HOPE BANCORP INC

Previous wording

Hope Bancorp, Inc. is the holding company of Bank of Hope, the only regional Korean American bank in the United States with $18.51 billion in total assets at September 30, 2025. With the addition of Territorial Savings, a division of Bank of Hope, effective April 2, 2025, the Company became the largest regional bank catering to multicultural customers across the continental United States and Hawaii. Headquartered in Los Angeles, the Bank provides a full suite of commercial, corporate and consumer loans, deposit and fee-based products and services, including commercial and commercial real estate lending, SBA lending, residential mortgage and other consumer lending; treasury management services, foreign currency exchange solutions, interest rate derivative products, and international trade financing, among others. The Bank operates 45 full-service branches in California, New York, New Jersey, Washington, Texas, Illinois, Georgia and Alabama under the Bank of Hope banner, and 29 branches in Hawaii under the Territorial Savings banner. The Bank also operates SBA loan production offices, commercial loan production offices, and residential mortgage loan production offices throughout the United States, and a representative office in Seoul, South Korea. Bank of Hope is a California-chartered bank, and its deposits are insured by the FDIC to the extent provided by law. Bank of Hope is an Equal Opportunity Lender.

Current wording

Hope Bancorp, Inc. is the holding company of Bank of Hope, the only regional Korean American bank in the United States with $18.66 billion in total assets at March 31, 2026. With the addition of Territorial Savings, a division of Bank of Hope, effective April 2, 2025, the Company became the largest regional bank catering to multicultural customers across the continental United States and Hawaii. Headquartered in Los Angeles, the Bank provides a full suite of commercial, corporate and consumer loans, deposit and fee-based products and services, including commercial and commercial real estate lending, SBA lending, residential mortgage and other consumer lending, treasury management services, foreign currency exchange solutions, interest rate derivative products, and international trade financing, among others. The Bank operates 45 full-service branches in California, New York, New Jersey, Washington, Texas, Illinois, Georgia and Alabama under the Bank of Hope banner, and 28 branches in Hawaii under the Territorial Savings banner. The Bank also operates SBA loan production offices, commercial loan production offices, and residential mortgage loan production offices throughout the United States, and a representative office in Seoul, South Korea. Bank of Hope is a California-chartered bank, and its deposits are insured by the FDIC to the extent provided by law. Bank of Hope is an Equal Opportunity Lender.

Previous wording

The following tables set forth a performance overview concerning the periods indicated and should be read in conjunction with the unaudited Consolidated Financial Statements and Notes set forth elsewhere in this Quarterly Report on Form 10-Q and the following Results of Operations and Financial Condition sections of this MD&A. During the second quarter of 2025, the acquisition of Territorial Bancorp Inc. was closed and we repositioned a portion of our investment securities AFS portfolio. The comparability of our operating results for the nine months ended September 30, 2025, with past performance was impacted by acquisition accounting adjustments and merger-related expenses associated with the Territorial Merger and the loss on securities sold. The Company has provided supplemental non-GAAP information to facilitate a better understanding of financial performance, identifying certain items as “notable”.

Current wording

The following tables set forth a performance overview concerning the periods indicated and should be read in conjunction with the unaudited Consolidated Financial Statements and Notes set forth elsewhere in this Quarterly Report on Form 10-Q and the following Results of Operations and Financial Condition sections of this MD&A. The comparability of our operating results for the three months ended March 31, 2026, with past performance was impacted by acquisition accounting adjustments and merger-related expenses associated with the 2025 Territorial Merger. We have provided supplemental non-GAAP information to facilitate a better understanding of financial performance, identifying certain items as “notable”.

Previous wording

(4)Efficiency ratio is defined as noninterest expense divided by the sum of net interest income before provision for credit losses and noninterest income.

Current wording

(4)Efficiency ratio is defined as noninterest expense divided by the sum of net interest income and noninterest income.

Previous wording

During the three and nine months ended September 30, 2025 and 2024, our operating results included certain notable items as a result of the Merger with Territorial, our legacy investment securities repositioning, the change in the California state tax apportionment rate, and other items. The following table summarizes the impact of non-core notable items recorded for the periods indicated and reconciles them to the most directly comparable GAAP financial measure.

Current wording

During the three months ended March 31, 2026 and 2025, our operating results included certain notable items as a result of the 2025 Merger with Territorial and other items. The following table summarizes the impact of non-core notable items recorded for the periods indicated and reconciles them to the most directly comparable GAAP financial measure.

Previous wording

Net income for the third quarter of 2025 was $30.8 million, or $0.24 per diluted common share, compared with net income of $24.2 million, or $0.20 per diluted common share, for the same period of 2024, which was an increase of $6.7 million. The year-over-year increase in net income was primarily due to increases in net interest income and noninterest income, offset partially by increases in noninterest expense and the provision for credit losses.

Current wording

Net income for the first quarter of 2026 was $29.5 million, or $0.23 per diluted common share, an increase of $8.4 million over net income of $21.1 million, or $0.17 per diluted common share, for the same period of 2025. The year-over-year increase in net income was primarily due to increases in net interest income and noninterest income, partially offset by increases in noninterest expense and the provision for credit losses.

Previous wording

Net interest income before provision for credit losses was $126.6 million for the third quarter of 2025, compared with $104.8 million for the same period of 2024, an increase of $21.8 million, or 20.8%. The year-over-year increase in net interest income was primarily driven by a lower cost of deposits and an increase in the average balance of interest earning assets, partially offset by an increase in the average balance of interest bearing deposits and lower yields on loans. As of September 30, 2025, the Federal Funds target rate was cut by an aggregate 75 basis points since September 30, 2024, impacting average yields and rates for the 2025 third quarter, compared with the same period of 2024.

Current wording

Net interest income was $124.1 million for the first quarter of 2026, compared with $100.8 million for the same period of 2025, an increase of $23.2 million, or 23.1%. The year-over-year increase in net interest income was primarily driven by a lower cost of deposits and an increase in the average balance of interest earning assets, partially offset by an increase in the average balance of interest bearing deposits. The year-over-year growth in average earning assets primarily reflected the acquisition of Territorial, which closed in the second quarter of 2025. As of March 31, 2026, the Federal Funds target rate was cut by an aggregate 75 basis points since March 31, 2025, favorably impacting funding costs for the first quarter of 2026 compared with the prior-year period.

Previous wording

The weighted average yield on loans decreased to 5.93% for the third quarter of 2025, down 23 basis points from 6.16% for the same period of 2024. The weighted average yield on loans decreased by 31 basis points to 5.89% for the nine months ended September 30, 2025, down from 6.20% for the same period of 2024. The year-over-year decrease in average loan yields was driven by the downward repricing of variable rate loans, reflecting higher benchmark interest rates in 2024 versus 2025. At September 30, 2025, variable interest rate loans made up 41% of the loan portfolio.

Current wording

The weighted average yield on loans decreased to 5.69% for the first quarter of 2026, down 19 basis points from 5.88% for the same period of 2025. The year-over-year decrease in average loan yields was driven by the downward repricing of variable rate loans, reflecting higher benchmark interest rates in 2025 versus 2026. At March 31, 2026, variable interest rate loans made up 43% of the loan portfolio. The total accretion of net discount on acquired loans was $4.6 million and $229 thousand for the three months ended March 31, 2026 and 2025, respectively.

Previous wording

The weighted average yield on investment securities for the three and nine months ended September 30, 2025, was 3.77% and 3.38%, respectively, compared with 3.05% and 3.10% for the same periods of 2024, respectively. The increase in average yields was primarily due to higher rates on new purchases of investment securities, and the sale of lower-yielding investment securities in the second quarter of 2025 as part of a strategic portfolio repositioning. At September 30, 2025, 29% of the investment portfolio consisted of securities with variable coupon rates. The change in yields was also impacted by fluctuations in the overall investment portfolio yield due to the change in pay-down speeds of investment securities.

Current wording

The weighted average yield on investment securities for the three months ended March 31, 2026, was 3.63%, an increase of 54 basis points from 3.09% for the same period of 2025. The increase in average yields was primarily due to higher rates on new purchases of investment securities, and the sale of lower-yielding investment securities in the second quarter of 2025 as part of a strategic portfolio partial repositioning. At March 31, 2026, 24% of the investment portfolio consisted of securities with variable coupon rates. The change in yields was also impacted by fluctuations in the overall investment portfolio yield due to the change in pay-down speeds of investment securities.

Previous wording

The weighted average cost of deposits for the third quarter of 2025 was 2.88%, a decrease of 56 basis points from 3.44% for the same period of 2024. The weighted average cost of deposits for the nine months ended September 30, 2025, was 3.00%, a decrease of 40 basis points from 3.40% for the same period of 2024. The year-over-year decrease in the cost of deposits was driven by decreases in market interest rates, the positive impact of the acquired Territorial deposits, which have a lower cost of funds, and the planned reduction of higher-costing brokered deposits.

Current wording

The weighted average cost of deposits for the first quarter of 2026 was 2.64%, a decrease of 54 basis points from 3.18% for the same period of 2025. The weighted average cost of interest bearing deposits for the first quarter of 2026 was 3.37%, a decrease of 77 basis points from 4.14% for the same period of 2025. The year-over-year decrease in the cost of deposits was driven by decreases in market interest rates, the positive impact of the acquired Territorial deposits, which have a lower cost of funds, and the planned reductions of higher-costing time deposits.

Previous wording

The provision for credit losses includes both provision for credit loss on loans and provision for unfunded loan commitments. The provision for credit losses for the third quarter of 2025 was $8.7 million, an increase of $5.4 million from $3.3 million for the same period of the prior year. The provision for credit losses for the nine months ended September 30, 2025, was $28.5 million, an increase of $21.2 million from $7.3 million for the same period of the prior year. The provision for credit losses for the nine months ended September 30, 2025 included $4.5 million of merger-related provision expenses that the Company considered a notable item.

Current wording

The provision for credit losses includes both provision for credit loss on loans and provision for unfunded loan commitments. The provision for credit losses for the first quarter of 2026 was $8.7 million, an increase from $4.8 million for the same period of the prior year.

Previous wording

The increase in provision for credit losses for the three and nine months ended September 30, 2025, compared to the same periods in 2024, was primarily due to increases in provision for credit losses on C&I loans, residential mortgage loans, and other consumer loans offset partially by a decrease in provision for credit losses on CRE loans. The year over year increase in provision for credit losses on C&I loans was primarily due to increased charge offs on C&I loans in 2025, compared with the same periods of 2024. The year-over-year increases in provision for credit losses on residential mortgage loans reflected the addition of $1.07 billion of loans from the Territorial acquisition. The decrease in provision for credit losses on CRE loans was primarily due to updates to historical loss and prepayment assumptions during the nine months ended September 30, 2025.

Current wording

The increase in provision for credit losses for the three months ended March 31, 2026, compared with the same period in 2025, was primarily due to increases in provision for credit losses on CRE loans offset partially by decreases in provision for credit losses on C&I loans, residential mortgage loans, and other consumer loans.

Previous wording

The provision for unfunded loan commitments was $610 thousand and $1.2 million for the three and nine months ended September 30, 2025, respectively, compared with a provision for unfunded loan commitments of $280 thousand and a recapture of provision for unfunded loan commitments of $1.0 million for the same periods of 2024, respectively. The year-over-year increase in the provision for unfunded loan commitments was primarily due to the change in balances of unfunded loan commitments.

Current wording

The recapture of provision for unfunded loan commitments was $550 thousand and $400 thousand for the three months ended March 31, 2026 and 2025, respectively. The year-over-year increase in the recapture of provision for unfunded loan commitments was primarily due to the change in balances of unfunded loan commitments.

Previous wording

Noninterest income is primarily comprised of service fees on deposit accounts, international service fees (fees received on trade finance letters of credit), wire transfer and foreign currency fees, swap fee income, net gains on sales of SBA loans, net gains or losses on sales of investment securities AFS, and other income and fees. Noninterest income for the third quarter of 2025 was $15.4 million, compared with $11.8 million for the same period of 2024, an increase of $3.5 million. Noninterest income for the nine months ended September 30, 2025, was $8.1 million, compared with $31.2 million for the same period of the prior year, a decrease of $23.1 million. Noninterest income in the nine months ended September 30, 2025, included $38.9 million of losses on investment securities AFS related to the securities portfolio repositioning, which we consider a notable item. See the “General” section of this MD&A for a reconciliation of GAAP to non-GAAP financial measures.

Current wording

Noninterest income is primarily comprised of service fees on deposit accounts, international service fees (fees received on trade finance letters of credit), wire transfer and foreign currency fees, other customer-driven income and fees, net gains on sales of SBA loans, net gains on sales of investment securities AFS, and other noninterest income. Noninterest income for the first quarter of 2026 was $17.0 million, compared with $15.7 million for the same period of 2025, an increase of $1.3 million.

Previous wording

The year-over-year increase in noninterest income for the three months ended September 30, 2025, was primarily driven by increases in swap fees, service fees on deposit accounts, wire transfer and foreign currency fees, and other income and fees. The year-over-year decrease in noninterest income for the nine months ended September 30, 2025, was primarily driven by net losses on sales of investment securities AFS, due to a securities portfolio repositioning in June 2025, partially offset by increases in net gains on sales of SBA loans, swap fees, service fees on deposit accounts, and other income and fees.

Current wording

The year-over-year increase in noninterest income for the three months ended March 31, 2026, was primarily driven by increases in other customer-driven income and fees, net gains on sales of AFS securities, and service fees on deposit accounts, partially offset by a decrease in other noninterest income.

Previous wording

Swap fee income represents fees earned from back-to-back swap transactions for our loan customers. The number of swap transactions is proportional to the increase in loan originations, which increased in 2025, and resulted in an increase in swap fee income for the three and nine months ended September 30, 2025, compared with the same periods in 2024.

Current wording

Other customer-driven income and fees for the three months ended March 31, 2026, included an increase of $885 thousand in customer-level swap fees driven by a higher volume of customer swap transactions, compared with the same period of 2025. Customer-level swap fee income represents fees earned from back-to-back swap transactions for our loan customers.

Previous wording

During the three and nine months ended September 30, 2025, we sold $48.1 million and $165.4 million in SBA guaranteed loans, respectively, and recorded $2.8 million and $9.9 million, respectively, in net gains on sale of SBA loans. This compares with net gains of $2.7 million and $4.7 million for the three and nine months ended September 30, 2024, respectively, on $41.4 million and $71.2 million in SBA guaranteed loans sold, respectively. The Bank resumed the sales of SBA guaranteed loans in the second quarter of 2024 due to improved premiums in the secondary markets, after retaining loan production on balance sheet starting in the second half of 2023. Due to the federal government shutdown that began on October 1, 2025, the Small Business Administration has suspended the acceptance of new SBA loan applications and the secondary market for SBA 7(a) loan sales has closed. If the government shutdown continues to persist, it may impact our ability to sell SBA loans and our net gains on the sale of SBA loans. Once the government shutdown is resolved, the pipeline of loans in progress with our SBA department will be processed. Outside of SBA, we do not expect the government shutdown to have a material impact to our other borrowers.

Current wording

During the three months ended March 31, 2026 and 2025, we sold $53.0 million and $49.9 million in SBA guaranteed loans, respectively, and recorded $3.3 million and $3.1 million, respectively, in net gains on sale of SBA loans.

Previous wording

Other income and fees for the three months ended September 30, 2025, included an increase of $788 thousand in earnings from BOLI, compared with the same period of 2024. Other income and fees for the nine months ended September 30, 2025, included increases of $1.7 million in net gains on sale of other loans, $1.5 million in earnings from BOLI, and $1.0 million in fair value adjustments of equity investments, compared with the same period of 2024.

Current wording

Other noninterest income for the three months ended March 31, 2026, included a decrease of $1.5 million in net gains on sale of other loans, compared with the same period of 2025.

Previous wording

Noninterest expense for the third quarter of 2025 was $96.9 million, an increase of $15.6 million, or 19.2%, from $81.3 million for the third quarter of 2024. Noninterest expense for the nine months ended September 30, 2025, was $290.2 million, an increase of$43.1 million, or 17.4%, from $247.1 million for the same period of the prior year. Noninterest expense included merger and restructuring-related costs, which the Company considers a notable item. See the “General” section of this MD&A for a reconciliation of GAAP to non-GAAP financial measures. Excluding notable items, noninterest expense for the third quarter of 2025 was $95.9 million compared with $79.8 million in the year-ago period; noninterest expense for the nine months ended September 30, 2025, was $269.4 million compared with $241.4 million in the year-ago period. See the “General” section of this MD&A for a reconciliation of GAAP to non-GAAP financial measures.

Current wording

Noninterest expense for the first quarter of 2026 was $94.5 million, an increase of $10.6 million, or 12.6%, from $83.9 million for the first quarter of 2025. Noninterest expense included merger and restructuring-related costs, which we consider notable items. Excluding notable items, noninterest expense for the first quarter of 2026 was $94.3 million compared with $81.3 million in the year-ago period. See the “General” section of this MD&A for a reconciliation of GAAP to non-GAAP financial measures.

Previous wording

Salaries and employee benefits expense increased $10.8 million, or 24.3%, for the third quarter of 2025, compared with the same period of 2024, and increased $20.4 million, or 15.0%, for the nine months ended September 30, 2025, compared with the same period of 2024. The year-over-year increase in salaries and employee benefits was primarily due to an increase in headcount following the Territorial acquisition. The number of full-time equivalent employees was 1,452 and 1,236 at September 30, 2025 and 2024, respectively.

Current wording

Salaries and employee benefits expense increased $7.8 million, or 16.0%, for the first quarter of 2026, compared with the same period of 2025. The year-over-year increase in salaries and employee benefits was primarily due to an increase in headcount following the 2025 Territorial acquisition. The number of full-time equivalent employees was 1,424 and 1,227 at March 31, 2026 and 2025, respectively.

Previous wording

Occupancy expense increased by $2.2 million, or 31.9%, for the third quarter of 2025, compared with the same period of 2024, and increased $4.6 million, or 22.2%, for the nine months ended September 30, 2025, compared with the same period of 2024. The increase in occupancy expense was primarily due to the increased number of Bank locations resulting from the Territorial acquisition. The Company acquired 29 branches in Hawaii from its Merger with Territorial.

Current wording

Occupancy, furniture and equipment expense increased $1.7 million, or 19.6%, for the first quarter of 2026, compared with the same period of 2025. The increase was primarily due to the increased number of Bank locations resulting from the Territorial acquisition. As of March 31, 2026, we operated 28 branches in Hawaii that were acquired in its 2025 Merger with Territorial.

Previous wording

Merger and restructuring-related costs decreased $475 thousand, or 33.1%, for the third quarter of 2025, compared with the same period of 2024, and increased $15.7 million, or 311.5%, for the nine months ended September 30, 2025, compared with the same period of 2024. Merger and restructuring-related costs mainly related to change-in-control and employee severance and retention expenses related to the Territorial acquisition, which was completed on April 2, 2025. See Note 16 - “Business Combinations” of the Notes to Consolidated Financial Statements for additional information regarding the Merger.

Current wording

Merger and restructuring-related costs decreased $2.3 million, or 90.7%, for the first quarter of 2026, compared with the same period of 2025. Merger and restructuring-related costs mainly comprised employee retention bonuses and professional fees related to the Territorial acquisition, which was completed on April 2, 2025. See Note 15 - “Acquisitions” of the Notes to Consolidated Financial Statements for additional information regarding the Merger.

Previous wording

For the three months ended September 30, 2025, the Company recorded an income tax provision of $5.6 million on pretax income of $36.5 million, representing an effective tax rate of 15.40%, compared with an income tax provision of $7.9 million on pretax income of $32.1 million, representing an effective tax rate of 24.74%, for the three months ended September 30, 2025.

Current wording

For the three months ended March 31, 2026, we recorded an income tax provision of $8.4 million on pretax income of $37.9 million, representing an effective tax rate of 22.10%, compared with an income tax provision of $6.7 million on pretax income of $27.8 million, representing an effective tax rate of 24.24%, for the three months ended March 31, 2025.

Previous wording

The year-over-year changes in the income tax provision or benefit, as well as the effective tax rates, for the three and nine months ended September 30, 2025, compared with the three and nine months ended September 30, 2024, reflected the impact of renewable energy tax credit investments made in the third quarter of 2025; as well as merger-related expenses and net losses on sale of investment securities recognized in the second quarter of 2025, both of which reduced pre-tax income. In addition, income tax expense and the effective tax rate were impacted by a change in California’s state tax apportionment law that was signed on June 27, 2025, and which became effective for tax years beginning on or after January 1, 2025.

Current wording

The year-over-year changes in the income tax provision or benefit, as well as the effective tax rates, for the three months ended March 31, 2026, compared with the three months ended March 31, 2025, reflected the impact of renewable energy tax credit investments made in the first quarter of 2026 and a lower California state tax apportionment.

Previous wording

We invest in affordable housing partnerships and receive tax credits that reduce our overall effective tax rate. Amortization of investments in affordable housing partnerships is recorded in noninterest expense based on benefit schedules of individual investment projects under the equity method of accounting. The benefit schedules show tax deductions investors can take each year. We amortize the initial cost of the investments in affordable housing partnerships. This amortization expense is more than offset by tax credits received, which reduce our tax provision expense dollar for dollar, and the tax benefits related to any tax losses generated through the affordable housing project’s expenditures. For the three and nine months ended September 30, 2025, total tax credits and other tax benefits related to our investment in affordable housing partnerships were approximately $3.4 million and $9.1 million, respectively. This compares with approximately $2.8 million and $8.3 million in tax credits and other tax benefits related to our investment in affordable housing partnerships for the same periods in 2024, respectively.

Current wording

We invest in affordable housing partnerships and receive tax credits that reduce our overall effective tax rate. Amortization of investments in affordable housing partnerships is recorded in noninterest expense based on benefit schedules of individual investment projects under the equity method of accounting. The benefit schedules show tax deductions investors can take each year. We amortize the initial cost of the investments in affordable housing partnerships. This amortization expense is more than offset by tax credits received, which reduce our tax provision expense dollar for dollar, and the tax benefits related to any tax losses generated through the affordable housing project’s expenditures. For the three months ended March 31, 2026 and 2025, total tax credits and other tax benefits related to our investment in affordable housing partnerships were approximately $2.3 million and $2.7 million, respectively.

Previous wording

In addition to affordable housing partnerships, beginning in the fourth quarter of 2024, we began to invest in projects that qualify for renewable energy tax credits. Amortization of investments in renewable energy projects is recorded as a part of income tax expense under the proportional amortization method of accounting. For the three and nine months ended September 30, 2025, the total generated renewable energy tax credits and benefits were $21.9 million and $22.6 million, respectively. These were partially offset by the amortization on the investments, which was $20.1 million and $20.8 million for the three and nine months ended September 30, 2025, respectively. There were no tax credits or amortization on investments in renewable energy projects for the same periods of 2024.

Current wording

In addition to affordable housing partnerships, we invest in projects that qualify for renewable energy tax credits. Amortization of investments in renewable energy projects is recorded as a part of income tax expense under the proportional amortization method of accounting. For the three months ended March 31, 2026 and 2025, the total generated renewable energy tax credits and benefits was $8.1 million and $350 thousand, respectively. This was partially offset by amortization on the investments, which was $7.0 million and $319 thousand for the three months ended March 31, 2026 and 2025, respectively.

Previous wording

At September 30, 2025, we had $2.02 billion in investment securities AFS, compared with $1.82 billion at December 31, 2024. The net unrealized loss on the investment securities AFS at September 30, 2025, was $193.5 million, compared with a net unrealized loss on securities AFS of $299.4 million at December 31, 2024. The year-to-date decrease in net unrealized loss position reflected movements in market interest rates and second quarter sales of investment securities AFS. At September 30, 2025, we had $243.5 million in investment securities HTM, compared with $252.4 million at December 31, 2024. We have the ability and intent to hold securities classified as HTM to maturity.

Current wording

At March 31, 2026, we had $1.95 billion in investment securities AFS, compared with $1.83 billion at December 31, 2025. The net unrealized loss on the investment securities AFS at March 31, 2026, was $194.6 million, compared with a net unrealized loss on securities AFS of $185.3 million at December 31, 2025. The year-to-date increase in net unrealized loss position reflected movements in market interest rates during the period. At March 31, 2026, we had $236.1 million in investment securities HTM, compared with $239.8 million at December 31, 2025. We have the ability and intent to hold securities classified as HTM to maturity.

Previous wording

During the nine months ended September 30, 2025, $717.5 million in investment securities was purchased, $953.1 million in investment securities was sold, $132.7 million in investment securities was paid down, and $45.1 million in investment securities was called.

Current wording

During the three months ended March 31, 2026, $277.9 million in investment securities was purchased, $34.1 million in investment securities was sold, $54.5 million in investment securities was paid down, and $68.5 million in investment securities was called.

Previous wording

We performed an analysis on our investment securities in unrealized loss positions at September 30, 2025 and December 31, 2024, and determined that an allowance for credit losses was not required for investment securities AFS or HTM. The majority of our investment portfolio consisted of securities issued by U.S. Government agencies or U.S. Government sponsored enterprises, which were determined to have a zero loss expectation. At September 30, 2025, we also had one asset-backed security, five corporate securities, and 35 municipal bonds not issued by U.S. Government agencies or U.S. Government sponsored enterprises that were in unrealized loss positions. Based on our analysis of these investment securities, we concluded a credit loss did not exist due to the strength of the issuers, high bond ratings, and because full payment of principal and interest is expected.

Current wording

We performed an analysis on our investment securities in unrealized loss positions at March 31, 2026 and December 31, 2025, and determined that an allowance for credit losses was not required for investment securities AFS or HTM. The majority of our investment portfolio consisted of securities issued by U.S. Government agencies or U.S. Government sponsored enterprises, which were determined to have a zero loss expectation. At March 31, 2026, we also had four asset-backed securities, five corporate securities, and 30 municipal bonds not issued by U.S. Government agencies or U.S. Government sponsored enterprises that were in unrealized loss positions. Based on our analysis of these investment securities, we concluded a credit loss did not exist due to the strength of the issuers, high bond ratings, and because full payment of principal and interest is expected.

Previous wording

At September 30, 2025, loans receivable totaled $14.59 billion, an increase of $968.6 million, or 7.1%, from $13.62 billion at December 31, 2024. The following table summarizes our loan portfolio by amount and percentage of total loans outstanding in each loan segment as of the dates indicated:

Current wording

At March 31, 2026, loans receivable totaled $14.64 billion, a decrease of $61.3 million, or 0.4%, from $14.70 billion at December 31, 2025. The following table summarizes our loan portfolio by amount and percentage of total loans outstanding in each loan segment as of the dates indicated:

Previous wording

Nonperforming assets, which consist of nonaccrual loans, accruing delinquent loans past due 90 days or more, and OREO, totaled $112.2 million at September 30, 2025, compared with $90.8 million at December 31, 2024, an increase of 23.5%. The year-to-date increase in nonperforming loans was largely driven by the migration of a CRE loan that is well secured by collateral property in a prime location. The ratio of nonperforming assets to total assets increased to 0.61% at September 30, 2025, compared with 0.53% at December 31, 2024. Nonaccrual loans to loans receivable was 0.75% at September 30, 2025, compared with 0.67% at December 31, 2024.

Current wording

Nonperforming assets, which consist of nonaccrual loans, accruing delinquent loans past due 90 days or more, and OREO, totaled $120.5 million at March 31, 2026, compared with $136.1 million at December 31, 2025, a decrease of 11.4%. The year-to-date decrease in nonperforming loans was largely driven by the payoff of a large CRE nonaccrual loan during the first quarter of 2026. The ratio of nonperforming assets to total assets decreased to 0.65% at March 31, 2026, compared with 0.73% at December 31, 2025. Nonaccrual loans to loans receivable was 0.75% at March 31, 2026, decreased from 0.90% at December 31, 2025.

Previous wording

(1) Nonaccrual loans exclude the guaranteed portion of delinquent SBA loans that are in liquidation totaling $15.3 million at September 30, 2025, and $12.8 million at December 31, 2024.

Current wording

(1) Nonaccrual loans exclude the guaranteed portion of delinquent SBA loans that are in liquidation totaling $19.4 million at March 31, 2026, and $15.6 million at December 31, 2025.

Previous wording

The ACL was $152.5 million at September 30, 2025, compared with $150.5 million at December 31, 2024. The ACL coverage ratio was 1.05% and 1.11% of loans receivable at September 30, 2025 and December 31, 2024, respectively. The year-to-date change in the ACL coverage ratio largely reflected the impact of the Territorial acquisition, which contributed $1.03 billion of residential mortgage loans at the close of the Merger. The following table reflects the allocation of the ACL by loan segment and the ratio of total ACL to total loans as of the dates indicated:

Current wording

The ACL was $155.1 million at March 31, 2026, compared with $156.7 million at December 31, 2025. The ACL coverage ratio was 1.06% and 1.07% of loans receivable at March 31, 2026 and December 31, 2025, respectively. The following table reflects the allocation of the ACL by loan segment and the ratio of total ACL to total loans as of the dates indicated:

Previous wording

The increase in ACL at September 30, 2025, compared with December 31, 2024, was due to an increase in ACL for residential mortgage loans, which was primarily driven by a higher residential mortgage loan balance as a result of the acquisition of Territorial. The increase in ACL for residential mortgage loans was partially offset by decreases in ACL for CRE loans and C&I loans. ACL for CRE loans declined due to decrease in balances of CRE loans, as well as from updates to historical loss and prepayment assumptions during the nine months ended September 30, 2025, which outweighed the impact of updated forecasted macroeconomic conditions. The third-party economic forecast used in the calculation at September 30, 2025, projected lower GDP growth and CRE price index, and slightly higher unemployment rates, relative to the forecast used at December 31, 2024. The decrease of ACL for C&I loans largely reflected improvement in credit quality.

Current wording

The decrease in ACL at March 31, 2026, compared with December 31, 2025, was due to a decrease in ACL for C&I loans, which was due to overall improvements in credit metrics for C&I loans as result of charge offs made during the quarter to resolve problem loans. The ACL for CRE loans increased from December 31, 2025 to March 31, 2026, primarily driven by a weakening in the commercial real estate price index forecasts from December 31, 2025 to March 31, 2026. The third-party economic forecast used in the calculation at March 31, 2026, projected slightly higher GDP growth but lower growth in the CRE price index and unemployment rates remained largely unchanged relative to the forecast used at December 31, 2025.

Previous wording

Net loan charge offs as a percentage of average loans were 0.14% and 0.24%, annualized, for the three and nine months ended September 30, 2025, respectively, compared with net loans charge offs of 0.17% and 0.13%, respectively, for the same periods in 2024. Net loan charge offs for the three and nine months ended September 30, 2025, primarily reflected C&I loan net charge offs of $6.0 million and $25.2 million, respectively.

Current wording

Net loan charge offs as a percentage of average loans were 0.29%, annualized, for the three months ended March 31, 2026, compared with net loans charge offs of 0.25%, annualized, for the same period in 2025. Net loan charge offs for the three months ended March 31, 2026, primarily reflected C&I loan net charge offs of $9.9 million.

Previous wording

We believe the ACL at September 30, 2025 was adequate to absorb current expected lifetime losses in the loan portfolio. However, there is no assurance that actual losses will not exceed the current estimated credit losses. Among other things, if the effects of the tariffs, global trade tensions, the federal government shutdown, inflation, potential economic recession, and the wars in the Gaza Strip and Ukraine are worse than we currently expect, or if the effects are prolonged, actual losses could exceed the estimated credit losses, which could have a material and adverse effect on our financial condition and results of operations.

Current wording

We believe the ACL at March 31, 2026 was adequate to absorb current expected lifetime losses in the loan portfolio. However, there is no assurance that actual losses will not exceed the current estimated credit losses. Among other things, if the effects of the tariffs, global trade tensions, inflation, potential economic recession, and the wars in Iran, the Gaza Strip, and Ukraine are worse than currently expected, or if the effects are prolonged, actual losses could exceed the estimated credit losses, which could have a material and adverse effect on our financial condition and results of operations.

Previous wording

At September 30, 2025, we had $44.0 million in accrued interest receivables on loans, compared with $43.0 million at December 31, 2024.

Current wording

At March 31, 2026, we had $45.2 million in accrued interest receivables on loans, compared with $43.5 million at December 31, 2025.

Previous wording

At September 30, 2025, we had $30.0 million in investments in affordable housing partnerships, compared with $32.4 million at December 31, 2024. The decrease in investments in affordable housing partnerships primarily reflected amortization during the nine months ended September 30, 2025, partially offset by investments of $5.2 million in affordable housing partnerships. Off-balance sheet commitments to fund investments in affordable housing partnerships totaled $21.4 million and $11.3 million at September 30, 2025 and December 31, 2024, respectively. Investments in affordable housing partnerships provide low-income housing tax credits.

Current wording

At March 31, 2026, we had $30.0 million in investments in affordable housing partnerships, compared with $27.9 million at December 31, 2025. The increase in investments in affordable housing partnerships primarily reflected investment in affordable housing partnerships of $4.5 million, partially offset by amortization during the three months ended March 31, 2026. Off-balance sheet commitments to fund investments in affordable housing partnerships totaled $16.0 million and $20.5 million at March 31, 2026 and December 31, 2025, respectively. Investments in affordable housing partnerships provide low-income housing tax credits.

Previous wording

At September 30, 2025, we had $28.7 million in investments in renewable energy tax credits on the Consolidated Statements of Financial Condition, compared with $3.4 million at December 31, 2024, which was recorded in other assets. At September 30, 2025 and December 31, 2024, unfunded commitments were $41.6 million and $2.8 million, which were recorded in other liabilities. The increase in both investments in renewable energy tax credits and their unfunded commitments reflected new investments made. During the three months ended September 30, 2025, we made new commitments to invest $46.2 million in renewable energy tax credit investments.

Current wording

At March 31, 2026, we had $30.4 million in investments in renewable energy tax credits on the Consolidated Statements of Financial Condition, compared with $12.4 million at December 31, 2025, which was recorded in other assets. At March 31, 2026 and December 31, 2025, unfunded commitments were $39.6 million and $12.4 million, respectively, which were recorded in other liabilities. The increase in both investments in renewable energy tax credits and their unfunded commitments reflected new investments made. During the three months ended March 31, 2026, we made new commitments to invest $25.0 million in renewable energy tax credit investments.

Previous wording

Deposits are the primary source of funds used in lending and investment activities. At September 30, 2025, total deposits were $15.83 billion, an increase of $1.50 billion, or 10.5%, from $14.33 billion at December 31, 2024. The increase in deposits was primarily due to the $1.67 billion in deposits assumed from the Territorial acquisition during the quarter ended September 30, 2025. Year-to-date, growth in customer deposits offset reductions of brokered deposits.

Current wording

Deposits are the primary source of funds used in lending and investment activities. At March 31, 2026, total deposits were $15.73 billion, an increase of $123.3 million, or 0.8%, from $15.60 billion at December 31, 2025.

Previous wording

At September 30, 2025, we had $657.6 million in brokered deposits and $300.0 million in California State Treasurer deposits, compared with $1.06 billion in brokered deposits and $300.0 million in California State Treasurer deposits at December 31, 2024. The California State Treasurer time deposits at September 30, 2025, had original maturities of six months, a weighted average interest rate of 4.16%, and were collateralized with a $330.0 million letter of credit issued by the FHLB. At September 30, 2025, time deposits owned by state and local governments in Hawaii were $243.5 million, and were collateralized by investment securities with an aggregate fair value of $255.3 million. At September 30, 2025, time deposits of more than $250 thousand totaled $3.33 billion, compared with $2.71 billion at December 31, 2024.

Current wording

At March 31, 2026, we had $1.04 billion in brokered deposits and $300.0 million in California State Treasurer deposits, compared with $902.0 million in brokered deposits and $300.0 million in California State Treasurer deposits at December 31, 2025. The California State Treasurer time deposits at March 31, 2026, had original maturities of six months, a weighted average interest rate of 3.67%, and were collateralized with a $330.0 million letter of credit issued by the FHLB. At March 31, 2026, time deposits owned by state and local governments in Hawaii were $293.9 million, and were collateralized by investment securities with an aggregate fair value of $315.6 million. At March 31, 2026, time deposits of more than $250 thousand totaled $3.19 billion, compared with $3.21 billion at December 31, 2025.