Record growth in deposits boosts First Hawaiian’s quarterly earnings

First Hawaiian Bank CEO Bob Harrison said the improving state economy has generated a lot of money that people are looking to put to work.

Until they do, they’re parking the money in liquid accounts.

The state’s largest bank was one of the beneficiaries of that wealth effect during the January-March period as deposits at First Hawaiian rose nearly 10 percent and surpassed $15 billion for the first time.

That strong deposit growth, as well as another solid period for lending, lifted earnings at First Hawaiian by 6.2 percent in the first quarter to $56.5 million from $53.2 million in the year-earlier period.

"People feel very safe with First Hawaiian Bank and (consider it) a safe haven to place deposits while they consider other investments," Harrison said ahead of Friday’s earnings release. "We’ve seen a strong recovery in the stock market, and we’ve seen people investing in real estate projects, such as condominiums. I also believe there’s a lot of money out there in the economy that’s one of the outcomes of the Fed’s (monetary easing) policies."

Harrison called the 9.6 percent increase in deposits to $15.2 billion from $13.8 billion a "truly outstanding" accomplishment.

"Most of that was from individuals, partnerships and corporations — core deposits," he added.

Loans also continued to increase at First Hawaiian and rose 6.5 percent to a record $10.2 billion from $9.5 billion in the year-earlier quarter. Assets rose 8.5 percent to a record $18.7 billion from $17.3 billion.

"(Lending) continues to be pretty broad-based," Harrison said. "We had strength in the consumer area, especially car financing. And on the construction side we’ve seen the cyclicality of certain projects as the construction loans are paid down and we have a drop until the next project ramps up."

Harrison said he expects to see strengthening consumer confidence and job growth throughout the year as the economy continues to expand and more construction projects come online.

"We’re seeing continuing strength in our quarterly business activity report across a number of different segments," Harrison said. "We also feel that unemployment at 4.1 percent is a great result. We’re seeing continued strong tourism and seeing more construction activity. And with the delivery of those buildings, people generally spend more as they furnish their units over the rest of the year. That should lead to increased consumer confidence and hopefully more job creation."

First Hawaiian’s net interest income improved as the spread between loan and deposit rates rose 4.8 percent to $112.6 million last quarter from $107.5 million in the year-earlier period due to the bank’s strong loan growth. Its net interest margin decreased to 2.80 percent from 2.91 percent as loans continue to reprice and the rates come down.

Noninterest income, which includes service charges and fees, rose 7.3 percent to $55.6 million from $51.8 million. Last quarter’s total included a gain of $700,000 from the sale of MasterCard stock that the bank received for its membership stake when the card company went public in 2006. In the first quarter of 2014, First Hawaiian received $5.1 million from the sale of MasterCard stock.

The bank’s credit quality continued to improve as nonperforming assets — loans overdue by 90 days or more — declined 22.3 percent to $24.1 million from $31.1 million and as a percentage of total assets improved to 0.13 percent from 0.18 percent.

"Essentially what’s happening is we’re working through the loans that were there and struggling, and we’re not seeing the same issues out there with any new ones," Harrison said.

The bank’s control over expenses, as reflected in the efficiency ratio that measures how much it costs First Hawaiian to make a dollar of revenue, improved to 44.65 cents from 45.09 cents in the year-earlier quarter.

As a wholly owned subsidiary of French banking giant BNP Pari­bas, First Hawaiian is not required to separately report its earnings, but does so voluntarily each quarter. The bank has 57 branches in Hawaii, three on Guam and two on Saipan.