First Hawaiian Q2 2025 Earnings Report

First Hawaiian EPS Results

• Actual EPS: $0.58
• Consensus EPS: $0.49
• Beat/Miss: Beat by +$0.09
• One Year Ago EPS: $0.48

First Hawaiian Revenue Results

• Actual Revenue: $217.54 million
• Expected Revenue: $214.67 million
• Beat/Miss: Beat by +$2.88 million
• YoY Revenue Growth: N/A

First Hawaiian Announcement Details

• Quarter: Q2 2025
• Date: 7/25/2025
• Time: Before Market Opens
• Conference Call Date: Friday, July 25, 2025
• Conference Call Time: 1:00PM ET

First Hawaiian (NASDAQ:FHB) is the oldest and largest bank in Hawaii, operating as the bank holding company for First Hawaiian Bank. Established in 1858, the company offers a full suite of financial services to individual, business and institutional clients. Its product portfolio includes consumer and commercial lending, deposit accounts, treasury and cash management, foreign exchange and trade finance, as well as wealth management and trust services.

First Hawaiian serves customers through an extensive network of branches, ATMs and digital channels across the Hawaiian Islands, Guam, Saipan and American Samoa. The bank’s retail division provides checking and savings accounts, home mortgages, auto and personal loans, while its commercial banking unit delivers working capital lines, equipment financing, real estate loans and international banking solutions. Dedicated private banking teams offer personalized investment advisory and trust services to high-net-worth clients.

In recent years, First Hawaiian has invested in enhancing its digital banking platform, rolling out mobile banking apps, online account opening and automated payment services to improve customer experience and operational efficiency. The company also maintains a strong community focus, supporting affordable housing initiatives, small-business lending programs and partnerships with local nonprofit organizations to foster economic development in the regions it serves.

First Hawaiian, Inc. is led by President and Chief Executive Officer Christopher J. Pinto and a senior management team committed to balancing innovation with the bank’s longstanding community values. With more than 160 years of history, First Hawaiian continues to adapt its offerings to evolving market trends while preserving its deep roots in Pacific communities.

First Hawaiian Q2 2025 Earnings Call Transcript

Key Takeaways

• Positive Sentiment: Our net income increased over 23% from the prior quarter, driven by higher net interest and noninterest income, disciplined expense control and lower provisions, including a $5.1 million benefit from California tax law.
• Positive Sentiment: Net interest income rose to $163.6 million, up $3.1 million quarter-over-quarter, and the net interest margin improved to 3.11% with an expected increase to 3.13% in Q3.
• Positive Sentiment: We repurchased 1 million shares for $25 million in Q2 and have $50 million of remaining authorization under our 2025 stock repurchase plan, reflecting strong capital deployment flexibility.
• Neutral Sentiment: Total loans were essentially flat, up 0.4% driven by dealer floorplan growth offset by commercial real estate payoffs, and we now expect full-year loan growth in the low single digits.
• Neutral Sentiment: Credit metrics remain healthy with a $4.5 million provision, allowance for credit losses coverage stable at 1.17% of loans, and nonperforming assets at 0.23% of total loans, largely well-secured.

Presentation

[Operator]

Thank you for standing by and welcome to the First Hawaiian Bank, Inc. Second Quarter twenty twenty five Earnings Conference Call. At this time, all participants are in a listen only mode. After the speakers' presentation, there will be a question and answer session. As a reminder, today's program is being recorded.

[Operator]

And now I'd like to introduce your host for today's program, Kevin Hassayama, Investor Relations Manager. Please go ahead, sir.

[Kevin Haseyama, Strategic Planning & Investor Relations Manager at First Hawaiian]

Thank you, Jonathan. And thank you everyone for joining us as we review our financial results for the second quarter of twenty twenty five. 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.

[Kevin Haseyama, Strategic Planning & Investor Relations Manager at First Hawaiian]

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 directly the comparable GAAP measurements. And now I'll turn the call over to Bob.

[Robert Harrison, Chairman, President & CEO at First Hawaiian]

Thank you for joining us today. I'll start by giving a quick overview of the local economy. Statewide seasonally adjusted unemployment rate continued to drift lower and was 2.8% in June compared to the national unemployment rate of 4.1%. Through May, total visitor arrivals were up 2.8% compared to last year as the strength in U. S.

[Robert Harrison, Chairman, President & CEO at First Hawaiian]

Mainland arrivals more than offset weakness in the Japanese and Canadian markets. Year to date spending was $9,000,000,000 up 6.5 compared to 2024. Interesting to note, we went back and looked and for the first five months of twenty nineteen to the first five months of twenty twenty five, visitor arrivals are down still 3.9%, but the spend is up over 24%. So while there's been a few less visitors, the spend is up substantially. Turning to slide two, we had a very strong second quarter.

[Robert Harrison, Chairman, President & CEO at First Hawaiian]

Our net income increased over 23% compared to the prior quarter. The improvements in our results compared to the last quarter were broad based, driven by higher net interest and noninterest income, good expense control and lower provision expense. Our results also include the impact from a change in California tax law that resulted in a net benefit of $5,100,000 Turning to slide three, the balance sheet remains solid. We continue to be well capitalized with ample liquidity. Loans and deposits were stable during the quarter and we repurchased about 1,000,000 shares at a total cost of $25,000,000 We have $50,000,000 of remaining authorization under the approved 2025 stock repurchase plan.

[Robert Harrison, Chairman, President & CEO at First Hawaiian]

We resumed reinvesting the investment portfolio cash flows in the second quarter, and we plan on maintaining the portfolio balance at its current level. Turning to slide four. Total loans increased about $59,000,000 or 0.4% from the prior quarter. The largest increase was in the C and I portfolio, which was primarily due to $125,000,000 increase in dealer floorplan balances. This was largely offset by payoffs from several completed construction projects in our commercial real estate portfolio.

[Robert Harrison, Chairman, President & CEO at First Hawaiian]

Looking forward, we expect full year loan growth will be in the low single digits. And now I'll turn it over to Jamie.

[James Moses, Vice Chairman of Finance Group & CFO at First Hawaiian]

Thanks, Bob. Turning to slide five. Total deposits increased slightly in the second quarter as growth in public deposits more than offset the decline in commercial and retail deposits. On the retail side, they were down $23,000,000 in the quarter, and commercial deposits were down 127,000,000 The decline in commercial deposits was due to the normal operational fluctuations that we see in that book. Total public deposits increased by $166,000,000 all in operating accounts.

[James Moses, Vice Chairman of Finance Group & CFO at First Hawaiian]

There was no change in the balance of public time deposits. Total deposit costs fell by four basis points in the quarter and our non interest bearing deposit ratio remained at 34%. On Slide six, we see that net interest income was $163,600,000 $3,100,000 higher than the prior quarter and the NIM was 3.11%, up three basis points compared to the prior quarter. The increase in the margin was driven entirely by lower deposit costs, primarily due to CD repricing. While we didn't see the anticipated benefit from fixed asset repricing in the second quarter, the underlying balance sheet dynamics driving the NIM remain intact, and we anticipate that the NIM in the third quarter will increase a couple of basis points to 3.13%.

[James Moses, Vice Chairman of Finance Group & CFO at First Hawaiian]

On to Slide seven, where noninterest income was $54,000,000 in the quarter and benefited from a few items that went our way. We continue to expect that recurring piece of noninterest income will be about $51,000,000 per quarter. Expenses were better than expected in the first half of the year, but we expect them to tick up just a bit in the back half. We think expenses in the third quarter will be up around 2% on a linked quarter basis and that full year expenses will be better than originally expected at around $5.00 $6,000,000 And now I'll turn it over to Leigh.

[Lea Nakamura, Executive VP & Chief Risk Officer of Risk Management Group at First Hawaiian]

Thank you, Jamie. Moving to slide eight, the bank continues to maintain its strong credit performance and healthy credit metrics. Credit risk remains low, stable and well within our expectations. We are not observing any broad signs of weakness across either the consumer or commercial portfolios. Classified assets increased by $31,600,000 on the quarter.

[Lea Nakamura, Executive VP & Chief Risk Officer of Risk Management Group at First Hawaiian]

These loans are well secured and we continue to work closely with the borrowers. Quarter to date net charge offs were $3,300,000 or nine basis points. Year to date net charge offs were $7,100,000 Our annual year to date net charge off rate was 10 basis points, one basis point lower than in the first quarter. Non performing assets and loans ninety days or more past due comprised 23 basis points of total loans and leases at the end of the second quarter, up six basis points from the prior quarter, resulting from an uptick in non accruals. Most of these were residential loans with low loan to value ratios, so we feel that the loss content in these loans is very low.

[Lea Nakamura, Executive VP & Chief Risk Officer of Risk Management Group at First Hawaiian]

Moving to slide nine, we show our second quarter allowance for credit losses broken out by disclosure segments. The bank recorded a $4,500,000 provision in the second quarter. The asset ACL increased by $1,200,000 to $167,800,000 with coverage remaining flat at 1.17% of total loans and leases. We believe that we continue to be conservatively reserved and ready for a wide range of outcomes. Let me now turn the call back to Bob for any closing remarks.

[Robert Harrison, Chairman, President & CEO at First Hawaiian]

Thank you, Jamie and Lee. And I'll be happy to take your questions.

[Operator]

Thank you. And our first question for today comes from the line of Liam Coonhill from Raymond James. Your question please.

[Liam Coohill, Senior Equity Research Associate at Raymond James]

Hi guys, Liam on for David. Thanks for taking my question. Just wanted to start out with C and I driving growth in the quarter and taking into account the low single digit outlook moving forward. How is the pipeline in terms of C and I? And is that the largest contributor?

[Liam Coohill, Senior Equity Research Associate at Raymond James]

And I'm also curious on the CRE side, are we seeing increasing demand from those borrowers? Appreciate any color you might have. Thank you.

[Robert Harrison, Chairman, President & CEO at First Hawaiian]

Sure. Good question. Most of the C and I growth came in our dealer floor plan and we have seen that pretty much continue to normalize back to what we had thought it would. Right about $600,000,000 let's see, $786,000,000 for the quarter at the end of the quarter. And that's up about $125,000,000 from the previous quarter.

[Robert Harrison, Chairman, President & CEO at First Hawaiian]

So that moves up and down. Car sales have slowed a little bit, but still there's uncertainty out there with respect to tariffs. So I think they're just, we don't know exactly what's going to happen with those balances, but we don't think they'll move around a whole lot. As relates to commercial real estate, the thing there was that we had thought some of the commercial construction loans were going to extend into mini perms and they didn't, which is a sign of very good credit quality. But on the other hand, it's a bit of a challenge for balances.

[Robert Harrison, Chairman, President & CEO at First Hawaiian]

So we still have a lot of those loans that are funding, that work is still going on. It's a little bit harder to predict when those will get paid off. So we changed our guidance a bit from low to mid single digits to low single digits for the full year, just in anticipation of that.

[Liam Coohill, Senior Equity Research Associate at Raymond James]

Thank you. I appreciate that. And you touched on tariff impacts. Have you been seeing that net out with the improvement in tourism spend on the islands? Do you think it's kind of a wash between the two factors or has that increased tourism spend kind of outpaced tariff concerns at this stage and adding softness of concerns versus last quarter? Thank you.

[Robert Harrison, Chairman, President & CEO at First Hawaiian]

Really no change in the the only impact we really see for tariffs is the uncertainty it gives our car dealers. That's still not exactly sure what those tariffs will be. I don't think it's had much of an impact on tourism. Japanese and Canadian tourism is down. I think primarily for the Japanese, it's a little bit slower economy and their exchange rate is still fairly weak for them.

[Robert Harrison, Chairman, President & CEO at First Hawaiian]

But US West and all of the Continental US has been strong and that's what led to the increase in arrivals and almost certainly the increase in spend.

[Liam Coohill, Senior Equity Research Associate at Raymond James]

Great. Thank you. And just last one for me. See the repurchases of some shares in the quarter. Just wondering what your capital priorities are at this stage as we move into the back half of the year?

[James Moses, Vice Chairman of Finance Group & CFO at First Hawaiian]

Yeah, I mean, think our the capital priorities remain the same. We'd love to deploy that in organic growth areas. Wanna make sure our dividend is stable. And the third option there is the share repurchases. And so, I think that's where we're gonna end up deploying more of our repurchase authority in the back half of the year.

[James Moses, Vice Chairman of Finance Group & CFO at First Hawaiian]

And so, think that's probably where we'll end up on that.

[Liam Coohill, Senior Equity Research Associate at Raymond James]

Great. Thanks for the color. I'll step back.

[Operator]

Thank you. And our next question comes from the line of Andrew Tyrrell from Stephens. Your question please.

[Andrew Terrell, Managing Director at Stephens Inc]

Hey, good morning.

[Robert Harrison, Chairman, President & CEO at First Hawaiian]

Good morning. Good morning.

[Andrew Terrell, Managing Director at Stephens Inc]

Maybe just to piggyback off of the last question around capital priorities. I mean, so I'm looking back, your capital position is stronger than it's been in a while. You've got a lot of capital. The loan growth outlook is maybe a little bit lower following this quarter. I'm curious how these things play together into your thought process on M and A and whether M and A makes more sense for you guys at this juncture. And maybe if you could just kind of update us your thought process there and if it does or doesn't make sense for you?

[Robert Harrison, Chairman, President & CEO at First Hawaiian]

Sure. This is Bob. I think that's something we always look at. We're not adverse to considering options, but we don't have anything we're looking at currently, but we're always out there talking to people as far as potentials for doing things with our capital. We're very comfortable with the capital levels.

[Robert Harrison, Chairman, President & CEO at First Hawaiian]

It's a little bit higher than we had guided to in years past. It was closer to 12%. We have increased the allowance. We do think there will be a rotation as Jamie was getting to out of securities and back into lending. And when that happens, that can eat up the capital fairly quickly.

[Robert Harrison, Chairman, President & CEO at First Hawaiian]

So we want to make sure we maintain enough capital for loan growth.

[Andrew Terrell, Managing Director at Stephens Inc]

Yes, makes sense. And maybe just one for Jamie, going back to the comments around the margin, and I appreciate the guidance for 3Q, that's helpful. What impacted, or anything we should be aware of that impacted loan yields in the second quarter and kind of mitigated what I thought would be a little bit better in kind of fixed repricing? Just any color you can provide on the underlying dynamics there would be helpful.

[James Moses, Vice Chairman of Finance Group & CFO at First Hawaiian]

Yes. So I think, Andrew, it was really a mix issue. So we you see in the materials, had sort of large payoffs in the construction book and increases in the C and I book. And so there was just this timing, I'll call it a timing differential, where we had higher margin loans pay off and they were replaced by relatively lower margin loans in the book. And it was really a mix issue there.

[James Moses, Vice Chairman of Finance Group & CFO at First Hawaiian]

I think in totality, that story still remains the same that the fixed rate cash flows coming off the books replaced by higher yielding assets in general will drive the NIM higher over time. Just of a weird quarter in terms of the mix of those things at the moment.

[Andrew Terrell, Managing Director at Stephens Inc]

Understood. And if I could sneak one more in, I think you talked about 51,000,000 of fee income is kind of a core number. It seems like the kind of credit and debit card fees and service charges that were both up this quarter, it seems like there's normally a carry forward of strength in kind of the third quarter there as well. So I'm hoping just to clarify any is that kind of just like what you view as core longer term? How should we think about third quarter on fee income?

[James Moses, Vice Chairman of Finance Group & CFO at First Hawaiian]

Yes. I think fee income in the third quarter is somewhere in that $51,000,000 $52,000,000 range. I mean, I think that's probably where we'll be. Have from time to time, we have a lot of things that happen from a, let's call it a markets perspective, where we have to revalue pension obligations, BOLI obligations, that kind of thing. So when the market's up quarter over quarter, we have small pops in these numbers.

[James Moses, Vice Chairman of Finance Group & CFO at First Hawaiian]

And so we had a number of like, let's call it, onesie twosies type things happen in this quarter in the $2,000,000 ish range that we know happen, right? These things happen for us from time to time. It's just hard to predict when they'll happen. So, that $103,000,000 range, I think is probably a good number for where we'll be in the third quarter.

[Andrew Terrell, Managing Director at Stephens Inc]

Great. I'll step back. Thank you for taking the questions.

[Robert Harrison, Chairman, President & CEO at First Hawaiian]

Yep.

[Operator]

Thank you. And our next question comes from the line of Kelly Mata from KBW. Your question, please.

[Kelly Motta, Managing Director at Keefe, Bruyette & Woods (KBW)]

Hi. Good morning. Thanks for the question. With regards to the tax rate, I see your DTA asked this quarter that you called out in the release. Jamie, can you provide, an updated outlook on on what what this tax law change does to your tax rate outlook for this year and beyond? Thank you.

[James Moses, Vice Chairman of Finance Group & CFO at First Hawaiian]

Yes. Yep. Yeah. You got it, Kelly. So, where normally we would say we would outlook at, like, 23% for our effective tax rate.

[James Moses, Vice Chairman of Finance Group & CFO at First Hawaiian]

The the outlook for the rest of the year is 23.2%, on that tax rate.

[Kelly Motta, Managing Director at Keefe, Bruyette & Woods (KBW)]

Okay. So fairly immaterial. Got it. Okay. And then on the deposit cost, you've done such a great job getting your deposit costs down in the first round of rate cuts.

[Kelly Motta, Managing Director at Keefe, Bruyette & Woods (KBW)]

It seems like there's a declining benefit after future cuts, but when those do come, wondering how you're thinking about deposit betas on the next round of cuts. You are asset sensitive, but that would be a nice offset.

[James Moses, Vice Chairman of Finance Group & CFO at First Hawaiian]

Yeah, so we have talked in the past about declining betas related to tax cuts. I don't think we're fully there yet at the moment. I think we probably have a few more rounds available to us before that starts to become a real issue. I would say that from the perspective of a rate cut, if we were a 95 beta or so on our rate sensitive deposits over the last two cuts, that maybe drops to 90 or so over the next couple of cuts. So, we we still feel pretty strongly that we'll be able to pass through a large portion, of those cuts to, to those rate sensitive customers.

[James Moses, Vice Chairman of Finance Group & CFO at First Hawaiian]

You know, but, you know, you know, after maybe another 1% or so that, you know, the beta will decline over time on that. So I think I think 90 is an okay number, you know, for the next one or two.

[Kelly Motta, Managing Director at Keefe, Bruyette & Woods (KBW)]

Oh, wow. Great. Got it. And then last for me, just a higher picture question. Loan growth this quarter, really nice T and I, but you had the construction pay downs.

[Kelly Motta, Managing Director at Keefe, Bruyette & Woods (KBW)]

It seems like the outlook is a little bit lower than at the start of the year, although still quite good. As you look ahead kind of broader more broadly speaking, what do you think are the main factors that would get increased activity among your client base to really pick up? And over the longer term, what's that more normalized growth rate? Do you think more mid single digits would be something that could be a useful longer term with these without the payoff headwinds? Thank you.

[Robert Harrison, Chairman, President & CEO at First Hawaiian]

Yeah, Kelly, it's Bob. I'm a little reluctant to look at longer term. Just most banks were following the economies of the areas we're in. So that's kind of making a bigger forecast that I'm comfortable with. But just to talk maybe a little more specifically about what happened this quarter.

[Robert Harrison, Chairman, President & CEO at First Hawaiian]

One of the reasons we lowered our guidance just a tad was that we had thought some of these construction loans were going to go into mini perm and if the takeout market is as strong as it is and they're getting paid off, you know, does affect that. How much will dealer floorplan continue to grow? Hard to tell, but, you know, with pre COVID, I think we're at eight fifty nine in total and, you know, now we're seven eighty six. So we're getting close to what pre COVID numbers were. So the amount of increase will likely slow down.

[Robert Harrison, Chairman, President & CEO at First Hawaiian]

So it's really the interplay between those two. The teams are out there, they're calling on people, there's good pipelines developing, but it's just hard to at this point put that into a number between now and year end. Other than what we've done in past year end, I don't think we'd be comfortable commenting.

[Kelly Motta, Managing Director at Keefe, Bruyette & Woods (KBW)]

Got it. Maybe just last follow-up on those construction loans getting taken out. Where are you seeing the most competition coming in? Is it from the local banks in Hawaii getting more aggressive on pricing, larger insurance companies, large banks?

[Robert Harrison, Chairman, President & CEO at First Hawaiian]

Oh, no. Yeah, this is the end of construction where normally, pre COVID you get taken out right away and then sometimes post COVID, it hangs around in a mini firm for a little while, which is always a feature of those loans. Now we're seeing more of a return to normalcy with institutional buyers, sometimes insurance companies, sometimes others taking out those loans upon completion of construction. It was never really designed to be a permanent loan for us. So it's not other local banks.

[Kelly Motta, Managing Director at Keefe, Bruyette & Woods (KBW)]

It. Awesome. Thank you so much. I'll step back.

[Robert Harrison, Chairman, President & CEO at First Hawaiian]

Yep.

[Operator]

Thank you. And our next question comes from the line of Jared Shaw from Barclays. Your question, please.

[Jared Shaw, Managing Director at Barclays Capital]

Hey there, thanks. Maybe just on the commercial loan growth that you're putting on, what are you seeing for spreads on C and I right now? Is that staying stable? Or are you seeing some compression with competition?

[James Moses, Vice Chairman of Finance Group & CFO at First Hawaiian]

Jared, this is Jamie. They're staying pretty stable. I think in totality, we have the weighted average roll on is in mid to upper sixes in totality in the books. So but mostly stable, would say, the spreads.

[Jared Shaw, Managing Director at Barclays Capital]

Okay. And then can you just walk through a little bit on the investment securities with the decline in yield this quarter and you talked about reinvesting some of those cash flows. What are you purchasing in terms of yield and duration? And should we expect to see some recovery in the securities yield? Or is it staying lower here?

[James Moses, Vice Chairman of Finance Group & CFO at First Hawaiian]

Yeah. No. You should expect maybe two and a quarter percent pickup in the on the things that we're putting back on versus the the roll off. So what's rolling off is about 2% in that book and we're going to be putting on maybe somewhere between four and four and a quarter. And so that keeping the duration a little bit keeping the duration sort of same flat in in the book.

[James Moses, Vice Chairman of Finance Group & CFO at First Hawaiian]

And we're replacing we're replacing cash flows that roll off with same type of assets that we that are rolling off. So mortgage securities with, you know, with, you know, that are good good structures, and, you know, have either through collateral features or, structure features that sort of give us a tight prepay window. So, in that five duration area.

[Jared Shaw, Managing Director at Barclays Capital]

Okay. Alright. Thanks. And then, just finally for me on credit. I know we're talking about low numbers, but when you look at sort of the growth in resi mortgage non performers over the last few quarters, that's been pretty big compared to where you've been before.

[Jared Shaw, Managing Director at Barclays Capital]

What's driving that weakness? I know that there's probably not a lot of lost content there, but is that what's sort of driving the underlying concern with the consumer on those?

[Robert Harrison, Chairman, President & CEO at First Hawaiian]

Jared, this is Bob. Maybe I'll start and then Lee can add some comments. The consumer at the, say the lower end is getting a little stretched. Savings as they accumulated during COVID have gone away and it's just getting a little bit tougher. Lee, I think you'd mentioned on collateral, but anything you wanna add?

[Lea Nakamura, Executive VP & Chief Risk Officer of Risk Management Group at First Hawaiian]

No, not really. I mean, the portfolio is performing as we expected. So we were pleased for a very long time with the performance and we continue to be very pleased and confident with the portfolio.

[Robert Harrison, Chairman, President & CEO at First Hawaiian]

Yeah, for a very long time we had zero. So anything above zero is gonna look like a big number. But we're not concerned about it from a loss perspective as I think Lee mentioned.

[Jared Shaw, Managing Director at Barclays Capital]

Yep. Okay. Thank you very much.

[Operator]

Thank you. And our next question comes from the line of Tamar Brahzylar from Wells Fargo. Your question please.

[Timur Braziler, Director - Mid-Cap Bank Equity Research at Wells Fargo]

Yes. Hi, good morning. Maybe just keeping to the line of commentary on credit, the increase in commercial criticized assets. Can you just help us reconcile kind of that increasing trend versus the still really strong level of charge offs? And how do you see that ultimately playing out?

[Timur Braziler, Director - Mid-Cap Bank Equity Research at Wells Fargo]

Do you think that is gonna somehow correlate to maybe an uptake in charge off activity again off of a really low base? Or do you think that ultimately they'll just end up curing themselves?

[Lea Nakamura, Executive VP & Chief Risk Officer of Risk Management Group at First Hawaiian]

For the most part, they will end up curing themselves. We already know of two that well, one paid off right after the end of the quarter. And then there's another one that we expect to pay off. And as you mentioned, right, the base is so low that you just have one loan move in and it moves significantly as a percentage. So again, we don't go into these without some expectation that some will have troubles.

[Lea Nakamura, Executive VP & Chief Risk Officer of Risk Management Group at First Hawaiian]

But when you stay close to the borrower, you can be confident that you'll come out very satisfactorily.

[Timur Braziler, Director - Mid-Cap Bank Equity Research at Wells Fargo]

Okay, thanks for that. And then, sorry, go ahead.

[Lea Nakamura, Executive VP & Chief Risk Officer of Risk Management Group at First Hawaiian]

No. We are confident in our book. The book is strong.

[Timur Braziler, Director - Mid-Cap Bank Equity Research at Wells Fargo]

Okay. Thanks for that. Maybe following up on the completed construction loans being refied away. I'm just trying to get the magnitude here of what's coming due from a construction completion standpoint. Then similarly on the CRE side for those resets that are approaching, I'm just wondering if you're seeing an increased level of competition from some of those potentially being resided away as well here.

[Robert Harrison, Chairman, President & CEO at First Hawaiian]

Yeah, Timur, I don't have the specific numbers of what's coming up. We had three loans pay off in the quarter, kind of led to that pay down for several actually. We are not seeing additional competition on as far as refinancing, as far as new deals coming forward, pricing had expanded a bit during COVID. It's coming back a little bit more to pre COVID spreads, but it's still solid and I think appropriate for the risks that we're underwriting.

[Timur Braziler, Director - Mid-Cap Bank Equity Research at Wells Fargo]

Okay, and then maybe just tying in some of the payoff activity, the fact that the floor plan book here is reaching a level of stabilization and your comments around the bond book reaching a level of stabilization. Is the expectation here that we start seeing asset growth or just given some of the dynamics, assets likely remain somewhat stagnant here for at least the near term?

[James Moses, Vice Chairman of Finance Group & CFO at First Hawaiian]

Timur, yeah. I think maybe we'll see some balance sheet growth. We're going to keep the bond book stable where it's at. And we should some loan growth in the back half of the year. So I would expect a larger balance sheet by year end.

[Robert Harrison, Chairman, President & CEO at First Hawaiian]

And some of it, just to add to Jamie's comments, some of the things that have been a drag over the last several years, our indirect book pre COVID was well over a billion, billion, billion and 1, now it's 600,000,000. So with whatever it is, five and a half years gone down by 500 plus million. That's now stabilized. So the market's reasonable and so we don't have that headwind now. A little bit of a headwind in residential lending as I think for all the banks here in Hawaii, but just not a lot of new volume as things mature.

[Robert Harrison, Chairman, President & CEO at First Hawaiian]

But on the commercial side to Jamie's point, you know, we're optimistic there's deals out there and we're looking at them and feel pretty good about the pipeline.

[Timur Braziler, Director - Mid-Cap Bank Equity Research at Wells Fargo]

Got it. Thank you for the questions.

[Operator]

Thank you. This does conclude the question and answer session of today's program. I'd like to hand the program back to Kevin Hassayama for any further remarks.

[Kevin Haseyama, Strategic Planning & Investor Relations Manager at First Hawaiian]

Thank you. We appreciate your interest in First Hawaiian, and please feel free to contact me if you have any additional questions. Thanks again for joining us, and have a good weekend.

[Operator]

Thank you, ladies and gentlemen, for your participation in today's conference. This does conclude the program. You may now disconnect. Good day.

Participants

Executives

• Kevin Haseyama, Strategic Planning & Investor Relations Manager
• Robert Harrison, Chairman, President & CEO
• James Moses, Vice Chairman of Finance Group & CFO
• Lea Nakamura, Executive VP & Chief Risk Officer of Risk Management Group

Analysts

• Liam Coohill, Senior Equity Research Associate at Raymond James
• Andrew Terrell, Managing Director at Stephens Inc
• Kelly Motta, Managing Director at Keefe, Bruyette & Woods (KBW)
• Jared Shaw, Managing Director at Barclays Capital
• Timur Braziler, Director - Mid-Cap Bank Equity Research at Wells Fargo