• Net Interest Income: $158.8 million, a linked-quarter increase of $2.1 million.
• Net Interest Margin (NIM): Increased 8 basis points to 3.03%.
• Loan Growth: $167 million or 1.2% from the prior quarter.
• Deposit Growth: Total retail and commercial deposits increased by $324 million.
• Non-Interest Income: $29.4 million, including a $26.2 million pretax loss on securities sale.
• Non-Interest Expenses: $124.1 million, down about $2 million from the prior quarter.
• Classified Assets: Decreased by $7.5 million due to paydowns.
• Net Charge-Offs: Year-to-date net charge-offs were $13.6 million.
• Allowance for Credit Losses (ACL): Decreased by $3.3 million to $164 million.

Release Date: January 31, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• First Hawaiian Inc (NASDAQ:FHB) reported strong growth in loans and deposits, contributing to a robust fourth-quarter performance.
• The company achieved an 8 basis point expansion in net interest margin (NIM) due to favorable deposit mix changes and rate outperformance.
• FHB executed an investment portfolio restructuring that is expected to increase net interest income by $8.6 million and NIM by 4 basis points in 2025.
• The bank maintained excellent credit quality with low credit risk and stable credit metrics.
• FHB demonstrated strong deposit performance, with total retail and commercial deposits increasing by $324 million in the fourth quarter.

Negative Points

• Visitor arrivals and spending in Hawaii were slightly down compared to 2023, indicating a slow pace of economic expansion.
• The company recognized a $26.2 million pretax loss due to the investment portfolio restructuring.
• Expected payoffs in the CRE and construction portfolios are anticipated to be a headwind for loan growth in 2025.
• Non-interest income was impacted by the $26.2 million pretax loss, and the run rate for non-interest income is expected to average around $51 million per quarter in 2025.
• The balance sheet's investment portfolio is expected to run down with cash flows of about $550 million coming off at 2%, limiting growth opportunities.

Q & A Highlights

Q: Bob, just a question on the loan pipeline and the cadence of the growth. How does it look going into the first quarter, and how do you think that will trend throughout the year? A: Bob Harrison, CEO: It's a little hard to predict quarter by quarter, but we have a lot of things we're working on both in Hawaii and the West Coast. The dealer businesses have shown growth and stabilized at a higher level than last year. However, we don't see much growth in consumer residential portfolios, with some expected runoff.

Q: The C&I growth that you had locally, is there anything specific you can point to that as far as business development or more willingness to borrow? A: Bob Harrison, CEO: The growth is spread over many companies, with larger companies contributing more dollars. It was broad-based, and we're happy with that.

Q: How would you expect the pace of buybacks to be throughout 2025? A: Jamie M. Moses, CFO: We plan to be opportunistic with buybacks, likely spreading them throughout the year. The pace will depend on factors like loan growth and capital deployment opportunities.

Q: I wanted to just start on the deposit side. Your deposit trends were really good. What drove some of that growth? A: Jamie M. Moses, CFO: Growth in DDA was strong due to hard work from our teams, community engagement, and technology investments. It wasn't just a few large accounts; it was broad-based across our customer base.

Q: How do you think about deposit growth as we look at the new year? A: Bob Harrison, CEO: We're optimistic about deposit growth, which will first be deployed in the loan portfolio. The rest will be managed by Jamie, who will decide on further deployment.

Q: What can we expect for interest-bearing deposit betas as we move through the year? A: Jamie M. Moses, CFO: With lower deposit costs, there's less room to cut rates further. We expect the beta to decline for new rate cuts, scaling back as rates decrease.

Q: Could you provide an update on the outlook for asset quality? A: Bob Harrison, CEO: We're closely monitoring our CRE and other portfolios, but everything seems stable. Lea Nakamura, Chief Risk Officer, adds that the Maui portfolio is performing well, contributing to a lower provision and a small release in Q4.

Q: If we had no rate cuts this year, what impact would that have on the NIM outlook? A: Jamie M. Moses, CFO: Without rate cuts, you could add another basis point or two per quarter to the NIM expansion guide.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.