How to Handle the Tri-Counties and First Hawaiian Bank Merger
A note from our founder to clients. You can read the original press release HERE:
Investor Update Regarding the Tri-Counties Bank and First Hawaiian Bank Merger
We are writing to share a few thoughts regarding the proposed merger between Tri-Counties Bank and First Hawaiian Bank, which is scheduled to close in the fourth quarter of 2026. Tri-Counties has been a wonderful holding for local investors over many decades, and we want to help you understand what this transition might mean for you and your portfolio.
How the Merger Works
This transaction is an all-stock merger. Upon closing, Tri-Counties Bank shareholders will receive 2.095 shares of First Hawaiian Bank for every share of Tri-Counties they currently hold. The final value you receive will depend on the closing price of First Hawaiian Bank stock on the official merger date.
Investment Considerations
As we evaluate the future of the newly combined company, we are keeping a close eye on several critical factors:
Growth and Earnings: The profitability and earnings growth outlook for the combined banks will drive long-term stock returns.
Interest Rates: Bank stocks tend to be interest rate sensitive in the short term. Recent increases in interest rates have pushed down prices of Tri Counties, First Hawaiian, and many regional banks since the merger announcement.
Efficiency: The ability to successfully reduce overhead costs and increase profit margins by combining duplicate services.
Portfolio Quality: The ability to maintain strong credit and investment portfolios.
Risk Management: Management’s ability to navigate bank-specific risks in a changing economy.
Customer Focus: Strategies for retaining current customers while driving future market share growth.
Evaluating Your Portfolio Strategy
For our clients with larger positions in Tri-Counties, holding onto the combined stock could increase your portfolio's overall risk by creating a concentrated position in a single company. While Tri-Counties has been highly rewarding, this merger may signal a good opportunity to consider taking some of those significant historical gains off the table and diversifying into areas with less risk.
Depending on your comfort level, there are a couple of ways to approach this:
Aggressive Investors: If you believe strongly in the future of the new institution, you may choose to continue holding the newly formed company.
Risk-Averse Investors: If you prefer to protect your gains, you might consider selling a portion of your position to avoid over-concentration in a single stock.
Tax and Estate Planning Opportunities
How you handle these shares can also create valuable tax planning opportunities, depending on the type of account they are held in:
Retirement Accounts: If you hold these shares in a retirement plan, selling is a non-taxable event, making it an ideal place to safely lock in your gains.
Personal and Trust Accounts: Shares held in these accounts can receive favorable tax treatment through strategic gifting of shares or estate transfers (such as a step-up in basis for your beneficiaries).
Charitable Gifting: Highly appreciated securities like Tri-Counties Bank are excellent tools for charitable giving. We can utilize strategies like a Donor Advised Fund or a Charitable Remainder Trust to maximize your tax benefits while supporting causes you care about.
Important decisions like these should always be driven by clearly defined goals in your personal financial and estate plan. We are here to help you navigate these choices and ensure they align with your long-term objectives.
Blessings,
Brian Sweeney, Founder at Sweeney & Michel, LLC