Core Insights - Bank of Hawaii reported strong fourth-quarter results with diluted earnings per share of $1.39, a 63% increase year-over-year and a 16% increase quarter-over-quarter, alongside a 15% return on common equity [4][7] - The bank's net interest margin (NIM) improved for the seventh consecutive quarter, rising 15 basis points to 2.61%, with management forecasting it could reach "near the 290 range" by the end of 2026 [3][7] - Management highlighted strong credit quality metrics, with net charge-offs at $4.1 million and non-performing assets at 10 basis points, while the allowance for credit losses was $146.8 million, or 1.04% of loans [6][18] Financial Performance - The bank's net income for the quarter was $60.9 million, primarily driven by expansion in net interest income and NIM [8] - Noninterest income was reported at $44.3 million, slightly down from $46.0 million in the previous quarter, with a notable gain on the sale of the merchant services portfolio [20] - Noninterest expense decreased to $109.5 million from $112.4 million in the prior quarter, with a forecasted expense growth of 3% to 3.5% for 2026 [21] Deposit and Loan Trends - Loans and deposits grew modestly, with non-interest-bearing demand deposits increasing by 6.6% on a linked-quarter basis [1] - The bank's loan growth outlook remains cautious, with expectations of low single-digit growth until both consumer and commercial segments contribute more consistently [13] - The commercial pipeline showed positive activity, particularly in large commercial real estate and middle market businesses, while residential mortgages benefited from increased purchase activity [14] Capital Management - The bank resumed share repurchases, buying about $5 million of common shares during the quarter, with $121 million remaining under the current repurchase plan [22][23] - Management expects to increase repurchases to a range of $15 million to $20 million per quarter if growth remains "tepid" [23] Market Positioning - Bank of Hawaii remains the clear deposit market share leader in Hawaii, with market share growth continuing into 2025, increasing by another 40 basis points [15] - The loan book is concentrated in core markets, with approximately 93% of loans in Hawaii, indicating a strong local focus [16]

Financial Data and Key Metrics Changes - Fully diluted earnings per share was $1.39, 63% higher year-over-year and 16% higher quarter-over-quarter [3] - Net interest margin improved for the seventh consecutive quarter, up 15 basis points to 2.61% [3] - Return on common equity improved to 15% [3] - Net income for the quarter was $60.9 million, an increase of $7.6 million compared to the linked quarter [11] Business Line Data and Key Metrics Changes - Loans and deposits both grew modestly in the quarter, with non-interest-bearing demand deposits growing 6.6% on a linked basis [3] - Consumer loans represent 57% of total loans, approximately $8 billion, with 86% consisting of residential mortgage and home equity loans [7] - Commercial lending portfolio totals $6.1 billion, representing 43% of total loans, with 73% secured by real estate [7] Market Data and Key Metrics Changes - Bank of Hawaii's market share growth continued in 2025, advancing another 40 basis points [4] - The bank is the clear deposit market share leader in Hawaii [4] - Approximately 93% of loans are based in Hawaii, with 4% in the Western Pacific and 3% on the mainland [6] Company Strategy and Development Direction - The company aims to achieve a net interest margin of near 290 by the end of 2026, driven by fixed asset repricing and improving deposit remix [5] - The bank's unique business model leverages its core Hawaii market and dominant brand position to create superior risk-adjusted returns [4] - The company is focused on enhancing its digital service, marketing, and commerce capabilities to maintain its competitive advantage [4] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the growth of non-interest-bearing deposits, although they expect growth to moderate from the 6% increase seen in Q4 [24] - The outlook for loan growth in 2026 is projected to be mid-single digits, with expectations for improved pipelines in both consumer and commercial lending [29][54] - Management noted that credit quality remains pristine, with a positive economic outlook for Hawaii supporting a reduction in the allowance for credit losses [39] Other Important Information - Noninterest income was $44.3 million during the quarter, impacted by a gain on the sale of the merchant services portfolio and a loss from investment portfolio repositioning [15] - The company resumed its stock repurchase program, purchasing approximately $5 million of common shares at an average price of $65 per share [19] - Capital ratios remained above regulatory thresholds, with Tier 1 capital at 14.5% and total risk-based capital at 15.5% [19] Q&A Session Summary Question: Can you provide insight on non-interest-bearing deposit growth? - Management indicated that the 6% growth in non-interest-bearing deposits may not continue at the same rate, attributing some growth to seasonality and balanced contributions from business segments [24] Question: What is the outlook for loan growth? - Management expressed a positive outlook for loan pipelines, expecting mid-single-digit growth in 2026, with contributions from both consumer and commercial sectors [29][54] Question: What is the status of special mention and classified balances? - Special mention at the end of Q4 was $63.4 million, down from the previous year, with total classified at $298.5 million [38] Question: Can you elaborate on margin expectations? - Management confirmed that the margin target of near 290 is based on year-end projections, not just Q4 averages, and highlighted the importance of fixed asset repricing [33] Question: What is the strategy for capital return and buybacks? - Management plans to increase stock repurchases to the $15 million-$20 million range per quarter, contingent on growth remaining stable [67]

Core Insights - Home Bank has maintained a disciplined loan structure, prioritizing risk-adjusted returns over growth, with a notable 9% annualized increase in deposits in Q3 and a 17% increase over the last 9 quarters [1] - The bank's net income for Q3 was reported at $12.4 million, reflecting a 9% increase from the previous quarter and a 31% increase year-over-year, with an expanding net interest margin (NIM) of 4.10% [4][7] - Loan growth expectations have been moderated to 1% to 2% for 2025, down from an earlier forecast of 4% to 6%, due to customer hesitance in moving forward with projects amid anticipated rate cuts [2] Financial Performance - Revenue growth has outpaced expense growth, with revenues increasing twice as fast as expenses over the last couple of years [3] - Nonperforming loans increased to $30.9 million, representing 88 basis points of total assets, primarily due to downgrades in five relationships [9] - The bank's efficiency ratio improved to below 60%, indicating better operational efficiency [4] Loan and Deposit Dynamics - The loan-to-deposit ratio stands at 91%, positioning the bank favorably for future loan growth [1][25] - Noninterest income for Q3 was $3.7 million, aligning with expectations, while noninterest expenses rose to $22.5 million [13] - The cost of interest-bearing liabilities decreased to 2.69%, aided by strong deposit growth [11] Credit Quality and Management - The bank's charge-offs remain low, averaging about 6 basis points over the last six years, with proactive credit management in place [5] - A negative provision expense of $229,000 was recorded due to declines in loan balances, indicating confidence in reserves [11] - The bank is optimistic about managing nonperforming assets, with expectations of no material losses from downgraded loans [20][21] Strategic Outlook - Home Bank has a strong leadership team with a cumulative experience of 981 years, which supports its confidence in navigating various economic climates [5] - The bank has grown tangible book value per share at a 9.5% annualized rate since 2019, alongside an 11.2% growth in EPS [14] - The bank is well-positioned to capitalize on M&A opportunities as activity accelerates nationwide [5]

Financial Data and Key Metrics Changes - Total assets reached $2.8 billion, up 8.1% year-over-year [2] - Loans grew by $216 million, or 11%, reflecting strong commercial activity [2] - Deposits increased to $171 million, or 7.9% [2] - Net interest income expanded to 3.27%, improving from 3.16% in the prior year [2] - Non-performing loans stood at 0.14% of total loans, indicating excellent credit quality [3] - Tangible book value per share increased 10.8% year-over-year to $11.97 [3] - GAAP-diluted EPS reported at $0.07, with operational diluted EPS at $0.44 [4] Business Line Data and Key Metrics Changes - Average loans increased $31.9 million, or 6.02% annualized compared to the prior quarter [10] - Gross loan production totaled $196 million in Q4, with $83.5 million from correspondent banking [12] - Average deposits were stable, down $3.9 million compared to the prior quarter but up $314.6 million year-over-year [10] - Net interest income increased by $933,000 on a linked quarter basis, representing 17.4% annualized growth [13] Market Data and Key Metrics Changes - The bank's loan portfolio increased to just under $2.2 billion, with commercial real estate representing 57% [18] - The quality of the loan portfolio remains strong, with a past-due ratio at 0.14% [19] - The bank's securities portfolio ended the quarter with $461.4 million, with a quarterly portfolio yield of 3.01% [15] Company Strategy and Development Direction - The company aims to expand and strengthen its deposit base as a top priority for 2026 [25] - Focus on four strong business lines: Business Banking, Private Client Group, Association Banking, and Correspondent Banking [26] - Plans to launch a new lending and deposit gathering team in targeted small business markets [27] - Emphasis on relationship-driven growth rather than rate-driven [25] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the bank's business model and strategic actions to enhance earnings power in 2026 [3] - Anticipation of further NIM improvement supported by rate cuts and ongoing deposit strategy execution [13] - The bank's capital ratios exceed regulatory requirements, indicating a solid financial position [6] Other Important Information - The board approved a 25% increase in quarterly cash dividend to $0.12 per share [6] - The company executed a $40 million subordinated debt issuance, primarily used for share repurchase [3] Q&A Session Summary Question: Deposit trends and shrinkage at year-end - Management noted a significant deposit move of over $100 million from a long-term client, which is expected to rebuild over time [35] Question: Loan-to-deposit ratio expectations - Management prefers a loan-to-deposit ratio between 90-95% and anticipates rebuilding deposits in 2026 [39] Question: SBA vertical expansion - The SBA initiative has been growing prudently, aiming for $40-$50 million in annual volume over the next three years [41] Question: Capital strategy and priorities - The focus remains on building capital and returning it to shareholders, with no significant plans for new initiatives [47] Question: Margin expectations for the first quarter - Management expects NIM to be flat to slightly up in the first quarter, with potential for growth from rate cuts [54] Question: Expense outlook - Anticipated expenses to gradually increase with new hires, targeting a low 50% efficiency ratio [65] Question: Fee income outlook - Expected non-interest income to build around $3.5-$3.8 million range for 2026, driven by various fee-generating activities [68]

Financial Data and Key Metrics Changes - The company achieved a record adjusted total revenue of $1.3 billion, with a 13% year-over-year increase in full-year adjusted total revenue to $1.26 billion [7][12] - Adjusted net income to common stockholders reached $314 million, marking a 53% improvement over 2024 levels, with adjusted earnings per share at $6.80 [7][14] - Full-year adjusted return on average assets (ROAA) improved by 30 basis points to 1.04%, while Q4 ROAA reached 1.2% [5][11] Business Line Data and Key Metrics Changes - Commercial loan growth was significant, increasing by $1.1 billion, or 10%, year-over-year, while total gross loans increased by $1.6 billion, or 7% [15][17] - Fee income from strategic areas generated $192 million, with a notable 24% growth in treasury product fees for the full year [9][22] - Investment banking saw substantial growth, with transaction volumes increasing nearly 40% year-over-year and total notional bank capital arranged rising by 20% [23] Market Data and Key Metrics Changes - The company reported a full-year deposit growth of $1.2 billion, or 5%, driven by effective client relationship management [17][18] - Average mortgage finance loans increased by 8% late in the quarter, with expectations for a 15% increase in full-year average balances in 2026 [16][57] - The commercial real estate portfolio is expected to see a 10% year-over-year decline in average balances, reflecting a cautious outlook [16][96] Company Strategy and Development Direction - The company is focused on consistent execution and realizing the full potential of its investments, emphasizing operational excellence and high-value client segments [5][9] - A disciplined capital allocation strategy is in place, with a focus on driving long-term shareholder value and maintaining a strong capital position [7][41] - The strategic focus includes enhancing fee income as a percentage of total revenue, which is expected to grow further [9][28] Management's Comments on Operating Environment and Future Outlook - Management expressed a cautious outlook for the macroeconomic environment, maintaining a conservative approach to provisioning [14][68] - The company anticipates continued revenue growth in the mid to high single-digit range, supported by strong client adoption and fee income growth [28][90] - Management highlighted the importance of maintaining financial resilience and prudent risk management in the current economic climate [41][62] Other Important Information - The company repurchased 2.2 million shares, or 4.9% of prior year shares outstanding, at approximately 114% of prior month's tangible book value per share [8][27] - The tangible common equity to tangible assets ratio finished at 10.6%, ranking first among the largest banks in the country [27] - The total allowance for credit loss remains near an all-time high, reflecting a conservative approach to credit risk management [24][81] Q&A Session Summary Question: Investment banking and trading outlook - Management reported arranging about $49 billion of debt for clients in 2025, with Q4 transaction volume up about 40% [33] Question: Capital management and buybacks - The company increased CET1 to 12.13% while growing loans and buying back shares, indicating a strong capital management strategy [41] Question: Expense outlook - Management indicated that expenses would grow in mid-single digits, primarily due to increased salaries and benefits as well as technology investments [51] Question: Loan growth and market conditions - Management expects strong C&I and mortgage finance growth to offset declines in commercial real estate balances, supporting mid to high single-digit growth in gross loans [56] Question: Recent credit trends - A modest increase in special mention loans was noted, primarily related to a few multifamily properties under pressure due to rental concessions [68][78]

Financial Data and Key Metrics Changes - The company achieved a record adjusted total revenue of $1.3 billion, with adjusted net income to common stockholders reaching $314 million, and adjusted earnings per share at $6.80, marking a 53% improvement over 2024 levels [5][12] - Full-year adjusted return on average assets (ROAA) was 1.04%, a 30 basis point improvement compared to 2024, while Q4 ROAA reached 1.2% [4][10] - Adjusted pre-provision net revenue was a record $489 million, reflecting a 32% increase year-over-year [11][12] Business Line Data and Key Metrics Changes - Commercial loan growth was $1.1 billion, or 10%, year-over-year, with total gross loans increasing by $1.6 billion, or 7% [5][14] - Adjusted fee-based revenue grew by 9% to $229 million, marking the third consecutive year of record fee income [11][20] - The company reported a 24% increase in treasury product fees for the full year, reflecting robust client acquisition [21] Market Data and Key Metrics Changes - The company expects total market originations in mortgage finance to increase by 16% to $2.3 trillion in 2026, with internal estimates suggesting a 15% increase in full-year average balances [15][40] - Average mortgage finance loans increased by 8% late in the quarter, driven by strong industry demand [15][48] Company Strategy and Development Direction - The company is focused on executing its strategy with discipline, scaling operations intentionally, and delivering consistent superior returns [8][25] - The strategic focus has shifted towards realizing the full potential of investments made in infrastructure, talent, and technology platforms [7][58] - The company aims to enhance profitability through diversified fee income streams and disciplined capital allocation [8][25] Management's Comments on Operating Environment and Future Outlook - Management expressed a cautious outlook for the macroeconomic environment, maintaining a conservative view on provisions for credit losses [12][44] - The company anticipates continued realized scale for multi-year platform investments, with total revenue growth expected in the mid to high single-digit range [25][26] - Management highlighted the importance of maintaining financial resilience amid economic uncertainty [25][32] Other Important Information - The company repurchased 2.2 million shares, or 4.9% of prior year shares outstanding, at approximately 114% of prior month's tangible book value per share [6][24] - The tangible common equity to tangible assets ratio finished at 10.56%, ranking first among the largest banks in the country [5][24] Q&A Session Summary Question: Investment banking and trading outlook - The investment banking pipeline remains healthy, with Q4 transaction volume up about 40%, and the company arranged approximately $49 billion of debt for clients in 2025 [28][29] Question: Capital management and buyback strategy - The company is pleased with its capital management, having increased CET1 to 12.13% while growing loans and buying back shares [32][34] Question: Expense outlook and hiring plans - The company plans to focus on leveraging previous investments by expanding capabilities and adding targeted coverage, with expected mid-single-digit expense growth [36][37] Question: Credit trends and provision guidance - The company experienced a modest increase in special mention loans, primarily related to a few multi-family properties under pressure [44][49] Question: Net interest margin (NIM) expectations - The company expects NIM to remain flattish in Q1, with a focus on managing deposit repricing and maintaining a strong client acquisition strategy [45][54]

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Core Insights - The company reported a fourth-quarter net interest margin (NIM) of 311 basis points, with a notable increase for seven consecutive quarters, surpassing the 3% mark [1][7] - Core earnings power improved significantly, with core EPS reaching $0.79, an 88% increase year-over-year, driven by record total revenues of $124 million [3][7] - The company emphasized organic growth, with no reliance on M&A-related adjustments [3][4] Financial Performance - Core pre-tax, pre-provision net revenue was reported at $61.5 million, equating to approximately 163 basis points of average assets [2] - Total deposits increased by about $800 million quarter-over-quarter, with core deposits rising approximately $1.2 billion year-over-year [6][8] - The cost of deposits fell to 185 basis points, down 24 basis points from the previous quarter [9] Loan and Deposit Growth - Business loans rose by over $500 million year-over-year, with a pipeline exceeding $1.3 billion driven by specialty verticals [5][12] - The company aims to reduce its commercial real estate concentration ratio to the mid-350% range while continuing to grow business loans [20] - Non-performing assets (NPAs) are low, representing approximately 34 basis points of total assets, indicating strong credit quality [15] Capital and Guidance - The common equity tier 1 (CET1) ratio increased to 11.66%, highlighting the company's strong capital position [16] - Management expects modest NIM expansion in the first half of 2026, with more substantial growth anticipated in the second half as loan repricing accelerates [17][20] - For 2026, total loan growth is projected to be in the lowest single digits, with growth weighted towards the second half of the year [20] Operational Strategy - The company is focusing on expanding its commercial and specialty finance verticals, with significant growth in healthcare-related lending [13][19] - Management highlighted the importance of relationship-driven deposit gathering, aiming for gradual improvement in the mix of non-interest-bearing deposits [11] - The bank's strategy includes maintaining balance sheet flexibility and a focus on floating-rate loans, which currently make up 35% to 40% of the portfolio [22]

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Summary of OptimumBank Holdings Conference Call Company Overview - **Company Name**: OptimumBank Holdings - **Ticker Symbol**: OPHC - **Founded**: 2000 - **Location**: Fort Lauderdale, South Florida - **Total Assets**: $1.1 billion as of December 31, 2023 [3] - **Market Capitalization**: Approximately $90 million, trading below book value [4] Financial Performance - **Net Earnings**: $16.6 million for 2025, a 27% increase from 2024 [6] - **Earnings Per Share (EPS)**: $0.72, up from $0.63 the previous year [6] - **Return on Equity (ROE)**: GAAP ROE at 14.83%, core ROE at 21.6% [4][34] - **Net Interest Margin (NIM)**: 4.28%, expected to rise further [5][8] - **Loan Portfolio Growth**: Grew nearly 20% in 2025, with expectations of 25%-30% growth in 2026 [10][11] Key Business Highlights - **Loan-to-Deposit Ratio**: Just over 100% [3] - **Gross Loan Portfolio**: Approximately $959 million [3] - **Deposits**: $932 million [3] - **Non-Interest Income**: Increased by 46% from the previous year [6] - **Commercial Real Estate Focus**: Portfolio primarily consists of owner-occupied properties, average loan size around $5 million [9][10] Growth Strategy - **Geographic Expansion**: Plans to expand into the Tampa area and beyond, focusing on where customer relationships exist [23] - **Vertical Integration**: Intent to create sister companies to support the bank, including HUD and bridge lending [24] - **Capital Raising**: Plans to attract new investors to grow the capital base, aiming for $15-20 million to support growth [27] Customer Relationship Management - **Customer Base**: Strong loyalty with a "cult following," leading to organic growth in deposits and loans [10][12] - **Service Approach**: Emphasis on providing a "white glove" service to all customers, regardless of wealth [12] Technology and Innovation - **Technology Upgrades**: Significant investment in technology improvements, with a new product launch expected in March or April 2024 [32][33] Risk Management - **Credit Risk**: No significant bad loans reported; proactive management of borrower relationships to mitigate risks [19][20] - **Economic Resilience**: Strong customer relationships expected to provide stability during economic downturns [38] Future Outlook - **Market Positioning**: Aiming for a market cap of $75 million to facilitate capital raises and increase trading volume [44][46] - **Sustainable Growth**: Focus on controlled and stable growth, with a strong emphasis on customer care [43] Additional Considerations - **Dividend Policy**: Discussions on potential dividends based on shareholder interest, balancing growth needs with shareholder returns [29][30] - **Investor Engagement**: Encouragement for potential investors to engage with the bank and its offerings [46]