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.

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 (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth 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.

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 is a shell company (as defined in Rule 12b-2 of the Exchange Act).

As of ~~April~~October 20, 2021, there were ~~40,394,324~~40,245,113 shares of common stock outstanding.

	Three Months Ended						Three Months Ended						Nine Months Ended
	March 31,						September 30,						September 30,
(dollars in thousands, except per share amounts)	2021			2020			2021			2020			2021			2020
Interest Income
Interest and Fees on Loans and Leases	$	99,299		$	108,210		$	100,570		$	103,189		$	300,763		$	319,027
Income on Investment Securities
Available-for-Sale		15,837			16,711			16,396			14,558			48,700			45,845
Held-to-Maturity		13,300			19,252			16,754			15,967			43,630			51,942
Deposits		7			9			2			3			9			13
Funds Sold		137			546			382			149			779			787
Other		185			218			159			151			526			494
Total Interest Income		128,765			144,946			134,263			134,017			394,407			418,108
Interest Expense
Deposits		4,329			14,260			3,837			5,891			12,318			28,105
Securities Sold Under Agreements to Repurchase		3,533			4,025			3,423			3,622			10,426			11,667
Funds Purchased		1			72			—			—			1			90
Short-Term Borrowings		—			39			—			1			—			62
Other Debt		333			584			184			337			760			1,361
Total Interest Expense		8,196			18,980			7,444			9,851			23,505			41,285
Net Interest Income		120,569			125,966			126,819			124,166			370,902			376,823
Provision for Credit Losses		(14,300	)		33,600			(10,400	)		28,600			(40,800	)		102,600
Net Interest Income After Provision for Credit Losses		134,869			92,366			137,219			95,566			411,702			274,223
Noninterest Income
Trust and Asset Management		11,278			10,915			11,415			10,752			34,375			32,217
Mortgage Banking		5,862			2,695			3,136			4,047			12,056			11,020
Service Charges on Deposit Accounts		6,128			7,451			6,510			6,027			18,703			18,575
Fees, Exchange, and Other Service Charges		13,607			13,200			13,604			12,296			41,018			34,913
Investment Securities Gains (Losses), Net		(1,203	)		(970	)		(1,259	)		(1,121	)		(39	)		11,125
Annuity and Insurance		702			928			735			881			2,348			2,692
Bank-Owned Life Insurance		1,917			1,580			1,897			1,806			5,877			5,035
Other		4,679			10,350			5,340			7,046			14,441			23,574
Total Noninterest Income		42,970			46,149			41,378			41,734			128,779			139,151
Noninterest Expense
Salaries and Benefits		56,251			54,463			56,447			51,951			168,859			157,129
Net Occupancy		9,090			8,955			3,079			7,281			17,216			24,997
Net Equipment		8,878			8,456			8,924			9,223			26,598			25,874
Data Processing		6,322			4,788			4,722			4,691			15,601			13,895
Professional Fees		3,406			3,208			2,948			2,743			9,468			9,012
FDIC Insurance		1,654			1,456			1,594			1,282			4,917			4,296
Other		13,264			14,986			18,805			12,778			49,252			39,950
Total Noninterest Expense		98,865			96,312			96,519			89,949			291,911			275,153
Income Before Provision for Income Taxes		78,974			42,203			82,078			47,351			248,570			138,221
Provision for Income Taxes		19,025			7,461			20,025			9,511			59,035			26,731
Net Income	$	59,949		$	34,742		$	62,053		$	37,840		$	189,535		$	111,490
Basic Earnings Per Share	$	1.51		$	0.88
Diluted Earnings Per Share	$	1.50		$	0.87
Dividends Declared Per Share	$	0.67		$	0.67
Basic Weighted Average Shares		39,827,590			39,681,611
Diluted Weighted Average Shares		40,071,477			39,916,986
Preferred Stock Dividends								1,006			—			1,006			—
Net Income Available to Common Shareholders							$	61,047		$	37,840		$	188,529		$	111,490
Basic Earnings Per Common Share							$	1.53		$	0.95		$	4.73		$	2.81
Diluted Earnings Per Common Share							$	1.52		$	0.95		$	4.70		$	2.80
Dividends Declared Per Common Share							$	0.70		$	0.67		$	2.04		$	2.01
Basic Weighted Average Common Shares								39,881,437			39,745,120			39,870,450			39,710,252
Diluted Weighted Average Common Shares								40,080,919			39,869,135			40,088,899			39,872,406

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

	Three Months Ended					Three Months Ended						Nine Months Ended
	March 31,					September 30,						September 30,
(dollars in thousands)	2021			2020		2021			2020			2021			2020
Net Income	$	59,949		$	34,742	$	62,053		$	37,840		$	189,535		$	111,490
Other Comprehensive Income (Loss), Net of Tax:
Net Unrealized Gains (Losses) on Investment Securities		(50,050	)		41,559		(7,541	)		(4,900	)		(57,714	)		44,389
Defined Benefit Plans		441			374		441			374			1,324			1,122
Total Other Comprehensive Income (Loss)		(49,609	)		41,933		(7,100	)		(4,526	)		(56,390	)		45,511
Comprehensive Income	$	10,340		$	76,675	$	54,953		$	33,314		$	133,145		$	157,001

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

(dollars in thousands)	March 31, 2021			December 31, 2020			September 30, 2021			December 31, 2020
Assets
Interest-Bearing Deposits in Other Banks	$	4,506		$	1,646		$	2,188		$	1,646
Funds Sold		1,101,631			333,022			422,063			333,022
Investment Securities
Available-for-Sale		4,024,763			3,791,689			4,353,520			3,791,689
Held-to-Maturity (Fair Value of $3,477,346 and $3,348,693)		3,464,360			3,262,727
Held-to-Maturity (Fair Value of $4,895,763 and $3,348,693)								4,899,880			3,262,727
Loans Held for Sale		18,320			82,565			21,965			82,565
Loans and Leases		12,140,703			11,940,020			12,072,750			11,940,020
Allowance for Credit Losses		(198,343	)		(216,252	)		(167,920	)		(216,252	)
Net Loans and Leases		11,942,360			11,723,768			11,904,830			11,723,768
Total Earning Assets		20,555,940			19,195,417			21,604,446			19,195,417
Cash and Due From Banks		286,717			279,420			231,711			279,420
Premises and Equipment, Net		198,107			199,695			199,144			199,695
Operating Lease Right-of-Use Assets		97,750			99,542			97,007			99,542
Accrued Interest Receivable		47,917			49,303			46,751			49,303
Foreclosed Real Estate		2,332			2,332			2,332			2,332
Mortgage Servicing Rights		22,320			19,652			22,099			19,652
Goodwill		31,517			31,517			31,517			31,517
Bank-Owned Life Insurance		291,764			291,480			293,230			291,480
Other Assets		412,907			435,293			437,146			435,293
Total Assets	$	21,947,271		$	20,603,651		$	22,965,383		$	20,603,651
Liabilities
Deposits
Noninterest-Bearing Demand	$	6,227,436		$	5,749,612		$	7,111,693		$	5,749,612
Interest-Bearing Demand		4,379,243			4,040,733			4,768,725			4,040,733
Savings		7,474,580			6,759,213			7,540,345			6,759,213
Time		1,475,392			1,662,063			1,072,915			1,662,063
Total Deposits		19,556,651			18,211,621			20,493,678			18,211,621
Securities Sold Under Agreements to Repurchase		600,490			600,590			450,490			600,590
Other Debt		60,459			60,481			10,414			60,481
Operating Lease Liabilities		105,820			107,412			104,452			107,412
Retirement Benefits Payable		50,687			51,197			49,802			51,197
Accrued Interest Payable		4,109			5,117			3,415			5,117
Taxes Payable and Deferred Taxes		15,599			2,463
Taxes Payable								9,815			2,463
Other Liabilities		193,235			190,263			246,208			190,263
Total Liabilities		20,587,050			19,229,144			21,368,274			19,229,144
Shareholders’ Equity
Common Stock ($.01 par value; authorized 500,000,000 shares; issued / outstanding: March 31, 2021 - 58,553,365 /40,394,234 and December 31, 2020 - 58,285,624 / 40,119,312)		580			580
Preferred Stock ($.01 par value; authorized 180,000 shares; issued and outstanding: September 30, 2021 - 180,000 shares)								180,000			—
Common Stock ($.01 par value; authorized 500,000,000 shares; issued / outstanding: September 30, 2021 - 58,559,089 / 40,305,801 and December 31, 2020 - 58,285,624 / 40,119,312)								580			580
Capital Surplus		594,804			591,360			598,341			591,360
Accumulated Other Comprehensive Income (Loss)		(41,787	)		7,822			(48,568	)		7,822
Retained Earnings		1,844,057			1,811,979			1,916,861			1,811,979
Treasury Stock, at Cost (Shares; March 31, 2021 - 18,159,131 and December 31, 2020 - 18,166,312)		(1,037,433	)		(1,037,234	)
Treasury Stock, at Cost (Shares; September 30, 2021 - 18,253,288 and December 31, 2020 - 18,166,312)								(1,050,105	)		(1,037,234	)
Total Shareholders’ Equity		1,360,221			1,374,507			1,597,109			1,374,507
Total Liabilities and Shareholders’ Equity	$	21,947,271		$	20,603,651		$	22,965,383		$	20,603,651

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

(dollars in thousands)	Common Shares Outstanding			Common Stock		Capital Surplus		Accum. Other Compre- hensive Income(Loss)			Retained Earnings			Treasury Stock			Total			Preferred Shares Outstanding		Preferred Stock		Common Shares Outstanding			Common Stock		Capital Surplus			Accum. Other Compre- hensive Income(Loss)			Retained Earnings			Treasury Stock			Total
Balance as of December 31, 2020		40,119,312		$	580	$	591,360	$	7,822		$	1,811,979		$	(1,037,234	)	$	1,374,507			—	$	—		40,119,312		$	580	$	591,360		$	7,822		$	1,811,979		$	(1,037,234	)	$	1,374,507
Net Income		—			—		—		—			59,949			—			59,949			—		—		—			—		—			—			59,949			—			59,949
Other Comprehensive Loss		—			—		—		(49,609	)		—			—			(49,609	)		—		—		—			—		—			(49,609	)		—			—			(49,609	)
Share-Based Compensation		—			—		2,780		—			—			—			2,780			—		—		—			—		2,780			—			—			—			2,780
Common Stock Issued under Purchase and Equity Compensation Plans		310,905			—		664		—			(845	)		2,990			2,809			—		—		310,905			—		664			—			(845	)		2,990			2,809
Common Stock Repurchased		(35,983	)		—		—		—			—			(3,189	)		(3,189	)		—		—		(35,983	)		—		—			—			—			(3,189	)		(3,189	)
Cash Dividends Declared ($0.67 per share)		—			—		—		—			(27,026	)		—			(27,026	)
Cash Dividends Declared Common Stock ($0.67 per share)																					—		—		—			—		—			—			(27,026	)		—			(27,026	)
Balance as of March 31, 2021		40,394,234		$	580	$	594,804	$	(41,787	)	$	1,844,057		$	(1,037,433	)	$	1,360,221			—	$	—		40,394,234		$	580	$	594,804		$	(41,787	)	$	1,844,057		$	(1,037,433	)	$	1,360,221

Net Income																					—		—		—			—		—			—			67,533			—			67,533
Other Comprehensive Income																					—		—		—			—		—			319			—			—			319
Share-Based Compensation																					—		—		—			—		3,342			—			—			—			3,342
Preferred Stock Issued, Net																					180,000		180,000		—			—		(4,513	)		—			—			—			175,487
Common Stock Issued under Purchase and Equity Compensation Plans																					—		—		72,421			—		628			—			(46	)		3,269			3,851
Common Stock Repurchased																					—		—		(1,173	)		—		—			—			—			(109	)		(109	)
Cash Dividends Declared Common Stock ($0.67 per share)																					—		��		—			—		—			—			(27,113	)		—			(27,113	)
Balance as of June 30, 2021																					180,000	$	180,000		40,465,482		$	580	$	594,261		$	(41,468	)	$	1,884,431		$	(1,034,273	)	$	1,583,531

Net Income																					—		—		—			—		—			—			62,053			—			62,053
Other Comprehensive Loss																					—		—		—			—		—			(7,100	)		—			—			(7,100	)
Share-Based Compensation																					—		—		—			—		3,536			—			—			—			3,536
Common Stock Issued under Purchase and Equity Compensation Plans																					—		—		82,939			—		544			—			(327	)		4,282			4,499
Common Stock Repurchased																					—		—		(242,620	)		—		—			—			—			(20,114	)		(20,114	)
Cash Dividends Declared Common Stock ($0.70 per share)																					—		—		—			—		—			—			(28,290	)		—			(28,290	)
Cash Dividends Declared Preferred Stock																					—		—		—			—		—			—			(1,006	)		—			(1,006	)
Balance as of September 30, 2021																					180,000	$	180,000		40,305,801		$	580	$	598,341		$	(48,568	)	$	1,916,861		$	(1,050,105	)	$	1,597,109

Balance as of December 31, 2019		40,039,695		$	579	$	582,566	$	(31,112	)	$	1,761,415		$	(1,026,616	)	$	1,286,832			—	$	—		40,039,695		$	579	$	582,566		$	(31,112	)	$	1,761,415		$	(1,026,616	)	$	1,286,832
Net Income		—			—		—		—			34,742			—			34,742			—		—		—			—		—			—			34,742			—			34,742
Other Comprehensive Income		—			—		—		41,933			—			—			41,933			—		—		—			—		—			41,933			—			—			41,933
Cumulative Change in Accounting Principle		—			—		—		—			3,632			—			3,632			—		—		—			—		—			—			3,632			—			3,632
Share-Based Compensation		—			—		1,497		—			—			—			1,497			—		—		—			—		1,497			—			—			—			1,497
Common Stock Issued under Purchase and Equity Compensation Plans		154,091			—		329		—			653			2,779			3,761			—		—		154,091			—		329			—			653			2,779			3,761
Common Stock Repurchased		(197,276	)		—		—		—			—			(17,633	)		(17,633	)		—		—		(197,276	)		—		—			—			—			(17,633	)		(17,633	)
Cash Dividends Declared ($0.67 per share)		—			—		—		—			(26,835	)		—			(26,835	)
Cash Dividends Declared Common Stock ($0.67 per share)																					—		—		—			—		—			—			(26,835	)		—			(26,835	)
Balance as of March 31, 2020		39,996,510		$	579	$	584,392	$	10,821		$	1,773,607		$	(1,041,470	)	$	1,327,929			—	$	—		39,996,510		$	579	$	584,392		$	10,821		$	1,773,607		$	(1,041,470	)	$	1,327,929

Net Income																					—		—		—			—		—			—			38,908			—			38,908
Other Comprehensive Income																					—		—		—			—		—			8,104			—			—			8,104
Share-Based Compensation																					—		—		—			—		2,207			—			—			—			2,207
Common Stock Issued under Purchase and Equity Compensation Plans																					—		—		53,672			1		347			—			680			898			1,926
Common Stock Repurchased																					—		—		(2,488	)		—		—			—			—			(148	)		(148	)
Cash Dividends Declared Common Stock ($0.67 per share)																					—		—		—			—		—			—			(26,844	)		—			(26,844	)
Balance as of June 30, 2020																					—	$	—		40,047,694		$	580	$	586,946		$	18,925		$	1,786,351		$	(1,040,720	)	$	1,352,082

Net Income																					—		—		—			—		—			—			37,840			—			37,840
Other Comprehensive Loss																					—		—		—			—		—			(4,526	)		—			—			(4,526	)
Share-Based Compensation																					—		—		—			—		1,643			—			—			—			1,643
Common Stock Issued under Purchase and Equity Compensation Plans																					—		—		14,919			—		43			—			429			1,201			1,673
Common Stock Repurchased																					—		—		(1,938	)		—		—			—			—			(116	)		(116	)
Cash Dividends Declared Common Stock ($0.67 per share)																					—		—		—			—		—			—			(26,857	)		—			(26,857	)
Balance as of September 30, 2020																					—	$	—		40,060,675		$	580	$	588,632		$	14,399		$	1,797,763		$	(1,039,635	)	$	1,361,739

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

	Three Months Ended						Nine Months Ended
	March 31,						September 30,
(dollars in thousands)	2021			2020			2021			2020
Operating Activities
Net Income	$	59,949		$	34,742		$	189,535		$	111,490
Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities:
Provision for Credit Losses		(14,300	)		33,600			(40,800	)		102,600
Depreciation and Amortization		5,238			4,767			15,751			14,929
Amortization of Deferred Loan and Lease (Fees) Costs, Net		(2,486	)		462			(13,431	)		(1,640	)
Amortization and Accretion of Premiums/Discounts on Investment Securities, Net		8,878			5,164			27,147			19,043
Amortization of Operating Lease Right-of-Use Assets		2,839			3,114			8,562			9,192
Share-Based Compensation		2,780			1,497			9,658			5,347
Benefit Plan Contributions		(470	)		(403	)		(1,274	)		(1,071	)
Deferred Income Taxes		6,397			(6,942	)		5,308			(31,725	)
Gains on Sale of Premises and Equipment								(9,893	)		(1,850	)
Net Gains on Sales of Loans and Leases		(6,558	)		(1,956	)		(12,639	)		(9,779	)
Net Losses (Gains) on Sales of Investment Securities		1,203			970			39			(11,125	)
Proceeds from Sales of Loans Held for Sale		171,763			129,913			412,153			333,770
Originations of Loans Held for Sale		(102,017	)		(110,415	)		(319,274	)		(316,203	)
Net Tax Benefits from Share-Based Compensation		331			524			1,349			469
Net Change in Other Assets and Other Liabilities		48,860			(99,892	)		68,084			(135,753	)
Net Cash Provided by (Used In) Operating Activities		182,407			(4,855	)
Net Cash Provided by Operating Activities								340,275			87,694
Investing Activities
Investment Securities Available-for-Sale:
Proceeds from Sales, Prepayments and Maturities		289,659			230,435			1,138,809			733,619
Purchases		(594,678	)		(238,997	)		(1,789,229	)		(1,238,926	)
Investment Securities Held-to-Maturity:
Proceeds from Prepayments and Maturities		325,969			236,134			914,953			1,000,743
Purchases		(533,839	)		(201,130	)		(2,569,229	)		(1,170,928	)
Net Change in Loans and Leases		(204,500	)		(364,878	)		(149,765	)		(782,613	)
Purchases of Premises and Equipment		(3,649	)		(12,607	)		(14,314	)		(25,693	)
Proceeds from Sale of Premises and Equipment								9,008			1,981
Net Cash Used in Investing Activities		(721,038	)		(351,043	)		(2,459,767	)		(1,481,817	)

Financing Activities
Net Change in Deposits		1,345,030			270,879			2,282,057			1,954,401
Net Change in Short-Term Borrowings		(100	)		148,900			(150,100	)		(2,200	)
Proceeds from Long-Term Debt								—			50,000
Repayments of Long-Term Debt		(22	)		(25,020	)		(50,067	)		(75,063	)
Net Proceeds from Issuance of Preferred Stock								175,487			—
Proceeds from Issuance of Common Stock		2,704			3,658			10,836			7,684
Repurchase of Common Stock		(3,189	)		(17,633	)		(23,412	)		(17,897	)
Cash Dividends Paid		(27,026	)		(26,835	)
Cash Dividends Paid on Common Stock								(82,429	)		(80,536	)
Cash Dividends Paid on Preferred Stock								(1,006	)		—
Net Cash Provided by Financing Activities		1,317,397			353,949			2,161,366			1,836,389
Net Change in Cash and Cash Equivalents		778,766			(1,949	)		41,874			442,266
Cash and Cash Equivalents at Beginning of Period		614,088			558,658			614,088			558,658
Cash and Cash Equivalents at End of Period	$	1,392,854		$	556,709		$	655,962		$	1,000,924
Supplemental Information
Cash Paid for Interest	$	9,204		$	19,088		$	25,207		$	42,712
Cash Paid for Income Taxes		2,771			3,459			41,193			46,949
Non-Cash Investing and Financing Activities:
Transfer from Loans to Loans Held for Sale								23,888			—

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

Bank of Hawaii Corporation (the “Parent”) is a Delaware corporation and a bank holding company headquartered in Honolulu, Hawaii. Bank of Hawaii 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 accompanying consolidated financial statements include the accounts of the Parent and its subsidiaries. The Parent’s principal operating subsidiary is Bank of Hawaii (the “Bank”).

The consolidated financial statements in this report have not been audited by an independent registered public accounting firm, but, in the opinion of management, reflect all adjustments necessary for a fair presentation of the results for the interim periods. All such adjustments are of a normal recurring nature. Intercompany accounts and transactions have been eliminated in consolidation. Certain prior period information has been reclassified to conform to the current period presentation. Operating results for the interim periods disclosed herein are not necessarily indicative of the results that may be expected for the full fiscal year or for any future period.

The accompanying consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and accompanying notes required by GAAP for complete financial statements and should be read in conjunction with the audited consolidated financial statements and related notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020.

On June 15, 2021, the Company issued and sold 7,200,000 depositary shares (the “depositary shares”), each representing a 1/40^th ownership interest in a share of ~~Estimates~~4.375% Fixed Rate Non-Cumulative Perpetual Preferred Stock, Series A, par value $0.01 per share (the “Series A Preferred Stock”). The Series A Preferred Stock has a liquidation preference of $1,000 per share. Net proceeds, after underwriting discounts and expenses, totaled $175.5 million. Dividends on the Series A Preferred Stock are not cumulative and will be paid when declared by the Parent’s Board of Directors to the extent that we have legally available funds to pay dividends. If declared, dividends will accrue and be payable quarterly, in arrears, on the liquidation preference amount, on a non-cumulative basis, at a rate of 4.375% per annum. Holders of the Series A Preferred Stock will not have voting rights, except with respect to certain changes in the ~~Preparation of Financial Statements~~

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.

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 (i) the power to direct the activitiesterms of the ~~VIE that most significantly impact the entity’s economic performance~~preferred stock, certain dividend non-payments and ~~(ii) the obligation to absorb losses or the right to receive benefits that could be significant to the VIE.~~

as otherwise required by applicable law. The Company ~~participates~~may redeem the Series A Preferred Stock at its option, (i) in ~~limited partnerships~~whole or ~~limited liability companies that sponsor low-income housing projects. These entities provide funds for the construction~~in part, from time to time, on any dividend payment date on or after August 1, 2026 or (ii) in whole but not in part, at any time within 90 days following a regulatory capital treatment event, in either case at a redemption price equal to $1,000 per share (equivalent to $25 per depositary share), plus any declared 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 entity, the low-income residency targets must be maintained.

For pre-2015 investments, the Company utilized the effective yield method whereby the Company recognized tax credits generally over 10 years and amortized the initial cost of the investment to provide a constant effective yield over the period that tax credits are allocated to the Company. Beginning January 1, 2015, new investments that meet the requirements of the proportional amortization are recognized based on this method.unpaid dividends.

On October 5, 2021, the Parent’s Board of Directors declared a cash dividend payment of $10.94 per share on its Series A Preferred Stock. This dividend equals $0.2735 per depositary share. The dividend will be payable on November 1, 2021, to shareholders of record of the Series A Preferred Stock at the close of business on October 18, 2021.

Unfunded commitments to fund these low-income housing entities were $44.6 million and $53.0 million as of March 31, 2021, and December 31, 2020, respectively. These unfunded commitments are unconditional and legally binding and are recorded in other liabilities in the consolidated statements of condition. See Note 6 ~~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 $138.4 million and $143.0 million as of March 31, 2021, and December 31, 2020, respectively, and is included in other assets in the consolidated statements of condition.

The current expected credit loss (“CECL”) approach requires an estimate of the credit losses expected over the life of an exposure (or pool of exposures). The 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. The Company considers future economic conditions and portfolio performance as part of a reasonable and supportable forecast period.

Portfolio segment is defined as the level at which an entity develops and documents a systematic methodology to determine its allowance for credit losses. The Company has designated 2 portfolio segments of loans and leases, commercial and consumer. These portfolio segments are further disaggregated into classes, which represent loans and leases of similar type, risk characteristics, and methods for monitoring and assessing credit risk. The commercial portfolio segment is disaggregated into four classes, commercial and industrial, commercial mortgage, construction, and lease financing. The consumer portfolio segment is also disaggregated into four classes, residential mortgage, home equity, auto, and other (which is comprised of revolving credit, installment, and consumer lease financing arrangements). Each commercial and consumer portfolio class is also segmented based on risk characteristics.

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 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 Company also considers qualitative adjustments to the quantitative baseline. For example, the Company considers 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 (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.

The Company also incorporates 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 commercial portfolio, which could differ from historical loss experience. The Company performs 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. The asset quality review is reviewed by management and the results are used to consider a qualitative adjustment 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 establishes a specific reserve for individually evaluated loans which do not share similar risk characteristics with the loans included in the quantitative baseline. These individually evaluated loans are removed from the pooling approach discussed above for the quantitative baseline, and include non-accrual loans, troubled debt restructurings (“TDRs”), and other loans as deemed appropriate by management. In addition, the Company individually evaluates “reasonably expected” TDRs, which are identified by the Company as a commercial loan expected to be classified as a TDR within the next six months. Management judgment is utilized to make this determination.

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 (e.g., geography, lien position) depending on the product.

The Company also considers qualitative adjustments to the quantitative baseline. For example, the Company considers the impact of current environmental factors at the reporting date that did not exist over the period from which historical experience was used. The environmental factors considered for the consumer portfolio are similar to the aforementioned factors considered for the commercial portfolio.

The Company also incorporates a one-year R&S loss forecast period to account for forecasted economic conditions and other factors on the performance of the consumer portfolio which could differ from historical loss experience. The Company performs a quarterly asset quality review designed to estimate gross charge-offs and recoveries for the forecast period. Management evaluates additional factors that may not be reflected in the net charge-off forecast to determine whether a qualitative adjustment is warranted.

As of the January 1, 2020, implementation date, and following the one-year R&S loss forecast period, the Company chose a reversion back to average historical loss rates using a straight line method based on forecasted and relatively benign economic conditions at the measurement date, with the exception of the home equity portfolio. For the home equity portfolio, the Company elected to revert back to average historical loss rates using a straight line method over the halfway point of the average life of the portfolio. The halfway point is used for the home equity portfolio given the longer average life length compared to the other consumer portfolios.

Since the first quarter of 2020, the Company has chosen an immediate reversion back to average historical loss rates following the one-year R&S loss forecast period. The reversion method, however, does not reflect the potential for higher losses than pre-pandemic levels due to the impact of COVID-19 beyond the R&S loss forecast period, which the Company has addressed through other qualitative adjustments.

The Company establishes a specific reserve for individually evaluated loans that do not share similar risk characteristics with the loans included in the quantitative baseline. These individually evaluated loans include “reasonably expected” TDRs, identified by the Company as a consumer loan for which a borrower’s application of loan modification due to hardship has been approved by the Company.

~~See Note 4~~ ~~Loans and Leases and the Allowance for Credit Losses~~ ~~for more information.~~

The Company’s HTM debt securities are also required to utilize the CECL approach to estimate expected credit losses. Substantially all of the Company’s HTM debt securities are issued by U.S. government agencies or U.S. government-sponsored enterprises. These securities carry the explicit and/or implicit guarantee of the U.S. government, are widely recognized as “risk free,” and have a long history of zero credit loss. Therefore, the Company did not record an allowance for credit losses for these securities.

The Company also carries a limited portfolio of HTM municipal bonds. As of March 31, 2021, the entire portfolio consisted of State of Hawaii bonds carrying a Moody’s rating of Aa2, with a portion of these bonds escrowed to maturity. To estimate the expected credit losses, the Company utilized the probability of default (“PD”)/loss given default (“LGD”) methodology. The PD, which represents the percentage likelihood that a bond will default over a given time period, is primarily based upon the bond’s current credit rating and maturity and computed using Moody’s rating transition matrix, which provides the probability of a rating migrating to default within a one-year period (adjustments are made for longer maturities). The LGD, which represents the percentage of loss if a default occurs, is based on the median recovery rate for municipals according to Moody’s. The Company’s exposure at default, represented by the carrying value of the municipal bond portfolio, is multiplied with the PD and the LGD to arrive at the expected credit loss. Management may exercise discretion to make adjustments based on environmental factors. As of March 31, 2021, the Company determined that the expected credit loss on its municipal bond portfolio was de minimis, and therefore, an allowance for credit losses was not recorded. See Note 3 ~~Investment Securities~~ ~~for more information.~~

~~Allowance for Credit Losses - Available-for-Sale (“AFS”) Debt Securities~~

The impairment model for available-for-sale (“AFS”) debt securities differs from the CECL approach utilized by HTM debt securities because AFS debt securities are measured at fair value rather than amortized cost. Although ASU No. 2016-13 replaced the legacy other-than-temporary impairment (“OTTI”) model with a credit loss model, it retained the fundamental nature of the legacy OTTI model. One notable change from the legacy OTTI model is when evaluating whether credit loss exists, an entity may no longer consider the length of time fair value has been less than amortized cost. For AFS debt securities in an unrealized loss position, the Company first assesses whether it intends to sell, or it is more likely than not that it will be required to sell the security before recovery of its amortized cost basis. If either criteria is met, the security’s amortized cost basis is written down to fair value through income. For AFS debt securities that do not meet the aforementioned criteria, the Company evaluates whether the decline in fair value has resulted from credit losses or other factors. 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, among other factors. If this assessment indicates that a credit loss exists, the present value of cash flows expected to be collected from the security are compared to the amortized cost basis of the security. If the present value of cash flows expected to be collected is less than the amortized cost basis, a credit loss exists and an allowance for credit losses is recorded for the credit loss, limited by the amount that the fair value is less than the amortized cost basis. Any impairment that has not been recorded through an allowance for credit losses is recognized in other comprehensive income. Changes in the allowance for credit losses are recorded as a provision for (or reversal of) credit losses. Losses are charged against the allowance when management believes the uncollectibility of an AFS security is confirmed or when either of the criteria regarding intent or requirement to sell is met. As of March 31, 2021, the Company determined that the unrealized loss positions in AFS securities were not the result of credit losses, and therefore, an allowance for credit losses was not recorded. See Note 3 ~~Investment Securities~~ ~~for more information.~~

~~Upon adoption of ASU No. 2016-13,~~ ~~“Measurement of Credit Losses on Financial Instruments”~~ ~~and its related amendments on January 1, 2020, the Company made the following elections regarding AIR:~~

A financial asset is considered collateral-dependent when the debtor is experiencing financial difficulty and repayment is expected to be provided substantially through the sale or operation of the collateral. For all classes of loans and leases deemed collateral-dependent, the Company elected the practical expedient to estimate expected credit losses based on the collateral’s fair value less cost to sell. In most cases, the Company records a partial charge-off to reduce the loan’s carrying value to the collateral’s fair value less cost to sell. Substantially all of the collateral consists of various types of real estate including residential properties; commercial properties such as retail centers, office buildings, and lodging; agriculture land; and vacant land.

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. However, a liability is not recognized for commitments unconditionally cancellable by the Company. The Unfunded Reserve is recognized as a liability (other liabilities in the consolidated statements of condition), with adjustments to the reserve recognized in provision for credit losses in the consolidated statements of income. 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. Loss rates are estimated by utilizing the same loss rates calculated for the Allowance general reserves. For the commercial portfolio, the historical loss rates were calculated utilizing the Cohort methodology, while the consumer portfolio utilized the Vintage methodology.

The COVID-19 pandemic has negatively impacted the global economy, including Hawaii and the Pacific Islands. In response to this crisis, the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act was passed by Congress and signed into law on March 27, 2020. The CARES Act, along with subsequent relief programs, provided substantial funding to fight the COVID-19 pandemic and stimulate the economy by supporting individuals and businesses through loans, grants, tax changes, and other types of relief. Some of the provisions applicable to the Company include, but are not limited to:

Also in response to the COVID-19 pandemic, the Board of Governors of the Federal Reserve System (“FRB”), the Federal Deposit Insurance Corporation (“FDIC”), the National Credit Union Administration (“NCUA”), the Office of the Comptroller of the Currency (“OCC”), and the Consumer Financial Protection Bureau (“CFPB”), in consultation with the state financial regulators (collectively, the “agencies”) issued a joint interagency statement (issued March 22, 2020; revised statement issued April 7, 2020). Some of the provisions applicable to the Company include, but are not limited to:

The Company began offering short-term loan modifications to assist borrowers during the COVID-19 pandemic. These modifications generally involve principal and/or interest payment deferrals for up to six months. These modifications generally meet the criteria of both Section 4013 of the CARES Act and the joint interagency statement, and therefore, the Company does not account for such loan modifications as TDRs. As the COVID-19 pandemic persists in negatively impacting the economy, the Company continues to offer additional loan modifications to borrowers struggling as a result of COVID-19. Similar to the initial modifications granted, the additional round of loan modifications are granted specifically under Section 4013 of the CARES Act and generally involve principal and/or interest payment deferrals for up to an additional six months for commercial and consumer loans, and principal-only deferrals for up to an additional 12 months for selected commercial loans. On August 3, 2020, the Federal Financial Institutions Examination Council on behalf of its members (collectively “the FFIEC members”) issued a joint statement on additional loan accommodations related to COVID-19. The joint statement clarifies that for loan modifications in which Section 4013 is being applied, subsequent modifications could also be eligible under Section 4013. To be eligible, each loan modification must be (1) related to the COVID-19 event; (2) executed on a loan that was not more than 30 days past due as of December 31, 2019; and (3) executed between March 1, 2020, and the earlier of (A) 60 days after the date of termination of the National Emergency or (B) December 31, 2020. The December 31, 2020 deadline was subsequently extended to January 1, 2022, by the CAA. Substantially all of the Company’s additional round of loan modifications granted under Section 4013 of the CARES Act are in compliance with the aforementioned FFIEC requirements. Accordingly, the Company does not account for such loan modifications as TDRs.

In April 2020, the FASB staff issued a Q&A document on accounting for lease concessions related to the effects of the COVID-19 pandemic. The FASB staff noted that entities may elect to not evaluate whether certain concessions provided by lessors to mitigate the effects of COVID-19 on lessees are lease modifications. This option is intended to reduce the operational challenges of individually assessing every COVID-19 related lease concession to determine whether it results in having to apply Topic 842 lease modification guidance. This election is available only for concessions related to the effects of the COVID-19 pandemic that do not result in a substantial increase in either the rights of the lessor or the obligations of the lessee. For entities that choose this election, they may account for the concession as if no changes to the lease contract were made. Under that accounting, a lessor would continue to recognize income. The Company has elected to apply the relief provided by the FASB not to evaluate individual contracts. The Company also elected not to apply the lease modification framework for concessions granted.

The Company, as lessor, granted lease concessions on some of its sales-type finance leases for equipment and automobiles. Equipment lease concessions primarily consist of interest-only payments for a six-month period. Regular lease payments resume after the six-month period and the maturity date is extended by six months. Automobile lease concessions primarily consist of six-month extension programs whereby lease payments currently due are deferred and shifted to the end of the lease term. Interest income continues to accrue during the deferral period. As of March 31, 2021, the Company has not offered a material amount of concessions.

The Company, as lessor, leases and subleases real property to lessee tenants under operating leases. As of March 31, 2021, no material lease concessions have been granted to lessees. The Company, as lessee, also leases ~~real estate property for branch locations, ATM locations, and office space. As of~~ ~~March 31, 2021, the Company has not requested any lease concessions.~~

In December 2019, the FASB issued ASU No. 2019-12, “Simplifying the Accounting for Income Taxes.” This ASU simplifies the accounting for income taxes by eliminating certain exceptions to the guidance in ASC 740 related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences. The new guidance also simplifies aspects of the accounting for franchise taxes and enacted changes in tax laws or rates and clarifies the accounting for transactions that result in a step-up in the tax basis of goodwill. Finally, it clarifies that single-member limited liability companies and similar disregarded entities that are not subject to income tax are not required to recognize an allocation of consolidated income tax expense in their separate financial statements, but they could elect to do so. ASU 2019-12 is effective for interim and annual reporting periods beginning after December 15, 2020. ASU 2019-12 did not have a material impact on the Company’s Consolidated Financial Statements.

~~In January 2021, the FASB issued ASU No. 2021-01,~~ ~~“Reference Rate Reform (Topic 848): Scope.”~~ This ASU clarifies that all derivative instruments affected by changes to the interest rates used for discounting, margining or contract price alignment due to reference rate reform are in the scope of ASC 848. Entities may apply certain optional expedients in ASC 848 to derivative instruments that do not reference LIBOR or another rate expected to be discontinued as a result of reference rate reform if there is a change to the interest rate used for discounting, margining or contract price alignment. The ASU also clarifies other aspects of ASC 848 and provides new guidance on how to address the effects of the cash compensation adjustment that is provided as part of the above change on certain aspects of hedge accounting. ASU 2021-01 is intended to reduce diversity in practice related to accounting for (1) modifications to the terms of affected derivatives and (2) existing hedging relationships in which the affected derivatives are designated as hedging instruments. ASU 2021-01 is effective upon issuance and generally can be applied through December 31, 2022, similar to the rest of the relief provided under ASC 848. Entities may elect to apply the guidance on contract modifications either (1) retrospectively as of any date from the beginning of any interim period that includes March 12, 2020 or (2) prospectively to new modifications from any date in an interim period that includes or is after January 7, 2021, up to the date that financial statements are available to be issued. The Company elected to adopt the guidance on contract modifications retrospectively as of October 1, 2020, and it did not have a material impact on the Company’s Consolidated Financial Statements. As the Company currently does not utilize hedge accounting, the guidance on hedge accounting is not applicable.

The following table provides a reconciliation of cash and cash equivalents reported within the consolidated statements of condition that sum to the total of the same such amounts shown in the consolidated statements of cash flows:

(dollars in thousands)	March 31, 2021		December 31, 2020		September 30, 2021		December 31, 2020
Interest-Bearing Deposits in Other Banks	$	4,506	$	1,646	$	2,188	$	1,646
Funds Sold		1,101,631		333,022		422,063		333,022
Cash and Due From Banks		286,717		279,420		231,711		279,420
Total Cash and Cash Equivalents	$	1,392,854	$	614,088	$	655,962	$	614,088

The amortized cost, gross unrealized gains and losses, and fair value of the Company’s investment securities as of ~~March 31,~~September 30, 2021, and December 31, 2020, were as follows:

(dollars in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
March 31, 2021
September 30, 2021
Available-for-Sale:
Debt Securities Issued by the U.S. Treasury and Government Agencies	$	165,355	$	408	$	(541	)	$	165,222	$	143,409	$	1,561	$	(106	)	$	144,864
Debt Securities Issued by States and Political Subdivisions		23,544		785		(4	)		24,325		20,231		839		(2	)		21,068
Debt Securities Issued by U.S. Government-Sponsored Enterprises		985		51		(1	)		1,035		1,509		47		(1	)		1,555
Debt Securities Issued by Corporations		219,493		3,589		(967	)		222,115		385,787		3,630		(1,543	)		387,874
Mortgage-Backed Securities:
Residential - Government Agencies		1,564,690		28,489		(7,834	)		1,585,345		1,410,231		15,435		(8,483	)		1,417,183
Residential - U.S. Government-Sponsored Enterprises		1,835,401		13,646		(41,118	)		1,807,929		2,223,697		8,395		(32,040	)		2,200,052
Commercial - Government Agencies		213,467		6,007		(682	)		218,792		177,721		3,877		(674	)		180,924
Total Mortgage-Backed Securities		3,613,558		48,142		(49,634	)		3,612,066		3,811,649		27,707		(41,197	)		3,798,159
Total	$	4,022,935	$	52,975	$	(51,147	)	$	4,024,763	$	4,362,585	$	33,784	$	(42,849	)	$	4,353,520
Held-to-Maturity:
Debt Securities Issued by the U.S. Treasury and Government Agencies	$	7,499	$	—	$	(166	)	$	7,333	$	131,465	$	277	$	(184	)	$	131,558
Debt Securities Issued by States and Political Subdivisions		33,596		533		—			34,129		33,254		125		—			33,379
Debt Securities Issued by Corporations		11,287		209		—			11,496		21,133		140		(271	)		21,002
Mortgage-Backed Securities:
Residential - Government Agencies		1,209,218		26,398		(13,732	)		1,221,884		1,877,804		18,683		(14,525	)		1,881,962
Residential - U.S. Government-Sponsored Enterprises		1,962,265		28,181		(25,499	)		1,964,947		2,371,155		22,683		(24,397	)		2,369,441
Commercial - Government Agencies		240,495		1,613		(4,551	)		237,557		465,069		900		(7,548	)		458,421
Total Mortgage-Backed Securities		3,411,978		56,192		(43,782	)		3,424,388		4,714,028		42,266		(46,470	)		4,709,824
Total	$	3,464,360	$	56,934	$	(43,948	)	$	3,477,346	$	4,899,880	$	42,808	$	(46,925	)	$	4,895,763
December 31, 2020
Available-for-Sale:
Debt Securities Issued by the U.S. Treasury and Government Agencies	$	174,409	$	427	$	(591	)	$	174,245	$	174,409	$	427	$	(591	)	$	174,245
Debt Securities Issued by States and Political Subdivisions		23,540		1,301		(1	)		24,840		23,540		1,301		(1	)		24,840
Debt Securities Issued by U.S. Government-Sponsored Enterprises		985		77		0			1,062		985		77		0			1,062
Debt Securities Issued by Corporations		220,717		4,844		(956	)		224,605		220,717		4,844		(956	)		224,605
Mortgage-Backed Securities:
Residential - Government Agencies		1,561,603		33,657		(445	)		1,594,815		1,561,603		33,657		(445	)		1,594,815
Residential - U.S. Government-Sponsored Enterprises		1,497,353		21,254		(324	)		1,518,283		1,497,353		21,254		(324	)		1,518,283
Commercial - Government Agencies		243,029		10,868		(58	)		253,839		243,029		10,868		(58	)		253,839
Total Mortgage-Backed Securities		3,301,985		65,779		(827	)		3,366,937		3,301,985		65,779		(827	)		3,366,937
Total	$	3,721,636	$	72,428	$	(2,375	)	$	3,791,689	$	3,721,636	$	72,428	$	(2,375	)	$	3,791,689
Held-to-Maturity:
Debt Securities Issued by the U.S. Treasury and Government Agencies	$	7,500	$	8	$	(8	)	$	7,500	$	7,500	$	8	$	(8	)	$	7,500
Debt Securities Issued by States and Political Subdivisions		33,763		741		—			34,504		33,763		741		—			34,504
Debt Securities Issued by Corporations		12,031		251		—			12,282		12,031		251		—			12,282
Mortgage-Backed Securities:
Residential - Government Agencies		917,459		30,580		(29	)		948,010		917,459		30,580		(29	)		948,010
Residential - U.S. Government-Sponsored Enterprises		2,099,053		51,735		(291	)		2,150,497		2,099,053		51,735		(291	)		2,150,497
Commercial - Government Agencies		192,921		3,179		(200	)		195,900		192,921		3,179		(200	)		195,900
Total Mortgage-Backed Securities		3,209,433		85,494		(520	)		3,294,407		3,209,433		85,494		(520	)		3,294,407
Total	$	3,262,727	$	86,494	$	(528	)	$	3,348,693	$	3,262,727	$	86,494	$	(528	)	$	3,348,693

The Company elected to exclude accrued interest receivable (“AIR”) from the amortized cost basis of debt securities disclosed throughout this footnote. For available-for-sale (“AFS”) debt securities, AIR totaled ~~$6.7~~$7.9 million and $6.6 million as of ~~March 31,~~September 30, 2021, and December 31, 2020, respectively. For held-to-maturity (“HTM”) debt securities, AIR totaled ~~$7.1~~$9.0 million and $6.8 million as of ~~March 31,~~September 30, 2021, and December 31, 2020, respectively. AIR is included in the “accrued interest receivable” line item on the Company’s consolidated statements of condition.

The table below presents an analysis of the contractual maturities of the Company’s investment securities as of ~~March 31,~~September 30, 2021. Debt securities issued by government agencies (Small Business Administration securities) and mortgage-backed securities are disclosed separately in the table below as these investment securities may prepay prior to their scheduled contractual maturity dates.

(dollars in thousands)	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Available-for-Sale:
Due in One Year or Less	$	52,007	$	51,965	$	26,227	$	26,290
Due After One Year Through Five Years		71,863		74,454		111,281		113,889
Due After Five Years Through Ten Years		121,056		121,972		270,764		271,069
		244,926		248,391		408,272		411,248
Debt Securities Issued by Government Agencies		164,451		164,306		142,664		144,113
Mortgage-Backed Securities:
Residential - Government Agencies		1,564,690		1,585,345		1,410,231		1,417,183
Residential - U.S. Government-Sponsored Enterprises		1,835,401		1,807,929		2,223,697		2,200,052
Commercial - Government Agencies		213,467		218,792		177,721		180,924
Total Mortgage-Backed Securities		3,613,558		3,612,066		3,811,649		3,798,159
Total	$	4,022,935	$	4,024,763	$	4,362,585	$	4,353,520
Held-to-Maturity:
Due in One Year or Less		33,595		34,128		33,254		33,379
Due After One Year Through Five Years		18,787		18,830		17,290		17,285
Due After Five Year Through Ten Years						123,966		124,204
Due After Ten Years						11,342		11,071
		52,382		52,958		185,852		185,939
Mortgage-Backed Securities:
Residential - Government Agencies		1,209,218		1,221,884		1,877,804		1,881,962
Residential - U.S. Government-Sponsored Enterprises		1,962,265		1,964,947		2,371,155		2,369,441
Commercial - Government Agencies		240,495		237,557		465,069		458,421
Total Mortgage-Backed Securities		3,411,978		3,424,388		4,714,028		4,709,824
Total	$	3,464,360	$	3,477,346	$	4,899,880	$	4,895,763

Investment securities with carrying values of $3.5 billion and $3.6 billion as of ~~March 31,~~September 30, 2021, and December 31, 2020, respectively, were pledged to secure deposits of governmental entities, securities sold under agreements to repurchase, and FRB discount window borrowing.

The table below presents the gains and losses from the sales of investment securities for the three and nine months ended ~~March 31,~~September 30, 2021, and ~~March 31,~~September 30, 2020:

	Three Months Ended March 31,						Three Months Ended September 30,						Nine Months Ended September 30,
(dollars in thousands)	2021			2020			2021			2020			2021			2020
Gross Gains on Sales of Investment Securities	$	—		$	77		$	110		$	—		$	3,785		$	14,257
Gross Losses on Sales of Investment Securities		(1,203	)		(1,047	)		(1,369	)		(1,121	)		(3,824	)		(3,132	)
Net Gains (Losses) on Sales of Investment Securities	$	(1,203	)	$	(970	)	$	(1,259	)	$	(1,121	)	$	(39	)	$	11,125

~~The losses on sales of~~Net investment securities losses totaled $1.3 million in the third quarter of 2021 compared to $1.1 million during the ~~three months ended March 31,~~same period in 2020. The net loss in the third quarter of 2021 ~~and March 31, 2020, were~~was primarily due to the fees paid to the counterparties of ~~the Company’s~~our prior Visa Class B share sale ~~transactions, which are expensed as incurred.~~ transactions. The net losses of $39 thousand in the first nine months of 2021 was primarily due to $3.8 million of the fees paid to the counterparties of our prior Visa Class B shares and was partially offset by the net gain from the sale of mortgage-backed securities, corporate and government debt securities. The net gain of $11.2 million in the first nine months of 2020 was primarily due to the sale of 80,214 Visa Class B shares.

The following table summarizes the Company’s AFS debt securities in an unrealized loss position for which an allowance for credit losses ~~has~~was not ~~been recorded,~~deemed necessary, aggregated by major security type and length of time in a continuous unrealized loss position:

	Less Than 12 Months					12 Months or Longer					Total					Less Than 12 Months					12 Months or Longer					Total
(dollars in thousands)	Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses
March 31, 2021
September 30, 2021
Available-for-Sale:
Debt Securities Issued by the U.S. Treasury and Government Agencies	$	2,833	$	(10	)	$	96,248	$	(531	)	$	99,081	$	(541	)	$	1,772	$	(4	)	$	10,458	$	(102	)	$	12,230	$	(106	)
Debt Securities Issued by States and Political Subdivisions		482		(3	)		25		(1	)		507		(4	)		413		(2	)		—		—			413		(2	)
Debt Securities Issued by U.S. Government- Sponsored Enterprises		49		(1	)		—		—			49		(1	)		99		(1	)		—		—			99		(1	)
Debt Securities Issued by Corporations		39,224		(776	)		74,809		(191	)		114,033		(967	)		123,230		(734	)		64,190		(809	)		187,420		(1,543	)
Mortgage-Backed Securities:
Residential - Government Agencies		354,059		(7,613	)		8,515		(221	)		362,574		(7,834	)		804,605		(8,313	)		7,954		(170	)		812,559		(8,483	)
Residential - U.S. Government-Sponsored Enterprises		1,229,286		(41,118	)		—		—			1,229,286		(41,118	)		1,756,938		(30,015	)		43,773		(2,025	)		1,800,711		(32,040	)
Commercial-Government Agencies		24,246		(682	)		—		—			24,246		(682	)		—		—			23,688		(674	)		23,688		(674	)
Total Mortgage-Backed Securities		1,607,591		(49,413	)		8,515		(221	)		1,616,106		(49,634	)		2,561,543		(38,328	)		75,415		(2,869	)		2,636,958		(41,197	)
Total	$	1,650,179	$	(50,203	)	$	179,597	$	(944	)	$	1,829,776	$	(51,147	)	$	2,687,057	$	(39,069	)	$	150,063	$	(3,780	)	$	2,837,120	$	(42,849	)

December 31, 2020
Available-for-Sale: ¹
Debt Securities Issued by the U.S. Treasury and Government Agencies	$	21,338	$	(42	)	$	87,070	$	(549	)	$	108,408	$	(591	)	$	21,338	$	(42	)	$	87,070	$	(549	)	$	108,408	$	(591	)
Debt Securities Issued by States and Political Subdivisions		—		—			26		(1	)		26		(1	)		—		—			26		(1	)		26		(1	)
Debt Securities Issued by Corporations		65,000		(853	)		50,000		(103	)		115,000		(956	)		65,000		(853	)		50,000		(103	)		115,000		(956	)
Mortgage-Backed Securities:
Residential - Government Agencies		113,538		(222	)		28,063		(223	)		141,601		(445	)		113,538		(222	)		28,063		(223	)		141,601		(445	)
Residential - U.S. Government-Sponsored Enterprises		94,002		(324	)		—		—			94,002		(324	)		94,002		(324	)		—		—			94,002		(324	)
Commercial - Government Agencies		25,075		(58	)		—		—			25,075		(58	)		25,075		(58	)		—		—			25,075		(58	)
Total Mortgage-Backed Securities		232,615		(604	)		28,063		(223	)		260,678		(827	)		232,615		(604	)		28,063		(223	)		260,678		(827	)
Total	$	318,953	$	(1,499	)	$	165,159	$	(876	)	$	484,112	$	(2,375	)	$	318,953	$	(1,499	)	$	165,159	$	(876	)	$	484,112	$	(2,375	)

¹ The fair value and gross unrealized losses as of December 31, 2020, have been updated to properly reflect the length of time they were in a continuous unrealized loss position.

The Company does not believe that the AFS debt securities that were in an unrealized loss position as of ~~March 31,~~September 30, 2021, which were comprised of ~~155~~213 individual securities, represent a credit loss impairment. The gross unrealized losses were primarily attributable to changes in interest rates, relative to when the investment securities were purchased. As of ~~March 31,~~September 30, 2021, and December 31, 2020, the gross unrealized losses reported for mortgage-backed securities were mostly related to investment securities issued by ~~the~~ Ginnie Mae, Fannie Mae, and Freddie Mac. The Company does not intend to sell the investment securities that were in an unrealized loss position and it is not more likely than not that the Company will be required to sell the investment securities before recovery of their amortized cost basis, which may be at maturity.

Substantially all of the Company’s HTM debt securities are issued by U.S. government agencies or U.S. government-sponsored enterprises. These securities carry the explicit and/or implicit guarantee of the U.S. government, are widely recognized as “risk free,” and have a long history of zero credit loss. Therefore, ~~the Company did not record~~ an allowance for credit losses for these securities was not deemed necessary as of ~~March 31,~~September 30, 2021.

The Company also carries a limited portfolio of HTM municipal bonds. As of March 31, 2021, the entire portfolio consisted of State of Hawaii bonds carrying a Moody’s rating of Aa2, with a portion of these bonds escrowed to maturity. Utilizing the CECL approach, the Company determined that the expected credit loss on its municipal bond portfolio was de minimis, and therefore, an allowance for credit losses was not recorded as of March 31, 2021.

Interest income from taxable and non-taxable investment securities for the three and nine months ended ~~March 31,~~September 30, 2021, and ~~March 31,~~September 30, 2020, were as follows:

	Three Months Ended March 31,				Three Months Ended September 30,				Nine Months Ended September 30,
(dollars in thousands)	2021		2020		2021		2020		2021		2020
Taxable	$	28,856	$	35,393	$	32,889	$	30,027	$	91,510	$	96,150
Non-Taxable		281		570		261		498		820		1,637
Total Interest Income from Investment Securities	$	29,137	$	35,963	$	33,150	$	30,525	$	92,330	$	97,787

As of ~~March 31,~~September 30, 2021, and December 31, 2020, the carrying value of the Company’s Federal Home Loan Bank of Des Moines stock and Federal Reserve Bank stock was as follows:

(dollars in thousands)	March 31, 2021		December 31, 2020		September 30, 2021		December 31, 2020
Federal Home Loan Bank Stock	$	12,000	$	12,000
Federal Home Loan Bank of Des Moines Stock					$	10,000	$	12,000
Federal Reserve Bank Stock		21,401		21,340		21,574		21,340
Total	$	33,401	$	33,340	$	31,574	$	33,340

These securities can only be redeemed or sold at their par value and only to the respective issuing institution or to another member institution. The Company records these non-marketable equity securities as a component of other assets and periodically evaluates these securities for impairment. Management considers these non-marketable equity securities to be long-term investments. Accordingly, when evaluating these securities for impairment, management considers the ultimate recoverability of the par value rather than recognizing temporary declines in value.

In 2008, the Company received Visa Class B restricted shares as part of Visa’s initial public offering. These shares are transferable only under limited circumstances until they can be converted into the publicly traded Class A common shares. This conversion will not occur until the settlement of certain litigation which will be indemnified by Visa members, including the Company. Visa funded an escrow account from its initial public offering to settle these litigation claims. Should this escrow account be insufficient to cover these litigation claims, Visa is entitled to fund additional amounts to the escrow account by reducing each member bank’s Class B conversion ratio to unrestricted Class A shares. As of ~~March 31,~~September 30, 2021, the conversion ratio was 1.6228. See Note 1211 Derivative Financial Instruments for more information.

During the second quarter of 2020, the Company sold its remaining 80,214 Visa Class B Shares and recorded a $14.2 million gain on sale. As a result of this sale, the Company 0 longer owns any Visa Class B shares.

The Company’s loan and lease portfolio was comprised of the following as of ~~March 31,~~September 30, 2021, and December 31, 2020:

(dollars in thousands)	March 31, 2021		December 31, 2020		September 30, 2021		December 31, 2020
Commercial
Commercial and Industrial	$	2,013,981	$	1,875,293	$	1,325,446	$	1,357,610
PPP ¹						268,480		517,683
Commercial Mortgage		2,859,246		2,854,829		2,994,520		2,854,829
Construction		281,164		259,798		296,052		259,798
Lease Financing		104,980		110,766		107,526		110,766
Total Commercial		5,259,371		5,100,686		4,992,024		5,100,686
Consumer
Residential Mortgage		4,216,976		4,130,513		4,272,540		4,130,513
Home Equity		1,577,500		1,604,538		1,680,229		1,604,538
Automobile		710,407		708,800		727,234		708,800
Other ¹		376,449		395,483
Other ²						400,723		395,483
Total Consumer		6,881,332		6,839,334		7,080,726		6,839,334
Total Loans and Leases	$	12,140,703	$	11,940,020	$	12,072,750	$	11,940,020

The majority of the Company’s lending activity is with customers located in the State of Hawaii. A substantial portion of the Company’s real estate loans are secured by real estate in Hawaii.

Net gains related to sales of residential mortgage loans, recorded as a component of mortgage banking income were ~~$2.1~~$1.2 million and ~~$3.2~~$3.4 million for the three months ended ~~March 31,~~September 30, 2021, and ~~March 31,~~September 30, 2020, respectively, and $5.9 million and $9.0 million for the nine months ended September 30, 2021, and September 30, 2020, respectively.

The Company elected to exclude AIR from the amortized cost basis of loans disclosed throughout this footnote. As of ~~March 31,~~September 30, 2021, and December 31, 2020, AIR for loans totaled ~~$34.1~~$29.9 million and $35.9 million, respectively, and is included in the “accrued interest receivable” line item on the Company’s consolidated statements of condition.

~~As previously mentioned in Note 1~~ ~~Summary of Significant Accounting Policies~~,In response to the COVID-19 pandemic, the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act was passed by Congress and signed into law on March 27, 2020. The CARES Act established the PPP, ~~administered directly by the SBA. The PPP~~which provides loans to small businesses who were affected by economic conditions as a result of COVID-19 to provide cash-flow assistance to employers who maintain their eligible costs during the COVID-19 emergency. PPP loans carry an interest rate of 1 percent, and a maturity of two or five years. These loans are fully guaranteed by the ~~SBA~~Small Business Administration (“SBA”) and may be eligible for forgiveness by the SBA to the extent that the proceeds are used to cover eligible costs over a period of up to 24 weeks after the loan is made as long as certain conditions are met regarding employee retention and compensation levels. PPP loans deemed eligible for forgiveness by the SBA will be repaid by the SBA to the Company. The SBA pays the Company fees for processing PPP loans. These processing fees are accounted for as loan origination fees and recognized over the contractual loan term as a yield adjustment on the loans. PPP loans are included in the Commercial and Industrial loan class. As of March 31, 2021, and December 31, 2020, PPP loans totaled $744.8 million (6,911 loans) and $528.1 million (4,435 loans), respectively.

The following presents by portfolio segment, the activity in the Allowance for the three and nine months ended ~~March 31,~~September 30, 2021, and ~~March 31,~~September 30, 2020.

(dollars in thousands)	Commercial			Consumer			Total			Commercial			Consumer			Total
Three Months Ended March 31, 2021
Three Months Ended September 30, 2021
Allowance for Credit Losses:
Balance at Beginning of Period (December 31, 2020)	$	84,847		$	131,405		$	216,252
Balance at Beginning of Period										$	78,639		$	101,746		$	180,385
Loans and Leases Charged-Off		(248	)		(6,043	)		(6,291	)		(196	)		(3,249	)		(3,445	)
Recoveries on Loans and Leases Previously Charged-Off		112			3,263			3,375			118			2,134			2,252
Net Loans and Leases Recovered (Charged-Off)		(136	)		(2,780	)		(2,916	)		(78	)		(1,115	)		(1,193	)
Provision for Credit Losses		(1,900	)		(13,093	)		(14,993	)		(9,894	)		(1,378	)		(11,272	)
Balance at End of Period	$	82,811		$	115,532		$	198,343		$	68,667		$	99,253		$	167,920
Three Months Ended March 31, 2020
Nine Months Ended September 30, 2021
Allowance for Credit Losses:
Balance at Beginning of Period										$	84,847		$	131,405		$	216,252
Loans and Leases Charged-Off											(900	)		(13,145	)		(14,045	)
Recoveries on Loans and Leases Previously Charged-Off											374			8,378			8,752
Net Loans and Leases Recovered (Charged-Off)											(526	)		(4,767	)		(5,293	)
Provision for Credit Losses											(15,654	)		(27,385	)		(43,039	)
Balance at End of Period										$	68,667		$	99,253		$	167,920
Three Months Ended September 30, 2020
Allowance for Credit Losses:
Balance at Beginning of Period										$	72,522		$	100,917		$	173,439
Loans and Leases Charged-Off											(171	)		(2,176	)		(2,347	)
Recoveries on Loans and Leases Previously Charged-Off											231			3,573			3,804
Net Loans and Leases Recovered (Charged-Off)											60			1,397			1,457
Provision for Credit Losses											7,685			20,915			28,600
Balance at End of Period										$	80,267		$	123,229		$	203,496
Nine Months Ended September 30, 2020
Allowance for Credit Losses:
Balance at Beginning of Period (December 31, 2020)	$	73,801		$	36,226		$	110,027		$	73,801		$	36,226		$	110,027
CECL Adoption (Day 1) Impact		(18,789	)		17,052			(1,737	)		(18,789	)		17,052			(1,737	)
Balance at Beginning of Period (January 1, 2020)		55,012			53,278			108,290			55,012			53,278			108,290
Loans and Leases Charged-Off		(693	)		(6,484	)		(7,177	)		(1,520	)		(16,287	)		(17,807	)
Recoveries on Loans and Leases Previously Charged-Off		329			3,108			3,437			2,084			8,329			10,413
Net Loans and Leases Recovered (Charged-Off)		(364	)		(3,376	)		(3,740	)		564			(7,958	)		(7,394	)
Provision for Credit Losses		13,339			20,261			33,600			24,691			77,909			102,600
Balance at End of Period	$	67,987		$	70,163		$	138,150		$	80,267		$	123,229		$	203,496

The Company uses several credit quality indicators to manage credit risk in an ongoing manner. The Company uses an internal credit risk rating system that categorizes loans and leases into pass, special mention, or classified categories. Credit risk ratings are applied individually to those classes of loans and leases that have significant or unique credit characteristics that benefit from a case-by-case evaluation. These are typically loans and leases to businesses or individuals in the classes which comprise the commercial portfolio segment. Groups of loans and leases that are underwritten and structured using standardized criteria and characteristics, such as statistical models (e.g., credit scoring or payment performance), are typically risk-rated and monitored collectively. These are typically loans and leases to individuals in the classes which comprise the consumer portfolio segment.

For pass rated credits, risk ratings are certified at a minimum annually. For special mention or classified credits, risk ratings are reviewed for appropriateness on an ongoing basis, monthly, or at a minimum, quarterly. The following presents by credit quality indicator, loan class, and year of origination, the amortized cost basis of the Company’s loans and leases as of ~~March 31,~~September 30, 2021.

		Term Loans by Origination Year																			Term Loans by Origination Year
(dollars in thousands)	YTD March 31, 2021			2020		2019		2018		2017		Prior		Revolving Loans		Revolving Loans Converted to Term Loans		Total Loans and Leases		YTD September 30, 2021			2020		2019		2018		2017		Prior		Revolving Loans		Revolving Loans Converted to Term Loans		Total Loans and Leases
March 31, 2021
September 30, 2021
Commercial
Commercial and Industrial	Commercial and Industrial																			Commercial and Industrial
Pass		$	338,648	$	868,969	$	116,796	$	116,999	$	42,553	$	106,466	$	295,977	$	720	$	1,887,128		$	335,503	$	341,306	$	91,475	$	80,521	$	31,948	$	89,088	$	257,097	$	589	$	1,227,527
Special Mention			88		32,548		2,040		0		0		364		27,586		40		62,666			2,008		33,200		0		0		0		153		25,343		26		60,730
Classified			270		8,477		107		13,656		711		18,864		22,011		91		64,187			188		2,024		88		2,055		573		18,409		13,785		67		37,189
Total Commercial and Industrial		$	339,006	$	909,994	$	118,943	$	130,655	$	43,264	$	125,694	$	345,574	$	851	$	2,013,981		$	337,699	$	376,530	$	91,563	$	82,576	$	32,521	$	107,650	$	296,225	$	682	$	1,325,446
PPP
Pass																					$	196,837	$	71,643	$	0	$	0	$	0	$	0	$	0	$	0	$	268,480
Total PPP																					$	196,837	$	71,643	$	0	$	0	$	0	$	0	$	0	$	0	$	268,480
Commercial Mortgage
Pass		$	150,533	$	830,847	$	409,973	$	340,907	$	224,916	$	651,705	$	73,919	$	0	$	2,682,800		$	608,445	$	774,572	$	362,497	$	264,407	$	196,531	$	554,832	$	61,212	$	0	$	2,822,496
Special Mention			2,101		87,109		28,340		3,073		7,100		18,364		0		0		146,087			39,129		69,618		0		30,286		0		6,122		0		0		145,155
Classified			858		15,883		651		0		272		12,695		0		0		30,359			1,589		10,566		644		0		4,784		9,286		0		0		26,869
Total Commercial Mortgage		$	153,492	$	933,839	$	438,964	$	343,980	$	232,288	$	682,764	$	73,919	$	0	$	2,859,246		$	649,163	$	854,756	$	363,141	$	294,693	$	201,315	$	570,240	$	61,212	$	0	$	2,994,520
Construction
Pass		$	44,556	$	106,654	$	89,590	$	11,272	$	894	$	0	$	28,198	$	0	$	281,164		$	101,403	$	118,076	$	61,403	$	0	$	894	$	0	$	14,276	$	0	$	296,052
Total Construction		$	44,556	$	106,654	$	89,590	$	11,272	$	894	$	0	$	28,198	$	0	$	281,164		$	101,403	$	118,076	$	61,403	$	0	$	894	$	0	$	14,276	$	0	$	296,052
Lease Financing
Pass		$	4,324	$	19,212	$	19,450	$	12,764	$	3,441	$	44,528	$	0	$	0	$	103,719		$	18,997	$	15,935	$	16,836	$	10,749	$	2,586	$	41,531	$	0	$	0	$	106,634
Special Mention			0		31		47		92		36		78		0		0		284			0		0		0		892		0		0		0		0		892
Classified			0		0		16		961		0		0		0		0		977
Total Lease Financing		$	4,324	$	19,243	$	19,513	$	13,817	$	3,477	$	44,606	$	0	$	0	$	104,980		$	18,997	$	15,935	$	16,836	$	11,641	$	2,586	$	41,531	$	0	$	0	$	107,526
Total Commercial		$	541,378	$	1,969,730	$	667,010	$	499,724	$	279,923	$	853,064	$	447,691	$	851	$	5,259,371		$	1,304,099	$	1,436,940	$	532,943	$	388,910	$	237,316	$	719,421	$	371,713	$	682	$	4,992,024
Consumer
Residential Mortgage
Pass		$	461,424	$	1,258,849	$	507,084	$	259,764	$	401,540	$	1,325,854	$	0	$	0	$	4,214,515		$	1,120,627	$	1,173,498	$	403,404	$	201,297	$	285,312	$	1,083,359	$	0	$	0	$	4,267,497
Classified			0		0		294		403		913		851		0		0		2,461			0		0		294		0		2,281		2,468		0		0		5,043
Total Residential Mortgage		$	461,424	$	1,258,849	$	507,378	$	260,167	$	402,453	$	1,326,705	$	0	$	0	$	4,216,976		$	1,120,627	$	1,173,498	$	403,698	$	201,297	$	287,593	$	1,085,827	$	0	$	0	$	4,272,540
Home Equity
Pass		$	0	$	0	$	0	$	0	$	0	$	4,233	$	1,531,403	$	35,016	$	1,570,652		$	0	$	0	$	0	$	0	$	0	$	3,282	$	1,636,803	$	34,308	$	1,674,393
Classified			0		0		0		0		0		74		5,640		1,134		6,848			0		0		0		0		0		113		4,920		803		5,836
Total Home Equity		$	0	$	0	$	0	$	0	$	0	$	4,307	$	1,537,043	$	36,150	$	1,577,500		$	0	$	0	$	0	$	0	$	0	$	3,395	$	1,641,723	$	35,111	$	1,680,229
Automobile
Pass		$	78,416	$	198,814	$	194,351	$	140,735	$	58,966	$	38,521	$	0	$	0	$	709,803		$	233,401	$	166,682	$	155,905	$	105,933	$	40,967	$	23,952	$	0	$	0	$	726,840
Classified			0		142		128		112		122		100		0		0		604			26		53		87		55		17		156		0		0		394
Total Automobile		$	78,416	$	198,956	$	194,479	$	140,847	$	59,088	$	38,621	$	0	$	0	$	710,407		$	233,427	$	166,735	$	155,992	$	105,988	$	40,984	$	24,108	$	0	$	0	$	727,234
Other¹
Pass		$	23,146	$	65,620	$	132,730	$	81,022	$	32,567	$	9,534	$	29,581	$	1,421	$	375,621		$	127,788	$	54,794	$	105,858	$	55,663	$	21,442	$	6,949	$	26,151	$	1,485	$	400,130
Classified			0		149		294		218		72		30		60		5		828			0		93		244		95		78		10		70		3		593
Total Other		$	23,146	$	65,769	$	133,024	$	81,240	$	32,639	$	9,564	$	29,641	$	1,426	$	376,449		$	127,788	$	54,887	$	106,102	$	55,758	$	21,520	$	6,959	$	26,221	$	1,488	$	400,723
Total Consumer		$	562,986	$	1,523,574	$	834,881	$	482,254	$	494,180	$	1,379,197	$	1,566,684	$	37,576	$	6,881,332		$	1,481,842	$	1,395,120	$	665,792	$	363,043	$	350,097	$	1,120,289	$	1,667,944	$	36,599	$	7,080,726
Total Loans and Leases		$	1,104,364	$	3,493,304	$	1,501,891	$	981,978	$	774,103	$	2,232,261	$	2,014,375	$	38,427	$	12,140,703		$	2,785,941	$	2,832,060	$	1,198,735	$	751,953	$	587,413	$	1,839,710	$	2,039,657	$	37,281	$	12,072,750

For the ~~three~~nine months ended ~~March 31,~~September 30, 2021, and ~~March 31,~~September 30, 2020, ~~$0.9~~$2.5 million and ~~$0.6~~$1.3 million revolving loans, respectively, were converted to term loans.

The following presents by credit quality indicator, loan class, and year of origination, the amortized cost basis of the Company’s loans and leases as of December 31, 2020.

		Term Loans by Origination Year																			Term Loans by Origination Year
(dollars in thousands)	2020			2019		2018		2017		2016		Prior		Revolving Loans		Revolving Loans Converted to Term Loans		Total Loans and Leases		2020			2019		2018		2017		2016		Prior		Revolving Loans		Revolving Loans Converted to Term Loans		Total Loans and Leases
December 31, 2020
Commercial
Commercial and Industrial	Commercial and Industrial																			Commercial and Industrial
Pass		$	944,463	$	149,024	$	149,468	$	49,385	$	52,354	$	68,269	$	342,339	$	847	$	1,756,149		$	426,780	$	149,024	$	149,468	$	49,385	$	52,354	$	68,269	$	342,339	$	847	$	1,238,466
Special Mention			11,702		42		0		0		110		95		32,319		52		44,320			11,702		42		0		0		110		95		32,319		52		44,320
Classified			32,208		1,734		2,266		777		19		19,166		18,529		125		74,824			32,208		1,734		2,266		777		19		19,166		18,529		125		74,824
Total Commercial and Industrial		$	988,373	$	150,800	$	151,734	$	50,162	$	52,483	$	87,530	$	393,187	$	1,024	$	1,875,293		$	470,690	$	150,800	$	151,734	$	50,162	$	52,483	$	87,530	$	393,187	$	1,024	$	1,357,610
PPP
Pass																					$	517,683	$	0	$	0	$	0	$	0	$	0	$	0	$	0	$	517,683
Total PPP																					$	517,683	$	0	$	0	$	0	$	0	$	0	$	0	$	0	$	517,683
Commercial Mortgage
Pass		$	847,676	$	458,472	$	350,363	$	245,157	$	267,860	$	425,157	$	76,869	$	0	$	2,671,554		$	847,676	$	458,472	$	350,363	$	245,157	$	267,860	$	425,157	$	76,869	$	0	$	2,671,554
Special Mention			66,523		28,418		291		7,117		8,665		5,035		0		0		116,049			66,523		28,418		291		7,117		8,665		5,035		0		0		116,049
Classified			49,640		655		2,783		274		4,742		9,132		0		0		67,226			49,640		655		2,783		274		4,742		9,132		0		0		67,226
Total Commercial Mortgage		$	963,839	$	487,545	$	353,437	$	252,548	$	281,267	$	439,324	$	76,869	$	0	$	2,854,829		$	963,839	$	487,545	$	353,437	$	252,548	$	281,267	$	439,324	$	76,869	$	0	$	2,854,829
Construction
Pass		$	106,508	$	105,731	$	11,275	$	8,133	$	0	$	0	$	28,151	$	0	$	259,798		$	106,508	$	105,731	$	11,275	$	8,133	$	0	$	0	$	28,151	$	0	$	259,798
Total Construction		$	106,508	$	105,731	$	11,275	$	8,133	$	0	$	0	$	28,151	$	0	$	259,798		$	106,508	$	105,731	$	11,275	$	8,133	$	0	$	0	$	28,151	$	0	$	259,798
Lease Financing
Pass		$	19,906	$	20,132	$	13,785	$	4,202	$	9,657	$	41,755	$	0	$	0	$	109,437		$	19,906	$	20,132	$	13,785	$	4,202	$	9,657	$	41,755	$	0	$	0	$	109,437
Classified			33		67		1,092		42		95		0		0		0		1,329			33		67		1,092		42		95		0		0		0		1,329
Total Lease Financing		$	19,939	$	20,199	$	14,877	$	4,244	$	9,752	$	41,755	$	0	$	0	$	110,766		$	19,939	$	20,199	$	14,877	$	4,244	$	9,752	$	41,755	$	0	$	0	$	110,766
Total Commercial		$	2,078,659	$	764,275	$	531,323	$	315,087	$	343,502	$	568,609	$	498,207	$	1,024	$	5,100,686		$	2,078,659	$	764,275	$	531,323	$	315,087	$	343,502	$	568,609	$	498,207	$	1,024	$	5,100,686
Consumer
Residential Mortgage
Pass		$	1,300,831	$	576,452	$	295,522	$	454,165	$	545,798	$	954,120	$	0	$	0	$	4,126,888		$	1,300,831	$	576,452	$	295,522	$	454,165	$	545,798	$	954,120	$	0	$	0	$	4,126,888
Classified			0		294		0		1,032		0		2,299		0		0		3,625			0		294		0		1,032		0		2,299		0		0		3,625
Total Residential Mortgage		$	1,300,831	$	576,746	$	295,522	$	455,197	$	545,798	$	956,419	$	0	$	0	$	4,130,513		$	1,300,831	$	576,746	$	295,522	$	455,197	$	545,798	$	956,419	$	0	$	0	$	4,130,513
Home Equity
Pass		$	0	$	0	$	0	$	0	$	0	$	4,449	$	1,556,671	$	37,559	$	1,598,679		$	0	$	0	$	0	$	0	$	0	$	4,449	$	1,556,671	$	37,559	$	1,598,679
Classified			0		0		0		0		0		88		4,693		1,078		5,859			0		0		0		0		0		88		4,693		1,078		5,859
Total Home Equity		$	0	$	0	$	0	$	0	$	0	$	4,537	$	1,561,364	$	38,637	$	1,604,538		$	0	$	0	$	0	$	0	$	0	$	4,537	$	1,561,364	$	38,637	$	1,604,538
Automobile
Pass		$	219,218	$	213,914	$	158,216	$	68,776	$	33,899	$	13,850	$	0	$	0	$	707,873		$	219,218	$	213,914	$	158,216	$	68,776	$	33,899	$	13,850	$	0	$	0	$	707,873
Classified			101		245		171		113		161		136		0		0		927			101		245		171		113		161		136		0		0		927
Total Automobile		$	219,319	$	214,159	$	158,387	$	68,889	$	34,060	$	13,986	$	0	$	0	$	708,800		$	219,319	$	214,159	$	158,387	$	68,889	$	34,060	$	13,986	$	0	$	0	$	708,800
Other¹
Pass		$	71,042	$	145,549	$	92,993	$	39,770	$	9,225	$	2,189	$	32,070	$	1,485	$	394,323		$	71,042	$	145,549	$	92,993	$	39,770	$	9,225	$	2,189	$	32,070	$	1,485	$	394,323
Classified			51		419		375		167		42		21		85		0		1,160			51		419		375		167		42		21		85		0		1,160
Total Other		$	71,093	$	145,968	$	93,368	$	39,937	$	9,267	$	2,210	$	32,155	$	1,485	$	395,483		$	71,093	$	145,968	$	93,368	$	39,937	$	9,267	$	2,210	$	32,155	$	1,485	$	395,483
Total Consumer		$	1,591,243	$	936,873	$	547,277	$	564,023	$	589,125	$	977,152	$	1,593,519	$	40,122	$	6,839,334		$	1,591,243	$	936,873	$	547,277	$	564,023	$	589,125	$	977,152	$	1,593,519	$	40,122	$	6,839,334
Total Loans and Leases		$	3,669,902	$	1,701,148	$	1,078,600	$	879,110	$	932,627	$	1,545,761	$	2,091,726	$	41,146	$	11,940,020		$	3,669,902	$	1,701,148	$	1,078,600	$	879,110	$	932,627	$	1,545,761	$	2,091,726	$	41,146	$	11,940,020

Loans and leases are considered to be past due once becoming 30 days delinquent. For the consumer portfolio, this generally represents two missed monthly payments. The following presents by class, an aging analysis of the Company’s loan and lease portfolio as of ~~March 31,~~September 30, 2021, and December 31, 2020.

(dollars in thousands)	30 - 59 Days Past Due		60 - 89 Days Past Due		Past Due 90 Days or More		Non- Accrual		Total Past Due and Non- Accrual		Current		Total Loans and Leases		Non- Accrual Loans and Leases that are Current ²		30 - 59 Days Past Due		60 - 89 Days Past Due		Past Due 90 Days or More		Non- Accrual		Total Past Due and Non- Accrual		Current		Total Loans and Leases		Non- Accrual Loans and Leases that are Current ²
As of March 31, 2021
As of September 30, 2021
Commercial
Commercial and Industrial	$	3,398	$	70	$	9	$	293	$	3,770	$	2,010,211	$	2,013,981	$	257	$	130	$	1,887	$	0	$	209	$	2,226	$	1,323,220	$	1,325,446	$	172
PPP																		0		0		0		0		0		268,480		268,480		0
Commercial Mortgage		0		0		0		8,503		8,503		2,850,743		2,859,246		4,959		0		0		0		8,309		8,309		2,986,211		2,994,520		8,309
Construction		0		0		0		0		0		281,164		281,164		0		0		0		0		0		0		296,052		296,052		0
Lease Financing		0		0		0		0		0		104,980		104,980		0		0		0		0		0		0		107,526		107,526		0
Total Commercial		3,398		70		9		8,796		12,273		5,247,098		5,259,371		5,216		130		1,887		0		8,518		10,535		4,981,489		4,992,024		8,481
Consumer
Residential Mortgage		3,510		3,111		4,069		1,804		12,494		4,204,482		4,216,976		404		1,074		3,253		4,776		4,348		13,451		4,259,089		4,272,540		528
Home Equity		4,568		2,328		4,906		4,951		16,753		1,560,747		1,577,500		882		2,219		689		2,946		5,422		11,276		1,668,953		1,680,229		1,234
Automobile		5,422		1,157		604		0		7,183		703,224		710,407		0		6,427		1,110		395		0		7,932		719,302		727,234		0
Other ¹		4,650		1,237		828		0		6,715		369,734		376,449		0		2,067		743		593		0		3,403		397,320		400,723		0
Total Consumer		18,150		7,833		10,407		6,755		43,145		6,838,187		6,881,332		1,286		11,787		5,795		8,710		9,770		36,062		7,044,664		7,080,726		1,762
Total	$	21,548	$	7,903	$	10,416	$	15,551	$	55,418	$	12,085,285	$	12,140,703	$	6,502	$	11,917	$	7,682	$	8,710	$	18,288	$	46,597	$	12,026,153	$	12,072,750	$	10,243

As of December 31, 2020
Commercial
Commercial and Industrial	$	191	$	59	$	0	$	441	$	691	$	1,874,602	$	1,875,293	$	285	$	191	$	59	$	0	$	441	$	691	$	1,356,919	$	1,357,610	$	285
PPP																		0		0		0		0		0		517,683		517,683		0
Commercial Mortgage		0		0		0		8,527		8,527		2,846,302		2,854,829		4,983		0		0		0		8,527		8,527		2,846,302		2,854,829		4,983
Construction		0		0		0		0		0		259,798		259,798		0		0		0		0		0		0		259,798		259,798		0
Lease Financing		0		0		0		0		0		110,766		110,766		0		0		0		0		0		0		110,766		110,766		0
Total Commercial		191		59		0		8,968		9,218		5,091,468		5,100,686		5,268		191		59		0		8,968		9,218		5,091,468		5,100,686		5,268
Consumer
Residential Mortgage		4,049		2,083		5,274		3,223		14,629		4,115,884		4,130,513		2,100		4,049		2,083		5,274		3,223		14,629		4,115,884		4,130,513		2,100
Home Equity		3,423		3,378		3,187		3,958		13,946		1,590,592		1,604,538		987		3,423		3,378		3,187		3,958		13,946		1,590,592		1,604,538		987
Automobile		6,358		2,215		925		0		9,498		699,302		708,800		0		6,358		2,215		925		0		9,498		699,302		708,800		0
Other ¹		2,556		1,612		1,160		0		5,328		390,155		395,483		0		2,556		1,612		1,160		0		5,328		390,155		395,483		0
Total Consumer		16,386		9,288		10,546		7,181		43,401		6,795,933		6,839,334		3,087		16,386		9,288		10,546		7,181		43,401		6,795,933		6,839,334		3,087
Total	$	16,577	$	9,347	$	10,546	$	16,149	$	52,619	$	11,887,401	$	11,940,020	$	8,355	$	16,577	$	9,347	$	10,546	$	16,149	$	52,619	$	11,887,401	$	11,940,020	$	8,355

The following presents the non-accrual loans and leases as of ~~March 31,~~September 30, 2021, and December 31, 2020.

	March 31, 2021						December 31, 2020						September 30, 2021						December 31, 2020
(dollars in thousands)	Non-accrual loans with a related ACL		Non-accrual loans without a related ACL		Total Non- accrual loans		Non-accrual loans with a related ACL		Non-accrual loans without a related ACL		Total Non- accrual loans		Non-accrual loans with a related ACL		Non-accrual loans without a related ACL		Total Non- accrual loans		Non-accrual loans with a related ACL		Non-accrual loans without a related ACL		Total Non- accrual loans
Commercial
Commercial and Industrial	$	293	$	0	$	293	$	441	$	0	$	441	$	209	$	0	$	209	$	441	$	0	$	441
Commercial Mortgage		8,503		0		8,503		8,527		0		8,527		4,765		3,544		8,309		8,527		0		8,527
Total Commercial		8,796		0		8,796		8,968		0		8,968		4,974		3,544		8,518		8,968		0		8,968
Consumer
Residential Mortgage		1,679		125		1,804		3,096		127		3,223		3,989		359		4,348		3,096		127		3,223
Home Equity		4,951		0		4,951		3,958		0		3,958		5,422		0		5,422		3,958		0		3,958
Total Consumer		6,630		125		6,755		7,054		127		7,181		9,411		359		9,770		7,054		127		7,181
Total	$	15,426	$	125	$	15,551	$	16,022	$	127	$	16,149	$	14,385	$	3,903	$	18,288	$	16,022	$	127	$	16,149

All payments received while on non-accrual status are applied against the principal balance of the loan or lease. The Company does not recognize interest income while loans or leases are on non-accrual status.

A modification of a loan constitutes a ~~TDR~~troubled debt restructuring (“TDR”) when the Company, for economic or legal reasons related to a borrower’s financial difficulties, grants a concession to the borrower that it would not otherwise consider. Loans modified in a TDR were ~~$84.1~~$72.7 million as of ~~March 31,~~September 30, 2021, and $72.5 million as of December 31, 2020. There were ~~$0.3~~$0.2 million and $0.5 million commitments to lend additional funds on loans modified in a TDR as of ~~March 31,~~September 30, 2021, and December 31, 2020, respectively.

The Company offers various types of concessions when modifying a loan or lease. Commercial and industrial loans modified in a TDR often involve temporary interest-only payments, term extensions, and converting revolving credit lines to term loans. Additional collateral, a co-borrower, or a guarantor is often requested. Commercial mortgage and construction loans modified in a TDR often involve reducing the interest rate for the remaining term of the loan, extending the maturity date at an interest rate lower than the current market rate for new debt with similar risk, or substituting or adding a co-borrower or guarantor. Construction loans modified in a TDR may also involve extending the interest-only payment period. Residential mortgage loans modified in a TDR generally include fully amortizing the loan for up to 40 years from the modification effective date. In some cases, the Company may forbear a portion of the unpaid principal balance with a balloon payment due upon maturity or pay-off of the loan. Land loans are also included in the class of residential mortgage loans. Land loans are typically structured as interest-only monthly payments with a balloon payment due at maturity. Land loan modifications usually involve extending the interest-only monthly payments up to an additional five years with a balloon payment due at maturity, or re-amortizing the remaining balance over a period up to 360 months. Interest rates are not changed for land loan modifications. Home equity modifications are made infrequently and are uniquely designed to meet the specific needs of each borrower. Automobile loans modified in a TDR are primarily comprised of loans where the Company has lowered monthly payments by extending the term.

Loans modified in a TDR are typically already on non-accrual status and partial charge-offs have in some cases already been taken against the outstanding loan balance. As a result, loans modified in a TDR may have the financial effect of increasing the specific Allowance associated with the loan. An Allowance for impaired commercial and consumer loans that have been modified in a TDR is measured based on the present value of expected future cash flows discounted at the loan’s effective interest rate, the loan’s observable market price, or the estimated fair value of the collateral, less any selling costs, if the loan is collateral dependent. Management exercises significant judgment in developing these estimates.

The following presents by class, information related to loans modified in a TDR during the three and nine months ended ~~March 31,~~September 30, 2021, and ~~March 31,~~September 30, 2020.

	Loans Modified as a TDR for the Three Months Ended March 31, 2021						Loans Modified as a TDR for the Three Months Ended March 31, 2020						Loans Modified as a TDR for the Three Months Ended September 30, 2021						Loans Modified as a TDR for the Three Months Ended September 30, 2020
			Recorded		Increase in				Recorded		Increase in				Recorded		Increase in				Recorded		Increase in
Troubled Debt Restructurings			Investment		Allowance				Investment		Allowance				Investment		Allowance				Investment		Allowance
(dollars in thousands)	Number of Contracts		(as of period end)¹		(as of period end)		Number of Contracts		(as of period end)¹		(as of period end)		Number of Contracts		(as of period end)¹		(as of period end)		Number of Contracts		(as of period end)¹		(as of period end)
Commercial
Commercial and Industrial		5	$	112	$	1		2	$	99	$	2		2	$	153	$	2		0	$	0	$	0
Construction														0		0		0		1		92		1
Total Commercial		5		112		1		2		99		2		2		153		2		1		92		1
Consumer
Residential Mortgage														2		796		21		0		0		0
Home Equity		1		52		4		0		0		0		2		779		46		2		134		0
Automobile		394		8,287		115		52		893		14		71		1,632		22		12		227		4
Other ²		214		1,965		79		31		240		10		51		439		16		7		93		4
Total Consumer		609		10,304		198		83		1,133		24		126		3,646		105		21		454		8
Total		614	$	10,416	$	199		85	$	1,232	$	26		128	$	3,799	$	107		22	$	546	$	9

¹ The period end balances reflect all paydowns and charge-offs since the modification date. TDRs fully paid-off, charged-off, or foreclosed upon by period end are not included.

The following presents by class, all loans modified in a TDR that defaulted during the three and nine months ended ~~March 31,~~September 30, 2021, and ~~March 31,~~September 30, 2020, and within twelve months of their modification date. A TDR is considered to be in default once it becomes 60 days or more past due following a modification.

	Three Months Ended March 31, 2021				Three Months Ended March 31, 2020				Three Months Ended September 30, 2021				Three Months Ended September 30, 2020
TDRs that Defaulted During the Period,			Recorded				Recorded				Recorded				Recorded
Within Twelve Months of their Modification Date	Number of		Investment		Number of		Investment		Number of		Investment		Number of		Investment
(dollars in thousands)	Contracts		(as of period end)¹		Contracts		(as of period end)¹		Contracts		(as of period end)¹		Contracts		(as of period end)¹
Consumer
Automobile		18	$	281		18	$	176		8	$	157		1	$	6
Other ²		4		27		5		50		5		27		0		0
Total Consumer		22		308		23		226		13		184		1		6
Total		22	$	308		23	$	226		13	$	184		1	$	6

Commercial and consumer loans modified in a TDR are closely monitored for delinquency as an early indicator of possible future default. If loans modified in a TDR subsequently default, the Company evaluates the loan for possible further impairment. The specific Allowance associated with the loan may be increased, adjustments may be made in the allocation of the Allowance, or partial charge-offs may be taken to further write-down the carrying value of the loan.

The Company initially offered short-term loan modifications to assist borrowers during the COVID-19 national emergency. These modifications generally involve principal and/or interest payment deferrals for up to six months. ~~As the COVID-19 pandemic persists in negatively impacting the economy, the Company continues to offer additional loan modifications to borrowers struggling as a result of COVID-19.~~ Similar to the initial modifications granted, the additional round of loan modifications generally involve principal and/or interest payment deferrals for up to an additional six months for commercial and consumer loans, and principal-only deferrals for up to an additional 12 months for selected commercial loans. The Company generally continues to accrue and recognize interest income during the deferral period. The Company offers several repayment options such as immediate repayment, repayment over a designated time period or as a balloon payment at maturity, or by extending the loan term. These modifications generally do not involve forgiveness or interest rate reductions. ~~See Note 1~~ ~~Summary~~Although our formal assistance programs have ended, the Company continues to work with our customers who are still being impacted by the pandemic. In addition, the Company evaluates the need to record an allowance for the related AIR. As of ~~Significant Accounting Policies~~September 30, 2021, and December 31, 2020, the Company recorded an AIR allowance of $0.7 million and $2.7 million, respectively. The allowance was recorded as a contra-asset against AIR with the offset to provision for ~~more information.~~credit losses. In addition, the Company elected to deduct the AIR from the AIR Allowance (rather than reversing interest income) when the AIR is deemed uncollectible, which generally occurs when the related loan is placed on nonaccrual status or is charged-off.

~~The~~ Company, as lessor, also granted short-term lease concessions on some of its sales-type finance leases for equipment and automobiles. The concessions primarily consists of six-month extension programs whereby lease payments currently due are deferred and shifted to the end of the lease term. Interest income continues to accrue, and in certain cases paid during the deferral period. Additional rounds of lease concessions were not material. ~~See Note 1~~ ~~Summary~~

In accordance with Section 4013 of ~~Significant Accounting Policies~~ ~~for more information.~~

~~These~~the CARES Act and the joint agency statement issued by banking agencies, these COVID-19 related loan and lease modifications are not accounted for as TDRs. These loan and lease modifications totaled ~~$271.0~~$130.4 million ~~(118~~(23 loans and leases) for the commercial segment and ~~$51.1~~$7.5 million ~~(419~~(31 loans and leases) for the consumer segment as of September 30, 2021, and $311.6 million (210 loans and leases) for the commercial segment and $178.1 million (1,920 loans and leases) for the consumer segment as of ~~March 31, 2021, and~~ December 31, ~~2020, respectively.~~2020.

Consumer mortgage loans collateralized by residential real estate property that are in the process of foreclosure totaled $1.5 million as of ~~March 31,~~September 30, 2021.

The Company’s portfolio of residential mortgage loans serviced for third parties was $2.7 billion as of September 30, 2021, and $2.8 billion as of ~~March 31, 2021, and~~ December 31, ~~2020, respectively.~~2020. Substantially all of these loans were originated by the Company and sold to third parties on a non-recourse basis with servicing rights retained. These retained servicing rights are recorded as a servicing asset and are initially recorded at fair value (see Note 1413 Fair Value of Assets and Liabilities for more information). Changes to the balance of mortgage servicing rights are recorded in mortgage banking income in the Company’s consolidated statements of income.

The Company’s mortgage servicing activities include collecting principal, interest, and escrow payments from borrowers; making tax and insurance payments on behalf of borrowers; monitoring delinquencies and executing foreclosure proceedings; and accounting for and remitting principal and interest payments to investors. Servicing income, including late and ancillary fees, was $1.6 million and ~~$1.9~~$1.7 million for the three months ended ~~March 31,~~September 30, 2021, and ~~March 31,~~September 30, 2020, and $4.8 million and $5.4 million for the nine months ended September 30, 2021, and September 30, 2020, respectively. Servicing income is recorded in mortgage banking income in the Company’s consolidated statements of income. The Company’s residential mortgage investor loan servicing portfolio is primarily comprised of fixed rate loans concentrated in Hawaii.

For the three and nine months ended ~~March 31,~~September 30, 2021, and ~~March 31,~~September 30, 2020, the change in the carrying value of the Company’s mortgage servicing rights accounted for under the fair value measurement method was as follows:

	Three Months Ended March 31,						Three Months Ended September 30,						Nine Months Ended September 30,
(dollars in thousands)	2021			2020			2021			2020			2021			2020
Balance at Beginning of Period	$	958		$	1,126		$	875		$	1,068		$	958		$	1,126
Change in Fair Value:
Due to Payoffs		(39	)		(25	)
Total Changes in Fair Value of Mortgage Servicing Rights		(39	)		(25	)
Change in Fair Value Due to Payoffs:								(49	)		(50	)		(132	)		(108	)
Balance at End of Period	$	919		$	1,101		$	826		$	1,018		$	826		$	1,018

	Three Months Ended March 31,						Three Months Ended September 30,						Nine Months Ended September 30,
(dollars in thousands)	2021			2020			2021			2020			2021			2020
Balance at Beginning of Period	$	18,694		$	23,896		$	20,598		$	21,836		$	18,694		$	23,896
Servicing Rights that Resulted From Asset Transfers		1,680			1,165			1,082			872			4,022			3,042
Amortization		(1,163	)		(1,112	)		(1,069	)		(1,271	)		(3,228	)		(3,684	)
Valuation Allowance Recovery (Provision)		2,190			(2,513	)		662			(568	)		1,785			(2,385	)
Balance at End of Period	$	21,401		$	21,436		$	21,273		$	20,869		$	21,273		$	20,869

Valuation Allowance:
Balance at Beginning of Period	$	(3,892	)	$	—		$	(2,769	)	$	(1,817	)	$	(3,892	)	$	—
Valuation Allowance Recovery (Provision)		2,190			(2,513	)		662			(568	)		1,785			(2,385	)
Balance at End of Period	$	(1,702	)	$	(2,513	)	$	(2,107	)	$	(2,385	)	$	(2,107	)	$	(2,385	)
Fair Value of Mortgage Servicing Rights Accounted for Under the Amortization Method
Beginning of Period	$	18,694		$	25,714		$	20,598		$	21,836		$	18,694		$	25,714
End of Period	$	21,401		$	21,436		$	21,273		$	20,870		$	21,273		$	20,870

The key data and assumptions used in estimating the fair value of the Company’s mortgage servicing rights as of ~~March 31,~~September 30, 2021, and December 31, 2020, were as follows:

	March 31, 2021			December 31, 2020			September 30, 2021			December 31, 2020
Weighted-Average Constant Prepayment Rate ¹		11.27	%		14.42	%		11.50	%		14.42	%
Weighted-Average Life (in years)		6.03			4.99			6.00			4.99
Weighted-Average Note Rate		3.79	%		3.87	%		3.67	%		3.87	%
Weighted-Average Discount Rate ²		6.88	%		5.81	%		6.67	%		5.81	%

A sensitivity analysis of the Company’s fair value of mortgage servicing rights to changes in certain key assumptions as of ~~March 31,~~September 30, 2021, and December 31, 2020, is presented in the following table.

(dollars in thousands)	March 31, 2021			December 31, 2020			September 30, 2021			December 31, 2020
Constant Prepayment Rate
Decrease in fair value from 25 basis points (“bps”) adverse change	$	(251	)	$	(203	)	$	(246	)	$	(203	)
Decrease in fair value from 50 bps adverse change		(498	)		(401	)		(487	)		(401	)
Discount Rate
Decrease in fair value from 25 bps adverse change		(226	)		(184	)		(223	)		(184	)
Decrease in fair value from 50 bps adverse change		(447	)		(365	)		(441	)		(365	)

This analysis generally cannot be extrapolated because the relationship of a change in one key assumption to the change in the fair value of the Company’s mortgage servicing rights usually is not linear. Also, the effect of changing one key assumption without changing other assumptions is not realistic.

The Company makes equity investments in various limited partnerships or limited liability companies that sponsor affordable housing projects utilizing the Low Income Housing Tax Credit (“LIHTC”) pursuant to Section 42 of the Internal Revenue Code. The purpose of these investments is to achieve a satisfactory return on capital, to facilitate the sale of affordable housing product offerings, and to assist in achieving goals associated with the Community Reinvestment Act. The primary activities of these entities include the identification, development, and operation of multi-family housing that is leased to qualifying residential tenants. Generally, these types of investments are funded through a combination of debt and equity.

The Company is a limited partner or non-managing member in each LIHTC limited partnership or limited liability company, respectively. Each of these entities is managed by an unrelated third-party general partner or managing member who exercises significant control over the affairs of the entity. The general partner or managing member has all the rights, powers and authority granted or permitted to be granted to a general partner of a limited partnership or managing member of a limited liability company. Duties entrusted to the general partner or managing member include, but are not limited to: investment in operating companies, company expenditures, investment of excess funds, borrowing funds, employment of agents, disposition of fund property, prepayment and refinancing of liabilities, votes and consents, contract authority, disbursement of funds, accounting methods, tax elections, bank accounts, insurance, litigation, cash reserve, and use of working capital reserve funds. Except for limited rights granted to the limited partner(s) or non-managing member(s) relating to the approval of certain transactions, the limited partner(s) and non-managing member(s) may not participate in the operation, management, or control of the entity’s business, transact any business in the entity’s name or have any power to sign documents for or otherwise bind the entity. In addition, the general partner or managing member may only be removed by the limited partner(s) or managing member(s) in the event of a failure to comply with the terms of the agreement or negligence in performing its duties.

The general partner or managing member of each entity has both the power to direct the activities which most significantly affect the performance of each entity and the obligation to absorb losses or the right to receive benefits that could be significant to the entities. Therefore, the Company has determined that it is not the primary beneficiary of any LIHTC entity. The Company uses the effective yield method to account for its pre-2015 investments in these entities. Beginning January 1, 2015, any new investments that meet the requirements of the proportional amortization method are recognized using the proportional amortization method. The Company’s net affordable housing tax credit investments and related unfunded commitments were ~~$134.8~~$126.9 million and $138.9 million as of ~~March 31,~~September 30, 2021, and December 31, 2020, respectively, and are included in other assets in the consolidated statements of condition.

As of ~~March 31,~~September 30, 2021, the expected payments for unfunded affordable housing commitments were as follows:

(dollars in thousands)	Amount		Amount
2021	$	15,122	$	12,710
2022		6,757		6,757
2023		19,025		19,025
2024		173		173
2025		56		56
Thereafter		3,424		3,424
Total Unfunded Commitments	$	44,557	$	42,145

The following table presents tax credits and other tax benefits recognized and amortization expense related to affordable housing for the three and nine months ended ~~March 31,~~September 30, 2021, and ~~March 31,~~September 30, 2020.

	Three Months Ended March 31,				Three Months Ended September 30,				Nine Months Ended September 30,
(dollars in thousands)	2021		2020		2021		2020		2021		2020
Effective Yield Method
Tax credits and other tax benefits recognized	$	2,151	$	2,938	$	2,151	$	2,938	$	6,453	$	8,814
Amortization Expense in Provision for Income Taxes		1,692		2,147		1,670		2,347		5,032		7,042
Proportional Amortization Method
Tax credits and other tax benefits recognized	$	2,591	$	1,523	$	2,708	$	1,794	$	8,178	$	4,839
Amortization Expense in Provision for Income Taxes		2,326		1,318		2,332		1,345		7,043		3,580

There were 0 impairment losses related to LIHTC investments during the ~~three~~nine months ended ~~March 31,~~September 30, 2021, and ~~March 31,~~September 30, 2020.

The Company enters into swap agreements to facilitate the risk management strategies of a small number of commercial banking customers. The Company mitigates the risk of entering into these agreements by entering into equal and offsetting swap agreements with third-party financial institutions. The swap agreements are free-standing derivatives and are recorded at fair value in the Company’s consolidated statements of condition (asset positions are included in other assets and liability positions are included in other liabilities). The Company is party to master netting arrangements with its financial institution counterparties; however, the Company does not offset assets and liabilities under these arrangements for financial statement presentation purposes. The master netting arrangements provide for a single net settlement of all swap agreements, as well as collateral, in the event of default on, or termination of, any one contract. Collateral, usually in the form of cash or marketable securities, is posted by the party (i.e., the Company or the financial institution counterparty) with net liability positions in accordance with contract thresholds. The Company had net liability positions with its financial institution counterparties totaling $11.6 million and $17.2 million as of March 31, 2021, and December 31, 2020, respectively. See Note 12 ~~Derivative Financial Instruments~~ ~~for more information.~~

Parties to a centrally cleared over-the-counter derivative exchange daily payments that reflect the daily change in value of the derivative. Effective 2017, these payments, commonly referred to as variation margin, are recorded as settlements of the derivatives’ mark-to-market exposure rather than collateral against the exposures. This rule change effectively results in any centrally cleared derivative having a fair value that approximates zero on a daily basis, and therefore, these swap agreements were not included in the offsetting table at the end of this section. See Note 12 ~~Derivative Financial Instruments~~ ~~for more information.~~

~~Securities Sold Under Agreements to Repurchase (“Repurchase Agreements”)~~

The Company enters into agreements under which it sells securities subject to an obligation to repurchase the same or similar securities. Under these arrangements, the Company may transfer legal control over the assets but still retain effective control through an agreement that both entitles and obligates the Company to repurchase the assets. As a result, these repurchase agreements are accounted for as collateralized financing arrangements (i.e., secured borrowings) and not as sales and subsequent repurchases of securities. The obligation to repurchase the securities is reflected as a liability in the Company’s consolidated statements of condition, while the securities underlying the repurchase agreements remain in the respective investment securities asset accounts. As a result, there is no offsetting or netting of the investment securities assets with the repurchase agreement liabilities. In addition, as the Company does not enter into reverse repurchase agreements, there is no such offsetting to be done with the repurchase agreements.

The right of setoff for a repurchase agreement resembles a secured borrowing, whereby the collateral pledged by the Company would be used to settle the fair value of the repurchase agreement should the Company be in default (e.g., fail to make an interest payment to the counterparty). For private institution repurchase agreements, if the private institution counterparty were to default (e.g., declare bankruptcy), the Company could cancel the repurchase agreement (i.e., cease payment of principal and interest) and attempt collection on the amount of collateral value in excess of the repurchase agreement fair value. The collateral is held by a third-party financial institution in the counterparty’s custodial account. The counterparty has the right to sell or repledge the investment securities. For government entity repurchase agreements, the collateral is held by the Company in a segregated custodial account under a tri-party agreement. The Company is required by the counterparty to maintain adequate collateral levels. In the event the collateral fair value falls below stipulated levels, the Company will pledge additional securities. The Company closely monitors collateral levels to ensure adequate levels are maintained, while mitigating the potential risk of over-collateralization in the event of counterparty default.

The following table presents the ~~remaining contractual maturities~~fair value of the ~~Company’s~~related collateral pledged against repurchase agreements as of ~~March 31,~~September 30, 2021, and December 31, ~~2020, disaggregated by the~~2020.

¹The class of collateral ~~pledged.~~pledged as of December 31, 2020, have been updated to properly reflect the remaining contractual maturity of repurchase agreements.

The following table presents the assets and liabilities subject to an enforceable master netting arrangement, or repurchase agreements as of ~~March 31,~~September 30, 2021, and December 31, 2020. The swap agreements the Company has with our commercial banking customers are not subject to an enforceable master netting arrangement, and therefore, are excluded from this table. ~~As previously mentioned, centrally~~Centrally cleared swap agreements between the Company and institutional counterparties are also excluded from this table. See Note 11 Derivative Financial Instruments for more information on swap agreements.

	(i)		(ii)		(iii) = (i)-(ii)		(iv)				(v) = (iii)-(iv)		(i)		(ii)		(iii) = (i)-(ii)		(iv)				(v) = (iii)-(iv)
							Gross Amounts Not Offset in the Statements of Condition												Gross Amounts Not Offset in the Statements of Condition
(dollars in thousands)	Gross Amounts Recognized in the Statements of Condition		Gross Amounts Offset in the Statements of Condition		Net Amounts Presented in the Statements of Condition		Netting Adjustments per Master Netting Arrangements		Fair Value of Collateral Pledged/ Received ¹		Net Amount		Gross Amounts Recognized in the Statements of Condition		Gross Amounts Offset in the Statements of Condition		Net Amounts Presented in the Statements of Condition		Netting Adjustments per Master Netting Arrangements		Fair Value of Collateral Pledged/ Received ¹		Net Amount
March 31, 2021
September 30, 2021
Assets:
Interest Rate Swap Agreements:
Institutional Counterparties													$	22	$	0	$	22	$	22	$	0	$	0

Liabilities:
Interest Rate Swap Agreements:
Institutional Counterparties	$	11,627	$	0	$	11,627	$	0	$	7,071	$	4,556	$	8,297	$	0	$	8,297	$	22	$	53,265	$	(44,990	)
Repurchase Agreements:
Private Institutions		600,000		0		600,000		—		600,000		0		450,000		0		450,000		—		450,000		0
Government Entities		490		0		490		—		490		0		490		0		490		—		490		0
	$	600,490	$	0	$	600,490	$	—	$	600,490	$	0	$	450,490	$	0	$	450,490	$	—	$	450,490	$	0
December 31, 2020
Assets:
Interest Rate Swap Agreements:
Institutional Counterparties	$	5	$	0	$	5	$	5	$	0	$	0	$	5	$	0	$	5	$	5	$	0	$	0
Liabilities:
Interest Rate Swap Agreements:
Institutional Counterparties		17,202		0		17,202		5		7,911		9,286		17,202		0		17,202		5		7,911		9,286
Repurchase Agreements:
Private Institutions		600,000		0		600,000		—		600,000		0		600,000		0		600,000		—		600,000		0
Government Entities		590		0		590		—		590		0		590		0		590		—		590		0
	$	600,590	$	0	$	600,590	$	—	$	600,590	$	0	$	600,590	$	0	$	600,590	$	—	$	600,590	$	0

The following table presents the components of other comprehensive income (loss) for the three and nine months ended ~~March 31,~~September 30, 2021, and ~~March 31,~~September 30, 2020:

(dollars in thousands)	Before Tax			Tax Effect			Net of Tax			Before Tax			Tax Effect			Net of Tax
Three Months Ended March 31, 2021
Three Months Ended September 30, 2021
Net Unrealized Gains (Losses) on Investment Securities:
Net Unrealized Gains (Losses) Arising During the Period										$	(10,263	)	$	(2,719	)	$	(7,544	)
Amounts Reclassified from Accumulated Other Comprehensive Income (Loss) that (Increase) Decrease Net Income:
(Gain) Loss on Sale											(83	)		(22	)		(61	)
Amortization of Unrealized Holding (Gains) Losses on Held-to- Maturity Securities ¹											87			23			64
Net Unrealized Gains (Losses) on Investment Securities											(10,259	)		(2,718	)		(7,541	)
Defined Benefit Plans:
Amortization of Net Actuarial Losses (Gains)											662			175			487
Amortization of Prior Service Credit											(62	)		(16	)		(46	)
Defined Benefit Plans, Net											600			159			441
Other Comprehensive Income (Loss)										$	(9,659	)	$	(2,559	)	$	(7,100	)

Three Months Ended September 30, 2020
Net Unrealized Gains (Losses) on Investment Securities:
Net Unrealized Gains (Losses) Arising During the Period	$	(68,225	)	$	(18,082	)	$	(50,143	)	$	(6,771	)	$	(1,795	)	$	(4,976	)
Amounts Reclassified from Accumulated Other Comprehensive Income (Loss) that (Increase) Decrease Net Income:
Amortization of Unrealized Holding (Gains) Losses on Held-to- Maturity Securities ¹		125			32			93			103			27			76
Net Unrealized Gains (Losses) on Investment Securities		(68,100	)		(18,050	)		(50,050	)		(6,668	)		(1,768	)		(4,900	)
Defined Benefit Plans:
Amortization of Net Actuarial Losses (Gains)		662			177			485			570			151			419
Amortization of Prior Service Credit		(61	)		(17	)		(44	)		(61	)		(16	)		(45	)
Defined Benefit Plans, Net		601			160			441			509			135			374
Other Comprehensive Income (Loss)	$	(67,499	)	$	(17,890	)	$	(49,609	)	$	(6,159	)	$	(1,633	)	$	(4,526	)

Three Months Ended March 31, 2020
Nine Months Ended September 30, 2021
Net Unrealized Gains (Losses) on Investment Securities:
Net Unrealized Gains (Losses) Arising During the Period	$	56,556		$	14,989		$	41,567		$	(75,360	)	$	(19,954	)	$	(55,406	)
Amounts Reclassified from Accumulated Other Comprehensive Income (Loss) that (Increase) Decrease Net Income:
(Gain) Loss on Sale		(77	)		(21	)		(56	)		(3,758	)		(1,014	)		(2,744	)
Amortization of Unrealized Holding (Gains) Losses on Held-to- Maturity Securities ¹		65			17			48			593			157			436
Net Unrealized Gains (Losses) on Investment Securities		56,544			14,985			41,559			(78,525	)		(20,811	)		(57,714	)
Defined Benefit Plans:
Amortization of Net Actuarial Losses (Gains)		570			152			418			1,985			525			1,460
Amortization of Prior Service Credit		(61	)		(17	)		(44	)		(185	)		(49	)		(136	)
Defined Benefit Plans, Net		509			135			374			1,800			476			1,324
Other Comprehensive Income (Loss)	$	57,053		$	15,120		$	41,933		$	(76,725	)	$	(20,335	)	$	(56,390	)

Nine Months Ended September 30, 2020
Net Unrealized Gains (Losses) on Investment Securities:
Net Unrealized Gains (Losses) Arising During the Period										$	60,177		$	15,945		$	44,232
Amounts Reclassified from Accumulated Other Comprehensive Income (Loss) that (Increase) Decrease Net Income:
(Gain) Loss on Sale											(77	)		(21	)		(56	)
Amortization of Unrealized Holding (Gains) Losses on Held-to- Maturity Securities ¹											289			76			213
Net Unrealized Gains (Losses) on Investment Securities											60,389			16,000			44,389
Defined Benefit Plans:
Amortization of Net Actuarial Losses (Gains)											1,711			454			1,257
Amortization of Prior Service Credit											(184	)		(49	)		(135	)
Defined Benefit Plans, Net											1,527			405			1,122
Other Comprehensive Income (Loss)										$	61,916		$	16,405		$	45,511

The following table presents the changes in each component of accumulated other comprehensive income (loss), net of tax, for the three and nine months ended ~~March 31,~~September 30, 2021, and ~~March 31,~~September 30, 2020:

(dollars in thousands)	Investment Securities- Available- for-Sale			Investment Securities- Held-to-Maturity			Defined Benefit Plans			Accumulated Other Comprehensive Income (Loss)			Investment Securities- Available- for-Sale			Investment Securities- Held-to-Maturity			Defined Benefit Plans			Accumulated Other Comprehensive Income (Loss)
Three Months Ended March 31, 2021
Three Months Ended September 30, 2021
Balance at Beginning of Period	$	51,495		$	(423	)	$	(43,250	)	$	7,822		$	950		$	(51	)	$	(42,367	)	$	(41,468	)
Other Comprehensive Income (Loss) Before Reclassifications		(50,143	)		0			0			(50,143	)		(7,544	)		0			0			(7,544	)
Amounts Reclassified from Accumulated Other Comprehensive Income (Loss)		0			93			441			534			(61	)		64			441			444
Total Other Comprehensive Income (Loss)		(50,143	)		93			441			(49,609	)		(7,605	)		64			441			(7,100	)
Balance at End of Period	$	1,352		$	(330	)	$	(42,809	)	$	(41,787	)	$	(6,655	)	$	13		$	(41,926	)	$	(48,568	)

Three Months Ended March 31, 2020
Three Months Ended September 30, 2020
Balance at Beginning of Period	$	8,359		$	(715	)	$	(38,756	)	$	(31,112	)	$	57,511		$	(578	)	$	(38,008	)	$	18,925
Other Comprehensive Income (Loss) Before Reclassifications		41,567			0			0			41,567			(4,976	)		0			0			(4,976	)
Amounts Reclassified from Accumulated Other Comprehensive Income (Loss)		(56	)		48			374			366			0			76			374			450
Total Other Comprehensive Income (Loss)		41,511			48			374			41,933			(4,976	)		76			374			(4,526	)
Balance at End of Period	$	49,870		$	(667	)	$	(38,382	)	$	10,821		$	52,535		$	(502	)	$	(37,634	)	$	14,399

Nine Months Ended September 30, 2021
Balance at Beginning of Period													$	51,495		$	(423	)	$	(43,250	)	$	7,822
Other Comprehensive Income (Loss) Before Reclassifications														(55,406	)		0			0			(55,406	)
Amounts Reclassified from Accumulated Other Comprehensive Income (Loss)														(2,744	)		436			1,324			(984	)
Total Other Comprehensive Income (Loss)														(58,150	)		436			1,324			(56,390	)
Balance at End of Period													$	(6,655	)	$	13		$	(41,926	)	$	(48,568	)

Nine Months Ended September 30, 2020
Balance at Beginning of Period													$	8,359		$	(715	)	$	(38,756	)	$	(31,112	)
Other Comprehensive Income (Loss) Before Reclassifications														44,232			0			0			44,232
Amounts Reclassified from Accumulated Other Comprehensive Income (Loss)														(56	)		213			1,122			1,279
Total Other Comprehensive Income (Loss)														44,176			213			1,122			45,511
Balance at End of Period													$	52,535		$	(502	)	$	(37,634	)	$	14,399

The following table presents the amounts reclassified out of each component of accumulated other comprehensive income (loss) for the three and nine months ended ~~March 31,~~September 30, 2021, and ~~March 31,~~September 30, 2020:

Details about Accumulated Other Comprehensive Income (Loss) Components	Amount Reclassified from Accumulated Other Comprehensive Income (Loss)¹						Affected Line Item in the Statement Where Net Income Is Presented	Amount Reclassified from Accumulated Other Comprehensive Income (Loss)¹						Affected Line Item in the Statement Where Net Income Is Presented
	Three Months Ended March 31,							Three Months Ended September 30,
(dollars in thousands)	2021			2020				2021			2020
Amortization of Unrealized Holding Gains (Losses) on Investment Securities Held-to-Maturity	$	(125	)	$	(65	)	Interest Income	$	(87	)	$	(103	)	Interest Income
		32			17		Provision for Income Tax		23			27		Provision for Income Tax
		(93	)		(48	)	Net of Tax		(64	)		(76	)	Net of Tax
Sale of Investment Securities Available-for-Sale		0			77		Investment Securities Gains (Losses), Net		83			0		Investment Securities Gains (Losses), Net
		0			(21	)	Provision for Income Tax		(22	)		0		Provision for Income Tax
		0			56		Net of tax		61			0		Net of tax

Amortization of Defined Benefit Plan Items
Prior Service Credit ²		61			61				62			62
Net Actuarial Losses ²		(662	)		(570	)			(662	)		(571	)
		(601	)		(509	)	Total Before Tax		(600	)		(509	)	Total Before Tax
		160			135		Provision for Income Tax		159			135		Provision for Income Tax
		(441	)		(374	)	Net of Tax		(441	)		(374	)	Net of Tax

Total Reclassifications for the Period	$	(534	)	$	(366	)	Net of Tax	$	(444	)	$	(450	)	Net of Tax

Details about Accumulated Other Comprehensive Income (Loss) Components								Amount Reclassified from Accumulated Other Comprehensive Income (Loss)¹						Affected Line Item in the Statement Where Net Income Is Presented
								Nine Months Ended September 30,
(dollars in thousands)								2021			2020
Amortization of Unrealized Holding Gains (Losses) on Investment Securities Held-to-Maturity								$	(593	)	$	(289	)	Interest Income
									157			76		Provision for Income Tax
									(436	)		(213	)	Net of Tax
Sale of Investment Securities Available-for-Sale									3,758			77		Investment Securities Gains (Losses), Net
									(1,014	)		(21	)	Provision for Income Tax
									2,744			56		Net of tax

Amortization of Defined Benefit Plan Items
Prior Service Credit ²									185			185
Net Actuarial Losses ²									(1,985	)		(1,712	)
									(1,800	)		(1,527	)	Total Before Tax
									476			405		Provision for Income Tax
									(1,324	)		(1,122	)	Net of Tax

Total Reclassifications for the Period								$	984		$	(1,279	)	Net of Tax

~~There were no adjustments to net income,~~Earnings per common share is computed using the ~~numerator, for purposes of computing earnings per share.~~ two-class method. The following is a reconciliation of the weighted average number of common shares ~~outstanding for computing~~used in the calculation of basic and diluted earnings per common share and antidilutive stock options and restricted stock outstanding for the three and nine months ended ~~March 31,~~September 30, 2021, and ~~March 31,~~September 30, 2020:

	Three Months Ended March 31,				Three Months Ended September 30,				Nine Months Ended September 30,
(dollars in thousands, except shares and per share amounts)					2021		2020		2021		2020
Numerator:
Net Income Available to Common Shareholders					$	61,047	$	37,840	$	188,529	$	111,490
	2021		2020
Denominator for Basic Earnings Per Share		39,827,590		39,681,611
Denominator:
Weighted Average Common Shares Outstanding - Basic						39,881,437		39,745,120		39,870,450		39,710,252
Dilutive Effect of Equity Based Awards		243,887		235,375		199,482		124,015		218,449		162,154
Denominator for Diluted Earnings Per Share		40,071,477		39,916,986
Weighted Average Common Shares Outstanding - Diluted						40,080,919		39,869,135		40,088,899		39,872,406

Earnings Per Common Share:
Basic					$	1.53	$	0.95	$	4.73	$	2.81
Diluted					$	1.52	$	0.95	$	4.70	$	2.80

Antidilutive Stock Options and Restricted Stock Outstanding		267,741		106,602		47,087		108,207		44,217		106,140

The Company’s business segments are defined as Consumer Banking, Commercial Banking, and Treasury and Other. The Company’s internal management accounting process measures the performance of these business segments. This process, which is not necessarily comparable with the process used by any other financial institution, uses various techniques to assign balance sheet and income statement amounts to the business segments, including allocations of income, expense, the provision for credit losses, and capital. This process is dynamic and requires certain allocations based on judgment and other subjective factors. Unlike financial accounting, there is no comprehensive authoritative guidance for management accounting that is equivalent to GAAP. Previously reported results have been reclassified to conform to the current reporting structure.

The net interest income of the business segments reflects the results of a funds transfer pricing process that matches assets and liabilities with similar interest rate sensitivity and maturity characteristics and reflects the allocation of net interest income related to the Company’s overall asset and liability management activities on a proportionate basis. The basis for the allocation of net interest income is a function of the Company’s assumptions that are subject to change based on changes in current interest rates and market conditions. Funds transfer pricing also serves to transfer interest rate risk to Treasury. However, the other business segments have some latitude to retain certain interest rate exposures related to customer pricing decisions within guidelines.

The provision for credit losses for the Consumer Banking and Commercial Banking business segments reflects the actual net charge-offs of those business segments. The amount of the consolidated provision for loan and lease losses is based on the methodology that we use to estimate our consolidated Allowance. The residual provision for credit losses to arrive at the consolidated provision for credit losses is included in Treasury and Other.

Noninterest income and expense includes allocations from support units to business units. These allocations are based on actual usage where practicably calculated or by management’s estimate of such usage.

The provision for income taxes is allocated to business segments using a 26% effective income tax rate. However, the provision for income taxes for our Leasing business unit (included in the Commercial Banking segment) and Auto Leasing portfolio and Pacific Century Life Insurance business unit (both included in the Consumer Banking segment) are assigned their actual effective income tax rates due to the unique relationship that income taxes have with their products. The residual income tax expense or benefit to arrive at the consolidated effective tax rate is included in Treasury and Other.

Consumer Banking offers a broad range of financial products and services, including loan, deposit and insurance products; private banking and international client banking services; trust services; investment management; and institutional investment advisory services. Consumer Banking also provides a full service brokerage offering equities, mutual funds, life insurance, and annuity products. Loan and lease products include residential mortgage loans, home equity lines of credit, automobile loans and leases, personal lines of credit, installment loans, small business loans and leases, and credit cards. Deposit products include checking, savings, and time deposit accounts. Private banking and personal trust groups assist individuals and families in building and preserving their wealth by providing investment, credit, and trust services to high-net-worth individuals. The investment management group manages portfolios utilizing a variety of investment products. Also within Consumer Banking, institutional client services offer investment advice to corporations, government entities, and foundations. Products and services from Consumer Banking are delivered to customers through 6354 branch locations and ~~361~~303 ATMs throughout Hawaii and the Pacific Islands, e-Bankoh (on-line banking service), a ~~24-hour~~ customer service center, and a mobile banking service.

Commercial Banking offers products including corporate banking, commercial real estate loans, commercial lease financing, auto dealer financing, and deposit products. Commercial lending and deposit products are offered to middle-market and large companies in Hawaii and the Pacific Islands. In addition, Commercial Banking offers deposit products to government entities in Hawaii. Commercial real estate mortgages focus on customers that include investors, developers, and builders predominantly domiciled in Hawaii. Commercial Banking also includes international banking and provides merchant services to its customers.

Treasury consists of corporate asset and liability management activities, including interest rate risk management and a foreign currency exchange business. This segment’s assets and liabilities (and related interest income and expense) consist of interest-bearing deposits, investment securities, federal funds sold and purchased, and short and long-term borrowings. The primary sources of noninterest income are from bank-owned life insurance, net gains from the sale of investment securities, and foreign exchange income related to customer-driven currency requests from merchants and island visitors. The net residual effect of the transfer pricing of assets and liabilities is included in Treasury, along with the elimination of intercompany transactions.

Other organizational units (Technology, Operations, Marketing, Human Resources, Finance, Credit and Risk Management, and Corporate and Regulatory Administration) provide a wide-range of support to the Company’s other income earning segments. Expenses incurred by these support units are charged to the business segments through an internal cost allocation process.

Selected business segment financial information as of and for the three and nine months ended ~~March 31,~~September 30, 2021, and ~~March 31,~~September 30, 2020, were as follows:

(dollars in thousands)	Consumer Banking			Commercial Banking			Treasury and Other			Consolidated Total			Consumer Banking			Commercial Banking			Treasury and Other			Consolidated Total
Three Months Ended March 31, 2021
Three Months Ended September 30, 2021
Net Interest Income	$	69,762		$	47,143		$	3,664		$	120,569		$	72,062		$	50,088		$	4,669		$	126,819
Provision for Credit Losses		2,866			50			(17,216	)		(14,300	)		1,235			(42	)		(11,593	)		(10,400	)
Net Interest Income After Provision for Credit Losses		66,896			47,093			20,880			134,869			70,827			50,130			16,262			137,219
Noninterest Income		33,698			7,858			1,414			42,970			32,046			7,906			1,426			41,378
Noninterest Expense		(78,181	)		(15,677	)		(5,007	)		(98,865	)		(71,377	)		(15,924	)		(9,218	)		(96,519	)
Income Before Provision for Income Taxes		22,413			39,274			17,287			78,974			31,496			42,112			8,470			82,078
Provision for Income Taxes		(5,474	)		(9,558	)		(3,993	)		(19,025	)		(8,001	)		(10,373	)		(1,651	)		(20,025	)
Net Income	$	16,939		$	29,716		$	13,294		$	59,949		$	23,495		$	31,739		$	6,819		$	62,053
Total Assets as of March 31, 2021	$	7,556,756		$	5,224,386		$	9,166,129		$	21,947,271
Total Assets as of September 30, 2021													$	7,530,513		$	5,087,831		$	10,347,039		$	22,965,383

Three Months Ended March 31, 2020¹
Three Months Ended September 30, 2020
Net Interest Income													$	73,868		$	47,797		$	2,501		$	124,166
Provision for Credit Losses														(1,372	)		(85	)		30,057			28,600
Net Interest Income (Loss) After Provision for Credit Losses														75,240			47,882			(27,556	)		95,566
Noninterest Income														31,776			7,672			2,286			41,734
Noninterest Expense														(69,408	)		(15,430	)		(5,111	)		(89,949	)
Income (Loss) Before Provision for Income Taxes														37,608			40,124			(30,381	)		47,351
Provision for Income Taxes														(9,627	)		(9,784	)		9,900			(9,511	)
Net Income (Loss)													$	27,981		$	30,340		$	(20,481	)	$	37,840
Total Assets as of September 30, 2020													$	7,383,822		$	5,027,836		$	7,697,831		$	20,109,489

Nine Months Ended September 30, 2021
Net Interest Income	$	73,914		$	45,237		$	6,815		$	125,966		$	212,991		$	146,269		$	11,642		$	370,902
Provision for Credit Losses		3,451			290			29,859			33,600			5,088			205			(46,093	)		(40,800	)
Net Interest Income After Provision for Credit Losses		70,463			44,947			(23,044	)		92,366			207,903			146,064			57,735			411,702
Noninterest Income		32,590			11,735			1,824			46,149			98,344			22,339			8,096			128,779
Noninterest Expense		(70,746	)		(17,346	)		(8,220	)		(96,312	)		(222,426	)		(47,343	)		(22,142	)		(291,911	)
Income Before Provision for Income Taxes		32,307			39,336			(29,440	)		42,203			83,821			121,060			43,689			248,570
Provision for Income Taxes		(8,116	)		(9,555	)		10,210			(7,461	)		(20,840	)		(29,634	)		(8,561	)		(59,035	)
Net Income	$	24,191		$	29,781		$	(19,230	)	$	34,742		$	62,981		$	91,426		$	35,128		$	189,535
Total Assets as of March 31, 2020¹	$	7,388,217		$	4,728,651		$	6,425,365		$	18,542,233
Total Assets as of September 30, 2021													$	7,530,513		$	5,087,831		$	10,347,039		$	22,965,383

Nine Months Ended September 30, 2020
Net Interest Income													$	221,003		$	144,253		$	11,567		$	376,823
Provision for Credit Losses														8,215			(819	)		95,204			102,600
Net Interest Income (Loss) After Provision for Credit Losses														212,788			145,072			(83,637	)		274,223
Noninterest Income														93,309			26,483			19,359			139,151
Noninterest Expense														(210,744	)		(47,552	)		(16,857	)		(275,153	)
Income (Loss) Before Provision for Income Taxes														95,353			124,003			(81,135	)		138,221
Provision for Income Taxes														(24,235	)		(30,278	)		27,782			(26,731	)
Net Income (Loss)													$	71,118		$	93,725		$	(53,353	)	$	111,490
Total Assets as of September 30, 2020													$	7,383,822		$	5,027,836		$	7,697,831		$	20,109,489

¹ ~~Certain prior period information has been reclassified to conform to current presentation.~~

~~Components of net periodic benefit cost for the Company’s pension plans and the postretirement benefit plan are presented in the following table for the three months ended March~~ 31 ~~2021, and March 31, 2020.~~

The service cost component of net periodic benefit cost is included in salaries and benefits and all other components of net periodic benefit cost are included in other noninterest expense in the consolidated statements of income for the Company’s pension plans and postretirement benefit plan. For the three months ended March 31, 2021, the Company contributed $0.1 million to the pension plans and $0.3 million to the postretirement benefit plan. The Company expects to contribute a total of $0.4 million to the pension plans and $1.2 million to the postretirement benefit plan for the year ending December 31, 2021.

The notional amount and fair value of the Company’s derivative financial instruments as of ~~March 31,~~September 30, 2021, and December 31, 2020, were as follows:

	March 31, 2021					December 31, 2020					September 30, 2021					December 31, 2020
(dollars in thousands)	Notional Amount		Fair Value			Notional Amount		Fair Value			Notional Amount		Fair Value			Notional Amount		Fair Value
Interest Rate Lock Commitments	$	100,322	$	2,704		$	102,881	$	4,947		$	48,993	$	1,222		$	102,881	$	4,947
Forward Commitments		102,778		748			158,759		(740	)		60,163		213			158,759		(740	)
Interest Rate Swap Agreements
Receive Fixed/Pay Variable Swaps		1,370,386		24,416			1,362,778		90,130			1,440,485		38,162			1,362,778		90,130
Pay Fixed/Receive Variable Swaps		1,370,386		(11,627	)		1,362,778		(17,197	)		1,440,485		(8,275	)		1,362,778		(17,197	)
Foreign Exchange Contracts		88,919		2,345			90,587		866			97,172		(645	)		90,587		866
Conversion Rate Swap Agreement		129,020		0			133,286		0			135,735		0			133,286		0

The following table presents the Company’s derivative financial instruments, their fair values, and their location in the consolidated statements of condition as of ~~March 31,~~September 30, 2021, and December 31, 2020:

Derivative Financial Instruments	March 31, 2021				December 31, 2020				September 30, 2021				December 31, 2020
Not Designated as Hedging Instruments ¹	Asset		Liability		Asset		Liability		Asset		Liability		Asset		Liability
(dollars in thousands)	Derivatives		Derivatives		Derivatives		Derivatives		Derivatives		Derivatives		Derivatives		Derivatives
Interest Rate Lock Commitments	$	2,704	$	0	$	4,947	$	0	$	1,222	$	0	$	4,947	$	0
Forward Commitments		794		46		0		740		227		14		0		740
Interest Rate Swap Agreements		42,339		29,561		90,342		17,409		47,211		17,324		90,342		17,409
Foreign Exchange Contracts		1,140		2,395		878		12		61		706		878		12
Total	$	46,977	$	32,002	$	96,167	$	18,161	$	48,721	$	18,044	$	96,167	$	18,161

The following table presents the Company’s derivative financial instruments and the amount and location of the net gains or losses recognized in the consolidated statements of income for the three and nine months ended ~~March 31,~~September 30, 2021, and ~~March 31,~~September 30, 2020:

	Location of						Location of
Derivative Financial Instruments	Net Gains (Losses)	Three Months Ended					Net Gains (Losses)	Three Months Ended						Nine Months Ended
Not Designated as Hedging Instruments	Recognized in the	March 31,					Recognized in the	September 30,						September 30,
(dollars in thousands)	Statements of Income	2021		2020			Statements of Income	2021			2020			2021		2020
Interest Rate Lock Commitments	Mortgage Banking	$	773	$	6,303		Mortgage Banking	$	2,083		$	4,903		$	6,927	$	15,556
Forward Commitments	Mortgage Banking		3,227		(2,184	)	Mortgage Banking		(53	)		(595	)		1,598		(3,652	)
Interest Rate Swap Agreements	Other Noninterest Income		1,604		6,438		Other Noninterest Income		2,147			2,575			4,848		12,041
Foreign Exchange Contracts	Other Noninterest Income		271		714		Other Noninterest Income		401			467			1,120		1,403
Total		$	5,875	$	11,271			$	4,578		$	7,350		$	14,493	$	25,348

Management has received authorization from the Bank’s Board of Directors to use derivative financial instruments as an end-user in connection with the Bank’s risk management activities and to accommodate the needs of the Bank’s customers. As with any financial instrument, derivative financial instruments have inherent risks. Market risk is defined as the risk of adverse financial impact due to fluctuations in interest rates, foreign exchange rates, and equity prices. Market risks associated with derivative financial instruments are balanced with the expected returns to enhance earnings performance and shareholder value, while limiting the volatility of each. The Company uses various processes to monitor its overall market risk exposure, including sensitivity analysis, value-at-risk calculations, and other methodologies.

Derivative financial instruments are also subject to credit and counterparty risk, which is defined as the risk of financial loss if a borrower or counterparty is either unable or unwilling to repay borrowings or settle transactions in accordance with the underlying contractual terms. Credit and counterparty risks associated with derivative financial instruments are similar to those relating to traditional financial instruments. The Company manages derivative credit and counterparty risk by evaluating the creditworthiness of each borrower or counterparty, adhering to the same credit approval process used for commercial lending activities.

As of ~~March 31,~~September 30, 2021, and December 31, 2020, the Company did not designate any derivative financial instruments as formal hedging relationships. The Company’s free-standing derivative financial instruments are required to be carried at their fair value on the Company’s consolidated statements of condition. These financial instruments have been limited to interest rate lock commitments (“IRLCs”), forward commitments, interest rate swap agreements, foreign exchange contracts, and conversion rate swap agreements.

~~The Company enters into IRLCs for residential mortgage loans which commit us to lend funds to a potential borrower at a specific interest rate and within a specified period~~32

The Company enters into interest rate swap agreements to facilitate the risk management strategies of a small number of commercial banking customers. The Company mitigates the ~~interest rate~~ risk of entering into these agreements by entering into equal and offsetting ~~interest rate~~ swap agreements with third-party financial institutions. The ~~interest rate~~ swap agreements are free-standing derivatives and are recorded at fair value in the Company’s consolidated statements of ~~condition. Fair value changes~~condition (asset positions are ~~recorded~~included in other ~~noninterest income~~assets and liability positions are included in ~~the Company’s consolidated statements of income.~~other liabilities). The Company is party to master netting arrangements with its financial institution counterparties; however, the Company does not offset assets and liabilities under these arrangements for financial statement presentation purposes. The master netting arrangements provide for a single net settlement of all swap agreements, as well as collateral, in the event of default on, or termination of, any one contract. Collateral, usually in the form of cash or marketable securities, is posted by the ~~counterparty~~party (i.e., the Company or the financial institution counterparty) with net liability positions in accordance with contract thresholds. ~~See Note 7~~ ~~Balance Sheet Offsetting~~ ~~for more information.~~

The ~~Company’s interest rate swap agreements~~Company had net liability positions with its financial institution counterparties ~~may contain credit-risk-related contingent features tied~~totaling $8.3 million and $17.2 million as of September 30, 2021, and December 31, 2020, respectively.

Parties to a specified credit rating of the Company. Under these provisions, should the Company’s specified rating fall below a particular level (e.g., investment grade), or if the Company no longer obtains the specified rating, the counterparty may require the Company to pledge collateral on an immediate and ongoing basis (subject to the requirement that such swapsover-the-counter derivatives which are in a net liability position beyond the level specified in the contract), or require immediate settlement of the swap agreement. Other credit-risk-related contingent features may also allow the counterparty to require immediate settlement of the swap agreement if the Company fails to maintain a specified minimum level of capitalization.

~~With regard to derivative contracts not~~ centrally cleared through a clearinghouse regulations require collateral to be posted by the party with a net liability position (i.e., the threshold for posting collateral was reduced to zero, subject to certain minimum transfer amounts). The requirements generally applied to new derivative contracts entered into by the Company after March 1, 2017, although certain counterparties may elect to apply lower thresholds to existing contracts.

~~Parties to a centrally cleared over-the-counter derivative~~ exchange daily payments that reflect the daily change in value of the ~~derivative. These~~derivatives. Effective 2017, these payments, ~~are~~ commonly referred to as variation ~~margin. Historically, variation~~ margin, payments have typically been treated as collateral against the derivative position. Effective 2017, the Chicago Mercantile Exchange and LCH.Clearnet Limited (collectively, the “clearinghouses”) amended their rulebooks to legally characterize variation margin payments for over-the-counter derivatives they clearare recorded as settlements of the derivatives’ mark-to-market exposure rather than collateral against the exposures. This rule change effectively ~~causes any derivative~~results in all centrally cleared ~~through one of the clearinghouses to have~~derivatives having a fair value that approximates zero on a daily basis. ~~The majority~~Substantially all of ~~the Company’s~~our swap agreements ~~executed with third-party financial institutions~~originated after the rule change are now required to be cleared through one of the clearinghouses. The uncleared swap agreements executed with third-party financial institutions will remain subject to the collateral requirements and credit-risk-related contingent features described in the previous paragraphs, and therefore, are not subject to the variation margin rule change. Likewise, the swap agreements executed with the Company’s commercial banking customers will remain uncleared and will also not be subject to the variation margin rule change.centrally cleared.

The Company utilizes foreign exchange contracts to offset risks related to transactions executed on behalf of customers. The foreign exchange contracts are free-standing derivatives which are carried at fair value with changes included in other noninterest income in the Company’s consolidated statements of income.

As certain sales of Visa Class B restricted shares were completed, the Company entered into a conversion rate swap agreement with the buyer that requires payment to the buyer in the event Visa further reduces the conversion ratio of Class B into Class A unrestricted common shares. In the event of Visa increasing the conversion ratio, the buyer would be required to make payment to the Company. As of ~~March 31,~~September 30, 2021, and December 31, 2020, the conversion rate swap agreement was valued at 0 (i.e., no contingent liability recorded) as further reductions to the conversion ratio were deemed neither probable nor reasonably estimable by management. See Note 3 Investment Securities for more information.

The Company’s credit commitments as of ~~March 31,~~September 30, 2021, and December 31, 2020, were as follows:

(dollars in thousands)	March 31, 2021		December 31, 2020		September 30, 2021		December 31, 2020
Unfunded Commitments to Extend Credit	$	2,837,258	$	2,787,123	$	2,973,153	$	2,787,123
Standby Letters of Credit		102,531		100,186		125,932		100,186
Commercial Letters of Credit		11,321		10,511		16,715		10,511
Total Credit Commitments	$	2,951,110	$	2,897,820	$	3,115,800	$	2,897,820

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of the terms or conditions established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since commitments may expire without being drawn, the total commitment amount does not necessarily represent future cash requirements.

Standby letters of credit are conditional commitments issued by the Company to guarantee the performance of a customer to a third-party. Standby letters of credit generally become payable upon the failure of the customer to perform according to the terms of the underlying contract with the third-party, while commercial letters of credit are issued specifically to facilitate commerce and typically result in the commitment being drawn on when the underlying transaction is consummated between the customer and a third party. The contractual amount of these letters of credit represents the maximum potential future payments guaranteed by the Company. The Company has recourse against the customer for any amount it is required to pay to a third-party under a standby letter of credit, and generally holds cash or deposits as collateral on those standby letters of credit for which collateral is deemed necessary.

On September 9, 2016, a purported class action lawsuit was filed by a Bank customer primarily alleging Bank of Hawaii’s practice of determining whether consumer deposit accounts were overdrawn based on “available balance” (which deducts debit card transactions that have taken place but which have not yet been posted) was not properly applied or disclosed to customers. On December 6, 2019, the parties executed a settlement agreement subject to court approval. The settlement provides for forgiveness of certain related and previously charged off overdraft fees, and a payment by the Company of $8.0 million into a class settlement fund the proceeds of which will be used to refund class members, and to pay attorneys’ fees, administrative and other costs, in exchange for a complete release of all claims asserted against the Company. As of December 31, 2020, the Company had reserved $8.0 million relating to this claim. On December 22, 2020, the Court issued an Order Granting Final Approval of Class Action Settlement and the settlement became effective on January 21, 2021. Refunds to current customers were issued by the Bank on January 26, 2021, and the Claims Administrator is in the process of issuing refunds to class members with closed accounts.

~~In addition to the litigation noted above, the~~ Company is subject to various ~~other~~ pending and threatened legal proceedings arising out of the normal course of business or operations. On at least a quarterly basis, the Company assesses its liabilities and contingencies in connection with outstanding legal proceedings using the most recent information available. On a case-by-case basis, reserves are established for those legal claims for which it is probable that a loss will be incurred and the amount of such loss can be reasonably estimated. Based on information currently available, management believes that the eventual outcome of these claims against the Company will not be materially in excess of such amounts reserved by the Company. However, in the event of unexpected future developments, it is possible that the ultimate resolution of these matters may result in a loss that materially exceeds the reserves established by the Company.

The Company sells residential mortgage loans in the secondary market primarily to the Federal National Mortgage Association (“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 the Government National Mortgage Corporation (“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 March 31, 2021, the unpaid principal balance of residential mortgage loans sold by the Company was $2.4 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. During the three months ended March 31, 2021, there were $0.6 million in residential mortgage loans repurchased as a result of the representation and warranty provisions contained in the applicable contract. As of March 31, 2021, there was 0 pending repurchase requests related to representation and warranty provisions.

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. For the three months ended March 31, 2021, there were 0 loans repurchased related to loan servicing activities. As of March 31, 2021, there were 0 pending repurchase requests related to loan servicing activities.

Although to date repurchase requests related to representation and warranty provisions and servicing activities have been limited, it is possible that requests to repurchase mortgage loans may increase in frequency as investors more aggressively pursue all means of recovering losses on their purchased loans. However, as of March 31, 2021, management believes that this exposure is not material due to the historical level of repurchase requests and loss trends and thus has not established a liability for losses related to mortgage loan repurchases. As of March 31, 2021, 99% of the Company’s residential mortgage loans serviced for investors were current. The Company maintains ongoing communications with investors and continues to evaluate this exposure by monitoring the level and number of repurchase requests as well as the delinquency rates in the loans sold to investors.

Fair value is defined as 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. GAAP established a fair value hierarchy that prioritizes the use of inputs used in valuation methodologies into the following three levels:

In some instances, an instrument may fall into multiple levels of the fair value hierarchy. In such instances, the instrument’s level within the fair value hierarchy is based on the lowest of the three levels (with Level 3 being the lowest) that is significant to the fair value measurement. Our assessment of the significance of an input requires judgment and considers factors specific to the instrument.

Fair values of investment securities available-for-sale were primarily measured using information from a third-party pricing service. This service provides pricing information by utilizing evaluated pricing models supported with market data information. Standard inputs include benchmark yields, reported trades, broker/dealer quotes, issuer spreads, two-sided markets, benchmark securities, bids, offers, and reference data from market research publications. Level 1 investment securities are comprised of debt securities issued by the U.S. Treasury, as quoted prices were available, unadjusted, for identical securities in active markets. Level 2 investment securities were primarily comprised of debt securities issued by the Small Business Administration, states and municipalities, corporations, as well as mortgage-backed securities issued by government agencies and government sponsored enterprises. Fair values were estimated primarily by obtaining quoted prices for similar assets in active markets or through the use of pricing models. In cases where there may be limited or less transparent information provided by the Company’s third-party pricing service, fair value may be estimated by the use of secondary pricing services or through the use of non-binding third-party broker quotes.

On a quarterly basis, management reviews the pricing information received from the Company’s third-party pricing service. This review process includes a comparison to a second source. The Company’s third-party pricing service has also established processes for us to submit inquiries regarding quoted prices. Periodically, based on these reviews, the Company will challenge the quoted prices provided by the Company’s third-party pricing service. The Company’s third-party pricing service will review the inputs to the evaluation in light of the new market data presented by us. The Company’s 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. On a quarterly basis, management also reviews a sample of securities priced by the Company’s third-party pricing service to review the significant assumptions and valuation methodologies used by the service. 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. Based on this review, management determines whether the current placement of the security in the fair value hierarchy is appropriate or whether transfers may be warranted.

The fair value of the Company’s residential mortgage loans held for sale was determined based on quoted prices for similar loans in active markets, and therefore, is classified as a Level 2 measurement.

~~Mortgage servicing rights do not trade in an active market with readily observable market data. As a result, the~~The Company estimates the fair value of mortgage servicing rights by using a discounted cash flow model to calculate the present value of estimated future net servicing income. The Company stratifies its mortgage servicing portfolio on the basis of loan type. The assumptions used in the discounted cash flow model are those that the Company believes market participants would use in estimating future net servicing income. Significant assumptions in the valuation of mortgage servicing rights include estimated loan repayment rates, the discount rate, servicing costs, and the timing of cash flows, among other factors. Mortgage servicing rights are classified as Level 3 measurements due to the use of significant unobservable inputs, as well as significant management judgment and estimation.

Other assets recorded at fair value on a recurring basis are primarily comprised of investments related to deferred compensation arrangements. Quoted prices for these investments, primarily in mutual funds, are available in active markets. Thus, the Company’s investments related to deferred compensation arrangements are classified as Level 1 measurements in the fair value hierarchy.

Derivative financial instruments recorded at fair value on a recurring basis are comprised of IRLCs, forward commitments, interest rate swap agreements, foreign exchange contracts, and Visa Class B to Class A shares conversion rate swap agreements. The fair values of IRLCs are calculated based on the value of the underlying loan held for sale, which in turn is based on quoted prices for similar loans in the secondary market. However, this value is adjusted by a factor which considers the likelihood that the loan in a locked position will ultimately close. This factor, the closing ratio, is derived from the Bank’s internal data and is adjusted using significant management judgment. As such, IRLCs are classified as Level 3 measurements. Forward commitments are classified as Level 2 measurements as they are primarily based on quoted prices from the secondary market based on the settlement date of the contracts, interpolated or extrapolated, if necessary, to estimate a fair value as of the end of the reporting period. The fair values of interest rate swap agreements are calculated using a discounted cash flow approach and utilize Level 2 observable inputs such as a market yield curve, effective date, maturity date, notional amount, and stated interest rate. ~~In October 2020, the Company revised its discounted cash flow~~The valuation methodology for cleared interest rate swaps with financial institution counterparties (and the related customer interest rate swaps) ~~to align with changes made by central clearinghouses when they migrated from the Effective Federal Funds Rate to~~is based on the Secured Overnight Financing Rate, ~~for discounting, price alignment, and margining purposes. The changes in valuation methodology are applied prospectively as a change in accounting estimate and are immaterial to~~while the ~~Company’s financial statements. The~~ valuation methodology for uncleared interest rate swaps ~~remains~~is based on the Effective Federal Funds Rate. In addition, the Company includes in its fair value calculation a credit factor adjustment which is based primarily on management judgment. Thus, interest rate swap agreements are classified as a Level 3 measurement. The fair values of foreign exchange contracts are calculated using the Bank’s multi-currency accounting system which utilizes contract specific information such as currency, maturity date, contractual amount, and strike price, along with market data information such as the spot rates of specific currency and yield curves. Foreign exchange contracts are classified as Level 2 measurements because while they are valued using the Bank’s multi-currency accounting system, significant management judgment or estimation is not required. The fair value of the Visa Class B restricted shares to Class A unrestricted common shares conversion rate swap agreements represent the amount owed by the Company to the buyer of the Visa Class B shares as a result of a reduction of the conversion ratio subsequent to the sales date. As of ~~March 31,~~September 30, 2021, and December 31, 2020, the conversion rate swap agreements were valued at zero as reductions to the conversion ratio were neither probable nor reasonably estimable by management. See Note 1211 Derivative Financial Instruments for more information.

The Company is exposed to credit risk if borrowers or counterparties fail to perform. The Company seeks to minimize credit risk through credit approvals, limits, monitoring procedures, and collateral requirements. The Company generally enters into transactions with borrowers and counterparties that carry high quality credit ratings. Credit risk associated with borrowers or counterparties as well as the Company’s non-performance risk is factored into the determination of the fair value of derivative financial instruments.

The table below presents the balances of assets and liabilities measured at fair value on a recurring basis as of ~~March 31,~~September 30, 2021, and December 31, 2020:

	Quoted Prices in Active Markets for Identical Assets or Liabilities		Significant Other Observable Inputs		Significant Unobservable Inputs				Quoted Prices in Active Markets for Identical Assets or Liabilities		Significant Other Observable Inputs		Significant Unobservable Inputs
(dollars in thousands)	(Level 1)		(Level 2)		(Level 3)		Total		(Level 1)		(Level 2)		(Level 3)		Total
March 31, 2021
September 30, 2021
Assets:
Investment Securities Available-for-Sale
Debt Securities Issued by the U.S. Treasury and Government Agencies	$	916	$	164,306	$	0	$	165,222	$	751	$	144,113	$	0	$	144,864
Debt Securities Issued by States and Political Subdivisions		0		24,325		0		24,325		0		21,068		0		21,068
Debt Securities Issued by U.S. Government-Sponsored Enterprises		0		1,035		0		1,035		0		1,555		0		1,555
Debt Securities Issued by Corporations		0		222,115		0		222,115		0		387,874		0		387,874
Mortgage-Backed Securities:
Residential - Government Agencies		0		1,585,345		0		1,585,345		0		1,417,183		0		1,417,183
Residential - U.S. Government-Sponsored Enterprises		0		1,807,929		0		1,807,929		0		2,200,052		0		2,200,052
Commercial - Government Agencies		0		218,792		0		218,792		0		180,924		0		180,924
Total Mortgage-Backed Securities		0		3,612,066		0		3,612,066		0		3,798,159		0		3,798,159
Total Investment Securities Available-for-Sale		916		4,023,847		0		4,024,763		751		4,352,769		0		4,353,520
Loans Held for Sale		0		18,320		0		18,320		0		21,965		0		21,965
Mortgage Servicing Rights		0		0		919		919		0		0		826		826
Other Assets		54,612		0		0		54,612		55,167		0		0		55,167
Derivatives ¹		0		1,934		45,043		46,977		0		288		48,433		48,721
Total Assets Measured at Fair Value on a Recurring Basis as of March 31, 2021	$	55,528	$	4,044,101	$	45,962	$	4,145,591
Total Assets Measured at Fair Value on a Recurring Basis as of September 30, 2021									$	55,918	$	4,375,022	$	49,259	$	4,480,199
Liabilities:
Derivatives ¹	$	0	$	2,441	$	29,561	$	32,002	$	0	$	720	$	17,324	$	18,044
Total Liabilities Measured at Fair Value on a Recurring Basis as of March 31, 2021	$	0	$	2,441	$	29,561	$	32,002
Total Liabilities Measured at Fair Value on a Recurring Basis as of September 30, 2021									$	0	$	720	$	17,324	$	18,044
December 31, 2020
Assets:
Investment Securities Available-for-Sale
Debt Securities Issued by the U.S. Treasury and Government Agencies	$	921	$	173,324	$	0	$	174,245	$	921	$	173,324	$	0	$	174,245
Debt Securities Issued by States and Political Subdivisions		0		24,840		0		24,840		0		24,840		0		24,840
Debt Securities Issued by U.S. Government-Sponsored Enterprises		0		1,062		0		1,062		0		1,062		0		1,062
Debt Securities Issued by Corporations		0		224,605		0		224,605		0		224,605		0		224,605
Mortgage-Backed Securities:
Residential - Government Agencies		0		1,594,815		0		1,594,815		0		1,594,815		0		1,594,815
Residential - U.S. Government-Sponsored Enterprises		0		1,518,283		0		1,518,283		0		1,518,283		0		1,518,283
Commercial - Government Agencies		0		253,839		0		253,839		0		253,839		0		253,839
Total Mortgage-Backed Securities		0		3,366,937		0		3,366,937		0		3,366,937		0		3,366,937
Total Investment Securities Available-for-Sale		921		3,790,768		0		3,791,689		921		3,790,768		0		3,791,689
Loans Held for Sale		0		82,565		0		82,565		0		82,565		0		82,565
Mortgage Servicing Rights		0		0		658		658		0		0		958		958
Other Assets		53,410		0		0		53,410		53,410		0		0		53,410
Derivatives ¹		0		878		95,289		96,167		0		878		95,289		96,167
Total Assets Measured at Fair Value on a Recurring Basis as of December 31, 2020	$	54,331	$	3,874,211	$	95,947	$	4,024,489	$	54,331	$	3,874,211	$	96,247	$	4,024,789
Liabilities:
Derivatives ¹	$	0	$	752	$	17,409	$	18,161	$	0	$	752	$	17,409	$	18,161
Total Liabilities Measured at Fair Value on a Recurring Basis as of December 31, 2020	$	0	$	752	$	17,409	$	18,161	$	0	$	752	$	17,409	$	18,161

For the three and nine months ended ~~March 31,~~September 30, 2021, and ~~March 31,~~September 30, 2020, the changes in Level 3 assets and liabilities measured at fair value on a recurring basis were as follows:

(dollars in thousands)	Mortgage Servicing Rights ¹			Net Derivative Assets and Liabilities ²			Mortgage Servicing Rights ¹			Net Derivative Assets and Liabilities ²
Three Months Ended March 31, 2021
Three Months Ended September 30, 2021
Balance as of July 1, 2021							$	875		$	37,957
Realized and Unrealized Net Gains (Losses):
Included in Net Income								(49	)		2,095
Transfers to Loans Held for Sale								—			(3,068	)
Variation Margin Payments								—			(5,875	)
Balance as of September 30, 2021							$	826		$	31,109
Total Unrealized Net Gains (Losses) Included in Net Income Related to Assets Still Held as of September 30, 2021							$	0		$	31,109

Three Months Ended September 30, 2020
Balance as of July 1, 2020							$	1,068		$	88,995
Realized and Unrealized Net Gains (Losses):
Included in Net Income								(50	)		4,909
Transfers to Loans Held for Sale								—			(4,242	)
Variation Margin Payments								—			(1,840	)
Balance as of September 30, 2020							$	1,018		$	87,822
Total Unrealized Net Gains (Losses) Included in Net Income Related to Assets Still Held as of September 30, 2020							$	0		$	87,822

Nine Months Ended September 30, 2021
Balance as of January 1, 2021	$	958			77,880		$	958			77,880
Realized and Unrealized Net Gains (Losses):
Included in Net Income		(39	)		874			(132	)		7,008
Transfers to Loans Held for Sale					(3,016	)		—			(10,652	)
Variation Margin Payments		—			(60,256	)		—			(43,127	)
Balance as of March 31, 2021	$	919			15,482
Total Unrealized Net Gains (Losses) Included in Net Income Related to Assets Still Held as of March 31, 2021	$	0		$	15,482
Balance as of September 30, 2021							$	826			31,109
Total Unrealized Net Gains (Losses) Included in Net Income Related to Assets Still Held as of September 30, 2021							$	0		$	31,109

Three Months Ended March 31, 2020
Nine Months Ended September 30, 2020
Balance as of January 1, 2020	$	1,126		$	22,573		$	1,126		$	22,573
Realized and Unrealized Net Gains (Losses):
Included in Net Income		(25	)		6,172			(108	)		15,372
Transfers to Loans Held for Sale		—			(3,653	)		—			(13,521	)
Variation Margin Payments		—			55,588			—			63,398
Balance as of March 31, 2020	$	1,101		$	80,680
Total Unrealized Net Gains (Losses) Included in Net Income Related to Assets Still Held as of March 31, 2020	$	0		$	80,680
Balance as of September 30, 2020							$	1,018		$	87,822
Total Unrealized Net Gains (Losses) Included in Net Income Related to Assets Still Held as of September 30, 2020							$	0		$	87,822

For Level 3 assets and liabilities measured at fair value on a recurring or nonrecurring basis as of ~~March 31,~~September 30, 2021, and December 31, 2020, the significant unobservable inputs used in the fair value measurements were as follows:


(dollars in thousands)	Valuation Technique	Description	Range						Weighted Average¹			Fair Value		Valuation Technique	Description	Range						Weighted Average¹			Fair Value
March 31, 2021
September 30, 2021
Mortgage Servicing Rights	Discounted Cash Flow	Constant Prepayment Rate	8.67%			-	12.98	%		11.27	%	$	22,320	Discounted Cash Flow	Constant Prepayment Rate		8.13	%	-	14.43	%		11.50	%	$	22,099
		Discount Rate	5.99%			-	6.96	%		6.88	%				Discount Rate		5.65	%	-	6.74	%		6.67	%	$	—
Net Derivative Assets and Liabilities:
Interest Rate Lock Commitments	Pricing Model	Closing Ratio	75.40%			-	99.00	%		92.19	%	$	2,704	Pricing Model	Closing Ratio		84.10	%	-	100.00	%		92.84	%	$	1,222
Interest Rate Swap Agreements	Discounted Cash Flow	Credit Factor	0.00%			-	0.49	%		0.15	%	$	12,778	Discounted Cash Flow	Credit Factor		0.00	%	-	0.49	%		0.14	%	$	29,887

December 31, 2020
Mortgage Servicing Rights	Discounted Cash Flow	Constant Prepayment Rate		8.71	%	-	15.89	%		14.42	%	$	19,652	Discounted Cash Flow	Constant Prepayment Rate		8.71	%	-	15.89	%		14.42	%	$	19,652
		Discount Rate		5.69	%	-	6.28	%		5.81	%				Discount Rate		5.69	%	-	6.28	%		5.81	%	$	—
Net Derivative Assets and Liabilities:
Interest Rate Lock Commitments	Pricing Model	Closing Ratio		84.10	%	-	99.00	%		90.76	%	$	4,947	Pricing Model	Closing Ratio		84.10	%	-	99.00	%		90.76	%	$	4,947
Interest Rate Swap Agreements	Discounted Cash Flow	Credit Factor	0.00%			-	0.49	%		0.29	%	$	72,933	Discounted Cash Flow	Credit Factor		0.00	%	-	0.49	%		0.29	%	$	72,933

The significant unobservable inputs used in the fair value measurement of the Company’s mortgage servicing rights are the weighted-average constant prepayment rate and weighted-average discount rate. Significant increases (decreases) in any of those inputs in isolation could result in a significantly lower (higher) fair value measurement. Although the constant prepayment rate and the discount rate are not directly interrelated, they generally move in opposite directions of each other.

The Company estimates the fair value of mortgage servicing rights by using a discounted cash flow model to calculate the present value of estimated future net servicing income. The Company’s Treasury Division enters observable and unobservable inputs into the model to arrive at an estimated fair value. To assess the reasonableness of the fair value measurement, the Treasury Division performs a back-test by comparing the model’s results to historical prepayment data. The Treasury Division also compares the fair value of the Company’s mortgage servicing rights to a value calculated by an independent third-party. Discussions are held with members from the Treasury, Mortgage Banking, and Controllers Divisions, along with the independent third-party to discuss and reconcile the fair value estimates and key assumptions used by the respective parties in arriving at those estimates. A subcommittee of the Company’s Asset/Liability Management Committee is responsible for providing oversight over the valuation methodology and key assumptions.

The significant unobservable input used in the fair value measurement of the Company’s IRLCs is the closing ratio, which represents the percentage of loans currently in a lock position which management estimates will ultimately close. Generally, the fair value of an IRLC is positive (negative) if the prevailing interest rate is lower (higher) than the IRLC rate. Therefore, an increase in the closing ratio (i.e., higher percentage of loans are estimated to close) will increase the gain or loss. The closing ratio is largely dependent on the loan processing stage that a loan is currently in and the change in prevailing interest rates from the time of the rate lock. The closing ratio is computed by the Company’s secondary marketing system using historical data and the ratio is periodically reviewed by the Company for reasonableness.

The unobservable input used in the fair value measurement of the Company’s interest rate swap agreements is the credit spread. This factor represents the risk that a counterparty is either unable or unwilling to settle a transaction in accordance with the underlying contractual terms. A significant increase (decrease) in the credit spread could result in a significantly lower (higher) fair value measurement. The credit spread is based upon the creditworthiness of the borrower and is input into a proprietary model that calculates fair value using probability of default, loss given default, and exposure at default.

The Company may be required periodically to measure certain assets and liabilities at fair value on a nonrecurring basis in accordance with GAAP. These adjustments to fair value usually result from the application of lower-of-cost-or-fair value accounting or impairment write-downs of individual assets. The following table represents the assets measured at fair value on a nonrecurring basis as of ~~March 31,~~September 30, 2021, and December 31, 2020.

(dollars in thousands)	Fair Value Hierarchy	Net Carrying Amount		Valuation Allowance			Fair Value Hierarchy	Net Carrying Amount		Valuation Allowance
March 31, 2021
September 30, 2021
Mortgage Servicing Rights - amortization method	Level 3	$	21,401	$	(1,702	)	Level 3	$	21,273	$	(2,107	)

December 31, 2020
Mortgage Servicing Rights - amortization method	Level 3	$	18,694	$	(3,892	)	Level 3	$	18,694	$	(3,892	)

The write-down of mortgage servicing rights accounted for under the amortization method was primarily due to changes in certain key assumptions used to estimate fair value. As previously mentioned, all of the Company's mortgage servicing rights are classified as Level 3 measurements due to the use of significant unobservable inputs, as well as significant management judgment and estimation.

During the fourth quarter of 2020, the Company recorded a total impairment charge of $7.0 million to write-down the net book value of 12 branches, cash-only ATMs, and a residual value of a leveraged lease. The impairment charge (included in net occupancy expense $3.6 million, interest and fees on loans and leases $3.0 million, and net equipment expense $0.4 million in the Company's consolidated statements of income) was recorded in the fourth quarter of 2020. The Company fully wrote-down the net book value of right-of-use assets and lease hold improvements due to the decision to close 12 branches. The carrying value of the ATMs and leveraged lease were reduced to estimated fair value less cost to sell based on recent appraisals, market conditions, and/or

management judgment. Due to the use of significant unobservable inputs combined with significant management judgment regarding the fair value of these assets, the carrying value was deemed a Level 3 measurement.

The Company elects the fair value option for all residential mortgage loans held for sale. This election allows for a more effective offset of the changes in fair values of the loans held for sale and the derivative financial instruments used to financially hedge them without having to apply complex hedge accounting requirements. As noted above, the fair value of the Company’s residential mortgage loans held for sale was determined based on quoted prices for similar loans in active markets.

The following table reflects the difference between the aggregate fair value and the aggregate unpaid principal balance of the Company’s residential mortgage loans held for sale as of ~~March 31,~~September 30, 2021, and December 31, 2020.

(dollars in thousands)	Aggregate Fair Value		Aggregate Unpaid Principal		Aggregate Fair Value Less Aggregate Unpaid Principal		Aggregate Fair Value		Aggregate Unpaid Principal		Aggregate Fair Value Less Aggregate Unpaid Principal
March 31, 2021
September 30, 2021
Loans Held for Sale	$	18,320	$	18,003	$	317	$	21,965	$	21,376	$	589

December 31, 2020
Loans Held for Sale	$	82,565	$	78,577	$	3,988	$	82,565	$	78,577	$	3,988

Changes in the estimated fair value of residential mortgage loans held for sale are reported as a component of mortgage banking income in the Company’s consolidated statements of income. For the three and nine months ended ~~March 31,~~September 30, 2021, and ~~March 31,~~September 30, 2020, the net gains or losses from the change in fair value of the Company’s residential mortgage loans held for sale were not material.

The following presents the carrying amount, fair value, and placement in the fair value hierarchy of the Company’s financial instruments not recorded at fair value on a recurring basis as of ~~March 31,~~September 30, 2021, and December 31, 2020. This table excludes financial instruments for which the carrying amount approximates fair value. For short-term financial assets such as cash and cash equivalents, the carrying amount is a reasonable estimate of fair value due to the relatively short time between the origination of the instrument and its expected realization. For non-marketable equity securities such as Federal Home Loan Bank and Federal Reserve Bank stock, the carrying amount is a reasonable estimate of fair value as these securities can only be redeemed or sold at their par value and only to the respective issuing government supported institution or to another member institution. For financial liabilities such as noninterest-bearing demand, interest-bearing demand, and savings deposits, the carrying amount is a reasonable estimate of fair value due to these products having no stated maturity.

					Fair Value Measurements										Fair Value Measurements
	Carrying				Quoted Prices in Active Markets for Identical Assets or Liabilities		Significant Other Observable Inputs		Significant Unobservable Inputs		Carrying				Quoted Prices in Active Markets for Identical Assets or Liabilities		Significant Other Observable Inputs		Significant Unobservable Inputs
(dollars in thousands)	Amount		Fair Value		(Level 1)		(Level 2)		(Level 3)		Amount		Fair Value		(Level 1)		(Level 2)		(Level 3)
March 31, 2021
September 30, 2021
Financial Instruments - Assets
Investment Securities Held-to-Maturity	$	3,464,360	$	3,477,346	$	7,333	$	3,470,011	$	0	$	4,899,880	$	4,895,763	$	131,558	$	4,764,205	$	0
Loans ¹		11,758,861		12,058,054		0		0		12,058,054		11,718,951		11,962,539		0		0		11,962,539
Financial Instruments - Liabilities
Time Deposits		1,475,392		1,478,713		0		1,478,713		0		1,072,915		1,074,210		0		1,074,210		0
Securities Sold Under Agreements to Repurchase		600,490		637,399		0		637,399		0		450,490		477,228		0		477,228		0
Other Debt ²		50,000		51,019		0		51,019		0
December 31, 2020
Financial Instruments - Assets
Investment Securities Held-to-Maturity	$	3,262,727	$	3,348,693	$	7,500	$	3,341,193	$	0	$	3,262,727	$	3,348,693	$	7,500	$	3,341,193	$	0
Loans ¹		11,536,011		12,019,151		0		0		12,019,151		11,536,011		12,019,151		0		0		12,019,151
Financial Instruments - Liabilities
Time Deposits		1,662,063		1,667,774		0		1,667,774		0		1,662,063		1,667,774		0		1,667,774		0
Securities Sold Under Agreements to Repurchase		600,590		649,039		0		649,039		0		600,590		649,039		0		649,039		0
Other Debt ²		50,000		51,546		0		51,546		0		50,000		51,546		0		51,546		0

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

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 make 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 and any lingering effects therefrom, volatility in the international and national economy and credit markets, 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) the effect of changes in or interpretations of 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;~~Act; 12) any failure or disruption in or breach of our operational or security 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 II of this report and Part I of our Annual Report on Form 10-K for the year ended December 31, 2020, and subsequent periodic and current reports filed with the SEC. 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.

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 Company’s Annual Report on Form 10-K for the year ended December 31, 2020. 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 presented in the section titled “Critical Accounting Policies” in Management’s Discussion and Analysis of Financial Condition and Results of Operations included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020. There have been no significant changes in the Company’s application of critical accounting policies since December 31, 2020.

Bank of Hawaii Corporation (the “Parent”) is a Delaware corporation and a bank holding company headquartered in Honolulu, Hawaii. The Parent’s principal operating subsidiary is Bank of Hawaii (the “Bank”).

The Bank, directly and through its subsidiaries, provides a broad range of financial services and products to businesses, consumers, and governments in Hawaii, Guam, and other Pacific Islands. References to “we,” “our,” “us,” or the “Company” refer to the Parent and its subsidiaries that are consolidated for financial reporting purposes.

The Company’s business strategy is to use our unique market knowledge, prudent management discipline and brand strength to deliver exceptional value to our stakeholders.

The COVID-19 pandemic has had and is continuing to have an impact on the Hawaii economy. The actions taken by the State of Hawaii beginning in March 2020 were imposed to mitigate the spread and lessen the public health impact of the COVID-19 virus in Hawaii. Prior to the COVID-19 pandemic, at risk industries of leisure and hospitality represented 19% of jobs and 10% of Hawaii’s GDP. 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 COVID-19. Hawaii’s large retiree population also contributes to a stable economic base. The U.S. government has enacted several stimulus programs to counteract the economic disruptions caused by the COVID-19 pandemic, including the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act, Paycheck Protection Program (“PPP”), Consolidated Appropriations Act (“CAA”), and American Rescue Plan (“ARP”). Notwithstanding these stimulus programs, the Hawaii economy will likely continue to face significant challenges.

We have taken and continue to take significant steps to help our customers who have been impacted by COVID-19. For our consumer customers, we initially provided payment relief for residential mortgage, home equity, auto loan, auto lease and direct personal loans for up to six months. We waived associated late fees, while not reporting these payment deferrals as late payments to the credit bureaus for all customers who were current prior to the event. For our commercial customers that continued to make interest payments, we provided six months of principal deferral, or alternatively, three months of interest or interest and principal deferral. AsAlthough our formal assistance programs have ended, the Bank continues to work with our customers who are still being impacted by the COVID-19 ~~pandemic persists in negatively impacting the economy, the Company continues to offer additional loan modifications to borrowers struggling as a result of COVID-19.~~pandemic.

The Bank continues to responsibly lend to qualified consumer and commercial customers. We ~~continue to participate~~participated in the SBA’s Small Business Paycheck Protection Program. As of ~~March 31,~~September 30, 2021, the Bank had ~~6,911~~1,939 PPP loans totaling ~~$744.8 million.~~$268.5 million net of deferred cost and fees.

Net income for the ~~first~~third quarter of 2021 was ~~$59.9~~$62.1 million, an increase of ~~$25.2~~$24.2 million or ~~73%~~64% compared to the same period in 2020. Diluted earnings per common share was ~~$1.50~~$1.52 for the ~~first~~third quarter of 2021, an increase of ~~$0.63~~$0.57 or ~~72%~~60% compared to the same period in 2020.

~~The Company’s higher earnings~~Net income for the first ~~quarter~~nine months of 2021 ~~were primarily due~~was $189.5 million, an increase of $78.0 million or 70% compared to the ~~following:~~same period in 2020. Diluted earnings per common share was $4.70 for the first nine months of 2021, an increase of $1.90 or 68% compared to the same period in 2020.

We maintained a strong balance sheet during the ~~first~~third quarter of 2021, with what we believe are appropriate reserves for credit losses and high levels of liquidity and ~~capital highlighted by the following.~~capital.

Financial Highlights				Table 1												Table 1
	Three Months Ended						Three Months Ended						Nine Months Ended
	March 31,						September 30,						September 30,
(dollars in thousands, except per share amounts)	2021			2020			2021			2020			2021			2020
For the Period:
Operating Results
Net Interest Income	$	120,569		$	125,966		$	126,819		$	124,166		$	370,902		$	376,823
Provision for Credit Losses		(14,300	)		33,600
Provision for Credit Losses ¹								(10,400	)		28,600			(40,800	)		102,600
Total Noninterest Income		42,970			46,149			41,378			41,734			128,779			139,151
Total Noninterest Expense		98,865			96,312			96,519			89,949			291,911			275,153
Net Income		59,949			34,742			62,053			37,840			189,535			111,490
Basic Earnings Per Share		1.51			0.88
Diluted Earnings Per Share		1.50			0.87
Dividends Declared Per Share		0.67			0.67
Basic Earnings Per Common Share								1.53			0.95			4.73			2.81
Diluted Earnings Per Common Share								1.52			0.95			4.70			2.80
Dividends Declared Per Common Share								0.70			0.67			2.04			2.01
Performance Ratios
Return on Average Assets		1.15	%		0.77	%		1.07	%		0.76	%		1.15	%		0.78	%
Return on Average Shareholders’ Equity		17.65			10.64			15.41			11.01			17.31			11.08
Efficiency Ratio ¹		60.45			55.96
Net Interest Margin ²		2.43			2.96
Dividend Payout Ratio ³		44.37			76.14
Return on Average Common Equity								17.08			11.01			18.10			11.08
Efficiency Ratio ²								57.38			54.22			58.42			53.33
Net Interest Margin ³								2.32			2.67			2.37			2.82
Dividend Payout Ratio ⁴								45.75			70.53			43.13			71.53
Average Shareholders’ Equity to Average Assets		6.51			7.21			6.95			6.93			6.63			7.06
Average Balances
Average Loans and Leases	$	11,952,587		$	11,060,707		$	11,958,321		$	11,739,785		$	12,002,426		$	11,510,222
Average Assets		21,150,670			18,222,602			22,993,036			19,741,139			22,079,174			19,053,626
Average Deposits		18,665,222			15,817,745			20,473,777			17,270,206			19,619,053			16,591,640
Average Shareholders’ Equity		1,377,272			1,313,848			1,598,076			1,367,756			1,463,566			1,344,402
Market Price Per Share of Common Stock
Closing	$	89.49		$	54.91		$	82.17		$	50.52		$	82.17		$	50.52
High		99.10			95.53			87.12			61.94			99.10			95.53
Low		75.65			46.70			75.68			48.77			75.65			46.70

	March 31, 2021			December 31, 2020									September 30, 2021			December 31, 2020
As of Period End:
Balance Sheet Totals
Loans and Leases	$	12,140,703		$	11,940,020								$	12,072,750		$	11,940,020
Total Assets		21,947,271			20,603,651									22,965,383			20,603,651
Total Deposits		19,556,651			18,211,621									20,493,678		��	18,211,621
Other Debt		60,459			60,481									10,414			60,481
Total Shareholders’ Equity		1,360,221			1,374,507									1,597,109			1,374,507
Asset Quality
Non-Performing Assets	$	17,883		$	18,481								$	20,620		$	18,481
Allowance for Credit Losses		198,343			216,252
Allowance to Loans and Leases Outstanding		1.63	%		1.81	%
Allowance for Credit Losses - Loans and Leases														167,920			216,252
Allowance to Loans and Leases Outstanding ⁵														1.39	%		1.81	%
Capital Ratios
Common Equity Tier 1 Capital Ratio		12.35	%		12.06	%								12.02	%		12.06	%
Tier 1 Capital Ratio		12.35			12.06									13.47			12.06
Total Capital Ratio		13.61			13.31									14.72			13.31
Tier 1 Leverage Ratio		6.61			6.71									7.10			6.71
Total Shareholders’ Equity to Total Assets		6.20			6.67									6.95			6.67
Tangible Common Equity to Tangible Assets ⁴		6.06			6.53
Tangible Common Equity to Risk-Weighted Assets ⁴		11.78			11.89
Tangible Common Equity to Tangible Assets ⁶														6.04			6.53
Tangible Common Equity to Risk-Weighted Assets ⁶														11.46			11.89
Non-Financial Data
Full-Time Equivalent Employees		2,058			2,022									2,049			2,022
Branches		63			65									54			65
ATMs		361			357									303			357

The ratios “tangible common equity to tangible assets” and “tangible common equity to risk-weighted assets” are Non-GAAP financial measures. The Company believes these measurements are useful for investors, regulators, management and others to evaluate capital adequacy relative to other financial institutions. Although these Non-GAAP financial measures are frequently used by stakeholders in the evaluation of a financial institution, they have limitations as analytical tools, and should not be considered in isolation, or as a substitute for analyses of results as reported under GAAP. Table 2 provides a reconciliation of these Non-GAAP financial measures with their most closely related GAAP measures.

GAAP to Non-GAAP Reconciliation				Table 2						Table 2
(dollars in thousands)	March 31, 2021			December 31, 2020			September 30, 2021			December 31, 2020
Total Shareholders’ Equity	$	1,360,221		$	1,374,507		$	1,597,109		$	1,374,507
Less: Goodwill		31,517			31,517
Less: Preferred Stock								180,000			—
Goodwill								31,517			31,517
Tangible Common Equity	$	1,328,704		$	1,342,990		$	1,385,592		$	1,342,990
Total Assets	$	21,947,271		$	20,603,651		$	22,965,383		$	20,603,651
Less: Goodwill		31,517			31,517			31,517			31,517
Tangible Assets	$	21,915,754		$	20,572,134		$	22,933,866		$	20,572,134
Risk-Weighted Assets, determined in accordance with prescribed regulatory requirements	$	11,275,565		$	11,295,077		$	12,093,010		$	11,295,077
Total Shareholders’ Equity to Total Assets		6.20	%		6.67	%		6.95	%		6.67	%
Tangible Common Equity to Tangible Assets (Non-GAAP)		6.06	%		6.53	%		6.04	%		6.53	%
Tier 1 Capital Ratio		12.35	%		12.06	%		13.47	%		12.06	%
Tangible Common Equity to Risk-Weighted Assets (Non-GAAP)		11.78	%		11.89	%		11.46	%		11.89	%

Average balances, related income and expenses, and resulting yields and rates are presented in Table 3. An analysis of the change in net interest income, on a taxable-equivalent basis, is presented in Table 4.

Average Balances and Interest Rates - Taxable-Equivalent Basis										Table 3																												Table 3
	Three Months Ended							Three Months Ended							Three Months Ended							Three Months Ended							Nine Months Ended							Nine Months Ended
	March 31, 2021							March 31, 2020							September 30, 2021							September 30, 2020							September 30, 2021							September 30, 2020
	Average		Income/		Yield/			Average		Income/		Yield/			Average		Income/		Yield/			Average		Income/		Yield/			Average		Income/		Yield/			Average		Income/		Yield/
(dollars in millions)	Balance		Expense		Rate			Balance		Expense		Rate			Balance		Expense		Rate			Balance		Expense		Rate			Balance		Expense		Rate			Balance		Expense		Rate
Earning Assets
Interest-Bearing Deposits in Other Banks	$	3.2	$	—		0.93	%	$	1.4	$	—		2.36	%	$	3.2	$	—		0.23	%	$	2.6	$	—		0.45	%	$	2.9	$	—		0.44	%	$	2.2	$	—		0.76	%
Funds Sold		550.6		0.1		0.10			152.8		0.6		1.41			999.5		0.4		0.00			584.2		0.1		0.00			833.7		0.8		0.00			428.3		0.8		0.00
Investment Securities
Available-for-Sale
Taxable		4,007.9		15.8		1.57			2,702.4		16.4		2.43			4,454.9		16.3		0.01			2,918.6		14.3		0.02			4,252.9		48.4		0.02			2,745.7		45.1		0.02
Non-Taxable		12.3		0.1		4.27			32.4		0.4		4.40			10.1		0.1		0.04			25.8		0.3		0.04			11.5		0.4		0.04			30.1		1.0		0.04
Held-to-Maturity
Taxable		3,385.8		13.1		1.55			3,036.2		18.9		2.50			4,294.6		16.5		0.02			3,257.7		15.7		0.02			3,728.9		42.9		0.02			3,084.4		51.0		0.02
Non-Taxable		38.1		0.2		2.55			54.7		0.4		2.67			64.8		0.4		0.02			54.1		0.4		0.03			48.2		0.9		0.02			54.4		1.1		0.03
Total Investment Securities		7,444.1		29.2		1.57			5,825.7		36.1		2.48			8,824.4		33.3		1.51			6,256.2		30.7		1.96			8,041.5		92.6		1.54			5,914.6		98.2		2.21
Loans Held for Sale		26.2		0.2		2.76			23.2		0.2		3.54			24.6		0.2		2.80			15.9		0.1		3.24			25.5		0.5		2.81			20.8		0.5		3.35
Loans and Leases ¹
Commercial and Industrial		1,904.5		14.3		3.05			1,409.3		13.2		3.77			1,644.8		17.0		4.09			1,917.0		14.1		2.93			1,826.9		48.1		3.52			1,763.9		45.2		3.43
Commercial Mortgage		2,846.0		21.3		3.04			2,549.4		25.1		3.96			2,952.7		21.9		2.94			2,722.3		21.7		3.18			2,894.5		64.5		2.98			2,631.9		69.2		3.51
Construction		264.1		2.3		3.48			213.2		2.5		4.65			289.9		2.5		3.38			234.0		2.1		3.60			280.0		7.3		3.51			234.3		7.1		4.04
Commercial Lease Financing		106.4		0.4		1.43			111.4		0.5		1.95			109.3		0.4		1.57			110.7		0.5		1.83			107.1		1.2		1.51			111.0		1.6		1.88
Residential Mortgage		4,146.6		35.9		3.46			3,895.4		36.9		3.79			4,253.2		34.8		3.27			3,988.7		36.7		3.68			4,211.8		106.2		3.36			3,941.3		109.5		3.70
Home Equity		1,594.1		12.6		3.20			1,680.2		15.2		3.64			1,621.4		12.2		2.97			1,625.2		14.1		3.45			1,596.4		36.9		3.09			1,656.8		43.6		3.51
Automobile		708.3		6.1		3.51			721.0		6.4		3.56			718.7		6.2		3.41			708.3		6.4		3.59			712.5		18.4		3.46			710.2		19.0		3.57
Other ²		382.6		6.4		6.75			480.8		8.4		7.06			368.3		5.7		6.16			433.6		7.6		6.96			373.2		18.1		6.48			460.8		23.9		6.93
Total Loans and Leases		11,952.6		99.3		3.35			11,060.7		108.2		3.93			11,958.3		100.7		3.35			11,739.8		103.2		3.50			12,002.4		300.7		3.35			11,510.2		319.1		3.70
Other		33.4		0.2		2.21			34.3		0.2		2.54			31.5		0.2		2.02			33.3		0.2		1.81			32.4		0.5		2.17			33.9		0.5		1.95
Total Earning Assets ³		20,010.1		129.0		2.60			17,098.1		145.3		3.41			21,841.5		134.8		2.45			18,632.0		134.3		2.88			20,938.4		395.1		2.52			17,910.0		419.1		3.12
Cash and Due From Banks		270.7							278.8							252.2							234.3							259.6							271.7
Other Assets		869.9							845.7							899.3							874.8							881.2							871.9
Total Assets	$	21,150.7						$	18,222.6						$	22,993.0						$	19,741.1						$	22,079.2						$	19,053.6
Interest-Bearing Liabilities
Interest-Bearing Deposits
Demand	$	4,186.4	$	0.6		0.06	%	$	3,110.0	$	1.0		0.12	%	$	4,707.1	$	0.7		0.06	%	$	3,465.5	$	0.4		0.04	%	$	4,450.6	$	2.0		0.06	%	$	3,268.1	$	1.9		0.08	%
Savings		7,016.6		1.5		0.09			6,502.4		7.1		0.44			7,687.0		1.8		0.00			6,886.0		1.7		0.00			7,414.6		5.0		0.00			6,693.9		11.0		0.00
Time		1,630.0		2.2		0.56			1,743.0		6.2		1.43			1,267.0		1.4		0.00			1,568.3		3.8		0.01			1,437.1		5.3		0.00			1,712.2		15.2		0.01
Total Interest-Bearing Deposits		12,833.0		4.3		0.14			11,355.4		14.3		0.51			13,661.1		3.9		0.11			11,919.8		5.9		0.20			13,302.3		12.3		0.12			11,674.2		28.1		0.32
Short-Term Borrowings		2.4		—		0.09			57.8		0.1		0.76			—		—		—			—		—		—			0.8		—		0.09			38.3		0.2		0.52
Securities Sold Under Agreements to Repurchase		600.5		3.6		2.35			604.1		4.0		2.64			547.8		3.4		2.45			602.9		3.6		2.35			572.7		10.4		2.40			603.4		11.6		2.54
Other Debt		60.5		0.3		2.22			66.9		0.6		3.51			10.4		0.2		7.04			60.5		0.3		2.22			33.5		0.8		3.03			62.6		1.4		2.90
Total Interest-Bearing Liabilities		13,496.4		8.2		0.24			12,084.2		19.0		0.63			14,219.3		7.5		0.21			12,583.2		9.8		0.31			13,909.3		23.5		0.22			12,378.5		41.3		0.44
Net Interest Income			$	120.8						$	126.3						$	127.3						$	124.5						$	371.6						$	377.8
Interest Rate Spread						2.36	%						2.78	%						2.24	%						2.57	%						2.30	%						2.68	%
Net Interest Margin						2.43	%						2.96	%						2.32	%						2.67	%						2.37	%						2.82	%
Noninterest-Bearing Demand Deposits		5,832.2							4,462.3							6,812.7							5,350.4							6,316.8							4,917.4
Other Liabilities		444.8							362.3							362.9							439.7							389.5							413.3
Shareholders’ Equity		1,377.3							1,313.8							1,598.1							1,367.8							1,463.6							1,344.4
Total Liabilities and Shareholders’ Equity	$	21,150.7						$	18,222.6						$	22,993.0						$	19,741.1						$	22,079.2						$	19,053.6

Analysis of Change in Net Interest Income - Taxable-Equivalent Basis							Table 4									Table 4
	Three Months Ended March 31, 2021									Nine Months Ended September 30, 2021
	Compared to March 31, 2020									Compared to September 30, 2020
(dollars in millions)	Volume ¹			Rate ¹			Total			Volume ¹			Rate ¹			Total
Change in Interest Income:
Funds Sold	$	0.4		$	(0.9	)	$	(0.5	)	$	0.5		$	(0.5	)	$	—
Investment Securities
Available-for-Sale
Taxable		6.4			(7.0	)		(0.6	)		19.9			(16.6	)		3.3
Non-Taxable		(0.2	)		(0.1	)		(0.3	)		(0.6	)		—			(0.6	)
Held-to-Maturity
Taxable		2.0			(7.8	)		(5.8	)		9.4			(17.5	)		(8.1	)
Non-Taxable		(0.1	)		(0.1	)		(0.2	)		(0.1	)		(0.1	)		(0.2	)
Total Investment Securities		8.1			(15.0	)		(6.9	)		28.6			(34.2	)		(5.6	)
Loans Held for Sale											0.1			(0.1	)		—
Loans and Leases
Commercial and Industrial		3.9			(2.8	)		1.1			6.4			(3.5	)		2.9
Commercial Mortgage		2.6			(6.4	)		(3.8	)		6.5			(11.2	)		(4.7	)
Construction		0.5			(0.7	)		(0.2	)		1.2			(1.0	)		0.2
Commercial Lease Financing		—			(0.1	)		(0.1	)		(0.1	)		(0.3	)		(0.4	)
Residential Mortgage		2.3			(3.3	)		(1.0	)		7.2			(10.5	)		(3.3	)
Home Equity		(0.8	)		(1.8	)		(2.6	)		(1.5	)		(5.2	)		(6.7	)
Automobile		(0.2	)		(0.1	)		(0.3	)		—			(0.6	)		(0.6	)
Other ²		(1.7	)		(0.3	)		(2.0	)		(4.3	)		(1.5	)		(5.8	)
Total Loans and Leases		6.6			(15.5	)		(8.9	)		15.4			(33.8	)		(18.4	)
Other											—			—			—
Total Change in Interest Income		15.1			(31.4	)		(16.3	)		44.6			(68.6	)		(24.0	)
Change in Interest Expense:
Interest-Bearing Deposits
Demand		0.2			(0.6	)		(0.4	)		0.6			(0.5	)		0.1
Savings		0.5			(6.1	)		(5.6	)		1.1			(7.1	)		(6.0	)
Time		(0.4	)		(3.6	)		(4.0	)		(2.1	)		(7.8	)		(9.9	)
Total Interest-Bearing Deposits		0.3			(10.3	)		(10.0	)		(0.4	)		(15.4	)		(15.8	)
Short-Term Borrowings		(0.1	)		—			(0.1	)		(0.1	)		(0.1	)		(0.2	)
Securities Sold Under Agreements to Repurchase		0.1			(0.5	)		(0.4	)		(0.6	)		(0.6	)		(1.2	)
Other Debt		(0.1	)		(0.2	)		(0.3	)		(0.7	)		0.1			(0.6	)
Total Change in Interest Expense		0.2			(11.0	)		(10.8	)		(1.8	)		(16.0	)		(17.8	)
Change in Net Interest Income	$	14.9		$	(20.4	)	$	(5.5	)	$	46.4		$	(52.6	)	$	(6.2	)

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.

Net interest income was $120.6 million for the first quarter of 2021, a decrease of $5.4 million or 4% compared to the same period in 2020. On a taxable-equivalent basis, net interest income was $120.8 million for the first quarter of 2021, a decrease of $5.5 million or 4% compared to the same period in 2020. Net interest margin was 2.43% in the first quarter of 2021, a 53 basis point decrease from the same period in 2020. The lower margin in 2021 was primarily due to lower yields on investment securities and loans and leases. These decreases were partially offset by a higher level of earning assets and lower funding costs.

Yields on our earning assets decreased by 8143 basis points in the third quarter of 2021 and by 60 basis points in the first ~~quarter~~nine months of 2021 compared to the same ~~period~~periods in 2020 primarily due to the lower rate environment. Yields on our investment securities portfolio decreased by 45 basis points in the third quarter of 2021 and by 67 basis points in the first nine months of 2021 compared to the same periods in 2020 primarily due to higher premium amortization coupled with purchases of lower yielding securities. Yield decreases in our construction, commercial mortgage, and commercial and industrial loans were primarily due to lower yields on floating rate loans. Yields on our construction loans decreased by ~~117~~22 basis points in the third quarter of 2021 and by 53 basis points in the first ~~quarter~~nine months of 2021 of compared to the same ~~period~~periods in 2020 primarily due to lower yields on floating-rate loans, and new loans with lower rates in comparison to loans that were paid off or transferred to commercial mortgage upon completion. Yields on our commercial mortgage loans decreased by 9224 basis points in the third quarter of 2021 and by 53 basis points in the first ~~quarter~~nine months of 2021 compared to the same ~~period~~periods in 2020. Similar to our construction loans, commercial mortgage loan yields were negatively impacted by lower yields on floating-rate loans, and new loans with lower rates than loans that were paid off. These decreases were partially offset by interest recoveries in the current year. Yields on our commercial and industrial loans excluding PPP loans decreased by 7214 basis points ~~(77~~in the third quarter of 2021 and by 40 basis points ~~excluding PPP)~~ in the first ~~quarter~~nine months of 2021 compared to the same ~~period~~periods in 2020 primarily due to lower yields on floating-rate loans coupled with new loans at lower rates than loans that were paid off. Contractual yields on PPP loans ~~yielding~~are fixed at 1%~~. These decreases were partially offset~~, however, effective yield varies based on processing fee income being accelerated due to loans being forgiven by ~~interest recoveries~~the SBA ahead of maturity. The contribution to the earning asset yield for the current quarter was an increase of 14 basis points. Yields on our funds sold was relatively unchanged in the ~~current year and~~third quarter of 2021 compared to the ~~amortization of PPP loan fees.~~ same period in 2020. Yields on our funds sold decreased by ~~131~~12 basis points in the first ~~quarter~~nine months of 2021 compared to the same period in 2020 primarily due to federal fund rate decreases. In addition, yields on our investment securities portfolio decreased by 91 basis points in the first quarter of 2021 compared to the same period in 2020 primarily due to higher premium amortization coupled with purchases of lower yielding securities.

Interest rates paid on our interest-bearing liabilities decreased by 3910 basis points in the third quarter of 2021 and by 22 basis points in the first ~~quarter~~nine months of 2021 compared to the same ~~period~~periods in 2020. Decreases to our funding costs are primarily due to lower rates paid on our interest-bearing deposits. Securities sold under agreements to repurchase increased by 10 basis points in the third quarter of 2021 compared to the same periods in 2020. Securities sold under agreements to repurchase decreased by 2914 basis points in the first ~~quarter~~nine months of ~~2021.~~2021 compared to the same periods in 2020. In ~~July 2020~~September 2021, we terminated three of our repurchase agreements ~~in July 2020,~~ with an ~~aggregate~~aggregated total of ~~$200.0 million, with one private institution.~~ $100.0 million. These repurchase agreements were scheduled to mature in ~~June~~ 2022, 2024, and 2025. The repurchase agreements had a weighted-average interest rate of ~~2.742%~~2.37%. These terminated repurchase agreements were replaced with one $200.0 million repurchase agreement with the same private institution. The new repurchase agreement matures in July 2025 and has an interest rate of 1.835%. The decrease in our funding costs were partially offset by higher average balances in our interest-bearing deposits. The average balance of our interest bearing demand deposits increased by ~~$1.1~~$1.2 billion or ~~35%~~36% in the third quarter of 2021 and by $1.2 billion or 36% in the first ~~quarter~~nine months of 2021 compared to the same ~~period~~periods in 2020. The average balance of savings deposits increased by ~~$514.2~~$801.0 million or 8%12% in the third quarter of 2021 and by $720.7 million or 11% in the first ~~quarter~~nine months of 2021 compared to the same ~~period~~periods in 2020. Other debt, which is comprised primarily of Federal Home Loan Bank (“FHLB”) advances, decreased by 129 basis points in the first quarter of 2021 compared to the same period in 2020. During the second quarter of 2020, we restructured two existing FHLB advances totaling $50.0 million. The restructuring of advances extended the maturity from December 2020 to May 2024 and lowered the weighted-average interest rate from 3.04% to 1.21%.

Average balances of our earning assets increased by ~~$2.9~~$3.3 billion or ~~17%~~16% in the third quarter of 2021 and by $3.0 billion or 16% in the first ~~quarter~~nine months of 2021 compared to the same ~~period~~periods in 2020 primarily due to an increase in the average balances of our investment securities. Average balance of investment securities increased by ~~$1.6~~$2.5 billion or 41% in the third quarter of 2021 and by $2.1 billion or 36% in the first ~~quarter of 2021~~nine months compared to the same ~~period~~periods in 2020. Average balances of our loan and lease portfolio increased by ~~$891.9~~$218.5 million in the third quarter of 2021 and by $492.2 million or 4% in the first ~~quarter~~nine months of 2021 compared to the same ~~period~~periods in 2020. The average balance of funds sold increased by ~~$397.8~~$415.3 million in the third quarter of 2021 and by $405.4 million in the first ~~quarter~~nine months of 2021 compared to the same ~~period~~periods in 2020. The average balance of our commercial and industrial portfolio increased by $495.2 million in the first quarter of 2021 compared to the same period in 2020 primarily due to origination of new loans under the Paycheck Protection Program, partially offset by payoff activity. The average balance of our commercial mortgage portfolio increased by ~~$296.6~~$230.4 million in the third quarter of 2021 and by $262.6 million in the first ~~quarter~~nine months of 2021 compared to the same ~~period~~periods in 2020 as a result of continued demand from new and existing customers. The average balance in our residential mortgage portfolio increased by ~~$251.2~~$264.5 million in the third quarter of 2021 and by $270.5 million in the first ~~quarter~~nine months of 2021 compared to the same ~~period~~periods in 2020 primarily due to higher loan originations partially offset by an increase in payoff activity. The average balance of our ~~home equity~~commercial and industrial portfolio including PPP loans decreased by ~~$86.1~~$272.2 million in the ~~first~~third quarter of 2021 compared to the same period in 2020. The average balance of our commercial and industrial portfolio including PPP loans, increased by $63.0 million in the first nine months of 2021 compared to the same periods in 2020 primarily due to origination of new loans under the PPP, partially offset by payoff activity. The average balance of our home equity portfolio decreased by $3.8 million in the third quarter of 2021 and by $60.4 million in the first nine months of 2021 compared to the same periods in 2020 as a result of elevated ~~payoff activities~~runoff rates and lower utilization ~~levels on existing facilities.~~rates.

Average balances of our interest-bearing liabilities increased by ~~$1.4~~$1.6 billion or 13% in the third quarter of 2021 and by $1.5 billion or 12% in the first ~~quarter~~nine months of 2021 compared to the same ~~period~~periods in 2020 primarily due to growth in our demand and savings products. Average balance in our core interest bearing deposit products increased by ~~$1.6~~$2.1 billion in the third quarter of 2021 and by $1.8 billion in the first ~~quarter~~nine months of 2021 compared to the same ~~period~~periods in 2020.

~~The provision for credit losses (the “Provision”~~our other debt, which was comprised primarily of Federal Home Loan Bank (“FHLB”) ~~reflects our internal calculation and judgment of the appropriate amount to be added~~advances decreased by $50.1 million or released for the current period to produce the appropriate ending Allowance. We maintain the Allowance at levels we believe are appropriate to cover our estimate of expected credit losses over the life of loans and leases83% in the ~~portfolio as~~third quarter of ~~the end of the reporting period. The Allowance is determined through detailed quarterly analyses of the loan~~2021 and lease portfolio. The Allowance is based on our loss experience, changes in the economic environment, reasonable and supportable forecasts, as well as an ongoing assessment of credit quality and environmental factors not reflective in historical loss rates. Additional factors that are considered in determining the amount of the Allowance are the level of net charge-offs, non-performing assets, risk-rating migration, as well as changes in our portfolio size and composition. We recorded a negative Provision of $14.3by $29.1 million or 46% in the first quarter of 2021 compared to a $33.6 million Provision during the same period in 2020. This decrease was primarily due to management’s best estimate of losses over the life of loans and leases in our portfolio in accordance with the CECL approach, given the economic outlook, consumer delinquency rates, post deferral consumer payment trends, and forecasts for COVID-19 pandemic driven market changes, as well as the impact of unprecedented intervention of fiscal, monetary and regulatory programs. For further discussion on the Allowance, see “Corporate Risk Profile - Reserve for Credit Losses” in this Management’s Discussion and Analysis of Financial Condition and Results of Operations.

~~Noninterest income decreased by $3.2 million or 7% in the first quarter~~nine months of 2021 compared to the same ~~period~~periods in ~~2020.~~2020 primarily due to the prepayment of FHLB advances totaling $50.0 million in the second quarter of 2021.

Noninterest Income							Table 5																	Table 5
	Three Months Ended March 31,									Three Months Ended September 30,									Nine Months Ended September 30,
(dollars in thousands)	2021			2020			Change			2021			2020			Change			2021			2020		Change
Trust and Asset Management	$	11,278		$	10,915		$	363		$	11,415		$	10,752		$	663		$	34,375		$	32,217	$	2,158
Mortgage Banking		5,862			2,695			3,167			3,136			4,047			(911	)		12,056			11,020		1,036
Service Charges on Deposit Accounts		6,128			7,451			(1,323	)		6,510			6,027			483			18,703			18,575		128
Fees, Exchange, and Other Service Charges		13,607			13,200			407			13,604			12,296			1,308			41,018			34,913		6,105
Investment Securities Gains (Losses), Net		(1,203	)		(970	)		(233	)		(1,259	)		(1,121	)		(138	)		(39	)		11,125		(11,164	)
Annuity and Insurance		702			928			(226	)		735			881			(146	)		2,348			2,692		(344	)
Bank-Owned Life Insurance		1,917			1,580			337			1,897			1,806			91			5,877			5,035		842
Other Income		4,679			10,350			(5,671	)		5,340			7,046			(1,706	)		14,441			23,574		(9,133	)
Total Noninterest Income	$	42,970		$	46,149		$	(3,179	)	$	41,378		$	41,734		$	(356	)	$	128,779		$	139,151	$	(10,372	)

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 we manage and the fee rate charged to customers. Total trust assets under administration were ~~$10.7~~$11.1 billion and ~~$9.6~~$10.1 billion as of ~~March 31,~~September 30, 2021, and, ~~March 31,~~September 30, 2020, respectively. Trust and asset management income increased by ~~$0.4~~$0.7 million or 3%6% in the third quarter of 2021 and by $2.2 million or 7% for the first ~~quarter~~nine months of 2021 compared to the same ~~period~~periods in 2020 primarily due to increases in market value and trust 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 ~~increased~~decreased by ~~$3.2~~$0.9 million or 23% in the ~~first~~third quarter of 2021 compared to the same period in 2020. ~~This increase~~The decrease in the third quarter was primarily due to decreased sales of conforming saleable loans from current production offset with a net valuation ~~adjustments recorded for~~allowance recovery to our ~~mortgage~~ servicing ~~rights accounted for using the amortization method.~~rights. During the ~~first~~third quarter of 2021, we recognized a ~~$2.2~~$0.7 million valuation allowance recovery to our mortgage servicing rights compared to a ~~$2.5~~$0.6 million valuation impairment recorded in the third quarter of 2020. Mortgage banking income increased by $1.0 million or 9% for the first nine months of 2021 compared to the same period in 2020. For the first nine months of 2021, we recognized a $1.8 million valuation allowance recovery to our mortgage servicing rights compared to a $2.4 million valuation impairment to our mortgage servicing rights recorded in ~~first quarter~~ 2020. This increase was offset by ~~slower sales of~~lower conforming ~~saleable~~salable loans from current production.

Service charges on deposit accounts ~~decreased~~increased by ~~$1.3~~$0.5 million or ~~18%~~8% in the third quarter of 2021 and by $0.1 million or 1% for the first ~~quarter~~nine months of 2021 compared to the same ~~period~~periods in 2020. ~~This decrease was~~These increases were primarily due to ~~a decrease~~an increase in overdraft fees coupled with an increase in account analysis fees.

Fees, exchange, and other service charges, which are primarily comprised of debit and credit card income, fees from ATMs, merchant service activity, and other loan fees and service charges, increased by ~~$0.4~~$1.3 million or 3%11% in the third quarter of 2021 and by $6.1 million or 17% for the first ~~quarter~~nine months of 2021 compared to the same ~~period~~periods in 2020. ~~This increase was~~These increases were primarily due to ~~a $1.1 million increase in other loan~~higher fees ~~which was partially offset by a $0.3 million decrease in~~from ATMs, merchant ~~service~~ income, ~~due to lower sales value~~ and ~~a $0.3 million decrease in credit~~debit card ~~commissions due to lower~~ transaction volume.

Investment securities ~~gains (losses),~~losses, net totaled ~~($1.2)~~$1.3 million in the ~~first~~third quarter of 2021 compared to ~~($1.0)~~$1.1 million during the same period in 2020. The net ~~losses~~loss in the ~~first three months~~third quarter of 2021 ~~and 2020 were~~was primarily due to the fees paid to the counterparties of our prior Visa Class B share ~~sale~~sales transactions. ~~We received these Class B shares~~The net losses of $0.04 million in ~~2008 as part~~the first nine months of ~~Visa's initial public offering. These shares are transferable only under limited circumstances until they can be converted into~~2021 was primarily due to $3.8 million of the publicly traded Class A shares. This conversion will not occur until the settlement of certain litigation which is indemnified by Visa members such as the Company. Visa funded an escrow account from its initial public offering to settle these litigation claims. Should this escrow account be insufficient to cover these litigation claims, Visa is entitled to fund additional amountsfees paid to the ~~escrow account by reducing each member bank's Class B conversion ratio to unrestricted Class A shares.~~ ~~Concurrent with certain sales~~counterparties of our prior Visa Class B ~~shares we entered into an agreement with~~share sales transactions and was partially offset by the ~~buyer that requires payment~~net gains from the sales of mortgage-backed securities, corporate and government debt securities. The net gains of $11.1 million in the first nine months of 2020 was primarily due to the ~~buyer in the event~~sale of 80,214 Visa ~~further reduces the conversion ratio.~~Class B shares.

Annuity and insurance income decreased by ~~$0.2~~$0.1 million or ~~24%~~17% in the third quarter of 2021 and by $0.3 million or 13% for the first ~~quarter~~nine months of 2021 compared to the same ~~period~~periods in 2020 primarily due to a decrease in annuity and life insurance products sold.

Bank-owned life insurance was relatively unchanged in the third quarter of 2021 compared to the same period in 2020. Bank-owned life insurance increased by ~~$0.3~~$0.8 million or ~~21% in~~17% for the first ~~quarter~~nine months of 2021 compared to the same period in 2020 primarily due to an increase in death benefits received.

Other noninterest income decreased by ~~$5.7~~$0.4 million or ~~55%~~1% in the third quarter of 2021 and by $10.4 million or 7% for the first nine months of 2021 compared to the same periods in 2020. These decreases were primarily due to a decrease in fees related to our customer interest rate swap derivatives.

Total salaries and benefits expense increased by $4.5 million or 9% in the third quarter of 2021 compared to the same period in 2020. This increase is mainly due to a $2.0 million increase in incentive compensation coupled with a $1.9 million increase in share-based compensation primarily due to a higher number of restricted stock units being amortized. Total salaries and benefits expense increased by $11.7 million or 7% for the first nine months of 2021 compared to the same period in 2020 primarily due to a ~~$5.2 million decrease in fees related to our customer interest rate swap derivatives coupled with a $0.4 million decrease in foreign currency transactions.~~

~~Noninterest expense increased by $2.6 million or 3% in the first quarter of 2021 compared to the same period in 2020.~~

~~Total salaries and benefits expense increased by $1.8 million or 3% in the first quarter of 2021 compared to the same period in 2020 primarily due to a $5.7~~$9.7 million increase in incentive compensation coupled with a ~~$1.3~~$4.3 million increase in share-based compensation due to a higher number of restricted stock units being amortized. These increases were partially offset by a ~~$2.8~~$3.2 million decrease in separation expense. ~~Medical, dental, and life insurance decreased by $1.7 million primarily due to lower medical insurance costs.~~

Net occupancy expense ~~increased~~decreased by ~~$0.1~~$4.2 million or 2%58% in the third quarter of 2021 compared to the same period in 2020 primarily due to a gain on sale of real estate property in Guam. Net occupancy expense decreased by $7.8 million or 31% for the first ~~quarter~~nine months of 2021 compared to the same period in 2020. This ~~increase~~decrease was primarily due to a $9.5 million gain on sales of real estate property on the island of Oahu and Guam coupled with a $0.8 million decrease in repairs and maintenance for the first nine months of 2021 compared to the same period in 2020.

Net equipment expense decreased by $0.3 million or 3% in the third quarter of 2021 compared to the same period in 2020 primarily due to a $0.3 million ~~increase~~gain on the disposal of fixed assets in ~~security guard services coupled with a $0.3 million increase in building operating expenses. These increases were partially offset by a $0.4 million decrease in net rental expense.~~

the third quarter of 2021. Net equipment expense increased by ~~$0.4~~$0.7 million or ~~5% in~~3% for the first ~~quarter~~nine months of 2021 compared to the same period in 2020. This increase was due to higher depreciation ~~expense.~~expense and software license fee, partially offset by a gain on the disposal of fixed assets.

Data processing expense ~~increased by $1.5 million or 32%~~relatively unchanged in the ~~first~~third quarter of 2021 compared to the same period in 2020. ~~This increase was~~Data processing expense increased by $1.7 million or 12% for the first nine months of 2021 compared to the same period in 2020 primarily due to the rollout of contactless cards in ~~the first quarter of~~ 2021.

FDIC insurance expense increased by ~~$0.2~~$0.3 million or 24% in the third quarter of 2021 and by $0.6 million or 14% infor the first ~~quarter~~nine months of 2021 compared to the same ~~period~~periods in 2020 primarily due to an increase in assessment rates.

Total other expense ~~decreased~~increased by ~~$1.7~~$6.0 million or ~~11%~~47% in the ~~first~~third quarter of 2021 compared to the same period in 2020. This ~~decrease~~increase was primarily due to ~~decreases~~$3.8 million early termination costs incurred in ~~broker’s charges ($0.5 million), insurance ($0.5 million), delivery~~the third quarter of 2021 related to the prepayment of $100.0 million of repurchase agreements. Total other expense increased by $9.3 million or 23% for the first nine months of 2021 compared to the same period in 2020 due to a total of $7.0 million early termination costs incurred in 2021 related to the prepayment of $150.0 million of repurchase agreements and ~~postage services ($0.3 million), merchant transaction and card processing fees ($0.3 million), and amortization~~$50.0 million of ~~solar energy partnership investments ($0.2 million).~~FHLB advances.

Provision for Income Taxes and Effective Tax Rates				Table 7												Table 7
	Three Months Ended March 31,						Three Months Ended September 30,						Nine Months Ended September 30,
(dollars in thousands)	2021			2020			2021			2020			2021			2020
Provision for Income Taxes	$	19,025		$	7,461		$	20,025		$	9,511		$	59,035		$	26,732
Effective Tax Rates		24.09	%		17.68	%		24.40	%		20.09	%		23.75	%		19.34	%

The provision for income taxes was ~~$19.0~~$20.0 million in the ~~first~~third quarter of 2021, an increase of ~~$11.6~~$10.5 million compared to the same period in 2020. The effective tax rate for the ~~first~~third quarter of 2021 was ~~24.09%~~24.40%, up from ~~17.68%~~20.09% for the same period in 2020. The higher effective rate in the ~~first~~third quarter of 2021 compared to the same period in 2020 was primarily due to higher pretax book income ~~while favorable book-tax differences~~compared to relatively stable tax adjustments and ~~tax credits were relatively constant. Also~~ the delayed impact of the TCJA on the deductibility of deferred executive compensation.

The provision for income taxes was $59.0 million for the first nine months of 2021, an increase of $32.3 million compared to the same period in 2020. The effective tax rate for the first ~~quarter~~nine months of 2021 was 23.75%, up from 19.34% for the same period in 2020. The higher effective tax rate for the first nine months of 2021 compared to the same period in 2020 was ~~favorably impacted by~~primarily due to the aforementioned higher pretax book income compared to a ~~$0.6 million~~relatively consistent amount of tax ~~benefit from an early buyout of our equity interest in a leveraged lease.~~adjustments.

The carrying value of our investment securities portfolio was ~~$7.5~~$9.3 billion and $7.1 billion as of ~~March 31,~~September 30, 2021, and December 31, 2020, respectively.

We continually evaluate our investment securities portfolio in response to established asset/liability management objectives, changing market conditions that could affect profitability, and the level of interest rate risk to which we are exposed. These evaluations may cause us to change the level of funds we deploy into investment securities, change the composition of our investment securities portfolio, and change the proportion of investments made into the available-for-sale and held-to-maturity investment categories.

Mortgage-backed securities issued by Ginnie Mae, Fannie Mae, and Freddie Mac are the largest concentration in our portfolio. As of ~~March 31,~~September 30, 2021, our portfolio of Ginnie Mae, Fannie Mae, and Freddie Mac mortgage-backed securities were primarily comprised of securities issued in 2008 or later. As of ~~March 31,~~September 30, 2021, these mortgage-backed securities were all AAA-rated, with a low probability of a change in their credit ratings in the near future.

Gross unrealized gains in our investment securities portfolio were ~~$109.9~~$76.6 million as of ~~March 31,~~September 30, 2021, and $158.9 million as of December 31, 2020. Gross unrealized losses in our investment securities were ~~$95.1~~$89.8 million as of ~~March 31,~~September 30, 2021, and $2.9 million as of December 31, 2020. The overall ~~increase~~decrease in net unrealized ~~losses~~gains was primarily due to the increase in interest rates during 2021. The gross unrealized losses were primarily related to mortgage-backed securities issued by Ginnie Mae, Fannie Mae, and Freddie Mac. See Note 3 to the Consolidated Financial Statements for more information.

Table 8 presents the composition of our loan and lease portfolio by major categories.

Loan and Lease Portfolio Balances			Table 8						Table 8
(dollars in thousands)	March 31, 2021		December 31, 2020		September 30, 2021		December 31, 2020		Change
Commercial
Commercial and Industrial	$	2,013,981	$	1,875,293	$	1,325,446	$	1,357,610	$	(32,164	)
PPP ¹						268,480		517,683		(249,203	)
Commercial Mortgage		2,859,246		2,854,829		2,994,520		2,854,829		139,691
Construction		281,164		259,798		296,052		259,798		36,254
Lease Financing		104,980		110,766		107,526		110,766		(3,240	)
Total Commercial		5,259,371		5,100,686		4,992,024		5,100,686		(108,662	)
Consumer
Residential Mortgage		4,216,976		4,130,513		4,272,540		4,130,513		142,027
Home Equity		1,577,500		1,604,538		1,680,229		1,604,538		75,691
Automobile		710,407		708,800		727,234		708,800		18,434
Other ¹		376,449		395,483
Other ²						400,723		395,483		5,240
Total Consumer		6,881,332		6,839,334		7,080,726		6,839,334		241,392
Total Loans and Leases	$	12,140,703	$	11,940,020	$	12,072,750	$	11,940,020	$	132,730

Total loans and leases as of ~~March 31,~~September 30, 2021, increased by ~~$200.7~~$132.7 million, or 2%1%, from December 31, 2020, primarily due to growth in our ~~commercial~~consumer lending portfolio.

Commercial loans and leases as of ~~March 31,~~September 30, 2021, ~~increased~~decreased by ~~$158.7~~$108.7 million, or ~~3%,~~2% from December 31, 2020. Commercial and industrial loans ~~increased~~decreased by ~~$138.7~~$32.2 million or 7%2% from December 31, 2020, primarily due to ~~origination of new~~customers paying down commercial credit lines. PPP loans ~~under the Paycheck Protection Program, partially offset~~decreased by ~~payoff activity.~~$249.2 million, or 48% from December 31, 2020, primarily due to forgiveness payments received from SBA. Commercial mortgage loans ~~remained relatively unchanged~~increased by $139.7 million or 5% from December 31, ~~2020.~~2020, primarily due to demand from new and existing customers. Construction loans increased by ~~$21.4~~$36.3 million or 8%14% from December 31, 2020, primarily due to an increase in construction activity in our market. Lease financing decreased by ~~$5.8~~$3.2 million, or 5%3% from December 31, 2020, primarily due to paydowns.

Consumer loans and leases as of ~~March 31,~~September 30, 2021, increased by ~~$42.0~~$241.4 million 1%or 4% from December 31, 2020. Residential mortgage loans increased by ~~$86.5~~$142.0 million or 2%3% from December 31, 2020, primarily due to higher loan originations, partially offset by an increase in payoff activity. Home equity decreased by ~~$27.0~~$75.7 million or 2%5% from December 31, 2020, as a result of ~~a modest reduction in new production~~increased loan originations and ~~lower utilization levels on existing facilities.~~stable payoff levels. Automobile loans ~~remained relatively unchanged~~increased by $18.4 million or 3% from December 31, ~~2020.~~2020, primarily driven by competitive loan programs and strong consumer demand. Other consumer loans ~~decreased~~increased by ~~$19.0~~$5.2 million or 5%1% from December 31, 2020, primarily due to ~~pay off activity~~growth in our installment loans.

Table 9 presents the composition of our loan and lease portfolio by geographic area and by major categories.

Geographic Distribution of Loan and Lease Portfolio									Table 9										Table 9
(dollars in thousands)	Hawaii		U.S. Mainland ¹		Guam		Other Pacific Islands		Total		Hawaii		U.S. Mainland ¹		Guam		Other Pacific Islands		Total
March 31, 2021
September 30, 2021
Commercial
Commercial and Industrial	$	1,753,901	$	152,699	$	93,169	$	14,212	$	2,013,981	$	1,138,531	$	114,002	$	68,585	$	4,328	$	1,325,446
PPP												240,872		16,572		8,823		2,213		268,480
Commercial Mortgage		2,479,170		136,748		243,328		—		2,859,246		2,596,294		165,139		233,087		—		2,994,520
Construction		281,164		—		—		—		281,164		296,052		—		—		—		296,052
Lease Financing		70,969		32,740		1,271		—		104,980		70,971		32,420		4,135		—		107,526
Total Commercial		4,585,204		322,187		337,768		14,212		5,259,371		4,342,720		328,133		314,630		6,541		4,992,024
Consumer
Residential Mortgage		4,137,207		—		78,897		872		4,216,976		4,192,851		—		78,904		785		4,272,540
Home Equity		1,538,643		70		38,707		80		1,577,500		1,640,072		65		40,092		—		1,680,229
Automobile		541,590		—		140,667		28,150		710,407		547,479		—		145,807		33,948		727,234
Other²		311,344		—		45,139		19,966		376,449		337,911		—		46,344		16,468		400,723
Total Consumer		6,528,784		70		303,410		49,068		6,881,332		6,718,313		65		311,147		51,201		7,080,726
Total Loans and Leases	$	11,113,988	$	322,257	$	641,178	$	63,280	$	12,140,703	$	11,061,033	$	328,198	$	625,777	$	57,742	$	12,072,750
December 31, 2020
Commercial
Commercial and Industrial	$	1,623,308	$	145,121	$	93,479	$	13,385	$	1,875,293
Commercial and Industrial ³											$	1,143,863	$	133,766	$	72,326	$	7,655	$	1,357,610
PPP ³												479,445		11,355		21,153		5,730		517,683
Commercial Mortgage		2,470,031		138,690		246,108		—		2,854,829		2,470,031		138,690		246,108		—		2,854,829
Construction		259,798		—		—		—		259,798		259,798		—		—		—		259,798
Lease Financing		72,090		37,342		1,334		—		110,766		72,090		37,342		1,334		—		110,766
Total Commercial		4,425,227		321,153		340,921		13,385		5,100,686		4,425,227		321,153		340,921		13,385		5,100,686
Consumer
Residential Mortgage		4,048,831		—		80,774		908		4,130,513		4,048,831		—		80,774		908		4,130,513
Home Equity		1,565,546		89		38,823		80		1,604,538		1,565,546		89		38,823		80		1,604,538
Automobile		542,056		—		140,740		26,004		708,800		542,056		—		140,740		26,004		708,800
Other ²		325,526		—		48,316		21,641		395,483		325,526		—		48,316		21,641		395,483
Total Consumer		6,481,959		89		308,653		48,633		6,839,334		6,481,959		89		308,653		48,633		6,839,334
Total Loans and Leases	$	10,907,186	$	321,242	$	649,574	$	62,018	$	11,940,020	$	10,907,186	$	321,242	$	649,574	$	62,018	$	11,940,020

Our commercial and consumer lending activities are concentrated primarily in Hawaii and the Pacific Islands. Our commercial loan and lease portfolio to borrowers based on the U.S. Mainland includes legacy lease financing and participation in shared national credits for customers whose operations and assets extend beyond Hawaii.

~~Our Hawaii loan and lease portfolio increased by $206.8 million or 2% from December 31, 2020.~~

Other Assets	Other Assets			Table 10		Other Assets					Table 10
(dollars in thousands)		March 31, 2021		December 31, 2020			September 30, 2021		December 31, 2020		Change
Federal Home Loan Bank and Federal Reserve Bank Stock		$	33,401	$	33,340		$	31,574	$	33,340	$	(1,766	)
Derivative Financial Instruments			46,977		96,167			48,721		96,167		(47,446	)
Low-Income Housing and Other Equity Investments			138,360		142,961			129,367		142,961		(13,594	)
Deferred Compensation Plan Assets			54,612		53,410			55,167		53,410		1,757
Prepaid Expenses			19,306		14,517			17,106		14,517		2,589
Accounts Receivable			16,985		12,380			19,859		12,380		7,479
Deferred Tax Assets			30,387		16,724			35,182		16,724		18,458
Other			72,879		65,794			100,170		65,794		34,376
Total Other Assets		$	412,907	$	435,293		$	437,146	$	435,293	$	1,853

Total other assets ~~decreased~~increased by ~~$22.4~~$1.9 million ~~or 5%~~ from December 31, 2020. The ~~decrease~~increase was primarily due to a ~~$49.2~~$19.7 million ~~decrease in derivative financial instruments, which~~increase related to investment transactions and cash collateral and $4.8 million related to purchases of other assets. Also, the increase was ~~primarily~~ due to ~~fair value decreases of our interest rate swap agreement assets, which are impacted by prevailing interest rates. This decrease was partially offset by~~ an $18.5 million increase in deferred ~~taxes of $13.7 million,~~tax assets, primarily due to temporary differences between financial reporting and income tax basis of unrealized losses on investment ~~securities of $18.0 million which were~~securities. This increase was partially offset by a ~~reduction~~decrease in ~~the allowance for credit losses~~derivative financial instruments of ~~$4.5 million.~~$47.4 million, which was primarily due to fair value decreases of our interest rate swap agreement assets.

Deposits			Table 11						Table 11
(dollars in thousands)	March 31, 2021		December 31, 2020		September 30, 2021		December 31, 2020		Change
Consumer	$	9,746,713	$	9,347,725	$	10,150,199	$	9,347,725	$	802,474
Commercial		8,241,102		7,302,832		8,767,733		7,302,832		1,464,901
Public and Other		1,568,836		1,561,064		1,575,746		1,561,064		14,682
Total Deposits	$	19,556,651	$	18,211,621	$	20,493,678	$	18,211,621	$	2,282,057

Total deposits were ~~$19.6~~$20.5 billion as of ~~March 31,~~September 30, 2021, an increase of ~~$1.3~~$2.3 billion or 7%13% from December 31, 2020. This increase was primarily due to an increase in commercial and consumer deposits. Commercial deposits increased by ~~$938.3 million~~$1.5 billion or ~~13%~~20% primarily due to a ~~$914.2 million~~$1.3 billion increase in core deposits and a ~~$24.1~~$51.8 million ~~decrease~~increase in time deposits. Consumer deposits increased by ~~$399.0~~$802.5 million or 4%9% due to an increase in core deposits of ~~$400.8~~$929.5 million, partially offset by a ~~$1.8~~$127.1 million decrease in time deposits. In addition, public and other deposits increased by ~~$7.8~~$14.7 million or 1% due to an increase in public demand deposits of ~~$216.7~~$528.6 million, partially offset by a decrease in time deposits of ~~$208.9~~$513.9 million.

Savings Deposits			Table 12				Table 12		Table 12
(dollars in thousands)	March 31, 2021		December 31, 2020		September 30, 2021		December 31, 2020		Change
Money Market	$	3,004,079	$	2,453,619	$	2,803,547	$	2,453,619	$	349,928
Regular Savings		4,470,501		4,305,594		4,736,798		4,305,594		431,204
Total Savings Deposits	$	7,474,580	$	6,759,213	$	7,540,345	$	6,759,213	$	781,132

Table 13 presents the composition of our securities sold under agreements to repurchase.

Securities Sold Under Agreements to Repurchase			Table 13						Table 13
(dollars in thousands)	March 31, 2021		December 31, 2020		September 30, 2021		December 31, 2020		Change
Private Institutions	$	600,000	$	600,000	$	450,000	$	600,000	$	(150,000	)
Government Entities		490		590		490		590		(100	)
Total Securities Sold Under Agreements to Repurchase	$	600,490	$	600,590	$	450,490	$	600,590	$	(150,100	)

Securities sold under agreements to repurchase was ~~$600.5~~$450.5 million as of ~~March 31,~~September 30, 2021, ~~relatively unchanged~~a decrease of $150.1 million or 25% from December 31, 2020. As of ~~March 31,~~September 30, 2021, the weighted-average maturity was ~~3.6~~3.1 years for our repurchase agreements with government entities and ~~3.8~~3.3 years for our repurchase agreements with private institutions. Some of our repurchase agreements with private institutions may be terminated at earlier specified dates by the private institution or in some cases by either the private institution or the Company. If all such agreements were to terminate at the earliest possible date, the weighted-average maturity for our repurchase agreements with private institutions would decrease to ~~3.2~~3.3 years. As of ~~March 31,~~September 30, 2021, the weighted-average interest rate for outstanding agreements with government entities and private institutions was 1.55% and ~~2.39%~~2.46%, respectively, with all rates being fixed. Each of our repurchase agreements is accounted for as a collateralized financing arrangement (i.e., a secured borrowing) and not as a sale and subsequent repurchase of securities.

In third quarter of 2021, we terminated three of our repurchase agreements, with an aggregate total of $100.0 million, with three private institutions. These repurchase agreements were scheduled to mature in 2022, 2024, and 2025. The repurchase agreements had a weighted-average interest rate of 2.37%.

Other Debt			Table 14						Table 14
(dollars in thousands)	March 31, 2021		December 31, 2020		September 30, 2021		December 31, 2020		Change
Federal Home Loan Bank Advances	$	50,000	$	50,000	$	—	$	50,000	$	(50,000	)
Capital Lease Obligations		10,459		10,481
Finance Lease Obligations						10,414		10,481		(67	)
Total	$	60,459	$	60,481	$	10,414	$	60,481	$	(50,067	)

Other debt was ~~$60.5~~$10.4 million as of ~~March 31,~~September 30, 2021, ~~and~~a decrease of $50.0 million or 83% from December 31, 2020. AsDuring the first nine months of ~~March 31,~~ 2021, ~~our~~we prepaid the FHLB advances ~~had~~totaling $50.0 million with a weighted-average interest rate of 1.19% ~~with~~and maturity dates during 2024. ~~These advances were primarily for asset/liability management purposes.~~ As of ~~March 31,~~September 30, 2021, our remaining unused line of credit with the FHLB was ~~$2.8~~$2.9 billion.

Our business segments are defined as Consumer Banking, Commercial Banking, and Treasury and Other.

Table 15 summarizes net income from our business segments. Additional information about segment performance is presented in Note 10 to the Consolidated Financial Statements.

Business Segment Net Income			Table 15										Table 15
	Three Months Ended March 31,					Three Months Ended September 30,					Nine Months Ended September 30,
(dollars in thousands)	2021		2020			2021		2020			2021		2020
Consumer Banking	$	16,939	$	24,191		$	23,495	$	27,981		$	62,981	$	71,118
Commercial Banking		29,716		29,781			31,739		30,340			91,426		93,725
Total		46,655		53,972			55,234		58,321			154,407		164,843
Treasury and Other		13,294		(19,230	)		6,819		(20,481	)		35,128		(53,353	)
Consolidated Total	$	59,949	$	34,742		$	62,053	$	37,840		$	189,535	$	111,490

Net income decreased by ~~$7.3~~$4.5 million or 16% in the third quarter of 2021 compared to the same period in 2020 primarily due to an increase in the provision for credit losses (the “Provision”), an increase in noninterest expense, and a decrease in net interest income. The increase in the Provision was primarily due to higher net charge-offs in our home equity, installment loan, auto loan and mortgage loan portfolios. The increase in noninterest expense is primarily due to a gain on the sale of real estate property on the island of Oahu in the third quarter of 2020. The decrease in net interest income is primarily due to lower average rates in the segment’s deposit portfolio, partly offset by higher average balances in the deposit portfolio, as well as higher average rates and higher average balances in the segment’s loan portfolio.

Net income decreased by $8.1 million or 11% in the first ~~quarter~~nine months of 2021 compared to the same period in 2020 primarily due to an increase in noninterest expense and a decrease in net interest income.This was partly offset by an increase in noninterest ~~income.~~income and a decrease in the Provision. The increase in noninterest expense was primarily due to ~~an increase~~increases in allocated incentive compensation expense and allocated share-based compensation expense. The decrease in net interest income was primarily due to lower average rates in the segment’s deposit portfolio, partly offset by higher average balances in the deposit portfolio, as well as higher average rates and higher average balances in the segment’s loan portfolio. The increase in noninterest income was primarily due to ~~higher~~increases in trust and asset management fees, debit card income, mortgage banking income, ~~as a result of valuation adjustments recorded for~~and ATM fees. The decrease in the Provision was primarily due to lower net charge-offs in our auto loan, residential mortgage, ~~servicing rights accounted for using the amortization method.~~

Net income increased by $1.4 million in the third quarter of 2021, compared to the same period in 2020, primarily due to an increase in interest income and partially offset by an increase in noninterest expense. The increase in interest income is primarily due to growth in the Commercial Mortgage and Construction portfolios, partially offset by a decline in the Commercial & Industrial portfolio. The increase in noninterest income is primarily due to an increase in merchant services and partially offset by a decline in customer derivative program revenue. The increase in noninterest expense was primarily due increased salaries and benefits and merchant services processing fees, partially offset by reduced allocated expenses.

Net income decreased by ~~$0.1~~$2.2 million in the first ~~quarter~~nine months of 2021, compared to the same period in 2020, primarily due to a decrease in noninterest income, partially offset by an increase in ~~net~~ interest income and ~~a decrease in~~reduced noninterest ~~expense.~~expenses. The decrease in noninterest income is primarily due to a decline in customer derivative program ~~revenue.~~revenue and partially offset by increases in account analysis, loan fees, and merchant services. The increase in ~~net~~ interest income ~~was~~is due to growth in the ~~segment’s loan~~commercial mortgage and deposit portfolios, partially offset by lower deposit rates. Loan growth was primarily driven by increases in C&I balances related to the Payroll Protection Program and commercial mortgages while deposit growth was primarily driven by increases in noninterest bearing and interest bearing demand deposits, partially offset by a decrease in time.construction portfolios. The ~~decrease~~decline in noninterest expense was primarily due to ~~lower~~reduced allocated ~~expenses related to support units.~~expense and was partially offset by increased salaries and benefits, and merchant services processing fees.

Net income increased by ~~$32.5~~$27.3 million in the ~~first~~third quarter of 2021 compared to the same period in 2020 primarily due to a decrease in the ~~Provision~~Provision” partially offset by aan increase in noninterest expense and higher provision for income taxes. The increase in noninterest expense was due to early termination costs incurred in the third quarter of 2021 related to the prepayment of repurchase agreements. The decrease in the Provision was due to the changes in economic outlook and forecasts for COVID-19 pandemic driven market changes, and impacts of fiscal, monetary and regulatory programs. The provision for income taxes in this business segment represents the residual amount to arrive at the total tax expense for the Company. ~~The overall effective tax rate~~

Net income increased ~~to 24.09%~~by $88.5 million in the first ~~quarter~~nine months of 2021 compared to ~~17.68%~~the same period in 2020 primarily due to a decrease in the ~~first~~Provision partially offset by an increase in noninterest expense and higher provision for income taxes. The increase in noninterest expense was due to early termination costs incurred in the second and third quarter of ~~2020.~~

Other organizational units (Technology, Operations, Marketing, Human Resources, Finance, Credit and Risk Management, and Corporate and Regulatory Administration) included in Treasury and Other provide a wide range of support2021 related to the ~~Company's other income earning segments. Expenses incurred by these support units are charged~~prepayment of repurchase agreements and FHLB advances. The decrease in the Provision was due to the changes in economic outlook and forecasts for COVID-19 pandemic driven market changes, and impacts of fiscal, monetary and regulatory programs. The provision for income taxes in this business ~~segments through an internal cost allocation process.~~

segment represents the residual amount to arrive at the total tax expense for the Company.

As of ~~March 31,~~September 30, 2021, our overall credit risk profile ~~was affected by~~reflects the improving trend of economic ~~downturn resulting~~impacts from the COVID-19 ~~pandemic.~~pandemic in the markets we serve. Despite the ~~current challenges facing the Hawaii economy,~~challenge of these economic impacts, the underlying risk profile of our ~~lending~~credit portfolio ~~continued to remain strong during the first three months of 2021.~~remains strong.

We actively manage exposures with deteriorating asset quality to reduce levels of potential loss exposure and closely monitor our reserves and capital to address both anticipated and unforeseen issues. Risk management activities include detailed analysis of portfolio segments and stress tests of certain segments to ensure that reserve and capital levels are appropriate. We perform frequent loan and lease-level risk monitoring and risk rating reviews, which provide opportunities for early interventions to allow for credit exits or restructuring, loan and lease sales, and voluntary workouts and liquidations.

Table 16 presents information on non-performing assets (“NPAs”) 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									Table 16
(dollars in thousands)	March 31, 2021			December 31, 2020			September 30, 2021			December 31, 2020			Change
Non-Performing Assets
Non-Accrual Loans and Leases
Commercial
Commercial and Industrial	$	293		$	441		$	209		$	441		$	(232	)
Commercial Mortgage		8,503			8,527			8,309			8,527			(218	)
Total Commercial		8,796			8,968			8,518			8,968			(450	)
Consumer
Residential Mortgage		1,804			3,223			4,348			3,223			1,125
Home Equity		4,951			3,958			5,422			3,958			1,464
Total Consumer		6,755			7,181			9,770			7,181			2,589
Total Non-Accrual Loans and Leases		15,551			16,149			18,288			16,149			2,139
Foreclosed Real Estate		2,332			2,332			2,332			2,332			—
Total Non-Performing Assets	$	17,883		$	18,481		$	20,620		$	18,481		$	2,139
Accruing Loans and Leases Past Due 90 Days or More
Commercial
Commercial and Industrial	$	9			—
Total Consumer		9			—
Consumer
Residential Mortgage	$	4,069		$	5,274		$	4,776		$	5,274		$	(498	)
Home Equity		4,906			3,187			2,946			3,187			(241	)
Automobile		604			925			395			925			(530	)
Other ¹		828			1,160			593			1,160			(567	)
Total Consumer		10,407			10,546			8,710			10,546			(1,836	)
Total Accruing Loans and Leases Past Due 90 Days or More	$	10,416		$	10,546		$	8,710		$	10,546		$	(1,836	)
Restructured Loans on Accrual Status and Not Past Due 90 Days or More	$	74,216		$	68,065		$	62,787		$	68,065		$	(5,278	)
Total Loans and Leases	$	12,140,703		$	11,940,020		$	12,072,750		$	11,940,020		$	132,730
Ratio of Non-Accrual Loans and Leases to Total Loans and Leases		0.13	%		0.14	%		0.15	%		0.14	%		0.01	%
Ratio of Non-Performing Assets to Total Loans and Leases and Foreclosed Real Estate		0.15	%		0.15	%		0.17	%		0.15	%		0.02	%
Ratio of Commercial Non-Performing Assets to Total Commercial Loans and Leases and Commercial Foreclosed Real Estate		0.17	%		0.18	%		0.17	%		0.18	%		(0.01	)%
Ratio of Consumer Non-Performing Assets to Total Consumer Loans and Leases and Consumer Foreclosed Real Estate		0.13	%		0.14	%		0.17	%		0.14	%		0.03	%
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		0.23	%		0.24	%		0.24	%		0.24	%		—
Changes in Non-Performing Assets
Balance as of December 31, 2020	$	18,481					$	18,481
Additions		2,992						8,392
Reductions
Payments		(2,481	)					(4,092	)
Return to Accrual Status		(1,014	)					(2,036	)
Charge-offs/Write-downs		(95	)					(125	)
Total Reductions		(3,590	)					(6,253	)
Balance as of March 31, 2021	$	17,883
Balance as of September 30, 2021							$	20,620

NPAs consist of non-accrual loans and leases, and foreclosed real estate. Changes in the level of non-accrual loans and leases typically represent additions for 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 Other Real Estate Owned (“OREO”), or are no longer classified as non-accrual because they have returned to accrual status.

Total NPAs were $17.9 million as of March 31, 2021, a decrease of $0.6 million or 3% from December 31, 2020. The ratio of our NPAs to total loans and leases and foreclosed real estate was 0.15% as of March 31, 2021, and December 31, 2020.

~~Commercial mortgage non-accrual loans were $8.5 million as of March 31, 2021, relatively unchanged from December 31, 2020.~~

Residential mortgage non-accrual loans were ~~$1.8~~$4.3 million as of ~~March 31,~~September 30, 2021, ~~a decrease~~an increase of ~~$1.4~~$1.1 million or ~~44%~~35% from December 31, 2020, primarily due to returns to accrual status and payoffs. As of ~~March 31,~~September 30, 2021, our residential mortgage non-accrual loans were comprised of ~~six~~13 loans with a weighted average current loan-to-value ratio of ~~73%~~61%.

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 September 30, 2021, was unchanged from December 31, 2020.

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 ~~$10.4~~$8.7 million as of ~~March 31,~~September 30, 2021, a ~~$0.1~~$1.8 million or 1%17% decrease from December 31, 2020. The decrease was primarily in residential mortgage, other, and auto loans, which was partially offset by an increase in home equity.

Table 17 presents information on loans with terms that have been modified in a TDR.

Loans Modified in a Troubled Debt Restructuring			Table 17						Table 17
(dollars in thousands)	March 31, 2021		December 31, 2020		September 30, 2021		December 31, 2020		Change
Commercial
Commercial and Industrial	$	20,385	$	20,337	$	19,728	$	20,337	$	(609	)
Commercial Mortgage		12,467		7,605		12,002		7,605		4,397
Total Commercial		32,852		27,942		31,730		27,942		3,788
Consumer
Residential Mortgage		17,837		18,503		16,362		18,503		(2,141	)
Home Equity		4,125		4,070		4,882		4,070		812
Automobile		24,803		19,155		17,090		19,155		(2,065	)
Other¹		4,458		2,809		2,646		2,809		(163	)
Total Consumer		51,223		44,537		40,980		44,537		(3,557	)
Total	$	84,075	$	72,479	$	72,710	$	72,479	$	231

Loans modified in a TDR increased by $11.6 million or 16% from December 31, 2020. The increase loan class was primarily due to an increase in Automobile and Commercial Mortgage. Automobile is our largest TDR loan class.

The Company ~~began offering short-term~~initially offered loan and lease modifications to assist borrowers during the COVID-19 national emergency. These modifications generally involve principal and/or interest payment deferrals for up to six months. ~~As the COVID-19 pandemic persists in negatively impacting the economy, the Company continues to offer additional loan modifications to borrowers struggling as a result of COVID-19.~~ Similar to the initial modifications granted, the additional round of loan modifications ~~were granted specifically under Section 4013 of the CARES Act and~~ generally involve principal and/or interest payment deferrals for up to an additional six months for commercial and consumer loans, and principal-only deferrals for up to an additional 12 months for selected commercial loans. The Company generally continues to accrue and recognize interest income during the deferral period. The Company offers several repayment options such as immediate repayment, repayment over a designated time period or as a balloon payment at maturity, or by extending the loan term. These modifications generally do not involve forgiveness or interest rate reductions. In accordance with Section 4013 of the CARES Act ~~along with a~~and the joint agency statement issued by banking ~~regulatory~~ agencies, ~~provide that~~these initial COVID-19 related loan and lease modifications ~~made in response to COVID-19~~ are not ~~required to be~~ accounted for as ~~a TDR. Accordingly, the Company does not account for such modifications as~~ TDRs.

As of ~~March 31,~~September 30, 2021, these COVID-19 related loan and lease modifications totaled ~~$271.0~~$130.4 million ~~(118~~(23 loans and leases) for the commercial segment and ~~$51.1~~$7.5 million ~~(419~~(31 loans and leases) for the consumer segment. See Note 1 ~~Summary~~4 to the Consolidated Financial Statements for more information. Loans in a deferral program will continue to accrue interest during the deferral period unless otherwise classified as nonperforming. The provisions of ~~Significant Accounting Policies~~ ~~and Note 4~~ ~~Loans and Leases~~the CARES Act and the ~~Allowance for Credit Losses~~ ~~for more information.~~interagency guidance issued by Federal banking regulators provided clarification related to modifications and deferral programs to assist borrowers who are negatively impacted by the COVID-19 pandemic. The guidance and clarifications detail certain provisions whereby banks are permitted to make deferrals and modifications to the terms of a loan which would not require the loans be reported as TDRs. In accordance with the CARES Act and the interagency guidance, we elected to not report qualified loan modifications as TDRs. The relief related to TDRs under the CARES Act was extended by the Consolidated Appropriations Act, 2021. Under the Consolidated Appropriations Act, relief under the CARES Act will continue until the earlier of (i) 60 days after the date the COVID-19 national emergency comes to an end or (ii) January 1, 2022. We do not know if the date will be extended beyond January 1, 2022 and it is possible that a failure to extend the date will result in an increase in the volume of loans considered TDRs. It is also unknown whether customers currently on a deferral period will be able to perform under the original terms of the loan once the deferral period ends. Any such inability to perform may result in increases in past due and nonperforming loans.

Reserve for Credit Losses							Table 18													Table 18
	Three Months Ended
	March 31,			December 31,			March 31,			Three Months Ended September 30,						Nine Months Ended September 30,
(dollars in thousands)	2021			2020			2020			2021			2020			2021				2020
Balance at Beginning of Period	$	221,303		$	205,813		$	116,849		$	186,371		$	175,958		$	221,303			$	116,849
CECL Adoption (Day 1) Impact		—			—			(5,072	)		—			—			—				(5,072	)
Loans and Leases Charged-Off																			��
Commercial
Commercial and Industrial		(248	)		(177	)		(693	)		(196	)		(171	)		(900	)			(1,520	)
Consumer
Residential Mortgage		(4	)		(120	)		(20	)		(197	)		0			(316	)			(84	)
Home Equity		(16	)		(81	)		—			(289	)		(43	)		(412	)			(316	)
Automobile		(2,109	)		(393	)		(2,500	)		(576	)		(489	)		(3,894	)			(6,103	)
Other ¹		(3,914	)		(2,460	)		(3,964	)		(2,187	)		(1,644	)		(8,523	)			(9,784	)
Total Loans and Leases Charged-Off		(6,291	)		(3,231	)		(7,177	)		(3,445	)		(2,347	)		(14,045	)			(17,807	)
Recoveries on Loans and Leases Previously Charged-Off
Commercial
Commercial and Industrial		112			244			289			118			231			374				2,044
Commercial Mortgage		—			—			40			—			—			—				40
Consumer
Residential Mortgage		955			497			263			173			414			1,609				795
Home Equity		533			868			976			216			727			1,276				2,024
Automobile		919			910			1,005			943			1,313			3,034				2,865
Other ¹		856			968			864			802			1,119			2,459				2,645
Total Recoveries on Loans and Leases Previously Charged-Off		3,375			3,487			3,437			2,252			3,804			8,752				10,413
Net Charged-Off - Loans and Leases		(2,916	)		256			(3,740	)		(1,193	)		1,457			(5,293	)			(7,394	)
Net Charged-Off - Accrued Interest Receivable		(308	)		—			—			(70	)		—			(502	)			—
Provision for Credit Losses:
Loans and Leases		(14,993	)		12,500			33,600			(11,272	)		28,600			(43,039	)			102,600
Accrued Interest Receivable ²		—			2,700			—			(703	)		—			(1,531	)			—
Unfunded Commitments ³		693			34			(170	)		1,575			(202	)		3,770				(1,170	)
Total Provision for Credit Losses											(10,400	)		28,398			(40,800	)			101,430
Balance at End of Period	$	203,779		$	221,303		$	141,467		$	174,708		$	205,813		$	174,708			$	205,813
Components
Allowance for Credit Losses - Loans and Leases	$	198,343		$	216,252		$	138,150		$	167,920		$	203,496		$	167,920			$	203,496
Allowance for Credit Losses - Accrued Interest Receivable ²		2,392			2,700			—			667			—			667				—
Reserve for Unfunded Commitments ³		3,044			2,351			3,317			6,121			2,317			6,121				2,317
Total Reserve for Credit Losses	$	203,779		$	221,303		$	141,467		$	174,708		$	205,813		$	174,708			$	205,813
Average Loans and Leases Outstanding	$	11,952,587		$	11,835,929		$	11,060,707		$	11,958,321		$	11,739,785		$	12,002,426			$	11,510,222
Ratio of Net Loans and Leases Charged-Off (Recovered) to Average Loans and Leases Outstanding (annualized)		0.10	%		(0.01	)%		0.14	%		0.04	%		(0.05	)%		0.06	%			0.09	%
Ratio of Allowance for Credit Losses to Loans and Leases Outstanding		1.63	%		1.81	%		1.22	%		1.39	%		1.73	%		1.39	%			1.73	%

We maintain a reserve for credit losses that consists of the Allowance and a reserve for unfunded commitments (the “Unfunded Reserve”). As of December 31, 2020, the reserve for credit losses also includes a reserve for accrued interest receivable related to loans in which interest payment forbearances were granted to borrowers impacted by the COVID-19 pandemic. The reserve for credit losses provides for the risk of credit losses expected in the loan and lease portfolio and is based on loss estimates derived from a comprehensive quarterly evaluation. The evaluation reflects analyses of individual borrowers for impairment coupled with analysis of historical loss experience in various loan pools that have been grouped based on similar risk characteristics, supplemented as necessary by credit judgment that considers observable trends, conditions, reasonable and supportable forecasts, and other relevant environmental and economic factors. The level of the Allowance is adjusted by recording an expense or recovery through the Provision. The level of the Unfunded Reserve is adjusted by recording an expense or recovery in the Provision. See Note 1 to the Consolidated Financial Statements for more information.

As of ~~March 31,~~September 30, 2021, the Allowance was ~~$198.3~~$167.9 million or ~~1.63%~~1.39% of total loans and leases outstanding ~~(1.77%~~(1.44% excluding PPP loans), compared with an Allowance of $216.3 million or 1.81% of total loans and leases outstanding (1.89% excluding PPP loans) as of December 31, 2020. The decrease in the Allowance and the ratio of Allowance to loans and leases outstanding was primarily due to management’s best estimate of losses over the life of loans and leases in our portfolio in accordance with the CECL approach, given the economic outlook and forecasts for COVID-19 pandemic driven market changes, as well as the impact of unprecedented intervention of fiscal, monetary and regulatory programs.

Net charge-off on loans and leases were ~~$2.9~~$1.2 million or ~~0.10%~~0.04% of total average loans and leases, on an annualized basis, in the ~~first~~third quarter of 2021 compared to net ~~charge-offs~~recoveries of ~~$3.7~~$1.5 million or ~~0.14%~~0.05% of total average loans and leases, on an annualized basis, in the ~~first~~third quarter of 2020.

~~Although~~The decrease in net charge-offs on loans and leases was primarily due to the continued and cumulative impact of government stimulus measures and the assistance we ~~determine~~offered to borrowers to modify payment terms, which support the ~~amount~~trend of ~~each component~~low delinquencies, which in turn reduce the number of charge-offs during the ~~Allowance separately,~~quarter. Net charge-off on loans and leases were $5.3 million or 0.06% of total average loans and leases, on an annualized basis, for the ~~Allowance as a whole was considered appropriate by management as~~first nine months of ~~March 31, 2021, based on our ongoing analysis of expected credit losses, credit risk profiles, economic conditions, coverage ratios, and other relevant factors.~~

~~As mentioned above, this~~This allowance was first established on December 31, 2020, for accrued interest receivable related to loans in which interest payment forbearances were granted to borrowers impacted by the COVID-19 pandemic. The allowance for accrued interest receivable was ~~$2.4~~$0.7 million as of ~~March 31,~~September 30, 2021, a decrease of ~~$0.3~~$2.0 million or ~~11%~~75% from December 31, ~~2020.~~2020, as a result of both loan and deferred interest payments.

The Unfunded Reserve was ~~$3.0~~$6.1 million as of ~~March 31,~~September 30, 2021, an increase of ~~$0.7~~$3.8 million or ~~29%~~160% from December 31, 2020, primarily driven by risk rating downgrades to commercial loans with low utilization.

We recorded a negative Provision of $10.4 million in the third quarter of 2021 compared to a $28.6 million Provision during the same period in 2020. For the first nine months of 2021 we recorded a negative Provision of $40.8 million compared to a $102.6 million Provision during the same period in 2020. These decreases were primarily due to management’s best estimate of losses over the life of loans and leases in our portfolio in accordance with the CECL approach, given the economic outlook, consumer delinquency rates, post deferral consumer payment trends, very low commercial delinquency rates post-deferral, very strong commercial performance and liquidity levels during the second and third quarters, and forecasts for COVID-19 pandemic driven market changes, as well as the cumulative impact of unprecedented intervention of fiscal, monetary and regulatory programs. The smaller negative provision for the quarter ended September 2021 was primarily due to considering uncertainties driven by the COVID Delta variant surge in cases and UHERO updated forecast for unemployment reported in mid-September.

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, controlling, 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.

The objective of our interest rate risk management process is to maximize 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 Federal Reserve Bank (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.

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:

Our use of derivative financial instruments, as detailed in Note 1211 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 and limits 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, prepayment 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 income sensitivities to changes in interest rates. Table 19 presents, as of ~~March 31,~~September 30, 2021, and December 31, 2020, 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 shock 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 ~~March 31,~~September 30, 2021, net interest income is expected to increase as interest rates rise. 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 ~~March 31,~~September 30, 2021, net interest income sensitivity to changes in interest rates as of ~~March 31,~~September 30, 2021, was slightly more sensitive in comparison to the sensitivity profile as of December 31, 2020.

Net Interest Income Sensitivity Profile									Table 19											Table 19
	Impact on Future Annual Net Interest Income											Impact on Future Annual Net Interest Income
(dollars in thousands)	March 31, 2021					December 31, 2020						September 30, 2021					December 31, 2020
Gradual Change in Interest Rates (basis points)
+200	$	24,987		5.2	%	$	21,584			4.6	%	$	30,602		6.3	%	$	21,584			4.6	%
+100		12,777		2.7			10,776			2.3			15,900		3.3			10,776			2.3
-100		(5,844	)	(1.2	)		(3,547	)		(0.8	)		(8,177	)	(1.7	)		(3,547	)		(0.8	)
Immediate Change in Interest Rates (basis points)
+200	$	59,946		12.5	%	$	56,113			11.9	%	$	67,793		13.9	%	$	56,113			11.9	%
+100		33,278		7.0			30,439			6.5			38,828		7.9			30,439			6.5
-100		(20,684	)	(4.3	)		(13,517	)		(2.9	)		(26,174	)	(5.4	)		(13,517	)		(2.9	)

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.

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 are 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.

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 periodically monitor our liquidity position in light of the changing economic environment and customer activity. Based on periodic 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 and our ability to sell loans in the secondary market. 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 lower 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 pledge loans to access secured borrowings from the FHLB and FRB. As of ~~March 31,~~September 30, 2021, we had additional borrowing capacity of ~~$2.8~~$2.9 billion from the FHLB and ~~$1.1~~$0.8 billion from the FRB based on the amount of collateral pledged.

We continued our focus on maintaining a strong liquidity position throughout the first ~~three~~nine months of 2021. As of ~~March 31,~~September 30, 2021, cash and cash equivalents were ~~$1.4~~$0.7 billion, the carrying value of our available-for-sale investment securities was ~~$4.0~~$4.4 billion, and total deposits were ~~$19.6 billion.~~ $20.5 billion as of September 30, 2021.

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. As of ~~March 31,~~September 30, 2021, the Company and the Bank were considered “well-capitalized” under this regulatory framework. The Company’s regulatory capital ratios are presented in Table 20 below. There have been no conditions or events since ~~March 31,~~September 30, 2021, that management believes have changed either the Company’s or the Bank’s capital classifications.

As of ~~March 31,~~September 30, 2021, shareholders’ equity was ~~$1.4~~$1.6 billion, ~~a decrease~~an increase of ~~$14.3~~$222.6 million or 1%16% from December 31, 2020. For the first ~~three~~nine months of 2021, net income of ~~$136.7~~$189.5 million, net preferred stock issuance of $175.5 million, common stock issuances of ~~$6.4~~$11.2 million, and share-based compensation of ~~$6.6~~$9.7 million were partially offset by other comprehensive loss of ~~$49.6~~$56.4 million, cash dividends paid of ~~$80.7~~$82.4 million on common shares, and common stock repurchased of ~~$3.5~~$23.4 million. ~~All repurchased stock was related to income tax withholdings on vesting of restricted stock.~~ In the first ~~three~~nine months of 2021, ~~there were no repurchases~~we repurchased 241,332 shares under our share repurchase program. These shares were repurchased at an average cost per share of $82.89 and a total cost of $20.0 million. From the beginning of our share repurchase program in July 2001 through ~~March 31,~~September 30, 2021, we repurchased a total of ~~57.1~~57.3 million shares of common stock and returned a total of $2.3 billion to our shareholders at an average cost of ~~$40.51~~$40.69 per share.

Remaining buyback authority under our share repurchase program was ~~$113.1~~$93.1 million as of ~~March 31,~~September 30, 2021. In March 2020, we suspended share repurchases in light of the COVID-19 pandemic. We believe the suspension, while conservative, is prudent given uncertainty regarding the length and severity of the COVID-19 pandemic. 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 March 2020, we suspended share repurchases in light of the COVID-19 pandemic. We resumed our share repurchase program in July 2021.

In ~~April~~October 2021, the Parent’s Board of Directors declared a quarterly dividend payment of its Fixed Rate Non-Cumulative Perpetual Preferred Stock, Series A, of $10.94 per share, equivalent to $0.2735 per depositary share. The dividend will be payable on November 1, 2021, to shareholders of record of the preferred stock at the close of business on October 18, 2021.

In October 2021, the Parent’s Board of Directors declared a quarterly cash dividend of ~~$0.67~~$0.70 per share on the Parent’s outstanding common shares. The dividend will be payable on ~~June~~December 14, 2021, to shareholders of record of the common stock at the close of business on ~~May 28,~~November 30, 2021.

Table 20 presents our regulatory capital and ratios as of ~~March 31,~~September 30, 2021, and December 31, ~~2020.~~2020

Regulatory Capital and Ratios				Table 20						Table 20
(dollars in thousands)	March 31, 2021			December 31, 2020			September 30, 2021			December 31, 2020
Regulatory Capital
Shareholders’ Equity	$	1,360,221		$	1,374,507
Total Common Shareholders’ Equity							$	1,421,623		$	1,374,507
Add: CECL Transitional Amount		19,369			23,750			12,101			23,750
Less: Goodwill ¹		28,718			28,718
Less: Goodwill, Net of Deferred Tax Liabilities								28,718			28,718
Postretirement Benefit Liability Adjustments		(42,809	)		(43,250	)		(41,925	)		(43,250	)
Net Unrealized Gains (Losses) on Investment Securities ²		1,022			51,072
Net Unrealized Gains (Losses) on Investment Securities ¹								(6,642	)		51,072
Other		(198	)		(198	)		(198	)		(198	)
Common Equity Tier 1 Capital		1,392,857			1,361,915			1,453,771			1,361,915
Preferred Stock, Net of Issuance Cost								175,486			—
Tier 1 Capital		1,392,857			1,361,915			1,629,257			1,361,915
Allowable Reserve for Credit Losses		141,499			141,869			151,322			141,869
Total Regulatory Capital	$	1,534,356		$	1,503,784		$	1,780,579		$	1,503,784
Risk-Weighted Assets	$	11,275,565		$	11,295,077		$	12,093,010		$	11,295,077
Key Regulatory Capital Ratios
Common Equity Tier 1 Capital Ratio		12.35	%		12.06	%		12.02	%		12.06	%
Tier 1 Capital Ratio		12.35			12.06			13.47			12.06
Total Capital Ratio		13.61			13.31			14.72			13.31
Tier 1 Leverage Ratio		6.61			6.71			7.10			6.71

We have elected to apply the modified transition provision related to the impact of the CECL accounting standard on regulatory capital, as provided by the US banking agencies’ March 2020 interim final rule that was finalized on September 30, 2020. Under the modified CECL transition provision, the regulatory capital impact of the Day 1 adjustment to the allowance for credit losses (after-tax), upon the January 1, 2020, CECL adoption date, has been deferred, and will phase in to regulatory capital at 25% per year commencing January 1, 2022. For the ongoing impact of CECL, we are allowed to defer the regulatory capital impact of the allowance for credit losses in an amount equal to 25% of the change in the allowance for credit losses (pre-tax) recognized through earnings for each period between January 1, 2020, and December 31, 2021. The cumulative adjustment to the allowance for credit losses between January 1, 2020, and December 31, 2021, will also phase in to regulatory capital at 25% per year commencing January 1, 2022.

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act was signed into law. The CARES Act established several new temporary U.S. Small Business Administration (“SBA”) loan programs to assist U.S. small businesses through the COVID-19 pandemic. One of the new loan programs iswas the Paycheck Protection Program, an expansion of the SBA’s 7(a) loan program and the Economic Injury Disaster Loan Program. The PPP ~~provides~~provided loans to small businesses who were affected by economic conditions as a result of COVID-19 to provide cash-flow assistance to employers who maintain their payroll (including healthcare and certain related expenses), mortgage interest, rent, leases, utilities and interest on existing debt during this emergency. Eligible borrowers ~~need~~needed to make a good faith certification that the uncertainty of current economic conditions make requesting assistance necessary to support ongoing operations. Pursuant to the provisions of Section 1106 of the CARES Act, borrowers may apply to the Bank for loan forgiveness of all or a portion of the loan, subject to certain eligibility requirements and conditions. On December 27, 2020, the Consolidated Appropriations Act, 2021 (“CAA”) was signed into law. The CAA provides several amendments to the PPP, including additional funding for first and second draws of PPP loans through March 31, 2021. On March 30, 2021, the PPP Extension Act of ~~2021was~~2021 was signed into law, which ~~extends~~extended the program to May 31, 2021. The Bank is an SBA lender and ~~began accepting~~accepted applications under the CARES Act via its online application process onfrom April 3, ~~2020.~~2020, until May 31, 2021, when the PPP program ended. As of ~~March 31,~~September 30, 2021, the Bank had ~~6,911~~1,939 PPP loans totaling ~~$744.8 million.~~$268.5 million net of deferred costs and fees.

On March 11, 2021, the American Rescue Plan Act of 2021 (“ARP”) was signed into law. Chief among the $1.9 trillion stimulus act is additional support for individuals, including $1,400 checks to many Americans, extended unemployment benefits, and expanded tax credits. In addition, ARP provides funding for state and local governments and support for businesses continuing to struggle as a result of the pandemic, including a modest increase to PPP, expanded eligibility to more non-profits, a grant program for restaurants that have suffered pandemic-related losses, and extended payroll support for the airline industry.

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 Operating 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.

We hold interests in several unconsolidated VIEs. These unconsolidated VIEs are primarily low-income housing partnerships and solar energy partnerships. 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 VIE. We have determined that the Company is not the primary beneficiary of these entities. As a result, we do not consolidate these VIEs. ~~See Note 1 to the Consolidated Financial Statements for more information. See Note 1 to the Consolidated Financial Statements for more information.~~

Our credit commitments and contractual obligations have not changed materially since previously reported in our Annual Report on Form 10-K for the year ended December 31, 2020.

See “Market Risk” of this Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The Company’s management, including the Chief Executive Officer and Chief Financial Officer, conducted an evaluation of the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of ~~March 31,~~September 30, 2021. The Company’s disclosure controls and procedures are designed to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the U.S. Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure. Based on this evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective as of ~~March 31,~~September 30, 2021.

There were no changes in the Company’s internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the quarter ended ~~March 31,~~September 30, 2021, that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

Information regarding legal proceedings is incorporated by reference from “Contingencies” in Note 1312 to our Consolidated Financial Statements (unaudited) set forth in Part I of this report.

There are no material changes from the risk factors set forth under Part I, Item 1A. “Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020, except as described below.

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 Asian air pollution and the spread of the COVID-19 pandemic, and Federal, State of Hawaii and local government budget issues may impact consumer and corporate spending.

The impacts of various travel restrictions, stay-at-home orders and quarantine requirements for visitors to Hawaii has had a dramatic negative impact on tourism. These events have contributed to a significant deterioration in general economic conditions in our markets which has impacted and will continue to adversely impact us and our customers’ operations. Though there has been an increase in tourism recently, many of the impacts in Hawaii and the Pacific Islands still linger.

Recent 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. In response to this deterioration, several government stimulus programs were initiated, including the ~~Coronavirus Aid, Relief, and Economic Security (“CARES”)~~CARES Act and the ~~Paycheck Protection Program (“PPP”).~~PPP. The level of 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.

The COVID-19 pandemic has disrupted the Hawaii economy and our business, and the extent and severity of the impact on our business and our financial results are highly uncertain and cannot be predicted.

The COVID-19 pandemic has had and is expected to continue to have 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 COVID-19 in the current economic cycle, 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 stay-at-home and/or shelter-in-place orders, quarantines, executive orders or similar government orders and restrictions in order to control the spread of COVID-19.

The stay-at-home and safer-at-home orders, along with the mandatory 10-day self-quarantine travel restrictions, ~~have~~ resulted in a dramatic decline in tourism in Hawaii. ~~Additionally,~~Though many of these restrictions are now being lifted or relaxed, tourism ~~has declined~~and tourism spending remained below pre-pandemic levels as various public events, attractions and venues were closed or cancelled. Recent limits on internal gatherings and vaccination requirements for restaurants has had an impact on the economy locally and many of our customers. We cannot predict when these closures and cancellations will diminish or when tourism and tourism spending levels in Hawaii will fully recover. This decline in tourism has, and is expected to continue to have, a negative impact to the Hawaii economy and our financial results.

~~Though~~Although some of the original restrictions have been relaxed, the mandatory self-quarantine travel restriction ~~has been extended indefinitely.~~remains in place. Beginning October 15, 2020, arriving passengers and interisland travelers may avoid the self-quarantine requirements by providing proof of a recent negative test result for COVID-19 prior to boarding. ~~Though there~~Beginning July 8, 2021, passengers from the United States mainland may bypass testing or quarantine by proving proof of full vaccination (15 days following the final vaccination dose). While the relaxation in travel restrictions has ~~been~~resulted in an increase in visitor arrivals, the tourism industry in Hawaii is ~~not near the level it was prior to the COVID-19 pandemic. In addition, there remains the possibility that the~~still below pre-pandemic levels. Additionally, current requirements ~~may be changed by the government as~~are subject to change should the infection rates ~~of COVID-19~~ in Hawaii change, causing uncertainty and ~~deterring~~continuing to impact travel to Hawaii.

Even as more and more individuals become vaccinated, prior travel restrictions and mandatory quarantines related to the COVID-19 pandemic may have a lasting impact on tourism in Hawaii. Because many of our customers, both commercial and consumer, derive at

least some of their income from tourism, this dramatic drop in tourism affects them directly, as well as the Hawaii economy as a whole. A downturn in the Hawaii economy and widespread impact to our customers’ income have a negative impact on our operations. We are unable to predict the extent to which the 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. The COVID-19 pandemic could prompt credit losses in our loan portfolios and increase our allowance for credit losses, particularly as businesses remain closed and as more customers draw on lines of credit or seek additional loans to help finance their businesses. 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 temporarily or permanently closed certain of our branches and offices and many employees are still working remotely. Though we have re-opened some of our branches, others remain closed. It is anticipated that staffing levels at our headquarters will remain lower than pre-pandemic levels for some time.

In response to the COVID-19 pandemic, we temporarily suspended residential property foreclosure sales, evictions, and involuntary automobile repossessions. ~~Foreclosures and evictions remain suspended.~~ We offered other expanded assistance to customers such as fee waivers, payment deferrals or forbearances on automobile loans and leases, mortgages, home equity loans and lines, as well as commercial, small business and personal loans. WeAlthough our formal assistance programs have ended, we continue to work with our customers ~~as many of~~who are still being impacted by the ~~initial assistance programs have been extended or renewed.~~COVID-19 pandemic. 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, the availability of federal, state, or local funding programs, 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.

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

The ~~anticipated end~~impacts of ~~LIBOR~~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 ~~June 30, 2023, may~~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 ~~affect our financial instruments~~impact, the Bank or its customers. To the extent that ~~are directly~~the Bank or ~~indirectly tied~~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 ~~LIBOR.~~

~~On July 27, 2017,~~climate change, the United Kingdom’s Financial Conduct Authority, which regulates LIBOR announced that after December 31, 2021, it would no longer compel banks to submit the rates required to calculate LIBOR. For the most common tenorsBank’s business and results of LIBOR this date has been extended to June 30, 2023. With this announcement there is uncertainty about the continued availability of LIBOR after June 30, 2023. If LIBOR ceases to be available or the methods of calculating LIBOR change from the current methods, financial products with interest rates tied to LIBORoperations may be adversely affected. Even if LIBOR remains available it is uncertain whether it will continue to be viewed as an acceptable market benchmark, what rate or rates may become accepted alternatives to LIBOR or what the effect of any such changes in views or alternatives may be on the markets for LIBOR-indexed financial instruments. We have loans, derivative contracts, and other financial instruments with rates that are either directly or indirectly tied to LIBOR. If any of the foregoing were to occur, 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 Company has formed an enterprise-wide, cross-functional project team to oversee the transition. The project team reports to a steering committee as well as Management and the Board on a periodic 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. In addition, the project team has completed an inventory of existing LIBOR-indexed products, which is monitored on an ongoing basis, LIBOR fallback language has been added to new loans, and LIBOR-based mortgage ARMs have been removed from our product offering.

The Parent’s repurchases of its common stock during the ~~first~~third quarter of 2021 were as follows:

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		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
January 1 - 31, 2021		1,370	$	76.93		—	$	113,073,521
February 1 - 28, 2021		34,500		89.10		—		113,073,521
March 1 - 31, 2021		113		89.77		—		113,073,521
July 1 - 31, 2021										1,288	$	84.61		22,500	$	111,171,297
August 1 - 31, 2021										—		84.68		130,500		100,120,594
September 1 - 30, 2021										—		79.82		88,332		93,069,913
Total		35,983	$	88.64		—				1,288	$	82.90		241,332

A list of exhibits to this Form 10-Q is set forth on the Exhibit Index and is incorporated herein by reference.

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Delaware		99-0148992
(State of incorporation)		(I.R.S. Employer Identification No.)

130 Merchant Street		Honolulu		Hawaii		96813
(Address of principal executive offices)		(City)		(State)		(Zip Code)

Title of each class		Trading Symbol					Name of each exchange on which registered
Common Stock, par value $0.01 per share	~~$.01 Par Value~~			BOH				New York Stock Exchange

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


		Page

Part I - Financial Information

Item 1.	Financial Statements (Unaudited)

	Consolidated Statements of Income – Three and nine months ended ~~March 31,~~September 30, 2021, and ~~March 31,~~September 30, 2020	2

	Consolidated Statements of Comprehensive Income – Three and nine months ended ~~Mach 31,~~September 30, 2021, and ~~March 31,~~September 30, 2020	3

	Consolidated Statements of Condition – ~~March 31,~~September 30, 2021, and December 31, 2020	4

	Consolidated Statements of Shareholders’ Equity – ~~Three~~Nine months ended ~~March 31,~~September 30, 2021, and ~~March 31,~~September 30, 2020	5

	Consolidated Statements of Cash Flows – ~~Three~~Nine months ended ~~March 31,~~September 30, 2021, and ~~March 31,~~September 30, 2020	6

	Notes to Consolidated Financial Statements	7

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	4941

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	7869

Item 4.	Controls and Procedures	7869

Part II - Other Information

Item 1A.	Risk Factors	7970

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	8172

Item 6.	Exhibits	8273

Signatures		8374

	Loans Modified as a TDR for the Nine Months Ended September 30, 2021						Loans Modified as a TDR for the Nine Months Ended September 30, 2020
			Recorded		Increase in				Recorded		Increase in
Troubled Debt Restructurings			Investment		Allowance				Investment		Allowance
(dollars in thousands)	Number of Contracts		(as of period end)¹		(as of period end)		Number of Contracts		(as of period end)¹		(as of period end)
Commercial
Commercial and Industrial		7	$	258	$	4		3	$	188	$	3
Construction		0		0		0		1		1,099		0
Total Commercial		7		258		4		4		1,287		3
Consumer
Residential Mortgage		14		5,785		584		0		0		0
Home Equity		9		1,488		80		2		134		0
Automobile		331		6,902		95		81		1,346		22
Other ²		144		1,321		48		42		357		15
Total Consumer		498		15,496		807		125		1,837		37
Total		505	$	15,754	$	811		129	$	3,124	$	40

	Nine Months Ended September 30, 2021				Nine Months Ended September 30, 2020
TDRs that Defaulted During the Period,			Recorded				Recorded
Within Twelve Months of their Modification Date	Number of		Investment		Number of		Investment
(dollars in thousands)	Contracts		(as of period end)¹		Contracts		(as of period end)¹
Consumer
Residential Mortgage		1	$	528		0	$	0
Automobile		12		213		33		591
Other ²		12		112		6		38
Total Consumer		25		853		39		629
Total		25	$	853		39	$	629

	Remaining Contractual Maturity of Repurchase Agreements
(dollars in thousands)	Up to 90 days		91-365 days		1-3 Years		After 3 Years		Total
September 30, 2021
Class of Collateral Pledged:
Debt Securities Issued by States and Political Subdivisions	$	0	$	0	$	0	$	490	$	490
Mortgage-Backed Securities:
Residential - Government Agencies		0		0		43,461		13,602		57,063
Residential - U.S. Government-Sponsored Enterprises		0		0		231,539		161,398		392,937
Total	$	0	$	0	$	275,000	$	175,490	$	450,490
December 31, 2020
Class of Collateral Pledged:
Debt Securities Issued by States and Political Subdivisions	$	100	$	0	$	0	$	490	$	590
Mortgage-Backed Securities: ¹
Residential - Government Agencies		0		0		20,210		83,599		103,809
Residential - U.S. Government-Sponsored Enterprises		0		0		4,790		491,401		496,191
Total	$	100	$	0	$	25,000	$	575,490	$	600,590

	Pension Benefits						Postretirement Benefits
(dollars in thousands)	2021			2020			2021			2020
Three Months Ended March 31,
Service Cost	$	0		$	0		$	176		$	151
Interest Cost		727			900			206			231
Expected Return on Plan Assets		(1,148	)		(1,258	)		0			0
Amortization of:
Prior Service Credit		0			0			(61	)		(61	)
Net Actuarial Losses		662			570			0			0
Net Periodic Benefit Cost	$	241		$	212		$	321		$	321


Level 1:	Inputs to the valuation methodology are quoted prices, unadjusted, for identical assets or liabilities in active markets. A quoted price in an active market provides the most reliable evidence of fair value and is used to measure fair value whenever available. A contractually binding sales price also provides reliable evidence of fair value.

Level 2:	Inputs to the valuation methodology include quoted prices for similar assets or liabilities in active markets; inputs to the valuation methodology include quoted prices for identical or similar assets or liabilities in markets that are not active; or inputs to the valuation methodology that utilize model-based techniques for which all significant assumptions are observable in the market.

Level 3:	Inputs to the valuation methodology are unobservable and significant to the fair value measurement; inputs to the valuation methodology that utilize model-based techniques for which significant assumptions are not observable in the market; or inputs to the valuation methodology that require significant management judgment or estimation, some of which may be internally developed.

Noninterest Expense												Table 6
	Three Months Ended September 30,							Nine Months Ended September 30,
(dollars in thousands)	2021		2020		Change			2021		2020		Change
Salaries	$	34,676	$	34,046	$	630		$	99,658	$	100,271	$	(613	)
Incentive Compensation		4,677		2,683		1,994			15,763		6,069		9,694
Share-Based Compensation		3,335		1,442		1,893			9,093		4,754		4,339
Commission Expense		1,772		1,800		(28	)		6,807		4,821		1,986
Retirement and Other Benefits		4,746		4,164		582			15,552		13,316		2,236
Payroll Taxes		2,825		2,624		201			9,819		9,949		(130	)
Medical, Dental, and Life Insurance		3,222		3,422		(200	)		8,850		11,394		(2,544	)
Separation Expense		1,194		1,770		(576	)		3,317		6,555		(3,238	)
Total Salaries and Benefits		56,447		51,951		4,496			168,859		157,129		11,730
Net Occupancy		3,079		7,281		(4,202	)		17,216		24,997		(7,781	)
Net Equipment		8,924		9,223		(299	)		26,598		25,874		724
Data Processing		4,722		4,691		31			15,601		13,895		1,706
Professional Fees		2,948		2,743		205			9,468		9,012		456
FDIC Insurance		1,594		1,282		312			4,917		4,296		621
Other Expense:
Delivery and Postage Services		1,363		1,636		(273	)		4,704		5,387		(683	)
Mileage Program Travel		1,340		1,172		168			3,708		3,341		367
Merchant Transaction and Card Processing Fees		1,424		1,025		399			3,781		3,205		576
Advertising		2,736		1,985		751			7,066		5,394		1,672
Amortization of Solar Energy Partnership Investments		512		716		(204	)		1,536		2,148		(612	)
Other		11,430		6,244		5,186			28,457		20,475		7,982
Total Other Expense		18,805		12,778		6,027			49,252		39,950		9,302
Total Noninterest Expense	$	96,519	$	89,949	$	6,570		$	291,911	$	275,153	$	16,758

Exhibit Number

3.1		Certificate of Incorporation of Bank of Hawaii Corporation (f/k/a Pacific Century Financial Corporation and Bancorp Hawaii, Inc.), as amended (incorporated by reference to Exhibit 3.1 to Bank of Hawaii Corporation’s Annual Report on Form 10-K for its fiscal year ended December 31, 2005 filed on February 28, 2006).

3.2		Certificate of Amendment of Certificate of Incorporation of Bank of Hawaii Corporation (incorporated by reference to Exhibit 3.1 to Bank of Hawaii Corporation’s Current Report on Form 8-K filed on April 30, 2008).

3.3		Certificate of Designations of 4.375% Fixed Rate Non-Cumulative Perpetual Preferred Stock, Series A (incorporated by reference to Exhibit 3.1 to Bank of Hawaii Corporation’s Current Report on Form 8-K filed on June 15, 2021).

3.4		Amended and Restated By-laws of Bank of Hawaii Corporation (as amended October 19, 2018) (incorporated by reference to Exhibit 3.2 to Bank of Hawaii Corporation’s Current Report on Form 8-K filed on October 24, 2018).

4.1		Deposit Agreement, dated June 15, 2021, by and among Bank of Hawaii Corporation, Computershare Inc. and Computershare Trust Company, N.A., jointly as depositary, and the holders from time to time of the depositary receipts described therein (incorporated by reference to the Company’s Current Report on Form 8-K filed with the SEC on June 15, 2021)

4.2		Form Depository Receipt (included in Exhibit 4.1)

31.1		Certification of Chief Executive Officer Pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as Amended, Adopted Pursuant to Section 302 of the Sarbanes Oxley Act of 2002

31.2		Certification of Chief Financial Officer Pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as Amended, Adopted Pursuant to Section 302 of the Sarbanes Oxley Act of 2002

32		Certification of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101.INS		Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document

101.SCH		Inline XBRL Taxonomy Extension Schema Document

101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase Document

101.LAB		Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase Document

104		The cover page for the Company’s Quarterly Report on the Form 10-Q has been formatted in Inline XBRL and contained in Exhibit 101

Date:	~~April~~October 26, 2021		Bank of Hawaii Corporation

		By:	/s/ Peter S. Ho
			Peter S. Ho
			Chairman of the Board,
			Chief Executive Officer, and
			President

		By:	/s/ Dean Y. Shigemura
			Dean Y. Shigemura
			Chief Financial Officer