BOH 10-K & 10-Q changes, risk factors and insider trading

These local economies rely heavily on tourism, the U.S. military, real estate, construction, government, and other service-based industries. Lower visitor arrivals or spending, unemployment rates, occupancy rates, real or threatened acts of war or terrorism, public unrest, increases in energy costs, inflation, tariffs, the availability of affordable air transportation, climate change, natural disasters and adverse weather, public health issues, and federal, State of Hawaiʻi and local government budget issues may impact consumer and corporate spending. The level of domestic and international visitor arrivals and spending, housing prices, real estate values, and unemployment rates are some of the metrics that we regularly monitor. We are also continuing to monitor Maui's recovery from the August 2023 wildfire. Additionally, financial markets may be adversely affected by the current or anticipated impact of military conflict, terrorism or other geopolitical events.

A sustained period of high inflation or other high costhigh-cost economic environment could pose a risk to local economies and the financial performance of the Bank.

A prolonged period of inflation or other period of high cost of goods such as a result of tariffs given that Hawaiʻi imports certain goods from Mexico, Canada and other countries that may become subject to tariffs, may impact our profitability by negatively impacting our costs and expenses.profitability. Economic and inflationary pressure on consumers and uncertainty regarding the economic environment could result in changes in consumer and commercial spending, borrowing and savings habits. Such conditions could have a material adverse effect on the credit quality of our loans and our business, financial condition and results of operations.

The impacts of climate change, such as extreme weather conditions, natural disasters and rising sea levels, could impact the Bank’s operations as well as those of its customers and third partythird-party vendors upon which it relies. Such events could also result in market volatility or negatively impact our customers’ ability to pay outstanding loans, or result in the deterioration of the value of our collateralcollateral, causing a material adverse effect on the Bank’s financial condition and results of operation. Furthermore, increasing regulation related to climate change could have an adverse effect on the business and financial condition of the Bank and its customers, including our credit portfolio. Further legislation and regulatory requirements could increase the operating expenses of, or otherwise adversely impact, the Bank or its customers. To the extent that the Bank or its customers experience increases in costs, reductions in the value of assets, constraints on operations or similar concerns driven by changes in regulation relating to climate change, the Bank’s business and results of operations may be adversely affected.

Events impacting the financial services industry,industry suchmay as the 2023 failures of Silicon Valley Bank, Signature Bank and First Republic Bank, have resultedresult in decreased confidence in banks among uninsured consumer and commercial depositors, other counterparties and investors, as well as significant disruption, volatility and reduced valuations of equity and other securities of banks in the capital markets. These events occurred duringDuring a period of rapidly rising interest rates which, among other things, resultedmay result in unrealized losses in longer duration securities and loans held by banks, and more competition for bank deposits. These events have,Disruptions and couldfailures continue to, adversely impactin the marketbanking price and volatility of the Company’s common stock. These eventsindustry may also result in potentially adverse changes to laws or regulations governing banks and bank holding companies or result in the impositionsimposition of restrictions through supervisory or enforcement activities, including higher capital requirements, which could have a material impact on our business. Inability to access wholesale funding, loss of client deposits or changes in our credit ratings could negatively impact our overall liquidity or capitalization, including by increasing the cost of capital or limiting our ability to access capital markets. We may be impacted by concerns regarding the soundness or creditworthiness of other financial institutions, which can cause substantial and cascading disruption within the financial markets and increased expenses.

Fixed rate loans increase our exposure to interest rate risk in a rising rate environment because interest-bearing liabilities would be subject to repricing before assets become subject to repricing. Adjustable rateAdjustable-rate loans decrease the risks to a lender associated with changes in interest rates but involve other risks. As interest rates rise, the payment by the borrower rises to the extent permitted by the terms of the loan, and the increased payment increases the potential for default. At the same time, for secured loans, the marketability of the underlying collateral may be adversely affected by higher interest rates. In a declining interest rate environment, there is likely to be an increase in prepayment activity on loans as the borrowers refinance their loans at lower interest rates. Under these circumstances, our results of operations could be negatively impacted.

Changes in interest rates also can affect the value of loans, investments and other interest-rate sensitive assets including mortgage servicing rights, and our ability to realize gains on the sale or resolution of assets. This type of income can vary significantly from quarter-to-quarter and year-to-year based on a number of different factors, including the interest rate environment. An increase in interest rates that adversely affects the ability of borrowers to pay the principal or interest on loans may lead to an increase in non-performing assets and increased credit loss reserve requirements that could have a material adverse effect on our results of operations Increased credit losses for the Bank could result if economic conditions stagnate or deteriorate. The risk of nonpayment on loans and leases is inherent in all lending activities. We maintain a reserve for credit losses to absorb estimated expected credit losses over the life of the loan and lease portfolio as of the balance sheet date. Management makes various assumptions and judgments about the loan and lease portfolios in determining the level of the reserve for credit losses. Many of these assumptions are based on current economic conditions. Should economic conditions stagnate or deteriorate nationally or in Hawaiʻi, we may be required to take increased reserves and/or experience higher credit losses in future periods. Inability of our borrowers to make timely repayments on their loans, or decreases in real estate collateral values may result in increased delinquencies, foreclosures, and customer bankruptcies, any of which could have a material adverse effect on our financial condition or results of operations.

Our non-performing assets were at $19.3$14.2 million, or 0.14%,0.10%, of total loans and leases and foreclosed real estate at December 31, 2024. Our criticized loans were $296.2 million, or 2.10%, of total loans and leases at December 31, 2024.2025. The risk of nonpayment on loans and leases is inherent in all lending activitiesactivities, and, like all financial institutions, we maintain an allowance for credit losses to provide for loans in our portfolio that may not be repaid in their entirety.

In determining the level of the reserve for credit losses, we consider numerous factors and our management makes various assumptions and judgments about the loan and lease portfolios, some of which are difficult, subjective, and involve complex judgments. Many of these assumptions are based on current economic conditions, particularly in Hawaiʻi and the West Pacific. If economic conditions stagnate or deteriorate, particularly in Hawaiʻi and the West Pacific, our borrowers may not be able to make timely repayments on their loans or real estate collateral values may decline, resulting in increased delinquencies, foreclosures, and customer bankruptcies, resulting in corresponding increases in credit losses. Our estimates of the risk of loss and amount of loss on any loan are complicated by the significant uncertainties surrounding our borrowersborrowers’ responses to changing business and economic conditions, interest rate environments, inflation and other factors. Because of the degree of uncertainty and susceptibility of these factors to change, our actual losses and estimates of risk of loss inherent in our loan portfolio have varied and are likely to continue to vary from our current estimates. Such variances may materially and adversely affect our financial condition and results of operations.

During 2025, the Parent repurchased 76,547 shares of common stock at a total cost of 5.0 million under its share repurchase program. The Parent also paid cash dividends of $112.3$113.0 million on common shares during 2024.2025. In January 2025,2026, the Parent’s Board of Directors declared a quarterly cash dividend of $0.70 per share on the Parent’s outstanding common shares.

Our dividend payments and/or stock repurchases may change from time-to-time,time to time, and we cannot provide assurance that we will continue to declare dividends and/or repurchase stock in any particular amounts or at all. Dividends on our common stock and/or stock repurchases are subject to capital availability and periodic determinations by our Board of Directors. Additionally, so long as any share of Series A Preferred Stock or Series B Preferred Stock remains outstanding, unless the full dividends for the immediately preceding dividend period on all outstanding shares of Series A Preferred Stock and Series B Preferred Stock have been paid in full or declared and a sum sufficient for the payment has been set aside, we would not be permitted to declare or pay a dividend on our common stock. We continue to evaluate the potential impact that regulatory proposals may have on our liquidity and capital management strategies, including those required under the Dodd-Frank Act. The actual amount and timing of future dividends,dividends and share repurchases, if any, will depend on market and economic conditions, applicable SEC rules, federal and state regulatory and supervisory restrictions, and various other factors. A reduction in or elimination of our dividend payments could have a negative effect on our stock price.

TheHistorically, the CFPB has exercised its broad rule-making,rulemaking, supervisory, and examination authority of consumer financial products, as well as expanded data collection and enforcement powers, over depository institutions with more than $10.0 billion in assets.assets, like the Bank. Regulation of overall safety and soundness, the CRA, federal housing and flood insurance, as they pertain to consumer financial products and services, remains with the FRB. AsWith achanges resultin priority of greaterthe regulatorynew scrutinyadministration, the role of consumerthe financialCFPB productsis aschanging. a whole,Nonetheless, the CompanyCFPB’s hasconsumer becomeprotection subjectlaws and rules will continue to moregovern the Bank’s relationship with its customers unless and expandeduntil regulatorythey examinations,are which also could result in increased costs as well as harm to our reputation in the event of a finding that we have not complied with the increased regulatory requirements.changed.

Further changes in income tax laws could be enacted, or interpretations of existing income tax laws could change, causing an adverse effect on our financial condition or results of operations. For example, the InflationOne ReductionBig Beautiful Bill Act (“OBBBA”) was enacted on AugustJuly 16,4, 2022,2025, permanently extending several tax provisions originally introduced under the 2017 Tax Cuts and introduced,Jobs amongAct provisions,that awere newset to expire at the end of 2025. The OBBBA also introduced changes to certain U.S. corporate minimum income tax onrules, certain large corporations, an excise taxmost of 1%which ontake certaineffect sharein repurchases by corporations, and increased funding for the Internal Revenue Service.2026. Although we have evaluated the impact of the OBBBA and do not anticipateexpect theany newmaterial corporatechanges minimumto incomeour effective tax willrate currentlyor applyresults toof us,operations, changes in our business and any future regulations or other guidance on the interpretation and application of the new corporate minimumtax tax, as well as the potential application of the share repurchase excise tax,rules, may result in additional taxes payable by us, which could materially and adversely affect our financial results and operations. Similarly, our accounting policies and methods are fundamental to how we report our financial condition and results of operations. Some of these policies require use of estimates and assumptions that may affect the value of our assets, liabilities, and financial results. Periodically, new accounting standards are issued or existing standards are revised, changing the methods for preparing our financial statements. These changes are not within our control and may significantly impact our financial condition and results of operations.

A failure in or breach of our operational systems, information systems, or infrastructure, or those of our third partythird-party vendors and other service providers, may result in financial losses, loss of customers, or damage to our reputation.

An interruption or breach in security of our information systems or those related to merchants and third partythird-party vendors, including as a result of cyber attacks, could disrupt our business, result in the disclosure or misuse of confidential or proprietary information, damage our reputation, or result in financial losses.

Our customers and employees have been, and will continue to be, targeted by parties using fraudulent emails and other communications in attempts to misappropriate passwords, payment card numbers, bank account information or other personal information or to introduce viruses or other malware through “trojan horse” programs to our customers’ devices. These communications may appear to be legitimate messages sent by the Bank or other businesses, but direct recipients to fake websites operated by the sender of the email or request that the recipient send a password or other confidential information via email or download a program. Despite our efforts to mitigate these threats through product improvements, use of encryption and authentication technology to secure online transmission of confidential consumer information, and customer and employee education, such attempted frauds against us or our merchants and our third partythird-party service providers remain a serious issue. The pervasiveness of cyber security incidents in general and the risks of cyber-crime are complex and continue to evolve. In light of several recent high-profile data breaches involving other companies’ losses of customer personal and financial information, a material cybersecurity incident could cause customer and/or Bank losses, damage to our brand, and increase our costs through the ongoing cost of technology investments to improve security, as well as the potential financial and reputational impact of a cyber security incident involving the Company.

We act as servicer for mortgage loans sold into the secondary market, primarily to government sponsored enterprises (“GSEs”) such as Fannie Mae. As a seller and servicer for those loans, we make warranties about their origination and are required to perform servicing according to complex contractual and handbook requirements. We maintain systems and procedures intended to ensure that we comply with these requirements. We may be penalized and, in limited instancesinstances, required to repurchase certain mortgages, due to alleged failures to adhere to these requirements. Should GSEs change the requirements in their servicing handbooks, we may sustain higher compliance costs.

We are, from time-to-time,time to time, involved in various legal proceedings arising from our normal business activities. These claims and legal actions, including supervisory actions by our regulators, could involve large monetary claims and significant defense costs. The outcome of these cases is uncertain. Substantial legal liability or significant regulatory action against us could have material financial effects or cause significant reputational harm to us, which in turn could seriously harm our business prospects. In recent years, regulatory enforcement and fines have increased across the banking and financial services sector. There is no assurance that those actions will not result in regulatory settlements or other enforcement actions against the Company or the Bank. Furthermore, a single event involving a potential violation of law or regulation may give rise to numerous and overlapping investigations and proceedings by multiple federal and state agencies and officials. In addition, if one or more financial institutions are found to have violated a law or regulation relating to certain business activities, this could lead to investigations by regulators or other governmental agencies of the same or similar activities by other financial institutions, including the Company, and large fines and remedial measures that may have been imposed in resolving earlier investigations for the same or similar activities at other financial institutions may be used as the basis for future settlements.

Our ability to engage in routine funding transactions could be adversely affected by the actions and commercial soundness of other financial institutions. Financial services institutions are interrelated as a result of trading, clearing, lending, counterparty, or other relationships. As a result, defaults by, or even rumors or questions about, one or more financial services institutions or the financial services industry in general have led to market-wide liquidity problems and could lead to losses or defaults by us or by other institutions. We have exposure to many different industries and counterparties, and we routinely execute transactions with brokers and dealers, commercial banks, investment banks, mutual funds, and other institutional clients. Many of these transactions expose us to credit risk in the event of default of our counterparty or client. In addition, our credit risk may be exacerbated when the collateral held by us cannot be realized upon or is liquidated at prices not sufficient to recover the full amount of the loan or derivative exposure due to us. Such losses could materially affect our financial condition or results of operations.

The Deposit Insurance Fund is supported mainly through quarterly assessments on insured banks, like the Bank. The Bank is subject to both base and special assessments. The Bank'sBank’s base assessment is determined by the FDIC using a risk-based assessment rate and average total assets minus our average tangible equity. Special assessments are made by the FDIC based on reported uninsured deposits and often times in response to particular events. In November 2023, the FDIC implemented a special assessment to recover the loss to the Deposit Insurance Fund following the failures of Silicon Valley Bank, Signature Bank, and First Republic Bank. The assessment was based on reported uninsured deposits as of December 31, 2022. TheAt Company'sDecember 31, 2025, the Company’s share of the FDIC special assessment was approximately $16.6$11.8 million.million and reflects adjustments to the initial assessment based on the FDIC’s updated estimate of losses, as well as revisions to our reported uninsured deposit balances. We may also experience increases in our base assessments depending on increases in our assessment base or assessment rate. Further increases in our assessment fees may have an adverse effect on our results of operations and financial condition.

The following MD&A is intended to help the reader understand the Company and its operations and is focused on our fiscal 20242025 and 20232024 financial results, including comparisons of year-to-year performance between these years. Discussion and analysis of our 20222023 fiscal year, as well as the year-to-year comparison between fiscal 20232024 and 2022,2023, are included in Part II, Item 7. “Management'sManagement’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023,2024, filed with the SEC on FebruaryMarch 29,4, 2024.2025.

Our forward-looking statements are based on numerous assumptions, any of which could prove to be inaccurate, and actual results may differ materially from those projected because of a variety of risks and uncertainties, including, but not limited to: (1) Our business is sensitive to regional business and economic conditions, in particular those of Hawaiʻi, Guam and other Pacific Islands; (2) Our loan portfolio is largely secured by real estate, and a downturn in the real estate market may adversely affect our results of operations; (3) Significant changes to the size, structure, powers and operations of the federal government, the effects of any prolonged shutdown of the federal government, changes to U.S. economic policies, and uncertainties regarding the potential for these changes may cause economic disruptions that could, in turn, adversely impact our business, results of operations and financial condition; (4) A sustained period of high inflation could pose a risk to local economies and the financial performance of the Bank; (45) Climate change and the governmental responses to it could have a material adverse impact on the Bank and its customers; (56) Disruptions, instability and failures in the banking industry may negatively impact us; (67) Any reduction in defense spending by the federal government in the state of Hawaiʻi could adversely impact the economy in Hawaiʻi and the Pacific Islands; (78) Changes in interest rates could adversely impact our results of operations and capital; (89) Our allowance for credit losses may prove to be insufficient to absorb losses or appropriately reflect, at any given time, the inherent risk of loss in our loan portfolio; (910) Consumer protection initiatives and court decisions related to the foreclosure process affect our remedies as a creditor; (1011) Changes in the capital markets could materially affect the level of assets under management and the demand for our other fee-based services; (1112) The Parent’s liquidity is dependent on dividends from the Bank; (1213) There can be no assurance that the Parent will continue to declare cash dividends; (1314) Fiscal and monetary policy changes may significantly impact our profitability and liquidity; (1415) Legislation and regulatory initiatives affecting the financial services industry, including new interpretations, restrictions and requirements, could detrimentally affect the Company’s business; (1516) Changes in income tax laws and interpretations, or in accounting standards, could materially affect our financial condition or results of operations; (1617) A failure in or breach of our operational systems, information systems, or infrastructure, or those of our third partythird-party vendors and other service providers, may result in financial losses, loss of customers, or damage to our reputation; (1718) An interruption or breach in security of our information systems or those related to merchants and third partythird-party vendors, including as a result of cyber-attacks, could disrupt our business, result in the disclosure or misuse of confidential or proprietary information, damage our reputation, or result in financial losses; (1819) Our mortgage banking income may experience significant volatility; (1920) Our mortgage loan servicing business may be impacted if we do not meet our obligations, or if servicing standards change; (2021) Risks related to representation and warranty provisions may impact our mortgage loan servicing business; (2122) Risks relating to residential mortgage loan servicing activities may adversely affect our results; (2223) The requirement to record certain assets and liabilities at fair value may adversely affect our financial results (2324) Natural disasters and adverse weather in Hawaiʻi and the Pacific Islands may negatively affect real estate property values and our operations (2425) Competition may adversely affect our business; (2526) Our future performance will depend on our ability to respond timely to technological change; (2627) The development and use of AI present risks and challenges that may adversely impact our business; (28) Negative public opinion could damage our reputation and adversely impact our earnings and liquidity (2729) We are subject to certain litigation, and our expenses related to this litigation may adversely affect our results; (2830) Our performance depends on attracting and retaining key employees and skilled personnel to operate our business effectively; (2931) The soundness of other financial institutions may adversely impact our financial condition or results of operations; and (3032) We have experienced increases in FDIC insurance assessments.

The risks and uncertainties that could cause actual results to differ materially from our historical experience and our expectations and projections include but are not limited to those described in Item 1A. “Risk Factors,” Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and elsewhere in our most recentthis Annual Report on Form 10-K and in subsequent SEC filings. Further, any forward-looking statement speaks only as of the date on which it is made, and we undertake no obligation to update or revise any forward-looking statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events, except as otherwise may be required by the federal securities laws.

The historical loss experience for the commercial portfolio segment is primarily determined by using a Cohort method. This method pools loans and leases into groups (“cohorts”) sharing similar risk characteristics based on product and risk ratings, and tracks each cohort’s historical net charge-offs to calculate a historical loss rate. The historical loss rates for each cohort are then averaged to calculate an overall historical loss rate which is applied to current loan balances to arrive at the quantitative baseline portion of the Allowance for most of the commercial portfolio segment.

The historical loss experience for the consumer portfolio segment is primarily determined by using a Vintage method. This method measures historical loss behavior in the form of a historical loss rate for homogenous loan pools that originateoriginated in the same period, known as a vintage. The historical loss rates are then applied to origination loan balances by vintage to determine the quantitative baseline portion of the Allowance for most of the consumer portfolio segment. The homogenous loan pools are segmented according to similar risk characteristics (e.g., residential mortgage, home equity) and may be sub-segmented further based on historical loss behavior. For example, we sub-segment residential mortgages by geography and home equity by lien position.

We also incorporate a reasonable and supportable (“R&S”) loss forecast period, which is currently one year, to account for the effect of forecasted economic conditions and other factors on the performance of the loan portfolios, which could differ from historical loss experience. We also perform asset quality reviews which includesinclude a review of forecasted gross charge-offs and recoveries, nonperforming assets, criticized loans and leases, and risk rating migration. The results of the asset quality review are used to consider qualitative adjustments to the quantitative baseline. After the one-year R&S loss forecast period, this adjustment assumes an immediate reversion to historical loss rates for the remaining expected life of the loan.

The company utilizes the University of Hawaiʻi Economic Research Organization (“UHERO”) macroeconomic forecast that is updated quarterly based on economic conditions and events. The forecast includes various economic variables for Hawaiʻi such as gross domestic product (“GDP”), unemployment rate, visitor arrivals, residential real estate market conditions, personal income, and inflation rate. We also utilize other forecast tools for broader U.S. economic variables such as interest rates, as well as toand apply any overlays to the forecast.R&S loss forecast as relevant.

The reserve for credit losses is generally sensitive to economic conditions and assumptions given the impact for potential losses for the consumer portfolio and risk rating migration for the commercial portfolio. For the consumer portfolio, as an example, an increase in the forecasted Hawaiʻi unemployment rate could lead to an increase in the rate of delinquencies and consequently charge-offs for consumer borrowers. For the Allowance at December 31, 2024,2025, a 25 basis25-basis point increase in the forecasted Hawaiʻi unemployment rates would have increased the quantitativequalitative component of the Allowance for consumer loans by an estimated $1.4$1.2 million. For the commercial portfolio, the impact of adverse changes in economic conditions on borrowers will vary, and generally evaluated on a case-by-case basis to include the borrower’s existing and expected financial capacity. Borrowers that would be most adversely impacted are identified as having the potential for migrating from a Pass to a Classified risk rating. For the Allowance at December 31, 2024,2025, a 50 basis50-basis point increase in the percentage of commercial loans risk rated as Classified would increase the quantitative component of the Allowance for commercial loans by an estimated $2.0$2.1 million. This sensitivity analysis is hypothetical and provided only to indicate the potential impact changes in economic conditions and assumptions may have on the Allowance estimate. Additionally, changes in factors and inputs may be directionally inconsistent, such that improvement in one factor may offset deterioration in others.

Financial assets that are recorded at fair value on a recurring basis include available-for-sale investment securities, loans held for sale, mortgage servicing rights, investments related to deferred compensation arrangements, and derivative financial instruments. As of December 31, 20242025 and 2023,2024, $3.6 billion or 15% and $2.9 billion or 12% and $2.5 billion or 11%,12%, respectively, of our total assets consisted of financial assets recorded at fair value on a recurring basis and most of these financial assets consisted of available-for-sale investment securities measured using information from a third partythird-party pricing service. These investments in debt securities and mortgage-backed securities were all classified in either Levels 1 or 2 of the fair value hierarchy. Financial liabilities that are recorded at fair value on a recurring basis are comprised of derivative financial instruments. As of December 31, 2024,2025 and 2023,2024, $154.1$107.2 million and $143.9$154.1 million, respectively, or less than 1% of our total liabilities consisted of financial liabilities recorded at fair value on a recurring basis.

We also use third partythird-party pricing services to assist our management in determining the value of securities. Our third partythird-party pricing service makes no representations or warranties that the pricing data provided to us is complete or free from errors, omissions, or defects. As a result, we have processes in place to monitor and periodically review the information provided to us by our third partythird-party pricing service such as: 1) Our third partythird-party pricing service provides us with documentation by asset class of inputs and methodologies used to value securities. We review this documentation to evaluate the inputs and valuation methodologies used to place securities into the appropriate level of the fair value hierarchy. This documentation is periodically updated by our third partythird-party pricing service. Accordingly, transfers of securities within the fair value hierarchy are made if deemed necessary. 2) On a quarterly basis, management also selects a sample of securities priced by the Company’s third partythird-party pricing service and reviews the significant assumptions and valuation methodologies used by the pricing service with respect to those securities. The information provided is comprised of market reference data, which may include reported trades; bids, offers, or broker-dealer dealer quotes; benchmark yields and spreads; as well as other reference data as appropriate. Periodically, based on these reviews, management determines whether the current placement of the security in the fair value hierarchy is appropriate or whether transfers may be warranted. 3) On a quarterly basis, management reviews the pricing information received from our third partythird-party pricing service. This review process includes a comparison to a second source. 4) Our third partythird-party pricing service has also established processes for us to submit inquiries regarding quoted prices. Periodically, we will challenge the quoted prices provided by our third partythird-party pricing service. Our third partythird-party pricing service will review the inputs to the evaluation in light of the new market data presented by us. Our third partythird-party pricing service may then affirm the original quoted price or may update the evaluation on a going forward basis. Generally, we do not adjust the price from the third partythird-party service provider. 5) On an annual basis, we obtain and review the third party’s most recently issued Service Organization Controls report related to controls placed in operation and tests of operating effectiveness, to update our understanding of the third partythird-party pricing service’s control environment.

Net income for 20242025 was $150.0$205.9 million, aan decreaseincrease of $21.2$55.9 millionmillion, or 12%37.3%, compared to the prior year. Diluted earnings per common share were $3.46$4.63 in 2024,2025, aan decreaseincrease of $0.68$1.17, or 16%33.8%, compared to the prior year. Our return on average assets was 0.64%0.87% in 2024,2025, aan decreaseincrease of 723 basis points from 2023,2024, and our return on average shareholders’ equity was 9.78%11.86% in 2024,2025, compared to 12.63%9.78% in the prior year.

•The return on average common equity for 20242025 was 10.85%13.29% compared to 13.89%10.85% for the prior year.

Noninterest•Net expenseinterest income was $430.1$537.5 million in 2024,2025, aan decreaseincrease of 1.7%$71.0 million compared to the prior year.

Total•Net assetsinterest weremargin $23.6was billion2.45% asin 2025, an increase of December29 31,basis 2024, a decrease of 0.6%points from the prior year.

Total•Noninterest loansexpense andwas leases$443.1 weremillion $14.1in billion as of December 31, 2024,2025, an increase of 1%3.0% fromcompared to the prior year.

•Total depositsassets were $20.6$24.2 billion as of December 31, 2024,2025, aan decreaseincrease of 2%2.4% from the prior year.

•Total shareholders’deposits equitywere was $1.7$21.2 billion as of December 31, 2024,2025, an increase of 18%2.7% from the prior year due to the issuance of Series B Preferred Stock in the second quarter of 2024.year.

No•During 2025, we repurchased 76,547 shares of common stock wereat repurchaseda total cost of $5.0 million under the share repurchase program in 2024.program. Total remaining buyback authority under the share repurchase program was $126.0$121.0 million as of December 31, 2024.2025.

Due1.Due to rounding, the amounts presented in this schedule may not tie to other amounts presented elsewhere in this report.

Interest2.Interest income includes taxable-equivalent basis adjustments, based upon a federal statutory tax rate of 21% of $3.8$6.4 million and $2.0$3.8 million for the years ended December 31, 2024,2025, and 2023,2024, respectively.

Non-performing3.Non-performing loans and leases are included in the respective average loan and lease balances.

The1.The change in interest income or expense due to both rate and volume has been allocated between the factors in proportion to the relationship of the absolute dollar amounts of the change in each.

The average balances of our earning assets decreasedincreased by $532.8$407.2 million or 2% in 20242025 compared to the prior year, primarily due to cashflowsincreases fromin the portfolioaverage beingbalances usedof toavailable-for-sale reduce(“AFS”) ourinvestment interest-bearingsecurities liabilities.and commercial mortgage loans. Yields on our investment securities portfolio increased by 414 basis points, primarily due to the amortization of lower yielding investments being reinvested into new investments at higher interest rates. This increase was partially offset by lower income earned from interest rate swaps that hedge a portion of our AFS securities portfolio partially offset by the impact of a portion of our corporate bonds portfolio converting from fixed-rate securities to lower floating-rate securities in the fourth quarter of 2023.portfolio. Yields on our loan and lease portfolio increased by 466 basis points due to yieldhigher increasesrates on home equity lines and automobile loans originated, partially offset by the payoffs of higher yielding commercial mortgage and commercial and industrial loans, and the impact of lower rates on our floating rate loancommercial portfolio, higher rates on loans originated during the period, and income earned from interest rate swaps that hedge a portion of our residential mortgage portfolio.loans.

Investment securities losses,losses net, decreasedincreased by $3.9$15.9 million or 211.6% in 20242025 compared to the prior yearyear, primarily due to $4.6a $16.8 million netrealized lossesloss on salesthe sale of investmentcertain securities in 2023,connection partiallywith offsetthe byrepositioning higherof fees$208.4 paidmillion toAFS counterparties for Visa Class B share conversion rate expensesecurities during 2024.the quarter ended December 31, 2025.

TotalOther otherincome expense decreasedincreased by $0.8$19.8 million or 1%100.3% in 20242025 compared to the prior yearyear. The increase was primarily due to lowera broker'sone-time chargesgain of $18.1 million as awe resultsold the economic interests of fewerour customermerchant swapsservices inportfolio 2024during asthe comparedquarter toended 2023.December 31, 2025.

The following MD&A is intended to help the reader understand the Company and its operations and is focused on our financial results for the firstsecond quarter of 2026, including comparisons of year-to-year performance, trends, and updates from the Company’s most recent 10-K filing. Discussion and analysis of our 2025 fiscal year, as well as the year-to-year comparison between fiscal years 2025 and 2024, are included in Part II, Item 7. “Management's Discussion and Analysis of Financial Condition and Results of Operations,” of our Annual Report on Form 10-K for the fiscal year ended December 31, 2025, filed with the SEC on February 24, 2026.

For the first threesix months of 2026, the median price of single-family home sales on Oahu increased by 2.6% while the median price of condominiums remainedincreased flatby 1.5% compared to the same period in 2025. The volume of single-family homes sales on Oahu increased 10.9%3.9% and condominium sales decreased 3.6%2.3% compared to the same period in 2025. Inventory of single-family homes and condominiums on Oahu was 2.83.2 months and 6.37.0 months, respectively, for the firstsecond quarter of 2026.

Net income for the firstsecond quarter of 2026 was $57.4$63.8 million, an increase of $13.4$16.2 million, or 31%,33.9%, compared to the same period in 2025. Diluted earnings per common share was $1.30$1.47 for the firstsecond quarter of 2026, an increase of $0.33,$0.41, or 34%,38.7%, compared to the same period in 2025.

•The return on average common equity for the firstsecond quarter of 2026 was 13.90%15.47% compared with 11.80%12.50% in the same period last year.

•Net interest income for the firstsecond quarter of 2026 was $151.0$153.6 million, an increase of 20%18.4% compared to the same period last year.

•Net interest margin was 2.74%2.78% in the firstsecond quarter of 2026, an increase of 4239 basis points from the same period last year.

•The provision for credit losses for the firstsecond quarter of 2026 and 2025 was $1.8$3.6 million and $3.3 million, respectively.

•Noninterest income was $41.3$43.3 million in the firstsecond quarter of 2026, a decrease of 6%3.3% compared to the same period last year.

•Noninterest expense was $116.1$111.2 million in the firstsecond quarter of 2026,2026 anand increaseremained of 5%flat compared to the same period last year.

•The effective tax rate for the firstsecond quarter of 2026 was 22.9%22.3% compared with 21.7%21.2% for the same period last year.

•Total assets were $23.9$23.8 billion as of MarchJune 31,30, 2026, a decrease of 1.1%1.4% from December 31, 2025.

•Total loans and leases were $14.2$14.3 billion as of MarchJune 31,30, 2026, an increase of 0.8%1.5% from December 31, 2025.

•The allowance for credit losses on loans and leases was $147.0 million as of MarchJune 31,30, 2026, an increase of $0.2 million from December 31, 2025. The ratio of the allowance for credit losses to total loans and leases outstanding was 1.04%1.03% at the end of the quarter, unchangeddown 1 basis point from December 31, 2025.

•Net loan and lease charge-offs during the firstsecond quarter of 2026 were $1.1$3.4 million or 3 basis points annualized of total average loans and leases outstanding. Net loan and lease charge-offs for the first quarter of 2026 weremillion, comprised of charge-offs of $4.1$4.7 million partially offset by recoveries of $3.0$1.3 million. Compared to the same quarter of 2025, net loan and lease charge-offs decreasedincreased by $3.3$0.8 million. Net loan and lease charge-offs to average loans and leases outstanding during the firstsecond quarter of 2026 was 0.03%0.10% compared to 0.13%0.07% in the same period last year.

•Total non-performing assets (“NPAs”) were $12.1$11.5 million as of MarchJune 31,30, 2026, down $2.1$2.7 million from December 31, 2025. NPAs were 98 basis points of total loans and leases and foreclosed real estate at the end of the quarter, down 12 basis pointpoints from December 31, 2025.

•The investment securities portfolio was $7.9$7.7 billion as of MarchJune 31,30, 2026, ana increasedecrease of 1.7%0.9% from December 31, 2025. The investment portfolio remains largely comprised of securities issued by U.S. government agencies and U.S. government-sponsored enterprises.

•Total deposits were $21.0$20.9 billion as of MarchJune 31,30, 2026 and $21.2 billion as of December 31, 2025.

•Total shareholders’ equity was $1.9 billion as of MarchJune 31,30, 2026 and December 31, 2025.

•During the three months ended MarchJune 31,30, 2026, we repurchased 194,096215,995 shares of common stock at an average cost per share of $77.84$78.60 and a total cost of $15.1$17.0 million under the share repurchase program. Total remaining buyback authority under the share repurchase program was $105.9$88.9 million at MarchJune 31,30, 2026.

•We maintained a quarterly dividend of $0.70 per common share during the three months ended MarchJune 31,30, 2026 and 2025.

2Interest income includes taxable-equivalent basis adjustments, based upon a federal statutory tax rate of 21%, of $1.4 million and $1.5$2.8 million for the three and six months ended MarchJune 31,30, 20262026, respectively, and $1.6 million and $3.1 million for the three and six months ended June 30, 2025, respectively.

The average balance of our earning assets for the three and six months ended MarchJune 31,30, 2026 increased by $357.1$346.1 million or 2% and $351.6 million or 2%, respectively, compared to the same periodperiods lastin year.2025. TheThese increaseincreases waswere primarily due to an increase in the average balance of available-for-sale investment securities. As compared to the same periodperiods last year, yields on our investment securities portfolio increased by 29 basis points during both the three and six months ended MarchJune 31,30, 2026 primarily due to the amortization of lower yielding investments being reinvested into new investments at higher current interest rates, as well as the impact of the repositioning of a portion of our AFS securities portfolio in the fourth quarter of 2025, which resulted in a higher-yielding securities mix. As compared to the same period last year, yields on our loan and lease portfolio increaseddecreased by 31 basis pointspoint during the three months ended MarchJune 31,30, 2026. The increase2026, primarily reflectsdue to a decrease in rates resulting in the repricing of certain variable‑rate loans. Yields on our loan and lease portfolio increased by 1 basis point during the six months ended June 30, 2026, primarily due to the continued amortization of lower‑yielding loans along with the origination of new loans at higher prevailing interest rates. This benefit wasrates, partially offset by lowera incomedecrease fromin interestrates rateresulting swaps andin the repricing of certain variable‑rate loans following recent Federal Reserve rate cuts.

The average balance of our interest-bearing liabilitiesdeposits for the three and six months ended MarchJune 31,30, 2026 decreased by $138.2$94.8 million or 1% and $94.5 million or 1%, respectively, compared to the same periodperiods in 2025 primarily due to a decrease in time deposits.2025. As compared to the same periodperiods last year, the cost of our interest-bearing liabilitiesdeposits decreased by 4243 basis points during both the three and six months ended MarchJune 31,30, 2026 primarily due to a decrease in the prevailing interest rate environment, which was driven by 175 basis points of interest rate cuts by the Federal Open Market Committee from September 2024 through December 2025.environment.

Fees, exchange, and other service charges decreased by $3.5$3.3 million or 24%23% in the firstsecond quarter of 2026 and by $6.8 million or 23% for the six months ended June 30, 2026 compared to the same periodperiods last year, primarily due to lower merchant income following the sale of our merchant services portfolio in the fourth quarter of 2025.

Bank-ownedAnnuity lifeand insurance income increased by $0.6 million or 40% in the second quarter of 2026 and by $0.5 million or 15%17% infor the firstsix quartermonths ofended June 30, 2026 compared to the same periodperiods last year, primarily due to anhigher increaseproduction inresulting deathfrom benefitsexpanded received.product offerings and improved referral activity during 2026.

Other income decreased by $0.8$0.7 million or 15%13% in the firstsecond quarter of 2026 and by $1.5 million or 14% for the six months ended June 30, 2026 compared to the same periodperiods last year. ThisThese decreasedecreases waswere primarily due to ana gain on sale of other real estate owned (“OREO”) property and the recovery of a previously charged-off bank-owned life insurance settlement recognized in the first quarter of 2025 and lower foreign exchange volumespolicy during the first quarter ofended 2026.June 30, 2025.

Total salaries and benefits expense increased by $5.6$1.3 million or 8.9%2% in the firstsecond quarter of 2026, primarily due to an increase in medical, dental, and life insurance expense, base salaries, and commission expense. Total salaries and benefits expense increased by $6.9 million or 6% for the six months ended June 30, 2026 compared to the same period last year, primarily due to an increase in share-based compensation related to the accelerated vesting in the first quarter of 2026 of restricted stock awards pursuant to the retirement provisions of performance-based restricted stock awards granted in 2024 and 2025,2025. as well as increases in baseBase salaries and separation expense. These increases were partially offsetincreased by decreases$1.6 inmillion retirementor and2% otherprimarily benefitsdue expenseto andannual medical,merit dental,increases, andwhile lifeincentive insurancecompensation expense.increased by $1.2 million or 11% during the six months ended June 30, 2026 compared to the same period last year.

FDICNet insuranceequipment expense increased by $1.1$0.6 million or 65.6%6% in the second quarter of 2026 and by $1.0 million or 5% for the firstsix quartermonths ofended June 30, 2026 compared to the same periodperiods last year, primarily due to ahigher partialsoftware recoverylicense offees theand FDIC special assessment in 2025, partially offset by a lower FDIC assessment rate in the current period.maintenance.

TotalFDIC otherinsurance expense decreased by $2.0$0.7 million or 12.5%18.2% forin the firstsecond quarter of 2026 compared to the same period last year, primarily due to a lower merchantFDIC transactionassessment andrate. cardFDIC processinginsurance feesexpense followingincreased by $0.4 million or 8% for the salesix months ended June 30, 2026 compared to the same period last year, primarily due to a partial recovery of ourthe merchantFDIC servicesspecial portfolioassessment in the fourth quarter of 2025. This was2025, partially offset by anthe increaselower inFDIC advertisingassessment expense.rate, discussed above.

The provision for income taxes was $17.1$18.3 million in the firstsecond quarter of 2026, an increase of $4.9$5.5 million compared to the same period inlast 2025.year. The effective tax rate for the firstsecond quarter of 2026 was 22.9%,22.3%, an increase from 21.7%21.2% for the same period inlast 2025.year. The higher effective tax rate infor the firstsecond quarter of 2026 compared to the same period last year was primarily due to an increase in nondeductible compensation and ana increasedecrease in tax expensebenefits from discrete items.

Cash and cash equivalents were $425.1$452.8 million as of MarchJune 31,30, 2026, a decrease of $521.4$493.7 million or 55.1%52.2% from the prior year. The decrease was primarily due to ana increasenet decrease in ourdeposits investmentand portfolio.loan growth during the period.

The carrying value of our investment securities portfolio was $7.9$7.7 billion and $7.8 billion as of MarchJune 31,30, 2026 and December 31, 2025, respectively. The increasedecrease was primarily due to portfolio runoff, including maturities and paydowns, partially offset by the purchase of $372.2$445.4 million in available-for-sale investment securities during the threesix months ended MarchJune 31,30, 2026. The increase was partially offset by the amortization of existing securities.

Mortgage-backed securities issued by Ginnie Mae, Fannie Mae, and Freddie Mac represent the largest concentration in our portfolio. As of MarchJune 31,30, 2026, the issuers of these securities carry credit ratings equivalent to those of the U.S. Government, reflecting the explicit and/or implicit guarantees provided.

Net unrealized losses in our AFS and HTM investment securities were $777.3$784.7 million as of MarchJune 31,30, 2026 and $739.8 million as of December 31, 2025. In addition, we transferred AFS investment securities to the HTM category in 2022. At the time of transfer, these securities had a fair value of $1.3 billion. The unrealized losses at the time of transfer remain in accumulated other comprehensive income and are amortized over the estimated remaining life of the securities through an adjustment to the effective yield of the HTM portfolio. The unamortized balance of these losses was $149.7$144.4 million and $155.0 million as of MarchJune 31,30, 2026 and December 31, 2025, respectively. See Note 7 Accumulated Other Comprehensive Income to the unaudited Consolidated Financial Statements for more information.

Total loans and leases as of MarchJune 31,30, 2026 increased by $110.8$204.6 million or 0.8%1.5% from December 31, 2025, primarily due to growth in both our commercial loans. This was partially offset by decreases in ourand consumer loans.

PrepaidLow-income expenseshousing investments decreased by $18.8 million or 8% due to the amortization of existing investments. Derivative financial instruments increased by $2.8$9.5 million or 12%,10%, primarily due to changesincreasing infair accruals and timingvalues of payments.our interest rate swaps impacted by prevailing interest rates. Deferred compensation plan assets decreased by $3.6$3.2 million or 22%,20%, primarily due to distributions from the executive deferred compensation plan during the threesix months ended MarchJune 31,30, 2026. Other assets increased by $6.1 million or 13%, primarily driven by improved funded status of the Company’s defined benefit pension plans.

Total deposits were $21.0$20.9 billion as of MarchJune 31,30, 2026, a decrease of $230.6$295.7 million or 1.1%1.4% from December 31, 2025. Consumer deposits increaseddecreased by $63.6$12.5 million due to increasesdecreases of $66.8$90.6 million in savingstime deposits, $30.5 million in non-interest bearing deposits,deposits and $11.6$53.6 million in interest-bearing demand deposits, partially offset by a decreaseincreases of $45.3$101.8 million in timesavings deposits and $29.9 million in noninterest-bearing deposits. Commercial deposits decreased by $257.0$430.0 million due to decreases of $153.5$220.0 million in savings deposits, $126.8$203.6 million in non-interest bearingnoninterest-bearing deposits, and $14.7$12.0 million in time deposits, partially offset by an increase of $38.1$5.6 million in interest-bearing demand deposits. Public and other deposits decreasedincreased by $37.2$146.8 million due to a decreaseincreases of $82.1$212.7 million in interest-bearing demand deposits and noninterest-bearing$82.3 million in savings deposits, partially offset by increasesa decrease of $29.5 million in saving deposits and $15.4$148.2 million in time deposits and noninterest-bearing deposits.

Securities sold under agreements to repurchase were $50.0 million as of both MarchJune 31,30, 2026 and December 31, 2025. As of MarchJune 31,30, 2026, our remaining repurchase agreement was at a fixed interest rate of 3.89% with a remaining maturity of 3.63.38 years. Our repurchase agreement was accounted for as a collateralized financing arrangement (i.e., a secured borrowing) and not as a sale and subsequent repurchase of securities. Our remaining repurchase agreement with a private institution may be terminated at earlier specified dates by either the private institution or the Company. See Note 6 Securities Sold Under Agreements to Repurchase to the unaudited Consolidated Financial Statements for more information.

Net income increased by $2.4$8.5 million or 8%29% in the firstsecond quarter of 2026 compared to the same period last year, primarily due to an increaseincreases in net interest income and ain decreasenoninterest income, partially offset by increases in noninterest expense and in the provision for credit losses. This was partially offset by an increase in noninterest expense. Net interest income increased by $10.7$14.4 million or 11%,15%, primarily due to higher deposit spreads on higher deposit balances. TheNoninterest provisionincome for credit losses decreasedincreased by $0.6$2.2 million or 18%,6%, primarily due to lowerhigher nettrust charge-offsand inasset themanagement autofees loanand portfolio.higher annuity and insurance fees. Noninterest expense increased by $7.9$4.2 million or 9%,5%, primarily due to higher allocated administrative and support unit costs and higher salaries & benefits expense. The provision for credit losses increased by $0.8 million or 30%, primarily due to higher net charge-offs in the auto loan, installment loan, and home equity portfolios.

Net income increased by $7.4$6.8 million or 23%22% in the firstsecond quarter of 2026 compared to the same period last year, primarily due to an increase in net interest income and a decrease in noninterest expense, partially offset by a decrease in noninterest income. Net interest income increased by $8.1$8.6 million or 15%,16%, primarily due to higher average deposit balances and spreads, which increased segment net interest income under our funds transfer pricing methodology, partially offset by lower loan balances.methodology. Noninterest income decreased by $3.5$2.2 million or 46%,36%, primarily due to a reduction in merchant revenue following the sale of the Bank’s merchant services portfolio in the fourth quarter of 2025, lowerpartially offset by increased loan and commitment fees,fees and reduced gains on the sale of leased assets, partially offset by an increase in account analysis fees.assets. Noninterest expense decreased by $2.9 million or 15%, primarily due to lower merchant transaction processing fees, salaries and& benefits, equipmentprofessional expenses,fees, and allocated administrative, support unit and treasury expenses, partially offset by increases in data processing, excise taxes, and customer derivative broker charges, and allocated branch expenses.charges.

Net loss decreased by $3.6$0.9 million or 21%7% in the firstsecond quarter of 2026 compared to the same period last year, primarily due to a decrease in net interest expenseexpense, anda an increase in noninterest income, partially offset by an increasedecrease in the provision for credit losseslosses, and ana increasedecrease in noninterest expense.expense, partially offset by a decrease in noninterest income. Net interest expense decreased by $6.4$1.0 million or 25%,5%, primarily due to an increase in interest income from higher earning asset balances and yields. Noninterest income increaseddecreased by $1.5 million or 31%, primarily due to decreases in other income. Noninterest expense decreased by $0.9 million or 30%,19%, primarily due to decreases in other noninterest expense, partially offset by an increase in BOLI and COLI income and a decrease in investment securities losses. Noninterest expense increased by $0.6 million or 14%, primarily due to higher salaries and& benefits expense. The provision for credit losses and income taxes in this business segment represents the residual amounts to arrive at the total amount for the Company.

Non-accrual loans and leases as of MarchJune 31,30, 2026 were $11.8$11.3 million, a decrease of $2.1$2.6 million or 15%19% from December 31, 2025 primarily due to a $2.1 million payoff of a commercial mortgage in the first quarter of 2026. As of MarchJune 31,30, 2026, our residential mortgage non-accrual loans were comprised of 1620 loans with a weighted average current loan-to-value ratio of 69%.68%. As of MarchJune 31,30, 2026, our home equity non-accrual loans were comprised of 5556 loans with a weighted average current loan-to-value ratio of 42%.51%.

Foreclosed real estate represents property acquired as the result of borrower defaults on loans. Foreclosed real estate 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. Foreclosed real estate was $0.2 million as of June 30, 2026 compared to $0.3 million as of March 31, 2026 and December 31, 2025.

Loans and leases past due 90 days or more and still accruing interest were $13.7$14.1 million as of MarchJune 31,30, 2026, a $1.5$1.9 million or 12%15% increase from December 31, 2025. The increase was primarily in our residential mortgage portfolio, partially offset by a decrease in our home equity portfolio.portfolio due to an increase in delinquencies. This category includes loans and leases that are well-secured and in the process of collection, as well as loans and leases that have not reached the specified past due status to be placed on non-accrual.

As of MarchJune 31,30, 2026, the Allowance was $147.0 million or 1.04%1.03% of total loans and leases outstanding compared with an Allowance of $146.8 million or 1.04% of total loans and leases outstanding as of December 31, 2025.

Net charge-offs on loans and leases for the three and six months ended MarchJune 31,30, 2026 and 2025 were $1.1$3.4 million or 0.03%0.10% and $4.4$4.5 million or 0.13%,0.06%, respectively,respectively of total average loans and leases on an annualized basis.basis, compared to $2.6 million or 0.07% and $7.0 million or 0.10% of total average loans and leases on an annualized basis for the three and six months ended June 30, 2025, respectively.

The Unfundedreserve Reservefor unfunded commitments was $2.1$2.3 million as of MarchJune 31,30, 2026, an increase of $0.5$0.6 million or 29%39% from December 31, 2025, primarily due to higher unfunded commitments in our commercial and industrial portfolio. The reserve for unfunded commitments is recorded in other liabilities in the unaudited consolidated statements of condition.

For the three and six months ended MarchJune 31,30, 2026, the provision for credit losses was $1.8$3.6 million and $5.4 million, respectively, compared to $3.3 million and $6.5 million for the same respective periodperiods last year. The increase in the provision for credit losses for the three months ended June 30, 2026 was primarily due to an increase in the reserve for unfunded commitments. The decrease in the provision for credit losses for the six months ended June 30, 2026 was primarily due to a $1.6 million recovery of a commercial mortgage loan in the first quarter of 2026.