FIRST HAWAIIAN, INC.

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, 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 and Quarterly Report on Form 10-Q for the quarter ended March 31, 2025. 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 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.

Current wording

Hawaii’s economy as a whole experienced mixed economic conditions during the quarter ended June 30, 2025. Although the economy 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 2.8% at June 30, 2025, compared to 2.9% at June 30, 2024. Nationally, the seasonally adjusted unemployment rate was 4.1% at June 30, 2025, compared to 4.1% at June 30, 2024.

Previous 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.

Current wording

Domestic visitor arrivals for the state remain stable, with the average daily domestic passenger counts for the first six months of 2025 relatively similar to the average daily domestic passenger counts during the first six 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 six months of 2025 is similar to the level of arrivals from Japan in the first six 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 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.

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 2.1%, while condominium sales decreased by 6.0%, in each case when comparing the first six months of 2025 with the same period in 2024. The median price of a single-family home sold on Oahu in the first six months of 2025 was $1,150,000, an increase of 6.0% from the same period in 2024. The median price of a condominium sold on Oahu in the first six months of 2025 was $507,000, a decrease of 0.5% from the same period in 2024. As of June 30, 2025, months of inventory of single-family homes and condominiums on Oahu were approximately 3.7 and 7.0 months, respectively.

Previous 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.

Current wording

More recently, the enactment of the One Big Beautiful Bill Act (“OBBBA”) introduced a sweeping package of tax reform provisions that will affect both businesses and individuals. The OBBBA also introduced spending cuts in social programs and reduction in funding for certain financial safeguards such as the Consumer Financial Protection Bureau (“CFPB”), that may impact our borrowers and the broader Hawaii economy. The impact of this legislation is not fully known at this time. Additionally, the recent California legislation, enacted on June 27, 2025, mandating a single-sales-factor apportionment from a previously three-factor formula retroactively effective starting from January 1, 2025, has affected our estimates of our income tax provision, deferred taxes and other comprehensive income. Further, following the changes in trade policy and tariffs announced under the Trump administration, markets, including global stock and bond markets, have experienced and continue to experience a high level of volatility. A decline in business and economic conditions caused by changes in trade policy or retaliatory measures, 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

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.

Current wording

Net income was $73.2 million for the three months ended June 30, 2025, an increase of $11.3 million or 18% as compared to the same period in 2024. Basic and diluted earnings per share were both $0.58 for the three months ended June 30, 2025, an increase of $0.10 or 21% as compared to the same period in 2024. The increase in net income was primarily due to a $10.7 million increase in net interest income, a $4.0 million decrease in the provision for income taxes and a $2.2 million increase in noninterest income. This was partially offset by a $2.9 million increase in noninterest expense and a $2.7 million increase in the provision for credit losses (the “Provision”).

Previous 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.

Current wording

Our return on average total assets was 1.23% for the three months ended June 30, 2025, an increase of 19 basis points from the same period in 2024, and our return on average total stockholders’ equity was 11.03% for the three months ended June 30, 2025, an increase of 112 basis points from the same period in 2024. Our return on average tangible assets was 1.28% for the three months ended June 30, 2025, an increase of 20 basis points from the same period in 2024, and our return on average tangible stockholders’ equity was 17.61% for the three months ended June 30, 2025, an increase of 119 basis points from the same period in 2024. Our efficiency ratio was 57.23% for the three months ended June 30, 2025 compared to 59.22% for the same period in 2024.

Previous 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.

Current wording

For the six months ended June 30, 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 13.03% as of June 30, 2025, an increase of 23 basis points from December 31, 2024. The increase in CET1 was primarily due to earnings for the six months ended June 30, 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 $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.

Current wording

Net interest income, on a fully taxable-equivalent basis, was $164.4 million for the three months ended June 30, 2025, an increase of $10.0 million or 6% compared to the same period in 2024. Our net interest margin was 3.11% for the three months ended June 30, 2025, an increase of 19 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 costs and higher average balances on our interest-bearing deposits in other banks, partially offset by lower earning asset yields driven by lower yields in our loan and lease portfolio during the three months ended June 30, 2025, compared to the same period in 2024. Deposit funding costs were $70.3 million for the three months ended June 30, 2025, a decrease of $15.3 million or 18% compared to the same period in 2024, primarily due to a decrease in interest rates. Rates paid on our interest-bearing deposits were 2.09% for the three months ended June 30, 2025, a decrease of 49 basis points compared to the same period in 2024, primarily due to rate decreases. For the three months ended June 30, 2025, the average balance on our interest-bearing deposits in other banks was $1.3 billion, an increase of $503.4 million or 65% compared to the same period in 2024. The yield on our loan and lease portfolio was 5.44% for the three months ended June 30, 2025, a decrease of 23 basis points as compared to the same period in 2024, primarily due to decreases in yields from our adjustable-rate commercial real estate and commercial and industrial loans, which are typically based on the Secured Overnight Financing Rate (“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 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.

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 second quarter of 2025. As noted above, our loan portfolio is also impacted by changes in the SOFR. At June 30, 2025, the one-month and three-month CME Term SOFR interest rates were 4.32% and 4.29%, respectively. At June 30, 2024, the one-month and three-month CME Term SOFR interest rates were 5.34% and 5.32%, 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 second quarter of 2025. There continues to be uncertainty in the changing market and economic conditions, 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 $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.

Current wording

The Provision was $4.5 million for the three months ended June 30, 2025, compared to a Provision of $1.8 million for the same period in 2024. The Provision of $4.5 million for the three months ended June 30, 2025, was primarily due to increases in the provision for commercial and industrial loans, home equity lines and construction loans and the provision for unfunded home equity line and commercial and industrial commitments. This was partially offset by decreases in the provision for residential mortgage loans, consumer loans and commercial real estate loans and the provision for unfunded construction commitments. We recorded net charge-offs of loans and leases of $3.3 million and $2.5 million for the three months ended June 30, 2025 and 2024, respectively. This represented net charge-offs of 0.09% and 0.07% of average loans and leases, on an annualized basis, for the three months ended June 30, 2025 and 2024, respectively. The Provision was $15.0 million for the six months ended June 30, 2025, compared to a Provision of $8.1 million for the same period in 2024. The Provision of $15.0 million for the six months ended June 30, 2025, was primarily due to increases in the provision for consumer loans, commercial and industrial loans, home equity lines and construction loans and the provision for unfunded commercial and industrial, construction and commercial real estate commitments. This was partially offset by decreases in the provision for residential mortgage loans, commercial real estate loans and lease financing. We recorded net charge-offs of loans and leases of $7.1 million and $6.3 million for the six months ended June 30, 2025 and 2024, respectively. This represented net charge-offs of 0.10% and 0.09% of average loans and leases, on an annualized basis, for the six months ended June 30, 2025 and 2024, respectively. The ACL was $167.8 million as of June 30, 2025, an increase of $7.4 million or 5% from December 31, 2024 and represented 1.17% of total outstanding loans and leases as of June 30, 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 June 30, 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 5 presents the major components of noninterest income for the three months ended March 31, 2025 and 2024:

Current wording

Table 7 presents the major components of noninterest income for the three months ended June 30, 2025 and 2024 and Table 8 presents the major components of noninterest income for the six months ended June 30, 2025 and 2024:

Previous wording

n/m – Denotes a variance that is not a meaningful metric to inform the change in noninterest income for the three months ended March 31, 2025 to the same period in 2024.

Current wording

n/m – Denotes a variance that is not a meaningful metric to inform the change in noninterest income for the six months ended June 30, 2025 to the same period in 2024.

Previous wording

Service charges on deposit accounts were $7.5 million for the three months ended March 31, 2025, a minimal change as compared to the same period in 2024.

Current wording

Service charges on deposit accounts were $7.8 million for the three months ended June 30, 2025, a minimal change as compared to the same period in 2024. Service charges on deposit accounts were $15.4 million for the six months ended June 30, 2025, a minimal change as compared to the same period in 2024.

Previous wording

Credit and debit card fees were $14.5 million for the three months ended March 31, 2025, a decrease of $1.7 million or 11% as compared to the same period in 2024. This decrease was primarily due to a $1.4 million decrease in interchange settlement fees and a $0.2 million increase in network association dues.

Current wording

Credit and debit card fees were $15.9 million for the three months ended June 30, 2025, an increase of $0.1 million as compared to the same period in 2024. Credit and debit card fees were $30.4 million for the six months ended June 30, 2025, a decrease of $1.6 million or 5% as compared to the same period in 2024. This decrease was primarily due to a $2.5 million decrease in interchange settlement fees and a $0.3 million increase in network association dues, partially offset by a $1.3 million increase in merchant service revenues.

Previous 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.

Current wording

Other service charges and fees were $13.4 million for the three months ended June 30, 2025, an increase of $2.3 million or 21% as compared to the same period in 2024. This increase was primarily due to a $1.9 million increase in fees from annuities and securities and a $0.2 million increase in fees from standby letters of credit arrangements. Other service charges and fees were $25.5 million for the six months ended June 30, 2025, an increase of $4.6 million or 22% as compared to the same period in 2024. This increase was primarily due to a $4.1 million increase in fees from annuities and securities and a $0.5 million increase in fees from standby letters of credit arrangements.

Previous 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.

Current wording

Trust and investment services income was $9.2 million for the three months ended June 30, 2025, a decrease of $0.3 million or 3% as compared to the same period in 2024. Trust and investment services income was $18.5 million for the six months ended June 30, 2025, a decrease of $1.3 million or 6% as compared to the same period in 2024. This decrease was primarily due to a $1.9 million decrease in investment management fees, partially offset by a $0.3 million increase in business cash management fees.

Previous 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.

Current wording

Other noninterest income was $3.0 million for the three months ended June 30, 2025, a decrease of $1.3 million or 30% as compared to the same period in 2024. This decrease was primarily due to a $1.5 million decrease in insurance proceeds received and a $0.5 million decrease in customer-related interest rate swap fees, partially offset by a $0.5 million decrease in net losses recognized in income related to derivative contractsanda $0.4 million increase in volume-based incentives. Other noninterest income was $5.5 million for the six months ended June 30, 2025, a decrease of $1.9 million or 26% as compared to the same period in 2024. This decrease was primarily due to a $3.5 million decrease in insurance proceeds received, partially offset by a $0.6 million decrease in net losses recognized in income related to derivative contracts and a $0.6 million increase in volume-based incentives.

Previous wording

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

Current wording

Table 9 presents the major components of noninterest expense for the three months ended June 30, 2025 and 2024 and Table 10 presents the major components of noninterest expense for the three months ended June 30, 2025 and 2024:

Previous 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.

Current wording

Salaries and employee benefits expense was $59.5 million for the three months ended June 30, 2025, an increase of $1.8 million or 3% as compared to the same period in 2024. This increase was primarily due to a $1.6 million increase in incentive compensation, a $0.3 million increase in retirement plan expenses and a $0.3 million increase in base salaries and related payroll taxes, partially offset by a $0.6 million decrease in adjustments made to the deferred compensation plan as a result of market conditions. Salaries and employee benefits expense was $119.6 million for the six months ended June 30, 2025, an increase of $2.6 million or 2% as compared to the same period in 2024. This increase was primarily due to a $3.8 million increase in incentive compensation and a $0.7 million increase in retirement plan expenses, partially offset by a $0.5 million increase in payroll and benefit costs being deferred as loan origination costs, a $0.5 million decrease in state unemployment tax expense, a $0.4 million decrease in adjustments made to the deferred compensation plan as a result of market conditions and a $0.4 million decrease in base salaries and related payroll taxes.

Previous 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.

Current wording

Contracted services and professional fees were $16.0 million for the three months ended June 30, 2025, a decrease of $0.1 million as compared to the same period in 2024. Contracted services and professional fees were $30.8 million for the six months ended June 30, 2025, a decrease of $1.0 million or 3% as compared to the same period in 2024. This decrease was primarily due to a $0.8 million decrease in outside services, primarily attributable to technology-related projects, marketing and new customer services and a $0.2 million decrease in audit, legal and consultant fees.

Previous 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.

Current wording

Occupancy expense was $7.9 million for the three months ended June 30, 2025, an increase of $0.6 million or 8% as compared to the same period in 2024. This increase was primarily due to a $0.4 million increase in building depreciation and a $0.3 million increase in building maintenance expense. Occupancy expense was $16.0 million for the six months ended June 30, 2025, an increase of $1.7 million or 12% as compared to the same period in 2024. This increase was primarily due to a $0.9 million increase in building depreciation, a $0.6 million increase in building maintenance expense and a $0.4 million decrease in net sublease rental income.

Previous 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.

Current wording

Equipment expense was $14.0 million for the three months ended June 30, 2025, an increase of $0.8 million or 6% as compared to the same period in 2024. This increase was primarily due to a $0.6 million increase in technology-related amortization and licensing and maintenance fees and a $0.2 million increase in furniture and equipment depreciation. Equipment expense was $27.9 million for the six months ended June 30, 2025, an increase of $1.3 million or 5% as compared to the same period in 2024. This increase was primarily due to a $1.1 million increase in technology-related amortization and licensing and maintenance fees and a $0.3 million increase in furniture and equipment depreciation.

Previous 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.

Current wording

Regulatory assessment and fees were $3.8 million for the three months ended June 30, 2025, a decrease of $0.1 million or 1% as compared to the same period in 2024. Regulatory assessment and fees were $7.6 million for the six months ended June 30, 2025, a decrease of $4.4 million or 36% 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 $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.

Current wording

Advertising and marketing expense was $2.0 million for the three months ended June 30, 2025, an increase of 0.3 million or 15% as compared to the same period in 2024. Advertising and marketing expense was $4.2 million for the six months ended June 30, 2025, a decrease of $0.2 million or 4% as compared to the same period in 2024.

Previous 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.

Current wording

Card rewards program expense was $8.4 million for the three months ended June 30, 2025, a decrease of $0.3 million or 4% as compared to the same period in 2024. Card rewards program expense was $16.3 million for the six months ended June 30, 2025, a decrease of $0.9 million or 5% as compared to the same period in 2024. This decrease was primarily due to a $0.6 million decrease in priority rewards card redemptions and a $0.6 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 $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.

Current wording

Other noninterest expense was $13.3 million for the three months ended June 30, 2025, a decrease of $0.1 million or 1% as compared to the same period in 2024. Other noninterest expense was $26.0 million for the six months ended June 30, 2025, a decrease of $1.6 million or 6% as compared to the same period in 2024. This decrease was primarily due to a $2.3 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 $0.4 million increase in brokers fees, a $0.4 million increase in software amortization expense and a $0.3 million increase in travel expenses.

Previous 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.

Current wording

The provision for income taxes was $14.9 million (an effective tax rate of 16.86%) for the three months ended June 30, 2025, compared with a provision for income taxes of $18.8 million (an effective tax rate of 23.30%) for the same period in 2024. The provision for income taxes was $32.6 million (an effective tax rate of 19.72%) for the six months ended June 30, 2025, compared with a provision for income taxes of $35.3 million (an effective tax rate of 23.30%) for the same period in 2024. The change in the effective tax rate was primarily due to the revaluation of the California deferred tax assets as of the beginning of the year due to the change in the California apportionment formula for banks.

Previous 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.

Current 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 six months ended June 30, 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 $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.

Current wording

Net income for the Retail Banking segment was $127.7 million for the six months ended June 30, 2025, an increase of $13.3 million or 12% as compared to the same period in 2024. The increase in net income for the Retail Banking segment was primarily due to a $7.4 million increase in net interest income, a $3.8 million decrease in noninterest expense, a $2.1 million increase in noninterest income and a $2.0 million decrease in the provision for income taxes, partially offset by a $1.9 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 regulatory assessment and fees. 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 decrease in the provision for income taxes was partially due to the allocation of the revaluation of the California deferred tax assets. The increase in the Provision allocated to the Retail Banking segment was primarily due to increases in the provision for consumer loans, commercial and industrial loans, home equity lines and construction loans.

Previous 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.

Current wording

Net income for the Commercial Banking segment was $59.0 million for the six months ended June 30, 2025, an increase of $1.4 million or 2% as compared to the same period in 2024. The increase in net income for the Commercial Banking segment was primarily due to an $8.5 million decrease in noninterest expense and a $3.4 million decrease in the provision for income taxes, partially offset by an $8.4 million decrease in net interest income and a $2.3 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 expenses. The decrease in the provision for income taxes was partially due to the allocation of the revaluation of the California deferred tax assets. The decrease in net interest income was primarily due to lower loan and lease spreads. The increase in the Provision allocated to the Commercial Banking segment was primarily due to increases in the provision for consumer loans, commercial and industrial loans, home equity lines and construction loans.

Previous 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.

Current wording

Net loss for the Treasury and Other segment was $54.2 million for the six months ended June 30, 2025, compared to a net loss of $55.8 million for the same period in 2024. The decrease in net loss for the Treasury and Other segment was primarily due to a $17.8 million decrease in net interest expense, partially offset by a $9.9 million increase in noninterest expense, a Provision of $0.5 million for the six months ended June 30, 2025 compared to a negative Provision of $2.2 million for same period in 2024, in addition to a $2.7 million decrease in the benefit for income taxes and $1.0 million decrease in noninterest income. The decrease in net interest expense was primarily due to a decrease in interest expense from public deposits and borrowings and higher average balances on interest-bearing deposits in other banks, partially offset by lower average balances in investment securities. 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 operational losses and other charge-offs and regulatory assessment and fees. The increase in the Provision was primarily due to the increase in the provision for unfunded commercial and industrial, construction and commercial real estate commitments. The decrease in the benefit for income taxes was partially due to the allocation of the revaluation of the California deferred tax assets. The decrease in noninterest income was primarily due to a decrease in insurance proceeds received, partially offset by an increase in BOLI income and a decrease in net losses recognized in income related to derivative contracts.

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 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.

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 June 30, 2025 and December 31, 2024, cash and cash equivalents were $1.4 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 June 30, 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 June 30, 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 June 30, 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 7.7 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 June 30, 2025, we have borrowing capacity of $2.7 billion from the FHLB and $3.4 billion from the FRB based on the amount of collateral pledged.

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 $133.3 million and $98.7 million as of March 31, 2025 and December 31, 2024, 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 $126.2 million and $98.7 million as of June 30, 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 $1.2 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.

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 June 30, 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 six months ended June 30, 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 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.

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 six months ended June 30, 2025, we had no repurchase requests related to loan servicing activities, nor were there any pending repurchase requests as of June 30, 2025.

Previous 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.

Current wording

The carrying value of our investment securities portfolio was $5.6 billion as of June 30, 2025, a decrease of $166.7 million or 3% 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 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.

Current wording

As of June 30, 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 $3.0 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, $133.1 million in collateralized loan obligations, $47.7 million in debt securities issued by government agencies (U.S. International Development Finance Corporation bonds) and $54.8 million in debt securities issued by states and political subdivisions.

Previous 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.

Current wording

Gross unrealized gains in our investment securities portfolio was $2.1 million and $0.6 million as of June 30, 2025 and December 31, 2024, respectively. Gross unrealized losses in our investment securities portfolio were $636.5 million and $792.7 million as of June 30, 2025 and December 31, 2024, respectively. The decrease in unrealized loss was primarily due to lower market interest rates as of June 30, 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.

Previous wording

For our available-for-sale investment securities, we conduct a regular assessment of our investment securities portfolio to determine whether any securities are impaired. If this assessment indicates that a credit loss exists, the present value of cash flows expected to be collected from the security is compared to the amortized cost basis of the security. If the present value of cash flows expected to be collected is less than the amortized cost basis, a credit loss exists and an allowance for credit losses is recorded for the credit loss, limited by the amount that the fair value is less than the amortized cost basis. Any impairment that has not been recorded through the allowance for credit losses is recognized in other comprehensive income. For the three months ended March 31, 2025, we did not record any credit losses related to our available-for-sale investment securities portfolio.

Current wording

For our available-for-sale investment securities, we conduct a regular assessment of our investment securities portfolio to determine whether any securities are impaired. If this assessment indicates that a credit loss exists, the present value of cash flows expected to be collected from the security is compared to the amortized cost basis of the security. If the present value of cash flows expected to be collected is less than the amortized cost basis, a credit loss exists and an allowance for credit losses is recorded for the credit loss, limited by the amount that the fair value is less than the amortized cost basis. Any impairment that has not been recorded through the allowance for credit losses is recognized in other comprehensive income. For the three and six months ended June 30, 2025, we did not record any credit losses related to our available-for-sale investment securities portfolio.