Key Highlights from First Hawaiian's Q2 2026 Performance
First Hawaiian, Inc. (NASDAQ:FHB) delivered a strong performance in the second quarter of 2026, with several key metrics showing improvement. The bank reported increased loan growth and a higher net interest margin, alongside continued solid credit quality. These results were achieved while preparing for its proposed combination with TriCo Bancshares.
Loan Growth and Margin Improvements
During the quarter, total loans grew by $137 million, representing an annualized growth rate of approximately 3.6%. This growth was primarily driven by commercial and industrial (C&I) lending and commercial real estate (CRE) lending. C&I balances rose by $98 million, largely due to dealer-flooring growth and expansion in the company’s Hawaii corporate portfolio. Additionally, completed construction projects led to the conversion of $95 million in construction loan balances into commercial real estate loans.
Despite some offsetting factors such as construction loan payoffs and lower residential balances, the bank continues to see a "very robust pipeline" in C&I and CRE lending. However, residential lending is expected to remain slow due to the current interest-rate environment.
The net interest margin improved by six basis points to 3.25%, supported by deposit mix and repricing, higher loan and securities yields, and lower cash balances. Management has raised its full-year net interest margin outlook to a range of 3.24%–3.25%, based on expectations for one rate increase later this year. The company also anticipates a third-quarter margin of about 3.27%.
Deposit Trends and Outlook
Total deposits declined by $623 million during the quarter, mainly due to expected public-deposit outflows. Retail deposits remained essentially flat, while commercial deposits fell about $156 million due to seasonal volatility. Public deposits decreased by $467 million, primarily in operating accounts, and public time deposits dropped by $115 million. However, the declines did not reflect lost customer relationships, as municipal partners found alternative investment options.
The company expects retail and commercial deposits to improve in the second half of the year due to seasonal patterns. The noninterest-bearing deposit ratio remained at 32%, and the total cost of deposits declined by two basis points from the first quarter.
Cost Savings and Strategic Focus
First Hawaiian is focused on completing its proposed merger with TriCo Bancshares, which is expected to close near the end of the year. During the regulatory review period, the bank does not expect to conduct share buybacks. Management reaffirmed its target of achieving 25% cost savings from the transaction and emphasized that credit quality remains strong.
The balance sheet is asset-sensitive, with roughly $6 billion of assets expected to reprice immediately following a rate increase based on SOFR. Approximately $3.5 billion to $4 billion of liabilities would also reprice to some degree.
Fees, Expenses, and Credit Quality
Noninterest income totaled $60.3 million, aided by higher bank-owned life insurance (BOLI) income, an excise tax refund, and increased swap fees. The company maintains its full-year noninterest income outlook of about $220 million, with a baseline of approximately $55 million per quarter.
Noninterest expense was $130.4 million, including $4.2 million in costs related to the TriCo transaction. The company expects additional transaction costs in the second half as it moves toward closing and integration. Excluding TriCo-related costs, First Hawaiian expects reported expenses of $515 million to $520 million for the full year.
Chief Risk Officer Lea Nakamura noted that credit performance and credit metrics remained healthy. The allowance for credit losses declined both in dollar terms and relative to coverage, primarily due to a material reduction in classified assets.
Economic Conditions in Hawaii
Chairman, President, and CEO Bob Harrison highlighted the relatively stable economic conditions in Hawaii. The statewide employment rate was 2.5% in May, compared to a national unemployment rate of 4.3%. Total visitor arrivals through May rose 2.9% from a year earlier, driven by visitors from the U.S. mainland and Japan. Year-to-date visitor spending reached $9.7 billion, up 7.5% from 2025 levels.
Hawaii housing prices also remained firm, with the median Oahu single-family home sales price reaching $1.2 million in June, up 10.4% year over year. The median condo price was $528,000, reflecting a 3.5% increase.
Future Outlook and Capital Plans
Harrison stated that First Hawaiian will not repurchase shares during the second quarter and is unlikely to conduct buybacks for the remainder of the year while the TriCo deal proceeds through regulatory review. The company’s common equity tier 1 ratio remained above 13%, according to an analyst's question during the call.
Management reiterated its target of 25% cost savings from the TriCo transaction and confirmed that three TriCo executives—Richard Smith, Dan Bailey, and Peter G. Wiese—are expected to join First Hawaiian’s senior management team.
About First Hawaiian
First Hawaiian, Inc. is the oldest and largest bank in Hawaii, operating as the bank holding company for First Hawaiian Bank. Established in 1858, the company offers a full suite of financial services to individual, business, and institutional clients. Its product portfolio includes consumer and commercial lending, deposit accounts, treasury and cash management, foreign exchange and trade finance, as well as wealth management and trust services.
First Hawaiian serves customers through an extensive network of branches, ATMs, and digital channels across the Hawaiian Islands, Guam, Saipan, and American Samoa.
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