Q2 2026 First Hawaiian inc Earnings Call

July 24, 2026

Speaker #2: Thank you for standing by, and welcome to the First Hawaiian, Inc. second quarter 2026 earnings conference call. At this time, all participants are in listen-only mode.

Operator: Thank you for standing by, welcome to the First Hawaiian, Inc. Second Quarter 2026 Earnings Conference Call. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you'll need to press star one one on your telephone. If your question has been answered and you'd like to remove yourself from the queue, simply press star one one again. As a reminder, today's program is being recorded. Now I'd like to introduce your host for today's program, Kevin Haseyama, Senior Vice President, Strategic Planning and Investor Relations. Please go ahead, sir.

Speaker #2: This will be a question-and-answer session. To ask a question during the session, you'll need to press star one-one (*)-one-one on your telephone. If your question has been answered and you'd like to remove yourself from the queue, simply press star one-one again.

Speaker #2: As a reminder, today's program is being recorded. And now I'd like to introduce your host for today's program, Kevin Haseyama, Senior Vice President, Strategic Planning and Investor Relations.

Speaker #2: Please go ahead, sir.

Speaker #3: Thank you, Jonathan. And thank you, everyone, for joining us as we review our financial results for the second quarter of 2026. With me today are Bob Harrison, Chairman, President, and CEO; Jamie Moses, Chief Financial Officer; and Lea Nakamura, Chief Risk Officer.

Kevin Haseyama: Thank you, Jonathan. Thank you, everyone, for joining us as we review our financial results for Q2 2026. With me today are Robert Harrison, Chairman, President, and CEO, James Moses, Chief Financial Officer, and Lea Nakamura, Chief Risk Officer. We have prepared a slide presentation that we will refer to in our remarks today. The presentation is available for downloading and viewing on our website at fhb.com in the investor relations section. During today's call, we will be making forward-looking statements, so please refer to slide one for our safe harbor statement. We may also discuss certain non-GAAP financial measures. The appendix to this presentation contains reconciliations of these non-GAAP financial measurements to the most directly comparable GAAP measurements. Now I'll turn the call over to Bob.

Kevin Haseyama: Thank you, Jonathan. Thank you, everyone, for joining us as we review our financial results for Q2 2026. With me today are Bob Harrison, Chairman, President, and CEO, Jamie Moses, Chief Financial Officer, and Lea Nakamura, Chief Risk Officer. We have prepared a slide presentation that we will refer to in our remarks today. The presentation is available for downloading and viewing on our website at fhb.com in the investor relations section. During today's call, we will be making forward-looking statements, so please refer to slide one for our safe harbor statement. We may also discuss certain non-GAAP financial measures. The appendix to this presentation contains reconciliations of these non-GAAP financial measurements to the most directly comparable GAAP measurements. Now I'll turn the call over to Bob.

Speaker #3: We have prepared a slide presentation that we will refer to in our remarks today. The presentation is available for downloading and viewing on our website at fhb.com in the Investor Relations section.

Speaker #3: During today's call, we will be making forward-looking statements, so please refer to slide 1 for our Safe Harbor Statement. We may also discuss certain non-GAAP financial measures.

Speaker #3: The appendix to this presentation contains reconciliations of these non-GAAP financial measurements to the most directly comparable GAAP measurements. And now, I'll turn the call over to Bob.

Speaker #4: Thank you, everyone, for joining us today. I'd like to focus on our strong second-quarter results on today's call, but first, I would like to start with my excitement about our recently announced deal with Trico Bancshares.

Robert Harrison: Thank you everyone for joining us today. I'd like to focus on our strong Q2 results on today's call. First, would like to start with my excitement about our recently announced deal with TriCo Bancshares, I'm looking forward to working with the TriCo team to build a leading Pacific banking franchise. Starting with the local economy, statewide employment rate remained relatively stable at 2.5% in May, compared to the national unemployment rate of 4.3%. Through May, total visitor arrivals were up 2.9% compared to last year, primarily due to more visitors from the US mainland and Japan. Year-to-date spending through May was $9.7 billion, up 7.5% compared to 2025 levels. The housing market remained stable. Median single family home sales price on Oahu in June was $1.2 million, up 10.4% from the prior year.

Bob Harrison: Thank you everyone for joining us today. I'd like to focus on our strong Q2 results on today's call. First, would like to start with my excitement about our recently announced deal with TriCo Bancshares, I'm looking forward to working with the TriCo team to build a leading Pacific banking franchise. Starting with the local economy, statewide employment rate remained relatively stable at 2.5% in May, compared to the national unemployment rate of 4.3%. Through May, total visitor arrivals were up 2.9% compared to last year, primarily due to more visitors from the US mainland and Japan. Year-to-date spending through May was $9.7 billion, up 7.5% compared to 2025 levels. The housing market remained stable. Median single family home sales price on Oahu in June was $1.2 million, up 10.4% from the prior year.

Speaker #4: And I'm looking forward to working with the Trico team to build a leading Pacific banking franchise. Starting with the local economy, the statewide employment rate remained relatively stable at 2.5% in May, compared to the national employment rate of 4.3%.

Speaker #4: Through May, total visitor arrivals were up 2.9% compared to last year, primarily due to more visitors from the U.S. mainland and Japan. Year-to-date spending through May was $9.7 billion, up 7.5% compared to 2025 levels.

Speaker #4: The housing market remained stable. The median single-family home sales price on Oahu in June was $1.2 million, up 10.4% from the prior year. The median condo sales price on Oahu in June was $528,000, up 3.5% from the prior year.

Robert Harrison: The median condo sales price on Oahu in June was $528,000, up 3.5% from the prior year. Turning to slide two, we had a strong start to the year. Loans grew, retail and commercial deposits were down slightly as expected. Credit quality remained solid, and we remain well capitalized. Our profitability measures remain strong with a return on average tangible assets of 1.28% and a return on average tangible equity of 16.34% for the quarter. The effective tax rate in Q2 was 22.9%. Turning to slide three, the balance sheet remains solid. We continue to be well capitalized with ample liquidity. Cash balances were lower in Q2, primarily due to the decline in public deposit balances. Based on our current outlook, we expect to maintain cash balances around this level for the rest of the year.

Bob Harrison: The median condo sales price on Oahu in June was $528,000, up 3.5% from the prior year. Turning to slide two, we had a strong start to the year. Loans grew, retail and commercial deposits were down slightly as expected. Credit quality remained solid, and we remain well capitalized. Our profitability measures remain strong with a return on average tangible assets of 1.28% and a return on average tangible equity of 16.34% for the quarter. The effective tax rate in Q2 was 22.9%. Turning to slide three, the balance sheet remains solid. We continue to be well capitalized with ample liquidity. Cash balances were lower in Q2, primarily due to the decline in public deposit balances. Based on our current outlook, we expect to maintain cash balances around this level for the rest of the year.

Speaker #4: Turning to slide 2, we had a strong start to the year. Loans grew, retail and commercial deposits were down slightly as expected, credit quality remained solid, and we remain well capitalized.

Speaker #4: Our profitability measures remained strong, with a return on average tangible assets of 1.28% and a return on average tangible equity of 16.34% for the quarter.

Speaker #4: The effective tax rate in the second quarter was 22.9%. Turning to slide 3, the balance sheet remained solid. We continue to be well capitalized, with ample liquidity.

Speaker #4: Cash balances were lower in Q2, primarily due to the decline in public deposit balances. Based on our current outlook, we expect to maintain cash balances around this level for the rest of the year.

Speaker #4: The balance sheet remains asset-sensitive and well-positioned to benefit from a higher-for-longer rate scenario. During the quarter, we did not purchase any shares. Turning to slide 4, total loans grew $137 million in the quarter, or about 3.6% on an annualized basis.

Robert Harrison: The balance sheet remains asset sensitive and well positioned to benefit from a higher for longer rate scenario. During the quarter, we did not purchase any shares. Turning to slide four, total loans grew $137 million in the quarter, or about 3.6% on an annualized basis. Growth was led by C&I and CRE loans, partially offset by payoffs in the construction portfolio and lower residential loans, as payoffs exceeded production. The $98 million increase in C&I balances was primarily driven by growth in dealer flooring, as well as our Hawaii corporate portfolio. Completed construction projects led to the conversion of $95 million of construction loan balances to CRE loans. I'll turn it over to Jamie.

Bob Harrison: The balance sheet remains asset sensitive and well positioned to benefit from a higher for longer rate scenario. During the quarter, we did not purchase any shares. Turning to slide four, total loans grew $137 million in the quarter, or about 3.6% on an annualized basis. Growth was led by C&I and CRE loans, partially offset by payoffs in the construction portfolio and lower residential loans, as payoffs exceeded production. The $98 million increase in C&I balances was primarily driven by growth in dealer flooring, as well as our Hawaii corporate portfolio. Completed construction projects led to the conversion of $95 million of construction loan balances to CRE loans. I'll turn it over to Jamie.

Speaker #4: Growth was led by CNI and CRE loans, partially offset by payoffs in the construction portfolio and lower residential loans, as payoffs exceeded production. The $98 million increase in CNI balances was primarily driven by growth in dealer flooring, as well as our Hawaii corporate portfolio.

Speaker #4: Completed construction projects led to the conversion of $95 million of construction loan balances to CRE loans. Now I'll turn it over to Jamie.

Speaker #3: Thanks, Bob. Turning to slide 5, our total cost of deposits fell by 2 basis points in the second quarter. Total deposits were down $623 million, with most of that decline due to outflows of public deposits.

James Moses: Thanks, Bob. Turning to slide five, our total cost of deposits fell by two basis points in Q2. Total deposits were down $623 million, with most of that decline due to outflows of public deposits. Retail deposits were essentially flat in Q2, while commercial deposits were down about $156 million. This decline was consistent with our expectations of seasonal volatility in that segment. Public deposits were down $467 million. The majority of this decline was in the operating accounts, while public time deposits were down by $115 million. That was also expected as we had elevated balances at the end of Q1. The remaining balance of public time deposits is only $9 million. Finally, our non-interest-bearing deposit ratio was 32%. On slide six, net interest income was $171 million, $3.5 million more than the prior quarter.

Jamie Moses: Thanks, Bob. Turning to slide five, our total cost of deposits fell by two basis points in Q2. Total deposits were down $623 million, with most of that decline due to outflows of public deposits. Retail deposits were essentially flat in Q2, while commercial deposits were down about $156 million. This decline was consistent with our expectations of seasonal volatility in that segment. Public deposits were down $467 million. The majority of this decline was in the operating accounts, while public time deposits were down by $115 million. That was also expected as we had elevated balances at the end of Q1. The remaining balance of public time deposits is only $9 million. Finally, our non-interest-bearing deposit ratio was 32%. On slide six, net interest income was $171 million, $3.5 million more than the prior quarter.

Speaker #3: Retail deposits were essentially flat in the second quarter, while commercial deposits were down about $156 million. This decline was consistent with our segment. Public deposits were down $467 million.

Speaker #3: The majority of this decline was in the operating accounts, while public time deposits were down by $115 million. That was also expected, as we had elevated balances at the end of Q1.

Speaker #3: The remaining balance of public time deposits is only $9 million. Finally, our non-interest-bearing deposit ratio was 32%. On slide 6, net interest income was $171 million, $3.5 million more than the prior quarter.

Speaker #3: The NIM in the second quarter was 3.25%, up 6 basis points from the primary excuse me, from the prior quarter. That was primarily due to deposit mix changes and repricing, higher loan and security yields, and lower cash balances.

James Moses: The NIM in Q2 was 3.25%, up six basis points from the prior quarter. That was primarily due to deposit mix changes and repricing, higher loan and security yields, and lower cash balances. Turning to slide seven, non-interest income was $60.3 million, primarily due to higher BOLI income, excise tax refund, and higher swap fees. Non-interest expense in Q2 was $130.4 million. The quarter included $4.2 million of expenses related to the TriCo transaction. We expect to incur more of those expenses in the H2 as we move to close and integration. I'll turn that over to Lea.

Jamie Moses: The NIM in Q2 was 3.25%, up six basis points from the prior quarter. That was primarily due to deposit mix changes and repricing, higher loan and security yields, and lower cash balances. Turning to slide seven, non-interest income was $60.3 million, primarily due to higher BOLI income, excise tax refund, and higher swap fees. Non-interest expense in Q2 was $130.4 million. The quarter included $4.2 million of expenses related to the TriCo transaction. We expect to incur more of those expenses in the H2 as we move to close and integration. I'll turn that over to Lea.

Speaker #3: Turning to slide 7, non-interest income was $60.3 million, primarily due to higher BOLI income, an excise tax refund, and higher swap fees. Non-interest expense in the second quarter was $130.4 million. The quarter included $4.2 million of expenses related to the Trico transaction.

Speaker #3: Now, we expect to incur more of those expenses in the back half of the year as we move to close and integration. And now I'll turn that over to Lea.

Speaker #2: Thank you, Jamie. Moving to slide 8, the bank continued to maintain its strong credit performance and healthy credit metrics in the second quarter. The reduction in the allowance for credit losses, both on a nominal and coverage basis, was driven primarily by a material decrease in classified assets.

Lea Nakamura: Thank you, Jamie. Moving to slide eight, the bank continued to maintain its strong credit performance and healthy credit metrics in Q2. The reduction in the allowance for credit losses, both on a nominal and coverage basis, was driven primarily by a material decrease in classified assets. With that, I'll turn it back over to Bob.

Speaker #2: And with that, I'll turn it back over to Bob.

Speaker #4: Thank you, Lea. Going to slide 9, we have an updated outlook for our key performance drivers. We continue to expect full-year loan growth to be in the 3 to 4 percent range.

Robert Harrison: Thank you, Lea. Going to slide nine, we have updated outlook for our key performance drivers. We continue to expect full year loan growth to be in the 3% to 4% range. With the markets now expecting one rate increase later this year, we have revised our full year NIM outlook to be in the 3.24% to 3.25% range. We also expect Q3 NIM to be about 3.27%. Our outlook for non-interest income remains unchanged at about $220 million for the year. Finally, we expect reported expenses to be between $515 to 520 million, excluding expenses related to the TriCo transaction. In closing, we had another good quarter. The bank continues to perform well, and credit quality is still strong. We're very excited about our partnership with TriCo Bancshares, which is expected to close near the end of the year.

Bob Harrison: Thank you, Lea. Going to slide nine, we have updated outlook for our key performance drivers. We continue to expect full year loan growth to be in the 3% to 4% range. With the markets now expecting one rate increase later this year, we have revised our full year NIM outlook to be in the 3.24% to 3.25% range. We also expect Q3 NIM to be about 3.27%. Our outlook for non-interest income remains unchanged at about $220 million for the year. Finally, we expect reported expenses to be between $515 to 520 million, excluding expenses related to the TriCo transaction. In closing, we had another good quarter. The bank continues to perform well, and credit quality is still strong. We're very excited about our partnership with TriCo Bancshares, which is expected to close near the end of the year.

Speaker #4: With the markets now expecting one rate increase later this year, we have revised our full-year NIM outlook to be in the 3.24 to 3.25 percent range.

Speaker #4: We also expect the third-quarter NIM to be about 3.27%. Our outlook for non-interest income remains unchanged at about $220 million for the year.

Speaker #4: And finally, we expect reported expenses to be between $515 and $520 million, excluding expenses related to the Trico transaction. In closing, we had another good quarter.

Speaker #4: The bank continues to perform well, and credit quality is still strong. We're very excited about our partnership with TriCo Bancshares, which is expected to close near the end of the year.

Speaker #4: Given that we recently announced a transaction, we don't have any new information at this time, besides what we presented on our July 23rd investor call.

Robert Harrison: Given that we recently announced the transaction, we don't have any new information at this time besides what we presented on our 23 July investor call. We are focused on the work needed to be done to complete it, and we'll continue to keep investors informed through our public filings and communications. Now we are happy to take your questions.

Bob Harrison: Given that we recently announced the transaction, we don't have any new information at this time besides what we presented on our 23 July investor call. We are focused on the work needed to be done to complete it, and we'll continue to keep investors informed through our public filings and communications. Now we are happy to take your questions.

Speaker #4: We are focused on the work needed to be done to complete it, and we'll continue to keep investors informed through our public filings and communications.

Speaker #4: Now, we are happy to take your questions.

Speaker #1: Certainly. And our first question for today comes from the line of Kelly Motta with KBW. Your question, please.

Operator: Certainly. Our first question for today comes from the line of Kelly Motta from KBW. Your question please.

Speaker #5: Hey, thank you for the question. Maybe to kick it off, on what you're seeing on the deposit side—the declining deposits, as you noted, was mostly on the government deposits.

Kelly Motta: Thank you for the question. Maybe to kick it off on what you're seeing on the deposit side. The kind of deposits, as you noted, was mostly on the government deposits. I know some of them are CDs and some might be more operating accounts. Can you discuss what you saw there? Otherwise, the core trends of retail and commercial, what those trends were and kind of how you're seeing activity shape up here as we look to H2.

Speaker #5: I know some of them are CDs, and some might be more operating accounts. Can you discuss kind of what you saw there? And then, otherwise, the core trends of retail and commercial—what those trends were, and kind of how you're seeing activity shape up here as we look to the back half of the year?

James Moses: Yeah. Kelly, thanks. It's Jamie. The government deposits were elevated, I'll call it, at the end of Q1 in our operating accounts. We kind of expected that decline to happen there. This was not about a loss of relationships or anything. The time deposits related to those were kind of they left, they rolled off our balance sheet, and I think our partners on the municipal side found better ways to invest that money off of our balance sheet, which is fine with us as well. When we go towards the retail and commercial side of things, we have this seasonality, I'll call it, where we kind of decline deposits in H1, we'll expect to have those deposits increase in H2 just from a seasonality perspective.

Jamie Moses: Yeah. Kelly, thanks. It's Jamie. The government deposits were elevated, I'll call it, at the end of Q1 in our operating accounts. We kind of expected that decline to happen there. This was not about a loss of relationships or anything. The time deposits related to those were kind of they left, they rolled off our balance sheet, and I think our partners on the municipal side found better ways to invest that money off of our balance sheet, which is fine with us as well. When we go towards the retail and commercial side of things, we have this seasonality, I'll call it, where we kind of decline deposits in H1 of the year, we'll expect to have those deposits increase in H2 just from a seasonality perspective.

Speaker #3: Yeah, Kelly. Thanks, Jamie. 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.

Speaker #3: This was not about a loss of relationships or anything. The time deposits related to those were kind of, they just left—they rolled off our balance sheet. I think our partners on the municipal side found better ways to invest that money, off of our balance sheet, which is fine with us as well.

Speaker #3: When we go towards the retail and commercial side of things, we have this seasonality, I'll call it, where we kind of decline in deposits in the first half of the year, and then we'll expect to have those deposits increase in the back half of the year, just from a seasonality perspective.

James Moses: For some reason, we see that a lot on the commercial side where balances kind of build through Q3 and Q4. Yeah, I think from a deposit perspective, we're happy with where we're at. The teams are doing a great job out there getting involved with their customers and retaining them. None of these declines were losses of customers or anything like that. I think it was just more flows that we saw than anything else.

Jamie Moses: For some reason, we see that a lot on the commercial side where balances kind of build through Q3 and Q4. Yeah, I think from a deposit perspective, we're happy with where we're at. The teams are doing a great job out there getting involved with their customers and retaining them. None of these declines were losses of customers or anything like that. I think it was just more flows that we saw than anything else.

Speaker #3: For some reason, we see that a lot on the commercial side, where balances kind of build through the third and fourth quarter. So, yeah, I think from a deposit perspective, we're happy with where we're at.

Speaker #3: The teams are doing a great job out there, getting involved with their customers and retaining them. And none of these declines were like losses of customers or anything like that.

Speaker #3: I think it was just more flows that we saw than anything else.

Speaker #5: Got it, that's helpful. And maybe you could speak to pricing competition on both sides of the balance sheet; Hawaii has historically been structurally just a more rational market.

Kelly Motta: Got it. That's helpful. Maybe you could speak to pricing competition on both sides of the balance sheet. Hawaii has historically been a structurally just more rational market. Wondering if you could offer any color both on loan pricing and deposit pricing as to how those are coming in and what you expect here. With the Fed on hold or potentially get a hike here. Thanks.

Speaker #5: So, wondering if you could offer any color both on loan pricing and deposit pricing—how those are coming in, and what you expect here if the Fed stays on hold, or if we potentially get a hike.

Speaker #5: Thanks.

Speaker #3: Yeah, we are seeing the same type of competition that we've always seen. And so, as you described it as rational, that works for me.

James Moses: Yeah. We are seeing the same type of competition that we've always seen. As you described it as rational, that works for me. I think that there hasn't really been any change in that. With the Fed on hold and maybe looking higher, there's a decent chance that we're kind of at the bottom in terms of deposit cost in totality on our side of things. I think peers on the mainland, you've seen a little bit of a different reaction. I think it's a lot more competitive there. Maybe you see some deposit costs rising there. For us, maybe we're going to keep it flat, maybe up a little bit as we go forward. The competition is basically staying the same here, I would say, on the deposit side.

Jamie Moses: Yeah. We are seeing the same type of competition that we've always seen. As you described it as rational, that works for me. I think that there hasn't really been any change in that. With the Fed on hold and maybe looking higher, there's a decent chance that we're kind of at the bottom in terms of deposit cost in totality on our side of things. I think peers on the mainland, you've seen a little bit of a different reaction. I think it's a lot more competitive there. Maybe you see some deposit costs rising there. For us, maybe we're going to keep it flat, maybe up a little bit as we go forward. The competition is basically staying the same here, I would say, on the deposit side.

Speaker #3: I think that there hasn't really been any change in that. But with the Fed on hold and maybe looking higher, there's a decent chance that we're kind of at the bottom in terms of deposit cost in totality on our side of things.

Speaker #3: I think peers on the mainland, you've seen a little bit of a different reaction. I think it's a lot more competitive there, and so maybe you see some deposit costs rising there.

Speaker #3: For us, maybe we're going to keep it flat, maybe up a little bit as we go forward. But the competition is basically staying the same here, I would say, on the deposit side.

Speaker #5: Got it, that's helpful. Maybe last question from me. You had some nice loan growth and reiterated the outlook. As you look ahead, how are pipelines, and what areas do you see informing growth in the back half of the year?

Kelly Motta: Got it. That's helpful. Maybe last question for me. You had some nice loan growth, reiterated the outlook. As you look ahead, how are pipelines and what areas do you see informing the H2 growth? Thanks.

Speaker #5: Thanks.

Speaker #4: Kelly, this is Bob. We still see a very robust pipeline in both the CNI and CRE. The CRE is, again, mostly construction, and some of that turns into permanent.

Robert Harrison: Kelly, this is Bob. We still see a very robust pipeline in both the C&I and CRE. The CRE is again mostly construction. Some of that turns into permanent. For the C&I, we're really seeing strength in the dealer side. Not only are existing customers growing their balances incrementally, but also working on a couple new customer relationships. That's where we're really seeing it. The residential side continues slow given the rate environment. We probably won't see much in residential.

Bob Harrison: Kelly, this is Bob. We still see a very robust pipeline in both the C&I and CRE. The CRE is again mostly construction. Some of that turns into permanent. For the C&I, we're really seeing strength in the dealer side. Not only are existing customers growing their balances incrementally, but also working on a couple new customer relationships. That's where we're really seeing it. The residential side continues slow given the rate environment. We probably won't see much in residential.

Speaker #4: For the CNI, we're really seeing strength on the dealer side. So not only are our existing customers growing their balances incrementally, but we're also working on a couple of new customer relationships.

Speaker #4: So that's what we're really seeing. The residential side continues to be slow given the rate environment, so we probably won't see much in residential.

Speaker #5: Great, thank you so much. I'll step back.

Kelly Motta: Great. Thank you so much. I'll step back.

Speaker #1: Thank you. And our next question comes from the line of Anthony Elion from J.P. Morgan. Your question, please.

Operator: Thank you. Our next question comes from the line of Anthony Elian from J.P. Morgan. Your question please.

Speaker #6: Hi everyone. On the NIM outlook, Jamie, you lifted the range by a few basis points. I think you said you're now including a hike in Q2. NIM came in better than you guided to.

Anthony Elian: Hi, everyone. On the NIM outlook, Jamie, you lifted the range by a few basis points. I think you said you're now including a hike and Q2 NIM came in better than you guided to. Anything else you'd point us to for the higher range for the full year?

Speaker #6: Anything else you can point us to for the higher range for the full year?

Speaker #3: No, I think that really describes it, Tony. The balance sheet repricing dynamics continue to exist here, so as we've described a number of times, roughly $400 million a quarter.

James Moses: No, I think that really describes it, Tony. The balance sheet repricing dynamics continue to exist here. As we've described a number of times, roughly $400 million a quarter. We think that spread in Q2 was about 140 basis points on the roll-on/roll-off, and we think somewhere in the neighborhood of 140 to 150 is, depending on the mix of those cash flows that come off the balance sheet. We think that'll continue to play out from that perspective. I think it really is just a change in outlook on the macro side of things that's driving an update to our NIM.

Jamie Moses: No, I think that really describes it, Tony. The balance sheet repricing dynamics continue to exist here. As we've described a number of times, roughly $400 million a quarter. We think that spread in Q2 was about 140 basis points on the roll-on/roll-off, and we think somewhere in the neighborhood of 140 to 150 is, depending on the mix of those cash flows that come off the balance sheet. We think that'll continue to play out from that perspective. I think it really is just a change in outlook on the macro side of things that's driving an update to our NIM.

Speaker #3: We think that spread in Q2 was about 140 basis points on the roll-on, roll-off. And we think somewhere in the neighborhood of 140 to 150, depending on the mix of those cash flows that come off the balance sheet.

Speaker #3: We think that'll continue to play out from that perspective. So I think it really is just a change in outlook on the macro side of things that's driving an update to our NIM.

Speaker #6: Okay. And then, on capital—you didn't buy back any shares in Q2, but your CET1 is still above 13%. How should we think about buybacks as you work through the TriCo deal close?

Anthony Elian: Okay. On capital, you didn't buy back any shares in Q2, but your CET1 is still above 13%. How should we think about buybacks as you work through the TriCo deal close? Thank you.

Speaker #6: Thank you.

Speaker #4: Tony, this is Bob. Good morning. We're probably not going to do buybacks throughout the rest of the year. Of course, that could change. We have the authorization.

Robert Harrison: Tony, this is Bob. Good morning. We're probably not going to do buybacks throughout the rest of the year. Of course, that could change. We have the authorization, as we go into the transaction, go through the regulatory process, it's unlikely.

Bob Harrison: Tony, this is Bob. Good morning. We're probably not going to do buybacks throughout the rest of the year. Of course, that could change. We have the authorization, as we go into the transaction, go through the regulatory process, it's unlikely.

Speaker #4: But as we go into the transaction and go through the regulatory process, it's unlikely.

Speaker #6: Thank you.

Anthony Elian: Thank you.

Speaker #1: Thank you. And our next question comes from the line of Andrew Terrell from Stevens. Your question, please.

Operator: Thank you. Our next question comes from the line of Andrew Terrell from Stephens. Your question please.

Andrew Terrell: Hey, good morning.

Speaker #7: Hey, good morning.

Speaker #4: Good morning.

Robert Harrison: Morning.

Bob Harrison: Morning.

Speaker #7: I just want to click one for me. You guys have done a great job on expenses. So far this year, if I look at just the midpoint of the full-year guide, it kind of implies you step up to a $130 million-ish, maybe a little north, expense run rate in the back half of the year.

Andrew Terrell: Just one quick one for me. You guys have done a great job on expenses so far this year. If I look at just the midpoint of the full year guide, it kind of implies you step up to like a $130-ish, maybe a little north expense run rate in H2. I just wanted to run that kind of run rate by you, and if that is the case, what kind of drives the expense pickup in H2?

Speaker #7: I just wanted to run that kind of run rate by you, and if that is the case, what drives the expense pickup in the back half of the year?

Speaker #3: Yeah, a couple of things, Andrew. We're going to continue to hire people. We want to make sure we continue to keep our loan pipelines robust.

James Moses: Yeah. A couple of things, Andrew. We're going to continue to hire people. We want to make sure we continue to keep our loan pipelines robust. We want to make sure we have folks out there to, investments that we're making in people to grow the balance sheet, on the one hand. We also have some projects and things like that won't finalize until H2. These expenses capitalize and go, then start to show up when they finish up. You'll see it on the salary side, but also on the professional services and IT side of things as well.

Jamie Moses: Yeah. A couple of things, Andrew. We're going to continue to hire people. We want to make sure we continue to keep our loan pipelines robust. We want to make sure we have folks out there to, investments that we're making in people to grow the balance sheet, on the one hand. We also have some projects and things like that won't finalize until H2. These expenses capitalize and go, then start to show up when they finish up. You'll see it on the salary side, but also on the professional services and IT side of things as well.

Speaker #3: We want to make sure we have folks out there for the investments that we're making in people to grow the balance sheet on the one hand.

Speaker #3: And then we also have some projects and things like that, that won't finalize until the back half of the year. And so then these expenses capitalize and go, and then start to show up when they finish up.

Speaker #3: So you're going to see it—you'll see it on the salary side, but then also on the professional services and IT side of things as well.

Speaker #7: Okay, great. And actually, while I've got you, on the margin, can you just remind us which meeting you have the hike in the guidance in?

Andrew Terrell: Okay. Great. Actually, while I've got you, on the margin, can you just remind us?

James Moses: Yeah

Jamie Moses: Yeah

Andrew Terrell: Which meeting do you have the hike in the guidance in? Are you going to quantify just the sensitivity of the balance sheet in terms of what a 25 basis point rate hike does to the margin, just with that square models with the guide?

Speaker #7: And are you able to quantify just the sensitivity of the balance sheet in terms of what a 25 basis point rate hike does to the margin versus without that square?

Speaker #7: Square models with the guide.

Speaker #3: Yep. So I think the right way to think about your last question there is that we have about $6 billion of assets that will reprice immediately.

James Moses: Yep. I think the right way to think about your last question there is that we have 6 billion or so of assets that will reprice immediately upon an increase, based on SOFR, roughly. We have three and a half to 4 billion of liabilities that we would expect that would reprice somewhat immediately around that. From an NII perspective, I think that's probably the right way to think about it for an increase in 25 basis points. I'm sorry, Andrew, I can't remember the first part of your question.

Jamie Moses: Yep. I think the right way to think about your last question there is that we have 6 billion or so of assets that will reprice immediately upon an increase, based on SOFR, roughly. We have three and a half to 4 billion of liabilities that we would expect that would reprice somewhat immediately around that. From an NII perspective, I think that's probably the right way to think about it for an increase in 25 basis points. I'm sorry, Andrew, I can't remember the first part of your question.

Speaker #3: Upon an increase, based on SOFR, roughly. And then we have $3.5 to $4 billion of liabilities that we would expect would reprice somewhat immediately around that.

Speaker #3: So from an NII perspective, I think that's probably the right way to think about it for an increase of 25 basis points. And then—I'm sorry, Andrew.

Speaker #3: I can't remember the first part of your question.

Robert Harrison: You're running blind. Yeah.

Bob Harrison: You're running blind. Yeah.

Speaker #7: No, I think that covers it. Just trying to see which part of which Fed meeting you had in the guide?

Andrew Terrell: No, I think that covers it. Just trying to.

James Moses: Okay

Jamie Moses: Okay

Andrew Terrell: Which Fed meeting did you have in the guide?

Speaker #3: No, I think it was—I think it's in the fourth quarter. I think early in the fourth quarter is when we had it.

James Moses: No, I think it's in Q4. I think early in Q4 is when we had it.

Jamie Moses: No, I think it's in Q4. I think early in Q4 is when we had it.

Speaker #7: Okay, awesome. Thank you so much.

Andrew Terrell: Okay. Awesome. Thank you so much.

Speaker #1: Thank you. And our next question comes from the line of Jared Shaw from Barclays. Your question, please.

Operator: Thank you. Our next question comes from the line of Jared Shaw from Barclays. Your question please.

Speaker #8: Hey there, good morning. I just have one comment, Bob, at the beginning. You said you saw an increase in tourism from Japan. With the currency rate here being so low, I guess that's encouraging.

Jared Shaw: Hey there. Good morning. I guess actually just one comment, Bob. At the beginning, you said you saw an increase in tourism from Japan. I guess, with the currency rate here being so low, I guess that's encouraging. What sort of driving do you think the increased traffic from there?

Speaker #8: I mean, is that what's sort of driving, do you think, the increased traffic from there?

Robert Harrison: I don't have a precise answer, but just talking to people in the industry, you're just seeing more enthusiasm, I guess, for the economy over there, and there's still people that have means to travel. I guess they've just decided to stop waiting and start traveling. It's incremental off of a lower base, so we're not anywhere near the pre-COVID number. We're up from the bottom that we had hit, and every additional traveler from Japan is welcome because they're just very good travelers and guests, and they really enjoy Hawaii. Yeah, it's difficult. 160 plus exchange rate is not easy for them.

Bob Harrison: I don't have a precise answer, but just talking to people in the industry, you're just seeing more enthusiasm, I guess, for the economy over there, and there's still people that have means to travel. I guess they've just decided to stop waiting and start traveling. It's incremental off of a lower base, so we're not anywhere near the pre-COVID number. We're up from the bottom that we had hit, and every additional traveler from Japan is welcome because they're just very good travelers and guests, and they really enjoy Hawaii. Yeah, it's difficult. 160 plus exchange rate is not easy for them.

Speaker #4: Yeah, I don't have a precise answer, but just talking to people in the industry, you're just seeing more enthusiasm, I guess, for the economy over there.

Speaker #4: And there are still people who have the means to travel, and I guess they've just decided to stop waiting and start traveling. But it's incremental, off of a lower base.

Speaker #4: So we're not anywhere near the pre-COVID numbers, but we're up from the bottom that we had hit. And every additional traveler from Japan is welcome, because they're just very good travelers and guests.

Speaker #4: And they really enjoy Hawaii. So, yeah, it's difficult. A 160-plus exchange rate is not easy for them.

Speaker #8: Yeah. Okay, thanks. And then on BOLI, you called out the BOLI increase. Is that a death benefit, or is that just a result of your higher deployed capital in the BOLI?

Jared Shaw: Yeah. Okay, thanks. Then on BOLI, you called out the BOLI increase. Is that a death benefit or is that just a result of sort of your higher deployed capital into BOLI?

Speaker #3: Yeah. Thanks, Jared. So, what that is, is we still have a component of our BOLI product that is sensitive to the markets. And so, we write it up and we write it down depending on how markets are going.

James Moses: Yeah. Thanks, Jared. What that is we still have a component of our BOLI product that is sensitive to actual markets. We write it up, and we write it down depending on how markets are going. That was a market impact on our BOLI this quarter.

Jamie Moses: Yeah. Thanks, Jared. What that is we still have a component of our BOLI product that is sensitive to actual markets. We write it up, and we write it down depending on how markets are going. That was a market impact on our BOLI this quarter.

Speaker #3: And so, that was a market impact on our BOLI this quarter.

Speaker #8: Okay. And then finally, I guess just as you're doing more work on the deal, have you given any thought to how your management structure may change to reflect the bigger presence in the mainland? And going forward, I guess, how much time do you think, Bob, you're going to be spending sort of off-island versus before?

Jared Shaw: Okay. Then finally, as you're doing more work on the deal, have you given any thought to how your management structure may change to reflect the bigger presence in the mainland? Going forward, how much time do you think, Bob, you're going to be spending off island versus before?

Speaker #4: People accuse me of not being here enough already. We have three members of their team joining our senior management team: Rick Smith, Dan Bailey, and Priti Rees.

Robert Harrison: People accuse me of not being here enough already. We have three members of their team joining our senior management team. Rick Smith, Dan Bailey, and Peter Wiese. As far as my time, I've been on the Federal Advisory Council now for three years, and I'll be rolling off. That's four to six trips a year to the West Coast, to the East Coast. Those trips will probably be redirected to California. It'll be pretty much the same as it is now, I would think.

Bob Harrison: People accuse me of not being here enough already. We have three members of their team joining our senior management team. Rick Smith, Dan Bailey, and Peter Wiese. As far as my time, I've been on the Federal Advisory Council now for three years, and I'll be rolling off. That's four to six trips a year to the West Coast, to the East Coast. Those trips will probably be redirected to California. It'll be pretty much the same as it is now, I would think.

Speaker #4: And as far as my time, I've been on the Federal Advisory Council now for three years. I'll be rolling off, so that's four to six trips a year to the West Coast or East Coast.

Speaker #4: So those trips will probably be redirected to California. But it'll be pretty much the same as it is now, I would think.

Speaker #8: Okay. Thanks a lot.

Jared Shaw: Okay. Thanks a lot.

Speaker #1: Thank you. And our next question comes from the line of Tim Mitchell from Raymond James. Your question, please.

Operator: Thank you. Our next question comes from the line of Tim Mitchell from Raymond James. Your question please.

Tim Mitchell: Hey, good morning, everyone. This is Tim on for David. One question on the deal. How has reception been from the TriCo bankers and clients since you guys announced the deal? What has your messaging been to them? Similar to Jared's question, what is your plan as it relates to letting that team operate maybe more independently than we see in most bank mergers, just given the unique nature of the transaction? Thank you.

Speaker #5: Hey, good morning, everyone. This is Tim Owen for David. One question on the deal: How has reception been from the Trico bankers and clients since you guys announced the deal?

Speaker #5: And kind of what has your messaging been to them? And, similar to Jared's question, what is your plan as it relates to letting that team operate, maybe more independently than we see in most bank mergers?

Speaker #5: Just given the unique nature of the transaction. Thank you.

Speaker #4: Yeah. Thanks for the question. And some of this, a good amount of this will be in the proxy, but just to maybe cover what we talked about last week, one of the reasons we like Trico so much is they have a strong management team.

Robert Harrison: Yeah. Thanks for the question. A good amount of this will be in the proxy, but just to maybe cover what we had talked about last week. One of the reasons we like TriCo so much is they have a strong management team, and we're planning on keeping most of them there. We're there to support them. We're here to learn from each other. They have a great bank, and they run it well, so that's what we're leveraging.

Bob Harrison: Yeah. Thanks for the question. A good amount of this will be in the proxy, but just to maybe cover what we had talked about last week. One of the reasons we like TriCo so much is they have a strong management team, and we're planning on keeping most of them there. We're there to support them. We're here to learn from each other. They have a great bank, and they run it well, so that's what we're leveraging.

Speaker #4: And we're planning on keeping most of them there. So we're there to support them. We're here to learn from each other. But they have a great bank and they run it well.

Speaker #4: So that's what we're leveraging.

Speaker #5: Okay, great. And then, just kind of on the earlier point of that question, regarding the reception from conversations with bankers and clients since the deal was announced, do you have any update on that?

Tim Mitchell: Okay, great. Just on the earlier point, I had a question, reception from conversations with bankers and clients since the deal was announced. Do you have any update to that?

Speaker #4: Yeah, we're still doing the outreach, and we can talk about that, I think, better at a later date. But I'll be up there in a few more weeks—a couple of weeks from now—to meet many of their employees I haven't already met, and I'm looking forward to doing that.

Robert Harrison: Yeah. We're still doing the outreach, and we can talk about that, I think, better at a later date. I'll be up there in a few more weeks, a couple of weeks from now, to meet many of their employees I haven't already met, and I'm looking forward to doing that.

Bob Harrison: Yeah. We're still doing the outreach, and we can talk about that, I think, better at a later date. I'll be up there in a few more weeks, a couple of weeks from now, to meet many of their employees I haven't already met, and I'm looking forward to doing that.

Speaker #5: Awesome. Thanks, Jake. My questions.

Tim Mitchell: Awesome. Thanks, Jake. My questions.

Tim Mitchell: Awesome. Thanks, take my questions.

Speaker #1: Thank you. And our next question comes from the line of Andrew Leach from StoneX Group. Your question, please.

Operator: Thank you. Our next question comes from the line of Andrew Liesch from StoneX Group. Your question please.

Speaker #6: Hey, everyone. Good morning. Just to put a fine point on the fee income guide, should this imply a step down towards like $54 or $53 million for the next two quarters?

Andrew Liesch: Hey, everyone. Good morning. Just to put a fine point on the fee income guide. Does this imply a step down towards $54 or $53 million for the next two quarters?

Speaker #3: I think that's... we always struggle with this one, Andrew, right? Because we have these— we have these things that show up every now and then.

James Moses: We always struggle with this one, Andrew, right?

Jamie Moses: We always struggle with this one, Andrew, right?

Andrew Liesch: Yeah.

James Moses: Because we have these things that show up every now and then. It's hard to forecast the timing of those things. I think when you look at what we had in Q1 and what we had here in Q2, you come pretty close to about what we've been expecting for the full year guide of $220 million. I wouldn't categorize it as a step down or anything like that. I would just categorize it as it's hard to forecast some of these one-off, one-time things that seem to happen at different points of the year. We generally think our number is about $55 million a quarter. There'll be some times when things show up and you kick that up a little bit, and sometimes things don't appear and kick that down a little bit.

Jamie Moses: Because we have these things that show up every now and then. It's hard to forecast the timing of those things. I think when you look at what we had in Q1 and what we had here in Q2, you come pretty close to about what we've been expecting for the full year guide of $220 million. I wouldn't categorize it as a step down or anything like that. I would just categorize it as it's hard to forecast some of these one-off, one-time things that seem to happen at different points of the year. We generally think our number is about $55 million a quarter. There'll be some times when things show up and you kick that up a little bit, and sometimes things don't appear and kick that down a little bit.

Speaker #3: So hard to forecast the timing of those things. I think when you look at you look at what we had in the first quarter and what we had here in the second quarter, you come pretty close to about what we would what we've been expecting for the full year guide of 220 million.

Speaker #3: And so I wouldn't categorize it as a step down or anything like that. I would just categorize it as—it's hard to forecast some of these one-off, one-time things that seem to happen.

Speaker #3: At different points in the year. So I think we generally think our numbers are about $55 million a quarter. And there'll be some times when things show up and kick that up a little bit and sometimes things don't appear and kick that down a little bit.

Speaker #6: Got it. All right. That makes sense. Just on the size of the average earning assets here going forward—you started the quarter with less cash on hand or interest-bearing cash, as you did the prior quarter.

Andrew Liesch: Got it. All right. That makes sense. Just on the size of average earning assets here going forward, you started the quarter with less cash on hand or interest-bearing cash as you did the prior quarter. I guess, has that started to rebuild with deposits coming back in? Just trying to get a sense on what average earning assets should shake out for Q3.

Speaker #6: I guess, has that started to rebuild with deposits coming back in? Just trying to get a sense of what average earning assets should shake out to for the third quarter.

Speaker #3: Yeah, no, I think we're probably going to run the cash at about where we're at—where you saw it at the end of the second quarter.

James Moses: Yeah. No, I think we're probably going to run the cash at about where you saw it at the end of Q2. I think in general, what you're going to see is just a slightly smaller asset size, but that's based on the cash, right? We still expect to see some pretty good loan growth in the back half of the year. Probably run the cash balances at about this $1 billion level.

Jamie Moses: Yeah. No, I think we're probably going to run the cash at about where you saw it at the end of Q2. I think in general, what you're going to see is just a slightly smaller asset size, but that's based on the cash, right? We still expect to see some pretty good loan growth in the back half of the year. Probably run the cash balances at about this $1 billion level.

Speaker #3: So I think, in general, what you're going to see is just a slightly smaller asset size, but that's based on cash, right? We still expect to see some pretty good loan growth in the back half of the year.

Speaker #3: So, probably run the cash balances at about this $1 billion level.

Speaker #6: Got it. That covers all my questions. Thanks so much.

Andrew Liesch: Got it. That covers all my questions. Thanks so much.

Speaker #1: Thank you. And our next question comes from the line of Matthew Clark from Piper Sandler. Your question, please.

Operator: Thank you. Our next question comes from the line of Matthew Clark from Piper Sandler. Your question please.

Speaker #7: Hey, good morning, everyone. I heard your commentary on deposit costs, but I just wondered what the spot rate was at the end of June.

Matthew Clark: Hey, good morning, everyone. Heard your commentary on deposit costs, just wondered what the spot rate was at the end of June.

Speaker #3: It was 121.

James Moses: It was 121.

Jamie Moses: It was 121.

Speaker #7: Okay, got it. Got it. Okay. And then, just maybe since everything else has been asked, I think, just back to the merger—any update on the 25% cost savings target?

Matthew Clark: Okay. Got it. Just maybe since everything else has been asked, I think, just back to the merger, any update on the 25% cost savings target? I'm assuming you're kind of still working through that, would love to hear where you expect the bulk of that to come from.

Speaker #7: I'm assuming you're still working through that, but I would love to hear where you expect the bulk of that to come from.

Speaker #3: Yeah. I mean, I think we kind of covered that on the deal announcement call. No real update on that 25% remains the target. And we feel comfortable that we'll be able to get there through a variety of through a variety of ways.

James Moses: Yeah, I think we kind of covered that on the deal announcement call. No real update on that. 25% remains the target, we feel comfortable that we'll be able to get there through a variety of ways. We're just very excited to get working with our partners over there at TriCo.

Jamie Moses: Yeah, I think we kind of covered that on the deal announcement call. No real update on that. 25% remains the target, we feel comfortable that we'll be able to get there through a variety of ways. We're just very excited to get working with our partners over there at TriCo.

Speaker #3: So we're just very excited to get working with our partners over there at Trico.

Speaker #7: Fair enough. Thanks.

Matthew Clark: Fair enough. Thanks.

Speaker #1: Thank you. This does conclude the question and answer session of today's program. I'd like to hand the program back to Kevin Haseyama for any further remarks.

Operator: Thank you. This does conclude the question and answer session of today's program. I'd like to hand the program back to Kevin Haseyama for any further remarks.

Speaker #4: We appreciate your interest in First Hawaiian. Please feel free to contact me if you have any additional questions. Thanks again for joining us, and have a good weekend.

Kevin Haseyama: We appreciate your interest in First Hawaiian, and please feel free to contact me if you have any additional questions. Thanks again for joining us, and have a good weekend.

Operator: Thank you, ladies and gentlemen, for your participation in today's conference. This does conclude the program. You may now disconnect. Good day.

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