10q10k10q10k.net

What changed in BANK OF HAWAII CORP's 10-K — 2022 vs 2023

vs

Paragraph-level year-over-year comparison of BANK OF HAWAII CORP's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+369 added−349 removedSource: 10-K (2023-12-31) vs 10-K (2022-12-31)

Top changes in BANK OF HAWAII CORP's 2023 10-K

369 paragraphs added · 349 removed · 246 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

25 edited+17 added−10 removed60 unchanged
Biggest changeThe regulatory bodies are authorized to take action against institutions that fail to meet such standards, including the assessment of civil monetary penalties and restitution, the issuance of cease-and-desist orders, and other actions, up to and including revocation of a bank’s charter for the most severe infractions, or putting such a bank into receivership if it is not financially viable.
Biggest changeThe regulatory bodies are authorized to take informal (non-public) or formal (public) supervisory actions against regulated entities, including BHCs and banks, that fail to meet such standards, including, without limitation, the issuance of written agreements, cease-and-desist orders, and consent orders, which may, among other things, result in restrictions on a bank’s ability to pay dividends, requirements to increase capital, restrictions on activities, the imposition of civil monetary penalties, and revocation of a bank’s charter for the most severe infractions, or putting such a bank into receivership if it is not financially viable.
As of December 31, 2022, the Bank was classified as “well capitalized.” The classification of a depository institution under one of the categories set out above is primarily for the purpose of applying the prompt corrective actions, and is not intended to be, nor should it be interpreted as, a representation of the overall financial condition or the prospects of that financial institution.
As of December 31, 2023, the Bank was classified as “well capitalized.” The classification of a depository institution under one of the categories set out above is primarily for the purpose of applying the prompt corrective actions, and is not intended to be, nor should it be interpreted as, a representation of the overall financial condition or the prospects of that financial institution.
Employee Benefits: The Company believes in enabling a healthy workforce and providing a benefits program that is designed to attract, retain, and motivate employees. In addition to competitive insurance, healthcare, and retirement offerings, examples of more innovative and workforce-specific benefits offerings include: mortgage discount program, student loan assistance program, well-being sessions, and personal finance education.
Employee Benefits: The Company believes in enabling a healthy workforce and providing a benefits program that is designed to attract, retain, and engage employees. In addition to competitive insurance, healthcare, and retirement offerings, examples of more innovative and workforce-specific benefits offerings include: mortgage discount program, student loan assistance program, well-being sessions, and personal finance education.
The Company continues to monitor and implement rules, regulations, and interpretations of the Dodd-Frank Act as they are adopted and modified, and to evaluate their application to our current and future operations. Capital Requirements In July 2013, the FRB, the Office of the Comptroller of the Currency (the “OCC”) and the FDIC adopted new capital rules (the “Rules”).
The Company continues to monitor and implement rules, regulations, and interpretations of the Dodd-Frank Act as they are adopted and modified, and to evaluate their application to our current and future operations. 3 Table of Contents Capital Requirements In July 2013, the FRB, the Office of the Comptroller of the Currency (the “OCC”) and the FDIC adopted new capital rules (the “Rules”).
The Bank’s current CRA rating is “outstanding”. • Consumer Protection Laws. In addition to the CRA, the Bank is subject to a number of federal laws designed to protect borrowers and promote lending to various sectors of the economy and population in connection with its lending activities.
The Bank’s current CRA rating is “outstanding”. 5 Table of Contents • Consumer Protection Laws. In addition to the CRA, the Bank is subject to a number of federal laws designed to protect borrowers and promote lending to various sectors of the economy and population in connection with its lending activities.
To help maintain Hawaii’s special culture of ‘ohana and working together toward common goals, renewed attention was paid to engaging teammates in a hybrid environment. Based on employee feedback from surveys, online and in-person sessions were created in 2022 to connect with employees and encourage collaboration.
To help maintain Hawaii’s special culture of ‘ohana and working together toward common goals, continued attention was paid to engaging teammates in a hybrid environment. Based on employee feedback from surveys, online and in-person sessions were continued in 2023 to connect with employees and encourage collaboration.
These restrictions include limits on loans to one borrower and conditions that must be met before such loans can be made. There is also an aggregate limitation on all loans to insiders and their related interests.
These 4 Table of Contents restrictions include limits on loans to one borrower and conditions that must be met before such loans can be made. There is also an aggregate limitation on all loans to insiders and their related interests.
Ho, 57 Chairman and Chief Executive Officer since July 2010 and President since April 2008. Dean Y. Shigemura, 59 Vice Chair since December 2017; Chief Financial Officer since March 2017. Marco A.
Ho, 58 Chairman and Chief Executive Officer since July 2010 and President since April 2008. Dean Y. Shigemura, 60 Vice Chair since December 2017; Chief Financial Officer since March 2017. Marco A.
Abbruzzese, 57 Vice Chair, Senior Executive Director of Wealth Management since January 2022; Regional Managing Director - Washington and Alaska of Wells Fargo from May 2009 to December 2021. Sharon M. Crofts, 57 Vice Chair, Client Solutions Group since April 2016. James C.
Abbruzzese, 58 Vice Chair, Senior Executive Director of Wealth Management since January 2022; Regional Managing Director - Washington and Alaska of Wells Fargo from May 2009 to December 2021. Sharon M. Crofts, 58 Vice Chair, Client Solutions Group since April 2016. Matthew K.M.
Key initiatives included the continued support of executive coaching to elevate leadership capabilities, the launch of a new and competitive Leadership Development Program, the first hybrid Pathways to Professional Excellence cohort with the largest enrollment of 38 employees and an enhanced online performance management process that allows the employee to own the first step of the performance review process.
Key initiatives included the continued support of executive coaching to elevate leadership capabilities, a competitive Leadership Development Program, a hybrid Pathways to Professional Excellence cohort with 36 employees and an enhanced online performance management process that empowers the employee to own the first step of the performance review process.
“Rising Team” is a software tool that provides managers a way to facilitate sessions with their team and offers everyone the opportunity to share thoughts and feedback in real time on a variety of leadership themed topics, such as Psychological safety, Appreciation, Natural talents and Career horizons.
“Rising Team” enables managers to confidently facilitate sessions with their team and offers everyone the opportunity to share thoughts and feedback in real time on a variety of leadership themed topics, such as Psychological safety, Appreciation, Natural talents and Career horizons.
Polk, 56 Chief Banking Officer since January 2022; Chief Commercial Officer from April 2020 to December 2021; Vice Chair since June 2016. Mary E. Sellers, 66 Vice Chair and Chief Risk Officer since July 2005. Matthew K.M.
Polk, 57 Chief Banking Officer since January 2022; Chief Commercial Officer from April 2020 to December 2021; Vice Chair since June 2016. Mary E. Sellers, 67 Vice Chair and Chief Risk Officer since July 2005. S.
Dressel, 61 Principal Accounting Officer, Senior Vice President and Controller since November 2022; Global Controller of Blockchain.com from September 2021 to October 2022; Senior Vice President and Controller of First Interstate Bank from October 2018 to September 2021; Corporate Controller of Ethos Lending LLC from February 2017 to October 2018.
Dressel, 62 Principal Accounting Officer, Senior Vice President and Controller since November 2022; Global Controller of Blockchain.com from September 2021 to October 2022; Senior Vice President and Controller of First Interstate Bank from October 2018 to September 2021.
We enhance people leadership capability to deliver exceptional employee experience and develop our workforce of tomorrow. Skills and professional development training is provided to employees at all levels, with additional development sessions specifically targeted to managers and leaders.
We nurture a collaborative, digitally connected workplace to support changing needs. We invest in people leadership capability to deliver exceptional employee experience and develop our workforce of tomorrow. Skills and professional development training is provided to employees at all levels, with additional development sessions specifically targeted to managers and leaders.
Certain restrictions also apply to extensions of credit made to an executive officer, directors, or principal shareholder of a bank (or to a related interest of such person) by a correspondent bank. 4 Table of Contents The Volcker Rule In December 2013, the Federal Reserve, the OCC, the FDIC, the SEC, and the Commodities Futures Trading Commission issued final rules to implement certain provisions of the Dodd-Frank Act commonly known as the “Volcker Rule.” The Volcker Rule, as amended on August 20, 2019, generally prohibits U.S. banks from engaging in proprietary trading and restricts those banking entities from sponsoring, investing in, or having certain relationships with hedge funds and private equity funds.
The Volcker Rule In December 2013, the Federal Reserve, the OCC, the FDIC, the SEC, and the Commodities Futures Trading Commission issued final rules to implement certain provisions of the Dodd-Frank Act commonly known as the “Volcker Rule.” The Volcker Rule, as amended on August 20, 2019, generally prohibits U.S. banks from engaging in proprietary trading and restricts those banking entities from sponsoring, investing in, or having certain relationships with hedge funds and private equity funds.
The Rules reflect, in part, certain standards initially adopted by the Basel Committee on Banking Supervision in December 2010 (which are commonly called “Basel III” standards) as well as requirements by the Dodd-Frank Act. 3 Table of Contents The Federal Deposit Insurance Corporation Improvement Act of 1991 (“FDICIA”) identifies five capital categories for insured depository institutions: “well capitalized,” “adequately capitalized,” “undercapitalized,” “significantly undercapitalized,” and “critically undercapitalized.” The federal banking agencies are authorized by FDICIA to impose progressively more restrictive constraints on operations, management and capital distributions, depending on the capital category in which an institution is classified.
The Federal Deposit Insurance Corporation Improvement Act of 1991 (“FDICIA”) identifies five capital categories for insured depository institutions: “well capitalized,” “adequately capitalized,” “undercapitalized,” “significantly undercapitalized,” and “critically undercapitalized.” The federal banking agencies are authorized by FDICIA to impose progressively more restrictive constraints on operations, management and capital distributions, depending on the capital category in which an institution is classified.
Emerson, 45 Vice Chair since November 2022; Senior Executive Director of Mortgage Banking and Loans since February 2020; Executive Vice President and Senior Executive Director of eCommerce from September 2018 to February 2020; Executive Vice President, Director of Business and Retail Deposit Products from February 2018 to September 2018. Jeanne M.
Emerson, 46 Chief Strategy Officer since November 2023; Vice Chair since November 2022; Senior Executive Director of Mortgage Banking and Loans from February 2020 to November 2023; Executive Vice President and Senior Executive Director of eCommerce from September 2018 to February 2020. Patrick M.
The Fair and Accurate Credit Transaction Act (“FACT Act”) requires financial institutions to develop and implement an identity theft prevention program to detect, prevent and mitigate identity theft “red flags” to reduce the risk that customer information will be misused to conduct fraudulent financial transactions. 5 Table of Contents A number of other federal and state consumer protection laws extensively govern the Bank’s relationship with its customers.
The Fair and Accurate Credit Transaction Act (“FACT Act”) requires financial institutions to develop and implement an identity theft prevention program to detect, prevent and mitigate identity theft “red flags” to reduce the risk that customer information will be misused to conduct fraudulent financial transactions.
Human Capital Management As of December 31, 2022, we employed 2,076 full-time equivalent employees, of which 1,973 are located in the State of Hawaii, with the remainder located in Guam and other Pacific Islands. None of our employees are subject to a collective bargaining agreement.
Human Capital Management As of December 31, 2023, we employed 1,899 full-time equivalent employees, of which 1,792 are located in the State of Hawaii, with the remainder located in Guam and other Pacific Islands.
The Parent is also registered as a financial institution holding company under the Hawaii Code of Financial Institutions (the “Code”) and is subject to the registration, reporting, and examination requirements of the Code. 2 Table of Contents The BHC Act prohibits, with certain exceptions, a BHC from acquiring direct or indirect beneficial ownership or control of either a company that is not a bank, or more than 5% of the voting shares of any bank, without the FRB’s prior approval.
The BHC Act prohibits, with certain exceptions, a BHC from acquiring direct or indirect beneficial ownership or control of either a company that is not a bank, or more than 5% of the voting shares of any bank, without the FRB’s prior approval.
In some cases, sessions led to referred candidates joining the Bank, and to current employees finding a new career path. “Manager Excellence Forums” continued in February 2022 as a platform connecting managers so that they can learn from and support one another when facing real management issues, and discuss practical solutions.
“Manager Connect”, formerly known as “Manager Excellence Forums” also returned in 2023 as a platform connecting managers so that they can learn from and support one another when facing real management issues, and discuss practical solutions.
The Parent The Parent is registered as a BHC under the Bank Holding Company Act of 1956, as amended (the “BHC Act”), and is subject to the supervision of and to examination by the Board of Governors of the Federal Reserve (the “FRB”).
Changes in applicable laws or regulations, or a change in the way such laws or regulations are interpreted by regulatory agencies or courts, may have a material impact on our business, operations, and earnings. 2 Table of Contents The Parent The Parent is registered as a BHC under the Bank Holding Company Act of 1956, as amended (the “BHC Act”), and is subject to the supervision of and to examination by the Board of Governors of the Federal Reserve (the “FRB”).
The Company values the contributions of all of its employees and is committed to building an active and connected employee community within the Company. Key areas of focus for the Company include: Diversity and Inclusion: The Company believes that a diverse and inclusive workforce fosters an environment where everyone can thrive and be successful.
Key areas of focus for the Company include: Diversity and Inclusion: The Company believes that a diverse and inclusive workforce fosters an environment where everyone can thrive and be successful. As of December 31, 2023, approximately 88% of our workforce are minorities (non-Caucasian) and approximately 62% of our workforce are female.
We conduct an external pay equity study periodically to evaluate that a gender pay gap does not exist. 6 Table of Contents Employee Development and Training: The Company is committed to providing all employees with the opportunity to grow, connect and thrive within the Company. We foster a seamlessly collaborative, digitally connected workplace to support changing needs.
Of our senior leaders and managers, 82% are minorities and 60% are female. We conduct an external pay equity study periodically to evaluate the gender pay gap and confirm one does not exist. Employee Development and Training: The Company is committed to providing all employees with the opportunity to develop personally and professionally.
“Exec Connect” proved to be especially valuable in welcoming new employees, allowing them to familiarize themselves with key executives and other employees. “Recruit Connect” also continued in 2022 to help teammates identify job opportunities within the Company and find out more about them.
“Recruit Connect” continued in 2023 to help teammates identify job opportunities within the Company and find out more about them. In some cases, sessions led to referred candidates joining the Bank, and to current employees finding a new career path.
Removed
Changes in applicable laws or regulations, or a change in the way such laws or regulations are interpreted by regulatory agencies or courts, may have a material impact on our business, operations, and earnings.
Added
We use our website at https://ir.boh.com as a routine channel of distribution of Company information, including press releases, presentations, financial and other supplemental information, as a means of disclosing material non-public information and for complying with our disclosure obligations under Regulation FD.
Removed
The Bank’s FDIC insurance assessment was $6.5 million in 2022, $6.5 million in 2021, and $5.8 million in 2020.
Added
Accordingly, investors should monitor the investor relations portion of our website in addition to following our social media channels, press releases, SEC filings, and public conference calls and webcasts.
Removed
As of December 31, 2022, approximately 87% of our workforce are minorities (non-Caucasian) and approximately 63% of our workforce are female, which accounts for 43% and 60% of our senior leaders and managers, respectively.
Added
None of the information provided on our website, in our press releases, public conference calls and webcasts, or through social media channels is incorporated into, or deemed to be a part of, this Annual Report on Form 10-K or in any other report or document we file with the SEC.
Removed
“Exec Connect” kicked off in January with our Executive Committee and returned in November during Employee Experience (“EX”) Month with our Operating Committee, giving employees opportunities to interact with members of the Executive Committee and Operating Committee. Employees were able to hear about high level strategies and share their own concerns and observations.
Added
The Parent is also registered as a financial institution holding company under the Hawaii Code of Financial Institutions (the “Code”) and is subject to the registration, reporting, and examination requirements of the Code.
Removed
Forum topics are suggested by the participants, who meet every other month, and have included Reemergence, Mastering Change, Employee Experience, opportunities to deliver great EX, importance of psychological safety, and how our leaders can continue to build stronger teams.
Added
The Rules reflect, in part, certain standards initially adopted by the Basel Committee on Banking Supervision in December 2010 (which are commonly called “Basel III” standards) as well as requirements by the Dodd-Frank Act.
Removed
“Rising Team” launched in October 2022 to offer a new and modern way for us to strengthen our connection with our teammates.
Added
Certain restrictions also apply to extensions of credit made to an executive officer, directors, or principal shareholder of a bank (or to a related interest of such person) by a correspondent bank.
Removed
In 2022, the Bank introduced a new Paid Time Off benefit that provides our employees with more flexibility and paid Parental Leave. Health and Safety: The health and safety of our employees is a priority.
Added
The Bank’s FDIC insurance assessment was $28.3 million in 2023, $6.5 million in 2022, and $6.5 million in 2021. In November 2023, the FDIC implemented a special assessment to recover the loss to the Deposit Insurance Fund following the closures of Silicon Valley Bank, Signature Bank and First Republic Bank earlier in the year.
Removed
In 2022, our commitment to workplace safety and workforce health enabled the Company to maintain business and operational continuity without diminishing our focus on both employee and customer safety during the COVID-19 pandemic. We also invested in ventilation system upgrades. Employees who chose not to get COVID vaccinated, were required to complete COVID testing weekly.
Added
The assessment was based on reported uninsured deposits as of December 31, 2022. The FDIC could cease collection early or extend the special assessment period as they deem necessary depending on whether the amount the FDIC collects from the special assessment is higher or lower than the actual or estimated FDIC losses.
Removed
The Company paid for the testing, provided paid time off to complete the weekly testing, and secured on site testing arrangements for our employees.
Added
The Bank's share of the FDIC special assessment was $14.7 million which was recorded in the fourth quarter of 2023 and is payable in eight quarterly installments starting in June 2024.
Removed
The Company hosted onsite COVID-19 vaccine and/or booster shot clinics, as well as provided paid time off for employees to receive their COVID-19 vaccine and/or booster shot. 7 Table of Contents Information about our Executive Officers Listed below are executive officers of the Parent. Peter S.
Added
A number of other federal and state consumer protection laws extensively govern the Bank’s relationship with its customers.
Added
None of our employees are subject to a collective bargaining agreement. 6 Table of Contents People are the heart and soul of the Company, and as such, the Company values the contributions of all of its employees and is committed to building an engaged and connected employee community within the Company.
Added
With the introduction of a new role dedicated to Culture and Employee Experience, deep focus was spent on creating a human-centric, inclusive and innovative environment that nurtures a strong sense of belonging, fuels continuous learning, and focuses on developing effective leaders, ultimately driving exceptional employee experience and sustainable organizational success.
Added
Topics have included: Evaluating Employees and Meaningful Conversations to prepare our managers for the 2023 Performance, Merit & Bonus season, Rising Team, and how our leaders can continue to build stronger team dynamics. “Rising Team” continued to be a priority in 2023. This new and modern technology platform provides a way for us to strengthen our connection with our teammates.
Added
The Bank continues to incorporate mental health, financial well-being, social health, community, and a positive employee experience in their well-being strategies, in addition to physical health. In 2023, the Bank made additional resources available to employees and continued to look for more opportunities to support employees and cultivate an environment where employees can be their whole selves.
Added
Health and Safety: The health and safety of our employees is a priority. We continue our commitment to workplace safety and workforce health to maintain business and operational continuity without diminishing our focus on both employee and customer safety. 7 Table of Contents Information about our Executive Officers Listed below are executive officers of the Parent. Peter S.
Added
McGuirk, 54 Vice Chair and Chief Administrative Officer since September 2023; Senior Executive Vice President and Chief General Counsel from November 2020 to September 2023; Executive Vice President and General Counsel at Flagstar Bank from December 2014 to October 2020. James C.
Added
Bradley Shairson, 54 Vice Chair and Deputy Chief Risk Officer since May 2023; Chief Credit Officer from May 2023 to January 2024; Chief Operating Officer and Chief Risk Officer of Regions Bank Capital Markets from March 2017 to April 2023. Jeanne M.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

35 edited+22 added−22 removed82 unchanged
Biggest changeIn light of several recent high-profile data breaches involving other companies’ losses of customer personal and financial information, we believe this risk could cause customer and/or Bank losses, damage to our brand, and increase our costs through the ongoing cost of technology investments to improve security, as well as the potential financial and reputational impact of a cyber security incident involving the Company. 13 Table of Contents Although we make significant efforts to maintain the security and integrity of our information systems and have implemented various measures to manage the risk of a security breach or disruption, there can be no assurance that our security efforts and measures will be effective or that attempted security breaches or disruptions would not be successful or damaging.
Biggest changeIn light of several recent high-profile data breaches involving other companies’ losses of customer personal and financial information, we believe this risk could cause customer and/or Bank losses, damage to our brand, and increase our costs through the ongoing cost of technology investments to improve security, as well as the potential financial and reputational impact of a cyber security incident involving the Company.
Market volatility that leads customers to liquidate investments or move investments to other institutions or asset classes, as well as lower asset values can reduce our level of assets under management, thereby decreasing our investment management revenues. 10 Table of Contents The Parent’s liquidity is dependent on dividends from the Bank.
Market volatility that leads customers to 10 Table of Contents liquidate investments or move investments to other institutions or asset classes, as well as lower asset values can reduce our level of assets under management, thereby decreasing our investment management revenues. The Parent’s liquidity is dependent on dividends from the Bank.
Lower visitor arrivals or spending, real or threatened acts of war or terrorism, public unrest, increases in energy costs, the availability of affordable air transportation, climate change, natural disasters and adverse weather, public health issues including the COVID-19 pandemic, and Federal, State of Hawaii and local government budget issues may impact consumer and corporate spending.
Lower visitor arrivals or spending, real or threatened acts of war or terrorism, public unrest, increases in energy costs, inflation, the availability of affordable air transportation, climate change, natural disasters and adverse weather, public health issues including the COVID-19 pandemic, and federal, State of Hawaii and local government budget issues may impact consumer and corporate spending.
The actual amount and timing of future dividends and share repurchases, if any, will depend on market and economic conditions, applicable SEC rules, federal and state regulatory restrictions, and various other factors.
The actual amount and timing of future dividends and share repurchases, if any, will depend on market and economic conditions, applicable SEC rules, federal and state regulatory and supervisory restrictions, and various other factors.
These third parties with which we do business or that facilitate our business activities, including exchanges, clearing firms, financial 12 Table of Contents intermediaries or vendors that provide services or security solutions for our operations, could also be sources of operational and information security risk to us, including breakdowns or failures of their own systems or capacity constraints.
These third parties with which we do business or that facilitate our business activities, including exchanges, clearing firms, financial intermediaries or vendors that provide services or security solutions for our operations, could also be sources of operational and information security risk to us, including breakdowns or failures of their own systems or capacity constraints.
Changes in the capital markets could affect the volume of income from and demand for our fee-based services. Our investment management revenues depend in large part on the level of assets under management.
Changes in the capital markets could materially affect the level of assets under management and the demand for our other fee-based services Changes in the capital markets could affect the volume of income from and demand for our fee-based services. Our investment management revenues depend in large part on the level of assets under management.
These standards and remedies are determined by servicing guides issued by the investors as well as the contract provisions established between the investors and the Company. Remedies could include repurchase of an affected loan. The requirement to record certain assets and liabilities at fair value may adversely affect our financial results.
These standards and remedies are determined by servicing guides issued by the investors as well as the contract provisions established between the investors and the Company. Remedies could include repurchase of an affected loan. 14 Table of Contents The requirement to record certain assets and liabilities at fair value may adversely affect our financial results.
As a result of greater regulatory scrutiny of consumer financial products as a whole, the Company has become subject to more and expanded regulatory examinations, which also could result in increased costs as well as harm to our reputation in the event of a finding that we have not complied with the increased regulatory requirements.
As a result of greater regulatory scrutiny of consumer financial products as a whole, the Company has become subject to more and 11 Table of Contents expanded regulatory examinations, which also could result in increased costs as well as harm to our reputation in the event of a finding that we have not complied with the increased regulatory requirements.
The occurrence of any such failures, disruptions or security breaches could have a negative impact on our results of operations, financial condition, and cash flows as well as damage our brand and reputation. Our mortgage banking income may experience significant volatility.
The occurrence of any such failures, disruptions or security breaches could have a negative impact on our results of operations, financial condition, and cash flows as well as damage our brand and reputation. 13 Table of Contents Our mortgage banking income may experience significant volatility.
Item 1A. Risk Factors There are a number of risks and uncertainties that could negatively affect our business, financial condition or results of operations. We are subject to various risks resulting from changing economic, environmental, political, industry, business, financial and regulatory conditions.
Item 1A. Ri sk Factors There are a number of risks and uncertainties that could negatively affect our business, financial condition or results of operations. We are subject to various risks resulting from changing economic, environmental, political, industry, business, financial and regulatory conditions.
As of December 31, 2022, the unpaid principal balance of residential mortgage loans sold by the Company was $2.1 billion. The agreements under which the Company sells residential mortgage loans require delivery of various documents to the investor or its document custodian.
As of December 31, 2023, the unpaid principal balance of residential mortgage loans sold by the Company was $2.0 billion. The agreements under which the Company sells residential mortgage loans require delivery of various documents to the investor or its document custodian.
To the extent that the Bank or its customers experience increases in costs, reductions in the value of assets, constraints on operations or similar concerns driven by changes in regulation relating to climate change, the Bank’s business and results of operations may be adversely affected.
To the extent that the Bank or its customers experience increases in costs, reductions in the value of assets, constraints on operations or similar concerns driven by changes in regulation relating to climate change, the Bank’s business and results of operations may be adversely affected. Disruptions, instability and failures in the banking industry.
In addition, our credit risk may be exacerbated when the collateral held by us cannot be realized upon or is liquidated at prices not sufficient to recover the full amount of the loan or derivative exposure due us. Such losses could materially affect our financial condition or results of operations. Item 1B. Unresolved Staff Comments None.
In addition, our credit risk may be exacerbated when the collateral held by us cannot be realized upon or is liquidated at prices not sufficient to recover the full amount of the loan or derivative exposure due us. Such losses could materially affect our financial condition or results of operations.
Management makes various assumptions and judgments about the loan and lease portfolios in determining the level of the reserve for credit losses. Many of these assumptions are based on current economic conditions. Should economic conditions stagnate or deteriorate nationally or in Hawaii, we may experience higher credit losses in future periods.
Management makes various assumptions and judgments about the loan and lease portfolios in determining the level of the reserve for credit losses. Many of these assumptions are based on current economic conditions. Should economic conditions stagnate or deteriorate nationally or in Hawaii, we may be required to take increased reserves and/or experience higher credit losses in future periods.
A natural disaster in Hawaii or the Pacific Islands could cause property values in the affected areas to fall, which could require the Bank to record an impairment on its financial statements. A natural disaster could also impact borrowers’ ability to pay their financial obligations, which would increase our exposure to loan defaults.
A natural disaster in Hawaii or the Pacific Islands could cause property values in the affected areas to fall, might limit our customers' access to adequate property insurance, or otherwise impact borrowers’ ability to pay their financial obligations, any of which would increase our exposure to loan defaults and could require the Bank to record an impairment on our financial statements.
In addition to servicing loans in the Company’s portfolio, substantially all of the loans the Company sells to investors are sold with servicing rights retained. The Company also services loans originated by other mortgage loan originators.
Risks relating to residential mortgage loan servicing activities may adversely affect our results. In addition to servicing loans in the Company’s portfolio, substantially all of the loans the Company sells to investors are sold with servicing rights retained. The Company also services loans originated by other mortgage loan originators.
We report certain assets, including available-for-sale investment securities, at fair value. Generally, for assets that are reported at fair value we use quoted market prices or valuation models that utilize market data inputs to estimate fair value.
We report certain assets, including available-for-sale investment securities, at fair value. Generally, for assets that are reported at fair value we use quoted market prices or valuation models that utilize market data inputs to estimate fair value. Because we record these assets at their estimated fair value, mark-to-market gains or losses may impact equity or income.
See the Contingencies section of Note 20 to the Consolidated Financial Statements for more information. Our performance depends on attracting and retaining key employees and skilled personnel to operate our business effectively. Our success is dependent on our ability to recruit qualified and skilled personnel to operate our business effectively. Competition for these qualified and skilled people is intense.
Our performance depends on attracting and retaining key employees and skilled personnel to operate our business effectively. Our success is dependent on our ability to recruit qualified and skilled personnel to operate our business effectively. Competition for these qualified and skilled people is intense.
In addition, o ur communications and information systems and operations (including those of third parties that facilitate our business activities) could be damaged or interrupted due to events such as natural or human-caused disasters (including public health crises) or extreme weather (including as a result of climate change), geopolitical events and security issues, computer viruses, physical or electronic break-ins, operational failures, and similar events or disruptions.
In addition, our communications and information systems and operations (including those of third parties that facilitate our business activities) could be damaged or interrupted due to events such as natural or human-caused disasters (including public health crises) or extreme weather (including as a result of climate change), geopolitical events and security issues, computer viruses, physical or electronic break-ins, operational failures, and similar events or disruptions. 12 Table of Contents Although we have safeguards and business continuity plans in place, our business operations may be adversely affected by significant and widespread disruption to our physical infrastructure or operating systems that support our business and our customers, resulting in financial losses, loss of customers, or damage to our reputation.
These local economies rely heavily on tourism, the U.S. military, real estate, construction, government, and other service-based industries.
Our business and earnings are closely tied to the economies of Hawaii and the Pacific Islands. These local economies rely heavily on tourism, the U.S. military, real estate, construction, government, and other service-based industries.
The manner in which these issues are ultimately resolved could impact our foreclosure procedures and costs, which in turn could affect our financial condition or results of operations. Changes in the capital markets could materially affect the level of assets under management and the demand for our other fee-based services.
The manner in which these issues are ultimately resolved could impact our foreclosure procedures and costs, which in turn could affect our financial condition or results of operations.
These methods are used in varying degrees and combinations to directly affect the availability of bank loans and deposits, as well as the interest rates charged on loans and paid on deposits.
These methods are used in varying degrees and combinations to directly affect the availability of bank loans and deposits, as well as the interest rates charged on loans and paid on deposits. Changes to these policies of the Federal Reserve may have a material effect on our business, results of operations and financial condition.
For the year ended December 31, 2022, the Company repurchased six residential mortgage loans with an aggregate unpaid principal balance totaling $1.6 million as a result of the representation and warranty provisions contained in these contracts.
For the year ended December 31, 2023, the Company repurchased three residential mortgage loans with an aggregate unpaid principal balance totaling $0.6 million as a result of the representation and warranty provisions contained in these contracts. The loans were delinquent as to principal and interest at the time of repurchase, however, no material losses were incurred related to these repurchases.
The borrowing power of our customers could also be negatively impacted by a decline in the value of collateral.
The borrowing power of our customers could also be negatively impacted by a decline in the value of collateral. A prolonged period of inflation may impact our profitability by negatively impacting our fixed costs and expenses.
Fiscal and Monetary Policy changes may significantly impact our profitability and liquidity The Company’s business and earnings are significantly affected by the fiscal and monetary policies of the Federal Government and its agencies. The Bank is particularly affected by the policies of the Federal Reserve, which regulates the supply of money and credit in the United States.
Risks Related to Regulatory Changes Fiscal and Monetary Policy changes may significantly impact our profitability and liquidity The Company’s business and earnings are significantly affected by the fiscal and monetary policies of the Federal Government and its agencies.
There can be no assurance that the Parent will continue to declare cash dividends or repurchase stock. During 2022, the Parent repurchased 627,629 shares of common stock at a total cost of $49.8 million under its share repurchase program. We suspended share repurchases from March 2020 to July 2021 in light of the COVID-19 pandemic.
There can be no assurance that the Parent will repurchase stock or continue to declare cash dividends. During 2023, the Parent repurchased 150,000 shares of common stock at a total cost of $9.9 million under its share repurchase program.
The Parent also paid cash dividends of $112.6 million on common shares during 2022. In January 2023, the Parent’s Board of Directors declared a quarterly cash dividend of $0.70 per share on the Parent’s outstanding common shares.
However, we suspended share repurchases in April 2023 in response to the turmoil in the banking industry due to several significant bank failures. The Parent also paid cash dividends of $111.8 million on common shares during 2023. In January 2024, the Parent’s Board of Directors declared a quarterly cash dividend of $0.70 per share on the Parent’s outstanding common shares.
Additionally, financial markets may be adversely affected by the current or anticipated impact of military conflict, including continuing military conflict between Russia and Ukraine, terrorism or other geopolitical events. 8 Table of Contents The impacts of various travel restrictions and quarantine requirements for visitors to Hawaii in connection with the COVID-19 pandemic had a dramatic negative impact on tourism and general economic conditions in our markets .
Additionally, financial markets may be adversely affected by the current or anticipated impact of military conflict, including continuing military conflict between Israel and Hamas, Russia and Ukraine, terrorism or other geopolitical events. There has been significant improvement in tourism and general economic conditions in Hawaii since the beginning of the COVID-19 pandemic.
The risks and uncertainties described below are what management believes are the material risk factors that could affect our business and operations, although they are not the only risks that may have a material adverse effect on the Company.
The risks and uncertainties described below are what management believes are the material risk factors that could affect our business and operations, although they are not the only risks that may have a material adverse effect on the Company. 8 Table of Contents Risks Related to Macroeconomic and Political Conditions Adverse changes in business and economic conditions, in particular those of Hawaii, Guam and other Pacific Islands, could lead to lower revenue, lower asset quality, and lower earnings.
Based on information currently available, we believe that the eventual outcome of known actions against us will not be materially in excess of such amounts accrued by us. However, in the event of unexpected future developments, it is possible that the ultimate resolution of those matters may be material to our financial results for any particular period.
We may be exposed to substantial uninsured liabilities, which could materially affect our results of operations and financial condition. Based on information currently available, we believe that the eventual outcome of known actions against us will not be materially in excess of such amounts accrued by us.
Substantial legal liability or significant regulatory action against us could have material financial effects or cause significant reputational harm to us, which in turn could seriously harm our business prospects. We may be exposed to substantial uninsured liabilities, which could materially affect our results of operations and financial condition.
Substantial legal liability or significant regulatory action against us could have material financial effects or cause significant reputational harm to us, which in turn could seriously harm our business prospects. 15 Table of Contents In recent years, regulatory enforcement and fines have increased across the banking and financial services sector.
The Dodd-Frank Act, enacted in July 2010, triggered sweeping reforms to the financial services industry.
Legislation and regulatory initiatives affecting the financial services industry, including new interpretations, restrictions and requirements, could detrimentally affect the Company’s business. The Dodd-Frank Act, enacted in July 2010, triggered sweeping reforms to the financial services industry.
Failure to effectively address this competitive risk by competing, innovating and making effective use of new and existing channels to deliver our products and services could adversely affect our financial condition or results of operations. 15 Table of Contents Negative public opinion could damage our reputation and adversely impact our earnings and liquidity.
Both federal and local laws provide mechanisms for out-of-state banks and their holding companies to acquire or open branches in our service territories. Failure to effectively address this competitive risk by competing, innovating and making effective use of new and existing channels to deliver our products and services could adversely affect our financial condition or results of operations.
A reduction in or elimination of our dividend payments and/or stock repurchases could have a negative effect on our stock price. Risks Related to Regulatory Changes The end of LIBOR may adversely affect our financial instruments that are directly or indirectly tied to LIBOR.
A reduction in or elimination of our dividend payments and/or prolonged suspension of stock repurchases could have a negative effect on our stock price.
Various federal and state laws and regulations limit the amount of dividends that the Bank may pay to the Parent. The Parent’s ability to meet its obligations, pay dividends to shareholders, or repurchase stock, may be further limited if federal and state laws and regulations further limit the amount of dividends the Bank is permitted to pay the Parent.
Various federal and state laws and regulations impose limitations on the payment of dividends, such as requiring regulatory approval under certain circumstances. Limitations on the Parent’s ability to receive dividends from the Bank could have a material adverse effect on the Parent’s ability to meet its obligations, pay dividends to shareholders, or repurchase stock.
Removed
Risks Related to Macroeconomic and Political Conditions Adverse changes in business and economic conditions, in particular those of Hawaii, Guam and other Pacific Islands, could lead to lower revenue, lower asset quality, and lower earnings. Our business and earnings are closely tied to the economies of Hawaii and the Pacific Islands.
Added
However, in August 2023, wildfires broke out in West Maui destroying the historic town of Lahaina as well as structures and farmland in Upcountry Maui and North Kihei. Roughly 2,200 structures were lost in the fire, 86% of which were homes. Although hotels have reopened, Maui’s visitor industry will continue to be impacted in the coming years.
Removed
Although there has been significant improvement in tourism and general economic conditions, COVID-19 continues to impact Hawaii and the Pacific Islands, including a lagging recovery in international tourism.
Added
Economic and inflationary pressure on consumers and uncertainty regarding the economic improvement could result in changes in consumer and commercial spending, borrowing and savings habits. Such conditions could have a material adverse effect on the credit quality of our loans and our business, financial condition and results of operations.
Removed
The COVID-19 pandemic has disrupted the Hawaii economy and our business, the extent of the impact on our business and our financial results remains uncertain. The COVID-19 pandemic has had a material adverse effect on our operations and financial performance. The duration of the COVID-19 pandemic and its effects still cannot be determined with a reasonable level of certainty.
Added
Recent events impacting the financial services industry, including the failure of Silicon Valley Bank, Signature Bank and First Republic Bank, have resulted in decreased confidence in banks among consumer and commercial depositors, other counterparties and investors, as well as significant disruption, volatility and reduced valuations of equity and other securities of banks in the capital markets.
Removed
We have experienced unprecedented levels of government stimulus in response to the COVID-19 pandemic, and have seen certain economic activities recovering since 2020, however, the lasting impacts of which are unknown. Novel viruses such as COVID-19 increase concerns related to illness when traveling and gathering in large numbers.
Added
These events occurred during a period of rapidly rising interest rates which, among other things, has resulted in unrealized losses in longer duration securities and loans held by banks, more competition for bank deposits and may increase the risk of a potential recession.
Removed
In response, the majority of the nation’s state and local jurisdictions imposed various restrictions in order to control the spread of COVID-19. Though most of these restrictions have now been lifted there is the possibility that they could be imposed again in the future.
Added
These recent events have, and could continue to, adversely impact the market price and volatility of the Company’s common stock.
Removed
Even as more and more individuals become fully vaccinated against COVID-19, prior and any future travel restrictions and mandatory quarantines related to the COVID-19 pandemic may have a lasting impact on tourism spending in Hawaii.
Added
These recent events may also result in potentially adverse changes to laws or regulations governing banks and bank holding companies or result in the impositions of restrictions through supervisory or enforcement activities, including higher capital requirements, which could have a material impact on our business.
Removed
Because many of our customers, both commercial and consumer, derive at least some of their income from tourism, a dramatic drop in tourism spending affects them directly, as well as the Hawaii economy as a whole. A downturn in the Hawaii economy and widespread reduction to our customers’ income in turn will have a negative impact on our operations.
Added
Inability to access short-term funding, loss of client deposits or changes in our credit ratings could increase the cost of funding, limit access to capital markets or negatively impact our overall liquidity or capitalization.
Removed
We are unable to predict the extent to which the COVID-19 pandemic and related impacts will continue to adversely affect our business, results of operations, financial condition, regulatory capital, and liquidity ratios. The COVID-19 pandemic, the institution of physical distancing, and shelter-in-place requirements resulted in both temporary and permanent closures of many businesses.
Added
We may be impacted by concerns regarding the soundness or 9 Table of Contents creditworthiness of other financial institutions, which can cause substantial and cascading disruption within the financial markets and increased expenses. Any reduction in defense spending by the federal government could adversely impact the economy in Hawaii and the Pacific Islands.
Removed
As a result, the demand for our products and services has been and may continue to be significantly impacted. Our operations may also be disrupted if significant portions of our workforce are unable to work effectively, due to illness, quarantines, government actions, or other restrictions in connection with the COVID-19 pandemic.
Added
The Bank is particularly affected by the policies of the Federal Reserve, which regulates the supply of money and credit in the United States.
Removed
We had temporarily closed certain of our branches and permanently closed others. Many employees are now working remotely or on a hybrid schedule. In response to the COVID-19 pandemic, we temporarily suspended residential property foreclosure sales, evictions, and involuntary automobile repossessions. We continue to work with our customers after the initial assistance programs expired.
Added
In addition, there may be increased regulatory scrutiny in the course of routine examinations and otherwise, and new regulations designed to respond to recent negative developments in the banking industry, all of which may increase our costs of doing business and reduce our profitability.
Removed
The extent to which the COVID-19 pandemic impacts our business, results of operations, financial condition, regulatory capital, and liquidity ratios will depend on the scope and duration of the COVID-19 pandemic, actions taken by governmental authorities, actions taken by other third parties in response to the COVID-19 pandemic, and the pace of recovery when the COVID-19 pandemic subsides, all of which are highly uncertain. 9 Table of Contents Any reduction in defense spending by the federal government could adversely impact the economy in Hawaii and the Pacific Islands.
Added
Among other things, there may be increased focus by both regulators and investors on deposit composition, the level of uninsured deposits, brokered deposits, unrealized losses in securities portfolios, liquidity, commercial real estate composition and concentration, and capital and general oversight and control of the foregoing.
Removed
On March 5, 2021, the UK Financial Conduct Authority, which regulates LIBOR, confirmed that all LIBOR settings will either cease to be provided by any administrator or will no longer be representative immediately after December 31, 2021 for 1-week and 2-month US dollar LIBOR and immediately after June 30, 2023 for all remaining US dollar LIBOR settings.
Added
Financial institutions, such as ourselves, could face increased scrutiny or be viewed as higher risk by regulators and/or the investor community, which could negatively affect its results of operations and financial condition.
Removed
In addition, U.S. banking regulatory agencies issued guidance encouraging banks to cease entering into new contracts that use U.S. dollar LIBOR as a reference rate by December 31, 2021. At the same time, various alternative rates, including the Secured Overnight Financing Rate (SOFR), have begun to be used more widely in both loan and derivative products.
Added
Although we make significant efforts to maintain the security and integrity of our information systems and have implemented various measures to manage the risk of a security breach or disruption, there can be no assurance that our security efforts and measures will be effective or that attempted security breaches or disruptions would not be successful or damaging.
Removed
We have loans, derivative contracts, and other financial instruments with rates that are either directly or indirectly tied to LIBOR. As the transition progresses, the interest rates on these instruments, as well as the revenue and expenses associated with the same, may be adversely affected.
Added
The level of interest rates can impact the estimated fair value of investment securities. Mark-to-market values of non-hedged available-for-sale investment securities are recorded in shareholders' equity as a component of other comprehensive income, while hedged investment securities are recorded in interest income.
Removed
Furthermore, failure to adequately manage this transition process with our customers, could adversely impact our reputation. The transition continues to be overseen by an enterprise-wide, cross-functional project team that reports to executive management on an ongoing basis.
Added
Negative public opinion could damage our reputation and adversely impact our earnings and liquidity.
Removed
The project team is organized around key work streams, which cover the products, systems, and operational processes impacted by the transition as well as client communication.
Added
There is no assurance that those actions will not result in regulatory settlements or other enforcement actions against the Company or the Bank. Furthermore, a single event involving a potential violation of law or regulation may give rise to numerous and overlapping investigations and proceedings by multiple federal and state agencies and officials.
Removed
Since its formation, the project team has overseen the transition to non-LIBOR based adjustable rate mortgages and floating rate commercial loans as well as related customer derivatives (LIBOR-based ARMs no longer offered since November 2020 and LIBOR-based commercial loans no longer offered since December 2021) and continues to work toward facilitating the transition of legacy LIBOR products.
Added
In addition, if one or more financial institutions are found to have violated a law or regulation relating to certain business activities, this could lead to investigations by regulators or other governmental agencies of the same or similar activities by other financial institutions, including the Company, and large fines and remedial measures that may have been imposed in resolving earlier investigations for the same or similar activities at other financial institutions may be used as the basis for future settlements.
Removed
Changes to these policies of the Federal Reserve may have a material effect on our business, results of operations and financial condition. 11 Table of Contents Legislation and regulatory initiatives affecting the financial services industry, including new interpretations, restrictions and requirements, could detrimentally affect the Company’s business.
Added
However, in the event of unexpected future developments, it is possible that the ultimate resolution of those matters may be material to our financial results for any particular period. See the Contingencies section of Note 20 to the Consolidated Financial Statements for more information.
Removed
Although we have safeguards and business continuity plans in place, our business operations may be adversely affected by significant and widespread disruption to our physical infrastructure or operating systems that support our business and our customers, resulting in financial losses, loss of customers, or damage to our reputation.
Added
We have experienced increases in FDIC insurance assessments due to the bank failures that occurred in 2023. In November 2023, the FDIC implemented a special assessment to recover the loss to the Deposit Insurance Fund following the failures of Silicon Valley Bank, Signature Bank, and First Republic Bank earlier in the year.
Removed
The loans were delinquent as to principal and interest at the time of repurchase, however, no material losses were incurred related to these repurchases. 14 Table of Contents Risks relating to residential mortgage loan servicing activities may adversely affect our results.
Added
The assessment was based on reported uninsured deposits as of December 31, 2022. The Company's share of the FDIC special assessment was $14.7 million which was recorded in the fourth quarter of 2023 and is payable in eight quarterly installments starting in June 2024.
Removed
Because we record these assets at their estimated fair value, we may incur losses even if the asset in question presents minimal credit risk. The level of interest rates can impact the estimated fair value of investment securities.
Added
In February 2024, the FDIC updated the loss estimate related to the bank failures to $20.4 billion, and increase from its original estimate of $16.3 billion. Based on the FDIC’s modified loss estimate, we expect an increase in special assessment expense in, or around, June 2024; however, we expect the increase will not be material.
Removed
Both federal and local laws provide mechanisms for out-of-state banks and their holding companies to acquire or open branches in our service territories.
Added
Further increases in our assessment fees may have an adverse effect on our results of operations and financial condition. Item 1B. Unresolv ed Staff Comments None. 16 Table of Contents

Item 2. Properties

Properties — owned and leased real estate

1 edited+0 added−0 removed0 unchanged
Biggest changeItem 2. Properties Our principal offices are located in the Financial Plaza of the Pacific in Honolulu, Hawaii. We own and lease other branch offices and operating facilities located throughout Hawaii and the Pacific Islands. Additional information with respect to premises and equipment is presented in Notes 6 and 23 to the Consolidated Financial Statements.
Biggest changeItem 2. P roperties Our principal offices are located in the Financial Plaza of the Pacific in Honolulu, Hawaii. We own and lease other branch offices and operating facilities located throughout Hawaii and the Pacific Islands. Additional information with respect to premises and equipment is presented in Notes 6 and 23 to the Consolidated Financial Statements.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

1 edited+0 added−0 removed1 unchanged
Biggest changeFor additional information, see Note 20 to the Consolidated Financial Statements, under the discussion related to Contingencies. Item 4. Mine Safety Disclosures Not Applicable. 16 Table of Contents Part II
Biggest changeFor additional information, see Note 20 to the Consolidated Financial Statements, under the discussion related to Contingencies. Item 4. Mine Sa fety Disclosures Not Applicable. 18 Table of Contents Part II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

8 edited+2 added−1 removed2 unchanged
Biggest changeIssuer Purchases of Equity Securities Period Total Number of Shares Purchased 1 Average Price Paid Per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs 2 October 1 - 31, 2022 20,157 $ 74.58 14,750 $ 49,744,220 November 1 - 30, 2022 96,762 78.67 94,750 42,292,742 December 1 - 31, 2022 82,846 77.26 82,846 35,892,569 Total 199,765 $ 77.67 192,346 1 During the fourth quarter of 2022, 7,419 shares were acquired from employees in connection with income tax withholdings related to the vesting of restricted stock and acquired by the trustee of a trust established pursuant to the Bank of Hawaii Corporation Director Deferred Compensation Plan (the “DDCP”) directly from the Parent in satisfaction of the Company’s obligations to participants under the DDCP.
Biggest changeDuring the fourth quarter of 2023, 4,807 shares were acquired from employees in connection with income tax withholdings related to the vesting of restricted stock and acquired by the trustee of a trust established pursuant to the Bank of Hawai'i Corporation Director Deferred Compensation Plan (the “DDCP”) directly from the Parent in satisfaction of the Company’s obligations to participants under the DDCP.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information, Shareholders, and Dividends Information regarding the historical market prices of the Parent’s common stock, book value, and dividends declared on that stock are shown below.
Item 5. Market for Registrant’s Common Equity, Related Sto ckholder Matters and Issuer Purchases of Equity Securities Market Information, Shareholders, and Dividends Information regarding the historical market prices of the Parent’s common stock, book value, and dividends declared on that stock are shown below.
The actual amount and timing of future share repurchases, if any, will depend on market and economic conditions, regulatory rules, applicable SEC rules, and various other factors. 17 Table of Contents Performance Graph The following graph shows the cumulative total return for the Parent’s common stock compared to the cumulative total returns for the Standard & Poor’s (“S&P”) 500 Index, the S&P Banks Index, and the S&P Supercomposite Regional Bank Index.
The actual amount and timing of future share repurchases, if any, will depend on market and economic conditions, regulatory rules, applicable SEC rules, and various other factors. 19 Table of Contents Performance Graph The following graph shows the cumulative total return for the Parent’s common stock compared to the cumulative total returns for the Standard & Poor's ("S&P") 500 Index, and the S&P Supercomposite Regional Bank Index.
As of February 15, 2023, there were 5,290 common shareholders of record. The Parent’s Board of Directors considers on a quarterly basis the feasibility of paying a cash dividend to its shareholders and the level and feasibility of repurchasing shares of the Parent’s common stock. Under the Parent’s historical practice, dividends declared on common stock are paid within the quarter.
As of February 14, 2024, there were 5,133 common shareholders of record. The Parent’s Board of Directors considers on a quarterly basis the feasibility of paying a cash dividend to its shareholders and the level and feasibility of repurchasing shares of the Parent’s common stock. Under the Parent’s historical practice, dividends declared on common stock are paid within the quarter.
The transaction did not involve a public offering and occurred without general solicitation or advertising. The shares were purchased at the closing price of the Parent’s common stock on the dates of purchase. 2 The share repurchase program was first announced in July 2001. The program has no set expiration or termination date.
The transaction was not conducted as part of the share repurchase program, did not involve a public offering and occurred without general solicitation or advertising. The shares were purchased at the closing price of the Parent’s common stock on the dates of purchase. 2. The share repurchase program was first announced in July 2001.
Market Prices, Book Values, and Common Stock Dividends Per Share Market Price Range Dividends Year/Period High Low Close Book Value Declared 2022 $ 92.38 $ 70.15 $ 77.56 $ 28.54 $ 2.80 First Quarter 92.38 79.60 83.92 0.70 Second Quarter 84.93 70.97 74.40 0.70 Third Quarter 85.45 70.89 76.12 0.70 Fourth Quarter 82.87 70.15 77.56 0.70 2021 $ 99.10 $ 75.65 $ 83.76 $ 35.57 $ 2.74 First Quarter 99.10 75.65 89.49 0.67 Second Quarter 95.95 81.23 84.22 0.67 Third Quarter 87.12 75.68 82.17 0.70 Fourth Quarter 88.96 78.73 83.76 0.70 The common stock of the Parent is traded on the New York Stock Exchange (NYSE Symbol: BOH) and quoted daily in leading financial publications.
Market Prices, Book Values, and Common Stock Dividends Per Share Market Price Range Dividends Year/Period High Low Close Book Value Declared 2023 $ 81.73 $ 30.83 $ 72.46 $ 31.05 $ 2.80 First Quarter 81.73 34.71 52.08 0.70 Second Quarter 52.37 30.83 41.23 0.70 Third Quarter 58.63 39.02 49.69 0.70 Fourth Quarter 75.19 45.56 72.46 0.70 2022 $ 92.38 $ 70.15 $ 77.56 $ 28.54 $ 2.80 First Quarter 92.38 79.60 83.92 0.70 Second Quarter 84.93 70.97 74.40 0.70 Third Quarter 85.45 70.89 76.12 0.70 Fourth Quarter 82.87 70.15 77.56 0.70 The common stock of the Parent is traded on the New York Stock Exchange (NYSE Symbol: BOH) and quoted daily in leading financial publications.
The Company has added the S&P Supercomposite Regional Bank Index to the graph because the companies in this index are the ones with which the Company competes for capital and talent.
The Company has included the S&P Supercomposite Regional Bank Index to the graph because the companies in this index are the ones with which the Company competes for capital and talent. The graph assumes that $100 was invested on December 31, 2018, in the Parent’s common stock, the S&P 500 Index, and the S&P Supercomposite Regional Bank Index.
The cumulative total return on each investment is as of December 31 of each of the subsequent five years and assumes reinvestment of dividends. 2017 2018 2019 2020 2021 2022 Bank of Hawaii Corporation $ 100 $ 81 $ 118 $ 99 $ 111 $ 107 S&P 500 Index $ 100 $ 96 $ 126 $ 149 $ 192 $ 157 S&P Banks Index $ 100 $ 84 $ 118 $ 101 $ 137 $ 111 S&P Supercomposite Regional Bank Index $ 100 $ 82 $ 107 $ 99 $ 139 $ 114 Item 6. [Reserved] 18 Table of Contents
The cumulative total return on each investment is as of December 31 of each of the subsequent five years and assumes reinvestment of dividends. 2018 2019 2020 2021 2022 2023 Bank of Hawai‘i Corporation $ 100 $ 146 $ 122 $ 138 $ 132 $ 130 S&P 500 Index $ 100 $ 141 $ 121 $ 164 $ 133 $ 147 S&P Supercomposite Regional Bank Index $ 100 $ 130 $ 122 $ 170 $ 140 $ 123 Item 6.
Removed
The graph assumes that $100 was invested on December 31, 2017, in the Parent’s common stock, the S&P 500 Index, the S&P Banks Index, and the S&P Supercomposite Regional Bank Index.
Added
Issuer Purchases of Equity Securities Period Total Number of Shares Purchased 1 Average Price Paid Per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs 2 October 1 - 31, 2023 4,712 $ 48.47 — $ 126,038,927 November 1 - 30, 2023 95 56.81 — 126,038,927 December 1 - 31, 2023 — — — 126,038,927 Total 4,807 $ 48.64 — 1.
Added
The program has no set expiration or termination date.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

176 edited+82 added−70 removed91 unchanged
Biggest changeTable 19 presents the activity in the Company’s reserve for credit losses for the years ended December 31: Reserve for Credit Losses Table 19 (dollars in thousands) 2022 2021 2020 2019 2018 Balance at Beginning of Period $ 164,297 $ 221,303 $ 116,849 $ 113,515 $ 114,168 CECL Adoption (Day 1) Impact — — (5,072 ) — — Loans and Leases Charged-Off Commercial Commercial and Industrial (925 ) (1,117 ) (1,697 ) (1,122 ) (1,505 ) Commercial Mortgage — — — (1,616 ) — Consumer Residential Mortgage (80 ) (316 ) (204 ) (112 ) (101 ) Home Equity (100 ) (417 ) (397 ) (900 ) (665 ) Automobile (4,652 ) (4,939 ) (6,496 ) (7,130 ) (8,218 ) Other 1 (7,585 ) (10,530 ) (12,244 ) (13,075 ) (14,075 ) Total Loans and Leases Charged-Off (13,342 ) (17,319 ) (21,038 ) (23,955 ) (24,564 ) Recoveries on Loans and Leases Previously Charged-Off Commercial Commercial and Industrial 552 506 2,288 1,513 2,039 Commercial Mortgage — — 40 — — Consumer Residential Mortgage 1,193 2,467 1,292 1,927 807 Home Equity 1,500 1,666 2,892 2,339 2,001 Automobile 2,276 3,510 3,775 2,961 2,902 Other 1 2,702 3,205 3,613 2,549 2,737 Total Recoveries on Loans and Leases Previously Charged-Off 8,223 11,354 13,900 11,289 10,486 Net Charged-Off - Loans and Leases (5,119 ) (5,965 ) (7,138 ) (12,666 ) (14,078 ) Net Charged-Off - Accrued Interest Receivable (131 ) (541 ) — — — Provision for Credit Losses 2 Loans and Leases (8,263 ) (52,466 ) 115,100 16,000 13,425 Accrued Interest Receivable 3 (283 ) (1,745 ) 2,700 — — Unfunded Commitments 4 746 3,711 (1,136 ) — — Total Provision for Credit Losses (7,800 ) (50,500 ) 116,664 16,000 13,425 Balance at End of Period $ 151,247 $ 164,297 $ 221,303 $ 116,849 $ 113,515 Components Allowance for Credit Losses - Loans and Leases $ 144,439 $ 157,821 $ 216,252 $ 110,027 $ 106,693 Allowance for Credit Losses - Accrued Interest Receivable 3 — 414 2,700 — — Reserve for Unfunded Commitments 4 6,808 6,062 2,351 6,822 6,822 Total Reserve for Credit Losses $ 151,247 $ 164,297 $ 221,303 $ 116,849 $ 113,515 Average Loans and Leases Outstanding $ 12,896,510 $ 12,023,669 $ 11,592,093 $ 10,688,424 $ 10,043,661 Ratio of Net Loans and Leases Charged-Off to Average Loans and Leases Outstanding 0.04 % 0.05 % 0.06 % 0.12 % 0.14 % Ratio of Allowance for Credit Losses to Loans and Leases Outstanding 5 1.06 % 1.29 % 1.81 % 1.00 % 1.02 % 1 Comprised of other revolving credit, installment, and lease financing. 2 Certain prior period information has been reclassified to conform to current presentations. 3 On December 31, 2020, the Company established a reserve on accrued interest receivable related to loans in which interest payment forbearances were granted to borrowers impacted by the COVID-19 pandemic.
Biggest changeTable 18 presents the activity in the Company’s reserve for credit losses for the years ended December 31: Reserve for Credit Losses Table 18 (dollars in thousands) 2023 2022 2021 2020 2019 Balance at Beginning of Period $151,247 $164,297 $221,303 $116,849 $113,515 CECL Adoption (Day 1) Impact — — — (5,072) — Loans and Leases Charged-Off Commercial Commercial and Industrial (987) (925) (1,117) (1,697) (1,122) Commercial Mortgage — — — — (1,616) Consumer Residential Mortgage (6) (80) (316) (204) (112) Home Equity (82) (100) (417) (397) (900) Automobile (5,247) (4,652) (4,939) (6,496) (7,130) Other 1 (8,645) (7,585) (10,530) (12,244) (13,075) Total Loans and Leases Charged-Off (14,967) (13,342) (17,319) (21,038) (23,955) Recoveries on Loans and Leases Previously Charged-Off Commercial Commercial and Industrial 350 552 506 2,288 1,513 Commercial Mortgage — — — 40 — Consumer Residential Mortgage 489 1,193 2,467 1,292 1,927 Home Equity 1,073 1,500 1,666 2,892 2,339 Automobile 2,782 2,276 3,510 3,775 2,961 Other 1 2,455 2,702 3,205 3,613 2,549 Total Recoveries on Loans and Leases Previously Charged-Off 7,149 8,223 11,354 13,900 11,289 Net Charged-Off - Loans and Leases (7,818) (5,119) (5,965) (7,138) (12,666) Net Charged-Off - Accrued Interest Receivable — (131) (541) — — Provision for Credit Losses 2 Loans and Leases 9,782 (8,263) (52,466) 115,100 16,000 Accrued Interest Receivable 3 — (283) (1,745) 2,700 — Unfunded Commitments 4 (782) 746 3,711 (1,136) — Total Provision for Credit Losses 9,000 (7,800) (50,500) 116,664 16,000 Balance at End of Period $152,429 $151,247 $164,297 $221,303 $116,849 Components Allowance for Credit Losses - Loans and Leases $146,403 $144,439 $157,821 $216,252 $110,027 Allowance for Credit Losses - Accrued Interest Receivable 3 — — 414 2,700 — Reserve for Unfunded Commitments 4 6,026 6,808 6,062 2,351 6,822 Total Reserve for Credit Losses $152,429 $151,247 $164,297 $221,303 $116,849 Average Loans and Leases Outstanding $13,851,551 $12,896,510 $12,023,669 $11,592,093 $10,688,424 Ratio of Net Loans and Leases Charged-Off to Average Loans and Leases Outstanding 0.06% 0.04% 0.05% 0.06% 0.12% Ratio of Allowance for Credit Losses to Loans and Leases Outstanding 5 1.05% 1.06% 1.29% 1.81% 1.00% 1.
Allow. as % of loan or lease category Loan category as % of total loans and leases Alloc. Allow. as % of loan or lease category Loan category as % of total loans and leases Alloc. Allow. as % of loan or lease category Loan category as % of total loans and leases Alloc.
Allow. as % of loan or lease category Loan category as % of total loans and leases Alloc. Allow. as % of loan or lease category Loan category as % of total loans and leases Alloc.
Our forward-looking statements are based on numerous assumptions, any of which could prove to be inaccurate, and actual results may differ materially from those projected because of a variety of risks and uncertainties, including, but not limited to: 1) general economic conditions either nationally, internationally, or locally may be different than expected, and particularly, any event that negatively impacts the tourism industry in Hawaii; 2) the compounding effects of the COVID-19 pandemic, including reduced tourism in Hawaii, the duration and scope of government mandates or other limitations of or restrictions on travel, volatility in the international and national economy and credit markets, inflation, worker absenteeism, quarantines or other travel or health-related restrictions, the length and severity of the COVID-19 pandemic, the pace of recovery following the COVID-19 pandemic, and the effect of government, business and individual actions intended to mitigate the effects of the COVID-19 pandemic; 3) changes in market interest rates that may affect credit markets and our ability to maintain our net interest margin; 4) changes in our credit quality or risk profile that may increase or decrease the required level of our reserve for credit losses; 5) the impact of legislative and regulatory initiatives, particularly the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the “Dodd-Frank Act”) and Economic Growth, Regulatory Relief, and Consumer Protection Act of 2018; 6) changes to the amount and timing of proposed common stock repurchases; 7) unanticipated changes in the securities markets, public debt markets, and other capital markets in the U.S. and internationally, including, without limitation, the anticipated elimination of the London Interbank Offered Rate (“LIBOR”) as a benchmark interest rate; 8) changes in fiscal and monetary policies of the markets in which we operate; 9) the increased cost of maintaining or the Company’s ability to maintain adequate liquidity and capital, based on the requirements adopted by the Basel Committee on Banking Supervision and U.S. regulators; 10) changes in accounting standards; 11) changes in tax laws or regulations, including Public Law 115-97, commonly known as the Tax Cuts and Jobs Act, or the interpretation of such laws and regulations; 12) any failure in or breach of our operational systems, information systems or infrastructure, or those of our merchants, third party vendors and other service providers; 13) any interruption or breach of security of our information systems resulting in failures or disruptions in customer account management, general ledger processing, and loan or deposit systems; 14) natural disasters, public unrest or adverse weather, public health, disease outbreaks, and other conditions impacting us and our customers’ operations or negatively impacting the tourism industry in Hawaii; 15) competitive pressures in the markets for financial services and products; 16) actual or alleged conduct which could harm our reputation; and 17) the impact of litigation and regulatory investigations of the Company, including costs, expenses, settlements, and judgments.
Our forward-looking statements are based on numerous assumptions, any of which could prove to be inaccurate, and actual results may differ materially from those projected because of a variety of risks and uncertainties, including, but not limited to: (1) general economic conditions either nationally, internationally, or locally may be different than expected, and particularly, any event that negatively impacts the tourism industry in Hawaii; (2) the compounding effects of the COVID-19 pandemic, including reduced tourism in Hawaii, the duration and scope of government mandates or other limitations of or restrictions on travel, volatility in the international and national economy and credit markets, inflation, worker absenteeism, quarantines or other travel or health-related restrictions, the length and severity of the COVID-19 pandemic, the pace of recovery following the COVID-19 pandemic, and the effect of government, business and individual actions intended to mitigate the effects of the COVID-19 pandemic; (3) changes in market interest rates that may affect credit markets and our ability to maintain our net interest margin; (4) changes in our credit quality or risk profile that may increase or decrease the required level of our reserve for credit losses; (5) the impact of legislative and regulatory initiatives, particularly the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the “Dodd-Frank Act”) and Economic Growth, Regulatory Relief, and Consumer Protection Act of 2018; (6) changes to the amount and timing of proposed common stock repurchases; (7) unanticipated changes in the securities markets, public debt markets, and other capital markets in the U.S. and internationally, including, without limitation, the elimination of the London Interbank Offered Rate (“LIBOR”) as a benchmark interest rate; (8) changes in fiscal and monetary policies of the markets in which we operate; (9) the increased cost of maintaining or the Company’s ability to maintain adequate liquidity and capital, based on the requirements adopted by the Basel Committee on Banking Supervision and U.S. regulators; (10) changes in accounting standards; (11) changes in tax laws or regulations, including Public Law 115-97, commonly known as the Tax Cuts and Jobs Act, or the interpretation of such laws and regulations; (12) any failure in or breach of our operational systems, information systems or infrastructure, or those of our merchants, third party vendors and other service providers; (13) any interruption or breach of security of our information systems resulting in failures or disruptions in customer account management, general ledger processing, and loan or deposit systems; (14) natural disasters, public unrest or adverse weather, public health, disease outbreaks, and other conditions impacting us and our customers’ operations or negatively impacting the tourism industry in Hawaii; (15) competitive pressures in the markets for financial services and products; (16) actual or alleged conduct which could harm our reputation; and (17) the impact of litigation and regulatory investigations of the Company, including costs, expenses, settlements, and judgments.
The actual amount and timing of future share repurchases, if any, will depend on market and economic conditions, regulatory rules, applicable SEC rules, and various other factors. In January 2023, the Parent’s Board of Directors declared the quarterly dividend of its Fixed Rate Non-Cumulative Perpetual Preferred Stock, Series A, of $10.94 per share, equivalent to $0.2735 per depositary share.
The actual amount and timing of future share repurchases, if any, will depend on market and economic conditions, regulatory rules, applicable SEC rules, and various other factors. In January 2024, the Parent’s Board of Directors declared the quarterly dividend of its Fixed Rate Non-Cumulative Perpetual Preferred Stock, Series A, of $10.94 per share, equivalent to $0.2735 per depositary share.
Discussion and analysis of our 2020 fiscal year, as well as the year-to-year comparison between fiscal 2021 and 2020, are included "Management's Discussion and Analysis of Financial Condition and Results of Operations" in Part II, Item 7 in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021, filed with the SEC on March 1, 2022.
Discussion and analysis of our 2021 fiscal year, as well as the year-to-year comparison between fiscal 2022 and 2021, are included "Management's Discussion and Analysis of Financial Condition and Results of Operations" in Part II, Item 7 in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022, filed with the SEC on March 1, 2023.
We require borrowers to maintain full coverage automobile insurance on automobile loans and leases, with the Bank listed as either the loss payee or additional insured. 38 Table of Contents Non-Performing Assets and Accruing Loans and Leases Past Due 90 Days or More Table 16 presents a five-year history of non-performing assets and accruing loans and leases past due 90 days or more.
We require borrowers to maintain full coverage automobile insurance on automobile loans and leases, with the Bank listed as either the loss payee or additional insured. 40 Table of Contents Non-Performing Assets and Accruing Loans and Leases Past Due 90 Days or More Table 16 presents a five-year history of non-performing assets and accruing loans and leases past due 90 days or more.
The provision for income taxes in this business segment represents the residual amount to arrive at the total tax expense for the Company. 30 Table of Contents Analysis of Statements of Condition Investment Securities Table 7 presents the maturity distribution at amortized cost, weighted-average yield to maturity, and fair value of our investment securities.
The provision for income taxes in this business segment represents the residual amount to arrive at the total tax expense for the Company. 32 Table of Contents Analysis of Statements of Condition Investment Securities Table 7 presents the maturity distribution at amortized cost, weighted-average yield to maturity, and fair value of our investment securities.
Maturities and Average Yield on Securities Table 7 (dollars in millions) 1 Year or Less Weighted Average Yield After 1 Year-5 Years Weighted Average Yield After 5 Years-10 Years Weighted Average Yield Over 10 Years Weighted Average Yield Total Weighted Average Yield Fair Value As of December 31, 2022 Available-for-Sale 1 Debt Securities Issued by the U.S.
Maturities and Average Yield on Securities Table 7 (dollars in millions) 1 Year or Less Weighted Average Yield After 1 Year-5 Years Weighted Average Yield After 5 Years-10 Years Weighted Average Yield Over 10 Years Weighted Average Yield Total Weighted Average Yield Fair Value As of December 31, 2023 Available-for-Sale 1 Debt Securities Issued by the U.S.
These investments in debt securities and mortgage-backed securities were all classified in either Levels 1 or 2 of the fair value hierarchy. Financial liabilities that are 21 Table of Contents recorded at fair value on a recurring basis are comprised of derivative financial instruments.
These investments in debt securities and mortgage-backed securities were all classified in either Levels 1 or 2 of the fair value hierarchy. Financial liabilities that are 23 Table of Contents recorded at fair value on a recurring basis are comprised of derivative financial instruments.
We consider and comply with various regulatory guidelines regarding required liquidity levels and regularly monitor our liquidity position in light of the changing economic environment and customer activity. Based on ongoing liquidity assessments, we may alter our asset, liability, and off-balance sheet positions.
We consider and comply with various regulatory guidelines regarding required liquidity levels and regularly monitor our liquidity position in light of the changing economic environment and customer activity. Based on periodic liquidity assessments, we may alter our asset, liability, and off-balance sheet positions.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations The following MD&A is intended to help the reader understand the Company and its operations and is focused on our fiscal 2022 and 2021 financial results, including comparisons of year-to-year performance between these years.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations The following MD&A is intended to help the reader understand the Company and its operations and is focused on our fiscal 2023 and 2022 financial results, including comparisons of year-to-year performance between these years.
Further, any forward-looking statement speaks only as of the date on which it is made, and we undertake no obligation to update or revise any forward-looking statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events, except as otherwise may be required by the federal securities laws. 19 Table of Contents Critical Accounting Policies Our Consolidated Financial Statements were prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) and follow general practices within the industries in which we operate.
Further, any forward-looking statement speaks only as of the date on which it is made, and we undertake no obligation to update or revise any forward-looking statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events, except as otherwise may be required by the federal securities laws. 21 Table of Contents Critical Accou nting Policies Our Consolidated Financial Statements were prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) and follow general practices within the industries in which we operate.
See Note 4 to the Consolidated Financial Statements and the “Corporate Risk Profile – Credit Risk” section of MD&A for more information on our loan and lease portfolio. 33 Table of Contents Table 9 presents the geographic distribution of our loan and lease portfolio.
See Note 4 to the Consolidated Financial Statements and the “Corporate Risk Profile – Credit Risk” section of MD&A for more information on our loan and lease portfolio. 35 Table of Contents Table 9 presents the geographic distribution of our loan and lease portfolio.
As of December 31, 2022, our investment securities portfolio was comprised of securities with an average base duration of approximately 5.45 years. We continually evaluate our investment securities portfolio in response to established asset/liability management objectives, changing market conditions that could affect profitability, and the level of interest rate risk to which we are exposed.
As of December 31, 2023, our investment securities portfolio was comprised of securities with an average base duration of approximately 5.45 years. We continually evaluate our investment securities portfolio in response to established asset/liability management objectives, changing market conditions that could affect profitability, and level of interest rate risk to which we are exposed.
As noted above, LTV rat ios generally do not exceed 75%, which are based on regulatory-compliant appraisals that we obtain for the underlying properties. Construction loans are underwritten against projected cash flows derived from rental income, business income from an owner-occupant, or the sale of the property to an end-user.
As noted above, LTV ratios generally do not exceed 75%, which are based on regulatory-compliant appraisals that we obtain for the underlying properties. Construction loans are underwritten against projected cash flows derived from rental income, business income from an owner-occupant, or the sale of the property to an end-user.
The underwriting terms for the home equity product generally permits borrowing availability, in the aggregate, up to 85% of the value of the collateral property for primary residence and up to 80% of the value of the collateral property for second residence or investor at the time of origination.
The underwriting terms for the home equity product generally permits borrowing availability, in the aggregate, up to 80% of the value of the collateral property for primary residence and up to 75% of the value of the collateral property for second residence or investor at the time of origination.
Expected loss rates are estimated using the loss rates calculated for the corresponding loan category in the Allowance. For the commercial portfolio, 20 Table of Contents the historical loss rates were calculated utilizing the Cohort methodology, while the consumer portfolio utilized the Vintage methodology.
Expected loss rates are estimated using the loss rates calculated for the corresponding loan category in the Allowance. For the commercial portfolio, 22 Table of Contents the historical loss rates were calculated utilizing the Cohort methodology, while the consumer portfolio utilized the Vintage methodology.
As of December 31, 2022, the Company’s capital levels remained characterized as “well-capitalized.” There have been no conditions or events since December 31, 2022, that management believes have changed either the Company’s or the Bank’s capital classifications.
As of December 31, 2023, the Company’s capital levels remained characterized as “well-capitalized.” There have been no conditions or events since December 31, 2023, that management believes have changed either the Company’s or the Bank’s capital classifications.
These evaluations may cause us to change the level of funds we deploy into investment securities, change the composition of our investment securities portfolio, and change the proportion of investments made into the available-for-sale and held-to-maturity investment categories. Mortgage-backed securities issued by Ginnie Mae, Fannie Mae, and Freddie Mac continue to be the largest concentrations in our portfolio.
These evaluations may cause us to change the level of funds deployed into investment securities, change the composition of our investment securities portfolio, and change the proportion of investments made into the available-for-sale and held-to-maturity investment categories. Mortgage-backed securities issued by Ginnie Mae, Fannie Mae, and Freddie Mac continue to be the largest concentrations in the portfolio.
Liquidity Risk Management The objective of our liquidity risk management process is to manage cash flow and liquidity in an effort to provide continuous access to sufficient, reasonably priced funds. Funding requirements are impacted by loan originations and refinancings, deposit balance changes, liability issuances and settlements, and off-balance sheet funding commitments.
Liquidity Risk Management The objective of our liquidity risk management process is to manage cash flow and liquidity in an effort to provide continuous access to sufficient, reasonably priced funds. Funding requirements are impacted by loan originations and refinancings, deposit 47 Table of Contents balance changes, liability issuances and settlements, and off-balance sheet funding commitments.
As of December 31, 2022, the Company’s capital levels remained characterized as “well-capitalized” under the new rules. Management continues to monitor regulatory developments and their potential impact to the Company’s liquidity requirements.
As of December 31, 2023, the Company’s capital levels remained characterized as “well-capitalized” under the new rules. Management continues to monitor regulatory developments and their potential impact to the Company’s liquidity requirements.
A valuation allowance is provided when it is more likely than not that some portion of the deferred tax asset will not be realized. As of December 31, 2022, and December 31, 2021, we carried a valuation allowance of $6.2 million and $3.2 million, respectively, related to our deferred tax assets established in connection with our low-income housing investments.
A valuation allowance is provided when it is more likely than not that some portion of the deferred tax asset will not be realized. As of December 31, 2023, and December 31, 2022, we carried a valuation allowance of $6.7 million and $6.2 million, respectively, related to our deferred tax assets established in connection with our low-income housing investments.
The estimate of expected credit losses under the CECL approach is based on relevant information about past events, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amounts. Historical loss experience is generally the starting point for estimating expected credit losses.
The estimate of expected credit losses is based on relevant information about past events, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amounts. Historical loss experience is generally the starting point for estimating expected credit losses.
Other Credit Risks In the normal course of business, we serve the needs of state and political subdivisions in multiple capacities, including traditional banking products such as deposit services, and by investing in municipal debt securities. The carrying value of our municipal debt securities was $95.3 million as of December 31, 2022, and $75.8 million as of December 31, 2021.
Other Credit Risks In the normal course of business, we serve the needs of state and political subdivisions in multiple capacities, including traditional banking products such as deposit services, and by investing in municipal debt securities. The carrying value of our municipal debt securities was $63.8 million as of December 31, 2023, and $95.3 million as of December 31, 2022.
As of December 31, 2022, these mortgage-backed securities were all AAA-rated, with a low probability of a change in their credit ratings in the near future. As of December 31, 2022, our available-for-sale investment securities portfolio was comprised of securities with an average base duration of approximately 3.89 years.
As of December 31, 2023, these mortgage-backed securities were all AAA-rated, with a low probability of a change in their credit ratings in the near future. As of December 31, 2023, our available-for-sale investment securities portfolio was comprised of securities with an average base duration of approximately 3.83 years.
These credits reduced the Company's provision for income taxes by $1.0 million, $2.1 million, and $3.1 million in 2022, 2021, and 2020, respectively. 22 Table of Contents Overview We are a regional financial services company serving businesses, consumers, and governments in Hawaii, Guam, and other Pacific Islands. Our principal operating subsidiary, the Bank, was founded in 1897.
These credits reduced the Company's provision for income taxes by $1.1 million, 1.0 million, $2.1 million in 2023, 2022, and 2021, respectively. 24 Table of Contents Overview We are a regional financial services company serving businesses, consumers, and governments in Hawaii, Guam, and other Pacific Islands. Our principal operating subsidiary, the Bank, was founded in 1897.
Of the remaining $784.2 million of corporate bonds, all were credit-rated A- or better by at least one nationally recognized statistical rating organization. Loans and Leases Table 8 presents the composition of our loan and lease portfolio by major categories.
Of the remaining $654.3 million of corporate bonds, all were credit-rated A- or better by at least one nationally recognized statistical rating organization. Loans and Leases Table 8 presents the composition of our loan and lease portfolio by major categories.
The Company’s regulatory capital ratios are presented in Table 22 below. 45 Table of Contents Table 2 2 presents a five-year history of activities and balances in our capital accounts, along with key capital ratios.
The Company’s regulatory capital ratios are presented in Table 22 below. 48 Table of Contents Table 22 presents a five-year history of activities and balances in our capital accounts, along with key capital ratios.
Geographic Distribution of Loan and Lease Portfolio Table 9 December 31, 2022 (dollars in thousands) Hawaii U.S.
Geographic Distribution of Loan and Lease Portfolio Table 9 December 31, 2023 (dollars in thousands) Hawaii U.S.
The dividend will be payable on March 14, 2023, to shareholders of record at the close of business on February 28, 2023. 46 Table of Contents Regulatory Initiatives Affecting the Banking Industry Basel III Under final FRB and FDIC approved rules implementing the Basel Committee on Banking Supervision’s capital guidelines for U.S. banks minimum requirements increased for both the quantity and quality of capital held by the Company.
The dividend will be payable on March 14 2024, to shareholders of record at the close of business on February 29, 2024. 49 Table of Contents Regulatory Initiatives Affecting the Banking Industry Basel III Under final FRB and FDIC approved rules implementing the Basel Committee on Banking Supervision’s capital guidelines for U.S. banks minimum requirements increased for both the quantity and quality of capital held by the Company.
Forward-Looking Statements This report contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.
Forward-Lookin g Statements This report contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.
The dividend was paid on February 1, 2023, to shareholders of record of the preferred stock at the close of business on January 17, 2023. In January 2023, the Parent’s Board of Directors declared the quarterly cash dividend of $0.70 per share on the Parent’s outstanding common shares.
The dividend was paid on February 1, 2024, to shareholders of record of the preferred stock at the close of business on January 16, 2024. In January 2024, the Parent’s Board of Directors declared the quarterly cash dividend of $0.70 per share on the Parent’s outstanding common shares.
PPP loans provided cash flow assistance to small businesses who were affected by economic conditions as a result of the COVID-19 pandemic. Commercial mortgages and construction loans are offered to real estate investors, developers, and builders primarily domiciled in Hawaii. Commercial mortgages are secured by first mortgages on commercial real estate at loan-to-value ratios generally not exceeding 75%.
Paycheck Protection Program loans provided cash flow assistance to small businesses affected by economic conditions as a result of the COVID-19 pandemic. Commercial mortgages and construction loans are offered to real estate investors, developers, and builders primarily domiciled in Hawaii. Commercial mortgages are secured by first mortgages on commercial real estate at loan-to-value ratios generally not exceeding 75%.
As of December 31, 2022, and December 31, 2021, our liabilities for UTBs were $3.7 million and $4.0 million, respectively. In 2022, the Company recognized federal and State of Hawaii investment tax credits from energy investments. The Company uses the deferral method of accounting for its investment tax credit with the benefit recognized in the provision for income taxes.
As of December 31, 2023, and December 31, 2022, our liabilities for UTBs were $3.7 million. In 2023, the Company recognized federal and State of Hawaii investment tax credits from energy investments. The Company uses the deferral method of accounting for its investment tax credit with the benefit recognized in the provision for income taxes.
Table 12 presents the components of our savings deposits as of December 31, 2022, and December 31, 2021.
Table 12 presents the components of our savings deposits as of December 31, 2023, and December 31, 2022.
In evaluating a proposed commercial mortgage loan, we primarily emphasize the ratio of the property’s projected net cash flows to the loan’s debt serv icing requirement. The debt service coverage ratio normally is not less than 12 5 % and it is computed after deducting for a vacancy factor and property expenses as appropriate.
In evaluating a proposed commercial mortgage loan, we primarily emphasize the ratio of the property’s projected net cash flows to the loan’s debt servicing requirement. The debt service coverage ratio normally is not less than 125% and it is computed after deducting for a vacancy factor and property expenses as appropriate.
As of December 31, 2022, and December 31, 2021, $2.9 billion or 12% and $4.4 billion or 19%, respectively, of our total assets consisted of financial assets recorded at fair value on a recurring basis and most of these financial assets consisted of available-for-sale investment securities measured using information from a third party pricing service.
As of December 31, 2023, and December 31, 2022, $2.5 billion or 11% and $2.9 billion or 12%, respectively, of our total assets consisted of financial assets recorded at fair value on a recurring basis and most of these financial assets consisted of available-for-sale investment securities measured using information from a third party pricing service.
Table 21 presents, for the twelve months subsequent to December 31, 2022, and December 31, 2021, an estimate of the change in net interest income that would result from a gradual and immediate change in interest rates, moving in a parallel fashion over the entire yield curve, relative to the measured base case scenario.
Table 21A presents, for the twelve months subsequent to December 31, 2023, and December 31, 2022, an estimate of the change in net interest income that would result from a gradual and immediate change in interest rates, moving in a parallel fashion over the 46 Table of Contents entire yield curve, relative to the measured base case scenario.
As of December 31, 2022, and December 31, 2021, Level 3 financial assets recorded at fair value on a recurring basis were $46.6 million and $42.6 million, respectively, or less than 1% of our total assets, and were comprised primarily of derivative financial instruments.
As of December 31, 2023, and December 31, 2022, Level 3 financial assets recorded at fair value on a recurring basis were $0.8 million and $46.6 million, respectively, or less than 1% of our total assets, and were comprised primarily of derivative financial instruments.
The ALCO, which is comprised of members of executive management, utilizes several techniques to manage interest rate risk, which include: • adjusting the statement of condition mix or altering the interest rate characteristics of assets and liabilities; • changing product pricing strategies; • modifying characteristics of the investment securities portfolio; and • using derivative financial instruments.
The ALCO, which is comprised of members of executive management, utilizes several techniques to manage interest rate risk, which include: • adjusting the balance sheet mix or altering the interest rate characteristics of assets and liabilities; • changing product pricing strategies; • modifying characteristics, including mix and duration, of the investment securities portfolio; and • using derivative financial instruments.
From the beginning of our share repurchase program in July 2001 through December 31, 2022, we repurchased a total of 58.0 million shares of common stock and returned a total of nearly $2.4 billion to our common shareholders at an average cost of $41.17 per share. Remaining buyback authority was $35.9 million as of December 31, 2022.
From the beginning of our share repurchase program in July 2001 through December 31, 2023, we repurchased a total of 58.2 million shares of common stock and returned a total of nearly $2.4 billion to our common shareholders at an average cost of $41.24 per share. Remaining buyback authority was $126.0 million as of December 31, 2023.
Noninterest Income Table 3 presents the major components of noninterest income for 2022 and 2021.
Noninterest Income Table 3 presents the major components of noninterest income for 2023 and 2022.
We also maintained investments in corporate bonds with a carrying value of $811.7 million as of December 31, 2022, and $403.4 million as of December 31, 2021. We are exposed to credit risk in these investments should the issuer of a security be unable to meet its financial obligations.
We also maintained investments in corporate bonds with a carrying value of $669.2 million as of December 31, 2023, and $811.7 million as of December 31, 2022. We are exposed to credit risk in these investments should the issuer of a security be unable to meet its financial obligations.
However, if we commit a material breach of obligations as servicer, we may be subject to various penalties which may include the repurchase of an affected loan or a reimbursement to the respective investor. 47 Table of Contents Selected Quarterly Consolidated Financial Data Table 23 presents our selected quarterly financial data for 2022 and 2021.
However, if we commit a material breach of obligations as servicer, we may be subject to various penalties which may include the repurchase of an affected loan or a reimbursement to the respective investor. 50 Table of Contents Selected Quarterly Conso lidated Financial Data Table 23 presents our selected quarterly financial data for 2023 and 2022.
The commercial loan and lease portfolio is comprised of commercial and industrial loans, PPP loans, commercial mortgages, construction loans, and lease financing. Commercial and industrial loans are made primarily to corporations, middle market, and small businesses for the purpose of financing equipment acquisition, expansion, working capital, and other general business purposes.
The commercial loan and lease portfolio is comprised of commercial and industrial loans, Paycheck Protection Program loans, commercial mortgages, construction loans, and lease financing. Commercial and industrial loans are made primarily to corporations, middle market, and small businesses for the purpose of financing equipment acquisitions, expansion, working capital, and other general business purposes.
For the Allowance at December 31, 2022, a 50 basis point increase in the % of commercial loans risk rated as Classified would increase the quantitative component of the Allowance for commercial loans by an estimated $2.1 million.
For the Allowance at December 31, 2023, a 50 basis point increase in the percentage of commercial loans risk rated as Classified would increase the quantitative component of the Allowance for commercial loans by an estimated $1.9 million.
These transactions are primarily executed on behalf of customers. Our trust and asset management income is at risk to fluctuations in the market values of underlying assets, particularly debt and equity securities. Also, our share-based compensation expense is dependent on the fair value of our stock options, restricted stock units, and restricted stock at the date of grant.
Our trust and asset management income is at risk to fluctuations in the market values of underlying assets, particularly debt and equity securities. Also, our share-based compensation expense is dependent on the fair value of our stock options, restricted stock units, and restricted stock at the date of grant.
Based on our net interest income simulation as of December 31, 2022, net interest income sensitivity to changes in interest rates for the twelve months subsequent to December 31, 2022, was less sensitive in comparison to the sensitivity profile for the twelve months subsequent to December 31, 2021.
Based on our net interest income simulation as of December 31, 2023, NII sensitivity to changes in interest rates for the twelve months subsequent to December 31, 2023, was more sensitive in comparison to the sensitivity profile for the twelve months subsequent to December 31, 2022.
For the Allowance at December 31, 2022, a 25 basis point increase in the forecasted Hawaii unemployment rates would have increased the quantitative component of the Allowance for consumer loans by an estimated $2.6 million.
For the Allowance at December 31, 2023, a 25 basis point increase in the forecasted Hawaii unemployment rates would have increased the quantitative component of the Allowance for consumer loans by an estimated $1.4 million.
After the one-year R&S loss forecast period, this adjustment assumes an immediate reversion to historical loss rates for the remaining expected life of the loan. The company utilizes the University of Hawaii Economic Research Organization (“UHERO”) macroeconomic forecast that continuously changes due to economic conditions and events.
After the one-year R&S loss forecast period, this adjustment assumes an immediate reversion to historical loss rates for the remaining expected life of the loan. The company utilizes the University of Hawaii Economic Research Organization (“UHERO”) macroeconomic forecast that is updated quarterly based on economic conditions and events.
As of December 31, 2022 , and December 31, 2021 , $ 168.0 million and $18.8 million , respectively, or less than 1% of our total liabilities consisted of financial liabilities recorded at fair value on a recurring basis.
As of December 31, 2023, and December 31, 2022, $143.9 million and $168.0 million, respectively, or less than 1% of our total liabilities consisted of financial liabilities recorded at fair value on a recurring basis.
We do not intend to sell the investment securities that were in an unrealized loss position and it is not more likely than not that we will be required to sell the investment securities before recovery of their amortized cost basis, which may be at maturity. See Note 3 to the Consolidated Financial Statements for more information.
We do not intend to sell the investment securities that were in an unrealized loss position and it is not more likely than not that we will be required to sell the investment securities before recovery of their amortized cost basis, which may be at maturity.
Our non-cancelable operating leases and finance lease obligations are primarily related to branch premises, equipment, and a portion of the Company’s headquarters’ building with lease terms extending through 2052. Purchase obligations arise from agreements to purchase goods or services that are enforceable and legally binding.
Contractual Obligations The Company has various contractual obligations that affect its cash flows and liquidity. Our non-cancelable operating leases and finance lease obligations are primarily related to branch premises, equipment, and a portion of the Company’s headquarters’ building with lease terms extending through 2052. Purchase obligations arise from agreements to purchase goods or services that are enforceable and legally binding.
These non-parallel interest rate scenarios indicate that net interest income may decrease from the base case scenario should the yield curve flatten or become inverted for a period of time.
These non-parallel interest rate scenarios indicate that net interest income may decrease from the base case scenario should the yield curve flatten or become more inverted for a period of time. Conversely, if the yield curve were to steepen, net interest income may increase.
These adjustments can include accounting for new or discontinued products, changes in our portfolio composition, delinquency trends, and with forecasted economic conditions including but not limited to unemployment, real estate market conditions (e.g. prices, sales activity and inventory), visitor arrivals, the continued uncertainty of the COVID-19 pandemic, and the cumulative impact of fiscal, monetary and regulatory programs in response to the pandemic.
These adjustments can include accounting for new or discontinued products, changes in our portfolio composition, delinquency trends, and with forecasted economic conditions including but not limited to unemployment, real estate market conditions (e.g. prices, sales activity and inventory), visitor arrivals, and the continued uncertainty of other global economic impact.
This increase was primarily due to increase in commercial and consumer loan interest income, partially offset by an increase in interest expense on savings deposits.
This decrease was primarily due to increase in savings and time deposit interest expense, partially offset by an increase in commercial and consumer loan interest income.
A key element in our ongoing process to measure and monitor interest rate risk is the utilization of an asset/liability simulation model that attempts to capture the dynamic nature of the statement of condition. The model is used to estimate and measure the statement of condition sensitivity to changes in interest rates.
A key element in our ongoing process to measure and monitor interest rate risk is the utilization of an asset/liability simulation model that attempts to capture the dynamic nature of assets and liabilities in various interest rate environments. This model is used to estimate and measure our balance sheet sensitivity to changes in interest rates.
Net charge-offs of loans and leases were $5.1 million or 0.04% of total average loans and leases in 2022 compared to $6.0 million or 0.05% of total average loans and leases in 2021. Net charge-offs in our consumer portfolios were $4.7 million in 2022 compared to $5.4 million in 2021.
Net charge-offs of loans and leases were $7.8 million or 0.06% of total average loans and leases in 2023 compared to $5.1 million or 0.04% of total average loans and leases in 2022. Net charge-offs in our consumer portfolios were $7.2 million in 2023 compared to $4.7 million in 2022.
Allow. as % of loan or lease category Loan category as % of total loans and leases Commercial Commercial and Industrial 1.72 % 10.32 % 1.86 % 12.14 % 2.30 % 15.70 % 2.12 % 12.55 % 1.98 % 12.74 % Commercial Mortgage 0.87 27.30 0.95 25.71 1.11 23.91 1.52 22.91 1.51 22.03 Construction 1.62 1.91 1.96 1.80 2.09 2.18 2.49 1.77 2.59 1.63 Lease Financing 4.04 0.51 2.85 0.86 4.17 0.93 1.10 1.11 0.68 1.69 Total Commercial 1.17 40.04 1.31 40.51 1.66 42.72 1.75 38.34 1.68 38.09 Consumer Residential Mortgage 0.37 34.10 0.48 35.15 0.79 34.59 0.16 35.40 0.19 35.16 Home Equity 0.75 16.31 1.03 14.98 2.37 13.44 0.58 15.25 0.67 16.09 Automobile 2.48 6.38 3.40 6.01 4.07 5.94 1.29 6.55 1.76 6.30 Other 1 5.84 3.17 6.88 3.35 8.08 3.31 2.21 4.46 2.22 4.36 Total Consumer 0.98 59.96 1.27 59.49 1.92 57.28 0.53 61.66 0.62 61.91 Total 1.06 % 100.00 % 1.29 % 100.00 % 1.81 % 100.00 % 1.00 % 100.00 % 1.02 % 100.00 % 1 Comprised of other revolving credit, installment, and lease financing .
Allow. as % of loan or lease category Loan category as % of total loans and leases Commercial Commercial and Industrial 2.05 % 11.91 % 1.72 % 10.32 % 1.86 % 12.14 % 2.30 % 15.70 % 2.12 % 12.55 % Commercial Mortgage 0.87 26.85 0.87 27.30 0.95 25.71 1.11 23.91 1.52 22.91 Construction 1.67 2.18 1.62 1.91 1.96 1.80 2.09 2.18 2.49 1.77 Lease Financing 3.84 0.43 4.04 0.51 2.85 0.86 4.17 0.93 1.10 1.11 Total Commercial 1.28 41.37 1.17 40.04 1.31 40.51 1.66 42.72 1.75 38.34 Consumer Residential Mortgage 0.42 33.55 0.37 34.10 0.48 35.15 0.79 34.59 0.16 35.40 Home Equity 0.63 16.22 0.75 16.31 1.03 14.98 2.37 13.44 0.58 15.25 Automobile 2.24 6.00 2.48 6.38 3.40 6.01 4.07 5.94 1.29 6.55 Other 1 4.93 2.86 5.84 3.17 6.88 3.35 8.08 3.31 2.21 4.46 Total Consumer 0.88 58.63 0.98 59.96 1.27 59.49 1.92 57.28 0.53 61.66 Total 1.05 % 100.00 % 1.06 % 100.00 % 1.29 % 100.00 % 1.81 % 100.00 % 1.00 % 100.00 % 1 Comprised of other revolving credit, installment, and lease financing. 44 Table of Contents Allowance for Credit Losses – Loans and Leases As of December 31, 2023, the Allowance was $146.4 million or 1.05% of total loans and leases outstanding compared with an Allowance of $144.4 million or 1.06% of total loans and leases outstanding as of December 31, 2022.
Shareholders’ Equity and Regulatory Capital Table 22 December 31, (dollars in thousands) 2022 2021 2020 2019 2018 Change in Shareholders' Equity Net Income $ 225,804 $ 253,372 $ 153,804 $ 225,913 $ 219,602 Cash Dividends Paid on Common Shares (112,557 ) (110,633 ) (107,434 ) (105,478 ) (98,496 ) Cash Dividends Paid on Preferred Shares (7,877 ) (2,975 ) — — — Dividend Reinvestment Program 4,680 4,835 5,012 5,039 4,689 Preferred Stock Issued, Net — 175,487 — — — Common Stock Repurchased (55,063 ) (31,258 ) (18,006 ) (137,649 ) (91,988 ) Other 1 (349,603 ) (51,724 ) 54,299 30,807 2,525 Increase (Decrease) in Shareholders' Equity $ (294,616 ) $ 237,104 $ 87,675 $ 18,632 $ 36,332 Regulatory Capital Total Common Shareholders' Equity $ 1,141,508 $ 1,436,124 $ 1,374,507 $ 1,286,832 $ 1,268,200 Add: CECL Transitional Amount 7,124 9,498 23,750 — — Less: Goodwill, Net of Deferred Tax Liabilities 28,746 28,747 28,718 28,718 28,718 Postretirement Benefit Liability Adjustments (25,078 ) (33,496 ) (43,250 ) (38,757 ) (36,010 ) Net Unrealized Gains (Losses) on Investment Securities (409,579 ) (32,886 ) 51,072 7,645 (15,033 ) Other (198 ) (198 ) (198 ) (198 ) (198 ) Common Equity Tier 1 Capital 1,554,741 1,483,455 1,361,915 1,289,424 1,290,723 Preferred Stock, Net of Issuance Cost 175,487 175,487 — — — Tier 1 Capital 1,730,228 1,658,942 1,361,915 1,289,424 1,290,723 Allowable Reserve for Credit Losses 145,202 153,001 141,869 116,849 113,515 Total Regulatory Capital $ 1,875,430 $ 1,811,943 $ 1,503,784 $ 1,406,273 $ 1,404,238 Risk-Weighted Assets $ 14,238,798 $ 12,236,805 $ 11,295,077 $ 10,589,061 $ 9,878,904 Key Regulatory Capital Ratios Common Equity Tier 1 Capital Ratio 10.92 % 12.12 % 12.06 % 12.18 % 13.07 % Tier 1 Capital Ratio 12.15 13.56 12.06 12.18 13.07 Total Capital Ratio 13.17 14.81 13.31 13.28 14.21 Tier 1 Leverage Ratio 7.37 7.32 6.71 7.25 7.60 1 Includes unrealized gains and losses on available-for-sale investment securities, minimum pension liability adjustments, and common stock issuances under share-based compensation.
Shareholders’ Equity and Regulatory Capital Table 22 December 31, (dollars in thousands) 2023 2022 2021 2020 2019 Change in Shareholders' Equity Net Income $ 171,202 $ 225,804 $ 253,372 $ 153,804 $ 225,913 Cash Dividends Paid on Common Shares (111,795 ) (112,557 ) (110,633 ) (107,434 ) (105,478 ) Cash Dividends Paid on Preferred Shares (7,877 ) (7,877 ) (2,975 ) — — Dividend Reinvestment Program 4,535 4,680 4,835 5,012 5,039 Preferred Stock Issued, Net — — 175,487 — — Common Stock Repurchased (14,290 ) (55,063 ) (31,258 ) (18,006 ) (137,649 ) Other 1 55,472 (349,603 ) (51,724 ) 54,299 30,807 Increase (Decrease) in Shareholders' Equity $ 97,247 $ (294,616 ) $ 237,104 $ 87,675 $ 18,632 Regulatory Capital Total Common Shareholders' Equity $ 1,238,756 $ 1,141,508 $ 1,436,124 $ 1,374,507 $ 1,286,832 Add: CECL Transitional Amount 4,749 7,124 9,498 23,750 — Less: Goodwill, Net of Deferred Tax Liabilities 28,746 28,746 28,747 28,718 28,718 Postretirement Benefit Liability Adjustments (23,261 ) (25,078 ) (33,496 ) (43,250 ) (38,757 ) Net Unrealized Gains (Losses) on Investment Securities (373,427 ) (409,579 ) (32,886 ) 51,072 7,645 Other (198 ) (198 ) (198 ) (198 ) (198 ) Common Equity Tier 1 Capital 1,611,645 1,554,741 1,483,455 1,361,915 1,289,424 Preferred Stock, Net of Issuance Cost 175,487 175,487 175,487 — — Tier 1 Capital 1,787,132 1,703,228 1,658,942 1,361,915 1,289,424 Allowable Reserve for Credit Losses 148,400 145,202 153,001 141,869 116,849 Total Regulatory Capital $ 1,935,532 $ 1,848,430 $ 1,811,943 $ 1,503,784 $ 1,406,273 Risk-Weighted Assets $ 14,226,780 $ 14,238,798 $ 12,236,805 $ 11,295,077 $ 10,589,061 Key Regulatory Capital Ratios Common Equity Tier 1 Capital Ratio 11.33 % 10.92 % 12.12 % 12.06 % 12.18 % Tier 1 Capital Ratio 12.56 12.15 13.56 12.06 12.18 Total Capital Ratio 13.60 13.17 14.81 13.31 13.28 Tier 1 Leverage Ratio 7.51 7.37 7.32 6.71 7.25 1.
Our commercial loan and lease portfolio to borrowers based on the U.S. Mainland includes participation in Shared National Credits. Table 10 presents a maturity distribution for selected loan categories.
Our commercial and consumer lending activities are concentrated primarily in Hawaii and the Pacific Islands. Our commercial loan and lease portfolio to borrowers based on the U.S. Mainland includes participation in Shared National Credits. Table 10 presents a maturity distribution for selected loan categories.
Lease financing decreased by $35.6 million or 34% from December 31, 2021, primarily due to paydowns and the termination of the last three remaining leveraged leases. The consumer loan and lease portfolio is comprised of residential mortgage loans, home equity lines and loans, indirect auto loans and leases, and other consumer loans including personal credit lines and direct installment loans.
Lease financing decreased by $9.6 million or 14% from December 31, 2022, primarily due to paydowns. 34 Table of Contents The consumer loan and lease portfolio is comprised of residential mortgage loans, home equity lines and loans, indirect auto loans and leases, and other consumer loans including personal credit lines and direct installment loans.
Allocation of Allowance for Credit Losses Table 20 December 31, (dollars in thousands) 2022 2021 2020 2019 2018 Commercial Commercial and Industrial $ 24,283 $ 27,650 $ 43,092 $ 29,281 $ 26,408 Commercial Mortgage 32,588 29,997 31,723 38,335 34,869 Construction 4,223 4,311 5,417 4,840 4,398 Lease Financing 2,806 2,992 4,615 1,345 1,199 Total Commercial 63,900 64,950 84,847 73,801 66,874 Consumer Residential Mortgage 17,079 20,721 32,643 6,366 6,870 Home Equity 16,654 18,924 37,987 9,777 11,240 Automobile 21,566 25,018 28,822 9,269 11,576 Other 1 25,240 28,208 31,953 10,814 10,133 Total Consumer 80,539 92,871 131,405 36,226 39,819 Total Allocation of Allowance for Credit Losses $ 144,439 $ 157,821 $ 216,252 $ 110,027 $ 106,693 December 31, 2022 2021 2020 2019 2018 Alloc.
Allocation of Allowance for Credit Losses Table 19 December 31, (dollars in thousands) 2023 2022 2021 2020 2019 Commercial Commercial and Industrial $ 34,036 $ 24,283 $ 27,650 $ 43,092 $ 29,281 Commercial Mortgage 32,646 32,588 29,997 31,723 38,335 Construction 5,090 4,223 4,311 5,417 4,840 Lease Financing 2,302 2,806 2,992 4,615 1,345 Total Commercial 74,074 63,900 64,950 84,847 73,801 Consumer Residential Mortgage 19,452 17,079 20,721 32,643 6,366 Home Equity 14,317 16,654 18,924 37,987 9,777 Automobile 18,799 21,566 25,018 28,822 9,269 Other 1 19,761 25,240 28,208 31,953 10,814 Total Consumer 72,329 80,539 92,871 131,405 36,226 Total Allocation of Allowance for Credit Losses $ 146,403 $ 144,439 $ 157,821 $ 216,252 $ 110,027 1 Comprised of other revolving credit, installment, and lease financing.
In addition to an evaluation of the applicant’s financial condition, a determination is made of the probable adequacy of the primary and secondary sources of repayment, such as additional collateral or personal guarantees, to be relied upon in the transaction. Credit agency reports of the applicant’s credit history supplement the analysis of the applicant’s and/or Guarantor’s creditworthiness.
In addition to an evaluation of the applicant’s financial condition, a determination is made of the probable adequacy of the primary and secondary sources of 39 Table of Contents repayment, such as additional collateral or personal guarantees, to be relied upon in the transaction.
Securities Sold Under Agreements to Repurchase Table 14 December 31, (dollars in thousands) 2022 2021 Private Institutions $ 725,000 $ 450,000 Government Entities 490 490 Total Securities Sold Under Agreements to Repurchase $ 725,490 $ 450,490 Securities sold under agreements to repurchase as of December 31, 2022, increased by $275.0 million or 61% from December 31, 2021.
Securities Sold Under Agreements to Repurchase Table 14 December 31, (dollars in thousands) 2023 2022 Private Institutions $ 150,000 $ 725,000 Government Entities 490 490 Total Securities Sold Under Agreements to Repurchase $ 150,490 $ 725,490 Securities sold under agreements to repurchase as of December 31, 2023, decreased by $575.0 million or 79% from December 31, 2022.
For the years ended December 31, 2022 and 2021, the offsetting provision was recorded in provision for credit losses in the consolidated statements of income.
For the years ended December 31, 2022 and 2021, the offsetting provision was recorded in provision for credit losses in the consolidated statements of income. In previous reporting periods, the offsetting provision was recorded in other noninterest expense. 5.
Mainland is made based on where the collateral is located. For unsecured loans and leases, classification as U.S. Mainland is made based on the location where the majority of the borrower’s business operations are conducted. 2 Comprised of other revolving credit, installment, and lease financing. Our commercial and consumer lending activities are concentrated primarily in Hawaii and the Pacific Islands.
For secured loans and leases, classification as U.S. Mainland is made based on where the collateral is located. For unsecured loans and leases, classification as U.S. Mainland is made based on the location where the majority of the borrower’s business operations are conducted. 2. Comprised of other revolving credit, installment, and lease financing.
Commercial mortgages and construction loans are offered to real estate investors, developers, builders, and owner-occupants primarily domiciled in Hawaii. These loans are secured by first mortgages on real estate at loan-to-value (“LTV”) ratios deemed appropriate based on the property type, location, overall quality, and sponsorship. Generally, these LTV ratios do not exceed 75%.
These loans are secured by first mortgages on real estate at loan-to-value (“LTV”) ratios deemed appropriate based on the property type, location, overall quality, and sponsorship. Generally, these LTV ratios do not exceed 75%.
As of December 31, 2022, based on our qualitative assessment, there were no reporting units where we believed it was more likely than not that the fair value of a reporting unit was less than its carrying amount, including goodwill. See Note 1 to the Consolidated Financial Statements for more information on our goodwill impairment policy.
As of December 31, 2023, based on our qualitative assessment, there were no reporting units where we believed it was more likely than not that the fair value of a reporting unit was less than its carrying amount, including goodwill.
Loans and Leases Table 8 December 31, (dollars in thousands) 2022 2021 2020 2019 2018 Commercial Commercial and Industrial $ 1,389,066 $ 1,361,921 $ 1,357,610 $ 1,379,152 $ 1,331,149 Paycheck Protection Program 19,579 126,779 517,683 — — Commercial Mortgage 3,725,542 3,152,130 2,854,829 2,518,051 2,302,356 Construction 260,825 220,254 259,798 194,170 170,061 Lease Financing 69,491 105,108 110,766 122,454 176,226 Total Commercial 5,464,503 4,966,192 5,100,686 4,213,827 3,979,792 Consumer Residential Mortgage 4,653,072 4,309,602 4,130,513 3,891,100 3,673,796 Home Equity 2,225,950 1,836,588 1,604,538 1,676,073 1,681,442 Automobile 870,396 736,565 708,800 720,286 658,133 Other 1 432,499 410,129 395,483 489,606 455,611 Total Consumer 8,181,917 7,292,884 6,839,334 6,777,065 6,468,982 Total Loans and Leases $ 13,646,420 $ 12,259,076 $ 11,940,020 $ 10,990,892 $ 10,448,774 1 Comprised of other revolving credit, installment, and lease financing.
Loans and Leases Table 8 December 31, (dollars in thousands) 2023 2022 2021 2020 2019 Commercial Commercial and Industrial $ 1,652,699 $ 1,389,066 $ 1,361,921 $ 1,357,610 $ 1,379,152 Paycheck Protection Program 11,369 19,579 126,779 517,683 — Commercial Mortgage 3,749,016 3,725,542 3,152,130 2,854,829 2,518,051 Construction 304,463 260,825 220,254 259,798 194,170 Lease Financing 59,939 69,491 105,108 110,766 122,454 Total Commercial 5,777,486 5,464,503 4,966,192 5,100,686 4,213,827 Consumer Residential Mortgage 4,684,171 4,653,072 4,309,602 4,130,513 3,891,100 Home Equity 2,264,827 2,225,950 1,836,588 1,604,538 1,676,073 Automobile 837,830 870,396 736,565 708,800 720,286 Other 1 400,712 432,499 410,129 395,483 489,606 Total Consumer 8,187,540 8,181,917 7,292,884 6,839,334 6,777,065 Total Loans and Leases $ 13,965,026 $ 13,646,420 $ 12,259,076 $ 11,940,020 $ 10,990,892 1.
The ALCO monitors sources and uses of funds and modifies asset and liability positions as liquidity requirements change. This process, combined with our ability to raise funds in money and capital markets and through private placements, provides flexibility in managing the exposure to liquidity risk. In an effort to satisfy our liquidity needs, we actively manage our assets and liabilities.
The ALCO monitors sources and uses of funds and modifies asset and liability positions as liquidity requirements change. This process, combined with our ability to raise funds in money and capital markets and through private placements, provides flexibility in managing the exposure to liquidity risk. We maintain access to ample sources of readily available contingent liquidity.
As of December 31, 2022, cash and cash equivalents were $401.8 million, the carrying value of our available-for-sale investment securities was $2.8 billion, and total deposits were $20.6 billion. As of December 31, 2022, our available-for-sale investment securities portfolio was comprised of securities with an average base duration of approximately 3.89 years.
As of December 31, 2023, cash and cash equivalents were $1.0 billion, the carrying value of our available-for-sale investment securities was $2.4 billion, and total deposits were $21.1 billion. As of December 31, 2023, our available-for-sale investment securities portfolio was comprised of securities with an average base duration of approximately 3.83 years.
Commercial Banking Net income increased by $2.8 million or 2% in 2022 compared to 2021 primarily due to an increase in net interest income, partially offset by a decrease in noninterest income and an increase in noninterest expense.
Commercial Banking Net income increased by $4.4 million or 4% in 2023 compared to 2022 primarily due to an increase in net interest income and noninterest income, partially offset by an increase in noninterest expense, and an increased tax provision.
Income Taxes Table 5 presents our provision for income taxes and effective tax rates for 2022 and 2021: Provision for Income Taxes and Effective Tax Rates Table 5 (dollars in thousands) Provision for Income Taxes Effective Tax Rates 2022 $ 64,830 22.31 % 2021 $ 72,182 22.17 % The provision for income taxes was $64.8 million in 2022, a decrease of $7.4 million compared to 2021.
Income Taxes Table 5 presents our provision for income taxes and effective tax rates for 2023 and 2022: Provision for Income Taxes and Effective Tax Rates Table 5 (dollars in thousands) Provision for Income Taxes Effective Tax Rates 2023 $ 55,914 24.62 % 2022 $ 64,830 22.31 % The provision for income taxes was $55.9 million in 2023, a decrease of $8.9 million compared to 2022.
As of December 31, 2022, months of inventory of single-family homes and condominiums on Oahu was 2.1 months and 2.2 months, respectively, compared to 0.8 months and 1.6 months as of December 31, 2021. Earnings Summary Net income for 2022 was $225.8 million, a decrease of $27.6 million or 11% compared to 2021.
As of December 31, 2023, months of inventory of single-family homes and condominiums on Oahu was 2.8 months and 3.2 months, respectively, compared to 2.1 months and 2.2 months as of December 31, 2022. 25 Table of Contents Earnings Summary Net income for 2023 was $171.2 million, a decrease of $54.6 million or 24% compared to 2022.
Fourth Quarter Results and Other Matters Net Income Available for Common Shareholders Net income available for common shareholders for the fourth quarter of 2022 was $59.3 million, a decrease of $2.5 million or 4% compared to the fourth quarter of 2021.
Fourth Quarter Results and Other Matters Net Income Available for Common Shareholders Net income available for common shareholders for the fourth quarter of 2023 was $28.4 million, a decrease of $30.9 million or 52% compared to the fourth quarter of 2022.
We manage and control credit risk in the loan and lease portfolio by adhering to well-defined underwriting criteria and account administration standards established by management. Written credit policies document underwriting standards, approval levels, exposure limits, and other guidelines deemed necessary and prudent. Portfolio exposure at the obligor, industry, product, and/or geographic location levels is actively monitored to manage concentration risk.
Written credit policies document underwriting standards, approval levels, exposure limits, and other guidelines deemed necessary and prudent. Portfolio exposure at the obligor, industry, product, and/or geographic location levels is actively monitored to manage concentration risk.
We will also remain focused on continuing to deliver strong financial results while maintaining prudent risk and capital management strategies as well as our commitment to support our local communities. Hawaii Economy The COVID-19 pandemic has had and is continuing to have an impact on the Hawaii economy.
We will also remain focused on continuing to deliver strong financial results while maintaining prudent risk and capital management strategies as well as our commitment to support our local communities.
The Allowance reflects management’s best estimate of losses over the life of loans and leases in our portfolio in accordance with the CECL approach.
The Allowance reflects management’s best estimate of losses over the life of loans and leases in our portfolio in accordance with the CECL approach. The Allowance and the Ratio of Allowance for Credit Losses to Loans and Leases Outstanding was stable compared with 2022.
Savings Deposits Table 12 December 31, (dollars in thousands) 2022 2021 Money Market $ 3,101,594 $ 2,529,985 Regular Savings 4,860,816 4,926,180 Total Savings Deposits $ 7,962,410 $ 7,456,165 Table 13 presents the maturity distribution of the estimated uninsured time deposits as of December 31, 2022, and December 31, 2021.
Savings Deposits Table 12 December 31, (dollars in thousands) 2023 2022 Money Market $ 3,258,631 $ 3,101,594 Regular Savings 4,930,841 4,860,816 Total Savings Deposits $ 8,189,472 $ 7,962,410 Table 13 presents the maturity distribution of the estimated uninsured time deposits as of December 31, 2023, and December 31, 2022.

… 248 more changes not shown on this page.

Other BOH 10-K year-over-year comparisons