First Hawaiian's Pacific Pivot: TriCo Deal Reshapes the Franchise
A mainland expansion and a higher NIM outlook mark a strategic shift for Hawaii's largest bank.
FHB · Earnings Call · 2026-07-24
A New Pacific Franchise
The big news from First Hawaiian's Q2 2026 earnings call is the announced merger with TriCo Bancshares, a mainland California-based bank. CEO Bob Harrison opened the call with his excitement: “I'd like to start with my excitement about our recently announced deal with TriCo Bancshares and I'm looking forward to working with the TriCo team to build a leading Pacific banking franchise.” — Robert Harrison, Chairman, President and CEO · 2026-07-24 This is a strategic pivot. For years, the company has been talking about mainland M&A. In the January 2026 call, Harrison laid out criteria: “we'd be looking for a strong management team, will stick around, be good partners with us... and just for location, west of the Rockies is more what we're familiar with.” — Robert Harrison, Chairman, President and CEO · 2026-01-30 Now it's happening. The TriCo transaction is a key new theme, and it's company-unique—unlike the market-wide tariff talk or AI themes. The deal is expected to close near year-end, and management is keeping the TriCo team. As Harrison says, "One of the reasons we like TriCo so much is they have a strong management team, and we're planning on keeping most of them there." This suggests a partnership model rather than a hard integration. They've targeted 25% cost savings, a number they reiterated when asked about it later in the call.A Better NIM Outlook
Beyond the merger, the bank raised its full-year NIM guidance to 3.24%-3.25%, up from the prior 3.16%-3.18% range set in January. CFO Jamie Moses explained the driver: “the balance sheet repricing dynamics continue to exist here... roughly $400 million a quarter, we think that, that spread in Q2 was about 140 basis points on the roll-on, roll-off.” — James Moses, Chief Financial Officer · 2026-07-24 The bank is asset-sensitive, and with the Fed now expected to hike (not cut), the NIM is set to improve further. They expect Q3 NIM of 3.27%. This is a clear positive surprise—in the prior quarter (Q1 2026), they had guided to NIM around 3.16-3.18% for the year, and now they've lifted it. The keywords from this quarter's earnings call reflect this: NIM outlook and expense related both spiked, though "expense related" is partially due to the TriCo costs. Of course, the expense side is rising, partly due to deal costs. The bank now expects reported expenses of $515-520M, excluding TriCo expenses. Jamie Moses noted they'll continue hiring to support loan pipelines.Balance Sheet and Credit: Stable Pillars
The deposit decline was entirely expected—public deposits fell $467M as elevated Q1 balances normalized. Jamie Moses explained: “The government deposits were elevated, I'll call it, at the end of Q1... This is not about a loss of relationships or anything.” — James Moses, Chief Financial Officer · 2026-07-24 Excluding public funds, core deposits were stable. Meanwhile, loans grew $137M (3.6% annualized), led by C&I and CRE. Bob Harrison noted on the pipeline: “We still see a very robust pipeline in both the C&I and CRE.” — Robert Harrison, Chairman, President and CEO · 2026-07-24 Credit quality remains strong. Chief Risk Officer Lea Nakamura said the reduction in the allowance was driven by "a material decrease in classified assets." The company's credit quality is solid, and return on tangible assets was 1.28% with ROTCE of 16.34% for the quarter.I'd like to start with my excitement about our recently announced deal with TriCo Bancshares and I'm looking forward to working with the TriCo team to build a leading Pacific banking franchise.