First Hawaiian Bank surpassed analysts’ estimates in the second quarter, but its net income fell 31.6% due to $35 million it added a year ago to its income from its loan-loss reserve.

The state’s largest bank reported today that margins improved due to higher interest rates, and loans and deposits gained from the second quarter of 2021. In the most recent quarter, First Hawaiian set aside $1 million for potential loan losses.

First Hawaiian Inc., the holding company, posted earnings of $59.4 million, or 46 cents a share, to beat analysts’ consensus estimate of 45 cents. A year earlier, the bank had net income of $86.7 million, or 67 cents a share.

“I’m pleased to report that we had a very strong second quarter as the bank continued to perform well,” First Hawaiian Chairman, President and CEO Bob Harrison said in a statement. “We had good loan and deposit growth, credit quality remained excellent, and we successfully converted to our new core operating system.”

The bank kept its quarterly stock dividend at 26 cents a share. It will be payable on Sept. 2 to stockholders of record at the close of business on Aug. 22.

First Hawaiian’s stock jumped 4%, or 99 cents, to $25.49 after the results were announced.

Net interest income, which is the difference between what the bank generates in loans and pays out in deposits, rose 10.4% to $145.1 million from the year-earlier quarter while the bank’s net interest margin rose 14 basis points to 2.60% during the same period, and increased by 18 basis points from the January-March quarter. Ralph Mesick, the bank’s chief risk officer and interim chief financial officer, said on the analysts’ call that the bank expects its net interest margin to rise an additional 25 to 30 basis points in the third quarter from the second quarter.

Noninterest income, which includes charges and fees, fell 10.6% to $44.1 million.

Loans rose 1.2% to $13.26 billion from the year-earlier quarter but jumped 11.5% on an annualized basis from the January-March period. Deposits increased 8.5% to $22.6 billion from the year-earlier quarter and rose 5.9% on an annualized basis from the first quarter.

“In spite of the volatility in the national economy, Hawaii has experienced good visitor arrivals this summer and the local economy is doing well,” Harrison said on the conference call. “At the bank, we have a good outlook for the second half of 2022 and beyond as we have a balance sheet that is well positioned for growth with good liquidity, strong capital and excellent credit quality.”

Compass Point analyst Laurie Havener Hunsicker maintained her neutral rating on the stock and kept her price target at $27. She said that the bank’s net interest margin and net interest income are poised to outperform in the second half of this year, but an increase in expenses puts an overhang on the stock. Still, she said the bank represents a solid core holding with a 4.1% dividend yield.