First Hawaiian has joined a lengthy list of banks that have taken one-time losses to offload low-yielding securities.
The $23.8 billion-asset, Honolulu-based bank disclosed on Monday the sale of $293 million of securities carrying a weighted average yield of 1.92%. First Hawaiian reinvested the proceeds in an equivalent amount of securities yielding just over 5%.
While the deal resulted in an after-tax loss totaling $19.7 million to be recognized in the fourth quarter, First Hawaiian's decision to swap low-yield securities for higher-yielding instruments is projected to add $8.6 million to 2025 net interest income and widen the company's net interest margin by four basis points. Fourth-quarter results should benefit to the tune of $500,000 in increased net interest income along with a single basis point of NIM expansion.
First Hawaiian expects earn-back to take three years. First Hawaiian reported net income totaling $61.5 million for the three months ended Sept. 30, so it's unlikely the restructuring alone would lead to a quarterly loss. A company spokeswoman declined to comment on the restructuring's impact on fourth-quarter earnings.
The move by First Hawaiian comes a week after Associated Banc-Corp in Green Bay, Wisconsin, said it had
In a similar transaction, the $1.5 billion-asset Union Bancshares in Morrisville, Vermont, said last week that it sold $38.8 million in low-yield securities, taking a $1 million after-tax loss.
Other banks that have announced balance-sheet restructuring transactions in the past year include
The parade of restructurings followed a spike in securities purchases by banks during the COVID-19 pandemic. Industry-wide securities assets, which totaled $4 trillion at the end of 2019, had jumped to $5.9 trillion three years later. In many cases, those assets turned into a drag on earnings after the Federal Reserve began raising interest rates in March 2022.
