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    FHB
    Earnings call· Jun 2026(Q2 FY26)

    FIRST HAWAIIAN, INC. FHB

    Jul 24, 2026 Source

    Executive summary

    First Hawaiian, Inc. Q2 FY26 — Strong Loan Growth and NIM Expansion

    First Hawaiian delivered strong Q2 FY26 results, marked by robust loan growth, particularly in C&I and CRE, and significant net interest margin expansion driven by deposit mix changes and higher yields. While total deposits declined due to expected public deposit outflows, core retail and commercial deposits remained stable, with management anticipating seasonal increases in the second half. The bank remains well-capitalized and asset-sensitive, positioning it to benefit from a higher-for-longer rate environment, with an updated full-year NIM outlook reflecting this positive trend.

    Highlights

    5

    • Return on average tangible assets of 1.28% for the quarter.

    • Return on average tangible equity of 16.34% for the quarter.

    • Total loans grew $137 million, or 3.6% on an annualized basis.

    • Net interest income (NII) was $171 million, up $3.5 million from the prior quarter.

    • Net interest margin (NIM) was 3.25%, up 6 basis points from the prior quarter.

    Concerns

    4

    • Total deposits were down $623 million, primarily due to outflows of public deposits.

    • Public time deposits were down $115 million.

    • Noninterest expense included $4.2 million of expenses related to the TriCo transaction.

    • Residential loans saw payoffs exceed production due to the rate environment.

    Guidance & targets

    6
    CategoryTargetConfidence
    Full year loan growth
    3% to 4% range
    high materiality
    High
    Full year NIM outlook
    3.24% to 3.25% range
    high materiality
    High
    Q3 NIM
    about 3.27%
    medium materiality
    High
    Full year noninterest income
    about $220 million
    medium materiality
    High
    Full year reported expenses (excluding TriCo transaction expenses)
    $515 million and $520 million
    high materiality
    High
    Share buybacks
    unlikely
    medium materiality
    High

    Operational metrics

    27
    Return on average tangible assets
    1.28%
    Q2 FY26
    Return on average tangible equity
    16.34%
    Q2 FY26
    Effective tax rate
    22.9%
    Q2 FY26
    Total loans growth
    $137 millionup 3.6% annualized
    Q2 FY26
    C&I loan increase
    $98 million
    Q2 FY26

    Primarily driven by growth in dealer flooring and Hawaii corporate portfolio.

    Construction loan conversion to CRE
    $95 million
    Q2 FY26

    Completed construction projects converted to CRE loans.

    Total deposits decline
    $623 million
    Q2 FY26

    Primarily due to outflows of public deposits.

    Public deposits decline
    $467 million
    Q2 FY26

    Majority of decline in operating accounts.

    Public time deposits decline
    $115 million
    Q2 FY26

    Expected decline due to elevated balances at end of Q1.

    Retail deposits
    flat
    Q2 FY26
    Commercial deposits decline
    $156 million
    Q2 FY26

    Consistent with expectations of seasonal volatility.

    Noninterest-bearing deposit ratio
    32%
    Q2 FY26
    Noninterest income
    $60.3 million
    Q2 FY26

    Primarily due to higher BOLI income, an excise tax refund, and higher swap fees.

    Noninterest expense
    $130.4 million
    Q2 FY26

    Includes $4.2 million of expenses related to the TriCo transaction.

    TriCo transaction expenses
    $4.2 million
    Q2 FY26

    More expenses expected in the back half of the year.

    Cash balances
    around $1 billion
    Q2 FY26

    Expected to maintain this level for the rest of the year.

    Assets repricing quarterly
    roughly $400 million
    quarterly

    Assets that reprice immediately upon an interest rate increase based on SOFR.

    Liabilities repricing quarterly
    $140 million to $150 million
    quarterly

    Liabilities expected to reprice somewhat immediately around an interest rate increase.

    Deposit cost spot rate
    1.21%
    end of June
    Fee income quarterly run rate
    about $55 million
    quarterly

    General expectation, subject to volatility of one-off items.

    Unemployment rate (Hawaii)
    2.5%
    May

    Remained relatively stable.

    National unemployment rate
    4.3%
    May
    Visitor arrivals growth
    2.9%up YoY
    YTD May

    Primarily due to more visitors from U.S. Mainland and Japan.

    Visitor spending growth
    7.5%compared to 2025 levels
    YTD May

    Total spending was $9.7 billion.

    Oahu median single-family home sales price
    $1.2 millionup 10.4% YoY
    June

    Housing market remains stable.

    Oahu median condo sales price
    $528,000up 3.5% YoY
    June

    Housing market remains stable.

    Cost of deposits
    fell by 2 basis points
    Q2 FY26

    Industry KPIs

    10
    MetricValueDetails
    Loans$137 millionUSD
    Depositsdown $623 millionUSD
    Rotce ROE16.34%%
    Cet1 ratioabove 13%%
    Capital returnsno shares purchased
    Fee income lines$60.3 millionUSD
    Allowance reservesreductionnominal and coverage basis
    Net interest income$171 millionUSD
    Net interest margin3.25%%
    Total operating expenses$130.4 millionUSD

    Deals & partnerships

    1
    TriCo BancsharesStrategic partnership to build a leading Pacific banking franchise.

    Management plans to keep most of TriCo's strong management team. More transaction expenses expected in H2 FY26.

    Risks & headwinds

    3
    Residential loan portfolio performanceQ2 FY26

    Payoffs exceeded production

    Mitigation: Not explicitly stated, but focus on C&I and CRE growth.

    Uncertainty of Fed rate pathH2 FY26

    Markets now expecting 1 rate increase later this year

    Mitigation: Balance sheet remains asset sensitive and well positioned to benefit from higher rates.

    Japanese Yen exchange rate impact on tourism

    160-plus exchange rate is not easy for them

    Mitigation: Increased enthusiasm for travel and people with means to travel are offsetting factors; incremental growth off a lower base.

    What to watch in Q3 FY26

    5

    Full-year loan growth

    Full year FY26
    Current3.6% annualized (Q2)
    Target3% to 4% range

    Why it matters

    Indicates the bank's ability to drive asset growth and revenue in a competitive environment.

    We continue to expect full year loan growth to be in the 3% to 4% range

    Q&A highlights

    7

    Can you discuss the drivers of the deposit decline, particularly in government deposits, and what core retail and commercial deposit trends you expect for the back half of the year?

    Jamie Moses clarified that the decline in government deposits was expected due to elevated Q1 balances and municipal partners finding alternative investments, not a loss of relationships. He noted that retail and commercial deposits follow a seasonal pattern, typically declining in the first half and expected to increase in the back half of the year.

    “The government deposits were elevated, I'll call it, at the end of Q1 in our operating accounts. And so we kind of expected that decline to happen there. This is not about a loss of relationships or anything.”

    asked by Kelly Motta · answered by James Moses

    2 min read5 chapters

    Detailed Narrative

    01

    Local Economy Overview

    Hawaii's economy demonstrates stability with a statewide unemployment rate of 2.5% in May, significantly lower than the national rate of 4.3%. Tourism continues to recover, with total visitor arrivals up 2.9% year-to-date through May, primarily driven by U.S. Mainland and Japan visitors. Year-to-date visitor spending reached $9.7 billion, an increase of 7.5% compared to 2025 levels. The housing market on Oahu remains stable, with the median single-family home sales price in June at $1.2 million, up 10.4% from the prior year, and the median condo sales price at $528,000, up 3.5%.

    02

    Balance Sheet and Liquidity Position

    The bank maintains a solid balance sheet, characterized by strong capitalization and ample liquidity. Cash balances were lower in Q2, mainly due to a decline in public deposit balances, and are expected to be maintained around the $1 billion level for the remainder of the year. The balance sheet is positioned as asset-sensitive, indicating it is well-suited to benefit from a sustained higher interest rate environment.

    03

    Loan Portfolio Dynamics

    Total loans experienced growth of $137 million in the quarter, representing an annualized increase of 3.6%. This growth was primarily fueled by increases in Commercial & Industrial (C&I) and Commercial Real Estate (CRE) loans. C&I balances rose by $98 million, driven by dealer flooring and the Hawaii corporate portfolio. Additionally, $95 million of construction loan balances converted to CRE loans following project completion. This growth was partially offset by residential loan payoffs exceeding new production.

    04

    Deposit Trends and Management Strategy

    Total deposits decreased by $623 million, largely attributable to outflows of public deposits, including a $115 million reduction in public time deposits and a $467 million decline in operating accounts. Retail deposits remained essentially flat, while commercial deposits saw a decrease of $156 million, consistent with anticipated seasonal volatility. The noninterest-bearing deposit ratio stood at 32%. Management expects core deposits to increase in the second half of the year due to seasonal patterns, emphasizing that declines were not due to customer relationship losses.

    05

    TriCo Bancshares Acquisition Update

    The recently announced acquisition of TriCo Bancshares is progressing, with an expected closing near the end of the year. Management expressed excitement about the partnership, highlighting TriCo's strong management team, most of whom are planned to be retained. The strategic rationale is to build a leading Pacific banking franchise, with a target of 25% cost savings from the transaction, which management remains confident in achieving.

    AI-generated summary of the company’s earnings call. Not investment advice.