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FH

FIRST HAWAIIAN, INC. (FHB)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 2024 delivered “a very strong quarter” operationally: loans +$166.9M, deposits +$94.5M, NIM +8bps to 3.03%, and expenses down $2.0M; GAAP EPS was $0.41 and net income $52.5M, impacted by a one-time $26.2M pretax securities loss from a portfolio restructure .
  • Management executed a portfolio repositioning (sold $290.4M of low-yield securities; reinvested $291.5M higher-yield) to lift 2025 NII by ~$8.6M and NIM by ~4bps; Board authorized a $100M 2025 buyback and declared a $0.26 dividend .
  • Credit quality remained excellent: negative provision ($0.8M), ACL coverage 1.11%, NCOs 0.09% annualized, NPAs at 0.14%; capital ratios strong (CET1 12.80%) .
  • 2025 outlook: NIM 3.06% in Q1 and +~3bps per quarter thereafter under the forward curve; fee income ~$51M/quarter; 2025 expenses ~$510M (+~2% y/y); loan growth low-to-mid single digits .
  • Estimates comparison unavailable due to an S&P Global rate-limit error; no consensus EPS or revenue data retrieved (see Estimates Context) [GetEstimates error].

What Went Well and What Went Wrong

What Went Well

  • “Strong quarter” across key drivers: loan and deposit growth, NIM expansion, controlled expenses, and excellent credit quality; plus $1M community contribution to the First Hawaiian Foundation .
  • Strategic portfolio restructure improved future earnings power (picked up ~310bps yield on restructured securities), expected to add ~$8.6M NII and ~4bps NIM in 2025; active capital return via $40M Q4 repurchases and $100M 2025 authorization .
  • Deposits: strong DDA growth and favorable mix shifts; total cost of deposits fell 17bps linked-quarter as pricing tracked Fed cuts, supporting NII and NIM expansion .

What Went Wrong

  • GAAP noninterest income fell $23.9M q/q due to the $26.2M securities loss; EPS declined to $0.41 from $0.48 in Q3, despite healthier core trends .
  • Efficiency ratio rose to 65.5% from 59.8% in Q3 given the restructuring loss; without the loss, fee run-rate would have been ~$55.6M vs reported $29.4M .
  • Construction loan portfolio continues to face payoffs/refinancing headwinds; residential consumer growth remains muted, limiting loan acceleration despite solid origination activity .

Financial Results

MetricQ4 2023Q3 2024Q4 2024
Net Interest Income ($MM)$151.8 $156.7 $158.8
Noninterest Income ($MM)$58.3 $53.3 $29.4
Net Income ($MM)$47.5 $61.5 $52.5
Diluted EPS ($)$0.37 $0.48 $0.41
Net Interest Margin (%)2.81% 2.95% 3.03%
Efficiency Ratio (%)67.28% 59.77% 65.51%
Effective Tax Rate (%)—19.6% 18.9%

Segment Loans Breakdown ($000)

SegmentQ4 2023Q3 2024Q4 2024
Commercial & Industrial$2,165,349 $2,110,077 $2,247,428
Commercial Real Estate$4,340,243 $4,265,289 $4,463,992
Construction$900,292 $1,056,249 $918,326
Residential (Mortgage + HELOC)$5,457,903 $5,346,883 $5,319,893
Consumer$1,109,901 $1,030,044 $1,023,969
Lease Financing$379,809 $432,828 $434,650
Total Loans & Leases$14,353,497 $14,241,370 $14,408,258

Deposits Breakdown ($000)

CategoryQ4 2023Q3 2024Q4 2024
Demand (Noninterest-bearing)$7,583,562 $6,800,028 $6,975,148
Savings$6,445,084 $5,896,029 $6,021,364
Money Market$3,847,853 $4,129,381 $4,027,334
Time$3,456,158 $3,402,264 $3,298,370
Total Deposits$21,332,657 $20,227,702 $20,322,216

KPIs and Asset Quality

KPIQ4 2023Q3 2024Q4 2024
ACL / Loans (%)1.09% 1.15% 1.11%
Net Charge-offs ($MM)$5.8 $3.9 $3.4
NCOs / Avg Loans (annualized) (%)0.16% 0.11% 0.09%
Non-performing Assets ($MM)$18.6 $17.8 $20.7
NPAs / Loans+OREO (%)—0.13% 0.14%
CET1 Ratio (%)12.39% 13.03% 12.80%

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Net Interest MarginQ1 2025Not disclosed3.06%; then +~3bps per quarter under forward curve New specific guide
Net Interest Margin (no cuts scenario)FY 2025Not disclosedAdd +1–2bps per quarter vs base guide Upside scenario
Noninterest IncomeFY 2025Not disclosed~$51M per quarter run-rate New
Noninterest ExpenseFY 2025Not disclosed~$510M (+~2% y/y) New
Loan GrowthFY 2025Not disclosedLow-to-mid single digits New
Securities Cash FlowsFY 2025Not disclosed~$550M from portfolio runoff; redeploy to fund loans or short duration securities New
DividendQuarterly$0.26 $0.26 (declared Jan 29, 2025) Maintained
Share RepurchaseFY 2024/2025$0 in Q3; $40M repurchased Q4 $100M authorization for 2025 Raised program size

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2 & Q3)Current Period (Q4)Trend
NIM trajectoryQ2: 2.92% (+1bp q/q) ; Q3: 2.95% (+3bps q/q) 3.03% (+8bps q/q); guide to continue expansion in 2025 Accelerating improvement
Deposits & mixQ2: deposits -$350.6M q/q ; Q3: deposits -$91.1M q/q Deposits +$94.5M; DDA ratio ~34%, costs -17bps q/q Mix improving; cost down
Loan growth cadenceQ2: +$39.7M q/q ; Q3: -$118.5M q/q +$166.9M q/q (CRE, C&I strength; construction payoffs a headwind) Re-acceleration with offsets
Portfolio strategyNo restructure noted in Q2/Q3; yields low-2% on securities Restructured $290.4M; +~310bps on restructured piece; 2025 NII/NIM uplift Proactive repositioning
Capital returnQ2/Q3: no repurchases Repurchased $40M in Q4; $100M 2025 buyback adopted Material step-up
Credit qualityNPAs ~0.13%; ACL ~1.12–1.15%; NCOs ~0.07–0.11% NPAs 0.14%; ACL 1.11%; NCOs 0.09%; provision release on Maui portfolio strength Stable to strong

Management Commentary

  • Bob Harrison (CEO): “We finished 2024 with a very strong quarter… loan and deposit balances grew, net interest margin expanded, expenses were well controlled and credit quality remained excellent.” He highlighted the investment portfolio restructuring to “increase our future earnings power” entering 2025 .
  • James Moses (CFO): “Net interest income was $158.8 million… margin increased 8 bps to 3.03%… we expect the margin to continue to expand throughout 2025,” with Q1 2025 NIM guided to 3.06% and ~3bps/quarter thereafter .
  • Lea Nakamura (CRO): “Credit risk remains low, stable and well within our expectations… we recorded an $800,000 provision release… primarily driven by better credit performance in the Maui portfolio” .

Q&A Highlights

  • Deposit dynamics and competition: Broad-based DDA growth across consumer and commercial; success attributed to community presence and prior technology investments; competitive dynamics on the islands unchanged recently .
  • Buyback pacing: 2025 $100M program to be deployed opportunistically through the year, contingent on loan growth and capital priorities .
  • Loan pipeline: Strong origination across Hawaii C&I and CRE; dealer flooring contributed; residential consumer remains subdued; payoffs likely to favor back-half loan growth .
  • Margin sensitivities: Base case assumes two Fed cuts (mid-year and late-year); no-cuts scenario adds +1–2bps per quarter to NIM trajectory .
  • Securities portfolio yield: Repositioned piece moved “about 2% coming off and about 5% coming on”; quarter portfolio yield ~2.10% .

Estimates Context

  • Wall Street consensus estimates (EPS, revenue) from S&P Global were unavailable due to a rate-limit error at the time of request. As a result, we cannot quantify beats/misses versus consensus for Q4 2024 or provide near-term estimate comparisons. We will update once S&P Global access is restored [GetEstimates error].

Key Takeaways for Investors

  • Core trends improved: underlying NII and NIM expanded on favorable deposit mix and pricing discipline; expect continued NIM expansion in 2025, a constructive setup for spread-driven earnings growth .
  • One-time securities loss masks core strength: absent the $26.2M loss, fee run-rate would have been ~$55.6M and efficiency materially lower; 2025 guidance implies normalization of fee income .
  • Strategic balance-sheet actions should lift 2025 earnings: securities repositioning (+~310bps on restructured tranche) and runoff redeployment (>$550M cash flows) into higher-yielding assets or funding exits .
  • Credit quality solid and stable: low NPAs/NCOs and a small provision release reflect benign risk; ACL coverage remains robust at 1.11% .
  • Capital return catalysts: $100M buyback authorization and sustained $0.26 dividend support TSR; deployment likely opportunistic with sensitivity to loan growth .
  • Watch construction payoffs and residential consumer softness: these dynamics may temper loan growth cadence despite healthy origination; management expects back-half loan growth to benefit as payoffs moderate .
  • Near-term trading: focus on NIM prints vs the 3.06% Q1 guide and deposit cost trajectory (-17bps q/q achieved in Q4); any upside on deposit growth or slower rate cuts could add incremental NIM basis points .