Company: BOH
Filing Date: 2025-07-28
Form Type: 10-Q
Source: 0001628280-25-036240
Chunk: 153

Company: BANK OF HAWAII CORP
Filing Date: 2025-07-28
Form: 10-Q
Item: Part I, Item 8
Chunk 153
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 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 $82.8 million and $136.1 million as of June 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 payment to the buyers in the event Visa further reduces the conversion ratio of Class B into Class A unrestricted common shares. In the event of Visa increasing the conversion ratio, the buyers would be required to make payment to the Company. As of June 30, 2025 and December 31, 2024, the conversion rate swap agreements were valued at zero (i.e., no contingent liability recorded) as further reductions to the conversion ratio were deemed not reasonably estimable by management.Makewhole AgreementsIn 2024, the Company entered into makewhole agreements with certain buyers of its Visa Class B restricted shares that reduces the payments