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What changed in CENTRAL PACIFIC FINANCIAL CORP's 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of CENTRAL PACIFIC FINANCIAL CORP's 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+463 added−451 removedSource: 10-K (2025-02-26) vs 10-K (2024-02-21)

Top changes in CENTRAL PACIFIC FINANCIAL CORP's 2024 10-K

463 paragraphs added · 451 removed · 378 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

59 edited+20 added−7 removed129 unchanged
Biggest changeThe Company has adopted an NYSE compliant clawback policy which is included with this Annual Report of Form 10-K as an exhibit. 12 Cybersecurity Federal regulators have issued multiple statements regarding cybersecurity stating that financial institutions need to design multiple layers of security controls to establish lines of defense and to ensure that their risk management processes also address the risk posed by compromised customer credentials, including security measures to reliably authenticate customers accessing internet-based services of the financial institution.
Biggest changeCybersecurity Federal regulators have issued multiple statements regarding cybersecurity that requires financial institutions to design and implement multiple layers of security controls to establish lines of defense to ensure strong cyber risk management processes. Risks associated with compromised customer credentials, including security measures to reliably authenticate customers accessing internet-based services of the financial institution must also be addressed.
In addition, because we are a not an advanced approach banking organization, we were permitted to make a one-time permanent election to exclude accumulated other comprehensive income items from regulatory capital.
In addition, because we are not an advanced approach banking organization, we were permitted to make a one-time permanent election to exclude accumulated other comprehensive income items from regulatory capital.
An institution that has (i) experienced rapid growth in CRE lending, (ii) notable exposure to a specific type of CRE, (iii) total reported loans for construction, land development, and other land representing 100% or more of the institution’s total risk-based capital, or (iv) total CRE loans representing 300% or more of the institution’s total risk-based capital, and the outstanding balance of the institutions CRE 15 portfolio has increased by 50% or more in the prior 36 months, may be identified for further supervisory analysis of the level and nature of its CRE concentration risk.
An institution that has (i) experienced rapid growth in CRE lending, (ii) notable exposure to a specific type of CRE, (iii) total reported loans for construction, land development, and other land representing 100% or more of the institution’s total risk-based capital, or (iv) total CRE loans representing 300% or more of the institution’s total risk-based capital, and the outstanding balance of the institutions CRE portfolio has increased by 50% or more in the prior 36 months, may be identified for further supervisory analysis of the level and nature of its CRE concentration risk.
We promote the health and wellness of our employees by strongly encouraging work-life balance, offering flexible work schedules including hybrid and remote, keeping the employee portion of health care premiums to a minimum and sponsoring various wellness programs. Employee retention helps us operate efficiently and achieve one of our business objectives, which is being an exceptional service provider.
We promote the health and wellness of our employees by strongly encouraging work-life balance, offering flexible work schedules including hybrid, keeping the employee portion of health care premiums to a minimum and sponsoring various wellness programs. Employee retention helps us operate efficiently and achieve one of our business objectives, which is being an exceptional service provider.
Bank holding companies that elect and retain "financial holding company" status pursuant to the Gramm-Leach-Bliley Act of 1999 ("GLBA") may engage in these non-banking activities and broader securities, insurance, merchant banking and other activities that are determined to be "financial in nature" or are incidental or 10 complementary to activities that are financial in nature without prior Federal Reserve approval.
Bank holding companies that elect and retain "financial holding company" status pursuant to the Gramm-Leach-Bliley Act of 1999 ("GLBA") may engage in these non-banking activities and broader securities, insurance, merchant banking and other activities that are determined to be "financial in nature" or are incidental or complementary to activities that are financial in nature without prior Federal Reserve approval.
Banks with less than $10 billion in assets, including the Bank, will continue to be examined for compliance by their primary federal banking agency. 14 The CFPB has finalized a number of significant rules which impact nearly every aspect of the lifecycle of a residential mortgage loan.
Banks with less than $10 billion in assets, including the Bank, will continue to be examined for compliance by their primary federal banking agency. The CFPB has finalized a number of significant rules which impact nearly every aspect of the lifecycle of a residential mortgage loan.
Loans in this category consist of loans secured by commercial real estate, including but not limited to, structures and facilities to support activities designated as multi-family residential properties, industrial, warehouse, general office, retail, health care and religious dwellings.
Loans in this category consist of loans secured by commercial real estate, including but not limited to, structures and facilities to support activities designated as multi-family residential properties, industrial, warehouse, general office, retail, health care, hotels, and religious dwellings.
Brokered Deposits The FDIC limits the ability to accept brokered deposits to those insured depository institutions that are well-capitalized. Institutions that are less than well-capitalized cannot accept, renew or roll over any brokered deposit unless they have applied 9 for and been granted a waiver by the FDIC.
Brokered Deposits The FDIC limits the ability to accept brokered deposits to those insured depository institutions that are well-capitalized. Institutions that are less than well-capitalized cannot accept, renew or roll over any brokered deposit unless they have applied for and been granted a waiver by the FDIC.
FDIC and DFI Enforcement Authority The federal and Hawaii regulatory structure gives the bank regulatory agencies extensive discretion in connection with their supervisory and enforcement activities and examination policies, including policies with respect to the classification of assets and the establishment of adequate loan loss reserves for regulatory purposes.
FRB, FDIC and DFI Enforcement Authority The federal and Hawaii regulatory structure gives the bank regulatory agencies extensive discretion in connection with their supervisory and enforcement activities and examination policies, including policies with respect to the classification of assets and the establishment of adequate loan loss reserves for regulatory purposes.
These risk-weighted assets are used to calculate the following minimum capital ratios for the Company and the Bank: 7 • Tier 1 Leverage Ratio , equal to the ratio of Tier 1 capital to quarterly average assets (net of goodwill, certain other intangible assets and certain other deductions). • Common Equity Tier 1 ("CET1") Risk-Based Capital Ratio , equal to the ratio of CET1 capital to risk-weighted assets.
These risk-weighted assets are used to calculate the following minimum capital ratios for the Company and the Bank: • Tier 1 Leverage Ratio , equal to the ratio of Tier 1 capital to quarterly average assets (net of goodwill, certain other intangible assets and certain other deductions). • Common Equity Tier 1 ("CET1") Risk-Based Capital Ratio , equal to the ratio of CET1 capital to risk-weighted assets.
Our CPB Women's Leadership Program provides opportunities for CPB's top 80 women leaders to develop leadership skills, build a support network and give back to the broader community through service projects. The safety, health and wellness of our employees is a top priority.
Our CPB Women's Leadership Program provides opportunities for CPB's top women leaders to develop leadership skills, build a support network and give back to the broader community through service projects. The safety, health and wellness of our employees is a top priority.
Also posted on our website and available in print upon request to our Investor Relations Department, are the charters for our Audit Committee, Compensation Committee and Governance Committee, as well as our Corporate Governance Guidelines and 16 Code of Conduct and Ethics.
Also posted on our website and available in print upon request to our Investor Relations Department, are the charters for our Audit Committee, Compensation Committee and Governance Committee, as well as our Corporate Governance Guidelines and Code of Conduct and Ethics.
In addition, a financial institution’s management is expected to maintain sufficient business continuity planning processes to ensure the rapid recovery, resumption and maintenance of the institution’s operations after a cyber-attack involving destructive malware.
In addition, a financial institution’s management is expected to maintain sufficient business continuity planning processes and capabilities to ensure the rapid recovery, resumption and maintenance of the institution’s operations after a cyber-attack involving destructive malware.
If, as a result of an examination, the DFI or the FDIC should determine that the financial condition, capital resources, asset quality, earnings prospects, management, liquidity, market sensitivity, or other aspects of the Bank's operations are unsatisfactory or that the Bank or its management is violating or has violated any law or regulation, the DFI and the FDIC , and separately the FDIC as insurer of the Bank's deposits, have residual authority to: • require affirmative action to correct any conditions resulting from any violation or practice; • direct an increase in capital and the maintenance of higher specific minimum capital ratios, which may preclude the Bank from being deemed well-capitalized and restrict its ability to accept certain brokered deposits; • restrict the Bank's growth geographically, by products and services, or by mergers and acquisitions, including bidding in FDIC receiverships for failed banks; 11 • enter into or issue informal or formal enforcement actions, including required board resolutions, memoranda of understanding, written agreements and consent or cease and desist orders or prompt corrective action orders to take corrective action and cease unsafe and unsound practices; • require prior approval of senior executive officer or director changes; remove officers and directors and assess civil monetary penalties; and • terminate FDIC insurance, revoke the charter and/or take possession of and close and liquidate the Bank or appoint the FDIC as receiver, which for a Hawaii state-chartered bank would result in a revocation of its charter.
If, as a result of an examination, the DFI or the FRB should determine that the financial 11 Table of C o ntents condition, capital resources, asset quality, earnings prospects, management, liquidity, market sensitivity, or other aspects of the Bank's operations are unsatisfactory or that the Bank or its management is violating or has violated any law or regulation, the DFI and the FRB , and separately the FDIC as insurer of the Bank's deposits, have residual authority to: • require affirmative action to correct any conditions resulting from any violation or practice; • direct an increase in capital and the maintenance of higher specific minimum capital ratios, which may preclude the Bank from being deemed well-capitalized and restrict its ability to accept certain brokered deposits; • restrict the Bank's growth geographically, by products and services, or by mergers and acquisitions, including bidding in FDIC receiverships for failed banks; • enter into or issue informal or formal enforcement actions, including required board resolutions, memoranda of understanding, written agreements and consent or cease and desist orders or prompt corrective action orders to take corrective action and cease unsafe and unsound practices; • require prior approval of senior executive officer or director changes; remove officers and directors and assess civil monetary penalties; and • terminate FDIC insurance, revoke the charter and/or take possession of and close and liquidate the Bank or appoint the FDIC as receiver, which for a Hawaii state-chartered bank would result in a revocation of its charter.
During periodic examinations, the DFI, FDIC, and FRB assess our financial condition, capital resources, asset quality, management, earnings prospects, liquidity, market sensitivity and other aspects of our operations. These bodies also determine whether our management is effectively managing the Bank and the holding company, and whether we are in compliance with all applicable laws or regulations.
During periodic examinations, the DFI, FDIC (2024 and prior), and FRB assess our financial condition, capital resources, asset quality, management, earnings prospects, liquidity, market sensitivity and other aspects of our operations. These bodies also determine whether our management is effectively managing the Bank and the holding company, and whether we are in compliance with all applicable laws or regulations.
If the Federal Reserve were to apply the same or a very similar well-capitalized standard to bank holding companies as that applicable to the Bank, the Company's capital ratios as of December 31, 2023 would exceed such revised well-capitalized standard.
If the Federal Reserve were to apply the same or a very similar well-capitalized standard to bank holding companies as that applicable to the Bank, the Company's capital ratios as of December 31, 2024 would exceed such revised well-capitalized standard.
As of December 31, 2023, the Bank’s construction, land development, and other land loans represented less than 100% of its total risk-based capital. As of December 31, 2023, the Bank's total CRE loans represented less than 300% of its total risk-based capital and has increased by less than 50% from the prior 36 months.
As of December 31, 2024, the Bank’s construction, land development, and other land loans represented less than 100% of its total risk-based capital. As of December 31, 2024, the Bank's total CRE loans represented less than 300% of its total risk-based capital and has increased by less than 50% from the prior 36 months.
Volcker Rule In December 2013, the federal bank regulatory agencies adopted final rules that implement a part of the Dodd-Frank Act commonly referred to as the "Volcker Rule." Under these rules and subject to certain exceptions, banking entities are restricted from engaging in activities that are considered proprietary trading and from sponsoring or investing in certain entities, including hedge or private equity funds that are considered "covered funds." Notwithstanding these provisions, in July 2019, the federal bank regulatory agencies finalized a rule which provides that community banks with $10 billion or less in total consolidated assets and total trading assets and liabilities of 5 percent or less of total consolidated assets, such as the Bank, are excluded from the Volcker Rule.
Volcker Rule In December 2013, the federal bank regulatory agencies adopted final rules that implement a part of the Dodd-Frank Act commonly referred to as the "Volcker Rule." Under these rules and subject to certain exceptions, banking entities are restricted from engaging in activities that are considered proprietary trading and from sponsoring or investing in certain entities, including 9 Table of C o ntents hedge or private equity funds that are considered "covered funds." Notwithstanding these provisions, in July 2019, the federal bank regulatory agencies finalized a rule which provides that community banks with $10 billion or less in total consolidated assets and total trading assets and liabilities of 5 percent or less of total consolidated assets, such as the Bank, are excluded from the Volcker Rule.
As the Company approaches and if it were to cross the $10 billion or more asset threshold, its compliance costs and regulatory requirements may increase. In December 2017, the Basel Committee published standards that it described as the finalization of the Basel III post-crisis regulatory reforms (the standards are commonly referred to as “Basel IV”).
As the Company approaches and if it were to cross the $10 billion or more asset threshold, its compliance costs and regulatory requirements likely will increase. In December 2017, the Basel Committee published standards that it described as the finalization of the Basel III post-crisis regulatory reforms (the standards are commonly referred to as “Basel IV”).
We also cannot predict whether or when regulatory requirements may be reduced or eliminated and the overall affect such reduction or elimination may have on the Company and the Bank. 6 Regulatory Agencies Central Pacific Financial Corp. is a legal entity separate and distinct from its subsidiaries.
We also cannot predict whether or when regulatory requirements may be reduced or eliminated and the overall effect such reduction or elimination may have on the Company and the Bank. Regulatory Agencies Central Pacific Financial Corp. is a legal entity separate and distinct from its subsidiaries.
These quantitative calculations are minimums, and the Federal Reserve, FDIC or DFI may determine that a banking organization, based on its size, complexity or risk profile, must maintain a higher level of capital in order to operate in a safe and sound manner.
These quantitative calculations are minimums, and the FRB, FDIC or DFI may determine that a banking organization, based on its size, complexity or risk profile, must maintain a higher level of capital in order to operate in a safe and sound manner.
In addition, our website includes information concerning purchases and sales of our equity securities by our executive officers and directors, as well as disclosure relating to certain non-GAAP financial measures (as defined in the SEC's Regulation G) that we may make public orally, telephonically, by webcast, by broadcast or by similar means from time to time. 17
In addition, our website includes information concerning purchases and sales of our equity securities by our executive officers and directors, as well as disclosure relating to certain non-GAAP financial measures (as defined in the SEC's Regulation G) that we may make public orally, telephonically, by webcast, by broadcast or by similar means from time to time. 17 Table of C o ntents
However, approximately 78% of our loan portfolio at December 31, 2023 consisted of real estate-related loans, including residential mortgage loans, home equity loans, commercial mortgage loans and construction loans. See "Part II, Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations—Financial Condition—Loan Portfolio." Our business activities are focused primarily in Hawaii.
However, approximately 79% of our loan portfolio at December 31, 2024 consisted of real estate-related loans, including residential mortgage loans, home equity loans, commercial mortgage loans and construction loans. See "Part II, Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations—Financial Condition—Loan Portfolio." Our business activities are focused primarily in Hawaii.
First mortgage loans secured by residential properties have an average loan origination size of approximately $0.6 million and marketable collateral.
First mortgage loans secured by residential properties have an average loan origination size of approximately $0.7 million and marketable collateral.
For banks with total assets in excess of $2 billion, which includes our Bank, the Bank’s CRA evaluation will be based on four tests: (i) retail lending; (ii) retail services and products (including digital delivery systems for banks with more than $10 billion in assets or banks which request consideration of such systems); (iii) community development (CD) financing; and (iv) CD services.
For banks with total assets in excess of $2 billion, which includes our Bank, the Bank’s CRA evaluation will be based on four tests: (i) retail lending; (ii) retail services and products (including digital delivery systems for 14 Table of C o ntents banks with more than $10 billion in assets or banks which request consideration of such systems); (iii) community development (CD) financing; and (iv) CD services.
The Bank will not incur the additional aggregate assessment as its uninsured deposits as of December 31, 2022 were less than the $5 billion deduction. If there are additional bank or financial institution failures or if the FDIC otherwise determines or if our asset size or risk of default increases, we may be required to pay higher FDIC premiums.
The Bank will not incur the additional aggregate assessment as its uninsured deposits as of December 31, 2022 were less than the $5 billion deduction. 12 Table of C o ntents If there are additional bank or financial institution failures or if our asset size or risk of default increases or if the FDIC otherwise determines, we may be required to pay higher FDIC premiums.
In the ordinary course of business, we rely on electronic communications and information systems to conduct our operations and to store sensitive data. We employ an in-depth, layered, defensive approach that leverages people, processes and technology to manage and maintain cybersecurity controls.
In the ordinary course of business, we rely on electronic communications and information systems to conduct our operations and to store sensitive data. We employ a layered defense-in-depth approach that leverages people, processes and technology to manage and maintain cybersecurity controls.
For a tabular presentation of the Company’s and the Bank’s capital ratios as of December 31, 2023, see Note 22 - Parent Company and Regulatory Restrictions to the Consolidated Financial Statements under "Part II, Item 8. Financial Statements and Supplementary Data".
For a tabular presentation of the Company’s and the Bank’s capital ratios as of December 31, 2024, see Note 23 - Parent Company and Regulatory Restrictions to the Consolidated Financial Statements under "Part II, Item 8. Financial Statements and Supplementary Data".
As of December 31, 2023, the Bank did not have any deposit liabilities categorized as brokered deposits.
As of December 31, 2024, the Bank did not have any deposit liabilities categorized as brokered deposits.
The final rule expands and codifies the presumptions for use in such determinations. By codifying the presumptions, the final rule provides greater transparency on the types of relationships that the Federal Reserve generally views as supporting a facts and circumstances determination that one company controls another company.
The final rule expands and codifies the presumptions for use in such determinations. By codifying the presumptions, the final rule provides greater transparency on the types of relationships that the Federal Reserve generally views as supporting a facts and circumstances determination that one company controls another 10 Table of C o ntents company.
We cannot predict whether or when new legislative initiatives may be proposed or enacted or new regulations or guidance may be promulgated nor the effect new laws, regulations and supervisory policies and practices may have on community banks generally or on our financial condition and results of operations.
We cannot predict whether or when new legislative initiatives may be proposed or enacted or new regulations or guidance may be promulgated nor the effect new laws, regulations and supervisory policies and practices may have on community banks generally or on our financial condition and results of 6 Table of C o ntents operations.
Our Bank's deposits are insured by the Federal Deposit Insurance Corporation ("FDIC") up to applicable limits. The Bank is not a member of the Federal Reserve System. 4 We derive our income primarily from interest and fees on loans, interest on investment securities and fees received in connection with deposit and other services.
Our Bank's deposits are insured by the Federal Deposit Insurance Corporation ("FDIC") up to applicable limits. The Bank became a member of the Federal Reserve System in January 2025. We derive our income primarily from interest and fees on loans, interest on investment securities and fees received in connection with deposit and other services.
While to date we have not detected a significant compromise, significant data loss or any material financial losses related to cybersecurity attacks, our systems and those of our customers and third-party service providers are under constant threat and it is possible that we could experience a significant event in the future.
While to date we have not experienced a significant 13 Table of C o ntents compromise, significant data loss or any material financial losses related to cybersecurity attacks, our systems and those of our customers and third-party service providers are under constant threat and it is possible that we could experience a significant event in the future.
Our Market Area and Competition Based on deposit market share among FDIC-insured financial institutions in Hawaii, Central Pacific Bank was the fourth-largest depository institution in the state as of December 31, 2023. The banking and financial services industry in the State of Hawaii generally, and particularly in our target market areas, is highly competitive.
Our Market Area and Competition Based on deposit market share among FDIC-insured financial institutions in Hawaii, Central Pacific Bank was the fourth-largest depository institution in the state as of December 31, 2024. 5 Table of C o ntents The banking and financial services industry in the State of Hawaii generally, and particularly in our target market areas, is highly competitive.
Our Subsidiaries Central Pacific Bank is the wholly-owned principal subsidiary of Central Pacific Financial Corp. As of December 31, 2023, other wholly-owned subsidiaries include CPB Capital Trust IV and CPB Statutory Trust V. In January 2020, the Bank acquired a 50% ownership interest in a mortgage loan origination and brokerage company, Oahu HomeLoans, LLC.
Our Subsidiaries Central Pacific Bank is the wholly-owned principal subsidiary of Central Pacific Financial Corp. As of December 31, 2024, other wholly-owned subsidiaries include CPB Capital Trust IV and CPB Statutory Trust V. In February 2024, the Bank acquired a 50% ownership interest in a mortgage loan origination and brokerage company, One Hawaii HomeLoans, LLC ("One Hawaii").
At December 31, 2023, the average employee had 9 years of service and 35% of our current staff had been with us for ten years or more. Available Information Our internet website can be found at www.cpb.bank.
At December 31, 2024, the employee average years of service was 10 years and 36% of our current staff had been with us for ten years or more. Available Information Our internet website can be found at www.cpb.bank.
Regulatory authorities have imposed cease and desist orders and civil money penalties against institutions found to be violating these obligations. 13 Operations and Consumer Compliance Laws The Bank must comply with numerous federal and state anti-money laundering and consumer protection and privacy statutes and implementing regulations, including the USA Patriot Act of 2001, GLBA, the Bank Secrecy Act, the Foreign Account Tax Compliance Act, the CRA, the Fair Debt Collection Practices Act, the Fair Credit Reporting Act, as amended by the Fair and Accurate Credit Transactions Act, the Equal Credit Opportunity Act, the Truth in Lending Act, the Fair Housing Act, the Home Mortgage Disclosure Act, the Real Estate Settlement Procedures Act, the National Flood Insurance Act, and various federal and state privacy protection laws, including the Telephone Consumer Protection Act and the CAN-SPAM Act.
Operations and Consumer Compliance Laws The Bank must comply with numerous federal and state anti-money laundering and consumer protection and privacy statutes and implementing regulations, including the USA Patriot Act of 2001, GLBA, the Bank Secrecy Act, the Foreign Account Tax Compliance Act, the CRA, the Fair Debt Collection Practices Act, the Fair Credit Reporting Act, as amended by the Fair and Accurate Credit Transactions Act, the Equal Credit Opportunity Act, the Truth in Lending Act, the Fair Housing Act, the Home Mortgage Disclosure Act, the Real Estate Settlement Procedures Act, the National Flood Insurance Act, and various federal and state privacy protection laws, including the Telephone Consumer Protection Act and the CAN-SPAM Act.
We provide financial results based on a fiscal year ending December 31 as a single reportable segment. As of December 31, 2023, we had total assets of $7.64 billion, total loans of $5.44 billion, total deposits of $6.85 billion and shareholders' equity of $503.8 million.
We provide financial results based on a fiscal year ending December 31 as a single reportable segment. As of December 31, 2024, we had total assets of $7.47 billion, total loans of $5.33 billion, total deposits of $6.64 billion and shareholders' equity of $538.4 million.
The final CRA rule takes effect on April 1, 2024 but builds in staggered compliance dates, including compliance with the new tests, data collection requirements, and the requirement to define retail lending assessment areas, all of which become applicable on January 1, 2026.
The final CRA rule was intended to take effect on April 1, 2024 with staggered compliance dates, including compliance with the new tests, data collection requirements, with the requirement to define retail lending assessment areas, all of which become applicable on January 1, 2026 and revised data reporting requirements taking effect January 1, 2027.
The substance or impact of pending or future legislation or regulation, or the application thereof, cannot be predicted, although enactment of proposed legislation (or modification or repeal of existing legislation) could impact the regulatory structure under which the Company and Bank operate and may significantly increase its costs, impede the efficiency of its internal business processes, require the Bank to increase its regulatory capital and modify its business strategy, and limit its ability to pursue business opportunities in an efficient manner.
The substance or impact of pending or future legislation or regulation, or the application thereof, cannot be predicted, although enactment of proposed legislation (or modification or repeal of existing legislation) could impact the regulatory structure under which the Company and Bank operate and may significantly increase its costs, impede the efficiency of its internal business processes, require the Bank to increase its regulatory capital and modify its business strategy, and limit its ability to pursue business opportunities in an efficient manner. 16 Table of C o ntents Under these circumstances, the Company's business, financial condition, results of operations or prospects may be adversely affected, perhaps materially.
Regulation of the Bank As a Hawaii state-chartered bank whose deposits are insured by the FDIC, the Bank is subject to regulation, supervision, and regular examination by the DFI, and by the FDIC, as the Bank's primary Federal regulator.
Regulation of the Bank As a Hawaii state-chartered bank whose deposits are insured by the FDIC and which became a member of the Federal Reserve effective January 24, 2025, the Bank is subject to regulation, supervision, and regular examination by the DFI, and principally by the FRB, as the Bank's primary Federal regulator.
The table below summarizes the capital requirements that the Company and the Bank must satisfy to avoid limitations on capital distributions and certain discretionary bonus payments (i.e., the required minimum capital ratios plus the Capital Conservation Buffer): Minimum Basel III Regulatory Capital Ratio Plus Capital Conservation Buffer CET1 risk-based capital ratio 7.0 % Tier 1 risk-based capital ratio 8.5 % Total risk-based capital ratio 10.5 % 8 As of December 31, 2023, the Company and the Bank are well-capitalized for regulatory purposes.
The Tier 1 Leverage Ratio is not impacted by the Capital Conservation Buffer, and a banking institution may be considered well-capitalized while remaining out of compliance with the Capital Conservation Buffer. 8 Table of C o ntents The table below summarizes the capital requirements that the Company and the Bank must satisfy to avoid limitations on capital distributions and certain discretionary bonus payments (i.e., the required minimum capital ratios plus the Capital Conservation Buffer): Minimum Basel III Regulatory Capital Ratio Plus Capital Conservation Buffer CET1 risk-based capital ratio 7.0 % Tier 1 risk-based capital ratio 8.5 % Total risk-based capital ratio 10.5 % As of December 31, 2024, the Company and the Bank are well-capitalized for regulatory purposes.
In March 2022, Oahu HomeLoans, LLC was terminated. Central Pacific Bank also owns 50% of Gentry HomeLoans, LLC, Haseko HomeLoans, LLC and Island Pacific HomeLoans, LLC, which are accounted for under the cost method and are included in unconsolidated entities in the Company's consolidated balance sheets.
Central Pacific Bank also owns 50% of Gentry HomeLoans, LLC, Haseko HomeLoans, LLC and Island Pacific HomeLoans, LLC, which are accounted for under the cost method and are included in unconsolidated entities in the Company's consolidated balance sheets. The Company sponsors the Central Pacific Foundation, which is not consolidated in the Company's financial statements.
We refer to Central Pacific Bank herein as "our Bank" or "the Bank." Through our Bank and its subsidiaries, we offer full-service commercial banking with 27 bank branches and 58 ATMs located throughout the State of Hawaii. Our administrative and main offices are located in Honolulu and we have 19 branches on the island of Oahu.
We refer to Central Pacific Bank herein as "our Bank" or "the Bank." Through our Bank and its subsidiaries, we offer full-service commercial banking with 27 bank branches and 55 ATMs located throughout the State of Hawaii.
The Bank concluded that the investment meets the consolidation requirements under Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") 810, "Consolidation." The Bank also concluded that the entity meets the definition of a variable interest entity and that we are the primary beneficiary of the variable interest entity. Accordingly, the investment has been consolidated into our financial statements.
The Bank concluded that the investment meets the consolidation requirements under Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") 810, "Consolidation" and the entity also meets the definition of a variable interest entity ("VIE") and as the Bank is the primary beneficiary of the VIE. Accordingly, the investment will be consolidated into the Company's financial statements when activity begins.
The CRA further requires the agencies to take a financial institution’s record of meeting its community credit needs into account when evaluating applications for, among other things, domestic branches, consummating mergers or acquisitions or holding company formations. On October 24, 2023, the OCC, FDIC, and FRB issued a final rule intended to modernize and strengthen regulations implementing the CRA.
The CRA further requires the agencies to take a financial institution’s record of meeting its community credit needs into account when evaluating applications for, among other things, domestic branches, consummating mergers or acquisitions or holding company formations.
Some of these competitors are much larger by total assets and capitalization, and have greater access to capital markets. 5 In order to compete with the other financial services providers in the State of Hawaii, we principally rely upon personal relationships between customers and our officers, directors and employees, and specialized services tailored to meet the needs of our customers and the communities we serve.
In order to compete with the other financial services providers in the State of Hawaii, we principally rely upon personal relationships between customers and our officers, directors and employees, and specialized services tailored to meet the needs of our customers and the communities we serve.
Included within the order is a sweeping recommendation that the Attorney General, in consultation with the heads of the FRB, FDIC and Office of the Comptroller of the Currency ("OCC") review current practices and adopt a plan for the “revitalization” of bank merger oversight to provide more extensive scrutiny of mergers.
Mergers and Acquisitions On July 9, 2021, President Biden signed an “Executive Order on Promoting Competition in the American Economy.” Included within the order is a sweeping recommendation that the Attorney General, in consultation with the heads of the FRB, FDIC and OCC review current practices and adopt a plan for the “revitalization” of bank merger oversight to provide more extensive scrutiny of mergers.
We continue to believe there will be an increased focus on regulatory compliance, supervision and examination in 2024. Capital Adequacy Requirements Bank holding companies and banks are subject to various regulatory capital requirements administered by state and federal banking agencies, including the Basel III Capital Rule.
Capital Adequacy Requirements Bank holding companies and banks are subject to various regulatory capital requirements administered by state and federal banking agencies, including the Basel III Capital Rule.
Legislative and Regulatory Developments The federal banking agencies continue to implement the remaining requirements in the Dodd-Frank Act, as well as promulgating other regulations and guidelines intended to assure the financial strength and safety and soundness of banks and the stability of the U.S. banking system.
Legislative and Regulatory Developments The federal banking agencies have the ability to promulgate regulations and guidelines intended to assure the financial strength and safety and soundness of banks and the stability of the U.S. banking system.
Under the Durbin Amendment to the Dodd-Frank Act, the Federal Reserve adopted rules establishing standards for assessing whether the interchange fees that may be charged with respect to certain electronic debit transactions are “reasonable and proportional” to the costs incurred by issuers for processing such transactions.
Consumers also have the option to direct banks and other financial institutions not to share information about transactions and experiences with affiliated companies for the purpose of marketing products or services. 15 Table of C o ntents Under the Durbin Amendment to the Dodd-Frank Act, the Federal Reserve adopted rules establishing standards for assessing whether the interchange fees that may be charged with respect to certain electronic debit transactions are “reasonable and proportional” to the costs incurred by issuers for processing such transactions.
Bank holding companies and banks engaged in significant trading activity may also be subject to the market risk capital guidelines and be required to incorporate additional market and interest rate risk components into their risk-based capital standards.
Bank holding companies and banks engaged in significant trading activity may also be subject to the market risk capital guidelines and be required to incorporate additional market and interest rate risk components into their risk-based capital standards. 7 Table of C o ntents The Federal Reserve monitors our capital adequacy on a consolidated basis, and the FDIC (2024 and prior), FRB (2025 and forward) and the DFI monitor the capital adequacy of our Bank.
These rules implement the Basel III international regulatory capital standards in the United States, as well as certain provisions of the Dodd-Frank Act.
The Company and the Bank are required to maintain minimum risk-based and leverage capital ratios, as well as a Capital Conservation Buffer, pursuant to the Basel III Capital Rule. These rules implement the Basel III international regulatory capital standards in the United States, as well as certain provisions of the Dodd-Frank Act.
The Bank received an "Outstanding" rating in the FDIC's 2022 Community Reinvestment Act Performance Evaluation that measures how financial institutions support their communities in the areas of lending, investment and service.
The Bank received an "Outstanding" rating in the FDIC's 2022 CRA Performance Evaluation that measures how financial institutions support their communities in the areas of lending, investment and service. On October 24, 2023, the OCC, FDIC, and FRB issued a final rule intended to modernize and strengthen regulations implementing the CRA.
At December 31, 2023, our workforce was over 90% ethnically diverse (non-Caucasian or two or more races) and 64% female, with 53% of all management staff having a supervisory role being female. We encourage and support the growth and development of our employees and, wherever possible, seek to fill positions by promotion and transfer from within the organization.
We are not a party to any collective bargaining agreement. At December 31, 2024, our workforce was over 92% ethnically diverse (non-Caucasian or two or more races) and 64% female, with 55% of all management staff having a supervisory role being female.
In response to the final rules, the NYSE implemented new clawback listing standards which are applicable to the Company.
In response to the final rules, the NYSE implemented new clawback listing standards which are applicable to the Company. The Company has adopted an NYSE compliant clawback policy which is included with this Annual Report of Form 10-K as an exhibit.
Central Pacific Bank, as a Hawaii state-chartered bank, is subject to primary supervision, periodic examination and regulation by the DFI and FDIC. The Company is also subject to certain regulations promulgated by the Consumer Financial Protection Bureau ("CFPB"), Federal Trade Commission ("FTC"), and FRB.
Central Pacific Bank, as a Hawaii state-chartered bank, is subject to primary supervision, periodic examination and regulation by the DFI and, effective January 24, 2025, the FRB. The Bank joined the Federal Reserve System as a member in January 2025, and was previously regulated primarily by the FDIC.
Under these circumstances, the Company's business, financial condition, results of operations or prospects may be adversely affected, perhaps materially. Employees and Human Capital We believe that the success of our business is largely due to the quality of our employees, the development of each employee's full potential, and our ability to provide timely and satisfying rewards to our employees.
Employees and Workforce We believe that the success of our business is largely due to the quality of our employees, the development of each employee's full potential, and our ability to provide timely and satisfying rewards to our employees. At December 31, 2024, we employed 741 persons, 697 on a full-time basis and 44 on a part-time basis.
We operate four branches on the island of Maui, two branches on the island of Hawaii and two branches on the island of Kauai.
Our administrative and main offices are located in Honolulu and we have 20 branches on the 4 Table of C o ntents island of Oahu. We operate four branches on the island of Maui, two branches on the island of Hawaii and one branch on the island of Kauai.
Removed
The Company sponsors the Central Pacific Foundation, which is not consolidated in the Company's financial statements.
Added
Some of these competitors are much larger by total assets and capitalization, and have greater access to capital markets.
Removed
The Federal Reserve monitors our capital adequacy on a consolidated basis, and the FDIC and the DFI monitor the capital adequacy of our Bank. The Company and the Bank are required to maintain minimum risk-based and leverage capital ratios, as well as a Capital Conservation Buffer, pursuant to the Basel III Capital Rule.
Added
The Bank did not fund its initial capital contribution and One Hawaii had no activity in 2024.
Removed
The Tier 1 Leverage Ratio is not impacted by the Capital Conservation Buffer, and a banking institution may be considered well-capitalized while remaining out of compliance with the Capital Conservation Buffer.
Added
As a FRB member bank, the Bank is required to subscribe to Federal Reserve capital stock in an amount equivalent to six percent (6%) of its capital and surplus.
Removed
Mergers and Acquisitions On July 9, 2021, President Biden signed an “Executive Order on Promoting Competition in the American Economy” .
Added
Although the par value of such stock is $100 per share, banks pay only $50 per share at the time of purchase with the understanding that the other half of the subscription amount is subject to call at any time.
Removed
We will continue to evaluate the impact of any changes to the regulations related to implementing this executive order and their impact to our financial condition, results of operations, and/or business strategies, which cannot be predicted at this time.
Added
On January 24, 2025, the Bank purchased 371,359 shares of Federal Reserve Bank Stock for an aggregate purchase price of $18.6 million. The Company is also subject to certain regulations promulgated by the Consumer Financial Protection Bureau ("CFPB"), Federal Trade Commission ("FTC"), and FRB.
Removed
Consumers also have the option to direct banks and other financial institutions not to share information about transactions and experiences with affiliated companies for the purpose of marketing products or services.
Added
However, we believe the Trump administration will seek to implement a regulatory reform agenda that is different than that of the Biden administration, impacting the rulemaking, supervision, examination and enforcement priorities of the federal banking agencies. The scope of such changes, however, cannot yet be determined.
Removed
At December 31, 2023, we employed 737 persons, 696 on a full-time basis and 41 on a part-time basis. We are not a party to any collective bargaining agreement.
Added
In September, 2024, the Department of Justice ("DOJ") announced that it withdrew its 1995 Bank Merger Guidelines and, instead, for purposes of evaluating the competitive impact of bank mergers, will rely on its 2023 Merger Guidelines which apply to all industries.
Added
For banks considering combinations where there may be even a remote possibility of antitrust concerns under the 2023 Merger Guidelines, the DOJ will review “market realities” in analyzing the competitive effects of a particular transaction.
Added
While branch deposit concentration may be one area of focus (i.e., traditional Herfindahl Hirschman Index (HHI) analysis for deposit concentration utilizing the 2023 Merger Guideline baselines), the DOJ will drill down into the products and services that a bank merger may affect prior to fully assessing the impact of a combination.
Added
This type of analysis may involve a more robust review of the competitive landscape (i.e., the impact of credit unions and other non-bank competitors), and a closer analysis of interest rates, types of mortgages and other loans offered, quality of service and convenience at branch locations, the types of customers served, and the unique needs in a particular bank market for bespoke financing.
Added
The impact of the election of President Trump on bank mergers and acquisition policy has yet to be determined.
Added
Regulatory authorities have imposed cease and desist orders and civil money penalties against institutions found to be violating these obligations.
Added
In addition, recent joint regulatory pronouncements by the federal banking agencies have emphasized the importance of managing all the risks, including operational and compliance risks, associated with any BaaS relationships.
Added
The final CRA rule was enjoined from implementation by a Texas federal court on April 1, 2024, extending the effective date of April 1, 2024, as well as all other implementation dates, on a day-for-day basis for each day that the injunction remains in effect. The decision of the district court is currently on appeal.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

77 edited+14 added−9 removed177 unchanged
Biggest changeRisks Related to the Operation of Our Business • Agreements with BaaS partners that we may enter into may produce limited revenue and may expose us to liability for compliance violations by BaaS partners and may require additional resources to review and monitor performance by our BaaS partners. 18 • The strategy of offering BaaS has been adopted by other institutions with which we compete. • Managing reputational risk is important to attracting and maintaining customers, investors and employees. • Our deposit customers may pursue alternatives to deposits at our Bank or seek higher yielding deposits causing us to incur increased funding costs. • Failure to manage our growth may adversely affect our performance. • Failure to maintain effective internal control over financial reporting or disclosure controls and procedures could adversely affect our ability to report our financial condition and results of operations accurately and on a timely basis. • Changes in our accounting policies or in accounting standards could materially affect how we report our financial results and condition. • Financial services companies depend on the accuracy and completeness of information about customers and counterparties. • We operate in a highly competitive industry and market area. • We are subject to environmental liability risk associated with our bank branches and any real estate collateral we acquire upon foreclosure. • Our business could be adversely affected by unfavorable actions from rating agencies. • Our operational risks include risks associated with third-party vendors and other financial institutions.
Biggest changeRisks Related to the Operation of Our Business • Managing reputational risk is important to attracting and maintaining customers, investors and employees. • Our deposit customers may pursue alternatives to deposits at our Bank or seek higher yielding deposits causing us to incur increased funding costs. 18 Table of C o ntents • Failure to manage our growth may adversely affect our performance. • Failure to maintain effective internal control over financial reporting or disclosure controls and procedures could adversely affect our ability to report our financial condition and results of operations accurately and on a timely basis. • Changes in our accounting policies or in accounting standards could materially affect how we report our financial results and condition. • Financial services companies depend on the accuracy and completeness of information about customers and counterparties. • We operate in a highly competitive industry and market area. • We are subject to environmental liability risk associated with our bank branches and any real estate collateral we acquire upon foreclosure. • Our business could be adversely affected by unfavorable actions from rating agencies. • Our operational risks include risks associated with third-party vendors and other financial institutions. • Significant increases in residential home insurance premiums and overall challenges in obtaining home owners insurance generally may negatively impact the residential real estate market. • Agreements with BaaS partners that we may enter into may produce limited revenue and may expose us to liability for compliance violations by BaaS partners and may require additional resources to review and monitor performance by our BaaS partners. • The strategy of offering BaaS has been adopted by other institutions with which we compete.
While the Company does not currently intend to sell these securities or loans, if the Company were required to sell such securities or loans to meet liquidity needs, it could incur losses, which could impair the Company’s capital, financial condition, and results of operations, thereby negatively impacting our profitability.
While the Company does not currently intend to sell these securities or loans to meet liquidity needs, if the Company were required to sell such securities or loans to meet liquidity needs, it could incur losses, which could impair the Company’s capital, financial condition, and results of operations, thereby negatively impacting our profitability.
These expenditures and other associated costs associated with compliance have been significant in the past and may increase in the future, which could have an adverse effect on our financial condition and results of operations. We are subject to various legal claims and litigation.
These expenditures and other costs associated with compliance have been significant in the past and may increase in the future, which could have an adverse effect on our financial condition and results of operations. We are subject to various legal claims and litigation.
Moreover, in recent periods, several large corporations, including financial institutions and retail companies, have suffered major data breaches, in some cases exposing not only confidential and proprietary corporate information, but also sensitive financial and other personal information of their customers and employees and subjecting them to potential fraudulent activity.
Moreover, in recent periods, several large corporations, including other financial institutions and retail companies, have suffered major data breaches, in some cases exposing not only confidential and proprietary corporate information, but also sensitive financial and other personal information of their customers and employees and subjecting them to potential fraudulent activity.
Risks Related to General Economic Conditions • Recent negative developments affecting the banking industry, such as bank failures or concerns involving liquidity, may have a material adverse effect on the Company’s operations. • Difficult economic and market conditions in Hawaii would result in significant adverse effects on us because of the geographic concentration of our business. • The fiscal, monetary and regulatory policies of the federal government and its agencies could have a material adverse effect on our results of operations. • Negative developments in the global and U.S. economies could have an adverse effect on us.
Risks Related to General Economic Conditions • Difficult economic and market conditions in Hawaii would result in significant adverse effects on us because of the geographic concentration of our business. • The fiscal, monetary and regulatory policies of the federal government and its agencies could have a material adverse effect on our results of operations. • Negative developments in the global and U.S. economies could have an adverse effect on us. • Negative developments affecting the banking industry, such as bank failures or concerns involving liquidity, may have a material adverse effect on the Company’s operations.
While we currently believe our repurchase risk is low, it is possible that requests to repurchase loans could occur in the future and such requests may have a material adverse effect on our 22 financial condition and results of operations. Consumer protection initiatives related to the foreclosure process could materially affect our ability as a creditor to obtain remedies.
While we currently believe our repurchase risk is low, it is possible that requests to repurchase loans could occur in the future and such requests may have a material adverse effect on our financial condition and results of operations. Consumer protection initiatives related to the foreclosure process could materially affect our ability as a creditor to obtain remedies.
Frequent or rapid changes in procedures, methodologies, systems, personnel and technology exacerbate the challenges of developing and maintaining a system of internal controls and can increase the cost and level of effort to develop and maintain such systems. 26 Changes in our accounting policies or in accounting standards could materially affect how we report our financial results and condition.
Frequent or rapid changes in procedures, methodologies, systems, personnel and technology exacerbate the challenges of developing and maintaining a system of internal controls and can increase the cost and level of effort to develop and maintain such systems. Changes in our accounting policies or in accounting standards could materially affect how we report our financial results and condition.
Regardless of whether these claims and legal actions are founded or unfounded, if such claims and legal actions are not resolved in a manner favorable to us, they may result in significant financial liability and/or adversely affect the market perception of us and our products and services, as well as 29 impact customer demand for our products and services.
Regardless of whether these claims and legal actions are founded or unfounded, if such claims and legal actions are not resolved in a manner favorable to us, they may result in significant financial liability and/or adversely affect the market perception of us and our products and services, as well as impact customer demand for our products and services.
Ratings assigned by ratings agencies to us, our affiliates or our securities may impact the decision of certain customers, or institutions in particular, to do business with us. A rating downgrade or a negative rating could adversely affect our deposits, our ability to access the capital markets on favorable terms and our business relationships.
Credit ratings assigned by ratings agencies to us, our affiliates or our securities may impact the decision of certain customers, or institutions in particular, to do business with us. A rating downgrade or a negative rating could adversely affect our deposits, our ability to access the capital markets on favorable terms and our business relationships.
While we believe 21 that our allowance for credit losses is appropriate to cover expected losses, we cannot provide assurance that we will not increase the allowance for credit losses further or that regulators will not require us to increase the allowance for credit losses which could have a material adverse effect on our net income and financial condition.
While we believe that our allowance for credit losses is appropriate to cover expected losses, we cannot provide assurance that we will not increase the allowance for credit losses further or that regulators will not require us to increase the allowance for credit losses which could have a material adverse effect on our net income and financial condition.
We are also subject to the provisions of the Hawaii Control Share Acquisitions Act, which prohibits the consummation of a “control share acquisition” (with 30 threshold ranges starting at 10% and set at 10% intervals up to a majority) unless approved by our shareholders or otherwise exempt.
We are also subject to the provisions of the Hawaii Control Share Acquisitions Act, which prohibits the consummation of a “control share acquisition” (with threshold ranges starting at 10% and set at 10% intervals up to a majority) unless approved by our shareholders or otherwise exempt.
We also own several of our branch locations and are building new branch locations in the State of Hawaii. For any real property that we may possess, there is a risk that hazardous or toxic substances could be found on these 27 properties.
We also own several of our branch locations and are building new branch locations in the State of Hawaii. For any real property that we may possess, there is a risk that hazardous or toxic substances could be found on these properties.
Our BaaS collaboration agreements, as they have in the past, may include loan or line of credit arrangements with our partners and may also include various loss sharing agreements. We typically will require guarantees and/or collateral to protect the Bank against credit risk.
Future BaaS collaboration agreements, as they have in the past, may include loan or line of credit arrangements with our partners and may also include various loss sharing agreements. We typically will require guarantees and/or collateral to protect the Bank against credit risk.
External Assessments The Company’s Information Technology and Information Security Departments are examined annually by our financial institution regulator, which includes reviewing our risk management activities to ensure we are properly and adequately managing our risks appropriate to the size and complexity of our business and operations.
External Assessments The Company’s Information Technology and Information Security Departments are examined annually by our financial institution regulator, which includes reviewing our cyber risk management activities to ensure we are properly and adequately managing our risks appropriate to the size and complexity of our business and operations.
Our business and operations are sensitive to business and economic conditions globally and domestically. Adverse economic and business conditions in the U.S. generally, and in our market areas, in particular, could reduce our growth rate, affect our 20 borrowers' ability to repay their loans and, consequently, adversely affect our financial condition and performance.
Our business and operations are sensitive to business and economic conditions globally and domestically. Adverse economic and business conditions in the U.S. generally, and in our market areas, in particular, could reduce our growth rate, affect our borrowers' ability to repay their loans and, consequently, adversely affect our financial condition and performance.
Failure to successfully attract and retain qualified personnel, or keep pace with 31 technological change affecting the financial services industry could have a material adverse impact on our business and, in turn, our financial condition and results of operations.
Failure to successfully attract and retain qualified personnel, or keep pace with technological change affecting the financial services industry could have a material adverse impact on our business and, in turn, our financial condition and results of operations.
Hawaii, where our business is located, and where a substantial portion of our customers and loan collateral is located, could be impacted by the effects of climate change, including increased frequency or severity of storms, hurricanes, floods, droughts, and rising sea levels.
Hawaii, where our business is located, and where a substantial portion of our customers and loan collateral is located, could be impacted by the effects of climate change, including increased frequency or severity of storms, hurricanes, floods, droughts, wildfires, and rising sea levels.
If our BaaS partners are not successful in achieving customer acceptance of their programs or terminate the 25 agreements before the end of their respective terms, our revenue under the various agreements may be limited or may cease altogether.
If our BaaS partners are not successful in achieving customer acceptance of their programs or terminate the agreements before the end of their respective terms, our revenue under the various agreements may be limited or may cease altogether.
Interest Rate and Liquidity Risks • Our business is subject to interest rate risk and fluctuations in interest rates may adversely affect our earnings. • If we are unable to effectively manage the composition and risk of our investment securities portfolio, which we expect will continue to comprise a significant portion of our earning assets, our net interest income and net interest margin could be adversely affected. • Rising interest rates have decreased the market value of the Company's fixed-rate investment securities and loan portfolios, and the Company would realize losses if we were required to sell such securities or loans to meet liquidity needs. • Our ability to maintain adequate sources of funding and liquidity and required capital levels may be negatively impacted by uncertainty in the economic environment which may, among other things, impact our ability to satisfy our obligations. • We rely on the mortgage secondary market for some of our revenue and liquidity. • We are required to act as a source of financial and managerial strength for our Bank. • We rely on dividends from our subsidiary for most of our revenue and liquidity.
Interest Rate and Liquidity Risks • Our business is subject to interest rate risk and fluctuations in interest rates may adversely affect our earnings. • If we are unable to effectively manage the composition and risk of our investment securities portfolio, which we expect will continue to comprise a significant portion of our earning assets, our net interest income and net interest margin could be adversely affected. • The high interest rate environment has decreased the market value of the Company's fixed-rate investment securities and loan portfolios, and the Company would realize losses if we were required to sell such securities or loans to meet liquidity needs. • Our ability to maintain adequate sources of funding and liquidity and required capital levels may be negatively impacted by uncertainty in the economic environment which may, among other things, impact our ability to satisfy our obligations. • We rely on the mortgage secondary market for some of our revenue and liquidity. • We are required to act as a source of financial and managerial strength for our Bank. • We rely on dividends from our subsidiary for most of our revenue and liquidity.
As of December 31, 2023, we had (i) $50.0 million in face amount of trust preferred securities outstanding with accrued and unpaid dividends thereon of $0.2 million, (ii) $55.0 million in principal amount of subordinated notes outstanding with accrued and unpaid interest thereon of $0.4 million and (iii) $50.0 million in FHLB long-term advances outstanding with accrued and unpaid dividends thereon of $6 thousand.
As of December 31, 2024, we had (i) $50.0 million in face amount of trust preferred securities outstanding with accrued and unpaid dividends thereon of $0.2 million, (ii) $55.0 million in principal amount of subordinated notes outstanding with accrued and unpaid interest thereon of $0.4 million and (iii) $50.0 million in FHLB long-term advances outstanding with accrued and unpaid dividends thereon of $6 thousand.
Threats to our reputation can come from many sources, including adverse sentiment about financial institutions generally, negative sentiment about our business, unethical practices, employee mistakes, misconduct or fraud, failure to deliver minimum standards of service or quality, failure of any product or service offered by us to meet our customers’ expectations, compliance deficiencies, government investigations, litigation, and questionable, unlawful or fraudulent activities of our partners, contract counterparties, employees or customers.
Threats to our reputation can come from many sources, including adverse sentiment about financial institutions generally, negative sentiment about our business, unethical practices, employee mistakes, misconduct or fraud, failure to deliver minimum standards of service or quality, failure of any product or service offered by us to meet our customers’ expectations, compliance deficiencies, government investigations, security breaches, litigation, and questionable, unlawful or fraudulent activities of our partners (including BaaS partners), contract counterparties, employees or customers.
As a result of inflationary pressures and the resulting rapid increases in interest rates initiated by the Federal Reserve over the years, the market values of the Company's fixed-rate investment securities and loan portfolios have declined significantly.
As a result of inflationary pressures and the resulting rapid increases in interest rates initiated by the Federal Reserve, the market values of the Company's fixed-rate investment securities and loan portfolios have declined significantly.
We cannot provide assurance that we will be able to sell assets at a level to allow us to repay borrowings or meet our liquidity needs. 24 We constantly monitor our activities with respect to liquidity and evaluate closely our utilization of our cash assets; however, there can be no assurance that our liquidity or the cost of funds to us may not be materially and adversely impacted as a result of economic, market, or operational considerations that we may not be able to control.
We cannot provide assurance that we will be able to sell assets at a level to allow us to repay borrowings or meet our liquidity needs. 24 Table of C o ntents We constantly monitor our activities with respect to liquidity and evaluate closely our utilization of our cash assets; however, there can be no assurance that our liquidity or the cost of funds to us may not be materially and adversely impacted as a result of economic, market, or operational considerations that we may not be able to control.
UNRESOLVED STAFF COMMENTS None. ITEM 1C. CYBERSECURITY Cybersecurity remains a top financial services industry risk due to increases in the quantity and sophistication of cyberattacks, which include ransomware, supply chain, and other prevalent attack methods resulting in unauthorized access to systems or sensitive data.
UNRESOLVED STAFF COMMENTS None. ITEM 1C. CYBERSECURITY Cybersecurity remains a top financial services industry risk due to increases in the quantity and sophistication of cyberattacks, which include ransomware, malware, credential theft, supply chain, and other prevalent attack methods resulting in unauthorized access to systems or sensitive data.
In addition, the high concentration of Hawaii real estate loans in our portfolio, combined with the deterioration in these sectors caused by an economic downturn, previously had and could have in the future a significantly more adverse impact on our operating results than many other banks across the nation.
In addition, the high concentration of Hawaii real estate loans in our portfolio, combined with the deterioration in these sectors caused by an economic downturn, could have in the future a significantly more adverse impact on our operating results than many other banks across the nation.
The Board of Directors overall, including the Board Risk Committee more specifically, oversees cybersecurity risk. The Executive Committee overall, and the Chief Legal Officer, Chief Technology Officer, and Information Security Manager more specifically, manages cybersecurity risk and the associated programs at the operational level.
The Board of Directors overall, including the Board Risk Committee more specifically, oversees cybersecurity risk. The Executive Committee overall, and the Chief Risk Officer, Chief Legal Officer, Chief Technology Officer, and Information Security Director more specifically, manages cybersecurity risk and the associated programs at the operational level.
Unless approved or otherwise exempt, for a period of one year after acquisition, the shares acquired by a person in a control share acquisition will be (i) denied voting rights, (ii) be nontransferable, and (iii) be subject to redemption at our option.
Unless approved or otherwise exempt, for a period of one year after acquisition, the shares acquired by a person in a control share acquisition will be (i) denied voting rights, (ii) be non-transferable, and (iii) be subject to redemption at our option.
In particular, our success has been and continues to be highly dependent upon the abilities of key executives, including our 32 President and Chief Executive Officer, our Senior Executive Vice President and Chief Financial Officer, and our other executive officers and certain other employees.
In particular, our success has been and continues to be highly dependent upon the abilities of key executives, including our Chairman, President and Chief Executive Officer, our Senior Executive Vice President and Chief Financial Officer, our Senior Executive Vice President and Chief Risk Officer, and our other executive officers and certain other employees.
The Information Security Program includes a threat intelligence program, policies and procedures, multi-layered cybersecurity technical safeguards, third-party security risk assessments, a formal incident response program, mandatory trainings for employees and independent contractors upon hire and regularly thereafter, compliance to banking regulations, annual audits, and reviews of vendors who handle sensitive information.
The Information Security Program, which is in compliance with banking regulations, includes a threat intelligence program, policies and procedures, multi-layered cybersecurity technical safeguards, third-party security risk assessments, a formal incident response program, mandatory trainings for employees and independent contractors upon hire and regularly thereafter, annual audits, and reviews of vendors who handle sensitive information.
We could experience increased expenses resulting from strategic planning, litigation, and technology and market changes, and reputational harm as a result of negative public sentiment, regulatory scrutiny, and reduced investor and stakeholder confidence due to our response to climate change and our climate change strategy, which, in turn, could have a material adverse effect on our business, results of operations, and financial condition. 33 ITEM 1B.
We could experience increased expenses resulting from strategic planning, litigation, and technology and market changes, and reputational harm as a result of negative public sentiment, regulatory scrutiny, and reduced investor and stakeholder confidence due to our response to climate change and our climate change strategy, which, in turn, could have a material adverse effect on our business, results of operations, and financial condition. 34 Table of C o ntents ITEM 1B.
Volatility in the market price of our common stock may prevent individual shareholders from being able to sell their shares when they want or at prices they find attractive. A significant decline in our stock price could result in substantial losses for shareholders and could lead to costly and disruptive securities litigation.
Volatility in the market price of our common stock may prevent individual shareholders from being able to sell their shares when they want or at prices they find attractive. 30 Table of C o ntents A significant decline in our stock price could result in substantial losses for shareholders and could lead to costly and disruptive securities litigation.
Accordingly, the occurrence of any such natural disasters, severe weather events, or other occurrences over which we have no control could have a material adverse effect on our business, which, in turn, could adversely affect our financial condition and results of operations. Climate change could have a material adverse effect on us and our customers.
Accordingly, the occurrence of any such natural disasters, severe weather events, or other occurrences over which we have no control could have a material adverse effect on our business, which, in turn, could adversely affect our financial condition and results of operations. 33 Table of C o ntents Climate change could have a material adverse effect on us and our customers.
Risks Related to Technology • We continually encounter technological change. • The occurrence of fraudulent activity, data privacy breaches, failures of our information security controls or cybersecurity-related incidents could have a material adverse effect on our business, financial condition and results of operations.
Risks Related to Technology • We continually encounter technological change including developments in artificial intelligence. • The occurrence of fraudulent activity, data privacy breaches, failures of our information security controls or cybersecurity-related incidents could have a material adverse effect on our business, financial condition and results of operations.
In particular, these statutes and regulations, and any changes thereto, could subject us to additional costs (including legal and compliance costs), limit the types of financial services and products we may offer and/or increase the ability of non-banks to offer competing financial services and products, among other things.
In particular, these statutes and regulations, and any changes thereto, could subject us to additional costs (including legal and compliance costs), limit the types of financial services and products we may offer and/or increase the 28 Table of C o ntents ability of non-banks to offer competing financial services and products, among other things.
The underwriting and credit monitoring policies and procedures that we have adopted to address this risk may not prevent unexpected losses that could have a material adverse effect on our business, financial condition, results of operations and cash flows.
The underwriting and credit monitoring 21 Table of C o ntents policies and procedures that we have adopted to address this risk may not prevent unexpected losses that could have a material adverse effect on our business, financial condition, results of operations and cash flows.
In connection with the sale of mortgage loans into the secondary market, we make representations and warranties, which, if breached, may require us to repurchase such loans, substitute other loans or indemnify the purchasers of such loans for actual losses incurred in respect to such loans.
In connection with the sale of mortgage loans into the secondary market, we make representations and warranties, which, if breached, may require us to repurchase such loans, substitute other loans or indemnify the purchasers of such loans for actual 22 Table of C o ntents losses incurred in respect to such loans.
Failure to follow applicable regulatory guidance in this area could expose us to regulatory actions. The ongoing operation of many financial institutions may be closely interrelated as a result of credit, trading, execution of transactions or other relationships between the institutions.
Failure to follow applicable regulatory guidance in this area could expose us to regulatory actions. 27 Table of C o ntents The ongoing operation of many financial institutions may be closely interrelated as a result of credit, trading, execution of transactions or other relationships between the institutions.
These areas include: • capital that must be maintained; • types of activities that can be engaged in; 28 • types and amounts of investments that can be made; • locations of offices; • insurance of deposits and the premiums that must be paid for this insurance; • procedures and policies must be paid; • conditions and restrictions on our executive compensation; and • how much cash must be set aside as reserves for deposits.
These areas may include: • capital that must be maintained; • types of activities that can be engaged in, including any BaaS relationships; • types and amounts of investments that can be made; • locations of offices; • insurance of deposits and the premiums that must be paid for this insurance; • procedures and policies; • conditions and restrictions on our executive compensation; and • how much cash must be set aside as reserves.
If we suffer greater losses than we are projecting, our financial condition and results of operations would be adversely affected. Provisions for credit losses and charge-offs of additional loans in the future, could adversely affect our results of operations. For the year ended December 31, 2023, we recorded $15.7 million in provision for credit losses.
If we suffer greater losses than we are projecting, our financial condition and results of operations would be adversely affected. Provisions for credit losses and charge-offs of additional loans in the future, could adversely affect our results of operations. For the year ended December 31, 2024, we recorded $9.8 million in provision for credit losses.
Approximately 78% of our loan portfolio as of December 31, 2023 was comprised of loans primarily collateralized by real estate, with the significant majority of these loans concentrated in Hawaii.
Approximately 79% of our loan portfolio as of December 31, 2024 was comprised of loans primarily collateralized by real estate, with the significant majority of these loans concentrated in Hawaii.
Hawaii law only permits the Bank to pay dividends out of retained earnings as defined under Hawaii banking law ("Statutory Retained Earnings"), which differs from GAAP retained earnings. As of December 31, 2023, the Bank had Statutory Retained Earnings of $169.1 million. In addition, regulatory authorities could limit the ability of the Bank to pay dividends to CPF.
Hawaii law only permits the Bank to pay dividends out of retained earnings as defined under Hawaii banking law ("Statutory Retained Earnings"), which differs from GAAP retained earnings. As of December 31, 2024, the Bank had Statutory Retained Earnings of $196.8 million. In addition, regulatory authorities could limit the ability of the Bank to pay dividends to CPF.
Risk Assessment – At least annually, a risk assessment is conducted that incorporates security assessments and testing conducted throughout the year, ongoing and completed security initiatives, evaluation of the cyber threat landscape, compliance, incidents, etc. The assessment results are presented to executive management and the Board of Directors. 34 ii.
Risk Assessment – At least annually, a risk assessment is conducted that incorporates other security assessments and testing conducted throughout the year, ongoing and completed security initiatives, evaluation of the cyber threat 35 Table of C o ntents landscape, compliance, incidents, etc. The assessment results are presented to executive management and the Board of Directors. ii.
Rising interest rates have decreased the market value of the Company’s fixed-rate investment securities and loan portfolios, and the Company would realize losses if we were required to sell such securities or loans to meet liquidity needs.
The high interest rate environment has decreased the market value of the Company’s fixed-rate investment securities and loan portfolios, and the Company would realize losses if we were required to sell such securities or loans to meet liquidity needs.
Risks Related to the Operation of Our Business Agreements with BaaS partners that we may enter into may produce limited revenue and may expose us to liability for compliance violations by BaaS partners and may require additional resources to review and monitor performance by our BaaS partners.
Agreements with BaaS partners that we may enter into may produce limited revenue and may expose us to liability for compliance violations by BaaS partners and may require additional resources to review and monitor performance by our BaaS partners.
Interest earned on investment securities represented 11.2% of our interest income in the year ended December 31, 2023, as compared to 13.4% of our interest income in the year ended December 31, 2022.
Interest earned on investment securities represented 11.7% of our interest income in the year ended December 31, 2024, as compared to 11.2% of our interest income in the year ended December 31, 2023.
The strategy of offering BaaS has been adopted by other institutions with which we compete. Other banks and institutions have instituted BaaS strategies similar to ours. As a consequence, we anticipate that we will encounter competition in this area currently and in the future.
The strategy of offering BaaS has been adopted by other institutions with which we compete and has come under enhanced regulatory scrutiny. Other banks and institutions have instituted BaaS strategies. As a consequence, we anticipate that we will encounter competition in this area currently and in the future.
The manner in which these issues are ultimately resolved could impact our foreclosure procedures, which in turn could adversely affect our business, financial condition or results of operations. Banking-as-a-Service ("BaaS") collaboration agreements that we may enter into may expose us to credit risk.
The loss mitigation practices could impact our foreclosure procedures, which in turn could adversely affect our business, financial condition or results of operations. Banking-as-a-Service ("BaaS") collaboration agreements that we may enter into may expose us to credit risk.
The Company’s Information Security Program includes key program stakeholders who meet regularly to discuss and execute on continually improving the Company’s Information Security Program through ongoing initiatives. The Company’s Information Security Program focuses on the following key areas to mitigate cyber risks: i.
The Company’s Information Security Program includes key program stakeholders who meet regularly to discuss and execute on continually improving the Company’s Information Security Program through ongoing initiatives. The Company implements a formal Information Security Program aligning to industry best practices and focuses on the following key areas to mitigate cyber risks: i.
In addition to annual examinations, the Company's Information Security Program, policies and practices, and cyber posture is subject to regular external independent reviews including annual audits, annual penetration tests, and quarterly third-party cyber risk assessments.
In addition to annual examinations, the Company's Information Security Program, policies and practices, and cyber posture are subject to regular external independent reviews including annual audits, annual penetration tests, and quarterly third-party cyber risk assessments to ensure cybersecurity controls are adequately designed and are operating effectively.
Continued organic growth and any future acquisitions we may make may present operating, integration, regulatory, management and other issues that could have a material adverse effect on our business, financial condition, results of operations and cash flows.
Continued organic growth and any future acquisitions or dispositions we may make or evaluate may result in additional expenses, and involve issues with operations, integration, regulatory, management and other issues that could have a material adverse effect on our business, financial condition, results of operations and cash flows.
Compliance with these legal requirements require us to incur costs for, installation and operation of pollution control equipment, emissions monitoring and fees, remediation and permitting at our branches and other facilities, among other things.
Our operations are subject to extensive federal, state and local environmental statutes, rules and regulations. Compliance with these legal requirements require us to incur costs for, installation and operation of pollution control equipment, emissions monitoring and fees, remediation and permitting at our branches and other facilities, among other things.
Mainland construction and real estate markets, the strength of the real estate market and the results of our operations could be negatively affected by an economic downturn. In addition, declines in the market for commercial property could cause some of our borrowers to suffer losses on their projects, which would negatively affect our financial condition, results of operations and prospects.
In addition, declines in the market for commercial property could cause some of our borrowers to suffer losses on their projects, which would negatively affect our financial condition, results of operations and prospects.
Additional credit losses may occur in the future and may occur at a rate greater than we have experienced to date. As a lender, we are exposed to the risk that our loan customers may not repay their loans according to their terms and that the collateral or guarantees securing these loans may be insufficient to assure repayment.
As a lender, we are exposed to the risk that our loan customers may not repay their loans according to their terms and that the collateral or guarantees securing these loans may be insufficient to assure repayment.
There can be no assurance that such statutes and regulations, any changes thereto or to their interpretation will not adversely affect our business.
In addition, regulations may be adopted that increase expenses associated with running our business and adversely affect our earnings. There can be no assurance that such statutes and regulations, any changes thereto or to their interpretation will not adversely affect our business.
Difficult economic and market conditions in Hawaii would result in significant adverse effects on us because of the geographic concentration of our business. Unlike larger national or other regional banks that are more geographically diversified, our business and operations are closely tied to the Hawaii market. The Hawaii economy relies on tourism, real estate, government and other service-based industries.
Unlike larger national or other regional banks that are more geographically diversified, our business and operations are closely tied to the Hawaii market. The Hawaii economy relies on tourism, real estate, government and other service-based industries.
Increased regulatory capital requirements and the associated compliance costs that were adopted by federal banking regulators, impose additional capital requirements on our business.
Federal banking regulators adopted regulatory capital standards that impose additional capital requirements on us, and increase our associated compliance costs.
We may not be able to effectively implement new technology-driven products and services or be successful in marketing these products and services to our customers. In addition, there are a limited number of qualified persons in our local marketplace with the knowledge and experience required to effectively maintain our information technology systems and implement our technology initiatives.
In addition, there are a limited number of qualified persons in our local marketplace with the knowledge and experience required to effectively maintain our information technology systems and implement our technology initiatives.
This competition may increase our costs, reduce our revenues or revenue growth or make it difficult for us to compete effectively in obtaining these relationships. Additionally, the BaaS model has faced recent challenges due to macroeconomic conditions, regulatory scrutiny and overall risk exposure. Managing reputational risk is important to attracting and maintaining customers, investors and employees.
This competition may increase our costs, reduce our revenues or revenue growth or make it difficult for us to compete effectively in obtaining these relationships. Additionally, the BaaS model has faced recent challenges due to macroeconomic conditions, regulatory scrutiny and overall risk exposure. In particular, bank regulatory agencies have jointly cautioned banks of elevated risks when engaging in BaaS relationships.
In addition, our financial flexibility could be constrained if we are unable to maintain our access to funding or if adequate financing is not available to accommodate future growth at acceptable interest rates, including in the current rising interest rate environment.
In addition, our financial flexibility could be constrained if we are unable to maintain our access to funding or if adequate financing is not available to accommodate future growth at acceptable interest rates. The management of liquidity risk is critical to the management of our business and our ability to service our customer base.
The financial services industry could become even more competitive as a result of legislative, regulatory and technological changes and continued consolidation. Banks, securities firms and insurance companies can merge under the umbrella of a financial holding company, which can virtually offer any type of financial service, including banking, securities underwriting, insurance (both agency and underwriting) and merchant banking.
Banks, securities firms and insurance companies can merge under the umbrella of a financial holding company, which can virtually offer any type of financial service, including banking, securities underwriting, insurance (both agency and underwriting) and merchant banking.
Some of our clients may have been affected by these breaches, which increase their risks of identity theft, credit card fraud and other fraudulent activity that could involve their accounts with us.
Some of our clients may have been affected by these breaches, which increase their risks of identity theft, credit card fraud and other fraudulent activity that may involve their accounts with us. 32 Table of C o ntents We use automation and technology tools to help reduce some risks of human error.
Defaults by, or even rumors or questions about, one or more financial services institutions, or the financial services industry have generally led to market-wide liquidity problems and could lead to losses or defaults by us or by other institutions. There is no assurance that any such losses would not materially and adversely affect our results of operations.
Defaults by, or even rumors or questions about, one or more financial services institutions, or the financial services industry have generally led to market-wide liquidity problems and could lead to losses or defaults by us or by other institutions.
General Risk Factors • We are dependent on key personnel and the loss of one or more of those key personnel may materially and adversely affect our prospects. • Natural disasters and other external events (including pandemic viruses or disease) could have a material adverse effect on our financial condition and results of operations. • Climate change could have a material adverse effect on us and our customers. 19 Risks Related to General Economic Conditions Recent negative developments affecting the banking industry, such as bank failures or concerns involving liquidity, may have a material adverse effect on the Company’s operations.
General Risk Factors • We are dependent on key personnel and the loss of one or more of those key personnel may materially and adversely affect our prospects. • Natural disasters and other external events (including pandemic viruses or disease) could have a material adverse effect on our financial condition and results of operations. • Climate change could have a material adverse effect on us and our customers. 19 Table of C o ntents Risks Related to General Economic Conditions Difficult economic and market conditions in Hawaii would result in significant adverse effects on us because of the geographic concentration of our business.
We also face competition from many other types of financial institutions, including without limitation, savings banks, credit unions, finance companies, financial service providers, including mortgage providers and brokers, operating via the internet and other technology platforms, brokerage firms, insurance companies, factoring companies and other financial intermediaries.
We also face competition from many other types of financial institutions, including without limitation, savings banks, credit unions, finance companies, financial service providers, including mortgage providers and brokers, operating via the internet and other technology platforms, brokerage firms, insurance companies, factoring companies and other financial intermediaries. 26 Table of C o ntents The financial services industry could become even more competitive as a result of legislative, regulatory and technological changes and continued consolidation.
Accordingly, effectively managing our investment 23 securities portfolio to generate interest income while managing the composition and risks (including credit, interest rate and liquidity) associated with that portfolio, including the mix of government agency and non-agency securities, remains important.
Accordingly, effectively managing our investment securities portfolio to generate interest income while managing the composition and risks (including credit, interest rate and liquidity) associated with that portfolio, including the mix of government agency and non-agency securities, remains important. 23 Table of C o ntents If we are unable to effectively manage our investment securities portfolio or if the interest income generated by our investment securities portfolio declines, our net interest income and net interest margin could be adversely affected.
Unfavorable or uncertain economic and market conditions can be caused by declines in economic growth, business activity or investor or business confidence; limitations on the availability or increases in the cost of credit and capital; increases in inflation or interest rates; high unemployment; natural disasters; or a combination of these or other factors.
Unfavorable or uncertain economic and market conditions can be caused by declines in economic growth, business activity or investor or business confidence; limitations on the availability or increases in the cost of credit and capital; increases in inflation or interest rates; high unemployment; natural disasters; or a combination of these or other factors. 20 Table of C o ntents Negative developments affecting the banking industry, such as bank failures or concerns involving liquidity, may have a material adverse effect on the Company’s operations.
Our future success depends, in part, upon our ability to address the needs of our customers by using technology to provide products and services that will satisfy customer demands, as well as to create additional efficiencies in our operations. Many of our competitors have substantially greater resources to invest in technological improvements.
The effective use of technology increases efficiency and enables financial institutions to better serve customers and to reduce costs. Our future success depends, in part, upon our ability to address the needs of our customers by using technology to provide products and services that will satisfy customer demands, as well as to create additional efficiencies in our operations.
Negative publicity regarding our business, employees, partners, contracting counterparties, employees or customers, with or without merit, may result in the loss of customers, investors and employees, costly litigation, a decline in revenues and increased governmental scrutiny and regulation.
Negative publicity regarding our business, employees, partners, contracting counterparties, employees or customers, with or without merit, may result in the loss of customers, investors and employees, costly litigation, a decline in revenues and increased governmental scrutiny and regulation. 25 Table of C o ntents Our deposit customers may pursue alternatives to deposits at our Bank or seek higher yielding deposits causing us to incur increased funding costs.
Our common stock is not insured and shareholders could lose the value of their entire investment. An investment in our common stock is not a deposit and is not insured against loss by the government or any governmental agency. Risks Related to Technology We continually encounter technological change.
An investment in our common stock is not a deposit and is not insured against loss by the government or any governmental agency. Risks Related to Technology We continually encounter technological change including developments in artificial intelligence. The financial services industry is continually undergoing rapid technological change with frequent introductions of new technology-driven products and services.
If that were to occur, we may have to record additional provisions for credit losses which would have an adverse impact on our net income, financial condition and capital ratios. Our allowance for credit losses may not be sufficient to cover actual credit losses, which could adversely affect our results of operations.
Because we have a significant amount of real estate loans, decreases in real estate values could adversely affect the value of property used as collateral for our loans. If that were to occur, we may have to record additional provisions for credit losses which would have an adverse impact on our net income, financial condition and capital ratios.
Ensuring contractual and regulatory compliance with these agreements will require additional internal and external resources which will increase our compliance costs and could adversely affect our business. Our agreements with our partners will also have varying terms and may be terminated by the parties under certain circumstances.
We may enter into agreements with BaaS partners pursuant to which we will provide certain banking services for the BaaS partner customers. Ensuring contractual and regulatory compliance with these agreements will require additional internal and external resources which will increase our compliance costs and could adversely affect our business.
The performance of our real estate loans depends on a number of factors, including the continued strength of the real estate markets in which we operate. As we have previously seen in the Hawaii and U.S.
The performance of our real estate loans depends on a number of factors, including the continued strength of the real estate markets in which we operate. The strength of the real estate market and the results of our operations could be negatively affected by an economic downturn.
The management of liquidity risk is critical to the management of our business and our ability to service our customer base. In managing our balance sheet, our primary source of funding is customer deposits.
In managing our balance sheet, our primary source of funding is customer deposits.
Risks Related to Legal, Compliance and Regulatory Matters Governmental regulation and regulatory actions against us may impair our operations or restrict our growth. As a regulated financial institution, we are subject to significant governmental supervision and regulation. These regulations affect our lending practices, capital structure, investment practices, dividend policy and growth, among other things.
As a regulated financial institution, we are subject to significant governmental supervision and regulation. These regulations affect our lending practices, capital structure, investment practices, BaaS relationships, dividend policy and growth, among other things. Statutes and regulations affecting our business as well as the interpretation of these statutes and regulations by examining authorities may be subject to change at any time.
In addition, increased regulatory capital requirements as well as our financial condition could require us to raise additional capital, which would dilute our existing shareholders at the time of such capital issuance.
In addition, increased regulatory capital requirements as well as our financial condition could require us to raise additional capital, which would dilute our existing shareholders at the time of such capital issuance. 29 Table of C o ntents Costs of compliance with environmental laws and regulations are significant, and the cost of compliance with new environmental laws, including limitations on emissions relating to climate change and disclosure requirements, could adversely affect our financial condition and results of operations.
Additionally, the joint federal-state settlement with several mortgage servicers over abuse of foreclosure practices creates further uncertainty for us and the mortgage servicing industry in general with respect to implementation of mortgage loan modifications and loss mitigation practices going forward.
We generally use the judicial foreclosure process which can be very lengthy. Additionally, the joint federal-state settlement with several mortgage servicers over abuse of foreclosure practices resulted in the implementation of enhanced mortgage loan modification programs and loss mitigation practices.
We cannot provide any assurance that we will continue to pay dividends to our shareholders.
We cannot provide any assurance that we will continue to pay dividends to our shareholders. Risks Related to the Operation of Our Business Managing reputational risk is important to attracting and maintaining customers, investors and employees.
Removed
Because we have a significant amount of real estate loans, decreases in real estate values could adversely affect the value of property used as collateral for our loans.
Added
Our allowance for credit losses may not be sufficient to cover actual credit losses, which could adversely affect our results of operations. Additional credit losses may occur in the future and may occur at a rate greater than we have experienced to date.
Removed
In 2011, Hawaii revised its rules for nonjudicial, or out-of-court, foreclosures. Prior to the revision, most lenders used the nonjudicial foreclosure method to handle foreclosures in Hawaii, as the process was less expensive and quicker than going through the court foreclosure process.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

6 edited+2 added−0 removed5 unchanged
Biggest changeFactors that could cause actual results to differ from those discussed in the forward-looking statements include but are not limited to: • the effects of inflation and interest rate fluctuations; • the adverse effects of recent bank failures and the potential impact of such developments on customer confidence and liquidity adequacy of the banking industry, • the adverse effects of the COVID-19 pandemic virus (and ongoing pandemic variants) and other pandemic viruses on local, national and international economies, including, but not limited to, the adverse impact on tourism and construction in the State of Hawaii, our borrowers, customers, third-party contractors, vendors and employees as well as the effects of government programs and initiatives in response thereto; • increase in inventory or adverse conditions in the real estate market and deterioration in the construction industry; • adverse changes in the financial performance and/or condition of our borrowers and, as a result, increased loan delinquency rates, deterioration in asset quality and losses in our loan portfolio; • the impact of local, national, and international economies and events (including natural disasters such as wildfires, volcanic eruptions, hurricanes, tsunamis, storms and earthquakes) on the Company’s business and operations and on tourism, the military and other major industries operating within the Hawaii market and any other markets in which the Company does business; • deterioration or malaise in domestic economic conditions, including any destabilization in the financial industry and deterioration of the real estate market, as well as the impact of declining levels of consumer and business confidence in the state of the economy in general and in financial institutions in particular; • changes in estimates of future reserve requirements based upon the periodic review thereof under relevant regulatory and accounting requirements; • the impact of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the "Dodd-Frank Act"), changes in capital standards, other regulatory reform and federal and state legislation, including but not limited to regulations promulgated by the Consumer Financial Protection Bureau (the "CFPB"), government-sponsored enterprise reform, and any related rules and regulations which affect our business operations and competitiveness; • the costs and effects of legal and regulatory developments, including legal proceedings or regulatory or other governmental inquiries and proceedings and the resolution thereof, the results of regulatory examinations or reviews and the effect of, our ability to comply with, any regulations or regulatory orders or actions we are or may become subject to, and the effect of any recurring or special FDIC assessments; • the effect of changes in accounting policies and practices, as may be adopted by the regulatory agencies, as well as the Public Company Accounting Oversight Board, the Financial Accounting Standards Board ("FASB") and other accounting standard setters and the cost and resources required to implement such changes; 3 • the effects of and changes in trade, monetary and fiscal policies and laws, including the interest rate policies of the Board of Governors of the Federal Reserve System (the "FRB" or the "Federal Reserve"); • changes in the competitive environment among financial holding companies and other financial service providers; • securities market and monetary fluctuations; • negative trends in our market capitalization and adverse changes in the price of the Company’s common stock; • political instability; • acts of war or terrorism; • changes in consumer spending, borrowings and savings habits; • technological changes and developments; • cybersecurity and data privacy breaches and the consequences therefrom; • failure to maintain effective internal control over financial reporting or disclosure controls and procedures; • the ability to address deficiencies in our internal controls over financial reporting or disclosure controls and procedures; • ability to successfully implement our initiatives to lower our efficiency ratio; • our ability to attract and retain key personnel; • changes in our personnel, organization, compensation and benefit plans; • our ability to successfully implement and achieve the objectives of our Banking-as-a-Service ("BaaS") initiatives, including adoption of the initiatives by customers and risks faced by any of our bank collaborations including reputational and regulatory risk; and • our success at managing any of the risks involved in the foregoing items.
Biggest changeNational and Hawaii economies; • the increase in inventory or adverse conditions in the real estate market and deterioration in the construction industry; • adverse changes in the financial performance and/or condition of our borrowers and, as a result, increased loan delinquency rates, deterioration in asset quality and losses in our loan portfolio; • the impact of local, national, and international economies and events (including natural disasters such as wildfires, volcanic eruptions, hurricanes, tsunamis, storms and earthquakes) on the Company’s business and operations and on tourism, the military and other major industries operating within the Hawaii market and any other markets in which the Company does business; • deterioration or malaise in domestic economic conditions, including any destabilization in the financial industry and deterioration of the real estate market, as well as the impact of declining levels of consumer and business confidence in the state of the economy in general and in financial institutions in particular; • changes in estimates of future reserve requirements based upon the periodic review thereof under relevant regulatory and accounting requirements; • the adverse effects of potential bank failures and the potential impact of such developments on customer confidence, deposit behavior, liquidity and regulatory responses thereto; • the adverse effects of the COVID-19 pandemic virus (and its variants) and other pandemic viruses on local, national and international economies, including, but not limited to, the adverse impact on tourism and construction in the State of Hawaii, our borrowers, customers, third-party contractors, vendors and employees, as well as the effects of government programs and initiatives in response thereto; • the impact of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the "Dodd-Frank Act"), changes in capital standards, other regulatory reform and federal and state legislation, including but not limited to regulations promulgated by the Consumer Financial Protection Bureau (the "CFPB"), government-sponsored enterprise reform, and any related rules and regulations which affect our business operations and competitiveness; • the costs and effects of legal and regulatory developments, including legal proceedings and lawsuits we are or may become subject to, or regulatory or other governmental inquiries and proceedings and the resolution thereof, the results of regulatory examinations or reviews and the effect of, our ability to comply with, any regulations or regulatory orders or actions we are or may become subject to, and the effect of any recurring or special FDIC assessments; 3 Table of C o ntents • the impact of a potential new regulatory reform agenda by the Trump administration that is significantly different than that of the Biden administration, impacting the rulemaking, supervision, examination and enforcement priorities of the federal banking agencies; • the effect of changes in accounting policies and practices, as may be adopted by the regulatory agencies, as well as the Public Company Accounting Oversight Board, the Financial Accounting Standards Board ("FASB") and other accounting standard setters and the cost and resources required to implement such changes; • the effects of and changes in trade, monetary and fiscal policies and laws, including the interest rate policies of the Board of Governors of the Federal Reserve System (the "FRB" or the "Federal Reserve"); • changes in the competitive environment among bank holding companies and other financial service providers; • securities market and monetary fluctuations, including the impact resulting from the elimination of the London Interbank Offered Rate Index; • negative trends in our market capitalization and adverse changes in the price of the Company’s common stock; • the effects of any acquisitions or dispositions we may make or evaluate, and the costs associated with any potential or actual acquisition or disposition; • political instability; • acts of war or terrorism; • changes in consumer spending, borrowings and savings habits; • technological changes and developments; • cybersecurity and data privacy breaches and the consequences therefrom; • susceptibility of fraud on the business; • failure to maintain effective internal control over financial reporting or disclosure controls and procedures; • the ability to address deficiencies in our internal controls over financial reporting or disclosure controls and procedures; • ability to successfully implement our initiatives to improve our efficiency; • our ability to attract and retain key personnel; • changes in our personnel, organization, compensation and benefit plans; • the impact of potential future Banking-as-a-Service ("BaaS") initiatives; and • our success at managing any of the risks involved in the foregoing items.
While we believe that our forward-looking statements and the assumptions underlying them are reasonably based, such statements and assumptions are by their nature subject to risks and uncertainties, and thus could later prove to be inaccurate or incorrect. Accordingly, actual results could differ materially from those in such statements or projections for a variety of reasons.
While we believe that our forward-looking statements and the assumptions underlying them are reasonably based, such statements and assumptions are by their nature subject to risks and uncertainties, and thus could later prove to be inaccurate or incorrect. Accordingly, actual results could differ materially from those statements or projections for a variety of reasons.
Item 15 Exhibits and Financial Statement Schedules 143 Exhibits 144 Item 16 Form 10-K Summary 147 Signatures 148 2 PART I Forward-Looking Statements and Factors that Could Affect Future Results Certain statements contained in this annual report on Form 10-K that are not statements of historical fact constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 (the "Act"), notwithstanding that such statements are not specifically identified.
Item 15 Exhibits and Financial Statement Schedules 143 Exhibits 144 Item 16 Form 10-K Summary 147 Signatures 148 2 Table of C o ntents PART I Forward-Looking Statements and Factors that Could Affect Future Results Certain statements contained in this annual report on Form 10-K that are not statements of historical fact constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 (the "Act"), notwithstanding that such statements are not specifically identified.
Item 1C. Cybersecurity 34 Item 2 Properties 35 Item 3 Legal Proceedings 35 Item 4 Mine Safety Disclosures 35 Part II.
Item 1C. Cybersecurity 35 Item 2 Properties 36 Item 3 Legal Proceedings 36 Item 4 Mine Safety Disclosures 36 Part II.
Item 5 Market for Registrant's Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities 36 Item 6 [Reserved] 37 Item 7 Management's Discussion and Analysis of Financial Condition and Results of Operations 38 Item 7A Quantitative and Qualitative Disclosures About Market Risk 72 Item 8 Financial Statements and Supplementary Data 73 Item 9 Changes In and Disagreements with Accountants on Accounting and Financial Disclosure 141 Item 9A Controls and Procedures 141 Item 9B Other Information 141 Item 9C Disclosure Regarding Foreign Jurisdictions That Prevent Inspections 141 Part III.
Item 5 Market for Registrant's Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities 37 Item 7 Management's Discussion and Analysis of Financial Condition and Results of Operations 39 Item 7A Quantitative and Qualitative Disclosures About Market Risk 74 Item 8 Financial Statements and Supplementary Data 75 Item 9 Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 141 Item 9A Controls and Procedures 141 Item 9B Other Information 141 Item 9C Disclosure Regarding Foreign Jurisdictions That Prevent Inspections 141 Part III.
Examples of forward-looking statements include but are not limited to: (i) projections of revenues, expenses, income or loss, earnings or loss per share, capital expenditures, the payment or nonpayment of dividends, capital position, credit losses, net interest margin or other financial items; (ii) statements of plans, objectives and expectations of Central Pacific Financial Corp. or its management or Board of Directors, including those relating to business plans, use of capital resources, products or services and regulatory developments and regulatory actions; (iii) statements of future economic performance; and (iv) statements of assumptions underlying or relating to any of the foregoing.
Examples of forward-looking statements include but are not limited to: (i) projections of revenues, expenses, income or loss, earnings or loss per share, capital expenditures, the payment or nonpayment of dividends, net interest income, capital position, credit losses, net interest margin or other financial items; (ii) statements of plans, objectives and expectations of Central Pacific Financial Corp.
Added
(the "Company") or its management or Board of Directors, including those relating to business plans, use of capital resources, products or services and regulatory developments and regulatory actions; (iii) statements of future economic performance including anticipated performance results from our business initiatives; and (iv) any statements of the assumptions underlying or relating to any of the foregoing.
Added
Factors that could cause actual results to differ from those discussed in the forward-looking statements include, but are not limited to: • the effects of inflation and interest rate fluctuations, including the impact from potential international tariffs; • disruptions in the economy, including supply chain disruptions; • labor contract disputes and potential strikes impacting both the U.S.

Item 2. Properties

Properties — owned and leased real estate

1 edited+0 added−0 removed2 unchanged
Biggest changeFor additional information relating to properties we own or lease and the related lease rental expense and commitments as of December 31, 2023, see Note 5 - Premises and Equipment and Note 15 - Operating Leases to the Consolidated Financial Statements under "Part II, Item 8. Financial Statements and Supplementary Data."
Biggest changeFor additional information relating to properties we own or lease and the related lease rental expense and commitments as of December 31, 2024, see Note 5 - Premises and Equipment and Note 15 - Operating Leases to the Consolidated Financial Statements under "Part II, Item 8. Financial Statements and Supplementary Data."

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

1 edited+1 added−1 removed0 unchanged
Biggest changeSee Note 19 - Contingent Liabilities and Other Commitments to the Consolidated Financial Statements under "Part II, Item 8. Financial Statements and Supplementary Data."
Biggest changeBased on information currently available to us, we do not expect that the ultimate costs to resolve these matters will have a material adverse effect on our financial condition or operations. See Note 19 - Contingent Liabilities and Other Commitments to the Consolidated Financial Statements under "Part II, Item 8. Financial Statements and Supplementary Data."
Removed
ITEM 3. LEGAL PROCEEDINGS Certain claims and lawsuits arising in the ordinary course of business have been filed or are pending against us. In the opinion of management, all such matters are of a nature that, if disposed of unfavorably, would not have a material adverse effect on our consolidated results of operations or financial position.
Added
ITEM 3. LEGAL PROCEEDINGS We are involved in legal proceedings that arise in the ordinary course of our business. The outcome of these matters and the timing of ultimate resolution is inherently difficult to predict.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

10 edited+2 added−1 removed2 unchanged
Biggest changeDuring the year ended December 31, 2023, we repurchased 130,010 shares of common stock, at an aggregate cost of $2.6 million under our 2023 Repurchase Plan. We cannot provide any assurance as to whether or not we will continue to repurchase common stock under any share repurchase program.
Biggest changeWe did not repurchase any shares of our common stock under our publicly announced share repurchase program during the three months ended December 31, 2024. During the year ended December 31, 2024, we repurchased 49,960 shares of common stock, at an aggregate cost of $0.9 million under our 2024 Repurchase Plan.
Under the terms of our trust preferred securities and subordinated notes, our ability to pay dividends with respect to common stock would be restricted if our obligations under our trust preferred securities and subordinated notes were not current. Our obligations on our outstanding trust preferred securities and subordinated notes are current as of December 31, 2023.
Under the terms of our trust preferred securities and subordinated notes, our ability to pay dividends with respect to common stock would be restricted if our obligations under our trust preferred securities and subordinated notes were not current. Our obligations on our outstanding trust preferred securities and subordinated notes are current as of December 31, 2024.
MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED SHAREHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Our common stock is traded on the NYSE under the ticker symbol "CPF." Set forth below is a line graph comparing the cumulative total stockholder return on the Company's common stock, based on the market price of the common stock and assuming reinvestment of dividends, with the Russell 2000 Index and the Standard and Poor's ("S&P") SmallCap 600 Commercial Bank Index for the five year period commencing December 31, 2018 and ending December 31, 2023.
MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED SHAREHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Our common stock is traded on the NYSE under the ticker symbol "CPF." Set forth below is a line graph comparing the cumulative total stockholder return on the Company's common stock, based on the market price of the common stock and assuming reinvestment of dividends, with the Russell 2000 Index, and the Standard and Poor's ("S&P") SmallCap 600 Commercial Bank Index for the five year period commencing December 31, 2019 and ending December 31, 2024.
These purchases were not included within the Company's publicly announced share repurchase program. Information relating to compensation plans under which equity securities of the Registrant are authorized for issuance is set forth under "Part III, Item 12—Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters."
These purchases were not included within the Company's publicly announced share repurchase program. Information relating to compensation plans under which equity securities of the Registrant are authorized for issuance is set forth under "Part III, Item 12—Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters." 38 Table of C o ntents
As of December 31, 2023, the Bank had Statutory Retained Earnings of $169.1 million. In addition, the Bank's regulators could impose limitations or conditions on the Bank's ability to pay dividends to the Company which would adversely impact the ability of the Company to pay dividends to our shareholders. See "Part I, Item 1.
As of December 31, 2024, the Bank had Statutory Retained Earnings of $196.8 million. In addition, the Bank's regulators could impose limitations or conditions on the Bank's ability to pay dividends to the Company which would adversely impact the ability of the Company to pay dividends to our shareholders. See "Part I, Item 1.
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 Programs Maximum Dollar Value of Shares that May Yet Be Purchased Under the Program October 1-31, 2023 — $ — — $ 23,382,807 November 1-30, 2023 882 17.81 — 23,382,807 December 1-31, 2023 — — — 23,382,807 Total 882 17.81 — 23,382,807 [1] During the three months ended December 31, 2023, 882 shares were acquired from employees in connection with income tax withholding obligations related to the vesting of restricted stock and/or performance stock units.
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 Programs Maximum Dollar Value of Shares that May Yet Be Purchased Under the Program October 1-31, 2024 — $ — — $ 19,054,953 November 1-30, 2024 509 31.03 — 19,054,953 December 1-31, 2024 — — — 19,054,953 Total 509 31.03 — 19,054,953 [1] During the three months ended December 31, 2024, 509 shares were acquired from employees in connection with income tax withholding obligations related to the vesting of restricted stock and/or performance stock units.
The graph assumes the investment of $100 on December 31, 2018.
The graph assumes the investment of $100 on December 31, 2019.
Issuer Purchases of Equity Securities On January 30, 2024, the Company's Board of Directors approved a new share repurchase authorization of up to $20 million of its common stock from time to time in the open market or in privately negotiated transactions, pursuant to a newly authorized share repurchase plan (the "2024 Repurchase Plan").
Business — Supervision and Regulation" for a discussion on regulatory restrictions. Issuer Purchases of Equity Securities On January 30, 2024, the Company's Board of Directors approved a share repurchase authorization of up to $20 million of its common stock from time to time in the open market or in privately negotiated transactions (the "2024 Repurchase Plan").
Indexed Total Annual Return (as of December 31, 2023) December 31, Index 2018 2019 2020 2021 2022 2023 Central Pacific Financial Corp. $ 100.00 $ 125.37 $ 84.64 $ 130.15 $ 97.94 $ 100.77 Russell 2000 Index 100.00 125.53 150.58 172.90 137.56 160.85 S&P SmallCap 600 Bank Index 100.00 120.57 106.04 143.94 132.60 130.34 As of January 31, 2024, there were 2,868 shareholders of record, excluding individuals and institutions for which shares were held in the names of nominees and brokerage firms. 36 Dividends Dividends are payable at the discretion of the Board of Directors and are subject to the restrictions under the federal and Hawaii law, including restrictions imposed by the FRB and covenants set forth in various agreements we are a party to, including covenants set forth in our trust preferred securities and subordinated notes.
Indexed Total Annual Return (as of December 31, 2024) December 31, Index 2019 2020 2021 2022 2023 2024 Central Pacific Financial Corp. $ 100.00 $ 67.51 $ 103.81 $ 78.12 $ 80.37 $ 124.00 Russell 2000 Index 100.00 119.96 137.74 109.59 128.14 142.93 S&P 600 Banks Index 100.00 87.95 119.38 109.98 108.10 123.92 As of January 31, 2025, there were 2,731 shareholders of record, excluding individuals and institutions for which shares were held in the names of nominees and brokerage firms. 37 Table of C o ntents Dividends Dividends are payable at the discretion of the Board of Directors and are subject to the restrictions under the federal and Hawaii law, including restrictions imposed by the FRB and covenants set forth in various agreements we are a party to, including covenants set forth in our trust preferred securities and subordinated notes.
The 2024 Repurchase Plan replaces and supersedes in its entirety the share repurchase program previously approved by the Company’s Board of Directors. We did not repurchase any shares of our common stock under our publicly announced share repurchase program during the three months ended December 31, 2023.
The 2024 Repurchase Plan replaced and superseded in its entirety the share repurchase program previously approved by the Company’s Board of Directors.
Removed
Business — Supervision and Regulation — Regulatory Actions" for a discussion on regulatory restrictions.
Added
On January 28, 2025, our Board of Directors approved a new share repurchase authorization of up to $30 million of our common stock from time to time in the open market or in privately negotiated transactions (the “2025 Repurchase Plan”). The 2025 Repurchase Plan replaces and supersedes in its entirety the 2024 Repurchase Plan.
Added
We cannot provide any assurance as to whether or not we will continue to repurchase common stock under any share repurchase program.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

223 edited+46 added−55 removed93 unchanged
Biggest changeComponents of Other Operating Expense Dollar Change Percent Change Year Ended December 31, 2023 2022 2023 2022 (Dollars in thousands) 2023 2022 2021 to 2022 to 2021 to 2022 to 2021 Salaries and employee benefits $ 82,050 $ 88,781 $ 90,213 $ (6,731) $ (1,432) (7.6) % (1.6) % Net occupancy 18,185 16,963 16,133 1,222 830 7.2 5.1 Equipment 3,958 4,238 4,344 (280) (106) (6.6) (2.4) Communication 3,010 2,958 3,271 52 (313) 1.8 (9.6) Legal and professional services 9,959 10,792 10,452 (833) 340 (7.7) 3.3 Computer software 17,726 14,840 13,304 2,886 1,536 19.4 11.5 Advertising 3,888 4,151 5,495 (263) (1,344) (6.3) (24.5) Other: Pension plan and SERP 380 5,339 1,254 (4,959) 4,085 (92.9) 325.8 Foreclosed assets — 1 3 (1) (2) (100.0) (66.7) Charitable contributions 454 453 179 1 274 0.2 153.1 FDIC insurance assessment 4,133 2,322 2,197 1,811 125 78.0 5.7 Miscellaneous loan expenses 1,291 1,339 1,657 (48) (318) (3.6) (19.2) ATM and debit card 3,364 3,025 3,149 339 (124) 11.2 (3.9) Armored car 1,701 1,068 891 633 177 59.3 19.9 Entertainment and promotions 2,015 1,513 1,289 502 224 33.2 17.4 Stationery and supplies 740 722 903 18 (181) 2.5 (20.0) Directors' fees and expenses 1,287 1,290 876 (3) 414 (0.2) 47.3 Directors' deferred compensation plan 360 (1,029) 1,292 1,389 (2,321) (135.0) (179.6) Branch consolidation costs — 612 436 (612) 176 (100.0) 40.4 Loss (gain) on disposal of fixed assets 12 5 101 7 (96) 140.0 (95.0) Loss on sale of loans 197 — — 197 — N.M.
Biggest changeComponents of Other Operating Expense Dollar Change Percent Change Year Ended December 31, 2024 2023 2024 2023 (Dollars in thousands) 2024 2023 2022 to 2023 to 2022 to 2023 to 2022 Salaries and employee benefits $ 85,941 $ 82,050 $ 88,781 $ 3,891 $ (6,731) 4.7 % (7.6) % Net occupancy 18,001 18,185 16,963 (184) 1,222 (1.0) 7.2 Equipment 3,881 3,958 4,238 (77) (280) (1.9) (6.6) Communication 3,177 3,010 2,958 167 52 5.5 1.8 Legal and professional services 9,790 9,959 10,792 (169) (833) (1.7) (7.7) Computer software 18,015 17,726 14,840 289 2,886 1.6 19.4 Advertising 3,615 3,888 4,151 (273) (263) (7.0) (6.3) Other: Pension plan and SERP 431 380 5,339 51 (4,959) 13.4 (92.9) Foreclosed assets — — 1 — (1) N.M.
In January 2023, the Company’s Board of Directors approved a new authorization to repurchase of up to $25 million of its common stock from time to time in the open market or in privately negotiated transactions (the "2023 Repurchase Plan"), pursuant to a newly authorized share repurchase program.
In January 2023, the Company’s Board of Directors approved a new authorization to repurchase up to $25 million of its common stock from time to time in the open market or in privately negotiated transactions (the "2023 Repurchase Plan"), pursuant to a newly authorized share repurchase program.
These instruments and the related off-balance sheet exposures are discussed in detail in Note 20 - Financial Instruments With Off-Balance Sheet Risk to the Consolidated Financial Statements under "Part II, Item 8.
These instruments and the related off-balance sheet exposures are discussed in detail in Note 20 - Financial Instruments With Off-Balance Sheet Risk to the Consolidated Financial Statements under "Part II, Item 8.
As discussed in Note 6 - Investments in Unconsolidated Entities in the accompanying notes to the consolidated financial statements in this report, the Company entered into a transaction with Swell in the third quarter of 2023 whereby Swell repurchased the Company’s entire preferred and common stock equity investment in exchange 40 for $0.5 million in cash, certain intellectual property rights and a platform usage fee agreement related to products that may be launched by Swell or its affiliates in the future (not to exceed $1.5 million in value).
As discussed in Note 6 - Investments in Unconsolidated Entities in the accompanying notes to the consolidated financial statements in this report, the Company entered into a transaction with Swell in the third quarter of 2023 whereby Swell repurchased the Company’s entire preferred and common stock equity investment in exchange for $0.5 million in cash, certain intellectual property rights and a platform usage fee agreement related to products that may be launched by Swell or its affiliates in the future (not to exceed $1.5 million in value).
The decrease was primarily due to lower salaries and employee benefits expense and lower pension plan and Supplemental Executive Retirement Plans ("SERP") expense (included in other) attributable to a non-recurring non-cash charge of $4.9 million related to the termination and settlement of the Company's defined benefit retirement plan during the second quarter of 2022, partially offset by higher computer software expense, a non-recurring charge of $2.3 million related to the early termination of a lease (included in other), higher FDIC insurance assessment (included in other), higher directors' deferred compensation plan expense (included in other) and higher net occupancy expense.
The decrease in other operating expense was primarily due to lower salaries and employee benefits expense and lower pension plan and Supplemental Executive Retirement Plans ("SERP") expense (included in other) attributable to a non-recurring non-cash charge of $4.9 million related to the termination and settlement of the Company's defined benefit retirement plan during the second quarter of 2022, partially offset by higher computer software expense, a non-recurring charge of $2.3 million related to the early termination of a lease, higher FDIC insurance assessment, higher directors' deferred compensation plan expense and higher net occupancy expense.
Interest rate risk arises when rate-sensitive assets and rate-sensitive liabilities mature or reprice during different periods or in differing amounts. In the normal course of business, we are subjected to interest rate risk through the activities of making loans and taking deposits, as well as from our investment 69 securities portfolio and other interest-bearing funding sources.
Interest rate risk arises when rate-sensitive assets and rate-sensitive liabilities mature or reprice during different periods or in differing amounts. In the normal course of business, we are subjected to interest rate risk through the activities of making loans and taking deposits, as well as from our investment securities portfolio and other interest-bearing funding sources.
Capital impact is measured through an Economic Value of Equity ("EVE") analysis which monitors the impact of the durations of rate sensitive assets and liabilities. The EVE analysis simulates the cash flows for all on- and off- balance sheet instruments under different rate scenarios which are then discounted to determine a present value for each scenario.
Capital impact is measured through an Economic Value of Equity ("EVE") analysis which monitors the impact of the 71 durations of rate sensitive assets and liabilities. The EVE analysis simulates the cash flows for all on- and off- balance sheet instruments under different rate scenarios which are then discounted to determine a present value for each scenario.
Loans secured by commercial property carry a greater risk than loans secured by residential property due to 54 operating income risk. Operating income risk is the risk that the borrower will be unable to generate sufficient cash flow from the operation of the property. The commercial real estate market and interest rate conditions through economic cycles will impact risk levels.
Loans secured by commercial property carry a greater risk than loans secured by residential property due to operating income risk. Operating income risk is the risk that the borrower will be unable to generate sufficient cash flow from the operation of the property. The commercial real estate market and interest rate conditions through economic cycles will impact risk levels.
Considerations include an evaluation of the quality, character and inherent risks in the loan portfolio, current and projected economic conditions and past loan loss experience. Consumer loans represent a moderate credit risk. Loans in this category are generally either unsecured or secured by personal assets such as automobiles.
Considerations include an evaluation of the quality, character and inherent risks in the loan portfolio, current and projected economic conditions and past loan loss experience. Consumer loans represent a moderate credit risk. Loans in this category are either unsecured or secured by personal assets such as automobiles.
These decreases were partially offset by a non- 49 recurring charge of $2.3 million related to the early termination of a branch lease, higher computer software expense of $2.9 million, FDIC insurance assessment of $1.8 million, directors' deferred compensation plan expenses of $1.4 million and net occupancy expense of $1.2 million.
These decreases were partially offset by a non-recurring charge of $2.3 million related to the early termination of a branch lease, higher computer software expense of $2.9 million, FDIC insurance assessment of $1.8 million, directors' deferred compensation plan expenses of $1.4 million and net occupancy expense of $1.2 million.
In 2023, we purchased $3.9 million in U.S. Mainland unsecured consumer loans under forward flow purchase agreements at par, with outstanding balances totaling $3.9 million. In 2022, we purchased U.S. Mainland unsecured consumer loans under forward flow purchase agreements with outstanding balances totaling $229.3 million for $217.2 million, reflecting a net discount of $12.1 million. In 2021, we purchased U.S.
In 2023, we purchased $3.9 million in U.S. Mainland unsecured consumer loans under forward flow purchase agreements at par, with outstanding balances totaling $3.9 million. In 2022, we purchased U.S. Mainland unsecured consumer loans under forward flow purchase agreements with outstanding balances totaling $229.3 million for $217.2 million, reflecting a net discount of $12.1 million.
Net interest income, when expressed as a percentage of average interest-earning assets, is referred to as "net interest margin." Interest income, which includes loan fees and resultant yield information, is expressed on a taxable-equivalent basis using a federal statutory tax rate of 21%.
Net interest income, when annualized and expressed as a percentage of average interest-earning assets, is referred to as "net interest margin." Interest income, which includes loan fees and resultant yield information, is expressed on a taxable-equivalent basis using a federal statutory tax rate of 21%.
Our products and services consist primarily of the following: • Loans : Our loans consist of commercial and industrial, commercial mortgage, and construction loans to small and medium-sized companies, business professionals, and real estate investors and developers, as well as residential mortgage, home equity, and consumer loans to local homeowners and individuals.
Our products and services consist primarily of the following: • Loans : Our loans consist of commercial and industrial, commercial mortgage, and construction loans to small and medium-sized companies, business professionals, and real estate investors and developers, as well as residential mortgage, home equity, and consumer loans to homeowners and individuals.
Loan Portfolio Our lending activities are focused on commercial and industrial loans, commercial mortgages, and construction loans to small and medium-sized companies, business professionals, and real estate investors and developers, as well as residential mortgages, home equity and consumer loans to local home-buyers and individuals.
Loan Portfolio Our lending activities are focused on commercial and industrial loans, commercial mortgages, and construction loans to small and medium-sized companies, business professionals, and real estate investors and developers, as well as residential mortgages, home equity and consumer loans to home-buyers and individuals.
Our ability to pay cash dividends to our shareholders is subject to restrictions under federal and Hawaii law, including restrictions imposed by the FRB and covenants set forth in various agreements we are a party to, including covenants set forth in our subordinated debentures.
Our ability to pay cash dividends to our shareholders is 69 subject to restrictions under federal and Hawaii law, including restrictions imposed by the FRB and covenants set forth in various agreements we are a party to, including covenants set forth in our subordinated debentures.
In 2023, we purchased $15.7 million in U.S. Mainland automobile loans, which included a $0.6 million premium over the $15.2 million outstanding balance. In 2022, we purchased U.S. Mainland automobile loans totaling $106.2 million, which included a $4.7 million premium over the $101.5 million outstanding balance. In 2021, we purchased U.S.
In 2023, we purchased U.S. Mainland automobile loans totaling $15.7 million, which included a $0.6 million premium over the $15.2 million outstanding balance. In 2022, we purchased U.S. Mainland automobile loans totaling $106.2 million, which included a $4.7 million premium over the $101.5 million outstanding balance.
During 2022, we recognized a credit to the Provision of $1.3 million, which included a credit to the Provision for off-balance sheet credit exposures of $1.6 million, offset by a debit to the Provision for loans of $0.3 million.
During 2022, we recognized a credit to the Provision of $1.3 million, which included a credit to the Provision for off-balance sheet credit exposures of $1.6 million, offset by a Provision for loans of $0.3 million.
Our consumer lines of credit use a qualifying payment based on a percentage of the credit limit that exceeds the actual required fully indexed interest rate payment calculation . The following table sets forth the maturity distribution and sensitivities of the loan portfolio to changes in interest rates at December 31, 2023.
Our consumer lines of credit use a qualifying payment based on a percentage of the credit limit that exceeds the actual required fully indexed interest rate payment calculation . The following table sets forth the maturity distribution and sensitivities of the loan portfolio to changes in interest rates at December 31, 2024.
Time deposits in amounts of $250,000 and greater are generally considered to be more price-sensitive than relationship-based and are thus given less focus in our marketing and sales efforts. The following table sets forth the composition of our deposits by category as of the dates indicated. Table 18.
Time deposits in amounts of $250,000 and greater are generally considered to be more price-sensitive than relationship-based and are thus given less focus in our marketing and sales efforts. The following table sets forth the composition of our deposits by category as of the dates indicated. Table 21.
Total available sources of liquidity as a percentage of uninsured and uncollateralized deposits was approximately 125%. Refer to Note 10 - Short-Term Borrowings and Long-Term Debt in the accompanying notes to the consolidated financial statements in this report for information on the Company's borrowing arrangements.
Total available sources of liquidity as a percentage of uninsured and uncollateralized deposits was approximately 113%. Refer to Note 10 - Short-Term Borrowings and Long-Term Debt in the accompanying notes to the consolidated financial statements in this report for information on the Company's borrowing arrangements.
The remaining components of off-balance sheet arrangements, primarily interest rate options and forward interest rate contracts related to our mortgage banking activities, are not expected to have a material impact on our consolidated financial position or results of operations. 71
The remaining components of off-balance sheet arrangements, primarily interest rate options and forward interest rate contracts related to our mortgage banking activities, are not expected to have a material impact on our consolidated financial position or results of operations. 73
The following table reflects our static net interest income sensitivity analysis as of December 31, 2023. The simulations estimate net interest income assuming no balance sheet growth under a flat interest rate scenario. The net interest income sensitivity is measured as the change in net interest income in alternate interest rate scenarios as a percentage of the flat rate scenario.
The following table reflects our static net interest income sensitivity analysis as of December 31, 2024. The simulations estimate net interest income assuming no balance sheet growth under a flat interest rate scenario. The net interest income sensitivity is measured as the change in net interest income in alternate interest rate scenarios as a percentage of the flat rate scenario.
The net interest income sensitivity table shows that the Company’s balance sheet is relatively well-matched against movements in interest rates and within our ALCO Policy risk limits that have been approved by the Board of Directors. Table 22.
The net interest income sensitivity table shows that the Company’s balance sheet is relatively well-matched against movements in interest rates and within our ALCO Policy risk limits that have been approved by the Board of Directors. Table 25.
Refer to "Part II, Item 7 - Liquidity and Borrowing Arrangements" for discussion. Recent Industry Developments Beginning in March 2023, the banking industry experienced significant volatility as a result of high-profile regional bank failures, which resulted in industry-wide concerns related to liquidity, deposit outflows, unrealized or unrecognized losses on investment securities and impacting consumer confidence in the banking industry.
Refer to "Part II, Item 7 - Liquidity Risk and Borrowing Arrangements" for discussion. Recent Industry Developments Beginning in March 2023, the banking industry experienced significant volatility as a result of high-profile regional bank failures, which resulted in industry-wide concerns related to liquidity, deposit outflows, unrealized or unrecognized losses on investment securities and weaker consumer confidence in the banking industry.
Contractual obligations in Table 21 - Contractual Obligations do not include off-balance sheet arrangements. These financial instruments include commitments to extend credit, standby letters of credit and financial guarantees written, forward foreign exchange contracts, forward interest rate contracts and interest rate swaps and options.
Contractual obligations in Table 24 - Contractual Obligations do not include off-balance sheet arrangements. These financial instruments include commitments to extend credit, standby letters of credit and financial guarantees written, forward foreign exchange contracts, forward interest rate contracts and interest rate swaps and options.
The increase in shareholders' equity from December 31, 2022 to December 31, 2023 was primarily attributable to net income of $58.7 million and other comprehensive income of $21.4 million, partially offset by cash dividends paid of $28.1 million and the repurchase of 130,010 shares of common stock for a total cost of $2.6 million.
The increase in shareholders' equity from December 31, 2022 to December 31, 2023 was primarily attributable to net income of $58.7 million and other comprehensive income of $21.4 million, partially offset by cash dividends paid of $28.1 million, and the repurchase of 130,010 shares of our common stock for a total cost of $2.6 million, under our stock repurchase program.
With an average loan origination size of approximately $0.6 million, marketable collateral and a stable Hawaii residential real estate market, credit losses on residential mortgage loans have historically been minimal.
With an average loan origination size of approximately $0.7 million, marketable collateral and a stable Hawaii residential real estate market, credit losses on residential mortgage loans have historically been minimal.
The increase in the ratio of shareholders' equity to total assets from 2022 to 2023 was primarily attributable to lower unrealized losses on available-for-sale investment securities recorded in accumulated other comprehensive income as of December 31, 2023 compared to December 31, 2022, and lower repurchases of common stock under the stock repurchase program during the year ended December 31, 2023.
The increase in the ratio of shareholders' equity to total assets from 2023 68 to 2024 was primarily attributable to lower unrealized losses on available-for-sale investment securities recorded in accumulated other comprehensive income as of December 31, 2024 compared to December 31, 2023, and lower repurchases of common stock under the stock repurchase program during the year ended December 31, 2024.
Trust Preferred Securities As of December 31, 2023, we have two remaining statutory trusts, CPB Capital Trust IV ("Trust IV") and CPB Statutory Trust V ("Trust V"), which issued a total of $50.0 million in floating rate trust preferred securities.
Trust Preferred Securities As of December 31, 2024, we have two remaining statutory trusts, CPB Capital Trust IV ("Trust IV") and CPB Statutory Trust V ("Trust V"), which issued a total of $50.0 million in floating rate trust preferred securities.
In an effort to rein in inflation, the FRB aggressively increased interest rates since the first quarter of 2022 when the Federal Funds Rate target was 0.00% to 0.25%. Since then, the FRB has raised the Federal Funds Rate by more than five percentage points, to the current 5.25% to 5.50%, a 22-year high.
In an effort to rein in inflation, the FRB aggressively increased interest rates since the first quarter of 2022 when the Federal Funds Rate target range was 0.00% to 0.25%. Since then, the FRB has raised the Federal Funds Rate by more than five percentage points, up to a 22-year high, 5.25% to 5.50%.
Financial Statements and Supplementary Data." The table below sets forth information regarding the average balances and average rates paid for certain deposit categories for each of the periods presented. Table 20.
Financial Statements and Supplementary Data." The table below sets forth information regarding the average balances and average rates paid for certain deposit categories for each of the periods presented. Table 23.
The lower amortization of mortgage servicing rights (included in mortgage banking income) was primarily attributable to the continued increases in market interest rates. These decreases were partially offset by a $5.1 million gain on sale of real estate office property, higher income from bank-owned life insurance ("BOLI") of $3.0 million and higher other service charges and fees.
The lower amortization of mortgage servicing rights (included in mortgage banking income) was primarily attributable to the continued increases in market interest rates. These decreases were partially offset by a $5.1 million gain on sale of real estate office property, higher income from BOLI of $3.0 million and higher other service charges and fees.
Subordinated Notes On October 20, 2020, the Company completed a $55.0 million private placement of ten-year fixed-to-floating rate subordinated notes, which will be used to support regulatory capital ratios and for general corporate purposes.
Subordinated Notes On October 20, 2020, the Company completed a $55.0 million private placement of ten-year fixed-to-floating rate subordinated notes, which was used to support regulatory capital ratios and for general corporate purposes.
In addition to the external interest rate environment, the overall direction and magnitude of rate movements in our deposit base will largely depend on the level of deposit growth we need to maintain adequate liquidity and competitive pricing considerations. 65 Contractual Obligations The following table sets forth our material contractual obligations (excluding deposit liabilities) as of December 31, 2023.
In addition to the external interest rate environment, the overall direction and magnitude of rate movements in our deposit base will largely depend on the level of deposit growth we need to maintain adequate liquidity and competitive pricing considerations. 67 Contractual Obligations The following table sets forth our material contractual obligations (excluding deposit liabilities) as of December 31, 2024.
The increase in commercial mortgage balances in 2023 was primarily due to increased demand from both new and existing customers. Consumer Loans The following table sets forth the major components of our consumer loan portfolio as of the dates indicated. Table 11.
The increase in commercial mortgage balances in 2024 was primarily due to increased demand from both new and existing customers. Consumer Loans The following table sets forth the major components of our consumer loan portfolio as of the dates indicated. Table 14.
As each project progresses, the projections are measured against actual disbursements and sales/lease results to determine if the project is on schedule and performing as planned. The specific monitoring requirements for each loan vary depending on the size and complexity of the project and the experience and financial strength of the borrower, sponsor and/or guarantor.
As each project progresses, the projections are measured against actual disbursements and sales/lease results to determine if the project is on schedule and performing as planned. 55 Table of C o ntents The specific monitoring requirements for each loan vary depending on the size and complexity of the project and the experience and financial strength of the borrower, sponsor and/or guarantor.
Our methodology for determining the adequacy of the ACL and Provision for loans takes into account many factors, including the level and trend of nonperforming and potential problem loans, net charge-off experience, current repayment by borrowers, prepayment assumptions, fair value of collateral 57 securing specific loans, changes in lending and underwriting standards and general economic factors, nationally and in the markets we serve.
Our methodology for determining the adequacy of the ACL and Provision for loans takes into account many factors, including the level and trend of nonperforming and potential 59 Table of C o ntents problem loans, net charge-off experience, current repayment by borrowers, prepayment assumptions, fair value of collateral securing specific loans, changes in lending and underwriting standards and general economic factors, nationally and in the markets we serve.
Net charge-offs were $15.0 million, $4.6 million, and $0.8 million , respectively, for the years ended December 31, 2023, 2022 and 2021. The following table sets forth the allocation of the ACL by loan category as of the dates indicated.
Net charge-offs were $15.7 million, $15.0 million, and $4.6 million, respectively, for the years ended December 31, 2024, 2023 and 2022. The following table sets forth the allocation of the ACL by loan category as of the dates indicated.
In January 2022, the Company’s Board of Directors approved an authorization to repurchase up to $30 million of its common stock from time to time in the open market or in privately negotiated transactions, pursuant to a newly authorized share repurchase program (the "2022 Repurchase Plan").
In January 2025, the Company’s Board of Directors approved a new authorization to repurchase of up to $30 million of its common stock from time to time in the open market or in privately negotiated transactions (the "2025 Repurchase Plan"), pursuant to a newly authorized share repurchase program.
These increases were partially offset by a decrease in average investment securities balances of $98.9 million, resulting in lower interest income of approximately $2.0 million.
These increases were partially offset by a decrease in the average investment securities balance of $98.9 million, resulting in lower interest income of approximately $2.0 million.
Commercial loans and commercial mortgage loans with variable interest rates are underwritten at the current market rate of interest. For commercial loans and commercial real estate loans with a fixed-rate period that are not fully amortizing, the loans are underwritten at the current market rate of interest.
For commercial loans and commercial real estate loans with a fixed-rate period that are not fully amortizing, the loans are underwritten at the current market rate of interest.
As of December 31, 2023, the valuation allowance on our net deferred tax assets ("DTA") totaled $4.4 million, which related to our DTA from net apportioned net operating loss ("NOL") carryforwards for California state income tax purposes as we do not expect to generate sufficient income in California to utilize the DTA.
As of December 31, 2024, the valuation allowance on our net deferred tax assets ("DTA") totaled $3.1 million, which related to our DTA from net apportioned net operating loss ("NOL") carryforwards for California state income tax purposes as we do not expect to generate sufficient income in California to utilize the DTA.
The alternate rate scenarios assume rates move up or down 100 and 200 bps in either a gradual (defined as the stated change over a 12-month period in equal increments) or an instantaneous, parallel fashion.
The alternate rate scenarios assume rates move up or down 100 to 300 bps in either a gradual (defined as the stated change over a 12-month period in equal increments) or an instantaneous, parallel fashion.
All loan requests considered by us should be for a clearly defined legitimate purpose with a determinable primary repayment source, as well as alternate sources of repayment. All loans should be 50 supported by appropriate documentation including, current financial statements, credit reports, collateral information, asset verification, tax returns, title reports, and appraisals (where appropriate).
All loan requests considered by us should be for a clearly defined legitimate purpose with a determinable primary repayment source, as well as alternate sources of repayment. All loans should be 53 Table of C o ntents supported by appropriate documentation including, current financial statements, credit reports, collateral information, asset verification, tax returns, title reports, and appraisals (where appropriate).
According to the latest available statistics from the Hawaii Tourism Authority ("HTA"), a total of 9.6 million visitors arrived to the Hawaiian Islands in the year ended December 31, 2023, mainly from the U.S. Mainland.
According to the latest available statistics from the Hawaii Tourism Authority ("HTA"), a total of 9.69 million visitors arrived to the Hawaiian Islands in the year ended December 31, 2024, mainly from the U.S. Mainland.
The increase in taxable-equivalent interest income in 2023 from 2022 was primarily due to increases in average yields earned on loans of 64 bps and average loan balances of $210.0 million, resulting in higher interest income of approximately $35.1 million and $7.9 million, respectively.
The increase in taxable-equivalent interest income in 2023 from 2022 was primarily due to increases in the average yield earned on loans of 64 bps and the average loans balance of $210.0 million, resulting in higher interest income of approximately $35.1 million and $7.9 million, respectively.
The decline in our ratio of shareholders' equity to total assets from 2021 to 2022 was primarily attributable to unrealized losses on available-for-sale investment securities recorded in accumulated other comprehensive loss during the year ended December 31, 2022 due to market volatility and the rising interest rate environment.
The increase in our ratio of shareholders' equity to total assets from 2022 to 2023 was primarily attributable to lower unrealized losses on available-for-sale investment securities recorded in accumulated other comprehensive loss during the year ended December 31, 2023 due to market volatility and the interest rate environment.
No gross gains were realized on the sale. With the proceeds, the Company purchased higher yielding AFS investment securities totaling $28.3 million with a weighted average yield of 5.68% and a weighted average duration of 2.5 years. The fluctuations in market valuation on the AFS portfolio continues to be driven by changes in market interest rates.
With the proceeds, the Company purchased higher yielding AFS investment securities totaling $28.3 million with a weighted average yield of 5.68% and a weighted average duration of 2.5 years. The fluctuations in market valuation on the AFS portfolio continues to be driven by changes in market interest rates.
According to a recent report by the State of Hawaii's Department of Business, Economic Development and Tourism ("DBEDT"), total visitor arrivals are expected to increase to approximately 9.8 million in 2024 and visitor spending is expected to be approximately $21.63 billion in 2024.
According to a recent report by the State of Hawaii's Department of Business, Economic Development and Tourism ("DBEDT"), total visitor arrivals are expected to increase to approximately 9.9 million in 2025 and visitor spending is expected to be approximately $21.46 billion in 2025.
During 2022, the Company repurchased approximately 3.1% of its common stock outstanding at December 31, 2021. When expressed as a percentage of total assets, shareholders' equity was 6.6% at December 31, 2023, compared to 6.1% at December 31, 2022 and 7.5% at December 31, 2021.
During 2023, the Company repurchased approximately 0.5% of its common stock outstanding at December 31, 2022. When expressed as a percentage of total assets, shareholders' equity was 7.2% at December 31, 2024, compared to 6.6% at December 31, 2023 and 6.1% at December 31, 2022.
As of December 31, 2022, approximately $4.21 billion, or 75.8% of loans outstanding were secured by real estate, including construction loans, residential mortgage loans, home equity loans, and commercial mortgage loans. The majority of our loans are made to companies and individuals with headquarters in, or residing in, the State of Hawaii.
As of December 31, 2023, approximately $4.23 billion, or 77.8% of loans outstanding were secured by real estate, including construction loans, residential mortgage loans, home equity loans, and commercial mortgage loans. The majority of our loans are made to companies and individuals with headquarters in, or residing in, the State of Hawaii.
The notes are redeemable at our option on any interest payment date on or after November 1, 2025. The subordinated notes totaled $54.6 million as of December 31, 2023, and includes $0.4 million in debt issuance costs, which are being amortized over the expected life.
The notes are redeemable at our option on any interest payment date on or after November 1, 2025. The subordinated notes totaled $54.8 million as of December 31, 2024, and includes $0.2 million in debt issuance costs, which are being amortized over the expected life.
There was no impact to net income as a result of the reclassifications. Maturity Distribution of Investment Portfolio The following table sets forth the maturity distribution of the investment portfolio and weighted-average yields by investment type and maturity grouping at December 31, 2023. Table 17.
There was no impact to net income as a result of the reclassifications. Maturity Distribution of Investment Portfolio The following table sets forth the maturity distribution of the investment portfolio and weighted-average yields by investment type and maturity grouping at December 31, 2024. 64 Table 20.
The Company's uninsured deposits, excluding fully collateralized deposits, were approximately $2.37 billion, or approximately 35% of total deposits, and $2.35 billion, or approximately 35% of total deposits, as of December 31, 2023 and December 31, 2022, respectively. 64 The table below sets forth the contractual maturities of our time deposits greater than the FDIC insurance limit of $250,000 as of December 31, 2023.
The Company's uninsured deposits, excluding fully collateralized deposits, were approximately $2.54 billion, or approximately 38% of total deposits, and $2.37 billion, or approximately 35% of total deposits, as of December 31, 2024 and December 31, 2023, respectively. 66 The table below sets forth the contractual maturities of our time deposits greater than the FDIC insurance limit of $250,000 as of December 31, 2024.
The Company believes that the efficiency ratio provides useful supplemental information that is important to a proper understanding of its core business results by investors. The Company's efficiency ratio should not be viewed as a substitute for results determined in accordance with GAAP, nor is it necessarily comparable to the efficiency ratio presented by other companies.
The Company believes that the efficiency ratio, a non-GAAP financial measure, provides useful supplemental information that is important to a proper understanding of its business results and operating efficiency. The Company's efficiency ratio should not be viewed as a substitute for results determined in accordance with GAAP, nor is it necessarily comparable to the efficiency ratio presented by other companies.
In 2023, 130,010 shares of common stock, at a cost of $2.6 million, were repurchased under the Company's 2022 and 2023 Repurchase Plans. A total of $23.4 million remained available for repurchase under the 2023 Repurchase Plan at December 31, 2023.
In 2023, 130,010 shares of common stock, at a cost of $2.6 million, were repurchased under the Company's share repurchase programs. A total of $23.4 million remained available for repurchase under the 2023 Repurchase Plan at December 31, 2023.
Net of this valuation allowance, the Company's net DTA totaled $29.5 million as of December 31, 2023, compared to a net DTA of $48.5 million as of December 31, 2022, and is included in other assets in the Company's consolidated balance sheets.
Net of this valuation allowance, the Company's net DTA totaled $17.8 million as of December 31, 2024, compared to a net DTA of $29.5 million as of December 31, 2023, and is included in other assets in the Company's consolidated balance sheets.
Our ACL for loans as a percentage of our nonaccrual loans decreased to 912% at December 31, 2023 from 1,214% at December 31, 2022, which increased from 1,158% at December 31, 2021. Overall, the Company maintained strong credit quality as represented by nonperforming assets of $7.0 million, $5.3 million, and $5.9 million at December 31, 2023, 2022 and 2021, respectively.
Our ACL for loans as a percentage of our nonaccrual loans decreased to 537% at December 31, 2024 from 912% at December 31, 2023, which decreased from 1,214% at December 31, 2022. Overall, the Company maintained strong credit quality as represented by nonperforming assets of $11.0 million, $7.0 million, and $5.3 million at December 31, 2024, 2023 and 2022, respectively.
Maturities are based on contractual maturity dates and do not factor in principal amortization. This differs from the assumptions used in the net interest income sensitivity analysis included in Table 22 - Net Interest Income Sensitivity. 56 Table 12.
Maturities are based on contractual maturity dates and do not factor in principal amortization. This differs from the assumptions used in the net interest income sensitivity analysis included in Table 25 - Net Interest Income Sensitivity. Table 15.
The Company's ratio of classified assets and other real estate owned to tier 1 capital and the ACL decreased from 6.25% at December 31, 2022 to 3.41% at December 31, 2023. Investment Portfolio The following table sets forth the amounts and distribution of investment securities held as of the dates indicated. Table 16.
The Company's ratio of classified assets and other real estate owned to tier 1 capital and the ACL decreased from 3.41% at December 31, 2023 to 3.17% at December 31, 2024. Investment Portfolio The following table sets forth the amounts and distribution of investment securities held as of the dates indicated. Table 19.
The lower mortgage banking income was primarily attributable to lower originations and fewer loans sold as a result of the significant increases in market interest rates which began in 2022. The Company's Home Loans Division recorded $266.6 million in loan originations in 2023, down from $568.2 million in loan originations in 2022 and $1.18 billion in loan originations in 2021.
The lower mortgage banking income was primarily attributable to lower originations and fewer loans sold as a result of the significant increases in market interest rates which began in 2022. The Company's Home Loans Division recorded $307.7 million and $266.6 million in loan originations in 2024 and 2023, respectively, and down from $568.2 million in loan originations in 2022.
Book value per share was $18.63, $16.76, and $20.14 at year-end 2023, 2022 and 2021, respectively. The increase in book value per share from 2022 was primarily attributable to the increase in shareholders' equity from December 31, 2022 to December 31, 2023, as described above.
Book value per share was $19.89, $18.63, and $16.76 at year-end 2024, 2023 and 2022, respectively. The increase in book value per share from 2023 was primarily attributable to the increase in shareholders' equity from December 31, 2023 to December 31, 2024, as described above.
The static scenarios have the benefit of comparability against other financial institutions but are not intended to represent management’s forecast.
The static scenarios have the benefit of comparability over time, as well as against other financial institutions, but are not intended to represent management’s forecast.
These negative variances were partially offset by a gain on sale of a real estate office property of $5.1 million completed in the fourth quarter of 2023, higher income from bank-owned life insurance and higher other service charges and fees.
These negative variances were partially offset by a gain on sale of a real estate office property of $5.1 million completed in the fourth quarter of 2023, higher income from bank-owned life insurance and higher other service charges and fees. See Table 9 - Components of Other Operating Income for more information.
Our practice is to make specific allocations on impaired loans and general allocations to each loan category based on management's risk assessment and estimated loss rate. Table 14.
Our practice is to make specific allocations on individually evaluated loans and general allocations to each loan category based on management's risk assessment and estimated loss rate. Table 17.
The increase in average rates paid on our interest-bearing liabilities in 2023 was primarily due to increases in average rates paid on interest-bearing deposits and long-term debt of 107 bps and 114 bps, respectively, attributable to the significant increase in market interest rates which began in 2022.
The increase in the average rate paid on our interest-bearing liabilities in 2024 was primarily due to increases in average rates paid on interest-bearing deposits and long-term debt of 49 bps and 70 bps, respectively, attributable to the significant increase in market interest rates which began in 2022.
Those attributes include, but are not limited to the following: (i) credit score, (ii) credit limit amount, and (iii) debt-to-income ratio. Loans totaled $5.44 billion at December 31, 2023, which decreased by $116.5 million, or 2.1%, from the $5.56 billion at December 31, 2022, which increased by $453.8 million, or 8.9%, from the $5.10 billion held at December 31, 2021.
Those attributes include, but are not limited to the following: (i) credit score, (ii) credit limit amount, and (iii) debt-to-income ratio. Loans totaled $5.33 billion at December 31, 2024, which decreased by $106.1 million, or 2.0%, from the $5.44 billion at December 31, 2023, which decreased by $116.5 million, or 2.1%, from the $5.56 billion held at December 31, 2022.
Net interest income (expressed on a taxable-equivalent basis) totaled $210.8 million in 2023, which decreased by $5.6 million, or 2.6%, from $216.4 million in 2022, which increased by $4.8 million, or 2.3%, from net interest income of $211.6 million recognized in 2021.
Net interest income (expressed on a taxable-equivalent basis) totaled $212.4 million in 2024, which increased by $1.6 million, or 0.8%, from $210.8 million in 2023, which decreased by $5.6 million, or 2.6%, from net interest income of $216.4 million recognized in 2022.
Interest Expense In 2023, interest expense was $72.7 million which represented an increase of $55.6 million, or 325.1%, compared to interest expense of $17.1 million in 2022, which was an increase of $9.4 million, or 121.6%, compared to $7.7 million in 2021.
Interest Expense In 2024, interest expense was $94.4 million which represented an increase of $21.7 million, or 29.9%, compared to interest expense of $72.7 million in 2023, which was an increase of $55.6 million, or 325.1%, compared to $17.1 million in 2022.
(*) N.M. (*) Early termination of lease 2,274 — — 2,274 — N.M. (*) N.M.
(*) Early termination of lease — 2,274 — (2,274) 2,274 (100.0) N.M.
Table 9. Loans by Geographic Distribution December 31, 2023 December 31, 2022 (Dollars in thousands) Hawaii U.S. Mainland Total Hawaii U.S.
Table 12. Loans by Geographic Distribution December 31, 2024 December 31, 2023 (Dollars in thousands) Hawaii U.S. Mainland Total Hawaii U.S.
HELOC balances as of December 31, 2023 totaled $736.5 million, decreasing by $2.9 million, or 0.4%, from the $739.4 million held at December 31, 2022, which increased by $102.1 million, or 16.0%, from the $637.2 million held at December 31, 2021. Commercial Mortgage Real estate mortgage loans secured by commercial properties represent a sizable portion of our loan portfolio.
HELOC balances as of December 31, 2024 totaled $677.0 million, decreasing by $59.5 million, or 8.1%, from the $736.5 million held at December 31, 2023, which decreased by $2.9 million, or 0.4%, from the $739.4 million held at December 31, 2022. Commercial Mortgage Real estate mortgage loans secured by commercial properties represent a sizable portion of our loan portfolio.
The Company reported uninsured deposits of $2.91 billion, or approximately 42% of total deposits in its FDIC Call Report as of December 31, 2023, compared to the reported $2.78 billion, or approximately 41% of total deposits as of December 31, 2022.
The Company reported estimated uninsured deposits of $2.82 billion, or approximately 42% of total deposits in its FDIC Call Report as of December 31, 2024, compared to the reported $2.91 billion, or approximately 42% of total deposits as of December 31, 2023.
The Department of Labor and Industrial Relations reported that Hawaii's seasonally adjusted annual unemployment rate was 2.9% in the month of December 2023. The unemployment rate of 2.9% in December 2023 fell below the national seasonally adjusted unemployment rate of 3.7%. DBEDT projects Hawaii's seasonally adjusted annual unemployment rate to be around 2.8% in 2024.
The Department of Labor and Industrial Relations reported that Hawaii's seasonally adjusted annual unemployment rate was 3.0% in the month of December 2024, which fell below the national seasonally adjusted unemployment rate of 4.1%. DBEDT projects Hawaii's seasonally adjusted annual unemployment rate to be around 2.7% in 2025.
Consistent with our focus of being a Hawaii-based bank, 85.2% of our loan portfolio was concentrated in the Hawaii market while 14.8% was concentrated in the U.S. Mainland as of December 31, 2023. As of December 31, 2022, 82.7% and 17.3% of our loan portfolio was concentrated in the Hawaii market and U.S. Mainland, respectively.
Consistent with our focus of being a Hawaii-based bank, 86.0% of our loan portfolio was concentrated in the Hawaii market while 14.0% was concentrated in the U.S. Mainland as of December 31, 2024. As of December 31, 2023, 85.2% and 14.8% of our loan portfolio was concentrated in the Hawaii market and U.S. Mainland, respectively.
During 2023, the Company repurchased approximately 0.5% of its common stock outstanding at December 31, 2022.
During 2024, the Company repurchased approximately 0.2% of its common stock outstanding at December 31, 2023.
The outstanding principal balance of loans with interest reserves was $100.9 million at December 31, 2023, compared to $68.6 million in the prior year, while remaining interest reserves was $10.2 million, or 10.1% of the outstanding principal balance of loans with interest reserves at December 31, 2023, compared to $10.5 million, or 15.3% of the outstanding principal balance of loans with interest reserves at December 31, 2022.
The outstanding principal balance of loans with interest reserves was $102.2 million at December 31, 2024, compared to $100.9 million in the prior year, while remaining interest reserves was $9.7 million, or 9.5% of the outstanding principal balance of loans with interest reserves at December 31, 2024, compared to $10.2 million, or 10.1% of the outstanding principal balance of loans with interest reserves at December 31, 2023.
Maturity Distribution of Investment Portfolio 62 Portfolio Type and Maturity Grouping Carrying Value Weighted Average Yield (1) (Dollars in thousands) Held-to-maturity portfolio: Debt securities - States and political subdivisions: After ten years $ 41,959 2.26 % Total debt securities - States and political subdivisions 41,959 2.26 Residential mortgage-backed securities - U.S. government-sponsored entities ("GSEs"): After ten years 590,379 1.92 Total residential mortgage-backed securities - U.S.
Maturity Distribution of Investment Portfolio Portfolio Type and Maturity Grouping Carrying Value Weighted Average Yield (1) (Dollars in thousands) Held-to-maturity portfolio: Debt securities - States and political subdivisions: After ten years $ 42,016 2.26 % Total debt securities - States and political subdivisions 42,016 2.26 Residential mortgage-backed securities - U.S. government-sponsored entities ("GSEs"): After ten years 554,914 1.89 Total residential mortgage-backed securities - U.S.
Our loan-to-deposit ratio at December 31, 2023 was 79.4% compared to 82.5% at December 31, 2022. The Company had cash on its balance sheet of $522.4 million and total other liquidity sources, including available borrowing capacity and unpledged investment securities of approximately $2.45 billion as of December 31, 2023.
Our loan-to-deposit ratio at December 31, 2024 was 80.3% compared to 79.4% at December 31, 2023. The Company had cash on its balance sheet of $380.9 million and total other liquidity sources, including available borrowing capacity and unpledged investment securities of approximately $2.49 billion as of December 31, 2024.
Net Interest Margin Our net interest margin was 2.94%, 3.09% and 3.18% in 2023, 2022 and 2021, respectively.
Net Interest Margin Our net interest margin was 3.01%, 2.94% and 3.09% in 2024, 2023 and 2022, respectively.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeManagement's Discussion and Analysis of Financial Condition and Results of Operations—Asset/Liability Management and Interest Rate Risk" and in Note 21 - Fair Value of Financial Assets and Financial Liabilities to the Consolidated Financial Statements under "Part II, Item 8. Financial Statements and Supplementary Data." 72
Biggest changeManagement's Discussion and Analysis of Financial Condition and Results of Operations—Asset/Liability Management and Interest Rate Risk" and in Note 21 - Fair Value of Financial Assets and Financial Liabilities to the Consolidated Financial Statements under "Part II, Item 8. Financial Statements and Supplementary Data." 74

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