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: 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 effectiveness of our risk management and internal disclosure controls and procedures; 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; the possibility of employee misconduct or mistakes; any failure or interruption of external vendors on which we rely; 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; risks associated with the sale of loans and with our use of appraisals in valuing and monitoring loans; the effects of the failure of any component of our business infrastructure provided by a third party; 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 geographic concentration of our business; our ability to keep pace with technological changes; the challenges posed by the development and use of artificial intelligence; our ability to successfully develop and commercialize new or enhanced products and services; changes in the demand for our products and services; the impact of, and changes in, applicable laws, regulations and accounting standards and policies; possible changes in trade, monetary and fiscal policies of, and other activities undertaken by, governments, agencies, central banks and similar organizations; the potential scrutiny of overdraft fees; our ability to continue to pay dividends on our common stock; the failure to…

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; 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; changes in the demand for our products and services; the impact of, and changes in, applicable laws, regulations and accounting standards and policies; possible changes in, or effects o…

Excerpt shortened here; the source contains the full paragraph.

Previous wording

The foregoing factors should not be considered an exhaustive list and should be read together with the risk factors and other cautionary statements included in our Annual Report on Form 10-K for the year ended December 31, 2023 and Quarterly Report on Form 10-Q for the quarters ended March 31, 2024 and June 30, 2024. If one or more events related to these or other risks or uncertainties materialize, or if our underlying assumptions prove to be incorrect, actual results may differ materially from what we anticipate. Accordingly, you should not place undue reliance on any such forward-looking statements. Any forward-looking statement speaks only as of the date on which it is made, and we do not undertake any obligation to update or review any forward-looking statement, whether as a result of new information, future developments or otherwise, except as required by applicable law.

Current wording

The foregoing factors should not be considered an exhaustive list and should be read together with the risk factors and other cautionary statements included in our Annual Report on Form 10-K for the year ended December 31, 2024. If one or more events related to these or other risks or uncertainties materialize, or if our underlying assumptions prove to be incorrect, actual results may differ materially from what we anticipate. Accordingly, you should not place undue reliance on any such forward-looking statements. Any forward-looking statement speaks only as of the date on which it is made, and we do not undertake any obligation to update or review any forward-looking statement, whether as a result of new information, future developments or otherwise, except as required by applicable law.

Previous 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 Labor and Industrial Relations, the statewide seasonally adjusted unemployment rate increased to 2.9% at September 30, 2024, compared to 2.8% at September 30, 2023. Nationally, the seasonally adjusted unemployment rate was 4.1% at September 30, 2024 compared to 3.8% at September 30, 2023.

Current wording

Hawaii’s economy as a whole experienced mixed economic conditions. Although it remains resilient, the State continues to endure high consumer prices and housing affordability challenges. According to the State of Hawaii Department of Business, Economic Development and Tourism, the statewide seasonally adjusted unemployment rate decreased to 2.9% at March 31, 2025, compared to 3.1% at March 31, 2024. Nationally, the seasonally adjusted unemployment rate was 4.2% at March 31, 2025 compared to 3.8% at March 31, 2024.

Previous wording

Domestic visitor arrivals for the state remain stable, with the average daily domestic passenger counts for the first nine months of 2024 relatively similar to the average daily passenger counts during the first nine months of 2023, according to the Hawaii Tourism Authority. International visitor arrivals from Japan in the first nine months of 2024 have increased significantly as compared to the first nine months of each of the last three years, but the level of arrivals from Japan remains below pre-pandemic levels due to the weak yen.

Current wording

Domestic visitor arrivals for the state remain stable, with the average daily domestic passenger counts for the first three months of 2025 relatively similar to the average daily passenger counts during the first three months of 2024, according to the Hawaii Tourism Authority. More generally, Hawaii’s economy depends significantly on conditions of the U.S. economy and key international economies, particularly Japan. International visitor arrivals from Japan in the first three months of 2025 is similar to the level of arrivals from Japan in the first three months of 2024, but remains below pre-pandemic arrival levels due to the weak yen.

Previous wording

The local Oahu housing market has remained relatively stable, but is experiencing some softening as compared to previous years primarily due to high interest rates. According to the Honolulu Board of Realtors, the volume of single-family home sales increased by 5.8%, while condominium sales decreased by 5.6%, in each case when comparing the first nine months of 2024 with the same period in 2023. When comparing the first nine months of 2024 with the same period in 2022, however, the volume of single-family home sales decreased by 26.5%, while condominium sales decreased by 35.0%. The median price of a single-family home sold on Oahu in the first nine 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 first nine months of 2024 was $510,000, an increase of 1.0% from the same period in 2023. As of September 30, 2024, months of inventory of single-family homes and condominiums on Oahu remained low at approximately 3.4 and 5.2 months, respectively.

Current wording

The local Oahu housing market has remained relatively stable, but continues to experience some softening as compared to previous years primarily due to high interest rates. According to the Honolulu Board of Realtors, the volume of single-family home sales decreased by 4.0%, while condominium sales increased by 0.4%, in each case when comparing the first three months of 2025 with the same period in 2024. When comparing the first three months of 2025 with the same period in 2023, the volume of single-family home sales increased by 1.8%, while condominium sales decreased by 6.7%. The median price of a single-family home sold on Oahu in the first three months of 2025 was $1,150,000, an increase of 7.5% from the same period in 2024. The median price of a condominium sold on Oahu in the first three months of 2025 was $510,000, an increase of 1.0% from the same period in 2024. As of March 31, 2025, months of inventory of single-family homes and condominiums on Oahu remained low at approximately 3.3 and 6.2 months, respectively.

Previous wording

Economic conditions and therefore our results of operations may be impacted by a variety of other factors as well, such as other natural disasters, an economic slowdown or recession, financial market volatility, supply chain disruptions, monetary and fiscal policy measures, heightened geopolitical tensions, fluctuations in foreign currency exchange rates and interest rates, such as the most recently announced 0.5% interest rate cut by the Federal Reserve, the political and regulatory environment, including the outcome of the U.S. 2024 elections, changes to the U.S. Federal budget and potential changes in tax laws.

Current wording

Our financial performance is highly dependent upon the business environment in the markets in which we operate and therefore may be impacted by a variety of factors such as a decline in economic conditions, natural disasters, financial market volatility, supply chain disruptions, monetary and fiscal policy measures, heightened geopolitical tensions, fluctuations in foreign currency exchange rates and interest rates, the political and regulatory environment, changes to the U.S. Federal budget and potential changes in tax laws. More recently, changes in trade policy and tariffs announced under the new Trump administration and markets, including global stock and bond markets, have experienced a high level of volatility following the announcement of these and other trade restriction measures. A decline in business and economic conditions caused by the imposition of U.S. tariffs on imported goods or retaliatory tariffs on U.S. goods, uncertainty in business conditions, including as a result of changes to government spending levels, or other factors beyond our control, could have an effect on the markets in which we operate and/or the credit quality of our loans, and therefore, our financial condition and results of operations.

Previous 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,” included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023, filed with the SEC on February 28, 2024.

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,” included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024, filed with the SEC on February 28, 2025, for additional information regarding material risks affecting the Company.

Previous wording

Net income was $61.5 million for the three months ended September 30, 2024, an increase of $3.3 million or 6% as compared to the same period in 2023. Basic and diluted earnings per share were both $0.48 per share for the three months ended September 30, 2024, an increase of $0.02 per share or 4% as compared to the same period in 2023. The increase in net income was primarily due to a $7.2 million increase in noninterest income and a $3.2 million decrease in the provision for income taxes. This was partially offset by a $6.8 million increase in noninterest expense and a $0.4 million decrease in net interest income.

Current wording

Net income was $59.2 million for the three months ended March 31, 2025, an increase of $5.0 million or 9% as compared to the same period in 2024. Basic and diluted earnings per share were both $0.47 for the three months ended March 31, 2025, an increase of $0.05 or 12% as compared to the same period in 2024. The increase in net income was primarily due to a $6.1 million increase in net interest income and a $5.3 million decrease in noninterest expense. This was partially offset by a $4.2 million increase in the provision for credit losses (the “Provision”), a $1.2 million increase in the provision for income taxes and a $0.9 million decrease in noninterest income.

Previous wording

Our return on average total assets was 1.02% for the three months ended September 30, 2024, an increase of nine basis points from the same period in 2023, and our return on average total stockholders’ equity was 9.45% for the three months ended September 30, 2024, a decrease of 31 basis points from the same period in 2023. Our return on average tangible assets was 1.06% for the three months ended September 30, 2024, an increase of nine basis points from the same period in 2023, and our return on average tangible stockholders’ equity was 15.35% for the three months ended September 30, 2024, a decrease of 149 basis points from the same period in 2023, primarily due to an increase in average tangible equity, which resulted in part from a decrease in net unrealized losses in our investment securities portfolio, partially offset by higher net income. Our efficiency ratio was 59.77% for the three months ended September 30, 2024 compared to 58.31% for the same period in 2023.

Current wording

Our return on average total assets was 1.01% for the three months ended March 31, 2025, an increase of 11 basis points from the same period in 2024, and our return on average total stockholders’ equity was 9.09% for the three months ended March 31, 2025, an increase of 36 basis points from the same period in 2024. Our return on average tangible assets was 1.05% for the three months ended March 31, 2025, an increase of 11 basis points from the same period in 2024, and our return on average tangible stockholders’ equity was 14.59% for the three months ended March 31, 2025, an increase of six basis points from the same period in 2024. Our efficiency ratio was 58.22% for the three months ended March 31, 2025 compared to 62.15% for the same period in 2024.

Previous wording

For the nine months ended September 30, 2024, we continued to maintain high levels of liquidity and adequate reserves for credit losses. We also remained well-capitalized. Common Equity Tier 1 (“CET1”) was 13.03% as of September 30, 2024, an increase of 64 basis points from December 31, 2023. The increase in CET1 was primarily due to earnings for the nine months ended September 30, 2024, partially offset by the dividends declared and paid to the Company’s stockholders.

Current wording

For the three months ended March 31, 2025, we continued to maintain high levels of liquidity and adequate reserves for credit losses. We also remained well-capitalized. Common Equity Tier 1 (“CET1”) was 12.93% as of March 31, 2025, an increase of 13 basis points from December 31, 2024. The increase in CET1 was primarily due to earnings for the three months ended March 31, 2025 and a decrease in risk-weighted assets, partially offset by the dividends declared and paid to the Company’s stockholders and common stock repurchased.

Previous wording

Net interest income, on a fully taxable-equivalent basis, was $157.8 million for the three months ended September 30, 2024, a decrease of $0.8 million or 1% compared to the same period in 2023. Our net interest margin was 2.95% for the three months ended September 30, 2024, an increase of nine basis points from the same period in 2023. The decrease in net interest income, on a fully taxable-equivalent basis, was primarily due to higher deposit funding costs and lower average balances in our investment securities portfolio. This was partially offset by higher earning asset yields driven by higher yields in our loan and lease portfolio and higher average balances on our interest-bearing deposits in other banks during the three months ended September 30, 2024, compared to the same period in 2023. Deposit funding costs were $87.5 million for the three months ended September 30, 2024, an increase of $12.8 million or 17% compared to the same period in 2023, primarily due to an increase in interest rates. Rates paid on our interest-bearing deposits were 2.58% for the three months ended September 30, 2024, an increase of 35 basis points compared to the same period in 2023, primarily due to rate increases. For the three months ended September 30, 2024, the average balance of our investment securities portfolio was $6.0 billion, a decrease of $1.0 billion or 15% compared to the same period in 2023, primarily due to payments and maturities, in addition to the sale of securities in late 2023. The yield on our loan and lease portfolio was 5.74% for the three months ended September 30, 2024, an increase of 35 basis points as compared to the same period in 2023, primarily due to higher rates on new loan originations. For the three months ended September 30, 2024, the average balance on our interest-bearing deposits in other banks was $1.0 billion, an increase of $411.8 million or 68% compared to the same period in 2023.

Current wording

Net interest income, on a fully taxable-equivalent basis, was $161.8 million for the three months ended March 31, 2025, an increase of $5.9 million or 4% compared to the same period in 2024. Our net interest margin was 3.08% for the three months ended March 31, 2025, an increase of 17 basis points from the same period in 2024. The increase in net interest income, on a fully taxable-equivalent basis, was primarily due to lower deposit funding and borrowing costs, partially offset by lower earning asset yields driven by lower yields in our loan and lease portfolio during the three months ended March 31, 2025, compared to the same period in 2024. Deposit funding costs were $71.7 million for the three months ended March 31, 2025, a decrease of $12.4 million or 15% compared to the same period in 2024, primarily due to a decrease in interest rates. Rates paid on our interest-bearing deposits were 2.16% for the three months ended March 31, 2025, a decrease of 38 basis points compared to the same period in 2024, primarily due to rate decreases. Total borrowing costs were $2.6 million for the three months ended March 31, 2025, a decrease of $3.4 million or 57% compared to the same period in 2024. During the third quarter of 2024, $500.0 million of FHLB advances matured and a new $250.0 million short-term FHLB advance was taken. The yield on our loan and lease portfolio was 5.44% for the three months ended March 31, 2025, a decrease of 19 basis points as compared to the same period in 2024, primarily due to decreases in yields from our adjustable-rate commercial real estate, commercial and industrial and construction loans, which are typically based on the SOFR.

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 2023 at 7.50% and increased 100 basis points (25 basis points each in February, March, May and July) to end the year at 8.50%. In September 2024, the prime rate decreased 50 basis points to 8.00%, where it remained as at the end of the third quarter of 2024. Our loan portfolio is also impacted by changes in the SOFR. At September 30, 2024, the one-month and three-month CME Term SOFR interest rates were 4.85% and 4.59%, respectively. At September 30, 2023, the one-month and three-month CME Term SOFR interest rates were 5.32% and 5.40%, respectively. The target range for the federal funds rate, which is the cost of immediately available overnight funds, began in 2023 at 4.25% to 4.50%, and increased 100 basis points to end the year at 5.25% to 5.50%. As of August 31, 2024, the federal funds rate was in the range of 5.25% to 5.50%. Effective September 19, 2024, the Federal Reserve decreased the federal funds rate to a range of 4.75% to 5.00%. 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.

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 2024 at 8.50% and 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%, where it remained as at the end of the first quarter of 2025. As noted above, our loan portfolio is also impacted by changes in the SOFR. At March 31, 2025, the one-month and three-month CME Term SOFR interest rates were 4.32% and 4.29%, respectively. At March 31, 2024, the one-month and three-month CME Term SOFR interest rates were 5.33% and 5.30%, respectively. The target range for the federal funds rate, which is the cost of immediately available overnight funds, began in 2024 at 5.25% to 5.50% and decreased 100 basis points to end the year at 4.25% to 4.50%, where it remained as at the end of the first quarter of 2025. There continues to be uncertainty in the changing market and economic conditions, particularly in recent weeks as a result of an increase in trade restrictions, 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 $7.4 million for the three months ended September 30, 2024, a decrease of $0.1 million or 1% as compared to the same period in 2023. We recorded net charge-offs of loans and leases of $3.9 million and net recoveries of $0.3 million for the three months ended September 30, 2024 and 2023, respectively. This represented net charge-offs of 0.11% and net recoveries of 0.01% of average loans and leases, on an annualized basis, for the three months ended September 30, 2024, and 2023, respectively. The Provision was $15.5 million for the nine months ended September 30, 2024, a decrease of $5.8 million or 27% as compared to the same period in 2023. The decrease was primarily due to decreases in the provision for construction loans and home equity lines and the provision for unfunded commercial and industrial and construction commitments. This was partially offset by increases in the provision for residential mortgage loans, consumer loans and commercial and industrial loans. We recorded net charge-offs of loans and leases of $10.2 million and $6.5 million for the nine months ended September 30, 2024 and 2023, respectively. This represented net charge-offs of 0.10% and 0.06% of average loans and leases, on an annualized basis, for the nine months ended September 30, 2024 and 2023, respectively. The ACL was $163.7 million as of September 30, 2024, an increase of $7.2 million or 5% from December 31, 2023 and represented 1.15% of total outstanding loans and leases as of September 30, 2024 compared to 1.09% of total outstanding loans and leases as of December 31, 2023. The reserve for unfunded commitments was $33.7 million as of September 30, 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.

Current wording

The Provision was $10.5 million for the three months ended March 31, 2025, an increase of $4.2 million or 67% as compared to the same period in 2024. The increase was primarily due to increases in the provision for consumer loans and the provision for unfunded commercial and industrial and construction commitments. This was partially offset by decreases in the provision for residential mortgage loans, construction loans, commercial real estate loans and lease financing and the provision for unfunded home equity line commitments. We recorded net charge-offs of loans and leases of $3.8 million for both the three months ended March 31, 2025 and 2024. This represented net charge-offs of 0.11% of average loans and leases, on an annualized basis, for both the three months ended March 31, 2025 and 2024. The ACL was $166.6 million as of March 31, 2025, an increase of $6.2 million or 4% from December 31, 2024 and represented 1.17% of total outstanding loans and leases as of March 31, 2025 compared to 1.11% of total outstanding loans and leases as of December 31, 2024. The reserve for unfunded commitments was $33.3 million as of March 31, 2025, compared to $32.8 million as of December 31, 2024. 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

Table 7 presents the major components of noninterest income for the three months ended September 30, 2024 and 2023 and Table 8 presents the major components of noninterest income for the nine months ended September 30, 2024 and 2023:

Current wording

Table 5 presents the major components of noninterest income for the three months ended March 31, 2025 and 2024:

Previous wording

Other service charges and fees were $11.8 million for the three months ended September 30, 2024, an increase of $2.2 million or 24% as compared to the same period in 2023. This increase was primarily due to a $2.1 million increase in fees from annuities and securities. Other service charges and fees were $32.7 million for the nine months ended September 30, 2024, an increase of $5.0 million or 18% as compared to the same period in 2023. This increase was primarily due to a $4.5 million increase in fees from annuities and securities and a $0.3 million increase in insurance income.

Current wording

Other service charges and fees were $12.2 million for the three months ended March 31, 2025, an increase of $2.3 million or 23% as compared to the same period in 2024. This increase was primarily due to a $2.1 million increase in fees from annuities and securities.

Previous wording

Trust and investment services income was $9.1 million for the three months ended September 30, 2024, a decrease of $0.7 million or 7% as compared to the same period in 2023. This decrease was primarily due to a $0.9 million decrease in investment management fees. Trust and investment services income was $28.9 million for the nine months ended September 30, 2024, an increase of $0.1 million as compared to the same period in 2023.

Current wording

Trust and investment services income was $9.4 million for the three months ended March 31, 2025, a decrease of $1.0 million or 10% as compared to the same period in 2024. This decrease was primarily due to a $1.2 million decrease in investment management fees.

Previous wording

Other noninterest income was $2.6 million for the three months ended September 30, 2024, an increase of $0.9 million or 56% as compared to the same period in 2023. This increase was primarily due to a $1.5 million tax refund received during the three months ended September 30, 2024, a $0.7 million increase in customer-related interest rate swap fees, a $0.3 million increase in income due to adjustments to certain liabilities assumed as a result of the Reorganization Transactions, $0.2 million in insurance proceeds received in the three months ended September 30, 2024, and a $0.2 million increase in net credit card equipment sales. This was partially offset by a $1.2 million increase in net losses recognized in income related to derivative contracts and a $0.9 million decrease in volume-based incentives. Other noninterest income was $10.0 million for the nine months ended September 30, 2024, an increase of $3.9 million or 63% as compared to the same period in 2023. This increase was primarily due to $4.1 million in insurance proceeds received in the nine months ended September 30, 2024 and a $1.5 million tax refund received during the nine months ended September 30, 2024, partially offset by a $1.7 million decrease in volume-based incentives.

Current wording

Other noninterest income was $2.5 million for the three months ended March 31, 2025, a decrease of $0.6 million or 19% as compared to the same period in 2024. This decrease was primarily due to $2.0 million in insurance proceeds received in the three months ended March 31, 2024 due to the destruction of the Lahaina branch in the Maui wildfires, partially offset by a $0.5 million increase in customer-related interest rate swap fees, a $0.2 million increase in volume-based incentives, a $0.2 million decrease in net losses recognized in income related to derivative contracts and a $0.2 million increase in gains on the sale of leased equipment.

Previous wording

Table 9 presents the major components of noninterest expense for the three months ended September 30, 2024 and 2023 and Table 10 presents the major components of noninterest expense for the nine months ended September 30, 2024 and 2023:

Current wording

Table 6 presents the major components of noninterest expense for the three months ended March 31, 2025 and 2024:

Previous wording

Salaries and employee benefits expense was $59.6 million for the three months ended September 30, 2024, an increase of $3.6 million or 6% as compared to the same period in 2023. This increase was primarily due to a $3.7 million increase in incentive compensation, a $0.7 million increase in retirement plan expenses and a $0.4 million increase in other compensation, primarily related to adjustments made to the deferred compensation plan as a result of market conditions, partially offset by a decrease in nonrecurring separation agreements and severance costs. Additionally, these increases were partially offset by a $0.6 million decrease in base salaries and related payroll taxes and a $0.6 million decrease in state unemployment tax expense. Salaries and employee benefits expense was $176.6 million for the nine months ended September 30, 2024, an increase of $6.7 million or 4% as compared to the same period in 2023. This increase was primarily due to a $5.9 million increase in incentive compensation, a $2.0 million decrease in payroll and benefit costs being deferred as loan origination costs, a $1.1 million increase in retirement plan expenses, a $0.7 million increase in group health plan costs and a $0.5 million increase in base salaries and related payroll taxes. This was partially offset bya $1.6 million decrease in other compensation, primarily related to nonrecurring separation agreements and severance costs recorded during the nine months ended September 30, 2023, partially offset by adjustments made to the deferred compensation plan as a result of market conditions. Other decreases includeda $0.8 million decrease in employee overtime pay expense and a $0.7 million decrease in state unemployment tax expense.

Current wording

Salaries and employee benefits expense was $60.1 million for the three months ended March 31, 2025, an increase of $0.8 million or 1% as compared to the same period in 2024. This increase was primarily due to a $2.2 million increase in incentive compensation and a $0.4 million increase in retirement plan expenses, partially offset by a $0.7 million decrease in base salaries and related payroll taxes, a $0.6 million increase in payroll and benefit costs being deferred as loan origination costs and a $0.4 million decrease in state unemployment tax expense.

Previous wording

Contracted services and professional fees were $14.6 million for the three months ended September 30, 2024, a decrease of $1.8 million or 11% as compared to the same period in 2023. This decrease was primarily due to a $1.3 million decrease in outside services, primarily attributable to technology-related projects, marketing and new customer services and a $0.5 million decrease in audit, legal and consultant fees. Contracted services and professional fees were $46.4 million for the nine months ended September 30, 2024, a decrease of $3.8 million or 7% as compared to the same period in 2023. This decrease was primarily due to a $3.5 million decrease in outside services, primarily attributable to non-technology-related projects, marketing and new customer services and a $0.3 million decrease in audit, legal and consultant fees.

Current wording

Contracted services and professional fees were $14.8 million for the three months ended March 31, 2025, a decrease of $0.9 million or 6% as compared to the same period in 2024. This decrease was primarily due to a $0.9 million decrease in outside services, primarily attributable to technology-related projects, marketing and new customer services.

Previous wording

Occupancy expense was $6.9 million for the three months ended September 30, 2024, an increase of $0.2 million or 3% as compared to the same period in 2023. Occupancy expense was $21.3 million for the nine months ended September 30, 2024, a decrease of $0.8 million or 4% as compared to the same period in 2023. This decrease was primarily due to a $0.6 million increase in net sublease rental income and a $0.3 million decrease in building depreciation.

Current wording

Occupancy expense was $8.1 million for the three months ended March 31, 2025, an increase of $1.2 million or 17% as compared to the same period in 2024. This increase was primarily due to a $0.6 million increase in building depreciation, a $0.4 million decrease in net sublease rental income and a $0.3 million increase in building maintenance expense.

Previous wording

Equipment expense was $13.1 million for the three months ended September 30, 2024, an increase of $1.3 million or 11% as compared to the same period in 2023. This increase was primarily due to a $1.3 million increase in technology-related amortization and licensing and maintenance fees. Equipment expense was $39.7 million for the nine months ended September 30, 2024, an increase of $7.1 million or 22% as compared to the same period in 2023. This increase was primarily due to a $7.0 million increase in technology-related amortization and licensing and maintenance fees.

Current wording

Equipment expense was $13.9 million for the three months ended March 31, 2025, an increase of $0.5 million or 3% as compared to the same period in 2024. This increase was primarily due to a $0.5 million increase in technology-related amortization and licensing and maintenance fees.

Previous wording

Regulatory assessment and fees were $3.4 million for the three months ended September 30, 2024, a decrease of $0.7 million or 18% as compared to the same period in 2023. This decrease was primarily due to a decrease in the FDIC insurance assessment. Regulatory assessment and fees were $15.3 million for the nine months ended September 30, 2024, an increase of $3.7 million or 32% as compared to the same period in 2023. During 2023, the FDIC approved a final rule for a special assessment to replenish the deposit insurance fund following bank failures occurring earlier in the year. As a result, the Company previously recorded a related loss of $16.3 million in the fourth quarter of 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. The Company estimated a related loss of $4.1 million, which was recorded in the first quarter of 2024. This estimate was later adjusted by $0.3 million in the third quarter of 2024 to bring the net loss related to the special assessment to $3.8 million for the nine months ended September 30, 2024.

Current wording

Regulatory assessment and fees were $3.8 million for the three months ended March 31, 2025, a decrease of $4.3 million or 53% as compared to the same period in 2024. This decrease was primarily due to a decrease in the FDIC insurance assessment. During 2023, the FDIC approved a final rule for a special assessment to replenish the deposit insurance fund following bank failures occurring earlier in the year. As a result, the Company previously recorded a related loss of $16.3 million in the fourth quarter of 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. The Company estimated a related loss of $4.1 million, which was recorded in the first quarter of 2024. This estimate was later adjusted by $0.3 million in the third quarter of 2024 to bring the net loss related to the special assessment to $3.8 million for the nine months ended September 30, 2024.

Previous wording

Advertising and marketing expense was $1.8 million for the three months ended September 30, 2024, a decrease of $0.5 million or 21% as compared to the same period in 2023. This decrease was primarily due to a $0.5 million decrease in advertising costs. Advertising and marketing expense was $6.2 million for the nine months ended September 30, 2024, a minimal change as compared to the same period in 2023.

Current wording

Advertising and marketing expense was $2.2 million for the three months ended March 31, 2025, a decrease of $0.4 million or 17% as compared to the same period in 2024. This decrease was primarily due to a $0.4 million decrease in advertising costs.

Previous wording

Card rewards program expense was $8.7 million for the three months ended September 30, 2024, an increase of $0.3 million or 4% as compared to the same period in 2023. Card rewards program expense was $25.9 million for the nine months ended September 30, 2024, an increase of $1.8 million or 7% as compared to the same period in 2023. This increase was primarily due to a $1.3 million increase in credit card cash reward redemptions and a $1.0 million increase in interchange fees paid to our credit card partners, partially offset by a $0.4 million decrease in international transaction fees.

Current wording

Card rewards program expense was $7.9 million for the three months ended March 31, 2025, a decrease of $0.6 million or 7% as compared to the same period in 2024. This decrease was primarily due to a $0.5 million decrease in priority rewards card redemptions and a $0.4 million decrease in interchange fees paid to our credit card partners, partially offset by a $0.3 million increase in credit card cash reward redemptions.

Previous wording

Other noninterest expense was $18.0 million for the three months ended September 30, 2024, an increase of $4.3 million or 31% as compared to the same period in 2023. This increase was primarily due to a $3.8 million increase in expense due to adjustments to certain liabilities assumed as a result of the Reorganization Transactions and a $1.7 million increase in operational losses and other charge-offs, partially offset by a $0.6 million decrease in business privilege tax expense and a $0.4 million decrease in losses incurred due to natural disasters. Other noninterest expense was $45.7 million for the nine months ended September 30, 2024, an increase of $3.5 million or 8% as compared to the same period in 2023. This increase was primarily due to a $3.8 million increase in expense due to adjustments to certain liabilities assumed as a result of the Reorganization Transactions, a $2.4 million increase in operational losses and other charge-offs and $0.7 million in costs associated with a fund acquired by the Company. This was partially offset by a $1.1 million decrease in business privilege tax expense, a $0.9 million decrease in pension-related expenses, a $0.6 million decrease in losses incurred due to natural disasters and a $0.4 million decrease in other insurance expense.

Current wording

Other noninterest expense was $12.7 million for the three months ended March 31, 2025, a decrease of $1.5 million or 11% as compared to the same period in 2024. This decrease was primarily due to a $1.4 million decrease in operational losses and other charge-offs and a $0.5 million decrease in costs associated with a fund acquired by the Company, partially offset by a $0.2 million increase in brokers fees.

Previous wording

The provision for income taxes was $15.0 million (an effective tax rate of 19.56%) for the three months ended September 30, 2024, compared with a provision for income taxes of $18.1 million (an effective tax rate of 23.76%) for the same period in 2023. The provision for income taxes was $50.2 million (an effective tax rate of 22.04%) for the nine months ended September 30, 2024, compared with a provision for income taxes of $59.2 million (an effective tax rate of 24.00%) for the same period in 2023. The change in the effective tax rate for both the three and nine months ended September 30, 2024 was primarily due to a $3.8 million decrease in the provision for income taxes due to the aforementioned adjustments to certain liabilities assumed as a result of the Reorganization Transactions.

Current wording

The provision for income taxes was $17.7 million (an effective tax rate of 23.00%) for the three months ended March 31, 2025, compared with a provision for income taxes of $16.5 million (an effective tax rate of 23.29%) for the same period in 2024. The change in the effective tax rate was partially due to an increase in tax credits and a reduction in nondeductible expenses for the three months ended March 31, 2025.

Previous wording

Our business segments are Retail Banking, Commercial Banking and Treasury and Other. Table 11 summarizes net income from our business segments for the three and nine months ended September 30, 2024 and 2023. Additional information about operating segment performance is presented in “Note 17. Reportable Operating Segments” contained in our unaudited interim consolidated financial statements.

Current wording

Our business segments are Retail Banking, Commercial Banking and Treasury and Other. Table 7 summarizes net income from our business segments for the three months ended March 31, 2025 and 2024. Additional information about operating segment performance is presented in “Note 17. Reportable Operating Segments” contained in our unaudited interim consolidated financial statements.

Previous wording

Net income for the Retail Banking segment was $58.0 million for the three months ended September 30, 2024, an increase of $9.5 million or 20% as compared to the same period in 2023. The increase in net income for the Retail Banking segment was primarily due to a $7.3 million increase in net interest income, a $4.9 million decrease in noninterest expense and a $1.8 million increase in noninterest income, partially offset by a $3.3 million increase in the provision for income taxes and a $1.0 million increase in the Provision. The increase in net interest income was primarily due to higher deposit spreads. The decrease in noninterest expense was primarily due to lower overall expenses that were allocated to the Retail Banking segment and a decrease in business privilege tax expense, partially offset by an increase in operational losses. The increase in noninterest income was primarily due to an increase in other service charges and fees, partially offset by a decrease in trust and investment services income. The increase in the provision for income taxes was primarily due to the increase in pretax income. The increase in the Provision was primarily due to higher allocated provision expenses to the Retail Banking segment.

Current wording

Net income for the Retail Banking segment was $59.9 million for the three months ended March 31, 2025, an increase of $3.8 million or 7% as compared to the same period in 2024. The increase in net income for the Retail Banking segment was primarily due to a $3.5 million decrease in noninterest expense, a $1.8 million increase in net interest income and a $0.6 million increase in noninterest income, partially offset by a $1.3 million increase in the Provision and a $0.8 million increase in the provision for income taxes. The decrease in noninterest expense was primarily due a decrease in regulatory assessment and fees, lower overall expenses that were allocated to the Retail Banking segment and a decrease in salaries and employee benefits expense. The increase in net interest income was primarily due to higher deposit spreads. The increase in noninterest income was primarily due to an increase in other service charges and fees, partially offset by a decrease in trust and investment services income. The increase in the Provision for the Retail Banking segment was primarily due to an increase in the provision for consumer loans. The increase in the provision for income taxes was primarily due to the increase in pretax income.

Previous wording

Net income for the Commercial Banking segment was $34.1 million for the three months ended September 30, 2024, an increase of $6.3 million or 22% as compared to the same period in 2023. The increase in net income for the Commercial Banking segment was primarily due to a $3.3 million decrease in noninterest expense, a $2.8 million increase in noninterest income and a $1.3 million increase in net interest income, partially offset by a $1.0 million increase in the provision for income taxes. The decrease in noninterest expense was primarily due to lower overall expenses that were allocated to the Commercial Banking segment and a decrease in salaries and benefits expense. The increase in noninterest income was primarily due to increases in credit and debit card fees, a tax refund received during the three months ended September 30, 2024, and an increase in customer-related interest rate swap fees, partially offset by a decrease in volume-based incentives. The increase in net interest income was primarily due to higher deposit spreads and average balances, partially offset by lower loan and lease spreads. The increase in the provision for income taxes was primarily due to the increase in pretax income.

Current wording

Net income for the Commercial Banking segment was $28.3 million for the three months ended March 31, 2025, an increase of $1.6 million or 6% as compared to the same period in 2024. The increase in net income for the Commercial Banking segment was primarily due to a $5.9 million decrease in noninterest expense, partially offset by a $2.8 million decrease in net interest income and a $1.6 million increase in the Provision. The decrease in noninterest expense was primarily due to higher overall credits that were allocated to the Commercial Banking segment and decreases in regulatory assessment and fees and card rewards program expense. The decrease in net interest income was primarily due to lower loan and lease spreads. The increase in the Provision for the Commercial Banking segment was primarily to an increase in the provision for consumer loans.

Previous wording

Net loss for the Treasury and Other segment was $86.5 million for the nine months ended September 30, 2024, compared to net loss of $11.9 million for the same period in 2023. The increase in net loss was primarily due to a $76.5 million increase in net interest expense and a $37.1 million increase in noninterest expense. This was partially offset by a $27.7 million increase in the benefit for income taxes, a negative Provision of $1.9 million for the nine months ended September 30, 2024, compared to a Provision of $3.9 million for the nine months ended September 30, 2023, and a $5.5 million increase in noninterest income. 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 and borrowings and an increase in interest income from interest-bearing deposits in other banks. The increase in noninterest expense was primarily due to lower credit allocations to the Treasury and Other segment, an increase in equipment expense, an increase in expense due to adjustments to certain liabilities assumed as a result of the Reorganization Transactions and increases in salaries and benefits expense and regulatory assessment and fees. This was partially offset by a decrease in contracted services and professional fees. The increase in the benefit for income taxes was partially due to the adjustments of certain liabilities assumed as a result of the Reorganization Transactions. The decrease in the Provision was primarily due to the decreases in the provision for unfunded commercial and industrial and construction commitments. The increase in noninterest income was primarily due to insurance proceeds received in the nine months ended September 30, 2024 and an increase in BOLI income.

Current wording

Net loss for the Treasury and Other segment was $29.0 million for the three months ended March 31, 2025, compared to a net loss of $28.6 million for the same period in 2024. The increase in net loss for the Treasury and Other segment was primarily due to a $4.2 million increase in noninterest expense, a $1.3 million decrease in noninterest income, a Provision of $0.5 million for the three months ended March 31, 2025, compared to a negative provision of $0.8 million, in addition to a $0.7 million decrease in the benefit for income taxes. This was partially offset by a $7.1 million decrease in net interest expense. The increase in noninterest expense was primarily due to lower credit allocations to the Treasury and Other segment and increases in salaries and employee benefits expense and occupancy expense, partially offset by decreases in regulatory assessment and fees and operational losses and other charge-offs. The decrease in noninterest income was primarily due to insurance proceeds received in the three months ended March 31, 2024. The decrease in the benefit for income taxes was partially due to the decrease in pretax loss. The increase in the Provision was primarily due to the increase in our provision for unfunded commitments. The decrease in net interest expense was primarily due to a decrease in interest expense from public deposits and borrowings, partially offset by a decrease in interest income from investment securities.

Previous wording

Immediate liquid resources are available in cash, which is primarily on deposit with the Federal Reserve Bank of San Francisco (“FRB”). As of September 30, 2024 and December 31, 2023, cash and cash equivalents were $1.1 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 $2.1 billion and $3.9 billion as of September 30, 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 September 30, 2024 and December 31, 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 September 30, 2024, our available-for-sale investment securities portfolio was comprised of securities with a weighted average life of approximately 4.3 years and our held-to-maturity investment securities portfolio was comprised of securities with a weighted average life of approximately 7.5 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 Federal Home Loan Bank of Des Moines (“FHLB”) and the FRB. As of September 30, 2024, we have borrowing capacity of $2.9 billion from the FHLB and $3.1 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 (“FRB”). As of March 31, 2025 and December 31, 2024, cash and cash equivalents were $1.3 billion and $1.2 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 $3.7 billion as of March 31, 2025, respectively. 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. As of March 31, 2025 and December 31, 2024, we maintained additional 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 March 31, 2025, our available-for-sale investment securities portfolio was comprised of securities with a weighted average life of approximately 4.6 years and our held-to-maturity investment securities portfolio was comprised of securities with a weighted average life of approximately 7.8 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 Federal Home Loan Bank of Des Moines (“FHLB”) and the FRB. As of March 31, 2025, we have borrowing capacity of $2.8 billion from the FHLB and $3.2 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 $18.8 billion and $19.5 billion as of September 30, 2024 and December 31, 2023, respectively, which represented 93% and 91% of our total deposits as of September 30, 2024 and December 31, 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.

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 $18.8 billion and $19.0 billion as of March 31, 2025 and December 31, 2024, respectively, which represented 93% of our total deposits as of both March 31, 2025 and December 31, 2024. 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

We typically have contractual obligations representing required future payments on certificates of deposits, borrowings, noncancelable operating leases, postretirement benefit contributions, purchase obligations and funding commitments on low-income housing tax credit investments. Our short-term borrowings decreased from $500.0 million as of December 31, 2023 to $250.0 million as of September 30, 2024. See “ – Short-term Borrowings” for further details. Other than this change, there have been no material changes to the cash requirements from our current and long-term contractual obligations previously reported as of December 31, 2023. 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.

Current wording

Our material cash requirements from our current and long-term contractual obligations have not changed materially since previously reported as of December 31, 2024. 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.

Previous wording

We hold interests in several unconsolidated variable interest entities (“VIEs”). These unconsolidated VIEs are primarily low-income housing tax credit investments in partnerships and limited liability companies. Variable interests are defined as contractual ownership or other interests in an entity that change with fluctuations in an entity’s net asset value. The primary beneficiary consolidates the VIE. Based on our analysis, we have determined that the Company is not the primary beneficiary of these entities. As a result, we do not consolidate these VIEs. Unfunded commitments to fund these low-income housing tax credit investments were $112.3 million and $80.7 million as of September 30, 2024 and December 31, 2023, respectively.

Current wording

We hold interests in several unconsolidated variable interest entities (“VIEs”). These unconsolidated VIEs are primarily low-income housing tax credit investments in partnerships and limited liability companies. Variable interests are defined as contractual ownership or other interests in an entity that change with fluctuations in an entity’s net asset value. The primary beneficiary consolidates the VIE. Based on our analysis, we have determined that the Company is not the primary beneficiary of these entities. As a result, we do not consolidate these VIEs. Unfunded commitments to fund these low-income housing tax credit investments were $133.3 million and $98.7 million as of March 31, 2025 and December 31, 2024, respectively.

Previous wording

We sell residential mortgage loans on the secondary market, primarily to Fannie Mae or Freddie Mac. The agreements under which we sell residential mortgage loans to Fannie Mae or Freddie Mac contain provisions that include various representations and warranties regarding the origination and characteristics of the residential mortgage loans. Although the specific representations and warranties vary among investors, insurance or guarantee agreements, they typically cover ownership of the loan, validity of the lien securing the loan, the absence of delinquent taxes or liens against the property securing the loan, compliance with loan criteria set forth in the applicable agreement, compliance with applicable federal, state and local laws and other matters. The unpaid principal balance of our portfolio of residential mortgage loans sold was $1.3 billion as of both September 30, 2024 and December 31, 2023. The agreements under which we sell residential mortgage loans require delivery of various documents to the investor or its document custodian. Although these loans are primarily sold on a non-recourse basis, we may be obligated to repurchase residential mortgage loans or reimburse investors for losses incurred if a loan review reveals that underwriting and documentation standards were potentially not met in the origination of those loans. Upon receipt of a repurchase request, we work with investors to arrive at a mutually agreeable resolution. Repurchase demands are typically reviewed on an individual loan by loan basis to validate the claims made by the investor to determine if a contractually required repurchase event has occurred. We manage the risk associated with potential repurchases or other forms of settlement through our underwriting and quality assurance practices and by servicing mortgage loans to meet investor and secondary market standards. For the nine months ended September 30, 2024, there was a $0.6 million pending repurchase request of a residential mortgage loan, however there were no completed repurchases.

Current wording

We sell residential mortgage loans on the secondary market, primarily to Fannie Mae or Freddie Mac. The agreements under which we sell residential mortgage loans to Fannie Mae or Freddie Mac contain provisions that include various representations and warranties regarding the origination and characteristics of the residential mortgage loans. Although the specific representations and warranties vary among investors, insurance or guarantee agreements, they typically cover ownership of the loan, validity of the lien securing the loan, the absence of delinquent taxes or liens against the property securing the loan, compliance with loan criteria set forth in the applicable agreement, compliance with applicable federal, state and local laws and other matters. The unpaid principal balance of our portfolio of residential mortgage loans sold was $1.2 billion and $1.3 billion as of March 31, 2025 and December 31, 2024, respectively. The agreements under which we sell residential mortgage loans require delivery of various documents to the investor or its document custodian. Although these loans are primarily sold on a non-recourse basis, we may be obligated to repurchase residential mortgage loans or reimburse investors for losses incurred if a loan review reveals that underwriting and documentation standards were potentially not met in the origination of those loans. Upon receipt of a repurchase request, we work with investors to arrive at a mutually agreeable resolution. Repurchase demands are typically reviewed on an individual loan by loan basis to validate the claims made by the investor to determine if a contractually required repurchase event has occurred. We manage the risk associated with potential repurchases or other forms of settlement through our underwriting and quality assurance practices and by servicing mortgage loans to meet investor and secondary market standards. For the three months ended March 31, 2025, there were no residential mortgage loan repurchases and there were no pending repurchase requests.

Previous wording

In addition to servicing loans in our portfolio, substantially all of the loans we sell to investors are sold with servicing rights retained. We also service loans originated by other mortgage loan originators. As servicer, our primary duties are to: (1) collect payments due from borrowers; (2) advance certain delinquent payments of principal and interest; (3) maintain and administer any hazard, title or primary mortgage insurance policies relating to the mortgage loans; (4) maintain any required escrow accounts for payment of taxes and insurance and administer escrow payments; and (5) foreclose on defaulted mortgage loans, or loan modifications or short sales. Each agreement under which we act as servicer generally specifies a standard of responsibility for actions taken by the Company in such capacity and provides protection against expenses and liabilities incurred by the Company when acting in compliance with the respective servicing agreements. However, if we commit a material breach of obligations as servicer, we may be subject to termination if the breach is not cured within a specified period following notice. The standards governing servicing and the possible remedies for violations of such standards vary by investor. These standards and remedies are determined by servicing guides issued by the investors as well as the contract provisions established between the investors and the Company. Remedies could include repurchase of an affected loan. For the nine months ended September 30, 2024, we had no repurchase requests related to loan servicing activities, nor were there any pending repurchase requests as of September 30, 2024.

Current wording

In addition to servicing loans in our portfolio, substantially all of the loans we sell to investors are sold with servicing rights retained. We also service loans originated by other mortgage loan originators. As servicer, our primary duties are to: (1) collect payments due from borrowers; (2) advance certain delinquent payments of principal and interest; (3) maintain and administer any hazard, title or primary mortgage insurance policies relating to the mortgage loans; (4) maintain any required escrow accounts for payment of taxes and insurance and administer escrow payments; and (5) foreclose on defaulted mortgage loans, or loan modifications or short sales. Each agreement under which we act as servicer generally specifies a standard of responsibility for actions taken by the Company in such capacity and provides protection against expenses and liabilities incurred by the Company when acting in compliance with the respective servicing agreements. However, if we commit a material breach of obligations as servicer, we may be subject to termination if the breach is not cured within a specified period following notice. The standards governing servicing and the possible remedies for violations of such standards vary by investor. These standards and remedies are determined by servicing guides issued by the investors as well as the contract provisions established between the investors and the Company. Remedies could include repurchase of an affected loan. For the three months ended March 31, 2025, we had no repurchase requests related to loan servicing activities, nor were there any pending repurchase requests as of March 31, 2025.

Previous wording

The carrying value of our investment securities portfolio was $5.9 billion as of September 30, 2024, a decrease of $387.1 million or 6% compared to December 31, 2023. Our available-for-sale investment securities are carried at fair value with changes in fair value reflected in other comprehensive income or through the Provision. Our held-to-maturity investment securities are carried at amortized cost.

Current wording

The carrying value of our investment securities portfolio was $5.6 billion as of March 31, 2025, a decrease of $133.8 million or 2% compared to December 31, 2024. Our available-for-sale investment securities are carried at fair value with changes in fair value reflected in other comprehensive income or through the Provision. Our held-to-maturity investment securities are carried at amortized cost.

Previous wording

As of September 30, 2024, we maintained all of our investment securities in either the available-for-sale category (recorded at fair value) or the held-to-maturity category (recorded at amortized cost) in the unaudited interim consolidated balance sheets, with $3.2 billion invested in collateralized mortgage obligations issued by Ginnie Mae, Fannie Mae and Freddie Mac. Our investment securities portfolio also included $2.3 billion in mortgage-backed securities issued by Ginnie Mae, Freddie Mac, Fannie Mae, Municipal Housing Authorities and non-agency entities, $208.9 million in collateralized loan obligations, $83.5 million in debt securities issued by the U.S. Treasury, government agencies (U.S. International Development Finance Corporation bonds) and government-sponsored enterprises and $54.5 million in debt securities issued by states and political subdivisions.

Current wording

As of March 31, 2025, we maintained all of our investment securities in either the available-for-sale category (recorded at fair value) or the held-to-maturity category (recorded at amortized cost) in the unaudited interim consolidated balance sheets, with $3.1 billion invested in collateralized mortgage obligations issued by Ginnie Mae, Fannie Mae and Freddie Mac. Our investment securities portfolio also included $2.3 billion in mortgage-backed securities issued by Ginnie Mae, Freddie Mac, Fannie Mae, Municipal Housing Authorities and non-agency entities, $136.5 million in collateralized loan obligations, $49.1 million in debt securities issued by government agencies (U.S. International Development Finance Corporation bonds) and $54.7 million in debt securities issued by states and political subdivisions.

Previous wording

Gross unrealized gains in our investment securities portfolio were $0.7 million and $0.2 million as of September 30, 2024 and December 31, 2023, respectively. Gross unrealized losses in our investment securities portfolio were $614.1 million and $770.2 million as of September 30, 2024 and December 31, 2023, respectively. The decrease in unrealized loss was primarily due to lower market interest rates as of September 30, 2024, relative to December 31, 2023, resulting in a higher valuation. Additionally, the decrease in unrealized loss positions were primarily related to our collateralized mortgage obligations, commercial mortgage-backed securities and residential mortgage-backed securities, the fair value of which is sensitive to changes in market interest rates.

Current wording

Gross unrealized gains in our investment securities portfolio was $0.6 million as of both March 31, 2025 and December 31, 2024. Gross unrealized losses in our investment securities portfolio were $707.8 million and $792.7 million as of March 31, 2025 and December 31, 2024, respectively. The decrease in unrealized loss was primarily due to lower market interest rates as of March 31, 2025, relative to December 31, 2024, resulting in a higher valuation. Additionally, the decrease in unrealized loss positions were primarily related to our collateralized mortgage obligations, commercial mortgage-backed securities and residential mortgage-backed securities, the fair value of which is sensitive to changes in market interest rates.