First Hawaiian Q2 2025 presentation: net income jumps 23%, NIM expands

First Hawaiian, Inc. (NASDAQ:FHB) reported a significant improvement in its financial performance for the second quarter of 2025, with net income rising 23% compared to the previous quarter. The company’s earnings call presentation, delivered on July 25, 2025, highlighted expanding margins, stable asset quality, and continued capital return to shareholders.

Quarterly Performance Highlights

First Hawaiian reported net income of $73.2 million for Q2 2025, up from $59.2 million in Q1 2025, representing a 23% quarter-over-quarter increase. Diluted earnings per share rose to $0.58, compared to $0.47 in the previous quarter. The bank’s net interest margin (NIM) expanded by 3 basis points to 3.11%, while the efficiency ratio improved to 57.2% from 58.2% in Q1.

As shown in the following financial highlights chart, the company demonstrated improvement across multiple performance metrics:

Return on average assets (ROA) increased to 1.23% from 1.01% in the previous quarter, while return on average tangible common equity (ROATCE) improved significantly to 17.61% from 14.59%. According to the earnings call transcript, the company benefited from a favorable tax law change in California, which added $5.1 million to its bottom line.

Net interest income increased by $3.1 million to $163.6 million, primarily driven by lower deposit costs. The cost of deposits decreased by 4 basis points to 1.39%, while the total cost of funds also declined by 4 basis points to 1.42%.

The following chart illustrates the improvement in net interest income and margin:

Noninterest income rose to $54.0 million in Q2 2025, up from $50.5 million in the previous quarter. Meanwhile, noninterest expense increased slightly to $124.9 million from $123.6 million in Q1, but the efficiency ratio still improved due to higher revenue.

Balance Sheet and Credit Quality

First Hawaiian’s balance sheet showed modest growth, with total assets increasing to $23.84 billion as of June 30, 2025, up from $23.75 billion at the end of the previous quarter. Total loans and leases grew by $58.8 million to $14.35 billion, while total deposits increased by $15.6 million to $20.23 billion.

The following balance sheet highlights provide a comprehensive overview of the company’s financial position:

Deposit growth was minimal at 0.1%, with some shifts in composition. The company experienced a $150 million decline in retail and commercial deposits, offset by a $166 million increase in public deposits due to higher operating account balances. The noninterest-bearing deposit ratio remained unchanged at 34% of total deposits.

As shown in the following deposit breakdown:

Asset quality remained strong, with net charge-offs at 0.09% of total loans, down from 0.11% in the previous quarter. However, non-performing assets and loans 90+ days past due increased to $33.0 million (0.23% of total assets) from $24.5 million (0.17%) in Q1. Commercial criticized assets also rose to $171.1 million (1.19% of commercial loans) from $145.3 million (1.02%) in the previous quarter.

The following chart details the company’s asset quality metrics:

The allowance for credit losses (ACL) stood at $167.8 million, representing 1.17% of total loans and leases, unchanged from the previous quarter. The provision for credit losses was $4.5 million, significantly lower than the $10.5 million recorded in Q1 2025.

The breakdown of allowance for credit losses by loan category is illustrated below:

Capital Management and Outlook

First Hawaiian maintained strong capital ratios, with the Common Equity Tier 1 (CET1) ratio improving to 13.03% from 12.93% in the previous quarter. The total capital ratio increased to 14.28% from 14.17%, while the Tier 1 leverage ratio rose to 9.12% from 9.01%.

During the quarter, the company repurchased 1.0 million shares of common stock at a total cost of $25 million. The board declared a quarterly dividend of $0.26 per share, payable on August 29, 2025, to shareholders of record as of August 18, 2025. This represents a dividend yield of approximately 4.3% based on the current stock price.

Tangible book value per share increased to $13.63 from $13.15 at the end of the previous quarter, as shown in the following GAAP to non-GAAP reconciliation:

Looking ahead, First Hawaiian expects continued growth with full-year loan growth projected in the low single digits. According to the earnings call transcript, the company anticipates its net interest margin to increase slightly to 3.13% in Q3. Fee income is projected to remain steady at around $51-52 million per quarter, while full-year expenses are expected to be approximately $506 million.

Market Reaction and Analyst Perspectives

First Hawaiian’s stock price closed at $24.16 on the day of the earnings release, marking a 2.19% rise in regular trading. In premarket trading, the stock saw an additional 1.41% increase, reaching $24.50, reflecting investor optimism following the company’s strong financial results.

With a market capitalization of $3.08 billion and a P/E ratio of 12.74, the stock is currently trading near its Fair Value according to InvestingPro analysis. The company’s consistent dividend payments for 10 consecutive years demonstrate strong financial stability and commitment to shareholder returns.

During the earnings call, CEO Bob Harrison noted, "We’re not adverse to considering options, but we don’t have anything we’re looking at currently," highlighting the company’s openness to strategic opportunities without immediate plans. Meanwhile, Chief Risk Officer Lee Nakamura expressed confidence in the company’s financial health, stating, "We are confident in our book. The book is strong."

Analysts have responded positively to the results, with three analysts revising their earnings expectations upward for the upcoming period, according to the earnings transcript. The company’s overall Financial Health Score stands at 2.39, indicating fair operational stability in a challenging economic environment.

Full presentation:

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