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What changed in FIRST HAWAIIAN, INC.'s 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of FIRST HAWAIIAN, INC.'s 2023 and 2024 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 2024 report.

+461 added−464 removedSource: 10-K (2025-02-28) vs 10-K (2024-02-28)

Top changes in FIRST HAWAIIAN, INC.'s 2024 10-K

461 paragraphs added · 464 removed · 401 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

52 edited+9 added−6 removed148 unchanged
Biggest changeWe offer healthcare options for employees aimed at reducing out-of-pocket costs. Additionally, the Bank utilizes plexiglass barriers and provides hand-sanitizing stations within our facilities. The Company will continue to monitor and take measures that it considers to be appropriate to protect the safety and health of its employees.
Biggest changeHealth, Safety and Wellness We recognize that each employee’s benefit needs may differ and have designed our benefits program to be flexible. We offer healthcare options for employees aimed at reducing out-of-pocket costs. Additionally, the Bank utilizes plexiglass barriers and provides hand-sanitizing stations within our facilities.
Bank holding companies that qualify and elect to be treated as “financial holding companies,” like us, may engage in, or acquire and retain the shares of a company engaged in, a broad range of additional activities that are (i) financial in nature, as determined by the Federal Reserve in consultation with the Secretary of the Treasury, or incidental to such financial activities or (ii) complementary to a financial activity and do not pose a substantial risk to the safety and soundness of depository institutions or the financial system generally.
Bank holding companies that qualify and elect to be treated as “financial holding companies,” like us, may engage in, or acquire and retain the shares of a company engaged in, a broad range of additional activities that are (i) financial in nature, as determined by the Federal Reserve in consultation with the Secretary of the Treasury, (ii) incidental to such financial activities, or (iii) complementary to a financial activity and do not pose a substantial risk to the safety and soundness of depository institutions or the financial system generally.
Bank Holding Company Act of 1956 (the “BHC Act”) and has elected to be treated as a financial holding company under the BHC Act. Consequently, FHI and its subsidiaries are subject to the supervision, regulation, examination and reporting requirements of the Board of Governors of the Federal Reserve System (the “Federal Reserve”).
Bank Holding Company Act of 1956, as amended (the “BHC Act”) and has elected to be treated as a financial holding company under the BHC Act. Consequently, FHI and its subsidiaries are subject to the supervision, regulation, examination and reporting requirements of the Board of Governors of the Federal Reserve System (the “Federal Reserve”).
To be “well capitalized” an insured depository institution must not be subject to any order or written agreement or directive requiring a specific capital level and must maintain the following minimum capital ratios: • Total capital ratio of at least 10.0%, • CET1 capital ratio of at least 6.5%, • Tier 1 capital ratio of at least 8.0%, and • Tier 1 leverage ratio of at least 5.0%. ​ A bank will be “adequately capitalized” if the institution has a total risk-based capital ratio of 8.0% or greater, a CET1 capital ratio of 4.5% or greater, a Tier 1 risk-based capital ratio of 6.0% or greater, and a leverage ratio of 4.0% or greater and is not “well capitalized.” An institution may be downgraded to, or deemed to be in, a capital category that is lower than indicated by its capital ratios if it is determined to be in an unsafe or unsound condition or if it receives an unsatisfactory examination rating with respect to certain matters.
To be deemed “well capitalized,” an IDI must not be subject to any order or written agreement or directive requiring a specific capital level and must maintain the following minimum capital ratios: • Total capital ratio of at least 10.0%, • CET1 capital ratio of at least 6.5%, • Tier 1 capital ratio of at least 8.0%, and • Tier 1 leverage ratio of at least 5.0%. ​ A bank will be “adequately capitalized” if the institution has a total risk-based capital ratio of 8.0% or greater, a CET1 capital ratio of 4.5% or greater, a Tier 1 risk-based capital ratio of 6.0% or greater, and a leverage ratio of 4.0% or greater and is not “well capitalized.” An institution may be downgraded to, or deemed to be in, a capital category that is lower than indicated by its capital ratios if it is determined to be in an unsafe or unsound condition or if it receives an unsatisfactory examination rating with respect to certain matters.
These changes to the regulatory framework could result in the Bank, among other things, facing higher compliance costs in charging overdraft fees, experiencing a decreased ability to recover amounts extended as overdraft protection, reducing the availability of overdraft protection, and/or charging lower overdraft fees. The Dodd-Frank Act does not prevent states from adopting stricter consumer protection standards.
These changes to the regulatory framework could result in FHB, among other things, facing higher compliance costs in charging overdraft fees, experiencing a decreased ability to recover amounts extended as overdraft protection, reducing the availability of overdraft protection, and/or charging lower overdraft fees. The Dodd-Frank Act does not prevent states from adopting stricter consumer protection standards.
FHB’s CRA performance could, among other things, result in the denial or delay in certain corporate applications filed by the Parent or the Bank, including applications for branch openings or relocations and applications to acquire, merge or consolidate with another banking institution or holding company. FHB received a rating of “Outstanding” in its most recently completed CRA examination.
FHB’s CRA performance could, among other things, result in the denial or delay in certain corporate applications filed by the Parent or the Bank, including applications for branch openings or relocations and applications to acquire, merge or consolidate with another banking institution or holding company. FHB received a rating of “Outstanding” in its most recently completed CRA performance evaluation.
Community Reinvestment Act of 1977 Under the CRA, the Bank has an obligation, consistent with safe and sound operations, to help meet the credit needs of the market areas where it operates, which include low- and moderate-income individuals and communities.
Community Reinvestment Act of 1977 Under the Community Reinvestment Act (“CRA”), the Bank has an obligation, consistent with safe and sound operations, to help meet the credit needs of the market areas where it operates, which include low- and moderate-income individuals and communities.
In addition, if any insured depository institution subsidiary of a financial holding company fails to maintain a CRA rating of at least “Satisfactory,” the financial holding company will be subject to restrictions on certain new activities and acquisitions. 4 Table of Contents FHB is a Federal Deposit Insurance Corporation (the “FDIC”) insured bank chartered under the laws of the State of Hawaii.
In addition, if any IDI subsidiary of a financial holding company fails to maintain a CRA rating of at least “Satisfactory,” the financial holding company will be subject to restrictions on certain new activities and acquisitions. 4 Table of Contents FHB is a Federal Deposit Insurance Corporation (the “FDIC”) insured bank chartered under the laws of the State of Hawaii.
A financial institution is expected to establish multiple lines of defense and to ensure their risk management processes address the risk posed by potential threats to the institution. A financial institution’s management is expected to maintain sufficient processes to effectively respond and recover the institution’s operations after a cyberattack.
A financial institution is expected to establish multiple lines of defense and to design their risk management processes to address the risk posed by potential threats to the institution. A financial institution’s management is expected to maintain sufficient processes to effectively respond and recover the institution’s operations after a cyberattack.
“Covered transactions” are defined by statute to include a loan or extension of credit, as well as a purchase of securities issued by an affiliate, a purchase of assets (unless otherwise exempted by the Federal Reserve) from the affiliate, the acceptance of securities issued by the affiliate as collateral for a loan, the issuance of a guarantee, acceptance or letter of credit on behalf of an affiliate, and credit exposure arising under derivative transactions, repurchase and reverse repurchase agreements, and securities borrowing and lending transactions.
The statute defines “covered transactions” to include a loan or extension of credit, as well as a purchase of securities issued by an affiliate, a purchase of assets (unless otherwise exempted by the Federal Reserve) from the affiliate, the acceptance of securities issued by the affiliate as collateral for a loan, the issuance of a guarantee, acceptance or letter of credit on behalf of an affiliate, and credit exposure arising under derivative transactions, repurchase and reverse repurchase agreements, and securities borrowing and lending transactions.
On November 16, 2023, the FDIC finalized a rule that imposes special assessments to recover the losses to the deposit insurance fund (“DIF”) resulting from the FDIC’s use, in March 2023, of the systemic risk exception to the least-cost resolution test under the Federal Deposit Insurance Act in connection with the receiverships of Silicon Valley Bank and Signature Bank.
On November 16, 2023, the FDIC finalized a rule that imposes special assessments to recover the losses to the DIF resulting from the FDIC’s use, in March 2023, of the systemic risk exception to the least-cost resolution test under the Federal Deposit Insurance Act in connection with the receiverships of Silicon Valley Bank and Signature Bank.
These laws include, but are not limited to, the Equal Credit Opportunity Act, the Fair Credit Reporting Act, the Truth in Lending Act, the Truth in Savings Act, the Electronic Fund Transfer Act, the Expedited Funds Availability Act, the Home Mortgage Disclosure Act, the Fair Housing Act, the Real Estate Settlement Procedures Act, the Service Members Civil Relief Act and these laws’ respective state-law counterparts, as well as state usury laws and laws regarding unfair and deceptive acts and practices.
These laws include, but are not limited to, the Equal Credit Opportunity Act, the Fair Credit Reporting Act, the Truth in Lending Act, the Truth in Savings Act, the Electronic Fund Transfer Act, the Expedited Funds Availability Act, the Home Mortgage Disclosure Act, the Fair Housing Act, the Real Estate Settlement Procedures Act, the Service Members Civil Relief Act and these laws’ respective state-law counterparts, as well as state usury laws and laws regarding “unfair, deceptive or abusive” acts and practices.
For a bank holding company to be eligible to elect financial holding company status, all of its subsidiary insured depository institutions must be well-capitalized and well-managed, as described below under “— Prompt Corrective Action Framework”, and must have received at least a “Satisfactory” rating on such institution’s most recent examination under the Community Reinvestment Act (the “CRA”), as described below under “—Community Reinvestment Act of 1977”.
For a bank holding company to be eligible to elect financial holding company status, all of its subsidiary insured depository institutions (“IDIs”) must be well-capitalized and well-managed, as described below under “— Prompt Corrective Action Framework”, and must have received at least a “Satisfactory” rating on such institution’s most recent performance evaluation under the Community Reinvestment Act (the “CRA”), as described below under “—Community Reinvestment Act of 1977”.
In addition, failure to implement or maintain adequate compliance programs could cause bank regulators not to approve an acquisition where regulatory approval is required or to prohibit an acquisition even if approval is not required.
Failure to implement or maintain adequate compliance programs could cause bank regulators not to approve an acquisition where regulatory approval is required or to prohibit an acquisition even if approval is not required.
Financial Statements and Supplementary Data for more information. Human Capital Resources ​ As of December 31, 2023, we had over 2,000 employees, which included full time employees, part time employees and temporary employees, primarily located in our key markets of Hawaii, Guam and Saipan. As of December 31, 2023, the average tenure of employees at our Company is 11.5 years.
Financial Statements and Supplementary Data for more information. Human Capital Resources ​ As of December 31, 2024, we had over 2,000 employees, which included full time employees, part time employees and temporary employees, primarily located in our key markets of Hawaii, Guam and Saipan. As of December 31, 2024, the average tenure of employees at our Company is 11.8 years.
These three principles are incorporated into the proposed joint compensation regulations under the Dodd-Frank Act, discussed below. During 2016, the federal bank regulatory agencies and the SEC proposed revised rules on incentive-based payment arrangements at specified regulated entities having at least $1 billion of total assets. These proposed rules have not been finalized.
These three principles are incorporated into the proposed joint compensation regulations under the Dodd-Frank Act, discussed below. During 2016, the federal bank regulatory agencies and the SEC proposed revised rules on incentive-based payment arrangements at specified regulated entities having at least $1 billion of total assets.
In addition, under the Federal Deposit Insurance Act of 1950 (“FDIA”), an insured depository institution may not pay a dividend if payment would cause it to become undercapitalized or if it already is undercapitalized. See “— Prompt Corrective Action Framework” below. Payment of Dividends and Common Stock Repurchases by FHI.
In addition, under the Federal Deposit Insurance Act of 1950 (“FDIA”), an IDI may not pay a dividend if payment would cause it to become undercapitalized or if it already is undercapitalized. See “— Prompt Corrective Action Framework” below. Payment of Dividends and Common Stock Repurchases by FHI.
Transactions with Affiliates and Insiders Transactions between the Bank and its subsidiaries, on the one hand, and the Company or any other affiliate of the Bank, on the other hand, are regulated under federal banking law.
Transactions with Affiliates and Insiders Certain “covered transactions” between the Bank and its subsidiaries, on the one hand, and the Company or any other affiliate of the Bank, on the other hand, are regulated under federal banking law.
Critically undercapitalized institutions are generally subject to appointment of a receiver or conservator. Brokered Deposits The FDIA prohibits insured depository institutions from accepting brokered deposits, unless it is well capitalized or is adequately capitalized and receives a waiver from the FDIC.
Critically undercapitalized institutions are generally subject to appointment of a receiver or conservator. Brokered Deposits The FDIA prohibits an IDI from accepting brokered deposits, unless it is well capitalized or is adequately capitalized and receives a waiver from the FDIC.
In reviewing applications seeking approval of merger and acquisition transactions, bank regulators consider, among other things, the competitive effect and public benefits of the transactions, the capital position and managerial resources of the combined organization, the risks to the stability of the U.S. banking or financial system, the applicant’s performance record under the CRA, the applicant’s compliance with applicable laws, including fair housing and other consumer protection laws and the effectiveness of all organizations involved in combating money laundering activities.
In reviewing applications seeking approval of merger and acquisition transactions, bank regulators consider, among other things, the competitive effect and public benefits of the transactions, the applicant’s financial condition and future prospects, including current and projected capital ratios and levels, the managerial resources of the combined organization, the risks to the stability of the U.S. banking or financial system, the applicant’s performance record under the CRA, the applicant’s compliance with applicable laws, including fair housing and other consumer protection laws and the effectiveness of all organizations involved in combating money laundering activities.
Under CFPB rules relating to residential mortgage loans, banks are required to: (i) develop and implement procedures to ensure compliance with a “reasonable ability to repay” test and identify whether a loan meets a new definition for a “qualified mortgage”, in which case a rebuttable presumption exists that the creditor extending the loan has satisfied the reasonable ability to repay test; (ii) implement disclosures, policies and procedures for originating and servicing mortgages including, but not limited to, integrated loans estimate and closing disclosures, pre-loan counseling, early intervention with delinquent borrowers and specific loss mitigation procedures for loans secured by a borrower’s principal residence; (iii) comply with additional restrictions on mortgage loan originator hiring and compensation; (iv) comply with disclosure requirements and standards for appraisals and certain financial products; and (v) maintain escrow accounts for higher-priced mortgage loans for a longer period of time. 12 Table of Contents On October 19, 2023, the CFPB proposed a new rule that would require a provider of payment accounts or products, such as a bank, to make data available to consumers upon request regarding the products or services they obtain from the provider.
Under CFPB rules relating to residential mortgage loans, banks are required to: (i) develop and implement procedures to ensure compliance with a “reasonable ability to repay” test and identify whether a loan meets a new definition for a “qualified mortgage”, in which case a rebuttable presumption exists that the creditor extending the loan has satisfied the reasonable ability to repay test; (ii) implement disclosures, policies and procedures for originating and servicing mortgages including, but not limited to, integrated loans estimate and closing disclosures, pre-loan counseling, early intervention with delinquent borrowers and specific loss mitigation procedures for loans secured by a borrower’s principal residence; (iii) comply with additional restrictions on mortgage loan originator hiring and compensation; (iv) comply with disclosure requirements and standards for appraisals and certain financial products; and (v) maintain escrow accounts for higher-priced mortgage loans for a longer period of time. 12 Table of Contents In October 2024, the CFPB issued a final rule requiring providers of payment accounts or products, such as a bank, to make data available to consumers upon request regarding the products or services they obtain from the provider, and to third parties, with the consumer’s express authorization, for the purpose of such third parties providing the consumer with financial products or services requested by the consumer.
Because the estimated loss pursuant to the systemic risk determination will be periodically adjusted, the FDIC retains the ability to cease collection early, extend the special assessment collection period and impose a final shortfall special assessment on a one-time basis. The Company expects the special assessments to be tax deductible.
Because the estimated loss pursuant to the systemic risk determination will be periodically adjusted, the FDIC retains the ability to cease collection early, extend the special assessment collection period and impose a final shortfall special assessment on a one-time basis.
The proposal would also generally require banks to restructure many overdraft fees, overdraft lines of credit, and other overdraft practices as separate consumer credit accounts that would be subject to those requirements.
The rule also generally requires banks to restructure many overdraft fees, overdraft lines of credit, and other overdraft practices as separate consumer credit accounts that would be subject to those requirements.
Certain extensions of credit also require the approval of the Bank’s board of directors. 7 Table of Contents Source of Strength Federal law requires bank holding companies to act as a source of financial and managerial strength to their subsidiary banks.
Certain extensions of credit also require the approval of the Bank’s board of directors. 7 Table of Contents Source of Strength Federal Reserve regulations and the FDIA require bank holding companies to act as a source of financial and managerial strength to their subsidiary banks.
In October 2022, the SEC adopted a final rule directing national securities exchanges and associations, including NASDAQ, to require policies mandating the recovery or “clawback” of excess incentive-based compensation earned by a current or former executive officer during the three fiscal years preceding a required accounting restatement, including to correct an error that would result in a material misstatement if the error were corrected in the current period or left uncorrected in the current period.
These proposed rules have not been finalized. 15 Table of Contents In October 2022, the SEC adopted a final rule directing national securities exchanges and associations, including NASDAQ, to require policies mandating the recovery or “clawback” of excess incentive-based compensation earned by a current or former executive officer during the three fiscal years preceding a required accounting restatement, including to correct an error that would result in a material misstatement if the error were corrected in the current period or left uncorrected in the current period.
Failure to comply with these sanctions could have serious financial, legal and reputational consequences, including causing applicable bank regulatory authorities not to approve merger or acquisition transactions when regulatory approval is required or to prohibit such transactions even if approval is not required.
Failure to comply with these sanctions could have serious financial, legal and reputational consequences, including the imposition of civil money penalties or causing applicable bank regulatory authorities not to approve merger or acquisition transactions when regulatory approval is required or to prohibit such transactions even if approval is not required.
As of December 31, 2023, the Bank met all capital ratio requirements to be well-capitalized with both a CET1 capital ratio and a Tier 1 capital ratio of 12.30%, total capital ratio of 13.48% and Tier 1 leverage ratio of 8.57%, in each case calculated under the Capital Rules. 9 Table of Contents The FDIA’s prompt corrective action provisions apply only to depository institutions such as the Bank, and not to bank holding companies.
As of December 31, 2024, the Bank met all capital ratio requirements to be well-capitalized with both a CET1 capital ratio and a Tier 1 capital ratio of 12.71%, total capital ratio of 13.90% and Tier 1 leverage ratio of 9.08%, in each case calculated under the Capital Rules. 9 Table of Contents The FDIA’s prompt corrective action provisions apply only to depository institutions such as the Bank, and not to bank holding companies.
Under the rule, the assessment base is the estimated uninsured deposits that an insured depository institution (“IDI”) reported in its December 31, 2022 Call Report, excluding the first $5 billion in estimated uninsured deposits.
Under the rule, the assessment base is the estimated uninsured deposits that an IDI reported in its December 31, 2022 Call Report, excluding the first $5 billion in estimated uninsured deposits.
If a financial holding company fails to continue to meet any of the well-capitalized and well-managed prerequisites for financial holding company status, the Federal Reserve may place limitations on the company’s ability to conduct the broader financial activities permissible for financial holding companies or impose limitations or conditions on the conduct or activities of the bank holding company or its affiliates.
If a financial holding company fails to continue to meet any of the well-capitalized and well-managed prerequisites for financial holding company status, the BHC Act imposes restrictions on new financial activities or acquisitions not otherwise permissible for bank holding companies, and the Federal Reserve may place additional limitations on the company’s ability to conduct the broader financial activities permissible for financial holding companies or impose limitations or conditions on the conduct or activities of the bank holding company or its affiliates.
In addition, the bank holding company must enter into an agreement with the Federal Reserve to comply with all applicable capital and management requirements.
In addition, the non-compliant bank holding company must enter into a confidential agreement with the Federal Reserve to comply with all applicable capital and management requirements.
State regulators have also been increasingly active in implementing privacy and cybersecurity standards and regulations. Recently, several states have adopted regulations requiring certain financial institutions to implement cybersecurity programs and providing detailed requirements with respect to these programs, including data encryption requirements. Many states have also recently implemented or modified their data breach notification and data privacy requirements.
Recently, several states have adopted regulations requiring certain financial institutions to implement cybersecurity programs and providing detailed requirements with respect to these programs, including data encryption requirements. Many states have also recently implemented or modified their data breach notification and data privacy requirements.
As of December 31, 2023, the Company’s CET1 capital ratio and Tier 1 capital ratio were each 12.39%, its total capital ratio was 13.57%, and its Tier 1 leverage ratio was 8.64%, in each case calculated under the Capital Rules. For more information on the Company’s and the Bank’s capital ratios, see “Item 7.
As of December 31, 2024, the Company’s CET1 capital ratio and Tier 1 capital ratio were each 12.80%, its total capital ratio was 13.99%, and its Tier 1 leverage ratio was 9.14%, in each case calculated under the Capital Rules. For more information on the Company’s and the Bank’s capital ratios, see “Item 7.
The federal bank regulators are required to take certain mandatory supervisory actions, and are authorized to take other discretionary actions, with respect to institutions that are undercapitalized, significantly undercapitalized or critically undercapitalized, with supervisory actions progressively becoming more severe as the institution’s capital category declines.
The FDIA establishes five capital categories (“well-capitalized”, “adequately capitalized”, “undercapitalized”, “significantly undercapitalized” and “critically undercapitalized”). The federal bank regulators are required to take certain mandatory supervisory actions, and are authorized to take other discretionary actions, with respect to institutions that are undercapitalized, significantly undercapitalized or critically undercapitalized, with supervisory actions progressively becoming more severe as the institution’s capital category declines.
As of December 31, 2023, FHB is the largest full-service bank headquartered in Hawaii as measured by assets, loans, deposits and net income. As of December 31, 2023, we had $24.9 billion of assets, $14.4 billion of gross loans and leases, $21.3 billion of deposits and $2.5 billion of stockholders’ equity.
As of December 31, 2024, FHB is the largest full-service bank headquartered in Hawaii as measured by assets, loans and net income. As of December 31, 2024, we had $23.8 billion of assets, $14.4 billion of gross loans and leases and $2.6 billion of stockholders’ equity.
Diversity and Inclusion We believe that employing a diverse workforce enhances our ability to serve our customers and our communities. By promoting a workforce that we believe is reflective of our customers and communities, we believe that we may better understand the financial needs of our customers and provide them with relevant financial service products.
Committed to Equal Opportunity By promoting a workforce that we believe is reflective of our customers and communities, we believe that we may better understand the financial needs of our customers and provide them with relevant financial service products.
An undercapitalized institution is also generally prohibited from increasing its average total assets, making acquisitions, establishing any branches or engaging in any new line of business, except in accordance with an accepted capital restoration plan or with the approval of the FDIC.
If a depository institution fails to submit an acceptable capital restoration plan or fails to implement an approved plan, it is treated as if it is “significantly undercapitalized.” An undercapitalized institution is also generally prohibited from increasing its average total assets, making acquisitions, establishing any branches or engaging in any new line of business, except in accordance with an accepted capital restoration plan or with the approval of the FDIC.
The new rule also includes data collection and reporting requirements, some of which are applicable only to banks with over $10 billion in assets, such as the Bank.
The new rule also includes data collection and reporting requirements, some of which are applicable only to banks with over $10 billion in assets, such as the Bank. Most provisions of the final rule will become effective on January 1, 2026, and the data reporting requirements will become effective on January 1, 2027.
The FDIC estimated in approving the rule that those assessed losses total approximately $16.3 billion. The rule provides that this loss estimate will be periodically adjusted, which will affect the amount of the special assessment.
The FDIC estimated in approving the rule that those assessed losses total approximately $16.3 billion. The rule provides that this loss estimate will be periodically adjusted, which will affect the amount of the special assessment. As of September 30, 2024, the FDIC’s total loss estimate was $24.1 billion, of which $18.9 billion will be recovered through the special assessment.
We generated $235.0 million of net income or diluted earnings per share of $1.84 per share for the year ended December 31, 2023. Through the Bank, we operate a network of 50 branches in Hawaii (45 branches), Guam (3 branches) and Saipan (2 branches).
We generated $230.1 million of net income or diluted earnings per share of $1.79 for the year ended December 31, 2024. Through the Bank, we operate a network of 48 branches in Hawaii (44 branches), Guam (3 branches) and Saipan (1 branch).
Interchange fees, or “swipe” fees, are charges that merchants pay to card-issuing banks, such as FHB, for processing electronic payment transactions. The current interchange fee limitations establish a maximum possible fee for many types of debit interchange transactions that is equal to no more than 21 cents per transaction plus five basis points multiplied by the value of the transaction.
The current interchange fee limitations establish a maximum possible fee for many types of debit interchange transactions that is equal to no more than 21 cents per transaction plus five basis points multiplied by the value of the transaction.
The Company’s clawback policy adopted in accordance with these listing standards is included as Exhibit 97.1. 15 Table of Contents Climate-Related and Other ESG Developments In recent years, federal, state and international lawmakers and regulators have increased their focus on financial institutions’ and other companies’ risk oversight, disclosures and practices in connection with climate change and other environmental, social and governance (“ESG”) matters.
Climate-Related and Other ESG Developments In recent years, federal, state and international lawmakers and regulators have increased their focus on financial institutions’ and other companies’ risk oversight, disclosures and practices in connection with climate change and other environmental, social and governance (“ESG”) matters.
On January 17, 2024, the CFPB proposed significant reforms to the regulatory framework governing overdraft practices applicable to banks such as FHB that have more than $10 billion in assets. The proposed rule would modify or eliminate several long-standing exclusions from requirements generally applicable to consumer credit that previously exempted certain overdraft practices.
On December 12, 2024, the CFPB finalized a rule that significantly reforms the regulatory framework governing overdraft practices applicable to banks that have more than $10 billion in assets, which will become effective on October 1, 2025. The rule modifies or eliminates several long-standing exclusions from requirements generally applicable to consumer credit that previously exempted certain overdraft practices.
Regulatory authorities have imposed cease and desist orders and civil money penalties against institutions found to be violating these requirements. 14 Table of Contents In January 2021, the Anti-Money Laundering Act of 2020 (“AMLA”), which amends the BSA, was enacted. The AMLA is intended to comprehensively reform and modernize U.S. anti-money laundering laws.
Compliance with these requirements is required beginning on January 1, 2026. In January 2021, the Anti-Money Laundering Act of 2020 (“AMLA”), which amends the BSA, was enacted. The AMLA is intended to comprehensively reform and modernize U.S. anti-money laundering laws.
We compete with commercial banks, savings banks, credit unions, non-bank financial services companies and other financial institutions operating within or near the areas we serve. Additionally, certain large banks headquartered on the U.S. mainland and large community banking institutions target the same customers we do.
Additionally, certain large banks headquartered on the U.S. mainland and large community banking institutions target the same customers we do.
Our Products and Services The Bank is a full-service community bank focused on building relationships with our customers. We provide a variety of deposit accounts and lending services to commercial and consumer customers, as well as credit card products, wealth management services and merchant processing services.
We provide a variety of deposit accounts and lending services to commercial and consumer customers, as well as credit card products, wealth management services and merchant processing services. We offer a comprehensive range of commercial lending services including commercial and industrial lending, auto dealer flooring, commercial real estate lending and construction lending.
Most provisions of the final rule will become effective on January 1, 2026, and the data reporting requirements will become effective on January 1, 2027. 13 Table of Contents Financial Privacy and Cybersecurity The federal bank regulators have adopted rules limiting the ability of banks and other financial institutions to disclose non-public information about consumers to unaffiliated third parties.
The final rule is currently enjoined as to the plaintiff trade associations while a federal court considers a lawsuit challenging the rule. 13 Table of Contents Financial Privacy and Cybersecurity The federal bank regulators have adopted rules under the Gramm-Leach-Bliley Act of 1999 limiting the ability of banks and other financial institutions to disclose non-public information about consumers to unaffiliated third parties.
Data that would be required to be made available under the rule would include transaction information, account balance, account and routing numbers, terms and conditions, upcoming bill information, and certain account verification data.
Data required to be made available under the rule includes transaction information, account balance, account and routing numbers, terms and conditions, upcoming bill information, and certain account verification data. For banks with at least $10 billion and less than $250 billion in total assets, compliance with the rule is required by April 1, 2027.
Prompt Corrective Action Framework The FDIA requires the federal bank regulators to take prompt corrective action in respect of depository institutions that fail to meet specified capital requirements. The FDIA establishes five capital categories (“well-capitalized”, “adequately capitalized”, “undercapitalized”, “significantly undercapitalized” and “critically undercapitalized”).
The Federal Reserve has indicated that it expects to work with the other federal banking regulators in 2025 on a revised proposal. Prompt Corrective Action Framework The FDIA requires the federal bank regulators to take prompt corrective action in respect of depository institutions that fail to meet specified capital requirements.
The total of the assessments for the Bank is estimated at $16.3 million, and such amount was recorded as an expense in the quarter of adoption (the quarter ending December 31, 2023). 11 Table of Contents The Volcker Rule The Dodd-Frank Act and the implementing regulations of the federal regulators generally prohibit banks and their affiliates from engaging in proprietary trading and investing in and sponsoring hedge funds and private equity funds (the “Volcker Rule”).
In June 2024, the FDIC announced that it projects that the special assessment will be collected for an additional two quarters beyond the initial eight-quarter collection period, at a lower rate. 11 Table of Contents The Volcker Rule The Dodd-Frank Act and the implementing regulations of the federal regulators generally prohibit banks and their affiliates from engaging in proprietary trading and investing in and sponsoring hedge funds and private equity funds (the “Volcker Rule”).
Our wealth management business offers individuals investment and financial planning services, insurance protection, trust and estate services and private banking. Competition We operate in the highly competitive financial services industry and face significant competition for customers from financial institutions located both within and beyond our principal markets.
Competition We operate in the highly competitive financial services industry and face significant competition for customers from financial institutions located both within and beyond our principal markets. We compete with commercial banks, savings banks, credit unions, non-bank financial services companies and other financial institutions operating within or near the areas we serve.
We offer a comprehensive range of commercial lending services including commercial and industrial lending, auto dealer flooring, commercial real estate lending and construction lending. Our primary consumer lending services are mortgage lending, auto finance, small business loans, personal installment loans and credit cards.
Our primary consumer lending services are mortgage lending, auto finance, small business loans, personal installment loans and credit cards. Our wealth management business offers individuals investment and financial planning services, insurance protection, trust and estate services and private banking.
Our commitment to diversity and inclusion starts at the top with a diverse board. As of the date of this report, the FHI Board of Directors includes three women, representing 33% of directors, and six ethnically diverse individuals, representing 67% of directors.
As of the date of this report, the FHI Board of Directors includes four women, representing 40% of directors, and seven ethnically diverse individuals, representing 70% of directors. As of December 31, 2024, 62% of our employees were women, 57% of all management positions were held by women, and 87% of our workforce were ethnically diverse.
Removed
As of December 31, 2023, 63% of our employees were women, 54% of all management positions were held by women, and 86% of our workforce were ethnically diverse. Health, Safety and Wellness We recognize that each employee’s benefit needs may differ and have designed our benefits program to be flexible.
Added
First Hawaiian Bank is an equal opportunity and affirmative action employer, committed to provide equal employment opportunities to all employees and applicants for employment in accordance with applicable federal, state and local laws.
Removed
Any such data provider would also have to make such data available to third parties, with the consumer’s express authorization and through an interface that satisfies formatting, performance and security standards, for the purpose of such third parties providing the consumer with financial products or services requested by the consumer.
Added
The Company will continue to monitor and take measures that it considers to be appropriate to protect the safety and health of its employees. Our Products and Services The Bank is a full-service community bank focused on building relationships with our customers.
Removed
The proposed rule is intended to give consumers control over their financial data, including with whom it is shared, and encourage competition in the provision of consumer financial products or services.
Added
Limitations on the Company’s ability to receive dividends from the Bank could have a material adverse effect on its liquidity and ability to pay dividends on its common stock or interest and principal on its debt, and ability to fund purchases of its common stock.
Removed
For banks that hold between $850 million and $50 billion in total assets, compliance with the proposed rule’s requirements would be required approximately two and a half years after adoption of the final rule. In October 2023, the Federal Reserve proposed amendments to its rules on interchange fees.
Added
In October 2023, the Federal Reserve proposed amendments to its rules on interchange fees. Interchange fees, or “swipe” fees, are charges that merchants pay to card-issuing banks, such as FHB, for processing electronic payment transactions.
Removed
For example, on March 21, 2022, the SEC issued a proposed rule on the enhancement and standardization of climate-related disclosures for investors. The proposed rule would require public issuers, including the Company, to significantly expand the scope of climate-related disclosures in their SEC filings.
Added
In 2023, the SEC issued a final rule that requires disclosure of material cybersecurity incidents, as well as cybersecurity risk management, strategy and governance.
Removed
The SEC has also announced plans to propose rules to require enhanced disclosure regarding human capital management and board diversity for public issuers.
Added
Under this rule, banking, organizations that are SEC registrants must generally disclose information about a material cybersecurity incident within four business days of determining it is material with periodic updates as to the status of the incident in subsequent filings as necessary. State regulators have also been increasingly active in implementing privacy and cybersecurity standards and regulations.
Added
Regulatory authorities have imposed cease and desist orders and civil money penalties against institutions found to be violating these requirements. 14 Table of Contents In August 2024, Financial Crimes Enforcement Network (“FinCEN”), which drafts and enforces regulations implementing the BSA and other anti-money laundering legislation, adopted a rule extending anti-money laundering obligations, including maintenance of an anti-money laundering program and filing certain reports with FinCEN, to registered investment advisers.
Added
The Company’s clawback policy adopted in accordance with these listing standards is incorporated by reference to this annual report on Form 10-K as Exhibit 97.1.
Added
For example, in March 2024, the SEC finalized a rule requiring public issuers to provide certain climate-related disclosures in their SEC filings beginning in 2026 with respect to fiscal year 2025 for large accelerated filers like us. The rule is currently stayed by the SEC pending the completion of judicial review of litigation challenging the rule.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

87 edited+18 added−1 removed208 unchanged
Biggest changeSuch events and long-term shifts may also have a significant impact on our customers, which could amplify credit risk by diminishing borrowers’ repayment capacity or collateral values, and other businesses and counterparties with whom we transact, which could have a broader impact on the economy, supply chains and distribution networks. ​ 39 Table of Contents Climate change may also result in new and/or more stringent regulatory requirements for the Company, which could materially affect the Company’s results of operations by requiring the Company to take costly measures to comply with any new laws or regulations related to climate change that may be forthcoming.
Biggest changeSuch events and long-term shifts may result in destruction or impairment of properties, disruptions to business operations, or reduced availability or increased price of insurance and may have a significant impact on our customers, which could amplify credit risk by diminishing borrowers’ repayment capacity or collateral values, and other businesses and counterparties with whom we transact, which could have a broader impact on the economy, supply chains and distribution networks.
These island locales are susceptible to a wide array of potential natural disasters including, but not limited to, hurricanes, floods, earthquakes and tsunamis, like the May 2023 super typhoon that struck Guam and August 2023 Maui wildfires.
These island locales are susceptible to a wide array of potential natural disasters including, but not limited to, hurricanes, floods, wildfires, earthquakes and tsunamis, like the May 2023 super typhoon that struck Guam and August 2023 Maui wildfires.
Failure to successfully keep pace with technological change affecting the financial services industry and failure to avoid interruptions, errors and delays could cause us to lose customers or have a material adverse effect on our business, financial condition or results of operations. ​ We expect that new technologies and business processes applicable to the consumer credit industry will continue to emerge, and these new technologies and business processes may be better than those we currently use.
Failure to successfully keep pace with technological change affecting the financial services industry and/or failure to avoid interruptions, errors and delays could cause us to lose customers or have a material adverse effect on our business, financial condition or results of operations. ​ We expect that new technologies and business processes applicable to the consumer credit industry will continue to emerge, and these new technologies and business processes may be better than those we currently use.
BWHI is required to pay us for any unexpected income tax liabilities that arise in connection with the Reorganization Transactions.
BWHI is required to pay us for any unexpected income tax liabilities that arise in connection with the Reorganization Transactions.
Evolving responses from federal and state governments and other regulators, and our customers or our third-party partners or vendors, to new challenges such as climate change have impacted and could continue to impact the economic and political conditions under which we operate. ​ 19 Table of Contents In addition, federal budget deficit concerns and the potential for political conflict over legislation to fund U.S. government operations and raise the U.S. government's debt limit may increase the possibility of a default by the U.S. government on its debt obligations, related credit-rating downgrades, or an economic recession in the United States.
Evolving responses from federal and state governments and other regulators, and our customers or our third-party partners or vendors, to challenges such as climate change have impacted and could continue to impact the economic and political conditions under which we operate. ​ 19 Table of Contents In addition, federal budget deficit concerns and the potential for political conflict over legislation to fund U.S. government operations and raise the U.S. government’s debt limit may increase the possibility of a default by the U.S. government on its debt obligations, related credit-rating downgrades, or an economic recession in the United States.
Declines in the economic conditions in these markets, tourism, fluctuations in the strength of currencies such as the U.S. dollar and the Japanese yen, the inability of the Hawaii economy to absorb continuing construction expansion, increases in levels of underemployment, increases in energy costs, and other inflationary conditions, high interest rates, the availability of affordable air transportation, supply chain disruptions, pandemics or other widespread health emergency (or concerns over the possibility of such an emergency), real or threatened acts of war or terrorism, adverse weather, natural disasters and local or national budget issues, among other factors, may impact consumer and corporate spending.
Declines in the economic conditions in these markets, tourism, fluctuations in the strength of currencies such as the U.S. dollar and the Japanese yen, the inability of the Hawaii economy to absorb continuing construction expansion, increases in levels of underemployment, increases in energy costs, and other inflationary conditions, high interest rates, the availability of affordable air transportation, supply chain disruptions, pandemics or other widespread health emergency (or concerns over the possibility of such an emergency), real or threatened acts of war or terrorism, adverse weather, natural disasters, such as wildfires, and local or national budget issues, among other factors, may impact consumer and corporate spending.
In addition to the following summary, you should consider the other information set forth in this “Risk Factors” section and the other information contained in this report before investing in our securities. ​ Market Risks • Our business may be adversely affected by conditions in the financial markets and economic conditions generally and in Hawaii, Guam and Saipan in particular. • A sustained period of high inflation could pose a risk to the economy and the financial performance of the Bank. • Our business is significantly dependent on the real estate markets in which we operate, as a significant percentage of our loan portfolio is secured by real estate. • Our business is subject to risk arising from conditions in the commercial real estate market. • Concentrated exposures to certain asset classes and individual obligors may unfavorably impact our operations. • Our business is subject to interest rate risk and fluctuations in interest rates may adversely affect our earnings. • The value of the investment securities we own may decline in the future. ​ Credit Risks • Our business, profitability and liquidity may be adversely affected by deterioration in the credit quality of, or defaults by, third parties who owe us money, securities or other assets or whose securities or obligations we hold. • We might underestimate the credit losses inherent in our loan and lease portfolio and have credit losses in excess of the amount we reserve for loan and lease losses. ​ Liquidity Risks • Loss of deposits could increase our funding costs. • Our liquidity is dependent on dividends from First Hawaiian Bank. ​ Operational Risks • Our ability to maintain, attract and retain customer relationships is highly dependent on our reputation. • We may not be able to attract and retain key personnel and other skilled employees. • If our techniques for managing risk are ineffective, we may be exposed to material unanticipated losses. • We are dependent on the use of data and modeling both in our management decision-making generally and in meeting regulatory expectations in particular. • The appraisals and other valuation techniques we use in evaluating and monitoring loans secured by real property, other real estate owned (“OREO”) and repossessed personal property may not accurately describe the net value of the asset. • The occurrence of fraudulent activity, breaches or failures of our information security controls or cybersecurity-related incidents could have a material adverse effect on our business, financial condition or results of operations. • The development and use of AI present risks and challenges that may adversely impact our business. • Employee misconduct or mistakes could expose us to significant legal liability and reputational harm. • We may be adversely affected by changes in the actual or perceived soundness or condition of other financial institutions. • Consumer protection initiatives related to the foreclosure process could materially affect our ability as a creditor to obtain remedies. • We are subject to a variety of risks in connection with any sale of loans we may conduct. • Our operations could be interrupted if certain external vendors on which we rely experience difficulty, terminate their services or fail to comply with banking laws and regulations. • We depend on the accuracy and completeness of information about customers and counterparties. • Our accounting estimates and risk management processes and controls rely on analytical and forecasting techniques and models and assumptions, and actual results may differ from these estimates. • Changes in our accounting policies or in accounting standards could materially affect how we report our financial results and condition. ​ 17 Table of Contents Strategic Risks • Geographic concentration in our existing markets may unfavorably impact our operations. • We operate in a highly competitive industry and market area. • New lines of business, products, product enhancements or services may subject us to additional risks. • We have dealer-centric automotive finance businesses, and a change in the key role of dealers within the automotive industry or our ability to maintain or build relationships with them could have an adverse effect on our business, results of operations, financial condition, or prospects. • We continually encounter technological change. ​ Legal, Regulatory and Compliance Risks • The banking industry is highly regulated, and the regulatory framework, together with any future legislative or regulatory changes, may have a significant adverse effect on our operations. • Fee revenues from overdraft protection programs constitute a portion of our noninterest income and may be subject to increased supervisory scrutiny. • We are required to act as a source of financial and managerial strength for our bank in times of stress. • We are subject to capital adequacy requirements and may be subject to more stringent capital requirements. • We may not pay dividends on our common stock in the future. • Rulemaking changes implemented by the CFPB have in the past resulted and may in the future result in higher regulatory and compliance costs that may adversely affect our results of operations. • Litigation and regulatory actions, including possible enforcement actions, could subject us to significant fines, penalties, judgments or other requirements resulting in increased expenses or restrictions on our business activities. • Increases in FDIC insurance premiums may adversely affect our earnings. • Non-compliance with the USA PATRIOT Act, the Bank Secrecy Act or other laws and regulations could result in fines or sanctions against us. • Regulations relating to privacy, information security and data protection could increase our costs, affect or limit how we collect and use personal information and adversely affect our business opportunities. • Differences in regulation can affect our ability to compete effectively. • Our use of third-party vendors and our other ongoing third-party business relationships are subject to increasing regulatory requirements and attention. • We are subject to environmental liability risk associated with our bank branches and any real estate collateral we acquire upon foreclosure. • We may be subject to litigation risk pertaining to our fiduciary responsibilities. ​ Other Risks Affecting Our Business • Severe weather, hurricanes, tsunamis, natural disasters, pandemics, acts of war or terrorism or other external events could significantly impact our business. • Climate change could have a material negative impact on us and our customers. • We may be subject to unexpected income tax liabilities in connection with the Reorganization Transactions.
In addition to the following summary, you should consider the other information set forth in this “Risk Factors” section and the other information contained in this report before investing in our securities. ​ Market Risks • Our business may be adversely affected by conditions in the financial markets and economic conditions generally and in Hawaii, Guam and Saipan in particular. • Inflationary pressures could pose a risk to the economy and the financial performance of the Bank. • Our business is significantly dependent on the real estate markets in which we operate, as a significant percentage of our loan portfolio is secured by real estate. • Our business is subject to risk arising from conditions in the commercial real estate market. • Concentrated exposures to certain asset classes and individual obligors may unfavorably impact our operations. • Our business is subject to interest rate risk and fluctuations in interest rates may adversely affect our earnings. • The value of the investment securities we own may decline in the future. ​ Credit Risks • Our business, profitability and liquidity may be adversely affected by deterioration in the credit quality of, or defaults by, third parties who owe us money, securities or other assets or whose securities or obligations we hold. • We might underestimate the credit losses inherent in our loan and lease portfolio and have credit losses in excess of the amount we reserve for loan and lease losses. ​ Liquidity Risks • Loss of deposits could increase our funding costs. • Our liquidity is dependent on dividends from First Hawaiian Bank. ​ Operational Risks • Our ability to maintain, attract and retain customer relationships is highly dependent on our reputation. • We may not be able to attract and retain key personnel and other skilled employees. • If our techniques for managing risk are ineffective, we may be exposed to material unanticipated losses. • We are dependent on the use of data and modeling both in our management decision-making generally and in meeting regulatory expectations in particular. • The appraisals and other valuation techniques we use in evaluating and monitoring loans secured by real property, other real estate owned (“OREO”) and repossessed personal property may not accurately describe the net value of the asset. • The occurrence of fraudulent activity, breaches or failures of our information security controls or cybersecurity-related incidents could have a material adverse effect on our business, financial condition or results of operations. • The development and use of AI present risks and challenges that may adversely impact our business. • Employee misconduct or mistakes could expose us to significant legal liability and reputational harm. • We may be adversely affected by changes in the actual or perceived soundness or condition of other financial institutions. • Consumer protection initiatives related to the foreclosure process could materially affect our ability as a creditor to obtain remedies. • We are subject to a variety of risks in connection with any sale of loans we may conduct. • Our operations could be interrupted if certain external vendors on which we rely experience difficulty, terminate their services or fail to comply with banking laws and regulations. • We depend on the accuracy and completeness of information about customers and counterparties. • Our accounting estimates and risk management processes and controls rely on analytical and forecasting techniques and models and assumptions, and actual results may differ from these estimates. • Changes in our accounting policies or in accounting standards could materially affect how we report our financial results and condition. ​ 17 Table of Contents Strategic Risks • Geographic concentration in our existing markets may unfavorably impact our operations. • We operate in a highly competitive industry and market area. • New lines of business, products, product enhancements or services may subject us to additional risks. • We have dealer-centric automotive finance businesses, and a change in the key role of dealers within the automotive industry or our ability to maintain or build relationships with them could have an adverse effect on our business, results of operations, financial condition, or prospects. • We continually encounter technological change. ​ Legal, Regulatory and Compliance Risks • The banking industry is highly regulated, and the regulatory framework, together with any future legislative or regulatory changes, may have a significant adverse effect on our operations. • Fee revenues from overdraft protection programs constitute a portion of our noninterest income and may be subject to increased supervisory scrutiny. • We are required to act as a source of financial and managerial strength for our bank in times of stress. • We are subject to capital adequacy requirements and may be subject to more stringent capital requirements. • We may not pay dividends on our common stock in the future. • Rulemaking changes implemented by the CFPB have in the past resulted and may in the future result in higher regulatory and compliance costs that may adversely affect our results of operations. • Litigation and regulatory actions, including possible enforcement actions, could subject us to significant fines, penalties, judgments or other requirements resulting in increased expenses or restrictions on our business activities. • Increases in FDIC insurance premiums may adversely affect our earnings. • Non-compliance with the USA PATRIOT Act, the Bank Secrecy Act or other laws and regulations could result in fines or sanctions against us. • Regulations relating to privacy, information security and data protection could increase our costs, affect or limit how we collect and use personal information and adversely affect our business opportunities. • Differences in regulation can affect our ability to compete effectively. • Our use of third-party vendors and our other ongoing third-party business relationships are subject to increasing regulatory requirements and attention. • We are subject to environmental liability risk associated with our bank branches and any real estate collateral we acquire upon foreclosure. • We may be subject to litigation risk pertaining to our fiduciary responsibilities. ​ Other Risks Affecting Our Business • Severe weather, hurricanes, tsunamis, natural disasters, pandemics, acts of war or terrorism or other external events could significantly impact our business. • Climate change could have a material negative impact on us and our customers. • We may be subject to unexpected income tax liabilities in connection with the Reorganization Transactions.
These competitive pressures from our peers, as well as any adoption by our regulators of new rules or supervisory guidance or more aggressive examination and enforcement policies in respect of banks’ overdraft protection practices, could cause us to modify our program and practices in ways that may have a negative impact on our revenue and earnings, which, in turn, could have an adverse effect on our financial condition and results of operations.
These competitive pressures from our peers, as well as any further adoption by our regulators of new rules or supervisory guidance or more aggressive examination and enforcement policies in respect of banks’ overdraft protection practices, could cause us to modify our program and practices in ways that may have a negative impact on our revenue and earnings, which, in turn, could have an adverse effect on our financial condition and results of operations.
See “Certain Related Party Transactions” in the Company’s Proxy Statement is incorporated herein by reference. If, however, our income tax liabilities with respect to the Reorganization Transactions are higher than the Return Taxes and BWHI fails to satisfy its payment obligations under the Tax Sharing Agreement, we could be liable for significantly higher federal and/or state income tax liabilities.
See “Certain Related Party Transactions” in the Company’s Proxy Statement, which is incorporated herein by reference. If, however, our income tax liabilities with respect to the Reorganization Transactions are higher than the Return Taxes and BWHI fails to satisfy its payment obligations under the Tax Sharing Agreement, we could be liable for significantly higher federal and/or state income tax liabilities.
They require management to make difficult, subjective or complex judgments about matters that are uncertain. Materially different amounts could be reported under different conditions or using different assumptions or estimates. These critical accounting policies include the allowance for credit losses, goodwill, fair value measurements, pension and postretirement benefit obligations and income taxes.
They require management to make difficult, subjective or complex judgments about matters that are uncertain. Materially different amounts could be reported under different conditions or using different assumptions or estimates. These critical accounting policies include the allowance for credit losses, fair value measurements, pension and postretirement benefit obligations and income taxes.
Moreover, under applicable laws, we may not be permitted to acquire any bank in Hawaii because we control more than 30% of the total amount of deposits in the Hawaii market. As a result, any further growth in the Hawaii market will most likely have to occur organically rather than by acquisition.
Under applicable laws, we may not be permitted to acquire any bank in Hawaii because we control more than 30% of the total amount of deposits in the Hawaii market. As a result, any further growth in the Hawaii market will most likely have to occur organically rather than by acquisition.
Our failure to comply with any applicable laws or regulations, or regulatory policies and interpretations of such laws and regulations, in some cases, even if such noncompliance was inadvertent, could result in sanctions by regulatory agencies, civil money penalties, related litigation by private plaintiffs, or damage to our reputation, all of which could have a material adverse effect our business, financial condition or results of operations. ​ We expect that our business will remain subject to extensive regulation and supervision and that the level of scrutiny and the enforcement environment may fluctuate over time, based on numerous factors, including changes in the United States presidential administration or one or both houses of Congress and public sentiment regarding financial institutions (which can be influenced by scandals and other incidents that involve participants in the financial services industry).
Our failure to comply with any applicable laws or regulations, or regulatory policies and interpretations of such laws and regulations, in some cases, even if such noncompliance was inadvertent, could result in sanctions by regulatory agencies, civil money penalties, related litigation by private plaintiffs, or damage to our reputation, all of which could have a material adverse effect our business, financial condition or results of operations. ​ 33 Table of Contents We expect that our business will remain subject to extensive regulation and supervision and that the level of scrutiny and the enforcement environment may fluctuate over time, based on numerous factors, including changes in the United States presidential administration or one or both houses of Congress and public sentiment regarding financial institutions (which can be influenced by scandals and other incidents that involve participants in the financial services industry).
This could have a material adverse effect on our business, financial condition or results of operations. ​ The occurrence of fraudulent activity, breaches or failures of our information security controls or cybersecurity-related incidents could have a material adverse effect on our business, financial condition or results of operations. ​ As a financial institution, we are susceptible to fraudulent activity, information security breaches and cybersecurity-related incidents that may be committed against us or our clients, which may result in financial losses or increased costs to us or our clients, disclosure, loss or misuse of our information or our client information, misappropriation of assets, privacy breaches against our clients, litigation or damage to our reputation.
This could have a material adverse effect on our business, financial condition or results of operations. ​ The occurrence of fraudulent activity, breaches or failures of our information security controls or cybersecurity-related incidents could have a material adverse effect on our business, financial condition or results of operations. ​ As a financial institution, we are susceptible to fraudulent activity, information security breaches and cybersecurity-related incidents that may be committed against us or our clients, which may result in financial losses or increased costs to us or our clients, disclosure, loss or misuse of our information or our clients’ information, misappropriation of assets, privacy breaches against our clients, litigation or damage to our reputation.
Our real estate loans consist primarily of residential loans, including home equity loans (representing 38% of our total loan and lease portfolio) and commercial and construction loans (representing 37% of our total loan and lease portfolio), with the significant majority of these loans concentrated in Hawaii.
Our real estate loans consist primarily of residential loans, including home equity loans (representing 37% of our total loan and lease portfolio) and commercial and construction loans (representing 37% of our total loan and lease portfolio), with the significant majority of these loans concentrated in Hawaii.
Our business, results of operations or competitive position may be adversely affected as a result. ​ Litigation and regulatory actions, including possible enforcement actions, could subject us to significant fines, penalties, judgments or other requirements resulting in increased expenses or restrictions on our business activities. ​ Our business is subject to increased litigation and regulatory risks as a result of a number of factors, including the highly regulated nature of the financial services industry and the focus of civil government attorneys on banks and the financial services industry generally, and in particular practices and requirements, including foreclosure practices, applicable consumer protection laws, classification of held for sale assets and compliance with anti-money laundering statutes, the Bank Secrecy Act and sanctions administered by OFAC.
Our business, results of operations or competitive position may be adversely affected as a result. ​ 35 Table of Contents Litigation and regulatory actions, including possible enforcement actions, could subject us to significant fines, penalties, judgments or other requirements resulting in increased expenses or restrictions on our business activities. ​ Our business is subject to increased litigation and regulatory risks as a result of a number of factors, including the highly regulated nature of the financial services industry and the focus of civil government attorneys on banks and the financial services industry generally, and in particular practices and requirements, including foreclosure practices, applicable consumer protection laws, classification of held for sale assets and compliance with anti-money laundering statutes, the Bank Secrecy Act and sanctions administered by OFAC.
A failure to maintain current technology and business processes could cause disruptions in our operations or cause our products and services to be less competitive, all of which could have a material adverse effect on our business, financial condition or results of operations. ​ 32 Table of Contents Legal, Regulatory and Compliance Risks ​ The banking industry is highly regulated, and the regulatory framework, together with any future legislative or regulatory changes, may have a significant adverse effect on our operations. ​ The banking industry is extensively regulated and supervised under both federal and state laws and regulations that are intended primarily for the protection of depositors, customers, federal deposit insurance funds and the banking system as a whole, not for the protection of our stockholders and creditors other than insured depositors.
A failure to maintain current technology and business processes could cause disruptions in our operations or cause our products and services to be less competitive, all of which could have a material adverse effect on our business, financial condition or results of operations. ​ Legal, Regulatory and Compliance Risks ​ The banking industry is highly regulated, and the regulatory framework, together with any future legislative or regulatory changes, may have a significant adverse effect on our operations. ​ The banking industry is extensively regulated and supervised under both federal and state laws and regulations that are intended primarily for the protection of depositors, customers, federal deposit insurance funds and the banking system as a whole, not for the protection of our stockholders and creditors other than insured depositors.
A severe downturn in the economy generally, in our markets specifically or affecting the business and assets of individual customers would generate increased charge-offs and a need for higher reserves. While we believe that our ACL was adequate as of December 31, 2023, there is no assurance that it will be sufficient to cover all incurred credit losses.
A severe downturn in the economy generally, in our markets specifically or affecting the business and assets of individual customers would generate increased charge-offs and a need for higher reserves. While we believe that our ACL was adequate as of December 31, 2024, there is no assurance that it will be sufficient to cover all incurred credit losses.
Some of these parties have in the past been the target of security breaches and cyberattacks, and because the transactions involve third parties and environments such as the point of sale that we do not control or secure, future security breaches or cyberattacks affecting any of these third parties could impact us through no fault of our own, and in some cases we may have exposure and suffer losses for breaches or attacks relating to them. ​ 26 Table of Contents Information pertaining to us and our customers is maintained, and transactions are executed, on networks and systems maintained by us, our customers and certain of our third-party partners, such as our online banking or reporting systems.
Some of these parties have in the past been the target of security breaches and cyberattacks, and because the transactions involve third parties and environments such as the point of sale that we do not control or secure, future security breaches or cyberattacks affecting any of these third parties could impact us through no fault of our own, and in some cases we may have exposure and suffer losses for breaches or attacks relating to them. ​ Information pertaining to us and our customers is maintained, and transactions are executed, on networks and systems maintained by us, our customers and certain of our third-party partners, such as our online banking or reporting systems.
However, as a result of rule changes, many lenders now forgo nonjudicial foreclosures and file all foreclosures in court, which has created a backlog and slowed the judicial foreclosure process. Following a joint federal-state settlement regarding foreclosure practices, mortgage servicers have implemented new programs to assist borrowers with loss mitigation options.
However, as a result of rule changes, many lenders now forgo nonjudicial foreclosures and file all foreclosures in court, which has created a backlog and slowed the judicial foreclosure process. Following a joint federal-state settlement regarding foreclosure practices, mortgage servicers implemented programs to assist borrowers with loss mitigation options.
Failure to maintain and implement adequate programs to combat money laundering and terrorist financing could also have serious reputational consequences for us, which could have a material adverse effect on our business, financial condition or results of operations. ​ 36 Table of Contents Regulations relating to privacy, information security and data protection could increase our costs, affect or limit how we collect and use personal information and adversely affect our business opportunities. ​ We are subject to various privacy, information security and data protection laws, including requirements concerning security breach notification, and we could be negatively impacted by these laws.
Failure to maintain and implement adequate programs to combat money laundering and terrorist financing could also have serious reputational consequences for us, which could have a material adverse effect on our business, financial condition or results of operations. ​ Regulations relating to privacy, information security and data protection could increase our costs, affect or limit how we collect and use personal information and adversely affect our business opportunities. ​ We are subject to various privacy, information security and data protection laws, including requirements concerning security breach notification, and we could be negatively impacted by these laws.
We may be required to reduce the value of any loans we mark held for sale as a result, which could have a material adverse effect on our business, financial condition or results of operations. ​ Our operations could be interrupted if certain external vendors on which we rely experience difficulty, terminate their services or fail to comply with banking laws and regulations. ​ We depend, to a significant extent, on relationships with third-party service providers that provide services, primarily information technology services, that are critical to our operations.
We may be required to reduce the value of any loans we mark held for sale as a result, which could have a material adverse effect on our business, financial condition or results of operations. ​ 29 Table of Contents Our operations could be interrupted if certain external vendors on which we rely experience difficulty, terminate their services or fail to comply with banking laws and regulations. ​ We depend, to a significant extent, on relationships with third-party service providers that provide services, primarily information technology services, that are critical to our operations.
Additionally, we have cultivated relationships with market leaders that result in relatively larger exposures to select single obligors than would be typical for an institution of our size in a larger operating market. For example, our top five dealer relationships represented approximately 39% of our outstanding dealer flooring commitments as of December 31, 2023.
Additionally, we have cultivated relationships with market leaders that result in relatively larger exposures to select single obligors than would be typical for an institution of our size in a larger operating market. For example, our top five dealer relationships represented approximately 39% of our outstanding dealer flooring commitments as of December 31, 2024.
Our failure to comply with privacy, data protection and information security laws could result in potentially significant regulatory or governmental investigations or actions, litigation, fines, sanctions and damage to our reputation, which could have a material adverse effect on our business, financial condition or results of operations. ​ Differences in regulation can affect our ability to compete effectively. ​ The content and application of laws and regulations applicable to financial institutions vary according to the size of the institution, the jurisdictions in which the institution is organized and operates and other factors.
Our failure to comply with privacy, data protection and information security laws could result in potentially significant regulatory or governmental investigations or actions, litigation, fines, sanctions and damage to our reputation, which could have a material adverse effect on our business, financial condition or results of operations. ​ 37 Table of Contents Differences in regulation can affect our ability to compete effectively. ​ The content and application of laws and regulations applicable to financial institutions vary according to the size of the institution, the jurisdictions in which the institution is organized and operates and other factors.
Our techniques for managing the risks we face may not fully mitigate the risk exposure in all economic or market environments, including exposure to risks that we might fail to identify or anticipate. ​ We are dependent on the use of data and modeling both in our management decision-making generally and in meeting regulatory expectations in particular. ​ The use of statistical and quantitative models and other quantitatively-based analyses is central to bank decision-making and regulatory compliance processes, and the employment of such analyses is becoming increasingly widespread in our operations.
Our techniques for managing the risks we face may not fully mitigate the risk exposure in all economic or market environments, including exposure to risks that we might fail to identify or anticipate. 25 Table of Contents ​ We are dependent on the use of data and modeling both in our management decision-making generally and in meeting regulatory expectations in particular. ​ The use of statistical and quantitative models and other quantitatively-based analyses is central to bank decision-making and regulatory compliance processes, and the employment of such analyses is becoming increasingly widespread in our operations.
General market fluctuations, industry factors and general economic and political conditions and events — such as economic slowdowns or recessions, interest rate changes or credit loss trends — could also cause our stock price to decrease regardless of operating results. ​ Future sales and issuances of our common stock, including sales as part of our equity-based compensation plans, could result in dilution of the percentage ownership of our stockholders and could lower our stock price. ​ The market price of our common stock could decline as a result of sales of a large number of shares of our common stock or from the perception that such sales could occur.
General market fluctuations, industry factors and general economic and political conditions and events — such as economic slowdowns or recessions, interest rate changes or credit loss trends — could also cause our stock price to decrease regardless of operating results. ​ 41 Table of Contents Future sales and issuances of our common stock, including sales as part of our equity-based compensation plans, could result in dilution of the percentage ownership of our stockholders and could lower our stock price. ​ The market price of our common stock could decline as a result of sales of a large number of shares of our common stock or from the perception that such sales could occur.
In addition, employee errors, such as inadvertent use or disclosure of confidential information, calculation errors, mistakes in addressing communications or data inputs, errors in developing, implementing or applying information technology systems or simple errors in judgment, could also have similar adverse effects. ​ We may be adversely affected by changes in the actual or perceived soundness or condition of other financial institutions. ​ Financial services institutions may be interconnected as a result of trading, investment, liquidity management, clearing, counterparty and other relationships.
In addition, employee errors, such as inadvertent use or disclosure of confidential information, calculation errors, mistakes in addressing communications or data inputs, errors in developing, implementing or applying information technology systems or simple errors in judgment, could also have similar adverse effects. ​ 28 Table of Contents We may be adversely affected by changes in the actual or perceived soundness or condition of other financial institutions. ​ Financial services institutions may be interconnected as a result of trading, investment, liquidity management, clearing, counterparty and other relationships.
Failure to successfully manage these risks in the development and implementation of new lines of business or offerings of new products, product enhancements or services could have a material adverse effect on our business, financial condition or results of operations. ​ 31 Table of Contents We have dealer-centric automotive finance businesses, and a change in the key role of dealers within the automotive industry or our ability to maintain or build relationships with them could have an adverse effect on our business, results of operations, financial condition, or prospects. ​ Our automotive finance business depends on the continuation of the key role of dealers within the automotive industry, the maintenance of our existing relationships with dealers, and our creation of new relationships with dealers.
Failure to successfully manage these risks in the development and implementation of new lines of business or offerings of new products, product enhancements or services could have a material adverse effect on our business, financial condition or results of operations. ​ We have dealer-centric automotive finance businesses, and a change in the key role of dealers within the automotive industry or our ability to maintain or build relationships with them could have an adverse effect on our business, results of operations, financial condition, or prospects. ​ Our automotive finance business depends on the continuation of the key role of dealers within the automotive industry, the maintenance of our existing relationships with dealers, and our creation of new relationships with dealers.
For a discussion of the expected impact of accounting pronouncements recently issued but not adopted by us as of December 31, 2023, see “Note 1. Organization and Summary of Significant Accounting Policies – Recent Accounting Pronouncements” in the notes to the consolidated financial statements included in Item 8.
For a discussion of the expected impact of accounting pronouncements recently issued but not adopted by us as of December 31, 2024, see “Note 1. Organization and Summary of Significant Accounting Policies – Recent Accounting Pronouncements” in the notes to the consolidated financial statements included in Item 8.
Other provisions of federal, state or local tax law may establish similar liability for other matters, including laws governing tax qualified pension plans, as well as other contingent liabilities. ​ 40 Table of Contents Risks Related to Our Common Stock ​ Our stock price may be volatile, and you could lose part or all of your investment as a result. ​ Stock price volatility may make it more difficult for you to resell your common stock when you want and at prices you find attractive.
Other provisions of federal, state or local tax law may establish similar liability for other matters, including laws governing tax qualified pension plans, as well as other contingent liabilities. ​ Risks Related to Our Common Stock ​ Our stock price may be volatile, and you could lose part or all of your investment as a result. ​ Stock price volatility may make it more difficult for you to resell your common stock when you want and at prices you find attractive.
Additionally, because of the complexity inherent in these approaches, misunderstanding or misuse of their outputs could similarly result in suboptimal decision-making. ​ ​ 25 Table of Contents The appraisals and other valuation techniques we use in evaluating and monitoring loans secured by real property, OREO and repossessed personal property may not accurately describe the net value of the asset. ​ In considering whether to make a loan secured by real property, we generally require an appraisal of the property.
Additionally, because of the complexity inherent in these approaches, misunderstanding or misuse of their outputs could similarly result in suboptimal decision-making. ​ The appraisals and other valuation techniques we use in evaluating and monitoring loans secured by real property, OREO and repossessed personal property may not accurately describe the net value of the asset. ​ In considering whether to make a loan secured by real property, we generally require an appraisal of the property.
Either of these results may adversely impact demand for our products and services or otherwise have a material adverse effect on our business, financial condition or results of operations. ​ 38 Table of Contents Other Risks Affecting Our Business . ​ Severe weather, hurricanes, tsunamis, natural disasters, pandemics, acts of war or terrorism or other external events could significantly impact our business. ​ Severe weather, hurricanes, tsunamis, natural disasters, widespread disease or pandemics or other severe health emergencies, or concerns over the possibility of such an emergency, acts of war or terrorism or other adverse external events could have a significant impact on our business.
Either of these results may adversely impact demand for our products and services or otherwise have a material adverse effect on our business, financial condition or results of operations. ​ Other Risks Affecting Our Business . ​ Severe weather, hurricanes, tsunamis, natural disasters, pandemics, acts of war or terrorism or other external events could significantly impact our business. ​ Severe weather, hurricanes, tsunamis, natural disasters, widespread disease or pandemics or other severe health emergencies, or concerns over the possibility of such an emergency, acts of war or terrorism or other adverse external events could have a significant impact on our business.
Defense of our reputation, trademarks and other intellectual property, including through litigation, could result in costs that could have a material adverse effect on our business, financial condition or results of operations. 24 Table of Contents ​ We may not be able to attract and retain key personnel and other skilled employees. ​ Our success depends, in large part, on the skills of our management team and our ability to retain, recruit and motivate key officers and employees.
Defense of our reputation, trademarks and other intellectual property, including through litigation, could result in costs that could have a material adverse effect on our business, financial condition or results of operations. ​ We may not be able to attract and retain key personnel and other skilled employees. ​ Our success depends, in large part, on the skills of our management team and our ability to retain, recruit and motivate key officers and employees.
The remediation costs and any other financial liabilities associated with an environmental hazard could have a material adverse effect on our business, financial condition or results of operations. ​ We may be subject to litigation risk pertaining to our fiduciary responsibilities. ​ Some of the services we provide, such as trust and investment services, require us to act as fiduciaries for our customers and others.
The remediation costs and any other financial liabilities associated with an environmental hazard could have a material adverse effect on our business, financial condition or results of operations. ​ 38 Table of Contents We may be subject to litigation risk pertaining to our fiduciary responsibilities. ​ Some of the services we provide, such as trust and investment services, require us to act as fiduciaries for our customers and others.
The inability to receive dividends from the Bank could have a material adverse effect on our business, financial condition, liquidity or results of operations. ​ Operational Risks ​ Our ability to maintain, attract and retain customer relationships is highly dependent on our reputation. ​ As the parent company of Hawaii’s oldest and largest bank, we rely in part on our bank’s reputation for superior financial services to retain our customer relationships.
The inability to receive dividends from the Bank could have a material adverse effect on our business, financial condition, liquidity or results of operations. ​ 24 Table of Contents Operational Risks ​ Our ability to maintain, attract and retain customer relationships is highly dependent on our reputation. ​ As the parent company of Hawaii’s oldest and largest bank, we rely in part on our bank’s reputation for superior financial services to retain our customer relationships.
Generative AI, if used to perpetrate fraud or launch cyberattacks, could create panic at a particular financial institution or exchange, which could pose a threat to financial stability. 27 Table of Contents ​ Employee misconduct or mistakes could expose us to significant legal liability and reputational harm. ​ We are vulnerable to reputational harm because we operate in an industry in which integrity and the confidence of our customers are of critical importance.
Generative AI, if used to perpetrate fraud or launch cyberattacks, could create panic at a particular financial institution or exchange, which could pose a threat to financial stability. ​ Employee misconduct or mistakes could expose us to significant legal liability and reputational harm. ​ We are vulnerable to reputational harm because we operate in an industry in which integrity and the confidence of our customers are of critical importance.
Our inability to comply with all federal and state regulations and investor guidelines regarding the origination, underwriting documentation and servicing of mortgage loans may impact our ability to sell mortgage loans in the future. ​ 28 Table of Contents In addition, we must report as held for sale any loans which we have undertaken to sell, whether or not a purchase agreement for the loans has been executed.
Our inability to comply with all federal and state regulations and investor guidelines regarding the origination, underwriting documentation and servicing of mortgage loans may impact our ability to sell mortgage loans in the future. ​ In addition, we must report as held for sale any loans which we have undertaken to sell, whether or not a purchase agreement for the loans has been executed.
In some cases, management must select the accounting policy or method to apply from two or more alternatives, any of which may be reasonable under the circumstances, yet which may result in our reporting materially different results than would have been reported under a different alternative. ​ 29 Table of Contents Certain accounting policies are critical to presenting our financial condition and results of operations.
In some cases, management must select the accounting policy or method to apply from two or more alternatives, any of which may be reasonable under the circumstances, yet which may result in our reporting materially different results than would have been reported under a different alternative. ​ Certain accounting policies are critical to presenting our financial condition and results of operations.
Our inability to manage our growth successfully or to continue to expand into new markets could have a material adverse effect on our business, financial condition or results of operations. ​ 30 Table of Contents We operate in a highly competitive industry and market area. ​ We operate in the highly competitive financial services industry and face significant competition for customers from financial institutions located both within and beyond our principal markets.
Our inability to manage our growth successfully or to continue to expand into new markets could have a material adverse effect on our business, financial condition or results of operations. ​ We operate in a highly competitive industry and market area. ​ We operate in the highly competitive financial services industry and face significant competition for customers from financial institutions located both within and beyond our principal markets.
In addition, a single event or issue may give rise to numerous and overlapping investigations and proceedings, including by multiple federal and state regulators and other governmental authorities. ​ 35 Table of Contents In the normal course of business, from time to time, we may be named as a defendant in various legal actions, including arbitrations, class actions and other litigation, arising in connection with our business activities.
In addition, a single event or issue may give rise to numerous and overlapping investigations and proceedings, including by multiple federal and state regulators and other governmental authorities. ​ In the normal course of business, from time to time, we may be named as a defendant in various legal actions, including arbitrations, class actions and other litigation, arising in connection with our business activities.
In addition, as supervisory expectations and industry practices regarding overdraft protection programs change, our continued offering of overdraft protection may result in negative public opinion and increased reputation risk. ​ We are required to act as a source of financial and managerial strength for our bank in times of stress. ​ Under federal law, we are required to act as a source of financial and managerial strength to our bank, and to commit resources to support our bank if necessary.
In addition, as supervisory expectations and industry practices regarding overdraft protection programs change, our continued offering of overdraft protection may result in negative public opinion and increased reputation risk. ​ 34 Table of Contents We are required to act as a source of financial and managerial strength for our bank in times of stress. ​ Under federal law, we are required to act as a source of financial and managerial strength to our bank, and to commit resources to support our bank if necessary.
Business — Supervision and Regulation — Deposit Insurance.” ​ Non-compliance with the USA PATRIOT Act, the Bank Secrecy Act or other laws and regulations could result in fines or sanctions against us. ​ The USA PATRIOT Act of 2001 and the Bank Secrecy Act require financial institutions to design and implement programs to prevent financial institutions from being used for money laundering and terrorist activities.
Business — Supervision and Regulation — Deposit Insurance.” ​ 36 Table of Contents Non-compliance with the USA PATRIOT Act, the Bank Secrecy Act or other laws and regulations could result in fines or sanctions against us. ​ The USA PATRIOT Act of 2001 and the Bank Secrecy Act require financial institutions to design and implement programs to prevent financial institutions from being used for money laundering and terrorist activities.
Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Policies” for more information. ​ Our internal controls, disclosure controls, processes and procedures, and corporate governance policies and procedures are based in part on certain assumptions and can provide only reasonable (not absolute) assurances that the objectives of the system are met.
Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Policies” for more information. ​ 30 Table of Contents Our internal controls, disclosure controls, processes and procedures, and corporate governance policies and procedures are based in part on certain assumptions and can provide only reasonable (not absolute) assurances that the objectives of the system are met.
Once we register and issue these shares, their holders will be able to sell them in the public market, subject to applicable transfer restrictions. ​ 41 Table of Contents We cannot predict the size of future issuances or sales of our common stock or the effect, if any, that future issuances or sales of shares of our common stock may have on the market price of our common stock.
Once we register and issue these shares, their holders will be able to sell them in the public market, subject to applicable transfer restrictions. ​ We cannot predict the size of future issuances or sales of our common stock or the effect, if any, that future issuances or sales of shares of our common stock may have on the market price of our common stock.
Damage to our reputation could undermine the confidence of our current and potential customers in our ability to provide high-quality financial services. Such damage could also impair the confidence of our counterparties and vendors and ultimately affect our ability to effect transactions.
Damage to our reputation could undermine the confidence of our current and potential customers in our ability to provide high-quality financial services and could impair the confidence of our counterparties and vendors and ultimately affect our ability to effect transactions.
As a result, these events may contribute to a deterioration in Hawaii’s general economic condition, which, as a result of our geographic concentration, could adversely impact us and our borrowers. ​ Commercial lending represents approximately 54% of our total loan and lease portfolio as of December 31, 2023, and we generally make loans to small to mid-sized businesses whose financial performance depends on the regional economy.
As a result, these events may contribute to a deterioration in Hawaii’s general economic condition, which, as a result of our geographic concentration, could adversely impact us and our borrowers. ​ Commercial lending represents approximately 56% of our total loan and lease portfolio as of December 31, 2024, and we generally make loans to small to mid-sized businesses whose financial performance depends on the regional economy.
Unfavorable or uncertain economic and market conditions can be caused by declines in economic growth, business activity or investor or business confidence, limitations on the availability or increases in the cost of credit and capital, increases in inflation or interest rates, high unemployment, natural disasters or a combination of these or other factors.
Unfavorable or uncertain economic and market conditions can be caused by declines in economic growth, business activity or investor or business confidence, limitations on the availability or increases in the cost of credit and capital, inflation, interest rate volatility, high unemployment, natural disasters or a combination of these or other factors.
Higher capital levels could also lower our return on equity. ​ 34 Table of Contents We may not pay dividends on our common stock in the future. ​ Holders of our common stock are entitled to receive only such dividends as our board of directors may declare out of funds legally available for such payments.
Higher capital levels could also lower our return on equity. ​ We may not pay dividends on our common stock in the future. ​ Holders of our common stock are entitled to receive only such dividends as our board of directors may declare out of funds legally available for such payments.
If this were to occur, our business, results of operations, financial condition, or prospects could be adversely affected. ​ We continually encounter technological change. ​ The financial services industry is continually undergoing rapid technological change with frequent introductions of new, technology-driven products and services.
If this were to occur, our business, results of operations, financial condition, or prospects could be adversely affected. ​ 32 Table of Contents We continually encounter technological change. ​ The financial services industry is continually undergoing rapid technological change with frequent introductions of new, technology-driven products and services.
Financial Statements and Supplementary Data for more information. ​ Strategic Risks ​ Geographic concentration in our existing markets may unfavorably impact our operations. ​ A substantial majority of our business is with customers located within Hawaii. Our operations are heavily concentrated in Hawaii, as well as in Guam and Saipan.
Financial Statements and Supplementary Data. ​ Strategic Risks ​ Geographic concentration in our existing markets may unfavorably impact our operations. ​ A substantial majority of our business is with customers located within Hawaii. Our operations are heavily concentrated in Hawaii, as well as in Guam and Saipan.
Some of our non-bank competitors are not subject to the same extensive regulations we are, and, as a result, may be able to compete more effectively for business. In particular, the activity of marketplace lenders and other financial technology companies (“fintechs”) has grown significantly over recent years and is expected to continue to grow.
Some of our non-bank competitors are not subject to the same extensive regulations we are, and, as a result, may be able to compete more effectively for business. In particular, the activity of private creditors and other financial technology companies (“fintechs”) has grown significantly over recent years and is expected to continue to grow.
Higher commodity prices, labor shortages and supply chain disruptions, including those resulting from Russia’s ongoing invasion of Ukraine and the conflict in the Middle East, are also contributing to higher inflation levels, which could, in turn, adversely affect the U.S. economy, the demand for our products and creditworthiness of our borrowers.
Higher commodity prices, labor shortages and supply chain disruptions, including those resulting from Russia’s ongoing invasion of Ukraine and the conflict in the Middle East, are also contributing to inflationary pressures, which could, in turn, adversely affect the U.S. economy, the demand for our products and creditworthiness of our borrowers.
Our failure to mitigate these risks effectively could have a material adverse effect on our business, financial condition or results of operations. 20 Table of Contents ​ Our business is subject to risk arising from conditions in the commercial real estate market. ​ As of December 31, 2023, our commercial real estate loans represented approximately $4.3 billion or 30% of our total loan and lease portfolio.
Our failure to mitigate these risks effectively could have a material adverse effect on our business, financial condition or results of operations. 20 Table of Contents ​ Our business is subject to risk arising from conditions in the commercial real estate market. ​ As of December 31, 2024, our commercial real estate loans represented approximately $4.5 billion or 31% of our total loan and lease portfolio.
We have not sought and will not seek any rulings from the IRS or state and local tax authorities regarding our expected tax treatment of the Reorganization Transactions. ​ In addition, under the U.S.
We have not sought and will not seek any rulings from the IRS or state and local tax authorities regarding our expected tax treatment of the Reorganization Transactions. ​ 40 Table of Contents In addition, under the U.S.
Furthermore, if we fail to offer interest in a sufficient amount to keep these deposits, our deposits may be reduced, which would require us to obtain funding in other ways or risk slowing our future asset growth. ​ The value of the investment securities we own may decline in the future. ​ As of December 31, 2023, we owned investment securities with a carrying value of $6.3 billion, which largely consisted of our positions in obligations of the U.S. government and government-sponsored enterprises.
Furthermore, if we fail to offer interest in a sufficient amount to keep these deposits, our deposits may be reduced, which would require us to obtain funding in other ways or risk slowing our future asset growth. ​ The value of the investment securities we own may decline in the future. ​ As of December 31, 2024, we owned investment securities with a carrying value of $5.7 billion, which largely consisted of our positions in obligations of the U.S. government and government-sponsored enterprises.
As discussed below, deterioration in economic conditions in Hawaii, Guam and Saipan would have a material adverse effect on our business, financial condition or results of operations. ​ In addition, continued, long-term growth may be unsustainable, given the concentration of our operations and customer base in Hawaii, Guam and Saipan.
As discussed above, deterioration in economic conditions in Hawaii, Guam and Saipan could have a material adverse effect on our business, financial condition or results of operations. ​ In addition, continued, long-term growth may be unsustainable, given the concentration of our operations and customer base in Hawaii, Guam and Saipan.
The emergence, adoption and evolution of new technologies that do not require intermediation, including distributed ledgers such as digital assets and blockchain, as well as advances in robotic process automation or AI, could significantly affect the competition for financial services.
The emergence, adoption and evolution of new technologies that do not require intermediation, including distributed ledgers such as digital assets and blockchain, as well as advances in automation, AI and robotics, could significantly affect the competition for financial services.
We may not be able to compete successfully with other financial institutions in our markets, and we may have to pay higher interest rates to attract deposits, accept lower yields to attract loans and pay higher wages for new employees, resulting in lower net interest margins and reduced profitability. ​ Many of our non-bank competitors are not subject to the same extensive regulations that govern our activities and may have greater flexibility in competing for business.
We may not be able to compete successfully with other financial institutions in our markets, and we may have to pay higher interest rates to attract deposits, accept lower yields to attract loans and/or pay higher wages for new employees, which may result in lower net interest margins and reduced profitability. ​ 31 Table of Contents Many of our non-bank competitors are not subject to the same extensive regulations that govern our activities and may have greater flexibility in competing for business.
Any substantial, unexpected, prolonged change in market interest rates could have a material adverse effect on our business, financial condition or results of operations. ​ As of December 31, 2023, we had $7.6 billion of noninterest-bearing demand deposits and $13.7 billion of interest-bearing deposits.
Any substantial, unexpected, prolonged change in market interest rates could have a material adverse effect on our business, financial condition or results of operations. ​ As of December 31, 2024, we had $7.0 billion of noninterest-bearing demand deposits and $13.3 billion of interest-bearing deposits.
In connection with prior political disputes over U.S. fiscal and budgetary issues leading to the U.S. government shutdown in 2011, S&P lowered its long term sovereign credit rating on the U.S. from AAA to AA+.
In connection with prior political disputes over U.S. fiscal and budgetary issues leading to the U.S. government shutdown in 2023, Fitch lowered its long term sovereign credit rating on the U.S. from AAA to AA+.
The laws and regulations applicable to us govern a variety of matters, including permissible types, amounts and terms of loans and investments we may make, the maximum interest rate that may be charged, the amount of reserves we must hold against deposits we take, the types of deposits we may accept, maintenance of adequate capital and liquidity, changes in the control of us and our bank, restrictions on dividends and establishment of new offices.
The laws and regulations applicable to us govern a variety of matters, including permissible types, amounts and terms of loans and investments we may make, the maximum interest rate that may be charged, the fees we can charge for certain products or transactions, the amount of reserves we must hold against deposits we take, the types of deposits we may accept, maintenance of adequate capital and liquidity, changes in the control of us and our bank, restrictions on dividends and establishment of new offices.
Further, the use of artificial intelligence (“AI”) by cybercriminals may increase the frequency and severity of cybersecurity attacks against us or our service providers and others on whom we rely. ​ We also face risks related to cyberattacks and other security breaches in connection with credit card transactions that typically involve the transmission of sensitive information regarding our customers through various third parties, including merchant acquiring banks, payment processors, payment card networks and our processors.
Further, evolving cyber threats, including as a result of the increased use of artificial intelligence (“AI”) by cybercriminals may increase the frequency and severity of cybersecurity attacks against us or our service providers and others on whom we rely. 26 Table of Contents ​ We also face risks related to cyberattacks and other security breaches in connection with credit card transactions that typically involve the transmission of sensitive information regarding our customers through various third parties, including merchant acquiring banks, payment processors, payment card networks and our processors.
We also have substantial ongoing business relationships with other third parties. These types of third-party relationships are subject to increasingly demanding regulatory requirements and attention by our federal bank regulators, as well as heightened supervisory expectations regarding our due diligence, ongoing monitoring and control over our third-party vendors and other ongoing third-party business relationships.
These types of third-party relationships are subject to increasingly demanding regulatory requirements and attention by our federal bank regulators, as well as heightened supervisory expectations regarding our due diligence, ongoing monitoring and control over our third-party vendors and other ongoing third-party business relationships.
In addition, to the extent the Company’s insurance covers aspects of any breach, such insurance may not be sufficient to cover all of the Company’s losses. ​ The development and use of AI present risks and challenges that may adversely impact our business. ​ We or our third-party vendors, clients or counterparties may develop or incorporate AI technology in certain business processes, services or products.
In addition, to the extent the Company’s insurance covers aspects of any breach, such insurance may not be sufficient to cover all of the Company’s losses. ​ 27 Table of Contents The development and use of AI present risks and challenges that may adversely impact our business. ​ We and/or our third-party vendors, clients or counterparties have in the past developed or incorporated, and may in the future develop or incorporate AI technology in certain business processes, services or products.
In April 2021, our stockholders approved an amendment and restatement of the First Hawaiian, Inc. 2016 Non-Employee Director Plan principally to increase the total number of shares of common stock that may be awarded under that plan by 193,941 shares. We have granted awards covering 3,335,948 shares of our common stock under these plans as of December 31, 2023.
In April 2021, our stockholders approved an amendment and restatement of the First Hawaiian, Inc. 2016 Non-Employee Director Plan principally to increase the total number of shares of common stock that may be awarded under that plan by 193,941 shares. We have granted awards covering 4,063,680 shares of our common stock under these plans as of December 31, 2024.
Because of the uncertainty of estimates involved in these matters, we may be required to do one or more of the following: significantly increase the allowance for credit losses or sustain credit losses that are significantly higher than the reserve provided; record an impairment on all or a portion of our goodwill balance; reduce the carrying value of an asset measured at fair value; or significantly increase our accrued tax liability.
Because of the uncertainty of estimates involved in these matters, we may be required to do one or more of the following: significantly increase the allowance for credit losses or sustain credit losses that are significantly higher than the reserve provided; reduce the carrying value of an asset measured at fair value; or significantly increase our accrued tax liability.
A further downgrade, or a downgrade by other rating agencies, as well as sovereign debt issues facing the governments of other countries, could have a material adverse impact on financial markets and economic conditions in the U.S. and worldwide. ​ A sustained period of high inflation could pose a risk to the economy and the financial performance of the Bank. ​ In recent periods, the increase in inflationary conditions accelerated due to, among other factors, global supply chain disruptions, changes in the labor market and geopolitical tensions.
A further downgrade, or downgrades by other rating agencies, as well as sovereign debt issues facing the governments of other countries, could have a material adverse impact on financial markets and economic conditions in the U.S. and worldwide. ​ Inflationary pressure could pose a risk to the economy and the financial performance of the Bank. ​ In recent periods, there have been significant changes in inflationary conditions due to, among other factors, global supply chain disruptions, changes in the labor market and geopolitical tensions.
We accept deposits directly from consumer and commercial customers and, as of December 31, 2023, we had $21.3 billion in deposits.
We accept deposits directly from consumer and commercial customers and, as of December 31, 2024, we had $20.3 billion in deposits.
Members of Congress and the leadership of the OCC and CFPB have expressed a heightened interest in bank overdraft protection programs. On January 17, 2024, the CFPB proposed a rule that would significantly reform the regulatory framework governing overdraft practices applicable to banks such as FHB that have more than $10 billion in assets.
Members of Congress and the leadership of the OCC and CFPB have expressed a heightened interest in bank overdraft protection programs. On December 12, 2024, the CFPB finalized a rule that significantly reforms the regulatory framework governing overdraft practices applicable to banks such as FHB that have more than $10 billion in assets.
In particular, we anticipate increased regulatory scrutiny, in the course of routine examinations and otherwise, and new regulations in response to recent negative developments in the banking industry, which may increase our cost of doing business and reduce our profitability.
In addition, we face significant regulatory scrutiny, in the course of routine examinations and otherwise, and new regulations in response to negative developments in the banking industry, which may increase our cost of doing business and reduce our profitability.
Consistent with industry trends, we may face an increasing number of attempted cyberattacks as we expand our mobile and other internet-based products and services, and we provide more of these services to a greater number of individual customers. The increased use of mobile and cloud technologies can heighten these and other operational risks.
Consistent with industry trends, we may face an increasing number of attempted cyberattacks as we expand our mobile and other internet-based products and services, and we provide more of these services to a greater number of individual customers.
As of February 9, 2024 we had a total of 127,622,503 shares of common stock outstanding. ​ We have filed a registration statement to register 6,253,385 shares of our common stock for issuance pursuant to awards granted under the equity incentive and employee stock purchase plans.
As of February 14, 2025 we had a total of 126,422,898 shares of common stock outstanding. ​ We have filed a registration statement to register 6,253,385 shares of our common stock for issuance pursuant to awards granted under the equity incentive and employee stock purchase plans.
Some of our clients may have been affected by these breaches, which increase their risks of identity theft, credit card fraud and other fraudulent activity that could involve their accounts with us. We are regularly the target of attempted electronic fraudulent activity, security breaches and cybersecurity-related attacks.
Some of our clients may have been affected by these breaches, which increase their risks of identity theft, credit card fraud and other fraudulent activity that could involve their accounts with us. Like other U.S. financial services companies, we have been and expect to continue to be the target of attempted electronic fraudulent activity, security breaches and cybersecurity-related attacks.
Climate changes presents multi-faceted risks, including (i) operational risk from the physical effects of climate events on our facilities and other assets as well as those of our customers; (ii) credit risk from borrowers with significant exposure to climate risk; and (iii) reputational risk from stakeholder concerns about our practices related to climate change, our carbon footprint and our business relationships with customers who operate in carbon-intensive industries. ​ For instance, climate change exposes us and our customers to physical risk as its effects may lead to more frequent and more extreme weather events, such as prolonged droughts or flooding, tornados, hurricanes, wildfires and extreme seasonal weather; and longer-term shifts, such as increasing average temperatures, ozone depletion and rising sea levels.
Climate change presents multi-faceted risks, including (i) operational risk from the physical effects of climate events on our facilities and other assets as well as those of our customers; (ii) credit risk from borrowers with significant exposure to climate risk; (iii) legal, regulatory and compliance risks arising from the policy, legal and regulatory changes associated with the transition to a less carbon-dependent economy; and (iv) reputational risk from stakeholder concerns about our practices related to climate change, our carbon footprint and our decision to change or continue to maintain our business relationships with customers who operate in carbon-intensive industries, and from negative public opinion related to any of our actions or inaction in response to climate change and our climate change strategy. ​ 39 Table of Contents For instance, climate change exposes us and our customers to physical risk as its effects may lead to more frequent and more extreme weather events, such as prolonged droughts or flooding, tornados, hurricanes, wildfires and extreme seasonal weather; and longer-term shifts, such as increasing average temperatures, ozone depletion and rising sea levels.
The Federal Reserve raised benchmark interest rates throughout 2022 and 2023 and may continue to raise interest rates, or maintain them at elevated levels by recent historical standards, in response to economic conditions, particularly inflationary pressures. When interest rates are increasing, we can generally be expected to earn higher net interest income.
The Federal Reserve may further raise or lower interest rates, or maintain them at elevated levels by recent historical standards, in response to economic conditions, particularly inflationary pressures and unemployment statistics. When interest rates rise, such as during 2022 and 2023, we can generally be expected to earn higher net interest income.
Other regulation has reduced the regulatory burden of large bank holding companies, and raised the asset thresholds at which more onerous requirements apply, which could cause certain large bank holding companies with less than $250 billion in total consolidated assets, which were previously subject to more stringent enhanced prudential standards, to become more competitive or to pursue expansion more aggressively. ​ 37 Table of Contents Our use of third-party vendors and our other ongoing third-party business relationships are subject to increasing regulatory requirements and attention. ​ We regularly use third-party vendors as part of our business.
Other regulation has reduced the regulatory burden of large bank holding companies, and raised the asset thresholds at which more onerous requirements apply, which could cause certain large bank holding companies with less than $250 billion in total consolidated assets, which were previously subject to more stringent enhanced prudential standards, to become more competitive or to pursue expansion more aggressively.
If adopted as proposed, the proposed rule would likely result in decreased revenue from overdraft transaction fees for FHB. See “Item 1. Business — Supervision and Regulation — Consumer Financial Protection” herein for more information about this proposed rule.
The rule will become effective on October 1, 2025. The new rule will likely result in decreased revenue from overdraft transaction fees for FHB. See “Item 1. Business — Supervision and Regulation — Consumer Financial Protection” herein for more information about this rule.
Finally, higher rates could result in deposit outflows or higher deposit costs. ​ Our business is significantly dependent on the real estate markets in which we operate, as a significant percentage of our loan portfolio is secured by real estate. ​ As of December 31, 2023, our real estate loans represented approximately $10.7 billion, or 75% of our total loan and lease portfolio.
These inflationary pressures could adversely impact our business, financial position and results of operations. ​ Our business is significantly dependent on the real estate markets in which we operate, as a significant percentage of our loan portfolio is secured by real estate. ​ As of December 31, 2024, our real estate loans represented approximately $10.7 billion, or 74% of our total loan and lease portfolio.
Cuts to defense and other security spending could have an adverse impact on the economy in our markets. ​ Other economic conditions that affect our financial performance include short-term and long-term interest rates, the prevailing yield curve, inflation and price levels (particularly for real estate), monetary policy, unemployment and the strength of the domestic economy as a whole.
The recent change in U.S. presidential administration contributes to uncertainty concerning the future direction and spending of the U.S. government. ​ Other economic conditions that affect our financial performance include short-term and long-term interest rates, the prevailing yield curve, inflation and price levels (particularly for real estate), monetary policy, unemployment and the strength of the domestic economy as a whole.
Federal and state bank regulators also have focused heavily on compliance with Bank Secrecy Act and anti-money laundering regulations in recent years. Failure to comply with these regulations could result in fines or sanctions, including restrictions on conducting acquisitions or establishing new branches, significant reputational harm and increased exposure to civil litigation.
Failure to comply with these regulations could result in fines or sanctions, including restrictions on conducting acquisitions or establishing new branches, significant reputational harm and increased exposure to civil litigation.
Any future changes in federal and state law and regulations, as well as the interpretations and implementations, or modifications or repeals, of such laws and regulations, could affect us in substantial and unpredictable ways, including those listed above or other ways that could have a material adverse effect on our business, financial condition or results of operations. 33 Table of Contents ​ Fee revenues from overdraft protection programs constitute a portion of our noninterest income and may be subject to increased supervisory scrutiny. ​ Revenues derived from transaction fees associated with overdraft protection programs offered to our customers are included in noninterest income.
Any of the foregoing could have a material adverse effect on our business, financial condition or results of operations. ​ Fee revenues from overdraft protection programs constitute a portion of our noninterest income and may be subject to increased supervisory scrutiny. ​ Revenues derived from transaction fees associated with overdraft protection programs offered to our customers are included in noninterest income.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeThe Senior Vice President – Enterprise Information Security has more than 20 years of information security risk management experience, including serving as a bank CISO, and has bachelor’s and master’s degrees and holds the CISSP certification. ​ The CISO is responsible for developing and implementing the Company’s cybersecurity and information security program, reporting on cybersecurity matters to the Board and senior management, ensuring compliance with standards, remediating known risks, overseeing incident detection and response and leading the employee cybersecurity awareness training program.
Biggest changeThe Senior Vice President – Enterprise Information Security has more than 30 years of experience at the Company and held various information technology and information security risk management roles, including serving as a bank information security officer, and has a bachelor’s degree and security certification. ​ The CISO is responsible for developing and implementing the Company’s cybersecurity and information security program, reporting on cybersecurity matters to the Board and senior management, ensuring compliance with standards, remediating known risks, overseeing incident detection and response and leading the employee cybersecurity awareness training program.
The CISO facilitates communication across business lines to support effective and consistent information security risk identification and control infrastructure, maintaining an ongoing dialogue regarding emerging or potential cybersecurity risks, receiving updates on significant developments in the cybersecurity domain and ensuring that the Board’s oversight is proactive and responsive. ​ The CISO, Senior Vice President – Enterprise Information Security, and Vice President – Cyber Risk Governance regularly inform the Chief Executive Officer, the Chief Operating Officer, the Chief Risk Officer, the Chief Information Officer, the Chief Technology Officer, and the Chief Audit Officer of all concerns related to cybersecurity risks and incidents, including the status of projects to strengthen our information security systems, assessments of the information security program and the emerging threat landscape.
The CISO facilitates communication across business lines to support effective and consistent information security risk identification and control infrastructure, maintaining an ongoing dialogue regarding emerging or potential cybersecurity risks, receiving updates on significant developments in the cybersecurity domain and ensuring that the Board’s oversight is proactive and responsive. ​ The CISO, Senior Vice President – Enterprise Information Security, and Vice President – Cyber Risk Governance regularly inform the Chief Executive Officer, the Chief Operating Officer, the Chief Risk Officer, the Chief Information Officer, the Chief Technology Officer, the Chief Compliance Officer, and the Chief Audit Officer of all concerns related to cybersecurity risks and incidents, including the status of projects to strengthen our information security systems, assessments of the information security program and the emerging threat landscape.
Furthermore, significant cybersecurity matters and strategic risk management decisions are escalated to the Company’s Board of Directors, ensuring that they have comprehensive information and can provide oversight with respect to critical cybersecurity issues. ​ 44 Table of Contents Monitoring Cybersecurity Incidents ​ In addition to the monitoring and reporting described above, the Company maintains an Enterprise Information Security Response Program, which includes regular monitoring of information systems through deployment of security controls designed to detect and identify threats and sets forth immediate actions to mitigate the impact of cybersecurity incidents.
Furthermore, significant cybersecurity matters and strategic risk management decisions are escalated to the Company’s Board of Directors, ensuring that they have comprehensive information and can provide oversight with respect to critical cybersecurity issues. ​ Monitoring Cybersecurity Incidents ​ In addition to the monitoring and reporting described above, the Company maintains an Enterprise Information Security Response Program, which includes regular monitoring of information systems through deployment of security controls designed to detect and identify threats and sets forth immediate actions to mitigate the impact of cybersecurity incidents.
The Risk Committee actively participates in strategic decisions related to cybersecurity, offering review and guidance on, among other things, program design, the Company’s cybersecurity risk profile and the effectiveness of its risk management strategies. 43 Table of Contents ​ The Board Risk Committee reviews and receives regular briefings from the Chief Information Officer, Chief Information Security Officer (the “CISO”), Chief Technology Officer, Chief Operating Officer, Chief Risk Officer, Senior Vice President – Enterprise Information Security, Chief Audit Officer, and Chief Executive Officer on information security and technology risks, including discussions of the Company’s information security and cybersecurity risk management programs.
The Risk Committee actively participates in strategic decisions related to cybersecurity, offering review and guidance on, among other things, program design, the Company’s cybersecurity risk profile and the effectiveness of its risk management strategies. ​ The Board Risk Committee reviews and receives regular briefings from the Chief Information Officer, Chief Information Security Officer (the “CISO”), Chief Technology Officer, Chief Operating Officer, Chief Risk Officer, Senior Vice President – Enterprise Information Security, Chief Audit Officer, and Chief Executive Officer on information security and technology risks, including discussions of the Company’s information security and cybersecurity risk management programs.
The Senior Vice President – Enterprise Information Security provides regular updates to senior management and the Board’s Risk Committee regarding the effectiveness of security controls and the state of the Company’s cybersecurity program and risk level. ​ The Bank maintains a three lines of defense structure with the Cybersecurity Division as the primary security control owner, Enterprise Information Security providing review, assessment and challenge of risk management policies and processes, and an Internal Audit team providing independent review of the first and second lines of defense.
The Senior Vice President – Enterprise Information Security provides regular updates to senior management and the Board’s Risk Committee regarding the effectiveness of security controls and the state of the Company’s cybersecurity program and risk level. ​ 44 Table of Contents The Bank maintains a three lines of defense structure with the Cybersecurity Division as the primary security control owner, Enterprise Information Security providing review, assessment and challenge of risk management policies and processes, and an Internal Audit team providing independent review of the first and second lines of defense.
CYBERSECURITY ​ Risk Management and Strategy ​ The Company recognizes the critical importance of developing, implementing and maintaining robust cybersecurity measures to safeguard our information systems and protect the confidentiality, integrity, and availability of our data. ​ Managing Material Risks and Integrated Overall Risk Management ​ The Company has implemented a risk-based approach to identify and assess the cybersecurity threats that could affect our business and information systems.
CYBERSECURITY ​ Risk Management and Strategy ​ The Company recognizes the critical importance of developing, implementing and maintaining robust cybersecurity measures to safeguard our information systems and protect the confidentiality, integrity, and availability of our data. ​ 42 Table of Contents Managing Material Risks and Integrated Overall Risk Management ​ The Company has implemented a risk-based approach to identify and assess the cybersecurity threats that could affect our business and information systems.
Policies and standards are subject to an internal review process and are approved by senior management. ​ 42 Table of Contents The Company has strategically integrated cybersecurity risk management into our enterprise-wide risk management framework in alignment with the three lines of defense model to promote an enterprise-wide culture of cybersecurity risk management.
Policies and standards are subject to an internal review process and are approved by senior management. ​ The Company has strategically integrated cybersecurity risk management into our enterprise-wide risk management framework in alignment with the three lines of defense model to promote an enterprise-wide culture of cybersecurity risk management.
Risk Factors” in this Form 10-K for further information about information and cybersecurity risk. ​ Governance ​ The Company’s Board of Directors is aware of the critical nature of managing risks associated with cybersecurity threats and the significance of these threats to our operational integrity and stakeholder confidence.
Risk Factors” in this Form 10-K for further information about information and cybersecurity risk. ​ 43 Table of Contents Governance ​ The Company’s Board of Directors is aware of the critical nature of managing risks associated with cybersecurity threats and the significance of these threats to our operational integrity and stakeholder confidence.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeITEM 2. PROPERTIES ​ Our corporate headquarters and main branch are located at 999 Bishop Street, Honolulu, Hawaii 96813. Inclusive of our main branch, we operated 50 branch offices located on the islands of Oahu, Maui, Hawaii, Kauai, Lanai, Guam and Saipan as of December 31, 2023.
Biggest changeITEM 2. PROPERTIES ​ Our corporate headquarters and main branch are located at 999 Bishop Street, Honolulu, Hawaii 96813. Inclusive of our main branch, we operated 48 branch offices located on the islands of Oahu, Maui, Hawaii, Kauai, Guam and Saipan as of December 31, 2024.
We lease 30 of our branch offices and own the remainder of our offices, including our corporate headquarters and main branch which is located in the First Hawaiian Center. We believe our current facilities are adequate to meet our needs; however, we have closed and may close branches in certain circumstances. ​
We lease 29 of our branch offices and own the remainder of our offices, including our corporate headquarters and main branch which is located in the First Hawaiian Center. We believe our current facilities are adequate to meet our needs; however, we have closed and may close branches in certain circumstances. ​

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeCommitments and Contingent Liabilities” in the notes to the consolidated financial statements included in Item 8. Financial Statements and Supplementary Data. ​ ITEM 4. MINE SAFETY DISCLOSURES ​ Not applicable. ​ ​ 45 Table of Contents PART II ​
Biggest changeCommitments and Contingent Liabilities” in the notes to the consolidated financial statements included in Item 8. Financial Statements and Supplementary Data. ​ ITEM 4. MINE SAFETY DISCLOSURES ​ Not applicable. ​ ​ 45 Table of Contents

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

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Biggest changeItem 4. Mine Safety Disclosures 45 Part II Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 46 ​ Item 6. ​ Reserved 47 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 48 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 92 Item 8.
Biggest changeItem 4. Mine Safety Disclosures 45 Part II Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 46 ​ Item 6. ​ Reserved 47 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 48 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 91 Item 8.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeCommon Stock ​ $ 100 ​ $ 133 ​ $ 115 ​ $ 138 ​ $ 137 ​ $ 127 S&P 500 Index ​ ​ 100 ​ ​ 131 ​ ​ 156 ​ ​ 200 ​ ​ 164 ​ ​ 207 KBW Regional Banking Index ​ ​ 100 ​ ​ 124 ​ ​ 113 ​ ​ 155 ​ ​ 144 ​ ​ 143 ​ ​ The stock performance depicted in the graph above should not be relied upon as indicative of future performance. ​
Biggest changeCommon Stock ​ $ 100 ​ $ 86 ​ $ 104 ​ $ 103 ​ $ 95 ​ $ 113 S&P 500 Index ​ ​ 100 ​ ​ 118 ​ ​ 152 ​ ​ 125 ​ ​ 158 ​ ​ 197 KBW Regional Banking Index ​ ​ 100 ​ ​ 91 ​ ​ 125 ​ ​ 116 ​ ​ 116 ​ ​ 131 ​ ​ The stock performance depicted in the graph above should not be relied upon as indicative of future performance. ​
The cumulative total return on each investment is as of December 31 of each subsequent five years and assumes reinvestment of dividends. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2018 ​ 2019 ​ 2020 ​ 2021 ​ 2022 ​ 2023 First Hawaiian, Inc.
The cumulative total return on each investment is as of December 31 of each subsequent five years and assumes reinvestment of dividends. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2019 ​ 2020 ​ 2021 ​ 2022 ​ 2023 ​ 2024 First Hawaiian, Inc.
The graph assumes that $100 was invested at the closing price on December 31, 2018, in our common stock, the S&P 500 Index and the KRX.
The graph assumes that $100 was invested at the closing price on December 31, 2019, in our common stock, the S&P 500 Index and the KRX.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES ​ FHI’s common stock is listed on the NASDAQ under the symbol “FHB” and is quoted daily in leading financial publications. ​ As of February 9, 2024, there were 20 common registered shareholders of record.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES ​ FHI’s common stock is listed on the NASDAQ under the symbol “FHB” and is quoted daily in leading financial publications. ​ As of February 14, 2025, there were 22 common registered shareholders of record.
Removed
These holdings are considered to be held in “street name” through a bank, broker, or other intermediary and in the aggregate, are registered as a single shareholder of record. ​ Purchases of Equity Securities by the Issuer ​ There were no purchases of shares of the Company’s common stock made by or on behalf of us or any “affiliated purchaser” (as defined in Rule 10b-18(a)(3) under the Securities Exchange Act of 1934) during the three months ended December 31, 2023. ​ On January 24, 2024, the Company’s Board of Directors adopted a stock repurchase program for up to $40 million of its outstanding common stock during 2024.
Added
These holdings are considered to be held in “street name” through a bank, broker, or other intermediary and in the aggregate, are registered as a single shareholder of record. ​ Purchases of Equity Securities by the Issuer ​ The following table provides certain information with respect to our purchases of shares of the Company’s common stock during the three months ended December 31, 2024: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Issuer Purchases of Equity Securities ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total Number of ​ Approximate Dollar ​ ​ ​ ​ ​ ​ ​ Shares Purchased ​ Value of Shares ​ ​ Total Number ​ Average ​ as Part of Publicly ​ that May Yet Be ​ ​ of Shares ​ Price Paid ​ Announced Plans or ​ Purchased Under the Period ​ Purchased 1 ​ per Share ​ Programs 2 ​ Plans or Programs 2 October 1, 2024 through October 31, 2024 ​ - ​ $ - ​ - ​ $ 40,000,000 November 1, 2024 through November 30, 2024 ​ 735,063 ​ ​ 27.00 ​ 732,282 ​ ​ 20,222,090 December 1, 2024 through December 31, 2024 ​ 741,462 ​ ​ 27.28 ​ 741,294 ​ ​ - Total ​ 1,476,525 ​ $ 27.14 ​ 1,473,576 ​ ​ ​ (1) Includes 2,949 shares acquired from employees to satisfy income tax withholding requirements in connection with vested share awards during three months ended December 31, 2024.
Added
(2) On January 24, 2024, the Company announced a stock repurchase program for up to $40 million of its outstanding common stock during 2024. On December 31, 2024, the stock repurchase program for 2024 expired with nil remaining of the $40 million repurchase amount authorized.
Added
On January 29, 2025, the Company announced a stock repurchase program for up to $100 million of its outstanding common stock during 2025.

Item 7. Management's Discussion & Analysis

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

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Biggest changeTable 12 presents the recorded investment in our loan and lease portfolio as of December 31, 2023: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Loans and Leases by Rate Type ​ ​ ​ ​ Table 12 ​ ​ December 31, 2023 ​ ​ ​ ​ ​ ​ Adjustable Rate ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Hybrid ​ Fixed ​ ​ ​ ​ (dollars in thousands) Treasury LIBOR BSBY Prime SOFR (1) Other Total Rate Rate Total ​ Commercial and industrial ​ $ — ​ $ — ​ $ 40,636 ​ $ 289,544 ​ $ 885,392 ​ $ 640,555 ​ $ 1,856,127 ​ $ 24,153 ​ $ 285,069 ​ $ 2,165,349 ​ Commercial real estate ​ ​ — ​ ​ — ​ ​ 84,935 ​ ​ 483,260 ​ ​ 2,384,924 ​ ​ 904,599 ​ ​ 3,857,718 ​ ​ 145,953 ​ ​ 336,572 ​ ​ 4,340,243 ​ Construction ​ ​ 9 ​ ​ — ​ ​ 26,298 ​ ​ 96,807 ​ ​ 603,457 ​ ​ 14,395 ​ ​ 740,966 ​ ​ 5,173 ​ ​ 154,153 ​ ​ 900,292 ​ Residential: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Residential mortgage ​ ​ 6,033 ​ ​ 86,461 ​ ​ — ​ ​ 11,542 ​ ​ 147,441 ​ ​ 71,514 ​ ​ 322,991 ​ ​ 552,275 ​ ​ 3,408,049 ​ ​ 4,283,315 ​ Home equity line ​ ​ 91 ​ ​ — ​ ​ — ​ ​ 534 ​ ​ — ​ ​ — ​ ​ 625 ​ ​ 920,577 ​ ​ 253,386 ​ ​ 1,174,588 ​ Total residential ​ ​ 6,124 ​ ​ 86,461 ​ ​ — ​ ​ 12,076 ​ ​ 147,441 ​ ​ 71,514 ​ ​ 323,616 ​ ​ 1,472,852 ​ ​ 3,661,435 ​ ​ 5,457,903 ​ Consumer ​ ​ 1,020 ​ ​ — ​ ​ 50 ​ ​ 337,088 ​ ​ — ​ ​ 1,134 ​ ​ 339,292 ​ ​ 729 ​ ​ 769,880 ​ ​ 1,109,901 ​ Lease financing ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 379,809 ​ ​ 379,809 ​ Total loans and leases ​ $ 7,153 ​ $ 86,461 ​ $ 151,919 ​ $ 1,218,775 ​ $ 4,021,214 ​ $ 1,632,197 ​ $ 7,117,719 ​ $ 1,648,860 ​ $ 5,586,918 ​ $ 14,353,497 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ % by rate type at December 31, 2023 ​ ​ 1 % ​ 1 % ​ 1 % ​ 8 % ​ 28 % ​ 11 % ​ 50 % ​ 11 % ​ 39 % ​ 100 % (1) Includes $3.3 billion in CME Term SOFR loans. ​ Tables 13 and 14 present the geographic distribution of our loan and lease portfolio as of December 31, 2023 and 2022: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Geographic Distribution of Loan and Lease Portfolio ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Table 13 ​ ​ December 31, 2023 ​ ​ ​ ​ ​ U.S. ​ Guam & ​ Foreign & ​ ​ ​ (dollars in thousands) Hawaii Mainland (1) Saipan Other Total Commercial and industrial ​ $ 862,698 ​ $ 1,179,343 ​ $ 97,416 ​ $ 25,892 ​ $ 2,165,349 Commercial real estate ​ ​ 2,353,847 ​ ​ 1,599,984 ​ ​ 386,412 ​ ​ — ​ ​ 4,340,243 Construction ​ ​ 392,328 ​ ​ 459,314 ​ ​ 48,650 ​ ​ — ​ ​ 900,292 Residential: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Residential mortgage ​ ​ 4,134,062 ​ ​ 2,682 ​ ​ 146,571 ​ ​ — ​ ​ 4,283,315 Home equity line ​ ​ 1,130,999 ​ ​ 313 ​ ​ 43,276 ​ ​ — ​ ​ 1,174,588 Total residential ​ ​ 5,265,061 ​ ​ 2,995 ​ ​ 189,847 ​ ​ — ​ ​ 5,457,903 Consumer ​ ​ 761,328 ​ ​ 38,577 ​ ​ 307,358 ​ ​ 2,638 ​ ​ 1,109,901 Lease financing ​ ​ 171,629 ​ ​ 193,740 ​ ​ 14,440 ​ ​ — ​ ​ 379,809 Total Loans and Leases ​ $ 9,806,891 ​ $ 3,473,953 ​ $ 1,044,123 ​ $ 28,530 ​ $ 14,353,497 Percentage of Total Loans and Leases ​ ​ 68% ​ ​ 24% ​ ​ 7% ​ ​ 1% ​ ​ 100% (2) For secured loans and leases, classification as U.S.
Biggest changeMainland is made based on the location where the majority of the borrower's business operations are conducted. ​ 73 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Geographic Distribution of Loan and Lease Portfolio ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Table 14 ​ ​ December 31, 2023 ​ ​ ​ ​ ​ U.S. ​ Guam & ​ Foreign & ​ ​ ​ (dollars in thousands) Hawaii Mainland (1) Saipan Other Total Commercial and industrial ​ $ 862,698 ​ $ 1,179,343 ​ $ 97,416 ​ $ 25,892 ​ $ 2,165,349 Commercial real estate ​ ​ 2,353,847 ​ ​ 1,599,984 ​ ​ 386,412 ​ ​ — ​ ​ 4,340,243 Construction ​ ​ 392,328 ​ ​ 459,314 ​ ​ 48,650 ​ ​ — ​ ​ 900,292 Residential: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Residential mortgage ​ ​ 4,134,062 ​ ​ 2,682 ​ ​ 146,571 ​ ​ — ​ ​ 4,283,315 Home equity line ​ ​ 1,130,999 ​ ​ 313 ​ ​ 43,276 ​ ​ — ​ ​ 1,174,588 Total residential ​ ​ 5,265,061 ​ ​ 2,995 ​ ​ 189,847 ​ ​ — ​ ​ 5,457,903 Consumer ​ ​ 761,328 ​ ​ 38,577 ​ ​ 307,358 ​ ​ 2,638 ​ ​ 1,109,901 Lease financing ​ ​ 171,629 ​ ​ 193,740 ​ ​ 14,440 ​ ​ — ​ ​ 379,809 Total Loans and Leases ​ $ 9,806,891 ​ $ 3,473,953 ​ $ 1,044,123 ​ $ 28,530 ​ $ 14,353,497 Percentage of Total Loans and Leases ​ ​ 68% ​ ​ 24% ​ ​ 7% ​ ​ 1% ​ ​ 100% (1) For secured loans and leases, classification as U.S.
Our net interest margin was 2.92% for the year ended December 31, 2023, an increase of 14 basis points as compared to 2022.
Our net interest margin was 2.92% for the year ended December 31, 2023, an increase of 14 basis points as compared to 2022.
Benefit Plans” in the notes to the consolidated financial statements included in Item 8.
Benefit Plans” in the notes to the consolidated financial statements included in Item 8.
Financial Statements and Supplementary Data and the discussion in “Analysis of Financial Condition — Allowance for Credit Losses” of this MD&A for more information on our loan and lease portfolio. ​ 72 Table of Contents The Company’s loan and lease portfolio includes adjustable-rate loans, primarily tied to SOFR and Prime, hybrid rate loans, for which the initial rate is fixed for a period from one year to as much as ten years, and fixed rate loans, for which the interest rate does not change through the life of the loan or the remaining life of the loan.
Financial Statements and Supplementary Data and the discussion in “Analysis of Financial Condition — Allowance for Credit Losses” of this MD&A for more information on our loan and lease portfolio. ​ 72 Table of Contents The Company’s loan and lease portfolio includes adjustable-rate loans, primarily tied to CME Term SOFR, Prime and SOFR, hybrid rate loans, for which the initial rate is fixed for a period from one year to as much as ten years, and fixed rate loans, for which the interest rate does not change through the life of the loan or the remaining life of the loan.
Our Commercial Banking segment includes our corporate banking related products, residential and commercial real estate loans, commercial lease financing, secured and unsecured lines of credit, automobile loans and auto dealer financing, business deposit products and credit cards.
Our Commercial Banking segment includes our corporate banking related products, commercial real estate loans, commercial lease financing, secured and unsecured lines of credit, automobile loans and auto dealer financing, business deposit products and credit cards.
Net charge-offs in our consumer portfolio segment include those related to credit card, automobile loans, installment loans and small business lines of credit and reflect the inherent risk associated with these loans. ​ Although we determine the amount of each component of the ACL separately, the ACL as a whole was considered appropriate by management as of December 31, 2023 and 2022.
Net charge-offs in our consumer portfolio segment include those related to credit card, automobile loans, installment loans and small business lines of credit and reflect the inherent risk associated with these loans. ​ Although we determine the amount of each component of the ACL separately, the ACL as a whole was considered appropriate by management as of December 31, 2024 and 2023.
We evaluate the sensitivity by using a static forecast, where the balance sheets as of December 31, 2023 and 2022 are held constant. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net Interest Income Sensitivity Profile - Estimated Percentage Change Over 12 Months ​ ​ Table 25 ​ ​ ​ Static Forecast ​ ​ Static Forecast ​ ​ ​ December 31, 2023 ​ December 31, 2022 ​ Gradual Change in Interest Rates (basis points) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ +100 ​ ​ ​ ​ 1.9 % ​ ​ ​ 3.2 % +50 ​ ​ ​ ​ 1.0 ​ ​ ​ ​ 1.6 ​ (50) ​ ​ ​ ​ (1.0) ​ ​ ​ ​ (1.7) ​ (100) ​ ​ ​ ​ (2.1) ​ ​ ​ ​ (3.4) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Immediate Change in Interest Rates (basis points) ​ ​ ​ ​ ​ ​ ​ ​ ​ +100 ​ ​ ​ ​ 3.6 % ​ ​ ​ 5.8 % +50 ​ ​ ​ ​ 1.8 ​ ​ ​ ​ 2.9 ​ (50) ​ ​ ​ ​ (2.0) ​ ​ ​ ​ (3.1) ​ (100) ​ ​ ​ ​ (4.0) ​ ​ ​ ​ (6.3) ​ ​ The table above shows the effects of a simulation which estimates the effect of a gradual and immediate sustained parallel shift in the yield curve of −100, −50, +50 and +100 basis points in market interest rates over a twelve-month period on our net interest income. ​ Currently, our interest rate profile, assuming a constant balance sheet, is such that we project net interest income will benefit from higher interest rates as our assets would reprice faster and to a greater degree than our liabilities, while in the case of lower interest rates, our assets would reprice downward and to a greater degree than our liabilities.
We evaluate the sensitivity by using a static forecast, where the balance sheets as of December 31, 2024 and 2023 are held constant. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net Interest Income Sensitivity Profile - Estimated Percentage Change Over 12 Months ​ ​ Table 25 ​ ​ ​ Static Forecast ​ ​ Static Forecast ​ ​ ​ December 31, 2024 ​ December 31, 2023 ​ Gradual Change in Interest Rates (basis points) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ +200 ​ ​ ​ ​ 3.1 % ​ ​ ​ 3.8 % +100 ​ ​ ​ ​ 1.6 ​ ​ ​ ​ 1.9 ​ +50 ​ ​ ​ ​ 0.8 ​ ​ ​ ​ 1.0 ​ (50) ​ ​ ​ ​ (0.8) ​ ​ ​ ​ (1.0) ​ (100) ​ ​ ​ ​ (1.6) ​ ​ ​ ​ (2.1) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Immediate Change in Interest Rates (basis points) ​ ​ ​ ​ ​ ​ ​ ​ ​ +200 ​ ​ ​ ​ 6.2 % ​ ​ ​ 7.3 % +100 ​ ​ ​ ​ 3.2 ​ ​ ​ ​ 3.6 ​ +50 ​ ​ ​ ​ 1.6 ​ ​ ​ ​ 1.8 ​ (50) ​ ​ ​ ​ (1.6) ​ ​ ​ ​ (2.0) ​ (100) ​ ​ ​ ​ (3.3) ​ ​ ​ ​ (4.0) ​ ​ The table above shows the effects of a simulation which estimates the effect of a gradual and immediate sustained parallel shift in the yield curve of −100, −50, +50, +100 and +200 basis points in market interest rates over a twelve-month period on our net interest income. ​ Currently, our interest rate profile, assuming a constant balance sheet, is such that we project net interest income will benefit from higher interest rates as our assets would reprice faster and to a greater degree than our liabilities, while in the case of lower interest rates, our assets would reprice downward and to a greater degree than our liabilities.
This increase was primarily due to a $7.9 million gain on the sale of a bank property in 2023, a $2.5 million increase in income due to adjustments to certain liabilities assumed as a result of the Reorganization Transactions, a $2.4 million increase in market adjustments on mutual funds purchased, a $1.5 million increase in volume-based incentives and a $0.9 million increase in net mortgage servicing rights income.
This increase was primarily due to the $7.9 million gain on the sale of a bank property in 2023 mentioned previously, a $2.5 million increase in income due to adjustments to certain liabilities assumed as a result of the Reorganization Transactions, a $2.4 million increase in market adjustments on mutual funds purchased, a $1.5 million increase in volume-based incentives and a $0.9 million increase in net mortgage servicing rights income.
The increase in noninterest income was primarily due to increases in BOLI income, a gain on the sale of a bank property in 2023, market adjustments on mutual funds purchased, income due to adjustments to certain liabilities assumed as a result of the Reorganization Transactions and net gains on the sale of investment securities, partially offset by an increase in net losses recognized in income related to derivative contracts.
The increase in noninterest income was primarily due to increases in BOLI income, a gain on the sale of a bank property in 2023 mentioned previously, market adjustments on mutual funds purchased, income due to adjustments to certain liabilities assumed as a result of the Reorganization Transactions and net gains on the sale of investment securities, partially offset by an increase in net losses recognized in income related to derivative contracts.
Financial Statements and Supplementary Data for more information on our financial instruments with off-balance sheet risk. ​ Investment Securities ​ Table 9 presents the estimated fair value of our available-for-sale investment securities portfolio and amortized cost of our held-to-maturity investment securities portfolio as of December 31, 2023 and 2022: ​ ​ ​ ​ ​ ​ ​ ​ Investment Securities ​ ​ ​ ​ ​ Table 9 ​ December 31, ​ December 31, (dollars in thousands) ​ 2023 ​ 2022 U.S.
Financial Statements and Supplementary Data for more information on our financial instruments with off-balance sheet risk. ​ Investment Securities ​ Table 9 presents the estimated fair value of our available-for-sale investment securities portfolio and amortized cost of our held-to-maturity investment securities portfolio as of December 31, 2024 and 2023: ​ ​ ​ ​ ​ ​ ​ ​ Investment Securities ​ ​ ​ ​ ​ Table 9 ​ ​ December 31, (dollars in thousands) ​ 2024 ​ 2023 U.S.
However, as of December 31, 2023, management believes that this exposure is not material due to the historical level of repurchase requests and loss trends and thus has not established a liability for losses related to mortgage loan repurchases. As of December 31, 2023, 99% of our residential mortgage loans serviced for investors were current.
However, as of December 31, 2024, management believes that this exposure is not material due to the historical level of repurchase requests and loss trends and thus has not established a liability for losses related to mortgage loan repurchases. As of December 31, 2024, 99% of our residential mortgage loans serviced for investors were current.
Thus, as interest rates change, we may use different techniques to manage interest rate risk. ​ Management uses the results of its various simulation analyses to formulate strategies to achieve a desired risk profile within the parameters of our capital and liquidity guidelines. ​ 91 Table of Contents In addition, our business relied upon a large volume of loans, derivative contracts and other financial instruments with attributes that are either directly or indirectly dependent on LIBOR to establish their interest rate and/or value.
Thus, as interest rates change, we may use different techniques to manage interest rate risk. ​ Management uses the results of its various simulation analyses to formulate strategies to achieve a desired risk profile within the parameters of our capital and liquidity guidelines. ​ In addition, our business relied upon a large volume of loans, derivative contracts and other financial instruments with attributes that are either directly or indirectly dependent on LIBOR to establish their interest rate and/or value.
A number of important factors could cause our actual results to differ materially from those indicated in these forward-looking statements, including the following: the geographic concentration of our business; current and future market and economic conditions generally or in Hawaii, Guam and Saipan in particular, including inflationary pressures and interest rate environment; our dependence on the real estate markets in which we operate; concentrated exposures to certain asset classes and individual obligors; the effect of changes in interest rates on our business, including our net interest income, net interest margin, the fair value of our investment securities, and our mortgage loan originations, mortgage servicing rights and mortgage loans held for sale; the future value of the investment securities that we own; the possibility of a deterioration in credit quality in our portfolio; the possibility we might underestimate the credit losses inherent in our loan and lease portfolio; our ability to attract and retain customer deposits; our inability to receive dividends from our bank, pay dividends to our common stockholders and satisfy obligations as they become due; our access to sources of liquidity and capital to address our liquidity needs; our ability to attract and retain skilled employees or changes in our management personnel; our ability to maintain our Bank's reputation; the failure to properly use and protect our customer and employee information and data; the possibility of employee misconduct or mistakes; the effectiveness of our risk management and internal disclosure controls and procedures; our ability to keep pace with technological changes; any failure or interruption of our information and communications systems; our ability to effectively compete with other financial services companies and the effects of competition in the financial services industry on our business; our ability to identify and address cybersecurity risks; the occurrence of fraudulent activity or effect of a material breach of, or disruption to, the security of any of our or our vendors’ systems; our ability to successfully develop and commercialize new or enhanced products and services; changes in the demand for our products and services; risks associated with the sale of loans and with our use of appraisals in valuing and monitoring loans; the possibility that actual results may differ from estimates and forecasts; fluctuations in the fair value of our assets and liabilities and off-balance sheet exposures; the effects of the failure of any component of our business infrastructure provided by a third party; the potential for environmental liability; the risk of being subject to litigation and the outcome thereof; the impact of, and changes in, applicable laws, regulations and accounting standards and policies; possible changes in trade, monetary and fiscal policies of, and other activities undertaken by, governments, agencies, central banks and similar organizations; the effects of severe weather, geopolitical instability, including war, terrorist attacks, pandemics or other severe health emergencies and man-made natural disasters; our ability to maintain consistent growth, earnings and profitability; the impact of any pandemic, epidemic or health-related crisis; our likelihood of success in, and the impact of, litigation or regulatory actions; our ability to continue to pay dividends on our common stock; contingent liabilities and unexpected tax liabilities that may be applicable to us as a result of the Reorganization Transactions; and damage to our reputation from any of the factors described above. ​ ​ 48 Table of Contents The foregoing factors should not be considered an exhaustive list and should be read together with the other cautionary statements set forth under “Item 1A.
A number of important factors could cause our actual results to differ materially from those indicated in these forward-looking statements, including the following: the geographic concentration of our business; current and future market and economic conditions generally or in Hawaii, Guam and Saipan in particular, including inflationary pressures and interest rate environment; our dependence on the real estate markets in which we operate; concentrated exposures to certain asset classes and individual obligors; the effect of changes in interest rates on our business, including our net interest income, net interest margin, the fair value of our investment securities, and our mortgage loan originations, mortgage servicing rights and mortgage loans held for sale; the future value of the investment securities that we own; the possibility of a deterioration in credit quality in our portfolio; the possibility we might underestimate the credit losses inherent in our loan and lease portfolio; our ability to attract and retain customer deposits; our inability to receive dividends from our Bank, pay dividends to our common stockholders and satisfy obligations as they become due; our access to sources of liquidity and capital to address our liquidity needs; our ability to attract and retain skilled employees or changes in our management personnel; our ability to maintain our Bank's reputation; the failure to properly use and protect our customer and employee information and data; the possibility of employee misconduct or mistakes; the actual or perceived soundness of other financial institutions; the effectiveness of our risk management and internal disclosure controls and procedures; our ability to keep pace with technological changes; any failure or interruption of our information and communications systems; our ability to effectively compete with other financial services companies and the effects of competition in the financial services industry on our business; our ability to identify and address cybersecurity risks; the occurrence of fraudulent activity or effect of a material breach of, or disruption to, the security of any of our or our vendors’ systems; our ability to successfully develop and commercialize new or enhanced products and services; changes in the demand for our products and services; risks associated with the sale of loans and with our use of appraisals in valuing and monitoring loans; the possibility that actual results may differ from estimates and forecasts; fluctuations in the fair value of our assets and liabilities and off-balance sheet exposures; the effects of the failure of any component of our business infrastructure provided by a third party; the potential for environmental liability; the risk of being subject to litigation and the outcome thereof; the impact of, and changes in, applicable laws, regulations and accounting standards and policies; possible changes in trade, monetary and fiscal policies of, and other activities undertaken by, governments, agencies, central banks and similar organizations, including as a result of changes following the recent U.S. election; the effects of severe weather, geopolitical instability, including war, terrorist attacks, pandemics or other severe health emergencies and natural disasters and other external events; the potential impact of climate change; our ability to maintain consistent growth, earnings and profitability; the impact of any pandemic, epidemic or health-related crisis; our likelihood of success in, and the impact of, litigation or regulatory actions; our ability to continue to pay dividends on our common stock; contingent liabilities and unexpected tax liabilities that may be applicable to us as a result of the Reorganization Transactions; and damage to our reputation from any of the factors described above. ​ ​ 48 Table of Contents The foregoing factors should not be considered an exhaustive list and should be read together with the other cautionary statements set forth under “Item 1A.
For the years ended December 31, 2023 and 2022, we did not record any credit losses related to our available-for-sale investment securities portfolio. ​ For our held-to-maturity investment securities, we utilize the Current Expected Credit Loss (“CECL”) approach to estimate lifetime expected credit losses. Substantially all of our held-to-maturity securities are issued by the U.S.
For the years ended December 31, 2024 and 2023, we did not record any credit losses related to our available-for-sale investment securities portfolio. ​ For our held-to-maturity investment securities, we utilize the Current Expected Credit Loss (“CECL”) approach to estimate lifetime expected credit losses. Substantially all of our held-to-maturity securities are issued by the U.S.
Table 7 summarizes net income (loss) from our business segments for the years ended December 31, 2023, 2022 and 2021. Additional information about operating segment performance is presented in “Note 22. Reportable Operating Segments” in the notes to the consolidated financial statements included in Item 8.
Table 7 summarizes net income (loss) from our business segments for the years ended December 31, 2024, 2023 and 2022. Additional information about operating segment performance is presented in “Note 22. Reportable Operating Segments” in the notes to the consolidated financial statements included in Item 8.
The increase in noninterest expense was primarily due to an increase in regulatory assessment and fees, a one-time settlement expense in connection to a lawsuit against the Company, and increases in salaries and benefits expense and card rewards program expense, partially offset by lower overall expenses that were allocated to the Commercial Banking segment.
The increase in noninterest expense was primarily due to an increase in regulatory assessment and fees, a one-time settlement expense in connection to a lawsuit against the Company mentioned previously, and increases in salaries and benefits expense and card rewards program expense, partially offset by lower overall expenses that were allocated to the Commercial Banking segment.
Therefore, as of December 31, 2023 and 2022, we did not record an allowance for credit losses related to our held-to-maturity investment securities portfolio. ​ We are required to hold non-marketable equity securities, comprised of FHLB stock, as a condition of our membership in the FHLB system.
Therefore, as of December 31, 2024 and 2023, we did not record an allowance for credit losses related to our held-to-maturity investment securities portfolio. ​ We are required to hold non-marketable equity securities, comprised of FHLB stock, as a condition of our membership in the FHLB system.
Because of limitations inherent in any approach used to measure interest rate risk, simulation results are not intended as a forecast of the actual effect of a change in market interest rates on our results but rather as a means to better plan and execute appropriate asset liability management strategies to manage our interest rate risk. ​ Table 25 presents, for the twelve months subsequent to December 31, 2023 and 2022, an estimate of the changes in net interest income that would result from ramps (gradual changes) and shocks (immediate changes) in market interest rates, moving in a parallel fashion over the entire yield curve, relative to the measured base case scenario.
Because of limitations inherent in any approach used to measure interest rate risk, simulation results are not intended as a forecast of the actual effect of a change in market interest rates on our results but rather as a means to better plan and execute appropriate asset liability management strategies to manage our interest rate risk. ​ 88 Table of Contents Table 25 presents, for the twelve months subsequent to December 31, 2024 and 2023, an estimate of the changes in net interest income that would result from ramps (gradual changes) and shocks (immediate changes) in market interest rates, moving in a parallel fashion over the entire yield curve, relative to the measured base case scenario.
The FHLB borrowing capacity was secured by commercial real estate and residential real estate loan collateral as of December 31, 2023 and residential real estate loan collateral as of December 31, 2022. ​ Pension and Postretirement Plan Obligations ​ We have a qualified noncontributory defined benefit pension plan, an unfunded supplemental executive retirement plan for certain key executives (“SERP”), a directors’ retirement plan, a non-qualified pension plan for eligible directors and a postretirement benefit plan providing life insurance and healthcare benefits that we offer to our directors and employees, as applicable.
The FHLB borrowing capacity was secured by commercial real estate and residential real estate loan collateral as of both December 31, 2024 and 2023. ​ Pension and Postretirement Plan Obligations ​ We have a qualified noncontributory defined benefit pension plan, an unfunded supplemental executive retirement plan for certain key executives (“SERP”), a directors’ retirement plan, a non-qualified pension plan for eligible directors and a postretirement benefit plan providing life insurance and healthcare benefits that we offer to our directors and employees, as applicable.
The Company performed its annual assessment of the criteria included in Accounting Standards Codification Topic 350, Intangibles – Goodwill and Other , and based on such assessment, the Company concluded that there was no impairment in our goodwill for the year ended December 31, 2023.
The Company performed its annual assessment of the criteria included in Accounting Standards Codification Topic 350, Intangibles – Goodwill and Other , and based on such assessment, the Company concluded that there was no impairment in our goodwill for the year ended December 31, 2024.
Financial Statements and Supplementary Data for more information on income taxes. ​ Future Application of Accounting Pronouncements ​ For a discussion of the expected impact of accounting pronouncements recently issued but not adopted by us as of December 31, 2023, see “Note 1.
Financial Statements and Supplementary Data for more information on income taxes. ​ Future Application of Accounting Pronouncements ​ For a discussion of the expected impact of accounting pronouncements recently issued but not adopted by us as of December 31, 2024, see “Note 1.
We understand and evaluate our customers’ borrowing needs and capacity to repay, in conjunction with their character and history. ​ Management has identified three categories of loans that we use to develop our systematic methodology to determine the ACL: commercial, residential and consumer. ​ Commercial lending is further categorized into four distinct classes based on characteristics relating to the borrower, transaction and collateral.
We understand and evaluate our customers’ borrowing needs and capacity to repay, in conjunction with their character and history. ​ Management has identified three categories of loans that we use to develop our systematic methodology to determine the ACL: commercial, residential and consumer. ​ 86 Table of Contents Commercial lending is further categorized into four distinct classes based on characteristics relating to the borrower, transaction and collateral.
Financial Statements and Supplementary Data for more information on our pension and postretirement benefit plans. ​ Capital ​ The Company and the Bank are subject to the Capital Rules, which implemented the Basel Committee on Banking Supervision’s December 2010 final capital framework for strengthening international capital standards, known as Basel III, and various provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act.
Financial Statements and Supplementary Data for more information on our pension and postretirement benefit plans. ​ 80 Table of Contents Capital ​ The Company and the Bank are subject to the Capital Rules, which implemented the Basel Committee on Banking Supervision’s December 2010 final capital framework for strengthening international capital standards, known as Basel III, and various provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act.
Underwriting of new leasing arrangements typically includes analyzing customer cash flows, evaluating secondary sources of repayment, such as the value of the leased asset, the guarantors’ net cash flows as well as other credit enhancements provided by the lessee. ​ 88 Table of Contents Residential lending is further categorized into the following classes: residential mortgages (loans secured by 1-4 family residential properties and home equity loans) and home equity lines of credit.
Underwriting of new leasing arrangements typically includes analyzing customer cash flows, evaluating secondary sources of repayment, such as the value of the leased asset, the guarantors’ net cash flows as well as other credit enhancements provided by the lessee. ​ Residential lending is further categorized into the following classes: residential mortgages (loans secured by 1-4 family residential properties and home equity loans) and home equity lines of credit.
We recorded a derivative liability which requires payment to the buyer of the Visa Class B restricted shares in the event Visa further reduces the conversion rate to its publicly traded Visa Class A shares. 85 Table of Contents ​ Our third-party pricing service makes no representations or warranties that the pricing data provided to us is complete or free from errors, omissions or defects.
We recorded a derivative liability which requires payment to the buyer of the Visa Class B restricted shares in the event Visa further reduces the conversion rate to its publicly traded Visa Class A shares. ​ Our third-party pricing service makes no representations or warranties that the pricing data provided to us is complete or free from errors, omissions or defects.
These changes, when they occur, may affect the provision for income taxes as well as current and deferred income taxes, and may be significant to our consolidated statements of income and balance sheets. ​ Management's determination of the realization of net deferred tax assets is based upon management's judgment of various future events and uncertainties, including the timing and amount of future income, as well as the implementation of various tax planning strategies to maximize realization of the deferred tax assets.
These changes, when they occur, may affect the provision for income taxes as well as current and deferred income taxes, and may be significant to our consolidated statements of income and balance sheets. ​ 85 Table of Contents Management's determination of the realization of net deferred tax assets is based upon management's judgment of various future events and uncertainties, including the timing and amount of future income, as well as the implementation of various tax planning strategies to maximize realization of the deferred tax assets.
As of December 31, 2023 and 2022, we maintained our excess liquidity primarily in collateralized mortgage obligations issued by Ginnie Mae, Fannie Mae and Freddie Mac and mortgage-backed securities issued by Ginnie Mae, Freddie Mac, Fannie Mae, Municipal Housing Authorities and non-agency entities.
As of December 31, 2024 and 2023, we maintained our excess liquidity primarily in collateralized mortgage obligations issued by Ginnie Mae, Fannie Mae and Freddie Mac and mortgage-backed securities issued by Ginnie Mae, Freddie Mac, Fannie Mae, Municipal Housing Authorities and non-agency entities.
We maintain ongoing communications with investors and continue to evaluate this exposure by monitoring the level and number of repurchase requests as well as the delinquency rates in loans sold to investors. ​ 68 Table of Contents Financial Instruments with Off-Balance Sheet Risk ​ The Company is a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers.
We maintain ongoing communications with investors and continue to evaluate this exposure by monitoring the level and number of repurchase requests as well as the delinquency rates in loans sold to investors. ​ Financial Instruments with Off-Balance Sheet Risk ​ The Company is a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers.
The amount of base case measurement and its sensitivity to shifts in the yield curve allow management to measure longer term repricing option risk in the balance sheet. ​ Limitations of Market Risk Measures ​ The results of our simulation analyses are hypothetical, and a variety of factors might cause actual results to differ substantially from what is depicted.
The amount of base case measurement and its sensitivity to shifts in the yield curve allow management to measure longer term repricing option risk in the balance sheet. ​ 89 Table of Contents Limitations of Market Risk Measures ​ The results of our simulation analyses are hypothetical, and a variety of factors might cause actual results to differ substantially from what is depicted.
Basic and diluted earnings per share were both $1.84 per share for the year ended December 31, 2023, a decrease of $0.24 per share or 12% as compared to 2022. The decrease in net income was primarily due to a $60.7 million increase in noninterest expense and a $25.2 million increase in the provision for credit losses (the “Provision”).
Basic and diluted earnings per share were both $1.84 for the year ended December 31, 2023, a decrease of $0.24 or 12% as compared to 2022. The decrease in net income was primarily due to a $60.7 million increase in noninterest expense and a $25.2 million increase in the Provision.
The ACL for loans and leases and the reserve for unfunded commitments was considered adequate based on our ongoing analysis of estimated expected credit losses, credit risk profiles, current economic outlook, coverage ratios and other relevant factors. The ACL anticipates cyclical losses consistent with a recession and includes a qualitative overlay for potential macroeconomic impacts.
The ACL for loans and leases and the reserve for unfunded commitments was considered adequate based on our ongoing analysis of estimated expected credit losses, credit risk profiles, current economic outlook, coverage ratios and other relevant factors. The ACL anticipates cyclical losses consistent with a recession and includes a qualitative overlay for macroeconomic uncertainties.
See “Analysis of Financial Condition — Liquidity” and “—Capital” sections of this MD&A for further discussions of liquidity risk management and capital management, respectively. ​ 87 Table of Contents Credit Risk ​ Credit risk is the risk that borrowers or counterparties will be unable or unwilling to repay their obligations in accordance with the underlying contractual terms.
See “Analysis of Financial Condition — Liquidity” and “—Capital” sections of this MD&A for further discussions of liquidity risk management and capital management, respectively. ​ Credit Risk ​ Credit risk is the risk that borrowers or counterparties will be unable or unwilling to repay their obligations in accordance with the underlying contractual terms.
Decisions are primarily based on repayment ability via debt-to-income ratios, LTV ratios and an evaluation of credit history. ​ Consumer lending is further categorized into the following classes of loans: credit cards, automobile loans and other consumer-related installment loans. Consumer loans are either unsecured or secured by the borrower’s personal assets.
Decisions are primarily based on repayment ability via debt-to-income ratios, LTV ratios and an evaluation of credit history. ​ 87 Table of Contents Consumer lending is further categorized into the following classes of loans: credit cards, automobile loans and other consumer-related installment loans. Consumer loans are either unsecured or secured by the borrower’s personal assets.
The Company believes that its approach to interest rate risk has appropriately considered its susceptibility to both rising and falling rates and has adopted strategies which minimize the impact of such risks. ​ 90 Table of Contents We also have longer term interest rate risk exposures which may not be appropriately measured by net interest income simulation analysis.
The Company believes that its approach to interest rate risk has appropriately considered its susceptibility to both rising and falling rates and has adopted strategies which minimize the impact of such risks. ​ We also have longer term interest rate risk exposures which may not be appropriately measured by net interest income simulation analysis.
FHB was founded in 1858 under the name Bishop & Company and was the first successful banking partnership in the Kingdom of Hawaii and the second oldest bank formed west of the Mississippi River. As of December 31, 2023, we were the largest full-service bank headquartered in Hawaii as measured by assets, loans and leases, deposits and net income.
FHB was founded in 1858 under the name Bishop & Company and was the first successful banking partnership in the Kingdom of Hawaii and the second oldest bank formed west of the Mississippi River. As of December 31, 2024, we were the largest full-service bank headquartered in Hawaii as measured by assets, loans and leases and net income.
The working group disbanded after the conclusion of the transition in December 2023. ​ Our LIBOR transition plan included work to ensure that our technology systems were prepared for the transition, our loan documents that reference LIBOR-based rates were appropriately amended to reference other methods of interest rate determinations and internal and external stakeholders were apprised of the transition.
The working group disbanded after the conclusion of the transition in December 2023. ​ 90 Table of Contents Our LIBOR transition plan included work to ensure that our technology systems were prepared for the transition, our loan documents that reference LIBOR-based rates were appropriately amended to reference other methods of interest rate determinations and internal and external stakeholders were apprised of the transition.
Other factors such as changes in balance sheet composition or deposit rate behavior could result in a change in repricing sensitivity. ​ Under the static balance sheet forecast as of December 31, 2023, our net interest income sensitivity profile is lower in higher interest rate scenarios compared to similar forecasts as of December 31, 2022.
Other factors such as changes in balance sheet composition or deposit rate behavior could result in a change in repricing sensitivity. ​ Under the static balance sheet forecast as of December 31, 2024, our net interest income sensitivity profile is slightly lower in higher interest rate scenarios compared to similar forecasts as of December 31, 2023.
We believe that our existing cash, cash equivalents, investments, and cash expected to be generated from operations, will be sufficient to meet our cash requirements within the next twelve months and beyond. ​ Potential Demands on Liquidity from Off-Balance Sheet Arrangements ​ We have off-balance sheet arrangements, such as variable interest entities, guarantees, and certain financial instruments with off-balance sheet risk, that may affect the Company’s financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources. 67 Table of Contents ​ Variable Interest Entities ​ We hold interests in several unconsolidated variable interest entities (“VIEs”).
We believe that our existing cash, cash equivalents, investments, and cash expected to be generated from operations, are still sufficient to meet our cash requirements within the next 12 months and beyond. ​ 67 Table of Contents Potential Demands on Liquidity from Off-Balance Sheet Arrangements ​ We have off-balance sheet arrangements, such as variable interest entities, guarantees, and certain financial instruments with off-balance sheet risk, that may affect the Company’s financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources. ​ Variable Interest Entities ​ We hold interests in several unconsolidated variable interest entities (“VIEs”).
The monetary policies of the Federal Reserve can influence the overall growth of loans, investment securities and deposits and the level of interest rates earned on assets and paid for liabilities. ​ 89 Table of Contents Market Risk Measurement ​ We primarily use net interest income simulation analysis to measure and analyze interest rate risk.
The monetary policies of the Federal Reserve can influence the overall growth of loans, investment securities and deposits and the level of interest rates earned on assets and paid for liabilities. ​ Market Risk Measurement ​ We primarily use net interest income simulation analysis to measure and analyze interest rate risk.
Income, if any, on such loans and leases is recognized on a cash basis. (2) Interest income includes taxable-equivalent basis adjustments of $5.6 million, $4.9 million and $2.8 million for the years ended December 31, 2023, 2022 and 2021, respectively.
Income, if any, on such loans and leases is recognized on a cash basis. (2) Interest income includes taxable-equivalent basis adjustments of $5.4 million, $5.6 million and $4.9 million for the years ended December 31, 2024, 2023 and 2022, respectively.
In May 2023, the FDIC issued a notice of proposed rulemaking for a special assessment to replenish the deposit insurance fund following the recent bank failures. In November 2023, the FDIC approved a final rule to implement the special assessment and we recorded a $16.3 million loss in December 2023.
In May 2023, the FDIC issued a notice of proposed rulemaking for a special assessment to replenish the deposit insurance fund following the 2023 bank failures. In November 2023, the FDIC approved a final rule to implement the special assessment and we recorded a $16.3 million expense in December 2023.
For the year ended December 31, 2023, there was one residential mortgage loan repurchase totaling $0.2 million and there were no pending repurchase requests. ​ In addition to servicing loans in our portfolio, substantially all of the loans we sell to investors are sold with servicing rights retained. We also service loans originated by other mortgage loan originators.
For the year ended December 31, 2024, there was one residential mortgage loan repurchase totaling $0.6 million and there were no pending repurchase requests. ​ In addition to servicing loans in our portfolio, substantially all of the loans we sell to investors are sold with servicing rights retained. We also service loans originated by other mortgage loan originators.
The accounting policies which we believe to be most critical in preparing our consolidated financial statements are those that are related to the determination of the ACL, goodwill, fair value estimates, pension and postretirement benefit obligations and income taxes. ​ 82 Table of Contents Allowance for Credit Losses ​ Management’s evaluation of the adequacy of the ACL is often the most critical of accounting estimates for a financial institution.
The accounting policies which we believe to be most critical in preparing our consolidated financial statements are those that are related to the determination of the ACL, fair value estimates, pension and postretirement benefit obligations and income taxes. ​ Allowance for Credit Losses ​ Management’s evaluation of the adequacy of the ACL is often the most critical of accounting estimates for a financial institution.
Our Bank’s underwriting standards typically require LTV ratios of not more than 80%, although higher levels are permitted with accompanying mortgage insurance. First mortgage loans secured by residential properties generally carry a moderate level of credit risk, with an average loan size of approximately $395,000 as of December 31, 2023.
Our Bank’s underwriting standards typically require LTV ratios of not more than 80%, although higher levels are permitted with accompanying mortgage insurance. First mortgage loans secured by residential properties generally carry a moderate level of credit risk, with an average loan size of approximately $394,000 as of December 31, 2024.
For the year ended December 31, 2023, we had no repurchase requests related to loan servicing activities, nor were there any pending repurchase requests as of December 31, 2023. ​ Although to date repurchase requests related to representation and warranty provisions and servicing activities have been limited, it is possible that requests to repurchase mortgage loans may increase in frequency as investors more aggressively pursue all means of recovering losses on their purchased loans.
For the year ended December 31, 2024, we had no repurchase requests related to loan servicing activities, nor were there any pending repurchase requests as of December 31, 2024. ​ 68 Table of Contents Although to date repurchase requests related to representation and warranty provisions and servicing activities have been limited, it is possible that requests to repurchase mortgage loans may increase in frequency as investors more aggressively pursue all means of recovering losses on their purchased loans.
During 2022, the prime rate increased a total of 425 basis points (25 basis points in March, 50 basis points in May, 75 basis points in each month of June, July, September and November, and 50 basis points in December) to end the year at 7.50%.
The prime rate began in 2022 at 3.25% and increased a total of 425 basis points (25 basis points in March, 50 basis points in May, 75 basis points in each month of June, July, September and November, and 50 basis points in December) to end the year at 7.50%.
International Development Finance Corporation bonds) and government-sponsored enterprises and $54.2 million in debt securities issued by states and political subdivisions. ​ 70 Table of Contents 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.
International Development Finance Corporation bonds) and government-sponsored enterprises and $54.6 million in debt securities issued by states and political subdivisions. ​ 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.
We seek to maintain reasonable levels of risk in consumer lending by following prudent underwriting guidelines, which include an evaluation of personal credit history, cash flow and collateral values based on existing market conditions. Consumer loans were $1.1 billion as of December 31, 2023, a decrease of $113.0 million or 9% from December 31, 2022.
We seek to maintain reasonable levels of risk in consumer lending by following prudent underwriting guidelines, which include an evaluation of personal credit history, cash flow and collateral values based on existing market conditions. Consumer loans were $1.0 billion as of December 31, 2024, a decrease of $85.9 million or 8% from December 31, 2023.
The capital conservation buffer is composed entirely of CET1, on top of these minimum risk weighted asset ratios, effectively resulting in minimum ratios of (i) 7% CET1 to risk-weighted assets, (ii) 8.5% Tier 1 capital to risk-weighted assets, and (iii) 10.5% total capital to risk-weighted assets. ​ 81 Table of Contents As of December 31, 2023, our capital levels remained characterized as “well capitalized” under the Capital Rules.
The capital conservation buffer is composed entirely of CET1, on top of these minimum risk weighted asset ratios, effectively resulting in minimum ratios of (i) 7% CET1 to risk-weighted assets, (ii) 8.5% Tier 1 capital to risk-weighted assets, and (iii) 10.5% total capital to risk-weighted assets. ​ As of December 31, 2024, our capital levels remained characterized as “well capitalized” under the Capital Rules.
Furthermore, as of December 31, 2023, the ACL was considered adequate based on our ongoing analysis of estimated expected credit losses, credit risk profiles, current economic outlook, coverage ratios and other relevant factors. The ACL anticipates cyclical losses consistent with a recession and includes a qualitative overlay for potential macroeconomic impacts.
Furthermore, as of December 31, 2024, the ACL was considered adequate based on our ongoing analysis of estimated expected credit losses, credit risk profiles, current economic outlook, coverage ratios and other relevant factors. The ACL anticipates cyclical losses consistent with a recession and includes a qualitative overlay for macroeconomic uncertainties.
As of December 31, 2023, we have borrowing capacity of $2.5 billion from the FHLB and $3.3 billion from the FRB based on the amount of collateral pledged. ​ 66 Table of Contents Our core deposits have historically provided us with a long-term source of stable and relatively lower cost of funding.
As of December 31, 2024, we have borrowing capacity of $2.8 billion from the FHLB and $3.0 billion from the FRB based on the amount of collateral pledged. ​ 66 Table of Contents Our core deposits have historically provided us with a long-term source of stable and relatively lower cost of funding.
As of December 31, 2023 and 2022, $2.3 billion or 9% and $3.2 billion or 13%, 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, 2024 and 2023, $1.9 billion or 8% and $2.3 billion or 9%, 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.
The decrease in total assets for the Treasury and Other segment was primarily due to decreases in our investment securities portfolio and interest-bearing deposits in other banks. ​ ​ Analysis of Financial Condition ​ Liquidity and Capital Resources ​ Liquidity refers to our ability to maintain cash flow that is adequate to fund operations and meet present and future financial obligations through either the sale or maturity of existing assets or by obtaining additional funding through liability management.
The increase in total earning assets for the Treasury and Other segment was primarily due to an increase in our interest-bearing deposits in other banks, partially offset by a decrease in our investment securities portfolio. ​ ​ Analysis of Financial Condition ​ Liquidity and Capital Resources ​ Liquidity refers to our ability to maintain cash flow that is adequate to fund operations and meet present and future financial obligations through either the sale or maturity of existing assets or by obtaining additional funding through liability management.
As of December 31, 2023 and 2022, our liabilities for UTBs were $212.0 million and $206.2 million, respectively. See “Note 15. Income Taxes” in the notes to the consolidated financial statements included in Item 8.
As of December 31, 2024 and 2023, our liabilities for UTBs were $206.4 million and $212.0 million, respectively. See “Note 15. Income Taxes” in the notes to the consolidated financial statements included in Item 8.
The carrying values of our available-for-sale investment securities and held-to-maturity investment securities were $3.2 billion and $4.3 billion as of December 31, 2022, respectively.
The carrying values of our available-for-sale investment securities and held-to-maturity investment securities were $2.3 billion and $4.0 billion as of December 31, 2023, respectively.
Net charge-offs in our consumer lending portfolio were $10.0 million for the year ended December 31, 2023 compared to net charge-offs of $9.3 million for 2022.
Net charge-offs in our consumer lending portfolio were $10.9 million for the year ended December 31, 2024 compared to net charge-offs of $10.0 million for 2023.
Unfunded commitments to fund these low-income housing tax credit investments were $80.7 million and $47.2 million as of December 31, 2023 and 2022, respectively. ​ Guarantees ​ We sell residential mortgage loans in the secondary market primarily to Fannie Mae or Freddie Mac.
Unfunded commitments to fund these low-income housing tax credit investments were $98.7 million and $80.7 million as of December 31, 2024 and 2023, respectively. ​ Guarantees ​ We sell residential mortgage loans in the secondary market primarily to Fannie Mae or Freddie Mac.
Our third-party pricing service may then affirm the original quoted price or may update the evaluation on a going forward basis. ​ Based on the composition of our investment securities portfolio, we believe that we have developed appropriate internal controls and performed appropriate due diligence procedures to prevent or detect material misstatements by our third-party pricing service. See “Note 21.
Our third-party pricing service may then affirm the original quoted price or may update the evaluation on a going forward basis. ​ 84 Table of Contents Based on the composition of our investment securities portfolio, we believe that we have developed appropriate internal controls and performed appropriate due diligence procedures to prevent or detect material misstatements by our third-party pricing service.
For the year ended December 31, 2023, the Provision included $24.9 million in provision for credit losses for loans and leases, compared to a negative $2.1 million in provision for credit losses for loans and leases in 2022, and $1.8 million in provision for credit losses for the reserve for unfunded commitments, compared to $3.5 million in provision for credit losses for the reserve for unfunded commitments in 2022.
For the year ended December 31, 2024, the Provision included $17.5 million in provision for credit losses for loans and leases, compared to $24.9 million in provision for credit losses for loans and leases in 2023, and a negative $2.8 million in provision for credit losses for the reserve for unfunded commitments, compared to $1.8 million in provision for credit losses for the reserve for unfunded commitments in 2023.
As of December 31, 2023 and 2022, the unpaid principal balance of our portfolio of residential mortgage loans sold was $1.3 billion and $1.4 billion, respectively. The agreements under which we sell residential mortgage loans require delivery of various documents to the investor or its document custodian.
As of both December 31, 2024 and 2023, the unpaid principal balance of our portfolio of residential mortgage loans sold was $1.3 billion. The agreements under which we sell residential mortgage loans require delivery of various documents to the investor or its document custodian.
The stock repurchase program may be suspended, terminated or modified at any time for any reason. ​ In January 2024, the Company’s Board of Directors declared a quarterly cash dividend of $0.26 per share on our outstanding shares.
The stock repurchase program may be suspended, terminated or modified at any time for any reason. ​ 81 Table of Contents In January 2025, the Company’s Board of Directors declared a quarterly cash dividend of $0.26 per share on our outstanding shares.
Changes in the level of non-accrual loans and leases typically represent increases for loans and leases that reach a specified past due status, offset by reductions for loans and leases that are charged-off, paid down, sold, transferred to held for sale classification, transferred to OREO or are no longer classified as non-accrual because they have returned to accrual status as a result of continued performance and an improvement in the borrower’s financial condition and loan repayment capabilities. ​ Total NPAs were $18.6 million as of December 31, 2023, an increase of $6.6 million or 55% from December 31, 2022.
Changes in the level of non-accrual loans and leases typically represent increases for loans and leases that reach a specified past due status, offset by reductions for loans and leases that are charged-off, paid down, sold, transferred to held for sale classification, transferred to OREO or are no longer classified as non-accrual because they have returned to accrual status as a result of continued performance and an improvement in the borrower’s financial condition and loan repayment capabilities. ​ Total NPAs were $20.7 million as of December 31, 2024, an increase of $2.1 million or 11% from December 31, 2023.
To calculate annual pension costs, we use the following key variables: (1) size of the employee population, length of service and estimated compensation increases; (2) actuarial assumptions and estimates; (3) expected long-term rate of return on plan assets; and (4) discount rate. ​ Pension and postretirement benefit plan obligations, net of pension plan assets, were $92.8 million as of December 31, 2023, a decrease of $1.1 million or 1% from December 31, 2022.
To calculate annual pension costs, we use the following key variables: (1) size of the employee population, length of service and estimated compensation increases; (2) actuarial assumptions and estimates; (3) expected long-term rate of return on plan assets; and (4) discount rate. ​ Pension and postretirement benefit plan obligations, net of pension plan assets, were $86.0 million as of December 31, 2024, a decrease of $6.7 million or 7% from December 31, 2023.
Our FHLB stock is accounted for at cost, which equals par or redemption value. As of December 31, 2023 and 2022, we held $32.6 million and $10.1 million in FHLB stock, respectively, which is recorded as a component of other assets in our consolidated balance sheets. ​ See “Note 3.
Our FHLB stock is accounted for at cost, which equals par or redemption value. As of December 31, 2024 and 2023, we held $21.4 million and $32.6 million in FHLB stock, respectively, which is recorded as a component of other assets in our consolidated balance sheets. ​ See “Note 3.
Financial Statements and Supplementary Data for more information on the ACL. ​ Goodwill ​ Goodwill was $995.5 million as of both December 31, 2023 and 2022. Our goodwill originated from the acquisition of the Company by BNPP in December of 2001.
Financial Statements and Supplementary Data for more information on the ACL. 78 Table of Contents ​ Goodwill ​ Goodwill was $995.5 million as of both December 31, 2024 and 2023. Our goodwill originated from the acquisition of the Company by BNPP in December of 2001.
The increase was primarily due to a $14.1 million increase in bank-owned life insurance (“BOLI”) income, a $5.5 million increase in other noninterest income, a $2.0 million increase in trust and investment services income, a $0.8 million increase in service charges on deposits accounts and a $0.8 million increase in net gains on the sale of investment securities, partially offset by a $2.1 million decrease in credit and debit card fees. ​ 54 Table of Contents ● Noninterest expense was $501.1 million for the year ended December 31, 2023, an increase of $60.7 million or 14% as compared to 2022.
The increase was primarily due to a $14.1 million increase in BOLI income, a $5.5 million increase in other noninterest income, a $2.0 million increase in trust and investment services income, a $0.8 million increase in service charges on deposits accounts and a $0.8 million increase in net gains on the sale of investment securities, partially offset by a $2.1 million decrease in credit and debit card fees. ​ ● Noninterest expense was $501.1 million for the year ended December 31, 2023, an increase of $60.7 million or 14% as compared to 2022.
The level of the Allowance was commensurate with our stable credit risk profile, loan portfolio growth and composition and a stable Hawaii economy. ​ Net charge-offs of loans and leases were $12.2 million or 0.09% of total average loans and leases for the year ended December 31, 2023 compared to $11.2 million or 0.08% for 2022.
The level of the Allowance was commensurate with our stable credit risk profile, loan portfolio growth and composition and a stable Hawaii economy. ​ Net charge-offs of loans and leases were $13.6 million or 0.10% of total average loans and leases for the year ended December 31, 2024 compared to $12.2 million or 0.09% for 2023.
Downgrading 1% of our commercial portfolio would increase the ACL at December 31, 2023 by approximately $1.3 million, and reducing FICO scores on the entire retail portfolio would increase the ACL at December 31, 2023 by approximately $4.1 million.
Downgrading 1% of our commercial portfolio would increase the ACL at December 31, 2024 by approximately $1.3 million, and reducing FICO scores on the entire retail portfolio would increase the ACL at December 31, 2024 by approximately $3.7 million.
At December 31, 2023 and 2022, the Company had $1.8 billion and $1.9 billion, respectively, of public deposits, all of which were fully collateralized with investment securities.
At December 31, 2024 and 2023, the Company had $0.8 billion and $1.8 billion, respectively, of public deposits, all of which were fully collateralized with investment securities.
As of December 31, 2023 and 2022, the amount of deposits excluding public deposits that exceeded FDIC insurance limits were estimated to be $9.1 billion, or 42% of total deposits, and $9.2 billion, or 42% of total deposits, respectively. As of December 31, 2023 and 2022, deposits accounts above $250,000 were estimated to be $12.6 billion and $13.3 billion, respectively.
As of December 31, 2024 and 2023, the amount of deposits excluding public deposits that exceeded FDIC insurance limits were estimated to be $9.2 billion, or 45% of total deposits, and $9.1 billion, or 42% of total deposits, respectively. As of December 31, 2024 and 2023, deposits accounts above $250,000 were estimated to be $11.6 billion and $12.6 billion, respectively.
As of December 31, 2023 and 2022, the liability which was classified in Level 3 of the fair value hierarchy was related to the sale of our Visa Class B restricted shares in 2016.
As of both December 31, 2024 and 2023, $2.3 million was classified in Level 3 of the fair value hierarchy. As of December 31, 2024 and 2023, the liability which was classified in Level 3 of the fair value hierarchy was related to the sale of our Visa Class B restricted shares in 2016.
Our core deposits, defined as all deposits exclusive of time deposits exceeding $250,000, totaled $19.5 billion and $20.2 billion as of December 31, 2023 and 2022, which represented 91% and 93%, respectively, of our total deposits as of December 31, 2023 and 2022, respectively.
Our core deposits, defined as all deposits exclusive of time deposits exceeding $250,000, totaled $19.0 billion and $19.5 billion as of December 31, 2024 and 2023, which represented 93% and 91%, respectively, of our total deposits as of December 31, 2024 and 2023, respectively.
The dividend is to be paid on March 1, 2024 to shareholders of record at the close of business on February 16, 2024. ​ Critical Accounting Policies ​ Our consolidated financial statements were prepared in accordance with GAAP and follow general practices within the industries in which we operate.
The dividend is to be paid on February 28, 2025 to shareholders of record at the close of business on February 14, 2025. ​ Critical Accounting Policies ​ Our consolidated financial statements were prepared in accordance with GAAP and follow general practices within the industries in which we operate.
The increase in total assets for the Commercial Banking segment was primarily due to increases in our commercial real estate loan and lease financing portfolios, partially offset by a decrease in our consumer loan portfolio. ​ 64 Table of Contents Net income for the Commercial Banking segment was $95.8 million for the year ended December 31, 2022, a decrease of $24.0 million or 20% as compared to 2021.
The increase in total earning assets for the Commercial Banking segment was primarily due to increases in our commercial real estate loan and lease financing portfolios, partially offset by a decrease in our consumer loan portfolio. ​ 64 Table of Contents Net income for the Commercial Banking segment was $95.2 million for the year ended December 31, 2023, a decrease of $0.6 million or 1% as compared to 2022.
This increase was primarily due to additions in residential mortgage loans of $3.3 million, offset by $1.0 million in payments, $0.8 million in returns to accrual status and a $0.1 million transfer to OREO.
This increase was due to additions in residential mortgage loans of $8.0 million, partially offset by $2.2 million in payments, $0.6 million in returns to accrual status and a $0.1 million transfer to OREO.
(4) Net interest margin is net interest income, on a fully taxable-equivalent basis, divided by average total earning assets. ​ 57 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Analysis of Change in Net Interest Income ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Table 4 ​ ​ Year Ended December 31, 2023 ​ Year Ended December 31, 2022 ​ ​ Compared to December 31, 2022 ​ Compared to December 31, 2021 (dollars in millions) Volume Rate Total (1) Volume Rate Total (1) Change in Interest Income: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest-Bearing Deposits in Other Banks ​ $ (5.8) ​ $ 22.0 ​ $ 16.2 ​ $ (1.7) ​ $ 9.7 ​ $ 8.0 Available-for-Sale Investment Securities ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Taxable ​ ​ (38.3) ​ ​ 28.9 ​ ​ (9.4) ​ ​ (31.6) ​ ​ 21.5 ​ ​ (10.1) Non-Taxable ​ ​ (6.9) ​ ​ 2.6 ​ ​ (4.3) ​ ​ (7.7) ​ ​ 2.4 ​ ​ (5.3) Held-to-Maturity Investment Securities ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Taxable ​ ​ 14.4 ​ ​ 0.8 ​ ​ 15.2 ​ ​ 45.5 ​ ​ — ​ ​ 45.5 Non-Taxable ​ ​ 3.9 ​ ​ (0.5) ​ ​ 3.4 ​ ​ 12.5 ​ ​ — ​ ​ 12.5 Total Investment Securities ​ ​ (26.9) ​ ​ 31.8 ​ ​ 4.9 ​ ​ 18.7 ​ ​ 23.9 ​ ​ 42.6 Loans Held for Sale ​ ​ — ​ ​ — ​ ​ — ​ ​ (0.1) ​ ​ — ​ ​ (0.1) Loans and Leases ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Commercial and industrial ​ ​ 6.8 ​ ​ 55.8 ​ ​ 62.6 ​ ​ (20.0) ​ ​ 16.2 ​ ​ (3.8) Commercial real estate ​ ​ 15.4 ​ ​ 97.4 ​ ​ 112.8 ​ ​ 14.1 ​ ​ 37.5 ​ ​ 51.6 Construction ​ ​ 5.9 ​ ​ 23.7 ​ ​ 29.6 ​ ​ (1.6) ​ ​ 8.7 ​ ​ 7.1 Residential: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Residential mortgage ​ ​ 3.7 ​ ​ 7.2 ​ ​ 10.9 ​ ​ 12.7 ​ ​ (5.5) ​ ​ 7.2 Home equity line ​ ​ 5.1 ​ ​ 7.7 ​ ​ 12.8 ​ ​ 3.5 ​ ​ 0.8 ​ ​ 4.3 Consumer ​ ​ (2.3) ​ ​ 8.5 ​ ​ 6.2 ​ ​ (3.0) ​ ​ 0.5 ​ ​ (2.5) Lease financing ​ ​ 2.8 ​ ​ 1.6 ​ ​ 4.4 ​ ​ 0.7 ​ ​ 1.4 ​ ​ 2.1 Total Loans and Leases ​ ​ 37.4 ​ ​ 201.9 ​ ​ 239.3 ​ ​ 6.4 ​ ​ 59.6 ​ ​ 66.0 Other Earning Assets ​ ​ 0.4 ​ ​ 0.3 ​ ​ 0.7 ​ ​ — ​ ​ (0.5) ​ ​ (0.5) Total Change in Interest Income ​ ​ 5.1 ​ ​ 256.0 ​ ​ 261.1 ​ ​ 23.3 ​ ​ 92.7 ​ ​ 116.0 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Change in Interest Expense: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest-Bearing Deposits ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Savings ​ ​ (1.9) ​ ​ 54.2 ​ ​ 52.3 ​ ​ — ​ ​ 16.7 ​ ​ 16.7 Money Market ​ ​ (0.9) ​ ​ 70.4 ​ ​ 69.5 ​ ​ 0.1 ​ ​ 14.4 ​ ​ 14.5 Time ​ ​ 13.8 ​ ​ 73.4 ​ ​ 87.2 ​ ​ (0.8) ​ ​ 4.9 ​ ​ 4.1 Total Interest-Bearing Deposits ​ ​ 11.0 ​ ​ 198.0 ​ ​ 209.0 ​ ​ (0.7) ​ ​ 36.0 ​ ​ 35.3 Federal Funds Purchased ​ ​ 0.2 ​ ​ 0.1 ​ ​ 0.3 ​ ​ 0.5 ​ ​ — ​ ​ 0.5 Other Short-Term Borrowings ​ ​ 13.0 ​ ​ — ​ ​ 13.0 ​ ​ — ​ ​ — ​ ​ — Long-Term Borrowings ​ ​ 12.5 ​ ​ — ​ ​ 12.5 ​ ​ (2.5) ​ ​ (2.4) ​ ​ (4.9) Other Interest-Bearing Liabilities ​ ​ 3.0 ​ ​ — ​ ​ 3.0 ​ ​ — ​ ​ — ​ ​ — Total Change in Interest Expense ​ ​ 39.7 ​ ​ 198.1 ​ ​ 237.8 ​ ​ (2.7) ​ ​ 33.6 ​ ​ 30.9 Change in Net Interest Income ​ $ (34.6) ​ $ 57.9 ​ $ 23.3 ​ $ 26.0 ​ $ 59.1 ​ $ 85.1 (1) The change in interest income and expense not solely due to changes in volume or rate has been allocated on a pro-rata basis to the volume and rate columns. ​ Net interest income, on a fully taxable-equivalent basis, was $641.7 million for the year ended December 31, 2023, an increase of $23.3 million or 4% as compared to 2022.
(4) Net interest margin is net interest income, on a fully taxable-equivalent basis, divided by average total earning assets. ​ 57 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Analysis of Change in Net Interest Income ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Table 4 ​ ​ Year Ended December 31, 2024 ​ Year Ended December 31, 2023 ​ ​ Compared to December 31, 2023 ​ Compared to December 31, 2022 (dollars in millions) Volume Rate Total (1) Volume Rate Total (1) Change in Interest Income: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest-Bearing Deposits in Other Banks ​ $ 20.4 ​ $ 0.4 ​ $ 20.8 ​ $ (5.8) ​ $ 22.0 ​ $ 16.2 Available-for-Sale Investment Securities ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Taxable ​ ​ (20.4) ​ ​ 0.8 ​ ​ (19.6) ​ ​ (38.3) ​ ​ 28.9 ​ ​ (9.4) Non-Taxable ​ ​ (0.5) ​ ​ — ​ ​ (0.5) ​ ​ (6.9) ​ ​ 2.6 ​ ​ (4.3) Held-to-Maturity Investment Securities ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Taxable ​ ​ (4.1) ​ ​ — ​ ​ (4.1) ​ ​ 14.4 ​ ​ 0.8 ​ ​ 15.2 Non-Taxable ​ ​ (0.1) ​ ​ (0.2) ​ ​ (0.3) ​ ​ 3.9 ​ ​ (0.5) ​ ​ 3.4 Total Investment Securities ​ ​ (25.1) ​ ​ 0.6 ​ ​ (24.5) ​ ​ (26.9) ​ ​ 31.8 ​ ​ 4.9 Loans Held for Sale ​ ​ 0.1 ​ ​ — ​ ​ 0.1 ​ ​ — ​ ​ — ​ ​ — Loans and Leases ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Commercial and industrial ​ ​ (0.7) ​ ​ 8.3 ​ ​ 7.6 ​ ​ 6.8 ​ ​ 55.8 ​ ​ 62.6 Commercial real estate ​ ​ 3.3 ​ ​ 13.0 ​ ​ 16.3 ​ ​ 15.4 ​ ​ 97.4 ​ ​ 112.8 Construction ​ ​ 7.9 ​ ​ 3.5 ​ ​ 11.4 ​ ​ 5.9 ​ ​ 23.7 ​ ​ 29.6 Residential: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Residential mortgage ​ ​ (3.2) ​ ​ 10.2 ​ ​ 7.0 ​ ​ 3.7 ​ ​ 7.2 ​ ​ 10.9 Home equity line ​ ​ 1.1 ​ ​ 10.6 ​ ​ 11.7 ​ ​ 5.1 ​ ​ 7.7 ​ ​ 12.8 Consumer ​ ​ (8.2) ​ ​ 10.1 ​ ​ 1.9 ​ ​ (2.3) ​ ​ 8.5 ​ ​ 6.2 Lease financing ​ ​ 3.2 ​ ​ (1.0) ​ ​ 2.2 ​ ​ 2.8 ​ ​ 1.6 ​ ​ 4.4 Total Loans and Leases ​ ​ 3.4 ​ ​ 54.7 ​ ​ 58.1 ​ ​ 37.4 ​ ​ 201.9 ​ ​ 239.3 Other Earning Assets ​ ​ (0.9) ​ ​ 2.7 ​ ​ 1.8 ​ ​ 0.4 ​ ​ 0.3 ​ ​ 0.7 Total Change in Interest Income ​ ​ (2.1) ​ ​ 58.4 ​ ​ 56.3 ​ ​ 5.1 ​ ​ 256.0 ​ ​ 261.1 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Change in Interest Expense: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest-Bearing Deposits ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Savings ​ ​ (1.6) ​ ​ 21.7 ​ ​ 20.1 ​ ​ (1.9) ​ ​ 54.2 ​ ​ 52.3 Money Market ​ ​ 4.5 ​ ​ 27.2 ​ ​ 31.7 ​ ​ (0.9) ​ ​ 70.4 ​ ​ 69.5 Time ​ ​ 10.0 ​ ​ 15.7 ​ ​ 25.7 ​ ​ 13.8 ​ ​ 73.4 ​ ​ 87.2 Total Interest-Bearing Deposits ​ ​ 12.9 ​ ​ 64.6 ​ ​ 77.5 ​ ​ 11.0 ​ ​ 198.0 ​ ​ 209.0 Federal Funds Purchased ​ ​ (0.4) ​ ​ (0.4) ​ ​ (0.8) ​ ​ 0.2 ​ ​ 0.1 ​ ​ 0.3 Other Short-Term Borrowings ​ ​ 7.7 ​ ​ (0.7) ​ ​ 7.0 ​ ​ 13.0 ​ ​ — ​ ​ 13.0 Long-Term Borrowings ​ ​ (6.3) ​ ​ (6.2) ​ ​ (12.5) ​ ​ 12.5 ​ ​ — ​ ​ 12.5 Other Interest-Bearing Liabilities ​ ​ (1.5) ​ ​ 0.1 ​ ​ (1.4) ​ ​ 3.0 ​ ​ — ​ ​ 3.0 Total Change in Interest Expense ​ ​ 12.4 ​ ​ 57.4 ​ ​ 69.8 ​ ​ 39.7 ​ ​ 198.1 ​ ​ 237.8 Change in Net Interest Income ​ $ (14.5) ​ $ 1.0 ​ $ (13.5) ​ $ (34.6) ​ $ 57.9 ​ $ 23.3 (1) The change in interest income and expense not solely due to changes in volume or rate has been allocated on a pro-rata basis to the volume and rate columns. ​ Net interest income, on a fully taxable-equivalent basis, was $628.2 million for the year ended December 31, 2024, a decrease of $13.5 million or 2% as compared to 2023.
As of December 31, 2023 and 2022, cash and cash equivalents were $1.7 billion and $0.5 billion, respectively. Potential sources of liquidity also include investment securities in our available-for-sale portfolio and held-to-maturity portfolio. The carrying values of our available-for-sale investment securities and held-to-maturity investment securities were $2.3 billion and $4.0 billion as of December 31, 2023, respectively.
As of December 31, 2024 and 2023, cash and cash equivalents were $1.2 billion and $1.7 billion, respectively. Potential sources of liquidity also include investment securities in our available-for-sale portfolio and held-to-maturity portfolio. The carrying values of our available-for-sale investment securities and held-to-maturity investment securities were $1.9 billion and $3.8 billion as of December 31, 2024, respectively.
Lease financing was $379.8 million as of December 31, 2023, an increase of $81.7 million or 27% from December 31, 2022. The increase was primarily due to the closing of several large lease transactions during the year. ​ See “Note 4. Loans and Leases” in the notes to the consolidated financial statements included in Item 8.
Lease financing was $434.7 million as of December 31, 2024, an increase of $54.8 million or 14% from December 31, 2023. The increase was primarily due to the closing of several large lease transactions during the year. ​ See “Note 4. Loans and Leases” in the notes to the consolidated financial statements included in Item 8.
We offer home equity lines of credit with variable rates; fixed rate lock options may be available post-closing. All lines are underwritten at 2% over the fully indexed rate. Our procedures for underwriting home equity lines of credit include an assessment of an applicant’s overall financial capacity and repayment ability.
We offer home equity lines of credit with variable rates; fixed rate lock options may be available post-closing. All lines are underwritten at 0.95% of the credit line amount. Our procedures for underwriting home equity lines of credit include an assessment of an applicant’s overall financial capacity and repayment ability.
These evaluations may cause us to change the level of funds we deploy into investment securities and change the composition of our investment securities portfolio. ​ Gross unrealized gains in our investment securities portfolio were $0.2 million and $0.1 million as of December 31, 2023 and 2022, respectively.
These evaluations may cause us to change the level of funds we deploy into investment securities and change the composition of our investment securities portfolio. ​ 70 Table of Contents Gross unrealized gains in our investment securities portfolio were $0.6 million and $0.2 million as of December 31, 2024 and 2023, respectively.

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