First Hawaiian, Inc.

today's program, Kevin Haseyama, Investor Relations Manager. Please go ahead, sir.

Thank you, Jonathan. And thank you everyone for joining us as we review our financial results for the fourth quarter of 2024. With me today are Bob Harrison, Chairman, President, and CEO, Jamie Moses, Chief Financial Officer, and Lee Nakamura, Chief Risk Officer. We have prepared a slide presentation that we will refer to in our remarks today. The presentation is available for downloading and viewing on our website at fhb.com in the investor relations section. During today's call, we will be making forward-looking statements, so please refer to slide one for our safe harbor statement. We may also discuss certain non-GAAP financial measures. The appendix to this presentation contains reconciliations of these non-GAAP financial measurements to the most directly comparable GAAP measurements. And now I'll turn the call over to Bob.

Thank you, Kevin. I'll start by giving a quick overview of the local economy. Our Hawaii economy continued to expand at a slow pace. The statewide seasonally adjusted unemployment rate remained stable in December at 3% compared to the national average of 4.1%. Through November, total visitor arrivals were down slightly at 0.2%. and spending was down 0.8% compared to 2023 levels for the same period. The housing market remained stable in December. Median sales price for a single family home on Oahu was $1.1 million, 5.8% higher than December of 2023. Median sales price for condominiums on Oahu was $540,000, 5.9% higher than last year. Also wanted to mention that our hearts go out to all those who were impacted by the wildfires in Los Angeles. We have a lot of customers, employees, and friends in the Los Angeles area, and those are all very important relationships to us. Fortunately, all of our employees who are based in Pasadena and their homes are safe. Turning to slide two, we have highlights of our fourth quarter results. We finished the year with a strong quarter driven by growth in loans and deposits, an increase in net interest income, excellent credit quality, solid non-interest income, and well-controlled expenses. One of our biggest drivers for our strong performance was eight basis points in NIM expansion driven by favorable deposit mix changes and rate outperformance. During the quarter, we also continued to support our communities with a $1 million contribution to the First Wine Foundation. Turning to slide three, I'll go over some balance sheet highlights. In the fourth quarter, we executed an investment portfolio restructuring by selling $290 million of securities and using the proceeds to reinvest in a similar amount of securities. That provided a 309 basis point increase in yield. This transaction is expected to increase net interest income by $8.6 million and net interest margin by four basis points in 2025. We recognize the $26.2 million pre-tax loss as a result of the transaction and the estimated impact on the fourth quarter were about half a million to NIN interest income and one basis point to NIN. We anticipate that we will continue to use portfolio runoff to fund low growth. The balance sheet remains well capitalized and we repurchased about one and a half million shares in the quarter using our entire 40 million stock authorization for 2024. Our stock purchase authorization for 2025 is $100 million. Now turning to slide four, loans grew $167 million or 1.2% from the prior quarter. Loan growth was driven by large increases in CRE and C&I. Over 90% of the CRE growth in the quarter was loans collateralized by Hawaii properties. Also, the CNI growth was primarily driven by Hawaii companies. Increases in dealer flooring balances added about $33 million to the CNI growth. The strong growth was partially offset by payoffs in the construction loan portfolio as a result of completed projects and early refinancing. Looking forward, we believe that we will have good origination activity in 2025. but expected payoffs in the CRA and construction portfolios will continue to be somewhat of a headwind. As a result, we expect full year loan growth to be in the low to mid single digit range.