FHB — First Hawaiian, Inc.

Summary of First Hawaiian, Inc. Q3 2025 Earnings Call

1. Key Financial Results and Metrics:

• Net Income: Increased compared to Q2, driven by higher net interest and noninterest income, despite a higher effective tax rate of 23.2%.
• Net Interest Income: $169.3 million, up $5.7 million from the previous quarter; NIM at 3.19%, an increase of 8 basis points.
• Total Deposits: Increased by $500 million, with commercial deposits up $135 million; retail deposits declined by $43 million due to seasonality.
• Total Loans: Declined by $223 million, primarily in Commercial & Industrial (C&I) loans.
• Noninterest Income: $57.1 million, benefiting from higher BOLI income and swap income.
• Credit Metrics: Classified assets increased by $30.1 million, primarily due to one borrower; net charge-offs were $4.2 million (12 basis points of total loans).

2. Strategic Updates and Business Highlights:

• Economic Overview: Hawaii's unemployment rate at 2.7%, with stable visitor spending and a resilient housing market.
• Liquidity Management: The bank is maintaining a solid balance sheet and has repaid a $250 million FHLB advance.
• Stock Buyback: Repurchased approximately 965,000 shares for $24 million, with $26 million remaining under the 2025 repurchase plan.
• Loan Growth Outlook: Strong production in the pipeline for Q4, particularly in commercial real estate (CRE) and C&I, aiming to end 2025 flat compared to 2024.

3. Forward Guidance and Outlook:

• NIM Expectations: Anticipated to see positive momentum in Q4, with a potential increase in margin due to loan and deposit outlook.
• Deposit Trends: Expected seasonal increases in retail and commercial deposits in Q4, while public deposits may decline.
• Noninterest Income: Projected normalized run rate of about $54 million per quarter going forward.

4. Bad News, Challenges, or Points of Concern:

• Loan Declines: Significant drop in C&I loans, particularly due to paydowns from corporate borrowers.
• Federal Government Shutdown: Potential economic impact on Hawaii, with concerns about financial hardships for families reliant on federal employment.
• Credit Quality: While overall credit performance remains strong, there is a noted increase in classified assets and slight uptick in nonaccruals.
• Market Competition: No significant changes in competitive dynamics or pricing behavior observed, but ongoing monitoring is necessary.

5. Notable Q&A Insights:

• Growth Outlook: Management expressed optimism about loan growth, particularly in CRE, while acknowledging challenges in dealer floor plan financing.
• Deposit Management: The bank is focusing on maintaining strong relationships to drive core deposit growth, despite some seasonal fluctuations.
• M&A Strategy: Open to discussions for mainland M&A opportunities, but no immediate changes in strategy or focus.
• Economic Resilience: Management remains confident in the local economy's resilience, despite potential federal spending shifts and the impact of the government shutdown.

Overall, First Hawaiian, Inc. reported a solid quarter with strong net income and deposit growth, while facing challenges in loan balances and potential economic headwinds from the federal government shutdown. The outlook remains cautiously optimistic with expectations for continued NIM improvement and loan growth in the upcoming quarter.