First Hawaiian, Inc. (NASDAQ:FHB) Q1 2025 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call presents a mixed picture: EPS increased slightly, but loan growth is uncertain and there's a decline in commercial deposits. The increase in credit loss allowance due to a pessimistic economic forecast and competitive pressures are concerns. However, the stable noninterest income and expenses, along with a robust share repurchase program, provide some positive aspects. The Q&A revealed uncertainties in loan growth and economic conditions, further supporting a neutral sentiment. Given the mid-cap status, the stock is likely to remain stable, with limited short-term movement.
Key Financial Performance
Earnings Per Share (EPS) $0.47, an increase from $0.46 year-over-year due to better-than-expected performance.
Net Interest Income $160.5 million, an increase of $1.8 million from the prior quarter, driven by lower deposit costs and investment portfolio restructuring.
Total Loans Declined by $115 million or 0.8% from the prior quarter, primarily due to payoffs in commercial real estate loans.
Total Deposits Slight decline in total deposits; retail deposits increased by $105 million while commercial deposits fell by $167 million due to fluctuations in larger accounts.
Cost of Deposits Fell by 11 basis points, benefiting from Q4 rate cuts and repricing trends from $1.4 billion of CDs.
Noninterest Income $50.5 million, stable compared to the prior quarter.
Noninterest Expenses $123.6 million, stable with no significant nonrecurring items.
Allowance for Credit Losses (ACL) Increased by $6.2 million to $166.6 million, reflecting a more pessimistic economic forecast.
Classified Assets Decreased by $3 million due to paydowns.
Net Charge-Offs Year-to-date net charge-offs were $3.8 million with a charge-off rate of 11 basis points.
Nonperforming Assets Came in at 17 basis points, down 2 basis points from the prior quarter.
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Operating Highlights
Net Interest Income: Net interest income was $160.5 million, $1.8 million higher than the prior quarter.
Cost of Deposits: Total cost of deposits fell by 11 basis points as the benefit from the Q4 rate cuts was fully priced in.
Credit Quality: Credit risk remains low, stable and well within expectations.
Share Repurchase: During the first quarter, we repurchased about 974,000 shares at a total cost of $25 million.
NIM Outlook: We anticipate that the NIM in the second quarter will increase a few basis points to 3.10.
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Risk or Challenges
Economic Uncertainty: Increased macroeconomic uncertainty affecting the company's outlook.
Credit Risk: While credit risk remains low, the bank has increased its allowance for credit losses due to a more pessimistic economic forecast.
Deposit Fluctuations: Decline in commercial deposits by $167 million attributed to normal fluctuations in larger accounts, not indicative of larger trends.
Competitive Pressures: Weakness around international rivals impacting local economic stability.
Consumer Confidence: Lack of clarity regarding consumer confidence may affect future business performance.
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Guidance & Outlook
Stock Repurchase: During the first quarter, we repurchased about 974,000 shares at a total cost of $25 million and we have $75 million in remaining authorization under the approved 2025 stock repurchase plan.
Credit Quality: Credit risk remains low, stable and well within our expectations. We’re not observing any broad signs of weakness across either the consumer or the commercial books.
Provision for Credit Losses: The bank recorded a $10.5 million provision in the first quarter, reflecting a more pessimistic forecast available to the economic forecasting component of our CECL model.
Net Interest Margin (NIM) Outlook: We anticipate that the NIM in the second quarter will increase a few basis points to 3.10.
Economic Uncertainty: Given the current macro environment, the level of uncertainty around our outlook has increased.
Noninterest Income and Expenses Outlook: Our full year outlook for both noninterest income and expenses remains the same.
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Shareholder Return Plan
Share Repurchase Program: During the first quarter, we repurchased about 974,000 shares at a total cost of $25 million and we have $75 million in remaining authorization under the approved 2025 stock repurchase plan.
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Key Q&A
Q:How is the pulse of your clients and the pipeline shaping up?
A:Average loans for the quarter were up over Q4, but there was some normal paydowns. The pipeline is strong, but there's uncertainty in the market.
Q:What is the competitive landscape on the deposit front?
A:As rates decline, there are opportunities to bring down deposit costs, but there’s limited room to reduce rates further.
Q:Can you remind us what the roll-off rates are and where you’re pricing new CDs?
A:We’re probably getting 20 to 30 basis points in total spread on that repricing.
Q:Can you touch on the trajectory of expenses this year?
A:We expect expenses to ramp up over the year but are committed to staying within the guidance provided.
Q:What are your thoughts around the floor plan businesses and exposure to tariffs?
A:We have no concerns about credit in the floor plan business, but tariffs could impact balances depending on how they are applied.
Q:What should we expect in terms of deposit seasonal trends?
A:Deposits typically build in the back half of the year, but there was a good increase in retail deposits this quarter.
Q:Will the overall size of the balance sheet grow with deposit growth?
A:Yes, if deposits grow, the size of the balance sheet will grow along with that.
Q:Do you think second quarter could be a growth quarter for total loans?
A:We still think there’s an opportunity for low to mid single digits growth, but it’s hard to predict which quarter will see growth.
Q:Are there any other loan portfolios you’re paying closer attention to?
A:We’re closely monitoring C&I loans and staying in contact with customers to understand their situations.
Q:What’s the spot deposit cost and margin in March?
A:Spot deposit cost was [1.41] and margin in March was [3.10].
Q:What are your expectations around the buyback moving forward?
A:We’re looking to return capital to shareholders programmatically, but there may be opportunities to accelerate buybacks.
Q:How quickly can you offset any rate cuts?
A:It depends on loan growth; if loans grow well, we can offset rate cuts, otherwise there may be a small decline.
Q:What’s the tax rate you should be using?
A:23% is a good number for the year.
Q:Where could tariffs potentially be more multiplicative for Hawaii?
A:Construction could see higher raw material costs, but no projects have been canceled yet.
Q:What are your thoughts around your consumer exposure and reserve build?
A:Consumer portfolios are performing well, but we are monitoring closely due to potential vulnerabilities.
Q:Review of Unclear Management Responses
A:Management avoided giving a direct answer regarding the specific impacts of tariffs on various sectors, particularly construction, and the uncertainty surrounding future loan growth and economic conditions.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
CDs deposit
CECL model
CEO Risk
CFO sir
CI portfolio
Conference Instructions
Hello overview
Inc expectation
Instructions reminder
NIM credit
Noninterest income
Transcript Hawaiian
Web site
base deposit
credit CI
date charge
economy flight
expectation Hawaiian
flight economy
flooring Slide
fluctuation
income NIM
line Slide
market Slide
measurement Hello
plan Slide
portfolio restructuring
presentation Web
repurchase plan
reserve
sir result
site Investor
stock repurchase
today program
uncertainty Slide
weakness
FHB Transcript
First Hawaiian, Inc. (FHB) Q4 2025 Earnings Call Transcript
Positive1-30
The earnings call summary shows strong loan growth, positive net interest margin trends, and a solid shareholder return plan with share buybacks. The Q&A session provided additional insights into loan growth and margin expansion, with management addressing potential risks. Despite some unclear responses, the overall sentiment is positive due to strong financial performance and strategic plans. The market cap indicates a moderate reaction, leading to a positive stock price movement prediction.
First Hawaiian, Inc. (FHB) Q3 2025 Earnings Call Transcript
Unknown10-24
The earnings call presents a mixed outlook. While strong core deposit growth and optimistic guidance on loan growth and fee income are positive, concerns about substandard loans and management's lack of clarity on M&A and specific financial metrics temper the sentiment. Additionally, the company's strategies to manage deposit costs and NIM amid potential Fed rate cuts show cautious optimism. Given the market cap of $2.6 billion, the stock is likely to experience minimal movement, resulting in a neutral sentiment over the next two weeks.
First Hawaiian, Inc. (FHB) Q2 2025 Earnings Call Transcript
Unknown7-25
The earnings call presents a mixed picture. Basic financial performance shows stable but unremarkable growth, with some concerns about tariffs and loan yields. Product development and market strategies seem steady but lack strong catalysts. The Q&A reveals uncertainties in long-term growth and competition, while financial health appears stable with some credit risk concerns. Shareholder returns are positive with planned repurchases. Overall, the sentiment is neutral, with no strong positive or negative drivers evident, and the market cap suggests a moderate reaction.
First Hawaiian, Inc. (NASDAQ:FHB) Q1 2025 Earnings Call Transcript
Unknown4-24
The earnings call presents a mixed picture: EPS increased slightly, but loan growth is uncertain and there's a decline in commercial deposits. The increase in credit loss allowance due to a pessimistic economic forecast and competitive pressures are concerns. However, the stable noninterest income and expenses, along with a robust share repurchase program, provide some positive aspects. The Q&A revealed uncertainties in loan growth and economic conditions, further supporting a neutral sentiment. Given the mid-cap status, the stock is likely to remain stable, with limited short-term movement.
FHB Slides
FHB Report
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