# EDGAR Filing Document

**Accession Number:** 0000046195
**File Stem:** 0001193125-23-074095
**Filing Date:** 2023-3
**Character Count:** 306959
**Document Hash:** 14f2a2ddc95cbd17f1902b4caf271f5b
**Contains OCR:** False
**Source Format:** 

## Filing Content

## Filing Summary
**0001193125-23-074095.hdr.sgml**: 20230317

**ACCESSION NUMBER**: 0001193125-23-074095

**CONFORMED SUBMISSION TYPE**: ARS

**PUBLIC DOCUMENT COUNT**: 1

**CONFORMED PERIOD OF REPORT**: 20221231

**FILED AS OF DATE**: 20230317

**DATE AS OF CHANGE**: 20230317

**EFFECTIVENESS DATE**: 20230317

**FILER**: 

**COMPANY DATA:**
- **COMPANY CONFORMED NAME:** BANK OF HAWAII CORP
- **CENTRAL INDEX KEY:** 0000046195
- **STANDARD INDUSTRIAL CLASSIFICATION:** STATE COMMERCIAL BANKS [6022]
- **IRS NUMBER:** 990148992
- **STATE OF INCORPORATION:** DE
- **FISCAL YEAR END:** 1231

**FILING VALUES:**
- **FORM TYPE:** ARS
- **SEC ACT:** 1934 Act
- **SEC FILE NUMBER:** 001-06887
- **FILM NUMBER:** 23743951

**BUSINESS ADDRESS:**
- **STREET 1:** 130 MERCHANT STREET
- **CITY:** HONOLULU
- **STATE:** HI
- **ZIP:** 96813
- **BUSINESS PHONE:** 8886433888

**MAIL ADDRESS:**
- **STREET 1:** 130 MERCHANT STREET
- **CITY:** HONOLULU
- **STATE:** HI
- **ZIP:** 96813

**FORMER COMPANY:**
- **FORMER CONFORMED NAME:** PACIFIC CENTURY FINANCIAL CORP
- **DATE OF NAME CHANGE:** 19970430

**FORMER COMPANY:**
- **FORMER CONFORMED NAME:** BANCORP HAWAII INC
- **DATE OF NAME CHANGE:** 19920703

**FORMER COMPANY:**
- **FORMER CONFORMED NAME:** HAWAII BANCORPORATION INC
- **DATE OF NAME CHANGE:** 19800128

### Attached PDF Documents

**Attachment 1:** `d464999dars.pdf`

125

YEARS

CELEBRATING
OUR STORIES

2022 ANNUAL REPORT Bank of Hawaii

# Contents

- 1 Chairman's Message
- 5 2022 Financial Summary
- 6 Celebrating 125 Years
- 16 Year in Review
- 21 Our Community
- 25 Our Employees
- 29 Client Profiles
- 50 2022 Financial Reports
- 52 Relative Stock Price
- 54 Executive and Operating Committees
- 56 Board of Directors
- 57 Shareholder Information

## ON THE COVER

*Canoe Builders* by Lee Lawrie, 1927

More information about the artwork featured on the cover can be found on page 53 of this report.

©2023, Bank of Hawaii Corporation, dba Bank of Hawai'i Corporation. Bank of Hawai'i is a registered trademark, and BankLana'i, Bankoh, EASE by Bank of Hawai'i, SimpliFi, SimpliFi Arena, and SimpliFi Mortgage are registered service marks of Bank of Hawaii. The Bank of Hawai'i logo and Bank of Hawai'i are trademarks of Bank of Hawaii. Bankoh Investment Services, Inc. is a non-banking subsidiary of Bank of Hawaii, member FINRA AND SIPC. Zelle is a registered service mark of Early Warning Services, LLC. All other trademarks and service marks appearing in this report, in print or online, are the property of their respective owners and no claim of ownership is made by their use. The individuals and/or owners of any other trademarks, logos, brands or other designations or origin mentioned herein did not sponsor, approve or endorse this publication.

CHAIRMAN'S MESSAGE

![img-0.jpeg](img-0.jpeg)

![img-1.jpeg](img-1.jpeg)

## Dear Fellow Shareholders,

In December 2022, Bank of Hawai‘i reached a major milestone-our 125$^{th}$ anniversary. Our company was founded in 1897 in the newly formed Republic of Hawai‘i by three businessmen and friends who could have never foreseen the tremendous changes on the horizon for Hawai‘i and for the bank.

As I look back at the bank’s growth since its founding and an incredible year of celebration, I also contemplate the ongoing adaptation to the once-in-a-century challenges of the COVID-19 pandemic, and the support we delivered that made an important difference.

Our conservative financial approach and prudent risk management combined with our investment in people and digital options provided us the resilience needed to meet challenges and create opportunities. It positioned us well to make swift changes and serve our customers in new ways while also maintaining specialized services in person. We have built a supportive foundation over 125 years that focuses on solid relationships with employees, customers and the community; environmental sustainability; and innovation.

Our 125$^{th}$ anniversary is also reflective of our strong brand and the values we embody-excellence, integrity, respect, innovation, commitment and teamwork. We have an abiding appreciation for all our stakeholders who have supported us over the last 125 years.

I’m honored to be part of the leadership of this special company whose history is also part of Hawai‘i’s history. You may read more about Bank of Hawai‘i’s 125-year story in a special section of this annual report.

BANK OF HAWAII 2022 ANNUAL REPORT 1

## Continuing Financial Strength

We made significant progress on our strategic initiatives in 2022, which positions us well for continued long-term growth. Bank of Hawai'i finished 2022 with a solid financial performance. We experienced quality core market loan growth in 2022, and continued net interest income and margin expansion. Asset quality, capital and liquidity remained strong at year end.

Diluted earnings per common share were $5.48 for the full year of 2022, compared with $6.25 for the full year of 2021. Net income for the year was $225.8 million, down 10.9% from the previous year. Despite rising interest rates, we saw continued loan growth to $13.6 billion, up 11.3% compared to 2021. In addition, total deposits ended the year at $20.6 billion, up 1.3% from year-end 2021.

Thanks to the hard work of our dedicated employees we are honored to have received the following recognition in 2022.

- Newsweek ranked Bank of Hawai'i **No. 3 among "America's Most Trusted Companies"** in the banking industry category, and the bank is the only Hawai'i business to appear on the list.
- Readers of the following publications selected Bank of Hawai'i as **"Hawai'i's Best Bank"**:

*Honolulu Star-Advertiser*  
(12th straight year),

*Hawaii Tribune-Herald*  
(7th straight year),

*West Hawaii Today*  
(3rd straight year), and

*The Garden Island*.

- Bank of Hawai'i was recognized by Junior Achievement USA with the **Bronze U.S. President's Volunteer Service Award** for the 2021-2022 school year.

- Additionally, Bank of Hawai'i continues to maintain its Aa3 rating for Long-Term Deposits and its a2 rating of the Baseline Credit Assessment by Moody's Investors Service (as of Dec. 2022).

## Recovery Continues for Hawai'i's Economy

Economic recovery in the state is improving with the return of visitors. While still not at pre-pandemic levels, total visitor arrivals for 2022 are nearing that number. Arrivals increased 36.4% to 9,247,848, compared to 6,777,760 in 2021. Visitor spending increased to $19.29 billion. The long awaited return of international travelers should advance the industry recovery. The Hawai'i State Department of Business, Economic Development & Tourism (DBEDT) is forecasting an increase of 6.5% in visitor arrivals and 7.1% in visitor spending in 2023 over 2022.

Hawai'i's unemployment rate has also improved. According to DBEDT, Hawai'i's unemployment rate was 3.2% in December 2022 compared to 4.3% at the end of 2021. Nationally, the rate was 3.5%. Historically, the jobless rate in Hawai'i reached a record high of 22.4% in April 2020, and a record low of 1.9% in September 2017. Hawai'i's employment market still remains competitive because many workers who left the labor force during the start of the pandemic have not yet returned.

Hawai'i's housing market spiked in the summer of 2022. The cost of a single-family home set a record in May when it reached a median price of $1,153,500, while the median price of a condo also hit a record median at $534,000. While Hawai'i's housing market remains stable, the number of sales has slowed due to lack of inventory and higher mortgage rates, and prices have dipped

slightly although still well above the previous year. The median price of single-family homes increased by 11.6% to $1,105,000 on O'ahu, 11.1% to $1,105,000 on Maui, 7.3% to $1,180,000 on Kaua'i, and 4.8% to $500,000 on Hawai'i Island. The median price of condos increased by 7.4% to $510,000 on O'ahu, 19.2% to $775,000 on Maui, 16.4% to $712,500 on Kaua'i, and 19.8% to $575,000 on Hawai'i Island.

## Prioritizing Our Employees' Success and Well-Being

One of the key elements to Bank of Hawai'i's success has always been our people, who work together to nurture meaningful relationships. Our ongoing investment in employees' well-being is about providing a variety of health and wellness support benefits, plus personal and professional development and education opportunities.

To help our employees during the challenges of the pandemic, Bank of Hawai'i announced an automatic 5% salary increase-2.5% merit increase and an unprecedented, one-time 2.5% inflation adjustment, which went into effect on April 1, 2022.

To provide greater flexibility, we announced a plan to combine vacation, floating holidays, personal days, dependent care, etc. into one paid time off category, starting in 2023. In addition, employees accrue time off at a faster rate and the number of vacation days that employees can carry over to the next year was increased.

To support education, the Bank of Hawai'i College Assistance Program (CAP) provides 100% free tuition to those who want to earn their first college degree. It has been a tremendous success since starting in 2016 with its first three participants.

2

CHAIRMAN'S MESSAGE

Our most recent graduating class in May 2022 represented our largest group yet-seven employees who received their bachelor's degrees from Chaminade University of Honolulu. To date, 16 employees have earned degrees, and 30 employees were enrolled in the fall 2022 semester.

We are delighted to also support the higher education dreams of children and grandchildren of employees through the Bank of Hawai'i Foundation Scholarship. In 2022, 25 scholars were awarded a combined $85,750 in scholarship funding. Created in 2014, the scholarship program is administered by the Hawai'i Community Foundation. Since then, Bank of Hawai'i Foundation has provided $876,750 for 251 college scholarships.

## Enhancing Our Customers' Experiences

With more digital banking options available than ever before, we know that our customers want a variety of convenient services available when it best suits them. Our Branch of Tomorrow network is an important cornerstone in providing flexible connections and specialized services as needed.

In 2022, we celebrated the opening of two new Branch of Tomorrow locations on Hawai'i Island in communities that we are proud to have served for many decades. Our Waimea Branch, which opened on Aug. 8, has been in its community for more than 60 years, while our Hilo Branch, which opened on Sept. 26, has been part of the area for more than a century.

In 2022, we enhanced SimpliFi, our digital banking platform, to allow customers to securely redeem pre-approved loans and instantly receive

money in their deposit account. This popular new convenience resulted in an immediate jump in online consumer lending.

Our decisions are based on firsthand customer feedback that allows us to continually improve. For example, in 2022 we received responses to more than 16,000 customer surveys. Previous feedback inspired the creation of 'Bank by Appointment,' which started early in the pandemic to allow for in-branch interactions and personalized services at a specific time and location. Even after pandemic restrictions eased, this feature proved to be a big draw for customers as appointments more than doubled to over 60,000, compared to 25,000 in 2021.

## Committed to Our Community

Bank of Hawai'i's commitment to taking care of our community is fundamental to who we are as a company. We view this as both a responsibility and an opportunity to create a better future for everyone. Through sponsorships, grants, hands-on volunteerism and more, we look for creative partnerships to make a difference.

A top priority is doing our part to seek solutions for Hawai'i's working poor by raising awareness of the issue and supporting efforts to address it. Bank of Hawai'i has sponsored the Aloha United Way's ALICE Report publication for Hawai'i since 2018. ALICE stands for Asset Limited, Income Constrained, Employed, and describes people and families with incomes above the Federal Poverty Line who do not qualify for many government assistance programs, and who are working, yet cannot afford basic necessities to remain self-sufficient.

In 2022, Bank of Hawai'i Foundation donated $97,500 to sponsor the publication of the latest report: ALICE in Hawai'i: 2022 Facts & Figures. The report was released in December and includes data for the entire state of Hawai'i on the impacts of the pandemic and inflation. Disappointing yet expected, the findings were eye-opening, such as an increase in Hawai'i households falling below the ALICE threshold, from 9% in 2019 to 15% in 2022. The report is available online at www.auw.org/alice-initiative.

Bank of Hawai'i also provides continuous support for the ALICE Cohort Initiative, made up of nonprofit partners that focus on sharing resources and working together to lift ALICE households to greater financial and social stability. The 2020-2024 ALICE Cohort features 17 nonprofits specifically working to increase access to public benefit programs, job training and career advancement opportunities. Their work also addresses decreasing household costs, developing matching savings programs, better access to loans, and the creation of affordable housing.

In 2022, Bank of Hawai'i Foundation provided over $2.2 million in community support, including special initiatives to mark our anniversary. For our 125th year, we wanted to go beyond celebrating a company milestone; we wanted to say thank you. In addition to our regular giving, each of our 2,000-plus employees had the opportunity to select a nonprofit to receive a $125 donation from Bank of Hawai'i Foundation. And to promote long-term environmental sustainability, the bank planted what amounts to 125 trees for every week of the year and provided grants to nonprofits that work to protect the environment. The total of these two initiatives reached nearly $345,000 for nonprofits in Hawai'i and the West Pacific.

BANK OF HAWAI'I 2022 ANNUAL REPORT 3

We rounded out the year with our annual Live Kōkua Giving Campaign, an effort driven by employees. This year's fall campaign raised $569,717 from our bank 'ohana to support 325 of Aloha United Way's partner nonprofits. Since its launch in 2010, the Live Kōkua Giving Campaign has raised more than $7.5 million for local nonprofits.

Two years ago, Bank of Hawai'i announced a unique endorsement partnership with eight University of Hawai'i (UH) student-athletes. We were pleased to increase the partnership to 42 college student-athletes in the 2022-23 season, with representatives across men's and women's basketball and volleyball. These SimpliFi Athletes serve as ambassadors to help promote bank programs and initiatives, and to spread goodwill throughout the community.

## Supporting Local Business

Supporting small businesses in our community has always been important to the bank. In 2022, we furthered our investment in local economic growth and diversification opportunities through a new program with Mana Up.

Mana Up is an accelerator and venture fund for Hawai'i-based products, with a mission to "level up," or help them grow their markets around the world. Mana Up's vision is to generate success for the local economy and create well-paying, interesting jobs for local people. Its goal is to create Hawai'i's next 100 product companies earning over $10 million in annual revenue. As Mana Up's banking partner, Bank of Hawai'i supports its annual accelerator program and has co-created an executive mentorship and training program to help propel local entrepreneurs to the next level.

## Diversity, Equity, Inclusion and Belonging

The diversity of our employees brings welcome perspectives and enhances our teamwork while providing valuable community connections. Employees enthusiastically participate in activities to support Diversity, Equity, Inclusion and Belonging and often include a community service component.

Some highlights from 2022:

- The bank's newest Employee Resource Group (ERG) was created to help expand understanding of Native Hawaiian history, culture and language.
- Our Women Inspired group partnered with the nonprofit Ma'i Movement to assemble period care kits and address the fact that one in four people experience period poverty in Hawai'i.
- For the fourth consecutive year, the bank was a visionary sponsor for the 2022 Honolulu Pride Parade & Festival and our RainBOH volunteers turned out to spread the joy.
- The Blue Brigade, our Military employee resource group, was there when a veteran and his family moved into the home the group helped build with Honolulu Habitat for Humanity.

## Welcome Executives

In January 2022, we welcomed Marco A. Abbruzzese to Bank of Hawai'i as vice chair and senior executive director of wealth management. He is responsible for overseeing the wealth management areas of Trust Services Group, Investment Services, and The Private Bank at Bank of Hawai'i. Abbruzzese also serves on our Executive

Committee. With over 30 years of experience in wealth management, we welcome his leadership.

In November, Matthew Emerson was promoted from senior executive vice president to vice chair at Bank of Hawai'i, where he continues to oversee Retail Lending, Deposits & Digital Banking. Matt first joined Bank of Hawai'i in 2010, and has shared his expertise in a variety of areas, including in Online and Mobile Banking, E-commerce and Digital Channels, Product Management, and Investment Services. Matt's experience and contributions to the company over the years make him a valuable member of our team, and well-deserving of this promotion.

## In Closing

As we celebrate 125 years of service, I would like to extend my heartfelt thanks to everyone involved in the success of Bank of Hawai'i. Thank you to our employees-past and present-for your dedication and commitment in caring for our customers. Thank you to our customers for entrusting us with many of your most important life decisions. Thank you to our communities across the Pacific; we are privileged to enjoy collaborative partnerships that bring continued growth for all. And we thank our shareholders for your confidence and support of Bank of Hawai'i.

Thank you for 125 years.

Mahalo nui loa,

PETER S. HO
Chairman, President and CEO

4

# 2022 Financial Summary

Bank of Hawai'i Corporation and Subsidiaries (dollars in thousands, except per-share amounts)

## FOR THE YEAR ENDED DECEMBER 31

|  | 2022 | 2021 |
| --- | --- | --- |
| Earnings Highlights and Performance Ratios |  |  |
| Net Income | $225,804 | $253,372 |
| Basic Earnings Per Common Share | 5.50 | 6.29 |
| Diluted Earnings Per Common Share | 5.48 | 6.25 |
| Dividends Declared Per Common Share | 2.80 | 2.74 |
| Net Income to Average Total Assets (ROA) | 0.98% | 1.14% |
| Net Income to Average Shareholders' Equity (ROE) | 16.10% | 16.94% |
| Net Income to Average Common Equity (ROCE) | 17.83% | 17.92% |
| Net Interest Margin 1 | 2.50% | 2.36% |
| Efficiency Ratio 2 | 59.49% | 58.86% |
| Market Price Per Share of Common Stock: |  |  |
| Closing | $77.56 | $83.76 |
| High | 92.38 | 99.10 |
| Low | 70.15 | 75.65 |

## AS OF DECEMBER 31

### Statements of Condition Highlights and Performance Ratios

| Loans and Leases | $13,646,420 | $12,259,076 |
| --- | --- | --- |
| Total Assets | 23,606,877 | 22,784,941 |
| Total Deposits | 20,615,696 | 20,360,108 |
| Other Debt | 410,294 | 10,391 |
| Total Shareholders' Equity | 1,316,995 | 1,611,611 |
| Book Value Per Common Share | $28.54 | $35.57 |
| Allowance to Loans and Leases Outstanding | 1.06% | 1.29% |
| Full-Time Equivalent Employees | 2,076 | 2,056 |
| Branches and Offices | 51 | 54 |

## FOR THE QUARTER ENDED DECEMBER 31

### Earnings Highlights and Performance Ratios

| Net Income | $61,307 | $63,837 |
| --- | --- | --- |
| Basic Earnings Per Common Share | 1.51 | 1.56 |
| Diluted Earnings Per Common Share | 1.50 | 1.55 |
| Net Income to Average Total Assets (ROA) | 1.05% | 1.12% |
| Net Income to Average Shareholders' Equity (ROE) | 18.91% | 15.92% |
| Net Income to Average Common Equity (ROCE) | 21.28% | 17.40% |
| Net Interest Margin 1 | 2.60% | 2.34% |
| Efficiency Ratio 2 | 56.46% | 60.18% |

$^{1}$ Net interest margin is defined as net interest income, on a taxable-equivalent basis, as a percentage of average earning assets.

$^{2}$ Efficiency ratio is defined as noninterest expense divided by total revenue (net interest income and total noninterest income).

BANK OF HAWAII 2022 ANNUAL REPORT 5

[BBOX]0.0996,0.0000,0.9298,0.5796[/BBOX]CELEBRATING 125 YEARS

## **While the world is very different from 1897**

when three friends opened the doors to Hawai‘i’s newest bank, what makes Bank of Hawai‘i special remains the same. Our commitment to our employees, customers and shareholders, and investing in the well-being of our island home is at the core of who we are.

Bank of Hawai‘i’s practice is to keep moving forward while remaining true to our vision and values. While our original founders-Peter Cushman Jones, Charles Montague Cooke and Joseph Ballard Atherton-couldn’t have imagined today’s digital banking environment, we feel sure that they would recognize their legacy of service and the underlying values of excellence, integrity, respect, innovation, commitment and teamwork that continue to guide us today.

As we continue to progress, our anniversary gives us an opportunity to look back and celebrate some of our accomplishments and milestones.

# TIMELINE

DECEMBER 17

**1897**

The Bank of Hawaii, Ltd. becomes the **first chartered and incorporated bank to do business in the Republic of Hawai'i**. It's started by Peter Cushman Jones, Charles Montague Cooke and Joseph Ballard Atherton.

![img-2.jpeg](img-2.jpeg)

JULY 1

**1903**

The first branch opens in Lihu'e, Kaua'i. It's rebuilt in 1912 and extensively renovated over the years. Today, the **Lihu'e Branch** is the oldest bank branch in the islands.

![img-3.jpeg](img-3.jpeg)

NOVEMBER 27

**1931**

The bank's name officially changes to **'Bank of Hawaii.'**

![img-4.jpeg](img-4.jpeg)

**1946**

Bank of Hawaii becomes the first Hawai'i bank to create a **Consumer Lending Department**.

![img-5.jpeg](img-5.jpeg)

1800s

1900s

DECEMBER 27

**1897**

The bank opens for business in a wooden building in downtown Honolulu with $400,000 in capital. Its first customer is Castle & Cooke Ltd., which opens a checking account.

![img-6.jpeg](img-6.jpeg)

MAY 1

**1928**

**Hawai'i's first Lei Day** is celebrated in the bank's downtown headquarters. The event honors the Lei Day Queen and her court, and features a lei-making competition judged by Hawaiian royalty.

![img-7.jpeg](img-7.jpeg)

**1942**

During World War II, Bank of Hawaii is designated the **official Pacific depository** for the United States Navy.

![img-8.jpeg](img-8.jpeg)

BANK OF HAWAII 2022 ANNUAL REPORT 7

# TIMELINE

## 1961

At the request of the Guam legislature, **Bank of Hawaii expands to Guam**. The bank also expands to Palau, and 10 years later adds services in Saipan.

![img-9.jpeg](img-9.jpeg)

## 1976

Bank of Hawaii introduces a **debit card**. For the first time, customers can make purchases and obtain cash from their checking accounts without writing a check.

![img-10.jpeg](img-10.jpeg)

## 1982

At a time when most purchases are made with cash, Bank of Hawaii becomes the **first local bank to operate an off-premise ATM**. Three years later, Bank of Hawaii is the first local financial institution to put ATMs inside stores.

## 1993

The bank forms a new **Investment and Trust Services Group** that includes “Pacific Capital Management,” a newly formed institutional money management company.

1900s

## 1966

Senior Vice President Wilson P. Cannon, Jr. kicks off the tradition of **Aloha Friday** by encouraging employees to trade their suits and ties for aloha shirts on Fridays.

![img-11.jpeg](img-11.jpeg)

## 1981

**Bank of Hawaii Foundation** is created to fund philanthropic efforts through grants, sponsorships and partnerships with local nonprofit organizations.

## 1991

“Bancorp Hawaii, Inc.” begins trading on the **New York Stock Exchange** under the symbol “BOH.” It also receives approval to establish a full-service securities brokerage, “Bancorp Investment Group.”

![img-12.jpeg](img-12.jpeg)

## 1994

A new **Safeway Waipahu In-Store Branch** introduces in-store banking to the islands. Other locations soon followed, including this branch in Kailua.

![img-13.jpeg](img-13.jpeg)

8

CELEBRATING 125 YEARS

## 1997

Bank of Hawaii celebrates its 100$^{th}$ anniversary by **investing \$5 million in the future of 100 local high school students** through the Bankoh 2nd Century Scholars program. Students from low and moderate income families receive extracurricular college prep assistance and the bank also funds their undergraduate college degrees.

## 2007

Bank of Hawaii introduces the state's first **wireless banking service** for customers who have Internet access on their mobile phones. This sets the foundation for Bank of Hawaii to become the first major financial institution in the state to launch an iPhone app.

Bank of Hawaii introduces the **HUD 184A Native Hawaiian Housing Loan Guarantee Program**. To date, the bank is the only Hawai'i-based lender providing Department of Hawaiian Home Lands (DHHL) loans.

## 2011

Bank of Hawaii Foundation becomes the founding sponsor of **PBS Hawai'i's HIKI NŌ**, the nation's first and only statewide student news program and digital media learning initiative. The sponsorship continues today.

## 2014

The **Bank of Hawaii Foundation Scholarship** for college-bound children and grandchildren of employees begins by awarding 26 scholarships. To date, it has funded 251 scholarships totaling \$876,750.

![img-0.jpeg](img-0.jpeg)

## 2000s

## 1998

The **eBankoh website** is launched, making Bank of Hawaii the first bank in the state to offer online banking.

![img-1.jpeg](img-1.jpeg)

## 2010

The first **Employee Giving Campaign** raises \$470,000 to benefit 20 employee-chosen nonprofits. Bank of Hawaii Foundation matches their donations for a total of \$1 million. In 2013, it is renamed the 'Live Kōkua Giving Campaign,' and to date has donated over \$7.5 million to nonprofits in Hawai'i and the West Pacific region.

![img-2.jpeg](img-2.jpeg)

## 2012

Bank of Hawaii adds the **Hawaiian language** to multi-language (Japanese, Chinese and English) screen capabilities of ATMs.

![img-3.jpeg](img-3.jpeg)

BANK OF HAWAII 2022 ANNUAL REPORT 9

# TIMELINE

## 2015

Designed to meet the growing needs of the unbanked and underbanked population, **EASE by Bank of Hawaii** becomes Hawai'i's first 100% digital checking account. In 2021, the paper-free and fee-free account was certified for meeting Bank On National Account Standards.

![img-4.jpeg](img-4.jpeg)

## 2018

SimpliFi Mortgage by Bank of Hawaii launches a **digital banking platform to streamline the online mortgage application** from any mobile device. Since then, SimpliFi by Bank of Hawaii has grown to help customers manage additional aspects of their finances online, such as opening accounts, buying a home and setting a budget.

## 2020

Bank of Hawaii **invests over $5 million in the University of Hawai'i athletics program**. UH Mānoa arena is renamed 'SimpliFi Arena at Stan Sheriff Center,' and Bank of Hawaii Foundation establishes an additional $100,000 endowment scholarship fund.

Bank of Hawaii Foundation makes an unprecedented **$3 million donation to Hawai'i Community Foundation's Hawai'i Resilience Fund** to help address growing social and economic impacts of COVID-19 in Hawai'i.

![img-5.jpeg](img-5.jpeg)

2000K

![img-6.jpeg](img-6.jpeg)

![img-7.jpeg](img-7.jpeg)

## 2016

The renovated Pearl City Branch debuts as the first **Branch of Tomorrow**, featuring cutting-edge technology and improved energy efficiency.

The **Bank of Hawaii College Assistance Program (CAP)** launches, providing 100% free tuition for employees seeking their college degrees. Since then, 16 employees have earned degrees paid for by the program, and the bank has given more than $1.7 million to employees for CAP educational costs.

## 2019

Bank of Hawaii is the first in Hawai'i to integrate **Zelle**, a person-to-person payment feature, into its mobile banking app.

![img-8.jpeg](img-8.jpeg)

## 2022

Bank of Hawai'i celebrates its **125th anniversary**, plants 125 trees per week throughout the year, and gives employees the opportunity to each choose a nonprofit to receive a $125 donation from Bank of Hawai'i Foundation. It also announces that out of appreciation and respect for the Hawaiian culture, the 'okina will be added to its corporate logo.

![img-9.jpeg](img-9.jpeg)

10

CELEBRATING 125 YEARS

# Bank of Hawai'i CEOs

1897 to present

![img-10.jpeg](img-10.jpeg)

**1897-1898**
PETER CUSHMAN JONES
FIRST PRESIDENT

![img-11.jpeg](img-11.jpeg)

**1898-1909**
CHARLES MONTAGUE
COOKE

![img-12.jpeg](img-12.jpeg)

**1909-1937**
CLARENCE HYDE COOKE

![img-13.jpeg](img-13.jpeg)

**1937-1955**
EDWARD W. CARDEN

![img-14.jpeg](img-14.jpeg)

**1956-1961**
RUDOLPH A. PETERSON

![img-15.jpeg](img-15.jpeg)

**1961-1962**
JULIAN A. DAVIS

![img-16.jpeg](img-16.jpeg)

**1963-1966**
EDWARD A. SCHNEIDER

![img-17.jpeg](img-17.jpeg)

**1966-1976**
CLIFTON D. TERRY

![img-18.jpeg](img-18.jpeg)

**1976-1980**
WILSON P. CANNON, JR.

![img-19.jpeg](img-19.jpeg)

**1980-1989**
FRANK J. MANAUT

![img-20.jpeg](img-20.jpeg)

**1989-1994**
HOWARD H. STEPHENSON

![img-21.jpeg](img-21.jpeg)

**1994-2000**
LAWRENCE M. JOHNSON

![img-22.jpeg](img-22.jpeg)

**2000-2004**
MICHAEL O'NEILL

![img-23.jpeg](img-23.jpeg)

**2004-2010**
ALLAN R. LANDON

![img-24.jpeg](img-24.jpeg)

**2010-PRESENT**
PETER S. HO

BANK OF HAWAI'I 2022 ANNUAL REPORT 11

# CELEBRATING TODAY
FOR A BETTER TOMORROW

![img-25.jpeg](img-25.jpeg)

The Bankoh Blue Crew was joined by Hawaiian Airlines for our Community Service Day at Waiʻanae Kai Forest Reserve.

**Throughout our 125th anniversary year, we celebrated our history and milestones made possible by the dedication and teamwork of many employees over the years. And because the story of Bank of Hawaiʻi is also about looking forward, we continue to celebrate by supporting our communities for a better tomorrow.**

12

CELEBRATING 125 YEARS

![img-26.jpeg](img-26.jpeg)

Our newly formed Native Hawaiian ERG volunteered at Paepae o He'eia in Windward O'ahu.

![img-27.jpeg](img-27.jpeg)

Sheri Morishige and Sherry Serrano helped distribute lunch vouchers to employees in downtown Honolulu.

Stephanie Xu and our Women Inspired ERG removed invasive algae from Maunalua Bay.

![img-28.jpeg](img-28.jpeg)

## CELEBRATING EMPLOYEES

Our employees are the key to our success and accomplishments over the past 125 years. To acknowledge and celebrate their essential role in helping meet this milestone, employees were invited to select a commemorative anniversary gift, and gift cards were given away each month as prizes in a bank history trivia game.

Additionally, every Friday during August, the bank treated employees to lunch. O'ahu employees at our downtown Honolulu and Hale O Kapolei locations ordered from visiting food trucks, while teammates at O'ahu branches, on neighbor islands and in the West Pacific received specially catered meals.

BANK OF HAWAII 2022 ANNUAL REPORT 13

# CELEBRATING TODAY
FOR A BETTER TOMORROW

![img-29.jpeg](img-29.jpeg)

Mark Tokito (second from left), Erlinda Alegre (second from right) and Rowell Comia (far right) presented The Salvation Army with a grant on behalf of the bank's Aloha for Community.

![img-30.jpeg](img-30.jpeg)

Damarly Dunkley of the Harmon Branch and her husband, Aric, were among more than 70 volunteers who planted trees to protect Guam's watersheds.

![img-31.jpeg](img-31.jpeg)

Bank volunteers joined Mariana Islands Nature Alliance (MINA) to plant trees along Kilili Beach in Saipan.

## CELEBRATING OUR COMMUNITY

### Aloha for Community

Bank of Hawai'i Foundation gave each Bank of Hawai'i employee the opportunity to select a nonprofit to receive $125. This resulted in a contribution totaling $218,750 to nonprofits across Hawai'i and the West Pacific Region. The 237 nonprofits selected by our employees span a wide range of organizations with compelling missions; Child & Family Service, Lanakila Meals on Wheels, and K9 Kokua were the top three chosen.

### Planting Trees for Sustainability

As part of our ongoing commitment to preserving the environment and to help address climate change, Bank of Hawai'i partnered with 12 nonprofits to plant more than 6,500 trees, the equivalent of more than 125 trees per week throughout 2022. These organizations planted trees statewide across Hawai'i, as well as on Guam, Saipan and Palau, and reflect all the island communities the bank serves. This initiative culminated on Arbor Day on Nov. 5, when hundreds of bank volunteers, along with Hawaiian Airlines employees, planted 2,000 native trees at the Wai'anae Kai Forest Reserve for Bank of Hawai'i's annual Community Service Day. Our overall tree planting support totaled $126,202.

14

CELEBRATING 125 YEARS

![img-32.jpeg](img-32.jpeg)

## 125 MAHALO MOMENTS

To express our gratitude to organizations and people we're honored to support, we shared 'Mahalo Moments' on our social media channels throughout our anniversary year. All 125 snapshots highlighted individuals and nonprofits who inspire us by making a difference in our communities every day.

To learn more about our 125-year history, visit www.boh.com/125 for details on Bank of Hawai'i's accomplishments, milestones and community support, as well as videos highlighting stories of our bank 'ohana.

![img-33.jpeg](img-33.jpeg)

BANK OF HAWAII 2022 ANNUAL REPORT 15

![img-34.jpeg](img-34.jpeg)

YEAR IN
REVIEW

# CREATING A
LASTING LEGACY

Employees came together at
Ruth Ke'elikölani Middle School for
the first in-person SmartMoney
Lesson Day since before the pandemic.

## We are honored to have received the following recognition in our 125th anniversary year:

Newsweek magazine ranked Bank of Hawai'i No. 3 in the banking category of its inaugural "America's Most Trusted Companies" list. Bank of Hawai'i is the only Hawai'i business to be recognized.

The readers of Honolulu Star-Advertiser, Hawaii Tribune-Herald, West Hawaii Today, and The Garden Isle all selected Bank of Hawai'i as "Hawai'i's Best Bank."

Junior Achievement USA recognized Bank of Hawai'i with the Bronze U.S. President's Volunteer Service Award for the 2021-2022 school year.

## Building Trust

Building lasting relationships is the foundation for serving our clients. In this increasingly digital banking environment, we know that our customers need more than the latest technology. Being available to interact with them in ways that go beyond answering their immediate financial needs is essential to providing the best possible services. Our goal remains to ensure that each interaction-whether in person, on the phone, at an ATM, or online-provides the best service and most reliable products when, where and how our customers want them.

We are evaluating all of our customer interactions from their points of view. This year we collected more than 16,000 customer surveys from all our service delivery channels (branches, website, Customer Service Center, online and mobile) and are assessing the feedback we received to make informed decisions about new products and their delivery. Based on this feedback, we are also streamlining many of our processes, including collaboration between departments at the bank.

## Developing New CX Leaders

Developing Customer Experience (CX) leaders who will explore new ways to champion customer-centricity across the company now and in the future is one of Bank of Hawai'i's strategic goals and focus.

In early 2022, our Customer Experience team began offering special training and presentations to empower employees to act as customer advocates in their respective departments. CX Advocate training included hands-on introductions to design thinking, a human-centered problem solving approach that can help teams

to better understand customer experiences, challenge assumptions and create innovative solutions. This CX Advocate pilot was so successful that it is being expanded to all departments across the bank in 2023.

CX certification courses were also made available to key leaders at the bank, and CX training curriculum was integrated into our existing Pathways to Professional Excellence (PPE) and Leadership Development Program (LDP). To further enhance the focus on a customer-first mindset-including with employees who do not interact directly with customers-eLearning modules were introduced to hone skills.

We are seeing a positive response to this renewed focus on customer experience, and we look forward to finding new and innovative solutions to better serve our customers.

## Every Call Matters

Our Customer Service Center has always played a key role in facilitating exceptional service for our customers. Not only does it quickly provide safe and secure personalized services, but also helps resolve any issues that may occur, giving peace of mind to customers.

The team connects with customers via several virtual channels including phone, chat and video. This year

we saw a significant decrease in wait times, down 50% from 2021 to 2022, resulting in an average wait of 5 minutes for 2022. We look forward to piloting a new position, the Virtual Relationship Banker, to work seamlessly within our branches to take customer appointments through virtual channels, ensuring customers can be served in the way that is most convenient for them.

## Digital Innovation and Growth

As customers trend toward digital options for banking, such as our mobile banking app or website, we are investing in making these tools simpler, safer and more convenient. Over the past two years, active monthly users of digital banking have grown by 12%.

Our website was updated to streamline its appearance and functionality, allowing us to expand our offerings while also ensuring a positive customer experience.

### PRE-APPROVED LOANS VIA SIMPLIFI

In 2022, SimpliFi, Bank of Hawai'i's convenient online account opening and application experience, allowed customers to redeem pre-approved loans. This online loan redemption feature allows customers to use our intuitive interface to electronically sign documents and immediately

BANK OF HAWAI'I 2022 ANNUAL REPORT 17

receive loan proceeds in their deposit account. This step forward in customer convenience proved very popular, resulting in an immediate jump in consumer lending online.

#### GROWING USE OF ZELLE

Bank of Hawai'i added the *Zelle* payments network to its app for Hawai'i customers in 2019 and launched the feature for Guam and Saipan in 2021, allowing users to send money directly from their bank account to someone else's. The convenience of fee-free, quick and secure transactions led to exponential adoption of *Zelle* since we first introduced it, and in 2022 year-over-year growth was 45%.

#### BANK BY APPOINTMENT

Bank by Appointment was launched at the start of the pandemic to make the best use of in-branch interactions and provide customers an option for personalized services at a specific time and location. The online system enables customers to book an in-person or telephone appointment for a wide range of specialized banking services, helps eliminate wait times, and allows bank personnel to provide the best services, products and customer experience.

This feature has been tremendously popular and more than doubled in use since last year, increasing to over 60,000 appointments in 2022 compared to 25,000 in 2021.

### Branch of Tomorrow Network Expands

Our branches provide important opportunities for face-to-face connections with our customers. Bank of Hawai'i's Branch of Tomorrow network grew in 2022 with the opening of two new branches on Hawai'i Island.

The first new location was Waimea Branch, which opened on Aug. 8, and the second was Hilo Branch, which opened on Sept. 26. Both branches have long histories in their respective locations, with our Hilo Branch in the community for more than 100 years, and our Waimea Branch in that community for more than 60 years.

Both new branches feature the latest Branch of Tomorrow improvements, such as a Pili Room for private consultations; a BankLanai® with enhanced ATM features and 24/7 access; and biometric safe deposit boxes. Each is also artistically designed to feature signature art pieces that reflect their community.

### Providing Support After COVID

#### SPECIALIZED LOAN ASSISTANCE

Our bank 'ohana teams worked tirelessly during the height of the pandemic to respond to the financial needs of customers. We created an emergency loan program

![img-35.jpeg](img-35.jpeg)

Our new Hilo Branch features the latest Branch of Tomorrow technology and a wide, open floorplan.

for residential mortgages, home equity credit lines, auto loans and installment loans in addition to offering loan deferrals to our commercial clients.

Our Consumer Collections, Guam Collections, Mortgage Collections and Recoveries teams, along with teammates from other business units, assisted customers with forbearances and extensions while providing protection from negative

### BANK OF HAWAI'I BRANCHES AND ATMS

(As of December 31, 2022)

|  | BRANCHES & IN-STORE BRANCHES | ATMS |
| --- | --- | --- |
| State of Hawai'i | 47 | 276 |
| O'ahu | 25 | 185 |
| Hawai'i Island | 8 | 40 |
| Maui | 8 | 29 |
| Kaua'i | 4 | 20 |
| Lāna'i | 1 | 1 |
| Moloka'i | 1 | 1 |
| West Pacific | 4 | 39 |
| Guam | 2 | 27 |
| CNMI/Saipan | 1 | 8 |
| Palau | 1 | 4 |
| Total | 51 | 315 |

18

YEAR IN REVIEW

credit bureau reporting. More than 16,500 customers benefitted from these special loan extensions over the past two years of the pandemic. In March of 2022, all of the consumer loans had been removed from these special programs because they were no longer needed.

# IN-PERSON SAFETY

As the risk from the pandemic decreased, Hawai‘i’s “Safe Travels” restrictions and the statewide indoor mask mandate ended on March 25, 2022. Bank of Hawai‘i relaxed its guidelines for mask wearing in accordance with the state’s guidelines, but retained some of the precautions as options for the safety of vulnerable employees and customers.

# Hawai‘i Housing Solutions

Homeownership is a major milestone. However, there is a severe shortage of affordable homes in Hawai‘i. We have long partnered with developers to create solutions to the housing shortage, and also work with homebuyers (including first-time homebuyers) to help them become homeowners. Since 2007 when we introduced the HUD 184A Native Hawaiian Housing Loan Guarantee Program, we continue to be the only Hawai‘i-based lender providing Department of Hawaiian Home Lands (DHHL) loans.

# HAWAI‘I’S LEADER IN MORTGAGE AND HOME EQUITY LENDING

We are honored that so many of Hawai‘i’s people choose us to help guide them through homeownership, home improvement and refinancing. According to data provided by Title Guaranty Hawaii, this positions Bank of Hawai‘i once again, as the No. 1 residential real estate lender in Hawai‘i in 2022.

For over a decade, we have been:

- #1 in number of mortgage and refinance loans made in the state of Hawai‘i, and
- #1 in total dollars by a local bank for residential loans.

In 2022 we increased home equity credit lines to $400,000 without the need for appraisal, allowing homeowners to more easily access their equity for whatever their lives might require. This program helped customers save up to $1,000 in third-party appraisal costs to originate a $400,000 home equity credit loan.

Bank of Hawai‘i has helped thousands of families follow their dreams of building wealth by making the process of obtaining a mortgage or refinancing as easy and accessible as possible through our SimpliFi by Bank of Hawai‘i online features, combined with the expertise of our residential loan officers.

# INVESTING IN AFFORDABLE HOUSING

With limited land mass and the need to import building materials, the cost of housing in Hawai‘i for renters as well as homebuyers remains one of the highest in the nation. This has caused some local workers to postpone or abandon dreams of homeownership-or even leave their island home.

Bank of Hawai‘i continues to focus on housing solutions to meet a variety of community needs by providing construction funding and lending to developers for affordable housing options. In 2022, Bank of Hawai‘i supported the acquisition or start of construction of 560 affordable housing units (206 on O‘ahu, 214 on Maui, 92 on Hawai‘i Island and 48 on Kaua‘i), and over 1,300 units are in the pipeline.

We are committed to investing in new opportunities to create more homes across the state, including recent development projects on three different islands.

![img-0.jpeg](img-0.jpeg)

BANK OF HAWAI‘I 2022 ANNUAL REPORT 19

![img-1.jpeg](img-1.jpeg)

Mana Up co-founder, Meli James, aims to support local businesses as they grow and expand their reach worldwide.

Bank of Hawai'i worked with nonprofit developer Ikaika Ohana and Urban Housing Communities (UHC) to support the Kaiāulu o Kūku'ia project in Lahaina, Maui. The 200-apartment project, made up of 25 two-story eight-plex buildings, will include 100 two-bedroom, 75 three-bedroom and 25 four-bedroom units of affordable workforce housing for families in Maui County earning 60% or less of the median income. Located on state land leased purposefully for the creation of affordable housing, this community is designed to be sustainable and energy efficient with cost savings for residents. Groundbreaking was held in July 2022.

Bank of Hawai'i assisted nonprofit developer EAH Housing with a 92-unit affordable senior community residence in Hilo for veterans, surviving spouses and other income-qualified seniors. Construction started in November 2022 for the Hale Nā Koa 'O Hanakahi development on Hawai'i Island, designed for people 62 years or older, serving households earning 30% to 80% of the area median income. The

project is the residential component of a master planned, full service complex that will also later include a veterans' center and a community-based outpatient clinic.

We are also a committed equity investor in Low-Income Housing Tax Credit (LIHTC) projects across the state as well as in the Commonwealth of the Northern Mariana Islands/Saipan. For example, in 2022, Bank of Hawai'i invested more than $20 million in LIHTC to support the development of Ikaika Ohana's Kaiāulu o Kūku'ia affordable housing development in Lahaina, Maui.

## Helping Local Businesses Grow

Bank of Hawai'i has always provided steadfast support to Hawai'i's small businesses and entrepreneurs at the heart of our communities. To fuel long-term growth and success for Hawai'i's businesses, we invested in local economic growth and diversification opportunities by partnering with Mana Up.

Mana Up is an accelerator and venture fund for Hawai'i-based entrepreneurs, with a mission to help them grow their markets globally through retail and e-commerce channels. They help Hawai'i companies become global companies, bringing to the world what makes Hawai'i special while increasing economic opportunity and jobs.

Additionally, Mana Up and Bank of Hawai'i have co-created an executive mentorship and training program to help propel local entrepreneurs to their next level. This annual initiative matches 10 Mana Up companies with executive mentors from Bank of Hawai'i based on specialized areas of growth. This program provides leadership and business maturation advice to entrepreneurs, while offering the executive mentors the opportunity to extend their expertise to benefit the community at large.

## Investment and Insurance Services in Changing Times

Bankoh Investment Services, Inc. (BISI), our securities broker dealer subsidiary, provides clients with a comprehensive and competitive suite of investment and insurance solutions with a personal touch.

During the pandemic and beyond, trusted BISI advisors have focused on providing enhanced education and personal support for clients concerned with retirement, healthcare costs, rising inflation and market volatility and declines. Their personal involvement with their clients allows them to offer helpful advice on how to manage their finances during post-pandemic changes.

20

![img-2.jpeg](img-2.jpeg)

OUR
COMMUNITY

# FINDING WAYS TO
GIVE BACK

Kanani Ioapo and her husband, Ken,
were among hundreds of volunteers
who planted trees at Wai'anae
Kai Forest Reserve for our annual
Community Service Day.

During our anniversary year, Bank of Hawai'i committed to showing our appreciation for the communities where we live and work. Each of the bank's 2,000-plus employees was given the opportunity to select a nonprofit to receive a $125 donation from Bank of Hawai'i Foundation.

![img-3.jpeg](img-3.jpeg)

Our Bankoh Blue Crew helped sort donations at YWCA's Dress for Success.

Additionally, the bank planted the equivalent of 125 trees per week throughout 2022, and provided grants to Hawai'i and West Pacific nonprofits that work to protect the environment. The total from these two initiatives alone is nearly $345,000. More information about the ways we gave back in celebration of 125 years can be found on pages 12-15 of this annual report.

Bank of Hawai'i, its employees, and the Foundation contributed nearly $3.4 million to community and philanthropic causes in 2022.

## Employee Giving through Live Kōkua

In 2022, our Bankoh Blue Crew (which references our bright blue shirts) has been highly visible doing good for the community.

### LIVE KŌKUA VOLUNTEER PROGRAM

Here are a few of the community service events in 2022.

**Homeless Shelter Lunches:** Bank volunteers returned to prepare and serve lunches to Institute for Human Services (IHS) residents. Prior to the pandemic, Bankoh Blue Crew members consistently volunteered for this service, and stepped up again once IHS made the opportunity available.

### YWCA Dress for Success:

Volunteers helped YWCA sort through donated items that are sold to raise funds to help empower participating women, including those transitioning out of prison or shelters, or who are new or returning to the workforce. The program provides mentorship, professional attire and job training.

**Goodwill Goes GLAM!** returned to the Blaisdell Exhibition Hall after a two-year hiatus. Volunteers assisted Goodwill Hawaii with their signature fundraiser to help people with employment barriers find work. Their community initiatives help more than 10,000 people statewide each year.

![img-4.jpeg](img-4.jpeg)

Kayla Matautia and Sheri Lynn Freitas were thrilled to volunteer at the popular Goodwill Goes GLAM! in person again this year.

### 2022 LIVE KŌKUA GIVING CAMPAIGN

Employees and retirees raise funds every year for the Live Kōkua Giving Campaign, first created in 2010.

This year's campaign, #BankohCares, ran from Oct. 11 to Dec. 12 and raised $569,717 to support a selection of Aloha United Way's partner nonprofits. To date, employees and retirees have donated over $7.5 million through the Live Kōkua Giving Campaign for nonprofits in Hawai'i and the West Pacific region.

## Support for 2020-2024 ALICE Cohort

For almost half of our residents, Hawai'i's high cost of living is taking a toll. Hawai'i's ALICE (Asset Limited, Income Constrained, Employed) Cohort Initiative raises awareness about a huge, but sometimes hidden, segment of our community that is struggling to afford basic necessities.

Hawai'i's ALICE Cohort Initiative focuses on lifting ALICE households-existing above the Federal Poverty Line, but still struggling-to greater financial and social stability, and increasing access to safe and affordable housing.

The 2022-24 ALICE Fund invests in the ALICE Cohort Initiative, which includes 17 nonprofits collectively working to develop and implement impactful and scalable programs to help O'ahu's ALICE households. It is overseen by Aloha United Way (AUW) and Hawai'i Community Foundation. Bank of Hawai'i Foundation is one of many supporting the 2022-24 ALICE Fund over three years.

22

OUR COMMUNITY

# ALICE IN HAWAIʻI: 2022 FACTS AND FIGURES

Bank of Hawaiʻi has sponsored the ALICE Report for Hawaiʻi since 2018.

In 2022, Bank of Hawaiʻi Foundation provided a grant of $97,500 to sponsor ALICE in Hawaiʻi: 2022 Facts & Figures. The report was released in December 2022 and made available publicly through AUW's website. It includes data for the entire state of Hawaiʻi and helps to inform government decision-making at the state and county levels.

# 2022 Financial Education/ Community Reinvestment Act (CRA)

Partnering with other organizations to support small businesses, improve financial education, create affordable housing and well-paying jobs, address homelessness, and improve healthcare are all areas of focus for

our participation under the CRA. Bank of Hawaiʻi holds an outstanding Community Reinvestment Act rating.

# SUPPORTING SAIPAN'S SMALL BUSINESSES

This is the 11th year of the I Kinometi Para I Kumunidāt I Islā-ta Small Business and Revitalization and Development grants. Grants of up to $5,000 are awarded each year by Bank of Hawaiʻi Foundation for projects that promote new small businesses on Saipan and encourage existing ones to expand with an emphasis on projects that will benefit the community.

![img-5.jpeg](img-5.jpeg)

Grant recipient, DreamPlay, used their funds to purchase learning and development tools for toddlers.

In 2022, the five awardees included:

- A gourmet cookie shop that purchased signage and furnishings so it could move from catering operations to a brick-and-mortar store.
- A locally owned dive shop that paid for scuba diving instructors and offered discounted classes to residents.
- A family-owned clothing company that purchased new inventory including quick-dry tees.
- A childcare service for preschool children that purchased supplies and provided teaching staff with the latest educational and childcare training.
- A locally owned outpatient hemodialysis center that purchased equipment to ensure continuous dialysis care and related services in the event of a disaster or power outage.

# NONPROFIT PARTNERSHIPS AT-A-GLANCE

# Bank of Hawaiʻi Foundation

Bank of Hawaiʻi Foundation is honored to support hundreds of nonprofits in our community each year. The following are some of the grants and sponsorships from Bank of Hawaiʻi Foundation in 2022.

# PBS Hawaiʻi's HIKI NŌ

$100,000 continues Bank of Hawaiʻi Foundation's 11th year of supporting the nation's first and only statewide student news program and digital media learning initiative.

# Hawaiʻi Foodbank

$50,000 was donated to improve the Foodbank's data tracking through new technology that will help them provide more reliable information to the federal government, and improve sustainability in their food distribution services.

# Bank of Hawaiʻi Foundation Family Sundays

$100,000 funded the return of Family Sundays at the Honolulu Museum of Art after a two-year hiatus due to the pandemic. Since 2004, Family Sundays by Bank of Hawaiʻi Foundation has offered free admission for residents on the third Sunday of every month,

providing access to arts, culture and entertainment.

# Hawaiʻi P-20 Partnerships for Education

$100,000 was provided to the University of Hawaiʻi Foundation for college scholarships.

# Legacy Foundation, Honolulu Pride Parade and Festival

A $15,000 annual commitment was made to continue our visionary level sponsorship through 2024 as part of our focus on diversity and inclusion in the community. Bank of Hawaiʻi Foundation has been a sponsor for the past four years.

# Catholic Charities Hawaiʻi's 75th Anniversary

$50,000 was donated to celebrate the organization's anniversary and to provide funding to their multiple services for Hawaiʻi's elderly, immigrants, mentally ill, families and others in need.

# 21st Annual Native Hawaiian Convention, "Hulihia"

$10,000 was provided to the Council for Native Hawaiian Advancement for their Honolulu convention. More than 1,500 community members attended the convention, which explored sustainability in Hawaiʻi.

BANK OF HAWAIʻI 2022 ANNUAL REPORT 23

## **HELPING LOW-INCOME FAMILIES RECEIVE TAX REFUNDS**

Every year since 2010, Bank of Hawai'i employees have partnered with Goodwill Hawai'i's Volunteer Income Tax Assistance (VITA) program. This year, 29 volunteers became IRS-certified for the 2022 season and were accepted in the Consumer Financial Protection Bureau (CFPB) Tax Time Initiative Cohort. Our volunteers prepared 95 tax filings that resulted in over $126,000 in refunds back to the community. This was the first year we had representation on four of the major Hawaiian Islands.

## **SUPPORTING PRINCESS RUTH KE'ELIKŌLANI MIDDLE SCHOOL**

Bank volunteers have provided unique financial education opportunities to public schools across Hawai'i and the West Pacific since 2009.

Built in the heart of downtown Honolulu on the grounds of the former palace of Princess Ruth Luka Ke'elikōlani of Hawai'i, this Title 1 school serves students in grades 6 through 8. While nearby neighborhoods feature luxury apartments and homes, the majority of students reside in government and affordable housing complexes or transitional and homeless shelters.

In April, nearly 50 Bank of Hawai'i volunteers returned to the school to teach 300 students in 23 classrooms for our SmartMoney Lesson Day during Financial Literacy Month. Topics were explored in a fun way, and included the importance of saving money as well as saving energy to help protect the environment. Dozens of other schools also welcomed bank volunteers to share SmartMoney financial lessons in the spring, and again in October and November.

We returned to Princess Ruth Ke'elikōlani Middle School on Career Day in May to share experiences about working at a bank and to answer students' questions.

## **HELPING YOUNG PEOPLE WHO HAVE EXPERIENCED FOSTER CARE**

The HI H.O.P.E.S. Initiative (in partnership with EPIC 'Ohana, Hawai'i Community Foundation, the Jim Casey Youth Opportunities Initiative, and the Annie E. Casey Foundation) works to ensure that Hawai'i's young people who experience foster care have the resources they need for success. Since 2010, Bank of Hawai'i has been a supporter of HI H.O.P.E.S., and continues to provide individual development savings accounts (IDAs) while building relationships with young people striving to create independence after experiencing foster care.

Since the start of HI H.O.P.E.S., Bank of Hawai'i has opened 968 IDAs for large purchases such as housing, education and vehicles. Forty-two percent of the accounts were used to make a qualified-asset purchase aggregating to $1.41 million. The most common qualified purchase on O'ahu was for education (35%), followed by housing (25%). On the neighbor islands, 44% of participants used their funds for transportation, while 24% made a deposit for housing.

Bank of Hawai'i employees also serve on advisory groups for HI H.O.P.E.S. on the four major islands including groups in Hilo and Kona on Hawai'i Island.

![img-6.jpeg](img-6.jpeg)

Lono Kealoha and other bank employees taught important financial literacy courses to 11$^{th}$ graders at Wai'anae High School in November.

24

Noe Jan

Business

![img-7.jpeg](img-7.jpeg)

OUR
EMPLOYEES

# CREATING
CONNECTIONS

Noe Jan Gumboc received his bachelor's
degree in May through Bank of Hawai'i's
College Assistance Program.

For 125 years, Bank of Hawai‘i’s greatest advantage has been our employees, who go above and beyond every day to bring care to our customers. There is nothing more powerful than the way they work together to build meaningful relationships and deliver exceptional service. In 2022, we continued to take steps to more deeply understand the needs of our employees.

## Benefits That Matter

At the beginning of 2022, Bank of Hawai‘i announced an annual 2.5% salary increase plus an unprecedented, one-time 2.5% inflation adjustment, that went into effect on April 1. The increases were implemented to reward the outstanding efforts of employees in providing service to customers and colleagues during the uncertainty and challenges of the pandemic, and to help offset the effects of the rapid rise in inflation.

In addition to the special merit increase, an announcement was made at the end of 2022 about new employee benefits scheduled to

go into effect January 2023. All of these benefits were designed to give employees greater flexibility and choice. These include:

- A consolidation of all paid time off (PTO) into one category. Formerly, paid time off was separated into vacation, floating holidays, birthdays and dependent care. An added benefit is that the amount of paid time off now accrues faster.
- New hires will be given access to a week of their paid time off as soon as they’re hired.

## Paying for Employees’ College Educations

In 2022, seven employees received their bachelor’s degrees from Chaminade University of Honolulu thanks to the Bank of Hawai‘i College Assistance Program (CAP). The program supports employees’ long-term educational goals by paying 100% of their tuition (plus fees for textbooks and materials) to get either an associate or bachelor’s degree from Chaminade or the University of Hawai‘i’s Community Colleges (UHCC).

The program started in 2016 with three participants and, to date, 16 employees have earned degrees in the major of their choice. Thirty employees were enrolled in the Fall 2022 semester, with $324,406 reimbursed. The program has paid more than $1.7 million for employees’ educational costs since its inception.

![img-8.jpeg](img-8.jpeg)

Peter Ho celebrated with the seven employees who received their bachelor’s degrees in the summer, paid for by the bank’s College Assistance Program: Tony Syxomphou, Noe Jan Gumboc, Parris Smith, Theresa Neal-Viela, David Lammay, Jonathan Enos and Alex Duggan.

26

OUR EMPLOYEES

## Connection and Inclusion

One of the ways that Bank of Hawai'i helps promote inclusivity in our workplace culture is through our Employee Resource Groups (ERG). These groups offer great ways for employees to connect as well as to educate the company as a whole. With many of our employees spending more time working from home, the ERGs and their community outreach efforts provide ways for employees to engage with one another while making a positive impact in the community.

These are some of the community activities of the groups in 2022:

**LGBTQ+:** Our RainBOH volunteers turned out to participate in the 2022 Honolulu Pride Parade & Festival for the first time after a two-year hiatus. Employees wearing 'Live Your Pride' T-shirts, butterfly wings and rainbow accessories marched in the Waikiki parade, helped hand out butterfly fans, and applied custom temporary tattoos at the bank's booth at the festival.

**Military:** During Mental Health Awareness Month in May, the Blue Brigade hosted a special discussion about managing stress to help promote the importance of emotional and psychological well-being. Open to all bank employees, this pau hana featured a speaker from Samaritan Counseling Center Hawaii.

Late in 2021, our Blue Brigade picked up hammers to help build a Honolulu Habitat for Humanity home for a U.S. Navy veteran and his family. In August 2022, our Blue Brigade was there to help celebrate when the completed Waimānalo home was blessed and the Young family moved in.

![img-9.jpeg](img-9.jpeg)

Our 'Live Your Happy. Live Your Pride' float was a highlight of the Honolulu Pride Parade through Waikiki.

**Women Inspired:** After hearing about the great work of the nonprofit Ma'i Movement to address the fact that one in four people experience period poverty in Hawai'i, this ERG signed up to help. Bank of Hawai'i purchased an assortment of menstrual products, and the Women Inspired volunteers broke down the pallets of supplies, sorted the products and packed supply boxes. Volunteers assembled 1,960 period care kits for Ma'i Movement.

**Native Hawaiian:** The bank's newest ERG welcomes Native Hawaiians and allies to advocate for Native Hawaiians, and helps expand understanding of Hawaiian history, culture and language. During Hawaiian History Month in September, a group of more than 40 employees, friends and family enjoyed a day of volunteering and fellowship

at Paepae o He'eia, the nonprofit that cares for He'eia Fishpond on the windward side of O'ahu. They removed invasive plants and helped to restore part of the fishpond wall.

![img-10.jpeg](img-10.jpeg)

The Blue Brigade helped build the Young family home and celebrated their move-in day in August. Here, in the new kitchen are Eddie Quan, Valerie Lam, Enid and Lloyd Young, Momi Akimseu and Fred Alvarado.

BANK OF HAWAI'I 2022 ANNUAL REPORT 27

## Strengthening Team Dynamics

Our special culture of 'ohana and collaboration is so important that Bank of Hawai'i invested in technology and tools, and created online forums to help teams stay connected during the pandemic, especially when many were working remotely. Now that the workplace has changed and we are embracing a new hybrid environment for some employees, we can no longer rely on just one method to stay connected and engaged.

We began rolling out new software to help managers better connect, engage and understand their employees while strengthening team dynamics. The new tool is designed to bring teams closer together through workshops facilitated by managers, and includes opportunities for discussion and interactive activities.

Employees also embraced a new engagement app that encourages positive connections with each other through appreciation posts, birthday wishes and anniversary celebrations.

![img-11.jpeg](img-11.jpeg)

Justin Prestidge and David Pajarillo joined other members of the newly formed Native Hawaiian ERG for their inaugural service day at Paepae o He'eia in Windward O'ahu.

## Bank of Hawai'i Employee Development Programs

### Leadership Development Program

Two-year accelerated program designed for recent college graduates who are looking to advance their business perspective and grow their skill set through hands-on, real-world experience.

**PROGRAM DATES:**
July 18, 2022-July 17, 2024

**OUTCOME:** Inaugural 2022 cohort kicked off with **3 associates** in Finance, Lending and Information Technology.

### Summer Intern Program

Summer interns spend eight weeks with various departments and bank leadership.

**PROGRAM DATES:**
June 13-Aug. 5, 2022

**OUTCOME:** **34 interns** representing **23 business units**

### Bank Associates Program

Over the course of the program, recent graduates and emerging professionals are exposed to a variety of offerings designed to boost personal and professional growth.

**PROGRAM DATES:**
July 11-Dec. 9, 2022

**OUTCOME:** **4 associates** in Branch Banking

### Pathways to Professional Excellence

Participants are nominated by their managers and selected to take part in this highly regarded leadership program.

**PROGRAM DATES:**
July 18-Dec. 16, 2022

**OUTCOME:** **37 employees** representing **14 business units**

### Movers and Shakas

Participants from Hawai'i businesses build relationships through cultural education, community service and networking opportunities.

**PROGRAM DATES:**
May 7-June 23 (Cohort #1) and Oct. 1-Nov. 10 (Cohort #2)

**OUTCOME:** **7 participants**

### College Mentorship Program

Provides college students with insights into corporate work environments, the financial industry and Bank of Hawai'i while providing professional development to help them grow.

**PROGRAM DATES:**
March 7-April 25 (Spring '22) and Oct. 3-Nov. 21 (Fall '22)

**OUTCOME:** **15 students** representing Chaminade University and UH Shidler Clubs (Business Executive Society of Tomorrow, Financial Management Association, and Information Technology Management Association)

![img-12.jpeg](img-12.jpeg)

2022 Pathways to Professional Excellence participants celebrated after completing the program.

28

![img-0.jpeg](img-0.jpeg)

OUR
CLIENTS

**Our 125-year story is filled with countless**
connections to our community that helped shape who we are today.
In celebration of our anniversary and in appreciation for those relationships, we connected with clients to celebrate their stories of success and partnership with Bank of Hawai'i, including some who were featured in our annual reports over the years.

@ EASYQUEHI  
#

“The bank is a lot like Hawai‘i, where we’re all looking out for each other.” -NIK LOBENDAHN

## NIK AND JENNIFER LOBENDAHN

*Owners, Over Easy, Easy ‘Que, Bakery at Over Easy*

Nik and Jennifer met when they were working at Alan Wong’s restaurant, where they shared a passion for food. They realized they wanted to start a business together before they even knew they wanted to get married. After seven years of saving and planning, plus help from family and friends, in July 2016 they opened Over Easy, a breakfast restaurant in Kailua with a fresh and unique menu. They hit the ground running, putting a lot of love and thought into every detail of their new business and featuring what Jennifer calls their life’s dream menu. In 2019, they expanded to open Easy ‘Que across the street from their breakfast location. It features a local-style barbecue menu with Asian flavor nuances the Lobendahns describe as “aloha barbeque.”

They survived the COVID shutdown by making creative pivots. Serving takeout at Over Easy, selling family dinners, DIY semi-prepared meals, pastry boxes, and other items helped them keep their doors open.

In 2022, they opened a bakery connected to Over Easy featuring baked goods they serve at the restaurant and other treats like custom cakes. While a lot of hard work goes into running their restaurants, they feel lucky to truly love what they do. They’re thankful for their team that helped them grow through the years, and look forward to what’s next.

EASYQUEHI.COM

![img-1.jpeg](img-1.jpeg)

30

BRANCH BANKING CLIENTS

![img-2.jpeg](img-2.jpeg)

BANK OF HAWAII 2022 ANNUAL REPORT 31

“There are three words that would describe our relationship with Bank of Hawai‘i: personalized, professional, partnership. And that’s the way that it should be with a banking relationship.”-RAND COON

## THE COON FAMILY

*Owners, Trilogy Excursions*

Trilogy Excursions is a multigenerational family business that started with two brothers, Eldon and Afton Coon. Now Eldon’s sons, Rand and Jim, and the third generation-the “cousin consortium” of their six adult children-work together. The company is celebrating its 50th anniversary in 2023.

After sailing around the South Pacific for a year and a half in a 50-foot trimaran they built themselves, Jim and Rand fell in love with Hawai‘i and settled on the island of Maui. In 1973, they decided to create a day experience much like their South Pacific cruise, which would show their guests the best day of their vacation by featuring good food with good friends, white sand beaches and beautiful snorkeling. Their crews are educated in Hawaiian culture, history, flora and fauna, and sharing that mana‘o (insight) is part of the engaging hospitality they offer to guests. Early on, the company set the boating-industry standard for environmental awareness and continues to work toward a long-term goal of becoming net zero as part of doing the right things for the environment.

SAILTRILOGY.COM

![img-3.jpeg](img-3.jpeg)

Jim Coon, LiAnne (Coon)
Driessen, Rand Coon and
Ginger (Coon) Lucy

32

COMMERCIAL BANKING CLIENTS

![img-4.jpeg](img-4.jpeg)

BANK OF HAWAII 2022 ANNUAL REPORT 33

“Once we made the switch to Bank of Hawai‘i there’s been no reason to go anywhere else. They’ve taken banking to a different level.” -MICHAEL ROCK

“It truly is the bank of Hawai‘i.”

-CHERYL ROCK

### **MICHAEL AND CHERYL ROCK**

*Owners, Hawaiian Instrument Designs Corp.

After moving to Maui in 1982 from Boston, Michael began building custom furniture and circular staircases for high-end building projects. For fun he used his craftsmanship to make repairs on stringed instruments. When the Gulf War slowed Maui’s construction, he began making ‘ukulele full time. Cheryl, whose background is in business and finance, focused on the clients so Michael could concentrate on crafting instruments, and in 1997 they opened their first store in Wailuku.

All of the instruments at Mele Ukulele are designed and finished in their shop. When the business started, ‘ukulele were considered toys sold as souvenirs or expensive custom-made instruments, with nothing in between. It became their mission to fill that gap and deliver affordable and quality instruments, especially for local families who wanted their children to learn to play. They developed different lines to offer a selection of price points suitable for anyone from a beginner to an intermediate to a professional. Thirty years later, the ‘ukulele is a mainstream instrument, and Mele Ukulele is proud of the role it continues to play. MELEUKULELE.COM

![img-5.jpeg](img-5.jpeg)

34

THE PRIVATE BANK CLIENTS

![img-6.jpeg](img-6.jpeg)

BANK OF HAWAII 2022 ANNUAL REPORT 35

![img-7.jpeg](img-7.jpeg)

Brittany Heyd and Meli James

36

BANKING PARTNER

![img-8.jpeg](img-8.jpeg)

“When I think of Bank of Hawai‘i, I think about it as all about Hawai‘i. It’s not just dollars and cents. This partnership is meaningful because of our shared overall mission in trying to achieve this next vision for Hawai‘i.” -BRITTANY HEYD

### MELI JAMES AND BRITTANY HEYD

*Co-founders, Mana Up*

Mana Up is a statewide initiative designed to support entrepreneurs in Hawai‘i. Mana Up hosts a six-month accelerator program for local product companies to help them grow through retail and e-commerce channels. With a goal to create Hawai‘i’s next 100 product companies earning over $10 million in annual revenue, Mana Up helps Hawai‘i-based companies “level up” and become global companies. Mana Up’s vision is to fuel an economic growth engine for Hawai‘i that can generate success for the local economy and create well-paying, interesting jobs for local people. As Mana Up’s exclusive banking partner at the Founder Level, Bank of Hawai‘i supports the annual accelerator program and is co-creating an executive mentorship and training program to help propel local entrepreneurs to their next level.

With one-on-one mentorship plus other support, 53% of Mana Up companies grew their revenue despite challenges during the pandemic. Many of these entrepreneurs have been recognized internationally for their products’ high quality or innovation.

MANAUPHAWAII.COM

BANK OF HAWAII 2022 ANNUAL REPORT 37

![img-9.jpeg](img-9.jpeg)

38

COMMERCIAL BANKING CLIENT

“Bank of Hawai‘i has been a supportive partner of Outrigger Hospitality Group since the company was founded 75 years ago. We value and trust the Bank of Hawai‘i team.”

**JEFF WAGONER**

*President & CEO, Outrigger Hospitality Group*

Outrigger Resorts & Hotels is a toes-in-the-sand brand, synonymous with beachfront hospitality, iconic live music and authentic signature experiences. Celebrating its 75th anniversary in 2022, Outrigger has charted a journey of discovery-expanding from Hawai‘i to premier beach resort destinations including Fiji, Mauritius, Thailand and the Maldives.

Outrigger is focused on positively affecting society and the environment with “The Outrigger Way” of caring for its hosts, guests and place. This theme is woven throughout Outrigger’s ESG (environmental, social, governance) platform. The OutriggerCARES Foundation, a 501(c)(3) nonprofit, was launched in 2022 as a formal vehicle to provide financial support to Outrigger hosts in times of need. And Outrigger Zone “OZONE,” the company’s global conservation program, focuses on preserving healthy oceans and protecting coral reefs. Through partnerships with like-minded nonprofits and its own Coral Kids Clubs, Outrigger aims to continue as active stewards of the environment and positive corporate citizens. OUTRIGGER.COM

BANK OF HAWAII 2022 ANNUAL REPORT 39

“The Lord has blessed and guided our family in so many ways, like leading us to Bank of Hawai‘i for assistance and advice with our financial needs.” -DR. WILLIAM WONG, JR.

#### **THE WONG FAMILY**

*Rita Wong and Dr. William Wong, Sr.*

*Kerri Wong and Dr. William Wong, Jr.*

The Wongs are a family of medical and real estate professionals and, as their practices grew, so did their relationship with Bank of Hawai‘i. Rita Wong is a Realtor® and real estate investor who also owns Rita Wong Realty, Inc., which specializes in real estate sales and vacation rentals. She has depended on Bank of Hawai‘i Senior Relationship Manager Cori Weston for many years.

Dermatologist William Wong, Sr., MD, owns Hawaii Dermatology & Surgery, Inc., which takes a holistic approach in delivering dermatology care. Ophthalmologist William Wong, Jr., MD, owns Hawaii Vision Clinic, which provides the highest standards of eye care and technology to treat all kinds of eye conditions in adults and children. Bank of Hawai‘i not only helped these professionals build their businesses, but also played a role in helping Rita and Dr. William Wong, Sr. set up education funding for their grandchildren, and guided Kerri and Dr. William Wong, Jr. in the startup of Hawaii Vision Clinic, and the construction of their family’s dream farm. HAWAIIDERMATOLOGYANDSURGERY.COM and HAWAIIVISIONCLINIC.COM

40

THE PRIVATE BANK CLIENTS

![img-0.jpeg](img-0.jpeg)

Dr. William Wong, Sr.,
Rita Wong, Kerri Wong and
Dr. William Wong, Jr.

BANK OF HAWAI'I 2022 ANNUAL REPORT 41

![img-1.jpeg](img-1.jpeg)

42

BRANCH BANKING CLIENT

“We are happy to have a partner like Bank of Hawai‘i with the services to help us with our personal banking as well as the expertise to help us succeed by revisiting our business plans, financial assessments and market analysis.”

**MALCOLM YORKSTON**

*Owner, Hawaiian Rainbow Bees LLC*

Hawaiian Rainbow Bees is proud to bring a local, unprocessed, healthy Hawaiian honey from “bee to bottle.” The family-owned-and-operated business pulls honey from about 1,500 hives. Many are located on macadamia nut farms on Hawai‘i Island, while others are in areas of diversified agriculture on O‘ahu and Hawai‘i Island featuring crops such as coffee, banana, coconut, mango and avocado. The honey is a regular winner at the annual Big Island Beekeepers Association’s Hawaiian Natural Honey Challenge, and is exported all over the world. Their EZ squeeze honey pouch is the first of its kind, and is perfect for Hawai‘i’s outdoor, on-the-go lifestyle.

Hawaiian Rainbow Bees has worked with Bank of Hawai‘i since the company’s inception in 2011. Malcolm regularly visits the tellers and manager at the Mānoa Branch, including Senior Market Manager Summerset Lovett, who helped Rainbow Bees set up their business accounts. More recently, Malcolm moved many of his personal accounts to Bank of Hawai‘i. RAINBOWBEES.COM

BANK OF HAWAII 2022 ANNUAL REPORT 43

![img-2.jpeg](img-2.jpeg)

Mysala Tokunaga,
Michael Tokunaga and
Peggy Tokunaga

44

COMMERCIAL BANKING CLIENT

“A wise and successful businessman once told me, ‘Michael, make sure you get a good contractor that you can trust and, most of all, a good bank and banker that you can also trust!’ Bank of Hawai‘i has treated our business very well for 102 years.”

# **MICHAEL TOKUNAGA**

*Owner, S. Tokunaga Store, Inc.*

S. Tokunaga Store, located in Hilo, Hawai‘i, offers a full range of fishing, diving, hunting, and firearms gear. Opened by Sumie Tokunaga in 1920 as a simple mom-and-pop store, the business has grown for 102 years. It is now run by Michael Tokunaga, the 3rd generation of Tokunagas, who took over the business from his mom, Ethel Tokunaga. Ethel (Sumie’s daughter-in-law) ran the business from 1960 to 1991. The store has become the No. 1 center for deep water and shoreline fishing supplies on Hawai‘i Island, and also offers everything for hunting, diving or camping adventures. With a knowledgeable staff who have over 75 years of combined experience, they continue to follow Sumie’s original philosophy of service: “Get the customers the products that they want, and provide them at a reasonable price with the best service. Treat them how you would like to be treated, and make them feel comfortable.” STOKUNAGASTORE.COM

BANK OF HAWAII 2022 ANNUAL REPORT 45

![img-3.jpeg](img-3.jpeg)

Dr. Chen and Norman Gentry
(seated in front) with
Thomas Gentry and Nicole Gentry

46

THE PRIVATE BANK CLIENTS

“We are honored and grateful for the thousands of homeowners who have placed their trust in Gentry for more than 50 years. We are especially thankful that Bank of Hawai‘i has been by our side as a loyal and trusted partner, through thick and thin, in all our business endeavors.”

# **NORMAN AND DR. CHERI GENTRY**

*Shareholders, Gentry Homes, Ltd.*

Gentry Homes, a family-owned business since 1968, has been building homes in Hawai‘i for more than fifty years. Ocean View Estates on the windward side of O‘ahu was among the first of many Gentry communities, which later included Waipio by Gentry and Ewa by Gentry. The Gentry name has come to represent the very best quality in new-home construction, and today more than 14,000 families call a Gentry community home. Gentry has also developed numerous commercial and industrial projects, such as Gentry’s Kona Marina, the Gentry Waipio Business Park, and the Gentry Pacific Design Center. Bank of Hawai‘i has been a trusted partner of the Gentry businesses for decades.

Norman and Dr. Cheri Gentry also work with Bank of Hawai‘i to plan for the financial futures of the third generation of the Gentry family and for their charitable giving.

GENTRYHAWAII.COM

BANK OF HAWAII 2022 ANNUAL REPORT 47

“Even though any teller can assist my mom, she always asks for Mike. She has difficulty hearing and knows Mike will patiently take the time to explain. It’s reassuring knowing that he’s nearby. He is such a blessing and will always be considered part of the family.” - LESLIE KAWAMOTO

#### JANE LEONG AND LESLIE KAWAMOTO

Jane Leong retired over 30 years ago and lives with her daughter and son-in-law, Leslie and Eric Kawamoto. Jane’s relationship with Bank of Hawai‘i began in the late 1950s when she worked at an office above the branch on South King Street, where she opened her first checking account.

Leslie works at Alexander & Baldwin as the CEO’s assistant. In 2012, she received a call from Sr. Relationship Banker Mike Kobashigawa at the Mānoa Branch. He suggested a meeting with a Bank of Hawai‘i financial planner to grow her mother’s money. “That was the beginning of our wonderful relationship with Mike,” Leslie said. “In addition to Mike, I have met many wonderful Bank of Hawai‘i employees downtown as part of my job. Whenever they call or visit, their good energy adds a smile to my day.”

48

BRANCH BANKING CLIENTS

![img-0.jpeg](img-0.jpeg)

BANK OF HAWAII 2022 ANNUAL REPORT 49

# Consolidated Statements of Income

Bank of Hawai'i Corporation and Subsidiaries (dollars in thousands, except per-share amounts)

FOR THE YEAR ENDED DECEMBER 31

|  | 2022 | 2021 |
| --- | --- | --- |
| Interest Income |  |  |
| Interest and Fees on Loans and Leases | $439,798 | $398,616 |
| Income on Investment Securities |  |  |
| Available-for-Sale | 70,555 | 64,550 |
| Held-to-Maturity | 81,490 | 61,955 |
| Deposits | 32 | 10 |
| Funds Sold | 4,274 | 883 |
| Other | 1,217 | 702 |
| Total Interest Income | 597,366 | 526,716 |
| Interest Expense |  |  |
| Deposits | 39,678 | 15,216 |
| Securities Sold Under Agreements to Repurchase | 12,600 | 13,260 |
| Funds Purchased | 417 | 7 |
| Short-Term Borrowings | 2,070 | - |
| Other Debt | 2,043 | 943 |
| Total Interest Expense | 56,808 | 29,426 |
| Net Interest Income | 540,558 | 497,290 |
| Provision for Credit Losses | (7,800) | (50,500) |
| Net Interest Income After Provision for Credit Losses | 548,358 | 547,790 |
| Noninterest Income |  |  |
| Trust and Asset Management | 43,803 | 46,068 |
| Mortgage Banking | 5,980 | 14,964 |
| Service Charges on Deposit Accounts | 29,620 | 25,564 |
| Fees, Exchange, and Other Service Charges | 54,914 | 55,457 |
| Investment Securities Losses, Net | (6,111) | (1,297) |
| Annuity and Insurance | 3,782 | 3,224 |
| Bank-Owned Life Insurance | 9,968 | 7,784 |
| Other | 15,585 | 19,589 |
| Total Noninterest Income | 157,541 | 171,353 |
| Noninterest Expense |  |  |
| Salaries and Benefits | 235,270 | 228,293 |
| Net Occupancy | 39,441 | 26,244 |
| Net Equipment | 38,374 | 35,703 |
| Data Processing | 18,362 | 20,297 |
| Professional Fees | 14,557 | 12,895 |
| FDIC Insurance | 6,546 | 6,536 |
| Other | 62,715 | 63,621 |
| Total Noninterest Expense | 415,265 | 393,589 |
| Income Before Provision for Income Taxes | 290,634 | 325,554 |
| Provision for Income Taxes | 64,830 | 72,182 |
| Net Income | $225,804 | $253,372 |
| Preferred Stock Dividends | 7,877 | 2,975 |
| Net Income Available to Common Shareholders | $217,927 | $250,397 |
| Basic Earnings Per Common Share | $5.50 | $6.29 |
| Diluted Earnings Per Common Share | $5.48 | $6.25 |
| Dividends Declared Per Common Share | $2.80 | $2.74 |
| Basic Weighted Average Common Shares | 39,601,089 | 39,837,798 |
| Diluted Weighted Average Common Shares | 39,788,002 | 40,053,664 |

Refer to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2022 for the Consolidated Financial Statements, including Report of Independent Registered Public Accounting Firm, thereon.

50

# Consolidated Statements of Condition

Bank of Hawai'i Corporation and Subsidiaries (dollars in thousands)

| AS OF DECEMBER 31 | 2022 | 2021 |
| --- | --- | --- |
| Assets |  |  |
| Interest-Bearing Deposits in Other Banks | $3,724 | $2,571 |
| Funds Sold | 81,364 | 361,536 |
| Investment Securities |  |  |
| Available-for-Sale | 2,844,823 | 4,279,056 |
| Held-to-Maturity (Fair Value of $4,615,393 and $4,646,619) | 5,414,139 | 4,694,780 |
| Loans Held for Sale | 1,035 | 26,746 |
| Loans and Leases | 13,646,420 | 12,259,076 |
| Allowance for Credit Losses | (144,439) | (157,821) |
| Net Loans and Leases | 13,501,981 | 12,101,255 |
| Total Earning Assets | 21,847,066 | 21,462,944 |
| Cash and Due From Banks | 316,679 | 196,327 |
| Premises and Equipment, Net | 206,777 | 199,393 |
| Operating Lease Right-of-Use Assets | 92,307 | 95,621 |
| Accrued Interest Receivable | 61,002 | 45,242 |
| Foreclosed Real Estate | 1,040 | 2,332 |
| Mortgage Servicing Rights | 22,619 | 22,251 |
| Goodwill | 31,517 | 31,517 |
| Bank-Owned Life Insurance | 453,882 | 344,587 |
| Other Assets | 573,988 | 384,727 |
| Total Assets | $23,606,877 | $22,784,941 |
| Liabilities |  |  |
| Deposits |  |  |
| Noninterest-Bearing Demand | $6,714,982 | $7,275,287 |
| Interest-Bearing Demand | 4,232,567 | 4,628,567 |
| Savings | 7,962,410 | 7,456,165 |
| Time | 1,705,737 | 1,000,089 |
| Total Deposits | 20,615,696 | 20,360,108 |
| Securities Sold Under Agreements to Repurchase | 725,490 | 450,490 |
| Other Debt | 410,294 | 10,391 |
| Operating Lease Liabilities | 100,526 | 103,210 |
| Retirement Benefits Payable | 26,991 | 38,494 |
| Accrued Interest Payable | 9,698 | 2,499 |
| Taxes Payable | 7,104 | 11,901 |
| Other Liabilities | 394,083 | 196,237 |
| Total Liabilities | 22,289,882 | 21,173,330 |
| Shareholders' Equity |  |  |
| Preferred Stock ($.01 par value; authorized 180,000 shares; issued / outstanding: December 31, 2022 and December 31, 2021 - 180,000) | 180,000 | 180,000 |
| Common Stock ($.01 par value; authorized 500,000,000 shares; issued / outstanding: December 31, 2022 - 58,733,625 / 39,835,750; and December 31, 2021 - 58,554,669 / 40,253,193) | 582 | 581 |
| Capital Surplus | 620,578 | 602,508 |
| Accumulated Other Comprehensive Loss | (434,658) | (66,382) |
| Retained Earnings | 2,055,912 | 1,950,375 |
| Treasury Stock, at Cost (Shares: December 31, 2022 - 18,897,875 and December 31, 2021 - 18,301,476) | (1,105,419) | (1,055,471) |
| Total Shareholders' Equity | 1,316,995 | 1,611,611 |
| Total Liabilities and Shareholders' Equity | $23,606,877 | $22,784,941 |

Refer to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2022 for the Consolidated Financial Statements, including Report of Independent Registered Public Accounting Firm, thereon.

BANK OF HAWAI'I 2022 ANNUAL REPORT 51

## Relative Stock Price Performance

Bank of Hawai'i Corporation / Bank of Hawai'i (As of Dec. 31, 2022)

![img-1.jpeg](img-1.jpeg)

## Unbroken History of Dividends

(Bank of Hawai'i Corporation)

![img-2.jpeg](img-2.jpeg)

Note: Historical dividends adjusted for stock splits

52

ON THE COVER

![img-3.jpeg](img-3.jpeg)

![img-4.jpeg](img-4.jpeg)

Strong, yet graceful, the powerful image depicted on our cover is of a bronze bas-relief plaque designed by renowned architectural sculptor Lee Lawrie. “Canoe Builders” was created for Bank of Hawai‘i’s newly built Honolulu headquarters that opened in 1927.

Native Hawaiians are shown shaping a canoe in this plaque. It is one of six commissioned for the building, each designed with careful thought and consideration for the unique beauty of Hawai‘i. Another by Lawrie shows Native Hawaiians casting a fishnet, while the four others designed by artist Thomas Mueller portray ancient and modern means of transportation and livelihoods.

The imagery resonates to this day, and all six plaques were preserved over the decades. They are still on display today in the bank’s Main Branch in downtown Honolulu.

BANK OF HAWAII 2022 ANNUAL REPORT 53

# Executive Committee

## Bank of Hawai'i Corporation / Bank of Hawai'i

AS OF DEC. 31, 2022

![img-5.jpeg](img-5.jpeg)

From left: Mary E. Sellers, Peter S. Ho, James C. Polk and Dean Y. Shigemura

![img-6.jpeg](img-6.jpeg)

From left: Marco A. Abbruzzese, Susan L. Ing, Matthew K.M. Emerson and Ruth L. Erickson.

Bank of Hawai'i's Executive Committee represents the major functions of the bank and is accountable for its overall strategy and performance.

**Peter S. Ho**
Chairman, President and Chief Executive Officer

**Marco A. Abbruzzese**
Vice Chair
Wealth Management

**Sharon M. Crofts**
Vice Chair
Client Solutions Group

**Matthew K.M. Emerson**
Vice Chair
Retail Lending, Deposits & Digital Banking

**James C. Polk**
Vice Chair and Chief Banking Officer

**Mary E. Sellers**
Vice Chair and Chief Risk Officer

**Dean Y. Shigemura**
Vice Chair and Chief Financial Officer

**Ruth L. Erickson**
Senior Executive Vice President, E-commerce and Demand Center

**Susan L. Ing**
Senior Executive Vice President and Chief Marketing Officer

54

![img-7.jpeg](img-7.jpeg)

![img-8.jpeg](img-8.jpeg)

From left: Sharon M. Crofts, Patrick M. McGuirk, Taryn L. Salmon and Sharlene R. Ginoza-Lee

**Patrick M. McGuirk**
Senior Executive Vice President,
Chief General Counsel and
Corporate Secretary

**Taryn L. Salmon**
Senior Executive Vice President
and Chief Information Officer

**Sharlene R. Ginoza-Lee**
Executive Vice President
and Chief People Officer

## Operating Committee

Bank of Hawai'i's Operating Committee is comprised of 19 leaders representing corporate staff functions from various business segments who are responsible for the daily operations of the bank.

**Eric Chen**
Senior Vice President
and Senior Director of
Enterprise Operations

**Guy C. Churchill**
Senior Executive Vice
President, Co-Lead
Executive Commercial
Banking Group

**Ryan Field**
Executive Vice President
and Chief Information
Security Officer

**Jill F.S. Higa**
Senior Executive Vice
President, Branch Banking

**Torrie M. Inouye**
Executive Vice President
and Chief Data Officer

**Vance H. Jones**
Executive Vice President
and Chief Technology
Officer

**Roger J. Khlopin**
Executive Vice President
and Chief Investment Officer

**Edward C.S. Kim**
Executive Vice President,
Consumer Lending

**Jennifer Lam**
Senior Executive Vice
President and Treasurer

**Kimarie Matthews**
Executive Vice President,
Client Services

**James K.M. Moniz**
Executive Vice President,
Mortgage Banking

**Lacey Nakaguma**
Executive Vice President
and Chief Audit Executive

**Craig A. Norris**
Senior Executive Vice
President and Chief
Credit Officer

**Amy Peckinpaugh**
Senior Vice President
and Director of Modern
Workplace Solutions

**Kristine R. Stebbins**
Executive Vice President
and Chief Experience Officer

**Dana S. Takushi**
Senior Executive Vice
President and Senior
Executive Director of
The Private Bank

**Melissa A. Torres-Laing**
Senior Vice President
and Director Corporate
Communications

**Luke W.T. Yeh**
Senior Executive Vice
President,
Enterprise Credit Risk
Analytics

**Dirk K. Yoshizawa**
Senior Executive Vice
President, Co-Lead
Executive Commercial
Banking Group

BANK OF HAWAI'I 2022 ANNUAL REPORT 55

# Board of Directors

## Bank of Hawai'i Corporation / Bank of Hawai'i

AS OF DEC. 31, 2022

![img-9.jpeg](img-9.jpeg)

Board of Directors (seated from left): Raymond P. Vara, Barbara J. Tanabe, Peter S. Ho, S. Haunani Apoliona, Kent T. Lucien. Standing from left: Michelle E. Hulst, Mark A. Burak, Elliot K. Mills, Victor K. Nichols, Robert W. Wo, Alicia E. Moy, John C. Erickson, Dana M. Tokioka and Joshua D. Feldman.

**Peter S. Ho**
Chairman, President and
Chief Executive Officer
Bank of Hawai'i Corporation
and Bank of Hawai'i

**Raymond P. Vara**
Bank of Hawai'i Lead
Independent Director
President and Chief
Executive Officer,
Hawai'i Pacific Health

**S. Haunani Apoliona**
Former Trustee,
Office of Hawaiian Affairs

**Mark A. Burak**
Retired Executive Vice President,
Bank of America

**John C. Erickson**
Former Vice Chairman,
Union Bank

**Joshua D. Feldman**
President and
Chief Executive Officer,
Tori Richard, Ltd.

**Michelle E. Hulst**
Former EVP and
Chief Operating Officer,
The Trade Desk

**Kent T. Lucien**
Retired Vice Chair and
Chief Strategy Officer,
Bank of Hawai'i Corporation
and Bank of Hawai'i

**Elliot K. Mills**
Vice President,
Disneyland Resort and Aulani,
A Disney® Resort and Spa

**Alicia E. Moy**
President and
Chief Executive Officer,
Hawai'i Gas

**Victor K. Nichols**
Former Chairman and
Chief Executive Officer,
Harland Clarke Holdings

**Barbara J. Tanabe**
Principal Owner,
Ho'akea Communications, LLC

**Dana M. Tokioka**
Vice President,
Atlas Insurance Agency, Inc.

**Robert W. Wo**
Owner and Director,
C.S. Wo & Sons, Ltd.

56

# Shareholder Information

## FORWARD-LOOKING STATEMENTS

This report contains forward-looking statements concerning, among other things, the economic and business environment in our service area and elsewhere, credit quality and other financial and business matters in future periods. Our forward-looking statements are based on numerous assumptions, any of which could prove to be inaccurate and actual results may differ materially from those projected because of a variety of risks and uncertainties, including, but not limited to: 1) general economic conditions either nationally, internationally or locally may be different than expected, and particularly, any event that negatively impacts the tourism industry in Hawai'i; 2) unanticipated changes in the securities markets, public debt markets, and other capital markets in the U.S. and internationally; 3) competitive pressures in the markets for financial services and products; 4) the impact of legislative and regulatory initiatives, particularly the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the "Dodd-Frank Act"); 5) changes in fiscal and monetary policies of the markets in which we operate; 6) the increased cost of maintaining or the Company's ability to maintain adequate liquidity and capital, based on the requirements adopted by the Basel Committee on Banking Supervision and U.S. regulators; 7) actual or alleged conduct which could harm our reputation; 8) changes in accounting standards; 9) changes in tax laws or regulations or the interpretation of such laws and regulations; 10) changes in our credit quality or risk profile that may increase or decrease the required level of our reserve for credit losses; 11) changes in market interest rates that may affect credit markets and our ability to maintain our net interest margin; 12) the impact of litigation and regulatory investigations of the Company, including costs, expenses, settlements, and judgments; 13) any failure in or breach of our operational systems, information systems or infrastructure, or those of our merchants, third party vendors and other service providers; 14) any interruption or breach of security of our information systems resulting in failures or disruptions in customer account management, general ledger processing, and loan or deposit systems; 15) changes to the amount and timing of proposed common stock repurchases; and 16) natural disasters, public unrest or adverse weather, public health, and other conditions impacting us and our customers' operations. Given these risks and uncertainties, investors should not place undue reliance on forward-looking statements as a prediction of actual results. For a detailed discussion of these and other risks and uncertainties that could cause actual results and events to differ materially from such forward-looking statements please refer to the risk factors discussed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022, and any subsequently filed reports with the U.S. Securities and Exchange Commission. Words such as "believes," "anticipates," "expects," "intends," "targeted," and similar expressions are intended to identify forward-looking statements, but are not the exclusive means of identifying such statements. We undertake no obligation to update forward-looking statements to reflect later events or circumstances.

For the reasons described above, we caution you against relying on any forward-looking statements. You should not consider any list of such factors to be an exhaustive statement of all of the risks, uncertainties, or potentially inaccurate assumptions that could cause our current expectations or beliefs to change. Further, any forward-looking statement speaks only as of the date on which it is made, and we undertake no obligation to update or revise any forward-looking statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events, except as otherwise may be required by the federal securities laws.

### Corporate Headquarters

Bank of Hawai'i Corporation
130 Merchant Street
Honolulu, Hawaii 96813

### Annual Meeting

The annual meeting of shareholders will be held on Friday, April 28, 2023, at 8:30 a.m. Hawai'i Time. Information to access the virtual meeting is available in the company's 2023 Proxy Statement.

### Transfer Agent and Registrar

Computershare Investor Services, LLC
150 Royall Street, Suite 101, Canton, MA 02021

### Common Stock Listing NYSE: BOH

The common stock of Bank of Hawai'i Corporation is traded on the New York Stock Exchange under the ticker symbol BOH and is quoted daily in leading financial publications as "Bank of Hawaii."

### Dividend Reinvestment & Stock Purchase Plan (DRP)

Bank of Hawai'i Corporation's DRP allows existing shareholders to purchase common shares of the company's stock by either reinvesting their stock dividends or by optional cash payments.

- Individuals must possess at least one share of the company's stock to participate in the DRP.
- Shares are purchased on the 10th business day of each month based on the average of five trading days ending on the day of purchase.
- Minimum payment for purchase of shares is $25 and the maximum is $5,000 per calendar quarter.
- There are no fees for purchasing shares or for the safekeeping of stock certificates. Fees are assessed on the sale of shares in the DRP.

Detailed information about Bank of Hawai'i Corporation's DRP can be found online at www.boh.com or by calling Computershare Investor Services LLC at 1-888-660-5443.

### Inquiries

Shareholders with questions about stock transfer services, share holdings or dividend reinvestment may contact Computershare Investor Services LLC at 1-888-660-5443 between 7:00 a.m. and 5:00 p.m. Central Standard Time.

### Investors and Analysts Seeking Financial Information

Jennifer Lam
Manager, Investor Relations
Phone: 1-808-694-8007

### For General Inquiries

Phone: 1-888-643-3888
www.boh.com

Bank of Hawai'i Corporation is an independent regional financial services company serving businesses, consumers and governments in Hawai'i and the West Pacific. The Company's principal subsidiary, Bank of Hawai'i, was founded in 1897. For more information about Bank of Hawai'i Corporation, see the Company's website, www.boh.com.

Bank of Hawai'i

BANK OF HAWAI'I CORPORATION

P.O. BOX 2900

HONOLULU, HAWAII 96846

125 Years: Celebrating Our Stories

View Bank of Hawai'i's 2022
digital Summary Annual Report,
featuring videos of our Chairman,
clients, community and employees
at www.boh.com/annual-report.

# **UNITED STATES**
**SECURITIES AND EXCHANGE COMMISSION**
Washington, D.C. 20549

# **FORM 10-K**

**(Mark One)**

☑ Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2022

or

☐ Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the transition period from _____ to

Commission File Number: 1-6887

# **BANK OF HAWAII CORPORATION**

(Exact name of registrant as specified in its charter)

**Delaware**

(State of incorporation)

**99-0148992**

(I.R.S. Employer Identification No.)

**130 Merchant Street**

(Address of principal executive offices)

**Honolulu**

(City)

**Hawaii**

(State)

**96813**

(Zip Code)

**1-888-643-3888**

(Registrant's telephone number, including area code)

# **Securities registered pursuant to Section 12(b) of the Act:**

| Title of each class | Trading Symbol | Name of each exchange on which registered |
| --- | --- | --- |
| Common Stock, par value $0.01 per share | BOH | New York Stock Exchange |
| Depository Shares, Each Representing 1/40 th Interest in a Share of 4.375% Fixed Rate Non-Cumulative Preferred Stock, Series A | BOH.PRA | New York Stock Exchange |

**Securities registered pursuant to Section 12(g) of the Act:** None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☑ No ☐

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☑

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes ☑ No ☐

Indicate by check mark whether the registrant has submitted electronically, every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.

| Large accelerated filer | ☑ Accelerated filer | ☐ |
| --- | --- | --- |
| Non-accelerated filer | ☐ Smaller reporting company | ☐ |
|  | Emerging growth company | ☐ |

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant has filed a report on and attestation to its management's assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☑

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant's executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).

Yes ☐ No ☑

The aggregate market value of the registrant's outstanding voting common stock held by non-affiliates on June 30, 2022 (the last business day of the registrant's most recently completed second fiscal quarter), determined using the per share closing price on that date on the New York Stock Exchange of $74.40, was approximately $2,927,429,225. There was no non-voting common equity of the registrant outstanding on that date.

As of February 15, 2023, there were 39,785,398 shares of common stock outstanding.

# **DOCUMENTS INCORPORATED BY REFERENCE**

Portions of the registrant's definitive proxy statement relating to its 2023 Annual Meeting of Shareholders, are incorporated herein by reference in Part III of this Annual Report on Form 10-K to the extent stated herein. Such proxy statement will be filed with the Securities and Exchange Commission within 120 days of the registrant's fiscal year end ended December 31, 2022.

# **Bank of Hawai‘i Corporation**
**2022 Form 10-K Annual Report**
**Table of Contents**

|  | Item Number |  | Page |
| --- | --- | --- | --- |
| Part I | Item 1. | Business | 2 |
|  | Item 1A. | Risk Factors | 8 |
|  | Item 1B. | Unresolved Staff Comments | 16 |
|  | Item 2. | Properties | 16 |
|  | Item 3. | Legal Proceedings | 16 |
|  | Item 4. | Mine Safety Disclosures | 16 |
| Part II | Item 5. | Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities | 17 |
|  | Item 6. | [Reserved] | 18 |
|  | Item 7. | Management's Discussion and Analysis of Financial Condition and Results of Operations | 19 |
|  | Item 7A. | Quantitative and Qualitative Disclosures About Market Risk | 49 |
|  | Item 8. | Financial Statements and Supplementary Data | 50 |
|  | Item 9. | Changes in and Disagreements With Accountants on Accounting and Financial Disclosure | 113 |
|  | Item 9A. | Controls and Procedures | 113 |
|  | Item 9B. | Other Information | 115 |
|  | Item 9C. | Disclosure Regarding Foreign Jurisdictions that Prevent Inspections | 115 |
| Part III | Item 10. | Directors, Executive Officers and Corporate Governance | 116 |
|  | Item 11. | Executive Compensation | 116 |
|  | Item 12. | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters | 116 |
|  | Item 13. | Certain Relationships and Related Transactions, and Director Independence | 116 |
|  | Item 14. | Principal Accounting Fees and Services | 116 |
| Part IV | Item 15. | Exhibits, Financial Statement Schedules | 117 |
|  | Item 16. | Form 10-K Summary | 121 |
| Signatures |  |  | 122 |

1

## Part I

## Item 1. Business

### General

Bank of Hawaii Corporation (“Bank of Hawai‘i Corporation” or the “Parent”) is a Delaware corporation and a bank holding company (“BHC”) headquartered in Honolulu, Hawaii. The Parent’s principal operating subsidiary, Bank of Hawaii (“Bank of Hawai‘i” or the “Bank”), was organized on December 17, 1897, and is chartered by the State of Hawaii. The Bank’s deposits are insured by the Federal Deposit Insurance Corporation (the “FDIC”) and the Bank is a member of the Federal Reserve System.

The Bank, directly and through its subsidiaries, provides a broad range of financial products and services primarily to customers in Hawaii, Guam, and other Pacific Islands. References to “we,” “our,” “us,” or “the Company” refer to the Parent and its subsidiaries and are consolidated for financial reporting purposes. The Bank’s subsidiaries are identified in Exhibit 21.1 to this Form 10-K and include, among others, Bankoh Investment Services, Inc., and Pacific Century Life Insurance Corporation. The Bank’s subsidiaries are engaged in securities brokerage, investment advisory services, and providing credit insurance.

We are organized into three business segments for management reporting purposes: Consumer Banking, Commercial Banking, and Treasury and Other. See Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) and Note 13 to the Consolidated Financial Statements for more information.

Our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and all amendments to those reports can be found free of charge on our website at www.boh.com as soon as reasonably practicable after such material is electronically filed with or furnished to the U.S. Securities and Exchange Commission (the “SEC”). The SEC maintains a website, www.sec.gov, which contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC. Our Corporate Governance Guidelines; charters of the Audit and Risk Committee, the Human Resources and Compensation Committee, and the Nominating and Corporate Governance Committee; and our Code of Business Conduct and Ethics are available on our website at www.boh.com. Printed copies of this information may be obtained, without charge, by written request to the Corporate Secretary at 130 Merchant Street, Honolulu, Hawaii, 96813.

### Competition

The Company operates in a highly competitive environment subject to intense competition from traditional financial service providers including banks, savings associations, credit unions, mortgage companies, finance companies, mutual funds, brokerage firms, insurance companies, and other non-traditional providers of financial services including financial service subsidiaries of commercial and manufacturing companies. Some of our competitors are not subject to the same level of regulation and oversight that is required of banks and BHCs, and receive favorable tax treatment. As a result, some of our competitors may have lower cost structures. Also, some of our competitors, through delivery channels such as the Internet, may be based outside of the markets that we serve. By emphasizing our extensive branch network, exceptional service levels, and knowledge of local trends and conditions, the Company believes it has developed a competitive advantage in its market.

### Supervision and Regulation

Our operations are subject to extensive regulation by federal and state governmental authorities. The regulations are primarily intended to protect depositors, customers, and the integrity of the U.S. banking system and capital markets. The following information describes some of the more significant laws and regulations applicable to us. The descriptions below are qualified in their entirety by reference to the applicable laws and regulations. Proposals to change the laws and regulations governing the banking industry are frequently raised in Congress, in state legislatures, and with the various bank regulatory agencies. Changes in applicable laws or regulations, or a change in the way such laws or regulations are interpreted by regulatory agencies or courts, may have a material impact on our business, operations, and earnings.

#### *The Parent*

The Parent is registered as a BHC under the Bank Holding Company Act of 1956, as amended (the “BHC Act”), and is subject to the supervision of and to examination by the Board of Governors of the Federal Reserve (the “FRB”). The Parent is also registered as a financial institution holding company under the Hawaii Code of Financial Institutions (the “Code”) and is subject to the registration, reporting, and examination requirements of the Code.

2

The BHC Act prohibits, with certain exceptions, a BHC from acquiring direct or indirect beneficial ownership or control of either a company that is not a bank, or more than 5% of the voting shares of any bank, without the FRB’s prior approval. A BHC is generally prohibited from engaging in any activity other than banking, managing or controlling banks or other subsidiaries authorized under the BHC Act, or an activity that the FRB has determined to be so closely related to those activities as to be a proper incident to one of them.

Under FRB policy, a BHC is expected to serve as a source of financial and management strength to its subsidiary bank(s). A BHC is also expected to commit resources to support its subsidiary bank(s) in circumstances where it might not do so absent such a policy. Under this policy, a BHC is expected to maintain reliable funding and contingency plans to stand ready to provide adequate capital funds to its subsidiary bank(s) during periods of financial adversity and to maintain the financial flexibility and capital-raising capacity to obtain additional resources for assisting its subsidiary bank(s).

Under the Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 (the “Riegle-Neal Act”) banks and BHCs from any state are permitted to acquire banks located in any other state, subject to certain conditions, including certain nationwide and state-imposed deposit concentration limits. Banks also have the ability, subject to certain restrictions, to acquire branches outside their home states by acquisition or merger under the Riegle-Neal Act. The establishment of new interstate branches is also possible in those states with laws that expressly permit de novo branching. Because the Code permits de novo branching by out-of-state banks, those banks may establish new branches in Hawaii.

#### *Bank of Hawai‘i*

The Bank is subject to extensive federal, state, territorial and foreign regulations that significantly affect its business and activities. The Bank is subject to supervision of the FRB and examination by the Federal Reserve Bank of San Francisco, the Consumer Financial Protection Bureau (the “CFPB”), and the State of Hawaii Department of Commerce and Consumer Affairs’ (“DCCA”) Division of Financial Institutions. These regulatory bodies have broad authority to implement standards and to initiate proceedings designed to prohibit depository institutions from engaging in activities that may represent “unsafe” or “unsound” banking practices or constitute violations of applicable laws, rules, regulations, administrative orders, or written agreements with regulators. The standards relate to, among other compliance matters, operations and management, asset quality, interest rate exposure, capital, executive compensation, and consumer protection. The regulatory bodies are authorized to take action against institutions that fail to meet such standards, including the assessment of civil monetary penalties and restitution, the issuance of cease-and-desist orders, and other actions, up to and including revocation of a bank’s charter for the most severe infractions, or putting such a bank into receivership if it is not financially viable.

Bankoh Investment Services, Inc., the broker-dealer and investment adviser subsidiary of the Bank, is incorporated in Hawaii and is regulated by the SEC, the Financial Industry Regulatory Authority, and the DCCA’s Insurance Division. Pacific Century Life Insurance Corporation is incorporated in Arizona and is primarily regulated by the State of Arizona Department of Insurance.

#### *The Dodd Frank Act*

The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the “Dodd-Frank Act”) and its regulations, among other things, mandated capital and liquidity requirements, established standards for mortgage lenders, regulated executive and incentive-based compensation, imposed various consumer protections and numerous other provisions. Provisions also limit or place significant burdens and costs on activities traditionally conducted by banking organizations, such as arranging and participating in swap and derivative transactions, proprietary trading and investing in private equity and other funds.

Several provisions of the Dodd-Frank Act were significantly changed by enactment of the Economic Growth, Regulatory Relief, and Consumer Protection Act in May 2018, notably by eliminating the requirement for institutions like the Company to perform and publicly disclose periodic stress tests. The Company continues to monitor and implement rules, regulations, and interpretations of the Dodd-Frank Act as they are adopted and modified, and to evaluate their application to our current and future operations.

#### *Capital Requirements*

In July 2013, the FRB, the Office of the Comptroller of the Currency (the “OCC”) and the FDIC adopted new capital rules (the “Rules”). These Rules were designed to help ensure that banks maintain strong capital positions by increasing both the quantity and quality of capital held by U.S. banking organizations. The Rules reflect, in part, certain standards initially adopted by the Basel Committee on Banking Supervision in December 2010 (which are commonly called “Basel III” standards) as well as requirements by the Dodd-Frank Act.

3

The Federal Deposit Insurance Corporation Improvement Act of 1991 (“FDICIA”) identifies five capital categories for insured depository institutions: “well capitalized,” “adequately capitalized,” “undercapitalized,” “significantly undercapitalized,” and “critically undercapitalized.”

The federal banking agencies are authorized by FDICIA to impose progressively more restrictive constraints on operations, management and capital distributions, depending on the capital category in which an institution is classified. These “prompt corrective actions” can include: requiring an insured depository institution to adopt a capital restoration plan guaranteed by the institution’s parent company; placing limits on asset growth and restrictions on activities, including restrictions on transactions with affiliates; restricting the interest rates the institution may pay on deposits; prohibiting the payment of principal or interest on subordinated debt; prohibiting the holding company from making capital distribution without prior regulatory approval; and ultimately appointing a receiver for the institution.

A “well capitalized” institution must have a Common Equity Tier 1 Capital Ratio of at least 6.5%, a Tier 1 Capital Ratio of at least 8%, a Total Capital Ratio of at least 10%, a Tier 1 Leverage Ratio of at least 5%, and not be subject to a capital directive order. As of December 31, 2022, the Bank was classified as “well capitalized.” The classification of a depository institution under one of the categories set out above is primarily for the purpose of applying the prompt corrective actions, and is not intended to be, nor should it be interpreted as, a representation of the overall financial condition or the prospects of that financial institution. See Note 11 to the Consolidated Financial Statements for more information.

#### *Dividend Restrictions*

The Parent is a legal entity separate and distinct from the Bank. The Parent’s principal source of funds to pay dividends on its common stock and to service its liabilities is dividends from the Bank. Various federal and state laws and regulations limit the amount of dividends the Bank may pay to the Parent without regulatory approval. The FRB is authorized to determine the circumstances when the payment of dividends would be an unsafe or unsound practice and to prohibit such payments. The right of the Parent, its shareholders, and creditors to participate in any distribution of the assets or earnings of its subsidiaries is also subject to the prior claims of creditors of those subsidiaries. For information regarding the limitations on the Bank’s ability to pay dividends to the Parent, see Note 11 to the Consolidated Financial Statements.

#### *Transactions with Affiliates and Insiders*

Transactions between the Bank and any affiliate are governed by Sections 23A and 23B of the Federal Reserve Act. An affiliate of the Bank is any company or entity which controls, is controlled by or is under common control with the Bank which is not a subsidiary of the Bank. Under federal law, the Bank is subject to restrictions that limit the transfer of funds or other items of value to the Parent, and any other non-bank affiliates in “covered transactions.” In general, covered transactions include making loans to an affiliate, the purchase of or investment in the securities issued by an affiliate, the purchase of assets from an affiliate, the acceptance of securities issued by an affiliate as collateral security for a loan or extensions of credit to any person or company, the issuance of a guarantee, acceptance or letter of credit on behalf of an affiliate, or certain transactions with an affiliate that involve the borrowing or lending of securities and certain derivative transactions with an affiliate.

Unless an exemption applies, covered transactions by the Bank with a single affiliate are limited to 10% of the Bank’s capital and surplus, and with respect to all covered transactions with affiliates in the aggregate, they are limited to 20% of the Bank’s capital and surplus. Section 23B of the Federal Reserve Act and Federal Reserve Regulation W also require that certain transactions between the Bank and its affiliates be on terms substantially the same, or at least as favorable to the Bank, as those prevailing at the time for comparable transactions with or involving other non-affiliated persons.

The Federal Reserve Act and Federal Reserve Regulation O place restrictions and certain reporting requirements on any extension of credit made by a member bank to (a) an executive officer, director, or principal shareholder of the bank, or any company of which the bank is a subsidiary, and of any other subsidiary of that company, and (b) a company controlled by such a person, or to a political or campaign committee that benefits or is controlled by such a person (collectively referred to as “insiders”). These restrictions include limits on loans to one borrower and conditions that must be met before such loans can be made. There is also an aggregate limitation on all loans to insiders and their related interests. Certain restrictions also apply to extensions of credit made to an executive officer, directors, or principal shareholder of a bank (or to a related interest of such person) by a correspondent bank.

4

# *The Volcker Rule*

In December 2013, the Federal Reserve, the OCC, the FDIC, the SEC, and the Commodities Futures Trading Commission issued final rules to implement certain provisions of the Dodd-Frank Act commonly known as the “Volcker Rule.” The Volcker Rule, as amended on August 20, 2019, generally prohibits U.S. banks from engaging in proprietary trading and restricts those banking entities from sponsoring, investing in, or having certain relationships with hedge funds and private equity funds. The prohibitions under the Volcker Rule are subject to a number of statutory exemptions, restrictions, and definitions. The Volcker Rule has not had a material impact on the Company’s Consolidated Financial Statements, but we continue to evaluate its application to our current and future operations.

# *FDIC Insurance*

The FDIC provides insurance coverage for certain deposits held by the Bank through the Deposit Insurance Fund, which the FDIC maintains by assessing depository institutions an insurance premium. The Bank is assessed deposit insurance premiums by the FDIC using a risk-based assessment rate and an adjusted average total assets. The Bank’s FDIC insurance assessment was $6.5 million in 2022, $6.5 million in 2021, and $5.8 million in 2020.

A depository institution’s deposit insurance may be terminated by the FDIC upon a finding that the institution’s financial condition is unsafe or unsound, or that the institution has engaged in unsafe or unsound practices, or has violated any applicable rule, regulation, or order or condition enacted or imposed by a regulatory agency. Termination of the Bank’s deposit insurance would end its ability to function as a commercial bank in Hawaii.

# *Depositor Preference*

In the event of the “liquidation or other resolution” of an insured depository institution, claims of insured and uninsured depositors for deposits payable in the United States (including the claims of the FDIC as subrogee of insured depositors), plus certain claims for administrative expenses of the FDIC as a receiver will have priority in payment ahead of unsecured creditors including, in the case of the Bank, the Parent.

# *Other Safety and Soundness Regulations*

The federal banking agencies also have adopted guidelines prescribing safety and soundness standards. These guidelines establish general standards for internal controls, information systems, internal audit systems, loan documentation, credit underwriting, interest rate risk exposure, asset growth, asset quality, earnings standards, compensation, fees and benefits. In general, the guidelines require appropriate systems and practices to identify and manage the risks and exposures specified in the guidelines before capital becomes impaired.

# *Community Reinvestment and Consumer Protection Laws*

- *Community Reinvestment.* The Community Reinvestment Act of 1977 (“CRA”) requires the appropriate federal banking agency, in connection with its examination of a bank, to assess the bank’s record in meeting the credit needs of the communities served by the bank, including low and moderate income neighborhoods. Under the CRA, institutions are assigned a rating of “outstanding,” “satisfactory,” “needs to improve,” or “substantial non-compliance.” The regulatory assessment of the bank’s record is made available to the public. Further, these assessments are considered by regulators when evaluating mergers, acquisitions and applications to open, close, or relocate a branch or facility. The Bank’s current CRA rating is “outstanding”.
- *Consumer Protection Laws.* In addition to the CRA, the Bank is subject to a number of federal laws designed to protect borrowers and promote lending to various sectors of the economy and population in connection with its lending activities. These include the Equal Credit Opportunity Act, the Truth-in-Lending Act, the Home Mortgage Disclosure Act and the Real Estate Settlement Procedures Act.

Federal banking regulators, pursuant to the Gramm-Leach-Bliley Act, have enacted regulations limiting the ability of banks and other financial institutions to disclose nonpublic consumer information to non-affiliated third parties. The regulations require disclosure of privacy policies and allow consumers to prevent certain personal information from being shared with non-affiliated third parties. The Fair and Accurate Credit Transaction Act (“FACT Act”) requires financial institutions to develop and implement an identity theft prevention program to detect, prevent and mitigate identity theft “red flags” to reduce the risk that customer information will be misused to conduct fraudulent financial transactions.

5

A number of other federal and state consumer protection laws extensively govern the Bank’s relationship with its customers. These laws include the Equal Credit Opportunity Act, the Fair Credit Reporting Act, the Truth in Lending Act, the Truth in Savings Act, the Electronic Fund Transfer Act, the Expedited Funds Availability Act, the Home Mortgage Disclosure Act, the Fair Housing Act, the Real Estate Settlement Procedures Act, the Fair Debt Collection Practices Act, Telephone Consumer Protection Act, the Service Members Civil Relief Act and these laws’ respective state-law counterparts, as well as state and territorial usury laws and laws regarding unfair and deceptive acts and practices. These and other laws subject the Bank to substantial regulatory oversight and, among other things, require disclosures of the cost of credit and terms of deposit accounts, provide substantive consumer rights, prohibit discrimination in credit transactions, regulate the use of credit report information, provide financial privacy protections, prohibit unfair, deceptive and abusive practices, and restrict the Bank’s ability to raise interest rates.

The CFPB was created under the Dodd-Frank Act as an agency responsible for promulgating and enforcing regulations designed to protect consumers including adding prohibitions on unfair, deceptive and abusive acts and practices. The CFPB, along with other prudential regulators and the Department of Justice, have also expanded the focus of their regulatory examinations and investigations to include “fair and responsible banking.” Fair and responsible banking strives to provide equal credit opportunities to all applicants of a community, to prohibit discrimination by lenders on the basis of certain borrower characteristics, and to ensure that a bank’s practices are not deceptive, unfair, or take unreasonable advantage of consumers or businesses. The enhanced focus encompasses the entire loan life cycle, including post-closing activities such as collections and servicing, and pre-application activities such as marketing and loan solicitation and origination.

Violations of applicable consumer protection laws and regulations can result in significant potential liability from litigation brought by customers, including actual damages, restitution and attorneys’ fees. Federal bank regulators, state attorneys general and state and local consumer protection agencies may also seek to enforce consumer protection requirements and obtain these and other remedies, including regulatory sanctions, customer rescission rights, and civil money penalties. Failure to comply with consumer protection requirements may also result in our failure to obtain required bank regulatory approvals for transactions the Bank may wish to pursue, or prohibit us from engaging in such transactions even if approval is not required.

#### *Bank Secrecy Act / Anti-Money Laundering Laws*

The Bank is subject to the Bank Secrecy Act and other anti-money laundering laws and regulations, including the USA PATRIOT Act of 2001. The USA PATRIOT Act created new laws, regulations, and penalties, imposed significant new compliance and due diligence obligations, and expanded the application of those laws outside the U.S. Additionally, like all U.S. companies and individuals, the Company is prohibited from transacting business with certain individuals and entities named on the Office of Foreign Asset Control’s list of Specially Designated Nationals and Blocked Persons.

The Bank has been required to implement policies, procedures, and controls to detect, prevent, and report potential money laundering and terrorist financing and to verify the identity of its customers. The Company maintains procedures and systems to identify its customers, and to monitor and block transactions related to prohibited persons and entities. Violations of these requirements can result in substantial civil and criminal sanctions. In addition, the federal financial institution regulatory agencies consider the effectiveness of a financial institution’s anti-money laundering activities when reviewing bank mergers and BHC acquisitions.

#### **Human Capital Management**

As of December 31, 2022, we employed 2,076 full-time equivalent employees, of which 1,973 are located in the State of Hawaii, with the remainder located in Guam and other Pacific Islands. None of our employees are subject to a collective bargaining agreement.

The Company values the contributions of all of its employees and is committed to building an active and connected employee community within the Company. Key areas of focus for the Company include:

Diversity and Inclusion: The Company believes that a diverse and inclusive workforce fosters an environment where everyone can thrive and be successful. As of December 31, 2022, approximately 87% of our workforce are minorities (non-Caucasian) and approximately 63% of our workforce are female, which accounts for 43% and 60% of our senior leaders and managers, respectively. We conduct an external pay equity study periodically to evaluate that a gender pay gap does not exist.

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Employee Development and Training: The Company is committed to providing all employees with the opportunity to grow, connect and thrive within the Company. We foster a seamlessly collaborative, digitally connected workplace to support changing needs. We enhance people leadership capability to deliver exceptional employee experience and develop our workforce of tomorrow. Skills and professional development training is provided to employees at all levels, with additional development sessions specifically targeted to managers and leaders. Key initiatives included the continued support of executive coaching to elevate leadership capabilities, the launch of a new and competitive Leadership Development Program, the first hybrid Pathways to Professional Excellence cohort with the largest enrollment of 38 employees and an enhanced online performance management process that allows the employee to own the first step of the performance review process.

To help maintain Hawaii’s special culture of *‘ohana* and working together toward common goals, renewed attention was paid to engaging teammates in a hybrid environment. Based on employee feedback from surveys, online and in-person sessions were created in 2022 to connect with employees and encourage collaboration. “Exec Connect” kicked off in January with our Executive Committee and returned in November during Employee Experience (“EX”) Month with our Operating Committee, giving employees opportunities to interact with members of the Executive Committee and Operating Committee. Employees were able to hear about high level strategies and share their own concerns and observations. “Exec Connect” proved to be especially valuable in welcoming new employees, allowing them to familiarize themselves with key executives and other employees. “Recruit Connect” also continued in 2022 to help teammates identify job opportunities within the Company and find out more about them. In some cases, sessions led to referred candidates joining the Bank, and to current employees finding a new career path. “Manager Excellence Forums” continued in February 2022 as a platform connecting managers so that they can learn from and support one another when facing real management issues, and discuss practical solutions. Manager engagement has been key to navigating the ever changing business environment, and these forums help managers stay connected and improve their management skills while moving forward with their teams. Forum topics are suggested by the participants, who meet every other month, and have included Reemergence, Mastering Change, Employee Experience, opportunities to deliver great EX, importance of psychological safety, and how our leaders can continue to build stronger teams. “Rising Team” launched in October 2022 to offer a new and modern way for us to strengthen our connection with our teammates. “Rising Team” is a software tool that provides managers a way to facilitate sessions with their team and offers everyone the opportunity to share thoughts and feedback in real time on a variety of leadership themed topics, such as Psychological safety, Appreciation, Natural talents and Career horizons.

Employee Benefits: The Company believes in enabling a healthy workforce and providing a benefits program that is designed to attract, retain, and motivate employees. In addition to competitive insurance, healthcare, and retirement offerings, examples of more innovative and workforce-specific benefits offerings include: mortgage discount program, student loan assistance program, well-being sessions, and personal finance education. In 2022, the Bank introduced a new Paid Time Off benefit that provides our employees with more flexibility and paid Parental Leave.

Health and Safety: The health and safety of our employees is a priority. In 2022, our commitment to workplace safety and workforce health enabled the Company to maintain business and operational continuity without diminishing our focus on both employee and customer safety during the COVID-19 pandemic. We also invested in ventilation system upgrades. Employees who chose not to get COVID vaccinated, were required to complete COVID testing weekly. The Company paid for the testing, provided paid time off to complete the weekly testing, and secured on site testing arrangements for our employees. The Company hosted onsite COVID-19 vaccine and/or booster shot clinics, as well as provided paid time off for employees to receive their COVID-19 vaccine and/or booster shot.

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# Information about our Executive Officers

Listed below are executive officers of the Parent.

Peter S. Ho, 57

Chairman and Chief Executive Officer since July 2010 and President since April 2008.

Dean Y. Shigemura, 59

Vice Chair since December 2017; Chief Financial Officer since March 2017.

Marco A. Abbruzzese, 57

Vice Chair, Senior Executive Director of Wealth Management since January 2022; Regional Managing Director - Washington and Alaska of Wells Fargo from May 2009 to December 2021.

Sharon M. Crofts, 57

Vice Chair, Client Solutions Group since April 2016.

James C. Polk, 56

Chief Banking Officer since January 2022; Chief Commercial Officer from April 2020 to December 2021; Vice Chair since June 2016.

Mary E. Sellers, 66

Vice Chair and Chief Risk Officer since July 2005.

Matthew K.M. Emerson, 45

Vice Chair since November 2022; Senior Executive Director of Mortgage Banking and Loans since February 2020; Executive Vice President and Senior Executive Director of eCommerce from September 2018 to February 2020; Executive Vice President, Director of Business and Retail Deposit Products from February 2018 to September 2018.

Jeanne M. Dressel, 61

Principal Accounting Officer, Senior Vice President and Controller since November 2022; Global Controller of Blockchain.com from September 2021 to October 2022; Senior Vice President and Controller of First Interstate Bank from October 2018 to September 2021; Corporate Controller of Ethos Lending LLC from February 2017 to October 2018.

## Item 1A. Risk Factors

There are a number of risks and uncertainties that could negatively affect our business, financial condition or results of operations. We are subject to various risks resulting from changing economic, environmental, political, industry, business, financial and regulatory conditions. The risks and uncertainties described below are what management believes are the material risk factors that could affect our business and operations, although they are not the only risks that may have a material adverse effect on the Company.

### Risks Related to Macroeconomic and Political Conditions

*Adverse changes in business and economic conditions, in particular those of Hawaii, Guam and other Pacific Islands, could lead to lower revenue, lower asset quality, and lower earnings.*

Our business and earnings are closely tied to the economies of Hawaii and the Pacific Islands. These local economies rely heavily on tourism, the U.S. military, real estate, construction, government, and other service-based industries. Lower visitor arrivals or spending, real or threatened acts of war or terrorism, public unrest, increases in energy costs, the availability of affordable air transportation, climate change, natural disasters and adverse weather, public health issues including the COVID-19 pandemic, and Federal, State of Hawaii and local government budget issues may impact consumer and corporate spending. Additionally, financial markets may be adversely affected by the current or anticipated impact of military conflict, including continuing military conflict between Russia and Ukraine, terrorism or other geopolitical events.

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The impacts of various travel restrictions and quarantine requirements for visitors to Hawaii in connection with the COVID-19 pandemic had a dramatic negative impact on tourism and general economic conditions in our markets. Although there has been significant improvement in tourism and general economic conditions, COVID-19 continues to impact Hawaii and the Pacific Islands, including a lagging recovery in international tourism.

Deterioration of economic conditions, locally, nationally, and internationally could adversely affect the quality of our assets, credit losses, and the demand for our products and services, which could lead to lower revenues, higher expenses, and lower earnings. The level of domestic and international visitor arrivals and spending, housing prices, and unemployment rates are some of the metrics that we continually monitor. We also monitor the value of collateral, such as real estate, that secures the loans we have made. The borrowing power of our customers could also be negatively impacted by a decline in the value of collateral.

# *Climate change and the governmental responses to it could have a material adverse impact on the Bank and its customers*

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

# *The COVID-19 pandemic has disrupted the Hawaii economy and our business, the extent of the impact on our business and our financial results remains uncertain.*

The COVID-19 pandemic has had a material adverse effect on our operations and financial performance. The duration of the COVID-19 pandemic and its effects still cannot be determined with a reasonable level of certainty. We have experienced unprecedented levels of government stimulus in response to the COVID-19 pandemic, and have seen certain economic activities recovering since 2020, however, the lasting impacts of which are unknown.

Novel viruses such as COVID-19 increase concerns related to illness when traveling and gathering in large numbers. In response, the majority of the nation’s state and local jurisdictions imposed various restrictions in order to control the spread of COVID-19. Though most of these restrictions have now been lifted there is the possibility that they could be imposed again in the future.

Even as more and more individuals become fully vaccinated against COVID-19, prior and any future travel restrictions and mandatory quarantines related to the COVID-19 pandemic may have a lasting impact on tourism spending in Hawaii. Because many of our customers, both commercial and consumer, derive at least some of their income from tourism, a dramatic drop in tourism spending affects them directly, as well as the Hawaii economy as a whole. A downturn in the Hawaii economy and widespread reduction to our customers’ income in turn will have a negative impact on our operations. We are unable to predict the extent to which the COVID-19 pandemic and related impacts will continue to adversely affect our business, results of operations, financial condition, regulatory capital, and liquidity ratios.

The COVID-19 pandemic, the institution of physical distancing, and shelter-in-place requirements resulted in both temporary and permanent closures of many businesses. As a result, the demand for our products and services has been and may continue to be significantly impacted. Our operations may also be disrupted if significant portions of our workforce are unable to work effectively, due to illness, quarantines, government actions, or other restrictions in connection with the COVID-19 pandemic. We had temporarily closed certain of our branches and permanently closed others. Many employees are now working remotely or on a hybrid schedule.

In response to the COVID-19 pandemic, we temporarily suspended residential property foreclosure sales, evictions, and involuntary automobile repossessions. We continue to work with our customers after the initial assistance programs expired. The extent to which the COVID-19 pandemic impacts our business, results of operations, financial condition, regulatory capital, and liquidity ratios will depend on the scope and duration of the COVID-19 pandemic, actions taken by governmental authorities, actions taken by other third parties in response to the COVID-19 pandemic, and the pace of recovery when the COVID-19 pandemic subsides, all of which are highly uncertain.

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*Any reduction in defense spending by the federal government could adversely impact the economy in Hawaii and the Pacific Islands.*

The U.S. military has a major presence in Hawaii and the Pacific Islands. As a result, the U.S. military is an important aspect of the economies in which we operate. The funding of the U.S. military is subject to the overall U.S. Government budget and appropriation decisions and processes which are driven by numerous factors, including geo-political events, macroeconomic conditions, and the ability and willingness of the U.S. Government to enact legislation. U.S. Government appropriations have been and likely will continue to be affected by larger U.S. Government budgetary issues and related legislation. Cuts in defense and other security spending could have an adverse impact on the economies in which we operate, which could adversely affect our business, financial condition, and results of operations.

*Changes in interest rates could adversely impact our results of operations and capital.*

Our earnings are highly dependent on the spread between the interest earned on loans, leases, and investment securities and the interest paid on deposits and borrowings. We primarily rely on customer deposits as a sizable source of relatively stable and low-cost funds. Changes in market interest rates impact the rates earned on loans, leases, and investment securities and the rates paid on deposits and borrowings. In addition, changes to market interest rates could impact the level of loans, leases, investment securities, deposits, and borrowings, and the credit profile of our current borrowers. Interest rates are affected by many factors beyond our control, and fluctuate in response to general economic conditions, currency fluctuations, and the monetary and fiscal policies of various governmental and regulatory authorities.

Changes in monetary policy, including changes in interest rates, will influence the origination of loans and leases, the purchase of investments, the generation of deposits, and the rates received on loans and investment securities and paid on deposits. Any substantial prolonged change in market interest rates may negatively impact our ability to attract deposits, originate loans and leases, and achieve satisfactory interest rate spreads. If we are unable to continue to fund loans and other assets through customer deposits or access capital markets on favorable terms or if we otherwise fail to manage our liquidity effectively, our liquidity, net interest margin, financial results and conditions may be adversely affected.

*Credit losses could increase if economic conditions stagnate or deteriorate.*

Increased credit losses for the Bank could result if economic conditions stagnate or deteriorate. The risk of nonpayment on loans and leases is inherent in all lending activities. We maintain a reserve for credit losses to absorb estimated expected credit losses over the life of the loan and lease portfolio as of the balance sheet date. Management makes various assumptions and judgments about the loan and lease portfolios in determining the level of the reserve for credit losses. Many of these assumptions are based on current economic conditions. Should economic conditions stagnate or deteriorate nationally or in Hawaii, we may experience higher credit losses in future periods.

Inability of our borrowers to make timely repayments on their loans, or decreases in real estate collateral values may result in increased delinquencies, foreclosures, and customer bankruptcies, any of which could have a material adverse effect on our financial condition or results of operations.

*Consumer protection initiatives and court decisions related to the foreclosure process affect our remedies as a creditor.*

Proposed consumer protection initiatives related to the foreclosure process, including voluntary and/or mandatory programs intended to permit or require lenders to consider loan modifications or other alternatives to foreclosure, could increase our credit losses or increase our expense in pursuing our remedies as a creditor.

In addition, Hawaii’s appellate courts have made rulings that increase the complexity and risk of nonjudicial, or out-of-court, foreclosures. At the same time, a chronic backlog of cases in the Hawaii courts has slowed the judicial foreclosure process, which delays the Bank’s ability to take over, preserve, and sell the mortgaged property. The manner in which these issues are ultimately resolved could impact our foreclosure procedures and costs, which in turn could affect our financial condition or results of operations.

*Changes in the capital markets could materially affect the level of assets under management and the demand for our other fee-based services.*

Changes in the capital markets could affect the volume of income from and demand for our fee-based services. Our investment management revenues depend in large part on the level of assets under management. Market volatility that leads customers to liquidate investments or move investments to other institutions or asset classes, as well as lower asset values can reduce our level of assets under management, thereby decreasing our investment management revenues.

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*The Parent’s liquidity is dependent on dividends from the Bank.*

The Parent is a separate and distinct legal entity from the Bank. The Parent receives substantially all of its cash in the form of dividends from the Bank. These dividends are the principal source of funds to pay, dividends on the Parent’s common and preferred stock or to repurchase common stock under the Parent’s share repurchase program. Various federal and state laws and regulations limit the amount of dividends that the Bank may pay to the Parent. The Parent’s ability to meet its obligations, pay dividends to shareholders, or repurchase stock, may be further limited if federal and state laws and regulations further limit the amount of dividends the Bank is permitted to pay the Parent.

*There can be no assurance that the Parent will continue to declare cash dividends or repurchase stock.*

During 2022, the Parent repurchased 627,629 shares of common stock at a total cost of $49.8 million under its share repurchase program. We suspended share repurchases from March 2020 to July 2021 in light of the COVID-19 pandemic. The Parent also paid cash dividends of $112.6 million on common shares during 2022. In January 2023, the Parent’s Board of Directors declared a quarterly cash dividend of $0.70 per share on the Parent’s outstanding common shares.

Our dividend payments and/or stock repurchases may change from time-to-time, and we cannot provide assurance that we will continue to declare dividends and/or repurchase stock in any particular amounts or at all. Dividends and/or stock repurchases are subject to capital availability and periodic determinations by our Board of Directors. We continue to evaluate the potential impact that regulatory proposals may have on our liquidity and capital management strategies, including Basel III and those required under the Dodd-Frank Act. The actual amount and timing of future dividends and share repurchases, if any, will depend on market and economic conditions, applicable SEC rules, federal and state regulatory restrictions, and various other factors. In addition, the amount we spend and the number of shares we are able to repurchase under our stock repurchase program may further be affected by a number of other factors, including the stock price and blackout periods in which we are restricted from repurchasing shares. A reduction in or elimination of our dividend payments and/or stock repurchases could have a negative effect on our stock price.

## Risks Related to Regulatory Changes

*The end of LIBOR may adversely affect our financial instruments that are directly or indirectly tied to LIBOR.*

On March 5, 2021, the UK Financial Conduct Authority, which regulates LIBOR, confirmed that all LIBOR settings will either cease to be provided by any administrator or will no longer be representative immediately after December 31, 2021 for 1-week and 2-month US dollar LIBOR and immediately after June 30, 2023 for all remaining US dollar LIBOR settings. In addition, U.S. banking regulatory agencies issued guidance encouraging banks to cease entering into new contracts that use U.S. dollar LIBOR as a reference rate by December 31, 2021. At the same time, various alternative rates, including the Secured Overnight Financing Rate (SOFR), have begun to be used more widely in both loan and derivative products.

We have loans, derivative contracts, and other financial instruments with rates that are either directly or indirectly tied to LIBOR. As the transition progresses, the interest rates on these instruments, as well as the revenue and expenses associated with the same, may be adversely affected. Furthermore, failure to adequately manage this transition process with our customers, could adversely impact our reputation.

The transition continues to be overseen by an enterprise-wide, cross-functional project team that reports to executive management on an ongoing basis. The project team is organized around key work streams, which cover the products, systems, and operational processes impacted by the transition as well as client communication. Since its formation, the project team has overseen the transition to non-LIBOR based adjustable rate mortgages and floating rate commercial loans as well as related customer derivatives (LIBOR-based ARMs no longer offered since November 2020 and LIBOR-based commercial loans no longer offered since December 2021) and continues to work toward facilitating the transition of legacy LIBOR products.

*Fiscal and Monetary Policy changes may significantly impact our profitability and liquidity*

The Company’s business and earnings are significantly affected by the fiscal and monetary policies of the Federal Government and its agencies. The Bank is particularly affected by the policies of the Federal Reserve, which regulates the supply of money and credit in the United States. Among the instruments of monetary policy available to the Federal Reserve are (a) conducting open market operations in U.S. government securities, (b) changing the discount rates of borrowings of depository institutions, (c) imposing or changing reserve requirements against depository institutions’ deposits, and (d) imposing or changing reserve requirements against certain borrowings by banks and their affiliates. These methods are used in varying degrees and combinations to directly affect the availability of bank loans and deposits, as well as the interest rates charged on loans and paid on deposits. Changes to these policies of the Federal Reserve may have a material effect on our business, results of operations and financial condition.

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*Legislation and regulatory initiatives affecting the financial services industry, including new interpretations, restrictions and requirements, could detrimentally affect the Company’s business.*

The Dodd-Frank Act, enacted in July 2010, triggered sweeping reforms to the financial services industry. The Dodd-Frank Act, other consumer protection laws, and their implementing rules and regulations are likely to continue to result in increased compliance costs, along with possible restrictions on our products, services and manner of operations, any of which may have a material adverse effect on our results of operations and financial condition.

The CFPB has exercised its broad rule-making, supervisory, and examination authority of consumer financial products, as well as expanded data collection and enforcement powers, over depository institutions with more than $10.0 billion in assets. Staff changes to key positions within the CFPB by the Biden administration may result in the CFPB pursuing more strict enforcement policies, similar to that experienced under the Obama administration. Regulation of overall safety and soundness, the CRA, federal housing and flood insurance, as they pertain to consumer financial products and services, remains with the FRB. As a result of greater regulatory scrutiny of consumer financial products as a whole, the Company has become subject to more and expanded regulatory examinations, which also could result in increased costs as well as harm to our reputation in the event of a finding that we have not complied with the increased regulatory requirements.

New laws, regulations, and changes, and the uncertainty surrounding whether such laws, regulations and changes will be implemented, interpreted, repealed or reinstated, in the current regulatory and political climate, may continue to increase our costs of regulatory compliance. They may significantly affect the markets in which we do business, the markets for and value of our investments, and our ongoing operations, costs, and profitability.

Further, leadership and staff changes in regulatory agencies such as the CFPB, CFTC, SEC, and the Treasury Department could lead to changes in the rulemaking, supervision, examination and enforcement priorities and policies of the agencies. The potential impact of any changes within these agencies cannot be predicted at this time.

*Changes in the capital, leverage, liquidity requirements for financial institutions could materially affect future requirements of the Company.*

Under Basel III, financial institutions are required to have more capital and a higher quality of capital. Under the final rules issued by the banking regulators, minimum requirements increased for both the quantity and quality of capital held by the Company.

Compliance with Basel III resulted in increased capital, liquidity, and disclosure requirements. See the “Regulatory Initiatives Affecting the Banking Industry” section in MD&A for more information.

*Changes in income tax laws and interpretations, or in accounting standards, could materially affect our financial condition or results of operations.*

Further changes in income tax laws could be enacted, or interpretations of existing income tax laws could change, causing an adverse effect on our financial condition or results of operations. For example, the Inflation Reduction Act was enacted on August 16, 2022, and introduced, among provisions, a new corporate minimum income tax on certain large corporations, an excise tax of 1% on certain share repurchases by corporations, and increased funding for the Internal Revenue Service. Although we do not anticipate the new corporate minimum income tax will currently apply to us, changes in our business and any future regulations or other guidance on the interpretation and application of the new corporate minimum tax, as well as the potential application of the share repurchase excise tax, may result in additional taxes payable by us, which could materially and adversely affect our financial results and operations. Similarly, our accounting policies and methods are fundamental to how we report our financial condition and results of operations. Some of these policies require use of estimates and assumptions that may affect the value of our assets, liabilities, and financial results. Periodically, new accounting standards are issued or existing standards are revised, changing the methods for preparing our financial statements. These changes are not within our control and may significantly impact our financial condition and results of operations.

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# Risks Related to Business Operations

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

We rely heavily on communications and information systems to conduct our business. In addition, we rely on third parties to provide key components of our infrastructure, including loan, deposit and general ledger processing, internet connections, and network access. These types of information and related systems are critical to the operation of our business and essential to our ability to perform day-to-day operations, and, in some cases, are critical to the operations of certain of our customers. These third parties with which we do business or that facilitate our business activities, including exchanges, clearing firms, financial intermediaries or vendors that provide services or security solutions for our operations, could also be sources of operational and information security risk to us, including breakdowns or failures of their own systems or capacity constraints. In addition, our communications and information systems and operations (including those of third parties that facilitate our business activities) could be damaged or interrupted due to events such as natural or human-caused disasters (including public health crises) or extreme weather (including as a result of climate change), geopolitical events and security issues, computer viruses, physical or electronic break-ins, operational failures, and similar events or disruptions.

Although we have safeguards and business continuity plans in place, our business operations may be adversely affected by significant and widespread disruption to our physical infrastructure or operating systems that support our business and our customers, resulting in financial losses, loss of customers, or damage to our reputation.

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

Our business requires the collection and retention of large volumes of customer data, including payment card numbers and other personally identifiable information in various information systems that we maintain and in those maintained by third parties with whom we contract to provide data services. We also maintain important internal company data such as personally identifiable information about our employees and information relating to our operations. The integrity and protection of that customer and company data is important to us. As customer, public, legislative and regulatory expectations and requirements regarding operational and information security have increased, our operating systems and infrastructure must continue to be safeguarded and monitored for potential failures, disruptions and breakdowns.

Our technologies, systems, networks and software, and those of other financial institutions have been, and are likely to continue to be, the target of cybersecurity threats and attacks, which may range from uncoordinated individual attempts to sophisticated and targeted measures directed at us. These cybersecurity threats and attacks may include, but are not limited to, attempts to access information, including customer and company information, malicious code, computer viruses and denial of service attacks that could result in unauthorized access, misuse, loss or destruction of data (including confidential customer information), account takeovers, unavailability of service or other events. These types of threats may result from human error, fraud or malice on the part of external or internal parties, intelligence-gathering by foreign governments, or from accidental technological failure internally or by our vendors. Further, to access our products and services our customers may use computers and mobile devices that are beyond our security control systems. The risk of a security breach or disruption, particularly through cyber-attack or cyber intrusion, including by computer hackers, has increased as the number, intensity and sophistication of attempted attacks and intrusions around the world have increased.

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

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Although we make significant efforts to maintain the security and integrity of our information systems and have implemented various measures to manage the risk of a security breach or disruption, there can be no assurance that our security efforts and measures will be effective or that attempted security breaches or disruptions would not be successful or damaging. Even the most well-protected information, networks, systems and facilities remain potentially vulnerable because attempted security breaches, particularly cyber-attacks and intrusions, or disruptions will occur in the future, and because the techniques used in such attempts are constantly evolving and generally are not recognized until launched against a target, in some cases are designed not to be detected and, in fact, may not be detected. Accordingly, we may be unable to anticipate these techniques or to implement adequate security barriers or other preventative measures, and thus making it virtually impossible for us to entirely mitigate this risk. A security breach or other significant disruption could: 1) disrupt the proper functioning of our networks and systems and therefore our operations and/or those of certain of our customers; 2) result in the unauthorized access to, and destruction, loss, theft, misappropriation or release of confidential, sensitive or otherwise valuable information of ours or our customers, including account numbers and other financial and personal information; 3) result in a violation of applicable privacy, data breach and other laws, subjecting the Bank to additional regulatory scrutiny and exposing the Bank to civil litigation, governmental fines and possible financial liability; 4) require significant management attention and resources to remedy the damages that result; or 5) harm our reputation or cause a decrease in the number of customers that choose to do business with us or reduce the level of business that our customers do with us. The occurrence of any such failures, disruptions or security breaches could have a negative impact on our results of operations, financial condition, and cash flows as well as damage our brand and reputation.

*Our mortgage banking income may experience significant volatility.*

Our mortgage banking income is highly influenced by the level and direction of mortgage interest rates, real estate activity, and refinancing activity. Interest rates can affect the amount of mortgage banking activity and impact fee income and the fair value of our derivative financial instruments and mortgage servicing rights. Mortgage banking income may also be impacted by changes in our strategy to manage our residential mortgage portfolio. For example, we may occasionally decide to add more conforming saleable loans to our portfolio (as opposed to selling the loans in the secondary market) which would reduce our gains on sales of residential mortgage loans. These variables could adversely affect mortgage banking income.

*Our mortgage loan servicing business may be impacted if we do not meet our obligations, or if servicing standards change.*

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

*Risks related to representation and warranty provisions may impact our mortgage loan servicing business*

The Company sells residential mortgage loans in the secondary market primarily to Fannie Mae. The Company also pools Federal Housing Administration (“FHA”) insured and U.S. Department of Veterans Affairs (“VA”) guaranteed residential mortgage loans for sale to Ginnie Mae. These pools of FHA-insured and VA-guaranteed residential mortgage loans are securitized by Ginnie Mae. The agreements under which the Company sells residential mortgage loans to Fannie Mae or Ginnie Mae and the insurance or guaranty agreements with FHA and VA contain provisions that include various representations and warranties regarding the origination and characteristics of the residential mortgage loans. Although the specific representations and warranties vary among investors, insurance or guarantee agreements, they typically cover ownership of the loan, validity of the lien securing the loan, the absence of delinquent taxes or liens against the property securing the loan, compliance with loan criteria set forth in the applicable agreement, compliance with applicable federal, state, and local laws, and other matters. As of December 31, 2022, the unpaid principal balance of residential mortgage loans sold by the Company was $2.1 billion. The agreements under which the Company sells residential mortgage loans require delivery of various documents to the investor or its document custodian. Although these loans are primarily sold on a non-recourse basis, the Company may be obligated to repurchase residential mortgage loans or reimburse investors for losses incurred if a loan review reveals that underwriting and documentation standards were potentially not met. Some agreements may require the Company to repurchase delinquent loans. Upon receipt of a repurchase request, the Company works with investors or insurers to arrive at a mutually agreeable resolution. Repurchase demands are typically reviewed on an individual loan by loan basis to validate the claims made by the investor or insurer and to determine if a contractually required repurchase event has occurred. The Company manages the risk associated with potential repurchases or other forms of settlement through its underwriting and quality assurance practices and by servicing mortgage loans to meet investor and secondary market standards. For the year ended December 31, 2022, the Company repurchased six residential mortgage loans with an aggregate unpaid principal balance totaling $1.6 million as a result of the representation and warranty provisions contained in these contracts. The loans were delinquent as to principal and interest at the time of repurchase, however, no material losses were incurred related to these repurchases.

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*Risks relating to residential mortgage loan servicing activities may adversely affect our results.*

In addition to servicing loans in the Company’s portfolio, substantially all of the loans the Company sells to investors are sold with servicing rights retained. The Company also services loans originated by other mortgage loan originators. As servicer, the Company’s primary duties are to: (1) collect payments due from borrowers; (2) advance certain delinquent payments of principal and interest; (3) maintain and administer any hazard, title, or primary mortgage insurance policies relating to the mortgage loans; (4) maintain any required escrow accounts for payment of taxes and insurance and administer escrow payments; and (5) foreclose on defaulted mortgage loans or, to the extent consistent with the documents governing a securitization, consider alternatives to foreclosure, such as loan modifications or short sales. Each agreement under which the Company acts as servicer generally specifies a standard of responsibility for actions taken by the Company in such capacity and provides protection against expenses and liabilities incurred by the Company when acting in compliance with the respective servicing agreements. However, if the Company commits a material breach of obligations as servicer, the Company may be subject to termination if the breach is not cured within a specified period following notice. The standards governing servicing and the possible remedies for violations of such standards vary by investor. These standards and remedies are determined by servicing guides issued by the investors as well as the contract provisions established between the investors and the Company. Remedies could include repurchase of an affected loan.

*The requirement to record certain assets and liabilities at fair value may adversely affect our financial results.*

We report certain assets, including available-for-sale investment securities, at fair value. Generally, for assets that are reported at fair value we use quoted market prices or valuation models that utilize market data inputs to estimate fair value. Because we record these assets at their estimated fair value, we may incur losses even if the asset in question presents minimal credit risk. The level of interest rates can impact the estimated fair value of investment securities. Disruptions in the capital markets may require us to reserve for credit losses in future periods with respect to investment securities in our portfolio. The amount and timing of any credit allowance recognized will be measured as the difference between the security’s amortized cost basis and the amount expected to be collected over the security’s lifetime.

*Natural disasters and adverse weather could negatively affect real estate property values and bank operations.*

Real estate and real estate property values play an important role for the Bank in several ways. The Bank owns or leases many real estate properties in connection with its operations, primarily located in Hawaii with its unique weather and geology. Our business operations could suffer to the extent the Bank cannot utilize its branch network due to damage from weather or other natural disasters. Real estate is also utilized as collateral for many of our loans. A natural disaster in Hawaii or the Pacific Islands could cause property values in the affected areas to fall, which could require the Bank to record an impairment on its financial statements. A natural disaster could also impact borrowers’ ability to pay their financial obligations, which would increase our exposure to loan defaults.

## General Risk Factors

*Competition may adversely affect our business.*

Our future depends on our ability to compete effectively. We compete for deposits, loans, leases, and other financial services with a variety of competitors, including banks, thrifts, savings associations, credit unions, mortgage companies, finance companies, mutual funds, brokerage firms, insurance companies, and other non-traditional providers of financial services, including financial technology companies and financial service subsidiaries of commercial and manufacturing companies. Some of our competitors are not subject to the same level of regulation and oversight that is required of banks and BHCs, and may benefit from tax exemptions or lower tax rates. As a result, some of these competitors may have lower cost structures.

We expect competitive conditions to intensify as consolidation in the financial services industry continues. The financial services industry is also likely to become more competitive as further technological advances enable more companies, including non-depository institutions, to provide financial services. Also, some of our competitors, through delivery channels such as the Internet, may be based outside of the markets that we serve.

Both federal and local laws provide mechanisms for out-of-state banks and their holding companies to acquire or open branches in our service territories. Failure to effectively address this competitive risk by competing, innovating and making effective use of new and existing channels to deliver our products and services could adversely affect our financial condition or results of operations.

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*Negative public opinion could damage our reputation and adversely impact our earnings and liquidity.*

Reputational risk, or the risk to our business, earnings, liquidity, and capital from negative public opinion, could result from our actual or alleged conduct in a variety of areas, including legal and regulatory compliance, lending practices, corporate governance, litigation, ethical issues, or inadequate protection of customer information. We expend significant resources to comply with regulatory requirements. Failure to comply could result in reputational harm or significant legal and/or remedial costs. Damage to our reputation could adversely affect our ability to retain and attract new customers, and adversely impact our earnings and liquidity.

*We are subject to certain litigation, and our expenses related to this litigation may adversely affect our results.*

We are, from time-to-time, involved in various legal proceedings arising from our normal business activities. These claims and legal actions, including supervisory actions by our regulators, could involve large monetary claims and significant defense costs. The outcome of these cases is uncertain. Substantial legal liability or significant regulatory action against us could have material financial effects or cause significant reputational harm to us, which in turn could seriously harm our business prospects. We may be exposed to substantial uninsured liabilities, which could materially affect our results of operations and financial condition. Based on information currently available, we believe that the eventual outcome of known actions against us will not be materially in excess of such amounts accrued by us. However, in the event of unexpected future developments, it is possible that the ultimate resolution of those matters may be material to our financial results for any particular period. See the *Contingencies* section of Note 20 to the Consolidated Financial Statements for more information.

*Our performance depends on attracting and retaining key employees and skilled personnel to operate our business effectively.*

Our success is dependent on our ability to recruit qualified and skilled personnel to operate our business effectively. Competition for these qualified and skilled people is intense. There are a limited number of qualified personnel in the markets we serve, so our success depends in part on the continued services of many of our current management and other key employees. Failure to retain our key employees and maintain adequate staffing of qualified personnel could adversely impact our operations and our ability to compete.

*The soundness of other financial institutions may adversely impact our financial condition or results of operations.*

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

## **Item 1B. Unresolved Staff Comments**

None.

## **Item 2. Properties**

Our principal offices are located in the Financial Plaza of the Pacific in Honolulu, Hawaii. We own and lease other branch offices and operating facilities located throughout Hawaii and the Pacific Islands. Additional information with respect to premises and equipment is presented in Notes 6 and 23 to the Consolidated Financial Statements.

## **Item 3. Legal Proceedings**

We are from time to time subject to lawsuits, investigations and claims arising out of the conduct of our business. Management believes that the ultimate resolution of these matters is not likely to materially affect our financial position and results of operations. For additional information, see Note 20 to the Consolidated Financial Statements, under the discussion related to Contingencies.

## **Item 4. Mine Safety Disclosures**

Not Applicable.

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## Part II

### Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

#### Market Information, Shareholders, and Dividends

Information regarding the historical market prices of the Parent’s common stock, book value, and dividends declared on that stock are shown below.

#### Market Prices, Book Values, and Common Stock Dividends Per Share

| Year/Period | Market Price Range |  |  | Book Value | Dividends Declared |
| --- | --- | --- | --- | --- | --- |
|  | High | Low | Close |  |  |
| 2022 | $92.38 | $70.15 | $77.56 | $28.54 | $2.80 |
| First Quarter | 92.38 | 79.60 | 83.92 |  | 0.70 |
| Second Quarter | 84.93 | 70.97 | 74.40 |  | 0.70 |
| Third Quarter | 85.45 | 70.89 | 76.12 |  | 0.70 |
| Fourth Quarter | 82.87 | 70.15 | 77.56 |  | 0.70 |
| 2021 | $99.10 | $75.65 | $83.76 | $35.57 | $2.74 |
| First Quarter | 99.10 | 75.65 | 89.49 |  | 0.67 |
| Second Quarter | 95.95 | 81.23 | 84.22 |  | 0.67 |
| Third Quarter | 87.12 | 75.68 | 82.17 |  | 0.70 |
| Fourth Quarter | 88.96 | 78.73 | 83.76 |  | 0.70 |

The common stock of the Parent is traded on the New York Stock Exchange (NYSE Symbol: BOH) and quoted daily in leading financial publications. As of February 15, 2023, there were 5,290 common shareholders of record.

The Parent’s Board of Directors considers on a quarterly basis the feasibility of paying a cash dividend to its shareholders and the level and feasibility of repurchasing shares of the Parent’s common stock. Under the Parent’s historical practice, dividends declared on common stock are paid within the quarter. See “Dividend Restrictions” under “Supervision and Regulation” in Item 1 of this report and Note 11 to the Consolidated Financial Statements for more information.

#### Issuer Purchases of Equity Securities

| Period | Total Number of Shares Purchased 1 | Average Price Paid Per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs 2 |
| --- | --- | --- | --- | --- |
| October 1 - 31, 2022 | 20,157 | $74.58 | 14,750 | $49,744,220 |
| November 1 - 30, 2022 | 96,762 | 78.67 | 94,750 | 42,292,742 |
| December 1 - 31, 2022 | 82,846 | 77.26 | 82,846 | 35,892,569 |
| Total | 199,765 | $77.67 | 192,346 |  |

$^{1}$ During the fourth quarter of 2022, 7,419 shares were acquired from employees in connection with income tax withholdings related to the vesting of restricted stock and acquired by the trustee of a trust established pursuant to the Bank of Hawaii Corporation Director Deferred Compensation Plan (the “DDCP”) directly from the Parent in satisfaction of the Company’s obligations to participants under the DDCP. The issuance of these shares was made in reliance upon the exemption from the registration requirements of the Securities Act of 1933, as amended (the “Securities Act”) by Section 4(a) (2) thereof. The trustee under the trust and the participants under the DDCP are accredited investors, as defined in Rule 501(a) under the Securities Act. The transaction did not involve a public offering and occurred without general solicitation or advertising. The shares were purchased at the closing price of the Parent’s common stock on the dates of purchase.

$^{2}$ The share repurchase program was first announced in July 2001. The program has no set expiration or termination date. The actual amount and timing of future share repurchases, if any, will depend on market and economic conditions, regulatory rules, applicable SEC rules, and various other factors.

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## Performance Graph

The following graph shows the cumulative total return for the Parent’s common stock compared to the cumulative total returns for the Standard & Poor’s (“S&P”) 500 Index, the S&P Banks Index, and the S&P Supercomposite Regional Bank Index. The Company has added the S&P Supercomposite Regional Bank Index to the graph because the companies in this index are the ones with which the Company competes for capital and talent. The graph assumes that $100 was invested on December 31, 2017, in the Parent’s common stock, the S&P 500 Index, the S&P Banks Index, and the S&P Supercomposite Regional Bank Index. The cumulative total return on each investment is as of December 31 of each of the subsequent five years and assumes reinvestment of dividends.

### COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN

![img-0.jpeg](img-0.jpeg)

|  | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 |
| --- | --- | --- | --- | --- | --- | --- |
| Bank of Hawaii Corporation | $100 | $81 | $118 | $99 | $111 | $107 |
| S&P 500 Index | $100 | $96 | $126 | $149 | $192 | $157 |
| S&P Banks Index | $100 | $84 | $118 | $101 | $137 | $111 |
| S&P Supercomposite Regional Bank Index | $100 | $82 | $107 | $99 | $139 | $114 |

### Item 6. [Reserved]

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## **Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations**

The following MD&A is intended to help the reader understand the Company and its operations and is focused on our fiscal 2022 and 2021 financial results, including comparisons of year-to-year performance between these years. Discussion and analysis of our 2020 fiscal year, as well as the year-to-year comparison between fiscal 2021 and 2020, are included 'Management's Discussion and Analysis of Financial Condition and Results of Operations' in Part II, Item 7 in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021, filed with the SEC on March 1, 2022.

### **Forward-Looking Statements**

This report contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements can be identified by the fact that they do not relate strictly to historical or current facts and may include statements concerning, among other things, the anticipated economic and business environment in our service area and elsewhere, credit quality and other financial and business matters in future periods, our future results of operations and financial position, our business strategy and plans and our objectives and future operations. We also may make forward-looking statements in our other documents filed with or furnished to the U.S. Securities and Exchange Commission (the 'SEC'). In addition, our senior management may provide forward-looking statements orally to analysts, investors, representatives of the media and others. Our forward-looking statements are based on numerous assumptions, any of which could prove to be inaccurate, and actual results may differ materially from those projected because of a variety of risks and uncertainties, including, but not limited to: 1) general economic conditions either nationally, internationally, or locally may be different than expected, and particularly, any event that negatively impacts the tourism industry in Hawaii; 2) the compounding effects of the COVID-19 pandemic, including reduced tourism in Hawaii, the duration and scope of government mandates or other limitations of or restrictions on travel, volatility in the international and national economy and credit markets, inflation, worker absenteeism, quarantines or other travel or health-related restrictions, the length and severity of the COVID-19 pandemic, the pace of recovery following the COVID-19 pandemic, and the effect of government, business and individual actions intended to mitigate the effects of the COVID-19 pandemic; 3) changes in market interest rates that may affect credit markets and our ability to maintain our net interest margin; 4) changes in our credit quality or risk profile that may increase or decrease the required level of our reserve for credit losses; 5) the impact of legislative and regulatory initiatives, particularly the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the 'Dodd-Frank Act') and Economic Growth, Regulatory Relief, and Consumer Protection Act of 2018; 6) changes to the amount and timing of proposed common stock repurchases; 7) unanticipated changes in the securities markets, public debt markets, and other capital markets in the U.S. and internationally, including, without limitation, the anticipated elimination of the London Interbank Offered Rate ('LIBOR') as a benchmark interest rate; 8) changes in fiscal and monetary policies of the markets in which we operate; 9) the increased cost of maintaining or the Company's ability to maintain adequate liquidity and capital, based on the requirements adopted by the Basel Committee on Banking Supervision and U.S. regulators; 10) changes in accounting standards; 11) changes in tax laws or regulations, including Public Law 115-97, commonly known as the Tax Cuts and Jobs Act, or the interpretation of such laws and regulations; 12) any failure in or breach of our operational systems, information systems or infrastructure, or those of our merchants, third party vendors and other service providers; 13) any interruption or breach of security of our information systems resulting in failures or disruptions in customer account management, general ledger processing, and loan or deposit systems; 14) natural disasters, public unrest or adverse weather, public health, disease outbreaks, and other conditions impacting us and our customers' operations or negatively impacting the tourism industry in Hawaii; 15) competitive pressures in the markets for financial services and products; 16) actual or alleged conduct which could harm our reputation; and 17) the impact of litigation and regulatory investigations of the Company, including costs, expenses, settlements, and judgments. Given these risks and uncertainties, investors should not place undue reliance on any forward-looking statement as a prediction of our actual results. A detailed discussion of these and other risks and uncertainties that could cause actual results and events to differ materially from such forward-looking statements is included under the section entitled 'Risk Factors' in Part I of this report. Words such as 'believes,' 'anticipates,' 'expects,' 'intends,' 'targeted,' and similar expressions are intended to identify forward-looking statements but are not the exclusive means of identifying such statements. We undertake no obligation to update forward-looking statements to reflect later events or circumstances, except as may be required by law.

For the reasons described above, we caution you against relying on any forward-looking statements. You should not consider any list of such factors to be an exhaustive statement of all of the risks, uncertainties, or potentially inaccurate assumptions that could cause our current expectations or beliefs to change. Further, any forward-looking statement speaks only as of the date on which it is made, and we undertake no obligation to update or revise any forward-looking statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events, except as otherwise may be required by the federal securities laws.

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# Critical Accounting Policies

Our Consolidated Financial Statements were prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) and follow general practices within the industries in which we operate. The most significant accounting policies we follow are presented in Note 1 to the Consolidated Financial Statements. Application of these principles requires us to make estimates, assumptions, and judgments that affect the amounts reported in the Consolidated Financial Statements and accompanying notes. Most accounting policies are not considered by management to be critical accounting policies. Several factors are considered in determining whether or not a policy is critical in the preparation of the Consolidated Financial Statements. These factors include among other things, whether the policy requires management to make difficult, subjective, and complex judgments about matters that are inherently uncertain and because it is likely that materially different amounts would be reported under different conditions or using different assumptions. The accounting policies which we believe to be most critical in preparing our Consolidated Financial Statements are those that are related to the determination of the reserve for credit losses, fair value estimates, and income taxes.

## *Reserve for Credit Losses*

A consequence of lending activities is that we may incur credit losses. The amount of such losses will vary depending upon the risk characteristics of the loan and lease portfolio as affected by economic conditions.

The reserve for credit losses consists of the allowance for credit losses (the “Allowance”) and the reserve for unfunded commitments (the “Unfunded Reserve”). As a result of our January 1, 2020, adoption of ASU No. 2016-13, “*Measurement of Credit Losses on Financial Instruments*,” and its related amendments, our methodology for estimating the reserve for credit losses changed significantly from December 31, 2019. The standard replaced the “incurred loss” approach with an “expected loss” approach known as current expected credit loss (“CECL”). The CECL approach requires an estimate of the credit losses expected over the life of an exposure (or pool of exposures). It removes the incurred loss approach’s threshold that delayed the recognition of a credit loss until it was “probable” a loss event was “incurred.” The reserve for credit losses is an estimate that is subject to uncertainty due to various assumptions and significant judgements used in the estimation process.

The estimate of expected credit losses under the CECL approach is based on relevant information about past events, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amounts. Historical loss experience is generally the starting point for estimating expected credit losses. We then consider whether the historical loss experience should be adjusted for asset-specific risk characteristics or current conditions at the reporting date that did not exist over the period from which historical experience was used. These adjustments can include accounting for new or discontinued products, changes in our portfolio composition, delinquency trends, and with forecasted economic conditions including but not limited to unemployment, real estate market conditions (e.g. prices, sales activity and inventory), visitor arrivals, the continued uncertainty of the COVID-19 pandemic, and the cumulative impact of fiscal, monetary and regulatory programs in response to the pandemic. The Unfunded Reserve represents the expected credit losses on off-balance sheet commitments such as unfunded commitments to extend credit and standby letters of credit. The Unfunded Reserve is determined by estimating future draws and applying the expected loss rates on those draws. However, a liability is not recognized for commitments unconditionally cancellable by the Company.

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

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

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The Unfunded Reserve is determined by estimating future draws and applying the expected loss rates on those draws. Future draws are based on historical averages of utilization rates (i.e., the likelihood of draws taken). To estimate future draws on unfunded balances, current utilization rates are compared to historical utilization rates. If current utilization rates are below historical utilization rates, the rate difference is applied to the committed balance to estimate the future draw. Expected loss rates are estimated using the loss rates calculated for the corresponding loan category in the Allowance. For the commercial portfolio, the historical loss rates were calculated utilizing the Cohort methodology, while the consumer portfolio utilized the Vintage methodology.

We also consider qualitative adjustments to the quantitative baseline such as the impact of current environmental factors at the reporting date that did not exist over the period from which historical experience was used. Relevant factors include, but are not limited to, concentrations of credit risk, such as geographic, large borrower, industry; and economic trends and conditions, such as Hawaii unemployment, real estate prices and market conditions, and visitor arrivals. We also consider changes in underwriting standards, experience and depth of lending staff, trends in delinquencies, and the level of criticized loans.

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

The company utilizes the University of Hawaii Economic Research Organization (“UHERO”) macroeconomic forecast that continuously changes due to economic conditions and events. The forecast includes various economic variables for Hawaii such as gross domestic product (“GDP”), unemployment rate, visitor arrivals, residential real estate market conditions, personal income, and inflation rate. We also utilize other third party macroeconomic forecast tools to provide broader US economic variables such as interest rates.

The reserve for credit losses is generally sensitive to economic conditions and assumptions given the impact for potential losses for the consumer portfolio and risk rating migration for the commercial portfolio. For the consumer portfolio, as an example, an increase in the forecasted Hawaii unemployment rate could lead to an increase in the rate of delinquencies and consequently charge-offs for consumer borrowers. For the Allowance at December 31, 2022, a 25 basis point increase in the forecasted Hawaii unemployment rates would have increased the quantitative component of the Allowance for consumer loans by an estimated $2.6 million. For the commercial portfolio, the impact of adverse changes in economic conditions on borrowers will vary, and generally evaluated on a case-by-case basis to include the borrower’s existing financial capacity. Borrowers that would be most adversely impacted are identified as having the potential for migrating from a Pass to a Classified risk rating. For the Allowance at December 31, 2022, a 50 basis point increase in the % of commercial loans risk rated as Classified would increase the quantitative component of the Allowance for commercial loans by an estimated $2.1 million. This sensitivity analysis is hypothetical and provided only to indicate the potential impact changes in economic conditions and assumptions may have on the Allowance estimate. Additionally, changes in factors and inputs may be directionally inconsistent, such that improvement in one factor may offset deterioration in others.

#### *Fair Value Measurements*

Fair value is the price that would be received to sell an asset or paid to transfer a liability in the principal or most advantageous market for an asset or liability in an orderly transaction between market participants at the measurement date. The degree of management judgment involved in determining the fair value of a financial instrument is dependent upon the availability of quoted market prices or observable market inputs. For financial instruments that are traded actively and have quoted market prices or observable market inputs, there is minimal subjectivity involved in measuring fair value. However, when quoted market prices or observable market inputs are not fully available, significant management judgment may be necessary to estimate fair value. In developing our fair value measurements, we maximize the use of observable inputs and minimize the use of unobservable inputs.

The fair value hierarchy defines Level 1 valuations as those based on quoted prices, unadjusted, for identical instruments traded in active markets. Level 2 valuations are those based on quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, or model-based valuation techniques for which all significant assumptions are observable in the market. Level 3 valuations are based on model-based techniques that use at least one significant assumption not observable in the market, or significant management judgment or estimation, some of which may be internally developed.

21

Financial assets that are recorded at fair value on a recurring basis include available-for-sale investment securities, loans held for sale, mortgage servicing rights, investments related to deferred compensation arrangements, and derivative financial instruments. As of December 31, 2022, and December 31, 2021, $2.9 billion or 12% and $4.4 billion or 19%, respectively, of our total assets consisted of financial assets recorded at fair value on a recurring basis and most of these financial assets consisted of available-for-sale investment securities measured using information from a third party pricing service. These investments in debt securities and mortgage-backed securities were all classified in either Levels 1 or 2 of the fair value hierarchy. Financial liabilities that are recorded at fair value on a recurring basis are comprised of derivative financial instruments. As of December 31, 2022, and December 31, 2021, $168.0 million and $18.8 million, respectively, or less than 1% of our total liabilities consisted of financial liabilities recorded at fair value on a recurring basis.

As of December 31, 2022, and December 31, 2021, Level 3 financial assets recorded at fair value on a recurring basis were $46.6 million and $42.6 million, respectively, or less than 1% of our total assets, and were comprised primarily of derivative financial instruments. As of December 31, 2022, and December 31, 2021, Level 3 financial liabilities recorded at fair value on a recurring basis were $168.0 million and $17.9 million, respectively, or less than 1% of our total liabilities, and were comprised of derivative financial instruments.

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

See Note 21 to the Consolidated Financial Statements for more information on our fair value measurements.

### *Income Taxes*

We determine our liabilities for income taxes based on current tax regulations and interpretations in tax jurisdictions where our income is subject to taxation. Currently, we file tax returns for federal, six state and local domestic jurisdictions, and three foreign jurisdictions. In estimating income taxes payable or receivable, we assess the relative merits and risks of the appropriate tax treatment considering statutory, judicial, and regulatory guidance in the context of each tax position. Accordingly, previously estimated liabilities are regularly reevaluated and adjusted through the provision for income taxes. Changes in the estimate of income taxes payable or receivable occur periodically due to changes in tax rates, interpretations of tax law, the status of examinations being conducted by various taxing authorities, and newly enacted statutory, judicial and regulatory guidance that impact the relative merits and risks of each tax position. These changes, when they occur, may affect the provision for income taxes as well as current and deferred income taxes, and may be significant to our statements of income and condition.

Management's determination of the realization of net deferred tax assets is based upon management's judgment of various future events and uncertainties, including the timing, character and amount of future income, as well as the implementation of various tax planning strategies to maximize realization of the deferred tax assets. A valuation allowance is provided when it is more likely than not that some portion of the deferred tax asset will not be realized. As of December 31, 2022, and December 31, 2021, we carried a valuation allowance of $6.2 million and $3.2 million, respectively, related to our deferred tax assets established in connection with our low-income housing investments.

22

We are also required to record a liability, referred to as an unrecognized tax benefit ("UTB"), for the entire amount of benefit taken in a prior or future income tax return when we determine that a tax position has a less than 50% likelihood of being accepted by the taxing authority. As of December 31, 2022, and December 31, 2021, our liabilities for UTBs were $3.7 million and $4.0 million, respectively.

In 2022, the Company recognized federal and State of Hawaii investment tax credits from energy investments. The Company uses the deferral method of accounting for its investment tax credit with the benefit recognized in the provision for income taxes. These credits reduced the Company's provision for income taxes by $1.0 million, $2.1 million, and $3.1 million in 2022, 2021, and 2020, respectively.

## Overview

We are a regional financial services company serving businesses, consumers, and governments in Hawaii, Guam, and other Pacific Islands. Our principal operating subsidiary, the Bank, was founded in 1897.

Our business strategy is to use our unique market knowledge, prudent management discipline and brand strength to deliver exceptional value to our stakeholders. Our business plan is balanced between growth and risk management while maintaining flexibility to adjust to economic changes. We will continue to focus on providing customers with best-in-class service and an innovative mix of products and services. We will also remain focused on continuing to deliver strong financial results while maintaining prudent risk and capital management strategies as well as our commitment to support our local communities.

### Hawaii Economy

The COVID-19 pandemic has had and is continuing to have an impact on the Hawaii economy. Hawaii benefits from a wide range of industries that help to provide stability in the case of economic shocks. Federal government jobs, primarily military, have historically been a stabilizing part of Hawaii's economy, supplying about 20% of GDP. Construction activity, including the Honolulu Rail Project, and other non-visitor-related activities have continued despite the COVID-19 pandemic. Hawaii's large retiree population also contributes to a stable economic base. Hawaii's unemployment rate was 3.2% in December 2022, substantially below its peak in April and May of 2020 and below the national average as of year-end 2022.

As previously mentioned, local housing prices are one of the metrics that we continually monitor. While sales volume fell year-over-year given the sharp rise in interest rates, home prices remained relatively stable and months of inventory remained relatively low. The volume of single-family home sales on Oahu decreased 23.2% in 2022 compared to 2021, while the volume of condominium sales on Oahu decreased 11.8% in 2022 compared to 2021. The median price of single-family home sales on Oahu increased by 11.6% in 2022 compared to 2021, while the condominium sales price on Oahu increased by 7.4% in 2022 compared to 2021. As of December 31, 2022, months of inventory of single-family homes and condominiums on Oahu was 2.1 months and 2.2 months, respectively, compared to 0.8 months and 1.6 months as of December 31, 2021.

### Earnings Summary

Net income for 2022 was $225.8 million, a decrease of $27.6 million or 11% compared to 2021. Diluted earnings per common share were $5.48 in 2022, a decrease of $0.77 or 12% compared to 2021. Our return on average assets was 0.98% in 2022, a decrease of 16 basis points from 2021, and our return on average shareholders' equity was 16.10% in 2022, compared to 16.94% in 2021.

Our lower net income in 2022 was primarily due to the following:

- The provision for credit losses in 2022 was a net benefit of $7.8 million compared to a net benefit of $50.5 million in 2021.
- Mortgage banking income was $6.0 million in 2022, a decrease of $9.0 million or 60% compared to 2021. This decrease was primarily due to decreased mortgage originations due to the higher interest rate environment.
- Net losses on sales of investment securities was $6.1 million in 2022, an increase of $4.8 million compared to 2021. This increase was primarily due to fees related to the Visa Class B Shares conversion rate agreements as well as gains on sales of investment securities in 2021.
- Other noninterest income was $15.6 million in 2022, a decrease of $4.0 million or 20% compared to 2021. This decrease was primarily due to one-time pre-tax charge of $6.9 million related to our agreement to sell assets that terminated leveraged leases related to 31 locomotives.

23

- Salaries and benefits expense was $235.3 million in 2022, an increase of $7.0 million or 3% compared to 2021. This increase was primarily due to increase in base salaries and incentive compensation coupled with a $5.7 million increase in share-based compensation due to a higher number of restricted stock units being amortized.
- Net occupancy expense was $39.4 million in 2022, an increase of $13.2 million or 50% compared to 2021. This increase was primarily due to a $9.5 million gain on sales of real estate property on the island of Oahu and Guam in 2021.

These items were partially offset by the following

- Net interest income was $540.6 million in 2022, an increase of $43.3 million or 9% compared to 2021. This increase was primarily due to the higher rate environment and strong loan growth over the year.
- Service Charges on Deposit Accounts was $29.6 million in 2022, an increase of $4.1 million or 16% compared to 2021. This increase was primarily due to increased transaction volume.
- The provision for income taxes was $64.8 million in 2022, a decrease of $7.4 million or 10% compared to 2021. The effective tax rate was 22.31% in 2022 compared to 22.17% in 2021. The provision for income tax decrease was primarily due to a lower pretax income.

We maintained a strong balance sheet throughout 2022, with what we believe are adequate reserves for credit losses, and high levels of liquidity and capital.

- Total assets were $23.6 billion as of December 31, 2022, an increase of $0.8 billion or 4% from December 31, 2021.
- Total loans and leases were $13.6 billion as of December 31, 2022, an increase of $1.4 billion or 11% from December 31, 2021, primarily due to strategic growth in lower risk loan categories including Commercial Mortgage, Residential Mortgage, and Home Equity.
- The allowance for credit losses (the “Allowance”) was $144.4 million as of December 31, 2022, a decrease of $13.4 million or 8% from December 31, 2021. The ratio of Allowance for credit losses to loans and leases outstanding was 1.06% as of December 31, 2022, compared to 1.29% as of December 31, 2021. The level of our Allowance was commensurate with the Company’s credit risk profile, future economic outlook, and forecasts utilized.
- The total carrying value of our investment securities portfolio was $8.3 billion as of December 31, 2022, a decrease of $0.7 billion or 8% from December 31, 2021. The Company transferred approximately $1.3 billion in available-for-sale investment securities to held-to-maturity during the third quarter of 2022. The portfolio remains largely comprised of securities issued by U.S. government agencies and U.S. government-sponsored enterprises.
- Total deposits were $20.6 billion as of December 31, 2022, an increase of $0.3 billion or 1% from December 31, 2021, primarily due to an increase in public deposits.
- Total shareholders’ equity was $1.3 billion as of December 31, 2022, a decrease of $0.3 billion or 18% from December 31, 2021. During 2022, we repurchased 689,450 shares of common stock at a total cost of $55.1 million. We also paid cash dividends of $112.6 million on common shares during 2022.

24

## Analysis of Statements of Income

Average balances, related income and expenses, and resulting yields and rates, on a taxable-equivalent basis, are presented in Table 1. An analysis of the change in net interest income, on a taxable-equivalent basis, is presented in Table 2.

### Average Balances and Interest Rates - Taxable-Equivalent Basis

Table 1

| (dollars in millions) | 2022 |  |  | 2021 |  |  |
| --- | --- | --- | --- | --- | --- | --- |
|  | Average Balance | Income/ Expense | Yield/ Rate | Average Balance | Income/ Expense | Yield/ Rate |
| Earning Assets |  |  |  |  |  |  |
| Interest-Bearing Deposits in Other Banks | $3.0 | $ - | 1.05% | $2.7 | $ - | 0.36% |
| Funds Sold | 260.5 | 4.3 | 1.64 | 692.4 | 0.9 | 0.13 |
| Investment Securities |  |  |  |  |  |  |
| Available-for-Sale |  |  |  |  |  |  |
| Taxable | 3,644.2 | 70.5 | 1.93 | 4,266.9 | 64.2 | 1.50 |
| Non-Taxable | 4.0 | 0.1 | 2.92 | 10.1 | 0.4 | 4.21 |
| Held-to-Maturity |  |  |  |  |  |  |
| Taxable | 4,750.0 | 80.9 | 1.70 | 3,988.1 | 61.0 | 1.53 |
| Non-Taxable | 35.6 | 0.7 | 2.10 | 50.7 | 1.2 | 2.41 |
| Total Investment Securities | 8,433.8 | 152.2 | 1.80 | 8,315.8 | 126.8 | 1.53 |
| Loans Held for Sale | 6.9 | 0.3 | 3.70 | 24.3 | 0.7 | 2.82 |
| Loans and Leases 1 |  |  |  |  |  |  |
| Commercial and Industrial | 1,349.3 | 46.2 | 3.42 | 1,285.1 | 37.1 | 2.88 |
| Paycheck Protection Program | 44.0 | 2.7 | 6.07 | 453.9 | 25.7 | 5.67 |
| Commercial Mortgage | 3,420.1 | 121.9 | 3.56 | 2,940.0 | 86.7 | 2.95 |
| Construction | 232.6 | 10.6 | 4.56 | 271.6 | 9.5 | 3.50 |
| Commercial Lease Financing | 88.5 | 1.3 | 1.49 | 107.2 | 1.5 | 1.42 |
| Residential Mortgage | 4,484.2 | 147.4 | 3.29 | 4,232.4 | 140.1 | 3.31 |
| Home Equity | 2,072.2 | 62.1 | 3.00 | 1,637.1 | 49.6 | 3.03 |
| Automobile | 786.1 | 25.4 | 3.23 | 717.0 | 24.6 | 3.43 |
| Other 2 | 419.5 | 23.0 | 5.49 | 379.4 | 23.9 | 6.30 |
| Total Loans and Leases | 12,896.5 | 440.6 | 3.42 | 12,023.7 | 398.7 | 3.32 |
| Other | 40.5 | 1.2 | 3.01 | 32.9 | 0.7 | 2.13 |
| Total Earning Assets 3 | 21,641.2 | 598.6 | 2.77 | 21,091.8 | 527.8 | 2.50 |
| Cash and Due from Banks | 237.4 |  |  | 252.5 |  |  |
| Other Assets | 1,128.1 |  |  | 882.9 |  |  |
| Total Assets | $23,006.7 |  |  | $22,227.2 |  |  |
| Interest-Bearing Liabilities |  |  |  |  |  |  |
| Interest-Bearing Deposits |  |  |  |  |  |  |
| Demand | $4,377.1 | $6.1 | 0.14% | $4,509.8 | $2.7 | 0.06% |
| Savings | 7,767.7 | 22.9 | 0.30 | 7,421.9 | 6.2 | 0.08 |
| Time | 1,135.5 | 10.7 | 0.94 | 1,331.8 | 6.3 | 0.47 |
| Total Interest-Bearing Deposits | 13,280.3 | 39.7 | 0.30 | 13,263.5 | 15.2 | 0.11 |
| Short-Term Borrowings | 77.1 | 2.5 | 3.23 | 5.2 | - | 0.13 |
| Securities Sold Under Agreements to Repurchase | 479.8 | 12.6 | 2.63 | 541.9 | 13.3 | 2.45 |
| Other Debt | 42.4 | 2 | 4.82 | 27.7 | 0.9 | 3.41 |
| Total Interest-Bearing Liabilities | 13,879.6 | 56.8 | 0.41 | 13,838.3 | 29.4 | 0.21 |
| Net Interest Income |  | $541.8 |  |  | $498.4 |  |
| Interest Rate Spread |  |  | 2.36% |  |  | 2.29% |
| Net Interest Margin |  |  | 2.50% |  |  | 2.36% |
| Noninterest-Bearing Demand Deposits | 7,270.4 |  |  | 6,507.6 |  |  |
| Other Liabilities | 454.2 |  |  | 385.7 |  |  |
| Shareholders' Equity | 1,402.5 |  |  | 1,495.6 |  |  |
| Total Liabilities and Shareholders' Equity | $23,006.7 |  |  | $22,227.2 |  |  |

$^{1}$ Non-performing loans and leases are included in the respective average loan and lease balances. Income, if any, on such loans and leases is recognized on a cash basis.

$^{2}$ Comprised of other consumer revolving credit, installment, and consumer lease financing.

$^{3}$ Interest income includes taxable-equivalent basis adjustments, based upon a federal statutory tax rate of 21% of $1.3 million and $1.1 million for the years ended December 31, 2022, and December 31, 2021, respectively.

25

# **Analysis of Change in Net Interest Income - Taxable-Equivalent Basis**

**Table 2**

| (dollars in millions) | Year Ended December 31, 2022 Compared to 2021 |  |  |
| --- | --- | --- | --- |
|  | Volume 1 | Rate 1 | Total |
| Change in Interest Income: |  |  |  |
| Funds Sold | $(0.9) | $4.3 | $3.4 |
| Investment Securities |  |  |  |
| Available-for-Sale |  |  |  |
| Taxable | (10.3) | 16.6 | 6.3 |
| Non-Taxable | (0.2) | (0.1) | (0.3) |
| Held-to-Maturity |  |  |  |
| Taxable | 12.5 | 7.4 | 19.9 |
| Non-Taxable | (0.3) | (0.2) | (0.5) |
| Total Investment Securities | 1.7 | 23.7 | 25.4 |
| Loans Held for Sale | (0.6) | 0.2 | (0.4) |
| Loans and Leases |  |  |  |
| Commercial and Industrial | 1.9 | 7.2 | 9.1 |
| Paycheck Protection Program | (24.8) | 1.8 | (23.0) |
| Commercial Mortgage | 15.5 | 19.7 | 35.2 |
| Construction | (1.5) | 2.6 | 1.1 |
| Commercial Lease Financing | (0.2) | 0.0 | (0.2) |
| Residential Mortgage | 8.3 | (1.0) | 7.3 |
| Home Equity | 13.1 | (0.6) | 12.5 |
| Automobile | 2.3 | (1.5) | 0.8 |
| Other 2 | 2.3 | (3.2) | (0.9) |
| Total Loans and Leases | 16.9 | 25.0 | 41.9 |
| Other | 0.2 | 0.3 | 0.5 |
| Total Change in Interest Income | 17.3 | 53.5 | 70.8 |
| Change in Interest Expense: |  |  |  |
| Interest-Bearing Deposits |  |  |  |
| Demand | (0.1) | 3.5 | 3.4 |
| Savings | 0.3 | 16.4 | 16.7 |
| Time | (1.0) | 5.4 | 4.4 |
| Total Interest-Bearing Deposits | (0.8) | 25.3 | 24.5 |
| Short-Term Borrowings | 0.9 | 1.6 | 2.5 |
| Securities Sold Under Agreements to Repurchase | (1.6) | 0.9 | (0.7) |
| Other Debt | 0.6 | 0.5 | 1.1 |
| Total Change in Interest Expense | (0.9) | 28.3 | 27.4 |
| Change in Net Interest Income | $18.2 | $25.2 | $43.4 |

$^{1}$ The change in interest income and expense are not solely due to changes in volume or rate has been allocated on a pro-rata basis to the volume and rate columns.

$^{2}$ Comprised of other consumer revolving credit, installment, and consumer lease financing.

# *Net Interest Income*

Net interest income is affected by the size and mix of our balance sheet components as well as the spread between interest earned on assets and interest paid on liabilities. Net interest margin is defined as net interest income, on a taxable-equivalent basis, as a percentage of average earning assets.

Yields on our earning assets increased by 27 basis points in 2022 compared to 2021 primarily due to the higher rate environment.

26

Yields on our investment securities portfolio increased by 27 basis points. Yields on our funds sold increased by 151 basis points primarily due to federal fund rate increases. Yields on our commercial and industrial loans excluding Paycheck Protection Program (“PPP”) loans increased by 54 basis points primarily due to the higher interest rate environment. Contractual yields on Paycheck Protection Program loans are fixed at 1%, however, effective yield varies based on processing fee income being accelerated due to loans being forgiven by the Small Business Administration (“SBA”) ahead of maturity. Yields on our commercial mortgage loans increased by 61 basis points due to the higher interest rate environment and an interest recovery in the second quarter of 2022. Yields on our construction loans increased by 106 basis points due to the higher interest rate environment and the payoff of lower yielding loans. Yields on our residential mortgage loans and home equity loans decreased by 2 basis points and 3 basis points, respectively, primarily due to pay downs of higher rate loans offset by the higher interest rate environment. Yields on other loans decreased by 81 basis points primarily due to the full year impact of promotional lower rate installment loans originated in the prior year.

Interest rates paid on our interest-bearing liabilities increased 20 basis points in 2022 compared to 2021. Interest rates paid on our securities sold under agreements to repurchase increased by 18 basis points from 2021 primarily due to the addition of $300.0 million in repurchase agreements with private institutions in the fourth quarter of 2022.

Average balances of our earning assets increased by $0.5 billion or 3% in 2022 compared to 2021 primarily due to an increase in the average balances of our loan and lease portfolio. The average balance of funds sold decreased by $431.9 million or 62%. The average balances of our investment securities increased by $0.1 billion. The average balance of total loan and leases increased by $872.8 million. The average balance of our commercial and industrial portfolio increased by $64.2 million or 5%. The average balance of our commercial mortgage portfolio increased by $480.1 million or 16% as a result of continued demand from new and existing customers. The average balance of our residential mortgage portfolio increased by $251.8 million or 6% primarily due to new originations which offset continued paydowns. The average balance of our home equity portfolio increased by $435.1 million mainly due to growth driven by ongoing promotions of our SmartRefi program. The average balance of our automobile loans portfolio increased by $69.1 million or 10% primarily due to competitive loan programs and pricing.

The average balances of our interest bearing deposit products increased by $16.8 million or 0.1%. The average balances of our interest-bearing liabilities increased by $41.3 million or 0.3%. The average balance of our interest bearing demand deposits decreased by $132.7 million or 2.9%. The average balance of our savings deposits increased by $345.8 million or 4.7%. The average balance of our time deposits decreased by $196.3 million or 14.7%.

The average balances of our securities sold under agreements to repurchase decreased by $62.1 million or 11%. This decrease was due to terminations and calls of repurchase agreements with private institutions ($25.0 million called in 2022 and $150.0 million terminated in 2021), partially offset by $300.0 million originated in late 2022. The average balances of our other debt, which was comprised primarily of Federal Home Loan Bank (“FHLB”) advances, increased by $14.7 million or 53% primarily due to new FHLB advances totaling $400.0 million originated in late 2022, partially offset by the prepayment of FHLB advances totaling $50.0 million during 2021.

### *Noninterest Income*

Table 3 presents the major components of noninterest income for 2022 and 2021.

| Noninterest Income (dollars in thousands) | Table 3 |  |  |  |
| --- | --- | --- | --- | --- |
|  | Year Ended December 31, |  | Dollar Change | Percent Change |
|  | 2022 | 2021 | 2022 to 2021 |  |
| Trust and Asset Management | $43,803 | $46,068 | $(2,265) | (5)% |
| Mortgage Banking | 5,980 | 14,964 | (8,984) | (60) |
| Service Charges on Deposit Accounts | 29,620 | 25,564 | 4,056 | 16 |
| Fees, Exchange, and Other Service Charges | 54,914 | 55,457 | (543) | (1) |
| Investment Securities Losses, Net | (6,111) | (1,297) | (4,814) | n.m. |
| Annuity and Insurance | 3,782 | 3,224 | 558 | 17 |
| Bank-Owned Life Insurance | 9,968 | 7,784 | 2,184 | 28 |
| Other | 15,585 | 19,589 | (4,004) | (20) |
| Total Noninterest Income | $157,541 | $171,353 | $(13,812) | (8)% |

n.m.- not meaningful.

27

Trust and asset management income is comprised of fees earned from the management and administration of trusts and other customer assets. These fees are largely based upon the market value of the assets that the Bank manages and the fee rate charged to customers. Total trust assets under administration were $10.5 billion and $11.5 billion as of December 31, 2022, and December 31, 2021, respectively. Trust and asset management income decreased by $2.3 million or 5% in 2022 compared to 2021 due to decreases in trust assets under administration and tax service fees.

Mortgage banking income is highly influenced by mortgage interest rates, the housing market, the amount of our loan sales, and our valuation of mortgage servicing rights. Mortgage banking income decreased by $9.0 million or 60% in 2022 compared to 2021. This decrease was primarily due to decreased sales of conforming saleable loans from current production. This decrease was partially offset by lower amortization of mortgage servicing rights.

Service charges on deposit accounts increased by $4.1 million or 16% in 2022 compared to 2021. This increase was primarily due to an increase in overdraft fees attributed to an increase in transaction volume.

Net losses on sales of investment securities totaled $6.1 million and $1.3 million in 2022 and 2021, respectively. The net loss in 2022 was primarily due to $6.1 million in the fees paid to the counterparties of our prior Visa Class B share sales transactions. The net loss in 2021 was primarily due to $5.1 million of the fees paid to the counterparties of our prior Visa Class B share sales transactions. This was offset by $3.8 million net gains on the sales of investment securities in 2021.

Bank-owned life insurance increased by $2.2 million or 28% in 2022 compared to 2021 primarily due to policy purchases in 2022.

Other noninterest income decreased by $4.0 million or 20% in 2022 compared to 2021. This decrease was primarily due to a $6.9 million loss related to the sale of certain leveraged lease assets.

#### *Noninterest Expense*

Table 4 presents the major components of noninterest expense for 2022 and 2021.

| Noninterest Expense (dollars in thousands) | Year Ended December 31, |  | Dollar Change | Percent Change |
| --- | --- | --- | --- | --- |
|  | 2022 | 2021 | 2022 to 2021 | 2022 to 2021 |
| Salaries and Benefits: |  |  |  |  |
| Salaries | $146,840 | $135,416 | $11,424 | 8% |
| Incentive Compensation | 23,425 | 22,462 | 963 | 0 |
| Share-Based Compensation | 15,220 | 12,489 | 2,731 | 22 |
| Commission Expense | 4,708 | 8,901 | (4,193) | (47) |
| Retirement and Other Benefits | 17,242 | 20,213 | (2,971) | (15) |
| Payroll Taxes | 13,395 | 12,404 | 991 | 8 |
| Medical, Dental, and Life Insurance | 11,958 | 12,831 | (873) | (7) |
| Separation Expense | 2,482 | 3,577 | (1,095) | (31) |
| Total Salaries and Benefits | 235,270 | 228,293 | 6,977 | 3 |
| Net Occupancy | 39,441 | 26,244 | 13,197 | 50 |
| Net Equipment | 38,374 | 35,703 | 2,671 | 7 |
| Data Processing | 18,362 | 20,297 | (1,935) | (10) |
| Professional Fees | 14,557 | 12,895 | 1,662 | 13 |
| FDIC Insurance | 6,546 | 6,536 | 10 | 0 |
| Other Expense: |  |  |  |  |
| Delivery and Postage Services | 6,606 | 6,358 | 248 | 4 |
| Mileage Program Travel | 4,591 | 4,948 | (357) | (7) |
| Merchant Transaction and Card Processing Fees | 6,005 | 5,180 | 825 | 16 |
| Advertising | 9,976 | 9,606 | 370 | 4 |
| Amortization - Solar Energy Partnership Investments | 1,189 | 2,048 | (859) | (42) |
| Other | 34,348 | 35,481 | (1,133) | (3) |
| Total Other Expense | 62,715 | 63,621 | (906) | (1) |
| Total Noninterest Expense | $415,265 | $393,589 | $21,676 | 6% |

28

# *Non-Performing Assets and Accruing Loans and Leases Past Due 90 Days or More*

Table 16 presents a five-year history of non-performing assets and accruing loans and leases past due 90 days or more.

# **Non-Performing Assets and Accruing Loans and Leases Past Due 90 Days or More**

**Table 16**

| (dollars in thousands) | December 31, |  |  |  |  |
| --- | --- | --- | --- | --- | --- |
|  | 2022 | 2021 | 2020 | 2019 | 2018 |
| Non-Performing Assets |  |  |  |  |  |
| Non-Accrual Loans and Leases |  |  |  |  |  |
| Commercial |  |  |  |  |  |
| Commercial and Industrial | $37 | $243 | $441 | $830 | $542 |
| Commercial Mortgage | 3,309 | 8,205 | 8,527 | 9,244 | 2,040 |
| Total Commercial | 3,346 | 8,448 | 8,968 | 10,074 | 2,582 |
| Consumer |  |  |  |  |  |
| Residential Mortgage | 4,239 | 3,305 | 3,223 | 4,125 | 5,321 |
| Home Equity | 4,022 | 4,881 | 3,958 | 3,181 | 3,671 |
| Total Consumer | 8,261 | 8,186 | 7,181 | 7,306 | 8,992 |
| Total Non-Accrual Loans and Leases | 11,607 | 16,634 | 16,149 | 17,380 | 11,574 |
| Foreclosed Real Estate | 1,040 | 2,332 | 2,332 | 2,737 | 1,356 |
| Total Non-Performing Assets | $12,647 | $18,966 | $18,481 | $20,117 | $12,930 |
| Accruing Loans and Leases Past Due 90 Days or More |  |  |  |  |  |
| Commercial |  |  |  |  |  |
| Commercial and Industrial | $ - | $ - | $ - | $ - | $10 |
| Total Commercial | - | - | - | - | 10 |
| Consumer |  |  |  |  |  |
| Residential Mortgage | 2,429 | 3,159 | 5,274 | 1,839 | 2,446 |
| Home Equity | 1,673 | 3,456 | 3,187 | 4,125 | 2,684 |
| Automobile | 589 | 729 | 925 | 949 | 513 |
| Other 1 | 683 | 426 | 1,160 | 1,493 | 914 |
| Total Consumer | 5,374 | 7,770 | 10,546 | 8,406 | 6,557 |
| Total Accruing Loans and Leases Past Due 90 Days or More | $5,374 | $7,770 | $10,546 | $8,406 | $6,567 |
| Restructured Loans on Accrual Status and Not Past Due 90 Days or More | $43,658 | $60,519 | $68,065 | $63,103 | $48,731 |
| Total Loans and Leases | $13,646,420 | $12,259,076 | $11,940,020 | $10,990,892 | $10,448,774 |
| Ratio of Non-Accrual Loans and Leases to Total Loans and Leases | 0.09% | 0.14% | 0.14% | 0.16% | 0.11% |
| Ratio of Non-Performing Assets to Total Loans and Leases and Foreclosed Real Estate | 0.09% | 0.15% | 0.15% | 0.18% | 0.12% |
| Ratio of Non-Performing Assets to Total Assets | 0.05% | 0.08% | 0.09% | 0.11% | 0.08% |
| Ratio of Commercial Non-Performing Assets to Total Commercial Loans and Leases and Commercial Foreclosed Real Estate | 0.06% | 0.17% | 0.18% | 0.24% | 0.06% |
| Ratio of Consumer Non-Performing Assets to Total Consumer Loans and Leases and Consumer Foreclosed Real Estate | 0.11% | 0.14% | 0.14% | 0.15% | 0.16% |
| Ratio of Non-Performing Assets and Accruing Loans and Leases Past Due 90 Days or More to Total Loans and Leases and Foreclosed Real Estate | 0.13% | 0.22% | 0.24% | 0.26% | 0.19% |

$^{1}$ Comprised of other revolving credit, installment, and lease financing.

39

Table 17 presents the activity in Non-Performing Assets (“NPAs”) for 2022:

| (dollars in thousands) |  | Table 17 |
| --- | --- | --- |
| Balance at Beginning of Year | $ | 18,966 |
| Additions |  | 5,729 |
| Reductions |  |  |
| Payments |  | (9,052) |
| Return to Accrual Status |  | (1,684) |
| Sales of Foreclosed Real Estate |  | (1,292) |
| Charge-offs/Write-downs |  | (20) |
| Total Reductions |  | (12,048) |
| Balance at End of Year | $ | 12,647 |

NPAs consist of non-accrual loans and leases and foreclosed real estate. Changes in the level of non-accrual loans and leases typically are caused by loans and leases that reach a specified past due status, offset by reductions for loans and leases that are charged-off, paid down, sold, transferred to foreclosed real estate, or are no longer classified as non-accrual because they have returned to accrual status.

Commercial mortgage non-accrual loans decreased by $5.0 million or 60% from December 31, 2022.

Foreclosed real estate represents property acquired as the result of borrower defaults on loans. Foreclosed real estate is recorded at fair value, less estimated selling costs, at the time of foreclosure. On an ongoing basis, properties are appraised as required by market conditions and applicable regulations. Foreclosed real estate as of December 31, 2022 decreased $1.3 million from December 31, 2021, due to sale of one foreclosed real estate in Hawaii.

If interest due on the balances of all non-accrual loans as of December 31, 2022, had been accrued under the original terms, approximately $0.1 million in total interest income would have been recorded in 2022.

#### *Loans and Leases Past Due 90 Days or More and Still Accruing Interest*

Loans and leases in this category are 90 days or more past due, as to principal or interest, and are still accruing interest because they are well-secured and in the process of collection. Loans and leases past due 90 days or more and still accruing interest were $5.4 million as of December 31, 2022, a $2.4 million or 31% decrease from December 31, 2021. This decrease was primarily in our residential mortgage and home equity portfolios.

#### *Loans Modified in a Troubled Debt Restructuring*

Table 18 presents information on loans whose terms have been modified in a TDR:

| Loans Modified in a Troubled Debt Restructuring |  | Table 18 |
| --- | --- | --- |
|  | December 31, |  |
| (dollars in thousands) | 2022 | 2021 |
| Commercial |  |  |
| Commercial and Industrial | $6,596 | $18,722 |
| Commercial Mortgage | 5,774 | 11,777 |
| Total Commercial | 12,370 | 30,499 |
| Consumer |  |  |
| Residential Mortgage | 15,565 | 16,102 |
| Home Equity | 4,839 | 4,877 |
| Automobile | 12,721 | 16,148 |
| Other 1 | 1,759 | 2,331 |
| Total Consumer | 34,884 | 39,458 |
| Total | $47,254 | $69,957 |

$^{1}$ Comprised of other revolving credit and installment financing.

40

## Reserve for Credit Losses

The reserve for credit losses consists of the Allowance and the Unfunded Reserve. Table 19 presents the activity in the Company’s reserve for credit losses for the years ended December 31:

| Reserve for Credit Losses (dollars in thousands) | 2022 | 2021 | 2020 | 2019 | 2018 |
| --- | --- | --- | --- | --- | --- |
| Balance at Beginning of Period | $164,297 | $221,303 | $116,849 | $113,515 | $114,168 |
| CECL Adoption (Day 1) Impact | - | - | (5,072) | - | - |
| Loans and Leases Charged-Off |  |  |  |  |  |
| Commercial |  |  |  |  |  |
| Commercial and Industrial | (925) | (1,117) | (1,697) | (1,122) | (1,505) |
| Commercial Mortgage | - | - | - | (1,616) | - |
| Consumer |  |  |  |  |  |
| Residential Mortgage | (80) | (316) | (204) | (112) | (101) |
| Home Equity | (100) | (417) | (397) | (900) | (665) |
| Automobile | (4,652) | (4,939) | (6,496) | (7,130) | (8,218) |
| Other 1 | (7,585) | (10,530) | (12,244) | (13,075) | (14,075) |
| Total Loans and Leases Charged-Off | (13,342) | (17,319) | (21,038) | (23,955) | (24,564) |
| Recoveries on Loans and Leases Previously Charged-Off |  |  |  |  |  |
| Commercial |  |  |  |  |  |
| Commercial and Industrial | 552 | 506 | 2,288 | 1,513 | 2,039 |
| Commercial Mortgage | - | - | 40 | - | - |
| Consumer |  |  |  |  |  |
| Residential Mortgage | 1,193 | 2,467 | 1,292 | 1,927 | 807 |
| Home Equity | 1,500 | 1,666 | 2,892 | 2,339 | 2,001 |
| Automobile | 2,276 | 3,510 | 3,775 | 2,961 | 2,902 |
| Other 1 | 2,702 | 3,205 | 3,613 | 2,549 | 2,737 |
| Total Recoveries on Loans and Leases Previously Charged-Off | 8,223 | 11,354 | 13,900 | 11,289 | 10,486 |
| Net Charged-Off - Loans and Leases | (5,119) | (5,965) | (7,138) | (12,666) | (14,078) |
| Net Charged-Off - Accrued Interest Receivable | (131) | (541) | - | - | - |
| Provision for Credit Losses 2 |  |  |  |  |  |
| Loans and Leases | (8,263) | (52,466) | 115,100 | 16,000 | 13,425 |
| Accrued Interest Receivable 3 | (283) | (1,745) | 2,700 | - | - |
| Unfunded Commitments 4 | 746 | 3,711 | (1,136) | - | - |
| Total Provision for Credit Losses | (7,800) | (50,500) | 116,664 | 16,000 | 13,425 |
| Balance at End of Period | $151,247 | $164,297 | $221,303 | $116,849 | $113,515 |
| Components |  |  |  |  |  |
| Allowance for Credit Losses - Loans and Leases | $144,439 | $157,821 | $216,252 | $110,027 | $106,693 |
| Allowance for Credit Losses - Accrued Interest Receivable 3 | - | 414 | 2,700 | - | - |
| Reserve for Unfunded Commitments 4 | 6,808 | 6,062 | 2,351 | 6,822 | 6,822 |
| Total Reserve for Credit Losses | $151,247 | $164,297 | $221,303 | $116,849 | $113,515 |
| Average Loans and Leases Outstanding | $12,896,510 | $12,023,669 | $11,592,093 | $10,688,424 | $10,043,661 |
| Ratio of Net Loans and Leases Charged-Off to Average Loans and Leases Outstanding | 0.04% | 0.05% | 0.06% | 0.12% | 0.14% |
| Ratio of Allowance for Credit Losses to Loans and Leases Outstanding 5 | 1.06% | 1.29% | 1.81% | 1.00% | 1.02% |

$^{1}$ Comprised of other revolving credit, installment, and lease financing.

$^{2}$ Certain prior period information has been reclassified to conform to current presentations.

$^{3}$ On December 31, 2020, the Company established a reserve on accrued interest receivable related to loans in which interest payment forbearances were granted to borrowers impacted by the COVID-19 pandemic. The reserve was recorded as a contra-asset against accrued interest receivable with the offset to provision for credit losses. In 2022, the reserve on accrued interest receivable was fully released.

$^{4}$ The reserve for unfunded commitments is separately recorded in other liabilities in the consolidated statements of condition. For the years ended December 31, 2022 and 2021, the offsetting provision was recorded in provision for credit losses in the consolidated statements of income. In previous reporting periods, the offsetting provision was recorded in other noninterest expense.

$^{5}$ The numerator comprises the Allowance for Credit Losses - Loans and Leases.

41

## Allowance for Credit Losses

Table 20 presents the allocation of the Allowance by loan and lease category.

### Allocation of Allowance for Credit Losses

Table 20

| (dollars in thousands) | December 31, |  |  |  |  |
| --- | --- | --- | --- | --- | --- |
|  | 2022 | 2021 | 2020 | 2019 | 2018 |
| Commercial |  |  |  |  |  |
| Commercial and Industrial | $24,283 | $27,650 | $43,092 | $29,281 | $26,408 |
| Commercial Mortgage | 32,588 | 29,997 | 31,723 | 38,335 | 34,869 |
| Construction | 4,223 | 4,311 | 5,417 | 4,840 | 4,398 |
| Lease Financing | 2,806 | 2,992 | 4,615 | 1,345 | 1,199 |
| Total Commercial | 63,900 | 64,950 | 84,847 | 73,801 | 66,874 |
| Consumer |  |  |  |  |  |
| Residential Mortgage | 17,079 | 20,721 | 32,643 | 6,366 | 6,870 |
| Home Equity | 16,654 | 18,924 | 37,987 | 9,777 | 11,240 |
| Automobile | 21,566 | 25,018 | 28,822 | 9,269 | 11,576 |
| Other 1 | 25,240 | 28,208 | 31,953 | 10,814 | 10,133 |
| Total Consumer | 80,539 | 92,871 | 131,405 | 36,226 | 39,819 |
| Total Allocation of Allowance for Credit Losses | $144,439 | $157,821 | $216,252 | $110,027 | $106,693 |

|  | December 31, |  |  |  |  |  |  |  |  |  |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
|  | 2022 |  | 2021 |  | 2020 |  | 2019 |  | 2018 |  |
|  | Alloc. Allow. as % of loan or lease category | Loan category as % of total loans and leases | Alloc. Allow. as % of loan or lease category | Loan category as % of total loans and leases | Alloc. Allow. as % of loan or lease category | Loan category as % of total loans and leases | Alloc. Allow. as % of loan or lease category | Loan category as % of total loans and leases | Alloc. Allow. as % of loan or lease category | Loan category as % of total loans and leases |
| Commercial |  |  |  |  |  |  |  |  |  |  |
| Commercial and Industrial | 1.72% | 10.32% | 1.86% | 12.14% | 2.30% | 15.70% | 2.12% | 12.55% | 1.98% | 12.74% |
| Commercial Mortgage | 0.87 | 27.30 | 0.95 | 25.71 | 1.11 | 23.91 | 1.52 | 22.91 | 1.51 | 22.03 |
| Construction | 1.62 | 1.91 | 1.96 | 1.80 | 2.09 | 2.18 | 2.49 | 1.77 | 2.59 | 1.63 |
| Lease Financing | 4.04 | 0.51 | 2.85 | 0.86 | 4.17 | 0.93 | 1.10 | 1.11 | 0.68 | 1.69 |
| Total Commercial | 1.17 | 40.04 | 1.31 | 40.51 | 1.66 | 42.72 | 1.75 | 38.34 | 1.68 | 38.09 |
| Consumer |  |  |  |  |  |  |  |  |  |  |
| Residential Mortgage | 0.37 | 34.10 | 0.48 | 35.15 | 0.79 | 34.59 | 0.16 | 35.40 | 0.19 | 35.16 |
| Home Equity | 0.75 | 16.31 | 1.03 | 14.98 | 2.37 | 13.44 | 0.58 | 15.25 | 0.67 | 16.09 |
| Automobile | 2.48 | 6.38 | 3.40 | 6.01 | 4.07 | 5.94 | 1.29 | 6.55 | 1.76 | 6.30 |
| Other 1 | 5.84 | 3.17 | 6.88 | 3.35 | 8.08 | 3.31 | 2.21 | 4.46 | 2.22 | 4.36 |
| Total Consumer | 0.98 | 59.96 | 1.27 | 59.49 | 1.92 | 57.28 | 0.53 | 61.66 | 0.62 | 61.91 |
| Total | 1.06% | 100.00% | 1.29% | 100.00% | 1.81% | 100.00% | 1.00% | 100.00% | 1.02% | 100.00% |

$^{1}$ Comprised of other revolving credit, installment, and lease financing.

## Allowance for Credit Losses - Loans and Leases

As of December 31, 2022, the Allowance was $144.4 million or 1.06% of total loans and leases outstanding (1.08% excluding PPP loans), compared with an Allowance of $157.8 million or 1.29% of total loans and leases outstanding (1.32% excluding PPP loans) as of December 31, 2021. The Allowance reflects management's best estimate of losses over the life of loans and leases in our portfolio in accordance with the CECL approach. The decrease in the Allowance and the Ratio of Allowance for Credit Losses to Loans and Leases Outstanding was primarily due to improvement in economic conditions and outlook, along with the performance of our commercial and consumer portfolios.

Net charge-offs of loans and leases were $5.1 million or 0.04% of total average loans and leases in 2022 compared to $6.0 million or 0.05% of total average loans and leases in 2021. Net charge-offs in our consumer portfolios were $4.7 million in 2022 compared to $5.4 million in 2021. This decrease was primarily reflected in our other and automobile portfolio. Net charge-offs in our commercial portfolios were $0.4 million in 2022 compared to net recoveries of $0.6 million in 2021. This decrease in charge-offs was primarily reflected in our consumer other portfolio.

42

The allocation of the Allowance to our commercial portfolio segment decreased by $1.1 million or 2% from December 31, 2021. This reduction was primarily due to a $3.4 million decrease in the Allowance allocated to the commercial and industrial portfolio, partially offset by a $2.6 million increase in the Allowance allocated to the commercial mortgage portfolio. The reductions were primarily due to improving economic conditions and lower risk rating migration expectations.

The allocation of the Allowance to our consumer portfolio segment decreased by $12.3 million or 13% from December 31, 2021. This reduction was due to a $3.6 million decrease in the Allowance allocated to the residential mortgage portfolio, a $3.5 million decrease in the Allowance allocated to the automobile portfolio, and reductions in the Allowance allocated to other and home equity portfolios, totaling $3.0 million and $2.3 million, respectively. The reductions were primarily due to improving economic conditions and lower loss forecasts.

See Note 4 to the Consolidated Financial Statements for more information on the Allowance and credit quality indicators.

#### *Reserve for Unfunded Commitments*

The Unfunded Reserve was $6.8 million as of December 31, 2022, and $6.1 million as of December 31, 2021, an increase of $0.7 million, which was primarily due to the impact of growing commitments and declining average utilization rates in the construction portfolio.

#### *Provision for Credit Losses*

The provision for credit losses was a net benefit of $7.8 million in 2022 and a net benefit of $50.5 million in 2021. This decrease in the net benefit was primarily due to a smaller reduction in the Allowance, as a significant amount of the build in the Allowance during 2020 due to credit concerns and uncertainty associated with COVID-19 was reversed in 2021 in response to improved economic conditions, and the significant level of fiscal and regulatory support and relief.

#### *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 $95.3 million as of December 31, 2022, and $75.8 million as of December 31, 2021. We also maintained investments in corporate bonds with a carrying value of $811.7 million as of December 31, 2022, and $403.4 million as of December 31, 2021. 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 to the 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 statements of income and condition. In this management process, market risks are balanced with expected returns in an effort to enhance earnings performance while limiting volatility.

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 established for interest rate risk and maintaining adequate levels of funding and liquidity. The potential cash flows, sales, or replacement value of many of our assets and liabilities, especially those that earn or pay interest, are sensitive to changes in the general level of interest rates. This interest rate risk arises primarily from our core business activities of extending loans and accepting deposits. Our investment securities portfolio is also subject to significant interest rate risk.

Many factors affect our exposure to changes in interest rates, such as general economic and financial conditions, customer preferences, historical pricing relationships, and repricing characteristics of financial instruments. Our earnings are affected not only by general economic conditions but also by the monetary and fiscal policies of the U.S. and its agencies, particularly the FRB. The monetary policies of the FRB can influence the overall growth of loans, investment securities, and deposits and the level of interest rates earned on assets and paid for liabilities.

43

In managing interest rate risk, we, through the Asset/Liability Management Committee (“ALCO”), measure short and long-term sensitivities to changes in interest rates. The ALCO, which is comprised of members of executive management, utilizes several techniques to manage interest rate risk, which include:

- adjusting the statement of condition mix or altering the interest rate characteristics of assets and liabilities;
- changing product pricing strategies;
- modifying characteristics of the investment securities portfolio; and
- using derivative financial instruments.

Our use of derivative financial instruments, as detailed in Note 17 to the Consolidated Financial Statements, has generally been limited. This is due to natural on-balance sheet hedges arising out of offsetting interest rate exposures from loans and investment securities with deposits and other interest-bearing liabilities. In particular, the investment securities portfolio is utilized to manage the interest rate exposure and sensitivity to within the guidelines established by the ALCO. We utilize natural and offsetting economic hedges in an effort to reduce the need to employ off-balance sheet derivative financial instruments to hedge interest rate risk exposures. Expected movements in interest rates are also considered in managing interest rate risk. Thus, as interest rates change, we may use different techniques to manage interest rate risk.

A key element in our ongoing process to measure and monitor interest rate risk is the utilization of an asset/liability simulation model that attempts to capture the dynamic nature of the statement of condition. The model is used to estimate and measure the statement of condition sensitivity to changes in interest rates. These estimates are based on assumptions about the behavior of loan and deposit pricing, repayment rates on mortgage-based assets, and principal amortization and maturities on other financial instruments. The model’s analytics include the effects of standard prepayment options on mortgages and customer withdrawal options for deposits. While such assumptions are inherently uncertain, we believe that our assumptions are reasonable.

We utilize net interest income simulations to analyze short-term income sensitivities to changes in interest rates. Table 21 presents, for the twelve months subsequent to December 31, 2022, and December 31, 2021, an estimate of the change in net interest income that would result from a gradual and immediate change in interest rates, moving in a parallel fashion over the entire yield curve, relative to the measured base case scenario. The base case scenario assumes the statement of condition and interest rates are generally unchanged. Based on our net interest income simulation as of December 31, 2022, net interest income is expected to increase as interest rates rise. This is due in part to our strategy to maintain a relatively short investment portfolio duration. In addition, rising interest rates would drive higher rates on loans and investment securities, as well as induce a slower pace of premium amortization on certain securities within our investment portfolio. However, lower interest rates would likely cause a decline in net interest income as lower rates would lead to lower yields on loans and investment securities, as well as drive higher premium amortization on existing investment securities. Based on our net interest income simulation as of December 31, 2022, net interest income sensitivity to changes in interest rates for the twelve months subsequent to December 31, 2022, was less sensitive in comparison to the sensitivity profile for the twelve months subsequent to December 31, 2021. Year-over-year asset sensitivity decreased due to slower forecasted prepayments for mortgage-related assets and higher projected interest expense due to the higher rate environment and lower fed funds sold, partially offset by higher balances in floating rate loans.

# **Net Interest Income Sensitivity Profile**

**Table 21**

| (dollars in thousands) | Impact on Future Annual Net Interest Income |  |  |  |
| --- | --- | --- | --- | --- |
|  | December 31, 2022 |  | December 31, 2021 |  |
| Gradual Change in Interest Rates (basis points) |  |  |  |  |
| +200 | $13,943 | 2.4% | $29,697 | 6.1% |
| +100 | 7,673 | 1.3 | 15,306 | 3.1 |
| -100 | (4,365) | (0.7) | (8,922) | (1.8) |
| Immediate Change in Interest Rates (basis points) |  |  |  |  |
| +200 | $22,100 | 3.8% | $68,037 | 14.0% |
| +100 | 11,627 | 2.0 | 38,361 | 7.9 |
| -100 | (8,659) | (1.5) | (30,511) | (6.3) |

To analyze the impact of changes in interest rates in a more realistic manner, non-parallel interest rate scenarios are also simulated. These non-parallel interest rate scenarios indicate that net interest income may decrease from the base case scenario should the yield curve flatten or become inverted for a period of time. Conversely, if the yield curve were to steepen, net interest income may increase.

44

### *Other Market Risks*

In addition to interest rate risk, we are exposed to other forms of market risk in our normal business transactions. Foreign currency and foreign exchange contracts expose us to a small degree of foreign currency risk. These transactions are primarily executed on behalf of customers. Our trust and asset management income is at risk to fluctuations in the market values of underlying assets, particularly debt and equity securities. Also, our share-based compensation expense is dependent on the fair value of our stock options, restricted stock units, and restricted stock at the date of grant. The fair value of stock options, restricted stock units, and restricted stock is impacted by the market price of the Parent’s common stock on the date of grant and is at risk to changes in equity markets, general economic conditions, and other factors.

### **Liquidity Risk Management**

The objective of our liquidity risk management process is to manage cash flow and liquidity in an effort to provide continuous access to sufficient, reasonably priced funds. Funding requirements are impacted by loan originations and refinancings, deposit balance changes, liability issuances and settlements, and off-balance sheet funding commitments. We consider and comply with various regulatory guidelines regarding required liquidity levels and regularly monitor our liquidity position in light of the changing economic environment and customer activity. Based on ongoing liquidity assessments, we may alter our asset, liability, and off-balance sheet positions. The ALCO monitors sources and uses of funds and modifies asset and liability positions as liquidity requirements change. This process, combined with our ability to raise funds in money and capital markets and through private placements, provides flexibility in managing the exposure to liquidity risk.

In an effort to satisfy our liquidity needs, we actively manage our assets and liabilities. We have access to immediate liquid resources in the form of cash which is primarily on deposit with the FRB. Potential sources of liquidity also include investment securities in our available-for-sale securities portfolio, our ability to sell loans in the secondary market, and to secure borrowings from the FRB and FHLB. Our held-to-maturity securities, while not intended for sale, may also be utilized in repurchase agreements to obtain funding. Our core deposits have historically provided us with a long-term source of stable and relatively low cost source of funding. Additional funding is available through the issuance of long-term debt or equity.

Maturities and payments on outstanding loans and investment securities also provide a steady flow of funds. Liquidity is further enhanced by our ability to access secured borrowings from the FHLB and FRB. As of December 31, 2022, we could have borrowed an additional $2.8 billion from the FHLB and an additional $603.4 million from the FRB based on the amount of pledged loans and investment securities.

We continued our focus on maintaining a strong liquidity position throughout 2022. As of December 31, 2022, cash and cash equivalents were $401.8 million, the carrying value of our available-for-sale investment securities was $2.8 billion, and total deposits were $20.6 billion. As of December 31, 2022, our available-for-sale investment securities portfolio was comprised of securities with an average base duration of approximately 3.89 years.

### **Capital Management**

We actively manage capital, commensurate with our risk profile, to enhance shareholder value. We also seek to maintain capital levels for the Company and the Bank at amounts in excess of the regulatory “well-capitalized” thresholds. Periodically, we may respond to market conditions by implementing changes to our overall balance sheet positioning to manage our capital position.

The Company and the Bank are each subject to regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements could cause certain mandatory and discretionary actions by regulators that, if undertaken, would likely have a material effect on our financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Company and the Bank must meet specific capital guidelines that involve quantitative and qualitative measures. These measures were established by regulation intended to ensure capital adequacy. Capital ratios are calculated using the regulatory capital rule that allows a five-year transition period related to the adoption of CECL. As of December 31, 2022, the Company’s capital levels remained characterized as “well-capitalized.” There have been no conditions or events since December 31, 2022, that management believes have changed either the Company’s or the Bank’s capital classifications. The Company’s regulatory capital ratios are presented in Table 22 below.

45

Table 22 presents a five-year history of activities and balances in our capital accounts, along with key capital ratios.

# **Shareholders' Equity and Regulatory Capital**

**Table 22**

| (dollars in thousands) | December 31, |  |  |  |  |
| --- | --- | --- | --- | --- | --- |
|  | 2022 | 2021 | 2020 | 2019 | 2018 |
| Change in Shareholders' Equity |  |  |  |  |  |
| Net Income | $225,804 | $253,372 | $153,804 | $225,913 | $219,602 |
| Cash Dividends Paid on Common Shares | (112,557) | (110,633) | (107,434) | (105,478) | (98,496) |
| Cash Dividends Paid on Preferred Shares | (7,877) | (2,975) | - | - | - |
| Dividend Reinvestment Program | 4,680 | 4,835 | 5,012 | 5,039 | 4,689 |
| Preferred Stock Issued, Net | - | 175,487 | - | - | - |
| Common Stock Repurchased | (55,063) | (31,258) | (18,006) | (137,649) | (91,988) |
| Other 1 | (349,603) | (51,724) | 54,299 | 30,807 | 2,525 |
| Increase (Decrease) in Shareholders' Equity | $(294,616) | $237,104 | $87,675 | $18,632 | $36,332 |
| Regulatory Capital |  |  |  |  |  |
| Total Common Shareholders' Equity | $1,141,508 | $1,436,124 | $1,374,507 | $1,286,832 | $1,268,200 |
| Add: CECL Transitional Amount | 7,124 | 9,498 | 23,750 | - | - |
| Less: Goodwill, Net of Deferred Tax Liabilities | 28,746 | 28,747 | 28,718 | 28,718 | 28,718 |
| Postretirement Benefit Liability Adjustments | (25,078) | (33,496) | (43,250) | (38,757) | (36,010) |
| Net Unrealized Gains (Losses) on Investment Securities | (409,579) | (32,886) | 51,072 | 7,645 | (15,033) |
| Other | (198) | (198) | (198) | (198) | (198) |
| Common Equity Tier 1 Capital | 1,554,741 | 1,483,455 | 1,361,915 | 1,289,424 | 1,290,723 |
| Preferred Stock, Net of Issuance Cost | 175,487 | 175,487 | - | - | - |
| Tier 1 Capital | 1,730,228 | 1,658,942 | 1,361,915 | 1,289,424 | 1,290,723 |
| Allowable Reserve for Credit Losses | 145,202 | 153,001 | 141,869 | 116,849 | 113,515 |
| Total Regulatory Capital | $1,875,430 | $1,811,943 | $1,503,784 | $1,406,273 | $1,404,238 |
| Risk-Weighted Assets | $14,238,798 | $12,236,805 | $11,295,077 | $10,589,061 | $9,878,904 |
| Key Regulatory Capital Ratios |  |  |  |  |  |
| Common Equity Tier 1 Capital Ratio | 10.92% | 12.12% | 12.06% | 12.18% | 13.07% |
| Tier 1 Capital Ratio | 12.15 | 13.56 | 12.06 | 12.18 | 13.07 |
| Total Capital Ratio | 13.17 | 14.81 | 13.31 | 13.28 | 14.21 |
| Tier 1 Leverage Ratio | 7.37 | 7.32 | 6.71 | 7.25 | 7.60 |

$^{1}$ Includes unrealized gains and losses on available-for-sale investment securities, minimum pension liability adjustments, and common stock issuances under share-based compensation.

As of December 31, 2022, shareholders' equity was $1.3 billion, a decrease of $294.6 million or 18% from December 31, 2021. For 2022, net income of $225.8 million, common stock issuances of $7.3 million, and share-based compensation of $16.1 million were offset by other comprehensive losses of $368.3 million, cash dividends of $112.6 million paid on common stock shares, cash dividends of $7.9 million paid on preferred stock shares, and common stock repurchases of $55.1 million. In 2022, included in the amount of common stock repurchased were 627,629 shares repurchased under our share repurchase program. These shares were repurchased at an average cost per share of $79.41 and a total cost of $49.8 million. From the beginning of our share repurchase program in July 2001 through December 31, 2022, we repurchased a total of 58.0 million shares of common stock and returned a total of nearly $2.4 billion to our common shareholders at an average cost of $41.17 per share.

Remaining buyback authority was $35.9 million as of December 31, 2022. In January 2023, the Parent's Board of Directors increased the authorization under the share repurchase program by an additional $100.0 million. Total remaining buyback authority under the share repurchase program was $135.9 million at January 20, 2023. The actual amount and timing of future share repurchases, if any, will depend on market and economic conditions, regulatory rules, applicable SEC rules, and various other factors.

In January 2023, the Parent's Board of Directors declared the quarterly dividend of its Fixed Rate Non-Cumulative Perpetual Preferred Stock, Series A, of $10.94 per share, equivalent to $0.2735 per depository share. The dividend was paid on February 1, 2023, to shareholders of record of the preferred stock at the close of business on January 17, 2023.

In January 2023, the Parent's Board of Directors declared the quarterly cash dividend of $0.70 per share on the Parent's outstanding common shares. The dividend will be payable on March 14, 2023, to shareholders of record at the close of business on February 28, 2023.

46

# Regulatory Initiatives Affecting the Banking Industry

### *Basel III*

Under final FRB and FDIC approved rules implementing the Basel Committee on Banking Supervision's capital guidelines for U.S. banks minimum requirements increased for both the quantity and quality of capital held by the Company. The Basel III capital standards substantially revised the risk-based capital requirements applicable to bank holding companies and their depository institution subsidiaries, including the definitions and the components of Tier 1 capital and Total Capital, the method of evaluating risk-weighted assets, institution of a capital conservation buffer, and other matters affecting regulatory capital ratios. Strict eligibility criteria for regulatory capital instruments were also implemented under the rules.

The phase-in period for the final rules became effective for the Company on January 1, 2015, with full compliance with all of the final rules' requirements phased in over a multi-year schedule, which were fully implemented on January 1, 2019. As of December 31, 2022, the Company's capital levels remained characterized as 'well-capitalized' under the new rules.

Management continues to monitor regulatory developments and their potential impact to the Company's liquidity requirements.

### *Stress Testing*

Enactment of the Economic Growth, Regulatory Relief, and Consumer Protection Act in May 2018 significantly altered several provisions of the Dodd-Frank Act, including how stress tests are run. Bank holding companies with total assets of less than $100 billion, such as the Company, are no longer subject to company-run stress testing requirements in section 165(i)(2) of the Dodd-Frank Act, including publishing a summary of results. At this time, the Company continues to run internal stress tests as a component of our comprehensive risk management and capital planning process.

## Operational Risk

Operational risk represents the risk of loss resulting from our operations, including, but not limited to, the risk of fraud by employees or persons outside the Company, errors relating to transaction processing and technology, failure to adhere to compliance requirements, and the risk of cyber attacks. We are also exposed to operational risk through our outsourcing arrangements, and the effect that changes in circumstances or capabilities of our outsourcing vendors can have on our ability to continue to perform operational functions necessary to our business. The risk of loss also includes the potential legal actions that could arise as a result of an operational deficiency or as a result of noncompliance with applicable regulatory standards, adverse business decisions or their implementation, and customer attrition due to potential negative publicity. Operational risk is inherent in all business activities, and management of this risk is important to the achievement of Company goals and objectives.

Our Operational Risk Committee (the 'ORC') provides oversight and assesses the most significant operational risks facing the Company. We have developed a framework that provides for a centralized operating risk management function through the ORC, supplemented by business unit responsibility for managing operational risks specific to their business units. Our internal audit department also validates the system of internal controls through ongoing risk-based audit procedures and reports on the effectiveness of internal controls to executive management and the Audit and Risk Committee of the Board of Directors.

We continuously strive to strengthen our system of internal controls to improve the oversight of operational risk. While our internal controls have been designed to minimize operational risks, there is no assurance that business disruption or operational losses will not occur. On an ongoing basis, management reassesses operational risks, implements appropriate process changes, and invests in enhancements to our systems of internal controls.

## Guarantees

We pool Federal Housing Administration ('FHA') insured and U.S. Department of Veterans Affairs ('VA') guaranteed residential mortgage loans for sale to Ginnie Mae. We also sell residential mortgage loans in the secondary market to Fannie Mae. The agreements under which we sell residential mortgage loans to Ginnie Mae or Fannie Mae and the insurance or guaranty agreements with the FHA and VA contain provisions that include various representations and warranties regarding the origination and characteristics of the residential mortgage loans. Although these loans are primarily sold on a non-recourse basis, we may be obligated to repurchase residential mortgage loans or reimburse the respective investor if it is found that required documents were not delivered or were defective.

We also service substantially all of the loans we sell to investors in the secondary market. Each agreement under which we act as servicer generally specifies a standard of responsibility for our actions and provides protection against expenses and liabilities incurred by us when acting in compliance with the respective servicing agreements. However, if we commit a material breach of obligations as servicer, we may be subject to various penalties which may include the repurchase of an affected loan or a reimbursement to the respective investor.

47

## Selected Quarterly Consolidated Financial Data

Table 23 presents our selected quarterly financial data for 2022 and 2021.

### Condensed Statements of Income

Table 23

| (dollars in thousands, except per share amounts) | Three Months Ended 2022 |  |  |  | Three Months Ended 2021 |  |  |  |
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
|  | Dec 31 | Sep 30 | Jun 30 | Mar 31 | Dec 31 | Sep 30 | Jun 30 | Mar 31 |
| Interest Income | $172,313 | $154,918 | $139,562 | $130,573 | $132,309 | $134,263 | $131,379 | $128,765 |
| Interest Expense | 31,575 | 13,263 | 6,660 | 5,310 | 5,921 | 7,444 | 7,865 | 8,196 |
| Net Interest Income | 140,738 | 141,655 | 132,902 | 125,263 | 126,388 | 126,819 | 123,514 | 120,569 |
| Provision for Credit Losses | 200 | - | (2,500) | (5,500) | (9,700) | (10,400) | (16,100) | (14,300) |
| Investment Securities Gains (Losses), Net | (1,124) | (2,147) | (1,295) | (1,545) | (1,258) | (1,259) | 2,423 | (1,203) |
| Noninterest Income | 42,296 | 32,807 | 43,453 | 45,096 | 43,832 | 42,637 | 42,008 | 44,173 |
| Noninterest Expense | 102,703 | 105,749 | 102,939 | 103,874 | 101,678 | 96,519 | 96,527 | 98,865 |
| Income Before Provision for Income Taxes | 79,007 | 66,566 | 74,621 | 70,440 | 76,984 | 82,078 | 87,518 | 78,974 |
| Provision for Income Taxes | 17,700 | 13,765 | 17,759 | 15,606 | 13,147 | 20,025 | 19,985 | 19,025 |
| Net Income | $61,307 | $52,801 | $56,862 | $54,834 | $63,837 | $62,053 | $67,533 | $59,949 |
| Preferred Stock Dividends | 1,969 | 1,969 | 1,969 | 1,969 | 1,969 | 1,006 | - | - |
| Net Income Available to Common Shareholders | $59,338 | $50,832 | $54,893 | $52,865 | $61,868 | $61,047 | $67,533 | $59,949 |
| Per Common Share |  |  |  |  |  |  |  |  |
| Basic Earnings Per Common Share | $1.51 | $1.28 | $1.38 | $1.33 | $1.56 | $1.53 | $1.69 | $1.51 |
| Diluted Earnings Per Common Share | $1.50 | $1.28 | $1.38 | $1.32 | $1.55 | $1.52 | $1.68 | $1.50 |
| Dividends Declared Per Common Share | $0.70 | $0.70 | $0.70 | $0.70 | $0.70 | $0.70 | $0.67 | $0.67 |
| Performance Ratios |  |  |  |  |  |  |  |  |
| Net Income to Average Total Assets (ROA) | 1.05% | 0.91% | 1.00% | 0.97% | 1.12% | 1.07% | 1.23% | 1.15% |
| Net Income to Average Shareholders' Equity (ROE) | 18.91 | 15.31 | 16.40 | 14.18 | 15.92 | 15.41 | 19.17 | 17.65 |
| Net Income to Average Common Equity (ROCE) | 21.28 | 16.98 | 18.19 | 15.44 | 17.40 | 17.08 | 19.61 | 17.65 |
| Efficiency Ratio 1 | 56.46 | 61.37 | 58.80 | 61.53 | 60.18 | 57.38 | 57.47 | 60.45 |
| Net Interest Margin 2 | 2.60 | 2.60 | 2.47 | 2.34 | 2.34 | 2.32 | 2.37 | 2.43 |

$^{1}$ The efficiency ratio is defined as noninterest expense divided by total revenue (net interest income and noninterest income).

$^{2}$ The net interest margin is defined as net interest income, on a taxable-equivalent basis, as a percentage of average earning assets.

## Fourth Quarter Results and Other Matters

### *Net Income Available for Common Shareholders*

Net income available for common shareholders for the fourth quarter of 2022 was $59.3 million, a decrease of $2.5 million or 4% compared to the fourth quarter of 2021. Diluted earnings per common share were $1.50 for the fourth quarter of 2022, a decrease of $0.05 or 3% compared to the fourth quarter of 2021.

### *Net Interest Income*

Net interest income, on a taxable-equivalent basis, for the fourth quarter of 2022 was $141.2 million, an increase of $14.5 million or 11% compared to the fourth quarter of 2021. This increase was primarily due to increase in commercial and consumer loan interest income, partially offset by an increase in interest expense on savings deposits. Net interest margin was 2.60% for the fourth quarter of 2022, an increase of 26 basis points compared to the fourth quarter of 2021, primarily due to higher yields in our investment securities and loans portfolio, partially offset by higher rates on deposits and borrowings.

48

### *Provision for Credit Losses*

The provision for credit losses for the fourth quarter of 2022 was a net expense of $0.2 million compared to a net benefit of $9.7 million in the fourth quarter of 2021, while recording a net charge-off of loans and leases of $1.9 million in the fourth quarter of 2022 compared to $0.7 million in the fourth quarter of 2021.

### *Noninterest Income*

Noninterest income, other than net gains on sales of investment securities, was $42.3 million in the fourth quarter of 2022, a decrease of $1.5 million or 4% compared to the fourth quarter of 2021. This decrease was primarily due to a $1.9 million decrease in mortgage banking income due to lower volume and a decrease in trust and asset management fees of $1.0 million due to a decrease in assets under management. These decreases were partially offset by a $0.7 million increase in service charges on deposit accounts, BOLI income, and other service charges.

### *Noninterest Expense*

Noninterest expense was $102.7 million in the fourth quarter of 2022, an increase of $1.0 million or 1% compared to the fourth quarter of 2021. This increase was primarily due to a $0.9 million increase in other expense and increases in equipment expense and professional fees of $0.8 million and $0.5 million, respectively. These increases were offset by $1.8 million decrease in salary and benefits expense primarily due to a decrease in corporate incentive plans and commission expense.

### *Provision for Income Taxes*

The provision for income taxes was $17.7 million in the fourth quarter of 2022, an increase of $4.6 million or 35% compared to the fourth quarter of 2021. The effective tax rate for the fourth quarter of 2022 was 22.4% compared with an effective tax rate of 17.1% for the fourth quarter of 2021. The difference in the effective tax rate in the fourth quarter of 2022 compared to the same period of 2021 was primarily due to higher pretax income, lower tax benefits and tax-advantage investments in 2022.

### *Common Stock Repurchase Program*

In the fourth quarter of 2022, we repurchased 192,346 shares of our common stock under our share repurchase program at an average cost per share of $77.77 and a total cost of $15.0 million. See Note 11 to the Consolidated Financial Statements for more information related to our common stock repurchase program.

### **Item 7A. Quantitative and Qualitative Disclosures About Market Risk**

See the Market Risk section in Management’s Discussion and Analysis of Financial Condition and Results of Operation included in Item 7 of this report.

49

# **Item 8. Financial Statements and Supplementary Data**

| Index | Page |
| --- | --- |
| Report of Independent Registered Public Accounting Firm (PCAOB ID: 42) | 51 |
| Consolidated Statements of Income | 53 |
| Consolidated Statements of Comprehensive Income | 54 |
| Consolidated Statements of Condition | 55 |
| Consolidated Statements of Shareholders' Equity | 56 |
| Consolidated Statements of Cash Flows | 57 |
| Notes to Consolidated Financial Statements | 58 |

50

# Report of Independent Registered Public Accounting Firm

To the Shareholders and the Board of Directors of Bank of Hawai‘i Corporation

## Opinion on the Financial Statements

We have audited the accompanying consolidated statements of condition of Bank of Hawai‘i Corporation and subsidiaries (the Company) as of December 31, 2022 and 2021, the related consolidated statements of income, comprehensive income, shareholders’ equity and cash flows for each of the three years in the period ended December 31, 2022, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2022, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated March 1, 2023 expressed an unqualified opinion thereon.

## Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

51

## Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the account or disclosures to which it relates.

*Description of the Matter*

### Allowance for Credit Losses - Loans and Leases

At December 31, 2022, the Company’s loans and leases portfolio and associated allowance for credit losses (the “Allowance”) totaled $13.6 billion and $144.4 million, respectively. As discussed in Note 1 to the consolidated financial statements, the Company’s current expected credit loss is an estimate of the credit losses expected over the life of an exposure (or pool of exposures). Management’s estimate of expected credit losses is based on relevant information about past events, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amounts. Historical loss experience is generally the starting point for estimating expected credit losses. The Company then considers whether the historical loss experience should be adjusted for asset-specific risk characteristics or current conditions at the reporting date that did not exist over the historical period used. Relevant factors include, but are not limited to, concentrations of credit risk (geographic, large borrower, and industry), economic trends and conditions, changes in underwriting standards, experience and depth of lending staff, trends in delinquencies, and the level of criticized loans (environmental factor). The Company also considers future economic conditions and portfolio performance as part of a reasonable and supportable forecast period. This includes a quarterly asset quality review which includes a review of forecasted gross charge-offs and recoveries, nonperforming assets, criticized loans and leases, and risk rating migration, as well as additional factors that may not be reflected in the net charge-off forecast.

Auditing the Company’s Allowance involved a high degree of subjectivity due to the judgment involved in management’s identification and measurement of the qualitative adjustments to the quantitative baseline that were included in the estimate of the Allowance.

*How We Addressed the Matter in Our Audit*

We obtained an understanding of the Company’s process for establishing the Allowance and evaluated the design and tested the operating effectiveness of controls that address the risk of material misstatement related to the measurement of the Allowance. We tested controls over management’s review of data inputs utilized in the Allowance calculation, management’s identification and review of the qualitative adjustments related to the loan and lease losses and management’s review and approval process over the final determination of the Allowance.

To test the identification and measurement of the qualitative adjustments included in management’s estimate of the Allowance, our audit procedures included, among others, evaluating the Allowance methodology used, including management’s consideration of the individual loan portfolio segments, and testing the completeness and accuracy of data from underlying systems and the data warehouse that was used in the determination of qualitative adjustments. We further evaluated management’s assessment of the qualitative adjustments by obtaining an understanding of the basis for any changes in underlying environmental factor adjustments and reasonable and supportable period and giving consideration to qualitative adjustments and other information available within the Company and from external sources focusing on both corroborating and any contrary evidence.

We also evaluated the overall Allowance amount to determine whether the amount appropriately reflected the current expected credit loss in the loan portfolio as of the balance sheet date. We reviewed subsequent events and transactions and considered whether they corroborated or contradicted the Company’s year-end measurement of the Allowance.

/s/ Ernst & Young LLP

We have served as the Company’s auditor since 1971.

Honolulu, Hawaii

March 1, 2023

52

# **Bank of Hawai'i Corporation and Subsidiaries**  
 **Consolidated Statements of Income**

| (dollars in thousands, except per share amounts) | Year Ended December 31, |  |  |
| --- | --- | --- | --- |
|  | 2022 | 2021 | 2020 |
| Interest Income |  |  |  |
| Interest and Fees on Loans and Leases | $439,798 | $398,616 | $417,498 |
| Income on Investment Securities |  |  |  |
| Available-for-Sale | 70,555 | 64,550 | 61,294 |
| Held-to-Maturity | 81,490 | 61,955 | 66,055 |
| Deposits | 32 | 10 | 14 |
| Funds Sold | 4,274 | 883 | 902 |
| Other | 1,217 | 702 | 661 |
| Total Interest Income | 597,366 | 526,716 | 546,424 |
| Interest Expense |  |  |  |
| Deposits | 39,678 | 15,216 | 32,966 |
| Securities Sold Under Agreements to Repurchase | 12,600 | 13,260 | 15,281 |
| Funds Purchased | 417 | 7 | 95 |
| Short-Term Borrowings | 2,070 | - | 62 |
| Other Debt | 2,043 | 943 | 1,698 |
| Total Interest Expense | 56,808 | 29,426 | 50,102 |
| Net Interest Income | 540,558 | 497,290 | 496,322 |
| Provision for Credit Losses | (7,800) | (50,500) | 117,800 |
| Net Interest Income After Provision for Credit Losses | 548,358 | 547,790 | 378,522 |
| Noninterest Income |  |  |  |
| Trust and Asset Management | 43,803 | 46,068 | 43,456 |
| Mortgage Banking | 5,980 | 14,964 | 17,871 |
| Service Charges on Deposit Accounts | 29,620 | 25,564 | 24,910 |
| Fees, Exchange, and Other Service Charges | 54,914 | 55,457 | 47,056 |
| Investment Securities Gains (Losses), Net | (6,111) | (1,297) | 9,932 |
| Annuity and Insurance | 3,782 | 3,224 | 3,362 |
| Bank-Owned Life Insurance | 9,968 | 7,784 | 7,388 |
| Other | 15,585 | 19,589 | 30,434 |
| Total Noninterest Income | 157,541 | 171,353 | 184,409 |
| Noninterest Expense |  |  |  |
| Salaries and Benefits | 235,270 | 228,293 | 207,329 |
| Net Occupancy | 39,441 | 26,244 | 39,533 |
| Net Equipment | 38,374 | 35,703 | 35,448 |
| Data Processing | 18,362 | 20,297 | 18,499 |
| Professional Fees | 14,557 | 12,895 | 12,186 |
| FDIC Insurance | 6,546 | 6,536 | 5,780 |
| Other | 62,715 | 63,621 | 55,032 |
| Total Noninterest Expense | 415,265 | 393,589 | 373,807 |
| Income Before Provision for Income Taxes | 290,634 | 325,554 | 189,124 |
| Provision for Income Taxes | 64,830 | 72,182 | 35,320 |
| Net Income | $225,804 | $253,372 | $153,804 |
| Preferred Stock Dividends | 7,877 | 2,975 | - |
| Net Income Available to Common Shareholders | $217,927 | $250,397 | $153,804 |
| Basic Earnings Per Common Share | $5.50 | $6.29 | $3.87 |
| Diluted Earnings Per Common Share | $5.48 | $6.25 | $3.86 |
| Dividends Declared Per Common Share | $2.80 | $2.74 | $2.68 |
| Basic Weighted Average Common Shares | 39,601,089 | 39,837,798 | 39,726,210 |
| Diluted Weighted Average Common Shares | 39,788,002 | 40,053,664 | 39,892,107 |

The accompanying notes are an integral part of the Consolidated Financial Statements.

53

# **Bank of Hawai'i Corporation and Subsidiaries**  
 **Consolidated Statements of Comprehensive Income**

| (dollars in thousands) | Year Ended December 31, |  |  |
| --- | --- | --- | --- |
|  | 2022 | 2021 | 2020 |
| Net Income | $225,804 | $253,372 | $153,804 |
| Other Comprehensive Income (Loss), Net of Tax: |  |  |  |
| Net Unrealized Gains (Losses) on Investment Securities | (376,694) | (83,958) | 43,428 |
| Defined Benefit Plans | 8,418 | 9,754 | (4,494) |
| Other Comprehensive Income (Loss) | (368,276) | (74,204) | 38,934 |
| Comprehensive Income (Loss) | $(142,472) | $179,168 | $192,738 |

The accompanying notes are an integral part of the Consolidated Financial Statements.

54

# **Bank of Hawai'i Corporation and Subsidiaries**  
 **Consolidated Statements of Condition**

| (dollars in thousands) | December 31, 2022 | December 31, 2021 |
| --- | --- | --- |
| Assets |  |  |
| Interest-Bearing Deposits in Other Banks | $3,724 | $2,571 |
| Funds Sold | 81,364 | 361,536 |
| Investment Securities |  |  |
| Available-for-Sale | 2,844,823 | 4,276,056 |
| Held-to-Maturity (Fair Value of $4,615,393 and $4,646,619) | 5,414,139 | 4,694,780 |
| Loans Held for Sale | 1,035 | 26,746 |
| Loans and Leases | 13,646,420 | 12,259,076 |
| Allowance for Credit Losses | (144,439) | (157,821) |
| Net Loans and Leases | 13,501,981 | 12,101,255 |
| Total Earning Assets | 21,847,066 | 21,462,944 |
| Cash and Due From Banks | 316,679 | 196,327 |
| Premises and Equipment, Net | 206,777 | 199,393 |
| Operating Lease Right-of-Use Assets | 92,307 | 95,621 |
| Accrued Interest Receivable | 61,002 | 45,242 |
| Foreclosed Real Estate | 1,040 | 2,332 |
| Mortgage Servicing Rights | 22,619 | 22,251 |
| Goodwill | 31,517 | 31,517 |
| Bank-Owned Life Insurance | 453,882 | 344,587 |
| Other Assets | 573,988 | 384,727 |
| Total Assets | $23,606,877 | $22,784,941 |
| Liabilities |  |  |
| Deposits |  |  |
| Noninterest-Bearing Demand | $6,714,982 | $7,275,287 |
| Interest-Bearing Demand | 4,232,567 | 4,628,567 |
| Savings | 7,962,410 | 7,456,165 |
| Time | 1,705,737 | 1,000,089 |
| Total Deposits | 20,615,696 | 20,360,108 |
| Securities Sold Under Agreements to Repurchase | 725,490 | 450,490 |
| Other Debt | 410,294 | 10,391 |
| Operating Lease Liabilities | 100,526 | 103,210 |
| Retirement Benefits Payable | 26,991 | 38,494 |
| Accrued Interest Payable | 9,698 | 2,499 |
| Taxes Payable | 7,104 | 11,901 |
| Other Liabilities | 394,083 | 196,237 |
| Total Liabilities | 22,289,882 | 21,173,330 |
| Commitments and Contingencies (Note 20 and Note 23) |  |  |
| Shareholders' Equity |  |  |
| Preferred Stock ($.01 par value; authorized 180,000 shares; issued and outstanding: December 31, 2022 and December 31, 2021 - 180,000) | 180,000 | 180,000 |
| Common Stock ($.01 par value; authorized 500,000,000 shares; issued / outstanding: December 31, 2022 - 58,733,625 / 39,835,750 and December 31, 2021 - 58,554,669 / 40,253,193) | 582 | 581 |
| Capital Surplus | 620,578 | 602,508 |
| Accumulated Other Comprehensive Loss | (434,658) | (66,382) |
| Retained Earnings | 2,055,912 | 1,950,375 |
| Treasury Stock, at Cost (Shares: December 31, 2022 - 18,897,875 and December 31, 2021 - 18,301,476) | (1,105,419) | (1,055,471) |
| Total Shareholders' Equity | 1,316,995 | 1,611,611 |
| Total Liabilities and Shareholders' Equity | $23,606,877 | $22,784,941 |

The accompanying notes are an integral part of the Consolidated Financial Statements.

55

# **Bank of Hawai'i Corporation and Subsidiaries**  
 **Consolidated Statements of Shareholders' Equity**

| (dollars in thousands except share amounts) | Preferred Shares Outstanding | Preferred Stock | Common Shares Outstanding | Common Stock | Capital Surplus | Accum. Other Comprehensive Income (Loss) | Retained Earnings | Treasury Stock | Total |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Balance as of December 31, 2019 | - | $ - | 40,039,695 | $579 | $582,566 | $(31,112) | $1,761,415 | $(1,026,616) | $1,286,832 |
| Net Income | - | - | - | - | - | - | 153,804 | - | 153,804 |
| Other Comprehensive Income | - | - | - | - | - | 38,934 | - | - | 38,934 |
| Cumulative Change in Accounting Principle | - | - | - | - | - | - | 3,632 | - | 3,632 |
| Share-Based Compensation | - | - | - | - | 7,577 | - | - | - | 7,577 |
| Common Stock Issued under Purchase and Equity Compensation Plans | - | - | 283,482 | 1 | 1,217 | - | 562 | 7,388 | 9,168 |
| Common Stock Repurchased | - | - | (203,865) | - | - | - | - | (18,006) | (18,006) |
| Cash Dividends Declared Common Stock ($2.68 per share) | - | - | - | - | - | - | (107,434) | - | (107,434) |
| Balance as of December 31, 2020 | - | $ - | 40,119,312 | $580 | $591,360 | $7,822 | $1,811,979 | $(1,037,234) | $1,374,507 |
| Net Income | - | - | - | - | - | - | 253,372 | - | 253,372 |
| Other Comprehensive Loss | - | - | - | - | - | (74,204) | - | - | (74,204) |
| Share-Based Compensation | - | - | - | - | 13,267 | - | - | - | 13,267 |
| Preferred Stock Issued, Net | 180,000 | 180,000 | - | - | (4,513) | - | - | - | 175,487 |
| Common Stock Issued under Purchase and Equity Compensation Plans | - | - | 507,121 | 1 | 2,394 | - | (1,368) | 13,021 | 14,048 |
| Common Stock Repurchased | - | - | (373,240) | - | - | - | - | (31,258) | (31,258) |
| Cash Dividends Declared Common Stock ($2.74 per share) | - | - | - | - | - | - | (110,633) | - | (110,633) |
| Cash Dividends Declared Preferred Stock | - | - | - | - | - | - | (2,975) | - | (2,975) |
| Balance as of December 31, 2021 | 180,000 | $180,000 | 40,253,193 | $581 | $602,508 | $(66,382) | $1,950,375 | $(1,055,471) | $1,611,611 |
| Net Income | - | - | - | - | - | - | 225,804 | - | 225,804 |
| Other Comprehensive Loss | - | - | - | - | - | (368,276) | - | - | (368,276) |
| Share-Based Compensation | - | - | - | - | 16,066 | - | - | - | 16,066 |
| Common Stock Issued under Purchase and Equity Compensation Plans | - | - | 272,007 | 1 | 2,004 | - | 167 | 5,115 | 7,287 |
| Common Stock Repurchased | - | - | (689,450) | - | - | - | - | (55,063) | (55,063) |
| Cash Dividends Declared Common Stock ($2.80 per share) | - | - | - | - | - | - | (112,557) | - | (112,557) |
| Cash Dividends Declared Preferred Stock | - | - | - | - | - | - | (7,877) | - | (7,877) |
| Balance as of December 31, 2022 | 180,000 | $180,000 | 39,835,750 | $582 | $620,578 | $(434,658) | $2,055,912 | $(1,105,419) | $1,316,995 |

The accompanying notes are an integral part of the Consolidated Financial Statements.

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# **Bank of Hawai'i Corporation and Subsidiaries**  
 **Consolidated Statements of Cash Flows**

|  | Year Ended December 31, |  |  |
| --- | --- | --- | --- |
| (dollars in thousands) | 2022 | 2021 | 2020 |
| Operating Activities |  |  |  |
| Net Income | $225,804 | $253,372 | $153,804 |
| Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities: |  |  |  |
| Provision for Credit Losses | (7,800) | (50,500) | 117,800 |
| Depreciation and Amortization | 21,377 | 21,084 | 20,205 |
| Amortization of Deferred Loans and Leases Fees, Net | (215) | (16,728) | (3,197) |
| Amortization and Accretion of Premiums/Discounts on Investment Securities, Net | 20,824 | 36,488 | 27,586 |
| Amortization of Operating Lease Right-of-Use-Assets | 11,843 | 11,493 | 12,281 |
| Share-Based Compensation | 16,066 | 13,267 | 7,578 |
| Benefit Plan Contributions | (1,679) | (1,687) | (1,615) |
| Deferred Income Taxes | (2,713) | 3,020 | (42,586) |
| Gains on Sale of Premises and Equipment | - | (8,655) | (1,850) |
| Loss on Agreement to Sell Assets That Will Terminate Certain Leveraged Leases | 6,918 | - | - |
| Impairment on Leveraged Lease | - | - | 2,951 |
| Impairment on In-Store Branches Closures and ATMs | - | - | 4,168 |
| Net Gains on Sales of Loans and Leases | (4,100) | (14,889) | (12,875) |
| Net (Gains) Losses on Investment Securities | 6,111 | 1,297 | (9,932) |
| Proceeds from Sales of Loans Held for Sale | 133,715 | 508,199 | 394,196 |
| Originations of Loans Held for Sale | (106,965) | (408,210) | (394,649) |
| Net Tax Benefits from Share-Based Compensation | 166 | 1,611 | 485 |
| Net Change in Other Assets and Other Liabilities | 13,608 | 27,989 | (127,934) |
| Net Cash Provided by Operating Activities | 332,960 | 377,151 | 146,416 |
| Investing Activities |  |  |  |
| Investment Securities Available-for-Sale: |  |  |  |
| Proceeds from Sales, Prepayments and Maturities | 677,087 | 1,487,043 | 1,003,432 |
| Purchases | (1,058,922) | (2,100,693) | (2,114,912) |
| Investment Securities Held-to-Maturity: |  |  |  |
| Proceeds from Prepayments and Maturities | 645,463 | 1,221,585 | 1,420,853 |
| Purchases | (91,229) | (2,676,376) | (1,661,180) |
| Net Change in Loans and Leases | (1,397,056) | (342,767) | (990,169) |
| Premises and Equipment, Net | (28,761) | (22,372) | (33,287) |
| Proceeds from Sale of Premises and Equipment | - | 10,246 | 1,981 |
| Net Cash Used in Investing Activities | (1,253,418) | (2,423,334) | (2,373,282) |
| Financing Activities |  |  |  |
| Net Change in Deposits | 255,588 | 2,148,487 | 2,427,147 |
| Net Change in Short-Term Borrowings | 275,000 | (150,100) | (3,716) |
| Proceeds from Other Debt | 400,000 | - | 50,000 |
| Repayments of Other Debt | (97) | (50,090) | (75,084) |
| Proceeds from Issuance of Preferred Stock | - | 175,487 | - |
| Proceeds from Issuance of Common Stock | 6,797 | 13,611 | 9,389 |
| Repurchase of Common Stock | (55,063) | (31,258) | (18,006) |
| Cash Dividends Paid on Common Stock | (112,557) | (110,633) | (107,434) |
| Cash Dividends Paid on Preferred Stock | (7,877) | (2,975) | - |
| Net Cash Provided by Financing Activities | 761,791 | 1,992,529 | 2,282,296 |
| Net Change in Cash and Cash Equivalents | (158,667) | (53,654) | 55,430 |
| Cash and Cash Equivalents at Beginning of Period | 560,434 | 614,088 | 558,658 |
| Cash and Cash Equivalents at End of Period | $401,767 | $560,434 | $614,088 |
| Supplemental Information |  |  |  |
| Cash Paid for Interest | $49,609 | $32,044 | $53,026 |
| Cash Paid for Income Taxes | 53,025 | 48,764 | 60,182 |
| Non-Cash Investing and Financing Activities: |  |  |  |
| Transfer of Investment Securities from Available-for-Sale to Held-to-Maturity | 1,275,043 | - | - |
| Transfers from Loans to Loans Held for Sale | 380 | 34,647 | 32,423 |

The accompanying notes are an integral part of the Consolidated Financial Statements.

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# Note 1. Summary of Significant Accounting Policies

### *Basis of Presentation*

Bank of Hawai‘i Corporation (the “Parent”) is a Delaware corporation and a bank holding company headquartered in Honolulu, Hawaii. Bank of Hawai‘i Corporation and its subsidiaries (collectively, the “Company”) provide a broad range of financial products and services to customers in Hawaii, Guam, and other Pacific Islands. The majority of the Company’s operations consist of customary commercial and consumer banking services including, but not limited to, lending, leasing, deposit services, trust and investment activities, brokerage services, and trade financing.

The accounting and reporting principles of the Company conform to U.S. generally accepted accounting principles (“GAAP”) and prevailing practices within the financial services industry. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts in the financial statements and accompanying notes. Actual results may differ from those estimates and such differences could be material to the financial statements.

Certain prior period information has been reclassified to conform to the current year presentation.

The following is a summary of the Company’s significant accounting policies:

### *Consolidation*

The accompanying consolidated financial statements include the accounts of the Parent and its subsidiaries. The Parent’s principal operating subsidiary is Bank of Hawai‘i (the “Bank”). All significant intercompany accounts and transactions have been eliminated in consolidation.

### *Variable Interest Entities*

Variable interests are defined as contractual ownership or other interests in an entity that change with fluctuations in an entity’s net asset value. The primary beneficiary consolidates the variable interest entity (“VIE”). The primary beneficiary is defined as the enterprise that has both the power to direct the activities of the VIE that most significantly impact the entity’s economic performance and the obligation to absorb losses or the right to receive benefits that could be significant to the VIE.

The Company has limited partnership interests in several low-income housing partnerships. These partnerships provide funds for the construction and operation of apartment complexes that provide affordable housing to lower-income households. If these developments successfully attract a specified percentage of residents falling in that lower income range, state and/or federal income tax credits are made available to the partners. The tax credits are generally recognized over 10 years for federal and 5 years for state. In order to continue receiving the tax credits each year over the life of the partnership, the low-income residency targets must be maintained.

Unfunded commitments to fund these low-income housing partnerships were $88.8 million and $44.0 million as of December 31, 2022, and December 31, 2021, respectively. These unfunded commitments are unconditional and legally binding and are recorded in other liabilities in the consolidated statements of condition. See Note 18 *Affordable Housing Projects Tax Credit Partnerships* for more information.

The Company also has limited partnership interests in solar energy tax credit partnership investments. These partnerships develop, build, own and operate solar renewable energy projects. Over the course of these investments, the Company expects to receive federal and state tax credits, tax-related benefits, and excess cash available for distribution, if any. The Company may be called to sell its interest in the limited partnerships through a call option once all investment tax credits have been recognized. Tax benefits associated with these investments are generally recognized over 6 years.

Although these entities meet the definition of a VIE, the Company is not the primary beneficiary of the entities, as the general partner has both the power to direct the activities that most significantly impact the economic performance of the entities and the obligation to absorb losses or the right to receive benefits that could be significant to the entities. While the partnership agreements allow the limited partners, through a majority vote, to remove the general partner, this right is not deemed to be substantive as the general partner can only be removed for cause.

The investments in these entities are initially recorded at cost, which approximates the maximum exposure to loss as a result of the Company’s involvement with these unconsolidated entities. The balance of the Company’s investments in these entities was $175.3 million and $136.6 million as of December 31, 2022, and December 31, 2021, respectively, and is included in other assets in the consolidated statements of condition.

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