First Hawaiian Q3 2025 Earnings Report

First Hawaiian EPS Results

• Actual EPS: $0.59
• Consensus EPS: $0.52
• Beat/Miss: Beat by +$0.07
• One Year Ago EPS: $0.48

First Hawaiian Revenue Results

• Actual Revenue: $226.39 million
• Expected Revenue: $218.22 million
• Beat/Miss: Beat by +$8.17 million
• YoY Revenue Growth: N/A

First Hawaiian Announcement Details

• Quarter: Q3 2025
• Date: 10/24/2025
• Time: Before Market Opens
• Conference Call Date: Friday, October 24, 2025
• Conference Call Time: 1:00PM ET

First Hawaiian (NASDAQ:FHB) is the oldest and largest bank in Hawaii, operating as the bank holding company for First Hawaiian Bank. Established in 1858, the company offers a full suite of financial services to individual, business and institutional clients. Its product portfolio includes consumer and commercial lending, deposit accounts, treasury and cash management, foreign exchange and trade finance, as well as wealth management and trust services.

First Hawaiian serves customers through an extensive network of branches, ATMs and digital channels across the Hawaiian Islands, Guam, Saipan and American Samoa. The bank’s retail division provides checking and savings accounts, home mortgages, auto and personal loans, while its commercial banking unit delivers working capital lines, equipment financing, real estate loans and international banking solutions. Dedicated private banking teams offer personalized investment advisory and trust services to high-net-worth clients.

In recent years, First Hawaiian has invested in enhancing its digital banking platform, rolling out mobile banking apps, online account opening and automated payment services to improve customer experience and operational efficiency. The company also maintains a strong community focus, supporting affordable housing initiatives, small-business lending programs and partnerships with local nonprofit organizations to foster economic development in the regions it serves.

First Hawaiian, Inc. is led by President and Chief Executive Officer Christopher J. Pinto and a senior management team committed to balancing innovation with the bank’s longstanding community values. With more than 160 years of history, First Hawaiian continues to adapt its offerings to evolving market trends while preserving its deep roots in Pacific communities.

First Hawaiian Q3 2025 Earnings Call Transcript

Key Takeaways

• Positive Sentiment: The company reported sequential net income growth driven by higher net interest and non‑interest income, with a NIM of 3.19% (up 8 bps) and management expecting a few more basis points of improvement in Q4 despite anticipated Fed cuts.
• Positive Sentiment: Total deposits rose about $500 million in Q3 (including a $406 million increase in public operating accounts); deposit cost fell 1 bp and non‑interest‑bearing deposits remain a strong 33% of the mix, with management expecting retail and commercial to increase in Q4.
• Neutral Sentiment: Total loans declined approximately $223 million in Q3—primarily C&I impacts from dealer floorplan reductions and corporate line paydowns—but management says the origination pipeline is strong and expects loans to finish the year roughly flat versus 2024.
• Positive Sentiment: Credit quality remains healthy with a Q3 provision of $4.5 million, an ACL of $165.3 million (coverage ~117 bps of loans), QTD net charge‑offs of $4.2 million and NPAs at 26 bps, with a modest increase in classified assets tied to a single longtime borrower being worked with.
• Positive Sentiment: Capital priorities remain shareholder friendly—the company repurchased ~965,000 shares for $24 million in Q3 with ~$26 million of 2025 buyback authorization remaining, and operating expenses are now expected to come in below the prior $506 million outlook.

Presentation

[Operator]

Thank you for standing by and welcome to the First Hawaiian Inc third quarter 2025 earnings conference call. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during this session, you'll need to press star one one on your telephone. If your question has been answered and you'd like to remove yourself from the queue, simply press star one one again. As a reminder, today's program is being recorded. Now I'd like to introduce your host for today's program, Kevin Haseyama, Investor Relations Manager. Please go ahead, sir.

[Kevin Haseyama, Investor Relations Manager at First Hawaiian Inc]

Thank you, Jonathan. Thank you, everyone, for joining us as we review our financial results for the third quarter of 2025. With me today are Bob Harrison, Chairman, President and CEO; Jamie Moses, CFO; and Lea Nakamura, Chief Risk Officer. We have prepared a slide presentation that we'll 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. Please refer to our Slide 1 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. Now I'll turn the call over to Bob.

[Bob Harrison, Chairman, President, and CEO at First Hawaiian Inc]

Hello, everyone. Thank you, and thanks for joining us today. I'll start by giving a quick overview of the local economy. The state unemployment rate continued to drift lower and was at 2.7% in August compared to the national unemployment rate of 4.3%. Through August, total visitor arrivals were up 0.7% compared to last year. It strengthened the U.S. Mainland arrivals, more than offset weaknesses in Japanese and Canadian arrivals. Year-to-date visitor spending was $4.6 billion, up 4.5% compared to the same period of last year. The housing market remained stable. The median single-family sales price on O'ahu was $1.2 million in September, up 3.8% from last year. The median condo sales price on O'ahu for September was $509,000, down 1.7% from the prior year. Before we move on, I wanted to discuss the federal government shutdown.

[Bob Harrison, Chairman, President, and CEO at First Hawaiian Inc]

It's too early to measure the full impact on the Hawaii economy, but with our large civilian federal workforce, we expect that many families will begin to face financial hardship. Through the Hawaii Bankers Association, all the local banks have asked affected families to contact their local bank to discuss available relief measures. Turning to Slide 2, we had another strong quarter as net income increased compared to the second quarter. The improvement relative to the prior quarter was driven by higher net interest and non-interest income, partially offset by a higher effective tax rate. As you might recall, our second quarter results included the impact from a change in California tax law, which resulted in a net benefit of $5.1 million last quarter. The effective tax rate in the third quarter returned to a more normalized 23.2%.

[Bob Harrison, Chairman, President, and CEO at First Hawaiian Inc]

Turning to Slide 3, the balance sheet remains solid as we continue to be well-capitalized with ample liquidity. We held the investment portfolio relatively flat, and loans declined by $223 million. Average deposits were higher during the quarter, and we saw a surge at the end of the quarter due to inflows in public operating accounts. Jamie will cover this in more detail in a little bit. We also repaid the $250 million FHLB advance that matured in September. During the quarter, we repurchased about 965,000 shares at a total cost of $24 million. We have $26 million of remaining authorization under the approved 2025 stock repurchase plan. Turning to Slide 4, total loans declined by about $223 million in the quarter. The decline was primarily in C&I.

[Bob Harrison, Chairman, President, and CEO at First Hawaiian Inc]

Dealer flooring balances fell by $146 million, and paydown on lines of credit by several Hawaii corporate borrowers added about $130 million to the decline in the C&I balances. We're seeing strong origination so far in the fourth quarter and expect to end the year about flat to year-end 2024. Now I'll turn it over to Jamie.

[Jamie Moses, Vice Chairman and CFO at First Hawaiian Inc]

Thanks, Bob. Turning to Slide 5, total deposits increased about $500 million in the third quarter. Commercial deposits increased to $135 million and were partially offset by a $43 million decline in retail deposits in the quarter. The decline in retail deposits seems to be largely due to seasonality, where we have seen a pattern of declining balances in the third quarter, followed by growth in the fourth quarter. Total public deposits increased by $406 million, and all of that growth was in operating accounts. There was no change in the balance of public time deposits. In the fourth quarter, we expect seasonal increases in both retail and commercial deposits, while seeing outflows in public deposits. The total cost of deposits fell by one basis point, and the ratio of non-interest-bearing deposits to total deposits was a strong 33%.

[Jamie Moses, Vice Chairman and CFO at First Hawaiian Inc]

On Slide 6, net interest income was $169.3 million, $5.7 million higher than the prior quarter. The NIM in the third quarter was 3.19%, up 8 basis points compared to the prior quarter. The increase in the margin was primarily driven by higher asset yields, as well as some non-recurring items such as loan fees. The run rate NIM for the month of September was 3.16%, and we continue to expect positive NIM momentum in the fourth quarter. Our current thinking is that the margin will advance a few basis points from the September NIM. This guidance reflects the impact of our fourth quarter loan and deposit outlook and additional 25 basis point rate cuts in both October and December. Turning to Slide 7, non-interest income was $57.1 million in the quarter. Non-interest income benefited from higher swap income due to favorable market movements and swap income.

[Jamie Moses, Vice Chairman and CFO at First Hawaiian Inc]

We continue to expect the normalized run rate of non-interest income will be about $54 million per quarter. There were no unusual expense items in the third quarter. Based on our year-to-date expenses, we now expect that full-year expenses will come in below our most recent outlook of $506 million. Now I'll turn it over to Lea.

[Lea Nakamura, EVP and Chief Risk Officer at First Hawaiian Inc]

Thank you, Jamie. Moving to Slide 8, the bank continued to maintain its strong credit performance and healthy credit metrics in the third quarter. Credit risk remains low, stable, and well within our expectations. We are not observing any broad signs of weakness across either the consumer or commercial books. Classified assets increased $30.1 million, due primarily to a single borrower who is a longtime customer that we know well and are continuing to work closely with. Quarter-to-date net charge-offs were $4.2 million, or 12 bps of total loans and leases. Year-to-date net charge-offs were $11.3 million. Our annualized year-to-date net charge-off rate was 11 basis points, or 1 basis points higher than in the second quarter. NPAs and 90-day past-due loans were 26 basis points at the end of the third quarter, up 3 basis points from the prior quarter, resulting from a slight increase in non-accruals.

[Lea Nakamura, EVP and Chief Risk Officer at First Hawaiian Inc]

Moving to Slide 9, we show our third quarter allowance for credit losses broken out by disclosure segment. The bank recorded a $4.5 million provision in the third quarter. The asset ACL decreased by $2.6 million to $165.3 million, with coverage remaining at 117 basis points of total loans and leases. We believe that we continue to be conservatively reserved and prepared for a wide range of outcomes. Now we would be very happy to take your questions.

[Operator]

Certainly. As a reminder, ladies and gentlemen, if you do have a question at this time, please press star one one on your telephone. Our first question comes from the line of David Feaster from Raymond James. Your question, please.

[David Feaster, Director at Raymond James]

Hey, good morning, everybody.

[Kevin Haseyama, Investor Relations Manager at First Hawaiian Inc]

Good morning, David.

[Bob Harrison, Chairman, President, and CEO at First Hawaiian Inc]

Good morning, James.

[David Feaster, Director at Raymond James]

I wanted to talk on, you know, just kind of the growth outlook. I mean, obviously, we've had some challenges, you know, the dealer floor plan was a headwind, some just natural declines in C&I. I was hoping you could first maybe touch on kind of how the pipeline is shaping up, you know, demand that you're seeing, and other opportunities that you'd be interested in helping, you know, accelerate organic growth, whether it's, you know, is there any appetite for pool purchases or, you know, SNCS? Just kind of curious, kind of like your thoughts on, again, what are you seeing now in the pipeline in demand and organic growth and other opportunities to accelerate that?

[Bob Harrison, Chairman, President, and CEO at First Hawaiian Inc]

Yeah, good morning, David. This is Bob. I'll maybe start off, hand it off to Jamie. Third quarter was a little unusual in that we saw some pretty significant paydowns in dealer floor plan. Part of that was one of our customers sold several franchises, so that impacted that negatively. Overall, we're still very bullish in that business. We're seeing very strong production in the pipeline. Some of that's already closed for the fourth quarter. Some of that's C&I. A lot of that is CRE. We think we're going to have a very strong fourth quarter. As we look to the future, we have considered pool purchases, but maybe I'll ask Jamie to comment on that.

[Jamie Moses, Vice Chairman and CFO at First Hawaiian Inc]

Yeah, thanks, Bob. I think we're looking at just in totality, as Bob said, we're looking at being able to get back to flat at the end of 2025, roughly to where we were at the end of 2024, which speaks to the strength of the pipeline that we see today. To the broader question of pools and purchases, I think we always look at things, and to the extent that we feel like we have some level of expertise or knowledge in particular areas, we look maybe to carve out things that we have expertise in. For example, maybe like a residential pool of Hawaii loans might be something where we would think long and hard about purchasing, or if there are opportunities around properties in Hawaii that we might look at as well.

[Jamie Moses, Vice Chairman and CFO at First Hawaiian Inc]

For the most part, we see that we want to grow loans, but we're really looking for areas where we have some sort of expertise or niche knowledge around in order to be able to do that.

[David Feaster, Director at Raymond James]

Okay. That's helpful. Maybe just, I mean, the core deposit growth was tremendous. I was hoping you could maybe touch on it a bit. You know, you talked on some continued growth in core deposits. Obviously, there's some seasonality that you alluded to, but could you talk about where you're having success driving core deposit growth? Just, again, you know, the good and the bad of that is we built liquidity. How do you think about deploying some of that liquidity in the coming months?

[Jamie Moses, Vice Chairman and CFO at First Hawaiian Inc]

Yeah, thanks, Dave. You know, I guess we're going to expect that our deposit total balance is probably going to be roughly flat at the end of the year to where we are today. That mix is going to shift a little bit from, you know, we expect to see some of our public deposits kind of run out here in the fourth quarter, but sort of replaced by retail and commercial deposits. Where we're having success really is our retail teams and our commercial teams are really out there and really talking to our customers and doing a really good job of maintaining and strengthening relationships in the community. I think we're really trying to focus on that relationship activity. We've had a lot of success with that, and that's due to the efforts of our retail and commercial teams primarily out here on the ground.

[Bob Harrison, Chairman, President, and CEO at First Hawaiian Inc]

To add to Jamie's answer, as far as the liquidity that we have, we are no longer letting the investment portfolio run down, so we're holding that flat. We have kind of restarted some purchases after a number of years of letting it run down. We're keeping that relatively flat with similar duration and very similar categories of securities that we're looking at to purchase.

[David Feaster, Director at Raymond James]

Okay. That's helpful. Maybe just last one from me. I appreciate the margin commentary. You know, I mean, look, you're naturally rate sensitive just given the strength of your core deposit base and the, you know, the floating rate nature of some of your loans. Just kind of curious, I mean, there's a lot of moving parts in here, right? You got liquidity deployment, you know, and there's a lot of moving parts, but I'm just kind of curious, you know, first, how do you think about managing deposit costs as the Fed cuts? Just given the tailwinds from backbook repricing, remixing, and some of this liquidity deployment that we're talking about, do you think that we can see the margin continue to expand even with Fed cuts next year?

[Jamie Moses, Vice Chairman and CFO at First Hawaiian Inc]

I think, Dave, that depends on the timing and the magnitude of those cuts. I think that is, you know, ultimately by the end of the year, it could be a challenge to see NIM expansion at the end of the year. For now, I think for now.

[Bob Harrison, Chairman, President, and CEO at First Hawaiian Inc]

End of the year you meant 2026.

[Jamie Moses, Vice Chairman and CFO at First Hawaiian Inc]

That's right.

[Bob Harrison, Chairman, President, and CEO at First Hawaiian Inc]

Yeah.

[Jamie Moses, Vice Chairman and CFO at First Hawaiian Inc]

Yeah. For now, what we see is that we have sufficient loan growth and sufficient loan growth to sort of cover this, right? We're still, you know, we're looking at $1 billion of cash flows over the next 12 months at like a, we'll call that like a 125 basis point spread right now to loans that we're putting back on the books. We have a 200-250 basis point spread on the investment portfolio right now, you know, that we're sort of, you know, that we're keeping flat. There are a lot of underlying dynamics. Of course, those spreads will decrease, right, the more the Fed decreases as well. I think the trajectory for now looks like we can still support, you know, increasing expansion of the margin. Of course, there will be a natural spot.

[Jamie Moses, Vice Chairman and CFO at First Hawaiian Inc]

I think that's maybe, you know, that's maybe like a percent or so from now, so four to five rate cuts, something like that. There'll be a natural floor to our ability to drive out further decreases in the deposit book. Good and bad news, right? Got a great deposit base, but it can only go so low, right? There's a floor on that. I think there is opportunity to continue to expand the NIM. Again, you know, I think that is going to be largely dependent on our ability to generate loans.

[David Feaster, Director at Raymond James]

Terrific. That's helpful. Thanks, everybody.

[Operator]

Thank you. Our next question comes from the line of Charlie Driscoll from KBW. Your question, please.

[Charlie Driscoll, Equity Research Associate at KBW]

Hi, this is Charlie on for Kelly Motta.

[Bob Harrison, Chairman, President, and CEO at First Hawaiian Inc]

Hey, Charlie.

[Charlie Driscoll, Equity Research Associate at KBW]

Just if you could remind us of your capital priorities, how you're viewing the buyback. From an M&A perspective, the environment's obviously heating up. Just remind us of your strategy on that front. Thank you.

[Jamie Moses, Vice Chairman and CFO at First Hawaiian Inc]

Yeah, thanks, Charlie. Capital priorities continue to be the same. We'd love to, you know, we're doing all the loans that fit our credit box and profile. We want to do all those that we can. We have a share buyback authority of $100 million. You see that we've done $74 million so far. The rest of that is going to depend on, I'll call it market conditions, for sure. I think the dividend is in, you know, pretty good yield kind of a place. Also, just in terms of the ratio of earnings that we pay out, it is relatively high. Probably not going to see an increase in the dividend or anything like that as part of that at the moment.

[Charlie Driscoll, Equity Research Associate at KBW]

That's helpful. Thank you. Circling back to the deposit rate conversation, the pricing in Hawaii has been rational and anticipating some cuts. We've been hearing some changes in expectations from banks. Maybe just put some numbers around how you're thinking about betas on the way down. Thank you.

[Jamie Moses, Vice Chairman and CFO at First Hawaiian Inc]

Yeah. Charlie, we tend to talk about it as beta on our rate-sensitive portfolio. We continue to have a roughly $4.5 billion rate-sensitive deposit portfolio. We've been very successful with past rate cuts. We're talking maybe 90%, 95% betas on that portfolio relative to a Fed rate cut. We think that drives a little bit lower, and it gets successively lower for each rate cut that we have. Right now, I think about maybe like a 90 beta on the next rate cut, 88 on the next one after that, 85, something like that. We still think we have a range there where we can drive deposit costs lower, of course, when the Fed cuts rates as well. It's a decreasing ability to do that for sure, but still relatively high at the moment.

[Charlie Driscoll, Equity Research Associate at KBW]

Thank you. I guess just a little bit of detail with the margin expansion and the 50 bps of additional cuts, are you assuming any loan purchases in that or no?

[Jamie Moses, Vice Chairman and CFO at First Hawaiian Inc]

No, no loan purchases in that. That's just what we're looking at in terms of, you know, we're looking at our pipelines and talking with the teams over the past month or so. We just expect to have really strong loan growth here in the fourth quarter.

[Charlie Driscoll, Equity Research Associate at KBW]

Okay, great. Thank you for taking my questions. I'll step back.

[Jamie Moses, Vice Chairman and CFO at First Hawaiian Inc]

Okay, Charlie.

[Operator]

Thank you. Our next question comes from the line of Anthony Elian from JPMorgan. Your question, please.

[Anthony Elian, Equity Research Analyst at JPMorgan]

Hi, everyone. Jamie, just to follow up on NIM. Just to follow up on NIM, you know, Slide 6, you saw a really nice tailwind from loan repricing, and it looks like every one of your loan yields increased from the prior quarter. I'm just wondering how much of a tailwind is left from loan repricing, maybe in 4Q and beyond, just given the outlook for rate cuts in the forward curve?

[Jamie Moses, Vice Chairman and CFO at First Hawaiian Inc]

Yeah, I think there's still tailwind there. I'll start with that. As we look out, we have $1 billion of fixed-rate cash flows coming off of the portfolio over the next 12 months. Right now, we think that's repricing higher at like a 125 basis point spread at the moment, so there's still a pretty significant tailwind there. The 125 basis points, that's an average. The more the Fed cuts, the tighter that spread gets for sure, but there is still an ability to reprice those cash flows higher. On the investment portfolio, where we're seeing $500 million-$600 million of runoff over the next 12 months, we're getting like a 225-250 basis point spread on those purchases.

[Jamie Moses, Vice Chairman and CFO at First Hawaiian Inc]

There's still a really significant sort of balance sheet roll impact that we're seeing that should be a tailwind, not only in the fourth quarter, but into the first and second quarters as well. All of this is dependent upon being able to replace those cash flows with loan growth. We think we can do that, but it will be dependent upon that sort of loan growth trajectory. To the extent that we don't get the loan growth, we would consider other things. We would consider maybe increasing the size of the investment portfolio, if it's not our preferred option. There are things that we would do to manage the balance sheet and to try to manage that NIM to continued expansion or at least sort of trying to keep it flat as we get those third and fourth and fifth anticipated rate cuts.

[Charlie Driscoll, Equity Research Associate at KBW]

Okay. My follow-up, I think you pointed to $54 million of fee income in 4Q. What are the areas or headwinds you expect to decline this quarter? Is it just the two items you call out on Slide 7? Thank you.

[Jamie Moses, Vice Chairman and CFO at First Hawaiian Inc]

Yeah, I think that's right, Tony. It's not really headwinds. We kind of got some good positive surprises here in the third quarter and wouldn't necessarily expect that to continue into the fourth.

[Bob Harrison, Chairman, President, and CEO at First Hawaiian Inc]

Yeah, to add to that, we had been kind of messaging more in the $51-$52 range. Now, just given the strength of the overall fee business, we're moving that up to $54 as kind of our expected run rate.

[Charlie Driscoll, Equity Research Associate at KBW]

Thank you.

[Operator]

Thank you. Our next question comes from the line of Matthew Clark from Piper Sandler. Your question, please.

[Matthew Clark, Senior Research Analyst at Piper Sandler]

Hey, good morning, everyone.

[Bob Harrison, Chairman, President, and CEO at First Hawaiian Inc]

Morning.

[Matthew Clark, Senior Research Analyst at Piper Sandler]

Just to close out the NIM discussion, do you have the spot rate on deposits at the end of September?

[Jamie Moses, Vice Chairman and CFO at First Hawaiian Inc]

That was 136 basis points end of September.

[Matthew Clark, Senior Research Analyst at Piper Sandler]

Thank you. The negative migration you saw in substandard this quarter, can you just speak to what drove that increase?

[Lea Nakamura, EVP and Chief Risk Officer at First Hawaiian Inc]

It is primarily that single loan to our longtime customer. We're not really worried about loss or anything like that. We work closely with the customer, and we just feel it's prudent to continue to update the ratings as we see the financials.

[Matthew Clark, Senior Research Analyst at Piper Sandler]

Okay, I may have missed it, but the type of customer in the situation there?

[Bob Harrison, Chairman, President, and CEO at First Hawaiian Inc]

Oh, we didn't share that one. We'd rather not. It's a small town.

[Matthew Clark, Senior Research Analyst at Piper Sandler]

Understood. On the capital question, I don't think we've finished up on the M&A piece, but I may have missed it. Any updated commentary on M&A discussions you might be having, whether or not things have changed materially since last quarter?

[Bob Harrison, Chairman, President, and CEO at First Hawaiian Inc]

No, unchanged. We're still open to talking to people and would certainly consider the right opportunity, but no change from previous guidance and discussion.

[Matthew Clark, Senior Research Analyst at Piper Sandler]

Okay, great. Thank you.

[Operator]

Thank you. As a reminder, ladies and gentlemen, if you do have a question at this time, please press star one one on your telephone. Our next question comes from the line of Timur Braziler from Wells Fargo. Your question, please.

[Timur Braziler, Director of Mid-Cap Bank Equity Research at Wells Fargo]

Hi, good morning.

[Bob Harrison, Chairman, President, and CEO at First Hawaiian Inc]

Morning.

[Jamie Moses, Vice Chairman and CFO at First Hawaiian Inc]

Morning.

[Timur Braziler, Director of Mid-Cap Bank Equity Research at Wells Fargo]

Jamie, your comment on total deposits, I want to make sure I heard that right. Is it flat for 4Q or flat for the year?

[Jamie Moses, Vice Chairman and CFO at First Hawaiian Inc]

It's flat third quarter to fourth quarter. We expect public to run out in the fourth quarter a little bit while we increase retail and commercial.

[Timur Braziler, Director of Mid-Cap Bank Equity Research at Wells Fargo]

Okay. Maybe back to Matt's last question, just more specifically, mainland M&A sounds like that's been something that's at least on the table more recently. Is that still the case? Maybe just remind us if that is the case, kind of what you'd be looking at as far as criteria goes.

[Bob Harrison, Chairman, President, and CEO at First Hawaiian Inc]

No change to what I said. Timur, I think the only thing would be it would only be mainland M&A for us because with our HHI and market share here, there's nothing we'd be able to do in Hawaii. No change. We're certainly open to talking to people and would consider the right opportunity.

[Timur Braziler, Director of Mid-Cap Bank Equity Research at Wells Fargo]

Okay. Yeah, that's a good point. Bob, your starting comment on expecting many families will face potentially some real hardships here from a prolonged federal government shutdown. I guess that comment and then looking at the last New Hero report, which is calling for a mild recession over the course of the next year, is that any different really from kind of the operating trends on the island over these last couple of years? Does that change the way that you guys are thinking about the local economy? I guess more pointed, just how much of that is already factored in in the reserving that you have, particularly on the consumer side?

[Bob Harrison, Chairman, President, and CEO at First Hawaiian Inc]

Yeah, maybe I'll start and ask Lea if she has any additional comments. Really, no change. We think that the local economy is resilient. I mean, people are not the first time this has happened. It's been a little while since there's been a shutdown that's affected, you know, salaries and all that. We just want to make sure, and that's why we want to do it with all the banks here. I want to make sure we're open and people know they can approach us if there's a need. We've had just very few inquiries. Lea, maybe you have any additional comments?

[Lea Nakamura, EVP and Chief Risk Officer at First Hawaiian Inc]

Not really. We haven't really seen any effects in the credit metrics yet, but we're always cautious, and we always take it into consideration when we try to figure out what the right valuation is for the ACL.

[Bob Harrison, Chairman, President, and CEO at First Hawaiian Inc]

Yeah, to speak to consumer credit metrics, Lea didn't mention it earlier, but the two that tend to pop up soonest are credit cards and indirect, and they're doing quite well. Really, nothing observable at this point, Timur.

[Timur Braziler, Director of Mid-Cap Bank Equity Research at Wells Fargo]

Great. Thank you. I'll step back.

[Operator]

Thank you. Our next question comes from the line of Jared Shaw from Barclays. Your question, please.

[Jared Shaw, Managing Director at Barclays]

Hey, everybody. I guess following up on that, when you look at the impact of federal spending, apart from military in Hawaii, are you concerned at all that it could be impacted by a re-shifting of federal priorities, or is it still pretty heavily defense-focused? While we're dealing with the shutdown now, you still feel that's not going to change the long-term contribution of federal government spending into Hawaii?

[Bob Harrison, Chairman, President, and CEO at First Hawaiian Inc]

Yeah, Jared, this is Bob. Totally agree. The long-term trend is defense-focused, and it's going to be very strong. I'm heading down to Guam next week, and the spend there is phenomenal, and the projects on deck here are very, very strong. We're not expecting that. Our core federal employee workforce is pretty stable, the largest employer being the Pearl Harbor Naval Shipyard, which has been identified as a key resource in the Navy. Really, you know, stable to improving, I guess, would be the long-term view.

[Jared Shaw, Managing Director at Barclays]

Okay. In conversations with your floor plan dealers, what's their expectation for sort of auto sale volume going into the next year? Are they thinking that there's going to be a slowdown in purchase activity, and is that incrementally, I guess, better for you with floor plans if inventories stay around longer?

[Bob Harrison, Chairman, President, and CEO at First Hawaiian Inc]

Certainly. We have really great customers with strong credit, so we'd love to see higher balances with those same customers. The discussions haven't been as much around next year. It's really been more topical about tariffs and the impacts of tariffs. Different manufacturers are picking up some of the impacts of those additional costs. Others, I think we'll start, based on conversations we're having, we'll start to soon start passing those through to customers. There's a fair amount of uncertainty still on the end impact of the tariffs that started at the beginning of this year and what consumers will do with potentially higher price points and how that will affect demand. If it slows down demand, maybe not in next year, but even into the fourth quarter, first and second quarters of 2026, that would definitely help us.

[Jared Shaw, Managing Director at Barclays]

Okay. Finally, for me, have you seen any change in sort of pricing behavior from some of the change in ownership of other Hawaii competitors over the last year? It sounded like earlier in the year there wasn't really any big change, but are you seeing any change in how they're approaching pricing in the markets?

[Bob Harrison, Chairman, President, and CEO at First Hawaiian Inc]

Yeah, we haven't seen any change in the market as far as competitive dynamics or pricing.

[Jared Shaw, Managing Director at Barclays]

Okay, thank you.

[Operator]

Thank you. Our next question comes from the line of Janet Lee from TD Securities. Your question, please.

[Janet Lee, Director and US Mid-Cap Bank Analyst at TD Securities]

Hello.

[Kevin Haseyama, Investor Relations Manager at First Hawaiian Inc]

Hey, Janet.

[Bob Harrison, Chairman, President, and CEO at First Hawaiian Inc]

Hey, Janet.

[Jamie Moses, Vice Chairman and CFO at First Hawaiian Inc]

Hey, Janet.

[Janet Lee, Director and US Mid-Cap Bank Analyst at TD Securities]

Hi, going back to M&A just quickly, I know you guys touched on it just a few times on this call, but can you remind us what is your stance, what is your current stance on that M&A, potential M&A opportunity if you are looking to, you know, you're considering opportunities? Like what would be, what would make sense in the mainland?

[Bob Harrison, Chairman, President, and CEO at First Hawaiian Inc]

Really nothing to add to earlier comments. I guess the only thing would be it'd be in the Western States, It's not that we're going to go Central or East, but there's just, we're open to talking to people and would consider the right opportunity. Really nothing more to share than that at this time.

[Janet Lee, Director and US Mid-Cap Bank Analyst at TD Securities]

Okay. Got it. Fair. I think people are entertaining the idea of resi mortgage coming back if the rate comes down to the five handle. Would that be something that would be helpful to your market or perhaps not because it's more of a supply issue? How should I think about the positive impact from that point on your resi?

[Jamie Moses, Vice Chairman and CFO at First Hawaiian Inc]

Yeah, Janet. It's a good question. I think that the lower the rates go, just the more activity you will see. You are correct that there is some sort of supply constraints around that for sure. I think it would be helpful for balances. I think that there's, you know, that there should be some good opportunities there. I mean, I think ultimately for the mortgage business in particular, if the rates go a little bit lower, we could see some increased activity in that area. That should be constructive.

[Janet Lee, Director and US Mid-Cap Bank Analyst at TD Securities]

Got it. Apologies if this was already covered, but that $130 million of pay down on corporate lines, is that, was that just seasonality that is coming back or just one-off? Is it seasonally a big quarter for pay downs?

[Bob Harrison, Chairman, President, and CEO at First Hawaiian Inc]

No, it wasn't necessarily seasonally. These were earlier draws for specific things, and now that that's done, they're getting repaid. It was odd in that several happened in the same quarter, but there's nothing unusual about the borrowing and repayment. It just all kind of landed. The draws weren't in the same quarter, but the paydowns were. That's why we didn't call it out on the way up, but we're calling it out when it got repaid.

[Janet Lee, Director and US Mid-Cap Bank Analyst at TD Securities]

Okay. Got it. Thank you.

[Operator]

Thank you. As a reminder, ladies and gentlemen, if you do have a question at this time, please press star one one on your telephone. This does conclude the question and answer session of today's program. I'd like to hand the program back to Kevin Haseyama for any further remarks.

[Kevin Haseyama, Investor Relations Manager at First Hawaiian Inc]

Thank you. We appreciate your interest in First Hawaiian, and 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, ladies and gentlemen, for your participation in today's conference. This does conclude the program. You may now disconnect. Good day.

Participants

Executives

• Lea Nakamura, EVP and Chief Risk Officer
• Jamie Moses, Vice Chairman and CFO
• Bob Harrison, Chairman, President, and CEO
• Kevin Haseyama, Investor Relations Manager

Analysts

• Jared Shaw, Managing Director at Barclays
• Charlie Driscoll, Equity Research Associate at KBW
• Janet Lee, Director and US Mid-Cap Bank Analyst at TD Securities
• Timur Braziler, Director of Mid-Cap Bank Equity Research at Wells Fargo
• Matthew Clark, Senior Research Analyst at Piper Sandler
• David Feaster, Director at Raymond James
• Anthony Elian, Equity Research Analyst at JPMorgan