Company: BOH
Filing Date: 2025-10-28
Form Type: 10-Q
Source: 0000046195-25-000037
Chunk: 159

Company: BANK OF HAWAII CORP
Filing Date: 2025-10-28
Form: 10-Q
Item: Part I, Item 8
Chunk 159
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 cost basis of the closed portfolios used in these hedging relationships was $2.8 billion and $3.0 billion, respectively.Derivatives Not Designated as Hedging InstrumentsInterest Rate Lock Commitments/Forward CommitmentsThe Company enters into interest rate lock commitments (“IRLCs”) for residential mortgage loans which commit us to lend funds to a potential borrower at a specific interest rate and within a specified period of time. IRLCs that relate to the origination of mortgage loans that will be held for sale are considered derivative financial instruments under applicable accounting guidance. Outstanding IRLCs expose the Company to the risk that the price of the mortgage loans underlying the commitments may decline due to increases in mortgage interest rates from inception of the rate lock to the funding of the loan. To mitigate this risk, the Company utilizes forward commitments as economic hedges against the potential decreases in the values of the loans held for sale. IRLCs and forward commitments are free-standing derivatives which are carried at fair 

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value with changes recorded in the mortgage banking component of noninterest income in the Company’s consolidated statements of income.Interest Rate Swap AgreementsThe Company enters into interest rate swap agreements to facilitate the risk management strategies of a small number of commercial banking customers. The Company mitigates the risk of entering into these agreements by entering into equal and offsetting interest rate swap agreements with highly rated third-party financial institutions. The interest rate swap agreements are free-standing derivatives and are recorded at fair value in the Company’s unaudited consolidated statements of condition (asset positions are included in other assets and liability positions are included in other liabilities). The Company is party to master netting arrangements with its financial institution counterparties; however, the Company does not offset assets and liabilities under these arrangements for financial statement presentation purposes. The master netting arrangements provide for a single net settlement of all swap agreements, as well as collateral, in the event of default on, or termination of, any one contract. Collateral, usually in the form of cash and marketable securities, is posted by the party (i.e., the Company or the financial institution counterparty) with net liability positions in accordance with contract thresholds. The Company had net asset positions with its financial institution counterparties totaling $71.2 million and $136.1 million as of September 30, 2025 and December 31, 2024, respectively.Conversion Rate Swap AgreementsAs certain sales of Visa Class B restricted shares were completed, the Company entered into conversion rate swap agreements with the buyers that require