First Hawaiian(FHB) - 2025 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The bank's net interest margin (NIM) expanded to 3.21%, up 2 basis points from the prior quarter [6][7] - Return on average tangible equity was 15.8% for the fourth quarter and 16.3% for the full year [4] - Net interest income for the fourth quarter was $170.3 million, an increase of $1 million from the previous quarter [6][7] - The effective tax rate for the fourth quarter was 24.8%, expected to return to about 23.2% going forward [4] Business Line Data and Key Metrics Changes - Total loans grew by $183 million in the quarter, or 5.2% on an annualized basis, with significant growth in commercial and industrial (C&I) loans [5] - 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 [6] - Non-interest income was reported at $55.6 million, while non-interest expense was $125.1 million for the fourth quarter [7] Market Data and Key Metrics Changes - The state unemployment rate was 2.2% in November, significantly lower than the national rate of 4.5% [3] - Total visitor arrivals in Hawaii were down 0.2% year-over-year, but spending increased by 6% to $19.6 billion [3] - The median single-family home price in Oahu rose to $1.1 million, a 4.3% increase from the previous year [3] Company Strategy and Development Direction - The company aims for full-year loan growth in the range of 3%-4%, primarily driven by C&I and commercial real estate (CRE) loans [11] - The bank plans to maintain a conservative approach to credit losses, with an allowance for credit losses increasing to $168.5 million [9] - The new stock repurchase authorization is for $250 million, providing flexibility for capital return strategies [5][54] Management's Comments on Operating Environment and Future Outlook - Management noted that credit risk remains low and stable, with no broad signs of weakness in consumer or commercial books [8] - The outlook for NIM is projected to be in the range of 3.16%-3.18%, with expectations of tailwinds from fixed asset repricing [11] - Management expressed confidence in the growth of multifamily loans and anticipated a normalization of growth in the second half of the year [18][39] Other Important Information - The bank repurchased about 1 million shares, utilizing the remaining $26 million of its $100 million purchase authorization for 2025 [5] - The bank's capital position remains strong, with a common equity tier 1 (CET1) ratio above the targeted 12% [54] Q&A Session Summary Question: Loan growth trends and pipeline - Management indicated that loan growth was broad-based, with C&I growth driven by existing lines and new dealer relationships [17] Question: Payoffs and paydowns in the industry - Management noted that payoffs have been occurring sooner than expected due to increased competition from permanent lenders [21] Question: Deposit trends and NIM expansion - Management confirmed that the margin guide reflects the ability to continue cutting deposit rates and fixed asset repricing [25] Question: Expense growth expectations - Management expects a normalization of expense growth in 2026, with a projected expense of about $520 million [45] Question: Capital return and buyback strategy - Management expressed a strong appetite for continuing the share buyback program while considering organic growth opportunities [51]