First Hawaiian(US:FHB)2025-07-25 18:00Financial Data and Key Metrics Changes - The company's net income increased over 23% compared to the prior quarter, driven by higher net interest and noninterest income, good expense control, and lower provision expense [6] - Total loans increased by approximately $59 million or 0.4% from the prior quarter, with the largest increase in the C and I portfolio [7] - Net interest income was $163.6 million, up $3.1 million from the prior quarter, with a net interest margin (NIM) of 3.11%, an increase of three basis points [11] Business Line Data and Key Metrics Changes - The C and I portfolio saw a significant increase of $125 million in dealer floorplan balances, while payoffs from completed construction projects offset some of this growth [7] - Total deposits increased slightly, with public deposits growing by $166 million, while commercial and retail deposits declined [10] - Noninterest income was $54 million in the quarter, with expectations for recurring noninterest income to be around $51 million per quarter [12] Market Data and Key Metrics Changes - The statewide seasonally adjusted unemployment rate was 2.8% in June, compared to the national rate of 4.1% [4] - Visitor arrivals were up 2.8% compared to last year, with year-to-date spending reaching $9 billion, an increase of 6.5% compared to 2024 [5] Company Strategy and Development Direction - The company plans to maintain its investment portfolio balance and has resumed reinvesting cash flows from the investment portfolio [6] - Capital priorities include organic growth, maintaining a stable dividend, and share repurchases, with a focus on deploying capital effectively in the back half of the year [26] Management's Comments on Operating Environment and Future Outlook - Management expects full-year loan growth to be in the low single digits, reflecting a cautious outlook due to uncertainties in the market [8] - The company is not observing broad signs of weakness in credit performance, with credit risk remaining low and stable [13] Other Important Information - The company recorded a $4.5 million provision for credit losses in the second quarter, with the allowance for credit losses increasing to $167.8 million [15] - The effective tax rate outlook for the rest of the year is projected at 23.2%, slightly higher than the previous estimate [47] Q&A Session Summary Question: How is the pipeline in terms of C and I? - Most of the C and I growth came from dealer floor plans, which have normalized, and there is uncertainty regarding future balances due to tariffs [20] Question: Have tariffs impacted tourism spending? - Tariffs have created uncertainty for car dealers but have not significantly impacted tourism spending, which has increased [24] Question: What are the capital priorities moving forward? - Capital priorities include organic growth, maintaining dividends, and share repurchases, with a focus on deploying repurchase authority in the back half of the year [26] Question: What is the outlook for M&A? - The company is open to considering M&A opportunities but currently has no specific targets [34] Question: What impacted loan yields in the second quarter? - The mix of loans, with higher margin loans being paid off and replaced by lower margin loans, affected loan yields [37] Question: What is the outlook for fee income in the third quarter? - Fee income is expected to be in the range of $51 million to $52 million for the third quarter [40] Question: What is driving the increase in residential mortgage non-performers? - The consumer at the lower end is getting stretched, leading to an increase in non-performing loans, but the company is not concerned about loss content [64] Question: How does the company view the increase in commercial criticized assets? - Most criticized assets are expected to cure themselves, and the company remains confident in its credit portfolio [71]