First Hawaiian (FHB) Q4 2025 earnings review
NIM Expansion Continues, Buyback Bazooka Unleashed
First Hawaiian finished 2025 with a mixed operational picture but a massive signal of confidence to shareholders. While Net Income slipped 5% sequentially to $69.9M due to rising credit costs and a dip in noninterest income, the core engine—Net Interest Margin—accelerated to 3.21%. Loans recovered from the Q3 dip, growing $183M. The headline news is the Board's authorization of a $250M share repurchase program, representing a significant portion of the company's market capitalization, signaling aggressive capital return intentions for 2026.
🐂 Bull Case
The Board authorized a fresh $250M buyback program. For context, the company repurchased only $100M in the entirety of 2025. This signals a dramatic acceleration in shareholder returns.
Net Interest Margin (NIM) has expanded for five consecutive quarters, rising from 3.03% in 24Q4 to 3.21% in 25Q4. Asset repricing continues to outpace funding costs.
🐻 Bear Case
Provision for credit losses jumped to $7.7M, nearly doubling from $4.5M in Q3. Non-performing assets rose to 0.29% of loans (up from 0.22%), indicating some stress is finally appearing in the portfolio.
Total deposits fell $214M sequentially to $20.5B. While the bank remains liquid, the inability to hold Q3's deposit gains suggests competitive pressure or cash sorting persists.
⚖️ Verdict: 🟢
Bullish. While the sequential earnings dip is a minor blemish, the 33% YoY earnings growth, consistent NIM expansion, and the massive step-up in buyback authorization ($250M vs $100M prior year) outweigh the modest normalization in credit costs.
Key Themes
Net Interest Margin Acceleration
NIM expansion remains the primary profit driver. The margin hit 3.21% in Q4, up 2 basis points sequentially and 18 basis points year-over-year. This defies the sector trend of compression and confirms the bank's asset-sensitive positioning is still yielding benefits despite rate cut expectations.
Loan Growth Recovery
After a concerning dip in Q3 (where loans fell ~$220M), Q4 showed a return to growth with balances rising $183M to $14.3B. This validates management's prior claim that Q3 weakness was due to non-recurring paydowns rather than structural demand issues.
Credit Normalization Accelerating
Credit metrics are moving off their historic lows. The provision for credit losses spiked to $7.7M (vs $4.5M in Q3 and a benefit of $0.75M a year ago). Net charge-offs ticked up to 0.14% annualized, and non-performing assets (NPAs) rose to $41M (0.29% of loans). While still healthy by industry standards, the trend is undeniably negative.
Deposit Volatility
Total deposits decreased by $213.9M sequentially. This reverses some of the $500M gain seen in Q3. In a rate-cutting environment, retaining deposits without overpaying is crucial; shrinking balances could pressure the loan-to-deposit ratio (currently ~70%, still very healthy) if the trend persists.
Efficiency Stagnation
The efficiency ratio hovered at 55.1%, basically flat vs Q3 (55.3%). With Noninterest Income falling $1.5M QoQ, the bank has limited leverage to improve profitability through cost cuts alone. Future earnings growth must come from the top line.
Other KPIs
Stable. Up slightly ($1.0M) from Q3. The growth in NIM offset the reduction in average earning assets.
Decelerating. Down $1.5M from Q3 ($57.1M). While consistent with the normalized run-rate guidance given in Q3 (~$54M), it removes a growth lever for the quarter.
Decelerating. Down from 1.27% in Q3, driven by the lower net income result, though still significantly higher than the 0.92% posted in 24Q4.
Guidance
Accelerating significantly. The Board adopted a new $250M program, replacing the 2025 program where total repurchases were only $100M. This implies a 2.5x increase in capital return capability.
Stable. The dividend remains unchanged, payable February 27, 2026.
Key Questions
Credit Provision Trend
Provision expense nearly doubled sequentially to $7.7M, and NPAs are at a 5-quarter high. Is this $7-8M range the new quarterly run-rate for 2026, or was there a specific impairment driving Q4?
Deposit Flows
Deposits reversed course and fell by ~$214M this quarter. Was this driven by seasonal public fund outflows mentioned in Q3, or are you seeing intensified competition for commercial balances?
Buyback Aggressiveness
The new $250M authorization is significantly larger than the $100M utilized in 2025. Does management intend to deploy this linearly throughout 2026, or is this a multi-year authorization?
NIM Outlook
NIM reached 3.21% in Q4. With Fed rate cuts potentially accelerating, where do you see the ceiling for NIM, and when do deposit betas become a headwind rather than a tailwind?