American Savings Bank, N.A. Q4 FY2026 earnings call

• Financial Strength & Capital: Delivered strong earnings with ROAA of 1.29% and ROTCE of 16.68%. Tier 1 leverage ratio increased to 9.24%, and total capital ratio rose to 14.76%. The Board declared a quarterly dividend of $0.27 per share.
• Balance Sheet Dynamics: Average loan balances increased while deposit costs decreased despite a rising rate environment. The balance sheet is neutral to slightly asset-sensitive, supporting NIM expansion in a higher-for-longer rate environment.
• Deposit Strategy: Core deposits declined modestly due to normal commercial activity seasonality. Non-interest-bearing deposits made up 31.5% of total deposits. Management emphasized building primary banking relationships with everyday customers to maintain low-cost funding.
• Loan Production & Runoff: Experienced $185.7 million of loan runoff at 5.79% yield versus $161 million in new production at 6.23% yield. Residential mortgage runoff was $54.9 million (4.85% yield) replaced by $63 million in production (6.14% yield).
• Local Economic Context: Infrastructure, military investment, and Maui rebuilding support construction. Visitor arrivals/spending increased YTD through August. Unemployment rose slightly to 2.8%. Economists have lowered 2026 growth estimates but still forecast growth.

The transcript does not break down financial performance by distinct product segments (e.g., Retail vs. Commercial). However, it provides aggregate financial metrics for the firm: Net Income was $29 million ($0.45 diluted EPS), representing a 6.7% increase from the prior quarter. Net Interest Income rose to $76.4 million, with Net Interest Margin expanding to 3.61%. Non-interest income was $21 million, and non-interest expense was $59 million. Total assets stood at $8.9 billion, with total deposits at $8.1 billion.

• Net Interest Margin: Expects a slow climb in NIM into 2027, driven by potential Federal Reserve rate hikes (one expected in Q4 2026, several in 2027). Cost of funds is expected to inch higher as rate-sensitive products reset.
• Cost of Deposits: Anticipates only a slight tick-up (approx. 2 basis points) in Q4 due to repricing from recent Fed hikes, followed by a slow climb.
• Expense Run Rate: Identifies $60.5 million as a normalized run rate for non-interest expense after excluding one-time fair value adjustments, with future inflationary impacts expected.
• Tax Rate: Projects an effective tax rate in the mid-22s to 23% range going forward, potentially increasing slightly as earnings grow.
• Capital Return: Actively discussing capital optimization with the Board; no determination made yet on stock buybacks pending lockup expirations.

• Credit Quality: Non-performing loans increased to 29 basis points due to a partial charge-off of a commercial construction loan ($4.1 million residual). Headwinds noted in hospitality sector and real estate secured loans.
• Economic Uncertainty: Local economists have lowered growth estimates for 2026. Elevated oil prices and storm impacts in Hawaii pose risks. Business sentiment is cautious/prudent.
• Regulatory/Tax: Being a public company introduced limitations on compensation deductions, impacting the effective tax rate.
• Interest Rate Risk: While currently asset-sensitive, changes in the interest rate environment directly impact margin expansion and cost of funds.

Q: Jeff Rulis asked about the sustainability of low deposit costs and margin trajectory given the 'roll-off, roll-on' dynamic. / A: CFO Dane Teruya explained that deposit yields are stable but will tick up slightly (~2 bps) in Q4 due to recent Fed hikes. He confirmed a slow climb in margins into 2027 as the bank resets higher-rate sensitive commercial products following anticipated further rate increases.

Q: Matthew Clark inquired about cash flow runoff from single-family residential and HTM securities, and CD runoff trends. / A: Teruya noted ~$55M resi runoff (4.85% yield) replaced by ~$63M production (6.14% yield), gaining ~125 bps spread. ~$74M ran off HTM/AFS securities, reinvested at >175 bps spread. CD runoff is customer-driven toward shorter durations (3-6 months) for liquidity, a trend expected to stabilize eventually.

Q: Andrew Terrell asked about the driver of increased non-accrual loans and the appropriate forward-looking tax rate. / A: CCO Steven Nakahara attributed the rise to a single CRE construction deal partial charge-off ($4.1M residual), with no material impact on interest income. Teruya stated the normalized tax rate should be mid-22s to 23%, likely closer to 22% for the full year 2026.

Q: Kelly Motta sought details on loan growth outlook and the success in growing non-interest-bearing deposits. / A: CEO Ann Teranishi projected flat residential portfolios with CRE/C&I opportunities, noting steady but cautious pipeline growth (2.2% YTD). She credited the franchise's loyalty among everyday Hawaiʻi residents for maintaining a low-cost, granular deposit base, supported by teams focusing on primary banking relationships.