First Hawaiian (FHB) Sells Lower-Yielding Debt Securities

By Bobby Samwell • Tuesday, December 10 10:16 • Permanent Link

First Hawaiian, Inc. (NASDAQ:FHB) recently completed a restructuring of its available-for-sale investment securities portfolio. The company executed the sale of $293 million of its lower-yielding available-for-sale debt securities, resulting in an estimated after-tax loss of $19.7 million. The proceeds from the sale were reinvested in $293 million of debt securities currently yielding 309 basis points more than the securities that were sold.

The transaction is projected to have a significant impact on the company's financials. It is expected to increase net interest income by approximately $8.6 million and net interest margin by approximately 4 basis points in 2025. Moreover, the transaction is also projected to increase net interest income by approximately $0.5 million and net interest margin by approximately 1 basis point in the fourth quarter of 2024.

The securities that were sold had a weighted average yield of 1.92% and a weighted average duration of 3.2 years. On the other hand, the proceeds were reinvested into securities with a weighted average yield of 5.01% and a weighted average duration of 4.1 years. The company recognized a one-time pre-tax loss of $26.2 million as a result of the transaction, which will be recognized in the quarter ending December 31, 2024. The breakeven on this transaction is estimated to be 3 years.

It is worth noting that this restructuring had no impact on tangible equity, and the company remains "well capitalized" under applicable regulatory guidelines.

First Hawaiian, Inc., a bank holding company headquartered in Honolulu, Hawaii, is the parent company of First Hawaiian Bank, which was founded in 1858 and is Hawaii’s oldest and largest financial institution. The company offers a comprehensive suite of banking services to consumer and commercial customers, including deposit products, loans, wealth management, insurance, trust, retirement planning, credit card, and merchant processing services. Customers may also access their accounts through ATMs, online, and mobile banking channels. Today the company's shares have moved 0.2% to a price of $27.44. For more information, read the company's full 8-K submission here.

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