FIRST HAWAIIAN, INC. 10-Q

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS ​ Cautionary Note Regarding Forward-Looking Statements ​ This Quarterly Report on Form 10-Q, including the documents incorporated by reference herein, contains, and from time to time our management may make, forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements reflect our current views with respect to, among other things, future events and our financial performance. These statements are often, but not always, made through the use of words or phrases such as “may,” “might,” “should,” “could,” “predict,” “potential,” “believe,” “expect,” “continue,” “will,” “anticipate,” “seek,” “estimate,” “intend,” “plan,” “projection,” “would,” “annualized” and “outlook,” or the negative version of those words or other comparable words or phrases of a future or forward-looking nature. Statements that are not historical or current facts, are forward-looking statements, and are based on current expectations, estimates and projections about our industry, management’s beliefs and certain assumptions made by management, many of which, by their nature, are inherently uncertain and beyond our control. Accordingly, we caution you that any such forward-looking statements are not guarantees of future performance and are subject to risks, assumptions, estimates and uncertainties that are difficult to predict. Although we believe that the expectations reflected in these forward-looking statements are reasonable as of the date made, actual results may prove to be materially different from the results expressed or implied by the forward-looking statements. ​ 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 of changes of, trade, monetary and fiscal policies of, and other activities undertaken by, governments, agencies, central banks and similar organizations, including trade and other geopolitical tensions resulting from the imposition of tariffs and tightening of export control regulations; the effects of severe weather, geopolitical instability, including war, terrorist attacks, pandemics or other severe health emergencies and natural disasters and other external events; the potential impact of climate change; our ability to maintain consistent growth, earnings and profitability; the impact of any pandemic, epidemic or health-related crisis; our likelihood of success in, and the impact of, litigation or regulatory actions; our ability to continue to pay dividends on our common stock; contingent liabilities and unexpected tax liabilities that may be applicable to us as a result of the Reorganization Transactions; and damage to our reputation from any of the factors described above. 46 Table of Contents 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. ​ Company Overview ​ FHI is a bank holding company, which owns 100% of the outstanding common stock of FHB, its only direct, wholly owned subsidiary. FHB was founded in 1858 under the name Bishop & Company and was the first successful banking partnership in the Kingdom of Hawaii and the second oldest bank formed west of the Mississippi River. The Bank operates its business through three operating segments: Retail Banking, Commercial Banking and Treasury and Other. ​ References to “we,” “our,” “us,” or the “Company” refer to the Parent and its subsidiary that are consolidated for financial reporting purposes. ​ Basis of Presentation ​ The accompanying unaudited interim consolidated financial statements of the Company reflect the results of operations, financial position and cash flows of FHI and its wholly owned subsidiary, FHB. All significant intercompany accounts and transactions have been eliminated in consolidation. ​ The accompanying unaudited interim consolidated financial statements of the Company have been prepared in accordance with GAAP for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and accompanying notes required by GAAP for complete financial statements. In the opinion of management, the accompanying unaudited interim consolidated financial statements reflect normal recurring adjustments necessary for a fair presentation of the results for the interim periods. ​ The accompanying unaudited interim consolidated financial statements of the Company should be read in conjunction with the audited consolidated financial statements and related notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024 and filed with the U.S. Securities and Exchange Commission (the “SEC”). ​ Hawaii Economy ​ 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. ​ 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. ​ 47 Table of Contents 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. ​ Other Economic Developments ​ 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. ​ 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. ​ 48 Table of Contents Selected Financial Data ​ Our financial highlights for the periods indicated are presented in Table 1: ​ ​ ​ ​ ​ ​ ​ ​ ​ Financial Highlights ​ ​ ​ ​ Table 1 ​ ​ For the Three Months Ended ​ ​ ​ March 31, ​ (dollars in thousands, except per share data) 2025 ​ 2024 ​ Income Statement Data: ​ ​ ​ ​ ​ ​ ​ Interest income ​ $ 235,150 ​ $ 244,952 ​ Interest expense ​ ​ 74,624 ​ ​ 90,525 ​ Net interest income ​ ​ 160,526 ​ ​ 154,427 ​ Provision for credit losses ​ ​ 10,500 ​ ​ 6,300 ​ Net interest income after provision for credit losses ​ ​ 150,026 ​ ​ 148,127 ​ Noninterest income ​ ​ 50,477 ​ ​ 51,371 ​ Noninterest expense ​ ​ 123,560 ​ ​ 128,813 ​ Income before provision for income taxes ​ ​ 76,943 ​ ​ 70,685 ​ Provision for income taxes ​ ​ 17,695 ​ ​ 16,465 ​ Net income ​ $ 59,248 ​ $ 54,220 ​ Basic earnings per share ​ $ 0.47 ​ $ 0.42 ​ Diluted earnings per share ​ $ 0.47 ​ $ 0.42 ​ Basic weighted-average outstanding shares ​ ​ 126,281,802 ​ ​ 127,707,354 ​ Diluted weighted-average outstanding shares ​ ​ 127,166,932 ​ ​ 128,217,689 ​ Dividends declared per share ​ $ 0.26 ​ $ 0.26 ​ Dividend payout ratio ​ ​ 55.32 % ​ 61.90 % Other Financial Information / Performance Ratios (1) : ​ ​ ​ ​ ​ ​ ​ Net interest margin ​ ​ 3.08 % ​ 2.91 % Efficiency ratio ​ ​ 58.22 % ​ 62.15 % Return on average total assets ​ ​ 1.01 % ​ 0.90 % Return on average tangible assets (non-GAAP) (2) ​ ​ 1.05 % ​ 0.94 % Return on average total stockholders' equity ​ ​ 9.09 % ​ 8.73 % Return on average tangible stockholders' equity (non-GAAP) (2) ​ ​ 14.59 % ​ 14.53 % Noninterest expense to average assets ​ ​ 2.10 % ​ 2.14 % (continued) ​ 49 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ (continued) ​ March 31, ​ December 31, ​ (dollars in thousands, except per share data) 2025 ​ 2024 ​ Balance Sheet Data: ​ ​ ​ ​ ​ ​ ​ Cash and cash equivalents ​ $ 1,314,579 ​ $ 1,170,190 ​ Investment securities available-for-sale ​ ​ 1,858,428 ​ ​ 1,926,516 ​ Investment securities held-to-maturity ​ ​ 3,724,908 ​ ​ 3,790,650 ​ Loans and leases ​ ​ 14,293,036 ​ ​ 14,408,258 ​ Allowance for credit losses for loans and leases ​ ​ 166,612 ​ ​ 160,393 ​ Goodwill ​ ​ 995,492 ​ ​ 995,492 ​ Total assets ​ ​ 23,744,958 ​ ​ 23,828,186 ​ Total deposits ​ ​ 20,215,816 ​ ​ 20,322,216 ​ Short-term borrowings ​ ​ 250,000 ​ ​ 250,000 ​ Total liabilities ​ ​ 21,096,106 ​ ​ 21,210,700 ​ Total stockholders' equity ​ ​ 2,648,852 ​ ​ 2,617,486 ​ Book value per share ​ $ 21.07 ​ $ 20.70 ​ Tangible book value per share (non-GAAP) (2) ​ $ 13.15 ​ $ 12.83 ​ ​ ​ ​ ​ ​ ​ ​ ​ Asset Quality Ratios: ​ ​ ​ ​ ​ ​ ​ Non-accrual loans and leases / total loans and leases ​ ​ 0.14 % ​ 0.14 % Allowance for credit losses for loans and leases / total loans and leases ​ ​ 1.17 % ​ 1.11 % Net charge-offs / average total loans and leases (3) ​ ​ 0.11 % ​ 0.10 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ March 31, ​ December 31, ​ Capital Ratios: 2025 ​ 2024 ​ Common Equity Tier 1 Capital Ratio ​ 12.93 % 12.80 % Tier 1 Capital Ratio ​ ​ 12.93 % ​ 12.80 % Total Capital Ratio ​ ​ 14.17 % ​ 13.99 % Tier 1 Leverage Ratio ​ ​ 9.01 % ​ 9.14 % Total stockholders' equity to total assets ​ ​ 11.16 % ​ 10.98 % Tangible stockholders' equity to tangible assets (non-GAAP) (2) ​ ​ 7.27 % ​ 7.10 % (1) Except for the efficiency ratio, amounts are annualized for the three months ended March 31, 2025 and 2024. ​ (2) Return on average tangible assets, return on average tangible stockholders’ equity, tangible book value per share and tangible stockholders’ equity to tangible assets are non-GAAP financial measures. We compute our return on average tangible assets as the ratio of net income to average tangible assets. We compute our return on average tangible stockholders’ equity as the ratio of net income to average tangible stockholders’ equity. We compute our tangible book value per share as the ratio of tangible stockholders’ equity to outstanding shares. We compute our tangible stockholders’ equity to tangible assets as the ratio of tangible stockholders’ equity to tangible assets. We believe that these financial measures are useful for investors, regulators, management and others to evaluate financial performance and capital adequacy relative to other financial institutions. Although these non-GAAP financial measures are frequently used by shareholders in the evaluation of a company, they have limitations as analytical tools and should not be considered in isolation or as a substitute for analyses of results as reported under GAAP. ​ (3) Net charge-offs / average total loans and leases is annualized for the three months ended March 31, 2025. ​ ​ ​ 50 Table of Contents The following table provides a reconciliation of these non-GAAP financial measures with their most closely related GAAP measures for the periods indicated: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ GAAP to Non-GAAP Reconciliation ​ ​ ​ ​ ​ Table 2 ​ ​ ​ For the Three Months Ended ​ ​ ​ ​ March 31, ​ ​ (dollars in thousands) 2025 ​ 2024 ​ ​ Income Statement Data: ​ ​ ​ ​ ​ ​ ​ ​ Net income ​ $ 59,248 ​ $ 54,220 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Average total stockholders' equity ​ $ 2,641,978 ​ $ 2,496,840 ​ ​ Less: average goodwill ​ ​ 995,492 ​ ​ 995,492 ​ ​ Average tangible stockholders' equity ​ $ 1,646,486 ​ $ 1,501,348 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Average total assets ​ $ 23,890,459 ​ $ 24,187,207 ​ ​ Less: average goodwill ​ ​ 995,492 ​ ​ 995,492 ​ ​ Average tangible assets ​ $ 22,894,967 ​ $ 23,191,715 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Return on average total stockholders' equity (a) ​ ​ 9.09 % ​ 8.73 % ​ Return on average tangible stockholders' equity (non-GAAP) (a) ​ ​ 14.59 % ​ 14.53 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Return on average total assets (a) ​ ​ 1.01 % ​ 0.90 % ​ Return on average tangible assets (non-GAAP) (a) ​ ​ 1.05 % ​ 0.94 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ As of ​ As of ​ ​ March 31, ​ December 31, ​ (dollars in thousands, except per share data) 2025 ​ 2024 ​ Balance Sheet Data: ​ ​ ​ ​ ​ ​ Total stockholders' equity $ 2,648,852 ​ $ 2,617,486 ​ Less: goodwill ​ 995,492 ​ ​ 995,492 ​ Tangible stockholders' equity $ 1,653,360 ​ $ 1,621,994 ​ ​ ​ ​ ​ ​ ​ ​ Total assets $ 23,744,958 ​ $ 23,828,186 ​ Less: goodwill ​ 995,492 ​ ​ 995,492 ​ Tangible assets $ 22,749,466 ​ $ 22,832,694 ​ ​ ​ ​ ​ ​ ​ ​ Shares outstanding ​ 125,692,598 ​ ​ 126,422,898 ​ ​ ​ ​ ​ ​ ​ ​ Total stockholders' equity to total assets ​ 11.16 % ​ 10.98 % Tangible stockholders' equity to tangible assets (non-GAAP) ​ 7.27 % ​ 7.10 % ​ ​ ​ ​ ​ ​ ​ Book value per share $ 21.07 ​ $ 20.70 ​ Tangible book value per share (non-GAAP) $ 13.15 ​ $ 12.83 ​ (a) Annualized for the three months ended March 31, 2025 and 2024. ​ ​ Financial Highlights ​ 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. ​ 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. ​ 51 Table of Contents Our results for the three months ended March 31, 2025 were highlighted by the following: ​ ● Net interest income was $160.5 million for the three months ended March 31, 2025, an increase of $6.1 million or four percent as 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 as compared to 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. ​ ● 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 Provision is recorded to maintain the allowance for credit losses for loans and leases (the “ACL”) and the reserve for unfunded commitments at levels deemed adequate to absorb lifetime expected credit losses in our loan and lease portfolio and unfunded loan and lease commitments as of the balance sheet date. ​ ● Noninterest income was $50.5 million for the three months ended March 31, 2025, a decrease of $0.9 million or 2% as compared to the same period in 2024. The decrease in noninterest income was primarily due to a $1.7 million decrease in credit and debit card fees, a $1.0 million decrease in trust and investment services income and a $0.6 million decrease in other noninterest income, partially offset by a $2.3 million increase in other service charges and fees. ​ ● Noninterest expense was $123.6 million for the three months ended March 31, 2025, a decrease of $5.3 million or 4% compared to the same period in 2024. The decrease in noninterest expense was primarily due to a $4.3 million decrease in regulatory assessment and fees, a $1.5 million decrease in other noninterest expense, a $0.9 million decrease in contracted services and professional fees and a $0.6 million decrease in card rewards program expense, partially offset by a $1.2 million increase in occupancy expense and a $0.8 million increase in salaries and employee benefits expense. ​ 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. ​ ● Total loans and leases were $14.3 billion as of March 31, 2025, a decrease of $115.2 million or 1% from December 31, 2024. The decrease in total loans and leases was primarily due to decreases in commercial real estate loans, residential real estate loans and consumer loans, partially offset by increases in construction loans and commercial and industrial loans. ​ ● The ACL was $166.6 million as of March 31, 2025, an increase of $6.2 million or 4% from December 31, 2024. The ratio of our ACL to total loans and leases outstanding was 1.17% as of March 31, 2025, an increase of six basis points compared to December 31, 2024. ​ ● Our investment portfolio is comprised of high-grade investment securities, primarily collateralized mortgage obligations issued by the Government National Mortgage Association (“Ginnie Mae”), the Federal National Mortgage Association (“Fannie Mae”) and the Federal Home Loan Mortgage Corporation (“Freddie Mac”) and mortgage-backed securities issued by Ginnie Mae, Freddie Mac, Fannie Mae, Municipal Housing Authorities and non-agency entities. The total carrying value of our investment securities portfolio was $5.6 billion as of March 31, 2025, a decrease of $133.8 million or 2% from December 31, 2024. Maturities and payments on investment securities were used to offset the decline in deposits. ​ 52 Table of Contents ● Total deposits were $20.2 billion as of March 31, 2025, a decrease of $106.4 million or 1% from December 31, 2024. The decrease in total deposits was primarily due to a $162.1 million decrease in money market deposit balances and an $89.6 million decrease in demand deposit balances, partially offset by an $89.4 million increase in savings deposit balances and a $55.9 million increase in time deposit balances. ​ ● Total stockholders’ equity was $2.6 billion as of March 31, 2025, an increase of $31.4 million or 1% from December 31, 2024. The increase in stockholders’ equity was primarily due to earnings for the period of $59.2 million and other comprehensive income, net of tax, of $30.2 million, primarily due to changes in our investment securities portfolio, partially offset by dividends declared and paid to the Company’s stockholders of $32.9 million and common stock repurchased of $25.0 million during the three months ended March 31, 2025. ​ Analysis of Results of Operations ​ Net Interest Income ​ For the three months ended March 31, 2025 and 2024, average balances, related income and expenses, on a fully taxable-equivalent basis, and resulting yields and rates are presented in Table 3. An analysis of the change in net interest income, on a fully taxable-equivalent basis, is presented in Table 4. 53 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Average Balances and Interest Rates ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Table 3 ​ ​ Three Months Ended ​ Three Months Ended ​ ​ ​ March 31, 2025 ​ March 31, 2024 ​ ​ ​ Average ​ Income/ ​ Yield/ ​ Average ​ Income/ ​ Yield/ ​ (dollars in millions) Balance Expense Rate ​ Balance Expense Rate ​ Earning Assets ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest-Bearing Deposits in Other Banks ​ $ 1,171.1 ​ $ 12.8 ​ 4.44 % $ 858.6 ​ $ 11.6 ​ 5.45 % Available-for-Sale Investment Securities ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Taxable ​ ​ 1,891.4 ​ ​ 13.2 ​ 2.79 ​ ​ 2,210.6 ​ ​ 14.5 ​ 2.63 ​ Non-Taxable ​ ​ 1.4 ​ ​ — ​ 5.52 ​ ​ 1.8 ​ ​ — ​ 5.61 ​ Held-to-Maturity Investment Securities ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Taxable ​ ​ 3,164.0 ​ ​ 13.6 ​ 1.72 ​ ​ 3,416.4 ​ ​ 14.6 ​ 1.71 ​ Non-Taxable ​ ​ 599.0 ​ ​ 3.7 ​ 2.51 ​ ​ 603.4 ​ ​ 4.0 ​ 2.65 ​ Total Investment Securities ​ ​ 5,655.8 ​ ​ 30.5 ​ 2.16 ​ ​ 6,232.2 ​ ​ 33.1 ​ 2.13 ​ Loans Held for Sale ​ ​ 0.3 ​ ​ — ​ 6.28 ​ ​ 0.7 ​ ​ — ​ 6.92 ​ Loans and Leases (1) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Commercial and industrial ​ ​ 2,196.8 ​ ​ 33.6 ​ 6.20 ​ ​ 2,164.9 ​ ​ 37.2 ​ 6.92 ​ Commercial real estate ​ ​ 4,420.1 ​ ​ 66.5 ​ 6.10 ​ ​ 4,323.5 ​ ​ 70.1 ​ 6.53 ​ Construction ​ ​ 937.0 ​ ​ 15.4 ​ 6.67 ​ ​ 924.7 ​ ​ 17.4 ​ 7.55 ​ Residential: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Residential mortgage ​ ​ 4,150.3 ​ ​ 40.9 ​ 3.94 ​ ​ 4,264.1 ​ ​ 42.0 ​ 3.94 ​ Home equity line ​ ​ 1,149.8 ​ ​ 13.1 ​ 4.61 ​ ​ 1,172.1 ​ ​ 12.0 ​ 4.13 ​ Consumer ​ ​ 1,019.5 ​ ​ 18.9 ​ 7.53 ​ ​ 1,083.5 ​ ​ 18.1 ​ 6.71 ​ Lease financing ​ ​ 436.5 ​ ​ 4.3 ​ 3.99 ​ ​ 379.8 ​ ​ 3.7 ​ 3.91 ​ Total Loans and Leases ​ ​ 14,310.0 ​ ​ 192.7 ​ 5.44 ​ ​ 14,312.6 ​ ​ 200.5 ​ 5.63 ​ Other Earning Assets ​ ​ 32.0 ​ ​ 0.4 ​ 5.48 ​ ​ 77.8 ​ ​ 1.2 ​ 5.90 ​ Total Earning Assets (2) ​ ​ 21,169.2 ​ ​ 236.4 ​ 4.51 ​ ​ 21,481.9 ​ ​ 246.4 ​ 4.61 ​ Cash and Due from Banks ​ ​ 235.9 ​ ​ ​ ​ ​ ​ ​ 244.3 ​ ​ ​ ​ ​ ​ Other Assets ​ ​ 2,485.4 ​ ​ ​ ​ ​ ​ ​ 2,461.0 ​ ​ ​ ​ ​ ​ Total Assets ​ $ 23,890.5 ​ ​ ​ ​ ​ ​ $ 24,187.2 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest-Bearing Liabilities ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest-Bearing Deposits ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Savings ​ $ 6,232.5 ​ $ 21.3 ​ 1.38 % $ 6,059.7 ​ $ 23.4 ​ 1.56 % Money Market ​ ​ 3,922.2 ​ ​ 23.0 ​ 2.38 ​ ​ 3,944.9 ​ ​ 28.8 ​ 2.94 ​ Time ​ ​ 3,317.1 ​ ​ 27.4 ​ 3.36 ​ ​ 3,325.3 ​ ​ 31.9 ​ 3.86 ​ Total Interest-Bearing Deposits ​ ​ 13,471.8 ​ ​ 71.7 ​ 2.16 ​ ​ 13,329.9 ​ ​ 84.1 ​ 2.54 ​ Other Short-Term Borrowings ​ ​ 250.0 ​ ​ 2.6 ​ 4.22 ​ ​ 500.0 ​ ​ 6.0 ​ 4.79 ​ Other Interest-Bearing Liabilities ​ ​ 27.5 ​ ​ 0.3 ​ 4.67 ​ ​ 33.0 ​ ​ 0.4 ​ 5.22 ​ Total Interest-Bearing Liabilities ​ ​ 13,749.3 ​ ​ 74.6 ​ 2.20 ​ ​ 13,862.9 ​ ​ 90.5 ​ 2.63 ​ Net Interest Income ​ ​ ​ ​ $ 161.8 ​ ​ ​ ​ ​ ​ $ 155.9 ​ ​ ​ Interest Rate Spread (3) ​ ​ ​ ​ ​ ​ ​ 2.31 % ​ ​ ​ ​ ​ ​ 1.98 % Net Interest Margin (4) ​ ​ ​ ​ ​ ​ ​ 3.08 % ​ ​ ​ ​ ​ ​ 2.91 % Noninterest-Bearing Demand Deposits ​ ​ 6,882.2 ​ ​ ​ ​ ​ ​ ​ 7,242.0 ​ ​ ​ ​ ​ ​ Other Liabilities ​ ​ 617.0 ​ ​ ​ ​ ​ ​ ​ 585.5 ​ ​ ​ ​ ​ ​ Stockholders' Equity ​ ​ 2,642.0 ​ ​ ​ ​ ​ ​ ​ 2,496.8 ​ ​ ​ ​ ​ ​ Total Liabilities and Stockholders' Equity ​ $ 23,890.5 ​ ​ ​ ​ ​ ​ $ 24,187.2 ​ ​ ​ ​ ​ ​ (1) Non-performing loans and leases are included in the respective average loan and lease balances. Income, if any, on such loans and leases is recognized on a cash basis. (2) Interest income includes taxable-equivalent basis adjustments of $1.2 million and $1.5 million for the three months ended March 31, 2025 and 2024, respectively. (3) Interest rate spread is the difference between the average yield on earning assets and the average rate paid on interest-bearing liabilities, on a fully taxable-equivalent basis. (4) Net interest margin is net interest income annualized for the three months ended March 31, 2025 and 2024, on a fully taxable-equivalent basis, divided by average total earning assets. ​ 54 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Analysis of Change in Net Interest Income ​ ​ ​ ​ ​ ​ ​ ​ Table 4 ​ ​ Three Months Ended March 31, 2025 ​ ​ Compared to March 31, 2024 (dollars in millions) Volume Rate Total (1) Change in Interest Income: ​ ​ ​ ​ ​ ​ Interest-Bearing Deposits in Other Banks ​ $ 3.7 ​ $ (2.5) ​ $ 1.2 Available-for-Sale Investment Securities ​ ​ ​ ​ ​ ​ ​ ​ ​ Taxable ​ ​ (2.2) ​ ​ 0.9 ​ ​ (1.3) Held-to-Maturity Investment Securities ​ ​ ​ ​ ​ ​ ​ ​ ​ Taxable ​ ​ (1.1) ​ ​ 0.1 ​ ​ (1.0) Non-Taxable ​ ​ — ​ ​ (0.3) ​ ​ (0.3) Total Investment Securities ​ ​ (3.3) ​ ​ 0.7 ​ ​ (2.6) Loans and Leases ​ ​ ​ ​ ​ ​ ​ ​ ​ Commercial and industrial ​ ​ 0.5 ​ ​ (4.1) ​ ​ (3.6) Commercial real estate ​ ​ 1.5 ​ ​ (5.1) ​ ​ (3.6) Construction ​ ​ 0.2 ​ ​ (2.2) ​ ​ (2.0) Residential: ​ ​ ​ ​ ​ ​ ​ ​ ​ Residential mortgage ​ ​ (1.1) ​ ​ — ​ ​ (1.1) Home equity line ​ ​ (0.2) ​ ​ 1.3 ​ ​ 1.1 Consumer ​ ​ (1.2) ​ ​ 2.0 ​ ​ 0.8 Lease financing ​ ​ 0.5 ​ ​ 0.1 ​ ​ 0.6 Total Loans and Leases ​ ​ 0.2 ​ ​ (8.0) ​ ​ (7.8) Other Earning Assets ​ ​ (0.7) ​ ​ (0.1) ​ ​ (0.8) Total Change in Interest Income ​ ​ (0.1) ​ ​ (9.9) ​ ​ (10.0) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Change in Interest Expense: ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest-Bearing Deposits ​ ​ ​ ​ ​ ​ ​ ​ ​ Savings ​ ​ 0.7 ​ ​ (2.8) ​ ​ (2.1) Money Market ​ ​ (0.2) ​ ​ (5.6) ​ ​ (5.8) Time ​ ​ (0.1) ​ ​ (4.4) ​ ​ (4.5) Total Interest-Bearing Deposits ​ ​ 0.4 ​ ​ (12.8) ​ ​ (12.4) Other Short-term Borrowings ​ ​ (2.7) ​ ​ (0.7) ​ ​ (3.4) Other Interest-Bearing Liabilities ​ ​ (0.1) ​ ​ — ​ ​ (0.1) Total Change in Interest Expense ​ ​ (2.4) ​ ​ (13.5) ​ ​ (15.9) Change in Net Interest Income ​ $ 2.3 ​ $ 3.6 ​ $ 5.9 (1) The change in interest income and expense not solely due to changes in volume or rate has been allocated on a pro-rata basis to the volume and rate columns. ​ 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. 55 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 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. ​ Provision for Credit Losses ​ 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. ​ Noninterest Income ​ Table 5 presents the major components of noninterest income for the three months ended March 31, 2025 and 2024: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Noninterest Income ​ ​ ​ ​ ​ Table 5 ​ ​ Three Months Ended ​ ​ ​ ​ ​ ​ ​ ​ March 31, ​ Dollar ​ Percent ​ (dollars in thousands) 2025 2024 Change Change ​ Service charges on deposit accounts ​ $ 7,535 ​ $ 7,546 ​ $ (11) ​ — % Credit and debit card fees ​ ​ 14,474 ​ ​ 16,173 ​ ​ (1,699) ​ (11) ​ Other service charges and fees ​ ​ 12,167 ​ ​ 9,904 ​ ​ 2,263 ​ 23 ​ Trust and investment services income ​ ​ 9,370 ​ ​ 10,354 ​ ​ (984) ​ (10) ​ Bank-owned life insurance ​ ​ 4,371 ​ ​ 4,286 ​ ​ 85 ​ 2 ​ Investment securities gains, net ​ ​ 37 ​ ​ — ​ ​ 37 ​ n/m ​ Other ​ ​ 2,523 ​ ​ 3,108 ​ ​ (585) ​ (19) ​ Total noninterest income ​ $ 50,477 ​ $ 51,371 ​ $ (894) ​ (2) % 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. ​ Total noninterest income was $50.5 million for the three months ended March 31, 2025, a decrease of $0.9 million or 2% as compared to the same period in 2024. ​ 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. ​ 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. ​ 56 Table of Contents 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. ​ 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. ​ BOLI income was $4.4 million for the three months ended March 31, 2025, an increase of $0.1 million or 2% as compared to the same period in 2024. ​ 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. ​ Noninterest Expense ​ Table 6 presents the major components of noninterest expense for the three months ended March 31, 2025 and 2024: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Noninterest Expense ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Table 6 ​ ​ Three Months Ended ​ ​ ​ ​ ​ ​ ​ ​ March 31, ​ Dollar ​ Percentage ​ (dollars in thousands) 2025 2024 Change Change ​ Salaries and employee benefits ​ $ 60,104 ​ $ 59,262 ​ $ 842 ​ 1 % Contracted services and professional fees ​ ​ 14,839 ​ ​ 15,739 ​ ​ (900) ​ (6) ​ Occupancy ​ ​ 8,100 ​ ​ 6,941 ​ ​ 1,159 ​ 17 ​ Equipment ​ ​ 13,871 ​ ​ 13,413 ​ ​ 458 ​ 3 ​ Regulatory assessment and fees ​ ​ 3,823 ​ ​ 8,120 ​ ​ (4,297) ​ (53) ​ Advertising and marketing ​ ​ 2,179 ​ ​ 2,612 ​ ​ (433) ​ (17) ​ Card rewards program ​ ​ 7,919 ​ ​ 8,508 ​ ​ (589) ​ (7) ​ Other ​ ​ 12,725 ​ ​ 14,218 ​ ​ (1,493) ​ (11) ​ Total noninterest expense ​ $ 123,560 ​ $ 128,813 ​ $ (5,253) ​ (4) % ​ Total noninterest expense was $123.6 million for the three months ended March 31, 2025, a decrease of $5.3 million or 4% as compared to the same period in 2024. ​ 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. ​ 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. ​ 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. ​ 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. ​ 57 Table of Contents 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. ​ 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. ​ 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. ​ 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. ​ Provision for Income Taxes ​ 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. ​ Analysis of Business Segments ​ 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. ​ ​ ​ ​ ​ ​ ​ ​ Business Segment Net Income (Loss) ​ ​ ​ ​ ​ Table 7 ​ ​ Three Months Ended ​ ​ March 31, (dollars in thousands) ​ 2025 ​ 2024 Retail Banking ​ $ 59,943 ​ $ 56,145 Commercial Banking ​ ​ 28,256 ​ ​ 26,668 Treasury and Other ​ ​ (28,951) ​ ​ (28,593) Total ​ $ 59,248 ​ $ 54,220 ​ Retail Banking. Our Retail Banking segment includes the financial products and services we provide to consumers and small businesses. Loan and lease products offered include residential and commercial mortgage loans, home equity lines of credit and loans, automobile loans and leases, secured and unsecured lines of credit, installment loans and small business loans and leases. Deposit products offered include checking, savings and time deposit accounts. Our Retail Banking segment also includes our wealth management services. ​ 58 Table of Contents 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. ​ Commercial Banking. Our Commercial Banking segment includes our corporate banking related products, commercial real estate loans, commercial lease financing, secured and unsecured lines of credit, automobile loans and auto dealer financing, business deposit products and credit cards that we provide primarily to middle market and large companies locally, nationally and internationally. ​ 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. ​ Treasury and Other. Our Treasury and Other segment includes our treasury business, which consists of corporate asset and liability management activities, including interest rate risk management. The assets and liabilities (and related interest income and expense) of our treasury business consist of interest-bearing deposits, investment securities, federal funds sold and purchased, government deposits, short- and long-term borrowings and bank-owned properties. Our primary sources of noninterest income are from bank-owned life insurance, net gains from the sale of investment securities, foreign exchange income related to customer driven cross-border wires for business and personal reasons and management of bank-owned properties. The net residual effect of the transfer pricing of assets and liabilities is included in Treasury and Other, along with the elimination of intercompany transactions. ​ Other organizational units (Technology, Operations, Credit and Risk Management, Human Resources, Finance, Administration, Marketing and Corporate and Regulatory Administration) provide a wide range of support to our other income earning segments. Expenses incurred by these support units are charged to the applicable business segments through an internal cost allocation process. ​ 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. ​ 59 Table of Contents Analysis of Financial Condition ​ Liquidity and Capital Resources ​ Liquidity refers to our ability to maintain cash flow that is adequate to fund operations and meet present and future financial obligations through either the sale or maturity of existing assets or by obtaining additional funding through liability management. We consider the effective and prudent management of liquidity to be fundamental to our health and strength. Our objective is to manage our cash flow and liquidity reserves so that they are adequate to fund our obligations and other commitments on a timely basis and at a reasonable cost. ​ Liquidity is managed to ensure stable, reliable and cost-effective sources of funds to satisfy demand for credit, deposit withdrawals and investment opportunities. Funding requirements are impacted by loan originations and refinancings, deposit balance changes, liability issuances and settlements and off-balance sheet funding commitments. We consider and comply with various regulatory and internal guidelines regarding required liquidity levels and periodically monitor our liquidity position in light of the changing economic environment and customer activity. Based on periodic liquidity assessments, we may alter our asset, liability and off-balance sheet positions. The Company’s Asset Liability Management Committee (“ALCO”) monitors sources and uses of funds and modifies asset and liability positions as liquidity requirements change. This process, combined with our ability to raise funds in money and capital markets and through private placements, provides flexibility in managing the exposure to liquidity risk. ​ 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. ​ 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. ​ The Company’s routine funding requirements are expected to consist primarily of general corporate needs and capital to be returned to our shareholders. We expect to meet these obligations from dividends paid by the Bank to the Parent. Additional sources of liquidity available to us include selling residential real estate loans in the secondary market, taking out short- and long-term borrowings and issuing long-term debt and equity securities. 60 Table of Contents ​ 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. ​ Potential Demands on Liquidity from Off-Balance Sheet Arrangements ​ We have off-balance sheet arrangements, such as variable interest entities, guarantees, and certain financial instruments with off-balance sheet risk, that may affect the Company’s financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources. ​ Variable Interest Entities ​ 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. ​ Guarantees ​ 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. ​ 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. ​ 61 Table of Contents Although to-date repurchase requests related to representation and warranty provisions and servicing activities have been limited, it is possible that requests to repurchase mortgage loans may increase in frequency as investors more aggressively pursue all means of recovering losses on their purchased loans. However, as of March 31, 2025, management believes that this exposure is not material due to the historical level of repurchase requests and loss trends and thus has not established a liability for losses related to mortgage loan repurchases. As of March 31, 2025, 99% of our residential mortgage loans serviced for investors were current. We maintain ongoing communications with investors and continue to evaluate this exposure by monitoring the level and number of repurchase requests as well as the delinquency rates in loans sold to investors. ​ Financial Instruments with Off-Balance Sheet Risk ​ The Company is a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit and standby and commercial letters of credit which are not reflected in the consolidated financial statements. ​ See “Note 12. Commitments and Contingent Liabilities” contained in our unaudited interim consolidated financial statements for more information on our financial instruments with off-balance sheet risk. ​ Investment Securities ​ Table 8 presents the estimated fair value of our available-for-sale investment securities portfolio and amortized cost of our held-to-maturity investment securities portfolio as of March 31, 2025 and December 31, 2024: ​ ​ ​ ​ ​ ​ ​ ​ Investment Securities ​ ​ ​ ​ ​ Table 8 ​ March 31, ​ December 31, (dollars in thousands) ​ 2025 ​ 2024 Government agency debt securities ​ $ — ​ $ 8,147 Mortgage-backed securities: ​ ​ ​ ​ ​ ​ Residential - Government agency ​ ​ 35,314 ​ ​ 35,859 Residential - Government-sponsored enterprises ​ ​ 727,417 ​ ​ 738,113 Commercial - Government agency ​ ​ 195,766 ​ ​ 196,125 Commercial - Government-sponsored enterprises ​ ​ 44,012 ​ ​ 44,908 Commercial - Non-agency ​ ​ 22,005 ​ ​ 22,083 Collateralized mortgage obligations: ​ ​ ​ ​ ​ ​ Government agency ​ ​ 391,674 ​ ​ 397,124 Government-sponsored enterprises ​ ​ 305,737 ​ ​ 310,682 Collateralized loan obligations ​ ​ 136,503 ​ ​ 173,475 Total available-for-sale securities ​ $ 1,858,428 ​ $ 1,926,516 ​ ​ ​ ​ ​ ​ ​ Government agency debt securities ​ $ 49,104 ​ $ 49,267 Mortgage-backed securities: ​ ​ ​ ​ ​ ​ Residential - Government agency ​ ​ 39,912 ​ ​ 40,888 Residential - Government-sponsored enterprises ​ ​ 91,523 ​ ​ 92,573 Commercial - Government agency ​ ​ 31,056 ​ ​ 31,009 Commercial - Government-sponsored enterprises ​ ​ 1,103,962 ​ ​ 1,114,549 Collateralized mortgage obligations: ​ ​ ​ ​ ​ ​ Government agency ​ ​ 887,439 ​ ​ 907,565 Government-sponsored enterprises ​ ​ 1,467,222 ​ ​ 1,500,212 Debt securities issued by states and political subdivisions ​ ​ 54,690 ​ ​ 54,587 Total held-to-maturity securities ​ $ 3,724,908 ​ $ 3,790,650 ​ 62 Table of Contents Table 9 presents the maturity distribution at amortized cost and weighted-average yield to maturity of our investment securities portfolio as of March 31, 2025: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Maturities and Weighted-Average Yield on Securities (1) ​ ​ Table 9 ​ ​ 1 Year or Less ​ After 1 Year - 5 Years ​ After 5 Years - 10 Years ​ Over 10 Years ​ Total ​ ​ ​ ​ Weighted ​ ​ ​ Weighted ​ ​ ​ Weighted ​ ​ ​ Weighted ​ ​ ​ Weighted ​ ​ ​ ​ ​ ​ ​ Average ​ ​ ​ Average ​ ​ ​ Average ​ ​ ​ Average ​ ​ ​ Average ​ Fair (dollars in millions) Amount Yield ​ Amount Yield ​ Amount Yield ​ Amount Yield ​ Amount Yield ​ Value As of March 31, 2025 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Available-for-sale securities ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Mortgage-backed securities: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Residential - Government agency (2) ​ $ 19.1 ​ 4.40 % $ 7.3 ​ 5.02 % $ 10.0 ​ 2.83 % $ — ​ — % $ 36.4 ​ 4.09 % $ 35.3 Residential - Government-sponsored enterprises (2) ​ ​ — ​ — ​ ​ 705.8 ​ 1.41 ​ ​ 108.3 ​ 4.74 ​ ​ — ​ — ​ ​ 814.1 ​ 1.85 ​ ​ 727.4 Commercial - Government agency (2) ​ ​ 1.2 ​ 2.53 ​ ​ 213.0 ​ 1.88 ​ ​ 31.9 ​ 1.79 ​ ​ — ​ — ​ ​ 246.1 ​ 1.87 ​ ​ 195.8 Commercial - Government-sponsored enterprises (2) ​ ​ 9.9 ​ 3.32 ​ ​ 35.0 ​ 1.31 ​ ​ 1.5 ​ 5.30 ​ ​ — ​ — ​ ​ 46.4 ​ 1.86 ​ ​ 44.0 Commercial - Non-agency ​ ​ — ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ 22.0 ​ 6.20 ​ ​ 22.0 ​ 6.20 ​ ​ 22.0 Collateralized mortgage obligations (2) : ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Government agency ​ ​ 1.5 ​ 1.70 ​ ​ 100.4 ​ 3.15 ​ ​ 338.8 ​ 2.10 ​ ​ — ​ — ​ ​ 440.7 ​ 2.34 ​ ​ 391.7 Government-sponsored enterprises ​ ​ 1.5 ​ 1.51 ​ ​ 194.4 ​ 1.82 ​ ​ 153.0 ​ 2.07 ​ ​ — ​ — ​ ​ 348.9 ​ 1.93 ​ ​ 305.7 Collateralized loan obligations ​ ​ — ​ — ​ ​ 9.3 ​ 6.33 ​ ​ 127.1 ​ 6.08 ​ ​ — ​ — ​ ​ 136.4 ​ 6.10 ​ ​ 136.5 Total available-for-sale securities as of March 31, 2025 ​ $ 33.2 ​ 3.76 % $ 1,265.2 ​ 1.74 % $ 770.6 ​ 3.13 % $ 22.0 ​ 6.20 % $ 2,091.0 ​ 2.33 % $ 1,858.4 Held-to-maturity securities ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Government agency debt securities ​ $ — ​ — % $ — ​ — % $ 25.9 ​ 1.33 % $ 23.2 ​ 1.85 % $ 49.1 ​ 1.58 % $ 44.6 Mortgage-backed securities (2) : ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Residential - Government agency ​ ​ — ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ 39.9 ​ 2.18 ​ ​ 39.9 ​ 2.18 ​ ​ 34.3 Residential - Government-sponsored enterprises ​ ​ — ​ — ​ ​ — ​ — ​ ​ 39.2 ​ 1.60 ​ ​ 52.3 ​ 1.59 ​ ​ 91.5 ​ 1.60 ​ ​ 78.0 Commercial - Government agency ​ ​ — ​ — ​ ​ 6.3 ​ 1.70 ​ ​ 24.8 ​ 2.05 ​ ​ — ​ — ​ ​ 31.1 ​ 1.98 ​ ​ 22.4 Commercial - Government-sponsored enterprises ​ ​ — ​ — ​ ​ 392.6 ​ 1.54 ​ ​ 451.9 ​ 2.07 ​ ​ 259.5 ​ 2.64 ​ ​ 1,104.0 ​ 2.02 ​ ​ 966.8 Collateralized mortgage obligations (2) : ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Government agency ​ ​ — ​ — ​ ​ — ​ — ​ ​ 793.9 ​ 1.42 ​ ​ 93.5 ​ 1.34 ​ ​ 887.4 ​ 1.41 ​ ​ 775.9 Government-sponsored enterprises ​ ​ — ​ — ​ ​ 170.6 ​ 1.60 ​ ​ 1,202.1 ​ 1.50 ​ ​ 94.5 ​ 1.63 ​ ​ 1,467.2 ​ 1.52 ​ ​ 1,279.5 Debt securities issued by state and political subdivisions ​ ​ — ​ — ​ ​ — ​ — ​ ​ 26.7 ​ 2.15 ​ ​ 28.0 ​ 2.39 ​ ​ 54.7 ​ 2.27 ​ ​ 48.8 Total held-to-maturity securities as of March 31, 2025 ​ $ — ​ — % $ 569.5 ​ 1.56 % $ 2,564.5 ​ 1.59 % $ 590.9 ​ 2.11 % $ 3,724.9 ​ 1.67 % $ 3,250.3 (1) Weighted-average yields were computed on a fully taxable-equivalent basis. (2) Maturities for mortgage-backed securities and collateralized mortgage obligations anticipate future prepayments. ​ 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. ​ 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. ​ We continually evaluate our investment securities portfolio in response to established asset/liability management objectives, changing market conditions that could affect profitability and the level of interest rate risk to which we are exposed. These evaluations may cause us to change the level of funds we deploy into investment securities and change the composition of our investment securities portfolio. ​ 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. 63 Table of Contents ​ 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. ​ For our held-to-maturity investment securities, we utilize the Current Expected Credit Loss (“CECL”) approach to estimate lifetime expected credit losses. Substantially all of our held-to-maturity securities are issued by the U.S. Government, its agencies and government-sponsored enterprises. These securities have a long history of no credit losses and carry the explicit or implicit guarantee of the U.S. government. Therefore, as of March 31, 2025, we did not record an allowance for credit losses related to our held-to-maturity investment securities portfolio. ​ We are required to hold non-marketable equity securities, comprised of FHLB stock, as a condition of our membership in the FHLB system. Our FHLB stock is accounted for at cost, which equals par or redemption value. As of both March 31, 2025 and December 31, 2024, we held $21.4 million in FHLB stock, which is recorded as a component of other assets in our unaudited interim consolidated balance sheets. ​ See “Note 2. Investment Securities” contained in our unaudited interim consolidated financial statements for more information on our investment securities portfolio. ​ Loans and Leases ​ Table 10 presents the composition of our loan and lease portfolio by major categories as of March 31, 2025 and December 31, 2024: ​ ​ ​ ​ ​ ​ ​ ​ Loans and Leases ​ ​ ​ ​ ​ Table 10 ​ ​ March 31, ​ December 31, (dollars in thousands) 2025 2024 Commercial and industrial ​ $ 2,261,394 ​ $ 2,247,428 Commercial real estate ​ ​ 4,367,433 ​ ​ 4,463,992 Construction ​ ​ 954,072 ​ ​ 918,326 Residential: ​ ​ ​ ​ ​ ​ Residential mortgage ​ ​ 4,129,518 ​ ​ 4,168,154 Home equity line ​ ​ 1,144,895 ​ ​ 1,151,739 Total residential ​ ​ 5,274,413 ​ ​ 5,319,893 Consumer ​ ​ 998,325 ​ ​ 1,023,969 Lease financing ​ ​ 437,399 ​ ​ 434,650 Total loans and leases ​ $ 14,293,036 ​ $ 14,408,258 ​ Total loans and leases were $14.3 billion as of March 31, 2025, a nominal decrease of 1% from December 31, 2024. The decrease in total loans and leases was primarily due to decreases in commercial real estate loans, residential real estate loans and consumer loans, partially offset by increases in construction loans, commercial and industrial loans and lease financing. ​ Commercial and industrial loans are made primarily to corporations, middle market and small businesses for the purpose of financing equipment acquisition, expansion, working capital and other general business purposes. We also offer a variety of automobile dealer flooring lines to our customers in Hawaii and California to assist with the financing of their inventory. Commercial and industrial loans were $2.3 billion as of March 31, 2025, an increase of $14.0 million or 1% from December 31, 2024. ​ 64 Table of Contents Commercial real estate loans are secured by first mortgages on commercial real estate at loan to value (“LTV”) ratios generally not exceeding 75% and a minimum debt service coverage ratio of 1.20 to 1. The commercial properties are predominantly apartments, neighborhood and grocery anchored retail, industrial, office, and to a lesser extent, specialized properties such as hotels. The primary source of repayment for investor property and owner occupied property is cash flow from the property and operating cash flow from the business, respectively. Commercial real estate loans were $4.4 billion as of March 31, 2025, a decrease of $96.6 million or 2% from December 31, 2024. ​ Construction loans are for the purchase or construction of a property for which repayment will be generated by the property. Loans in this portfolio are primarily for the purchase of land, as well as for the development of commercial properties, single family homes and condominiums. We classify loans as construction until the completion of the construction phase. Following construction, if a loan is retained by the Bank, the loan is reclassified to the commercial real estate or residential real estate classes of loans. Construction loans were $954.1 million as of March 31, 2025, an increase of $35.7 million or 4% from December 31, 2024. ​ Residential real estate loans are generally secured by 1-4 unit residential properties and are underwritten using traditional underwriting systems to assess the credit risks and financial capacity and repayment ability of the consumer. Decisions are primarily based on LTV ratios, debt-to-income (“DTI”) ratios, liquidity and credit scores. LTV ratios generally do not exceed 80%, although higher levels are permitted with mortgage insurance. We offer fixed rate mortgage products and variable rate mortgage products including home equity lines of credit. Since our transition from the London Interbank Offered Rate (“LIBOR”) in late 2021, we now offer variable rate mortgage products based on SOFR with interest rates that are subject to change every six months after the third, fifth, seventh or tenth year, depending on the product. Prior to this, we offered variable rate mortgage products based on LIBOR with interest rates that were subject to change every year after the first, third, fifth or tenth year, depending on the product. Variable rate residential mortgage loans are underwritten at fully-indexed interest rates. We generally do not offer interest-only, payment-option facilities, or any product with negative amortization. Residential real estate loans were $5.3 billion as of March 31, 2025, a decrease of $45.5 million or 1% from December 31, 2024. ​ Consumer loans consist primarily of open- and closed-end direct and indirect credit facilities for personal, automobile and household purchases as well as credit card loans. We seek to maintain reasonable levels of risk in consumer lending by following prudent underwriting guidelines, which include an evaluation of personal credit history, cash flow and collateral values based on existing market conditions. Consumer loans were $998.3 million as of March 31, 2025, a decrease of $25.6 million or 3% from December 31, 2024. ​ Lease financing consists of commercial single investor leases and leveraged leases. Underwriting of new lease transactions is based on our lending policy, including but not limited to an analysis of customer cash flows and secondary sources of repayment, including the value of leased equipment, the guarantors’ cash flows and/or other credit enhancements. No new leveraged leases are being added to the portfolio and all remaining leveraged leases are running off. Lease financing was $437.4 million as of March 31, 2025, an increase of $2.7 million or 1% from December 31, 2024. ​ See “Note 3. Loans and Leases” and “Note 4. Allowance for Credit Losses” contained in our unaudited interim consolidated financial statements and the discussion in “Analysis of Financial Condition — Allowance for Credit Losses” of this MD&A for more information on our loan and lease portfolio. ​ The Company’s loan and lease portfolio includes adjustable-rate loans, primarily tied to CME Term SOFR, Prime and SOFR, hybrid-rate loans, for which the initial rate is fixed for a period from one year to as much as ten years, and fixed rate loans, for which the interest rate does not change through the life of the loan or the remaining life of the loan. Table 11 presents the recorded investment in our loan and lease portfolio as of March 31, 2025 by rate type: 65 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Loans and Leases by Rate Type ​ ​ ​ ​ Table 11 ​ ​ March 31, 2025 ​ ​ ​ ​ ​ ​ Adjustable Rate ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ CME ​ ​ ​ ​ ​ ​ ​ Hybrid ​ Fixed ​ ​ ​ ​ (dollars in thousands) Treasury SOFR Prime Term SOFR Other Total Rate Rate Total ​ Commercial and industrial ​ $ — ​ $ 15,464 ​ $ 299,770 ​ $ 896,261 ​ $ 755,511 ​ $ 1,967,006 ​ $ 15,909 ​ $ 278,479 ​ $ 2,261,394 ​ Commercial real estate ​ ​ — ​ ​ 534,158 ​ ​ 467,459 ​ ​ 1,958,631 ​ ​ 971,827 ​ ​ 3,932,075 ​ ​ 116,790 ​ ​ 318,568 ​ ​ 4,367,433 ​ Construction ​ ​ — ​ ​ 110,060 ​ ​ 105,501 ​ ​ 602,369 ​ ​ 6,275 ​ ​ 824,205 ​ ​ 4,278 ​ ​ 125,589 ​ ​ 954,072 ​ Residential: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Residential mortgage ​ ​ 2,512 ​ ​ 122,714 ​ ​ 7,863 ​ ​ 71,364 ​ ​ 72,059 ​ ​ 276,512 ​ ​ 623,380 ​ ​ 3,229,626 ​ ​ 4,129,518 ​ Home equity line ​ ​ — ​ ​ — ​ ​ 846 ​ ​ — ​ ​ — ​ ​ 846 ​ ​ 920,111 ​ ​ 223,938 ​ ​ 1,144,895 ​ Total residential ​ ​ 2,512 ​ ​ 122,714 ​ ​ 8,709 ​ ​ 71,364 ​ ​ 72,059 ​ ​ 277,358 ​ ​ 1,543,491 ​ ​ 3,453,564 ​ ​ 5,274,413 ​ Consumer ​ ​ 865 ​ ​ — ​ ​ 324,609 ​ ​ — ​ ​ 1,010 ​ ​ 326,484 ​ ​ 500 ​ ​ 671,341 ​ ​ 998,325 ​ Lease financing ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 437,399 ​ ​ 437,399 ​ Total loans and leases ​ $ 3,377 ​ $ 782,396 ​ $ 1,206,048 ​ $ 3,528,625 ​ $ 1,806,682 ​ $ 7,327,128 ​ $ 1,680,968 ​ $ 5,284,940 ​ $ 14,293,036 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ % by rate type at March 31, 2025 ​ ​ 1 % ​ 4 % ​ 8 % ​ 25 % ​ 13 % ​ 51 % ​ 12 % ​ 37 % ​ 100 % ​ ​ Tables 12 and 13 present the geographic distribution of our loan and lease portfolio as of March 31, 2025 and December 31, 2024: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Geographic Distribution of Loan and Lease Portfolio ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Table 12 ​ ​ March 31, 2025 ​ ​ ​ ​ ​ U.S. ​ Guam & ​ Foreign & ​ ​ ​ (dollars in thousands) Hawaii Mainland (1) Saipan Other Total Commercial and industrial ​ $ 945,379 ​ $ 1,198,565 ​ $ 103,180 ​ $ 14,270 ​ $ 2,261,394 Commercial real estate ​ ​ 2,445,831 ​ ​ 1,544,299 ​ ​ 377,303 ​ ​ — ​ ​ 4,367,433 Construction ​ ​ 394,632 ​ ​ 535,725 ​ ​ 23,715 ​ ​ — ​ ​ 954,072 Residential: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Residential mortgage ​ ​ 3,976,459 ​ ​ 2,690 ​ ​ 150,369 ​ ​ — ​ ​ 4,129,518 Home equity line ​ ​ 1,099,577 ​ ​ 259 ​ ​ 45,059 ​ ​ — ​ ​ 1,144,895 Total residential ​ ​ 5,076,036 ​ ​ 2,949 ​ ​ 195,428 ​ ​ — ​ ​ 5,274,413 Consumer ​ ​ 654,631 ​ ​ 35,243 ​ ​ 305,340 ​ ​ 3,111 ​ ​ 998,325 Lease financing ​ ​ 245,418 ​ ​ 179,195 ​ ​ 12,786 ​ ​ — ​ ​ 437,399 Total Loans and Leases ​ $ 9,761,927 ​ $ 3,495,976 ​ $ 1,017,752 ​ $ 17,381 ​ $ 14,293,036 Percentage of Total Loans and Leases ​ ​ 68% ​ ​ 24% ​ ​ 7% ​ ​ 1% ​ ​ 100% (1) For secured loans and leases, classification as U.S. Mainland is made based on where the collateral is located. For unsecured loans and leases, classification as U.S. Mainland is made based on the location where the majority of the borrower’s business operations are conducted. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Geographic Distribution of Loan and Lease Portfolio ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Table 13 ​ ​ December 31, 2024 ​ ​ ​ ​ ​ U.S. ​ Guam & ​ Foreign & ​ ​ ​ (dollars in thousands) Hawaii Mainland (1) Saipan Other Total Commercial and industrial ​ $ 923,762 ​ $ 1,205,251 ​ $ 103,726 ​ $ 14,689 ​ $ 2,247,428 Commercial real estate ​ ​ 2,532,545 ​ ​ 1,537,878 ​ ​ 393,569 ​ ​ — ​ ​ 4,463,992 Construction ​ ​ 365,346 ​ ​ 526,674 ​ ​ 26,306 ​ ​ — ​ ​ 918,326 Residential: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Residential mortgage ​ ​ 4,017,261 ​ ​ 2,631 ​ ​ 148,262 ​ ​ — ​ ​ 4,168,154 Home equity line ​ ​ 1,106,228 ​ ​ 259 ​ ​ 45,252 ​ ​ — ​ ​ 1,151,739 Total residential ​ ​ 5,123,489 ​ ​ 2,890 ​ ​ 193,514 ​ ​ — ​ ​ 5,319,893 Consumer ​ ​ 672,202 ​ ​ 36,956 ​ ​ 311,281 ​ ​ 3,530 ​ ​ 1,023,969 Lease financing ​ ​ 236,827 ​ ​ 181,904 ​ ​ 15,919 ​ ​ — ​ ​ 434,650 Total Loans and Leases ​ $ 9,854,171 ​ $ 3,491,553 ​ $ 1,044,315 ​ $ 18,219 ​ $ 14,408,258 Percentage of Total Loans and Leases ​ ​ 68% ​ ​ 24% ​ ​ 7% ​ ​ 1% ​ ​ 100% (1) For secured loans and leases, classification as U.S. Mainland is made based on where the collateral is located. For unsecured loans and leases, classification as U.S. Mainland is made based on the location where the majority of the borrower’s business operations are conducted. ​ 66 Table of Contents Our lending activities are concentrated primarily in Hawaii. However, we also have lending activities on the U.S. mainland, Guam and Saipan. Our commercial lending activities on the U.S. mainland include automobile dealer flooring activities in California, participation in the Shared National Credits Program and selective commercial real estate projects based on existing customer relationships. Our lease financing portfolio includes commercial leveraged and single investor lease financing activities both in Hawaii and on the U.S. mainland. However, no new leveraged leases are being added to the portfolio and all remaining leveraged leases are running off. Our consumer lending activities are concentrated primarily in Hawaii and, to a smaller extent, in Guam and Saipan. ​ Table 14 presents the contractual maturities of our loan and lease portfolio by major categories and the sensitivities to changes in interest rates as of March 31, 2025: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Maturities for Loan and Lease Portfolio (1) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Table 14 ​ ​ March 31, 2025 ​ ​ Due in One ​ Due After One ​ Due After Five ​ Due After ​ ​ ​ (dollars in thousands) Year or Less to Five Years to Fifteen Years Fifteen Years Total Commercial and industrial ​ $ 916,073 ​ $ 1,027,543 ​ $ 245,174 ​ $ 72,604 ​ $ 2,261,394 Commercial real estate ​ ​ 953,761 ​ ​ 2,107,965 ​ ​ 1,289,035 ​ ​ 16,672 ​ ​ 4,367,433 Construction ​ ​ 372,038 ​ ​ 423,902 ​ ​ 122,222 ​ ​ 35,910 ​ ​ 954,072 Residential: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Residential mortgage ​ ​ 12,130 ​ ​ 41,637 ​ ​ 398,555 ​ ​ 3,677,196 ​ ​ 4,129,518 Home equity line ​ ​ 17,942 ​ ​ 99,558 ​ ​ 100,720 ​ ​ 926,675 ​ ​ 1,144,895 Total residential ​ ​ 30,072 ​ ​ 141,195 ​ ​ 499,275 ​ ​ 4,603,871 ​ ​ 5,274,413 Consumer ​ ​ 134,502 ​ ​ 687,420 ​ ​ 176,403 ​ ​ — ​ ​ 998,325 Lease financing ​ ​ 19,566 ​ ​ 203,471 ​ ​ 102,584 ​ ​ 111,778 ​ ​ 437,399 Total Loans and Leases ​ $ 2,426,012 ​ $ 4,591,496 ​ $ 2,434,693 ​ $ 4,840,835 ​ $ 14,293,036 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total of loans and leases with: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Adjustable interest rates ​ $ 2,214,481 ​ $ 3,437,079 ​ $ 1,448,098 ​ $ 227,470 ​ $ 7,327,128 Hybrid interest rates ​ ​ 43,739 ​ ​ 143,188 ​ ​ 96,882 ​ ​ 1,397,159 ​ ​ 1,680,968 Fixed interest rates ​ ​ 167,792 ​ ​ 1,011,229 ​ ​ 889,713 ​ ​ 3,216,206 ​ ​ 5,284,940 Total Loans and Leases ​ $ 2,426,012 ​ $ 4,591,496 ​ $ 2,434,693 ​ $ 4,840,835 ​ $ 14,293,036 (1) Based on contractual maturities, including extension and renewal options that are not unconditionally cancellable by the Company. ​ Credit Quality ​ We perform an internal loan review and grading or scoring procedures on an ongoing basis. The review provides management with periodic information as to the quality of the loan portfolio and effectiveness of our lending policies and procedures. The objective of the loan review and grading or scoring procedures is to identify, in a timely manner, existing or emerging credit quality issues so that appropriate steps can be initiated to avoid or minimize future losses. ​ For purposes of managing credit risk and estimating the ACL, management has identified three portfolio segments (commercial, residential and consumer) that we use to develop our systematic methodology to determine the ACL. The categorization of loans for the evaluation of credit risk is specific to our credit risk evaluation process and these loan categories are not necessarily the same as the loan categories used for other evaluations of our loan portfolio. See “Note 4. Allowance for Credit Losses” contained in our unaudited interim consolidated financial statements for more information about our approach to estimating the ACL. ​ The following tables and discussion address non-performing assets and loans and leases that are 90 days past due but are still accruing interest. ​ 67 Table of Contents Non-Performing Assets and Loans and Leases Past Due 90 Days or More and Still Accruing Interest ​ Table 15 presents information on our non-performing assets and accruing loans and leases past due 90 days or more as of March 31, 2025 and December 31, 2024: ​ ​ ​ ​ ​ ​ ​ ​ ​ Non-Performing Assets and Accruing Loans and Leases Past Due 90 Days or More ​ ​ ​ ​ ​ Table 15 ​ ​ March 31, ​ December 31, ​ (dollars in thousands) 2025 ​ 2024 ​ Non-Performing Assets ​ ​ ​ ​ ​ ​ ​ Non-Accrual Loans and Leases ​ ​ ​ ​ ​ ​ ​ Commercial Loans: ​ ​ ​ ​ ​ ​ ​ Commercial and industrial ​ $ — ​ $ 329 ​ Commercial real estate ​ ​ 216 ​ ​ 411 ​ Construction ​ ​ 375 ​ ​ — ​ Total Commercial Loans ​ ​ 591 ​ ​ 740 ​ Residential Loans: ​ ​ ​ ​ ​ ​ ​ Residential mortgage ​ ​ 12,809 ​ ​ 12,768 ​ Home equity line ​ ​ 6,788 ​ ​ 7,171 ​ Total Residential Loans ​ ​ 19,597 ​ ​ 19,939 ​ Total Non-Accrual Loans and Leases ​ ​ 20,188 ​ ​ 20,679 ​ Total Non-Performing Assets ​ $ 20,188 ​ $ 20,679 ​ ​ ​ ​ ​ ​ ​ ​ ​ Accruing Loans and Leases Past Due 90 Days or More ​ ​ ​ ​ ​ ​ ​ Commercial Loans: ​ ​ ​ ​ ​ ​ ​ Commercial and industrial ​ $ 740 ​ $ 1,432 ​ Construction ​ ​ — ​ ​ 536 ​ Total Commercial Loans ​ ​ 740 ​ ​ 1,968 ​ Residential mortgage ​ ​ 1,008 ​ ​ 1,317 ​ Consumer ​ ​ 2,554 ​ ​ 2,734 ​ Total Accruing Loans and Leases Past Due 90 Days or More ​ $ 4,302 ​ $ 6,019 ​ ​ ​ ​ ​ ​ ​ ​ ​ Total Loans and Leases ​ $ 14,293,036 ​ $ 14,408,258 ​ ​ ​ ​ ​ ​ ​ ​ ​ Ratio of Non-Accrual Loans and Leases to Total Loans and Leases ​ ​ 0.14 % ​ 0.14 % Ratio of Non-Performing Assets to Total Loans and Leases and OREO ​ ​ 0.14 % ​ 0.14 % Ratio of Non-Performing Assets and Accruing Loans and Leases Past Due 90 Days or More to Total Loans and Leases and OREO ​ ​ 0.17 % ​ 0.19 % ​ Table 16 presents the activity in Non-Performing Assets (“NPAs”) for the three months ended March 31, 2025 and 2024: ​ ​ ​ ​ ​ ​ ​ ​ Non-Performing Assets ​ ​ ​ ​ ​ Table 16 ​ ​ Three Months Ended March 31, (dollars in thousands) 2025 2024 Balance at beginning of period ​ $ 20,679 ​ $ 18,595 Additions ​ ​ 3,187 ​ ​ 1,405 Reductions ​ ​ ​ ​ ​ ​ Payments ​ ​ (2,272) ​ ​ (1,235) Return to accrual status ​ ​ (1,010) ​ ​ (651) Sales of other real estate owned ​ ​ — ​ ​ (75) Charge-offs/write-downs ​ ​ (396) ​ ​ (22) Total Reductions ​ ​ (3,678) ​ ​ (1,983) Balance at end of period ​ $ 20,188 ​ $ 18,017 ​ The level of NPAs represents an indicator of the potential for future credit losses. NPAs consist of non-accrual loans and leases and other real estate owned (“OREO”). Changes in the level of non-accrual loans and leases typically represent increases for loans and leases that reach a specified past due status, offset by reductions for loans and leases that are charged-off, paid down, sold, transferred to held for sale classification, transferred to OREO or are no longer classified as non-accrual because they have returned to accrual status as a result of continued performance and an improvement in the borrower’s financial condition and loan repayment capabilities. ​ Total NPAs were $20.2 million as of March 31, 2025, a decrease of $0.5 million or 2% from December 31, 2024. The ratio of our NPAs to total loans and leases and OREO was 0.14% as of both March 31, 2025 and December 31, 2024. ​ 68 Table of Contents The largest component of our NPAs is typically residential mortgage loans. The level of these NPAs can remain elevated due to a lengthy judicial foreclosure process in Hawaii. As of March 31, 2025, residential mortgage non-accrual loans were $12.8 million, a nominal increase from December 31, 2024. This nominal increase comprised of additions totaling $1.8 million, which were mostly offset by payments of $1.0 million and returns to accrual status of $0.8 million. As of March 31, 2025, our residential mortgage non-accrual loans were comprised of 46 loans with a weighted average current LTV ratio of 48%. ​ As of March 31, 2025, home equity line non-accrual loans were $6.8 million, a decrease of $0.4 million or 5% from December 31, 2024. This decrease was due to payments of $1.0 million, returns to accrual status of $0.3 million and charge-offs of $0.1 million, partially offset by additions totaling $1.0 million. ​ OREO represents property acquired as the result of borrower defaults on loans. OREO is recorded at fair value, less estimated selling costs, at the time of foreclosure. On an ongoing basis, properties are appraised as required by market conditions and applicable regulations. There was no OREO held as of both March 31, 2025 and December 31, 2024. ​ Loans and Leases Past Due 90 Days or More and Still Accruing Interest. Loans and leases in this category are 90 days or more past due, as to principal or interest, and are still accruing interest because they are well secured and in the process of collection. ​ Loans and leases past due 90 days or more and still accruing interest were $4.3 million as of March 31, 2025, a decrease of $1.7 million or 29% from December 31, 2024. This decrease was primarily due to decreases in commercial and industrial loans of $0.7 million, construction loans of $0.5 million and residential mortgage loans of $0.3 million, that were past due 90 days or more and still accruing interest. ​ Allowance for Credit Losses for Loans and Leases & Reserve for Unfunded Commitments ​ Table 17 presents an analysis of our ACL for the periods indicated: ​ ​ ​ ​ ​ ​ ​ ​ ​ Allowance for Credit Losses and Reserve for Unfunded Commitments ​ ​ ​ ​ ​ Table 17 ​ ​ Three Months Ended March 31, ​ (dollars in thousands) 2025 ​ 2024 ​ Balance at Beginning of Period ​ $ 193,240 ​ $ 192,138 ​ Loans and Leases Charged-Off ​ ​ ​ ​ ​ ​ ​ Commercial and industrial ​ ​ (1,459) ​ ​ (909) ​ Home equity line ​ ​ (14) ​ ​ — ​ Consumer ​ ​ (5,025) ​ ​ (4,854) ​ Total Loans and Leases Charged-Off ​ ​ (6,498) ​ ​ (5,763) ​ Recoveries on Loans and Leases Previously Charged-Off ​ ​ ​ ​ ​ ​ ​ Commercial Loans: ​ ​ ​ ​ ​ ​ ​ Commercial and industrial ​ ​ 403 ​ ​ 211 ​ Commercial real estate ​ ​ 251 ​ ​ — ​ Total Commercial Loans ​ ​ 654 ​ ​ 211 ​ Residential Loans: ​ ​ ​ ​ ​ ​ ​ Residential mortgage ​ ​ 20 ​ ​ 30 ​ Home equity line ​ ​ 64 ​ ​ 44 ​ Total Residential Loans ​ ​ 84 ​ ​ 74 ​ Consumer ​ ​ 1,979 ​ ​ 1,689 ​ Total Recoveries on Loans and Leases Previously Charged-Off ​ ​ 2,717 ​ ​ 1,974 ​ Net Loans and Leases Charged-Off ​ ​ (3,781) ​ ​ (3,789) ​ Provision for Credit Losses ​ ​ 10,500 ​ ​ 6,300 ​ Balance at End of Period ​ $ 199,959 ​ $ 194,649 ​ Components: ​ ​ ​ ​ ​ ​ ​ Allowance for Credit Losses ​ $ 166,612 ​ $ 159,836 ​ Reserve for Unfunded Commitments ​ ​ 33,347 ​ ​ 34,813 ​ Total Allowance for Credit Losses and Reserve for Unfunded Commitments ​ $ 199,959 ​ $ 194,649 ​ Average Loans and Leases Outstanding ​ $ 14,309,998 ​ $ 14,312,563 ​ Ratio of Net Loans and Leases Charged-Off to Average Loans and Leases Outstanding (1) ​ ​ 0.11 % ​ 0.11 % Ratio of Allowance for Credit Losses for Loans and Leases to Loans and Leases Outstanding ​ ​ 1.17 % ​ 1.12 % Ratio of Allowance for Credit Losses for Loans and Leases to Non-accrual Loans and Leases ​ ​ 8.25x ​ ​ 8.87x ​ (1) Annualized for the three months ended March 31, 2025 and 2024. ​ 69 Table of Contents Tables 18 and 19 present the allocation of the ACL by loan and lease category, in both dollars and as a percentage of total loans and leases outstanding as of March 31, 2025 and December 31, 2024: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Allocation of the Allowance for Credit Losses by Loan and Lease Category ​ ​ ​ ​ ​ ​ Table 18 ​ ​ March 31, 2025 ​ ​ ​ ​ ​ Allocated ​ Loan ​ ​ ​ ​ ​ ​ ACL as ​ category as ​ ​ ​ ​ ​ ​ % of loan or ​ % of total ​ ​ ​ ​ ​ ​ lease ​ loans and ​ (dollars in thousands) Amount ​ category ​ leases ​ Commercial and industrial ​ $ 17,992 ​ 0.80 % 15.82 % Commercial real estate ​ ​ 39,370 ​ 0.90 ​ 30.56 ​ Construction ​ ​ 9,511 ​ 1.00 ​ 6.68 ​ Lease financing ​ ​ 2,344 ​ 0.54 ​ 3.06 ​ Total commercial ​ ​ 69,217 ​ 0.86 ​ 56.12 ​ Residential mortgage ​ ​ 34,374 ​ 0.83 ​ 28.89 ​ Home equity line ​ ​ 10,270 ​ 0.90 ​ 8.01 ​ Total residential ​ ​ 44,644 ​ 0.85 ​ 36.90 ​ Consumer ​ ​ 52,751 ​ 5.28 ​ 6.98 ​ Total ​ $ 166,612 ​ 1.17 % 100.00 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Allocation of the Allowance for Credit Losses by Loan and Lease Category ​ ​ ​ ​ ​ ​ Table 19 ​ ​ December 31, 2024 ​ ​ ​ ​ ​ Allocated ​ Loan ​ ​ ​ ​ ​ ​ ACL as ​ category as ​ ​ ​ ​ ​ ​ % of loan or ​ % of total ​ ​ ​ ​ ​ ​ lease ​ loans and ​ (dollars in thousands) ​ Amount ​ category ​ leases ​ Commercial and industrial ​ $ 16,332 ​ 0.73 % 15.60 % Commercial real estate ​ ​ 40,624 ​ 0.91 ​ 30.98 ​ Construction ​ ​ 8,570 ​ 0.93 ​ 6.37 ​ Lease financing ​ ​ 2,269 ​ 0.52 ​ 3.02 ​ Total commercial ​ ​ 67,795 ​ 0.84 ​ 55.97 ​ Residential mortgage ​ ​ 39,230 ​ 0.94 ​ 28.93 ​ Home equity line ​ ​ 10,205 ​ 0.89 ​ 7.99 ​ Total residential ​ ​ 49,435 ​ 0.93 ​ 36.92 ​ Consumer ​ ​ 43,163 ​ 4.22 ​ 7.11 ​ Total ​ $ 160,393 ​ 1.11 % 100.00 % ​ Table 20 presents the net charge-offs (recoveries) to average loans and leases by category during the three months ended March 31, 2025 and 2024: ​ ​ ​ ​ ​ ​ ​ ​ ​ Net Charge-Offs (Recoveries) to Average Loans and Leases By Category (1) ​ ​ ​ ​ ​ Table 20 ​ ​ Three Months Ended March 31, ​ ​ 2025 2024 Commercial and industrial ​ ​ 0.19 % ​ 0.13 % Commercial real estate ​ ​ (0.02) ​ ​ — ​ Construction ​ ​ — ​ ​ — ​ Lease financing ​ ​ — ​ ​ — ​ Total commercial ​ ​ 0.04 ​ ​ 0.04 ​ Residential mortgage ​ ​ — ​ ​ — ​ Home equity line ​ ​ (0.02) ​ ​ (0.02) ​ Total residential ​ ​ (0.01) ​ ​ (0.01) ​ Consumer ​ ​ 1.21 ​ ​ 1.17 ​ Total loans and leases ​ ​ 0.11 % ​ 0.11 % (1) Annualized for the three months ended March 31, 2025 and 2024. ​ 70 Table of Contents As of March 31, 2025, the ACL was $166.6 million or 1.17% of total loans and leases outstanding, compared with an ACL of $160.4 million or 1.11% of total loans and leases outstanding 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. ​ Net charge-offs of loans and leases were $3.8 million or 0.11% of total average loans and leases, on an annualized basis, for both the three months ended March 31, 2025 and 2024. Net charge-offs in our commercial lending portfolio were $0.8 million and $0.7 million for the three months ended March 31, 2025 and 2024, respectively. Net recoveries in our residential lending portfolio were $0.1 million for both the three months ended March 31, 2025 and 2024. Net charge-offs in our consumer lending portfolio were $3.0 million and $3.2 million for the three months ended March 31, 2025 and 2024, respectively. Net charge-offs in our consumer portfolio segment include those related to credit cards, automobile loans, installment loans and small business lines of credit and reflect the inherent risk associated with these loans. ​ Although we determine the amount of each component of the ACL separately, the ACL as a whole was considered appropriate by management as of March 31, 2025 and December 31, 2024. Furthermore, as of March 31, 2025, the ACL was considered adequate based on our ongoing analysis of estimated expected credit losses, credit risk profiles, current economic outlook, coverage ratios and other relevant factors. The ACL anticipates cyclical losses consistent with a recession and includes a qualitative overlay for potential macroeconomic impacts. We will continue to monitor factors that drive expected credit losses including the uncertainty of the economy, inflation and geopolitical instability. See “Note 4. Allowance for Credit Losses” contained in our unaudited interim consolidated financial statements for more information on the ACL. ​ Goodwill ​ Goodwill was $995.5 million as of both March 31, 2025 and December 31, 2024. Our goodwill originated from the acquisition of the Company by BNP Paribas in December of 2001. Goodwill generated in that acquisition was recorded on the balance sheet of the Bank as a result of push down accounting treatment, and remains on our consolidated balance sheets. ​ The Company’s policy is to assess goodwill for impairment at the reporting unit level on an annual basis or between annual assessments if a triggering event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount. Impairment is the condition that exists when the carrying amount of a reporting unit exceeds its fair value. There was no impairment in our goodwill for the three months ended March 31, 2025. Future events, including geopolitical concerns, inflation concerns, global supply chain issues, and other factors affecting the economy, that could cause a significant decline in our expected future cash flows or a significant adverse change in our business or the business climate may necessitate taking charges in future reporting periods related to the impairment of our goodwill. ​ Other Assets ​ Other assets were $851.5 million as of March 31, 2025, an increase of $19.5 million or 2% from December 31, 2024. The increase in other assets was primarily due to increases of $33.5 million in low-income housing tax credit (“LIHTC”) investments and $23.4 million in suspense and clearing accounts. This was partially offset by decreases of $20.5 million in current tax receivables and deferred tax assets and $12.5 million in prepaid assets. ​ Deposits ​ Deposits are the primary funding source for the Bank and are acquired from a broad base of local markets, including both individual and corporate customers. We obtain funds from depositors by offering a range of deposit types, including demand, savings, money market and time. ​ 71 Table of Contents Table 21 presents the composition of our deposits as of March 31, 2025 and December 31, 2024: ​ ​ ​ ​ ​ ​ ​ ​ Deposits ​ ​ ​ ​ ​ Table 21 ​ ​ March 31, ​ December 31, (dollars in thousands) 2025 2024 U.S.: ​ ​ ​ ​ ​ ​ Demand ​ $ 6,089,865 ​ $ 6,169,833 Savings ​ ​ 5,579,979 ​ ​ 5,498,043 Money Market ​ ​ 3,483,746 ​ ​ 3,636,586 Time ​ ​ 2,938,633 ​ ​ 2,878,968 Foreign (1) : ​ ​ ​ ​ ​ ​ Demand ​ ​ 795,686 ​ ​ 805,315 Savings ​ ​ 530,817 ​ ​ 523,321 Money Market ​ ​ 381,457 ​ ​ 390,748 Time ​ ​ 415,633 ​ ​ 419,402 Total Deposits (2) ​ $ 20,215,816 ​ $ 20,322,216 (1) Foreign deposits were comprised of Guam and Saipan deposit accounts. (2) Public deposits were $0.7 billion as of March 31, 2025, a decrease of $44.3 million or 6% compared to December 31, 2024. ​ Total deposits were $20.2 billion as of March 31, 2025, a decrease of $106.4 million or 1% from December 31, 2024. The decrease in deposit balances stemmed primarily from a $162.1 million decrease in non-public money market deposit balances, an $87.1 million decrease in non-public demand deposit balances and a $67.4 million decrease in public savings deposit balances. These decreases were partially offset by a $156.9 million increase in non-public savings deposit balances, a $30.2 million increase in non-public time deposit balances and a $25.7 million increase in public time deposit balances. ​ As of March 31, 2025 and December 31, 2024, the amount of deposits that exceeded FDIC insurance limits were estimated to be $9.9 billion, or 48% of total deposits, and $9.9 billion, or 49% of total deposits, respectively. At March 31, 2025 and December 31, 2024, the Company had $0.7 billion and $0.8 billion, respectively, of public deposits, all of which were fully collateralized with investment securities. As of March 31, 2025 and December 31, 2024, the amount of deposits excluding public deposits that exceeded FDIC insurance limits were estimated to be $9.1 billion, or 45% of total deposits, and $9.2 billion, or 45% of total deposits, respectively. As of March 31, 2025 and December 31, 2024, deposit accounts above $250,000 were $11.5 billion and $11.6 billion, respectively. As of March 31, 2025 and December 31, 2024, deposit balances over $250,000 in corporate operating accounts were $1.9 billion and $2.1 billion, respectively. ​ Table 22 presents the estimated amount of time deposits that were in excess of the FDIC insurance limit, further segregated by time remaining until maturity, as of March 31, 2025: ​ ​ ​ ​ ​ Uninsured Time Deposits ​ ​ Table 22 (dollars in thousands) ​ March 31, 2025 Three months or less ​ $ 560,994 Over three through six months ​ ​ 419,980 Over six through twelve months ​ ​ 259,800 Over twelve months ​ ​ 17,015 Total (1) ​ $ 1,257,789 (1) Includes $182.7 million in public time deposits that are fully collateralized with investment securities. ​ Short-term Borrowings ​ As of March 31, 2025 and December 31, 2024, the Company’s short-term borrowings consisted of $250.0 million in short-term FHLB fixed-rate advances with a weighted average interest rate of 4.16% maturing in September 2025. ​ As of March 31, 2025 and December 31, 2024, the Company had a remaining line of credit of $2.8 billion available from the FHLB. The FHLB borrowing capacity was secured by commercial real estate and residential real estate loan collateral as of both March 31, 2025 and December 31, 2024. ​ 72 Table of Contents Pension and Postretirement Plan Obligations ​ We have a noncontributory qualified defined benefit pension plan, an unfunded supplemental executive retirement plan (“SERP”), a directors’ retirement plan (a non-qualified pension plan for eligible directors) and a postretirement benefit plan providing life insurance and healthcare benefits that we offer to our directors and employees, as applicable. The noncontributory qualified defined benefit pension plan, the unfunded supplemental executive retirement plan and the directors’ retirement plan are all frozen to new participants. On March 11, 2019, the Company’s board of directors approved an amendment to the SERP to freeze the SERP. As a result of such amendment, effective July 1, 2019, there are no new accruals of benefits, including service accruals. To calculate annual pension costs, we use the following key variables: (1) size of the employee population, length of service and estimated compensation increases; (2) actuarial assumptions and estimates; (3) expected long-term rate of return on plan assets; and (4) discount rate. ​ Pension and postretirement benefit plan obligations, net of pension plan assets, were $85.4 million as of March 31, 2025, a nominal decrease from December 31, 2024. This decrease was primarily due to payments of $2.1 million, offset by net periodic benefit costs for the three months ended March 31, 2025 of $1.5 million. ​ See “Note 15. Noninterest Income and Noninterest Expense” contained in our unaudited interim consolidated financial statements for more information on our pension and postretirement benefit plans. ​ Capital ​ The bank regulators currently use a combination of risk-based ratios and a leverage ratio to evaluate capital adequacy. The Company and the Bank are subject to the federal bank regulators’ final rules implementing Basel III and various provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Capital Rules”). ​ The Capital Rules, among other things impose a capital measure called CET1, to which most deductions/adjustments to regulatory capital must be made. In addition, the Capital Rules specify that Tier 1 capital consists of CET1 and “Additional Tier 1 capital” instruments meeting certain specified requirements. ​ Under the Capital Rules, the minimum capital ratios are as follows: ​ ● 4.5% CET1 capital to risk-weighted assets, ● 6.0% Tier 1 capital (that is, CET1 capital plus Additional Tier 1 capital) to risk-weighted assets, ● 8.0% Total capital (that is, Tier 1 capital plus Tier 2 capital) to risk-weighted assets, and ● 4.0% Tier 1 capital to average quarterly assets. The Capital Rules also require a 2.5% capital conservation buffer designed to absorb losses during periods of economic stress. The capital conservation buffer is composed entirely of CET1, on top of these minimum risk weighted asset ratios, effectively resulting in minimum ratios of (i) 7% CET1 to risk-weighted assets, (ii) 8.5% Tier 1 capital to risk-weighted assets, and (iii) 10.5% total capital to risk-weighted assets. ​ As of March 31, 2025, the Company’s capital levels remained characterized as “well-capitalized” under the Capital Rules. The Company’s regulatory capital ratios, calculated in accordance with the Capital Rules, are presented in Table 23 below. There have been no conditions or events since March 31, 2025 that management believes have changed either the Company’s or the Bank’s capital classifications. 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. ​ 73 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ FHI's Regulatory Capital ​ ​ ​ ​ ​ Table 23 ​ ​ March 31, ​ December 31, ​ (dollars in thousands) 2025 ​ 2024 ​ Stockholders' Equity ​ $ 2,648,852 ​ $ 2,617,486 ​ Less: ​ ​ ​ ​ ​ ​ ​ Goodwill ​ ​ 995,492 ​ ​ 995,492 ​ Accumulated other comprehensive loss, net ​ ​ (433,769) ​ ​ (463,994) ​ Tax credit carryforward ​ ​ 3,150 ​ ​ 2,050 ​ Common Equity Tier 1 Capital and Tier 1 Capital ​ $ 2,083,979 ​ $ 2,083,938 ​ Add: ​ ​ ​ ​ ​ ​ ​ Qualifying allowance for credit losses and reserve for unfunded commitments ​ ​ 199,959 ​ ​ 193,240 ​ Total Capital ​ $ 2,283,938 ​ $ 2,277,178 ​ Risk-Weighted Assets ​ $ 16,117,539 ​ $ 16,281,101 ​ ​ ​ ​ ​ ​ ​ ​ ​ FHI's Key Regulatory Capital Ratios ​ ​ ​ ​ ​ ​ ​ Common Equity Tier 1 Capital Ratio ​ ​ 12.93 % ​ 12.80 % Tier 1 Capital Ratio ​ ​ 12.93 % ​ 12.80 % Total Capital Ratio ​ ​ 14.17 % ​ 13.99 % Tier 1 Leverage Ratio ​ ​ 9.01 % ​ 9.14 % ​ Total stockholders’ equity was $2.6 billion as of March 31, 2025, an increase of $31.4 million or 1% from December 31, 2024. The increase in stockholders’ equity was primarily due to earnings for the period of $59.2 million and other comprehensive income, net of tax, of $30.2 million, primarily due to changes in our investment securities portfolio, partially offset by dividends declared and paid to the Company’s stockholders of $32.9 million and common stock repurchased for approximately $25.0 million during the three months ended March 31, 2025. ​ In January 2025, the Company announced a stock repurchase program for up to $100.0 million of its outstanding common stock during 2025. Under this plan, the Company repurchased 974,345 shares at a total cost of approximately $25.0 million during the three months ended March 31, 2025. The timing and exact amount of stock repurchases, if any, will be subject to management’s discretion and various factors, including the Company’s capital position and financial performance, as well as market conditions. The stock repurchase program may be suspended, terminated or modified at any time for any reason. ​ In April 2025, the Company’s Board of Directors declared a quarterly cash dividend of $0.26 per share on our outstanding shares. The dividend is to be paid on May 30, 2025 to shareholders of record at the close of business on May 19, 2025. ​ Future Application of Accounting Pronouncements ​ For a discussion of the expected impact of accounting pronouncements recently issued but not adopted by us as of March 31, 2025, see “Note 1. Organization and Basis of Presentation — Recent Accounting Pronouncements” to the unaudited interim consolidated financial statements for more information. ​ Risk Governance and Quantitative and Qualitative Disclosures About Market Risk ​ Managing risk is an essential part of successfully operating our business. Management believes that the most prominent risk exposures for the Company are credit risk, market risk, liquidity risk management, capital management and operational risk. See “Analysis of Financial Condition — Liquidity and Capital Resources” and “— Capital” sections of this MD&A for further discussions of liquidity risk management and capital management, respectively. ​ 74 Table of Contents Credit Risk ​ Credit risk is the risk that borrowers or counterparties will be unable or unwilling to repay their obligations in accordance with the underlying contractual terms. We manage and control credit risk in the loan and lease portfolio by adhering to well-defined underwriting criteria and account administration standards established by management. Written credit policies document underwriting standards, approval levels, exposure limits and other limits or standards deemed necessary and prudent. Portfolio diversification at the obligor, industry, product, and/or geographic location levels is actively managed to mitigate concentration risk. In addition, credit risk management includes an independent credit review process that assesses compliance with commercial, real estate and consumer credit policies, risk ratings and other critical credit information. In addition to implementing risk management practices that are based upon established and sound lending practices, we adhere to sound credit principles. We understand and evaluate our customers’ borrowing needs and capacity to repay, in conjunction with their character and history. ​ Management has identified three categories of loans that we use to develop our systematic methodology to determine the ACL: commercial, residential and consumer. ​ Commercial lending is further categorized into four distinct classes based on characteristics relating to the borrower, transaction and collateral. These classes are: commercial and industrial, commercial real estate, construction and lease financing. Commercial and industrial loans are primarily for the purpose of financing equipment acquisition, expansion, working capital and other general business purposes by medium to larger Hawaii based corporations, as well as U.S. mainland and international companies. Commercial and industrial loans are typically secured by non-real estate assets whereby the collateral is trading assets, enterprise value or inventory. As with many of our customers, our commercial and industrial loan customers are heavily dependent on tourism, government expenditures and real estate values. Commercial real estate loans are secured by real estate, including but not limited to structures and facilities to support activities designated as retail, health care, general office space, warehouse and industrial space. Our Bank’s underwriting policy generally requires that net cash flows from the property be sufficient to service the debt while still maintaining an appropriate amount of reserves. Commercial real estate loans in Hawaii are characterized by having a limited supply of real estate at commercially attractive locations, long delivery time frames for development and high interest rate sensitivity. Our construction lending portfolio consists primarily of land loans, single family and condominium development loans. Financing of construction loans is subject to a high degree of credit risk given the long delivery time frames for such projects. Construction lending activities are underwritten on a project financing basis whereby the cash flows or lease rents from the underlying real estate collateral or the sale of the finished inventory is the primary source of repayment. Market feasibility analysis is typically performed by assessing market comparables, market conditions and demand in the specific lending area and general community. We require presales of finished inventory or preleasing requirements prior to loan funding. However, because this analysis is typically performed on a forward looking basis, real estate construction projects typically present a higher risk profile in our lending activities. Lease financing activities include commercial single investor leases and leveraged leases used to purchase items ranging from computer equipment to transportation equipment. Underwriting of new leasing arrangements typically includes analyzing customer cash flows, evaluating secondary sources of repayment, such as the value of the leased asset, the guarantors’ net cash flows as well as other credit enhancements provided by the lessee. ​ Residential lending is further categorized into the following classes: residential mortgages (loans secured by 1-4 family residential properties and home equity loans) and home equity lines of credit. Our Bank’s underwriting standards typically require LTV ratios of not more than 80%, although higher levels are permitted with accompanying mortgage insurance. First mortgage loans secured by residential properties generally carry a moderate level of credit risk, with an average loan size of approximately $393,000 at March 31, 2025. Residential mortgage loan production is added to our loan portfolio or is sold in the secondary market, based on management’s evaluation of our liquidity, capital and loan portfolio mix as well as market conditions. Changes in interest rates, the economic environment and other market factors have impacted, and will likely continue to impact, the marketability and value of collateral and the financial condition of our borrowers which impacts the level of credit risk inherent in this portfolio, although we remain in a supply constrained housing environment in Hawaii. Geographic concentrations exist for this portfolio as nearly all residential mortgage loans and home equity lines of credit are for residences located in Hawaii, Guam or Saipan. These island locales are susceptible to a wide array of potential natural disasters including, but not limited to, hurricanes, floods, tsunamis and earthquakes. We offer home equity lines of credit with variable rates; fixed rate lock options may be available post-closing. All lines are underwritten at 0.95% of the credit line amount. Our procedures for underwriting home equity lines of credit include an assessment of an applicant’s overall financial capacity and repayment ability. Decisions are primarily based on repayment ability via debt-to-income ratios, LTV ratios and an evaluation of credit history. ​ 75 Table of Contents Consumer lending is further categorized into the following classes of loans: credit cards, automobile loans and other consumer-related installment loans. Consumer loans are either unsecured or secured by the borrower’s personal assets. The average loan size is generally small, and risk is diversified among many borrowers. We offer a wide array of credit cards for business and personal use. In general, our customers are attracted to our credit card offerings on the basis of price, credit limit, reward programs and other product features. Credit card underwriting decisions are generally based on repayment ability of our borrower via DTI ratios, credit bureau information, including payment history, debt burden and credit scores, such as FICO, and analysis of financial capacity. Automobile lending activities include loans and leases secured by new or used automobiles. We originate the majority of our automobile loans and leases on an indirect basis through selected dealerships. Our procedures for underwriting automobile loans include an assessment of an applicant’s overall financial capacity and repayment ability, credit history and the ability to meet existing obligations and payments on the proposed loan or lease. Although an applicant’s creditworthiness is the primary consideration, the underwriting process also includes a comparison of the value of the collateral security to the proposed loan amount. We require borrowers to maintain full coverage automobile insurance on automobile loans and leases, with the Bank listed as either the loss payee or additional insured. Installment loans consist of open and closed end facilities for personal and household purchases. We seek to maintain reasonable levels of risk in installment lending by following prudent underwriting guidelines which include an evaluation of personal credit history and cash flow. ​ Market Risk ​ Market risk is the potential of loss arising from changes in interest rates, foreign exchange rates, equity prices and commodity prices, including the correlation among these factors and their volatility. When the value of an instrument is tied to such external factors, the holder faces market risk. We are exposed to market risk primarily from interest rate risk, which is defined as the risk of loss of net interest income or net interest margin because of changes in interest rates. ​ The potential cash flows, sales or replacement value of many of our assets and liabilities, especially those that earn or pay interest, are sensitive to changes in the general level of interest rates. In the banking industry, changes in interest rates can significantly impact earnings and the safety and soundness of an entity. ​ Interest rate risk arises primarily from our core business activities of extending loans and accepting deposits. This occurs when our interest earning loans and interest-bearing deposits mature or reprice at different times, on a different basis or in unequal amounts. Interest rates may also affect loan demand, credit losses, mortgage origination volume, pre- payment speeds and other items affecting earnings. ​ Many factors affect our exposure to changes in interest rates, such as general economic and financial conditions, customer preferences, historical pricing relationships and repricing characteristics of financial instruments. Our earnings are affected not only by general economic conditions, but also by the monetary and fiscal policies of the United States and its agencies, particularly the Federal Reserve. The monetary policies of the Federal Reserve can influence the overall growth of loans, investment securities and deposits and the level of interest rates earned on assets and paid for liabilities. ​ Market Risk Measurement ​ We primarily use net interest income simulation analysis to measure and analyze interest rate risk. We run various hypothetical interest rate scenarios and compare these results against a measured base case scenario. Our net interest income simulation analysis incorporates various assumptions, which we believe are reasonable but which may have a significant impact on results. These assumptions include: (1) the timing of changes in interest rates, (2) shifts or rotations in the yield curve, (3) re-pricing characteristics for market rate sensitive instruments on and off-balance sheet, (4) differing sensitivities of financial instruments due to differing underlying rate indices and (5) varying loan prepayment speeds for different interest rate scenarios. Because of limitations inherent in any approach used to measure interest rate risk, simulation results are not intended as a forecast of the actual effect of a change in market interest rates on our results but rather as a means to better plan and execute appropriate asset liability management strategies to manage our interest rate risk. ​ 76 Table of Contents Table 24 presents, for the twelve months subsequent to March 31, 2025 and December 31, 2024, an estimate of the changes in net interest income that would result from ramps (gradual changes) and shocks (immediate changes) in market interest rates, moving in a parallel fashion over the entire yield curve, relative to the measured base case scenario. Ramp scenarios assume interest rates move gradually in parallel across the yield curve relative to the base case scenario. Shock scenarios assume an immediate and sustained parallel shift in interest rates across the entire yield curve, relative to the base case scenario. The base case scenario assumes that the balance sheet and interest rates are generally unchanged. We evaluate the sensitivity by using a static forecast, where the balance sheets as of March 31, 2025 and December 31, 2024 are held constant. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net Interest Income Sensitivity Profile - Estimated Percentage Change Over 12 Months ​ ​ Table 24 ​ ​ ​ Static Forecast ​ ​ Static Forecast ​ ​ ​ March 31, 2025 ​ December 31, 2024 ​ Gradual Change in Interest Rates (basis points) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ +200 ​ ​ ​ ​ 3.5 % ​ ​ ​ 3.1 % +100 ​ ​ ​ ​ 1.7 ​ ​ ​ ​ 1.6 ​ +50 ​ ​ ​ ​ 0.9 ​ ​ ​ ​ 0.8 ​ (50) ​ ​ ​ ​ (0.9) ​ ​ ​ ​ (0.8) ​ (100) ​ ​ ​ ​ (1.8) ​ ​ ​ ​ (1.6) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Immediate Change in Interest Rates (basis points) ​ ​ ​ ​ ​ ​ ​ ​ ​ +200 ​ ​ ​ ​ 6.7 % ​ ​ ​ 6.2 % +100 ​ ​ ​ ​ 3.4 ​ ​ ​ ​ 3.2 ​ +50 ​ ​ ​ ​ 1.7 ​ ​ ​ ​ 1.6 ​ (50) ​ ​ ​ ​ (1.7) ​ ​ ​ ​ (1.6) ​ (100) ​ ​ ​ ​ (3.5) ​ ​ ​ ​ (3.3) ​ ​ ​ The table above shows the effects of a simulation which estimates the effect of a gradual and immediate sustained parallel shift in the yield curve of −100, −50, +50, +100 and +200 basis points in market interest rates over a twelve-month period on our net interest income. ​ Currently, our interest rate profile, assuming a constant balance sheet, is such that we project net interest income will benefit from higher interest rates as our assets would reprice faster and to a greater degree than our liabilities, while in the case of lower interest rates, our assets would reprice downward and to a greater degree than our liabilities. Other factors such as changes in balance sheet composition or deposit rate behavior could result in a change in repricing sensitivity. ​ Under the static balance sheet forecast as of March 31, 2025, our net interest income sensitivity profile is slightly higher in higher interest rate scenarios compared to similar forecasts as of December 31, 2024. The sensitivity outcome described above is primarily due to the impact of holding a larger federal funds position as of March 31, 2025 as compared with December 31, 2024. ​ The comparisons above provide insight into the potential effects of changes in interest rates on net interest income. The Company believes that its approach to interest rate risk has appropriately considered its susceptibility to both rising and falling rates and has adopted strategies which minimize the impact of such risks. ​ We also have longer term interest rate risk exposures which may not be appropriately measured by net interest income simulation analysis. We use market value of equity (“MVE”) sensitivity analysis to study the impact of long-term cash flows on earnings and capital. MVE involves discounting present values of all cash flows of on-balance sheet and off-balance sheet items under different interest rate scenarios. The discounted present value of all cash flows represents our MVE. MVE analysis requires modifying the expected cash flows in each interest rate scenario, which will impact the discounted present value. The amount of base case measurement and its sensitivity to shifts in the yield curve allow management to measure longer term repricing option risk in the balance sheet. ​ 77 Table of Contents Limitations of Market Risk Measures ​ The results of our simulation analyses are hypothetical, and a variety of factors might cause actual results to differ substantially from what is depicted. For example, if the timing and magnitude of interest rate changes differ from those projected, our net interest income might vary significantly. Non parallel yield curve shifts such as a flattening or steepening of the yield curve or changes in interest rate spreads would also cause our net interest income to be different from that depicted. An increasing interest rate environment could reduce projected net interest income if deposits and other short-term liabilities re-price faster than expected or faster than our assets re-price. Actual results could differ from those projected if we grow assets and liabilities faster or slower than estimated if we experience a net outflow of deposits or if our mix of assets and liabilities otherwise changes. For example, while we maintain relatively high levels of liquidity, a faster than expected withdrawal of deposits out of the bank may cause us to seek higher cost sources of funding. Actual results could also differ from those projected if we experience substantially different prepayment speeds in our loan portfolio than those assumed in the simulation analyses. Finally, these simulation results do not consider all the actions that we may undertake in response to potential or actual changes in interest rates, such as changes to our loan, investment, deposit, funding or hedging strategies. ​ Market Risk Governance ​ We seek to achieve consistent growth in net interest income and capital while managing volatility arising from changes in market interest rates. The objective of our interest rate risk management process is to increase net interest income while operating within acceptable limits established for interest rate risk and maintaining adequate levels of funding and liquidity. ​ To manage the impact on net interest income, we manage our exposure to changes in interest rates through our asset and liability management activities within guidelines established by our ALCO and approved by our board of directors. The ALCO has the responsibility for approving and ensuring compliance with the ALCO management policies, including interest rate risk exposures. The objective of our interest rate risk management process is to maximize net interest income while operating within acceptable limits established for interest rate risk and maintaining adequate levels of funding and liquidity. ​ Through review and oversight by the ALCO, we attempt to engage in strategies that neutralize interest rate risk as much as possible. Our use of derivative financial instruments, as detailed in “Note 11. Derivative Financial Instruments” to the unaudited interim consolidated financial statements, has generally been limited. This is due to natural on balance sheet hedges arising out of offsetting interest rate exposures from loans and investment securities with deposits and other interest-bearing liabilities. In particular, the investment securities portfolio is utilized to manage the interest rate exposure and sensitivity to within the guidelines and limits established by the ALCO. We utilize natural and offsetting economic hedges in an effort to reduce the need to employ off-balance sheet derivative financial instruments to hedge interest rate risk exposures. Expected movements in interest rates are also considered in managing interest rate risk. Thus, as interest rates change, we may use different techniques to manage interest rate risk. ​ Management uses the results of its various simulation analyses to formulate strategies to achieve a desired risk profile within the parameters of our capital and liquidity guidelines. ​ Operational Risk ​ Operational risk is the risk of loss arising from inadequate or failed processes, people or systems, external events (such as natural disasters), or compliance, reputational or legal matters, including the risk of loss resulting from fraud, litigation and breaches in data security. Operational risk is inherent in all of our business ventures and the management of that risk is important to the achievement of our objectives. We have a framework in place that includes the reporting and assessment of any operational risk events, and the assessment of our mitigating strategies within our key business lines. This framework is implemented through our policies, processes and reporting requirements. We measure and report operational risk using the seven operational risk event types projected by the Basel Committee on Banking Supervision in Basel II: (1) external fraud; (2) internal fraud; (3) employment practices and workplace safety; (4) clients, products and business practices; (5) damage to physical assets; (6) business disruption and system failures; and (7) execution, delivery and process management. Our operational risk review process is also a core part of our assessment of material new products or activities. ​ ​ 78 Table of Contents ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK ​ See “Part I, Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Risk Governance and Quantitative and Qualitative Disclosures About Market Risk.” ​