First Hawaiian Bank’s earnings were under pressure all last year because the company needed to set aside reserves for potential loan losses.

Not this time, however.

In yet another sign that Hawaii is on its way to an economic recovery, the state’s largest bank reported today that first-quarter net income soared 48.4% largely because the bank didn’t need to add to its reserves, and saw loan deferrals drop to $81 million, or 0.7% of loans, from $725 million, or 5.8% of loans, at the end of December. The bank said 96% of borrowers who went on deferral have returned to pay.

First Hawaiian also resumed its stock repurchase program following a year that saw banks across the country halt share repurchases due to the financial effects of the COVID-19 pandemic. First Hawaiian bought back $9.5 million worth of its own stock at an average price of $28.70 a share.

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The improved financial picture allowed First Hawaiian Inc., the holding company for the bank, to post net income of $57.7 million, or 44 cents a share, to match analysts’ estimates according to research firm Thomson Reuters. That compares with $38.9 million, or 30 cents a share, in the year-earlier quarter.

“We had a good first quarter as our teams continued supporting local businesses by originating $459 million of PPP (Paycheck Protection Program) loans,” First Hawaiian Chairman, President and CEO Bob Harrison said in a statement. “We also experienced strong deposit growth and maintained excellent credit quality. We are optimistic about the local economy, as the state’s vaccine rollout is well underway and we are seeing a steady increase in visitor arrivals, all positive signs for Hawaii’s economy.”

Harrison, though, cautioned on the bank’s conference call with analysts that he is still exercising caution about releasing reserves.

“There’s a lot of very good signs in the economy here, (but) it’s still a little bit early to make a call on recovery yet,” he said. “So I think over the next couple of quarters, we’ll have a better idea on that.”

Chief Risk Officer Ralph Mesick reiterated Harrison’s stance during the call.

“I think everything is starting to line up the way that we had hoped it would,” Mesick said. “And I do think that we just need to see what happens in the next couple of quarters and see if this really takes hold. But I mean our outlook was for a second-half recovery, and we’re really starting to see that now.”

The zero loan-loss provision last quarter allowed the bank to recognize all its earnings compared with the first quarter of 2020 when it allocated $41.2 million to its reserves. For all of 2020, the bank added $121.7 million to its reserves.

Banks are required to set aside loans that may become unpayable on their balance sheet to show whether they have enough money to meet depositors’ and regulators’ needs.

The bank’s year-over-year loans were virtually flat as they fell 0.6% to $13.30 billion from $13.38 billion. But the loans increased $21.2 million from the fourth quarter driven by the origination of $459 million in new PPP loans. Chief Financial Officer Ravi Mellela said full-year loan growth, excluding PPP, will be in the low single-digit range.

Deposits jumped 18.3% to $20.13 billion from $17.02 billion in the year-earlier quarter.

The bank’s net interest income, which is the difference between what it generates from loans and pays out in deposits, fell 6.9% to $129.2 million from the year-earlier quarter, with the net interest margin worsening by 57 basis points to 2.55% from 3.12%.

Noninterest income, which includes charges and fees, fell 10.9% to $43.9 million from the year-earlier quarter.

First Hawaiian said it would maintain its quarterly dividend at 26 cents a share that based on Friday’s closing price equates to an annualized yield of 3.8%. The dividend will be payable June 4 to stockholders of record at the close of business on May 24.

First Hawaiian’s stock rose 7 cents to $27.14 after the financial results were released.