Company: BOH
Filing Date: 2025-03-04
Form Type: 10-K
Source: 0000950170-25-031193
Chunk: 213

Company: BANK OF HAWAII CORP
Filing Date: 2025-03-04
Form: 10-K
Item: Item 7
Chunk 213
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 Note 4 in Item 8. “Notes to Consolidated Financial Statements” for more information on the Allowance and credit quality indicators.

Reserve for Unfunded Commitments

The Unfunded Reserve was $2.1 million as of December 31, 2024, and $6.0 million as of December 31, 2023, a decrease of $3.9 million, which was primarily due to the impact of slightly lower historical loss rates and lower unfunded commitments.

Provision for Credit Losses

The provision for credit losses was $11.2 million for the year ended December 31, 2024 compared to $9.0 million in the prior year. The increase in the provision was due to a higher provision for the Allowance for loans and leases, partially offset by a lower provision for the Unfunded Reserve. 

Other Credit Risks

In the normal course of business, we serve the needs of state and political subdivisions in multiple capacities, including traditional banking products such as deposit services, and by investing in municipal debt securities. The carrying value of our municipal debt securities was $63.9 million as of December 31, 2024, and $63.8 million as of December 31, 2023. We also maintained investments in corporate bonds with a carrying value of $682.2 million as of December 31, 2024, and $669.2 million as of December 31, 2023. We are exposed to credit risk in these investments should the issuer of a security be unable to meet its financial obligations. This may result in the issuer failing to make scheduled interest payments and/or being unable to repay the principal upon maturity.

Our use of derivative financial instruments exposes the Company to counterparty credit risk. See Note 17 in Item 8. “Notes to Consolidated Financial Statements” for more information.

Market Risk

Market risk is the potential of loss arising from adverse changes in interest rates and prices. We are exposed to market risk as a consequence of the normal course of conducting our business activities. Our market risk management process involves measuring, monitoring, and mitigating risks that can significantly impact our consolidated statements of income and condition. In this management process, we balance market risks with expected returns to enhance earnings performance while managing volatility to an acceptable level.

Our primary market risk exposure is interest rate risk.

Interest Rate Risk

The objective of our interest rate risk management process is to optimize net interest income while operating within acceptable limits. This involves balancing expected