Central Pacific Financial Corporation

10/28/2026 | Press release | Distributed by Public on 10/28/2026 13:38

Quarterly Report for Quarter Ending September 30, 2026 (Form 10-Q)

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 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, payment or nonpayment of dividends, net interest income, capital levels, credit losses, net interest margin, liquidity, and 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 strategies, use of capital, products or services, technology initiatives, acquisitions, and regulatory developments or actions; (iii) statements concerning future economic performance and anticipated results from our business initiatives and strategic objectives; and (iv) statements regarding assumptions underlying or relating to any of the foregoing.
Words such as "believe," "plan," "anticipate," "aim," "seek," "expect," "intend," "forecast," "hope," "target," "continue," "remain," "estimate," "will," "should," "may," "could," "would," and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain such identifying words.
While we believe that our forward-looking statements and the assumptions underlying them are reasonable, such statements are inherently subject to significant risks and uncertainties that are difficult to predict and are beyond our control. Actual results may differ materially from those expressed or implied by such forward-looking statements as a result of numerous factors, including, but are not limited to:
•the persistence or resurgence of current inflationary pressures in the United States and our market areas, and their effect on market interest rates, economic conditions, and credit quality;
•the impact of the current U.S. administration's economic policies, including potential international tariffs, geopolitical instability, trade tensions, fiscal policy changes, cost-cutting, and other governmental initiatives;
•disruptions in the economy, including the effects of government shutdown(s) and supply chain disruptions;
•labor contract disputes, and potential strikes impacting both the U.S. National and Hawaii economies;
•adverse trends in the real estate or construction industries, including rising inventory levels or declining property values;
•deterioration in borrowers' financial performance leading to increased loan delinquencies, asset quality issues, or loan losses;
•the impact of local, national, and international economies and natural disasters (such as wildfires, volcanic eruptions, hurricanes, tsunamis, storms, floods, or earthquakes) on our markets and major industries within Hawaii;
•weakness in domestic economic conditions, including higher unemployment levels, instability in the financial industry, deterioration in the real estate markets, and declines in consumer or business confidence;
•revisions to estimates of reserve requirements under applicable regulatory and accounting standards;
•the adverse effects of bank failures on customer confidence, deposit behavior, liquidity, and regulatory responses;
•the adverse effects of pandemics, epidemics, and other public health emergencies, including their impact on Hawaii's tourism and construction sectors, and on our borrowers, customers, vendors, and employees;
•the impact of legislative and regulatory developments, changing capital and consumer protection rules, and new regulations affecting our operations and competitiveness;
•the costs and effects of legal and regulatory proceedings, including actual or threatened litigation and the results of governmental and regulatory examinations and orders, as well as the costs of ongoing or potential compliance efforts;
•the effect of accounting standard changes adopted by regulatory agencies, the Securities and Exchange Commission ("SEC"), the Public Company Accounting Oversight Board ("PCAOB"), or the Financial Accounting Standards Board ("FASB"), and the cost and resources associated with implementation;
•changes in trade, tariff, monetary, or fiscal policies and laws, including actions by the Board of Governors of the Federal Reserve System;
•increased competition from banks, credit unions, fintech companies, nonbank lenders, and other financial service providers;
•market volatility and monetary fluctuations;
•declines in our market capitalization or changes in the price of the Company's common stock;
•the effects and cost of acquisitions, dispositions, strategic investments, business combinations, restructurings, or other strategic transactions we may pursue or evaluate;
•political instability, acts of war or terrorism, or other geopolitical conflicts;
•shifts in consumer spending, borrowing and savings behaviors;
•technological changes and developments;
•cybersecurity incidents, data privacy breaches, or fraud involving us or third-party vendors;
•deficiencies in our internal control over financial reporting or disclosure controls and procedures, and our ability to remediate them;
•our ability to achieve efficiency ratio improvement goals;
•changes in management, directors, key personnel, organizational structure, compensation programs, employee benefit plans, or our ability to attract and retain qualified personnel;
•risks related to the United States fiscal debt, deficit and budget uncertainties; and
•our ability to successfully manage the risks associated with any of 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 Form 10-K for the last fiscal year, respectively, and in particular, the discussion of "Risk Factors" set forth herein and therein. 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.
General
Central Pacific Financial Corp. ("CPF"), a Hawaii corporation and registered bank holding company under the Bank Holding Company Act of 1956, as amended (the "BHC Act"), was organized on February 1, 1982. CPF serves as the bank holding company for its principal subsidiary, Central Pacific Bank, which was incorporated in its present form in the State of Hawaii on March 16, 1982, following a holding company reorganization. The Bank's predecessor entity was originally incorporated in the State of Hawaii on January 15, 1954.
CPF reports financial results on a fiscal year ending December 31 and operates as a single reportable segment: banking operations.
Throughout this document, "Central Pacific Bank" is referred to as "our Bank" or "the Bank," and "the Company," "we," "us," or "our," refers to Central Pacific Financial Corp. on a consolidated basis, including the Bank and other consolidated subsidiaries.
As of September 30, 2026, Central Pacific Bank operated 27 branches and 56 ATMs across the State of Hawaii, offering full-service community banking.
Central Pacific Bank was founded by World War II veterans who, despite returning home as war heroes, faced limited banking opportunities in Hawaii. In response, they established the Bank to serve individuals and small businesses that lacked access to financial services at the time. This legacy continues to guide our commitment to creating opportunities and servicing our community through exceptional customer service and tailored financial products that meet the evolving needs of our customers, including:
•Loans: The Company's loan portfolio includes commercial and industrial loans, commercial mortgages, and construction loans to small and medium-sized businesses, professionals, and real estate investors and developers. The Company also offers residential mortgages, home equity loans, and consumer loans to individuals. Lending activities represent a core source of interest income, which is a key driver of our overall revenue. The Company aims to maintain a strong and diversified loan portfolio, primarily in Hawaii, with selective expansion into mainland markets.
•Deposits: The Company offers a comprehensive suite of deposit products and services including checking, savings, and time deposit accounts, as well as cash management solutions and digital banking capabilities. The Company's extensive branch and ATM network across the State of Hawaii supports convenient access for its customers. The interest paid on deposits is a key component of interest expense, which significantly influences overall earnings. In addition, fees and service charges on deposit accounts, along with card interchange income contribute meaningfully to other operating revenue.
•Wealth Management: The Company offers non-deposit investment products, annuities, investment management, trust custody, estate planning, and financial advisory services.
Our foundational principles are based on continuing to be a leading bank for small businesses, and a professional and reliable resource to meet Hawaii's housing needs. To drive growth, diversify our balance sheet, and strengthen resilience, we also focus on markets and niche segments that differentiate our Bank, which includes strategic partnerships with financial institutions in Japan and Korea.
Basis of Presentation
This Management's Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the accompanying unaudited consolidated financial statements under "Part I, Item 1. Financial Statements." 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, 2025 filed with the U.S. Securities and Exchange Commission (the "SEC") on February 27, 2026, including the "Risk Factors" disclosed 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 management to make certain judgments, estimates and assumptions that affect reported amounts and disclosures. Actual results may differ from these estimates, and such differences could be material to the financial statements.
Accounting estimates are deemed critical when a different estimate could reasonably have been used, or where changes in the estimate are reasonably likely to occur from period-to-period and would materially impact the consolidated financial statements as of or for the periods presented. Management has reviewed the development and selection of the critical accounting estimates and disclosures noted below with the Audit Committee of the Board of Directors.
Management determined the allowance for credit losses ("ACL") on loans is a critical accounting policy as of September 30, 2026 and December 31, 2025. This policy requires significant judgment and involves inherent complexity. Additional information regarding this policy is provided in Note 1 - Summary of Significant Accounting Policies included in the accompanying notes to the consolidated financial statements, as well as in Note 1 and the section titled "Critical Accounting Policies and Use of Estimates" within Management's Discussion and Analysis of Financial Condition and Operating Results in the Company's 2025 Annual Report on Form 10-K.
Executive Overview
The Company reported net income of $22.8 million, or $0.88 per diluted share for the three months ended September 30, 2026, compared to net income of $18.6 million, or $0.69 per diluted share for the same period of 2025. Net income for the nine months ended September 30, 2026 was $64.3 million, or $2.46 per diluted share, compared to net income of $54.6 million, or $2.01 per diluted share for the nine months ended September 30, 2025.
During the three months ended September 30, 2026, the Company recorded a provision for credit losses of $1.9 million, compared to a provision of $4.2 million during the same period of 2025. The provision for credit losses for the three months ended September 30, 2026 included a provision for credit losses on loans of $1.9 million, offset by a credit to the reserve for off-balance sheet credit exposures of $37 thousand. The provision for credit losses for the same period of 2025 included a provision for credit losses on loans of $3.4 million, and an increase to the reserve for off-balance sheet credit exposures of $0.7 million.
The decrease in the provision for credit losses in the three months ended September 30, 2026, compared to the same period of 2025 was primarily driven by lower reserve requirements resulting from changes in portfolio composition and loan-level credit
characteristics. The decrease was also consistent with improved credit quality indicators, including lower nonaccrual loan balances. These favorable factors were partially offset by qualitative reserve requirements related to problem loan trends, and other portfolio-specific risks.
During the nine months ended September 30, 2026, the Company recorded a provision for credit losses of $8.6 million, compared to a provision of $13.3 million during the same period of 2025. The provision for credit losses for the nine months ended September 30, 2026 included a provision for credit losses on loans of $8.0 million, and an increase to the reserve for off-balance sheet credit exposures of $0.7 million. The provision for credit losses for the same period of 2025 included a provision for credit losses on loans of $11.2 million, and an increase to the reserve for off-balance sheet credit exposures of $2.2 million.
The decrease in the provision for credit losses in the nine months ended September 30, 2026, compared to the same period of 2025 was primarily driven by decreases in loans and net charge-offs. These decreases were partially offset by the continued application of qualitative reserves to address forecast uncertainty and certain portfolio-specific credit risks.
Three Months Ended September 30, Nine Months Ended September 30,
2026 2025 2026 2025
Return on average assets 1.22 % 1.01 % 1.15 % 0.99 %
Return on average shareholders' equity 15.28 12.89 14.37 12.99
Basic earnings per share $ 0.89 $ 0.69 $ 2.48 $ 2.02
Diluted earnings per share 0.88 0.69 2.46 2.01
Non-GAAP Financial Measures
To supplement its consolidated financial information, the Company utilizes certain non-GAAP financial measures. These measures are not intended to be considered in isolation or as a substitute for comparable GAAP results. The Company believes these non-GAAP financial measures provide meaningful insight to investors and other stakeholders in understanding its financial performance and position, by excluding certain transactions that may be non-recurring, non-operational, or not indicative of ongoing results. The Company also believes that these non-GAAP measures offer a useful perspective for evaluating performance trends over time and are intended to support period-to-period comparisons. In addition, the Company believes they are valuable tools for both investors and management in assessing historical results and forecasting future performance. Non-GAAP financial measures may not be comparable to similarly titled measures reported by other companies. The results for the three and nine months ended September 30, 2026 were not materially impacted by items outside of the normal course of business.
The following reconciling adjustment from GAAP to non-GAAP adjusted financial measures include a net pre-tax expenses of $1.5 million related to the consolidation of the Company's former operations center into its main office during the three months ended September 30, 2025.
Management does not consider this transaction to be representative of the Company's core operating performance. The related income tax effect was calculated using an assumed effective tax rate of 23%.
Three Months Ended September 30, Nine Months Ended September 30,
(Dollars in thousands, except per share data) 2026 2025 2026 2025
Financial Measures:
Net income $ 22,776 $ 18,574 $ 64,323 $ 54,605
Diluted earnings per share $ 0.88 $ 0.69 $ 2.46 $ 2.01
Return on average assets 1.22 % 1.01 % 1.15 % 0.99 %
Return on average shareholders' equity 15.28 % 12.89 % 14.37 % 12.99 %
Efficiency ratio (non-GAAP) 58.27 % 62.84 % 59.25 % 61.47 %
As of September 30, 2026 and 2025:
Tangible common equity ratio (non-GAAP) 7.80 % 7.92 %
Three Months Ended September 30, Nine Months Ended September 30,
(Dollars in thousands, except per share data) 2026 2025 2026 2025
Adjusted Financial Measures (Non-GAAP):
Adjusted net income $ 22,776 $ 19,741 $ 64,323 $ 55,772
Adjusted diluted earnings per share $ 0.88 $ 0.73 $ 2.46 $ 2.06
Adjusted return on average assets 1.22 % 1.08 % 1.15 % 1.01 %
Adjusted return on average shareholders' equity 15.28 % 13.67 % 14.37 % 13.25 %
Adjusted efficiency ratio 58.27 % 60.81 % 59.25 % 60.77 %
As of September 30, 2026 and 2025:
Adjusted tangible common equity ratio 7.80 % 7.94 %
Adjusted Net Income and Diluted Earnings per Share
The following table presents a reconciliation of the Company's non-GAAP adjusted net income and adjusted diluted EPS for the periods presented, excluding the reconciling adjustments discussed above:
Three Months Ended September 30, Nine Months Ended September 30,
(Dollars in thousands, except per share data) 2026 2025 2026 2025
GAAP net income $ 22,776 $ 18,574 $ 64,323 $ 54,605
Add: Expenses related to the consolidation of the Operations Center - 1,516 - 1,516
Non-GAAP pre-tax adjustments - 1,516 - 1,516
Less: Income tax effects (assumes 23% ETR) - (349) - (349)
Non-GAAP adjustments, net of tax
- 1,167 - 1,167
Adjusted net income (non-GAAP) $ 22,776 $ 19,741 $ 64,323 $ 55,772
Diluted weighted average shares outstanding 25,817,417 27,083,280 26,111,724 27,118,824
GAAP diluted EPS $ 0.88 $ 0.69 $ 2.46 $ 2.01
Add: Non-GAAP adjustments, net of tax - 0.04 - 0.05
Adjusted diluted EPS (non-GAAP) $ 0.88 $ 0.73 $ 2.46 $ 2.06
Adjusted Return on Average Assets and Adjusted Return on Average Shareholders' Equity
The following table presents a calculation of the Company's non-GAAP adjusted ROA and adjusted ROE for the periods presented, excluding the reconciling adjustments discussed above:
Three Months Ended September 30, Nine Months Ended September 30,
(Dollars in thousands) 2026 2025 2026 2025
Average assets $ 7,463,644 $ 7,341,281 $ 7,431,431 $ 7,347,895
Add: Non-GAAP adjustments, net of tax - 1,167 - 389
Adjusted average assets (non-GAAP) $ 7,463,644 $ 7,342,448 $ 7,431,431 $ 7,348,284
ROA (GAAP net income divided by average assets) 1.22 % 1.01 % 1.15 % 0.99 %
Add: Non-GAAP adjustments, net of tax - 0.07 - 0.02
Adjusted ROA (non-GAAP) 1.22 % 1.08 % 1.15 % 1.01 %
Average shareholders' equity $ 596,147 $ 576,531 $ 596,655 $ 560,671
Add: Non-GAAP adjustments, net of tax - 1,167 - 389
Adjusted average shareholders' equity (non-GAAP) $ 596,147 $ 577,698 $ 596,655 $ 561,060
ROE (GAAP net income divided by average shareholders' equity) 15.28 % 12.89 % 14.37 % 12.99 %
Add: Non-GAAP adjustments, net of tax - 0.78 - 0.26
Adjusted ROE (non-GAAP) 15.28 % 13.67 % 14.37 % 13.25 %
Efficiency Ratio
A key measure of operating efficiency monitored by the Company is the efficiency ratio, which is derived from GAAP-based amounts. It is calculated by dividing total other operating expenses by total pre-provision revenue (defined as net interest income plus total other operating income). The Company believes that the efficiency ratio, a non-GAAP financial measure, provides a useful supplemental metric that enhances understanding of its business performance and operating efficiency. The following table presents the Company's efficiency ratio for the periods presented:
Three Months Ended September 30, Nine Months Ended September 30,
(Dollars in thousands) 2026 2025 2026 2025
Total other operating expense $ 44,770 $ 47,009 $ 134,616 $ 133,027
Less: Expenses related to the consolidation of the Operations Center - (1,516) - (1,516)
Non-GAAP pre-tax adjustments - (1,516) - (1,516)
Adjusted total other operating expense (non-GAAP) $ 44,770 $ 45,493 $ 134,616 $ 131,511
Net interest income $ 64,473 $ 61,301 $ 188,665 $ 178,796
Total other operating income 12,357 13,507 38,551 37,616
Total revenue $ 76,830 $ 74,808 $ 227,216 $ 216,412
Efficiency ratio (non-GAAP) 58.27 % 62.84 % 59.25 % 61.47 %
Less: Non-GAAP pre-tax adjustments - (2.03) - (0.70)
Adjusted efficiency ratio (non-GAAP) 58.27 % 60.81 % 59.25 % 60.77 %
Tangible Common Equity Ratio
The tangible common equity ("TCE") ratio, a non-GAAP financial measure, is calculated by dividing tangible common equity by tangible assets. The following table presents the Company's TCE ratio and adjusted TCE ratio as of the dates presented:
(Dollars in thousands) September 30, 2026 September 30, 2025
Total equity $ 581,437 $ 588,066
Less: Intangible assets - -
TCE $ 581,437 588,066
Add: Non-GAAP adjustments, net of tax - 1,167
Adjusted TCE (non-GAAP) $ 581,437 $ 589,233
Total assets $ 7,449,610 $ 7,421,478
Less: Intangible assets - -
Tangible assets $ 7,449,610 7,421,478
Add: Non-GAAP adjustments, net of tax - 1,167
Adjusted tangible assets (non-GAAP) $ 7,449,610 $ 7,422,645
TCE ratio (non-GAAP) 7.80 % 7.92 %
Add: Non-GAAP adjustments, net of tax - 0.02
Adjusted TCE ratio (non-GAAP) 7.80 % 7.94 %
Material Trends
Our operations are primarily concentrated in the State of Hawaii, making our performance highly sensitive to local economic, environmental, and industry-specific conditions - particularly those affecting real estate, tourism, and broader macroeconomic trends. A favorable business climate in Hawaii is typically characterized by expanding gross state product, low unemployment and rising personal income, while an unfavorable climate reflects the opposite.
Labor Market and Economic Indicators
The Hawaii State Department of Business, Economic Development and Tourism ("DBEDT") reported that Hawaii's seasonally adjusted unemployment rate was 2.8% in September 2026, higher than 2.2% in December 2025, but well below the national seasonally adjusted unemployment rate of 4.2%. University of Hawaii Economic Research Organization ("UHERO") forecasts Hawaii's seasonally adjusted unemployment rate to remain relatively steady at 2.5% for the full year 2026.
According to UHERO, inflation is expected to average 4.8% in 2026 before falling to 3.3% in 2027, driven by the impact of high oil prices due to the U.S. conflict with Iran. UHERO expects, Hawaii's Real GDP to grow 0.5% this year which has slowed due to the impact of oil prices and an unusually active storm season.
Construction remains a significant contributor to the economy through large federal military projects, the Honolulu Skyline rail project, and private condominium development.
Real Estate Market
Real estate lending, particularly residential and commercial mortgage loans, is a core focus of the Company. Consequently, our performance is closely tied to the health of Hawaii's real estate market. Despite mixed results, Hawaii's housing market remained resilient in the nine months ended September 30, 2026. According to the Honolulu Board of Realtors, sales of Oahu single-family homes rose 6.2%, while Oahu condominium sales fell 8.1 % for the nine months ended September 30, 2026, compared to the same period of 2025. The median sale price of Oahu single-family homes stayed relatively flat at $1.2 million in the nine months ended September 30, 2026, compared to $1.1 million in the same period of 2025. The median sale price of Oahu condominiums increased by 2.0% to $515,000 in the nine months ended September 30, 2026, compared to $505,000 in the same period of 2025.
Tourism Trends
According to preliminary data from the DBEDT, 6.69 million visitors arrived in the Hawaiian Islands during the eight months ended August 31, 2026, an increase of 1.8% from 6.57 million visitors during the same period of 2025. Visitor arrivals from Japan are modestly improving with a 0.8% increase year-over-year. Visitor spending totaled $15.21 billion in the eight months ended August 31, 2026, up 4.1% from $14.62 billion in the same period of 2025.
While tourism has performed reasonably well through the start of the year, UHERO's September 2026 report anticipates tourism levels to face headwinds with surging fuel costs and the impact of multiple storms. Tourism from international markets continues to face challenges due to tariff disputes, exchange rate movements, and cross-border tensions.
Interest Rate Environment
Changes in monetary policy, including interest rate adjustments, can significantly influence interest income on loans and investment securities, interest expense on deposits and borrowings, loan origination and deposit growth, and the fair value of assets and liabilities, among other areas.
Throughout the first eight months of 2026, the FOMC maintained the target range for the federal funds rate at 3.50% to 3.75%. While economic activity continued to expand at a solid pace, inflation remained above the Federal Reserve's target and uncertainty surrounding the economic outlook persisted. At its September 16, 2026 meeting, the FOMC increased the target range for the federal funds rate by 25 bps to 3.75% to 4.00%, citing elevated inflation, resilient domestic spending, strong productivity growth, robust capital investment, and a stable labor market. The Committee also indicated that additional rate increases may be warranted depending on future economic conditions and inflation trends.
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 nine months ended September 30, 2026 and 2025 is presented below. Net interest margin is calculated as annualized net interest income, adjusted to a taxable-equivalent basis using a federal statutory tax rate of 21%, expressed as a percentage of average interest-earning assets.
(Dollars in thousands) Three Months Ended September 30,
2026 2025 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 $ 272,554 3.72 % $ 2,558 $ 167,247 4.41 % $ 1,857 $ 105,307 (0.69) % $ 701
Investment securities:
Taxable (1)
1,376,837 2.98 10,277 1,348,314 2.90 9,776 28,523 0.08 501
Tax-exempt (1) (2)
134,512 2.56 867 138,470 2.59 898 (3,958) (0.03) (31)
Total investment securities 1,511,349 2.94 11,144 1,486,784 2.87 10,674 24,565 0.07 470
Loans, including loans held for sale (3)
5,297,112 5.01 66,695 5,332,656 5.01 67,222 (35,544) - (527)
FRB and FHLB stock 24,792 6.66 413 25,066 6.30 395 (274) 0.36 18
Total interest earning assets 7,105,807 4.52 80,810 7,011,753 4.55 80,148 94,054 (0.03) 662
Noninterest-earning assets 357,837 329,528 28,309
Total assets $ 7,463,644 $ 7,341,281 $ 122,363
Liabilities and Equity
Interest-bearing liabilities:
Interest-bearing demand deposits $ 1,444,639 0.21 % $ 765 $ 1,358,837 0.14 % $ 490 $ 85,802 0.07 % $ 275
Savings and money market deposits 2,406,350 1.32 8,009 2,293,452 1.54 8,898 112,898 (0.22) (889)
Time deposits up to $250,000 404,823 2.05 2,096 437,192 2.28 2,509 (32,369) (0.23) (413)
Time deposits over $250,000 565,681 2.95 4,212 586,251 3.32 4,901 (20,570) (0.37) (689)
Total interest-bearing deposits 4,821,493 1.24 15,082 4,675,732 1.43 16,798 145,761 (0.19) (1,716)
FHLB advances and other short-term borrowings 54 4.20 1 - - - 54 4.20 1
Long-term debt 76,547 5.55 1,072 131,493 5.61 1,860 (54,946) (0.06) (788)
Total interest-bearing liabilities 4,898,094 1.31 16,155 4,807,225 1.54 18,658 90,869 (0.23) (2,503)
Noninterest-bearing deposits 1,841,557 1,833,960 7,597
Other liabilities 127,846 123,565 4,281
Total liabilities 6,867,497 6,764,750 102,747
Total equity 596,147 576,531 19,616
Total liabilities and equity $ 7,463,644 $ 7,341,281 $ 122,363
Net interest income (taxable-equivalent) 64,655 61,490 3,165
Taxable-equivalent adjustment (2)
(182) (189) 7
Net interest income (GAAP) $ 64,473 $ 61,301 $ 3,172
Interest rate spread 3.21 % 3.01 % 0.20 %
Net interest margin (taxable-equivalent) (4)
3.62 % 3.49 % 0.13 %
(1) At amortized cost.
(2) Interest income and resultant yield information for tax-exempt investment securities is expressed on a taxable-equivalent basis using a federal statutory tax rate of 21%.
(3) Includes nonaccrual loans.
(4) Annualized net interest income and expense in the NIM calculation are based on the day count interest payment conventions at the interest-earning asset or interest-bearing liability level (i.e. 30/360, actual/actual, actual/360).
(Dollars in thousands) Nine Months Ended September 30,
2026 2025 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 $ 267,004 3.70 % $ 7,389 $ 169,066 4.42 % $ 5,595 $ 97,938 (0.72) % $ 1,794
Investment securities:
Taxable (1)
1,352,766 2.88 29,219 1,367,968 2.87 29,448 (15,202) 0.01 (229)
Tax-exempt (1) (2)
134,995 2.56 2,596 139,050 2.58 2,691 (4,055) (0.02) (95)
Total investment securities 1,487,761 2.85 31,815 1,507,018 2.84 32,139 (19,257) 0.01 (324)
Loans, including loans held for sale (3)
5,288,952 4.97 196,571 5,317,481 4.95 197,009 (28,529) 0.02 (438)
FRB and FHLB stock 24,887 6.34 1,183 23,392 6.31 1,107 1,495 0.03 76
Total interest earning assets 7,068,604 4.48 236,958 7,016,957 4.49 235,850 51,647 (0.01) 1,108
Noninterest-earning assets 362,827 330,938 31,889
Total assets $ 7,431,431 $ 7,347,895 $ 83,536
Liabilities and Equity
Interest-bearing liabilities:
Interest-bearing demand deposits $ 1,431,951 0.19 % $ 2,044 $ 1,357,095 0.14 % $ 1,385 $ 74,856 0.05 % $ 659
Savings and money market deposits 2,381,708 1.29 23,065 2,304,708 1.52 26,174 77,000 (0.23) (3,109)
Time deposits up to $250,000 421,967 2.13 6,717 444,726 2.37 7,887 (22,759) (0.24) (1,170)
Time deposits over $250,000 561,642 3.03 12,744 597,876 3.41 15,246 (36,234) (0.38) (2,502)
Total interest-bearing deposits 4,797,268 1.24 44,570 4,704,405 1.44 50,692 92,863 (0.20) (6,122)
FHLB advances and other short-term borrowings 18 4.20 1 - - - 18 4.20 1
Long-term debt 76,547 5.55 3,177 138,298 5.60 5,797 (61,751) (0.05) (2,620)
Total interest-bearing liabilities 4,873,833 1.31 47,748 4,842,703 1.56 56,489 31,130 (0.25) (8,741)
Noninterest-bearing deposits 1,831,764 1,820,158 11,606
Other liabilities 129,179 124,363 4,816
Total liabilities 6,834,776 6,787,224 47,552
Total equity 596,655 560,671 35,984
Total liabilities and equity $ 7,431,431 $ 7,347,895 $ 83,536
Net interest income (taxable-equivalent) 189,210 179,361 9,849
Taxable-equivalent adjustment (2)
(545) (565) 20
Net interest income (GAAP) $ 188,665 $ 178,796 $ 9,869
Interest rate spread 3.17 % 2.93 % 0.24 %
Net interest margin (taxable-equivalent) (4)
3.57 % 3.41 % 0.16 %
(1) At amortized cost.
(2) Includes taxable-equivalent adjustment using a federal statutory tax rate of 21%.
(3) Includes nonaccrual loans.
(4) Annualized net interest income and expense in the NIM calculation are based on the day count interest payment conventions at the interest-earning asset or interest-bearing liability level (i.e. 30/360, actual/actual, actual/360).
Net interest margin was 3.62% for the third quarter of 2026, an increase of 13 bps from 3.49% for the same quarter of 2025. Net interest margin was 3.57% for the nine months ended September 30, 2026, an increase of 16 bps from 3.41% in the same period of 2025.
The increase in net interest margin ("NIM") for the three months ended September 30, 2026 was primarily attributable to lower funding costs of 23 bps, reflecting declines in rates paid on interest-bearing deposits of 19 bps and lower interest expense on
long-term debt. Deposit costs benefited from the repricing of interest-bearing deposit accounts and maturing time deposits at lower rates compared to the prior year period. In addition, the payoff of long-term debt and lower rates on the remaining balances reduced borrowing costs. While earning-asset yields remained relatively stable compared to the prior year, the reduction in funding costs more than offset the modest decline in asset yields, resulting in an expansion of net interest margin.
The increase in NIM for the nine months ended September 30, 2026 was also primarily driven by lower funding costs of 25 bps, reflecting declines in rates paid on interest-bearing deposits of 20 bps and reduced interest expense on long-term debt. Deposit repricing throughout 2026 allowed the Company to lower rates on certain deposit products as higher-cost balances matured or repriced, while the payoff of long-term debt further reduced interest expense. Earning-asset yields were generally stable compared to the prior year period as the increases in average yields earned on investment securities of 1 bp and loans of 2 bp was partially offset by the 72 bp decline in average yields earned on interest-bearing deposits in other financial institutions. Therefore the improvement in NIM was driven predominantly by the reduction in the overall cost of funds.
Rate-Volume Analysis
For each category of interest-earning assets and interest-bearing liabilities, changes in interest income or expense are analyzed based on two factors: (i) changes in average balances (volume) and (ii) changes in weighted average interest rates (rate). The change in volume is calculated by multiplying the change in average balance by the prior period's average yield or rate. The change in rate is calculated by multiplying the change in average yield or rate by current period's average balance. Any residual change in interest income or expense not solely attributable to volume or rate is allocated proportionately between the two factors.
Three Months Ended September 30, 2026
Compared To September 30, 2025 		Nine Months Ended September 30, 2026
Compared To September 30, 2025
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 $ 1,168 $ (467) $ 701 $ 3,239 $ (1,445) $ 1,794
Investment securities:
Taxable (1)
215 286 501 (329) 100 (229)
Tax-exempt (1) (2)
(22) (9) (31) (76) (19) (95)
Total investment securities 193 277 470 (405) 81 (324)
Loans, including loans held for sale (3)
(527) - (527) (1,157) 719 (438)
FRB and FHLB stock (4) 22 18 70 6 76
Total interest earning assets 830 (168) 662 1,747 (639) 1,108
Interest-bearing liabilities:
Interest-bearing demand deposits 29 246 275 85 574 659
Savings and money market deposits 435 (1,324) (889) 899 (4,008) (3,109)
Time deposits up to $250,000 (183) (230) (413) (407) (763) (1,170)
Time deposits over $250,000 (170) (519) (689) (917) (1,585) (2,502)
Total interest-bearing deposits 111 (1,827) (1,716) (340) (5,782) (6,122)
FHLB advances and other short-term borrowings - 1 1 - 1 1
Long-term debt (777) (11) (788) (2,591) (29) (2,620)
Total interest-bearing liabilities (666) (1,837) (2,503) (2,931) (5,810) (8,741)
Net interest income (taxable-equivalent) $ 1,496 $ 1,669 $ 3,165 $ 4,678 $ 5,171 $ 9,849
(1) At amortized cost.
(2) Interest income and resultant yield information for tax-exempt investment securities is expressed on a taxable-equivalent basis using a federal statutory tax rate of 21%.
(3) Includes nonaccrual loans.
Net interest income (expressed on a taxable-equivalent basis) was $64.7 million for the third quarter of 2026, an increase of $3.2 million, or 5.1% from $61.5 million for the same quarter of 2025. Net interest income (expressed on a taxable-equivalent basis) was $189.2 million for the nine months ended September 30, 2026, an increase of $9.8 million or 5.5% from
$179.4 million for the same period of 2025. The increase for the third quarter of 2026 was primarily driven by the higher average balance on interest-bearing deposits in other financial institutions, and the higher average balance and yield earned on investment securities, combined with the lower average rate paid on interest-bearing deposits and the lower average balance and rate paid on long-term debt. These positive variances were partially offset by the decrease in the average rate earned on interest-bearing deposits in other financial institutions, combined with the decline in the average loan balance.
The increase for the nine months ended September 30, 2026 was primarily driven by the increase in average interest-bearing deposits in other financial institutions, combined with the lower average rate paid on interest-bearing deposits and lower average balance and rate paid on long-term debt. These positive variances were partially offset by the decrease in the average yield earned on interest-bearing deposits in other financial institutions, combined with the lower average investment securities and loan balances.
Other Operating Income
The following tables present components of other operating income for the periods presented:
Three Months Ended September 30,
(Dollars in thousands) 2026 2025 $ Change % Change
Other operating income:
Mortgage banking income $ 548 $ 958 $ (410) -42.8 %
Service charges on deposit accounts 2,450 2,330 120 5.2
Other service charges and fees 6,516 6,472 44 0.7
Income from fiduciary activities 1,614 1,547 67 4.3
Income from bank-owned life insurance 584 1,879 (1,295) -68.9
Net loss on sales of investment securities - (30) 30 -100.0
Other:
Equity in earnings of unconsolidated entities (17) 32 (49) -153.1
Income recovered on previously charged-off loans 9 37 (28) -75.7
Other recoveries 31 27 4 14.8
Unrealized gains on loans held for sale (5) - (5) N.M.
Commissions on sale of checks 155 75 80 106.7
Other 472 180 292 162.2
Total other operating income $ 12,357 $ 13,507 $ (1,150) -8.5
Note: Certain amounts in the prior period financial statements have been reclassified to conform to the presentation of the current period.
Total other operating income for the third quarter of 2026 was $12.4 million, which decreased by $1.2 million, or 8.5%, from $13.5 million in same quarter of 2025. The decrease was primarily due to a decrease in income from bank-owned life insurance ("BOLI") of $1.3 million. The Company has certain company-owned life insurance policies used to hedge market risks associated with its deferred compensation plans, which are tied to the equity markets, therefore, the Company has also recognized offsetting decreases in deferred compensation expense in other operating expenses.
Nine Months Ended September 30,
(Dollars in thousands) 2026 2025 $ Change % Change
Other operating income:
Mortgage banking income $ 1,890 $ 2,299 $ (409) -17.8 %
Service charges on deposit accounts 6,999 6,601 398 6.0
Other service charges and fees 18,635 18,195 440 2.4
Income from fiduciary activities 4,617 4,672 (55) -1.2
Income from bank-owned life insurance 3,982 4,636 (654) -14.1
Net loss on sales of investment securities - (30) 30 -100.0
Other:
Equity in earnings of unconsolidated entities 22 65 (43) -66.2
Income recovered on previously charged-off loans 93 130 (37) -28.5
Other recoveries 78 80 (2) -2.5
Unrealized gains on loans held for sale 2 78 (76) -97.4
Commissions on sale of checks 454 231 223 96.5
Other 1,779 659 1,120 170.0
Total other operating income $ 38,551 $ 37,616 $ 935 2.5
Not meaningful ("N.M.")
Note: Certain amounts in the prior period financial statements have been reclassified to conform to the presentation of the current period.
Total other operating income for the nine months ended September 30, 2026 was $38.6 million, which increased by $0.9 million, or 2.5%, from $37.6 million for the same period of 2025. The increase was primarily due to increases in debit card program extension consideration (included in other operating income-other) of $1.2 million, service charges on deposits accounts of $0.4 million, and other service charges and fees of $0.4 million, partially offset by decreases in BOLI income of $0.7 million, and mortgage banking income of $0.4 million.
Other Operating Expense
The following tables present components of other operating expense for the periods presented:
Three Months Ended September 30,
(Dollars in thousands) 2026 2025 $ Change % Change
Other operating expense:
Salaries and employee benefits $ 24,148 $ 24,749 $ (601) -2.4 %
Net occupancy 4,671 4,598 73 1.6
Computer software 5,025 5,151 (126) -2.4
Legal and professional services 2,825 2,669 156 5.8
Equipment 822 867 (45) -5.2
Advertising 813 730 83 11.4
Communication 983 791 192 24.3
Other:
SERP expense 108 113 (5) -4.4
Foreclosed asset expense 2 - 2 N.M.
Charitable contributions 171 155 16 10.3
FDIC insurance assessment 880 790 90 11.4
Miscellaneous loan expenses 308 160 148 92.5
ATM and debit card expenses 991 1,048 (57) -5.4
Armored car expenses 459 468 (9) -1.9
Entertainment and promotions 440 461 (21) -4.6
Stationery and supplies 181 153 28 18.3
Directors' fees and expenses 312 409 (97) -23.7
Directors' deferred compensation plan expense (283) 397 (680) -171.3
Facility consolidation costs - 1,516 (1,516) -100.0
Loss (gain) on disposal of fixed assets - 3 (3) -100.0
Other 1,914 1,781 133 7.5
Total other operating expense $ 44,770 $ 47,009 $ (2,239) -4.8
Not meaningful ("N.M.")
Note: Certain amounts in the prior period financial statements have been reclassified to conform to the presentation of the current period.
Total other operating expense for the third quarter of 2026 was $44.8 million, which decreased by $2.2 million, or 4.8%, from $47.0 million for the same quarter of 2025, primarily driven by a one-time expense of $1.5 million related to the operations center consolidation in the third quarter of 2025, combined with lower directors' deferred compensation plan expense of $0.7 million and lower salaries and employee benefits of $0.6 million. The lower salaries and employee benefits and directors' deferred compensation plan expense was primarily due to lower deferred compensation expense related to equity market performance.
Nine Months Ended September 30,
(Dollars in thousands) 2026 2025 $ Change % Change
Other operating expense:
Salaries and employee benefits $ 72,605 $ 69,264 $ 3,341 4.8 %
Net occupancy 13,292 13,243 49 0.4
Computer software 15,022 15,185 (163) -1.1
Legal and professional services 7,816 8,340 (524) -6.3
Equipment 2,451 2,899 (448) -15.5
Advertising 2,572 2,449 123 5.0
Communication 2,646 2,725 (79) -2.9
Other:
SERP expense 323 341 (18) -5.3
Foreclosed asset expense 3 - 3 N.M.
Charitable contributions 596 478 118 24.7
FDIC insurance assessment 2,654 2,485 169 6.8
Miscellaneous loan expenses 916 809 107 13.2
ATM and debit card expenses 2,538 2,742 (204) -7.4
Armored car expenses 1,304 1,357 (53) -3.9
Entertainment and promotions 1,431 1,295 136 10.5
Stationery and supplies 595 531 64 12.1
Directors' fees and expenses 934 1,277 (343) -26.9
Directors' deferred compensation plan expense 822 390 432 110.8
Facility consolidation costs - 1,516 (1,516) -100.0
Loss (gain) on disposal of fixed assets - 3 (3) -100.0
Other 6,096 5,698 398 7.0
Total other operating expense $ 134,616 $ 133,027 $ 1,589 1.2
Not meaningful ("N.M.")
Note: Certain amounts in the prior period financial statements have been reclassified to conform to the presentation of the current period.
Total other operating expense for the nine months ended September 30, 2026 was $134.6 million, which increased by $1.6 million, or 1.2%, from $133.0 million for the same period of 2025. The increase was primarily driven by higher salaries and employee benefits of $3.3 million, partially offset by a one-time expense of $1.5 million related to the operations center consolidation in the third quarter of 2025, and decreases in legal and professional services of $0.5 million, equipment expenses of $0.4 million, and directors' fees and expense of $0.3 million. The higher salaries and employee benefits were primarily due to merit increases and higher commissions.
Income Taxes
The Company recorded income tax expense of $7.4 million for the third quarter of 2026, compared to $5.1 million for the same quarter of 2025. For the nine months ended September 30, 2026, the Company recorded income tax expense of $19.7 million, compared to $15.5 million for the same period of 2025. The increases in income tax expense were primarily attributable to higher pre-tax income.
The effective tax rate ("ETR") for the third quarter of 2026 was 24.50%, compared to 21.44% for the same quarter of 2025. For the nine months ended September 30, 2026, the ETR was 23.40%, compared to 22.07% for the same period of 2025. The increases in the Company's effective tax rate were primarily attributable to higher pre-tax income and lower tax-exempt income.
The Company's net deferred tax asset ("DTA"), net of valuation allowance, totaled $31.9 million as of September 30, 2026, compared to $23.6 million as of December 31, 2025. These amounts were included in other assets on the Company's consolidated balance sheets. The increase in net DTA was primarily driven by the decrease in the fair value of the available-for-sale ("AFS") investment portfolio due to the rise in market interest rates.
The valuation allowance on the Company's net DTA totaled $3.4 million and $3.4 million as of September 30, 2026 and June 30, 2026, respectively. The valuation allowance on our net DTA relates to net apportioned net operating loss ("NOL") carryforwards for California state income tax purposes as the state has suspended the use of NOL carryforwards for the tax years 2024 through 2026.
Financial Condition
Total assets were $7.45 billion as of September 30, 2026, an increase of $40.4 million, or 0.5%, from $7.41 billion as of December 31, 2025. The increase was primarily driven by increases in investment securities of $30.8 million, loans of $24.0 million, and net DTA (included in other assets) of $8.3 million.
Investment Securities
Investment securities totaled $1.34 billion as of September 30, 2026, an increase of $30.8 million, or 2.4%, from $1.31 billion as of December 31, 2025. The increase in the investment securities portfolio reflected purchases of $162.6 million and amortization of unrecognized losses on investment securities transferred to held-to-maturity ("HTM") of $5.0 million, partially offset by principal runoff and net accretion of discount totaling $101.0 million, and a $35.8 million decrease in the market valuation of the AFS portfolio.
The average taxable-equivalent yield earned on investment securities was 2.94% in the third quarter of 2026, compared to 2.87% in the same quarter of 2025. For the nine months ended September 30, 2026, the average taxable-equivalent yield earned on investment securities was 2.85%, compared to 2.84% in the same period of 2025. The increase in the average yield earned on investment securities was primarily due to higher yields earned on new investment purchases, partially offset by lower income recognized from the Company's interest rate swap.
Loans
The Company strategically supplements its Hawaii loan portfolio by selectively pursuing commercial, construction, commercial real estate, and consumer loan opportunities on the U.S. Mainland. This approach supports growth, enhances geographic, asset class and rate type diversification, generally provides higher yields, while maintaining the Company's disciplined credit standards and underwriting practices.
The following table presents outstanding loans by class and geographic location as of the dates presented:
(Dollars in thousands) September 30,
2026 		December 31,
2025
Commercial and industrial:
Hawaii $ 454,989 $ 453,619
U.S. Mainland 123,585 140,973
Total commercial and industrial 578,574 594,592
Construction:
Hawaii 97,939 153,392
U.S. Mainland 119,205 59,799
Total construction 217,144 213,191
Residential mortgage:
Hawaii 1,802,348 1,839,191
Total residential mortgage 1,802,348 1,839,191
Home equity:
Hawaii 568,114 600,082
Total home equity 568,114 600,082
Commercial mortgage:
Hawaii 1,213,867 1,202,078
U.S. Mainland 499,147 392,355
Total commercial mortgage 1,713,014 1,594,433
Consumer:
Hawaii 207,728 219,573
U.S. Mainland 226,148 228,034
Total consumer 433,876 447,607
Loans, net of deferred fees and costs:
Hawaii (1) 4,344,985 4,467,935
U.S. Mainland (2) 968,085 821,161
Total loans, net of deferred fees and costs $ 5,313,070 $ 5,289,096
(1) Hawaii loans include Guam loans, which represent less than one percent of total Hawaii loans.
(2) For secured loans, classification as U.S. Mainland is made based on where the collateral is located. For unsecured loans, classification as U.S. Mainland is made based on the location of the borrower.
Loans, net of deferred costs, totaled $5.31 billion as of September 30, 2026, an increase of $24.0 million, or 0.5%, from $5.29 billion as of December 31, 2025. The increase was primarily driven by an increase in commercial mortgage loans of $118.6 million, partially offset by decreases in residential mortgage loans of $36.8 million, home equity loans of $32.0 million, commercial and industrial loans of $16.0 million, and consumer loans of $13.7 million.
The Hawaii loan portfolio decreased by $123.0 million, or 2.8%, from December 31, 2025. The decrease was primarily due to decreases in construction loans of $55.5 million, residential mortgage loans of $36.8 million, home equity loans of $32.0
million, and consumer loans of $11.8 million. These decreases were partially offset by increases in commercial mortgage loans of $11.8 million and commercial and industrial loans of $1.4 million.
The U.S. Mainland loan portfolio increased by $146.9 million, or 17.9%, from December 31, 2025. The increase was primarily driven by increases in commercial mortgage loans of $106.8 million and construction loans of $59.4 million, partially offset by decreases in commercial and industrial loans of $17.4 million and consumer loans of $1.9 million. During the nine months ended September 30, 2026, the Company purchased $70.5 million in U.S. Mainland consumer automobile loans, which were largely offset by portfolio runoff.
The average yield earned on loans was 5.01% in the third quarter of 2026, relatively consistent from the same quarter of 2025. For the nine months ended September 30, 2026, the average yield earned on loans was 4.97%, compared to 4.95% in the same period of 2025. The increase in the average yield earned in the nine months ended September 30, 2026 was primarily due to higher new production loan yields compared to runoff yields.
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 September 30, 2026. 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 $ 7,020 $ 149,728 $ 92,786 $ - $ 249,534 43.1 %
With variable interest rates 31,563 214,517 21,479 61,481 329,040 56.9 %
Total commercial and industrial 38,583 364,245 114,265 61,481 578,574 100.0 %
Construction:
With fixed interest rates 2,418 47,735 16,997 - $ 67,150 30.9 %
With variable interest rates 48,758 77,791 22,683 762 149,994 69.1 %
Total construction 51,176 125,526 39,680 762 217,144 100.0 %
Residential mortgage:
With fixed interest rates 201 8,328 82,147 1,357,505 $ 1,448,181 80.3 %
With variable interest rates 2 380 6,732 347,053 354,167 19.7 %
Total residential mortgage 203 8,708 88,879 1,704,558 1,802,348 100.0 %
Home equity:
With fixed interest rates 7,646 3,288 17,281 37,020 $ 65,235 11.5 %
With variable interest rates 3,850 3,791 1,113 494,125 502,879 88.5 %
Total home equity 11,496 7,079 18,394 531,145 568,114 100.0 %
Commercial mortgage:
With fixed interest rates 83,683 373,630 278,374 - $ 735,687 42.9 %
With variable interest rates 209,564 527,668 240,095 - 977,327 57.1 %
Total commercial mortgage 293,247 901,298 518,469 - 1,713,014 100.0 %
Consumer:
With fixed interest rates 16,445 237,049 84,504 56,166 $ 394,164 90.8 %
With variable interest rates 8,045 4,075 - 27,592 39,712 9.2 %
Total consumer 24,490 241,124 84,504 83,758 433,876 100.0 %
Loans:
With fixed interest rates $ 117,413 $ 819,758 $ 572,089 $ 1,450,691 $ 2,959,951 55.7 %
With variable interest rates 301,782 828,222 292,102 931,013 2,353,119 44.3 %
Total loans $ 419,195 $ 1,647,980 $ 864,191 $ 2,381,704 $ 5,313,070 100.0 %
Nonperforming Assets and Accruing Loans 90 Days or More Past Due
The following table presents nonperforming assets ("NPAs") and accruing loans 90 days or more past due as of the dates presented:
(Dollars in thousands) September 30,
2026 		December 31,
2025 		$ Change % Change
Nonperforming Assets
Nonaccrual loans:
Commercial and industrial $ 138 $ 591 $ (453) (76.6) %
Residential mortgage 9,620 10,572 (952) (9.0)
Home equity 2,673 2,608 65 2.5
Consumer 606 615 (9) (1.5)
Total nonaccrual loans 13,037 14,386 (1,349) (9.4)
Other real estate owned ("OREO"):
Residential mortgage 973 - 973 N.M.
Total OREO 973 - 973 N.M.
Total NPAs 14,010 14,386 (376) (2.6)
Accruing Loans 90 Days or More Past Due
Residential mortgage - 664 (664) (100.0)
Home equity - 485 (485) (100.0)
Consumer 521 403 118 29.3
Total accruing loans 90 days or more past due 521 1,552 (1,031) (66.4)
Total NPAs and accruing loans 90 days or more past due $ 14,531 $ 15,938 $ (1,407) (8.8)
Ratio of nonaccrual loans to total loans 0.25 % 0.27 % (0.02) %
Ratio of NPAs to total assets 0.19 % 0.19 % - %
Ratio of NPAs and accruing loans 90 days or more past due to total loans and OREO 0.27 % 0.30 % (0.03) %
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, 2025 $ 14,386
Additions 8,432
Reductions:
Payments (1,729)
Return to accrual status (3,603)
Charge-offs, valuation adjustments and other reductions (3,476)
Total reductions (8,808)
Balance at September 30, 2026 $ 14,010
Nonperforming assets totaled $14.0 million, or 0.19% of total assets as of September 30, 2026, compared to $14.4 million, or 0.19% of total assets as of December 31, 2025.
Criticized loans increased by $25.4 million from December 31, 2025 to $96.6 million, or 1.8% of total loans, as of September 30, 2026. Within criticized loans, special mention loans increased by $2.1 million to $5.7 million, or 0.1% of total loans and classified loans increased by $23.3 million to $90.8 million, or 1.7% of total loans. The increase in classified and criticized loans during the nine months ended September 30, 2026 was primarily driven by the downgrade of a commercial
lending relationship due to borrower-specific factors. The relationship consisted of loans with an aggregate outstanding balance of $20.7 million. The increase was attributable to the unique circumstances of the borrower and we believe was not reflective of broad-based deterioration in overall portfolio credit quality. The loans continue to perform and remain well-collateralized, and management continues to closely monitor the credits and related collateral values.
The Company's ratio of classified assets and other real estate owned to Tier 1 capital plus the ACL was 11.49% as of September 30, 2026, which increased from 8.56% as of December 31, 2025.
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 September 30, Nine Months Ended September 30,
(Dollars in thousands) 2026 2025 2026 2025
Allowance for Credit Losses ("ACL") on Loans:
Balance at beginning of period $ 60,581 $ 59,611 $ 59,621 $ 59,182
Provision for credit losses on loans 1,929 3,440 7,957 11,155
Charge-offs:
Commercial and industrial (885) (1,071) (3,294) (4,509)
Residential mortgage - - (23) -
Consumer (2,666) (2,824) (7,250) (8,665)
Total charge-offs (3,551) (3,895) (10,567) (13,174)
Recoveries:
Commercial and industrial 284 204 657 570
Construction - - 2 3
Residential mortgage 9 8 27 25
Home equity 3 9 15 21
Consumer 586 1,016 2,129 2,611
Total recoveries 882 1,237 2,830 3,230
Net charge-offs (2,669) (2,658) (7,737) (9,944)
Balance at end of period $ 59,841 $ 60,393 $ 59,841 $ 60,393
Average loans, net of deferred fees and costs $ 5,297,112 $ 5,332,656 $ 5,288,952 $ 5,317,481
Ratio of annualized net charge-offs to average loans 0.20 % 0.20 % 0.20 % 0.25 %
Ratio of ACL to total loans 1.13 % 1.13 % 1.13 % 1.13 %
Ratio of ACL to nonaccrual loans 459 % 422 % 459 % 422 %
The ACL as a percentage of total loans was 1.13% as of September 30, 2026, compared to 1.13% as of December 31, 2025 and 1.13% as of September 30, 2025.
The following table presents the allocation of the ACL by loan class as of the dates indicated. The Company applies specific allocations to individually evaluated loans and general allocations to loan classes based on management's assessment of credit risk and estimated loss rates.
September 30, 2026 December 31, 2025
(Dollars in thousands) ACL on Loans % of ACL by Loan Class Loan Class as a % of Total Loans ACL on Loans % of ACL by Loan Class Loan Class as a % of Total Loans
Commercial and industrial $ 7,684 12.8 % 10.9 % $ 7,982 13.4 % 11.2 %
Construction 4,097 6.8 4.1 3,815 6.4 4.0
Residential mortgage 13,091 21.9 33.9 14,219 23.8 34.9
Home equity 1,089 1.8 10.7 1,242 2.1 11.3
Commercial mortgage 21,113 35.3 32.2 19,544 32.8 30.1
Consumer 12,767 21.4 8.2 12,819 21.5 8.5
Total $ 59,841 100.0 % 100.0 % $ 59,621 100.0 % 100.0 %
The following table presents the ratio of annualized net charge-offs (recoveries) by loan class to average loans for the periods presented:
Three Months Ended September 30, Nine Months Ended September 30,
2026 2025 2026 2025
Commercial and industrial 0.05 % 0.07 % 0.07 % 0.10 %
Consumer 0.15 0.13 0.13 0.15
Total 0.20 % 0.20 % 0.20 % 0.25 %
Deposits
The Company's deposit portfolio is well-diversified and reflects a long-standing commitment to relationship-based banking. As of September 30, 2026, approximately 54% of deposit customers have maintained accounts with the Bank for over 10 years, underscoring the stability and loyalty of the customer base.
While the Company's deposit-gathering efforts are primarily focused in Hawaii, its strategy also extends beyond local markets. Through strategic partnerships with financial institutions in Japan and Korea, the Bank continues to attract U.S. dollar deposits from international sources. These relationships support deposit growth and diversification while aligning with the Company's prudent risk management practices.
The following table presents the composition of our deposits by category as of the dates presented:
(Dollars in thousands) September 30,
2026 		December 31,
2025 		$ Change % Change
Noninterest-bearing demand deposits $ 1,897,421 $ 1,891,198 $ 6,223 0.3 %
Interest-bearing demand deposits 1,423,298 1,388,107 35,191 2.5
Savings and money market deposits 2,398,449 2,346,522 51,927 2.2
Time deposits up to $250,000 389,305 433,629 (44,324) (10.2)
Core deposits 6,108,473 6,059,456 49,017 0.8
Other time deposits greater than $250,000 438,230 412,188 26,042 6.3
Government time deposits 117,159 138,120 (20,961) (15.2)
Total time deposits greater than $250,000 555,389 550,308 5,081 0.9
Total deposits $ 6,663,862 $ 6,609,764 $ 54,098 0.8
Total deposits were $6.66 billion as of September 30, 2026, an increase of $54.1 million, or 0.8%, from $6.61 billion as of December 31, 2025. The Company did not hold any wholesale, brokered, or listing service deposits as of September 30, 2026.
Core deposits, which we define as demand deposits, savings and money market deposits, and time deposits up to $250,000, totaled $6.11 billion as of September 30, 2026, an increase of $49.0 million, from $6.06 billion as of December 31, 2025. Core deposits remained relatively consistent and represented 91.7% of total deposits as of September 30, 2026 and December 31, 2025.
The average cost of total deposits was 90 bps in the third quarter of 2026, compared to 102 bps in the same quarter of 2025. For the nine months ended September 30, 2026, the average cost of total deposits was 90 bps, compared to 104 bps in the same period of 2025.
All deposits are insured up to applicable limits by the Deposit Insurance Fund of the FDIC. Estimated uninsured deposits totaled $2.86 billion, or 43% of total deposits, as reported in the Company's Federal Financial Institutions Examination Council ("FFIEC") Call Report as of September 30, 2026, compared to $2.78 billion, or 42% of total deposits as of December 31, 2025.
Fully collateralized deposits totaled approximately $298.6 million as of September 30, 2026, compared to $281.0 million as of December 31, 2025. Excluding fully collateralized deposits, estimated uninsured deposits totaled $2.56 billion, or 38% of total deposits as of September 30, 2026, compared to $2.49 billion, or 38% of total deposits as of December 31, 2025.
The following table presents the remaining maturity of time deposits in excess of the FDIC insurance limit of $250,000 as of September 30, 2026:
(Dollars in thousands) September 30, 2026
Remaining maturity:
Three months or less $ 246,387
Over three through twelve months 296,943
Over one year through three years 12,059
Total $ 555,389
Capital Resources
The Company conducts ongoing assessments of its capital adequacy, evaluating projected sources and uses of capital in conjunction with the size and quality of its assets, anticipated business performance, changes in monetary and fiscal policy, and regulatory capital requirements. As part of this process, the Board of Directors regularly reviews the Company's capital position-including the call and maturity dates of existing capital instruments-to determine whether additional capital should be raised (via debt or equity) or whether capital may be returned to shareholders through dividends and/or share repurchases.
Common Equity
Total shareholders' equity was $581.4 million as of September 30, 2026, compared to $592.6 million as of December 31, 2025. The change in total shareholders' equity was primarily attributable to net income of $64.3 million for the nine months ended September 30, 2026, partially offset by the repurchase of $33.0 million in common stock under the Company's stock repurchase program, cash dividends paid of $22.8 million, and other comprehensive loss of $20.5 million resulting from a decrease in the fair value of the available for sale investment portfolio due to the rise in market interest rates.
The ratio of total shareholders' equity to total assets was 7.80% as of September 30, 2026, compared to 8.00% as of December 31, 2025. Book value per share was $22.79 as of September 30, 2026, compared to $22.47 as of December 31, 2025.
Holding Company Capital Resources
Under the Dodd-Frank Act, CPF is required to serve as a source of financial strength to the Bank. CPF is responsible for meeting its own obligations, including payments on its junior subordinated debentures that fund trust preferred securities.
CPF relies on dividends from the Bank to meet its obligations. On a stand-alone basis, CPF had an available cash balance of $7.0 million as of September 30, 2026, compared to $5.5 million as of December 31, 2025.
As a Hawaii state-chartered bank, the Bank may only pay dividends to the extent it has Statutory Retained Earnings, as defined under Hawaii banking law, which differs from GAAP retained earnings. The Bank had Statutory Retained Earnings of $243.5 million as of September 30, 2026, compared to $234.7 million as of December 31, 2025.
Dividends are subject to the discretion of the Board of Directors and may be restricted by federal and Hawaii state laws, regulatory guidance from the FRB, and covenants set forth in various agreements the Company is a party to, including
covenants set forth in our junior subordinated debentures. There can be no assurance that dividends will continue at the current rate or at all.
Share Repurchases
On January 27, 2026, the Company's Board of Directors authorized a share repurchase plan (the "2026 Repurchase Plan"), permitting the repurchase of up to $55.0 million of the Company's common stock. Repurchases may be made from time to time in the open market or through privately negotiated transactions. The 2026 Repurchase Plan replaced and superseded in its entirety the share repurchase program previously approved by the Company's Board of Directors.
During the nine months ended September 30, 2026, the Company repurchased 937,364 shares of common stock at an aggregate cost of $33.0 million under the 2026 Repurchase Plan. As of September 30, 2026, $22.0 million remained available for repurchase under the plan. There can be no assurance that share repurchases will continue at the current rate or at all.
Trust Preferred Securities
As of September 30, 2026, the Company maintained two statutory trusts, CPB Capital Trust IV ("Trust IV") and CPB Statutory Trust V ("Trust V"), which issued a combined $50.0 million in floating rate trust preferred securities. These securities, along with the underlying junior subordinated debentures and the common securities issued by the trusts, 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.
The Company provides a full and unconditional guarantee of each trust's obligations related to its trust preferred securities. Subject to certain exceptions and limitations, the Company may defer interest payments on the subordinated debentures for up to 20 consecutive quarters without default or penalty. As of September 30, 2026, the Company was current on all required interest payments and had not exercised its right to defer interest payments on the subordinated debentures.
Regulatory Capital Ratios
The Company and the Bank are subject to regulatory capital requirements administered by federal banking agencies. These requirements include both quantitative measures, based on assets, liabilities, and certain off-balance-sheet exposures calculated under regulatory accounting principles, and qualitative assessments by regulators. For banks, capital adequacy is also governed by prompt corrective action regulations. Failure to meet minimum capital requirements may result in regulatory enforcement actions.
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 regulatory 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" section of the Company's 2025 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. As of September 30, 2026 and December 31, 2025, the leverage capital, tier 1 risk-based capital, total risk-based capital, and CET1 risk-based capital ratios for both the Company and the Bank exceeded the thresholds required for a "well-capitalized" designation under applicable regulations.
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.
September 30, 2026
Leverage capital $ 739,253 9.7 % $ 304,280 4.0 % N/A N/A
CET1 risk-based capital 689,253 12.7 244,745 4.5 N/A N/A
Tier 1 risk-based capital 739,253 13.6 326,327 6.0 N/A N/A
Total risk-based capital 805,204 14.8 435,102 8.0 N/A N/A
December 31, 2025
Leverage capital $ 729,850 9.8 % $ 297,858 4.0 % N/A N/A
CET1 risk-based capital 679,850 12.7 241,149 4.5 N/A N/A
Tier 1 risk-based capital 729,850 13.6 321,531 6.0 N/A N/A
Total risk-based capital 794,911 14.8 428,708 8.0 N/A N/A
Central Pacific Bank
September 30, 2026
Leverage capital $ 729,845 9.6 % $ 304,034 4.0 % $ 380,043 5.0 %
CET1 risk-based capital 729,845 13.4 244,477 4.5 353,133 6.5
Tier 1 risk-based capital 729,845 13.4 325,969 6.0 434,626 8.0
Total risk-based capital 795,796 14.6 434,626 8.0 543,282 10.0
December 31, 2025
Leverage capital $ 720,980 9.7 % $ 297,503 4.0 % $ 371,879 5.0 %
CET1 risk-based capital 720,980 13.5 240,630 4.5 347,577 6.5
Tier 1 risk-based capital 720,980 13.5 320,840 6.0 427,787 8.0
Total risk-based capital 786,041 14.7 427,787 8.0 534,734 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 September 30, 2026 and December 31, 2025, the Company and the Bank's risk-based capital exceeded the required CCB.
Market Risk
Market risk represents the potential for loss in financial instruments arising from adverse changes in market rates and prices, including interest rates, foreign exchange rates, commodity prices, and equity prices. The Company's primary market risk exposure is interest rate risk, which arises 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
The Company's earnings and capital are sensitive to interest rate fluctuations. Interest rate risk is inherent in the Company's core activities, including loan origination, deposit gathering, investment portfolio management, and other interest-bearing funding sources. Asset/liability management seeks to align the maturities and repricing characteristics of rate-sensitive assets and liabilities to achieve financial objectives while managing risk.
The Company's Asset/Liability Management Policy is designed to optimize the risk-adjusted return to shareholders while maintaining consistently acceptable levels of liquidity, interest rate risk and capital adequacy. The Asset/Liability Management Committee ("ALCO") oversees interest rate risk utilizing a detailed and dynamic earnings and capital simulation model that evaluates earnings and capital under various interest rate scenarios and balance sheet forecasts.
Earnings sensitivity is typically measured by estimated changes in net interest income ("NII") under different rate scenarios. Capital sensitivity is typically measured through an Economic Value of Equity ("EVE") analysis which monitors the impact of the durations of rate sensitive assets and liabilities. The EVE analysis simulates the cash flows for all on- and off-balance sheet instruments under different rate scenarios which are then discounted to determine a present value for each scenario. 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 presents the Company's 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. 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 results indicate that the Company's balance sheet is relatively well-positioned against movements in interest rates and remains within ALCO Policy risk limits that have been approved by the Board of Directors.
September 30, 2026 December 31, 2025
Estimated Net Interest Income Sensitivity Estimated Net Interest Income Sensitivity
Rate Change Gradual Instantaneous Gradual Instantaneous
+300 bps 3.73 % 6.77 % 2.58 % 4.33 %
+200 bps 2.51 % 4.54 % 1.60 % 2.93 %
+100 bps 1.29 % 2.30 % 0.60 % 1.49 %
-100 bps (0.59) % (1.85) % (0.83) % (1.06) %
-200 bps (1.49) % (4.05) % (1.54) % (2.57) %
-300 bps (2.60) % (7.28) % (2.35) % (4.51) %
Liquidity and Borrowing Arrangements
The Company's objective in managing liquidity is to maintain a prudent balance between sources and uses of funds in order to economically meet the cash requirements of customers for loans and deposit withdrawals, while also supporting lending and investment opportunities as they arise. Liquidity is monitored daily in relation to changes in loan and deposit balances to ensure optimal utilization, maintenance of adequate levels of readily marketable assets, and access to reliable short-term funding sources.
To support this objective, the Company performs regular liquidity stress testing under a range of scenarios to evaluate its ability to withstand potential liquidity stress events. Forecasts of Company cash flows are updated and analyzed periodically, and more frequently during periods of elevated liquidity risk.
Historically, core deposits have provided us a stable and low-cost funding base, although they remain subject to competitive pressures in the Company's market. A significant portion of deposits are granular, long-tenured, and relationship-based. In
addition to core deposits, the Company also has access to a variety of other short-term and long-term funding sources, including 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.
As of September 30, 2026, the Company had $359.4 million in cash on its balance sheet and approximately $2.69 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, 2025. There have been no material changes in our cash requirements from known contractual and other obligations since December 31, 2025.
Central Pacific Financial Corporation published this content on October 28, 2026, and is solely responsible for the information contained herein. Distributed via EDGAR on October 28, 2026 at 19:38 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]