Release Date: October 25, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- First Hawaiian Inc (FHB, Financial) reported stable deposit costs with only a 1 basis point increase from the previous quarter.
- The company maintained a solid credit performance with strong and stable credit risk metrics.
- First Hawaiian Inc (FHB) plans to resume share repurchases in the fourth quarter due to strong and growing capital levels.
- Non-interest income increased by $1.5 million from the prior quarter, driven by higher credit and debit card fees and BOLI income.
- The bank's balance sheet remains well-capitalized, with ample liquidity and favorable AOCI changes.
Negative Points
- Unexpected loan payoffs were a headwind, leading to a $119 million decrease in total loans compared to the prior quarter.
- Total deposits decreased by $91 million, driven by a decline in total public deposits.
- The net interest margin is expected to decline modestly in the fourth quarter.
- Classified assets increased by $64.6 million due to a couple of downgrades, although these loans are well-collateralized.
- The housing market showed mixed signals, with a decrease in the median sales price for condos on Oahu by 2.8% compared to the previous year.
Q & A Highlights
Q: How does the pipeline look for growth, and where are you seeing opportunities?
A: Robert Harrison, CEO, mentioned that opportunities continue to be in the commercial real estate space, both in Hawaii and on the West Coast, as well as in the dealer floor plan area. The consumer side remains soft, with little activity in residential or home equity.
Q: Can you discuss the earning asset repricing and remixing side, particularly regarding securities cash flows and loan cash flows?
A: James Moses, CFO, explained that they see about $400 million per quarter of fixed-rate cash flows coming off the books, repricing from around 4.5% to new loans in the 6.5% to 7% range. This dynamic is expected to contribute positively to the net interest margin (NIM) in Q4.
Q: What is the outlook for deposit repricing, and are there any plans for securities restructuring?
A: Robert Harrison, CEO, stated that they have been clear with deposit customers about adjusting rates accordingly with Fed rate changes. James Moses, CFO, added that they prefer share buybacks over securities restructuring as a means to return capital to shareholders.
Q: Can you explain the provision build in the quarter, particularly for consumer and home equity books?
A: Lea Nakamura, Chief Risk Officer, noted that the reserve build was not due to specific concerns but rather adjustments in modeling coefficients. The bank remains well-secured in those portfolios.
Q: What is driving the elevated level of payoffs, especially on the C&I side?
A: Robert Harrison, CEO, explained that some deals were lost to more aggressive mainland lenders in syndicated deals where First Hawaiian was not the lead. This is part of the competitive landscape, particularly in high-quality names.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
