HOPE BANCORP INC (HOPE)

Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”)

The following discussion and analysis should be read in conjunction with Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the year ended December 31, 2025 and the unaudited Consolidated Financial Statements and Notes set forth elsewhere in this Quarterly Report on Form 10-Q.

GENERAL

Hope Bancorp, Inc. is the holding company of Bank of Hope, the only regional Korean American bank in the United States with $18.66 billion in total assets at March 31, 2026. With the addition of Territorial Savings, a division of Bank of Hope, effective April 2, 2025, the Company became the largest regional bank catering to multicultural customers across the continental United States and Hawaii. Headquartered in Los Angeles, the Bank provides a full suite of commercial, corporate and consumer loans, deposit and fee-based products and services, including commercial and commercial real estate lending, SBA lending, residential mortgage and other consumer lending, treasury management services, foreign currency exchange solutions, interest rate derivative products, and international trade financing, among others. The Bank operates 45 full-service branches in California, New York, New Jersey, Washington, Texas, Illinois, Georgia and Alabama under the Bank of Hope banner, and 28 branches in Hawaii under the Territorial Savings banner. The Bank also operates SBA loan production offices, commercial loan production offices, and residential mortgage loan production offices throughout the United States, and a representative office in Seoul, South Korea. Bank of Hope is a California-chartered bank, and its deposits are insured by the FDIC to the extent provided by law. Bank of Hope is an Equal Opportunity Lender.

The Bank’s principal business involves earning interest on loans and investment securities, primarily funded by deposits and borrowings. Operating income and net income are derived primarily from the difference between interest income received from interest earning assets and interest expense paid on interest bearing liabilities and, to a lesser extent, from fees received in connection with servicing loan and deposit accounts, providing fee-based products and services, and income from the sale of loans. Major expenses are the interest paid on deposits and borrowings, provisions for credit losses and general operating expenses, which primarily consist of salaries and employee benefits, occupancy costs, and other operating expenses. Interest rates are highly sensitive to many factors that are beyond our control, such as changes in the national economy and in the related monetary policies of the FRB, inflation, unemployment, consumer spending, tariffs, political changes, and other events. We cannot predict the impact that these factors and future changes in domestic and foreign economic and political conditions might have on our business, financial condition, and results of operations.

60

Selected Financial Data

The following tables set forth a performance overview concerning the periods indicated and should be read in conjunction with the unaudited Consolidated Financial Statements and Notes set forth elsewhere in this Quarterly Report on Form 10-Q and the following Results of Operations and Financial Condition sections of this MD&A. The comparability of our operating results for the three months ended March 31, 2026, with past performance was impacted by acquisition accounting adjustments and merger-related expenses associated with the 2025 Territorial Merger. We have provided supplemental non-GAAP information to facilitate a better understanding of financial performance, identifying certain items as “notable”.

61

_____________________________________________

(1)Net income excluding notable items, earnings per common share - diluted excluding notable items, TCE per share, ROTCE, ROA excluding notable items, ROE excluding notable items, ROTCE excluding notable items, efficiency ratio excluding notable items, and TCE ratio are non-GAAP financial measures that we believe provide investors with information useful in understanding our operating results and financial condition. A quantitative reconciliation of the most directly comparable GAAP to non-GAAP financial measures is provided on the following pages.

(2)Annualized.

(3)Net interest margin is calculated by dividing annualized net interest income by average total interest earning assets.

(4)Efficiency ratio is defined as noninterest expense divided by the sum of net interest income and noninterest income.

(5)The ratios generally required to meet the definition of a “well-capitalized” financial institution under certain banking regulations are 5.0% leverage capital ratio, 6.5% common equity tier 1 capital ratio, 8.0% tier 1 capital ratio, and 10.0% total capital ratio.

(6)Calculations are based on quarterly average asset balances.

62

Non-GAAP Financial Measurements

We provide certain non-GAAP financial measures that we believe provide investors with meaningful supplemental information that is useful in understanding our operating results and financial condition. The methodologies for calculating non-GAAP measures may differ among companies. The following tables reconcile the non-GAAP financial measures used in this Form 10-Q to the most comparable GAAP performance measures. The non-GAAP financial measures provide information useful to investors in understanding our operating performance and trends and assist in comparing our results with the performance of our peers.

During the three months ended March 31, 2026 and 2025, our operating results included certain notable items as a result of the 2025 Merger with Territorial and other items. The following table summarizes the impact of non-core notable items recorded for the periods indicated and reconciles them to the most directly comparable GAAP financial measure.

_____________________________________________

(1)Non-GAAP financial measures.

63

[[GREPCENT_TABLE]]
[["","","","Three Months Ended March 31,"],["","","","","","2026","","2025"],["","","","","","(Dollars in thousands)"],["Noninterest expense","","","","","$","94,455","","","$","83,861"],["Notable items:"],["FDIC special assessment (reversal)","","","","","58","","","\u2014"],[

[Excerpt truncated for page length; source filing is linked above.]

Item 7.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of our financial condition and results of operations should be read together with our Consolidated Financial Statements and accompanying notes presented elsewhere in this Report. This discussion and analysis contains forward-looking statements that involve risks, uncertainties, and assumptions. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of many factors, including those set forth under Item 1A “Risk Factors” and elsewhere in this Report. Please see the “Forward Looking Information” immediately preceding Part I of this Report.

Overview

Our principal business involves earning interest on loans and investment securities that are funded primarily by customer deposits, wholesale deposits, and other borrowings. Our operating income and net income are derived primarily from the difference between interest income received from interest earning assets and interest expense paid on interest bearing liabilities and, to a lesser extent, from fees received in connection with servicing loan and deposit accounts and income from the sale of loans. Our major expenses are the interest we pay on deposits and borrowings, provisions for credit losses, and general operating expenses, which primarily consist of salaries and employee benefits, occupancy costs, and other operating expenses. Interest rates are highly sensitive to many factors that are beyond our control, such as changes in the national economy and in the related monetary policies of the FRB, inflation, unemployment, consumer spending, and political changes and events. We cannot predict the impact that these factors and future changes in domestic and foreign economic and political conditions might have on our performance.

Our results are affected by economic conditions in our markets and to a lesser degree in South Korea. A decline in economic and business conditions in our market areas or in South Korea may have a material adverse impact on the quality of our loan portfolio or the demand for our products and services, which in turn may have a material adverse effect on our financial condition and results of operations.

The Company completed its acquisition of Honolulu-based Territorial, the holding company of Territorial Savings Bank, effective April 2, 2025. With the acquisition of Territorial Savings, a division of Bank of Hope, the Company became the largest regional bank catering to multicultural customers across the continental United States and Hawaii.

30

Selected Financial Data

The following table presents selected financial and other data for each of the years in the five-year period ended December 31, 2025. The information below should be read in conjunction with the more detailed information included elsewhere herein, including our Audited Consolidated Financial Statements and Notes thereto. The comparability of our operating results for the year ended December 31, 2025, with past performance was impacted by acquisition accounting adjustments and merger-related expenses associated with the acquisition of Territorial Bancorp Inc. and the loss on securities sold as a result of repositioning of a portion of our investment securities. The Company has provided supplemental non-GAAP information to facilitate a better understanding of financial performance, identifying certain items as “notable”. There were no notable items for the years ended December 31, 2022 and 2021.

31

32

______________________________

(1)    Net income excluding notable items, earnings per common share - diluted excluding notable items, TCE per share, ROTCE, ROA excluding notable items, ROE excluding notable items, ROTCE excluding notable items, efficiency ratio excluding notable items, and TCE ratio are non-GAAP financial measures that we believe provide investors with information useful in understanding our operating results and financial condition. A quantitative reconciliation of the most directly comparable GAAP to non-GAAP financial measures is provided on the following pages.

(2)    Net income divided by average assets.

(3)    Net income divided by average stockholders’ equity.

(4)    Net interest income divided by average interest earning assets.

(5)    Interest income divided by average interest earning assets.

(6)    Interest expense divided by average interest bearing liabilities.

(7)    Noninterest expense divided by the sum of net interest income plus noninterest income.

(8)    The ratios generally required to meet the definition of a “well-capitalized” financial institution under certain banking regulations are 5.0% leverage capital ratio, 6.5% common equity tier 1 capital ratio, 8.0% tier 1 capital ratio, and 10.0% total capital ratio.

(9)    Excludes delinquent SBA loans that are guaranteed and currently in liquidation.

(10)    We adopted ASU 2022-02 on January 1, 2023, which eliminated the concept of TDR loans from GAAP. Prior to January 1, 2023, nonperforming loans included accruing TDR loans.

(11)    Nonperforming assets consist of nonperforming loans and OREO. Prior to January 1, 2023, nonperforming loans included accruing TDR loans.

33

Non-GAAP Financial Measurements

We provide certain non-GAAP financial measures that we believe provide investors with meaningful supplemental information that is useful in understanding our operating results and financial condition. The methodologies for calculating non-GAAP measures may differ among companies. The following tables reconcile the non-GAAP financial measures used in this Form 10-K to the most comparable GAAP performance measures. The non-GAAP financial measures provide information that may be useful to investors in understanding our operating performance and trends and assist in comparing our results with the performance of our peers.

Tangible book value per common share is calculated by subtracting goodwill and core deposit intangible assets from total stockholders’ equity, then dividing the difference by the number of shares of common stock outstanding. TCE ratio is calculated by subtracting goodwill and core deposit intangible assets from total stockholders’ equity, then dividing the difference by total assets after subtracting goodwill and core deposit intangible assets.

Return on average tangible common equity is calculated by dividing net income for the period by average stockholders’ equity for the period after subtracting average goodwill and core deposit intangible assets for the period from average stockholders’ equity.

________________________________

(1)Non-GAAP financial measures.

34

During the years ended December 31, 2025, 2024 and 2023, our operating results included certain notable items as a result of the Merger with Territorial, our investment securities repositioning, strategic restructuring, the change in the California state tax apportionment rate, and other items. The following table summarizes the impact of non-core notable items recorded for the periods indicated and reconciles them to the most directly comparable GAAP financial measure. There were no notable items for the years ended December 31, 2022 and 2021.

_____________________________________________

(1)Non-GAAP financial measures.

35

Critical Accounting Policies

Our financial statements are prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) and generally accepted practices within the banking industry. The financial information contained within these statements is, to a significant extent, financial information that is based on approximate measures of the financial effects of transactions and events that have already occurred. All of our significant accounting policies are described in Note 1 of our Notes to Consolidated Financial Statements presented elsewhere in this Report and are essential to understanding Management’s Discussion and Analysis of Financial Condition and Results of Operations. GAAP requires management to make estimates and judgments that affect the reported amounts of assets and liabilities, revenues and expenses, and related disclosures of contingent assets and liabilities at the date of our financial statements. Actual results may materially and adversely differ from these estimates under different assumptions or conditions.

The following is a summary of the more subjective and complex accounting estimates and judgments affecting the financial condition and results reported in our financial statements. In each area, we have identified the variables we believe to be the most important in the estimation process. We use the best information available to us to make the estimations necessary to value the related assets and liabilities in each of these areas. Management has reviewed these critical accounting estimates and related disclosures with our Audit Committee.

Investment Securities

Description - We evaluate investment securities AFS and HTM for impairment related to credit losses on at least a quarterly basis. Based on our evaluation, we do not believe that we had any investment securities AFS or HTM with a credit loss impairment as of December 31, 2025. Investment securities are discussed in more detail under “Financial Condition - Investment Securities Portfolio.”

Subjective Estimates and Judgments - Significant judgment is involved in determining when an investment securities AFS decline in fair value is credit impaired. Investment securities AFS in unrealized loss positions are first assessed as to whether we intend to sell, or if it is more likely than not that we will be required to sell the security before recovery of its amortized cost basis. If one of the criteria is met, the security’s amortized cost basis is written down to fair value through current earnings. We then apply a zero credit loss assumption to investment securities issued by the U.S. government or government-sponsored enterprises. For other securities that do not meet these criteria, we evaluate whether the decline in fair value resulted from credit losses or other factors. In evaluating whether a credit loss exists, we set up an initial filter for impairment triggers. Once the quantitative filters have been triggered, the securities are placed on a watch list and an additional assessment is performed to identify whether credit impairment exists. In making this assessment, management considers the extent to which fair value is less than amortized cost, any changes to the rating of the security by a rating agency, and adverse conditions specifically related to the security and the issuer, among other factors.

The investment securities HTM as of December 31, 2025, were all issued by the U.S. government or government-sponsored enterprises and therefore the Company applied a zero credit loss assumption.

Impact if Actual Results Differ From Estimates and Judgments - Changes in management’s assessment of the factors used to determine if an investment security is credit impaired could lead to additional impairment charges. Additionally, a security that had no apparent risk could be affected by a sudden or acute change in market condition and necessitate an impairment charge.

Allowance for Credit Losses

Description - The allowance for credit losses is maintained at a level believed to be adequate by management to absorb expected lifetime credit losses in the loan portfolio as of the date of the consolidated financial statements. The adequacy of the allowance for credit losses is determined by management based upon an evaluation and review of the credit quality of the loan portfolio, consideration of current and projected economic conditions and variables, historical loss experience, relevant internal and external factors that affect the collection of a loan, and other pertinent factors.

The allowance for credit losses is discussed in more detail under “Financial Condition - Allowance for Credit Losses.”

Subjective Estimates and Judgments - We determine the adequacy of the allowance for credit losses by analyzing and estimating lifetime expected credit losses in the loan portfolio. The allowance for credit losses is determined utilizing quantitative and qualitative loss factors.

36

Included in the quantitative portion of our analysis of the allowance for credit losses are key inputs including borrowers’ net operating income, debt coverage ratios, and real estate collateral values, as well as key inputs that are more subjective or require management’s judgment including key macroeconomic variables from Moody’s forecast scenarios including GDP, unemployment rates, interest rates, and commercial real estate prices. These key inputs are utilized in our models to develop probability of default (“PD”) and loss given default (“LGD”) assumptions used in the calculation of estimated quantitative losses. The key macroeconomic variables were derived from Moody’s consensus scenario as of December 31, 2025 and 2024.

Certain key macroeconomic variable inputs used in the calculation of our allowance for credit losses experienced a change between projections as of December 31, 2024 versus projections as of December 31, 2025. While GDP growth rates remained relatively flat, unemployment rates showed a slight increase and the CRE price index growth rates showed a decline at December 31, 2025, compared with December 31, 2024. Changes in the key macroeconomic variables are presented in the tables below.

Moody's consensus projected key macroeconomic variable inputs as of December 31, 2025:

__________________________________

* Represents year over year growth rates.

Moody's consensus projected key macroeconomic variable inputs as of December 31, 2024:

__________________________________

* Represents year over year growth rates.

In addition to an estimate of quantitatively derived losses, our allowance for credit losses also includes an estimate of qualitatively derived losses to account for risks not fully captured by the quantitative calculation of estimated credit losses. At December 31, 2025, the qualitative portion of our allowance for credit losses totaled $32.0 million compared with $50.1 million at December 31, 2024. The qualitative portion of our allowance for credit losses is determined by management and takes into consideration factors related to changes to lending policies, changes in the nature and volume of loans, risks related to lending management, changes to the volume and severity of past due and nonaccrual loans, changes in the quality of loan review, concentrations of credit, and other external factors. Some of these factors are more subjective than others and require significant judgment from management to determine estimated losses.

Impact if Actual Results Differ From Estimates and Judgments - Adverse changes in management’s assessment of the assumptions and key inputs used to determine the allowance for credit losses could lead to increases in the allowance for credit losses through additional provisions for credit losses. If actual losses and conditions differ materially from the assumptions used to determine the allowance for credit losses, our actual credit losses could differ materially from management’s estimates.

37

Moody’s consensus forecast assumes that the probability that the economy will perform better than the consensus estimates is equal to the probability that it will perform worse. A sensitivity analysis of our allowance for credit losses was performed by estimating credit losses using the Moody’s S2 scenario as of December 31, 2025, which has a more negative outlook on the economy compared with the Moody’s consensus scenario. The S2 scenario includes assumptions including worse than expected impact to the economy from the Trump’s administration’s tariffs and deportations, increased concerns over Russia’s invasion of Ukraine and China’s blockage of the Taiwan Strait, decline in the U.S. stock market, and declines in European economies. Incorporating key macroeconomic inputs from Moody’s S2 projected scenario in our calculation of the allowance for credit losses resulted in additional allowance for credit losses of approximately $30.4 million compared with the results using the Moody’s consensus forecast as of December 31, 2025. Management reviews the results using the comparison scenario for sensitivity analysis and considered the results when evaluating the qualitative factor adjustments.

While management believes that it has established adequate allowances for lifetime credit losses on loans, actual results may prove different, and the differences could be material.

Goodwill

Description - Goodwill is generally determined as the excess of the fair value of the consideration paid over the fair value of the net assets acquired and liabilities assumed as of the acquisition date. Goodwill recorded in a purchase business combination is determined to have an indefinite useful life and is not amortized but tested for impairment at least annually. Goodwill may also be tested for impairment on an interim basis if circumstances change or an event occurs between annual tests that would more likely than not reduce the fair value of the reporting unit below its carrying amount. The Company is managed as a single combined operating segment. An impairment loss must be recognized for any excess of carrying value over fair value of the goodwill.

Subjective Estimates and Judgments - Before applying the goodwill impairment test, in accordance with ASC 350 “Intangibles - Goodwill and Other”, we perform a qualitative assessment of whether it is more likely than not that a reporting unit’s fair value is less than its carrying amount. If we conclude that it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, we do not perform Step 1 of the impairment analysis. We assess certain qualitative factors to determine whether impairment is likely including: our market capitalization, capital adequacy, continued performance compared to peers, and continued improvement in asset quality trends, among others. This qualitative assessment can be subjective in nature and includes a certain amount of management judgment in determining whether it is more likely than not that a reporting unit’s fair value is less than its carrying amount.

In the event we perform an impairment test, the determination of fair value is based on a combination of valuation techniques which include the income approach using the discounted cash flow method and market approach using the guideline public company method and guideline transaction method. These valuation approaches incorporate management assumptions and estimates including developing cash flow projections, selecting appropriate discount rates, calculation of a terminal growth rate, minimum target capitalization levels, identifying relevant market comparables, incorporating current and projected economic conditions, and selecting an appropriate control premium.

Impact if Actual Results Differ From Estimates and Judgments - Changes in qualitative factors assessed, changes to assumptions used in the impairment test, selection and weighting of the various fair value techniques, and downturns in economic or business conditions, could have a significant adverse impact on the carrying value of goodwill and could result in impairment losses which could have a material impact in our financial condition and earnings. We did not perform a quantitative test for the year ended December 31, 2025, as we performed a qualitative analysis that indicated that goodwill was more than likely not impaired.

Goodwill is discussed in more detail in Note 6 to our Notes to Consolidated Financial Statements presented in this Report.

Income Taxes

Description - We use the asset and liability method of accounting for income taxes in which deferred tax assets and liabilities are established for the temporary differences between the financial reporting basis and the tax basis of our asset and liabilities. The realization of the net deferred tax asset generally depends upon future levels of taxable income and the existence of prior years’ taxable income, to which “carry back” refund claims could be made. A valuation allowance is maintained, when necessary, to reduce deferred tax assets that management estimates are more likely than not to be unrealizable based on available evidence at the time the estimate is made. Furthermore, tax positions that could be deemed uncertain are required to be disclosed and reserved for if it is more likely than not that the position would not be sustained upon audit examination. Taxes are discussed in more detail in Note 18 to our Notes to Consolidated Financial Statements presented in this Report.

38

Subjective Estimates and Judgments - Significant management judgment is required in determining income tax expense and deferred tax assets and liabilities. Some judgments are subjective and involve estimates and assumptions about matters that are inherently uncertain. In determining the valuation allowance, we use historical and forecasted future operating results. In determining the level of reserve needed for uncertain tax positions, we consider relevant current legislation and court rulings, among other authoritative items, to determine the level of exposure inherent in our tax positions. Management believes that the accounting estimate related to the valuation allowance and uncertain tax positions are a critical accounting estimate because the underlying assumptions can change from period to period.

Impact if Actual Results Differ From Estimates and Judgments - Although management believes that the judgments and estimates used are reasonable, should actual factors and conditions differ materially from those considered by management, the actual realization of the net deferred tax asset and tax positions taken could differ materially from the amounts recorded in the financial statements. If we are not able to realize all or part of our net deferred tax asset in the future or if a tax position is overturned by a taxing authority, an adjustment to the deferred tax asset valuation allowance would be charged to income tax expense in the period such determination was made which could have a material impact on our earnings.

Business Combinations

Description - We account for business combinations using the purchase method of accounting in accordance with FASB ASC Topic 805, Business Combinations, which requires assets acquired and liabilities assumed to be recognized at fair value as of the acquisition date. The excess of purchase price over the fair value of assets acquired and liabilities assumed is recorded as goodwill. Significant estimates and judgments are involved in the fair valuation process. Loans acquired through business combinations have historically comprised the majority of purchase accounting adjustments in arriving at the fair values of acquired assets and liabilities. Loans acquired in a business combination are recorded at fair value with no carry-over of any allowance for credit losses. With our early adoption of ASU 2025-08 in 2025, loans are categorized as Purchase Credit Deteriorated (“PCD”) or Purchased Seasoned Loans (“PSL”). PCD loans are defined as loans that have experienced more than insignificant credit deterioration since origination and PSL loans are defined as non-PCD loans that are 1) are obtained in an asset acquisition or upon consolidation of a variable interest entity that is not a business and 2) are acquired more than 90 days after their origination date by a transferee that was not involved in their origination. All other acquired loans are categorized as non-PCD loans.

Subjective Estimates and Judgments - Significant judgment is involved in determining the fair value of loans acquired in a business combination. Determining the fair value of acquired loans involves estimating the principal and interest cash flows expected to be collected and discounting the cash flows at a market rate of interest. Management considers a number of factors in evaluating the fair value of acquired loans including the remaining life of the acquired loans, current and historical delinquency status, probability of default, estimated prepayments, foreclosure lag, risk rating, estimated value of the underlying collateral, and interest rate environment.

Impact if Actual Results Differ From Estimates and Judgments - Changes in management’s assumptions can have a material impact on the estimated fair value of acquired loans, and as a result, goodwill or bargain purchase gain recorded in a business combination.

Business Combinations is discussed in more detail in Note 19 to our Notes to Consolidated Financial Statements presented in this Report.

39

Results of Operations

Operations Summary

Our most significant source of income is net interest income, which is the difference between our interest income and our interest expense. Generally, interest income is generated from the loans we extend to our customers, our investments and interest earning cash, and interest expense is generated from interest bearing deposits our customers have with us and from our borrowings or debt. Our ability to generate profitable levels of net interest income is largely dependent on our ability to manage the levels of interest earning assets and interest bearing liabilities, and the rates received or paid on them, as well as our ability to maintain sound asset quality and appropriate levels of capital and liquidity. As mentioned above, interest income and interest expense may fluctuate based on factors beyond our control, such as economic or political conditions and policies.

We attempt to minimize the effect of interest rate fluctuations on net interest margin by monitoring our interest sensitive assets and our interest sensitive liabilities. Net interest income can be affected by a change in the composition of assets and liabilities, such as replacing higher yielding loans with a like amount of lower yielding investment securities. Changes in the level of nonaccrual loans and changes in volume and interest rates can also affect net interest income.

Our other source of income is noninterest income, including service charges and fees on deposit accounts, net gains on sale of loans that were held for sale and investment securities AFS, and other income and fees.

Our expenses consist of interest expense, the provisions for credit losses, and noninterest expenses, which are primarily salaries and benefits and occupancy expense. The following table presents our Condensed Consolidated Statements of Income and the changes year over year.

Net Income

Our net income was $61.6 million for 2025 compared with $99.6 million for 2024 and $133.7 million for 2023. Our diluted earnings per common share totaled $0.49, $0.82, and $1.11 for the years 2025, 2024, and 2023, respectively. The return on average assets was 0.34%, 0.56%, and 0.67% and the return on average stockholders’ equity was 2.77%, 4.68%, and 6.48% for the years 2025, 2024, and 2023, respectively. 2025’s results included an aggregate $51.8 million of notable items, net of taxes, that impacted the comparability of the Company’s operating results with past performance. Notable items for the year ended December 31, 2025, included a net loss on sales of securities from an investment securities repositioning, merger-related items, and income tax expense from the change in California’s state tax apportionment law. Net income, excluding notable items for 2025 was $113.3 million, or $0.89 per diluted common share, compared with net income of $103.4 million, or $0.85 per diluted share, for 2024. The decrease in net income for 2024 compared with 2023 was primarily due to a decrease in net interest income, offset partially by decreases in provision for credit losses and noninterest expense.

See the “Overview” section of this MD&A for a reconciliation of GAAP to non-GAAP financial measures.

40

Net Interest Margin and Net Interest Rate Spread

We analyze our earnings performance using, among other measures, net interest spread and net interest margin. The net interest spread represents the difference between the weighted average yield earned on interest earning assets and the weighted average rate paid on interest bearing liabilities. Net interest income, when expressed as a percentage of average total interest earning assets, is referred to as the net interest margin. Our net interest margin is affected by changes in the yields earned on assets and rates paid on liabilities, as well as the ratio of the amounts of interest earning assets to interest bearing liabilities.

Interest rates charged on our loans are affected principally by the demand for such loans, the supply of money available for lending purposes, the interest rate environment, and other competitive factors. These factors are in turn affected by general economic conditions and other factors beyond our control, such as federal economic policies, the general supply of money in the economy, legislative tax policies, government budgetary matters, and the actions of the FRB.

41

The following tables present our consolidated daily average balance of major assets and liabilities, together with interest rates earned and paid on the various sources and uses of funds for the periods indicated:

______________________________

(1)    Interest income on loans includes accretion of net deferred loan origination fees and costs, prepayment fees received on loan payoffs and accretion of discounts on acquired loans. See the table below for detail.

(2)    Average balances of loans are net of deferred loan origination fees and costs and include nonaccrual loans and loans held for sale.

(3)    Interest income and yields are not presented on a tax-equivalent basis.

(4)    Yield on interest earning assets minus cost of interest bearing liabilities.

(5)    Cost on interest bearing liabilities and noninterest bearing deposits.

42

The following table presents net loan origination fees, loan prepayment fee income, interest reversed for nonaccrual loans, and discount accretion income included as part of loan interest income for the years indicated:

The following table summarizes the accretion and amortization adjustments resulting from the Merger with Territorial that were included in net interest income for the twelve months ended months ended December 31, 2025 and 2024:

Net Interest Income

Net interest income was $472.2 million for 2025, compared with $427.9 million for 2024 and $525.9 million for 2023. Changes in net interest income are a function of changes in interest rates and volumes of interest earning assets and interest bearing liabilities. The table below sets forth information regarding the changes in interest income and interest expense for the periods indicated. The total change for each category of interest earning assets and interest bearing liabilities is segmented into the change attributable to variations in volume (changes in volume multiplied by the old rate) and the change attributable to variations in interest rates (changes in rates multiplied by the old volume). Nonaccrual loans are included in average loans used to compute this table.

43

Net interest income before provision for credit losses increased by $44.4 million, or 10%, for 2025 compared with 2024. The increase in net interest income was primarily driven by a lower cost of funds and an increase in the average balance of loans, partially offset by a lower yield on loans and an increase in the average balance of deposits. As of December 31, 2025, the Federal Funds target rate was cut by an aggregate 175 basis points since September 2024, impacting average yields and rates for 2025 compared with 2024.

Net interest income before provision for credit losses decreased by $98.0 million, or 19%, for 2024 compared with 2023. The decrease in net interest income was driven by a higher cost of funds and a decrease in the average balance of interest earning assets, partially offset by expanding yields on interest earning assets and a decrease in the average balance of interest bearing liabilities. The expanding interest earning asset yields and higher deposit costs reflected changes in market interest rates during the period. The upper range of the target federal funds rate decreased to 4.50% at December 31, 2024, down from 5.50% at December 31, 2023, but the cuts to the federal funds rate did not begin until September 2024. The year-over-year decrease in the balance of average interest earning cash and deposits in other banks between 2024 and 2023 was primarily due to the payoff of borrowings under the FRB’s Bank Term Funding Program in 2024.

Interest Income

Interest income was $941.2 million for 2025, compared with $954.0 million for 2024, and $1.05 billion for 2023. The yield on average interest earning assets was 5.50% for 2025, compared with 5.69% for 2024, and 5.60% for 2023.

Comparison of 2025 with 2024

The decrease in interest income of $12.8 million, or 1.3%, for 2025 compared with 2024 was primarily driven by a lower yield on loans and a lower average balance and yield on cash and deposits at other banks, partially offset by an increase in the average balance of loans and a higher yield on investment securities. The decreases in yields on loans and cash and deposits at other banks were driven by a decline in market interest rates during the period. The increase in yield on investment securities was a result of a strategic repositioning we executed in June 2025, wherein part of the investment securities portfolio was sold and the funds reinvested in higher yielding investment securities.

Comparison of 2024 with 2023

The decrease in interest income of $94.9 million, or 9.0%, for 2024 compared with 2023 was primarily driven by lower average balances of loans and cash and deposits at other banks, offset partially by expanding yields of interest earnings assets.

Interest Expense

Deposits

Interest expense on deposits was $457.3 million for 2025, compared with $495.4 million for 2024, and $441.2 million for 2023. The average cost of deposits was 2.94% for 2025, compared with 3.38% for 2024, and 2.82% for 2023. The average cost of interest bearing deposits was 3.77% for 2025, compared with 4.51% for 2024, and 3.92% for 2023.

Comparison of 2025 with 2024

The decrease in interest expense on total deposits of $38.2 million, or 8%, for 2025 compared with 2024 was due to a lower cost of interest bearing deposits, and a lower average balance and rate on FHLB and FRB borrowings. The decrease in the cost of funds was driven by a decline in market interest rates during the period.

Comparison of 2024 with 2023

The increase in interest expense on total deposits of $54.2 million, or 12%, for 2024 compared with 2023 was due to a higher cost of interest bearing deposits. The increase in the cost of deposits was driven by rising interest rates during the period, a migration of deposits into higher-cost categories due to customer preferences for higher rates, and deposit pricing competition.

44

FHLB and FRB Borrowings

FHLB and FRB borrowings consist of advances from the FHLB and FRB. As part of our asset-liability management, we utilize FHLB and FRB borrowings to supplement our deposit source of funds. Therefore, there may be fluctuations in these balances depending on the short-term liquidity and longer-term financing needs of the Bank.

Average FHLB and FRB borrowings were $79.9 million for 2025, compared with $531.9 million in 2024, and $1.62 billion in 2023. Interest expense on FHLB and FRB borrowings was $2.1 million for 2025 compared with $19.9 million for 2024, and $69.4 million for 2023. The average cost of FHLB and FRB borrowings was 2.57% for 2025, compared with 3.73% for 2024, and 4.29% for 2023. The decrease in the cost of FHLB and FRB borrowings for 2025 compared to 2024 was primarily attributable to declining market interest rates.

Convertible Notes

In 2018, we issued $217.5 million in senior convertible notes. Interest expense on convertible notes was $9 thousand for 2025 compared with $9 thousand and $1.9 million for 2024 and 2023, respectively. The cost of our convertible notes for 2025 was 2.00% compared with 2.00% for 2024 and 2.47% for 2023. The cost of our convertible notes consisted of the 2.00% coupon rate for 2025 and 2024, and also included non-cash interest expense from the capitalization of issuance cost for 2023.

During the year ended December 31, 2023, we repurchased our notes in the aggregate principal amount of $19.9 million and recorded a gain on debt extinguishment of $405 thousand. The repurchased notes were immediately cancelled subsequent to repurchase. On May 15, 2023, most holders of our convertible notes exercised their right to put their notes and therefore we paid off $197.1 million of convertible note principal in cash. There were no repurchases or put options exercised for the years ended December 31, 2025 and 2024.

Subordinated Debentures

At December 31, 2025, our nine wholly-owned subsidiary grantor trusts had issued $126.0 million of pooled trust preferred securities. Trust preferred securities accrue and pay distributions periodically at specified annual rates as provided in the related indentures. The trusts used the net proceeds from the offering to purchase a like amount of subordinated indentures. The subordinated debentures bear interest at the 3-month Chicago Mercantile Exchange term Secured Financing Overnight Rate (“SOFR”) rate, plus a designated spread. Prior to LIBOR cessation at June 2023, the interest rate was tied to the 3-month LIBOR rate, plus a designated spread. There were no changes in our balance of subordinated debentures during 2025 or 2024, aside from the increases related to the discount accretion on subordinated debentures acquired from previous acquisitions. Interest expense on subordinated debentures was $9.6 million for 2025 compared with $10.8 million for 2024, and $10.5 million for 2023. The average rate on other borrowings decreased to 8.96% for 2025, compared with 10.17% for 2024, and 10.02% for 2023. The change in cost of other borrowings, or subordinated debentures, for 2023, compared with 2025 and 2024, was due to changes in the 3-month SOFR and 3-month LIBOR rates.

Provision for Credit Losses

The provision for credit losses reflects management’s assessment of the current period cost associated with credit risk inherent in the loan portfolio. The provision for credit losses for each period includes provision for credit losses on loans and provision for unfunded loan commitments. Provision for credit losses on loans is dependent upon many factors, including loan growth, net charge offs, changes in the composition of the loan portfolio, delinquencies, assessments by management, examinations of the loan portfolio, the value of the underlying collateral on problem loans, the general economic conditions in our market areas, and future projections of the economy. Specifically, the provision for credit losses on loans represents the amount charged against current period earnings to achieve an allowance for credit losses that, in management’s judgment, is adequate to absorb probable lifetime losses inherent in the loan portfolio. Provision for unfunded loan commitments is based on the estimated future funding of loan commitments. Periodic fluctuations in the provision for credit losses result from management’s assessment of the adequacy of the allowance for credit losses and allowance for unfunded loan commitments, and actual credit losses may vary in material respects from current estimates. If the allowances for credit losses are inadequate, we may be required to record additional provisions, which may have a material and adverse effect on business, financial condition, and results of operations.

45

Comparison of 2025 with 2024

The provision for credit losses on loans was $31.2 million for 2025, an increase of $12.8 million from $18.4 million for 2024. The increase in provision for credit losses was primarily due to an $11.0 million increase in provision for credit loss on loans for residential mortgage loans for the year ended December 31, 2025 compared to the year ended December 31, 2024. Provision for credit loss on residential mortgage loans increased in 2025 compared to 2024 due to ACL model enhancements made in 2024 which resulted in an $8.4 million reversal of provision for credit loss on residential mortgage loans for the year ended December 31, 2024 compared to $2.6 million in provision or credit loss on residential mortgage loans for the year ended December 31, 2025. The allowance for credit losses coverage ratio was 1.07% of loans receivable at December 31, 2025, compared with 1.11% at December 31, 2024.

Comparison of 2024 with 2023

The provision for credit losses on loans was $18.4 million for 2024, a decrease of $10.7 million from $29.1 million for 2023. The decrease in provision for credit losses was primarily due to a decrease of $12.3 million in provision for credit loss on loans on residential mortgage loans and a decrease of $2.7 million in provision for credit losses on CRE loans, offset partially by an increase of $4.6 million in provision for credit loss on loans on C&I loans. The decline in provision for credit loss on loans for residential mortgage loans was due to ACL model enhancements made during the second quarter of 2024, which contributed to the reversal of provision for credit loss on loans of $8.4 million for residential mortgage loans for the year ended December 31, 2024. The increase in provision for credit loss on loans for C&I loans was due to an increase in criticized C&I loans as of December 31, 2024, compared with December 31, 2023. The allowance for credit losses coverage ratio was 1.11% of loans receivable at December 31, 2024, compared with 1.15% at December 31, 2023.

Noninterest Income

Noninterest income is primarily comprised of service fees on deposit accounts, international service fees (fees received on trade finance letters of credit), wire transfer and foreign currency fees, swap fee income, net gains on sales of loans, net gains or losses on sales of investment securities AFS, net gain on branch sales, and other income and fees, which included loan servicing fees, earnings on bank owned life insurance, changes in the fair value of our equity investments with readily determinable fair value, and other miscellaneous income. Noninterest income was $26.5 million for 2025 compared with $47.1 million for 2024, and $45.6 million for 2023.

A breakdown of noninterest income by category is shown below:

Comparison of 2025 with 2024

The decrease in noninterest income for 2025 compared with 2024 was primarily attributable to net losses on sales of investment securities AFS, due to a securities portfolio repositioning in June 2025, partially offset by higher net gains on sales of SBA loans, swap fee income, and other income and fees. Noninterest income for 2025 included $38.9 million of losses on investment securities AFS related to the securities portfolio repositioning, which we consider a notable item. See the “Overview” section of this MD&A for a reconciliation of GAAP to non-GAAP financial measures.

46

During the year ended December 31, 2025, we sold $211.4 million in SBA guaranteed loans and recorded $12.5 million in net gains on sale of SBA loans. During the year ended December 31, 2024, we sold $119.6 million in SBA guaranteed loans and recorded $7.8 million in net gains on sale of SBA loans.

The net losses on sales of investment securities AFS for 2025 were primarily attributable to the strategic repositioning of a part of our investment securities AFS portfolio in June 2025. We sold securities AFS with a fair value of $417.9 million, consisting of lower-yielding collateralized mortgage obligations, mortgage-backed, corporate, and municipal securities, and recorded realized losses of $38.9 million. Net proceeds from these sales were redeployed to purchase higher-yielding investment securities. During the year ended December 31, 2024, we sold $276.3 million in fair value of investment securities AFS at a net gain of $936 thousand.

Other income and fees increased for 2025 compared with 2024, primarily due to increases in earnings from BOLI, fair value adjustments on equity investments, and net gains on sale of other loans.

Comparison of 2024 with 2023

The increase in noninterest income for 2024 compared with 2023 was primarily attributable to higher net gains on sales of SBA loans, net gain on branch sales and gains on sales of securities AFS and service fees on deposit accounts, and partially offset by a decrease in other income and fees.

Service fees on deposit accounts increased for 2024 compared with 2023 due to increases in business analysis fees and non-sufficient funds fees.

During the year ended December 31, 2024, we sold $119.6 million in SBA guaranteed loans and recorded $7.8 million in net gains on sale of SBA loans. During the year ended December 31, 2023, we sold $79.1 million in SBA guaranteed loans and recorded $4.1 million in net gains on sale of SBA loans. The Bank resumed the sales of SBA guaranteed loans in the second quarter of 2024 due to improved premiums in the secondary markets, after retaining loan production on balance sheet starting in the second half of 2023.

During the year ended December 31, 2024, we sold $276.3 million in fair value of investment securities AFS and recorded $936 thousand in net gains on sales of investment securities AFS. There were no investment securities AFS sold during 2023.

During the year ended December 31, 2024, we recorded a net gain on branch sales of $1.0 million related to the sale of our two branches in Virginia, which closed on October 1, 2024. There were no gains on branch sales during 2023.

Other income and fees decreased for 2024 compared with 2023, primarily due to a $5.8 million gain from a cash distribution from an investment in an affordable housing partnership, which was recorded in 2023. There were no gains from cash distributions for investments in affordable housing partnerships in 2024.

47

Noninterest Expense

Noninterest expense was $389.6 million for 2025, compared with $324.7 million for 2024, and $362.0 million for 2023. The increase in noninterest expense was $64.9 million, or 20%, for 2025 compared with 2024, and a decrease of $37.3 million, or 10%, for 2024 compared with 2023. Noninterest expense included merger and restructuring-related costs, which the Company considers a notable item. Excluding notable items, noninterest expense for 2025 was $368.8 million, compared with $318.4 million for 2024, and $346.4 million for 2023. See the “Overview” section of this MD&A for a reconciliation of GAAP to non-GAAP financial measures. Noninterest expense as a percentage of average assets for 2025 was 2.14%, compared with 1.83% for both 2024 and 2023.

A breakdown of noninterest expense by category is provided below:

Comparison of 2025 with 2024

The increase in noninterest expense for 2025 compared with 2024 was primarily driven by increases in salaries and employee benefits, merger and restructuring-related costs, furniture, equipment and software expense, occupancy expense, and other noninterest expense, partially offset by a decrease in earned interest credits expense. We closed the acquisition of Territorial on April 2, 2025, and 2025’s results included three quarters of operating expenses related to the Territorial franchise.

Salaries and employee benefits expense increased by $36.3 million, or 20.4%, for 2025 compared with 2024. The year-over-year increase in salaries and employee benefits was primarily due to an increase in headcount following the Territorial acquisition. The number of full-time equivalent employees was 1,434 at December 31, 2025, compared with 1,244 at both December 31, 2024 and 2023.

Occupancy expense increased by $6.7 million, or 24.5%, for 2025 compared with 2024. The increase in occupancy expense was primarily due to the increased number of Bank locations resulting from the Territorial acquisition. The Company acquired 29 branches in Hawaii from its Merger with Territorial.

Furniture, equipment and software expense increased by $8.1 million, or 33.6%, for 2025 compared with 2024. The increase in furniture, equipment and software expense was primarily due to increased depreciation expense on furniture, software and equipment as a result of the Territorial acquisition.

Earned interest credits are provided to certain commercial depositors to help offset deposit service charges incurred. The earned interest credits are tied to short-term interest rates, and accordingly, earned interest credit expense decreased with the declines in the Federal Funds rate since September 2024. Earned interest credit expense decreased $10.5 million for 2025 compared with 2024, reflecting the changes in the federal funds rates.

48

Merger and restructuring-related costs increased by $15.9 million, or 282.7%, for 2025 compared with 2024. Merger and restructuring-related costs were mainly related to change-in-control and employee severance and retention expenses related to the Territorial acquisition, which was completed on April 2, 2025. See Note 19 “Business Combinations” of the Notes to Consolidated Financial Statements for additional information regarding the Merger.

Other noninterest expense increased by $5.8 million, or 21.3%, for 2025 compared with 2024. The increase was primarily attributable to an increase in core deposit intangible amortization expense related to acquired deposits from Territorial.

Comparison of 2024 with 2023

The decrease in noninterest expense for 2024 compared with 2023 was primarily driven by decreases in salaries and employee benefits, restructuring costs, and lower FDIC assessments, partially offset by increases in merger-related expenses, professional fees, and earned interest credit expense.

Salaries and employee benefits expense decreased by $30.0 million, or 14.4%, for 2024 compared with 2023. The year-over-year decrease in salaries and employee benefits was due to lower average number of employees for the years ended 2024 compared to 2023. The number of full-time equivalent employees was 1,244 at both December 31, 2024 and December 31, 2023, compared to 1,549 at December 31, 2022. During the fourth quarter of 2023, we had a headcount reduction related to our restructuring in which we reduced our workforce by 13%. In the first quarter of 2023, a staffing rationalization reduced our headcount by 5%.

Professional fees increased by $2.5 million, or 39%, for 2024 compared with 2023. The year-over-year increase in professional fees was due overall increase in legal fees and other professional services.

FDIC assessments expense decreased by $2.5 million, or 18.7%, for 2024 compared with 2023. The FDIC assessment expense utilizes an initial base assessment rate, which is calculated as a percentage of the Bank’s average consolidated total assets less average tangible equity. In addition to the initial assessment base, adjustments are added based upon the Bank’s regulatory rating and on other financial measures. In 2023, the FDIC annual base assessment rate increased by two basis points industry-wide. In addition, in November 2023, the FDIC approved a special assessment at the rate of approximately 13.4 basis points per year, paid in eight quarterly installments beginning in the first quarter of 2024. This rate was applied to an assessment base of the insured depository institution’s estimated uninsured deposits reported as of December 31, 2022, adjusted to exclude the first $5 billion in estimated uninsured deposits. In February 2024, the FDIC informed banks of an increase from the original estimate related to this special assessment. This additional amount was paid in two additional quarterly installments, at a rate of approximately 9.4 basis points per year on the same adjusted assessment base. The decrease in FDIC assessments expense for the year ended December 31, 2024, compared with the same period in 2023, was primarily due to lower average consolidated total assets and a lower assessment base.

Earned interest credits are provided to certain commercial depositors in the residential mortgage industry to help offset deposit service charges incurred. The earned interest credits are tied to short-term interest rates and have increased with the increases in the federal funds rates since mid-2022. Earned interest credit expense increased $1.0 million for 2024 compared with 2023, reflecting the changes in the federal funds rates as well as changes in the average balances of the underlying deposits.

Merger-related costs of $4.6 million for the year ended December 31, 2024, were primarily professional fees related to the Merger with Territorial. See Note 19 “Business Combinations” to the Notes to Consolidated Financial Statements for additional information regarding the merger. There were no merger-related costs for the year ended December 31, 2023. Restructuring-related costs totaled $1.0 million in 2024, and were related to the Company’s strategic reorganization announced in October 2023. Restructuring-related costs for the year ended December 31, 2023, totaled $11.6 million. Restructuring costs primarily comprised severance costs, planned branch closure charges and professional fees. As part of the restructuring, the Company reduced its workforce by 13% in October 2023, and consolidated certain branches in the first half of 2024.

49

Income Tax Provision

The provision for income taxes for 2025 was $15.7 million, compared with $33.3 million in 2024 and $44.2 million in 2023. The effective income tax rate was 20.30% for 2025 compared with 25.07% for 2024 and 24.86% for 2023. The decrease in effective tax rate for 2025 compared with 2024 was primarily due to the positive impact from renewable energy tax credit investments and investments in affordable housing partnership that the Company realized in 2025. In addition, income tax expense and the effective tax rate were impacted by a change in California’s state tax apportionment law that was signed on June 27, 2025, and which became effective for tax years beginning on or after January 1, 2025.

On June 27, 2025, California Senate Bill 132 was signed into law, requiring that banks and financial companies transition from an equally weighted three-factor apportionment formula to a single-sales-factor apportionment formula, effective for tax years beginning in 2025. As a result of the change in the California tax apportionment rate effective beginning of 2025, we recorded an income tax expense of $4.8 million in 2025, related to the remeasurement of the deferred tax asset. This item is included in the reconciliation of GAAP to non-GAAP financial measures in the “Overview” section of this MD&A.

On July 4, 2025, the One Big Beautiful Bill Act (“OBBBA”) was enacted in the U.S. The OBBBA includes significant provisions, such as the permanent extension of certain expiring provisions of the Tax Cuts and Jobs Act, the restoration of favorable tax treatment for certain business provisions, and accelerated phase outs to the Inflation Reduction Act energy tax credits. We continue to assess any potential impact to our Consolidated Financial Statements but for fiscal year 2025, OBBBA did not have a material impact.

We invest in affordable housing partnerships and receive CRA credits and tax credits that reduce the overall effective tax rate. Amortization of investments in affordable housing partnerships is recorded in noninterest expense based on benefit schedules of individual investment projects under the equity method of accounting. The benefit schedules show tax deductions investors can take each year. We amortize the initial cost of the investments in affordable housing partnerships. This amortization expense is more than offset by both tax credits received, which reduce our tax provision expense dollar for dollar, and the tax benefits related to any tax losses generated through the affordable housing project’s expenditures. Total tax credits related to our investment in affordable housing partnership investment was approximately $12.1 million and $11.1 million for the years ended December 31, 2025 and 2024, respectively. The balance of investments in affordable housing partnerships decreased from $32.4 million at December 31, 2024, to $27.9 million at December 31, 2025.

In addition to affordable housing projects, beginning in the fourth quarter of 2024, we began to invest in projects that qualify for renewable energy tax credits. Amortization of investments in renewable energy projects is recorded as a part of the tax expense under the proportional amortization method of accounting and offsets some of the income tax benefits of the renewable energy tax credits. For the years ended December 31, 2025 and 2024, the total generated renewable energy tax credits and benefits were $40.3 million and $18.2 million, respectively. These were partially offset by the amortization on the investments, which was $36.9 million and $16.6 million for 2025 and 2024, respectively. There were no tax credits or amortization on investments in renewable energy projects for 2023.

50

Financial Condition

Our total assets were $18.53 billion at December 31, 2025, an increase of $1.48 billion, or 8.7%, from $17.05 billion at December 31, 2024.

Cash and Cash Equivalents

Cash and cash equivalents were $560.1 million at December 31, 2025, an increase of $101.9 million, or 22.2%, from $458.2 million at December 31, 2024.

Investment Securities Portfolio

The main objectives of our investment strategy are to provide sources of liquidity while managing our interest rate risk and generating an adequate level of interest income. Our investment policy permits investments in various types of securities, certificates of deposits, and federal funds sold in compliance with various restrictions in the policy.

Our investment securities AFS totaled $1.83 billion at December 31, 2025, compared with $1.82 billion at December 31, 2024. At December 31, 2025, we had $239.8 million in investment securities HTM compared with $252.4 million at December 31, 2024. We have the ability and intent to hold investment securities classified as HTM to maturity. In 2025, $777.8 million in investment securities was purchased, $1.13 billion in investment securities was sold, $204.0 million in investment securities was paid down, and $57.1 million in investment securities was called.

Investments AFS and HTM of $18.5 million and $516.7 million, respectively, were acquired as part of the Territorial acquisition on April 2, 2025, and, immediately upon acquisition, categorized as AFS according to management’s intent. The investment securities were sold at a market value of $535.2 million, with no gain or loss impact on the Consolidated Statements of Income. See Note 19 “Business Combinations” of the Notes to the Consolidated Financial Statements for additional information regarding the Merger.

As part of a strategic repositioning of investment securities in June 2025, we sold a portion of our legacy investment securities portfolio AFS with a fair value of $417.9 million, consisting of lower-yielding collateralized mortgage obligations, mortgage-backed, corporate, and municipal securities, and recorded realized losses of $38.9 million. Net proceeds from the sales were redeployed to purchase higher-yielding investment securities AFS.

At December 31, 2025, $228.9 million in HTM securities were pledged to secure public deposits, or for other purposes required or permitted by law, of which $217.2 million in securities were pledged for time deposits owned by state and local governments in Hawaii, $11.7 million in investment securities HTM were pledged for advances from FHLB Des Moines, and $306 thousand in AFS securities was pledged for other public deposits.

Our investment portfolio consisted of government sponsored enterprise (“GSE”) bonds, mortgage-backed securities (“MBS”), collateralized mortgage obligations (“CMOs”), asset-backed securities, corporate securities, and municipal securities.

Our investment securities portfolio is primarily invested in residential CMOs and residential and commercial MBS, which combined to represent 87% and 85% of our total investment securities portfolio at December 31, 2025 and 2024, respectively. At December 31, 2025 and 2024, all of our CMOs and MBS were issued by the Government National Mortgage Association (“GNMA”), Fannie Mae (“FNMA”), or Freddie Mac (“FHLMC”), which guarantee the contractual cash flows of these investments. All of our corporate, asset-backed, and municipal securities at December 31, 2025, were rated as investment grade aside from one municipal bond which is not rated and tied to the repayment of the underlying collateral of a loan with the Company. The underlying loan is currently in good standing with the Company.

51

The following table presents the amortized cost, estimated fair value, and net unrealized gain and losses on our investment securities as of the dates indicated:

52

The following table summarizes the maturity of securities based on carrying value and their related weighted average yield (non-tax equivalent) at December 31, 2025: