First Hawaiian, Inc. Q3 FY2025 earnings call

• Local economy: State unemployment rate at 2.7% in August, visitor arrivals up 0.7% through August, housing market stable; federal shutdown impact on Hawaii economy early but full impact unclear.
• Financial results: Net income increased, balance sheet solid with ample liquidity, loans declined, deposits increased.
• Deposits: Commercial deposits up $135 million, retail deposits down $43 million seasonally, public deposits up $406 million in operating accounts.
• Net interest income: Up due to higher asset yields, NIM expected to advance a few basis points in Q4.
• Credit performance: Strong credit metrics, $4.5 million provision in Q3, allowance coverage at 117 basis points of total loans and leases.

Total loans declined by about $223 million in the quarter, primarily in C&I; dealer flooring balances fell by $146 million and paydown on lines of credit by Hawaii corporate borrowers added to the decline. Total deposits increased about $500 million in the third quarter, with commercial deposits increasing $135 million and retail deposits declining $43 million. Net interest income was $169.3 million, $5.7 million higher than the prior quarter, with NIM in the third quarter at 3.19%, up 8 basis points. Noninterest income was $57.1 million in the quarter, benefited by higher BOLI income and swap income.

• Loan outlook: Q4 originations strong, expected flat to year-end 2024.
• NIM: Expect margin to advance a few basis points in Q4, considering loan and deposit outlook and additional 25 basis point rate cuts in October and December.
• Noninterest income: Expected normalized run rate of about $54 million per quarter.

• Federal government shutdown could impact Hawaii families financially.
• Uncertainty from tariffs affecting auto sales and customer demand.

Q: David Feaster asked about growth outlook, pipeline, and organic growth opportunities.

A: Bob Harrison and Jamie Moses discussed strong pipeline in Q4, including CRE, and considered pool purchases.

Q: Charlie Driscoll asked about capital priorities, buyback, and deposit rate betas.

A: Bob Harrison mentioned capital priorities, $100 million share buyback authority, and deposit rate betas around 90% for next rate cut.

Q: Anthony Elian asked about NIM, fee income, and headwinds.

A: James Moses said fee income expected around $54 million, with no major headwinds continuing into Q4.

Q: Matthew Clark asked about deposit spot rate and substandard migration.

A: James Moses said deposit spot rate end of September was 136 basis points; Lea Nakamura said substandard increase was due to a single loan to a long-time customer.

Q: Timur Braziler asked about deposits, M&A, and auto sales.

A: James Moses said deposits flat Q3 to Q4; Robert Harrison discussed M&A in Western states and auto sales uncertainty due to tariffs.

Q: Jared Shaw asked about federal spending impact, auto sale volume, and pricing changes.

A: Bob Harrison discussed stable federal spending in Hawaii; auto sale volume uncertainty due to tariffs; no change in pricing from competitors.

Q: Sun Young Lee asked about M&A stance and resi mortgage impact.

A: Robert Harrison said open to M&A in Western states; James Moses said lower rates could boost resi mortgage activity.

Q: Sun Young Lee asked about corporate line paydowns.

A: Robert Harrison said paydowns were due to earlier draws being repaid, not seasonal.