TriCo Bancshares ratings placed on watch upgrade after First Hawaiian merger deal

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TriCo on watch after merger deal

Highlights

KBRA placed TriCo Bancshares' BBB+ senior unsecured and BBB subordinated debt ratings on Watch Upgrade after First Hawaiian's July 13, 2026, $2.0 billion acquisition announcement.
The merger is expected to close by end-2026, deliver approximately 6% EPS accretion in 2027, 4.7% tangible book value dilution, and a 2.8-year earnback period.
Combined entity will have $22 billion in loans, $29 billion in deposits, a pro forma CET1 ratio of 12.4%, and significantly expand First Hawaiian's California presence.

Merger terms and ratings actions

As reported by Kroll Bond Rating Agency, KBRA places the senior unsecured debt rating of BBB+ and the subordinated debt rating of BBB for TriCo Bancshares on Watch Upgrade after First Hawaiian announced on July 13, 2026 a definitive agreement to acquire the Chico, California-based lender. KBRA also affirms TriCo’s short-term debt rating at K2 and places the ratings of subsidiary Tri Counties Bank on Watch Upgrade, including its A- deposit and senior unsecured debt ratings, BBB+ subordinated debt rating, and K2 short-term deposit and debt ratings.

The transaction is expected to close by the end of 2026, subject to shareholder and regulatory approvals. It values TriCo at about $2.0 billion, or 1.98 times tangible book value, and is expected to generate roughly 6% earnings-per-share accretion in 2027 with fully phased-in cost savings, while producing 4.7% tangible book value dilution and a 2.8-year crossover earnback period.

Upon closing, existing First Hawaiian shareholders are expected to own about 65% of the combined company, while TriCo shareholders would own about 35%. First Hawaiian says it plans to keep the Tri Counties Bank brand on the mainland and does not expect branch closures tied to the transaction.

California expansion and balance sheet impact

First Hawaiian, long identified with its home market in Hawaii, has maintained mainland lending operations for decades but lacked a significant mainland retail deposit and branch network. TriCo gives the bank immediate scale in California, especially in Northern California and the Central Valley, and on a pro forma basis the combined company would have about $22 billion in loans, $29 billion in deposits and 117 branches, making it the sixth-largest bank headquartered in the Western U.S. by deposits.

The merger also shifts the geographic mix of the balance sheet. Mainland loans would account for about 49% of the pro forma total and mainland deposits about 29%, materially expanding First Hawaiian’s presence beyond Hawaii.

KBRA says capital is expected to remain strong, with a pro forma CET1 ratio of about 12.4% at closing, compared with 13.3% for TriCo and 13.1% for First Hawaiian in the first quarter of 2026. The combined company is expected to generate more than 125 basis points of CET1 capital annually after full cost saves, supporting growth, dividends and potential share repurchases.

Funding and asset quality metrics also remain central to the ratings view. TriCo brings a low-cost, granular deposit base, while the combined company is expected to have a pro forma deposit cost of about 1.23%, around 31% noninterest-bearing deposits, 93% core deposit funding, no brokered deposits and a loan-to-deposit ratio of about 74%. Although TriCo’s portfolio is heavily weighted to commercial real estate and multifamily lending, the combined loan mix would be more diversified, and KBRA says both companies show conservative credit cultures and strong historical asset quality.

Management expects TriCo’s California franchise and local leadership to anchor First Hawaiian’s mainland growth strategy, while First Hawaiian adds products including treasury management, wealth and private banking, specialty finance, international banking, SBA lending, merchant services and cards. Four current TriCo directors, including Chairman, President and CEO Rick Smith, are expected to join the First Hawaiian and First Hawaiian Bank boards, and KBRA says that continuity helps reduce execution risk as it reviews the merged company after closing.

Our earlier coverage of KBRA’s A- insurance financial strength rating for TruSpire Retirement Insurance Company highlighted the insurer’s shift from a legacy run-off block toward building a U.S. retail annuity platform under Malibu Life Holdings. We noted KBRA’s focus on strong capitalization and conservative investments, alongside a capital support agreement requiring the parent to restore the CAL RBC ratio to at least 400% if it falls below that level as new business scales.

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