First Hawaiian, Inc. (FHB) Q4 2025 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call summary shows strong loan growth, positive net interest margin trends, and a solid shareholder return plan with share buybacks. The Q&A session provided additional insights into loan growth and margin expansion, with management addressing potential risks. Despite some unclear responses, the overall sentiment is positive due to strong financial performance and strategic plans. The market cap indicates a moderate reaction, leading to a positive stock price movement prediction.
Key Financial Performance
State Unemployment Rate 2.2% in November, compared to the national unemployment rate of 4.5%. This indicates a strong local economy.
Visitor Arrivals Down 0.2% year-to-date through November compared to last year, primarily due to fewer visitors from Canada. However, visitor spending increased by 6% year-over-year to $19.6 billion.
Median Single-Family Home Price on Oahu $1.1 million in December, up 4.3% from the prior year, indicating a stable housing market.
Median Condo Sales Price on Oahu $512,000 in December, down 5.2% from last year, reflecting a decline in this segment of the housing market.
Return on Average Tangible Equity 15.8% in the fourth quarter and 16.3% for the full year, showing solid profitability measures.
Effective Tax Rate 24.8% in the fourth quarter, higher due to the reversal of a previously accrued tax benefit. Expected to normalize to 23.2% going forward.
Total Loans Grew by $183 million in the quarter, or 5.2% annualized, driven by growth in C&I loans and conversions from construction to CRE loans.
Retail and Commercial Deposits Increased by $233 million in the fourth quarter, while public deposits declined by $447 million, resulting in a net deposit increase of $214 million.
Cost of Deposits Fell by 9 basis points to 1.29% in the fourth quarter, contributing to improved margins.
Net Interest Income (NII) $170.3 million in the fourth quarter, up $1 million from the prior quarter, driven by lower deposit costs and benefits from matured borrowings.
Net Interest Margin (NIM) 3.21% in the fourth quarter, up 2 basis points from the prior quarter, due to lower deposit costs and matured borrowings.
Noninterest Income $55.6 million in the fourth quarter.
Noninterest Expense $125.1 million in the fourth quarter.
Classified Assets Decreased by 7 basis points, indicating improved credit quality.
Special Mention Assets Increased by 16 basis points, reflecting some isolated risks.
Net Charge-Offs $5 million in the fourth quarter (14 basis points of total loans and leases). Year-to-date net charge-offs were $16.3 million, with an annual rate of 11 basis points, unchanged from the prior quarter.
Nonperforming Assets and 90-Day Past Due Loans 31 basis points of total loans and leases at the end of the fourth quarter, up 5 basis points from the prior quarter, primarily due to a single relationship.
Allowance for Credit Losses (ACL) Increased by $3.2 million to $168.5 million, with coverage rising to 118 basis points of total loans and leases, reflecting conservative provisioning.
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Operating Highlights
Visitor Arrivals and Spending: Total visitor arrivals were down 0.2% compared to last year, primarily due to fewer visitors from Canada. However, spending through November was $19.6 billion, up 6% compared to the same period last year. Japan showed growth in visitor arrivals, up 2.8% year-to-date.
Housing Market: The median single-family home price on Oahu in December was $1.1 million, up 4.3% from the prior year. The median condo sales price on Oahu in December was $512,000, down 5.2% from last year.
Net Interest Margin (NIM) and Income: Net interest income was $170.3 million, $1 million higher than the prior quarter. NIM in the fourth quarter was 3.21%, up 2 basis points compared to the prior quarter.
Deposits: Retail and commercial deposits increased by $233 million, while public deposits declined by $447 million, resulting in a net increase of $214 million in deposits for the fourth quarter.
Credit Quality: Classified assets decreased by 7 basis points, while special mention assets increased by 16 basis points. Nonperforming assets and 90-day past due loans were 31 basis points of total loans and leases, up 5 basis points from the prior quarter.
Stock Repurchase Authorization: The company repurchased about 1 million shares, using the remaining $26 million of the $100 million purchase authorization for 2025. A new stock repurchase authorization of $250 million was announced, with no specific time frame.
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Risk or Challenges
Visitor Arrivals: Total visitor arrivals were down 0.2% compared to last year, primarily due to fewer visitors from Canada. This could impact revenue from tourism-related activities.
Deposit Dynamics: Public deposits declined by $447 million in the fourth quarter, which could affect liquidity and funding stability.
Loan Portfolio: Nonperforming assets and 90-day past due loans increased by 5 basis points, primarily driven by a single relationship, indicating potential credit risk.
Interest Rate Environment: Additional Federal Reserve rate cuts and a decreasing deposit beta are expected to be headwinds for net interest margin (NIM) in 2026.
Special Mention Assets: Special mention assets increased by 16 basis points, which could signal emerging credit quality concerns.
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Guidance & Outlook
Effective Tax Rate: The effective tax rate is expected to return to about 23.2% going forward.
Stock Repurchase Authorization: A new stock repurchase authorization of $250 million has been approved, with no specific time frame for completion.
Loan Growth: Full year loan growth is expected to be in the 3% to 4% range, driven primarily by CRE and C&I loans.
Net Interest Margin (NIM): The full year NIM is anticipated to be in the 3.16% to 3.18% range, with tailwinds from fixed asset repricing and headwinds from Fed rate cuts and decreasing deposit beta.
Noninterest Income: Noninterest income is expected to be stable at approximately $220 million for the year.
Expenses: Expenses are projected to be about $520 million in 2026.
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Shareholder Return Plan
Share Repurchase: During the quarter, we repurchased about 1 million shares, which used the remaining $26 million of our $100 million purchase authorization for 2025. Our new stock repurchase authorization is for $250 million. Unlike prior authorization, the current authorization is not for a specific time frame.
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Key Q&A
Q:How are pipelines shaping up and how much of the growth in C&I was increasing utilization versus new relationship growth?
A:Loan growth was broad-based, with activity in local markets and mainland draws under lines. New dealer relationships also contributed. Multifamily pipelines remain busy, with deals taking time to fund. Payoffs in the CRE portfolio impacted growth, but normalized growth is expected in the second half of the year.
Q:What led to payoffs and paydowns coming sooner than expected, and does the loan growth outlook consider this risk?
A:Payoffs came sooner due to permanent lenders seeking assets earlier than normal, though not as early as during past periods. Paydowns are linked to a gap in deal activity from a few years ago. This trend is expected to normalize in the second half of the year. The loan growth outlook accounts for these factors.
Q:What is driving margin expansion and how has reducing deposit costs impacted attrition or pushback?
A:Margin expansion is driven by the ability to cut deposit rates when the Fed cuts and fixed asset repricing. Deposit betas are expected to be lower going forward. Deposit cost reductions have not caused significant attrition or pushback.
Q:Can you clarify the $385 million of fixed cash flows and its impact on spread competition for new assets?
A:The $385 million of fixed cash flows is a quarterly figure. Spread competition exists, with securities portfolio yielding 180-200 basis points and loans yielding 80-100 basis points. Loan growth guidance of 3%-4% may start lower in the first half of the year and pick up in the second half.
Q:What are the deposit beta expectations after two rate cuts, and how should expenses be viewed for 2026?
A:Deposit betas are expected to step down to 30%-35% after two rate cuts. Expenses are projected to grow 4%-5% in 2026, reflecting normalization after years of flat growth due to cost-saving measures and hiring challenges.
Q:What is the appetite for share buybacks and how does it compare to M&A considerations?
A:The company has a strong appetite to continue share buybacks at a similar pace as 2025, with flexibility to adjust based on capital needs. M&A remains an option, focusing on well-managed targets with strong management, disciplined lending, and a strong deposit franchise, ideally located west of the Rockies.
Q:What is the spot rate on deposits at the end of the year and how do expenses trend seasonally?
A:The spot rate on deposits at the end of December was 1.24%. Expenses are generally flat throughout the year, with a slight pickup in the first quarter.
Q:What are the updated thoughts on mainland M&A and ideal target characteristics?
A:The company is open to mainland M&A, focusing on targets with strong management, disciplined lending, and a strong deposit franchise. Ideal targets are located west of the Rockies and range from $2 billion to $15 billion in size.
Q:How are deposit balances expected to trend in the first quarter and throughout the year?
A:Deposit balances are expected to decline seasonally in the first quarter, with low single-digit growth in commercial and retail deposits for the year. Public deposits may fluctuate.
Q:What is the full-year NIM guidance and expectations for the first quarter?
A:Full-year NIM guidance is 3.16%-3.18%, with a slight decline expected in the first quarter due to recent rate cuts.
Q:What is the opportunity set for multifamily production and how does it impact loan growth?
A:The opportunity set for multifamily production booked 12-24 months ago is significant but specific figures were not provided. Loan growth is supported by increased draws on existing lines and new production, particularly on the West Coast.
Q:Is it normal for construction deals to convert to commercial real estate financing in-house?
A:For customers within the footprint, it is normal to convert construction deals to commercial real estate financing in-house. This is less common for multifamily construction on the mainland.
Q:Why did C&I yields hold up well this quarter?
A:C&I yields held up due to draws under existing lines, which had structurally lower pricing compared to new production. Further analysis is needed for a definitive answer.
Q:Review of Unclear Management Responses
A:Management avoided providing specific figures for the opportunity set of multifamily production booked 12-24 months ago. Additionally, they did not provide a clear breakdown of loan growth from increased draws versus new production. Some responses, such as those regarding C&I yields and the impact of construction deals converting to commercial real estate financing, lacked detailed analysis or clarity.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
Balance sheet
CI loan
CRE conversion
CRE decline
Canada Japan
Chief Risk
Group
Haseyama Investor
Housing market
Instructions today
Japan spot
Manager Strategic
NIM interest
Oahu Slide
Officer Chief
Relations Manager
Slide Balance
Slide NIM
addition auto
arrival visitor
asset basis
authorization frame
balance portfolio
basis CI
basis date
benefit borrowing
borrowing loan
conference speaker
construction CRE
construction couple
construction deal
conversion balance
couple construction
customer CRE
loan basis
price Oahu
FHB Transcript
First Hawaiian, Inc. (FHB) Q4 2025 Earnings Call Transcript
Positive1-30
The earnings call summary shows strong loan growth, positive net interest margin trends, and a solid shareholder return plan with share buybacks. The Q&A session provided additional insights into loan growth and margin expansion, with management addressing potential risks. Despite some unclear responses, the overall sentiment is positive due to strong financial performance and strategic plans. The market cap indicates a moderate reaction, leading to a positive stock price movement prediction.
First Hawaiian, Inc. (FHB) Q3 2025 Earnings Call Transcript
Unknown10-24
The earnings call presents a mixed outlook. While strong core deposit growth and optimistic guidance on loan growth and fee income are positive, concerns about substandard loans and management's lack of clarity on M&A and specific financial metrics temper the sentiment. Additionally, the company's strategies to manage deposit costs and NIM amid potential Fed rate cuts show cautious optimism. Given the market cap of $2.6 billion, the stock is likely to experience minimal movement, resulting in a neutral sentiment over the next two weeks.
First Hawaiian, Inc. (FHB) Q2 2025 Earnings Call Transcript
Unknown7-25
The earnings call presents a mixed picture. Basic financial performance shows stable but unremarkable growth, with some concerns about tariffs and loan yields. Product development and market strategies seem steady but lack strong catalysts. The Q&A reveals uncertainties in long-term growth and competition, while financial health appears stable with some credit risk concerns. Shareholder returns are positive with planned repurchases. Overall, the sentiment is neutral, with no strong positive or negative drivers evident, and the market cap suggests a moderate reaction.
First Hawaiian, Inc. (NASDAQ:FHB) Q1 2025 Earnings Call Transcript
Unknown4-24
The earnings call presents a mixed picture: EPS increased slightly, but loan growth is uncertain and there's a decline in commercial deposits. The increase in credit loss allowance due to a pessimistic economic forecast and competitive pressures are concerns. However, the stable noninterest income and expenses, along with a robust share repurchase program, provide some positive aspects. The Q&A revealed uncertainties in loan growth and economic conditions, further supporting a neutral sentiment. Given the mid-cap status, the stock is likely to remain stable, with limited short-term movement.
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FHB Report
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