First Hawaiian, Inc. (‘FHI’) operates as a bank holding company for First Hawaiian Bank (‘FHB’ or the ‘bank’).
Through the bank, the company operates a network of various branches in Hawaii, Guam, and Saipan. The company provides a diversified range of banking services to consumer and commercial customers, including deposit products, lending services, and wealth management and trust services. Through the company’s distribution channels, it offers a variety of deposit products to its customers,...
First Hawaiian, Inc. (‘FHI’) operates as a bank holding company for First Hawaiian Bank (‘FHB’ or the ‘bank’).
Through the bank, the company operates a network of various branches in Hawaii, Guam, and Saipan. The company provides a diversified range of banking services to consumer and commercial customers, including deposit products, lending services, and wealth management and trust services. Through the company’s distribution channels, it offers a variety of deposit products to its customers, including checking and savings accounts, and other types of deposit accounts. The company offers comprehensive commercial banking services to middle-market and large Hawaii-based businesses with strong balance sheets and high-quality collateral. It provides commercial and industrial lending, including auto dealer flooring, commercial real estate, and construction lending. The company also offers comprehensive consumer lending services focused on residential real estate lending, indirect auto financing, and other consumer loans to individuals and small businesses through the company’s branch, online, and mobile distribution channels. The company’s wealth management business provides an array of trust services, private banking, and investment management services. It also offers consumer and commercial credit cards, and merchant processing.
The company seeks to develop comprehensive, long-term banking relationships by offering a diverse array of products and services, cross-selling those products and services, and delivering high-quality customer service. The company’s service culture and emphasis on repeat positive customer experiences are integral to its banking strategy and exemplified by its longstanding customer relationships.
Segments
The company operates its business through three operating segments: Retail Banking, Commercial Banking, and Treasury and Other.
Retail Banking: The company’s Retail Banking segment includes the financial products and services it provides to consumers and small businesses. Loan and lease products offered include residential and commercial mortgage loans, home equity lines of credit and loans, automobile loans and leases, secured and unsecured lines of credit, installment loans, and small business loans and leases. Deposit products offered include checking, savings, and time deposit accounts. The company’s Retail Banking segment also includes its wealth management services. Products and services from Retail Banking are delivered to customers through 48 banking locations throughout the State of Hawaii, Guam, and Saipan.
Commercial Banking: The company’s Commercial Banking segment includes its corporate banking-related products, commercial real estate loans, commercial lease financing, secured and unsecured lines of credit, automobile loans, and auto dealer financing, business deposit products, and credit cards. Commercial lending and deposit products are offered primarily to middle-market and large companies locally, nationally, and internationally.
Treasury and Other: The company’s Treasury and Other segment includes its treasury business, which consists of corporate asset and liability management activities, including interest rate risk management. The assets and liabilities (and related interest income and expense) of the company’s treasury business consist of interest-bearing deposits, investment securities, federal funds sold and purchased, government deposits, short and long-term borrowings, and bank-owned properties. The company’s primary sources of noninterest income are from bank-owned life insurance (BOLI), net gains from the sale of investment securities, foreign exchange income related to customer-driven cross-border wires for business and personal reasons, and management of bank-owned properties in Hawaii and Guam.
Other organizational units (Technology, Operations, Credit and Risk Management, Human Resources, Finance, Administration, Marketing, and Corporate and Regulatory Administration) provide a wide range of support to its other income-earning segments.
Products and Services
The bank is a full-service community bank focused on building relationships with its customers. The company provides a variety of deposit accounts and lending services to commercial and consumer customers, as well as credit card products, wealth management services, and merchant processing services. It offers a comprehensive range of commercial lending services, including commercial and industrial lending, auto dealer flooring, commercial real estate lending, and construction lending. The company’s primary consumer lending services are mortgage lending, auto finance, small business loans, personal installment loans, and credit cards. The company’s wealth management business offers individuals investment and financial planning services, insurance protection, trust, and estate services, and private banking.
Loans and Leases
Commercial and industrial loans are made primarily to corporations, middle-market, and small businesses for the purpose of financing equipment acquisition, expansion, working capital, and other general business purposes. The company also offers a variety of automobile dealer flooring lines to its customers in Hawaii and California to assist with the financing of their inventory.
Commercial real estate loans are secured by first mortgages on commercial real estate at loan-to-value (‘LTV’) ratios generally not exceeding 75%, and a minimum debt service coverage ratio of 1.20 to 1. The commercial properties are predominantly apartments, neighborhood, and grocery-anchored retail, industrial, office, and, to a lesser extent, specialized properties such as hotels.
Construction loans are for the purchase or construction of a property for which repayment will be generated by the property. Loans in this portfolio are primarily for the purchase of land, as well as for the development of commercial properties, single-family homes, and condominiums. The company classifies loans as construction until the completion of the construction phase.
Residential real estate loans are generally secured by 1-4 unit residential properties and are underwritten using traditional underwriting systems to assess the credit risks and financial capacity and repayment ability of the consumer. Decisions are primarily based on LTV ratios, debt-to-income (‘DTI’) ratios, liquidity, and credit scores. LTV ratios generally do not exceed 80%, although higher levels are permitted with mortgage insurance. The company offers fixed-rate mortgage products and variable-rate mortgage products, including HELOC. Since the company’s transition from LIBOR in late 2021, it now offers variable-rate mortgage products based on SOFR, with interest rates that are subject to change every six months after the third, fifth, seventh, or tenth year, depending on the product.
Consumer loans consist primarily of open- and closed-end direct and indirect credit facilities for personal, automobile, and household purchases, as well as credit card loans. The company seeks to maintain reasonable levels of risk in consumer lending by following prudent underwriting guidelines, which include an evaluation of personal credit history, cash flow, and collateral values based on existing market conditions.
The company’s loan and lease portfolio includes adjustable-rate loans, primarily tied to CME Term SOFR, Prime, and SOFR, hybrid rate loans, for which the initial rate is fixed for a period from one year to as much as ten years, and fixed-rate loans, for which the interest rate does not change through the life of the loan or the remaining life of the loan.
The company’s lending activities are concentrated primarily in Hawaii. However, it also has lending activities on the U.S. mainland, Guam, and Saipan. The company’s commercial lending activities on the U.S. mainland include automobile dealer flooring activities in California, participation in the Shared National Credits Program, and selective commercial real estate projects based on existing customer relationships. The company’s lease financing portfolio includes commercial leveraged and single investor lease financing activities both in Hawaii and on the U.S. mainland. However, no new leveraged leases are being added to the portfolio, and all remaining leveraged leases are running off. The company’s consumer lending activities are concentrated primarily in Hawaii and, to a smaller extent, Guam and Saipan.
Investment Portfolio
As of December 31, 2024, the company’s investment portfolio included U.S. Treasury and government agency debt securities; government-sponsored enterprises debt securities; mortgage-backed securities, such as residential - government agency, residential - government-sponsored enterprises, commercial - government agency, commercial - government-sponsored enterprises, and commercial - non-agency; collateralized mortgage obligations, such as government agency and government-sponsored enterprises; and collateralized loan obligations.
Deposits
Deposits are the primary funding source for the bank and are acquired from a broad base of local markets, including both individual and corporate customers. The company obtains funds from depositors by offering a range of deposit types, including demand, savings, money market, and time.
Supervision and Regulation
FHI is a bank holding company under the U.S. Bank Holding Company Act of 1956, as amended (the ‘BHC Act’), and has elected to be treated as a financial holding company under the BHC Act. Consequently, FHI and its subsidiaries are subject to the supervision, regulation, examination, and reporting requirements of the Board of Governors of the Federal Reserve System (the ‘Federal Reserve’). The BHC Act provides generally for ‘umbrella’ regulation of bank holding companies by the Federal Reserve and functional regulation of holding company subsidiaries by applicable regulatory agencies.
FHB is a Federal Deposit Insurance Corporation (the ‘FDIC’) insured bank chartered under the laws of the State of Hawaii. FHB is not a member of the Federal Reserve System. Consequently, the FDIC and the Hawaii Department of Financial Institutions (the ‘Hawaii DFI’) are the primary regulators of FHB and also regulate its subsidiaries. FHB’s branch operations in Guam are also subject to regulation by the Banking and Insurance Commissioner of the Government of Guam Department of Revenue and Taxation (the ‘Guam Banking and Insurance Commissioner’). FHB’s branch operation in Saipan, which is one of the principal islands of the Commonwealth of the Northern Mariana Islands (‘CNMI’), is subject to the regulatory jurisdiction of the Division of Banking of the CNMI Department of Commerce. In addition, as the owner of a Hawaii-chartered bank, FHI is registered as a financial institution holding company under the Hawaii Code of Financial Institutions (the ‘Hawaii Code’) and is subject to the registration, reporting, and examination requirements of the Hawaii Code, as well as supervision and examination by the Hawaii DFI.
The company offers certain insurance, investment, and trust products through FHB and its subsidiary, Bishop Street Capital Management Corporation, a registered investment adviser with the SEC. Bishop Street Capital Management Corporation is subject to the disclosure and regulatory requirements of the Investment Advisers Act of 1940, as administered by the SEC. FHB is also registered as a municipal securities advisor with the Municipal Securities Rulemaking Board (‘MSRB’) and the SEC and is subject to the disclosure and regulatory requirements of the MSRB and the SEC. FHB’s insurance brokerage activities in Hawaii are conducted under its insurance producer license by appointed agents (licensed insurance producers), and those licensees are subject to regulation by the Insurance Division of the State of Hawaii Department of Commerce and Consumer Affairs (the ‘DCCA Insurance Division’). FHB’s trust services in Hawaii are subject to regulation by the FDIC and the Hawaii DFI. FHB’s insurance activities in Guam are conducted under a general agent’s license issued by the Guam Banking and Insurance Commissioner, and FHB is therefore subject to regulation by the insurance branch of the regulatory division of the Guam Department of Revenue and Taxation.
FHB and its affiliates are also subject to supervision, regulation, examination, and enforcement by the Consumer Financial Protection Bureau (the ‘CFPB’), with respect to consumer protection laws and regulations. In addition, FHI is subject to the disclosure and regulatory requirements of the U.S. Securities and Exchange Act of 1934 (‘Exchange Act’) administered by the SEC and the rules adopted by NASDAQ applicable to listed companies. The company is subject to numerous other statutes and regulations that affect its business activities and operations.
Hawaii law also imposes restrictions on the bank’s activities and corporate governance requirements intended to ensure the safety and soundness of the bank. For example, the Hawaii Code requires that at least one of the directors of the bank, as well as the Chief Executive Officer of the bank, be residents of the State of Hawaii. FHB is also restricted under the Hawaii Code to investing in certain types of investments and is generally limited in the amount of money it can lend to a single borrower or invest in securities issued by a single issuer (in each case, 20% of FHB’s common stock and additional paid-in capital).
The company must obtain the prior approval of the Federal Reserve before (i) acquiring direct or indirect ownership or control of any voting shares of any bank or bank holding company, if after such acquisition, it will directly or indirectly own or control 5% or more of any class of voting shares of the institution, (ii) acquiring all or substantially all of the assets of any bank (other than directly through the bank), or (iii) merging or consolidating with any other bank holding company. Under the Bank Merger Act, the prior approval of the FDIC is required for the bank to merge with another bank or purchase all or substantially all of the assets or assume any of the deposits of another FDIC-insured depository institution.
As a bank holding company, FHI is subject to oversight by the Federal Reserve. The Federal Reserve Act generally requires those transactions to be on terms at least as favorable to the bank.
The Federal Reserve monitors the capital adequacy of the company, and the FDIC and the Hawaii DFI monitor the capital adequacy of the bank. The bank regulators currently use a combination of risk-based ratios and a leverage ratio to evaluate capital adequacy. The company and the bank are subject to the federal bank regulators’ final rules implementing Basel III and various provisions of the Dodd-Frank Act (the ‘Capital Rules’).
As an FDIC-insured bank, FHB must pay deposit insurance assessments to the FDIC based on its average total assets minus its average tangible equity.
The company has incurred costs to adopt additional policies and systems to ensure compliance with the Volcker Rule.
The company is subject to a number of federal and state consumer protection laws that extensively govern its relationship with its customers. These laws include, but are not limited to, the Equal Credit Opportunity Act, the Fair Credit Reporting Act, the Truth in Lending Act, the Truth in Savings Act, the Electronic Fund Transfer Act, the Expedited Funds Availability Act, the Home Mortgage Disclosure Act, the Fair Housing Act, the Real Estate Settlement Procedures Act, the Service Members Civil Relief Act, and these laws’ respective state-law counterparts, as well as state usury laws and laws regarding ‘unfair, deceptive, or abusive’ acts and practices.
Under the Community Reinvestment Act (‘CRA’), the bank has an obligation, consistent with safe and sound operations, to help meet the credit needs of the market areas where it operates, which include low- and moderate-income individuals and communities. In connection with its examination of the bank, the FDIC is required to assess the bank’s CRA performance in the areas of lending, investments, and services. FHB’s CRA performance could, among other things, result in the denial or delay in certain corporate applications filed by the parent or the bank, including applications for branch openings or relocations, and applications to acquire, merge, or consolidate with another banking institution or holding company. FHB received a rating of ‘Outstanding’ in its most recently completed CRA performance evaluation.
In October 2023, the OCC, the Federal Reserve, and the FDIC jointly issued a final rule to modernize the federal bank regulators’ regulations implementing the CRA. The final rule introduces new tests under which the performance of banks with over $2 billion in assets will be assessed. The new rule also includes data collection and reporting requirements, some of which are applicable only to banks with over $10 billion in assets, such as the bank.
Under the final rule, a bank holding company, such as FHI, and an FDIC-supervised insured depository institution, such as FHB, would be required to notify the Federal Reserve or FDIC, respectively, within 36 hours of any incident that has materially disrupted or degraded, or is reasonably likely to materially disrupt or degrade, the banking organization’s ability to deliver services to a material portion of its customer base, jeopardize the viability of key operations of the banking organization, or pose a threat to the financial stability of the United States.
History
The company was founded in 1858. The company was incorporated in 1973. The company was formerly known as BancWest Corporation and changed its name to First Hawaiian, Inc. in April 2016.
