First Hawaiian, Inc. (NASDAQ:FHB) Q1 2026 Earnings Call Transcript

First Hawaiian, Inc. (NASDAQ:FHB) Q1 2026 Earnings Call Transcript April 24, 2026

First Hawaiian, Inc. beats earnings expectations. Reported EPS is $0.55, expectations were $0.53.

Operator: Good day, and thank you for standing by. Welcome to the First Hawaiian, Inc. Q1 2026 Earnings Conference Call. At this time, all participants are in a listen-only mode. Please be advised that today’s conference is being recorded. After the speakers’ presentation, we will have a question-and-answer session. To ask a question, please press 11 on your telephone and wait for your name to be announced. To withdraw your question, please press 11 again. I would now like to hand the conference over to your speaker today, Kevin Haseyama, Investor Relations Manager.

Kevin Haseyama: Thank you, everyone, for joining us as we review our financial results for 2026. With me today are Bob Harrison, Chairman, President and CEO; Jamie Moses, Chief Financial Officer; and Lea Nakamura, Chief Risk Officer. We have prepared a slide presentation that we will refer to in our remarks today. The presentation is available for downloading and viewing on our website at fhb.com in the Investor Relations section. During today’s call, we will be making forward-looking statements, so please refer to slide one for our safe harbor statement. We may also discuss certain non-GAAP financial measures. The appendix to this presentation contains reconciliations of these non-GAAP financial measurements to the most directly comparable GAAP measurements. I will now turn the call over to Bob.

Bob Harrison: Thank you, everyone, for joining us today. I wanted to start by sharing our support for the communities impacted by the recent flooding in Hawaii from the Konololo storms and Typhoon Sinlaku in Guam and Saipan. It is really important for us to support our communities, and we are actively providing relief and support to help our customers and those affected in the relevant communities. Moving on to the outlook, the statewide unemployment rate remained stable at 2.2% in January. That compares to the national rate of 4.3% for the same month. Through February, total visitor arrivals were up 7.1% compared to last year, primarily due to more visitors from the U.S. Mainland and Japan. To date, spending through February was $4.2 billion, up 14.8% compared to 2025 levels for the same period.

At this point, it is too soon to know how tourism and the local economy might be impacted by recent global events. The housing market remains stable with the median single-family home sales price on Oahu in March at $1.2 million, up 3.4% from the prior year, and the median condo sales price on Oahu in March was $510 thousand, up 2% from the prior year. Turning to slide two, we had a strong start to the year. Loans and deposits grew, credit quality remained solid, and we remained well capitalized. Our return on average tangible assets was 1.2% and return on average tangible equity was 15.3% for the first quarter. The effective tax rate for the first quarter was 22.5%. Turning to slide three, the balance sheet remains solid as we continue to be well capitalized with ample liquidity.

We remain asset sensitive and well positioned to benefit from a higher-for-longer rate scenario. During the quarter, we repurchased about 1.3 million shares at a cost of $32 million. Turning to slide four, total loans grew over $128 million in the quarter, up 3.6% on an annualized basis. We had good growth in CRE and C&I loans, partially offset by runoff in the residential loan portfolio and payoffs in the construction loan portfolio. Some of the growth in the CRE portfolio and decline in the construction portfolio were due to completed construction projects converting to permanent financing. Now I will turn it over to Jamie.

Jamie Moses: Thanks, Bob. Turning to slide five, we delivered solid deposit momentum in the quarter with total deposits increasing by $262 million, driven primarily by growth in public operating balances. Retail and commercial deposits were modestly higher and, importantly, did not experience the typical seasonal outflows we have seen at the start of prior years, which we view as a positive signal. Public deposits increased $244 million reflecting higher operating account balances. We continue to see meaningful improvement in funding costs with the total cost of deposits declining seven basis points to 1.22%. Our noninterest-bearing deposit ratio remained healthy at 31%, reinforcing the strength and stability of our core funding base.

On slide six, net interest income for the quarter was $167.5 million, down $2.8 million from the prior quarter. Net interest margin was 3.19%, a decline of two basis points sequentially. This reflects the full-quarter impact of the December rate cut. As we look ahead, we expect the balance sheet repricing story to continue throughout the year. Turning to slide seven, noninterest income totaled $52.8 million for the quarter. The decline from last quarter was primarily attributed to lower BOLI income and swap fee activity, which we view as timing-related rather than structural. Noninterest expense was $127.9 million, and there were no material, unusual, or nonrecurring items in the quarter. Our expense profile remains well controlled and aligned with our full-year outlook.

With that, I will turn it over to Lea to review our credit performance.

Lea Nakamura: Thank you, Jamie. Moving to slide eight, the bank continued to maintain its strong credit performance and healthy credit metrics in the first quarter. Credit risk remains low, stable, and well within our expectations. Overall, we are not observing any broad signs of weakness across either the consumer or commercial books. Criticized assets decreased by 21 basis points, and nonperforming assets and loans 90 days or more past due were 30 basis points of total loans and leases, down one basis point from the prior quarter, resulting from a decrease in dealer flooring nonaccruals. Quarter-to-date net charge-offs were $4.9 million, or 14 basis points of average loans and leases, unchanged from the fourth quarter. The bank recorded a $5 million provision in the first quarter.

The allowance for credit losses increased by just under $1 million to $169 million, with a coverage ratio of 1.17% of total loans and leases. We believe that we are conservatively reserved and ready for a wide range of outcomes.

Bob Harrison: Thanks, Lea. Turning to slide nine, we have updated our outlook for key performance drivers. We continue to expect full-year loan growth to be in the 3% to 4% range. With the markets now expecting no rate cuts this year, we have revised our full-year NIM outlook to be in the 3.22% to 3.23% range. We expect second-quarter NIM to be up two to three basis points from the first-quarter NIM. Our outlook for noninterest income remains about $220 million for the year. Finally, we expect expenses to gradually increase throughout the year, and we continue to forecast full-year expenses will be about $520 million. That concludes our prepared remarks, and now we would be happy to take your questions.

Q&A Session

Operator: We will now open the call for questions. As a reminder, to ask a question, please press 11 on your telephone and wait for your name to be announced. To withdraw your question, please press 11 again. One moment for questions. Our first question comes from Anthony Elian with JPMorgan.

Anthony Elian: Great. Thanks. Jamie, on the outlook, the drivers of the two to three basis points sequential increase in NIM in 2Q—could you help us unpack that a little bit? What is driving the range for the full year moving higher, and is that entirely coming from no rate cuts this year?

Jamie Moses: Tony, good morning. The right answer to that is the balance sheet repricing story that we have had and seen for the last year or two. Again, just to remind everybody, we have about $400 million of fixed-rate cash flows that come off every quarter and get repriced at about a 155 basis point spread higher on a weighted average basis between loans and securities. That is really the driver as we go forward. We still are an asset-sensitive balance sheet, so we will see a decline in NIM if there is a rate cut in any given quarter, then the balance sheet repricing dynamics after that will drive the NIM higher as we go forward.

Anthony Elian: Thank you. And then on expense, you reiterated the outlook of $520 million for the full year, but I think 1Q came in a little bit lower than what we were expecting, which should imply a pretty good pickup over the course of the year. Is that the right way to think about it, and what are the areas driving the increase in expense? Thank you.

Jamie Moses: Yes, it is going to be broad based in terms of the areas. Hopefully, we will get some more salary expense in there as we have talked about. We are looking to hire talented folks to come over and drive revenues for us, so hopefully that is where we will see much of that pickup. But generally broad based, and I think you are thinking about it correctly in terms of a little pickup and a ramp as we get throughout the year.

Operator: Thank you. Our next question comes from Jared Shaw with Barclays.

Jared Shaw: Morning. When you look at the growth, C&I growth has been pretty good. Any specific drivers underpinning that? And can you update us on your appetite for Mainland expansion? Any of the hires, Jamie, that you are talking about—should we think are coming maybe off island?

Bob Harrison: Yes, Jared. Let me start with the loan outlook. The $71 million in C&I growth for the quarter—about $24 million of that was dealer floor plan, and the rest were draws on existing lines of credit, both local companies and Mainland companies. So it was pretty broad based, with good growth in dealer flooring, which we appreciate. We look at that for the rest of the year as being an opportunity, along with commercial real estate, to continue to grow. On hiring, we are looking for people all over. Of course, we would strongly prefer to hire locally, but if we are unable to do so, we would look to the Mainland.

Jared Shaw: On the floor planning, are you seeing utilization get back to more normal levels? I know it was pretty low for a while. Or is that growth coming from expanding the network?

Bob Harrison: We added a new dealer relationship during the quarter, but that was not all of it. I think it was a little bit of utilization, so a mix of both.

Jared Shaw: Okay. And then separately, the securities yields are still pretty low and, with the extra capital you have, would you consider putting on more of a cost-of-funds leverage play here, or utilize some of the extra deposit growth on securities and prefund some of that cash flow that is going to be coming off? Or should we think that you are going to be reinvesting cash flows as they happen?

Jamie Moses: Yes, Jared. I think the answer is the latter. We are just going to be reinvesting cash flows as they come off. No plans to do any sort of restructuring or anything at the moment, and no plans to expand the size of the securities portfolio either. For now, it is just cash flows coming off, and we will reinvest them.

Jared Shaw: Great. Thank you.

Jamie Moses: Thank you.

Operator: Our next question comes from David Feaster with Raymond James. You may proceed.

David Feaster: Hey, good morning, everybody. I wanted to touch on the competitive side. You have a unique perspective. Could you compare and contrast the Mainland versus Hawaii? Are you starting to see competition shift from just pricing to pushing on structures and standards? What are you seeing on that front?

Bob Harrison: Yes, Dave, this is Bob. We really have not seen much change. It has always been cyclically competitive on pricing. Now we are getting a little bit more competitive on price primarily on the Mainland, but a little bit here. It has always been a bit more competitive on price in Hawaii given the various banks’ low loan-to-deposit ratios—everybody has liquidity they are looking to put to work here in Hawaii—so that is always an issue here. We are seeing it cycle down slightly in our Mainland markets. A little bit of that is multifamily construction that was higher on a spread a year and a half ago than it is today, so that speaks to that. The other thing we are seeing is the larger banks are taking bigger pieces of deals, and so there is less available. There is a little bit more competition for deals themselves as some of the larger banks are increasing their hold levels. Does that address your question?

David Feaster: Yes, that is helpful. And you reiterated the fee income guide. Can you walk through some of the business lines, the underlying trends, and some of the puts and takes you are seeing there?

Bob Harrison: On the wealth side, we are continuing to see really good interactions between our customers and our wealth advisers. That business has continued to grow year after year for many years now, so that has been a nice opportunity. The fees associated with our credit card business have been pretty stable. There is movement quarter to quarter—usually a little stronger in Q4, a little less in Q1—but that is pretty standard for what we would expect in that business. Jamie, anything you would add to that?

Jamie Moses: Yes, the only thing to add is there is a portion of our BOLI that is market driven and can be somewhat volatile. We saw that a little bit at the end of the first quarter with the market underperforming, so we had fewer fees related to that. Swap fee income in our loan book can also be cyclical depending on what kind of lending we are doing in a particular quarter and what our customers want. Combine those with what Bob mentioned, and that is how we get to the fee guide.

David Feaster: Okay. And then touching on the funding side—you had a lot of success this quarter, with a lot of benefit from public funds. Can you touch on competition on the funding side and how you think about gaining share and driving market share growth on the deposit front? Where do you see more opportunity—commercial or retail? What funding trends are you seeing?

Bob Harrison: Virtually all of our deposits are here in market. It is a day-in, day-out ground game—getting out there and meeting with customers and prospects, showing them the different products and services we offer, and seeing how we can make that work for them. There is not a lot of magic to it that would change quarter over quarter, but our folks are out there meeting with customers on the consumer, small business, and larger business side.

David Feaster: Alright. Thank you.

Operator: Our next question comes from Kelly Motta with KBW.

Kelly Motta: Hey, good morning. Thanks for the question. On capital—really solid here—I apologize if it was asked already, but have you done any work on the proposed capital changes and the potential impact to your ratios?

Jamie Moses: Yes, we have done a little bit of work on it. We think that it could possibly add maybe 1% CET1 to our capital levels. But, again, it is proposed, and we are not going to change our capital allocation strategy or plans based on that. If it goes through the way it is, we think it is about a 1% add.

Kelly Motta: Got it. That is really helpful. You have been very consistent with the share repurchase. It seems like, even with growth picking up, that is probably a good expectation. How are you thinking about that? Thank you.

Jamie Moses: Yes, Kelly, I think you summarized it well for us.

Bob Harrison: We have the $250 million allocation, and we used $34 million in Q1. It is not set for a particular year or timing, so we will use it as it makes sense going forward.

Jamie Moses: Yes, to be clear, the amount of the authorization was $250 million.

Kelly Motta: Got it. That is really helpful. Then, on credit—anything you are watching or pulling away from?

Lea Nakamura: I do not think there is anything we are pulling away from. Given the uncertainty in the environment, the volatility, and the recent natural disaster events that have happened in our footprint, we are watching certain portfolios very carefully, but we have not really seen anything so far.

Kelly Motta: Got it. Thank you so much for the time. I will step back.

Operator: Thank you. Our next question comes from Andrew Terrell with Stephens. You may proceed.

Andrew Terrell: Good morning. To go back on the margin, I hear you on the near-term and full-year guide, and that the majority of what underpins that is the fixed repricing. Is there any level of benefit you would expect or work to do on the deposit base as you move throughout the year? Have you fully exhausted the ability to reprice lower, or are there other tweaks you could make on the funding side?

Jamie Moses: There is still some ability to work on that, in particular with CD pricing and what rolls over every quarter. We have seen a significant decline in the competitive environment around those from, say, a year or so ago, so we could still see some benefit from that. The March deposit cost number was 1.20%, a little bit lower than what we had in the quarter, so you can see the dynamics of CD repricing around that. I would not expect it to go too much lower with rates staying the same in totality in terms of deposit cost. The guide for the year on the NIM is inclusive of any rate actions we might take on the deposit side, as well as the repricing story.

Andrew Terrell: Last quarter, you talked about the fixed cash flows for the year—roll-off yield 4%, new asset yield 5.5%. There has been a lot of rate volatility throughout the first quarter. Do you feel like a 5.5% blended new asset yield is still a fair assumption based on what you are seeing for loan origination yields and where you are buying securities today?

Jamie Moses: Yes, I think so. It is going to depend quarter to quarter based on what type of lending activity we do in any given quarter. If activity is primarily in lower-spread things, it might be a little bit lower than that. But for the year, 155 basis points is a good number, and that $400 million per quarter of cash flows coming off and repricing is still a good number.

Andrew Terrell: Got it. One last one: we started talking more about Mainland M&A interest last year with you. Has anything changed there—any willingness or appetite, or your view of the M&A market as it stands right now?

Bob Harrison: No updates. We are still talking to people to see if there are things that might make sense, but we have not changed our profile or what we are looking for. We are really looking for a good fit first and foremost and then take it from there.

Andrew Terrell: Great. Thank you for taking the questions.

Operator: Thank you. Our next question comes from Matthew Clark with Piper Sandler. You may proceed.

Matthew Clark: Hey, good morning. Just a couple follow-ups on the cash flows on the asset side. It is $400 million a quarter, but can you give us a split between loans and securities on average? We can guesstimate the rates, but I am trying to forecast those individual yields.

Jamie Moses: The right way to think about it is, for the year, we expect $600 million of cash flows coming off the securities portfolio. That leaves $1 billion in cash flows from loans. The spread of 150 to 155 basis points that we talked about is inclusive of the roll-off and roll-on yields. In the quarter, we added in the securities portfolio in the 4.90% range of yield, and a little bit higher than that—around 6.20%—on our loan yields. I think that gets you what you need there, Matthew.

Matthew Clark: Great. Then, to drill into the CDs—how much do you have coming due in 2Q, and what are the roll-off and roll-on rates?

Jamie Moses: In Q2, we are going to have about $1 billion come due. That is currently somewhere in the neighborhood of a 2.90% CD rate, and I think that will roll over at something like a 2.50% weighted average. It is hard to tell for sure because some folks roll into promos and some roll into rack rates, but if you back into the margin guidance we have given, you can get to what you need on the CD side.

Matthew Clark: Got it. Getting to a NIM that is a little bit above what you are forecasting for 2Q. Thank you.

Operator: Thank you. I would now like to turn the call back over to Kevin Haseyama for any closing remarks.

Kevin Haseyama: We appreciate your interest in First Hawaiian, Inc. Please feel free to contact me if you have any additional questions. Thanks again for joining us, and have a good weekend.

Operator: Thank you. This concludes the conference. Thank you for your participation. You may now disconnect.