FIRST HAWAIIAN INC

Previous wording

A number of important factors could cause our actual results to differ materially from those indicated in these forward-looking statements, including the following: the geographic concentration of our business; current and future market and economic conditions generally or in Hawaii, Guam and Saipan in particular, including inflationary pressures and interest rate environment; our dependence on the real estate markets in which we operate; concentrated exposures to certain asset classes and individual obligors; the effect of changes in interest rates on our business, including our net interest income, net interest margin, the fair value of our investment securities, and our mortgage loan originations, mortgage servicing rights and mortgage loans held for sale; the future value of the investment securities that we own; the possibility of a deterioration in credit quality in our portfolio; the possibility we might underestimate the credit losses inherent in our loan and lease portfolio; our ability to attract and retain customer deposits; our inability to receive dividends from our bank, pay dividends to our common stockholders and satisfy obligations as they become due; our access to sources of liquidity and capital to address our liquidity needs; our ability to attract and retain skilled employees or changes in our management personnel; our ability to maintain our Bank's reputation; the failure to properly use and protect our customer and employee information and data; the possibility of employee misconduct or mistakes; the effectiveness of our risk management and internal disclosure controls and procedures; our ability to keep pace with technological changes; any failure or interruption of our information and communications systems; our ability to effectively compete with other financial services companies and the effects of competition in the financial services industry on our business; our ability to identify and address cybersecurity risks; the occurrence of fraudulent activity or effect of a material breach of, or disruption to, the security of any of our or our vendors’ systems; our ability to successfully develop and commercialize new or enhanced products and services; changes in the demand for our products and services; risks associated with the sale of loans and with our use of appraisals in valuing and monitoring loans; the possibility that actual results may differ from estimates and forecasts; fluctuations in the fair value of our assets and liabilities and off-balance sheet exposures; the effects of the failure of any component of our business infrastructure provided by a third party; the potential for environmental liability; the risk of being subject to litigation and the outcome thereof; the impact of, and changes in, applicable laws, regulations and accounting standards and policies; possible changes in trade, monetary and fiscal policies of, and other activities undertaken by, governments, agencies, central banks and similar orga…

Excerpt shortened here; the source contains the full paragraph.

Current wording

A number of important factors could cause our actual results to differ materially from those indicated in these forward-looking statements, including the following: the geographic concentration of our business; current and future market and economic conditions generally or in Hawaii, Guam and Saipan in particular, including inflationary pressures and interest rate environment; our dependence on the real estate markets in which we operate; concentrated exposures to certain asset classes and individual obligors; the effect of changes in interest rates on our business, including our net interest income, net interest margin, the fair value of our investment securities, and our mortgage loan originations, mortgage servicing rights and mortgage loans held for sale; the future value of the investment securities that we own; the possibility of a deterioration in credit quality in our portfolio; the possibility we might underestimate the credit losses inherent in our loan and lease portfolio; our ability to attract and retain customer deposits; our inability to receive dividends from our Bank, pay dividends to our common stockholders and satisfy obligations as they become due; our access to sources of liquidity and capital to address our liquidity needs; our ability to attract and retain skilled employees or changes in our management personnel; our ability to maintain our Bank's reputation; the failure to properly use and protect our customer and employee information and data; the possibility of employee misconduct or mistakes; the actual or perceived soundness of other financial institutions; the effectiveness of our risk management and internal disclosure controls and procedures; our ability to keep pace with technological changes; any failure or interruption of our information and communications systems; our ability to effectively compete with other financial services companies and the effects of competition in the financial services industry on our business; our ability to identify and address cybersecurity risks; the occurrence of fraudulent activity or effect of a material breach of, or disruption to, the security of any of our or our vendors’ systems; our ability to successfully develop and commercialize new or enhanced products and services; changes in the demand for our products and services; risks associated with the sale of loans and with our use of appraisals in valuing and monitoring loans; the possibility that actual results may differ from estimates and forecasts; fluctuations in the fair value of our assets and liabilities and off-balance sheet exposures; the effects of the failure of any component of our business infrastructure provided by a third party; the potential for environmental liability; the risk of being subject to litigation and the outcome thereof; the impact of, and changes in, applicable laws, regulations and accounting standards and policies; possible changes in trade, monetary and fiscal policies of, and other activities u…

Excerpt shortened here; the source contains the full paragraph.

Previous wording

As of December 31, 2023, we were the largest full-service bank headquartered in Hawaii as measured by assets, loans and leases, deposits and net income. As of December 31, 2023, we had $24.9 billion of assets, $14.4 billion of gross loans and leases and $21.3 billion of deposits. We also generated $235.0 million of net income or diluted earnings per share of $1.84 per share for the year ended December 31, 2023. We operate our business through three operating segments: Retail Banking, Commercial Banking and Treasury and Other. See “Note 22. Reportable Operating Segments” in the notes to the consolidated financial statements included in Item 8. Financial Statements and Supplementary Data for more information.

Current wording

As of December 31, 2024, we were the largest full-service bank headquartered in Hawaii as measured by assets, loans and leases and net income. As of December 31, 2024, we had $23.8 billion of assets and $14.4 billion of gross loans and leases. We also generated $230.1 million of net income or diluted earnings per share of $1.79 for the year ended December 31, 2024. We operate our business through three operating segments: Retail Banking, Commercial Banking and Treasury and Other. See “Note 22. Reportable Operating Segments” in the notes to the consolidated financial statements included in Item 8. Financial Statements and Supplementary Data for more information.

Previous wording

Hawaii’s economy reflects some decline during the year ended December 31, 2023 but remains relatively resilient in the wake of the wildfires that affected the island of Maui in early August and high consumer prices. According to the State of Hawaii Department of Labor and Industrial Relations, the statewide seasonally adjusted unemployment rate decreased to 2.9% at December 31, 2023, compared to 3.2% at December 31, 2022. Nationally, the seasonally adjusted unemployment rate was 3.7% at December 31, 2023 compared to 3.5% at December 31, 2022.

Current wording

Hawaii’s economy remains relatively resilient in the wake of high consumer prices and the August 2023 wildfires that continue to affect the island of Maui. According to the State of Hawaii Department of Business, Economic Development and Tourism, the statewide seasonally adjusted unemployment rate was 3.0% at December 31, 2024 compared to 2.9% at December 31, 2023. Nationally, the seasonally adjusted unemployment rate was 4.1% at December 31, 2024 compared to 3.7% at December 31, 2023.

Previous wording

The housing market has slowed compared to the prior year but is still trending upwards overall. Both volume of real estate sales and housing prices decreased when comparing the twelve months of 2023 with the twelve months of 2022. According to the Honolulu Board of Realtors, the volume of single-family home sales decreased by 26.3%, while condominium sales decreased by 28%, as compared to the same period in 2022. The median price of a single-family home sold on Oahu in the twelve months of 2023 was $1,050,000, a decrease of 5.0% from the same period in 2022, but an increase of 6.1% from the same period in 2021. The median price of a condominium sold on Oahu in the twelve months of 2023 was $508,500, a decrease of 0.3% from the same period in 2022, but an increase of 7.1% from the same period in 2021. As of December 31, 2023, months of inventory of single-family homes and condominiums on Oahu remained low at approximately 2.8 and 3.2 months, respectively.

Current wording

The local Oahu housing market has remained relatively stable, but is experiencing some softening as compared to previous years primarily due to home prices continuing to rise and high mortgage interest rates. According to the Honolulu Board of Realtors, the volume of single-family home sales increased by 9.1%, while condominium sales decreased by 2.5%, in each case when comparing the twelve months of 2024 with the same period in 2023. When comparing the twelve months of 2024 with the same period in 2022, however, the volume of single-family home sales decreased by 19.6%, while condominium sales decreased by 29.8%. The median price of a single-family home sold on Oahu in the twelve months of 2024 was $1,100,000, an increase of 4.8% from the same period in 2023. The median price of a condominium sold on Oahu in the twelve months of 2024 was $515,000, an increase of 1.3% from the same period in 2023. As of December 31, 2024, months of inventory of single-family homes and condominiums on Oahu remained low at approximately 2.9 and 5.2 months, respectively.

Previous wording

Other key factors could impact our profitability in future reporting periods. See Item 1A. Risk Factors, beginning in the section captioned “Summary of Risk Factors.”

Current wording

These and other key factors could impact our profitability in future reporting periods. See Item 1A. Risk Factors, beginning in the section captioned “Summary of Risk Factors.”

Previous wording

Net income was $235.0 million for the year ended December 31, 2023, a decrease of $30.7 million or 12% as compared to 2022. Basic and diluted earnings per share were both $1.84 per share for the year ended December 31, 2023, a decrease of $0.24 per share or 12% as compared to 2022. The decrease in net income was primarily due to a $60.7 million increase in noninterest expense and a $25.2 million increase in the provision for credit losses (the “Provision”). This was partially offset by a $22.6 million increase in net interest income, a $21.3 million increase in noninterest income and an $11.3 million decrease in the provision for income taxes.

Current wording

Net income was $235.0 million for the year ended December 31, 2023, a decrease of $30.7 million or 12% as compared to 2022. Basic and diluted earnings per share were both $1.84 for the year ended December 31, 2023, a decrease of $0.24 or 12% as compared to 2022. The decrease in net income was primarily due to a $60.7 million increase in noninterest expense and a $25.2 million increase in the Provision. This was partially offset by a $22.6 million increase in net interest income, a $21.3 million increase in noninterest income and an $11.3 million decrease in the provision for income taxes.

Previous wording

Our return on average total assets was 1.06% for the year ended December 31, 2022, a decrease of three basis points as compared to 2021, and our return on average total stockholders’ equity was 11.44% for the year ended December 31, 2022, an increase of 163 basis points as compared to 2021. Our return on average tangible assets was 1.11% for the year ended December 31, 2022, a decrease of two basis points as compared to 2021, and our return on average tangible stockholders’ equity was 20.03% for the year ended December 31, 2022, an increase of 452 basis points as compared to 2021. Our efficiency ratio was 55.20% for the year ended December 31, 2022 as compared to 56.45% in 2021. Return on average tangible assets and return on average tangible stockholders’ equity are non-GAAP financial measures. For a reconciliation to the most directly comparable GAAP financial measures for return on average tangible assets and return on average tangible stockholders’ equity, see Table 2, GAAP to Non-GAAP Reconciliation.

Current wording

Our return on average total assets was 0.96% for the year ended December 31, 2024, an increase of one basis point as compared to 2023, and our return on average total stockholders’ equity was 9.00% for the year ended December 31, 2024, a decrease of 101 basis points as compared to 2023. Our return on average tangible assets was 1.00% for the year ended December 31, 2024, an increase of one basis point as compared to 2023, and our return on average tangible stockholders’ equity was 14.74% for the year ended December 31, 2024, a decrease of 265 basis points as compared to 2023, due to an increase in average stockholders’ equity, which resulted in part from a decrease in net unrealized losses in our investment securities portfolio, and lower net income. Our efficiency ratio was 61.57% for the year ended December 31, 2024 as compared to 59.48% in 2023. Return on average tangible assets and return on average tangible stockholders’ equity are non-GAAP financial measures. For a reconciliation to the most directly comparable GAAP financial measures for return on average tangible assets and return on average tangible stockholders’ equity, see Table 2, GAAP to Non-GAAP Reconciliation.

Previous wording

Our results for the year ended December 31, 2022 were highlighted by the following:

Current wording

Our results for the December 31, 2023 were highlighted by the following:

Previous wording

The Federal Reserve influences the general market rates of interest, including the deposit and loan rates offered by many financial institutions. Our loan portfolio is affected by changes in the prime interest rate. The prime rate began in 2021 at 3.25%, where it remained at through the end of the year. During 2022, the prime rate increased a total of 425 basis points (25 basis points in March, 50 basis points in May, 75 basis points in each month of June, July, September and November, and 50 basis points in December) to end the year at 7.50%. During 2023, the prime rate increased 100 basis points (25 basis points each in February, March, May and July) to end 2023 at 8.50%. As noted above, our loan portfolio is also impacted by changes in the SOFR. At December 31, 2023, the one-month and three-month CME Term SOFR interest rates were 5.35% and 5.33%, respectively. At December 31, 2022, the one-month and three-month CME Term SOFR interest rates were 4.36% and 4.59%, respectively. At December 31, 2021, the one-month and three-month CME Term SOFR interest rates were 0.05% and 0.09%, respectively. The target range for the federal funds rate, which is the cost of immediately available overnight funds, began in 2021 at 0.00% to 0.25% where it remained at through the end of the year. During 2022, the federal funds rate increased 425 basis points to end the year at 4.25% to 4.50%. During 2023, the federal funds rate increased 100 basis points to end the year at 5.25% to 5.50%.

Current wording

The Federal Reserve influences the general market rates of interest, including the deposit and loan rates offered by many financial institutions. Our loan portfolio is affected by changes in the prime interest rate. The prime rate began in 2022 at 3.25% and increased a total of 425 basis points (25 basis points in March, 50 basis points in May, 75 basis points in each month of June, July, September and November, and 50 basis points in December) to end the year at 7.50%. During 2023, the prime rate increased 100 basis points (25 basis points each in February, March, May and July) to end the year at 8.50%. In 2024, the prime rate decreased 100 basis points (50 basis points in September, and 25 basis points in both November and December) to end the year at 7.50%. Our loan portfolio is also impacted by changes in the SOFR. At December 31, 2024, the one-month and three-month CME Term SOFR interest rates were 4.33% and 4.31%, respectively. At December 31, 2023, the one-month and three-month CME Term SOFR interest rates were 5.35% and 5.33%, respectively. At December 31, 2022, the one-month and three-month CME Term SOFR interest rates were 4.36% and 4.59%, respectively. The target range for the federal funds rate, which is the cost of immediately available overnight funds, began in 2022 at 0.00% to 0.25%, and increased a total of 425 basis points to end the year at 4.25% to 4.50%. During 2023, the federal funds rate increased 100 basis points to end the year at 5.25% to 5.50%. In 2024, the federal funds rate decreased 100 basis points to end the year at 4.25% to 4.50%. There continues to be uncertainty in the changing market and economic conditions, including the possibility of additional measures that could be taken by the Federal Reserve and other government agencies related to the overall macroeconomic environment.

Previous wording

The Provision was $26.6 million for the year ended December 31, 2023 compared to a Provision of $1.4 million in 2022. For the year ended December 31, 2023, the Provision included $24.9 million in provision for credit losses for loans and leases, compared to a negative $2.1 million in provision for credit losses for loans and leases in 2022, and $1.8 million in provision for credit losses for the reserve for unfunded commitments, compared to $3.5 million in provision for credit losses for the reserve for unfunded commitments in 2022. The Provision of $26.6 million was primarily due to increases in the provision for consumer loans, construction loans, commercial and industrial loans, residential mortgage loans and commercial real estate loans and the provision for unfunded commercial and industrial and construction commitments. This was partially offset by a decrease in the provision for unfunded home equity line commitments. We recorded net charge-offs of $12.2 million and $11.2 million for the years ended December 31, 2023 and 2022, respectively. This represented net charge-offs of 0.09% and 0.08% of total average loans and leases for the years ended December 31, 2023 and 2022, respectively. The ACL was $156.5 million and $143.9 million as of December 31, 2023 and 2022, respectively, and represented 1.09% of total outstanding loans and leases as of December 31, 2023, compared to 1.02% of total outstanding loans and leases as of December 31, 2022. The reserve for unfunded commitments was $35.6 million as of December 31, 2023, compared to $33.8 million as of December 31, 2022. The Provision is recorded to maintain the ACL and the reserve for unfunded commitments at levels deemed adequate by management based on the factors noted in the “Risk Governance and Quantitative and Qualitative Disclosures About Market Risk — Credit Risk” section of this MD&A.

Current wording

The Provision was $14.8 million for the year ended December 31, 2024 compared to a Provision of $26.6 million in 2023. For the year ended December 31, 2024, the Provision included $17.5 million in provision for credit losses for loans and leases, compared to $24.9 million in provision for credit losses for loans and leases in 2023, and a negative $2.8 million in provision for credit losses for the reserve for unfunded commitments, compared to $1.8 million in provision for credit losses for the reserve for unfunded commitments in 2023. The Provision of $14.8 million was primarily due to decreases in the provision for construction loans, commercial real estate loans and home equity lines and the provision for unfunded commercial and industrial, construction, home equity line and commercial real estate commitments. This was partially offset by increases in the provision for consumer loans, commercial and industrial loans and residential mortgage loans. We recorded net charge-offs of $13.6 million and $12.2 million for the years ended December 31, 2024 and 2023, respectively. This represented net charge-offs of 0.10% and 0.09% of total average loans and leases for the years ended December 31, 2024 and 2023, respectively. The ACL was $160.4 million and $156.5 million as of December 31, 2024 and 2023, respectively, and represented 1.11% of total outstanding loans and leases as of December 31, 2024, compared to 1.09% of total outstanding loans and leases as of December 31, 2023. The reserve for unfunded commitments was $32.8 million as of December 31, 2024, compared to $35.6 million as of December 31, 2023. The Provision is recorded to maintain the ACL and the reserve for unfunded commitments at levels deemed adequate by management based on the factors noted in the “Risk Governance and Quantitative and Qualitative Disclosures About Market Risk — Credit Risk” section of this MD&A.

Previous wording

Total noninterest income was $200.8 million for the year ended December 31, 2023, an increase of $21.3 million or 12% as compared to 2022. Total noninterest income was $179.5 million for the year ended December 31, 2022, a decrease of $5.4 million or 3% as compared to 2021.

Current wording

Total noninterest income was $185.8 million for the year ended December 31, 2024, a decrease of $15.0 million or 7% as compared to 2023. Total noninterest income was $200.8 million for the year ended December 31, 2023, an increase of $21.3 million or 12% as compared to 2022.

Previous wording

Service charges on deposit accounts were $29.6 million for the year ended December 31, 2023, an increase of $0.8 million or 3% as compared to 2022. This increase was primarily due to a $0.9 million increase in dormant account fees, a $0.7 million increase in account analysis service charges and a $0.6 million increase in overdraft and checking account fees, partially offset by a $1.1 million decrease in checking account service fees. Service charges on deposit accounts were $28.8 million for the year ended December 31, 2022, an increase of $1.3 million or 5% as compared to 2021. This increase was primarily due to a $1.8 million increase in overdraft and checking account fees, a $1.0 million increase in dormant account fees and a $0.6 million increase in account analysis service charges, partially offset by a $2.0 million decrease in checking account service fees.

Current wording

Service charges on deposit accounts were $31.1 million for the year ended December 31, 2024, an increase of $1.4 million or 5% as compared to 2023. This increase was primarily due to a $2.6 million increase in account analysis service charges, partially offset by a $1.2 million decrease in overdraft and checking account fees. Service charges on deposit accounts were $29.6 million for the year ended December 31, 2023, an increase of $0.8 million or 3% as compared to 2022. This increase was primarily due to a $0.9 million increase in dormant account fees, a $0.7 million increase in account analysis service charges and a $0.6 million increase in overdraft and checking account fees, partially offset by a $1.1 million decrease in checking account service fees.

Previous wording

Credit and debit card fees were $63.9 million for the year ended December 31, 2023, a decrease of $2.1 million or 3% as compared to 2022. This decrease was primarily due to a $3.1 million increase in network association dues, a $2.1 million decrease in merchant service revenues and a $1.0 million decrease in ATM interchange and surcharge fees, partially offset by a $3.1 million increase in interchange settlement fees and a $1.0 million increase in debit card interchange fees. Credit and debit card fees were $66.0 million for the year ended December 31, 2022, an increase of $2.4 million or 4% as compared to 2021. This increase was primarily due to a $3.3 million increase in interchange settlement fees and a $1.7 million increase in merchant service revenues, partially offset by a $1.6 million increase in network association dues and a $0.9 million decrease in ATM interchange and surcharge fees.

Current wording

Credit and debit card fees were $64.4 million for the year ended December 31, 2024, an increase of $0.5 million or 1% as compared to 2023. This increase was primarily due to a $2.6 million increase in debit card interchange fees, a $1.9 million decrease in network association dues and a $1.4 million increase in interchange settlement fees, partially offset by a $3.2 million decrease in ATM interchange and surcharge fees, a $1.3 million decrease in merchant service revenues and a $0.6 million decrease in rental fees from credit card terminals. Credit and debit card fees were $63.9 million for the year ended December 31, 2023, a decrease of $2.1 million or 3% as compared to 2022. This decrease was primarily due to a $3.1 million increase in network association dues, a $2.1 million decrease in merchant service revenues and a $1.0 million decrease in ATM interchange and surcharge fees, partially offset by a $3.1 million increase in interchange settlement fees and a $1.0 million increase in debit card interchange fees.

Previous wording

Other service charges and fees were $37.3 million for the year ended December 31, 2023, an increase of $0.3 million or 1% as compared to 2022. Other service charges and fees were $37.0 million for the year ended December 31, 2022, a decrease of $1.5 million or 4% as compared to 2021. This decrease was primarily due to a $1.0 million decrease in miscellaneous service fees, a $1.0 million decrease in service fees related to participation loans, a $0.4 million decrease in fees from standby letters of credit arrangements, a $0.3 million decrease in insurance income, a $0.3 million decrease in traveler’s check processing fees and a $0.2 million decrease in safe deposit box rental fees. This was partially offset by a $1.9 million increase in fees from annuities and securities.

Current wording

Other service charges and fees were $45.9 million for the year ended December 31, 2024, an increase of $8.6 million or 23% as compared to 2023. This increase was primarily due to a $6.9 million increase in fees from annuities and securities, a $0.3 million increase in safe deposit box rental fees, a $0.3 million increase in miscellaneous service fees, a $0.3 million increase in cash management service fees, a $0.3 million increase in insurance income and a $0.3 million increase in fees from standby letters of credit arrangements. Other service charges and fees were $37.3 million for the year ended December 31, 2023, an increase of $0.3 million or 1% as compared to 2022.

Previous wording

Trust and investment services income was $38.4 million for the year ended December 31, 2023, an increase of $2.0 million or 5% as compared to 2022. This increase was primarily due to a $1.1 million increase in investment management fees and a $1.1 million increase in business cash management fees. Trust and investment services income was $36.5 million for the year ended December 31, 2022, an increase of $1.7 million or 5% as compared to 2021. This increase was primarily due to a $2.5 million increase in business cash management fees and a $0.5 million increase in investment management fees. This was partially offset by a $0.4 million decrease in irrevocable trust fees, a $0.3 million decrease in trust service fees and a $0.3 million decrease in pension plan fees.

Current wording

Trust and investment services income was $38.3 million for the year ended December 31, 2024, a decrease of $0.1 million as compared to 2023. Trust and investment services income was $38.4 million for the year ended December 31, 2023, an increase of $2.0 million or 5% as compared to 2022. This increase was primarily due to a $1.1 million increase in investment management fees and a $1.1 million increase in business cash management fees.

Previous wording

BOLI income was $15.3 million for the year ended December 31, 2023, an increase of $14.1 million as compared to 2022. This increase was due to an $11.0 million increase in BOLI earnings and a $3.1 million increase in death benefit proceeds from life insurance policies. BOLI income was $1.2 million for the year ended December 31, 2022, a decrease of $11.9 million or 91% as compared to 2021. This decrease was due to a $9.7 million decrease in BOLI earnings and a $2.3 million decrease in death benefit proceeds from life insurance policies.

Current wording

BOLI income was $17.9 million for the year ended December 31, 2024, an increase of $2.5 million or 17% as compared to 2023. This increase was due to a $3.0 million increase in BOLI earnings, partially offset by a $0.4 million decrease in death benefit proceeds from life insurance policies. BOLI income was $15.3 million for the year ended December 31, 2023, an increase of $14.1 million as compared to 2022. This increase was due to an $11.0 million increase in BOLI earnings and a $3.1 million increase in death benefit proceeds from life insurance policies.

Previous wording

Net gains on the sale of investment securities were $0.8 million for the year ended December 31, 2023, an increase in net gains of $0.8 million as compared to the same period in 2022. The net gains were primarily due to a $40.8 million net realized gain on the sale of the Company’s remaining approximately 120,000 Visa Class B restricted shares, partially offset by $40.0 million of net realized losses on sales of available-for-sale investment securities. Net gains on the sale of investment securities were nil for the year ended December 31, 2022.

Current wording

Net losses on the sale of investment securities were $26.2 million for the year ended December 31, 2024, an increase in net losses of $27.0 million as compared to the same period in 2023. The net losses were primarily due to the investment portfolio restructuring and sale of investment securities resulting in a realized loss of $26.2 million. Net gains on the sale of investment securities were $0.8 million for the year ended December 31, 2023, an increase in net gains of $0.8 million as compared to the same period in 2022. The net gains were primarily due to a $40.8 million net realized gain on the sale of the Company’s remaining approximately 120,000 Visa Class B restricted shares, partially offset by $40.0 million of net realized losses on sales of available-for-sale investment securities.

Previous wording

Other noninterest income was $15.4 million for the year ended December 31, 2023, an increase of $5.5 million or 55% as compared to 2022. This increase was primarily due to a $7.9 million gain on the sale of a bank property in 2023, a $2.5 million increase in income due to adjustments to certain liabilities assumed as a result of the Reorganization Transactions, a $2.4 million increase in market adjustments on mutual funds purchased, a $1.5 million increase in volume-based incentives and a $0.9 million increase in net mortgage servicing rights income. This was partially offset by a $7.0 million increase in net losses recognized in income related to derivative contracts, a $1.2 million tax refund received during the year ended December 31, 2022, a $0.7 million decrease in customer-related interest rate swap fees and a $0.4 million decrease in debit card merchant discount fees. Other noninterest income was $9.9 million for the year ended December 31, 2022, an increase of $2.7 million or 37% as compared to 2021. This increase was primarily due to a $5.2 million decrease in net losses recognized in income related to derivative contracts, a $1.2 million tax refund received, a $0.7 million increase in net mortgage servicing rights income, a $0.5 million increase in vendor bonuses received and a $0.4 million increase in market adjustments for foreign exchange transactions. This was partially offset by a $2.2 million decrease in gains on the sale of bank properties, a $1.6 million decrease in gains on the sale of residential loans to government-sponsored enterprises and a $1.5 million decrease in market adjustments on mutual funds purchased.

Current wording

Other noninterest income was $14.5 million for the year ended December 31, 2024, a decrease of $1.0 million or 6% as compared to 2023. This decrease was primarily due to a $7.9 million gain on the sale of a bank property in 2023 and a $1.2 million decrease in volume-based incentives. This was partially offset by $4.1 million in insurance proceeds received during the year ended December 31, 2024, a $1.6 million excise tax refund received during the year ended December 31, 2024, a $1.5 million decrease in net losses recognized in income related to derivative contracts and a $0.5 million decrease in interest paid on collateral payments related to derivative instruments. Other noninterest income was $15.4 million for the year ended December 31, 2023, an increase of $5.5 million or 55% as compared to 2022. This increase was primarily due to the $7.9 million gain on the sale of a bank property in 2023 mentioned previously, a $2.5 million increase in income due to adjustments to certain liabilities assumed as a result of the Reorganization Transactions, a $2.4 million increase in market adjustments on mutual funds purchased, a $1.5 million increase in volume-based incentives and a $0.9 million increase in net mortgage servicing rights income. This was partially offset by a $7.0 million increase in net losses recognized in income related to derivative contracts, a $1.2 million tax refund received during the year ended December 31, 2022, a $0.7 million decrease in customer-related interest rate swap fees and a $0.4 million decrease in debit card merchant discount fees.

Previous wording

Total noninterest expense was $501.1 million for the year ended December 31, 2023, an increase of $60.7 million or 14% as compared to 2022. Total noninterest expense was $440.5 million for the year ended December 31, 2022, an increase of $35.0 million or 9% as compared to 2021.

Current wording

Total noninterest expense was $501.2 million for the year ended December 31, 2024, an increase of $0.1 million as compared to 2023. Total noninterest expense was $501.1 million for the year ended December 31, 2023, an increase of $60.7 million or 14% as compared to 2022.

Previous wording

Salaries and employee benefits expense was $225.8 million for the year ended December 31, 2023, an increase of $26.6 million or 13% as compared to 2022. This increase was primarily due to a $12.7 million increase in base salaries and related payroll taxes, a $10.7 million decrease in payroll and benefit costs being deferred as loan origination costs, a $4.3 million increase in other compensation, primarily related to adjustments made to the deferred compensation plan as a result of market conditions and nonrecurring separation agreements and severance costs, a $1.3 million increase in retirement plan expenses, a $1.1 million increase in state unemployment tax expense and a $0.8 million increase in group health plan costs. This was partially offset by a $2.2 million decrease in incentive compensation, a $1.1 million decrease in temporary help expenses and a $0.9 million decrease in employee overtime pay expense. Salaries and employee benefits expense was $199.1 million for the year ended December 31, 2022, an increase of $16.7 million or 9% as compared to 2021. This increase was primarily due to a $15.4 million decrease in payroll and benefit costs being deferred as loan origination costs, an $11.7 million increase in base salaries and related payroll taxes, a $0.6 million increase in employee overtime pay expense and a $0.4 million increase in incentive compensation. This was partially offset by a $7.9 million decrease in other compensation, primarily related to adjustments made to the deferred compensation plan as a result of market conditions and a nonrecurring severance cost of $1.2 million recorded during the year ended December 31, 2021, as well as a $1.6 million decrease in temporary help expenses, a $1.1 million decrease in retirement plan expenses and a $0.9 million decrease in group health plan costs.

Current wording

Salaries and employee benefits expense was $235.6 million for the year ended December 31, 2024, an increase of $9.8 million or 4% as compared to 2023. This increase was primarily due to a $9.7 million increase in incentive compensation, a $1.8 million increase in retirement plan expenses, a $1.2 million decrease in payroll and benefit costs being deferred as loan origination costs and a $1.0 million increase in group health plan costs. This was partially offset bya $1.1 million decrease in other compensation, primarily related to a decrease in nonrecurring separation agreements and severance costs, partially offset by adjustments made to the deferred compensation plan as a result of market conditions, a $0.9 million decrease in employee overtime pay expense, a $0.9 million decrease in state unemployment tax expense and a $0.6 million decrease in temporary help expenses. Salaries and employee benefits expense was $225.8 million for the year ended December 31, 2023, an increase of $26.6 million or 13% as compared to 2022. This increase was primarily due to a $12.7 million increase in base salaries and related payroll taxes, a $10.7 million decrease in payroll and benefit costs being deferred as loan origination costs, a $4.3 million increase in other compensation, primarily related to adjustments made to the deferred compensation plan as a result of market conditions and nonrecurring separation agreements and severance costs, a $1.3 million increase in retirement plan expenses, a $1.1 million increase in state unemployment tax expense and a $0.8 million increase in group health plan costs. This was partially offset by a $2.2 million decrease in incentive compensation, a $1.1 million decrease in temporary help expenses and a $0.9 million decrease in employee overtime pay expense.

Previous wording

Contracted services and professional fees were $66.4 million for the year ended December 31, 2023, a decrease of $3.6 million or 5% as compared to 2022. This decrease was primarily due to a $6.2 million decrease in contracted data processing expenses and a $3.2 million decrease in audit, legal and consultant fees. This was partially offset by a $5.8 million increase in outside services, primarily attributable to technology-related projects, marketing and new customer services. Contracted services and professional fees were $70.0 million for the year ended December 31, 2022, an increase of $6.7 million or 11% as compared to 2021. This increase was primarily due to an $11.6 million increase in outside services, primarily attributable to technology-related projects, marketing and new customer services, and a $3.2 million increase in audit, legal and consultant fees. This was partially offset by an $8.0 million decrease in contracted data processing expenses.

Current wording

Contracted services and professional fees were $60.9 million for the year ended December 31, 2024, a decrease of $5.5 million or 8% as compared to 2023. This decrease was primarily due to a $4.3 million decrease in outside services, primarily attributable to technology-related projects, marketing and new customer services, a $0.6 million decrease in contracted data processing expenses and a $0.6 million decrease in audit, legal and consultant fees. Contracted services and professional fees were $66.4 million for the year ended December 31, 2023, a decrease of $3.6 million or 5% as compared to 2022. This decrease was primarily due to a $6.2 million decrease in contracted data processing expenses and a $3.2 million decrease in audit, legal and consultant fees. This was partially offset by a $5.8 million increase in outside services, primarily attributable to technology-related projects, marketing and new customer services.

Previous wording

Occupancy expense was $29.6 million for the year ended December 31, 2023, a decrease of $1.4 million or 5% as compared to 2022. This decrease was due to a $0.9 million decrease in building depreciation, a $0.7 million decrease in building maintenance expense and a $0.5 million decrease in utilities expense, partially offset by a $0.8 million decrease in net sublease rental income. Occupancy expense was $31.0 million for the year ended December 31, 2022, an increase of $1.7 million or 6% as compared to 2021. This increase was due to a $1.6 million increase in utilities expense and a $0.9 million increase in building maintenance expense, partially offset by a $0.4 million decrease in rental expense and a $0.3 million decrease in real property tax expense.

Current wording

Occupancy expense was $29.0 million for the year ended December 31, 2024, a decrease of $0.6 million or 2% as compared to 2023. This decrease was due to a $0.5 million increase in net sublease rental income and a $0.3 million decrease in building depreciation, partially offset by a $0.4 million increase in lease-related insurance expense. Occupancy expense was $29.6 million for the year ended December 31, 2023, a decrease of $1.4 million or 5% as compared to 2022. This decrease was due to a $0.9 million decrease in building depreciation, a $0.7 million decrease in building maintenance expense and a $0.5 million decrease in utilities expense, partially offset by a $0.8 million decrease in net sublease rental income.

Previous wording

Equipment expense was $45.1 million for the year ended December 31, 2023, an increase of $10.6 million or 31% as compared to 2022. This increase was primarily due to an $11.8 million increase in technology-related amortization and licensing and maintenance fees, partially offset by a $0.9 million decrease in furniture and equipment depreciation. Equipment expense was $34.5 million for the year ended December 31, 2022, an increase of $9.8 million or 40% as compared to 2021. This increase was primarily due to a $10.5 million increase in technology-related amortization and licensing and maintenance fees, partially offset by a $0.5 million decrease in furniture and equipment depreciation.

Current wording

Equipment expense was $53.9 million for the year ended December 31, 2024, an increase of $8.8 million or 19% as compared to 2023. This increase was primarily due to an $8.0 million increase in technology-related amortization and licensing and maintenance fees, a $0.5 million increase in furniture and equipment depreciation and a $0.3 million increase in other furniture and equipment expense. Equipment expense was $45.1 million for the year ended December 31, 2023, an increase of $10.6 million or 31% as compared to 2022. This increase was primarily due to an $11.8 million increase in technology-related amortization and licensing and maintenance fees, partially offset by a $0.9 million decrease in furniture and equipment depreciation.

Previous wording

Regulatory assessment and fees were $32.1 million for the year ended December 31, 2023, an increase of $22.5 million as compared to 2022. This increase was primarily due to increases in the FDIC insurance assessment. In October 2022, the FDIC adopted a final rule to increase the initial base deposit insurance assessment rate schedules by 2 basis points beginning with the first quarterly assessment period of 2023. In May 2023, the FDIC issued a notice of proposed rulemaking for a special assessment to replenish the deposit insurance fund following the recent bank failures. In November 2023, the FDIC approved a final rule to implement the special assessment and we recorded a $16.3 million loss in December 2023. Regulatory assessment and fees were $9.6 million for the year ended December 31, 2022, an increase of $1.4 million or 16% as compared to 2021. This increase was primarily due to a $1.4 million increase in the FDIC insurance assessment.

Current wording

Regulatory assessment and fees were $19.1 million for the year ended December 31, 2024, a decrease of $13.0 million or 40% as compared to 2023. Regulatory assessment and fees were $32.1 million for the year ended December 31, 2023, an increase of $22.5 million as compared to 2022. In October 2022, the FDIC adopted a final rule to increase the initial base deposit insurance assessment rate schedules by 2 basis points beginning with the first quarterly assessment period of 2023. In May 2023, the FDIC issued a notice of proposed rulemaking for a special assessment to replenish the deposit insurance fund following the 2023 bank failures. In November 2023, the FDIC approved a final rule to implement the special assessment and we recorded a $16.3 million expense in December 2023. During the first quarter of 2024, the FDIC issued a notice that the original loss estimate related to the 2023 bank failures was subsequently increased and that this increase would result in an additional assessment expense to affected institutions. As a result, we recorded a net expense related to the special assessment of $3.5 million for year ended December 31, 2024.

Previous wording

Advertising and marketing expense was $7.6 million for the year ended December 31, 2023, a decrease of $0.4 million or 5% as compared to 2022. Advertising and marketing expense was $8.0 million for the year ended December 31, 2022, an increase of $1.9 million or 31% as compared to 2021. This increase was primarily due to a $1.5 million increase in advertising costs.

Current wording

Advertising and marketing expense was $7.7 million for the year ended December 31, 2024, an increase of $0.1 million or 1% as compared to 2023. Advertising and marketing expense was $7.6 million for the year ended December 31, 2023, a decrease of $0.4 million or 5% as compared to 2022.

Previous wording

Card rewards program expense was $31.6 million for the year ended December 31, 2023, an increase of $0.6 million or 2% as compared to 2022. This increase was primarily due to a $2.1 million increase in credit card cash reward redemptions and a $1.2 million increase in interchange fees paid to our credit card partners, partially offset by a $2.5 million decrease in priority rewards card redemptions. Card rewards program expense was $31.0 million for the year ended December 31, 2022, an increase of $5.7 million or 23% as compared to 2021. This increase was primarily due to a $3.8 million increase in priority rewards card redemptions, a $1.3 million increase in interchange fees paid to our credit card partners and a $0.6 million increase in credit card cash reward redemptions.

Current wording

Card rewards program expense was $33.8 million for the year ended December 31, 2024, an increase of $2.2 million or 7% as compared to 2023. This increase was primarily due to a $1.6 million increase in credit card cash reward redemptions and a $1.6 million increase in interchange fees paid to our credit card partners, partially offset by a $0.7 million decrease in priority rewards card redemptions and a $0.3 million decrease in international transaction fees. Card rewards program expense was $31.6 million for the year ended December 31, 2023, an increase of $0.6 million or 2% as compared to 2022. This increase was primarily due to a $2.1 million increase in credit card cash reward redemptions and a $1.2 million increase in interchange fees paid to our credit card partners, partially offset by a $2.5 million decrease in priority rewards card redemptions.

Previous wording

Other noninterest expense was $62.9 million for the year ended December 31, 2023, an increase of $5.7 million or 10% as compared to 2022. This increase was primarily due to a one-time settlement expense in connection to a lawsuit against the Company, a $2.7 million increase in charitable contributions and increases in postage expenses, signature-based card fraud expenses and travel expenses. This was partially offset by a $1.4 million decrease in pension-related expenses, and decreases in activity charges assessed on the Company’s bank accounts, general and administrative expenses primarily around supplies, insurance, meals and entertainment and shipping and delivery, software amortization expense, mortgage loan charges and other tax expense. Other noninterest expense was $57.2 million for the year ended December 31, 2022, a decrease of $8.9 million or 13% as compared to 2021. This decrease was primarily due to $9.0 million in prepayment fees to terminate the Company’s FHLB fixed-rate advances recorded during the year ended December 31, 2021, a $3.1 million decrease in software amortization expense, and a $1.3 million decrease in pension-related expenses. This was partially offset by a $1.9 million increase in general and administrative expenses primarily around supplies, insurance, meals and entertainment and shipping and delivery, a $1.4 million increase in charitable contributions, a $0.7 million increase in travel expenses and a $0.5 million increase in activity charges assessed on the Company’s bank accounts.

Current wording

Other noninterest expense was $61.2 million for the year ended December 31, 2024, a decrease of $1.7 million or 3% as compared to 2023. This decrease was primarily due to a $3.3 million decrease in operational losses and other charge-offs, a $2.1 million decrease in charitable contributions, a $1.0 million decrease in pension-related expenses, a $0.8 million decrease in losses incurred due to natural disasters and a $0.6 million decrease in business privilege tax expense. This was partially offset by a $3.8 million increase in expense due to adjustments to certain liabilities assumed as a result of the Reorganization Transactions, a $1.0 million increase in brokers fees, a $0.6 million increase in costs associated with a fund acquired by the Company and a $0.6 million increase in other tax expense. Other noninterest expense was $62.9 million for the year ended December 31, 2023, an increase of $5.7 million or 10% as compared to 2022. This increase was primarily due to a one-time settlement expense in connection to a lawsuit against the Company, a $2.7 million increase in charitable contributions and increases in postage expenses, signature-based card fraud expenses and travel expenses. This was partially offset by a $1.4 million decrease in pension-related expenses, and decreases in activity charges assessed on the Company’s bank accounts, general and administrative expenses primarily around supplies, insurance, meals and entertainment and shipping and delivery, software amortization expense, mortgage loan charges and other tax expense.

Previous wording

The provision for income taxes was $74.2 million (reflecting an effective tax rate of 24.00%) for the year ended December 31, 2023, compared with a provision for income taxes of $85.5 million (reflecting an effective tax rate of 24.35%) in 2022. Additional information about the provision for income taxes is presented in “Note 15. Income Taxes” in the notes to the consolidated financial statements included in Item 8. Financial Statements and Supplementary Data.

Current wording

The provision for income taxes was $62.5 million (reflecting an effective tax rate of 21.35%) for the year ended December 31, 2024, compared with a provision for income taxes of $74.2 million (reflecting an effective tax rate of 24.00%) in 2023. Additional information about the provision for income taxes is presented in “Note 15. Income Taxes” in the notes to the consolidated financial statements included in Item 8. Financial Statements and Supplementary Data.

Previous wording

Retail Banking. Our Retail Banking segment includes the financial products and services we provide to consumers and small businesses. Loan and lease products offered include residential and commercial mortgage loans, home equity lines of credit and loans, automobile loans and leases, secured and unsecured lines of credit, installment loans, and small business loans and leases. Deposit products offered include checking, savings and time deposit accounts. Our Retail Banking segment also includes our wealth management services. Products and services from Retail Banking are delivered to customers through 50 banking locations throughout the State of Hawaii, Guam and Saipan.

Current wording

Retail Banking. Our Retail Banking segment includes the financial products and services we provide to consumers and small businesses. Loan and lease products offered include residential and commercial mortgage loans, home equity lines of credit and loans, automobile loans and leases, secured and unsecured lines of credit, installment loans, and small business loans and leases. Deposit products offered include checking, savings and time deposit accounts. Our Retail Banking segment also includes our wealth management services. Products and services from Retail Banking are delivered to customers through 48 banking locations throughout the State of Hawaii, Guam and Saipan.

Previous wording

Net income for the Retail Banking segment was $183.1 million for the year ended December 31, 2023, an increase of $3.4 million or 2% as compared to 2022. The increase in net income for the Retail Banking segment was primarily due to a $21.9 million increase in net interest income and a $3.6 million increase in noninterest income. This was partially offset by an $11.2 million increase in noninterest expense and a Provision of $9.9 million for the year ended December 31, 2023, compared to a negative Provision of $1.0 million for the year ended December 31, 2022. The increase in net interest income was primarily due to higher deposit spreads, partially offset by lower loan spreads. The increase in noninterest income was primarily due to increases in trust and investment services income, net mortgage servicing rights income and service charges on deposit accounts. The increase in noninterest expense was primarily due to increases in salaries and employee benefits expense, regulatory assessments and fees, occupancy expense and costs related to natural disaster events, partially offset by lower overall expenses that were allocated to the Retail Banking segment. The increase in the Provision was primarily due to an increase in our provision for credit losses for loans and leases allocated to the Retail Banking segment. The increase in total assets for the Retail Banking segment was primarily due to increases in our residential real estate and commercial real estate loan portfolios.

Current wording

Net income for the Retail Banking segment was $183.1 million for the year ended December 31, 2023, an increase of $3.4 million or 2% as compared to 2022. The increase in net income for the Retail Banking segment was primarily due to a $21.9 million increase in net interest income and a $3.6 million increase in noninterest income. This was partially offset by an $11.2 million increase in noninterest expense and a Provision of $9.9 million for the year ended December 31, 2023, compared to a negative Provision of $1.0 million for the year ended December 31, 2022. The increase in net interest income was primarily due to higher deposit spreads, partially offset by lower loan spreads. The increase in noninterest income was primarily due to increases in trust and investment services income, net mortgage servicing rights income and service charges on deposit accounts. The increase in noninterest expense was primarily due to increases in salaries and employee benefits expense, regulatory assessments and fees, occupancy expense and costs related to natural disaster events, partially offset by lower overall expenses that were allocated to the Retail Banking segment. The increase in the Provision was primarily due to an increase in our provision for credit losses for loans and leases allocated to the Retail Banking segment. The increase in total earning assets for the Retail Banking segment was primarily due to increases in our residential real estate and commercial real estate loan portfolios.

Previous wording

Commercial Banking. Our Commercial Banking segment includes our corporate banking related products, residential and commercial real estate loans, commercial lease financing, secured and unsecured lines of credit, automobile loans and auto dealer financing, business deposit products and credit cards. Commercial lending and deposit products are offered primarily to middle-market and large companies locally, nationally and internationally.

Current wording

Commercial Banking. Our Commercial Banking segment includes our corporate banking related products, commercial real estate loans, commercial lease financing, secured and unsecured lines of credit, automobile loans and auto dealer financing, business deposit products and credit cards. Commercial lending and deposit products are offered primarily to middle-market and large companies locally, nationally and internationally.

Previous wording

Net income for the Commercial Banking segment was $95.2 million for the year ended December 31, 2023, a decrease of $0.6 million or 1% as compared to 2022. The decrease in net income for the Commercial Banking segment was primarily due to a Provision of $15.0 million for the year ended December 31, 2023, compared to a negative Provision of $1.2 million for the year ended December 31, 2022, in addition to a $2.9 million increase in noninterest expense and a $2.2 million decrease in noninterest income. This was partially offset by an $18.4 million increase in net interest income and a $2.2 million decrease in the provision for income taxes. The increase in the Provision was primarily due to an increase in our provision for credit losses for loans and leases allocated to the Commercial Banking segment. The increase in noninterest expense was primarily due to an increase in regulatory assessment and fees, a one-time settlement expense in connection to a lawsuit against the Company, and increases in salaries and benefits expense and card rewards program expense, partially offset by lower overall expenses that were allocated to the Commercial Banking segment. The decrease in noninterest income was primarily due to a decrease in credit and debit card fees. The increase in net interest income was primarily due to higher loan average balances and spreads, partially offset by a decrease in loan fees. The decrease in the provision for income taxes was primarily due to the decrease in pretax income. The increase in total assets for the Commercial Banking segment was primarily due to increases in our commercial real estate loan and lease financing portfolios, partially offset by a decrease in our consumer loan portfolio.

Current wording

Net income for the Commercial Banking segment was $95.2 million for the year ended December 31, 2023, a decrease of $0.6 million or 1% as compared to 2022. The decrease in net income for the Commercial Banking segment was primarily due to a Provision of $15.0 million for the year ended December 31, 2023, compared to a negative Provision of $1.2 million for the year ended December 31, 2022, in addition to a $2.9 million increase in noninterest expense and a $2.2 million decrease in noninterest income. This was partially offset by an $18.4 million increase in net interest income and a $2.2 million decrease in the provision for income taxes. The increase in the Provision was primarily due to an increase in our provision for credit losses for loans and leases allocated to the Commercial Banking segment. The increase in noninterest expense was primarily due to an increase in regulatory assessment and fees, a one-time settlement expense in connection to a lawsuit against the Company mentioned previously, and increases in salaries and benefits expense and card rewards program expense, partially offset by lower overall expenses that were allocated to the Commercial Banking segment. The decrease in noninterest income was primarily due to a decrease in credit and debit card fees. The increase in net interest income was primarily due to higher loan average balances and spreads, partially offset by a decrease in loan fees. The decrease in the provision for income taxes was primarily due to the decrease in pretax income. The increase in total earning assets for the Commercial Banking segment was primarily due to increases in our commercial loan and lease financing portfolios, partially offset by a decrease in our consumer loan portfolio.

Previous wording

Net loss for the Treasury and Other segment was $9.7 million for the year ended December 31, 2022, a decrease in net loss of $31.3 million or 76% as compared to 2021. The decrease in net loss was primarily due to a $38.3 million increase in net interest income and a $19.6 million decrease in noninterest expense, partially offset by a $12.6 million decrease in noninterest income, a $3.8 million increase in the Provision and a $10.3 million decrease in the benefit for income taxes. The increase in net interest income was primarily due to higher average balances and yields on our investment securities portfolio, partially offset by an increase in net transfer pricing charges that reside in the Treasury and Other segment. The decrease in noninterest expense was primarily due to higher overall credits that were allocated to the Treasury and Other segment and prepayment termination fees paid in 2021 that did not occur in 2022. This was partially offset by increases in equipment expense, contracted services and professional fees, salaries and employee benefits expense and advertising and marketing expense. The decrease in noninterest income was primarily due to decreases in BOLI income, gains on the sale of bank properties, market adjustments on mutual funds purchased and service charges on deposit accounts, partially offset by a decrease in net losses recognized in income related to derivative contracts. The increase in the Provision was due to the increase in the reserve for unfunded commitments for the year ended December 31, 2022. The decrease in the benefit for income taxes was primarily due to the decrease in pretax loss. The decrease in total assets for the Treasury and Other segment was primarily due to decreases in our investment securities portfolio and interest-bearing deposits in other banks.

Current wording

Net loss for the Treasury and Other segment was $140.7 million for the year ended December 31, 2024, compared to net loss of $43.3 million for the same period in 2023. The increase in net loss was primarily due to a $72.2 million increase in net interest expense, a $31.5 million increase in noninterest expense and a $27.5 million decrease in noninterest income. This was partially offset by a $29.2 million increase in the benefit for income taxes and a negative Provision of $2.8 million for the year ended December 31, 2024, compared to a Provision of $1.8 million for the same period in 2023. The increase in net interest expense was primarily due to an increase in net transfer pricing charges that reside in the Treasury and Other segment and a decrease in interest income from investment securities, partially offset by a decrease in interest expense from public deposits, higher interest income on our interest-bearing deposits in other banks and lower borrowing costs. The increase in noninterest expense was primarily due to lower overall credits that were allocated to the Treasury and Other segment and increases in equipment expense, salaries and employee benefits expense, expense due to adjustments to certain liabilities assumed as a result of the Reorganization Transactions and operational losses and other charge-offs. This was partially offset by decreases in contracted services and professional fees and regulatory assessment and fees and charitable contributions. The decrease in noninterest income was primarily due to net losses on the sale of investment securities in 2024, gain on the sale of a bank property in 2023 and a decrease in credit and debit card fees. This was partially offset by insurance proceeds received in 2024, an increase in BOLI income and a decrease in net losses recognized in income related to derivative contracts. The increase in the benefit for income taxes was primarily due to the increase in pretax loss in addition to adjustments to certain liabilities assumed as a result of the Reorganization Transactions. The decrease in the Provision was primarily due to the decrease in our provision for unfunded commitments. The decrease in total earning assets for the Treasury and Other segment was primarily due to decreases in our interest-bearing deposits in other banks and our investment securities portfolio.

Previous wording

Net loss for the Treasury and Other segment was $43.3 million for the year ended December 31, 2023, an increase in net loss of $33.6 million as compared to 2022. The increase in net loss was primarily due to a $46.6 million increase in noninterest expense and a $17.8 million decrease in net interest income, partially offset by a $19.9 million increase in noninterest income, a $9.1 million increase in the benefit for income taxes and a $1.7 million decrease in the Provision. The increase in noninterest expense was primarily due to lower overall credits that were allocated to the Treasury and Other segment and increases in equipment expense, salaries and employee benefits expense and regulatory assessment and fees. This was partially offset by decreases in contracted services and professional fees and occupancy expense. The decrease in net interest income was primarily due to an increase in interest expense from public deposits and higher borrowing costs, partially offset by an increase in net transfer pricing credits that reside in the Treasury and Other segment and higher yields on our interest-bearing deposits in other banks. The increase in noninterest income was primarily due to increases in BOLI income, a gain on the sale of a bank property in 2023, market adjustments on mutual funds purchased, income due to adjustments to certain liabilities assumed as a result of the Reorganization Transactions and net gains on the sale of investment securities, partially offset by an increase in net losses recognized in income related to derivative contracts. The increase in the benefit for income taxes was primarily due to the increase in pretax loss. The decrease in the Provision was primarily due to the decrease in the provision for unfunded home equity line commitments. The increase in total assets for the Treasury and Other segment was primarily due to an increase in our interest-bearing deposits in other banks, partially offset by a decrease in our investment securities portfolio.

Current wording

Net loss for the Treasury and Other segment was $43.3 million for the year ended December 31, 2023, an increase in net loss of $33.6 million as compared to 2022. The increase in net loss was primarily due to a $46.6 million increase in noninterest expense and a $17.8 million decrease in net interest income, partially offset by a $19.9 million increase in noninterest income, a $9.1 million increase in the benefit for income taxes and a $1.7 million decrease in the Provision. The increase in noninterest expense was primarily due to lower overall credits that were allocated to the Treasury and Other segment and increases in equipment expense, salaries and employee benefits expense and regulatory assessment and fees. This was partially offset by decreases in contracted services and professional fees and occupancy expense. The decrease in net interest income was primarily due to an increase in interest expense from public deposits and higher borrowing costs, partially offset by an increase in net transfer pricing credits that reside in the Treasury and Other segment and higher yields on our interest-bearing deposits in other banks. The increase in noninterest income was primarily due to increases in BOLI income, a gain on the sale of a bank property in 2023 mentioned previously, market adjustments on mutual funds purchased, income due to adjustments to certain liabilities assumed as a result of the Reorganization Transactions and net gains on the sale of investment securities, partially offset by an increase in net losses recognized in income related to derivative contracts. The increase in the benefit for income taxes was primarily due to the increase in pretax loss. The decrease in the Provision was primarily due to the decrease in the provision for unfunded home equity line commitments. The increase in total earning assets for the Treasury and Other segment was primarily due to an increase in our interest-bearing deposits in other banks, partially offset by a decrease in our investment securities portfolio.

Previous wording

Immediate liquid resources are available in cash which is primarily on deposit with the Federal Reserve Bank of San Francisco (the “FRB”). As of December 31, 2023 and 2022, cash and cash equivalents were $1.7 billion and $0.5 billion, respectively. Potential sources of liquidity also include investment securities in our available-for-sale portfolio and held-to-maturity portfolio. The carrying values of our available-for-sale investment securities and held-to-maturity investment securities were $2.3 billion and $4.0 billion as of December 31, 2023, respectively. The carrying values of our available-for-sale investment securities and held-to-maturity investment securities were $3.2 billion and $4.3 billion as of December 31, 2022, respectively. As of December 31, 2023 and 2022, we maintained our excess liquidity primarily in collateralized mortgage obligations issued by Ginnie Mae, Fannie Mae and Freddie Mac and mortgage-backed securities issued by Ginnie Mae, Freddie Mac, Fannie Mae, Municipal Housing Authorities and non-agency entities. As of December 31, 2023, our available-for-sale investment securities portfolio was comprised of securities with a weighted average life of approximately 4.2 years and our held-to-maturity investment securities portfolio was comprised of securities with a weighted average life of approximately 7.9 years. These funds offer substantial resources to meet either new loan demand or to help offset reductions in our deposit funding base as they provide quick sources of liquidity by pledging to obtain secured borrowings and repurchase agreements or sales of our available-for-sale securities portfolio. Liquidity is further enhanced by our ability to pledge loans to access secured borrowings from the FHLB and the FRB. As of December 31, 2023, we have borrowing capacity of $2.5 billion from the FHLB and $3.3 billion from the FRB based on the amount of collateral pledged.

Current wording

Immediate liquid resources are available in cash which is primarily on deposit with the Federal Reserve Bank of San Francisco (the “FRB”). As of December 31, 2024 and 2023, cash and cash equivalents were $1.2 billion and $1.7 billion, respectively. Potential sources of liquidity also include investment securities in our available-for-sale portfolio and held-to-maturity portfolio. The carrying values of our available-for-sale investment securities and held-to-maturity investment securities were $1.9 billion and $3.8 billion as of December 31, 2024, respectively. The carrying values of our available-for-sale investment securities and held-to-maturity investment securities were $2.3 billion and $4.0 billion as of December 31, 2023, respectively. As of December 31, 2024 and 2023, we maintained our excess liquidity primarily in collateralized mortgage obligations issued by Ginnie Mae, Fannie Mae and Freddie Mac and mortgage-backed securities issued by Ginnie Mae, Freddie Mac, Fannie Mae, Municipal Housing Authorities and non-agency entities. As of December 31, 2024, our available-for-sale investment securities portfolio was comprised of securities with a weighted average life of approximately 5.4 years and our held-to-maturity investment securities portfolio was comprised of securities with a weighted average life of approximately 7.6 years. These funds offer substantial resources to meet either new loan demand or to help offset reductions in our deposit funding base as they provide quick sources of liquidity by pledging to obtain secured borrowings and repurchase agreements or sales of our available-for-sale securities portfolio. Liquidity is further enhanced by our ability to pledge loans to access secured borrowings from the FHLB and the FRB. As of December 31, 2024, we have borrowing capacity of $2.8 billion from the FHLB and $3.0 billion from the FRB based on the amount of collateral pledged.

Previous wording

Our core deposits have historically provided us with a long-term source of stable and relatively lower cost of funding. Our core deposits, defined as all deposits exclusive of time deposits exceeding $250,000, totaled $19.5 billion and $20.2 billion as of December 31, 2023 and 2022, which represented 91% and 93%, respectively, of our total deposits as of December 31, 2023 and 2022, respectively. These core deposits are normally less volatile, often with customer relationships tied to other products offered by the Company; however, deposit levels could decrease if interest rates increase significantly or if corporate customers increase investing activities, including alternative investment options, that reduce deposit balances.

Current wording

Our core deposits have historically provided us with a long-term source of stable and relatively lower cost of funding. Our core deposits, defined as all deposits exclusive of time deposits exceeding $250,000, totaled $19.0 billion and $19.5 billion as of December 31, 2024 and 2023, which represented 93% and 91%, respectively, of our total deposits as of December 31, 2024 and 2023, respectively. These core deposits are normally less volatile, often with customer relationships tied to other products offered by the Company; however, deposit levels could decrease if interest rates increase significantly or if corporate customers increase investing activities, including alternative investment options, that reduce deposit balances.

Previous wording

Commitments to extend credit, standby letters of credit and commercial letters of credit do not necessarily represent future cash requirements in that these commitments often expire without being drawn upon; therefore, these items are not included in the table above. Purchase obligations arise from agreements to purchase goods or services that are enforceable and legally binding. Other contracts included in purchase obligations primarily consist of service agreements for various systems and applications supporting bank operations, including the systems and applications in the Bank’s core system. Postretirement benefit contributions represent the minimum expected contribution to the postretirement benefit plan. Actual contributions may differ from these estimates.

Current wording

Commitments to extend credit, standby letters of credit and commercial letters of credit do not necessarily represent future cash requirements in that these commitments often expire without being drawn upon; therefore, these items, which totaled $6.0 billion and $6.5 billion as of December 31, 2024 and 2023, respectively, are not included in the table above. See the discussion of these credit and contractual commitments in “Note 17. Commitments and Contingent Liabilities” in the notes to the consolidated financial statements included in Item 8. Financial Statements and Supplementary Data.

Previous wording

Our liability for unrecognized tax benefits (“UTBs”) as of December 31, 2023 and 2022 was $212.0 million and $206.2 million, respectively. The increase in UTB was primarily due to additions related to previously identified tax positions. We are unable to reasonably estimate the period of cash settlement with the respective taxing authority. As a result, our liability for UTBs is not disclosed in the table above.

Current wording

Our liability for unrecognized tax benefits (“UTBs”) as of December 31, 2024 and 2023 was $206.4 million and $212.0 million, respectively. The decrease in UTBs was primarily due to reductions related to previously identified tax positions as a result of the expiration of statute of limitations and resolutions with tax authorities. We are unable to reasonably estimate the period of cash settlement with the respective taxing authority. As a result, our liability for UTBs is not disclosed in the table above.

Previous wording

Other material cash requirements include general corporate operating activities, stock repurchases, and capital to be returned to our shareholders.

Current wording

Other material cash requirements may also include general corporate operating activities, stock repurchases, and capital to be returned to our shareholders.

Previous wording

We expect to meet these obligations from dividends paid by the Bank to the Parent. Additional sources of liquidity available to us include selling residential real estate loans in the secondary market, taking out short- and long-term borrowings and issuing long-term debt and equity securities. We believe that our existing cash, cash equivalents, investments, and cash expected to be generated from operations, will be sufficient to meet our cash requirements within the next twelve months and beyond.

Current wording

We expect to meet these obligations from dividends paid by the Bank to the Parent. Additional sources of liquidity available to us include selling residential real estate loans in the secondary market, taking out short- and long-term borrowings and issuing long-term debt and equity securities. We believe that our existing cash, cash equivalents, investments, and cash expected to be generated from operations, are still sufficient to meet our cash requirements within the next 12 months and beyond.