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What changed in CENTRAL PACIFIC FINANCIAL CORP's 10-K — 2024 vs 2025

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Paragraph-level year-over-year comparison of CENTRAL PACIFIC FINANCIAL CORP's 2024 and 2025 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 2025 report.

+668 added−673 removedSource: 10-K (2026-02-27) vs 10-K (2025-02-26)

Top changes in CENTRAL PACIFIC FINANCIAL CORP's 2025 10-K

668 paragraphs added · 673 removed · 480 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

126 edited+64 added−68 removed14 unchanged
Biggest changeIn such a situation, a subsidiary bank will be required by their federal regulator to take "prompt corrective action" (see the "Prompt Corrective Action Provisions" section above); • limit dividends payable to shareholders and restrict the ability of bank holding companies to obtain dividends or other distributions from their subsidiary banks; • require a bank holding company to terminate an activity or terminate control of or liquidate or divest certain subsidiaries, affiliates or investments if the Federal Reserve believes the activity or the control of the subsidiary or affiliate constitutes a significant risk to the financial safety, soundness or stability of any bank subsidiary; • require the prior approval for changes in senior executive officers or directors and prohibit golden parachute payments, including change in control agreements, or new employment agreements with such payment terms, which are contingent upon termination when a bank holding company is deemed to be in troubled condition; • regulate provisions of certain bank holding company debt, including the authority to impose interest ceilings and reserve requirements on such debt and require prior approval to purchase or redeem securities in certain situations; • require prior approval for the acquisition of 5% or more of the voting stock of a bank or bank holding company by bank holding companies or other acquisitions and mergers with other banks or bank holding companies and require the regulators to consider certain competitive, management, financial, and anti-money laundering compliance impact on the U.S.; and • require prior notice and/or prior approval of the acquisition of control of a bank or a bank holding company by a shareholder or individuals acting in concert with ownership or control of 10% of the voting stock being a presumption of control.
Biggest changeIf a subsidiary bank fails to maintain adequate capital, regulators may require "prompt corrective action" (see the "Prompt Corrective Action Provisions" section above); • Dividend Restrictions: Limitation on dividends payable to shareholders and restrictions on obtaining dividends or other distributions from subsidiary banks; • Risk Mitigation: Authority to require termination of activities or divestiture of subsidiaries, affiliates or investments deemed to pose significant risk to the safety, soundness or stability of any bank subsidiary; • Management Oversight: Prior approval for changes in senior executive officers or directors; prohibition of golden parachute payments and certain employment agreements when the company is in troubled condition; • Debt Regulation: Oversight of certain debt provisions, including interest ceilings, reserve requirements, and prior approval for purchasing or redeeming securities in specific circumstances; • Acquisition Approvals: Prior regulatory approval is required to acquire 5% or more of voting stock of a bank or bank holding company, as well as for mergers or acquisitions, which are evaluated based on competitive (anti-trust), financial, and managerial considerations; and • Control Presumptions: Prior notice or approval for acquiring control of a bank or bank holding company, with ownership or control of 10% of voting stock generally presumed to constitute control.
Management's Discussion and Analysis of Financial Condition and Results of Operations." Business Concentrations No individual or single group of related accounts is considered material in relation to the assets or deposits of our Bank, or in relation to the overall business of the Company.
Management's Discussion and Analysis of Financial Condition and Results of Operations." Business Concentrations No individual or single group of related accounts is considered material in relation to the assets or deposits of our Bank, or in the overall business of the Company.
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.
If, as a result of an examination, the DFI or the FRB 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 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.
Conversely, this legislation also enacted limitations on certain deductions, including the deduction of FDIC deposit insurance premiums, which partially offset the expected increase in net earnings from the lower tax rate. On August 16, 2022, the Inflation Reduction Act of 2022 (the "IRA") was enacted into law.
Conversely, this legislation also enacted limitations on 17 Table of Contents certain deductions, including the deduction of FDIC deposit insurance premiums, which partially offset the expected increase in net earnings from the lower tax rate. On August 16, 2022, the Inflation Reduction Act of 2022 (the "IRA") was enacted into law.
Under the Basel framework, as amended, these standards became effective on January 1, 2023, with an aggregate output floor phasing in through January 1, 2028. Under the current U.S. capital rules, operational risk capital requirements and a capital floor apply only to advanced approaches institutions, and not to the Company and the Bank.
Under the Basel framework, as amended, these standards became effective on January 1, 2023, with an aggregate output floor phasing in through January 1, 2028. Under the current U.S. capital rules, operational risk capital requirements and capital floors apply only to advanced approaches institutions, and therefore do not apply to the Company and the Bank.
The IRA imposes a non-deductible 1% excise tax on the aggregate fair market value of stock repurchased by certain public companies, if any, including the Company, occurring after December 31, 2022.
The IRA, among other things, imposes a non-deductible 1% excise tax on the aggregate fair market value of stock repurchased by certain public companies, if any, including the Company, occurring after December 31, 2022.
The guidelines establish operational and managerial standards generally relating to: (1) internal controls, information systems, and internal audit systems; (2) loan documentation; (3) credit underwriting; (4) interest-rate exposure; (5) asset growth and asset quality; and (6) compensation, fees, and benefits.
The guidelines establish operational and managerial standards generally relating to: (1) internal controls, information systems, 11 Table of Contents and internal audit systems; (2) loan documentation; (3) credit underwriting; (4) interest-rate exposure; (5) asset growth and asset quality; and (6) compensation, fees, and benefits.
The impact of the election of President Trump on bank mergers and acquisition policy has yet to be determined.
The full impact of the election of President Trump on bank mergers and acquisition policy has yet to be fully determined.
Currently, we qualify for the small issuer exemption from the interchange fee cap, which applies to any debit card issuer that, together with its affiliates, has total assets of less than $10 billion as of the end of the previous calendar year.
Currently, the Bank qualifies for the small issuer exemption from the interchange fee cap, which applies to any debit card issuer that, together with its affiliates, has total assets of less than $10 billion as of the end of the previous calendar year.
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
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. 18 Table of Contents
Deposit Insurance The FDIC is an independent federal agency that insures deposits through the Deposit Insurance Fund (the "DIF") up to prescribed statutory limits of federally insured banks and savings institutions and safeguards the safety and soundness of the banking and savings industries.
Deposit Insurance The FDIC is an independent federal agency that insures deposits at federally insured banks and savings institutions through the Deposit Insurance Fund (the "DIF"), up to prescribed statutory limits. The FDIC also promotes the safety and soundness of the banking and savings industries.
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.
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.
The CFPB’s functions include investigating consumer complaints, conducting market research, rule making, and enforcing rules related to consumer financial products and services. CFPB regulations and guidance, including supervision and examination, apply to all covered persons, and banks with $10 billion or more in assets.
The CFPB’s functions include investigating consumer complaints, conducting market research, issuing regulations, and enforcing compliance related to consumer financial products and services. CFPB regulations and guidance, including supervision and examination, apply to all covered persons and banks with $10 billion or more in assets.
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.
Approximately 80% of our loan portfolio at December 31, 2025 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 concentrated primarily in Hawaii.
The Dodd-Frank Act revised the FDIC's DIF management authority by setting requirements for the Designated Reserve Ratio (the "DRR", calculated as the DIF balance divided by estimated insured deposits) and redefining the assessment base which is used to calculate banks' quarterly assessments.
The Dodd-Frank Act revised the FDIC's authority over DIF management by establishing requirements for the Designated Reserve Ratio ("DRR"), calculated as the DIF balance divided by estimated insured deposits, and by redefining the assessment base used to calculate quarterly assessments.
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 is subject to numerous federal and state laws and regulations governing anti-money laundering, consumer protection, and privacy, including: • Anti-Money Laundering and Privacy Laws: USA Patriot Act of 2001, GLBA, Bank Secrecy Act, Foreign Account Tax Compliance Act, and the Anti-Money Laundering Act of 2020 (“AMLA”). • Consumer Protection Laws: CRA, Fair Debt Collection Practices Act, Fair Credit Reporting Act, as amended by the Fair and Accurate Credit Transactions Act, Equal Credit Opportunity Act, Truth in Lending Act, Fair Housing Act, Home Mortgage Disclosure Act, Real Estate Settlement Procedures Act, and National Flood Insurance Act. • Privacy and Marketing Laws: Telephone Consumer Protection Act, CAN-SPAM Act, and various state privacy and data protection statutes.
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".
For a detailed tabular presentation of the Company’s and the Bank’s capital ratios as of December 31, 2025, see Note 23 - Parent Company and Regulatory Restrictions to the Consolidated Financial Statements under "Part II, Item 8. Financial Statements and Supplementary Data". Basel IV and U.S.
During 2016, as required by the Dodd-Frank Act, the federal bank regulatory agencies and the SEC proposed revised rules on incentive-based payment arrangements at specified regulated entities having at least $1 billion of total assets. In October 2022, the SEC adopted final rules implementing the incentive-based compensation recovery (clawback) provisions of the Dodd-Frank Act.
As required by the Dodd-Frank Act, federal banking agencies and the SEC proposed revised rules in 2016 governing incentive-based payment arrangements at regulated entities with at least $1 billion of total assets. In October 2022, the SEC adopted final rules implementing the incentive-based compensation recovery ("clawback") provisions of the Dodd-Frank Act.
ITEM 1. BUSINESS General Central Pacific Financial Corp., a Hawaii corporation and bank holding company registered under the Bank Holding Company Act of 1956, as amended (the "BHC Act"), was organized on February 1, 1982.
ITEM 1. BUSINESS General Central Pacific Financial Corp. is a Hawaii corporation and a registered bank holding company under the Bank Holding Company Act of 1956, as amended (the "BHC Act"). CPF was organized on February 1, 1982, and serves as the holding company for its principal subsidiary, Central Pacific Bank.
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.
These risk-weighted assets are used as the denomimator to calculate the following minimum capital ratios: • Tier 1 Leverage Ratio: Tier 1 capital divided by quarterly average assets (net of goodwill, other intangible assets, and certain other deductions). • Common Equity Tier 1 ("CET1") Risk-Based Capital Ratio: CET1 capital divided by risk-weighted assets.
Consequently, our results of operations and financial condition are impacted by the general economic trends in Hawaii, particularly in the commercial and residential real estate markets. During periods of economic strength, the real estate market and the real estate industry typically perform well; during periods of economic weakness, they typically are adversely affected.
Consequently, our financial condition and results of operations are closely tied to the economic trends in Hawaii, particularly in the commercial and residential real estate markets. During periods of economic strength, real estate markets typically perform well; during periods of economic weakness, they are adversely affected.
Our operations, like those of other financial institutions that operate in our market, are significantly influenced by economic conditions in Hawaii, including the strength of the real estate market and the tourism industry, as well as the fiscal and regulatory policies of the federal and state government and the regulatory authorities that govern financial institutions.
Our Market Area and Competition Our operations, like those of other financial institutions in our market, are significantly influenced by economic conditions in Hawaii, particularly the strength of the real estate market and the tourism industry, as well as the fiscal and regulatory policies of federal and state governments and the authorities that regulate financial institutions.
In July 2023, the FRB, OCC and FDIC proposed significant changes to the current Basel III capital rules which replaces the advanced approaches risk weighted assets framework with a new enhanced risk-based framework and requires banking organizations with $100 billion in assets to calculate their regulatory capital using more enhanced requirements applicable to even larger organizations.
In July 2023, the FRB, OCC, and FDIC proposed significant changes to the current Basel III capital rules. These proposals would replace the advanced approaches risk-weighted assets framework with a new enhanced risk-based framework and require banking organizations with $100 billion or more in assets to calculate regulatory capital using more stringent requirements applicable to even larger organizations.
We will become subject to the interchange fee cap beginning July 1 of the year following the time when our total assets reaches or exceeds $10 billion. Reliance on the small issuer exemption does not exempt us from federal regulations prohibiting network exclusivity arrangements or from routing restrictions.
The Bank will become subject to the interchange fee cap beginning July 1 of the year following the point at which its total assets reach or exceeds $10 billion. Reliance on the small issuer exemption does not exempt us from federal regulations prohibiting network exclusivity arrangements or from routing restrictions.
In addition, consumers may also prevent disclosure of certain information among affiliated companies that is assembled or used to determine eligibility for a product or service, such as that shown on consumer credit reports and asset and income information from applications.
These regulations affect how consumer information is transmitted through diversified financial companies and conveyed to outside vendors. In addition, consumers may also prevent disclosure of certain information among affiliated companies that is assembled or used to determine eligibility for a product or service, such as that shown on consumer credit reports and asset and income information from applications.
Based upon its capital levels, a bank that is classified as well-capitalized, adequately capitalized, or under-capitalized may be treated as though it were in the next lower capital category if the appropriate federal banking agency, after notice and opportunity for hearing, determines that an unsafe or unsound condition, or an unsafe or unsound practice, warrants such treatment.
In addition, an institution that is classified as well-capitalized, adequately capitalized, or under-capitalized may, upon notice and an opportunity for a hearing, be treated as though it were in the next lower capital category if its primary regulator determines that an unsafe or unsound condition or practice warrants such treatment.
Subject to regulatory and statutory restrictions, including restrictions under applicable Hawaii law and federal regulation, future cash dividends by the Bank will depend upon management's assessment of future capital requirements, contractual restrictions and other factors.
Subject to regulatory and statutory restrictions, including restrictions under applicable Hawaii law and federal regulation, future cash dividends by the Bank will depend upon management's assessment of future capital requirements, contractual restrictions and other factors. The Company cannot provide any assurance that the Bank will be able to continue to pay dividends to the Company.
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.
Based on deposit market share among FDIC-insured financial institutions in Hawaii, Central Pacific Bank is ranked as the fourth-largest depository institution in the state as of December 31, 2025. The banking and financial services industry in Hawaii, particularly within our target market areas, is highly competitive.
Residential mortgage loans include fixed-rate and adjustable-rate loans primarily secured by single-family, owner-occupied residences in Hawaii and home equity lines of credit and loans. We typically require loan-to-value ratios of not more than 80%, although higher levels are permitted with accompanying mortgage insurance.
Lending Activities Through our Bank, we concentrate our lending activities in five principal areas: (1) Residential Mortgage Lending. Includes fixed-rate and adjustable-rate loans primarily secured by single-family, owner-occupied residences in Hawaii, as well as home equity lines of credit and loans. We typically require loan-to-value ratios of not more than 80%, although higher levels are permitted with mortgage insurance.
Commercial Real Estate Concentration Limits In December 2006, the federal banking regulators issued guidance entitled “Concentrations in Commercial Real Estate Lending, Sound Risk Management Practices” to address increased concentrations in commercial real estate and construction, or "CRE", loans.
Commercial Real Estate Concentration Limits In December 2006, federal banking regulators issued guidance titled "Concentrations in Commercial Real Estate Lending, Sound Risk Management Practices" to address increasing concentrations in commercial real estate ("CRE") and construction loans.
Our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and all amendments to those reports can be found on our internet website as soon as reasonably practicable after such materials are electronically filed with or furnished to the SEC.
Available Information Our website, www.cpb.bank, provides access to our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and all related amendments to those reports as soon as reasonably practicable after such materials are electronically filed with or furnished to the SEC.
We made this election in order to avoid significant variations in our levels of capital depending upon the impact of interest rate fluctuations on the fair value of our Bank’s available-for-sale securities portfolio. • Tier 1 Risk-Based Capital Ratio , equal to the ratio of Tier 1 capital to risk-weighted assets.
This election was made in order to avoid significant variations in our levels of capital depending upon the impact of interest rate fluctuations on the fair value of our Bank’s available-for-sale securities portfolio. • Tier 1 Risk-Based Capital Ratio: Tier 1 capital divided by risk-weighted assets. Tier 1 capital includes CET1 capital, perpetual preferred stock, and certain qualifying capital instruments.
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.
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 reported as investments in unconsolidated entities in the Company's consolidated balance sheets.
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.
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. As of December 31, 2025, the Bank’s construction, land development, and other land loans represented less than 100% of its total risk-based capital.
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.
The Bank received an "Outstanding" rating in the FDIC's 2022 CRA Performance Evaluation, which measures lending, investment, and service activities supporting community needs. On October 24, 2023, the OCC, FDIC, and FRB jointly issued a final rule intended to modernize and strengthen regulations implementing the CRA.
Interchange fees, or “swipe” fees, are charges that merchants pay to us and other card-issuing banks for processing electronic payment transactions. Under the final rules, the maximum permissible interchange fee is equal to no more than 21 cents plus 5 basis points of the transaction value for many types of debit interchange transactions.
Interchange fees, or "swipe" fees, are charges that merchants pay to us and other card-issuing banks for processing electronic payment transactions. Under the final rules, the maximum permissible interchange fee for banks with assets in excess of $10 billion is capped at 21 cents plus 5 basis points of the transaction value for most debit interchange transactions.
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").
Our Subsidiaries Central Pacific Bank is the wholly-owned principal subsidiary of Central Pacific Financial Corp. As of December 31, 2025, other wholly-owned subsidiaries include CPB Capital Trust IV and CPB Statutory Trust V. Central Pacific Bank owns 50% of One Hawaii HomeLoans, LLC ("One Hawaii").
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.
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 Table of Contents As of December 31, 2025, the Company and the Bank were well-capitalized for regulatory purposes.
In addition, the Dodd-Frank Act provides the CFPB with broad supervisory, examination and enforcement authority over various consumer financial products and services, including the ability to require reimbursements and other payments to customers for alleged violations of UDAAP.
In addition, the Dodd-Frank Act provides the CFPB with broad supervisory, examination and enforcement authority over various consumer financial products and services, including the ability to require reimbursements and other payments to customers for alleged violations of UDAAP and other legal requirements and to impose significant penalties, as well as injunctive relief that prohibits lenders from engaging in allegedly unlawful practices.
In October 2022, in order to increase the likelihood that the reserve ratio would be restored to at least 1.35% by the statutory deadline of September 30, 2029, the FDIC increased the initial base deposit insurance assessment rate schedules uniformly by 2 basis points.
In October 2022, to ensure the reserve ratio would reach at least 1.35% by the statutory deadline of September 30, 2029, the FDIC increased the initial base deposit insurance assessment rate schedules uniformly by 2 basis points. The increase in assessment rates became effective January 1, 2023, beginning with the first quarterly assessment period of 2023.
We compete for loans, deposits and customers with other commercial banks, savings banks, securities and brokerage companies, financial technology ("fintech") companies, mortgage companies, insurance companies, finance companies, credit unions and other non-bank financial service providers, including mortgage providers and brokers, operating via the internet and other technology platforms.
We compete for loans, deposits, and customers with a broad range of financial service providers, including commercial and savings banks, securities and brokerage firms, financial technology ("fintech") companies, mortgage companies, insurance companies, finance companies, credit unions, and other non-bank financial service providers. This competition also includes online mortgage lenders and brokers operating through digital platforms.
Loans in this category consist of construction, land development, and other land loans for residential and commercial construction projects. (5) Consumer Lending. Loans in this category are generally either unsecured or secured by personal assets, such as automobiles, and the average loan size is generally small.
Includes loans for construction, land development, and other land loans for residential and commercial projects. (5) Consumer Lending. Includes loans that are generally unsecured or secured by personal assets, such as automobiles, with relatively small average loan sizes.
Treasury Department’s Office of Foreign Assets Control, or OFAC, administers and enforces economic and trade sanctions against targeted foreign countries and regimes, under authority of various laws, including designated foreign countries, nationals and others. OFAC publishes lists of specially designated targets and countries.
Treasury Department’s Office of Foreign Assets Control ("OFAC") administers and enforces economic and trade sanctions against targeted foreign countries, regimes, and individuals under various laws.
Consumer Financial Protection Bureau ("CFPB") The Dodd-Frank Act provided for the creation of the CFPB as an independent entity with broad rule making, supervisory and enforcement authority over consumer financial products and services, including deposit products, residential mortgages, home equity loans and credit cards.
Until that rulemaking process is completed, the 1995 CRA regulations remain applicable. 15 Table of Contents Consumer Financial Protection Bureau ("CFPB") The Dodd-Frank Act established the CFPB as an independent entity with broad rule making, supervisory and enforcement authority over consumer financial products and services, including deposit products, residential mortgages, home equity loans, and credit cards.
Dividends It is the Federal Reserve's policy that bank holding companies should generally pay dividends on common stock only out of income available over the past year, and only if prospective earnings retention is consistent with the organization's expected future needs and financial condition.
It is the policy of the Federal Reserve that a bank holding company should generally pay dividends on common stock only out of earnings, and only if prospective earnings retention is consistent with the company’s capital needs and overall current and prospective financial condition.
The amount of FDIC assessments paid by each DIF member institution is based on its asset size and its relative risk of default as measured by regulatory capital ratios and other supervisory factors. We are generally unable to control the amount of premiums that we are required to pay for FDIC insurance. The FDIC has set the DRR at 2.00%.
FDIC assessments are determined based on an institution's asset size and relative risk of default, as measured by regulatory capital ratios and other supervisory factors. We generally have limited ability to influence the premiums required for FDIC insurance. 12 Table of Contents The FDIC has set the DRR at 2.00%.
The AMLA is intended to be a comprehensive reform and modernization to U.S. bank secrecy and anti-money laundering laws.
The Anti-Money Laundering Act of 2020 ("AMLA"), which amends the Bank Secrecy Act of 1970 (“BSA”), was enacted in January 2021. The AMLA is intended to be a comprehensive reform and modernization to U.S. bank secrecy and anti-money laundering laws.
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 2023 CRA final rule was scheduled to take effect on April 1, 2024, with staggered compliance dates for various provisions, including the new performance tests, data collection requirements, and the establishment of revised retail lending assessment areas.
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 regulatory capital requirements administered by federal and state banking agencies, including the Basel III Capital Rule. These rules establish minimum risk-based and leverage capital ratios designed to ensure the safety and soundness of financial institutions.
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.
Employees and Workforce We believe the success of our business is largely due to the quality of our employees, the development of their full potential, and our ability to provide timely and meaningful rewards to our employees. At December 31, 2025, we employed 763 individuals, including 722 full-time and 41 part-time employees.
For example, the Tax Cuts and Jobs Act of 2017 resulted in a reduction of our federal tax rate from a minimum of 35% in 2017 to 21% in 2018 through current, which had a favorable impact on our earnings.
Changes in these tax laws may be retroactive to previous periods and as a result could impact our current and future financial performance. For example, the Tax Cuts and Jobs Act of 2017 resulted in a reduction of our federal tax rate from a minimum of 35% in 2017 to 21% beginning in 2018, which favorably impacted our earnings.
In November 2021, the federal banking agencies adopted a final rule, with compliance required by May 1, 2022, that requires banking organizations to notify their primary banking regulator within 36 hours of determining that a "computer-security incident" has materially disrupted or degraded, or is reasonably likely to materially disrupt or degrade, the banking organization’s ability to carry out banking operations or deliver banking products and services to a material portion of its customer base, its businesses and operations that would result in material loss, or its operations that would impact the stability of the United States.
In November 2021, federal banking agencies adopted a final rule, requiring banking organizations to notify their primary regulator within 36 hours of determining that a "computer-security incident" has materially disrupted or is reasonably likely to disrupt banking organizations, delivery of services to a material portion of customers, or operations that could result in material loss or impact U.S. financial stability.
When we refer to "the Company," "we," "us" or "our," we mean Central Pacific Financial Corp. and its subsidiaries on a consolidated basis. When we refer to "Central Pacific Financial Corp.," "CPF" or to the holding company, we are referring to the parent company on a standalone basis.
Throughout this document, "Central Pacific Bank" is referred to as "our Bank" or "the Bank" and "the Company," "we," "us" or "our," refers to Central Pacific Financial Corp. on a consolidated basis. The terms "Central Pacific Financial Corp.," "CPF," or "the holding company", refers to the parent company on a standalone basis.
The Company is also subject to the accounting oversight and corporate governance requirements of the Sarbanes-Oxley Act of 2002. Requirements include, but are not limited to: executive certifications of financial presentations, requirements for board audit committees and their members, disclosure of controls and procedures, and establishment and testing of internal controls over financial reporting.
We are also subject to the corporate governance and accounting requirements of the Sarbanes-Oxley Act of 2002, which include executive certifications of financial statements, audit committees requirements, disclosure of controls and procedures, and the establishment and testing of internal controls over financial reporting. Central Pacific Bank is a Hawaii state-chartered bank with deposits insured by the FDIC.
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.
Durbin Amendment and Interchange Fees 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.
We believe we remain competitive by offering flexibility and superior service levels to our customers, coupled with competitive interest rate pricing, strong digital technology and local promotional activities. For further discussion of factors affecting our operations see, "Part II, Item 7.
We believe our competitive advantage lies in offering flexibility, superior customer service, competitive pricing, robust digital banking capabilities, and locally-focused promotional activities. For further discussion of factors affecting our operations see, "Part II, Item 7.
Among other things, these standards revise the Basel Committee's standardized approach for credit risk (including by recalibrating risk weights and introducing new capital requirements for certain “unconditionally cancellable commitments,” such as unused credit card lines of credit) and provides a new standardized approach for operational risk capital.
Implementation In December 2017, the Basel Committee published standards described as the finalization of Basel III post-crisis regulatory reforms, commonly referred to as "Basel IV." These standards revise the Basel Committee's standardized approach for credit risk (including recalibrating risk weights and introducing new capital requirements for certain "unconditionally cancellable commitments," such as unused credit card lines of credit), and establishes a new standardized approach for operational risk capital.
As the bank holding company for Central Pacific Bank, Central Pacific Financial Corp. is regulated under the BHC Act and is subject to inspection, examination and supervision by the FRB. It is also subject to Hawaii's Code of Financial Institutions and is subject to inspection, examination and supervision by the Hawaii Division of Financial Institutions ("DFI").
Regulatory Oversight Central Pacific Financial Corp. is a separate legal entity from its subsidiaries and serves as the bank holding company for Central Pacific Bank. CPF is regulated under the BHC Act and is subject to inspection, examination, and supervision by the FRB.
The review of products and practices to prevent unfair, deceptive or abusive acts or practices ("UDAAP") has been a focus of the CFPB, and of banking regulators more broadly.
Comply with new disclosure requirements and standards for appraisals and certain financial products; and 5. Maintain escrow accounts for higher-priced mortgage loans for extended periods. The review of products and practices to prevent unfair, deceptive or abusive acts or practices ("UDAAP") has been a focus of the CFPB, and of banking regulators more broadly.
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.
We cannot predict if or when new legislation will be enacted or new regulations or guidance will be issued, nor the impact such changes may have on community banks generally or on our financial condition and results of operations.
Change in Bank Control Federal law and regulation set forth the types of transactions that require prior notice under the Change in Bank Control Act (“CIBCA”). Pursuant to CIBCA and Regulation Y, any person (acting directly or indirectly) that seeks to acquire control of a bank or its holding company must provide prior notice to the Federal Reserve.
Change in Bank Control Under the Change in Bank Control Act (“CIBCA”) and Regulation Y, any person seeking to acquire control of a bank or its holding company must provide prior notice to the Federal Reserve. A "person" includes individuals and entities such as corporations, partnerships, trusts, and joint venture.
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.
The Bank became a member of the Federal Reserve System ("Federal Reserve") in January 2025, making the Federal Reserve Bank ("FRB") its primary federal regulator. Financial Performance Drivers We derive income primarily from interest and fees on loans, interest and dividends on investment securities, and fees related to deposit and other services.
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.
We rely on electronic communications and information systems to conduct our operations and to store sensitive data. Our cybersecurity program employs a layered, defense-in-depth approach leveraging people, processes and technology to manage 13 Table of Contents and maintain cybersecurity controls. We utilize preventative and detective tools to monitor, block, and alert on suspicious activity, including advanced persistent threats.
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.
Subject to certain exceptions, these rules prohibit banking entities from engaging in proprietary trading and from sponsoring or investing in certain entities, including hedge funds and private equity funds classified as "covered funds." In July 2019, regulators finalized a rule exempting community banks with $10 billion or less in total consolidated assets and total trading assets and liabilities of 5% or less of total consolidated assets (and which is not controlled by a company whose total assets and total trading assets and liabilities are in excess of such amounts), from the Volcker Rule.
We believe our commitment to living out our core values, actively prioritizing concern for our employees’ well-being, supporting our employees’ career goals, offering a competitive compensation and benefits package that includes health insurance and retirement savings plans, aids in retention of our top-performing employees.
We believe our strong core values, focus on employee well-being, career support, and competitive compensation and benefits, including health insurance and retirement savings plans, aids in retention of our top-performing employees.
Such developments could increase or decrease the cost of doing business, limit or expand permissible activities or affect the competitive balance among banks, savings associations, credit unions and other financial institutions.
Future developments could increase or decrease the cost of doing business, limit or expand permissible activities or alter the competitive landscape among banks, savings associations, credit unions, and other financial institutions. Similarly, we cannot predict whether regulatory requirements will be reduced or eliminated or the overall effect such changes may have on the Company and the Bank.
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.
However, enactment of proposed legislation (or modification or repeal of existing legislation) could have the following impact: • Restructure the regulatory framework under which the Company and Bank operate; • Significantly increase its costs; • Impede the efficiency of its internal business processes; • Require the Bank to increase its regulatory capital; • Necessitate changes to its business strategy; • Limit its ability to pursue business opportunities in an efficient manner.
Any future increases in FDIC insurance premiums may have a material and adverse effect on our earnings and could have a material adverse effect on the value of, or market for, our common stock. Incentive Compensation Under regulatory guidance applicable to all banking organizations, incentive compensation policies must be consistent with safety and soundness principles.
Any such increases may materially and adversely affect our earnings and could negatively impact the value or market for our common stock. Incentive Compensation Regulatory guidance applicable to all banking organizations requires that incentive compensation policies align with safety and soundness principles.Institutions must ensure that compensation programs: 1.
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.
Despite these measures, cybersecurity threats remain pervasive, sophisticated, and rapidly evolving. While we have not experienced a significant compromise, data loss, or material financial impact to date, our systems, and those of our customers and third-party service providers, are under constant threat.
Under the new standards, in order to be considered well-capitalized, the Bank will be required to meet the new common equity Tier 1 ratio of 6.5%, an increased Tier 1 ratio of 8% (increased from 6%), a total capital ratio of 10% (unchanged) and a leverage ratio of 5% (unchanged).
To be considered well-capitalized, the Bank must now maintain a CET1 ratio of 6.5%, a Tier 1 capital ratio of at least 8%, a total capital ratio of at least 10%, and a leverage ratio of at least 5%.
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.
Companies that elect and maintain "financial holding company" status under the Gramm-Leach-Bliley Act of 1999 ("GLBA") may engage in broader activities, including securities, insurance, and merchant banking, without prior approval. To qualify, the bank holding company and its depository institution subsidiaries must be well-capitalized, well managed, and in satisfactory compliance with the Community Reinvestment Act ("CRA").
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.
In response, the NYSE adopted new clawback listing standards applicable to the Company. We have implemented an NYSE-compliant clawback policy, which is included as an exhibit to this Annual Report on Form 10-K. Cybersecurity Federal regulators have issued guidance requiring financial institutions to implement layered security controls and robust cyber risk management processes.
The Dodd-Frank Act also provides the CFPB the ability to impose significant penalties, as well as injunctive relief that prohibits lenders from engaging in allegedly unlawful practices. The CFPB also has the authority to obtain cease and desist orders providing for affirmative relief or monetary penalties. The Dodd-Frank Act does not prevent states from adopting stricter consumer protection standards.
The CFPB also has the authority to obtain cease and desist orders providing for affirmative relief or monetary penalties. The Dodd-Frank Act does not prevent states from adopting stricter consumer protection standards. CFPB and state regulation of financial products and potential enforcement actions could also adversely affect the Bank’s business, financial condition or results of operations.
Under this guidance, financial institutions must review their compensation programs to ensure that they: (i) provide employees with incentives that appropriately balance risk and reward and that do not encourage imprudent risk, (ii) are compatible with effective controls and risk management, and (iii) are supported by strong corporate governance, including active and effective oversight by the banking organization’s board of directors.
Provide incentives that appropriately balance risk and reward and do not encourage imprudent risk-taking, 2. Are compatible with effective controls and risk management, and 3. Are supported by strong corporate governance, including active oversight by the board of directors. Monitoring methods should be commensurate with the size and complexity of the organization and its use of incentive compensation.
Noncompliance with these laws could subject the Bank to lawsuits and could also result in administrative penalties, including, fines and reimbursements. The Company and the Bank are also subject to federal and state laws prohibiting unfair or fraudulent business practices, untrue or misleading advertising and unfair competition.
Noncompliance with these laws can result in lawsuits, administrative penalties, fines, reimbursements, and other enforcement actions. The Company and the Bank are also subject to federal and state laws prohibiting unfair or deceptive practices, misleading advertising. and unfair competition. Recent joint regulatory pronouncements have emphasized the importance of managing operational and compliance risks associated with Banking-as-a-Service ("BaaS") relationships.
In addition, in December 2015, the federal bank agencies issued additional guidance entitled “Statement on Prudent Risk Management for Commercial Real Estate Lending.” Together, these guidelines describe the criteria the agencies will use as indicators to identify institutions potentially exposed to CRE concentration risk.
Subsequently, in December 2015, the federal bank agencies issued additional guidance titled "Statement on Prudent Risk Management for Commercial Real Estate Lending." Together, these guidelines outline the criteria used by regulators to identify institutions that may be exposed to heightened CRE concentration risk. An institution may be subjected to further supervisory review if it has: 1.
Other Restrictions on the Company's Activities Subject to prior notice or Federal Reserve approval, bank holding companies may generally engage in, or acquire shares of companies engaged in, activities determined by the Federal Reserve to be so closely related to banking or managing or controlling banks as to be a proper incident thereto.
Other Restrictions on the Company's Activities Bank holding companies (BHCs) may engage in non-banking activities deemed "closely related to banking" under section 4(c)(8) of the Bank Holding Company Act, subject to Federal Reserve approval or prior notice.
The borrower's business is typically regarded as the principal source of repayment, although our underwriting policies and practices generally require additional sources of collateral, including real estate and other business assets, as well as personal guarantees where possible to mitigate risk and help to reduce credit losses. (3) Commercial Mortgage Lending.
Consists primarily of term loans and lines of credit to small and middle-market businesses and professionals in Hawaii. Operating cash flow from the borrower's business is typically the primary source of repayment, but our underwriting generally requires additional collateral, such as real estate and business assets, and personal guarantees where possible to mitigate risk. (3) Commercial Mortgage Lending.
In addition to base salary, our compensation program includes variable pay (e.g., commission, incentive, bonus) for all employees. Our variable pay programs are designed to motivate and reward high levels of individual performance that aligns with our corporate strategy and business plan, and contributes to CPB’s success.
In addition to base salary, our compensation program includes variable pay (e.g., commission, incentive, bonus) designed to motivate and reward high performance that 4 Table of Contents aligns with our corporate strategy and business objectives. At December 31, 2025, the employee average tenure was 9 years and 33% of our staff had been with us for 10 years or more.
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.
The Company is also subject to regulations issued by the Consumer Financial Protection Bureau ("CFPB"), Federal Trade Commission ("FTC"), and FRB. During periodic examinations, the DFI and FRB assess our financial condition, capital resources, asset quality, management, earnings prospects, liquidity, market sensitivity, and other aspects of our operations.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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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.
Biggest changeRisks Related to Interest Rates and Liquidity • 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. 19 Table of Contents Risks 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. • 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 completely, accurately and timely. • 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 homeowners insurance generally may negatively impact the residential real estate market.
See Note 1 - Summary of Significant Accounting Policies to the Consolidated Financial Statements under "Part II, Item 8. Financial Statements and Supplementary Data." Our commercial and industrial loan and commercial real estate loan portfolios expose us to risks that may be greater than the risks related to our other loans.
See Note 1 - Summary of Significant Accounting Policies to the Consolidated Financial Statements under "Part II, Item 8. Financial Statements and Supplementary Data." Our commercial and industrial, and commercial real estate loan portfolios expose us to risks that may be greater than the risks related to our other loans.
The availability and level of deposits and other funding sources is highly dependent upon the perception of the liquidity and creditworthiness of the financial institution, and perception can change quickly in response to market conditions or circumstances unique to a particular company.
The availability and level of deposits and other funding sources is highly dependent upon the perception of the liquidity and creditworthiness of the financial institution. Perception can change quickly in response to market conditions or circumstances unique to a particular company.
Risks Related to Legal, Compliance and Regulatory Matters • Governmental regulation and regulatory actions against us may impair our operations or restrict our growth. • We face a risk of noncompliance and enforcement action with the Bank Secrecy Act and other anti-money laundering statutes and regulations. • Regulatory capital standards impose enhanced capital adequacy requirements on us. • 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, could adversely affect our financial condition and results of operations. • We are subject to various legal claims and litigation.
Risks Related to Legal, Compliance and Regulatory Matters • Governmental regulation and regulatory actions against us may impair our operations or restrict our growth. • We face a risk of noncompliance and enforcement action with the Bank Secrecy Act and other anti-money laundering statutes and regulations. • Regulatory capital standards impose enhanced capital adequacy requirements on us. • Costs of compliance with environmental laws and regulations are significant, and the cost of compliance with potential new environmental laws, including limitations on emissions relating to climate change, could adversely affect our financial condition and results of operations. • We are subject to various legal claims and litigation.
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.
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, contract counterparties, employees or customers.
Credit Risks • A large percentage of our loans are collateralized by real estate and deterioration in the real estate market may adversely affect our financial results. • Our real estate loan operations have a considerable effect on our results of operations. • Provisions for credit losses and charge-offs of additional loans in the future, could adversely affect our results of operations. • Our allowance for credit losses may not be sufficient to cover actual credit losses, which could adversely affect our results of operations.
Risks Related to Credit • Our real estate loan operations have a considerable effect on our results of operations. • A large percentage of our loans are collateralized by real estate and deterioration in the real estate market may adversely affect our financial results. • Provisions for credit losses and charge-offs of additional loans in the future, could adversely affect our results of operations. • Our allowance for credit losses may not be sufficient to cover actual credit losses, which could adversely affect our results of operations.
We face substantial competition in all areas of our operations from a variety of different competitors, many of which are larger and may have more financial resources. Such competitors primarily include national, regional and community banks within the various markets we operate. Additionally, various out of state banks conduct business in the market areas in which we currently operate.
We face substantial competition in all areas of our operations from a variety of different competitors, many of which are larger and may have more financial resources. Such competitors primarily include national, regional, and community banks within the various markets in which we operate. Additionally, various out-of-state banks conduct business in our market areas.
The administration of existing capital adequacy laws as well as the adoption of new laws and regulations relating to capital adequacy, or more expansive or aggressive interpretations of existing laws and regulations, could have a material adverse effect on our business, liquidity, financial condition and results of operations and could substantially restrict our ability to pay dividends, repurchase any of our capital stock, or pay executive bonuses.
The administration of existing capital adequacy laws as well as the adoption of new laws and regulations relating to capital adequacy, or more expansive or aggressive interpretations of existing laws and regulations, could have a material adverse effect on our business, liquidity, financial condition and results of operations and could substantially restrict our ability to pay dividends, repurchase our capital stock, or pay executive bonuses.
Recent natural disasters locally and nationally, including fires in Maui and California as well as flooding in other parts of the United States, have caused home insurers to significantly increase their premiums on homeowner’s insurance and/or eliminate or limit the availability of certain insurance products, including homeowners insurance.
Recent natural disasters locally and nationally, including fires in Maui and California, as well as flooding in other parts of the United States, have caused home insurers to significantly increase their premiums on homeowner’s insurance and/or eliminate or limit the availability of certain insurance products, including homeowners and condo insurance.
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.
Future BaaS collaboration agreements may include loan or line of credit arrangements with our potential partners and may also include various loss sharing agreements, as they have in the past. We typically will require guarantees and/or collateral to protect the Bank against credit risk.
Technology has also lowered barriers to entry and made it possible for non-banks to offer products and services traditionally provided by banks, such as automatic transfer and automatic payment systems. Many of our competitors have fewer regulatory constraints and may have lower cost structures.
Technology has lowered barriers to entry and made it possible for non-banks to offer products and services traditionally provided by banks, such as automatic transfer and automatic payment systems. Many of our competitors have fewer regulatory constraints and may have lower cost structures.
Failure to perform in any of these areas could significantly weaken our competitive position and adversely affect our growth and profitability, which in turn, could have a material adverse effect on our financial condition and results of operations. In addition, the soundness of our financial condition may also affect our competitiveness.
Failure to perform in any of these areas could significantly weaken our competitive position and adversely affect our growth and profitability, which, in turn, could have a material adverse effect on our financial condition and results of operations. In addition, the soundness of our financial condition may affect our competitiveness.
Interest Rate and Liquidity Risks Our business is subject to interest rate risk and fluctuations in interest rates may adversely affect our earnings. The majority of our assets and liabilities are monetary in nature and subject to risk from changes in interest rates.
Risks Related to Interest Rates and Liquidity Our business is subject to interest rate risk and fluctuations in interest rates may adversely affect our earnings. The majority of our assets and liabilities are monetary in nature and subject to risk from changes in interest rates.
Although we have developed, and continue to invest in, systems and processes that are designed to detect and prevent data security breaches and cyber-attacks and periodically test our security, we may fail to anticipate or adequately mitigate breaches of security or experience data privacy breaches that could result in loss of business to us and/or our clients, damage to our reputation, incurrence of additional expenses, disruption to our business, our inability to grow our online services or other businesses, additional regulatory scrutiny or penalties, including resulting violations of law (whether federal or in one or more states) or our exposure to civil litigation and possible financial liability — any of which could have a material adverse effect on our business, financial condition and, results of operations.
Although we have developed, and continue to invest in, systems and processes that are designed to detect and prevent data security breaches and cyberattacks and periodically test our security, we may fail to anticipate or adequately mitigate breaches of security or experience data privacy breaches that could result in loss of business to us and/or our clients, damage to our reputation, incurrence of additional expenses, disruption to our business, our inability to grow our online services or other businesses, additional regulatory scrutiny or penalties, including resulting violations of law (whether federal or in one or more states) or our exposure to civil litigation and possible financial liability — any of which could have a material adverse effect on our business, financial condition and, results of operations.
Such fraudulent activity may take many forms, including: check fraud, electronic fraud, wire fraud, phishing, social engineering, and other dishonest acts. Information security breaches and cybersecurity-related incidents may include fraudulent or unauthorized access to systems used by us, our vendors, or our clients, denial or degradation of service attacks, and malware or other cyber-attacks.
Such fraudulent activity may take many forms, including: check fraud, electronic fraud, wire fraud, phishing, social engineering, and other dishonest acts. Information security breaches and cybersecurity-related incidents may include fraudulent or unauthorized access to systems used by us, our vendors, or our clients, denial or degradation of service attacks, and malware or other cyberattacks.
Our ability to compete successfully depends on a number of factors, including, among other things: • the ability to develop, maintain and build upon long-term customer relationships based on top quality service, high ethical standards and safe, sound assets; • the ability to expand our market position; • the scope, relevance and pricing of products and services offered to meet customer needs and demands; • the rate at which we introduce new products and services relative to our competitors; • customer satisfaction with our level of service; and • industry and general economic trends.
Our ability to compete successfully depends on a number of factors, including, among others: • the ability to develop, maintain, and build upon long-term customer relationships based on top-quality service, high ethical standards, and safe, sound assets; • the ability to expand our market position; • the scope, relevance, and pricing of products and services offered to meet customer needs and demands; • the rate at which we introduce new products and services relative to our competitors; • customer satisfaction with our level of service; and • industry and general economic trends.
We rely on Federal National Mortgage Association ("Fannie Mae"), Federal Home Loan Mortgage Corporation ("Freddie Mac") and other purchasers to purchase first mortgage loans in order to reduce our credit risk and interest rate risk and provide funding for additional loans we desire to originate.
We rely on Federal National Mortgage Association ("Fannie Mae"), Federal Home Loan Mortgage Corporation ("Freddie Mac"), and other purchasers to purchase first mortgage loans in order to reduce our credit and interest rate risks, and provide funding for additional loans we desire to originate.
Climate change presents multi-faceted risks, including: operational risk from the physical effects of climate events on our Bank and our customers’ facilities and other assets; credit risk from borrowers with significant exposure to climate risk; transition risks associated with the transition to a less carbon-dependent economy; and reputational risk from stakeholder concerns about our practices related to climate change, our carbon footprint, and our business relationships with clients who operate in carbon-intensive industries.
Climate change presents multi-faceted risks, including: operational risk from the physical effects of climate events on our Bank and our customers’ facilities and other assets; credit risk from borrowers with significant exposure to climate risk; 34 Table of Contents transition risks associated with the transition to a less carbon-dependent economy; and reputational risk from stakeholder concerns about our practices related to climate change, our carbon footprint, and our business relationships with clients who operate in carbon-intensive industries.
We expect that we will periodically experience "gaps" in the interest rate sensitivities of our assets and liabilities, meaning that either our interest-bearing liabilities will be more sensitive to changes in market interest rates than our interest-earning assets, or vice versa.
We expect that we will periodically experience "gaps" in the interest rate sensitivity of our assets and liabilities, meaning that either our interest-bearing liabilities will be more sensitive to changes in market interest rates than our interest-earning assets, or vice versa.
In addition, bank regulatory authorities may bring enforcement actions against banks and bank holding companies, including CPF and the Bank, for unsafe or unsound practices in the conduct of their businesses or for violations of any law, rule or regulation.
In addition, bank regulatory authorities may bring enforcement actions against banks and bank holding companies, including the Company and the Bank, for unsafe or unsound practices in the conduct of their businesses or for violations of any law, rule or regulation.
As a result of changes to financial accounting or reporting standards, whether promulgated or required by the FASB or other regulators, we could be required to change certain assumptions or estimates that we have previously used in preparing our financial statements, which could adversely affect our business, financial condition and results of operations.
As a result of changes to financial accounting or reporting standards, whether promulgated or required by the FASB or other regulators, we could be required to change certain assumptions or estimates that we have previously used in preparing our financial statements, which could adversely affect our 27 Table of Contents business, financial condition, and results of operations.
Other economic conditions that affect our financial performance include short-term and long-term interest rates, the prevailing yield curve, inflation (which we are currently experiencing) and price levels (particularly for real estate), monetary policy, unemployment and the strength of the domestic economy as a whole.
Other 21 Table of Contents economic conditions that affect our financial performance include short-term and long-term interest rates, the prevailing yield curve, inflation (which we are currently experiencing) and price levels (particularly for real estate), monetary policy, unemployment and the strength of the domestic economy as a whole.
Significant increases in residential home insurance premiums and overall challenges in obtaining home owners insurance generally may negatively impact the residential real estate market. We originate a significant amount of residential mortgage loans.
Significant increases in residential home insurance premiums and overall challenges in obtaining homeowners insurance generally may negatively impact the residential real estate market. We originate a significant amount of residential mortgage loans.
We are unable to predict or control fluctuations of market interest rates, which are affected by many factors, including the following: • inflation; • recession; • market conditions; • changes in unemployment; • the money supply; • international disorder and instability in domestic and foreign financial markets; and • governmental actions.
We are unable to predict or control fluctuations of market interest rates, which are affected by many factors, including the following: • inflation; • recession; • market conditions; • changes in unemployment; 24 Table of Contents • the money supply; • international disorder and instability in domestic and foreign financial markets; and • governmental actions.
A failure to maintain effective internal control over financial reporting or disclosure controls and procedures could adversely affect our ability to report our financial results accurately and on a timely basis, which could result in a loss of investor confidence in our financial reporting or adversely affect our access to sources of liquidity.
A failure to maintain effective internal control over financial reporting or disclosure controls and procedures could adversely affect our ability to report our financial results completely, accurately, and timely, which could result in a loss of investor confidence in our financial reporting or adversely affect our access to sources of liquidity.
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.
These areas may include: • capital that must be maintained; • types of activities that can be engaged in; • 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.
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.
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. 20 Table of Contents 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.
Concerns about our past and future financial condition or concerns about our credit exposure to other parties could adversely impact our sources of liquidity, financial position, including regulatory capital ratios, results of operations and our business prospects.
Concerns about our past and future financial condition or concerns about our 25 Table of Contents credit exposure to other parties could adversely impact our sources of liquidity, financial position, including regulatory capital ratios, results of operations and our business prospects.
The techniques used in cyber-attacks change rapidly and are increasingly sophisticated, including through the use of generative artificial intelligence and deepfakes, and potential future use of quantum computing, and as a result, cyber attacks or data security breaches may be more difficult to anticipate.
The techniques used in cyberattacks change rapidly and are increasingly sophisticated, including the use of generative artificial intelligence and deepfakes, and potential future use of quantum computing, and as a result, cyberattacks or data security breaches may be more difficult to anticipate.
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.
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.
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.
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. We use automation and technology tools to help reduce some risks of human error.
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.
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.
Unexpected deterioration in the credit quality of our commercial or commercial real estate loan portfolios would require us to increase our provision for credit losses, which would reduce our profitability and could materially adversely affect our business, financial condition, results of operations and prospects. Furthermore, such deterioration could require us to raise additional capital.
Unexpected deterioration in the credit quality of our commercial or commercial real estate loan portfolios would require us to increase our provision for credit losses, which would reduce our profitability and could materially adversely affect our business, financial condition, results of operations, and prospects.
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.
Volatility in the market price of our 31 Table of Contents 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.
These bank failures underscore the importance of maintaining diversified sources of funding as key measures to ensure the safety and soundness of a financial institution. As a result, market conditions and other external factors may impact the competitive landscape for deposits in the banking industry and could materially adversely impact the Company's liquidity and results of operations.
These bank failures underscore the importance of maintaining diversified sources of funding as key measures to ensure the safety and soundness of a financial institution. As a result, market conditions and other external factors may impact the competitive landscape for deposits in the banking industry and could have a material, adverse impact on the Company's liquidity and results of operations.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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 completely, accurately, and timely.
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.
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.
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.
Approximately 80% of our loan portfolio as of December 31, 2025 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, 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.
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, 2025, the Bank had Statutory Retained Earnings of $234.7 million. In addition, regulatory authorities could limit the ability of the Bank to pay dividends to CPF.
Additionally, due to their size, many competitors may be able to achieve economies of scale and, as a result, may offer a broader range of products and services as well as better pricing for those products and services than we can.
Additionally, due to their size, many competitors may be able to achieve economies of scale and, as a result, offer a broader range of products and services, as well as more favorable pricing, than we can.
In recent periods, there continues to be a rise in electronic fraudulent activity, security breaches, and cyber-attacks within the financial services industry, especially in the commercial banking sector due to cyber criminals targeting commercial bank accounts. Consistent with industry trends, we have also experienced an increase in attempted electronic fraudulent activity, security breaches, and cybersecurity-related incidents in recent periods.
In recent periods, there continues to be a rise in electronic fraudulent activity, security breaches, and cyberattacks within the financial services industry, including the commercial banking sector due to cyber criminals targeting commercial bank accounts. Consistent with industry trends, we have also experienced an increase in attempted electronic fraudulent activity.
Given that climate change could impose systemic risks upon the financial sector, either via disruptions in economic activity resulting from the physical impacts of climate change or changes in policies as the economy transitions to a less carbon-intensive environment, we may face regulatory risk of increasing focus on our resilience to climate-related risks, including in the context of stress testing for various climate stress scenarios.
Given that climate change could impose systemic risks on the financial sector, either through disruptions in economic activity resulting from the physical impacts of climate change or through changes in policies as the economy transitions to a less carbon-intensive environment, we may face increased regulatory focus on our resilience to climate-related risks, including in the context of climate-related stress testing.
There is no assurance that any such losses would not materially and adversely affect our results of operations. 31 Table of C o ntents Our common stock is not insured and shareholders could lose the value of their entire investment.
There is no assurance that any such losses would not materially and adversely affect our results of operations. 32 Table of Contents Our common stock is not insured and shareholders could lose the value of their entire investment.
Our operational risks include risks associated with third-party vendors and other financial institutions. We rely upon certain third-party vendors to provide products and services necessary to maintain our day-to-day operations, including, providing the core processing system that services the Bank, as well as data processing and storage, online and mobile banking interfaces and services, internet connections, telecommunications, and network access.
We rely upon certain third-party vendors to provide products and services necessary to maintain our day-to-day operations, including, providing the core processing system that services the Bank, as well as data processing and storage, online and mobile banking interfaces and services, internet connections, telecommunications, and network access.
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.
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. • The financial services industry and broader economy may be subject to new or changing government policy, legislation and regulation, or the prolonged effects of a government shutdown. • 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.
Additional credit losses may occur in the future and may occur at a rate greater than we have experienced to date. • Our commercial and industrial loan and commercial real estate loan portfolios expose us to risks that may be greater than the risks related to our other loans. • We may incur future losses in connection with certain representations and warranties we have made with respect to mortgages that we have sold in the secondary market. • Consumer protection initiatives related to the foreclosure process could materially affect our ability as a creditor to obtain remedies. • Banking-as-a-Service ("BaaS") collaboration agreements that we may enter into may expose us to credit risk.
Additional credit losses may occur in the future and may occur at a rate greater than we have experienced to date. • Our commercial and industrial, and commercial real estate loan portfolios expose us to risks that may be greater than the risks related to our other loans. • We may incur future losses in connection with certain representations and warranties we have made with respect to mortgages that we have sold in the secondary market. • Consumer protection initiatives related to the foreclosure process could materially affect our ability as a creditor to obtain remedies. • Changes to, or limitations on our ability to participate in, the programs and guidelines of government-sponsored entities could adversely affect our mortgage origination and secondary‑market activities. • Banking-as-a-Service ("BaaS") collaboration agreements that we may enter into may expose us to credit risk.
Some tools are dependent on the quality of the data used by the tool to learn and enhance the process for which it is responsible. Bad, missing or anomalous data can adversely affect the functioning of such tools.
Automated systems may themselves experience outages or problems. Some tools are dependent on the quality of the data used by the tool to learn and enhance the process for which it is responsible. Bad, missing or anomalous data can adversely affect the functioning of such tools.
In addition, federal and state banking regulators may require banks with higher levels of commercial real estate loans to implement more stringent underwriting, internal controls, risk management policies and portfolio stress testing, as well as possibly higher levels of allowances for credit losses and capital levels as a result of commercial real estate lending growth and exposures.
Furthermore, such deterioration could require us to raise additional capital. 23 Table of Contents In addition, federal and state banking regulators may require banks with higher levels of commercial real estate loans to implement more stringent underwriting, internal controls, risk management policies and portfolio stress testing, as well as possibly higher levels of allowances for credit losses and capital levels as a result of commercial real estate lending growth and exposures.
Nonetheless, we continue to also rely on many manual processes to conduct our business and manage our risks. In addition, use of automation tools does not eliminate the need for effective design and monitoring of their operation to ensure they operate as intended. Enhanced use of automation may present its own risks. Automated systems may themselves experience outages or problems.
Nonetheless, we continue to also rely on many manual processes to conduct our business and manage our risks. In addition, use of automation tools does not eliminate the need for effective design and monitoring of their operation to ensure they operate as intended. Enhanced use of automation 33 Table of Contents may present its own risks.
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.
Interest earned on investment securities represented 13.3% of our interest income in the year ended December 31, 2025, as compared to 11.7% of our interest income in the year ended December 31, 2024.
Breaches of information security also may occur, and in infrequent cases have occurred, through intentional or unintentional acts by those having access to our systems or our clients' or counterparties' confidential information, including employees.
Breaches of information security also may occur through intentional or unintentional acts by those having access to our systems or our clients' or counterparties' confidential information, including employees.
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.
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.
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.
We constantly monitor our activities with respect to liquidity, and evaluate our utilization of our cash assets closely; 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.
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.
Compliance with these legal requirements could 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.
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.
As of December 31, 2025, we had (i) $50.0 million in face amount of trust preferred securities outstanding with accrued and unpaid dividends thereon of $0.2 million and (ii) $25.0 million in FHLB long-term advances outstanding with accrued and unpaid dividends thereon of $3 thousand.
Changes in FRB policies and our regulatory environment are beyond our control, and we are unable to predict what changes may occur or the manner in which any future changes may affect our business, financial condition and results of operation. Negative developments in the global and U.S. economies could have an adverse effect on us.
Changes in FRB policies and our regulatory environment are beyond our control, and we are unable to predict what changes may occur or the manner in which any future changes may affect our business, financial condition and results of operation.
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.
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.
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.
There can be no assurance that such statutes and regulations, any changes thereto or to their interpretation will not adversely affect our business.
Ongoing legislative or regulatory uncertainties and changes regarding climate risk management and practices may result in higher regulatory, compliance, credit, and reputational risks and costs. With the increased importance and focus on climate change, we are in the process of creating governance processes around climate change-related risks and integrating climate considerations into our risk governance framework.
Ongoing legislative or regulatory uncertainty and changes related to climate risk management and practices may result in higher regulatory, compliance, credit, and reputational risks and costs. With the increased importance and focus on climate change, we continue to monitor climate change-related risks and integrate climate considerations into our risk governance framework as appropriate.
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.
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 the event of a default with respect to any of these loans, amounts received upon sale of the collateral may be insufficient to recover outstanding principal and interest on the loan. Our real estate loan operations have a considerable effect on our results of operations.
In the event of a default with respect to any of these loans, amounts received upon sale of the collateral may be insufficient to recover outstanding principal and interest on the loan. Provisions for credit losses and charge-offs of additional loans in the future, could adversely affect our results of operations.
As a result of a variety of factors, including a decline in local, national or international economic conditions, it is possible that we may experience material credit losses and in turn, decreases to our allowance for credit losses.
For the year ended December 31, 2025, we recorded $15.7 million in provision for credit losses. As a result of a variety of factors, including a decline in local, national or international economic conditions, it is possible that we may experience deterioration in credit quality and material credit losses and in turn, increases to our provision for credit losses.
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.
Additionally, because of the complexity inherent in these approaches, misunderstanding or misuse of their outputs could similarly result in suboptimal decision-making. 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.
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.
We also face competition from many other types of financial institutions, including without limitation, savings banks, credit unions, finance companies, and financial service providers, such as mortgage providers and brokers, operating via the internet and other technology platforms, brokerage firms, insurance companies, factoring companies, and other financial intermediaries.
Credit Risks A large percentage of our loans are collateralized by real estate and deterioration in the real estate market may adversely affect our financial results. Our results of operations have been, and in future periods, will continue to be significantly impacted by the economy in Hawaii, and to a lesser extent, other markets we are exposed to including California.
Our results of operations have been, and will continue to be significantly impacted by the economy in Hawaii, and to a lesser extent, other markets we are exposed to including California.
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 may merge under the umbrella of a financial holding company, enabling them to offer a broad array of financial services, including banking, securities underwriting, insurance (both agency and underwriting), and merchant banking.
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.
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.
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 and subordinated notes.
The inability to receive dividends from the Bank could have a material adverse effect on our financial condition, results of operations, and prospects. 26 Table of Contents 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.
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.
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.
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.
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.
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.
Our business could be adversely affected by unfavorable actions from rating agencies. 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.
If hazardous or toxic substances are found, we may be liable for remediation costs, as well as for personal injury and property damage and costs of complying with applicable environmental regulatory requirements. Failure to comply with such requirements can result in penalties.
For any real property that we may possess, there is a risk that hazardous or toxic substances could be found on these properties. If hazardous or toxic substances are found, we may be liable for remediation costs, as well as for personal injury and property damage and costs of complying with applicable environmental regulatory requirements.
Environmental laws may require us to incur substantial expenses and may materially reduce the affected property's value or limit our ability to use, sell or lease the affected property. In addition, future laws or more stringent interpretations or enforcement policies with respect to existing laws may increase our exposure to environmental liability.
Failure to comply with such requirements can result in penalties. Environmental laws may require us to incur substantial expenses and may materially reduce the affected property's value or limit our ability to use, sell, or lease the affected property.
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.
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.
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.
Risks Related to Credit Our real estate loan operations have a considerable effect on our results of operations. 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.
Customers may decide not to do business with the Bank due to its financial condition. We are subject to environmental liability risk associated with our bank branches and any real estate collateral we acquire upon foreclosure. During the ordinary course of business, we may foreclose on and take title to properties securing certain loans that we have originated or acquired.
Customers may decide not to do business with the Bank if they perceive our financial condition to be less favorable that that of our competitors. 28 Table of Contents We are subject to environmental liability risk associated with our bank branches and any real estate collateral we acquire upon foreclosure.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Removed
Item 1C. Cybersecurity 35 Item 2 Properties 36 Item 3 Legal Proceedings 36 Item 4 Mine Safety Disclosures 36 Part II.
Added
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.
Removed
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.
Added
The Company maintains a formal and comprehensive enterprise-wide Information Security and Cybersecurity Program (the "Information Security Program") that protects the confidentiality, integrity, and availability of the Company’s information assets and manages reasonably foreseeable cybersecurity risks and threats.
Removed
Item 10 Directors, Executive Officers and Corporate Governance 142 Item 11 Executive Compensation 142 Item 12 Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 142 Item 13 Certain Relationships and Related Transactions, and Director Independence 142 Item 14 Principal Accountant Fees and Services 142 Part IV.
Added
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.
Removed
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.
Added
Governance As a regulated financial institution, the Company must adhere to the security requirements and expectations of the applicable regulatory agencies, which include requirements related to cybersecurity, data privacy, vendor security risk management, systems availability, and business continuity planning, among others.
Removed
In addition, certain statements may be contained in our future filings with the U.S. Securities and Exchange Commission ("SEC"), in press releases and in oral and written statements made by us or with our approval that are not statements of historical fact and constitute forward-looking statements within the meaning of the Act.
Added
The regulatory agencies have established responsibility guidelines for the Board of Directors and senior management, which include establishing policy, appointing and training personnel, implementing review and testing functions, and ensuring an appropriate frequency of reporting.
Removed
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 is examined annually, and its Information Security Program, policies and standards are designed to meet regulatory requirements and industry standards to implement physical, administrative, and technical controls to comply with the Gramm-Leach-Bliley Act ("GLBA"), Sarbanes-Oxley Act ("SOX") of 2002, and industry frameworks such as the Federal Financial Institutions Examination Council ("FFIEC").
Removed
(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
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 35 Table of Contents Security Director more specifically, manages cybersecurity risk and the associated programs at the operational level.
Removed
Words such as "believe," "plan," "anticipate," "seek", "expect," "intend," "forecast," "hope," "target," "continue," "remain," "estimate," "will," "should," "may" and other similar expressions are intended to identify forward-looking statements but are not the exclusive means of identifying such statements.
Added
Regular updates on cybersecurity are provided to the Management Risk Committee, to the Board Risk Committee and/or the Board of Directors. Risk Management and Strategy The Company has complex information systems used for a variety of functions by customers, employees, and vendors.
Removed
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.
Added
In addition, third parties with which the Company does business or that facilitate business activities (e.g., vendors, exchanges, clearing houses, central depositories and financial intermediaries) could also be sources of cybersecurity risk to the Company, including breakdowns or failures of their systems, misconduct by the employees of such parties, or cyberattacks which could affect their ability to deliver a product or service to the Company.
Removed
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.
Added
Our systems are regularly targeted by attacks aimed at disrupting services, misusing or accessing customer data without authorization, seeking financial extortion, or executing fraudulent activities.
Removed
National 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.
Added
As of the date of this Annual Report on Form 10-K, we do not believe that any risks from cybersecurity threats, including as a result of any previous cybersecurity incidents, have materially affected or are reasonably likely to materially affect us, including our business strategy, results of operations, or financial condition.
Removed
For further information with respect to factors that could cause actual results to materially differ from the expectations or projections stated in the forward-looking statements, please see also "Part I, Item 1A. Risk Factors" of this report. We urge investors to consider all of these factors carefully in evaluating the forward-looking statements contained in this Form 10-K.
Added
Nevertheless, it is important to acknowledge that we cannot guarantee the prevention or detection of sophisticated cyberattacks. In the event of significant service disruptions, unauthorized access leading to the misuse of customer information, or fraudulent activities affecting our or third-party systems, the Company may face operational, regulatory, legal, and reputational challenges, which could adversely affect our business and financial conditions.
Removed
Forward-looking statements speak only as of the date on which such statements are made. We undertake no obligation to update any forward-looking statements to reflect events or circumstances after the date on which such statement is made, or to reflect the occurrence of unanticipated events except as required by law.
Added
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: 1.
Added
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 landscape, compliance, incidents, etc. The assessment results are presented to executive management and the Board of Directors or Board Risk Committee. 2.
Added
Technical Safeguards – Multi-layered controls, defenses, and continuous monitoring tools are used to protect, detect, and respond to cyber threats and incidents. External independent assessments, regular threat intelligence review, and lessons learned from incident response drive continuous tool and process improvements. 3.
Added
Incident Response and Recovery - The Company's formal Incident Response and Business Continuity Programs establish a clear, consistent, standard, and organized process by which cybersecurity incidents will be promptly responded to by the Company's incident response teams. 4.
Added
Third-Party Risk Management – The Company's formal vendor management program includes security risk assessments requiring the vendor to meet or exceed appropriate security requirements prior to the hosting or sharing of sensitive information with third parties. The Company’s standard contract provisions obligate third-party compliance with industry standard security protections. 5.
Added
Education and Awareness - The Company conducts cybersecurity training, both formally through mandatory courses and informally through written communications and other updates. Employees are tested periodically with phishing tests to reinforce training. The Company has held webinars and also sends periodic emails to its customers with tips and suggestions to protect themselves against cybersecurity incidents.
Added
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.
Added
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.

Item 2. Properties

Properties — owned and leased real estate

3 edited+0 added−0 removed0 unchanged
Biggest changeThese leases expire on various dates through 2045 and generally contain renewal options for periods ranging from 5 to 15 years.
Biggest changeThese leases expire on various dates through 2045 and 36 Table of Contents generally contain renewal options for periods ranging from 5 to 15 years.
ITEM 2. PROPERTIES We hold title to the land and building in Honolulu, Hawaii where our Main branch office and headquarters are located, as well as other branch and operations offices throughout the State of Hawaii. In addition, we occupy or hold leases for approximately 30 other properties including office space for our remaining branches.
ITEM 2. PROPERTIES We hold title to the land and building in Honolulu, Hawaii where our Main branch office and headquarters are located, as well as other branch and operations offices throughout the State of Hawaii. In addition, we occupy or hold leases for approximately 25 other properties including office space for our remaining branches.
For 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."
For additional information relating to properties we own or lease and the related lease rental expense and commitments as of December 31, 2025, 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 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

11 edited+3 added−3 removed0 unchanged
Biggest changeIndexed 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.
Biggest changeIndexed Total Annual Return (as of December 31, 2025) December 31, Index 2020 2021 2022 2023 2024 2025 Central Pacific Financial Corp. $ 100.00 $ 153.78 $ 115.72 $ 119.06 $ 183.68 $ 204.52 Russell 2000 Index 100.00 114.82 91.35 106.82 119.14 134.40 S&P 600 Banks Index 100.00 135.74 125.04 122.91 140.90 147.34 As of January 31, 2026, there were 2,558 shareholders of record, excluding individuals and institutions for which shares were held in the names of nominees and brokerage firms. 38 Table of Contents Dividends CPF relies on dividends from the Bank to meet its obligations.
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.
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, 2020 and ending December 31, 2025.
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
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." 39 Table of Contents
The graph assumes the investment of $100 on December 31, 2019.
The graph assumes the investment of $100 on December 31, 2020.
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.
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, 2025 154,793 $ 29.36 154,793 $ 18,440,402 November 1-30, 2025 104,509 29.46 104,000 15,376,269 December 1-31, 2025 270,820 32.17 270,820 6,664,168 Total 530,122 30.81 529,613 6,664,168 [1] During the three months ended December 31, 2025, 509 shares were acquired from employees in connection with income tax withholding obligations related to the vesting of restricted stock or performance stock units.
Additionally, our ability to pay dividends depends on our ability to obtain dividends from our Bank. As a Hawaii state-chartered bank, the Bank may only pay dividends to the extent it has retained earnings as defined under Hawaii banking law ("Statutory Retained Earnings"), which differs from GAAP retained earnings.
As a Hawaii state-chartered bank, the Bank may only pay dividends to the extent it has Statutory Retained Earnings, as defined under Hawaii banking law, which differs from GAAP retained earnings. As of December 31, 2025, the Bank had Statutory Retained Earnings of $234.7 million.
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.
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.
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.
Issuer Purchases of Equity Securities On January 28, 2025, the Company's Board of Directors authorized a share repurchase plan (the “2025 Repurchase Plan”), permitting the repurchase of up to $30 million of the Company's common stock. Repurchases may be made from time to time in the open market or through privately negotiated transactions.
The 2024 Repurchase Plan replaced and superseded in its entirety the share repurchase program previously approved by the Company’s Board of Directors.
The 2025 Repurchase Plan replaced and superseded in its entirety the share repurchase program previously approved by the Company’s Board of Directors. During the three months ended December 31, 2025, the Company repurchased 529,613 shares of common stock, at an aggregate cost of $16.3 million under the 2025 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, 2024.
There is no assurance that dividends will continue at the current rate or at all. Under the terms of the Company's junior subordinated debentures, its ability to pay dividends with respect to common stock would be restricted if the obligations under the junior subordinated debentures were not current.
We 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.
During the year ended December 31, 2025, the Company repurchased 788,261 shares of common stock, at an aggregate cost of $23.3 million under the 2025 Repurchase Plan. As of December 31, 2025, $6.7 million in share repurchase authorization remained available for repurchase under the Company's 2025 Repurchase Plan.
Removed
There can be no assurance that the Board of Directors will continue to pay dividends at the same rate, or at all, in the future.
Added
Dividends are subject to the discretion of the Board of Directors and may be restricted by federal and Hawaii state laws, regulatory guidance from the FRB, and covenants set forth in various agreements the Company is a party to, including covenants set forth in our junior subordinated debentures.
Removed
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").
Added
Obligations on the outstanding junior subordinated debentures were current as of December 31, 2025. See "Part I, Item 1. Business — Supervision and Regulation" for a discussion on regulatory restrictions.
Removed
We cannot provide any assurance as to whether or not we will continue to repurchase common stock under any share repurchase program.
Added
On January 27, 2026, the Company’s Board of Directors approved a new share repurchase plan (the "2026 Repurchase Plan") permitting the repurchase of up to $55.0 million of the Company’s common stock. The 2026 Repurchase Plan replaces the 2025 Repurchase Plan in its entirety. The Company makes no assurance regarding the timing or extent of future repurchases under this program.

Item 7. Management's Discussion & Analysis

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

248 edited+84 added−77 removed37 unchanged
Biggest changeAverage Balances, Interest Income and Expense, Yields, and Rates (Taxable-Equivalent) 2024 2023 2022 (Dollars in thousands) Average Balance Average Yield/ Rate Amount of Interest Average Balance Average Yield/ Rate Amount of Interest Average Balance Average Yield/ Rate Amount of Interest Assets Interest-earning assets: Interest-bearing deposits in other financial institutions $ 220,526 5.26 % $ 11,593 $ 134,150 5.34 % $ 7,163 $ 80,096 0.92 % $ 740 Investment securities, excluding valuation allowance: Taxable (1) 1,334,695 2.49 33,278 1,365,067 2.11 28,789 1,455,246 1.93 28,062 Tax-exempt (1) 141,688 2.26 3,199 150,399 2.45 3,686 159,120 2.55 4,056 Total investment securities 1,476,383 2.47 36,477 1,515,466 2.14 32,475 1,614,366 1.99 32,118 Loans, incl. loans-held-for-sale (2) 5,358,059 4.82 258,192 5,508,530 4.42 243,315 5,298,573 3.78 200,280 Federal Home Loan Bank ("FHLB") stock 6,896 7.38 509 11,317 4.23 478 10,197 3.63 370 Total interest-earning assets 7,061,864 4.34 306,771 7,169,463 3.95 283,431 7,003,232 3.33 233,508 Noninterest-earning assets 316,343 309,780 337,029 Total assets $ 7,378,207 $ 7,479,243 $ 7,340,261 Liabilities and Equity Interest-bearing liabilities: Interest-bearing demand deposits $ 1,287,628 0.17 % $ 2,159 $ 1,359,240 0.13 % $ 1,701 $ 1,438,232 0.06 % $ 806 Savings and money market deposits 2,263,273 1.64 37,043 2,195,763 1.00 21,979 2,208,630 0.19 4,188 Time deposits up to $250,000 538,216 3.16 17,025 415,541 2.15 8,917 245,599 0.70 1,723 Time deposits over $250,000 687,404 4.23 29,059 795,917 3.81 30,288 494,943 0.89 4,391 Total interest-bearing deposits 4,776,521 1.79 85,286 4,766,461 1.32 62,885 4,387,404 0.25 11,108 Federal funds purchased and securities sold 1 5.57 — — — — — — — FHLB advances and other short-term borrowings 17 5.58 1 23,322 4.88 1,139 37,211 2.84 1,055 Long-term debt 156,218 5.81 9,079 148,922 5.80 8,633 105,732 4.66 4,930 Total interest-bearing liabilities 4,932,757 1.91 94,366 4,938,705 1.47 72,657 4,530,347 0.38 17,093 Noninterest-bearing deposits 1,794,469 1,933,666 2,216,645 Other liabilities 129,973 133,053 115,478 Total liabilities 6,857,199 7,005,424 6,862,470 Shareholders' equity 521,008 473,819 477,775 Non-controlling interest — — 16 Total equity 521,008 473,819 477,791 Total liabilities and equity $ 7,378,207 $ 7,479,243 $ 7,340,261 Net interest income $ 212,405 $ 210,774 $ 216,415 Interest rate spread 2.43 % 2.48 % 2.95 % Net interest margin 3.01 % 2.94 % 3.09 % (1) At amortized cost.
Biggest changeAverage Balances, Interest Income and Expense, Yields, and Rates (Taxable-Equivalent) 2025 2024 2023 (Dollars in thousands) Average Balance Average Yield/ Rate Amount of Interest Average Balance Average Yield/ Rate Amount of Interest Average Balance Average Yield/ Rate Amount of Interest Assets Interest-earning assets: Interest-bearing deposits in other financial institutions $ 164,721 4.31 % $ 7,096 $ 220,526 5.26 % $ 11,593 $ 134,150 5.34 % $ 7,163 Investment securities, excluding valuation allowance: Taxable (1) 1,356,467 2.86 38,849 1,334,695 2.49 33,278 1,365,067 2.11 28,789 Tax-exempt (1) (3) 138,415 2.58 3,572 141,688 2.26 3,199 150,399 2.45 3,686 Total investment securities 1,494,882 2.84 42,421 1,476,383 2.47 36,477 1,515,466 2.14 32,475 Loans, incl. loans-held-for-sale (2) 5,320,258 4.96 263,906 5,358,059 4.82 258,192 5,508,530 4.42 243,315 Federal Reserve Bank ("FRB") and Federal Home Loan Bank ("FHLB") stock 23,948 6.22 1,489 6,896 7.38 509 11,317 4.23 478 Total interest-earning assets 7,003,809 4.50 314,912 7,061,864 4.34 306,771 7,169,463 3.95 283,431 Noninterest-earning assets 334,559 316,343 309,780 Total assets $ 7,338,368 $ 7,378,207 $ 7,479,243 Liabilities and Equity Interest-bearing liabilities: Interest-bearing demand deposits $ 1,357,433 0.13 % $ 1,826 $ 1,287,628 0.17 % $ 2,159 $ 1,359,240 0.13 % $ 1,701 Savings and money market deposits 2,302,973 1.48 34,178 2,263,273 1.64 37,043 2,195,763 1.00 21,979 Time deposits up to $250,000 442,001 2.33 10,309 538,216 3.16 17,025 415,541 2.15 8,917 Time deposits over $250,000 591,162 3.35 19,823 687,404 4.23 29,059 795,917 3.81 30,288 Total interest-bearing deposits 4,693,569 1.41 66,136 4,776,521 1.79 85,286 4,766,461 1.32 62,885 Federal funds purchased and securities sold — — — 1 5.57 — — — — FHLB advances and other short-term borrowings — — — 17 5.58 1 23,322 4.88 1,139 Long-term debt 127,707 5.59 7,143 156,218 5.81 9,079 148,922 5.80 8,633 Total interest-bearing liabilities 4,821,276 1.52 73,279 4,932,757 1.91 94,366 4,938,705 1.47 72,657 Noninterest-bearing deposits 1,824,581 1,794,469 1,933,666 Other liabilities 123,502 129,973 133,053 Total liabilities 6,769,359 6,857,199 7,005,424 Shareholders' equity 569,009 521,008 473,819 Non-controlling interest — — — Total equity 569,009 521,008 473,819 Total liabilities and equity $ 7,338,368 $ 7,378,207 $ 7,479,243 Taxable-equivalent net interest income $ 241,633 $ 212,405 $ 210,774 Taxable-equivalent adjustment (3) (750) (672) (774) Net interest income $ 240,883 $ 211,733 $ 210,000 Interest rate spread 2.98 % 2.43 % 2.48 % Net interest margin 3.45 % 3.01 % 2.94 % (1) At amortized cost.
(*) Early termination of lease — 2,274 — (2,274) 2,274 (100.0) N.M.
(*) (100.0) Early termination of lease — — 2,274 — (2,274) N.M.
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.
At a minimum, to ensure that loan proceeds are properly disbursed and to assess whether it is appropriate to capitalize interest or demand cash payment of interest, our monitoring process generally includes: • Physical inspection of the project to ensure work has progressed to the stage for which payment is being requested; • Verification that the work completed is in conformance with plans and specifications and items for which disbursement is requested are within budget; and • Determination that there continues to be satisfactory project progress.
At a minimum, to ensure that loan proceeds are properly disbursed and to assess whether it is appropriate to capitalize interest or demand cash payment of interest, our monitoring process generally includes: 62 • Physical inspection of the project to ensure work has progressed to the stage for which payment is being requested; • Verification that the work completed is in conformance with plans and specifications and items for which disbursement is requested are within budget; and • Determination that there continues to be satisfactory project progress.
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%.
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 presented on a taxable-equivalent basis using a federal statutory tax rate of 21%.
The increase in shareholders' equity from December 31, 2023 to December 31, 2024 was primarily attributable to net income of $53.4 million and other comprehensive income of $8.2 million, partially offset by cash dividends paid of $28.1 million and the repurchase of 49,960 shares of common stock for a total cost of $0.9 million.
The increase in shareholders' equity from December 31, 2023 to December 31, 2024 was primarily attributable to net income of $53.4 million and other comprehensive income of $8.2 million, partially offset by cash dividends paid of $28.1 million, and the repurchase of 49,960 shares of common stock at a total cost of $0.9 million.
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.
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 class are either unsecured or secured by personal assets such as automobiles.
Risk of credit losses could be greater in this loan category relative to secured loans where a greater percentage of the loan amount is usually covered by collateral. Nonetheless, any collateral or personal guarantees obtained on commercial loans can mitigate the increased risk and help to reduce credit losses.
Risk of credit losses could be greater in this loan class relative to secured loans where a greater percentage of the loan amount is usually covered by collateral. Nonetheless, any collateral or personal guarantees obtained on commercial loans can mitigate the increased risk and help to reduce credit losses.
The increase in taxable-equivalent interest income in 2024 from 2023 was primarily due to an increase in the average yields earned on loans and investment securities of 40 bps and 33 bps, resulting in higher interest income of approximately $21.5 million and $4.9 million, respectively.
The increase in taxable-equivalent interest income in 2024 from 2023 was primarily due to increases in the average yields earned on loans and investment securities of 40 bps and 33 bps, respectively, resulting in higher interest income of approximately $21.5 million and $4.9 million, respectively.
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 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. 78
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.
Alternate rate scenarios assume rates move up or down 100 bps, 200 bps or 300 bps in either a gradual (defined as the stated change over a 12-month period in equal increments) or an instantaneous, parallel fashion.
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.
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.
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.
Trust Preferred Securities As of December 31, 2025, 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.
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.
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. 70 The following table sets forth the composition of our deposits by category as of the dates indicated. Table 22.
We may also require borrowers to directly pay scheduled interest payments. Our process for determining that construction projects are moving as planned are detailed in our lending policies and guidelines. Prior to approving a loan, the Company and borrower generally agree on a construction budget, a proforma monthly disbursement schedule, and sales/leaseback assumptions.
We may also require borrowers to directly pay scheduled interest payments. Our process for assessing whether construction projects are moving as planned are detailed in our lending policies and guidelines. Prior to approving a loan, the Company and borrower generally agree on a construction budget, a proforma monthly disbursement schedule, and sales/leaseback assumptions.
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 following table reflects our static net interest income sensitivity analysis as of December 31, 2025. The simulations estimate net interest income assuming no balance sheet growth. 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.
Qualifying payments for our variable-rate residential mortgage loans with initial fixed-rate periods of five years or less are calculated using the greater of the note rate plus 2% per annum or the fully indexed rate.
For variable-rate residential mortgage loans with initial fixed-rate periods of five years or less, qualifying payments are calculated using the greater of (a) the note rate plus 2% per annum, or (b) the fully indexed rate.
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.
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 securing specific loans, changes in lending and underwriting standards and general economic factors, nationally and in the markets we serve.
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.
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. 65 Table 17.
In addition, the Company recognized a gain on sale of a real estate office property of $5.1 million in 2023.
Additionally, the Company recognized a $5.1 million gain on the sale of a real estate office property in 2023.
These decreases were partially offset by higher other service charges and fees of $2.0 million and higher income from bank-owned life insurance ("BOLI") of $1.7 million. Significant variances in income from BOLI are primarily attributable to volatility in the equity markets and higher death benefit income.
These decreases were partially offset by higher other service charges and fees of $2.0 million and higher income from BOLI of $1.7 million. Significant variances in income from BOLI are primarily attributable to volatility in the equity markets and higher death benefit income.
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.
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.
The Company sold 17 AFS investment securities with a book value of $30.0 million, weighted average yield of 3.25%, weighted average duration of 3.4 years, and received proceeds of $28.1 million, which resulted in gross realized losses of $1.9 million. 63 Table of C o ntents No gross gains were realized on the sale.
The Company sold 17 AFS investment securities with a book value of $30.0 million, weighted average yield of 3.25%, weighted average duration of 3.4 years, and received proceeds of $28.1 million, which resulted in gross realized losses of $1.9 million. No gross gains were realized on the sale.
The Director of Compliance reviews formal complaints to determine if a significant compliance risk exists and communicates those findings to our Board Risk Committee. Strategic Risk Strategic risk is the risk to earnings or capital arising from adverse decisions or improper implementation of strategic decisions.
The Director of Compliance reviews formal complaints to determine if significant compliance risk exists and communicates findings to the Board Risk Committee. Strategic Risk Strategic risk refers to the risk to earnings or capital arising from adverse strategic decisions or the improper implementation of those decisions.
In certain rare circumstances, we may decide to extend, renew, and/or restructure the terms of a construction loan. Reasons for the restructure can range from cost overruns to project delays and the restructuring can result in additional funds being advanced or an extension of the maturity date of the loan.
In certain rare circumstances, we may decide to extend, renew, and/or restructure the terms of a construction loan due to cost overruns or project delays and restructuring can result in additional funds being advanced or an extension of the maturity date of the loan.
I n the fourth quarter of 2024, the Company executed an investment portfolio repositioning of its AFS investment securities portfolio. The Company sold 24 lower-yielding AFS investment securities with a book value of $106.5 million and received proceeds of $96.6 million, which resulted in gross realized losses of $9.9 million. No gross gains were realized on the sale.
Investment Portfolio Repositioning I n the fourth quarter of 2024, the Company executed an investment portfolio repositioning of its available-for-sale ("AFS") investment securities portfolio. The Company sold 24 lower-yielding AFS investment securities with a book value of $106.5 million, and received proceeds of $96.6 million, which resulted in gross realized losses of $9.9 million.
Financial Statements and Supplementary Data." Introduction We are a bank holding company that, through our banking subsidiary, Central Pacific Bank, offers full service commercial banking in the State of Hawaii. We strive to provide exceptional customer service and products that meet our customers' needs.
Introduction We are a bank holding company that, through our banking subsidiary, Central Pacific Bank, offers full service commercial banking primarily in the State of Hawaii. We strive to provide exceptional customer service and products that meet our customers' needs.
Other consumer loans of $35.5 million at December 31, 2024 increased by $1.6 million, or 4.7%, from December 31, 2023 of $33.9 million, which decreased by $1.3 million, or 3.8%, from $35.2 million at December 31, 2022.
Other consumer loans of $34.3 million at December 31, 2025 decreased by $1.2 million, or 3.4%, from December 31, 2024 of $35.5 million, which increased by $1.6 million, or 4.7%, from $33.9 million at December 31, 2023.
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.
In January 2026, the Company’s Board of Directors approved a new authorization to repurchase of up to $55.0 million of its common stock from time to time in the open market or in privately negotiated transactions (the "2026 Repurchase Plan"), pursuant to a newly authorized share repurchase program.
In the first quarter of 2022, the Company entered into a forward starting interest rate swap on certain municipal debt securities with a notional amount of $115.5 million. The swap became effective on March 31, 2024. The Company pays the counterparty a fixed rate of 2.095% and receives a floating rate based on the Federal Funds effective rate.
Interest Rate Swap In the first quarter of 2022, the Company entered into a forward starting interest rate swap on certain municipal debt securities with a notional amount of $115.5 million. Under the terms of the swap, the Company pays the counterparty a fixed rate of 2.095%, and receives a floating rate based on the Federal Funds effective rate.
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.
Total available sources of liquidity as a percentage of uninsured and uncollateralized deposits was approximately 116% at December 31, 2025. 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 2025 Repurchase Plan replaces and supersedes in its entirety the 2024 Repurchase Plan. The Company will continue to monitor the environment, capital needs, and assess risk and return as part of its ongoing capital management decisions on future share repurchases, and there can be no assurance that the Company will repurchase shares of its common stock in the future.
The Company will continue to monitor the environment, capital needs, and assess risk and return as part of its ongoing capital management decisions on future share repurchases, and there can be no assurance that the Company will repurchase shares of its common stock in the future.
The decrease in our ACL for loans as a percentage of total loans from December 31, 2023 to December 31, 2024 and the decrease in the Provision in 2024 reflects improvements in the economic forecast while maintaining adequate coverage for our loan portfolio.
The increase in our ACL on loans as a percentage of total loans from December 31, 2024 to December 31, 2025 and the increase in the Provision in 2025 reflects improvements in the economic forecast while maintaining adequate coverage for our loan portfolio.
(*) N.M. (*) Amortization and impairment of intangible assets 1,461 39 — 1,422 39 3,646.2 N.M. (*) Branch consolidation costs — — 612 — (612) N.M. (*) (100.0) Loss on disposal of fixed assets 55 12 5 43 7 358.3 140.0 Loss on sale of loans — 197 — (197) 197 (100.0) N.M.
(*) Amortization and impairment of intangible assets — 1,461 39 (1,461) 1,422 (100.0) 3,646.2 Branch consolidation costs 1,516 — — 1,516 — N.M. (*) N.M. (*) Loss on disposal of fixed assets 3 55 12 (52) 43 (94.5) 358.3 Loss on sale of loans — — 197 — (197) N.M.
We recorded a provision for credit losses of $9.8 million in 2024, compared to a provision of $15.7 million in 2023. The lower provision for credit losses was primarily due to improvements in the economic forecast and movements in loan balances by segment, combined with an overall loan balance decline during the year.
We recorded a provision for credit losses of $15.7 million in 2025, compared to a provision of $9.8 million in 2024. The higher provision for credit losses was primarily due to movements in loan balances by segment, partially offset by improvements in the economic forecast, combined with an overall loan balance decline during the year.
The decrease in the effective tax rate in 2024 from 2023 was primarily attributable to higher tax-exempt income from BOLI as a percentage of pre-tax income, combined with additional tax credits recognized and tax return to provision adjustments in 2024. The decrease in income tax expense in 2023 from 2022 was primarily due to lower pre-tax income.
The decrease in the effective tax rate in 2024 from 2023 was primarily attributable to higher tax-exempt income from BOLI as a percentage of pretax income, combined with additional tax credits recognized and tax return-to-provision adjustments in 2024.
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.
Book value per share was $22.47, $19.89, and $18.63 at year-end 2025, 2024 and 2023, respectively. The increase in book value per share from 2024 was primarily attributable to the increase in shareholders' equity from December 31, 2024 to December 31, 2025, as described above.
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.
The increase in the ratio of shareholders' equity to total assets from 2024 to 2025 was primarily attributable to higher net income in 2025, and lower unrealized losses on available-for-sale investment securities recorded in accumulated other comprehensive income as of December 31, 2025 compared to December 31, 2024, partially offset by higher repurchases of common stock under the stock repurchase program during the year ended December 31, 2025. 73 The increase in our ratio of shareholders' equity to total assets from 2023 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.
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.
Net of this valuation allowance, the Company's net DTA totaled $23.6 million as of December 31, 2025, compared to a net DTA of $17.8 million as of December 31, 2024, and is included in other assets in the Company's consolidated balance sheets.
During 2023, we recognized a Provision of $15.7 million, which included a Provision for loans of $15.2 million and a Provision for off-balance sheet credit exposures of 60 Table of C o ntents $0.5 million.
During 2023, we recognized a Provision of $15.7 million, which included a Provision for loans of $15.2 million, and a Provision for off-balance sheet credit exposures of $0.5 million.
Critical Accounting Policies and Use of Estimates The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America ("GAAP") requires that management make a number of judgments, estimates and assumptions that affect the reported amounts of assets, liabilities, income and expense in the financial statements and the related disclosures made.
Critical Accounting Policies and Use of Estimates The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America ("GAAP") requires management to make judgments, estimates, and assumptions that affect the reported amounts of assets, liabilities, income, and expenses, as well as related disclosures.
The decrease in other operating income was primarily due to a loss on sale of investment securities of $9.9 million related to an investment portfolio repositioning completed in the fourth quarter of 2024, compared to a loss of $2.1 million primarily due to an investment portfolio repositioning completed in 2023.
Other operating income decreased by $7.9 million from 2023 to 2024. The decrease was primarily due to a $9.9 million loss on sale of investment securities related to a portfolio repositioning completed in the fourth quarter of 2024, compared to a $2.1 million loss primarily attributable to a similar repositioning completed in 2023.
Nonperforming assets at December 31, 2024 were comprised entirely of nonaccrual loans totaling $11.0 million, none of which were loans classified as held for sale. The majority of the nonaccrual loans are in the residential mortgage category which are well-collateralized with strong loan-to-value ratios.
Nonperforming assets at December 31, 2025 were comprised entirely of nonaccrual loans totaling $14.4 million, none of which were loans classified as held for sale. The majority of the nonaccrual loans are in the residential mortgage class which are well-collateralized with strong loan-to-value ratios.
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.
As of December 31, 2024, t approximately $4.22 billion, or 79.0% 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.
Closed-end residential mortgage loan balances as of December 31, 2024 totaled $1.89 billion, decreasing by $35.3 million, or 1.8%, from the $1.93 billion held at year-end 2023, which decreased by $13.2 million, or 0.7%, from the $1.94 billion held at year-end 2022.
Closed-end residential mortgage loan balances as of December 31, 2025 totaled $1.84 billion, decreasing by $53.3 million, or 2.8%, from the $1.89 billion held at year-end 2024, which decreased by $35.3 million, or 1.8%, from the $1.93 billion held at year-end 2023.
Analysis of the appropriateness of the ACL for loans is performed quarterly to coincide with financial disclosure to the public and to the regulatory agencies and is governed by a Board of Directors-approved policy and methodology. The following table sets forth certain information with respect to the ACL for loans as of the dates or for the periods presented.
Analysis of the appropriateness of the ACL on loans is performed quarterly to coincide with financial disclosure to the public and to the regulatory agencies and is governed by a policy and methodology approved by the Audit Committee of the Board of Directors. 68 The following table presents certain information with respect to the ACL on loans as of the dates and for the periods presented: Table 19.
The notes bear a fixed interest rate of 4.75% for the first five years through November 1, 2025 and will reset quarterly thereafter for the remaining five years to the then current three-month Secured Overnight Financing Rate, as published by the Federal Reserve Bank of New York, plus 456 basis points.
The notes bore a fixed interest rate of 4.75% for the first five years through November 1, 2025, after which the interest rate resets quarterly to the then current three-month Secured Overnight Financing Rate, as published by the Federal Reserve Bank of New York, plus 456 basis points.
According to the Honolulu Board of Realtors, the median price for a single-family home on Oahu was $1,100,000 for the year ended December 31, 2024, representing an increase of 4.8% from the median resale price of $1,050,000 for the year ended December 31, 2023.
According to the Honolulu Board of Realtors, the median price for a single-family home on Oahu was $1,139,000 for the year ended December 31, 2025, representing an increase of 3.5% from the median resale price of $1,100,000 for the year ended December 31, 2024.
During 2024, the Company repurchased approximately 0.2% of its common stock outstanding at December 31, 2023.
During 2025, the Company repurchased approximately 2.9% of its common stock outstanding at December 31, 2024.
The increase was primarily due to higher salaries and employee benefits of $3.9 million, expenses related to our evaluation and assessment of a strategic opportunity in 2024 of $3.1 million, and higher directors' deferred compensation plan expenses of $1.2 million.
The increase was primarily due to higher salaries and employee benefits of $3.9 million, $3.1 million in expenses related to the evaluation of a strategic opportunity in 2024, an impairment charge on intangible assets of $1.3 million in 2024, and higher directors' deferred compensation plan expenses of $1.2 million.
These decreases were partially offset by higher other service charges and fees of $2.0 million and higher income from bank-owned life insurance of $1.7 million, The higher income from bank-owned life insurance was primarily attributable to stock market volatility and higher death benefit income, and was partially offset by higher deferred compensation expense included in salaries and employee benefits and other expenses in other operating expense.
These decreases were partially offset by higher other service charges and fees of $2.0 million and higher income from BOLI of $1.7 million in 2024, The increase in BOLI income was primarily attributable to stock market volatility and higher death benefit income, partially offset by higher deferred 45 Table of Contents compensation expense included in salaries and employee benefits and other operating expense.
Refer to Note 1 - Summary of Significant Accounting Policies in the accompanying notes to the consolidated financial statements in this report for further discussion of the risk factors considered by management in establishing the ACL.
For additional details on the risk factors considered by management in establishing the ACL, refer to Note 1 - Summary of Significant Accounting Policies in the accompanying notes to the Consolidated Financial Statements.
Commercial mortgage balances as of December 31, 2024 totaled $1.50 billion, increasing by $117.8 million, or 8.5%, from the $1.38 billion held at December 31, 2023, which increased by $19.8 million, or 1.5%, from the $1.36 billion held at December 31, 2022.
Commercial mortgage balances as of December 31, 2025 totaled $1.59 billion, increasing by $93.8 million, or 6.2%, from the $1.50 billion held at December 31, 2024, which increased by $117.8 million, or 8.5%, from the $1.38 billion held at December 31, 2023.
The increase in total other operating expense in 2024, compared to 2023, was primarily due to expenses related to a strategic opportunity in 2024 of $3.1 million, higher salaries and employee benefits of $3.9 million, amortization and impairment of 52 Table of C o ntents intangible assets of $1.4 million, and higher directors' deferred compensation plan expenses of $1.2 million.
Significant fluctuations in directors' deferred compensation plan expenses are primarily due to stock market volatility. 56 Table of Contents The increase in total other operating expense in 2024, compared to 2023, was primarily due to expenses related to a strategic opportunity in 2024 of $3.1 million, higher salaries and employee benefits of $3.9 million, amortization and impairment of intangible assets of $1.4 million, and higher directors' deferred compensation plan expenses of $1.2 million.
Concentrations of Credit Risk As of December 31, 2024, approximately $4.22 billion, or 79.0% of loans outstanding were secured by real estate, including construction loans, residential mortgage loans, home equity loans, and commercial mortgage loans.
Concentrations of Credit Risk As of December 31, 2025, approximately $4.25 billion, or 80.3% of loans outstanding were secured by real estate, including construction loans, residential mortgage loans, home equity loans, and commercial mortgage loans.
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.
The outstanding principal balance of loans with interest reserves was $181.1 million at December 31, 2025, compared to $102.2 million in the prior year, while remaining interest reserves was $23.6 million, or 13.0% of the outstanding principal balance of loans with interest reserves at December 31, 2025, compared to $9.7 million, or 9.5% of the outstanding principal balance of loans with interest reserves at December 31, 2024.
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.
Net charge-offs were $12.4 million, $15.7 million, and $15.0 million, respectively, for the years ended December 31, 2025, 2024 and 2023. The following table presents the allocation of the ACL by loan class as of the dates indicated.
On July 3, 2023, after the cessation of the LIBOR benchmark rate on June 30, 2023, the Company amended its Trust IV and Trust V debt agreements to replace the LIBOR-based reference rate with an adjusted CME Term Secured Overnight Financing Rate ("SOFR") plus a tenor spread adjustment.
On July 3, 2023, following the cessation of the LIBOR benchmark rate on June 30, 2023, the Company amended the debt agreements of Trust IV and Trust V to adopt the CME Term Secured Overnight Financing Rate ("SOFR"), plus a tenor spread adjustment.
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.
During 2024, we recognized a Provision of $9.8 million, which included a Provision for loans of $11.0 million, offset by a credit to the Provision for off-balance sheet credit exposures of $1.1 million.
Our core deposit portfolio grew by $54.0 million, or 0.9%. • Our capital position and consistent profitability allowed us to pay cash dividends of $1.04 per share in 2024.
Our core deposit portfolio grew by $19.3 million, or 0.3%. • Our capital position and consistent profitability allowed us to pay cash dividends of $1.09 per share in 2025.
Net Interest Income Sensitivity Estimated Net Interest Income Sensitivity Rate Change Gradual Instantaneous +300 bps 3.03 % 4.00 % +200 bps 1.91 % 2.68 % +100 bps 0.84 % 1.36 % -100 bps (1.36) % (2.21) % -200 bps (2.93) % (4.74) % -300 bps (4.55) % (7.41) % Liquidity Risk and Borrowing Arrangements Our objective in managing liquidity is to maintain a balance between sources and uses of funds in order to economically meet the cash requirements of customers for loans and deposit withdrawals and participate in lending and investment opportunities as they arise.
Net Interest Income Sensitivity December 31, 2025 December 31, 2024 Estimated Net Interest Income Sensitivity Estimated Net Interest Income Sensitivity Rate Change Gradual Instantaneous Gradual Instantaneous +300 bps 2.58 % 4.33 % 3.03 % 4.00 % +200 bps 1.60 % 2.93 % 1.91 % 2.68 % +100 bps 0.60 % 1.49 % 0.84 % 1.36 % -100 bps (0.83) % (1.06) % (1.36) % (2.21) % -200 bps (1.54) % (2.57) % (2.93) % (4.74) % -300 bps (2.35) % (4.51) % (4.55) % (7.41) % Liquidity Risk and Borrowing Arrangements The Company's objective in managing liquidity is to maintain a prudent balance between sources and uses of funds in order to economically meet the cash requirements of customers for loans and deposit withdrawals, while also supporting lending and investment opportunities as they arise.
A favorable business environment is generally characterized by expanding gross state product, low unemployment and rising personal income; while an unfavorable business environment is characterized by the reverse.
A favorable business climate in Hawaii is generally characterized by expanding gross state product, low unemployment, and rising personal income; while an unfavorable business climate reflects the opposite.
(*) N.M. (*) Commissions on sale of checks 298 312 307 (14) 5 (4.5) 1.6 Gain on sale of premises and equipment — 5,128 — (5,128) 5,128 (100.0) N.M.
(*) Commissions on sale of checks 279 298 312 (19) (14) (6.4) (4.5) Gain on sale of premises and equipment — — 5,128 — (5,128) N.M.
Income Taxes In 2024, the Company recorded income tax expense of $14.6 million, compared to $18.2 million in 2023, and $24.8 million in 2022. Our effective tax rate was 21.5% in 2024 compared to 23.6% in 2023 and 25.2% in 2022. The decrease in income tax expense in 2024 from 2023 was primarily due to lower pre-tax income.
Income Taxes In 2025, the Company recorded income tax expense of $20.8 million, compared to $14.6 million in 2024, and $18.2 million in 2023. The effective tax rate was 21.2% in 2025 compared to 21.5% in 2024 and 23.6% in 2023. The increase in income tax expense in 2025 from 2024 was primarily due to higher pre-tax income.
As of December 31, 2024, the Company determined that neither this Act nor changes to income tax laws or regulations in other jurisdictions had a significant impact on income tax expense. As of December 31, 2024, the Company estimates that it will not owe any excise tax on the Company's stock repurchases in 2024.
As of December 31, 2025, the Company determined that neither this Act nor changes to income tax laws or regulations in other jurisdictions had a significant impact on income tax expense. As of December 31, 2025, the Company estimates that it will owe and therefore has accrued approximately $0.2 million in excise tax on the Company's stock repurchases in 2025.
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.
Our ACL on loans as a percentage of our nonaccrual loans decreased to 414% at December 31, 2025, from 537% at December 31, 2024, which decreased from 912% at December 31, 2023. 69 Overall, the Company maintained strong credit quality as represented by nonperforming assets of $14.4 million, $11.0 million, and $7.0 million at December 31, 2025, 2024 and 2023, respectively.
We utilize internal auditors and independent audit firms to test key controls of operational processes and to audit information systems, compliance management programs, loan programs and trust services. The key to managing transaction risk is in the design, documentation and implementation of well-defined procedures and controls.
We employ both internal auditors and independent audit firms to test key operational controls and audit information systems, compliance programs, loan programs, and trust services. Effective management of transaction risk depends on the design, documentation, and implementation of well-defined procedures and controls.
Deposits The primary source of our funding comes from deposits in the State of Hawaii. In this competitive market, we strive to distinguish ourselves by providing exceptional customer service in our branch offices and through digital channels, and establishing long-term relationships with businesses and their principals.
In this competitive market, we strive to distinguish ourselves by providing exceptional customer service in our branch offices and through digital channels, and establishing long-term relationships with businesses and their principals.
In January 2024, the Company’s Board of Directors approved a new authorization to repurchase 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"), pursuant to a newly authorized share repurchase program.
In January 2024, the Company’s Board of Directors authorized a new share repurchase program (the "2024 Repurchase Plan") allowing the Company to repurchase of up to $20 million of its common stock in open market or privately negotiated transactions. The 2024 Repurchase Plan superseded the prior repurchase authorization in its entirety.
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.
Financial Statements and Supplementary Data." The table below presents information regarding the average balances and average rates paid for certain deposit categories for the periods presented. Table 24.
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.
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. These notes were subsequently exchanged for registered notes with identical terms at the end of the fourth quarter of 2020.
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.
The results indicate that the Company’s balance sheet is relatively well-positioned against movements in interest rates and remains within ALCO Policy risk limits that have been approved by the Board of Directors. Table 25.
The median resale price for condominiums on Oahu was $515,000 for the year ended December 31, 2024, representing an increase of 1.3% from the median resale price of $508,500 for the year ended December 31, 2023. Oahu unit sales volume increased by 9.1% for single-family homes, and decreased by 2.5% for condominiums in 2024 from 2023.
The median resale price for condominiums on Oahu was $507,250 for the year ended December 31, 2025, representing a decrease of 1.5% from the median resale price of $515,000 for the year ended December 31, 2024. Oahu unit sales volume increased by 3.5% for single-family homes, and decreased by 1.1% for condominiums in 2025 from 2024.
Overview of Results of Operations 2024 vs. 2023 Comparison In 2024, we recognized net income of $53.4 million, or fully diluted earnings per share ("EPS") of $1.97, compared to net income of $58.7 million, or EPS of $2.17, in 2023. Our ROA and ROE for 2024 was 0.72% and 10.25%, respectively, compared to 0.78% and 12.38%, respectively, in 2023.
Overview of Results of Operations 2025 vs. 2024 Comparison In 2025, we recognized net income of $77.5 million, or fully diluted earnings per share ("EPS") of $2.86, compared to net income of $53.4 million, or EPS of $1.97, in 2024. Our ROA and ROE for 2025 was 1.06% and 13.62%, respectively, compared to 0.72% and 10.25%, respectively, in 2024.
The average rate paid on all deposits increased 36 bps to 1.30% in 2024 from 0.94% in 2023, which increased from 0.17% in 2022.
The average rate paid on all deposits decreased 29 bps to 1.01% in 2025 from 1.30% in 2024, which increased from 0.94% in 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.
For consumer lines of credit, qualifying payments are calculated using a percentage of the credit limit that exceeds the actual required payment based on the fully indexed interest rate . The following table presents the maturity distribution and sensitivities of the loan portfolio to changes in interest rates at December 31, 2025.
(See Tables 3-8 for reconciliations of the adjusted non-GAAP financial measures.) • We recorded return on average assets ("ROA") and return on average shareholders' equity ("ROE") ratios of 0.72% and 10.25%, respectively, in 2024, compared to ROA and ROE ratios of 0.78% and 12.38%, respectively, in 2023.
(See Tables 1-6 for reconciliations of the adjusted non-GAAP financial measures.) • We recorded return on average assets ("ROA") and return on average shareholders' equity ("ROE") ratios of 1.06% and 13.62%, respectively, in 2025, compared to ROA and ROE ratios of 0.72% and 10.25%, respectively, in 2024.
Net interest income is our primary source of earnings and is derived primarily from the difference between the interest income we earn on loans and investment securities, and the interest expense we pay on deposits and borrowings.
Net interest income remains our primary source of earnings and is derived from the difference between interest income earned on loans, investment securities and other interest-earning assets, and the interest expense we pay on deposits, borrowings, and other interest-bearing liabilities.
The increase in nonperforming assets in 2024 was attributable to $11.6 million in gross additions, offset by $2.0 million in repayments, $0.7 million in loans returned to accrual status and $5.0 million in charge-offs, valuation and other adjustments.
The increase in nonperforming assets in 2025 was attributable to $11.7 million in gross additions, offset by $1.9 million in repayments, $3.3 million in loans returned to accrual status, and $3.1 million in charge-offs, valuation adjustments and other reductions.
Non-GAAP Financial Measures To supplement our consolidated financial information, the Company uses certain non-GAAP financial measures, which are not meant to be considered in isolation or as a substitute for comparable GAAP financial measures.
Non-GAAP Financial Measures To supplement its consolidated financial information, the Company utilizes certain non-GAAP financial measures. These measures are not intended to be considered in isolation or as a substitute for comparable GAAP results.

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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." 74
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." 79

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