First Hawaiian, Inc.

Second-quarter net interest income was $171 million, up $3.5 million from the prior quarter, and net interest margin was 3.25%, up 6 basis points sequentially. Noninterest income was $60.3 million and noninterest expense was $130.4 million, including $4.2 million of TriCo transaction expenses. The effective tax rate was 22.9%, return on average tangible assets was 1.28%, and return on average tangible equity was 16.34%. Total loans increased $137 million in the quarter, while total deposits declined $623 million, mostly due to public deposit outflows. For full-year guidance, management now expects loan growth of 3% to 4%, NIM of 3.24% to 3.25% with third-quarter NIM around 3.27%, noninterest income of about $220 million, and reported expenses of $515 million to $520 million excluding TriCo-related costs.

Bob Harrison emphasized that the quarter was strong, with growth in loans, solid credit quality, and a well-capitalized, liquid balance sheet. He said the balance sheet remains asset sensitive and positioned to benefit from a higher-for-longer rate environment, and he tied much of the loan momentum to C&I and CRE pipelines, especially dealer flooring and construction-to-permanent activity. He also highlighted optimism around the recently announced TriCo Bancshares deal, saying the bank is excited to build a leading Pacific banking franchise.

Jamie Moses focused on the mechanics behind the quarter’s results: total cost of deposits fell 2 basis points, NII rose to $171 million, and NIM improved to 3.25% from the prior quarter due to deposit mix changes, repricing, higher loan and security yields, and lower cash balances. He also noted that public deposits declined by $467 million after being elevated at the end of Q1, and that the remaining public time deposits were only $9 million. On expenses, he said Q2 included $4.2 million of TriCo transaction costs and that more of those expenses should come in the back half of the year; he also said cash will likely stay around the current level and that a 25 bp rate hike would reprice roughly $6 billion of assets and $3.5 billion to $4 billion of liabilities.

Analysts focused on deposit trends, pricing competition, NIM guidance, buybacks, expenses, and the TriCo merger. Management said the deposit decline was expected seasonality and public-fund runoff, not customer loss, and that retail and commercial balances should improve in the back half of the year. On capital, Bob Harrison said share repurchases are unlikely for the rest of the year as the company moves through the regulatory process for TriCo. Management also said the 25% cost savings target for the deal remains in place, and that TriCo’s leadership team will largely stay in place.