First Hawaiian (NASDAQ:FHB) reported third-quarter financial results on Friday. The transcript from the company’s third-quarter earnings call has been provided below.
This transcript is brought to you by Benzinga APIs. For real-time access to our entire catalog, please visit https://www.benzinga.com/apis/ for a consultation.
View the webcast at https://edge.media-server.com/mmc/p/gs2zqm6u/
Summary
First Hawaiian is progressing well with its acquisition and expects to close within the quarter after obtaining necessary approvals.
The local economy faces challenges from higher energy costs and active storms, but unemployment remains low at 2.8%, and the visitor industry is resilient.
Net interest income increased, deposit balances grew, and the margin improved by 5 basis points, while noninterest expenses were below expectations.
A tax settlement with California resulted in a $24.3 million expense but also a $31 million tax benefit.
Total loans declined by $115 million due to unexpected CRE loan payoffs and a decline in residential loans, but the balance sheet remains strong and well-capitalized.
The company expects reduced loan growth for the full year at 1-2%, down from previous guidance of 3-4%, but anticipates benefiting from a higher interest rate environment.
The integration with TriCo is underway with a focus on minimizing execution risk, and the merger is expected to enhance growth opportunities.
Management emphasizes the importance of letting TriCo maintain its operational strengths while integrating the two banks.
Noninterest income is forecasted to remain stable, and expenses are expected to be lower than initially projected, excluding merger-related costs.
Concerns over office and CRE loans were addressed, noting specific challenges in Seattle but confidence in the overall health of the loan portfolio.
Full Transcript
OPERATOR
Thank you for standing by, and welcome to First Hawaiian’s third quarter 2026 earnings conference call. At this time, all participants are in a 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 11 on your telephone. If your question has been answered and you’d like to remove yourself from the queue, simply press star 11 again. As a reminder, today’s program is being recorded.
And now I’d like to introduce your host for today’s program, Kevin Hasayama, Senior Vice President, Strategic Planning and Investor Relations. Please go ahead, sir.
Kevin Hasayama (Senior Vice President, Strategic Planning and Investor Relations)
Thank you, Jonathan. And thank you, everyone, for joining us as we review our financial results for the third quarter of 2026. With me today are Bob Harrison, Chairman, President and CEO, Jamie Moses, Chief Financial Officer, and Lee 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. And now I’ll turn the call over to Bob.
Bob Harrison (Chairman, President and Chief Executive Officer)
Thank you, Kevin. Appreciate everybody joining us today. Turning to slide 2, I’ll start by providing an update on the acquisition. As you can see from the slide, we’re making good progress obtaining the necessary regulatory and shareholder approvals. The next major milestones are the shareholder special meetings on October 29 and obtaining final regulatory approvals. Integration planning is going well and we continue to expect to close this quarter.
We’ll provide updates throughout the process. Now a quick overview of the local economy. It’s been a challenging year as the state deals with dual headwinds of both higher energy costs and unusually active storm season. In spite of that, the economy continues to grow, albeit at a slower pace. Statewide unemployment rate was relatively stable at 2.8% for September compared to the national unemployment rate of 4.2% for the same month. Visitor industry continues to be resilient. Total visitor arrivals were up 1.8% compared to last year, primarily due to visitors from the mainland U.S. and Japan.
Year-to-date spending through August was $15.2 billion, up 4.1% for the comparable period in 2025. The housing market remained stable. Median single-family home price on Oahu was $1.1 million in September, down 3.9% from last year, but condo prices remained stable at 523,000, up 2.8% from 2025. Turning to Slide 3, our results for the quarter reflect the continued solid performance by the team. Net interest income increased, deposit costs declined while deposit balances grew, and the margin increased 5 basis points. Net interest income was in line with expectations and noninterest expenses came in below expectations, excluding merger-related costs and a tax settlement expense. The $24.3 million tax settlement expense stemmed from a settlement with the State of California on tax liabilities resulting from our 2016 separation from BNP Paribas.
The aforementioned tax settlement also resulted in a $31 million tax benefit in the third quarter. Overall credit quality remains good, but we did have some noise in our credit metrics this quarter, and Lee will provide more details when she goes over that later. Turning to slide 4, the balance sheet remains solid. We continue to be well capitalized with ample liquidity. Balance sheet remains asset sensitive and well positioned to benefit from a higher-for-longer rate scenario. During the quarter we did not repurchase any shares.
Turning to Slide 5, total loans declined 115 million in the quarter. Decline was primarily due to unexpected CRE loan payoffs, a slight decline in dealer floor plan balances, and runoff in the residential loan portfolio. As an example, we did have one large CRE loan that was paid off unexpectedly, being refinanced by a mainland lender that offered very aggressive pricing, and I think that’s a reflection of the credit quality of the portfolio as well as demand.
Payoffs were more heavily weighted towards the end of the quarter as average balances in Q3 were slightly higher than the previous quarter. Now I’ll turn it over to Jamie.
Jamie Moses (Vice Chairman and Chief Financial Officer)
Thanks, Bob. Turning to Slide 6, total deposits were up about 50 million while our total cost of deposits fell by 3 basis points in the third quarter. Increased commercial and public operating deposit balances were partially offset by a decline in retail deposits, and our noninterest-bearing deposit ratio was 32%. On slide 7, net interest income was 174.1 million, $3.1 million more than the prior quarter. The increase in NII was driven by the increase in the margin along with the higher average loan balances in the quarter. The NIM in the third quarter was 3.30%, up 5 basis points linked quarter with both asset yield and funding costs helping to drive that NIM accretion.
Turning to slide 8, noninterest income was $56.1 million, in line with our outlook. Noninterest expense in the third quarter was $160 million. The quarter included $6.7 million of merger-related costs and, as Bob mentioned, also included $24.3 million expense related to a California tax settlement agreement related to our 2016 IPO. This expense was more than offset by the $31 million tax benefit that we recognized as part of that settlement. Excluding these items, operating expenses were well within our expectations, and now I’ll turn it over to Lee.
Lee Nakamura (Chief Risk Officer)
Thank you, Jamie. Moving to Slide 9, while we had some noise in the third quarter, the overall loan portfolio remains healthy, asset quality remains strong, and the portfolios continue to perform within our expectations. Our risk appetite has not changed. We continue to manage our portfolio such that asset quality remains within our risk appetite as demonstrated by historical norms. This slide summarizes some of the drivers behind the changes in some of the key credit measures this quarter.
Third quarter net charge-offs were $21.9 million, or 60 basis points of total loans and leases. This was primarily driven by a $12.5 million partial charge-off of a participated loan on an office building located in downtown Seattle. This loan was originated in 2019 and performed well through COVID but has struggled due to the shifting economics associated with the city’s contraction in office demand and higher-for-longer interest rates. We believe that this is an isolated situation.
Our downtown Seattle office portfolio consists of only one other loan, which continues to perform and is backed by a very strong sponsor with whom we have partnered for many years. Our year-to-date annualized net charge-off rate is 29 basis points. Criticized assets increased by 72 basis points in the third quarter. This increase was primarily the result of four non-office commercial real estate loan downgrades. It is important to note that while the credit review process resulted in these downgrades, we believe that the actual loss content is limited. The bank recorded a $20.3 million provision in the third quarter. The increased provision expense was driven by the office charge-off and the CRE loan downgrades.
The allowance for credit losses decreased by $4 million to $164 million with a coverage ratio of 1.14% of total loans and leases. Nonperforming assets and loans 90 days or more past due were 45 basis points of total loans and leases at the end of the third quarter. This increase was primarily related to operational issues arising out of the recent outsourcing of our residential mortgage servicing as well as the previously mentioned charged-off office loan, as the portion that was not charged off was placed on nonaccrual. Since the end of the quarter, 40% of these residential mortgage loans have been brought current, and we are confident that we will be able to resolve the remaining population in good order.
Turning to Slide 10, you can see a summary of our key credit metrics. And now I’ll turn it back over to Bob.
Bob Harrison (Chairman, President and Chief Executive Officer)
Thank you, Lee. On slide 11 we have our updated outlook for key performance drivers. We obviously didn’t get the loan growth we expected in the third quarter, so we’re reducing our full year loan outlook to 1 to 2% growth, down from 3 to 4% growth. Our asset-sensitive balance sheet continues to benefit from the higher interest rate environment. So we expect NIM in the fourth quarter to be between 3.34 to 3.35%, which increases our full year NIM outlook to 3.26 to 3.27%.
Our outlook for noninterest income remains about 220 million for the full year. Expenses, excluding merger-related costs and tax expense in the third quarter related to that settlement, is expected to come in lower than we previously thought, and our full year outlook is now in the 510 to $515 million range. The effective tax rate should remain unchanged, and we’re expecting approximately 25 million in merger-related costs in the fourth quarter. Now we’d be happy to take your questions, certainly.
OPERATOR
And as a reminder, ladies and gentlemen, if you do have a question at this time, please press star 11 on your telephone. Our first for today comes from the line of Andrew Tanro from Stevens. Your question, please.
Andrew Tanro (Analyst)
Hey, good morning. Maybe I could just start on the loan growth. It looks like the expectations of, if I’m kind of reading it right, for pretty flat loans, maybe up a little bit in the fourth quarter. Can you just talk us through kind of the pipelines today, opportunities you’re seeing for growth out there right now?
Kevin Hasayama (Senior Vice President, Strategic Planning and Investor Relations)
Yes, Andrew. Bob will answer your question.
Bob Harrison (Chairman, President and Chief Executive Officer)
Yeah, no, the pipeline is still there. We still have quite a bit of loans in process. It’s really the continuing battle of things getting paid off. So it’s really, that’s the balance between a solid pipeline and looking over our shoulder a little bit for things that are unexpected.
Andrew Tanro (Analyst)
Okay. And if I could ask just on the margin, I appreciate the guidance for the fourth quarter. There’s a, I think, a pretty wide range out there in terms of estimates for 2027 margin right now. Could you just talk to us when you, when you put Trico on the fold, and I know it may be tough to put a finger on, but could you just talk us through the general expectation of what kind of pro forma margin is. I don’t know the best way to slice it, but just trying to tighten up the maybe expectations a little.
Jamie Moses (Vice Chairman and Chief Financial Officer)
Andrew, it’s Jamie. I appreciate the question, understand why you’d ask it a little. That’s kind of hard for me to answer at the moment, for sure. I can speak to our margin. You know, we continue to see the effects of, you know, fixed-rate cash flow repricing on our balance sheet. About 400 million or so a quarter, and spread in this past quarter was about 170. So we think the spread is maybe 160 to 170 kind of going forward on that. And, of course, that depends on Fed rate increases or not.
And just a reminder, we expect, generally speaking, if there’s a Fed rate increase in a prior quarter, we would expect a couple basis points of margin accretion based on that. And then with the fixed-rate cash flow repricing and then just general repricing on the balance sheet, we would expect another couple basis points or so just if rates remain flat. So yeah, that’s what I got for you today.
Bob Harrison (Chairman, President and Chief Executive Officer)
And Andrea, this is Bob again, just a little more color on the loan side. You know, we are seeing a still solid pipeline for CRE, just to break it down a little bit. The residential is continued runoff. Given the rate outlook, it’s going to be difficult to see residential activity really picking up. But we are seeing CRE still being strong and typically we don’t know if it’s going to come true. But typically at the end of the year you do see increase in dealer floor plan, dealer floor plan balances.
So if we follow the usual norms it should be an okay fourth quarter. But we did adjust our guidance to take into account what happened in the third quarter.
Andrea
Great. Thanks so much for taking the questions.
OPERATOR
Thank you. And our next question comes from the line of David Feaster from Raymond James, your question please.
David Feaster (Analyst)
Hi, good morning everybody.
Bob Harrison (Chairman, President and Chief Executive Officer)
Morning Dave.
David Feaster (Analyst)
I just wanted to start on the funding side. You know you’ve got a huge advantage being in Hawaii and the kind of the closed loop nature of that market. You know, funding costs have continued to come down. I’m just kind of curious the competitive landscape here as rates are going higher, do you have more funding cost leverage left or do you think we’re kind of at a trough here?
Jamie Moses (Vice Chairman and Chief Financial Officer)
Hey David, Jamie, I think we’re kind of at a trough in this quarter. I think this is probably as low as it’s going to be especially given the rate outlook that we’ve seen. Of course that can change. Competitive pressures here in Hawaii continue to be muted. Let’s call it all the large four banks here, we’re all in the same boat in terms of loans to deposit ratio and things like that. The competition is about kind of what it always has been. Rates up I think will kind of drive, you know, sort of, let’s call it CD repricing slightly higher because of that.
And then we have our normal competition and you know, where we’re, you know, competitive with each other around client acquisition. So we’re probably at a trough now. I guess the best way to describe it is, you know, we think maybe interest bearing deposit betas somewhere in the 40% ratio in totality where in total deposit betas will be like 30 or so some 30 basis points or something like that.
David Feaster (Analyst)
Okay, terrific. And then I mean just looking at Trico, I mean they had a pretty solid quarter. Right. And I’m just kind of curious as you guys are working together, getting prepared for the closing. Still expecting to close by year end I guess. You know, as you’ve gotten to know their team more like how’s lockups going? How are you preparing for the integration and conversion? Just kind of any updates on. Because I mean like that I think is one of the bigger risks with the deal.
Right. It’s just the execution of integrating this and getting that done smoothly. Could you just touch on some of the things that you’re working on to prepare for that and make it as smooth a transition as possible?
Bob Harrison (Chairman, President and Chief Executive Officer)
Sure. Dave, this is Bob, happy to answer that question. Yes, we’re very focused on that. We’re working very closely with them. Jamie is actually heading our integration management office. Peter Weiss, their CFO is heading it on their side. They’re working closely on organizing the teams to get ready for post closing whenever that happens. It should be fourth quarter as we talked about. So that’s happening. We’ve reached out to a number of their people.
The vast majority are staying on with us. There are one, maybe two that are not and that’s not unexpected but really we’re excited to be working with them and so far really working closely together to see how we can get that done. We totally agree with you. The execution risk is what we’re completely focused on and that’s what matters. And that’s where we’re spending a lot of time on it. Exchanging visits between Trico to First Hawaiian and First Hawaiian employees going up to Trico.
Everybody getting to know each other really spending the time so that when we do close, we can really hit the ground running to, you know, make this work
David Feaster (Analyst)
and then maybe just kind of following up on that. When I talk to investors, one of the biggest concerns that they have is, you know, I guess, can you let. Try. Can. Can you let Trico be Trico? Because Trico is, as we talked about, this is a merger of two really good banks. Right. And Trico is, you know, performing very well. How do you think about letting you know, just integration as two separate banks running in two separate markets? Kind of. How do you think about letting them do what they do versus what are you going to bring in house and maybe change some of what they do?
I’m just kind of curious. How do you think about that whole concept?
Bob Harrison (Chairman, President and Chief Executive Officer)
Rick and I have spent a lot of time talking about that it is the most important thing to get right, so to speak. Of course you need to do the core conversion, you need to do all those other things. But the really long term value comes from letting Trico be Trico and us supporting them with their customers and in their markets. And if there’s things we can learn from them, we will. If there’s things they can learn from us, you know, I’m sure they’re open to that.
I know they are because we talked about it. So execution will prove that and we just need to get through that. But that is a top priority for, for both Rick and myself and both sets of management teams as well. It’s not just the two folks at the top. It’s really both sets of management teams thinking and working the same way.
David Feaster (Analyst)
Terrific. Thanks, everybody.
OPERATOR
Thank you. And our next question comes from the line of Anthony Elian from JP Morgan. Your question please.
Anthony Elian (Analyst)
Hi everyone. Slide six, you call out. You saw some nice growth in commercial deposits from 2Q. Can you give us some more color on what drove that and how you’re thinking about commercial deposit and overall deposit growth going forward?
Jamie Moses (Vice Chairman and Chief Financial Officer)
Hey Tony, it’s Jamie. So I would call that sort of normal flows that we saw in the quarter on the commercial side. Same kind of thing on the retail side. You know, some sort of what I’ll call like normal outflows. Typically what we have in the fourth quarter is inflows across most across both retail and commercial. For sure. Sometimes we see that in public, but that’s a little, you know, more event driven, I would say. You know, if you look to our past fourth quarter growth guides, those are kind of like where we usually come in in the fourth quarter.
You know, I hesitate I kind of always say this. We hesitate to call it seasonal because we’re not sure what really drives it. It just seems to happen for us in the fourth quarter every year. So, you know, we would expect some deposit growth in the quarter.
Anthony Elian (Analyst)
Thank you. And then my follow up on credit. Could you give us some more color on other office or CRE loans? You may be taking a closer look at your level of confidence that 3Q is just a one off quarter in terms of the migration you saw and any additional credit reviews you’re doing. Thank you.
Bob Harrison (Chairman, President and Chief Executive Officer)
Tony, this is Bob. Maybe I’ll start and then hand it off to Lee. I think it maybe is worth taking a second on the office building in Seattle. That’s a key market that we’ve known for a long time. It was a two bank deal with a very strong agent, very strong sponsor at the time. It’s still 75% occupied by a federal agency that’s paying its rent. It’s just, you know, downtown Seattle, if you haven’t been there, is challenged right now and the office market is severely impacted on that.
So that’s why we consider that one really a one off. Having said that, we like to tell all the information we can as soon as we can. So just like we did during COVID we’ve been doing deep dives throughout the whole portfolio and that’s what led to some of the regrades. But maybe I’ll turn it over to Lee for any other comments.
Lee Nakamura (Chief Risk Officer)
Yeah. I think we all understand that the high interest rates have stayed around a lot longer than we thought. And you know, a lot of these loans were put on in a different interest rate environment. So we’ve been watching very carefully what’s been happening to these properties. And by and large we’re very comfortable. We remain comfortable when we enter these deals. We know that potentially there could be some downside and that’s why we have to be very careful about who we choose to participate with, who we choose as our sponsors.
We don’t have very much in Mainland office. It’s not one of the portfolios that we are actively expanding. I think the other portions of our portfolios that we advertise as our core, those are still very strong. So yeah. Does that answer your question, Tony?
Anthony Elian (Analyst)
It does. Thank you for the color.
OPERATOR
Thank you. And our next question comes from the line of Matthew Clark from Piper Sandler. Your question please.
Matthew Clark (Analyst)
Thank you. Good morning everyone. Just rounding out the deposit cost conversation. Do you have the spot rate at the end of September to give us
Jamie Moses (Vice Chairman and Chief Financial Officer)
some visibility yeah, it was 117 basis points, same as it was for the quarter.
Matthew Clark (Analyst)
Okay, great. And then on the 400 million of cash flows on the asset side, can you split that between loans and securities and the related spread pickup between the two that we should assume. I know it’s going to get a little fuzzy with Trico, but that’d be helpful.
Jamie Moses (Vice Chairman and Chief Financial Officer)
Yeah. So roughly, you know, let’s call it 250 million on the loan side and 150 million on the security side. In the, you know, let’s call it 110 basis points spread on the loans and maybe 200 basis points or so on the securities at this moment.
Matthew Clark (Analyst)
Okay, great. And then just on the downgrade of the four CRE loans, can you just provide a little more color there? It sounds like it’s rate related, but you know, the size of each of those credits, the types of properties and kind of the outlook for each of those credits.
Lee Nakamura (Chief Risk Officer)
So three of the downgrades came out of the national SNCC exam. Two are portfolio loans, which are multifamily properties in multiple areas. They were entered into several years in 2020, again in a different rate environment and again, not an area that we are not a type of asset that we have actively grown in many, many years. We went into it because we were looking for a little more diversification. We don’t really have many of those assets left, but we look closely at the loss content and we think whatever provisions we’ve made are appropriate for that map.
Matthew Clark (Analyst)
Great. And can you remind us of the size of your SNCC portfolio and the percentage that’s criticized?
Lee Nakamura (Chief Risk Officer)
So CNI SNCC is the credit only pieces. So the pieces that we bought on the secondary, that’s 275 million in outstanding and everything’s pass rated except for we have an $11.6 million unfunded commitment and that’s special mention. But everything else is pass.
Matthew Clark (Analyst)
Any CRE SNCCs.
Lee Nakamura (Chief Risk Officer)
So we have CRE SN— I don’t. We might have to get back to you at that number, Matt.
Matthew Clark (Analyst)
Okay, thank you.
OPERATOR
Thank you. And our next question comes from the line of Janet Lee from TD Cowan. Your question please.
Janet Lee (Analyst)
Hello. On the lending front, it looks like CNI was down most of it from the Lord Dealer flooring. Is the expectation that CNI can still grow from here, but then being partially offset by still elevated CRE payoffs? Or some of your peers have been talking about how the CRE payoffs may moderate a little bit because of higher rates or do you see activity declining on either side CRE or CNI in terms of the demand.
Bob Harrison (Chairman, President and Chief Executive Officer)
Well, Dan, this is Bob. I think that, you know, part of that is much of our C&I. Historically, the volatility is driven by dealer floor plan, and that comes and goes. It depends on what’s happening in the market. Obviously, rates being up, dealers are going to do their best to manage their inventory. A little slower economy should lead to higher floor plan balances as cars don’t move as quick. So those are both kind of offsetting. So it’s not an easy, you know, answer one way or the other.
The balances typically do go up in the fourth quarter. We have been onboarding a new client or two every quarter or so. So you have some natural growth in the portfolio as well. But it really is hard to predict exactly the rate of flow of what the balances are going to be. The only thing we do control is getting out there and working with new customers, potential prospects and converting those. And so that’s how we take charge of that portfolio. Broadly in the market for our C&I and unfunded lines, the utilization has been within a few basis points, about the same throughout the year.
So there might be bumps up or down, but we really haven’t seen a sustained growth in working capital borrowings as an example. So does that answer your question?
Dan
Yeah, it does.
Janet Lee (Analyst)
Thank you, Jamie. Just a follow-up to your beta comment. Forty percent-ish on interest-bearing and 30% on total deposit beta. Is that just for Legacy First Hawaiian or does that include TriCo?
Jamie Moses (Vice Chairman and Chief Financial Officer)
Yeah, good question, Janet. That was just us. That’s just Legacy First Hawaiian.
Janet Lee (Analyst)
How would that change with TriCo, if at all?
Jamie Moses (Vice Chairman and Chief Financial Officer)
You know, hard to know or say at this point. I think once we finally get closed and we can, you know, we’ll be working together between now and then. We’ll, you know, we’ll figure out how all of our strategies will interact and how this will all work out together. But, you know, for now it’s kind of hard to say other than that we think very highly of how TriCo has managed their deposit costs over a very long period of time. And, you know, we would imagine that we’re both going to continue to manage our costs in the same way that we do today or in very similar ways.
Janet Lee (Analyst)
Thank you.
OPERATOR
Thank you. And our next question comes from the line of Andrew Leach from StoneX. Your question, please.
Andrew Leach (Analyst)
Morning everyone. So, recognize that you didn’t buy back any stock this quarter. Looking into next year, deal’s closed, capital ratios still be pretty solid. How are you viewing capital or the buyback at that point? I mean, your capital ratios should be really strong here after the deal closes.
Bob Harrison (Chairman, President and Chief Executive Officer)
Yeah. So this is Bob. It’s certainly something that we’ve done consistently for a long time, ever since we went public, and we did pause it for the transaction. The expectation would be that as we put the two organizations together and have the combined balance sheet, we see a lot of accretion, we see a lot of profitability that will add to that. And so together that would certainly be something we would look to. We still have authorization to do buybacks.
So all of that’s on the table. It’s just a little bit early to decide how much and when.
Andrew Leach (Analyst)
Got it. And then with the new Basel III rules, still expecting maybe 100 basis points to CET1?
Jamie Moses (Vice Chairman and Chief Financial Officer)
Yep, yep. That would be our expectation around that.
Andrew Leach (Analyst)
Got it. That’s my question. Thanks so much.
OPERATOR
Thank you. And our next question comes from the line of Megan Lynch from KBW. Your question please.
Megan Lynch (Analyst)
Hi, thanks for taking my question. So, sort of with TriCo coming on, I was sort of wondering back to loan growth and your outlook. Is there any interest or thoughts about reducing the mainland participation book, or like, how are you sort of thinking of your mix as you become one with TriCo?
Bob Harrison (Chairman, President and Chief Executive Officer)
Megan, this is Bob. That’s certainly something we’re looking at and talking to the TriCo team about. Obviously we’d always rather have a full relationship with whoever we’re doing business with and not have just a lending relationship. And the combination of the two of us will allow us to build out the relationship with existing customers of ours that are today lending-only or lending and cards-only. So that will benefit, I think, across the board.
And although we’re both very liquid, if we have the opportunity to take some of that liquidity and capital and put it towards broader relationships, we will certainly do that and over time do less of the credit-only type of lending.
Megan Lynch (Analyst)
Okay, awesome. Thank you. That was helpful. And then on the systems conversion, have you decided which core platform the combined bank will use?
Jamie Moses (Vice Chairman and Chief Financial Officer)
You know, we haven’t really talked about that yet. We are, you know, we’re in discussions. We’re continuing to think that the second half of next year is when we’ll have our conversion. The teams are working very well together right now, very excited about watching the relationships between TriCo and us develop inside the IMO offices. You know, as Bob mentioned earlier, having people back and forth, getting to know each other a lot better, we feel really good about the way that this partnership is developing and we still continue to be very excited about the strategic nature of this deal and we know they feel that same way as well.
Bob Harrison (Chairman, President and Chief Executive Officer)
And this is Bob. Specific to your question though, we’re not ready to announce that at this point.
Megan Lynch (Analyst)
Oh, I got it. Thank you. And then just one more. Could you provide a spot NIM?
Jamie Moses (Vice Chairman and Chief Financial Officer)
Yes. It was 3.33 in September.
Megan Lynch (Analyst)
Okay, perfect. Thank you. That’s it from me.
OPERATOR
Thank you. And once again, ladies and gentlemen, if you do have a question at this time, please press star 11 on your telephone. Our next question comes from the line of Jared Shaw from Barclays. Your question please.
John Rao (Analyst)
Hi, this is John Rao for Jared. I guess maybe building on the last couple questions, as you’ve gotten to know TriCo more and more of the frontline employees there, have you thought more about the balance of the combined company between California and Hawaii and any areas that they’re focused on that you think are worth investing in post deal close?
Bob Harrison (Chairman, President and Chief Executive Officer)
Yeah, this is Bob. We’re certainly having a lot of conversations about that. There’s a couple things that they do that we have not done historically, just lack of availability. One is oil and gas and the other is more agriculture and agriculture-related lending. They do a great job in those spaces and we’re certainly going to support them. If there’s opportunity to grow there, we would certainly look to grow in that. A couple things that we do that maybe we can take over there and see if the opportunity exists: we know the hospitality business very, very well.
And again, that’s going to be some of that cross-fertilization between the two teams to see how we can learn off each other, lean in, and grow the combined bank.
John Rao (Analyst)
Okay, great, thanks for that. And then I guess leading into the deal close and after, are there any deposit promos or anything you’re doing on the deposit side to make sure you retain those balances over the next, like, six to 12 months?
Bob Harrison (Chairman, President and Chief Executive Officer)
Well, you know, we will be looking at all of that stuff over time. I think maybe the right way to think about it is there’s no branch overlap, so no branch closures. If you’re a California customer of TriCo, you’re going to continue to walk into the same branch you always walked into with the same people and your same favorite teller that you always got to talk to. So that sort of disruption will be very much minimized, and the disruption will come around the time of, like, say probably conversion.
So, you know, we’ve got some time to think about that, but we will be very, very focused on retaining customers to the best of our abilities, obviously, in California and here in Hawaii, like we always do. I think customer retention is something we always think about, and we’ll continue to think about that in the next phase here.
John Rao (Analyst)
Okay, great. That’s all I have. Thanks.
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 Hasayama for any further remarks.
Kevin Hasayama (Senior Vice President, Strategic Planning and Investor Relations)
Thank you. 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.
Disclaimer: This transcript is provided for informational purposes only. While we strive for accuracy, there may be errors or omissions in this automated transcription. For official company statements and financial information, please refer to the company’s SEC filings and official press releases. Corporate participants’ and analysts’ statements reflect their views as of the date of this call and are subject to change without notice.
Recent Comments