Regulatory Capital Requirements

6 Months Ended

Jun. 30, 2020

Regulatory Capital Requirements

Regulatory Capital Requirements

11. Regulatory Capital Requirements

Federal and state laws and regulations limit the amount of dividends the Company may declare or pay. The Company depends primarily on dividends from FHB as the source of funds for the Company’s payment of dividends.

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”) capital, Tier 1 capital and total capital to risk-weighted assets, as well as a minimum leverage ratio.

The table below sets forth those ratios at June 30, 2020 and December 31, 2019:

					First Hawaiian				Minimum		Well-
	First Hawaiian, Inc.				Bank				Capital		Capitalized
(dollars in thousands)	Amount		Ratio		Amount		Ratio		Ratio(1)		Ratio(1)
June 30, 2020:
Common equity tier 1 capital to risk-weighted assets	$	1,653,674	11.86	%	$	1,634,333	11.72	%	4.50	%	6.50	%
Tier 1 capital to risk-weighted assets		1,653,674	11.86	%		1,634,333	11.72	%	6.00	%	8.00	%
Total capital to risk-weighted assets		1,828,511	13.11	%		1,809,165	12.97	%	8.00	%	10.00	%
Tier 1 capital to average assets (leverage ratio)		1,653,674	7.75	%		1,634,333	7.66	%	4.00	%	5.00	%
December 31, 2019:
Common equity tier 1 capital to risk-weighted assets	$	1,676,515	11.88	%	$	1,654,304	11.72	%	4.50	%	6.50	%
Tier 1 capital to risk-weighted assets		1,676,515	11.88	%		1,654,304	11.72	%	6.00	%	8.00	%
Total capital to risk-weighted assets		1,807,645	12.81	%		1,785,434	12.65	%	8.00	%	10.00	%
Tier 1 capital to average assets (leverage ratio)		1,676,515	8.79	%		1,654,304	8.67	%	4.00	%	5.00	%

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

A capital conservation buffer requires a 2.5% capital conservation buffer designed to absorb losses during periods of economic stress. The capital conservation buffer is composed entirely of CET1, on top of these minimum risk weighted asset ratios, effectively resulting in minimum ratios of (i) 7% CET1 to risk-weighted assets, (ii) 8.5% Tier 1 capital to risk-weighted assets, and (iii) 10.5% total capital to risk-weighted assets. As of June 30, 2020, under the bank regulatory capital guidelines, the Company and Bank were both classified as well-capitalized. Management is not aware of any conditions or events that have occurred since June 30, 2020, to change the capital adequacy category of the Company or the Bank.