First Hawaiian(FHB) - 2024 Q1 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company reported net income of $54.3 million or$0.42 per share, with a return on average tangible assets of 0.94% and a return on average tangible common equity of 14.53% [40] - Total loans and leases were $14.3 billion, approximately$33 million lower than the previous quarter, with net interest income increasing by $2.6 million to$154.4 million [27][30] - The net interest margin (NIM) increased by 10 basis points to 2.91%, with a projected NIM of about 2.89% for the next quarter [30][40] Business Line Data and Key Metrics Changes - Construction loans increased by $72 million, driven by line draws for ongoing projects, while the company faced headwinds from a slowdown in the residential real estate market and a run-off in the indirect auto portfolio [27] - Non-interest income was$51.4 million, a decrease of $7 million from the prior quarter, primarily due to non-recurring income from insurance proceeds related to the Lahaina wildfires [31] Market Data and Key Metrics Changes - The statewide unemployment rate in Hawaii was 3.1$526 million of investment securities to pay down higher-cost public time deposits [41] - The focus remains on supporting customers and managing the balance sheet effectively in response to changing interest rates [51][62] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in loan demand picking up in the second half of the year, with full-year growth expected in the low-single-digit range [27] - The company is cautious about the residential market, indicating that while improvements are hoped for, they are not forecasted [84] Other Important Information - The allowance for credit losses increased by $3.3 million to$159.8 million, with coverage rising to 1.12% of total loans and leases [45] - The company recorded a $6.3 million provision in the first quarter, reflecting a proactive approach to potential credit risks [45] Q&A Session Summary Question: What occurred in the criticized loans portfolio? - Management clarified that a significant portion of criticized loans was related to multi-family construction, which has since been paid off, indicating strong credit quality [2][3] Question: What is the expected insurance benefit from outstanding claims related to the Maui wildfires? - The company confirmed that the insurance benefit received this quarter was related to their branch that burned down, with further claims expected as rebuilding progresses [7][35] Question: How does the company view the balance sheet management in the current rate environment? - Management indicated that they are focused on managing the balance sheet effectively, considering the current economic conditions and interest rate outlook [49][62] Question: What are the expectations for loan growth and the commercial pipeline? - The company noted ongoing deal flow from commercial real estate and expects to see strength in construction loans, with a cautious outlook on overall loan growth [73][74] Question: How is the credit quality performing in the Shared National Credit portfolio? - Management acknowledged some weakness but expressed confidence in the overall strength of the portfolio, with no loans on non-accrual status [88]