First Hawaiian's NIM Hits Five-Quarter High as TriCo Deal Reshapes Footprint
Net interest margin expanded 6 basis points to 3.25%, the strongest in five quarters, as the Hawaii lender agreed to acquire TriCo Bancshares in a $63.12-a-share all-stock deal.
First Hawaiian (FHB) posted its widest net interest margin in five quarters, with NIM expanding 6 basis points QoQ to 3.25% in Q2 2026. The result reversed a 2 basis-point dip in the prior period and capped a steady climb from the 3.11% trough recorded in Q2 2025. Cost of deposits fell 2 basis points QoQ to 1.20%, extending a multi-quarter decline from the 2.17% level disclosed in late 2025.
The margin tailwind flowed directly to the bottom line. Net income rose 8.3% QoQ to $73.4 million, pushing diluted EPS to $0.60 from $0.55. Return on average assets improved 9 basis points to 1.23%, while return on average tangible common equity climbed to 16.3% from 15.3%.
Loan growth reaccelerated alongside the margin expansion. Gross loans increased roughly $200 million QoQ to $14.6 billion, a faster pace than the $128.3 million added in Q1 and the $183.1 million in Q4 2025. Book value per share reached $23.22, with tangible book value per share of $15.04 reflecting 3% QoQ growth.
The quarterly results arrived alongside a transformational acquisition announcement. First Hawaiian agreed to acquire TriCo Bancshares in an all-stock transaction valued at $63.12 per TriCo share, creating a combined institution with roughly $34 billion in assets and the sixth-largest bank headquartered in the Western U.S.. The deal extends First Hawaiian's funding advantage into California: the pro forma cost of deposits of 1.23% ranks in the top decile among regional banks.
Management projected the combined entity would carry a 12.4% CET1 ratio at close, with 2027 targets of 1.35% or better ROAA, 18%-plus ROATCE, and an efficiency ratio below 50%. Standalone, First Hawaiian's CET1 stood at 13.12% at the end of Q1, down modestly from 13.17% in Q4 2025 as the bank continued repurchasing shares — $32.0 million in Q1, following $26.0 million and $24.0 million in the two prior quarters.
Credit metrics remained benign. Non-performing assets declined to $39.7 million, or 0.27% of loans, in Q1 from $41.0 million (0.29%) in Q4, though the ratio had risen from 0.22% a year earlier. Net charge-offs held at 0.14% of average loans annualized in both Q1 and Q4, up from 0.09% in Q2 2025, tracking a gradual normalization rather than a deterioration. Provision for credit losses had trended between $4.5 million and $7.7 million over the prior four quarters, with the Q4 2025 spike tied to loan growth.
The efficiency ratio widened to 57.8% in Q1 from 55.1% in Q4, pressured by $2.8 million in higher noninterest expense and $2.7 million in lower fee income. Management's sub-50% efficiency target for the combined company signals expectations for meaningful cost saves as TriCo is integrated.
With deposit costs declining, margins expanding, and a California foothold on the horizon, First Hawaiian enters the second half of 2026 with its strongest operating momentum in more than a year — and a deal that, if consummated, would more than double its geographic reach.