퍼스트 하와이안(FHB) 2026년 3분기 실적 발표 콘퍼런스 콜: NIM 상승, 대출 전망 하향

핵심 요약

• 순이자이익은 전분기 대비 310만 달러 증가한 1억 7,410만 달러를 기록했으며, 순이자마진(NIM)은 5bp 확대된 3.30%를 나타냈습니다.
• 예상치 못한 상업용 부동산(CRE) 조기 상환, 딜러 플로어플랜 잔액 감소, 주택담보대출 자연 감소(runoff)로 인해 총대출은 1억 1,500만 달러 줄었습니다. 경영진은 연간 대출 성장률 전망치를 기존 3%~4%에서 1%~2%로 하향 조정했습니다.
• 예금은 약 5,000만 달러 증가했고, 총예금 비용은 3bp 감소했으며, 무이자 예금이 총예금에서 차지하는 비중은 32%를 기록했습니다.
• 신용비용이 증가했습니다. 순상각액은 2,190만 달러(대출 및 리스의 60bp)를 기록했으며, 여기에는 시애틀 도심 오피스 대출에 대한 1,250만 달러의 부분 상각이 포함되었습니다.
• 경영진은 2026년 4분기 NIM을 3.34%~3.35%로 예상했으며, 연간 NIM 전망치를 3.26%~3.27%로 상향 조정했습니다.
• 퍼스트 하와이안(First Hawaiian)은 주주 승인 및 최종 규제 당국의 승인을 전제로 TriCo 인수가 2026년 4분기에 완료될 것으로 계속 기대하고 있습니다.

주요 재무 데이터

사업 및 영업 실적

상업용 부동산(CRE)은 대출 파이프라인에서 가장 견조한 부문으로 남아 있었으나, 예상치 못한 조기 상환이 기말 잔액에 부담을 주었습니다. 경영진은 공격적인 가격 정책을 제시한 본토 대출 기관을 통해 리파이낸싱을 진행한 대형 CRE 대출 1건을 주요 원인으로 꼽았습니다. 주택담보대출 잔액은 계속 감소했으며, 딜러 플로어플랜 잔액은 소폭 감소했습니다.

회사 측은 조기 상환 시점이 불확실성을 초래하고는 있지만 대출 파이프라인 자체는 여전히 견조하다고 밝혔습니다. 딜러 플로어플랜 잔액은 일반적으로 4분기에 증가하지만, 경영진은 재고 수준과 경제 상황으로 인해 향후 추이를 예측하기 어렵다고 지적했습니다.

예금 증가는 기업 및 공공 영업용 계좌에서 비롯되었으며, 개인 예금 유출로 일부 상쇄되었습니다. 경영진은 예년의 패턴과 마찬가지로 4분기에 개인 및 기업 계좌 전반에서 예금 유입이 있을 것으로 예상하고 있습니다.

퍼스트 하와이안은 여전히 자산 민감적(asset-sensitive) 구조를 유지하고 있습니다. 분기마다 대출 약 2억 5,000만 달러와 유가증권 약 1억 5,000만 달러를 포함해 총 약 4억 달러 규모의 고정금리 현금흐름에 대한 금리 재산정이 이루어집니다. 경영진은 현재 대출에서 약 110bp, 유가증권에서 약 200bp의 스프레드 개선이 이루어지고 있는 것으로 추정했습니다.

하와이 경제는 높은 에너지 비용과 빈번한 폭풍우 계절의 영향 속에 완만한 성장세를 이어갔습니다. 9월 실업률은 2.8%를 기록했습니다. 입국 관광객 수는 전년 동기 대비 1.8% 증가했으며, 8월까지의 연간 누적 관광객 지출액은 4.1% 증가한 152억 달러를 기록했습니다.

경영진 가이던스

경영진은 실효세율이 변동 없이 유지될 것으로 예상하고 있습니다. 기존 퍼스트 하와이안 기준 경영진은 이자부 예금 베타를 약 40%, 총예금 베타를 약 30%로 추정했으나, 이러한 가정에 TriCo는 포함되지 않았다고 밝혔습니다.

리스크 및 주요 관찰 사항

이번 분기의 신용 상태 악화는 시애틀 도심 오피스 참여 대출(participated loan)에 대한 1,250만 달러의 부분 상각과 오피스 외 4건의 CRE 등급 하향에 집중되었습니다. 경영진은 시애틀 익스포저가 단발성 문제라고 설명하며, 은행이 보유한 시애틀 도심 오피스 대출은 1건에 불과하다고 덧붙였습니다.

요주의 이하 자산(Criticized assets)은 72bp 증가했습니다. 경영진은 이러한 증가가 주로 4건의 CRE 등급 하향에 따른 것이며, 관련 손실 규모는 제한적일 것으로 본다고 밝혔습니다. 고금리 기조의 장기화는 저금리 시기에 취급된 대출에 대해 여전히 우려 요인으로 남아 있습니다.

주택담보대출 관리(servicing) 외주 관련 문제가 90일 이상 연체 대출 증가에 영향을 미쳤습니다. 분기 말 이후 영향받은 주택담보대출의 40%가 정상 상태로 복귀했으며, 경영진은 나머지 건도 해결될 것으로 예상하고 있습니다.

인수 실행은 여전히 핵심 과제로 남아 있습니다. 주요 예정 일정으로는 10월 29일 주주총회와 최종 규제 당국 승인이 있습니다. 통합 플랫폼은 아직 발표되지 않았으나 시스템 통합(conversion)은 2027년 하반기로 예상됩니다.

애널리스트 Q&A 주요 내용

• 대출 성장: 경영진은 특히 CRE를 중심으로 파이프라인이 활발하게 유지되고 있으나, 예상치 못한 조기 상환과 주택담보대출 감소가 순성장을 계속 제약하고 있다고 밝혔습니다.
• 마진 전망: 금리가 변동 없이 유지된다면 대차대조표 금리 재산정을 통해 마진에 약 2bp 수준의 추가 상승이 이뤄질 수 있습니다. 경영진은 지난 분기 연방준비제도(Fed)의 금리 인상이 이와 유사한 추가 이익을 제공할 수 있다고 언급했습니다.
• 예금 금리 책정: 경영진은 하와이 주요 은행 간의 경쟁 압력이 크지 않은 상황에서 3분기 예금 비용이 저점에 근접했을 가능성이 높은 것으로 보고 있습니다. 금리가 상승할 경우 양도성예금증서(CD) 금리가 소폭 상승할 수 있습니다.
• TriCo 통합: 접촉한 TriCo 직원 대다수가 잔류할 것으로 예상됩니다. 양사는 예상되는 4분기 인수 완료에 앞서 임직원 상호 방문을 진행하고 통합 팀을 구성하고 있습니다. 경영진은 TriCo의 영업적 강점과 고객 관계를 유지하는 점을 강조했습니다.
• 통합 대출 전략: 퍼스트 하와이안은 이번 거래를 통해 고객 관계를 확대하고 시간이 지남에 따라 여신 전용 본토 참여 대출을 줄일 수 있을 것으로 기대하고 있습니다. 또한 TriCo의 농업 및 석유·가스 대출 역량에서 기회를 모색하는 한편, 퍼스트 하와이안은 호스피탈리티 분야의 전문성을 기여할 수 있을 것으로 보고 있습니다.
• 자본 배치: 퍼스트 하와이안은 이번 거래로 인해 3분기 중 자사주 매입을 진행하지 않았습니다. 경영진은 거래 종결 및 대차대조표 통합 이후 자사주 매입 재개를 검토할 수 있다고 밝혔습니다. 또한 새로운 바젤 III 규제로 인해 CET1 비율이 약 100bp 감소할 수 있다는 전망을 유지하고 있습니다.

실적발표 컨퍼런스 콜 전문

전체 실적 발표 컨퍼런스 콜 녹취록

경영진 발표

Operator

Thank you for standing by, and welcome to the First Hawaiian, Inc. Third Quarter 2026 Earnings Conference Call. [Operator Instructions] 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. Please go ahead, sir.

Kevin Haseyama

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 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 1 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.

Robert Harrison

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 will 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 an 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 remains stable. Median single-family home price on Oahu was $1.1 million in September, down 3.9% from last year. The 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 Lea 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.

James Moses

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 yields 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 a $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 Lea.

Lea Nakamura

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 our 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 4 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.

Robert Harrison

Thank you, Lea. On Slide 11, we have our updated outlook for our 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 previously -- than we previously thought, and our full year outlook is now in the $510 million 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.

Operator

[Operator Instructions] Our first question for today comes from the line of Andrew Terrell from Stephens.

질의응답

Andrew Terrell

Maybe if I could just start on the loan growth. It looks like the expectations of, if I'm kind of reading it right, for kind of 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?

Robert Harrison

Yes, Andrew, Bob answering your question. Yes. 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 Terrell

Okay. And if I could ask just on the margin. I appreciate the guidance for the fourth quarter. There's, 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 put TriCo in the fold, and I know it may be tough to put a finger on, but can 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.

James Moses

Andrew, it's Jamie. I appreciate the question, and I understand why you'd ask it. That's kind of hard for me to answer at the moment for sure. I can speak to our margin. We continue to see the effects of fixed-rate cash flow repricing on our balance sheet. It's 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 of 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 of basis points or so just if rates remain flat. So yes, that's what I got for you today.

Robert Harrison

And Andrew, this is Bob again. Just a little more color on the loan side. We are seeing a still solid pipeline for CRE. Just to break it down a little bit, the residential continue to run off 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 through. But typically, at the end of the year, you do see an increase in dealer floor plan balances. So that if we follow the usual norm, it should be an okay fourth quarter, but we did adjust our guidance to take into account what happened in the third quarter.

Operator

And our next question comes from the line of David Feaster from Raymond James.

David Feaster

I just wanted to start on the funding side. You've got a huge advantage being in Hawaii and the kind of the closed-loop nature of that market. 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?

James Moses

David, it's 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 4 banks here are -- we're all in the same boat in terms of loans-to-deposit ratio and things like that. So the competition is about kind of what it always has been. So rates up, I think, will kind of drive sort of, let's call it, CD repricing slightly higher because of that. And then we have our normal competition and where we're competitive with each other around client acquisition.

So we're probably at a trough now. I guess the best way to describe it is 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

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, as you've got to know their team more, like how is 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, is 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 a smooth transition as possible?

Robert Harrison

Sure, David, 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 Wiese, 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, should be fourth quarter, as we've 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 1, maybe 2 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 why 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 make this work.

David Feaster

Got it. And then maybe just kind of following up on that. When I talk to investors, one of the biggest concerns that they have is, I guess, can you let TriCo be TriCo? Because TriCo -- as we talked about, this is a merger of 2 really good banks, right? And TriCo is performing very well. How do you think about letting -- just the integration as -- 2 separate banks run in 2 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?

Robert Harrison

Yes. 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 are things they can learn from us, I'm sure they're open to that. I know they are because we've talked about it. So execution will prove that, and we just need to get through that, but that is a top priority for both Rick and myself and both sets of management teams as well. It's not just the 2 folks at the top. It's really both sets of management teams thinking and working the same way.

Operator

And our next question comes from the line of Anthony Elian from JPMorgan.

Anthony Elian

Slide 6, 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?

James Moses

Yes. 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, 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 more event-driven. I would say if you look to our past fourth quarter growth guide, those are kind of like where we usually come in, in the fourth quarter. 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 we would expect some deposit growth in the quarter.

Anthony Elian

And then my follow-up on credit. Can 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?

Robert Harrison

Tony, this is Bob. Maybe I'll start and then hand it off to Lea. 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 2-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 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 Lea for any other comments she has.

Lea Nakamura

No, I think we all understand that the high interest rates have stayed around a lot longer than we thought. And 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 -- yes.

Robert Harrison

Does that answer your question, Tony?

Anthony Elian

It does.

Operator

And our next question comes from the line of Matthew Clark from Piper Sandler.

Matthew Clark

Just rounding out the deposit cost conversation, do you have the spot rate at the end of September to give us some visibility?

James Moses

Yes, it was 117 basis points, same as it was for the quarter.

Matthew Clark

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 2 that we should assume? I know it's going to get a little fuzzy with TriCo, but that would be helpful.

James Moses

Yes. So roughly, let's call it, $250 million in -- on the loan side and $150 million on the securities side in the, 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

Okay. Great. And then just on the downgrade of the 4 CRE loans, can you just provide a little more color there? It sounds like it's rate-related, but the size of each of those credits, the types of properties and kind of the outlook for each of those credits?

Lea Nakamura

So 3 of the downgrades came out of the national SNC exam. 2 are portfolio loans, which are multifamily properties in multiple areas. They were entered into several years ago 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.

Robert Harrison

But we look closely at the loss content, and we think whatever provisions we've made are appropriate for that, Matt.

Matthew Clark

Great. And can you remind us of the size of your SNC portfolio and the percentage that's criticized?

Lea Nakamura

So C&I SNC is the credit-only pieces. So the pieces that we bought on the secondary, that's $275 million in outstanding and everything is pass rated, except for we have an $11.6 million unfunded commitment, and that's special mention. But everything else is pass.

Matthew Clark

Any CRE SNCs?

Lea Nakamura

So we have CRE SNCs. I don't...

Robert Harrison

We might have to get back to you at that number, Matt.

Lea Nakamura

Yes.

Operator

And our next question comes from the line of Janet Lee from TD Cowen.

Sun Young Lee

On the lending front, it looks like C&I was down, most of it from the lower dealer flooring. Is the expectation that C&I 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 C&I in terms of the demand?

Robert Harrison

Well, Janet, this is Bob. I think that part of that is much of our C&I historically, the volatility is driven by dealer floor plan, and that comes and goes depend 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 answer one way or the other. The balances typically do go up in the fourth quarter. We have been onboarding a new client or 2 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?

Sun Young Lee

Yes, it does. Jamie, just a follow-up to your beta comment, 40%-ish on interest-bearing and 30 basis points -- sorry, 30% on total deposit beta. Is that just for legacy First Hawaiian? Or does that include TriCo?

James Moses

Yes. Good question, Janet. That was just us. That's just legacy First Hawaiian.

Sun Young Lee

How would that change with TriCo, if at all?

James Moses

Hard to know or say at this point. I think once we finally get closed and we can -- we'll be working together between now and then, we'll figure out how all of our strategies will interact and how this will all work out together. But 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 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.

Operator

And our next question comes from the line of Andrew Liesch from StoneX.

Andrew Liesch

So I recognize that you didn't buy back any stock this quarter. Looking into next year, deal has closed, capital ratios [indiscernible] still be pretty solid. I mean how are you viewing capital -- or the buyback at that point? I mean your capital ratio should be really strong here after the deal closes.

Robert Harrison

Yes. 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 2 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 Liesch

Got it. And then with the new Basel III rules, still expecting maybe 100 basis points to CET1?

James Moses

Yes, that would be our expectation around that.

Operator

And our next question comes from the line of Meghan Lynch from KBW.

Meghan Lynch

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 are -- become one with TriCo?

Robert Harrison

Meghan, this is Bob. That's certainly something we're looking at and talking to the TriCo team about. Obviously, we'd always rather to have a full relationship with whoever we're doing business with and not have just a lending relationship, and that -- the combination of the 2 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'll certainly do that and over time, do less of the credit-only type of lending.

Meghan Lynch

Okay. Awesome. That was helpful. And then on the systems conversion, have you decided which platform the combined bank will use?

James Moses

We haven't really talked about that yet. We're in discussions. We're continuing to think that 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. 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 the same way as well.

Robert Harrison

And this is Bob. Specific to your question, though, we're not ready to announce that at this point.

Meghan Lynch

All right. Got it. And then just one more. Could you provide a spot NIM?

James Moses

Yes, it was 3.33% in September.

Operator

[Operator Instructions] Our next question comes from the line of Jared Shaw from Barclays.

Unknown Analyst

This is [ John ] on for Jared. I guess maybe building on the last couple of 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 of lending that they're focused on that you think are worth investing in post deal close?

Robert Harrison

Yes, this is Bob. We're certainly having a lot of conversations about that. There's a couple of 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, that we would certainly look to grow in that. A couple of 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 2 teams to see how we can learn off each other, lean in and grow the combined bank.

Unknown Analyst

Okay. Great. And then I guess leading into the deal close and after, I guess, 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 6 to 12 months?

James Moses

Well, we will be looking at all of that stuff over time. I think maybe the right way to think about it is there won't -- 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 there's -- that sort of disruption would be very much minimized. And the disruption will come around the time of say, probably conversion. So 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.

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.

Kevin Haseyama

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.