First Hawaiian Inc ((FHB)) has held its Q4 earnings call. Read on for the main highlights of the call.
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The latest earnings call from First Hawaiian Inc. exuded a generally positive sentiment, underscored by notable achievements in loan and deposit growth, improved net interest income, and sustained credit quality. Despite these positive indicators, the company acknowledged challenges such as a downturn in visitor arrivals and spending, a pre-tax loss from securities sales, and potential headwinds from loan payoffs.
Net Interest Income Growth
Net interest income saw a notable increase of $2.1 million, reaching $158.8 million, driven by strategic pricing and effective deposit gathering, particularly in demand deposits. The margin expanded by eight basis points to 3.03%, showcasing the company’s adept financial management in an evolving market landscape.
Strong Loan and Deposit Growth
The company reported robust growth in loans, which rose by $167 million or 1.2% from the previous quarter. This growth was primarily fueled by commercial real estate (CRE) and commercial and industrial (C&I) sectors. Additionally, total retail and commercial deposits surged by $324 million, reflecting strong deposit performance.
Investment Portfolio Restructuring
First Hawaiian Inc. undertook a strategic restructuring of its investment portfolio, selling $290 million in securities. This move resulted in a 309 basis point increase in yield and is expected to augment net interest income by $8.6 million in 2025, positioning the company favorably for future financial performance.
Credit Quality Remains Strong
The bank maintained its strong credit performance, with classified assets declining by $7.5 million and a low net charge-off rate of 10 basis points. Nonperforming assets were minimal, constituting only 19 basis points of total loans and leases, signifying robust credit management.
Visitor Arrivals and Spending Decline
The local tourism sector faced challenges, with total visitor arrivals decreasing by 0.2% and spending declining by 0.8% compared to 2023 levels. These figures highlight the ongoing difficulties in the tourism industry, which could impact future economic contributions.
Pre-Tax Loss on Securities Sale
The restructuring of the investment portfolio resulted in a $26.2 million pre-tax loss, impacting non-interest income. This loss was a necessary step in the company’s strategic financial realignment, despite the immediate impact on earnings.
Payoff Headwinds in Loan Growth
While the company experienced strong loan growth, it also faced potential headwinds from payoffs in the construction loan portfolio due to completed projects and early refinancing. This presents a challenge in sustaining the current growth trajectory.
Forward-Looking Guidance
Looking ahead, First Hawaiian Inc. anticipates continued growth, with expectations for loan growth in the low- to mid-single digits for the full year. The investment portfolio restructuring is expected to boost net interest income by $8.6 million and expand the net interest margin by 4 basis points in 2025. The bank’s balance sheet remains strong, with a new $100 million stock repurchase authorization for 2025, signaling confidence in its future prospects.
In summary, First Hawaiian Inc.’s earnings call highlighted a generally positive financial outlook, with significant achievements in loan and deposit growth, and strategic moves in investment restructuring. While challenges persist, particularly in the tourism sector and loan growth headwinds, the company remains well-positioned with strong credit quality and forward-looking strategies to capitalize on future opportunities.
