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What changed in BANK OF HAWAII CORP's 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of BANK OF HAWAII CORP'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.

+452 added−442 removedSource: 10-K (2024-12-31) vs 10-K (2023-12-31)

Top changes in BANK OF HAWAII CORP's 2024 10-K

452 paragraphs added · 442 removed · 335 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

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Biggest changeWe nurture a collaborative, digitally connected workplace to support changing needs. We invest in people leadership capability to deliver exceptional employee experience and develop our workforce of tomorrow. Skills and professional development training is provided to employees at all levels, with additional development sessions specifically targeted to managers and leaders.
Biggest changeSkills and professional development training is provided to employees at all levels, with additional development sessions specifically targeted to managers and leaders. Making Leadership Excellence a Priority is a key component of the Employee Experience, and we need our leaders to deliver exceptional employee experiences and develop the successful workforce of tomorrow.
FDIC Insurance The FDIC provides insurance coverage for certain deposits held by the Bank through the Deposit Insurance Fund, which the FDIC maintains by assessing depository institutions an insurance premium. The Bank is assessed deposit insurance premiums by the FDIC using a risk-based assessment rate and an adjusted average total assets.
FDIC Insurance The FDIC provides insurance coverage for certain deposits held by the Bank through the Deposit Insurance Fund, which the FDIC maintains by assessing depository institutions an insurance premium. The Bank is assessed deposit insurance premiums by the FDIC using a risk-based assessment rate and adjusted average total assets.
Our Corporate Governance Guidelines; charters of the Audit and Risk Committee, the Human Resources and Compensation Committee, and the Nominating and Corporate Governance Committee; and our Code of Business Conduct and Ethics are available on our website at www.boh.com.
Our Corporate Governance Guidelines; charters of the Audit Committee, the Human Resources and Compensation Committee, and the Nominating and Corporate Governance Committee; and our Code of Business Conduct and Ethics are available on our website at www.boh.com.
Topics have included: Evaluating Employees and Meaningful Conversations to prepare our managers for the 2023 Performance, Merit & Bonus season, Rising Team, and how our leaders can continue to build stronger team dynamics. “Rising Team” continued to be a priority in 2023. This new and modern technology platform provides a way for us to strengthen our connection with our teammates.
Topics have included: Evaluating Employees and Meaningful Conversations to prepare our managers for the 2024 Performance, Merit & Bonus season, Rising Team, and how our leaders can continue to build stronger team dynamics. “Rising Team” continued to be a priority in 2024. This new and modern technology platform provides a way for us to strengthen our connection with our teammates.
As of December 31, 2023, the Bank was classified as “well capitalized.” The classification of a depository institution under one of the categories set out above is primarily for the purpose of applying the prompt corrective actions, and is not intended to be, nor should it be interpreted as, a representation of the overall financial condition or the prospects of that financial institution.
As of December 31, 2024, the Bank was classified as “well capitalized.” The classification of a depository institution under one of the categories set out above is primarily for the purpose of applying the prompt corrective actions, and is not intended to be, nor should it be interpreted as, a representation of the overall financial condition or the prospects of that financial institution.
“Recruit Connect” continued in 2023 to help teammates identify job opportunities within the Company and find out more about them. In some cases, sessions led to referred candidates joining the Bank, and to current employees finding a new career path.
“Recruit Connect” continued in 2024 to help teammates identify job opportunities within the Company and find out more about them. In some cases, sessions led to referred candidates joining the Bank, and to current employees finding a new career path.
The Company continues to monitor and implement rules, regulations, and interpretations of the Dodd-Frank Act as they are adopted and modified, and to evaluate their application to our current and future operations. 3 Table of Contents Capital Requirements In July 2013, the FRB, the Office of the Comptroller of the Currency (the “OCC”) and the FDIC adopted new capital rules (the “Rules”).
The Company continues to monitor and implement rules, regulations, and interpretations of the Dodd-Frank Act as they are adopted and modified, and to evaluate their application to our current and future operations. Capital Requirements In July 2013, the FRB, the Office of the Comptroller of the Currency (the “OCC”) and the FDIC adopted new capital rules (the “Rules”).
The Bank’s deposits are insured by the Federal Deposit Insurance Corporation (the “FDIC”) and the Bank is a member of the Federal Reserve System. The Bank, directly and through its subsidiaries, provides a broad range of financial products and services primarily to customers in Hawaii, Guam, and other Pacific Islands.
The Bank’s deposits are insured by the Federal Deposit Insurance Corporation (the “FDIC”) and the Bank is a member of the Federal Reserve System. The Bank, directly and through its subsidiaries, provides a broad range of financial products and services primarily to customers in Hawaiʻi, Guam, and other Pacific Islands.
Health and Safety: The health and safety of our employees is a priority. We continue our commitment to workplace safety and workforce health to maintain business and operational continuity without diminishing our focus on both employee and customer safety. 7 Table of Contents Information about our Executive Officers Listed below are executive officers of the Parent. Peter S.
Health and Safety: The health and safety of our employees is a priority. We continue our commitment to workplace safety and workforce health to maintain business and operational continuity without diminishing our focus on both employee and customer safety. Information about our Executive Officers Listed below are executive officers of the Parent. Peter S.
Unless an exemption applies, covered transactions by the Bank with a single affiliate are limited to 10% of the Bank’s capital and surplus, and with respect to all covered transactions with affiliates in the aggregate, they are limited to 20% of the Bank’s capital and surplus.
Unless an exemption applies, covered transactions by the Bank with a single affiliate are limited to 10% of the Bank’s capital and surplus, and with respect to all covered transactions with affiliates in the aggregate, they are limited to 20% of the Bank’s capital 4 Table of Contents and surplus.
The Bank is subject to supervision of the FRB and examination by the Federal Reserve Bank of San Francisco, the Consumer Financial Protection Bureau (the “CFPB”), and the State of Hawaii Department of Commerce and Consumer Affairs’ (“DCCA”) Division of Financial Institutions.
The Bank is subject to supervision of the FRB and examination by the Federal Reserve Bank of San Francisco, the Consumer Financial Protection Bureau (the “CFPB”), and the State of Hawaiʻi Department of Commerce and Consumer Affairs’ (“DCCA”) Division of Financial Institutions.
Because the Code permits de novo branching by out-of-state banks, those banks may establish new branches in Hawaii. Bank of Hawai‘i The Bank is subject to extensive federal, state, territorial and foreign regulations that significantly affect its business and activities.
Because the Code permits de novo branching by out-of-state banks, those banks may establish new branches in Hawaiʻi. Bank of Hawaiʻi The Bank is subject to extensive federal, state, territorial and foreign regulations that significantly affect its business and activities.
Employee Benefits: The Company believes in enabling a healthy workforce and providing a benefits program that is designed to attract, retain, and engage employees. In addition to competitive insurance, healthcare, and retirement offerings, examples of more innovative and workforce-specific benefits offerings include: mortgage discount program, student loan assistance program, well-being sessions, and personal finance education.
Employee Benefits: We believe in enabling a healthy workforce and providing a benefits program that is designed to attract, retain, and engage employees. In addition to competitive insurance, healthcare, and retirement offerings, examples of more innovative and workforce-specific benefits offerings include: mortgage discount program, student loan assistance program, well-being sessions, and personal finance education.
Provisions also limit or place significant burdens and costs on activities traditionally conducted by banking organizations, such as arranging and participating in swap and derivative transactions, proprietary trading and investing in private equity and other funds.
Provisions also limit or 3 Table of Contents place significant burdens and costs on activities traditionally conducted by banking organizations, such as arranging and participating in swap and derivative transactions, proprietary trading and investing in private equity and other funds.
Printed copies of this information may be obtained, without charge, by written request to the Corporate Secretary at 130 Merchant Street, Honolulu, Hawaii, 96813.
Printed copies of this information may be obtained, without charge, by written request to the Corporate Secretary at 130 Merchant Street, Honolulu, Hawaiʻi, 96813.
The Parent is also registered as a financial institution holding company under the Hawaii Code of Financial Institutions (the “Code”) and is subject to the registration, reporting, and examination requirements of the Code.
The Parent is also registered as a financial institution holding company under the Hawaiʻi Code of Financial Institutions (the “Code”) and is subject to the registration, reporting, and examination requirements of the Code.
Item 1. Business General Bank of Hawaii Corporation (“Bank of Hawai‘i Corporation” or the “Parent”) is a Delaware corporation and a bank holding company (“BHC”) headquartered in Honolulu, Hawaii. The Parent’s principal operating subsidiary, Bank of Hawaii (“Bank of Hawai‘i” or the “Bank”), was organized on December 17, 1897, and is chartered by the State of Hawaii.
Item 1. Business General Bank of Hawaii Corporation (“Bank of Hawai‘i Corporation” or the “Parent”) is a Delaware corporation and a bank holding company (“BHC”) headquartered in Honolulu, Hawai‘i. The Parent’s principal operating wholly-owned subsidiary, Bank of Hawai‘i (“Bank of Hawaiʻi” or the “Bank”), was organized on December 17, 1897, and is chartered by the State of Hawai‘i.
To help maintain Hawaii’s special culture of ‘ohana and working together toward common goals, continued attention was paid to engaging teammates in a hybrid environment. Based on employee feedback from surveys, online and in-person sessions were continued in 2023 to connect with employees and encourage collaboration.
To help maintain Hawaiʻi’s special culture of ‘ohana and working together toward common goals, continued attention was paid to engaging teammates in a hybrid environment. Based on employee feedback from surveys, online and in-person sessions were continued in 2024 to connect with employees and encourage collaboration.
These 4 Table of Contents restrictions include limits on loans to one borrower and conditions that must be met before such loans can be made. There is also an aggregate limitation on all loans to insiders and their related interests.
These restrictions include limits on loans to one borrower and conditions that must be met before such loans can be made. There is also an aggregate limitation on all loans to insiders and their related interests.
The right of the Parent, its shareholders, and creditors to participate in any distribution of the assets or earnings of its subsidiaries is also subject to the prior claims of creditors of those subsidiaries. For information regarding the limitations on the Bank’s ability to pay dividends to the Parent, see Note 11 to the Consolidated Financial Statements.
The right of the Parent, its shareholders, and creditors to participate in any distribution of the assets or earnings of its subsidiaries is also subject to the prior claims of creditors of those subsidiaries. For information regarding the limitations on the Bank’s ability to pay dividends to the Parent, see Note 11 in Item 8.
In general, the guidelines require appropriate systems and practices to identify and manage the risks and exposures specified in the guidelines before capital becomes impaired. Community Reinvestment and Consumer Protection Laws • Community Reinvestment.
In general, the guidelines require appropriate systems and practices to identify and manage the risks and exposures specified in the guidelines before capital becomes impaired. 5 Table of Contents Community Reinvestment and Consumer Protection Laws ▪ Community Reinvestment.
Transactions with Affiliates and Insiders Transactions between the Bank and any affiliate are governed by Sections 23A and 23B of the Federal Reserve Act. An affiliate of the Bank is any company or entity which controls, is controlled by or is under common control with the Bank which is not a subsidiary of the Bank.
“Notes to Consolidated Financial Statements.” Transactions with Affiliates and Insiders Transactions between the Bank and any affiliate are governed by Sections 23A and 23B of the Federal Reserve Act. An affiliate of the Bank is any company or entity which controls, is controlled by or is under common control with the Bank which is not a subsidiary of the Bank.
Termination of the Bank’s deposit insurance would end its ability to function as a commercial bank in Hawaii.
Termination of the Bank’s deposit insurance would end its ability to function as a commercial bank in Hawaiʻi.
Emerson, 46 Chief Strategy Officer since November 2023; Vice Chair since November 2022; Senior Executive Director of Mortgage Banking and Loans from February 2020 to November 2023; Executive Vice President and Senior Executive Director of eCommerce from September 2018 to February 2020. Patrick M.
Emerson, 47 Chief Retail Banking Officer since July 2024; Chief Strategy Officer since November 2023; Vice Chair since November 2022; Senior Executive Director of Mortgage Banking and Loans from February 2020 to November 2023; Senior Executive Vice President and Senior Executive Director of eCommerce from September 2018 to February 2020. Patrick M.
The SEC maintains a website, www.sec.gov, which contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC.
Securities and Exchange Commission (the “SEC”). The SEC maintains a website, www.sec.gov, which contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC.
See Note 11 to the Consolidated Financial Statements for more information. Dividend Restrictions The Parent is a legal entity separate and distinct from the Bank. The Parent’s principal source of funds to pay dividends on its common stock and to service its liabilities is dividends from the Bank.
See Note 11 in Item 8. “Notes to Consolidated Financial Statements” for more information. Dividend Restrictions The Parent is a legal entity separate and distinct from the Bank. The Parent’s principal source of funds to pay dividends on its common stock and preferred stock and to service its liabilities is dividends from the Bank.
Our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and all amendments to those reports can be found free of charge on our website at www.boh.com as soon as reasonably practicable after such material is electronically filed with or furnished to the U.S. Securities and Exchange Commission (the “SEC”).
“Notes to Consolidated Financial Statements” for more information. Our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and all amendments to those reports can be found free of charge on our website at www.boh.com as soon as reasonably practicable after such material is electronically filed with or furnished to the U.S.
The Bank’s subsidiaries are engaged in securities brokerage, investment advisory services, and providing credit insurance. We are organized into three business segments for management reporting purposes: Consumer Banking, Commercial Banking, and Treasury and Other. See Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) and Note 13 to the Consolidated Financial Statements for more information.
The Bank’s subsidiaries are engaged in securities brokerage, investment advisory services, and providing credit insurance. We are organized into three business segments for management reporting purposes: Consumer Banking, Commercial Banking, and Treasury and Other. See Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” (“MD&A”) and Note 13 in Item 8.
Key initiatives included the continued support of executive coaching to elevate leadership capabilities, a competitive Leadership Development Program, a hybrid Pathways to Professional Excellence cohort with 36 employees and an enhanced online performance management process that empowers the employee to own the first step of the performance review process.
Key initiatives include the continued support of executive coaching to elevate leadership capabilities, a new senior leader development series called the Leadership Excellence Forum, a competitive Leadership Development Program, a hybrid Pathways to Professional Excellence cohort with 36 employees from Oahu, the neighbor islands and the West Pacific and an enhanced online performance management process that empowers the employee to own the first step of the performance review process.
Bradley Shairson, 54 Vice Chair and Deputy Chief Risk Officer since May 2023; Chief Credit Officer from May 2023 to January 2024; Chief Operating Officer and Chief Risk Officer of Regions Bank Capital Markets from March 2017 to April 2023. Jeanne M.
Bradley Shairson, 55 Vice Chair and Chief Risk Officer since March 2024; Deputy Chief Risk Officer from May 2023 to March 2024; Chief Operating Officer and Chief Risk Officer of Regions Bank Capital Markets from March 2017 to April 2023. 8 Table of Contents
McGuirk, 54 Vice Chair and Chief Administrative Officer since September 2023; Senior Executive Vice President and Chief General Counsel from November 2020 to September 2023; Executive Vice President and General Counsel at Flagstar Bank from December 2014 to October 2020. James C.
McGuirk, 55 Vice Chair and Chief Administrative Officer since September 2023; Senior Executive Vice President and Chief General Counsel from November 2020 to September 2023; Executive Vice President and General Counsel at Flagstar Bank from December 2014 to October 2020. Taryn L. Salmon, 54 Vice Chair and Chief Information and Operations Officer since April 2024. S.
The assessment was based on reported uninsured deposits as of December 31, 2022. The FDIC could cease collection early or extend the special assessment period as they deem necessary depending on whether the amount the FDIC collects from the special assessment is higher or lower than the actual or estimated FDIC losses.
The FDIC could cease collection early or extend the special assessment period as they deem necessary depending on whether the amount the FDIC collects from the special assessment is higher or lower than the actual or estimated FDIC losses. The initial FDIC special assessment of $14.7 million was accrued during the year ended December 31, 2023.
Bankoh Investment Services, Inc., the broker-dealer and investment adviser subsidiary of the Bank, is incorporated in Hawaii and is regulated by the SEC, the Financial Industry Regulatory Authority, and the DCCA’s Insurance Division. Pacific Century Life Insurance Corporation is incorporated in Arizona and is primarily regulated by the State of Arizona Department of Insurance.
Bankoh Investment Services, Inc., the broker-dealer and investment adviser subsidiary of the Bank, is incorporated in Hawaiʻi and is regulated by the SEC, the Financial Industry Regulatory Authority, and the DCCA’s Insurance Division.
“Manager Connect”, formerly known as “Manager Excellence Forums” also returned in 2023 as a platform connecting managers so that they can learn from and support one another when facing real management issues, and discuss practical solutions.
“Manager Excellence Forums” continued in 7 Table of Contents 2024 as a platform connecting managers so that they can learn from and support one another when facing real management issues and discuss practical solutions.
Bank Secrecy Act / Anti-Money Laundering Laws The Bank is subject to the Bank Secrecy Act and other anti-money laundering laws and regulations, including the USA PATRIOT Act of 2001. The USA PATRIOT Act created new laws, regulations, and penalties, imposed significant new compliance and due diligence obligations, and expanded the application of those laws outside the U.S.
The USA PATRIOT Act created new laws, regulations, and penalties, imposed significant new compliance and due diligence obligations, and expanded the application of those laws outside the U.S.
Abbruzzese, 58 Vice Chair, Senior Executive Director of Wealth Management since January 2022; Regional Managing Director - Washington and Alaska of Wells Fargo from May 2009 to December 2021. Sharon M. Crofts, 58 Vice Chair, Client Solutions Group since April 2016. Matthew K.M.
Marco A. Abbruzzese, 59 Vice Chair, Senior Executive Director of Wealth Management since January 2022; Regional Managing Director - Washington, Oregon and Alaska of Wells Fargo from June 2009 to December 2021. Matthew K.M.
Failure to comply with consumer protection requirements may also result in our failure to obtain required bank regulatory approvals for transactions the Bank may wish to pursue, or prohibit us from engaging in such transactions even if approval is not required.
Failure to comply with consumer protection requirements may also result in our failure to obtain required bank regulatory approvals for transactions the Bank may wish to pursue, or prohibit us from engaging in such transactions even if approval is not required. 6 Table of Contents Bank Secrecy Act / Anti-Money Laundering Laws The Bank is subject to the Bank Secrecy Act and other anti-money laundering laws and regulations, including the USA PATRIOT Act of 2001.
The prohibitions under the Volcker Rule are subject to a number of statutory exemptions, restrictions, and definitions. The Volcker Rule has not had a material impact on the Company’s Consolidated Financial Statements, but we continue to evaluate its application to our current and future operations.
The prohibitions under the Volcker Rule are subject to a number of statutory exemptions, restrictions, and definitions. The Volcker Rule has not had a material impact on the Company’s financial condition and results of operation.
The Bank’s FDIC insurance assessment was $28.3 million in 2023, $6.5 million in 2022, and $6.5 million in 2021. In November 2023, the FDIC implemented a special assessment to recover the loss to the Deposit Insurance Fund following the closures of Silicon Valley Bank, Signature Bank and First Republic Bank earlier in the year.
In November 2023, the FDIC implemented a special assessment to recover the loss to the Deposit Insurance Fund following the closures of Silicon Valley Bank, Signature Bank and First Republic Bank. The assessment was based on reported uninsured deposits as of December 31, 2022.
Human Capital Management As of December 31, 2023, we employed 1,899 full-time equivalent employees, of which 1,792 are located in the State of Hawaii, with the remainder located in Guam and other Pacific Islands.
Human Capital Management As of December 31, 2024, we employed 1,865 full-time equivalent employees, of which 1,732 are located in the State of Hawaiʻi, with the remainder located in Guam, other Pacific Islands, and other U.S. states. None of our employees are subject to a collective bargaining agreement.
The regulations require disclosure of privacy policies and allow consumers to prevent certain personal information from being shared with non-affiliated third parties.
Federal banking regulators, pursuant to the Gramm-Leach-Bliley Act, have enacted regulations limiting the ability of banks and other financial institutions to disclose nonpublic consumer information to non-affiliated third parties. The regulations require disclosure of privacy policies and allow consumers to prevent certain personal information from being shared with non-affiliated third parties.
The Bank’s current CRA rating is “outstanding”. 5 Table of Contents • Consumer Protection Laws. In addition to the CRA, the Bank is subject to a number of federal laws designed to protect borrowers and promote lending to various sectors of the economy and population in connection with its lending activities.
In addition to the CRA, the Bank is subject to a number of federal laws designed to protect borrowers and promote lending to various sectors of the economy and population in connection with its lending activities. These include the Equal Credit Opportunity Act, the Truth-in-Lending Act, the Home Mortgage Disclosure Act and the Real Estate Settlement Procedures Act.
Ho, 58 Chairman and Chief Executive Officer since July 2010 and President since April 2008. Dean Y. Shigemura, 60 Vice Chair since December 2017; Chief Financial Officer since March 2017. Marco A.
Ho, 59 Chairman and Chief Executive Officer since July 2010; President from April 2008 to July 2024. James C. Polk, 58 President since July 2024; Chief Banking Officer since January 2022; Chief Commercial Officer from January 2020 to December 2021; Vice Chair since June 2016. Dean Y. Shigemura, 61 Vice Chair since December 2017; Chief Financial Officer since March 2017.
With the introduction of a new role dedicated to Culture and Employee Experience, deep focus was spent on creating a human-centric, inclusive and innovative environment that nurtures a strong sense of belonging, fuels continuous learning, and focuses on developing effective leaders, ultimately driving exceptional employee experience and sustainable organizational success.
A driving focus is creating a human-centric, inclusive and innovative environment that nurtures a strong sense of belonging, fuels continuous learning and develops effective leaders, who drive exceptional employee experiences and continued organizational success.
Changes in applicable laws or regulations, or a change in the way such laws or regulations are interpreted by regulatory agencies or courts, may have a material impact on our business, operations, and earnings. 2 Table of Contents The Parent The Parent is registered as a BHC under the Bank Holding Company Act of 1956, as amended (the “BHC Act”), and is subject to the supervision of and to examination by the Board of Governors of the Federal Reserve (the “FRB”).
The Parent The Parent is registered as a BHC under the Bank Holding Company Act of 1956, as amended (the “BHC Act”), and is subject to the supervision of and to examination by the Board of Governors of the Federal Reserve (the “FRB”).
The Bank continues to incorporate mental health, financial well-being, social health, community, and a positive employee experience in their well-being strategies, in addition to physical health. In 2023, the Bank made additional resources available to employees and continued to look for more opportunities to support employees and cultivate an environment where employees can be their whole selves.
We continue to incorporate mental health, financial well-being, social health, community, and a positive employee experience in their well-being strategies, in addition to physical health. In 2024, we expanded resources to support employees and actively sought new ways to foster an environment where employees feel empowered to bring their whole selves to work.
None of our employees are subject to a collective bargaining agreement. 6 Table of Contents People are the heart and soul of the Company, and as such, the Company values the contributions of all of its employees and is committed to building an engaged and connected employee community within the Company.
People are our heart and soul, and we value the contributions of all of our teammates. We are committed to building an engaged and connected employee community. We introduced a role dedicated to Culture and Employee Experience.
Key areas of focus for the Company include: Diversity and Inclusion: The Company believes that a diverse and inclusive workforce fosters an environment where everyone can thrive and be successful. As of December 31, 2023, approximately 88% of our workforce are minorities (non-Caucasian) and approximately 62% of our workforce are female.
Key areas of focus for us include: We believe in a work environment where teammates feel they belong and be their authentic selves leading them to thrive, contribute and succeed. As of December 31, 2024, approximately 88% of our workforce identifies as minorities (non-Caucasian) and approximately 61% of our employees are female.
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The Bank's share of the FDIC special assessment was $14.7 million which was recorded in the fourth quarter of 2023 and is payable in eight quarterly installments starting in June 2024.
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Changes in applicable laws or regulations, or a change in the way such laws or regulations are interpreted by regulatory agencies or courts, may have a material impact on our business, operations, and earnings.
Removed
These include the Equal Credit Opportunity Act, the Truth-in-Lending Act, the Home Mortgage Disclosure Act and the Real Estate Settlement Procedures Act. Federal banking regulators, pursuant to the Gramm-Leach-Bliley Act, have enacted regulations limiting the ability of banks and other financial institutions to disclose nonpublic consumer information to non-affiliated third parties.
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The federal banking regulators regularly issue new guidance and standards, and update existing guidance and standards, regarding cybersecurity intended to enhance cyber risk management among financial institutions.
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Of our senior leaders and managers, 82% are minorities and 60% are female. We conduct an external pay equity study periodically to evaluate the gender pay gap and confirm one does not exist. Employee Development and Training: The Company is committed to providing all employees with the opportunity to develop personally and professionally.
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Financial institutions are expected to comply with such guidance and standards and to accordingly develop appropriate security controls and risk management process. 2 Table of Contents In November 2021, the United States federal bank regulatory agencies adopted a rule regarding notification requirements for banking organizations related to significant computer security incidents.
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Polk, 57 Chief Banking Officer since January 2022; Chief Commercial Officer from April 2020 to December 2021; Vice Chair since June 2016. Mary E. Sellers, 67 Vice Chair and Chief Risk Officer since July 2005. S.
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Under this rule, a bank holding company, such as Parent, and a national bank, such as the Bank, are required to notify the Federal Reserve of OCC, respectively, within 36 hours of incidents that have materially disrupted or degraded, or are reasonably likely to materially disrupt or degrade, the banking organization's ability to deliver services to a material portion of its customer base, jeopardize the viability of key operations of the banking organization, or pose a threat to the financial stability of the United States.
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Dressel, 62 Principal Accounting Officer, Senior Vice President and Controller since November 2022; Global Controller of Blockchain.com from September 2021 to October 2022; Senior Vice President and Controller of First Interstate Bank from October 2018 to September 2021.
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Pacific Century Life Insurance Corporation is a subsidiary of the Bank and is incorporated in Arizona and is primarily regulated by the State of Arizona Department of Insurance.
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The Bank’s FDIC insurance assessment was $17.9 million in 2024, $28.3 million in 2023 and $6.5 million in 2022. The increase in the FDIC insurance during 2023 was primarily related to a special assessment, discussed below.
Added
Subsequent adjustments increased the special assessment by $1.9 million to $16.6 million. These adjustments were accrued during the year ended December 31, 2024. The special assessment is being paid in eight quarterly installments, which began in June 2024.
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The Bank’s current CRA rating is “outstanding.” In October 2023, the U.S. banking agencies issued a final rule to amend their regulations implementing the CRA.
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The rule materially revises the current CRA framework, including the assessment areas in which a bank is evaluated to include activities associated with online and mobile banking, the tests used to evaluate the Bank in its assessment areas, new methods of calculating credit for lending, investment, and service activities, and additional data collection and reporting requirements.
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Most of the rule's provisions will become applicable on January 1, 2026. Reporting of the collected data will not be required until 2027. ▪ Consumer Protection Laws.
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These agencies are focusing their examinations on anti-money laundering compliance, and we will continue to monitor and augment, where necessary, the Company's anti-money laundering compliance programs. In January 2021, the Anti-Money Laundering Act of 2020 (“AMLA”), which amends the Bank Secrecy Act, was enacted.
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Among other things, the AMLA codifies a risk-based approach to anti-money laundering compliance for financial institutions; requires the U.S. Department of the Treasury to promulgate priorities for anti-money laundering and countering the financing of terrorism policy' requires the development of standards by the U.S.
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Department of the Treasury for testing technology and internal processes for Bank Secrecy Act compliance; expands enforcement and investigation-related authority, including a significant expansion in the available sanctions for certain Bank Secrecy Act violations; and expands Bank Secrecy Act whistleblower incentives and protections.
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Many of the statutory provisions in the AMLA will require additional rulemaking, reports and other measures, and the impact of the AMLA will depend on, among other measures, the impact of the AMLA will depend on, among other things, rulemaking and implementation guidance.
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Among our senior leaders and managers, 82% are minorities and 59% are female. We conduct regular external pay equity studies to evaluate compensation practices and confirm that gender pay gaps do not exist. Our commitment is to create a workplace where every individual feels valued, known, empowered and inspired.
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Leadership and Employee Development: We are committed to the success of our teammates and have focused on their growth and development both personally and professionally. We nurture a collaborative, digitally connected workplace aligned to the changing needs of the work environment.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

64 edited+42 added−11 removed64 unchanged
Biggest changeIn addition, our communications and information systems and operations (including those of third parties that facilitate our business activities) could be damaged or interrupted due to events such as natural or human-caused disasters (including public health crises) or extreme weather (including as a result of climate change), geopolitical events and security issues, computer viruses, physical or electronic break-ins, operational failures, and similar events or disruptions. 12 Table of Contents Although we have safeguards and business continuity plans in place, our business operations may be adversely affected by significant and widespread disruption to our physical infrastructure or operating systems that support our business and our customers, resulting in financial losses, loss of customers, or damage to our reputation.
Biggest changeIn addition, our communications and information systems and operations (including those of third parties that facilitate our business activities) could be damaged or interrupted due to events such as natural or human-caused disasters (including public health crises) or extreme weather (including as a result of climate change), geopolitical events and security issues, computer viruses, physical or electronic break-ins, operational failures, and similar events or disruptions.
These recent events may also result in potentially adverse changes to laws or regulations governing banks and bank holding companies or result in the impositions of restrictions through supervisory or enforcement activities, including higher capital requirements, which could have a material impact on our business.
These events may also result in potentially adverse changes to laws or regulations governing banks and bank holding companies or result in the impositions of restrictions through supervisory or enforcement activities, including higher capital requirements, which could have a material impact on our business.
Each agreement under which the Company acts as servicer generally specifies a standard of responsibility for actions taken by the Company in such capacity and provides protection against expenses and liabilities incurred by the Company when acting in compliance with the respective servicing agreements.
Additionally, each agreement under which the Company acts as servicer generally specifies a standard of responsibility for actions taken by the Company in such capacity and provides protection against expenses and liabilities incurred by the Company when acting in compliance with the respective servicing agreements.
Various federal and state laws and regulations impose limitations on the payment of dividends, such as requiring regulatory approval under certain circumstances. Limitations on the Parent’s ability to receive dividends from the Bank could have a material adverse effect on the Parent’s ability to meet its obligations, pay dividends to shareholders, or repurchase stock.
Various federal and state laws and regulations impose limitations on the payment of dividends, such as requiring regulatory approval under certain circumstances. Limitations on the Parent’s ability to receive dividends from the Bank could have a material adverse effect on the Parent’s ability to meet its obligations or pay dividends to shareholders.
In addition, if one or more financial institutions are found to have violated a law or regulation relating to certain business activities, this could lead to investigations by regulators or other governmental agencies of the same or similar activities by other financial institutions, including the Company, and large fines and remedial measures that may have been imposed in resolving earlier investigations for the same or similar activities at other financial institutions may be used as the basis for future settlements.
In addition, if one or more financial institutions are found to have violated a law or regulation relating to certain business activities, this could lead to investigations by regulators or other governmental agencies of the same or similar activities by other financial institutions, including the Company, 17 Table of Contents and large fines and remedial measures that may have been imposed in resolving earlier investigations for the same or similar activities at other financial institutions may be used as the basis for future settlements.
Although we do not anticipate the new corporate minimum income tax will currently apply to us, changes in our business and any future regulations or other guidance on the interpretation and application of the new corporate minimum tax, as well as the potential application of the share repurchase excise tax, may result in additional taxes payable by us, which could materially and adversely affect our financial results and operations.
Although we do not anticipate the new corporate minimum income tax will currently apply to us, changes in our business and any future regulations or other guidance on the interpretation and application of the new corporate minimum tax, as well as the potential application of the share repurchase excise tax, may result in additional taxes payable by us, which could materially and adversely affect our 13 Table of Contents financial results and operations.
Management makes various assumptions and judgments about the loan and lease portfolios in determining the level of the reserve for credit losses. Many of these assumptions are based on current economic conditions. Should economic conditions stagnate or deteriorate nationally or in Hawaii, we may be required to take increased reserves and/or experience higher credit losses in future periods.
Management makes various assumptions and judgments about the loan and lease portfolios in determining the level of the reserve for credit losses. Many of these assumptions are based on current economic conditions. Should economic conditions stagnate or deteriorate nationally or in Hawaiʻi, we may be required to take increased reserves and/or experience higher credit losses in future periods.
Changes in the capital markets could materially affect the level of assets under management and the demand for our other fee-based services Changes in the capital markets could affect the volume of income from and demand for our fee-based services. Our investment management revenues depend in large part on the level of assets under management.
Changes in the capital markets could affect the volume of income from and demand for our fee-based services. Our investment management revenues depend in large part on the level of assets under management.
Upon receipt of a repurchase request, the Company works with investors or insurers to arrive at a mutually agreeable resolution. Repurchase demands are typically reviewed on an individual loan by loan basis to validate the claims made by the investor or insurer and to determine if a contractually required repurchase event has occurred.
Upon receipt of a 15 Table of Contents repurchase request, the Company works with investors or insurers to arrive at a mutually agreeable resolution. Repurchase demands are typically reviewed on an individual loan by loan basis to validate the claims made by the investor or insurer and to determine if a contractually required repurchase event has occurred.
To the extent that the Bank or its customers experience increases in costs, reductions in the value of assets, constraints on operations or similar concerns driven by changes in regulation relating to climate change, the Bank’s business and results of operations may be adversely affected. Disruptions, instability and failures in the banking industry.
To the extent that the Bank or its customers experience increases in costs, reductions in the value of assets, constraints on operations or similar concerns driven by changes in regulation relating to climate change, the Bank’s business and results of operations may be adversely affected. Disruptions, instability and failures in the banking industry may negatively impact us.
These standards and remedies are determined by servicing guides issued by the investors as well as the contract provisions established between the investors and the Company. Remedies could include repurchase of an affected loan. 14 Table of Contents The requirement to record certain assets and liabilities at fair value may adversely affect our financial results.
These standards and remedies are determined by servicing guides issued by the investors as well as the contract provisions established between the investors and the Company. Remedies could include repurchase of an affected loan. The requirement to record certain assets and liabilities at fair value may adversely affect our financial results.
As a result of greater regulatory scrutiny of consumer financial products as a whole, the Company has become subject to more and 11 Table of Contents expanded regulatory examinations, which also could result in increased costs as well as harm to our reputation in the event of a finding that we have not complied with the increased regulatory requirements.
As a result of greater regulatory scrutiny of consumer financial products as a whole, the Company has become subject to more and expanded regulatory examinations, which also could result in increased costs as well as harm to our reputation in the event of a finding that we have not complied with the increased regulatory requirements.
The occurrence of any such failures, disruptions or security breaches could have a negative impact on our results of operations, financial condition, and cash flows as well as damage our brand and reputation. 13 Table of Contents Our mortgage banking income may experience significant volatility.
The occurrence of any such failures, disruptions or security breaches could have a negative impact on our results of operations, financial condition, and cash flows as well as damage our brand and reputation. Our mortgage banking income may experience significant volatility.
Our business operations could suffer to the extent the Bank cannot utilize its branch network due to damage from weather or other natural disasters. Real estate is also utilized as collateral for many of our loans.
Our business operations could suffer to the extent the Bank cannot utilize its branch network due to damage from weather or other natural disasters. 16 Table of Contents Real estate is also utilized as collateral for many of our loans.
Cuts in defense and other security spending could have an adverse impact on the economies in which we operate, which could adversely affect our business, financial condition, and results of operations. Changes in interest rates could adversely impact our results of operations and capital.
Cuts in defense and other security spending in the State of Hawaiʻi could have an adverse impact on the economies in which we operate, which could adversely affect our business, financial condition, and results of operations. Changes in interest rates could adversely impact our results of operations and capital.
For the year ended December 31, 2023, the Company repurchased three residential mortgage loans with an aggregate unpaid principal balance totaling $0.6 million as a result of the representation and warranty provisions contained in these contracts. The loans were delinquent as to principal and interest at the time of repurchase, however, no material losses were incurred related to these repurchases.
For the year ended December 31, 2024, the Company repurchased three residential mortgage loans with an aggregate unpaid principal balance totaling $1.1 million as a result of the representation and warranty provisions contained in these contracts. The loans were delinquent as to principal and interest at the time of repurchase, however, no material losses were incurred related to these repurchases.
A natural disaster in Hawaii or the Pacific Islands could cause property values in the affected areas to fall, might limit our customers' access to adequate property insurance, or otherwise impact borrowers’ ability to pay their financial obligations, any of which would increase our exposure to loan defaults and could require the Bank to record an impairment on our financial statements.
A natural disaster in Hawaiʻi or the West Pacific could cause property values in the affected areas to fall, might limit our customers' access to adequate property insurance, or otherwise impact borrowers’ ability to pay their financial obligations, any of which would increase our exposure to loan defaults and could require the Bank to record an impairment on our financial statements.
Our dividend payments and/or stock repurchases may change from time-to-time, and we cannot provide assurance that we will continue to declare dividends and/or repurchase stock in any particular amounts or at all. Dividends and/or stock repurchases are subject to capital availability and periodic determinations by our Board of Directors.
Our dividend payments may change from time-to-time, and we cannot provide assurance that we will continue to declare dividends in any particular amounts or at all. Dividends on our common stock are subject to capital availability and periodic determinations by our Board of Directors.
Substantial legal liability or significant regulatory action against us could have material financial effects or cause significant reputational harm to us, which in turn could seriously harm our business prospects. 15 Table of Contents In recent years, regulatory enforcement and fines have increased across the banking and financial services sector.
Substantial legal liability or significant regulatory action against us could have material financial effects or cause significant reputational harm to us, which in turn could seriously harm our business prospects. In recent years, regulatory enforcement and fines have increased across the banking and financial services sector.
In addition, Hawaii’s appellate courts have made rulings that increase the complexity and risk of nonjudicial, or out-of-court, foreclosures. At the same time, a chronic backlog of cases in the Hawaii courts has slowed the judicial foreclosure process, which delays the Bank’s ability to take over, preserve, and sell the mortgaged property.
In addition, Hawaiʻi’s appellate courts have made rulings that increase the complexity and risk of nonjudicial, or out-of-court, foreclosures. At the same time, a chronic backlog of cases in the Hawaiʻi courts has slowed the judicial foreclosure process, which delays the Bank’s ability to take over, preserve and sell the mortgaged property.
Further increases in our assessment fees may have an adverse effect on our results of operations and financial condition. Item 1B. Unresolv ed Staff Comments None. 16 Table of Contents
Further increases in our assessment fees may have an adverse effect on our results of operations and financial condition. Item 1B. Unresolv ed Staff Comments None.
As of December 31, 2023, the unpaid principal balance of residential mortgage loans sold by the Company was $2.0 billion. The agreements under which the Company sells residential mortgage loans require delivery of various documents to the investor or its document custodian.
As of December 31, 2024, the unpaid principal balance of residential mortgage loans sold and serviced by the Company was $2.0 billion. The agreements under which the Company sells residential mortgage loans require delivery of various documents to the investor or its document custodian.
Economic and inflationary pressure on consumers and uncertainty regarding the economic improvement could result in changes in consumer and commercial spending, borrowing and savings habits. Such conditions could have a material adverse effect on the credit quality of our loans and our business, financial condition and results of operations.
Economic and inflationary pressure on consumers and uncertainty regarding the economic 9 Table of Contents environment could result in changes in consumer and commercial spending, borrowing and savings habits. Such conditions could have a material adverse effect on the credit quality of our loans and our business, financial condition and results of operations.
In addition, our credit risk may be exacerbated when the collateral held by us cannot be realized upon or is liquidated at prices not sufficient to recover the full amount of the loan or derivative exposure due us. Such losses could materially affect our financial condition or results of operations.
In addition, our credit risk may be exacerbated when the collateral held by us cannot be realized upon or is liquidated at prices not sufficient to recover the full amount of the loan or derivative exposure due us. Such losses could materially affect our financial condition or results of operations. We have experienced increases in FDIC insurance assessments.
Reputational risk, or the risk to our business, earnings, liquidity, and capital from negative public opinion, could result from our actual or alleged conduct in a variety of areas, including legal and regulatory compliance, lending practices, corporate governance, litigation, ethical issues, or inadequate protection of customer information. We expend significant resources to comply with regulatory requirements.
Reputational risk, or the risk to our business, earnings, liquidity, and capital from negative public opinion, could result from our actual or alleged conduct in a variety of areas, including legal and regulatory compliance, lending practices, corporate governance, litigation, ethical issues, or inadequate protection of customer information.
Market volatility that leads customers to 10 Table of Contents liquidate investments or move investments to other institutions or asset classes, as well as lower asset values can reduce our level of assets under management, thereby decreasing our investment management revenues. The Parent’s liquidity is dependent on dividends from the Bank.
Market volatility that leads customers to liquidate investments or move investments to other institutions or asset classes, as well as lower asset values can reduce our level of assets under management, thereby decreasing our investment management revenues. Risks Related to Common Stock The Parent’s liquidity is dependent on dividends from the Bank.
Recent events impacting the financial services industry, including the failure of Silicon Valley Bank, Signature Bank and First Republic Bank, have resulted in decreased confidence in banks among consumer and commercial depositors, other counterparties and investors, as well as significant disruption, volatility and reduced valuations of equity and other securities of banks in the capital markets.
Events impacting the financial services industry, such as the 2023 failures of Silicon Valley Bank, Signature Bank and First Republic Bank, have resulted in decreased confidence in banks among uninsured consumer and commercial depositors, other counterparties and investors, as well as significant disruption, volatility and reduced valuations of equity and other securities of banks in the capital markets.
The U.S. military has a major presence in Hawaii and the Pacific Islands. As a result, the U.S. military is an important aspect of the economies in which we operate. The funding of the U.S. military is subject to the overall U.S.
The U.S. military has a major presence in Hawaiʻi and the West Pacific. As a result, the U.S. military is an important aspect of the economies in which we operate. The funding of the U.S. military is subject to the overall U.S.
These variables could adversely affect mortgage banking income. Our mortgage loan servicing business may be impacted if we do not meet our obligations, or if servicing standards change. We act as servicer for mortgage loans sold into the secondary market, primarily to government sponsored enterprises (“GSEs”) such as Fannie Mae.
Our mortgage loan servicing business may be impacted if we do not meet our obligations, or if servicing standards change. We act as servicer for mortgage loans sold into the secondary market, primarily to government sponsored enterprises (“GSEs”) such as Fannie Mae.
In light of several recent high-profile data breaches involving other companies’ losses of customer personal and financial information, we believe this risk could cause customer and/or Bank losses, damage to our brand, and increase our costs through the ongoing cost of technology investments to improve security, as well as the potential financial and reputational impact of a cyber security incident involving the Company.
In light of several recent high-profile data breaches involving other companies’ losses of customer personal and financial information, a material cybersecurity incident could cause customer and/or Bank losses, damage to our brand, and increase our costs through the 14 Table of Contents ongoing cost of technology investments to improve security, as well as the potential financial and reputational impact of a cyber security incident involving the Company.
Financial institutions, such as ourselves, could face increased scrutiny or be viewed as higher risk by regulators and/or the investor community, which could negatively affect its results of operations and financial condition.
Financial institutions, such as ourselves, could face increased scrutiny or be viewed as higher risk by regulators and/or the investor community, which could negatively affect our results of operations and financial condition or the market for our common stock.
These pools of FHA-insured and VA-guaranteed residential mortgage loans are securitized by Ginnie Mae. The agreements under which the Company sells residential mortgage loans to Fannie Mae or Ginnie Mae and the insurance or guaranty agreements with FHA and VA contain provisions that include various representations and warranties regarding the origination and characteristics of the residential mortgage loans.
The agreements under which the Company sells residential mortgage loans to Fannie Mae or Ginnie Mae and the insurance or guaranty agreements with FHA and VA contain provisions that include various representations and warranties regarding the origination and characteristics of the residential mortgage loans.
The financial services industry is also likely to become more competitive as further technological advances enable more companies, including non-depository institutions, to provide financial services. Also, some of our competitors, through delivery channels such as the Internet, may be based outside of the markets that we serve.
Our future performance will depend on our ability to respond timely to technological change. The financial services industry is likely to become more competitive as further technological advances enable more companies, including non-depository institutions, to provide financial services. Also, some of our competitors, through delivery channels such as the Internet, may be based outside of the markets that we serve.
We may be impacted by concerns regarding the soundness or 9 Table of Contents creditworthiness of other financial institutions, which can cause substantial and cascading disruption within the financial markets and increased expenses. Any reduction in defense spending by the federal government could adversely impact the economy in Hawaii and the Pacific Islands.
We may be impacted by concerns regarding the soundness or creditworthiness of other financial institutions, which can cause substantial and cascading disruption within the financial markets and increased expenses. Any reduction in defense spending by the federal government in the State of Hawai ʻ i could adversely impact the economy in Hawaiʻi and the West Pacific.
They may significantly affect the markets in which we do business, the markets for and value of our investments, and our ongoing operations, costs, and profitability.
These laws and regulations may significantly affect the markets in which we do business, the markets for and value of our assets and investments, and our ongoing operations, costs, and profitability.
However, in the event of unexpected future developments, it is possible that the ultimate resolution of those matters may be material to our financial results for any particular period. See the Contingencies section of Note 20 to the Consolidated Financial Statements for more information.
However, in the event of unexpected future developments, it is possible that the ultimate resolution of those matters may be material to our financial results for any particular period. See Note 20 in Item 8. “Notes to the Consolidated Financial Statements” under the discussion related to Contingencies for more information.
Lower visitor arrivals or spending, real or threatened acts of war or terrorism, public unrest, increases in energy costs, inflation, the availability of affordable air transportation, climate change, natural disasters and adverse weather, public health issues including the COVID-19 pandemic, and federal, State of Hawaii and local government budget issues may impact consumer and corporate spending.
Lower visitor arrivals or spending, unemployment rates, occupancy rates, real or threatened acts of war or terrorism, public unrest, increases in energy costs, inflation, tariffs, the availability of affordable air transportation, climate change, natural disasters and adverse weather, public health issues, and federal, State of Hawaiʻi and local government budget issues may impact consumer and corporate spending.
Increased credit losses for the Bank could result if economic conditions stagnate or deteriorate. The risk of nonpayment on loans and leases is inherent in all lending activities. We maintain a reserve for credit losses to absorb estimated expected credit losses over the life of the loan and lease portfolio as of the balance sheet date.
The risk of nonpayment on loans and leases is inherent in all lending activities. We maintain a reserve for credit losses to absorb estimated expected credit losses over the life of the loan and lease portfolio as of the balance sheet date.
Natural disasters and adverse weather could negatively affect real estate property values and bank operations. Real estate and real estate property values play an important role for the Bank in several ways. The Bank owns or leases many real estate properties in connection with its operations, primarily located in Hawaii with its unique weather and geology.
Real estate and real estate property values play an important role for the Bank in several ways. The Bank owns or leases many real estate properties in connection with its operations, primarily located in Hawaiʻi with its unique weather and geology.
We may be penalized and, in limited instances required to repurchase certain mortgages, due to alleged failures to adhere to these requirements. Should GSEs change the requirements in their servicing handbooks, we may sustain higher compliance costs.
We may be penalized and, in limited instances required to repurchase certain mortgages, due to alleged failures to adhere to these requirements. Should GSEs change the requirements in their servicing handbooks, we may sustain higher compliance costs. Risks related to representation and warranty provisions may impact our mortgage loan servicing business.
Mortgage banking income may also be impacted by changes in our strategy to manage our residential mortgage portfolio. For example, we may occasionally decide to add more conforming saleable loans to our portfolio (as opposed to selling the loans in the secondary market) which would reduce our gains on sales of residential mortgage loans.
For example, we may occasionally decide to add more conforming saleable loans to our portfolio (as opposed to selling the loans in the secondary market) which would reduce our gains on sales of residential mortgage loans. These variables could adversely affect mortgage banking income.
The Dodd-Frank Act, other consumer protection laws, and their implementing rules and regulations are likely to continue to result in increased compliance costs, along with possible restrictions on our products, services and manner of operations, any of which may have a material adverse effect on our results of operations and financial condition.
“Business – Supervision and Regulation” of this Annual Report on Form 10-K for information regarding regulation affecting the Company. 12 Table of Contents The Dodd-Frank Act, other consumer protection laws, and their implementing rules and regulations are likely to continue to result in increased compliance costs, along with possible restrictions on our products, services and manner of operations, any of which may have a material adverse effect on our results of operations and financial condition.
Inability to access short-term funding, loss of client deposits or changes in our credit ratings could increase the cost of funding, limit access to capital markets or negatively impact our overall liquidity or capitalization.
Inability to access wholesale funding, loss of client deposits or changes in our credit ratings could negatively impact our overall liquidity or capitalization, including by increasing the cost of capital or limiting our ability to access capital markets.
The CFPB has exercised its broad rule-making, supervisory, and examination authority of consumer financial products, as well as expanded data collection and enforcement powers, over depository institutions with more than $10.0 billion in assets.
The CFPB has exercised its broad rule-making, supervisory, and examination authority of consumer financial products, as well as expanded data collection and enforcement powers, over depository institutions with more than $10.0 billion in assets. Regulation of overall safety and soundness, the CRA, federal housing and flood insurance, as they pertain to consumer financial products and services, remains with the FRB.
Risks Related to Regulatory Changes Fiscal and Monetary Policy changes may significantly impact our profitability and liquidity The Company’s business and earnings are significantly affected by the fiscal and monetary policies of the Federal Government and its agencies.
A reduction in or elimination of our dividend payments could have a negative effect on our stock price. Risks Related to Regulatory Changes Fiscal and monetary policy changes may significantly impact our profitability and liquidity. The Company’s business and earnings are significantly affected by the fiscal and monetary policies of the Federal Government and its agencies.
The level of interest rates can impact the estimated fair value of investment securities. Mark-to-market values of non-hedged available-for-sale investment securities are recorded in shareholders' equity as a component of other comprehensive income, while hedged investment securities are recorded in interest income.
The level of interest rates can impact the estimated fair value of investment securities. Mark-to-market values of non-hedged available-for-sale investment securities are recorded in shareholders’ equity as a component of other comprehensive income. Disruptions in the capital markets may require us to reserve for credit losses in future periods with respect to investment securities in our portfolio.
Risks related to representation and warranty provisions may impact our mortgage loan servicing business The Company sells residential mortgage loans in the secondary market primarily to Fannie Mae. The Company also pools Federal Housing Administration (“FHA”) insured and U.S. Department of Veterans Affairs (“VA”) guaranteed residential mortgage loans for sale to Ginnie Mae.
The Company sells residential mortgage loans in the secondary market primarily to Fannie Mae. The Company also pools Federal Housing Administration (“FHA”) insured and U.S. Department of Veterans Affairs (“VA”) guaranteed residential mortgage loans for sale to Ginnie Mae. These pools of FHA-insured and VA-guaranteed residential mortgage loans are securitized by Ginnie Mae.
Deterioration of economic conditions, locally, nationally, and internationally could adversely affect the quality of our assets, credit losses, and the demand for our products and services, which could lead to lower revenues, higher expenses, and lower earnings.
Deterioration of business and economic conditions, particularly in Hawaiʻi and the West Pacific, has in the past adversely affected, and in the future could adversely affect the quality of our assets, credit losses, and the demand for our products and services, which could lead to lower revenues, higher expenses, and lower earnings.
These events occurred during a period of rapidly rising interest rates which, among other things, has resulted in unrealized losses in longer duration securities and loans held by banks, more competition for bank deposits and may increase the risk of a potential recession.
These events occurred during a period of rapidly rising interest rates which, among other things, resulted in unrealized losses in longer duration securities and loans held by banks, and more competition for bank deposits. These events have, and could continue to, adversely impact the market price and volatility of the Company’s common stock.
Our business and earnings are closely tied to the economies of Hawaii and the Pacific Islands. These local economies rely heavily on tourism, the U.S. military, real estate, construction, government, and other service-based industries.
These local economies rely heavily on tourism, the U.S. military, real estate, construction, government, and other service-based industries.
However, in August 2023, wildfires broke out in West Maui destroying the historic town of Lahaina as well as structures and farmland in Upcountry Maui and North Kihei. Roughly 2,200 structures were lost in the fire, 86% of which were homes. Although hotels have reopened, Maui’s visitor industry will continue to be impacted in the coming years.
In August 2023, wildfires broke out in West Maui destroying the historic town of Lahaina as well as structures and farmland in Upcountry Maui and North Kihei. Roughly 2,200 structures were lost in the fire, 85% of which were homes.
Negative public opinion could damage our reputation and adversely impact our earnings and liquidity.
Negative public opinion could damage our reputation and adversely impact our earnings and liquidity. Our bank's reputation is critical to establishing and retaining our customer relationships.
If we are unable to continue to fund loans and other assets through customer deposits or access capital markets on favorable terms or if we otherwise fail to manage our liquidity effectively, our liquidity, net interest margin, financial results and conditions may be adversely affected. Credit losses could increase if economic conditions stagnate or deteriorate.
If we are unable to continue to fund loans and other assets through customer deposits or access capital markets on favorable terms or if we otherwise fail to manage our liquidity effectively, our liquidity, net interest margin, financial results and condition may be adversely affected. 10 Table of Contents Fixed rate loans increase our exposure to interest rate risk in a rising rate environment because interest-bearing liabilities would be subject to repricing before assets become subject to repricing.
We have experienced increases in FDIC insurance assessments due to the bank failures that occurred in 2023. In November 2023, the FDIC implemented a special assessment to recover the loss to the Deposit Insurance Fund following the failures of Silicon Valley Bank, Signature Bank, and First Republic Bank earlier in the year.
Special assessments are made by the FDIC based on reported uninsured deposits and often times in response to particular events. In November 2023, the FDIC implemented a special assessment to recover the loss to the Deposit Insurance Fund following the failures of Silicon Valley Bank, Signature Bank, and First Republic Bank.
The level of domestic and international visitor arrivals and spending, housing prices, and unemployment rates are some of the metrics that we continually monitor. We also monitor the value of collateral, such as real estate, that secures the loans we have made.
The level of domestic and international visitor arrivals and spending, housing prices, real estate values, and unemployment rates are some of the metrics that we regularly monitor. We are also continuing to monitor Maui's recovery from the August 2023 wildfire.
The actual amount and timing of future dividends and share repurchases, if any, will depend on market and economic conditions, applicable SEC rules, federal and state regulatory and supervisory restrictions, and various other factors.
We continue to evaluate the potential impact that regulatory proposals may have on our liquidity and capital management strategies, including those required under the Dodd-Frank Act. The actual amount and timing of future dividends, if any, will depend on market and economic conditions, applicable SEC rules, federal and state regulatory and supervisory restrictions, and various other factors.
However, we suspended share repurchases in April 2023 in response to the turmoil in the banking industry due to several significant bank failures. The Parent also paid cash dividends of $111.8 million on common shares during 2023. In January 2024, the Parent’s Board of Directors declared a quarterly cash dividend of $0.70 per share on the Parent’s outstanding common shares.
There can be no assurance that the Parent will continue to declare cash dividends. The Parent paid cash dividends of $112.3 million on common shares during 2024. In January 2025, the Parent’s Board of Directors declared a quarterly cash dividend of $0.70 per share on the Parent’s outstanding common shares.
Disruptions in the capital markets may require us to reserve for credit losses in future periods with respect to investment securities in our portfolio. The amount and timing of any credit allowance recognized will be measured as the difference between the security’s amortized cost basis and the amount expected to be collected over the security’s lifetime.
The amount and timing of any credit allowance recognized will be measured as the difference between the security’s amortized cost basis and the amount expected to be collected over the security’s lifetime. Natural disasters and adverse weather in Hawaiʻi and the West Pacific may negatively affect real estate property values and our operations.
Item 1A. Ri sk Factors There are a number of risks and uncertainties that could negatively affect our business, financial condition or results of operations. We are subject to various risks resulting from changing economic, environmental, political, industry, business, financial and regulatory conditions.
Item 1A. Ri sk Factors There are a number of risks and uncertainties, including those material risk factors described below, that could negatively affect our business, financial condition, results of operations, liquidity and the trading price of our common stock.
Additionally, financial markets may be adversely affected by the current or anticipated impact of military conflict, including continuing military conflict between Israel and Hamas, Russia and Ukraine, terrorism or other geopolitical events. There has been significant improvement in tourism and general economic conditions in Hawaii since the beginning of the COVID-19 pandemic.
Additionally, financial markets may be adversely affected by the current or anticipated impact of military conflict, terrorism or other geopolitical events.
Legislation and regulatory initiatives affecting the financial services industry, including new interpretations, restrictions and requirements, could detrimentally affect the Company’s business. The Dodd-Frank Act, enacted in July 2010, triggered sweeping reforms to the financial services industry.
Legislation and regulatory initiatives affecting the financial services industry, including new interpretations, restrictions and requirements, could detrimentally affect the Company’s business. We are and will continue to be subject to extensive examination, supervision and comprehensive regulation by federal bank regulatory agencies.
Compliance with Basel III resulted in increased capital, liquidity, and disclosure requirements. See the “Regulatory Initiatives Affecting the Banking Industry” section in MD&A for more information. Changes in income tax laws and interpretations, or in accounting standards, could materially affect our financial condition or results of operations.
Higher capital levels could also lower our return on equity. Changes in income tax laws and interpretations, or in accounting standards, could materially affect our financial condition or results of operations.
The assessment was based on reported uninsured deposits as of December 31, 2022. The Company's share of the FDIC special assessment was $14.7 million which was recorded in the fourth quarter of 2023 and is payable in eight quarterly installments starting in June 2024.
The assessment was based on reported uninsured deposits as of December 31, 2022. The Company's share of the FDIC special assessment was approximately $16.6 million. We may also experience increases in our base assessments depending on increases in our assessment base or assessment rate.
Changes in the capital, leverage, liquidity requirements for financial institutions could materially affect future requirements of the Company. Under Basel III, financial institutions are required to have more capital and a higher quality of capital. Under the final rules issued by the banking regulators, minimum requirements increased for both the quantity and quality of capital held by the Company.
Changes in the capital, leverage, liquidity requirements for financial institutions could materially affect future requirements of the Company. We are subject to regulatory requirements relating to capital, which are subject to change from time to time.
Removed
The risks and uncertainties described below are what management believes are the material risk factors that could affect our business and operations, although they are not the only risks that may have a material adverse effect on the Company. 8 Table of Contents Risks Related to Macroeconomic and Political Conditions Adverse changes in business and economic conditions, in particular those of Hawaii, Guam and other Pacific Islands, could lead to lower revenue, lower asset quality, and lower earnings.
Added
To the extent that any of the information in this Form 10-K constitutes forward-looking statements, the risk factors below are cautionary statements identifying important factors that could cause actual results to differ materially from those expressed in any forward-looking statements made by us or on our behalf. See Item 7.
Removed
The borrowing power of our customers could also be negatively impacted by a decline in the value of collateral. A prolonged period of inflation may impact our profitability by negatively impacting our fixed costs and expenses.
Added
“Management's Discussion and Analysis of Financial Condition and Results of Operations - Forward-Looking Statements.” Risks Related to Macroeconomic and Political Conditions Our business is sensitive to regional business and economic conditions, in particular those of Hawaiʻi, Guam and other Pacific Islands. Our business and operations are primarily concentrated in Hawaiʻi and the Pacific Islands.
Removed
These recent events have, and could continue to, adversely impact the market price and volatility of the Company’s common stock.
Added
The local economic conditions in these market areas have a significant impact on the Company's ability to originate loans, the ability of the borrowers to repay these loans, and the value of the collateral securing these loans.
Removed
The manner in which these issues are ultimately resolved could impact our foreclosure procedures and costs, which in turn could affect our financial condition or results of operations.
Added
A significant decline in the general business and economic conditions caused by declines in one or more key industries, inflation, recession, unemployment, U.S. tariffs on imported goods or retaliatory tariffs on U.S. goods, or other factors beyond the Company's control can affect, and has in the past affected, these local economic conditions.
Removed
There can be no assurance that the Parent will repurchase stock or continue to declare cash dividends. During 2023, the Parent repurchased 150,000 shares of common stock at a total cost of $9.9 million under its share repurchase program.
Added
Our loan portfolio is largely secured by real estate, and a downturn in the real estate market may adversely affect our results of operations. Our loan portfolio is largely secured by real estate, with a particular concentration of real estate located in Hawaiʻi and the West Pacific.
Removed
We continue to evaluate the potential impact that regulatory proposals may have on our liquidity and capital management strategies, including Basel III and those required under the Dodd-Frank Act.
Added
As of December 31, 2024, our residential mortgage loans represented $4.6 billion, or 32.9%, of our total loan and lease portfolio and our commercial mortgage loans represented approximately $4.0 billion, or 28.6%, of our total loan and lease portfolio.
Removed
In addition, the amount we spend and the number of shares we are able to repurchase under our stock repurchase program may further be affected by a number of other factors, including the stock price and blackout periods in which we are restricted from repurchasing shares.
Added
Payments on loans secured by commercial real estate often depend upon the successful operation and management of the properties and the businesses which operate from within them. Payments on loans secured by residential real estate often depends on the employment of the homeowner.
Removed
A reduction in or elimination of our dividend payments and/or prolonged suspension of stock repurchases could have a negative effect on our stock price.
Added
Repayment of loans may be affected by factors such as adverse conditions in the real estate market, changes in business and economic conditions, changes in government regulation, or the impact of trends toward hybrid work.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeWe have implemented a Third Party Risk Management framework, which provides the tools and practices utilized in the oversight of third party service providers, with an objective to meet legal and regulatory obligations, contractual requirements, performance expectations, and our own principles and values.
Biggest changeThis framework equips us with the necessary tools and practices for effective oversight of third-party service providers, ensuring compliance with legal and regulatory obligations, contractual requirements, performance expectations, and our own principles and values. Our vendor risk management practices are robust and include comprehensive risk assessments of suppliers, with a strong emphasis on cybersecurity.
The Audit & Risk Committee, which is charged with assisting the Board of Directors in fulfilling its oversight responsibilities related to the Company’s enterprise-wide risk management framework, receives an operational risk update at least quarterly that includes a review of cybersecurity and information security risk.
The Risk Management Committee, which is charged with assisting the Board of Directors in fulfilling its oversight responsibilities related to the Company’s enterprise-wide risk management framework, receives an operational risk update at least quarterly that includes a review of cybersecurity and information security risk.
One of the key aspects of this program is a risk assessment that is used to identify industry and company-specific risks, measure control effectiveness, identify any gaps that need to be addressed, and linking our controls with applicable policies, standards and guidelines to ensure that responsible parties are aware of their obligations with respect to this program..
One of the key aspects of this program is a risk assessment that is used to identify industry and company-specific risks, measure control 18 Table of Contents effectiveness, identify any gaps that need to be addressed, and linking our controls with applicable policies, standards and guidelines to ensure that responsible parties are aware of their obligations with respect to this program.
The Board of Directors is also responsible for the approval and oversight of the Information Security (IS) Program. Our Chief Information Security Officer (CISO), who is designated as the IS Program Coordinator, has extensive information technology, security and program management experience.
The Board of Directors is also responsible for the approval and oversight of the Information Security (“IS”) Program . Our CISO , who is designated as the IS Program Coordinator, has over 15 years of relevant information technology, security and program management experience.
For the 2023 period, we reported no material cybersecurity incidents affecting the confidentiality, integrity, or availability of data or systems.
We also strive to negotiate appropriate cybersecurity provisions in our vendor contracts. For the 2024 period, we reported no material cybersecurity incidents affecting the confidentiality, integrity, or availability of data or systems.
Central to incident management is the Information Security Incident Response Team (ISIRT), which is responsible for responding expeditiously and effectively to security incidents to minimize risks to the business, customers and consumers.
Under the direction of the CISO, the IS Program focuses on preventing, detecting, and responding to cybersecurity incidents by ensuring the confidentiality, integrity and availability of company information. Central to incident management is the Information Security Incident Response Team, which is responsible for responding expeditiously and effectively to security incidents to minimize risks to the business, customers and consumers.
We face certain ongoing risks from cybersecurity threats that, if realized, are reasonably likely to materially affect us, including our operations, business strategy, results of operations, or financial condition. 17 Table of Contents For further information, please see our risk factor titled “An interruption or breach in security of our information systems or those related to merchants and third-party vendors, including as a result of cyber attacks, could disrupt our business, result in the disclosure or misuse of confidential or proprietary information, damage our reputation, or result in financial losses.”
“Risk Factors,” including the risk factor titled “An interruption or breach in security of our information systems or those related to merchants and third-party vendors, including as a result of cyber attacks, could disrupt our business, result in the disclosure or misuse of confidential or proprietary information, damage our reputation, or result in financial losses.”
We utilize third party service providers to support and facilitate business and operational activities and to achieve strategic goals. However, third parties may expose us and our customers to various risks.
We depend on third-party service providers to support our business and operational activities and to help us achieve our strategic goals. However, these third parties can introduce various risks to us and our customers. To mitigate these risks, we have established a Third Party Risk Management framework.
The Board of Directors reviews an Enterprise Risk Position report that reflects key risk measures and trends across the Company, including cybersecurity. The Board of Directors also reviews and approves the Information Security Policy annually and frequently receives presentations on and discusses cybersecurity and information security risks, industry trends and best practices.
Additionally, the Board annually reviews and approves the Information Security Policy and frequently receives presentations from the Chief Information Security Officer ( “CISO” ) on cybersecurity risks, industry trends, and best practices .
Removed
Governanc e Since the management of cybersecurity risks is ultimately the responsibility of the Board of Directors, it devotes significant time and attention to the oversight of cybersecurity and information security risks, and benefits from the technical expertise of its members.
Added
The program ensures regulatory compliance in alignment with Federal Financial Institutions Examination Council, the Sarbanes-Oxley Act of 2002, and the Gramm-Leach-Bliley Act.
Removed
The Information Risk and Controls Management Department, under the direction of the CISO, administers the IS Program with an objective of preventing cybersecurity incidents by ensuring the confidentiality, integrity and availability of company information.
Added
Governanc e The Board of Directors holds ultimate responsibility for overseeing cybersecurity and information security risks. They dedicate substantial time and attention to this critical area, leveraging the technical expertise of their members. The Board regularly reviews an Enterprise-Wide Risk Report, which includes key cybersecurity risk measures and trends across the Company.
Removed
We are subject to extensive federal and state regulation of customer privacy and the security of financial information. Our federal regulator, the FRB, is part of the Federal Financial Institutions Examination Council (FFIEC), which publishes extensive guidelines and examination procedures that are used to review the security of Bank of Hawaiʻi and other financial institutions.
Added
We use commercially available services to monitor our vendors, providing security scores for supplier technology services, threat intelligence, financial intelligence, and other cybersecurity-related considerations. Regular reviews are conducted to track changes in our vendors' cybersecurity risk posture, and continuous threat intelligence monitoring helps identify potential cybersecurity incidents involving third parties.
Added
We face certain ongoing risks from cybersecurity threats that, if realized, are reasonably likely to materially affect us, including our operations, business strategy, results of operations, or financial condition. For furth er information, see Item 1A.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeItem 2. P roperties Our principal offices are located in the Financial Plaza of the Pacific in Honolulu, Hawaii. We own and lease other branch offices and operating facilities located throughout Hawaii and the Pacific Islands. Additional information with respect to premises and equipment is presented in Notes 6 and 23 to the Consolidated Financial Statements.
Biggest changeItem 2. P roperties Our principal offices are located in the Financial Plaza of the Pacific in Honolulu, Hawaiʻi. We own and lease other branch offices and operating facilities located throughout Hawaiʻi and the West Pacific. We believe our current facilities are adequate to meet our needs.
Added
Additional information with respect to premises and equipment is presented in Notes 6 and 23 in Item 8. “Notes to Consolidated Financial Statements.” 19 Table of Contents

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeItem 3. Legal Proceedings We are from time to time subject to lawsuits, investigations and claims arising out of the conduct of our business. Management believes that the ultimate resolution of these matters is not likely to materially affect our financial position and results of operations.
Biggest changeItem 3. Legal Proceedings We are from time to time subject to lawsuits, investigations and claims arising out of the conduct of our business. There are no pending legal proceedings against or involving the Company for which the outcome is likely to have a material adverse effect upon its financial position or results of operations.
For additional information, see Note 20 to the Consolidated Financial Statements, under the discussion related to Contingencies. Item 4. Mine Sa fety Disclosures Not Applicable. 18 Table of Contents Part II
For additional information, see Note 20 in Item 8. “Notes to Consolidated Financial Statements,” under the discussion related to Contingencies. Item 4. Mine Sa fety Disclosures Not Applicable. Part II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeDuring the fourth quarter of 2023, 4,807 shares were acquired from employees in connection with income tax withholdings related to the vesting of restricted stock and acquired by the trustee of a trust established pursuant to the Bank of Hawai'i Corporation Director Deferred Compensation Plan (the “DDCP”) directly from the Parent in satisfaction of the Company’s obligations to participants under the DDCP.
Biggest changeDuring the fourth quarter of 2024, 2,583 shares were acquired from employees in connection with income tax withholdings related to the vesting of restricted stock. The shares were purchased at the closing price of the Parent’s common stock on the dates of purchase. 2.
The Company has included the S&P Supercomposite Regional Bank Index to the graph because the companies in this index are the ones with which the Company competes for capital and talent. The graph assumes that $100 was invested on December 31, 2018, in the Parent’s common stock, the S&P 500 Index, and the S&P Supercomposite Regional Bank Index.
The Company has included the S&P Supercomposite Regional Bank Index to the graph because the companies in this index are the ones with which the Company competes for capital and talent. The graph assumes that $100 was invested on December 31, 2019, in the Parent’s common stock, the S&P 500 Index, and the S&P Supercomposite Regional Bank Index.
The actual amount and timing of future share repurchases, if any, will depend on market and economic conditions, regulatory rules, applicable SEC rules, and various other factors. 19 Table of Contents Performance Graph The following graph shows the cumulative total return for the Parent’s common stock compared to the cumulative total returns for the Standard & Poor's ("S&P") 500 Index, and the S&P Supercomposite Regional Bank Index.
The actual amount and timing of future share repurchases, if any, will depend on market and economic conditions, regulatory rules, applicable SEC rules, and various other factors. 20 Table of Contents Performance Graph The following graph shows the cumulative total return for the Parent’s common stock compared to the cumulative total returns for the Standard & Poor's (“S&P”) 500 Index, and the S&P Supercomposite Regional Bank Index.
As of February 14, 2024, there were 5,133 common shareholders of record. The Parent’s Board of Directors considers on a quarterly basis the feasibility of paying a cash dividend to its shareholders and the level and feasibility of repurchasing shares of the Parent’s common stock. Under the Parent’s historical practice, dividends declared on common stock are paid within the quarter.
The Parent’s Board of Directors considers on a quarterly basis the advisability of paying a cash dividend to its shareholders and the level and advisability of repurchasing shares of the Parent’s common stock. Under the Parent’s historical practice, dividends declared on common stock are paid within the quarter. See Item 1.
Issuer Purchases of Equity Securities Period Total Number of Shares Purchased 1 Average Price Paid Per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs 2 October 1 - 31, 2023 4,712 $ 48.47 — $ 126,038,927 November 1 - 30, 2023 95 56.81 — 126,038,927 December 1 - 31, 2023 — — — 126,038,927 Total 4,807 $ 48.64 — 1.
The repurchases in the fourth quarter ended December 31, 2024, consisted of the following: Period Total Number of Shares Purchased 1 Average Price Paid Per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs 2 October 1 - 31, 2024 2,190 $ 64.92 — $ 126,038,927 November 1 - 30, 2024 393 77.07 — 126,038,927 December 1 - 31, 2024 — — — 126,038,927 Total 2,583 $ 66.77 — 1.
The cumulative total return on each investment is as of December 31 of each of the subsequent five years and assumes reinvestment of dividends. 2018 2019 2020 2021 2022 2023 Bank of Hawai‘i Corporation $ 100 $ 146 $ 122 $ 138 $ 132 $ 130 S&P 500 Index $ 100 $ 141 $ 121 $ 164 $ 133 $ 147 S&P Supercomposite Regional Bank Index $ 100 $ 130 $ 122 $ 170 $ 140 $ 123 Item 6.
The cumulative total return on each investment is as of December 31 of each of the subsequent five years and assumes reinvestment of dividends. 2019 2020 2021 2022 2023 2024 Bank of Hawaii Corporation $ 100 $ 84 $ 95 $ 91 $ 89 $ 92 S&P 500 Index $ 100 $ 118 $ 152 $ 125 $ 158 $ 197 S&P Supercomposite Regional Bank Index $ 100 $ 93 $ 131 $ 107 $ 94 $ 114 Item 6.
Item 5. Market for Registrant’s Common Equity, Related Sto ckholder Matters and Issuer Purchases of Equity Securities Market Information, Shareholders, and Dividends Information regarding the historical market prices of the Parent’s common stock, book value, and dividends declared on that stock are shown below.
Item 5. Market for Registrant’s Common Equity, Related Sto ckholder Matters and Issuer Purchases of Equity Securities The common stock of the Parent is traded on the New York Stock Exchange (NYSE Symbol: BOH) and quoted daily in leading financial publications. As of February 13, 2025, there were 4,930 common shareholders of record.
Removed
Market Prices, Book Values, and Common Stock Dividends Per Share Market Price Range Dividends Year/Period High Low Close Book Value Declared 2023 $ 81.73 $ 30.83 $ 72.46 $ 31.05 $ 2.80 First Quarter 81.73 34.71 52.08 0.70 Second Quarter 52.37 30.83 41.23 0.70 Third Quarter 58.63 39.02 49.69 0.70 Fourth Quarter 75.19 45.56 72.46 0.70 2022 $ 92.38 $ 70.15 $ 77.56 $ 28.54 $ 2.80 First Quarter 92.38 79.60 83.92 0.70 Second Quarter 84.93 70.97 74.40 0.70 Third Quarter 85.45 70.89 76.12 0.70 Fourth Quarter 82.87 70.15 77.56 0.70 The common stock of the Parent is traded on the New York Stock Exchange (NYSE Symbol: BOH) and quoted daily in leading financial publications.
Added
“Business – Supervision and Regulation, Dividend Restrictions” of this report and Note 11 in Item 8. “Notes to Consolidated Financial Statements” for more information. Issuer Purchases of Equity Securities During the fourth quarter ended December 31, 2024, there were no purchases of our common stock made by the Parent under our previously announced share repurchase program.
Removed
See “Dividend Restrictions” under “Supervision and Regulation” in Item 1 of this report and Note 11 to the Consolidated Financial Statements for more information.
Added
The share repurchase program was first announced in July 2001 with an initial authorization to repurchase $70 million in shares of common stock. The Board increased the share repurchase program, most recently in January 2019 by $130 million. The share repurchase program has no set expiration or termination date.
Removed
The issuance of these shares was made in reliance upon the exemption from the registration requirements of the Securities Act of 1933, as amended (the “Securities Act”) by Section 4(a) (2) thereof. The trustee under the trust and the participants under the DDCP are accredited investors, as defined in Rule 501(a) under the Securities Act.
Removed
The transaction was not conducted as part of the share repurchase program, did not involve a public offering and occurred without general solicitation or advertising. The shares were purchased at the closing price of the Parent’s common stock on the dates of purchase. 2. The share repurchase program was first announced in July 2001.
Removed
The program has no set expiration or termination date.

Item 7. Management's Discussion & Analysis

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

204 edited+52 added−83 removed62 unchanged
Biggest changeAverage Balances and Interest Rates – Taxable-Equivalent Basis Table 1 2023 2022 (dollars in millions) Average Balance Income/ Expense Yield/ Rate Average Balance Income/ Expense Yield/ Rate Earning Assets Interest-Bearing Deposits in Other Banks $ 3.5 $ 0.1 2.44 % $ 3.0 $ - 1.05 % Funds Sold 540.4 28.3 5.24 260.5 4.3 1.64 Investment Securities Available-for-Sale Taxable 2,631.0 93.4 3.55 3,644.2 70.5 1.93 Non-Taxable 6.1 0.2 4.06 4.0 0.1 2.92 Held-to-Maturity Taxable 5,173.9 92.2 1.78 4,750.0 80.9 1.70 Non-Taxable 35.1 0.7 2.10 35.6 0.7 2.10 Total Investment Securities 7,846.1 186.5 2.38 8,433.8 152.2 1.80 Loans Held for Sale 3.0 0.2 6.16 6.9 0.3 3.70 Loans and Leases 1 Commercial and Industrial 1,497.1 74.0 4.94 1,349.3 46.2 3.42 Paycheck Protection Program 14.1 0.2 1.63 44.0 2.7 6.07 Commercial Mortgage 3,776.2 197.0 5.22 3,420.1 121.9 3.56 Construction 262.1 16.0 6.09 232.6 10.6 4.56 Commercial Lease Financing 63.7 0.8 1.30 88.5 1.3 1.49 Residential Mortgage 4,690.5 168.9 3.60 4,484.2 147.4 3.29 Home Equity 2,268.0 78.2 3.45 2,072.2 62.1 3.00 Automobile 866.1 31.8 3.67 786.1 25.4 3.23 Other 2 413.8 25.3 6.12 419.5 23.0 5.49 Total Loans and Leases 13,851.6 592.2 4.28 12,896.5 440.6 3.42 Other 78.3 5.1 6.51 40.5 1.2 3.01 Total Earning Assets 3 22,322.9 812.4 3.64 21,641.2 598.6 2.77 Cash and Due from Banks 292.1 237.4 Other Assets 1,339.2 1,128.1 Total Assets $ 23,954.2 $ 23,006.7 Interest-Bearing Liabilities Interest-Bearing Deposits Demand $ 3,978.7 $ 27.0 0.68 % $ 4,377.1 $ 6.1 0.14 % Savings 8,018.4 137.4 1.71 7,767.7 22.9 0.30 Time 2,424.8 86.4 3.56 1,135.5 10.7 0.94 Total Interest-Bearing Deposits 14,421.9 250.8 1.74 13,280.3 39.7 0.30 Funds Purchased 18.5 0.9 4.79 18.5 0.4 2.26 Short-Term Borrowings 114.0 5.7 5.01 58.6 2.1 3.53 Securities Sold Under Agreements to Repurchase 530.9 16.3 3.07 479.8 12.6 2.63 Other Debt 921.8 39.7 4.30 42.4 2 4.82 Total Interest-Bearing Liabilities 16,007.1 313.4 1.96 13,879.6 56.8 0.41 Net Interest Income $ 499.0 $ 541.8 Interest Rate Spread 1.68 % 2.36 % Net Interest Margin 2.24 % 2.50 % Noninterest-Bearing Demand Deposits 5,990.5 7,270.4 Other Liabilities 601.1 454.2 Shareholders’ Equity 1,355.5 1,402.5 Total Liabilities and Shareholders’ Equity $ 23,954.2 $ 23,006.7 1.
Biggest changeAverage Balances and Interest Rates – Taxable-Equivalent Basis 1 Table 1 2024 2023 (dollars in millions) Average Balance Income/ Expense 2 Yield/ Rate Average Balance Income/ Expense Yield/ Rate Earning Assets Cash and Cash Equivalents $ 594.1 $ 30.7 5.17 % $ 543.9 $ 28.4 5.22 % Investment Securities Available-for-Sale Taxable 2,433.8 89.3 3.67 2,631.0 93.4 3.55 Non-Taxable 9.2 0.6 6.05 6.1 0.2 4.06 Held-to-Maturity Taxable 4,783.5 84.9 1.78 5,173.9 92.2 1.78 Non-Taxable 34.5 0.7 2.10 35.1 0.7 2.10 Total Investment Securities 7,261.0 175.5 2.42 7,846.1 186.5 2.38 Loans Held for Sale 2.9 0.2 6.05 3.0 0.2 6.16 Loans and Leases 3 Commercial Mortgage 3,763.6 205.9 5.47 3,776.2 197.0 5.22 Commercial and Industrial 1,679.8 89.2 5.31 1,511.2 74.2 4.91 Construction 333.4 25.6 7.66 262.1 16.0 6.09 Commercial Lease Financing 65.1 1.7 2.68 63.7 0.8 1.30 Residential Mortgage 4,614.8 182.4 3.95 4,690.5 168.9 3.60 Home Equity 2,217.5 87.8 3.96 2,268.0 78.2 3.45 Automobile 803.6 37.0 4.61 866.1 31.8 3.67 Other 391.1 27.4 7.01 413.8 25.3 6.12 Total Loans and Leases 13,868.9 657.0 4.74 13,851.6 592.2 4.28 Other 63.2 4.2 6.66 78.3 5.1 6.51 Total Earning Assets 2 21,790.1 867.6 3.98 22,322.9 812.4 3.64 Non-Earning Assets 1,572.6 1,631.3 Total Assets $ 23,362.7 $ 23,954.2 Interest-Bearing Liabilities Interest-Bearing Deposits Demand 3,745.9 33.2 0.89 3,978.7 27.0 0.68 Savings 8,362.3 209.7 2.51 8,018.4 137.4 1.71 Time 3,042.3 125.9 4.14 2,424.8 86.4 3.56 Total Interest-Bearing Deposits 15,150.5 368.8 2.43 14,421.9 250.8 1.74 Funds Purchased 0.8 0.0 5.46 18.5 0.9 4.79 Short-Term Borrowings 0.0 0.0 5.25 114.0 5.7 5.01 Securities Sold Under Agreements to Repurchase 118.2 4.6 3.90 530.9 16.3 3.07 Other Debt 559.6 23.8 4.24 921.8 39.7 4.30 Total Interest-Bearing Liabilities 15,829.1 397.2 2.51 16,007.1 313.4 1.96 Net Interest Income $ 470.4 $ 499.0 Interest Rate Spread 1.47 % 1.68 % Net Interest Margin 2.16 % 2.24 % Noninterest-Bearing Demand Deposits 5,385.8 5,990.5 Other Liabilities 614.6 601.1 Shareholders’ Equity 1,533.2 1,355.5 Total Liabilities and Shareholders’ Equity $ 23,362.7 $ 23,954.2 1.
Allow. as % of loan or lease category Loan category as % of total loans and leases Alloc. Allow. as % of loan or lease category Loan category as % of total loans and leases Alloc.
Allow. as % of Loan or Lease Category Loan Category as % of Total Loans and Leases Alloc. Allow. as % of Loan or Lease Category Loan Category as % of Total Loans and Leases Alloc. Allow. as % of Loan or Lease Category Loan Category as % of Total Loans and Leases Alloc.
Our internal audit department also validates the system of internal controls through ongoing risk-based audit procedures and reports on the effectiveness of internal controls to executive management and the Audit and Risk Committee of the Board of Directors. We continuously strive to strengthen our system of internal controls to improve the oversight of operational risk.
Our internal audit department also validates the system of internal controls through ongoing risk-based audit procedures and reports on the effectiveness of internal controls to executive management and the Audit Committee of the Board of Directors. We continuously strive to strengthen our system of internal controls to improve the oversight of operational risk.
For the commercial portfolio, the impact of adverse changes in economic conditions on borrowers will vary, and generally evaluated on a case-by-case basis to include the borrower’s existing financial capacity. Borrowers that would be most adversely impacted are identified as having the potential for migrating from a Pass to a Classified risk rating.
For the commercial portfolio, the impact of adverse changes in economic conditions on borrowers will vary, and generally evaluated on a case-by-case basis to include the borrower’s existing and expected financial capacity. Borrowers that would be most adversely impacted are identified as having the potential for migrating from a Pass to a Classified risk rating.
Market Risk Market risk is the potential of loss arising from adverse changes in interest rates and prices. We are exposed to market risk as a consequence of the normal course of conducting our business activities. Our market risk management process involves measuring, monitoring, and mitigating risks that can significantly impact our statements of income and condition.
Market Risk Market risk is the potential of loss arising from adverse changes in interest rates and prices. We are exposed to market risk as a consequence of the normal course of conducting our business activities. Our market risk management process involves measuring, monitoring, and mitigating risks that can significantly impact our consolidated statements of income and condition.
The provision for income taxes in this business segment represents the residual amount to arrive at the total tax expense for the Company. 32 Table of Contents Analysis of Statements of Condition Investment Securities Table 7 presents the maturity distribution at amortized cost, weighted-average yield to maturity, and fair value of our investment securities.
The provision for income taxes in this business segment represents the residual amount to arrive at the total tax expense for the Company. 32 Table of Contents Analysis of Consolidated Statements of Condition Investment Securities Table 7 presents the maturity distribution at amortized cost, weighted-average yield to maturity, and fair value of our investment securities.
The historical loss experience for the commercial portfolio segment is primarily determined using a Cohort method. This method pools loans into groups (“cohorts”) sharing similar risk characteristics based on product and risk ratings, and tracks each cohort’s historical net charge-offs to calculate a historical loss rate.
The historical loss experience for the commercial portfolio segment is primarily determined using a Cohort method. This method pools loans and leases into groups (“cohorts”) sharing similar risk characteristics based on product and risk ratings, and tracks each cohort’s historical net charge-offs to calculate a historical loss rate.
Furthermore, credit risk management also includes an independent credit review process that assesses compliance with commercial and consumer credit policies, risk ratings, and other critical credit information. In addition to utilizing risk management practices that are based upon established and sound lending practices, we adhere to Regulatory Safety and Soundness credit standards.
Furthermore, credit risk management includes an independent credit review process that assesses compliance with commercial and consumer credit policies, risk ratings, and other critical credit information. In addition to utilizing risk management practices that are based upon established and sound lending practices, we adhere to Regulatory Safety and Soundness credit standards.
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 statements of income and condition.
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 condition.
Maximum loan amounts and LTVs are determined by collateral value and customer segment. Automobile lending activities include loans and leases secured by new or used automobiles, and leases secured by new automobiles.
Maximum line and loan amounts and LTVs are determined by collateral value and customer segment. Automobile lending activities include loans and leases secured by new or used automobiles, and leases secured by new automobiles.
From the beginning of our share repurchase program in July 2001 through December 31, 2023, we repurchased a total of 58.2 million shares of common stock and returned a total of nearly $2.4 billion to our common shareholders at an average cost of $41.24 per share. Remaining buyback authority was $126.0 million as of December 31, 2023.
From the beginning of our share repurchase program in July 2001 through December 31, 2024, we repurchased a total of 58.2 million shares of common stock and returned a total of nearly $2.4 billion to our common shareholders at an average cost of $41.24 per share. Remaining buyback authority was $126.0 million as of December 31, 2024.
As of December 31, 2023, and December 31, 2022, $2.5 billion or 11% and $2.9 billion or 12%, respectively, of our total assets consisted of financial assets recorded at fair value on a recurring basis and most of these financial assets consisted of available-for-sale investment securities measured using information from a third party pricing service.
As of December 31, 2024 and 2023, $2.9 billion or 12% and $2.5 billion or 11%, 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.
Although a significant portion of our investment securities were in an unrealized loss position as of December 31, 2023, we believe we have sufficient access to various forms of liquidity that would alleviate the need to liquidate these investment securities and realize the losses. We continued our focus on maintaining a strong liquidity position throughout 2023.
Although a significant portion of our investment securities were in an unrealized loss position as of December 31, 2024, we believe we have sufficient access to various forms of liquidity that would alleviate the need to liquidate these investment securities and realize the losses. We continued our focus on maintaining a strong liquidity position throughout 2024.
We offer fixed and variable rate home equity loans, with variable rate loans underwritten at fully-indexed interest rates. Our procedures for underwriting home equity loans include an assessment of an applicant’s overall financial capacity and repayment ability. Decisions are primarily based on LTV ratios, DTI ratios, liquidity and credit scores.
We offer fixed and variable rate home equity loans, with variable rate loans underwritten at fully-indexed interest rates. Our procedures for underwriting home equity loans include an assessment of an applicant’s overall financial capacity and repayment ability. Decisions are primarily based on LTV ratios, DTI ratios or DSCR, liquidity and credit scores.
We pay particular attention to the +/-200 basis point shock sensitivities, as we believe they represent a more realistic range of rate movements that could occur in the near to medium term. For the year ended December 31, 2023, we remained within applicable guidelines for such scenarios.
We pay particular attention to the +/-200 basis point shock sensitivities, as we believe they represent a more realistic range of rate movements that could occur in the near to medium term. For the year ended December 31, 2024, we remained within applicable guidelines for such scenarios.
The Unfunded Reserve represents the expected credit losses on off-balance sheet commitments such as unfunded commitments to extend credit and standby letters of credit. The Unfunded Reserve is determined by estimating future draws and applying the expected loss rates on those draws. However, a liability is not recognized for commitments unconditionally cancellable by the Company.
The Unfunded Reserve represents the expected credit losses on off-balance sheet commitments such as unfunded commitments to extend credit and standby letters of credit. The Unfunded Reserve is determined by estimating future draws and applying the expected loss rates on those draws. However, a liability is not recognized for commitments unconditionally cancelable by the Company.
Maturities and Average Yield on Securities Table 7 (dollars in millions) 1 Year or Less Weighted Average Yield After 1 Year-5 Years Weighted Average Yield After 5 Years-10 Years Weighted Average Yield Over 10 Years Weighted Average Yield Total Weighted Average Yield Fair Value As of December 31, 2023 Available-for-Sale 1 Debt Securities Issued by the U.S.
Maturities and Average Yield on Securities Table 7 (dollars in millions) 1 Year or Less Weighted Average Yield After 1 Year-5 Years Weighted Average Yield After 5 Years-10 Years Weighted Average Yield Over 10 Years Weighted Average Yield Total Weighted Average Yield Fair Value As of December 31, 2024 Available-for-Sale 1 Debt Securities Issued by the U.S.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations The following MD&A is intended to help the reader understand the Company and its operations and is focused on our fiscal 2023 and 2022 financial results, including comparisons of year-to-year performance between these years.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations The following MD&A is intended to help the reader understand the Company and its operations and is focused on our fiscal 2024 and 2023 financial results, including comparisons of year-to-year performance between these years.
Total remaining buyback authority under the share repurchase program was $126.0 million as of December 31, 2023. • The Company’s Board of Directors declared a quarterly cash dividend of $0.70 per share on the Company’s outstanding common shares.
Total remaining buyback authority under the share repurchase program was $126.0 million as of December 31, 2024. • The Company’s Board of Directors declared a quarterly cash dividend of $0.70 per share on the Company’s outstanding common shares.
Lease financing consists of sales-type leases used by commercial customers to finance capital purchases. Although our primary market is Hawaii, the commercial portfolio contains loans to some borrowers based on the U.S. Mainland, including some Shared National Credits, which have a business connection to Hawaii or are associated with a Hawaii customer relationship.
Lease financing consists of sales-type leases used by commercial customers to finance capital purchases. Although our primary market is Hawaiʻi, the commercial portfolio contains loans to some borrowers based on the U.S. Mainland, including some Shared National Credits, which have a business connection to Hawaiʻi or are associated with a Hawaiʻi customer relationship.
The underwriting terms for the home equity product generally permits borrowing availability, in the aggregate, up to 80% of the value of the collateral property for primary residence and up to 75% of the value of the collateral property for second residence or investor at the time of origination.
The underwriting terms for the home equity product generally permits borrowing availability, in the aggregate, up to 80% of the value of the collateral property for primary residence and up to 75% of the value of the collateral property for secondary residence or investor at the time of origination.
Operational risk is inherent in all business activities, and management of this risk is important to the achievement of Company goals and objectives. Our Operational Risk Committee (the “ORC”) provides oversight and assesses the most significant operational risks facing the Company.
Operational risk is inherent in all business activities, and management of this risk is important to the achievement of Company goals and objectives. Our Operational Risk Committee (the “ORC”) provides oversight and assesses the most significant operational risks including cybersecurity risks facing the Company.
As of December 31, 2023, the Company’s capital levels remained characterized as “well-capitalized.” There have been no conditions or events since December 31, 2023, that management believes have changed either the Company’s or the Bank’s capital classifications.
As of December 31, 2024, the Company’s capital levels remained characterized as “well-capitalized.” There have been no conditions or events since December 31, 2024, that management believes have changed either the Company’s or the Bank’s capital classifications.
After the one-year R&S loss forecast period, this adjustment assumes an immediate reversion to historical loss rates for the remaining expected life of the loan. The company utilizes the University of Hawaii Economic Research Organization (“UHERO”) macroeconomic forecast that is updated quarterly based on economic conditions and events.
After the one-year R&S loss forecast period, this adjustment assumes an immediate reversion to historical loss rates for the remaining expected life of the loan. The company utilizes the University of Hawaiʻi Economic Research Organization (“UHERO”) macroeconomic forecast that is updated quarterly based on economic conditions and events.
The following table presents an estimate of the change in EVE that would result from an immediate change in interest rates, moving in a parallel fashion over the entire yield curve, relative to the measured base case scenario. Similar to the sensitivity profile above, the base case scenario assumes the statement of condition and interest rates are generally unchanged.
The following table presents an estimate of the change in EVE that would result from an immediate change in interest rates, moving in a parallel fashion over the entire yield curve, relative to the measured base case scenario. Similar to the sensitivity profile above, the base case scenario assumes the consolidated statements of condition and interest rates are generally unchanged.
The dividend will be payable on March 14 2024, to shareholders of record at the close of business on February 29, 2024. 49 Table of Contents Regulatory Initiatives Affecting the Banking Industry Basel III Under final FRB and FDIC approved rules implementing the Basel Committee on Banking Supervision’s capital guidelines for U.S. banks minimum requirements increased for both the quantity and quality of capital held by the Company.
The dividend will be payable on March 14, 2025, to shareholders of record at the close of business on February 28, 2025. 49 Table of Contents Regulatory Initiatives Affecting the Banking Industry Basel III Under final FRB and FDIC approved rules implementing the Basel Committee on Banking Supervision’s capital guidelines for U.S. banks minimum requirements increased for both the quantity and quality of capital held by the Company.
The results are measured relative to established limits and early warning indicators that ensure that fluctuation in income and valuation in both up and down rate shocks remain within levels approved by the Asset and Liability Management Committee (“ALCO”) and the Board of Directors.
The results are measured relative to established limits 45 Table of Contents and early warning indicators that ensure that fluctuation in income and valuation in both up and down rate shocks remain within levels approved by the Asset and Liability Management Committee (“ALCO”) and the Board of Directors.
These investments in debt securities and mortgage-backed securities were all classified in either Levels 1 or 2 of the fair value hierarchy. Financial liabilities that are 23 Table of Contents recorded at fair value on a recurring basis are comprised of derivative financial instruments.
These investments in debt securities and mortgage-backed securities were all classified in either Levels 1 or 2 of the fair value hierarchy. Financial liabilities that are recorded at fair value on a recurring basis are comprised of derivative financial instruments.
The discount rate used to value the present value of future benefit obligations as of each year-end is the rate used to estimate the net periodic benefit cost for the following year.
The discount rate is used to determine the present value of future benefit obligations and the net periodic benefit cost. The discount rate used to value the present value of future benefit obligations as of each year-end is the rate used to estimate the net periodic benefit cost for the following year.
Lease financing primarily consists of sales-type leases to finance capital purchases ranging from computer equipment to transportation equipment. The credit decisions for these transactions are based upon an assessment of the overall financial capacity of the applicant.
Lease financing primarily consists of sales-type leases to finance capital purchases ranging from computer equipment to equipment and vehicles. The credit decisions for these transactions are based upon an assessment of the overall financial capacity of the applicant.
Table 21A presents, for the twelve months subsequent to December 31, 2023, and December 31, 2022, an estimate of the change in net interest income that would result from a gradual and immediate change in interest rates, moving in a parallel fashion over the 46 Table of Contents entire yield curve, relative to the measured base case scenario.
Table 21A presents, for the twelve months subsequent to December 31, 2024, and 2023, an estimate of the change in net interest income that would result from a gradual and immediate change in interest rates, moving in a parallel fashion over the entire yield curve, relative to the measured base case scenario.
We originate automobile loans on an indirect basis through selected dealerships in Hawaii, Guam and Saipan, and we originate automobile leases on an indirect basis through selected dealerships in Hawaii. Our procedures for underwriting automobile loans and leases include an assessment of an applicant’s overall financial capacity and repayment ability.
We originate automobile loans on an indirect basis through selected dealerships in Hawaiʻi, Guam and Saipan, and we originate automobile leases on an indirect basis through selected dealerships in Hawaiʻi. Our procedures for underwriting automobile loans and leases include an assessment of an applicant’s overall financial capacity and repayment ability.
Net loan and lease charge-offs in 2023 were comprised of charge-offs of $15.0 million partially offset by recoveries of $7.2 million.
Net loan and lease charge-offs in 2024 were comprised of charge-offs of $15.0 million partially offset by recoveries of $7.2 million.
The Allowance reflects management’s best estimate of losses over the life of loans and leases in our portfolio in accordance with the CECL approach. The Allowance and the Ratio of Allowance for Credit Losses to Loans and Leases Outstanding was stable compared with 2022.
The Allowance reflects management’s best estimate of losses over the life of loans and leases in our portfolio in accordance with the CECL approach. The Ratio of Allowance for Credit Losses to Loans and Leases Outstanding was stable compared with the prior year.
These adjustments can include accounting for new or discontinued products, changes in our portfolio composition, delinquency trends, and with forecasted economic conditions including but not limited to unemployment, real estate market conditions (e.g. prices, sales activity and inventory), visitor arrivals, and the continued uncertainty of other global economic impact.
These adjustments can include accounting for new or discontinued products, changes in our portfolio composition, delinquency trends, and with forecasted economic conditions including but not limited to unemployment, real estate market conditions (e.g. prices, sales activity and inventory), visitor arrivals, and the uncertainty of other events (local, national and global).
Of the remaining $654.3 million of corporate bonds, all were credit-rated A- or better by at least one nationally recognized statistical rating organization. Loans and Leases Table 8 presents the composition of our loan and lease portfolio by major categories.
Of the remaining $670.4 million of corporate bonds, all were credit-rated A- or better by at least one nationally recognized statistical rating organization. Loans and Leases Table 8 presents the composition of our loan and lease portfolio by major categories.
However, lower interest rates would likely cause a decline in net interest income as lower rates would lead to lower yields on loans and investment securities, as well as drive higher premium amortization on existing investment securities.
However, lower interest rates would likely cause an initial decline in net interest income as lower rates would lead to lower yields on loans and investment securities, as well as drive higher premium amortization on existing investment securities.
Other Credit Risks In the normal course of business, we serve the needs of state and political subdivisions in multiple capacities, including traditional banking products such as deposit services, and by investing in municipal debt securities. The carrying value of our municipal debt securities was $63.8 million as of December 31, 2023, and $95.3 million as of December 31, 2022.
Other Credit Risks In the normal course of business, we serve the needs of state and political subdivisions in multiple capacities, including traditional banking products such as deposit services, and by investing in municipal debt securities. The carrying value of our municipal debt securities was $63.9 million as of December 31, 2024, and $63.8 million as of December 31, 2023.
This may result in the issuer failing to make scheduled interest payments and/or being unable to repay the principal upon maturity. Our use of derivative financial instruments exposes the Company to counterparty credit risk. See Note 17 to the Consolidated Financial Statements for more information.
This may result in the issuer failing to make scheduled interest payments and/or being unable to repay the principal upon maturity. Our use of derivative financial instruments exposes the Company to counterparty credit risk. See Note 17 in Item 8. “Notes to Consolidated Financial Statements” for more information.
For the consumer portfolio, as an example, an increase in the forecasted Hawaii unemployment rate could lead to an increase in the rate of delinquencies and consequently charge-offs for consumer borrowers.
For the consumer portfolio, as an example, an increase in the forecasted Hawaiʻi unemployment rate could lead to an increase in the rate of delinquencies and consequently charge-offs for consumer borrowers.
Some of our repurchase agreements with private institutions may be terminated at earlier specified dates by the private institution or in some cases by either the private institution or the Company. If all such agreements were to terminate at the earliest possible date, the weighted-average maturity for our repurchase agreements with private institutions would be 0.6 years.
Some of our repurchase agreements with private institutions may be terminated at earlier specified dates by either the private institution or the Company. If all such agreements were to terminate at the earliest possible date, the weighted-average maturity of our repurchase agreements with private institutions would be 0.1 years.
We also maintained investments in corporate bonds with a carrying value of $669.2 million as of December 31, 2023, and $811.7 million as of December 31, 2022. We are exposed to credit risk in these investments should the issuer of a security be unable to meet its financial obligations.
We also maintained investments in corporate bonds with a carrying value of $682.2 million as of December 31, 2024, and $669.2 million as of December 31, 2023. We are exposed to credit risk in these investments should the issuer of a security be unable to meet its financial obligations.
Construction loans are made for the purchase or construction of a property for which repayment will be generated by the property. We classify loans as construction until the completion of the construction phase. Following construction, if a loan is retained, the loan is reclassified to the commercial mortgage category.
Amount includes unamortized loan origination fees. Construction loans are made for the purchase or construction of a property for which repayment will be generated by the property. We classify loans as construction until the completion of the construction phase. Following construction, if a loan is retained, the loan is reclassified to the commercial mortgage category.
Allow. as % of loan or lease category Loan category as % of total loans and leases Commercial Commercial and Industrial 2.05 % 11.91 % 1.72 % 10.32 % 1.86 % 12.14 % 2.30 % 15.70 % 2.12 % 12.55 % Commercial Mortgage 0.87 26.85 0.87 27.30 0.95 25.71 1.11 23.91 1.52 22.91 Construction 1.67 2.18 1.62 1.91 1.96 1.80 2.09 2.18 2.49 1.77 Lease Financing 3.84 0.43 4.04 0.51 2.85 0.86 4.17 0.93 1.10 1.11 Total Commercial 1.28 41.37 1.17 40.04 1.31 40.51 1.66 42.72 1.75 38.34 Consumer Residential Mortgage 0.42 33.55 0.37 34.10 0.48 35.15 0.79 34.59 0.16 35.40 Home Equity 0.63 16.22 0.75 16.31 1.03 14.98 2.37 13.44 0.58 15.25 Automobile 2.24 6.00 2.48 6.38 3.40 6.01 4.07 5.94 1.29 6.55 Other 1 4.93 2.86 5.84 3.17 6.88 3.35 8.08 3.31 2.21 4.46 Total Consumer 0.88 58.63 0.98 59.96 1.27 59.49 1.92 57.28 0.53 61.66 Total 1.05 % 100.00 % 1.06 % 100.00 % 1.29 % 100.00 % 1.81 % 100.00 % 1.00 % 100.00 % 1 Comprised of other revolving credit, installment, and lease financing. 44 Table of Contents Allowance for Credit Losses – Loans and Leases As of December 31, 2023, the Allowance was $146.4 million or 1.05% of total loans and leases outstanding compared with an Allowance of $144.4 million or 1.06% of total loans and leases outstanding as of December 31, 2022.
Allow. as % of Loan or Lease Category Loan Category as % of Total Loans and Leases Commercial Commercial Mortgage 1.09 % 28.56 % 0.87 % 26.85 % 0.87 % 27.30 % 0.95 % 25.71 % 1.11 % 23.91 % Commercial and Industrial 1.93 12.11 2.05 11.91 1.72 10.32 1.86 12.14 2.30 15.70 Construction 1.72 2.19 1.67 2.18 1.62 1.91 1.96 1.80 2.09 2.18 Lease Financing 2.20 0.64 3.84 0.43 4.04 0.51 2.85 0.86 4.17 0.93 Total Commercial 1.37 43.52 1.28 41.37 1.17 40.04 1.31 40.51 1.66 42.72 Consumer Residential Mortgage 0.34 32.88 0.42 33.55 0.37 34.10 0.48 35.15 0.79 34.59 Home Equity 0.56 15.38 0.63 16.22 0.75 16.31 1.03 14.98 2.37 13.44 Automobile 2.24 5.43 2.24 6.00 2.48 6.38 3.40 6.01 4.07 5.94 Other 5.02 2.79 4.93 2.86 5.84 3.17 6.88 3.35 8.08 3.31 Total Consumer 0.81 56.48 0.88 58.63 0.98 59.96 1.27 59.49 1.92 57.28 Total 1.06 % 100.00 % 1.05 % 100.00 % 1.06 % 100.00 % 1.29 % 100.00 % 1.81 % 100.00 % Allowance for Credit Losses – Loans and Leases As of December 31, 2024, the Allowance was $148.5 million or 1.06% of total loans and leases outstanding compared with an Allowance of $146.4 million or 1.05% of total loans and leases outstanding as of December 31, 2023.
Liquidity Risk Management The objective of our liquidity risk management process is to manage cash flow and liquidity in an effort to provide continuous access to sufficient, reasonably priced funds. Funding requirements are impacted by loan originations and refinancings, deposit 47 Table of Contents balance changes, liability issuances and settlements, and off-balance sheet funding commitments.
Liquidity Risk Management The objective of our liquidity risk management process is to manage cash flow and liquidity in an effort to provide continuous access to sufficient, reasonably priced funds. Funding requirements are impacted by factors such as loan originations and refinancings, changes in deposit balances, liability issuances and settlements, and off-balance sheet funding commitments.
For the Allowance at December 31, 2023, a 25 basis point increase in the forecasted Hawaii unemployment rates would have increased the quantitative component of the Allowance for consumer loans by an estimated $1.4 million.
For the Allowance at December 31, 2024, a 25 basis point increase in the forecasted Hawaiʻi unemployment rates would have increased the quantitative component of the Allowance for consumer loans by an estimated $1.4 million.
As of December 31, 2023, and December 31, 2022, $143.9 million and $168.0 million, respectively, or less than 1% of our total liabilities consisted of financial liabilities recorded at fair value on a recurring basis.
As of December 31, 2024, and 2023, $154.1 million and $143.9 million, respectively, or less than 1% of our total liabilities consisted of financial liabilities recorded at fair value on a recurring basis.
The dividend will be payable on March 14, 2024 to shareholders of record at the close of business on February 29, 2024. 26 Table of Contents Analysis of Statements of Income Average balances, related income and expenses, and resulting yields and rates, on a taxable-equivalent basis, are presented in Table 1.
The dividend will be payable on March 14, 2025 to shareholders of record at the close of business on February 28, 2025. 27 Table of Contents Analysis of Consolidated Statements of Income Average balances, related income and expenses, and resulting yields and rates, on a taxable-equivalent basis, are presented in Table 1.
The dividend was paid on February 1, 2024, to shareholders of record of the preferred stock at the close of business on January 16, 2024. In January 2024, the Parent’s Board of Directors declared the quarterly cash dividend of $0.70 per share on the Parent’s outstanding common shares.
The dividend was paid on February 3, 2025, to shareholders of record of the preferred stock at the close of business on January 17, 2025. In January 2025, the Parent’s Board of Directors declared the quarterly cash dividend of $0.70 per share on the Parent’s outstanding common shares.
For the Allowance at December 31, 2023, a 50 basis point increase in the percentage of commercial loans risk rated as Classified would increase the quantitative component of the Allowance for commercial loans by an estimated $1.9 million.
For the Allowance at December 31, 2024, a 50 basis point increase in the percentage of commercial loans risk rated as Classified would increase the quantitative component of the Allowance for commercial loans by an estimated $2.0 million.
The potential cash flows, sales, or replacement value of many of our assets and liabilities, especially those that earn or pay interest, are sensitive to changes in the general level of interest rates. This interest rate risk arises primarily from our core business activities of extending loans and accepting deposits.
The potential cash flows, sales, or replacement value of many of our assets and liabilities, especially those that earn or pay interest, are sensitive to changes in interest rates. This interest rate risk arises primarily from our core business activities of extending loans and accepting deposits. Our investment securities portfolio is also subject to significant interest rate risk.
The base case scenario assumes the statement of condition and interest rates are generally unchanged.
The base case scenario assumes the consolidated statements of condition and interest rates are generally unchanged.
As of December 31, 2023, and December 31, 2022, Level 3 financial assets recorded at fair value on a recurring basis were $0.8 million and $46.6 million, respectively, or less than 1% of our total assets, and were comprised primarily of derivative financial instruments.
As of December 31, 2024 and 2023, Level 3 financial assets recorded at fair value on a recurring basis were $0.7 million and $0.8 million, respectively, or less than 1% of our total assets, and were comprised primarily of mortgage servicing rights and derivative financial instruments.
Table 18 presents the activity in the Company’s reserve for credit losses for the years ended December 31: Reserve for Credit Losses Table 18 (dollars in thousands) 2023 2022 2021 2020 2019 Balance at Beginning of Period $151,247 $164,297 $221,303 $116,849 $113,515 CECL Adoption (Day 1) Impact — — — (5,072) — Loans and Leases Charged-Off Commercial Commercial and Industrial (987) (925) (1,117) (1,697) (1,122) Commercial Mortgage — — — — (1,616) Consumer Residential Mortgage (6) (80) (316) (204) (112) Home Equity (82) (100) (417) (397) (900) Automobile (5,247) (4,652) (4,939) (6,496) (7,130) Other 1 (8,645) (7,585) (10,530) (12,244) (13,075) Total Loans and Leases Charged-Off (14,967) (13,342) (17,319) (21,038) (23,955) Recoveries on Loans and Leases Previously Charged-Off Commercial Commercial and Industrial 350 552 506 2,288 1,513 Commercial Mortgage — — — 40 — Consumer Residential Mortgage 489 1,193 2,467 1,292 1,927 Home Equity 1,073 1,500 1,666 2,892 2,339 Automobile 2,782 2,276 3,510 3,775 2,961 Other 1 2,455 2,702 3,205 3,613 2,549 Total Recoveries on Loans and Leases Previously Charged-Off 7,149 8,223 11,354 13,900 11,289 Net Charged-Off - Loans and Leases (7,818) (5,119) (5,965) (7,138) (12,666) Net Charged-Off - Accrued Interest Receivable — (131) (541) — — Provision for Credit Losses 2 Loans and Leases 9,782 (8,263) (52,466) 115,100 16,000 Accrued Interest Receivable 3 — (283) (1,745) 2,700 — Unfunded Commitments 4 (782) 746 3,711 (1,136) — Total Provision for Credit Losses 9,000 (7,800) (50,500) 116,664 16,000 Balance at End of Period $152,429 $151,247 $164,297 $221,303 $116,849 Components Allowance for Credit Losses - Loans and Leases $146,403 $144,439 $157,821 $216,252 $110,027 Allowance for Credit Losses - Accrued Interest Receivable 3 — — 414 2,700 — Reserve for Unfunded Commitments 4 6,026 6,808 6,062 2,351 6,822 Total Reserve for Credit Losses $152,429 $151,247 $164,297 $221,303 $116,849 Average Loans and Leases Outstanding $13,851,551 $12,896,510 $12,023,669 $11,592,093 $10,688,424 Ratio of Net Loans and Leases Charged-Off to Average Loans and Leases Outstanding 0.06% 0.04% 0.05% 0.06% 0.12% Ratio of Allowance for Credit Losses to Loans and Leases Outstanding 5 1.05% 1.06% 1.29% 1.81% 1.00% 1.
Table 18 presents the activity in the Company’s reserve for credit losses for the years ended December 31: Reserve for Credit Losses Table 18 (dollars in thousands) 2024 2023 2022 2021 2020 Balance at Beginning of Period $ 152,429 $ 151,247 $ 164,297 $ 221,303 $ 116,849 CECL Adoption (Day 1) Impact — — — — (5,072 ) Loans and Leases Charged-Off Commercial Commercial and Industrial (2,609 ) (987 ) (925 ) (1,117 ) (1,697 ) Consumer Residential Mortgage (385 ) (6 ) (80 ) (316 ) (204 ) Home Equity (701 ) (82 ) (100 ) (417 ) (397 ) Automobile (5,342 ) (5,247 ) (4,652 ) (4,939 ) (6,496 ) Other (10,099 ) (8,645 ) (7,585 ) (10,530 ) (12,244 ) Total Loans and Leases Charged-Off (19,136 ) (14,967 ) (13,342 ) (17,319 ) (21,038 ) Recoveries on Loans and Leases Previously Charged-Off Commercial Commercial and Industrial 832 350 552 506 2,288 Commercial Mortgage — — — — 40 Consumer Residential Mortgage 303 489 1,193 2,467 1,292 Home Equity 792 1,073 1,500 1,666 2,892 Automobile 2,168 2,782 2,276 3,510 3,775 Other 2,111 2,455 2,702 3,205 3,613 Total Recoveries on Loans and Leases Previously Charged-Off 6,206 7,149 8,223 11,354 13,900 Net Charged-Off - Loans and Leases (12,930 ) (7,818 ) (5,119 ) (5,965 ) (7,138 ) Net Charged-Off - Accrued Interest Receivable — — (131 ) (541 ) — Provision for Credit Losses 1 Loans and Leases 15,055 9,782 (8,263 ) (52,466 ) 115,100 Accrued Interest Receivable 2 — — (283 ) (1,745 ) 2,700 Unfunded Commitments 3 (3,905 ) (782 ) 746 3,711 (1,136 ) Total Provision for Credit Losses 11,150 9,000 (7,800 ) (50,500 ) 116,664 Balance at End of Period $ 150,649 $ 152,429 $ 151,247 $ 164,297 $ 221,303 Components Allowance for Credit Losses - Loans and Leases $ 148,528 $ 146,403 $ 144,439 $ 157,821 $ 216,252 Allowance for Credit Losses - Accrued Interest Receivable 2 — — — 414 2,700 Reserve for Unfunded Commitments 3 2,121 6,026 6,808 6,062 2,351 Total Reserve for Credit Losses $ 150,649 $ 152,429 $ 151,247 $ 164,297 $ 221,303 Average Loans and Leases Outstanding $ 13,868,916 $ 13,851,551 $ 12,896,510 $ 12,023,669 $ 11,592,093 Ratio of Net Loans and Leases Charged-Off to Average Loans and Leases Outstanding 0.09 % 0.06 % 0.04 % 0.05 % 0.06 % Ratio of Allowance for Credit Losses to Loans and Leases Outstanding 4 1.06 % 1.05 % 1.06 % 1.29 % 1.81 % 1.
While our internal controls have been designed to minimize operational risks, there is no assurance that business disruption or operational losses will not occur. On an ongoing basis, management reassesses operational risks, implements appropriate process changes, and invests in enhancements to our systems of internal controls. Guarantees We pool Federal Housing Administration (“FHA”) insured and U.S.
While our internal controls have been designed to minimize operational risks, there is no assurance that business disruption or operational losses will not occur. On an ongoing basis, management reassesses operational risks, implements appropriate process changes, and invests in enhancements to our systems of internal controls.
Discussion and analysis of our 2021 fiscal year, as well as the year-to-year comparison between fiscal 2022 and 2021, are included "Management's Discussion and Analysis of Financial Condition and Results of Operations" in Part II, Item 7 in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022, filed with the SEC on March 1, 2023.
Discussion and analysis of our 2022 fiscal year, as well as the year-to-year comparison between fiscal 2023 and 2022, are included in Part II, Item 7. “Management's Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023, filed with the SEC on February 29, 2024.
In addition, business interruption insurance or other insurance may be required. Owner-occupant commercial mortgage loans are underwritten based upon the cash flow of the business provided that the real estate asset is utilized in the operation of the business. Real estate is evaluated independently as a secondary source of repayment.
Owner-occupant commercial mortgage loans are underwritten based upon the cash flow of the business provided that the real estate asset is utilized in the operation of the business. Real estate is evaluated independently as a secondary source of repayment.
Compared to 2022, net loan and lease charge-offs increased by $2.7 million or 2 basis points on total average loans and leases outstanding. • The allowance for credit losses on loans and leases was $146.4 million as of December 31, 2023, an increase of $2.0 million from December 31, 2022.
Compared to 2023, net loan and lease charge-offs increased by $2.7 million or 2 basis points on total average loans and leases outstanding. • The allowance for credit losses on loans and leases was $148.5 million as of December 31, 2024, an increase of $2.1 million from the prior year.
Shareholders’ Equity and Regulatory Capital Table 22 December 31, (dollars in thousands) 2023 2022 2021 2020 2019 Change in Shareholders' Equity Net Income $ 171,202 $ 225,804 $ 253,372 $ 153,804 $ 225,913 Cash Dividends Paid on Common Shares (111,795 ) (112,557 ) (110,633 ) (107,434 ) (105,478 ) Cash Dividends Paid on Preferred Shares (7,877 ) (7,877 ) (2,975 ) — — Dividend Reinvestment Program 4,535 4,680 4,835 5,012 5,039 Preferred Stock Issued, Net — — 175,487 — — Common Stock Repurchased (14,290 ) (55,063 ) (31,258 ) (18,006 ) (137,649 ) Other 1 55,472 (349,603 ) (51,724 ) 54,299 30,807 Increase (Decrease) in Shareholders' Equity $ 97,247 $ (294,616 ) $ 237,104 $ 87,675 $ 18,632 Regulatory Capital Total Common Shareholders' Equity $ 1,238,756 $ 1,141,508 $ 1,436,124 $ 1,374,507 $ 1,286,832 Add: CECL Transitional Amount 4,749 7,124 9,498 23,750 — Less: Goodwill, Net of Deferred Tax Liabilities 28,746 28,746 28,747 28,718 28,718 Postretirement Benefit Liability Adjustments (23,261 ) (25,078 ) (33,496 ) (43,250 ) (38,757 ) Net Unrealized Gains (Losses) on Investment Securities (373,427 ) (409,579 ) (32,886 ) 51,072 7,645 Other (198 ) (198 ) (198 ) (198 ) (198 ) Common Equity Tier 1 Capital 1,611,645 1,554,741 1,483,455 1,361,915 1,289,424 Preferred Stock, Net of Issuance Cost 175,487 175,487 175,487 — — Tier 1 Capital 1,787,132 1,703,228 1,658,942 1,361,915 1,289,424 Allowable Reserve for Credit Losses 148,400 145,202 153,001 141,869 116,849 Total Regulatory Capital $ 1,935,532 $ 1,848,430 $ 1,811,943 $ 1,503,784 $ 1,406,273 Risk-Weighted Assets $ 14,226,780 $ 14,238,798 $ 12,236,805 $ 11,295,077 $ 10,589,061 Key Regulatory Capital Ratios Common Equity Tier 1 Capital Ratio 11.33 % 10.92 % 12.12 % 12.06 % 12.18 % Tier 1 Capital Ratio 12.56 12.15 13.56 12.06 12.18 Total Capital Ratio 13.60 13.17 14.81 13.31 13.28 Tier 1 Leverage Ratio 7.51 7.37 7.32 6.71 7.25 1.
Shareholders’ Equity and Regulatory Capital Table 22 December 31, (dollars in thousands) 2024 2023 2022 2021 2020 Change in Shareholders' Equity Net Income $ 149,994 $ 171,202 $ 225,804 $ 253,372 $ 153,804 Cash Dividends Paid on Common Shares (112,313 ) (111,795 ) (112,557 ) (110,633 ) (107,434 ) Cash Dividends Paid on Preferred Shares (12,644 ) (7,877 ) (7,877 ) (2,975 ) — Dividend Reinvestment Program 4,246 4,535 4,680 4,835 5,012 Preferred Stock Issued, Net 160,614 — — 175,487 — Common Stock Repurchased (5,302 ) (14,290 ) (55,063 ) (31,258 ) (18,006 ) Other 1 68,937 55,472 (349,603 ) (51,724 ) 54,299 Increase (Decrease) in Shareholders' Equity $ 253,532 $ 97,247 $ (294,616 ) $ 237,104 $ 87,675 Regulatory Capital Total Common Shareholders' Equity $ 1,322,774 $ 1,238,756 $ 1,141,508 $ 1,436,124 $ 1,374,507 Add: CECL Transitional Amount 2,375 4,749 7,124 9,498 23,750 Less: Goodwill, Net of Deferred Tax Liabilities 28,746 28,746 28,746 28,747 28,718 Postretirement Benefit Liability Adjustments (23,396 ) (23,261 ) (25,078 ) (33,496 ) (43,250 ) Net Unrealized Gains (Losses) on Investment Securities (319,993 ) (373,427 ) (409,579 ) (32,886 ) 51,072 Other (9,097 ) (198 ) (198 ) (198 ) (198 ) Common Equity Tier 1 Capital 1,648,889 1,611,645 1,554,741 1,483,455 1,361,915 Preferred Stock, Net of Issuance Cost 336,101 175,487 175,487 175,487 — Tier 1 Capital 1,984,990 1,787,132 1,730,228 1,658,942 1,361,915 Allowable Reserve for Credit Losses 148,634 148,400 145,202 153,001 141,869 Total Regulatory Capital $ 2,133,624 $ 1,935,532 $ 1,875,430 $ 1,811,943 $ 1,503,784 Risk-Weighted Assets $ 14,225,908 $ 14,226,780 $ 14,238,798 $ 12,236,805 $ 11,295,077 Key Regulatory Capital Ratios Common Equity Tier 1 Capital Ratio 11.59 % 11.33 % 10.92 % 12.12 % 12.06 % Tier 1 Capital Ratio 13.95 12.56 12.15 13.56 12.06 Total Capital Ratio 15.00 13.60 13.17 14.81 13.31 Tier 1 Leverage Ratio 8.31 7.51 7.37 7.32 6.71 1.
If interest due on the balances of all non-accrual loans as of December 31, 2023 had been accrued under the original terms, approximately $0.9 million in total interest income would have been recorded in 2023.
If interest due on the balances of all non-accrual loans as of December 31, 2024 had been accrued under the original terms, approximately $1.2 million in total interest income would have been recognized in 2024.
A key element in our ongoing process to measure and monitor interest rate risk is the utilization of an asset/liability simulation model that attempts to capture the dynamic nature of assets and liabilities in various interest rate environments. This model is used to estimate and measure our balance sheet sensitivity to changes in interest rates.
“Notes to Consolidated Financial Statements.” A key element in our ongoing process to measure and monitor interest rate risk is the utilization of an asset/liability simulation model. This model attempts to capture the dynamic nature of assets and liabilities in various interest rate environments. It estimates and measures our balance sheet sensitivity to changes in interest rates.
The ALCO monitors sources and uses of funds and modifies asset and liability positions as liquidity requirements change. This process, combined with our ability to raise funds in money and capital markets and through private placements, provides flexibility in managing the exposure to liquidity risk. We maintain access to ample sources of readily available contingent liquidity.
This process, combined with our ability to raise funds in money and capital markets and through private placements, provides flexibility in managing the exposure to liquidity risk. We maintain access to ample sources of readily available contingent liquidity.
Our commercial and consumer lending activities are concentrated primarily in Hawaii and the Pacific Islands. Our commercial loan and lease portfolio to borrowers based on the U.S. Mainland includes participation in Shared National Credits. Table 10 presents a maturity distribution for selected loan categories.
Our commercial loan and lease portfolio to borrowers based on the U.S. Mainland includes participation in Shared National Credits. Table 10 presents a maturity distribution for selected loan categories.
As of December 31, 2023, our hedging program consisted primarily of pay-fixed interest rate swaps. As interest rates change, we may use different instruments to manage interest rate risk, including caps, floors, swaptions and other commonly utilized derivative instruments. See Note 11 to the Consolidated Financial Statements.
As of December 31, 2024, our hedging program consisted primarily of pay-fixed interest rate swaps. As interest rates change, we may use different instruments to manage interest rate risk, including caps, floors, swaptions and other commonly utilized derivative instruments. See Note 17 in Item 8.
In the case of off-balance-sheet credit exposures, the allowance for credit losses is a liability account, calculated in accordance with ASC 326, reported as a component of other liabilities in our consolidated balance sheets.
In the case of off-balance-sheet credit exposures, the Unfunded Reserve is a liability account, calculated in accordance with ASC 326, reported as a component of other liabilities in our consolidated statements of condition.
In addition to an evaluation of the applicant’s financial condition, a determination is made of the probable adequacy of the primary and secondary sources of 39 Table of Contents repayment, such as additional collateral or personal guarantees, to be relied upon in the transaction.
In addition to an evaluation of the applicant’s financial condition, a determination is made of the probable adequacy of the primary and secondary sources of repayment, such as additional collateral or personal guarantees, to be relied upon in the transaction. Credit agency reports of the applicant’s credit history supplement the analysis of the applicant’s and/or guarantor’s creditworthiness.
In 2023, we added a net $550.0 million of FHLB advances with a weighted-average interest rate of 4.13% and maturity dates ranging from 2026 to 2028. As of December 31, 2023, our available capacity under our line of credit with the FHLB was $2.5 billion.
In 2023, we added a net $550.0 million of FHLB advances with a weighted-average interest rate of 4.13% and maturity dates ranging from 2026 to 2028. As of December 31, 2024, our available capacity under our line of credit with the FHLB was $1.7 billion. The FHLB borrowing capacity is secured by residential real estate loan collateral.
Gross unrealized gains in our investment securities portfolio were $0.7 million as of December 31, 2023, and $1.9 million as of December 31, 2022. Gross unrealized losses in the investment securities portfolio were $1.0 billion as of December 31, 2023, and $1.1 billion as of December 31, 2022.
Gross unrealized gains in our investment securities portfolio were $1.3 million and $0.7 million as of December 31, 2024 and 2023, respectively. Gross unrealized losses in the investment securities portfolio were $1.1 billion and $1.0 billion as of 33 Table of Contents December 31, 2024 and 2023, respectively.
We will also remain focused on continuing to deliver strong financial results while maintaining prudent risk and capital management strategies as well as our commitment to support our local communities.
We will also remain focused on continuing to deliver strong financial results while maintaining prudent risk and capital management strategies as well as our commitment to support our local communities. Hawaiʻi Economy Global economic conditions remain broadly favorable for the local economy.
See Note 7 to the Consolidated Financial Statements for more information on the composition of our other assets. Deposits Table 11 presents the components of our deposits by major customer categories as of December 31, 2023, and December 31, 2022.
“Notes to Consolidated Financial Statements” for more information on the composition of our other assets. 36 Table of Contents Deposits Table 11 presents the components of our deposits by major customer categories as of December 31, 2024, and 2023.
Income Taxes Table 5 presents our provision for income taxes and effective tax rates for 2023 and 2022: Provision for Income Taxes and Effective Tax Rates Table 5 (dollars in thousands) Provision for Income Taxes Effective Tax Rates 2023 $ 55,914 24.62 % 2022 $ 64,830 22.31 % The provision for income taxes was $55.9 million in 2023, a decrease of $8.9 million compared to 2022.
Income Taxes Table 5 presents our provision for income taxes and effective tax rates for 2024 and 2023: Provision for Income Taxes and Effective Tax Rates Table 5 (dollars in thousands) Provision for Income Taxes Effective Tax Rates 2024 $ 47,857 24.19 % 2023 $ 55,914 24.62 % 31 Table of Contents The provision for income taxes was $47.9 million in 2024, a decrease of $8.1 million compared to the prior year.
Includes unrealized gains and losses on investment securities, minimum pension liability adjustments, and common stock issuances under share-based compensation and related tax benefits. As of December 31, 2023, shareholders’ equity was $1.4 billion, an increase of $97.2 million or 7% from December 31, 2022.
Includes unrealized gains and losses on investment securities, minimum pension liability adjustments, and common stock issuances under share-based compensation and related tax impact. As of December 31, 2024, shareholders’ equity was $1.7 billion, an increase of $253.5 million or 18% from the prior year.
Allocation of Allowance for Credit Losses Table 19 December 31, (dollars in thousands) 2023 2022 2021 2020 2019 Commercial Commercial and Industrial $ 34,036 $ 24,283 $ 27,650 $ 43,092 $ 29,281 Commercial Mortgage 32,646 32,588 29,997 31,723 38,335 Construction 5,090 4,223 4,311 5,417 4,840 Lease Financing 2,302 2,806 2,992 4,615 1,345 Total Commercial 74,074 63,900 64,950 84,847 73,801 Consumer Residential Mortgage 19,452 17,079 20,721 32,643 6,366 Home Equity 14,317 16,654 18,924 37,987 9,777 Automobile 18,799 21,566 25,018 28,822 9,269 Other 1 19,761 25,240 28,208 31,953 10,814 Total Consumer 72,329 80,539 92,871 131,405 36,226 Total Allocation of Allowance for Credit Losses $ 146,403 $ 144,439 $ 157,821 $ 216,252 $ 110,027 1 Comprised of other revolving credit, installment, and lease financing.
Allocation of Allowance for Credit Losses Table 19 December 31, (dollars in thousands) 2024 2023 2022 2021 2020 Commercial Commercial Mortgage $ 43,745 $ 32,646 $ 32,588 $ 29,997 $ 31,723 Commercial and Industrial 32,840 34,036 24,283 27,650 43,092 Construction 5,315 5,090 4,223 4,311 5,417 Lease Financing 2,000 2,302 2,806 2,992 4,615 Total Commercial 83,900 74,074 63,900 64,950 84,847 Consumer Residential Mortgage 15,685 19,452 17,079 20,721 32,643 Home Equity 12,130 14,317 16,654 18,924 37,987 Automobile 17,116 18,799 21,566 25,018 28,822 Other 19,697 19,761 25,240 28,208 31,953 Total Consumer 64,628 72,329 80,539 92,871 131,405 Total Allocation of Allowance for Credit Losses $ 148,528 $ 146,403 $ 144,439 $ 157,821 $ 216,252 Allocation of Allowance as Percent of Loan or Lease Category Table 20 December 31, 2024 2023 2022 2021 2020 Alloc.
The forecast includes various economic variables for Hawaii such as gross domestic product (“GDP”), unemployment rate, visitor arrivals, residential real estate market conditions, personal income, and inflation rate. We also utilize other third party macroeconomic forecast tools to provide broader US economic variables such as interest rates.
The forecast includes various economic variables for Hawaiʻi such as gross domestic product (“GDP”), unemployment rate, visitor arrivals, residential real estate market conditions, personal income, and inflation rate. We also utilize other forecast tools for broader U.S. economic variables such as interest rates, as well as to apply any overlays to the forecast.
We do not intend to sell the investment securities that were in an unrealized loss position and it is not more likely than not that we will be required to sell the investment securities before recovery of their amortized cost basis, which may be at maturity.
At December 31, 2024, we had the intent and ability to hold the investment securities that were in an unrealized loss position and it is not more likely than not that we will be required to sell the investment securities before recovery of their amortized cost basis, which may be at maturity. See Note 3 in Item 8.
We consider and comply with various regulatory guidelines regarding required liquidity levels and regularly monitor our liquidity position in light of the changing economic environment and customer activity. Based on periodic liquidity assessments, we may alter our asset, liability, and off-balance sheet positions.
We adhere to various regulatory guidelines regarding required liquidity levels and regularly monitor our liquidity position in light of the changing economic environment and customer activity. Based on periodic liquidity assessments, we may alter our asset, liability, and off-balance sheet positions. The ALCO monitors sources and uses of funds and modifies asset and liability positions as liquidity requirements change.
Our investment securities portfolio is also subject to significant interest rate risk. We utilize two management guidelines to measure our interest rate risk exposure to fluctuations in interest rates: 1) net interest income (“NII”) sensitivity, and 2) economic value of equity (“EVE”) sensitivity.
We utilize two management guidelines to measure our interest rate risk exposure: 1) net interest income (“NII”) sensitivity, and 2) economic value of equity (“EVE”) sensitivity.
However, if we commit a material breach of obligations as servicer, we may be subject to various penalties which may include the repurchase of an affected loan or a reimbursement to the respective investor. 50 Table of Contents Selected Quarterly Conso lidated Financial Data Table 23 presents our selected quarterly financial data for 2023 and 2022.
However, if we commit a material breach of 50 Table of Contents obligations as servicer, we may be subject to various penalties which may include the repurchase of an affected loan or a reimbursement to the respective investor.
Treasury and Government Agencies $ — 0.0 % $ 82.2 1.2 % $ 49.5 1.5 % $ — 0.0 % $ 131.7 1.3 % $ 116.5 Debt Securities Issued by Corporations 0.7 1.8 — — 10.8 1.6 — — 11.5 1.6 9.5 Mortgage-Backed Securities 2 Residential - Government Agencies 5.6 2.3 102.4 2.8 1,566.1 1.5 — — 1,674.1 1.6 1,408.6 Residential - U.S.
Treasury and Government Agencies $ 7.5 0.3 % $ 74.8 1.3 % $ 49.6 1.5 % $ — 0.0 % $ 131.9 1.3 % $ 116.9 Debt Securities Issued by Corporations — — — — 10.5 1.6 — — 10.5 1.6 8.3 Collateralized Mortgage Obligations 2 : Residential - U.S.
Net Interest Income Sensitivity Profile Table 21A Impact on Future Annual Net Interest Income (dollars in thousands) December 31, 2023 December 31, 2022 Immediate Change in Interest Rates (basis points) +400 $ 109,909 21.6 % $ 43,864 7.5 % +300 85,238 16.7 32,989 5.7 +200 59,228 11.6 22,100 3.8 +100 31,961 6.3 11,627 2.0 -100 (33,605 ) (6.6 ) (8,659 ) (1.5 ) -200 (64,601 ) (12.7 ) (20,051 ) (3.4 ) -300 (95,971 ) (18.8 ) (35,230 ) (6.0 ) -400 (129,431 ) (25.4 ) (50,426 ) (8.7 ) Based on our net interest income simulation as of December 31, 2023, net interest income is expected to increase as interest rates rise.
Net Interest Income Sensitivity Profile Table 21A Impact on Future Annual Net Interest Income (dollars in thousands) December 31, 2024 December 31, 2023 Immediate Change in Interest Rates (basis points) +400 $ 31,028 5.6 % $ 109,909 21.6 % +300 25,281 4.6 85,238 16.7 +200 18,783 3.4 59,228 11.6 +100 10,393 1.9 31,961 6.3 -100 (13,029 ) (2.3 ) (33,605 ) (6.6 ) -200 (27,883 ) (5.0 ) (64,601 ) (12.7 ) -300 (43,536 ) (7.8 ) (95,971 ) (18.8 ) -400 (65,753 ) (11.8 ) (129,431 ) (25.4 ) 46 Table of Contents Based on our net interest income simulation as of December 31, 2024, net interest income is expected to increase as interest rates rise.

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