雅虎香港財經 First Hawaiian, Inc. (NASDAQ:FHB) Q1 2024 Earnings Call Transcript
First Hawaiian, Inc. (NASDAQ:FHB) Q1 2024 Earnings Call Transcript April 26, 2024
First Hawaiian, Inc. reports earnings inline with expectations. Reported EPS is $0.42 EPS, expectations were $0.42. FHB isn't one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).
Operator: Good day and thank you for standing by. Welcome to the First Hawaiian Inc. Q1 2024 Earnings Conference Call. At this time all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker, Mr. Kevin Haseyama, Investor Relations Manager. Please go ahead.
Kevin Haseyama : Thank you, Tanya. And thank you everyone for joining us as we review our financial results for the First Quarter of 2024. With me today are Bob Harrison, Chairman, President, and CEO; Jamie Moses, Chief Financial Officer, and Lea Nakamura, Chief Risk Officer. We have prepared a slide presentation that we will refer to in our remarks today. The presentation is available for downloading and viewing on our website at fhb.com in the Investor Relations section. During today's call, we will be making forward-looking statements, so please refer to Slide 1 for our Safe Harbor statement. We may also discuss certain non-GAAP financial measures. The appendix to this presentation contains reconciliations of these non-GAAP financial measurements to the most directly comparable GAAP measurements. And now I'll turn the call over to Bob.
Robert Harrison : Good morning, everyone. I'll start with an overview of the local economy. Hawaii economy continues to perform well with the state unemployment rate remaining low, tourism is steady, and the construction industry is healthy. Statewide seasonally adjusted unemployment rate for March was 3.1% compared to the national unemployment rate of 3.8%. The statewide visitor industry is continuing to recover faster than expected following the Maui wildfires, but still remains slightly below 2023 levels. The legislative session is wrapping up, and additional funding was secured for the Hawaii Tourism Authority, and a new marketing campaign was announced a couple days ago, so things are looking up to that. Through February, total visitor arrivals were down 0.6% and spending was down 1.9% compared to 2023 levels.
That was primarily due to declines on Maui. Excluding Maui, arrivals and spending were above 2023 levels. Growth in international visitors have helped offset declining visitors from the U.S. Mainland, with increases in Japanese visitors making up most of the increase in the international arrivals. The housing market is relatively stable despite reduced activity levels. In March, the median sales price for a single family home on Oahu was $1.1 million, a 1.5% higher than 2023. The median sales price for condos on Oahu was $500,000, 6.7% below the previous year. Turning to Slide 2, I'll go over the highlights of our first quarter financial performance. We started the year with a solid quarter. Net income was $54.3 million or $0.42 per share. The return on average tangible assets was 0.94%.
And the return on average tangible common equity was 14.53%. As expected, the net interest margin expanded in the first quarter, this drove a $2.6 million increase in net interest income versus the prior quarter. Turning to Slide 3, We continue to execute the balance sheet optimization that started in the fourth quarter with the sale of $526 million of investment securities. During the first quarter, we used those proceeds to pay down about $470 million of higher cost public time deposits. The duration of the investment portfolio increased slightly in Q1, as a result of the security sale during the prior quarter. Our balance sheet strength continued to increase as we grew capital levels and have ample liquidity. Turning to Slide 4, period-end loans and leases were $14.3 billion, about $33 million lower than December 31st.
Line draws for ongoing construction projects drove the $72 million increase in construction loans. We did continue to face headwinds due to the slowdown of residential real estate market and the continued run-off in the indirect auto portfolio. We still believe that loan demand will pick up in the second half of the year and that full year growth will be in the low-single digit range. Now I'll turn it over to Jamie.
James Moses : Thanks, Bob, and good morning, everyone. Turning to Slide 5, total deposit balances declined by $663 million, primarily due to the $470 million decrease in public time deposits. The decrease in public costs -- sorry, excuse me -- in higher cost public time was intentional and was part of the overall balance sheet actions that we announced on our last call. Retail deposits increased by $142 million in the first quarter, and that was offset by a $355 million decline in commercial deposits. The drop in commercial deposits was primarily due to normal fluctuations in a few large commercial accounts, as well as about $170 million of insurance payments related to the Maui wildfires. The non-interest-bearing deposit ratio was 34% at the end of the quarter.
The rate of increase in deposit costs continued to slow down in the first quarter. Our total cost of deposits for the quarter was 165 basis points, a 9 basis point increase from the prior quarter. Turning to Slide 6, net interest income increased $2.6 million from the prior quarter to $154.4 million, and our reported net interest margin increased by 10 basis points to 2.91%. We had a non-recurring interest income related to the recognition of interest on deferred loans tied to the Maui wildfires that added about $1.5 million to interest income and 3 basis points to the margin in the first quarter. The spot NIM in March was 2.87% and we are projecting the NIM in the second quarter to be about 2.89%. We do expect that the NIM will increase about 1 to 2 basis points per quarter for the remainder of the year.
Through the end of the first quarter, the cumulative betas were 46.5% on interest-bearing deposits and 30.2% on total deposits. Turning to Slide 7, non-interest income was $51.4 million, $7 million less than the prior quarter. We had about $2 million of non-recurring income in Q2, excuse me -- in Q1 as a result of insurance proceeds we received for losses we incurred during the Lahaina wildfires. We continue to expect quarterly non-interest income to be in the $49 million to $50 million range. Non-interest expenses were $128.8 million in the first quarter and included a $4.1 million FDIC special assessment. Excluding that special assessment, expenses were in line with our expectations and we continue to expect full year expenses to be around $500 million.
Now I'll turn it over to Lea.
Lea Nakamura : Thank you, Jamie. Moving to Slide 8, the bank maintained its strong credit performance and healthy credit metrics in the first quarter. While we have seen some modest deterioration in credit quality, our experience so far is well within our expectations. We are not observing any broad signs of weakness across either the consumer or commercial loan books, and we have more than sufficient loan loss coverage. Classified assets increased by $64.3 million, driven by several downgraded credits. This caused the ratio of classified assets to total loans and leases to increase by 45 basis points to 64 basis points of total loans and leases. Of that $64.3 million increase, $24.4 million was paid-off in full after the end of the first quarter.
Year-to-date net charge-offs were $3.8 million. Our annualized year-to-date net charge-off rate was 11 basis points, 2 basis points higher than in the fourth quarter. Non-performing assets and loans past due 90 days or more [were] (ph) 15 basis points of total loans and leases at the end of the first quarter, unchanged from the prior quarter. And finally, the bank recorded a $6.3 million provision in the first quarter. Moving to Slide 9, we show our first quarter allowance for credit losses broken out by disclosure segment. The asset ACL increased by $3.3 million to $159.8 million with coverage rising 3 basis points to 1.12% of total loans and leases. The ACL continues to include a reserve for the potential impact of the Maui wildfires. This estimate includes the potential impact to borrowers located both inside and outside of the fire zones, as well as any insurance coverage.
Turning to Slide 10, we provide an updated snapshot of our commercial real estate exposure. CRE represents approximately 30% of our total loans and leases. Credit quality remains strong, with LTVs manageable and criticized loans continuing to comprise a very small portion of the portfolio. Let me now turn the call back to Bob for any closing remarks.
Robert Harrison : Thank you, Jamie. Thank you, Lea. We'd welcome any questions that you would have.
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