Regulatory Capital Requirements

6 Months Ended

Jun. 30, 2016

Regulatory Capital Requirements

Regulatory Capital Requirements

9. Regulatory Capital Requirements

The Company and the Bank are subject to various regulatory capital requirements imposed by federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory, and possibly additional discretionary, actions by regulators that, if undertaken, could have a direct material effect on the Company’s and the Bank’s operating activities and financial condition. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Company and Bank must meet specific capital guidelines that involve quantitative measures of its assets and certain off-balance-sheet items. The capital amounts and classifications are also subject to qualitative judgments by the regulators about components, risk weightings and other factors.

Quantitative measures established by regulation to ensure capital adequacy require the Company and Bank to maintain minimum amounts and ratios of Common Equity Tier 1 (“CET1”), Tier 1 and total capital to risk-weighted assets, as well as a minimum leverage ratio.

The table below sets forth those ratios at June 30, 2016 and December 31, 2015:

	First Hawaiian,				First Hawaiian				Minimum		Well-
	Inc.				Bank				Capital		Capitalized
(dollars in thousands)	Amount		Ratio		Amount		Ratio		Ratio(1)		Ratio(1)
June 30, 2016:
Common equity tier 1 capital to risk-weighted assets	$	1,510,743	12.45	%	$	1,483,271	12.27	%	5.125	%	6.50	%
Tier 1 capital to risk-weighted assets		1,510,743	12.45	%		1,483,278	12.27	%	6.625	%	8.00	%
Total capital to risk-weighted assets		1,647,703	13.58	%		1,620,238	13.40	%	8.625	%	10.00	%
Tier 1 capital to average assets (leverage ratio)		1,510,743	8.42	%		1,483,278	8.25	%	4.000	%	5.00	%
December 31, 2015:
Common equity tier 1 capital to risk-weighted assets	$	1,792,701	15.31	%	$	1,782,961	15.24	%	4.500	%	6.50	%
Tier 1 capital to risk-weighted assets		1,792,708	15.31	%		1,782,968	15.24	%	6.000	%	8.00	%
Total capital to risk-weighted assets		1,928,792	16.48	%		1,919,052	16.40	%	8.000	%	10.00	%
Tier 1 capital to average assets (leverage ratio)		1,792,708	9.84	%		1,782,968	9.80	%	4.000	%	5.00	%

(1)As defined by the regulations issued by the Board of Governors of the Federal Reserve System, Office of the Comptroller of the Currency, and Federal Deposit Insurance Corporation (“FDIC”).

Total stockholder’s equity was $2.5 billion as of June 30, 2016, a decrease of $235.9 million or 8.6% from December 31, 2015. The change in stockholder’s equity was primarily due to distributions of $393.6 million made in connection with the Reorganization Transactions. This was partially offset by earnings for the six months ended June 30, 2016 of $120.4 million.

A new capital conservation buffer, comprised of common equity Tier 1 capital, was established above the regulatory minimum capital requirements. This capital conservation buffer was phased in beginning January 1, 2016 at 0.625% of risk-weighted assets and will increase each subsequent year by an additional 0.625% until reaching its final level of 2.5% on January 1, 2019. As of June 30, 2016, under the bank regulatory capital guidelines, the Company and Bank are both classified as well-capitalized.