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FIRST HAWAIIAN, INC. (FHB)·Q2 2025 Earnings Summary

Executive Summary

  • EPS and profitability improved materially: diluted EPS was $0.58, up 23% QoQ and 21% YoY on higher net interest income, lower deposit costs, and a lower effective tax rate driven by a California tax law change; net income rose to $73.2M .
  • EPS beat Wall Street consensus by ~$0.09 (consensus $0.49*), while revenue was roughly in line/slightly below S&P Global’s consensus ($213.0M actual per S&P vs $214.9M estimate*) — a net positive given margin expansion; company-reported revenue (NII+noninterest income) was $217.5M .
  • Balance sheet trends were constructive: loans +$58.8M QoQ (C&I strength offset construction payoffs), deposits +$15.6M, NIM +3 bps to 3.11%, CET1 rose to 13.03%; credit remained solid despite an uptick in residential nonaccruals .
  • Guidance improved where it matters: management now expects Q3 NIM ~3.13% (raised) and full-year noninterest expense around ~$506M (lowered), with fee income run-rate ~$51–$52M/quarter and loan growth in low single digits .
  • Potential stock reaction catalysts: margin trajectory (raised NIM outlook), disciplined opex, ongoing buybacks ($25M in Q2; $50M remaining authorization), and stable credit; watch residential nonaccruals and construction paydowns .

What Went Well and What Went Wrong

What Went Well

  • “Outstanding second quarter” driven by strong revenues, controlled expenses, and excellent credit quality; net income rose 23.6% QoQ to $73.2M and diluted EPS was $0.58 .
  • NIM expanded 3 bps to 3.11% entirely due to lower deposit costs (CD repricing), and deposit costs fell 4 bps QoQ; noninterest income rose to $54.0M vs $50.5M in Q1 .
  • Capital and shareholder returns: CET1 increased to 13.03%; company repurchased ~1.04M shares for $25.0M at $23.99 average, dividend maintained at $0.26/share .

What Went Wrong

  • Nonperforming assets increased to $28.6M (0.20% of loans and OREO) from $20.2M (0.14%) on residential nonaccruals; residential NPA increase noted but loss content viewed as very low due to low LTVs .
  • Construction paydowns and takeouts pressured loan balances, limiting loan growth to low single digits for the year; guidance reduced from low-to-mid to low single digits .
  • On S&P Global’s definitions, revenue modestly missed consensus (actual $213.0M vs $214.9M estimate*) despite company-reported revenue (NII+noninterest income) rising QoQ to $217.5M .

Financial Results

MetricQ2 2024Q1 2025Q2 2025Q2 2025 Consensus
Revenue ($USD Millions)$204.6 $211.0 $217.5 $214.9*
Net Interest Income ($USD Millions)$152.9 $160.5 $163.6 —
Noninterest Income ($USD Millions)$51.8 $50.5 $54.0 —
Net Income ($USD Millions)$61.9 $59.2 $73.2 —
Diluted EPS ($USD)$0.48 $0.47 $0.58 $0.49*
Net Interest Margin (%)2.92% 3.08% 3.11% —
Efficiency Ratio (%)59.22% 58.22% 57.23% —

Consensus values marked with * were retrieved from S&P Global.

Segment Loans Breakdown ($USD Millions):

SegmentQ2 2024Q1 2025Q2 2025
Commercial & Industrial$2,208.7 $2,261.4 $2,370.2
Commercial Real Estate$4,305.0 $4,367.4 $4,411.6
Construction$1,017.6 $954.1 $884.3
Residential Mortgage$4,216.4 $4,129.5 $4,085.8
Home Equity Line$1,159.8 $1,144.9 $1,161.9
Consumer$1,027.1 $998.3 $1,011.1
Lease Financing$425.2 $437.4 $426.9
Total Loans & Leases$14,359.9 $14,293.0 $14,351.9

Key KPIs

KPIQ2 2024Q1 2025Q2 2025
Total Deposits ($USD Billions)$20.32 $20.22 $20.23
Total Assets ($USD Billions)$23.99 $23.74 $23.84
CET1 Ratio (%)12.73% 12.93% 13.03%
Tier 1 Leverage (%)9.03% 9.01% 9.12%
Nonperforming Assets ($USD Millions; % of loans/OREO)$18.0; 0.20% $20.2; 0.14% $28.6; 0.20%
Net Charge-offs ($USD Millions; annualized bps)$2.5; 7 bps $3.8; 11 bps $3.3; 9 bps
Allowance for Credit Losses ($USD Millions; % of loans)$160.5; 1.12% $166.6; 1.17% $167.8; 1.17%
Dividend per Share ($USD)$0.26 $0.26 $0.26

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Net Interest MarginQ3 2025“Increase a few bps” roadmap; Q2 guide ~3.10% ~3.13% expected Raised
Noninterest ExpenseFY 2025~$510M ~$506M Lowered
Fee Income Run-rateQ3 2025~$51M/quarter in 2025 ~$51–$52M in Q3 Maintained/slightly raised
Loan GrowthFY 2025Low-to-mid single digits Low single digits Lowered
Effective Tax RateRemainder of FY 2025~23% ~23.2% Slightly raised
Share RepurchasesFY 2025$75M remaining authorization (post Q1) $50M remaining; likely more in back half Updated utilization plan
DividendQ3 2025$0.26/share maintained in Q1 $0.26/share declared (payable Aug 29) Maintained

Earnings Call Themes & Trends

TopicQ4 2024 (Prior)Q1 2025 (Prior)Q2 2025 (Current)Trend
Tariffs/MacroWatching impacts on costs, deposit betas, tourism; cautious optimism Heightened uncertainty; monitoring C&I and construction cost risks Dealer floor plan uncertainty; tourism spend strong; limited tariff impact so far Mixed risk, manageable
Tourism & Local EconomySlow expansion; arrivals down slightly; housing stable Stable; visitor arrivals/spend up; Maui improving Arrivals up 2.8% YoY; spend up; unemployment 2.8% Improving
Deposit BetasExpect decline in absolute beta with further rate cuts Declining deposit costs; further reductions possible via CDs Deposit costs −4 bps QoQ; room for further pass-through, beta ~90% next cuts Favorable
NIM TrajectoryExpansion roadmap through 2025; 3.06% in Q1 guide Guided Q2 ~3.10% Guides Q3 ~3.13%; driven by lower deposit costs Improving
Securities PortfolioRestructured +309 bps yield pickup in Q4 Runoff funding loans; cash elevated Reinvesting runoff; ~4–4.25% yields; ~5 duration Yield improving
Dealer Floor PlanStabilizing at higher post-COVID level $661M ending balance; flexible operators ~$786M; +$125M QoQ; normalizing Growth stabilized
CRE/ConstructionCRE growth; construction payoffs a headwind Pipeline good; payoffs possible; mini-perm potential Construction takeouts/payoffs reduced balances; new volume funding ongoing Payoff headwind
Capital & Buybacks$100M 2025 authorization Programmatic ~$25M/quarter targeted $25M repurchased; $50M remaining; likely back-half deployment Continuing
M&AOpen-minded but no active deals —Not adverse; nothing currently No change
Credit QualityStrong; Maui performance improving Strong; ACL build on macro; YTD NCOs 11 bps Still strong; uptick in residential nonaccruals; ACL coverage flat Stable with watch points

Management Commentary

  • “I’m happy to report that First Hawaiian Bank had an outstanding second quarter… driven by strong revenues, well controlled expenses and continued excellent credit quality.” — Bob Harrison, CEO .
  • “The increase in the margin was driven entirely by lower deposit costs… we anticipate that the NIM in the third quarter will increase a couple of basis points to 3.13%.” — Jamie Moses, CFO .
  • “Credit risk remains low, stable… Most [residential nonaccruals] were loans with low loan-to-value ratios. We feel that the loss content in these loans is very low.” — Lee Nakamura, CRO .

Q&A Highlights

  • Loan growth drivers: C&I growth primarily dealer floor plan (+$125M QoQ); construction payoffs/takeouts constrained balances; full-year loan growth now low single digits .
  • Margin mechanics: NIM expansion entirely from lower deposit costs (CD repricing); Q3 NIM guided to ~3.13% .
  • Fee and expense outlook: Recurring noninterest income ~$51–$52M/quarter; Q3 expenses up ~2% QoQ; FY opex ~ $506M (lowered) .
  • Capital deployment: Stable dividend; buybacks likely to be used more in back half; M&A opportunistic but nothing active .
  • Credit clarifications: Uptick in residential nonaccruals viewed as low loss content; criticized assets expected to cure; charge-offs remained low .

Estimates Context

  • Q2 2025 EPS: Company diluted EPS $0.58 vs S&P Global consensus $0.48997* (beat); S&P’s “Primary EPS” actual was $0.54*, reflecting methodological differences vs company reporting .
  • Q2 2025 Revenue: Company-reported revenue (NII+noninterest income) $217.5M vs S&P Global revenue consensus $214.9M*; S&P Global’s “actual revenue” for Q2 was $213.0M*, indicating a slight miss on their definition .
  • Forward estimates: Q3 2025 consensus EPS ~$0.522* and revenue ~$218.3M*; Q4 2025 consensus EPS ~$0.550* and revenue ~$225.5M*.

Consensus values marked with * were retrieved from S&P Global.

Key Takeaways for Investors

  • Margin trajectory is improving and guidance was raised (Q3 NIM ~3.13%), supported by deposit cost relief and securities reinvestment yields — a near-term positive for NII and EPS .
  • Expense discipline tightened (FY opex lowered to ~$506M), with fee run-rate ~$51–$52M/quarter; operating leverage improving even with modest loan growth .
  • Credit remains robust; monitor residential nonaccruals (increase this quarter) but loss content appears limited due to low LTVs; ACL coverage stable at 1.17% .
  • Loan growth will be driven by C&I (dealer floor plan) while construction payoffs/takeouts remain a headwind; full-year growth trimmed to low single digits .
  • Capital return continues: $25M buybacks in Q2, $50M remaining authorization, stable dividend — supportive for shares in the back half .
  • Watch macro levers: deposit betas on future rate cuts (~90% pass-through next cuts), tourism strength, and tariff-related uncertainty impacting dealers and construction inputs .
  • Near-term trading: Focus on NIM prints and expense run-rate; upside if revenue aligns with company definitions and margin expands as guided; risk skew from NPA drift and slower loan growth .

Citations: Press release and 8-K Q2 2025 ; 8-K Q2 2025 exhibit tables ; Q2 2025 call transcript ; Q1 2025 8-K and call ; Q4 2024 call .