In the recent earnings call for the second quarter of 2024, First Hawaiian Bank presented a robust financial performance, showcasing growth and stability in various aspects of its business. The call, led by Kevin Haseyama, was marked by a focus on key themes and trends that are indicative of the bank's overall financial health and growth prospects.
Economic Overview and Loan Growth
The call began with an overview of the local economy in Hawaii, which continues to perform well despite some challenges. The state's unemployment rate remains low, and tourism is steady, albeit with a decline in visitor arrivals and spending. The housing market has also remained relatively stable, with median sales prices showing a significant increase for single-family homes on Oahu.
In terms of loan growth, the bank reported a total increase of $39.7 million in the second quarter. This growth was driven by several areas, including draws on existing construction loans and new leasing opportunities. Notably, the bank saw a decline in consumer loan balances due to runoff in the indirect auto portfolio. Despite this, the pipeline for loan production is strong, with expectations of increased activity in the second half of the year.
Deposit Trends and Stability
Deposit trends were another significant focus of the call, with total deposits showing a decline of $351 million. However, the bank remains optimistic about the second half of the year, citing a slowing migration of noninterest-bearing deposits to higher cost accounts and a favorable deposit mix. This stability in deposit trends has contributed to the bank's low 170 basis point total cost of deposits.
Credit Quality and Allowance for Credit Losses
Credit quality remains a key strength for First Hawaiian Bank, with several key credit metrics improving in the quarter. The bank sold two criticized SNC loans at par, demonstrating its proactive approach to credit management. The allowance for credit losses remains well-covered, with a coverage ratio of 1.12%.
Noninterest Income and Expenses
Noninterest income was $51.8 million in the second quarter, slightly higher than the previous quarter. Noninterest expenses were lower, primarily due to the absence of a $4.1 million FDIC special assessment in the second quarter. The bank anticipates a relatively flat noninterest income in the third quarter, with a continued focus on expense management.
Capital and Dividends
Capital levels continued to grow in the second quarter, with the bank maintaining a strong capital position. The bank also announced plans to restart buybacks in the second half of the year, while maintaining a dividend payout of 54%.
Challenges and Outlook
Despite the positive performance, the bank did acknowledge some challenges, including the ongoing impact of the pandemic on the economy and the housing market. However, the bank remains optimistic about its future prospects, with a focus on loan growth and deposit stability.
Overall, First Hawaiian Bank's earnings call for the second quarter of 2024 painted a picture of a bank that is well-positioned for the future, with a focus on growth, stability, and proactive credit management. The bank's strong financial performance and optimistic outlook for the second half of the year bode well for its investors and stakeholders.