First Hawaiian, Inc. Q2 FY2026 earnings call

• Local Economy Conditions

  • Hawaii statewide unemployment rate held stable at 2.5% in May, below the national 4.3% rate
  • Year-to-date visitor arrivals through May rose 2.9% year-over-year, driven by increased visitors from the U.S. mainland and Japan; total visitor spending hit $9.7 billion, up 7.5% from 2025
  • Hawaii housing market remained stable: Oahu median single-family home price rose 10.4% year-over-year to $1.2 million, and median condo price rose 3.5% to $528,000

• Balance Sheet and Capital

  • The balance sheet remains solid, well-capitalized with ample liquidity; lower cash balances in Q2 stem from expected public deposit outflows, and management expects to maintain cash at current levels through the end of the year
  • The balance sheet remains asset-sensitive, well positioned to benefit from a higher-for-longer interest rate environment
  • No share repurchases were completed in Q2

• Strategic Update

  • Management confirmed the recently announced merger agreement with Trico Bank Shares, aimed at building a leading Pacific regional banking franchise; the deal is expected to close near the end of 2026
  • Trico's existing strong management team will be retained, with three Trico team members joining the combined senior management team; the Trico franchise will operate with significant independence post-close
  • Management is focused on completing regulatory and preparatory work for the merger, and will update investors via public filings as the process progresses

• Credit Performance

  • Credit quality remains solid with healthy credit metrics; classified assets declined materially, allowing for a reduction in the allowance for credit losses on both nominal and coverage bases

The call does not break out financial performance across separate pre-defined product segments, only reporting aggregated and line-of-business balance sheet and income results. Aggregated results for Q2 2026: net interest income (NII) was $171 million, up $3.5 million from the prior quarter, with a net interest margin (NIM) of 3.25% (up 6 basis points quarter-over-quarter). Non-interest income was $60.3 million, driven by higher BOLI income, an excise tax refund, and higher swap fees. Non-interest expense was $130.4 million, including $4.2 million of transaction-related expenses for the Trico Bank Shares merger. Total loans grew $137 million in the quarter (3.6% annualized), led by a $98 million increase in Commercial and Industrial (CNI) loans (driven by dealer flooring and Hawaii corporate portfolio growth) and CRE loan growth from construction loan conversions ($95 million of construction loans converted to CRE), partially offset by payoffs in the construction portfolio and lower residential loan balances (payoffs exceeded production). Total deposits declined $623 million: public deposits fell $467 million (expected after elevated Q1 balances), commercial deposits declined $156 million (in line with expected seasonal volatility), and retail deposits were essentially flat. The non-interest bearing deposit ratio was 32%, and total cost of deposits fell 2 basis points quarter-over-quarter. Profitability: return on average tangible assets of 1.28%, return on average tangible equity of 16.34%, effective tax rate of 22.9%. Credit quality: allowance for credit losses declined driven by a material decrease in classified assets.

• Full-year 2026 loan growth guidance is maintained at 3% to 4%
• Full-year NIM guidance was revised upward to a range of 3.24% to 3.25%, to account for markets pricing in an expected 25 basis point Fed rate hike in the fourth quarter of 2026; third quarter NIM is expected to reach approximately 3.27%
• Full-year non-interest income guidance is unchanged at approximately $220 million
• Full-year reported operating expenses (excluding Trico merger-related expenses) are guided to a range of $515 million to $520 million; additional merger-related expenses are expected to be incurred in the second half of 2026 as closing and integration work progresses
• Share repurchases are unlikely for the remainder of 2026 during the Trico merger process, despite the bank holding CET1 capital above 13% and existing repurchase authorization

No material new risks or operational failures were discussed explicitly in this earning call. Forward-looking statements are subject to standard macroeconomic and regulatory risks associated with the pending merger, interest rate movements, and deposit volatility, which were referenced via the standard safe harbor disclosure.

Q: Analyst Kelly Matta asked for clarification on deposit trends, core retail/commercial deposit health, pricing competition dynamics in Hawaii, and the outlook for back-half loan growth drivers. / A: Jamie Moses confirmed the Q2 deposit decline was entirely expected, driven by seasonal public deposit outflows after elevated Q1 balances, not lost customer relationships. He noted Hawaii’s deposit and loan pricing competition remains historically rational, with little change from prior trends, and expects deposit costs to hold steady or rise only slightly even if the Fed hikes rates. Bob Harrison added that loan pipelines remain robust for CNI (especially dealer flooring) and CRE (mostly construction conversion), while residential loan growth will stay slow due to current elevated interest rates. (501 characters)

Q: Analyst Anthony Elion asked what drove the upward NIM guidance revision, and how share buybacks will be managed during the Trico merger process. / A: Jamie Moses explained the upward revision was solely driven by the updated macro outlook that includes an expected Fed rate hike, combined with ongoing positive balance sheet repricing dynamics (roughly $400 million in annualized cash flow roll-off with 140-150 bps spread on new originations). Bob Harrison confirmed that no share buybacks are expected for the remainder of 2026 during the regulatory approval process for the merger, even with CET1 capital well above requirements. (472 characters)

Q: Analyst Andrew Terrell asked what is driving the expected expense run-rate increase in the second half of 2026, and what the balance sheet sensitivity is to a 25 bps rate hike. / A: Jamie Moses explained the back-half expense increase will come from planned hiring to support continued loan growth, plus delayed project expenses for IT and professional services initiatives that will finalize in H2 2026. He noted roughly $6 billion in assets will reprice immediately after a 25 bps hike, versus ~$3.5-4 billion in immediately repriceable liabilities, leaving the bank net positive for NII from a rate increase. (451 characters)

Q: Analyst Tim Mitchell asked about client and employee reception of the Trico merger, and whether the Trico team will operate independently post-close. / A: Bob Harrison confirmed that the core strategic rationale for the merger is leveraging Trico's existing strong management and market position, so most of the Trico team will be retained and the franchise will operate with significant independence. Outreach to Trico employees and clients is ongoing, with a formal update planned for a later date once engagement is complete. (342 characters)