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

The U.S. military has a major presence in Hawaii and Guam and, as a result, is an important aspect of the economies in which we operate. The funding of the U.S. military occurs as part of the overall U.S. government budget and appropriation process which is driven by numerous factors, including geopolitical events, macroeconomic conditions and the ability of the U.S. government to enact legislation such as appropriations bills. Cuts to defense and other security spending could have an adverse impact on the economy in our markets. The recent change in U.S. presidential administration contributes to uncertainty concerning the future direction and spending of the U.S. government.

U.S. global trade policies, including the imposition of tariffs and uncertainty surrounding the resolution of trade disputes, or renewal of trade agreements, with various countries, may cause inflation to rise and ultimately affect interest rates. In addition, federal budget deficit concerns and the potential for political conflict over legislation to fund U.S. government operations and raise the U.S. government’s debt limit may increase the possibility of a default by the U.S. government on its debt obligations, related credit-rating downgrades, or an economic recession in the United States. Many of our investment securities are issued by the U.S. government and government agencies and sponsored entities. AsA aprolonged resultor repeated shutdown of uncertainthe domestic political conditions, including potential futureU.S. federal government shutdowns,could theadversely possibilityaffect our business, financial condition, liquidity, and results of theoperations. A U.S. federal government defaultingshutdown may also impair the financial capacity of borrowers who depend on itsfederal obligationssalaries, forcontracts, areimbursements, periodor benefit programs, including government employees, federal contractors, and recipients of timegovernment-funded dueservices. Reduced or delayed income to debtthese ceilingborrowers limitationscould increase delinquencies, reduce loan demand, negatively affect deposit inflows, and increase our credit risk exposure. In addition, disruptions to federal economic data releases or otherfiscal unresolvedoperations politicalmay issues,create investmentsvolatility in financial instrumentsmarkets, issuedaffecting orinterest guaranteedrates, byliquidity conditions, and the federalvaluation governmentof pose liquidity risks. In connection with prior political disputes over U.S. fiscal and budgetary issues leading to the U.S. government shutdownsecurities in 2023,our Fitchinvestment lowered its long term sovereign credit rating on the U.S. from AAA to AA+. A further downgrade, or downgrades by other rating agencies, as well as sovereign debt issues facing the governments of other countries, could have a material adverse impact on financial markets and economic conditions in the U.S. and worldwide.portfolio.

Inflationary pressurepressures could pose a risk to the economy and the financial performance of the Bank.

In recent periods, there have been significant changes in inflationary conditions due to, among other factors, global supply chain disruptions, changes in the labor market and geopolitical tensions. Higher commodity prices, labor shortages and supply chain disruptions, includinghave thosealso resulting from Russia’s ongoing invasion of Ukrainecontributed, and the conflictmay in the Middlefuture East, are also contributingcontribute, to inflationary pressures, which could, in turn, adversely affect the U.S. economy, the demand for our products and creditworthiness of our borrowers. Volatility and uncertainty related to inflation and the effects of inflation may enhance or contribute to some of the risks of our business.business, Higherincluding costthrough couldincreasing reduce our profit margins. Aggressive action by monetary authorities to combat inflation could lead to higher rates which couldcosts, negatively affectaffecting economic growth.growth or impacting asset values or customer defaults. Higher rates could make less creditworthy customers less able to meet their payment obligations. Higher rates could also lead to reduced valuations on long duration financial assets and real estate and impact the value of collateral pledged for loans. Finally, higher rates could result in deposit outflows or higher deposit costs. These inflationary pressures could adversely impact our business, financial position and results of operations.

As of December 31, 2024,2025, our commercial real estate loans represented approximately $4.5$4.6 billion or 31%32% of our total loan and lease portfolio. Commercial real estate loans may have a greater risk of loss than residential mortgage loans, in part because these loans are generally larger or more complex to underwrite and 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. As payments on loans secured by commercial real estate often depend upon the successful operation and management of the properties and the businesses which operate from within them, repayment of such loans may be affected by factors outside the borrower’s control, such as adverse conditions in the real estate market or the economy or changes in government regulation. In recent years, commercial real estate markets have been experiencing substantial growth, and increased competitive pressures have contributed significantly to historically low capitalization rates and rising property values. Commercial real estate markets have been particularly impacted by the economic disruption in recent years resulting from the COVID-19 pandemic and a reduced demand for office space driven by the implications of hybrid work arrangements. Accordingly, federal banking regulatory agencies have expressed concerns about weaknesses in the current commercial real estate market. Our failure to adequately implement risk management policies, procedures and controls could adversely affect our ability to increase this portfolio going forward and could result in an increased rate of delinquencies in, and increased losses from, this portfolio.

Interest rates in the United States fellhave dramaticallybeen during the first quarter of 2020 and remained low through 2021, which adversely affected our net interest income. The Federal Reserve raised benchmark interest rates throughout 2022 and 2023 and held them at a high levelvolatile in 2024 until it decreased the benchmark rate by 50 basis points in September 2024, by 25 basis points in November 2024 and by 25 basis points in December 2024. The Federal Reserve may further raise or lower interest rates, or maintain them at elevated levels by recent historical standards, in response to economic conditions, particularly inflationary pressures and unemployment statistics.years. When interest rates rise, such as during 2022 and 2023, we can generally be expected to earn higher net interest income. However, higher interest rates can also lead to fewer originations of loans, less liquidity in the financial markets, and higher funding costs, each of which could adversely affect our revenues, liquidity and capital levels. Higher interest rates can also negatively affect the payment performance on loans that are linked to variable interest rates. If borrowers of variable rate loans are unable to afford higher interest payments, those borrowers may reduce or stop making payments, thereby causing us to incur losses and increased operational costs related to servicing a higher volume of delinquent loans. When interest rates decline, such as during the end of 2024, we have experienced, and could in the future experience, fixed-rate loan prepayments and higher investment portfolio cash flows, resulting in a lower yield on earning assets.

In order to manage the significant risks inherent in our business, we must maintain effective policies, procedures and systems that enable us to identify, monitor and control our exposure to material risks, such as credit, operational, legaloperational and reputationallegal risks. Our risk management methods may prove to be ineffective due to their design, their implementation or the degree to which we adhere to them, or as a result of the lack of adequate, accurate or timely information or otherwise. If our risk management efforts are ineffective, we could suffer losses that could have a material adverse effect on our business, financial condition or results of operations. In addition, we could be subject to litigation, particularly from our customers, and sanctions or fines from regulators. Our techniques for managing the risks we face may not fully mitigate the risk exposure in all economic or market environments, including exposure to risks that we might fail to identify or anticipate.

Certain accounting policies are critical to presenting our financial condition and results of operations. They require management to make difficult, subjective or complex judgments about matters that are uncertain. Materially different amounts could be reported under different conditions or using different assumptions or estimates. These critical accounting policies include the allowance for credit losses,losses and fair value measurements, pension and postretirement benefit obligations and income taxes.measurements. Because of the uncertainty of estimates involved in these matters, we may be required to do one or more of the following: significantly increase the allowance for credit losses or sustain credit losses that are significantly higher than the reserve provided; or reduce the carrying value of an asset measured at fair value; or significantly increase our accrued tax liability.value. Any of these could have a material adverse effect on our business, financial condition or results of operations. See “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Policies” for more information.

We operate in the highly competitive financial services industry and face significant competition for customers from financial institutions located both within and beyond our principal markets. We compete with commercial banks, savings banks, credit unions, non-bank financial services companiescompanies, andinsurance companies, other financial institutionsinstitutions, money market funds, hedge funds, and private equity and credit firms operating within or near the areas we serve. Additionally, certain large banks headquartered on the U.S. mainland and large community banking institutions target the same customers we do. Competition among providers of financial products and services continues to increase, with consumers and businesses having the opportunity to select from a growing variety of traditional and nontraditional alternatives, such as Private Credit/Direct lenders. In addition, as customer preferences and expectations continue to evolve, technology has lowered barriers to entry and made it possible for banks to expand their geographic reach by providing services over the Internet and for non-banks to offer products and services traditionally provided by banks, such as automatic transfer and automatic payment systems. The emergence, adoption and evolution of new technologies that do not require intermediation, including distributed ledgers such as digital assets and blockchain, as well as advances in automation, AI and robotics, could significantly affect the competition for financial services. The banking industry is experiencing rapid changes in technology, and, as a result, our future success will depend in part on our ability to address our customers’ needs by using technology. Customer loyalty can be influenced by a competitor’s new products, especially offerings that could provide cost savings or a higher return to the customer. We continue to face increased competitive pressures on loan rates and terms for high-quality credits. We may not be able to compete successfully with other financialfirms institutionscompeting in our markets, and we may have to pay higher interest rates to attract deposits, accept lower yields to attract loans and/or pay higher wages for new employees, which may result in lower net interest margins and reduced profitability.

We expect that our business will remain subject to extensive regulation and supervision and that the level of scrutiny and the enforcement environment may fluctuate over time, based on numerous factors, including changes in thestate Unitedand Statesfederal presidentialpolitical administration or one or both houses of Congressbodies and public sentiment regarding financial institutions (which can be influenced by scandals and other incidents that involve participants in the financial services industry). We are unable to predict the form or nature of any future changes to the laws, rules, regulations, or supervisory guidance and policies, including the interpretation or implementation thereof. In addition, we face significant regulatory scrutiny, in the course of routine examinations and otherwise, and new regulations in response to negative developments in the banking industry, which may increase our cost of doing business and reduce our profitability. Among other things, there may be increased focus by both regulators and investors on deposit composition, the level of uninsured deposits, brokered deposits, unrealized losses in securities portfolios, liquidity, commercial real estate loan composition and concentrations, and capital as well as general oversight and control of the foregoing. We could face increased scrutiny or be viewed as higher risk by regulators and/or the investor community, which could have a material adverse effect on our business, financial condition and results of operations.

In addition, changes in key personnel at the agencies that regulate the Company, including the federal banking regulators, may result in differing interpretations of existing rules and guidelines and potentially more stringent enforcement and more severe penalties than previously experienced. New regulations and modifications to existing regulations and supervisory expectations have increased, and may in the future increase, our costs over time, result in decreased revenues and net income, reduce our ability to compete effectively (particularly with non-bank financial institutions that may not be subject to the same laws and regulations), make it less attractive for us to continue providing certain products and services, or require changes to our existing regulatory compliance and risk management structure. Any future changes in federal and state law and regulations, as well as the interpretations and implementations, or modifications or repeals, of such laws and regulations, could affect us in substantial and unpredictable ways. RecentChanges in regulators and political developments, including the new presidential administrationbodies in the U.S.,U.S. have added additional uncertainty with respect to new laws or regulations or changes in the interpretations or enforcement of existing laws or regulations, including potential deregulation in some areas. In addition, litigation challenging actions or regulations by federal or state authorities could, depending on the outcome, significantly affect the regulatory and supervisory framework affecting our operations. Any of the foregoing could have a material adverse effect on our business, financial condition or results of operations.

The content and application of laws and regulations applicable to financial institutions vary according to the size of the institution, the jurisdictions in which the institution is organized and operates and other factors. Some of our non-bank competitors are not subject to the same extensive regulations we are, and, as a result, may be able to compete more effectively for business. In particular, the activity of private creditors and other financial technology companies (“fintechs”) has grown significantly over recent years and is expected to continue to grow. Fintechs have and may continue to offer bank or bank-like products. For example, a number of fintechs have applied for, and in some cases received, bank or industrial loan charters. In addition, otherOther fintechs have partnered with existing banks to allow them to offer deposit products to their customers. Regulatory changes may also make it easier for fintechs to partner with banks and offer deposit products. Other regulation has reduced the regulatory burden of large bank holding companies, and raised the asset thresholds at which more onerous requirements apply, which could cause certain large bank holding companies with less than $250 billion in total consolidated assets, which were previously subject to more stringent enhanced prudential standards, to become more competitive or to pursue expansion more aggressively. There is also increased competition by out-of-market competitors through online and mobile channels. In addition, the emergence, adoption and evolution of new technologies that do not require intermediation, including distributed ledgers, as well as advances in automation, could significantly affect competition for financial services. Our profitability depends upon our continued ability to compete successfully in our market area.

Our business, as well as the operations and activities of our customers, could be negatively impacted by climateclimate-related change.physical Climateand changetransition presentsrisks. Climate-related risks present both immediate and long-term risks to us and our customers and these risks are expected tomay increase over time. ClimateClimate-related changerisks presentspresent multi-faceted risks, including (i) operational risk from the physical effects of climate events on our facilities and other assets as well as those of our customers; (ii) credit risk from borrowers with significant exposure to climateclimate-related riskrisks; (iii) legal, regulatory and compliance risks arising from the policy, legal and regulatory changes associated with the transition to a less carbon-dependent economy; and (iv) reputationalrisk riskof harm to our brand from stakeholder concerns about our practices related to climateclimate-related change,risks, our carbon footprint and our decision to change or continue to maintain our business relationships with customers who operate in carbon-intensive industries, and from negative public opinion related to any of our actual or perceived actions or inaction in response to climateclimate-related changerisks and our climate change strategy.

For instance, climate change exposes uswe and our customers are exposed to physical risk as its effects may lead to more frequent and more extreme weather events, such as prolonged droughts or flooding, tornados, hurricanes, wildfires and extreme seasonal weather; and longer-term shifts, such as increasing average temperatures, ozone depletion and rising sea levels. As our primary markets are located on islands in the Pacific Ocean, they may be particularly susceptible to certain of these risks or other risksclimate-related resulting from climate change,risks, including those relating to rising sea levels. Such events and long-term shifts may result in destruction or impairment of properties, disruptions to business operations, or reduced availability or increased price of insurance and may have a significant impact on our customers, which could amplify credit risk by diminishing borrowers’ repayment capacity or collateral values, and other businesses and counterparties with whom we transact, which could have a broader impact on the economy, supply chains and distribution networks. Furthermore, we would be exposed to a great deal of uncertainty when recovering from such events, including the time it will take to rebuild physically and economically and the amounts of insurance coverage or government assistance available to our affected customers.

ClimateThe changeCompany may also resultbecome insubject to new and/or more stringent climate-related legal and regulatory requirements for the Company,requirements, which could materially affect the Company’s results of operations by requiring the Company to take costly measures to comply with any newsuch laws or regulations related to climate change that may be forthcoming.regulations. Ongoing legislative or regulatory uncertainties and changes regarding, climate risk management and practices may also subject us to different and potentially conflicting requirements in the various jurisdictions in which we operate. New regulations or guidance, or the attitudes of regulators, shareholders and employees regarding climateclimate-related change,matters, may affect the activities in which the Company engages and the products that the Company offers. In addition, an increasing perspective that financial institutions, including the Company, play an important role in managingClimate-related risks related to climate change, including indirectly with respect to their customers, may result in increased pressure on the Company to take additional steps to disclose and manage its climate risks and related lending and other activities. Risks associated with climate change are continuing to evolve rapidly, making it difficult to assess the effects of climatesuch changerisks on the Company, and the Company expects that climate change-relatedclimate-related risks will continue to evolve and may increase over time. If our actual or perceived action or inaction in response to these climate change-related risks are, or are perceived to be, ineffective or insufficient, or if we participate in, or decide not to participate in, certain industries or activities perceived to be associated with causing or exacerbating climateclimate-related change,risks, we could be subject to enforcement and other supervisory or government actions, reputational damage, a loss of customer or investor confidence, difficulty retaining or attracting talented employees, or other harm.

Provisions of federal banking laws, including regulatory approval requirements, could make it difficult for a third partythird-party to acquire us, even if doing so would be perceived to be beneficial to our stockholders. Acquisition of 10% or more of any class of voting stock of a bank holding company or depository institution, including shares of our common stock, generally creates a rebuttable presumption that the acquirer “controls” the bank holding company or depository institution. Also, a bank holding company must obtain the prior approval of the Federal Reserve before, among other things, acquiring direct or indirect ownership or control of more than 5% of the voting shares of any bank, including our bank.

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; the development and use of AI; our ability to successfully develop and commercialize new or enhanced products and services; changes in the demand for our products and services; risks associated with the sale of loans and with our use of appraisals in valuing and monitoring loans; the possibility that actual results may differ from estimates and forecasts; fluctuations in the fair value of our assets and liabilities and off-balance sheet exposures; the effects of the failure of any component of our business infrastructure provided by a third partythird-party; the potential for environmental liability; the risk of being subject to litigation and the outcome thereof; the impact of, and changes in, applicable laws, regulations and accounting standards and policies; possible changes in trade, monetary and fiscal policies of, and other activities undertaken by, governments, agencies, central banks and similar organizations, including as a result of changes following the recent U.S. electionorganizations; 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.

The foregoing factors should not be considered an exhaustive list and should be read together with the other cautionary statements set forth under “Item 1A. Risk Factors” in this Annual Report on Form 10-K. 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.

As of December 31, 2024,2025, we were the largest full-service bank headquartered in Hawaii as measured by assets, loans and leases and net income. As of December 31, 2024,2025, we had $23.8 billion of assets and $14.4$14.3 billion of gross loans and leases. We also generated $230.1$276.3 million of net income or diluted earnings per share of $1.79$2.20 for the year ended December 31, 2024.2025. We operate our business through threetwo operating segments: Retail Banking, Commercial Banking and TreasuryCommercial andBanking. All other activities, including Treasury, are reported in Corporate/Other. See “Note 22. Reportable Operating Segments” in the notes to the consolidated financial statements included in Item 8. Financial Statements and Supplementary Data for more information.

Hawaii’s economy as a whole experienced mixed economic conditions during the year ended December 31, 2025. Although the economy remains relatively resilient inand maintains a lower unemployment rate than the wakecountry ofas a whole, the State continues to endure high consumer prices and thehousing Augustaffordability 2023challenges, wildfireswhich thatare expected to continue to affectwith the islandgradual pass-through of Maui.tariffs, as well as a steady out-migration of its population. According to the State of Hawaii Department of Business, Economic Development and Tourism, the statewide seasonally adjusted unemployment rate was 3.0%2.2% at December 31, 20242025, comparedlower to 2.9% at December 31, 2023. Nationally,than the national seasonally adjusted unemployment rate wasof 4.1% at December 31, 2024 compared to 3.7% at December 31, 2023.4.4%.

Domestic visitor arrivals for the state remain stable, with the average daily domestic passenger counts for the year ended December 31, 20242025 being relatively similar to the average daily domestic passenger counts during the year ended December 31, 2023,2024, 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 during the year ended December 31, 2024 have increasednot significantlyyet as comparedrecovered to each of the last three years, but the level of arrivals from Japan still remains below pre-pandemic levelsarrival due to the weak yen.levels.

The local Oahu housing market hascontinues remainedto relatively stable, but is experiencingexperience some softening as compared to previous years primarily due to home prices continuing to rise and high mortgageincreased interest rates. According to the Honolulu Board of Realtors, the volume of single-family home sales increased by 9.1%,3.5%, while condominium sales decreased by 2.5%,1.1%, in each case when comparing the twelveyear monthsended ofDecember 202431, 2025 with the same period in 2023. When comparing the twelve months of 2024 with the same period in 2022, however, the volume of single-family home sales decreased by 19.6%, while condominium sales decreased by 29.8%.2024. The median price of a single-family home sold on Oahu in the twelve months of 20242025 was $1,100,000,$1,139,000, an increase of 4.8%3.5% fromcompared theto same period in 2023.2024. The median price of a condominium sold on Oahu in the2025 twelvewas months$507,000, a decrease of 20241.5% wascompared $515,000,to an increase of 1.3% from the same period in 2023.2024. As of December 31, 2024,2025, months of inventory of single-family homes and condominiums on Oahu remained low atwere approximately 2.6 and 5.9 months, respectively, as compared to 2.9 and 5.2 months, respectively.respectively, as of December 31, 2024.

Net income was $230.1$276.3 million for the year ended December 31, 2024,2025, aan decreaseincrease of $4.9$46.1 million or 2%20% as compared to 2023.2024. Basic earnings per share was $1.80$2.21 for the year ended December 31, 2024,2025, aan decreaseincrease of $0.04$0.41 or 2%23% as compared to 2023.2024. Diluted earnings per share was $1.79$2.20 for the year ended December 31, 2024,2025, aan decreaseincrease of $0.05$0.41 or 3%23% as compared to 2023.2024. The decreaseincrease in net income was primarily due to a $15.0$41.0 million decreaseincrease in net interest income, a $31.2 million increase in noninterest income and a $13.4$1.8 million decrease in netnoninterest interest income.expense. This was partially offset by ana $11.9$15.5 million decreaseincrease in the provision for income taxes and a $12.5 million increase in the provision for credit losses (the “Provision”) and an $11.7 million decrease in the provision for income taxes..

Net income was $235.0$230.1 million for the year ended December 31, 2023,2024, a decrease of $30.7$4.9 million or 12%2% as compared to 2022.2023. Basic and diluted earnings per share werewas both $1.84$1.80 for the year ended December 31, 2023,2024, a decrease of $0.24$0.04 or 12%2% as compared to 2022.2023. TheDiluted earnings per share was $1.79 for the year ended December 31, 2024, a decrease of $0.05 or 3% as compared to 2023.The decrease in net income was primarily due to a $60.7$15.0 million increasedecrease in noninterest expenseincome and a $25.2$13.4 million increasedecrease in thenet Provision.interest income. This was partially offset by aan $22.6$11.9 million increasedecrease in netthe interest income, a $21.3 million increase in noninterest incomeProvision and an $11.3$11.7 million decrease in the provision for income taxes.

Our return on average total assets was 0.95%1.16% for the year ended December 31, 2023,2025, aan decreaseincrease of 1120 basis points as compared to 2022,2024, and our return on average total stockholders’ equity was 10.01%10.26% for the year ended December 31, 2023,2025, aan decreaseincrease of 143126 basis points as compared to 2022.2024. Our return on average tangible assets was 0.99%1.21% for the year ended December 31, 2023,2025, aan decreaseincrease of 1221 basis points as compared to 2022,2024, and our return on average tangible stockholders’ equity was 17.39%16.27% for the year ended December 31, 2023,2025, aan decreaseincrease of 264153 basis points as compared to 2022.2024, due to higher net income, offset by an increase in average tangible stockholders’ equity. Our efficiency ratio was 59.48%56.43% for the year ended December 31, 20232025 as compared to 55.20%61.57% in 2022.2024. Return on average tangible assets and return on average tangible stockholders’ equity are non-GAAP financial measures. For a reconciliation to the most directly comparable GAAP financial measures for return on average tangible assets and return on average tangible stockholders’ equity, see Table 2, GAAP to Non-GAAP Reconciliation.

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 20222023 at 3.25%7.50% and increased a total of 425 basis points (25 basis points in March, 50 basis points in May, 75 basis points in each month of June, July, September and November, and 50 basis points in December) to end the year at 7.50%. During 2023, the prime rate increased 100 basis points (25 basis points each in February, March, May and July) to end the year at 8.50%. InDuring 2024, the prime rate decreased a total of 100 basis points (50 basis points in September, and 25 basis points in both November and December) to end the year at 7.50%. In 2025, the prime rate decreased 75 basis points (25 basis points each in September, October and December) to end the year at 6.75%. Our loan portfolio is also impacted by changes in the SOFR. At December 31, 2025, the one-month and three-month CME Term SOFR interest rates were 3.70% and 3.66%, respectively. At December 31, 2024, the one-month and three-month CME Term SOFR interest rates were 4.33% and 4.31%, respectively. At December 31, 2023, the one-month and three-month CME Term SOFR interest rates were 5.35% and 5.33%, respectively. At December 31, 2022, the one-month and three-month CME Term SOFR interest rates were 4.36% and 4.59%, respectively. The target range for the federal funds rate, which is the cost of immediately available overnight funds, began in 20222023 at 0.00%4.25% to 0.25%,4.50%, and increased a total of 425 basis points to end the year at 4.25% to 4.50%. During 2023, the federal funds rate increased 100 basis points to end the year at 5.25% to 5.50%. InDuring 2024, the federal funds rate decreased a total of 100 basis points to end the year at 4.25% to 4.50%. ThereIn continues2025, the federal funds rate decreased 75 basis points to be uncertainty inend the changingyear marketat and economic conditions, including the possibility of additional measures that could be taken by the Federal Reserve and other government agencies related3.50% to the overall macroeconomic environment.3.75%.

The Provision was $14.8$27.2 million for the year ended December 31, 20242025, compared to a Provision of $26.6$14.8 million in 2023.2024. For the year ended December 31, 2024,2025, the Provision included $17.5$24.4 million in provision for credit losses for loans and leases, compared to $24.9$17.5 million in provision for credit losses for loans and leases in 2023,2024, and $2.9 million in provision for credit losses for the reserve for unfunded commitments, compared to a negative $2.8 million in provision for credit losses for the reserve for unfunded commitments, compared to $1.8 million in provision for credit losses for the reserve for unfunded commitments in 2023.2024. The increase in the Provision of $14.8 million was primarily due to decreasesincreases in the provision for home equity lines, commercial and industrial loans, construction loans, commercial real estate loans and homelease equity linesfinancing and the provision for unfunded commercial and industrial, construction, home equity line andline, commercial real estate and commercial and industrial commitments. This was partially offset by increasesdecreases in the provision for consumerresidential loans, commercial and industrialmortgage loans and residential mortgageconsumer loans. We recorded net charge-offs of $13.6$16.3 million and $12.2$13.6 million for the years ended December 31, 20242025 and 2023,2024, respectively. This represented net charge-offs of 0.10%0.11% and 0.09%0.10% of total average loans and leases for the years ended December 31, 20242025 and 2023,2024, respectively. The ACL was $160.4$168.5 million and $156.5$160.4 million as of December 31, 20242025 and 2023,2024, respectively, and represented 1.18% of total outstanding loans and leases as of December 31, 2025, compared to 1.11% of total outstanding loans and leases as of December 31, 2024, compared to 1.09% of total outstanding loans and leases as of December 31, 2023.2024. The reserve for unfunded commitments was $35.7 million as of December 31, 2025, compared to $32.8 million as of December 31, 2024, compared to $35.6 million as of December 31, 2023.2024. 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.

Credit and debit card fees were $61.8 million for the year ended December 31, 2025, a decrease of $2.6 million or 4% as compared to 2024. This decrease was primarily due to a $3.1 million decrease in interchange settlement fees and a $0.8 million decrease in ATM interchange and surcharge fees, partially offset by a $1.3 million increase in merchant service revenues. Credit and debit card fees were $64.4 million for the year ended December 31, 2024, an increase of $0.5 million or 1% as compared to 2023. This increase was primarily due to a $2.6 million increase in debit card interchange fees, a $1.9 million decrease in network association dues and a $1.4 million increase in interchange settlement fees, partially offset by a $3.2 million decrease in ATM interchange and surcharge fees, a $1.3 million decrease in merchant service revenues and a $0.6 million decrease in rental fees from credit card terminals. Credit and debit card fees were $63.9 million for the year ended December 31, 2023, a decrease of $2.1 million or 3% as compared to 2022. This decrease was primarily due to a $3.1 million increase in network association dues, a $2.1 million decrease in merchant service revenues and a $1.0 million decrease in ATM interchange and surcharge fees, partially offset by a $3.1 million increase in interchange settlement fees and a $1.0 million increase in debit card interchange fees.

Other service charges and fees were $53.2 million for the year ended December 31, 2025, an increase of $7.3 million or 16% as compared to 2024. This increase was primarily due to a $7.3 million increase in fees from annuities and securities and a $0.8 million increase in fees from standby letters of credit arrangements, partially offset by a $0.3 million decrease in service fees related to participation loans, a $0.2 million decrease in online banking fees and a $0.2 million decrease in insurance income. Other service charges and fees were $45.9 million for the year ended December 31, 2024, an increase of $8.6 million or 23% as compared to 2023. This increase was primarily due to a $6.9 million increase in fees from annuities and securities, a $0.3 million increase in safe deposit box rental fees, a $0.3 million increase in miscellaneous service fees, a $0.3 million increase in cash management service fees, a $0.3 million increase in insurance income and a $0.3 million increase in fees from standby letters of credit arrangements. Other service charges and fees were $37.3 million for the year ended December 31, 2023, an increase of $0.3 million or 1% as compared to 2022.

BOLI income was $20.6 million for the year ended December 31, 2025, an increase of $2.8 million or 15% as compared to 2024. This increase was due to a $4.7 million increase in BOLI earnings, partially offset by a $2.0 million decrease in death benefit proceeds from life insurance policies. BOLI income was $17.9 million for the year ended December 31, 2024, an increase of $2.5 million or 17% as compared to 2023. This increase was due to a $3.0 million increase in BOLI earnings, partially offset by a $0.4 million decrease in death benefit proceeds from life insurance policies. BOLI income was $15.3 million for the year ended December 31, 2023, an increase of $14.1 million as compared to 2022. This increase was due to an $11.0 million increase in BOLI earnings and a $3.1 million increase in death benefit proceeds from life insurance policies.

Net gains on the sale of investment securities were nil for the year ended December 31, 2025. Net losses on the sale of investment securities were $26.2 million for the year ended December 31, 2024, an increase in net losses of $27.0 million as compared to the same period in 2023. The net losses were primarily due to the investment portfolio restructuring and sale of investment securities resulting in a realized loss of $26.2 million. Net gains on the sale of investment securities were $0.8 million for the year ended December 31, 2023, an increase in net gains of $0.8 million as compared to the same period in 2022. The net gains were primarily due to a $40.8 million net realized gain on the sale of the Company’s remaining approximately 120,000 Visa Class B restricted shares, partially offset by $40.0 million of net realized losses on sales of available-for-sale investment securities.2024.

Salaries and employee benefits expense was $245.9 million for the year ended December 31, 2025, an increase of $10.3 million or 4% as compared to 2024. This increase was primarily due to a $10.7 million increase in incentive compensation, a $2.4 million increase in base salaries and related payroll taxes and a $0.5 million increase in group health plan costs. This was partially offset by a $2.0 million increase in payroll and benefit costs being deferred as loan origination costs, a $0.6 million decrease in state unemployment tax expense, a $0.3 million decrease in nonrecurring separation agreements and severance costs and a $0.3 million decrease in adjustments made to the deferred compensation plan as a result of market conditions. Salaries and employee benefits expense was $235.6 million for the year ended December 31, 2024, an increase of $9.8 million or 4% as compared to 2023. This increase was primarily due to a $9.7 million increase in incentive compensation, a $1.8 million increase in retirement plan expenses, a $1.2 million decrease in payroll and benefit costs being deferred as loan origination costs and a $1.0 million increase in group health plan costs. This was partially offset by a $1.1 million decrease in other compensation, primarily related to a decrease in nonrecurring separation agreements and severance costs, partially offset by adjustments made to the deferred compensation plan as a result of market conditions, a $0.9 million decrease in employee overtime pay expense, a $0.9 million decrease in state unemployment tax expense and a $0.6 million decrease in temporary help expenses. Salaries and employee benefits expense was $225.8 million for the year ended December 31, 2023, an increase of $26.6 million or 13% as compared to 2022. This increase was primarily due to a $12.7 million increase in base salaries and related payroll taxes, a $10.7 million decrease in payroll and benefit costs being deferred as loan origination costs, a $4.3 million increase in other compensation, primarily related to adjustments made to the deferred compensation plan as a result of market conditions and nonrecurring separation agreements and severance costs, a $1.3 million increase in retirement plan expenses, a $1.1 million increase in state unemployment tax expense and a $0.8 million increase in group health plan costs. This was partially offset by a $2.2 million decrease in incentive compensation, a $1.1 million decrease in temporary help expenses and a $0.9 million decrease in employee overtime pay expense.

Card rewards programOccupancy expense was $33.8$30.2 million for the year ended December 31, 2024,2025, an increase of $2.2$1.3 million or 7%4% as compared to 2023.2024. This increase was primarily due to a $1.6 million increase in creditbuilding card cash reward redemptions and a $1.6 million increase in interchange fees paid to our credit card partners,depreciation, partially offset by a $0.7$0.4 million decrease in priorityutilities rewardsexpense. card redemptions and a $0.3 million decrease in international transaction fees. Card rewards programOccupancy expense was $31.6$29.0 million for the year ended December 31, 2023,2024, ana increasedecrease of $0.6 million or 2% as compared to 2022.2023. This increasedecrease was primarily due to a $2.1$0.5 million increase in creditnet cardsublease cashrental reward redemptionsincome and a $1.2$0.3 million increasedecrease in interchangebuilding fees paid to our credit card partners,depreciation, partially offset by a $2.5$0.4 million decreaseincrease in prioritylease-related rewardsinsurance card redemptions.expense.

Other noninterest expense was $52.6 million for the year ended December 31, 2025, a decrease of $8.6 million or 14% as compared to 2024. This decrease was primarily due to a $4.6 million decrease in operational losses and other charge-offs, a $3.8 million decrease in expense due to adjustments to certain liabilities assumed as a result of the Reorganization Transactions, a $1.1 million decrease in costs associated with a fund acquired by the Company and a $0.6 million decrease in pension-related expenses. This was partially offset by a $1.0 million increase in charitable contributions and donations and a $0.7 million increase in brokers fees. Other noninterest expense was $61.2 million for the year ended December 31, 2024, a decrease of $1.7 million or 3% as compared to 2023. This decrease was primarily due to a $3.3 million decrease in operational losses and other charge-offs, a $2.1 million decrease in charitable contributions, a $1.0 million decrease in pension-related expenses, a $0.8 million decrease in losses incurred due to natural disasters and a $0.6 million decrease in business privilege tax expense. This was partially offset by a $3.8 million increase in expense due to adjustments to certain liabilities assumed as a result of the Reorganization Transactions, a $1.0 million increase in brokers fees, a $0.6 million increase in costs associated with a fund acquired by the Company and a $0.6 million increase in other tax expense. Other noninterest expense was $62.9 million for the year ended December 31, 2023, an increase of $5.7 million or 10% as compared to 2022. This increase was primarily due to a one-time settlement expense in connection to a lawsuit against the Company, a $2.7 million increase in charitable contributions and increases in postage expenses, signature-based card fraud expenses and travel expenses. This was partially offset by a $1.4 million decrease in pension-related expenses, and decreases in activity charges assessed on the Company’s bank accounts, general and administrative expenses primarily around supplies, insurance, meals and entertainment and shipping and delivery, software amortization expense, mortgage loan charges and other tax expense.

The provision for income taxes was $78.0 million (reflecting an effective tax rate of 22.01%) for the year ended December 31, 2025, compared with a provision for income taxes of $62.5 million (reflecting an effective tax rate of 21.35%) forin 2024. On July 4, 2025, President Trump signed and enacted the yearOne endedBig DecemberBeautiful 31,Bill 2024,Act compared(“OBBBA”) withinto law. Its enactment did not have a provisionmaterial forimpact to our income taxestax ofexpense $74.2 million (reflecting anor effective tax raterate. ofThis 24.00%)legislation made significant changes to the energy credit provisions which may impact the Company’s ability to originate solar leases in 2023.the future. Additional information about the provision for income taxes is presented in “Note 15. Income Taxes” in the notes to the consolidated financial statements included in Item 8. Financial Statements and Supplementary Data.

Our business segments are Retail Banking,Banking and Commercial Banking, andwith Treasuryall andother activities, including Treasury, reported in Corporate/Other. Table 7 summarizes net income (loss) from our business segments and Corporate/Other for the years ended December 31, 2024,2025, 20232024 and 2022.2023. Additional information about operating segment performance and Corporate/Other is presented in “Note 22. Reportable Operating Segments” in the notes to the consolidated financial statements included in Item 8. Financial Statements and Supplementary Data.

Net income for the Retail Banking segment was $183.1$250.5 million for the year ended December 31, 2023,2025, an increase of $3.4$22.7 million or 2%10% as compared to 2022.2024. The increase in net income for the Retail Banking segment was primarily due to a $21.9$24.8 million increase in net interest income andincome, a $3.6$5.6 million increase in noninterest income.income Thisand wasa $4.3 million decrease in noninterest expense, partially offset by ana $11.2$9.0 million increase in noninterestthe expenseprovision for income taxes and a Provision of $9.9$3.1 million forincrease in the year ended December 31, 2023, compared to a negative Provision of $1.0 million for the year ended December 31, 2022.Provision. The increase in net interest income was primarily due to higher deposit spreads,spreads partially offset by lowerand loan spreads. The increase in noninterest income was primarily due to increasesan increase in other service charges and fees, partially offset by a decrease in trust and investment services income, net mortgage servicing rights income and service charges on deposit accounts.income. The increasedecrease in noninterest expense was primarily due to increasesdecreases in salaries and employee benefits expense, regulatory assessments and fees, occupancy expensefees and costsoperational relatedlosses and other charge-offs. The increase in the provision for income taxes was primarily due to naturalthe disasterincrease events,in pretax income, partially offset by lowerthe overallallocation expensesof thatthe wereremeasurement of the California deferred tax assets. The increase in the Provision allocated to the Retail Banking segment. The increase in the Provisionsegment was primarily due to an increaseincreases in ourthe provision for credithome lossesequity forlines, commercial and industrial loans, construction loans, commercial real estate loans and leaseslease allocated to the Retail Banking segment.financing. The increase in total earning assets for the Retail Banking segment was primarily due to increases in our residentialcommercial real estateloan and commercialconsumer loan portfolios, partially offset by a decrease in our residential real estate loan portfolios.portfolio.

Net income for the Commercial Banking segment was $95.2$130.0 million for the year ended December 31, 2023,2025, a decrease of $0.6$13.0 million or 1%9% as compared to 2022.2024. The decrease in net income for the Commercial Banking segment was primarily due to a Provision of $15.0$23.0 million fordecrease thein yearnet endedinterest December 31, 2023, compared toincome, a negative Provision of $1.2 million for the year ended December 31, 2022, in addition to a $2.9$3.8 million increase in the Provision and a $1.1 million decrease in noninterest income, partially offset by a $10.6 million decrease in noninterest expense and a $2.2 million decrease in noninterest income. This was partially offset by an $18.4 million increase in net interest income and a $2.2$4.4 million decrease in the provision for income taxes. The increasedecrease in thenet Provisioninterest income was primarily due to anlower loan and lease spreads and deposits spreads, partially offset by higher average deposit balances. The increase in ourthe provision for credit losses for loans and leasesProvision allocated to the Commercial Banking segment. The increase in noninterest expensesegment was primarily due to an increase in regulatory assessment and fees, a one-time settlement expense in connection to a lawsuit against the Company mentioned previously, and increases in salariesthe provision for home equity lines, commercial and benefitsindustrial expenseloans, construction loans, commercial real estate loans and cardlease rewards program expense, partially offset by lower overall expenses that were allocated to the Commercial Banking segment.financing. The decrease in noninterest income was primarily due to a decrease in credit and debit card fees.fees and an excise tax refund and insurance proceeds received in 2024, partially offset by increases in customer-related interest rate swap fees, volume-based incentives and service charges on deposit accounts. The increasedecrease in netnoninterest interest incomeexpense was primarily due to higher loanoverall averagecredits balancesthat were allocated to the Commercial Banking segment and spreads, partially offset by a decrease in loanregulatory assessment and fees. The decrease in the provision for income taxes was primarily due to the decrease in pretax income.income, in addition to the allocation of the remeasurement of the California deferred tax assets. The increasedecrease in total earning assets for the Commercial Banking segment was primarily due to increasesa decrease in our commercial loan and lease financing portfolios, partially offset by a decrease in our consumer loan portfolio.

Item 1A of Part I of the Company’s Annual Report on Form 10-K for the year ended December 31, 2025, filed with the SEC on February 27, 2026 contains a discussion of our risk factors. Except as set forth in this Item 1A and to the extent that additional factual information disclosed in this Quarterly Report on Form 10-Q relates to such risk factors, there are no material changes from the risk factors as disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2025.

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 regarding the expected timing, completion and effects of the proposed business combination between First Hawaiian, Inc. (“FHI”) and TriCo Bancshares (“TriCo”) and the plans, objectives and expectations of FHI are forward-looking statements. 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; the development and use of AI; our ability to successfully develop and commercialize new or enhanced products and services; changes in the demand for our products and services; risks associated with the sale of loans and with our use of appraisals in valuing and monitoring loans; the possibility that actual results may differ from estimates and forecasts; fluctuations in the fair value of our assets and liabilities and off-balance sheet exposures; the effects of the failure of any component of our business infrastructure provided by a third party; the potential for environmental liability; the risk of being subject to litigation and the outcome thereof; the impact of, and changes in, applicable laws, regulations and accounting standards and policies; possible changes in trade, monetary and fiscal policies of, and other activities undertaken by, governments, agencies, central banks and similar organizations, including trade and other geopolitical tensions resulting from conflicts in the Middle East, 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; 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; the failure to close our previously announced merger with TriCo when expected or at all because required regulatory, First Hawaiian stockholder, TriCo shareholder or other approvals, or other conditions to closing, are not received or satisfied on a timely basis or at all, and the risk that any regulatory approvals may result in the imposition of conditions that could adversely affect the combined company or the expected benefits of the proposed merger; the occurrence of any event, change or other circumstances that could give rise to the right of one or both of the parties to terminate the Merger Agreement; the proposed merger being more expensive or taking longer to complete than anticipated, including as a result of unexpected factors or events; the diversion of management’s attention from ongoing business operations and opportunities due to the proposed merger; the dilutive effect of shares of our common stock to be issued in connection with the proposed merger; changes in our or TriCo’s share price before closing; the possibility that the anticipated benefits of the proposed merger with TriCo, including anticipated cost savings and strategic gains, are not realized when expected or at all, including as a result of the impact of, or problems arising from, the integration of the companies or as a result of the strength of the economy, competitive factors in the areas where we do business, or as a result of other unexpected factors or events; potential adverse reactions or changes to business or employee relationships, including those resulting from the announcement or completion of the proposed merger with TriCo; any change in the purchase accounting assumptions used regarding the TriCo assets acquired and liabilities assumed to determine the fair value and credit marks; and the outcome of any legal proceedings that may be instituted against FHI or TriCo related to the proposed merger; and damage to our reputation from any of the factors described above.

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, 2025.2025, as well as the risk factors related to the proposed merger with TriCo set forth in Part II, Item 1A of this Quarterly Report. 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 any forward-looking statement, whether as a result of new information, future developments or otherwise, except as required by applicable law.

Hawaii’s economy continues to remain resilient in an environment facing challenges, including from: high consumer prices and housing affordability, both of which are expected to continue with the gradual pass-through of tariffs and the ongoing conflict with Iran; a steady out-migration of its population; adverse weather events, such as the Kona Low storms,events alongside rising insurance costs; and slower economic growth with a 1.7%1.6% forecasted increase in the real gross domestic product for Hawaii in 2026 according to the State of Hawaii Department of Business, Economic Development & Tourism (“DBEDT”) as compared to a 2.2% forecasted increase for the United States overall in 2026.2026 according to the Congressional Budget Office’s Budget and Economic Outlook. Recent geopolitical developments, including the conflicts in the Middle East, elevate uncertainty.

Despite these challenges, according to the State of Hawaii Department of Business, Economic Development and Tourism,DBEDT, the statewide seasonally adjusted unemployment rate was 2.3%2.6% at FebruaryJune 28,30, 2026, which is lower than the national seasonally adjusted unemployment rate of 4.4%.4.2%.

Tourism also remains stable, with the average daily domestic passenger counts for the threesix months ended MarchJune 31,30, 2026 sixfive percent higher than the average daily domestic passenger counts during the threesix months ended MarchJune 31,30, 2025, according to the Hawaii Tourism Authority. Hawaii’s economy depends significantly on conditions of the U.S. economy and key international economies, particularly Japan, and the broader demand for travel of these key markets. International visitor arrivals have not yet recovered to pre-pandemic arrival levels and demand for tourism could be negatively impacted by increasing fuel prices.

The local Oahu housing market, particularly condominiums, continues to experience some softening as compared to previous years primarily due to continued high interest rates and prices. According to the Honolulu Board of Realtors, the volume of single-family home sales increased by 10.9%,3.9%, while condominium sales decreased by 3.6%,2.3%, in each case when comparing the threesix months ended MarchJune 31,30, 2026 with the same period in 2025. The median price of a single-family home sold on Oahu during the first threesix months of 2026 was $1,180,000, an increase of 2.6% compared to the same period in 2025. The median price of a condominium sold on Oahu during the first threesix months of 2026 was $510,000,$515,000, equivalentan increase of 1.5% compared to the median price during the same period in 2025. As of MarchJune 31,30, 2026, months of inventory of single-family homes and condominiums on Oahu were approximately 2.83.2 and 6.37.0 months, respectively, as compared to 3.33.7 and 6.27.0 months, respectively, as of MarchJune 31,30, 2025.

Net income was $67.8$73.4 million for the three months ended MarchJune 31,30, 2026, an increase of $8.5$0.1 million or 14% as compared to the same period in 2025. Basic and diluted earnings per share waswere $0.55both $0.60 for the three months ended MarchJune 31,30, 2026, an increase of $0.08$0.02 or 17% as compared to the same period in 2025. Diluted earnings per share was $0.55 for the three months ended March 31, 2026, an increase of $0.08 or 17%3% as compared to the same period in 2025. The slight increase in net income was primarily due to a $7.0$7.4 million increase in net interest income, a $5.5 million decrease in the provision for credit losses (the “Provision”)income and a $2.3$6.3 million increase in noninterest income. This was partially offset by a $4.3$7.0 million increase in the provision for income taxes, a $5.5 million increase in noninterest expense and a $2.0$1.1 million increase in the provision for incomecredit taxes.losses (the “Provision”).

Our return on average total assets was 1.14%1.23% for the three months ended MarchJune 31,30, 2026, anconsistent increase of 13 basis points fromwith the same period in 2025, and our return on average total stockholders’ equity was 9.86%10.52% for the three months ended MarchJune 31,30, 2026, ana increasedecrease of 7751 basis points forfrom the same period in 2025. Our return on average tangible assets was 1.19%1.28% for the three months ended MarchJune 31,30, 2026, anconsistent increase of 14 basis points fromwith the same period in 2025, and our return on average tangible stockholders’ equity was 15.33%16.34% for the three months ended MarchJune 31,30, 2026, ana increasedecrease of 74127 basis points from the same period in 2025. Our efficiency ratio was 57.77%56.17% for the three months ended MarchJune 31,30, 2026 compared to 58.22%57.23% for the same period in 2025.

Our results for the three months ended MarchJune 31,30, 2026 were highlighted by the following:

For the threesix months ended MarchJune 31,30, 2026, we continued to maintain high levels of liquidity and adequate reserves for credit losses. We also remained well-capitalized. Common Equity Tier 1 (“CET1”) was 13.12%13.27% as of MarchJune 31,30, 2026, aan decreaseincrease of 510 basis points from December 31, 2025. The decreaseincrease in CET1 was primarily due to commonearnings stockfor repurchasedthe andsix months ended June 30, 2026, partially offset by dividends declared and paid to the Company’s stockholdersstockholders, common stock repurchased and an increase in risk-weighted assets, partially offset by earnings for the three months ended March 31, 2026.assets.

For the three months ended MarchJune 31,30, 2026 and 2025, 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.

Net interest income, on a fully taxable-equivalent basis, was $168.5$171.9 million for the three months ended MarchJune 31,30, 2026, an increase of $6.7$7.5 million or 4%5% compared to the same period in 2025. Our net interest margin was 3.19%3.25% for the three months ended MarchJune 31,30, 2026, an increase of 1114 basis points from the same period in 2025. The increase in net interest income, on a fully taxable-equivalent basis, was primarily due to lower deposit funding and borrowing costs and higher average balances on our interest-bearing deposits in other banks,costs, partially offset by lower earning asset yields driven by lower yields in our loan and lease portfolio during the three months ended MarchJune 31,30, 2026, compared to the same period in 2025. Deposit funding costs were $62.1$61.2 million for the three months ended MarchJune 31,30, 2026, a decrease of $9.6$9.1 million or 13% compared to the same period in 2025, primarily due to a decrease in interest rates. Rates paid on our interest-bearing deposits were 1.78%1.75% for the three months ended MarchJune 31,30, 2026, a decrease of 3834 basis points compared to the same period in 2025, primarily due to rate decreases. Total borrowing costs were nil for the three months ended MarchJune 31,30, 2026, a decrease of $2.6$250.0 million compared to the same period in 2025.2025, as $250.0 million of FHLB advances matured during the third quarter of 2025. For the three months ended March 31, 2026, the average balance on our interest-bearing deposits in other banks was $1.5 billion, an increase of $283.9 million or 24% compared to the same period in 2025. The yield on our loan and lease portfolio was 5.29%5.30% for the three months ended MarchJune 31,30, 2026, a decrease of 1514 basis points as compared to the same period in 2025, primarily due to decreases in yields from our adjustable-rate commercial real estate,estate and commercial and industrial and construction loans, which are typically based on the SOFR.

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 decreased by75by 75 basis points in 2025 to end the year at 6.75%, where it remained as at the end of the firstsecond quarter of 2026. As noted above, our loan portfolio is also impacted by changes in the SOFR. At MarchJune 31,30, 2026, the one-month and three-month CME Term SOFR interest rates were 3.66%3.65% and 3.68%,3.73%, respectively. At MarchJune 31,30, 2025, the one-month and three-month CME Term SOFR interest rates were 4.32% and 4.29%, respectively. The target range for the federal funds rate, which is the cost of immediately available overnight funds, decreased 75 basis points in 2025 to end the year at 3.50% to 3.75%, where it remainsremained as at MarchJune 31,30, 2026. There continues to be uncertainty in the changing market and economic conditions.

The Provision was $5.0$5.6 million for the three months ended MarchJune 31,30, 2026, an increase of $1.1 million or 24% compared to the same period in 2025. The increase was primarily due to increases in the provision for consumer loans, construction loans and commercial real estate loans and the provision for unfunded construction commitments. This was partially offset by decreases in the provision for commercial and industrial loans and residential mortgage loans. We recorded net charge-offs of loans and leases of $4.1 million and $3.3 million for the three months ended June 30, 2026 and 2025, respectively. This represented net charge-offs of 0.11% and 0.09% of average loans and leases, on an annualized basis, for the three months ended June 30, 2026 and 2025, respectively. The Provision was $10.6 million for the six months ended June 30, 2026, a decrease of $5.5$4.4 million or 52%29% compared to the same period in 2025. The decrease was primarily due to decreases in the provision for commercial and industrial loans, consumer loans, construction loans and home equity lines and lease financing and the provision for unfunded commercialhome andequity industrial and commercial real estateline commitments. This was partially offset by increases in the provision for residential mortgage loans, commercial andreal industrialestate loans and commercialresidential real estatemortgage loans and the provision for unfunded construction commitments. We recorded net charge-offs of loans and leases of $4.9$9.0 million and $3.8$7.1 million for the threesix months ended MarchJune 31,30, 2026 and 2025, respectively. This represented net charge-offs of 0.14%0.13% and 0.11%0.10% of average loans and leases, on an annualized basis, for the threesix months ended MarchJune 31,30, 2026 and 2025, respectively. The ACL was $169.3$168.1 million as of MarchJune 31,30, 2026, ana increasedecrease of $0.9$0.4 million or 1% from December 31, 2025 and represented 1.17%1.15% of total outstanding loans and leases as of MarchJune 31,30, 2026, compared to 1.18% of total outstanding loans and leases as of December 31, 2025. The reserve for unfunded commitments was $34.9$37.7 million as of MarchJune 31,30, 2026, compared to $35.7 million as of December 31, 2025. 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.

Table 57 presents the major components of noninterest income for the three months ended MarchJune 31,30, 2026 and 2025 and Table 8 presents the major components of noninterest income for the six months ended June 30, 2026 and 2025:

n/m – Denotes a variance that is not a meaningful metric to inform the change in noninterest income for the three months ended MarchJune 31,30, 2026 to the same period in 2025.

Othern/m – Denotes a variance that is not a meaningful metric to inform the change in noninterest income was $2.6 million for the threesix months ended MarchJune 31,30, 2026, a minimal change as compared2026 to the same period in 2025.

Table 69 presents the major components of noninterest expense for the three months ended MarchJune 31,30, 2026 and 2025 and Table 10 presents the major components of noninterest expense for the six months ended June 30, 2026 and 2025:

Total noninterest expense was $127.9$130.4 million for the three months ended MarchJune 31,30, 2026, an increase of $4.3$5.5 million or 4% as compared to the same period in 2025. Total noninterest expense was $258.3 million for the six months ended June 30, 2026, an increase of $9.8 million or 4% as compared to the same period in 2025.

Contracted services and professional fees were $14.0$18.4 million for the three months ended MarchJune 31,30, 2026, aan decreaseincrease of $0.9$2.4 million or 6%15% as compared to the same period in 2025. This decreaseincrease was primarily due to a $1.0$4.2 million increase in audit, legal and consultant fees, partially offset by a $1.7 million decrease in outside services, primarily attributable to technology-related projects, marketing and new customer services. Contracted services and professional fees were $32.4 million for the six months ended June 30, 2026, an increase of $1.5 million or 5% as compared to the same period in 2025. This increase was primarily due to a $4.3 million increase in audit, legal and consultant fees, partially offset by a $2.7 million decrease in outside services, primarily attributable to technology-related projects, marketing and new customer services.

Occupancy expense was $7.8$7.9 million for the three months ended MarchJune 31,30, 2026, a decreaseminimal of $0.3 million or 4%change as compared to the same period in 2025. Occupancy expense was $15.7 million for the six months ended June 30, 2026, a decrease of $0.3 million or 2% as compared to the same period in 2025.

Equipment expense was $14.8$14.6 million for the three months ended MarchJune 31,30, 2026, an increase of $0.9$0.5 million or 7%4% as compared to the same period in 2025. This increase was primarily due to a $0.5$0.3 million increase in technology-related amortization and licensing and maintenance fees and a $0.2 million increase in furniture and equipment depreciation. Equipment expense was $29.3 million for the six months ended June 30, 2026, an increase of $1.4 million or 5% as compared to the same period in 2025. This increase was primarily due to a $0.8 million increase in furniture and equipment depreciation and a $0.4$0.7 million increase in technology-related amortization and licensing and maintenance fees.

Regulatory assessment and fees were $3.2$3.4 million for the three months ended MarchJune 31,30, 2026, a decrease of $0.6$0.3 million or 15%9% as compared to the same period in 2025. Regulatory assessment and fees were $6.7 million for the six months ended June 30, 2026, a decrease of $0.9 million or 12% as compared to the same period in 2025. 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. As a result, we recorded a net expense related to the additional special assessment of $3.5 million for the year ended December 31, 2024. In December 2025, the FDIC reduced the rate at which the assessment is collected for the eighth quarter of the collection period, with an invoice payment date of March 30, 2026, from 3.36 basis points to 2.97 basis points. We recorded a reduction in the expense related to the additional special assessment of $2.6 million in 2025 and $0.2 million in the first quarter of 2026.

Advertising and marketing expense was $2.3$2.2 million for the three months ended MarchJune 31,30, 2026, an increase of $0.1 million or 3%7% as compared to the same period in 2025. Advertising and marketing expense was $4.4 million for the six months ended June 30, 2026, an increase of $0.2 million or 5% as compared to the same period in 2025.

Card rewards program expense was $8.4 million for the three months ended MarchJune 31,30, 2026, a minimal change as compared to the same period in 2025. Card rewards program expense was $16.8 million for the six months ended June 30, 2026, an increase of $0.5 million or 6%3% as compared to the same period in 2025. This increase was primarily due to a $0.4$0.3 million increase in interchange fees paid to our credit card partnerscash reward redemptions and a $0.2 million increase in priority rewards card redemptions.

Other noninterest expense was $13.3$13.2 million for the three months ended MarchJune 31,30, 2026, a decrease of $0.1 million as compared to the same period in 2025. Other noninterest expense was $26.5 million for the six months ended June 30, 2026, an increase of $0.6$0.5 million or 5%2% as compared to the same period in 2025. This increase was primarily due to a $0.7$0.8 million increase in charitable contributions andcontributions, a $0.2$0.3 million increase in postage expenses, a $0.3 million increase in brokers fees,fees and a $0.3 million increase in operational losses and other charge-offs, partially offset by a $1.0 million decrease in software amortization expense and a $0.3 million decrease in softwarepension-related amortization expense.expenses.

The provision for income taxes was $19.7$21.9 million (reflecting an effective tax rate of 22.50%22.95%) for the three months ended MarchJune 31,30, 2026, compared with a provision for income taxes of $17.7$14.9 million (reflecting an effective tax rate of 23.00%16.86%) for the same period in 2025. The changeprovision infor theincome taxes was $41.5 million (an effective tax rate wasof partially22.73%) for the six months ended June 30, 2026, compared with a provision for income taxes of $32.6 million (an effective tax rate of 19.72%) for the same period in 2025. The lower effective tax rates in 2025 were primarily due to anthe increaserevaluation of the California deferred tax assets due to the change in taxthe creditsCalifornia apportionment formula for the three months ended March 31, 2026.banks.

Our business segments are Retail Banking and Commercial Banking, with all other activities, including Treasury, reported in Corporate/Other. Table 711 summarizes net income (loss) from our business segments and Corporate/Other for the three and six months ended MarchJune 31,30, 2026 and 2025. Additional information about operating segment performance and Corporate/Other is presented in “Note 16. Reportable Operating Segments” contained in our unaudited interim consolidated financial statements.

During the quarter ended December 31, 2025, we realigned our internal organizational and management reporting structure. As a result of this change, we reduced our reportable operating segments from three to two. Our reportable segments are now Retail Banking and Commercial Banking. Activities previously reported within the Treasury and Other segment are now included in Corporate/Other, as Treasury exists to support our operating segments. The change in reportable segments reflects how our chief operating decision maker currently evaluates performance and allocates resources. In addition, during the third quarter of 2025, we made changes to the internal measurement of segment operating profits for the purpose of evaluating segment performance and resource allocation. The primary reason for the change was to align loan and deposit balances within the business segment that directly manages them. Specifically, certain loan and deposit balances previously included as part of the Retail Banking and Commercial Banking segments were reclassified among the segments and what is now Corporate/Other. The reallocation of select loan and deposit balances affected net interest income, net interest income after provision for credit losses, provision for income taxes, net income and segment earning assets. We have reported our selected financial information using the new loan and deposit balance alignments and using two reportable operating segments for the three and six months ended MarchJune 31,30, 2026. Prior-period segment information has been recast to conform to the current presentation.

Net income for the Retail Banking segment was $60.1$68.2 million for the three months ended MarchJune 31,30, 2026, an increase of $2.6$2.8 million or 5%4% as compared to the same period in 2025. The increase in net income for the Retail Banking segment was primarily due to a $3.7$5.8 million increase in net interest income, a $2.2$1.4 million increase in noninterest income, a $1.0 million decrease in noninterest expense and a $0.9 million decrease in the Provision, and a $1.5 million increase in noninterest income, partially offset by a $3.4 million increase in noninterest expense and a $1.3$6.1 million increase in the provision for income taxes. The increase in net interest income was primarily due to higher deposit spreads and higher loan spreads. The increase in noninterest income was primarily due to increases in other service charges and fees and service charges on deposit accounts. The decrease in noninterest expense was primarily due to lower overall expenses that were allocated to the Retail Banking segment, partially offset by increases in occupancy expense and salaries and employee benefits expense. The decrease in the Provision allocated to the Retail Banking segment was primarily due to decreases in the provision for consumercommercial and industrial loans and residential mortgage loans, partially offset by increases in the provision for residentialconsumer loans.loans, Theconstructions increase in noninterest income was primarily due to an increase in other service chargesloans and fees.commercial Thereal increaseestate in noninterest expense was primarily due to an increase in salaries and employee benefits expense, an increase in occupancy expense and higher overall expenses that were allocated to the Retail Banking segment.loans. The increase in the provision for income taxes was primarily due to the increaseallocation of the revaluation of the California deferred tax assets in pretax income.2025.

Net income for the Commercial Banking segment was $31.4$36.8 million for the three months ended MarchJune 31,30, 2026, an increase of $0.6$3.8 million or 2%11% as compared to the same period in 2025. The increase in net income for the Commercial Banking segment was primarily due to a $2.0$2.5 million increase in net interest income, a $2.4 million increase in noninterest income, a $0.9 million decrease in noninterest expense and a $0.8 million decrease in the Provision, partially offset by a $0.8$2.8 million increase in noninterest income and a $0.2 million decrease in the provision for income taxes,taxes. partiallyThe offset by a $2.0 million decreaseincrease in net interest income was primarily due to higher average loan balances and ahigher $0.5loan millionfees. The increase in noninterest expense.income was primarily due to excise tax refunds received during the three months ended June 30, 2026 and an increase in customer-related interest rate swap fees. The decrease in noninterest expense was primarily due to higher overall credits that were allocated to the Commercial Banking segment. The decrease in the Provision allocated to the Commercial Banking segment was primarily due to decreases in the provision for consumercommercial and industrial loans and residential mortgage loans, partially offset by increases in the provision for residentialconsumer loans, construction loans and commercial real estate loans. The increase in noninterest income was primarily due to an increase in credit and debit card fees and an increase in service charges on deposit accounts. The decrease in the provision for income taxes was primarily due to anthe increaseallocation of the revaluation of the California deferred tax assets in tax credits. The decrease in net interest income was primarily due to lower deposit spreads and lower loan and lease spreads, partially offset by higher average deposit balances and higher average loan balances. The increase in noninterest expense was primarily due to higher card reward program expense and higher salaries and employee benefits expense, partially offset by higher overall credits that were allocated to the Commercial Banking segment.2025.