株探米国株
英語
エドガーで原本を確認する
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Table of Contents

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549

FORM 10-Q

(Mark One)

☒      QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2025

or

☐         TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from               to              

Commission File Number: 001-31567

CENTRAL PACIFIC FINANCIAL CORP.
(Exact name of registrant as specified in its charter)

Hawaii 99-0212597
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)
 
220 South King Street, Honolulu, Hawaii 96813
(Address of principal executive offices) (Zip code)
 
(808) 544-0500
(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:
Title of each class Trading Symbol(s) Name of each exchange on which registered
Common stock, No Par Value CPF New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

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

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

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

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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

The number of shares outstanding of registrant's common stock, no par value, on July 31, 2025 was 26,981,436 shares.

Table of Contents
CENTRAL PACIFIC FINANCIAL CORP. AND SUBSIDIARIES
Form 10-Q

Table of Contents
  Page
 

2
Table of Contents
PART I.   FINANCIAL INFORMATION

Item 1. Financial Statements

CENTRAL PACIFIC FINANCIAL CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)

As of
(dollars in thousands) June 30,
2025		 December 31,
2024
Assets    
Cash and due from financial institutions $ 110,935  $ 77,774 
Interest-bearing deposits in other financial institutions 206,035  303,167 
Investment securities:
Debt securities available-for-sale, at fair value 765,213  737,658 
Debt securities held-to-maturity, at amortized cost; fair value of: $499,833 as of June 30, 2025 and $506,681 as of December 31, 2024
 580,476  596,930 
Total investment securities 1,345,689  1,334,588 
Loans held for sale —  5,662 
Loans 5,289,809  5,332,852 
Less: allowance for credit losses (59,611) (59,182)
Loans, net of allowance for credit losses 5,230,198  5,273,670 
Premises and equipment, net 103,657  104,342 
Accrued interest receivable 23,518  23,378 
Investment in unconsolidated entities 49,370  52,417 
Mortgage servicing rights, net 8,436  8,473 
Bank-owned life insurance 177,639  176,216 
Federal Home Loan Bank of Des Moines ("FHLB") and Federal Reserve Bank ("FRB") stock 24,816  6,929 
Right-of-use lease assets 30,693  30,824 
Other assets 58,581  74,656 
Total assets $ 7,369,567  $ 7,472,096 
Liabilities and Equity    
Deposits:    
Noninterest-bearing demand $ 1,938,226  $ 1,888,937 
Interest-bearing demand 1,336,620  1,338,719 
Savings and money market 2,242,122  2,329,170 
Time 1,028,021  1,087,185 
Total deposits 6,544,989  6,644,011 
Long-term debt, net of unamortized debt issuance costs 131,466  156,345 
Lease liabilities 31,981  32,025 
Accrued interest payable 8,755  10,051 
Other liabilities 83,502  91,279 
Total liabilities 6,800,693  6,933,711 
Contingent liabilities and other commitments (see Note 17)
Equity:    
Preferred stock, no par value, authorized 1,000,000 shares;
issued and outstanding: none as of June 30, 2025 and December 31, 2024
 —  — 
Common stock, no par value, authorized 185,000,000 shares;
issued and outstanding: 26,981,436 as of June 30, 2025 and 27,065,570 as of December 31, 2024
 399,823  404,494 
Additional paid-in capital 106,033  105,054 
Retained earnings 164,676  143,259 
Accumulated other comprehensive loss (101,658) (114,422)
Total equity 568,874  538,385 
Total liabilities and equity $ 7,369,567  $ 7,472,096 

See accompanying notes to consolidated financial statements.
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CENTRAL PACIFIC FINANCIAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)

Three Months Ended June 30, Six Months Ended June 30,
(dollars in thousands, except per share data) 2025 2024 2025 2024
Interest income:        
Interest and fees on loans $ 65,668  $ 64,422  $ 129,787  $ 127,241 
Interest and dividends on investment securities:
Taxable investment securities 9,871  8,466  19,672  15,677 
Tax-exempt investment securities 709  598  1,417  1,253 
Interest on deposits in other financial institutions 1,484  2,203  3,738  5,814 
Dividend income on FHLB and FRB stock 388  151  712  257 
Total interest income 78,120  75,840  155,326  150,242 
Interest expense:        
Interest on deposits:        
Demand 443  490  895  989 
Savings and money market 8,414  8,977  17,276  17,420 
Time 7,616  12,173  15,723  25,163 
Interest on short-term borrowings —  1  —  1 
Interest on long-term debt 1,851  2,278  3,937  4,561 
Total interest expense 18,324  23,919  37,831  48,134 
Net interest income 59,796  51,921  117,495  102,108 
Provision for credit losses 4,987  2,239  9,159  6,175 
Net interest income after provision for credit losses 54,809  49,682  108,336  95,933 
Other operating income:        
Mortgage banking income 744  1,040  1,341  1,653 
Service charges on deposit accounts 2,124  2,135  4,271  4,238 
Other service charges and fees 5,957  5,869  11,723  11,130 
Income from fiduciary activities 1,501  1,449  3,125  2,884 
Income from bank-owned life insurance 2,260  1,234  2,757  2,756 
Other 427  394  892  704 
Total other operating income 13,013  12,121  24,109  23,365 
Other operating expense:        
Salaries and employee benefits 22,696  21,246  44,515  41,981 
Net occupancy 4,253  4,597  8,645  9,197 
Computer software 5,320  4,381  10,034  8,668 
Legal and professional services 2,873  2,506  5,671  4,826 
Equipment 950  995  2,032  2,005 
Advertising 832  901  1,719  1,815 
Communication 901  657  1,934  1,494 
Other 6,121  5,868  11,468  11,741 
Total other operating expense 43,946  41,151  86,018  81,727 
Income before income taxes 23,876  20,652  46,427  37,571 
Income tax expense 5,605  4,835  10,396  8,809 
Net income $ 18,271  $ 15,817  $ 36,031  $ 28,762 
Per common share data:        
Basic earnings per share $ 0.68  $ 0.58  $ 1.33  $ 1.06 
Diluted earnings per share $ 0.67  $ 0.58  $ 1.33  $ 1.06 
Basic weighted average shares outstanding 26,988,169  27,053,549  27,037,388  27,050,037 
Diluted weighted average shares outstanding 27,069,677  27,116,349  27,139,969  27,106,267 

See accompanying notes to consolidated financial statements.
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CENTRAL PACIFIC FINANCIAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)

Three Months Ended June 30, Six Months Ended June 30,
(dollars in thousands) 2025 2024 2025 2024
Net income $ 18,271  $ 15,817  $ 36,031  $ 28,762 
Other comprehensive income, net of tax:
Net change in fair value of available-for-sale investment securities 1,728  274  12,983  (4,906)
Amortization of unrealized losses on investment securities transferred to held-to-maturity 1,305  1,374  2,448  2,580 
Net change in fair value of derivatives (1,126) (16) (2,667) 2,231 
Total other comprehensive income (loss), net of tax 1,907  1,632  12,764  (95)
Comprehensive income $ 20,178  $ 17,449  $ 48,795  $ 28,667 

See accompanying notes to consolidated financial statements.
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CENTRAL PACIFIC FINANCIAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(Unaudited)

(dollars in thousands, 
except per share data)		 Common
Shares
Outstanding		 Preferred
Stock		 Common
Stock		 Additional Paid-In Capital Retained Earnings Accum.
Other
Comp.
Loss		 Total
Balance at December 31, 2024 27,065,570  $ —  $ 404,494  $ 105,054  $ 143,259  $ (114,422) $ 538,385 
Net income —  —  —  —  17,760  —  17,760 
Other comprehensive income —  —  —  —  —  10,857  10,857 
Cash dividends paid ($0.27 per share)
 —  —  —  —  (7,327) —  (7,327)
Common stock repurchased and retired and other related costs (77,316) —  (2,094) —  —  —  (2,094)
Share-based compensation 73,335  —  —  (205) —  —  (205)
Balance at March 31, 2025 27,061,589  —  402,400  104,849  153,692  (103,565) 557,376 
Net income —  —  —  —  18,271  —  18,271 
Other comprehensive income —  —  —  —  —  1,907  1,907 
Cash dividends paid ($0.27 per share)
 —  —  —  —  (7,287) —  (7,287)
Common stock repurchased and retired and other related costs (103,077) —  (2,577) —  —  —  (2,577)
Share-based compensation 22,924  —  —  1,184  —  —  1,184 
Balance at June 30, 2025 26,981,436  $ —  $ 399,823  $ 106,033  $ 164,676  $ (101,658) $ 568,874 

(dollars in thousands, 
except per share data)		 Common
Shares
Outstanding		 Preferred
Stock		 Common
Stock		 Additional Paid-In Capital Retained Earnings Accum.
Other
Comp.
Loss		 Total
Balance at December 31, 2023 27,045,033  $ —  $ 405,439  $ 102,982  $ 117,990  $ (122,596) $ 503,815 
Net income —  —  —  —  12,945  —  12,945 
Other comprehensive loss —  —  —  —  —  (1,727) (1,727)
Cash dividends paid ($0.26 per share)
 —  —  —  —  (7,033) —  (7,033)
Common stock repurchased and retired and other related costs (49,960) —  (945) —  —  —  (945)
Share-based compensation 47,253  —  —  148  —  —  148 
Balance at March 31, 2024 27,042,326  —  404,494  103,130  123,902  (124,323) 507,203 
Net income —  —  —  —  15,817  —  15,817 
Other comprehensive income —  —  —  —  —  1,632  1,632 
Cash dividends paid ($0.26 per share)
 —  —  —  —  (7,036) —  (7,036)
Share-based compensation 21,318  —  —  1,031  —  —  1,031 
Balance at June 30, 2024 27,063,644  $ —  $ 404,494  $ 104,161  $ 132,683  $ (122,691) $ 518,647 

See accompanying notes to consolidated financial statements.
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CENTRAL PACIFIC FINANCIAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (continued)
(Unaudited)

(dollars in thousands, 
except per share data)		 Common
Shares
Outstanding		 Preferred
Stock		 Common
Stock		 Additional Paid-In Capital Retained Earnings Accum.
Other
Comp.
Loss		 Total
Balance at December 31, 2024 27,065,570  $ —  $ 404,494  $ 105,054  $ 143,259  $ (114,422) $ 538,385 
Net income —  —  —  —  36,031  —  36,031 
Other comprehensive income —  —  —  —  —  12,764  12,764 
Cash dividends paid ($0.54 per share)
 —  —  —  —  (14,614) —  (14,614)
Common stock repurchased and retired and other related costs (180,393) —  (4,671) —  —  —  (4,671)
Share-based compensation 96,259  —  —  979  —  —  979 
Balance at June 30, 2025 26,981,436  $ —  $ 399,823  $ 106,033  $ 164,676  $ (101,658) $ 568,874 

(dollars in thousands, 
except per share data)		 Common
Shares
Outstanding		 Preferred
Stock		 Common
Stock		 Additional Paid-In Capital Retained Earnings Accum.
Other
Comp.
Loss		 Total
Balance at December 31, 2023 27,045,033  $ —  $ 405,439  $ 102,982  $ 117,990  $ (122,596) $ 503,815 
Net income —  —  —  —  28,762  —  28,762 
Other comprehensive loss —  —  —  —  —  (95) (95)
Cash dividends paid ($0.52 per share)
 —  —  —  —  (14,069) —  (14,069)
Common stock repurchased and retired and other related costs (49,960) —  (945) —  —  —  (945)
Share-based compensation 68,571  —  —  1,179  —  —  1,179 
Balance at June 30, 2024 27,063,644  $ —  $ 404,494  $ 104,161  $ 132,683  $ (122,691) $ 518,647 

See accompanying notes to consolidated financial statements.
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CENTRAL PACIFIC FINANCIAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

Six Months Ended June 30,
(dollars in thousands) 2025 2024
Cash flows from operating activities:    
Net income $ 36,031  $ 28,762 
Adjustments to reconcile net income to net cash provided by operating activities:  
Provision for credit losses 9,159  6,175 
Depreciation and amortization of premises and equipment 3,563  3,454 
Loss on disposal of premises and equipment 10  16 
Non-cash lease expense 87  — 
Cash flows from operating leases (2,559) (2,682)
Amortization of mortgage servicing rights 397  370 
Net (accretion of discount) amortization of premium on investment securities (543) 1,099 
Share-based compensation 979  1,179 
Net gain on sales of residential mortgage loans (468) (748)
Proceeds from sales of loans held for sale 37,653  36,620 
Originations of loans held for sale (31,523) (38,044)
Equity in the (earnings) losses of unconsolidated entities (33) 31 
Distributions from unconsolidated entities 13  — 
Net increase in cash surrender value of bank-owned life insurance (2,757) (2,756)
Deferred income tax expense (3,238) 1,165 
Net tax expense from share-based compensation 137  128 
Net change in other assets and liabilities 7,805  8,177 
Net cash provided by operating activities 54,713  42,946 
Cash flows from investing activities:    
Purchases of investment securities available-for-sale (50,592) (62,336)
Proceeds from maturities, prepayments and calls of investment securities available-for-sale 41,623  25,495 
Proceeds from maturities, prepayments and calls of investment securities held-to-maturity 19,370  19,545 
Net loan payments received 99,776  59,444 
Purchases of loan portfolios (65,463) (12,384)
Purchases of bank-owned life insurance (726) (2,502)
Proceeds from bank-owned life insurance death benefits 2,060  2,248 
Net purchases of premises and equipment (2,888) (7,932)
Contributions to unconsolidated entities (650) (7,787)
Net purchases of FHLB and FRB stock (17,887) (132)
Net cash provided by investing activities 24,623  13,659 
Cash flows from financing activities:    
Net decrease in deposits (99,022) (265,137)
Repayments of long-term debt (25,000) — 
Cash dividends paid on common stock (14,614) (14,069)
Repurchases of common stock and other related costs (4,671) (945)
Net cash used in financing activities (143,307) (280,151)
Net decrease in cash and cash equivalents (63,971) (223,546)
Cash and cash equivalents at beginning of period 380,941  522,437 
Cash and cash equivalents at end of period $ 316,970  $ 298,891 


CENTRAL PACIFIC FINANCIAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
(Unaudited)

Six Months Ended June 30,
(dollars in thousands) 2025 2024
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest expense paid $ 39,127  $ 52,084 
Income taxes paid, net 2,222  — 
Supplemental disclosure of non-cash information:
Lease liabilities arising from obtaining right-of-use lease assets 1,888  5,029 
Amortization of unrealized losses on investment securities transferred to held-to-maturity at fair value 3,325  3,505 

See accompanying notes to consolidated financial statements.
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CENTRAL PACIFIC FINANCIAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying unaudited consolidated financial statements of Central Pacific Financial Corp. and Subsidiaries (herein referred to as the "Company," "we," "us," or "our") have been prepared in accordance with U.S. generally accepted accounting principles ("GAAP") for interim financial information and instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations.

These interim condensed consolidated financial statements and notes should be read in conjunction with the Company's consolidated financial statements and notes thereto filed on Form 10-K for the fiscal year ended December 31, 2024. In the opinion of management, all adjustments necessary for a fair presentation have been made and include all normal recurring adjustments. Interim results of operations are not necessarily indicative of results to be expected for the year.

Allowance for Credit Losses on Loans

The allowance for credit losses ("ACL") on loans is a valuation account that is deducted from the amortized cost basis of loans to present the net amount expected to be collected on loans. The Company’s policy is to charge off a loan against the ACL during the period in which the loan is deemed to be uncollectible and all interest previously accrued but uncollected, is reversed against current period interest income. Subsequent receipts, if any, are credited first to the remaining principal, then to the ACL on loans as recoveries, and finally to interest income.

The ACL on loans represents management's estimate of all expected credit losses over the expected life of the Company’s loan portfolio as of a given balance sheet date. Management estimates the ACL balance using relevant information available from both internal and external sources, regarding the collectability of cash flows impacted by past events, current conditions, and reasonable and supportable forecasts of future economic conditions. When the Company is unable to forecast future economic events, management may revert to historical information.

The Company's ACL model incorporates a reasonable and supportable forecast period of one year and reverts to historical loss information on a straight-line basis over one year when its forecast is no longer deemed reasonable and supportable. Historical loss experience provides the basis for the Company’s expected credit loss estimate. Adjustments to historical loss information may be made for differences in current loan-specific risk characteristics, such as differences in underwriting standards, portfolio mix, or when historical asset terms do not reflect the contractual terms of the financial assets being evaluated.

The Company's ACL model may also consider other adjustments to address changes in conditions, trends, and circumstances such as local industry changes that could have a significant impact on the risk profile of the loan portfolio and provide for adjustments that may not be reflected or captured in the historical loss data. These factors include: lending policies, imprecision in forecasting future economic conditions, loan profile, lending staff, problem loan trends, loan review, collateral, credit concentration, or other internal and external factors.

The Company uses Moody’s Analytics ("Moody's"), a firm widely recognized and used for its research, analysis, and economic forecasts, for its economic forecast assumptions. The Company generally uses Moody’s most recent Baseline forecast, which is updated at least monthly with a variety of upside and downside economic scenarios and considers both national and Hawaii-specific economic indicators. In addition, the Company uses a qualitative factor for forecast imprecision to account for economic and market volatility or instability.

The ACL on loans is measured on a collective basis when similar risk characteristics exist. The following is a description of the risk characteristics of each segment:

Commercial and industrial loans

Commercial and industrial loans consist primarily of term loans and lines of credit to small- and middle-market businesses and professionals. The predominant risk characteristics of this segment are the cash flows of the business we lend to, global cash flows including guarantor liquidity, as well as economic and market conditions.
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Although our underwriting policy and practice generally requires secondary sources of support or collateral to mitigate risk, cash flow generated from the borrower’s business is typically regarded as the principal source of repayment.

Small Business Administration Paycheck Protection Program ("SBA PPP") loans, which are included in the commercial and industrial loan segment, are guaranteed by the SBA and may be forgivable in whole or in part in accordance with the requirements of the PPP. As a result, we anticipated zero losses on these loans and accordingly applied a Zero Loss methodology from the third quarter of 2023 through the first quarter of 2025. During second quarter of 2025, the Company updated its ACL model to measure expected credit losses on SBA PPP loans consistent with other commercial and industrial loans using the DCF methodology. The impact of this update was immaterial.

Construction loans

Construction loans include both residential and commercial development projects. Each construction project is evaluated for economic viability and construction loans pose higher credit risks than typical secured loans. Financial strength of the borrower, completion risk (the risk that the project will not be completed on time and within budget) and geographic location are the predominant risk characteristics of this segment.

Commercial real estate loans - Multi-family

Multi-family mortgage loans can comprise multi-building properties with extensive amenities or a single building with no amenities. The predominant risk characteristic of this segment is operating risk or the ability to generate sufficient rental income from the operation of the property.

Commercial real estate loans - Others

Commercial real estate loans are secured by commercial properties. The predominant risk characteristic of this segment is operating risk, which is the risk that the borrower will be unable to generate sufficient cash flows from the operation of the property. Interest rate conditions and the commercial real estate market through economic cycles also impact risk levels.

Residential mortgage loans

Residential mortgage loans primarily includes fixed-rate or adjustable-rate loans secured by single-family owner-occupied primary residences in Hawaii. Economic conditions such as unemployment levels, future changes in interest rates, Hawaii home prices and other market factors impact the level of credit risk inherent in the portfolio.

Home equity lines of credit

Home equity lines of credit include fixed or floating interest rate loans and are also primarily secured by single-family owner-occupied primary residences in Hawaii. They are underwritten based on a minimum FICO score, maximum debt-to-income ratio, and maximum combined loan-to-value ratio. Home equity lines of credit are monitored based on credit score, delinquency, end of draw period and maturity.

Consumer loans

Consumer loans consist of unsecured consumer lines of credit and non-revolving (term) consumer loans, including automobile loans. The predominant risk characteristics of this segment relate to current and projected economic conditions, as well as employment and income levels attributed to the borrower.

Due to immateriality of the other consumer revolving loan portfolio, during second quarter of 2025, the Company updated its ACL model to measure expected credit losses on other revolving consumer loans together with non-revolving consumer loans. Both portfolios measured expected credit losses using the DCF methodology. The impact of this update was immaterial.

Purchased consumer loans

Purchased consumer loans consist of automobile and unsecured consumer loans. The predominant risk characteristics of this segment include current and projected economic conditions, employment and income levels, and the quality of purchased consumer loans.

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The following table presents the Company's loan portfolio segments and the methodology used to measure expected credit losses. The historical look-back period is 2008 to present, economic forecast length is one year and the reversion method is one year (on a straight-line basis) for all segments.

Segment Expected Credit Loss Methodology Historical Look-Back Period
Economic Forecast Length
Reversion Method
Commercial and industrial DCF 2008 to present One year One year
(straight-line
basis)
Construction DCF
Commercial real estate - Multi-family DCF
Commercial real estate - All others DCF
Residential mortgage DCF
Home equity DCF
Consumer DCF
Consumer - Purchased WARM

During the third quarter of 2023, the Company updated its methodology to measure expected credit losses from the Probability of Default/Loss Given Default ("PD/LGD") or Loss-Rate Migration methods to the Discounted Cash Flow ("DCF") method for all segments except SBA PPP and purchased consumer loans. The Company believes that the DCF methodology has better alignment with the Current Expected Credit Losses ("CECL") standard for forward looking forecasting, while also factoring in more detailed assumptions. The Company utilizes an industry leading software platform to perform the DCF analysis using a historical look back period of 2008 to present.

The Company uses the Moody's baseline forecast with an economic forecast length of one year and a one-year, straight-line reversion method. We revert to the historical average of the macroeconomic variables being used. During the second quarter of 2025, the forecast models were updated to incorporate post-COVID-19 pandemic data, while still excluding periods affected by the COVID-19 pandemic period due to abnormal and volatile behavior.

The ACL on the purchased consumer loan portfolios is calculated using the Remaining Life methodology (also known as the Weighted Average Remaining Maturity or "WARM" methodology) as this portfolio is evaluated on a pooled basis.

The following is a description of the methodologies utilized to measure expected credit losses from the third quarter of 2023 to present:

Discounted Cash Flow

The DCF methodology calculates CECL reserves as the difference between the amortized cost of a loan and the discounted expected value of future cash flows. Expected future cash flows are calculated based on assumptions of PD/LGD, prepayments and recovery rates, and are discounted using the loan’s effective interest rate.

Remaining Life or Weighted Average Remaining Maturity

Under the remaining life or WARM methodology, lifetime expected credit losses are calculated by determining the remaining life of the loan pool, and then applying a loss rate over this remaining life. The methodology considers historical loss experience to estimate credit losses for the remaining balance of the loan pool. The calculated loss rate is applied to the contractual term (adjusted for prepayments) to determine the loan pool’s current expected credit losses.

Impact of Recently Issued Accounting Pronouncements on Future Filings

In December 2023, the FASB issued ASU 2023-09, "Income Taxes (Topic 740): Improvements to Income Tax Disclosures". ASU 2023-09 expands existing income tax disclosures for rate reconciliations by requiring disclosure of certain specific categories in the rate reconciliation, as well as additional qualitative information about the reconciliation, and additional disaggregated information about income taxes paid. ASU 2023-09 is effective for fiscal years beginning after December 15, 2024, with early adoption permitted, and is to be applied on a prospective basis. The Company adopted the amendments of ASU 2023-09 effective January 1, 2025, which did not have a material impact on its consolidated financial statements. The Company will include the required disclosures in its Annual Report on Form 10-K for the year ending December 31, 2025.

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In November 2024, the FASB issued ASU 2024-03, "Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses". ASU 2024-03 requires public entities to provide disaggregated disclosures, in the notes to the financial statements, of certain categories of expenses that are included in expense line items on the face of the income statement. The amendments in ASU 2024-03 are effective for annual periods beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027. Early adoption is permitted. The Company does not expect the adoption of this standard to have a material impact on the Company’s financial position or results of operations.

2. INVESTMENT SECURITIES

The following tables present the amortized cost, fair value and related ACL on available-for-sale ("AFS") and held-to-maturity ("HTM") investment securities as of June 30, 2025 and December 31, 2024 and the corresponding amounts of gross unrealized gains and losses recognized in accumulated other comprehensive income (loss) and gross unrecognized gains and losses:

Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value ACL
(dollars in thousands)
June 30, 2025
Available-for-sale:        
Debt securities:        
States and political subdivisions $ 143,610  $ 3  $ (28,837) $ 114,776  $ — 
U.S. Treasury and other government-sponsored entities and agencies 102,171  900  (1,656) 101,415  — 
Collateralized loan obligations 40,990  49  (123) 40,916  — 
Mortgage-backed securities:        
Residential - U.S. government-sponsored entities and agencies 467,868  1,382  (47,182) 422,068  — 
Residential - Non-government agencies 16,891  126  (878) 16,139  — 
Commercial - U.S. government-sponsored entities and agencies 80,566  316  (12,578) 68,304  — 
Commercial - Non-government agencies 1,599  —  (4) 1,595  — 
Total available-for-sale investment securities $ 853,695  $ 2,776  $ (91,258) $ 765,213  $ — 

Amortized Cost Gross Unrecognized Gains Gross Unrecognized Losses Fair Value ACL
(dollars in thousands)
June 30, 2025
Held-to-maturity:
Debt securities:
States and political subdivisions $ 41,979  $ —  $ (9,484) $ 32,495  $ — 
Mortgage-backed securities:
Residential - U.S. government-sponsored entities and agencies 538,497  122  (71,281) 467,338  — 
Total held-to-maturity investment securities $ 580,476  $ 122  $ (80,765) $ 499,833  $ — 

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Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value ACL
(dollars in thousands)
December 31, 2024
Available-for-sale:        
Debt securities:        
States and political subdivisions $ 147,014  $ 2  $ (30,183) $ 116,833  $ — 
U.S. Treasury and other government-sponsored entities and agencies 83,861  81  (2,742) 81,200  — 
Collateralized loan obligations 31,254  —  (114) 31,140  — 
Mortgage-backed securities:  
Residential - U.S. government-sponsored entities and agencies 472,476  42  (58,047) 414,471  — 
Residential - Non-government agencies 17,836  151  (1,061) 16,926  — 
Commercial - U.S. government-sponsored entities and agencies 81,400  76  (14,315) 67,161  — 
Commercial - Non-government agencies 9,933  —  (6) 9,927  — 
Total available-for-sale investment securities $ 843,774  $ 352  $ (106,468) $ 737,658  $ — 

Amortized Cost Gross Unrecognized Gains Gross Unrecognized Losses Fair Value ACL
(dollars in thousands)
December 31, 2024
Held-to-maturity:
Debt securities:
States and political subdivisions $ 42,016  $ —  $ (8,884) $ 33,132  $ — 
Mortgage-backed securities:
Residential - U.S. government-sponsored entities and agencies 554,914  —  (81,365) 473,549  — 
Total held-to-maturity investment securities $ 596,930  $ —  $ (90,249) $ 506,681  $ — 

The Company did not transfer any investment securities that were classified as AFS to HTM during the three and six months ended June 30, 2025 and 2024. During the three and six months ended June 30, 2025, the Company recorded a total of $1.8 million and $3.3 million, respectively, in amortization of unrecognized losses on investment securities previously transferred from AFS to HTM. During the three and six months ended June 30, 2024, the Company recorded a total of $1.9 million and $3.5 million, respectively, in amortization of unrecognized losses on investment securities previously transferred from AFS to HTM.

The Company elected to not measure an estimate of credit losses on accrued interest receivable as the Company writes off any uncollectible accrued interest receivable in a timely manner. Accrued interest receivable on investment securities is reported together with accrued interest receivable on loans and other assets in the consolidated balance sheets. Accrued interest receivable on investment securities totaled $4.7 million and $4.8 million as of June 30, 2025 and December 31, 2024, respectively.

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The amortized cost, estimated fair value and weighted average yield of our AFS and HTM investment securities as of June 30, 2025, by contractual maturity, are shown below. Expected maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties. Securities not due at a single maturity date are shown separately.

(dollars in thousands) Amortized Cost Fair Value
Weighted Average Yield (1)
June 30, 2025
Available-for-sale:
Debt securities:
Due in one year or less $ 4,294  $ 4,287  5.74  %
Due after one year through five years 40,003  40,006  4.15 
Due after five years through ten years 60,343  59,050  3.75 
Due after ten years 141,141  112,848  2.84 
Collateralized loan obligations 40,990  40,916  5.75 
Mortgage-backed securities:
Residential - U.S. government-sponsored entities and agencies 467,868  422,068  2.96 
Residential - Non-government agencies 16,891  16,139  4.55 
Commercial - U.S. government-sponsored entities and agencies 80,566  68,304  2.76 
Commercial - Non-government agencies 1,599  1,595  0.24 
Total available-for-sale securities $ 853,695  $ 765,213  3.24  %

(dollars in thousands) Amortized Cost Fair Value
Weighted Average Yield (1)
June 30, 2025
Held-to-maturity:    
Debt securities:
Due after ten years $ 41,979  $ 32,495  2.26  %
Mortgage-backed securities:    
Residential - U.S. government-sponsored entities and agencies 538,497  467,338  1.88 
Total held-to-maturity securities $ 580,476  $ 499,833  1.91  %

(1)Weighted-average yields are computed on an annual basis, and yields on tax-exempt obligations are computed on a taxable-equivalent basis using a federal statutory tax rate of 21%.

The Company did not sell any investment securities during the three and six months ended June 30, 2025 and 2024.

Investment securities with carrying values totaling $757.3 million and $756.0 million as of June 30, 2025 and December 31, 2024, respectively, were pledged to secure public funds on deposit, Federal Reserve Bank borrowings and other financial transactions.

There were no holdings of investment securities of any one issuer, other than the U.S. Government and its agencies, in an amount greater than 10% of shareholders' equity as of June 30, 2025 and December 31, 2024.

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The following tables summarize AFS and HTM investment securities, which were in a loss position as of the dates presented, aggregated by major security type and length of time in a continuous loss position. There were a total of 196 and 218 AFS investment securities which were in an unrealized loss position, without an ACL, as of June 30, 2025 and December 31, 2024, respectively. There were a total of 81 and 83 HTM investment securities which were in an unrecognized loss position, without an ACL, as of June 30, 2025 and December 31, 2024, respectively.

Less Than 12 Months 12 Months or Longer Total
(dollars in thousands) Fair Value Unrealized Losses Fair Value Unrealized Losses Fair Value Unrealized Losses
June 30, 2025
Available-for-sale:
Debt securities:            
States and political subdivisions $ 4,264  $ (9) $ 107,654  $ (28,828) $ 111,918  $ (28,837)
U.S. Treasury and other government-sponsored entities and agencies 1,576  (19) 12,263  (1,637) 13,839  (1,656)
Collateralized loan obligations 31,097  (123) —  —  31,097  (123)
Mortgage-backed securities:            
Residential - U.S. government-sponsored entities and agencies 54,287  (719) 255,027  (46,463) 309,314  (47,182)
Residential - Non-government agencies 4,919  (69) 7,328  (809) 12,247  (878)
Commercial - U.S. government-sponsored entities and agencies —  —  49,169  (12,578) 49,169  (12,578)
Commercial - Non-government agencies 1,595  (4) —  —  1,595  (4)
Total $ 97,738  $ (943) $ 431,441  $ (90,315) $ 529,179  $ (91,258)

Less Than 12 Months 12 Months or Longer Total
(dollars in thousands) Fair Value Unrecognized Losses Fair Value Unrecognized Losses Fair Value Unrecognized Losses
June 30, 2025
Held-to-maturity:
Debt securities:
States and political subdivisions $ —  $ —  $ 32,495  $ (9,484) $ 32,495  $ (9,484)
Mortgage-backed securities:
Residential - U.S. government-sponsored entities and agencies —  —  455,477  (71,281) 455,477  (71,281)
Total $ —  $ —  $ 487,972  $ (80,765) $ 487,972  $ (80,765)

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Less Than 12 Months 12 Months or Longer Total
(dollars in thousands) Fair Value Unrealized Losses Fair Value Unrealized Losses Fair Value Unrealized Losses
December 31, 2024
Available-for-sale:
Debt securities:            
States and political subdivisions $ 4,967  $ (85) $ 107,267  $ (30,098) $ 112,234  $ (30,183)
U.S. Treasury and other government-sponsored entities and agencies 56,139  (803) 12,971  (1,939) 69,110  (2,742)
Collateralized loan obligations 31,140  (114) —  —  31,140  (114)
Mortgage-backed securities:            
Residential - U.S. government-sponsored entities and agencies 135,224  (2,254) 260,575  (55,793) 395,799  (58,047)
Residential - Non-government agencies 5,270  (100) 7,606  (961) 12,876  (1,061)
Commercial - U.S. government-sponsored entities and agencies 12,469  (90) 48,304  (14,225) 60,773  (14,315)
Commercial - Non-government agencies 9,927  (6) —  —  9,927  (6)
Total $ 255,136  $ (3,452) $ 436,723  $ (103,016) $ 691,859  $ (106,468)

Less Than 12 Months 12 Months or Longer Total
(dollars in thousands) Fair Value Unrecognized Losses Fair Value Unrecognized Losses Fair Value Unrecognized Losses
December 31, 2024
Held-to-maturity:
Debt securities:
States and political subdivisions $ —  $ —  $ 33,132  $ (8,884) $ 33,132  $ (8,884)
Mortgage-backed securities:
Residential - U.S. government-sponsored entities and agencies 7,470  (19) 466,079  (81,346) 473,549  (81,365)
Total $ 7,470  $ (19) $ 499,211  $ (90,230) $ 506,681  $ (90,249)

Investment securities in an unrealized or unrecognized loss position are evaluated at least on a quarterly basis, and include evaluating the changes in the investment securities' ratings issued by rating agencies and changes in the financial condition of the issuer. For mortgage-related securities, delinquency and loss information with respect to the underlying collateral, changes in levels of subordination for the Company's particular position within the repayment structure, and remaining credit enhancement as compared to projected credit losses of the security are also evaluated.

The Company has evaluated its AFS and HTM investment securities that are in an unrealized or unrecognized loss position and has determined that the losses on the Company's investment securities are unrelated to credit quality and primarily attributable to changes in interest rates and volatility in the financial markets since purchase. All of the investment securities in a loss position continue to be rated investment grade by one or more major rating agencies. The Company does not intend to sell the AFS and HTM securities that were in a loss position as of June 30, 2025 and December 31, 2024, and it is unlikely that the Company will be required to sell these securities before recovery of its amortized cost basis that may be at maturity. Therefore, the Company has not recorded an ACL on these securities.

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3. LOANS AND CREDIT QUALITY

The following table presents loans by class, excluding loans held for sale, net of deferred fees and costs as of the dates presented:

(dollars in thousands) June 30, 2025 December 31, 2024
Commercial and industrial $ 608,130  $ 606,936 
Real estate:
Construction 190,008  145,211 
Residential mortgage 1,851,690  1,892,520 
Home equity 627,834  676,982 
Commercial mortgage 1,540,523  1,500,680 
Consumer 471,624  510,523 
Loans, net of deferred fees and costs $ 5,289,809  $ 5,332,852 

Interest income on loans is accrued at the contractual rate of interest on the unpaid principal balance. The Company elected to not measure an estimate of credit losses on accrued interest receivable as the Company writes off any uncollectible accrued interest receivable in a timely manner. Accrued interest receivable on loans is reported together with accrued interest receivable on investment securities and other assets in the consolidated balance sheets. Accrued interest receivable on loans totaled $18.0 million and $17.5 million as of June 30, 2025 and December 31, 2024, respectively.

During the three months ended March 31, 2025, the Company identified and reclassified $58.3 million in consumer loans to the commercial and industrial loan class as the loans' structure and characteristics more closely aligned with loans in the commercial and industrial class.

The Company did not transfer any loans to the held for sale category during the three and six months ended June 30, 2025 and 2024 and did not sell any loans originally held for investment during the three and six months ended June 30, 2025 and 2024.

Purchased Loans

The following table presents loan purchase information at the time of purchase by class during the periods presented. None of the loan purchases were categorized as purchased credit deteriorated ("PCD") and there were no loans categorized as PCD during the periods presented.

(dollars in thousands) Three Months Ended June 30, Six Months Ended June 30,
Purchases of U.S. Mainland consumer - automobile: 2025 2024 2025 2024
Outstanding balance $ 32,787  $ 12,384  $ 64,227  $ 12,384 
Premium 1,000  247  1,236  247 
Purchase price $ 33,787  $ 12,631  $ 65,463  $ 12,631 

Collateral-Dependent Loans

A loan is considered collateral-dependent when the borrower is experiencing financial difficulty and repayment is expected to be provided substantially through the operation or sale of the collateral, which are individually evaluated to determine expected credit losses.
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The following tables present the amortized cost basis of collateral-dependent loans by class and the related ACL allocated to these loans as of the dates presented:

(dollars in thousands) Secured by
1-4 Family
Residential
Properties		 Allocated
ACL
June 30, 2025
Real estate:
Residential mortgage $ 12,327  $ — 
Home equity 1,889  — 
Total $ 14,216  $ — 

(dollars in thousands) Secured by
1-4 Family
Residential
Properties		 Allocated
ACL
December 31, 2024
Real estate:
Residential mortgage $ 9,044  $ — 
Home equity 952  — 
Total $ 9,996  $ — 

Foreclosure Proceedings

The Company did not own any foreclosed properties as of June 30, 2025 and December 31, 2024. The Company did not sell any foreclosed properties during the three and six months ended June 30, 2025 and 2024.

The Company had $2.8 million and $3.9 million of residential mortgage loans collateralized by residential real estate properties that were in the process of foreclosure as of June 30, 2025 and December 31, 2024, respectively.

The Company did not have any commercial real estate loans in the process of foreclosure as of June 30, 2025 and December 31, 2024.

Nonaccrual and Past Due Loans

For all loan types, the Company determines delinquency status by considering the number of days full payments required by the contractual terms of the loan are past due. The following tables present by class, the aging of the recorded investment in past due loans as of the dates presented. The following tables also present the amortized cost of loans on nonaccrual status for which there was no related ACL as of the dates presented:

(dollars in thousands) Accruing
Loans
30 - 59 Days
Past Due		 Accruing
Loans
60 - 89 Days
Past Due		 Accruing
Loans
90+ Days
Past Due		 Nonaccrual
Loans		 Total
Past Due
and
Nonaccrual		 Loans Not
Past Due		 Total Loans Nonaccrual
Loans
With
No ACL
June 30, 2025
Commercial and industrial $ 1,601  $ 231  $ —  $ 110  $ 1,942  $ 606,188  $ 608,130  $ — 
Real estate:    
Construction —  —  —  —  —  190,008  190,008  — 
Residential mortgage 693  4,077  1,625  12,327  18,722  1,832,968  1,851,690  12,327 
Home equity 716  1,023  21  1,889  3,649  624,185  627,834  1,889 
Commercial mortgage 481  —  —  —  481  1,540,042  1,540,523  — 
Consumer 3,506  1,488  418  569  5,981  465,643  471,624  — 
Total $ 6,997  $ 6,819  $ 2,064  $ 14,895  $ 30,775  $ 5,259,034  $ 5,289,809  $ 14,216 

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(dollars in thousands) Accruing
Loans
30 - 59 Days
Past Due		 Accruing
Loans
60 - 89 Days
Past Due		 Accruing
Loans
90+ Days
Past Due		 Nonaccrual
Loans		 Total
Past Due
and
Nonaccrual		 Loans Not
Past Due		 Total Loans Nonaccrual
Loans
With
No ACL
December 31, 2024
Commercial and industrial $ 2,978  $ 210  $ —  $ 414  $ 3,602  $ 603,334  $ 606,936  $ — 
Real estate:    
Construction —  —  —  —  —  145,211  145,211  — 
Residential mortgage 8,880  3,316  323  9,044  21,563  1,870,957  1,892,520  9,044 
Home equity 943  485  78  952  2,458  674,524  676,982  952 
Commercial mortgage —  —  —  —  —  1,500,680  1,500,680  — 
Consumer 5,255  1,444  373  608  7,680  502,843  510,523  — 
Total $ 18,056  $ 5,455  $ 774  $ 11,018  $ 35,303  $ 5,297,549  $ 5,332,852  $ 9,996 

Loan Modifications for Borrowers Experiencing Financial Difficulty

The Company has not had any material modifications to loans either individually or in the aggregate for borrowers experiencing financial difficulty during the three and six months ended June 30, 2025 and 2024.

Credit Quality Indicators

The Company categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt such as: current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors. The Company analyzes loans individually by classifying the loans by credit risk. This analysis includes non-homogeneous loans, such as commercial and commercial real estate loans. This analysis is performed regularly on an ongoing basis. The Company uses the following definitions for risk rating of loans.

Pass. Loans classified as pass are not adversely rated, are contractually current as to principal and interest, and are otherwise in compliance with the contractual terms of the loan agreement.

Special Mention. Loans classified as special mention, while still adequately protected by the borrower's capital adequacy and payment capability, exhibit distinct weakening trends and/or elevated levels of exposure to external conditions. If left unchecked or uncorrected, these potential weaknesses may result in deteriorated prospects of repayment. These exposures require management's close attention so as to avoid becoming undue or unwarranted credit exposures.

Substandard. Loans classified as substandard are inadequately protected by the borrower's current financial condition and payment capability or of the collateral pledged, if any. These loans have a well-defined weakness or weaknesses that jeopardize the orderly repayment of debt. They are characterized by the distinct possibility that the Company will sustain some loss if the deficiencies are not corrected.

Doubtful. Loans classified as doubtful have all the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses make collection or orderly repayment in full, on the basis of current existing facts, conditions and values, highly questionable and improbable. Possibility of loss is extremely high, but because of certain important and reasonably specific factors that may work to the advantage and strengthening of the exposure, its classification as an estimate loss is deferred until its more exact status may be determined.

Loss. Loans classified as loss are considered to be non-collectible and of such little value that their continuance as bankable assets is not warranted. This does not mean the loan has absolutely no recovery value, but rather it is neither practical nor desirable to defer writing off the loan, even though partial recovery may be obtained in the future. Losses are taken in the period in which they surface as uncollectible.

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The following tables present the amortized cost basis, net of deferred fees and costs, of the Company's loans by class, credit quality indicator and origination year as of the dates presented. Revolving loans converted to term as of and during the periods presented were not material to the total loan portfolio. In addition, the following tables present gross charge-offs of loans by origination year during the periods presented.

(dollars in thousands) Amortized Cost of Term Loans by Year of Origination Amortized Cost of Revolving Loans
June 30, 2025 2025 2024 2023 2022 2021 Prior Total
Commercial and industrial:
Risk Rating
Pass $ 31,282  $ 187,004  $ 45,474  $ 62,664  $ 56,749  $ 123,716  $ 96,531  $ 603,420 
Special Mention —  —  473  —  79  —  —  552 
Substandard —  3,346  60  703  16  33  —  4,158 
Subtotal 31,282  190,350  46,007  63,367  56,844  123,749  96,531  608,130 
Construction:
Risk Rating
Pass 17,703  17,259  52,798  43,193  17,887  41,168  —  190,008 
Subtotal 17,703  17,259  52,798  43,193  17,887  41,168  —  190,008 
Residential mortgage:
Risk Rating
Pass 21,133  81,145  87,380  252,374  576,264  818,561  —  1,836,857 
Substandard —  —  259  1,599  1,318  11,657  —  14,833 
Subtotal 21,133  81,145  87,639  253,973  577,582  830,218  —  1,851,690 
Home equity:
Risk Rating
Pass 230  2,354  11,516  26,800  16,854  32,338  535,832  625,924 
Substandard —  —  1,190  —  —  470  250  1,910 
Subtotal 230  2,354  12,706  26,800  16,854  32,808  536,082  627,834 
Commercial mortgage:
Risk Rating
Pass 74,618  146,086  94,851  198,733  217,594  729,933  6,171  1,467,986 
Special Mention —  —  618  29,939  1,403  —  —  31,960 
Substandard —  33,261  —  —  —  7,316  —  40,577 
Subtotal 74,618  179,347  95,469  228,672  218,997  737,249  6,171  1,540,523 
Consumer:
Risk Rating
Pass 45,082  85,783  65,601  139,490  74,807  24,325  35,548  470,636 
Substandard —  102  67  185  51  564  1  970 
Loss —  —  —  —  —  18  —  18 
Subtotal 45,082  85,885  65,668  139,675  74,858  24,907  35,549  471,624 
Total $ 190,048  $ 556,340  $ 360,287  $ 755,680  $ 963,022  $ 1,790,099  $ 674,333  $ 5,289,809 

(dollars in thousands) Gross Charge-Offs by Year of Origination
Six Months Ended June 30, 2025 2025 2024 2023 2022 2021 Prior Total
Commercial and industrial $ —  $ 2,140  $ 145  $ 188  $ 140  $ 825  $ 3,438 
Consumer —  501  512  2,986  1,234  608  5,841 
Gross charge-offs $ —  $ 2,641  $ 657  $ 3,174  $ 1,374  $ 1,433  $ 9,279 

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(dollars in thousands) Amortized Cost of Term Loans by Year of Origination Amortized Cost of Revolving Loans
December 31, 2024 2024 2023 2022 2021 2020 Prior Total
Commercial and industrial:
Risk Rating
Pass $ 167,816  $ 58,905  $ 69,576  $ 57,354  $ 21,827  $ 142,546  $ 81,876  $ 599,900 
Special Mention —  —  —  2,539  —  —  —  2,539 
Substandard 3,372  110  922  11  —  82  —  4,497 
Subtotal 171,188  59,015  70,498  59,904  21,827  142,628  81,876  606,936 
Construction:
Risk Rating
Pass 10,141  33,646  35,398  19,217  11,754  34,937  118  145,211 
Subtotal 10,141  33,646  35,398  19,217  11,754  34,937  118  145,211 
Residential mortgage:
Risk Rating
Pass 85,844  89,118  259,516  589,118  393,633  465,032  —  1,882,261 
Substandard —  —  1,599  616  1,855  6,189  —  10,259 
Subtotal 85,844  89,118  261,115  589,734  395,488  471,221  —  1,892,520 
Home equity:
Risk Rating
Pass 1,060  11,787  28,687  18,277  8,406  25,235  582,499  675,951 
Substandard —  —  —  —  —  1,031  —  1,031 
Subtotal 1,060  11,787  28,687  18,277  8,406  26,266  582,499  676,982 
Commercial mortgage:
Risk Rating
Pass 180,391  95,323  235,344  223,724  111,399  635,255  5,731  1,487,167 
Special Mention —  621  —  2,506  —  2,930  —  6,057 
Substandard —  —  —  —  —  7,456  —  7,456 
Subtotal 180,391  95,944  235,344  226,230  111,399  645,641  5,731  1,500,680 
Consumer:
Risk Rating
Pass 95,971  60,771  173,097  92,976  20,838  14,466  51,422  509,541 
Substandard 21  90  162  144  27  478  60  982 
Subtotal 95,992  60,861  173,259  93,120  20,865  14,944  51,482  510,523 
Total $ 544,616  $ 350,371  $ 804,301  $ 1,006,482  $ 569,739  $ 1,335,637  $ 721,706  $ 5,332,852 

(dollars in thousands) Gross Charge-Offs by Year of Origination
Six Months Ended June 30, 2024 2024 2023 2022 2021 2020 Prior Total
Commercial and industrial $ 19  $ 74  $ 204  $ 184  $ 13  $ 707  $ 1,201 
Real estate:
Residential mortgage —  —  76  —  —  208  284 
Consumer 5  392  5,460  2,318  283  725  9,183 
Gross charge-offs $ 24  $ 466  $ 5,740  $ 2,502  $ 296  $ 1,640  $ 10,668 

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4. ALLOWANCE FOR CREDIT LOSSES AND RESERVE FOR OFF-BALANCE SHEET CREDIT EXPOSURES

The following tables present by segment, the activities in the ACL on loans during the periods presented:

(dollars in thousands) Real Estate  
Three Months Ended June 30, 2025 Commercial and Industrial Construction Residential Mortgage Home Equity Commercial Mortgage Consumer Total
Beginning balance $ 7,423  $ 2,282  $ 15,936  $ 1,808  $ 19,523  $ 13,497  $ 60,469 
Provision (credit) for credit losses on loans 2,480  1,078  (2,065) (768) 742  2,343  3,810 
Gross charge-offs (2,858) —  —  —  —  (2,864) (5,722)
Gross recoveries 195  3  7  9  —  840  1,054 
Net (charge-offs) recoveries (2,663) 3  7  9  —  (2,024) (4,668)
Ending balance $ 7,240  $ 3,363  $ 13,878  $ 1,049  $ 20,265  $ 13,816  $ 59,611 

(dollars in thousands) Real Estate
Three Months Ended June 30, 2024 Commercial and Industrial Construction Residential Mortgage Home Equity Commercial Mortgage Consumer Total
Beginning balance $ 7,008  $ 3,619  $ 16,026  $ 3,733  $ 17,004  $ 16,142  $ 63,532 
Provision (credit) for credit losses on loans 452  179  (362) 96  333  1,750  2,448 
Gross charge-offs (519) —  (284) —  —  (4,345) (5,148)
Gross recoveries 130  —  9  —  —  1,254  1,393 
Net (charge-offs) recoveries (389) —  (275) —  —  (3,091) (3,755)
Ending balance $ 7,071  $ 3,798  $ 15,389  $ 3,829  $ 17,337  $ 14,801  $ 62,225 

(dollars in thousands) Real Estate
Six Months Ended June 30, 2025 Commercial and Industrial Construction Residential Mortgage Home Equity Commercial Mortgage Consumer Total
Beginning balance $ 7,113  $ 2,316  $ 15,267  $ 2,335  $ 18,882  $ 13,269  $ 59,182 
Provision (credit) for credit losses on loans 3,199  1,044  (1,406) (1,298) 1,383  4,793  7,715 
Gross charge-offs (3,438) —  —  —  —  (5,841) (9,279)
Gross recoveries 366  3  17  12  —  1,595  1,993 
Net (charge-offs) recoveries (3,072) 3  17  12  —  (4,246) (7,286)
Ending balance $ 7,240  $ 3,363  $ 13,878  $ 1,049  $ 20,265  $ 13,816  $ 59,611 

(dollars in thousands) Real Estate
Six Months Ended June 30, 2024 Commercial and Industrial Construction Residential Mortgage Home Equity Commercial Mortgage Consumer Total
Beginning balance $ 7,181  $ 4,004  $ 14,626  $ 3,501  $ 17,543  $ 17,079  $ 63,934 
Provision (credit) for credit losses on loans 871  (206) 1,030  322  (206) 4,758  6,569 
Gross charge-offs (1,201) —  (284) —  —  (9,183) (10,668)
Gross recoveries 220  —  17  6  —  2,147  2,390 
Net (charge-offs) recoveries (981) —  (267) 6  —  (7,036) (8,278)
Ending balance $ 7,071  $ 3,798  $ 15,389  $ 3,829  $ 17,337  $ 14,801  $ 62,225 

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The following table presents the activities in the reserve for off-balance sheet credit exposures, included in other liabilities on the Company's consolidated balance sheets, during the periods presented. The provision (credit) for off-balance sheet credit exposures is included in the provision for credit losses on the Company's consolidated statements of income during the periods presented.

Three Months Ended June 30, Six Months Ended June 30,
(dollars in thousands) 2025 2024 2025 2024
Beginning balance $ 2,837  $ 3,521  $ 2,570  $ 3,706 
Provision (credit) for off-balance sheet credit exposures 1,177  (209) 1,444  (394)
Ending balance $ 4,014  $ 3,312  $ 4,014  $ 3,312 

5. INVESTMENTS IN UNCONSOLIDATED ENTITIES

The following table presents the components of the Company's investments in unconsolidated entities as of the dates presented:

(dollars in thousands) June 30, 2025 December 31, 2024
Investments in low-income housing tax credit partnerships, net of amortization $ 45,663  $ 48,730 
Investments in common securities of statutory trusts 1,547  1,547 
Investments in affiliates 110  90 
Other 2,050  2,050 
Total $ 49,370  $ 52,417 

The Company had commitments to fund low-income housing tax credit ("LIHTC") partnerships totaling $63.5 million and $63.5 million as of June 30, 2025 and December 31, 2024, respectively. Unfunded commitments related to LIHTC partnerships totaled $18.5 million and $19.1 million as of June 30, 2025 and December 31, 2024, respectively, and were included in other liabilities in the Company's consolidated balance sheets. The investments were accounted for under the proportional amortization method and were included in investments in unconsolidated entities in the Company's consolidated balance sheets.

The following table presents the expected payments for the unfunded commitments of LIHTC and other partnerships as of June 30, 2025, for the remainder of fiscal year 2025, the next five succeeding fiscal years, and all years thereafter:

(dollars in thousands)
Year Ending December 31, LIHTC Other Total
2025 (remainder) $ 10,528  $ 703  $ 11,231 
2026 7,564  —  7,564 
2027 36  —  36 
2028 30  —  30 
2029 37  —  37 
2030 30  —  30 
Thereafter 305  —  305 
Total unfunded commitments $ 18,530  $ 703  $ 19,233 

The following table presents amortization and tax credits recognized associated with our investments in LIHTC partnerships for the periods presented:

Three Months Ended June 30, Six Months Ended June 30,
(dollars in thousands) 2025 2024 2025 2024
Proportional amortization method:
Amortization expense recognized in income tax expense $ 1,533  $ 674  $ 3,067  $ 1,360 
Tax credits recognized in income tax expense 1,794  801  3,588  1,601 

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In 2021, the Company committed $2.0 million to the JAM FINTOP Banktech Fund, L.P. The Company does not have the ability to exercise significant influence over the JAM FINTOP Banktech Fund, L.P. and the investment does not have a readily determinable fair value. As a result, the Company determined that the cost method of accounting for the investment was appropriate. The Company had $0.7 million and $0.8 million in unfunded commitments related to the investment as of June 30, 2025 and December 31, 2024, respectively, which was included in other liabilities in the Company's consolidated balance sheets.

6. MORTGAGE SERVICING RIGHTS

Mortgage loans serviced for others are not reported on the Company's consolidated balance sheets. The following table presents mortgage loans serviced for others by investor, which totaled $1.16 billion and $1.18 billion as of June 30, 2025 and December 31, 2024, respectively.

(dollars in thousands) June 30, 2025 December 31, 2024
Mortgage loan portfolio serviced for:
Federal National Mortgage Association $ 717,197  $ 720,070 
Federal Home Loan Mortgage Corporation 445,417  457,228 
Federal Home Loan Bank 361  444 
Total loans serviced for others $ 1,162,975  $ 1,177,742 

The following tables present changes in mortgage servicing rights ("MSR") for the periods presented:

(dollars in thousands)
Balance at March 31, 2025 $ 8,418 
Additions 223 
Amortization (205)
Balance at June 30, 2025 $ 8,436 
Balance at March 31, 2024 $ 8,599 
Additions 229 
Amortization (192)
Balance at June 30, 2024 $ 8,636 

(dollars in thousands)
Balance at December 31, 2024 $ 8,473 
Additions 360 
Amortization (397)
Balance at June 30, 2025 $ 8,436 
Balance at December 31, 2023 $ 8,696 
Additions 310 
Amortization (370)
Balance at June 30, 2024 $ 8,636 

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The following table presents the fair market value and key assumptions used in determining the fair market value of MSR as of the dates presented:

(dollars in thousands) June 30, 2025 December 31, 2024
Fair market value, beginning of year $ 12,387  $ 12,185 
Fair market value, end of period 11,897  12,387 
Weighted average discount rate 9.5  % 9.5  %
Weighted average prepayment speed assumption 10.5  10.2 

The Company performs an impairment assessment of its MSR whenever events or changes in circumstance indicate that the carrying value of the MSR may not be recoverable. The Company noted no impairment or triggering events related to its MSR as of June 30, 2025.

7. DERIVATIVES

The Company utilizes various designated and undesignated derivative financial instruments to reduce its exposure to movements in interest rates. The Company measures all derivatives at fair value on its consolidated balance sheet. In each reporting period, the Company records the derivative instruments in other assets or other liabilities depending on whether the derivatives are in an asset or liability position. For derivative instruments that are designated as cash flow hedging instruments, the Company records the effective portion of the changes in the fair value of the derivative in accumulated other comprehensive income (loss) ("AOCI"), net of tax, until earnings are affected by the variability of cash flows of the hedged transaction. The Company immediately recognizes the portion of the gain or loss in the fair value of the derivative that represents hedge ineffectiveness in current period earnings. For derivative instruments that are not designated as hedging instruments, changes in the fair value of the derivative are included in current period earnings.

Derivative financial instruments are subject to credit and counterparty risk, which is defined as the risk of financial loss if a borrower or counterparty is either unable or unwilling to repay borrowings or settle transactions in accordance with the underlying contractual terms. Credit and counterparty risks associated with derivative financial instruments are similar to those relating to traditional financial instruments. The Company manages derivative credit and counterparty risk by evaluating the creditworthiness of each borrower or counterparty and requiring collateral where appropriate.

Interest Rate Lock and Forward Sale Commitments

The Company enters into interest rate lock commitments on certain mortgage loans that are intended to be sold. To manage interest rate risk on interest rate lock commitments, the Company also enters into forward loan sale commitments on the loans that are intended to be sold. The interest rate lock and forward loan sale commitments are accounted for as undesignated derivatives and are recorded at their respective fair values in other assets and other liabilities, with changes in fair value recorded in current period earnings. These instruments serve to reduce the Company's exposure to movements in interest rates.

The Company was not party to any interest rate lock commitments on mortgage loans as of June 30, 2025. The Company was party to interest rate lock commitments on $0.5 million of mortgage loans as of December 31, 2024. The Company was not party to any forward sale commitments as of June 30, 2025. The Company was party to forward sale commitments on mortgage loans of $4.9 million as of December 31, 2024.

Risk Participation Agreements

From time to time, the Company may enter into credit risk participation agreements ("RPA") with financial institution counterparties for interest rate swaps related to loans in which it participates. The RPAs entered into by us and a participant bank provide credit protection to the financial institution counterparties should the borrowers fail to perform on their interest rate derivative contracts with the financial institutions. The RPAs are accounted for as undesignated derivatives and are recorded at fair value, with changes in fair value recorded in current period earnings.

The Company was party to RPAs with total notional amounts of $34.8 million and $35.2 million as of June 30, 2025 and December 31, 2024, respectively. The fair value of the RPAs was insignificant to the consolidated financial statements as of June 30, 2025 and December 31, 2024.

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Back-to-Back Swap Agreements

The Company established a program whereby it originates a variable rate loan and enters into a variable-to-fixed interest rate swap with the customer. The Company also enters into an equal and offsetting swap with a third-party financial institution. These "back-to-back swap agreements" are intended to offset each other and allow the Company to originate a variable rate loan, while providing a contract for fixed interest payments for the customer. The net cash flow for the Company is equal to the interest income received from a variable rate loan originated with the customer. These back-to-back swap agreements are free-standing derivatives and recorded at fair value in other assets or other liabilities on the Company's consolidated balance sheet, with changes in fair value recorded in current period earnings.

The Company has entered into swap agreements with its borrowers with total notional amounts of $61.5 million and $50.2 million as of June 30, 2025 and December 31, 2024, respectively, offset by swap agreements with third-party financial institutions with the same total notional amounts. The Company received $7.9 million and $12.9 million in counter-party cash collateral related to the back-to-back swap agreements as of June 30, 2025 and December 31, 2024, respectively.

Interest Rate Swap

To mitigate interest rate risk, during the first quarter of 2022, the Company entered into a forward starting interest rate swap, with a notional amount of $115.5 million, that was designated as a fair value hedge of certain municipal debt securities. The Company pays the counterparty a fixed rate of 2.095% and receives a floating rate based on the Federal Funds effective rate. The fair value hedge became effective on March 31, 2024 and has a maturity date of March 31, 2029.

During the second quarter of 2025, an underlying municipal debt security totaling $1.0 million was called. As a result the interest rate swap was partially terminated and the notional amount was adjusted to $114.6 million. All other terms of the interest rate swap remained unchanged.

The interest rate swap is carried on the Company’s consolidated balance sheet at its fair value in other assets (when the fair value is positive) or in other liabilities (when the fair value is negative). The changes in the fair value of the interest rate swap are recorded in interest income. The unrealized gains or losses due to changes in fair value of the hedged debt securities due to changes in benchmark interest rates are recorded as an adjustment to the hedged debt securities and offset in the same interest income line item. As of June 30, 2025, the hedge was determined to be effective and the Company expects the hedge to remain effective during the remaining term.

During the three months ended June 30, 2025 and 2024, the Company recorded income on the interest rate swap of $0.7 million and $0.9 million, respectively, in interest income on taxable investment securities on the Company's consolidated statements of income. During the six months ended June 30, 2025 and 2024, the Company recorded income on the interest rate swap of $1.5 million and $0.8 million, respectively, in interest income on taxable investment securities on the Company's consolidated statements of income.

The following tables present the location of all assets and liabilities associated with our derivative instruments within the consolidated balance sheets as of the dates presented:

Derivative Financial Instruments Not Designated as Hedging Instruments Asset Derivatives Liability Derivatives
Fair Value at Fair Value at
(dollars in thousands) Balance Sheet Location June 30,
2025		 December 31,
2024		 June 30,
2025		 December 31,
2024
Interest rate lock and forward sale commitments Other assets / other liabilities $ —  $ 46  $ —  $ 4 
Back-to-back swap agreements Other assets / other liabilities 3,321  3,840  3,321  3,840 
Derivative Financial Instruments Designated as Hedging Instruments Asset Derivatives Liability Derivatives
Fair Value at Fair Value at
(dollars in thousands) Balance Sheet Location June 30,
2025		 December 31,
2024		 June 30,
2025		 December 31,
2024
Interest rate swap Other assets / other liabilities $ 4,890  $ 8,382  $ —  $ — 

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The following tables present the impact of derivative instruments and their location within the consolidated statements of income for the periods presented:

Derivative Financial Instruments
Not Designated as Hedging Instruments		 Location of Gain (Loss)
Recognized in
Earnings on Derivatives		 Amount of Gain (Loss)
Recognized in
Earnings on Derivatives
(dollars in thousands)
Three Months Ended June 30, 2025    
Interest rate lock and forward sale commitments Mortgage banking income $ (1)
Loans held for sale Other income 3 
Three Months Ended June 30, 2024  
Interest rate lock and forward sale commitments Mortgage banking income (4)
Loans held for sale Other income (17)

Derivative Financial Instruments
Not Designated as Hedging Instruments		 Location of Gain (Loss)
Recognized in
Earnings on Derivatives		 Amount of Gain (Loss)
Recognized in
Earnings on Derivatives
(dollars in thousands)
Six Months Ended June 30, 2025  
Interest rate lock and forward sale commitments Mortgage banking income $ (43)
Loans held for sale Other income 78 
Back-to-back swap agreements Other service charges and fees 176 
Six Months Ended June 30, 2024  
Interest rate lock and forward sale commitments Mortgage banking income 31 
Loans held for sale Other income (17)
Back-to-back swap agreements Other service charges and fees 80 

Derivative Financial Instruments
Designated as Hedging Instruments		 Location of Gain (Loss)
Recognized in
Earnings on Derivatives		 Amount of Gain (Loss)
Recognized in
Earnings on Derivatives
(dollars in thousands)
Three Months Ended June 30, 2025
Interest rate swap Interest income $ 749 
Three Months Ended June 30, 2024
Interest rate swap Interest income 884 

Derivative Financial Instruments
Designated as Hedging Instruments		 Location of Gain (Loss)
Recognized in
Earnings on Derivatives		 Amount of Gain (Loss)
Recognized in
Earnings on Derivatives
(dollars in thousands)
Six Months Ended June 30, 2025
Interest rate swap Interest income $ 1,467 
Six Months Ended June 30, 2024
Interest rate swap Interest income 776 

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The following table presents the amounts recorded on the consolidated balance sheets related to cumulative basis adjustments for fair value hedges as of the periods presented:

Line Item in the Consolidated Balance Sheets


(dollars in thousands) June 30, 2025 December 31, 2024
Investment securities, available-for-sale:
Carrying Amount of the Hedged Assets $ 88,351  $ 88,777 
Cumulative Amount of Fair Value Hedging Adjustment Included in the Carrying Amount of the Hedged Assets (5,183) (8,805)

8. SHORT-TERM BORROWINGS AND LONG-TERM DEBT

The following table presents long-term debt, which is based on original maturity and consists of advances under the arrangement with Federal Home Loan Bank of Des Moines, junior subordinated debentures and subordinated notes as of the dates presented:

(dollars in thousands) June 30, 2025 December 31, 2024
Long-term debt:
Federal Home Loan Bank long-term advances $ 25,000  $ 50,000 
Junior subordinated debentures 51,547  51,547 
Subordinated notes, net of unamortized debt issuance costs 54,919  54,798 
Total $ 131,466  $ 156,345 

At June 30, 2025, future principal payments on long-term debt based on redemption date or final maturity are as follows. The $55.0 million in subordinated notes due in 2030 are callable quarterly beginning November 1, 2025.

(dollars in thousands)
Year Ending December 31,
2025 (remainder) $ — 
2026 — 
2027 — 
2028 25,000 
2029 — 
2030 55,000 
Thereafter 51,547 
Total $ 131,547 

Federal Home Loan Bank Advances and Other Borrowings

The Bank is a member of the Federal Home Loan Bank of Des Moines (the "FHLB") and maintained a $1.74 billion line of credit as of June 30, 2025, compared to $1.76 billion as of December 31, 2024. As of June 30, 2025, $1.63 billion was undrawn under this arrangement, compared to $1.63 billion as of December 31, 2024. There were no short-term borrowings outstanding under this arrangement as of June 30, 2025 and December 31, 2024. There was a $25.0 million long-term advance under the FHLB arrangement bearing an interest rate of 4.02% as of June 30, 2025. There were $50.0 million in long-term advances under the FHLB arrangement bearing interest rates between 4.02% and 4.62% as of December 31, 2024.

The FHLB provides standby letters of credit on behalf of the Bank to secure certain public deposits. If the FHLB is required to make a payment on a standby letter of credit, the payment amount is converted to an advance at the FHLB. Standby letters of credit under this arrangement that are used to collateralize certain government deposits totaled $83.6 million as of June 30, 2025, compared to $83.6 million as of December 31, 2024. The letters of credit are counted against the total line of credit, the same as the current outstanding debt, to determine the undrawn or total available line of credit.

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In accordance with the collateral provisions of the Advances, Security and Deposit Agreement with the FHLB, the FHLB advances and standby letters of credit available as of June 30, 2025 and December 31, 2024 were secured by certain real estate loans with a carrying value of approximately $3.08 billion and $3.14 billion, respectively.

The Bank had additional unused borrowings available at the Federal Reserve Discount Window of $229.5 million and $232.1 million as of June 30, 2025 and December 31, 2024, respectively. Certain commercial and commercial real estate loans with a par value totaling $123.6 million and $128.3 million as of June 30, 2025 and December 31, 2024, respectively, were pledged as collateral on our line of credit with the Federal Reserve. In addition, investment securities with a par value of $178.3 million and $184.3 million as of June 30, 2025 and December 31, 2024, respectively, were pledged to the Federal Reserve in support of the line of credit. The Federal Reserve does not have the right to sell or repledge these loans and investment securities.

The Bank had additional unused and unsecured credit lines available totaling $75.0 million as of June 30, 2025 and December 31, 2024.

Junior Subordinated Debentures

The following table presents the Company's junior subordinated debentures outstanding, which are recorded in long-term debt on the Company's consolidated balance sheets as of the dates presented:

(dollars in thousands)
Name of Trust June 30, 2025 December 31, 2024 Interest Rate
CPB Capital Trust IV $ 30,928  $ 30,928 
Three-month CME Term SOFR + tenor spread adjustment of 0.26% + 2.45%
CPB Statutory Trust V 20,619  20,619 
Three-month CME Term SOFR + tenor spread adjustment of 0.26% + 1.87%
Total $ 51,547  $ 51,547 

In September 2004, we created a wholly-owned statutory trust, CPB Capital Trust IV ("Trust IV"). Trust IV issued $30.0 million in floating rate trust preferred securities, which bore an interest rate of three-month LIBOR plus 2.45%, maturing on December 15, 2034. The principal assets of Trust IV are $30.9 million of the Company's junior subordinated debentures with an identical interest rate and maturity as the Trust IV trust preferred securities. Trust IV issued $0.9 million of common securities to the Company.

In December 2004, we created a wholly-owned statutory trust, CPB Statutory Trust V ("Trust V"). Trust V issued $20.0 million in floating rate trust preferred securities, which bore an interest rate of three-month LIBOR plus 1.87%, maturing on December 15, 2034. The principal assets of Trust V are $20.6 million of the Company's junior subordinated debentures with an identical interest rate and maturity as the Trust V trust preferred securities. Trust V issued $0.6 million of common securities to the Company.

The Company is not considered the primary beneficiary of Trusts IV and V. Therefore, the trusts are not considered variable interest entities and are not consolidated in the Company's financial statements. Rather the junior subordinated debentures are shown as liabilities on the Company's consolidated balance sheets. The Company's investments in the common securities of the trusts are included in investment in unconsolidated entities in the Company's consolidated balance sheets.

The floating trust preferred securities, the junior subordinated debentures that are the assets of Trusts IV and V and the common securities issued by Trusts IV and V are redeemable in whole or in part on any interest payment date, or at any time in whole but not in part within 90 days following the occurrence of certain events. Our obligations with respect to the issuance of the trust preferred securities constitute a full and unconditional guarantee by the Company of each trust's obligations with respect to its trust preferred securities. Subject to certain exceptions and limitations, we may elect from time to time to defer interest payments on the junior subordinated debentures, which would result in a deferral of distribution payments on the related trust preferred securities, for up to 20 consecutive quarterly periods without default or penalty.

The junior subordinated debentures are included in Tier 1 capital, with certain limitations applicable, under regulatory guidelines and interpretations.

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Subordinated Notes

The following table presents the Company's subordinated notes outstanding as of the dates presented:

(dollars in thousands)
Description June 30, 2025 December 31, 2024 Interest Rate
October 2020 Private Placement $ 55,000  $ 55,000 
4.75% for the first five years. Resets quarterly thereafter to the then current three-month SOFR plus 456 basis points. The subordinated notes are due in 2030 but are callable quarterly beginning on November 1, 2025.

On October 20, 2020, the Company completed a $55.0 million private placement of ten-year fixed-to-floating rate subordinated notes, which will be used to support regulatory capital ratios and for general corporate purposes. The Company exchanged the privately placed notes for registered notes with the same terms and in the same aggregate principal amount at the end of the fourth quarter of 2020. The subordinated notes bear a fixed interest rate of 4.75% for the first five years through but excluding, November 1, 2025, and will reset quarterly thereafter from and including, November 1, 2025, for the remaining five years to the then current three-month Secured Overnight Financing Rate ("SOFR"), as published by the Federal Reserve Bank of New York, plus 456 basis points. The subordinated notes are callable on any quarterly interest payment date on or after November 1, 2025.

The subordinated notes are included in Tier 2 capital, with certain limitations applicable, under current regulatory guidelines and interpretations. The subordinated notes had a carrying value of $54.9 million and $54.8 million, net of unamortized debt issuance costs of $0.1 million and $0.2 million as of June 30, 2025 and December 31, 2024, respectively.

9. REVENUE FROM CONTRACTS WITH CUSTOMERS

The following table presents the Company's other operating income, segregated by revenue streams that are in-scope and out-of-scope of ASC 606, "Revenue from Contracts with Customers" for the periods presented:

Three Months Ended June 30, 2025 Three Months Ended June 30, 2024
(dollars in thousands) In-Scope Out-of-Scope Total In-Scope Out-of-Scope Total
Other operating income:
Mortgage banking income $ 197  $ 547  $ 744  $ 202  $ 838  $ 1,040 
Service charges on deposit accounts 2,124  —  2,124  2,135  —  2,135 
Other service charges and fees 5,311  646  5,957  5,348  521  5,869 
Income from fiduciary activities 1,501  —  1,501  1,449  —  1,449 
Income from bank-owned life insurance —  2,260  2,260  —  1,234  1,234 
Other —  427  427  —  394  394 
Total other operating income $ 9,133  $ 3,880  $ 13,013  $ 9,134  $ 2,987  $ 12,121 


Six Months Ended June 30, 2025 Six Months Ended June 30, 2024
(dollars in thousands) In-Scope Out-of-Scope Total In-Scope Out-of-Scope Total
Other operating income:
Mortgage banking income $ 439  $ 902  $ 1,341  $ 274  $ 1,379  $ 1,653 
Service charges on deposit accounts 4,271  —  4,271  4,238  —  4,238 
Other service charges and fees 10,458  1,265  11,723  10,018  1,112  11,130 
Income from fiduciary activities 3,125  —  3,125  2,884  —  2,884 
Income from bank-owned life insurance —  2,757  2,757  —  2,756  2,756 
Other —  892  892  —  704  704 
Total other operating income $ 18,293  $ 5,816  $ 24,109  $ 17,414  $ 5,951  $ 23,365 
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10. SHARE-BASED COMPENSATION

Restricted and Performance Stock Units

Under the Company's 2023 Stock Compensation Plan, the Company awarded restricted stock units ("RSUs") and performance stock units ("PSUs") to certain non-officer directors and management personnel. The awards typically vest over a two-, three- or five-year period from the date of grant and are subject to forfeiture until performance and employment targets are achieved. Compensation expense is typically measured as the market price of the stock awards on the grant date, and is recognized over the specified vesting periods.

The following table presents the activities of RSUs and PSUs for the six months ended June 30, 2025:

(dollars in thousands, except per share data) Shares Weighted Average Grant Date Fair Value Per Share Fair Value of RSUs and PSUs That Vested During the Period
Non-vested RSUs and PSUs, beginning of period 284,151  $ 22.48 
Changes during the period:    
Granted 105,751  30.17 
Forfeited (1,763) 35.19 
Vested (101,865) 25.49  $ 3,018 
Non-vested RSUs and PSUs, end of period 286,274  24.18 

11. SUPPLEMENTAL EXECUTIVE RETIREMENT PLANS

In 1995, 2001, 2004 and 2006, the Bank established Supplemental Executive Retirement Plans ("SERP"), which provide certain (current and former) officers of the Company with supplemental retirement benefits. On December 31, 2002, the 1995 and 2001 SERP were curtailed. In conjunction with the September 2004 merger with CB Bancshares, Inc. ("CBBI"), the Company assumed CBBI's SERP obligation.

The projected benefit obligation of the unfunded SERP is recorded in other liabilities on the Company's consolidated balance sheets. The projected benefit obligation was $8.7 million and $8.8 million as of June 30, 2025 and December 31, 2024, respectively.

The following table presents the components of net periodic benefit cost for the SERP for the periods presented:

Three Months Ended June 30, Six Months Ended June 30,
(dollars in thousands) 2025 2024 2025 2024
Interest cost $ 114  $ 108  $ 228  $ 216 
Net periodic benefit cost $ 114  $ 108  $ 228  $ 216 

All components of net periodic benefit cost are included in other operating expenses in the Company's consolidated statements of income.

12. OPERATING LEASES

The Company leases certain land and buildings for its bank branches and ATMs. In some instances, a lease may contain renewal options to extend the term of the lease. Renewal options that are likely to be exercised have been recognized as part of our right-of-use assets and lease liabilities in accordance with ASC 842, "Leases". Certain leases also contain variable payments that are primarily determined based on common area maintenance costs and Hawaii state tax rates. All leases are operating leases and we do not include any short-term leases in the calculation of the right-of-use assets and lease liabilities. The most significant assumption related to the Company’s application of ASC 842 was the discount rate assumption. As most of the Company’s lease agreements do not provide for an implicit interest rate, the Company uses the collateralized interest rate that the Company would have to pay to borrow over a similar term to estimate the Company’s lease liabilities.

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The following table presents total lease cost, cash flow information, weighted-average remaining lease term and weighted-average discount rate for the periods presented:

Three Months Ended June 30, Six Months Ended June 30,
(dollars in thousands) 2025 2024 2025 2024
Lease cost:
Operating lease cost $ 1,336  $ 1,437  $ 2,643  $ 2,740 
Variable lease cost 643  927  1,262  1,862 
Total lease cost $ 1,979  $ 2,364  $ 3,905  $ 4,602 
Other information:
Operating cash flows from operating leases $ (1,279) $ (1,425) $ (2,559) $ (2,682)
Weighted-average remaining lease term - operating leases 10.0 years 10.9 years 10.0 years 10.9 years
Weighted-average discount rate - operating leases 4.13  % 4.09  % 4.13  % 4.09  %

The following table presents a schedule of annual undiscounted cash flows for our operating leases and a reconciliation of those cash flows to the operating lease liabilities as of June 30, 2025, for the remainder of fiscal year 2025, the next five succeeding fiscal years and all years thereafter:

(dollars in thousands) Undiscounted Cash Flows Lease Liability Expense Lease Liability Reduction
Year Ending December 31,
2025 (remainder) $ 2,569  $ 638  $ 1,931 
2026 5,168  1,151  4,017 
2027 4,400  1,007  3,393 
2028 3,718  884  2,834 
2029 3,351  773  2,578 
2030 3,378  665  2,713 
Thereafter 16,963  2,448  14,515 
Total $ 39,547  $ 7,566  $ 31,981 

In addition, the Company, as lessor, leases certain properties that it owns. All of these leases are operating leases. The following table presents lease income related to these leases that was recognized for the periods presented:

Three Months Ended June 30, Six Months Ended June 30,
(dollars in thousands) 2025 2024 2025 2024
Total rental income recognized $ 481  $ 511  $ 949  $ 1,020 

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The following table presents estimated lease payments, based on the Company's leases as lessor as of June 30, 2025, for the remainder of fiscal year 2025, the next five succeeding fiscal years, and all years thereafter:

(dollars in thousands)
Year Ending December 31,
2025 (remainder) $ 723 
2026 1,290 
2027 1,171 
2028 717 
2029 641 
2030 533 
Thereafter 782 
Total $ 5,857 

13. ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

The following tables present the components of other comprehensive income (loss) for the periods presented:

(dollars in thousands) Before Tax Tax Effect Net of Tax
Three Months Ended June 30, 2025      
Net change in fair value of investment securities:      
Net unrealized gains on AFS investment securities arising during the period $ 2,347  $ 619  $ 1,728 
Less: Amortization of unrealized losses on investment securities transferred to HTM 1,773  468  1,305 
Net change in fair value of investment securities 4,120  1,087  3,033 
Net change in fair value of derivatives:
Net unrealized losses arising during the period (1,529) (403) (1,126)
Other comprehensive income $ 2,591  $ 684  $ 1,907 

(dollars in thousands) Before Tax Tax Effect Net of Tax
Three Months Ended June 30, 2024      
Net change in fair value of investment securities:      
Net unrealized gains on AFS investment securities arising during the period $ 370  $ 96  $ 274 
Less: Amortization of unrealized losses on investment securities transferred to HTM 1,867  493  1,374 
Net change in fair value of investment securities 2,237  589  1,648 
Net change in fair value of derivatives:
Net unrealized losses arising during the period (22) (6) (16)
Other comprehensive income $ 2,215  $ 583  $ 1,632 

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(dollars in thousands) Before Tax Tax Effect Net of Tax
Six Months Ended June 30, 2025      
Net change in fair value of investment securities:      
Net unrealized gains on AFS investment securities arising during the period $ 17,634  $ 4,651  $ 12,983 
Less: Amortization of unrealized losses on investment securities transferred to HTM 3,325  877  2,448 
Net change in fair value of investment securities 20,959  5,528  15,431 
Net change in fair value of derivatives:
Net unrealized losses arising during the period (3,622) (955) (2,667)
Other comprehensive income $ 17,337  $ 4,573  $ 12,764 

(dollars in thousands) Before Tax Tax Effect Net of Tax
Six Months Ended June 30, 2024      
Net change in fair value of investment securities:      
Net unrealized losses on AFS investment securities arising during the period $ (6,665) $ (1,759) $ (4,906)
Less: Amortization of unrealized losses on investment securities transferred to HTM 3,505  925  2,580 
Net change in fair value of investment securities (3,160) (834) (2,326)
Net change in fair value of derivatives:
Net unrealized gains arising during the period $ 3,031  $ 800  $ 2,231 
Other comprehensive loss $ (129) $ (34) $ (95)


The following tables present the changes in each component of accumulated other comprehensive income (loss), net of tax, for the periods presented:

(dollars in thousands) Investment Securities Derivatives SERP AOCI
Three Months Ended June 30, 2025      
Balance at beginning of period $ (109,093) $ 4,953  $ 575  $ (103,565)
Other comprehensive income (loss) before reclassifications 1,728  (1,126) —  602 
Reclassification adjustments from AOCI 1,305  —  —  1,305 
Total other comprehensive income (loss) 3,033  (1,126) —  1,907 
Balance at end of period $ (106,060) $ 3,827  $ 575  $ (101,658)

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(dollars in thousands) Investment Securities Derivatives SERP AOCI
Three Months Ended June 30, 2024      
Balance at beginning of period $ (131,896) $ 7,276  $ 297  $ (124,323)
Other comprehensive income (loss) before reclassifications 274  (16) —  258 
Reclassification adjustments from AOCI 1,374  —  —  1,374 
Total other comprehensive income (loss) 1,648  (16) —  1,632 
Balance at end of period $ (130,248) $ 7,260  $ 297  $ (122,691)

(dollars in thousands) Investment Securities Derivatives SERP AOCI
Six Months Ended June 30, 2025      
Balance at beginning of period $ (121,491) $ 6,494  $ 575  $ (114,422)
Other comprehensive income (loss) before reclassifications 12,983  (2,667) —  10,316 
Reclassification adjustments from AOCI 2,448  —  —  2,448 
Total other comprehensive income (loss) 15,431  (2,667) —  12,764 
Balance at end of period $ (106,060) $ 3,827  $ 575  $ (101,658)

(dollars in thousands) Investment Securities Derivatives SERP AOCI
Six Months Ended June 30, 2024      
Balance at beginning of period $ (127,922) $ 5,029  $ 297  $ (122,596)
Other comprehensive (loss) income before reclassifications (4,906) 2,231  —  (2,675)
Reclassification adjustments from AOCI 2,580  —  —  2,580 
Total other comprehensive (loss) income (2,326) 2,231  —  (95)
Balance at end of period $ (130,248) $ 7,260  $ 297  $ (122,691)


The following tables present the amounts reclassified out of each component of AOCI for the periods presented:

Amount Reclassified from AOCI Affected Line Item in the Statement Where Net Income is Presented
(dollars in thousands) Three Months Ended June 30,
Details about AOCI Components 2025 2024
Amortization of unrealized losses on investment securities transferred to HTM:
Amortization $ 1,773  $ 1,867  Interest and dividends on investment securities
Tax effect (468) (493) Income tax benefit
Total reclassification adjustments from AOCI for the period, net of tax $ 1,305  $ 1,374 

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Amount Reclassified from AOCI Affected Line Item in the Statement Where Net Income is Presented
(dollars in thousands) Six Months Ended June 30,
Details about AOCI Components 2025 2024
Amortization of unrealized losses on investment securities transferred to HTM:
Amortization $ 3,325  $ 3,505  Interest and dividends on investment securities
Tax effect (877) (925) Income tax benefit
Total reclassification adjustments from AOCI for the period, net of tax $ 2,448  $ 2,580 
14. EARNINGS PER SHARE

The following table presents the information used to compute basic and diluted earnings per share for the periods presented:

Three Months Ended June 30, Six Months Ended June 30,
(dollars in thousands, except per share data) 2025 2024 2025 2024
Net income $ 18,271  $ 15,817  $ 36,031  $ 28,762 
Weighted average common shares outstanding - basic 26,988,169  27,053,549  27,037,388  27,050,037 
Dilutive effect of employee stock options and awards 81,508  62,800  102,581  56,230 
Weighted average common shares outstanding - diluted 27,069,677  27,116,349  27,139,969  27,106,267 
Basic earnings per share $ 0.68  $ 0.58  $ 1.33  $ 1.06 
Diluted earnings per share $ 0.67  $ 0.58  $ 1.33  $ 1.06 
Anti-dilutive employee stock options and awards 5,623  2,917  3,040  1,890 

15. FAIR VALUE OF FINANCIAL ASSETS AND LIABILITIES

Disclosures about Fair Value of Financial Instruments

Fair value estimates, methods and assumptions are set forth below for our financial instruments.

Short-Term Financial Instruments

The carrying values of short-term financial instruments are deemed to approximate fair values. Such instruments are considered readily convertible to cash and include cash and due from financial institutions, interest-bearing deposits in other financial institutions, accrued interest receivable, the majority of short-term FHLB advances and other short-term borrowings, and accrued interest payable.

Investment Securities

The fair value of investment securities is based on market price quotations received from third-party pricing services. The third-party pricing services utilize pricing models supported with timely market data information. Where quoted market prices are not available, fair values are based on quoted market prices of comparable securities.

Loans

Fair values of loans are estimated based on discounted cash flows of portfolios of loans with similar financial characteristics including the type of loan, interest terms and repayment history. Fair values are calculated by discounting scheduled cash flows through estimated maturities using estimated market discount rates. Estimated market discount rates are reflective of credit and interest rate risks inherent in the Company's various loan types and are derived from available market information, as well as specific borrower information. The weighted average discount rate used in the valuation of loans was 6.52% and 7.07% as of June 30, 2025 and December 31, 2024, respectively. In accordance with ASU 2016-01, the fair values of loans are measured based on the notion of exit price.
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Loans Held for Sale

The fair value of loans classified as held for sale are generally based upon quoted prices for similar assets in active markets, acceptance of firm offer letters with agreed upon purchase prices, discounted cash flow models that take into account market observable assumptions, or independent appraisals of the underlying collateral securing the loans. We report loans previously held for investment that were transferred to loans held for sale, if any, at fair value, net of estimated selling costs on our consolidated balance sheets.

Deposit Liabilities

The fair values of deposits with no stated maturity, such as noninterest-bearing demand deposits and interest-bearing demand and savings accounts, for the purposes of this disclosure, are shown to equal the carrying amount which is the amount payable on demand. The fair value of time deposits is estimated by discounting future cash flows using rates currently offered for FHLB advances of similar remaining maturities. The weighted average discount rate used in the valuation of time deposits was 4.46% and 4.50% as of June 30, 2025 and December 31, 2024, respectively.

Long-Term Debt

The fair values of our long-term debt is estimated by discounting scheduled cash flows over the contractual borrowing period at the estimated market rate for similar borrowing arrangements. The weighted average discount rate used in the valuation of long-term debt was 7.09% and 6.68% as of June 30, 2025 and December 31, 2024, respectively.

Derivatives

The fair values of derivative financial instruments are based upon current market values, if available. If there are no relevant comparable values, fair values are based on pricing models using current assumptions for forward sale commitments, interest rate lock commitments, risk participation agreements, back-to-back swap agreements, and interest rate swaps.

Off-Balance Sheet Financial Instruments

The fair values of off-balance sheet financial instruments are estimated based on the fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements and the present creditworthiness of the counterparties, current settlement values or quoted market prices of comparable instruments.

Limitations

Fair value estimates are made at a specific point in time based on relevant market and financial instrument information. These estimates do not reflect any premium or discount that could result from offering for sale at one time our entire holdings of a particular financial instrument. Because no market exists for a significant portion of our financial instruments, fair value estimates are based on judgments regarding future expected loss experience, current economic conditions, risk characteristics of various financial instruments and other factors. These estimates cannot be determined with precision as they are subjective in nature and involve uncertainties and matters of significant judgment. Changes in assumptions could significantly affect the estimates.

Fair value estimates are based on existing on- and off-balance sheet financial instruments without attempting to estimate the value of future business and the value of assets and liabilities that are not considered financial instruments. For example, significant assets and liabilities that are not considered financial assets or liabilities include deferred tax assets and premises and equipment.
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(dollars in thousands)     Fair Value Measurement Using
June 30, 2025 Carrying
Amount		 Estimated
Fair Value		 Quoted Prices
in Active
Markets for
Identical Assets
(Level 1)		 Significant
Other
Observable
Inputs
(Level 2)		 Significant
Unobservable
Inputs
(Level 3)
Financial assets:          
Cash and due from financial institutions $ 110,935  $ 110,935  $ 110,935  $ —  $ — 
Interest-bearing deposits in other financial institutions 206,035  206,035  206,035  —  — 
Investment securities 1,345,689  1,265,046  61,063  1,197,211  6,772 
Loans 5,289,809  4,976,272  —  —  4,976,272 
Accrued interest receivable 23,518  23,518  410  4,425  18,683 
Financial liabilities:          
Deposits:          
Noninterest-bearing demand 1,938,226  1,938,226  1,938,226  —  — 
Interest-bearing demand and savings and money market 3,578,742  3,578,742  3,578,742  —  — 
Time 1,028,021  1,020,979  —  —  1,020,979 
Long-term debt 131,466  126,705  —  —  126,705 
Accrued interest payable 8,755  8,755  109  —  8,646 

(dollars in thousands) Fair Value Measurement Using
June 30, 2025 Notional
Amount		 Carrying
Amount		 Estimated
Fair Value		 Quoted Prices
in Active
Markets for
Identical Assets
(Level 1)		 Significant
Other
Observable
Inputs
(Level 2)		 Significant
Unobservable
Inputs
(Level 3)
Off-balance sheet financial instruments:  
Commitments to extend credit $ 1,350,411  $ —  $ 1,314  $ —  $ 1,314  $ — 
Standby letters of credit and financial guarantees written 2,520  —  38  —  38  — 
Derivatives:
Back-to-back swap agreements:
Assets 61,525  3,321  3,321  —  —  3,321 
Liabilities (61,525) (3,321) (3,321) —  —  (3,321)
Risk participation agreements 34,750  —  —  —  —  — 
Interest rate swap agreements 114,580  4,890  4,890  —  4,890  — 
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(dollars in thousands)     Fair Value Measurement Using
December 31, 2024 Carrying
Amount		 Estimated
Fair Value		 Quoted Prices
in Active
Markets for
Identical Assets
(Level 1)		 Significant
Other
Observable
Inputs
(Level 2)		 Significant
Unobservable
Inputs
(Level 3)
Financial assets:
Cash and due from financial institutions $ 77,774  $ 77,774  $ 77,774  $ —  $ — 
Interest-bearing deposits in other financial institutions 303,167  303,167  303,167  —  — 
Investment securities 1,334,588  1,244,339  59,498  1,177,994  6,847 
Loans held for sale 5,662  5,662  —  5,662  — 
Loans 5,332,852  4,916,765  —  —  4,916,765 
Accrued interest receivable 23,378  23,378  462  4,607  18,309 
Financial liabilities:          
Deposits:          
Noninterest-bearing demand 1,888,937  1,888,937  1,888,937  —  — 
Interest-bearing demand and savings and money market 3,667,889  3,667,889  3,667,889  —  — 
Time 1,087,185  1,079,275  —  —  1,079,275 
Long-term debt 156,345  153,760  —  —  153,760 
Accrued interest payable 10,051  10,051  113  —  9,938 

(dollars in thousands)     Fair Value Measurement Using
December 31, 2024 Notional
Amount		 Carrying
Amount		 Estimated
Fair Value		 Quoted Prices
in Active
Markets for
Identical Assets
(Level 1)		 Significant
Other
Observable
Inputs
(Level 2)		 Significant
Unobservable
Inputs
(Level 3)
Off-balance sheet financial instruments:
Commitments to extend credit $ 1,219,537  $ —  $ 1,167  $ —  $ 1,167  $ — 
Standby letters of credit and financial guarantees written 2,702  —  41  —  41  — 
Derivatives:
Back-to-back swap agreements:
Assets 50,202  3,840  3,840  —  —  3,840 
Liabilities (50,202) (3,840) (3,840) —  —  (3,840)
Interest rate lock commitments 469  (4) (4) —  (4) — 
Forward sale commitments 4,909  46  46  —  46  — 
Risk participation agreements 35,183  —  —  —  —  — 
Interest rate swap agreements 115,545  8,382  8,382  —  8,382  — 

Fair Value Measurements

We group our financial assets and liabilities at fair value into three levels based on the markets in which the financial assets and liabilities are traded and the reliability of the assumptions used to determine fair value as follows:

•Level 1 — Valuation is based upon quoted prices (unadjusted) for identical assets or liabilities traded in active markets. A quoted price in an active market provides the most reliable evidence of fair value and shall be used to measure fair value whenever available.

•Level 2 — Valuation is based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant assumptions are observable in the market.

•Level 3 — Valuation is generated from model-based techniques that use significant assumptions not observable in the market. These unobservable assumptions reflect our own estimates of assumptions that market participants would use in
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pricing the asset or liability. Valuation techniques include use of discounted cash flow models and similar techniques that requires the use of significant judgment or estimation.

We base our fair values on the price that we would expect to receive if an asset were sold, or the price that we would expect to pay to transfer a liability in an orderly transaction between market participants at the measurement date. We also maximize the use of observable inputs and minimize the use of unobservable inputs when developing fair value measurements.

We use fair value measurements to record adjustments to certain financial assets and liabilities and to determine fair value disclosures. Available-for-sale securities and derivatives are recorded at fair value on a recurring basis. Periodically, we may be required to record other financial assets at fair value on a nonrecurring basis such as loans held for sale, individually evaluated loans, mortgage servicing rights, and other real estate owned. These nonrecurring fair value adjustments typically involve application of the lower of cost or fair value accounting or write-downs of individual assets.

During the year ended December 31, 2024, the Company transferred its interest rate swap from Level 3 to Level 2 of the fair value hierarchy. The transfer was due to a change in the methodology used. There were no transfers of financial assets and liabilities into and out of Level 3 of the fair value hierarchy during the three months and six months ended June 30, 2025.

The following tables present the fair value of financial assets and liabilities measured on a recurring basis as of the dates presented:
(dollars in thousands) Fair Value at Reporting Date Using
June 30, 2025 Fair Value Quoted Prices
in Active
Markets for
Identical Assets
(Level 1)		 Significant
Other
Observable
Inputs
(Level 2)		 Significant
Unobservable
Inputs
(Level 3)
Available-for-sale securities:        
Debt securities:        
States and political subdivisions $ 114,776  $ —  $ 108,675  $ 6,101 
U.S. Treasury and other government-sponsored entities and agencies 101,415  61,063  40,352  — 
Collateralized loan obligations 40,916  —  40,916  — 
Mortgage-backed securities:        
Residential - U.S. government-sponsored entities and agencies 422,068  —  422,068  — 
Residential - Non-government agencies 16,139  —  15,468  671 
Commercial - U.S. government-sponsored entities and agencies 68,304  —  68,304  — 
Commercial - Non-government agencies 1,595  —  1,595  — 
Total available-for-sale investment securities 765,213  61,063  697,378  6,772 
Derivatives:
Interest rate swap agreements 4,890  —  4,890  — 
Total derivatives 4,890  —  4,890  — 
Total $ 770,103  $ 61,063  $ 702,268  $ 6,772 

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(dollars in thousands) Fair Value at Reporting Date Using
December 31, 2024 Fair Value Quoted Prices
in Active
Markets for
Identical Assets
(Level 1)		 Significant
Other
Observable
Inputs
(Level 2)		 Significant
Unobservable
Inputs
(Level 3)
Available-for-sale securities:        
Debt securities:        
States and political subdivisions $ 116,833  $ —  $ 110,668  $ 6,165 
U.S. Treasury and other government-sponsored entities and agencies 81,200  59,498  21,702  — 
Collateralized loan obligations 31,140  —  31,140  — 
Mortgage-backed securities:        
Residential - U.S. government-sponsored entities and agencies 414,471  —  414,471  — 
Residential - Non-government agencies 16,926  —  16,244  682 
Commercial - U.S. government-sponsored entities and agencies 67,161  —  67,161  — 
Commercial - Non-government agencies 9,927  —  9,927  — 
Total available-for-sale investment securities 737,658  59,498  671,313  6,847 
Derivatives:
Interest rate lock commitments (4) —  (4) — 
Forward sale commitments 46  —  46  — 
Interest rate swap agreements 8,382  —  8,382  — 
Total derivatives 8,424  —  8,424  — 
Total $ 746,082  $ 59,498  $ 679,737  $ 6,847 

The following table presents changes in Level 3 financial assets and liabilities measured at fair value on a recurring basis for the periods presented:
Available-For-Sale Debt Securities:
(dollars in thousands) States and Political Subdivisions Residential - Non-Government Agencies Interest Rate Swap Agreements Total
Balance at December 31, 2024 $ 6,165  $ 682  $ —  $ 6,847 
Principal payments received (129) (12) —  (141)
Unrealized net gain (loss) included in other comprehensive income 65  1  —  66 
Balance at June 30, 2025 $ 6,101  $ 671  $ —  $ 6,772 
   
Balance at December 31, 2023 $ 6,436  $ 714  $ 6,440  $ 13,590 
Principal payments received (120) (12) —  (132)
Unrealized net gain (loss) included in other comprehensive income (62) (8) 2,864  2,794 
Balance at June 30, 2024 $ 6,254  $ 694  $ 9,304  $ 16,252 

Based on a discounted cash flow model that calculates the present value of estimated future principal and interest payments, the estimated aggregate fair value of Level 3 financial assets and liabilities measured at fair value on a recurring basis was $6.8 million and $6.8 million as of June 30, 2025 and December 31, 2024, respectively.

The weighted-average discount rate was used as the significant unobservable input in the fair value measurement of the available-for-sale debt securities. The weighted average discount rate utilized was 6.04%, 6.22% and 6.54% as of June 30, 2025, December 31, 2024 and June 30, 2024, respectively, which was derived by incorporating a credit spread over the FHLB Fixed-Rate Advance curve. Significant increases (decreases) in the weighted-average discount rate could result in a significantly lower (higher) fair value measurement.
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There were no financial assets or liabilities measured on a nonrecurring basis as of June 30, 2025 and December 31, 2024.
16. SEGMENT INFORMATION

The Company evaluated its operating segments in accordance with ASC 280, "Segment Reporting" and determined it operates as one reportable segment, banking operations. The Company provides a comprehensive range of financial services, such as construction and real estate development lending, commercial lending, residential mortgage lending, consumer lending, trust services, retail brokerage services and our retail branch offices, which are then aggregated as there is no material difference in the products and services offered based on customer type or geographic location. All activities are closely aligned with the core business of providing financial services and are subject to similar risks and rewards. No single customer accounts for more than 10% of total revenue. All operations are domestic and located in the State of Hawaii.

The Company's Executive Committee, who is the designated chief operating decision maker ("CODM"), evaluates performance and makes decisions based on consolidated financial information. The CODM does not separately evaluate distinct groups of products or services, nor are resources allocated differently based on individual product lines or geographic regions. Rather, performance is assessed on an overall basis, considering consolidated metrics such as total revenues, profit, and risk management of the Company as a whole, and resources are allocated to support the Company's overall business plan.

Loans, investments, and deposits provide the revenues in banking operations and are presented in the Company's consolidated balance sheets. Interest expense, provisions for credit losses, and salaries and employee benefits provide the significant expenses in banking operations and are presented in the Company's consolidated statements of income. Segment performance is evaluated using consolidated net income with the majority of the Company’s net income derived from net interest income. Accordingly, management focuses primarily on net interest income, rather than gross interest income and expense amounts, in evaluating segment profitability.

The accounting policies of the segment is consistent with those described in Note 1 - Summary of Significant Accounting Policies to the consolidated financial statements in the Annual Report on Form 10-K for the year ended December 31, 2024 filed with the SEC.

17. CONTINGENT LIABILITIES AND OTHER COMMITMENTS

The Company and its subsidiaries are involved in legal proceedings arising in the ordinary course of business. The outcome of these matters and the timing of ultimate resolution is inherently difficult to predict. Based on information currently available to us and after consultation with legal counsel, management believes the ultimate disposition of those matters will not have a material adverse effect on our financial condition or operations.

In the normal course of business there are outstanding contingent liabilities and other commitments such as unused loan commitment, unused letters of credit and items held for collections, which are not reflected in the accompanying consolidated financial statements. Management does not anticipate any material losses as a result of these transactions and has a reserve for off-balance sheet credit exposures appropriately recorded in other liabilities on the Company's consolidated balance sheets.

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

Forward-Looking Statements and Factors that Could Affect Future Results

Certain statements contained in this quarterly report on Form 10-Q 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. 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. 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. (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. 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.

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. 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 the persistence of current inflationary pressures, or the resurgence of elevated levels of inflation in the United States and our market areas, and its impact on market interest rates, the economy and credit quality;
•the impact of the current U.S. administration's recent economic policies, including international tariffs, and other cost-cutting initiatives;
•disruptions in the economy, including supply chain disruptions;
•labor contract disputes and potential strikes impacting both the U.S. 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 bank failures and the potential impact of such developments on customer confidence, deposit behavior, liquidity and regulatory responses thereto;
•the adverse effects of pandemic viruses (and their variants), epidemics and other public health emergencies 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, and 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 Federal Deposit Insurance Corporation ("FDIC") assessments;
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•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 ("PCAOB"), 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, tariff, monetary and fiscal policies and laws, including the interest rate policies of the Board of Governors of the Federal Reserve System (the "FRB" or the "Federal Reserve");
•changes in the competitive environment among financial holding companies and other financial service providers;
•securities market and monetary fluctuations, 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 potential or actual acquisitions or dispositions we may make or evaluate, and the related costs associated therewith, including re-engagement in any potential acquisition or disposition process;
•political instability;
•acts of war or terrorism or military conflicts domestically or internationally;
•changes in consumer spending, borrowings and savings habits;
•technological changes and developments;
•cybersecurity and data privacy breaches and the consequence therefrom, including those involving our third-party vendors or other service providers;
•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;
•our ability to successfully implement our initiatives to lower our efficiency;
•our ability to attract and retain key personnel;
•changes in our personnel, organization, compensation and benefit plans;
•our ability to successfully implement and achieve the objectives of potential future Banking-as-a-Service ("BaaS") initiatives, including adoption of the initiatives by customers and risks faced by any of our bank collaborations including reputational and regulatory risk;
•uncertainty regarding United States fiscal debt, deficit and budget matters; and
•our success at managing the risks involved in the foregoing items.

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 the Company's publicly available Securities and Exchange Commission filings, including the Company's Forms 10-Q and 10-K for the current fiscal quarter and the last fiscal year, respectively, and in particular, the discussion of "Risk Factors" set forth therein and herein. We urge investors to consider all of these factors carefully in evaluating the forward-looking statements contained in this document. 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.

Overview

Central Pacific Financial Corp. ("CPF"), a Hawaii corporation and a bank holding company registered under the Bank Holding Company Act of 1956, as amended (the "BHC Act"), was organized on February 1, 1982. Our principal business is to serve as a holding company for our bank subsidiary, Central Pacific Bank, which was incorporated in its present form in the State of Hawaii on March 16, 1982 in connection with the holding company reorganization. Its predecessor entity was incorporated in the State of Hawaii on January 15, 1954. We provide financial results based on a fiscal year ending December 31 as a single reportable segment.

We refer to Central Pacific Bank herein as "our Bank" or "the Bank," and when we say "the Company," "we," "us" or "our," we mean the holding company on a consolidated basis with the Bank and our other consolidated subsidiaries.

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Central Pacific Bank is a full-service community bank with 27 branches and 55 ATMs located throughout the State of Hawaii as of June 30, 2025.

We were founded by World War II veterans who were not offered the same banking courtesies in Hawaii, even though they came home from the war as heroes. They founded the Bank to serve the needs of individuals and small businesses that did not have access to financial services in Hawaii at the time. We strive to provide exceptional customer service and products that meet our customers' needs, including:

•Loans: Our loans consist of commercial and industrial, commercial mortgage, and construction loans to small and medium-sized companies, business professionals, and real estate investors and developers, as well as residential mortgage, home equity, and consumer loans to homeowners and individuals. Our lending activities contribute to a key component of our revenues reported in interest income. We strive for a strong and diverse loan portfolio in Hawaii and selective mainland markets.

•Deposits: We offer a full range of deposit products and services including: checking, savings and time deposits, cash management, and digital banking services. We also maintain a broad branch and ATM network in the State of Hawaii. The interest paid on such deposits has a significant impact on our interest expense, an important factor in determining our earnings. In addition, fees and service charges on deposit accounts and card interchange contribute to our revenues.

Additionally, we offer wealth management products and services, such as non-deposit investment products, annuities, investment management, trust custody, estate and financial planning services.

Our foundational principles are based on continuing to be a leading bank for small businesses, a professional and reliable resource to meet Hawaii’s housing needs, and also serve as a bridge between Hawaii and Japan. Through a legacy of strong connections with Japan, including individuals, businesses and several regional banks, we continue to service the needs and promote ongoing activities primarily through deposit product offerings and two-way referrals of other products and services.

Basis of Presentation

Management's discussion and analysis of financial condition and results of operations should be read in conjunction with the accompanying consolidated financial statements under "Part I, Item 1. Financial Statements (Unaudited)." The following discussion should also be read in conjunction with the Company's Annual Report on Form 10-K for the year ended December 31, 2024 filed with the U.S. Securities and Exchange Commission (the "SEC") on February 26, 2025, including the “Risk Factors” set forth therein.

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 certain judgments and use certain estimates and assumptions that affect amounts reported and disclosures made. Actual results may differ from those estimates and such differences could be material to the financial statements.

Accounting estimates are deemed critical when a different estimate could have reasonably been used or where changes in the estimate are reasonably likely to occur from period-to-period and would materially impact our consolidated financial statements as of or for the periods presented. Management has discussed the development and selection of the critical accounting estimates noted below with the Audit Committee of the Board of Directors, and the Audit Committee has reviewed the accompanying disclosures.

The Company identified a significant accounting policy, which involves a higher degree of judgment and complexity in making certain estimates and assumptions that affect amounts reported in our consolidated financial statements. As of June 30, 2025 and December 31, 2024, the significant accounting policy that we believed to be the most critical in preparing our consolidated financial statements is the determination of the allowance for credit losses ("ACL") on loans. This is further described in Note 1 - Summary of Significant Accounting Policies included in the accompanying notes to the consolidated financial statements, Note 1 - Summary of Significant Accounting Policies included in the accompanying notes to the consolidated financial statements for the year ended December 31, 2024, and the section titled "Critical Accounting Policies and Use of Estimates" in Management's Discussion and Analysis of Financial Condition and Operating Results included in the Company's 2024 Annual Report on Form 10-K.

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Financial Summary

Net income for the three months ended June 30, 2025 was $18.3 million, or $0.67 per diluted share, compared to net income of $15.8 million, or $0.58 per diluted share for the three months ended June 30, 2024. Net income for the six months ended June 30, 2025 was $36.0 million, or $1.33 per diluted share, compared to net income of $28.8 million, or $1.06 per diluted share for the six months ended June 30, 2024.

During the three months ended June 30, 2025, the Company recorded a provision for credit losses of $5.0 million, compared to a provision of $2.2 million during the three months ended June 30, 2024. During the six months ended June 30, 2025, the Company recorded a provision for credit losses of $9.2 million, compared to a provision of $6.2 million during the six months ended June 30, 2024. The increase in the provision was primarily driven by the macro-economic forecast used in our current expected credit losses model, combined with higher off-balance sheet credit exposure related to new unfunded construction loan commitments.

The Company's pre-provision net revenue ("PPNR"), a non-GAAP financial measure which excludes the provision for credit losses and income tax expense from net income, for the three months ended June 30, 2025 was $28.9 million, compared to $22.9 million for the three months ended June 30, 2024. The Company's PPNR for the six months ended June 30, 2025 was $55.6 million, compared to $43.7 million for the six months ended June 30, 2024. See the following section titled "Non-GAAP Financial Measures" for reconciliation of PPNR.

The following table presents annualized returns on average assets ("ROA") and average shareholders' equity ("ROE"), and basic and diluted earnings per share ("EPS") for the periods presented. ROA and ROE are annualized based on a 30/360 day convention.

Three Months Ended June 30, Six Months Ended June 30,
  2025 2024 2025 2024
Return on average assets 1.00  % 0.86  % 0.98  % 0.78  %
Return on average shareholders’ equity 13.04  12.42  13.04  11.38 
Basic earnings per share $ 0.68  $ 0.58  $ 1.33  $ 1.06 
Diluted earnings per share 0.67  0.58  1.33  1.06 

Non-GAAP Financial Measures

The Company uses certain non-GAAP financial measures in addition to our GAAP results to provide useful information which we believe are better indicators of the Company's core activities. This information should be considered as supplemental in nature and should not be considered in isolation or as a substitute for the related financial information prepared in accordance with GAAP. In addition, these non-GAAP financial measures may not be comparable to similarly entitled measures reported by other companies.

Pre-Provision Net Revenue

The Company believes that PPNR, a non-GAAP financial measure, is useful as a tool to help evaluate the ability to provide for credit costs through operations. The following table presents a reconciliation of the Company's PPNR for the periods presented:

Three Months Ended June 30, Six Months Ended June 30,
(dollars in thousands) 2025 2024 2025 2024
GAAP net income $ 18,271  $ 15,817  $ 36,031  $ 28,762 
Add: Income tax expense 5,605  4,835  10,396  8,809 
Pre-tax income 23,876  20,652  46,427  37,571 
Add: Provision for credit losses 4,987  2,239  9,159  6,175 
PPNR (non-GAAP)
 $ 28,863  $ 22,891  55,586  43,746 

The higher PPNR in the second quarter of 2025 and six months ended June 30, 2025 were primarily due to higher net interest income of $7.9 million and $15.4 million, respectively, compared to the same year-ago periods. The higher net interest income was primarily due to higher average yields earned on interest-earning assets, combined with lower average rates paid on interest-bearing deposits.
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Efficiency Ratio

A key measure of operating efficiency tracked by the Company is the efficiency ratio, which is derived from GAAP-based amounts, as is calculated by dividing total other operating expenses by total pre-provision revenue (net interest income plus total other operating income). The Company believes that the efficiency ratio, a non-GAAP financial measure, provides useful supplemental information that is important to a proper understanding of its business results and operating efficiency. The Company's efficiency ratio should not be viewed as a substitute for results determined in accordance with GAAP, nor is it necessarily comparable to the efficiency ratio presented by other companies.

The following table sets forth efficiency ratio for the periods presented:

Three Months Ended June 30, Six Months Ended June 30,
(dollars in thousands) 2025 2024 2025 2024
Total other operating expense $ 43,946  $ 41,151  $ 86,018  $ 81,727 
Net interest income $ 59,796  $ 51,921  $ 117,495  $ 102,108 
Total other operating income 13,013  12,121  24,109  23,365 
Total revenue $ 72,809  $ 64,042  $ 141,604  $ 125,473 
Efficiency ratio (non-GAAP) 60.36  % 64.26  % 60.75  % 65.14  %

Our efficiency ratio in the second quarter of 2025 improved to 60.36%, compared to 64.26% in the year-ago quarter. Our efficiency ratio in the six months ended June 30, 2025 improved to 60.75%, compared to 65.14% in the same year-ago period.

The improvement in the efficiency ratio in the second quarter of 2025 and six months ended June 30, 2025, compared to the same year-ago periods, were primarily due to higher net interest income and other operating income, despite higher other operating expense.

Tangible Common Equity Ratio

The following table presents our tangible common equity ("TCE") ratio, a non-GAAP financial measure, which is calculated by dividing tangible common equity by tangible assets, as of the dates presented:

(dollars in thousands) June 30, 2025 December 31, 2024 June 30, 2024
Total shareholders' equity $ 568,874  $ 538,385  $ 518,647 
Less: Intangible assets —  —  (1,414)
TCE (non-GAAP) $ 568,874  $ 538,385  $ 517,233 
Total assets $ 7,369,567  $ 7,472,096  $ 7,386,952 
Less: Intangible assets —  —  (1,414)
Tangible assets (non-GAAP) $ 7,369,567  $ 7,472,096  $ 7,385,538 
TCE ratio (non-GAAP) 7.72  % 7.21  % 7.00  %

Material Trends

The majority of our operations are concentrated in the State of Hawaii. As a result, our performance is significantly influenced by the strength of the real estate markets, the tourism industry, and the economic and environmental conditions in Hawaii, along with the effect of macroeconomic conditions. 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 opposite.
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According to preliminary statistics from the Hawaii Tourism Authority ("HTA"), a total of 4.9 million visitors arrived to the Hawaiian Islands during the six months ended June 30, 2025, mainly from the U.S. Mainland, up 2.0% from 4.8 million visitors in the same prior year period, but down 4.9% from 5.2 million visitors in the same period in the pre-pandemic and record year in 2019. The recovery of visitors from Japan remains slow and has continued to be offset by the strength of domestic travel. Average daily census visitors from Japan were down approximately 5.7% during the six months ended June 30, 2025, compared to the same prior year period, and were down by approximately 55.4% from the same period in 2019.

Total spending for visitors arriving in the six months ended June 30, 2025 was $10.95 billion, up 5.8% from $10.35 billion in the same period last year, and up by 23.6% from $8.86 billion in the same period in 2019.

According to a May 2025 report by the University of Hawaii Economic Research Organization ("UHERO"), total visitor arrivals by air are expected to be approximately 9.47 million in 2025, which is a decrease of approximately 2.2% from 9.69 million in 2024. Visitor spending is expected to decline by approximately 5.7% to $19.40 billion in 2025 from $20.58 billion in 2024.

The Department of Labor and Industrial Relations reported that Hawaii's seasonally adjusted annual unemployment rate was 2.8% in the month of June 2025, compared to 2.9% in the month of June 2024 and the national seasonally adjusted unemployment rate of 4.1% in the month of June 2025. UHERO projects Hawaii's seasonally adjusted annual unemployment rate to remain low at approximately 3.1% in 2025.

Hawaii's economy is measured by the growth of real personal income and real gross state product. UHERO projects real personal income to grow by 0.9% and real gross state product to grow by 1.1% in 2025.

UHERO's forecasts were updated to reflect the current U.S. administration's recent economic policies, including tariffs, and other cost-cutting initiatives. However, the impact of these economic policies and cost-cutting initiatives remains uncertain and could slow growth and/or have negative impacts to Hawaii's economy.

Real estate lending is one of the primary focuses for the Company, including residential mortgage and commercial mortgage loans. As a result, the Company is dependent on the strength of Hawaii's real estate market. The Hawaii housing market overall remained strong in the first half of 2025 despite some mixed results. According to the Honolulu Board of Realtors, sales of Oahu single-family homes in the six months ended June 30, 2025 were down 2.1%, while sales of Oahu condominiums were down 6.0% from the same prior year period. The Oahu single-family home median price in the six months ended June 30, 2025 rose by 6.0% to $1.2 million from $1.1 million in the same prior year period. The Oahu condominium median price in the six months ended June 30, 2025 declined by 0.5% to $507,000 from $510,000 in the same prior year period.

Changes in monetary policy, including changes in interest rates, could influence: (i) the amount of interest we receive on loans and securities, (ii) the amount of interest we pay on deposits and borrowings, (iii) our ability to originate loans and obtain deposits, and (iv) the fair value of our assets and liabilities, among other things.

In an effort to rein in inflation, the FRB aggressively increased interest rates beginning in the first quarter of 2022, when the Federal Funds Rate target range was 0.00% to 0.25%. Over the following 18 months, the FRB raised the rate by more than five percentage points, reaching a 22-year high of 5.25% to 5.50%. The rate remained the same until September 2024, when the Federal Open Market Committee ("FOMC") lowered the target range by 50 basis points ("bp" or "bps") to 4.75% to 5.00%, reflecting increased confidence that inflation was sustainably moving towards the 2% target. Additional 25 bps cuts followed in November and December 2024, bringing the target range to 4.25% to 4.50% by year-end.

Through June 2025, the FOMC has maintained the Federal Funds Rate at that level. However, based on recent economic data and continued progress on inflation, the FOMC has signaled that it anticipates two additional rate cuts in the latter half of 2025, assuming current trends continue.

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Results of Operations

Net Interest Income and Net Interest Margin

A comparison of net interest income and net interest margin on a taxable-equivalent basis for the three and six months ended June 30, 2025 and 2024 is presented below. Net interest margin is defined as annualized net interest income, on a taxable-equivalent basis using a federal statutory tax rate of 21%, as a percentage of average interest earning assets.

(dollars in thousands) Three Months Ended June 30,
2025 2024 Variance
Average
Balance		 Average
Yield/
Rate		 Interest
Income/
Expense		 Average
Balance		 Average
Yield/
Rate		 Interest
Income/
Expense		 Average
Balance		 Average
Yield/
Rate		 Interest
Income/
Expense
Assets          
Interest earning assets:  
Interest-bearing deposits in other financial institutions $ 134,270  4.43  % $ 1,484  $ 162,393  5.46  % $ 2,203  $ (28,123) (1.03) % $ (719)
Investment securities:
Taxable (1) 1,379,213  2.86  9,871  1,335,100  2.54  8,466  44,113  0.32  1,405 
Tax-exempt (1) (2) 139,103  2.58  897  142,268  2.13  757  (3,165) 0.45  140 
Total investment securities 1,518,316  2.84  10,768  1,477,368  2.50  9,223  40,948  0.34  1,545 
Loans, including loans held for sale 5,307,946  4.96  65,668  5,385,829  4.80  64,422  (77,883) 0.16  1,246 
FHLB and FRB stock 24,565  6.33  388  6,925  8.71  151  17,640  (2.38) 237 
Total interest earning assets 6,985,097  4.49  78,308  7,032,515  4.34  75,999  (47,418) 0.15  2,309 
Noninterest-earning assets 329,047      306,199      22,848   
Total assets $ 7,314,144      $ 7,338,714      $ (24,570)  
Liabilities and Equity
Interest-bearing liabilities:                  
Interest-bearing demand deposits $ 1,357,049  0.13  % $ 443  $ 1,273,901  0.15  % $ 490  $ 83,148  (0.02) % $ (47)
Savings and money market deposits 2,275,799  1.48  8,414  2,221,754  1.63  8,977  54,045  (0.15) (563)
Time deposits up to $250,000 439,738  2.32  2,546  555,809  3.29  4,548  (116,071) (0.97) (2,002)
Time deposits over $250,000 603,652  3.37  5,070  703,280  4.36  7,625  (99,628) (0.99) (2,555)
Total interest-bearing deposits 4,676,238  1.41  16,473  4,754,744  1.83  21,640  (78,506) (0.42) (5,167)
FHLB advances and other short-term borrowings —  —  —  66  5.60  1  (66) (5.60) (1)
Long-term debt 131,431  5.65  1,851  156,188  5.86  2,278  (24,757) (0.21) (427)
Total interest-bearing liabilities 4,807,669  1.53  18,324  4,910,998  1.96  23,919  (103,329) (0.43) (5,595)
Noninterest-bearing deposits 1,827,225    1,788,023    39,202 
Other liabilities 119,002      130,186      (11,184)  
Total liabilities 6,753,896      6,829,207      (75,311)  
Total equity 560,248      509,507      50,741   
Total liabilities and equity $ 7,314,144      $ 7,338,714      $ (24,570)  
Net interest income (taxable-equivalent)     59,984      52,080      7,904 
Taxable-equivalent adjustment (188) (159) (29)
Net interest income (GAAP) $ 59,796  $ 51,921  $ 7,875 
Interest rate spread 2.96  % 2.38  % 0.58  %
Net interest margin (taxable-equivalent)   3.44  %     2.97  %     0.47  %  
(1)  At amortized cost.
(2) Includes taxable-equivalent adjustment using a federal statutory tax rate of 21%.

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Net interest income (expressed on a taxable-equivalent basis) was $60.0 million for the second quarter of 2025, representing an increase of $7.9 million, or 15.2% from $52.1 million in the year-ago quarter. The increase in net interest income from the year-ago quarter was primarily due to higher average yields earned on loans and investment securities, combined with lower average interest-bearing deposit balances and lower average rates paid on interest-bearing deposits. These positive variances were partially offset by a decline in average loans.

Interest Income

Taxable-equivalent interest income was $78.3 million for the second quarter of 2025, representing an increase of $2.3 million, or 3.0%, from $76.0 million in the year-ago quarter. The increase during the second quarter of 2025, compared to the year-ago quarter was primarily attributable to an increase in average yield earned on loans of 16 bps, resulting in an increase in interest income of approximately $2.2 million, and an increase in average yield earned on investment securities of 34 bps, resulting in an increase in interest income of approximately $1.3 million. These increases were partially offset by decreases in the average balance and average yield earned on interest-bearing deposits in other financial institutions resulting in an decrease in interest income of approximately $0.7 million, and a decrease in average loan balances of $77.9 million, resulting in a decrease in interest income of approximately $0.9 million.

Interest Expense

Interest expense was $18.3 million for the second quarter of 2025, representing a decrease of $5.6 million, or 23.4%, from $23.9 million in the year-ago quarter. Average interest-bearing deposits decreased by $78.5 million, resulting in a decrease in interest expense of approximately $1.8 million. Average rates paid on interest-bearing deposits of 1.41% decreased by 42 bps from the year-ago quarter, resulting in a decrease in interest expense of approximately $3.4 million. In addition, interest expense on long-term debt decreased by $0.4 million, primarily due to payoff of a $25.0 million FHLB long-term advance during the first quarter of 2025.

Net Interest Margin

Our net interest margin of 3.44% for the second quarter of 2025 increased by 47 bps from 2.97% in the year-ago quarter. The increase in net interest margin for the second quarter of 2025 was primarily attributable to increases in average yields earned on loans and investment securities, combined with the decrease in average rates paid on interest-bearing deposits.

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(dollars in thousands) Six Months Ended June 30,
2025 2024 Variance
Average
Balance		 Average
Yield/
Rate		 Interest
Income/
Expense		 Average
Balance		 Average
Yield/
Rate		 Interest
Income/
Expense		 Average
Balance		 Average
Yield/
Rate		 Interest
Income/
Expense
Assets
Interest earning assets:
Interest-bearing deposits in other financial institutions $ 169,991  4.43  % $ 3,738  $ 213,905  5.47  % $ 5,814  $ (43,914) (1.04) % $ (2,076)
Investment securities:
Taxable (1) 1,377,957  2.86  19,672  1,329,879  2.36  15,677  48,078  0.50  3,995 
Tax-exempt (1) (2) 139,345  2.57  1,794  142,549  2.23  1,586  (3,204) 0.34  208 
Total investment securities 1,517,302  2.83  21,466  1,472,428  2.34  17,263  44,874  0.49  4,203 
Loans, including loans held for sale 5,309,768  4.92  129,787  5,393,193  4.74  127,241  (83,425) 0.18  2,546 
FHLB and FRB stock 22,541  6.32  712  6,863  7.49  257  15,678  (1.17) 455 
Total interest earning assets 7,019,602  4.46  155,703  7,086,389  4.26  150,575  (66,787) 0.20  5,128 
Noninterest-earning assets 331,655  307,799  23,856 
Total assets $ 7,351,257  $ 7,394,188  $ (42,931)
Liabilities and Equity
Interest-bearing liabilities:
Interest-bearing demand deposits $ 1,356,209  0.13  % $ 895  $ 1,285,383  0.15  % $ 989  $ 70,826  (0.02) % $ (94)
Savings and money market deposits 2,310,429  1.51  17,276  2,220,002  1.58  17,420  90,427  (0.07) (144)
Time deposits up to $250,000 448,557  2.42  5,377  550,044  3.25  8,887  (101,487) (0.83) (3,510)
Time deposits over $250,000 603,785  3.46  10,346  748,649  4.37  16,276  (144,864) (0.91) (5,930)
Total interest-bearing deposits 4,718,980  1.45  33,894  4,804,078  1.82  43,572  (85,098) (0.37) (9,678)
FHLB advances and other short-term borrowings —  —  —  33  5.60  1  (33) (5.60) (1)
Long-term debt 141,758  5.60  3,937  156,159  5.87  4,561  (14,401) (0.27) (624)
Total interest-bearing liabilities 4,860,738  1.57  37,831  4,960,270  1.95  48,134  (99,532) (0.38) (10,303)
Noninterest-bearing deposits 1,813,142  1,797,212  15,930 
Other liabilities 124,767  131,392  (6,625)
Total liabilities 6,798,647  6,888,874  (90,227)
Total equity 552,610  505,314  47,296 
Total liabilities and equity $ 7,351,257  $ 7,394,188  $ (42,931)
Net interest income (taxable-equivalent) 117,872  102,441  15,431 
Taxable-equivalent adjustment (377) (333) (44)
Net interest income (GAAP) $ 117,495  $ 102,108  $ 15,387 
Interest rate spread 2.89  % 2.31  % 0.58  %
Net interest margin (taxable-equivalent) 3.37  % 2.90  % 0.47  %
(1)  At amortized cost.
(2) Includes taxable-equivalent adjustment using a federal statutory tax rate of 21%.

Net interest income (expressed on a taxable-equivalent basis) was $117.9 million for the six months ended June 30, 2025, representing an increase of $15.4 million or 15.1% from $102.4 million in the six months ended June 30, 2024. The increase from the year-ago period was primarily due to higher average yields earned on loans and investment securities, combined with lower average interest-bearing deposit balances and lower average rates paid on interest-bearing deposits. These positive variances were partially offset by a decline in average loans.

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Interest Income

Taxable-equivalent interest income was $155.7 million for the six months ended June 30, 2025, representing an increase of $5.1 million, or 3.4%, from $150.6 million in the year-ago period. The increase was primarily attributable to increases in average yields earned on loans and investment securities of 18 bps and 49 bps, respectively, resulting in increases in interest income of approximately $4.6 million and $3.7 million, respectively. The increase in the average yield earned on investment securities was partially attributable to higher income from an interest rate swap that became effective on March 31, 2024 of $0.7 million, compared to the same prior year period. These increases were partially offset by a decrease in average loan balances of $83.4 million during the six months ended June 30, 2025, compared to the year-ago period, resulting in a decrease in interest income of approximately $2.1 million. In addition, the decrease in average balance and yield earned on interest-bearing deposits in other financial institutions of $43.9 million and 104 bps, respectively, resulted in a decrease in interest income of approximately $2.1 million.

Interest Expense

Interest expense was $37.8 million for the six months ended June 30, 2025, which decreased by $10.3 million, or 21.4%, from $48.1 million in the year-ago period. Average rates paid on interest-bearing deposits of 1.45% decreased by 37 bps and average interest-bearing deposit balances decreased by $85.1 million from the year-ago period, resulting in decreases in interest expense of approximately $5.6 million and $4.1 million, respectively.

Net Interest Margin

Our net interest margin of 3.37% for the six months ended June 30, 2025 increased by 47 bps from 2.90% in the year-ago period. As previously discussed, the increase in net interest margin for the six months ended June 30, 2025 compared to the year-ago period was primarily attributable to the aforementioned increases in average yields earned on loans and investment securities, combined with a decline in average rates paid on interest-bearing deposits and long-term debt.

Rate-Volume Analysis

For each category of interest-earning assets and interest-bearing liabilities, information is provided on changes attributable to: (i) changes in average balances (volume) and (ii) changes in weighted average interest rates (rate). The change in volume is calculated as change in average balance, multiplied by prior period average yield/rate. The change in rate is calculated as change in average yield/rate, multiplied by current period volume. The change in interest income not solely due to change in volume or change in rate has been allocated proportionately to change in volume and change in average yield/rate.

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Three Months Ended June 30, 2025
Compared To June 30, 2024		 Six Months Ended June 30, 2025
Compared To June 30, 2024
Increase (Decrease) Due to: Increase (Decrease) Due to:
(dollars in thousands) Volume Rate Net Change Volume Rate Net Change
Interest earning assets:
Interest-bearing deposits in other financial institutions $ (378) $ (341) $ (719) $ (1,196) $ (880) $ (2,076)
Investment securities:
Taxable (1) 284  1,121  1,405  565  3,430  3,995 
Tax-exempt (1) (2) (17) 157  140  (35) 243  208 
Total investment securities 267  1,278  1,545  530  3,673  4,203 
Loans, including loans held for sale (917) 2,163  1,246  (2,052) 4,598  2,546 
FHLB and FRB stock 383  (146) 237  587  (132) 455 
Total interest earning assets (645) 2,954  2,309  (2,131) 7,259  5,128 
Interest-bearing liabilities:
Interest-bearing demand deposits 28  (75) (47) 50  (144) (94)
Savings and money market deposits 234  (797) (563) 691  (835) (144)
Time deposits up to $250,000 (946) (1,056) (2,002) (1,649) (1,861) (3,510)
Time deposits over $250,000 (1,075) (1,480) (2,555) (3,175) (2,755) (5,930)
Total interest-bearing deposits (1,759) (3,408) (5,167) (4,083) (5,595) (9,678)
FHLB advances and other short-term borrowings (1) —  (1) (1) —  (1)
Long-term debt (359) (68) (427) (430) (194) (624)
Total interest-bearing liabilities (2,119) (3,476) (5,595) (4,514) (5,789) (10,303)
Net interest income (taxable-equivalent) $ 1,474  $ 6,430  $ 7,904  $ 2,383  $ 13,048  $ 15,431 
(1)  At amortized cost.
(2) Includes taxable-equivalent adjustment using a federal statutory tax rate of 21%.

Other Operating Income

The following tables present components of other operating income for the periods presented:

  Three Months Ended June 30,
(dollars in thousands) 2025 2024 $ Change % Change
Other operating income:
Mortgage banking income $ 744  $ 1,040  $ (296) -28.5  %
Service charges on deposit accounts 2,124  2,135  (11) -0.5 
Other service charges and fees 5,957  5,869  88  1.5 
Income from fiduciary activities 1,501  1,449  52  3.6 
Income from bank-owned life insurance 2,260  1,234  1,026  83.1 
Other:  
Equity in earnings of unconsolidated entities 32  49  (17) -34.7 
Income recovered on previously charged-off loans 57  43  14  32.6 
Other recoveries 23  20  3  15.0 
Unrealized gains on loans held for sale 3  (17) 20  -117.6 
Commissions on sale of checks 81  69  12  17.4 
Other 231  230  1  0.4 
Total other operating income $ 13,013  $ 12,121  $ 892  7.4 

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For the second quarter of 2025, total other operating income was $13.0 million, which increased by $0.9 million, or 7.4%, from $12.1 million in the year-ago quarter. The increase from the same year-ago quarter was primarily due to higher income from bank-owned life insurance ("BOLI") of $1.0 million, partially offset by lower mortgage banking income of $0.3 million. The higher income from BOLI was primarily attributable to volatile equity market returns and their impact on corporate-owned life insurance ("COLI") policies used to hedge deferred compensation expense.

  Six Months Ended June 30,
(dollars in thousands) 2025 2024 $ Change % Change
Other operating income:
Mortgage banking income $ 1,341  $ 1,653  $ (312) -18.9  %
Service charges on deposit accounts 4,271  4,238  33  0.8 
Other service charges and fees 11,723  11,130  593  5.3 
Income from fiduciary activities 3,125  2,884  241  8.4 
Income from bank-owned life insurance 2,757  2,756  1  — 
Other:
Equity in earnings of unconsolidated entities 33  (31) 64  -206.5 
Income recovered on previously charged-off loans 93  95  (2) -2.1 
Other recoveries 53  44  9  20.5 
Unrealized gains on loans held for sale 78  (17) 95  -558.8 
Commissions on sale of checks 156  147  9  6.1 
Other 479  466  13  2.8 
Total other operating income $ 24,109  $ 23,365  $ 744  3.2 

For the six months ended June 30, 2025, total other operating income was $24.1 million, which increased by $0.7 million, or 3.2%, from $23.4 million in the year-ago period. The increase from the same year-ago period was primarily due to higher other service charges and fees of $0.6 million, and income from fiduciary activities of $0.2 million, partially offset by lower mortgage banking income of $0.3 million. The higher other service charges and fees was attributable to higher investment services fees and ATM and debit card fees.

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Other Operating Expense

The following tables present components of other operating expense for the periods presented:

Three Months Ended June 30,
(dollars in thousands) 2025 2024 $ Change % Change
Other operating expense:
Salaries and employee benefits $ 22,696  $ 21,246  $ 1,450  6.8  %
Net occupancy 4,253  4,597  (344) -7.5 
Computer software 5,320  4,381  939  21.4 
Legal and professional services 2,873  2,506  367  14.6 
Equipment 950  995  (45) -4.5 
Advertising 832  901  (69) -7.7 
Communication 901  657  244  37.1 
Other:
SERP expense 114  108  6  5.6 
Charitable contributions 177  129  48  37.2 
FDIC insurance assessment 845  922  (77) -8.4 
Miscellaneous loan expenses 351  434  (83) -19.1 
ATM and debit card expenses 838  847  (9) -1.1 
Armored car expenses 464  458  6  1.3 
Entertainment and promotions 530  428  102  23.8 
Stationery and supplies 208  210  (2) -1.0 
Directors’ fees and expenses 567  263  304  115.6 
Directors' deferred compensation plan expense 260  204  56  27.5 
Amortization and impairment of intangible assets —  23  (23) -100.0 
Loss (gain) on disposal of fixed assets —  13  (13) -100.0 
Other 1,767  1,829  (62) -3.4 
Total other operating expense $ 43,946  $ 41,151  $ 2,795  6.8 
Note: Certain amounts in the prior period financial statements have been reclassified to conform to the presentation of the current period.

For the second quarter of 2025, total other operating expense was $43.9 million, which increased by $2.8 million, or 6.8%, from $41.2 million in the year-ago quarter. The increase from the same year-ago quarter was primarily due to higher salaries and employee benefits of $1.5 million, computer software of $0.9 million, legal and professional services of $0.4 million, and directors' fees of $0.3 million. The higher salaries and employee benefits was primarily due to higher deferred compensation expense.

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Six Months Ended June 30,
(dollars in thousands) 2025 2024 $ Change % Change
Other operating expense:
Salaries and employee benefits $ 44,515  $ 41,981  $ 2,534  6.0  %
Net occupancy 8,645  9,197  (552) -6.0 
Computer software 10,034  8,668  1,366  15.8 
Legal and professional services 5,671  4,826  845  17.5 
Equipment 2,032  2,005  27  1.3 
Advertising 1,719  1,815  (96) -5.3 
Communication 1,934  1,494  440  29.5 
Other:
SERP expense 228  216  12  5.6 
Charitable contributions 323  328  (5) -1.5 
FDIC insurance assessment 1,695  1,881  (186) -9.9 
Miscellaneous loan expenses 649  709  (60) -8.5 
ATM and debit card expenses 1,694  1,771  (77) -4.3 
Armored car expenses 889  941  (52) -5.5 
Entertainment and promotions 834  834  —  — 
Stationery and supplies 378  382  (4) -1.0 
Directors’ fees and expenses 868  601  267  44.4 
Directors' deferred compensation plan expense (7) 342  (349) -102.0 
Amortization and impairment of intangible assets —  47  (47) -100.0 
Loss (gain) on disposal of fixed assets —  16  (16) -100.0 
Other 3,917  3,673  244  6.6 
Total other operating expense $ 86,018  $ 81,727  $ 4,291  5.3 
Note: Certain amounts in the prior period financial statements have been reclassified to conform to the presentation of the current period.

For the six months ended June 30, 2025, total other operating expense was $86.0 million and increased by $4.3 million, or 5.3%, from $81.7 million in the same year-ago period. The increase from the same year-ago period was primarily due to higher salaries and employee benefits of $2.5 million, computer software expense of $1.4 million, and legal and professional services of $0.8 million, partially offset by lower net occupancy expense of $0.6 million.

Income Taxes

The Company recorded income tax expense of $5.6 million for the second quarter of 2025, compared to $4.8 million in the same year-ago period. The Company recorded income tax expense of $10.4 million for the six months ended June 30, 2025, compared to $8.8 million in the same year-ago period.

The effective tax rate ("ETR") for the second quarter of 2025 was 23.48%, compared to 23.41% in the same year-ago quarter. The ETR for the six months ended June 30, 2025 was 22.39%, compared to 23.45% in the same year-ago period.

The increase in income tax expense for the three and six months ended June 30, 2025 was primarily attributable to higher pre-tax income compared to the same year-ago periods. The decrease in the effective tax rate in the six months ended June 30, 2025 was primarily attributable to higher low-income housing tax credits recognized, compared to the same year-ago period.

The Company's net deferred tax assets ("DTA"), net of valuation allowance, totaled $21.1 million and $17.8 million as of June 30, 2025 and December 31, 2024, respectively, and was included in other assets on our consolidated balance sheets.

The valuation allowance on our net deferred tax assets ("DTA") as of June 30, 2025 and December 31, 2024 totaled $3.1 million and $3.1 million, respectively, which related entirely to our DTA from net apportioned net operating loss ("NOL")
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carryforwards for California state income tax purposes, as the Company does not expect to generate sufficient income in California to utilize the DTA.

Financial Condition

Total assets were $7.37 billion as of June 30, 2025 and decreased by $102.5 million, or 1.4%, from $7.47 billion as of December 31, 2024 primarily due to declines in loans, interest-bearing deposits in other financial institutions, total deposits and long-term borrowings, partially offset by increases in investment securities and FRB stock.

Investment Securities

Investment securities totaled $1.35 billion as of June 30, 2025, which increased by $11.1 million, or 0.8%, from $1.33 billion as of December 31, 2024. The increase in the investment securities portfolio reflected purchases of $50.6 million and an increase in the market valuation on the AFS portfolio of $21.0 million, partially offset by principal runoff of $60.5 million.

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Loans

The following table presents outstanding loans by class and geographic location as of the dates presented:

(dollars in thousands) June 30,
2025		 December 31,
2024		 $ Change % Change
Hawaii:        
Commercial and industrial $ 455,372  $ 430,167  $ 25,205  5.9  %
Real estate:
Construction 172,382  145,182  27,200  18.7 
Residential mortgage 1,851,690  1,892,520  (40,830) (2.2)
Home equity 627,834  676,982  (49,148) (7.3)
Commercial mortgage 1,161,244  1,165,060  (3,816) (0.3)
Consumer 224,085  274,712  (50,627) (18.4)
Total loans 4,492,607  4,584,623  (92,016) (2.0)
Less: ACL (44,372) (45,967) 1,595  (3.5)
Loans, net of ACL $ 4,448,235  $ 4,538,656  $ (90,421) (2.0)
U.S. Mainland:        
Commercial and industrial $ 152,758  $ 176,769  $ (24,011) (13.6)
Real estate:
Construction 17,626  29  17,597  60,679.3  *
Commercial mortgage 379,279  335,620  43,659  13.0 
Consumer 247,539  235,811  11,728  5.0 
Total loans 797,202  748,229  48,973  6.5 
Less: ACL (15,239) (13,215) (2,024) 15.3 
Loans, net of ACL $ 781,963  $ 735,014  $ 46,949  6.4 
Total:        
Commercial and industrial $ 608,130  $ 606,936  $ 1,194  0.2 
Real estate:
Construction 190,008  145,211  44,797  30.8 
Residential mortgage 1,851,690  1,892,520  (40,830) (2.2)
Home equity 627,834  676,982  (49,148) (7.3)
Commercial mortgage 1,540,523  1,500,680  39,843  2.7 
Consumer 471,624  510,523  (38,899) (7.6)
Total loans 5,289,809  5,332,852  (43,043) (0.8)
Less: ACL (59,611) (59,182) (429) 0.7 
Loans, net of ACL $ 5,230,198  $ 5,273,670  $ (43,472) (0.8)
* Not meaningful.

The Company strategically supplements its Hawaii loan portfolio by selectively pursuing commercial, commercial real estate, and consumer loan opportunities on the U.S. Mainland. This approach offers greater growth potential, increased diversification, and the possibility of higher yields, all while upholding the Company's rigorous credit standards and underwriting guidelines.

Loans, net of deferred costs, totaled $5.29 billion as of June 30, 2025, which decreased by $43.0 million, or 0.8%, from $5.33 billion as of December 31, 2024. The decrease was primarily due to decreases in home equity of $49.1 million, residential mortgage of $40.8 million, and consumer of $38.9 million. These decreases were partially offset by increases in construction of $44.8 million, commercial mortgage of $39.8 million, and commercial and industrial of $1.2 million.

The Hawaii loan portfolio decreased by $92.0 million, or 2.0%, from December 31, 2024. The decrease reflected decreases in consumer of $50.6 million, home equity of $49.1 million, residential mortgage of $40.8 million, and commercial mortgage of $3.8 million. These decreases were partially offset by increases in construction of $27.2 million and commercial and industrial of $25.2 million. During the three months ended March 31, 2025, the Company identified and reclassified $58.3 million in Hawaii consumer loans to the Hawaii commercial and industrial loan class as the loans' structure and characteristics more closely aligned with loans in the commercial and industrial class.
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The U.S. Mainland loan portfolio increased by $49.0 million, or 6.5%, from December 31, 2024. The increase was primarily attributable to increases in commercial mortgage of $43.7 million, construction of $17.6 million, and consumer of $11.7 million, partially offset by a decrease in commercial and industrial of $24.0 million.

Maturity Distribution and Sensitivities of Loans to Changes in Interest Rates

The following table sets forth the maturity distribution and sensitivities of the loan portfolio to changes in interest rates at June 30, 2025. Maturities are based on contractual maturity dates and do not factor in principal amortization.

Maturing
(dollars in thousands) One Year
or Less		 Over One
Through
Five Years		 Over Five
Through
Fifteen Years		 Over 
Fifteen
Years		 Total Percentage
Commercial and industrial:
With fixed interest rates $ 5,849  $ 163,297  $ 95,628  $ —  $ 264,774  43.5  %
With variable interest rates 34,352  216,391  36,165  56,448  343,356  56.5  %
Total commercial and industrial 40,201  379,688  131,793  56,448  608,130  100.0  %
Construction:
With fixed interest rates 1,059  21,992  21,601  —  $ 44,652  23.5  %
With variable interest rates 86,154  39,876  18,063  1,263  145,356  76.5  %
Total construction 87,213  61,868  39,664  1,263  190,008  100.0  %
Residential mortgage:
With fixed interest rates 1,504  14,456  230,120  1,311,964  $ 1,558,044  84.1  %
With variable interest rates 720  2,245  18,329  272,352  293,646  15.9  %
Total residential mortgage 2,224  16,701  248,449  1,584,316  1,851,690  100.0  %
Home equity:
With fixed interest rates —  19,046  34,517  31,468  $ 85,031  13.5  %
With variable interest rates 2,003  7,920  18,922  513,958  542,803  86.5  %
Total home equity 2,003  26,966  53,439  545,426  627,834  100.0  %
Commercial mortgage:
With fixed interest rates 28,837  408,240  348,064  —  $ 785,141  51.0  %
With variable interest rates 93,705  475,463  186,214  —  755,382  49.0  %
Total commercial mortgage 122,542  883,703  534,278  —  1,540,523  100.0  %
Consumer:
With fixed interest rates 10,725  304,216  50,072  72,856  $ 437,869  92.8  %
With variable interest rates 4,492  1,935  —  27,328  33,755  7.2  %
Total consumer 15,217  306,151  50,072  100,184  471,624  100.0  %
Loans:
With fixed interest rates $ 47,974  $ 931,247  $ 780,002  $ 1,416,288  $ 3,175,511  60.0  %
With variable interest rates 221,426  743,830  277,693  871,349  2,114,298  40.0  %
Total loans $ 269,400  $ 1,675,077  $ 1,057,695  $ 2,287,637  $ 5,289,809  100.0  %

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Nonperforming Assets and Accruing Loans 90+ Days Past Due

The following table presents nonperforming assets and accruing loans 90+ days past due as of the dates presented:

(dollars in thousands) June 30,
2025		 December 31,
2024		 $ Change % Change
Nonperforming Assets ("NPAs")    
Nonaccrual loans:    
Commercial and industrial $ 110  $ 414  $ (304) (73.4) %
Real estate:
Residential mortgage 12,327  9,044  3,283  36.3 
Home equity 1,889  952  937  98.4 
Consumer 569  608  (39) (6.4)
Total nonaccrual loans 14,895  11,018  3,877  35.2 
Other real estate owned ("OREO") —  —  —  N.M.
Total NPAs 14,895  11,018  3,877  35.2 
Accruing Loans 90+ Days Past Due
Real estate:
Residential mortgage 1,625  323  1,302  403.1 
Home equity 21  78  (57) (73.1)
Consumer 418  373  45  12.1 
Total accruing loans 90+ days past due 2,064  774  1,290  166.7 
Total NPAs and accruing loans 90+ days past due $ 16,959  $ 11,792  $ 5,167  43.8 
Ratio of nonaccrual loans to total loans 0.28  % 0.21  % 0.07  %
Ratio of NPAs to total assets 0.20  % 0.15  % 0.05  %
Ratio of NPAs and accruing loans 90+ days past due to total loans and OREO 0.32  % 0.22  % 0.10  %
Ratio of classified assets and OREO to tier 1 capital and ACL 8.01  % 3.17  % 4.84  %
Not meaningful ("N.M.")

The following table presents year-to-date activities in nonperforming assets for the period presented:

(dollars in thousands)
Balance at December 31, 2024 $ 11,018 
Additions 8,276 
Reductions:  
Payments (1,199)
Return to accrual status (1,419)
Charge-offs, valuation and other adjustments (1,781)
Total reductions (4,399)
Net increase 3,877 
Balance at June 30, 2025 $ 14,895 

Nonperforming assets totaled $14.9 million, or 0.20% of total assets as of June 30, 2025, compared to $11.0 million, or 0.15% of total assets as of December 31, 2024. The increase in nonperforming assets from December 31, 2024 was primarily attributable to additions to nonaccrual loans totaling $8.3 million, partially offset by $1.2 million in repayments of nonaccrual loans, $1.4 million in loans returned to accrual status and $1.8 million in net charge-offs, valuation and other adjustments.

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Criticized loans as of June 30, 2025 increased by $62.2 million from December 31, 2024 to $95.0 million, or 1.8% of the total loan portfolio. Special mention loans increased by $23.9 million to $32.5 million, or 0.6% of the total loan portfolio. Classified loans increased by $38.2 million to $62.5 million, or 1.2% of the total loan portfolio. The increase in criticized loans was primarily due to the downgrade of a commercial real estate participation loan to special mention and an owner-occupied commercial real estate loan to classified during the second quarter of 2025. Both loans are performing and are adequately collateralized.

The Company's ratio of classified assets and other real estate owned to tier 1 capital and the ACL was 8.01% as of June 30, 2025, which increased from 3.17% as of December 31, 2024.

Allowance for Credit Losses

The following table presents certain information with respect to the ACL on loans as of the dates and for the periods presented:

Three Months Ended June 30, Six Months Ended June 30,
(dollars in thousands) 2025 2024 2025 2024
Allowance for Credit Losses ("ACL") on Loans:
Balance at beginning of period $ 60,469  $ 63,532  $ 59,182  $ 63,934 
Provision for credit losses on loans 3,810  2,448  7,715  6,569 
Charge-offs:
Commercial and industrial (2,858) (519) (3,438) (1,201)
Real estate:
Residential mortgage —  (284) —  (284)
Consumer (2,864) (4,345) (5,841) (9,183)
Total charge-offs (5,722) (5,148) (9,279) (10,668)
Recoveries:
Commercial and industrial 195  130  366  220 
Real estate:
Construction 3  —  3  — 
Residential mortgage 7  9  17  17 
Home equity 9  —  12  6 
Consumer 840  1,254  1,595  2,147 
Total recoveries 1,054  1,393  1,993  2,390 
Net charge-offs (4,668) (3,755) (7,286) (8,278)
Balance at end of period $ 59,611  $ 62,225  $ 59,611  $ 62,225 
Average loans, net of deferred fees and costs $ 5,307,946  $ 5,385,829  $ 5,309,768  $ 5,393,193 
Ratio of annualized net charge-offs to average loans 0.35  % 0.28  % 0.27  % 0.31  %
Ratio of ACL to total loans 1.13  % 1.16  % 1.13  % 1.16  %
Ratio of ACL to nonaccrual loans 400  % 607  % 400  % 607  %

Our ACL on loans totaled $59.6 million as of June 30, 2025, compared to $59.2 million as of December 31, 2024 and $62.2 million as of June 30, 2024.

During the three months ended June 30, 2025, we recorded a provision for credit losses on loans of $3.8 million and net charge-offs of $4.7 million. During the three months ended June 30, 2024, we recorded a provision for credit losses on loans of $2.4 million and net charge-offs of $3.8 million.

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During the six months ended June 30, 2025, we recorded a provision for credit losses on loans of $7.7 million and net charge-offs of $7.3 million. During the six months ended June 30, 2024, we recorded a provision for credit losses on loans of $6.6 million and net charge-offs of $8.3 million.

Our ratio of ACL to total loans was 1.13% as of June 30, 2025, compared to 1.11% as of December 31, 2024 and 1.16% as of June 30, 2024.

In accordance with GAAP, loans held for sale and other real estate assets are not included in our assessment of the ACL.

The following table presents the allocation of the ACL by loan class as of the dates indicated. Our practice is to make
specific allocations on individually evaluated loans and general allocations to each loan class based on management's risk
assessment and estimated loss rate.

June 30, 2025 December 31, 2024
(dollars in thousands) ACL for Loans % of ACL by Loan Class Loan Class as a % of Total Loans ACL for Loans % of ACL by Loan Class Loan Class as a % of Total Loans
Commercial and industrial $ 7,240  12.1  % 11.5  % $ 7,113  12.0  % 11.4  %
Real estate:
Construction 3,363  5.6  % 3.6  2,316  3.9  % 2.7 
Residential mortgage 13,878  23.3  % 35.0  15,267  25.8  % 35.5 
Home equity 1,049  1.8  % 11.9  2,335  3.9  % 12.7 
Commercial mortgage 20,265  34.0  % 29.1  18,882  31.9  % 28.1 
Consumer 13,816  23.2  % 8.9  13,269  22.5  % 9.6 
Total $ 59,611  100.0  % 100.0  % $ 59,182  100.0  % 100.0  %

The following table presents the ratio of annualized net charge-offs (recoveries) to average loans by loan class for the periods presented .

Three Months Ended June 30, Six Months Ended June 30,
2025 2024 2025 2024
Commercial and industrial 0.20  % 0.03  % 0.12  % 0.04  %
Real estate:
Residential mortgage —  0.02  (0.01) 0.01 
Consumer 0.15  0.23  0.16  0.26 
Total 0.35  % 0.28  % 0.27  % 0.31  %

Deposits

The following table presents the composition of our deposits by category as of the dates presented:

(dollars in thousands) June 30,
2025		 December 31,
2024		 $ Change % Change
Noninterest-bearing demand deposits $ 1,938,226  $ 1,888,937  $ 49,289  2.6  %
Interest-bearing demand deposits 1,336,620  1,338,719  (2,099) (0.2)
Savings and money market deposits 2,242,122  2,329,170  (87,048) (3.7)
Time deposits up to $250,000 439,687  483,378  (43,691) (9.0)
Core deposits 5,956,655  6,040,204  (83,549) (1.4)
Other time deposits greater than $250,000 459,945  500,693  (40,748) (8.1)
Government time deposits 128,389  103,114  25,275  24.5 
Total time deposits greater than $250,000 588,334  603,807  (15,473) (2.6)
Total deposits $ 6,544,989  $ 6,644,011  $ (99,022) (1.5)

The Company's deposit portfolio is diversified and long-standing, reflecting a business model centered on fostering long-term customer relationships. As of June 30, 2025, approximately 53% of deposit customers have maintained accounts with the Bank for over a decade.
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Although primarily focused in Hawaii, the Company's deposit-gathering strategies extend beyond local markets through ongoing relationships with Japanese regional banks, corporations and non-resident alien individuals, who refer and deposit U.S. dollar funds with the Bank.

Total deposits of $6.54 billion as of June 30, 2025 decreased by $99.0 million, or 1.5%, from total deposits of $6.64 billion as of December 31, 2024. The decreases in savings and money market deposits of $87.0 million, time deposits up to $250,000 of $43.7 million, other time deposits greater than $250,000 of $40.7 million, and interest-bearing demand deposits of $2.1 million, were partially offset by increases in noninterest-bearing demand deposits of $49.3 million and government time deposits of $25.3 million. The Company did not have any wholesale, brokered or listing service deposits.

Core deposits, which we define as demand deposits, savings and money market deposits, and time deposits up to $250,000, totaled $5.96 billion as of June 30, 2025 and decreased by $83.5 million, from $6.04 billion as of December 31, 2024. Core deposits as a percentage of total deposits was 91.0% as of June 30, 2025, compared to 90.9% as of December 31, 2024.

Our average cost of total deposits was 102 bps during the second quarter of 2025, compared to 108 bps during the previous quarter, and 133 bps during the same year-ago quarter. Our average cost of total deposits was 105 bps during the six months ended June 30, 2025, compared to 133 bps during the same year-ago period.

Our deposits are insured up to applicable limits by the Deposit Insurance Fund of the FDIC. The Company reported estimated uninsured deposits of $2.67 billion, or 41% of total deposits in its FDIC Call Report as of June 30, 2025, compared to an estimated $2.82 billion, or 42% of total deposits as of December 31, 2024. The Company had fully collateralized deposits of approximately $288.9 million and $282.3 million as of June 30, 2025 and December 31, 2024, respectively. The Company's estimated uninsured deposits, excluding fully collateralized deposits, totaled $2.39 billion, or 36% of total deposits as of June 30, 2025, compared to the estimated $2.54 billion, or 38% of total deposits as of December 31, 2024.

The following table presents the amount of time deposits in excess of the FDIC insurance limit of $250,000 by remaining maturity as of June 30, 2025:

(dollars in thousands) June 30, 2025
Remaining maturity:
Three months or less $ 361,395 
Over three through twelve months 213,457 
Over one year through three years 12,965 
Over three years 517 
Total $ 588,334 

Capital Resources

In order to ensure adequate levels of capital, we perform ongoing assessment of projected sources and uses of capital in conjunction with an analysis of the size and quality of our assets, the anticipated performance of our business, changes in monetary and fiscal policies, and the level of risk and regulatory capital requirements. As a part of this assessment, the Board of Directors reviews our capital position, including the call and maturity date of existing capital instruments, on an ongoing basis to ensure it is adequate, including, but not limited to, the need for raising additional capital (whether debt and/or equity), or the ability to return capital to our shareholders, including the ability to declare cash dividends or repurchase our securities.

Common Equity

Our total shareholders' equity was $568.9 million as of June 30, 2025, compared to $538.4 million as of December 31, 2024. The change in total shareholders' equity was primarily attributable to net income of $36.0 million and other comprehensive income of $12.8 million in the six months ended June 30, 2025, partially offset by cash dividends paid of $14.6 million, the repurchase of $4.7 million in shares of our common stock under our stock repurchase programs.

Our total shareholders' equity to total assets ratio was 7.72% as of June 30, 2025, compared to 7.21% as of December 31, 2024. Our book value per share was $21.08 and $19.89 as of June 30, 2025 and December 31, 2024, respectively.

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Holding Company Capital Resources

CPF is required to act as a source of strength to the Bank under the Dodd-Frank Act. CPF is obligated to pay its expenses and payments on its junior subordinated debentures which fund payments on the outstanding trust preferred securities and subordinated notes.

CPF relies on the Bank to pay dividends to fund its obligations. In order to meet its ongoing obligations, on a stand-alone basis, CPF had an available cash balance of $19.3 million and $23.0 million as of June 30, 2025 and December 31, 2024, respectively.

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. The Bank had Statutory Retained Earnings of $218.8 million and $196.8 million as of June 30, 2025 and December 31, 2024, respectively.

Dividends are payable at the discretion of the Board of Directors and there can be no assurance that the Board of Directors will allow the Company to continue to pay dividends at the same rate, or at all, in the future. 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 junior subordinated debentures and subordinated notes.

Share Repurchases

In January 2025, the Company’s Board of Directors approved an authorization to repurchase up to $30.0 million of its common stock from time to time in the open market or in privately negotiated transactions (the "2025 Repurchase Plan"), pursuant to a newly authorized share repurchase plan. The 2025 Repurchase Plan replaces and supersedes in its entirety the share repurchase plan previously approved by the Board of Directors.

During the six months ended June 30, 2025, the Company repurchased 180,393 shares of common stock, at an aggregate cost of $4.7 million under the 2025 Repurchase Plan. As of June 30, 2025, $25.3 million remained available for repurchase under the 2025 Repurchase Plan.

Trust Preferred Securities

As of June 30, 2025, the Company has two 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. The trust preferred securities, the underlying floating rate junior subordinated debentures that are the assets of Trusts IV and V, and the common securities issued by Trusts IV and V are redeemable in whole or in part on any interest payment date for Trust IV and V, or at any time in whole but not in part within 90 days following the occurrence of certain events.

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. Accounting Standards Codification ("ASC") 848 allows us to account for the modification as a continuation of the existing contract without additional analysis. The $30.0 million in floating rate trust preferred securities of Trust IV bear an interest rate of three-month CME Term SOFR plus a tenor spread adjustment of 0.26% plus 2.45% and the $20.0 million in floating rate trust preferred securities of Trust V bear an interest rate of three-month CME Term SOFR plus a tenor spread adjustment of 0.26% plus 1.87%.

Our obligations with respect to the issuance of the trust preferred securities constitute a full and unconditional guarantee by the Company of each trust's obligations with respect to its trust preferred securities. Subject to certain exceptions and limitations, we may elect from time to time to defer subordinated debenture interest payments, which would result in a deferral of dividend payments on the related trust preferred securities, for up to 20 consecutive quarterly periods without default or penalty.

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. The Company exchanged the privately placed notes for registered notes with the same terms and in the same aggregate principal amount at the end of the fourth quarter of 2020. 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 SOFR, as published by the Federal Reserve Bank of New York, plus 4.56%. The subordinated notes are callable quarterly after the first five years. The subordinated notes had a carrying value of $54.9 million as of June 30, 2025, which was net of unamortized debt issuance costs of $0.1 million that is being amortized over the expected life.
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Regulatory Capital Ratios

The Company and the Bank are subject to various regulatory capital requirements administered by federal banking agencies. Capital adequacy guidelines and, additionally for banks, prompt corrective action regulations, involve quantitative measures of assets, liabilities, and certain off-balance-sheet items calculated under regulatory accounting practices. Capital amounts and classifications are also subject to qualitative judgments by regulators. Failure to meet capital requirements can initiate regulatory action.

Federal banking agencies previously issued an interim final rule that delayed the estimated impact on regulatory capital resulting from the adoption of CECL. The interim final rule provided banking organizations that implement CECL before the end of 2020 the option to delay for two years the estimated impact of CECL on regulatory capital relative to regulatory capital determined under the prior incurred loss methodology, followed by a three-year transition period to phase out the aggregate amount of capital benefit provided during the initial two-year delay. The federal banking agencies subsequently issued a final rule that made certain technical changes to the interim final rule. The changes in the final rule apply only to those banking organizations that elected the CECL transition relief provided under the rule. The Company elected this option and the transition period ended on December 31, 2024.

General capital adequacy regulations adopted by the FRB and FDIC require an institution to maintain minimum leverage capital, tier 1 risk-based capital, total risk-based capital, and common equity tier 1 ("CET1") capital ratios. In addition to these uniform risk-based capital guidelines and leverage ratios that apply across the industry, the regulators have the discretion to set individual minimum capital requirements for specific institutions at rates significantly above the minimum guidelines and ratios. For a further discussion of capital requirements for the Company and the Bank and the effect of forthcoming changes in required regulatory capital ratios, see the discussion in the "Business — Supervision and Regulation" sections of our 2024 Form 10-K.

The following table presents the regulatory capital ratios for the Company and the Bank, as well as the minimum capital adequacy requirements applicable to all financial institutions, as of the dates presented. The leverage capital, tier 1 risk-based capital, total risk-based capital, and CET1 risk-based capital ratios for the Company and the Bank as of June 30, 2025 and December 31, 2024, were above the levels required for a "well capitalized" regulatory designation.

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  Actual Minimum Required
for Capital Adequacy
Purposes		 Minimum Required
to be
Well Capitalized
(dollars in thousands) Amount Ratio Amount
Ratio [1]
 Amount Ratio
Central Pacific Financial Corp.            
June 30, 2025            
Leverage capital $ 720,200  9.6  % $ 299,157  4.0  % N/A N/A
CET1 risk-based capital 670,200  12.6  239,348  4.5  N/A N/A
Tier 1 risk-based capital 720,200  13.5  319,131  6.0  N/A N/A
Total risk-based capital 838,824  15.8  425,508  8.0  N/A N/A
December 31, 2024            
Leverage capital $ 704,045  9.3  % $ 301,967  4.0  % N/A N/A
CET1 risk-based capital 654,045  12.3  239,366  4.5  N/A N/A
Tier 1 risk-based capital 704,045  13.2  319,155  6.0  N/A N/A
Total risk-based capital 820,796  15.4  425,540  8.0  N/A N/A
Central Pacific Bank            
June 30, 2025            
Leverage capital $ 751,553  10.1  % $ 298,658  4.0  % $ 373,322  5.0  %
CET1 risk-based capital 751,553  14.1  239,058  4.5  345,305  6.5 
Tier 1 risk-based capital 751,553  14.1  318,744  6.0  424,991  8.0 
Total risk-based capital 815,177  15.3  424,991  8.0  531,239  10.0 
December 31, 2024            
Leverage capital $ 731,155  9.7  % $ 301,410  4.0  % $ 376,763  5.0  %
CET1 risk-based capital 731,155  13.8  238,814  4.5  344,953  6.5 
Tier 1 risk-based capital 731,155  13.8  318,419  6.0  424,558  8.0 
Total risk-based capital 792,906  14.9  424,558  8.0  530,698  10.0 

[1] Under the Basel III Capital Rules, the Company and the Bank must also maintain a 2.5% Capital Conservation Buffer ("CCB") to avoid becoming subject to restrictions on capital distributions and certain discretionary bonus payments to management. The CCB is calculated as a ratio of CET1 capital to risk-weighted assets, and effectively increases the required minimum risk-based capital ratios. As of June 30, 2025 and December 31, 2024, the Company and the Bank's risk-based capital exceeded the required CCB.

Market Risk

Market risk is the risk of loss in a financial instrument arising from adverse changes in market rates/prices such as interest rates, foreign currency rates, commodity prices and equity prices. Our primary market risk exposure is interest rate risk that occurs when rate-sensitive assets and rate-sensitive liabilities mature or reprice during different periods or in differing amounts.

Asset/Liability Management and Interest Rate Risk

Our earnings and capital are sensitive to risk of interest rate fluctuations. Interest rate risk arises when rate-sensitive assets and rate-sensitive liabilities mature or reprice during different periods or in differing amounts. In the normal course of business, the Company is subject to interest rate risk through the activities of making loans and taking deposits, as well as from our investment securities portfolio and other interest-bearing funding sources. Asset/liability management attempts to coordinate our rate-sensitive assets and rate-sensitive liabilities to meet our financial objectives.

Our Asset/Liability Management Policy seeks to maximize the risk-adjusted return to shareholders while maintaining consistently acceptable levels of liquidity, interest rate risk and capitalization. The Asset/Liability Management Committee ("ALCO") manages interest rate risk utilizing a detailed and dynamic earnings and capital simulation model to analyze earnings and capital in various interest rate scenarios and balance sheet forecasts. Earnings are typically measured by estimated changes in net interest income ("NII") under different rate scenarios. Capital impact is measured through an Economic Value of Equity ("EVE") analysis which monitors the impact of the durations of rate sensitive assets and liabilities.
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The EVE analysis simulates the cash flows for all on- and off- balance sheet instruments under different rate scenarios which are then discounted to determine a present value for each scenario. The net present value of our assets and liabilities represents the EVE for each scenario. The EVE results for each scenario are then compared to the base scenario to determine the Company’s sensitivities to longer term rate exposures. The results of the analyses are shared with the Board of Directors and informs strategic actions to mitigate and optimize our risk position and profitability. Adverse interest rate risk exposures are managed through the shortening or lengthening of the duration of assets and liabilities.

The ALCO simulation model used to measure and manage interest rate risk exposures includes both dynamic and static balance sheet and rate scenarios. The dynamic model scenarios provide an enhanced view that enables management and the Board of Directors to have a realistic view of the expected impact to earnings and capital from forecasted non-parallel movements in interest rates as well as balance sheet changes. On the other hand, static rate scenarios are a measurement of embedded interest rate risk in the balance sheet as of a point in time and incorporate various hypothetical interest rate scenarios that may include gradual or immediate parallel rate changes. The static scenarios have the benefit of comparability over time, as well as against other financial institutions, but are not intended to represent management's forecast. Both dynamic and static model simulations include the use of a number of key modeling assumptions including prepayment speeds, pricing spreads of assets and liabilities, deposit decay rates and the timing and magnitude of deposit rate changes in relation to changes in the overall level of interest rates. The assumptions are typically based on analyses of institution specific actual historical data and trends. Market information is also incorporated where relevant and appropriate. Assumptions are periodically reviewed and updated by ALCO. During periods of increased market volatility, assumptions will be reviewed more frequently. While management believes the assumptions are reasonable, actual behaviors and results may likely differ.

The following table reflects our static net interest income sensitivity analysis as of the dates presented. 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 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. 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.

June 30, 2025 December 31, 2024
Estimated Net Interest Income Sensitivity Estimated Net Interest Income Sensitivity
Rate Change Gradual Instantaneous Gradual Instantaneous
+300 bps 3.30  % 5.32  % 3.03  % 4.00  %
+200 bps 2.22  % 3.58  % 1.91  % 2.68  %
+100 bps 1.14  % 1.78  % 0.84  % 1.36  %
-100 bps (1.24) % (2.51) % (1.36) % (2.21) %
-200 bps (2.84) % (5.46) % (2.93) % (4.74) %
-300 bps (4.48) % (8.53) % (4.55) % (7.41) %

Liquidity 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. We monitor our liquidity position in relation to changes in loan and deposit balances on a daily basis to ensure maximum utilization, maintenance of an adequate level of readily marketable assets and access to short-term funding sources.

The Company performs regular liquidity stress testing under a variety of scenarios to ensure that liquidity is adequate under certain potential liquidity stress events. Further, forecasts of Company cash flows are updated and analyzed periodically and more frequently during periods of elevated liquidity risk.

Core deposits have historically provided us with a sizable source of relatively stable and low cost funds, but are subject to competitive pressure in our market. A significant portion of our deposits are granular, long-tenured, and relationship-based. In addition to core deposit funding, we also have access to a variety of other short-term and long-term funding sources, which include proceeds from maturities of our loans and investment securities, as well as secondary funding sources available to meet our liquidity needs, such as the FHLB, secured repurchase agreements and the Federal Reserve discount window.
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As of June 30, 2025, the Company had $317.0 million in cash on its balance sheet and approximately $2.50 billion in total other liquidity sources, including available borrowing capacity and unpledged investment securities. Refer to Note 8 - 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.

Information regarding our material contractual obligations is provided in "Part II, Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" of our Annual Report on Form 10-K for the year ended December 31, 2024. There have been no material changes in our cash requirements from known contractual and other obligations since December 31, 2024.

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Item 3. Quantitative and Qualitative Disclosures about Market Risk

For quantitative and qualitative disclosures regarding market risks, refer to "Market Risk" and "Asset/Liability Management and Interest Rate Risk" of Part I, Item 2, "Management’s Discussion and Analysis of Financial Condition and Results of Operations."

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

As of the end of the period covered by this report and pursuant to Rule 13a-15 of the Securities Exchange Act of 1934, as amended, (the "Exchange Act"), the Company's management, including the principal executive officer and principal financial officer, conducted an evaluation of the effectiveness and design of the Company's disclosure controls and procedures (as that term is defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act). Based upon that evaluation, the Company's principal executive officer and principal financial officer concluded that the Company's disclosure controls and procedures were effective as of the end of the period covered by this report.

Changes in Internal Control Over Financial Reporting

There have been no changes in the Company’s internal control over financial reporting (as defined in Rule 13a-15(f) and 15d-15(f) of the Exchange Act) that occurred during the period covered by this report, that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
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PART II.   OTHER INFORMATION

Item 1. Legal Proceedings

See Note 17 - Contingent Liabilities and Other Commitments to the consolidated financial statements in Part I of this Form 10-Q, incorporated herein by reference.

Item 1A. Risk Factors

There have been no material changes from the Risk Factors as previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2024, as filed with the SEC on February 26, 2025, except as described below:

The financial services industry and broader economy may be subject to new or changing government policy, legislation and regulation.

Our success depends, to a certain extent, upon local, national and global economic and political conditions, as well as governmental monetary, trade and interest rate policies. The current U.S. administration has and continues to implement significant and rapid changes in federal government operations and policies, including international trade policies, which may impact economic stability, the financial markets and the financial services industry broadly. Conditions such as an economic recession, stagflation, rising unemployment, the effects of tariffs, trade wars, inflationary prices, tax law changes and other factors beyond our control may adversely affect our asset quality, deposit levels, loan demand, demand for our products and services and the ability to manage costs associated with employees and vendors. The occurrence of any of the foregoing events could have a material adverse effect on our business, financial condition or results of operations.

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

Issuer Purchases of Equity Securities

On January 27, 2025, the Company's Board of Directors approved a new share repurchase authorization of up to $30.0 million of its common stock from time to time in the open market or in privately negotiated transactions, pursuant to a newly authorized share repurchase plan (the "2025 Repurchase Plan"). 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 June 30, 2025, the Company repurchased 103,077 shares of common stock, at a cost of $2.6 million or $25.00 per share, under the Company's 2025 Repurchase Plan.

As of June 30, 2025, $25.3 million in share repurchase authorization remained available for repurchase under the Company's 2025 Repurchase Plan. We cannot provide any assurance as to whether or not we will continue to repurchase common stock under our share repurchase program.

  Issuer Purchases of Equity Securities
Period
Total
Number
of Shares
Purchased [1]
 Average
Price Paid
per Share		 Total Shares
Purchased as
Part of Publicly
Announced
Programs		 Maximum Dollar
Value of
Shares That
May Yet Be
Purchased Under
the Program
April 1-30, 2025 87,661  $ 24.73  87,661  $ 25,737,724 
May 1-31, 2025 9,987  26.81  9,000  25,497,207 
June 1-30, 2025 6,416  25.93  6,416  25,330,845 
Total 104,064  $ 25.00  103,077  25,330,845 

[1] During the three months ended June 30, 2025, 987 shares were acquired from employees in connection with income tax withholding obligations related to the vesting of restricted stock or performance stock units. These purchases were not included within the Company's publicly announced share repurchase program.

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Item 5. Other Information

Rule 10b5-1 Trading Arrangements

None of the Company’s directors or officers (as defined in Rule 16a-1(f)) adopted, modified or terminated a Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading arrangement (in each case, as defined in item 408 of Regulation S-K) for the purchase or sale of the Company's common stock during the three months ended June 30, 2025.

Item 6. Exhibits

Exhibit No.   Document
3.1
31.1
31.2
32.1
32.2
101.INS Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document *
101.SCH Inline XBRL Taxonomy Extension Schema Document *
101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document *
101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document *
101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document *
101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document *
104 Cover Page Interactive Data File - the cover page XBRL tags are embedded within the Inline XBRL document (included in Exhibit 101)
* Filed herewith.
** Furnished herewith.

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SIGNATURES
 
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
 
  CENTRAL PACIFIC FINANCIAL CORP.
 
   
   
Date: August 5, 2025 /s/ Arnold D. Martines
  Arnold D. Martines
 
Chairman, President and Chief Executive Officer
  (Principal Executive Officer)
/s/ Dayna N. Matsumoto
  Dayna N. Matsumoto
  Executive Vice President and Chief Financial Officer
(Principal Financial and Accounting Officer)

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EX-3.1 2 exhibit31restatedarticle.htm EX-3.1 exhibit31restatedarticle
Exhibit 3.1 CENTRAL PACIFIC FINANCIAL CORP. RESTATED ARTICLES OF INCORPORATION ARTICLE I The name of this corporation shall be CENTRAL PACIFIC FINANCIAL CORP. ARTICLE II The place of the principal office of the Corporation shall be at Honolulu, City and County of Honolulu, State of Hawaii; 50 North King Street, Honolulu, Hawaii 96817, there may be such subordinate or branch offices in such place or places within or without said State as may be deemed necessary or requisite by the Board of Directors to transact the business of the Corporation, which business may be conducted anywhere in the world, with such branch or subordinate offices to be in charge of such person or persons as may be appointed by the Board of Directors. ARTICLE III The primary specific purpose for which said Corporation is organized is to own and hold the stocks, bonds, and other securities of other corporation, to receive the dividends, interest, and income thereon, and to distribute the same to stockholders of this Corporation; to acquire, own and hold the stocks, bonds, and other securities and evidences of indebtedness of any corporation, domestic or foreign, and to issue in exchange therefor, its own stocks, the purport and intent of the powers herein defined being that this Corporation is organized primarily for the purpose of owing and holding property; and distributing its avails, and doing such acts as are necessary for the maintenance of its corporate existence and management of its internal affairs. l. In addition to the foregoing, the said Corporation is organized for the following purposes, including the transaction of any or all lawful businesses for which corporations may be incorporated pursuant to Chapter 416, Hawaii Revised Statutes, and shall have the following powers: (a) Without restrictions or limit as to amount, to buy or otherwise acquire, own, hold, use, improve, develop, subdivide, mortgage, lease or take on lease, sell, convey and in any and every other manner deal in and with and dispose of real estate, buildings and other improvements, hereditaments, easements and appurtenances of every kind in connection therewith, or any estate or interests therein, of any tenure or description, on any terms or conditions, to the fullest extent permitted by law, and also any and all kinds of chattels, goods, wares, merchandise, and agricultural, manufacturing and mercantile products and commodities, and patents, licenses, debentures, securities, stocks, bonds, commercial paper, and other forms of assets, rights and interests and evidences of property or indebtedness, tangible or intangible; to take or hold mortgages for any unpaid balance of the purchase money on any of the lands, buildings or other improvements and properties sold, and to sell, foreclose or otherwise dispose of said mortgages; (b) To manufacture, purchase, sell, exchange, export and import and otherwise deal in all kinds of goods, wares and merchandise; to engage in such other business as may be necessary, suitable or proper to the accomplishment of the purposes connected with or relating thereto; (c) To acquire any and all rights, permits, privileges and franchises suitable or convenient for the purposes of the Corporation; (d) To acquire and carry on all or any part of the business or property and to undertake any liabilities of any person, firm, association, estate, company, or corporation and as the consideration for the same to pay cash, property, and/or to issue any shares of stock and/or obligations of this Corporation; (e) To enter into limited or general partnership or into any arrangement for sharing profits, joint adventure, reciprocal considerations or cooperation with any persons, partnerships, or corporations, syndicates, companies, trusts and associations of all kinds carrying on, engaged in, or about to carry on or engage in, any business or transaction which the Corporation is authorized to carry on or engage in, or in which the Corporation shall have directly or indirectly any interest, or any business or transaction capable of being conducted so as directly or indirectly to benefit this Corporation, and to take or otherwise acquire and hold, sell, reissue, or otherwise deal with shares of stock in or securities or obligations of, to advance and lend money, with or without security, and to subsidize or otherwise assist any such company, and to guarantee the principal or interest of any such security obligations, or any dividends upon any such shares of stock, and to discharge and cancel without payment any indebtedness thus arising; (f) To purchase and acquire from any of its officers, directors, or stockholders, any property, interests, or shares of stock and other assets belonging to them or any of them which the Board of Directors may deem it advisable to acquire; (g) To purchase and acquire shares of the capital stock (of any class), bonds, and other obligations of this Corporation, from time to time, to such extent, in such manner, and upon such terms as its Board of Directors shall determine; and from time to time to accept any such shares, bonds, and obligations as security for, or in payment on accounts, or in satisfaction of, any claims, or demands of this Corporation, and to reissue the same from time to time, upon such terms, prices, and conditions as may be fixed by its Board of Directors or Executive Committee; (h) To acquire by purchase, subscription, or otherwise, and to own, hold, sell, negotiate, assign, deal in, exchange, transfer, mortgage, pledge, or otherwise dispose of any shares of the capital stock, script, or any voting trust certificates in respect of the shares of capital stock of, or any bonds, mortgages, securities, or evidence of indebtedness issued or created by, any other corporation, joint stock company, or association, public or private, or of the government of the United States of America, or of any foreign government, or of any state, territory, municipality, or other political subdivision or of any governmental agency; and to issue in exchange therefor, in the manner permitted by law, shares of the capital stock, bonds, or other obligations of the Corporation; and while the holder or owner of any such shares of capital stock, script, voting trust certificates, bonds, mortgages, or other securities or evidence of indebtedness, to 1

 
possess and exercise in respect thereof any and all rights, powers, and privileges of ownership, including the right to vote thereon; (i) To borrow and/or raise money and/or to obtain and maintain credit for any of the purposes of the Corporation, in any amount, even in excess of its capital stock, by the sale or issue of bonds, notes, debentures, collateral trust certificates, or other obligations of any nature, or in any manner, and to secure the same by mortgage or other liens upon any and all of the property, real, personal, or in action, of every description whatsoever, or any portion thereof, of this Corporation, whether at the time owned or thereafter acquired, or to issue bonds, debentures, debenture stock, warrants, notes or other obligations without any security and with the right to subordinate payment of such obligations to other borrowings whether made before, simultaneous with, or after the issue of said obligations; to redeem any debt or other obligation before the same shall fall due, on any terms and at any advance or premium; (j) The Corporation, at the time of its organization, or at any time or times thereafter, may purchase or acquire shares, stocks, bonds, debentures, and other securities or obligations, or any property, real, personal, or mixed, from any person or persons, corporation or corporations, who may be promoters, officers, or directors of this Corporation, and each stockholder of this Corporation shall be deemed, by reason of his having become such, to have waived any and all objections to such acquisition of shares, stocks, bonds, debentures, and other securities, obligations, or property, real, personal, or mixed, and to have agreed that no promoter, officer, or director shall be liable to account to this Corporation for any profit or benefit derived by him by reason of such transaction; (k) The Corporation shall possess all the powers necessary to conduct said businesses and to carry out the purposes and objects herein expressed, and shall have all the powers now or hereafter expressly conferred upon corporations under the laws of the State of Hawaii, together with such additional and implied powers as may now or hereafter be provided thereby, including, but not limited to, the right to incur debts in excess of its capital stock. 2. The clauses set forth in this Article II are to be construed both as purposes and powers; and it is hereby expressly provided that the enumeration herein of specific purposes and powers shall not be held to limit or restrict in any manner the general powers of the Corporation. It is the intention that the purposes, objects, and powers specified in each of the said clauses shall, except as otherwise expressly provided, in no wise be limited or restricted by reference to or inference from the terms of any other clause or paragraph of this article, or of any other article of these Articles of Incorporation. ARTICLE IV 1. The amount of authorized capital stock of the Corporation shall be ONE HUNDRED EIGHTY FIVE MILLION (185,000,000) shares of common stock, no par value per share, and ONE MILLION (1,000,000) shares of preferred stock, no par value per share. The Corporation shall have the privilege of subsequent extensions of its capital stock from time to time in the manner provided by law. Upon the filing and effectiveness (the “Effective Time”) pursuant to the Hawaii Business Corporation Act of these Articles of Amendment, each twenty (20) shares of Common Stock issued and outstanding immediately prior to the Effective Time shall be combined into one (1) validly issued, fully paid and non-assessable share of Common Stock without any further action by the Corporation or the holder thereof (the “Reverse Stock Split”). No fractional shares of Common Stock will be issued in connection with the Reverse Stock Split. For each holder of Common Stock, the number of shares held before the Reverse Stock Split will be divided by twenty (20) and, if the resulting number is not a whole number, then such number will be rounded up to the next nearest whole number. Each certificate that immediately prior to the Effective Time represented shares of Common Stock (“Old Certificates”), shall thereafter represent that number of shares of Common Stock into which the shares of Common Stock represented by the Old Certificate shall have been combined, subject to the rounding of fractional numbers as described above. 2. No shares of stock shall be sold or transferred except in accordance with the provisions of the by-laws of this Corporation. 3. All future issues of stock, whether at present authorized or future increases, shall, from time to time, be subject to the sale and disposal by the Board of Directors at such price, to the purchasers, and upon such terms as the Board of Directors shall determine to be in the best interests of the Corporation; and this provision shall apply also to any issue of notes, bonds, debentures, warrants, rights or preferred stock, that shall be hereinafter authorized, which are convertible into common or preferred stock. 4. The Corporation shall have power from time to time to create an additional class or additional classes of shares of capital stock with such preferences, voting powers, restrictions and qualifications thereof as shall be fixed by the resolution authorizing the issuance thereof. 5. Anything herein contained to the contrary notwithstanding, the rights of the holders of all classes of stock of the Corporation in respect of dividends shall at all times be subject to the power of the Board of Directors from time to time to set aside such reserves and/or to make such other provision, if any, for working capital and for additions and improvements to its plant, for acquisition of real or personal property for the enlargement of its business, for general expansion of its business, and for any other reserve or reserves for any proper purpose as said Board shall deem to be necessary or advisable. 6. The name of the initial subscriber for shares, the number of shares subscribed for by such initial subscriber, the subscription price for such shares, and the amount of capital and paid-in-surplus paid in by such initial subscriber, whether in cash, non- cash consideration, or a combination of both, are as follows: Amount of Amount of Amount of Amount of Capital Paid Paid-In Paid-In Surplus No. of Capital Paid- In, Surplus Paid In, by Non- Name of Shares Subscription In, by Non-Cash Paid In, In Cash Subscriber Subscribed Price In Cash Consideration Cash Consideration SAKAE TAKAHASHI 68 $ 340.00 $ 340.00 NONE NONE NONE YOSHIHARU SATOH 66 330.00 330.00 NONE NONE NONE MINORU UEDA 66 330.00 330.00 NONE NONE NONE 200 $ 1,000.00 $ 1,000.00 2

 
7. Pursuant to the authority granted to and vested in the Board of Directors of the Company in accordance with the provisions of its Articles of Incorporation, the Board of Directors hereby creates a series of Preferred Stock, no par value per share, of the Company and hereby states the designation and number of shares, and fixes the relative rights, preferences and limitations thereof as follows: Section 1. Designation and Amount. The shares of such series shall be designated as “Junior Participating Preferred Stock, Series A” (the “Series A Preferred Stock”), and the number of shares constituting the Series A Preferred Stock shall be Five Hundred Thousand (500,000). Such number of shares may be increased or decreased by resolution of the Board of Directors; provided, that no decrease shall reduce the number of shares of Series A Preferred stock to a number less than the number of shares then outstanding plus the number of shares reserved for issuance upon the exercise of outstanding options, rights, or warrants or upon the conversion of any outstanding securities issued by the Company convertible into Series A Preferred Stock. Section 2. Dividends and Distributions. (A) Subject to the rights of the holders of any shares of any series of Preferred Stock (or any similar stock) ranking prior and superior to the Series A Preferred Stock with respect to dividends, the holders of shares of Series A Preferred Stock, in preference to the holders of Common Stock of the Company, and of any other junior stock, shall be entitled to receive, when, as, and if declared by the Board of Directors out of funds legally available for the purpose, quarterly dividends payable in cash on the first day of March, June, September, and December in each year (each such date being referred to herein as a “Quarterly Dividend Payment Date”), commencing on the first Quarterly Dividend Payment Date after the first issuance of a share or fraction of a share of Series A Preferred Stock, in an amount per share (rounded to the nearest cent) equal to the greater of (a) $l.00 or (b) subject to the provision for adjustment hereinafter set forth, one hundred (100) times the aggregate per share amount of all cash dividends, and one hundred (100) times the aggregate per share amount (payable in kind) of all non-cash dividends or other distributions, other than a dividend payable in shares of Common Stock or a subdivision of the outstanding shares of Common Stock (by reclassification or otherwise), declared on the Common Stock since the immediately preceding Quarterly Dividend Payment Date or, with respect to the first Quarterly Dividend Payment Date, since the first issuance of any share or fraction of a share of Series A Preferred Stock. In the event the Company shall at any time declare or pay any dividend on the Common Stock payable in shares of Common Stock, or effect a subdivision or combination or consolidation of the outstanding shares of Common Stock (by reclassification or otherwise than by payment of a dividend in shares of Common Stock) into a greater or lesser number of shares of Common Stock, then in each such case the amount to which holders of shares of Series A Preferred Stock were entitled immediately prior to such event under clause (b) of the preceding sentence shall be adjusted by multiplying such amount by a fraction, the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event. (B) The Company shall declare a dividend or distribution on the Series A Preferred Stock as provided in paragraph (A) of this Section immediately after it declares a dividend or distribution on the Common Stock (other than a dividend payable in shares of Common Stock); provided that, in the event no dividend or distribution shall have been declared on the Common Stock during the period between any Quarterly Dividend Payment Date and the next subsequent Quarterly Dividend Payment Date, a dividend of $l.00 per share on the Series A Preferred Stock shall nevertheless be payable on such subsequent Quarterly Dividend Payment Date. (C) Dividends shall begin to accrue and be cumulative on outstanding shares of Series A Preferred Stock from the Quarterly Dividend Payment Date next preceding on the date of issue of such shares, unless the date of issue of such shares is prior to the record date for the first Quarterly Dividend Payment Date, in which case dividends on such shares shall begin to accrue from the date of issue of such shares, or unless the date of issue is a Quarterly Dividend Payment Date or is a date after the record date for the determination of holders of shares of Series A Preferred Stock entitled to receive a quarterly dividend and before such Quarterly Dividend Payment Date, in either of which events such dividends shall begin to accrue and be cumulative from such Quarterly Dividend Payment Date. Accrued but unpaid dividends shall not bear interest. Dividends paid on the shares of Series A Preferred Stock in an amount less than the total amount of such dividends at the time accrued and payable on such shares shall be allocated pro rata on a share-by-share basis among all such shares at the time outstanding. The Board of Directors may fix a record date for the determination of holders of shares of Series A Preferred Stock entitled to receive payment of a dividend or distribution declared thereon, which record date shall be not more than 60 days prior to the date fixed for the payment thereof. Section 3. Voting Rights. The holders of Series A Preferred Stock shall have the following voting rights: (A) Subject to the provision for adjustment hereinafter set forth, each share of Series A Preferred Stock shall entitle the holder thereof to one hundred (100) votes on all matters submitted to a vote of the stockholders of the Company. In the event the Company shall at any time declare or pay any dividend on the Common Stock payable in shares of Common Stock, or effect a subdivision or combination or consolidation of the outstanding shares of Common Stock (by reclassification or otherwise than by payment of a dividend in shares of Common Stock) into a greater or lesser number of shares of Common Stock, then in each such case the number of votes per share to which holders of shares of Series A Preferred Stock were entitled immediately prior to such event shall be adjusted by multiplying such number by a fraction, the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event. (B) Except as otherwise provided herein, in any other Statement of Designation creating a series of Preferred Stock or any similar stock, or by law, the holders of shares of Series A Preferred Stock and the holders of shares of Common Stock and any other capital stock of the Company having general voting rights shall vote together as one class on all matters submitted to a vote of stockholders of the Company. 3

 
(C) Except as set forth herein, or as otherwise provided by law, holders of Series A Preferred Stock shall have no special voting rights and their consent shall not be required (except to the extent they are entitled to vote with holders of Common Stock as set forth herein) for taking any corporate action. Section 4. Certain Restrictions. (A) Whenever quarterly dividends or other dividends or distributions payable on the Series A Preferred Stock as provided in Section 2 are in arrears, thereafter and until all accrued and unpaid dividends and distributions, whether or not declared, on shares of Series A Preferred Stock outstanding shall have been paid in full, the Company shall not: (i) declare or pay dividends, or make any other distributions, on any shares of stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series A Preferred Stock; (ii) declare or pay dividends, or make any other distributions, on any shares of stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Series A Preferred Stock, except dividends paid ratably on the Series A Preferred Stock and all such parity stock on which dividends are payable or in arrears in proportion to the total amounts to which the holders of all such shares are then entitled; (iii) redeem or purchase or otherwise acquire for consideration shares of any stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series A Preferred Stock provided that the Company may at any time redeem, purchase or otherwise acquire shares of any junior stock in exchange for shares of any stock of the Company ranking junior (as to dividends and upon dissolution, liquidation or winding up) to the Series A Preferred; or (iv) redeem or purchase or otherwise acquire for consideration any shares of Series A Preferred Stock, or any shares of stock ranking on a parity with the Series A Preferred Stock, except in accordance with a purchase offer made in writing or by publication (as determined by the Board of Directors) to all holders of such shares upon such terms as the Board of Directors, after consideration of the respective annual dividend rates and other relative rights and preferences of the respective series and classes, shall determine in good faith will result in fair and equitable treatment among the respective series or classes. (B) The Company shall not permit any subsidiary of the Company to purchase or otherwise acquire for consideration any shares of stock of the Company unless the Company could, under paragraph (A) of this Section 4, purchase or otherwise acquire such shares at such time and in such manner. Section 5. Reacquired Shares. Any shares of Series A Preferred Stock purchased or otherwise acquired by the Company in any manner whatsoever shall be retired and canceled promptly after the acquisition thereof. All such shares shall upon their cancellation become authorized but unissued shares of Preferred Stock and may be reissued as part of a new series of the Preferred Stock subject to the conditions and restrictions on issuance set forth herein, in the Articles of Incorporation of the Company, or in any other Statement of Designation creating a series of Preferred Stock or any similar stock or as otherwise required by law. Section 6. Liquidation, Dissolution or Winding Up. Upon any liquidation, dissolution or winding up of the Company, no distribution shall be made (A) to the holders of shares of stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series A Preferred Stock unless, prior thereto, the holders of shares of Series A Preferred Stock shall have received $100 per share, plus an amount equal to accrued and unpaid dividends and distributions thereon, whether or not declared, to the date of such payment provided that the holders of shares of Series A Preferred Stock shall be entitled to receive an aggregate amount per share, subject to the provision for adjustment hereinafter set forth, equal to one hundred (100) times the aggregate amount to be distributed per share to holders of shares of Common Stock, or (B) to the holders of shares of stock ranking on a party (either as to dividends or upon liquidation, dissolution or winding up) with the Series A Preferred Stock, except distributions made ratable on the Series A Preferred Stock and all such parity stock in proportion to the total amounts to which the holders of all such shares are entitled upon such liquidation, dissolution or winding up. In the event the Company shall at any time declare or pay any dividend on the Common Stock payable in shares of Common Stock, or effect a subdivision or combination or consolidation of the outstanding shares of Common Stock (by reclassification or otherwise than by payment of a dividend in shares of Common Stock) into a greater or lesser number of shares of Common Stock, then in each such case the aggregate amount to which holders of shares of Series A Preferred Stock were entitled immediately prior to such event under the proviso in clause (A) of the preceding sentence shall be adjusted by multiplying such amount by a fraction the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event. Section 7. Consolidation, Merger, etc. In case the Company shall enter into any consolidation, merger, combination, or other transaction in which the shares of Common Stock are exchanged for or changed into other stock or securities, cash, and/or any other property, then in any such case each share of Series A Preferred Stock shall at the same time be similarly exchanged or changed into an amount per share, subject to the provision for adjustment hereinafter set forth, equal to one hundred (100) times the aggregate amount of stock, securities, cash, and/or any other property (payable in kind), as the case may be, into which or for which each share of Common Stock is changed or exchanged. In the event the Company shall at any time declare or pay any dividend on the Common Stock payable in shares of Common Stock, or effect subdivision or combination or consolidation of the outstanding shares of Common Stock (by reclassification or otherwise than by payment of a dividend in shares of Common Stock) into a greater or lesser number of shares of Common Stock, then in each such case the amount set forth in the preceding sentence with respect to the exchange or change of shares of Series A Preferred Stock shall be adjusted by multiplying such amount by a fraction, the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event. Section 8. No Redemption. 4

 
The shares of Series A Preferred Stock shall not be redeemable. Section 9. Rank. The Series A Preferred Stock shall rank, with respect to the payment of dividends and the distribution of assets, junior to all series of any other class of the Company’s Preferred Stock. Section 10. Amendment. The Articles of Incorporation of the Company shall not be amended in any manner which would materially alter or change the powers, preferences, or special rights of the Series A Preferred Stock so as to affect them adversely without the affirmative vote of the holders of at least two-thirds of the outstanding shares of Series A Preferred Stock, voting together as a single class. ARTICLE V l. There shall be a Board of Directors of not less than five (5) members, who shall be elected at the annual meeting of the stockholders, as, and in the manner prescribed in the By-Laws of the Corporation. At least one member of the Board of Directors shall be a resident of the State of Hawaii. The directors shall be elected or appointed and any vacancies at any time occurring shall be filled by the stockholders or the directors or any thereof in such manner and for such terms as the by-laws may prescribe. Except as otherwise limited by these Articles, By-Laws, or by law, all corporate powers and authority of the Corporation shall be vested in the Board of Directors; however, an Executive Committee may be appointed by the Board of Directors as provided in the By-Laws and during the intervals between meetings of the Board of Directors, the Executive Committee shall possess and may execute any of the powers delegated to it by the Board of Directors. 2. The officers of the Corporation shall be a president, one or more vice presidents, a secretary, and a treasurer, who shall be elected by the Board of Directors as shall be prescribed by the by-laws. There may also be as officers of the Corporation a Chairman of the Board, a Chief Executive Officer, secretaries and treasurers. The officers need not be stockholders, except as may otherwise be provided by the by-laws of the Corporation. There may also be such other officers and agents as the business of the Corporation may require, who shall be elected or appointed as the by-laws may prescribe. The same person may hold at the same time two or more offices. 3. The persons who are the first officers and directors of the Corporation who shall serve until the first annual meeting of the shareholders or until their successors are elected and qualify, are as follows: YOSHIHARU SATOH President and Director Residence Address 616 Ulili Street Honolulu, Hawaii 968l6 MINORU UEDA Executive Vice President and Director Residence Address 2499 Kapiolani Boulevard, Apartment 1701 Honolulu, Hawaii 96826 HAROLD YAMANAKA Senior Vice President and Secretary Residence Address 314 Puamamane Street Honolulu, Hawaii 96821 DONALD KAMEMOTO Senior Vice President and Treasurer Residence Address 1480 Akeke Place Kailua, Hawaii 96734 DANIEL K. INOUYE Director Residence Address 469 Ena Road Honolulu, Hawaii 96815 PAUL DEVENS Director Residence Address 5631 Hoihi Place Honolulu, Hawaii 96821 ALICE F. GUILD Director Residence Address 2108 Keeaumoku Street Honolulu, Hawaii 96834 DENNIS I. HIROTA Director Residence Address 1279 Puualoha Street Kailua, Hawaii 96734 CHARLES H. KIMURA Director Residence Address 738 Honua Street Honolulu, Hawaii 96816 SIDNEY S. KOSASA Director Residence Address 820 Onaha Street Honolulu, Hawaii 96816 EATON MAGOON, JR. Director Residence Address 3641 Diamond Head Road Honolulu, Hawaii 96816 WALLACE Y. MATSUMOTO Director Residence Address 3062 Kahaloa Drive Honolulu, Hawaii 96822 SHINSUKE NAKAMINE Director Residence Address 414 Uhini Place Honolulu, Hawaii 96813 ELTON H. SAKAMOTO Director Residence Address 1133 Nehoa Street Honolulu, Hawaii 96822 5

 
SAKAE TAKAHASHI Director Residence Address 3828 Old Pali Road Honolulu, Hawaii 96817 GORDON I. TANIOKA Director Residence Address 2904 Oahu Avenue Honolulu, Hawaii 96822 LESTER B. K. YEE Director Residence Address 4145 Papu Circle Honolulu, Hawaii 968l6 4. No contract or other transaction between the Corporation and any other corporation or any firm, association or other organization, and no act of the Corporation, shall in any way be affected or invalidated by the fact that any of the directors or officers of the Corporation are parties to such contract or transaction or act or are pecuniarily or otherwise interested in the same or are directors or officers or members of any such corporation or any such firm, association or other corporation; provided that the interest of such director or officer shall be disclosed or shall have been known to the Board of Directors authorizing or approving the same, or to a majority thereof. Any director of the Corporation who is pecuniarily or otherwise interested in or is a director or officer or member of such other corporation or any other firm, association or other organization, may be counted in determining a quorum of any meeting of the Board of Directors which shall authorize or approve any such contract, transaction or act, and may vote thereon with like force and effect as if he were in no way interested therein. Neither any director or officer of the Corporation, being so interested in any such contract, transaction, or act of the Corporation which shall be approved by the Board of Directors of the Corporation, nor any corporation, firm, association, or other organization in which such director, or officer may be interested, shall be liable or accountable to the Corporation, or to any stockholder thereof, for any loss incurred by the Corporation pursuant to or by reason of such contract, transaction or act, or for any gain received by any such other party pursuant thereto or by reason thereof. 5. Any director of the Corporation may vote upon any contract or other transaction between the Corporation and any subsidiary or affiliated corporation, including any corporation which owns all or substantially all of the shares of the capital stock of the Corporation, without regard to the fact that he may also be a director or officer or stockholder of or otherwise interested in or connected with such subsidiary or affiliated corporation; and no contract or other transaction entered into by and between the Corporation and any such subsidiary or affiliated corporation shall be affected or invalidated by the fact that any director or officer of the Corporation may also be a director, officer, or stockholder of or otherwise interested in or connected with such subsidiary or affiliated corporation, or by the fact that said contract or transaction may be entered into by officers of the Corporation or may be authorized or ratified by the vote of the directors who may also be directors, officers, or stockholders of or otherwise interested in or connected with such subsidiary or affiliated corporation. ARTICLE VI 1. The Corporation hereby organized shall be a body corporate under the laws of the State of Hawaii, with all rights, powers, privileges and immunities which are now or may hereafter be secured by law to corporations, and shall be subject to all general laws now in effect or hereafter enacted in regard to corporations. 2. The Corporation shall have succession by its corporate name for a term of perpetual duration and shall have all the powers herein enumerated or implied herefrom, and the powers now or which may hereafter be provided by law for incorporated companies. ARTICLE VII Service of legal process may be made upon the Corporation in the manner provided by law. ARTICLE VIII SPECIAL VOTING PROVISIONS 1. Vote Required for Certain Business Combinations. 1.1 Higher Vote for Certain Business Combinations. In addition to any affirmative vote required by law or these Articles of Incorporation and except as otherwise expressly provided in Section 2 of this Article VIII the affirmative vote of the holders of at least 75% of the voting power of the then outstanding shares of capital stock of the Corporation entitled to vote generally in the election of directors (the “Voting Stock”), voting together as a single class shall be required for any of the following: (l) any merger or consolidation of the Corporation or any Subsidiary (as hereinafter defined) with (i) any Interested Stockholder (as hereinafter defined) or (ii) any other corporation (whether or not itself an Interested Stockholder) which is, or after such merger or consolidation would be, an Affiliate (as hereinafter defined) of an Interested Stockholder, or (2) any sale, lease, license, exchange, mortgage, pledge, transfer or other disposition (in one transaction or a series of transactions) to or with any Interested Stockholder or any Affiliate of any Interested Stockholder of any assets of the Corporation or any Subsidiary having an aggregate Fair Market Value (as hereinafter defined) of $2,000,000 or more; or (3) the issuance or transfer by the Corporation or any Subsidiary (in one transaction or a series of transactions) of any securities of the Corporation or any Subsidiary to any Interested Stockholder or any Affiliate of any Interested Stockholder having an aggregate Fair Market Value of $2,000,000 or more; or (4) the adoption of any plan or proposal for the liquidated or dissolution of the Corporation proposed by or on behalf of an Interested Stockholder or any Affiliate of any Interested Stockholder, or 6

 
(5) any reclassification of securities (including any reverse stock split), or recapitalization of the Corporation, or any merger or consolidation of the Corporation with any of its Subsidiaries or any other transaction (whether or not with or into or otherwise involving an Interested Stockholder) which has the effect, directly or indirectly, of increasing the proportionate share of the outstanding shares of any class of equity or convertible securities of the Corporation or any Subsidiary which is directly or indirectly owned by any Interested Stockholder or any Affiliate of any Interested Stockholder; The affirmative vote required in this Section 1.1 of Article VIII shall be required notwithstanding the fact that no vote may be required, or that a lesser percentage may be specified, by law or in any agreement with any national securities exchange or otherwise. 1.2 Definition of “Business Combination”. The term “Business Combination” as used in this Article VIII shall mean any transaction which is referred to in any one or more of clauses (l) through (5) of Section 1.1 of this Section 1. 2. When Higher Vote is Not Required. The provisions of Section 1 shall not be applicable to any particular Business Combination, and such Business Combination shall require only such affirmative vote as is required by law and by any other provision of these Articles of Incorporation, if all of the conditions specified in either of the following Sections 2.1 or 2.2 are met: 2.1 Approval by Disinterested Directors. The Business Combination shall have been approved by a majority of the Disinterested Directors (as hereinafter defined). 2.2 Price and Procedural Requirements. All of the following conditions shall have been met: (1) the aggregate amount of the cash and the Fair Market Value as of the date of the consummation of the Business Combination of consideration other than cash to be received per share by holders of the Corporation’s common stock, no par value (“Common Stock”) in such Business Combination shall be at least equal to the higher of the following: (a) (if applicable) the highest per share price (including any brokerage commissions, transfer taxes and soliciting dealers’ fees) paid by the Interested Stockholder for any shares of Common Stock acquired by it (i) within the five-year period immediately prior to the first public announcement of the terms of the proposed Business Combination (the “Announcement Date”) or (ii) in the transaction in which it became an Interested Stockholder, whichever is higher; and (b) the Fair Market Value per share of Common Stock on the Announcement Date or on the date on which the Interested Stockholder became an Interested Stockholder (such latter date is referred to in this Article VIII as the “Determination Date”), whichever is higher. (2) The aggregate amount of the cash and the Fair Market Value as of the date of the consummation of the Business Combination of consideration other than cash to be received per share by holders of shares of any class of outstanding Voting Stock other than Common Stock shall be at least equal to the highest of the following (it being intended that the requirements of this clause (2) shall be required to be met with respect to every class of outstanding Voting Stock, whether or not the Interested Stockholder has previously acquired any shares of a particular class of Voting Stock): (a) (if applicable) the highest per share price (including any brokerage commissions, transfer taxes and soliciting dealers’ fees) paid by the Interested Stockholder for any shares of such class of Voting Stock acquired by it (i) within the five-year period immediately prior to the Announcement Date or (ii) in the transaction in which it became an Interested Stockholder, whichever is higher; (b) the Fair Market Value per share of such class of Voting Stock on the Announcement Date or on the Determination Date, whichever is higher, and (c) (if applicable) the highest preferential amount per share to which the holders of shares of such class of Voting Stock are entitled in the event of any liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary. (3) The consideration to be received by holders of a particular class of outstanding Voting Stock (including Common Stock) shall be in cash or in the same form as the Interested Stockholder has previously paid for shares of such class of Voting Stock. If the Interested Stockholder has paid for shares of any class of Voting Stock with varying forms of consideration, the form of consideration for such class of Voting Stock shall be either cash or the form used to acquire the largest number of shares of such class of Voting Stock previously acquired by it. The price determined in accordance with clauses (l) and (2) of this Section 2.2 shall be subject to appropriate adjustment in the event of any stock dividend, stock split, combination of shares or similar event. (4) After such Interested Stockholder has proposed such a Business Combination and prior to the consummation of such Business Combination: (a) except as approved by a majority of the Disinterested Directors, there shall have been no failure to declare and pay at the regular date therefor any full semi-annual dividends (whether or not cumulative) on the outstanding Preferred Stock of the Corporation; (b) there shall have been (i) no reduction in that semi-annual rate of dividends paid on the Common Stock (except as necessary to reflect any subdivision of the Common Stock), except as approved by a majority of the Disinterested Directors, and (ii) an increase in such quarterly rate of dividends paid on such Common Stock as necessary to 7

 
reflect any reclassification (including any reverse stock split), recapitalization, reorganization or any similar transaction which has the effect of reducing the number of outstanding shares of the Common Stock, unless the failure so to increase such annual rate is approved by a majority of the Disinterested Directors; and (c) such Interested Stockholder shall not have become the beneficial owner of any additional shares of Voting Stock except as part of the transaction which results in such Interested Stockholder becoming an Interested Stockholder. (5) A proxy or information statement describing the proposed Business Combination and complying with the requirements of the Securities Exchange Act of 1934, as amended (or any subsequent provisions replacing such) (hereinafter referred to as the “Act”), and the rules and regulations of the Securities and Exchange Commission thereunder shall be mailed to public stockholders of the Corporation at least 30 days prior to the consummation of such Business Combination (whether or not such proxy or information statement is required to be mailed pursuant to the Act). (6) The holders of all outstanding shares of Voting Stock not beneficially owned by the Interested Stockholder prior to the consummation of any Business Combination shall be entitled to receive in such Business Combination cash or other consideration for their shares of such Voting Stock in compliance with clauses (l), (2) and (3) of Section 2.2 of Article VIII (provided, however, that the failure of any such holders who are exercising their statutory rights to dissent from such Business Combination and receive payment of the fair value of their shares to exchange their shares in such Business Combination shall not be deemed to have prevented the condition set forth in this clause (6) from being satisfied). 3. Certain Definitions. For the purpose of this Article VIII the following shall be deemed to have the meanings specified below: 3.1 The term “person” shall mean any individual, firm, corporation or other entity. 3.2 The term “Interested Stockholder” shall mean any person (other than the Corporation or any Subsidiary) who or which: (1) is the beneficial owner, directly or indirectly, of more than 10% of the voting power of the then outstanding Voting Stock; or (2) is an Affiliate of the Corporation and at any time within the five-year period immediately prior to the date in question was the beneficial owner, directly or indirectly, of 10% or more of the voting power of the then outstanding Voting Stock; or (3) is an assignee of or has otherwise succeeded to any shares of Voting Stock which were at any time within the five-year period immediately prior to the date in question beneficially owned by an Interested Stockholder, if such assignment or succession shall have occurred in the course of a transaction or series of transactions not involving a public offering within the meaning of the Securities Act of 1933, as amended (or any subsequent provisions replacing such). 3.3 A person shall be deemed a “beneficial owner” of any Voting Stock: (l) which such person or any of its Affiliates or Associates (as hereinafter defined) beneficially owns, directly or indirectly; or (2) which such person or any of its Affiliates or Associates has (a) the right to acquire (whether such right is exercisable immediately or only after the passage of time), pursuant to any agreement, arrangement or understanding or upon the exercise of conversion rights, exchange rights, warrants or options, or otherwise, or (b) the right to vote pursuant to any agreement, arrangement or understanding; or (3) which is beneficially owned, directly or indirectly, by any other person with which such person or any of its Affiliates or Associates has any agreement, arrangement or understanding for the purpose of acquiring, holding, voting or disposing of any shares of Voting Stock. 3.4 For the purpose of determining whether a person is an Interested Stockholder pursuant to Section 3.2 of Article VIII, the number of shares of Voting Stock deemed to be outstanding shall include shares deemed owned through application of Section 3.3 of Article VIII but shall not include any other shares of Voting Stock which may be issuable pursuant to any agreement, arrangement or understanding, or upon exercise of conversion rights, warrants or options, or otherwise. 3.5 The terms “Affiliate” or “Associate” shall have the respective meanings ascribed to such terms in Rule 12b-2 of the General Rules and Regulations under the Act, as in effect on November 1, 1986. 3.6 The term “Subsidiary” shall mean any corporation of which a majority of any class of equity security is owned, directly or indirectly, by the Corporation; provided, however, that for the purposes of the definition of Interested Stockholder set forth in Section 3.2 of Article VIII, the term “Subsidiary” shall mean only a corporation of which a majority of each class of equity security is owned, directly or indirectly, by the Corporation. 3.7 The term “Fair Market Value” shall mean: (l) in the case of stock, the highest closing sale price during the 30-day period immediately preceding the date in question of a share of such stock on the National Association of Securities Dealers, Inc. Automated Quotations System or any similar system then in use, or if no such quotations are available, the fair market value on the date in question of a share of such stock as determined by a majority of the Disinterested Directors in good faith, in each case with respect to any class of such stock, appropriately adjusted for any dividend or distribution in shares of such stock or any subdivision or reclassification of outstanding shares of such stock into a greater number of shares of such stock or any combination or reclassification of outstanding shares of such stock into a smaller number of shares of such stock; and (2) in the case of property other than cash or stock, 8

 
the fair market value of such property on the date in question as determined by a majority of the Disinterested Directors in good faith. 3.8 In the event of any Business Combination in which the Corporation is the survivor, the phrase “consideration other than cash to be received” as used in clauses (l) and (2) of Section 2.2 of Article VIII shall include the shares of Common Stock and/or the shares of any other class of outstanding Voting Stock retained by the holders of such shares. 3.9 The term “Disinterested Director” shall mean any member of the Board of Directors of the Corporation who is unaffiliated with the Interested Stockholder and who was a member of the Board of Directors prior to the Determination Date, and any successor of a Disinterested Director who is unaffiliated with the Interested Stockholder and is recommended to succeed a Disinterested Director by a majority of the total number of Disinterested Directors then on the Board of Directors. 3.10 References to “highest per share price” shall in each case with respect to any class of stock reflect an appropriate adjustment for any dividend or distribution in shares of such stock or any subdivision or reclassification of outstanding shares of such stock into a greater number of shares of such stock or any combination or reclassification of outstanding shares of such stock into a smaller number of shares of such stock. 4. Powers of the Board of Directors. A majority of the Board of Directors of the Corporation shall have the power and duty to determine for the purpose of this Article VIII, on the basis of information known to them after reasonable inquiry, whether a person is an Interested Stockholder. Once the Board of Directors has made a determination, pursuant to the preceding sentence, that a person is an Interested Stockholder, a majority of the total number of Directors of the Corporation who would qualify as Disinterested Directors shall have the power and duty to interpret all of the terms and provisions of this Article VIII, and to determine on the basis of information known to them after reasonable inquiry all facts necessary to ascertain compliance with this Article VIII, including, without limitation, (A) the number of shares of Voting Stock beneficially owned by any person, (B) whether a person is an Affiliate or Associate of another, (C) whether the assets which are the subject of any Business Combination have, or the consideration to be received for the issuance or transfer of securities by the Corporation or any Subsidiary in any Business Combination has, an aggregate Fair Market Value of $2,000,000 or more and (D) whether all of the applicable conditions set forth in Section 2.2 of this Article VIII have been met with respect to any Business Combination. Any determination pursuant to this Section 4 made in good faith shall be binding and conclusive on all parties. 5. No Effect on Fiduciary Obligations of Interested Stockholders. Nothing contained in this Article VIII shall be construed to relieve any Interested Stockholder from any fiduciary obligation imposed by law. 6. Amendment, Repeal, Etc. Notwithstanding any other provisions of these Articles of Incorporation or the by-laws of the Corporation (and notwithstanding the fact that a lesser percentage may be specified by law, these Articles of Incorporation or the by-laws of the Corporation), the affirmative vote of the holders of 75% or more of the outstanding Voting Stock, voting together as a single class, shall be required to amend or repeal, or adopt any provisions inconsistent with, this Article VIII. ARTICLE IX 1. To the fullest extent permitted by the Hawaii Business Corporation Act, including, without limitation, Hawaii Revised Statutes, Section 414-222, as the Hawaii Business Corporation Act now exists or hereafter may be amended (but, in the case of any such amendment, if permitted by law, only to the extent that such amendment permits the Corporation to provide a broader limitation on monetary liability than permitted before that amendment), no director of the Corporation shall be liable to the Corporation or its stockholders for monetary damages for any action taken, or any failure to take any action, as a director. 2. Any repeal or modification of the foregoing paragraph shall not adversely affect any right or protection of a director of the Corporation existing at the time of that repeal or modification. ARTICLE X 1. The Corporation may amend these Articles of Incorporation at any time in the manner now or hereafter prescribed or permitted by law, provided that, except as otherwise provided in these Articles of Incorporation, any amendment shall be approved by the affirmative vote of the holders of a majority of the shares entitled to vote thereon, unless any class of shares is entitled to vote thereon as a separate voting group, in which event the proposed amendment shall be approved by the affirmative vote of the holders of a majority of the shares of each class of shares entitled to vote thereon as a separate voting group and of the total shares entitled to vote thereon. ARTICLE XI Ownership Limit Section 1. Certain Definitions. For purposes of this Article XI, the following terms shall have the meanings indicated: “Affiliate” shall have the meaning ascribed to such term in Rule 12b-2 of the General Rules and Regulations under the Securities Exchange Act of 1934, as amended, and to the extent not included within the foregoing, shall also include with respect to any Person, any other Person whose Stock would be deemed to be (i) constructively owned by such first Person, (ii) owned by a “single entity” as defined in Section 1.382-3(a)(1) of the Treasury Regulations, or (iii) otherwise aggregated with shares owned by such first Person, in each case pursuant to the provisions of the Code, or any successor or replacement provision, and the Treasury Regulations thereunder; A Person shall be deemed the “Beneficial Owner” of, and shall be deemed to “Beneficially Own,” and shall have “Beneficial Ownership” of, any Stocks (i) which such Person directly owns or (ii) which such Person would be deemed to own constructively pursuant to Section 382 of the Code and the Treasury Regulations promulgated thereunder (including as a result of the deemed 9

 
exercise of an “option” pursuant to Treasury Regulation Section 1.382-4(d) and including, without duplication, Stock owned by any Affiliate of such Person); provided that a Person shall not be treated as “Beneficially Owning” Stock pursuant to clause (i) above to the extent that such Person does not have the right to receive or the power to direct the receipt of dividends from, or the proceeds from the sale of, such Stock; “Business Day” shall mean any day other than a Saturday, a Sunday, or a day on which banking institutions in Hawaii are authorized or obligated by law or executive order to close. “Close of Business” on any given date shall mean 5:00 p.m., Hawaii time, on such date; provided, however, that if such date is not a Business Day it shall mean 5:00 p.m., Hawaii time, on the next succeeding Business Day. “Code” means the Internal Revenue Code of 1986, as amended from time to time or any successor statute; “Common Shares” when used with reference to the Corporation shall mean the shares of common stock, no par value per share, of the Corporation; “Exempt Person” means the Corporation, any Subsidiary (in each case including, without limitation, in any fiduciary capacity), any employee benefit plan or compensation arrangement of the Corporation or any Subsidiary, or any entity or trustee holding Stock to the extent organized, appointed or established by the Corporation or any Subsidiary for or pursuant to the terms of any such employee benefit plan or compensation arrangement; “Expiration Date” means the earliest of (i) the Close of Business on the date that is the fifth (5th) anniversary of May 2, 2011, (ii) such time as the Board determines, in its sole discretion, that this Article XI is no longer necessary for the preservation of existence of the Tax Benefits and (iii) a date on which the Board determines, in its sole discretion, that this Article XI is no longer in the best interests of the Corporation and its shareholders; “Option” shall have the meaning set forth in Treasury Regulation § 1.382-4; “Person” means any individual, firm, corporation, partnership, trust association, limited liability company, limited liability partnership, governmental entity or other entity or any group of Persons making a “coordinated acquisition” of shares or otherwise treated as an entity within the meaning of Treasury Regulation Section 1.382-3(a)(1)(i) and shall include any successor (by merger or otherwise) of any such entity; “Prohibited Transfer” means any purported transfer of Stock to the extent that such transfer is prohibited under this Article XI; “Public Group” has the meaning set forth in Treasury Regulation Section 1.382-2T(f)(13); “Stock” means Common Shares and any other interest that would be treated as “stock” of the Corporation pursuant to Treasury Regulation Section 1.382-2T(f)(18); “Subsidiary” of any Person shall mean any corporation or other entity of which a majority of the voting power of the voting equity securities or equity interest is owned, directly or indirectly, by such Person; “Tax Benefits” means the net operating loss carryovers, capital loss carryovers, general business credit carryovers, alternative minimum tax credit carryovers and foreign tax credit carryovers, as well as any loss or deduction attributable to “net unrealized built- in loss” within the meaning of Section 382 of the Code and the treasury regulations promulgated thereunder, of the Corporation or any direct or indirect subsidiary thereof; “Threshold Holder” means any Person who or which, together with all Affiliates of such Person, shall be the Beneficial Owner of 4.99% or more of (i) the Common Shares then outstanding or (ii) any class of Stock (other than Common Shares) then outstanding; “transfer” means any direct or indirect sale, transfer, assignment, conveyance, pledge or other disposition or other action taken by a Person, other than the Corporation, that alters the Beneficial Ownership of any Person, including, without limitation, the creation or grant of an option (including an option within the meaning of Treasury Regulation § 1.382-2T(h)(4)(v)), but shall not include (A) the creation or grant of an option by the Corporation, or (B) the issuance of Stock by the Corporation; “transferee” means any Person to whom any Stock is transferred; and “U.S. Government” means any of (i) the federal government of the United States of America, (ii) any instrumentality or agency of the federal government of the United States of America and (iii) any Person wholly-owned by, or the sole beneficiary of which is, the federal government of the United States or any instrumentality or agency thereof. Section 2. Transfer Restrictions. Solely for the purpose of permitting the utilization of the Tax Benefits to which the Corporation (or any other member of the consolidated group of which the Corporation is common parent for federal income tax purposes) is or may be entitled pursuant to the Code and the regulations thereunder, from and after May 2, 2011 until the Expiration Date, no Person (including for the avoidance of doubt the U.S. Government) other than the Corporation shall, except as provided in Section 3 (a) below, transfer to any Person, other than the U.S. Government and any Exempt Person, any direct or indirect interest in any Stock or Options to acquire Stock to the extent that such transfer, if effective, would cause the transferee or any other Person to become a Threshold Holder, or would cause the Beneficial Ownership of a Threshold Holder to increase. Section 3. Permitted Transfers. (a) Any transfer that would otherwise be prohibited pursuant to Section 2 of this Article XI shall nonetheless be permitted if (i) the transfer is to a Public Group (including a new Public Group created under Treasury Regulation Section 1.382-2T(j) (3)(i), (ii) prior to such transfer being consummated (or, in the case of an involuntary transfer, as soon as practicable after the transaction is consummated), the Board of Directors, in its sole discretion, approves the transfer (such approval may relate to a transfer or series of identified transfers), (iii) such transfer is pursuant to any transaction, including, but not limited to, a merger or consolidation, in which all holders of Stock receive, or are offered the same opportunity to receive, cash or other consideration for all such Stock, and upon the consummation of which the acquiror will own at least a majority of the outstanding shares of Stock or 10

 
(iv) such transfer is a transfer by the Corporation to an underwriter or placement agent for distribution in a public offering, whether registered or conducted pursuant to an exception from registration; provided, however, that transfers by such underwriter or placement agent to purchasers in such offering remain subject to this Article XI. In determining whether to approve a proposed transfer pursuant to (ii) of this subparagraph (a), the Board of Directors may, in its discretion, require (at the expense of the transferor and/or transferee) an opinion of counsel selected by the Board of Directors that the transfer will not result in the application of any limitation pursuant to Section 382 of the Code on the use of the Tax Benefits. (b) The Board of Directors may exercise the authority granted by this Section 3 through duly authorized officers or agents of the Corporation. The Board of Directors may establish a committee to determine whether to approve a proposed transfer or for any other purpose relating to this Article XI. As a condition to the Corporation’s consideration of a request to approve a proposed transfer, the Board of Directors may require the transferor and/or transferee to reimburse or agree to reimburse the Corporation, on demand, for all costs and expenses incurred by the Corporation with respect to such proposed transfer, including, without limitation, the Corporation’s costs and expenses incurred in determining whether to authorize such proposed transfer. Section 4. Treatment of Prohibited Transfers. Unless the transfer is permitted as provided in Section 3 of this Article XI, any attempted transfer of Stock or Options in excess of the Stock or Options that could be transferred to the transferee without restriction under Section 2 of this Article XI shall not be effective to transfer ownership of such excess Stock or Options (the “Prohibited Shares”) to the purported acquiror thereof (the “Purported Acquiror”), who shall not be entitled to any rights as a shareholder of the Corporation with respect to such Prohibited Shares (including, without limitation, the right to vote or to receive dividends with respect thereto). (a) Upon demand by the Corporation, the Purported Acquiror shall transfer any certificate or other evidence of purported ownership of Prohibited Shares within the Purported Acquiror’s possession or control, along with any dividends or other distributions paid by the Corporation with respect to any Prohibited Shares that were received by the Purported Acquiror (the “Prohibited Distributions”), to such Person as the Corporation shall designate to act as transfer agent for such Prohibited Shares (the “Agent”). If the Purported Acquiror has sold any Prohibited Shares to an unrelated party in an arm’s-length transaction after purportedly acquiring them, the Purported Acquiror shall be deemed to have sold such Prohibited Shares for the Agent, and in lieu of transferring such Prohibited Shares (and Prohibited Distributions with respect thereto) to the Agent shall transfer to the Agent any such Prohibited Distributions and the proceeds of such sale (the “Resale Proceeds”) except to the extent that the Agent grants written permission to the Purported Acquiror to retain a portion of such Resale Proceeds not exceeding the amount that would have been payable by the Agent to the Purported Acquiror pursuant to subparagraph (b) below if such Prohibited Shares had been sold by the Agent rather than by the Purported Acquiror. Any purported transfer of Prohibited Shares by the Purported Acquiror other than a transfer described in one of the first two sentences of this subparagraph (a) shall not be effective to transfer any ownership of such Prohibited Shares. (b) The Agent shall sell in one or more arm’s-length transactions (through the New York Stock Exchange, if possible) any Prohibited Shares transferred to the Agent by the Purported Acquiror, provided, however, that any such sale must not constitute a Prohibited Transfer and provided further, that the Agent shall effect such sale or sales in an orderly fashion and shall not be required to effect any such sale within any specific time frame if, in the Agent’s discretion, such sale or sales would disrupt the market for the Stock or otherwise would adversely affect the value of the Stock. The proceeds of such sale (the “Sales Proceeds”), or the Resale Proceeds, if applicable, shall be used to pay the expenses of the Agent in connection with its duties under this Section 4 with respect to such Prohibited Shares, and the remainder shall be allocated to the Purported Acquiror up to the following amount: (i) where applicable, the purported purchase price paid or value of consideration surrendered by the Purported Acquiror for such Prohibited Shares, and (ii) where the purported transfer of Prohibited Shares to the Purported Acquiror was by gift, inheritance, or any similar purported transfer, the fair market value (as determined in good faith by the Board of Directors) of such Prohibited Shares at the time of such purported transfer. Subject to the succeeding provisions of this subparagraph, any Resale Proceeds or Sales Proceeds in excess of the amount allocable to the Purported Acquiror pursuant to the preceding sentence, together with any Prohibited Distributions, shall be transferred to an entity described in Section 501(c)(3) of the Code and selected by the Board of Directors or its designee; provided, however, that if the Prohibited Shares (including any Prohibited Shares arising from a previous Prohibited Transfer not sold by the Agent in a prior sale or sales) represent Beneficial Ownership of 4.99% or greater, then any such remaining amounts to the extent attributable to the disposition of the portion of such Prohibited Shares exceeding 4.98% of the outstanding Stock shall be paid to two or more organizations qualifying under Section 501(c)(3) selected by the Board of Directors. In no event shall any such amounts described in the preceding sentence inure to the benefit of the Corporation or the Agent, but such amounts may be used to cover expenses incurred by the Agent in connection with its duties under this Section 4 with respect to the related Prohibited Shares. Notwithstanding anything in this Article XI to the contrary, the Corporation shall at all times be entitled to make application to any court of equitable jurisdiction within the State of Hawaii for an adjudication of the respective rights and interests of any Person in and to any Sale Proceeds, Resale Proceeds and Prohibited Distributions pursuant to this Article XI and applicable law and for leave to pay such amounts into such court. (c) Within thirty (30) business days of learning of a purported transfer of Prohibited Shares to a Purported Acquiror, the Corporation through its Secretary may demand that the Purported Acquiror surrender to the Agent the certificates or other evidence representing the Prohibited Shares, or any Resale Proceeds, and any Prohibited Distributions, and if such surrender is not made by the Purported Acquiror the Corporation may institute legal proceedings to compel such transfer; provided, however, that nothing in this paragraph (c) shall preclude the Corporation in its discretion from immediately bringing legal proceedings without a prior demand, and provided further that failure of the Corporation to act within the time periods set out in this paragraph (c) shall not constitute a waiver of any right of the Corporation to compel any transfer required by subparagraph (a) of this Section 4. (d) Upon a determination by the Corporation that there has been or is threatened a purported transfer of Prohibited Shares to a Purported Acquiror, the Corporation may take such action in addition to any action permitted by the preceding paragraph as it deems advisable to give effect to the provisions of this Article XI, including, without limitation, refusing to give effect on the books of this Corporation to such purported transfer or instituting proceedings to enjoin such purported transfer. If the Corporation refuses to give effect on the books to a purported transfer, the Purported Acquiror of such a transfer of Prohibited Shares shall not be recognized as a shareholder of the Corporation for any purpose whatsoever in respect of the Prohibited Shares and the Purported Acquiror shall not be entitled with respect to such Prohibited Shares to any rights of shareholders of the Corporation, including without limitation, the right to vote such Prohibited Shares and to receive dividends or distributions, whether liquidating or otherwise, in respect thereof, if any, and the Prohibited Shares shall be deemed to remain with the transferor unless and until the Prohibited Shares are transferred to the Agent pursuant to subparagraph (a) of this Section 4 or until an approval is obtained pursuant to Section 3. 11

 
Section 5. Liability. To the fullest extent permitted by law, any Person subject to the provisions of this Article XI who knowingly violates the provisions of this Article XI and any other Persons controlling, controlled by or under common control with such Person shall be jointly and severally liable to the Corporation for, and shall indemnify and hold the Corporation harmless against, any and all damages suffered as a result of such violation, including but not limited to damages resulting from a reduction in, or elimination of, the Corporation’s ability to utilize its Tax Benefits, and attorneys’ and auditors’ fees incurred in connection with such violation. Section 6. Transferee Information. The Corporation may require as a condition to the approval of the transfer of any shares of its Stock or Options to acquire Stock pursuant to this Article XI that the proposed transferee furnish to the Corporation all information reasonably requested by the Corporation and reasonably available to the proposed transferee and its Affiliates with respect to the direct or indirect ownership interests of the proposed transferee (and of Persons to whom ownership interests of the proposed transferee would be attributed for purposes of Section 382 of the Code) in Stock or Options. Section 7. Legend on Certificates. All certificates or direct registration account statements evidencing ownership of shares of Stock that are subject to the restrictions on transfer contained in this Article XI shall bear a conspicuous legend referencing the restrictions set forth in this Article XI as follows: “THE RESTATED ARTICLES OF INCORPORATION, AS AMENDED (THE “CERTIFICATE OF INCORPORATION”), OF THE CORPORATION CONTAINS RESTRICTIONS PROHIBITING THE TRANSFER (AS DEFINED IN THE CERTIFICATE OF INCORPORATION) OF COMMON STOCK OF THE CORPORATION (INCLUDING THE CREATION OR GRANT OF CERTAIN OPTIONS, RIGHTS AND WARRANTS) WITHOUT THE PRIOR AUTHORIZATION OF THE BOARD OF DIRECTORS OF THE CORPORATION (THE “BOARD OF DIRECTORS”) IF SUCH TRANSFER AFFECTS THE PERCENTAGE OF STOCK OF THE CORPORATION (WITHIN THE MEANING OF SECTION 382 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE “CODE”) AND THE TREASURY REGULATIONS PROMULGATED THEREUNDER), THAT IS TREATED AS OWNED BY A FIVE PERCENT SHAREHOLDER UNDER THE CODE AND SUCH REGULATIONS. IF THE TRANSFER RESTRICTIONS ARE VIOLATED, THEN THE TRANSFER WILL BE VOID AB INITIO AND THE PURPORTED TRANSFEREE OF THE STOCK WILL BE REQUIRED TO TRANSFER THE PROHIBITED SHARES (AS DEFINED IN THE RESTATED ARTICLES OF INCORPORATION) TO THE CORPORATION’S AGENT. THE CORPORATION WILL FURNISH WITHOUT CHARGE TO THE HOLDER OF RECORD OF THIS CERTIFICATE A COPY OF THE RESTATED ARTICLES OF INCORPORATION, CONTAINING THE ABOVE-REFERENCED TRANSFER RESTRICTIONS, UPON WRITTEN REQUEST TO THE CORPORATION AT ITS PRINCIPAL PLACE OF BUSINESS.” Section 8. Board Authority. (a) The Board of Directors shall have the power to determine all matters necessary for assessing compliance with this Article XI, including, without limitation, the identification of Threshold Holders with respect to the Corporation within the meaning of Section 382 of the Code and the regulations thereunder; the ownership shifts, within the meaning of Section 382 of the Code, that have previously taken place; the magnitude of the ownership shift that would result from the proposed transaction; the effect of any reasonably foreseeable transactions by the Corporation or any other Person (including any transfer of Stock or Options that the Corporation has no power to prevent, without regard to any knowledge on the part of the Corporation as to the likelihood of such transfer); the possible effects of an ownership change within the meaning of Section 382 of the Code and any other matters which the Board of Directors determines to be relevant. Moreover, the Corporation and the Board of Directors shall be entitled to rely in good faith upon the information, opinions, reports or statements of the executive officers of the Corporation or of the Corporation’s legal counsel, independent auditors, transfer agent, investment bankers, and other employees and agents in making the determinations and findings contemplated by this Article XI to the fullest extent permitted by law. Any determination by the Board of Directors pursuant to this Article XI shall be conclusive. (b) Nothing contained in this Article XI shall limit the authority of the Board of Directors to take such other action to the extent permitted by law as it deems necessary or advisable to protect the Corporation and its shareholders in preserving the Tax Benefits. Without limiting the generality of the foregoing, in the event of a change in law making one or more of the following actions necessary in order to prevent an ownership change for purposes of Section 382 of the Code, this Article XI shall be amended consistent with such change in law, by written resolution of the Board of Directors and without any further action by the shareholders of the Corporation, to (i) modify the ownership interest percentage in the definition of Threshold Holder, (ii) modify the definitions of any terms set forth in this Article XI or (iii) modify the terms of this Article XI as appropriate, in each case as such change in law is interpreted by the Board of Directors. Shareholders of the Corporation shall be notified of such modification through a filing with the Securities and Exchange Commission or such other method of notice as the Secretary of the Corporation shall deem appropriate. (c) In the case of an ambiguity in the application of any of the provisions of this Article XI, including any definition used herein, the Board of Directors shall have the power to determine the application of such provisions with respect to any situation based on its reasonable belief, understanding or knowledge of the circumstances. In the event this Article XI requires an action by the Board of Directors but fails to provide specific guidance with respect to such action, the Board of Directors shall have the power to determine the action to be taken so long as such action is not contrary to the provisions of this Article XI. All such actions, calculations, interpretations and determinations which are done or made by the Board of Directors in good faith shall be conclusive and binding on the Corporation, the Agent, and all other parties for all other purposes of this Article XI. Section 9. Severability. If any provision of this Article XI or any application of such provision is determined to be invalid by any federal or state court having jurisdiction over the issue, the validity of the remaining provisions shall not be affected and other applications of such provision shall be affected only to the extent necessary to comply with the determination of such court. Section 10. Benefits of Article XI. Nothing in this Article XI shall be construed to give to any Person other than the Corporation or the Agent any legal or equitable right, remedy or claim under this Article XI. This Article XI shall be for the sole and exclusive benefit of the Corporation and the Agent. * * * Incorporated: Restated Articles of Incorporation, DCCA Form DC-4, filed October 28, 2004. Articles of Amendment, DCCA Form DC-3, filed May 11, 2005. Articles of Amendment, DCCA Form DC-3, filed October 26, 2009. 12

 
Articles of Amendment, DCCA Form DC-3, filed February 2, 2011. Articles of Amendment, DCCA Form DC-3, filed May 2, 2011. Articles of Amendment, DCCA Form DC-3, filed April 25, 2014. Reference: Statement of Issuance of Shares of Preferred or Special Classes in Shares, DCCA Form DC-6, filed December 31, 2008. Correction, DCCA Form X-3, filed January 7, 2009. Statement of Issuance of Shares of Preferred or Special Classes in Shares, DCCA Form DC-6, filed November 24, 2010. Updated as of 4/30/14 13

 
WWW.BUSINESSREGISTRATIONS.COM FORM DC-3 Nonrefundable Filing Fee: $25.00 7/2008 STATE OF HAWAII DEPARTMENT OF COMMERCE AND CONSUMER AFFAIRS Business Registration Division FILED 04/25/2014 2:09 PM 335 Merchant Street Business Registration Division Mailing Address: P.O. Box 40, Honolulu, Hawaii 96810 DEPT. OF COMMERCE AND Phone No. (808) 586-2727 CONSUMER AFFAIRS State of Hawaii ARTICLES OF AMENDMENT (Section 414-266, Hawaii Revised Statutes) PLEASE TYPE OR PRINT LEGIBLY IN BLACK INK The undersigned, duly authorized officer of the corporation submitting these Articles of Amendment, certifies as follows: 1. The name of the corporation is: Central Pacific Financial Corp. 2. The amendment(s) adopted is attached. 3. The total number of shares outstanding is: 42,108,496 common as of February 24, 2014 4. The amendment(s) was adopted (check one): ⌧ at a meeting of the shareholders held on April 25, 2014 (Month Day Year) Class/Series Total Number of Votes Entitled to be Cast Number of Votes Cast For Amendment Number of Votes Cast Against Amendment OR 0 by written consent dated which all of the shareholders signed. (Month Day Year) 5. If the amendment(s) provides for ah exchange, reclassification, or cancellation of issued shares, provisions necessary to effect the exchange, re-classification, or cancellation, if any, have been made. The undersigned certifies under the penalties of Section 414-20, Hawaii Revised Statutes, that the undersigned has read the above statements, I/we are authorized to make this change, and that the statements are true and correct. Signed this 25th day of April, 2014 Glenn K.C. Ching, Senior VP and Secretary /s/ Glenn K.C. Ching (Type/Print Name & Title) (Signature of Officer) SEE INSTRUCTIONS ON REVERSE SIDE. The articles must be signed by at least one officer of the corporation. common 42,108,496 39,717,777 113,059

 
ATTACHMENT TO ARTICLES OF AMENDMENT OF CENTRAL PACIFIC FINANCIAL CORP. The definition of “Expiration Date” in Section 1 of Article XI of the Restated Articles of Incorporation of Central Pacific Financial Corp. (the “Corporation”), as amended, is hereby amended in its entirety to read as follows: ““Expiration Date” means the earliest of (i) the Close of Business on the date that is the fifth (5th) anniversary of May 2, 2011, (ii) such time as the Board determines, in its sole discretion, that this Article XI is no longer necessary for the preservation of existence of the Tax Benefits and (iii) a date on which the Board determines, in its sole discretion, that this Article XI is no longer in the best interests of the Corporation and its shareholders;”

 
~ www.8USINEssREOISTRAT10NS.COM FORM DC-7 '- 111111111~i1iii1m 111; STATE OF HAWAII FILED 06/24/2025 12:15 PM Business Registration Division DEPT. OF COMMERCE AND CONSUMER AFFAIRS DEPARTMENT OF COMMERCE AND CONSUMER AFFAIRS Business Registration Division 335 Merchant Street State of Hawaii Mailing Address: P.O. Box 40, Honolulu, Hawaii 96810 Phone No. (808) 586-2727 STATEMENT OF CANCELLATION OF ACQUIRED SHARES (Sedlan-41-4-102, Hawaii RNIGCI &atutelJ PLEASE TYPE OR PRINT LEG/BLY IN BLACK INK The undersigned, duly authorized officer of the corporation submitting this Statement. certifies as follows: 1. The name of the corporation is: CENTRAL PACIFIC FINANCIAL CORP. 2. The total number of shares the corporation is authorized to issue ts: CLASS/SERIES NUMBER OF SHARES See Attachment 3. The number of acquired shares cancelled is: CLASS/SERIES NUMBER OF SHARES See Attachment 4. The total number of authorized sharas remaining after the reduc1ion of the shares is: CLASS/SERIES NUMBER OF SHARES See Attachment 50136D1 The undersigned certifies under the penalties of Section 414-20, Hawaii Revised Statutes, that the undersigned has read the above statements, I/We are authorized to make this change, and that the statements are true and correc1. Signed this _2_4 ___ day of June 2025 Ian Tanaka, Senior Vice President (T~ Name & TIO.) SEE INSTRUCTIONS ON REVERSE SIDE. The articles must be signed by at least one officer of the corporation. m 1/1 -0 0 -~

 
Attachment to STATEMENT OF CANCELLATION OF ACQUIRED SHARES Corporation: Central Pacific Financial Corp. 2. The total number of shares, itemized by class and series, that the corporation is authorized to issue is: Class/Series Number of Shares Common Stock 185.000.000 Preferred Stock - No Par Value 265,000 Junior Participating Preferred Stock, Series A 500,000 Fixed Rate Cumulative Perpetual Preferred Stock 135,000 Junior Particioatim! Preferred Stock, Series C 100.000 3. The number of acquired shares, itemized by class and series, cancelled is: Class/Series Number of Shares Common Stock 0 Preferred Stock - No Par Value 0 Junior Participating Preferred Stock. Series A 500,000 Fixed Rate Cumulative Perpetual Preferred Stock 135,000 Junior Participating Preferred Stock, Series C I 00,000 4. The total number of authorized shares, itemized by class and series, remaining after the reduction of the shares is: Class/Series Number of Shares* Common Stock 185.000,000 Preferred Stock - No Par Value 1.000,000 Junior Participating Preferred Stock, Series A 0 Fixed Rate Cumulative Peroetual Preferred Stock 0 Junior Participating Preferred Stock. Series C 0 Note: Pursuant to the Corporation's Restated Articles of Incorporation, as amended, all shares of Junior Participating Preferred Stock, Series A, Fixed Rate Cumulative Perpetual Preferred Stock, and Junior Participating Preferred Stock, Series C, shall upon their cancellation become authorized but unissued shares of Preferred Stock and may be reissued as part of a new series of the Preferred Stock subject to the conditions and restrictions on issuance set forth in the Restated Articles of Incorporation or in any Statement of Designation creating a series of Preferred Stock. 403648465.2 ... 8 ... ~

 
EX-31.1 3 exhibit311-q22025063025.htm EX-31.1 Document

Exhibit 31.1

Rule 13a-14(a) Certification of Chief Executive Officer in
Accordance with Section 302 of the Sarbanes-Oxley Act of 2002

I, Arnold D. Martines, President and Chief Executive Officer of Central Pacific Financial Corp. (the “Company”), certify that:

(1)I have reviewed this quarterly report on Form 10-Q of the Company;

(2)Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

(3)Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the Company as of, and for, the periods presented in this quarterly report;

(4)The Company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(e)) for the Company and we have:

(a)designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision to ensure that material information relating to the Company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

(b)designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)evaluated the effectiveness of the Company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this quarterly report based on such evaluation; and

(d)disclosed in this quarterly report any change in the Company’s internal control over financial reporting that occurred during the Company’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting; and

(5)The Company’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Company’s auditors and the audit committee of the Company’s board of directors (or persons performing the equivalent functions):

(a)all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Company’s ability to record, process, summarize and report financial information; and

(b)any fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s internal control over financial reporting.


Date: August 5, 2025 /s/ Arnold D. Martines
  Arnold D. Martines
  Chairman,
President and Chief Executive Officer
(Principal Executive Officer)


EX-31.2 4 exhibit312-q22025063025.htm EX-31.2 Document

Exhibit 31.2

Rule 13a-14(a) Certification of Chief Financial Officer in
Accordance with Section 302 of the Sarbanes-Oxley Act of 2002

I, David S. Morimoto, Senior Executive Vice President and Chief Financial Officer of Central Pacific Financial Corp. (the “Company”), certify that:

(1)I have reviewed this quarterly report on Form 10-Q of the Company;

(2)Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

(3)Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the Company as of, and for, the periods presented in this quarterly report;

(4)The Company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(e)) for the Company and we have:
 
(a)designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision to ensure that material information relating to the Company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

(b)designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)evaluated the effectiveness of the Company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this quarterly report based on such evaluation; and

(d)disclosed in this quarterly report any change in the Company’s internal control over financial reporting that occurred during the Company’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting; and

(5)The Company’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Company’s auditors and the audit committee of the Company’s board of directors (or persons performing the equivalent functions):

(a)all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Company’s ability to record, process, summarize and report financial information; and

(b)any fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s internal control over financial reporting.


Date: August 5, 2025 /s/ Dayna N. Matsumoto
  Dayna N. Matsumoto
  Executive Vice President and Chief Financial Officer
  (Principal Financial and Accounting Officer)


EX-32.1 5 exhibit321-q22025063025.htm EX-32.1 Document

Exhibit 32.1

Section 1350 Certification of Chief Executive Officer in
Accordance with Section 906 of the Sarbanes-Oxley Act of 2002

In connection with the Quarterly Report of Central Pacific Financial Corp. (the “Company”) on Form 10-Q for the period ended June 30, 2025 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Arnold D. Martines, President and Chief Executive Officer, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

(1)The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)The information contained in the Report fairly presents, in all material aspects, the financial condition and results of operations of the Company.


Date: August 5, 2025 /s/ Arnold D. Martines
  Arnold D. Martines
  Chairman,
President and Chief Executive Officer
(Principal Executive Officer)

A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

This certification accompanies the Report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not be deemed filed by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.
EX-32.2 6 exhibit322-q22025063025.htm EX-32.2 Document

Exhibit 32.2

Section 1350 Certification of Chief Financial Officer in
Accordance with Section 906 of the Sarbanes-Oxley Act of 2002

In connection with the Quarterly Report of Central Pacific Financial Corp. (the “Company”) on Form 10-Q for the period ended June 30, 2025 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, David S. Morimoto, Senior Executive Vice President and Chief Financial Officer, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

(1)The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)The information contained in the Report fairly presents, in all material aspects, the financial condition and results of operations of the Company.


Date: August 5, 2025 /s/ Dayna N. Matsumoto
  Dayna N. Matsumoto
  Executive Vice President and Chief Financial Officer
  (Principal Financial and Accounting Officer)

A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

This certification accompanies the Report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not be deemed filed by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.