- Key takeaway: Acquiring TriCounties Bank's parent company would give First Hawaiian its first presence on the U.S. mainland in a decade.
- Forward look: The merged company would have $34 billion of assets and 113 branches in Hawaii and California.
- Expert quote: "What we've lacked since our separation from Bank of the West is a branch network to expand client relationships and offer a full suite of product offerings." — First Hawaiian Chairman and CEO Bob Harrison
First Hawaiian clinched an 18-month courtship Monday, announcing a $2 billion, all-stock deal to acquire the $9.95 billion-asset TriCo Bancshares in Chico, California.
The deal gives Honolulu-based First Hawaiian its first physical presence on the U.S. mainland since
First Hawaiian Chairman and CEO Bob Harrison said Monday on a conference call with analysts that the $24.3 billion-asset bank has been an active lender in California since the mid-1990s. "What we've lacked since our separation from Bank of the West is a branch network to expand client relationships and offer a full suite of product offerings," Harrison said.
The deal with TriCo, which operates as TriCounties Bank, addresses that issue.
First Hawaiian would gain 68 branches in Northern and Central California, along with $8.4 billion in customer deposits. It plans to preserve the TriCounties brand and retain key leaders, including CEO Rick Smith, who will join the combined company's board and serve as a senior advisor to Harrison.
Though Smith stopped short of calling TriCo's sale to First Hawaiian an auction, he did say the company "looked carefully" at multiple strategic options, including potential acquisitions.
"For our customers and our bankers, this is a meaningful step forward," Smith said on the conference call. "By joining First Hawaiian, we gain a larger balance sheet and a broader set of products and capabilities. Our bankers will be able to do even more for our customers and communities that have trusted us for decades."
Analysts' reaction to the transaction, which is slated for a fourth-quarter close, was generally positive.
Piper Sandler's Matthew Clark described it in a research note as a "logical pairing" that aligns with First Hawaiian's "long-stated objective of accelerating mainland growth." Raymond James analyst David Feaster said on the conference call that the deal is "financially and strategically compelling."
"These are two good banks" that are being put together, Feaster said.
The combined company will hold $34 billion of assets and $29 billion of deposits, and will operate 113 branches in California and Hawaii. It is expected to generate more than $325 million of capital annually.
First Hawaiian is projecting cost savings of 25% as part of the merger, but Harrison said the Hawaii-based bank plans to maintain all of TriCo's branches. Smith called the opportunity to keep all the branches an important consideration in its decision to sell to First Hawaiian.
"Those things really matter when you talk about retention of key people to make the organization go forward," Smith said on the conference call.
The $2 billion sales price works out to 198% of TriCo's tangible book value. While that is a higher premium than sellers have been receiving in recent deals, TD Cowen analyst Janet Cowen called the acquisition a "strategically sound step," noting that the projected earn-back period is less than three years.
TriCo was founded in 1975 in Chico, located about an hour and a half north of Sacramento. Smith has served as its president and CEO since 1999. He was named chairman in 2024.
First Hawaiian is much older. Its roots stretch back to 1858, when it was founded as Bishop & Company in Honolulu. BNP Parbas acquired First Hawaiian in 1998 and merged it into its BancWest Corp. subsidiary, which also operated Bank of the West.
When BNP Paribas eventually pulled up stakes in its U.S. retail banking business, it sold Bank of the West to BMO Financial Group, and it sold off its stake in First Hawaiian.
About a quarter of First Hawaiian's $14.3 billion-asset loan portfolio is comprised of mainland loans. While that proportion is sure to increase after purchasing TriCo, Hawaii will remain the focal point of the company's operation, Harrison insisted.
"Hawaii is still home. It is still the core of what we're doing on a combined basis," Harrison said on the conference call. "This will actually allow us to continue to grow and build capital and invest now in two places."
