Financial Data and Key Metrics Changes - Earnings per share increased for the fourth consecutive quarter, reaching $1.60, up by $0.09 compared to the linked quarter [16] - Net interest income (NII) expanded by $3.9 million, marking the fifth consecutive quarter of growth, while net interest margin (NIM) increased by seven basis points [17][18] - Capital ratios improved, with Tier one capital at 14.2% and total risk-based capital at 15.2% [24] Business Line Data and Key Metrics Changes - The loan portfolio is balanced between consumer (56% or $7.9 billion) and commercial loans (44% or $6.1 billion), with a significant portion secured by real estate [11][12] - Consumer loans predominantly consist of residential mortgages and home equity, with a weighted average loan-to-value (LTV) of 48% [11] - Commercial real estate loans account for $4 billion, representing 29% of total loans, with low vacancy rates supporting a stable market [12] Market Data and Key Metrics Changes - Hawaii's employment continues to outperform the broader U.S. economy, with visitor expenditures up 6.5% year-to-date and arrivals up 2.8% through May [8] - Residential real estate prices in Hawaii are stable, with single-family home prices rising modestly and condo prices down 0.5% year-to-date [8] Company Strategy and Development Direction - The company maintains a unique business model focused on the local market, leveraging a strong brand position to effectively price deposits [6][7] - The strategy includes a focus on deposit remixing from lower yielding to higher yielding deposits while maintaining overall deposit levels [7] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving a net interest margin of 2.50% by year-end, with expectations for continued growth in NII and NIM [32] - The company anticipates modest loan growth and plans to continue growing its securities portfolio [34] Other Important Information - Non-interest income increased to $44.8 million, with a one-time gain of approximately $800,000 related to a BOLI recovery [22] - Non-interest expense was $110.8 million, with a severance charge of $1.4 million included in this quarter [22] Q&A Session Summary Question: Margin path expectations - Management believes a net interest margin of 2.50% is achievable, with no obstacles anticipated [32] Question: Balance sheet growth and securities - The company expects to continue growing its securities portfolio, investing excess liquidity into it [34] Question: Trends in commercial and industrial loans - Commercial loan performance was disappointing, with a flat linked quarter, but management sees potential for improvement as market clarity increases [44] Question: Deposit dynamics and DDA growth - Management is focused on building demand deposits, which are high-margin products, but acknowledges the competitive landscape [48] Question: Expense growth expectations - The company expects a 2% to 3% increase in expenses for the year, with a potential step back in the second half [52] Question: Capital priorities and buybacks - The company plans to maintain its buyback position until there is more clarity on the economy [54] Question: Expected cash flows from securities and loans - Expected cash flows from the securities book are projected to be around $550 million [58]

Financial Data and Key Metrics Changes - The company reported a net income of $9.8 million for Q1 2025, a $36 million improvement year over year, resulting in a return on equity (ROE) of 11% [6] - Adjusted net income increased to $19 million, reflecting a $15 million year-over-year increase, with adjusted EBITDA reaching $34 million, a $32 million increase [6][18] - Operating expenses were reported at $93 million, down 15% year over year, with expectations of approximately $390 million for the full year 2025 [10][17] Business Line Data and Key Metrics Changes - Originations for Q1 2025 totaled $469 million, up 39% year over year, with secured personal loans accounting for 19% of this growth [8][14] - The secured personal loans portfolio grew by 59% year over year, reaching $178 million, representing 7% of the company's total portfolio [11][12] - The annualized net charge-off rate was 12.2%, at the low end of guidance, with a decline in dollar net charge-offs for the sixth consecutive quarter [7][20] Market Data and Key Metrics Changes - The company expects year-over-year growth in originations to be in the 10% range for Q2 2025, reflecting a cautious approach due to macroeconomic uncertainties [9][12] - The thirty-plus day delinquency rate improved to 4.5% in April, down from 4.7% in Q1, indicating positive underlying trends [7][20] Company Strategy and Development Direction - The company is focused on three strategic priorities: improving credit outcomes, strengthening business economics, and identifying high-quality originations [10][11] - The guidance for full-year 2025 reflects a commitment to performance improvement despite macroeconomic uncertainties, with adjusted EPS expectations of $1.1 to $1.3, indicating strong growth [13][24] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the uncertainty in the macroeconomic environment, including potential higher unemployment and inflation, leading to a more cautious outlook on originations growth [51][52] - The company plans to adjust its marketing expenditures based on macroeconomic conditions, with a focus on maintaining operational discipline [53] Other Important Information - The company has successfully reduced its debt-to-equity ratio from 7.9 times to 7.6 times, with no further mandatory corporate debt repayment obligations for the remainder of 2025 [21] - The company raised approximately $3 billion in diversified financings since June 2023, maintaining strong access to capital markets [22] Q&A Session Summary Question: Update on online or digital loan application activity versus in-branch - Management noted a small shift of about two points from physical to online applications, indicating stable performance across channels [30][31] Question: Strategy for growing secured loans - The secured personal loans grew by 59% year over year, with a focus on presenting both secured and unsecured products to customers [32][33] Question: Comments on competition in the current macro environment - Management expressed confidence in their competitive position, noting that competitors are behaving rationally in pricing [34][35] Question: Impact of app features on customer acquisition costs - The cost to acquire customers remained stable year over year, with a focus on driving awareness of secured personal loans [39][41] Question: Changes in repayment patterns since phasing out physical checks - No unexpected shifts were noted in repayment patterns, with delinquencies showing a downward trend [43][44] Question: Shift towards returning borrowers for originations - Management confirmed a focus on returning borrowers, who generally present lower acquisition costs and loss levels [45][46] Question: Macro outlook and originations guidance - The decision to taper originations growth to 10% was based on a cautious approach to the macroeconomic environment [51][52] Question: Operating expense outlook and factors affecting it - Management indicated a focus on maintaining discipline in operating expenses, with potential adjustments based on macro conditions [53] Question: Decision to shrink the size of the Board - The Board's decision to reduce its size was based on feedback from shareholders and a desire for more efficient governance [54]