Available-for-Sale Investment Securities   4,737.3   25.2  2.11   4,961.2   27.4  2.21   5,124.9   24.2  1.88 
Loans Held for Sale   1.8   —  3.83   1.9   —  3.44   0.1   —  3.62 
Loans and Leases (1)                         
Commercial and industrial   3,019.9   31.0  4.08   3,177.4   30.5  3.84   3,276.4   27.3  3.31 
Real estate - commercial   2,975.3   31.0  4.13   2,883.0   28.9  4.02   2,696.4   25.1  3.69 
Real estate - construction   629.5   6.7  4.20   620.7   6.2  4.03   570.6   5.1  3.54 
Real estate - residential   4,159.0   43.1  4.11   4,087.2   41.9  4.11   3,846.8   39.2  4.04 
Consumer   1,649.7   22.4  5.39   1,624.6   21.7  5.35   1,546.9   21.0  5.39 
Lease financing   162.3   1.2  3.00   159.7   1.1  2.83   177.9   1.3  2.91 
Total Loans and Leases   12,595.7   135.4  4.26   12,552.6   130.3  4.16   12,115.0   119.0  3.90 
Other Earning Assets   50.0   0.2  1.29   21.0   0.1  2.21   29.5   0.1  1.22 
Total Earning Assets (2)   18,041.5   164.1  3.61   17,817.9   159.0  3.58   17,867.0   145.3  3.23 
Cash and Due from Banks   336.5        317.7        324.0      
Other Assets   2,013.5        1,985.9        1,918.1      
Total Assets $ 20,391.5      $ 20,121.5      $ 20,109.1      
                          
Interest-Bearing Liabilities                         
Interest-Bearing Deposits                         
Savings $ 4,727.2 $ 3.3  0.28$ 4,573.0 $ 2.4  0.21$ 4,505.1 $ 1.1  0.10%
Money Market   2,871.0   4.6  0.63   2,725.9   2.7  0.40   2,607.7   0.9  0.13 
Time   3,705.7   12.3  1.32   4,003.5   12.2  1.22   4,208.0   10.0  0.94 
Total Interest-Bearing Deposits   11,303.9   20.2  0.71   11,302.4   17.3  0.62   11,320.8   12.0  0.42 
Short-Term Borrowings   3.3   —  1.30   42.7   0.2  1.85   0.8   —  0.91 
Long-Term Borrowings   358.7   2.6  2.85   6.6   0.1  3.79   —   —  — 
Total Interest-Bearing Liabilities   11,665.9   22.8  0.78   11,351.7   17.6  0.62   11,321.6   12.0  0.42 
Net Interest Income    $ 141.3      $ 141.4      $ 133.3   
Interest Rate Spread        2.83       2.96       2.81%
Net Interest Margin        3.11       3.18       2.96%
Noninterest-Bearing Demand Deposits   5,854.9        5,897.0        5,844.6      
Other Liabilities   442.8        406.4        378.3      
Stockholders' Equity   2,427.9        2,466.4        2,564.6      
Total Liabilities and Stockholders' Equity $ 20,391.5      $ 20,121.5      $ 20,109.1      

(1) Non-performing loans and leases are included in the respective average loan and lease balances. Income, if any, on such loans and leases is recognized on a cash basis.
(2)For the periods disclosed above, the taxable-equivalent basis adjustments made to the table above were not material.



Average Balances and Interest Rates               Table 5 
  Nine Months Ended  Nine Months Ended  
  September 30, 2018 September 30, 2017 
  Average Income/ Yield/ Average Income/ Yield/ 
(dollars in millions) Balance Expense Rate Balance Expense Rate 
Earning Assets                 
Interest-Bearing Deposits in Other Banks $ 518.4 $ 6.9  1.77$ 516.8 $ 4.0  1.02%
Available-for-Sale Investment Securities   4,951.4   81.6  2.20   5,189.7   75.7  1.95 
Loans Held for Sale   1.3   —  3.60   —   —  — 
Loans and Leases (1)                 
Commercial and industrial   3,100.1   89.2  3.85   3,263.3   77.3  3.17 
Real estate - commercial   2,886.7   86.3  4.00   2,606.1   71.1  3.65 
Real estate - construction   623.9   18.6  4.00   514.1   13.1  3.41 
Real estate - residential   4,085.7   126.0  4.12   3,784.5   115.5  4.08 
Consumer   1,625.0   65.5  5.38   1,528.8   61.8  5.41 
Lease financing   161.3   3.6  2.98   172.1   3.6  2.84 
Total Loans and Leases   12,482.7   389.2  4.17   11,868.9   342.4  3.86 
Other Earning Assets   28.6   0.3  1.58   30.0   0.1  0.62 
Total Earning Assets (2)   17,982.4   478.0  3.55   17,605.4   422.2  3.21 
Cash and Due from Banks   324.4        322.7      
Other Assets   2,000.0        1,930.1      
Total Assets $ 20,306.8      $ 19,858.2      
                  
Interest-Bearing Liabilities                 
Interest-Bearing Deposits                 
Savings $ 4,615.1 $ 7.4  0.21$ 4,500.1 $ 2.5  0.08%
Money Market   2,769.9   9.1  0.44   2,574.0   2.2  0.11 
Time   3,985.2   36.3  1.22   4,027.9   23.6  0.78 
Total Interest-Bearing Deposits   11,370.2   52.8  0.62   11,102.0   28.3  0.34 
Short-Term Borrowings   15.3   0.2  1.81   2.1   —  0.68 
Long-Term Borrowings   123.1   2.7  2.87   —   —  — 
Total Interest-Bearing Liabilities   11,508.6   55.7  0.65   11,104.1   28.3  0.34 
Net Interest Income    $ 422.3      $ 393.9   
Interest Rate Spread        2.90       2.87%
Net Interest Margin        3.14       2.99%
Noninterest-Bearing Demand Deposits   5,916.0        5,848.5      
Other Liabilities   417.6        378.2      
Stockholders' Equity   2,464.6        2,527.4      
Total Liabilities and Stockholders' Equity $ 20,306.8      $ 19,858.2      


(1) Non-performing loans and leases are included in the respective average loan and lease balances. Income, if any, on such loans and leases is recognized on a cash basis.
(2)For the periods disclosed above, the taxable-equivalent basis adjustments made to the table above were not material.

 


Analysis of Change in Net Interest Income        Table 6
  Three Months Ended September 30, 2018
  Compared to June 30, 2018
(dollars in millions) Volume Rate Total
Change in Interest Income:         
Interest-Bearing Deposits in Other Banks $ 1.9  $ 0.2  $ 2.1 
Available-for-Sale Investment Securities   (1.2)   (1.0)   (2.2)
Loans and Leases         
Commercial and industrial   (1.5)   2.1    0.6 
Real estate - commercial   0.9    1.2    2.1 
Real estate - construction   0.1    0.4    0.5 
Real estate - residential   0.7    0.4    1.1 
Consumer   0.3    0.4    0.7 
Lease financing   —    0.1    0.1 
Total Loans and Leases   0.5    4.6    5.1 
Other Earning Assets   0.1    (0.1)   — 
Total Change in Interest Income   1.3    3.7    5.0 
          
Change in Interest Expense:         
Interest-Bearing Deposits         
Savings   0.1    0.8    0.9 
Money Market   0.2    1.7    1.9 
Time   (1.0)   1.1    0.1 
Total Interest-Bearing Deposits   (0.7)   3.6    2.9 
Short-Term Borrowings   (0.1)   (0.1)   (0.2)
Long-Term Borrowings   2.5    —    2.5 
Total Change in Interest Expense   1.7    3.5    5.2 
Change in Net Interest Income $ (0.4) $ 0.2  $ (0.2)



Analysis of Change in Net Interest Income        Table 7
  Three Months Ended September 30, 2018
  Compared to September 30, 2017
(dollars in millions) Volume Rate Total
Change in Interest Income:         
Interest-Bearing Deposits in Other Banks $ 0.2  $ 1.1 $ 1.3 
Available-for-Sale Investment Securities   (1.9)   2.9   1.0 
Loans and Leases         
Commercial and industrial   (2.3)   6.0   3.7 
Real estate - commercial   2.7    3.2   5.9 
Real estate - construction   0.6    1.0   1.6 
Real estate - residential   3.3    0.6   3.9 
Consumer   1.4    —   1.4 
Lease financing   (0.1)   —   (0.1)
Total Loans and Leases   5.6    10.8   16.4 
Other Earning Assets   0.1    —   0.1 
Total Change in Interest Income   4.0    14.8   18.8 
          
Change in Interest Expense:         
Interest-Bearing Deposits         
Savings   0.1    2.1   2.2 
Money Market   0.1    3.6   3.7 
Time   (1.3)   3.6   2.3 
Total Interest-Bearing Deposits   (1.1)   9.3   8.2 
Long-Term Borrowings   2.6    —   2.6 
Total Change in Interest Expense   1.5    9.3   10.8 
Change in Net Interest Income $ 2.5  $ 5.5 $ 8.0 



Analysis of Change in Net Interest Income        Table 8
  Nine Months Ended September 30, 2018
  Compared to September 30, 2017
(dollars in millions) Volume Rate Total
Change in Interest Income:         
Interest-Bearing Deposits in Other Banks $ —  $ 2.9  $ 2.9
Available-for-Sale Investment Securities   (3.6)   9.5    5.9
Loans and Leases         
Commercial and industrial   (4.0)   15.9    11.9
Real estate - commercial   8.0    7.2    15.2
Real estate - construction   3.0    2.5    5.5
Real estate - residential   9.3    1.2    10.5
Consumer   3.9    (0.2)   3.7
Lease financing   (0.2)   0.2    —
Total Loans and Leases   20.0    26.8    46.8
Other Earning Assets   —    0.2    0.2
Total Change in Interest Income   16.4    39.4    55.8
          
Change in Interest Expense:         
Interest-Bearing Deposits         
Savings   0.1    4.8    4.9
Money Market   0.2    6.7    6.9
Time   (0.3)   13.0    12.7
Total Interest-Bearing Deposits   —    24.5    24.5
Short-Term Borrowings   0.2    —    0.2
Long-Term Borrowings   2.7    —    2.7
Total Change in Interest Expense   2.9    24.5    27.4
Change in Net Interest Income $ 13.5  $ 14.9  $ 28.4



Loans and Leases           Table 9
  September 30,  June 30,  December 31,  September 30, 
(dollars in thousands) 2018 2018 2017 2017
Commercial and industrial $ 2,969,237  $ 3,116,145  $ 3,135,266  $ 3,190,237
Real estate:            
Commercial   2,891,753   2,837,520   2,667,597   2,625,688
Construction   612,794   654,084   632,911   598,763
Residential   4,313,489   4,236,083   4,090,053   4,001,478
Total real estate   7,818,036   7,727,687   7,390,561   7,225,929
Consumer   1,651,877   1,632,088   1,586,476   1,562,172
Lease financing   161,314   161,766   165,066   171,373
Total loans and leases $ 12,600,464 $ 12,637,686 $ 12,277,369 $ 12,149,711



             
Deposits           Table 10
  September 30,  June 30,  December 31,  September 30, 
(dollars in thousands) 2018 2018 2017 2017
Demand $ 5,807,355 $ 5,965,083 $ 6,126,853 $ 5,907,634
Savings   4,685,460   4,772,922   4,509,419   4,411,411
Money Market   2,905,959   2,768,190   2,801,968   2,631,311
Time   3,290,499   3,889,343   4,173,882   4,645,127
  Total Deposits $ 16,689,273 $ 17,395,538 $ 17,612,122 $ 17,595,483



Non-Performing Assets and Accruing Loans and Leases Past Due 90 Days or More           Table 11
  September 30,  June 30,  December 31,  September 30, 
(dollars in thousands) 2018 2018 2017 2017
Non-Performing Assets            
Non-Accrual Loans and Leases            
Commercial Loans:            
Commercial and industrial $ 481 $ 1,821 $ 2,932 $ 2,312
Real estate - commercial   2,786   2,844   1,786   —
Real estate - construction   2,001   2,238   —   —
Total Commercial Loans   5,268   6,903   4,718   2,312
Residential   5,678   6,541   5,107   5,562
Total Non-Accrual Loans and Leases   10,946   13,444   9,825   7,874
Other Real Estate Owned   362   325   329   564
Total Non-Performing Assets $ 11,308 $ 13,769 $ 10,154 $ 8,438
             
Accruing Loans and Leases Past Due 90 Days or More            
Commercial Loans:            
Commercial and industrial $ 141 $ 163 $ 220 $ 1,751
Real estate - commercial   172   —   1,400   3,247
Total Commercial Loans   313   163   1,620   4,998
Residential   2,788   1,581   1,360   1,055
Consumer   2,813   1,451   1,394   1,894
Total Accruing Loans and Leases Past Due 90 Days or More $ 5,914 $ 3,195 $ 4,374 $ 7,947
             
Restructured Loans on Accrual Status and Not Past Due 90 Days or More   28,608   32,277   34,130   36,728
Total Loans and Leases $ 12,600,464 $ 12,637,686 $ 12,277,369 $ 12,149,711



Allowance for Loan and Lease Losses              Table 12 
  For the Three Months Ended  For the Nine Months Ended  
  September 30,  June 30,  September 30,  September 30,  September 30,  
(dollars in thousands) 2018 2018 2017 2018 2017 
Balance at Beginning of Period $ 140,601  $ 138,574  $ 136,883  $ 137,253  $ 135,494  
Loans and Leases Charged-Off                
Commercial Loans:                
Commercial and industrial   (303)   —    (408)   (778)   (1,338) 
Lease financing   —    —    (1)   —    (147) 
Total Commercial Loans   (303)   —    (409)   (778)   (1,485) 
Residential   (125)   (34)   (293)   (159)   (315) 
Consumer   (5,700)   (6,290)   (6,263)   (18,615)   (17,086) 
Total Loans and Leases Charged-Off   (6,128)   (6,324)   (6,965)   (19,552)   (18,886) 
Recoveries on Loans and Leases Previously Charged-Off                
Commercial Loans:                
Commercial and industrial   51    39    582    154    825  
Real estate - commercial   21    32    336    175    468  
Total Commercial Loans   72    71    918    329    1,293  
Residential   442    60    139    684    610  
Consumer   1,803    2,200    1,852    6,106    5,416  
Total Recoveries on Loans and Leases Previously Charged-Off   2,317    2,331    2,909    7,119    7,319  
Net Loans and Leases Charged-Off   (3,811)   (3,993)   (4,056)   (12,433)   (11,567) 
Provision for Loan and Lease Losses   4,460    6,020    4,500    16,430    13,400  
Balance at End of Period $ 141,250  $ 140,601  $ 137,327  $ 141,250  $ 137,327  
Average Loans and Leases Outstanding $ 12,595,668  $ 12,552,610  $ 12,115,001  $ 12,482,747  $ 11,868,917  
Ratio of Net Loans and Leases Charged-Off to Average Loans and Leases Outstanding   0.12%   0.13%   0.13%   0.13   0.13% 
Ratio of Allowance for Loan and Lease Losses to Loans and Leases Outstanding   1.12%   1.11%   1.13%   1.12   1.13% 



GAAP to Non-GAAP Reconciliation          Table 13 
  For the Three Months Ended  For the Nine Months Ended  
  September 30,  June 30,  September 30,  September 30,  
(dollars in thousands, except per share amounts) 2018  2018 2017 2018  2017 
Income Statement Data:                
Net income $ 67,388 $ 69,053 $ 58,363 $ 204,399 $ 171,998 
                 
Average total stockholders' equity $ 2,427,907 $ 2,466,392 $ 2,564,563 $ 2,464,601 $ 2,527,435 
Less: average goodwill   995,492   995,492   995,492   995,492   995,492 
Average tangible stockholders' equity $ 1,432,415 $ 1,470,900 $ 1,569,071 $ 1,469,109 $ 1,531,943 
                 
Average total assets $ 20,391,456 $ 20,121,504 $ 20,109,090 $ 20,306,833 $ 19,858,184 
Less: average goodwill   995,492   995,492   995,492   995,492   995,492 
Average tangible assets $ 19,395,964 $ 19,126,012 $ 19,113,598 $ 19,311,341 $ 18,862,692 
                 
Return on average total stockholders' equity(1)   11.01  11.23  9.03  11.09  9.10%
Return on average tangible stockholders' equity (non-GAAP)(1)   18.66  18.83  14.76  18.60  15.01%
                 
Return on average total assets(1)   1.31  1.38  1.15  1.35  1.16
Return on average tangible assets (non-GAAP)(1)   1.38  1.45  1.21  1.42  1.22
                 
Average stockholders' equity to average assets   11.91  12.26  12.75  12.14  12.73
Tangible average stockholders' equity to tangible average assets (non-GAAP)   7.39  7.69  8.21  7.61  8.12



  As of As of As of As of 
  September 30,  June 30,  December 31,  September 30,  
  2018 2018 2017 2017 
Balance Sheet Data:             
Total stockholders' equity $ 2,423,462 $ 2,459,175 $ 2,532,551 $ 2,581,858 
Less: goodwill   995,492   995,492   995,492   995,492 
Tangible stockholders' equity $ 1,427,970 $ 1,463,683 $ 1,537,059 $ 1,586,366 
              
Total assets $ 19,983,838 $ 20,479,719 $ 20,549,461 $ 20,565,627 
Less: goodwill   995,492   995,492   995,492   995,492 
Tangible assets $ 18,988,346 $ 19,484,227 $ 19,553,969 $ 19,570,135 
              
Shares outstanding   134,873,728   136,642,060   139,588,782   139,586,282 
              
Total stockholders' equity to total assets   12.13  12.01  12.32  12.55%
Tangible stockholders' equity to tangible assets (non-GAAP)   7.52  7.51  7.86  8.11%
              
Book value per share $ 17.97 $ 18.00 $ 18.14 $ 18.50 
Tangible book value per share (non-GAAP) $ 10.59 $ 10.71 $ 11.01 $ 11.36 


(1) Annualized for the three and nine months ended September 30, 2018 and 2017 and the three months ended June 30, 2018.



GAAP to Non-GAAP Reconciliation              Table 14 
  For the Three Months Ended For the Nine Months Ended  
  September 30,  June 30,  September 30,  September 30,  
(dollars in thousands, except per share amounts) 2018 2018 2017 2018 2017 
Net interest income $ 141,258  $ 141,403  $ 133,319  $ 422,333  $ 393,918  
Core net interest income (non-GAAP) $ 141,258  $ 141,403  $ 133,319  $ 422,333  $ 393,918  
                 
Noninterest income $ 47,405  $ 49,797  $ 49,664  $ 145,902  $ 151,281  
Gains on sale of real estate   —    —    (2,667)   —    (2,667) 
Core noninterest income (non-GAAP) $ 47,405  $ 49,797  $ 46,997  $ 145,902  $ 148,614  
                 
Noninterest expense $ 93,147  $ 91,865  $ 84,784  $ 275,599  $ 257,704  
Loss on litigation settlement(1)   (4,125)   —    —    (4,125)   —  
One-time items(2)   (511)   (914)   (543)   (1,832)   (1,384) 
Core noninterest expense (non-GAAP) $ 88,511  $ 90,951  $ 84,241  $ 269,642  $ 256,320  
                 
Net income $ 67,388  $ 69,053  $ 58,363  $ 204,399  $ 171,998  
Gains on sale of real estate   —    —    (2,667)   —    (2,667) 
Loss on litigation settlement(1)   4,125    —    —    4,125    —  
One-time items(2)   511    914    543    1,832    1,384  
Tax adjustments(3)   (1,206)   (247)   801    (1,559)   488  
Total core adjustments   3,430    667    (1,323)   4,398    (795) 
Core net income (non-GAAP) $ 70,818  $ 69,720  $ 57,040  $ 208,797  $ 171,203  
Core basic earnings per share (non-GAAP) $ 0.52  $ 0.51  $ 0.41  $ 1.52  $ 1.23  
Core diluted earnings per share (non-GAAP) $ 0.52  $ 0.50  $ 0.41  $ 1.52  $ 1.23  
                 
Basic earnings per share $ 0.50  $ 0.50  $ 0.42  $ 1.48  $ 1.23  
Diluted earnings per share $ 0.50  $ 0.50  $ 0.42  $ 1.48  $ 1.23  


(1) The Company reached an agreement in principle to resolve a putative class action lawsuit alleging that the Bank improperly charged certain overdraft fees. In connection with the anticipated settlement agreement, the Company recorded an expense of approximately $4.1 million during the three and nine months ended September 30, 2018.
(2) One-time items include the loss on our funding swap as a result of a decrease in the conversion rate of our Visa Class B restricted shares sold in 2016 as well as public offering related costs.
(3) Represents the adjustments to net income, tax effected at the Company’s effective tax rate for the respective period.