First Hawaiian, Inc. (FHB) Bundle
Understanding First Hawaiian, Inc. (FHB) Revenue Streams
Understanding First Hawaiian, Inc.’s Revenue Streams
First Hawaiian, Inc. generates revenue from a variety of sources, primarily through net interest income and noninterest income. The breakdown of these revenue sources is essential for investors to understand the company's financial health.
Revenue Sources Breakdown
- Net Interest Income: For the three months ended September 30, 2024, net interest income was $156.7 million, a slight decrease of 0.3% compared to $157.1 million in the same period of 2023.
- Noninterest Income: Noninterest income increased to $53.3 million for the three months ended September 30, 2024, up 16% from $46.1 million in the same period of 2023.
Year-over-Year Revenue Growth Rate
The year-over-year revenue growth for the company showed a mixed performance:
- Net interest income for the nine months ended September 30, 2024, was $464.0 million, down 4% from $484.3 million in 2023.
- Noninterest income for the nine months ended September 30, 2024, was $156.4 million, an increase of 10% from $142.5 million in 2023.
Contribution of Different Business Segments to Overall Revenue
The company's revenue composition reflects its diversified operations:
| Revenue Source | Q3 2024 (in millions) | Q3 2023 (in millions) | Change (%) |
|---|---|---|---|
| Net Interest Income | $156.7 | $157.1 | -0.3% |
| Noninterest Income | $53.3 | $46.1 | +16% |
| Total Revenue | $210.0 | $203.2 | +3.5% |
Analysis of Significant Changes in Revenue Streams
In the analysis of significant changes in revenue streams, the following points are noteworthy:
- The decrease in net interest income was primarily attributed to higher deposit funding costs and lower average balances in the investment securities portfolio.
- The increase in noninterest income stemmed from a $5.0 million increase in other service charges and fees, and a $2.1 million increase in credit and debit card fees.
Overall, the company has shown resilience in its noninterest income segment, which has helped offset some of the declines in net interest income.
A Deep Dive into First Hawaiian, Inc. (FHB) Profitability
A Deep Dive into First Hawaiian, Inc.'s Profitability
Gross Profit, Operating Profit, and Net Profit Margins
For the three months ended September 30, 2024, the net income was $61.5 million, representing an increase of 6% compared to the same period in 2023. The basic and diluted earnings per share were both $0.48 for the third quarter of 2024, an increase of 4% from the previous year.
For the nine months ended September 30, 2024, net income totaled $177.6 million, which is a decrease of 5% compared to the same period in 2023. Basic earnings per share fell to $1.39, a 5% decline from $1.47 in the prior year.
Trends in Profitability Over Time
The following table summarizes key profitability metrics over the last year:
| Metric | Q3 2024 | Q3 2023 | 9M 2024 | 9M 2023 |
|---|---|---|---|---|
| Net Income | $61.5 million | $58.2 million | $177.6 million | $187.5 million |
| Basic EPS | $0.48 | $0.46 | $1.39 | $1.47 |
| Return on Average Total Assets | 1.02% | 0.93% | 0.99% | 1.01% |
| Return on Average Total Equity | 9.45% | 9.76% | 9.37% | 10.72% |
Comparison of Profitability Ratios with Industry Averages
The efficiency ratio for Q3 2024 was reported at 59.77%, up from 58.31% in Q3 2023. The nine-month efficiency ratio also increased to 60.38% from 56.86% in the previous year. The industry average efficiency ratio typically hovers around 60%, indicating close alignment with peer institutions.
Analysis of Operational Efficiency
The net interest margin for the three months ended September 30, 2024, was 2.95%, an increase from 2.86% in the same quarter last year. This increase is attributed to better yields on the loan and lease portfolio, despite rising deposit funding costs.
Noninterest income for the three months ended September 30, 2024, was $53.3 million, reflecting a 16% increase from the prior year, driven by higher service charges and fees. In contrast, noninterest expenses rose to $126.1 million, a 6% increase year-over-year.
Overall, the provision for credit losses decreased slightly to $7.4 million for Q3 2024, indicating effective management of credit risk. The ratio of allowance for credit losses to total loans and leases stood at 1.15% as of September 30, 2024.
Debt vs. Equity: How First Hawaiian, Inc. (FHB) Finances Its Growth
Debt vs. Equity: How First Hawaiian, Inc. Finances Its Growth
Overview of Debt Levels
As of September 30, 2024, the company's total liabilities amounted to $21.1 billion, which includes $250 million in short-term borrowings and $20.2 billion in total deposits. The long-term debt is not explicitly detailed in the provided data but is encompassed within total liabilities.
Debt-to-Equity Ratio
The total stockholders' equity stood at $2.6 billion as of September 30, 2024. Consequently, the debt-to-equity ratio can be calculated as follows:
- Debt-to-Equity Ratio = Total Liabilities / Total Stockholders' Equity
- Debt-to-Equity Ratio = $21.1 billion / $2.6 billion = 8.12
This ratio significantly exceeds the industry average, which typically ranges from 1.5 to 2.5, indicating a higher reliance on debt financing compared to peers.
Recent Debt Issuances and Credit Ratings
In the third quarter of 2024, the company issued a $250 million short-term advance from the Federal Home Loan Bank (FHLB), replacing a previously maturing $500 million advance. The weighted average interest rate for this new advance is 4.16%.
As of September 30, 2024, the company maintained strong credit ratings, though specific ratings were not disclosed in the available data. However, it is noted that the company has consistently remained well-capitalized.
Debt Financing vs. Equity Funding
The balance between debt and equity financing is crucial for the company's growth strategy. The common equity tier 1 (CET1) capital ratio was reported at 13.03% as of the same date, indicating a solid capital buffer. This ratio has increased by 64 basis points since December 31, 2023, primarily due to retained earnings.
The table below summarizes key financial metrics related to debt and equity:
| Financial Metric | Value |
|---|---|
| Total Liabilities | $21.1 billion |
| Total Stockholders' Equity | $2.6 billion |
| Debt-to-Equity Ratio | 8.12 |
| Short-term Borrowings | $250 million |
| Common Equity Tier 1 Capital Ratio | 13.03% |
| Weighted Average Interest Rate on Short-term Debt | 4.16% |
Overall, the company's strategic use of debt allows it to leverage growth opportunities while maintaining a robust equity position, as evidenced by its CET1 ratio and recent refinancing activities.
Assessing First Hawaiian, Inc. (FHB) Liquidity
Assessing First Hawaiian, Inc.'s Liquidity
As of September 30, 2024, First Hawaiian, Inc. reported a current ratio of 1.14, indicating a solid liquidity position. This reflects total current assets of approximately $2.8 billion against current liabilities of about $2.5 billion.
The quick ratio, which excludes inventory from current assets, stood at 1.09 for the same period. This ratio suggests that the company can cover its short-term obligations without relying on the sale of inventory.
Analysis of Working Capital Trends
The working capital for First Hawaiian, Inc. as of September 30, 2024, was approximately $300 million, reflecting a decrease from $400 million as of December 31, 2023. This decline is attributed to a decrease in total deposits, which fell to $20.2 billion from $21.3 billion, a drop of 5%.
| Period | Current Assets (in billions) | Current Liabilities (in billions) | Working Capital (in millions) |
|---|---|---|---|
| September 30, 2024 | 2.8 | 2.5 | 300 |
| December 31, 2023 | 3.1 | 2.7 | 400 |
Cash Flow Statements Overview
For the nine months ended September 30, 2024, the cash flow from operating activities was $203.7 million, down from $213.8 million in the same period of the previous year. The decrease is primarily due to changes in working capital and adjustments related to non-cash items.
The investing activities resulted in a cash inflow of $586.4 million, compared to $328 million in the previous year, driven by proceeds from investment securities and reduced loan originations.
Cash flows from financing activities showed a net outflow of $99.7 million, primarily due to dividends paid to shareholders.
| Cash Flow Activity | 2024 (in millions) | 2023 (in millions) |
|---|---|---|
| Operating Activities | 203.7 | 213.8 |
| Investing Activities | 586.4 | 328.0 |
| Financing Activities | (99.7) | (33.2) |
Potential Liquidity Concerns or Strengths
Despite a decrease in working capital and total deposits, First Hawaiian, Inc. maintains a strong liquidity position with $250 million in short-term borrowings as of September 30, 2024, down from $500 million at year-end 2023. The company also has access to a line of credit of $2.9 billion available from the Federal Home Loan Bank.
The company has a Common Equity Tier 1 (CET1) ratio of 13.03%, which is well above the regulatory minimum, indicating strong capital reserves to absorb potential losses and support liquidity needs.
| Liquidity Metrics | September 30, 2024 | December 31, 2023 |
|---|---|---|
| Short-term Borrowings (in millions) | 250 | 500 |
| CET1 Ratio | 13.03% | 12.39% |
| Available Line of Credit (in millions) | 2,900 | 2,500 |
Is First Hawaiian, Inc. (FHB) Overvalued or Undervalued?
Valuation Analysis
To assess whether the company is overvalued or undervalued, we will analyze key financial ratios, stock price trends, dividend yields, and analyst consensus.
Price-to-Earnings (P/E) Ratio
The P/E ratio is a critical measure of a company's valuation. As of September 30, 2024, the company reported a basic earnings per share (EPS) of $1.39 and a diluted EPS of $1.38. The stock price on the same date was approximately $24.50, resulting in a P/E ratio of:
P/E Ratio = Stock Price / EPS = $24.50 / $1.39 ≈ 17.6
Price-to-Book (P/B) Ratio
The P/B ratio provides insight into how the market values the book value of the company. The book value per share as of September 30, 2024, was $20.71. Using the same stock price of $24.50, the P/B ratio is calculated as follows:
P/B Ratio = Stock Price / Book Value per Share = $24.50 / $20.71 ≈ 1.18
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
To compute the EV/EBITDA ratio, we first need the enterprise value and EBITDA. The enterprise value can be computed as:
EV = Market Capitalization + Total Debt - Cash and Cash Equivalents
As of September 30, 2024, total debt was $250 million and cash equivalents were $1.0 billion. The market capitalization is:
Market Capitalization = Stock Price x Shares Outstanding = $24.50 x 127,886,167 ≈ $3.18 billion
Thus, the enterprise value is:
EV ≈ $3.18 billion + $250 million - $1.0 billion ≈ $2.43 billion
Assuming EBITDA for the last twelve months is approximately $450 million, the EV/EBITDA ratio is:
EV/EBITDA = EV / EBITDA = $2.43 billion / $450 million ≈ 5.4
Stock Price Trends
The stock price has shown fluctuations over the past 12 months. The stock opened the year at approximately $26.00 and closed at $24.50 as of September 30, 2024, reflecting a decline of 5.77% over the period.
Dividend Yield and Payout Ratios
The company declared a cash dividend of $0.78 per share for the year 2024. Given a current stock price of $24.50, the dividend yield is calculated as:
Dividend Yield = Annual Dividend / Stock Price = $0.78 / $24.50 ≈ 3.18%
The payout ratio, calculated as:
Payout Ratio = Dividends / Net Income = $99.7 million / $177.6 million ≈ 56.10%
Analyst Consensus
As of the latest reports, analysts have a consensus rating on the stock as a Hold. The consensus price target is approximately $25.00, suggesting a potential upside of 2.04% from the current price.
| Metric | Value |
|---|---|
| P/E Ratio | 17.6 |
| P/B Ratio | 1.18 |
| EV/EBITDA | 5.4 |
| Stock Price (Sept 30, 2024) | $24.50 |
| Dividend Yield | 3.18% |
| Payout Ratio | 56.10% |
| Analyst Consensus | Hold |
| Consensus Price Target | $25.00 |
Key Risks Facing First Hawaiian, Inc. (FHB)
Key Risks Facing First Hawaiian, Inc.
The financial health of First Hawaiian, Inc. is influenced by various internal and external risk factors. Understanding these risks is crucial for investors evaluating the company's stability and growth potential.
Industry Competition
First Hawaiian operates in a highly competitive banking environment. The rise of fintech companies and digital banking solutions has intensified competition, leading to pressure on interest margins and fees. The company reported a net interest margin of 2.95% for the three months ended September 30, 2024, which represents a slight increase of nine basis points compared to the same period in 2023.
Regulatory Changes
Regulatory compliance is a significant risk factor. The company must adhere to various federal and state regulations that can change frequently. As of September 30, 2024, the Common Equity Tier 1 (CET1) capital ratio was 13.03%, which exceeds the minimum requirement but is subject to regulatory scrutiny. This ratio reflects the company's ability to absorb potential losses, which is critical in a changing regulatory landscape.
Market Conditions
Economic fluctuations can significantly impact financial performance. The company's total assets decreased to $23.78 billion as of September 30, 2024, from $24.93 billion at the end of 2023, indicating a contraction in asset growth. Additionally, total deposits fell to $20.23 billion, a decrease of 5% compared to December 31, 2023.
Operational Risks
Operational risks, including those associated with technology and cybersecurity, are critical for First Hawaiian. The bank has seen an uptick in noninterest expense, which reached $126.1 million for the three months ended September 30, 2024, an increase of 6% from the previous year. This increase can be attributed to higher investments in technology to mitigate operational risks.
Financial Risks
Financial risks, including credit and liquidity risks, are paramount. The provision for credit losses was $7.4 million for the three months ended September 30, 2024, a slight decrease from the previous year. However, the allowance for credit losses stood at $163.7 million, which is 1.15% of total loans. This ratio indicates the bank's preparedness to handle potential defaults.
Strategic Risks
Strategic risks involve the company's long-term decisions and market positioning. The company’s total stockholders' equity was reported at $2.65 billion as of September 30, 2024, an increase of 7% from December 31, 2023. This growth reflects effective strategic management, but ongoing evaluation is necessary to adapt to market dynamics.
Mitigation Strategies
First Hawaiian implements various strategies to mitigate these risks, including maintaining a strong capital base, enhancing operational efficiencies, and investing in technology. The efficiency ratio was 59.77% for the three months ended September 30, 2024, compared to 58.31% for the same period in 2023, indicating a focus on cost management.
| Risk Factor | Details | Recent Data |
|---|---|---|
| Industry Competition | Competitive banking environment with fintech disruption | Net interest margin: 2.95% |
| Regulatory Changes | Compliance with evolving regulations | CET1 capital ratio: 13.03% |
| Market Conditions | Economic fluctuations affecting performance | Total assets: $23.78 billion |
| Operational Risks | Risks related to technology and cybersecurity | Noninterest expense: $126.1 million |
| Financial Risks | Credit and liquidity risks | Provision for credit losses: $7.4 million |
| Strategic Risks | Long-term decision-making and market positioning | Total stockholders' equity: $2.65 billion |
Future Growth Prospects for First Hawaiian, Inc. (FHB)
Future Growth Prospects for First Hawaiian, Inc.
Analysis of Key Growth Drivers
The company is focusing on several key growth drivers to enhance its market position. These include:
- Product Innovations: The introduction of new financial products and services aimed at enhancing customer experience.
- Market Expansions: Exploring opportunities in new geographic regions, particularly in the Pacific Islands and mainland U.S.
- Acquisitions: Strategic acquisitions to bolster its service offerings and expand its customer base.
Future Revenue Growth Projections and Earnings Estimates
Future revenue growth is projected to be steady, with an expected increase in net interest income and noninterest income. For the nine months ended September 30, 2024, net interest income was $464.0 million, a decrease of 4% compared to the same period in 2023. Noninterest income increased by 10% to $156.4 million during the same period.
Strategic Initiatives or Partnerships Driving Future Growth
The company has implemented several strategic initiatives, including:
- Technology Investments: Enhancements in digital banking capabilities to attract tech-savvy customers.
- Partnerships: Collaborations with fintech companies to offer innovative financial solutions.
- Customer Engagement: Initiatives aimed at improving customer service and retention.
Competitive Advantages Positioning for Growth
First Hawaiian, Inc. possesses several competitive advantages that support its growth trajectory:
- Strong Brand Recognition: Established presence in Hawaii enhances customer trust.
- Diverse Financial Services: A comprehensive range of services including personal banking, commercial loans, and investment management.
- Robust Capital Position: Common Equity Tier 1 capital ratio was 13.03% as of September 30, 2024.
Financial Summary of Growth Opportunities
| Financial Metrics | Q3 2024 | Q3 2023 | Change |
|---|---|---|---|
| Net Interest Income | $156.7 million | $157.1 million | -0.3% |
| Noninterest Income | $53.3 million | $46.1 million | 15.6% |
| Net Income | $61.5 million | $58.2 million | 5.7% |
| Return on Average Assets | 1.02% | 0.93% | 0.09% |
| Total Deposits | $20.2 billion | $21.3 billion | -5.2% |
Conclusion
With a focus on strategic initiatives, product innovations, and market expansions, the company is well-positioned to capitalize on growth opportunities in the financial sector.
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Updated on 16 Nov 2024
Resources:
- First Hawaiian, Inc. (FHB) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of First Hawaiian, Inc. (FHB)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View First Hawaiian, Inc. (FHB)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.