2ND QUARTER 2017 EARNINGS CONFERENCE CALL JULY 27, 2017

Transcription

1 2ND QUARTER 2017 EARNINGS CONFERENCE CALL JULY 27, 2017

2 FORWARD-LOOKING STATEMENTS This presentation contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 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, and any such forward-looking statements are subject to risks, assumptions, estimates and uncertainties that are difficult to predict. Actual results may prove to be materially different from the results expressed or implied by the forward-looking statements. Factors that could cause our actual results to differ materially from those described in the forward-looking statements can be found in our SEC filings, including, but not limited to, our annual report on Form 10-K for the year ended December 31, 2016, which is available on our website ( and the SEC s website ( Any forward-looking statement speaks only as of the date on which it is made, and we do not undertake any obligation to update or review any forwardlooking statement, whether as a result of new information, future developments or otherwise, except as required by applicable law. 2

3 Q HIGHLIGHTS Solid Earnings Net income of $56.9 million, or $0.41 per diluted share Core net income (1) of $57.2 million, or $0.41 per diluted share Disciplined Growth, Strong Balance Sheet Record total assets of $20.4 billion Loan and lease growth of $281 million, or 2.4%, to $12.1 billion Deposit growth of $514 million, or 3.0%, to $17.5 billion Net charge-off ratio: 0.11% annualized Capital ratios in excess of well-capitalized ratios at 6/30/17 Strong Financial Performance Efficiency ratio of 47.3% ROATA (1) of 1.22%, core ROATA (1) of 1.23% ROATCE (1) of 14.89%, core ROATCE (1) of 14.96% (1) Non-GAAP financial measure. A reconciliation to the comparable GAAP measurement is provided in the appendix of this slide presentation 3

4 SUMMARY INCOME STATEMENT Quarter ended ($ in millions except per share data) 6/30/17 3/31/17 6/30/16 Net interest income $ $ $ Provision for loan and lease losses Noninterest income Noninterest expense Pre-tax income Tax expense Net Income $ 56.9 $ 56.7 $ 54.9 Core adjustments (1) Tax adjustments (0.2) (0.1) 0.0 Core Net Income (1) $ 57.2 $ 57.0 $ 54.9 Earnings per diluted share: Earnings available to common shareholders $ 0.41 $ 0.41 $ 0.39 Core EPS (1) (1) Non-GAAP financial measure. A reconciliation to the comparable GAAP measurement is provided in the appendix of this slide presentation 4

5 NET INTEREST INCOME $1.4 million increase in premium amortization in the investment securities portfolio in Q ($ millions) % 3.02% % % % Q2 16 Q3 16 Q4 16 Q1 17 Q % 3.10% 3.00% 2.90% 2.80% 2.70% 2.60% 2.50% Net Interest Income Net Interest Margin 5

6 NONINTEREST INCOME $1.3 million of BOLI death benefits in Q ($ millions) Q2 16 Q3 16 Q4 16 Q1 17 Q2 17 6

7 NONINTEREST EXPENSE Outlook: ~47% efficiency ratio in 2017, ~47-48% efficiency ratio in 2018 ($ millions) % % 48.3% 45.8% 47.2% 47.3% 50.0% % 25.0 Q2 16 Q3 16 Q4 16 Q1 17 Q % Nonint Expense Efficiency Ratio 7

8 SELECTED BALANCE SHEET ITEMS ($ in millions except per share data) 6/30/17 3/31/17 6/30/16 Selected Assets Interest bearing deposits in other banks $ $ $ Investment securities 5, , ,601.3 Loans and leases 12, , ,187.7 Total assets 20, , ,053 Selected Liabilities and Stockholders Equity Total deposits 17, , ,122.1 Total stockholders equity 2, , ,501.0 Diluted weighted shares outstanding 139,646, ,637, ,459,620 Book value per share $ Tangible book value per share (1) $ (1) Non-GAAP financial measure. A reconciliation to the comparable GAAP measurement is provided in the appendix of this slide presentation 8

9 LOANS Total loans and leases grew $281 million, or 2.4%, in Q ($ billions) Loans and Leases ($ billions) CRE & Construction Jun-16 Sep-16 Dec-16 Mar-17 Jun-17 Jun-16 Sep-16 Dec-16 Mar-17 Jun-17 ($ billions) C&I ($ billions) Residential & HELOC Jun-16 Sep-16 Dec-16 Mar-17 Jun-17 Jun-16 Sep-16 Dec-16 Mar-17 Jun-17 9

10 DEPOSITS Total deposits increased $514 million, or 3.0%, in Q ($ billions) TOTAL DEPOSITS DEPOSIT COMPOSITION Time 23.3% Demand 33.6% Money Market 16.9% Savings 26.2% Jun-16 Sep-16 Dec-16 Mar-17 Jun-17 6/30/17 10

11 ASSET QUALITY NCOs / Ave Loans and Leases ($ millions) ALLL 0.10% 0.12% 0.12% 0.15% 0.11% Q2 16 Q3 16 Q4 16 Q1 17 Q2 17 Jun-16 Sep-16 Dec-16 Mar-17 Jun-17 Non-Accrual Loans and Leases / Total Loans and Leases 0.12% 0.08% 0.08% 0.06% 0.06% 0.25% Delinquency Rate 0.32% 0.27% 0.28% 0.29% Jun-16 Sep-16 Dec-16 Mar-17 Jun-17 Jun-16 Sep-16 Dec-16 Mar-17 Jun-17 11

12 HAWAII S ECONOMY Healthy Labor Market June statewide seasonally-adjusted state unemployment rate was 2.7%, compared to 4.4% nationally Strong Visitor Industry (data through 5/31/17) YTD visitor arrivals: 3.8 million, up 4.2% vs prior year YTD visitor spending: $6.9 billion, up 9.8% vs prior year Oahu Residential Real Estate (YTD through 6/30/17) Volume of single family home sales: +4.4% vs prior year Volume of condominium sales: +6.0% vs prior year Median single-family home sale price: $750k, +3.2% vs prior year Median condominium sale price: $399k, +3.6% vs prior year Sources: Hawaii Tourism Authority, State of Hawaii Department of Labor and Industrial Relations, Honolulu Board of Realtors. 12

13 QUESTIONS

14 APPENDIX Non-GAAP Reconciliations 14

15 GAAP TO NON-GAAP RECONCILIATIONS 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. The following tables provide a reconciliation of these non-gaap financial measures with their most closely related GAAP measures. 15

16 GAAP TO NON-GAAP RECONCILIATION For the Three Months Ended For the Six Months Ended June 30, March 31, June 30, June 30, (dollars in thousands, except per share amounts) Income Statement Data: Net income $ ,895 $ ,740 $ ,860 $ ,635 $ ,391 Average total stockholders' equity $ 2,528,388 $ 2,488,519 $ 2,491,138 $ 2,508,564 $ 2,630,307 Less: average goodwill 995, , , , ,492 Average tangible stockholders' equity $ 1,532,896 $ 1,493,027 $ 1,495,646 $ 1,513,072 $ 1,634,815 Average total assets $ 19,692,222 $ 19,769,508 $ 18,950,020 $ 19,730,651 $ 19,120,180 Less: average goodwill 995, , , , ,492 Average tangible assets $ 18,696,730 $ 18,774,016 $ 17,954,528 $ 18,735,159 $ 18,124,688 Return on average total stockholders' equity (a) 9.03 % 9.25 % 8.86 % 9.13 % 9.20 % Return on average tangible stockholders' equity (non-gaap) (a) % % % % % Return on average total assets (a) 1.16 % 1.16 % 1.16 % 1.16 % 1.27 % Return on average tangible assets (non-gaap) (a) 1.22 % 1.23 % 1.23 % 1.22 % 1.34 % Average stockholders' equity to average assets % % % % % Tangible average stockholders' equity to tangible average assets (non-gaap) 8.20 % 7.95 % 8.33 % 8.08 % 9.02 % (a) Annualized for the three months and six months ended June 30, 2016 and 2017, and the three months ended March 31,

17 GAAP TO NON-GAAP RECONCILIATION For the Three Months Ended For the Six Months Ended June 30, March 31, June 30, June 30, (dollars in thousands, except per share amounts) Net interest income $ ,254 $ ,345 $ ,427 $ ,599 $ ,739 Core net interest income (non-gaap) $ 131,254 $ 129,345 $ 120,427 $ 260,599 $ 237,739 Noninterest income $ 48,870 $ 49,407 $ 46,371 $ 98,277 $ 119,890 Loss (gain) on sale of securities (3,050) Gain on sale of stock (Visa/MasterCard) (22,678) Core noninterest income (non-gaap) $ 48,870 $ 49,407 $ 46,371 $ 98,277 $ 94,162 Noninterest expense $ 85,241 $ 84,339 $ 78,473 $ 169,580 $ 163,537 One-time items (a) (457) (384) (841) (2,547) Core noninterest expense (non-gaap) $ 84,784 $ 83,955 $ 78,473 $ 168,739 $ 160,990 Net income $ 56,895 $ 56,740 $ 54,860 $ 113,635 $ 120,391 Gain on sale of securities (3,050) Gain on sale of stock (Visa/MasterCard) (22,678) One-time items (a) ,547 Tax adjustments (b) (171) (142) (313) 8,723 Total core adjustments (14,458) Core net income (non-gaap) $ 57,181 $ 56,982 $ 54,860 $ 114,163 $ 105,933 Core basic earnings per share (non-gaap) $ 0.41 $ 0.41 $ 0.39 $ 0.82 $ 0.76 Core diluted earnings per share (non-gaap) $ 0.41 $ 0.41 $ 0.39 $ 0.82 $ 0.76 (a) (b) One-time items include initial public offering related costs. Represents the adjustments to net income, tax effected at the Company s effective tax rate for the respective period. 17