Hawaiian first margins and loans rise despite lower profits

First Hawaiian Bank beat analysts’ estimates in the second quarter, but its net profit fell 31.6% due to the $35 million it added a year ago to its income from its reserve for loan losses.

The state’s largest bank today announced that margins have improved due to higher interest rates and loans and deposits obtained from the second quarter of 2021. During the last quarter, First Hawaiian has set aside $1 million for potential loan losses.

First Hawaiian Inc., the holding company, posted earnings of $59.4 million, or 46 cents per share, to beat analysts’ consensus estimate of 45 cents. A year earlier, the bank had net income of $86.7 million, or 67 cents per share.

“I am pleased to report that we had a very strong second quarter as the bank continued to perform well,” First Hawaiian President and CEO Bob Harrison said in a statement. “We experienced good loan and deposit growth, credit quality remained excellent and we successfully converted to our new core operating system.”

The bank maintained its quarterly stock dividend at 26 cents per share. It will be payable on September 2 to shareholders of record at the close of business on August 22.

First Hawaiian’s stock jumped 4%, or 99 cents, to $25.49 after the earnings release.

Net interest income, which is the difference between what the bank generates in loans and pays out in deposits, rose 10.4% to $145.1 million from the prior quarter, while net margin The bank’s interest rate rose 14 basis points to 2.60% over the same period. , and was up 18 basis points from the January-March quarter. Ralph Mesick, the bank’s acting chief risk and financial officer, said on the analysts’ call that the bank expects its net interest margin to rise another 25 to 30 basis points in the third quarter. quarter compared to the second quarter.

Non-interest revenue, which includes charges and fees, fell 10.6% to $44.1 million.

Loans rose 1.2% to $13.26 billion from the prior quarter, but jumped 11.5% on an annualized basis from the January-March period. Deposits rose 8.5% to $22.6 billion from the prior quarter and were up 5.9% on an annualized basis from the first quarter.

“Despite the volatility in the national economy, Hawaii has seen good visitor arrivals this summer and the local economy is doing well,” Harrison said on the conference call. “At the bank, we have a good outlook for the second half of 2022 and beyond, as we have a balance sheet well positioned for growth with good liquidity, strong capital and excellent credit quality.”

Compass Point analyst Laurie Havener Hunsicker maintained her neutral rating on the stock and kept her price target at $27. She said the bank’s net interest margin and net interest income are poised to outperform in the second half of this year, but an increase in spending puts an overhang on the stock. Nonetheless, she said the bank represented a strong core portfolio with a dividend yield of 4.1%.

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